SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended November 30, 1997
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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.
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(Exact name of Registrant as specified in its charter)
Missouri 43-1182535
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(State or other jurisdiction of (I.R.S/ Employer
incorporation or organization) Identification No.)
500 North Broadway, St. Louis, Missouri 63102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 206-4600
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
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 ___.
Page 1 of 32 Pages
Exhibit Index located on Page 18
<PAGE>
_X_ Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
As of February 1, 1998, the aggregate market value of the Registrant's units of
limited partnership interest (which constitute voting securities under certain
circumstances) held by non-affiliates of the Registrant was $12,000,000. (The
aggregate market value was computed on the basis of the initial selling price of
$1,000 per unit of limited partnership interest, using the number of units not
beneficially owned on February 1, 1998 by the General Partners or holders of 10%
or more of the Registrant's limited partnership interests. The initial selling
price of $1,000 per unit is not the current market value. Accurate pricing
information is not available because the value of the units of limited
partnership interests is not determinable since no active secondary market
exists. The characterization of such General Partners and 10% holders as
affiliates is for the purpose of this computation only and should not be
construed as an admission for any purpose that any such persons are, or other
persons not so characterized are not, in fact, affiliates of the Registrant).
Documents incorporated by reference:
Portions of the Prospectus of the Registrant dated November 16, 1979, as
supplemented and filed pursuant to Rule 424(c) of the Securities Act of 1933,
are incorporated by reference in Part III of this Annual Report on Form 10-K.
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<PAGE>
PART I
ITEM 1: BUSINESS
It should be noted that this 10-K contains forward-looking information (as
defined in the Private Securities Litigation Reform Act of 1995) that involves
risk and uncertainty, including trends in the real estate investment market,
projected leasing and sales, and the future prospects for the Registrant. Actual
results could differ materially from those contemplated by such statements.
Nooney Real Property Investors-Two, L.P. (the "Registrant") is a limited
partnership formed under the Missouri Uniform Limited Partnership Law on
September 26, 1979, to invest, on a leveraged basis, in income-producing real
properties such as shopping centers, office buildings, apartment complexes,
office/warehouses and light industrial properties. The Registrant originally
invested in six real property investments. During fiscal 1989, one of the
Registrant's properties, Penn Park Office Complex in Oklahoma City, was sold at
foreclosure to the property's mortgage lender. On November 14, 1991, a portion
of one of the Registrant's properties, Building G of the Morenci located in
Indianapolis, Indiana, was sold to a party unaffiliated with the Registrant.
During fiscal 1992, Stone City Mall was sold at foreclosure to the property's
mortgage lender.
The Registrant's primary investment objectives are to preserve and protect the
Limited Partners' capital and obtain long-term appreciation in the value of its
properties. The term of the Registrant is until December 31, 2019. It was
originally anticipated that the Registrant would sell or refinance its
properties within approximately five to ten years after their acquisition. The
depression of real estate values experienced nationwide from 1988 to 1993
lengthened this time frame in order to achieve the goal of capital appreciation.
The real estate investment market began to improve in 1994 and is expected to
further continue its improvement over the next several years. Management
believes this trend should increase the value of the Registrant's properties in
the future. The Registrant is intended to be self-liquidating and proceeds, if
any, from the sale or refinancing of the Registrant's real property investments
will not be invested in new properties but will be distributed to the Partners
or, at the discretion of the General Partners, applied to capital improvements
to, or the payment of indebtedness with respect to, existing properties, the
payment of other expenses or the establishment of reserves.
The business in which the Registrant is engaged is highly competitive. The
Registrant's investment properties are located in or near major urban areas and
are subject to competition from other similar types of properties in such areas.
The Registrant competes for tenants for its properties with numerous other real
estate limited partnerships, as well as with individuals, corporations, real
estate investment trusts and other entities engaged in real estate investment
activities. Such competition is based on such factors as location, rent
schedules and services and amenities provided.
The Registrant has no employees. Property management services for the
Registrant's investment properties are provided by Nooney, Inc., an affiliate of
the General Partners.
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<PAGE>
ITEM 2: PROPERTIES
On October 3, l979, the Registrant purchased the Maple Tree Shopping Center (
"Maple Tree") located at the corner of Clayton and Clarkson Roads in West St.
Louis County, Missouri. Constructed in l974 of steel and masonry block, Maple
Tree contains approximately 72,000 net rentable square feet and is located on a
7.8 acre site which provides paved parking for 366 cars. The purchase price of
Maple Tree was $3,184,053. Maple Tree was 100% leased by 18 tenants at November
30, 1997.
On October 15, l980, the Registrant purchased Park Plaza I & II, ("Park Plaza")
an office/warehouse center located at 5707-5797 Park Plaza Court in
Indianapolis, Indiana. Park Plaza consists of two one-story, concrete block
buildings. Park Plaza I was built in l975 and Park Plaza II in l979. Park Plaza
is located on a 9 acre site which provides paved parking for 150 cars. The
purchase price of Park Plaza was $2,411,163. The buildings contain a total of
approximately 95,000 net rentable square feet and were 97% leased by 28 tenants
at November 30, 1997.
On March 27, l981, the Registrant purchased Morenci Professional Park Buildings
A, B, C, D & G ("Morenci"), an office/warehouse complex located at 62nd Street
and Guion Road in Indianapolis, Indiana. Morenci consisted of five one-story,
masonry buildings located on a 13.35 acre site. Buildings A, B, C & D were built
in l975 and building G was built in l979. The total purchase price, excluding
Building G, of Morenci was $3,009,924. On November 14, 1991, Building G was sold
to a party unaffiliated with the Registrant. The remaining buildings contain a
total of approximately 105,600 net rentable square feet and were 93% leased by
49 tenants at November 30, 1997.
On March 27, l981, the Registrant purchased the Jackson Industrial Building A
("Jackson Warehouse"), a warehouse building located at Post Road and 30th Street
in Indianapolis, Indiana. Jackson Warehouse is a one-story, masonry building and
is located on a 21.87 acre site. The building, originally constructed in l976
and subsequently expanded in l980, contains approximately 320,000 net rentable
square feet. The purchase price of Jackson Warehouse was $6,089,929. Jackson
Warehouse was 100% leased by 2 tenants at November 30, 1997.
Reference is made to Note 3 to Notes to Financial Statements filed herewith as
Exhibit 99.3 in response to Item 8 for a description of the mortgage
indebtedness secured by the Registrant's real property investments. Reference is
also made to Note 6 to Notes to Financial Statements for a discussion of
revenues derived from major tenants.
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<PAGE>
The following table sets forth certain information as of November 30, 1997,
relating to the properties owned by the Registrant.
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
EFFECTIVE
TOTAL BASE RENT PER- PRINCIPAL TENANTS LEASE
SQUARE ANNUALIZED PER SQUARE CENT OVER 10% OF PROPERTY BASE EXPIRA-
PROPERTY FEET BASE RENT FOOT LEASED RENT REVENUES (%) TION
- -------- ------ ---------- ---------- ------ ------------------------- -------
<S> <C> <C> <C> <C> <C> <C>
Jackson Warehouse 320,000 $ 846,600 $2.65 100% Paper Manufacturers (30%) 2002
Formica Corporation (70%) 2000***
Morenci 105,600 $ 403,680 $4.10 93% None
Maple Tree 72,000 $ 451,442 $6.26 100% Schnucks Super Markets (33%)* 1999
Super X Drugs (10%)** 2000
Park Plaza 95,000 $ 453,173 $4.89 97% None
</TABLE>
* Space subleased to DeBasio Furniture
** Space subleased to Medicine & More
*** Tenant has executed option to cancel lease July 1998
ITEM 3: LEGAL PROCEEDINGS
The Registrant is not a party to any material pending legal proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1997.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of February 1, 1998, there were 973 record holders of Interests in the
Registrant. There is no public market for the Interests and it is not
anticipated that a public market will develop.
There were no cash distributions paid to the Limited Partners during fiscal 1996
or fiscal 1997.
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<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended November 30,
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1997 1996 1995 1994 1993
(Not covered by independent auditors' report)
<S> <C> <C> <C> <C> <C>
Rental and other income $ 2,424,206 $ 2,301,696 $ 2,331,934 $ 2,344,886 $ 2,248,054
Net income (loss) 88,364 16,926 54,444 (35,044) (61,339)
Data per limited partnership unit:
Net income (loss) 7.29 1.40 4.49 (2.89) (5.06)
Weighted average limited partnership
units outstanding 12,000 12,000 12,000 12,000 12,000
At year-end:
Total assets 7,906,122 8,354,094 8,440,165 8,747,540 9,110,149
Investment property - net 7,210,295 7,459,116 7,515,411 7,818,235 8,226,069
Mortgage notes payable 7,633,066 7,999,107 8,331,643 8,664,475 8,971,966
Partners' equity (deficiency in assets) (201,758) (290,122) (307,048) (361,492) (326,448)
See Item 7: Management's Discussion and Analysis for discussion of comparability of items.
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</TABLE>
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash reserves as of November 30, 1997, are $448,898, a decrease of $147,349 from
year ended November 30, 1996. The decrease in cash was due to the expenditures
necessary during the year for capital, leasing and tenant finish costs. The
Registrant had significant expenditures for the continued re-leasing at Morenci.
In addition, a partial roof replacement was done at Maple Tree and major
concrete and resurfacing of parking lots was completed at Park Plaza. The
Registrant expects to fund anticipated capital expenditures for 1998 from cash
flow provided by operations. The anticipated capital expenditures in 1998 by
property are as follows:
Other Capital Leasing Capital Total
-------------------------------------------
Park Plaza $ 0 $ 32,178 $ 32,178
Morenci 86,705 12,252 98,957
Maple Tree 36,000 6,000 42,000
Jackson Warehouse 0 261,900 261,900
-----------------------------------------
$122,705 $312,330 $435,416
At all four of the Registrant's properties, leasing capital has been budgeted to
fund tenant alterations and lease commissions for new and renewal leases to be
signed during the year. At Morenci, the Registrant has forecasted other capital
for asphalt resurfacing, build out of office areas for a model unit and concrete
and sidewalk replacements. At Maple Tree, other capital has been forecasted for
new monument signage and overlaying the main driveway.
As of November 1, 1997, the Registrant negotiated an extension of the second
mortgages secured by Park Plaza, Morenci , and Maple Tree . The terms of the
extensions were for a period of 90 days at a rate of 1.5% over the then
corporate base rate. As of November 30, 1997, the interest rate on the debt was
10%. The balance of the second mortgage debt on Park Plaza and Morenci as of
November 30, 1997, is $231,065. The balance of the second mortgage debt on Maple
Tree as of November 30, 1997, is $259,860. These mortgages matured February 1,
1998 and the lender has extended the loans at the same rate with a new maturity
date of August 1, 1998.
The first mortgage debt on Morenci and Park Plaza have maturity dates of October
1, 2005, and December 31, 2003, respectively. The first mortgage debt on Maple
Tree has a maturity date of July 2009.
On November 1, 1995, the Registrant refinanced the existing first deed of trust
on Jackson Warehouse for a period of five years at a rate of 9.31%, being
amortized over 18 years.
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<PAGE>
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
mortgage debt as it matures. Until such time as the real estate market recovers
and profitable sale of the properties is feasible, the Registrant will continue
to manage the properties to achieve its investment objectives.
Results of Operations
The results of operations for the Registrant's properties for the years ended
November 30, 1997, 1996, and 1995 are detailed in the schedule below. Expenses
of the Registrant are excluded.
Jackson
Warehouse Maple Tree Park Plaza Morenci
--------- ---------- ---------- -------
1997
----
Revenues $867,895 $564,370 $484,872 $505,086
Expenses 861,781 465,257 330,272 522,937
----------------------------------------------------
Net Income (Loss) $ 6,114 $ 99,113 $154,600 $(17,851)
====================================================
1996
----
Revenues $864,995 $543,132 $478,980 $405,786
Expenses 847,648 479,561 359,583 490,772
----------------------------------------------------
Net Income (Loss) $ 17,347 $ 63,571 $119,397 $(84,986)
====================================================
1995
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Revenues $886,870 $524,832 $436,685 $489,455
Expenses 953,738 469,795 329,971 423,981
-----------------------------------------------------
Net Income (Loss) $(66,868) $ 55,037 $106,714 $ 65,474
=====================================================
1997 Property Comparisons
For the year ended 1997 compared to 1996, at Jackson Warehouse, revenues
increased slightly due to an increase in rental income ($4,200) and increase in
tax reimbursement income ($4,191), offset by a decrease in interest income
($3,990) and a decrease in miscellaneous income ($1,500). Expenses increased
$14,133 due to an increase in real estate taxes ($31,309), partially offset by
decreases in other professional services ($3,594), decreases in building repair
and maintenance ($2,144), and a decrease in amortization ($5,974).
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<PAGE>
At Maple Tree, revenues increased $21,238 due to increases in base rental income
($10,739), increases in real estate tax reimbursement ($7,945), a decrease in
bad debt expense ($9,894), partially offset by decreases in percentage rental
income ($10,450). Expenses at Maple Tree decreased $14,304 when comparing the
two years due principally to decreases in parking lot repairs ($2,892),
landscaping ($1,071) and a decrease in real estate taxes ($7,535), offset by
increases in plumbing repairs and maintenance ($3,426) and electric repairs and
maintenance ($4,213).
At Park Plaza, revenues increased $5,892 due to increases in base rental income
($12,761) and a decrease in bad debt expense ($11,260), offset by a decrease in
escalation reimbursement income ($17,035). Expenses decreased $29,311 when
comparing the two years due to a decrease in amortization ($3,760), decrease in
building repairs and maintenance ($5,218), and real estate taxes ($9,486).
At Morenci, revenues increased significantly by $99,300 when comparing the two
years. The increase in revenue is due to an increase in base rental revenue due
to the increase in occupancy. Base rental revenue increased ($74,739), common
area maintenance reimbursement income increased ($23,740), and real estate tax
reimbursement income increased ($12,559), offset by decreases in miscellaneous
income ($5,303) and water income ($4,372). Expenses at Morenci increased $32,165
as a result of increases in building repairs and maintenance ($12,635), electric
repairs and maintenance ($11,200), landscaping ($5,553), and parking lot repairs
($3,118), offset by a decrease in vacancy expense ($7,276) and a decrease in
other professional services ($3,082). The increase in occupancy from 80% at the
beginning of the year to 93% at the end of the year resulted in both the
increase in revenues and increase in expenses as spaces were prepared for new
tenants.
The occupancy levels at November 30 are as follows:
Occupancy rates at November 30
1997 1996 1995
----------------------------
Park Plaza 97% 100% 100%
Morenci 93% 80% 99%
Maple Tree 100% 100% 96%
Jackson Warehouse 100% 100% 100%
Jackson Warehouse has two tenants who lease 100% of the available space. The
major tenant who occupies approximately 70% of the available space has a lease
which runs until July 2000. This tenant has an option to cancel the lease as of
July 1998. Subsequent to the year end, the tenant has exercised its cancellation
option. The tenant has already vacated the space and is negotiating with the
Registrant to turn the space back over prior to July 1998. The cancellation
provides for all rental payments through July 1998 and a cancellation penalty of
$138,260. The Registrant will use this cancellation penalty to prepare the space
for re-leasing and to help fund capital expenditures, tenant improvements and
lease commissions that will be needed upon the re-leasing. The other tenant has
a lease which expires in July 2002.
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<PAGE>
Maple Tree remained 100% occupied during the fourth quarter of 1997. The Center
has two major tenants who occupy 18% and 42% of the available space. Their
leases have expirations of April 30, 2000 and July 31, 1999, respectively and
each has several renewal options.
Occupancy at Park Plaza was 97% at the end of the fourth quarter of 1997. During
the fourth quarter, one new lease was signed for a tenant occupying 1,640 square
feet and one tenant vacated 2,460 square feet. At Park Plaza, no tenant occupies
more than 10% of the total space.
During the fourth quarter of 1997, the occupancy at Morenci increased to 93%.
Leasing activity consisted of new leases being signed with three tenants for
4,800 square feet, renewal leases being signed for three tenants for 4,800
square feet, and two tenants vacated 2,400 square feet. The occupancy of the
property improved from 80% at the beginning of the year to 93% at year-end.
No tenant occupies more than 10% of the total space.
Year 2000 issues
The Registrant believes that the impact of the year 2000 will not be of a major
concern on any future results. The management company employed by the Registrant
utilizes various computer software packages as tools in running its accounting
operations. The Registrant's properties are maintained on software provided by a
third party. The management company has received information from that company
indicating that the main software program has all its core products already
compatible with 2000 dates and that these have been proven in the field for over
five years. A few of the add on products that are not critical to the management
company's business are in process of being updated and the third party vendor
anticipates compliance by the end of 1998.
1997 Comparisons
For the year ended November 30, 1997, the Registrant's consolidated revenues are
$2,434,123 compared to $2,316,648 for the year ended November 30, 1996. On a
consolidated basis, revenues increased $117,475 or 5%, mainly due to the
increase in occupancy at Morenci.
The Registrant's consolidated expenses for the year ended November 30, 1997,
were $2,345,759 as compared to $2,299,722 at the year ended November 30, 1996.
Consolidated expenses increased $46,037 or 2%. The increase in expenses was
mainly attributable to increases in real estate taxes and repairs and
maintenance at the Registrant's properties. Net income for the year ended
November 30, 1997, was $88,364 or $7.29 per limited partnership unit. This is an
increase over the year ended November 30, 1996, when net income was $16,926 or
$1.40 per limited partnership unit. Cash flow provided by operations for the
year ended November 30, 1997 were $459,605. This cash flow enabled the
Registrant to fund capital expenditures of $240,913 and to reduce loan balances
by $366,041.
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<PAGE>
1996 Comparisons
For the year ended November 30, 1996, the Registrant's consolidated revenues
were $2,316,648 compared to $2,341,704 for the year-ended November 30, 1995. On
a consolidated basis revenues decreased $25,056 or approximately 1%.
Consolidated revenues remained relatively stable from 1995 to 1996.
The Registrant's consolidated expenses for the year-ended November 30, 1996,
were $2,299,722. When compared to year-ended November 30, 1995, consolidated
expenses increased $12,462 or less than 1%.
In 1996 net income was $16,926 or $1.40 per limited partnership unit. In 1995,
the net income was $54,444 or $4.49 per limited partnership share. Cash flow
provided by operations for the year-ended November 30, 1996 were $693,291. This
cash flow enabled the Registrant to fund capital expenditures of $392,866 and to
reduce loan balances by $332,536.
Inflation
The effects of inflation did not have a material impact upon the Registrant's
operation in fiscal l997, and are not expected to materially affect the
Registrant's operation in l998.
Interest Rates
Interest rates on floating rate debt remained constant in 1996 and went down in
1997. Future increases in the prime interest rate can adversely affect the
operations of the Registrant.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements of the Registrant are filed herewith as Exhibit 99.3 and
are incorporated herein by reference (see Item 14(a)(1)). The supplementary
financial information specified by Item 302 of Regulation S-K is provided in
Item 7.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
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<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant responsible for all aspects of the
Registrant's operations are Gregory J. Nooney, Jr., age 67, and Nooney
Investors, Inc., a Missouri corporation. Gregory J. Nooney, Jr. is a senior
officer of Nooney Company, the sponsor of the Registrant.
The background and experience of the General Partners are as follows:
Gregory J. Nooney, Jr. joined Nooney Company in 1954 and is currently Chairman
of the Board and Chief Executive Officer.
John J. Nooney is a Special General Partner of the Partnership and as such, does
not exercise control of the affairs of the Partnership.
John J. Nooney joined Nooney Company in 1958 and was President and Treasurer
until he resigned in 1992.
Nooney Investors, Inc., a wholly-owned subsidiary of Nooney Company, was formed
in June 1979 for the purpose of being a general and/or limited partner in the
Registrant and other limited partnerships. Gregory J. Nooney, Jr. and Patricia
A. Nooney are directors of Nooney Investors, Inc.
Gregory J. Nooney, Jr. and John J. Nooney are brothers. Gregory J. Nooney, Jr.
and the estate of Faith L. Nooney (the deceased wife of John J. Nooney) are
stockholders of Nooney Company, with Gregory J. Nooney, Jr. controlling all
voting stock of Nooney Company.
PAN, Inc. became a General Partner during 1997 and is wholly-owned by Patricia
A. Nooney, the daughter of Gregory J. Nooney, Jr.
The General Partners will continue to serve as General Partners until their
withdrawal or their removal from office by the Limited Partners.
Certain of the General Partners act as general partners of limited partnerships
and hold directorships of companies with a class of securities registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934 or subject to
the requirements of Section 15(d) of the Act. A list of such directorships, and
the limited partnerships for which the General Partners serve as general
partners, is filed herewith as Exhibit 99.1 and incorporated herein by
reference.
During 1993 Lindbergh Boulevard Partners, L.P. filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code. Gregory J. Nooney, Jr. is the
general partner of Nooney Ltd. II, L.P, which in turn is the general partner of
Nooney Development Partners, L.P., which in turn is the general partner of
Nooney-Hazelwood Associates, L.P., which is the general partner of Lindbergh
Boulevard Partners, L.P. Lindbergh Boulevard Partners, L.P. emerged from
bankruptcy on May 17, 1994, when its Plan of Reorganization was confirmed.
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<PAGE>
On October 31, 1997, Nooney Company sold its wholly-owned subsidiary, Nooney
Investors, Inc., the corporate general partner of the Partnership to S-P
Properties, Inc., a California corporation, which in turn is a wholly-owned
subsidiary of CGS Real Estate Company, Inc., a Texas corporation.
Simultaneously, Gregory J. Nooney, Jr., an individual general partner and PAN,
Inc., a corporate general partner, sold their economic interests to S-P
Properties, Inc. and resigned as general partners.
ITEM 11: EXECUTIVE COMPENSATION
The General Partners are entitled to a share of distributions and a share of
profits and losses as more fully described under the headings "Compensation to
General Partners and Affiliates" on pages 8-11 and "Profits and Losses for Tax
Purposes; Distributions; and Expenses of General Partners" on pages A-14 to A-17
of the Prospectus of the Registrant dated November 16, 1979, as supplemented and
filed pursuant to Rule 424(c) of the Securities Act of 1933 (the "Prospectus"),
which are incorporated herein by reference.
During fiscal l997, there were no cash distributions paid to the General
Partners by the Registrant.
See Item 13 below for a discussion of transactions between the Registrant and
certain affiliates of the General Partners.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
Title Name of Amount and Nature of Percentage
of Class Beneficial Owner Beneficial Ownership of Class
-------- ---------------- -------------------- ----------
Limited Liquidity Fund XI 10 Units 0.08%
Partnership Liquidity Fund XVI 3 Units 0.02%
Interests Liquidity Fund
Growth+Partners 45 Units 0.38%
Liquidity Fund
Income-Growth Investors 38 Units 0.32%
Liquidity Fund Tax
Exempt Partners II 298 Units 2.48%
Liquidity Fund 73, L.P. 142 Units 1.18%
Liquidity Fund 74, L.P. 256 Units 2.13%
Liquidity Fund Tax Exempt
Partners III 14 Units 0.12%
Liquidity Fund Qualified Plan
Investors II 50 Units 0.42%
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<PAGE>
The aggregate amount beneficially owned by the above listed reporting persons
totals 856 Units, or 7.13% of the outstanding interests of the Registrant. The
sole general partner of each of the above reporting persons is Liquidity
Financial Group, L.P., a California limited partnership. Voting and dispositive
power is exercised on behalf of each reporting person by its general partner.
(b) Security Ownership of Management.
None of the General Partners is known to the Registrant to be the beneficial
owner, either directly or indirectly, of any Interests in the Registrant.
(c) Changes in Control.
There are no arrangements known to the Registrant, the operation of which may at
a subsequent date result in a change in control of the Registrant.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others.
Certain affiliates of the General Partners are entitled to certain fees and
other payments from the Registrant in connection with certain transactions of
the Registrant as more fully described under the headings "Compensation to
General Partners and Affiliates" on pages 8-11 and "Management" on pages 23-25
of the Prospectus, which are incorporated herein by reference.
Nooney Krombach Company, the manager of the Registrant's properties, is a
wholly-owned subsidiary of Nooney Company. Nooney Krombach Company is entitled
to receive monthly compensation from the Registrant for property management and
leasing services, plus administrative expenses. During fiscal 1997 the
Registrant paid property management fees of $109,770 to Nooney Krombach Company
and $27,500 as reimbursement for indirect expenses incurred in connection with
management of the Registrant. On October 31, 1997, CGS Real Estate Company
purchased the real estate management business of Nooney Krombach Company and
formed Nooney, Inc. to perform the management of the Registrant. The Registrant
paid Nooney, Inc. $11,341 in property management fees in 1997 and $2,500 as
reimbursement for indirect expenses incurred in connection with the management
of the Registrant.
See Item 11 above for a discussion of cash distributions paid to the General
Partners during fiscal l997.
(b) Certain Business Relationships.
The relationship of certain of the General Partners to certain of their
affiliates is set forth in Item 13(a) above. Also see Item 13(a) above for a
discussion of amounts paid by the Registrant to the General Partners or their
affiliates during fiscal 1997 in connection with various transactions.
-14-
<PAGE>
(c) Indebtedness of Management.
Not Applicable.
(d) Transactions with promoters.
Not Applicable.
-15-
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements (filed herewith as Exhibit 99.3):
Independent auditors' report
Balance sheets
Statements of operations
Statements of partners' equity (deficiency in assets)
Statements of cash flows
Notes to financial statements
(2) Financial Statement Schedules (filed herewith as Exhibit 99.3):
Schedule - Reconciliation of partners' equity (deficiency in assets)
Schedule III - Real estate and accumulated depreciation
All other schedules are omitted because they are inapplicable or not
required under the instructions.
(3) Exhibits:
See Exhibit Index on Page 18.
(b) Reports on Form 8-K
On November 14, 1997, the Registrant filed a report on Form 8-K which
reported an Item 1, Changes in Control of Registrant.
(c) Exhibits:
See Exhibit Index on Page 18.
(d) Not Applicable
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) under 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.
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
Date: February 27, 1998 /s/ Gregory J. Nooney, Jr.
----------------------------- ----------------------------------
Gregory J. Nooney, Jr.
General Partner
PAN, Inc.
General Partner
Date: February 27, 1998 By: /s/ Patricia A. Nooney
----------------------------- -----------------------------------
Patricia A. Nooney
President and Secretary
Nooney Investors, Inc.
General Partner
Date: February 27, l998 By: /s/ Gregory J. Nooney, Jr.
----------------------------- -----------------------------------
Gregory J. Nooney, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ Patricia A. Nooney
-----------------------------------
Patricia A. Nooney
Senior Vice President and
Secretary
-17-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C> <C>
3.1 Amended and Restated Agreement and Certificate of Limited N/A
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).
10 Management Contract between Nooney Real Property Investors- N/A
Two, L.P. and Nooney Company is incorporated by reference to
Exhibit 10(a) to the Registration Statement on Form S-11
under the Securities Act of 1933 (File No. 2-65006). The
Management Contract was assigned by Nooney Krombach Company, a
wholly-owned subsidiary of Nooney Company, on October 31, 1997, to
Nooney, Inc. a wholly-owned subsidiary of CGS Real Estate Company,
Inc., and is identical in all material respects to the management
contract referred to above.
99.1 List of Directorships filed in response to Item 10. 19
99.2 Pages 8-11, 23-25 and A-14 - A-17 of the Prospectus N/A
of the Registrant dated November 16, 1979, as
supplemented and filed pursuant to Rule 424(c)
of the Securities Act of 1933 are incorporated by reference.
99.3 Financial Statements and Schedules. 20-32
-18-
</TABLE>
EXHIBIT 99.1
Below each General Partner's name is a list of the limited partnerships, other
than the Registrant, for which the General Partner serves as a general partner
and the companies for which the General Partner serves as a director. The list
includes only those limited partnerships and companies which have a class of
securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934 or are subject to the requirements of Section 15(d) of the Act.
Gregory J. Nooney, Jr.
Limited Partnerships:
Nooney Real Property Investors-Four, L.P. Nooney Income Fund Ltd., L.P.
Nooney Income Fund Ltd. II, L.P.
Directorships:
Nooney Realty Trust, Inc.
John J. Nooney
Limited Partnerships:
Nooney Real Property Investors-Four, L.P. Nooney Income Fund Ltd., L.P.
Nooney Income Fund Ltd. II, L.P.
PAN, Inc.
Limited Partnerships:
Nooney Real Property Investors-Four, L.P. Nooney Income Fund Ltd., L.P.
Nooney Income Fund Ltd. II, L.P.
-19-
<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> 12-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 448,898
<SECURITIES> 0
<RECEIVABLES> 127,415
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 622,259
<PP&E> 16,081,958
<DEPRECIATION> 8,871,663
<TOTAL-ASSETS> 7,906,122
<CURRENT-LIABILITIES> 394,616
<BONDS> 7,633,066
<COMMON> 0
0
0
<OTHER-SE> (201,758)
<TOTAL-LIABILITY-AND-EQUITY> 7,906,122
<SALES> 2,424,206
<TOTAL-REVENUES> 2,434,123
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,602,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 743,173
<INCOME-PRETAX> 88,364
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,364
<EPS-PRIMARY> 7.29
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.3
INDEPENDENT AUDITORS' REPORT
To the Partners of
Nooney Real Property Investors-Two, L.P.:
We have audited the accompanying balance sheets of Nooney Real Property
Investors-Two, L.P. (a limited partnership) as of November 30, 1997 and 1996,
and the related statements of operations, partners' equity (deficiency in
assets) and cash flows for each of the three years in the period ended November
30, 1997. Our audits also included the financial statement schedules listed in
the index at Item 14(a)2. These financial statements and financial statement
schedules are the responsibility of the Partnership's general partners. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Nooney Real Property Investors-Two, L.P. as
of November 30, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended November 30, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
January 9, 1998
(January 19, 1998 as to Note 7)
(February 1, 1998 as to Note 3)
St. Louis, Missouri
-20-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
- --------------------------------------------------------------------------------
ASSETS 1997 1996
CASH AND CASH EQUIVALENTS $ 448,898 $ 596,247
ACCOUNTS RECEIVABLE - No allowance for
doubtful accounts considered necessary 127,415 147,278
PREPAID EXPENSES AND DEPOSITS 45,946 46,229
INVESTMENT PROPERTY (Note 3):
Land 1,886,042 1,886,042
Buildings and improvements 14,195,916 13,965,067
------------ ------------
16,081,958 15,851,109
Less accumulated depreciation (8,871,663) (8,391,993)
------------ ------------
7,210,295 7,459,116
DEFERRED EXPENSES - At amortized cost 73,568 105,224
------------ ------------
TOTAL $ 7,906,122 $ 8,354,094
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY IN ASSETS)
LIABILITIES:
Accounts payable and accrued expenses $ 394,616 $ 572,660
Refundable tenant deposits 80,198 72,449
Mortgage notes payable (Note 3) 7,633,066 7,999,107
------------ ------------
Total liabilities 8,107,880 8,644,216
PARTNERS' EQUITY (DEFICIENCY IN ASSETS) (201,758) (290,122)
------------ ------------
TOTAL $ 7,906,122 $ 8,354,094
============ ============
See notes to financial statements.
-21-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1997 1996 1995
REVENUES:
Rental and other income (Notes 4 and 6) $2,424,206 $2,301,696 $2,331,934
Interest 9,917 14,952 9,770
---------- ---------- ----------
Total revenues 2,434,123 2,316,648 2,341,704
---------- ---------- ----------
EXPENSES:
Interest 743,173 775,729 838,277
Depreciation and amortization 522,594 518,000 493,498
Real estate taxes 395,233 379,527 413,490
Repairs and maintenance 148,206 109,051 104,119
Property management fees - related party 121,111 114,645 116,228
Other operating expenses (includes
$30,000 in each year to related party) 415,442 402,770 321,648
---------- ---------- ----------
Total expenses 2,345,759 2,299,722 2,287,260
---------- ---------- ----------
NET INCOME $ 88,364 $ 16,926 $ 54,444
========== ========== ==========
NET INCOME ALLOCATION:
General partners $ 884 $ 169 $ 544
Limited partners 87,480 16,757 53,900
LIMITED PARTNERSHIP DATA:
Net income per unit $ 7.29 $ 1.40 $ 4.49
========== ========== ==========
Weighted average limited partnership
units outstanding
12,000 12,000 12,000
========== ========== ==========
See notes to financial statements.
-22-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
Limited General
Partners Partners Total
BALANCE (DEFICIENCY IN ASSETS),
DECEMBER 1, 1994 $(278,169) $ (83,323) $(361,492)
Net income 53,900 544 54,444
--------- --------- ---------
BALANCE (DEFICIENCY IN ASSETS),
NOVEMBER 30, 1995 (224,269) (82,779) (307,048)
Net income 16,757 169 16,926
--------- --------- ---------
BALANCE (DEFICIENCY IN ASSETS),
NOVEMBER 30, 1996 (207,512) (82,610) (290,122)
Net income 87,480 884 88,364
--------- --------- ---------
BALANCE (DEFICIENCY IN ASSETS),
NOVEMBER 30, 1997 $(120,032) $ (81,726) $(201,758)
========= ========= =========
See notes to financial statements.
-23-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 88,364 $ 16,926 $ 54,444
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 489,734 474,196 438,029
Amortization of deferred expenses 32,860 43,804 55,465
Changes in accounts affecting operations:
Accounts receivable 19,863 (29,076) 128,799
Prepaid expenses and deposits 283 (7,873) (27,511)
Deferred expenses (1,204) (34,225) (126,883)
Accounts payable and accrued expenses (178,044) 218,353 (35,420)
Refundable tenant deposits 7,749 11,186 6,433
--------- --------- ---------
Net cash provided by operating
activities 459,605 693,291 493,356
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Net additions to investment property (240,913) (392,866) (135,205)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES -
Payments on mortgage notes payable (366,041) (332,536) (332,832)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (147,349) (32,111) 25,319
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 596,247 628,358 603,039
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 448,898 $ 596,247 $ 628,358
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the
year for interest $ 743,173 $ 741,503 $ 843,312
========= ========= =========
See notes to financial statements.
-24-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BUSINESS
Nooney Real Property Investors-Two, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of Missouri on September
26, 1979. The Partnership was organized to invest primarily in
income-producing real properties such as shopping centers, office
buildings, other commercial properties, apartment buildings, warehouses
and light industrial properties. The Partnership's portfolio is comprised
of: a shopping center located in West St. Louis County, Missouri; an
office/warehouse complex, a multi-tenant office and a warehouse all
located in Indianapolis, Indiana. These properties generated 23.4%, 20.9%,
19.8% and 35.9% of rental and other income, respectively, for the year
ended November 30, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements include only those assets, liabilities and
results of operations of the partners which relate to the business of the
Partnership. The statements do not include any 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 personal responsibility of the partners.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The corporate general partner was a wholly-owned subsidiary of Nooney
Company. One of the individual general partners was an officer, director
and shareholder of Nooney Company. The other individual general partner's
spouse's estate was a shareholder of Nooney Company. Nooney Krombach
Company, a wholly-owned subsidiary of Nooney Company, managed the
Partnership's real estate for a management fee. Property management fees
paid to Nooney Krombach Company were $109,770, $114,645 and $116,228 for
the years ended November 30, 1997, 1996 and 1995, respectively. Property
management fees paid to Nooney, Inc. in 1997 were $11,341. Additionally,
the Partnership paid Nooney Krombach Company $27,500 in 1997 and $30,000
in 1996 and 1995 as reimbursement for management services and indirect
expenses in connection with the management of the Partnership. The
Partnership paid Nooney, Inc. $2,500 in 1997 for these same reimbursement
items.
On October 31, 1997, Nooney Company sold its wholly-owned subsidiary,
Nooney Investors, Inc., the corporate general partner of the Partnership
to S-P Properties, Inc., a California corporation, which in turn is a
wholly-owned subsidiary of CGS Real Estate Company, Inc., a Texas
corporation. Simultaneously, Gregory J. Nooney, Jr., an individual general
partner and PAN, Inc., a corporate general partner, sold their economic
interests to S-P Properties, Inc. and resigned as general partners subject
to a ninety day notification to the limited partners. CGS Real Estate also
-25-
<PAGE>
purchased the real estate management business of Nooney Krombach Company
and formed Nooney, Inc. to perform the management of the Partnership. The
Partnership continues to pay management fees to Nooney, Inc.
The Partnership considers all highly liquid debt instruments with a
maturity of three months or less at date of purchase to be cash
equivalents.
Investment property is recorded at the lower of cost or fair market value.
Impairment is determined if the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the property.
Depreciation and amortization is provided on a straight-line basis over
the estimated useful life of the depreciable asset (30 years for
buildings) or, in the case of tenant alterations, over the term of the
lease.
Deferred expenses consist primarily of lease fees and financing costs and
are amortized over the terms of their respective leases or notes.
Lease agreements are accounted for as operating leases and rentals from
such leases are reported as revenues ratably over the terms of the leases.
Certain lease agreements provide for rent concessions. At November 30,
1997 accounts receivable include approximately $14,000 ($11,000 in 1996)
of accrued rent concessions which is not yet due under the terms of the
various lease agreements.
Included in rental and other income are amounts received from tenants
under provisions of lease agreements which require the tenants to pay
additional rent equal to specified portions of certain expenses such as
real estate taxes, insurance, utilities and common area maintenance. The
income is recorded in the same period that the related expense is
incurred.
Pursuant to the terms of the Partnership Agreement, income and losses from
operations and cash distributions are allocated pro rata to the general
and limited partners based upon the relationship of original capital
contributions.
Limited partnership per unit computations are based on the weighted
average number of limited partnership units outstanding during the year.
-26-
<PAGE>
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable as of November 30, 1997 and 1996 and the related
collateral book values consist of the following:
1997 1996
Maple Tree Shopping Center
- --------------------------
(Book value of $1,054,225 at November 30, 1997)
9.125%, due in monthly installments of $17,911,
including interest, to 2009 $1,532,619 $1,604,116
Note payable to bank, principal due in monthly
installments of $1,208 plus interest at bank's
prime rate (8.5% at November 30, 1997) plus
1-1/2% to February 1, 1998 when entire
principal balance is due 259,860 275,564
Park Plaza I & II Office/Warehouse Complex
- ------------------------------------------
(Book value of $886,889 at November 30, 1997)
9.5%, due in monthly installments of $12,669,
including interest, to 2003 700,094 781,320
Morenci Professional Park
- -------------------------
(Book value of $1,665,405 at November 30, 1997)
10.25%, due in monthly installments of $15,682,
including interest, to 2005 1,017,572 1,096,814
Note payable to bank, principal due in monthly
installments of $1,111 plus interest at bank's
prime rate (8.5% at November 30, 1997) plus
1-1/2%, to February 1, 1998, when entire
principal balance is due 231,065 246,593
Jackson Industrial Park, Building A
- -----------------------------------
(Book value of $3,603,776 at November 30, 1997)
9.31%, due in monthly installments of $39,203,
including interest, to 2000, when remaining
principal balance of $3,542,902 is due 3,891,856 3,994,700
---------- ----------
Total $7,633,066 $7,999,107
========== ==========
On February 1, 1998, the holders of the notes related to the Maple Tree
Shopping Center and Morenci Professional Park 10% second mortgage notes
extended the due dates to August 1, 1998 at the same rate.
The mortgage notes are collateralized by deeds of trust and assignments of
rents on all investment properties. Principal payments required during the
next five years are as follows:
1998 $ 859,570
1999 406,112
2000 3,963,747
2001 340,959
2002 372,201
In accordance with Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments, the estimated fair
value of mortgage notes payable with maturities greater than one year is
determined based on rates currently available to the Partnership for
-27-
<PAGE>
mortgage notes with similar terms and remaining maturities. The estimated
fair value of mortgage notes payable with maturities of less than one year
are valued at their carrying amounts included in the balance sheet, which
are reasonable estimates of fair value due to the relatively short period
to maturity of the instruments. The carrying amount and estimated fair
value of the Partnership's debt at November 30, 1997 and 1996 are
summarized as follows:
1997 1996
----------------------- -----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Mortgage Notes Payable $ 7,633,066 $ 7,728,000 $ 7,999,107 $ 7,980,000
Fair value estimates are made at a specific point in time, are subjective
in nature and involve uncertainties and matters of significant judgment.
Settlement of the Partnership's debt obligations at fair value may not be
possible and may not be a prudent management decision. The potential loss
on extinguishment at November 30, 1997 does not take into consideration
expenses that would be incurred to settle the debt obligations at fair
value.
4. RENTAL REVENUES UNDER OPERATING LEASES
Minimum future rental revenues under noncancelable operating leases in
effect as of November 30, 1997 are as follows:
1998 $ 1,737,000
1999 979,000
2000 503,000
2001 339,000
2002 224,000
Remainder 268,000
------------
Total $ 4,050,000
============
In addition, certain lease agreements require tenant participation in
certain operating expenses and additional contingent rentals based upon
percentages of tenant sales in excess of minimum amounts. Tenant
participation in expenses included in revenues approximated $259,000 for
the year ended November 30, 1997 ($236,000 for the year ended November 30,
1996 and $240,000 for the year ended November 30, 1995). Contingent
rentals were not significant for the years ended November 30, 1997, 1996
and 1995.
5. FEDERAL INCOME TAX STATUS
The general partners have received a ruling from the Internal Revenue
Service that Nooney Real Property Investors-Two, L.P. is considered a
partnership for income tax purposes.
Selling commissions and offering expenses incurred in connection with the
sale of limited partnership units are not deductible for income tax
purposes and therefore increase the partners' bases. Investment property
additions after December 31, 1980 are depreciated for income tax purposes
using rates which differ from rates used for computing depreciation for
financial statement reporting. Rents received in advance are includable in
taxable income in the year received. Rent concessions, recognized ratably
over lease terms for financial statement purposes, are includable in
taxable income in the year rents are received. Insurance premiums are
deductible for tax purposes in the year paid. Losses in connection with
-28-
<PAGE>
the writedown of investment property are not recognized for income tax
purposes until the property is disposed.
The comparison of financial statement and income tax reporting is as
follows:
Financial Income
Statement Tax
1997:
Net income $ 88,364 $ 386,375
Partners' equity (deficiency in assets) (201,758) (1,394,060)
1996:
Net income $ 16,926 $ 203,760
Partners' equity (deficiency in assets) (290,122) (1,780,435)
1995:
Net income (loss) $ 5,444 $ (27,316)
Partners' equity (deficiency in assets) (307,048) (1,984,195)
6. MAJOR TENANTS
A substantial amount of the Partnership's revenue in 1997 was derived from
two major tenants whose rentals amounted to approximately $582,000 (Note
7) and $257,250 or 24% and 11%, respectively, of total revenues.
A substantial amount of the Partnership's revenue in 1996 was derived from
two major tenants whose rentals amounted to approximately $582,000 and
$252,000 or 25% and 11%, respectively, of total revenues.
A substantial amount of the Partnership's revenue in 1995 was derived from
two major tenants whose rentals amounted to approximately $582,000 and
$252,000 or 25% and 11%, respectively, of total revenues.
7. SUBSEQUENT EVENT
On January 19, 1998, the Partnership received written notice that one of
their major tenants will be exercising their option to terminate their
lease effective July 31, 1998. This option requires full monthly rent of
$48,500 through July 31, 1998 plus a termination penalty of $138,260. The
tenant has vacated the space.
* * * * * *
-29-
<PAGE>
<TABLE>
<CAPTION>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE - RECONCILIATION OF PARTNERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- ------------------------------------------------------------------------------------------------------------------------------------
The reconciliation of partners' equity (deficiency in assets) between financial statement and income tax reporting is as follows:
1997
-----------------------------------------------
Limited General
Partners Partners Total
<S> <C> <C> <C>
Balance (deficiency) per statement of partners' equity $ (120,032) $ (81,726) $ (201,758)
Add:
Selling commissions and other offering costs not deductible for income tax
purposes 1,395,653 - 1,395,653
Prepaid rents included in income for income tax purposes 12,690 128 12,818
Writedown of investment property not recognized for income tax purposes 214,341 2,165 216,506
------------ ----------- -------------
1,502,652 (79,433) 1,423,219
Less:
Excess depreciation deducted for income tax purposes 2,766,300 27,942 2,794,242
Rent concessions not recognized for income tax purposes 13,386 135 13,521
Insurance premiums deducted for income tax purposes 9,421 95 9,516
------------ ------------ ------------
Balance (deficiency) per tax return $ (1,286,455) $ (107,605) $ (1,394,060)
============ ============ ============
1996
-----------------------------------------------
Limited General
Partners Partners Total
Balance (deficiency) per statement of partners' equity $ (207,512) $ (82,610) $ (290,122)
Add:
Selling commissions and other offering costs not deductible for income tax
purposes 1,395,653 - 1,395,653
Prepaid rents included in income for income tax purposes 8,221 83 8,304
Writedown of investment property not recognized for income tax purposes 214,341 2,165 216,506
------------ ------------ ------------
1,410,703 (80,362) 1,330,341
Less:
Excess depreciation deducted for income tax purposes 3,059,861 30,906 3,090,767
Rent concessions not recognized for income tax purposes 10,750 109 10,859
Insurance premiums deducted for income tax purposes 9,058 92 9,150
------------ ------------ ------------
Balance (deficiency) per tax return $ (1,668,966) $ (111,469) $ (1,780,435)
============ ============ ============
1995
-----------------------------------------------
Limited General
Partners Partners Total
Balance (deficiency) per statement of partners' equity $ (224,269) $ (82,779) $ (307,048)
Add:
Selling commissions and other offering costs not deductible for income tax
purposes 1,395,653 - 1,395,653
Prepaid rents included in income for income tax purposes 15,377 155 15,532
Writedown of investment property not recognized for income tax purposes 214,341 2,165 216,506
------------ ------------ ------------
1,401,102 (80,459) 1,320,643
Less:
Excess depreciation deducted for income tax purposes 3,247,195 32,800 3,279,995
Rent concessions not recognized for income tax purposes 12,099 122 12,221
Insurance premiums deducted for income tax purposes 12,496 126 12,622
------------ ------------ ------------
Balance (deficiency) per tax return $ (1,870,688) $ (113,507) $ (1,984,195)
============ ============ ============
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III- REAL ESTATE AND ACCUMULATED DEPRECIATION
NOVEMBER 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C
-------- -------- --------
Initial Cost to Partnership
--------------------------------------------
Buildings and
Description Encumbrances Land Improvements Total
<S> <C> <C> <C> <C>
Maple Tree Shopping Center, Ellisville, Missouri $ 1,792,479 $ 474,750 $ 2,709,303 $ 3,184,053
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 700,094 182,335 2,228,828 2,411,163
Morenci Professional Park, Indianapolis, Indiana 1,248,637 320,418 2,689,506 3,009,924
Jackson Industrial Park, Building A, Indianapolis, Indiana 3,891,856 908,539 5,181,390 6,089,929
------------ ------------ ------------ ------------
Total $ 7,633,066 $ 1,886,042 $ 12,809,027 $ 14,695,069
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Column D Column E
-------- --------
Costs
Capitalized Gross Amount at Which
Subsequent Carried at Close of Period
--------------------------------------------
to Buildings and
Description Acquisition Land Improvements Total
<S> <C> <C> <C> <C>
Maple Tree Shopping Center, Ellisville, Missouri $ 435,127 $ 474,750 $ 3,144,430 $ 3,619,180
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 184,974 (1) 182,335 2,413,802 2,596,137
Morenci Professional Park, Indianapolis, Indiana 82,413 (2) 320,418 2,771,919 3,092,337
Jackson Industrial Park, Building A, Indianapolis, Indiana 684,375 908,539 5,865,765 6,774,304
------------ ------------ ------------ ------------
Total $ 1,386,889 $ 1,886,042 $ 14,195,916 $ 16,081,958
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Column F Column G Column H Column I
--------------------------- --------- ---------------------
Life on Which
Depreciation
Accumulated Date of Date in Latest Income
Depreciation Construction Acquired Statement is Computed
<S> <C> <C> <C> <C>
Maple Tree Shopping Center, Ellisville, Missouri $ 2,564,955 1974 10/3/79 30 yrs.
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 1,709,248 1975, 1979 10/15/80 30 yrs.
Morenci Professional Park, Indianapolis, Indiana 1,426,932 1975, 1979 3/27/81 30 yrs.
Jackson Industrial Park, Building A, Indianapolis, Indiana 3,170,528 1976, 1980 3/27/81 30 yrs.
------------
Total $ 8,871,663
============
(1) Amount is net of a building writedown of $77,225, to reflect the minimum recoverable value to the Partnership.
(2) Amount includes the disposal of Building G of Morenci Professional Park for $482,387 and a building writedown of $139,281 to
reflect the minimum recoverable value to the Partnership.
(Continued)
-31-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
(A) Reconciliation of amounts in Column E:
Balance at beginning of period $ 15,851,109 $ 15,458,243 $ 15,359,430
Add - Cost of improvements 240,913 417,901 135,205
Less - Cost of disposals (10,064) (25,035) (36,392)
------------ ------------ ------------
Balance at end of period $ 16,081,958 $ 15,851,109 $ 15,458,243
============ ============ ============
(B) Reconciliation of amounts in Column F:
Balance at beginning of period $ 8,391,993 $ 7,942,832 $ 7,541,195
Add - Provision during the period 489,734 474,196 438,029
Less - Depreciation on disposals (10,064) (25,035) (36,392)
------------ ------------ ------------
Balance at end of period $ 8,871,663 $ 8,391,993 $ 7,942,832
============ ============ ============
(C) The aggregate cost of real estate owned for
federal income tax purposes $ 16,298,464 $ 16,067,615 $ 15,674,749
============ ============ ============
(Concluded)
</TABLE>
-32-
