UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-17556
Brauvin High Yield Fund L.P. II
(Exact name of registrant as specified in its charter)
Delaware 36-3580153
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 North LaSalle Street, Chicago, Illinois 60602
(Address of principal executive offices) (Zip Code)
(312)759-7660
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
BRAUVIN HIGH YIELD FUND L.P. II
INDEX
Page
PART I Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . 3
Statements of Net Assets in Liquidation as of
June 30, 2002 and December 31, 2001
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Net Assets in Liquidation
for the period January 1, 2002 to June 30, 2002
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . 5
Statement of Changes in Net Assets in Liquidation
for the period January 1, 2001 to June 30, 2001
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . 6
Statements of Operations for the six
months ended June 30, 2002 and June 30, 2001
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . 7
Statements of Operations for the three
months ended June 30, 2002 and June 30, 2001
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . 8
Notes to Financial Statements . . . . . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 20
Item 3. Quantitative and Qualitative Disclosures about
Market Risk . . . . . . . . . . . . . . . . . . . . . . . 22
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 23
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 23
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . 23
Item 4. Submissions of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 5. Other Information. . . . . . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 2001 Statement of Net Assets in
Liquidation (Liquidation Basis), the following Statement of Net
Assets in Liquidation as of June 30, 2002, Statement of Changes in
Net Assets in Liquidation for the period January 1, 2002 to June
30, 2002 (Liquidation Basis), Statement of Changes in Net Assets in
Liquidation for the period January 1, 2001 to June 30, 2001
(Liquidation Basis), Statements of Operations for the six months
ended June 30, 2002 and 2001 (Liquidation Basis) and Statements of
Operations for the three months ended June 30, 2002 and 2001
(Liquidation Basis) for Brauvin High Yield Fund L.P. II (the
"Partnership") are unaudited and have not been examined by
independent public accountants but reflect, in the opinion of
management, all adjustments necessary to present fairly the
information required. All such adjustments are of a normal
recurring nature.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Partnership's 2001 Annual Report on Form 10-K.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENTS OF NET ASSETS IN LIQUIDATION AS OF
JUNE 30, 2002 AND DECEMBER 31, 2001 (LIQUIDATION BASIS)
June 30,
2002 December 31,
(Unaudited) 2001
ASSETS
Cash and cash equivalents $5,792,511 $5,477,530
Due from an affiliate (Note 3) -- 320,569
Due from General Partners (Note 4) 140,000 140,000
Total Assets 5,932,511 5,938,099
LIABILITIES
Accounts payable and accrued
expenses 246,147 248,407
Due to affiliate (Note 3) 5,050 --
Reserve for estimated costs during
the period of liquidation 143,900 174,200
Total Liabilities 395,097 422,607
Net Assets in Liquidation $5,537,414 $5,515,492
See accompanying notes to financial statements
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION (LIQUIDATION BASIS) FOR THE PERIOD
JANUARY 1, 2002 TO JUNE 30, 2002
(Unaudited)
Net Assets in Liquidation at
January 1, 2002 $5,515,492
Net income 21,922
Net Assets in Liquidation at
June 30, 2002 $5,537,414
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET ASSETS IN
LIQUIDATION (LIQUIDATION BASIS) FOR THE PERIOD
JANUARY 1, 2001 TO JUNE 30, 2001
(Unaudited)
Net Assets in Liquidation at
January 1, 2001 $5,665,362
Income from operations 19,569
Loss on sale of property (4,993)
Net Assets in Liquidation at
June 30, 2001 $5,679,938
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(LIQUIDATION BASIS)
(Unaudited)
INCOME: 2002 2001
Rental $ -- $ 682
Interest 53,381 147,311
Other 9,980 12,335
Total income 63,361 160,328
EXPENSES:
General and administrative 41,439 119,701
Transaction costs (Note 5) -- 21,058
Total expenses 41,439 140,759
Income before loss on sale
of property 21,922 19,569
Loss on the sale of property -- (4,993)
Net income $ 21,922 $ 14,576
Net income allocated to:
General Partners $ 548 $ 364
Limited Partners $ 21,374 $ 14,212
Net income per unit
(40,347 units outstanding) $ 0.53 $ 0.35
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(LIQUIDATION BASIS)
(Unaudited)
INCOME: 2002 2001
Interest $ 26,702 $ 63,733
Other 9,364 9,492
Total income 36,066 73,225
EXPENSES:
General and administrative 16,832 22,480
Transaction costs (Note 5) -- 4,766
Total expenses 16,832 27,246
Net income $ 19,234 $ 45,979
Net income allocated to:
General Partners $ 385 $ 1,149
Limited Partners $ 18,849 $ 44,830
Net income per unit
(40,347 units outstanding) $ 0.47 $ 1.11
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 2002 and 2001
(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 are subject to "triple-net" leases. The General
Partners of the Partnership are Brauvin Realty Advisors II, Inc.
and Jerome J. Brault. Brauvin Realty Advisors II, Inc. is owned
primarily by Messrs. Brault (beneficially) (44%) and Cezar M.
Froelich (44%). Mr. Froelich resigned as a director of Brauvin
Realty Advisors II, Inc. in December 1994 and as an Individual
General Partner effective as of September 17, 1996. Brauvin
Securities, Inc., an affiliate of the General Partners, was the
selling agent of the Partnership.
The Partnership was formed on May 4, 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 June
30, 2002, the Partnership has sold $42,982,178 of Units. This
total includes $4,059,178 of Units purchased by Limited Partners
who utilized their distributions of Operating Cash Flow to purchase
Units through the distribution reinvestment plan (the "Plan").
Units valued at $2,886,915 have been repurchased by the Partnership
from Limited Partners liquidating their investment in the
Partnership and have been retired as of June 30, 2002. As of June
30, 2002, the Plan participants have acquired Units under the Plan,
which approximate 9% of the total Units outstanding.
The Partnership acquired the land and buildings underlying 14
Ponderosa restaurants, two Taco Bell restaurants, three Children's
World Learning Centers, three Hardee's restaurants, one Blockbuster
Video store, three Avis Lube Oil Change Centers and three Chi-Chi's
restaurants. Also acquired were 99%, 51% and 26% equity interests
in three joint ventures with affiliated entities, which ventures
purchased the land and buildings underlying six Ponderosa
restaurants, a Scandinavian Health Spa and a Blockbuster Video
store, respectively. In 1995, the Partnership and Metromedia, the
parent of Ponderosa Restaurants, exchanged one of the Ponderosa
restaurants for a Tony Roma's restaurant.
In February 1994, the Partnership sold the Taco Bell Restaurant
located in Schofield, Wisconsin. In January 1998, the joint
venture partnership sold Ponderosa unit 850 located in Mansfield,
Ohio. In April 1998, the Partnership sold Ponderosa unit 876
located in Sweden, New York. In June 1999, the Partnership sold the
former Hardee's property located in Albion, Michigan. In October
1999, the Partnership sold four Ponderosa units located in
Appleton, Wisconsin; Oneonta, New York; Middletown, New York; and
Eureka, Missouri. In December 1999, the Partnership sold its joint
venture interest in the Blockbuster Video store to an affiliated
entity.
In January, 2000, the Partnership sold Ponderosa unit 128 located
in Bloomington, Illinois and Chi Chis unit 366 located in
Clarksville, Tennessee.
Pursuant to the approval of the Special Master and the United
States District Court, on August 7, 2000, an affiliated entity
purchased all but two of the Partnership's properties. In January
2001, an affiliated party purchased one of the properties for a
contract sales price of $275,000. In December 2001, the sole
remaining property was sold to a third party for a contract sales
price of $350,000.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Management's Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Basis of Presentation
As a result of the settlement agreement (see Note 5), which was
approved by the United States District Court for the Northern
District of Illinois on June 18, 1999, the Partnership began the
liquidation process and, in accordance with generally accepted
accounting principles, the Partnership's financial statements for
periods subsequent to June 18, 1999 have been prepared on a
liquidation basis. Accordingly, the carrying values of the assets
are presented at estimated net realizable amounts and all
liabilities are presented at estimated settlement amounts,
including estimated costs associated with carrying out the
liquidation. Preparation of the financial statements on a
liquidation basis requires significant assumptions by management,
including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the
assumptions and the actual results because events and circumstances
frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the
statement of net assets as of June 30, 2002.
Accounting Method
The accompanying financial statements have been prepared using
the accrual method of accounting.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the financial statements.
However, in certain instances, the Partnership has been required
under applicable state law to remit directly to the tax authorities
amounts representing withholding from distributions paid to
partners.
Investment in Real Estate
Prior to the preparation of the financial statements on a
liquidation basis, the operating properties acquired by the
Partnership were stated at cost including acquisition costs and net
of impairment adjustments. Depreciation expense was computed on a
straight-line basis over approximately 35 years.
The Partnership recorded an impairment adjustment to reduce the
cost basis of real estate to its estimated fair value when the real
estate was judged to have suffered an impairment that was other
than temporary.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months of
purchase.
Restricted Cash
Per the terms of the settlement agreement (see Note 5) the
Partnership was required to establish a cash reserve that was
restricted for the payment of the General Partners' legal fees and
costs. The release of these funds to the General Partners is
subject to the certification by the Special Master that the General
Partners have been cooperative, did not breach their fiduciary
duties to the Limited Partners, did not breach the settlement
agreement or the Partnership Agreement and used their best efforts
to manage the affairs of the Partnership in such a manner as to
maximize the value and marketability of the Partnership's assets in
accordance with their obligations under the Partnership Agreement.
In November 2000, the General Partners received certification
from the Special Master and subsequently in January, 2001 the
restricted cash was released to the General Partners.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"), which requires that all derivatives be recognized as
assets and liabilities in the balance sheet and be measured at fair
value. SFAS 133 also requires changes in fair value of derivatives
to be recorded each period in current earnings or comprehensive
income depending on the intended use of the derivatives. In June,
2000, the FASB issued SFAS 138, which amends the accounting and
reporting standards of SFAS 133 for certain derivatives and certain
hedging activities. SFAS 133 and SFAS 138 were required to be
adopted by the Partnership effective January 1, 2001. The adoption
of SFAS 133 and SFAS 138 did not have an impact on the financial
position, results of operations and cash flows of the Partnership.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" ("SFAS 141"). SFAS 141
requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. In July 2001, the FASB issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"), which was effective January
1, 2002. SFAS 142 requires, among other things, the discontinuance
of goodwill amortization. In addition, the standard includes
provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the
identification of reporting units for purposes of assessing
potential future impairments of goodwill.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations"
("SFAS 143"), which was effective for years beginning after June
15, 2002. SFAS 143 requires recognition of a liability and
associated asset for the fair value of costs arising from legal
obligations associated with the retirement of tangible long-lived
assets. The asset is to be allocated to expense over its estimated
useful life.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"), which was effective for fiscal
years beginning after December 15, 2001. SFAS 144 supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS
144 retains the recognition and measurement requirements of SFAS
121, but resolves significant SFAS 121 implementation issues. In
addition, it applies to a segment of a business accounted for as a
discontinued operation (which was formerly covered by portions of
Accounting Principles Board Opinion No. 30).
The Partnership does not believe that the adoption of SFAS 141,
142, 143 and 144 will have a significant impact on its financial
statements.
(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:
first, to the Limited Partners until the Limited Partners have
received an amount equal to the 10% Cumulative Preferred Return,
as such term is defined in the Agreement;
second, to the Limited Partners until the Limited Partners have
received an amount equal to the amount of their Adjusted
Investment, as such term is defined in the Agreement; and
third, 95% to the Limited Partners and 5% to the General
Partners.
Profits and Losses
Net profits and losses from operations of the Partnership
[computed without regard to any allowance for depreciation or cost
recovery deductions under the Internal Revenue Code of 1986, as
amended (the "Code")] for each taxable year of the Partnership
shall be allocated between the Limited Partners and the General
Partners in accordance with the ratio of aggregate distributions of
Operating Cash Flow attributable to such tax year, although if no
distributions are made in any year, net losses (computed without
regard to any allowance for depreciation or cost recovery
deductions under the Code) shall be allocated 99% to the Limited
Partners and 1% to the General Partners. Notwithstanding the
foregoing, all depreciation and cost recovery deductions allowed
under the Code shall be allocated 2.5% to the General Partners and
97.5% to the Taxable Class Limited Partners, as defined in the
Agreement.
The net profit of the Partnership from any sale or other
disposition of a Partnership property shall be allocated (with
ordinary income being allocated first) as follows: (a) first, an
amount equal to the aggregate deficit balances of the Partners'
Capital Accounts, as such term is defined in the Agreement, shall
be allocated to each Partner who or which has a deficit Capital
Account balance in the same ratio as the deficit balance of such
Partner's Capital Account bears to the aggregate of the deficit
balances of all Partners' Capital Accounts; (b) second, to the
Limited Partners until the Limited Partners have been allocated an
amount of profits equal to their 10% Cumulative Preferred Return as
of such date; (c) third, to the Limited Partners until the Limited
Partners have been allocated an amount of profit equal to the
amount of their Adjusted Investment; and (d) thereafter, 95% to the
Limited Partners and 5% to the General Partners. The net loss of
the Partnership from any sale or other disposition of a Partnership
property shall be allocated as follows: (a) first, an amount equal
to the aggregate positive balances in the Partners' Capital
Accounts, to each Partner in the same ratio as the positive balance
in such Partner's Capital Account bears to the aggregate of all
Partners' positive Capital Account balances; and (b) thereafter,
95% to the Limited Partners and 5% to the General Partners.
(3) TRANSACTIONS WITH RELATED PARTIES
An affiliate of the General Partners managed 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 was subordinated, annually, to receipt by
the Limited Partners of a 9% non-cumulative, non-compounded return
on their Adjusted Investment.
The original General Partners owed the Partnership $140,000 at
June 30, 2002 and 2001, relating to the Distribution Guaranty
Reserve (see Note 4).
The Partnership previously paid affiliates of the General
Partners selling commissions of 8-1/2% of the capital contributions
received for Units sold by the affiliates.
The Partnership previously paid an affiliate of the General
Partners an acquisition fee in the amount of up to 6% of the gross
proceeds of the Partnership's offering for the services rendered in
connection with the process pertaining to the acquisition of a
property. Acquisition fees related to the properties not
ultimately purchased by the Partnership are expensed as incurred.
An affiliate of one of the General Partners provided securities
and real estate counsel to the Partnership.
Fees, commissions and other expenses paid or payable to the
General Partners or their affiliates for the six months ended June
30, 2002 and 2001 were as follows:
2002 2001
Reimbursable operating
expenses $37,918 $13,584
As of June 30, 2002 the Partnership owed an affiliate $5,050
related to reimbursable operating expenses.
As of December 31, 2001 the Partnership was owed $320,569 from
an affiliate related to a bank deposit error. The amount
represented the proceeds from the sale of Rock Hill which were
wired to an affiliate in error. The amount was received in January
2002.
(4) WORKING CAPITAL RESERVES
The Partnership had set aside 1% of the gross proceeds of its
offering in a reserve (the "Distribution Guaranty Reserve"). The
Distribution Guaranty Reserve was structured so as to enable the
Partnership to make quarterly distributions of Operating Cash Flow
equal to at least 9.25% per annum on Adjusted Investment during the
period from the Escrow Termination Date (February 28, 1989), as
such term is defined in Section H.3 of the Agreement, through the
earlier of: (i) the first anniversary of the Escrow Termination
Date (February 28, 1990); or (ii) the expenditure of 95% of the
proceeds available for investment in properties, which date was
July 26, 1989. The original General Partners guaranteed payment of
any amounts in excess of the Distribution Guaranty Reserve and were
entitled to receive any amounts of the Distribution Guaranty
Reserve not used to fund distributions.
The Partnership's acquisition process was not completed until
March 1991 due to an unusually high number of properties being
declined during the due diligence process because of the General
Partners' unwillingness to lower the Partnership's investment
standards. As a result, the Partnership did not generate
sufficient Operating Cash Flow to fully support the distributions
to Limited Partners in 1990.
In order to continue to maintain the 9.25% per annum distribution
through December 31, 1990, the original General Partners agreed to
continue their Distribution Guaranty up to the net amount of
$140,000. At June 30, 2002 and 2001, $140,000 was due from the
original General Partners related to the Distribution Guaranty.
(5) LITIGATION
Two legal actions against the Partnership, the General Partners
of the Partnership and affiliates of such General Partners, as well
as against the Partnership on a nominal basis in connection with a
proposed transaction that was not consummated, were commenced and
have been settled. On April 13, 1999, all the parties to the
litigation reached an agreement to settle the litigation, subject
to the approval by the United States District Court for the
Northern District of Illinois. This approval was obtained on June
18, 1999. The terms of the settlement agreement, along with a
Notice to the Class, were forwarded to the Limited Partners in the
second quarter of 1999. One additional legal action, which was
dismissed on January 28, 1998, had also been brought against the
General Partners and affiliates, as well as the Partnership on a
nominal basis. The Partnership, the General Partners and their
named affiliates denied all allegations set forth in the
complaints.
On November 8, 2001, the Magistrate Judge for the United States
district Court for the Northern District of Illinois ruled on the
plaintiff's legal fee petition. As a result of this ruling the
Partnership will be required to pay the plaintiff's attorneys
approximately $220,000. The plaintiff's attorneys subsequently
challenged this ruling. On July 19, 2002, the Assigned Judge for
the Northern District of Illinois affirmed the legal fee petition
ruling of the Magistrate Judge. The plaintiff's attorneys may also
challenge this ruling. In addition, the Partnership may cross
appeal the fee ruling. Therefore, it is uncertain whether this
amount (or a greater or lesser amount) will actually be paid by the
Partnership.
(6) SALE OF PARTNERSHIP ASSETS
In January 2001, an affiliated party purchased one of the
properties for a contract sales price of $275,000. In December
2001, the sole remaining property was sold to a third party for a
contract sales price of $350,000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
Certain statements in this Quarterly Report that are not
historical fact constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Discussions containing forward-looking statements may be found in
this section and in the section entitled "Business." Without
limiting the foregoing, words such as "anticipates," "expects,"
"intends," "plans" and similar expressions are intended to identify
forward-looking statements. These statements are subject to a
number of risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements.
The Partnership undertakes no obligation to update these forward-
looking statements to reflect future events or circumstances.
Liquidity and Capital Resources
Pursuant to the approval of the Special Master and the United
States District Court, on August 7, 2000, an affiliated entity
purchased all but two of the Partnership's properties. In January
2001, an affiliated party purchased one of the properties for a
contract sales price of $275,000. In December 2001, the sole
remaining property was sold to a third party for a contract sales
price of $350,000.
The Special Master approved total reserves for the Partnership
in the amount of $5.177 million or $128.31 per Unit. These
reserves will be held by the Partnership; and the length of the
reserve period and the amounts that will ultimately be distributed
to investors will depend on several factors not known at this time.
The Partnership intends to make a liquidating distribution to the
Limited Partners from the net sale proceeds remaining from the
Partnership's properties after payment of all legal and operating
expenses. The Partnership may make partial distributions of the
proceeds prior to the final distribution. The timing of the
liquidating distribution has not yet been determined.
In the third quarter of 2000, the Partnership distributed
$11,582,000 (or $287.05 per Unit) from the sale of the assets.
On November 8, 2001, the Magistrate Judge for the United States
district Court for the Northern District of Illinois ruled on the
plaintiff's legal fee petition. As a result of this ruling the
Partnership will be required to pay the plaintiff's attorneys
approximately $220,000. The plaintiff's attorneys subsequently
challenged this ruling. On July 19, 2002, the Assigned Judge for
the Northern District of Illinois affirmed the legal fee petition
ruling of the Magistrate Judge. The plaintiff's attorneys may also
challenge this ruling. In addition, the Partnership may cross
appeal the fee ruling. Therefore, it is uncertain whether this
amount (or a greater or lesser amount) will actually be paid by the
Partnership.
During the six months ended June 30, 2002 and 2001, the General
Partners and their affiliates did not earn any management fees, and
did not receive any Operating Cash Flow distributions. As of
December 31, 2001, the Partnership was owed $320,569 from an
affiliate related to a bank deposit error. The amount represents
the proceeds from the sale of Rock Hill, which were wired to an
affiliate in error. In January 2002, the affiliate returned this
deposit error with interest to the Partnership.
Results of Operations (Liquidation Basis) - Six months ended June
30, 2002 and 2001
As a result of the settlement agreement that was approved by the
United States District Court for the Northern District of Illinois
on June 18, 1999 the Partnership began the liquidation process and,
in accordance with generally accepted accounting principles, the
Partnership's financial statements for periods subsequent to June
18, 1999 have been prepared on a liquidation basis.
The Partnership had net income of $22,000 for the six months
ended June 30, 2002 compared to net income of $15,000 for the six
months ended June 30, 2001, an increase in net income of $7,000.
The increase in net income is primarily the result of the change in
operating income and expenses as discussed in the following
paragraphs.
Total income was $63,000 for the six months ended June 30, 2002
compared to $160,000 for the six months ended June 30, 2001, a
decline of $97,000. The decline in total income relates primarily
to interest income. Interest income declined by $94,000 which is
associated with a decline in interest rates on the Partnership's
investments. The decline in rental income relates to the
Partnership's January 2001 property sale.
Total expenses were $41,000 for the six months ended June 30,
2002 compared to $141,000 for the six months ended June 30, 2001,
a decrease of $100,000. The reason for the change in expenses
relates to a decline in general and administrative expenses of
$78,000 and a decline in transaction costs of $21,000. General and
administrative expenses declined as a result of the Partnership
reclassifying certain expenses to reduce the reserve for estimated
costs during liquidation. These expenses were reclassified since
the Partnership no longer has any operating properties and the
liquidation process has begun. General and administrative expenses
also declined due to a decrease in the amount of franchise taxes
paid to various states.
Results of Operations (Liquidation Basis) - Three months ended June
30, 2002 and 2001
The Partnership had net income of $19,000 for the three months
ended June 30, 2002 compared to net income of $46,000 for the three
months ended June 30, 2001, a decrease in net income of $27,000.
Total income was $36,000 for the three months ended June 30, 2002
compared to $73,000 for the three months ended June 30, 2001, a
decline of $37,000. The decline in total income relates primarily
to interest income. Interest income declined by $37,000 which is
associated with a decline in interest rates on the Partnership's
investments.
Total expenses were $17,000 for the three months ended June 30,
2002 compared to $27,000 for the three months ended June 30, 2001,
a decrease of $10,000. The reason for the change in expenses
relates to a decline in general and administrative expenses of
$6,000 and a decline in transaction costs of $5,000. General and
administrative expenses declined as a result of the Partnership
reclassifying certain expenses to reduce the reserve for estimated
costs during liquidation. These expenses were reclassified since
the Partnership no longer has any operating properties and the
liquidation process has begun.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership does not engage in any hedge transactions or
derivative financial instruments.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Two legal actions, as hereinafter described, against the
General Partners of the Partnership and affiliates of
such General Partners, as well as against the Partnership
on a nominal basis in connection with a proposed
transaction that was not consummated, have been settled.
On April 13, 1999, all the parties to the litigation
reached an agreement to settle the litigation, subject
to the approval by the United States District Court for
the Northern District of Illinois. This approval was
obtained on June 18, 1999. The terms of the settlement
agreement, along with a Notice to the Class, were
forwarded to the Limited Partners in the second quarter
of 1999. One additional legal action, which was
dismissed on January 28, 1998 had also been brought
against the General Partners of the Partnership and
affiliates of such General Partners, as well as the
Partnership on a nominal basis in connection with the
Merger. With respect to these actions the Partnership
and the General Partners and their named affiliates
denied all allegations set forth in the complaints and
vigorously defended against such claims.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission Of Matters To a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports On Form 8-K.
Exhibit 99. Certification of Officers.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BY: Brauvin Realty Advisors II, Inc.
Corporate General Partner of
Brauvin High Yield Fund L.P. II
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: August 14, 2002
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and Treasurer
DATE: August 14, 2002
Exhibit 99
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF
BRAUVIN REALTY ADVISORS II, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN HIGH YIELD FUND L.P. II.
The undersigned, being the duly elected Chief Executive Officer of
Brauvin Realty Advisors II, Inc., an Illinois corporation, is
authorized to execute this Certificate on behalf of Brauvin High
Yield Fund L.P. (the "Partnership"), and further certifies that to
the best of his knowledge:
(1) The Form 10-Q for the quarter ended June 30,
2002 filed by Partnership and containing the
Partnership's financial statements for the
quarter then ended, fully complies with the
requirements of Section 13(a) and 15(d), as
applicable, of the Securities Exchange Act
of 1934, as amended; and
(2) The information contained in said Form 10-Q
fairly presents, in all material respects,
the financial condition and results of
operations of the Corporation.
IN WITNESS WHEREOF, I have set my hand this 14th day of August,
2002.
/s/ Jerome J. Brault
Jerome J. Brault
Chief Executive Officer
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
BRAUVIN REALTY ADVISORS II, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN HIGH YIELD FUND L.P. II.
The undersigned, being the duly elected Chief Financial Officer of
Brauvin Realty Advisors II, Inc., an Illinois corporation, is
authorized to execute this Certificate on behalf of Brauvin High
Yield Fund L.P. II (the "Partnership"), and further certifies that
to the best of his knowledge:
(1) The Form 10-Q for the quarter ended June 30,
2002 filed by Partnership and containing the
Partnership's financial statements for the
quarter then ended, fully complies with the
requirements of Section 13(a) and 15(d), as
applicable, of the Securities Exchange Act
of 1934, as amended; and
(2) The information contained in said Form 10-Q
fairly presents, in all material respects,
the financial condition and results of
operations of the Corporation.
IN WITNESS WHEREOF, I have set my hand this 14th day of August,
2002.
/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer