<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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 0-19219
Brauvin Income Plus L.P. III
(Exact name of registrant as specified in its charter)
Delaware 36-3639043
(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
(Registrant's telephone number, including area code)
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)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 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 filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not 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-K
or any amendment to this Form 10-K. [ X ]
The aggregate sales price of the limited partnership interests of
the registrant (the "Units") to unaffiliated investors of the
registrant during the initial offering period was $21,307,600.
This does not reflect market value. This is the price at which the
Units were sold to the public during the initial offering period,
and there is no current market for the Units nor have any Units
been sold within the last 60 days prior to this filing except for
Units sold to or by the registrant pursuant to the registrant's
distribution reinvestment plan.
Portions of the Prospectus of the registrant dated October 30, 1989
(the "Prospectus"), as supplemented December 7, 1989, December 20,
1989, April 24, 1990, December 12, 1990, August 29, 1991 and
September 17, 1991 and filed pursuant to Rule 424(b) and Rule
424(c) under the Securities Act of 1933, as amended, are
incorporated by reference into Parts II, III and IV of this Annual
Report on Form 10-K.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
1996 FORM 10-K ANNUAL REPORT
INDEX
PART I
Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders. . 15
PART II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters . . . . . . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 19
Item 8. Consolidated Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . 26
PART III
Item 10. Directors and Executive Officers of the Partnership. . 27
Item 11. Executive Compensation . . . . . . . . . . . . . . . . 29
Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . 31
Item 13. Certain Relationships and Related Transactions . . . . 32
PART IV
Item 14. Exhibits, Consolidated Financial Statements and
Schedule, and Reports on Form 8-K. . . . . . . . . . . 33
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
<PAGE>
PART I
Item 1. Business.
Brauvin Income Plus L.P. III (the "Partnership") is a Delaware
limited partnership formed in July 1989 for the purpose of
acquiring debt-free ownership of existing, free-standing,
income-producing retail, office and industrial real estate
properties predominantly all of which would involve "triple-net"
leases. It was anticipated at the time the Partnership first
offered its Units (as defined below) that a majority of these
properties would be leased to operators of national franchise
automotive service businesses, retail stores and convenience
stores, fast food and sit-down restaurants, health and recreational
facilities, as well as banks and savings and loan branches. The
leases would provide for a base minimum annual rent and increases
in rent such as through participation in gross sales above a stated
level, fixed increases on specific dates or indexation of rent to
indices such as the Consumer Price Index. The Partnership sold
$982,070 of its limited partnership interests (the "Units")
commencing October 30, 1989 through December 31, 1989, pursuant to
a Registration Statement on Form S-11 under the Securities Act of
1933, as amended (the "Offering"). The Offering was conditioned
upon the sale of $1,200,000 in Units which was achieved on January
15, 1990. An additional $20,325,530 in Units were sold from the
period January 1, 1990 until the Offering closed on October 29,
1991, for a cumulative total of $21,307,600. An additional
$1,459,119 has been raised through the Partnership's distribution
reinvestment plan (the "Plan") through February 15, 1996. These
Units were purchased from the Units reserved for the distribution
reinvestment plan after the termination of the Offering. The
Offering was anticipated to close on October 29, 1990, but was
extended through and closed on October 29, 1991 by the General
Partners with the approval of the appropriate regulatory
authorities. As of December 31, 1996, $462,972 of Units sold
through the Offering have been repurchased by the Partnership from
investors liquidating their investment and have been retired. The
investors in the Partnership (the "Limited Partners") share in the
benefits of ownership of the Partnership's real property
investments proportionally based on the number of Units owned by
each Limited Partner compared to the total number of Units sold.
The principal investment objectives of the Partnership are:
(i) preservation and protection of capital; (ii) distribution of
current cash flow from the Partnership's cash flow attributable to
rental income; (iii) capital appreciation; (iv) the potential for
increased income and protection against inflation through
escalation in the base rent or participation and growth in the
sales of the lessees of the Partnership's properties; (v) the
deferral of the taxation of cash distributions for Taxable Class
Limited Partners; and (vi) the production of "passive" income to
offset "passive" losses from other investments.
Some tax shelter of cash distributions by the Partnership will
be available to Taxable Class Limited Partners through depreciation
of the underlying properties. Taxable Class Limited Partners will
benefit from the special allocation of all depreciation to the
Units which they acquired from the Partnership because their
reduced taxable income each year will result in a reduction in
taxes due, although no "spill-over" losses are expected. Taxable
income generated by property operations will likely be considered
passive income for federal income tax purposes because Section
469(c)(2) of the Internal Revenue Code states that a passive
activity includes "any rental activity" and, therefore, is
available to offset losses Taxable Class Limited Partners may have
realized in other passive investments.
During the early years of the Partnership the Limited Partners
received cash distributions in excess of their allocable share of
the Partnership's income, and substantially in excess of their tax
liability thereon, particularly for the Taxable Class Limited
Partners due to the special allocation of depreciation deductions,
although the Taxable Class Limited Partners will recognize more
income from the sale of Partnership properties.
Taxable income generated by property operations will likely be
considered passive income for federal income tax purposes and,
therefore, such income can be used to offset losses Taxable Class
Limited Partners will receive from other passive investments,
subject to certain limitations.
It was originally contemplated that the Partnership would
dispose of its properties approximately seven to ten years after
their acquisition with a view towards liquidation of the
Partnership within that period.
In accordance therewith, the Partnership entered into an
agreement and plan of merger dated as of June 14, 1996, as amended
on March 24, 1997 (the "Merger Agreement") with Brauvin Real Estate
Funds L.L.C., a Delaware limited liability company (the
"Purchaser") affiliated with the General Partners of the
Partnership. Pursuant to the terms of the Merger Agreement, the
Partnership proposes to merge with and into the Purchaser through
a merger (the "Merger") of its Units. In connection with the
Merger, the Limited Partners will receive approximately $8.85 per
Unit in cash. Promptly upon consummation of the Merger, the
Partnership will cease to exist and the Purchaser, as the surviving
entity will succeed to all of the assets and liabilities of the
Partnership.
On November 8, 1996 a Special Meeting of the Limited Partners
(the "Special Meeting") was held at the office of the Partnership
where a vote of the Limited Partners was taken and the merger of
the Partnership with the Purchaser was approved as described in the
Partnership's proxy materials dated August 23, 1996, as
supplemented (the "Proxy"). Further information regarding the
Merger is located in Items 3, 7 and 13 below.
The terms of the transactions between the Partnership and
affiliates of the General Partners of the Partnership are set forth
in Item 13 below. Reference is hereby made for a description of
such terms and transactions.
The restated limited partnership agreement of the Partnership
(the "Agreement") provides that the Partnership shall terminate
December 31, 2035, unless sooner terminated.
The Partnership has no employees.
Market Conditions/Competition
Since the current leases at the Partnership's properties
entitle the Partnership to participate in gross receipts of lessees
above fixed minimum amounts, the success of the Partnership will
depend in part on the ability of those lessees to compete with
similar businesses in the vicinity.
Although management of the Partnership anticipates that the
Merger will be consummated by the end of the second quarter of
1997, should the Merger not be completed, the General Partners of
the Partnership will have to determine whether to continue its
operations or attempt to sell some or all of the properties. The
Partnership has and continues to compete in the disposition of
property with many other entities. It is not possible for the
General Partners to determine at this time what actions they will
take in connection with the continuation of the Partnership should
the Merger not be completed. The General Partners will evaluate
factors such as the economy, the lease terms, the financial
strength of the existing tenants and the ability to locate
potential purchasers.
Item 2. Properties.
All lease payments are current pursuant to the terms of each
of the leases. The Partnership is landlord only and does not
participate in the operations of any of the properties purchased by
the Partnership. 100% of the properties are occupied and all
properties were paid for in cash, without any financing. The
General Partners believe that all properties are adequately
insured.
On October 31, 1996, the Partnership and three other
affiliated public real estate limited partnerships formed a joint
venture, Brauvin Bay County Venture, to purchase the land and
building underlying a newly constructed Blockbuster Video store.
The Partnership has a 34% equity interest in the Brauvin Bay County
Venture.
The following information is presented only for the properties
whose cost basis exceeds 10% of the gross proceeds of the Offering
or whose rental income exceeds 10% of the total rental income of
the Partnership.
On September 17, 1991, the Partnership purchased from an
entity unaffiliated with the Partnership the land and buildings
underlying two Sports Unlimited sporting goods stores (the
"Stores") for $4,350,000, plus closing costs. The Stores are
located in Winter Park, Florida, a suburb of Orlando, and
Charlotte, North Carolina. The Stores are leased to and operated
by Sports and Recreation, Inc. ("SRI") and SRI Holdings, Inc.
(collectively, the "Tenant"). The leases are for 20 years maturing
in September 2011, with two ten-year renewal options. The Tenant
is obligated to pay base minimum rent each month in the amount of
$41,688. The base rent will increase in the third lease year
effective January 1, 1994, the seventh lease year and every three
years thereafter in accordance with increases in the Consumer Price
Index, not to exceed 4% per annum. Pursuant to the triple-net
lease, the Tenant is responsible for all obligations and expenses
incident to the operation and maintenance of the Stores including
all taxes, insurance premiums and structural repairs. The Tenant,
based on the February 3, 1991 consolidated financial statements,
had sufficient net worth and, accordingly, the General Partners
determined that lease insurance, although not presently available,
would not be required for these acquisitions.
The following is a demographic summary of the five Ponderosa
restaurants, two Chi-Chi's restaurants, one International House of
Pancakes restaurant, one Applebee's restaurant, two Sports
Unlimited stores, one Chili's restaurant, three Steak n Shake
restaurants, the 34% interest in a Blockbuster Video store and the
6.4% interest in a CompUSA store purchased by the Partnership:
Ponderosas:
Kissimmee, Florida
Unit 1005 is located at 4042 West Vine Street. The structure,
built in 1980, is a one-story, 5,360 square foot building
constructed with wood trim over wood frame on an approximately
60,000 square foot site.
Waukegan, Illinois
Unit 164 is located at 2915 Belvidere Road. The structure,
built in 1970 and renovated in 1986, is a one-story, 4,700 square
foot building constructed with wood and painted concrete block with
wood trim over wood frame on an approximately 49,300 square foot
site.
Elmhurst, Illinois
Unit 173 is located at 856 North York Road. The structure,
built in 1969, is a one-story, 4,700 square foot building
constructed with painted stucco and wood trim over wood frame on an
approximately 41,000 square foot site.
Dayton, Ohio
Unit 856 is located at 726 Miller Lane. The structure, built
in 1985 and renovated in 1986, is a one-story, 6,060 square foot
building constructed with stucco over wood frame on an
approximately 116,800 square foot site.
In August 1995, Metromedia, the parent of Ponderosa, closed
the Dayton, Ohio restaurant and subsequently reopened it as a
Bennigan's restaurant in January 1996. Per the terms of the lease,
Metromedia continues to make all rent and certain occupancy
payments to the Partnership.
Kansas City, Missouri
Unit 1069 is located at 7210 Northeast 43rd Street. The
structure, built in 1987, is a one-story, 5,400 square foot
building constructed with stucco over wood frame on an
approximately 61,420 square foot site.
Chi-Chi's:
Buffalo, New York
Unit 360 is located at the intersection of Nile Strip and
McKinley Parkway at the entrance to a regional mall. The
restaurant is situated on a 1.5 acre site and contains 7,270 square
feet with a seating capacity of 280 people. The property opened in
January 1990.
Hickory, North Carolina
Unit 401 is located at 2060 Highway 70 Southeast in Hickory,
adjacent to the Valley Hill Mall, a 625,000 square foot regional
shopping center. The property was built in 1990 and consists of a
5,678 square foot restaurant located on an approximately 50,000
square foot land parcel.
During 1995 Chi-Chi's, the sub-tenant under the Foodmaker
master lease, closed its Hickory, North Carolina restaurant because
it was not profitable. Under the terms of the lease, Foodmaker,
the master tenant and guarantor, continued to pay rent for this
property. Chi-Chi's undertook to re-lease the closed restaurant.
In March 1996, a potential sub-tenant executed a second sub-lease
with Chi-Chi's for the property. This new sub-tenant (Carolina
Country BBQ of Hickory) occupied the facility in November 1996.
Foodmaker continues to be the guarantor under terms of the second
sub-lease.
International House of Pancakes:
Denver, Colorado
The I-HOP property consists of a 4,500 square foot building on
approximately one acre of land. The property is positioned on an
outparcel of a 350,000 square foot shopping mall located on Highway
285, a major east/west traffic route in Denver. The restaurant
opened in March 1989.
Applebee's:
St. Charles, Missouri
The Applebee's property consists of a 4,140 square foot
building on a 66,516 square foot parcel of land. The building is
a square-shaped, one-story, wood-framed and brick-faced structure
which was completed in December 1990. The dining area seated 159
patrons, but was expanded in 1992 to add another 38 seats at a cost
to the Partnership of $79,974, and has a U-shaped bar.
Sports Unlimited:
Orlando, Florida
This property is located at 2075 Semoran Blvd. in Winter Park,
Florida, a suburb of Orlando, and consists of a 40,000 square foot
building on 3.8 acres of land. The building is single-story
concrete construction with a flat, built-up composition roof over
metal decking supported by steel bar joists. The building was
completed in 1988.
Charlotte, North Carolina
This property is located at 7300 E. Independence Blvd and
consists of a 30,000 square foot building on 2.5 acres of land.
The building is single-story concrete construction completed in
1987.
Chili's:
Midland, Texas
The Partnership owns a 99.5% interest in a joint venture, with
an affiliated public real estate limited partnership, that acquired
the Chili's property. This property is located at 4610 N. Garfield
Street in Midland, Texas. The property consists of a 6,213 square
foot building situated on a 45,540 square foot site as an
out-parcel at a shopping center complex consisting of five
buildings. The property is single-story construction framed in a
combination of steel, wood and brick. The property was completed
in 1984.
Steak n Shake:
Collinsville, Illinois
The property is located approximately 10 miles east of St.
Louis, Missouri. The property contains 3,560 square feet on a
38,770 square foot parcel of land. The single-story property was
constructed in 1991.
Indianapolis, Indiana
This property is located at 1501 E. 86th Street on a corner
lot at the intersection of Westfield Boulevard and 86th Street.
The property contains 4,760 square feet on a 1.27 acre site. The
single-story property was constructed in 1974.
Indianapolis, Indiana
This property is located at 8460 N. Michigan Road as an
outparcel of a K-Mart anchored shopping center. The property
contains 3,860 square feet on a 0.918 acre site. The single-story
property was constructed in 1989.
Blockbuster:
Callaway, Florida
The Partnership owns a 34.0% interest in a joint venture, with
affiliated public real estate limited partnerships, that acquired
the Blockbuster Video store. The property is located at 123 N.
Tydall Parkway on the major arterial in the Panama City, Florida
area. The property contains a 6,466 square foot building located
on a 40,075 square foot parcel of land. The property was
constructed in 1996.
CompUSA:
Duluth, Georgia
The Partnership owns a 6.4% interest in a joint venture, with
affiliated public real estate limited partnerships, that acquired the
CompUSA store. The CompUSA store is a 25,000 square foot single
story building located on a 105,919 square foot parcel in Duluth,
Georgia, a suburb of Atlanta, in the Gwinnett Place Mall Shopping
area. The single story building was completed in March 1993
utilizing a frame of steel and concrete block.
The following table summarizes the operations of the Partnership's
properties.
<PAGE>
<TABLE>
BRAUVIN INCOME PLUS L.P. III
SUMMARY OF OPERATING DATA
DECEMBER 31, 1996
<CAPTION>
PERCENT OF 1996 1996 LEASE
PURCHASE ORIGINAL RENTAL PERCENT EXPIRATION RENEWAL
PROPERTIES PRICE UNITS SOLD INCOME OF TOTAL DATES OPTIONS
<S> <C> <C> <C> <C> <C> <C>
5 PONDEROSA RESTAURANTS $ 5,266,155 24.7% $ 686,774 30.7% 2003 4 FIVE YEAR OPTIONS
2 CHI CHI'S RESTAURANTS 2,280,400 10.7% 299,529 10.3% 2011 4 FIVE YEAR OPTIONS
1 IHOP RESTAURANT 645,000 3.0% 102,629 4.6% 2009 2 FIVE YEAR OPTIONS
1 APPLEBEE'S RESTAURANT
& EXPANSION 1,229,974 5.8% 199,773 8.9% 2011 2 TEN YEAR OPTIONS
1 ORLANDO SPORTS UNLIMITED
STORE 1,900,000 8.9% 297,162 13.3% 2011 2 TEN YEAR OPTIONS
1 CHARLOTTE SPORTS
UNLIMITED STORE 2,450,000 11.5% 230,452 10.3% 2011 2 TEN YEAR OPTIONS
1 CHILI'S RESTAURANT 950,000 4.5% 126,551 5.7% 2004 2 FIVE YEAR OPTIONS
3 STEAK N' SHAKE
RESTAURANTS 2,525,000 11.9% 339,297 15.2% 2010 2 TEN YEAR OPTIONS
6.4% OF 1 COMPUSA 150,400 0.7% 15,899 0.7% 2008 4 FIVE YEAR OPTIONS
34.0% OF 1 BLOCKBUSTER CALLAWAY 344,702 1.7% 6,290 0.3% 2006 3 FIVE YEAR OPTIONS
$17,741,631 83.4% $2,304,356 100.0%
<FN>
<F1>
NOTE - THE FORMAT OF THIS SCHEDULE DIFFERS FROM THE INCOME STATEMENT OF THE PARTNERSHIP. THIS SCHEDULE ALLOCATES THE
PARTNERSHIP'S SHARE OF PURCHASE PRICE AND RENTAL INCOME FROM EACH JOINT VENTURE. THE INCOME STATEMENT USES THE
EQUITY METHOD OF ACCOUNTING, THEREFORE, NO RENTAL INCOME IS RECORDED IN THE RENTAL INCOME ACCOUNTS FOR THE JOINT
VENTURES.
</FN>
</TABLE>
<PAGE>
Risk 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 their leases, including making base rent or percentage
rent payments to the Partnership. Such a default by the tenants or
a premature termination of any one of the leases could have an
adverse effect on the financial position of the Partnership.
Furthermore, the Partnership may be unable to successfully locate
a substitute tenant due to the fact that these buildings, except
the Sports Unlimited, Blockbuster and CompUSA sites, have been
designed or built primarily to house particular restaurant
operations. Thus, the properties may not be readily marketable to
a new tenant without substantial capital improvements or
remodeling. Such improvements may require expenditure of
Partnership funds otherwise available for distribution.
Item 3. Legal Proceedings.
Two legal actions, as hereinafter described, were filed
against certain of the General Partners of the Partnership and
affiliates of such General Partners, as well as against the
Partnership on a nominal basis in connection with the Merger. Each
of these actions was brought by limited partners of the
Partnership. The Partnership and the named General Partners and
their affiliates deny all allegations set forth in the complaints
and are vigorously defending against such claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty
Advisors IV, Inc., James L. Brault, and Brauvin Real Estate Funds,
L.L.C. and Brauvin High Yield Fund L.P., Brauvin High Yield Fund
II, L.P., Brauvin Income Plus L.P. III, and Brauvin Corporate Lease
Program IV, L.P., Docket No. 96012807. The Partnership and the
other affiliated partnerships named in this lawsuit (the
"Affiliated Partnerships") that are each named as a "Nominal
Defendant" in this lawsuit. Jerome J. Brault, the Managing General
Partner of the Partnership, and Brauvin Realty Advisors III, Inc.,
the Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships have been
named as defendants. James L. Brault, an officer of the Corporate
General Partner and the son of Jerome J. Brault, is also named as
a defendant.
Plaintiffs filed an amended complaint on October 8, 1996. The
amended complaint alleges a purported class action consisting of
claims for breach of fiduciary duties, fraud, breach of the
Agreement, and civil racketeering. The amended complaint seeks
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transactions with the Purchaser. The
defendants have answered plaintiffs' amended complaint, and have
denied each of the plaintiffs' allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action requested that
the Circuit Court enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. This
motion was denied by the Circuit Court on October 8, 1996, and the
Florida appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling. There have been no material
developments with respect to this lawsuit since October 8, 1996.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of Illinois,
styled M. Barbara Christman, Joseph Forte, Janet M. Toolson, John
Archbold, and Ben O. Carroll v. Brauvin Realty Advisors, Inc.,
Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III,
Inc., Brauvin Realty Advisors IV, Inc., Jerome J. Brault; Brauvin
Real Estate Funds, L.L.C. and Brauvin High Yield Fund L.P., Brauvin
High Yield Fund L.P. II, Brauvin Income Plus L.P. III, and Brauvin
Corporate Lease Program IV L.P., Docket No. 96C6025. The
Partnership and the other Affiliated Partnerships are each named as
a "Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, are
named as defendants.
The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of
the Agreement, and violation of the Illinois Deceptive Trade
Practices Act, 815 ILCS 505 et seq. The amended complaint seeks
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transaction with the Purchaser.
On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the limited partners of the Partnership
and of the Affiliated Partnerships, and appointed plaintiffs'
counsel, The Mills Law Firm, as counsel for the class. On October
2, 1996, the District Court also conducted a hearing on plaintiffs'
motion to preliminarily enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. The
District Court denied plaintiffs' motion for a preliminary
injunction at the conclusion of the October 2, 1996 hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Limited Partners,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, Jerome J. Brault and the
Corporate General Partner (collectively, the "Operating General
Partners") of the Partnership filed a counterclaim against
plaintiffs and their counsel, The Mills Law Firm, alleging that
plaintiffs and The Mills Law Firm violated the federal securities
laws and proxy rules by sending their September 27, 1996 letter to
the Limited Partners. The plaintiffs and The Mills Law Firm have
moved to dismiss this counterclaim. The District Court has taken
this motion under advisement and has yet to issue a ruling.
On October 10 and 11, 1996, the District Court conducted an
evidentiary hearing on the motion of the Operating General Partners
to invalidate revocations of proxies procured as a result of The
Mills Law Firm's September 27, 1996 letter. In that evidentiary
hearing, The Mills Law Firm admitted that it violated the proxy
rules by sending its September 27, 1996 letter to the Limited
Partners without filing such letter with the Securities and
Exchange Commission (the "Commission") in violation of the
Commission's requirements. At the conclusion of the hearing on
October 10 and 11, the District Court found that the Operating
General Partners have a likelihood of succeeding on the merits with
respect to their claim that the September 27, 1996 letter sent to
the Limited Partners by plaintiffs and The Mills Law Firm is false
or misleading in several significant respects.
Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The Mills Law
Firm's September 27, 1996 letter because it did not believe it
possessed the authority to do so under present law. This ruling
was appealed to the Seventh Circuit Court of Appeals. The Seventh
Court of Appeals subsequently dismissed this appeal on the grounds
that the appeal was rendered moot by the Limited Partners' approval
on November 8, 1996 of the Merger.
On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Agreement does
not allow the Limited Partners to vote in favor of or against the
proposed transaction with the Purchaser by proxy. These cross-
motions for partial summary judgement were taken under advisement
by the District Court, and the District Court has yet to issue a
ruling.
On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs have named the Partnership as a "Nominal Defendant."
Plaintiffs have also added a new claim, alleging that the Operating
General Partners violated certain of the Commission's rules (15
U.S.C. section 78n(a), 17 C.F.R. sections 240.14a-9, 140.14a-4) by
making false and misleading statements in the Proxy. Plaintiffs
also allege that the Operating General Partners breached their
fiduciary duties, breached various provisions of the Agreement,
violated the Illinois Deceptive Trade Practice Act, 815 ILCS 505 et
seq., and violated section 17-305 of the Delaware Revised Uniform
Limited Partnership Act. The Operating General Partners deny those
allegations and will continue to vigorously defend against these
claims.
Pursuant to the Agreement and Delaware law, the Partnership will
advance to the defendants their defense costs. The Corporate
General Partner has agreed to repay the Partnership for the
advances if it is ever determined that the parties were not
entitled to receive the advances. No estimate can reasonably be
made at this time of the costs of defense.
Item 4. Submission of Matters to a Vote of Security Holders.
A Special Meeting of the Limited Partners was held on Friday,
November 8, 1996 at 10:00 a.m. At this Special Meeting, the
Limited Partners holding a majority of the Units approved the
Merger of the Partnership with and into the Purchaser.
Additionally, at the Special Meeting, Limited Partners holding a
majority of the Units approved the adoption of an amendment to the
Agreement to allow the majority vote of the Limited Partners to
determine the outcome of the transaction with the Purchaser without
a vote of the General Partners of the Partnership.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters.
At December 31, 1996, there were approximately 1,627 Limited
Partners in the Partnership. There is no established public trading
market for Units and it is not anticipated that there will be a
public market for Units. Neither the General Partners nor the
Partnership are obligated, but reserve the right, to redeem or
repurchase Units. Units may also be purchased by the Plan in
certain instances. Any Units so purchased shall be retired.
However, there is no intent to redeem or purchase Units pending the
Merger.
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 the substitution of
a Limited Partner.
Cash distributions to Limited Partners for 1996, 1995 and 1994
were $1,049,822, $2,060,581 and $2,007,702, respectively. Prior to
the commencement of the Partnership's proxy solicitation in August
1996, distributions were paid four times per year, within 60 days
following the end of each calendar quarter or were paid monthly
within 15 days of the end of the month, depending upon the Limited
Partner's preference (see Item 7). All distributions represent
cash flow from operations. No amount distributed in 1996 was a
return of capital. Pursuant to the terms of the Merger Agreement,
net income after August 1, 1996 accrues to the Purchaser and,
therefore, the net income through July 31, 1996 will be distributed
to the Limited Partners at the time of the closing of the Merger.
Since the net income of the Partnership after August 1, 1996
accrues to the Purchaser, no distributions of net income were paid
to the Limited Partners for the two months of August and September
1996 and the quarter ended December 31, 1996. As a result of the
delays in closing the Merger, the Purchaser has agreed to allow
distributions of net income accruing from and after January 1, 1997
until the Merger is consummated. See Item 7.
<PAGE>
Item 6. Selected Financial Data.
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Selected Income Statement Data:
Rental Income $ 2,282,166 $ 2,249,447 $ 2,157,975
Interest Income 44,900 22,397 27,246
Net Income 1,421,119 1,756,847 1,668,247
Net Income Per Unit (a) $ 0.62 $ 0.78 $ 0.76
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 1,442,263 $ 1,069,555 $ 925,719
Land, Buildings and
Improvements 18,308,792 18,308,792 18,308,792
Investment in Brauvin
Gwinnett County Venture 151,818 153,668 157,014
Investment in Brauvin
Bay County Venture 367,323 -- --
Total Assets 18,137,625 17,780,591 18,027,140
Cash Distributions to
General Partners 21,042 44,237 5,500
Cash Distributions to
Limited Partners (b) 1,049,822 2,060,581 2,007,702
Cash Distributions to
Limited Partners
Per Unit (a) $ 0.47 $ 0.93 $ 0.91
(a) Net income per Unit and cash distributions per Unit are based on
the average Units outstanding during the year since they were of
varying dollar amounts and percentages based upon the dates
Limited Partners were admitted to the Partnership and additional
Units were purchased through the Plan.
(b) This includes $18,558, $17,867 and $19,933 paid to various
states for income taxes on behalf of all Limited Partners for the
years 1996, 1995 and 1994, respectively.
The above selected financial data should be read in conjunction
with the consolidated financial statements and the related notes
appearing elsewhere in this annual report.
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Years Ended December 31, 1993 and 1992
1993 1992
Selected Income Statement Data:
Rental Income $ 2,121,744 $ 1,978,171
Interest Income 6,086 49,654
Net Income 1,614,428 1,439,149
Net Income Per Unit (a) $ 0.73 $ 0.65
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 579,340 $ 380,001
Land, Buildings and Improvements 18,308,792 18,308,792
Investment in Brauvin Gwinnett
County Venture 160,556 --
Investment in Brauvin Bay
County Venture -- --
Total Assets 18,066,905 18,075,034
Cash Distributions to General
Partners -- --
Cash Distributions to Limited
Partners (b) 1,973,921 1,958,231
Cash Distributions to Limited
Partners per Unit (a) $ 0.91 $ 0.91
(a) Net income per Unit and cash distributions per Unit are based
on the average Units outstanding during the year since they
were of varying dollar amounts and percentages based upon the
dates Limited Partners were admitted to the Partnership and
additional Units were purchased through the Plan.
(b) This includes $17,705 and $7,856 paid to various states for
income taxes on behalf of all Limited Partners for the years
1993 and 1992, respectively.
The above selected financial data should be read in conjunction
with the consolidated financial statements and the related notes
appearing elsewhere in this annual report.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
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 "Business." Without limiting the
foregoing, words such as "anticipates," "expects,""intends,""plans"
and similar expressions are intended to identify forward-looking
statements. Theses 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 commenced an offering to the public on October
30, 1989 of 2,500,000 Units. The offering was anticipated to close
on October 29, 1990 but was extended by the General Partners with
the necessary regulatory approval to October 29, 1991. The
Offering was conditioned upon the sale of $1,200,000, which was
achieved on January 15, 1990. The Offering closed on October 29,
1991 with the Partnership raising a cumulative total of
$21,307,600. Until the proxy solicitation process began, the
Partnership continued to raise additional funds through the Plan.
The Plan raised $1,459,119 through December 31, 1996 from Limited
Partners investing their distributions of Operating Cash Flow in
additional Units. As of December 31, 1996, Units valued at
$462,972 have been repurchased by the Partnership from Limited
Partners liquidating their investment in the Partnership and have
been retired.
The Partnership purchased the land, buildings and improvements
underlying five Ponderosa restaurants on January 19, 1990, February
16, 1990, March 19, 1990, April 24, 1990 and June 4, 1990,
respectively. In addition, the Partnership closed on the land,
buildings and improvements underlying two Chi-Chi's restaurants;
the first closed on March 12, 1991 and the second closed on March
27, 1991. The land, buildings and improvements underlying an IHOP
restaurant were purchased on April 26, 1991, an Applebee's
restaurant on June 5, 1991 (which was expanded in 1992), two Sports
Unlimited sporting goods stores on September 17, 1991, a Chili's
restaurant on February 7, 1992 and three Steak n Shake restaurants
on April 16, 1992.
On February 7, 1992, the Partnership purchased a 99.5% equity
interest in a joint venture with an affiliate, Brauvin Chili's
Limited Partnership, which owns one Chili's restaurant.
On November 9, 1993, the Partnership purchased a 6.4% interest
in a joint venture with affiliated public real estate limited
partnerships (the "Venture"). The Venture acquired the land and
building underlying a 25,000 square foot CompUSA computer
superstore from an unaffiliated seller.
On October 31, 1996, the Partnership purchased a 34% joint
venture equity interest in a joint venture with affiliated public
real estate limited partnerships, the Brauvin Bay County Venture.
The Bay County Venture purchased real property upon which is
operated a newly constructed Blockbuster video store. The property
contains a 6,466 square foot building located on a 40,075 square
foot parcel of land.
These operating properties are expected to generate cash flow
for the Partnership after deducting certain operating and general
and administrative expenses from their rental income. The
Partnership has no funds available to purchase additional property,
excluding those raised through the Plan.
Below is a table summarizing the four year historical data for
distribution rates per unit:
Distribution
Date 1997 1996 1995 1994
February 15 $.2313 $.2313 $.2250
May 15 .2313 .2313 .2250
August 15 -- .2313 .2250
November 15 -- .2313 .2313
Should the Merger not occur, future increases in the
Partnership's distributions will largely depend on increased sales
at the Partnership's properties resulting in additional percentage
rent and, to a lesser extent, on rental increases, which will occur
due to increases in receipts from certain leases based upon
increases in the Consumer Price Index or scheduled increases of
base rent.
In order to enhance the Partnership's diversity and overall
financial performance, the General Partners agreed to the
conversion of one of the Partnership's Ponderosa restaurants (Unit
#856) in Dayton, Ohio into a Bennigan's in January 1996.
Bennigan's is an affiliate of Ponderosa. Metromedia Steakhouses
Company L.P., the current lease obligor, remains liable on the
existing lease. However, the General Partners believe the
conversion will ultimately generate additional percentage rent to
the Partnership and enhance the overall security of the lease. The
General Partners also believe this change adds to both the
diversity and the underlying quality of the Partnership's assets.
The Chi-Chi's located in Hickory, North Carolina closed
October 2, 1995. However, the property is leased to Foodmaker,
Inc. whom has made complete payments under the lease. Chi-Chi's has
undertook to re-lease the closed restaurant. In March 1996, a sub-
tenant executed a second sub-lease with Chi-Chi's for the property.
The new sub-tenant (Carolina Country BBQ of Hickory) began occupying
the facility in November 1996. Foodmaker continues to be the
guarantor under terms of the second sub-lease.
During the year ended December 31, 1996, the General Partners
and its affiliates collected management fees of $23,180 and
received $21,042 in Operating Cash Flow distributions.
Pursuant to the terms of the Merger Agreement, the Limited
Partners will receive approximately $8.85 per Unit in cash.
Promptly upon consummation of the Merger, the Partnership will
cease to exist and the Purchaser, as the surviving entity will
succeed to all of the assets and liabilities of the Partnership.
The Limited Partners holding a majority of the Units approved the
Merger on November 8, 1996.
The Partnership drafted a proxy statement, which required
prior review and comment by the Commission, to solicit proxies for
use at the Special Meeting originally to be held at the offices of
the Partnership on September 24, 1996. As a result of various
pending legal issues, as described in Item 3, the Special Meeting
was adjourned to November 8, 1996 at 10:00 a.m. The purpose of
the Special Meeting was to vote upon the Merger and certain other
matters as described in the Proxy.
By approving the Merger, the Limited Partners also approved an
amendment of the Agreement allowing the Partnership to sell or
lease property to affiliates (this amendment, together with the
Merger shall be referred to herein as the "Transaction"). The
Delaware Revised Uniform Limited Partnership Act (the "Act")
provides that a merger must also be approved by the general
partners of a partnership, unless the limited partnership agreement
provides otherwise. Because the Agreement did not address this
matter, at the Special Meeting, Limited Partners holding a majority
of the Units were also asked to approve the adoption of an
amendment to the Agreement to allow the majority vote of the
Limited Partners to determine the outcome of the transaction with
the Purchaser without the vote of the General Partners of the
Partnership. Such approval was also received. Neither the Act
nor the Agreement provides the Limited Partners not voting in favor
of the Transaction with dissenters' appraisal rights.
The redemption price to be paid to the Limited Partners in
connection with the Merger is based on the fair market value of the
properties of the Partnership (the "Assets"). Cushman & Wakefield
Valuation Advisory Service ("Cushman & Wakefield"), an independent
appraiser, the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets, to satisfy the Partnership's
requirements under the Employee Retirement Income Security Act of
1974, as amended. Cushman & Wakefield determined the fair market
value of the Assets to be $19,129,150, or $8.58 per Unit. The
redemption price of $8.85 per Unit also includes all remaining cash
of the Partnership, less net earnings of the Partnership from and
after August 1, 1996 through December 31, 1996, less the
Partnership's actual costs incurred and accrued through the
effective time of the filing of the certificate of merger,
including reasonable reserves in connection with: (i) the proxy
solicitation; (ii) the Transaction (as detailed in the Merger
Agreement); and (iii) the winding up of the Partnership, including
preparation of the final audit, tax return and K-1s (collectively,
the "Transaction Costs") and less all other Partnership
obligations.
Cushman & Wakefield subsequently provided an opinion as to the
fairness of the Transaction to the Limited Partners from a
financial point of view. In its opinion, Cushman & Wakefield
advised that, the price per Unit reflected in the Transaction is
fair, from a financial point of view to the Limited Partners.
Cushman & Wakefield's determination that a price is "fair" does not
mean that the price is the highest price which might be obtained in
the marketplace, but rather that based on the appraised values of
the properties, the price reflected in the Transaction is believed
by Cushman & Wakefield to be reasonable.
The General Partners are Mr. Jerome J. Brault, the Managing
General Partner of the Partnership, and Brauvin Realty Advisors
III, Inc., the Corporate General Partner of the Partnership. Mr.
Cezar M. Froelich resigned his position as an Individual General
Partner of the Partnership effective as of September 17, 1996. The
General Partners will not receive any payment in exchange for the
redemption of their general partnership interests nor will they
receive any fees from the Partnership in connection with the
Transaction.
The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, will have a
minority ownership interest in the Purchaser. Therefore, the
Messrs. Brault have an indirect economic interest in consummating
the Transaction that is in conflict with the economic interests of
the Limited Partners. Mr. Froelich has no affiliation with the
Purchaser.
Although the Special Meeting was held and the necessary
approvals received, the Merger has not been completed primarily due
to the lawsuits that are still pending. The General Partners
believe that these lawsuits are without merit and, therefore,
continue to vigorously defend against them. The Purchaser is aware
of these lawsuits and is nonetheless willing to proceed with the
Merger, subject to the satisfaction of its due diligence as
outlined below.
Following receipt of Limited Partner approval, representatives
of the Purchaser commenced in earnest the finalization of
Purchaser's financing and its due diligence review of the assets of
the Partnership and those of the Affiliated Partnerships. The due
diligence process has revealed certain concerns relating to
potential environmental problems at some of the properties of the
Partnership and the Affiliated Partnerships. The due diligence
review has also raised questions regarding the interpretation of
certain terms in the leases governing some of the Partnership's and
the Affiliated Partnerships' properties. A very significant tenant
is interpreting certain purchase options contained in its leases in
a way that would cause the value of the properties leased by such
tenant to be significantly below the current appraised value.
Members of management of the Partnership and the Affiliated
Partnerships have been working diligently with the Purchaser to
assess these risks and to resolve them in a way that will allow the
Merger and the related transactions to be consummated without any
changes to the terms or the Merger price.
In accordance with the terms of the Merger Agreement, the
General Partners suspended all distributions to Limited Partners,
however, as a result of the unforeseen delays brought about by the
litigation and the due diligence issues highlighted above, the
General Partners felt it was appropriate that an earnings
distribution be made to the Limited Partners. Although the terms
of the Merger Agreement entered into by the Partnership and the
Purchaser provides that the assets being acquired by the Purchaser
in connection with the merger include all earnings of the
Partnership from and after August 1, 1996, the Purchaser has agreed
to allow the Partnership to make distributions to the Limited
Partners of net earnings for the period from and after January 1,
1997 until the merger is consummated. In exchange, the Partnership
has agreed to extend the termination date of the Merger Agreement
to June 30, 1997 to allow the Purchaser time to complete its due
diligence. Notwithstanding the extension of the termination date,
the Partnership and the Purchaser continue to work through the due
diligence issues outlined above, with the intent of closing the
Merger as soon as possible. Net earnings accruing after March 31,
1997 through the closing date will be included with the final cash
distribution to the Limited Partners from the Merger.
A distribution of the Partnership's net earnings for the
period January 1, 1997 to March 31, 1997 was made to the Limited
Partners on March 31, 1997 in the amount of approximately $534,400.
Results of Operations - Years ended December 31, 1996 and 1995
Results of operations for the Partnership for the year ended
December 31, 1996 reflected net income of $1,421,119 compared to
$1,756,847 for the year ended December 31, 1995, a decrease of
approximately $335,700. The decrease in net income was due
primarily to an increase in total expenses as a result of the
Partnership's Transaction and property valuations.
Total income for the year ended December 31, 1996 was
$2,327,929 as compared to $2,275,223 for the year ended December
31, 1995, an increase of approximately $52,700. The increase in
total income is mainly due to an increase in rental income as a
result of an increase in percentage rental income at several of the
properties. Total income was also effected due to an increase in
interest income as a result of the Partnership having more funds
invested during 1996.
Total expenses for the year ended December 31, 1996 were
$921,133 as compared to $531,100 for the year ended December 31,
1995, an increase of approximately $390,000. The increase in
expense is primarily the result of legal and other professional
fees paid or accrued related to the Transaction. Total expenses
also increased in 1996 compared to 1995 as a result of the
Partnership hiring an independent real estate company to conduct
property valuations to provide a valuation of the Units to satisfy
the Partnership's requirements under the Employee Retirement Income
Security Act of 1974, as amended.
Results of Operations - Years ended December 31, 1995 and 1994
Results of operations reflected net income of $1,756,847 for
the year ended December 31, 1995 compared to $1,668,247 for the
year ended December 31, 1994, an increase of $88,600. The increase
in net income is mainly due to an increase in rental income of
approximately $91,000 which was a result of the Partnership's
earning additional rent based on the sales performance at several
of the properties.
Results of Operations - Years ended December 31, 1994 and 1993
Results of operations reflected net income of $1,668,247 in
1994 as compared to $1,614,428 for 1993. The increase of
approximately $54,000 is due to an increase in rental income of
approximately $36,000 as a result of base rental increases based
upon increases in the Consumer Price Index and fixed rate increases
based upon the original lease terms, an increase in interest income
of approximately $21,000, an increase in other income of
approximately $17,000 and an increase in equity interest income of
approximately $12,000. These increases in income were slightly
offset by an increase in management fees of $5,105 and an increase
of general and administrative expenses of approximately $26,000.
Impact of Inflation
The Partnership anticipates that the operations of the
Partnership will not be significantly impacted by inflation. To
offset any potential adverse effects of inflation, the Partnership
entered into "triple-net" leases with the tenant being responsible
for all operating expenses, insurance and real estate taxes. In
addition, several of the leases require escalations of rent based
upon increases in the Consumer Price Index, scheduled increases of
base rents, or tenant sales.
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
See Index to Consolidated Financial Statements and Schedule on
Page F-1 of this Annual Report on Form 10-K for consolidated
financial statements and financial statement schedule, where
applicable.
The supplemental financial information specified in Item 302
of Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During the Partnership's two most recent fiscal years, there
have been no changes in, or disagreements with, the accountants.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partners of the Partnership are:
Brauvin Realty Advisors III, Inc., an Illinois corporation
Mr. Jerome J. Brault, individually
Brauvin Realty Advisors III, Inc. (the "Corporate General
Partner") was formed under the laws of the State of Illinois in
1989, with its issued and outstanding shares being owned by Messrs.
Jerome J. Brault (beneficially)(50%) and Cezar M. Froelich (50%).
The principal officers and directors of the Corporate General
Partner are:
Mr. Jerome J. Brault. . . . . Chairman of the Board of
Directors, President, Chief
Executive Officer and
Director
Mr. B. Allen Aynessazian. . . Treasurer and Chief Financial
Officer
Mr. James L. Brault . . . . . Vice President and Secretary
The business experience during the past five years of the
principal officers and directors of the Corporate General Partner
and the General Partners are as follows:
MR. JEROME J. BRAULT (age 63) chairman of the board of
directors, president and chief executive officer of the Corporate
General Partner, as well as a principal shareholder of the
Corporate General Partner. He is a member and manager of Brauvin
Real Estate Funds, L.L.C. Since 1979, he has been a shareholder,
president and a director of Brauvin/Chicago, Ltd. He is an
officer, director and one of the principal shareholders of various
Brauvin entities which act as the general partners of six other
publicly registered real estate programs. He is an officer,
director and one of the principal shareholders of Brauvin
Associates, Inc., Brauvin Management Company, Brauvin Advisory
Services, Inc. and Brauvin Securities, Inc., Illinois companies
engaged in the real estate and securities businesses. He is a
director, president and chief executive officer of Brauvin Net
Lease V, Inc. 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 acted 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 a shareholder in Brauvin
Management Company and Brauvin Financial Inc. Mr. Froelich
resigned as a director of the Corporate General Partner in December
1994 and as an Individual General Partner effective as of September
17, 1996.
MR. JAMES L. BRAULT (age 36) is a vice president and secretary
and is responsible for the overall operations of the Corporate
General Partner and other affiliates of the Corporate General
Partner. He is an officer of Brauvin Real Estate Funds, L.L.C. He
is an officer of various Brauvin entities, which act as the general
partners of six other publicly registered real estate programs.
Mr. Brault is executive vice president and assistant secretary and
is responsible for the overall operations of Brauvin Management
Company. He is also an executive vice president and secretary for
Brauvin Net Lease V, Inc. Prior to joining the Brauvin
organization in May 1989, he was a Vice President of the Commercial
Real Estate Division of the First National Bank of Chicago ("First
Chicago"), based in their Washington, D.C. office. Mr. Brault
joined First Chicago in 1983 and his responsibilities included the
origination and management of commercial real estate loans, as well
as the direct management of a loan portfolio in excess of $150
million. Mr. Brault received a B.A. in Economics from Williams
College, Williamstown, Massachusetts in 1983 and an M.B.A. in
Finance and Investments from George Washington University,
Washington, D.C. in 1987. Mr. Brault is the son of Mr. Jerome J.
Brault.
MR. B. ALLEN AYNESSAZIAN (age 32) is the treasurer and chief
financial officer of the Corporate General Partner and other
affiliates of the Corporate General Partner. He is the chief
financial officer of various Brauvin publicly registered real
estate programs. He is the chief financial officer of Brauvin Net
Lease V, Inc. He is also responsible for the overall financial
accounting of Brauvin Management Company, Brauvin Financial, Inc.
and related partnerships. He is also responsible for the
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 11. 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 its
affiliates as described under the caption "Compensation Table" on
pages 10 to 12 of the Partnership's Prospectus and "Summary of
Limited Partnership Agreement - Allocations and Distribution to the
Limited Partners" on page 70 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 Sales or Refinancing
Proceeds" and "Compensation of General Partners and Their
Affiliates" located on pages A-8 to A-13 of the Agreement, attached
as Exhibit A to the Prospectus. The relationship of the Corporate
General Partner (and its directors and officers) to its affiliates
is set forth above in Item 10. Reference is also made to Note 2 of
the Notes to Consolidated Financial Statements filed with this
Annual Report on Form 10-K for a description of such distributions
and allocations.
The General Partners received Acquisition Fees for services
rendered in connection with the selection, purchase, construction
or development of any property by the Partnership whether
designated as real estate commissions, acquisition fees, finders'
fees, selection fees, development fees, non-recurring management
fees, consulting fees, payments for covenants not to compete,
guarantee fees, financing fees or any other similar fees or
commissions, however designated and however treated for tax or
accounting purposes. Such Acquisition Fees may not exceed such
compensation as is customarily charged in arm's-length transactions
by others rendering similar services as an ongoing public activity
in the same geographic locale and for comparable properties. In
addition, unaffiliated real estate brokers and other parties
engaged by the seller of a Partnership property received fees or
commissions for their services from the seller in connection with
the purchase of a property by the Partnership, in an amount of up
to 1/2% of the gross proceeds of the Offering. Such fee was not
paid with any of the gross proceeds of the Offering. In the event
real estate brokers or other parties receive such fees which would
be considered Acquisition Fees, the total Acquisition Fees paid to
all parties by all parties will not exceed 5-1/2% of the gross
proceeds of the Offering. The aggregate Acquisition Fees to be
paid to an affiliate of the General Partners shall not exceed 5% of
the gross proceeds of the Offering. No acquisition fees were paid
in 1995 or 1994. An acquisition fee of $21,278 was paid in 1996
related to the Bay County Venture purchase.
Up to a maximum of 1% of the gross proceeds of the Offering
was set aside for the Partnership's Distribution Reserve which, if
not utilized to pay the Limited One Year Guaranty Return of 9-1/4%
per annum on Adjusted Investment, could have been paid to an
affiliate of the General Partners at the sole discretion of the
General Partners on the earlier of: (i) October 29, 1991; or (ii)
the expenditure of 95% of the proceeds of the Offering available
for Investment in Properties (the "Distribution Reserve
Termination"). No such amounts were paid to the General Partners
since the Distribution Reserve was fully used to fund distributions
to the Limited Partners.
An affiliate of the General Partners may provide leasing and
re-leasing services to the Partnership in connection with the
management of Partnership properties. The maximum property
management fee paid to an affiliate of the General Partners shall
be equal to 1% of the gross revenues of each Partnership property,
however, the receipt of such property management fees by the
affiliate of the General Partners is subordinate to receipt by the
Limited Partners of the 9-1/4% non-cumulative, non-compounded
annual return on Adjusted Investment (the "Current Preferred
Return"). In the fourth quarter of 1994, the Partnership paid
property management fees of $5,105 as a result of the Limited
Partners receiving a 9-1/4% non-cumulative, non-compounded return
for the third quarter of 1994. During 1996 and 1995, the
Partnership paid $23,180 and $29,539, respectively, for property
management fees.
(c, d, e & f) Not applicable.
(g) The Partnership has no employees and pays no
employee or director compensation.
(h & i) Not applicable.
(j) Compensation Committee Interlocks and Insider
Participation. Since the Partnership has no
employees, it did not have a compensation committee
and is not responsible for the payment of any
compensation.
(k) Not applicable.
(l) Not applicable.
The following is a summary of all fees, commissions and other
expenses paid or payable to the General Partners or its affiliates
for the years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
Selling commissions $6,867 $27,592 $26,309
Management fees 22,990 29,539 5,105
Reimbursable operating expenses 98,457 64,679 74,400
Legal fees 4,244 5,022 31,352
Acquisitions fees 21,278 -- --
Transaction costs 8,844 -- --
Item 12. 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) None of the officers and directors of the Corporate
General Partner of the Partnership purchased Units.
(c) Other than as described in the Proxy, the Partnership is
not aware of any arrangements which may result in a
change in the control of the Partnership.
No officer or director of the Corporate General Partner
possesses a right to acquire beneficial ownership of
Units of the Partnership. The General Partners of the
Partnership will share in the profits, losses and
distributions of the Partnership as outlined in Item 11,
"Executive Compensation."
Item 13. Certain Relationships and Related Transactions.
(a & b) The Partnership is entitled to engage in various
transactions involving affiliates of the Corporate
General Partner, as described under the sections
"Compensation Table" and "Conflicts of Interest" on pages
11 to 14 and 14 to 16, respectively, of the Partnership's
Prospectus, as supplemented, and the section of the
Agreement entitled "Rights, Duties and Obligations of
General Partners" on pages A-15 to A-18. The
relationship of the Corporate General Partner to its
affiliates is set forth in Item 10. Cezar M. Froelich is
a principal of the law firm of Shefsky & Froelich Ltd.,
which firm acted as securities and real estate counsel to
the Partnership, the General Partners and certain of
their respective affiliates.
(c) No management persons are indebted to the Partnership.
(d) There have been no significant transactions with
promoters.
<PAGE>
PART IV
Item 14. Exhibits, Consolidated Financial Statements and Schedule,
and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Consolidated Financial Statements and Schedule
indicated in Part II, Item 8 "Consolidated
Financial Statements and Supplementary Data." (See
Index to Consolidated Financial Statements and
Schedule on page F-1 of Form 10-K).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-K, Item 601:
(10)(d) First Amendment and Waiver to the Agreement and
Plan of Merger.
(21) Subsidiaries of the Registrant.
(27) Financial Data Schedule.
The following exhibits are incorporated by reference from the
Registrant's Registration Statement (File No. 33-28577) on Form
S-11 filed under the Securities Act of 1933:
Exhibit No. Description
3.(a) Restated Limited Partnership Agreement.
3.(b) Articles of Incorporation of Brauvin Realty Advisors
III, Inc.
3.(c) By-Laws of Brauvin Realty Advisors III, Inc.
3.(d) Amendment to the Certificate of Limited Partnership
of the Partnership.
10.(a) Escrow Agreement.
(b) Form 8-K. On November 8, 1996, the vote of the Limited
Partners was taken and resulted in approval of the merger of
the Partnership per the terms of the Proxy. This Form 8-K was
dated and filed on November 8, 1996.
(c) An annual report for the fiscal year 1996 will be sent to the
Limited Partners subsequent to this filing.
The following exhibits are incorporated by reference to the
Registrant's fiscal year ended 1994 Form 10-K (File No. 0-19219):
Exhibit No. Description
(10)(b)(1) Management Agreement.
(19)(a) Amendment to Distribution Reinvestment Plan.
(28) Pages 11-16, 40, 41 and 70 of the Partnership's
Prospectus dated October 30, 1989, as
supplemented, pages A-8 to A-13 and A-15 to A-18
of the Agreement and portions of Supplements #4
and #5.
The following exhibit is incorporated by reference to the
Registrant's definitive proxy statement dated August 23, 1996 (File
No. 0-17557):
Exhibit No. Description
(10)(c) Merger Agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
BRAUVIN INCOME PLUS L.P. III
BY:Brauvin Realty Advisors III, Inc.
Corporate General Partner
By: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors, President and Chief
Executive Officer
By: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and
Treasurer
By: /s/ James L. Brault
James L. Brault
Vice President and Secretary
INDIVIDUAL GENERAL PARTNER
/s/ Jerome J. Brault
Jerome J. Brault
Dated: 4/10/97
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1996 and 1995 . . . . . . F-3
Consolidated Statements of Operations, for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . F-4
Consolidated Statements of Partners' Capital, for
the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . F-5
Consolidated Statements of Cash Flows, for the years
ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-7
Schedule III--Real Estate and Accumulated Depreciation,
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . F-25
All other schedules provided for in Item 14(a)(2) of Form 10-K are
either not required, not applicable or immaterial.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Brauvin Income Plus L. P. III
Chicago, Illinois
We have audited the accompanying consolidated balance sheets of
Brauvin Income Plus L. P. III (a limited partnership) and subsidiary
as of December 31, 1996 and 1995, and the related consolidated
statements of operations, partners' capital, and cash flows for the
each of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in the
Index to Consolidated Financial Statements and Schedule on page F-1.
These consolidated financial statements and the financial statement
schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Brauvin
Income Plus L. P. III and its subsidiary at December 31, 1996 and
1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 10, 1997
(April 2, 1997 as to Note 6)
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1996 1995
ASSETS
Investment in real estate, at cost:
Land $ 7,845,528 $ 7,845,528
Buildings and improvements 10,463,264 10,463,264
18,308,792 18,308,792
Less: Accumulated depreciation (2,254,604) (1,869,626)
Net investment in real estate 16,054,188 16,439,166
Investment in Joint Ventures (Note 5):
Brauvin Gwinnett County Venture 151,818 153,668
Brauvin Bay County Venture 367,323 --
Cash and cash equivalents 1,442,263 1,069,555
Rent receivable 3,318 --
Deferred rent receivable 45,201 36,572
Due from affiliates -- 7,301
Prepaid offering costs 70,824 72,270
Other assets 2,690 2,059
Total Assets $18,137,625 $17,780,591
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 315,549 $ 311,553
Rent received in advance 62,236 83,800
Total Liabilities 377,785 395,353
Minority Interest in Brauvin
Brauvin Chili's Limited Partnership (569) (514)
PARTNERS' CAPITAL:
General Partners 78,152 70,772
Limited Partners 17,682,257 17,314,980
Total Partners' Capital 17,760,409 17,385,752
Total Liabilities and Partners'
Capital $18,137,625 $17,780,591
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
INCOME:
Rental $2,282,166 $2,249,447 $2,157,975
Interest 44,900 22,397 27,246
Other 863 3,379 20,426
Total income 2,327,929 2,275,223 2,205,647
EXPENSES:
General and administrative 158,191 118,448 150,726
Management fees (Note 3) 22,990 29,539 5,105
Transaction costs (Note 6) 297,345 -- --
Valuation fees 57,629 -- --
Depreciation 384,978 383,113 386,842
Amortization of deferred
organization costs -- -- 6,000
Total expenses 921,133 531,100 548,673
Income before minority interests and
equity interest in joint ventures 1,406,796 1,744,123 1,656,974
Minority interest share in
Brauvin Chili's Limited
Partnership's net income (530) (569) (546)
Equity interest in net income from:
Brauvin Bay County Venture 1,343 -- --
Brauvin Gwinnett County Venture 13,510 13,293 11,819
Net income $1,421,119 $1,756,847 $1,668,247
Net income allocated to the
General Partners $ 28,422 $ 35,137 $ --
Net income allocated to the
Limited Partners $1,392,697 $1,721,710 $1,668,247
Net income per Unit outstanding (a) $ 0.62 $ 0.78 $ 0.76
(a) Net income per Unit is based on the average Units outstanding during the
year since they were of varying dollar amounts and percentages based
upon the dates Limited Partners were admitted to the Partnership and
additional Units were purchased through the distribution reinvestment
plan (the "Plan").
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partners Partners* Total
Balance, January 1, 1994 $ 85,372 $17,719,343 $17,804,715
Contributions, net -- 145,507 145,507
Selling commissions and other
offering costs -- (31,848) (31,848)
Net income -- 1,668,247 1,668,247
Cash distributions (5,500) (2,007,702) (2,013,202)
Balance, December 31, 1994 79,872 17,493,547 17,573,419
Contributions, net -- 193,705 193,705
Selling commissions and other
offering costs -- (33,401) (33,401)
Net income 35,137 1,721,710 1,756,847
Cash distributions (44,237) (2,060,581) (2,104,818)
Balance, December 31, 1995 70,772 17,314,980 17,385,752
Contributions, net -- 32,715 32,715
Selling commissions and other
offering costs -- (8,313) (8,313)
Net income 28,422 1,392,697 1,421,119
Cash distributions (21,042) (1,049,822) (1,070,864)
Balance, December 31, 1996 $ 78,152 $17,682,257 $17,760,409
* Total Units outstanding at December 31, 1996, 1995 and 1994 were
2,230,375, 2,227,103, and 2,208,472, respectively. Cash distributions
to Limited Partners per Unit were approximately, $0.47, $0.93 and $0.91
for the years ended December 31, 1996, 1995 and 1994, respectively. Cash
distributions to Limited Partners per Unit are based on the average Units
outstanding during the year since they were of varying dollar amounts and
percentages based upon the dates Limited Partners were admitted to the
Partnership and additional Units were purchased through the Plan.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net income $1,421,119 $1,756,847 $1,668,247
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 384,978 383,113 392,842
Minority interest's share of income from
Brauvin Chili's Limited Partnership 530 569 546
Equity interest in net income from:
Brauvin Bay County Venture (1,343) -- --
Brauvin Gwinnett County Venture (13,510) (13,293) (11,819)
(Increase) decrease in rent receivable (3,318) 13,755 (4,963)
Increase in deferred rent receivable (8,629) (8,629) (10,129)
Decrease (increase) in due from affiliates 7,301 (4,949) (688)
Increase in other assets (631) (2,059) --
Increase in accounts payable and
accrued expenses 3,996 12,815 170,784
(Decrease) increase in rent received
in advance (21,564) (61,144) 17,604
(Decrease) increase in due to affiliates -- (10,421) 3,337
Net cash provided by operating
activities 1,768,929 2,066,604 2,225,761
Cash flows from investing activities:
Investment in Brauvin Bay County Venture (365,980) -- --
Distributions from Brauvin Gwinnett
County Venture 15,360 16,639 15,361
Net cash (used in) provided by
investing activities (350,620) 16,639 15,361
Cash flows from financing activities:
Sale of Units, net of liquidations and
selling commissions 25,848 166,112 119,199
Cash distributions to Limited Partners (1,049,822)(2,060,581)(2,007,702)
Cash distributions to General Partners (21,042) (44,237) (5,500)
Cash distribution to minority interest -
Brauvin Chili's Limited Partnership (585) (701) (740)
Net cash used in financing activities (1,045,601)(1,939,407)(1,894,743)
Net increase in cash and
cash equivalents 372,708 143,836 346,379
Cash and cash equivalents at beginning
of year 1,069,555 925,719 579,340
Cash and cash equivalents at end of year $1,422,263 $1,069,555 $ 925,719
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1996, 1995 and 1994
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BRAUVIN INCOME PLUS L.P. III (the "Partnership") is a Delaware
limited partnership organized for the purpose of acquiring
debt-free ownership of existing, free-standing, income-producing
retail, office or industrial real estate properties predominantly
subject to "triple-net" leases. The General Partners of the
Partnership are Brauvin Realty Advisors III, Inc. and Jerome J.
Brault. Brauvin Realty Advisors III, Inc. is owned by Messrs.
Brault (beneficially) (50%) and Cezar M. Froelich (50%). Mr.
Froelich resigned as a director of Brauvin Realty Advisors III,
Inc. in December 1994 and as an Individual General Partner
effective as of September 17, 1996. Brauvin Securities, Inc., an
affiliate of the General Partners, was the selling agent for the
Partnership. The Partnership is managed by an affiliate of the
General Partners.
The Partnership was formed on July 31, 1989 and filed a
Registration Statement on Form S-11 with the Securities and
Exchange Commission which was declared effective on October 30,
1989. 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 January 15,
1990. The Partnership's offering was originally expected to close
on October 29, 1990 but the Partnership, with the receipt of the
necessary regulatory approval, extended the offering until it
closed on October 29, 1991. Through December 31, 1996, 1995, and
1994, the Partnership has sold $22,766,719, $22,693,694 and
$22,084,729 of Units, respectively. These totals include
$1,459,119, $1,386,094 and $1,096,388 of Units, respectively,
raised by Limited Partners who utilized their distributions of
Operating Cash Flow to purchase additional Units through the
distribution reinvestment plan (the "Plan"). Units valued at
$462,972, $422,662 and $321,667 have been repurchased by the
Partnership from Limited Partners liquidating their investment in
the Partnership and have been retired as of December 31, 1996, 1995
and 1994, respectively. As of December 31, 1996, the Plan
participants have acquired Units under the Plan which approximate
6% of the total Units outstanding.
The Partnership has acquired the land and buildings underlying
five Ponderosa restaurants, two Chi-Chi's restaurants, one
International House of Pancakes restaurant, one Applebee's
restaurant, two Sports Unlimited stores, and three Steak n Shake
restaurants. The Partnership also acquired 99.5%, 6.4% and 34.0%
equity interests in three joint ventures with entities affiliated
with the Partnership. These ventures own the land underlying a
Chili's restaurant, a CompUSA store and a Blockbuster Video store,
respectively.
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 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 consolidated financial
statements. However, in certain instances, the Partnership has
been required under applicable state law to remit directly to the
tax authorities amounts representing withholding from distributions
paid to partners.
Consolidation of Joint Venture
The Partnership owns a 99.5% equity interest in one joint
venture, Brauvin Chili's Limited Partnership, which owns one
Chili's restaurant. The accompanying financial statements have
consolidated 100% of the assets, liabilities, operations and
partners' capital of Brauvin Chili's Limited Partnership. All
significant intercompany accounts have been eliminated.
Investment in Joint Venture
The Partnership owns a 6.4% and a 34.0% equity interest in two
joint ventures, Brauvin Gwinnett County Venture, which owns one
CompUSA store, and Brauvin Bay County Venture, which owns one
Blockbuster Video store, respectively. The accompanying financial
statements include the investments in Brauvin Gwinnett County
Venture and Brauvin Bay County Venture using the equity method of
accounting.
Investment in Real Estate
The operating properties acquired by the Partnership are stated
at cost including acquisition costs. The Partnership's rental
properties are stated at cost including acquisition costs.
Depreciation is recorded on a straight-line basis over the
estimated economic lives of the properties which approximate 35
years.
In 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of" (SFAS
121). 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, 1996 and 1995. Accordingly, no impairment loss has been
recorded in the accompanying financial statements for the years
ended December 31, 1996 and 1995.
Organization and Offering Costs
Organization costs represent costs incurred in connection with
the organization and formation of the Partnership. Organization
costs were amortized over a period of five years using the
straight-line method. Offering costs represent costs incurred in
selling Units, such as the printing of the Prospectus and marketing
materials. Offering costs have been recorded as a reduction of
Limited Partners' Capital.
Prepaid offering costs represent amounts in excess of the
defined percentages of the gross proceeds. Prior to the
commencement of the Partnership's proxy solicitation (See Note 6),
gross proceeds were expected to increase due to the purchase of
additional Units through the Plan and the prepaid offering costs
would be transferred to offering costs and treated as a reduction
in Partners' Capital.
Cash and Cash Equivalents
Cash equivalents include all highly liquid debt instruments with
an original maturity within three months of purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of December 31, 1996 and
1995, 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 a reasonable
estimate of fair value: cash and cash equivalents; rent receivable;
due from affiliates; accounts payable and accrued expenses; and
rent received in advance.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement") shall be distributed: (a) first, to the Limited
Partners until the Limited Partners receive an amount equal to a
9-1/4% non-cumulative, non-compounded, annual return on Adjusted
Investment, as such term is defined in the Agreement, commencing on
the last day of the calendar quarter in which the Unit was
purchased (the "Current Preferred Return"); and (b) thereafter, any
remaining amounts will be distributed 98% to the Limited Partners
(on a pro rata basis) and 2% to the General Partners.
The net proceeds of a sale or refinancing of a Partnership
property shall be distributed as follows:
. first, pro rata to the Limited Partners until each Limited
Partner has received an amount equal to a 10.5% cumulative,
non-compounded, annual return of Adjusted Investment (the
"Cumulative Preferred Return");
. second, to the Limited Partners until each Limited Partner has
been paid an amount equal to his Adjusted Investment, as defined
in the Agreement, apportioned pro rata among the Limited
Partners based on the amount of the Adjusted Investment; and
. thereafter, 95% to the Limited Partners (apportioned pro rata
based on Units) and 5% to the General Partners.
Profits and Losses
Net profits and losses from operations of the Partnership
[computed without regard to any allowance for depreciation or cost
recovery deductions under the Internal Revenue Code of 1986, as
amended (the "Code")] for each taxable year of the Partnership
shall be allocated to each Partner in the same ratio as the cash
distributions received by such Partner attributable to that period
bears to the total cash distributed by the Partnership. In the
event that there are no cash distributions, net profits and losses
from operations of the Partnership (computed without regard to any
allowance for depreciation or cost recovery deductions under the
Code) shall be allocated 99% to the Limited Partners and 1% to the
General Partners. Notwithstanding the foregoing, all depreciation
and cost recovery deductions allowed under the Code shall be
allocated 2% to the General Partners and 98% to the Taxable Class
Limited Partners, as defined in the Agreement.
The net profit of the Partnership from any sale or other
disposition of a Partnership property shall be allocated (with
ordinary income being allocated first) as follows: (a) first, an
amount equal to the aggregate deficit balances of the Partners'
Capital Accounts, as such term is defined in the Agreement, shall
be allocated to each Partner who or which has a deficit Capital
Account balance in the same ratio as the deficit balance of such
Partner's Capital Account bears to the aggregate of the deficit
balances of all Partners' Capital Accounts; (b) second, to the
Limited Partners until the Capital Account balances of the Limited
Partners are equal to any unpaid Cumulative Preferred Return, as of
such date; (c) third, to the Limited Partners until the Capital
Account balances of the Limited Partners are equal to the sum of
the amount of their Adjusted Investment plus any unpaid Cumulative
Preferred Return; (d) fourth, to the General Partners until their
Capital Account balances are equal to any previously subordinated
fees; and (e) thereafter, 95% to the Limited Partners and 5% to the
General Partners. The net loss of the Partnership from any sale or
other disposition of a Partnership property shall be allocated as
follows: (a) first, an amount equal to the aggregate positive
balances in the Partners' Capital Accounts, to each Partner in the
same ratio as the positive balance in such Partner's Capital
Account bears to the aggregate of all Partners' positive Capital
Accounts balances; and (b) thereafter, 95% to the Limited Partners
and 5% to the General Partners.
(3) TRANSACTIONS WITH RELATED PARTIES
The Partnership pays an affiliate of the General Partners an
annual property management fee equal to up to 1% of gross revenues
derived from Partnership properties managed by such affiliate. The
property management fee is subordinated to receipt by the Limited
Partners of distributions of Operating Cash Flow in an amount equal
to the Current Preferred Return.
An affiliate of one of the General Partners provided securities
and real estate counsel to the Partnership.
The Partnership pays affiliates of the General Partners selling
commissions of 7-1/2% of the capital contributions received for
Units sold by the affiliates.
The Partnership pays an affiliate of the General Partners an
acquisition fee in the amount of up to 5% of the gross proceeds of
the Partnership's offering for the services rendered in connection
with the process pertaining to the acquisition of a property.
Acquisition fees related to the properties not ultimately purchased
by the Partnership are expensed as incurred.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the years ended December 31,
1996, 1995 and 1994 were as follows:
1996 1995 1994
Selling commissions $ 6,867 $27,592 $26,309
Management fees 22,990 29,539 5,105
Reimbursable operating expenses 98,457 64,679 74,400
Legal fees 4,244 5,022 31,352
Acquisition Fees 21,278 -- --
Transaction costs 8,844 -- --
(4) LEASES
The Partnership's rental income is principally obtained from
tenants through rental payments provided under triple-net
noncancelable operating leases. The leases provide for a base
minimum annual rent and increases in rent such as through
participation in gross sales above a stated level. The following is
a schedule of noncancelable future minimum rental payments due to
the Partnership under operating leases of Partnership properties as
of December 31, 1996:
Year Ending December 31:
1997 $ 2,117,409
1998 2,117,409
1999 2,124,909
2000 2,127,409
2001 2,127,409
Thereafter 14,137,988
$24,752,533
Additional rent based on percentages of tenant sales increases
was $158,196, $142,179 and $58,684 in 1996, 1995 and 1994,
respectively.
Approximately 31% of the Partnership's rental income is from
properties operated as Ponderosa restaurants. The Partnership is
subject to some risk of loss should adverse events affect those
Ponderosa restaurants and, in turn, adversely affect the lessees'
ability to pay rent to the Partnership.
(5) INVESTMENT IN JOINT VENTURES
The Partnership owns equity interests in the Brauvin Gwinnett
County Venture and the Brauvin Bay County Venture and reports its
investments on the equity method. The following are condensed
financial statements for the Brauvin Gwinnett County Venture and
the Bay County Venture:
BRAUVIN GWINNETT COUNTY VENTURE
December 31, 1996 December 31, 1995
Land and buildings, net $2,330,758 $2,376,510
Other assets 59,531 41,567
$2,390,289 $2,418,077
Liabilities $ 23,820 $ 22,702
Partners' capital 2,366,469 2,395,375
$2,390,289 $2,418,077
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
Rental income $264,475 $264,248 $241,451
Expenses:
Depreciation 45,752 45,752 45,752
Management fees 2,520 2,497 2,520
Operating and
administrative 5,109 8,292 8,510
53,381 56,541 56,782
Net income $211,094 $207,707 $184,669
<PAGE>
BRAUVIN BAY COUNTY VENTURE
December 31, 1996
Land and buildings, net $1,069,277
Other assets 13,531
$1,082,808
Liabilities $ 1,155
Partners' capital 1,081,653
$1,082,808
Period from
October 31, 1996
(inception) to
December 31,
1996
Rental income $18,502
Expenses:
Depreciation 2,898
Management fees 191
Operating and administrative 11,463
14,552
Net income $ 3,950
(6) MERGER AND LITIGATION
Merger
Pursuant to the terms of the an agreement and plan of merger
dated as of June 14, 1996, as amended March 24, 1997 (the "Merger
Agreement") the Partnership proposes to merge with and into the
Brauvin Real Estate Funds L.L.C., a Delaware limited liability
company affiliated with certain of the General Partners (the
"Purchaser") through a merger (the "Merger") of its Units. In
connection with the Merger, the Limited Partners will receive
approximately $8.85 per Unit in cash. Promptly upon consummation
of the Merger, the Partnership will cease to exist and the
Purchaser, as the surviving entity, will succeed to all of the
assets and liabilities of the Partnership. The Limited Partners
holding a majority of the Units approved the Merger on November 8,
1996. By approving the Merger, the Limited Partners also approved
an amendment of the Agreement allowing the Partnership to sell or
lease property to affiliates (this amendment, together with the
Merger shall be referred to herein as the "Transaction").
The redemption price to be paid to the Limited Partners in
connection with the Merger is based on the fair market value of the
properties of the Partnership (the "Assets"). Cushman & Wakefield
Valuation Advisory Service ("Cushman & Wakefield"), an independent
appraiser, the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets, to satisfy the Partnership's
requirements under the Employee Retirement Income Security Act of
1974, as amended. Cushman & Wakefield determined the fair market
value of the Assets to be $19,129,150, or $8.58 per Unit. The
redemption price of $8.85 per Unit also includes all remaining cash
of the Partnership, less net earnings of the Partnership from and
after August 1, 1996 through December 31, 1996, less the
Partnership's actual costs incurred and accrued through the
effective time of the filing of the certificate of merger,
including reasonable reserves in connection with: (i) the proxy
solicitation; (ii) the Transaction (as detailed in the Merger
Agreement); and (iii) the winding up of the Partnership, including
preparation of the final audit, tax return and K-1s (collectively,
the "Transaction Costs") and less all other Partnership
obligations.
The General Partners will not receive any payment in exchange for
the redemption of their general partnership interests nor will they
receive any fees from the Partnership in connection with the
Transaction. The Managing General Partner and his son, James L.
Brault, an executive officer of the Corporate General Partner, will
have a minority ownership interest in the Purchaser.
The Merger has not been completed primarily due to certain
litigation, as described below, that is still pending. The
Operating General Partners (as defined below) believe that these
lawsuits are without merit and, therefore, continue to vigorously
defend against them. The Purchaser is aware of these lawsuits and
is nonetheless willing to proceed with the Merger, subject to the
satisfaction of its due diligence as outlined below.
Following receipt of Limited Partner approval, the Purchaser
commenced the finalization of Purchaser's financing and its due
diligence review of the assets of the Partnership and those of the
Affiliated Partnerships (as defined below). The due diligence
process has revealed certain concerns relating to potential
environmental problems at some of the properties of the Partnership
and the Affiliated Partnerships. The due diligence review has also
raised questions regarding the interpretation of certain terms in
the leases governing some of the Partnership's and the Affiliated
Partnerships' properties. A very significant tenant is
interpreting certain purchase options contained in its leases in a
way that would cause the value of the properties leased by such
tenant to be significantly below the current appraised value.
Members of management of the Partnership and the Affiliated
Partnerships have been working with the Purchaser to assess these
risks and to resolve them in a way that will allow the Merger and
the related transactions to be consummated without any changes to
the terms or the Merger price.
In accordance with the terms of the Merger Agreement, the General
Partners suspended all distributions to Limited Partners; however,
as a result of the unforeseen delays brought about by the
litigation and the due diligence issues highlighted above, the
General Partners felt it was appropriate that an earnings
distribution be made to the Limited Partners. Although the terms
of the Merger Agreement entered into by the Partnership and the
Purchaser provide that the Assets being acquired by the Purchaser
in connection with the Merger include all earnings of the
Partnership from and after August 1, 1996, the Purchaser has agreed
to allow the Partnership to make distributions to the Limited
Partners of net earnings for the period from and after January 1,
1997 until the Merger is consummated. In exchange, the Partnership
has agreed to extend the termination date of the Merger Agreement
to June 30, 1997 to allow the Purchaser time to complete its due
diligence. Notwithstanding the extension of the termination date,
the Partnership and the Purchaser continue to work through the due
diligence issues outlined above, with the intent of closing the
merger as soon as possible.
A distribution of the Partnership's net earnings for the period
January 1, 1997 to March 31, 1997 was made to the Limited Partners
on March 31, 1997 in the amount of approximately $534,400. Net
earnings accruing after March 31, 1997 through the closing date
will be included with the final cash distribution to the Limited
Partners from the Merger.
Litigation
Two legal actions, as hereinafter described, were filed against
certain of the General Partners of the Partnership and affiliates
of such General Partners, as well as against the Partnership on a
nominal basis in connection with the Merger. Each of these actions
was brought by limited partners of the Partnership. The
Partnership and the named General Partners and their affiliates
deny all allegations set forth in the complaints and are vigorously
defending against such claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty
Advisors IV, Inc., James L. Brault, and Brauvin Real Estate Funds,
L.L.C. and Brauvin High Yield Fund L.P., Brauvin High Yield Fund
II, L.P., Brauvin Income Plus L.P. III, and Brauvin Corporate Lease
Program IV, L.P., Docket No. 96012807. The Partnership and the
other affiliated partnerships named in this lawsuit (the
"Affiliated Partnerships") that are proposed to be a party to a
merger or sale with the Purchaser, are each named as a "Nominal
Defendant" in this lawsuit. Jerome J. Brault, the Managing General
Partner of the Partnership, and Brauvin Realty Advisors III, Inc.,
the Corporate General Partner of the Partnership, as well as
certain corporate general partners of the Affiliated Partnerships,
have been named as defendants in this lawsuit. James L. Brault, an
officer of the Corporate General Partner and the son of Jerome J.
Brault, is also named as a defendant.
The plaintiffs filed an amended complaint on October 8, 1996.
The amended complaint alleges a purported class action consisting
of claims for breach of fiduciary duties, fraud, breach of the
Agreement, and civil racketeering. The amended complaint seeks
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transactions with the Purchaser. The
defendants have answered plaintiffs' amended complaint, and have
denied each of the plaintiffs' allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action requested that
the Circuit Court enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. This
motion was denied by the Circuit Court on October 8, 1996, and the
Florida appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling. There have been no material
developments with respect to this lawsuit since October 8, 1996.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of Illinois,
styled M. Barbara Christman, Joseph Forte, Janet M. Toolson, John
Archbold, and Ben O. Carroll v. Brauvin Realty Advisors, Inc.,
Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III,
Inc., Brauvin Realty Advisors IV, Inc., Jerome J. Brault; Brauvin
Real Estate Funds, L.L.C. and Brauvin High Yield Fund L.P., Brauvin
High Yield Fund L.P. II, Brauvin Income Plus L.P. III, and Brauvin
Corporate Lease Program IV L.P., Docket No. 96C6025. The
Partnership and the Affiliated Partnerships are each named as a
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, are
named as defendants.
The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of
the Agreement, and violation of the Illinois Deceptive Trade
Practices Act. The amended complaint seeks injunctive relief, as
well as compensatory and punitive damages, relating to the proposed
transaction with the Purchaser.
On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the limited partners of the Partnership
and of the Affiliated Partnerships, and appointed plaintiffs'
counsel, The Mills Law Firm, as counsel for the class. On October
2, 1996, the District Court also conducted a hearing on plaintiffs'
motion to preliminarily enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. The
District Court denied plaintiffs' motion for a preliminary
injunction at the conclusion of the October 2, 1996 hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Limited Partners,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, the Operating General
Partners filed a counterclaim against plaintiffs and their counsel,
The Mills Law Firm, alleging that plaintiffs and The Mills Law Firm
violated the federal securities laws and proxy rules by sending
their September 27, 1996 letter to the Limited Partners. The
plaintiffs and The Mills Law Firm have moved to dismiss this
counterclaim. The District Court has taken this motion under
advisement and has yet to issue a ruling.
On October 10 and 11, 1996, the District Court conducted an
evidentiary hearing on the motion of the Operating General Partners
to invalidate revocations of proxies procured as a result of The
Mills Law Firm's September 27, 1996 letter. In that evidentiary
hearing, The Mills Law Firm admitted that it violated the proxy
rules by sending its September 27, 1996 letter to the Limited
Partners without filing such letter with the Commission in
violation of the Commission's requirements. At the conclusion of
the hearing on October 10 and 11, the District Court found that the
Operating General Partners have a likelihood of succeeding on the
merits with respect to their claim that the September 27, 1996
letter sent to the Limited Partners by plaintiffs and The Mills Law
Firm is false or misleading in several significant respects.
Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The Mills Law
Firm's September 27, 1996 letter because it did not believe it
possessed the authority to do so under present law. This ruling
was appealed to the Seventh Circuit Court of Appeals. The Seventh
Court of Appeals subsequently dismissed this appeal on the grounds
that the appeal was rendered moot by the Limited Partners' approval
on November 8, 1996 of the Merger.
On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Agreement does
not allow the Limited Partners to vote in favor of or against the
proposed transaction with the Purchaser by proxy. These cross-
motions for partial summary judgement were taken under advisement
by the District Court, and the District Court has yet to issue a
ruling.
On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs have named the Partnership as a "Nominal Defendant."
Plaintiffs have also added a new claim, alleging that the Operating
General Partners violated certain of the Commission rules by making
false and misleading statements in the Proxy. Plaintiffs also
allege that the Operating General Partners breached their fiduciary
duties, breached various provisions of the Agreement, violated the
Illinois Deceptive Trade Practice Act and violated section 17-305
of the Delaware Revised Uniform Limited Partnership Act. The
Operating General Partners deny those allegations and will continue
to vigorously defend against these claims.
Pursuant to the Agreement and Delaware law, the Partnership will
advance to the defendants their defense costs. The Corporate
General Partner has agreed to repay the Partnership for the
advances if it is ever determined that the parties were not
entitled to receive the advances. No estimate can reasonably be
made at this time of the costs of defense.
<PAGE>
<TABLE>
SCHEDULE III
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION> Gross Amount at Which Carried
Initial Cost at Close of Period
Buildings, Buildings,
Personal Cost of Personal
Property and Subsequent Property and Accumulated Date
Description Encumbrances (c) Land Improvements Improvements Land Improvements Total Depreciation (b) Acquired
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ponderosas $0 $2,500,751 $ 3,052,809 $0 $2,500,751 $ 3,052,809 $ 5,553,560 $ 932,402 11/90-6/90
Chi Chi's Restaurant 0 865,252 1,530,299 0 865,252 1,530,299 2,395,551 314,526 3/91
IHOP 0 297,951 394,958 0 297,951 394,958 692,909 64,435 4/91
Applebee's & Expansion 0 442,625 786,889 83,631 442,625 870,520 1,313,145 180,378 6/91 & 4/92
Sports Unlimited 0 2,194,992 2,395,773 0 2,194,992 2,395,773 4,590,765 460,088 9/91
Chili's Restaurant 0 247,257 788,593 0 247,257 788,593 1,035,850 110,009 2/92
Steak N'Shake 0 1,296,700 1,430,312 0 1,296,700 1,430,312 2,727,012 192,766 3/92
$0 $7,845,528 $10,379,633 $83,631 $7,845,528 $10,463,264 $18,308,792 $2,254,604
<FN>
<F1>
NOTES:
(a) The cost of this real estate is $18,308,792 for tax purposes (unaudited). The buildings are depreciated over
approximately 35 years using the straight line method. The properties were constructed between 1969 and 1986.
(b) The following schedule summarizes the changes in the Partnership's real estate and accumulated depreciation balances:
</FN>
<CAPTION>
Real estate 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $18,308,792 $18,308,792 $18,308,792
Additions-land, buildings and improvements -- -- --
Balance at end of year $18,308,792 $18,308,792 $18,308,792
Accumulated depreciation 1996 1995 1994
Balance at beginning of year $ 1,869,626 $ 1,486,513 $ 1,099,671
Provision for depreciation 384,978 383,113 386,842
Balance at end of year $ 2,254,604 $ 1,869,626 $ 1,486,513
<FN>
<F2>
(c) Encumbrances - Brauvin Income Plus L.P. III did not borrow cash in order to purchase its properties. 100% of the land and
buildings were paid for with funds contributed by the Interest Holders.
</FN>
</TABLE>
EXHIBIT
TO
BRAUVIN INCOME PLUS L.P. III
FORM 10-K ANNUAL REPORT
FOR THE PERIOD ENDED
DECEMBER 31, 1996
<PAGE>
EXHIBIT INDEX
BRAUVIN INCOME PLUS L.P. III
FORM 10-K
For the fiscal year ended December 31, 1996
Exhibit (10)(d) First Amendment and Waiver to the Agreement and
Plan of Merger
Exhibit (21) Subsidiaries of the Registrant
Exhibit (27) Financial Data Schedule
<PAGE>
EXHIBIT (10) (d)
FIRST AMENDMENT AND WAIVER
to
AGREEMENT AND PLAN OF MERGER
This Amendment and Waiver (the "Amendment") is made and entered
into as of March 24, 1997, by and among BRAUVIN HIGH YIELD FUND
L.P., a Delaware limited partnership ("Brauvin I"), BRAUVIN HIGH
YIELD FUND L.P. II, a Delaware limited partnership ("Brauvin II"),
BRAUVIN INCOME PLUS L.P. III, a Delaware limited partnership
("Brauvin III; and together with Brauvin I and Brauvin II, being
sometimes collectively referred to as the "Brauvin Partnerships")
and BRAUVIN REAL ESTATE FUNDS, L.L.C., a Delaware limited liability
company (the "Merger Company").
R E C I T A L S
WHEREAS, the Brauvin Partnerships and the Merger Company have
entered into an Agreement and Plan of Merger, dated as of June 14,
1996 (the "Merger Agreement");
WHEREAS, the assets being acquired by the Merger Company in
connection with the Transaction include all earnings of the Brauvin
Partnerships from and after August 1, 1996;
WHEREAS, unforeseen events have led to the delay in the
consummation of the Transaction contemplated by the Merger
Agreement;
WHEREAS, the Brauvin Partnerships have requested that certain
funds constituting earnings accrued after August 1, 1996 and
currently being held by the Brauvin Partnerships be released to the
limited partners of the Brauvin Partnerships;
WHEREAS, the Merger Company has agreed to allow for the release
of certain funds on the condition that the Brauvin Partnerships
agree to extend the Termination Date as set forth in the Merger
Agreement; and
WHEREAS, as a result of the foregoing, the Brauvin Partnerships
and the Merger Company desire to amend the Merger Agreement in
certain respects and to waive certain provisions thereof as set
forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows, each
intending to be legally bound as and to the extent herein provided.
1. Definitions. Capitalized terms used but not otherwise
defined herein are used herein as defined in the Merger Agreement.
Each reference in the Merger Agreement to "Merger Agreement," "this
Agreement" or words of like import, shall, unless the context
otherwise requires, be deemed to refer to the Merger Agreement as
amended hereby.
2. Amendments.
(a) Section 2.1.2 of the Merger Agreement is hereby deleted
and restated in its entirety as follows:
"General Partner Interest. The general partner interests
held by: Brauvin Realty Advisors, Inc., Jerome J. Brault and
David M. Strosberg (the "Brauvin I GPs") in Brauvin I; Brauvin
Realty Advisors II, Inc., Jerome J. Brault and David M.
Strosberg (the "Brauvin II GPs") in Brauvin II; and Brauvin
Realty Advisors III, Inc. and Jerome J. Brault (the "Brauvin
III GPs" and together with the Brauvin I GPs and the Brauvin II
GPs, the "Brauvin GPs") in Brauvin III shall all be cancelled
and extinguished and no consideration shall be paid therefor."
(b) The definition of "Brauvin I Unit Value" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Brauvin I Unit Value' means an amount which is equal to
the quotient obtained by dividing (i) the difference between
(A) the sum of (1) the fair market value of substantially all
of Brauvin I's real estate related assets, including the value
of Brauvin I's interest, if any, in joint ventures owning real
estate (as determined by Cushman & Wakefield or other
independent appraiser), and (2) Brauvin I's Available Cash and
(B) the sum of (1) the costs of the Transaction to Brauvin I to
the extent not otherwise deducted in computing Available Cash
and not previously paid, (2) other liabilities of Brauvin I not
otherwise deducted in computing Available Cash and not
otherwise included in costs of the Transaction and (3) the
earnings of Brauvin I from August 1, 1996 through December 31,
1996 by (ii) the number of Brauvin I Units."
(c) The definition of "Brauvin II Unit Value" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Brauvin II Unit Value' means an amount which is equal
to the quotient obtained by dividing (i) the difference between
(A) the sum of (1) the fair market value of substantially all
of Brauvin II's real estate related assets, including the value
of Brauvin II's interest, if any, in joint ventures owning real
estate (as determined by Cushman & Wakefield or other
independent appraiser), and (2) Brauvin II's Available Cash and
(B) the sum of (1) the costs of the Transaction to Brauvin II
to the extent not otherwise deducted in computing Available
Cash and not previously paid, (2) other liabilities of Brauvin
II not otherwise deducted in computing Available Cash and not
otherwise included in costs of the Transaction and (3) the
earnings of Brauvin II from August 1, 1996 through December 31,
1996 by (ii) the number of Brauvin II Units."
(d) The definition of "Brauvin III Unit Value" as set forth
in Section 9.2 of the Merger Agreement is hereby deleted and
restated in its entirety as follows:
"'Brauvin III Unit Value' means an amount which is equal
to the quotient obtained by dividing (i) the difference between
(A) the sum of (1) the fair market value of substantially all
of Brauvin III's real estate related assets, including the
value of Brauvin III's interest, if any, in joint ventures
owning real estate (as determined by Cushman & Wakefield or
other independent appraiser), and (2) Brauvin III's Available
Cash and (B) the sum of (1) the costs of the Transaction to
Brauvin III to the extent not otherwise deducted in computing
Available Cash and not previously paid, (2) other liabilities
of Brauvin III not otherwise deducted in computing Available
Cash and not otherwise included in costs of the Transaction and
(3) the earnings of Brauvin III from August 1, 1996 through
December 31, 1996 by (ii) the number of Brauvin III Units."
(e) The definition of "Termination Date" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Termination Date' means June 30, 1997."
3. Waiver.
(a) In connection with the amendments set forth in Sections
2(b), (c) and (d) above, the Merger Company waives compliance with
Section 7.3.10 of the Merger Agreement to allow the Brauvin
Partnerships to make distributions of earnings with respect to
Units, for earnings received from and after January 1, 1997 through
the Effective Time.
(b) The Merger Company acknowledges that it has been fully
informed of certain actions, suits and proceedings that have been
commenced against the Brauvin Partnerships and certain of their
Affiliates seeking to restrain in certain material respects the
Transaction and seeking material damages in connection therewith.
The absence of such actions, suits and proceedings is a condition
precedent to the obligations of the Merger Company as set forth in
Section 7.3.5 of the Merger Agreement. The Merger Company hereby
waives compliance with Section 7.3.5 of the Merger Agreement with
respect to such actions, suits and proceedings that have been
brought as of the date hereof.
No other waiver of any other filings or other term or condition of
the Merger Agreement, express or implied, should be inferred from
the foregoing waivers.
4. Construction. The Article and Section headings of this
Amendment are for convenience of reference only and do not form a
part hereof and do not in any way modify, interpret or construe the
intentions of the parties.
5. Effectiveness. The effectiveness of this Amendment is
subject to receipt by the parties hereto of counterparts of this
Amendment executed by each party (whether on the same or different
counterparts).
6. Binding Amendment. This Amendment shall be binding upon
and inure to the benefit of the parties and their respective
successors and permitted assigns.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF ILLINOIS.
8. Counterparts. This Amendment may be executed in one or
more counterparts, and all such counterparts shall constitute one
and the same instrument.
[Signatures on following pages.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Brauvin Partnerships:
BRAUVIN HIGH YIELD FUND L.P.,
a Delaware limited partnership
By: Brauvin Realty Advisors, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
BRAUVIN HIGH YIELD FUND L.P. II,
a Delaware limited partnership
By: Brauvin Realty Advisors II, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
BRAUVIN INCOME PLUS L.P. III,
a Delaware limited partnership
By: Brauvin Realty Advisors III, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
<PAGE>
Merger Company:
BRAUVIN REAL ESTATE FUNDS, L.L.C.,
a Delaware limited liability company
By: Brauvin Realty Estate Funds, Inc.,
an Illinois corporation
Its: Manager
By: /s/James L. Brault
Its: President
<PAGE>
(Exhibit 21)
Name of Subsidiary State of Formation
Brauvin Chili's Limited Partnership Delaware
Brauvin Gwinnett County Venture Illinois
Brauvin Bay County Venture Illinois
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,442,263
<SECURITIES> 519,141 <F1>
<RECEIVABLES> 48,519
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,308,792 <F2>
<DEPRECIATION> 2,254,604
<TOTAL-ASSETS> 18,137,625
<CURRENT-LIABILITIES> 377,785
<BONDS> (569) <F3>
0
0
<COMMON> 17,760,409 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,137,625
<SALES> 0
<TOTAL-REVENUES> 2,327,929 <F5>
<CGS> 0
<TOTAL-COSTS> 921,133 <F6>
<OTHER-EXPENSES> (12,980) <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,421,119
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURES
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "BONDS" REPRESENTS MINORITY INTEREST IN JOINT VENTURE
<F4> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F7> "OTHER EXPENSES" REPRESENTS MINORITY INTEREST AND JOINT
VENTURES' NET INCOME/LOSS
</FN>
</TABLE>
