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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
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.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312)759-7660
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
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BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
INDEX
Page
PART I Financial Information
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . . .3
Consolidated Statement of Net Assets in Liquidation
as of September 30,1999 (Liquidation Basis)
and Balance Sheet at
December 31, 1998 (Going Concern Basis) . . . . .. . . . . . .4
Consolidated Statement of Changes in
Net Assets in Liquidation for the period
June 18, 1999 to September 30, 1999
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . . .5
Notes to Consolidated Financial Statements . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . 19
Item 3. Quantitative and Qualitative Disclosures about
Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . 29
PART II
Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 30
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 30
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 30
Item 4. Submissions of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . 30
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 30
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1998 Consolidated Balance Sheet
(Going Concern Basis), the following Consolidated Statements of Net
Assets in Liquidation as of September 30, 1999 (Liquidation Basis)
and the Consolidated Statement of Changes in Net Assets in
Liquidation for the period June 18, 1999 to September 30, 1999
(Liquidation Basis)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 financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Partnership's 1998 Annual Report on Form 10-K.
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BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION AS OF
SEPTEMBER 30, 1999 AND BALANCE SHEET AT DECEMBER 31, 1998
(Liquidation (Going Concern
Basis) Basis)
September 30, 1999 December 31,1998
(Unaudited)
ASSETS
Land -- $10,018,972
Buildings and improvements -- 22,241,682
-- 32,260,654
Less: Accumulated depreciation -- (6,364,451)
Net investment in real estate -- 25,896,203
Real estate held for sale $30,793,546 --
Investment in Joint Venture (Note 7):
Brauvin Bay County Venture 271,706 274,777
Cash and cash equivalents 1,210,567 1,585,830
Restricted cash 294,060 --
Rent receivable 79,527 76,374
Deferred rent receivable -- 477,663
Due from General Partner 140,000 140,000
Other assets -- 20,499
Total Assets $32,789,406 $28,471,346
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 422,060 $ 377,213
Rent received in advance 191,064 35,784
Deferred gain on sale of real estate 5,399,979 --
Reserve for estimated costs during
the liquidation period 180,000 --
Tenant security deposits 85,903 85,903
Due to affiliates 4,782 3,592
Total Liabilities 6,283,788 502,492
Minority Interest in Brauvin:
High Yield Joint Venture 18,435 18,726
Funds Joint Venture 2,153,302 2,413,241
Net Assets in Liquidation $24,333,881
PARTNERS' CAPITAL
General Partners 346,855
Limited Partners 25,190,032
Total Partners Capital 25,536,887
Total Liabilities and Partners' Capital $28,471,346
See accompanying notes to consolidated financial statements.
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BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS) FOR THE PERIOD
JUNE 18, 1999 TO SEPTEMBER 30, 1999
(Unaudited)
Net Assets June 18, 1999
(Going Concern Basis) $24,898,268
Net income from operations 879,287
Distributions (1,000,244)
Adjustments to Liquidation Basis (443,430)
Net Assets in Liquidation
at September 30, 1999 $24,333,881
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 subject to "triple-net" leases. The General Partners
of the Partnership are Brauvin Realty Advisors II, Inc. and Jerome
J. Brault. Brauvin Realty Advisors II, Inc. is owned primarily by
Messrs. Brault (beneficially) (44%) and Cezar M. Froelich (44%).
Mr. Froelich resigned as a director of Brauvin Realty Advisors II,
Inc. in December 1994 and as an Individual General Partner
effective as of September 17, 1996. 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
September 30, 1999 and December 31, 1998, the Partnership has sold
$42,982,178 of Units. These totals include $4,059,178 of Units,
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 have
been repurchased by the Partnership from Limited Partners
liquidating their investment in the Partnership and have been
retired as of September 30, 1999 and December 31, 1998. As of
September 30, 1999, the Plan 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, one
Blockbuster Video store, three Avis Lube Oil Change Centers and
three Chi-Chi's restaurants. Also acquired were 99%, 51% and 26%
equity interests in three joint ventures with affiliated entities,
which ventures purchased the land and buildings underlying six
Ponderosa restaurants, a Scandinavian Health Spa and a Blockbuster
Video store, respectively. In 1995, the Partnership and
Metromedia, the parent of Ponderosa Restaurants, exchanged one of
the Ponderosa restaurants for a Tony Roma's restaurant. The
Partnership's acquisition process is now completed.
In February 1994, the Partnership sold the Taco Bell Restaurant
located in Schofield, Wisconsin. In January 1998, the joint
venture partnership sold Ponderosa unit 850 located in Mansfield,
Ohio. In April 1998, the Partnership sold Ponderosa unit 876
located in Sweden, New York.
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.
Basis of Presentation
As a result of the settlement agreement (see Note 8) which was
approved by the United States District Court for the Northern
District of Illinois on June 18, 1999 the Partnership has begun the
liquidation process and, in accordance with generally accepted
accounting principles, the Partnership's financial statements for
periods subsequent to June 18, 1999 have been prepared on a
liquidation basis. Accordingly, the carrying value of the assets
is presented at net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated
costs associated with carrying out the liquidation. Preparation of
the financial statements on a liquidation basis requires
significant assumptions by management, including the estimate of
liquidation costs and the resolution of any contingent liabilities.
There may be differences between the assumptions and the actual
results because events and circumstances frequently do not occur as
expected. Those differences, if any, could result in a change in
the net assets recorded in the statement of net assets as of
September 30, 1999.
Accounting Method
The accompanying financial statements have been prepared using
the accrual method of accounting.
Rental Income
Prior to the preparation of the financial statements on a
liquidation basis, rental income was 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 were 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.
Investment in Joint Venture
The Partnership owns a 26% equity interest in a joint venture,
Brauvin Bay County Venture, which owns one Blockbuster Video Store.
The accompanying financial statements include the investment in
Brauvin Bay County Venture using the equity method of accounting.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements.
However, in certain instances, the Partnership has been required
under applicable state law to remit directly to the tax authorities
amounts representing withholding from distributions paid to
partners.
Investment in Real Estate
Prior to the preparation of the financial statements on a
liquidation basis, the operating properties acquired by the
Partnership were stated at cost including acquisition costs, net of
an allowance for impairment. Depreciation expense was computed on
a straight-line basis over approximately 35 years.
The Partnership provided an allowance for impairment to reduce
the cost basis of real estate to its estimated fair value when the
real estate is judged to have suffered an impairment that is other
than temporary. The Partnership has performed an analysis of its
long-lived assets, and the Partnership's management determined that
there were no events or changes in circumstances that indicated
that the carrying amount of the assets may not be recoverable at
December 31, 1998, except as described in Note 8.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months of
purchase.
Restricted Cash
Per the terms of the settlement agreement (see Note 8) the
Partnership was required to establish a cash reserve that will be
restricted for the payment of the General Partners legal fees and
costs. The release of these funds to the General Partners is
subject to the certification by the Special Master that the General
Partners have been cooperative, did not breach their fiduciary
duties to the Limited Partners, did not breach the settlement
agreement or the Partnership Agreement and used their best efforts
to manage the affairs of the Partnership in such a manner as to
maximize the value and marketability of the Partnership's assets in
accordance with their obligations under the Partnership Agreement.
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 December 31, 1998, 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.
The carrying amounts of the following items are a reasonable
estimate of fair value: cash and cash equivalents; rent
receivable; due from General Partners; accounts payable and accrued
expenses; rent received in advance; due to an affiliate; and tenant
security deposits.
(2) ADJUSTMENT TO LIQUIDATION BASIS
On June 18, 1999, in accordance with the liquidation basis of
accounting, assets were adjusted to estimated net realizable value
and liabilities were adjusted to estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. The net adjustment required to convert from the going
concern (historical cost) basis to the liquidation basis of
accounting was a decrease in assets of $443,430 which is included
in the September 30, 1999 statement of changes in net assets in
liquidation. Significant changes in the carrying value of assets
and liabilities are summarized as follows:
Increase in real estate held for sale(a) $5,399,712
Decrease in investment in minority interest
in Joint Venture 235,415
Write-off of deferred rent receivable (480,439)
Write-off of prepaid offering costs (18,139)
Increase in deferred gain on sale
of real estate (5,399,979)
Estimated liquidation costs (180,000)
Total adjustment to liquidation basis $ (443,430)
(a) Net of estimated selling costs
(3) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement"), shall be distributed: (a) first, to the Limited
Partners 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 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.
(4) 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 original General Partners owe the Partnership $140,000 at
September 30, 1999 and December 31, 1998, 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.
The Partnership pays an affiliate of the General Partners an
acquisition fee in the amount of up to 6% of the gross proceeds of
the Partnership's offering for the services rendered in connection
with the process pertaining to the acquisition of a property.
Acquisition fees related to the properties not ultimately purchased
by the Partnership are expensed as incurred.
An affiliate of one of the General Partners provided securities
and real estate counsel to the Partnership.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the nine months ended
September 30, 1999 and 1998 were as follows:
1999 1998
Management fees $32,642 $30,549
Reimbursable operating
expenses 150,918 127,567
As of September 30, 1999 and December 31, 1998, the Partnership
has made all payments to affiliates except for $4,782 and $3,592,
respectively related to management fees.
(5) WORKING CAPITAL RESERVES
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 original 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 original General Partners agreed to
continue the Distribution Guaranty up to the net $140,000 of
Distribution Guaranty previously paid to them. At September 30,
1999 and December 31, 1998, $140,000 was due from the original
General Partners related to the Distribution Guaranty.
(6) PROVISION FOR IMPAIRMENT
During the first quarter of 1998, the Partnership recorded an
impairment of $130,000 related to an other than temporary decline
in the value of the real estate for the Ponderosa located in
Sweden, New York. This allowance has been recorded as a reduction
of the property's cost, and allocated to the land and buildings
based on the original acquisition cost allocation of 30% (land) and
70% (building).
During the fourth quarter of 1998, the Partnership recorded an
impairment of $984,000 related to an other than temporary decline
in real estate for Ponderosa properties in various locations. An
impairment of $192,000 related to an other than temporary decline
in real estate was also recorded for Hardee's properties located in
Michigan. These allowances were recorded as a reduction of the
properties' cost, and allocated to the land and buildings based on
the original acquisition cost allocation of 30% (land) and 70%
(building).
(7) INVESTMENT IN JOINT VENTURE
The Partnership owns an equity interest in the Brauvin Bay County
Venture and reports its investment on the equity method. The
following are condensed financial statements for the Brauvin Bay
County Venture:
BRAUVIN BAY COUNTY VENTURE
(Liquidation (Going Concern
Basis) Basis)
September 30, 1999 December 31, 1998
Land and buildings, net $ -- $1,033,942
Real estate held for sale 1,028,651 --
Other assets 23,632 17,330
$1,052,283 $1,051,272
Liabilities $ 17,117 $ 4,296
Net assets in liquidation $1,035,166
Partners' capital 1,046,976
$1,051,272
(8) MERGER AND LITIGATION
Merger
Pursuant to the terms of an agreement and plan of merger dated
as of June 14, 1996, as amended March 24, 1997, June 30, 1997,
September 30, 1997, December 31, 1997, March 31, 1998 and June 30,
1998 (the "Merger Agreement"), the Partnership proposed to merge
with and into Brauvin Real Estate Funds, L.L.C., a Delaware limited
liability company affiliated with certain of the General Partners
(the "Purchaser") through a merger (the "Merger") of its Units.
Although the Merger will not be consummated, the following text
describes the transaction. Promptly upon consummation of the
Merger, the Partnership would have ceased to exist and the
Purchaser, as the surviving entity, would succeed to all of the
assets and liabilities of the Partnership. The Limited Partners
holding a majority of the Units voted on the Merger on November 8,
1996. The Limited Partners voted on an amendment of the Agreement
allowing the Partnership to sell or lease property to affiliates
(this amendment, together with the Merger shall be referred to
herein as the "Transaction").
The redemption price to be paid to the Limited Partners in
connection with the Merger was based on the fair market value of
the properties of the Partnership (the "Assets"). Cushman &
Wakefield Valuation Advisory Services ("Cushman & Wakefield"), an
independent appraiser, the largest real estate valuation and
consulting organization in the United States, was engaged by the
Partnership to prepare an appraisal of Assets, to satisfy the
Partnership's requirements under the Employee Retirement Income
Security Act of 1974, as amended. Cushman & Wakefield determined
the fair market value of the Assets at April 1, 1996 to be
$30,183,300, or $748.09 per Unit. Subsequently, the Partnership
purchased a 26% interest in Brauvin Bay County Venture. Based on
the terms of the Merger Agreement, the fair market value of the
Assets will be increased by the amount of the investment in Brauvin
Bay County Venture, and correspondingly, the Partnership's cash
holdings were reduced by the same amount and, therefore, the total
redemption amount would remain unchanged. The redemption price of
$779.22 per Unit also included all remaining cash of the
Partnership, less net earnings of the Partnership from and after
August 1, 1996 through December 31, 1996, less the Partnership's
actual costs incurred and accrued through the effective time at the
filing of the certificate of merger, including reasonable reserves
in connection with: (i) the proxy solicitation; (ii) the
Transaction (as detailed in the Merger Agreement); and (iii) the
winding up of the Partnership, including preparation of the final
audit, tax return and K-1s (collectively, the "Transaction Costs")
and less all other Partnership obligations. Of the original cash
redemption amount, approximately $31.13 was distributed to the
Limited Partners in the December 31, 1997 distribution.
The General Partners were not to receive any payment in exchange
for the redemption of their general partnership interests nor would
they have received any fees from the Partnership in connection with
the Transaction. The Managing General Partner and his son, James
L. Brault, an executive officer of the Corporate General Partner,
were to have a minority ownership interest in the Purchaser.
The Merger was not completed primarily due to certain litigation,
as described below. The General Partners believe that these
lawsuits are without merit and, therefore, continue to vigorously
defend against them. Because of the August 12, 1998 rulings of the
District Court in the Christman Litigation, as described below, it
is not possible for the Merger to be consummated.
Distributions of the Partnership's net earnings for the periods
January 1, 1998 to March 31, 1998, April 1, 1998 to June 30, 1998,
July 1, 1998 to September 30, 1998, and October 1, 1998 to December
31, 1998 were made to Limited Partners on May 8, 1998, August 15,
1998, November 15, 1998, and February 15, 1999, respectively in the
amounts of approximately $884,000, $593,200, $1,063,700, and
$1,005,800.
As the result of a property sale by Brauvin High Yield Venture
a return of capital distribution was also made to Limited Partners
on May 8, 1998 in the amount of approximately $743,000.
Additionally, on August 15, 1998, a return of capital distribution
was made to Limited Partners in the approximate amount of $611,500
from the sale of the Ponderosa located in Sweden, New York.
Distributions of the Partnership's net earnings for the periods
January 1, 1999 to March 30, 1999, April 1, 1999 to June 30, 1999
and July 1, 1999 to September 30, 1999 were made to Limited
Partners on May 17, 1999, August 15, 1999 and November 15, 1999,
respectively, in the amounts of approximately $907,500, $790,000,
and $860,000. In addition, on August 15, 1999 and November 15,
1999, the Partnership made return of capital distributions to the
Limited Partners in the amounts of approximately $210,000 and
$3,442,700. The $210,000 return of capital was distributed to the
Limited Partners as a result of the sale of the Hardees located in
Albion, Michigan. The $3,442,700 return of capital was primarily
associated with the Partnerships disposition of four of its
Ponderosa properties located in Appleton, Wisconsin, Oneonta and
Middletown, New York and Eureka, Missouri.
Litigation
Two legal actions, as hereinafter described, against the General
Partners of the Partnership and affiliates of such General
Partners, as well as against the Partnership on a nominal basis in
connection with the Merger, have been settled. On April 13, 1999,
all the parties to the litigation reached an agreement to settle
the litigation, subject to the approval by the United States
District Court for the Northern District of Illinois. This
approval was obtained on June 18, 1999. Management believes that
the settlement will not have a material financial impact on the
Partnership. The terms of the settlement agreement, along with a
Notice to the Class, were forwarded to the Limited Partners in the
second quarter. One additional legal action, which was dismissed
on January 28, 1998 had also been brought against the General
Partners of the Partnership and affiliates of such General
Partners, as well as the Partnership on a nominal basis in
connection with the Merger. With respect to these actions the
Partnership and the General Partners and their named affiliates
denied all allegations set forth in the complaints and vigorously
defended against such claims.
(9) PROPERTY SALE
On June 21, 1999, the Partnership sold the vacant Hardees
restaurant located in Albion, Michigan to an unaffiliated third
party for $210,000.
(10) SUBSEQUENT EVENT
On October 15, 1999 the Partnership sold, to an unaffiliated third
party, the Ponderosa restaurants located in Appleton, Wisconsin;
Oneonta, New York; Middletown, New York; and Eureka, Missouri. The
combined sales price was $3,476,000. The net proceeds from these
sales will be distributed as a return of capital on November 15,
1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, words such as "anticipates,"
"expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. These statements are
subject to a number of risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking
statements. The Partnership undertakes no obligation to update
these forward-looking statements to reflect future events or
circumstances.
Year 2000
The "Year 2000" problem concerns the inability of computer
technology systems to correctly identify and process date sensitive
information beyond December 31, 1999. Many computers
automatically add the "19" prefix to the last two digits the
computer reads for the year when date information is needed in
computer software programs. Thus when a date beginning on January
1, 2000 is entered into a computer, the computer may interpret this
date as the year "1900" rather than "2000".
The Partnership's computer information technology systems consist
of a network of personal computers linked to a server built using
hardware and software from mainstream suppliers. The Partnership
does not own any equipment that contains embedded microprocessors,
which may also pose a potential Year 2000 problem. Additionally,
the Partnership has no internally generated software coding to
correct as all of the Partnership's software is purchased and
licensed from external providers. These external providers have
assured management that their systems are, or will be, Year 2000
compliant.
The Partnership has two main software packages that contain date
sensitive information, (i) accounting and (ii) investor relations.
In 1997, the Partnership initiated and completed the conversion
from its existing accounting software to a new software program
that is Year 2000 compliant. In 1998, the investor relations
software was also updated to a new software program that is Year
2000 compliant. Management has determined that the Year 2000 issue
will not pose significant operational problems for its remaining
computer software systems. All costs associated with these
conversions are expensed as incurred, and are not material.
Management does not believe that any further expenditures will be
necessary for the Partnership to be Year 2000 compliant. However,
additional personal computers may be purchased from time to time to
replace existing machines.
Also in 1997, management of the Partnership initiated formal
communications with all of its significant third party vendors,
service providers and financial institutions to determine the
extent to which the Partnership is vulnerable to those third
parties failure to remedy their own Year 2000 issue. There can be
no guarantee that the systems of these third parties will be timely
converted and would not have an adverse effect on the Partnership.
The most reasonably likely worst case scenario for the
Partnership with respect to the Year 2000 issue would be the
inability of certain tenants to timely make their rental payments
beginning in January 2000. This could result in the Partnership
temporarily suffering a depletion of the Partnership's cash
reserves as expenses will need to be paid while the cash flows from
revenues are delayed. The Partnership has no formal Year 2000
contingency plan.
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.
Until the proxy solicitation process began, the Plan raised
$4,059,178 through September 30, 1999 from Limited Partners
investing their distributions of Operating Cash Flow in additional
Units. As of September 30, 1999, Units valued at $2,886,915 have
been repurchased by the Partnership from Limited Partners
liquidating their investment in the Partnership and have been
retired.
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 three Children's World Learning Centers,
three Hardee's restaurants, one Blockbuster video store and three
Avis Lubes. The Partnership purchased three Chi-Chi's restaurants
in 1991.
On October 31, 1996, the Partnership purchased a 26% equity
interest in a joint venture with affiliated public real estate
limited partnerships (the "Bay County Venture"). The Bay County
Venture purchased real property upon which a newly constructed
Blockbuster Video store is operated. The property contains a 6,466
square foot building located on a 40,075 square foot parcel of
land.
The Partnership's acquisition process is now completed.
In 1996, the Partnership engaged Cushman & Wakefield to prepare
an appraisal of the Partnership's properties. As a result of this
appraisal, the Partnership recorded an additional provision for
impairment of $550,000 related to an other than temporary decline
in real estate for the St. Johns, Michigan and Albion, Michigan
properties during the fourth quarter of 1996. This allowance has
been recorded as a reduction of the properties' cost, and allocated
to the land and building based on the original acquisition cost
allocation of 30% (land) and 70% (building).
During the first quarter of 1998, the Partnership recorded an
impairment of $130,000 related to an other than temporary decline
in the value of real estate for the Ponderosa located in Sweden,
New York. This allowance has been recorded as a reduction of the
property's cost, and allocated to the land and buildings based on
the original acquisition cost allocation of 30% (land) and 70%
(building).
During the fourth quarter of 1998, the Partnership recorded an
impairment of $984,000 related to an other than temporary decline
in the value of real estate for several Ponderosa properties in
various locations. Additionally an impairment of $192,000 related
to an other than temporary decline in the value of real estate was
also recorded for the Hardee's properties located in Michigan.
These allowances were recorded as a reduction of the properties'
cost, and allocated to the land and buildings based on the original
acquisition cost allocation of 30% (land) and 70% (building).
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. 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 Reserve previously paid to them. At September 30, 1999,
$140,000 was due from the original General Partners related to the
Distribution Guaranty.
Below is a table summarizing the four year historical data for
distribution rates per unit:
Distribution
Date 1999(a) 1998 (b) 1997 1996
February 15 $24.9281 $ -- $20.1875 $22.3597
May 15 22.4924 21.9087 18.8614 22.3597
August 15 19.5858 14.7020 22.8662 --
November 15 (c) 21.3147 26.3634 56.6001 --
(a) The May 1999 distribution was made on May 17, 1999. In
addition the August 15, 1999 amount does not include a return
of capital distribution of approximately $5.2048 per unit, and
the November 15, 1999 amount does not include a return of
capital distribution of approximately $85.3260 per unit.
(b) The 1998 distributions were made on May 8, 1998, August 15,
1998, November 15, 1998, and February 15, 1999 respectively,
and the amounts indicated above do not include return of
capital distributions of approximately $18.4152, $15.1571,
$0.00, and $0.00 per Unit, respectively.
(c) The 1997 distributions were made on March 31, 1997, July 15,
1997, October 22,1997 and December 31, 1997.
Distributions of the Partnership's net earnings for the periods
January 1, 1998 to March 31, 1998, April 1, 1998 to June 30, 1998,
July 1, 1998 to September 30, 1998, and October 1, 1998 to December
31, 1998 were made to Limited Partners on May 8, 1998, August 15,
1998, November 15, 1998, and February 15, 1999, respectively, in the
amounts of approximately $884,000, $593,200, $1,063,700, and
$1,005,800.
As the result of a property sale by Brauvin High Yield Venture
a return of capital distribution was also made to Limited Partners
on May 8, 1998 in the amount of approximately $743,000.
Additionally on August 15, 1998, a return of capital distribution
was also made to Limited Partners in the approximate amount of
$611,500 from the sale of the Ponderosa located in Sweden, New York.
Distributions of the Partnership's net earnings for the periods
January 1, 1999 to March 30, 1999, April 1, 1999 to June 30, 1999
and July 1, 1999 to September 30, 1999 were made to Limited
Partners on May 17, 1999, August 15, 1999 and November 15, 1999,
respectively, in the amounts of approximately $907,500, $790,000,
and $860,000. In addition, on August 15, 1999 and November 15,
1999, the Partnership made return of capital distributions to the
Limited Partners in the amounts of approximately $210,000 and
$3,442,700. The $210,000 return of capital was distributed to the
Limited Partners as a result of the sale of the Hardees located in
Albion, Michigan. The $3,442,700 return of capital was primarily
associated with the Partnerships disposition of four of its
Ponderosa properties located in Appleton, Wisconsin, Oneonta and
Middletown, New York and Eureka, Missouri.
Per the terms of the Merger, the Partnership's net earnings from
April 1996 through July 1996 were to be distributed to the Limited
Partners in conjunction with the closing of the Merger. However,
because of the lengthy delay and the uncertainty of the ultimate
closing date, the General Partners decided to make a significant
distribution on December 31, 1997 of the Partnership's earnings.
Included in the December 31, 1997 distribution was any prior period
earnings including amounts previously reserved for anticipated
closing costs.
Based on the August 12, 1998 ruling of the District Court in the
Christman litigation, it is not possible for the Merger to be
consummated. The reserves will be re-established by the
Partnership as soon as a definitive sale process has been
determined and the associated costs and reserves can be identified.
Future increases in the Partnership's distributions will largely
depend on increased sales at the Partnership's properties resulting
in additional percentage rent and, to a lesser extent, on rental
increases which will occur due to increases in receipts from
certain leases based upon increases in the Consumer Price Index or
scheduled increases of base rent.
During the nine months ended September 30, 1999, and the year
ended December 31, 1998, the General Partners and their affiliates
earned management fees of $32,642 and $40,657, respectively. In
January 1998, the Partnership paid the General Partners
approximately $19,800 as an Operating Cash Flow distribution for
the year ended December 31, 1997.
Although the Merger will not be consummated, the following text
describes the Transaction. Pursuant to the terms of the Merger
Agreement, the Limited Partners would have received approximately
$779.22 per Unit in cash (of this original amount approximately
$31.13 has already been distributed to the Limited Partners).
Promptly upon consummation of the Merger, the Partnership would
have ceased to exist and the Purchaser, as the surviving entity,
would have succeeded to all of the assets and liabilities of the
Partnership.
The Partnership drafted a proxy statement, which required prior
review and comment by the Securities and Exchange Commission, to
solicit proxies for use at the Special Meeting originally to be
held at the offices of the Partnership on September 24, 1996. As
a result of the various legal issues, as described in "Legal
Proceedings" the Special Meeting was adjourned to November 8, 1996
at 9:30 a.m. The purpose of the Special Meeting was to vote upon
the Merger and certain other matters as described in the Proxy.
By approving the Merger, the Limited Partners also would have
approved an amendment of the Agreement allowing the Partnership to
sell or lease property to affiliates (this amendment, together with
the Merger shall be referred to herein as the "Transaction"). The
Delaware Revised Uniform Limited Partnership Act (the "Act")
provides that a merger must also be approved by the general
partners of a partnership, unless the limited partnership agreement
provides otherwise. Because the Agreement did not address this
matter, at the Special Meeting, Limited Partners holding a majority
of the Units were asked to approve the adoption of an amendment to
the Agreement to allow the majority vote of the Limited Partners to
determine the outcome of the transaction with the Purchaser without
the vote of the General Partners. Neither the Act nor the
Agreement provides the Limited Partners not voting in favor of the
Transaction with dissenters' appraisal rights.
The redemption price to be paid to the Limited Partners in
connection with the Merger was based on the fair market value of
the properties of the Partnership (the "Assets"). Cushman &
Wakefield, an independent appraiser, the largest real estate
valuation and consulting organization in the United States, was
engaged by the Partnership to prepare an appraisal of the Assets,
to satisfy the Partnership's requirements under the Employee
Retirement Income Security Act of 1974, as amended. Cushman &
Wakefield determined the fair market value of the Assets to be
$30,183,300, or $748.09 per Unit, at April 1, 1996. Subsequently,
the Partnership purchased a 26% interest in Brauvin Bay County
Venture. Based on the terms of the Merger Agreement, the fair
market value of the Assets will be increased by the amount of the
investment in Brauvin Bay County Venture, and correspondingly, the
Partnership's cash holdings were reduced by the same amount and
therefore the total redemption amount would remain unchanged. The
redemption price of $779.22 per Unit also included all remaining
cash of the Partnership, less net earnings of the Partnership from
and after August 1, 1996 through December 31, 1996, less the
Partnership's actual costs incurred and accrued through the
effective time at the filing of the certificate of merger,
including reasonable reserves in connection with: (i) the proxy
solicitation; (ii) the Transaction (as detailed in the Merger
Agreement); and (iii) the winding up of the Partnership, including
preparation of the final audit, tax return and K-1s (collectively,
the "Transaction Costs") and less all other Partnership
obligations. Of the total redemption price stated above,
approximately $31.13 was distributed to Limited Partners in the
December 31, 1997 distribution.
Cushman & Wakefield subsequently provided an opinion as to the
fairness of the Transaction to the Limited Partners from a
financial point of view. In its opinion, Cushman & Wakefield
advised that the price per Unit reflected in the Transaction was
fair, from a financial point of view, to the Limited Partners.
Cushman & Wakefield's determination that a price is "fair" does not
mean that the price was the highest price which might be obtained
in the marketplace, but rather that based on the appraised values
of the Assets, the price reflected in the Transaction is believed
by Cushman & Wakefield to be reasonable.
Mr. Jerome J. Brault is the Managing General Partner of the
Partnership and Brauvin Realty Advisors II, Inc. is the Corporate
General Partner. On April 23, 1997, Mr. David M. Strosberg
resigned as an Individual General Partner of the Partnership. Mr.
Cezar M. Froelich resigned his position as an Individual General
Partner effective as of September 17, 1996. The General Partners
were not to receive any payment in exchange for the redemption of
their general partnership interests nor were they to receive any
fees from the Partnership in connection with the Transaction. The
remaining General Partners do not believe that Mr. Strosberg's or
Mr. Froelich's lack of involvement has had an adverse effect, and
should not in the future have any adverse effect, on the operations
of the Partnership.
The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, were to have a
minority ownership interest in the Purchaser. Therefore, the
Messrs. Brault had an indirect economic interest in consummating
the Transaction that was in conflict with the economic interests of
the Limited Partners. Messrs. Froelich and Strosberg have no
affiliation with the Purchaser.
Although the Special Meeting was held and an affirmative vote of
the majority of the Limited Partners was received, the District
Court in the Christman litigation ruled on August 12, 1998 in favor
of the Plaintiff's motion for partial summary judgement, holding
that the Agreement did not allow the Limited Partners to vote in
favor or against the Transaction by proxy.
As discussed in "Legal Proceedings", all the parties to the
litigation reached an agreement to settle the litigation, subject
to the approval by the United States District Court for the
Northern District of Illinois.
The 1999 and 1998 distributions were lower than prior
distributions because the Partnership incurred significant
valuation fees and legal costs to defend against the lawsuit. In
addition, the remaining term of the Partnership's properties'
leases continue to shrink. This fact is causing the Partnership to
potentially face the risks and costs of lease rollover. This
heightened degree of risk may also have an adverse effect on the
ultimate value of the Assets. Further, the Partnership's most
significant tenant, Ponderosa, has recently closed and vacated six
of the Partnership's properties. (The Partnership owned three of
them directly and had a majority joint venture interest in the
other three). The General Partners are working to remedy this
vacancy situation. As of December 31, 1998, two of the closed
properties have been sublet to local concept operators. However,
one of the closed properties incurred significant fire damage and
Ponderosa terminated its lease. The Partnership has commenced a
lawsuit against the tenant to recover lost rent and damages related
to the fire. In addition, these recent developments could
materially affect the Assets' long term prospects. Unfortunately,
these recent developments are some of the exact risks and costs the
Partnership was seeking to avoid with the successful completion of
the Merger. In January 1998, one of the closed joint venture
Ponderosa restaurants located in Mansfield, Ohio was sold to an
unaffiliated third party. In April 1998, the fire damaged property
located in Sweden, New York was sold by the Partnership to an
unaffiliated third party.
On January 16, 1998, by agreement of the Partnership and the
General Partners and pursuant to a motion of the General Partners,
the District Court entered an order preventing the Partnership and
the General Partners from completing the Merger, or otherwise
disposing of all or substantially all of the Partnership's assets,
until further order of the court.
On January 28, 1998, the District Court entered an Order of
Reference to Special Master, designating a Special Master and
vesting the Special Master with authority to resolve certain
aspects of the lawsuit subject to the District Court's review and
confirmation. The Special Master has been empowered to determine
how the assets of the Partnership should be sold or disposed of in
a manner which allows the Limited Partners to maximize their
financial return in the shortest practicable time frame. In
addition, early in the second quarter of 1998, the Special Master
retained a financial advisor (the "Financial Advisor"), at the
expense of the Partnership, to assist the Special Master. The
Financial Advisor was engaged to perform a valuation of the
properties of the Partnership as well as a valuation of the
Partnership itself. The cost to the Partnership for the services
of the Financial Advisor was approximately $185,000.
On August 4, 1998 the Special Master filed a Report and
Recommendation with the District Court expressing the Special
Master's recommendation that the Partnership's properties be
disposed of in an auction conducted by the Financial Advisor under
the direction of the Special Master. The District Court accepted
this Report and Recommendation. On November 4, 1998, the Special
Master filed an additional Report and Recommendation with the
District Court, requesting that the Court withdraw its Order of
Reference to Special Master on the grounds it would be impossible
to effect the sale of the Partnership's properties in a manner that
maximizes the financial return to Limited Partners in a short time
frame, unless certain litigation issues are resolved.
On November 4, 1998, the Special Master filed an additional
Report and Recommendation with the District Court, requesting that
the Court withdraw its Order of Reference to Special Master on the
grounds it would be impossible to effect the sale of the
Partnership's properties in a manner that maximizes the financial
return to Limited Partners in a short time frame, unless certain
litigation issues are resolved. The District Court has accepted
this Report and Recommendation.
On January 21, 1999, plaintiffs filed another amended complaint,
adding additional claims against the General Partners and seeking
class certification under Federal Rule 23 as to the newly added
claims, and as to all other claims in plaintiffs' complaint which
had not been previously certified. The District Court granted
plaintiffs' request for class certification as to all of the claims
not previously certified, and certified all of the claims of the
plaintiffs' complaint under Rule 23(b)(1), 23(b)(2) and 23(b)(3).
In addition, pursuant to the General Partners' motion, the
District Court dismissed as moot certain of plaintiffs' claims,
including plaintiffs' claim that the General Partners violated
certain of the rules of the Securities and Exchange Commission by
allegedly making false and misleading statements in the Proxy. The
District Court similarly dismissed as moot a counterclaim that had
been made against class plaintiffs and their counsel for violating
the federal securities laws.
On April 13, 1999, all of the parties reached a Settlement
Agreement encompassing all matters in the lawsuit. The Settlement
Agreement is subject to the approval by the District Court, and the
Limited Partners will be provided with a written notice concerning
its terms.
Results of Operations
As a result of the settlement agreement that was approved by the
United States District Court for the Northern District of Illinois
on June 18, 1999 the Partnership has begun the liquidation process
and therefore operations are being accounted for on a liquidation
basis of accounting. The settlement agreement gave the Special
Master authority to liquidate the assets of the Partnership in an
orderly manner, to this end the Special Master has retained the
services of the Financial Advisor who is actively marketing the
properties for sale.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk.
The Partnership does not engage in any hedge transactions or
derivative financial instruments.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Two legal actions, as hereinafter described, against the General
Partners of the Partnership and affiliates of such General
Partners, as well as against the Partnership on a nominal basis in
connection with the Merger, have been settled. On April 13, 1999,
all the parties to the litigation reached an agreement to settle
the litigation, subject to the approval by the United States
District Court for the Northern District of Illinois. This
approval was obtained on June 18, 1999. Management believes that
the settlement will not have a material financial impact on the
Partnership. The terms of the settlement agreement, along with a
Notice to the Class, were forwarded to the Limited Partners in the
second quarter. One additional legal action, which was dismissed
on January 28, 1998 had also been brought against the General
Partners of the Partnership and affiliates of such General
Partners, as well as the Partnership on a nominal basis in
connection with the Merger. With respect to these actions the
Partnership and the General Partners and their named affiliates
denied all allegations set forth in the complaints and vigorously
defended against such claims.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission Of Matters To a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports On Form 8-K.
Exhibit 27. Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BY: Brauvin Realty Advisors 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: November 15,1999
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and Treasurer
DATE: November 15, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,210,567
<SECURITIES> 271,706 <F1>
<RECEIVABLES> 79,527
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 30,793,546 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,789,406
<CURRENT-LIABILITIES> 6,283,788
<BONDS> 2,171,737 <F3>
0
0
<COMMON> 24,333,881 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 2,116,144 <F5>
<CGS> 0
<TOTAL-COSTS> 720,869 <F6>
<OTHER-EXPENSES> 136,897 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 25,108
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,283,486
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENTS IN JOINT VENTURE
<F2> "PP&E" REPRESENTS REAL ESTATE HELD FOR SALE
<F3> "BONDS" REPRESENTS MINORITY INTEREST IN JOINT VENTURES
<F4> "COMMON" REPRESENTS NET ASSETS IN LIQUIDATION
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F7> "OTHER EXPENSES" REPRESENTS MINORITY INTEREST AND JOINT
VENTURES' NET INCOME/LOSS
</FN>
</TABLE>
