BANYAN STRATEGIC LAND FUND II, 10QSB, 1997-08-14

BANYAN STRATEGIC LAND FUND II
10QSB, 1997-08-14
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997

[ ] 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 0-16886

Banyan Strategic Land Fund II
-----------------------------
(Name of Small Business Issuer in its charter)

Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code : (312) 553-9800

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES |X| NO |_|

Shares of common stock outstanding as of August 14, 1997: 11,923,421

Transitional Small Business Disclosure Format: YES |_| NO |X|
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BANYAN STRATEGIC LAND FUND II
Consolidated Balance Sheets

June 30, 1997 and December 31, 1996
(Unaudited)

<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents ...................................... $ 3,076,373 $ 145,335
Restricted Cash ................................................ 4,419,500 --
Interest Receivable on Investments ............................. 16,929 --
Interest Receivable on Loans ................................... 133,515 118,821
Loans Receivable ............................................... 1,035,000 1,035,000
Foreclosed Real Estate Held for Sale, Net ...................... 9,961,991 10,611,991
Investment in Real Estate Venture .............................. 3,464,073 4,300,865
Other Assets ................................................... 576,800 551,868
------------- -------------

Total Assets ................................................... $ 22,684,181 $ 16,763,880
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note Payable ................................................... $ 4,419,500 $ --
Accounts Payable and Accrued Expenses .......................... 285,025 266,903
Accrued Real Estate Taxes ...................................... -- 32,715
------------- -------------

Total Liabilities .............................................. 4,704,525 299,618
------------- -------------

Stockholders' Equity
Shares of Common Stock, $0.01 Par Value,
50,000,000 Authorized, 21,253,268 and 19,266,268 Share Issued
at June 30, 1997 and December 31, 1996, respectively ......... 173,582,633 170,927,133
Accumulated Deficit ............................................ (139,748,770) (138,608,664)
Treasury Stock at Cost, 9,329,847 Shares ...................... (15,854,207) (15,854,207)
------------- -------------

Total Stockholders' Equity ..................................... 17,979,656 16,464,262
------------- -------------

Total Liabilities and Stockholders' Equity ..................... $ 22,684,181 $ 16,763,880
============= =============

Book Value Per Share of Common Stock
(11,923,421 and 9,936,421 Shares Outstanding, at June 30, 1997
and December 31, 1996, respectively) ......................... $ 1.51 $ 1.66
============= =============
</TABLE>

The accompanying notes are an integral part
of the consolidated financial statements.

2
<PAGE>

BANYAN STRATEGIC LAND FUND II
Consolidated Statements of Income and Expenses

For the Six Months ended June 30, 1997 and 1996
(Unaudited)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable ............................. $ 24,694 $ 30,824
Income on Investments .................................... 19,411 2,072
----------- -----------

Total Income From Lending and Investing Activities ......... 44,105 32,896
----------- -----------

EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real
Estate Held for Sale .................................... 332,880 540,487
Net (Gain) Loss From Disposition of Foreclosed Real Estate
Held for Sale ........................................... 32,612 (31,091)
Net (Income) Loss From Operations of
Real Estate Venture ..................................... (45,033) 86,031
----------- -----------

Total Expenses From Property Operating
Activities ............................................... 320,459 595,427
----------- -----------

Other Expenses:
Stockholder Expenses ..................................... 39,120 80,049
Directors' Fees, Expenses, and Insurance ................. 111,094 99,621
Other Professional Fees .................................. 250,780 90,964
General and Administrative ............................... 462,758 348,199
----------- -----------

Total Other Expenses ..................................... 863,752 618,833
----------- -----------

Total Expenses ............................................. 1,184,211 1,214,260
----------- -----------

Net Loss ................................................... $(1,140,106) $(1,181,364)
=========== ===========

Net Loss Per Share of Common Stock
(Based on the Weighted Average
Number of Shares Outstanding of 10,617,051 and
9,936,421, respectively) ................................. $ (0.11) $ (0.12)
=========== ===========
</TABLE>

The accompanying notes are an integral part
of the consolidated financial statements.

3
<PAGE>

BANYAN STRATEGIC LAND FUND II
Consolidated Statements of Income and Expenses

For the Three Months ended June 30, 1997 and 1996
(Unaudited)

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
INCOME
Income From Lending and Investing Activities:
Interest on Loans Receivable ............................. $ 5,000 $ 18,355
Income on Investments .................................... 18,967 591
--------- ---------

Total Income From Lending and Investing Activities ......... 23,967 18,946
--------- ---------

EXPENSES
Expenses From Property Operating Activities:
Net Loss From Operations of Foreclosed Real
Estate Held for Sale .................................... 198,122 190,804
Net (Gain) Loss From Disposition of Foreclosed Real Estate
Held for Sale ........................................... 32,612 (31,091)
Net (Income) Loss From Operations of
Real Estate Venture ..................................... (18,108) 52,060
--------- ---------

Total Expenses From Property Operating
Activities ............................................... 212,626 211,773
--------- ---------

Other Expenses:
Stockholder Expenses ..................................... 22,941 59,527
Directors' Fees, Expenses, and Insurance ................. 56,514 48,352
Other Professional Fees .................................. 145,986 45,403
General and Administrative ............................... 348,712 194,628
--------- ---------

Total Other Expenses ..................................... 574,153 347,910
--------- ---------

Total Expenses ............................................. 786,779 559,683
--------- ---------

Net Loss ................................................... $(762,812) $(540,737)
========= =========

Net Loss Per Share of Common Stock
(Based on the Weighted Average
Number of Shares Outstanding of 11,290,201 and
9,936,421, respectively) ................................. $ (0.07) $ (0.05)
========= =========
</TABLE>

The accompanying notes are an integral part
of the consolidated financial statements.

4
<PAGE>

BANYAN STRATEGIC LAND FUND II
Consolidated Statement of Stockholders' Equity

For the Six Months ended June 30, 1997
(Unaudited)

<TABLE>
<CAPTION>
Common Stock
-------------------------- Accumulated Treasury
Shares Amount Deficit Stock Total
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stockholders' Equity,
December 31, 1996 ... 19,266,268 $170,927,133 $(138,608,664) $(15,854,207) $ 16,464,262

Issuance of Stock, Net 1,987,000 2,655,500 -- -- 2,655,500

Net Loss ............. -- -- (1,140,106) -- (1,140,106)
---------- ------------ ------------- ------------ ------------

Stockholder's Equity,
June 30, 1997 ....... 21,253,268 $173,582,633 $(139,748,770) $(15,854,207) $ 17,979,656
========== ============ ============= ============ ============
</TABLE>

The accompanying notes are an integral part
of the consolidated financial statements.

5
<PAGE>

BANYAN STRATEGIC LAND FUND II
Consolidated Statements of Cash Flows

For the Six Months ended June 30, 1997 and 1996
(Unaudited)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ....................................................... $(1,140,106) $(1,181,364)
Adjustments to Reconcile Net Loss to Net Cash Used
In Operating Activities:
Net (Gain) Loss From Disposition of Foreclosed
Real Estate Held For Sale ................................... 32,612 (31,091)
Net (Income) Loss From Operations of Real Estate Venture .... (45,033) 86,031
Net Change In:
Interest Receivable on Investments ........................... (16,929) 3,754
Interest Receivable on Loans ................................. (14,694) (25,864)
Other Assets ................................................. (24,932) 227,670
Accounts Payable and Accrued Expenses ........................ 18,122 (237,222)
Accrued Real Estate Taxes .................................... (32,715) 15,489
----------- -----------

Net Cash Used in Operating Activities .......................... (1,223,675) (1,142,597)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Investment Securities .................. -- 310,007
Principal Payments on Investment Securities .................. -- 316,939
Proceeds from the Sale of Investment in Real Estate Venture .. 858,767 --
Proceeds from the Sale of Foreclosed Real Estate Held for Sale 617,388 271,757
Investments in Real Estate Venture ........................... 23,058 (15,233)
----------- -----------

Net Cash Provided By Investing Activities ...................... 1,499,213 883,470
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock, Net ....................................... 2,655,500 --
----------- -----------

Net Cash Provided By Financing Activities ...................... 2,655,500 --
----------- -----------

Net Increase (Decrease) in Cash and Cash Equivalents ........... 2,931,038 (259,127)

Cash and Cash Equivalents at Beginning of Period ............... 145,335 549,309
----------- -----------

Cash and Cash Equivalents at End of Period ..................... $ 3,076,373 $ 290,182
=========== ===========
</TABLE>

The accompanying notes are an integral part
of the consolidated financial statements.

6
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements

June 30, 1997
(Unaudited)

Readers of this quarterly report should refer to Banyan Strategic Land
Fund II's (the "Fund's") audited consolidated financial statements for the year
ended December 31, 1996, which are included in the Fund's 1996 Annual Report on
Form 10-KSB for the year ended December 31, 1996, as certain footnote
disclosures which would substantially duplicate those contained in such audited
statements have been omitted from this report.

In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 1997 and December 31, 1996 and results of operations for
the three and six month periods ended June 30, 1997 and 1996 have been made and
are reflected.

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Fund and its wholly-owned subsidiaries and consolidated ventures which hold
title to the Fund's properties. In April 1996, the Fund acquired 100% of the
outstanding shares of BMC Banden Corp. The assets and liabilities of this
wholly-owned subsidiary have not been consolidated as they have been accorded no
value. All intercompany balances and transactions have been eliminated in
consolidation. The Fund's 47% interest in the H Street Assemblage is accounted
for on the equity method as an investment in real estate joint venture.

Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Fund will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The Fund has not yet determined what the
impact of Statement 128 will be on the calculation of fully diluted earnings per
share.

2. Foreclosed Real Estate Held for Sale

Lindfield Tract D

The Lindfield Tract D property is an 8.5-acre parcel of land zoned for
commercial use within a multi-use planned unit development, located in
Kissimmee, Florida. The Fund's carrying value for this property was $650,000. On
June 23, 1997, the Fund sold the Lindfield Tract D property to an unaffiliated
third party for a purchase price of $675,000. Cash proceeds received, net of
transaction costs, were $617,388, resulting in a net loss on disposition of
$32,612 for financial reporting purposes.

7
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements
(Continued)

Rancho Malibu

Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Fund
and Legend Properties, Inc. (f/k/a Banyan Mortgage Investment Fund) ("Legend")
acquired title to the property pursuant to a deed in lieu of foreclosure
agreement. The Fund owns a 98.6% general partner interest in the Venture while
Legend holds the remaining 1.4% interest as a limited partner. The Venture's
results are consolidated in the accompanying financial statements.

From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu and various
citizen groups. The City initiated two separate legal actions intended to
preclude the issuance of a Coastal Development Permit, both of which were
ultimately resolved in favor of the Venture.

Concurrent with the aforementioned litigation, the Venture pursued
entitlements before the Board of Supervisors for the County of Los Angeles. In
September 1995, the Los Angeles County Regional Planning Commission, by a 3 to 2
vote, approved a revised plan to develop a fifty-one unit housing community on
the Rancho Malibu property. The Los Angeles County Regional Planning
Commission's approval was appealed to the Los Angeles County Board of
Supervisors. On May 14, 1996, the Los Angeles County Board of Supervisors
approved a compromise project (the "Project") to create forty-six single family
lots. These approvals are specified in Los Angeles County CUP No. 91-315(3), Oak
Tree Permit No. 91-315(3) and Tentative Tract No. 46277 (revised), approved May
14, 1996. On June 17, 1996, a neighboring homeowners association filed an action
entitled La Chusa Highlands Property Owners Association, Inc. v. Los Angeles
County, et al., Los Angeles County Superior Court Case No. BS039789 (the "La
Chusa Litigation"), challenging the aforesaid approvals. The Fund, Legend and
the Venture are named as real parties in interest.

The La Chusa Litigation was tried before a Court on January 27, 1997. On
February 5, 1997, the Court issued its ruling, granting the Petitioner's Writ
and remanding the matter to the County Board of Supervisors for further action
on three separate grounds: (i) the Supervisors' analyses and findings relating
to the consistency of the Projects' cul de sacs and streets within certain
County of Los Angeles Code provisions restricting the length of cul de sacs to
1,000 feet were deemed inadequate; (2) a proposed deed restriction requiring the
Venture to "diligently seek" approval for a second living unit on five of the
forty-six lots was held to be too abstract to comply with the low income housing
requirement of state law and (3) the Court found that the County acted
improperly when it approved the Project in January of 1996 and later approved a
Supplemental Environmental Impact Report ("SEIR") in May of 1996.

The Court's order specifically rejected challenges to the Project's
entitlements predicated on: (i) the adequacy of the Supervisors' analyses of the
environmental impacts of the Project under the SEIR; (ii) the consistency of the
Project with the County General Plan; (iii) the approval of a

8
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements
(Continued)

sewage treatment plant and (iv) the density of the Project under the Hillside
Management Ordinance.

The Court entered a final judgment in the La Chusa Litigation on March 25,
1997. The Venture filed a notice of appeal of this judgment on April 25, 1997
and also intends to seek further action by the Supervisors to address the three
issues specified by the Court in order to reinstate the entitlements set aside
by the Court. The Venture expects to be heard at the Supervisors' meeting
scheduled for September 23, 1997, but has yet to receive confirmation of its
place on the Agenda.

On April 29, 1997, counsel for La Chusa Highlands Property Owners
Association, Inc. presented a petition for an award of attorney's fees in
connection with the Court's judgment of March 25, 1997. The Court heard argument
on the petition and on April 30, 1997 awarded the petitioner's counsel the sum
of $126,711 in attorney's fees and related costs. An appeal of this order has
been incorporated into the Fund's appeal of the March 25, 1997 judgment
discussed above. The Fund's initial brief is due on October 9, 1997.

In an earlier action, the Venture challenged the General Plan and the
Environmental Impact Report adopted by the City of Malibu on Nov. 20, 1995 in a
lawsuit entitled BMIF/BSLFII Rancho Malibu Limited Partnership v. City of
Malibu, Los Angeles County Superior Court Case No. SS006374. On July 31, 1996,
the Venture and the City of Malibu executed and delivered a settlement agreement
which, among other things, resulted in a dismissal of the lawsuit challenging
the City's General Plan and which precludes the City from challenging the
Venture's entitlements before any public body (in the absence of a significant
requested change). The City is also precluded by the settlement agreement from
participating in the La Chusa Litigation.

During the six months ended June 30, 1997, the Venture incurred
approximately $329,000 in costs in connection with Rancho Malibu relating to
entitlement activities, holding costs and litigation. These costs, treated as
capital contributions to the Venture by the Fund, were included in total
expenses from property operating activities on the Fund's consolidated
statements of income and expenses. As of June 30, 1997 and December 31, 1996,
the Fund's carrying value of the property was $9,961,991.

3. Transaction with Affiliates

Administrative costs, primarily salaries and general and administrative
expenses, were incurred on the Fund's behalf by Banyan Management Corp. ("BMC")
and were reimbursed at cost by the Fund. These costs were allocated to the Fund
and other entities to which BMC provides administrative services based upon the
actual number of hours spent by BMC personnel on matters related to that
particular entity in relation to total BMC personnel hours. The Fund's allocable
share of costs for the six months ended June 30, 1997 and 1996 aggregated
$90,835 and $185,245, respectively. As one of its administrative services, BMC
served as the paying agent for general and administrative costs of the Fund. As
part of providing this payment service, BMC maintained a bank account on behalf
of the Fund. At June 30, 1997, the Fund had a net receivable due from

9
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements
(Continued)

BMC of $18,662. The net receivable is included in other assets in the Fund's
Consolidated Balance Sheet. See also Note 6 - Exchange Agreement.

4. Disposition of Investment in Real Estate Venture

On October 22, 1990, the Fund acquired title to the property known as the H
Street Assemblage located in Washington, D.C. pursuant to an agreement with
Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Fund and BSRT
formed a joint venture (the "Venture") to pursue its development rights. The
Fund has a 47% interest in the Venture while BSRT owns the remaining 53%. This
property consisted of 36,100 square feet of undeveloped land in downtown
Washington, D.C. plus an approximately 55,900 square foot office building. The
entire property is zoned for office development.

On March 20, 1997, the Venture sold approximately 3,500 square feet of the
Venture's land to the United States General Services Administration on behalf of
the United States of America ("GSA") for a purchase price of $1,680,000. GSA
also paid the Venture $150,000 as a reimbursement of expenses that the Venture
incurred in anticipation of this transaction. The Venture received net sales
proceeds of approximately $1,827,000 of which approximately $859,000 was the
Fund's share. The Fund recognized no gain or loss on the sale. The Venture has
obtained all approvals from various governmental agencies for the modifications
necessary to the existing approved design for the proposed building on the
Venture's remaining property that had been necessitated by this sale.

On July 29, 1997, the H Street Venture sold the remaining land and office
building to an unaffiliated third party for $9 million. The Fund received net
sale proceeds of approximately $3,981,000 and will recognize a gain on
disposition of approximately $168,000 in the third quarter of 1997. As of July
29, 1997, the Venture had no further ownership interest in the H Street
Assemblage property.

5. Litigation

On June 16, 1994, Coastal Group, Inc. brought an action against Westholme
Partners, (an entity in which the Fund has a limited partnership interest), Bank
of America (f/k/a Continental Bank, N.A.) ("CINB"), BMC Westholme Corp., (a
wholly owned subsidiary of the Fund); the Anden Group ("Anden"), William A.
Brandt, Jr. and Kent Kneblekamp in the New Jersey Superior Court, Middlesex
County. The case was subsequently removed to the United States District Court
for the District of New Jersey and assigned case # 94-3010. The case involves a
real estate development project located in New Jersey known as "Winding River."

BMC Westholme Corp. was served with Summons and Complaint in June of 1994,
but was not actively involved in the various motions and other procedural
matters which extended for approximately thirty months. On February 10, 1997,
BMC Westholme Corp. filed its Answer and began to take a more active role in the
case.

10
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements
(Continued)

The plaintiff's complaint has been substantially reduced by favorable
rulings, entered October 3, 1996, on various motions to dismiss whereby ten of
plaintiff's sixteen counts were dismissed and another count was limited in
scope. The complaint now alleges breach of contract, unjust enrichment, breach
of the implied covenant of good faith and fair dealing and fraudulent transfer
and also seeks relief under a theory of promissory estoppel and requests the
creation of a constructive trust for the benefit of plaintiff.

The case arises from a failed development and a subsequent foreclosure
filed by defendant CINB. The plaintiff contends, among other things, that CINB
and BMC Westholme Corp. conspired with Anden to deprive the plaintiff of its
interest in the Winding River project, damaging plaintiff's reputation as a
homebuilder and causing it to lose business opportunities. The amount in
controversy exceeds $6 million, although the Fund believes that if there is any
liability to the plaintiffs in this matter, it rests with defendants other than
BMC Westholme Corp. The case remains in the discovery phase. A significant
amount of discovery, including depositions and document production, was
concluded during the second quarter and in July 1997. A pre-trial order has been
submitted by all parties. Factual discovery is now completed; expert depositions
are anticipated in August 1997 and the case is expected to be tried in the
fourth quarter of 1997.

The ultimate outcome of this matter cannot be determined at this time.
However, in the opinion of management of the Fund, the eventual outcome of this
matter will not have a material adverse effect on the financial position of the
Fund. The financial statements do not include any adjustments for liability, if
any, arising from this matter.

6. Exchange Agreement

The Fund executed and delivered an Exchange Agreement dated as of April 30,
1997 (as amended as of August 7, 1997, the "Agreement") among the Fund, Equis
Exchange L.L.C., a Massachusetts limited liability company ("Equis"), Equis
Financial Group Limited Partnership ("EFG") and certain partnerships affiliated
with EFG ("the Partnerships"). Pursuant to the Agreement, on April 30, 1997, the
Fund issued to the Partnerships 1,987,000 shares of the Fund's common stock at
the price of $1.50 per share. Cash proceeds received by the Fund, $2,655,500,
were net of related costs of $325,000. The 1,987,000 shares are included in the
total shares outstanding of the Fund when calculating Net Loss Per Share of
Common Stock Based on the Weighted Average Number of Shares Outstanding. In
addition, the Partnerships made a three-year loan (the "Loan") to the Fund in
the amount of approximately $4.4 million. These transactions are expected to
provide capital to assist the Fund in a new growth-oriented business plan, which
includes the development of the Fund's Rancho Malibu property.

The Loan was initially disbursed into a segregated account, the proceeds of
which were not immediately available to the Fund. The interest rate on the Loan
is equal to the interest rate earned on the proceeds of the Loan so long as they
remain in the segregated account. If the shareholder consent (discussed below)
is obtained, the Loan will be disbursed to the Fund, the interest rate will
change to 10% per annum, the term will be fixed at three years and mandatory
principal reductions will be required, if and to the extent net proceeds are
received from the sale or refinancing of the

11
<PAGE>

BANYAN STRATEGIC LAND FUND II
Notes to Consolidated Financial Statements
(Continued)

Rancho Malibu property. If the consent is not obtained by December 31, 1997, the
Loan will be accelerated and repaid by liquidating the segregated account.

The Agreement further provides that the Fund will solicit its shareholders
for proxies in connection with proposed changes in the Fund's Articles of
Incorporation and By-laws. Among the changes requested will be: (i) the election
of a new Board of Directors nominated by EFG for terms of up to 3 years and an
increase in size of the Board to as many as nine members, provided a majority of
the Board shall consist of members independent of the Fund, EFG or any
affiliate; (ii) an amendment extending the Fund's life to perpetual and changing
its name; (iii) an amendment designed to restrict or deter, to the extent
legally permissible, the acquisition of more than 4.9% of the common stock of
the Fund by any person in such a manner as would cause such person to become a
5% shareholder within the meaning of Section 382 (g) of the Internal Revenue
Code; and (iv) any other amendment reasonably requested by EFG. If the aforesaid
consent of the shareholders is obtained by December 31, 1997, the Fund intends
to declare a one-time cash distribution to its shareholders of $0.20 per share.

Pursuant to the Agreement, the Administrative Services Agreement between
the Fund and BMC was amended to provide, among other things, for the immediate
payment to BMC of the termination fee required thereby in the amount of $251,823
and the transfer to BMC's designee of the Fund's ownership interest in BMC.
Pursuant to the Agreement, the Fund also entered into a new Administrative
Services Agreement with EFG.

As a result of these transactions, Mr. Gary D. Engle, a principal of EFG,
was added to the Fund's Board of Directors and Mr. James A. Coyne, also a
principal of EFG, was named Chief Operating Officer of the Fund.

7. Stock Options

On May 8, 1997, the Fund retired 68,500 options to purchase shares of the
Fund's common stock at a price of $0.20 per share or $13,700. The options were
originally granted from 1994 to 1996 to certain members of management pursuant
to the 1994 Executive and Directors Stock Option Plan at a weighted average
price of $1.30 per share.

12
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition
or Plan of Operation

General

The Fund was originally established to invest primarily in short-term,
junior, predevelopment and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Fund. As a result of these defaults, the Fund suspended the making of new
loans, except for advances of additional funds under circumstances in which it
is deemed necessary to preserve the value of existing collateral, including
instances where the Fund has foreclosed upon or taken title, directly or
indirectly, to the collateral. The Fund also suspended distributions to
stockholders. In 1990, the Fund implemented a plan designed to preserve its
assets and manage its properties acquired through foreclosure or otherwise until
they would be disposed of in an orderly manner. On February 25, 1997, the
Directors of the Fund authorized management to engage an investment banking firm
for purposes of evaluating strategic alternatives for maximizing shareholder
value. The Fund executed and delivered an Exchange Agreement dated as of April
30, 1997 (as amended as of August 7, 1997, the "Agreement") among the Fund,
Equis Exchange L.L.C., a Massachusetts limited liability company ("Equis"),
Equis Financial Group Limited Partnership ("EFG") and certain partnerships
affiliated with EFG ("the Partnerships"). Pursuant to the Agreement, the Fund
issued to the Partnerships 1,987,000 shares of the Fund's common stock at the
price of $1.50 per share. Cash proceeds received by the Fund, $2,655,500, were
net of related costs of $325,000. In addition, the Partnerships made a
three-year loan to the Fund in the amount of approximately $4.4 million. These
transactions are expected to provide capital to assist the Fund in a new
growth-oriented business plan, which includes the development of the Fund's
Rancho Malibu property. See Note 6 to the financial statements for additional
discussion.

Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Discussions containing forward-looking
statements may be found in this section. Without limiting the foregoing, words
such as "anticipates", "expects", "intends", "plans" and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties including the Fund's ability to successfully
implement a new growth-oriented business plan and favorably resolve the
litigations (discussed below). Actual results could differ materially from those
projected in the forward-looking statements. The Fund undertakes no obligation
to update these forward-looking statements to reflect future events or
circumstances.

The Fund currently holds an ownership interest in a 274-acre land parcel
located in Southern California known as the Rancho Malibu property. In addition,
at June 30, 1997, the Fund owned a 47% partnership interest in the H Street
Venture which held title to an approximately 55,900 square foot office building
and an adjacent land parcel containing 32,600 square feet located in Washington
D.C. (see discussion of subsequent sale below). The Fund's current loan
portfolio consists of the Northholme Partners, Hemet IV and Lindfield Tract A
loans.

13
<PAGE>

Liquidity and Capital Resources

Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at June 30, 1997 and December 31, 1996
was $3,076,373 and $145,335, respectively. This increase in total cash and cash
equivalents of $2,931,038 is the result of cash generated through investing and
financing activities of $1,499,213 and $2,655,500, respectively, offset by
$1,223,675 cash used for operating activities.

Cash Flow From Operating Activities: Net cash used in operating activities
increased by approximately $81,000 for the six months ended June 30, 1997 to
approximately $1,224,000 from approximately $1,143,000 for the same period in
1996.

Cash Flow From Investing Activities: For the six months ended June 30,
1997, net cash provided by investing activities was approximately $1,499,000
compared to approximately $883,000 for the same period in 1996. This increase of
approximately $616,000 is due primarily to proceeds from the sale of investment
in real estate venture of approximately $859,000 (see below) and proceeds from
the sale of foreclosed real estate of approximately $617,000 (see below) during
the six months ended June 30, 1997 compared to approximately $272,000 of
proceeds received from the disposition of Westholme assets during the same
period in 1996. In addition, in 1996 the Fund received proceeds from sale of
investment securities of approximately $310,000 and principal payments on
investment securities of approximately $317,000.

On March 20, 1997, the H Street Venture sold approximately 3,500 square
feet of the H Street Venture's land to the United States General Services
Administration on behalf of the United States of America ("GSA") for a purchase
price of $1,680,000. GSA also paid the H Street Venture $150,000 as a
reimbursement of expenses that the H Street Venture incurred in anticipation of
this transaction. The H Street Venture received net sales proceeds of
approximately $1,827,000, of which approximately $859,000 is the Fund's share.
The Fund recognized no gain or loss on this sale. The H Street Venture has
obtained all required approvals from various governmental agencies for the
modifications necessary to the existing approved design for the proposed
building on the H Street Venture's remaining property that had been necessitated
by this sale. See Note 4 to the financial statements regarding the sale of the H
Street Venture's remaining property subsequent to June 30, 1997.

On June 23, 1997, the Fund sold the Lindfield Tract D property to an
unaffiliated third party for a purchase price of $675,000. Cash proceeds
received, $617,388, were net of transaction costs (see Results of Operations).

Cash Flow From Financing Activities: During the six months ended June 30,
1997, net cash provided by financing activities was $2,655,500 resulting from
the issuance of stock. The Fund executed and delivered an Exchange Agreement
dated as of April 30, 1997 (as amended as of August 7, 1997, the "Agreement")
among the Fund, Equis Exchange L.L.C., a Massachusetts limited liability company
("Equis"), Equis Financial Group Limited Partnership ("EFG") and certain
partnerships affiliated with EFG ("the Partnerships"). Pursuant to the
Agreement, the Fund issued to the Partnerships 1,987,000 shares of the Fund's
common stock at the price of $1.50 per share. The proceeds to the Fund were net
of transaction costs of $325,000. In addition, the Partnerships made a
three-year loan to the Fund in the amount of approximately $4.4 million.

14
<PAGE>

These transactions are expected to provide capital to assist the Fund in a new
growth-oriented business plan, which includes the development of the Fund's
Rancho Malibu property.

The Loan was initially disbursed into a segregated account, the proceeds of
which were not immediately available to the Fund. The interest rate on the Loan
is equal to the interest rate earned on the proceeds of the Loan so long as they
remain in the segregated account. If the shareholder consent (discussed below)
is obtained, the loan will be disbursed to the Fund, the interest rate will
change to 10% per annum, the term will be fixed at three years and mandatory
principal reductions will be required, if and to the extent net proceeds are
received from the sale or refinancing of the Rancho Malibu property. If the
consent is not obtained by December 31, 1997, the Loan will be accelerated and
repaid by liquidating the segregated account.

The Fund's future liquidity needs are dependent upon, among other things:
(i) the level of liquidity required to successfully implement a new
growth-oriented business plan (ii) the Fund's ability to favorably resolve the
La Chusa Litigation which impacts the Rancho Malibu property; and (iii) the
Fund's ability to control its property level and Fund level operating expenses.

15
<PAGE>

As of June 30, 1997 and December 31, 1996, the Fund's mortgage loan
portfolio consisted of three loans with a carrying value totaling $1,035,000.
During the six months ended June 30, 1997, the Fund received interest payments
of $10,000 on the Lindfield Tract A purchase money mortgage note. For the six
months ended June 30, 1997 and 1996, the Fund accrued interest on these loans
totaling approximately $24,700 and $30,800, respectively.

Results of Operations

Total income from lending and investing activities for the six months ended
June 30, 1997 increased to $44,105 from $32,896 for the six months ended June
30, 1996. This increase is due primarily to an increase in income earned on
investments. The increase in income on investments was due to an increase in
cash available for investment resulting primarily from the stock issuance.

Total expenses for the six months ended June 30, 1997 decreased to
$1,184,211 from $1,214,260 for the six months ended June 30, 1996. This decrease
of $30,049 for the six months ended June 30, 1997 when compared to the same
period in 1996 is due to a decrease of $274,968 in total expenses from property
operating activities offset by an increase of $244,919 in total other expenses.
The decrease in total property operating expenses is due primarily to a decrease
in net loss from operations of foreclosed real estate held for sale. The
decrease in the net loss from operations of foreclosed real estate held for sale
is due to a reduction in legal and entitlement costs relating to the Rancho
Malibu property subsequent to the approval of the project by the Los Angeles
County Board of Supervisors as discussed below. Further contributing to the
decrease in total property operating expenses is the recognition of net income
from operations of real estate venture of $45,033, relating to the Fund's
interest in the H Street property, for the six months ended June 30, 1997 as
compared to a net loss of $86,031 for the same period in 1996. See discussion
below for further details regarding the operating results and sale of the H
Street property. Partially offsetting the decrease in total property operating
expenses was the recognition of a net loss of $32,612 from disposition of the
foreclosed real estate held for sale during the six months ended June 30, 1997,
compared to a net gain of $31,091 during the same period in 1996 (see discussion
below). The increase in total other expenses is due primarily to increases in
general and administrative expenses and other professional fees. The increase in
general and administrative expenses reflects a termination fee of $251,823 paid
to BMC in connection with the Exchange Agreement (see Note 6 to the financial
statements) offset by a reduction in recurring expenses of BMC resulting from a
reduction in time spent by BMC personnel on Fund related matters. Other
professional fees increased due primarily to legal costs related to the
Westholme litigation as discussed below and costs incurred to engage an
investment banking firm for purposes of evaluating strategic alternatives for
maximizing shareholder value.

During the six months ended June 30, 1997, the Fund recorded net income of
$45,033 from the operations of a real estate venture as compared to a net loss
of $86,031 for the same period in 1996. This net income (loss) reflects the
Fund's 47% interest in the H Street Venture. The H Street Venture owned an
office building with approximately 55,900 square feet of gross leasable area
(the "Victor Building") and an adjacent land parcel consisting of 36,100 square
feet (the "H Street Assemblage") located in Washington, D.C. On March 20, 1997,
the H Street Venture sold approximately 3,500 square feet of the H Street
Venture's land to the United States General Services Administration on behalf of
the United States of America ("GSA") for a purchase price of $1,680,000. GSA
also paid the H Street Venture $150,000 as a reimbursement of expenses that the

16
<PAGE>

H Street Venture incurred in anticipation of this transaction. The H Street
Venture received net sales proceeds of approximately $1,827,000, of which
approximately $859,000 was the Fund's share. The Fund recognized no gain or loss
on this sale. The H Street Venture obtained all required approvals from various
governmental agencies for the modifications necessary to the existing approved
design for the proposed building on the H Street Venture's remaining property
that had been necessitated by this sale. On July 29, 1997, the H Street Venture
sold the remaining land and the Victor Building to an unaffiliated third party
for $9 million. The Fund received net sale proceeds of approximately $3,981,000
and will recognize a gain on disposition of approximately $168,000 in the third
quarter of 1997. As of July 29, 1997, the Venture had no further ownership
interest in the H Street Assemblage property.

On June 23, 1997, the Fund sold the Lindfield Tract D property, having a
carrying value of $650,000, to an unaffiliated third party for a purchase price
of $675,000. Cash proceeds received, net of transaction costs, were $617,388
resulting in a loss on disposition of $32,612 for financial reporting purposes.
During the six months ended June 30, 1996, the Fund recognized a net gain from
the disposition of its interest in the Hemet Phase III property of $31,091.

The above discussed changes resulted in a decrease in the net loss for the
six months ended June 30, 1997 to $1,140,106 ($0.11 per share) from $1,181,364
($0.12 per share) for the six months ended June 30, 1996. On April 30, 1997, the
Fund issued 1,987,000 shares of stock. As a result, the net loss per share for
the six months ended June 30, 1997 is based on the weighted average number of
shares outstanding during the period of 10,617,051 as compared to 9,936,421 for
the same period in 1996.

Total income from lending and investing activities for the three months
ended June 30, 1997 increased to $23,967 from $18,946 for the three months ended
June 30, 1996. This increase is due primarily to an increase in income earned on
investments. The increase in income on investments was due to an increase in
cash available for investment resulting primarily from the stock issuance.

Total expenses for the three months ended June 30, 1997 increased to
$786,779 from $559,683 for the three months ended June 30, 1996. This increase
of $227,096 for the three months ended June 30, 1997 when compared to the same
period in 1996 is primarily due to an increase of $226,243 in total other
expenses. The increase in total other expenses is due primarily to increases in
general and administrative expenses and other professional fees. The increase in
general and administrative expenses reflects a termination fee of $251,823 paid
to BMC in connection with the Exchange Agreement (see Note 6 to the financial
statements) offset by a reduction in recurring expenses of BMC resulting from a
reduction in time spent by BMC personnel on Fund related matters. Other
professional fees increased due primarily to legal costs related to the
Westholme litigation as discussed below and costs incurred to engage an
investment banking firm for purposes of evaluating strategic alternatives for
maximizing shareholder value. The increase in total property operating expenses
reflects the recognition of a net loss of $32,612 from disposition of foreclosed
real estate held for sale during the three months ended June 30, 1997 as
compared to a net gain of $31,091 during the same period in 1996 (see discussion
above). In addition, the increase in total property operating expenses reflects
an increase in net loss from operations of foreclosed real estate held for sale.
The increase in the net loss from operations of foreclosed real estate held for
sale is due to the accrual of legal costs awarded to the plaintiff by the Court
on April 30, 1997 relating to the Rancho Malibu property (see Note 2 to the
financial statements). Partially offsetting the

17
<PAGE>

increase in property operating expenses is the recognition of net income of
$18,108 from operations of real estate venture relating to the Fund's interest
in the H Street property for the three months ended June 30, 1997 as compared to
a net loss of $52,060 for the same period in 1996. See discussion above for
further details regarding the operating results and sale of the H Street
property.

The above discussed changes resulted in an increase in the net loss for the
three months ended June 30, 1997 to $762,812 ($0.07 per share) from $540,737
($0.05 per share) for the three months ended June 30, 1996. On April 30, 1997,
the Fund issued 1,987,000 shares of stock. As a result, the net loss per share
for the three months ended June 30, 1997 is based on the weighted average number
of shares outstanding during the period of 11,290,201 as compared to 9,936,421
for the same period in 1996.

On a quarterly basis, management reviews the mortgage loans in the Fund's
portfolio and records appropriate loss provisions. The provisions are based upon
a number of factors, including management's analyses of the value of the
collateral and, in certain cases, ongoing negotiations regarding disposition of
this collateral, as well as consideration of the general business conditions
affecting the Fund's portfolio. Management also reviews the investment
properties held by the Fund on a quarterly basis and, when it has been
determined that a permanent impairment in the value of a given property has
occurred, the carrying value of the property is then written down to its fair
market value. Management has determined that no reductions are necessary for the
three and six months ended June 30, 1997.

Litigation

18
<PAGE>

The Court's order specifically rejected challenges to the entitlements
predicated on: (i) the adequacy of the Supervisors' analyses of the
environmental impacts of the Project under the SEIR; (ii) the consistency of the
Project with the County General Plan; (iii) the approval of a sewage treatment
plant and (iv) the density of the Project under the Hillside Management
Ordinance.

During the six months ended June 30, 1997, the Venture incurred
approximately $329,000 on Rancho Malibu relating to entitlement activities,
holding costs and litigation. These costs, treated as capital contributions to
the Venture by the Fund, were included in total expenses from property operating
activities on the Fund's consolidated statements of income and expenses. As of
June 30, 1997 and December 31, 1996, the Fund's carrying value of the property
was $9,961,991.

19
<PAGE>

Court, Middlesex County. The case was subsequently removed to the United States
District Court for the District of New Jersey and assigned case # 94-3010. The
case involves a real estate development project located in New Jersey known as
"Winding River."

The plaintiff's complaint has been substantially reduced by favorable
rulings, entered October 3, 1996, on various motions to dismiss whereby ten of
plaintiff's sixteen counts were dismissed and another count was limited in
scope. The complaint now alleges breach of contract, unjust enrichment, breach
of the implied covenant of good faith and fair dealing, fraudulent transfer and
also seeks relief under a theory of promissory estoppel and requests the
creation of a constructive trust for the benefit of plaintiff.

The case arises from a failed development and a subsequent foreclosure
filed by defendant CINB. The plaintiff contends, among other things, that CINB
and BMC Westholme conspired with Anden to deprive the plaintiff of its interest
in the Winding River project, damaging plaintiff's reputation as a homebuilder
and causing it to lose business opportunities. The amount in controversy exceeds
$6 million, although the Fund believes that if there is any liability to the
plaintiffs in this matter, it rests with defendants other than BMC Westholme
Corp. The case remains in the discovery phase. A significant amount of
discovery, including depositions and document production, was concluded during
the second quarter and in July of 1997. A pre-trial order has been submitted by
all parties. Fact discovery is now completed; expert depositions are anticipated
in August of 1997 and the case is expected to be tried in the fourth quarter of
1997.

The ultimate outcome of this matter cannot be determined at this time,
however, in the opinion of management of the Fund, the eventual outcome of this
matter will not have a material adverse effect on the financial position of the
Fund. The financial statements do not include any adjustments for liability, if
any, arising from this matter.

20
<PAGE>

PART II - OTHER INFORMATION

Item 2. Changes in Securities

Item 6. Exhibits and Reports on Form 8-K

(a) The following document is filed as part of this Report:

Exhibit
Number Description
------ -----------

(10) Material Contracts

(i) Third Amended and Restated Employment
Agreement for Leonard G. Levine dated May 1, 1997

(ii) Amendment No. 1 to Exchange Agreement dated
August 7, 1997

The following exhibits are incorporated by reference from the Fund's
Quarterly Report on Form 10-QSB for the period ended March 31, 1997:

Exhibit
Number Description
------ -----------

(10) Material Contracts

(i) Exchange Agreement dated as of April 30, 1997
by and among AFG Hato Arrow Limited Partnership,
AFG Dove Arrow Limited Partnership, AIP/Larkfield
Limited Partnership, Equis Exchange LLC, Equis
Financial Group Limited Partnership and the
Registrant and related exhibits.

The following exhibits are incorporated by reference from the Fund's
Annual Report on Form 10-KSB for the year ended December 31, 1996:

21
<PAGE>

Exhibit
Number Description
------ -----------

(10) Material Contracts

(iii) Directors Stock Option Agreement dated July
15, 1994

(iv) Executive Stock Option Agreements dated July
1, 1994, July 11, 1995 and April 16, 1996

(21) Subsidiaries of the Fund

The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (file number
33-13585), referencing the exhibit number used in such Registration
Statement.

Exhibit
Number Description
------ -----------

(3)(a) Certificate of Incorporation

(3)(b) By-Laws

(b) No Reports on Form 8-K were filed during the quarter ended June 30,
1997.

22
<PAGE>

SIGNATURES

PURSUANT to the requirements of the Exchange Act, the Issuer has duly
caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.

BANYAN STRATEGIC LAND FUND II

By: /s/ Leonard G. Levine Date: August 14, 1997
Leonard G. Levine, President

By: /s/ Joel L. Teglia Date: August 14, 1997
Joel L. Teglia, Vice President and
Chief Financial Officer

EXHIBIT 10(i)
THIRD AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

This THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is made
and entered into as of May 1, 1997 by and between LEONARD G. LEVINE (the
"Executive) and BANYAN STRATEGIC LAND FUND II (the "Fund").

R E C I T A L S:

A. The parties have previously entered into a Second Amended and Restated
Employment Agreement made as of December 31, 1992 by and between the parties
hereto, as amended by a First Amendment dated as of December 31, 1992 (as
amended, the "Original Agreement")

B. The parties desire to amend and restate the Original Agreement in its
entirety.

C. The Fund desires to continue to employ the Executive and the Executive
desires to accept such continued employment on the terms set forth in this
Agreement.

NOW THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Fund and the
Executive do hereby agree to amend and restate in its entirety the Original
Agreement.

1. Employment and Duties. On the terms and subject to the conditions set forth
in this Agreement, the Fund agrees to employ the Executive as the chief
executive officer of the Fund to perform such duties as are consistent with such
position as may be assigned, from time to time, by the Fund's Board of Directors
("Board of Directors"). The Executive agrees to accept appointment as President
of the Fund.

2. Performance. The Executive accepts the employment described in Section 1 of
this Agreement and agrees to faithfully and diligently perform the services
described therein.

3. Term. The term of employment under this Agreement shall commence on May 1,
1997 (the "Commencement Date") and shall remain in effect for a period of one
month, ending on June 1, 1997 (the "Employment Period") unless sooner terminated
hereunder. The Employment Period thereafter shall be automatically renewed for
successive one (1) month periods unless this Agreement is terminated by either
the Executive or the Fund by giving written notice of termination on or before
thirty days preceding the effective date of the termination of the Employment
Period.

4. Salary. For the services to be rendered by the Executive hereunder, the Fund
shall pay the Executive an annual base salary of $111,926 subject to the CPI
Adjustment described below ("Salary"). The Salary shall be payable in the manner
and frequency in which the payroll of Banyan Management Corp. is customarily
handled. The Salary shall be subject to annual increases (but no decreases) due
to cost of living ("CPI Adjustment") as follows: the Salary shall be increased
effective January 1 of each year beginning 1998 by multiplying the Salary for
the year just ended by a fraction the numerator of which is the Index (as
defined below) for November of the year just ended and the denominator of which
is the Index for November of the immediately prior year. For purposes of this
Agreement, the term "Index" shall mean the Chicago All Items Consumer Price
Index--All Urban Consumers (1982-84 base) as released by the U.S. Bureau of
Labor Statistics.

5. Bonus. During the Employment Period, the Board of Directors may, in its sole
discretion, pay a bonus to the Executive in consideration of the Executive's
performance of his duties and the Fund's profitability. The Fund shall not be
obligated to pay any bonus unless and until such bonus is declared by its Board
of Directors.

1
<PAGE>

6. Other Benefits. Except as otherwise specifically provided herein, during the
Employment Period, the Executive shall be eligible for all non-wage benefits
which either of the Fund or Banyan Management Corp. provide generally for their
other salaried employees, and in all cases shall continue to be entitled to and
shall receive the life insurance and disability benefits currently provided or
made available to the Executive. Upon termination of this Agreement, the Fund
shall, upon request by the Executive, assign and transfer to the Executive any
life insurance, health insurance and disability insurance policies covering the
Executive (to the extent assignable) in which the Fund has an interest provided
that any premiums accruing after the Termination Date shall be the sole
responsibility of Executive.

7. Business Expenses. The Fund shall reimburse the Executive for the reasonable,
ordinary, and necessary business expenses incurred by him in connection with the
performance of his duties hereunder, including, but not limited to, ordinary and
necessary travel expenses and entertainment expenses and cellular phone
expenses. The Executive shall provide the Fund with an accounting of his
expenses, which account shall clearly reflect which expenses are reimbursable by
the Fund. The Executive shall provide the Fund with such other supporting
documentation and other substantiation of reimbursable expenses as will conform
to Internal Revenue Service or other requirements. All such reimbursements shall
be payable by the Fund to the Executive within a reasonable time after receipt
by the Fund of appropriate documentation therefor.

8. Termination.

(a) Termination by the Executive. At any time from and after August
1, 1997, the Executive may terminate his employment by the Fund at any
time by written notice of termination given to the Fund and to First
American Title Insurance Company (the "Escrow Agent") at least thirty (30)
days in advance of the termination date stated in such notice (a
"Termination Date").

(b) Termination by the Fund. The Fund may terminate the Executive's
employment at any time with or without cause by written notice of
termination given to the Executive and to the Escrow Agent at least thirty
(30) days in advance of the termination date stated in such notice (a
"Termination Date").

(c) Termination Upon Death or Disability. The employment of the
Executive shall terminate upon the death of the Executive or at such time
as the Executive is permanently unable to perform fully his duties under
this Agreement by reason of illness, accident or other disability (as
confirmed by competent medical evidence) (each, a "Termination Date").

9. Severance Pay; Escrow.

(a) Termination Fee and Other Payments. In the event that the
Executive's employment is terminated for any reason pursuant to Section 8
of this Agreement, including without limitation the Executive's voluntary
termination effected in compliance with Section 8(a) above, the Executive
shall receive: (i) any Salary earned through the Termination Date; (ii) a
fee in the amount of $400,000 (the "Termination Fee"); and (iii) any
amounts, such as reimbursable business expenses, health insurance
reimbursements or other payments which are payable to the Executive or
have accrued for his benefit through the Termination Date.

(b) Escrow of Termination Fee. Simultaneously with the execution of
this Agreement, the Fund shall place an amount equal to the Termination
Fee into an escrow account pursuant to an Escrow Agreement mutually
agreeable between the Fund and the Executive (the "Escrow Agreement") in
the form attached as Exhibit A hereto.

10. Release.

(a) The Fund for itself, its agents, officers, directors,
shareholders, successors, and assigns, hereby remises, releases and
forever discharges the Executive, his heirs, executors and administrators,
as the case may be (all of whom shall be hereinafter collectively referred
to as the

2
<PAGE>

"Fund Releasee") of and from all manner of actions, causes, and causes of
action, suits, debts, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, controversies, agreements, promises, variances,
trespasses, damages, judgments, executions, claims and demands,
whatsoever, in law or in equity, whether mature, contingent, direct,
derivative, personal, assigned, discovered, undiscovered, subrogated or
otherwise, which the Fund ever had, now has or may hereafter have against
the Fund Releasee, for, upon, or by reason of any matter, cause or thing,
arising out of or relating to any act of the Fund Releasee or the Fund
Releasee's failure to act which occurred on or before May 1, 1997;
provided, however, that actions to enforce the terms of this Agreement and
the Fund Releasee's right to any indemnification provided by the Fund
under Section 12 of this Agreement or otherwise are expressly not included
within the terms or meaning of the foregoing release. This release is not
to be construed as an admission of liability on the part of the Fund
Releasee.

(b) The Executive for himself, his agents, officers, directors,
shareholders, successors, and assigns, hereby remises, releases and
forever discharges the Fund, its heirs, and its respective agents,
officers, directors, shareholders, successors, assigns, executors and
administrators, as the case may be (all of whom shall be hereinafter
collectively referred to as the "Executive Releasee") of and from all
manner of actions, causes, and causes of action, suits, debts, sums of
money, accounts, reckonings, bonds, bills, specialties, covenants,
controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, claims and demands, whatsoever, in law or in
equity, whether mature, contingent, direct, derivative, personal,
assigned, discovered, undiscovered, subrogated or otherwise, which the
Executive ever had, now has or may hereafter have against Executive
Releasee, for, upon, or by reason of any matter, cause or thing, arising
out of or relating to any act of Executive Releasee or Executive
Releasee's failure to act which occurred on or before May 1, 1997;
provided, however, that actions to enforce the terms of this Agreement are
expressly not included within the terms or meaning of the foregoing
release. This release is not to be construed as an admission of liability
on the part of the Executive Releasee.

(c) Disability or Death. In the event that the Executive's
employment is terminated under Section 8(c), the Executive, his heirs,
beneficiaries or personal representatives shall be entitled to receive the
payments described under Section 9(a) and shall also be entitled to any
disability benefits or life insurance proceeds to which Executive
otherwise would have been entitled under this Agreement.

11. Other Activities of the Executive. During the term of this Agreement, the
Executive shall not: (i) engage in any activity which may be adverse to the
Fund's business; (ii) appropriate or usurp Fund business opportunities; or (iii)
engage or invest in businesses or assets which compete directly or indirectly
with the Fund; provided however that the Fund acknowledges that the Executive
currently serves as President of Banyan Strategic Realty Trust ("BSRT"), and the
Executive shall not be deemed to have violated this Agreement as a result of any
actions he may take in furtherance of his duties to BSRT.

12. Indemnification. The Fund shall indemnify and hold harmless the Executive
from liabilities, which he may incur resulting from or arising out of any act
undertaken in connection with his duties on behalf of the Fund under this
Agreement in the same manner and to the same extent as the Fund indemnifies any
director or any other officer. The indemnification provided in this Section 12
shall survive the termination of this Agreement.

13. General Provisions.

(a) Notice. Any notice required or permitted hereunder shall be made
in writing (i) either by actual delivery of the notice into the hands of
the party thereunder entitled, (ii) by facsimile transmission, or (iii) by
the mailing of the notice in the United States mail, certified or
registered mail, return receipt requested, all postage prepaid and
addressed to the party to who the notice is to be given at the party's
respective address set forth below, or such other address as the parties
may from time to time designate by written notice as herein provided.

3
<PAGE>

As addressed to the Fund:

Banyan Strategic Land Fund II
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
Facsimile: 312-553-0450

With a copy to:

Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Michael J. Choate
Facsimile: 312-527-5921

As addressed to the Executive:

Leonard G. Levine
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
Facsimile: 312-553-0450

With a copy to:

Saitlin Patzik Frank & Samotny Ltd.
150 S. Wacker Drive
Suite 900
Chicago, Illinois 60606
Attention: Alan B. Patzik
Facsimile: 312-551-1101

As addressed to the Escrow Agent: in accordance with the terms of
the Escrow Agreement attached as Exhibit A hereto.

The notice shall be deemed to be received in case (i) on the date of
its actual receipt by the recipient, in case (ii) on the date the sender
receives a confirmation that the facsimile transmission was completed and
received by the recipient, and in case (iii) on the date of its mailing.

(b) Further Assurances. Each party agrees to execute and deliver
such additional instruments and documents, including without limitation
the Escrow Agreement, and to take all such other actions as any of the
other parties may reasonably request from time to time in order to effect
the provisions, purposes and intent of this Agreement.

(c) Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute
one and the same Agreement.

(d) Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.

(e) No Strict Construction. This Agreement has been mutually
negotiated and drafted by the parties and no presumption or rule of
contract construction or interpretation by or against a party

4
<PAGE>

shall be made on the basis of the party which might otherwise be charged
with drafting this Agreement.

(f) References. As used herein, all provisions shall include the
masculine, feminine, neuter, singular and plural thereof, wherever the
context and facts require such construction.

(g) Recitals. The recitals set forth in this Agreement are
incorporated by reference herein and made a part hereof, as if fully
rewritten.

(h) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Fund unless made in writing
and signed by an officer of the Fund duly authorized by the Board of
Directors or upon the Executive unless made in writing and signed by him.
The waiver by the Fund of the breach of any provision of this Agreement by
the Executive shall not operate or be construed as a waiver of any
subsequent breach by him.

(i) Entire Agreement. This Agreement constitutes the entire
Agreement between the parties with respect to the Executive's duties and
compensation as an executive of the Fund on or after May 1, 1997, and
there are no representations, warranties, agreements or commitments
between the parties hereto with respect to his employment except as set
forth herein. The Original Agreement shall continue to govern issues with
respect to the Executive's employment prior to May 1, 1997.

(j) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.

(k) Severability. If any provision of this Agreement shall, for any
reason, be held unenforceable, such provision shall be severed from this
Agreement unless, as a result of such severance, the Agreement fails to
reflect the basic intent of the parties. If the Agreement continues to
reflect the basic intent of the parties, then the invalidity of such
specific provisions shall not affect the enforceability of any other
provision herein, and the remaining provisions shall remain in full force
and effect.

(l) Assignment. The Executive may not under any circumstances
delegate any of his rights and obligations hereunder without first
obtaining the prior written consent of the Fund. This Agreement and all of
the Fund's rights and obligations hereunder may be assigned or transferred
by it, in whole or in part, to be binding upon and inure to the benefit of
any subsidiary or successor of the Fund.

(m) Costs of Enforcement. In the event of any suit or proceeding
seeking to enforce the terms, covenants, or conditions of this Agreement,
the prevailing party shall, in addition to all other remedies and relief
that may be available under this Agreement or applicable law, recover his
or its reasonable attorney's fees and costs as shall be determined and
awarded by the court.

IN WITNESS WHEREOF, this Agreement is entered into on the day and year
first above written.

BAYNAN STRATEGIC LAND FUND II

By:
--------------------------------------------
Robert G. Higgins, Vice President, Secretary
and General Counsel

EXECUTIVE:

------------------------------------------
Leonard G. Levine

5
<PAGE>

EXHIBIT 10(ii)

AMENDMENT NO. 1 TO EXCHANGE AGREEMENT

This Amendment No. 1 to Exchange Agreement (the "Amendment") is made and
entered into as of August 7, 1997 by and among Banyan Strategic Land Fund II, a
Delaware corporation, Equis Financial Group Limited Partnership, a Massachusetts
limited partners, Equis Exchange LLC, a Massachusetts limited liability company,
and AFG Hato Arrow Limited Partnership, AFG Dove Arrow Limited Partnership and
AIP/Larkfield Limited Partnership, each of which is a Massachusetts limited
partnership (all parties to this Amendment, collectively, "the Parties").

R E C I T A L S

A. The Parties entered into an Exchange Agreement (the "Agreement,"
capitalized terms used without definitions herein have the meanings given them
in the Agreement), dated April 30, 1997.

B. The Parties desire to amend certain dates found within the Agreement
and its exhibits.

NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:

1. Amendment of Section 4.10(d) of the Agreement. The second sentence
of Section 4.10(d) is deleted in its entirety and replaced by the following:

If the Stockholders' Consent is obtained by December 31, 1997,
Banyan shall declare and pay a distribution to its stockholders of $.20
per share out of legally available funds.

2. Amendment to Exhibit C to the Agreement. Paragraph a. of Exhibit C
to the Agreement is deleted in its entirety and replaced by the following:

a. The Stockholders' Consent, as that term is defined in Section 4.10
of the Exchange Agreement, shall not have been obtained on or before
December 31, 1997.

3. Amendment to Exhibit F to the Agreement. Paragraph a. of Exhibit F
to the Agreement is deleted in its entirety and replaced by the following:

a. The Stockholders' Consent, as that term is defined in Section 4.10
of the Exchange Agreement, shall not have been obtained by December
31, 1997.

4. Miscellaneous Provisions.

(a) 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.

(b) Further Assurances. Each party agrees to execute and deliver
such additional instruments and documents, including without limitation
allonges to the promissory notes executed in connection with the
Agreement, and to take all such other actions as any of the other parties
may reasonably request from time to time in order to effect the
provisions, purposes and intent of this Amendment.

(c) Entire Agreement; Effect on Other Agreements. This Amendment
constitutes the entire understanding of the Parties with respect to the
amendments to the Agreement described herein and may be modified only in
accordance with the provision of the Agreement governing amendments.

6
<PAGE>

Upon execution of this Amendment, all references in the Agreement and any
documents executed or delivered in connection therewith, including without
limitation any documents relating to the Agreement, shall be deemed to be
referenced to the Agreement as amended, supplemented or modified by this
Amendment.

(d) Severability. If any provision of this Amendment shall, for any
reason, be held unenforceable, such provision shall be severed from this
Amendment unless, as a result of such severance, this Amendment fails to
reflect the basic intent of the parties. If this Amendment continues to
reflect the basic intent of the parties, then the invalidity of such
specific provision shall not affect the enforceability of any other
provision herein, and the remaining provisions shall remain in full force
and effect.

(e) Counterparts; Effectiveness. This Amendment may be executed in
two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together shall
constitute one and the same Amendment. When this Amendment has been
executed by the Parties, it shall become effective as of the date and year
first written above.

(f) Headings. The descriptive headings of this Amendment are
inserted for convenience only and do not constitute a part of this
Amendment.

(g) No Strict Construction. This Amendment has been mutually
negotiated and drafted by the parties and no presumption or rule of
contract construction or interpretation by or against a party shall be
made on the basis of the party which might otherwise be charged with
drafting this Amendment.

(h) References. As used herein, all provisions shall include the
masculine, feminine, neuter, singular and plural thereof, wherever the
context and facts require such construction.

(i) Recitals. The recitals set forth in this Amendment are
incorporated by reference herein and made a part hereof, as if fully
rewritten.

IN WITNESS WHEREOF, this Amendment is entered into on the day and year
first written above.

BANYAN STRATEGIC LAND FUND II

By: /s/ Leonard G. Levine
---------------------------------------------------
Leonard G. Levine, President

EQUIS FINANCIAL GROUP LIMITED
PARTNERSHIP
By: Equis Corporation, its General Partner

By: /s/ James A. Coyne
---------------------------------------------------
James A. Coyne, Senior Vice President

AFG HATO ARROW LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated, its General Partner

By: /s/ James A. Coyne
---------------------------------------------------
James A. Coyne, Vice President

7
<PAGE>

AFG DOVE ARROW LIMITED PARTNERSHIP
By: AFG Leasing VI Incorporated, its General Partner

By: /s/ James A. Coyne
---------------------------------------------------
James A. Coyne, Vice President

AIP/LARKFIELD LIMITED PARTNERSHIP
By: AFG Leasing IV Inorporated, its General Partner

By: /s/ James A. Coyne
---------------------------------------------------
James A. Coyne, Vice President

EQUIS EXCHANGE LLC

By: /s/ James A. Coyne
---------------------------------------------------
James A. Coyne, Manager

"This schedule contains summary financial information extracted from Banyan
Strategic Land Fund II's Form 10QSB for the six months ended June 30, 1997 and
is qualified in its entirety by reference to such Form 10QSB."

</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,076,373
<SECURITIES> 0
<RECEIVABLES> 1,185,444
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,093,302
<PP&E> 13,426,064
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,684,181
<CURRENT-LIABILITIES> 285,025
<BONDS> 4,419,500
0
0
<COMMON> 17,979,656
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22,684,181
<SALES> 0
<TOTAL-REVENUES> 44,105
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,184,211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,140,106)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,140,106)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,140,106)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)

</TABLE>