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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 September 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 0-17557
Brauvin High Yield Fund L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3569428
(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 .
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
INDEX Page
PART I Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . 3
Balance Sheets at September 30, 1996 and December 31,
1995 . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the nine months ended
September 30, 1996 and September 30, 1995. . . . . . 5
Statements of Operations for the three months ended
September 30, 1996 and September 30, 1995. . . . . . 6
Statements of Partners' Capital for the period
January 1, 1995 to September 30, 1996. . . . . . . . 7
Statements of Cash Flows for the nine months ended
September 30, 1996 and September 30, 1995. . . . . . 8
Notes to Financial Statements. . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . 20
PART II Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 26
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 29
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 29
Item 4. Submissions of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . 29
Item 5. Other Information . . . . . . . . . . . . . . . . . 29
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 29
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 30
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 1995 Balance Sheet, the
following Balance Sheet as of September 30, 1996, Statements of
Operations for the nine months ended September 30, 1996 and 1995,
Statements of Operations for the three months ended September 30,
1996 and 1995, Statements of Partners' Capital for the period
January 1, 1995 to September 30, 1996 and Statements of Cash Flows
for the nine months ended September 30, 1996 and September 30, 1995
for Brauvin High Yield Fund 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 financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Partnership's 1995 Annual Report on Form 10-K.
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
BALANCE SHEETS
September 30, December 31,
1996 1995
ASSETS
Investment in real estate, at cost:
Land $ 5,768,768 $ 5,768,768
Buildings 13,554,207 13,554,207
19,322,975 19,322,975
Less: accumulated depreciation (3,142,099) (2,852,122)
Net investment in real estate 16,180,876 16,470,853
Investment in Joint Ventures (Note 5):
Brauvin High Yield Venture 32,727 33,746
Brauvin Funds Joint Venture 2,456,289 2,472,647
Brauvin Gwinnett County Venture 552,404 557,389
Cash and cash equivalents 1,944,485 1,363,085
Due from affiliates -- 358
Prepaid offering costs 15,703 16,763
Other assets 17,159 17,759
Total Assets $21,199,643 $20,932,600
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 174,088 $ 10,443
Rent received in advance 81,239 86,903
Total Liabilities 255,327 97,346
PARTNERS' CAPITAL:
General Partners 125,523 124,295
Interest Holders 20,818,793 20,710,959
Total Partners' Capital 20,944,316 20,835,254
Total Liabilities and Partners' Capital $21,199,643 $20,932,600
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30,
1996 1995
INCOME:
Rental $1,847,555 $1,868,945
Interest 60,941 39,598
Other 312 256
Total income 1,908,808 1,908,799
EXPENSES:
General and administrative 136,827 117,936
Transaction costs 233,173 --
Valuation fees 89,016 --
Management fees 18,860 18,643
Depreciation 289,977 289,976
Total expenses 767,853 426,555
Income before equity interest in joint
ventures 1,140,955 1,482,244
Equity Interest in Joint Venture's Net Income:
Brauvin High Yield Venture 4,381 4,296
Brauvin Funds Joint Venture 218,842 219,668
Brauvin Gwinnett County Venture 37,135 34,844
Net income $1,401,313 $1,741,052
Net income allocated to the General Partners $ 28,026 $ 34,821
Net income allocated to the Interest Holders $1,373,287 $1,706,231
Net income per Unit outstanding (a) $ 0.52 $ 0.66
(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 Interest Holders were admitted to
the Partnership and additional Units were purchased through the
distribution reinvestment plan (the "Plan").
See accompanying notes to financial statements.
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30,
1996 1995
INCOME:
Rental $635,857 $653,206
Interest 22,212 15,812
Other 92 118
Total income 658,161 669,136
EXPENSES:
General and administrative 50,608 47,400
Transaction costs 217,344 --
Valuation fees 3,816 --
Management fees 6,385 6,375
Depreciation 96,659 96,658
Total expenses 374,812 150,433
Income before equity interest in joint
ventures 283,349 518,703
Equity Interest in Joint Venture's Net Income:
Brauvin High Yield Venture 1,482 1,438
Brauvin Funds Joint Venture 73,572 73,727
Brauvin Gwinnett County Venture 12,892 11,239
Net income $371,295 $605,107
Net income allocated to the General Partners $ 7,426 $ 12,102
Net income allocated to the Interest
Holders $363,869 $593,005
Net income per Unit outstanding (a) $ 0.14 $ 0.23
(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 Interest Holders were admitted to
the Partnership and additional Units were purchased through the
Plan.
See accompanying notes to financial statements.
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF PARTNERS' CAPITAL
For the Period January 1, 1995 to September 30, 1996
General Interest
Partners Holders* Total
Balance, January 1, 1995 $129,815 $20,631,058 $20,760,873
Contributions, net -- 399,001 399,001
Selling commissions and
other offering costs (Note 1) -- (39,045) (39,045)
Net income 47,349 2,320,094 2,367,443
Cash distributions (52,869) (2,600,149) (2,653,018)
Balance, December 31, 1995 124,295 20,710,959 20,835,254
Contributions, net -- 65,998 65,998
Selling commissions and
other offering costs (Note 1) -- (10,070) (10,070)
Net income 28,026 1,373,287 1,401,313
Cash distributions (26,798) (1,321,381) (1,348,179)
Balance, September 30, 1996 $125,523 $20,818,793 $20,944,316
*Total Units sold at September 30, 1996 and December 31, 1995 were
2,627,503 and 2,620,903 respectively. Cash distributions to Interest
Holders per Unit were $0.50 and $1.00 for the nine months ended September
30, 1996 and the year ended December 31, 1995. Cash distributions to
Interest Holders 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 Interest Holders were admitted to the
Partnership and additional Units were purchased through the Plan.
See accompanying notes to financial statements.
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
1996 1995
Cash flows from operating activities:
Net income $1,401,313 $1,741,052
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 289,977 289,976
Equity interest in Brauvin High Yield
Venture's net income (4,381) (4,296)
Equity interest in Brauvin Funds Joint
Venture's net income (218,842) (219,668)
Equity interest in Brauvin Gwinnett County
Venture's net income (37,135) (34,844)
Repayment from affiliate 358 --
Decrease in other assets 600 6,039
Decrease in due from affiliates -- 12,107
Increase in accounts payable and accrued
expenses 163,645 7,259
Increase in due to affiliates -- 320
Decrease in rent received in advance (5,664) (183,885)
Net cash provided by operating activities 1,589,871 1,614,060
Cash flows from investing activities:
Distributions from Brauvin High
Yield Venture 5,400 4,649
Distributions from Brauvin Funds
Joint Venture 235,200 208,250
Distributions from Brauvin Gwinnett
County Venture 42,120 45,630
Cash provided by investing activities 282,720 258,529
Cash flows from financing activities:
Sale of Units, net of liquidations, selling
commissions and other offering costs 56,988 267,287
Cash distributions to General Partners (26,798) (39,467)
Cash distributions to Interest Holders (1,321,381) (1,943,101)
Net cash used in financing activities (1,291,191) (1,715,281)
Net increase in cash and cash
equivalents 581,400 157,308
Cash and cash equivalents at beginning
of period 1,363,085 1,016,066
Cash and cash equivalents at end of period $1,944,485 $1,173,374
See accompanying notes to financial statements.
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BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BRAUVIN HIGH YIELD FUND L.P. (the "Partnership") is a Delaware
limited partnership organized for the purpose of acquiring debt-free
ownership of existing, free-standing, income-producing retail,
office and industrial real estate properties predominantly subject
to "triple-net" leases. The General Partners of the Partnership are
Brauvin Realty Advisors, Inc., Jerome J. Brault, and David M.
Strosberg. Brauvin Realty Advisors, Inc. is owned primarily by Mr.
Brault (beneficially)and Mr. Cezar M. Foelich. Mr. Cezar M.
Froelich resigned as an individual General Partner effective
September 17,1996. Brauvin Securities, Inc., an affiliate of the
General Partners, was the selling agent of the Partnership. The
Partnership is managed by an affiliate of the General Partners.
The Partnership was formed on January 6, 1987 and filed a
Registration Statement on Form S-11 with the Securities and Exchange
Commission which became effective on September 4, 1987. The sale
of the minimum of $1,200,000 of depository units representing
beneficial assignments of limited partnership interests of the
Partnership (the "Units") necessary for the Partnership to commence
operations was achieved on November 18, 1987. The Partnership's
offering closed on May 19, 1988. A total of $25,000,000 of Units
were subscribed for and issued between September 4, 1987 and May 19,
1988, pursuant to the Partnership's public offering. Through
September 30, 1996 and December 31, 1995, the Partnership had sold
$27,922,102 and $27,816,104, of Units, respectively. These totals
include $2,922,102, and $2,816,104 of Units, respectively, purchased
by Interest Holders who utilized their distributions of Operating
Cash Flow to purchase additional Units through the distribution
reinvestment plan (the "Plan"). Units valued at $1,647,070 and
$1,607,070 have been purchased by the Partnership from Interest
Holders liquidating their investment in the Partnership and have
been retired as of September 30, 1996 and December 31, 1995,
respectively. As of September 30, 1996 the Participants have
acquired Units under the Plan which approximate 10% of total Units
outstanding.
The Partnership has acquired the land and buildings underlying 20
Taco Bell restaurants, 11 Ponderosa restaurants and two Children's
World Learning Centers. The Partnership also acquired 1%, 49% and
23.4% equity interests in three joint ventures with three entities
affiliated with the Partnership. These ventures own the land and
buildings underlying six Ponderosa restaurants, a Scandinavian
Health Spa and a CompUSA 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 these estimates.
Accounting Method
The accompanying financial statements have been prepared using the
accrual method of accounting.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements. 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.
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 35 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.
Investment in Joint Ventures
The Partnership owns a 1% equity interest in Brauvin High Yield
Venture, which owns the land and building underlying six Ponderosa
restaurants; a 49% equity interest in Brauvin Funds Joint Venture,
which owns the land and building underlying a Scandinavian Health
Spa; and a 23.4% equity interest in Brauvin Gwinnett County Venture,
which owns the land and building underlying a CompUSA store. The
accompanying financial statements include the investments in Brauvin
High Yield Venture, Brauvin Funds Joint Venture and Brauvin Gwinnett
County Venture using the equity method of accounting.
Organization Costs and Prepaid 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.
Gross proceeds of the offering 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 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 September 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.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement"), shall be distributed: (a) first, to the Interest
Holders until the Interest Holders receive an amount equal to their
10% Current Preferred Return, as such term is defined in the
Agreement; and (b) thereafter, any remaining amounts will be
distributed 98% to the Interest Holders and 2% to the General
Partners.
The net proceeds of a sale or refinancing of a Partnership
property shall be distributed as follows:
first, to the Interest Holders until each Interest Holder has
been paid an amount equal to the 10% Cumulative Preferred
Return, as defined in the Agreement;
second, to the Interest Holders until each Interest Holder has
been paid an amount equal to his Adjusted Investment, as
defined in the Agreement;
third, to the General Partners until they have been paid an
amount equal to a 2% preferred return; and
fourth, 95% of any remaining Net Sale or Refinancing Proceeds,
as such term is defined in the Agreement, to the Interest
Holders and the remaining 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 98% to the Interest Holders and 2% 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 Interest Holders, 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
Interest Holders until the Interest Holders have been allocated
profits equal to their 10% Cumulative Preferred Return; (c) third,
to the Interest Holders until the Interest Holders have been
allocated an amount of profit equal to the amount of their Adjusted
Investment; (d) fourth, to the General Partners until such time as
they have been allocated profits equal to a 2% preferred return; and
(e) thereafter, 95% to the Interest Holders 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, 98% to the Interest Holders and 2% to the General
Partners.
(3) TRANSACTIONS WITH RELATED PARTIES
An affiliate of the General Partners manages the Partnership's
real estate properties for an annual management fee equal to up to
1% of gross revenues derived from the properties. The property
management fee is subordinated, annually, to receipt by the Interest
Holders of an annual 10% non-cumulative, non-compounded return on
Adjusted Investment (as defined).
The Partnership pays affiliates of the General Partners selling
commissions of 8-1/2% of the capital contributions received for
Units sold by the affiliates.
An affiliate of one of the shareholders of the Corporate General
Partner provided 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 nine months ended
September 30, 1996 and 1995 were as follows:
1996 1995
Selling commissions $ 9,010 $29,029
Management fees 18,860 18,643
Reimbursable operating
expenses 94,674 54,000
Legal fees 2,545 334
(4) WORKING CAPITAL RESERVES
The Partnership set aside 1% of the gross proceeds of its Offering
as a working capital reserve. At any time two years subsequent to
the termination of the Partnership's offering (May 19, 1990), it
became permissible to reduce the working capital reserve to an
amount equal to not less than 1/2% of the proceeds of the Offering
($125,000) if the General Partners believed such reduction to be in
the best interests of the Partnership and the Interest Holders. As
a result thereof, $125,000 was paid to an affiliate of the General
Partners in the fourth quarter of 1990 as an additional Acquisition
Fee and $125,000 remains in reserve.
(5) EQUITY INVESTMENTS
The Partnership owns equity interests in the Brauvin High Yield
Venture, Brauvin Funds Joint Venture and Brauvin Gwinnett County
Venture and reports its investments on the equity method. The
following are condensed financial statements for the Brauvin High
Yield Venture, Brauvin Funds Joint Venture and Brauvin Gwinnett
County Venture:
BRAUVIN HIGH YIELD VENTURE
September 30, December 31,
1996 1995
Land and buildings, net $5,072,896 $5,163,083
Other assets 9,025 21,792
Total Assets $5,081,921 $5,184,875
Liabilities $ 4,048 $ 5,126
Partners' capital 5,077,873 5,179,749
Total Liabilities and
Partners Capital $5,081,921 $5,184,875
For the nine months ended September 30,
1996 1995
Rental income $537,179 $528,762
Expenses:
Depreciation 90,188 90,187
Management fees 5,581 5,319
Operating and administrative 3,286 3,615
Net income $438,124 $429,641
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BRAUVIN FUNDS JOINT VENTURE
September 30, December 31,
1996 1995
Land and buildings, net $4,733,928 $4,816,500
Other assets 331,747 284,969
Total Assets $5,065,675 $5,101,469
Liabilities $ (406) $ 2,004
Partners' capital 5,066,081 5,099,465
Total Liabilities and
Partners' Capital $5,065,675 $5,101,469
For the nine months ended September 30,
1996 1995
Rental income $537,725 $541,403
Expenses:
Depreciation 82,572 82,572
Management fees 5,061 5,110
Operating and administrative 3,476 5,419
Net income $446,616 $448,302
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BRAUVIN GWINNETT COUNTY VENTURE
September 30, December 31,
1996 1995
Land and buildings, net $2,342,196 $2,376,510
Other assets 33,450 41,567
Total Assets $2,375,646 $2,418,077
Liabilities $ 1,575 $ 22,702
Partners' capital 2,374,071 2,395,375
Total Liabilities and
Partners' Capital $2,375,646 $2,418,077
For the nine months ended September 30,
1996 1995
Rental income $198,607 $190,751
Expenses:
Depreciation 34,314 34,314
Management fees 1,656 1,870
Operating and administrative 3,941 5,663
Net income $158,696 $148,904
(6) SUBSEQUENT EVENTS
Investment in Joint Ventures
On October 31, 1996, the Partnership purchased a 16% interest in
a joint venture with affiliated real estate limited partnerships
(the "Bay County Venture"). The Bay County Venture acquired the
land and building underlying a 6,466 square foot Blockbuster Video
Store located in Callaway, FL from an unaffiliated seller for
approximately $1,015,000 plus closing costs and related fees.
Vote of Interest Holders
On Friday, November 8, 1996 there was a Special Meeting of
Interest Holders of Brauvin High Yield Fund L.P. At this Special
Meeting, the Interest Holders holding a majority of the Units
approved the merger of the Partnership with and into the Brauvin
Real Estate Funds L.L.C., a Delaware limited liability company (the
"Purchaser"), which approval automatically resulted in the adoption
of an amendment to the Partnership Agreement, to allow the
Partnership to sell or lease property to affiliates. In addition,
at the Special Meeting, Interest Holders holding a majority of the
Units approved the adoption of an amendment to the Partnership
Agreement to allow the majority vote of the Interest Holders to
determine the outcome of the transaction with the Purchaser without
the vote of the General Partners of the Partnership.
<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 September
4, 1987 of 1,500,000 Units which was subsequently increased to
2,500,000 Units. The offering closed on May 19, 1988 after
2,500,000 Units were sold. The Partnership purchased the land and
buildings underlying seven Taco Bell restaurants in 1987. In 1988,
the Partnership purchased 13 Taco Bell restaurants, nine Ponderosa
restaurants and an interest in a joint venture which purchased nine
Ponderosa restaurants. In 1989, the Partnership purchased the land
and building underlying a Ponderosa restaurant, an interest in a
joint venture which purchased a Scandinavian Health Spa, the land
and buildings underlying two Children's World Learning Centers and
the land and building underlying an additional Ponderosa restaurant.
In 1993, the Partnership purchased a 23.4% interest in a joint
venture which purchased a CompUSA store.
On October 31, 1996, the Partnership purchased a 16% interest in
a joint venture with affiliated real estate limited partnerships
(the "Bay County Venture"). The Bay County Venture acquired the
land and building underlying a 6,466 square foot Blockbuster Video
Store located in Callaway, FL from an unaffiliated seller for
approximately $1,015,000 plus closing costs and related fees.
The Partnership raised $25,000,000 through its initial offering
and an additional $2,922,102 as of September 30, 1996, through Units
purchased by certain Interest Holders investing their distributions
of Operating Cash Flow in additional Units through the distribution
reinvestment plan (the "Plan"). As of September 30, 1996, Units
valued at $1,647,070 have been purchased by the Partnership from
Interest Holders liquidating their original investment and such
Units have been retired. The Partnership has no funds available to
purchase additional property, excluding those raised through the
Plan.
Below is a table summarizing the historical data for
distributions per Unit:
Distribution
Date 1996 1995 1994 1993 1992 1991
February 15 $.2500 $.2500 $.2500 $.2500 $.2500 $.2375
May 15 .2500 .2500 .2500 .2500 .2500 .2406
August 15 -- .2500 .2500 .2500 .2563 .2438
November 15 .2625 .2625 .2563 .2438 .2375
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.
During the nine months ended September 30, 1996 and the year
ended December 31, 1995, the General Partners and its affiliates collected
a management fee of $18,860 and $24,998, respectively and received
$26,798 and $52,869 in Operating Cash Flow distributions for the nine
months ended September 30, 1996 and the year ended December 31, 1995,
respectively.
The Partnership has entered into an agreement and plan of merger
dated as of June 14, 1996 (the "Merger Agreement") with Brauvin Real
Estate Funds L.L.C., a Delaware limited liability company (the
"Purchaser"). 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 limited partnership interests. In
connection with the Merger, the beneficial owners (the "Interest
Holders") of the limited partnership interests of the Partnership
(the "Units") will receive approximately $9.31 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
affirmative vote of the Interest Holders holding a majority of the
Units was necessary to approve the Merger.
The Partnership drafted a proxy statement, which required prior
review and comment by the Securities and Exchange Commission (the
"Commission"), to solicit proxies for use at a special meeting of
the Interest Holders (the "Special Meeting") originally to be held
at the offices of the Partnership on September 24, 1996. As a
result of various legal issues, the Special Meeting was adjourned
to November 8, 1996 at 9:00 a.m. The purpose of the Special Meeting
was to vote upon the Merger and certain other matters as described
herein.
The Special Meeting of Interest Holders of Brauvin High Yield Fund
L.P. was held on Friday, November 8, 1996 at 9:00 a.m. At this
Special Meeting, the Interest Holders holding a majority of the
Units approved the merger of the Partnership with and into the
Purchaser. At the Special Meeting, Interest Holders holding a
majority of the Units approved the adoption of an amendment to the
Partnership 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.
By approving the Merger, the Interest Holders also approved an
amendment of the Restated Limited 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 Merger shall be referred to herein as the
"Transaction"). In addition, 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. The Partnership
Agreement does not address this matter. Neither the Act nor the
Partnership Agreement provide the Interest Holders not voting in
favor of the Transaction with dissenters' appraisal rights.
The actual redemption price will be based on the fair market
value of the properties of the Partnership (the "Assets") as
determined by an independent appraiser at such time as is specified
in the certificate of merger (the "Effective Time"), plus all
remaining cash of the Partnership (which will not include earnings
after July 31, 1996, which due to the wind up and litigation costs
of the Partnership are expected to be nominal), less the
Partnership's actual costs incurred and accrued through the
Effective Time, 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 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 Interest Holders from a financial point of view.
Cushman & Wakefield has preliminarily determined that the fair
market value of the Assets of the Partnership is $23,198,450, which
is approximately $8.83 per Unit. In addition, Cushman & Wakefield
has finalized and issued its opinion as to the fairness of the
Transaction to the Interesst Holders 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, Inc., the corporate general partner of the
Partnership (the "Corporate General Partner") and David M.
Strosberg. Mr. Cezar M. 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 became effective on 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
Braults have an indirect economic interest in consummating the
Transaction that is in conflict with the economic interests of the
Interest Holders. Messrs. Froelich and Strosberg have 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. II, Brauvin Income Plus L.P. III and Brauvin Corporate
Lease Program IV L.P., Delaware limited partnerships affiliated with
the Partnership.
The General Partners have temporarily suspended all distributions
to Interest Holders and liquidations pending consummation of the
Transaction.
Results of Operations - Nine months ended September 30, 1996 and
1995.
Results of operations for the Partnership for the nine months
ended September 30, 1996 reflected net income of $1,401,313 as
compared to $1,741,052 for the nine months ended September 30, 1995,
a decrease of approximately $339,700. The decrease in net income
is a result of an increase in expenses as a result of the
Transaction.
Total income for the nine months ended September 30, 1996 and
1995 reflected total income of approximately $1,908,800 for both
periods. Total income was effected by the increase in interest
income of approximately $21,300 as a result of more funds invested
during 1996 however this increase in interest income was offset by
a decline in percentage rent at certain of the Partnership's
properties during the period ended in 1996.
Total expenses for the nine months ended September 30, 1996 were
$767,853 as compared to $426,555 for the nine months ended September
30, 1995, an increase of approximately $341,300. The increase in
expenses is primarily the result of legal and other professional
fees paid or accrued as a result of the Transaction. Expenses also
increased in 1996 compared to 1995 due to the Partnership hiring an
independent real estate company to conduct property valuations
pursuant to the terms of the Prospectus.
Results of Operations - Three months ended September 30, 1996 and
1995
Results of operations for the Partnership for the three months
ended September 30, 1996 reflected net income of $371,295 as
compared to $605,107 for the three months ended September 30, 1995,
a decrease of approximately $233,800. The decrease in net income
is a result of an increase in expenses as a result of the
Transaction.
Total income for the three months ended September 30, 1996 was
$658,161 as compared to $669,136 for the three months ended
September 30, 1995, a decrease of approximately $11,000. The
decrease in total income was due to an decrease in rental income of
approximately $17,300 as a result of certain properties earning
decreased amounts of percentage rents during 1996. Partially
offsetting the decline in percentage rents is an increase in
interest income of approximately $6,400 which was the result of more
funds invested during 1996.
Total expenses for the three months ended September 30, 1996 were
$374,812 as compared to $150,433 for the three months ended
September 30, 1995, an increase of approximately $224,400. The
increase in expenses is primarily the result of legal and other
professional fees paid or accrued as a result of the Transaction.
Expenses also increased in 1996 compared to 1995 due to the
Partnership hiring an independent real estate company to conduct
property valuations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Two legal actions, as hereinafter described, were recently
filed against certain of the General Partners of the
Partnership and affiliates of such General Partners, as
well as, in one instance, against the Partnership on a
nominal basis. Each of these actions was brought by
limited partners of the Partnership. The Partnership,
and/or these certain 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., 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,
along with the other partnerships proposed to be party to
a merger or sale with Brauvin Real Estate Funds, L.L.C., a
Delaware limited liability company (the "Purchaser"), is
named as a "Nominal Defendant" in a lawsuit. Jerome J.
Brault, the Managing General Partner of the Partnership,
and Brauvin Realty Advisors, Inc., the Corporate General
Partner of the Partnership, as well as the Corporate
General Partners of certain other partnerships affiliated
with the Partnership (the "Affiliated Partnership"), 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 Partnership Agreement, and civil
racketeering. The amended complaint seeks injunctive
relief, as well as compensatory and punitive damages,
relating to the proposed transaction 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
Interest Holders 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.
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., Docket No. 96C6025. The Partnership is not
named as a Defendant in the lawsuit. Jerome J. Brault and
the Corporate General Partners 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 Partnership 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 September 20, 1996, the District Court entered an order
postponing until October 9, 1996 the Special Meeting of the
Interest Holders of the Partnership and of the other
partnerships to vote on the proposed transactions with the
Purchaser, which meetings had been scheduled for September
24, 1996.
On October 2, 1996, the District Court certified
plaintiffs' proposed class as all of the Interest Holders
of the Partnership and of the other Affiliated
Partnerships, and appointed plaintiffs' counsel, The Mills
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
Interest Holders and the proposed transaction 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
Firm, mailed a solicitation to all of the Interest Holders,
requesting that they revoke their previously-mailed proxies
in favor of the proposed transaction with the Purchaser.
On September 30, 1996, Jerome J. Brault and the Corporate
General Partners (collectively, the "Operating General
Partners") moved the District Court to invalidate
revocations of proxies procured by The Mills Firm's
September 27, 1996 letter on the basis that The Mills
Firm's September 27, 1996 letter was materially misleading
in violation of the federal securities laws and SEC proxy
rules.
On October 11, 1996, the Operating General Partners of the
Partnership filed a counterclaim against plaintiffs and
their counsel, The Mills Firm, alleging that plaintiffs and
The Mills Firm violated the federal securities laws and SEC
proxy rules by sending their September 27, 1996 letter to
the Interest Holders.
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 Firm's September 27, 1996 letter. In
that evidentiary hearing, The Mills Firm admitted that it
violated the SEC proxy rules by sending its September 27,
1996 letter to the Interest Holders without filing such
letter with the SEC in violation of SEC 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 Interest Holders by plaintiffs and The Mills 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 Firm's September 27, 1996 letter because it did not
believe it possessed the authority to do so under present
law. This ruling by the District Court has been appealed
to the Seventh Circuit Court of Appeals. The Court of
Appeals has granted the request of the Operating General
Partners for an expedited hearing and the Court of Appeals
has scheduled oral arguments for January 1997.
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. Item 5. Notification of the partners
of the legal proceedings filed
against the Partnership and certain
general partners of the Partnership
regarding the Transaction. This Form
8-K was dated September 17, 1996 and
filed on September 23, 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, Inc., Corporate
General Partner of Brauvin High Yield
Fund L.P.
BY:/s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: November 18, 1996
BY:/s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
DATE: November 18, 1996
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-31-1996
<CASH> 1,944,485
<SECURITIES> 3,041,420 <F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,322,975 <F2>
<DEPRECIATION> 3,142,099
<TOTAL-ASSETS> 21,199,643
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 20,944,316 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,199,643
<SALES> 0
<TOTAL-REVENUES> 1,908,808 <F4>
<CGS> 0
<TOTAL-COSTS> 767,853 <F5>
<OTHER-EXPENSES> (260,358)<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,401,313
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENTS IN JOINT VENTURE
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<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 EQUITY INTEREST IN JOINT
VENTURES' NET INCOME
</FN>
</TABLE>
