UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934



|For the quarterly period ended September 30, 2001 | Commission file number 2-89185
|------------------------------------------------- | ------------------------------



GULLEDGE REALTY INVESTORS II, L.P.



|State of Organization: VIRGINIA | I.R.S. Employer Identification No. 54-1191237
|------------------------------- | ---------------------------------------------



One North Jefferson Avenue

St. Louis, Missouri 63103





Registrant's telephone number, including area code: (314) 955-4188







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 of 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 XNo











GULLEDGE REALTY INVESTORS II, L.P.

(A Limited Partnership)



INDEX





|         |                                                        | PAGE
|-------- | ------------------------------------------------------ | ----
|PART I.  | FINANCIAL INFORMATION:                                 |     
|         | Balance Sheets (Unaudited)                             | 1   
|         | Statements of Operations (Unaudited)                   | 2   
|         | Statements of Changes in Partners' Deficit (Unaudited) | 3   
|         | Statements of Cash Flows (Unaudited)                   | 4   
|         | Notes to Financial Statements (Unaudited)              | 5-8 
|         | Management's Financial Discussion                      | 9   
|         |                                                        |     
|PART II. | OTHER INFORMATION                                      | 10  
|         |                                                        |     
|         | SIGNATURES                                             | 11  



Balance Sheets

(Unaudited)



|                                           | September 30, | December 31,
|------------------------------------------ | ------------- | ------------
|ASSETS                                     | 2001          | 2000        
|                                           |               |             
|Cash and cash equivalents                  | $     68,621  | $     14,740
|                                           |               |             
|Advances to Project Partnerships           | 2,777         | 6,751       
|                                           |               |             
|Investment in Project Partnership (Note B) | -             | 254,246     
|                                           |               |             
|Distributions Receivable                   | -             | 20,549      
|                                           |               |             
|                                           |               |             
|Total Assets                               | $     71,398  | $   296,286 
|                                           |               |             
|                                           |               |             
|                                           |               |             
|LIABILITIES AND PARTNERS' DEFICIT          |               |             
|                                           |               |             
|Accounts payable                           | $     19,900  | $     10,200
|                                           |               |             
|Payable to affiliates                      | 783,359       | 704,300     
|                                           |               |             
|Note payable and accrued                   |               |             
|interest payable (Note B)                  | 3,647,591     | 3,723,543   
|                                           |               |             
|Capital contributions payable              | 50,000        | 50,000      
|                                           |               |             
|Total Liabilities                          | 4,500,850     | 4,488,043   
|                                           |               |             
|Partners' Deficit                          | (4,429,452)   | (4,191,757) 
|                                           |               |             
|Total Liabilities and                      |               |             
|Partners' Deficit                          | $     71,398  | $   296,286 





See Notes to Financial Statements.

Statements of Operations

(Unaudited)



|                          | Three Months Ended | Nine Months Ended
|------------------------- | ------------------ | -----------------
|                          | September 30,      | September 30,    
|                          | 2001               | 2000             
|                          |                    |                  
|Revenue:                  |                    |                  
|                          |                    |                  
|Interest income           | $          458     | $          452   
|                          |                    |                  
|Distributions             | 8,456              | 3,940            
|                          |                    |                  
|Equity in income          |                    |                  
|of Project Partnership    | -                  | 49,909           
|                          |                    |                  
|                          | 8,914              | 54,301           
|Expenses:                 |                    |                  
|                          |                    |                  
|Asset management fee      | 28,645             | 28,645           
|                          |                    |                  
|Professional fees         | 2,550              | 2,667            
|                          |                    |                  
|Consulting fees           | 11,000             | 11,000           
|                          |                    |                  
|Operating expenses        | 3,256              | (168)            
|                          |                    |                  
|Interest expense (Note B) | 79,252             | 79,252           
|                          |                    |                  
|                          | 124,703            | 121,396          
|                          |                    |                  
|Net loss                  | $ (115,789)        | $   (67,095)     





See Notes to Financial Statements.



Statements of Changes in Partners' Deficit

(Unaudited)

Nine Months Ended September 30, 2001 and 2000



|                               |              |             | Special       |             
|------------------------------ | ------------ | ----------- | ------------- | ------------
|                               | Total        | General     | Limited       | Limited     
|Balances at January 1, 2000    | $(3,882,659) | $  (51,330) | $    (89,940) | $(3,741,389)
|                               |              |             |               |             
|Net loss for nine months       |              |             |               |             
|ended September 30, 2000       | (242,050)    | (2,663)     | (4,599)       | (234,788)   
|                               |              |             |               |             
|                               |              |             |               |             
|Balances at September 30, 2000 | $(4,124,709) | $  (53,993) | $    (94,539) | $(3,976,177)
|                               |              |             |               |             
|                               |              |             |               |             
|                               |              |             |               |             
|                               |              |             |               |             
|Balances at January 1, 2001    | $(4,191,757) | $(54,730)   | $    (95,813) | $(4,041,214)
|                               |              |             |               |             
|Net loss for nine months       |              |             |               |             
|ended September 30, 2001       | (237,695)    | (2,615)     | (4,516)       | (230,564)   
|                               |              |             |               |             
|Balances at September 30, 2001 | $(4,429,452) | $  (57,345) | $  (100,329)  | $(4,271,778)
|                               |              |             |               |             
|                               |              |             |               |             
|Number of ownership units      | 11,814       | 131         | 225           | 11,458      









See Notes to Financial Statements.

Statements of Cash Flows

(Unaudited)





|                                              | Nine Months Ended
|--------------------------------------------- | -----------------
|                                              | September 30,    
|                                              | 2001             
|Cash Flows From Operating Activities:         |                  
|Net loss                                      | $(237,695)       
|Adjustments to reconcile net loss             |                  
|to net cash from operating activities:        |                  
|Equity in income of Project Partnership       | (32,324)         
|Distributions from zero basis                 |                  
|Project Partnerships                          | (96,368)         
|Changes in assets and liabilities:            |                  
|Advances to Project Partnerships              | 3,974            
|Accrued interest on note payable              | (75,952)         
|Accounts payable                              | 9,700            
|Payable to affiliates                         | 79,059           
|                                              |                  
|Net Cash From Operating Activities            | (349,606)        
|                                              |                  
|Cash Flows From Investing Activities -        |                  
|Distributions from all Project Partnerships   | 403,487          
|                                              |                  
|Increase in Cash                              | 53,881           
|                                              |                  
|Cash and Cash Equivalents Beginning of Period | 14,740           
|                                              |                  
|Cash and Cash Equivalents End of Period       | $   68,621       
|                                              |                  
|Additional cash flow information:             |                  
|Interest payments                             | $ 311,123        















See Notes to Financial Statements.

NOTES TO FINANCIAL STATEMENTS

Nine Months Ended September 30, 2001 and 2000

(Unaudited)



Note A          Summary of Significant Accounting Policies

Partnership Organization

Gulledge Realty Investors II, L.P. (the Registrant) is a limited partnership organized in December 1983 under the laws of the Commonwealth of Virginia for the purpose of acquiring limited partner interests in real estate limited partnerships ("Project Partnerships"). These Project Partnerships include Colony Place Associates, Ltd. ("Colony"), Country Oaks Apartments Limited Partnership, Hawthorn Housing Limited Partnership ("Hawthorn"), Olympic Housing Limited Partnership ("Olympic"), Pine West Ltd., and Rancho Vista Associates. The Project Partnerships previously included Florence Housing Associates ("Florence") and Greentree Housing Limited Partnership, which assets were sold in 2000 and 1999, respectively. Each of the Project Partnerships is an operating real estate project which receives mortgage interest subsidies and/or rental assistance from the United States Department of Housing and Urban Development (HUD) or Farmer's Home Administration. The Registrant commenced operations in March 1984.

The financial statements include only those assets, liabilities, and results of operations which relate to the business of the Registrant and do not include any assets, liabilities, or operating results attributable to the partners' individual activities. These financial statements should be read in conjunction with the Registrant's annual report on Form 10-K for the year ended December 31, 2000. All adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim period have been reflected. All such adjustments consist of normal recurring accruals, unless otherwise disclosed in these interim financial statements. The results of operations, for the nine months ended September 30, 2001, are not necessarily indicative of the results for the year ending December 31, 2001. Where appropriate, prior year's financial information has been reclassified to conform with the current year presentation.

Comprehensive losses for the nine month periods ended September 30, 2001 and 2000 were equal to the Registrant's net losses.

Cash and Cash Equivalents

Cash equivalents consist of interest bearing money market account balances.

Investments in Project Partnerships

The investments in Project Partnerships are accounted for using the equity method of accounting. Under the equity method, investments are reflected at cost, adjusted for the Registrant's share of the Project Partnerships' income or loss. The Registrant is under no obligation to contribute additional capital, or to lend monies necessary to fund cash flow deficiencies of the Project Partnerships, because the Registrant is a limited partner in such partnerships. The investment account will not be reduced below zero because the Partnership is not liable for Project Partnership losses in excess of such investment. Losses in subsequent years will be maintained separately for tax purposes. These losses are available to be applied toward any possible future income from these partnerships. Any distributions received from the Project Partnerships, subsequent to reducing the investment account to zero, will be recognized as income in the year received.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 significantly from those estimated.

Income Taxes

No provision has been made for current or deferred income taxes since they are the responsibility of each partner. Profits (or gains) and losses of the Registrant are allocated to the partners in accordance with the partnership agreement.

Segment Reporting

The Partnership's principal line of business is investing in Project Partnerships that own and operate Projects that are financed and/or operated under federal or state housing assistance programs. Management has considered the requirements of SFAS 131 and believes that the partnership operates in one business segment.

Derivative Instruments and Hedging Activities

In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133. In June 1999, the FASB also issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferred of the Effective Date of FASB Statement No. 133. SFAS No. 137 defers the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities until January 1, 2001. SFAS No. 133, as amended by SFAS No. 138, requires, among other things, that all derivatives, be recognized in the balance sheets as either assets or liabilities and measured at fair value. The corresponding derivative gains and losses should be reported based upon the hedge relationship. If such a relationship exists, changes in the fair value of derivatives that are not designated as hedges or that do not meet the hedge accounting criteria in SFAS NO. 133 are required to be reported in income. Effective January 1, 2001, the Partnership adopted these Statements. This adoption did not have an impact on the Partnership's financial statements.

Reclassifications

Where appropriate, prior years' financial information has been reclassified to conform with the current year presentation.

Note B          Investment in Project Partnership and Note Payable

Hawthorn refinanced its mortgage during 1997. Proceeds from the refinancing were used to make a partial payment on the promissory note which had come due December 31, 1996. The remaining balance of the promissory note was renegotiated. The mortgage was refinanced under HUD regulations which limit the amount of debt that can be collateralized by the project. Accordingly, HUD would not approve the mortgage refinance unless the promissory note was no longer a liability of the project. Therefore, the general partner of the Registrant and the noteholder agreed to have the promissory note assumed by the Registrant. The promissory note is now collateralized by the partners' interests in Hawthorn. Principal and interest due on the promissory note are only payable from surplus cash received by the Registrant from Hawthorn. The Registrant is not required to make any payments from surplus cash it receives from any other project. The promissory note plus accrued interest totaled $3,647,591 at September 30, 2001, and bears simple interest at a rate of 9%. Any principal and interest remaining unpaid on June 30, 2002, will be due in full.

In conjunction with assuming the liability for the promissory note, the Registrant also recorded a corresponding investment in Hawthorn. The investment account was then reduced by previously unrecorded losses of Hawthorn in accordance with the equity method of accounting. The investment account will be adjusted in future years by the Registrant's share of any additional income or loss from Hawthorn as reported on Hawthorn's periodic financial statements. This investment account will also be reduced whenever the Registrant receives a distribution from Hawthorn. During the nine months ended September 30, 2001, the investment account was reduced to zero and the Registrant recognized approximately $87,000 in distribution income from Hawthorn.

None of the Project Partnerships are experiencing significant cash flow deficiencies after adding back non-cash items such as depreciation, amortization and accrued interest on promissory notes not currently payable to the operating losses of the Project Partnerships.

MANAGEMENT'S FINANCIAL DISCUSSION

For the Nine Months Ended September 30, 2001 and 2000



The Registrant is a limited partnership formed to acquire limited partner interests in real estate limited partnerships (Project Partnerships). The Registrant's investments in the Project Partnerships are recorded using the equity method of accounting (see Note A).

The primary reasons for the decrease in net loss for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000 were due to an increase in distributions partially offset by a decrease in equity in income of Project Partnership, and a decrease in operating expenses and interest expense.

The Registrant is liable for a promissory note that bears simple interest at a rate of 9%. Principal and interest payable totaled $3,647,591 at September 30, 2001. Principal and interest can only be paid from distributions received from Hawthorn. The Registrant is not required to use distributions from any other Project Partnership to make payments on this promissory note.

The Registrant's ownership interest in two other Project Partnerships (Colony Place and Olympic Housing) is pledged as collateral in connection with promissory notes issued by the respective Project Partnerships. The Colony Place promissory note was due June 30, 1997 and had been extended to November 30, 1999, while the general partner attempted to locate a buyer for the project. A buyer was not located before November 30, 1999. This note is currently in default. Therefore, the noteholder may demand payment and the project may revert to the noteholder. The Olympic Housing promissory note expired December 31, 2000. This note is currently in default. The noteholder has notified Olympic of its demand for payment. Therefore, the project may revert to the noteholder at any time.







PART II OTHER INFORMATION





|Item 6: | Exhibits and Reports on Form 8-K                                            
|------- | ----------------------------------------------------------------------------
|        |                                                                             
|        | (b)    Reports on Form 8-K - There were no reports filed on Form 8-K for the
|        | quarter ended September 30, 2001.                                           







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.



|                        | GULLEDGE REALTY INVESTORS II, L.P. 
|----------------------- | -----------------------------------
|                        |                                    
|                        | By:     GULL-AGE Properties, Inc.  
|                        | Managing General Partner           
|                        |                                    
|                        |                                    
|                        |                                    
|                        |                                    
|Date: November 12, 2001 | By:     /s/ Douglas L. Kelly_______
|                        | Douglas L. Kelly                   
|                        | President, Secretary, Treasurer,   
|                        | and Director