SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended May 31, 1997
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
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Commission file number 0-10287
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NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Missouri 43-1182535
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7701 Forsyth Boulevard, St. Louis, Missouri 63105
- ------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-7700
-----------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,if changed since last report.
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 ___.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12,13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date ______.
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<PAGE>
PART I
ITEM 1 - FINANCIAL STATEMENTS:
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
May 31, November 30,
1997 1996
(Unaudited)
----------- -------------
ASSETS:
Cash and cash equivalents $ 450,067 $ 596,247
Accounts receivable 100,936 147,278
Prepaid expenses and deposits 124,165 46,229
Investment property
Land 1,886,042 1,886,042
Buildings and improvements 14,056,771 13,965,067
------------ ------------
15,942,813 15,851,109
Less accumulated depreciation 8,630,977 8,391,993
------------ ------------
7,311,836 7,459,116
Deferred expenses-At amortized cost 89,130 105,224
------------ ------------
$ 8,076,134 $ 8,354,094
============ ============
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Accounts payable and accrued expenses $ 471,638 $ 572,660
Mortgage notes payable 7,821,869 7,999,107
Refundable tenant deposits 79,775 72,449
------------ ------------
8,373,282 8,644,216
Partners' Deficit (297,148) (290,122)
------------ ------------
$ 8,076,134 $ 8,354,094
============ ============
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<PAGE>
<TABLE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 595,093 $ 539,093 $ 1,179,828 $ 1,102,555
Interest 526 2,624 3,956 5,289
----------- ----------- ----------- -----------
595,619 541,717 1,183,784 1,107,844
EXPENSES:
Interest 186,744 196,112 374,938 392,770
Depreciation and amortization 130,839 126,140 259,306 248,085
Real estate taxes 96,807 72,376 194,124 196,468
Property management fees paid to
Nooney Krombach Company 29,795 27,002 59,055 55,212
Reimbursement to Nooney Krombach
Company for partnership management
services and indirect expenses 7,500 7,500 15,000 15,000
Insurance 14,022 11,161 23,100 24,355
Parking Lot 14,432 22,295 25,147 33,576
Repairs & Maintenance 23,364 5,245 31,746 14,149
Office - General 8,800 9,210 16,842 21,075
Payroll 22,382 17,635 38,656 35,247
Professional Services 14,465 7,118 65,732 43,316
Vacancy Expense 10,197 19,609 20,797 27,680
Other operating expenses 15,753 15,143 66,367 67,576
----------- ----------- ----------- -----------
575,100 536,546 1,190,810 1,174,509
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 20,519 $ 5,171 $ (7,026) $ (66,665)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 1.69 $ 0.43 $ (0.58) $ (5.50)
=========== =========== =========== ===========
PARTNERS' DEFICIT:
Beginning of Period $ (317,667) $ (378,877) $ (290,122) $ (307,040)
Net Loss 20,519 5,171 (7,026) (66,665)
----------- ----------- ----------- -----------
End of Period $ (297,148) $ (373,706) $ (297,148) $ (373,705)
=========== =========== =========== ===========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
</TABLE>
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<PAGE>
<TABLE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
May 31, May 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (7,026) $ (66,664)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 259,306 248,085
Changes in assets and liabilities:
Decrease in accounts receivable 46,342 45,939
Increase in prepaid expenses and deposits (77,936) (102,616)
Increase in deferred expenses (1,203) (2,530)
Increase (Decrease) in accounts payable and accrued expenses (101,022) 89,648
Increase in refundable tenant deposits 7,326 3,663
--------- ---------
Total Adjustments 132,813 282,189
--------- ---------
Net cash from operating activities 125,787 215,525
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property (94,729) (149,214)
--------- ---------
Net cash used in investing activities (94,729) (149,214)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage notes payable (177,238) (162,626)
--------- ---------
Net cash used in financing activities (177,238) (162,626)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (146,180) (96,315)
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period 596,247 628,358
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 450,067 $ 532,043
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during period for interest $ 374,938 $ 392,770
========= =========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
</TABLE>
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<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MAY 31, 1997 AND 1996
NOTE A:
Refer to the Registrant's financial statements for the year ended November 30,
1996, which are contained in the Registrant's Annual Report on Form 10-K, for a
description of the accounting policies which have been continued without change
except as noted below. Also, refer to the footnotes to those statements for
additional details of the Registrant's financial condition. The details in those
notes have not changed except as a result of normal transactions in the interim
or as noted below.
NOTE B:
The financial statements include only those assets, liabilities, and results of
operations of the partners which relate to the business of Nooney Real Property
Investors-Two, L.P. The statements do not include assets, liabilities, revenues
or expenses attributable to the partners' individual activities. No provision
has been made for federal and state income taxes since these taxes are the
responsibility of the partners. In the opinion of the general partners, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
financial position at May 31, 1997 and for all periods presented have been made.
NOTE C:
The Registrant's properties are managed by Nooney Krombach Company, a
wholly-owned subsidiary of Nooney Company. Certain individual general partners
and a corporate general partner of the Registrant are officers and directors of
Nooney Company. Nooney Investors, Inc., a general partner, is a wholly-owned
subsidiary of Nooney Company.
NOTE D:
The income (loss) per limited partnership unit for the three and six months
ended May 31, 1997 and 1996 was computed based on 12,000 units, the number of
units outstanding during the periods.
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<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash on hand as of May 31, 1997 is $450,067, a decrease of $146,180 from year
end November 30, 1996. The decrease in cash flow can be attributed to capital
expenditures for the three and six month periods ending May 31, 1997. As
indicated in the first quarter report, capital expenditures of $146,000 were
paid for partial roof replacement at Jackson Industrial and $49,000 was paid for
parking lot resurfacing at Park Plaza. These expenditures were accrued on the
books as of November 30, 1996, but the cash payments were made in the first
quarter of 1997. In addition, during the second quarter of 1997, capital
expenditures included a partial roof replacement at Maple Tree Shopping Center
and tenant alterations at Park Plaza and Morenci Professional Park. Cash
produced from operating activities for the six months ended May 31, 1997 was
$125,787. Though cash on hand has decreased over the past six months, the
Registrant anticipates the properties to provide adequate cash flow from
operations to fund future capital expenditures budgeted during 1997. The capital
expenditures by property anticipated for the balance of 1997 are as follows:
Leasing Capital Other Capital Total
--------------- ------------- -----
Park Plaza I & II $ 5,253 $ 62,120 $ 67,373
Morenci Professional Park 32,992 27,840 60,832
Maple Tree Shopping Center 6,000 38,998 44,998
Jackson Industrial 4,000 0 4,000
-------- -------- --------
$ 48,245 $128,958 $177,203
======== ======== ========
Leasing Capital at the Registrant's properties will fund tenant alterations and
lease commissions. Other Capital at Park Plaza I & II will be for major concrete
repair and replacement and resurfacing the front parking lot. Maple Tree
Shopping Center anticipates the final phase of the enclosure of the trash
dumpsters to comply with city ordinances and replacement of the shopping
center's main signage. At Morenci Professional Park, the first phase of the
parking lot resurfacing is scheduled for the fourth quarter.
The first mortgage debt on Morenci Professional Park and Park Plaza I and II
have maturity dates of October 2005 and December 2003, respectively. The first
mortgage on Jackson Industrial expires in November 2000. The second mortgages
secured by Park Plaza I and II, Morenci Professional Park and Maple Tree
Shopping Center continue to be extended one year at a time and currently expire
November 1997. The interest rate on these two second mortgages is the current
prime rate plus 1.5%. The interest rate on this debt as of May 31, 1997 was 10%.
The balance of the second mortgage debt on Park Plaza I and II and Morenci
Professional Park as of May 31, 1997 is $239,636. The balance of the second
mortgage debt on Maple Tree Shopping Center as of May 31, 1997 is $268,607.
The future liquidity of the Registrant is dependent on its ability to fund
future capital expenditures and mortgage payments from operations and cash
reserves, maintain occupancy, and negotiate with lenders the refinancing of the
mortgage debt as it matures. Until such time as the real estate market recovers
and a profitable sale of the properties is feasible, the Registrant will
continue to manage the properties to achieve its investment objectives.
-6-
<PAGE>
Results of Property Operations
The results of operations of the Registrant's properties for the quarter ended
May 31, 1997 and 1996 are detailed in the schedule below. Revenues and expenses
of the Registrant are not presented:
Jackson Maple Tree Park Plaza Morenci
Industrial Shopping Center I and II Prof. Park
---------- --------------- -------- ----------
1997
----
Revenues $ 218,664 $ 137,636 $ 122,756 $ 116,835
Expenses 217,193 122,776 82,234 122,350
--------- --------- --------- ---------
Net Income (Loss) $ 1,471 $ 14,860 $ 40,522 $ (5,515)
========= ========= ========= =========
1996
----
Revenues $ 218,664 $ 139,772 $ 111,215 $ 83,300
Expenses 180,794 126,928 97,261 121,755
--------- --------- --------- ---------
Net Income (Loss) $ 37,870 $ 12,844 $ 13,954 $ (38,455)
========= ========= ========= =========
At Jackson Industrial, revenues remained stable when comparing the quarter ended
May 31, 1997 to the quarter ended May 31, 1996. Expenses increased due to an
increase in the recorded real estate tax expense. In the prior year, a
retroactive accrual adjustment had been made for real estate taxes due to a
successful appeal. Real estate taxes at Jackson Industrial are paid in arrears
which resulted in an accrual adjustment in 1996. Real estate taxes on a cash
basis have remained relatively stable.
At Maple Tree Shopping Center, net income increased slightly due to a slight
increase in rental revenue and a decrease in operating expenses.
At Park Plaza I and II, revenues increased $11,541 when comparing the quarter
ended May 31, 1997 to the quarter ended May 31, 1996. The increase in income can
be attributable to slight increases in base rental rates as well as increases in
common area maintenance and real estate tax reimbursements. Also during the
quarter ended May 31, 1997, the Registrant received $4,985 in miscellaneous
non-rental income due to a fee from a tenant who negotiated an early
cancellation of their lease. Operating expenses at Park Plaza I and II decreased
$15,027 when comparing quarter ended May 31, 1997 to May 31, 1996. This decrease
in expenses can be attributable to a decrease in the real estate tax expense and
decreases in depreciation and amortization expense.
The results of operations at Morenci Professional Park vary significantly when
comparing the quarter ended results from May 31, 1997 to May 31, 1996. The
significant increase in revenue is attributable to an increase in occupancy due
to a successful re-leasing of much of the space vacant during 1996. Occupancy
results are discussed below. Operating expenses remained relatively stable when
comparing the two years.
The occupancy at Park Plaza I and II, Maple Tree Shopping Center and Jackson
Industrial remained at high levels and the occupancy at Morenci Professional
Park increased significantly due to the re-leasing of the space vacated by a
major tenant as of December 31, 1995. The occupancy levels at May 31, 1997, 1996
and 1995 are as follows:
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<PAGE>
Occupancy levels as of May 31,
Property 1997 1996 1995
-------- ---- ---- ----
Park Plaza I & II 97% 98% 100%
Morenci Professional Park 86% 61% 98%
Maple Tree Shopping Center 100% 98% 98%
Jackson Industrial 100% 100% 100%
At Park Plaza I & II, occupancy at the quarter ended May 31, 1997 was 97%, a
decrease of only 1% from the prior year. Leasing activity during the quarter
consisted of one new lease for 3,600 square feet, a renewal of an existing
tenant in 4,140 square feet, and two tenants vacating 6,060 square feet. At Park
Plaza I and II, no tenant occupies more than 10% of the available space.
The second quarter leasing activity at Morenci Professional Park consisted of
eight new tenants leasing 12,000 square feet, two existing tenants renewing in
8,400 square feet and one tenant vacating 1,200 square feet. There are no major
tenants occupying more than 10% of the space at this property.
During the second quarter, leasing activity at Maple Tree Shopping Center was
minimal as one tenant occupying 800 square feet renewed their lease and the
property remained at 100%. Two tenants occupy 18% and 42% of the available space
with leases expiring April 30, 2000 and July 31, 1999, respectively.
Jackson Industrial continues to have two tenants who lease 100% of the available
space. One tenant occupies 61% of the space on a lease which expires July 31,
2000. This tenant has vacated the premises and is currently offering the space
as available for sublease. This tenant also has a termination option which they
have not exercised. The Registrant is currently negotiating with a possible
subtenant who desires to lease beyond the tenant's original lease term. The
other tenant occupies 39% of the available space on a lease which expires July
31, 2002.
1997 Comparison
Revenues for the quarter ended May 31, 1997 and 1996 are $595,619 and $541,717,
respectively. For the six month period ended May 31, 1997 and 1996, revenues are
$1,183,784 and $1,107,844, respectively. For the quarter ended, revenues
increased $53,902 when comparing the two periods and for the six month period,
revenues increased $75,940. This increase in revenue can be attributive
primarily to the increase in occupancy at Morenci Professional Park. As of May
31, 1997 and 1996, consolidated expenses for the quarter ended were $575,100 and
$536,546, respectively. For the six month period ended May 31, 1997 and 1996,
consolidated expenses were $1,190,810 and $1,174,509, respectively. For the
quarter ended, consolidated expenses increased $38,554 due to increases in real
estate taxes ($24,431), repairs and maintenance ($18,119), and professional
services ($7,347), partially offset by decreases in interest expense ($9,368),
parking lot repairs ($7,863) and vacancy expense ($9,412). For the six month
period ended May 31, 1997, when compared to the same period May 31, 1996,
consolidated expenses increased approximately 1% or $16,301.
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<PAGE>
1996 Comparison
Revenues for the quarter ended May 31, 1996 and 1995 are $555,301 and $595,132,
respectively. For the six month period ended May 31, 1996 and 1995 revenues are
$1,121,428 and $1,169,300, respectively. For the quarter ended, revenues
decreased $39,831 when comparing May 31, 1996 to May 31, 1995 and for the six
month period ended revenues decreased $47,872 for the same periods ended May 31,
1996 and 1995.
The decrease in consolidated revenues on a quarterly and six month basis can be
attributed to decreases at Morenci Professional Park and Jackson Industrial. The
decrease in revenues at Morenci Professional Park can be attributed to the
move-out of a major tenant in December 1995. The tenant occupied approximately
49% of the available space and on a quarterly basis paid approximately $105,000
in rent. Offsetting the loss in rental income from the major tenant is rental
revenues received from new and expanding tenants. Since the move-out of the
major tenant in December 1995, occupancy at Morenci Professional Park has
increased approximately 11%. At Jackson Industrial revenues decreased due to a
decrease in tax recovery income. One of the major tenants renewed in 1995 and
received a new base year thus adjusting the amount of real estate tax expense
the Registrant may pass through to the tenant in the form of real estate tax
recovery income.
As of May 31, 1996 and 1995 consolidated expenses for the quarter ended were
$550,129 and $559,836, respectively. For the six month period ended May 31, 1996
and 1995 consolidated expenses were $1,188,092 and $1,137,235, respectively. For
the quarter ended consolidated expenses remained relatively stable, however,
individual expense items varied significantly. For the six month period ended
May 31, 1996 when compared to the same period ended May 31, 1995 consolidated
expenses increased $50,857 or 4.5%.
For the quarter ended May 31, 1996 as compared to the quarter ended May 31,
1995, the following expense categories varied significantly: interest expense
decreased $15,298; real estate taxes decreased $32,251, and; other operating
expenses increased $31,802. Jackson Industrial refinanced its first mortgage
debt effective November 1, 1995 for a period of five years at a rate of 9.31%,
being amortized over 18 years compared to a rate of 10.40% prior to the
refinancing. The decrease in real estate taxes can be attributed to an
assessment change which resulted in changes in the liability accruals at Jackson
Industrial and Park Plaza I & II. At Jackson Industrial the real estate tax
accrual was adjusted for a decrease in the assessed value while at Park Plaza I
& II the real estate tax accrual was adjusted for an increase in the assessed
value. The net difference in the accrual adjustments resulted in an overall
decrease in real estate tax expense. The increase in other operating expenses
relates to increases in vacancy expenses ($17,312), bad debt expenses ($12,028)
and parking lot expenditures ($8,355). The increase in the aforementioned
expenses were offset by a decrease in professional services ($4,070).
The increase in expenses for the six month period ended May 31, 1996 when
compared to May 31, 1995 can be attributed to an increase in other operating
expenses offset by a decrease in interest expense. The increase in other
operating expenses is attributable to the following expense categories: snow
removal ($16,384), parking lot expenditures ($13,281), administrative expenses
($12,799), bad debt expense ($9,878) and insurance ($6,272). These expense
categories were offset by a decrease in professional services ($5,994).The
decrease in interest expense relates to the refinancing of the first mortgage
debt at Jackson Industrial effective November 1, 1995 for a period of five years
at a rate of 9.31%, being amortized over 18 years.
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<PAGE>
Inflation
The effects of inflation did not have material impact upon the Registrant's
operations in fiscal year 1996 and are not expected to materially affect the
Registrant's operations in 1997.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
None
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.
Dated: July 15, 1997 NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
-----------------------
By: /S/ Gregory J. Nooney, Jr.
----------------------------------
Gregory J. Nooney, Jr.
General Partner
PAN, INC.
By: /S/ Patricia A. Nooney
----------------------------------
Patricia A. Nooney
President
NOONEY INVESTORS, INC.
By: /S/ Gregory J. Nooney, Jr.
----------------------------------
Gregory J. Nooney, Jr.
Chairman
By: /S/ Patricia A. Nooney
----------------------------------
Patricia A. Nooney
Senior Vice President and Secretary
BEING A MAJORITY OF THE DIRECTORS
-11-
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
3.1 Amended and Restated Agreement and Certificate of Limited
Partnership dated November 5, 1979, is incorporated by
reference to the Prospectus contained in Amendment No. 1
to the Registration Statement on Form S-11 under the
Securities Act of 1933 (File No. 2-65006).
27 Financial Data Schedule (provided for the information of
U.S. Securities and Exchange Commission only)
-12-
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR NOONEY REAL PROPERTY INVESTORS-TWO, L.P. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000312155
<NAME> NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 450,067
<SECURITIES> 0
<RECEIVABLES> 100,936
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 675,168
<PP&E> 15,942,813
<DEPRECIATION> 8,630,977
<TOTAL-ASSETS> 8,076,134
<CURRENT-LIABILITIES> 401,048
<BONDS> 7,821,869
0
0
<COMMON> 0
<OTHER-SE> (297,148)
<TOTAL-LIABILITY-AND-EQUITY> 8,205,690
<SALES> 1,179,828
<TOTAL-REVENUES> 1,183,784
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 815,872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 374,938
<INCOME-PRETAX> (7,026)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,026)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> 0
</TABLE>
