<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 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 0-21536
Brauvin Corporate Lease Program IV L. P.
(Exact name of registrant as specified in its charter)
Delaware 36 -3800611
(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)
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 .
<PAGE> BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
INDEX
Page
PART I Financial Information
Item 1. Consolidated Financial Statements. . . . . . . . . . . 3
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995. . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the
six months ended June 30, 1996 and 1995. . . . . . . . 5
Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995. . . . . . . 6
Consolidated Statements of Partners' Capital for
the periods January 1, 1995 to June 30, 1996 . . . . . 7
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995. . . . . . . . 8
Notes to Consolidated Financial Statements . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 17
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 20
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . 20
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . 21
Item 4. Submissions of Matters to a Vote of Security Holders . 21
Item 5. Other Information. . . . . . . . . . . . . . . . . . . 21
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 21
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1995 Consolidated Balance Sheet, the
following Consolidated Balance Sheet as of June 30, 1996, Consolidated
Statements of Operations for the six months ended June 30, 1996 and
1995, Consolidated Statements of Operations for the three months ended
June 30, 1996 and 1995, Consolidated Statements of Partners' Capital for
the periods January 1, 1995 to June 30, 1996 and Consolidated Statements
of Cash Flows for the six months ended June 30, 1996 and 1995 for
Brauvin Corporate Lease Program IV L.P. (the "Partnership") are
unaudited and have not been examined by independent public accountants
but reflect, in the opinion of the management, all adjustments necessary
to present fairly the information required. All such adjustments are of
a normal recurring nature.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Partnership's 1995 Annual Report on Form 10-K.
<PAGE>
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
ASSETS
Investment in real estate, at cost:
Land $ 4,315,540 $ 4,315,540
Buildings and improvements 9,993,090 9,993,090
14,308,630 14,308,630
Less: accumulated depreciation (770,547) (638,479)
Net investment in real estate 13,538,083 13,670,151
Cash and cash equivalents 607,972 711,167
Tenant receivables 325 --
Deferred rent receivable 301,614 241,119
Due from affiliates -- 7,627
Prepaid offering costs 175,163 175,983
Organization costs (net of
accumulated amortization of
$25,000 and $22,000, respectively) 5,000 8,000
Other assets 40,867 36,901
Total Assets $14,669,024 $14,850,948
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 48,116 $ 33,660
Rent received in advance 27,050 67,205
Total Liabilities 75,166 100,865
MINORITY INTERESTS IN BRAUVIN
GWINNETT COUNTY VENTURE 706,170 711,056
PARTNERS' CAPITAL:
General Partners 10,794 10,794
Limited Partners 13,876,894 14,028,233
Total Partners' Capital 13,887,688 14,039,027
Total Liabilities and
Partners' Capital $14,669,024 $14,850,948
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30,
1996 1995
INCOME:
Rental $761,387 $ 810,681
Interest 15,835 12,588
Other 1,713 7,188
Total income 778,935 830,457
EXPENSES:
General and administrative 125,630 67,280
Management fees (Note 3) 7,098 8,363
Amortization of organization costs 3,000 3,000
Depreciation 132,068 132,068
Total expenses 267,796 210,711
Income before minority interests
in joint venture 511,139 619,746
Minority interests' share in Brauvin
Gwinnett County Venture's net income (30,874) (30,061)
Net income $480,265 $589,685
Net income allocated to the
Limited Partners $480,265 $589,685
Net income per Unit outstanding (a) $ 0.29 $ 0.36
(a)Net income per Unit was based on the average Units outstanding during
the period 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 CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30,
1996 1995
INCOME:
Rental $372,794 $409,234
Interest 7,563 7,831
Other 135 (6,005)
Total income 380,492 411,060
EXPENSES:
General and administrative 75,858 34,344
Management fees (Note 3) 3,453 3,993
Amortization of organization costs 1,500 1,500
Depreciation 66,034 66,033
Total expenses 146,845 105,870
Income before minority interests
in joint venture 233,647 305,190
Minority interests' share in Brauvin
Gwinnett County Venture's net income (15,031) (15,374)
Net income $218,616 $289,816
Net income allocated to the
Limited Partners $218,616 $289,816
Net income per Unit outstanding (a) $ 0.13 $ 0.18
(a)Net income per Unit was based on the average Units outstanding during the
period 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 CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the periods from January 1, 1995 through June 30, 1996
General Limited
Partners Partners* Total
Balance, January 1, 1995 $10,794 $14,003,907 $14,014,701
Contributions, net -- 136,937 136,937
Selling commissions and other
offering costs (Note 1) -- (19,395) (19,395)
Net income -- 1,203,510 1,203,510
Cash distributions -- (1,296,726) (1,296,726)
Balance, December 31, 1995 10,794 14,028,233 14,039,027
Contributions, net -- 5,982 5,982
Selling commissions and other
offering costs (Note 1) -- (4,917) (4,917)
Net income -- 480,265 480,265
Cash distributions -- (632,669) (632,669)
Balance, June 30, 1996 $10,794 $13,876,894 $13,887,688
*Total Units sold, including those raised through the Plan, at June 30, 1996
and December 31, 1995 were 1,632,510 and 1,631,872, respectively. Cash
distributions to Limited Partners per Unit were $0.39 and $0.80 for the six
months ended June 30, 1996 and the year ended December 31, 1995,
respectively. Cash distributions to Limited Partners per Unit are based on
the average Units outstanding during the period 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 CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
1996 1995
Cash flows from operating activities:
Net income $ 480,265 $ 589,685
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 135,068 135,069
Minority interests in Brauvin Gwinnett
County Venture's net income 30,874 30,061
(Increase) decrease in tenant receivable (325) 20,379
Increase in deferred rent receivable (60,495) (56,297)
Decrease in prepaid offering costs -- 1,601
Decrease in due from affiliates 7,627 7,241
Increase in other assets (3,966) (2,460)
Increase in accounts payable and
accrued expenses 14,456 23,361
Decrease in rent received in advance (40,155) (50,006)
Increase in due to affiliates -- 450
Net cash provided by operating activities 563,349 699,084
Cash flows from financing activities:
Sale of Units, net of liquidations, selling
commissions and other offering costs 1,885 45,433
Cash distributions to Limited Partners (632,669) (650,865)
Cash distribution to minority interests
in Brauvin Gwinnett County Venture (35,760) (40,230)
Net cash used in financing activities (666,544) (645,662)
Net (decrease) increase in cash and
cash equivalents (103,195) 53,422
Cash and cash equivalents at beginning
of period 711,167 569,244
Cash and cash equivalents at end of period $607,972 $ 622,666
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN CORPORATE LEASE PROGRAM IV L.P.
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Brauvin Corporate Lease Program IV L.P. (the "Partnership") is
a Delaware limited partnership formed on August 7, 1991 for the
purpose of acquiring debt-free ownership of existing,
income-producing retail and other commercial properties predominantly
all of which will be subject to "triple-net" leases. It is
anticipated that these properties will be leased primarily to
corporate lessees of national and regional retail businesses, service
providers and other users consistent with "triple-net" lease
properties. The leases will 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 General
Partners of the Partnership are Brauvin Realty Advisors IV, Inc.,
Jerome J. Brault and Cezar M. Froelich. Brauvin Realty Advisors IV,
Inc. is owned by Messrs. Brault (beneficially)(50%) and Froelich
(50%). Brauvin Securities, Inc., an affiliate of the General
Partners, is the selling agent of the Partnership.
The Partnership filed a Registration Statement on Form S-11 with
the Securities and Exchange Commission which was declared effective
on December 12, 1991. Per the terms of the Restated Limited
Partnership Agreement of the Partnership (the "Agreement"), the
minimum of $1,200,000 of limited partnership interests of the
Partnership (the "Units") necessary for the Partnership to commence
operations was achieved on April 27, 1992. The Partnership's
offering was anticipated to close on December 11, 1992 but the
Partnership obtained an extension until December 11, 1993. A total
of 1,600,831 Units were sold to the public through the offering at
$10 per Unit ($16,008,310). Through June 30, 1996 and
December 31, 1995 the Partnership has sold $16,443,810 and
$16,402,428 of Units, respectively. These totals include $435,100
and $394,118 of Units, respectively, raised by Limited Partners who
utilized their distributions of Operating Cash Flow to purchase
additional Units through the Partnership's distribution reinvestment
plan (the "Plan"). Units valued at $118,706 and $83,706 have been
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
purchased by the Partnership from Limited Partners liquidating their
investment in the Partnership and have been retired as of June 30,
1996 and December 31, 1995, respectively. As of June 30, 1996, the
Plan participants own Units which approximate 3% of the total Units
sold.
The Partnership has acquired the land and buildings underlying
a Steak n Shake restaurant, a Children's World Learning Center, two
Chuck E. Cheese's restaurants, a Mrs. Winner's Chicken and Biscuit
restaurant, a House of Fabrics store, a Volume ShoeSource store, an
East Side Mario's Restaurant, a Blockbuster Video Store, and a Walden
Books Store. In addition, the Partnership has acquired a 70.2%
equity interest in a joint venture with two entities affiliated with
the Partnership. This venture owns the land and building underlying
a CompUSA store.
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 these 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 70.2% equity interest in a joint venture,
which owns the land and the buildings underlying one CompUSA store.
The accompanying financial statements have consolidated 100% of the
assets, liabilities, operations and partners' capital of Brauvin
Gwinnett County Venture. All significant intercompany accounts have
been eliminated.
Investment in Real Estate
The operating properties acquired by the Partnership are stated
at cost including acquisition costs. Depreciation expense is computed
on a straight-line basis over approximately 39 years.
In 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets" (SFAS 121). In conjunction with the adoption of SFAS
121, the Partnership performed an analysis of its long-lived assets,
and the Partnership's management determined that there were no events
or changes in circumstances that indicated that the carrying amount
of the assets may not be recoverable. Accordingly, no impairment
loss has been recorded in the accompanying financial statements.
Organization and Offering Costs
Organization costs represent costs incurred in connection with
the organization and formation of the Partnership. Organization
costs are 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
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. Subsequently, gross
proceeds are expected to increase due to the purchase of additional
Units through the Plan and the prepaid offering costs will be
transferred to offering costs and treated as a reduction in Partners'
Capital.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months from date
of purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been
determined by using available market information and appropriate
valuation methodologies. However, considerable judgement is
necessarily required in interpreting market data to develop estimates
of fair value.
The fair value estimates presented herein are based on
information available to management as of June 30, 1996 and December
31, 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; due from
affiliates; accounts payable and accrued expenses; and rent received
in advance.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to classifications adopted in 1996.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement"), during the period commencing with the date the
Partnership accepts subscriptions for Units totaling $1,200,000 and
terminating on the Termination Date, as defined in the Prospectus,
shall be distributed to the Limited Partners on a quarterly basis.
Distributions of Operating Cash Flow, if available, shall be made
within 45 days following the end of each calendar quarter or are paid
monthly within 15 days of the end of the month, depending upon the
Limited Partner's preference, commencing with the first quarter
following the Termination Date. Operating Cash Flow during such
period shall be distributed as follows: (a) first, to the Limited
Partners until the Limited Partners receive an amount equal to a 9%
non-cumulative, non-compounded annual return on Adjusted Investment,
as 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% cumulative,
non-compounded, annual return of Adjusted Investment (the
"Cumulative Preferred Return");
second, to the Limited Partners until each Limited Partner has
received an amount equal to the amount of his Adjusted
Investment, apportioned pro rata 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 Class A
Investors, 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
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.
The Partnership paid an affiliated entity a non-accountable
selling expense allowance in an amount equal to 2% of the gross
proceeds of the Partnership's offering, a portion of which may be
reallowed to participating dealers.
In the event that the Partnership does not use more than 2% of
the gross proceeds of the offering for the payment of legal,
accounting, escrow, filing and other fees incurred in connection with
the organization or formation of the Partnership, the Partnership may
pay the General Partners any unused portion of the 2% of the gross
proceeds of the offering allowed for organization and offering
expenses, not to exceed 1/2% of the gross proceeds of the offering.
The General Partners will use such funds to pay certain expenses of
the offering incurred by them not covered by the definition of
organization and offering expenses.
An affiliate of the General Partners provides leasing and
re-leasing services to the Partnership in connection with the
management of Partnership properties. The property management fee
payable to an affiliate of the General Partners is 1% of the gross
revenues of each Partnership property.
An affiliate of the General Partners or the General Partners
will receive a real estate brokerage commission in connection with
the disposition of Partnership properties. Such commission will be
in an amount equal to the lesser of: (i) 3% of the sale price of the
property; or (ii) 50% of the real estate commission customarily
charged for similar services in the locale of the property being
sold; provided, however, that receipt by the General Partners or one
of their affiliates of such commission is subordinated to receipt by
the Limited Partners of their Current Preferred Return.
An affiliate of one of the General Partners provides securities
and real estate counsel to the Partnership.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the six months ended June 30,
1996 and 1995 were as follows:
1996 1995
Selling commissions $ 4,098 $ 7,961
Management fees 7,098 8,363
Reimbursable operating expense 39,000 34,800
Legal fees 3,304 1,050
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Partnership commenced an offering to the public on
December 12, 1991 of 3,300,000 Units, 300,000 of which are
available only through the Partnership's distribution reinvestment
plan (the "Plan"). The offering was anticipated to close on
December 11, 1992, but was extended until December 11, 1993 with
the appropriate governmental approvals. None of the Units were
subscribed and issued between December 12, 1991 and December 31,
1991, pursuant to the Partnership's public offering. The offering
was conditioned upon the sale of $1,200,000, which was achieved on
April 27, 1992. The Partnership raised a total of $16,008,710
through the initial offering and an additional $435,100 through the
distribution reinvestment plan through June 30, 1996. As of June
30, 1996 Units valued at $118,706 have been purchased by the
Partnership from Limited Partners liquidating their original
investment and have been retired.
The Partnership has acquired the land and buildings underlying
a Steak n Shake restaurant, a Children's World Learning Center,
two Chuck E. Cheese's restaurants, a Mrs. Winner's Chicken and
Biscuit restaurant, a House of Fabrics store, a Volume ShoeSource
store, an East Side Mario's Restaurant, a Blockbuster Video Store,
and a Walden Books Store. In addition, the Partnership has
acquired a 70.2% equity interest in a joint venture with two
entities affiliated with the Partnership. This venture owns the
land and building underlying a CompUSA store.
The Partnership is fully invested in properties with the
exception of funds raised through the Plan. 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.
In October 1994 House of Fabrics filed for protection under
Chapter 11 of the United States Bankruptcy Code. At the time of
the filing the tenant was over one month in arrears. From October
1994 until January 1996, House of Fabrics occupied the Joliet
property and paid all rents and occupancy expenses on a timely
basis.
In August 1995, House of Fabrics notified the Partnership
that, under the provisions of the bankruptcy code, they had
rejected the lease and indicated that they would vacate the
property at the end of January 1996. House of Fabrics vacated the
property on January 31, 1996. The Partnership has engaged a
national brokerage firm to assist in re-leasing this property.
Below is a table summarizing the historical data for
distributions per Unit:
Distribution
Date 1996 1995 1994 1993 1992
February 15 $.2000 $.2000 $.1625 $.1500 --
May 15 .1875 .2000 .1750 .1500 $.0920
August 15 .2000 .2000 .1250 .1750
November 15 .2000 .2500 .1375 .1500
Future increases in the Partnership's distributions will depend
on increased sales at the Partnership's properties, resulting in
additional percentage rent. Rental increases, to a lesser extent,
may occur due to increases in receipts from certain leases based
upon increases in the Consumer Price Index or scheduled increases
of base rent.
The Partnership has entered into an Agreement for Purchase and
Sale of Assets dated as of June 14, 1996 (the "Sale Agreement")
with Brauvin Real Estate Funds L.L.C., a Delaware limited liability
company (the "Purchaser"). Pursuant to the terms of the Sale
Agreement, the Partnership proposes to sell substantially all of
the Partnership's properties (the "Assets"). In connection with
the Sale, the beneficial owners (the "Limited Partners") of the
limited partnership interests of the Partnership (the "Units") will
receive approximately $7.92 per Unit in cash (as hereinafter
defined). If the Transaction is approved and certain conditions are
met, the Partnership will be liquidated and dissolved (the
"Liquidation") and those investors who entered into the Partnership
as Class A Investors (those not in need of passive income) (the
"Class A Limited Partners") will receive a liquidating distribution
of approximately $6.95 to $7.50 per Unit in cash based upon the
time such Class A Limited Partners invested in the Partnership and
Class B Investors (those who are tax-exempt or seeking passive
income to offset passive losses) (the "Class B Limited Partners")
will receive a liquidating distribution of approximately $8.44 to
$8.73 per Unit. The affirmative vote of the Limited Partners
holding a majority of the Units is necessary to approve the Merger.
The Partnership is currently in the process of drafting a proxy
statement, which will require prior review and comment by the
Securities and Exchange Commission (the "Commission"), to solicit
proxies for use at a special meeting of the Limited Partners (the
"Special Meeting") to be held at the offices of the Partnership at
a date in the near future. The purpose of the Special Meeting is
to vote upon the Sale and certain other matters as described
herein. The preliminary proxy materials of the Partnership have
been filed with the Commission.
By approving the Sale, the Limited Partners will also be
approving an amendment of the Partnership Agreement of the
Partnership, as amended (the "Partnership Agreement") allowing the
Partnership to sell or lease property to affiliates (this
amendment, together with the Sale shall be referred to herein as
the "Transaction"). The approval of the general partners of a
partnership is not necessary to approve the Transaction. The
Partnership Agreement does not provide the Limited Partners not
voting in favor of the Transaction with dissenters' appraisal
rights.
The actual liquidating distribution will be based upon the cash
proceeds from the Sale, plus all remaining cash of the Partnership
(which will include earnings only through July 31, 1996), less the
Partnership's actual costs incurred and accrued through the
effective time of the Sale ("the Effective Time"), including
reasonable reserves in connection with: (i) the proxy
solicitation; (ii) the Sale (as detailed in the Acquisition
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 outstanding Partnership
liabilities.
Cushman & Wakefield Valuation Advisory Services ("Cushman &
Wakefield"), the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets. Cushman & Wakefield was
subsequently engaged to provide an opinion as to the fairness of
the Transaction to the Limited Partners from a financial point of
view. Cushman & Wakefield has preliminarily determined that the
fair market value of the Assets of the Partnership is $12,489,100,
which is approximately $7.65 per Unit. In addition, Cushman &
Wakefield is finalizing its opinion as to the fairness of the
Transaction to the Limited Partners from a financial point of view.
The General Partners are Jerome J. Brault, the managing general
partner of the Partnership (the "Managing General Partner"),
Brauvin Realty Advisors IV, Inc., the corporate general partner of
the Partnership (the "Corporate General Partner") and Cezar M.
Froelich. Mr. Froelich gave notice of his intent to resign as a
General Partner of the Partnership on May 23, 1996. Pursuant to
the terms of the Partnership Agreement, Mr. Froelich's resignation
will become effective on the 90th day following notice to the
Limited Partners. The General Partners will not receive any fees
in connection with the Transaction and will receive only a de
minimis liquidating distribution of less than $17,000 in the
aggregate in accordance with the terms of the Partnership
Agreement.
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
Braults 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.
The Transaction is one of a series of related transactions
whereby the Purchaser seeks to acquire the Assets of the
Partnership and the assets, through purchase or merger, of Brauvin
High Yield Fund L.P., Brauvin High Yield Fund L.P. II and Brauvin
Income Plus L.P. III, Delaware limited partnerships affiliated with
the Partnership.
The General Partners have temporarily suspended all
distributions to Limited Partners and liquidations until there is
a vote on the Transaction.
Results of Operation - Six Months Ended June 30, 1996 and 1995
Results of operations for the six months ended June 30, 1996
reflected net income of $480,265 compared to net income of $589,685
for the six months ended June 30, 1995, a decrease of approximately
$109,400. The decrease in net income is a result of an increase in
general and administrative expense, which was a result of the
Partnership hiring an independent real estate company to conduct
property valuations, the Transaction professional fees paid and the
expenses associated with the House of Fabrics vacancy.
Total income was $778,935 in 1996 as compared to $830,457 in
1995, a decrease of approximately $51,500. The decrease in total
income is due to 1996 rental income reflecting a month of
operations of the House of Fabrics property, while 1995 reflects a
full six month period.
Total expenses were $267,796 in 1996 as compared to $210,711 in
1995, an increase of approximately $57,100. The increase in
expenses is primarily the result of an increase in general and
administrative expense due to the Partnership hiring an independent
real estate company to conduct property valuations. General and
administrative expense also increased in 1996 compared to 1995 as
a result of legal and other professional fees paid as a result of
the Transaction. Additionally, general and adminsitrative expenses
increased as consequence of the vacancy at the House of Fabrics.
Results of Operation - Three Months Ended June 30, 1996 and 1995
Results of operations for the three months ended June 30, 1996
reflected net income of $218,616 compared to net income of $289,816
for the three months ended June 30, 1995, a decrease of
approximately $71,200. The decrease in net income is a result of
an increase in general and administrative expense, which was a
result of the Partnership hiring an independent real estate company
to conduct property valuations, the Transaction professional fees
paid and the expenses associated with the House of Fabrics vacancy.
Total income was $380,492 in 1996 as compared to $411,060 in
1995, a decrease of approximately $30,600. The decrease in total
income is due to 1996 rental income reflecting no rental income
from the operations of the House of Fabrics property, while 1995
reflects a full three month period.
Total expenses were $146,845 in 1996 as compared to $105,870 in
1995, an increase of approximately $41,000. The increase in
expenses is primarily the result of an increase in general and
administrative expense due to the Partnership hiring an independent
real estate company to conduct property valuations. General and
administrative expense also increased in 1996 compared to 1995 as
a result of legal and other professional fees paid as a result of
the Transaction. Additionally, general and adminsitrative expenses
increased as consequence of the vacancy at the House of Fabrics.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
On October 14, 1993, an affiliate of the Partnership,
Brauvin, Inc., brought a lawsuit against an unaffiliated
seller due to the seller's alleged refusal to proceed
under the terms of a purchase and sale agreement Brauvin,
Inc. entered into to acquire three properties in
Jacksonville, Florida. In this lawsuit, Brauvin, Inc. has
sought specific performance of the purchase and sale
agreement to require the unaffiliated seller to sell the
subject properties to Brauvin, Inc. Brauvin, Inc.
subsequently amended its complaint to add the tenant of
the properties, Rally's, Inc., as an additional defendant
seeking an unspecified amount of damages. Rally's, Inc. was
added because of its activities which Brauvin, Inc. alleges
have tortiously interfered with the business relations
between Brauvin, Inc. and the seller.
In response to the lawsuit, the seller made a counterclaim
against Brauvin, Inc. with counts for slander of title,
tortious interference with an advantageous business
relationship, conspiracy and to quiet title. The seller
has also sued a former employee of Brauvin, Inc. and the
Partnership. The counterclaim is seeking damages in an
amount in excess of $2,000,000, together with punitive
damages. The Partnership filed a motion to dismiss as the
Partnership believes the Florida court does not have
jurisdiction over the Partnership. During 1994, the
motion to dismiss was denied. The Partnership made
attempts to settle but did not succeed. The Partnership
intends to vigorously defend itself in this action. During
the six months ended June 30, 1996 there has been no change
in the legal proceedings.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission Of Matters To a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports On Form 8-K.
Exhibit 27. Financial Data Schedule
Form 8-K. Notificaction to the partners of the resignation
of of Mr. Cezar M. Froelich as a General Partner
of the Parntership and the resignation of Mr.
Thomas Coorsh as Treasurer and Chief Financial
Officer. This Form 8-K was dated May 23, 1996 and
filed on June 21, 1996 and amended on July 24, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
l934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BY: Brauvin Realty Advisors IV, Inc.
Corporate General Partner of
Brauvin Corporate Lease Program IV L.P.
BY: /S/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: August 14, 1996
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
DATE: August 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 607,972
<SECURITIES> 0
<RECEIVABLES> 301,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,308,630 <F1>
<DEPRECIATION> 770,547
<TOTAL-ASSETS> 14,669,024
<CURRENT-LIABILITIES> 0
<BONDS> 706,170 <F2>
0
0
<COMMON> 13,887,688 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,669,024
<SALES> 0
<TOTAL-REVENUES> 778,935 <F4>
<CGS> 0
<TOTAL-COSTS> 267,796 <F5>
<OTHER-EXPENSES> 30,874 <F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 480,265
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F2> "BONDS" REPRESENTS MINORITY INTEREST IN JOINT VENTURE
<F3> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F6> "OTHER EXPENSES" REPRESENTS MINORITY INTEREST IN JOINT
VENTURES' NET INCOME
</FN>
</TABLE>
