<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 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 0-17556
Brauvin High Yield Fund L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3580153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
INDEX
Page
PART I Financial Information
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . 3
Consolidated Balance Sheets at March 31, 1996
and December 31, 1995. . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the
three months ended March 31, 1996 and 1995 . . . . . . . . . 5
Consolidated Statements of Partners' Capital for
the periods January 1, 1995 to March 31, 1996. . . . . . . . 6
Consolidated Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 16
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 21
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 21
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 21
Item 4. Submissions of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 21
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1995 Consolidated Balance Sheet, the
following Consolidated Balance Sheet as of March 31, 1996, Consolidated
Statements of Operations for the three months ended March 31, 1996 and
1995, Consolidated Statements of Partners' Capital for the periods
January 1, 1995 to March 31, 1996 and Consolidated Statements of Cash
Flows for the three months ended March 31, 1996 and 1995 for Brauvin
High Yield Fund L.P. II (the "Partnership") are unaudited and have not
been examined by independent public accountants but reflect, in the
opinion of the management, all adjustments necessary to present fairly
the information required. All such adjustments are of a normal
recurring nature.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Partnership's 1995 Annual Report on Form 10-K.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
ASSETS
Investment in real estate, at cost:
Land $11,126,124 $11,126,124
Buildings 24,825,040 24,825,040
35,951,164 35,951,164
Less: accumulated depreciation (4,815,906) (4,635,384)
Net investment in real estate 31,135,258 31,315,780
Cash and cash equivalents 1,367,182 1,374,779
Rent receivable 19,505 56,975
Deferred rent receivable 291,868 274,978
Due from General Partners (Note 4) 139,850 150,175
Other assets 32,076 34,321
Total Assets $32,985,739 $33,207,008
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 61,186 $ 61,759
Rent received in advance 39,506 58,344
Total Liabilities 100,692 120,103
MINORITY INTEREST IN
BRAUVIN HIGH YIELD VENTURE 33,365 33,746
MINORITY INTEREST IN
BRAUVIN FUNDS JOINT VENTURE 2,467,238 2,472,647
PARTNERS' CAPITAL:
General Partners 319,429 319,429
Limited Partners 30,065,015 30,261,083
Total Partners' Capital 30,384,444 30,580,512
Total Liabilities and
Partners' Capital $32,985,739 $33,207,008
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
1996 1995
INCOME:
Rental $1,040,396 $1,037,861
Interest 20,684 9,825
Other 154 2,283
Total income 1,061,234 1,049,969
EXPENSES:
General and administrative 98,520 32,151
Management fees (Note 3) 10,787 10,335
Amortization of other assets 1,382 1,082
Depreciation 180,522 183,319
Total expenses 291,211 226,887
Income before minority interests 770,023 823,082
MINORITY INTEREST'S SHARE OF NET INCOME:
Brauvin High Yield Venture (1,419) (1,414)
Brauvin Funds Joint Venture (72,991) (72,970)
Net income $ 695,613 $ 748,698
Net income allocated to the
Limited Partners $ 695,613 $ 748,698
Net income per Unit outstanding (a) $ 17.25 $ 18.75
(a) Net income per Unit was based on the average Units outstanding
during the period since they were of varying dollar amounts and
percentages based upon the dates Limited Partners were admitted to the
Partnership and additional Units were purchased through the distribution
reinvestment plan (the "Plan").
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the periods from January 1, 1995 to March 31, 1996
General Limited
Partners Partners* Total
Balance, January 1, 1995 $ 319,429 $30,417,672 $30,737,101
Contributions, net -- 446,338 446,338
Selling commissions and other
offering costs (Note 1) -- (60,173) (60,173)
Net income -- 3,039,738 3,039,738
Cash distributions -- (3,582,492) (3,582,492)
Balance, December 31, 1995 319,429 30,261,083 30,580,512
Contributions, net -- 30,965 30,965
Selling commissions and other
offering costs (Note 1) -- (15,203) (15,203)
Net income -- 695,613 695,613
Cash distributions -- (907,443) (907,443)
Balance, March 31, 1996 $ 319,429 $30,065,015 $30,384,444
* Total Units outstanding at March 31, 1996 and December 31, 1995 were
40,347 and 40,316, respectively. Cash distributions to Limited Partners
per Unit were $22.50 and $89.36 for the three months ended March 31,
1996 and the year ended December 31, 1995, respectively. Cash
distributions to Limited Partners 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 Limited Partners were
admitted to the Partnership and additional Units were purchased through
the Plan.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net income $ 695,613 $ 748,698
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 181,904 184,401
Minority interest's share of income
from Brauvin High Yield Venture 1,419 1,414
Minority interest's share of income
from Brauvin Funds Joint Venture 72,991 72,970
Decrease in rent receivable 37,470 26,804
Increase in deferred rent receivable (16,890) (16,890)
Increase in other assets (2,033) (3,289)
Decrease in accounts payable and accrued
expenses (573) (52,103)
Decrease in rent received in advance (18,838) (198,473)
Increase in due to affiliates -- 14,410
Net cash provided by operating activities 951,063 777,942
Cash flows from investing activities:
Cash distribution to minority interest-
Brauvin High Yield Venture (1,800) (1,150)
Cash distribution to minority interest-
Brauvin Funds Joint Venture (78,400) (80,850)
Net cash used in investing activities (80,200) (82,000)
Cash flows from financing activities:
Sale of Units, net of selling commissions
and other offering costs 18,658 103,143
Cash distributions to Limited Partners (907,443) (897,832)
Decrease (increase) in due from affiliates 10,325 (298)
Net cash used in financing activities (878,460) (794,987)
Net decrease in cash and cash equivalents (7,597) (99,045)
Cash and cash equivalents at
beginning of period 1,374,779 1,106,917
Cash and cash equivalents at end of period $1,367,182 $1,007,872
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BRAUVIN HIGH YIELD FUND L.P. II (the "Partnership") is a Delaware
limited partnership organized for the purpose of acquiring debt-free
ownership of existing, free-standing, income-producing retail, office or
industrial real estate properties predominantly all of which will
involve "triple-net" leases. The General Partners of the Partnership
are Brauvin Realty Advisors II, Inc., Jerome J. Brault, Cezar M.
Froelich and David M. Strosberg. Brauvin Realty Advisors II, Inc. is
owned primarily by Messrs. Brault (beneficially) (44%) and Froelich
(44%). Brauvin Securities, Inc., an affiliate of the General Partners,
is the selling agent of the Partnership.
The Partnership was formed on May 3, 1988 and filed a Registration
Statement on Form S-11 with the Securities and Exchange Commission which
became effective on June 17, 1988. The minimum of $1,200,000 of limited
partnership interests of the Partnership (the "Units") necessary for the
Partnership to commence operations was achieved on July 26, 1988. The
offering was anticipated to close on June 16, 1989 but was extended
until and closed on September 30, 1989. A total of $38,923,000 of Units
were subscribed for and issued between June 17, 1988 and September 30,
1989, pursuant to the Partnership's public offering. Through March 31,
1996 and December 31, 1995 the Partnership has sold $42,982,178 and
$42,837,384 of Units, respectively. These totals include $4,059,178 and
$3,914,384 of Units, respectively, purchased by Limited Partners who
utilized their distributions of Operating Cash Flow to purchase Units
through the distribution reinvestment plan (the "Plan"). Units valued
at $2,886,915 and $2,773,086 have been purchased by the Partnership from
Limited Partners liquidating their investment in the Partnership and
have been retired as of March 31, 1996 and December 31, 1995,
respectively. As of March 31, 1996, the Participants have acquired
Units under the Plan which approximate 9% of the total Units
outstanding.
The Partnership has acquired the land and buildings underlying 14
Ponderosa restaurants, two Taco Bell restaurants, three Children's World
Learning Centers, three Hardee's restaurants, three Avis Lube Oil Change
Centers, one Blockbuster Video store and three Chi-Chi's restaurants.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Also acquired were 99% and 51% equity interests in two joint ventures
with an affiliated entity, which ventures purchased the land and
buildings underlying six Ponderosa restaurants and a Scandinavian
HealthSpa, respectively. The Partnership's acquisition process is now
completed except to the extent funds raised through the Plan are
sufficient to purchase additional properties.
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.
Rental Income
Rental income is recognized on a straight line basis over the life of
the related leases. Differences between rental income earned and
amounts due per the respective lease agreements are credited or charged,
as applicable, to deferred rent receivable.
Consolidation of Joint Ventures
The Partnership owns a 99% equity interest in a joint venture, Brauvin
High Yield Venture, which owns six Ponderosa restaurants, and a 51%
equity interest in another joint venture, Brauvin Funds Joint Venture,
which owns a Scandinavian Health Spa. The accompanying financial
statements have consolidated 100% of the assets, liabilities, operations
and partners' capital of these ventures. All significant intercompany
accounts have been eliminated.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
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, net of an allowance for impairment.
Depreciation expense is computed on a straight-line basis over
approximately 35 years.
Prior to 1995, the Partnership provided an allowance for impairment to
reduce the cost basis of real estate to its estimated net realizable
value when the real estate was judged to have suffered an
impairment in value that is other than temporary. For purposes of this
analysis, the cost basis of real estate included deferred rent
receivable and accumulated depreciation. Net realizable value is
inherently subjective and is based on management's best estimate of
current conditions and assumptions about expected future conditions.
Estimated net realizable value was calculated based on undiscounted
estimated operating cash flows of the property over an expected holding
period, with a sales price at the end of the holding period calculated
by applying an expected capitalization rate to the stabilized net
operating income of the property, less associated sales costs.
In 1995 the Partnership adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets"
(SFAS 121). In conjunction with the adoption of SFAS 121, the
Partnership performed an analysis of its long-lived assets, and the
Partnership's management determined that there were no events or changes
in circumstances that indicated that the carrying amount of the assets
may not be recoverable at March 31, 1996 and December 31, 1995.
Accordingly, no impairment loss has been recorded in the accompanying
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
financial statements for the three months ended March 31, 1996 and the
year ended December 31, 1995.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt instruments
with an original maturity within three months of purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by
using available market information and appropriate valuation
methodologies. However, considerable judgement is necessarily required
in interpreting market data to develop estimates of fair value.
The fair value estimates presented herein are based on information
available to management as of March 31, 1996 and December 31, 1995, but
may not necessarily be indicative of the amounts that the Partnership
could realize in a current market exchange. The use of different
assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts. Although management is not aware
of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from amounts presented
herein.
The carrying amounts of the following items are a reasonable estimate
of fair value: cash and cash equivalents; due from General Partners;
accounts payable and accrued expenses; and rent received in advance.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement (the
"Agreement"), shall be distributed: (a) first, to the Limited Partners
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
until the Limited Partners 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 97.5% to the
Limited Partners and 2.5% to the General Partners.
The net proceeds of a sale or refinancing of a Partnership property
shall be distributed as follows:
first, to the Limited Partners until the Limited Partners have
received an amount equal to the 10% Cumulative Preferred Return,
as such term is defined in the Agreement;
second, to the Limited Partners until the Limited Partners have
received an amount equal to the amount of their Adjusted
Investment, as such term is defined in the Agreement; and
third, 95% to the Limited Partners and 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
between the Limited Partners and the General Partners in accordance with
the ratio of aggregate distributions of Operating Cash Flow attributable
to such tax year, although if no distributions are made in any year, net
losses (computed without regard to any allowance for depreciation or
cost recovery deductions under the Code) shall be allocated 99% to the
Limited Partners and 1% to the General Partners. Notwithstanding the
foregoing, all depreciation and cost recovery deductions allowed under
the Code shall be allocated 2.5% to the General Partners and 97.5% to
the Taxable Class Limited Partners, 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
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
of the deficit balances of all Partners' Capital Accounts; (b) second,
to the Limited Partners until the Limited Partners have been allocated
an amount of profits equal to their 10% Cumulative Preferred Return as
of such date; (c) third, to the Limited Partners until the Limited
Partners have been allocated an amount of profit equal to the amount of
their Adjusted Investment; and (d) thereafter, 95% to the Limited
Partners 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
Account balances; and (b) thereafter, 95% to the Limited Partners and 5%
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 property 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 Limited
Partners of a 9% non-cumulative, non-compounded return on their Adjusted
Investment.
The General Partners currently owe the Partnership approximately
$140,000 relating to the Distribution Guaranty Reserve.
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. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Fees, commissions and other expenses paid or payable to the General
Partners or its affiliates for the three months ended March 31, 1996 and
1995 were as follows:
1996 1995
Selling commissions $12,307 $12,344
Management fees 10,787 10,335
Reimbursable operating expenses 35,674 18,000
Legal fees 285 3,206
(4) WORKING CAPITAL RESERVES
The Partnership has made distributions to Limited Partners for
calendar years 1993, 1994, 1995 and the first quarter of 1996 (the final
payment for each year from 1993-1995 is made the following February 15).
As contemplated in the Prospectus, the distributions prior to full
property specification exceeded the amount of Operating Cash Flow, as
such term is defined in the Agreement, available for distribution. The
Partnership set aside 1% of the gross proceeds of its offering in a
reserve (the "Distribution Guaranty Reserve"). The Distribution
Guaranty Reserve was structured so as to enable the Partnership to make
quarterly distributions of Operating Cash Flow equal to at least 9.25%
per annum on Adjusted Investment during the period from the Escrow
Termination Date (February 28, 1989), as such term is defined in Section
H.3 of the Agreement, through the earlier of: (i) the first anniversary
of the Escrow Termination Date (February 28, 1990); or (ii) the
expenditure of 95% of the proceeds available for investment in
properties, which date was July 26, 1989. The General Partners
guaranteed payment of any amounts in excess of the Distribution Guaranty
Reserve and were entitled to receive any amounts of the Distribution
Guaranty Reserve not used to fund distributions.
The Partnership's acquisition process was not completed until March
1991 due to an unusually high number of properties being declined during
the due diligence process because of the General Partners' unwillingness
to lower the Partnership's investment standards. As a result, the
Partnership had a substantial amount of cash invested in short-term
investments, as opposed to properties, and during 1990 did not generate
sufficient Operating Cash Flow to fully support the distributions to
Limited Partners.
<PAGE>
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
In order to continue to maintain the 9.25% per annum distribution
through December 31, 1990, the General Partners agreed to continue the
Distribution Guaranty up to the net $140,000 of Distribution Guaranty
previously paid to them. At March 31, 1996 and December 31, 1995,
$140,000 was due from the General Partners related to the Distribution
Guaranty.
Furthermore, since at December 31, 1990, the Partnership had not yet
completed its acquisition process and Operating Cash Flow together with
the Distribution Guaranty Reserve was as yet insufficient to fund
distributions, the General Partners committed to advance an additional
$136,000 to maintain the 9.25% per annum distribution through
December 31, 1990 and ensure that distributions would not be paid out of
Capital Contributions, as defined in the Prospectus. The cumulative
deficit produced has been reduced from $136,000, at December 31, 1990,
to $0 at December 31, 1995, as Operating Cash Flow has exceeded
distributions since December 31, 1990.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership commenced an offering to the public on June 17, 1988
of 25,000 Units (subject to increase to 40,000 units). The offering was
anticipated to close on June 16, 1989 but was extended and closed on
September 30, 1989. A total of $38,923,000 of Units were subscribed and
issued between June 17, 1988 and September 30, 1989, pursuant to the
public offering.
The Partnership continues to raise additional funds through the Plan.
The Plan raised $4,059,178 through March 31, 1996 from Limited Partners
investing their distributions of Operating Cash Flow in additional
Units. As of March 31, 1996, Units valued at $2,886,915, have been
purchased by the Partnership from Limited Partners liquidating their
original investment in the Partnership and have been retired. The
Partnership has no funds available to purchase additional property,
excluding those raised through the Plan.
The Partnership purchased the land and buildings underlying seven
Ponderosa restaurants in 1988, and owns a 99% equity interest in an
affiliated joint venture formed in 1988 which purchased the land and
buildings underlying six Ponderosa restaurants. In 1989, the
Partnership purchased the land and buildings underlying two Taco Bell
restaurants, formed a 51% equity interest in an affiliated joint
venture which purchased a Scandinavian Health Spa and purchased the land
and buildings underlying seven additional Ponderosa restaurants. In
1990, the Partnership purchased the land and buildings underlying a
Children's World Learning Center, three Hardee's restaurants, three
Avis Lubes, a Blockbuster Video store and two Children's World Learning
Centers. The Partnership purchased three Chi-Chi's restaurants in 1991.
The Partnership's acquisition process is now completed with the
exception of acquisitions made with funds raised through the Plan.
As previously discussed in the December 31, 1995 10-K, beginning in
September 1990, the Partnership did not receive rental payments from the
tenant at the Hardee's Albion, Michigan and St. Johns, Michigan
properties (the "Properties"). During the period from March 1991 to
April 1992, the Partnership operated the Properties through an
affiliated lessee. During that period the operating expenses and
management fees exceeded the revenues generated from the restaurant by
<PAGE>
$398,915, which deficit was funded by the Partnership. The
Partnership's receivable from the affiliated lessee was written off in
1994. The Partnership re-leased these Properties to Jasaza, Inc., in
January 1994, which terminated its lease at the Properties in April,
1994. In the third quarter of 1994, the Partnership recorded an
allowance for impairment of $500,000 related to an other than temporary
decline in the value of real estate for the Properties. In the fourth
quarter of 1994 the Partnership executed a lease with a Dairy Queen
franchisee to lease the St. Johns property at a monthly amount lower
than rent from the previous tenant. The Partnership continues to
actively market the Albion property.
In April 1994, the lessee of the Rock Hill, Missouri property
defaulted on its payment obligations and vacated the property. The
Partnership has continued to receive rent payments from the guarantor,
Avis Lube, Inc. Avis Lube, Inc. has subleased the property through
March 1996 to an unaffiliated sublessee, Clarkson Investors II, an
auto/oil repair operator. The Partnership has signed a new lease with
the sublessee to operate the property after the initial lease expires.
The lease is for 42 months commencing March 26, 1996 and provides for
annual base rent of $55,000. The new lease rent is lower than current
rent.
In February 1995, the Chi-Chi's restaurant in Clarksville, TN
closed due to poor sales. During the third quarter of 1995 the Chi-Chi's
restaurants in Charlotte, NC and Richmond, VA were closed. The
corporate obligor continues to make timely and complete lease payments,
per the terms of the lease, while actively seeking subtenants.
In order to enhance the Partnership's diversity and overall
financial performance, the General Partners have recently agreed to the
following change within the Partnership's Ponderosa portfolio.
Ponderosa Unit #728 in Orchard Park, New York was "swapped" with a Tony
Roma's restaurant in Mesquite, Texas. Metromedia Steakhouses will
remain liable under the current lease and Tony Roma's will sublease the
property. The Partnership will benefit from an immediate base rent
increase as well as future base rent and percentage rent increases not
anticipated from the Orchard Park property.
The Partnership has made distributions to Limited Partners for
calendar years 1993, 1994, 1995 and the first quarter of 1996 (the final
payment for each year from 1993-1995 being made the following February
15). As contemplated in the Prospectus, the distributions prior to full
<PAGE>
property specification exceeded the amount of Operating Cash Flow, as
such term is defined in the Agreement, available for distribution. As
described in Footnote 8 to the section of the Prospectus on pages 8 and
9 entitled "Estimated Use of Proceeds of Offering", the Partnership set
aside 1% of the gross proceeds of the Offering in a reserve (the
"Distribution Guaranty Reserve"). The Distribution Guaranty Reserve was
structured so as to enable the Partnership to make quarterly
distributions of Operating Cash Flow equal to at least 9.25% per annum
on Adjusted Investment during the period from the Escrow Termination
Date (February 28, 1989), as such term is defined in Section H.3 of the
Agreement, through the earlier of: (i) the first anniversary of the
Escrow Termination Date (February 28, 1990); or (ii) the expenditure of
95% of the proceeds available for investment in properties, which date
was July 26, 1989. The General Partners guaranteed payment of any
amounts in excess of the Distribution Guaranty Reserve and were entitled
to receive any amounts of the Distribution Guaranty Reserve not used to
fund distributions.
The Partnership's acquisition process was not completed until March
1991 due to an unusually high number of properties being declined during
the due diligence process because of the General Partners' unwillingness
to lower the Partnership's investment standards. As a result, the
Partnership had a substantial amount of cash invested in short-term
investments, as opposed to properties, and during 1990 did not generate
sufficient Operating Cash Flow to fully support the distributions to
Limited Partners.
In order to continue to maintain the 9.25% per annum distribution
through December 31, 1990, the General Partners agreed to continue the
Distribution Guaranty up to the net $140,000 of Distribution Guaranty
previously paid to them. At March 31, 1996, $140,000 was due from the
General Partners related to the Distribution Guaranty.
<PAGE>
Below is a table summarizing the historical data for distribution
rates per annum:
Distribution
Date 1996 1995 1994 1993 1992 1991
February 15 9.00% 9.00% 9.00% 9.00% 8.75% 9.25%
May 15 9.00 9.00 9.00 9.00 8.75 9.25
August 15 9.00 9.00 9.00 8.75 8.75
November 15(a) 9.00 8.00 9.00 8.75 8.75
(a) The November 15, 1994 quarterly distribution rate does not include
the return of capital of $248,257.
Due to the previous defaults under the lease agreements by the two
Hardee's lessees, Operating Cash Flow for 1991 was insufficient to
maintain a 9.25% per annum distribution and was reduced to 8.75%. In
order to enable the Partnership to make distributions entirely from
Operating Cash Flow, beginning August 15, 1991, distributions were
reduced to 8.75% per annum for the balance of 1991 and for the first
three quarters of 1992; commencing with the February 15, 1993
distribution the distribution rate was raised to 9.0% per annum.
Results of Operations - Three months ended March 31, 1996 and 1995
Results of operations for the three months ended March 31, 1996
reflected net income of $695,613 compared to net income of $748,698 for
the three months ended March 31, 1995, a decrease of approximately
$53,100.
Total income for the three months ended March 31, 1996 was
$1,061,234 as compared to $1,049,969 for the period ended March 31,
1995, an increase of approximately $11,300. The increase in total
income is primarily due to the increase in interest income, which was
the result of higher cash balances during 1996.
<PAGE>
Total expenses for the three months ended March 31, 1996 were
$291,211 as compared to $226,887 for the period ended March 31, 1995, an
increase of approximately $64,300. The increase in expenses was due to
an increase in general and administrative expense related to the
Partnership hiring an independent real estate company to conduct
property valuations.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission Of Matters To a Vote of Security Holders.
None.
ITEM 5. Other Information.
As previously reported, the Partnership has engaged a
nationally known real estate firm to perform a valuation of
the Partnership's properties. The stated unit value used
for both liquidations and the purchase of new units through
the dividend reinvestment program will change as a result of
this valuation. At the time of the distribution, the
valuation had not been completed. Once the valuation has been
completed, the new stated unit value will be communicated to
all partners.
The General Partners have determined that, for the current
distribution, all investors, including those who had selected
the dividend reinvestment option, will receive their
distributions in the form of a check. When the unit valuation
process has been completed and the new stated unit value
communicated to all partners, each partner will be able to
determine if they wish to enter or continue in the dividend
reinvestment program.
Similarly, the General Partners have determined that unit
liquidations will be temporarily suspended until the valuation
has been completed. At that time, pending liquidation requests
will be processed according to the terms of the prospectus and
liquidated at the then current stated unit value.
<PAGE>
ITEM 6. Exhibits and Reports On Form 8-K.
Exhibit 27. Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BY: Brauvin Realty Advisors II, Inc.
Corporate General Partner of
Brauvin High Yield Fund L.P. II
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: May 21, 1996
BY: /s/ Thomas J. Coorsh
Thomas J. Coorsh
Chief Financial Officer and Treasurer
DATE: May 21, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,367,182
<SECURITIES> 0
<RECEIVABLES> 311,373
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,951,164 <F1>
<DEPRECIATION> 4,815,906
<TOTAL-ASSETS> 32,985,739
<CURRENT-LIABILITIES> 0
<BONDS> 2,500,603 <F2>
0
0
<COMMON> 30,384,444 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,985,739
<SALES> 0
<TOTAL-REVENUES> 1,061,234 <F4>
<CGS> 0
<TOTAL-COSTS> 291,211 <F5>
<OTHER-EXPENSES> 74,410 <F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 695,613
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F2> "BONDS" REPRESENTS MINORITY INTEREST IN JOINT VENTURES
<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 MINORITY INTEREST SHARE OF
NET INCOME
</FN>
</TABLE>
