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, 1998
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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 _________________________
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.)
500 North Broadway, St. Louis, Missouri 63102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 206-4600
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7701 Forsyth Boulevard, Suite 700, St. Louis, MO 63105
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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:
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NOONEY INCOME FUND LTD. II, L.P.
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(A LIMITED PARTNERSHIP)
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BALANCE SHEETS
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March 31, December 31,
1998 1997
ASSETS: (Unaudited)
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Cash and cash equivalents $ 1,128,339 $ 1,378,138
Accounts receivable 107,591 152,950
Prepaid expenses and deposits 15,715 17,052
Investment property, at cost:
Land 2,618,857 2,618,857
Buildings and Improvements 13,554,848 13,517,224
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16,173,705 16,136,081
Less accumulated depreciation 4,327,498 4,194,255
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11,846,207 11,941,826
Investment property-held for sale 2,792,512 2,802,714
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14,638,719 14,744,540
Deferred expenses - At amortized cost 284,842 271,024
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$16,175,206 $16,563,704
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LIABILITIES AND PARTNERS' EQUITY:
Liabilities:
Accounts payable and accrued expenses $ 119,198 $ 480,609
Accrued real estate taxes 446,688 556,902
Refundable tenant deposits 196,549 148,774
Mortgage note payable 7,071,368 7,096,532
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7,833,803 8,282,817
Partners' Equity 8,341,403 8,280,887
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$16,175,206 $16,563,704
=========== ===========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY INCOME FUND LTD. II, L.P.
-------------------------------
(A LIMITED PARTNERSHIP)
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STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
---------------------------------------------
(UNAUDITED)
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Three Months Ended
March 31, March 31,
1998 1997
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REVENUES:
Rental and other income $ 875,317 $ 878,966
Interest 0 430
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875,317 879,396
EXPENSES:
Interest Expense 146,020 145,110
Depreciation and amortization 194,876 232,723
Real estate taxes 160,757 115,768
Property management fees paid to
Nooney Inc. 51,257 53,469
Reimbursement to Nooney Inc.
for partnership management
services and indirect expenses 10,000 10,000
Repairs & Maintenance 44,277 49,702
Professional Services 22,199 78,572
Utilities 37,771 35,153
Payroll 22,583 26,276
Cleaning 40,868 37,647
Insurance 15,463 15,687
Snow Removal 17,918 27,744
Other operating expenses 50,812 35,554
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814,801 863,405
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NET INCOME $ 60,516 $ 15,991
========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 3.12 $ .82
========== ==========
PARTNERS' EQUITY:
Beginning of Period $8,280,887 $8,472,267
Net Income 60,516 15,991
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End of Period $8,341,403 $8,488,258
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SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY INCOME FUND LTD. II, L.P.
-------------------------------
(A LIMITED PARTNERSHIP)
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STATEMENTS OF CASH FLOWS
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(UNAUDITED)
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Three Months Ended
March 31, March 31,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 60,516 $ 15,991
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 194,876 232,723
Changes in assets and liabilities:
Decrease in accounts receivable 45,359 25,095
Decrease (Increase) in prepaid
expenses & deposits 1,337 (12,953)
Increase in deferred assets (38,137) (18,459)
Decrease in accounts payable (361,411) (17,785)
Decrease in accrued real estate taxes (110,214) (146,597)
Increase in refundable tenant deposits 47,775 7,517
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Total Adjustments (220,415) 69,541
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Net cash provided by (used in)
operating activities (159,899) 85,532
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CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to investment property (64,736) (7,483)
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CASH FLOWS FROM FINANCING ACTIVITIES -
Payments on mortgage notes payable (25,164) (23,367)
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NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (249,799) 54,682
CASH AND CASH EQUIVALENTS, beginning of period 1,378,138 1,326,026
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CASH AND CASH EQUIVALENTS, end of period $ 1,128,339 $ 1,377,708
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during year for interest $ 146,020 $ 145,110
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY INCOME FUND LTD. II, L.P.
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(A LIMITED PARTNERSHIP)
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
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THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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NOTE A:
Refer to the Registrant's financial statements for the year ended December 31,
1997, 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, 1998 and for all periods presented
have been made. The results of operations for the three-month period ended March
31, 1998 are not necessarily indicative of the results which may be expected for
the entire year.
NOTE C:
The Registrant's properties are managed by Nooney, Inc., a wholly-owned
subsidiary of CGS Real Estate Company. Nooney Income Investments Two, Inc., a
general partner, is a 75% owned subsidiary of S-P Properties, Inc. S-P
Properties, Inc. is a wholly-owned subsidiary of CGS Real Estate Company.
NOTE D:
The earnings per limited partnership unit for the three months ended March 31,
1998 and 1997 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
It should be noted that this 10-Q 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.
Liquidity and Capital Resources
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Cash and cash equivalents on hand as of March 31, 1998, is $1,128,339, a
decrease of ($249,799) when compared to year end December 31, 1997. During the
quarter, net cash used in operating activities was $159,899. Cash was used for
payment of tenant improvements in the amount of $64,736 and payments on mortgage
notes payable of $25,164. 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 1998. The anticipated
capital expenditures by property are as follows:
Leasing Capital Other Capital Total
--------------- ------------- -----
NorthCreek Office Park $ 83,000 $ 11,000 $ 94,000
Tower Industrial Building 0 0 0
Northeast Commerce Center 49,786 0 49,786
Countryside Executive Center 141,473 38,000 179,473
Leawood Fountain Plaza (24%) 36,600 6,096 42,696
-------- -------- --------
$310,859 $ 55,096 $365,955
======== ======== ========
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, carpet replacement in
three building hallways, and new exterior lighting. At Countryside Executive
Center, Other Capital relates to the installation of a new irrigation system,
new property signage, and new conference room furniture. At NorthCreek Office
Park, the Other Capital consists of wallcovering replacement.
As previously disclosed, the Registrant feels 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
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The results of operations for the Registrant's properties for the quarters ended
March 31, 1998 and 1997 are detailed in the schedule below. Expenses and
revenues of the Registrant are excluded.
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Tower Northeast Countryside Leawood
NorthCreek Industrial Commerce Executive Fountain
Office Park Building Center Center Plaza (24%)
----------- -------- ------ ------ -----------
1998
----
Revenues $ 347,904 $ 50,153 $ 165,800 $ 221,282 $ 66,590
Expenses 298,191 26,185 170,405 259,923 63,402
--------- --------- --------- --------- ---------
Net Income (Loss) $ 49,713 $ 23,968 $ (4,605) $ (38,641) $ 3,188
========= ========= ========= ========= =========
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 $ 11,975 $ 25,244 $ 27,283 $ 26,971 $ 10,268
========= ========= ========= ========= =========
Revenues at NorthCreek Office Park increased $9,912 or 2.9% when comparing
quarter end March 31, 1998 to the first quarter ended March 31, 1997. This
increase can be primarily attributed to an increase in escalation income
($17,209 due to higher tenant billings based on the 1997 reconciliation of
reimbursable expenses , partially offset by a decrease in base rental income
($6,623). Expenses decreased from $326,017 for the quarter ended March 31, 1997
to $298,191 for the quarter ended March 31, 1998. This 8.5% decrease is mainly
attributable to decreases in depreciation and amortization expense ($36,800),
partially offset by increases in repairs and maintenance expense ($6,522) and
electric expense ($1,762).
Operating results at Tower Industrial Building for the quarter ended March 31,
1998 and 1997 remained relatively stable.
Revenues at Northeast Commerce Center were $165,800 at the quarter ended March
31, 1998 and $164,821 for the quarter ended March 31, 1997. Although overall
revenue remained consistent with prior year, there was an increase in base
rental income of ($9,333), partially offset by a decrease in escalation income
of ($7,671). Expenses for the quarters ending March 31, 1998 and March 31, 1997
were $170,405 and $137,538, respectively. The 24% increase in expenses can be
attributable to increases in real estate taxes ($42,867), heating,ventilation, &
air conditioning ($3,321), and amortization expense ($6,558), offset by
decreases in depreciation expense ($16,793) and payroll expense ($1,965). The
increase in real estate tax is due to the quarter ending March 31, 1997
reflected a 1996 tax savings not realized until 1997, while the quarter ending
March 31, 1998 reflect current expense only.
At Countryside Executive Center, revenues were $221,282 and $264,071 for the
quarters ended March 31, 1998 and March 31, 1997, respectively. Revenues
decreased 16.2% or $42,789 due to decreases in miscellaneous income ($52,372)
which can be attributable to a major tenant paying double rent during a holdover
period for the first quarter of 1997 and escalation income ($5,259). This was
offset by increases in base rental income from tenants ($14,408), cross easement
income ($2,675) and debt recovery ($1,353). Operating expenses increased 9.6% or
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<PAGE>
$22,823 when comparing the two years. The expenses which increased include real
estate taxes ($3,311) and amortization expense ($31,467), offset by decreases in
snow removal ($9,409) and management fees ($2,567). The increase in amortization
expense is due to an additional $185,000 of tenant alteration assets added
subsequent to the quarter ending March 31, 1997.
At Leawood Fountain Plaza, revenues decreased 10.3% or $7,659. The decrease in
income can be attributable to decreases in escalation income ($7,682) and
miscellaneous income ($1,520), partially offset by an increase in rental income
($1,968). Operating expenses remained stable when comparing the two periods.
The occupancy levels at the Registrant's properties are listed below:
Occupancy levels as of March 31,
--------------------------------
Property 1998 1997 1996
-------- ---- ---- ----
NorthCreek Office Park 95% 98% 96%
Tower Industrial Building 100% 100% 100%
Northeast Commerce Center 94% 87% 61%
Countryside Executive Center 69% 59% 70%
Leawood Fountain Plaza (24%) 90% 88% 91%
During the first quarter of 1998, leasing activity at NorthCreek Office Park
consisted of two tenants signing leases for a total of 7,292 square feet, one
tenant renewing their lease for 2,528 square feet and one tenant vacating 1,900
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 94% during the quarter.
Occupancy improved from the first quarter of 1997 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 spaces. 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 three new tenants occupying 4,036 square feet and three tenants
vacating 7,080 square feet. The Registrant continues to work with the local
brokerage firm to market the property and improve the occupancy.
During the first quarter of 1998, occupancy at Leawood Fountain Plaza increased
to 90%. Leasing activity consisted of two tenants occupying 1,140 square feet.
There was no other leasing activity. Interest in leasing space at Leawood
Fountain Plaza has been strong and the Registrant anticipates occupancy
increasing during the second quarter. The property has two major tenants, one
who occupies approximately 11% of the available space whose lease expires in
July 1998 and a second major tenant who occupies approximately 10% of the
available space whose lease expires in July 1999. The Registrant has been in
ongoing negotiations with the tenant whose lease expires in July 1998 and
anticipates executing a renewal document during the second quarter.
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<PAGE>
Results of Consolidated Operations 1998
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For the quarter ended March 31, 1998, consolidated revenues are $875,317
compared to $879,396 for the quarter ended March 31, 1997. Revenues at a
consolidated level remained relatively stable with less than a 1% decrease.
Consolidated expenses for the quarters ending March 31, 1998 and March 31, 1997
are $814,801 and $863,405, respectively. The $48,604 decrease in expenses is a
result of a combination of factors. Significant decreases occurred in
depreciation and amortization expense, repairs and maintenance expense, and snow
removal. These decreases were partially offset by consolidated increases in real
estate tax expense and other operating expenses as explained individually by
property above.
Results of Consolidated Operation 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). Consolidated expenses for the quarters ending March 31,
1997 and March 31, 1996 are $863,405 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.
Inflation
- ---------
The effects of inflation did not have a material impact upon the Registrant's
operation in fiscal l997 and are not expected to materially affect the
Registrant's operation in l998.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
See Exhibit Index on Page 11
(b) Reports on Form 8-K
None
SIGNATURES
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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, 1998 By: Nooney Income Investments Two, Inc.
General Partner
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
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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 information 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,128,339
<SECURITIES> 0
<RECEIVABLES> 107,591
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,251,645
<PP&E> 16,173,705
<DEPRECIATION> 4,327,498
<TOTAL-ASSETS> 16,175,206
<CURRENT-LIABILITIES> 565,886
<BONDS> 7,071,368
<COMMON> 0
0
0
<OTHER-SE> 8,341,403
<TOTAL-LIABILITY-AND-EQUITY> 16,175,206
<SALES> 875,317
<TOTAL-REVENUES> 875,317
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 668,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146,020
<INCOME-PRETAX> 60,516
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,516
<EPS-PRIMARY> 3.12
<EPS-DILUTED> 0
</TABLE>
