UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from N/A to N/A
Commission File Number 0-28332
BRAUVIN NET LEASE V, INC.
(Exact name of small business issuer in its charter)
Maryland 36-3913066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
As of May 14, 1997, the registrant had 1,286,916 shares of Common
Stock outstanding.
Transitional Small Business Disclosure Format(check one)
Yes No X .
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3
Consolidated Balance Sheet at March 31, 1997 . . . . . . . . 4
Consolidated Statements of Operations, for the
three months ended March 31, 1997 and 1996 . . . . . . . . . 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . 7
Item 2. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . . . . . . . . . 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .16
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . .16
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . .16
Item 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . .16
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . .16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The following Consolidated Balance Sheet as of March 31, 1997,
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996 and Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996 for Brauvin Net
Lease V, Inc. (the "Fund") are unaudited but reflect, in the
opinion of the management, all adjustments necessary to make the
consolidated financial statements not misleading. All such
adjustments are of a normal recurring nature.
These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Fund's 1996 Annual Report on Form 10-KSB.
<PAGE>
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31,
1997
ASSETS
Investment in real estate, at cost:
Land $ 3,964,744
Buildings 7,516,323
11,481,067
Less accumulated depreciation (285,013)
Net investment in real estate 11,196,054
Cash and cash equivalents 525,475
Organization costs (net of
accumulated amortization of
$21,583) 13,417
Deferred rent receivable 108,509
Prepaid expenses and deferred
acquisition costs 53,206
Total Assets $11,896,661
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 10,861
Rents received in advance 70,458
Due to affiliates 57,999
Total Liabilities 139,318
Stockholders' Equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized; none issued
Common stock, $.01 par value,
9,000,000 shares authorized;
1,299,775 shares issued
and outstanding 12,998
Additional paid-in capital 11,865,141
Retained earnings (deficit) (120,796)
Total Stockholders' Equity 11,757,343
Total Liabilities and Stockholders'
Equity $11,896,661
See notes to consolidated financial statements.
<PAGE>
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
INCOME
Rental $ 321,605 $ 228,230
Interest and other 18,314 41,184
Total income 339,919 269,414
EXPENSES
Directors fees 7,001 6,999
Advisory fees 43,750 19,048
Management fees 3,386 2,131
General and administrative 21,698 16,331
Acquisition costs 31,378 30,814
Depreciation and amortization 44,207 34,161
Total expenses 151,420 109,484
Net Income $ 188,499 $159,930
Net Income Per Share
(based on average shares
outstanding of 1,297,934
and 1,237,518, respectively
for the three months ended
March 31, 1997 and 1996) $ 0.15 $ 0.13
See notes to consolidated financial statements.
<PAGE>
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
Cash Flows From Operating Activities:
Net income $ 188,499 $ 159,930
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of organization costs 1,750 1,750
Depreciation 42,457 32,411
Acquisition costs charged off 31,378 30,814
Increase in deferred rent receivables (23,945) --
Decrease in prepaid expenses and
deferred acquisition costs 3,001 3,999
Decrease (increase) in tenant receivables 378 (19,074)
Decrease in accounts payable and
accrued expenses (10,923) (11,992)
Increase in due to affiliates 4,066 6,480
Increase (decrease) in rent received
in advance 20,885 (3,000)
Net cash provided by operating
activities 257,546 201,318
Cash Flows From Investing Activities:
Purchase of properties (1,529,287) (23,447)
Acquisition costs -- (49,008)
Cash used in investing activities (1,529,287) (72,455)
Cash Flows From Financing Activities:
Issuance of stock 35,891 1,321,538
Selling commissions and other
offering costs (34,258) (116,877)
Dividends (229,517) (196,106)
Net cash (used in) provided by
financing activities (227,884) 1,008,555
Net (decrease) increase in cash
and cash equivalents (1,499,625) 1,137,418
Cash and cash equivalents at
beginning of period 2,025,100 3,058,504
Cash and cash equivalents at
end of period $ 525,475 $4,195,922
Supplemental Cash Flow Information:
In 1997, Purchase of properties is net of $3,087 of acquisition
costs paid in 1996 and reclassified to land and building in 1997 in
conjunction with the acquisition of the related properties.
See notes to consolidated financial statements.
BRAUVIN NET LEASE V, INC.
(a Maryland corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Brauvin Net Lease V, Inc. (the "Fund") is a Maryland corporation
formed on October 14, 1993, which operates as a real estate
investment trust ("REIT") under federal tax laws. The Fund intends
to continue to acquire properties that will be leased to
creditworthy corporate operators of nationally or regionally
established businesses primarily in the retail and family
restaurant sectors. Substantially all of the leases will be on a
long-term "triple net" basis generally requiring the corporate
tenant to pay both base annual rent with mandatory escalation
clauses and all operating expenses. The Fund acquired a Country
Harvest Buffet Restaurant during the year ended December 31, 1994;
an On the Border Restaurant, a Blockbuster Video, a Chili's
Restaurant, a Just for Feet and a Video Watch during the year ended
December 31, 1995; and a Pier 1 Imports and a Taylor Rental during
the year ended December 31, 1996 and a Jiffy Lube and Firestone
facility during the quarter ended March 31, 1997.
The advisory agreement provides for Brauvin Realty Advisors V,
L.L.C. (the "Advisor"), an affiliate of the Fund, to be the advisor
to the Fund. The Fund registered the sale of up to 5,000,000
shares of common stock at $10.00 per share in an initial public
offering filed with the Securities and Exchange Commission
("Registration Statement") and the issuance of 500,000 shares
pursuant to the Fund's dividend reinvestment plan. On August 8,
1994, the Fund sold the minimum 120,000 shares required under its
Registration Statement and commenced its real estate activities.
The offering period for the sale of common stock terminated on
February 25, 1996. At March 31, 1997, the Fund had sold 1,299,775
shares and the gross proceeds raised were $13,358,479, net of
liquidations of $160,750, including $200,000 invested by the
Advisor, before reduction for selling commissions and other
offering costs.
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 consolidated financial statements have been
prepared using the accrual method of accounting.
Rental Income
Rental income is recognized on a straight line basis over the
life of the related leases. Differences between rental income
earned and amounts due per the respective lease agreements are
credited or charged, as applicable, to deferred rent receivable.
Federal Income Taxes
For the year ended December 31, 1997, the Fund intends to be
treated as a REIT under the Internal Revenue Code Sections 856-860.
A REIT will generally not be subject to federal income taxation to
the extent that it distributes at least 95% of its taxable income
to its shareholders and meets certain asset and income tests as
well as other requirements. Accordingly, no provision has been made
for Federal income taxes in the financial statements.
Consolidation of Subsidiary
The Fund owns a 100% interest in one qualified REIT subsidiary,
Germantown Associates, Inc., which owns one Firestone/JiffyLube
property. The accompanying financial statements have consolidated
100% of the assets, liabilities, operations and stockholder's
equity of Germantown Associates, Inc. All significant intercompany
accounts have been eliminated.
Investment in Real Estate
The Fund'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 40 years.
In 1995, the Fund 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
Fund has performed an analysis of its long-lived assets, and the
Fund's management determined that there were no events or changes
in circumstances that indicated that the carrying amount of the
assets may not be recoverable at March 31, 1997. Accordingly, no
impairment loss has been recorded in the accompanying financial
statements.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments
with an original maturity within three months from date of
purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of March 31, 1997, but may
not necessarily be indicative of the amounts that the Fund could
realize in a current market exchange. The use of different
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts. Although management is
not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements
since that date, and current estimates of fair value may differ
significantly from amounts presented herein.
The carrying amounts of the following items are reasonable
estimates of fair value: cash and cash equivalents; accounts
payable and accrued expense, rents received in advance and due to
affiliates.
Organization Costs
Organization costs represent costs incurred in connection with
the organization and formation of the Fund. Organization costs are
amortized over a period of five years using the straight line
method.
Deferred Acquisition Costs
Deferred acquisition costs represent direct costs incurred in
performing due diligence procedures on potential property
acquisitions. Such costs are included in the carrying basis of
properties when acquired. Costs relating to the unsuccessful
acquisition of properties are expensed.
(2) RELATED PARTY TRANSACTIONS
The Fund is required to pay certain fees to the Advisor or its
affiliates pursuant to various agreements set forth in the
Prospectus and described below.
Pursuant to the terms of the Selling Agreement, Brauvin
Securities, Inc. ("BSI"), an affiliate of the Advisor, is entitled
to placement charges of 5.50% of the gross proceeds of the Fund's
offering, all of which will be re-allowed to placement agents. In
addition, BSI is entitled to a marketing and due diligence expense
allowance fee equal to 0.50% of the gross proceeds to reimburse
marketing and due diligence expenses, some portion of which may be
re-allowed to placement agents.
Pursuant to the terms of the Advisory Agreement, the Advisor is
entitled to receive acquisition fees for services rendered in
connection with the selection or acquisition of any property
however designated as real estate commissions, selection fees,
development fees, or any fees of a similar nature. Such
acquisition fees may not exceed the lesser of (a) such compensation
as is customarily charged in arm's-length transactions by others
rendering similar services as an ongoing business in the same
geographic locale and for comparable properties or (b) 3.5% of the
gross proceeds of the Fund's offering. The Fund will also
reimburse the Advisor an amount estimated to be 0.75% of the gross
proceeds of the offering in connection with any expenses attendant
to the acquisition of properties whether or not acquired.
Pursuant to the terms of the Advisory Agreement, the Advisor was
entitled to an annual advisory fee, payable monthly, in an amount
equal to 0.60% of the gross proceeds during the offering. Following
the termination of the offering, an amount equal to the greater of:
(i) .60% of gross proceeds, or (ii) $175,000.
Pursuant to the terms of the Management Agreement, Brauvin
Management Company ("BMC"), an affiliate of the Advisor, provided
leasing and re-leasing services to the Fund in connection with the
management of Fund's properties. The property management fee
payable to an affiliate of the Advisor shall not exceed the lesser
of: (a) fees which are competitive for similar services in the
geographical area where the properties are located; or (b) 1% of
the gross revenues of each property.
Fees, commissions and other expenses incurred and payable to the
Advisor or its affiliates for the three months ended March 31,
1997, and 1996 were as follows:
1997 1996
Selling commissions $ -- $ 73,856
Due diligence fees 179 11,606
Advisory fees 43,750 19,048
Dividend
reinvestment fees 363 411
Management fees 3,386 2,131
Nonaccountable fees 897 31,413
Acquisition fees
and expenses 28,860 67,875
$ 77,435 $206,340
As of March 31, 1997 the Fund had made all payments to affiliates
except for $53,913 for advisory fees, $20 for dividend reinvestment
fees, $2,625 for acquisition fees and $1,441 for management fees.
For the same period in 1996 the Fund made all payments except for
$6,500 for advisory fees.
(3) DIVIDENDS
Below is a table summarizing the dividends declared:
Declaration Record Payment Dividend
Date(a) Dates Date Rate (b) Amount
5/4/95 1/1/95-3/31/95 5/15/95 .01370 % $ 78,681
8/3/95 4/1/95-6/30/95 8/15/95 .01781 136,467
11/2/95 7/1/95-9/30/95 11/15/95 .01918 169,235
1/25/96 10/1/95-12/31/95 2/15/96 .01918 196,106
5/2/96 1/1/96-3/31/96 5/15/96 .01918 216,247
8/1/96 4/1/96-6/30/96 8/15/96 .01918 227,068
10/31/96 7/1/96-9/30/96 11/15/96 .01918 229,532
1/31/97 10/1/96-12/31/96 2/15/97 .01918 229,517
5/8/97 1/1/97-3/31/97 5/15/97 .01918 224,034
(a) Dividends were declared on a daily basis.
(b) The dividend rate is presented on a per day basis.
In order to qualify as a REIT, the Fund is required to distribute
dividends to its Stockholders in an amount at least equal to 95% of
REIT taxable income of the Fund. The Fund intends to make
quarterly distributions to satisfy all annual distribution
requirements.
The dividend reinvestment plan ("Reinvestment Plan") is available
to the stockholders so that stockholders, if they so elect, may
have their distributions from the Fund invested in shares. The
price per share purchased through the Reinvestment Plan shall equal
$10 per share with the purchase of partial shares allowed. The
Fund has registered 500,000 shares for distribution solely in
connection with the Reinvestment Plan. Funds raised through the
Reinvestment Plan will be utilized to (i) purchase shares from
existing stockholders who have notified the Fund of their desire to
sell their shares or held for subsequent redemptions; or (ii)
purchase additional properties. The stockholders electing to
participate in the Reinvestment Plan will be charged a service
charge, in an amount equal to 1% of their distributions, which will
be paid to an affiliate of the Advisor to defray the administrative
costs of the Reinvestment Plan. At March 31, 1997, there were
approximately 29,280 shares purchased through the Reinvestment
Plan and approximately, 16,075 shares liquidated.
(4) Subsequent Events
On May 8, 1997, the Fund declared an ordinary income dividend on
a per share basis of $0.001918 per day for each day investors were
admitted between January 1, 1997 and March 31, 1997. The dividend
aggregated $224,034 payable to stockholders of record on March 31,
1997 and will be paid on May 15, 1997.
Item 2. Management's Discussion and Analysis or Plan of Operations.
Liquidity and Capital Resources
As of March 31, 1997, the Fund had received $11,878,138 in
connection with the sale of shares, net of selling commissions and
other offering costs, including $200,000 paid by the Advisor for a
share of stock as disclosed in the prospectus and liquidations of
$160,750. The Fund acquired one property during the year ended
December 31, 1994 for $900,000 plus closing costs, acquired five
properties during the year ended December 31, 1995 for $6,511,400
plus closing costs and acquired two properties during the year
ended December 31, 1996 for $2,025,000 plus closing costs. On
February 20, 1997, effective as of January 20, 1997, the Fund
purchased a property leased to Bridgestone/Firestone Inc. and to
Jiffy Lube International of Maryland, Inc. for $1,450,000 plus
closing costs.
Upon the acquisition of the Firestone and Jiffy Lube property,
the Fund has invested all the proceeds of the offering allocable to
investments in real estate. The Fund has no material capital
commitments. In the opinion of management of the Fund, each
property is adequately covered by insurance. For further
information, refer to the financial statements and footnotes
thereto included in the Annual Report on Form 10-KSB for the year
ended December 31, 1996.
Compliance with 95% REIT taxable income test
The Fund is required, under the Code, to make distributions of
an amount not less than 95% of its REIT taxable income during the
year.
In accordance with the Fund's intent to maintain its
qualification as a REIT under the Code, the Fund intends to manage
its dividend distributions to approximate earnings during the year
to which they relate.
Cash Flows
During the three months ended March 31, 1997, cash provided by
operating activities was $257,546 relating to property operations.
Cash flows from investing activities of $1,529,287 related to the
acquisition of one property, as discussed above. Cash flows used
in financing activities were $227,884 relating principally to
dividends paid. The Fund anticipates that operating activities
will continue to provide sources of cash.
The Fund's cash flows during the three months ended March 31,
1996 resulted principally from financing activities relating to the
issuance of stock, which generated $1,321,538 less costs related
thereto such as selling commissions and other costs aggregating
$116,877 and dividends to stockholders of $196,106. Cash flows
provided by operating activities were $201,318 due principally to
cash generated from property operations. Cash flows used in
investing activities were $72,455 relating principally to the
acquisition of the Pier 1 Imports property purchased subsequent to
March 31, 1996.
Results of Operations
(Amounts rounded to nearest $000's)
The Fund generated net income of $188,000 for the three months
ended March 31, 1997 as compared to net income of $160,000 for the
same three month period in 1996.
Total income for the three months ended March 31, 1997 was
$340,000 as compared to $270,000 for the same three month period in
1996, an increase of $70,000. The $70,000 increase resulted
primarily from additional rental income received from the nine
properties held during the three months ended March 31, 1997 as
compared to six properties held during the same three month period
in 1996.
For the three months ended March 31, 1997 total expenses were
$151,000 as compared to $109,000 for the same three month period in
1996, an increase of $42,000. The increase was due primarily to
advisory fees increasing approximately $25,000. Advisory fees
increased pursuant to the terms of the Advisory Agreement, the
Advisor was entitled to an annual advisory fee, payable monthly, in
an amount equal to 0.60% of the gross proceeds during the offering.
Following the termination of the offering, an amount equal to the
greater of: (i) .60% of gross proceeds, or (ii) $175,000. Other
expenses have increased such as depreciation in the amount of
$10,000 due to the increased number of properties which were held
for the three months ended March 31, 1997 as compared to the same
three month period in 1996.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security
Holders.
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit 27. Financial Data Schedule
On March 7, 1997 and amended on April 30, 1997 the
Fund filed a Form 8-K and a Form 8-K/A,
respectively, to report the Fund's purchase of
the Firestone/Jiffy Lube Facility and providing
tenant summarized financial information.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRAUVIN NET LEASE V, INC.
BY: /s/ James L. Brault
James L. Brault
Executive Vice President and Secretary
DATE: May 15, 1997
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer
DATE: May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 525,475
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,481,067 <F1>
<DEPRECIATION> 285,013
<TOTAL-ASSETS> 11,896,661
<CURRENT-LIABILITIES> 81,319
<BONDS> 0
0
0
<COMMON> 11,757,343 <F2>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,896,661
<SALES> 0
<TOTAL-REVENUES> 339,919 <F3>
<CGS> 0
<TOTAL-COSTS> 151,420 <F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,499
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F2> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F3> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F4> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
</FN>
</TABLE>
