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, 1999
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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.)
One Memorial Drive, 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 ___.
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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, 2000, 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
issued and outstanding on February 1, 2000, excluding the number of units
beneficially owned 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 other
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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PART I
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ITEM 1: BUSINESS
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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 Professional
Park 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 American Spectrum Midwest
(formerly Nooney, Inc.), an affiliate of the General Partners.
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CGS Real Estate Company, Inc. ("CGS"), an affiliate of the corporate general
partner of the Registrant, is in the process of developing a plan pursuant to
which the properties owned by the Registrant would be combined with the
properties of other real estate partnerships managed by CGS and its affiliates.
These limited partnerships own office properties, industrial properties,
shopping centers, and residential apartment properties. It is expected that the
acquiror would in the future qualify as a real estate investment trust. Limited
partners would receive shares of common stock in the acquiror which would be
listed on a national securities exchange or the NASDAQ national market system.
The Registrant's participation in this plan will require the consent of its
limited partners. The plan and the benefits and risks thereof will be described
in detail in a registration statement filed under the Securities Act of 1933 and
solicitation material to be provided to limited partners in connection with the
solicitation of the consent of the limited partners.
The plan described above is in the preliminary stages and there can be no
assurances that such plan will be consummated.
ITEM 2: PROPERTIES
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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, 1999.
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 98% leased by 27 tenants
at November 30, 1999.
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 92% leased by
48 tenants at November 30, 1999.
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
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square feet. The purchase price of Jackson Warehouse was $6,089,929. Jackson
Warehouse was 61% leased by 2 tenants at November 30, 1999.
Reference is made to Note 3 to Notes to Financial Statements filed herewith as
Exhibit 99.3 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.
The following table sets forth certain information as of November 30, 1999,
relating to the properties owned by the Registrant.
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
TOTAL EFFECTIVE PER- PRINCIPAL TENANTS
SQUARE ANNUALIZED BASE RENT PER CENT OVER 10% OF PROPERTY BASE RENT LEASE
PROPERTY FEET BASE RENT SQUARE FOOT LEASED REVENUES (%) EXPIRATION
- -------- ------ ---------- ------------- ------ ------------------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Jackson Warehouse 320,000 $ 466,200 $2.41 61% Von Duprin, Inc. (43%) 2001
Paper Manufacturers (57%) 2002
Morenci 105,600 $ 421,380 $4.33 92% None
Maple Tree 72,000 $ 481,833 $6.68 100% Schnucks Super Markets (31%)* 2004
Super X Drugs (10%)** 2005
Park Plaza 95,000 $ 518,865 $5.55 98% TRC Corp. (11%) 2004
US Miniature Lamp, Inc. (10%) 2001
</TABLE>
* Space subleased to DeBasio Furniture
** Space subleased to Medicine & More
ITEM 3: LEGAL PROCEEDINGS
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The Registrant is not a party to any material pending legal proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of security holders during the fourth
quarter of fiscal 1999.
PART II
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ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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As of February 1, 2000, there were 889 record holders of units of Limited
Partnership Interest 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 1998
or fiscal 1999.
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ITEM 6: SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
Years Ended November 30,
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1999 1998 1997 1996 1995
(Not covered by independent auditors' report)
<S> <C> <C> <C> <C> <C>
Rental and other income $ 2,150,405 $ 2,417,980 $ 2,424,206 $ 2,301,696 $ 2,331,934
Net income (loss) (158,010) (59,425) 88,364 16,926 54,444
Data per limited partnership unit:
Net income (loss) (13.04) (4.90) 7.29 1.40 4.49
Weighted average limited partnership units outstanding 12,000 12,000 12,000 12,000 12,000
At year-end:
Total assets 9,427,232 7,574,604 7,906,122 8,354,094 8,440,165
Investment property - net 6,439,039 6,833,226 7,210,295 7,459,116 7,515,411
Mortgage notes payable 9,387,057 7,236,825 7,633,066 7,999,107 8,331,643
Deficiency in assets (419,193) (261,183) (201,758) (290,122) (307,048)
See Item 7: Management's Discussion and Analysis for discussion of comparability of items.
</TABLE>
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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Liquidity and Capital Resources
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Cash reserves as of November 30, 1999, are $2,572,203, an increase of $2,086,047
from year ended November 30, 1998. The increase in cash can primarily be
attributed to the new financing obtained for three of the Registrant's
properties. The previous mortgage indebtedness was paid in full with the
proceeds of the new mortgage agreements. The utilization of the remaining
portion of the proceeds from the refinancing is being reviewed by the general
partners to provide for future anticipated needs of the Registrant. The
Registrant plans to maintain adequate cash reserves and to fund anticipated
capital expenditures in 2000. The anticipated capital expenditures by property
are:
Other Capital Leasing Capital Total
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Park Plaza $ 82,149 $ 29,090 $111,239
Morenci 140,698 27,072 167,770
Maple Tree 370,800 -0- 370,800
Jackson Warehouse 15,000 244,608 259,608
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$608,647 $300,770 $909,417
Other capital at Park Plaza, Morenci and Maple Tree will be funded by the cash
reserves for such improvements from the new loan agreements. Other capital at
Jackson Warehouse will be funded from operations. Leasing capital at all four of
the Registrant's properties will be funded from operations. Jackson Warehouse's
future funding for leasing capital is based upon anticipated higher occupancy
levels.
At all four of the Registrant's properties, leasing capital has been budgeted to
fund tenant alternations and lease commissions for new and renewal leases to be
signed during the year. At Morenci the Registrant has budgeted other capital for
upgrading the exterior lighting, asphalt overlay of the east section of the lot,
replacement of concrete sidewalks, ADA (American Disabilities Act) compliance,
and asphalt sealing. At Park Plaza the Registrant has budgeted other capital for
replacement of the porch canopies, roof repairs, exterior masonry and painting,
and parking lot sealing and striping. At Maple Tree Shopping Center other
capital has been budgeted for replacement of a section of the roof, overlaying
the rear and main drives of the center, ADA (American Disabilities Act)
compliance, and canopy renovation. At Jackson Warehouse other capital has been
budgeted for separation of utilities and building of a new entrance in the event
the vacant space needs to be further subdivided.
On November 30, 1999, the Registrant refinanced the debt on three of its
properties. A new note with a balance of $5,721,083 secured by Park Plaza I and
II, Morenci, and Maple Tree was obtained. In addition, the lender held back
$628,917 for specified capital improvements. This money will be drawn upon by
the Registrant as needed. The refinancing will result in a total mortgage for
the above-mentioned properties of $6,350,000. The note bears interest at a rate
of 9.01% per annum and calls for monthly installments of $57,348 including both
interest and principal, through December 2004. The first mortgage debt on
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Jackson Warehouse has a balance due of $3,665,974 and a maturity date of
November 2000. The interest rate on the debt is 9.31%. The Registrant intends to
renew the Jackson note payable under similar terms.
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.
Results of Operations
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The results of operations for the Registrant's properties for the years ended
November 30, 1999, 1998, and 1997 are detailed in the schedule below. Expenses
of the Registrant are excluded.
Jackson
Warehouse Maple Tree Park Plaza Morenci
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1999
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Revenues $ 486,226 $ 579,848 $ 518,807 $ 528,030
Expenses 817,433 499,735 304,485 503,551
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Net (Loss) Income $ (331,207) $ 80,113 $ 214,322 $ 24,479
=========== =========== =========== ===========
1998
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Revenues $ 835,944 $ 591,382 $ 484,736 $ 530,493
Expenses 1,130,028 469,852 286,508 455,275
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Net (Loss) Income $ (294,084) $ 121,530 $ 198,228 $ 75,218
=========== =========== =========== ===========
1997
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Revenues $ 867,895 $ 564,370 $ 484,872 $ 505,086
Expenses 861,781 465,257 330,272 522,937
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Net Income (Loss) $ 6,114 $ 99,113 $ 154,600 $ (17,851)
=========== =========== =========== ===========
1999 Property Comparisons
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At Jackson Warehouse, for the year ended 1999 revenues decreased compared to
1998 due to a decrease in base rental revenues of $181,920 as a result of the
consistent lower occupancy level than that reflected for the majority of 1998. A
decrease was also reflected in miscellaneous income ($161,522) due to
termination fees received only in 1998. Expenses decreased substantially
($312,595) due to decreases in repairs and maintenance-building ($37,000), real
estate tax ($19,917), management fees ($17,486), vacancy expenses ($186,475),
interest expense ($39,408), and amortization expense ($31,203). These decreases
were partially offset by increases in insurance ($3,837), payroll ($2,490),
legal fees ($5,500), and various other operating expenses ($7,067). The decrease
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in repairs and maintenance-building can be attributed to preventive roof repairs
done in 1998, not necessary in 1999. Vacancy expense was higher in 1998 due to
the cost associated with the clean up and refurbishing of the significant space
vacated in 1998. Management fee expense is lower when compared to that of the
prior year due to related lower revenues. The decrease in interest expense can
be attributed to declining principal balances.
At Maple Tree, revenues decreased ($11,534) due to decreases in percentage rent
($9,358), common area maintenance reimbursement ($4,442), and real estate tax
revenues ($4,601). These decreases were partially offset by an increase in base
rental revenue ($7,314). Expenses at Maple Tree increased ($29,883) when
compared to year-end 1998. Increases were reflected in landscaping expense
($5,806), real estate tax ($10,892), and interest expense ($13,846). The
increase in real estate tax expense is due to higher annual taxes in 1999.
Interest penalties to pay off old mortgages prior to obtaining the new mortgage
resulted in the increased interest expense.
At Park Plaza I and II revenues increased $34,071 when compared to the prior
year end. Base rental revenues increased ($23,319), and miscellaneous revenues
increased in the amount of ($14,252). These increases were partially offset by
decreases in common area maintenance and real estate tax revenues. Expenses
increased $17,977 due to snow removal ($15,674), real estate tax expense
($14,383), and other operating expenses ($1,049). These increases were partially
offset by decreases in repairs and maintenance-electrical ($7,475), and vacancy
related expenses ($5,654). Real estate tax expense was lower in 1998 due to a
refund received and recorded in 1998.
At Morenci Professional Park revenues decreased $2,463 when comparing the year
ended 1999 to the year ended 1998. The decrease in revenues is primarily due to
a decrease in common area maintenance reimbursement revenues ($10,090),
partially offset by an increase in base rental revenue ($7,941). Expenses
increased $48,276 primarily due to increases reflected in plumbing repairs
($6,200), repairs and maintenance electrical service ($3,608), snow removal
($14,951), real estate tax expense ($13,593), and various other operating
expenses ($9,924). The increase in the real estate tax expense can be attributed
to higher annual taxes billed to the property in 1999.
The occupancy levels at November 30 are as follows:
Occupancy rates at November 30
1999 1998 1997
---- ---- ----
Park Plaza 98% 95% 97%
Morenci 92% 94% 93%
Maple Tree 100% 100% 100%
Jackson Warehouse 61% 61% 100%
For the year ended November 30, 1999, Jackson Warehouse had two tenants who
leased 61% of the available space. One of the tenants occupied 40% of the space
on a lease which expires in July 2002. The other tenant occupied 21% of the
space on a lease which expires in November 2001. There was no leasing activity
in 1999. Effective December 1, 1999, the Registrant negotiated a lease amendment
through February 29, 2000 for 125,464 square feet (39%) with the tenant who had
previously occupied 21% of the available space. The tenant will be occupying
additional space starting in March 2000 (at which time the tenant will occupy
51% of the available space). The Registrant has signed a short-term lease with a
new tenant who will occupy 56,800 square feet (18%) from December 1, 1999,
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through February 29, 2000. As of March 2000, when additional space will become
available due to the expiration of the short-term lease, the tenant whose lease
amendment terminates on February 29, 2000, will expand and occupy an additional
39,736 square feet. This will leave the property with a 9% vacancy.
Maple Tree remained 100% occupied during the fourth quarter of 1999. During the
quarter, two tenants signed new leases for 2,700 square feet, and two tenants
vacated a total of 2,700 square feet. During all of 1999, the Registrant signed
three new leases for 5,340 square feet, three tenants renewed their leases for
36,848 square feet, and three tenants vacated 5,340 square feet. The center has
two major tenants who occupy 18% and 42% of the available space. Their leases
have expiration dates of April 30, 2005 and July 31, 2004, respectively.
Occupancy at Park Plaza was 98% at the end of the fourth quarter of 1999. During
the fourth quarter, two tenants signed new leases for 12,600 square feet;and one
tenant renewed its lease for 3,600 square feet. During 1999 four tenants signed
new leases for 17,400 square feet; five tenants renewed their leases for 18,180
square feet; and two tenants vacated 10,640 square feet. At Park Plaza one
tenant occupies 10% of the total space, with a lease expiring August 2004.
Occupancy at Morenci Professional Park was 92% as of November 30, 1999. During
the fourth quarter, one tenant signed a new lease for 1,200 square feet; two
tenants renewed their leases for 3,600 square feet; and two tenants vacated
4,800 square feet. During all of 1999, nine tenants signed new leases for 12,000
square feet; four tenants renewed their leases for 12,000 square feet; and six
tenants vacated 14,400 square feet. No tenant occupies more than 10% of the
total space.
The Registrant reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of a property may not
be recoverable. The Registrant considers a history of operating losses or a
change in occupancy to be primary indicators of potential impairment. The
Registrant deems the Property to be impaired if a forecast of undiscounted
future operating cash flows directly related to the Property, including disposal
value, if any, is less than its carrying amount. If the Property is determined
to be impaired, the loss is measured as the amount by which the carrying amount
of the Property exceeds its fair value. Fair value is based on quoted market
prices in active markets, if available. If quoted market prices are not
available, an estimate of fair value is based on the best information available,
including prices for similar properties or the results of valuation techniques
such as discounting estimated future cash flows. Considerable management
judgment is necessary to estimate fair value. Accordingly, actual results could
vary significantly from such estimates.
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Year 2000 issues
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Information Technology Systems
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The Registrant did not experience any information technology hardware or
software disruptions or failure as a result of the Year 2000. Subsequent to
December 31, 1999, the Registrant's "IT" systems have continued to operate, as
normally, at the management office and all four of the Registrant's properties.
Non-Information Technology Systems
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All non-information systems at the Registrant's four properties did not
experience any disruptions or failures as a result of the Year 2000. These
systems included elevators, heating, ventilating, air conditioning (HVAC)
systems, and locks. These and other like systems continue to operate as normal
in the year 2000.
The Registrant did not separately track internal costs related to the Year 2000
issue. The changing of the century did not have a material impact on the
Registrant's financial condition or results of its operations.
Material Third Parties' Systems Failures
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The Registrant did not experience any material impact related to third party
system failures for the Year 2000 issue at any of its four properties. Payments
from tenants did not appear to be delayed due to the Year 2000 conversion. The
Registrant remains confident that no third party material issues will arise in
the future.
1999 Comparisons
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For the year ended November 30, 1999, consolidated revenues were $2,150,447
compared to $2,423,480 for the year ended November 30, 1998. The decrease in
revenues of $273,033 can primarily be attributed to the loss of revenues at
Jackson Warehouse due to lower occupancy level throughout the year when compared
to that of the prior year.
Consolidated expenses for the year ended November 30, 1999, were $2,280,827 as
compared to $2,482,905 for the year ended November 30, 1998. Consolidated
expenses decreased $202,078. The decrease is primarily attributable to decreases
in vacancy and other expenses at the Jackson Warehouse. In 1998, a significant
amount of expense was incurred to prepare the property for re-leasing after the
vacating of a former major tenant. During 1999 this expense was not necessary
since the space was rehabilitated in 1998. Net loss for the year ended November
30, 1999, was $158,010 compared to a net loss of $59,425 for the year ended
November 30, 1998. This decrease of $98,585 resulted in a net loss per
partnership unit of $13.04 compared to net loss per limited partnership unit of
$4.90 for the year ended November 30, 1998. Net cash used in operating
activities for the year ended November 30, 1999 was ($4,207). The Registrant was
able to fund capital expenditures of $59,978 and make payments on previously
existing notes payable of $395,283 during 1999.
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1998 Comparisons
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For the year ended November 30, 1998, consolidated revenues were $2,423,480
compared to $2,434,123 for the year ended November 30, 1997. On a consolidated
basis, revenues were fairly steady, decreasing $10,643 or less than 1%.
Consolidated expenses for the year ended November 30,1998, were $2,482,905 as
compared to $2,345,759 for the year ended November 30, 1997. Consolidated
expenses increased 6% or $137,146. The increase is mainly attributable to an
increase in vacancy expense at the Jackson Warehouse. This expense was due to
the clean up of the interior of the space vacated by the large tenant during the
year and prepare this space and the exterior of the building for re-leasing. Net
income for the year ended November 30, 1998, was a net loss for the year of
$59,425 as compared to net income of $88,364 for the year ended November 30,
1997. This decrease resulted in a net loss per limited partnership unit of $4.90
compared to net income per limited partnership unit of $7.29 for the year ended
November 30, 1997. Cash flow provided by operating activities for the year ended
November 30, 1998 was $543,644. The Registrant was able to fund capital
expenditures of $110,145 and reduce loan balances by $396,241 during 1998.
Inflation
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The effects of inflation did not have a material impact upon the Registrant's
operation in fiscal years 1997, 1998, and l999, and are not expected to
materially affect the Registrant's operation in 2000.
Interest Rates
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Interest rates on floating rate debt fluctuated throughout 1999. All debt of the
Registrant is now at a fixed rate, therefore, future increases in the prime
interest rate will not affect operations of the Registrant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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The Registrant considered the provision of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments". The
Registrant had no holdings of derivative financial or commodity instruments at
November 30, 1999. A review of the Registrant's other financial instruments and
risk exposures at that date revealed that the Registrant had no exposure to
interest rate risk due to the payoff of the second mortgage debt. Interest rates
are not anticipated to affect the Registrant's financial position, results of
operations or cash flows.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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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
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FINANCIAL DISCLOSURE
--------------------
None
PART III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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The Registrant has two General Partners. The background and experience of the
General Partners are as follows:
The General Partner of the Registrant responsible for all aspects of the
Registrant's operations is Nooney Investors, Inc., a Missouri corporation.
Nooney Investors, Inc., a wholly-owned subsidiary of S-P Properties, Inc., was
formed in June 1979 for the purpose of being a general and/or limited partner in
the Registrant and other limited partnerships.
John J. Nooney is a Special General Partner of the Partnership and as such, does
not exercise control of the affairs of the Partnership.
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.
On October 31, 1997, Nooney Company sold its wholly-owned subsidiary, Nooney
Investors, Inc., the corporate general partner of the Registrant to S-P
Properties, Inc., a California corporation, which in turn is a wholly-owned
subsidiary of CGS, a Texas corporation. Simultaneously, Gregory J. Nooney, Jr.,
an individual general partner and PAN, Inc., a corporate general partner, sold
their economic interests in the Registrant 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
-13-
<PAGE>
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 l999, 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%
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, which is located at
4457 Willow Road, Suite 102, Pleasanton, California 94588. Voting and
dispositive power is exercised on behalf of each reporting person by its general
partner.
Limited CGS Real Estate Company 648 Units 5.4%
Partnership
Interests
CGS is located at 2424 S.E. Bristol Street, Newport Beach, California 92660.
-14-
<PAGE>
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.
American Spectrum Midwest (formerly Nooney, Inc.), the manager of the
Registrant's properties, is a wholly-owned subsidiary of CGS, an affiliate of
the General Partner. American Spectrum Midwest (formerly Nooney, Inc.) is
entitled to receive monthly compensation from the Registrant for property
management and leasing services, plus administrative expenses. During fiscal
1999 the Registrant paid property management fees of $105,322 to American
Spectrum Midwest (formerly Nooney, Inc.) and $30,000 as reimbursement for
indirect expenses incurred in connection with management of the Registrant.
See Item 11 above for a discussion of cash distributions paid to the General
Partners during fiscal l999.
(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 1999 in connection with various transactions.
(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
During the last quarter of the period covered by this report, the Registrant
filed no reports on Form 8-K.
(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.
Nooney Investors, Inc.
General Partner
Date: February 28, 2000 By:/s/ William J. Carden
----------------------------- -----------------------------------------
William J. Carden
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: February 28, 2000 By:/s/ William J. Carden
----------------------------- -----------------------------------------
William J. Carden
Chairman of the Board and
Chief Executive Officer
Date: February 28, 2000 By:/s/ Gregory J. Nooney, Jr.
----------------------------- -----------------------------------------
Gregory J. Nooney, Jr.
Director
Date: February 28, 2000 By:/s/ Thomas N. Thurber
----------------------------- -----------------------------------------
Thomas N. Thurber
Director
-17-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
Number Description Number
- ------- ----------- ------
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. (n/k/a
American Spectrum Midwest), 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
-18-
<PAGE>
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.
John J. Nooney
Limited Partnerships:
Nooney Income Fund Ltd., L.P.
Nooney Income Fund Ltd. II, L.P.
Companies:
None
-19-
<PAGE>
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, 1999 and 1998,
and the related statements of operations, deficiency in assets and cash flows
for each of the three years in the period ended November 30, 1999. 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, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended November 30, 1999 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
St. Louis, Missouri
February 4, 2000
-20-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
NOVEMBER 30, 1999 AND 1998
- --------------------------------------------------------------------------------
ASSETS 1999 1998
CASH AND CASH EQUIVALENTS $ 2,572,203 $ 486,156
ACCOUNTS RECEIVABLE - No allowance for doubtful
accounts considered necessary 120,110 119,039
PREPAID EXPENSES AND DEPOSITS 58,448 55,880
INVESTMENT PROPERTY:
Land 1,886,042 1,886,042
Buildings and improvements 14,187,855 14,137,031
------------ ------------
16,073,897 16,023,073
Less accumulated depreciation (9,634,858) (9,189,847)
------------ ------------
6,439,039 6,833,226
DEFERRED EXPENSES - At amortized cost 237,432 80,303
------------ ------------
TOTAL $ 9,427,232 $ 7,574,604
============ ============
LIABILITIES AND DEFICIENCY IN ASSETS
LIABILITIES:
Accounts payable and accrued expenses $ 359,278 $ 518,876
Refundable tenant deposits 100,090 80,086
Mortgage notes payable 9,387,057 7,236,825
------------ ------------
Total liabilities 9,846,425 7,835,787
DEFICIENCY IN ASSETS (419,193) (261,183)
------------ ------------
TOTAL $ 9,427,232 $ 7,574,604
============ ============
See notes to financial statements.
-21-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
1999 1998 1997
REVENUES:
Rental and other income $ 2,150,405 $ 2,417,980 $ 2,424,206
Interest 42 5,500 9,917
----------- ----------- -----------
Total revenues 2,150,447 2,423,480 2,434,123
----------- ----------- -----------
EXPENSES:
Interest 679,243 705,682 743,173
Depreciation and amortization 491,525 518,176 522,594
Real estate taxes 385,810 374,014 395,233
Repairs and maintenance 133,084 151,061 148,206
Property management fees - related
party 105,322 122,128 121,111
Other operating expenses (includes
$30,000 in each year to related
party) 513,473 611,844 415,442
----------- ----------- -----------
Total expenses 2,308,457 2,482,905 2,345,759
----------- ----------- -----------
NET INCOME (LOSS) $ (158,010) $ (59,425) $ 88,364
=========== =========== ===========
NET INCOME (LOSS) ALLOCATION:
General partners $ (1,580) $ (594) $ 884
Limited partners (156,430) (58,831) 87,480
LIMITED PARTNERSHIP DATA:
Net income (loss) per unit $ (13.04) $ (4.90) $ 7.29
=========== =========== ===========
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 DEFICIENCY IN ASSETS
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
Limited General
Partners Partners Total
BALANCE, DECEMBER 1, 1996 $(207,512) $ (82,610) $(290,122)
Net income 87,480 884 88,364
--------- --------- ---------
BALANCE, NOVEMBER 30, 1997 (120,032) (81,726) (201,758)
Net loss (58,831) (594) (59,425)
--------- --------- ---------
BALANCE, NOVEMBER 30, 1998 (178,863) (82,320) (261,183)
Net loss (156,430) (1,580) (158,010)
--------- --------- ---------
BALANCE, NOVEMBER 30, 1999 $(335,293) $ (83,900) $(419,193)
========= ========= =========
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, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (158,010) $ (59,425) $ 88,364
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 454,165 487,214 489,734
Amortization of deferred expenses 37,360 30,962 32,860
Changes in accounts affecting operations:
Accounts receivable (1,071) 8,376 19,863
Prepaid expenses and deposits (2,568) (9,934) 283
Deferred expenses (194,489) (37,697) (1,204)
Accounts payable and accrued expenses (159,598) 124,260 (178,044)
Refundable tenant deposits 20,004 (112) 7,749
----------- ----------- -----------
Net cash (used in) provided by
operating activities (4,207) 543,644 459,605
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Net additions to investment property (59,978) (110,145) (240,913)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage notes payable (395,283) (396,241) (366,041)
Proceeds from mortgage notes payable 5,721,083
Repayment of mortgage notes payable (3,175,568)
-----------
Net cash provided by (used in)
financing activities 2,150,232 (396,241) (366,041)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,086,047 37,258 (147,349)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 486,156 448,898 596,247
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,572,203 $ 486,156 $ 448,898
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the year
for interest $ 683,312 $ 701,613 $ 743,173
=========== =========== ===========
</TABLE>
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, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
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; two
office/warehouse complexes, a multi-tenant office and a warehouse all
located in Indianapolis, Indiana. These properties generated 27.4%, 25.0%,
24.6% and 23.0% of rental and other income, respectively, for the year
ended November 30, 1998.
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.
Prior to October 31, 1997, 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 for
the year ended November 30, 1997. Additionally, the Partnership paid
Nooney Krombach Company $27,500 in 1997 as reimbursement for management
services and indirect expenses in connection with the management of the
Partnership.
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
purchased the real estate management business of Nooney Krombach Company
and formed Nooney, Inc. to perform the management of the Partnership.
-25-
<PAGE>
In September 1999, Nooney, Inc. changed its name to American Spectrum
Midwest, Inc. and began doing business under the new name at that time.
Ownership remained unchanged. Property management fees paid to American
Spectrum Midwest, Inc. were $105,322, $122,128 and $11,341 for the years
ended November 30, 1999, 1998 and 1997, respectively. Additionally, the
Partnership paid American Spectrum Midwest, Inc. $30,000 in 1999 and 1998
and $2,500 in 1997 as reimbursement for management services and indirect
expenses in connection with the management of the Partnership and $63,500
in 1999 for loan refinancing fees related to the new mortgage notes
discussed in Note 3.
The Partnership considers all highly liquid debt instruments with a
maturity of three months or less at date of purchase to be cash
equivalents. Cash and cash equivalents include $100,090 and $80,086 of
restricted cash at November 30, 1999 and 1998, respectively. Restricted
cash represents deposits paid by tenants.
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. Rent concessions
represent revenue which is not yet due under the terms of the various
agreements. Accrued rent concessions included in accounts receivable were
$20,732 and $23,127 at November 30, 1999 and 1998, respectively.
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, 1999 and 1998 and the related
collateral book values consist of the following:
1999 1998
Maple Tree Shopping Center
- --------------------------
(Book value of $980,607 at November 30, 1999)
9.01%, due in monthly installments of $19,758,
including interest, to December 2004 $1,977,223 $ -
9.125%, due in monthly installments of $17,911,
including interest to 2009. Paid off on
November 30, 1999 1,454,324
Note payable to bank, principal due in monthly
installments of $1,208 plus interest at bank's
prime rate (8.5% at November 30, 1999) plus 1-1/2%.
Paid off on November 30, 1999 245,364
Park Plaza I & II Office/Warehouse Complex
- ------------------------------------------
(Book value of $817,431 at November 30, 1999)
9.01%, due in monthly installments of $18,214,
including interest, to December 2004 1,833,710
9.5%, due in monthly installments of $12,669,
including interest, to 2003. Paid off on
November 30, 1999 610,751
Morenci Professional Park
- -------------------------
(Book value of $1,455,227 at November 30, 1999)
9.01% due in monthly installments of $19,376,
including interest, to December 2004 1,910,150
10.25%, due in monthly installments of $15,682,
including interest, to 2005. Paid off on
November 30, 1999 929,636
Note payable to bank, principal due in monthly
installments of $1,111 plus interest at bank's
prime rate (8.5% at November 30, 1999) plus 1-1/2%.
Paid off on November 30, 1999 217,733
Jackson Industrial Park, Building A
- -----------------------------------
(Book value of $3,185,774 at November 30, 1999)
9.31%, due in monthly installments of $39,203,
including interest, to November 2000, when
remaining principal balance of $3,542,902 is due 3,665,974 3,779,017
---------- ----------
Total $9,387,057 $7,236,825
========== ==========
The Maple Tree, Park Plaza and Morenci notes that were repaid on November
30, 1999 were paid with the proceeds received upon refinancing the
properties with a new lender. Prepayment penalties related to the paid off
mortgage notes totaled $27,630 and were expensed in 1999.
Management intends to refinance the Jackson note payable under similar
terms by extending the due date.
-27-
<PAGE>
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:
2000 $3,845,999
2001 196,932
2002 215,427
2003 235,659
2004 257,791
Thereafter 4,635,249
----------
Total $9,387,057
==========
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
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, 1999 and 1998 are
summarized as follows:
1999 1998
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Mortgage Notes Payable $9,387,057 $9,357,000 $7,236,825 $7,438,000
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, 1999 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, 1999 are as follows:
2000 $1,743,000
2001 1,285,000
2002 694,000
2003 351,000
2004 193,000
Remainder 196,000
----------
Total $4,462,000
==========
-28-
<PAGE>
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 $231,000 for
the year ended November 30, 1999 ($260,000 for the year ended November 30,
1998 and $259,000 for the year ended November 30, 1997). Contingent
rentals were not significant for the years ended November 30, 1999, 1998
and 1997.
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
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
1999:
Net (loss) income $ (158,010) $ 72,833
Deficiency in assets (419,193) (1,181,414)
1998:
Net (loss) income $ (59,425) $ 139,813
Deficiency in assets (261,183) (1,254,247)
1997:
Net income $ 88,364 $ 386,375
Deficiency in assets (201,758) (1,394,060)
6. MAJOR TENANTS
A substantial amount of the Partnership's revenue in 1999 was derived from
one major tenant whose rentals amounted to approximately $265,000 or $12%.
A substantial amount of the Partnership's revenue in 1998 was derived from
two major tenants whose rentals amounted to approximately $582,000 and
$265,000 or 24% and 11%, respectively, of total revenues. Effective July
31, 1998, the Partnership lost the major tenant accounting for 24% of
total revenues. Effective November 23, 1998, approximately one-third of
the vacated space was filled by a new tenant.
-29-
<PAGE>
A substantial amount of the Partnership's revenue in 1997 was derived from
two major tenants whose rentals amounted to approximately $582,000 and
$257,250 or 24% and 11%, respectively, of total revenues.
7. BUSINESS SEGMENTS (IN THOUSANDS)
The Partnership has four reportable segments: Jackson "A" Industrial Park,
Maple Tree Shopping Center, Park Plaza Office Complex and Morenci
Professional Park. The Partnership's management evaluates performance of
each segment based on profit or loss from operations before allocation of
property writedowns, general and administrative expenses, unusual and
extraordinary items, and interest. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies (see Note 2).
(In thousands) 1999 1998 1997
REVENUES:
Jackson $ 486.2 $ 835.9 $ 867.9
Maple Tree 579.8 591.4 564.4
Park Plaza 518.8 484.7 484.9
Morenci 528.0 530.5 505.1
---------- ---------- ----------
$ 2,112.8 $ 2,442.5 $ 2,422.3
========== ========== ==========
OPERATING PROFIT (LOSS):
Jackson $ (331.2) $ (294.1) $ 6.1
Maple Tree 80.1 121.5 99.1
Park Plaza 214.3 198.2 154.6
Morenci 24.5 75.2 (17.9)
---------- ---------- ----------
$ (12.3) $ 100.8 $ 241.9
========== ========== ==========
CAPITAL EXPENDITURES:
Jackson $ 3.3 $ 2.7 $ 3.8
Maple Tree 14.8 45.3 54.2
Park Plaza 18.3 35.2 54.9
Morenci 23.6 26.9 128.0
---------- ---------- ----------
$ 60.0 $ 110.1 $ 240.9
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Jackson $ 222.4 $ 253.6 $ 238.7
Maple Tree 69.1 67.0 69.3
Park Plaza 66.7 66.7 75.9
Morenci 133.2 130.6 137.5
---------- ---------- ----------
$ 491.4 $ 517.9 $ 521.4
========== ========== ==========
ASSETS:
Jackson $ 3,238.4 $ 3,474.2
Maple Tree 1,152.4 1,133.2
-30-
<PAGE>
Park Plaza 900.3 885.2
Morenci 1,521.5 1,584.6
---------- ----------
$ 6,812.6 $ 7,077.2
========== ==========
Reconciliation of segment data to the Partnership's consolidated data
follow:
(In thousands) 1999 1998 1997
REVENUES:
Segments $ 2,112.8 $ 2,442.5 $ 2,422.3
Corporate and other 37.6 (24.5) 1.9
---------- ---------- ----------
$ 2,150.4 $ 2,418.0 $ 2,424.2
========== ========== ==========
NET INCOME (LOSS):
Segments operating profit (loss) $ (12.3) $ 100.8 $ 241.9
Other income (expense) 37.5 (19.1) 11.9
General and administrative expenses (183.2) (141.1) (165.4)
---------- ---------- ----------
$ (158.0) $ (59.4) $ 88.4
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Segments $ 491.4 $ 517.9 $ 521.4
Corporate and other 0.1 0.3 1.2
---------- ---------- ----------
$ 491.5 $ 518.2 $ 522.6
========== ========== ==========
ASSETS:
Segments $ 6,812.6 $ 7,077.2
Corporate and other 2,614.6 497.4
---------- ----------
$ 9,427.2 $ 7,574.6
========== ==========
* * * * * *
-31-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
<TABLE>
<CAPTION>
SCHEDULE - RECONCILIATION OF DEFICIENCY IN ASSETS
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------------------------------------------------------------
The reconciliation of deficiency in assets between financial statement and
income tax reporting is as follows:
1999 1998
--------------------------------------- ---------------------------------------
Limited General Limited General
Partners Partners Total Partners Partners Total
<S> <C> <C> <C> <C> <C> <C>
Balance per statement of deficiency in assets $ (335,293) $ (83,900) $ (419,193) $ (178,863) $ (82,320) $ (261,183)
Add:
Selling commissions and other offering
costs not deductible for income tax purposes 1,395,653 1,395,653 1,395,653 1,395,653
Prepaid rents included in income for income
tax purposes 7,959 80 8,039 12,226 123 12,349
Writedown of investment property not recognized
for income tax purposes 214,341 2,165 216,506 214,341 2,165 216,506
----------- ----------- ----------- ----------- ----------- -----------
1,282,660 (81,655) 1,201,005 1,443,357 (80,032) 1,363,325
Less:
Excess depreciation deducted for income tax
purposes 2,298,825 23,221 2,322,046 2,569,639 25,956 2,595,595
Rent concessions not recognized for income
tax purposes 20,525 207 20,732 (8,367) (85) (8,452)
Insurance premiums deducted for income
tax purposes 39,245 396 39,641 30,125 304 30,429
----------- ----------- ----------- ----------- ----------- -----------
Deficiency per tax return $(1,075,935) $ (105,479) $(1,181,414) $(1,148,040) $ (106,207) $(1,254,247)
=========== =========== =========== =========== =========== ===========
1997
----------------------------------------
Limited General
Partners Partners Total
Balance per statement of deficiency in assets $ (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
----------- ----------- -----------
Deficiency per tax return $(1,286,455) $ (107,605) $(1,394,060)
=========== =========== ===========
</TABLE>
-32-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
<TABLE>
<CAPTION>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
-------- -------- -------- --------
Costs
Initial Cost to Partnership Capitalized
------------------------------------- Subsequent
Buildings and to
Description Encumbrances Land Improvements Total Acquisition
<S> <C> <C> <C> <C> <C>
Maple Tree Shopping Center, Ellisville,
Missouri $ 1,977,223 $ 474,750 $ 2,709,303 $ 3,184,053 $ 490,845
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 1,833,710 182,335 2,228,828 2,411,163 225,198 (1)
Morenci Professional Park, Indianapolis,
Indiana 1,910,150 320,418 2,689,506 3,009,924 87,304 (2)
Jackson Industrial Park, Building A,
Indianapolis, Indiana 3,665,974 908,539 5,181,390 6,089,929 575,481
----------- ----------- ----------- ----------- -----------
Total $ 9,387,507 $ 1,886,042 $12,809,027 $14,695,069 $ 1,378,828
=========== =========== =========== =========== ===========
Column E
--------
Gross Amounts at Which
Carried at Close of Period
-------------------------------------
Buildings and
Land Improvements Total
Maple Tree Shopping Center, Ellisville,
Missouri $ 474,750 $ 3,200,148 $ 3,674,898
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 182,335 2,454,026 2,636,361
Morenci Professional Park, Indianapolis,
Indiana 320,418 2,776,810 3,097,228
Jackson Industrial Park, Building A,
Indianapolis, Indiana 908,539 5,756,871 6,665,410
----------- ----------- -----------
Total $ 1,886,042 $14,187,855 $16,073,897
=========== =========== ===========
</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 $ 2,694,291 1974 10/3/79 30 yrs.
Park Plaza I & II Office/Warehouse Complex,
Indianapolis, Indiana 1,818,930 1975, 1979 10/15/80 30 yrs.
Morenci Professional Park, Indianapolis,
Indiana 1,642,001 1975, 1979 3/27/81 30 yrs.
Jackson Industrial Park, Building A,
Indianapolis, Indiana 3,479,636 1976, 1980 3/27/81 30 yrs.
-----------
Total $ 9,634,858
===========
<FN>
(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.
</FN>
(Continued)
</TABLE>
-33-
<PAGE>
NOONEY REAL PROPERTY INVESTORS-TWO, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
YEARS ENDED NOVEMBER 30, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
(A) Reconciliation of amounts in Column E:
<S> <C> <C> <C>
Balance at beginning of period $ 16,023,073 $ 16,081,958 $ 15,851,109
Add - Cost of improvements 59,978 110,145 240,913
Less - Cost of disposals (9,154) (169,030) (10,064)
------------ ------------ ------------
Balance at end of period $ 16,073,897 $ 16,023,073 $ 16,081,958
============ ============ ============
(B) Reconciliation of amounts in Column F:
Balance at beginning of period $ 9,189,847 $ 8,871,663 $ 8,391,993
Add - Provision during the period 454,165 487,214 489,734
Less - Depreciation on disposals (9,154) (169,030) (10,064)
------------ ------------ ------------
Balance at end of period $ 9,634,858 $ 9,189,847 $ 8,871,663
============ ============ ============
(C) The aggregate cost of real estate
owned for federal income tax purposes $ 16,290,403 $ 16,239,579 $ 16,298,464
============ ============ ============
</TABLE>
(Concluded)
-34-
<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-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 2,572,203
<SECURITIES> 0
<RECEIVABLES> 120,110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,750,761
<PP&E> 16,073,897
<DEPRECIATION> 9,189,847
<TOTAL-ASSETS> 9,427,232
<CURRENT-LIABILITIES> 359,278
<BONDS> 9,387,057
<COMMON> 0
0
0
<OTHER-SE> (419,193)
<TOTAL-LIABILITY-AND-EQUITY> 9,427,232
<SALES> 2,150,405
<TOTAL-REVENUES> 2,150,447
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,629,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 679,243
<INCOME-PRETAX> (158,010)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (158,010)
<EPS-BASIC> (13.04)
<EPS-DILUTED> 0
</TABLE>
