SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 August 31, 1998
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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.
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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 N. Broadway, Suite 1200, St.Louis, Missouri 63102-2124
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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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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
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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:
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NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
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(A LIMITED PARTNERSHIP)
-----------------------
BALANCE SHEETS
--------------
August 31, November 30,
1998 1997
(Unaudited)
----------- ------------
ASSETS:
Cash and cash equivalents $ 547,978 $ 448,898
Accounts receivable 91,070 127,415
Prepaid expenses and deposits 179,648 45,946
Investment property
Land 1,886,042 1,886,042
Buildings and improvements 14,094,237 14,195,916
------------ ------------
15,980,279 16,081,958
Less accumulated depreciation 9,106,086 8,871,663
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6,874,193 7,210,295
Deferred expenses-At amortized cost 57,866 73,568
------------ ------------
$ 7,750,755 $ 7,906,122
============ ============
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Accounts payable and accrued expenses $ 477,244 $ 394,616
Mortgage notes payable 7,339,188 7,633,066
Refundable tenant deposits 83,357 80,198
----------- ------------
7,899,789 8,107,880
Partners' Deficit (149,034) (201,758)
------------ ------------
$ 7,750,755 $ 7,906,122
============ ============
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
----------------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
----------------------------------------------
(UNAUDITED)
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 470,709 $ 603,022 $ 1,931,072 $ 1,782,849
Interest 553 3,291 4,964 7,247
----------- ----------- ----------- -----------
471,262 606,313 1,936,036 1,790,096
EXPENSES:
Interest 175,353 182,072 517,155 557,010
Depreciation and amortization 124,854 131,586 413,493 390,891
Real estate taxes 98,250 101,883 293,536 296,007
Property management fees paid to
Nooney, Inc. 23,913 29,927 97,471 88,982
Reimbursement to Nooney, Inc.
for partnership management
services and indirect expenses 7,500 7,500 22,500 22,500
Insurance 10,775 13,015 34,974 39,340
Parking Lot 18,526 25,151 40,584 50,298
Repairs & Maintenance 8,288 16,739 58,981 49,266
Office - General 9,471 9,724 27,879 26,794
Payroll 23,940 19,629 64,503 58,285
Professional Services 18,767 11,799 45,892 78,257
Vacancy Expense 95,084 3,848 203,963 24,652
Other operating expenses 10,985 6,390 62,381 67,790
----------- ----------- ----------- -----------
625,706 559,263 1,883,312 1,750,072
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (154,444) $ 47,050 $ 52,724 $ 40,024
=========== =========== =========== ===========
NET (LOSS) INCOME PER LIMITED
PARTNERSHIP UNIT $ (12.74) $ 3.88 $ 4.35 $ 3.30
=========== =========== =========== ===========
PARTNERS' EQUITY (DEFICIT):
Beginning of Period $ 5,410 $ (297,148) $ (201,758) $ (290,122)
Net (Loss) Income (154,444) 47,050 52,724 40,024
----------- ----------- ----------- -----------
End of Period $ (149,034) $ (250,098) $ (149,034) $ (250,098)
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
----------------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
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Nine Months Ended
Aug. 31, Aug. 31,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 52,724 $ 40,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 413,493 390,891
Changes in assets and liabilities:
(Decrease) Increase in accounts receivable 36,345 (2,917)
Increase in prepaid expenses and deposits (133,702) (37,604)
Increase in deferred expenses (6,50) (1,202)
Increase (Decrease) in current liabilities 85,787 (69,810)
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Total Adjustments 395,421 279,358
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Net cash from operating activities 448,145 319,382
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property (55,187) (147,623)
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Net cash used in investing activities (55,187) (147,623)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage notes payable (293,878) (269,080)
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Net cash used in financing activities (293,878) (269,080)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 99,080 (97,321)
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period 448,898 596,247
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 547,978 $ 498,926
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during period for interest $ 517,155 $ 557,010
========= =========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
-4-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
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(A LIMITED PARTNERSHIP)
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
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THREE AND NINE MONTHS ENDED AUGUST 31, 1998 AND 1997
----------------------------------------------------
NOTE A:
Refer to the Registrant's financial statements for the year ended November 30,
1997, 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.
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 August 31, 1998 and for all periods presented have been
made. The results of operations for the three-month and nine-month period ended
August 31, 1998 are not necessarily indicative of the results which may be
expected for the entire year.
NOTE C:
The Registrant's properties are managed by Nooney, Inc., a wholly-owned
subsidiary of CGS Real Estate Company. Nooney Investors, Inc., a general
partner, is a wholly-owned subsidiary of S-P Properties, Inc. S-P Properties,
Inc is a wholly-owned subsidiary of CGS Real Estate Company.
NOTE D:
The income (loss) per limited partnership unit for the three and nine months
ended August 31, 1998 and 1997 was computed based on 12,000 units, the number of
units outstanding during the periods.
NOTE E:
Effective December 1, 1997, the Registrant adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
established standards for the reporting and display of comprehensive income and
its components. The adoption of this statement did not effect the Registrant's
consolidated financial statements for the three and nine month periods ended
August 31, 1998 and 1997.
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<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
It should be noted that this 10-Q 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 Registrant. Actual
results could differ materially from those contemplated by such statements.
Liquidity and Capital Resources
- -------------------------------
Cash on hand as of August 31, 1998 is $547,978, an increase of $99,080 from year
ended November 30, 1997. The increase in cash can primarily be attributed to
substantial termination fees received from a prior major tenant at Jackson
Industrial during the second quarter of 1998. Cash produced from operating
activities for the nine months ended August 31, 1998 was $448,145 and was used
to fund capital additions of $55,187 and make payments on mortgage notes of
$293,878. The Registrant expects the properties to provide adequate cash flow
from operations to fund anticipated capital expenditures during the fourth
quarter of 1998. The anticipated capital expenditures by property are as
follows:
Leasing Capital Other Capital Total
--------------- ------------- -----
Park Plaza I & II $ 8,034 $ 0 $ 8,034
Maple Tree Shopping Center 8,300 20,500 28,800
Jackson Industrial 34,192 25,000 59,192
Morenci Professional Park 0 0 0
------- ------- -------
$50,526 $45,500 $96,026
======= ======= =======
Leasing Capital at Park Plaza I & II, Maple Tree Shopping Center and Jackson
Industrial will fund tenant alterations and lease commissions for both new and
renewal tenants. Other Capital at Maple Tree Shopping Center will be for the
addition of a new ground sign. Other Capital at Jackson Industrial will be for
separating suite utilities.
The first mortgage debt on Morenci Professional Park and Park Plaza I & II have
maturity dates of October 2005 and January 2004, respectively. The first
mortgage on Jackson Industrial and Maple Tree Shopping Center expire in November
2000 and July 2009, respectively. The second mortgages secured by Park Plaza I &
II, Morenci Professional Park and Maple Tree Shopping Center were extended in
August 1998 and will expire in February 1999. The Registrant anticipates the
lender will continue to renew these loans. The interest rate on these two second
mortgages is the current prime rate plus 1.5%. The interest rate on this debt as
of August 31, 1998, was 10%. The balance of the second mortgage debt on Park
Plaza I & II and Morenci Professional Park as of August 31, 1998, is $221,066.
The balance of the second mortgage debt on Maple Tree Shopping Center as of
August 31, 1998, is $248,988.
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
August 31, 1998 and 1997 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
---------- --------------- ---------- ----------
1998
----
Revenues $ 73,866 $ 142,664 $ 122,315 $ 139,399
Expenses 299,879 115,942 76,649 114,892
--------- --------- --------- ---------
Net (Loss) Income $(226,013) $ 26,722 $ 45,666 $ 24,507
========= ========= ========= =========
1997
----
Revenues $ 210,253 $ 139,475 $ 120,842 $ 127,971
Expenses 218,044 116,262 80,095 120,619
--------- --------- --------- ---------
Net (Loss) Income $ (7,791) $ 23,213 $ 40,747 $ 7,352
========= ========= ========= =========
The operating results at Jackson Industrial show a significant decrease in
revenue when comparing the quarter ended August 31, 1998 to the quarter ended
August 31, 1997. This decrease of $136,387 is primarily due to a former major
tenant vacating during second quarter 1998, which in third quarter 1997 this
tenant accounted for $145,000 of the quarterly income. Expenses increased
$81,835 when comparing the two quarters. This increase was primarily due to
payments made relating to the rehabilitation of the above mentioned now vacant
space in the amount of approximately $92,000.
At Maple Tree Shopping Center, revenues increased when comparing the two years.
This increase of $3,189 is due to slight increases in both rental and tax
income. Expenses for the quarter ended August 31, 1998, remained consistent when
compared to the quarter ended August 31, 1997.
Revenues at Park Plaza I & II were relatively stable when comparing quarter
ended August 31, 1998 to 1997. Expenses decreased when comparing the two
quarters by $3,446 due mainly to a slight decrease in interest, depreciation,
and amortization expenses.
The results of operations at Morenci Professional Park shows that the property's
operations improved when comparing the third quarters from 1998 to 1997.
Revenues increased $11,428 due to increases in rental income ($6,900), common
area maintenance income ($2,250), and miscellaneous income ($3,100). These
increases were partially offset by an increase in bad debt expense of ($1,250).
The increase in rent can be attributed to an increase in occupancy when compared
to the level at August 31, 1997. Expenses decreased $5,727 due primarily to
decreases in repairs and maintenance related expenses.
The occupancy levels of the Registrant's properties at August 31, 1998, 1997 and
1996 are as follows:
Occupancy levels as of August 31,
Property 1998 1997 1996
-------- ---- ---- ----
Park Plaza I & II 98% 98% 100%
Morenci Professional Park 94% 91% 68%
Maple Tree Shopping Center 100% 100% 100%
Jackson Industrial 39% 100% 100%
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<PAGE>
At Park Plaza I & II, occupancy during the quarter increased from 96% at the
beginning of the quarter to 98% at the quarter's end. Leasing activity consisted
of the renewal of one tenant occupying 2,340 square feet, the signing of a lease
with one tenant for 3,600 square feet, and one tenant vacated 2,340 square feet.
At Park Plaza I & II no tenant occupies more than 10% of the available space.
At Morenci Professional Park, leasing activity was brisk during the third
quarter. The occupancy increased from 93% to 94% at the quarter's end. Leasing
activity consisted of the Registrant entering into new leases with four new
tenants for 4,800 square feet, renewing four tenants in 9,600 square feet, while
two tenants in 3,600 square feet vacated their spaces. No tenant occupies more
than 10% of the available space.
At Maple Tree Shopping Center, occupancy remained at 100% and there was no
leasing activity during the quarter. The property has two major tenants who
occupy approximately 18% and 42% of the available space with lease expirations
of April 30, 2000 and July 31, 1999, respectively.
Jackson Industrial remains 39% occupied during the quarter. As previously
indicated, one tenant occupying 61% of the space vacated in the spring of 1998.
The Registrant has refurbished the space for re-leasing and hired a local
brokerage firm to market the property. There has been interest from several
prospective tenants and the Registrant is currently working to try to consummate
leases with one or more of these prospects. It is anticipated that this space
will be broken up into two or three spaces for new tenants. The other tenant
occupying 39% of the available space has a lease which expires July 31 of the
year 2002.
Year 2000 Issues
- ----------------
The Registrant believes that the impact of the year 2000 will not cause the
Registrant to incur a future expense that will have a material impact of 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 crucial to the management company's
business are in process of being updated and the third party vendor anticipates
compliance by the end of 1998.
1998 Comparisons
- ----------------
Revenues for the quarter ended August 31, 1998 and 1997 are $471,262 and
606,313, respectively. For the nine month period ended August 31, 1998 and 1997
revenues are $1,936,036 and $1,790,096, respectively. For the quarter ended,
revenues decreased $135,051 when comparing August 31, 1998 to 1997 and for the
nine month period ended revenues increased $145,940 when compared to prior year.
The decrease in consolidated revenues for the quarter is primarily due to the
lack of rental income received attributable to the vacancy of a former major
tenant at Jackson Industrial. The amount of income normally reflected from this
tenant during a three month period is $145,000. The increase in revenues for the
nine month period is primarily due to the termination fees received at Jackson
Industrial during the 2nd quarter of 1998, related to the same former tenant.
As of August 31, 1998 and 1997 consolidated expenses for the quarter ended were
$625,706 and $559,263, respectively. For the nine month period ended August 31,
1998 and 1997 consolidated expenses were $1,883,312 and $1,750,072,
respectively. For the quarter ended, expenses increased $66,443. This increase
can primarily be attributed to increases in vacancy expense ($91,236),
professional services ($6,968), and payroll ($44,311). These increases were
-8-
<PAGE>
partially offset by decreases in interest ($6,719), depreciation and
amortization ($6,732), management fees ($6,014), parking lot ($6,625), and
repairs and maintenance ($8,451). The substantial increase in vacancy expense is
due to the Jackson Industrial rehabilitation of recently vacated space. For the
nine month period ending August 31, 1998, expenses increased $133,240. This was
primarily due to increases in depreciation and amortization ($22,602),
management fees ($8,489), repairs and maintenance ($9,715), and vacancy expense
($179,311). These increases were partially offset by decreases in interest
expense ($39,855), parking lot ($9,714), professional services ($32,365), and
other operating expenses ($5,409). The increase in depreciation and amortization
is due to the additional amortization necessary at Jackson Industrial in
relation to the early termination of a major tenant. The increase in vacancy
expense can be attributed to additional expenses incurred at Jackson Industrial,
as mentioned previously.
1997 Comparisons
- ----------------
Revenues for the quarter ended August 31, 1997 and 1996 are $606,313 and
$571,056, respectively. For the nine month period ended August 31, 1997 and
1996, revenues are $1,790,096 and $1,692,485, respectively. For the quarter
ended August 31, 1997, revenues increased $35,257 when compared to the prior
year and increased $97,611 when comparing the nine month period ended August 31,
1997 to the prior year. The increase in revenues is mainly due to the increase
in rental income at Morenci Professional Park as a result of the increase in
occupancy.
Consolidated expenses for the quarter ended August 31, 1997 and 1996, were
$559,263 and $547,089, respectively. Consolidated expenses increased $12,174
when comparing the quarter ended August 31, 1997 to the prior period.
Consolidated expenses for the nine months ended August 31,1997 and August 31,
1996, were $1,750,072 and $1,735,182, respectively. For the quarter ended August
31, 1997, expenses increased $12,174 due mainly to an increase in professional
services ($6,042) and parking lot repairs ($5,603). For the nine months ended
August 31, 1997, expenses increased $14,897 when compared to the similar period
of the prior year. This increase in expenses was a result of an increase in
repairs and maintenance ($20,437) and professional services ($29,183) and
payroll costs ($7,432), offset by decreases in interest ($28,321) and vacancy
expense ($8,535).
Inflation
- ---------
The effects of inflation did not have material impact upon the Registrant's
operations in fiscal year 1997 and are not expected to materially affect the
Registrant's operations in 1998.
-9-
<PAGE>
PART II. OTHER INFORMATION
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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: October 15, 1998 NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
----------------------------
By: NOONEY INVESTORS, INC.
General Partner
By: /s/ Gregory J. Nooney, Jr.
-----------------------------------
Gregory J. Nooney, Jr.
Chairman
By: /s/ Patricia A. Nooney
-----------------------------------
Patricia A. Nooney
Senior Vice President and Secretary
-10-
<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)
-11-
<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> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 547,978
<SECURITIES> 0
<RECEIVABLES> 91,070
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 818,696
<PP&E> 15,980,279
<DEPRECIATION> 9,106,086
<TOTAL-ASSETS> 7,750,755
<CURRENT-LIABILITIES> 477,244
<BONDS> 7,339,188
<COMMON> 0
0
0
<OTHER-SE> (149,034)
<TOTAL-LIABILITY-AND-EQUITY> 7,750,755
<SALES> 1,931,072
<TOTAL-REVENUES> 1,936,036
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,366,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 517,155
<INCOME-PRETAX> 52,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,724
<EPS-PRIMARY> 4.35
<EPS-DILUTED> 0
</TABLE>
