<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-17557
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Depository Units representing Beneficial Assignments of Limited
Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
The aggregate sales price of the depositary units representing
beneficial assignments of limited partnership interests of the
registrant (the "Units") to unaffiliated investors of the
registrant during the initial offering period was $25,000,000.
This does not reflect market value. This is the price at which the
Units were sold to the public during the initial offering period.
There is no current market for the Units nor have Units been sold
within the last 60 days prior to this filing except for Units sold
to or by the registrant pursuant to the registrant's distribution
reinvestment plan.
Portions of the Prospectus of the registrant dated September 4,
1987, as supplemented November 24, 1987 and December 28, 1987 and
filed pursuant to Rule 424(b) and Rule 424(c) under the Securities
Act of 1933, as amended, are incorporated by reference into Parts
II, III and IV of this Annual Report on Form 10-K.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
1996 FORM 10-K ANNUAL REPORT
INDEX
PART I Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . 18
PART II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters. . . . . . . . . . . . . . . . . . . . 19
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 22
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 28
PART III
Item 10. Directors and Executive Officers of the Partnership . . . . . 29
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . 31
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . 32
Item 13. Certain Relationships and Related Transactions. . . . . . . . 33
PART IV
Item 14. Exhibits, Financial Statements and Schedule, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 34
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
PART I
Item 1. Business.
Brauvin High Yield Fund L.P. (the "Partnership") is a Delaware
limited partnership formed in January 1987 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. It was
anticipated at the time the Partnership first offered its Units
(as defined below) that a majority of these properties would be
leased to operators of national franchise fast food restaurants,
automotive services and convenience stores, as well as banks and
savings and loans. The leases would provide for a base minimum
annual rent and increases in rent, such as through participation
in gross sales above a stated level, fixed increases on specific
dates or indexation of rent to indices such as the Consumer Price
Index. The Partnership sold $25,000,000 in depository units
representing beneficial assignments of limited partnership
interests (the "Units") commencing September 4, 1987, at $10.00
per Unit (the "Offering") pursuant to a Registration Statement on
Form S-11 under the Securities Act of 1933, as amended. The
Offering closed on May 19, 1988. An additional $2,922,102 has
been raised through the sale of additional Units pursuant to the
Partnership's distribution reinvestment plan (the "Plan") through
December 31, 1996. These Units were purchased from the Units
reserved for the Plan after the termination of the Offering. As
of December 31, 1996, $1,647,070 of Units sold through the
Offering have been repurchased by the Partnership from investors
liquidating their investment and have been retired. The investors
in the Partnership (the "Interest Holders") share in the benefits
of ownership of the Partnership's real property investments
according to the number of Units each owns.
The principal investment objectives of the Partnership are: (i)
distribution of current cash flow from the Partnership's cash flow
attributable to rental income; (ii) capital appreciation; (iii)
preservation and protection of capital; (iv) the potential for
increased income and protection against inflation through
escalation in the base rent or participation and growth in the
sales of the lessees of the Partnership's properties; (v) the
production of "passive" income to offset "passive" losses from
other investments; and (vi) the partial shelter of cash
distributions for Taxable Interest Holders.
A Taxable Interest Holder is defined as: (a) an Interest Holder
who purchased Units from the Partnership during the Offering and
who at the time of such purchase was not: (i) a Qualified Plan;
(ii) an organization (other than a cooperative described in
Section 521 of the Internal Revenue Code of 1986, as amended [the
"Code"]) which is exempt from tax imposed by Chapter 1 (Normal
Taxes and Surtaxes) of the Code; or (iii) a foreign person or
entity, unless more than 50% of the gross income derived by the
foreign person or entity from the Partnership is subject to U.S.
income tax; and (b) each subsequent transferee of any Units from
an Interest Holder described in (a) above.
A Tax-Exempt Interest Holder is defined as: (a) an Interest
Holder who purchased Units from the Partnership during the
Offering and who at the time of such purchase was: (i) a
Qualified Plan; (ii) an organization (other than a cooperative
described in Section 521 of the Code) which is exempt from tax
imposed by Chapter 1 (Normal Taxes and Surtaxes) of the Code; or
(iii) a foreign person or entity, unless more than 50% of the
gross income derived by the foreign person or entity from the
Partnership is subject to U.S. income tax; (b) a Taxable Interest
Holder who elects to be treated as an investor described in (a)
above; and (c) each subsequent transferee of any Units from an
Interest Holder described in (a) and (b) above.
Some tax shelter of cash distributions by the Partnership is
available to Taxable Interest Holders through depreciation of the
underlying properties. Taxable Interest Holders benefit from the
special allocation of all depreciation to the Units which they
acquired from the Partnership because their reduced taxable income
each year will result in a reduction in taxes due, although no
"spill-over" losses are expected. Taxable income generated by
property operations will likely be considered passive income for
federal income tax purposes because Section 469(c)(2) of the Code
states that a passive activity includes "any rental activity" and,
therefore, is available to offset losses Taxable Interest Holders
may have realized in other passive investments.
It was originally contemplated that the Partnership would
dispose of its properties approximately six to nine years after
their acquisition with a view towards liquidation of the
Partnership within that period.
In accordance therewith, the Partnership entered into an
agreement and plan of merger dated as of June 14, 1996, as amended
March 24, 1997 (the "Merger Agreement"), with Brauvin Real Estate
Funds L.L.C., a Delaware limited liability company affiliated with
certain General Partners of the Partnership (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 Units. In connection with the Merger,
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.
On November 8, 1996, a special meeting of the Interest Holders
(the "Special Meeting") was held at the office of the Partnership
where a vote of the Interest Holders was taken and the merger of
the Partnership with and into the Purchaser was approved as
described in the Partnership's proxy materials dated August 23,
1996. Further information regarding the Merger, as supplemented
(the "Proxy"), is located in Items 3, 7 and 13 below.
The terms of the transactions between the Partnership and
affiliates of the General Partners of the Partnership are set
forth in Item 13 below. Reference is hereby made to such sections
for a description of such terms and transactions.
The restated limited partnership agreement of the Partnership
(the "Agreement") provides that the Partnership shall terminate
December 31, 2025, unless sooner terminated pursuant to its terms.
The Partnership has no employees.
Market Conditions/Competition
The Partnership has utilized its proceeds available for
investment to acquire properties. Since the leases of certain of
the Partnership's properties entitle the Partnership to
participate in gross receipts of lessees above fixed minimum
amounts, the success of the Partnership will depend in part on the
ability of those lessees to compete with similar businesses in
their respective vicinities.
Although management of the Partnership anticipates that the
Merger will be consummated by the end of the second quarter of
1997, should the Merger not be completed, the General Partners of
the Partnership will have to determine whether to continue its
operations or attempt to sell some or all of the properties. The
Partnership has and continues to compete with many other entities
engaged in real estate investment activities. It is not possible
for the General Partners to determine at this time what actions
they will take in connection with the continuation of the
Partnership should the Merger not be completed. The General
Partners will evaluate factors such as the economy, the lease
terms, the financial strength of the existing tenants and the
ability to locate potential purchasers.
Item 2. Properties.
The Partnership is a landlord only and does not participate in
the operations of any of the properties discussed herein. All
lease payments due the Partnership are current. All properties
are 100% occupied and were paid for in cash, without any
financing. The General Partners believe that the Partnership's
properties are adequately insured.
On October 31, 1996, the Partnership and three other affiliated
public real estate limited partnerships formed a joint venture,
Brauvin Bay County Venture, to purchase the land and building
underlying a newly constructed Blockbuster Video store. The
Partnership has a 16% equity interest in the Brauvin Bay County
Venture.
The following information is presented for the only property
whose cost basis exceeds 10% of the gross proceeds of the
Offering.
On July 21, 1989, the Partnership and Brauvin High Yield Fund
L.P. II ("BHYF II"), an affiliated public real estate limited
partnership, formed a joint venture, Brauvin Funds Joint Venture
("Funds JV"), to purchase a Scandinavian Health Spa (the "Health
Spa") in Glendale, Arizona from an unaffiliated developer for
$5,250,000, plus closing costs. The Health Spa was constructed in
1988. The Health Spa is subject to a triple-net lease with the
lessee, Scandinavian U.S. Swim & Fitness, Inc., which is
responsible for paying all taxes, insurance premiums and
maintenance costs. The lease terminates in 2009. The rent is
payable in equal monthly installments and was increased by 11.5%
on February 1, 1994 and will increase by 11.5% every five years
thereafter. The lease is guaranteed by Bally's Health and Tennis
Corporation whose financial statements reflected a net worth of
approximately $275 million at the time of acquisition. On this
basis, the General Partners determined that no rent insurance
would be required by the Partnership.
The Partnership contributed $2,585,608 (49%) to Funds JV and
BHYF II contributed $2,691,143 (51%). Taxable income and
distributable cash flow have been and will continue to be
allocated according to the venturers' respective capital
contributions.
The following is a summary of the real estate and improvements
of each of the 20 Taco Bell restaurants, 11 Ponderosa restaurants,
the 49% interest in the Scandinavian Health Spa, the 1% interest
in 6 Ponderosa restaurants, the two Children's World Learning
Centers, the 23.4% interest in a CompUSA store and the 16.0%
interest in a Blockbuster Video store purchased by the
Partnership.
Taco Bells:
Warner Robins, Georgia
Unit 1389 is located at 1998 Watson Boulevard. The building
consists of 1,288 square feet situated on a 25,000 square foot
parcel and was constructed in 1977 utilizing jumbo bricks.
Valdosta, Georgia
Unit 1392 is located at 2918 North Ashley Street. The building
consists of 1,288 square feet situated on a 16,222 square foot
parcel and was constructed in 1982 utilizing jumbo bricks.
Albany, Georgia
Unit 1450 is located at 1707 North Slappey Boulevard. The
building consists of 1,288 square feet situated on a 11,850 square
foot parcel and was constructed in 1982 utilizing jumbo bricks.
Alliance, Ohio
Unit 1653 is located at 110 West State Street. The building
consists of 1,584 square feet situated on a 14,400 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block with a clay tile roof.
Dunedin, Florida
Unit 1835 is located at 2296 State Route 580. The building
consists of 1,584 square feet situated on a 21,021 square foot
parcel and was constructed in 1980 utilizing jumbo bricks.
In February 1995, Taco Bell closed and vacated this restaurant.
Taco Bell, in accordance with the lease, continued to pay rent and
certain occupancy costs for this property. In March 1996, Taco
Bell and the Partnership agreed to sub-lease this property to a
local tenant. Taco Bell continues to remain responsible to the
Partnership for all rents and certain occupancy expenses through
the original lease term.
Logansport, Indiana
Unit 1845 is located at 3419 Highway 24 East. Highway 24 East
is a two-lane east-west road. The building consists of 1,566
square feet situated on a 19,200 square foot parcel and was
constructed in 1980 utilizing stucco over concrete block.
Dover, Ohio
Unit 1856 is located at 718 Boulevard Avenue. Boulevard Avenue
is a four-lane northwest-southwest highway. The building consists
of 1,584 square feet situated on a 20,500 square foot parcel and
was constructed in 1980 utilizing stucco over concrete block.
Greenville, North Carolina
Unit 1871 is located at 319 East Greenville Boulevard. The
building consists of 1,584 square feet situated on a 22,788 square
foot parcel and was constructed in 1980 utilizing stucco over
concrete block.
Palm Bay, Florida
Unit 1912 is located at 176 North Harris Avenue. Harris Avenue
is a frontage street to Palm Bay Road. The building consists of
1,584 square feet situated on a 15,250 square foot parcel and was
constructed in 1980 utilizing jumbo bricks.
Sandusky, Ohio
Unit 1915 is located at 3306 Milan Road. The building consists
of 1,584 square feet situated on a 33,000 square foot parcel and
was constructed in 1980 utilizing stucco over concrete block.
Mesa, Arizona
Unit 1925 is located at 531 East Southern Avenue. The building
consists of 1,584 square feet situated on a 28,000 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block.
Zanesville, Ohio
Unit 1929 is located at 2460 North Maple Street. The building
consists of 1,584 square feet situated on a 17,934 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block.
Ashtabula, Ohio
Unit 1937 is located at 1226 West Prospect Avenue. The building
consists of 1,584 square feet situated on a 21,049 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block.
Dalton, Georgia
Unit 1966 is located at 1509 Walnut Avenue. The building
consists of 1,584 square feet situated on a 18,275 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block.
Ashland, Ohio
Unit 1994 is located at 315 Claremont Avenue. The building
consists of 1,584 square feet situated on a 16,000 square foot
parcel and was constructed in 1980 utilizing stucco over concrete
block.
Martinez, California
Unit 2030 is located at 11 Muir Road. The building consists of
1,584 square feet situated on a 13,940 square foot parcel and was
constructed in 1981 utilizing concrete block over wood frame.
Phoenix, Arizona
Unit 2069 is located at 1701 West Bell Street. The building
consists of 1,584 square feet situated on a 9,375 square foot
parcel and was constructed in 1981 utilizing stucco over concrete
block.
Noblesville, Indiana
Unit 2132 is located at 610 West Route 32. The building
consists of 1,584 square feet situated on a 26,250 square foot
parcel and was constructed in 1982 utilizing stucco over concrete
block.
Spartanburg, South Carolina
Unit 2200 is located at 800 North Pine Street. The building
consists of 1,584 square feet situated on a 24,750 square foot
parcel and was constructed in 1982 utilizing stucco over concrete
block.
Winslow, Arizona
Unit 2091 is located at 1605 North Park Drive. The building
consists of 2,808 square feet situated on a 37,651 square foot
parcel and was constructed in 1982 utilizing stucco over concrete
block.
Ponderosas:
Brandon, Florida
Unit 1061 is located at 1449 West Brandon Boulevard. The
building consists of 6,376 square feet situated on a 50,094 square
foot parcel and was constructed in 1985 utilizing wood siding over
concrete block.
Johnstown, New York
Unit 778 is located at Route 30-A and North Comrie Avenue. The
building consists of 5,833 square feet situated on a 50,094 square
foot parcel and was constructed in 1979 utilizing wood siding over
concrete block.
Indianapolis, Indiana
Unit 109 is located at 2915 South Madison Avenue. The building
consists of 7,040 square feet situated on a 79,645 square foot
parcel and was constructed in 1969 utilizing wood siding over
concrete block.
Massena, New York
Unit 752 is located at St. Regis Boulevard and Main Street. The
building consists of 5,817 square feet situated on a 48,399 square
foot parcel and was constructed in 1979 utilizing wood siding over
concrete block.
Chenango, New York
Unit 673 is located at 1261 Front Street. The building consists
of 5,402 square feet situated on a 32,712 square foot parcel and
was constructed in 1979 utilizing wood siding over concrete block
and facebrick.
New Windsor, New York
Unit 782 is located at 334 Windsor Highway. The building
consists of 5,402 square feet situated on a 47,685 square foot
parcel and was constructed in 1980 utilizing wood siding over
concrete block.
Wadsworth, Ohio
Unit 775 is located at 135 Great Oaks Trail. The building
consists of 5,800 square feet situated on a 43,560 square foot
parcel and was constructed in 1986 utilizing stucco over concrete
block.
Westerville, Ohio
Unit 815 is located at 728 South State Street. The building
consists of 4,528 square feet situated on a 46,478 square foot
parcel and was constructed in 1984 utilizing facebrick with wood
siding frontage.
Grand Rapids, Michigan
Unit 194 is located at 308 North Drake Road. The building
consists of 5,088 square feet situated on a 95,383 square foot
parcel and was constructed in 1970 utilizing wood siding over
concrete block.
Buffalo, New York
Unit 677 is located at 2060 Main Street. The building consists
of 5,440 square feet situated on a 192,656 square foot parcel and
was constructed in 1980 and remodeled in 1987 utilizing wood
siding over concrete block with a sloped and shingled roof.
Westbourne, Ohio
Unit 409 is located at 3328 Westbourne Drive. The building
consists of 5,400 square feet situated on a 48,000 square foot
parcel and was constructed in 1974 using wood siding over wood
frame.
Joint Venture Ponderosas:
Louisville, Kentucky
Unit 110 is located at 4801 Dixie Highway. The building
consists of 5,100 square feet situated on a 62,496 square foot
parcel and was constructed in 1969 utilizing wood siding over
concrete block with flagstone.
Cuyahoga Falls, Ohio
Unit 268 is located at 1641 State Road. The building consists
of 5,587 square feet situated on a 40,228 square foot parcel and
was constructed in 1973 utilizing wood siding over concrete block.
Tipp City, Ohio
Unit 785 is located at 135 South Garber. The building consists
of 6,080 square feet situated on a 53,100 square foot parcel and
was constructed in 1980 utilizing wood siding over concrete block.
Mansfield, Ohio
Unit 850 is located at 1075 Ashland Road. The building consists
of 5,600 square feet situated on a 104,500 square foot parcel and
was constructed in 1980 utilizing wood siding over concrete block
and flagstone.
Tampa, Florida
Unit 1060 is located at 4420 West Gandy Boulevard. The building
consists of 5,777 square feet situated on a 50,094 square foot
parcel and was constructed in 1986 utilizing wood siding over
concrete block.
Mooresville, Indiana
Unit 1057 is located at 499 South Indiana Street. The building
consists of 6,770 square feet situated on a 63,525 square foot
parcel and was constructed in 1981 utilizing wood siding over
concrete block.
Scandinavian Health Spa:
Glendale, Arizona
The Health Spa is a 36,556 square foot health club located on
a three acre parcel in Glendale, Arizona, a suburb of Phoenix.
The property is a two-story health and fitness workout facility
located within the 195,000 square foot Glendale Galleria Shopping
Center.
Children's World Learning Centers:
Troy, Michigan
The Children's World Learning Center is a 6,175 square foot
facility located at 1064 East Wattles. The single-story building
was constructed in 1985 utilizing a wood frame and a pitched roof
with asphalt shingles.
Sterling Heights, Michigan
The Children's World Learning Center is a 5,005 square foot
facility located at 35505 Schoenherr. The single-story building
was constructed in 1983 utilizing a wood frame and a pitched roof
with asphalt shingles.
CompUSA:
Duluth, Georgia
The Partnership owns a 23.4% interest in a joint venture with
affiliated public real estate limited partnerships that acquired
the land and building underlying a CompUSA store. The CompUSA
store is a 25,000 square foot single story building located on a
105,919 square foot parcel in Duluth, Georgia, a suburb of
Atlanta, in the Gwinnett Place Mall Shopping Area. The single
story building was completed in March 1993 utilizing a frame of
steel and concrete block.
Blockbuster Video:
Callaway, Florida
The Partnership owns a 16.0% interest in a joint venture with
affiliated public real estate limited partnerships that acquired
the land and building underlying a Blockbuster Video store. The
property is located at 123 N. Tydall Parkway on the major arterial
in the Panama City, Florida area. The property contains a 6,466
square foot building located on a 40,075 square foot parcel of
land.
The following table summarizes the operations of the
Partnership's properties.
<PAGE>
<TABLE>
BRAUVIN HIGH YIELD FUND
SUMMARY OF OPERATING DATA
DECEMBER 31, 1996
<CAPTION>
PERCENT OF 1996 1996 LEASE
PURCHASE ORIGINAL RENTAL PERCENT EXPIRATION RENEWAL
PROPERTIES PRICE UNITS SOLD INCOME OF TOTAL DATES OPTIONS
<S> <C> <C> <C> <C> <C> <C>
49% OF 1 SCANDINAVIAN HEALTH SPA $ 2,572,500 10.3% $ 351,270 12.2% 2009 4 FIVE YEAR OPTIONS
1% OF 6 PONDEROSA RESTAURANTS 56,850 0.2% 7,140 0.2% 2003 4 FIVE YEAR OPTIONS
23.4% OF 1 COMPUSA STORE 549,900 2.2% 61,887 2.2% 2008 4 FIVE YEAR OPTIONS
20 TACO BELL RESTAURANTS 6,770,707 27.1% 1,095,209 38.2% 2000-2006 NONE
11 PONDEROSA RESTAURANTS 10,087,611 40.3% 1,211,216 42.2% 2003 4 FIVE YEAR OPTIONS
2 CHILDREN'S WORLD LEARNING CENTERS 1,096,078 4.4% 140,611 4.9% 2003-20052 4 FIVE YEAR OPTIONS
16.0% of 1 BLOCKBUSTER
VIDEO STORE 162,213 .6% 2,960 0.1% 2006 3 FIVE YEAR OPTIONS
$21,295,859 85.1% $2,870,293 100.0%
<FN>
<F1>
NOTE - THE FORMAT OF THIS SCHEDULE DIFFERS FROM THE INCOME STATEMENT OF THE PARTNERSHIP.
THIS SCHEDULE ALLOCATES THE PARTNERSHIP'S SHARE OF PURCHASE PRICE AND RENTAL INCOME FROM EACH JOINT VENTURE.
THE INCOME STATEMENT USES THE EQUITY METHOD OF ACCOUNTING, THEREFORE, NO RENTAL INCOME IS RECORDED IN THE RENTAL
INCOME ACCOUNTS FOR THE JOINT VENTURES.
</FN>
</TABLE>
<PAGE>
Risks of Ownership
The possibility exists that the tenants of the
Partnership's properties may be unable to fulfill their
obligations pursuant to the terms of their leases, including
making base rent or percentage rent payments to the Partnership.
Such a default by the tenants or a premature termination of any
one of the leases could have an adverse effect on the financial
position of the Partnership. Furthermore, the Partnership may be
unable to successfully locate a substitute tenant due to the fact
that these buildings have been designed or built primarily to
house a specific operation. Thus, the properties may not be
readily marketable to a new tenant without substantial capital
improvements or remodeling. Such improvements may require
expenditure of Partnership funds otherwise available for
distribution. In addition, because in excess of 40% of the
Partnership's cash available for investment has been invested in
properties operated as Ponderosa family restaurants and in excess
of 38% of the Partnership's rental income is from properties
operated as Taco Bells restaurants, the Partnership is subject to
some risk of loss should adverse events affect Ponderosa or Taco
Bell restaurants and in turn adversely affect the lessees'
ability to pay rent to the Partnership.
Item 3. Legal Proceedings.
Two legal actions, as hereinafter described, were filed against
certain of the General Partners of the Partnership and affiliates
of such General Partners, as well as against the Partnership on a
nominal basis in connection with the Merger. Each of these
actions was brought by limited partners of the Partnership. The
Partnership, and the named General Partners and their affiliates
deny all allegations set forth in the complaints and are
vigorously defending against such claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty
Advisors IV, Inc., James L. Brault, and Brauvin Real Estate Funds,
L.L.C. and Brauvin High Yield Fund L.P., Brauvin High Yield Fund
II, L.P., Brauvin Income Plus L.P. III, and Brauvin Corporate
Lease Program IV, L.P., Docket No. 96012807. The Partnership and
the other affiliated partnerships named in this lawsuit (the
"Affiliated Partnerships") that are 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
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transactions with the Purchaser. The
defendants have answered plaintiffs' amended complaint, and have
denied each of the plaintiffs' allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action requested
that the Circuit Court enjoin the special meetings of the limited
partners and the proposed transactions with the Purchaser. This
motion was denied by the Circuit Court on October 8, 1996, and the
Florida appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling. There have been no material
developments with respect to this lawsuit since October 8, 1996.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of
Illinois, styled M. Barbara Christman, Joseph Forte, Janet M.
Toolson, John Archbold, and Ben O. Carroll v. Brauvin Realty
Advisors, Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty
Advisors III, Inc., Brauvin Realty Advisors IV, Inc., Jerome J.
Brault; Brauvin Real Estate Funds, L.L.C. and Brauvin High Yield
Fund L.P., Brauvin High Yield Fund L.P. II, Brauvin Income Plus
L.P. III, and Brauvin Corporate Lease Program IV L.P., Docket No.
96C6025. The Partnership and the other Affiliated Partnerships
are each named as a "Nominal Defendant" in the lawsuit. Jerome J.
Brault and the Corporate General Partner of the Partnership, as
well as the corporate general partners of the Affiliated
Partnerships, are named as defendants.
The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of
the Agreement, and violation of the Illinois Deceptive Trade
Practices Act, 815 ILCS 505 et seq. The amended complaint seeks
injunctive relief, as well as compensatory and punitive damages,
relating to the proposed transaction with the Purchaser.
On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the limited partners of the Partnership
and of the Affiliated Partnerships, and appointed plaintiffs'
counsel, The Mills Law Firm, as counsel for the class. On October
2, 1996, the District Court also conducted a hearing on
plaintiffs' motion to preliminarily enjoin the special meetings of
the limited partners and the proposed transactions with the
Purchaser. The District Court denied plaintiffs' motion for a
preliminary injunction at the conclusion of the October 2, 1996
hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Interest Holders,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, Jerome J. Brault and
the Corporate General Partner (collectively, the "Operating
General Partners") of the Partnership filed a counterclaim against
plaintiffs and their counsel, The Mills Law Firm, alleging that
plaintiffs and The Mills Law Firm violated the federal securities
laws and proxy rules by sending their September 27, 1996 letter to
the 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 Securities
and Exchange Commission (the "Commission") in violation of the
Commission's requirements. At the conclusion of the hearing on
October 10 and 11, the District Court found that the Operating
General Partners have a likelihood of succeeding on the merits
with respect to their claim that the September 27, 1996 letter
sent to the 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.
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's
rules (15 U.S.C. section 78n(a), 17 C.F.R. sections 240.14a-9,
140.14a-4) by making false and misleading statements in the Proxy.
Plaintiffs also allege that the Operating General Partners
breached their fiduciary duties, breached various provisions of
the Agreement, violated the Illinois Deceptive Trade Practice Act,
815 ILCS 505 et seq., and violated section 17-305 of the Delaware
Revised Uniform Limited Partnership Act. The Operating General
Partners deny those allegations and will continue to vigorously
defend against these claims.
Pursuant to the Agreement and Delaware law, the Partnership
will advance to the defendants their defense costs. The Corporate
General Partner has agreed to repay the Partnership for the
advances if it is ever determined that the parties were not
entitled to receive the advances. No estimate can reasonably be
made at this time of any potential liability from the litigation
or the costs of defense.
Item 4. Submission of Matters to a Vote of Security Holders.
The Special Meeting of Interest Holders was held on Friday,
November 8, 1996 at 9:00 a.m. At the Special Meeting, the
Interest Holders holding a majority of the Units approved the
Merger of the Partnership with and into the Purchaser.
Additionally, at the Special Meeting, Interest Holders holding a
majority of the Units approved 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.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters.
At December 31, 1996, there were approximately 1,837 Interest
Holders in the Partnership. There is no established public
trading market for Units and it is not anticipated that there will
be a public market for Units. Neither the General Partners nor
the Partnership are obligated, but reserve the right, to redeem or
repurchase Units. Units may also be purchased by the Plan in
certain instances. Any Units so purchased shall be retired.
However, there is no intent to redeem or purchase Units pending
the Merger.
Pursuant to the terms of the Agreement, there are restrictions
on the ability of the Interest Holders to transfer their Units.
In all cases, the General Partners must consent to the
substitution of an Interest Holder.
Cash distributions to Interest Holders for 1996, 1995 and 1994
were $1,321,381, $2,600,149 and $2,616,758, respectively. Prior
to the commencement of the Partnership's proxy solicitation in
August 1996, distributions were paid four times per year, within
60 days following the end of each calendar quarter. See Item 7.
All distributions represent cash flow from operations. No amount
distributed in 1996 was a return of capital. Pursuant to the
terms of the Merger Agreement, net income after August 1, 1996
accrues to the Purchaser and, therefore, the net income through
July 31, 1996 will be distributed to the Interest Holders at the
time of the closing of the Merger. Since the net income of the
Partnership after August 1, 1996 accrues to the Purchaser, no
distributions of net income were paid to the Interest Holders for
the two months of August and September 1996 and the quarter ended
December 31, 1996. As a result of the delays in closing the
Merger, the Purchaser has agreed to allow distributions of net
income accruing from and after January 1, 1997 until the Merger is
consummated. See Item 7.
<PAGE>
Item 6. Selected Financial Data.
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
(Not Covered By Independent Auditor's Report)
Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Selected Income Statement Data:
Rental Income $ 2,447,036 $ 2,502,755 $ 2,494,203
Interest and other Income 88,582 63,650 27,682
Net Income 1,836,063 2,367,443 2,296,122
Net Income Per Unit (a) $ 0.69 $ 0.91 $ 0.87
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 2,231,481 $ 1,363,085 $ 1,016,066
Land and Buildings 19,322,975 19,322,975 19,322,975
Investment in Brauvin High
Yield Venture 32,374 33,746 34,179
Investment in Brauvin Funds
Joint Venture 2,450,861 2,472,647 2,494,341
Investment in Brauvin
Gwinnett County Venture 550,625 557,389 569,626
Investment in Brauvin Bay
County Venture 171,433 -- --
Total Assets 21,553,997 20,932,600 21,010,763
Cash Distributions to
General Partners 26,798 52,869 53,233
Cash Distributions to
Interest Holders (b) 1,321,381 2,600,149 2,616,758
Cash Distributions to
Interest Holders Per
Unit(a) $ 0.50 $ 1.00 $ 1.01
(a) Net income per Unit and 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 date Interest Holders were admitted to the
Partnership and additional Units were purchased through the Plan.
(b) This includes $8,682, $9,209 and $8,342 paid to various states
for income taxes on behalf of all Interest Holders for the years
1996, 1995 and 1994, respectively.
The above selected financial data should be read in conjunction
with the financial statements and the related notes appearing
elsewhere in this annual report.
<PAGE>
Item 6. Selected Financial Data - continued.
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
(Not Covered By Independent Auditor's Report)
Years Ended December 31, 1993 and 1992
1993 1992
Selected Income Statement Data:
Rental Income $ 2,432,331 $ 2,429,983
Interest and other Income 26,909 32,278
Net Income 2,189,394 2,117,417
Net Income Per Unit (a) $ 0.84 0.82
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 857,383 $ 1,065,360
Land and Buildings 19,322,975 19,322,975
Investment in Brauvin High
Yield Venture 36,494 37,644
Investment in Brauvin Funds
Joint Venture 2,511,957 2,519,883
Investment in Brauvin
Gwinnett County Venture 582,573 --
Total Assets 21,285,952 21,370,824
Cash Distributions to
General Partners 52,853 39,264
Cash Distributions to
Interest Holders (b) 2,590,902 2,560,503
Cash Distributions to
Interest Holders Per
Unit(a) $ 1.01 $ 1.01
(a) Net income per Unit and 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 date Interest Holders were
admitted to the Partnership and additional Units were
purchased through the Plan.
(b) This includes $6,873 and $5,934 paid to various states for
income taxes on behalf of all Interest Holders for the years
1993 and 1992, respectively.
The above selected financial data should be read in conjunction
with the financial statements and the related notes appearing
elsewhere in this annual report.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General
Certain statements in this Annual Report that are not historical
fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Discussions
containing forward-looking statements may be found in this section
and in the section entitled "Business." Without limiting the
foregoing, words such as "anticipates," "expects," "intends,"
"plans" and similar expressions are intended to identify forward-
looking stats. 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.
On October 31, 1996, the Partnership purchased a 16.0% interest
in a joint venture with affiliated public real estate limited
partnerships (the "Bay County Venture"). The 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 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 continued until the proxy solicitation
process began. As of 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,
excluding those raised through the Plan.
Below is a table summarizing the four year historical data for
distribution rates per unit:
Distribution
Date 1997 1996 1995 1994
February 15 $.2500 $.2500 $.2500
May 15 .2500 .2500 .2500
August 15 -- .2500 .2500
November 15 -- .2500 .2625
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.
During the years ended December 31, 1996 and 1995, the General
Partners and its affiliates collected management fees of $24,994 and
$24,998, respectively, and received $26,798 and $52,869 in Operating
Cash Flow distributions for the years ended December 31, 1996 and
1995, 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 Item 3, 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.
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.
In addition to Mr. Jerome J. Brault, the Managing General Partner
of the Partnership, and Brauvin Realty Advisors, Inc., the Corporate
General Partner of the Partnership, Mr. David M. Strosberg is also
an Individual General Partner of the Partnership. Mr. Cezar M.
Froelich resigned his position as an Individual General Partner of
the Partnership effective as of September 17, 1996. The General
Partners will not receive any payment in exchange for the redemption
of their general partnership interests nor will they receive any
fees from the Partnership in connection with the Transaction.
The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, will have a
minority ownership interest in the Purchaser. Therefore, the
Messrs. Brault have an indirect economic interest in consummating
the Transaction that is in conflict with the economic interests of
the 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 due diligence
review has also raised questions regarding the interpretation of
certain terms in the leases governing some of the Partnership's and
the Affiliated Partnerships' properties. A very significant tenant
is interpreting certain purchase options contained in its leases in
a way that would cause the value of the properties leased by such
tenant to be significantly below the current appraised value.
Members of management of the Partnership and the Affiliated
Partnerships have been working diligently with the Purchaser to
assess these risks and to resolve them in a way that will allow the
Merger and the related transactions to be consummated without any
changes to the terms or the Merger price.
In accordance with the terms of the Merger Agreement, the
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 - Years ended December 31, 1996 and 1995
Results of operations for the Partnership for the year ended
December 31, 1996 reflected net income of $1,836,063 as compared to
$2,367,443 for the year ended December 31, 1995, a decrease of
approximately $531,400. The decrease in net income resulted from
the increase in expenses as a result of the property valuations and
the Transaction.
Total income for the year ended December 31, 1996 was $2,535,618
as compared to $2,566,405 for the year ended December 31, 1995, a
decrease of approximately $30,800. Total income was effected by an
increase in interest income as a result of the Partnership having
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 1996.
Total expenses for the year ended December 31, 1996 were
$1,047,225 as compared to $545,438 for the year ended December 31,
1995, an increase of approximately $501,800. The increase in
expenses is primarily the result of: (i) legal and other
professional fees paid or accrued as a result of the Transaction and
(ii) the Partnership hiring an independent real estate company to
conduct property valuations to provide a valuation of the Units to
satisfy the Partnership's requirements under the Employee Retirement
Income Security Act of 1974, as amended.
Results of Operations - Years ended December 31, 1995 and 1994
Results of operations for 1995 reflected net income of
$2,367,443. Net income for 1995 increased by approximately $71,000
over 1994 due primarily to increased interest income of
approximately $36,000 which is a result of the Partnership's
accumulating cash reserves for the possible acquisition of an
additional property. Net income also increased due to a decrease
in the amortization of deferred organization costs and other assets
of approximately $24,000, which was the result of the full
amortization of these items in 1994.
Results of Operations - Years ended December 31, 1994 and 1993
Results of operations for 1994 reflected net income of
$2,296,122. Net income for 1994 increased by approximately $107,000
over 1993 due primarily to increased percentage rent revenue of
approximately $58,000 and an increase in the equity interest in
Brauvin Gwinnett County Venture's net income of approximately
$45,000.
Other Information
On March 15, 1989, Mr. David M. Strosberg resigned as an employee
of the Corporate General Partner and certain affiliates of the
Corporate General Partner. Currently, Mr. Strosberg remains an
Individual General Partner of the Partnership. The remaining
General Partners do not believe that Mr. Strosberg's lack of
involvement has had an adverse effect, and should not in the future
have any adverse effect, on the operations of the Partnership.
Impact of Inflation
The Partnership anticipates that the operations of the
Partnership will not be significantly impacted by inflation. To
offset any potential adverse effects of inflation, the Partnership
entered into "triple-net" leases with the tenant being responsible
for all operating expenses, insurance and real estate taxes. In
addition, several of the leases require escalations of rent based
upon increases in the Consumer Price Index, scheduled increases of
base rents, or tenant sales.
Item 8. Financial Statements and Supplementary Data.
See Index of Financial Statements and Schedule on Page F-1 of
this Annual Report on Form 10-K for financial statements and
financial statement schedule, where applicable.
The supplemental financial information specified in Item 302 of
Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
During the Partnership's two most recent fiscal years, there have
been no changes in, or disagreements with, the accountants.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partners of the Partnership are:
Brauvin Realty Advisors, Inc., an Illinois corporation
Mr. Jerome J. Brault, individually
Mr. David M. Strosberg, individually
Brauvin Realty Advisors, Inc. was formed under the laws of the
State of Illinois in 1986, with its issued and outstanding shares
being owned by Messrs. Jerome J. Brault (beneficially) (44%), Cezar
M. Froelich (44%) and David M. Strosberg (12%).
The principal officers and directors of the Corporate General
Partner are:
Mr. Jerome J. Brault . . . .Chairman of the Board of Directors,
President, Chief Executive Officer
and Director
Mr. B. Allen Aynessazian. . Treasurer and Chief Financial
Officer
Mr. James L. Brault . . . . Vice President and Secretary
The business experience during the past five years of the General
Partners and the principal officers and directors of the Corporate
General Partner are as follows:
MR. JEROME J. BRAULT (age 63) chairman of the board of directors,
president and chief executive officer of the Corporate General
Partner, as well as a principal shareholder of the Corporate General
Partner. He is an officer of Brauvin Real Estate Funds, L.L.C.
Since 1979, he has been a shareholder, president and a director of
Brauvin/Chicago, Ltd. He is an officer, director and one of the
principal shareholders of various Brauvin entities which act as the
general partners of six other publicly registered real estate
programs. He is an officer, director and one of the principal
shareholders of Brauvin Associates, Inc., Brauvin Management
Company, Brauvin Advisory Services, Inc. and Brauvin Securities,
Inc., Illinois companies engaged in the real estate and securities
businesses. He is a director, president and chief executive officer
of Brauvin Net Lease V, Inc. Mr. Brault received a B.S. in Business
from DePaul University, Chicago, Illinois in 1959.
MR. CEZAR M. FROELICH (age 51) is a principal with the Chicago law
firm of Shefsky & Froelich Ltd., which acted as counsel to the
General Partners, the Partnership and certain of their affiliates.
His practice has been primarily in the fields of securities and real
estate and he has acted as legal counsel to various public and
private real estate limited partnerships, mortgage pools and real
estate investment trusts. Mr. Froelich is a shareholder in Brauvin
Management Company and Brauvin Financial Inc. Mr. Froelich resigned
as a director of the Corporate General Partner in December 1994 and
as an Individual General Partner effective as of September 17, 1996.
MR. JAMES L. BRAULT (age 36) is a vice president and secretary and
is responsible for the overall operations of the Corporate General
Partner and other affiliates of the Corporate General Partner. He
is an officer of Brauvin Real Estate Funds, L.L.C. He is an officer
of various Brauvin entities which act as the general partners of six
other publicly registered real estate programs. Mr. Brault is
executive vice president and assistant secretary and is responsible
for the overall operations of Brauvin Management Company. He is
also an executive vice president and secretary for Brauvin Net Lease
V, Inc. Prior to joining the Brauvin organization in May 1989, he
was a Vice President of the Commercial Real Estate Division of the
First National Bank of Chicago ("First Chicago"), based in their
Washington, D.C. office. Mr. Brault joined First Chicago in 1983
and his responsibilities included the origination and management of
commercial real estate loans, as well as the direct management of
a loan portfolio in excess of $150 million. Mr. Brault received a
B.A. in Economics from Williams College, Williamstown, Massachusetts
in 1983 and an M.B.A. in Finance and Investments from George
Washington University, Washington, D.C. in 1987. Mr. Brault is the
son of Mr. Jerome J. Brault.
MR. B. ALLEN AYNESSAZIAN (age 32) is the treasurer and chief
financial officer of the Corporate General Partner and other
affiliates of the Corporate General Partner. He is the chief
financial officer of various Brauvin publicly registered real estate
programs. He is also the chief financial officer of Brauvin Net
Lease V, Inc. He is responsible for the overall financial
accounting of Brauvin Management Company, Brauvin Financial, Inc.
and related partnerships. He is also responsible for the
Partnership's accounting and financial reporting to regulatory
agencies. He joined the Brauvin organization in August 1996. Prior
to that time, he was the chief financial officer of Giordano's
Enterprises, a privately held, 40-restaurant, family-style pizza
chain in the Chicago metropolitan area where he worked since 1989.
While at Giordano's, Mr. Aynessazian was responsible for all
accounting functions, lease negotiations and financings of new
restaurants, equipment and general corporate debt. From 1987 to
1989, Mr. Aynessazian worked in the accounting compliance and tax
department of KPMG Peat Marwick. Mr. Aynessazian is a certified
public accountant.
Item 11. Executive Compensation.
(a & b)The Partnership is required to pay certain fees, make
distributions and allocate a share of the profits and losses of the
Partnership to the Corporate General Partner and its affiliates as
described under the caption "Compensation Table" on pages 11 to 13
of the Partnership's Prospectus, as supplemented, and the sections
of the Agreement entitled "Distributions of Operating Cash Flow,"
"Allocation of Profits, Losses and Deductions," "Distribution of Net
Sale or Refinancing Proceeds" and "Compensation of General Partners
and Their Affiliates" on pages A-12 to A-17 of the Agreement
attached as Exhibit A to the Prospectus. The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth above in Item 10. Reference is also made
to Note 2 of the Notes to the Financial Statements filed with this
annual report for a description of such distributions and
allocations.
The General Partners are entitled to receive Acquisition Fees for
services rendered in connection with the selection, purchase,
construction or development of any property by the Partnership
whether designated as real estate commissions, acquisition fees,
finders' fees, selection fees, development fees, construction fees,
non-recurring management fees, consulting fees or any other similar
fees or commissions, however treated for tax or accounting purposes.
Aggregate Acquisition Fees payable to all persons in connection with
the purchase of Partnership properties may not exceed such
compensation as is customarily charged in arm's-length transactions
by others rendering similar services as an ongoing public activity
in the same geographic locale and for comparable properties. The
aggregate Acquisition Fees to be paid to the General Partners and
their affiliates shall not exceed 4-1/2% of the gross proceeds of
the Offering. In addition, an additional Acquisition Fee may be
paid to the General Partners and its affiliates to the extent of
excess working capital reserves (as defined). No acquisition fees
were paid in 1995 or 1994. An acquisition fee of $8,588 was paid
in 1996 related to the Bay County Venture purchase.
An affiliate of the General Partners may provide leasing and
re-leasing services to the Partnership in connection with the
management of Partnership properties. The maximum property
management fee to the General Partners or their affiliates shall be
equal to 1% of the gross revenues of each Partnership property or
interest therein; however, the receipt of such property management
fees by the General Partners or their affiliates is subordinated to
the receipt by the Limited Partners of a 10% non-cumulative,
non-compounded annual return on Adjusted Investment. In 1996, 1995
and 1994, the Partnership paid management fees of $24,994, $24,998
and $25,596, respectively, to affiliates of the General Partners.
(c, d, e & f) Not applicable.
(g) The Partnership has no employees and pays no
employee or director compensation.
(h & i) Not applicable.
(j) Compensation Committee Interlocks and Insider
Participation. Since the Partnership has no
employees, it did not have a compensation committee
and is not responsible for the payment of any
compensation.
(k) Not applicable.
(l) Not applicable.
The following is a summary of all fees, commissions and other
expenses paid or payable to the General Partners or their affiliates
for the years ended December 31, 1996, 1995 and 1994:
1996 1995 1994
Selling commissions $ 9,010 $34,935 $33,388
Management fees 24,994 24,998 25,596
Reimbursable operating expenses 118,764 69,808 74,400
Legal fees 2,737 349 4,370
Acquisition fees 8,588 -- --
Transaction costs 10,854 -- --
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) No person or group is known by the Partnership to own
beneficially more than 5% of the outstanding Units of the
Partnership.
(b) One of the Individual General Partners of the Partnership
purchased $5,000 of the Units. No officers or directors
of the Corporate General Partner own any Units.
Amount and
Title Nature of Percentage
of Name and Address Beneficial Of
Class of Beneficial Owners Ownership Class
Units David M. Strosberg $5,000 0.02%
320 W. Illinois #C-221
Chicago, IL 60610
(c) Other than as described in the Proxy, the Partnership is
not aware of any arrangement, the operations of which may
result in a change of control of the Partnership.
No officer or director of the Corporate General Partner possesses
a right to acquire beneficial ownership of Units of the Partnership.
The General Partners will share in the profits, losses and
distributions of the Partnership as outlined in Item 11, "Executive
Compensation."
Item 13. Certain Relationships and Related Transactions.
(a & b) The Partnership is entitled to engage in various
transactions involving affiliates of the Corporate General Partner,
as described in the section of the Partnership's Prospectus, as
supplemented, entitled "Compensation Table" and "Conflicts of
Interest" at pages 11 to 16 and the section of the Agreement
entitled "Rights, Duties and Obligations of General Partners" at
pages A-19 to A-25 of the Agreement. The relationship of the
Corporate General Partner to its affiliates is set forth in Item 10.
Cezar M. Froelich is a principal of the law firm of Shefsky &
Froelich Ltd., which firm acted as securities and real estate
counsel to the Partnership and certain of their respective
affiliates.
(c) No management persons are indebted to the Partnership.
(d) There have been no transactions with promoters.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Financial Statements and Schedule indicated in Part II,
Item 8 "Financial Statements and Supplementary Data."
(See Index to Financial Statements and Schedule on page
F-1 of Form 10-K).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-K Item 601:
(10)(d) First Amendment and Waiver to Agreement and Plan of Merger.
(21) Subsidiaries of the Registrant.
(27) Financial Data Schedule.
The following exhibits are incorporated by reference from the
Registrant's Registration Statement (File No. 33-11899) on Form S-11
filed under the Securities Act of 1933:
Exhibit No. Description
3.(a) Restated Limited Partnership Agreement
3.(b) Articles of Incorporation of Brauvin
Realty Advisors,Inc.
3.(c) By-Laws of Brauvin Realty Advisors, Inc.
3.(d) Amendment to the Certificate of Limited
Partnership of the Partnership
10.(a) Escrow Agreement
(b) Form 8-K. On November 8, 1996, the vote of the Interest
Holders was taken and resulted in approval of the merger of the
Partnership per the terms of the Proxy. This Form 8-K was
dated and filed on November 8, 1996.
(c) An annual report for the fiscal year 1996 will be sent to the
Interest Holders subsequent to this filing.
<PAGE>
The following exhibits are incorporated by reference to the
Registrant's fiscal year ended December 31, 1994 Form 10-K (File No.
0-17557):
Exhibit No. Description
(10)(b)(1) Management Agreement
(28) Pages 9-16 of the Partnership's Prospectus dated
September 4, 1987 as supplemented, and pages A-12
to A-17 and A-19 to A-25 of the Agreement.
The following exhibits are incorporated by reference to the
Registrant's definitive proxy statement dated August 23, 1996 (File
No. 0-17557):
Exhibit No. Description
(10)(c) Merger Agreement.
<PAGE>
SIGNATURES
In accordance with Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRAUVIN HIGH YIELD FUND L.P.
BY: Brauvin Realty Advisors, Inc.
Corporate General Partner
By:/s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
By:/s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
By:/s/ James L. Brault
James L. Brault
Vice President and Secretary
INDIVIDUAL GENERAL PARTNERS
/s/ Jerome J. Brault
Jerome J. Brault
David M. Strosberg
DATED: 4/10/97
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . F-2
Financial Statements:
Balance Sheets, December 31, 1996 and 1995 . . . . . . . . . . F-3
Statements of Operations, for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . F-4
Statements of Partners' Capital, for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . F-5
Statements of Cash Flows, for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . F-7
Schedule III -- Real Estate and Accumulated
Depreciation, December 31, 1996. . . . . . . . . . . . . . . . F-29
All other schedules provided for in Item 14(a)(2) of Form 10-K are
either not required, or are inapplicable, or immaterial.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Brauvin High Yield Fund L.P.
Chicago, Illinois
We have audited the accompanying balance sheets of Brauvin High Yield
Fund L.P. (a limited partnership) as of December 31, 1996 and 1995,
and the related statements of operations, partners' capital, and cash
flows for each of the three years in the period ended December 31,
1996. Our audits also included the financial statement schedule
listed in the Index to Financial Statements and Schedule on page F-1.
These financial statements and the financial statement schedule are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements
and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Brauvin High Yield Fund
L.P. at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information
set forth therein.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 10, 1997
(April 2, 1997 as to Note 7)
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
BALANCE SHEETS
December 31, 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 (3,238,758) (2,852,122)
Net investment in real estate 16,084,217 16,470,853
Investment in Joint Ventures (Note 6):
Brauvin High Yield Venture 32,374 33,746
Brauvin Funds Joint Venture 2,450,861 2,472,647
Brauvin Gwinnett County Venture 550,625 557,389
Brauvin Bay County Venture 171,433 --
Cash and cash equivalents 2,231,481 1,363,085
Due from affiliates 20 358
Prepaid offering costs 15,703 16,763
Other assets 17,283 17,759
Total Assets $21,553,997 $20,932,600
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 29,018 $ 10,443
Rent received in advance 144,365 86,903
Total Liabilities 173,383 97,346
PARTNERS' CAPITAL:
General Partners 134,218 124,295
Interest Holders 21,246,396 20,710,959
Total Partners' Capital 21,380,614 20,835,254
Total Liabilities and
Partners' Capital $21,553,997 $20,932,600
See accompanying notes to financial statements
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31,
1996 1995 1994
INCOME
Rental $2,447,036 $2,502,755 $2,494,203
Interest and other 88,582 63,650 27,682
Total income 2,535,618 2,566,405 2,521,885
EXPENSES
General and administrative 189,729 133,805 129,068
Management fees (Note 3) 24,994 24,998 25,596
Transaction costs (Note 7) 356,850 -- --
Valuation fees 89,016 -- --
Depreciation 386,636 386,635 386,636
Amortization of deferred
organization costs and
other assets -- -- 24,345
Total expenses 1,047,225 545,438 565,645
Income before equity interest
in joint ventures 1,488,393 2,020,967 1,956,240
Equity Interest in Joint
Ventures' Net Income:
Brauvin High Yield Venture 5,828 5,967 5,585
Brauvin Funds Joint Venture 291,814 291,906 291,084
Brauvin Gwinnett County
Venture 49,396 48,603 43,213
Brauvin Bay County Venture 632 -- --
Net Income $1,836,063 $2,367,443 $2,296,122
Net income allocated to the
General Partners $ 36,721 $ 47,349 $ 45,922
Net income allocated to the
Interest Holders $1,799,342 $2,320,094 $2,250,200
Net income per
Unit outstanding (a) $ 0.69 $ 0.91 $ 0.87
(a) Net income per Unit was 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
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 years ended December 31, 1996, 1995 and 1994
General Interest
Partners Holders * Total
BALANCE at January 1, 1994 $ 137,126 $20,971,637 $21,108,763
Contributions, net -- 63,295 63,295
Selling commissions and other
offering costs -- (37,316) (37,316)
Net income 45,922 2,250,200 2,296,122
Cash distributions (53,233) (2,616,758) (2,669,991)
Balance, December 31, 1994 129,815 20,631,058 20,760,873
Contributions, net -- 399,001 399,001
Selling commissions and
other offering costs -- (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 -- 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
* Total Units outstanding at December 31, 1996, 1995 and 1994 were
2,627,503, 2,620,903 and 2,581,003, respectively. Cash distributions
to Interest Holders per Unit were approximately, $0.50, $1.00 and
$1.01 for the years ended December 31, 1996, 1995 and 1994,
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 the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash Flows From Operating Activities:
Net income $1,836,063 $2,367,443 $2,296,122
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 386,636 386,635 410,981
Equity interest in Brauvin High
Yield Venture's net income (5,828) (5,967) (5,585)
Equity interest in Brauvin Funds Joint
Venture's net income (291,814) (291,906) (291,084)
Equity interest in Brauvin Gwinnett
County Venture's net income (49,396) (48,603) (43,213)
Equity interest in Brauvin Bay County
Venture's net income (632) -- --
Repayment from (advances to)affiliates 338 11,793 (11,633)
Decrease (increase) in other assets 476 (11,720) (2,282)
Increase (decrease) in accounts payable
and accrued expenses 18,575 (4,209) (46,141)
Decrease in due to affiliates -- (2,859) (1,286)
Increase (decrease) in rent received
in advance 57,462 (145,476) 120,128
Net cash provided by operating
activities 1,951,880 2,255,131 2,426,007
Cash Flows From Investing Activities:
Distributions from Brauvin High
Yield Venture 7,200 6,400 7,900
Distributions from Brauvin Funds
Joint Venture 313,600 313,600 308,700
Distributions from Brauvin Gwinnett
County Venture 56,160 60,840 56,160
Investment in Brauvin Bay County
Venture (170,801) -- --
Net cash provided by investing
activities 206,159 380,840 372,760
Cash Flows From Financing Activities:
Sale of Units, net of liquidations, selling
commissions and other offering costs 58,536 364,066 29,907
Cash distributions to General Partners (26,798) (52,869) (53,233)
Cash distributions to Interest Holders (1,321,381) (2,600,149) (2,616,758)
Net cash used in financing activities (1,289,643) (2,288,952) (2,640,084)
Net increase in cash and cash
equivalents 868,396 347,019 158,683
Cash and cash equivalents at beginning
of year 1,363,085 1,016,066 857,383
Cash and cash equivalents at end
of year $2,231,481 $1,363,085 $1,016,066
See accompanying notes to financial statements
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1996, 1995 and 1994
(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
December 31, 1996, 1995 and 1994 the Partnership had sold
$27,922,102, $27,816,104 and $27,410,356 of Units, respectively.
These totals include $2,922,102, $2,816,104 and $2,410,356 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, $1,607,070 and $1,595,070 have been
repurchased by the Partnership from Interest Holders liquidating
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
their investment in the Partnership and have been retired as of
December 31, 1996, 1995 and 1994, respectively. As of December 31,
1996, the Plan participants have acquired Units under the Plan which
approximate 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.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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 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 December 31, 1996 and 1995.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for the years ended December 31,
1996 and 1995.
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,
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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.
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 7), 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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on information
available to management as of December 31, 1996, 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 rents
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:
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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 General Partners provides securities
and real estate counsel to the Partnership.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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 years ended December 31,
1996, 1995 and 1994 were as follows:
1996 1995 1994
Selling commissions $ 9,010 $34,935 $33,388
Management fees 24,994 24,998 25,596
Reimbursable operating
expenses 118,764 69,808 74,400
Legal fees 2,737 349 4,370
Acquisition fees 8,588 -- --
Transaction costs 10,854 -- --
(4) LEASES
The Partnership's rental income is principally obtained from
tenants through rental payments provided under triple-net
noncancelable operating leases. The leases provide for a base
minimum annual rent and increases in rent such as through
participation in gross sales above a stated level.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
The following is a schedule of noncancelable future minimum
rental payments due to the Partnership under operating leases of
Partnership properties as of December 31, 1996:
Year ending December 31:
1997 $ 2,154,301
1998 2,154,301
1999 2,154,301
2000 2,109,387
2001 1,886,663
Thereafter 3,358,654
$13,817,607
Additional rent based on percentages of tenant sales increases
was $296,269, $354,310 and $347,616, in 1996, 1995 and 1994,
respectively.
Approximately 42% and 39% of the Partnership's rental income is
from properties operated as Ponderosa and Taco Bell restaurants,
respectively. The Partnership is subject to some risk of loss
should adverse events affect those Ponderosa and Taco Bell
restaurants and, in turn, adversely affect the lessees' ability to
pay rent to the Partnership.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
(5) 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.
(6) 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
For the years ended December 31, 1996, 1995 and 1994
BRAUVIN HIGH YIELD VENTURE
December 31, December 31,
1996 1995
Land and buildings, net $5,042,833 $5,163,083
Other assets 18,144 21,792
$5,060,977 $5,184,875
Liabilities $ 18,442 $ 5,126
Partners' capital 5,042,535 5,179,749
$5,060,977 $5,184,875
Years Ended December 31,
1996 1995 1994
Rental and other income $714,260 $728,839 $690,061
Expenses:
Depreciation 120,250 120,251 120,250
Management fees 7,413 7,133 7,055
Operating and
administrative 3,811 4,772 4,223
131,474 132,156 131,528
Net Income $582,786 $596,683 $558,533
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
BRAUVIN FUNDS JOINT VENTURE
December 31, December 31,
1996 1995
Land and buildings, net $4,706,404 $4,816,500
Other assets 348,975 284,969
$5,055,379 $5,101,469
Liabilities $ 374 $ 2,004
Partners' capital 5,055,005 5,099,465
$5,055,379 $5,101,469
Year Ended December 31,
1996 1995 1994
Rental and other income $716,981 $720,088 $714,588
Expenses:
Depreciation 110,096 110,096 110,096
Management fees 6,752 6,838 6,763
Operating and
administrative 4,593 7,429 3,682
121,441 124,363 120,541
Net Income $595,540 $595,725 $594,047
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
BRAUVIN GWINNETT COUNTY VENTURE
December 31, December 31,
1996 1995
Land and buildings, net $2,330,758 $2,376,510
Other assets 59,531 41,567
$2,390,289 $2,418,077
Liabilities $ 23,820 $ 22,702
Partners' capital 2,366,469 2,395,375
$2,390,289 $2,418,077
Years Ended December 31,
1996 1995 1994
Rental and other income $264,475 $264,248 $241,451
Expenses:
Depreciation 45,752 45,752 45,752
Management fees 2,520 2,497 2,520
Operating and
administrative 5,109 8,292 8,510
53,381 56,541 56,782
Net Income $211,094 $207,707 $184,669
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
BRAUVIN BAY COUNTY VENTURE
December 31, 1996
Land and buildings, net $1,069,277
Other assets 13,531
$1,082,808
Liabilities $ 1,155
Partners' capital 1,081,653
$1,082,808
Period from
October 31, 1996
(inception) to
December 31,
1996
Rental income $18,502
Expenses:
Depreciation 2,898
Management fees 191
Operating and administrative 11,463
14,552
Net Income $ 3,950
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
(7) 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 solicitation;
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
(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 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
For the years ended December 31, 1996, 1995 and 1994
Merger and the related transactions to be consummated without any
changes to the terms or the Merger price.
In accordance with the terms of the Merger Agreement, the
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
was brought by Interest Holders of the Partnership. The Partnership
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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 Interest Holders of the Partnership and
the limited partners of the Affiliated Partnerships, and appointed
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
plaintiffs' counsel, The Mills Law Firm, as counsel for the class.
On October 2, 1996, the District Court also conducted a hearing on
plaintiffs' motion to preliminarily enjoin the special meetings of
the limited partners and the proposed transactions with the
Purchaser. The District Court denied plaintiffs' motion for a
preliminary injunction at the conclusion of the October 2, 1996
hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the 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.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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.
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.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For the years ended December 31, 1996, 1995 and 1994
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>
<TABLE>
SCHEDULE III
BRAUVIN HIGH YIELD FUND L.P.
(a Delaware limited partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION> Gross Amount at Which Carried
Initial Cost (a) at Close of Period (b)
Buildings, Buildings,
Personal Cost of Personal
Property and Subsequent Property and Accumulated Date
Description Encumbrances(c) Land Improvements Improvements Land Improvements Total(a) Depreciation Acquired
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taco Bells $0 $2,245,312 $5,239,062 $0 $2,245,312 $ 5,239,062 $ 7,484,374 $1,334,505 12/87-2/88
Ponderosas 0 3,167,168 7,390,057 0 3,167,168 7,390,057 10,557,225 1,716,985 9/88-11/89
Children's World
Learning Centers 0 356,288 831,338 0 356,288 831,338 1,187,626 168,741 7/89
Unallocated additional
Acquisition Fee 0 0 93,750 0 0 93,750 93,750 18,527 11/90-12/90
$0 $5,768,768 $13,554,207 $0 $5,768,768 $13,554,207 $ 19,322,975 $3,238,758
<FN>
<F1>
NOTES:
(a) The cost of this real estate is $19,322,975 for tax purposes (unaudited). The buildings are depreciated over
approximately 35 years using the straight line method. The properties were constructed between 1969 and 1986.
(b) The following schedule summarizes the changes in the Partnership's real estate and accumulated depreciation balances:
</FN>
<CAPTION>
Real estate 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $19,322,975 $19,322,975 $19,322,975
Additions-land, buildings and improvements 0 0 0
Balance at end of year $19,322,975 $19,322,975 $19,322,975
Accumulated depreciation 1996 1995 1994
Balance at beginning of year $ 2,852,122 $ 2,465,487 $ 2,078,851
Provision for depreciation 386,636 386,635 386,636
Balance at end of year $ 3,238,758 $ 2,852,122 $ 2,465,487
<FN>
<F2>
(c) Encumbrances - Brauvin High Yield Fund L.P. did not borrow cash in order to purchase its properties. 100% of the land
and buildings were paid for with funds contributed by the Interest Holders.
</FN>
</TABLE>
<PAGE>
EXHIBITS
TO
BRAUVIN HIGH YIELD FUND L.P.
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1996
<PAGE>
EXHIBIT INDEX
Exhibit (10) (d) First Amendment and Waiver to Agreement
and Plan of Merger
Exhibit (21) Subsidiaries of the Registrant
Exhibit (27) Financial Data Schedule
<PAGE>
EXHIBIT (10) (d)
FIRST AMENDMENT AND WAIVER
to
AGREEMENT AND PLAN OF MERGER
This Amendment and Waiver (the "Amendment") is made and entered
into as of March 24, 1997, by and among BRAUVIN HIGH YIELD FUND
L.P., a Delaware limited partnership ("Brauvin I"), BRAUVIN HIGH
YIELD FUND L.P. II, a Delaware limited partnership ("Brauvin II"),
BRAUVIN INCOME PLUS L.P. III, a Delaware limited partnership
("Brauvin III; and together with Brauvin I and Brauvin II, being
sometimes collectively referred to as the "Brauvin Partnerships")
and BRAUVIN REAL ESTATE FUNDS, L.L.C., a Delaware limited liability
company (the "Merger Company").
R E C I T A L S
WHEREAS, the Brauvin Partnerships and the Merger Company have
entered into an Agreement and Plan of Merger, dated as of June 14,
1996 (the "Merger Agreement");
WHEREAS, the assets being acquired by the Merger Company in
connection with the Transaction include all earnings of the Brauvin
Partnerships from and after August 1, 1996;
WHEREAS, unforeseen events have led to the delay in the
consummation of the Transaction contemplated by the Merger
Agreement;
WHEREAS, the Brauvin Partnerships have requested that certain
funds constituting earnings accrued after August 1, 1996 and
currently being held by the Brauvin Partnerships be released to the
limited partners of the Brauvin Partnerships;
WHEREAS, the Merger Company has agreed to allow for the release
of certain funds on the condition that the Brauvin Partnerships
agree to extend the Termination Date as set forth in the Merger
Agreement; and
WHEREAS, as a result of the foregoing, the Brauvin Partnerships
and the Merger Company desire to amend the Merger Agreement in
certain respects and to waive certain provisions thereof as set
forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows, each
intending to be legally bound as and to the extent herein provided.
1. Definitions. Capitalized terms used but not otherwise
defined herein are used herein as defined in the Merger Agreement.
Each reference in the Merger Agreement to "Merger Agreement," "this
Agreement" or words of like import, shall, unless the context
otherwise requires, be deemed to refer to the Merger Agreement as
amended hereby.
2. Amendments.
(a) Section 2.1.2 of the Merger Agreement is hereby deleted
and restated in its entirety as follows:
"General Partner Interest. The general partner interests
held by: Brauvin Realty Advisors, Inc., Jerome J. Brault and
David M. Strosberg (the "Brauvin I GPs") in Brauvin I; Brauvin
Realty Advisors II, Inc., Jerome J. Brault and David M.
Strosberg (the "Brauvin II GPs") in Brauvin II; and Brauvin
Realty Advisors III, Inc. and Jerome J. Brault (the "Brauvin III
GPs" and together with the Brauvin I GPs and the Brauvin II GPs,
the "Brauvin GPs") in Brauvin III shall all be cancelled and
extinguished and no consideration shall be paid therefor."
(b) The definition of "Brauvin I Unit Value" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Brauvin I Unit Value' means an amount which is equal to
the quotient obtained by dividing (i) the difference between (A)
the sum of (1) the fair market value of substantially all of
Brauvin I's real estate related assets, including the value of
Brauvin I's interest, if any, in joint ventures owning real
estate (as determined by Cushman & Wakefield or other
independent appraiser), and (2) Brauvin I's Available Cash and
(B) the sum of (1) the costs of the Transaction to Brauvin I to
the extent not otherwise deducted in computing Available Cash
and not previously paid, (2) other liabilities of Brauvin I not
otherwise deducted in computing Available Cash and not otherwise
included in costs of the Transaction and (3) the earnings of
Brauvin I from August 1, 1996 through December 31, 1996 by (ii)
the number of Brauvin I Units."
(c) The definition of "Brauvin II Unit Value" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Brauvin II Unit Value' means an amount which is equal
to the quotient obtained by dividing (i) the difference between
(A) the sum of (1) the fair market value of substantially all
of Brauvin II's real estate related assets, including the value
of Brauvin II's interest, if any, in joint ventures owning real
estate (as determined by Cushman & Wakefield or other
independent appraiser), and (2) Brauvin II's Available Cash and
(B) the sum of (1) the costs of the Transaction to Brauvin II
to the extent not otherwise deducted in computing Available Cash
and not previously paid, (2) other liabilities of Brauvin II not
otherwise deducted in computing Available Cash and not otherwise
included in costs of the Transaction and (3) the earnings of
Brauvin II from August 1, 1996 through December 31, 1996 by (ii)
the number of Brauvin II Units."
(d) The definition of "Brauvin III Unit Value" as set forth
in Section 9.2 of the Merger Agreement is hereby deleted and
restated in its entirety as follows:
"'Brauvin III Unit Value' means an amount which is equal
to the quotient obtained by dividing (i) the difference between
(A) the sum of (1) the fair market value of substantially all
of Brauvin III's real estate related assets, including the value
of Brauvin III's interest, if any, in joint ventures owning real
estate (as determined by Cushman & Wakefield or other
independent appraiser), and (2) Brauvin III's Available Cash and
(B) the sum of (1) the costs of the Transaction to Brauvin III
to the extent not otherwise deducted in computing Available Cash
and not previously paid, (2) other liabilities of Brauvin III
not otherwise deducted in computing Available Cash and not
otherwise included in costs of the Transaction and (3) the
earnings of Brauvin III from August 1, 1996 through December 31,
1996 by (ii) the number of Brauvin III Units."
(e) The definition of "Termination Date" as set forth in
Section 9.2 of the Merger Agreement is hereby deleted and restated
in its entirety as follows:
"'Termination Date' means June 30, 1997."
3. Waiver.
(a) In connection with the amendments set forth in Sections
2(b), (c) and (d) above, the Merger Company waives compliance with
Section 7.3.10 of the Merger Agreement to allow the Brauvin
Partnerships to make distributions of earnings with respect to
Units, for earnings received from and after January 1, 1997 through
the Effective Time.
(b) The Merger Company acknowledges that it has been fully
informed of certain actions, suits and proceedings that have been
commenced against the Brauvin Partnerships and certain of their
Affiliates seeking to restrain in certain material respects the
Transaction and seeking material damages in connection therewith.
The absence of such actions, suits and proceedings is a condition
precedent to the obligations of the Merger Company as set forth in
Section 7.3.5 of the Merger Agreement. The Merger Company hereby
waives compliance with Section 7.3.5 of the Merger Agreement with
respect to such actions, suits and proceedings that have been
brought as of the date hereof.
No other waiver of any other filings or other term or condition of
the Merger Agreement, express or implied, should be inferred from
the foregoing waivers.
4. Construction. The Article and Section headings of this
Amendment are for convenience of reference only and do not form a
part hereof and do not in any way modify, interpret or construe the
intentions of the parties.
5. Effectiveness. The effectiveness of this Amendment is
subject to receipt by the parties hereto of counterparts of this
Amendment executed by each party (whether on the same or different
counterparts).
6. Binding Amendment. This Amendment shall be binding upon
and inure to the benefit of the parties and their respective
successors and permitted assigns.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF ILLINOIS.
8. Counterparts. This Amendment may be executed in one or
more counterparts, and all such counterparts shall constitute one
and the same instrument.
[Signatures on following pages.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Brauvin Partnerships:
BRAUVIN HIGH YIELD FUND L.P.,
a Delaware limited partnership
By: Brauvin Realty Advisors, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
BRAUVIN HIGH YIELD FUND L.P. II,
a Delaware limited partnership
By: Brauvin Realty Advisors II, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
BRAUVIN INCOME PLUS L.P. III,
a Delaware limited partnership
By: Brauvin Realty Advisors III, Inc.,
an Illinois corporation
Its: Corporate General Partner
By: /s/ Jerome J. Brault
Its: President
<PAGE>
Merger Company:
BRAUVIN REAL ESTATE FUNDS, L.L.C.,
a Delaware limited liability company
By: Brauvin Realty Estate Funds, Inc.,
an Illinois corporation
Its: Manager
By: /s/James L. Brault
Its: President
<PAGE>
Exhibit 21
Name of Subsidiary State of Formation
Brauvin High Yield Venture Illinois
Brauvin Funds Joint Venture Illinois
Brauvin Gwinnett County Venture Illinois
Brauvin Bay County Venture Illinois
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,231,481
<SECURITIES> 3,205,293 <F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,322,975 <F2>
<DEPRECIATION> 3,238,758
<TOTAL-ASSETS> 21,553,997
<CURRENT-LIABILITIES> 173,383
<BONDS> 0
0
0
<COMMON> 21,380,614 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,553,997
<SALES> 0
<TOTAL-REVENUES> 2,535,618 <F4>
<CGS> 0
<TOTAL-COSTS> 1,047,225 <F5>
<OTHER-EXPENSES> (347,670) <F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,836,063
<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>
