United States
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 o
    
    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 333-116595
 LEASE EQUITY APPRECIATION FUND II, L.P.
  Delaware
    
    20-1056194(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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LEASE EQUITY APPRECIATION FUND II, L.P.
INDEX TO QUARTERLY REPORT
 ON FORM 10-Q
 PAGEPART I FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets  March 31, 2009 (unaudited) and December 31, 2008
    
    
    3Consolidated Statements of Operations
Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    4Consolidated Statement of Partners Capital
Three Months Ended March 31, 2009 (unaudited)
    
    
    5Consolidated Statements of Cash Flows
Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    6Notes to Consolidated Financial Statements  March 31, 2009 (unaudited)
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    13ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21ITEM 4. Controls and Procedures
    
    
    21PART II OTHER INFORMATIONITEM 6. Exhibits
    
    
    22SIGNATURES
    
    
    23
  2




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (in thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCash
    
    $
    346
    
    
    $
    149Restricted cash
    
    
    25,560
    
    
    
    29,234Accounts receivable
    
    
    107
    
    
    
    133Investment in leases and loans, net
    
    
    244,121
    
    
    
    265,993Deferred financing costs, net
    
    
    3,537
    
    
    
    2,956Other assets
    
    
    532
    
    
    
    574$
    274,203
    
    
    $
    299,039LIABILITIES AND PARTNERS CAPITALLiabilities:Bank debt
    
    $
    231,059
    
    
    $
    254,744Accounts payable and accrued expenses
    
    
    728
    
    
    
    574Other liabilities
    
    
    996
    
    
    
    952Derivative liabilities at fair value
    
    
    9,946
    
    
    
    11,734Due to affiliates
    
    
    15,116
    
    
    
    11,983Total liabilities
    
    
    257,845
    
    
    
    279,987Commitments and contingenciesPartners Capital:General partner
    
    
    (265
    )
    
    
    (221
    )Limited partners
    
    
    25,015
    
    
    
    29,371Accumulated other comprehensive loss
    
    
    (8,392
    )
    
    
    (10,098
    )Total partners capital
    
    
    16,358
    
    
    
    19,052$
    274,203
    
    
    $
    299,039
  3




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##### 



LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 (in thousands, except unit data)
 (unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Revenues:Interest on equipment financings
    
    $
    5,336
    
    
    $
    7,276Rental income
    
    
    800
    
    
    
    1,316(Losses) gains on sales of equipment and lease dispositions, net
    
    
    (164
    )
    
    
    322Other
    
    
    438
    
    
    
    6436,410
    
    
    
    9,557Expenses:Interest expense
    
    
    3,675
    
    
    
    4,796Depreciation on operating leases
    
    
    700
    
    
    
    1,114Provision for credit losses
    
    
    2,872
    
    
    
    1,321Management fees to affiliate
    
    
    798
    
    
    
    984Administrative expenses reimbursed to affiliate
    
    
    693
    
    
    
    443General and administrative expenses
    
    
    838
    
    
    
    6059,576
    
    
    
    9,263Net (loss) income
    
    $
    (3,166
    )
    
    $
    294Weighted average number of limited partner units
outstanding during the period
    
    
    593,394
    
    
    
    597,497Net (loss) income per weighted average limited partner unit
    
    $
    (5.28
    )
    
    $
    0.49
  4




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##### 



LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
 
 Consolidated Statement of Partners Capital
 For the Three Months Ended March 31, 2009
 (in thousands, except unit data)
 (unaudited)
 AccumulatedGeneral
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalPartner
    
    
    Limited Partners
    
    
    Comprehensive
    
    
    Partners
    
    
    ComprehensiveAmount
    
    
    Units
    
    
    Amount
    
    
    Income (Loss)
    
    
    Capital
    
    
    Income (Loss)Balance, January 1, 2009
    
    $
    (221
    )
    
    
    593,694
    
    
    $
    29,371
    
    
    $
    (10,098
    )
    
    $
    19,052Cash distributions
    
    
    (12
    )
    
    
    
    
    
    
    (1,170
    )
    
    
    
    
    
    
    (1,182
    )Redemptions of limited partner units
    
    
    
    
    
    
    (604
    )
    
    
    (52
    )
    
    
    
    
    
    
    (52
    )Net loss
    
    
    (32
    )
    
    
    
    
    
    
    (3,134
    )
    
    
    
    
    
    
    (3,166
    )
    
    $
    (3,166
    )Unrealized gains on financial derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,802
    
    
    
    1,802
    
    
    
    1,802Amortization of gains on financial
derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    (96
    )
    
    
    (96
    )Balance, March 31, 2009
    
    $
    (265
    )
    
    
    593,090
    
    
    $
    25,015
    
    
    $
    (8,392
    )
    
    $
    16,358
    
    
    $
    (1,460
    )
  5




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##### 



LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (in thousands)
 (unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (3,166
    )
    
    $
    294Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Losses (gains) on sales of equipment and lease dispositions, net
    
    
    164
    
    
    
    (322
    )Depreciation
    
    
    700
    
    
    
    1,114Provision for credit losses
    
    
    2,872
    
    
    
    1,321Amortization of deferred financing costs
    
    
    170
    
    
    
    123Amortization of gains on financial derivative
    
    
    (96
    )
    
    
    (95
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    26
    
    
    
    29Other assets
    
    
    56
    
    
    
    363Accounts payable and accrued expenses and other liabilities
    
    
    198
    
    
    
    223Due to affiliates, net
    
    
    3,133
    
    
    
    1,684Net cash provided by operating activities
    
    
    4,057
    
    
    
    4,734Cash flows from investing activities:Purchases of leases and loans
    
    
    (6,986
    )
    
    
    (26,586
    )Proceeds from leases and loans
    
    
    25,207
    
    
    
    31,822Security deposits returned, net of collected
    
    
    (85
    )
    
    
    (144
    )Net cash provided by investing activities
    
    
    18,136
    
    
    
    5,092Cash flows from financing activities:Borrowings of bank debt
    
    
    6,656
    
    
    
    26,953Repayment of bank debt
    
    
    (30,341
    )
    
    
    (33,388
    )Decrease (increase) in restricted cash
    
    
    3,674
    
    
    
    (1,817
    )Increase in deferred financing costs
    
    
    (751
    )
    
    
    (4
    )Redemption of Limited Partners capital
    
    
    (52
    )
    
    
    (55
    )Cash distributions to partners
    
    
    (1,182
    )
    
    
    (1,204
    )Net cash used in financing activities
    
    
    (21,996
    )
    
    
    (9,515
    )Increase in cash
    
    
    197
    
    
    
    311Cash, beginning of period
    
    
    149
    
    
    
    259Cash, end of period
    
    $
    346
    
    
    $
    570
  6




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##### 



LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
 
 Notes To Consolidated Financial Statements
 March 31, 2009
 (unaudited)
 NOTE 1  ORGANIZATION AND NATURE OF BUSINESS
 .
    NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Newly Adopted Accounting Principles
 Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS 133
 7




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LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 3  INVESTMENT IN LEASES AND LOANS
  March 31,
    
    
    December 31,2009
    
    
    2008Direct financing leases
    
    $
    196,036
    
    
    $
    212,536Loans
    
    
    48,348
    
    
    
    52,461Operating leases
    
    
    6,467
    
    
    
    6,766250,851
    
    
    
    271,763Allowance for credit losses
    
    
    (6,730
    )
    
    
    (5,770
    )$
    244,121
    
    
    $
    265,993
  March 31,
    
    
    December 31,2009
    
    
    2008Leases
    
    
    Loans
    
    
    Leases
    
    
    LoansTotal future minimum lease payments
    
    $
    221,109
    
    
    $
    58,864
    
    
    $
    239,564
    
    
    $
    63,641Unearned income
    
    
    (21,884
    )
    
    
    (9,711
    )
    
    
    (24,274
    )
    
    
    (10,373
    )Residuals, net of unearned residual income
    
    
    509
    
    
    
    
    
    
    
    657
    
    
    
    Security deposits
    
    
    (3,698
    )
    
    
    (805
    )
    
    
    (3,411
    )
    
    
    (807
    )$
    196,036
    
    
    $
    48,348
    
    
    $
    212,536
    
    
    $
    52,461
  March 31,
    
    
    December 31,2009
    
    
    2008Equipment
    
    $
    15,550
    
    
    $
    15,683Accumulated Depreciation
    
    
    (8,995
    )
    
    
    (8,832
    )Security deposits
    
    
    (88
    )
    
    
    (85
    )$
    6,467
    
    
    $
    6,766
 8




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LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 3  INVESTMENT IN LEASES AND LOANS  (Continued)
  Three Months EndedMarch 31,2009
    
    
    2008Allowance for credit losses, beginning of period
    
    $
    5,770
    
    
    $
    1,960Provision for credit losses
    
    
    2,872
    
    
    
    1,321Charge-offs
    
    
    (1,993
    )
    
    
    (1,650
    )Recoveries
    
    
    81
    
    
    
    79Allowance for credit losses, end of period
    
    $
    6,730
    
    
    $
    1,710
  NOTE 4  BANK DEBT
  Interest rate
    
    
    Decemberper annum
    
    
    31, 2008Facility
    
    
    Amount
    
    
    Amount
    
    
    adjusted for
    
    
    OutstandingType
    
    Maturity Date
    
    Amount
    
    
    Outstanding
    
    

Available (1)
    
    

swaps (2)
    
    
    BalanceTerm Securitization   Class A-2
    
    Term
    
    January 2010
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    8,671Term Securitization   Class A-3
    
    Term
    
    July 2010
    
    
    91,397
    
    
    
    91,397
    
    
    
    
    
    
    
    5.6
    %
    
    
    101,320Term Securitization   Class B
    
    Term
    
    July 2010
    
    
    14,530
    
    
    
    14,530
    
    
    
    
    
    
    
    6.7
    %
    
    
    14,530WestLB
    
    Revolving
    
    (3)
    
    
    150,000
    
    
    
    125,132
    
    
    
    24,868
    
    
    
    5.7
    %
    
    
    130,223$
    255,927
    
    
    $
    231,059
    
    
    $
    24,868
    
    
    
    
    
    
    $
    254,744
 
 (1)
    
    Availability under this credit facility is subject to having sufficient eligible leases or
loans (as defined in the agreements) to pledge as collateral and compliance with the
borrowing base formula.(2)
    
    To mitigate fluctuations in interest rates, the Fund entered into interest rate swap
agreements. The interest rate swap agreements terminate on various dates and fix the interest
rate. This rate reflects the weighted average fixed rate.(3)
    
    The facility is renewable for a one year period in June 2009. The Funds currently in the
process of negotiating the renewal. If the WestLB facility is not extended at the time of
renewal, pursuant to the loan agreement the Fund would not be required to make full repayment
at the time of renewal. Rather, the Fund would continue to repay the outstanding debt as
payments under the leases and loans pledged as collateral are received.   9




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LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 4  BANK DEBT  (Continued)
 Debt repayments
  2010
    
    $
    96,1412011
    
    
    62,9312012
    
    
    39,6322013
    
    
    21,2782014
    
    
    9,147Thereafter
    
    
    1,930$
    231,059
 NOTE 5  DERIVATIVE INSTRUMENTS
     10




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LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 5  DERIVATIVE INSTRUMENTS  (Continued)
  Notional
    
    
    
    
    
    FairAmount
    
    Balance Sheet Location
    
    ValueDerivatives designated as hedging instruments
under SFAS 133Interest rate swap contracts
    
    $
    213,679
    
    
    Derivative liabilities at fair value
    
    $
    9,946Accumulated other comprehensive loss
    
    $
    (9,946
    )
   NOTE 6  CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH AFFILIATES
  Three Months Ended March 31,2009
    
    2008Acquisition fees
    
    $
    123
    
    
    $
    507Management fees
    
    
    798
    
    
    
    984Administrative expenses
    
    
    693
    
    
    
    443
 Acquisition Fees.
 Management Fees.
 Administrative Fees
  11




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LEASE EQUITY APPRECIATION FUND II, L.P. AND SUBSIDIARIES
Notes To Consolidated Financial Statements  (Continued)
March 31, 2009
(unaudited)
 NOTE 7  COMMITMENTS AND CONTINGENCIES
  12




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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 When used in this Form 10-Q, the words believes anticipates, expects and similar expressions
are intended to identify forward-looking statements. Such statements are subject to certain risks
and uncertainties more particularly described in other documents filed with Securities and Exchange
Commission. These risks and uncertainties could cause actual results to differ materially.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. We undertake no obligation to publicly release the results of any
revisions to forward-looking statements which we may make to reflect events or circumstances after
the date of this Form 10-Q or to reflect the occurrence of unanticipated events.
 Overview
   
    
    500 or fewer employees;
    
    $1.0 billion or less in total assets; or
    
    $100.0 million or less in total annual sales.
    13




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##### 



Finance Receivables and Asset Quality
  March 31,
    
    December 31,2009
    
    2008Investment in leases and loans, net
    
    $
    244,121
    
    
    $
    265,993Number of contracts
    
    
    20,500
    
    
    
    21,400Number of individual end users (a)
    
    
    18,000
    
    
    
    18,600Average original equipment cost
    
    $
    26.5
    
    
    $
    25.5Average initial term (in months)
    
    
    56
    
    
    
    55States accounting for more than 10% of lease
and loan portfolio:California
    
    
    14
    %
    
    
    13
    %Types of equipment accounting for more than
10% of commercial finance assets portfolio:Industrial equipment
    
    
    26
    %
    
    
    26
    %Medical equipment
    
    
    18
    %
    
    
    18
    %Office equipment
    
    
    10
    %
    
    
    10
    %Computers
    
    
    10
    %
    
    
    11
    %Types of equipment accounting for more than
10% of commercial finance assets portfolio:Services
    
    
    45
    %
    
    
    44
    %Retail Trade
    
    
    13
    %
    
    
    12
    %Manufacturing
    
    
    11
    %
    
    
    11
    %
 
 (a)
    
    Located in the 50 states as well as the District of Columbia and Puerto Rico.
No individual end user or single piece of equipment accounted for more than 1% of our
portfolio based on original cost of the equipment.   14




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##### 



As of and for theAs of and for the
    
    Year EndedThree Months Ended March 31,
    
    December 31,Change2009
    
    2008
    
    $
    
    %
    
    2008Investment in direct
financing leases and loans
before allowance for credit
losses
    
    $
    244,384
    
    
    $
    327,734
    
    
    $
    (83,350
    )
    
    
    (25
    )%
    
    $
    264,997Weighted average investment
in direct financing leases
and loans before allowance
for credit losses
    
    
    255,084
    
    
    
    322,220
    
    
    
    (67,136
    )
    
    
    (21
    )%
    
    
    305,453Allowance for credit losses
    
    
    6,730
    
    
    
    1,710
    
    
    
    5,020
    
    
    
    294
    %
    
    
    5,770Non-performing assets
    
    
    18,990
    
    
    
    13,257
    
    
    
    5,733
    
    
    
    43
    %
    
    
    15,224Charge-offs, net of recoveries
    
    $
    1,912
    
    
    $
    1,571
    
    
    $
    341
    
    
    
    22
    %
    
    $
    7,318As a percentage of finance receivables:Allowance for credit losses
    
    
    2.75
    %
    
    
    0.52
    %
    
    
    
    
    
    
    
    
    
    
    2.18
    %Non-performing assets
    
    
    7.77
    %
    
    
    4.05
    %
    
    
    
    
    
    
    
    
    
    
    5.74
    %As a percentage of weighted
average finance receivables:Charge-offs, net of recoveries
    
    
    0.75
    %
    
    
    0.49
    %
    
    
    
    
    
    
    
    
    
    
    2.40
    %
    15




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##### 



Critical Accounting Policies
   Results of Operations
 Three Months Ended March 31, 2009 compared to the Three Months Ended March 31, 2008
 Increase (Decrease)2009
    
    
    2008
    
    
    $
    
    
    %Revenues:Interest on equipment financings
    
    $
    5,336
    
    
    $
    7,276
    
    
    $
    (1,940
    )
    
    
    (27
    )%Rental income
    
    
    800
    
    
    
    1,316
    
    
    
    (516
    )
    
    
    (39
    )%(Losses) gains on sales of equipment and lease
dispositions, net
    
    
    (164
    )
    
    
    322
    
    
    
    (486
    )
    
    
    (151
    )%Other
    
    
    438
    
    
    
    643
    
    
    
    (205
    )
    
    
    (32
    )%6,410
    
    
    
    9,557
    
    
    
    (3,147
    )
    
    
    (33
    )%Expenses:Interest expense
    
    
    3,675
    
    
    
    4,796
    
    
    
    (1,121
    )
    
    
    (23
    )%Depreciation on operating leases
    
    
    700
    
    
    
    1,114
    
    
    
    (414
    )
    
    
    (37
    )%Provision for credit losses
    
    
    2,872
    
    
    
    1,321
    
    
    
    1,551
    
    
    
    117
    %Management fees to affiliate
    
    
    798
    
    
    
    984
    
    
    
    (186
    )
    
    
    (19
    )%Administrative expenses reimbursed to affiliate
    
    
    693
    
    
    
    443
    
    
    
    250
    
    
    
    56
    %General and administrative expenses
    
    
    838
    
    
    
    605
    
    
    
    233
    
    
    
    39
    %9,576
    
    
    $
    9,263
    
    
    
    313
    
    
    
    3
    %Net (loss) income
    
    $
    (3,166
    )
    
    $
    294
    
    
    $
    (3,460
    )
    
    
    (1,177
    )%
  16




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##### 




    
    a decrease in interest income on equipment financings. Our weighted average net
investment in financing assets decreased to $255.1 million for the three months ended
March 31, 2009 as compared to $322.2 million for the three months ended March 31, 2008,
a decrease of $67.1 million (20%). This decrease was offset by the increased yields on
leases acquired in 2008 due to an increase in the rates we were able to charge as a
result of the current scarcity of credit available to small and mid-size businesses.
    
    a decrease in rental income which was principally the result of a decrease in our
investment in operating leases in the 2009 period compared to the 2008 period.
    
    a decrease in (losses) gains on sales of equipment. (Losses) gains on sales of
equipment may vary significantly from period to period.
    
    a decrease in other income, which consists primarily of late fee income.
  
    
    an increase in our provision for credit losses. We provide for credit losses when
losses are likely to occur based on a migration analysis of past due payments and
economic conditions. Our provision for credit losses has increased due to the impact
of the economic recession in the United States on our customers ability to make
payments on their leases and loans, resulting in an increase in non-performing assets
as a percentage of finance receivables to 7.77% as of March 31, 2009 as compared to
5.74% as of December 31, 2008 and 4.05% as of March 31, 2009.
    
    an increase in administrative expenses reimbursed to affiliate due to the hiring of
additional collection personnel by our General Partner to attempt to control the impact
on delinquencies resulting from the economic recession in the United States.
    
    an increase in general and administrative expenses, principally related to increased
legal costs associated with collection efforts. We expect the increase in legal costs
will result in future recoveries of credit losses.
  
    
    a decrease in interest expense due to a decrease in average debt outstanding.
Weighted average borrowings for the three months ended March 31, 2009 and 2008 were
$243.3 million and $317.1 million, respectively, at an effective interest rate of 6.0%
for each period.
    
    a decrease in depreciation on operating leases directly related to a decrease in our
investment in operating leases.
    
    a decrease in management fees attributable to the decrease in our portfolio of
equipment financing assets, since management fees are paid based on lease payments
received.
  Liquidity and Capital Resources
  17




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##### 



Three Months EndedMarch 31,2009
    
    
    2008Net cash provided by operating activities
    
    $
    4,057
    
    
    $
    4,734Net cash provided by investing activities
    
    
    18,136
    
    
    
    5,092Net cash used in financing activities
    
    
    (21,996
    )
    
    
    (9,515
    )Increase in cash
    
    $
    197
    
    
    $
    311
    Facility
    
    
    Amount
    
    
    Amount
    
    
    Amount ofType
    
    
    Amount
    
    
    Outstanding
    
    
    Available (2)
    
    
    Collateral (3)Series 2007  Term Securitization (1)
    
    Term
    
    $
    105,927
    
    
    $
    105,927
    
    
    $
    
    
    
    $
    135,894WestLB
    
    Revolving
    
    
    150,000
    
    
    
    125,132
    
    
    
    24,868
    
    
    
    130,260$
    255,927
    
    
    $
    231,059
    
    
    $
    24,868
    
    
    $
    266,154
 
 (1)
    
    The original amount borrowed at June 2007 was $276.8 million. A term note
securitization is a one-time funding that pays down over time without any ability for us to
draw down additional amounts.(2)
    
    Availability under this credit facility is subject to having sufficient eligible leases
or loans (as defined by the agreement) to pledge as collateral and compliance with the
borrowing base formula.(3)
    
    Recourse under these facilities is limited to the amount of collateral pledged.   18




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19




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##### 



Contractual Obligations and Commercial Commitments
  Payments Due by PeriodLess than
    
    1 - 3
    
    4 - 5
    
    After 5Total
    
    1 Year
    
    Years
    
    Years
    
    YearsBank debt (1)
    
    $
    231,059
    
    
    $
    96,141
    
    
    $
    102,563
    
    
    $
    30,425
    
    
    $
    1,930
 
 1)
    
    To mitigate interest rate risk on the variable rate debt, we employ a hedging
strategy using derivative financial instruments, such as interest rate swaps, which fix
the weighted average interest rates. Not included in the table above are estimated
interest payments calculated at rates in effect at March 31, 2009: Less than 1 year:
$10.5 million; 1-3 years: $10.1 million; 4-5 years: $3.4 million; and after 5 years:
$547,000. The fair value of the swap liability as of March 31, 2009 is $9.9 million.  Legal Proceedings
  20




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##### 



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest rates
    
    
    
    
    
    Interest ratesfall 100 basis
    
    
    
    
    
    rise 100 basispoints
    
    Unchanged
    
    pointsHedging instrumentsFair value
    
    $
    (13,301
    )
    
    $
    (9,946
    )
    
    $
    (7,455
    )Change in fair value
    
    $
    (3,355
    )
    
    
    
    
    
    $
    2,491Change as a percent of fair value
    
    
    (34
    )%
    
    
    
    
    
    
    25
    %
  
 ITEM 4  CONTROLS AND PROCEDURES
 Disclosure Controls
   Changes in Internal Control over Financial Reporting
  21




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##### 



ITEM 6  EXHIBITS
 Exhibit No.
    
    Description3.1
    
    Certificate of Limited Partnership for Lease Equity Appreciation Fund II, L.P. (1)3.2
    
    Amended Certificate of Limited Partnership for Lease Equity Appreciation Fund II, L.P.(2)3.3
    
    Amended and Restated Agreement of Limited Partnership for Lease Equity Appreciation Fund II, L.P.
(3)4.1
    
    Forms of letters sent to limited partners confirming their investment (1)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Filed previously on June 17, 2004 as an exhibit to our Registration Statement and by this
reference incorporated herein.(2)
    
    Filed previously on September 7, 2004 in Pre-Effective Amendment No. 1 as an exhibit to our
Registration Statement and by this reference incorporated herein.(3)
    
    Filed previously on December 27, 2005 as Appendix A Post-Effective Amendment No. 1 to our
Registration Statement and by this reference incorporated herein. 
 22




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##### 



SIGNATURES
  LEASE EQUITY APPRECIATION FUND II, L.P
  May 15, 2009
    /s/ Crit DeMentCRIT DEMENTChairman and Chief Executive OfficerMay 15, 2009
    /s/ Robert K. MoskovitzROBERT K. MOSKOVITZChief Financial OfficerMay 15, 2009
    /s/ Tonya L. ZweierTONYA L. ZWEIERChief Accounting Officer 23