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 June 30, 2000
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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.)
One Memorial Drive, Suite 1000, St. Louis, MO 63102-2449
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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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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
--------------
June 30,
2000 December 31,
(Unaudited) 1999
ASSETS: ------------ ------------
Cash and cash equivalents $ 1,354,006 $ 1,190,211
Accounts receivable 432,331 257,599
Prepaid expenses and deposits 45,855 24,430
Investment property, at cost:
Land 2,618,857 2,618,857
Buildings and improvements 14,039,176 13,997,112
------------ ------------
16,658,033 16,615,969
Less accumulated depreciation (5,392,177) (5,162,333)
------------ ------------
11,265,856 11,453,636
Investment property-held for sale 2,847,660 2,860,890
------------ ------------
14,113,516 14,314,526
Prepaid and deferred expenses - at
amortized cost 368,077 321,834
------------ ------------
$ 16,313,785 $ 16,108,600
============ ============
LIABILITIES AND PARTNERS' EQUITY:
Liabilities:
Accounts payable and accrued expenses $ 165,434 $ 174,137
Accrued real estate taxes 388,694 485,507
Refundable tenant deposits 269,174 250,231
Mortgage note payable 6,813,723 6,871,246
------------ ------------
7,637,025 7,781,121
Partners' equity 8,676,760 8,327,479
------------ ------------
$ 16,313,785 $ 16,108,600
============ ============
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)
-----------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 1,107,626 $ 929,911 $ 2,049,773 $ 1,785,526
Interest 1,063 0 2,447 0
----------- ----------- ----------- -----------
1,108,689 929,911 2,052,220 1,785,526
EXPENSES:
Interest expense 154,207 134,795 300,946 268,883
Depreciation and amortization 202,175 181,390 401,607 362,431
Real estate taxes 126,823 303,252 257,738 442,277
Property management fees paid to
American Spectrum Midwest 65,705 55,345 122,155 106,241
Reimbursement to American Spectrum Midwest
for partnership management
services and indirect expenses 10,000 10,000 20,000 20,000
Repairs and maintenance 54,276 89,543 100,799 150,051
Professional services 29,874 31,808 60,397 78,488
Utilities 38,887 32,427 87,603 72,767
Payroll 29,284 26,569 59,416 57,245
Cleaning 37,477 37,535 74,994 68,180
Insurance 14,296 19,678 30,423 37,449
Parking lot / landscaping expenses 28,252 27,953 41,234 40,333
Other operating expenses 49,566 56,725 145,627 178,364
----------- ----------- ----------- -----------
840,822 1,007,020 1,702,939 1,882,709
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 267,867 $ (77,109) $ 349,281 $ (97,183)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 13.80 $ (3.97) $ 17.99 $ (5.01)
=========== =========== =========== ===========
PARTNERS' EQUITY:
Beginning of period $ 8,408,893 $ 8,242,469 $ 8,327,479 $ 8,262,543
Net income (loss) 267,867 (77,109) 349,281 (97,183)
----------- ----------- ----------- -----------
End of period $ 8,676,760 $ 8,165,360 $ 8,676,760 $ 8,165,360
=========== =========== =========== ===========
</TABLE>
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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Six Months Ended
June 30, June 30,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 349,281 $ (97,184)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 401,607 362,431
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (174,732) 2,288
Increase in prepaid expenses and deposits (21,425) (28,225)
Increase in deferred assets (99,824) (21,521)
(Decrease) increase in accounts payable (8,703) 63,888
(Decrease) increase in accrued real
estate taxes (96,813) 62,001
Increase in refundable tenant deposits 18,943 20,620
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Total adjustments 19,053 461,482
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Net cash provided by operating
activities 368,334 364,299
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CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to investment property (147,016) (292,362)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Payments on mortgage notes payable (57,523) (57,522)
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NET INCREASE IN CASH AND 163,795 14,415
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of period 1,190,211 1,249,605
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,354,006 $ 1,264,020
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during year for interest $ 300,946 $ 268,883
=========== ===========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY INCOME FUND LTD. II, L.P.
--------------------------------
(A LIMITED PARTNERSHIP)
-----------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
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THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
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NOTE A:
Refer to the Registrant's financial statements for the year ended December 31,
1999, 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 June 30, 2000 and for all periods presented
have been made. The results of operations for the three and six month periods
ended June 30, 2000, are not necessarily indicative of the results which may be
expected for the entire year.
NOTE C:
The Registrant's properties are managed by American Spectrum Midwest (formerly
Nooney, Inc.), a wholly-owned subsidiary of CGS Real Estate Company. Nooney
Income Investments Two, Inc., a general partner, is a wholly-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 and six month periods
ended June 30, 2000 and 1999 was computed based on 19,221 units, the number of
units outstanding during the periods.
NOTE E:
CGS is continuing the process of developing a plan pursuant to which the
properties owned by the Registrant would be combined with the properties of
other real estate partnerships managed by CGS and its affiliates. These limited
partnerships own office properties, industrial properties, shopping centers, and
residential apartment properties. It is expected that the acquiror would in the
future qualify as a real estate investment trust. Limited partners would receive
shares of common stock in the acquiror which would be listed on a national
securities exchange or the NASDAQ national market system.
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NOTE F:
The Registrant has no items of other comprehensive income, accordingly, net
income and other comprehensive income are the same.
NOTE G:
The partnership has five reportable operating segments: Leawood Fountain Plaza,
Tower Industrial, Countryside Executive Center, Northeast Commerce Center, and
NorthCreek Office Park. The Partnership's management evaluates performance of
each segment based on profit or loss from operations before allocation of
property write downs, general and administrative expenses, unusual and
extraordinary items, and interest.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Leawood Fountain Plaza (24%) $ 86,905 $ 84,674 $ 170,672 $ 168,985
Tower Industrial 54,970 50,450 105,754 100,900
Countryside Executive Center 463,640 277,023 801,837 537,603
Northeast Commerce Center 116,779 128,059 218,046 220,237
NorthCreek Office Park 372,786 382,209 739,616 741,875
---------- ---------- ---------- ----------
1,095,080 922,415 2,035,925 1,769,600
========== ========== ========== ==========
Operating Profit:
Leawood Fountain Plaza (24%) $ 19,315 $ 12,226 $ 40,816 $ 28,097
Tower Industrial 22,514 22,676 43,591 46,398
Countryside Executive Center 192,476 (133,232) 256,547 (113,152)
Northeast Commerce Center (24,122) (36,354) (86,464) (150,445)
NorthCreek Office Park 80,749 55,387 150,970 101,554
---------- ---------- ---------- ----------
290,932 (79,297) 405,460 (87,548)
========== ========== ========== ==========
Capital Expenditures:
Leawood Fountain Plaza (24%) $ 32,474 $ 2,400 $ 33,362 $ 6,560
Tower Industrial 0 147,048 0 150,898
Countryside Executive Center 8,052 38,098 43,668 54,472
Northeast Commerce Center 17,977 41,865 17,977 47,725
NorthCreek Office Park 3,794 5,762 52,009 32,707
---------- ---------- ---------- ----------
62,297 235,173 147,016 292,362
========== ========== ========== ==========
Depreciation and Amortization:
Leawood Fountain Plaza (24%) $ 15,426 $ 22,863 $ 30,200 $ 46,754
Tower Industrial 10,859 10,838 22,863 21,250
Countryside Executive Center 44,631 30,505 85,926 62,689
Northeast Commerce Center 53,842 65,422 106,496 128,161
NorthCreek Office Park 77,417 90,129 156,123 180,315
---------- ---------- ---------- ----------
202,175 219,757 401,607 439,169
========== ========== ========== ==========
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Assets:
June 30, 2000 December 31, 1999
------------- -----------------
Leawood Fountain Plaza (24%) $ 973,179 $ 946,803
Tower Industrial 999,019 985,935
Countryside Executive Center 3,302,308 3,126,218
Northeast Commerce Center 3,539,050 3,512,653
NorthCreek Office Park 6,429,058 6,410,529
----------- -----------
15,242,614 14,982,138
=========== ===========
Reconciliation of segment data to the Partnership's consolidated data is as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Segments $1,095,080 $ 922,415 $2,035,925 $1,769,600
Corporate and other 13,609 7,496 16,295 15,926
---------- ---------- ---------- ----------
1,108,689 929,911 2,052,220 1,785,526
========== ========== ========== ==========
Net Income (Loss):
Segments $ 290,932 $ (79,297) $ 405,460 $ (87,548)
Corporate and other income 13,609 7,496 16,295 15,926
General and admin expenses (36,674) (5,308) (72,474) (25,561)
---------- ---------- ---------- ----------
267,867 (77,109) 349,281 (97,183)
========== ========== ========== ==========
Depreciation and Amortization
Segments $ 202,175 $ 219,757 $ 401,607 $ 439,169
Corporate and other 0 (38,367) 0 (76,738)
---------- ---------- ---------- ----------
202,175 181,390 401,607 362,431
========== ========== ========== ==========
Assets:
June 30, 2000 December 31, 1999
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Segments $15,242,614 $14,982,138
Corporate and other 1,071,171 1,126,462
----------- -----------
16,313,785 16,108,600
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ITEM 7: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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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
-------------------------------
Cash and cash equivalents on hand as of June 30, 2000, is $1,354,006 an increase
of $163,795 when compared to the year ended December 31, 1999. During the six
month period ending June 30, 2000, net cash provided by operating activities was
$368,334. Cash was used for capital and tenant improvements in the amount of
$147,016 and payment on mortgage notes payable in the amount of $57,523. 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 2000. The anticipated capital expenditures by
property are as follows:
Other Capital Leasing Capital Total
------------- --------------- -----
NorthCreek Office Park $ 44,000 $ 60,727 $104,727
Tower Industrial Building 0 0 0
Northeast Commerce Center 16,508 412,064 428,572
Countryside Office Park 16,000 14,838 30,838
Leawood Fountain Plaza (24%) 0 28,284 28,284
-------- -------- --------
$ 76,508 $515,913 $592,421
======== ======== ========
Leasing Capital at all of the partnership's properties relates to tenant
improvements and lease commissions for new and renewal tenants. At Northeast
Commerce Center Other Capital includes heating and air-conditioning unit
installation and electrical upgrades. At Countryside Executive Center, Other
Capital relates to the replacement of common area ceiling tiles and new air
conditioning units. At NorthCreek Office Park, Other Capital is reserved for
parking lot resurfacing. The Registrant reviews cash reserves on a regular basis
prior to beginning scheduled capital improvements. In the event there is not
adequate funds, the capital improvement will be postponed until such funds are
available.
As previously disclosed, the Registrant felt that the market conditions existed
whereby Countryside Executive Center should be sold. Management has increased
the occupancy level to 91% at June 30, 2000 from 70% at June 30, 1999. The
Registrant is still evaluating the sale and other options regarding the property
based on the increased occupancy level and the improving market conditions in
the surrounding areas.
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 negotiate with lenders the refinancing of
mortgage debt as it matures.
Results of Operations by Property
---------------------------------
The results of operations for the Registrant's properties for the quarters ended
June 30, 2000 and 1999 are detailed in the schedule below. Revenues and expenses
of the Registrant are excluded.
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Tower Northeast Countryside Leawood
NorthCreek Industrial Commerce Office Fountain
Office Park Building Center Park Plaza (24%)
----------- -------- ------ ---- -----------
2nd Quarter 2000
Revenues $ 372,786 $ 54,970 $ 116,779 $ 463,640 $ 86,905
Expenses 292,037 32,456 140,901 271,164 67,590
--------- --------- --------- --------- ---------
Net income (loss) $ 80,749 $ 22,514 $ (24,122) $ 192,476 $ 19,315
========= ========= ========= ========= =========
2nd Quarter 1999
Revenues $ 382,209 $ 50,450 $ 128,059 $ 277,023 $ 84,674
Expenses 326,822 27,774 164,413 410,255 72,448
--------- --------- --------- --------- ---------
Net income (loss) $ 55,387 $ 22,676 $ (36,354) $(133,232) $ 12,226
========= ========= ========= ========= =========
At NorthCreek Office Park net income for the quarter ended June 30, 2000 was
$80,749 compared to net income of $55,387 in 1999. Revenues decreased $9,423
when comparing the two quarters. This decrease can be attributed to decreases in
both base rental and escalation revenues due to a slight decrease in the
occupancy level than that of prior year. Expenses decreased $34,785 when
comparing the two quarters. This decrease can primarily be attributed to
decreases in depreciation and amortization expense ($12,712), landscaping
expenses ($4,267), repairs and maintenance related expenses ($22,424), real
estate taxes ($3,000), and other operating expenses ($3,059), partially offset
by an increase in interest expense ($10,677). The decrease in depreciation and
amortization can be attributed to both fully amortized assets and the allocation
of the property write down, now being depreciated at the property level. The
decrease in repairs and maintenance related expenses is due to general building
common area improvement expenses incurred in 1999 only. The increase in interest
expense is a direct result of the rise in the variable interest rate than that
of prior year.
Operating results at Tower Industrial Building remained consistent, with only a
$162 decrease in net income when comparing the quarter ended June 30, 2000 to
the quarter ended June 30, 1999, however, there was an increase in revenues of
$4,520 and an increase in expenses of $4,682. The increase in revenues is due to
increases in both base rental and real estate tax revenue as a result of renewal
increases effective in 2000 for the property's one tenant. The increase in
expenses is primarily due to a higher annual tax assessed for the property. The
property continues to operate as anticipated.
For the quarter ended June 30, 2000 and 1999, revenues at Northeast Commerce
Center were $116,779 and $128,059, respectively. The decrease in revenues of
$11,280 can primarily be attributed to a decrease in escalation revenue
($25,262) and miscellaneous revenues ($7,500), partially offset by an increase
in base rental revenue ($21,498). The decrease in miscellaneous revenues is due
to a cancellation fee received during 2nd quarter of 1999 only. The decrease in
escalation revenue is due to a decrease in the amount of reimbursable expenses.
The increase in base rent can be attributed to the rise in the occupancy level
from that of prior year. The property's expenses for the quarter ended June 30,
2000 and 1999, were $140,901 and $164,413, respectively. The decrease in
expenses of $23,512 is primarily attributable to decreases in depreciation and
amortization expense ($11,580), real estate tax expense ($11,422), repairs and
maintenance related expenses ($2,474), and vacancy related expenses ($3,140).
These decreased expenses were partially offset by an increase in interest
expense ($5,435). The decrease in depreciation and amortization expense can be
attributed to the allocation of the property writedown now being depreciated at
the property level. The decreased real estate tax expense can be attributed to
lower annual taxes due for the property in 2000. The increase in interest
expense is a direct result of the rise in the variable interest rate than that
of prior year.
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Revenues at Countryside Office Park were $463,640 for the quarter ended June 30,
2000 and $277,023 for the quarter ended June 30, 1999. The increase in revenue
of $186,617 when comparing the two periods, is primarily attributable to
increases in base rental revenue ($73,698), escalation revenue ($9,569), and
real estate tax revenue ($102,552). The increase in base rental and escalation
revenue can be attributed to the high occupancy level than that of prior year.
The increased real estate tax revenue is due to amounts billed to tenants for
their proportionate share of tax appeal fees paid that have resulted in a real
estate tax expense savings that span a five year period. Expenses at Countryside
Office Park were $271,164 and $410,255 for the quarters ended June 30, 2000 and
June 30, 1999, respectively. This decrease in expenses of $139,091 can be
primarily attributable to decreases in real estate tax expense ($165,740) due to
the expense of the previously mentioned tax appeal fee in 1999. No tax appeal
fees have been expensed in 2000. Decreases were also reflected in repairs and
maintenance related expenses ($9,353) and vacancy expenses ($6,954). These
decreases were partially offset by increases in management fee expense
($11,197), landscaping expense ($14,169), interest expense ($3,300), and
amortization expense ($14,126). The repairs and maintenance decrease can
primarily be attributed to lower heating and air-conditioning and general
building repair costs in the second quarter of 2000 than that of prior year. The
increased management fee expense is a direct result of the higher revenue level
achieved from the increase in the property's occupancy, than that of prior year.
The increase in landscaping expense can be attributed to exterior plant and
flower installations in done in 2000 only. The increase in amortization expense
is due to additional tenant alterations and lease commissions incurred as new
tenants have been added to the property.
At Leawood Fountain Plaza, net income for the quarter ended June 30, 2000 and
the quarter ended June 30, 1999 was $19,315 and $12,226, respectively, resulting
in an increase in net income of $7,089. Revenues increased $2,231 and expenses
decreased $4,858 when comparing the two quarters. Slight increases were
reflected in both base rental and escalation revenues. Decreases were reflected
in parking lot and depreciation/amortization expense when compared to that of
prior year.
The occupancy levels at June 30 are as follows:
Occupancy levels as of June 30,
-------------------------------
Property 2000 1999 1998
-------- ---- ---- ----
NorthCreek Office Park 96% 100% 95%
Tower Industrial Building 100% 100% 100%
Northeast Commerce Center 65% 50% 94%
Countryside Office Park 91% 70% 71%
Leawood Fountain Plaza (24%) 98% 98% 94%
Leasing activity during the second quarter of 2000 at NorthCreek Office Park
consisted of one new tenant signing a lease for 912 square feet, one tenant
renewing their lease for 1,898 square feet and one tenant vacating 620 square
feet. Occupancy remained at 96% throughout the quarter. The office park has one
major tenant with two leases that together comprise 33% of the available space.
These leases both expire in December 2003.
The Tower Industrial Building remains 100% leased to a single tenant whose lease
expires on December 31, 2001.
At Northeast Commerce Center leasing activity during the quarter consisted of
one new tenant signing a lease for 16,150 square feet. The property increased
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16% to 65% occupied throughout the quarter. The property has three major tenants
who occupy 23%, 11%, and 16% of the available space, with leases that expire in
September 2003, December 2006, and August 2005, respectively. The Registrant is
working with a local Cincinnati brokerage firm to handle the leasing of the
remaining space at the property.
Leasing activity at Countryside Office Park consisted of two tenants renewing
2,283 square feet, and one tenant vacating 1,042 square feet. Occupancy
decreased by 1%, to 91% during the quarter. The property has two major tenants
who occupy 14% and 13% of the available space with leases expiring in 2005 and
2002, respectively.
During the second quarter of 2000, leasing activity at Leawood Fountain Plaza
consisted of the Registrant renewing one lease for 946 square feet and the
Registrant signing one new lease with a tenant for 4,470 square feet. The
occupancy increased to 98% throughout the quarter. The property has two major
tenants occupying 14% and 10% of the available space on leases which expire in
October 2001 and July 2004, respectively.
The Registrant reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of a property may not
be recoverable. The Registrant considers a history of operating losses or a
change in occupancy to be primary indicators of potential impairment. The
Registrant deems the Property to be impaired if a forecast of undiscounted
future operating cash flows directly related to the Property, including disposal
value, if any, is less than its carrying amount. If the Property is determined
to be impaired, the loss is measured as the amount by which the carrying amount
of the Property exceeds its fair value. Fair value is based on quoted market
prices in active markets, if available. If quoted market prices are not
available, an estimated of fair value is based on the best information
available, including prices for similar properties or the results of valuation
techniques such as discounting estimated future cash flows. Considerable
management judgement is necessary to estimate fair value. Accordingly, actual
results could vary significantly from such estimates.
Results of Consolidated Operations 2000
---------------------------------------
Consolidated revenues for the three month period ended June 30, 2000 and 1999,
are $1,108,689 and $929,911, respectively. Consolidated revenues for the six
month period ended June 30, 2000 and 1999 are $2,052,220 and $1,785,526,
respectively. Revenues increased $178,778 for the three month period and
$266,694 for the six month period when comparing to that of prior year.
Consolidated revenues have increased primarily due to increases in base rental
and real estate tax revenues at Countryside Office Park as a result of the
higher occupancy level and the recapture in revenue of the real estate tax
appeal fees, as mentioned in the property comparisons. During the three month
periods ended June 30, 2000 and 1999, consolidated expenses were $840,822 and
$1,007,020, respectively. Consolidated expenses for the six month periods ended
June 30, 2000 and 1999 were $1,702,939 and $1,882,709, respectively.
Consolidated expenses decreased $166,198 and $179,770 for the three and six
month periods when compared to that of prior year. The decrease in expenses for
the three month period is primarily due to decreases in real estate tax expense
($176,429), repairs and maintenance related expenses ($35,267), insurance
($5,382), and other operating expenses ($7,159). These decreases were partially
offset by increases in interest expense ($19,412), depreciation and amortization
expense ($20,785), management fee expense ($10,360), and utility expense
($6,460). The decrease in real estate tax expense is due to lower annual taxes
at both Countryside Office Park and Northeast Commerce Center, as mentioned
previously in the property comparisons. The decreased repairs and maintenance
expenses are due to lower heating/air-conditioning and general building costs at
Northcreek and Countryside, also mentioned in the property comparisons. The
increase in interest expense can be attributed to the increased interest rate at
three of the Registrant's properties, than that of prior year. The increase in
depreciation and amortization is due to the addition of capital and tenant
related assets since the same period of the prior year. The decrease in
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consolidated expenses of $179,770 for the six month period is primarily due to
decreases in real estate tax expense ($184,539), repairs and maintenance related
expenses ($49,252), professional services ($18,091), insurance ($7,026), and
other operating expenses ($32,737). These decreases were partially offset by
increases in interest expense ($32,063), depreciation/amortization expense
($39,176), management fees ($15,914), utilities ($14,836), payroll ($2,171), and
cleaning expense ($6,814). The decrease in real estate tax expense and repairs
and maintenance, as well as the increases in interest and
depreciation/amortization have been addressed above in the three month period
comparisons. The decrease in professional services can be attributed to a
decrease in partnership related legal expenses than that of prior year. The
decrease in other operating expenses for the six month period is due to
decreases in snow removal and vacancy related expenses. The increase in
management fees is directly related to the increased revenues. The utility
expense increase can be attributed to increased electric expense at three of the
Registrant's properties.
Results of Consolidated Operations 1999
---------------------------------------
Consolidated revenues for the three month period ended June 30, 1999 and 1998,
are $929,911 and $899,041, respectively. Consolidated revenues for the six month
period ended June 30, 1999 and 1998 are $1,785,526 and $1,774,358, respectively.
Revenues increased $30,870 for the three month period and $11,168 for the six
month period ended June 30, 1999 when compared to the prior period. Consolidated
revenues overall have increased primarily due to increases in escalation revenue
at Northeast Commerce Center and NorthCreek Office Park and to increases in base
rental revenue at NorthCreek Office Park, Countryside Executive Center, and
Leawood Fountain Plaza. These increases in revenue were offset by a significant
decrease in base rental income at Northeast Commerce Center. During the three
month periods ended June 30, 1999 and 1998, consolidated expenses were
$1,007,020 and $873,271. Consolidated expenses for the six month periods ended
June 30, 1999 and 1998 were $1,882,709 and 1,688,703, respectively. Consolidated
expenses increased $133,749 and $194,636 for the three and six month periods
when comparing to prior year. The increase in expenses for the three month
period is due to increases in real estate tax expense ($149,800), repairs and
maintenance ($23,403), and professional services ($9,180). These increases were
partially offset by decreases in interest expense ($13,712), cleaning expense
($4,547), parking lot-landscaping expense ($10,017), and other operating
expenses ($21,306). The increase in real estate expense is due to the tax appeal
fee payment at Countryside. The increased repairs and maintenance expenses are
due to common area improvements made at NorthCreek Office Park. The decrease in
interest expense can be attributed to increased principal payments from prior
comparison period. The landscaping expense decrease is due to the reduction in
contracted service at Countryside Executive Center. The decrease in other
operating expenses is primarily due to a decrease in common area related and
fire/crime prevention expenses. The increase of $194,636 for the six month
period is due to increases in real estate tax expense ($134,789), repairs and
maintenance ($39,418), professional services ($33,660), payroll ($10,523),
insurance ($3,404), and other operating expenses ($33,697). These increases were
partially offset by decreases in interest expense ($25,644),
depreciation/amortization ($16,312), cleaning expense ($14,304), and landscaping
($6,702). The increase in real estate tax and repairs and maintenance, as well
as the decreases in interest and landscaping have been addressed above in the
three month comparisons. The increase in professional services can be attributed
to an increase in partnership related professional services in the first quarter
of 1999. The increase in payroll for the six month period is due to additional
office personnel costs during 1st quarter 1999. The increase in other operating
expenses for the six month period is due to significant increases in snow
removal and vacancy related expense (primarily at Northeast Commerce Center).
The decrease in cleaning is due to the absence of monthly cleaning
reimbursements to the former major tenant at Northeast Commerce Center.
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<PAGE>
Inflation
---------
The effects of inflation did not have a material impact upon the Registrant's
operations.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
See Exhibit Index on Page 15
(b) Reports on Form 8-K
On April 17, 2000, the Registrant filed a report on Form 8-K which
reported an Item 4, Changes in Registrant's Certifying Accountant
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOONEY INCOME FUND LTD. II, L.P.
Date: August 14, 2000 By: Nooney Income Investments Two, Inc.
----------------------------- General Partner
By: /s/ Gregory J. Nooney, Jr.
------------------------------------
Gregory J. Nooney, Jr.
Vice Chairman
By: /s/ Patricia A. Nooney
------------------------------------
Patricia A. Nooney
President and Secretary
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<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
3 Amended and Restated Agreement and Certificate of Limited
Partnership, dated February 3, 1986, is incorporated by
reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1986, as filed pursuant to
Rule 13a-1 of the Securities Exchange Act of 1934 (File No.
0-14360)
27 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
-15-
