<PAGE> 1
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 December 31, 1995
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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 0-14360
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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
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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
- ------------------------------------ -----------------------------------------
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 [ ].
Page 1 of 48 Pages
Exhibit Index located on Page 19
<PAGE> 2
[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, 1996, 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. (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
not beneficially owned on February 1, 1996, 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 the 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 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 February 15, 1985, 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.
<PAGE> 3
PART I
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ITEM 1: BUSINESS
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Nooney Income Fund Ltd. II, L.P. (the "Registrant") is a limited partnership
formed under the Missouri Uniform Limited Partnership Law on February 12, 1985,
to invest, on an all-cash basis, in income-producing real properties such as
shopping centers, office buildings, office/warehouse properties and other
commercial properties. The Registrant originally invested in five real
properties described in Item 2 below. The Registrant continues to own and
operate its five original properties.
The Registrant's primary investment objectives are to preserve and protect the
Limited Partners' capital, provide the maximum possible cash distributions to
the Partners, and provide for capital growth through appreciation in the value
of the Registrant's properties. The term of the Registrant is until
December 31, 2085. It was originally anticipated that the Registrant would
sell or finance 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, continued this
improvement in 1995, 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 from the sale or financing 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. (See Item 7: Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources - for a discussion of possible future acquisitions and possible sales
of properties.)
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 Nooney Krombach Company, an
affiliate of the General Partners.
ITEM 2: PROPERTIES
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On February 20, 1985, the Registrant acquired a 24% interest as a tenant in
common in Leawood Fountain Plaza, a three building office complex in Leawood,
Kansas. Constructed in two phases in 1982 and 1983, the buildings contain
approximately 29,000, 28,000 and 25,000 net rentable square feet respectively,
<PAGE> 4
or an aggregate of approximately 82,000 net rentable square feet of office
space. The buildings are located on a 7.9 acre site which provides paved
parking for 403 cars. The purchase price of the complex was $9,626,576, of
which $2,310,379 was paid by the Registrant for its 24% interest. The
remaining 76% interest was purchased by Nooney Income Fund Ltd., L.P., an
affiliate of the Registrant, as the other tenant in common. All costs and
revenues attributable to the operation of the complex are shared by the
Registrant and Nooney Income Fund Ltd., L.P. in proportion to their respective
percentage interests. The complex was 92% leased by 42 tenants at
December 31, 1995.
On March 20, 1986, the Registrant acquired the Tower Industrial Building, an
office warehouse located at 750-760 Tower Road in Mundelein, Illinois, a suburb
of Chicago. The purchase price of the building was $1,235,820. The one-story
concrete block building contains approximately 42,000 net rentable square feet
and is situated on a 3 acre site which provides parking for 140 cars. The
building is currently 100% leased by Baxter International Inc.
On December 16, 1986, the Registrant acquired a 50% interest as a tenant in
common in Countryside Executive Center, a single story office building located
at 1210-1270 W. Northwest Highway in Palatine, Illinois, a suburb of Chicago.
The building contains approximately 91,000 net rentable square feet and is
situated on an 8.6 acre site which provides parking spaces for 467 cars, some
of which spaces are shared with adjoining properties pursuant to a mutual
easement agreement which also provides for the sharing of certain expenses.
The total purchase price of the building was $9,853,660, of which $4,926,830
was paid by the Registrant for its 50% interest. The remaining 50% interest
was purchased by Nooney Income Fund Ltd. III, L.P., an affiliate of the
Registrant, and during 1993 was transferred to a subsidiary of the mortgage
holder. All costs and revenues attributable to the operation of the building
were shared by the Registrant and a subsidiary of the mortgage holder in
proportion to their respective percentage interests. As of December 29, 1995,
the Registrant acquired the mortgage lender's interest in Countryside Executive
Center for $1,250.000. The building was 73% leased by 33 tenants at December
31, 1995. (See Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.)
On December 29, 1986, the Registrant acquired a 45% interest as a tenant in
common in Wards Corner Business Center A & B, a two building
office/warehouse/showroom facility located at 420-422 Wards Corner Road in
Loveland, Ohio, a suburb of Cincinnati. Effective January 1, 1996, the
property known as Wards Corner was renamed Northeast Commerce Center. The two
single-story buildings contain 50,000 net rentable square feet each, or an
aggregate of approximately 100,000 net rentable square feet. The buildings are
situated on a 7.5 acre site which provides parking for 278 cars. The total
purchase price of the buildings was $6,630,395, of which $2,983,678 was paid by
the Registrant for its 45% interest. The remaining 55% interest was purchased
by Nooney Income Fund Ltd. III, L.P., an affiliate of the Registrant, and
during 1993 was transferred to a subsidiary of the mortgage holder. All costs
and revenues attributable to the operation of the buildings were shared by the
Registrant and a subsidiary of the mortgage holder in proportion to their
respective percentage interests. As of December 29, 1995, the Registrant
acquired the mortgage lender's interest in Wards Corner for $1,980,000. The
buildings were 56% leased by 2 tenants at December 31, 1995. (See Item 7:
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources.)
<PAGE> 5
On December 29, 1986, the Registrant acquired a 45% interest as a tenant in
common in NorthCreek Office Park, a three building office complex located at
8220, 8240 and 8260 NorthCreek Drive in Cincinnati, Ohio. Constructed in
phases in 1984 and 1986, the three-story buildings contain 19,396, 23,995 and
43,560 net rentable square feet respectively, or an aggregate of approximately
86,000 net rentable square feet. The buildings are located on a 8.4 acre site
which provides paved parking for 366 cars. The purchase price of the complex
was $11,063,260, of which approximately $4,978,467 was paid by the Registrant
for its 45% interest. The remaining 55% interest was purchased by Nooney
Income Fund Ltd. III, L.P., an affiliate of the Registrant, and during 1993 was
transferred to a subsidiary of the mortgage holder. All costs and revenues
attributable to the operation of the complex were shared by the Registrant and
a subsidiary of the mortgage holder in proportion to their respective
percentage interests. As of December 29, 1995, the Registrant acquired the
mortgage lender's interest in NorthCreek Office Park for $3,960,000. The
complex was 97% leased by 33 tenants at December 31, 1995. (See Item 7:
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources.)
Reference is made to Note 7 of Notes to Financial Statements for a description
of revenues derived from major tenants.
The following table sets forth certain information as of December 31, 1995,
relating to the properties owned by the Partnership.
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
EFFECTIVE
BASE RENT
TOTAL PER PRINCIPAL TENANTS
SQUARE ANNUALIZED SQUARE PERCENT OVER 10% OF PROPERTY LEASE
PROPERTY FEET BASE RENT<F1> FOOT LEASED SQUARE FOOTAGE EXPIRATION
- ---------------------------- ------- ------------- ---------- ------- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tower Industrial Building 42,000 $ 149,000 $ 3.54 100% Baxter International
Inc. (100%) 2000
Leawood Fountain Plaza 82,000 $1,126,000 $14.83 92% Family Medical Care
of Kansas City (10%) 1999
Wards Corner Business Center 100,000 $ 406,600 $ 7.26 56% Baldwin Piano & Organ
Co. (50%) 1996 <F2>
Countryside Executive Center 91,000 $ 937,500 $14.08 73% None
NorthCreek Office Park 86,000 $1,196,300 $13.54 97% Cincinnati Group
Health Associates
(28%), (8%) 2003, 1998
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<FN>
<F1> Represents 100% of Base Rent. Registrant has 24% ownership in Leawood Fountain Plaza.
<F2> Lease extended through 1998.
</TABLE>
<PAGE> 6
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
- ------------------------------------------------------------
On October 4, 1995, the Registrant submitted to the limited partners a Consent
Statement requesting their consent to purchase the portions of NorthCreek
Office Park, Wards Corner, and Countryside Executive Center not currently owned
by the Registrant. 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 was financed) was approved. The
purchase occurred on December 29, 1995.
PART II
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ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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As of February 1, 1996 there were 1,636 record holders of Interests in the
Registrant. There is no public market for the Interests and it is not
anticipated that a public market will develop.
<TABLE>
Cash Distributions Paid Per Limited Partnership Unit
----------------------------------------------------
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
1994 0 0 $12.50 $6.25
1995 0 $6.25 0 $6.25
</TABLE>
<PAGE> 7
ITEM 6: SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
Year Ended December 31,
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1995 <F1> 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
(Not covered by independent auditors' report)
<S> <C> <C> <C> <C> <C>
Rental and other income $ 1,754,750 $ 1,729,872 $ 1,843,782 $ 1,893,640 $ 1,841,982
Net income (loss) 209,517 254,046 (1,261,814) (197,387) (3,243,787)
Data per limited partnership unit:
Net income (loss) 10.17 12.16 (65.61) (10.17) (168.06)
Cash distributions - Investment
income 10.17 12.16 -- -- --
Cash distributions - Return of
capital 2.33 6.59 12.50 -- 20.00
Weighted average limited partnership
units outstanding 19,221 19,221 19,221 19,221 19,221
At year-end:
Total assets 16,803,566 9,118,452 9,287,233 10,807,797 10,988,076
Investment property, net 15,166,737 7,803,472 7,980,243 9,334,150 10,065,643
Mortgage note payable 7,190,000
Partners' equity 8,643,642 8,689,086 8,817,462 10,334,221 10,531,608
- ---------------
<FN>
See Item 7: Management's Discussion and Analysis for discussion of comparability of items.
<F1> Balance sheet includes the effects of an acquisition which occurred on December 29, 1995. See Note 1
to financial statements.
</TABLE>
<PAGE> 8
ITEM: 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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Liquidity and Capital Resources
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Cash on hand as of December 31, 1995 is $1,092,159, a decrease of $25,874 from
year ended December 31, 1994. During 1995 cash remained relatively stable when
compared to its year end 1994 balance. Even though cash remained relatively
stable, cash provided by operations significantly decreased from 1994 to 1995
due to legal, accounting fees, and printing and mailing costs incurred in 1995
relating to the Consent Statement. Offsetting the increases in legal and
accounting fees were reductions in cash distributions and additions to
investment properties. The Registrant expects anticipated capital expenditures
during 1996 will be adequately funded by current cash reserves and the
properties' operating cash flow. The anticipated capital expenditures are as
follows:
<TABLE>
<CAPTION>
Other Leasing
Capital Capital Total
---------- ---------- ----------
<S> <C> <C> <C>
NorthCreek Office Park $ 42,500 $ 63,550 $106,050
Tower Industrial Building $ 0 $ 0 $ 0
Wards Corner Business Center $ 39,500 $377,300 $416,800
Countryside Executive Center $ 80,800 $209,900 $290,700
Leawood Fountain Plaza (24%) $ 14,450 $ 19,750 $ 34,200
---------- ---------- ----------
$177,250 $670,500 $847,750
========== ========== ==========
</TABLE>
Throughout 1996, approximately $847,750 of capital expenditures have been
forecasted. The significant amount of capital expenditures are necessary to
increase the occupancy rate at Wards Corner and Countryside Executive Center
through the construction of interior finishes and the payment of lease
commissions. The remainder of the capital to be funded will be for parking lot
improvements at Leawood Fountain Plaza and Countryside Executive Center,
exterior painting at Leawood Fountain Plaza, wood shingle treatment at
NorthCreek Office Park, exterior brick repair at Countryside Executive Center,
and ADA compliance at Leawood Fountain Plaza and NorthCreek Office Park.
As previously disclosed, on November 10, 1995, the deadline for voting under
the Consent Statement, the Registrant received approval from a majority of the
limited partnership units to purchase an undivided interest in NorthCreek
Office Park, Countryside Executive Center and Wards Corner Business Center not
currently owned by the Registrant. The transaction closed on December 29, 1995.
The purchase price of $7,190,000 was financed through a first mortgage loan
secured by the properties purchased in the transaction. The first mortgage loan
has a floating interest rate of 3/4% above the then published prime rate of the
lender and a maturity date of December 31, 2002. Payments on the note have been
structured whereby only interest will be paid during 1996 with principal
payments commencing January 1, 1997. (See Note 4 to the financial statements).
<PAGE> 9
As previously disclosed in the Consent Statement, he General Partners feel that
the market conditions exist whereby Countryside Executive Center should be
sold. During the first quarter of 1996 the Registrant has begun the marketing
process of the property. The strategy is to lease up some of the vacant suites
as part of the marketing program.
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 sell Countryside Executive Center at a price
sufficient to satisfy required obligations. Until such time as the real estate
market fully recovers, 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 year ended
December 31, 1995, 1994 and 1993 are detailed in the schedule below. Expenses
of the Registrant are excluded.
<TABLE>
<CAPTION>
NorthCreek Tower Wards Countryside Leawood
Office Park Industrial Corner Executive Fountain
(45%) (100%) (45%) Ctr. (50%) Plaza (24%)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Revenues $588,137 $189,118 $190,971 $ 537,615 $279,202
Expenses $426,096 $ 98,856 $235,966 $ 619,398 $258,081
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $162,041 $ 90,262 $(44,995) $ (81,783) $ 21,121
1994
- ----
Revenues $546,704 $181,873 $233,643 $ 553,433 $257,715
Expenses $429,322 $ 86,763 $239,895 $ 589,994 $246,818
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $117,382 $ 95,110 $ (6,252) $ (36,561) $ 10,897
1993
- ----
Revenues $471,572 $180,354 $318,157 $ 573,866 $251,313
Expenses $401,997 $ 85,664 $245,079 $ 712,379 $253,488
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 69,575 $ 94,690 $ 73,078 $(138,513) $ (2,175)
</TABLE>
NorthCreek Office Park operations over the past three years has significantly
improved. Revenues have increased $116,565 when comparing 1993 to 1995, a 25%
increase. The significant increase can be primarily attributable to an overall
<PAGE> 10
increase in average occupancy along with slightly increasing rental rates.
Average occupancy for 1993, 1994 and 1995 was 86.6%, 90.8% and 95.6%,
respectively. Expenses from 1993 to 1994 increased by $27,325 while from 1994
to 1995 they remained relatively stable. The increase from 1993 to 1994 relates
to increases in amortization ($14,928), management fees ($4,042),
administrative costs ($3,755), snow removal ($2,029), and repairs and
maintenance ($2,514), offset by decrease in professional services ($6,143).
With increasing revenues and relatively stable expenses, net income increased
$47,807 and $44,659 from 1993 to 1994 and from 1994 to 1995, respectively.
The operations at Tower Industrial Building, occupied by a single tenant, have
been relatively stable over the three year period commencing January 1, 1993
and ending December 31, 1995.
From 1993 to 1994 then from 1994 to 1995, the operating results at Wards Corner
have resulted in a decrease in revenues. In 1993 revenues were inflated due to
a bad debt recovery of $129,470 offset by an increase in rental revenues of
$45,280 from 1993 to 1994. The increase in rental revenues can be attributable
to an increase in average occupancy from 1993 (65.8%) to 1994 (73.8%). The
decrease in revenues when comparing 1994 to 1995 can be attributable to a
decrease in average occupancy. Average occupancy was 73.8% and 56% during 1994
and 1995, respectively. For the three year period, operating expenses remained
relatively stable.
At Countryside Executive Center net loss varied from year to year. Revenues
decreased during the three year period while expenses fluctuated from a high in
1993 of $712,379 to a low in 1994 of $589,994. The decrease in revenues from
1993 to 1994 can be attributable to a decrease in expense pass through and tax
participation income offset by an increase in rental income. During 1995
revenues further declined due to lower average occupancy resulting in a
decrease in rental income offset by an increase in cross easement income.
Expenses from 1993 to 1994 decreased significantly due to the payment of a
consulting fee in 1993 and a reduction in bad debt expense. During 1995
expenses increased $29,404 when compared to 1994. The increase can be
attributable to real estate taxes ($26,332), vacancy expense ($5,880), repairs
and maintenance ($5,869), and parking lot expenditures ($4,987), offset by a
decrease in cleaning ($9,762).
Leawood Fountain Plaza's operating results improved each year during a three
year period commencing January 1, 1993 and ending December 31, 1995. Revenues
from 1993 to 1994 increased $6,402 due primarily to increases in rental income
resulting from higher average occupancy. From 1994 to 1995 revenues increased
$21,487 due primarily to a termination payment received from a tenant who
vacated their space during 1995. Expenses from 1993 to 1994 decreased $6,670
which can be attributable to decreases in cleaning ($1,865), repairs and
maintenance ($3,587), and snow removal ($2,939), offset by increases in real
estate taxes ($1,728) and administrative costs ($1,795). During 1995 expenses
increased $11,263 when compared to 1994 expenses. The increases which occurred
in 1995 relate to increases in amortization ($3,790), real estate taxes
($2,150), repairs and maintenance ($2,958), management fees ($1,478), and
administrative costs ($2,127), offset by decreases in cleaning ($2,597) and
parking lot expenditures ($1,402).
<PAGE> 11
The occupancy levels at the Registrant's properties as of December 31, 1995,
1994 and 1993 are detailed in the schedule below.
<TABLE>
<CAPTION>
Occupancy rates at December 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NorthCreek Office Park 97% 97% 85%
Tower Industrial Building 100% 100% 100%
Wards Corner Business Center 56% 56% 82%
Countryside Executive Center 73% 83% 82%
Leawood Fountain Plaza 92% 90% 89%
</TABLE>
For the quarter ended December 31, 1995, occupancy at NorthCreek Office Park
increased from 94% to 97% through the leasing of 2,604 square feet to two
individual tenants. For the year, occupancy at NorthCreek Office Park remained
at 97% through the renewal of 10,438 square feet, the execution of six new
leases with total square feet of 14,075, and the vacating by four tenants who
occupied 14,436 square feet. 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.
Tower Industrial Building is leased by a single tenant whose lease expires on
April 30, 2000.
During the fourth quarter, occupancy level at Wards Corner remained the same as
the previous quarter. For the year, no leasing activity occurred at Wards
Corner. Although no leasing activity occurred during 1995, the Registrant, in
the first quarter on 1996 executed the following: two year extension through
December 1998 from the property's major tenant; 5,000 square foot expansion of
an existing tenant along with a three year renewal through October 1999; and
two new leases for approximately 18,900 square feet for terms of 5 years. As
previously mentioned, the Center has one major tenant that occupies 50% of the
available space. Their lease expires December 1998.
At Countryside Executive Center during the fourth quarter, leasing activity
netted an increase in occupancy of 3% or 2,779 square feet. The Registrant
renewed 2,766 square feet, signed three new leases for 3,716 square feet and
one tenant vacated 937 square feet. For the year, occupancy decreased 10% and
had the following leasing activity: eight new leases were executed occupying
8,038 square feet, renewed six leases totaling 5,881 square feet, vacated five
leases with 18,241 square feet. Countryside Executive Center has no major
tenants who occupy more than 10% of the available space.
At Leawood Fountain Plaza occupancy decreased from 96% to 92% during the fourth
quarter due to a lease termination (2,659 square feet) and a lease cancellation
(970 square feet), while only one new lease was signed for 1,067 square feet.
The Registrant renewed one tenant who occupies 1,650 square feet. During the
year occupancy increased from 90% to 92%. The Registrant signed five new leases
totaling 10,868 square feet while four tenants vacated 8,909 square feet.
Renewals for the year totaled 12,765 square feet. The property has one major
<PAGE> 12
tenant who occupies approximately 10% of the available space. Their lease
expires in July 1999.
1995 Comparisons
- ----------------
As of December 31, 1995, the Registrant's consolidated revenues are $1,786,540
compared to $1,753,366 for the year ended December 31, 1994. The increase of
$33,174 can be attributable to increased revenues at NorthCreek Office Park
and Leawood Fountain Plaza along with a decrease in rent concessions at
NorthCreek Office Park. Offsetting the revenue increases were decreases in
revenues at Wards Corner. The increase in consolidated revenues directly
correlates with an increase in average occupancy at both NorthCreek Office Park
and Leawood Fountain Plaza when comparing 1994 to 1995. While NorthCreek Office
Park and Leawood Fountain Plaza had increases in average occupancy and
revenues, Wards Corner's average occupancy decreased along with its revenues.
For the year ended December 31, 1995 consolidated expenses are $1,577,023 which
is an increase of $77,703 when compared to year ended December 31, 1994. The
increase in consolidated expenses can be attributable to increases in real
estate taxes, operating expenses and professional services. The increases in
real estate taxes is attributable to Countryside Executive Center and Leawood
Fountain Plaza. The increase in operating expenses relates to increases in
administrative costs ($17,555) and vacancy expense ($13,445), offset by
decrease in cleaning ($7,218). The increase in administrative costs are
attributable to the Consent Statement. The increase in vacancy expense relates
to Countryside Executive Center and Wards Corner while the decrease in cleaning
was predominately attributable to Countryside Executive Center. Professional
fees increased during 1995 due to costs associated with the Consent Statement.
With revenues increasing $33,174 and expenses increasing $77,703, net income
for the year ended December 31, 1995, decreased $44,529 when compared to year
ended December 31, 1994. The decrease in net income resulted in a decline in
earnings per limited partnership unit of $1.99. Cash flow provided by
operations for the year ended December 31, 1995 is $823,576 compared to
$706,242 provided by operations in 1994. The Registrant distributed $254,961
to the limited and general partners along with $154,049 of property additions.
1994 Comparisons
- ----------------
For the year ended December 31, 1994 consolidated revenues were $1,753,366
which represents a decrease of $116,787 when compared to December 31, 1993. The
decrease in revenues relates to an increase in rent concessions ($94,349) and a
decrease in bad debt recoveries ($129,470) at Wards Corner, offset by and
increase in revenues at NorthCreek Office Park ($74,459). As previously stated,
the increase in revenues at NorthCreek Office Park can be attributable to an
increase in average occupancy.
As of December 31, 1994 consolidated expenses are $1,499,320 which is a
decrease of $1,632,647 when compared to year end December 31, 1993. The
significant decrease in expenses relates to the investment property devaluation
in 1993 of $1,506,000. If the investment property devaluation is not
considered, the consolidated expenses decreased $126,647. The decrease after
taking into account the investment property devaluation is predominately due to
decreases in real estate taxes and other operating expenses offset by an
<PAGE> 13
increase in professional fees. The decrease in real estate taxes is
attributable to Countryside Executive Center and its reduction in property
assessment value from 1993 to 1994. The decrease in other operating expenses
relates to decreases in bad debt expense ($52,581), vacancy expense ($12,947),
and utility costs ($7,449), offset by increases in administrative costs
($7,813). The decrease in bad debt expense and vacancy expense relates
primarily to Wards Corner while the decrease in utility costs is attributable
to Countryside Executive Center. The increase in administrative costs relates
to fourth quarter 1994 expenses relating to the preparation of the Consent
Statement. The increase in professional fees also relates to the preparation of
the Consent Statement.
Net income for the year ended December 31, 1994 was $254,046 or $12.16 per
limited partnership unit. For the same period ended December 31, 1993, the net
loss was $1,261,814 or $65.61 per limited partnership unit. The significant
increase in net income from 1993 to 1994 is attributable to the 1993 investment
property devaluation of $1,506,000. Cash flow provided by operations for the
year ended was $706,242 which enabled the Registrant to fund investment
property additions of $251,995 and distribute $382,422 to the limited and
general partners.
Inflation
- ---------
The effects of inflation did not have a material impact upon the Registrant's
operations in fiscal 1995, and are not expected to materially affect the
Registrant's operation in 1996.
Interest Rates
- --------------
In 1995 the Registrant was not affected by increases in interest rates on
floating rate debt. Future increases in the prime interest rate can adversely
affect the operations of the Registrant in 1996 and in the future.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
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 not
applicable.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------
None
<PAGE> 14
PART III
--------
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ---------------------------------------------------------------
The General Partners of the Registrant responsible for all aspects of the
Registrant's operations are Gregory J. Nooney, Jr., age 65, and Nooney Income
Investments Two, Inc., a Missouri corporation. Gregory J. Nooney, Jr. is a
senior officer of Nooney Company, the sponsor of the Registrant.
The background and experience of the General Partners are as follows:
Gregory J. Nooney, Jr. joined Nooney Company in 1954 and is currently Chairman
of the Board and Chief Executive Officer.
John J. Nooney is a Special General Partner of the Partnership and as such,
does not exercise control of the affairs of the Partnership.
John J. Nooney joined Nooney Company in 1958 and was President and Treasurer
until he resigned in 1992. Mr. Nooney is currently Chairman of the Board of
Dalton Investments, a real estate asset management firm.
Nooney Income Investments Two, Inc. was formed in November 1984 for the purpose
of being a general and/or limited partner in the Registrant and other limited
partnerships. Gregory J. Nooney, Jr. is a director of Nooney Income
Investments Two, Inc.
Gregory J. Nooney, Jr. and John J. Nooney are brothers. Gregory J. Nooney, Jr.
and Faith L. Nooney (wife of John J. Nooney) are stockholders of Nooney
Company, with Gregory J. Nooney, Jr. controlling all voting stock of Nooney
Company.
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.
During 1993 Lindbergh Boulevard Partners, L.P. filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code. Gregory J. Nooney, Jr. is the
general partner of Nooney Ltd. II, L.P, which in turn is the general partner of
Nooney Development Partners, L.P., which in turn is the general partner of
Nooney-Hazelwood Associates, L.P. which is the general partner of Lindbergh
Boulevard Partners, L.P. Lindbergh Boulevard Partners, L.P. emerged from
bankruptcy on May 17, 1994, when its Plan of Reorganization was confirmed.
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 26-27 and "Profits and Losses for Tax
<PAGE> 15
Purposes; Distributions; and Expenses of General Partners" on pages A-17 to
A-22 of the Prospectus of the Registrant dated February 15, 1985, as
supplemented and filed pursuant to Rule 424(c) of the Securities Act of 1933
(the "Prospectus"), which are incorporated herein by reference.
During 1995, cash distributions of $14,693 were 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.
No person is known to the Registrant to be the beneficial owner of more than 5%
of the outstanding Interests of the Registrant.
(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 26-27 and "Management" on pages 23-25
of the Prospectus, which are incorporated herein by reference.
Nooney Krombach Company, the manager of Registrant's properties, is a wholly-
owned subsidiary of Nooney Company. Nooney Krombach Company is entitled to
receive monthly compensation from the Registrant for property management and
leasing services, plus reimbursement of expenses. During the year ended
December 31, 1995, the Registrant paid property management fees of $107,060 to
Nooney Krombach Company.
The Registrant paid Nooney Krombach Company $25,000 for reimbursement for
certain administrative services including accounting, issuing and transferring
of units, data processing, investor communications and other administrative
services.
In addition, the Registrant paid Nooney Krombach Company a fee of $75,000 for
its services in connection with the purchase of the mortgage lender's interest
in NorthCreek Executive Center, Wards Corner Business Center and Countryside
Executive Center.
<PAGE> 16
See Item 11 above for a discussion of cash distributions paid to the General
Partners during the year ended December 31, 1995.
(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 the year ended December 31, 1995 in connection with various
transactions.
(c) Indebtedness of Management.
Not Applicable.
(d) Transactions with promoters.
Not Applicable.
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 (deficit)
Statements of cash flows
Notes to financial statements
2. Financial Statement Schedules (filed herewith as Exhibit 99.3):
Schedule - Reconciliation of partners' equity (deficit)
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 19.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report, the
Registrant filed a report on Form 8-K dated December 29, 1995, which
reported an Item 2. Acquisition of Assets.
<PAGE> 17
(c) Exhibits:
See Exhibit Index on Page 19.
(d) Not applicable.
<PAGE> 18
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: March 8, 1996 /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. - Director
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
<PAGE> 19
EXHIBIT INDEX
-------------
Exhibit Number Description
- -------------- --------------------------------------------------------------
3 Amended and Restated Agreement and Certificate of Limited
Partnership dated February 3, 1986, is incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1986, as filed pursuant to
Rule 13a-1 of the Securities Exchange Act of 1934 (File
No. 0-14360).
10 Management Contract between Nooney Income Fund Ltd. II and
Nooney Management Company (now Nooney Krombach Company) dated
March 12, 1985, is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1985, as filed pursuant to Rule 15d-1 of the
Securities Exchange Act of 1934 (File No. 2-94533).
27 Financial Data Schedule (provided for the information of the
Securities and Exchange Commission only)
99.1 List of Directorships filed in response to Item 10.
99.2 Pages 23-27 and A-17 - A-22 of the Prospectus of the
Registrant dated February 15, 1985, 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.
<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.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,092,159
<SECURITIES> 0
<RECEIVABLES> 320,515
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,412,674
<PP&E> 15,960,359
<DEPRECIATION> 3,225,159
<TOTAL-ASSETS> 16,803,566
<CURRENT-LIABILITIES> 857,890
<BONDS> 7,190,000
0
0
<COMMON> 0
<OTHER-SE> 8,643,642
<TOTAL-LIABILITY-AND-EQUITY> 16,803,566
<SALES> 1,785,540
<TOTAL-REVENUES> 1,786,540
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,575,889
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,134
<INCOME-PRETAX> 209,517
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,517
<EPS-PRIMARY> 10.17
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
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.
Gregory J. Nooney, Jr.
- ----------------------
Limited Partnerships:
Nooney Real Property Investors-Two, L.P. Nooney Income Fund Ltd., L.P
Nooney Real Property Investors-Four, L.P.
Directorships:
Nooney Realty Trust, Inc.
John J. Nooney
- --------------
Limited Partnerships:
Nooney Real Property Investors-Two, L.P. Nooney Income Fund Ltd., L.P.
Nooney Real Property Investors-Four, L.P.
<PAGE> 1
EXHIBIT 99.3
INDEPENDENT AUDITORS' REPORT
To the Partners of
Nooney Income Fund Ltd. II, L.P.:
We have audited the accompanying balance sheets of Nooney Income Fund Ltd. II,
L.P. (a limited partnership) as of December 31, 1995 and 1994, and the related
statements of operations, partners' equity (deficiency in assets) and cash
flows for each of the three years in the period ended December 31, 1994. 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 Income Fund, Ltd. II, L.P. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 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.
/S/ DELOITTE & TOUCHE LLP
February 9, 1996
<PAGE> 2
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS (Notes 2 and 3) $ 1,092,159 $ 1,118,033
ACCOUNTS RECEIVABLE (Note 2) 320,515 108,832
INVESTMENT PROPERTY (Notes 1, 2 and 9):
Land 2,618,857 1,674,836
Buildings and improvements 13,341,502 10,260,354
------------ ------------
15,960,359 11,935,190
Less accumulated depreciation 3,225,159 4,131,718
------------ ------------
12,735,200 7,803,472
Investment property held for sale (Notes 1 and 2) 2,431,537
------------ ------------
Total investment property 15,166,737 7,803,472
DEFERRED EXPENSES - At amortized cost (Note 2) 224,155 88,115
------------ ------------
TOTAL $16,803,566 $ 9,118,452
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 251,779 $ 42,775
Accrued real estate taxes 606,111 290,572
Accrued sewer expenses (Note 7) 32,400
Refundable tenant deposits 112,034 63,619
Mortgage note payable (Note 4) 7,190,000
------------ ------------
Total liabilities 8,159,924 429,366
PARTNERS' EQUITY 8,643,642 8,689,086
------------ ------------
TOTAL $16,803,566 $ 9,118,452
============ ============
- ---------------
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 3
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rental and other income (Notes 2, 5 and 8) $ 1,754,750 $ 1,729,872 $ 1,843,782
Interest 31,790 23,494 26,371
------------ ------------ ------------
Total revenues 1,786,540 1,753,366 1,870,153
EXPENSES:
Interest 1,134 1,238 1,238
Depreciation and amortization (Note 2) 450,319 459,247 475,591
Real estate taxes 366,762 331,245 405,246
Property management fees - related party (Note 2) 107,060 105,854 104,619
Repairs and maintenance 123,167 118,850 120,209
Other operating expenses (includes $25,000 in 1995,
1994 and 1993) (Note 2) 372,120 354,554 419,054
Professional services 156,461 128,332 100,010
Writedown of investment property (Note 9) 1,506,000
------------ ------------ ------------
Total expenses 1,577,023 1,499,320 3,131,967
------------ ------------ ------------
NET INCOME (LOSS) $ 209,517 $ 254,046 $(1,261,814)
============ ============ ============
NET INCOME (LOSS) ALLOCATION:
General partners $ 13,989 $ 20,380 $ (725)
Limited partners $ 195,528 $ 233,666 $(1,261,089)
LIMITED PARTNERS' DATA (Note 2):
Net income (loss) per unit $ 10.17 $ 12.16 $ (65.61)
============ ============ ============
Cash distributions - Investment income per unit $ 10.17 $ 12.16 $ --
============ ============ ============
Cash distributions - Return of capital per unit $ 2.33 $ 6.59 $ 12.50
============ ============ ============
Weighted average limited partnership units outstanding 19,221 19,221 19,221
============ ============ ============
</TABLE>
<PAGE> 4
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Limited General
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE (DEFICIENCY IN ASSETS),
JANUARY 1, 1993 $10,443,020 $ (108,799) $10,334,221
Net loss (1,261,089) (725) (1,261,814)
Cash distributions (240,262) (14,683) (254,945)
------------ ------------ ------------
BALANCE (DEFICIENCY IN ASSETS),
DECEMBER 31, 1993 8,941,669 (124,207) 8,817,462
Net income 233,666 20,380 254,046
Cash distributions (360,410) (22,012) (382,422)
------------ ------------ ------------
BALANCE (DEFICIENCY IN ASSETS),
DECEMBER 31, 1994 8,814,925 (125,839) 8,689,086
Net income 195,528 13,989 209,517
Cash distributions (240,268) (14,693) (254,961)
------------ ------------ ------------
BALANCE (DEFICIENCY IN ASSETS),
DECEMBER 31, 1995 $ 8,770,185 $ (126,543) $ 8,643,642
============ ============ ============
- ---------------
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 5
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 209,517 $ 254,046 $(1,261,814)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Writedown of investment property -- 1,506,000
Depreciation 421,224 428,766 451,328
Amortization of deferred expenses 29,095 30,481 24,263
Net changes in accounts affecting operations:
Accounts receivable (211,683) 87,981 (59,956)
Deferred expenses (165,135) (54,627) (20,726)
Accounts payable and accrued expenses 209,004 (8,332) 16,100
Accrued real estate taxes 315,539 (35,006) (26,483)
Accrued sewer expenses (32,400) 1,238 1,237
Refundable tenant deposits 48,415 1,695 5,341
------------ ------------ ------------
Net cash provided by operating activities 823,576 706,242 635,290
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property (154,049) (251,995) (603,421)
Acquisition interests (7,630,440)
------------ ------------ ------------
Net cash used in investing activities (7,784,489) (251,995) (603,421)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Cash distributions to partners (254,961) (382,422) (254,945)
Proceeds from mortgage note payable 7,190,000
------------ ------------ ------------
Net cash provided by (used in) financing activities 6,935,039 (382,422) (254,945)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (25,874) 71,825 (223,076)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,118,033 1,046,208 1,269,284
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,092,159 $ 1,118,033 $ 1,046,208
============ ============ ============
- ---------------
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 6
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- -------------------------------------------------------------------------------
1. BUSINESS
Nooney Income Fund Ltd. II, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of Missouri on
February 13, 1985 for the purpose of investing in income-producing real
properties, such as shopping centers, office buildings, warehouses and
other commercial properties.
The Partnership owned three properties jointly within 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 in lieu of foreclosure. On December 29,
1995, the Partnership purchased the partial interests of Countryside
Executive Center (50%), Wards Corner Business Center A & B (55%) and
NorthCreek Office Park (55%) (the Acquisition Interests) from the
subsidiary of the mortgage lender. The purchase price was $7,190,000 which
was 100% financed by the mortgage lender. The Partnership received
authority to complete the transaction through solicitation of the limited
partners, with a majority of the limited partnership units positively
consenting to the transaction. Effective January 1, 1996, the property
known as Wards Corner was renamed Northeast Commerce Center.
The Partnership's undivided interest in its properties prior to and after
the acquisition is as follows:
Prior to After
Acquisition Acquisition
----------- -----------
Leawood Fountain Plaza 24 % 24 %
Countryside Executive Center 50 % 100 %
Wards Corner Business Center A & B 45 % 100 %
NorthCreek Office Park 45 % 100 %
Tower Industrial Building 100 % 100 %
The transaction was accounted for under the purchase method; therefore, the
balance sheet as of December 31, 1995 includes the Partnership's interests
in its properties after the acquisition.
<PAGE> 7
The statements of operations presented reflect the results of operations of
the various properties from their respective dates of acquisition. The
following table presents unaudited pro forma financial information assuming
the acquisition occurred at the beginning of each of the years presented.
These pro forma results have been prepared for comparative purposes only
based upon assumptions that management deems appropriate and do not purport
to be indicative of what would have occurred had the acquisition been made
at the beginning of each of the years presented.
(Unaudited)
--------------------------
1995 1994
------------ ------------
Total revenues $ 3,245,517 $ 3,210,161
------------ ------------
Interest 690,723 701,025
Depreciation and amortization 724,941 736,476
Real estate taxes 681,157 618,351
Other operating expenses 1,269,077 1,205,903
------------ ------------
Total expenses 3,365,898 3,261,755
------------ ------------
Net loss $ (120,381) $ (51,594)
============ ============
Net income (loss) allocation:
General partners $ 10,690 $ 17,324
Limited partners $ (131,071) $ (68,918)
Limited partners data:
Net income (loss) per unit $ (6.82) $ (3.59)
============ ============
Weighted average limited partnership units
outstanding 19,221 19,221
============ ============
The Partnership's portfolio is comprised of a 24% undivided interest in an
office complex in Leawood, Kansas; an office warehouse in Mundelein,
Illinois; a single story office building in Palatine, Illinois; an
office/warehouse/showroom facility in Loveland, Ohio; and an office complex
in Cincinnati, Ohio. The proportionate share of these properties owned by
the Partnership generated 15.64%, 10.59%, 30.12%, 10.70% and 32.95% of
rental and other income, respectively, for the year ended December 31,
1995.
It is management's intent to sell Countryside Executive Center
(Countryside) as soon as practicable because of local market conditions,
tax burdens and other factors related specifically to this property.
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 Nooney Income
Fund Ltd. II, L.P. The statements do not include any assets, liabilities,
revenues or expenses attributable to the partners' individual activities.
<PAGE> 8
No provision has been made for federal and state income taxes since these
taxes are the personal responsibility of the partners.
The corporate general partner is a partially-owned subsidiary of Nooney
Company. One of the individual general partners is an officer, director
and shareholder of Nooney Company. Another individual general partner's
spouse is a shareholder of Nooney Company. Nooney Company is also an
economic assignee of two former individual general partners. Nooney
Krombach Company, a wholly-owned subsidiary of Nooney Company, manages the
Partnership's real estate for a management fee. Property management fees
paid to Nooney Krombach Company were $107,060 and $105,854 and $104,619 for
the years ended December 31, 1995, 1994 and 1993, respectively. In 1995,
the Partnership paid an acquisition/financing fee to Nooney Krombach
Company of $75,000 relating to the purchase of the Acquisition Interests,
which was capitalized into the purchase price. Additionally, the
Partnership pays Nooney Krombach Company $25,000 annually as reimbursement
for administrative services including accounting, issuing and transferring
of units, data processing and investor communications.
Investment property is recorded at the lower-of-cost or net realizable
value. Investment property that is currently held for sale is recorded at
the lower of its net book value or net realizable value.
Buildings and improvements are depreciated over their estimated useful
lives using the straight-line method.
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. At December 31,
1995, accounts receivable include approximately $59,000 ($91,000 in 1994)
of accrued rent which is not yet due under the terms of various lease
agreements.
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.
Net Operating Cash Income, as defined in the Partnership Agreement, is
distributed quarterly as follows: (1) 90% pro rata to the limited partners;
(2) 9% to the individual general partners as their annual Partnership
Management Fee; and (3) 1% to the individual general partners.
In the event it is determined after the close of a fiscal year that the
limited partners have not received their 7-1/2% non-cumulative preference
as defined in the Partnership Agreement, then the individual general
partners return to the partnership a portion of their distributions
received as their 9% annual Partnership Management Fee until the limited
partners have received their 7-1/2% non-cumulative preference. The
individual general partners are not required to return any amount in excess
of one-half of the 9% Partnership Management Fee received. If Net
Operating Cash Income for any fiscal year is not sufficient to pay the
limited partners any portion of their 7-1/2% non-cumulative preference, the
unpaid amount does not accrue to future fiscal years. The annual
Partnership Management Fee is a cumulative preference. The preferential
return can be distributed only through cash distributed as a result of a
Major Capital Event (as defined) or cash distributed upon dissolution of
<PAGE> 9
the partnership. Such preferred distribution is only allowed after the
general and limited partners receive amounts equal to their adjusted
capital accounts and the limited partners receive an 11% cumulative return.
Through December 31, 1995, Partnership Management Fees totaling $237,429
have not been paid under the limitations stated above. Based upon the
priorities of cash to be distributed, management believes that the
likelihood of payment of the $237,429 is remote and therefore was not
accrued on the balance sheet.
For financial statement and income tax reporting, the income from
operations is allocated as follows: first, a special allocation of gross
income to the individual general partners in the amount equal to the annual
partnership management fee distributed to the individual general partners
during the period; then, the remainder is allocated 1% to the individual
general partners and 99% pro rata to the limited partners based upon the
relationship of original capital contributions of the limited partners.
Limited partnership per unit computations are based on the weighted average
number of limited partnership units outstanding during the period.
The Partnership considers all highly liquid debt instruments with a
maturity of three months or less at date of purchase to be cash
equivalents.
Deferred expenses consist of lease fees which are amortized over the terms
of their respective leases.
Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform with the 1995 presentation.
3. CASH EQUIVALENTS
Cash equivalents consist of bank repurchase agreements of $370,000 at
December 31, 1995 ($675,000 at December 31, 1994).
4. MORTGAGE NOTE PAYABLE
Mortgage note payable as of December 31, 1995, consists of the following:
Note payable to bank, interest only due monthly at bank's
prime rate (8.5% at December 31, 1995) plus .75% to
December 1996 when monthly payments increase to include
the following principal payments:
1997 - $7,789; 1998 - $8,388; 1999 and 2000 - $9,587;
2001 and 2002 - $11,000. Remaining principal balance
is due in December 2002 $7,190,000
==========
The mortgage note is collateralized by deeds of trust and assignment of
rents on investment property with a net book value of $13,400,000 at
December 31, 1995. Principal payments required during the next five years
are as follows:
1996 $ --
1997 93,000
1998 101,000
1999 115,000
2000 115,000
<PAGE> 10
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of 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 carrying amount and
estimated fair market value of the Partnership's debt at December 31, 1995
are equal since the debt terms specify a fixed principal payment.
Carrying Estimated
Amount Fair Value
---------- ----------
Mortgage note payable $7,190,000 $7,190,000
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 December 31, 1995 does not take into consideration
expenses that would be incurred to settle the debt obligations at fair
value.
5. RENTAL REVENUES UNDER OPERATING LEASES
Minimum future rental revenues under noncancelable operating leases in
effect as of December 31, 1995 are as follows:
1996 $ 2,597,000
1997 1,506,000
1998 983,000
1999 602,000
2000 369,000
Remainder 925,000
------------
Total $ 6,982,000
============
6. FEDERAL INCOME TAX STATUS
The general partners believe, based on opinion of legal counsel, that
Nooney Income Fund Ltd. II, 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 properties
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. Losses in connection with the writedown of investment property
are not recognized for tax purposes until the property is disposed.
<PAGE> 11
The comparison of financial statement and income tax reporting is as
follows:
Financial Income
Statement Tax
------------ ------------
1995:
Net income $ 209,517 $ 53,069
Partners' equity 8,643,642 14,496,254
1994:
Net income $ 254,046 $ 114,775
Partners' equity 8,689,086 14,698,146
1993:
Net loss $(1,261,814) $ (241,634)
Partners' equity 8,817,462 14,965,793
7. ACCRUED SEWER EXPENSES
The Partnership's estimated obligation for construction of a sewer system
at one of its properties was accrued when the Partnership acquired the
property. Payments on the obligation were made in 1995.
8. MAJOR TENANT
A substantial amount of the Partnership's revenue in 1995 was derived from
two major tenants whose rentals amounted to approximately $201,000 and
$191,000 or 11.3% and 10.7%, respectively, of total revenues. A
substantial amount of the Partnership's revenue in 1994 was derived from
two major tenants whose rentals amounted to $194,000 for each tenant or
11% of total revenues for each tenant. No individual tenant accounted for
more than 10% of revenue in 1993.
9. WRITEDOWN OF INVESTMENT PROPERTY
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 to amounts equal to the appraised
values. These adjustments were made in the fourth quarter as a result of
lease renegotiations that took place and market information that became
available at that time. No such writedowns were necessary in 1994 and
1995.
* * * * * *
<PAGE> 12
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE - RECONCILIATION OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------
The reconciliation of partners' equity (deficit) between financial statement and income tax reporting is as
follows:
<CAPTION>
December 31, 1995
----------------------------------------
Limited General
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance (deficit) per statement of partners' equity $ 8,770,185 $ (126,543) $ 8,643,642
Add:
Selling commissions and other offering costs not deductible for
income tax purposes 2,411,625 2,411,625
Prepaid rents included in income for income tax purposes (1,411) (14) (1,425)
Master lease income included in income for income tax purposes 118,404 1,196 119,600
Writedown of investment property not recognized for income tax
purposes 5,202,450 52,550 5,255,000
------------ ------------ ------------
Total 16,501,253 (72,811) 16,428,442
Less:
Excess depreciation and amortization deducted for income tax
purposes 1,836,918 36,549 1,873,467
Rent concessions not recognized for income tax purposes 58,134 587 58,721
------------ ------------ ------------
Balance (deficit) per tax return $14,606,201 $ (109,947) $14,496,254
============ ============ ============
<CAPTION>
December 31, 1994
----------------------------------------
Limited General
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance (deficit) per statement of partners' equity $ 8,814,925 $ (125,839) $ 8,689,086
Add:
Selling commissions and other offering costs not deductible for
income tax purposes 2,411,625 2,411,625
Prepaid rents included in income for income tax purposes 10,620 107 10,727
Master lease income included in income for income tax purposes 118,404 1,196 119,600
Writedown of investment property not recognized for income tax
purposes 5,202,450 52,550 5,255,000
------------ ------------ ------------
Total 16,558,024 (71,986) 16,486,038
<PAGE> 13
Less:
Excess depreciation and amortization deducted for income tax
purposes 1,662,220 34,784 1,697,004
Rent concessions not recognized for income tax purposes 89,979 909 90,888
------------ ------------ ------------
Balance (deficit) per tax return $14,805,825 $ (107,679) $14,698,146
============ ============ ============
<CAPTION>
December 31, 1993
----------------------------------------
Limited General
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance (deficit) per statement of partners' equity $ 8,941,669 $ (124,207) $ 8,817,462
Add:
Selling commissions and other offering costs not deductible
for income tax purposes 2,411,625 2,411,625
Prepaid rents included in income for income tax purposes 23,259 235 23,494
Master lease income included in income for income tax purposes 118,404 1,196 119,600
Writedown of investment property not recognized for income tax
purposes 5,202,450 52,550 5,255,000
------------ ------------ ------------
Total 16,697,407 (70,226) 16,627,181
Less:
Excess depreciation and amortization deducted for income tax
purposes 1,492,267 33,068 1,525,335
Rent concessions not recognized for income tax purposes 134,692 1,361 136,053
------------ ------------ ------------
Balance (deficit) per tax return $15,070,448 $ (104,655) $14,965,793
============ ============ ============
</TABLE>
<PAGE> 14
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Column A Column B Column C
- ---------------------------------------------------- ------------ ----------------------------------------
Initial Cost to Partnership
----------------------------------------
Buildings and
Description Encumbrances Land Improvements Total
- ---------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Leawood Fountain Plaza Office Complex (24% undivided
interest), Leawood, Kansas $ -- $ 318,962 $ 1,991,417 $ 2,310,379
Tower Industrial Building, Mundelein, Illinois 193,744 1,042,076 1,235,820
Countryside Executive Center, Palatine, Illinois 623,919 4,302,911 4,926,830
NorthCreek Office Park, Cincinnati, Ohio 338,850 4,639,617 4,978,467
Wards Corner Business Center A & B, Cincinnati, Ohio 199,361 2,784,317 2,983,678
Countryside Executive Center, NorthCreek Office Park
and Wards Center Business Center A & B 7,190,000
------------ ------------ ------------ ------------
Total $ 7,190,000 $ 1,674,836 $14,760,338 $16,435,174
============ ============ ============ ============
<CAPTION>
Column A Column D Column E
- ---------------------------------------------------- ------------ ----------------------------------------
Costs
Capitalized Gross Amount at Which
Subsequent Carried at Close of Period
to ----------------------------------------
Acquisition Buildings and
Description <F1> Land Improvements Total
- ---------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Leawood Fountain Plaza Office Complex (24% undivided
interest), Leawood, Kansas $ (677,693) $ 318,962 $ 1,313,724 $ 1,632,686
Tower Industrial Building, Mundelein, Illinois 2,840 193,744 1,044,916 1,238,660
Countryside Executive Center, Palatine, Illinois (1,444,287) 1,356,419 2,126,124 3,482,543
NorthCreek Office Park, Cincinnati, Ohio 3,606,915 1,370,100 7,215,282 8,585,382
Wards Corner Business Center A & B, Cincinnati, Ohio 1,519,953 736,051 3,767,580 4,503,631
Countryside Executive Center, NorthCreek Office Park
and Wards Center Business Center A & B
------------ ------------ ------------ ------------
Total $ 3,007,728 $ 3,975,276 $15,467,626 $19,442,902
============ ============ ============ ============
<PAGE> 15
- ---------------
<FN>
<F1> Amounts shown are net of assets written-off and the following writedowns to reflect appraised values:
Leawood Fountain Plaza Office Complex $ 754,000
Countryside Executive Center 3,256,000
NorthCreek Office Park 484,000
Wards Corner Business Center A & B 761,000
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H Column I
- ---------------------------------------------------- ------------ ------------ ------------ ------------
Life on
Which
Depreciation
in Latest
Income
Accumulated Date of Date Statement
Description Depreciation Construction Acquired is Computed
- ---------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Leawood Fountain Plaza Office Complex (24% undivided
interest), Leawood, Kansas $ 730,928 1982-1983 2/20/85 30 years
Tower Industrial Building, Mundelein, Illinois 341,949 1974 3/20/86 30 years
Countryside Executive Center, Palatine, Illinois 1,051,006 1975 12/16/86 30 years
NorthCreek Office Park, Cincinnati, Ohio 1,405,984 1984-1986 12/29/86 30 years
Wards Corner Business Center A & B, Cincinnati, Ohio 746,298 1985 12/29/86 30 years
------------
Total $ 4,276,165
============
(Continued)
</TABLE>
<PAGE> 16
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
(A) Reconciliation of amounts in Column E:
Balance at beginning of period $11,935,190 $11,709,165 $12,660,831
Add:
Cost of improvements 154,049 251,995 603,421
Acquisition of undivided interests 7,630,440
Less:
Writedown of investment property (1,506,000)
Cost of disposals 276,777 (25,970) (49,087)
------------ ------------ ------------
Balance at end of period $19,442,902 $11,935,190 $11,709,165
============ ============ ============
Reconciliation of amounts in Column F:
(B) Balance at beginning period $ 4,131,718 $ 3,728,922 $ 3,326,681
Add - Provision during period 421,224 428,766 451,328
Less - Depreciation on disposals 276,777 (25,970) (49,087)
------------ ------------ ------------
Balance at end of period $ 4,276,165 $ 4,131,718 $ 3,728,922
============ ============ ============
(C) The aggregate cost of real estate owned for
federal income tax purposes $24,697,902 $17,190,190 $16,964,165
============ ============ ============
(Concluded)
</TABLE>
