<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 March 31, 1997
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 .
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
INDEX
Page
PART I Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 3
Balance Sheets at March 31, 1997 and
December 31, 1996. . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the three months
ended March 31, 1997 and 1996. . . . . . . . . . . . . . . 5
Statements of Partners' Capital for the period
January 1, 1996 to March 31, 1997. . . . . . . . . . . . . 6
Statements of Cash Flows for the three months
ended March 31, 1997 and 1996. . . . . . . . . . . . . . . 7
Notes to Financial Statements. . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . 28
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 35
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 39
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 39
Item 4. Submissions of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . 39
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 39
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 39
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 1996 Balance Sheet, the following
Balance Sheet as of March 31, 1997, Statements of Operations for
the three months ended March 31, 1997 and 1996, Statements of
Partners' Capital for the period January 1, 1996 to March 31, 1997
and Statements of Cash Flows for the three months ended March 31,
1997 and 1996 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 1996 Annual Report on Form 10-K.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
BALANCE SHEETS
March 31, December 31,
1997 1996
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 (3,335,417) (3,238,758)
Net investment in real estate 15,987,558 16,084,217
Investment in Joint Ventures (Note 5):
Brauvin High Yield Venture 32,044 32,374
Brauvin Funds Joint Venture 2,445,936 2,450,861
Brauvin Gwinnett County Venture 547,859 550,625
Brauvin Bay County Venture 170,336 171,433
Cash and cash equivalents 2,250,043 2,231,481
Due from affiliates -- 20
Prepaid offering costs 15,703 15,703
Other assets 249 17,283
Total Assets $21,449,728 $21,553,997
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 23,864 $ 29,018
Due to affiliates 20 --
Rent received in advance 136,636 144,365
Total Liabilities 160,520 173,383
PARTNERS' CAPITAL:
General Partners 144,342 134,218
Interest Holders 21,144,866 21,246,396
Total Partners' Capital 21,289,208 21,380,614
Total Liabilities and
Partners' Capital $21,449,728 $21,553,997
See accompanying notes to financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
1997 1996
INCOME:
Rental $598,148 $584,877
Interest 30,963 19,453
Other 92 97
Total income 629,203 604,427
EXPENSES:
General and administrative 55,074 34,053
Management fees (Note 3) 6,588 6,133
Transaction costs (Note 6) 50,075 --
Valuation fees -- 42,600
Depreciation 96,659 96,659
Total expenses 208,396 179,445
Income before equity interest in
joint ventures 420,807 424,982
Equity Interest in Joint Venture's
Net Income:
Brauvin High Yield Venture 1,470 1,419
Brauvin Funds Joint Venture 68,575 72,991
Brauvin Gwinnett County Venture 12,444 12,440
Brauvin Bay County Venture 2,903 --
Net income $506,199 $511,832
Net income allocated to the General
Partners $ 10,124 $ 10,237
Net income allocated to the Interest
Holders $496,075 $501,595
Net income per Unit outstanding (a) $ 0.19 $ 0.19
(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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF PARTNERS' CAPITAL
For the Period January 1, 1996 to March 31, 1997
General Interest
Partners Holders * Total
Balance at January 1, 1996 $124,295 $20,710,959 $20,835,254
Contributions, net -- 67,546 67,546
Selling commissions and
other offering costs -- (10,070) (10,070)
Net income 36,721 1,799,342 1,836,063
Cash distributions (26,798) (1,321,381) (1,348,179)
Balance, December 31, 1996 134,218 21,246,396 21,380,614
Net income 10,124 496,075 506,199
Cash distributions -- (597,605) (597,605)
Balance, March 31, 1997 $144,342 $21,144,866 $21,289,208
* Total Units outstanding at March 31, 1997 and December 31, 1996
were 2,627,503. Cash distributions to Interest Holders per Unit
were approximately $0.23 and $0.50 for the three months ended March
31, 1997 and the year ended December 31, 1996, respectively. Cash
distributions to Interest Holders per Unit are based on the average
Units outstanding during the year since they were of varying dollar
amounts and percentages based upon the dates Interest Holders were
admitted to the Partnership and additional Units were purchased
through the Plan.
See accompanying notes to financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF CASH FLOWS
For Three Months Ended March 31,
1997 1996
Cash flows from operating activities:
Net income $506,199 $ 511,832
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 96,659 96,659
Equity interest in Brauvin High
Yield Venture's net income (1,470) (1,419)
Equity interest in Brauvin Funds
Joint Venture's net income (68,575) (72,991)
Equity interest in Brauvin Gwinnett
County Venture's net income (12,444) (12,440)
Equity interest in Brauvin Bay
County Venture's net income (2,903) --
Repayment from affiliates 20 358
Decrease (increase) in other assets 17,034 (809)
(Decrease) increase in accounts payable
and accrued expenses (5,154) 547
Increase in due to affiliates 20 --
Decrease in rent received in advance (7,729) (4,567)
Net cash provided by operating activities 521,657 517,170
Cash flows from investing activities:
Distributions from Brauvin High Yield Venture 1,800 1,800
Distributions from Brauvin Funds Joint Venture 73,500 78,400
Distributions from Brauvin Gwinnett
County Venture 15,210 14,040
Distributions from Brauvin Bay County Venture 4,000 --
Net cash provided by investing activities 94,510 94,240
Cash flows from financing activities:
Sale of Units, net of liquidations, selling
commissions and other offering costs -- 56,988
Cash distributions to General Partners -- (13,455)
Cash distributions to Interest Holders (597,605) (659,129)
Net cash used in financing activities (597,605) (615,596)
Net increase (decrease) in cash and
cash equivalents 18,562 (4,186)
Cash and cash equivalents at beginning
of period 2,231,481 1,363,085
Cash and cash equivalents at end of period $2,250,043 $1,358,899
See accompanying notes to financial statements.
<PAGE>
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
Messrs. Brault (beneficially)(44%) and Froelich (44%). Mr.
Froelich resigned as a director of the Corporate General Partner in
December 1994 and as an individual General Partner effective as of
September 17, 1996. 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 March 31, 1997 and December 31, 1996 the
Partnership had sold $27,922,102 of Units. This total includes
$2,922,102 of Units 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 have been repurchased by the Partnership
from Interest Holders liquidating their investment in the
Partnership and have been retired as of March 31, 1997 and
December 31, 1996. As of March 31, 1997, the Plan participants
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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%,
23.4% and 16% equity interests in four joint ventures with three
entities affiliated with the Partnership. These ventures own the
land and buildings underlying six Ponderosa restaurants, a
Scandinavian Health Spa, a CompUSA store and a Blockbuster Video
store, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from 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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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 and for Long-Lived Assets to be Disposed Of"
(SFAS 121). The Partnership has performed an analysis of its long-
lived assets, and the Partnership's management determined that
there were no events or changes in circumstances that indicated
that the carrying amount of the assets may not be recoverable at
March 31, 1997 and December 31, 1996. Accordingly, no impairment
loss has been recorded in the accompanying financial statements for
the three months ended March 31, 1997 and 1996.
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; a 23.4% equity interest in Brauvin Gwinnett County Venture,
which owns the land and building underlying a CompUSA store; and a
16% equity interest in Brauvin Bay County Venture which owns the
land and building underlying a Blockbuster Video store. The
accompanying financial statements include the investments in
Brauvin High Yield Venture, Brauvin Funds Joint Venture, Brauvin
Gwinnett County Venture and Brauvin Bay County Venture, using the
equity method of accounting.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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.
Prepaid offering costs represent amounts in excess of the defined
percentages of the gross proceeds. Prior to the commencement of
the Partnership's proxy solicitation (see Note 6), gross proceeds
were expected to increase due to the purchase of additional Units
through the Plan and the prepaid offering costs would be
transferred to offering costs and treated as a reduction in
Partners' Capital.
Cash and Cash Equivalents
Cash 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 March 31, 1997, 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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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 to/from
affiliates; accounts payable and accrued expenses; and rents
received in advance.
Reclassifications
Certain reclassifications have been made to the 1996 financial
statements to conform to classifications adopted in 1997.
(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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
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 General Partners provides securities
and real estate counsel to the Partnership.
The Partnership pays an affiliate of the General Partners an
acquisition fee in the amount of up to 4.5% of the gross proceeds
of the Partnership's offering for the services rendered in
connection with the process pertaining to the acquisition of a
property. Acquisition fees related to the properties not
ultimately purchased by the Partnership are expensed as incurred.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the three months ended March
31, 1997 and 1996 were as follows:
1997 1996
Selling commissions $ -- $ 9,010
Management fees 6,588 6,133
Reimbursable operating
expenses 41,201 21,600
Legal fees -- 326
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(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) INVESTMENT IN JOINT VENTURES
The Partnership owns equity interests in the Brauvin High Yield
Venture, Brauvin Funds Joint Venture, Brauvin Gwinnett County
Venture and Brauvin Bay 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, Brauvin Gwinnett County Venture and Brauvin Bay County
Venture:
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
BRAUVIN HIGH YIELD VENTURE
March 31, December 31,
1997 1996
Land and buildings, net $5,012,771 $5,042,833
Other assets 16,505 18,144
$5,029,276 $5,060,977
Liabilities $ 19,708 $ 18,442
Partners' capital 5,009,568 5,042,535
$5,029,276 $5,060,977
Three Months Ended March 31,
1997 1996
Rental and other income $181,434 $175,907
Expenses:
Depreciation 30,063 30,063
Management fees 1,848 1,874
Operating and
administrative 2,491 2,086
34,402 34,023
Net Income $147,032 $141,884
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
BRAUVIN FUNDS JOINT VENTURE
March 31, December 31,
1997 1996
Land and buildings, net $4,678,880 $4,706,404
Other assets 351,511 348,975
$5,030,391 $5,055,379
Liabilities $ 2,328 $ 374
Partners' capital 5,028,063 5,055,005
$5,030,391 $5,055,379
Three Months Ended March 31,
1997 1996
Rental and other income $179,256 $178,679
Expenses:
Depreciation 27,524 27,524
Management fees 1,666 1,693
Operating and
administrative 10,118 501
39,308 29,718
Net Income $139,948 $148,961
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
BRAUVIN GWINNETT COUNTY VENTURE
March 31, December 31,
1997 1996
Land and buildings, net $2,320,177 $2,330,758
Other assets 37,538 59,531
$2,357,715 $2,390,289
Liabilities $ 3,066 $ 23,820
Partners' capital 2,354,649 2,366,469
$2,357,715 $2,390,289
Three Months Ended March 31,
1997 1996
Rental and other income $65,805 $65,225
Expenses:
Depreciation 10,582 11,438
Management fees 875 622
Operating and
administrative 1,169 --
12,626 12,060
Net Income $53,179 $53,165
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
BRAUVIN BAY COUNTY VENTURE
March 31, December 31,
1997 1996
Land and buildings, net $1,066,293 $1,069,277
Other assets 8,313 13,531
$1,074,606 $1,082,808
Liabilities $ 193 $ 1,155
Partners' capital 1,074,413 1,081,653
$1,074,606 $1,082,808
Three Months Ended March 31,
1997
Rental income $27,914
Expenses:
Depreciation 2,984
Management fees 292
Operating and administrative 6,493
9,769
Net Income $18,145
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(6) MERGER AND LITIGATION
Merger
Pursuant to the terms of an agreement and plan of merger dated
as of June 14, 1996, as amended March 24, 1997 (the "Merger
Agreement"), the Partnership proposes to merge with and into
Brauvin Real Estate Funds L.L.C., a Delaware limited liability
company (the "Purchaser"), affiliated with certain of the General
Partners through a merger (the "Merger") of its Units. 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 Interest
Holders holding a majority of the Units approved the Merger on
November 8, 1996. By approving the Merger, the Interest Holders
also approved an amendment to the Agreement allowing the
Partnership to sell or lease property to affiliates (this
amendment, together with the Merger shall be referred to herein as
the "Transaction").
The redemption price to be paid to the Interest Holders in
connection with the Merger is based on the fair market value of the
properties of the Partnership (the "Assets"). Cushman & Wakefield
Valuation Advisory Services ("Cushman & Wakefield"), an independent
appraiser, the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets, to satisfy the Partnership's
requirements under the Employee Retirement Income Security Act of
1974, as amended. Cushman & Wakefield determined the fair market
value of the Assets to be $23,198,450, or $8.83 per Unit. The
redemption price of $9.31 per Unit also includes all remaining cash
of the Partnership, less net earnings of the Partnership from and
after August 1, 1996 through December 31, 1996, less the
Partnership's actual costs incurred and accrued through the
effective time at the filing of the certificate of merger,
including reasonable reserves in connection with: (i) the proxy
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
solicitation; (ii) the Transaction (as detailed in the Merger
Agreement); and (iii) the winding up of the Partnership, including
preparation of the final audit, tax return and K-1s (collectively,
the "Transaction Costs") and less all other Partnership
obligations.
The General Partners will not receive any payment in exchange for
the redemption of their general partnership interests nor will they
receive any fees from the Partnership in connection with the
Transaction. The Managing General Partner and his son, James L.
Brault, an executive officer of the Corporate General Partner, will
have a minority ownership interest in the Purchaser.
The Merger has not been completed primarily due to certain
litigation, as described below, that is still pending. The
Operating General Partners (as defined below) believe that these
lawsuits are without merit and, therefore, continue to vigorously
defend against them. The Purchaser is aware of these lawsuits and
is nonetheless willing to proceed with the Merger, subject to the
satisfaction of its due diligence as outlined below.
Following receipt of Interest Holder approval, the Purchaser
commenced the finalization of the Purchaser's financing and its due
diligence review of the assets of the Partnership and those of the
Affiliated Partnerships (as defined below). The due diligence
process has revealed certain concerns relating to potential
environmental problems at some of the properties of the Partnership
and the Affiliated Partnerships. The investigation has narrowed the
concerns to properties of the Affiliated Partnerships. The due
diligence review has also raised questions regarding the
interpretation of certain terms in the leases governing some
of the Partnership's and the Affiliated Partnerships' properties.
A very significant tenant is interpreting certain purchase options
contained in its leases in a way that would cause the value of
the properties leased by such tenant to be significantly below
the current appraised value. Members of management of the Partnership
and the Affiliated Partnerships have been working diligently with
the Purchaser to assess these risks and to resolve them in a way
that will allow the
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
Merger and the related transactions to be consummated without any
changes to the terms or the Merger price. The Purchaser is
continuing to assess certain lease provisions, assess the costs and
risks of the litigation discussed below, and finalize its financing
in the light of these developments.
In accordance with the terms of the Merger Agreement, the
Operating General Partners suspended all distributions to Interest
Holders; however, as a result of the unforeseen delays brought
about by the litigation and the due diligence issues highlighted
above, the Operating General Partners felt it was appropriate that
an earnings distribution be made to the Interest Holders. Although
the terms of the Merger Agreement provide that the Assets being
acquired by the Purchaser in connection with the Merger include all
earnings of the Partnership from and after August 1, 1996, the
Purchaser has agreed to allow the Partnership to make distributions
to the Interest Holders of net earnings for the period from and
after January 1, 1997 until the Merger is consummated. In
exchange, the Partnership has agreed to extend the termination date
of the Merger Agreement to June 30, 1997 to allow the Purchaser
time to complete its due diligence. Notwithstanding the extension
of the termination date, the Partnership and the Purchaser continue
to work through the due diligence issues outlined above, with the
intent of closing the Merger as soon as possible.
A distribution of the Partnership's net earnings for the period
January 1, 1997 to March 31, 1997 was made to the Interest Holders
on March 31, 1997 in the amount of approximately $597,600. Net
earnings accruing after March 31, 1997 through the closing date
will be included with the final cash distribution to the Interest
Holders from the Merger.
Litigation
Two legal actions, as hereinafter described, were filed against
certain of the General Partners of the Partnership and affiliates
of such General Partners, as well as against the Partnership on a
nominal basis in connection with the Merger. Each of these actions
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
was brought by Interest Holders of the Partnership. The
Partnership and the named General Partners and their affiliates,
deny all allegations set forth in the complaints and are vigorously
defending against such claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty
Advisors IV, Inc., James L. Brault, and Brauvin Real Estate Funds,
L.L.C. and Brauvin High Yield Fund L.P., Brauvin High Yield Fund
II, L.P., Brauvin Income Plus L.P. III, and Brauvin Corporate Lease
Program IV, L.P., Docket No. 96012807. The Partnership and the
other affiliated partnerships named in this lawsuit (the
"Affiliated Partnerships") that are proposed to be a party to a
merger or sale with the Purchaser, are each named as a "Nominal
Defendant" in this lawsuit. Jerome J. Brault, the Managing General
Partner of the Partnership, and Brauvin Realty Advisors, Inc., the
Corporate General Partner of the Partnership, as well as certain
corporate general partners of the Affiliated Partnerships, have
been named as defendants. James L. Brault, an officer of the
Corporate General Partner and the son of Jerome J. Brault, is also
named as a defendant.
The plaintiffs filed an amended complaint on October 8, 1996.
The amended complaint alleges a purported class action consisting
of claims for breach of fiduciary duties, fraud, breach of the
Agreement, and civil racketeering. The amended complaint seeks
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transactions with the Purchaser. The
defendants have answered plaintiffs' amended complaint, and have
denied each of the plaintiffs' allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action requested that
the Circuit Court enjoin the special meetings of the limited
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
partners and the proposed transactions with the Purchaser. This
motion was denied by the Circuit Court on October 8, 1996, and the
Florida appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling. There have been no material
developments with respect to this lawsuit since October 8, 1996.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of Illinois,
styled M. Barbara Christman, Joseph Forte, Janet M. Toolson, John
Archbold, and Ben O. Carroll v. Brauvin Realty Advisors, Inc.,
Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III,
Inc., Brauvin Realty Advisors IV, Inc., Jerome J. Brault; Brauvin
Real Estate Funds, L.L.C. and Brauvin High Yield Fund L.P., Brauvin
High Yield Fund L.P. II, Brauvin Income Plus L.P. III, and Brauvin
Corporate Lease Program IV L.P., Docket No. 96C6025. The
Partnership and the Affiliated Partnerships are each named as a
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, are
named as defendants.
The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of
the Agreement, and violation of the Illinois Deceptive Trade
Practices Act. The amended complaint seeks injunctive relief, as
well as compensatory and punitive damages, relating to the proposed
transaction with the Purchaser.
On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the Interest Holders of the Partnership
and the limited partners of the Affiliated Partnerships, and
appointed plaintiffs' counsel, The Mills Law Firm, as counsel for
the class. On October 2, 1996, the District Court also conducted
a hearing on plaintiffs' motion to preliminarily enjoin the special
meetings of the limited partners and the proposed transactions with
the Purchaser. The District Court denied plaintiffs' motion for a
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
preliminary injunction at the conclusion of the October 2, 1996
hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Interest Holders,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, the Operating General
Partners filed a counterclaim against plaintiffs and their counsel,
The Mills Law Firm, alleging that plaintiffs and The Mills Law Firm
violated the federal securities laws and proxy rules by sending
their September 27, 1996 letter to the Interest Holders. The
plaintiffs and The Mills Law Firm have moved to dismiss this
counterclaim. The District Court has taken this motion under
advisement and has yet to issue a ruling.
On October 10 and 11, 1996, the District Court conducted an
evidentiary hearing on the motion of the Operating General Partners
to invalidate revocations of proxies procured as a result of The
Mills Law Firm's September 27, 1996 letter. In that evidentiary
hearing, The Mills Law Firm admitted that it violated the proxy
rules by sending its September 27, 1996 letter to the Interest
Holders without filing such letter with the Commission in violation
of the Commission's requirements. At the conclusion of the hearing
on October 10 and 11, the District Court found that the Operating
General Partners have a likelihood of succeeding on the merits with
respect to their claim that the September 27, 1996 letter sent to
the Interest Holders by plaintiffs and The Mills Law Firm is false
or misleading in several significant respects.
Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The Mills Law
Firm's September 27, 1996 letter because it did not believe it
possessed the authority to do so under present law. This ruling
was appealed to the Seventh Circuit Court of Appeals. The Seventh
Court of Appeals subsequently dismissed this appeal on the grounds
that the appeal was rendered moot by the Interest Holders' approval
on November 8, 1996 of the Merger.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Agreement does
not allow the Interest Holders to vote in favor of or against the
proposed transaction with the Purchaser by proxy. These cross-
motions for partial summary judgement were taken under advisement
by the District Court, and the District Court has yet to issue a
ruling.
On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs have named the Partnership as a "Nominal Defendant."
Plaintiffs have also added a new claim, alleging that the Operating
General Partners violated certain of the Commission rules by making
false and misleading statements in the Proxy. Plaintiffs also
allege that the Operating General Partners breached their fiduciary
duties, breached various provisions of the Agreement, violated the
Illinois Deceptive Trade Practice Act, and violated section 17-305
of the Delaware Revised Uniform Limited Partnership Act. The
Operating General Partners deny those allegations and will continue
to vigorously defend against these claims.
On April 2, 1997, plaintiffs again requested that the District
Court enjoin the closing of the transaction with the
Purchaser. After conducting a lengthy hearing on May 1, 1997, the
District Court denied plaintiffs' motion to preliminarily enjoin
the closing of the transaction with the Purchaser.
Pursuant to the Agreement and Delaware law, the Partnership will
advance to the defendants their defense costs. The Corporate
General Partner has agreed to repay the Partnership for the
advances if it is ever determined that the parties were not
entitled to receive the advances. No estimate can reasonably be
made at this time of any potential liability from the litigation or
the costs of defense.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS-CONTINUED
(7) SUBSEQUENT EVENTS
On April 23, 1997, Mr. David M. Strosberg notified the Managing
General Partner of the Partnership of his decision to resign and
withdraw as an individual General Partner of the Partnership as of
such date.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Discussions containing forward-looking statements may be found in
this section. Without limiting the foregoing, words such as
"anticipates," "expects," "intends," "plans" and similar
expressions are intended to identify forward-looking statements.
These statements are subject to a number of risks and
uncertainties. Actual results could differ materially from those
projected in the forward-looking statements. The Partnership
undertakes no obligation to update these forward-looking statements
to reflect future events or circumstances.
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 six
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.
On November 9, 1993, the Partnership purchased a 23.4% interest
in a joint venture with affiliated public real estate limited
partnerships (the "Venture"). The Venture acquired the land and
building underlying a 25,000 square foot CompUSA computer
superstore from an unaffiliated seller.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
On October 31, 1996, the Partnership purchased a 16.0% interest
in a joint venture with affiliated public real estate limited
partnerships (the "Brauvin Bay County Venture"). The Brauvin Bay
County Venture purchased real property upon which a newly
constructed Blockbuster Video store is operated. The property
contains a 6,466 square foot building located on a 40,075 square
foot parcel of land.
The Partnership raised $25,000,000 through its initial offering
and an additional $2,922,102, as of March 31, 1997 and December 31,
1996, through Units purchased by certain Interest Holders investing
their distributions of Operating Cash Flow in additional Units
through the Plan, which process was continued when the proxy
solicitation process began. As of March 31, 1997 and December 31,
1996, Units valued at $1,647,070 have been repurchased by the
Partnership from Interest Holders liquidating their original
investment and have been retired. The Partnership has no funds
available to purchase additional property.
Below is a table summarizing the four year historical data for
distribution rates per unit:
Distribution
Date 1997 1996 1995 1994
February 15 $.2274(a) $.2500 $.2500 $.2500
May 15 .2500 .2500 .2500
August 15 -- .2500 .2500
November 15 -- .2500 .2625
(a) The 1997 distribution was made on March 31, 1997.
Should the Merger not occur, future increases in the
Partnership's distributions will largely depend on increased sales
at the Partnership's properties resulting in additional percentage
rent and, to a lesser extent on rental increases, which will occur
due to increases in receipts from certain leases based upon
increases in the Consumer Price Index or scheduled increases of base
rent.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
During the period ended March 31, 1997 and the year ended
December 31, 1996, the General Partners and its affiliates collected
management fees of $6,588 and $24,994, respectively, and received
$0 and $26,798 in Operating Cash Flow distributions for the period
and years ended March 31, 1997 and December 31, 1996, respectively.
Pursuant to the terms of the Merger Agreement, the Interest
Holders 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 Interest Holders
holding a majority of the Units approved the Merger on November 8,
1996.
The Partnership drafted a proxy statement, which required prior
review and comment by the Commission, to solicit proxies for use at
the Special Meeting originally scheduled to be held at the offices
of the Partnership on September 24, 1996. As a result of various
legal issues, as described in legal proceedings, 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 in the Proxy.
By approving the Merger, the Interest Holders also approved an
amendment to the Agreement allowing the Partnership to sell or lease
property to affiliates (this amendment, together with the Merger
shall be referred to herein as the "Transaction"). The Delaware
Revised Uniform Limited Partnership Act (the "Act") provides that
a merger must also be approved by the general partners of a
partnership, unless the limited partnership agreement provides
otherwise. Because the Agreement did not address this matter, at
the Special Meeting, Interest Holders holding a majority of the
Units were also asked to approve the adoption of an amendment to the
Agreement to allow the majority vote of the Interest Holders to
determine the outcome of the transaction with the Purchaser without
the vote of the General Partners of the Partnership. Neither the
Act nor the Agreement provides the Interest Holders not voting in
favor of the Transaction with dissenters' appraisal rights.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
The redemption price to be paid to the Interest Holders in
connection with the Merger is based on the fair market value of the
properties of the Partnership (the "Assets"). Cushman & Wakefield
Valuation Advisory Services ("Cushman & Wakefield"), an independent
appraiser, the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets, to satisfy the Partnership's
requirements under the Employee Retirement Income Security Act of
1974, as amended. Cushman & Wakefield determined the fair market
value of the Assets to be $23,198,450, or $8.83 per Unit. The
redemption price of $9.31 per Unit also includes all remaining cash
of the Partnership, less net earnings of the Partnership from and
after August 1, 1996 through December 31, 1996, less the
Partnership's actual costs incurred and accrued through the
effective time at the filing of the certificate of merger, including
reasonable reserves in connection with: (i) the proxy solicitation;
(ii) the Transaction (as detailed in the Merger Agreement); and
(iii) the winding up of the Partnership, including preparation of
the final audit, tax return and K-1s (collectively, the "Transaction
Costs") and less all other Partnership obligations.
Cushman & Wakefield subsequently provided an opinion as to the
fairness of the Transaction to the Interest Holders from a financial
point of view. In its opinion, Cushman & Wakefield advised that the
price per Unit reflected in the Transaction is fair, from a
financial point of view, to the Interest Holders. Cushman &
Wakefield's determination that a price is "fair" does not mean that
the price is the highest price which might be obtained in the
marketplace, but rather that based on the appraised values of the
Assets, the price reflected in the Transaction is believed by
Cushman & Wakefield to be reasonable.
The General Partners of the Partnership are Mr. Jerome J. Brault,
the Managing General Partner, and Brauvin Realty Advisors, Inc., the
Corporate General Partner. Mr. Cezar M. Froelich resigned his
position as an Individual General Partner of the Partnership
effective as of September 17, 1996 and Mr. David M. Strosberg
resigned his position as an individual general partner of the
Partnership effective as of April 23, 1997. The General Partners
will not receive any payment in exchange for the redemption of their
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
general partnership interests nor will they receive any fees from
the Partnership in connection with the Transaction.
The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, will have a
minority ownership interest in the Purchaser. Therefore, the
Messrs. Brault have an indirect economic interest in consummating
the Transaction that is in conflict with the economic interests of
the Interest Holders. Messrs. Froelich and Strosberg have no
affiliation with the Purchaser.
Although the Special Meeting was held and the necessary approvals
received, the Merger has not been completed primarily due to the
lawsuits that are still pending. The Operating General Partners
believe that these lawsuits are without merit, and therefore,
continue to vigorously defend against them. The Purchaser is aware
of these lawsuits and is nonetheless willing to proceed with the
Merger, subject to the satisfaction of its due diligence as outlined
below.
Following receipt of Interest Holder approval, representatives of
the Purchaser commenced in earnest the finalization of the
Purchaser's financing and its due diligence review of the assets of
the Partnership and those of the Affiliated Partnerships. The due
diligence process has revealed certain concerns relating to
potential environmental problems at some of the properties of the
Partnership and the Affiliated Partnerships. The investigation has
narrowed the concerns to properties of the Affiliated Partnerships.
The due diligence review has also raised questions regarding the
interpretation of certain terms in the leases governing some of
the Partnership's and the Affiliated Partnerships' properties.
A very significant tenant is interpreting certain purchase options
contained in its leases in a way that would cause the value of the
properties leased by such tenant to be significantly below the
current appraised value. Members of management of the Partnership
and the Affiliated Partnerships have been working diligently with
the Purchaser to assess these risks and to resolve them in a way
that will allow the Merger and the related transactions to be
consummated without any changes to the terms or the Merger price.
The Purchaser is continuing to assess certain lease provisions,
assess the costs and
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
risks of the litigation discussed below, and finalize its financing
in the light of these developments.
In accordance with the terms of the Merger Agreement, the
Operating General Partners suspended all distributions to Interest
Holders, however, as a result of the unforeseen delays brought about
by the litigation and the due diligence issues highlighted above,
the Operating General Partners felt it was appropriate that an
earnings distribution be made to the Interest Holders. Although the
terms of the Merger Agreement provide that the Assets being acquired
by the Purchaser in connection with the Merger include all earnings
of the Partnership from and after August 1, 1996, the Purchaser has
agreed to allow the Partnership to make distributions to the
Interest Holders of net earnings for the period from and after
January 1, 1997 until the Merger is consummated. In exchange, the
Partnership has agreed to extend the termination date of the Merger
Agreement to June 30, 1997 to allow the Purchaser time to complete
its due diligence. Notwithstanding the extension of the termination
date, the Partnership and the Purchaser continue to work through the
due diligence issues outlined above, with the intent of closing the
Merger as soon as possible. Net earnings accruing after March 31,
1997 through the closing date will be included with the final cash
distribution to the Interest Holders from the Merger.
A distribution of the Partnership's net earnings for the period
January 1, 1997 to March 31, 1997 was made to the Interest Holders
on March 31, 1997 in the amount of approximately $597,600.
Results of Operations - Three months ended March 31, 1997 and 1996
Results of operations for the three months ended March 31, 1997
reflected net income of $506,199 compared to net income of $511,832
for the three months ended March 31, 1996, a decrease of
approximately $5,700.
Total income for the three months ended March 31, 1997 was
$629,203 as compared to $604,427 for the period ended March 31,
1996, an increase of approximately $24,800. The increase in total
income is primarily due to the increase in interest income, which
was the result of higher cash balances during 1997.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
Total expenses for the three months ended March 31, 1997 were
$208,396 as compared to $179,445 for the period ended March 31,
1996, an increase of approximately $29,000. The increase in
expenses was primarily due to an increase in general and
administrative expense associated with the Partnership's attempt to
resolve some of the due diligence issues and related items
associated with the Merger, as discussed above. The increase in
expenses was also due to the 1997 transaction costs expense of
$50,075 which was offset by the 1996 valuation fee of $42,600.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Two legal actions, as hereinafter described, were filed against
certain of the General Partners of the Partnership and affiliates
of such General Partners, as well as against the Partnership on a
nominal basis in connection with the Merger. Each of these actions
was brought by limited partners of the Partnership. The Partnership
and the named General Partners and their affiliates, deny all
allegations set forth in the complaints and are vigorously defending
against such claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty Advisors
IV, Inc., James L. Brault, and Brauvin Real Estate Funds, L.L.C. and
Brauvin High Yield Fund L.P., Brauvin High Yield Fund II, L.P.,
Brauvin Income Plus L.P. III, and Brauvin Corporate Lease Program
IV, L.P., Docket No. 96012807. The Partnership and the other
affiliated partnerships named in this lawsuit (the "Affiliated
Partnerships") that are proposed to be a party to a merger or sale
with the Purchaser, are each named as a "Nominal Defendant" in this
lawsuit. Jerome J. Brault, the Managing General Partner of the
Partnership, and Brauvin Realty Advisors, Inc., the Corporate
General Partner of the Partnership, as well as certain corporate
general partners of the Affiliated Partnerships, have been named as
defendants in this lawsuit. James L. Brault, an officer of the
Corporate General Partner and the son of Jerome J. Brault, is also
named as a defendant.
Plaintiffs filed an amended complaint on October 8, 1996. The
amended complaint alleges a purported class action consisting of
claims for breach of fiduciary duties, fraud, breach of the
Agreement, and civil racketeering. The amended complaint seeks
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transactions with the Purchaser. The
defendants have answered plaintiffs' amended complaint, and have
denied each of the plaintiffs' allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action requested that
the Circuit Court enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. This
motion was denied by the Circuit Court on October 8, 1996, and the
Florida appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling. There have been no material
developments with respect to this lawsuit since October 8, 1996.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of Illinois,
styled M. Barbara Christman, Joseph Forte, Janet M. Toolson, John
Archbold, and Ben O. Carroll v. Brauvin Realty Advisors, Inc.,
Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III, Inc.,
Brauvin Realty Advisors IV, Inc., Jerome J. Brault; Brauvin Real
Estate Funds, L.L.C. and Brauvin High Yield Fund L.P., Brauvin High
Yield Fund L.P. II, Brauvin Income Plus L.P. III, and Brauvin
Corporate Lease Program IV L.P., Docket No. 96C6025. The
Partnership and the Affiliated Partnerships are each named as a
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, are named
as defendants.
The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of the
Agreement, and violation of the Illinois Deceptive Trade Practices
Act. The amended complaint seeks injunctive relief,
as well as compensatory and punitive damages, relating to the
proposed transaction with the Purchaser.
On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the limited partners of the Partnership and
of the Affiliated Partnerships, and appointed plaintiffs' counsel,
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
The Mills Law Firm, as counsel for the class. On October 2, 1996,
the District Court also conducted a hearing on plaintiffs' motion
to preliminarily enjoin the special meetings of the limited partners
and the proposed 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 Law
Firm, mailed a solicitation to all of the Limited Partners,
requesting that they revoke their previously-mailed proxies in favor
of the Merger. On October 11, 1996, the Operating General Partners
filed a counterclaim against plaintiffs and their counsel, The Mills
Law Firm, alleging that plaintiffs and The Mills Law Firm violated
the federal securities laws and proxy rules by sending their
September 27, 1996 letter to the Limited Partners. The plaintiffs
and The Mills Law Firm have moved to dismiss this counterclaim. The
District Court has taken this motion under advisement and has yet
to issue a ruling.
On October 10 and 11, 1996, the District Court conducted an
evidentiary hearing on the motion of the Operating General Partners
to invalidate revocations of proxies procured as a result of The
Mills Law Firm's September 27, 1996 letter. In that evidentiary
hearing, The Mills Law Firm admitted that it violated the proxy
rules by sending its September 27, 1996 letter to the Limited
Partners without filing such letter with the Commission in violation
of the Commission's requirements. At the conclusion of the hearing
on October 10 and 11, the District Court found that the Operating
General Partners have a likelihood of succeeding on the merits with
respect to their claim that the September 27, 1996 letter sent to
the Limited Partners by plaintiffs and The Mills Law Firm is false
or misleading in several significant respects.
Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The Mills Law
Firm's September 27, 1996 letter because it did not believe it
possessed the authority to do so under present law. This ruling
was appealed to the Seventh Circuit Court of Appeals. The Seventh
Court of Appeals subsequently dismissed this appeal on the grounds
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
that the appeal was rendered moot by the Limited Partners' approval
November 8, 1996 of the Merger.
On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Partnership
Agreement does not allow the Limited Partners to vote in favor of
or against the proposed transaction with the Purchaser by proxy.
These cross-motions for partial summary judgement were taken under
advisement by the District Court, and the District Court has yet to
issue a ruling.
On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs have named the Partnership as a "Nominal Defendant."
Plaintiffs have also added a new claim, alleging that the Operating
General Partners violated certain of the Commission's rules by
making false and misleading statements in the Proxy. Plaintiffs
also allege that the Operating General Partners breached their
fiduciary duties, breached various provisions of the Agreement,
violated the Illinois Deceptive Trade Practice Act, and violated
section 17-305 of the Delaware Revised Uniform Limited Partnership
Act. The Operating General Partners deny those allegations and will
continue to vigorously defend against these claims.
On April 2, 1997, plaintiffs again requested that the District
Court enjoin the closing of the transaction with the
Purchaser. After conducting a lengthy hearing on May 1, 1997, the
District Court denied plaintiffs' motion to preliminarily enjoin the
closing of the transaction with the Purchaser.
Pursuant to the Agreement and Delaware law, the Partnership will
advance to the defendants their defense costs. The Corporate
General Partner has agreed to repay the Partnership for the advances
if it is ever determined that the parties were not entitled to
receive the advances. No estimate can reasonably be made at this
time of any potential liability from the litigation or the costs of
defense.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
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
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
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: May 15, 1997
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
DATE: May 15, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,250,043
<SECURITIES> 3,196,175 <F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,322,975 <F2>
<DEPRECIATION> 3,335,417
<TOTAL-ASSETS> 21,449,728
<CURRENT-LIABILITIES> 160,520
<BONDS> 0
0
0
<COMMON> 21,289,208 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,449,728
<SALES> 0
<TOTAL-REVENUES> 629,203 <F4>
<CGS> 0
<TOTAL-COSTS> 208,396 <F5>
<OTHER-EXPENSES> (85,392)<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 506,199
<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>
