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, 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
--------------------------------------------------
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.)
500 North Broadway, Suite 1200, St.Louis, MO 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
--- ---
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.
----------------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
BALANCE SHEETS
--------------
May 31, November 30,
1998 1997
(Unaudited)
------------ -----------
ASSETS:
Cash and cash equivalents $ 764,446 $ 448,898
Accounts receivable 73,705 127,415
Prepaid expenses and deposits 147,642 45,946
Investment property
Land 1,886,042 1,886,042
Buildings and improvements 14,137,004 14,195,916
------------ ------------
16,023,046 16,081,958
Less accumulated depreciation 9,025,770 8,871,663
------------ ------------
6,997,276 7,210,295
Deferred expenses-At amortized cost 62,842 73,568
------------ ------------
$ 8,045,911 $ 7,906,122
============ ============
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Accounts payable and accrued expenses $ 521,043 $ 394,616
Mortgage notes payable 7,439,317 7,633,066
Refundable tenant deposits 80,141 80,198
------------ ------------
8,040,501 8,107,880
Partners' Equity (Deficit) 5,410 (201,758)
------------ ------------
$ 8,045,911 $ 7,906,122
============ ============
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<TABLE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
----------------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY (DEFICIT)
-------------------------------------------------------
(UNAUDITED)
-----------
<CAPTION>
Three Months Ended Six Months Ended
May 31 May 31, May 31, May 31,
1998 1997 1998 1997
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 875,381 $ 595,093 $1,460,362 $ 1,179,828
Interest 3,702 526 4,411 3,956
--------- ----------- ---------- -----------
879,083 595,619 1,464,773 1,183,784
EXPENSES:
Interest 171,504 186,744 341,802 374,938
Depreciation and amortization 159,744 130,839 288,638 259,306
Real estate taxes 97,500 96,807 195,286 194,124
Property management fees paid to
Nooney Inc. 44,180 29,795 73,560 59,055
Reimbursement to Nooney Inc.
for partnership management
services and indirect expenses 7,500 7,500 15,000 15,000
Insurance 11,955 14,022 24,198 23,100
Parking Lot 16,693 14,432 26,158 25,147
Repairs & Maintenance 40,515 23,364 50,692 31,746
Office - General 8,346 8,800 18,409 16,842
Payroll 20,424 22,382 40,563 38,656
Professional Services 6,846 14,465 27,125 65,732
Vacancy Expense 91,855 10,197 108,880 20,797
Other operating expenses 15,308 15,753 47,294 66,367
--------- ----------- ---------- -----------
692,370 575,100 1,257,605 1,190,810
--------- ----------- ---------- -----------
NET INCOME (LOSS) $ 186,713 $ 20,519 $ 207,168 $ (7,026)
========= =========== ========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 15.41 $ 1.69 $ 17.09 $ (0.58)
========= =========== ========== ===========
PARTNERS' EQUITY (DEFICIT):
Beginning of Period $(181,303) $ (317,667) $ (201,758) $ (290,122)
Net Income (Loss) 186,713 20,519 207,168 (7,026)
--------- ----------- ---------- -----------
End of Period $ 5,410 $ (297,148) $ 5,410 $ (297,148)
========= =========== ========== ===========
<FN>
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
</FN>
</TABLE>
-3-
<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,
1998 1997
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 207,168 $ (7,026)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 288,638 259,306
Changes in assets and liabilities:
Decrease in accounts receivable 53,710 46,342
Increase in prepaid expenses and deposits (101,696) (77,936)
Increase in deferred expenses (4,017) (1,203)
Increase (Decrease) in accounts payable and accrued expenses 126,457 (101,022)
(Decrease) Increase in refundable tenant deposits (57) 7,326
--------- ---------
Total Adjustments 363,005 132,813
--------- ---------
Net cash from operating activities 570,173 125,787
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property (60,876) (94,729)
--------- ---------
Net cash used in investing activities (60,876) (94,729)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage notes payable (193,749) (177,238)
--------- ---------
Net cash used in financing activities (193,749) (177,238)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 315,548 (146,180)
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period 448,898 596,247
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 764,446 $ 450,067
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during period for interest $ 341,802 $ 374,938
========= =========
<FN>
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
</FN>
</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, 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
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, 1998 and for all periods presented have been made.
The results of operations for the three-month and six-month period ended May 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 six months
ended May 31, 1998 and 1997 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
-------------------------
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 the Registrant. Actual
results could differ materially from those contemplated by such statements.
Liquidity and Capital Resources
- -------------------------------
Cash on hand as of May 31, 1998 is $764,446, an increase of $315,548 from year
end November 30, 1997. The increase in cash flow can primarily be attributed to
termination and early lease cancellation fees paid by a major tenant for
vacating Jackson Industrial on March 31, 1998, instead of their original lease
end date of July 31, 1998. Total extra fees paid were $255,000. Cash produced
from operating activities for the six months ended May 31, 1998 was $570,173 and
was used to fund capital additions of $60,876 and make payments on mortgage
notes of $193,749. The Registrant plans to maintain adequate cash reserves and
fund capital expenditures from operations during the remainder of 1998. The
capital expenditures by property anticipated for the balance of 1998 are as
follows:
Leasing Capital Other Capital Total
--------------- ------------- -----
Park Plaza I & II $ 5,955 $ 0 $ 5,955
Morenci Professional Park 2,964 0 2,964
Maple Tree Shopping Center 6,000 20,500 26,500
Jackson Industrial 261,900 0 261,900
-------- -------- --------
$276,819 $ 20,500 $297,319
======== ======== ========
Leasing Capital at the Registrant's properties will fund tenant alterations and
lease commissions. The significant amount of leasing capital at Jackson
Industrial is due to renovating the vacated space to make it more marketable to
prospective tenants. Other Capital at Maple Tree Shopping Center will be for a
major asphalt overlay of the main drive.
The first mortgage debt on Morenci Professional Park and Park Plaza I and II
have maturity dates of October 2005 and January 2004, respectively. The first
mortgage debt on Jackson Industrial and Maple Tree Shopping Center will expire
in November 2000 and July 2009, respectively. The second mortgages secured by
Park Plaza I and II, Morenci Professional Park and Maple Tree Shopping Center
have been extended one year at a time and currently expire August 1998. The
Registrant believes the Lender will again renew these loans in August 1998. 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, 1998 was 10%. The balance of the
second mortgage debt on Park Plaza I and II and Morenci Professional Park as of
May 31, 1998 is $224,399. The balance of the second mortgage debt on Maple Tree
Shopping Center as of May 31, 1998 is $252,612.
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.
-6-
<PAGE>
Results of Property Operations
- ------------------------------
The results of operations of the Registrant's properties for the quarter ended
May 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 $473,966 $157,075 $119,672 $ 132,885
Expenses 364,395 118,259 84,872 107,387
-------- -------- -------- ---------
Net Income $109,571 $ 38,816 $ 34,800 $ 25,498
======== ======== ======== =========
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)
======== ======== ======== =========
At Jackson Industrial, revenues increased significantly when comparing the
quarter ended May 31, 1998 to the quarter ended May 31, 1997 due to termination
and early lease cancellation fees received from a vacating tenant. Expenses
increased $147,202 due to increases in management fees ($12,765) due to
additional income from the lease termination, repairs & maintenance - building
($22,300) for preventative roof repairs, vacancy expense ($83,902) due to the
refurbishment of the vacant suite and the resurfacing of the entrance lot, and
amortization expense ($31,312) also attributable to the write off of the former
tenant alteration costs as fully-amortized assets. These increases were
partially offset by a decrease in interest expense of ($2,469).
At Maple Tree Shopping Center revenues increased $19,439 when comparing the
quarter ending May 31, 1998 to the quarter ending May 31, 1997 due to increases
in common area maintenance income ($6,295), tax income ($1,419), rental income
($1,324), and bad debt recovery ($10,263). The debt recovery relates to amounts
due from a prior tenant in 1995. Expenses reflect a minimal decrease when
comparing quarters due to a decrease in overall repair & maintenance expenses.
At Park Plaza I and II, revenues decreased $3,084 when comparing the quarter
ended May 31, 1998 to the quarter ended May 31, 1997. The decrease in income can
primarily be attributable to slight decreases in common area maintenance and
real estate tax reimbursement income. Operating expenses at Park Plaza I and II
increased $2,638 when comparing quarter ended May 31, 1998 to May 31, 1997. This
minimal increase in expenses can be attributable to increases in operating
expenses, partially offset by decreases in interest, depreciation, and
amortization expenses.
At Morenci Professional Park, revenues increased $16,050 when comparing the
quarter ending May 31, 1998 to the quarter ending May 31, 1997. The increase in
income can primarily be attributed to increases in rental income ($12,260) and
common area maintenance income ($3,153) due to a higher overall occupancy level.
Expenses decreased $14,963 when comparing the two quarters. The decreases are
attributable to decreases in interest expense ($9,364) due to interest payments
on both the 1st mortgage and line of credit decreasing due to accumulated
principal payments and vacancy expenses ($5,324) due to higher occupancy.
-7-
<PAGE>
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, 1998, 1997
and 1996 are as follows:
Occupancy levels as of May 31,
Property 1998 1997 1996
-------- ---- ---- ----
Park Plaza I & II 96% 97% 98%
Morenci Professional Park 93% 86% 61%
Maple Tree Shopping Center 100% 100% 98%
Jackson Industrial 39% 100% 100%
Leasing activity for the quarter at Park Plaza I & II consisted of three new
leases being signed for 9,560 square feet, two tenants renewing their leases for
4,140 square feet and three tenants vacating 11,360 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
two new tenants leasing 2,400 square feet and one tenant vacating 1,200 square
feet. Occupancy increased from 86% at the quarter end 1997 to 93% at the quarter
end 1998. There are no major tenants occupying more than 10% of the space at
this property.
At Maple Tree Shopping Center occupancy remained at 100%. During the quarter,
three tenants renewed their leases for 4,700 square feet. Two tenants occupy 18%
and 42% of the available space with leases expiring April 30, 2000 and July 31,
1999, respectively.
At Jackson Industrial, one of the major tenants, who occupied 194,000 square
feet (61%), vacated during the quarter. Their lease expired July 31, 2000 and
the Registrant reached an early termination with this tenant so that it could
begin preparing the space for re-leasing. The vacating tenant paid all rent due
through July 31 plus an estimated cost for the utilities and other occupancy
costs through that date. The tenant vacated pursuant to a termination option
which they had exercised as reported in the prior quarter. In addition to paying
the rent due, a termination fee was also received. The Registrant is currently
preparing the space for re-leasing. The Registrant has hired a local brokerage
firm to market the property to new tenants. The other tenant occupies 39% of the
available space on a lease which expires July 31, 2002.
1998 Comparison
- ---------------
Revenues for the quarter ended May 31, 1998 and 1997 are $879,083 and $595,619,
respectively. For the six month period ended May 31, 1998 and 1997 revenues are
$1,464,773 and $1,183,784 respectively. For the quarter ended, revenues
increased $283,464 when comparing the two periods and for the six month period,
revenues increased $280,989. This increase in revenue can be attributed
primarily to the termination and early cancellation fees received at Jackson
Industrial, in addition to increases in common area maintenance income, bad debt
recovery, and interest income. As of May 31, 1998 and 1997 consolidated expenses
for the quarter ended were $692,366 and 575,100 respectively. For the six month
period ended May 31, 1998 and 1997, consolidated expenses were $1,257,605 and
$1,190,810 respectively. For the quarter ended, consolidated expenses increased
-8-
<PAGE>
$117,270 primarily due to increases in management fees ($14,385), repairs and
maintenance ($17,151), vacancy expenses ($81,658), and amortization ($32,662),
partially offset by decreases in interest expense ($15,240), depreciation
($3,757), and professional fees ($7,619). For the six month period ended May 31,
1998, compared to the same period in 1997, consolidated expenses increased
$66,795 due to increases in management fees ($14,505), repairs and maintenance
($18,946), vacancy expenses ($88,083), painting/decorating ($3,500), water/sewer
($4,409), and amortization ($31,899). These increases were partially offset by
decreases in interest expense ($33,136), snow removal ($21,062), professional
fees ($38,607), and depreciation ($2,567).
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.
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
- ---------------------------
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, 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
/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> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 764,446
<SECURITIES> 0
<RECEIVABLES> 73,705
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 985,793
<PP&E> 16,023,046
<DEPRECIATION> 9,025,770
<TOTAL-ASSETS> 8,045,911
<CURRENT-LIABILITIES> 521,043
<BONDS> 7,439,317
<COMMON> 0
0
0
<OTHER-SE> 5,410
<TOTAL-LIABILITY-AND-EQUITY> 8,045,911
<SALES> 875,381
<TOTAL-REVENUES> 879,083
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 520,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,504
<INCOME-PRETAX> 186,713
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,713
<EPS-PRIMARY> 15.41
<EPS-DILUTED> 0
</TABLE>
