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, 1996
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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
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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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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____.
Page 1 of 34 Pages
Exhibit Index located on Page 20
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__X__ Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
As of February 1, 1997, 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, 1997, 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.
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PART I
ITEM 1: BUSINESS
It should be noted that this 10-K contains forward-looking information (as
defined in the Private Securities Litigation Reform Act of 1995) that involves
risk and uncertainty, including trends in the real estate investment market,
projected leasing and sales, and the future prospects for the Registrant. Actual
results could differ materially from those contemplated by such statements.
Nooney 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 1996, 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.
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ITEM 2: PROPERTIES
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,
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 39 tenants at December 31, 1996.
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 lender. As of December 29,
1995, the Registrant acquired the mortgage lender's interest in Countryside
Executive Center for $1,250,000. Prior to December 29, 1995, all costs and
revenues attributable to the operation of the building were shared by the
Registrant and a subsidiary of the mortgage lender in proportion to their
respective percentage interests. The building was 61% leased by 31 tenants at
December 31, 1996. (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
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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 lender. As of December 29,
1995, the Registrant acquired the mortgage lender's interest in Northeast
Commerce Center for $1,980,000. Prior to December 29, 1995, all costs and
revenues attributable to the operation of the buildings were shared by the
Registrant and a subsidary of the mortgage lender in proportion to their
respective percentage interests. The buildings were 87% leased by 4 tenants at
December 31, 1996. (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 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 19,500, 24,000 and 48,000
net rentable square feet respectively, or an aggregate of approximately 91,500
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 lender. As of December 29, 1995, the Registrant
acquired the mortgage lender's interest in NorthCreek Office Park for
$3,960,000. Prior to December 29, 1995, all costs and revenues attributable to
the operation of the complex were shared by the Registrant and a subsididary of
the mortgage lender in proportion to their respective percentage interests. The
complex was 98% leased by 35 tenants at December 31, 1996. (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.
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<PAGE>
<TABLE>
The following table sets forth certain information as of December 31, 1996, relating to the properties owned by the Partnership.
<CAPTION>
AVERAGE
ANNUALIZED
TOTAL EFFECTIVE PRINCIPAL TENANTS
SQUARE ANNUALIZED BASE RENT PER PERCENT OVER 10% OF PROPERTY LEASE
PROPERTY FEET BASE RENT* SQUARE FOOT LEASED SQUARE FOOTAGE EXPIRATION
- -------- ------ ---------- ------------- ------- -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tower Industrial Baxter International Inc.
Building 42,000 $ 153,200 $3.64 100% (100%) 2000
Leawood Fountain Midwest Mechanical (11%) 1998
Plaza 82,000 $1,140,000 $15.19 92% Family Medical Care of 1999
Kansas City (10%)
Northeast Baldwin Piano & Organ
Commerce Center 100,000 $ 553,710 $ 6.33 87% Co. (50%) 1998
Hill Top Research (11%) 2001
Aerospace International
(19%) 1999
Countryside
Executive Center 91,000 $ 840,120 $15.08 61% Insurance Auto Auctions
(13%) 1997
NorthCreek Office Cincinnati Group Health
Parj 91,500 $1,196,300 $13.54 98% Associates (28%), (8%) 2003, 1998
* Represents 100% of Base Rent. Registrant has 24% ownership in Leawood Fountain Plaza.
</TABLE>
ITEM 3: LEGAL PROCEEDINGS
The Registrant is not a party to any material pending legal proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
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<PAGE>
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of February 1, 1997 there were 1,634 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.
Cash Distributions Paid Per Limited Partnership Unit
----------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
1995 0 $6.25 0 $6.25
1996 0 0 0 $12.50
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<TABLE>
ITEM 6: SELECTED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
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1996 1995 (1) 1994 1993 1992
(Not covered by independent auditors' report)
<S> <C> <C> <C> <C> <C>
Rental and other income $ 3,502,080 $ 1,754,750 $ 1,729,872 $ 1,843,782 $ 1,893,640
Net income (loss) 83,571 209,517 254,046 (1,261,814) (197,387)
Data per limited partnership unit:
Net income (loss) 3.69 10.17 12.16 (65.61) (10.17)
Cash distributions - Investment income 3.69 10.17 12.16 -- --
Cash distributions - Return of capital 8.81 2.33 6.59 12.50 --
Weighted average limited partnership
units outstanding 19,221 19,221 19,221 19,221 19,221
At year-end:
Total assets 16,473,106 16,803,566 9,118,452 9,287,233 10,807,797
Investment property, net 14,798,098 15,166,737 7,803,472 7,980,243 9,334,150
Mortgage note payable 7,190,000 7,190,000 -- -- --
Partners' equity 8,472,267 8,643,642 8,689,086 8,817,462 10,334,221
See Item 7: Management's Discussion and Analysis for discussion of comparability of items.
(1) Balance sheet includes the effects of an acquisition which occurred on December 29, 1995. See Note 1 to financial statements.
</TABLE>
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<PAGE>
ITEM: 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash on hand as of December 31, 1996, is $1,323,026, an increase of $230,867
from the year ended December 31, 1995. During 1996, cash provided by operations
increased when compared to the prior year because of the prior year's higher
expenses related to the Consent Statement. No such expenses were incurred in
1996 and thus the Registrant was able to accumulate more cash reserves. The
Registrant expects the capital expenditures during 1997 will be adequately
funded by current cash reserves and the properties' operating cash flow. The
anticipated capital expenditures are as follows:
Other Leasing
Capital Capital Total
---------------------------------
NorthCreek Office Park $ 45,000 $ 90,986 $135,986
Tower Industrial Building 0 0 0
Northeast Commerce Center 0 88,289 88,289
Countryside Executive Center 72,401 530,488 602,889
Leawood Fountain Plaza (24%) 30,180 48,341 78,521
---------------------------------
$147,581 $758,104 $905,685
=================================
The significant amount of leasing capital for NorthCreek Office Park, Northeast
Commerce Center, Countryside Executive Center and Leawood Fountain Plaza relates
to costs for the construction of tenant improvements and payment of lease
commissions for new and renewal leases. The other capital is for restroom
countertops and treatment of the wood shingle roofs at NorthCreek Office Park,
siding repairs and repainting, as well as continuing the parking lot overlay at
Countryside Executive Center, and sprinkler additions at Leawood Fountain Plaza
to bring the building up to current codes.
As previously disclosed, the Registrant feels that the market conditions exist
where Countryside Executive Center should be sold. The strategy has been to
lease up the property and, once an acceptable level of occupancy has been
obtained, to put the building on the market for sale. During 1996, leasing
results were poor and thus the building has not yet been placed on the market
for sale. The Registrant is working closely with a local brokerage firm in the
market area of the property and will be making significant efforts to lease the
vacant space in 1997 so that, by the end of the third quarter of 1997, the
building will be at an occupancy level sufficient to market the property for
sale at a price that will be acceptable to the Registrant.
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.
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<PAGE>
Results of Operations
The results of operations for the Registrant's properties for the years ended
December 31, 1996, 1995 and 1994 are detailed in the schedule below. Expenses of
the Registrant are excluded.
<TABLE>
<CAPTION>
NorthCreek Tower Northeast Countryside Leawood
Office Park Industrial Commerce Executive Fountain
(100%) (100%) (100%) Center (100%) Plaza (24%)
----------- ---------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
1996
- ----
Revenues $1,387,766 $199,099 $582,345 $1,068,983 $286,674
Expenses 1,171,977 109,090 671,080 1,087,519 278,219
---------------------------------------------------------------------------------
Net Income (Loss) $ 215,789 $ 90,009 $(88,735) $ (18,536) $ 8,455
Note: In 1995 and 1994, the Registrant owned only a partial interest in three of its properties.
The results of operations for those years reflect the following percentage.
NorthCreek Tower Northeast Countryside Leawood
Office Park Industrial Commerce Executive Fountain
(45%) (100%) (45%) Center (50%) Plaza (24%)
----------- ---------- --------- ------------- -----------
1995
- ----
Revenues $ 588,137 $189,118 $190,971 $ 537,615 $279,202
Expenses 426,096 98,856 235,966 619,398 258,081
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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
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Net Income (Loss) $ 117,382 $ 95,110 $ (6,252) $ (36,561) $ 10,897
</TABLE>
At NorthCreek Office Park, revenues increased 6% from 1995 to 1996 due to
increasing rental rates in the overall market. Expenses increased 24% from 1995
to 1996 due to interest payments made during 1996. As indicated in last year's
report, the Registrant purchased the undivided interest in NorthCreek Office
Park, Countryside Executive Center and Northeast Commerce Center on December 29,
1995 that had not previously been owned by the Registrant. The purchase price of
$7,190,000 was financed through a first mortgage loan secured by the properties.
The first mortgage loan has a floating interest rate of 3/4% above the then
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published prime rate of the lender. Payments on the note were structured whereby
only interest was due during 1996. Principal payments will commence January 1,
1997. Interest payments of $337,746 were made by NorthCreek Office Park during
the year. Without the addition of this new interest expense, overall operating
expenses would have decreased by 11% due to decreases in cleaning ($14,200) and
legal & administrative fees ($9,106). Occupancy increased in 1996 to 98%. In
1995 and 1994, the occupancy averaged 97%. Due to the increase in expenses, net
income decreased $144,302 when comparing 1996 to the prior year.
The operations at Tower Industrial Building, which remains occupied by a single
tenant, have been relatively stable over the 3-year period.
Operating results at Northeast Commerce Center significantly improved during
1996. Revenues increased $157,965 or 37% due to the overall increase in
occupancy which went from 56% at year-ended 1995 to 87% at the year end 1996.
Revenues decreased from 1994 to 1995 due to the fact that in 1994, the property
was occupied by a short-term tenant for most of the year. Occupancy at year-end
1994 was the same as at the year-end 1995 at 56%. Expenses at Northeast Commerce
Center increased 28% from 1995 to 1996 because of the payment of $171,666 of
interest due to the new loan placed on the property. Without the addition of the
interest expense, the overall operating expenses of the property decreased in
1996. The net loss on the property decreased from 1995 to 1996 by $11,254.
At Countryside Executive Center, revenues decreased less than 1% from 1995 to
1996 dropping for the third consecutive year. The decrease in revenues is
attributable to a decrease in occupancy from 1995 to 1996. Expenses also
decreased from 1995 to 1996, due to the fact that the property was held for sale
and, therefore, no depreciation expense was taken. This decrease in depreciation
expense was offset by an increase in interest expense of $104,594. There was no
interest expense in 1994 or 1995 as previously discussed. The net loss at
Countryside Executive Center decreased from 1995 to 1996 by $145,030.
At Leawood Fountain Plaza, revenues increased for the third year in a row,
increasing $7,472 between 1995 and 1996. This increase in revenue during 1996 is
attributable to an increase in the common area maintenance reimbursements from
tenants ($21,704) offset by a decrease in miscellaneous income ($16,104). In
1995, a termination payment was received from a tenant who vacated their space
during 1995 which caused a non-recurring increase in revenues that year. During
1995, expenses increased $35,665 when compared to 1994 expenses. The increases
were related to increases in amortization ($12,003), real estate taxes ($6,808),
repairs and maintenance ($9,369), and administrative costs ($6,735) offset by
decreases in cleaning and parking lot expenditures. Expenses increased $20,138
from 1995 to 1996. The increase in expenses was attributable to increases in
electric ($3,549), parking lot ($2,550), heating, ventilating and air
conditioning repair and maintenance ($2,271), and real estate taxes ($11,914).
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The occupancy levels at the Registrant's properties as of December 31, 1996,
1995 and 1994 are detailed in the schedule below.
Occupancy rates at December 31,
1996 1995 1994
--------------------------
NorthCreek Office Park 98% 97% 97%
Tower Industrial 100% 100% 100%
Northeast Commerce Center 87% 56% 56%
Countryside Executive Center 61% 73% 83%
Leawood Fountain Plaza 92% 92% 90%
For the quarter ended December 31, 1996, occupancy at NorthCreek Office Park
remained at 98%. There was no leasing activity during the fourth quarter. For
the year, occupancy increased 1% to 98%. There were seven new leases for tenants
occupying 8,209 square feet, renewal leases for three new tenants occupying
4,674 square feet and five tenants vacated occupying 6,477 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 by a single tenant whose lease expires on
April 30, 2000.
There was no leasing activity during the fourth quarter at Northeast Commerce
Center. The occupancy remained at 87%. During 1996, however, one tenant renewed
its lease in 6,000 square feet and then expanded into an additional 12,560
square feet. This lease expires in October 1999. The largest tenant at the
property occupying 50,000 square feet also renewed its lease during 1996 for an
additional two year term which expires at the end of December 1998. Another
major tenant signed a new lease for 10,900 square feet. In addition, a second
new lease was signed for 8,000 square feet.
During the fourth quarter at Countryside Executive Center, leasing activity
included one new lease for 442 square feet, one renewal for 120 square feet and
three tenants vacated occupying 11,694 square feet. Occupancy decreased from 74%
at the beginning of the quarter to 61% at the quarter's end. For the year,
occupancy decreased from 73% to 61%. There were five new leases for 4,904 square
feet, eight renewals for 7,392, while six tenants occupying 15,771 square feet
vacated. There is one major tenant which occupies approximately 13% of the
building under a month-to-month lease. During 1996, the Registrant worked hard
to renew and expand this tenant in the building. Subsequent to year end, the
tenant has decided to vacate Countryside Executive Center and move to a new
location in May 1997. The tenant remains on a month-to-month lease until that
time.
At Leawood Fountain Plaza, occupancy increased during the fourth quarter from
90% to 92%. The increase is attributable to new leases with three tenants for a
total of 3,207 square feet while one tenant occupying 811 square feet renewed
and two tenants vacated 1,537 square feet. For all of 1996, occupancy remained
level at 92%. During 1996, the Registrant signed eight new leases for 7,009
square feet, renewed leases with six tenants occupying 7,289 square feet, while
seven tenants occupying 7,093 square feet vacated. The property has two major
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tenants, one who occupies approximately 11% of the available space whose lease
expires in July 1998 and the second major tenant who occupies approximately 10%
of the available space is on a lease which expires in July of 1999.
1996 Comparisons
As of December 31, 1996, the Registrant's consolidated revenues were $3,509,669
compared to $1,786,540 for the year ended December 31, 1995. This increase of
96% is attributable to the fact that the Registrant now owns 100% of Countryside
Executive Center, Northeast Commerce Center and NorthCreek Office Park. In prior
years, the Registrant owned 50%, 45% and 45%, respectively.
For the year ended December 31, 1996, consolidated expenses were $3,426,098
compared to $1,577,023 for the year ended 1995. Consolidated expenses
significantly increased due to the fact that the Registrant now owns 100% of
Countryside Executive Center, Northeast Commerce Center and NorthCreek Office
Park. In addition as previously stated, the Registrant placed a first mortgage
loan on these properties at the time of the purchase. Consolidated interest
expense for 1996 was $614,006. In addition, depreciation increased from $450,319
in 1995 to $652,940 in 1996. Net income on a consolidated basis decreased from
$209,517 in 1995 to $83,571 in 1996. Net income per limited partnership unit
decreased from $10.17 to $3.69 in 1996. The decreases in net income are
attributable to the additional depreciation expense the Registrant now incurs as
a result of the purchase of the additional property interest. During 1996, the
Registrant distributed $225,189 to the partners and had net additions to the
investment properties of $267,056.
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
Northeast Commerce Center. 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,
Northeast Commerce Center'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
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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 Northeast Commerce Center 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.
Inflation
The effects of inflation did not have a material impact upon the Registrant's
operations in fiscal l995 or 1996, and are not expected to materially affect the
Registrant's operation in l997.
Interest Rates
In 1996 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.
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
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<PAGE>
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 66, 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.
-15-
<PAGE>
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
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 1996, cash distributions of $14,683 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.
-16-
<PAGE>
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, 1996, the Registrant paid property management fees of $211,474 to Nooney
Krombach Company.
The Registrant paid Nooney Krombach Company $40,000 for reimbursement for
certain administrative services including accounting, issuing and transferring
of units, data processing, investor communications and other administrative
services.
See Item 11 above for a discussion of cash distributions paid to the General
Partners during the year ended December 31, 1996.
(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, 1996 in connection with various
transactions.
(c) Indebtedness of Management.
Not Applicable.
(d) Transactions with promoters.
Not Applicable.
-17-
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements (filed herewith as Exhibit 99.3):
Independent auditors' report
Balance sheets
Statements of operations
Statements of partners' equity (deficiency in assets)
Statements of cash flows
Notes to financial statements
2. Financial Statement Schedules (filed herewith as Exhibit 99.3):
Schedule - Reconciliation of partners' equity (deficiency
in assets)
Schedule III - Real estate and accumulated depreciation
All other schedules are omitted because they are
inapplicable or not required under the instructions.
3. Exhibits:
See Exhibit Index on Page 20.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report, the
Registrant filed no reports on Form 8-K.
(c) Exhibits:
See Exhibit Index on Page 20.
(d) Not applicable.
-18-
<PAGE>
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 31, 1997 /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
-19-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
Number Description Number
- ------ ----------- ------
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). N/A
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). N/A
99.1 List of Directorships filed in response to Item 10. 21
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. N/A
99.3 Financial Statements and Schedules. 22-34
-20-
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.
-21-
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, 1996 and 1995, and the related
statements of operations, partners' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1996. Our audits also included
the financial statement schedules listed in the index at Item 14(a)2. These
financial statements are the responsibility of the Partnership's general
partners. Our responsibility is to express an opinion on these financial
statements 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, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
February 14, 1997
-22-
<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
--------------------------------------------------------------------------
ASSETS 1996 1995
CASH AND CASH EQUIVALENTS (Note 3) $ 1,323,026 $ 1,092,159
ACCOUNTS RECEIVABLE 219,655 320,515
INVESTMENT PROPERTY (Notes 1, 2 and 4):
Land 2,618,857 2,618,857
Buildings and improvements 13,405,976 13,341,502
----------- -----------
16,024,833 15,960,359
Less accumulated depreciation 3,710,204 3,225,159
----------- -----------
12,314,629 12,735,200
Investment property held for sale
(Notes 1 and 4) 2,483,469 2,431,537
----------- -----------
Total investment property 14,798,098 15,166,737
DEFERRED EXPENSES - At amortized cost 132,327 224,155
----------- -----------
TOTAL $16,473,106 $16,803,566
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 103,331 $ 251,779
Accrued real estate taxes 582,482 606,111
Refundable tenant deposits 125,026 112,034
Mortgage note payable (Note 4) 7,190,000 7,190,000
----------- -----------
Total liabilities 8,000,839 8,159,924
PARTNERS' EQUITY 8,472,267 8,643,642
----------- -----------
TOTAL $16,473,106 $16,803,566
=========== ===========
See notes to financial statements.
-23-
<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------------
1996 1995 1994
REVENUES:
Rental and other income (Note 5) $3,502,080 $1,754,750 $1,729,872
Interest 7,589 31,790 23,494
---------- ---------- ----------
Total revenues 3,509,669 1,786,540 1,753,366
EXPENSES:
Interest 614,006 1,134 1,238
Depreciation and amortization 652,940 450,319 459,247
Real estate taxes 754,649 366,762 331,245
Property management fees -
related party 211,474 107,060 105,854
Repairs and maintenance 306,146 123,167 118,850
Other operating expenses
(includes $40,000 in 1996 and
$25,000 in 1995 and 1994 to
related party) 754,932 372,120 354,554
Professional services 131,951 156,461 128,332
---------- ---------- ----------
Total expenses 3,426,098 1,577,023 1,499,320
---------- ---------- ----------
NET INCOME $ 83,571 $ 209,517 $ 254,046
========== ========== ==========
NET INCOME ALLOCATION:
General partners $ 12,729 $ 13,989 $ 20,380
Limited partners $ 70,842 $ 195,528 $ 233,666
LIMITED PARTNERS' DATA (Note 2):
Net income per unit $ 3.69 $ 10.17 $ 12.16
========== ========== ==========
Cash distributions -
Investment income per unit $ 3.69 $ 10.17 $ 12.16
========== ========== ==========
Cash distributions -
Return of capital per unit $ 8.81 $ 2.33 $ 6.59
========== ========== ==========
Weighted average limited
partnership units outstanding 19,221 19,221 19,221
========== ========== ==========
See notes to financial statements.
-24-
<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------------------------------
Limited General
Partners Partners Total
BALANCE (DEFICIT), JANUARY 1, 1994 $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 (DEFICIT), 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 (DEFICIT), DECEMBER 31, 1995 8,770,185 (126,543) 8,643,642
Net income 70,842 12,729 83,571
Cash distributions (240,263) (14,683) (254,946)
---------- ---------- ----------
BALANCE (DEFICIT), DECEMBER 31, 19964 $8,600,764 $ (128,497) $8,472,267
========== ========== ==========
See notes to financial statements.
-25-
<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,571 $ 209,517 $ 254,046
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 593,828 421,224 428,766
Amortization of deferred expenses 59,112 29,095 30,481
Net changes in accounts affecting
operations:
Accounts receivable 100,860 (211,683) 87,981
Deferred expenses 32,716 165,135 (54,627)
Accounts payable and accrued
expenses (148,448) 209,004 (8,332)
Accrued real estate taxes (23,629) 315,539 (35,006)
Accrued sewer expenses -- (32,400) 1,238
Refundable tenant deposits 12,992 48,415 1,695
---------- ---------- ----------
Net cash provided by
operating activities 711,002 823,576 706,242
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to investment property (225,189) (154,049) (251,995)
Acquisition interests -- (7,630,440) --
---------- ---------- ----------
Net cash used in investing
activities (225,189) (7,784,489) (251,995)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES-
Cash distributions to partners (254,946) (254,961) (382,422)
Proceeds from mortgage note payable -- 7,190,000 --
---------- ---------- ----------
Net cash provided by (used
in) financing activities (254,946) 6,935,039 (382,422)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 230,867 (25,874) 71,825
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 1,092,159 1,118,033 1,046,208
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $1,323,026 $1,092,159 $1,118,033
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during the
year for interest $ 599,823 $ 1,134 $ 1,238
========== ========== ==========
See notes to financial statements.
-26-
<PAGE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1995
- --------------------------------------------------------------------------------
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.
Prior to December 29, 1995, the Partnership owned three properties jointly
with Nooney Income Fund Ltd. III, L.P. (NIF III). NIF III was unable to
service its debt, and its percentage interests in the jointly-held
properties were transferred to a subsidiary of the mortgage lender 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 %
Northeast Commerce Center 45 % 100 %
NorthCreek Office Park 45 % 100 %
Tower Industrial Building 100 % 100 %
The transaction was accounted for under the purchase method; therefore,
the balance sheets as of December 31, 1996 and 1995 include the
Partnership's interests in its properties after the acquisition.
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 8.2%, 5.6%, 30.3%, 16.5% and 39.4% of
rental and other income, respectively, for the year ended December 31,
1996.
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.
-27-
<PAGE>
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. No provision has been made for federal and state income taxes
since these taxes are the personal responsibility of the partners.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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 $211,454 and $107,060 and $105,854
for the years ended December 31, 1996, 1995 and 1994, 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 paid Nooney Krombach Company $40,000 in 1996 and $25,000 in
1995 and 1994 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. Impairment is determined if the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the
carrying amount of the property. 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,
1996, accounts receivable include approximately $59,000 ($59,000 in 1995)
of accrued rent concessions 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.
-28-
<PAGE>
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
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, 1996, Partnership Management Fees totaling
$249,441 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 $249,441 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 primarily of lease fees which are amortized over
the terms of their respective leases.
3. CASH EQUIVALENTS
Cash equivalents consist of bank repurchase agreements of $50,000 at
December 31, 1996 ($370,000 at December 31, 1995).
4. MORTGAGE NOTE PAYABLE
Mortgage note payable as of December 31, 1996 and 1995, consists of the
following:
1996 1995
Note payable to bank, interest only
due monthly at bank's prime rate (8.25%
at December 31, 1996) plus .75% to
December 1996 when monthly principal
payments commence $7,190,000 $7,190,000
========== ==========
The mortgage note is collateralized by deeds of trust and assignment of
rents on investment property (Countryside, Northeast Commerce Center and
NorthCreek Office Park) with a net book value of $13,100,000 at December
31, 1996.
-29-
<PAGE>
Principal payments required during the next five years are as follows:
1997 $ 93,468
1998 100,656
1999 115,044
2000 115,044
2001 132,000
2002 6,633,788
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, 1996
and 1995 are equal due to the adjustable rate feature of the note.
5. RENTAL REVENUES UNDER OPERATING LEASES
Minimum future rental revenues under noncancelable operating leases in
effect as of December 31, 1996 are as follows:
1997 $2,473,000
1998 1,849,000
1999 929,000
2000 500,000
2001 362,000
Remainder 617,000
----------
Total $6,730,000
==========
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 write-down of investment
property are not recognized for tax purposes until the property is
disposed.
-30-
<PAGE>
The comparison of financial statement and income tax reporting is as
follows:
Financial Income
Statement Tax
1996:
Net income (loss) $ 83,571 $(8,446,752)
Partners' equity 8,472,267 5,794,556
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
7. MAJOR TENANT
A substantial amount of the Partnership's revenue in 1996 was derived from
two major tenants whose rentals amounted to approximately $469,000 and
$374,000 or 13.3% and 10.6%, respectively, of total revenues. 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.
* * * * * *
-31-
<PAGE>
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE - RECONCILIATION OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
The reconciliation of partners' equity (deficit) between financial statement and income tax reporting is as follows:
<CAPTION>
December 31, 1996 December 31, 1995
----------------------------------- ------------------------------------
Limited General Limited General
Partners Partners Total Partners Partners Total
<S> <C> <C> <C> <C> <C> <C>
Balance (deficit) per statement of partners' equity $ 8,600,764 $(128,497) $ 8,472,267 $ 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 2,411,625 -- 2,411,625
Prepaid rents included in income for income
tax purposes 23,551 238 23,789 (1,411) (14) (1,425)
Master lease income included in income for
income tax purposes 118,404 1,196 119,600 118,404 1,196 119,600
Writedown of investment property not recognized
for income tax purposes 5,202,450 52,550 5,255,000 5,202,450 52,550 5,255,000
----------- --------- ----------- ----------- --------- -----------
Total 16,356,794 (74,513) 16,282,281 16,501,253 (72,811) 16,428,442
Less:
Excess depreciation and amortization deducted
for income tax purposes 10,303,392 122,070 10,425,462 1,836,918 36,549 1,873,467
Rent concessions not recognized for income
tax purposes 58,833 594 59,427 58,134 587 58,721
Insurance premiums deducted for tax purposes 2,808 28 2,836 -- -- --
----------- --------- ----------- ----------- --------- -----------
Balance (deficit) per tax return $ 5,991,761 $(197,205) $ 5,794,556 $14,606,201 $(109,947) $14,496,254
=========== ========= =========== =========== ========= ===========
December 31, 1994
-----------------------------------
Limited General
Partners Partners Total
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
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
Insurance premiums deducted for tax purposes -- -- --
----------- --------- -----------
Balance (deficit) per tax return $14,805,825 $(107,679) $14,698,146
=========== ========= ===========
-32-
</TABLE>
<PAGE>
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Costs Gross Amount at Which
Initial Cost to Partnership Capitalized Carried at Close of Period
------------------------------ Subsequent to -------------------------------
Buildings and Acquisition(1) Buildings and
Description Encumbrances Land Improvements Total Land Improvements Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leawood Fountain Plaza Office
Complex 24% undivided interest),
Leawood, Kansas $ -- $ 318,962 $ 1,991,417 $ 2,310,379 $ (665,376) $ 318,962 $ 1,326,041 $ 1,645,003
Tower Industrial Building,
Mundelein, Illinois -- 193,744 1,042,076 1,235,820 2,841 193,744 1,044,917 1,238,661
NorthCreek Office Park,
Cincinnati, Ohio -- 338,850 4,639,617 4,978,467 3,624,231 1,370,100 7,232,598 8,602,698
Northeast Commerce Center,
Cincinnati, Ohio -- 199,361 2,784,317 2,983,678 1,554,793 736,051 3,802,420 4,538,471
Countryside Executive Center,
NorthCreek Office Park and Wards
Center Business Center A & B 7,190,000 -- -- -- -- -- -- --
---------- ---------- ----------- ----------- ---------- ---------- ----------- -----------
-- 1,050,917 10,457,427 11,508,344 4,516,489 2,618,857 13,405,976 16,024,833
Countryside Executive Center,
Palatine, Illinois -- 623,919 4,302,911 4,926,830 (1,381,931) 1,356,419 2,188,480 3,544,899(2)
---------- ---------- ----------- ----------- ---------- ---------- ----------- -----------
Total $7,190,000 $1,674,836 $14,760,338 $16,435,174 $3,134,558 $3,975,276 $15,594,456 $19,569,732
========== ========== =========== =========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Column F Column G Column H Column I
------------ ------------ -------- ---------------------
Life on
Which Depreciation
Accumulated Date of Date In Latest Income
Depreciation Construction Acquired Statement is Computed
<S> <C> <C> <C> <C>
Leawood Fountain Plaza Office
Complex (24% undivided interest),
Leawood, Kansas $ 787,406 1982-1983 2/20/85 30 years
Tower Industrial Building,
Mundelein, Illinois 377,253 1974 3/20/86 30 years
NorthCreek Office Park,
Cincinnati, Ohio 1,662,474 1984-1986 12/29/86 30 years
Northeast Commerce Center,
Cincinnati, Ohio 883,071 1985 12/29/86 30 years
----------
3,710,204
Countryside Executive Center,
Palatine, Illinois 1,061,430 1975 12/16/86 30 years
----------
Total $4,771,634 (2)
==========
(1) Amounts shown are net of assets written-off and the following writedowns to reflect appraised values:
Leawood Fountain Plaza Office Complex 754,000
NorthCreek Office Park 2,852,836
Northeast Commerce Center 2,520,518
Countryside Executive Center 7,475,910
(2) Amount is shown net in the financial statements $(2,483,469).
(Continued)
-33-
</TABLE>
<PAGE>
<TABLE>
NOONEY INCOME FUND LTD. II, L.P.
(A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
(A) Reconciliation of amounts in Column E:
Balance at beginning of period $ 19,442,902 $ 11,935,190 $ 11,709,165
Add:
Cost of improvements 225,189 154,049 251,995
Acquisition of undivided interests -- 7,630,440 --
Less - cost of disposals (98,359) (276,777) (25,970)
------------ ------------ -------------
Balance at end of period $ 19,569,732 $ 19,442,902 $ 11,935,190
============ ============ ============
Reconciliation of amounts in Column F:
(B) Balance at beginning period $ 4,276,165 $ 4,131,718 $ 3,728,922
Add - Provision during period 593,828 421,224 428,766
Less - Depreciation on disposals (98,359) (276,777) (25,970)
------------ ------------ ------------
Balance at end of period $ 4,771,634 $ 4,276,165 $ 4,131,718
============ ============ ============
(C) The aggregate cost of real estate owned for
federal income tax purposes $ 33,173,530 $ 24,697,902 $ 17,190,190
============ ============ ============
(Concluded)
-34-
</TABLE>
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,323,026
<SECURITIES> 0
<RECEIVABLES> 219,655
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,542,681
<PP&E> 16,024,833
<DEPRECIATION> 3,710,204
<TOTAL-ASSETS> 16,473,106
<CURRENT-LIABILITIES> 685,813
<BONDS> 7,190,000
0
0
<COMMON> 0
<OTHER-SE> 8,472,267
<TOTAL-LIABILITY-AND-EQUITY> 16,473,106
<SALES> 3,509,669
<TOTAL-REVENUES> 3,509,669
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,812,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 614,006
<INCOME-PRETAX> 83,571
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,571
<EPS-PRIMARY> 3.69
<EPS-DILUTED> 0
</TABLE>
