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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994
[ ] 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.
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(Exact name of Registrant as specified in its charter)
Missouri 43-1357693
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7701 Forsyth Boulevard, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-7700
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
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 [ ].
[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.
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As of February 1, 1994, 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 $19,221,000.
Documents incorporated by reference: None
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ITEM: 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
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The Registrant's cash and cash equivalents at December 31, 1994, increased
slightly when compared to the previous year due to an increase in cash flow
from operations and fewer capital expenditures, partially offset by a partner
distribution of $18.75 per unit.
During 1994, the properties generated cash flow after capital expenditures. In
addition to continued leasing related capital expenditures at certain
properties, Countryside Executive Center completed common area renovations.
During 1994, tenants vacated 41,000 square feet at Wards Corner. Until any re-
leasing occurs, this vacancy will reduce rental revenue by $159,600 (of which
$71,820 represents the Registrant's proportionate share) annually (assuming all
of such space remains vacant and any new leases, when entered into, are at the
old rental rate). The Registrant, however, expects the properties to provide
adequate cash flow from operations and available cash to fund capital
expenditures during 1995 which are comparable to 1994. (See Expected Capital
Expenditures).
As previously disclosed, the Registrant owned three properties jointly with
Nooney Income Fund Ltd. III, L.P. ("NIF III"). NIF III was unable to service
its debt, and its percentage interests in the jointly held properties were
transferred to a subsidiary of the mortgage lender, St. Louis Investment
Properties, Inc.("SLIP"), in lieu of foreclosure. The Registrant believes SLIP
could attempt to partition those properties and force their sale at auction for
what the Registrant believes could be a very low price. This would likely
reduce the amount of any cash available for distribution to the partners when
the Registrant is dissolved. The Registrant has successfully negotiated a
contract with SLIP to purchase the partial interests ("Acquisition Interests")
in the jointly held properties (Wards Corner, Countryside, and NorthCreek).
The purchase price is $7,190,000, of which the mortgage lender will finance
100%. This transaction is subject to the approval of the limited partners. A
preliminary consent statement seeking the limited partners' approval of the
purchase was filed with the Securities and Exchange Commission on October 18,
1994. The General Partners subsequently decided to postpone seeking the
limited partners' approval pending completion of the 1994 audited financial
statements. It is now anticipated the consent statement will be sent to the
limited partners in July, 1995. The purchase of the Acquisition Interests from
SLIP will enable the Registrant to fully control its own destiny with respect
to the improvement, management and sale of its properties. The General
Partners' goal is to attempt to enhance the value of the Registrant's
properties, with the exception of Countryside, over the next several years in
order to increase the amount of any cash available for distribution to the
partners when the Registrant is dissolved. Due to market conditions, tax
burdens and other factors relating to Countryside, the Registrant intends to
attempt to sell Countryside by July 1996 if the limited partners vote in favor
of the purchase of the Acquisition Interests. The General Partners believe
that now is not the time to sell NorthCreek, Wards Corner, Leawood or Tower
Industrial, since the General Partners believe that the commercial real estate
markets in those areas will improve over the next several years. Registrant's
management is unable to predict whether the limited partners will approve the
transaction or whether SLIP would be successful in an attempt to force a
partition and sale of Countryside, NorthCreek and Wards Corner.
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The future liquidity of the Registrant is dependent on its ability to fund
future capital expenditures from operations and cash reserves, maintain
occupancy and contend with the ownership issues of the jointly held properties.
Until such time as market conditions may improve and the profitable sale of the
properties may be feasible, the Registrant will continue to manage its
properties.
Results of Operations
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During the three years ended December 31, 1994, 1993 and 1992, the Registrant's
properties generated cash flows (excluding any partnership expenses) as
follows:
<TABLE>
<CAPTION>
Tower Ind. Leawood Countryside Wards NorthCreek
Building Fountain Exec. Center Corner Office Park
(100%) <F1> (24%) <F1> (50%) <F1> (45%) <F1> (45%) <F1>
------------ ------------ ------------ ------------ ------------
<C> <C> <C> <C> <C> <C>
1994
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Net Operating Cash Income <F2> $129,000 $107,000 $202,000 $127,000 $352,000
Capital Expenditures (-0-) (6,000) (41,000) (-0-) (-0-)
Tenant Alterations (-0-) (26,000) (39,000) (-0-) (139,000)
Lease Commissions (-0-) (4,000) (3,000) (3,000) (14,000)
------------ ------------ ------------ ------------ ------------
Net Property Cash Flow $129,000 $ 71,000 $119,000 $124,000 $199,000
============ ============ ============ ============ ============
1993
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Net Operating Cash Income <F2> $127,000 $ 91,000 $ 53,000 $155,000 $248,000
Capital Expenditures (-0-) (2,000) (433,000) (-0-) (23,000)
Tenant Alterations (-0-) (20,000) (73,000) (3,000) (49,000)
Lease Commissions (-0-) (2,000) (14,000) (3,000) (2,000)
------------ ------------ ------------ ------------ ------------
Net Property Cash Flow $127,000 $ 67,000 $(467,000) $149,000 $174,000
============ ============ ============ ============ ============
1992
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Net Operating Cash Income <F2> $124,000 $ 89,000 $ 64,000 $173,000 $261,000
Capital Expenditures (-0-) ( 7,000) ( 5,000) (-0-) (-0-)
Tenant Alterations (-0-) (53,000) (26,000) (-0-) (69,000)
Lease Commissions (-0-) (11,000) (8,000) (-0-) (32,000)
------------ ------------ ------------ ------------ ------------
Net Property Cash Flow $124,000 $ 18,000 $ 25,000 $173,000 $160,000
============ ============ ============ ============ ============
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<FN>
<F1> Represents the percentage of the Registrant's ownership in the above mentioned properties.
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<F2> Net Operating Cash Income represents Rental Revenue less Operating Expenses, excluding depreciation
and amortization and write-down of investment property, less debt service. The Registrant is not
currently servicing any debt. Net Operating Cash Income (i) does not represent cash flow from
operations as defined by generally accepted accounting principles, (ii) is not necessarily
indicative of cash available to fund all cash flow needs and (iii) should not be considered as an
alternative to Net Income for purposes of evaluating the Registrant's operating performance.
</TABLE>
Expected 1995 Capital Expenditures
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<TABLE>
<CAPTION>
Tenant Alterations
and Capital
Lease Commissions Expenditures Total
------------------ -------------- --------------
<C> <C> <C> <C>
Tower Industrial Bldg. (100%) <F1> $ 44,000 $ -0- $ 44,000
Leawood Fountain Plaza (24%) <F1> 74,000 10,000 84,000
Countryside Executive Ctr. (50%) <F1> 23,000 46,000 69,000
Wards Corner (45%)* 32,000 27,000 59,000
NorthCreek Office (45%)* 23,000 25,000 48,000
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$196,000 $108,000 $304,000
================== ============== ==============
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<FN>
<F1> Represents the percentage of the Registrant's ownership in the above mentioned properties.
</TABLE>
During 1994, capital expenditures, including tenant alterations and lease
commissions, were $275,000.
During 1995, approximately $304,000 of capital expenditures are expected by the
Registrant for its proportionate share of ownership interest in the properties.
Presently there are no contracts in place for any of these capital
expenditures. At Countryside, brick planters will be rebuilt and a portion of
the parking lot will be resurfaced. NorthCreek is scheduled for exterior
painting of all buildings. Leawood Fountain Plaza is currently undergoing
minor roof repairs and is scheduled for sidewalk repairs. At Wards Corner,
existing interior improvements in the vacant space will be demolished and
refurbished for re-leasing purposes. All properties are scheduled to incur
leasing related capital expenditures (tenant alterations and lease commissions)
in connection with future lease negotiations. The timing and cost of these
capital expenditures will vary.
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The occupancy levels at the Registrant's properties are listed below:
<TABLE>
<CAPTION>
PROPERTY Occupancy Levels at December 31,
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1994 1993 1992
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<C> <C> <C> <C>
Tower Industrial Bldg. 100% 100% 100%
Leawood Fountain Plaza 90% 89% 92%
Countryside Executive Center 83% 82% 87%
Wards Corner 56% 82% 91%
NorthCreek Office Park 97% 85% 78%
</TABLE>
Tower Industrial Building is leased by a single tenant whose lease expires on
April 30, 2000.
At Leawood Fountain Plaza, the Registrant leased and renewed 24,337 square feet
of space which increased occupancy by 1% during 1994. The property has one
major tenant who leases more than 10% of the leasable area. This lease expires
in 1999.
During 1994, the Registrant leased 10,244 and renewed 3,983 square feet of
space at Countryside Executive Center. This activity increased occupancy by 1%.
Rental rates remained relatively flat for the year. The property has no major
tenants who occupy greater than 10% of the leasable area.
At Wards Corner during 1994, the Registrant leased 15,000 square feet on a
short-term basis to a temporary tenant who previously leased 24,000 square
feet on a short-term basis in the fourth quarter of 1993. The short-term lease
expired and the tenant vacated the 39,000 square feet at the end of the third
quarter of 1994. In addition, 2,000 square feet was vacated during the third
quarter. This activity resulted in a decrease in occupancy from 82% in 1993 to
56% in 1994. The Registrant is actively marketing this space but has no
prospects at this time. Wards Corner has one major tenant who occupies 50% of
the property. This lease expires in December 1996.
During 1994 at NorthCreek Office Park, the Registrant successfully renegotiated
a lease with the assignee of the major tenant. This new tenant renewed for a
10-year term the lease on 23,995 square feet at a slightly lower rental rate.
This tenant also leased, for a five-year term, 6,688 square feet in another
building in the office park. In addition to the aforementioned activity, the
Registrant leased 14,451 and renewed 9,327 square feet of space . Rental rates
remained relatively flat. Occupancy increased from 85% in 1993 to 97% in 1994
as a result of this leasing activity. NorthCreek Office Park has one major
tenant, with two leases that comprise 36% of the property. These two leases
expire in December 1998 and December 2003.
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1994 Comparisons
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Rental Revenues for the year ended December 31, 1994, decreased by 6% compared
to the previous year. At Wards Corner, revenue decreased due to lower
occupancy. Revenues at Countryside Executive Center decreased primarily due to
lower expense recoveries due to a successful real estate tax appeal and lower
operating expenses, partially offset by higher rental revenue due to higher
average occupancy. Rental revenue and operating expense recoveries at
NorthCreek increased due to higher occupancy. Leawood Fountain Plaza's revenue
increased due to higher average occupancy. Tower Industrial revenue remained
flat.
Operating expenses, excluding depreciation and amortization and write-down of
investment property, for the year ended December 31, 1994 decreased by 10%,
compared to the previous year. At Countryside Executive Center, operating
expenses decreased primarily due to a successful real estate tax appeal and
lower utilities and general repairs. NorthCreek Office Park experienced a
slight increase in overall expenses due to higher occupancy. Operating expenses
at Leawood decreased due to lower parking lot repairs and general repairs and
less snow removal. Tower Industrial and Wards Corner operating expenses
remained relatively flat.
Depreciation and amortization expenses for the year ended December 31, 1994,
decreased by 5% compared to the previous year. This decrease is primarily due
to the additional write- down of investment property in 1993 partially offset
by additional leasing related capital expenditures (lease commissions and
tenant alterations) at Countryside Executive Center, NorthCreek Office Park and
Leawood Fountain Plaza. (See Write-downs of the Value of Certain Properties.)
1993 Comparisons
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Rental revenues for the year ended December 31, 1993, decreased by 3% compared
to the previous year. At Wards Corner, revenues only decreased 6% due to the
recovery of a $150,000 bad debt written-off in 1992. Rental revenue and
expense recoveries at NorthCreek decreased 8% from 1992 due to lower average
occupancy. Revenues at Countryside Executive Center increased over the prior
year due to slightly higher average occupancy. At Leawood Fountain Plaza and
Tower Industrial revenue remained flat.
Operating expenses, excluding depreciation and amortization and write-down of
investment property, decreased 4% compared to the previous year. At Wards
Corner, operating expenses decreased 4% due to fluctuations in various expense
categories. Countryside Executive Center experienced a slight increase due to
higher repairs and maintenance and cleaning, offset partially by lower real
estate taxes. Expenses at Leawood, Tower, and NorthCreek remained relatively
flat.
Depreciation and amortization expenses for the year ended December 31, 1993
decreased by 14% compared to the previous year. This decrease is primarily due
to leasing related capital expenditures (lease commissions and tenant
alterations) becoming fully amortized in 1992 and early 1993 at Countryside
Executive Center, NorthCreek Office Park and Leawood Fountain Plaza. In
addition, write-down of investment property in 1992 contributed to the decrease
in depreciation. (See Write-downs of the Value of Certain Properties.)
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1992 Comparisons
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Rental revenues for the year ended December 31, 1992, increased by 3% compared
to those of the previous year. At Leawood Fountain Plaza, revenues increased
12% from $226,411 in 1991 to $253,055 in 1992 due to higher occupancy. Tower
Industrial revenues increased 2% from $175,921 in 1991 to $180,109 in 1992 due
to higher minimum rent from CPI increase and higher tax participation income
from slightly higher real estate taxes. Countryside Executive Center revenues
decreased 1% from $553,938 in 1991 to $547,536 in 1992 due to lower expense
reimbursements from tenant renewals with new base years, and lower cross
easement income, partially offset by higher tax participation income. Revenues
at Wards Corner increased 2% from $382,226 in 1991 to $391,367 in 1992 due to
higher expense reimbursements and storage income, partially offset by lower tax
participation income from a decrease in real estate tax expense. NorthCreek
Office Park revenues increased 3% from $493,629 in 1991 to $507,666 in 1992 due
to higher expense reimbursements and miscellaneous income from tenant
termination fee. These are partially offset by lower minimum rents due to slow
leasing.
Operating expenses, excluding depreciation and amortization and write-down of
investment property, in aggregate increased 6% compared to the previous year.
This increase was primarily attributable to reserves for bad debt expense from
major tenants at Wards Corner and NorthCreek Office Park. Operating expenses
at Leawood decreased 4% from 1991 due to lower real estate taxes and fewer
vacancy expenses. Tower Industrial operating expenses increased 7% over 1991
due to slightly higher real estate taxes. Operating expenses at Countryside
increased 1% over 1991 due primarily to higher real estate taxes, repairs and
maintenance expenses and vacancy expenses, offset by lower parking lot
expenses. Wards Corner operating expenses increased 38% over 1991 due
primarily to a reserve for bad debts from a major tenant, partially offset by
lower real estate tax expense. Operating expenses at NorthCreek increased 6%
over 1991 due to a reserve for bad debts from a major tenant, partially offset
by lower real estate taxes and repairs and maintenance expenses.
Depreciation and amortization expenses for the year ended December 31, 1992
decreased by 8% when compared to the previous year. This decrease is primarily
due to the write-down of investment property in 1991 partially offset by
additional leasing related capital expenditures (lease commissions and tenant
alterations) at Leawood Fountain Plaza and NorthCreek Office Park. (See Write-
downs of the Value of Certain Properties.)
Write-downs of the Value of Certain Properties
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At the end of fiscal 1993 and 1992 it was determined that the fair market value
of certain properties decreased to amounts less than their respective recorded
values. As a result, aggregate write-downs of $1,506,000 and $366,000,
respectively, were recorded for book purposes only. The write-downs were based
solely on the appraised values of the properties. Because appraisals of the
Registrant's properties are generally made in December of each year, any write-
downs are taken in the fourth quarter. While the appraised value of Wards
Corner decreased by $100,000, there were no write-downs made during the year
ended December 31, 1994.
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Specifically, in 1993, the General Partners reduced the carrying value of
Countryside Executive Center by $1,206,000, NorthCreek Office Park by $97,000
and Wards Corner Business Center by $203,000. In 1992, the General Partners
reduced the carrying value of Wards Corner by $366,000.
The General Partners believe the reductions in the value of Countryside were
primarily due to: (i) the continued increase in real estate taxes in Cook
County, Illinois from 1992 through 1993; (ii) the need for substantial capital
improvements at the property in 1993, primarily replacement of the entire roof
in 1993; and (iii) increased vacancy at the property in 1993 due to market
conditions and the requirements for additional leasing related capital. The
General Partners believe the reductions in the value of NorthCreek were
primarily due to: (i) the failure in 1993 of a major tenant to exercise its
option as contemplated at the time of the prior appraisal and the renewal of
that tenant at a rental rate less than the option price and (ii) local real
estate market conditions in 1992. The General Partners believe the value of
Wards Corner was primarily affected by: (i) the unanticipated vacating of the
property by a tenant who occupied approximately 40% of the property in 1993,
several years prior to the expiration of its lease, and the cost of the
resulting collection efforts to settle both past due and future rentals; and
(ii) local real estate market conditions in 1992.
The amount of any change in the value of the properties is determined by the
independent appraisal firm which the Registrant retained to perform the annual
appraisals of all of the Registrant's properties. This policy has been
consistent throughout the existence of the Registrant.
The General Partners' write-down of the value of a property does not reflect
the General Partners' determination that the amount of the write-down cannot be
recovered by the Registrant upon the ultimate sale of the property.
Inflation
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The effects of inflation did not have a material impact upon the Registrant's
operations in fiscal 1994, and are not expected to materially affect the
Registrant's operation in 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: 06/15/95 By: /S/ GREGORY J. NOONEY, JR.
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Gregory J. Nooney, Jr.
General Partner
Nooney Income Investments Two, Inc.
By: /S/ GREGORY J. NOONEY, JR.
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Gregory J. Nooney, Jr.
Chairman of the Board and
Chief Executive Officer
By: /S/ PATRICIA A. NOONEY
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Patricia A. Nooney - Director
Senior Vice President and
Secretary
BEING A MAJORITY OF THE DIRECTORS
