UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2003
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
September 30, 2003 and December 31, 2002
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . . 4
Statement of Changes in Net Assets in Liquidation
for the period January 1, 2003 to September 30, 2003
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . . 5
Statement of Changes in Net Assets in Liquidation
for the period January 1, 2002 to September 30, 2002
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . . 6
Statements of Operations for the nine months ended
September 30, 2003 and 2002
(Liquidation Basis) . . . . . . . . . . . . . . . . . . . . 7
Statements of Operations for the three months ended
September 30, 2003 and 2002
(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
Item 4. Controls and Procedures. . . . . . . . . . . . . . . . .22
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . .24
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . .24
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . .24
Item 4. Submissions of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . .24
Item 5. Other Information. . . . . . . . . . . . . . . . . . . .24
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .24
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . .25
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 2002 Statement of Net Assets in
Liquidation (Liquidation Basis), the following Statement of Net
Assets in Liquidation as of September 30, 2003, Statement of
Changes in Net Assets in Liquidation for the period January 1, 2003
to September 30, 2003 (Liquidation Basis), Statement of Changes in
Net Assets in Liquidation for the period January 1, 2002 to
September 30, 2002 (Liquidation Basis), Statements of Operations
for the nine months ended September 30, 2003 and 2002 (Liquidation
Basis) and Statements of Operations for the three months ended
September 30, 2003 and 2002 (Liquidation Basis) for Brauvin High
Yield Fund L.P. II (the "Partnership") are unaudited and have not
been examined by independent public accountants but reflect, in the
opinion of the management, all adjustments necessary to present
fairly the information required. All such adjustments are of a
normal recurring nature.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Partnership's 2002 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
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002 (LIQUIDATION BASIS)
September 30,
2003 December 31,
(Unaudited) 2002
ASSETS
Cash and cash equivalents $4,432,358 $4,503,838
Due from Affiliate 11,210 --
Due from General Partners (Note 5) -- 140,000
Total Assets 4,443,568 4,643,838
LIABILITIES:
Accounts payable and accrued
expenses 27,281 20,050
Reserve for estimated costs during
the period of liquidation 122,550 158,400
Total Liabilities 149,831 178,450
Net Assets in Liquidation $4,293,737 $4,465,388
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 FOR THE PERIOD JANUARY 1, 2003 TO SEPTEMBER 30, 2003
(LIQUIDATION BASIS)
(Unaudited)
Net Assets in Liquidation at
January 1, 2003 $4,465,388
Loss from operations (171,651)
Net Assets in Liquidation at
September 30, 2003 $4,293,737
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 FOR THE PERIOD JANUARY 1, 2002 TO SEPTEMBER 30, 2002
(LIQUIDATION BASIS)
(Unaudited)
Net Assets in Liquidation at
January 1, 2002 $5,515,492
Loss from operations (22,449)
Net Assets in Liquidation at
September 30, 2002 $5,493,043
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(LIQUIDATION BASIS)
(Unaudited)
INCOME: 2003 2002
Interest $ 37,073 $ 79,789
Other -- 22,725
Total income 37,073 102,514
EXPENSES:
Transaction costs -- 39,158
General and administrative 208,724 85,805
Total expenses 208,724 124,963
Net loss $(171,651) $(22,449)
Net loss allocated to:
General Partners $ (4,291) $ (561)
Limited Partners $(167,360) $(21,888)
Net loss per unit
(40,347 units outstanding) $ (4.15) $ (0.54)
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 SEPTEMBER 30, 2003 AND 2002
(LIQUIDATION BASIS)
(Unaudited)
INCOME: 2003 2002
Interest $ 10,645 $ 26,408
Other -- 12,745
Total income 10,645 39,153
EXPENSES:
Transaction costs -- 39,158
General and administrative 173,724 44,366
Total expenses 173,724 83,524
Net loss $(163,079) $(44,371)
Net loss allocated to:
General Partners $ (4,077) $ (1,109)
Limited Partners $(159,002) $(43,262)
Net loss per unit
(40,347 units outstanding) $ (3.94) $ (1.07)
See accompanying notes to financial statements.
BRAUVIN HIGH YIELD FUND L.P. II
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and 2002
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Brauvin High Yield Fund L.P. II (the "Partnership") is a Delaware
limited partnership which was 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
September 30, 2003, 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 September 30, 2003. As
of September 30, 2003, 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-Chi's 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 Accounting
As a result of the settlement agreement (see Note 6), 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 September 30, 2003.
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.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt
instruments with an original maturity within three months of
purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates are based on information available to
management as of September 30, 2003 and December 31, 2002, but may
not necessarily be indicative of the amounts that the Partnership
could realize in a current market exchange. The use of different
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The carrying amounts of the following items are a reasonable
estimate of fair value: cash and cash equivalents; due from
affiliate and General Partners; accounts payable and accrued
expenses; and reserve for estimated costs during the period of
liquidation.
Derivatives and Hedging Instruments
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 adopted by the
Partnership effective January 1, 2001. The Partnership had no
derivatives in 2003 or 2002.
Recent Accounting Pronouncements
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
intangibles, reassessment of the useful lives of existing
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.
Application of the statements to future acquisitions, if any,
could result in the recognition, upon acquisition, of additional
intangible assets (acquired in-place lease origination costs and
acquired above market leases) and liabilities (acquired below
market leases), which would be amortized over the remaining terms
of the acquired leases.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations"
("SFAS 143"), which is 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.
In April 2002, FASB issued Statement of Financial Accounting
Standards No. 145, "Recession of FASB Statements No. 4, 44,
Amendment of FASB No. 13, and Technical Corrections" ("SFAS 145").
Generally, the recission of FASB No. 4, "Reporting Gains and Losses
from Extinguishment of Debt" would require that debt extinguishment
costs are to no longer be treated as extraordinary items. The
amendment to FASB No. 13, "Accounting for Leases" requires sale-
leaseback accounting for certain lease modifications that have the
economic effects that are similar to sale-leaseback transactions.
This statement is generally effective for the year ending December
31, 2003.
In November 2002, FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" (FIN 45).
FIN 45 elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations
under certain guarantees that it has issued and clarifies that a
guarantor is required to recognize, at inception of the guarantee,
a liability for the fair value of the obligation undertaken in
issuing the guarantee. The initial recognition and measurement
provisions of FIN 45 are applicable to guarantees issued or
modified after December 31, 2002. The disclosure requirements of
FIN 45 are effective for periods ending after December 15, 2002.
In January 2003, FASB issued interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46). FIN 46
addresses consolidation by business enterprises of certain variable
interest entities in which the equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other
parties. FIN 46 applies to variable interest entities created
after January 31, 2003 and to such entities in which the interest
was acquired prior to February 1, 2003 and commencing with the
first for fiscal year or interim periods ending after December 15,
2003.
The Partnership does not believe that the adoption of SFAS 143,
144 and 145 and FIN 45 and 46, has a significant impact on its
financial statements.
(3) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement"), shall be distributed: (a) first, to the Limited
Partners until the Limited Partners receive an amount equal to
their 10% Current Preferred Return, as such term is defined in the
Agreement; and (b) thereafter, any remaining amounts will be
distributed 97.5% to the Limited Partners and 2.5% to the General
Partners.
The net proceeds of a sale or refinancing of a Partnership
property shall be distributed as follows:
first, to the Limited Partners until the Limited Partners have
received an amount equal to the 10% Cumulative Preferred Return,
as such term is defined in the Agreement;
second, to the Limited Partners until the Limited Partners have
received an amount equal to the amount of their Adjusted
Investment, as such term is defined in the Agreement; and
third, 95% to the Limited Partners and 5% to the General
Partners.
Profits and Losses
Net profits and losses from operations of the Partnership
[computed without regard to any allowance for depreciation or cost
recovery deductions under the Internal Revenue Code of 1986, as
amended (the "Code")] for each taxable year of the Partnership
shall be allocated between the Limited Partners and the General
Partners in accordance with the ratio of aggregate distributions of
Operating Cash Flow attributable to such tax year, although if no
distributions are made in any year, net losses (computed without
regard to any allowance for depreciation or cost recovery
deductions under the Code) shall be allocated 99% to the Limited
Partners and 1% to the General Partners. Notwithstanding the
foregoing, all depreciation and cost recovery deductions allowed
under the Code shall be allocated 2.5% to the General Partners and
97.5% to the Taxable Class Limited Partners, as defined in the
Agreement.
The net profit of the Partnership from any sale or other
disposition of a Partnership property shall be allocated (with
ordinary income being allocated first) as follows: (a) first, an
amount equal to the aggregate deficit balances of the Partners'
Capital Accounts, as such term is defined in the Agreement, shall
be allocated to each Partner who or which has a deficit Capital
Account balance in the same ratio as the deficit balance of such
Partner's Capital Account bears to the aggregate of the deficit
balances of all Partners' Capital Accounts; (b) second, to the
Limited Partners until the Limited Partners have been allocated an
amount of profits equal to their 10% Cumulative Preferred Return as
of such date; (c) third, to the Limited Partners until the Limited
Partners have been allocated an amount of profit equal to the
amount of their Adjusted Investment; and (d) thereafter, 95% to the
Limited Partners and 5% to the General Partners. The net loss of
the Partnership from any sale or other disposition of a Partnership
property shall be allocated as follows: (a) first, an amount equal
to the aggregate positive balances in the Partners' Capital
Accounts, to each Partner in the same ratio as the positive balance
in such Partner's Capital Account bears to the aggregate of all
Partners' positive Capital Account balances; and (b) thereafter,
95% to the Limited Partners and 5% to the General Partners.
(4) TRANSACTIONS WITH RELATED PARTIES
An affiliate of the General Partners 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
December 31, 2002, relating to the Distribution Guaranty Reserve
(see Note 5). During the third quarter of 2003, the Partnership
instituted collection procedures from the original General Partners
and it was determined that collection of this receivable was
unenforceable.
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 its affiliates for the nine months ended
September 30, 2003 and 2002 were as follows:
2003 2002
Reimbursable operating
expenses $68,634 $76,388
As of September 30, 2003 the Partnership was owed $11,210 from an
affiliate. The Partnership received this reimbursement in October,
2003.
(5) 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 December 31, 2002, $140,000 was due from the original
General Partners related to the Distribution Guaranty. During the
third quarter of 2003, the Partnership instituted collection
procedures from the original General Partners and it was determined
that collection of this receivable was unenforceable.
(6) 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. 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 appealed this ruling. On September 24, 2002, the
plaintiff's attorneys filed a Stipulation of Dismissal of their
appeal in the District Court for the Northern District of Illinois.
The Partnership paid total plaintiff's attorney fees and expenses
of $263,081 on September 24, 2002.
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 were held by the Partnership; and the length of the
reserve period and the remaining 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. 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 appealed this ruling. On September 24, 2002, the
plaintiff's attorneys filed a Stipulation of Dismissal of their
appeal in the District Court for the Northern District of Illinois.
The Partnership paid total plaintiff's attorney fees and expenses
of $263,081 on September 24, 2002.
During the nine months ended September 30, 2003 and 2002, the
General Partners and their affiliates did not earn any management
fees, and did not receive any Operating Cash Flow distributions.
Results of Operations (Liquidation Basis) - Nine months ended
September 30, 2003 and 2002
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 a net loss of $172,000 for the nine months
ended September 30, 2003 compared to a net loss of $22,000 for the
nine months ended September 30, 2002, an increase in net loss of
$149,000.
Total income was $37,000 for the nine months ended September 30,
2003, compared to $103,000 for the nine months ended September 30,
2002, a decline of $65,000 which is primarily a result of a decline
in interest income. The $43,000 decline in interest income is
associated with a decline in interest rates on the Partnership's
investments as well as a decline in the cash available for
investment.
Total expenses were $209,000 for the nine months ended September
30, 2003, compared to $125,000 for the nine months ended September
30, 2002, an increase of $84,000. The reason for the change in
expenses is primarily a result of the $140,000 distribution
guarantee as it was determined that the collection of this
receivable was deemed unenforceable from the General Partners
offset by a reduction in transaction costs of $39,000.
Results of Operations (Liquidation Basis) - Three months ended
September 30, 2003 and 2002
The Partnership had net loss of $163,000 for the three months
ended September 30, 2003 compared to net loss of $44,000 for the
three months ended September 30, 2002, an increase in net loss of
$119,000.
Total income was $11,000 for the three months ended September 30,
2003 compared to $39,000 for the three months ended September 30,
2002, a decline of $28,000. The decline in total income relates
primarily to interest income. Interest income declined by $15,000
which is associated with a decline in interest rates on the
Partnership's investments.
Total expenses were $174,000 for the three months ended September
30, 2003 compared to $84,000 for the three months ended September
30, 2001, an increase of $90,000. The reason for the change in
expenses is primarily a result of the $140,000 distribution
guarantee as it was determined that the collection of this
receivable was deemed unenforceable from the General Partners
offset by a reduction in transaction costs of $39,000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Partnership does not engage in any hedge transactions or
derivative financial instruments.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Chief Executive Officer and Chief Financial Officer of the
corporate general partner have reviewed and evaluated the
effectiveness of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as
of a date within 90 days before the filing date of this quarterly
report. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that the Company's current
disclosure controls and procedures are effective and timely,
providing all material information relating to the Company required
to be disclosed in reports filed or submitted under the Exchange Act.
Changes in Internal Controls
There have not been any significant changes in the Company's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
The Chief Executive Officer and Chief Financial Officer are not
aware of any significant deficiencies or material weaknesses,
therefore no corrective actions were taken.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission Of Matters To a Vote of Security Holders.
None.
ITEM 5. Other Information.
On October 28, 2003, Jerome Brault resigned as an
Individual General Partner of the Partnership.
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: December 15, 2003
BY: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and Treasurer
DATE: December 15, 2003
CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
OF
BRAUVIN REALTY ADVISORS II, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN HIGH YIELD FUND L.P. II
I, Jerome J. Brault, Chief Executive Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brauvin
High Yield Fund L.P. II;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the consolidated
financial condition, results of operations and statement of
changes in net assets in liquidation of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f) for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures presented in this
report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
BY:/s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: December 15, 2003
CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
OF
BRAUVIN REALTY ADVISORS II, INC.
CORPORATE GENERAL PARTNER
OF
BRAUVIN HIGH YIELD FUND L.P. II
I, Thomas E. Murphy, Chief Financial Officer of the Company,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brauvin
High Yield Fund L.P. II;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the consolidated
financial condition, results of operations and statement of
changes in net assets in liquidation of the registrant as of,
and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f) for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that
material information relating to the registrant,
including its consolidated subsidiaries, is made
known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) designed such internal control over financial
reporting, or caused such internal control over
financial reporting to be designed under our
supervision, to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures presented in this
report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the
end of the period covered by this report based on
such evaluation; and
d) disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over
financial reporting.
BY:/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and Treasurer
DATE: December 15, 2003
Exhibit 99
SECTION 906 CERTIFICATION
The following statement is provided by the undersigned to
accompany the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and shall not be deemed filed pursuant to any
provisions of the Securities Exchange Act of 1934 or any other
securities law:
Each of the undersigned certifies that the foregoing Report on
Form 10-Q fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the
information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of
operations of Brauvin High Yield Fund L.P. II.
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: December 15, 2003
BY:/s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and Treasurer
DATE: December 15, 2003