For the fiscal quarter ended September 30, 2004

Commission File Number 33-4682

(Exact name of registrant as specified in its charter)

State or other jurisdiction of incorporation or organization)

I.R.S. Employer Identification No.)

(Address of principal executive offices) Zip Code

Registrant's telephone number, including area code: (916) 353-0500

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units

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 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. X Yes No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No

As of September 30, 2004 the aggregate Limited Partnership Units held by nonaffiliates of the registrant was 23,030. There is no market for the Units.

When used in this quarterly report, the words "believes," "anticipates" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including, but not limited to, those set forth in the sections entitled "Potential Factors Affecting Future Operating Results" and "Qualitative and Quantitative Disclosures About Market Risks" below. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the case hereof. The Partnership undertakes no obligation to publicly release the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART 1 - FINANCIAL INFORMATION

A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows:

The financial statements of Capital Builders Development Properties II (The "Partnership") are prepared on the accrual basis of accounting and therefore revenue is recorded as earned and costs and expenses are recorded as incurred.

During July 2002, the Highlands 80 ("H80") buildings (8 individual buildings) were listed for sale, and during October 2002 the Capital Professional Center project ("CPC") (two individual buildings) was also listed for sale. This resulted in all real estate assets of the Partnership being listed for sale during the periods ended September 30, 2004 and December 31, 2003. As discussed in Note 3, one of the eight H80 buildings and CPC had been sold as of the quarter ended March 31, 2003, leaving three H80 buildings unsold as of September 30, 2004. The three remaining buildings continue to be listed for sale.

In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144), the current year results from the operations and financial position of the entire entity, as well as all other periods presented, have been classified as discontinued operations as the Partnership had listed all assets for sale before September 30, 2004 and December 31, 2003, and the Partnership had met all of the other criteria of long-lived assets to be disposed of by sale. Depreciation was ceased on all buildings or project when the buildings or project were listed for sale in accordance with FAS 144.

Additionally, in accordance with FAS 144, all unsold buildings were evaluated for impairment. No impairment adjustments were required.

The three remaining H80 buildings continue to be listed for sale and continue to meet the held for sale criteria in FAS 144 and are classified as held for sale and as discontinued operations. Although the unsold buildings have been held for sale in excess of one year, the delay in sale is outside of Management's control and Management remains committed to its plan to sell the buildings as evidenced by the buildings being continuously listed for sale.

Currently, the three remaining buildings are listed to be sold for a total of $8,975,000. Subsequent to the September 30, 2004 quarter end, the Partnership received an offer to purchase all three remaining buildings for $8,100,000; however, Management is attempting to finalize two additional leases that could have a favorable impact on the final sales price. Management anticipates that these three buildings will be sold by the end of 2004.

Management has not and will not adopt a strategy for dissolving the Partnership until such time as a majority of the Partnership's properties have been sold, sales contracts for the balance of the properties are pending, and the General Partner approves such a plan.

Capital Builders Development Properties II, a California Limited Partnership, is owned under the laws of the State of California. The Managing General Partner is Capital Builders, Inc., a California corporation (CB).

The Partnership is in the business of real estate development and is not a significant factor in its industry. The Partnership's investment properties are located near major urban areas and, accordingly, compete not only with similar properties in their immediate areas but with hundreds of properties throughout the urban areas. Such competition is primarily on the basis of locations, rents, services and amenities. In addition, the Partnership competes with significant numbers of individuals and organizations (including similar companies, real estate investment trusts and financial institutions) with respect to the purchase and sale of land, primarily on the basis of the prices and terms of such transactions.

Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

The Partnership's investment property consists of commercial land, buildings and leasehold improvements that are carried net of accumulated depreciation. Depreciation was provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives of three to forty years. The straight-line method of depreciation was followed for financial reporting purposes. Depreciation and amortization was ceased when the corresponding real estate assets were listed for sale.

Lease commissions are costs associated with obtaining leases with terms in excess of one year. The Partnership capitalizes these costs and amortizes them on a straight line basis over their related lease term.

The Partnership has no provision for income taxes since all income or losses are reported separately on the individual Partners' tax returns.

Rental income is recognized on a straight-line basis over the life of the lease, which may differ from the scheduled rental payments.

Gains from building sales are recognized using the full accrual method when title has passed to the buyer, the collectibility of the sales price is reasonably assured, the required minimum cash down payment has been received, and the Partnership has no continuing involvement with the property. When a sale does not meet the requirements for full profit recognition, the sale or a portion of the profit thereon is deferred until such requirements are met using the deposit, installment, or cost recovery methods, as appropriate under the circumstances.

The allowance for doubtful accounts is based upon analysis of possible losses from trade receivables. The allowance for doubtful accounts was $360 as of September 30, 2004 and December 31, 2003. The provision for losses during the periods ended September 30, 2004 and December 31, 2003 was $-0-.

The net income per Limited Partnership Unit is computed based on the weighted average number of Units outstanding of 23,030 during the periods ended September 30, 2004 and December 31, 2003.

For purposes of the statement of cash flows, the Partnership considers all short-term investments with a maturity, at date of purchase, of three months or less to be cash equivalents.

The preparation of financial statements requires Partnership Management to make estimates and judgments that effect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Partnership Management evaluates its estimates, including those related to long lived assets, accounts receivable, and contingencies and litigation. Partnership Management bases its estimates on current information, historical experience and or various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recognition of revenue that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Managing General Partner (Capital Builders, Inc.) and the Associate General Partners are entitled to reimbursement of expenses incurred on behalf of the Partnership and certain fees from the Partnership. These fees include: a portion of the sales commissions payable by the Partnership with respect to the sale of the Partnership Units; an acquisition fee of up to 12.5% of gross proceeds from the sale of the Partnership Units; a property management fee up to 6% of gross rental revenues realized by the Partnership with respect to its properties; a subordinated real estate commission of up to 3% of the gross sales price of the properties; and a subordinated 25% share of the Partnership's distributions of cash from sales or refinancing. The property management fee currently being charged is 5% of gross rental revenues collected. None of the 3% subordinated real estate commission was earned or paid.

All acquisition fees and expenses, all underwriting commissions, and all offering and organizational expenses which can be paid are limited to 20% of the gross proceeds from sales of Partnership Units provided the Partnership incurs no borrowing to develop its properties. However, these fees may increase to a maximum of 33% of the gross offering proceeds based upon the total acquisition and development costs, including borrowings. Since the formation of the Partnership, 27.5% of these fees were paid to the Partnership's related parties, leaving a remaining maximum of 5.5% ($633,325) of the gross offering proceeds.

The General Partner's had previously agreed to reduce its future General Partner participation in proceeds from sales by an amount equal to the loss on the abandonment of option fees in 1988 ($110,000) and interest on the amount at a rate equal to that of the borrowed funds rate as determined by construction or permanent funds utilized by the Partnership.

On June 15, 2004, the Partnership entered into a settlement agreement with three of its Associate General Partners to pay a maximum of $45,000 ($15,000 each) only after the Limited Partners of the Partnership have received cumulative distributions of cash from sales or refinancing equal to their capital contributions to the Partnership (see Item 5., Legal Proceedings, for further disclosure). The Partnership has not accrued for any of the settlement as the settlement is contingent upon the sale of the remaining buildings for a sales price in excess of the amount sufficient to repay Limited Partner capital contributions.

The total management fees paid to the Managing General Partner were $24,869 and $26,198 for the nine months ended September 30, 2004 and 2003, respectively, while total reimbursement of expenses was $188,015 and $201,937, respectively.

Management fees are classified on the Statements of Operations as an Operating Expense. Reimbursement of expenses are primarily for investor services, preparation of SEC filings, audit coordination and other Partnership management functions. Expense reimbursements are classified as Operating Expenses and General and Administrative expenses on the Statements of Operations.

In accordance with the Partnership Agreement, the General Partner may hire outside consultants or perform the necessary accounting, reporting and investor service functions internally, and pass through the associated costs. It has been determined by the General Partner that if outside consultants were to perform these functions, the related costs would be substantially higher to the Partnership.

The components of the investment property account are as follows:

During January 2003, the Partnership sold one Highlands 80 building and CPC. The Partnership received net proceeds of $9,407,720 after commissions and closing costs for such sales. The sale of these assets resulted in gain recognition of $4,508,980 during the quarter ended March 31, 2003. In conjunction with these sales, tenant security deposits were assumed by the buyers while the Partnership retained ownership of the accounts receivable. There were no additional sales during the first three quarters of 2004 or the remainder of 2003. As of September 30, 2004, the three remaining Highlands 80 buildings remain listed for sale at a combined price of $8,975,000.

The Partnership leases its property under long term noncancelable operating leases to various tenants. The facilities are leased through agreements for rents based on the square footage leased. Minimum annual base rental payments under these leases for the full years ending December 31 are as follows:

The Partnership is involved in litigation arising in the normal course of its business. In the opinion of management, the Partnership's recovery or liability if any, under any pending litigation would not materially affect its financial condition or results of operations.

During the month of July 2002, the Highlands 80 project (8 individual buildings) was listed for sale, and during the month of October 2002 the CPC project (two individual buildings) was listed for sale, which resulted in all real estate assets of the Partnership being listed for sale during the year ended December 31, 2002.

In accordance with the Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144), the current quarter results from operations and financial position of the entire entity, as well as all other periods presented, have been classified as discontinued operations as the Partnership continued to have all remaining assets listed for sale as of or through September 30, 2004 and the Partnership had met all of the other criteria of long-lived assets to be disposed of by sale. Depreciation was ceased on all buildings or project when the buildings or project was listed for sale in accordance with FAS 144.

The Partnership commenced operations on May 22, 1986 upon the sale of the minimum number of Limited Partnership Units. The Partnership's initial source of cash was from the sale of Limited Partnership Units. Through the offering of Units, the Partnership raised $11,515,000 (represented by 23,030 Limited Partnership Units). Cash generated from the sale of Limited Partnership Units was used to acquire land and for the development of a mixed use commercial project and a 40% interest in a commercial office project. In May 1997, the remaining 60% interest in the project was acquired.

The Partnership's primary current sources of cash are from cash balances, property rental income and sales proceeds once the remaining Highlands 80 buildings are sold. As of September 30, 2004, the Partnership had $966,291 in cash. It is the Partnership's investment goal to utilize existing cash reserves for continued leasing operations (tenant improvements and leasing commissions) at Highlands 80 Phase III. The Partnership no longer has any debt service obligations since all loans have been paid off in full. As the remaining Highlands 80 buildings are sold, future net sales proceeds will be distributed to the Limited Partners. Currently, the three remaining buildings are listed to be sold for a total of $8,975,000. Subsequent to the September 30, 2004 quarter end, the Partnership received an offer to purchase all three remaining buildings for $8,100,000; however, Management is attempting to finalize two additional leases that could have a favorable impact on the final sales price. Management anticipates that these three buildings will be sold by the end of 2004.

The Partnership's future cash flow from operations is expected to approximate $15,000 per month until the Highlands 80 Phase III building is leased up or until additional buildings are sold. As Phase III is leased up, rental income is expected to increase; however, as buildings are sold, rental income will decrease. The Partnership will continue to incur administration costs until all of the assets of the Partnership are sold and the Partnership is terminated.

The Partnership will continue to incur improvement costs as the Phase III building is leased. The total projected building and tenant improvement costs expected to be incurred during the remainder of 2004 are estimated to be $390,000. These costs will be funded with current cash reserves.

During the nine months ended September 30, 2004, the Partnership paid $24,869 in management fees to its Managing General Partner. Management fees are classified on the Statements of Operations as an Operating Expense. The General Partner is currently charging 5% of collected revenue.

The Partnership's ability to maintain or improve cash flow is dependent upon its ability to maintain and improve the occupancy of its investment properties and its ability to continue to sell its assets. Management believes the Partnership's financial resources should be adequate to meet 2004's obligations and no adverse change in liquidity is foreseen. The Partnership's properties' current market values are in excess of its total liabilities.

The Partnership's discussion and analysis of its financial condition and results of operations are based upon the Partnership's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires Partnership Management to make estimates and judgments that effect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Partnership Management evaluates its estimates, including those related to long lived assets, accounts receivable, deferred revenue, and contingencies and litigation. Partnership Management bases its estimates on current information, historical experience and or various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recognition of revenue that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Partnership believes the following critical accounting policy affects its more significant judgments and estimates used in the preparation of its financial statements:

Valuation of Investment Property (Long-Lived Assets):

Investment property is evaluated for impairment on a continual basis based on the property's occupancy levels, annual cash flows, and projected cash flows based on the rental market and other factors including prospective new tenants.

Classification as Discontinued Operations:

All real estate assets of the Partnership continued to be listed for sale during the quarter ended September 30, 2004. In accordance with the Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144), the current quarter results from the operations and financial position of the entire entity have been classified as discontinued operations. Additionally, all prior periods have been stated as if the entire entity had been a discontinued operation. Depreciation was ceased on all buildings or project when the buildings or project was listed for sale in accordance with FAS 144.

During the nine months ended September 30, 2004 as compared to September 30, 2003, the Partnership's total revenues decreased by $784 (0.1%), while its expenses also decreased by $134,684 (21.9%), resulting in an increase in net income from discontinued operations of $133,900 (230%).

The decrease in revenue and expenses from discontinued operations is primarily due the sale of Capital Professional Center and one additional Highlands 80 building during the first quarter of 2003.

The decrease in interest expense of $48,611 is due to the Partnership having paid off all debt during the first quarter of 2003.

The increase in amortization expense of $21,983 is due to amortization of leasing commissions being recorded during the first three quarters of 2004 while the amortization of such commissions had been ceased during 2002 when all investment properties were listed for sale and classified as being held for sale under FAS 144. It was determined during the first quarter of 2004 that the amortization of leasing commissions should continue while investment properties are held for sale, and therefore amortization of leasing commissions were reinstated only during the first three quarters ended September 30, 2004.

The sale of Capital Professional Center and one Highlands 80 building resulted in the Partnership recognizing a gain from sale of investment property totaling $4,508,980 and a total net income of $4,450,636 for the nine months ended September 30, 2003. There were no additional sales during the remainder of the year ended 2003 or during the first three quarters of 2004.

The Partnership utilized these proceeds to pay down its remaining debt of $4,084,942 and made cash distributions to its Limited Partners totaling $4,999,997 during the nine months ended September 30, 2003. General and administrative costs primarily include fixed costs which decreased only slightly with the building sales.

The Partnership does not have a material market risk due to financial instruments held by the Partnership.

1. Disclosure Controls and Procedures

The undersigned principal executive officer and principal financial officer of Capital Builders Development Properties II conclude that Capital Builders Development Properties II's disclosure controls and procedures are effective as of September 30, 2004 based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rule 15d-15.

2. Changes in Internal Control over Financial Reporting

On June 15, 2004, the Partnership entered into a settlement agreement with three of its associate general partners, James F. Elder, Michael C. Elder, and David L. Nelson (collectively, the "Claimants"). In April 2002, the Claimants, through counsel, asserted an interest in the proceeds from the sale of properties by the Partnership pursuant to the Partnership Agreement. Under the Partnership Agreement, the General Partners of the Partnership are entitled, from the proceeds of the sale or refinancing of the Partnership's properties, to a deferred acquisition fee if certain tests are met. Claimants asserted that, as associate general partners of the Partnership, they were entitled to this fee. CBI, as Managing General Partner of the Partnership, disputed the claim.

The settlement was the result of some two years of negotiations between CBI and the Claimants. Pursuant to the terms of the settlement agreement, the Partnership will pay the Claimants, from "Cash From Sales or Refinancing," $15,000 each, or $45,000 in total, after the Limited Partners of the Partnership have received cumulative distributions of Cash From Sales or Refinancing equal to their capital contributions to the Partnership. As of September 30, 2004, the Partnership had made an aggregate of $4,999,997 in distributions of Cash From Sales Or Refinancing to the Limited Partners of the Partnership, representing 43.4% of the Limited Partners' capital contributions to the Partnership. No payment will be made to the Claimants unless and until the Limited Partners have received Cash From Sales or Refinancing equal to their remaining capital contributions. In return for this payment, the Claimants release the Partnership from any further claim arising from their interest in the Partnership as Associate General Partners.

CBI entered into the settlement, for and on behalf of the Partnership, to avoid the costs of litigating the dispute in court, and because the question of the claimants' right to a deferred acquisition fee, under the terms of the Partnership Agreement, involves complex calculations. Under the terms of the settlement, neither the Partnership nor CBI acknowledges any wrongdoing.

As part of the settlement, Michael J. Metzger, President of CBI and an associate general partner of the Partnership, has disclaimed any interest either personally or for CBI to any deferred acquisition fee from the Partnership.

31.1 Rule 13a-14 Certification

* This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is deemed to be "filed" with the Commission or subject to the rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

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.

CAPITAL BUILDERS DEVELOPMENT PROPERTIES II

a California Limited Partnership

By: Capital Builders, Inc.

Its: Corporate General Partner

Date: November 11, 2004

By: _____________________________________

Michael J. Metzger

President

Date: November 11, 2004

By: _____________________________________

Kenneth L. Buckler

Chief Financial Officer