<PAGE> 1
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 September 30, 1995
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 0-14360
NOONEY INCOME FUND LTD. II, L.P.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Missouri 43-1357693
- ------------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7701 Forsyth Boulevard, St. Louis, Missouri 63105
- ------------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-7700
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date .
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Page 1 of 11 Pages
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS:
- ------------------------------
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
--------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
BALANCE SHEETS
--------------
<CAPTION>
Sept. 30, December 31,
1995 1994
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 1,277,706 $ 1,118,033
Accounts receivable 117,804 108,832
Prepaid expenses 135,450 29,472
Investment property, at cost:
Land and improvements 1,674,836 1,674,836
Buildings 10,171,785 10,260,354
----------- -----------
11,846,621 11,935,190
Less accumulated depreciation 4,266,857 4,131,718
----------- -----------
7,579,764 7,803,472
Deferred expenses - At amortized cost 75,510 58,643
----------- -----------
$ 9,186,234 $ 9,118,452
=========== ===========
LIABILITIES AND PARTNERS' EQUITY:
Liabilities:
Accounts payable and accrued expenses $ 417,508 $ 365,747
Refundable tenant deposits 58,237 63,619
----------- -----------
475,745 429,366
Partners' Equity 8,710,489 8,689,086
----------- -----------
$ 9,186,234 $ 9,118,452
=========== ===========
</TABLE>
<PAGE> 3
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
--------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
---------------------------------------------
(UNAUDITED)
-----------
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 432,452 $ 447,847 $1,316,153 $1,332,743
Interest 7,329 6,461 24,415 16,480
----------- ----------- ------------ ------------
439,781 454,308 1,340,568 1,349,223
EXPENSES:
Depreciation and amortization 110,479 117,662 328,412 339,001
Real estate taxes 97,795 51,062 256,789 241,718
Property management fees paid to
Nooney Krombach Company 26,010 27,440 80,319 80,884
Reimbursement to Nooney Krombach Company for
partnership management services and indirect
expenses 6,250 6,250 18,750 18,750
Other operating expenses 143,945 122,288 507,418 428,463
----------- ----------- ------------ ------------
384,479 324,702 1,191,688 1,108,816
----------- ----------- ------------ ------------
NET INCOME $ 55,302 $ 129,606 $ 148,880 $ 240,407
=========== =========== ============ ============
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 2.45 $ 6.06 $ 6.50 $ 11.76
=========== =========== ============ ============
PARTNERS' EQUITY:
Beginning of Period $8,655,187 $8,928,263 $8,689,086 $8,817,462
Net Income 55,302 129,606 148,880 240,407
Cash Distribution to Partners (254,945) (127,477) (254,945)
----------- ----------- ------------ ------------
End of Period $8,710,489 $8,802,924 $8,710,489 $8,802,924
=========== =========== ============ ============
</TABLE>
<PAGE> 4
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
--------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
STATEMENTS OF CASH FLOWS
------------------------
(UNAUDITED)
-----------
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 55,302 $ 129,606 $ 148,880 $ 240,407
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 110,479 117,662 328,412 339,001
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 23,586 26,608 (8,972) 36,695
(Increase) Decrease in prepaid expenses and
deposits (20,111) 20,142 (105,978) 33,186
Increase in deferred assets at amortized cost (4,055) (23,184) (38,263) (56,304)
Increase (Decrease) in accounts payable and
accrued expenses 63,244 (79,073) 51,762 (122,348)
(Decrease) Increase in refundable tenant deposits (4,083) 659 (5,382) 3,911
----------- ----------- ------------ ------------
Total Adjustments 169,060 62,814 221,579 234,141
----------- ----------- ------------ ------------
Net cash provided by operating activities 224,362 192,420 370,459 474,548
----------- ----------- ------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to investment property (31,422) (92,315) (83,309) (181,736)
----------- ----------- ------------ ------------
Net cash used in investing activities (31,422) (92,315) (83,309) (181,736)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Cash distributions to partners 0 (254,945) (127,477) (254,945)
----------- ----------- ------------ ------------
Net cash used in financing activities 0 (254,945) (127,477) (254,945)
----------- ----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH 192,940 (154,840) 159,673 37,867
CASH AND CASH EQUIVALENTS, beginning of period 1,084,766 1,238,915 1,118,033 1,046,208
----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $1,277,706 $1,084,075 $1,277,706 $1,084,075
=========== =========== ============ ============
</TABLE>
<PAGE> 5
NOONEY INCOME FUND LTD.II, L.P.
-------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
-------------------------------------------------------
NOTE A:
Refer to the Registrant's financial statements for the year ended December 31,
1994, which are contained in the Registrant's Annual Report on Form 10-K, for a
description of the accounting policies which have been continued without
change. Also, refer to the footnotes to those statements for additional details
of the Registrant's financial condition. The details in those notes have not
changed except as a result of normal transactions in the interim periods 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 Income Fund
Ltd. II, 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 individual 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 September 30, 1995 and for all periods
presented have been made.
NOTE C:
The Registrant's properties are managed by Nooney Krombach Company, a wholly-
owned subsidiary of Nooney Company. Certain general partners of the Registrant
are officers and directors of Nooney Company. Nooney Income Investments Two,
Inc., a general partner, is a 75% owned subsidiary of Nooney Company.
NOTE D:
The earnings per limited partnership unit for the three months ended September
30, 1995 and 1994 was computed based on 19,221 units, the number of units
outstanding during the periods.
<PAGE> 6
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Cash on hand as of September 30, 1995 is $1,277,706, an increase of $159,673
from year end December 31,1994. In 1994, the Registrant distributed $382,422
and had capital expenditures totaling $251,995 while in the first nine months
of 1995 cash distributions and capital expenditures were $127,477 and $83,309,
respectively. While cash distributions and capital expenditures significantly
decreased in 1995, a corresponding increase in cash did not occur due to
legal and accounting fees pertaining to the Consent Statement. The Consent
Statement is discussed later in this section. Based on current cash balances
and the properties' ability to provide operating cash flow, the Registrant
expects the properties to fund anticipated capital expenditures through cash
flow from operations for the remainder of 1995. The anticipated expenditures
by property are as follows:
<TABLE>
<CAPTION>
Other Leasing
Capital Capital Total
---------- ---------- ----------
<S> <C> <C> <C>
NorthCreek Office Park (45%) $ 15,000 $ 3,800 $ 18,800
Tower Industrial Bldg. (100%) 0 0 0
Wards Corner (45%) 18,000 0 18,000
Countryside Executive C (50%) 0 5,700 5,700
Leawood Fountain Pl. (24%) 2,800 20,800 23,600
---------- ---------- ----------
$ 35,800 $ 30,300 $ 66,100
</TABLE>
During the remainder of 1995, approximately $66,100 of capital expenditures are
expected. At Countryside Executive Center, Leawood Fountain Plaza and
NorthCreek Office Park, leasing capital includes funds for tenant alterations
to their respective suites along with brokerage commissions for new tenant
leases. Other capital expenditures at NorthCreek Office Park include the
painting of the buildings' exterior skin. Capital expenditures at Leawood
Fountain Plaza are necessary to conform the property to ADA requirements and
repair minor structural problems. The remaining property, Wards Corner, has
set aside capital to demolish the interior of several vacated suites.
As of November 10, 1995, the deadline for voting under the Consent Statement,
13,862 partnership units (72.12% of the total partnership units) were voted,
11,233 voted (81.03% of those voting) in favor while 2,679 voted (18.97% of
those voting) were against the proposal. The favorable votes represented
58.44% of the total population (19,221 partnership units issued); therefore the
purchase of the portions of NorthCreek Office Park, Wards Corner and
Countryside Executive Center not currently owned by the Registrant (for a
purchase price of $7,190,000, all of which will be financed) was approved. The
purchase will occur on or before December 29, 1995.
The future liquidity of the Registrant is dependent on its ability to fund
future capital expenditures from operations and cash reserves, maintain
<PAGE> 7
occupancy and contend with the ownership issues of the jointly held properties.
Until such time as the real estate market recovers and profitable sale of the
properties is feasible, the Registrant will continue to manage the properties
to achieve its investment objectives.
Results of Operations
- ---------------------
The results of operations for the Registrant's properties for the quarters
ended September 30, 1995 and 1994 are detailed in the schedule below. Expenses
of the Registrant are excluded.
<TABLE>
<CAPTION>
Tower Ind. Leawood Countryside Wards NorthCreek
Building Fountain Exec. Center Corner Office Park
(100%) (24%) (50%) (45%) (45%)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Revenues $52,114 $64,160 $130,890 $47,799 $141,955
Expenses 29,272 63,137 153,145 55,050 101,564
------------ ------------ ------------ ------------ ------------
Net Income $22,842 $ 1,023 $(22,255) $(7,251) $ 40,391
============ ============ ============ ============ ============
1994
- ----
Revenues $45,669 $65,838 $148,388 $62,441 $139,539
Expenses 21,136 66,002 113,637 57,248 104,344
------------ ------------ ------------ ------------ ------------
Net Income $24,533 $ (164) $ 34,751 $ 5,193 $ 35,195
============ ============ ============ ============ ============
</TABLE>
For the quarter ended September 30, 1995 when compared to the same period ended
September 30, 1994, the operating results of Leawood Fountain Plaza, NorthCreek
Office Park and Tower Industrial Building are similar. Countryside Executive
Center decrease in net income is caused by a decrease in rental income and
increases in utilities, repairs and maintenance and real estate taxes. The
decrease in net income at Wards Corner relates to the decrease in rental income
due to a decrease in occupancy.
<PAGE> 8
The changes in occupancy levels at the Registrant's properties were mixed
during the third quarter. An analysis of each properties' particular change in
occupancy will be further analyzed later in this document. The occupancy
levels at September 30 are as follows:
<TABLE>
<CAPTION>
PROPERTY Occupancy Levels at September 30,
- -------------------------------------------- ---------------------------------
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Tower Ind. Bldg. 100% 100% 100%
Leawood Fountain Pl. 96% 94% 92%
Countryside Exec. Center 70% 86% 85%
Wards Corner 56% 56% 52%
NorthCreek Office Park 94% 92% 91%
</TABLE>
Tower Industrial Building is leased by a single tenant whose lease expires on
April 30, 2000.
During the third quarter the occupancy at Leawood Fountain Plaza increased from
the previous quarter through the net leasing of 1,718 square feet. Two new
leases were signed during the third quarter accounting for 3,929 square feet.
Offsetting the newly leased space was the vacating of a single tenant. The
Registrant renewed four existing tenant leases totaling approximately 15,222
square feet. The rental rates for the new leases and renewals have slightly
increased from the previous quarter. The property has one major tenant that
leases approximately 10% of the available space. Their lease expires in July
1999.
At Countryside Executive Center, the Registrant leased and renewed 2,172 square
feet to three tenants. Rental rates of the three tenants remained stable when
compared to existing tenant rental rates. However, offsetting the renewals and
new leases were three tenants totaling 11,319 square foot who vacated their
space during the third quarter. The property has no major tenants who occupy
more than 10% of the available space.
At Wards Corner, there was no leasing activity during the third quarter.
Although no leasing activity has been achieved, the Registrant is actively
marketing and preparing the unoccupied space for immediate occupancy. Under a
new marketing plan, the name of the property will be changed to Northeast
Commerce Center. Wards Corner is currently 56% occupied. Of the 56%, one
major tenant, Baldwin Piano and Organ Company, occupies 50,000 square feet
under a lease which expires December 31, 1996. The General Partners have had
preliminary discussions with the tenant on renewing their lease, but cannot
predict the outcome of the negotiations at this time. The tenant is
considering all of its options for when the lease expires, which include
renewing for its existing space, downsizing, or relocating to a new location.
Leasing activity during the third quarter of 1995 at NorthCreek Office Park
resulted in the renewal of three tenants totaling 3,908 square feet and the
vacating of two tenants with a combined 1,983 square feet. Additionally, two
new leases were executed occupying 2,530 square feet. Rental rates remained
<PAGE> 9
relatively flat for the quarter. The office park has one major tenant, with
two leases that comprise 36% of the available space. These two leases expire
in December 1998 and December 2003.
1995 Comparisons
- ----------------
As of September 30, 1995, the Registrant's consolidated revenues are $439,781
for the quarter ended and $1,340,568 for the nine month period ended. For the
quarter ended revenues decreased approximately 3.20% while for the nine month
period ended revenues remained relatively stable decreasing less than 1% when
compared to the same period ended September 30, 1994.
For the quarter ended September 30, 1995, rental revenues decreased
approximately 3.44% or $15,395. The decrease in rental revenues relates to the
loss of a major tenant at Wards Corner, effective September 30, 1994.
Offsetting some of the approximately $50,000 in lost quarterly rental revenues
generated from this tenant were increases in rental revenues at Leawood
Fountain Plaza and NorthCreek Office Park. However, for the nine month period
ended September 30, 1995 rental revenues still remained flat. This occurrence
is attributable to the receipt of a termination fee received in the first
quarter of 1995 from a tenant at Countryside Executive Center. The termination
fee along with the increased revenues at NorthCreek Office Park and Leawood
Fountain Plaza offset the rental revenues lost due to the tenant that vacated
Wards Corner. Interest income increased significantly when compared to the
same nine month period ended September 30, 1994. Increases is attributable to
the maintaining of higher cash balances in the Registrant's short term
investment vehicles.
As of September 30, 1995, the Registrant's consolidated expenses for the
quarter ended and nine month period ended are $384,479 and $1,191,688,
respectively. For the quarter ended September 30, 1995 expenses increased
$59,777 or 18.41% when compared to the same period ended September 30, 1994.
For the nine month period ended September 30, 1995, expenses increased $82,872
or 7.47% when compared to the same period ended September 30, 1994.
The increase in consolidated expenses for the quarter ended September 30, 1995
when compared to the quarter ended September 30, 1994 relates to an increase
in real estate taxes and other operating expenses. The increase in real estate
taxes is attributable to an accrual adjustment at Countryside Executive Center
that was posted as a reduction to the expense recorded in the third quarter of
1995. The adjustment was necessary to properly reflect the property's real
estate tax expense. At Tower Industrial real estate taxes increased due to a
road assessment which was passed through to the tenant. Real estate taxes at
the remaining three properties remained relatively stable. The increase in
other operating expenses are attributable to professional fees (legal and
accounting) in conjunction with the Consent Proxy. The professional fees
accounted for approximately 50% of the overall increase, while increases in
insurance, utilities and repairs and maintenance account for the remaining 50%
of the increase.
For the nine month period ended September 30, 1995 and 1994, consolidated
expenses are $1,191,688 and $1,108,816, respectively. The increase in expense
for the nine month period are attributable to real estate taxes and other
operating expenses. These increases were offset by a decrease in depreciation
and amortization. The increase in real estate taxes relates to a road
assessment at Tower Industrial and an increase in property assessment at
<PAGE> 10
Countryside Executive Center. The properties assessments were increased in
1995 resulting in increased real estate taxes.
Other operating expenses for the nine month period ended September 30, 1995 and
1994 are $507,418 and $428,463, respectively. The increase of $78,955 or
18.43% is mainly attributable to professional fees (legal and accounting),
which had an increase $61,833, and administrative expenses, which had an
increase of $18,036. Both increases related to the completion of the Consent
Proxy. The remainder of the increase was caused by utilities ($6,450), vacancy
expenses ($8,583), and repairs and maintenance ($7,337). Offsetting the above
mentioned increases were decreases in snow removal ($6,191) and office cleaning
($4,389).
1994 Comparisons
- ----------------
The Registrant generated revenues of $454,308 during the third quarter of 1994
compared to $435,506 in 1993. Year-to-date gross revenue totaled $1,349,223
for 1994 and $1,360,356 for 1993. The 4% quarterly increase is primarily due
to increased rental revenue at Wards Corner due to higher occupancy from a
month-to-month tenant and increases in operating expense recoveries and rental
revenue at Countryside and NorthCreek. The 1% year-to-date decrease in
revenues is due to a large bad debt recovery in 1993 at Wards Corner and a
termination fee received in the prior year at Countryside. A temporary tenant
at Wards Corner vacated 39,000 square feet effective September 30, 1994, which
decreased occupancy at the property to 56%.
For the quarter ended September 30, 1994 and 1993, consolidated expenses were
$324,702 and $381,447, respectively. For the nine month period ended September
30, 1994 and 1993 expenses were $1,108,816 and $1,222,193, respectively. The
decrease in consolidated expenses for the quarter ended and nine month period
ended were attributable to decreases in real estate taxes and other operating
expenses. The decrease in real estate taxes for the quarter ended and nine
month period ended relate to an accrual adjustment reducing the expense that
was recorded in third quarter of 1994 to properly reflect the Countryside
Executive Center's expense. Along with the accrual adjustment, the property
assessment at Leawood Fountain Plaza decreased resulting in a decrease in real
estate tax expense. Other operating expenses decreased $9,576 for the quarter
ended and $25,085 for the nine month period ended when comparing September 30,
1994 to September 30, 1993. The decrease in other operating expenses for the
quarter ended relate to decreased vacancy expense and rent concession expense
offset by increases, professional fees and office cleaning. For the nine month
period ended the decrease in other operating expenses were attributable to
decreases in rent concessions, vacancy expenses and utilities offset by
increases in snow removal, other taxes and professional fees.
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
Exhibit 27 -- Financial Data Schedule (provided for the
information of the Securities and Exchange
Commission only)
(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.
NOONEY INCOME FUND LTD. II, L.P.
Dated: 11/14/95 By: /s/ Gregory J. Nooney, Jr.
-------------------------------------
Gregory J. Nooney, Jr.
General Partner
Nooney Income Investments Two, Inc.
By: /s/ Gregory J. Nooney, Jr.
-------------------------------------
Gregory J. Nooney, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ Patricia A. Nooney
-------------------------------------
Patricia A. Nooney - Director
Senior Vice President and Secretary
BEING A MAJORITY OF THE DIRECTORS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR NOONEY INCOME FUND LTD. II, L.P. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000757764
<NAME> NOONEY INCOME FUND LTD. II, L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,142,753
<SECURITIES> 0
<RECEIVABLES> 89,856
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,232,609
<PP&E> 11,936,434
<DEPRECIATION> 4,232,123
<TOTAL-ASSETS> 9,106,611
<CURRENT-LIABILITIES> 372,694
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,733,918
<TOTAL-LIABILITY-AND-EQUITY> 9,106,611
<SALES> 459,629
<TOTAL-REVENUES> 459,629
<CGS> 414,797
<TOTAL-COSTS> 414,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 44,832
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,832
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 0
</TABLE>
