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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1995
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 36-358013
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (Section 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ X ]
The aggregate sales price of the limited partnership interests of
the registrant (the "Units") to unaffiliated investors of the
registrant during the initial offering period was $38,923,000.
This does not reflect market value. This is the price at which the
Units were sold to the public during the initial offering period.
There is no current market for the Units nor have any Units been
sold within the last 60 days prior to this filing except for Units
sold to or by the registrant pursuant to the registrant's
distribution reinvestment plan as described in the prospectus of
the registrant dated June 17, 1988, as supplemented (the
"Prospectus").
Portions of the Prospectus of the registrant dated June 17, 1988,
as supplemented July 12, 1988, March 1, 1989, April 28, 1989, and
June 7, 1989 and filed pursuant to Rule 424(b) and Rule 424(c)under
the Securities Act of 1933, as amended, are incorporated by
reference into Parts II, III and IV of this Annual Report on Form
10-K.
BRAUVIN HIGH YIELD FUND L.P. II
1995 FORM 10-K ANNUAL REPORT
INDEX
PART I
Page
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 18
PART II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters . . . . . . . . . . . . . . . . . . . 19
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 22
Item 8. Consolidated Financial Statements and Supplementary
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure. . . . . . 29
PART III
Item 10. Directors and Executive Officers of the Partnership.. . . . . 30
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . 32
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . 34
Item 13. Certain Relationships and Related Transactions. . . . . . . . 35
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules,
and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 36
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
PART I
Item 1. Business.
Brauvin High Yield Fund L.P. II (the "Partnership") is a Delaware
limited partnership formed in May 1988 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 would involve "triple-net" leases. It was anticipated
at the time the Partnership first offered its Units (as defined
below) that a majority of these properties would be leased to
operators of national franchise fast food and sit-down restaurants,
automotive service businesses and convenience stores, as well as
banks and savings and loan branches. The leases would provide for
a base minimum annual rent and increases in rent such as through
participation in gross sales above a stated level, fixed increases
on specific dates or indexation of rent to indices such as the
Consumer Price Index. The Partnership sold $38,923,000 of limited
partnership interests (the "Units") commencing June 17, 1988,
pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended, to the public at a price of
$1,000 per Unit (the "Offering"). The Offering closed on September
30, 1989. An additional $3,914,384 of Units has been purchased by
Limited Partners investing their distributions of Operating Cash
Flow in the Partnership's distribution reinvestment plan (the
"Plan") through December 31, 1995. These Units were purchased from
the Units reserved for the Plan after termination of the Offering.
These Units were issued at the Offering price per Unit, less any
amounts per Unit of the Offering price that have been returned to
Participants. Of the Units issued under the Plan as of December
31, 1995, $2,773,086 have been purchased by the Partnership from
investors liquidating their investment and have been retired. The
investors in the Partnership (the "Limited Partners") share in the
benefits of ownership of the Partnership's real property
investments according to the number of Units each owns.
The principal investment objectives of the Partnership are: (i)
distribution of current cash flow from the Partnership's cash flow
attributable to rental income; (ii) capital appreciation; (iii)
preservation and protection of capital; (iv) the potential
for increased income and protection against inflation through
escalation in the base rent or participation and growth in the
sales of the lessees of the Partnership's properties; (v) the
partial shelter of cash distributions for Taxable Class Limited
Partners; and (vi) the production of "passive" income to offset
"passive" losses from other investments.
The General Partners believe that the Partnership has, to date,
met its principal investment objectives as follows: (i)
distributions of current cash flow attributable to rental income;
(ii) capital appears to be appreciating as cash flow is increasing
for individual properties except for the Orlando, Florida and Rock
Hill, Missouri, Avis Lubes and the Albion, Michigan properties
(final determination cannot be made until properties are sold);
(iii) capital is being preserved and protected through routine
upkeep of properties and continued payment of real estate taxes and
insurance premiums; (iv) participation in each lease either through
escalation in the base rent or in the sales of the lessees of the
Partnership's properties; (v) production of "passive income"; and
(vi) the cash distributions for Taxable Class Limited Partners have
been partially sheltered by depreciation, as explained below.
Some tax shelter of cash distributions by the Partnership will
be available to Taxable Class Limited Partners through depreciation
of the underlying properties. Taxable Class Limited Partners will
benefit from the special allocation of all depreciation to the
Units which they acquired from the Partnership because their
reduced taxable income each year will result in a reduction in
taxes due, although no "spill-over" losses are expected. Taxable
income generated by property operations will likely be considered
passive income for federal income tax purposes because Section
469(c)(2) of the Internal Revenue Code states that a passive
activity includes "any rental activity" and, therefore, is
available to offset losses Taxable Class Limited Partners may have
realized in other passive investments.
The terms of the transactions between the Partnership and
affiliates of the General Partners of the Partnership are set forth
in Item 13 below to which reference is hereby made for a
description of such terms and transactions.
The Partnership has no employees.
Market Conditions/Competition
The Partnership has utilized its proceeds available for
investment towards the acquisition of properties. Since the leases
at certain of the Partnership's properties entitle the Partnership
to participate in gross receipts of lessees above fixed minimum
amounts, the success of the Partnership will depend in part on the
ability of those lessees to compete with similar businesses in
their respective vicinities.
The Partnership also competes with many other entities engaged
in real estate investment activities in the disposition of
property. The ability to locate purchasers and the sales prices of
the properties will depend primarily on the success of the
operating properties and the desirability of the location of the
operating properties. The Partnership's objectives during the
liquidation stage include distributing cash flow to the Limited
Partners in excess of their 10% Cumulative Preferred Return, as
hereinafter defined.
Item 2. Properties.
The Partnership is landlord only and does not participate in the
operations of any of the properties discussed herein. All
properties are occupied and all lease payments to the Partnership
are current with the exception of the former Hardee's restaurant
located in Albion, Michigan and the three Chi-Chi's restaurants (as
discussed in the following summary). All properties were paid for
in cash, without any financing. The General Partners believe that
the Partnership's properties are adequately insured.
The Taco Bell restaurant located in Schofield, Wisconsin was sold
in February 1994 (see Item 7). In October 1994, the Partnership
exchanged the Ponderosa restaurant in Apopka, Florida for a
Ponderosa restaurant in Joliet, Illinois (see Item 7).
The following is a summary of the real estate and improvements,
of each of the Ponderosa restaurants, the two Taco Bell
restaurants, the Scandinavian Health Spa, the three Children's
World Learning Centers, the three Avis Lubes, the Hardee's
restaurant, the Blockbuster Video store, the three Chi-Chi's
restaurants, the St. Johns, Michigan property and the Albion,
Michigan property. No property had a cost basis in excess of 10%
of the gross proceeds of the Offering or had rental income in
excess of 10% of the total rental income of the Partnership.
Ponderosas:
Rockford, Illinois
Unit 112 is located at 3725 East State Street. The building,
built in 1969, consists of 5,930 square feet situated on a 31,476
square foot parcel. The building was constructed utilizing wood
siding over concrete block.
Bloomington, Illinois
Unit 128 is located at 1329 East Empire Street. The building,
built in 1970, consists of 4,608 square feet situated on a 60,725
square foot parcel. The building was constructed utilizing wood
siding over concrete block.
Orchard Park, New York
Unit 728 is located at 3019 Union Road. The building, built in
1980, consists of 5,600 square feet situated on a 75,000 square
foot parcel. The building was constructed utilizing wood siding
over concrete block.
In July 1995, Metromedia, the parent of Ponderosa, closed the
Orchard Park, New York restaurant. In exchange for the closed
Ponderosa, the Partnership agreed to accept a Tony Roma's
restaurant in Mesquite, Texas. The Tony Roma's restaurant will
result in additional rent of approximately $2,000 per year plus
percentage rents and future rent escalations upon excercise of
lease renewals.
Oneonta, New York
Unit 740 is located at 333 Chestnut. The building, built in
1979, consists of 5,250 square feet situated on a 61,600 square
foot parcel. The building was constructed utilizing wood siding
over concrete block and facebrick.
Middletown, New York
Unit 779 is located at 163 Dolson Avenue. The building, built
in 1980, consists of 6,120 square feet situated on a 71,708 square
foot parcel. The building was constructed utilizing stained wood
veneer and flagstone.
Joliet, Illinois
Unit 129 is located at 2200 West Jefferson Street. The building,
built in 1970, consists of 4,500 square feet situated on a 57,000
square parcel. The building was constructed utilizing brick and
wood siding. This Ponderosa was received in exchange for Ponderosa
Unit 1055, an original purchase of the Partnership, in December
1994.
In June 1995, Metromedia, the parent of Ponderosa, closed the
Joliet, Illinois Ponderosa with the intent of converting the site
into a Bennigan's restaurant. Subsequently, Metromedia changed its mind
and is looking for a suitable subleasee. Under the terms of its lease,
Metromedia is continuing to pay rent to the Partnership.
Franklin, Ohio
Unit 1071 is located at 3320 Village Drive. The building, built
in 1987, consists of 4,550 square feet situated on a 9,242 square
foot parcel. The building was constructed utilizing wood siding
over concrete block.
Herkimer, New York
Unit 665 is located at the corner of State and King Streets. The
building, built in 1979 and remodeled in 1988, consists of 5,817
square feet situated on a 44,932 square foot parcel. The building
was constructed using wood siding over concrete block and
facebrick.
Sweden, New York
Unit 876 is located at 6460 Brockport-Spencerport Road. The
building, built in 1981 and remodeled in 1987, consists of 5,400
square feet situated on a 47,500 square foot parcel. The building
was constructed using wood paneling over concrete block.
Appleton, Wisconsin
Unit 182 is located at 130 South Bluemond Road. The building,
built in 1969 and renovated in 1986, is a one-story, 5,400 square
foot building constructed with stucco and painted concrete block
with wood trim over wood frame on an approximately 54,450 square
foot site.
Dublin, Ohio
Unit 347 is located at 1671 East Dublin-Granville Road. The
building, built in 1973 and renovated in 1987, is a one-story,
5,360 square foot building constructed with wood siding over wood
frame on an approximately 47,000 square foot site.
Penfield, New York
Unit 755 is located at 1610 Penfield Road. The building, built
in 1981 and renovated in 1987, is a one-story, 5,400 square foot
building constructed with vinyl siding over wood frame on an
approximately 54,900 square foot site.
Pendleton Pike, Indiana
Unit 816 is located at 8502 Pendleton Pike. The building, built
in 1984 and renovated in 1987, is a one-story, 5,400 square foot
building constructed with a prefab stucco facade with an atrium
front and wood panels on the sides of the building on an
approximately 95,000 square foot site.
Eureka, Missouri
Unit 857 is located at 80 Hilltop Village Center. The building,
built in 1981 and renovated in 1986, is a one-story, 5,360 square
foot building contructed with wood over wood frame on an
approximately 71,400 square foot site.
Joint Venture Ponderosas:
The Partnership has a 99% interest in a Joint Venture with an
affiliated public real estate partnership that acquired the
following six Ponderosas:
Louisville, Kentucky
Unit 110 is located at 4801 Dixie Highway. The building, built
in 1969, consists of 5,100 square feet situated on a 62,496 square
foot parcel. The building was constructed utilizing wood siding
over concrete block with flagstone.
Cuyahoga Falls, Ohio
Unit 268 is located at 1641 State Road. The building, built in
1973, consists of 5,587 square feet situated on a 40,228 square
foot parcel. The building was constructed utilizing wood siding
over concrete block.
Tipp City, Ohio
Unit 785 is located at 135 South Garber. The building, built in
1980, consists of 6,080 square feet situated on a 53,100 square
foot parcel. The building was constructed utilizing wood siding
over concrete block.
Mansfield, Ohio
Unit 850 is located at 1075 Ashland Road. The building, built
in 1980, consists of 5,600 square feet situated on a 104,500 square
foot parcel. The building was constructed utilizing wood siding
over concrete block and flagstone.
Tampa, Florida
Unit 1060 is located at 4420 West Gandy. The building, built in
1986, consists of 5,777 square feet situated on a 50,094 square
foot parcel. The building was constructed utilizing wood siding
over concrete block.
Mooresville, Indiana
Unit 1057 is located at 499 South Indiana Street. The building,
built in 1981, consists of 6,770 square feet situated on a 63,525
square foot parcel. The building was constructed utilizing wood
siding over concrete block.
Taco Bells:
Schofield, Wisconsin
Unit 1343 is located at 704 Grand Avenue approximately 2.5 miles
south of Wausau, Wisconsin. The building, built in 1978, consists
of 1,440 square feet situated on a 11,603 square foot parcel. The
building was constructed utilizing painted brick on a concrete
foundation. This property was sold in February 1994. See Item 7.
Lansing, Michigan
Unit 1848 is located at 4238 West Saginaw on the outskirts of
Lansing, Michigan. The building, built in 1979, consists of 1,566
square feet situated on a 21,186 square foot parcel. The building
was constructed utilizing painted brick on a concrete foundation.
Scandinavian Health Spa
The Partnership has a 51% interest in a joint venture with an
affiliated public real estate partnership that purchased the
Scandinavian Health Spa. The Scandinavian Health Spa is a 36,556
square foot health club located on a three-acre parcel in Glendale,
Arizona, a suburb of Phoenix. The Health Spa is a two-story health
and fitness workout facility located within the 195,000 square foot
Glendale Galleria Shopping Center.
Children's World Learning Centers:
Livonia, Michigan
The Children's World Learning Center is located at 38880 West Six
Mile Road in Livonia, Michigan, approximately 12 miles west of
downtown Detroit. The 6,095 square foot, single-story building was
built in 1984 utilizing concrete block and has a pitched roof with
asphalt shingles.
Farmington Hills, Michigan
The Children's World Learning Center is located at 29047 13 Mile
Road in Farmington Hills, Michigan, approximately 26 miles
northwest of Detroit. The 6,175 square foot, single-story building
was built in 1989 utilizing a wood frame and has a pitched roof
with asphalt shingles.
Waterford, Michigan
The Children's World Learning Center is located at 3100 Dixie
Highway in Waterford, Michigan, approximately 35 miles northwest of
Detroit. The 6,175 square foot, single-story building was built in
1988 utilizing a wood frame and has a pitched roof with asphalt
shingles.
Avis Lubes:
Orlando, Florida
The Avis Lube is located at 2699 Delaney Street across the street
from a 91,000 square foot shopping center anchored by Publix and
Woolworths. The building, built in 1989, consists of 1,532 square
feet situated on a 12,150 square foot parcel. The building was
constructed using concrete block and has two oil change bays.
Orlando, Florida
The Avis Lube is located at 1625 South Conway Road across the
street from a 123,000 square foot shopping center anchored by
Publix and Eckard Drugs. The building, built in 1989, consists of
1,947 square feet situated on a 24,939 square foot parcel. The
building was constructed using concrete block and has three oil
change bays.
The lessee of the two Orlando Avis Lubes defaulted on its payment
obligations under the lease in 1991 and in January 1992 vacated
the properties. The Partnership has continued to receive rent
payments from the lessee, which Avis Lube, Inc. guarantees to the
Partnership until the lease expires in June 1996. Avis Lube, Inc.
has subleased the properties until June 1996 to an unaffiliated
sublessee, Florida Express Lubes, Inc. The Partnership has signed
new leases with the sublessee to operate the properties, as lessee,
beginning in June 1996. The leases are for a 14 year term
commencing June 1, 1996. Base annual rent at 2699 Delaney Street
is $48,000 and at 1625 South Conway Road is $54,000. The new lease
rents are lower than the current rents.
Rock Hill, Missouri
The Avis Lube is located at 9725 Manchester Road, two miles west
of the St. Louis, Missouri city limits. The building, built in
1988, consists of 2,940 square feet situated on a 21,143 square
foot parcel. The building was constructed using brick veneer and
has four oil change bays, two with service pit work access and two
with ground level work access.
The lessee of the Rock Hill, Missouri property defaulted on its
payment obligations and vacated the property in April 1994. 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.
Hardee's:
Newcastle, Oklahoma
The restaurant is an outparcel of a 67,500 square foot shopping
center located on the 400 & 500 block of N.W. 32nd. The 3,300
square foot, single-story building was built on a 35,200 square
foot parcel in 1990 utilizing a wood frame with brick facing.
St. Johns, Michigan
The restaurant is an outparcel of a 70,000 square foot Wal-Mart
department store located at the corner of U.S. 27 and Townsend
Road. The 3,300 square foot, single-story building was built on a
47,200 square foot parcel in 1990 utilizing a wood frame with brick
facing.
Albion, Michigan
The restaurant is located at 118 E. Michigan Avenue. The 3,034
square foot, single-story building was built on a 32,670 square
foot parcel in 1990 utilizing a wood frame with brick facing.
Beginning in September 1990, the Partnership did not receive rent
payments on the Hardee's restaurants located in Albion, Michigan
and St. Johns, Michigan (the "Properties"). As a result of
eviction proceedings commenced by the Partnership against the
defaulting lessee on January 5, 1991 due to nonpayment of rent, the
Partnership obtained legal possession of the Albion property on
February 25, 1991 and the St. Johns property on March 18, 1991 and
the leases were terminated. Subsequently, Wolverine Fast Food,
Inc. ("Wolverine"), the defaulting lessee, filed a Chapter 11
bankruptcy proceeding. Upon obtaining possession of the Properties,
the Partnership entered into a lease (the "Interim Lease") with an
affiliate of the Partnership (the "Affiliated Lessee") until a
suitable unaffiliated lessee could be found. Simultaneously, the
Partnership entered into negotiations with Hardee's Food Systems,
Inc. ("Hardee's"), the franchisor, to manage and operate the
Properties until a new franchisee/tenant for the Properties could
be located.
During the period that the properties were operated by the
Affiliated Lessee, the operating expenses and management fees
exceeded the revenues generated by the restaurants. As a result,
the Partnership advanced $398,915 to the Affiliated Lessee as of
December 31, 1993 and 1992, which was fully reserved in 1993 and
written off in 1994.
After taking possession of the Properties, the Partnership, in
conjunction with Hardee's, had sought replacement operators for the
Properties. During that time, Wolverine approached the Partnership
to re-lease the restaurants on a long-term basis. Because the
Partnership had been unable to identify another long-term tenant
for the restaurants and because Hardee's began to actively support
Wolverine and substantial improvement in the performance of the
remaining Wolverine restaurants was reported, the Partnership
entered into negotiations with Wolverine to re-lease the
Properties.
As a result of discussions with Wolverine, the Partnership agreed
to lease the Properties to Wolverine, Kenneth Schiefelbein, Barbara
Schiefelbein and Jon Guiles, individual principals of Wolverine,
for a period of 20 years. The lease term commenced at the St.
Johns property on April 1, 1992 and June 1, 1992 at the Albion
property. Beginning February 1993, the St. Johns property and
beginning July 1993 the Albion property became seriously delinquent
on payments of rent to the Partnership. Although the tenant made
irregular rent payments, these delinquencies increased each month
throughout the remainder of 1993. In December 1993, Wolverine
abandoned the St. Johns property and in January 1994, the Albion
property was vacated. On February 2, 1994, the Wolverine petition
to the Bankruptcy court was modified from a Chapter 11 to a Chapter
7 filing. In conjunction with the lease negotiations, as well as
with the lawsuits filed by the Partnership against Schiefelbein and
Guiles, Schiefelbein and Guiles executed agreements with the
partnership for non-dischageable debt obligations. A
non-dischargeable judgement in the amount of $2.5 million was entered
against Schiefelbein and a non-dischargeable judgement in the amount of
$1.5 million was entered against Guiles.
The Partnership entered into a lease with a new tenant, Jasaza,
Inc., to operate the Albion property as a Hardee's restaurant. The
base rent on the property began at a level below the original lease
with Wolverine but was to increase each year. In addition,
starting in year three of the lease, percentage rents was to be
due. On April 8, 1994, the Partnership was notified that Jasaza,
Inc., the replacement tenant, was terminating its lease at the
Albion Hardee's as of April 12, 1994. The Partnership continues to
actively market this property for a replacement tenant.
During 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 the real estate for the St.
Johns, Michigan and Albion, Michigan properties. This allowance
has been recorded as a reduction of the properties' cost, and
allocated to the land and building based on the original
acquisition percentages of 30% (land) and 70% (building).
During the fourth quarter of 1994, the Partnership executed a
lease with a Dairy Queen franchisee to be the new tenant at the St.
Johns, Michigan property. The lease is for a five year term and
commenced February 1, 1995. Base rent is $2,500 per month with
monthly percentage rent of 5% due after monthly sales exceed
$37,500. The lease provides an option to renew for one five year
period. The new lease rent is lower than the rent from the
previous tenant.
Blockbuster Video:
South Orange, New Jersey
The video store is located at 57 South Orange Avenue in downtown
South Orange. The 6,705 square foot brick building was completely
renovated in 1990 and consists of a primary level, a mezzanine
level plus a full basement for storage.
Chi-Chi's:
Richmond, Virginia
Unit 353 is located at 9135 West Broad Street in Richmond and
consists of a 7,270 square foot restaurant with a seating capacity
of 280. The property was built in January 1990 and is situated on
approximately one acre of land.
Charlotte, North Carolina
Unit 373 is located at 2522 Sardis Road North at the intersection
of Independence Boulevard. The property is situated on a 1.5 acre
parcel and consists of a 7,270 square foot restaurant with a
seating capacity for 280. The property opened in May 1990.
Clarksville, Tennessee
Unit 366 is located in Governor's Square Shopping Center at 2815
Guthrie Road in Clarksville. The property consists of a 5,678
square foot restaurant with seating for 180 people and is situated
on an approximately 50,000 square foot parcel of land. The
property opened in May 1990.
During 1995 Chi-Chi's, the sub-tenant under the Foodmaker master
lease, closed each of its three restaurants owned by the
Partnership because they were not profitable. Under the terms of
the three leases, Foodmaker, the master tenant and guarantor, is
continuing to pay rent for the properties.
Chi-Chi's has undertaken to release the three closed restaurants.
In March 1996, a potential sub-tenant executed a second sub-lease
with Chi-Chi's for the Charlotte, North Carolina property. This
sub-lease is currently being reviewed by both Foodmaker and the
Partnership and must be accepted by all three parties before it
becomes effective. Foodmaker will continue to be the guarantor
under terms of the second sub-lease.
Foodmaker owns, operates and franchises Jack In The Box, a chain
of fast-food restaurants located principally in the western and
southwestern United States. Until January 27, 1994, Foodmaker also
owned Chi-Chi's, Inc. ("Chi-Chi's"), a chain of full-service,
casual Mexican restaurants located primarily in the Midwestern and
Midatlantic United States.
For the year ended October 31, 1995, Foodmaker recorded revenues
of $1.019 billion from their 863 franchise owned and 389 company
owned stores.
The following table summarizes the operations of the
Partnership's properties.
BRAUVIN HIGH YIELD FUND L.P. II
SUMMARY OF OPERATING DATA
DECEMBER 31, 1995
PERCENT OF 1995 1995 LEASE
PURCHASE ORIGINAL RENTAL PERCENT EXPIRATION RENEWAL
PROPERTIES PRICE UNITS SOLD INCOME OF TOTAL DATES OPTIONS
51% OF 1 SCANDINAVIAN HEALTH SPA $ 2,677,500 6.9% $ 364,440 9.5% 2009 4 FIVE YEAR OPTIONS
99% OF 6 PONDEROSA RESTAURANTS 5,628,150 14.5% 721,316 18.8% 2003 4 FIVE YEAR OPTIONS
TACO BELL RESTAURANT-LANSING, MI 381,200 1.0% 66,625 1.7% 2003 NONE
TACO BELL RESTAURANT-
SCHOFIELD, WI (A) 246,300 0.6% 0 0.0% -- NONE
14 PONDEROSA RESTAURANTS 12,269,992 31.5% 1,503,497 39.2% 2003-2004 2 FIVE YEAR OPTIONS
3 CHILDRENN'S WORLD LEARNING CENTER 2,368,922 6.1% 292,231 7.6% 2004-2009 2 FIVE YEAR OPTIONS
3 AVIS LUBE OIL CHANGE CENTERS 1,539,964 4.0% 223,377 5.8% 2010 2 TEN YEAR OPTIONS
HARDEE'S RESTAURANT-ST. JOHNS, MI 484,512 1.2% 63,211 1.7% 2010 NONE
ALBION, MI PROPERTY (B) 894,223 2.3% 32,272 0.9% -- 1 FIVE YEAR OPTION
BLOCKBUSTER VIDEO RENTAL 1,100,000 2.8% 137,789 3.6% 2010 2 TEN YEAR OPTIONS
3 CHI-CHI'S RESTAURANTS 3,369,000 8.7% 430,050 11.2% 2011 4 FIVE YEAR OPTIONS
$31,840,879 81.9% $3,834,808 100.0%
NOTE - THE FORMAT OF THIS SCHEDULE DIFFERS FROM THE INCOME STATEMENT OF THE PARTNERSHIP.
THIS SCHEDULE ALLOCATES THE PARTNERSHIP'S SHARE OF PURCHASE PRICE AND RENTAL INCOME FORM EACH JOINT VENTURE.
(A) SOLD FEBRUARY 18, 1994
(B) RELEASED TO DAIRY QUEEN FRANCHISEE. LEASE COMMENCED FEBRUARY 1, 1995.
(C) FOR LEASE
Risks of Ownership
The possibility exists that the tenants of the Partnership's
properties may be unable to fulfill their obligations pursuant to
the terms of their leases, including making base rent or percentage
rent payments to the Partnership. Such a default by the tenants or
a premature termination of any one of the leases could have an
adverse effect on the financial position of the Partnership. As
discussed in Items 2 and 7, the past tenant in the Partnership's
Albion, Michigan and St. Johns, Michigan Hardees' is in default on
its leases. The St. Johns, Michigan property has been re-leased at
a lower base rent with the new tenant paying for all remodeling and
capital improvements needed. The Partnership may be unable to
successfully locate a substitute tenant for the Albion, Michigan
property due to the fact that the building had been designed or
built primarily to house a specific operation. Thus, the Albion,
Michigan property and other Partnership properties may not be
readily marketable to a new tenant without substantial capital
improvements or remodeling. Such improvements may require
expenditure of Partnership funds otherwise available for
distribution. In addition, because in excess of 30% of the
Partnership's cash available for investment has been invested in
properties operated as Ponderosa family restaurants, the
Partnership is subject to some risk of loss should adverse events
affect Ponderosa and in turn adversely affect the Ponderosa
lessees' ability to pay rent to the Partnership.
Item 3. Legal Proceedings.
See the discussion in Items 2 and 7 with respect to legal
proceedings initiated by the Partnership against the defaulting
lessee of the Hardees' restaurants located in Albion, Michigan and
St. Johns, Michigan.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Units and Related Security
Holder Matters.
At December 31, 1995, there were approximately 2,690 Limited
Partners in the Partnership. There is no established public
trading market for Units and it is not anticipated that there will
be a public market for Units. Neither the Corporate General
Partner nor the Partnership are obligated, but reserve the right,
to redeem or repurchase the Units. Units may also be purchased by
the Plan. Any Units so redeemed or repurchased shall be retired.
Pursuant to the terms of the Agreement, there are restrictions
on the ability of the Limited Partners to transfer their Units. In
all cases, the General Partners must consent to the substitution of
a Limited Partner.
Cash distributions to Limited Partners for 1995, 1994 and 1993
were $3,582,492, $3,726,277 and $3,569,741, respectively. Of the
$3,726,277 cash distributions to Limited Partners in 1994, $248,257
was a return of capital. Distributions are paid four times per
year, within 60 days after the end of each calendar quarter. The
Partnership provided for a reserve in its initial offering to fund
cash distributions in excess of operating cash flow. Such payments
from the reserve represent a return of capital and represent less
than 2% of cumulative distributions through February 15, 1996.
Item 6. Selected Financial Data.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
Selected Income Statement Data:
Rental Income (a) $4,192,243 $4,198,955 $4,128,233
Interest Income 68,435 31,248 12,876
Net Income 3,039,738 2,564,375 2,346,355
Net Income Per Unit (b) $75.82 $64.69 $57.82
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 1,374,779 $1,106,917 $ 799,390
Land and Buildings 35,951,164 35,951,164 36,727,348
Total Assets 33,207,008 33,630,071 34,704,875
Cash Distributions to
Limited Partners (c) 3,582,492 3,478,020 3,569,741
Cash Distributions to Limited
Partners Per Unit (b) $89.36 $87.74 $90.22
(a) This includes $67,561, $73,122 and $134,295 of non-cash income
related to the change in the deferred rent receivable balance
for 1995, 1994 and 1993, respectively.
(b) Net income per Unit and 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.
(c) This includes $9,060, $14,717 and $10,909 paid to various states
for income taxes on behalf of all Limited Partners for the years
1995, 1994 and 1993, respectively. The above selected financial
data should be read in conjunction with the financial statements
and the related notes appearing elsewhere in this annual report.
Item 6. Selected Financial Data - continued.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Year Ended December 31, 1992 and 1991
1992 1991
Selected Income Statement Data:
Rental Income $4,064,706 $3,890,615
Interest Income 20,440 98,369
Net Income 2,936,205 2,750,029
Net Income Per Unit (a) $72.62 $68.18
Selected Balance Sheet Data:
Cash and Cash Equivalents $ 548,439 $ 534,673
Land and Buildings 36,727,348 36,727,348
Total Assets 35,626,490 36,220,659
Cash Distributions to
Limited Partners (b) 3,456,204 3,535,493
Cash Distributions to Limited
Partners Per Unit (a) $87.68 $89.90
(a) Net income per Unit and 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.
(b) This includes $7,856 and $10,323 paid to various states for
income taxes on behalf of all Limited Partners for the years
1992 and 1991, respectively.
The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing elsewhere in this
annual report.
Item 7. 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 $3,914,384 through December 31, 1995 from Limited
Partners investing their distributions of Operating Cash Flow in
additional Units. As of December 31, 1995, Units valued at $2,773,086
have been purchased by the Partnership from Limited Partners liquidating
their 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 three
Children's World Learning Centers, three Hardee's restaurants, three
Avis Lubes, and a Blockbuster Video store. 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.
Beginning in September 1990, the Partnership did not receive rent
payments on the Hardee's restaurants located in Albion, Michigan and St.
Johns, Michigan (the "Properties"). As a result of eviction proceedings
commenced by the Partnership against the defaulting lessee on January 5,
1991 due to nonpayment of rent, the Partnership obtained legal
possession of the Albion property on February 25, 1991 and the St. Johns
property on March 18, 1991 and the leases were terminated.
Subsequently, Wolverine Fast Food, Inc. ("Wolverine"), the defaulting
lessee, filed a Chapter 11 bankruptcy proceeding. Upon obtaining
possession of the Properties, the Partnership entered into a lease
(the "Interim Lease") with an affiliate of the Partnership (the
"Affiliated Lessee") until a suitable unaffiliated lessee could be
found. Simultaneously, the Partnership entered into negotiations with
Hardee's Food Systems, Inc. ("Hardee's"), the franchisor, to manage and
operate the Properties until a new franchisee/tenant for the Properties
could be located.
During the period that the Properties were operated by the Affiliated
Lessee, the operating expenses and management fees exceeded the revenues
generated by the restaurants. As a result, the Partnership advanced
$398,915 to the Affiliated Lessee as of December 31, 1993 and 1992,
which was fully reserved in 1993 and written off in 1994.
After taking possession of the Properties, the Partnership, in
conjunction with Hardee's, had sought replacement operators for the
Properties. During that time, Wolverine approached the Partnership to
re-lease the restaurants on a long-term basis. Because the Partnership
had been unable to identify another long-term tenant for the restaurants
and because Hardee's began to actively support Wolverine and reported
substantial improvements in the performance of the remaining Wolverine
restaurants was reported, the Partnership entered into negotiations with
Wolverine to re-lease the Properties.
As a result of discussions with Wolverine, the Partnership agreed to
lease the Properties to Wolverine, Kenneth Schiefelbein, Barbara
Schiefelbein and Jon Guiles, individual principals of Wolverine, for a
period of 20 years. The lease term commenced at the St. Johns property
on April 1, 1992 and June 1, 1992 at the Albion property. Beginning
February 1993, the St. Johns property and beginning July 1993 the Albion
property became seriously delinquent on payments of rent to the
Partnership. Although the tenant made irregular rent payments, these
delinquencies increased each month throughout the remainder of 1993. In
December 1993, Wolverine abandoned the St. Johns property and in
January 1994 the Albion property was vacated. On February 2, 1994, the
Wolverine petition to the Bankruptcy court was modified from a Chapter
11 to a Chapter 7 filing. In conjunction with the lease negotiations,
as well as with the lawsuits filed by the Partnership against
Schiefelbein and Guiles, Schiefelbein and Guiles executed agreements
with the partnership for non-dischageable debt obligations. A
non-dischargeable judgement in the amount of $2.5 million was entered
against Schiefelbein and a non-dischargeable judgement in the amount of
$1.5 million was entered against Guiles.
The Partnership entered into a lease with a new tenant, Jasaza, Inc.,
to operate the Albion property as a Hardee's restaurant. The base rent
on the property began at a level below the original lease with Wolverine
but increases each year. In addition, starting in year three of the
lease, percentage rents was to be due. On April 8, 1994, the
Partnership was notified that Jasaza, Inc., the replacement tenant was
terminating its lease at the Albion Hardee's as of April 12, 1994. The
Partnership continues to actively market this property for a replacement
tenant.
During 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 the real estate for the St. Johns, Michigan and
Albion, Michigan properties. This allowance has been recorded as a
reduction of the properties' cost, and allocated to the land and
building based on the original acquisition percentages of 30% (land) and
70% (building).
During the fourth quarter of 1994, the Partnership executed a lease
with a Dairy Queen franchisee to be the new tenant at the St. Johns,
Michigan property. The lease is for a five year term and commenced
February 1, 1995. Base rent is $2,500 per month with monthly percentage
rent of 5% due after monthly sales exceed $37,500. The lease provides
an option to renew for one five year period. The new lease rent is
lower than the rent from the previous tenant.
On February 18, 1994, the Partnership sold the Taco Bell located in
Schofield, Wisconsin to an unaffiliated third party. The following is
a calculation of the gain realized on the sale:
Sale proceeds $ 375,000
Less net book value:
Land 82,856
Building 193,328
Accumulated depreciation (27,927)
Net book value 248,257
Realized gain $ 126,743
All amounts receivable on this property were collected at the sale.
The sale proceeds of $375,000 were distributed to the Limited Partners
on November 15, 1994.
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.
The lessee of the two Orlando Avis Lubes defaulted on its payment
obligations under the lease in 1991 and in January 1992 vacated the
properties. The Partnership has continued to receive rent payments from
the lessee, which Avis Lube, Inc. guarantees to the Partnership until
the lease expires in June 1996. Avis Lube, Inc. has subleased the
properties until June 1996 to an unaffiliated sublessee, Florida
Express Lubes, Inc. The Partnership has signed new leases with the
sublessee to operate the properties, as lessee, beginning in June 1996.
The leases are for a 14 year term commencing June 1, 1996. Base annual
rent at 2699 Delaney Street is $48,000 and at 1625 South Conway Road is
$54,000. The new lease rents are lower than the current rents.
The Partnership has made distributions to Limited Partners for
calendar years 1993, 1994 and 1995 (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 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 December 31, 1995, 1994 and 1993, $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.
Below is a table summarizing the five year 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 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.
Future increases in the Partnership's distributions and elimination
of prior shortfalls will largely depend on successfully re-leasing the
vacant Albion, Michigan property and increased sales at the
Partnership's properties resulting in additional percentage rent.
Rental increases, to a lesser extent, will occur due to increases in
certain leases based upon increases in the Consumer Price Index or
scheduled increases in base rent.
The Partnership has engaged an independent third party to perform
valuations of the Partnership's investments in real estate as of
December 31, 1995.
Results of Operations - 1995
Results of operations for the year ended December 31, 1995 reflected
net income of $3,039,738 compared to $2,564,375 for the year ended
December 31, 1994, an increase of $475,363. The increase in net income
is mainly due to reduced expenses in 1995 compared to 1994 which was a
result of the Partnership's 1994 recognition of a provision for
impairment on other than a temporary decline in the value of the real
estate of $500,000 for the St. Johns, Michigan and the Albion, Michigan
properties. Additionally, expenses declined for the year ended December
31, 1995 compared to 1994 as a result of a decline in the provision for
bad debts of approximately $68,000 that was established for the St.
Johns, Michigan and Albion, Michigan properties. Another factor that
caused income to increase for the year ended in 1995 compared to 1994
was an increase in interest income of approximately $37,000, which was
the result of higher cash balances during the year. Partially
offsetting these increases in net income was the recognition in 1994 of
the gain on the sale of the Taco Bell restaurant of approximately
$127,000.
Results of Operations - 1994
Results of operations for the year ended December 31, 1994 reflected
net income of $2,564,375 compared to $2,346,355 for year ended December
31, 1993, an increase of approximately $218,000. The increase in income
was mainly due to the gain from the sale of the Taco Bell restaurant of
approximately $127,000 and as a result of increases in base rent
based upon increases in the Consumer Price Index. The increase in
interest income of approximately $18,000 is a result of both higher
interest rates and higher cash balances during the year. Total expenses
increased approximately $12,000 as a result of a provision for
impairment on other than a temporary decline in the value of the real
estate of $500,000 for the St. Johns, Michigan and Albion, Michigan
properties in 1994 offset by a decrease in bad debt expense of
approximately $495,000 due to the provision for bad debts established in
1993 for the St. Johns, Michigan and Albion, Michigan properties. In
addition, general and administrative expense increased as a result of
the Taco Bell sale and Ponderosa property exchange. This increase was
slightly offset by the decrease in depreciation expense due to the
reduction in properties as a result of the Taco Bell sale.
Results of Operations - 1993
Results of operations for the years ended December 31, 1993 and 1992
reflected net income of $2,346,355 and $2,936,205, respectively. Rental
income increased in 1993 by approximately $60,000 over 1992 as a result
of base rental increases based upon increases in the Consumer Price
Index and scheduled increases in base rent based upon the original lease
terms. Management fees are subordinated to a 9% distribution to Limited
Partners, which was achieved in 1993 but not in 1992. Management fees
incurred for 1993 were $41,205. Total expenses increased by
approximately $585,000 which was primarily a result of a provision for
bad debts established for the Hardees restaurants located in St. Johns
and Albion, Michigan.
Impact of Inflation
The Partnership anticipates that the operations of the Partnership
will not be significantly impacted by inflation. To offset any
potential adverse effects of inflation, the Partnership has entered into
"triple-net" leases with tenants, making the tenants responsible for all
operating expenses, insurance and real estate taxes. In addition,
several of the leases require escalations of rent based upon increases
in the Consumer Price Index, scheduled increases in base rents, or
tenant sales.
Other Information
On March 15, 1989, Mr. David M. Strosberg resigned as an employee of
Brauvin Realty Services, Inc. and Brauvin Advisory Services, Inc.
Currently, Mr. Strosberg remains an Individual General Partner of the
Partnership. The remaining General Partners do not believe that
Mr. Strosberg's resignation has had an adverse effect, and should not in
the future have any adverse effect, on the operations of the
Partnership.
Item 8. Consolidated Financial Statements and Supplementary Data.
See Index to Consolidated Financial Statements and Schedule on Page
F-1 of this Annual Report on Form 10-K for consolidated financial
statements and financial statement schedule, where applicable.
The supplemental financial information specified in Item 302 of
Regulation S-K is not applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
During the Partnership's two most recent fiscal years, there has been
no changes in, or disagreements with, the accountants.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partners of the Partnership are:
Brauvin Realty Advisors II, Inc., an Illinois corporation
Mr. Jerome J. Brault, individually
Mr. Cezar M. Froelich, individually
Mr. David M. Strosberg, individually
Brauvin Realty Advisors II, Inc. (the "Corporate General Partner"),
was formed under the laws of the State of Illinois in 1988, with its
issued and outstanding shares being owned by Messrs. Jerome J. Brault
(beneficially)(44%), Cezar M. Froelich (44%) and David M. Strosberg
(12%).
The principal officers and directors of the Corporate General Partner
are:
Mr. Jerome J. Brault . . . . . . Chairman of the Board of Directors,
President, Chief Executive Officer and Director
Mr. Thomas J. Coorsh . . . . . . Treasurer and Chief Financial Officer
Mr. James L. Brault. . . . . . . Vice President and Secretary
The business experience during the past five years of the principal
officers and directors of the Corporate General Partner are as follows:
Mr. Jerome J. Brault (age 62) is Director, Chairman of the Board and
President of Brauvin Properties, Inc., Brauvin Realty Properties, Inc.,
Brauvin Realty Partners, Inc., Brauvin Ventures, Inc., Brauvin
Associates, Inc., Brauvin 6, Inc., Brauvin Advisory Services, Inc.,
Brauvin Securities Inc. and Brauvin Restaurant Properties, Inc. He is
Director, President, Chairman of the Board, Chief Executive Officer and
Secretary of Brauvin Realty Services, Inc., Brauvin Management Company
and Brauvin Financial, Inc. He is President and Director of Brauvin,
Inc. He is also Director, President, Chairman of the Board and Chief
Executive Officer of Brauvin Chili's Inc., Brauvin Realty Advisors,
Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III,
Inc., Brauvin Realty Advisors IV, Inc., Brauvin Realty Advisors V, LLC,
and Brauvin Net Lease V, Inc., as well as an individual general partner
in seven other affiliated public limited partnerships. Prior to Mr.
Brault's affiliation with the Brauvin organization, he was the Chief
Operating Officer of Burton J. Vincent, Chesley & Company, a New York
Stock Exchange member firm. He is the father of James L. Brault, an
officer of certain affiliated Brauvin entities.
Mr. Cezar M. Froelich (age 50) is a principal with the Chicago law
firm of Shefsky Froelich & Devine Ltd., which acts as counsel to the
General Partners, the Partnership and certain of their affiliates. His
practice has been primarily in the fields of securities and real estate
and he has acted as legal counsel to various public and private real
estate limited partnerships, mortgage pools and real estate investment
trusts. Mr. Froelich is an individual general partner in seven other
affiliated public limited partnerships and a shareholder in Brauvin
Management Company and Brauvin Financial Inc. Mr. Froelich resigned as
a director of the corporate general partner in December 1994.
Mr. Thomas J. Coorsh (age 46) is the Treasurer and Chief Financial
Officer of Brauvin Chili's, Inc., Brauvin Properties, Inc., Brauvin
Realty Properties, Inc., Brauvin Realty Partners, Inc., Brauvin
Ventures, Inc., Brauvin 6, Inc., Brauvin Realty Advisors, Inc., Brauvin
Realty Advisors II, Inc., Brauvin Realty Advisors III, Inc., Brauvin
Realty Advisors IV, Inc., Brauvin Realty Advisors V, LLC, Brauvin Net
Lease V, Inc., Brauvin Management Company, Brauvin Financial, Inc.,
Brauvin Securities, Inc., Brauvin Inc., Brauvin Associates, Inc.,
Brauvin Advisory Services, Inc. and Brauvin Restaurant Properties, Inc.
He is responsible for the overall financial management of Brauvin
Management Company, Brauvin Financial, Inc. and related partnerships.
He is responsible for partnership accounting and financial reporting to
regulatory agencies. From May 1992 until joining Brauvin in November of
1993, Mr. Coorsh was self-employed as a business consultant. Between
1990 and 1992, Mr. Coorsh was the senior vice president of finance and
chief accounting officer for Lexington Homes, an Illinois-based
homebuilder. In 1990 Mr. Coorsh left The Balcor Company, a major real
estate syndicator, property manager and lender to join Lexington Homes.
Mr. Coorsh began work at The Balcor Company in 1985 and his most recent
position was first vice president - finance. Mr. Coorsh's
responsibilities at Balcor included property management accounting and
finance; treasury; and financial and strategic planning. Before joining
Balcor, Mr. Coorsh held financial positions with several large, public
corporations headquartered in the Chicago metropolitan area. Mr. Coorsh
is a Certified Public Accountant.
Mr. James L. Brault (age 35) is a Vice President and Secretary of
Brauvin Chili's, Inc., Brauvin Properties, Inc., Brauvin Realty
Properties, Inc., Brauvin Realty Partners, Inc., Brauvin Ventures,
Inc., Brauvin 6, Inc., Brauvin Realty Advisors, Inc., Brauvin Realty
Advisors II, Inc., Brauvin Realty Advisors III, Inc., Brauvin Associates
Inc., Brauvin Inc., Brauvin Securities, Inc. and Brauvin Restaurant
Properties, Inc. He is Executive Vice President and Secretary of
Brauvin Advisory Services, Inc. He is also Executive Vice President,
Secretary and Director of Brauvin Realty Advisors IV, Inc. and Brauvin
Realty Advisors V, LLC and Brauvin Net Lease V, Inc. Additionally, he
is the Executive Vice President and Assistant Secretary of Brauvin
Management Company and Brauvin Financial, Inc., as well as a Director of
Brauvin Financial, Inc. Prior to joining the Brauvin organization in
May 1989, he was a Vice President of the Commercial Loan Division of the
First National Bank of Chicago, based in their Washington, D.C. office.
Mr. Brault joined the First National Bank of Chicago in 1983 and his
responsibilities included the origination and management of commercial
real estate loans, as well as the direct management of a loan portfolio
in excess of $150,000,000. Mr. Brault is a son of Mr. Jerome J. Brault,
the managing general partner of the Partnership.
Item 11. Executive Compensation.
(a & b) The Partnership is required to pay certain fees, make
distributions and allocate a share of the profits and losses of the
Partnership to the Corporate General Partner and its affiliates as
described under the caption "Compensation Table" on pages 10 to 12 of
the Partnership's Prospectus, as supplemented, and the sections of the
Agreement entitled "Distribution of Operating Cash Flow," "Allocation of
Profits, Losses and Deductions," "Distribution of Net Sale or
Refinancing Proceeds" and "Compensation of General Partners and Their
Affiliates" on pages A-10 to A-15 of the Agreement, attached as Exhibit
A to the Prospectus. The relationship of the Corporate General Partner
(and its directors and officers) to its affiliates is set forth above in
Item 10. Reference is also made to Note 2 of the Notes to the
Consolidated Financial Statements filed with this annual report for a
description of such distributions and allocations.
The General Partners are entitled to receive Acquisition Fees for
services rendered in connection with the selection, purchase,
construction or development of any property by the Partnership whether
designated as real estate commissions, acquisition fees, finders' fees,
selection fees, development fees, construction fees, non-recurring
management fees, consulting fees or any other similar fees or
commissions, however designated and however treated for tax or
accounting purposes. Aggregate Acquisition Fees payable to all persons
in connection with the purchase of Partnership properties may not
exceed such compensation as is customarily charged in arm's-length
transactions by others rendering similar services as an ongoing public
activity in the same geographic locale and for comparable properties.
The aggregate Acquisition Fees to be paid to the General Partners and
their affiliates shall not exceed 6% of the gross proceeds of the
Offering. No amounts were paid in 1993, 1994 or 1995 since the
acquisition process was completed in 1991.
As described in Item 7, the General Partners were also entitled to
receive any portion of the 1% of the gross proceeds of the Offering
placed in the Distribution Guaranty Reserve not utilized to pay the
Distribution Guaranty through the Distribution Guaranty Termination
Date. The General Partners received approximately $140,000 in
consideration for providing such guaranty to the Partnership through the
Distribution Guaranty Termination date of July 28, 1989. However, 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 December 31, 1995, 1994, and 1993,
$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
$62,000 at December 31, 1992 and $23,000 at December 31, 1993 and 1994
and $0 at December 31, 1995 because Operating Cash Flow has exceeded
distributions since December 31, 1990. The General Partners'
commitment, at December 31, 1995, has been reduced accordingly.
Advances under the commitment are to be funded by the General Partners
on an as needed basis, however, no cash advances under the commitment
have been made through December 31, 1995.
An affiliate of the General Partners provides leasing and re-leasing
services to the Partnership in connection with the management of
Partnership properties. The maximum property management fee payable to
the General Partners or their affiliates shall be equal to 1% of the
gross revenues of each Partnership property or interest therein,
however, the receipt of such property management fee by the General
Partners or their affiliates is subordinated to the receipt by the
Limited Partners of a 9% non-cumulative, non-compounded annual return on
Adjusted Investment. An affiliate of the General Partners received
$42,134, $41,934 and $41,205 in 1995, 1994 and 1993 respectively, for
providing such services to the Partnership.
(c, d, e & f) Not applicable.
(g) The Partnership has no employees and pays no employee
or director compensation.
(h & i) Not applicable.
(j) Compensation Committee Interlocks and Insider
Participation. Since the Partnership has no employees,
it did not have a compensation committee and is not
responsible for the payment of any compensation.
(k) Not applicable.
(l) Not applicable.
The following is a summary of all fees, commissions and other expenses
paid or payable to the General Partners or its affiliates for the years
ended December 31, 1995, 1994 and 1993:
1995 1994 1993
Selling commissions $48,712 $45,464 $47,206
Management fees 42,134 41,934 41,205
Reimbursable operating expenses 80,583 74,400 73,526
Legal fees 11,642 18,477 20,244
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
(a) No person or group is known by the Partnership to own
beneficially more than 5% of the outstanding Units of
the Partnership.
(b) None of the officers and directors of the Corporate General
Partner of the Partnership purchased Units.
(c) The Partnership is not aware of any arrangements, the operators
of which may result in a change in control of the Partnership.
No officer or director of the Corporate General Partner possesses a
right to acquire beneficial ownership of Units. The General Partners of
the Partnership will share in the profits, losses and distributions of
the Partnership as outlined in Item 11, "Executive Compensation."
Item 13. Certain Relationships and Related Transactions.
(a & b) The Partnership is entitled to engage in various transactions
involving affiliates of the Corporate General Partner of the
Partnership, as described in the sections of the
Partnership's Prospectus, as supplemented, entitled
"Compensation Table" and "Conflicts of Interest" at pages 10
to 15 and the section of the Agreement entitled "Rights,
Duties and Obligations of General Partners" at pages A-17 to
A-20 of the Agreement. The relationship of the Corporate
General Partner to its affiliates is set forth in Item 10.
Cezar M. Froelich is an individual general partner of the
Partnership and is also a principal of the law firm of
Shefsky Froelich & Devine Ltd., which firm acts as
securities and real estate counsel to the Partnership, the
General Partners and certain of their respective affiliates.
(c) The General Partners owe the Partnership, at December 31,
1995, approximately $140,000.
(d) There have been no transactions with promoters.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and
Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Consolidated Financial Statements and Schedule indicated
in Part II, Item 8 "Consolidated Financial Statements and
Supplementary Data." (See Index to Consolidated Financial
Statements and Schedule on page F-1 of Form 10-K).
(3) Exhibits required by the Securities and Exchange
Commission Regulation S-K Item 601:
(19)(a) Amendment to Distribution Reinvestment Plan
(22) Subsidiaries of the Registrant.
(27) Financial Data Schedule
The following exhibits are incorporated by reference from the
Registrant's Registration Statement (File No. 33-21928) on Form S-11
filed under the Securities Act of 1933:
Exhibit No. Description
3.(a) Restated Limited Partnership Agreement
3.(b) Articles of Incorporation of Brauvin Realty
Advisors II, Inc.
3.(c) By-Laws of Brauvin Realty Advisors II, Inc.
3.(d) Amendment to the Certificate of Limited
Partnership of the Partnership
10.(a) Escrow Agreement
(b) The Partnership did not file any report on Form 8-K during the
fourth quarter of 1995.
(c) An annual report for the fiscal year 1995 will be sent to the
Limited Partners subsequent to this filing and the partnership
will furnish copies of such report to the Securities and Exchange
Commission at that time.
The following exhibits are incorporated by references to the
Registrant's fiscal year ended December 31, 1994 Form 10-K (File No. 0-17756):
Exhibit No. Description
(10)(b)(1) Management Agreement
(28) Pages 8-15 of the Partnership's Prospectus dated
June 17, 1988 as supplemented, and pages A-10 to
A-15 and A-17 to A-20 of the Agreement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BRAUVIN HIGH YIELD FUND L.P. II
BY: Brauvin Realty Advisors II, Inc.
Corporate General Partner
By:/s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
By:/s/ Thomas J. Coorsh
Thomas J. Coorsh
Chief Financial Officer and Treasurer
By:/s/ James L. Brault
James L. Brault
Vice President and Secretary
INDIVIDUAL GENERAL PARTNERS
/s/ Jerome J. Brault
Jerome J. Brault
/s/ Cezar M. Froelich
Cezar M. Froelich
David M. Strosberg
DATED: MARCH 29, 1996
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Page
Independent Auditors' Report . . . . . . . . . . . . . . . .. F-2
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994 . .F-3
Consolidated Statements of Operations, for the years
ended December 31, 1995, 1994 and 1993. . . . . . . . . . .F-4
Consolidated Statements of Partners' Capital, for the years
ended December 31, 1995, 1994 and 1993. . . . . . . . . . .F-5
Consolidated Statements of Cash Flows, for the years ended
December 31, 1995, 1994 and 1993. . . . . . . . . . . . . .F-6
Notes to Consolidated Financial Statements. . . . . . . . .F-7
Schedule III -- Real Estate and Accumulated Depreciation,
December 31, 1995. . . . . . . . . . . . . . . . . . . . . .F-21
All other schedules provided for in Item 14(a)(2) of Form 10-K are
either not required, not applicable, or immaterial.
INDEPENDENT AUDITORS' REPORT
To the Partners
Brauvin High Yield Fund L.P. II
Chicago, Illinois
We have audited the accompanying consolidated balance sheets of
Brauvin High Yield Fund L.P. II(a limited partnership) and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements
of operations, partners' capital, and cash flows for each of the three
years in the period ended December 31, 1995. Our audits also included
the financial statement schedule listed in the Index to Consolidated
Financial Statements and Schedule on page F-1. These consolidated
financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is
to express an opinion on these consolidated financial statements and
the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Brauvin High Yield
Fund L.P. II and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 9, 1996
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1995 1994
ASSETS
Investment in real estate (Note 4):
Land $11,126,124 $11,126,124
Buildings 24,825,040 24,825,040
35,951,164 35,951,164
Less: Accumulated depreciation (4,635,384) (3,913,295)
Net investment in real estate 31,315,780 32,037,869
Cash and cash equivalents 1,374,779 1,106,917
Rent receivable 56,975 66,614
Deferred rent receivable 274,978 207,417
Due from General Partners (Note 5) 150,175 167,696
Other assets 34,321 43,558
Total Assets $33,207,008 $33,630,071
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued
expenses $ 61,759 $ 131,504
Due to affiliates (Note 3) -- 3,469
Due to General Partners (Note 5) -- 23,000
Rent received in advance 58,344 206,477
Total Liabilities 120,103 364,450
MINORITY INTEREST IN BRAUVIN HIGH
YIELD VENTURE 33,746 34,179
MINORITY INTEREST IN BRAUVIN FUNDS
JOINT VENTURE 2,472,647 2,494,341
PARTNERS' CAPITAL:
General Partners 319,429 319,429
Limited Partners 30,261,083 30,417,672
Total Partners' Capital 30,580,512 30,737,101
Total Liabilities and
Partners' Capital $33,207,008 $33,630,071
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
INCOME
Rental (Note 4) $4,192,243 $4,198,955 $4,128,233
Interest 68,435 31,248 12,876
Other 7,708 19,057 4,962
Total income 4,268,386 4,249,260 4,146,071
EXPENSES
General and administrative 161,125 170,956 147,102
Management fees (Note 3) 42,134 41,934 41,205
Provision for bad debts -- 68,374 563,167
Amortization of deferred
organization costs and
other assets 5,427 4,327 12,940
Depreciation 722,089 729,368 738,778
Provision for impairment(Note 4) -- 500,000 --
Total expenses 930,775 1,514,959 1,503,192
Income before gain on sale and
minority interests in joint
ventures 3,337,611 2,734,301 2,642,879
Gain on sale (Note 6) -- 126,743 --
Income before minority interest
in joint ventures 3,337,611 2,861,044 2,642,879
MINORITY INTERESTS' SHARE OF NET INCOME:
Brauvin High Yield Venture (5,967) (5,585) (5,550)
Brauvin Funds Joint Venture (291,906) (291,084) (290,974)
Net Income $3,039,738 $2,564,375 $2,346,355
Net income allocated to the
General Partners $ -- $ -- $ 58,659
Net income allocated to the
Limited Partners $3,039,738 $2,564,375 $2,287,696
Net income per
Unit outstanding (a) $ 75.82 $ 64.69 $ 57.82
(a) Net income per Unit is 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.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
Years Ended December 31, 1995, 1994 and 1993
General Limited
Partners Partners * Total
Balance, January 1, 1993 $260,770 $32,587,354 $32,848,124
Contributions, net -- 181,294 181,294
Selling commissions and
other offering costs (Note 1) -- (58,314) (58,314)
Net income 58,659 2,287,696 2,346,355
Cash distributions -- (3,569,741) (3,569,741)
Balance, December 31, 1993 319,429 31,428,289 31,747,718
Contributions, net -- 207,446 207,446
Return of capital -- (248,257) (248,257)
Selling commissions and
other offering costs (Note 1) -- (56,161) (56,161)
Net income -- 2,564,375 2,564,375
Cash distributions -- (3,478,020) (3,478,020)
Balance, December 31, 1994 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
* Total Units outstanding at December 31, 1995, 1994 and 1993 were
40,316, 39,866 and 39,659, respectively. Cash distributions to Limited
Partners per Unit were $89.36, $87.74 and $90.22 for the years ended
December 31, 1995, 1994 and 1993, 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
distribution reinvestment plan.
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash Flows From Operating Activities:
Net income $3,039,738 $2,564,375 $2,346,355
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 727,516 733,695 751,718
Gain on sale -- (126,743) --
Provision for impairment -- 500,000 --
Provision for bad debts -- 68,374 563,167
Minority interests' share of income
from Brauvin High Yield Venture 5,967 5,585 5,550
Minority interests' share of income
from Brauvin Funds Joint Venture 291,906 291,084 290,974
Decrease (increase) in rent
receivable 9,639 (99,534) (82,706)
Increase in deferred rent receivable (67,561) (73,122) (134,295)
(Increase) decrease in other assets (7,652) (4,737) 26,346
(Decrease) increase in accounts
payable and accrued expenses (69,745) (17,235) 69,900
(Decrease) increase in rent
received in advance (148,133) (16,156) 222,633
Decrease in due to affiliates (3,469) (10,865) (65,666)
Net cash provided by operating
activities 3,778,206 3,814,721 3,993,976
Cash Flows From Investing Activities:
Cash distribution to minority interest -
Brauvin High Yield Venture (6,400) (7,900) (6,700)
Cash distribution to minority interest -
Brauvin Funds Joint Venture (313,600) (308,700) (298,900)
Proceeds from sale of property -- 375,000 --
Net cash (used in) provided by
investing activities (320,000) 58,400 (305,600)
Cash Flows From Financing Activities:
Sale of Units, net of liquidations,
selling commissions and other
offering costs 397,627 161,982 134,084
Return of capital -- (248,257) --
Cash distributions to Limited
Partners (3,582,492)(3,478,020)(3,569,741)
Decrease (increase)in due from
General Partners 17,521 (1,299) 37,232
Decrease in due to General
Partners (23,000) -- (39,000)
Net cash used in financing
activities (3,190,344)(3,565,594)(3,437,425)
Net increase in cash and cash
equivalents 267,862 307,527 250,951
Cash and cash equivalents at
beginning of year 1,106,917 799,390 548,439
Cash and cash equivalents at
end of year $1,374,779 $1,106,917 $ 799,390
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1995, 1994 and 1993
(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
December 31, 1995, 1994 and 1993, the Partnership has sold
$42,837,384, $39,866,216 and $39,658,770 of Units, respectively.
These totals include $3,914,384, $3,342,063 and $2,807,196 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 $2,773,086, $2,646,347 and $2,070,669 have been purchased
by the Partnership from Limited Partners liquidating their
investment in the Partnership and have been retired as of December
31, 1995, 1994 and 1993, respectively. As of December 31, 1995,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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. 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 Health Spa, 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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.
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 (see
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
Note 4). 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 December 31, 1995.
Accordingly, no impairment loss has been recorded in the
accompanying financial statements for 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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, 1995 and
1994, 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; due to affiliates;
due to General Partners; and rents received in advance.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement"), shall be distributed: (a) first, to the 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:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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.
(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 Partnership has advanced $398,915 to an affiliated lessee
relating to the Hardee's transactions as of December 31, 1993 and
1992, as discussed in Note 4. An allowance for doubtful
accounts of $398,915 was established on this receivable at
December 31,
1993. In 1994, this receivable was determined to be uncollectible
and was written off.
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the years ended December 31,
1995, 1994 and 1993 were as follows:
1995 1994 1993
Selling commissions $48,712 $45,464 $47,206
Management fees 42,134 41,934 41,205
Reimbursable operating
expenses 80,583 74,400 73,526
Legal fees 11,642 18,477 20,224
(4) LEASES
The Partnership's rental income is principally obtained from
tenants through rental payments provided under triple-net
noncancelable operating leases. The leases provide for a base
minimum annual rent and increases in rent such as through
participation in gross sales above a stated level. The following
is a schedule of noncancelable future minimum rental payments due
to the Partnership under operating leases as of December 31, 1995:
Year ending December 31:
1996 $ 3,982,339
1997 3,978,575
1998 3,978,575
1999 4,051,782
2000 4,032,983
Thereafter 22,662,443
$42,686,697
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
Additional rent based on percentages of tenant sales increases
was $129,786, $125,427 and $75,998 in 1995, 1994 and 1993,
respectively.
Approximately 58% of the Partnership's rental income is from
properties operated as Ponderosa restaurants. The Partnership is
subject to some risk of loss should adverse events affect those
Ponderosa restuarants and in turn adversely affect the lessees'
ability to pay rent to the Partnership.
Beginning in September 1990, the Partnership did not receive rent
payments on the Hardee's restaurants located in Albion, Michigan
and St. Johns, Michigan (the "Properties"). As a result of
eviction proceedings commenced by the Partnership against the
defaulting lessee on January 5, 1991 due to nonpayment of rent, the
Partnership obtained legal possession of the Albion property on
February 25, 1991 and the St. Johns property on March 18, 1991 and
the leases were terminated. Subsequently, Wolverine Fast Food,
Inc., ("Wolverine") the defaulting lessee, filed a Chapter 11
bankruptcy proceeding. Upon obtaining possession of the Properties,
the Partnership entered into a lease (the Interim Lease") with an
affiliate of the Partnership (the "Affiliated Lessee") until a
suitable unaffiliated lessee could be found. Simultaneously, the
Partnership entered into negotiations with Hardee's Food Systems,
Inc. ("Hardee's"), the franchisor, to manage and operate the
Properties until a new franchisee/tenant for the Properties could
be located.
During the period that the Properties were operated by the
Affiliated Lessee, the operating expenses and management fees
exceeded the revenues generated by the restaurants. As a result,
the Partnership advanced $398,915 to the Affiliated Lessee as of
December 31, 1993 and 1992, which was fully reserved in 1993 and
written off in 1994.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
After taking possession of the Properties, the Partnership, in
conjunction with Hardee's, had sought replacement operators for the
Properties. During that time, Wolverine approached the Partnership
to re-lease the restaurants on a long-term basis. Because the
Partnership had been unable to identify another long-term tenant
for the restaurants and because Hardee's began to actively support
Wolverine and substantial improvement in the performance of the
remaining Wolverine restaurants was reported, the Partnership
entered into negotiations with Wolverine to re-lease the
Properties.
As a result of discussions with Wolverine, the Partnership agreed
to lease the Properties to Wolverine, Kenneth Schiefelbein, Barbara
Schiefelbein and Jon Guiles, individual principals of Wolverine,
for a period of 20 years. The lease term commenced at the St.
Johns property on April 1, 1992 and June 1, 1992 at the Albion
property. Beginning February 1993, the St. Johns property and
beginning July 1993 the Albion property became significantly
delinquent on payments of rent to the Partnership. Although the
tenant made irregular rent payments, these delinquencies increased
each month throughout the remainder of 1993. In December 1993,
Wolverine abandoned the St. Johns property and in January 1994 the
Albion property was vacated. On February 2, 1994, the Wolverine
petition to the Bankruptcy court was modified from a Chapter 11 to
a Chapter 7 filing. In conjunction with the lease negotiations, as
well as with the lawsuits filed by the Partnership against
Schiefelbein and Guiles, Schiefelbein and Guiles executed
agreements with the Partnership for non-dischargeable debt obligations.
A non-dischargeable judgement in the amount of $2.5 million was entered
against Schiefelbein and a non-dischargeable judgement in the amount of
$1.5 million was entered against Guiles.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
The Partnership entered into a lease with a new tenant, Jasaza,
Inc., to operate the Albion property as a Hardee's restaurant. The
base rent on the property began at a level below the original lease
with Wolverine but increases each year. In addition, starting in
year three of the lease, percentage rents was to be due. On April
8, 1994, the Partnership was notified that Jasaza, Inc., the
replacement tenant, was terminating its lease at the Albion
Hardee's, as of April 12, 1994. The Partnership continues to
actively market this property for a replacement tenant.
During 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 the real estate for the St.
Johns, Michigan and Albion, Michigan properties. This allowance
has been recorded as a reduction of the Properties' cost, and
allocated to the land and building based on the original
acquisition percentages of 30% (land) and 70% (building).
During the fourth quarter of 1994, the Partnership executed a
lease with a Dairy Queen franchisee to be the new tenant at the St.
Johns, Michigan property. The lease is for a five year term and
commenced February 1, 1995. Base rent is $2,500 per month with
monthly percentage rent of 5% due after monthly sales exceed
$37,500. The lease provides an option to renew for one five year
period.
The lessee of the two Orlando Avis Lubes defaulted on its payment
obligations under the lease in 1991 and in January 1992 vacated the
properties. The Partnership has continued to receive rent payments
from the lessee, which Avis Lube, Inc. guarantees to the
Partnership until the lease expires in June 1996. Avis Lube, Inc.
has subleased the properties until June 1996 to an unaffiliated
sublessee, Florida Express Lube, Inc. The Partnership has signed
new leases with the sublessee to operate the properties, as lessee,
beginning in June of 1996. The leases are for a 14 year term
commencing June 1, 1996. Base annual rent at 2699 Delaney Street
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
is $48,000 and at 1625 South Conway Road is $54,000. The new lease
rents are lower than the current rents.
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.
(5) WORKING CAPITAL RESERVES
The Partnership has made distributions to Limited Partners for
calendar years 1993, 1994 and the first three quarters of 1995 (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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
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 December 31, 1995, 1994 and
1993, $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.
(6) SALE OF PROPERTY
On February 18, 1994, the Partnership sold the Taco Bell located
in Schofield, Wisconsin to an unaffiliated third party. The
following is a calculation of the gain realized on the sale:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- continued
For the years ended December 31, 1995, 1994 and 1993
Sale proceeds $375,000
Less net book value:
Land 82,856
Building 193,328
Accumulated depreciation (27,927)
Net book value 248,257
Realized gain $126,743
All amounts receivable on this property were collected at the sale.
The sale proceeds of $375,000 were distributed to the Limited
Partners on November 15, 1994.
(7) PROVISION FOR IMPAIRMENT
During 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 the real estate for the St.
Johns, Michigan and Albion, Michigan properties. This allowance
has been recorded as a reduction of the properties' cost, and
allocated to the land and building based on the original
acquisition percentages of 30% (land) and 70% (building).
SCHEDULE III
BRAUVIN HIGH YIELD FUND L.P.II
(a Delaware limited partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
Gross Amount at Which Carried
Initial Cost at Close of Period
Buildings Cost of Buildings
and Subsequent and Accumulated Date
Description Encumbrances (c) Land Improvements Improvements Land Improvements Total Depreciation (b) Acquired
Ponderosas - BHYF II $0 $ 3,907,384 $ 9,117,233 $0 $ 3,907,384 $ 9,117,233 $13,024,617 $1,771,036 9/88-11/89
Ponderosas - BHYV 0 1,810,770 4,225,129 0 1,810,770 4,225,129 6,035,899 872,816 9/88
Taco Bell 0 128,236 299,218 0 128,236 299,218 427,454 59,543 1/89
Scandinavian Health
Spa-BFJV 0 1,657,861 3,868,342 0 1,657,861 3,868,342 5,526,203 709,703 7/89
Children's World
Learning Center 0 771,140 1,799,327 0 771,140 1,799,327 2,570,467 282,439 1/90-9/90
Hardee's Restaurant 0 729,798 1,702,861 0 579,798 1,352,861 1,932,659 249,079 5/90-7/90
Avis Lubes 0 507,620 1,184,448 0 507,620 1,184,448 1,692,068 186,361 6/90-8/90
Blockbuster Video Store 0 354,644 827,501 0 354,644 827,501 1,182,145 127,570 9/90
Chi-Chi's Restaurant 0 1,408,671 2,150,981 0 1,408,671 2,150,981 3,559,652 376,837 3/91
$0 $11,276,124 $25,175,040 $0 $11,126,124 $24,825,040 $35,951,164 $4,635,384
NOTES:
(a) The cost of this real estate is $36,451,166 for tax purposes (unaudited). The buildings are depreciated over
approximately 35 years using the straight line method. The properties were constructed between 1969 and 1990.
(b) The following schedule summarizes the changes in the Partnership's real estate and accumulated depreciation balances:
Real estate 1995 1994 1993
Balance at beginning of year $35,951,164 $36,727,348 $36,727,348
Subtractions - land and buildings (d) 0 (776,184) 0
Balance at end of year $35,951,164 $35,951,164 $36,727,348
Accumulated depreciation 1995 1994 1993
Balance at beginning of year $ 3,913,295 $ 3,211,854 $ 2,473,076
Subtractions - (e) 0 (27,927) 0
Provision for depreciation 722,089 729,368 738,778
Balance at end of year $ 4,635,384 $ 3,913,295 $ 3,211,854
(c) Encumbrances - Brauvin High Yield Fund L.P. II did not borrow cash in order to purchase its properties.
100% of the land and buildings were paid for with funds contributed by the Limited Partners.
(d) Amount reflects provision for impairment on land of $150,000 and buildings of $350,000 related to
the properties in St. Johns and Albion, Michigan and the sale of the Schofield, Wosconsin Taco Bell,
cost basis of which was $276,184.
(e) Amount represents accumulated depreciation on the sold Schofield, Wisconsin Taco Bell as of 1/31/94.
EXHIBITS
TO
BRAUVIN HIGH YIELD FUND L.P. II
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1995
EXHIBIT INDEX
BRAUVIN HIGH YIELD FUND L.P. II
FORM 10-K
For the fiscal year ended December 31, 1995
Exhibit (19)(a) Amendment to Distribution Reinvestment
Plan
Exhibit (21) Subsidiaries of the Registrant
Exhibit (27) Financial Data Schedule
Exhibit 19 (a) Amendment to Distribution Reinvestment Plan
The General Partners have adopted an enhancement to the
Partenrship's Distribution Reinvestment Plan effective August,
1995. This enhancement will permit unit holders to reinvest at a
unit price that will be adjusted to reflect any return of investor
capital generated through property sales. In addition, any unit
liquidations will also occur at the adjusted unit price.
Exhibit 21
Name of Subsidiary State of Formation
Brauvin High Yield Venture Illinois
Brauvin Funds Joint Venture Illinois