SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended March 31, 1997
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14360
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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
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12,13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date ___.
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PART I
ITEM 1 - Financial Statements:
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited)
ASSETS: ----------- -----------
Cash and cash equivalents $ 1,377,708 $ 1,323,026
Accounts receivable 194,560 219,655
Investment property, at cost:
Land 2,618,857 2,618,857
Buildings and Improvements 13,408,670 13,405,976
----------- -----------
16,027,527 16,024,833
Less accumulated depreciation 3,909,375 3,710,204
----------- -----------
12,118,152 12,314,629
Investment property-held for sale 2,470,106 2,483,469
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14,588,258 14,798,098
Prepaid and Deferred expenses -
At amortized cost 148,340 132,327
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$16,308,866 $16,473,106
=========== ===========
LIABILITIES AND PARTNERS' EQUITY:
Liabilities:
Accounts payable and accrued
expenses $ 85,546 $ 103,331
Accrued real estate taxes 435,886 582,482
Refundable tenant deposits 132,543 125,026
Mortgage note payable 7,166,633 7,190,000
----------- -----------
7,820,608 8,000,839
Partners' Equity 8,488,258 8,472,267
----------- -----------
$16,308,866 $16,473,106
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SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
(UNAUDITED)
Three Months Ended
March 31, March 31,
1997 1996
----------- -----------
REVENUES:
Rental and other income $ 878,966 $ 759,483
Interest 430 5,043
----------- -----------
879,396 764,526
EXPENSES:
Interest Expense 145,110 158,110
Depreciation and amortization 232,723 164,172
Real estate taxes 115,768 169,887
Property management fees paid to
Nooney Krombach Company 53,469 46,353
Reimbursement to Nooney Krombach
Company for partnership management
services and indirect expenses 10,000 6,250
Repairs & Maintenance 49,702 44,044
Professional Services 78,572 88,384
Utilities 35,153 41,009
Payroll 26,276 25,017
Cleaning 37,647 37,479
Other operating expenses 78,985 78,895
----------- -----------
863,405 859,600
----------- -----------
NET INCOME (LOSS) $ 15,991 $ (95,074)
=========== ===========
NET INCOME(LOSS) PER LIMITED
PARTNERSHIP UNIT $ .82 $ (4.90)
=========== ===========
PARTNERS' EQUITY:
Beginning of Period $ 8,472,267 $ 8,643,642
Net Income (Loss) 15,991 (95,074)
----------- -----------
End of Period $ 8,488,258 $ 8,548,568
=========== ===========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31, March 31,
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 15,991 $ (95,074)
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 232,723 164,172
Real estate tax deposits received -- 337,685
Changes in assets and liabilities:
Decrease in accounts receivable 25,095 121,158
Increase in prepaid expenses &
deferred assets (31,413) (125,264)
Decrease in accounts payable (17,785) (153,271)
Decrease in accrued real estate taxes (146,596) (126,541)
Increase in refundable tenant deposits 7,517 5,865
----------- -----------
Total Adjustments 69,541 223,804
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Net cash provided by operating
activities 85,532 128,730
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CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to investment property (7,483) (36,664)
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CASH FLOWS FROM FINANCING ACTIVITIES -
Payments on mortgage notes payable (23,367) 0
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 54,682 92,066
CASH AND CASH EQUIVALENTS, beginning of period 1,323,026 1,092,159
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,377,708 $ 1,184,225
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during year for interest 145,110 158,110
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NOTE A:
Refer to the Registrant's financial statements for the year ended December 31,
1996, which are contained in the Registrant's Annual Report on Form 10-K, for a
description of the accounting policies which have been continued without change.
Also, refer to the footnotes to those statements for additional details of the
Registrant's financial condition. The details in those notes have not changed
except as a result of normal transactions in the interim periods.
NOTE B:
The financial statements include only those assets, liabilities, and results of
operations of the partners which relate to the business of Nooney Income Fund
Ltd. II, L.P. The statements do not include assets, liabilities, revenues or
expenses attributable to the partners' individual activities. No provision has
been made for federal and state income taxes since these taxes are the
responsibility of the individual partners. In the opinion of the general
partners, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in financial position at March 31, 1997 and for all periods presented
have been made.
NOTE C:
The Registrant's properties are managed by Nooney Krombach Company, a
wholly-owned subsidiary of Nooney Company. Certain general partners of the
Registrant are officers and directors of Nooney Company. Nooney Income
Investments Two, Inc., a general partner, is a 75% owned subsidiary of Nooney
Company.
NOTE D:
The earnings per limited partnership unit for the three months ended March 31,
1997 and 1996 was computed based on 19,221 units, the number of units
outstanding during the periods.
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<PAGE>
ITEM :7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash and cash equivalents on hand as of March 31, 1997, is $1,377,708, an
increase of $54,682 when compared to year end December 31, 1996. During the
quarter, net cash provided by operating activities was $85,532. Cash was used
for payment of tenant improvements in the amount of $7,483 and payments on
mortgage notes payable of $23,367. Based on the current cash balances and the
properties ability to provide operating cash flow, the Registrant expects the
properties to fund anticipated capital expenditures for the remainder of 1997.
The anticipated capital expenditures by property are as follows:
Leasing Capital Other Capital Total
--------------- ------------- -----
NorthCreek Office Park $ 76,909 $ 45,000 $ 121,909
Tower Industrial Building 0 0 0
Northeast Commerce Center 88,289 0 88,289
Countryside Executive Center 486,594 72,401 558,995
Leawood Fountain Plaza (24%) 51,831 12,180 64,011
--------- --------- ---------
$703,623 $129,581 $833,204
======== ======== ========
Leasing Capital at all of the partnership's properties relates to tenant
improvements and lease commissions for new and renewal tenants. Other Capital at
Leawood Fountain Plaza includes sidewalk replacement, sprinkler additions, and
remodeling of the second floor restrooms as well as some new exterior lighting.
At Countryside Executive Center, Other Capital relates to parking lot
resurfacing and repair and painting of the building siding. At NorthCreek Office
Park, the Other Capital consists of replacing restroom countertops and treating
the wood shingle roofs throughout the property.
As previously disclosed, the General Partners feel that the market conditions
exist whereby Countryside Executive Center should be sold. As previously
reported, management is currently working on leasing additional space so that
occupancy is at a higher level which will command a higher sale price when the
property is ultimately sold.
The future liquidity of the Registrant is dependent on its ability to fund
future capital expenditures from operations and cash reserves and maintain
occupancy at all of the properties. Until such time as the real estate market
recovers and profitable sale of the properties is feasible, the Registrant will
continue to manage the properties to achieve its investment objectives.
Results of Operations by Property
The results of operations for the Registrant's properties for the quarters ended
March 31, 1997 and 1996 are detailed in the schedule below. Expenses and
revenues of the Registrant are excluded.
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<PAGE>
Tower Northeast Countryside Leawood
NorthCreek Industrial Commerce Executive Fountain
Office Park Building Center Center Plaza (24%)
----------- -------- ------ ------ -----------
1997
----
Revenues $ 337,992 $ 50,011 $ 164,821 $ 264,071 $ 74,249
Expenses 326,017 24,767 137,538 237,100 63,981
--------- --------- --------- --------- ---------
Net Income (Loss) $ 11,975 $ 25,244 $ 27,283 $ 26,971 $ 10,268
========= ========= ========= ========= =========
1996
----
Revenues $ 328,963 $ 47,043 $ 109,192 $ 223,021 $ 65,305
Expenses 295,396 25,161 168,700 249,770 62,791
--------- --------- --------- --------- ---------
Net Income (Loss) $ 33,567 $ 21,882 $ (59,508) $ (26,749) $ 2,514
========= ========= ========= ========= =========
Revenues at NorthCreek Office Park increased $9,029 or 3% when comparing quarter
end March 31, 1997 to the first quarter ended March 31, 1996. This 3% increase
can be attributable to an increase in base rental income due to overall rate
increases throughout the past year ($6,400) as well as an increase in escalation
income ($1,900). Expenses increased from $295,396 for the quarter ended March
31, 1996 to $326,017 for the quarter ended March 31, 1997. This increase is
mainly attributable to increases in depreciation expense ($36,300), repairs and
maintenance heating, ventilation and air conditioning ($4,300), and real estate
taxes ($3,300), offset by decreases in electric expense ($3,600) and snow
removal ($4,600).
Operating results at Tower Industrial Building for the quarter ended March 31,
1997 and 1996 remained relatively stable.
Revenues at Northeast Commerce Center were $164,821 at the quarter ended March
31, 1997 and $109,192 for the quarter ended March 31, 1996. This 51% increase or
$55,629 can be attributable to an increase in occupancy in the property from
1996 to 1997. At quarter end 1996, the property was 61% occupied. At quarter end
1997, the property is 87% occupied. Expenses for the quarters ending March 31,
1997 and March 31, 1996 were $137,538 and $168,700, respectively. The decrease
in expenses can be attributable to decreases in real estate taxes ($51,700) and
professional service other ($6,000), offset by increases in depreciation expense
($22,900) and amortization expense ($11,500).
At Countryside Executive Center, revenues were $264,071 and $223,021 for the
quarters ended March 31, 1997 and March 31, 1996, respectively. Revenues
increased 18% or $41,050 due to an increase in miscellaneous income ($50,600)
which can be attributable to a major tenant paying double rent during a holdover
period for the first quarter of 1997. This was offset by decreases in base
rental income from tenants overall ($35,500). This decrease is attributable to a
decrease in the overall occupancy at the property when comparing one year to the
next. Operating expenses decreased 5% or $12,670 when comparing the two years.
The expenses which decreased include real estate taxes ($8,900), repairs and
maintenance non-reimbursable building expenses ($3,200), and amortization
expense ($3,600), offset by an increase in snow removal of $7,600.
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At Leawood Fountain Plaza, revenues increased 13.7% or $8,944. The increase in
income can be attributable to increases in base rental rates, escalation income,
and miscellaneous income. Operating expenses remained relatively stable when
comparing the two periods.
The occupancy levels at the Registrant's properties are listed below:
Occupancy levels as of March 31,
--------------------------------
Property 1997 1996 1995
-------- ---- ---- ----
NorthCreek Office Park 98% 96% 97%
Tower Industrial Building 100% 100% 100%
Northeast Commerce Center 87% 61% 56%
Countryside Executive Center 59% 70% 83%
Leawood Fountain Plaza (24%) 88% 91% 92%
During the first quarter of 1997, leasing activity at NorthCreek Office Park
consisted of one tenant renewing their lease for 1,456 square feet. NorthCreek
Office Park has one major tenant which occupies spaces under two leases which
together comprise 36% of the available space. These leases expire in December
1998 and December 2003.
Tower Industrial Building is leased to a single tenant whose lease expires on
April 30, 2000.
At Northeast Commerce Center, occupancy remained 87% during the quarter.
Occupancy has increased greatly when compared to March 31, 1996, as detailed in
the annual report filed for this Registrant. The property has three major
tenants who occupy 50%, 18% and 10% of the available space. Their leases expire
December 31, 1998, October 31, 1999, and June 13, 2001, respectively.
At Countryside Executive Center, leasing activity during the first quarter
consisted of two new leases totaling $1,474 square feet, two renewal leases for
tenants occupying 2,444 square feet, and two tenants vacating 3,801 square feet.
The property's occupancy dropped from 61% at December 31, 1996, to 59% as of
March 31, 1997. This property has one major tenant who occupies approximately
13% of the space under a month-to-month lease. During 1996, the Registrant
worked hard to renew and expand this tenant in the building. During the first
quarter, the tenant decided to vacate Countryside Executive Center and move to a
new location at the end of May 1997 due to the fact that Countryside did not
have enough available space to meet its expansion needs. While on a
month-to-month lease, this tenant has been paying double rent.
During the first quarter of 1997, occupancy at Leawood Fountain Plaza dropped
from 92% at December 31, 1996 to 88% as of March 31, 1997. During the quarter,
one new lease was signed for 580 square feet. Two tenants renewed their leases
for 2,532 square feet and three tenants vacated 3,770 square feet. The property
has two major tenants, one occupying approximately 11% of the available space
whose lease expires in July 1998 and a second major tenant occupying
approximately 10% of the available space whose lease expires in July 1999.
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<PAGE>
Results of Consolidated Operations 1997
For the quarter ended March 31, 1997, consolidated revenues are $879,396
compared to $764,526 for the quarter ended March 31, 1996. The increase in
revenues of $114,870 can be attributable to increases in revenues at Northeast
Commerce Center ($55,629), Countryside Executive Center ($41,050), and Leawood
Fountain Plaza ($8,944) for the reasons discussed above. Consolidated expenses
for the quarters ending March 31, 1997 and March 31, 1996 are $863,404 and
$859,600, respectively. The slight increase in expenses is a result of a
combination of factors. Interest expense decreased slightly, depreciation and
amortization increased, real estate taxes decreased, property management fees
increased and other operating expenses decreased.
Results of Consolidated Operations 1996
For the quarter ended March 31, 1996 consolidated revenues are $764,526 compared
to $459,629 for the quarter ended March 31, 1995. The significant increase in
consolidated revenues is a direct result of the purchase of the undivided
interest in NorthCreek Office Park (55%), Countryside Executive Center (50%) and
Northeast Commerce Center (55%). When comparing operating results for the
quarter ended March 31, 1996 to 1995 as if the purchase of the additional
undivided interest in the properties occurred December 31, 1994, consolidated
revenues are $764,526 and $868,161, respectively. The decrease in revenues when
comparing similar ownership percentages can be attributed to Countryside
Executive Center and NorthCreek Office Park. The decrease in revenues of
approximately $71,500 at Countryside Executive Center relates to occupancy. The
average occupancy for the quarter ended March 31, 1995 was 83% while for the
quarter ended March 31, 1996 average occupancy is 71%. Revenues decreased
approximately $15,500 at NorthCreek Office Park primarily due to decreases in
expense pass-through income. As tenants renew their leases they receive a new
base year for operating expense pass-throughs. Their new base year causes a
reduction in the amount of expenses that can be passed-through to the tenant.
As of March 31, 1996 and 1995 consolidated expenses for the quarter ended were
$868,242 and $414,797. The significant increase in consolidated expenses is a
direct result of the purchase of the undivided interest in NorthCreek Office
Park (55%), Countryside Executive Center (50%) and Northeast Commerce Center
(55%). When comparing operating results for the quarter ended March 31, 1996 to
1995 as if the purchase of the additional undivided interest in the properties
occurred December 31, 1994, consolidated expenses were $868,242 and $773,018,
respectively. The increase in expenses when comparing similar ownership
percentages can be attributed to an increase in interest expense and other
operating expenses offset by a decrease in depreciation expense. Interest
expense increased $158,110 due to the first mortgage debt the Registrant assumed
through the purchase of the undivided interest in NorthCreek Office Park (55%),
Countryside Executive Center (50%) and Northeast Commerce Center (55%). The
increase in other operating expenses of $32,712 is attributable to professional
services ($22,393), snow removal ($10,045) and insurance ($7,743) offset by a
decrease in vacancy expense ($8,739). The decrease in depreciation expense of
$79,527 can be attributed to Countryside Executive Center and the
reclassification of the property to property held for sale. With the
reclassification of the property effective December 31, 1995, under generally
accepted accounting principals, the asset can no longer be depreciated.
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<PAGE>
Inflation
The effects of inflation did not have a material impact upon the Registrant's
operation in fiscal 1996 and are not expected to materially affect the
Registrant's operation in 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on Page 11
(b) Reports on Form 8-K
None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOONEY INCOME FUND LTD. II, L.P.
Date: May 15, 1997 By: /s/ Gregory J. Nooney, Jr.
------------------------------
Gregory J. Nooney, Jr.
General Partner
Nooney Income Investments Two, Inc.
By: /s/ Gregory J. Nooney, Jr.
------------------------------
Gregory J. Nooney, Jr.
Chairman of the Board and
Chief Executive Officer
By: /s/ Patricia A. Nooney
------------------------------
Patricia A. Nooney - Director
Senior Vice President and Secretary
BEING A MAJORITY OF THE DIRECTORS
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<PAGE>
EXHIBIT INDEX
Exhibit Number Description
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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)
27 Financial Data Schedule (provided for the infor-
mation of the U.S. Securities and Exchange
Commission only)
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<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,377,708
<SECURITIES> 0
<RECEIVABLES> 194,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,572,268
<PP&E> 16,027,527
<DEPRECIATION> 3,909,375
<TOTAL-ASSETS> 16,308,366
<CURRENT-LIABILITIES> 521,432
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,488,258
<TOTAL-LIABILITY-AND-EQUITY> 16,308,866
<SALES> 878,966
<TOTAL-REVENUES> 879,396
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 718,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,110
<INCOME-PRETAX> 15,991
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,991
<EPS-PRIMARY> .82
<EPS-DILUTED> 0
</TABLE>
