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 September 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
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Sept. 30, December 31,
2000 1999
ASSETS: (Unaudited)
------------ ------------
Cash and cash equivalents $ 1,366,280 $ 1,190,211
Accounts receivable 256,553 257,599
Prepaid expenses and deposits 48,187 24,430
Investment property, at cost:
Land 2,618,857 2,618,857
Buildings and Improvements 14,310,259 13,997,112
------------ ------------
16,929,116 16,615,969
Less accumulated depreciation (5,525,751) (5,162,333)
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11,403,365 11,453,636
Investment property-held for sale 2,842,363 2,860,890
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14,245,728 14,314,526
Prepaid and Deferred expenses - At
amortized cost 341,654 321,834
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$ 16,258,402 $ 16,108,600
============ ============
LIABILITIES AND PARTNERS' EQUITY:
Liabilities:
Accounts payable and accrued expenses $ 74,713 $ 174,137
Accrued real estate taxes 368,668 485,507
Refundable tenant deposits 272,245 250,231
Mortgage note payable 6,784,962 6,871,246
------------ ------------
7,500,588 7,781,121
Partners' Equity 8,757,814 8,327,479
------------ ------------
$ 16,258,402 $ 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 Nine Months Ended
Sept.30, Sept.30, Sept.30, Sept.30,
2000 1999 2000 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rental and other income $ 975,238 $ 916,320 $ 3,025,010 $ 2,701,846
Interest 697 0 3,145 0
----------- ----------- ----------- -----------
975,935 916,320 3,028,155 2,701,846
EXPENSES:
Interest expense 158,842 141,000 459,788 409,883
Depreciation and amortization 209,353 186,863 610,961 549,293
Real estate taxes 131,495 120,291 389,232 551,738
Property management fees paid to
American Spectrum Midwest 57,646 53,838 179,802 160,079
Reimbursement to American Spectrum
Midwest for partnership management
services and indirect expenses 10,000 10,000 30,000 30,000
Repairs and maintenance 51,344 49,043 152,143 199,093
Professional services 60,698 86,134 121,095 164,621
Utilities 39,760 44,517 127,363 117,284
Payroll 37,359 29,949 102,407 87,193
Cleaning 38,970 36,051 113,964 104,231
Insurance 18,644 13,509 49,067 50,958
Landscaping expenses 13,894 34,360 55,128 74,692
Other operating expenses 66,875 46,088 206,870 235,287
----------- ----------- ----------- -----------
894,880 851,643 2,597,820 2,734,352
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 81,055 $ 64,677 $ 430,335 $ (32,506)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 4.17 $ 3.33 $ 22.16 $ (1.67)
=========== =========== =========== ===========
PARTNERS' EQUITY:
Beginning of Period $ 8,676,759 $ 8,165,360 $ 8,327,479 $ 8,262,543
Net Income (Loss) 81,055 64,677 430,335 (32,506)
----------- ----------- ----------- -----------
End of Period $ 8,757,814 $ 8,230,037 $ 8,757,814 $ 8,230,037
=========== =========== =========== ===========
</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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Nine Months Ended
Sept.30, Sept.30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 430,335 $ (32,506)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 610,961 549,293
Changes in assets and liabilities:
Decrease in accounts receivable 1,046 3,819
Increase in prepaid expenses and deposits (23,757) (29,276)
Increase in deferred assets (101,250) (114,585)
(Decrease) Increase in accounts payable (99,424) 11,408
(Decrease) Increase in accrued real
estate taxes (116,839) 17,942
Increase in refundable tenant deposits 22,014 33,319
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Total Adjustments 292,751 471,920
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Net cash provided by operating
activities 723,086 439,414
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CASH FLOWS FROM INVESTING ACTIVITIES -
Additions to investment property (460,733) (424,667)
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CASH FLOWS FROM FINANCING ACTIVITIES -
Payments on mortgage notes payable (86,284) (86,283)
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Net cash used in financing activities (86,284) (86,283)
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NET INCREASE (DECREASE) IN CASH AND 176,069 (71,536)
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of period 1,190,211 1,249,605
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,366,280 $ 1,178,069
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during year for
interest $ 459,788 $ 409,883
=========== ===========
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
---------------------------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 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 or as noted below.
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 cash flows at September 30, 2000 and for all periods presented have
been made. The results of operations for the three and nine month periods ended
September 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 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 and nine months ended
September 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. The transaction is
subject to the approval of the limited partners of the Registrant and portions
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of the other partnerships. The Registrant has filed a Registration Statement on
Form S-4 relating to the solicitation of consents with the Security and Exchange
Commission.
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 Office Park, Northeast Commerce Center, and
NorthCreek Office Park. The Partnership's management evaluates performance of
each segment based on profit or loss from operations, including the allocation
of property write downs, amortization of straight line base rent, general and
administrative expenses, unusual and extraordinary items, and interest.
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Leawood Fountain Plaza (24%) $ 87,018 $ 82,516 $ 257,690 $ 251,201
Tower Industrial 53,941 51,421 159,695 152,322
Countryside Office Park 355,416 288,900 1,157,253 826,502
Northeast Commerce Center 103,814 108,512 321,861 328,749
NorthCreek Office Park 366,328 366,013 1,105,944 1,107,888
---------- ---------- ----------- -----------
966,517 897,362 3,002,443 2,666,662
========== ========== =========== ===========
Operating Profit (Loss):
Leawood Fountain Plaza (24%) $ 24,297 $ 7,103 $ 65,112 $ 35,200
Tower Industrial 24,109 22,833 67,699 69,231
Countryside Office Park 88,536 38,247 345,083 (74,905)
Northeast Commerce Center (71,992) (51,714) (158,455) (202,159)
NorthCreek Office Park 42,220 81,887 193,190 183,441
---------- ---------- ----------- -----------
107,170 98,356 512,629 10,808
========== ========== =========== ===========
Capital Expenditures:
Leawood Fountain Plaza (24%) $ 2,484 $ 11,149 $ 35,846 $ 17,709
Tower Industrial 0 41,850 0 192,748
Countryside Office Park 24,443 75,321 68,111 129,793
Northeast Commerce Center 263,988 0 281,966 47,725
NorthCreek Office Park 22,803 3,985 74,810 36,692
---------- ---------- ----------- -----------
313,718 132,305 460,733 424,667
========== ========== =========== ===========
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Depreciation and Amortization:
Leawood Fountain Plaza (24%) $ 15,602 $ 24,628 $ 45,802 $ 71,382
Tower Industrial 10,286 11,905 33,148 33,155
Countryside Office Park 44,749 33,142 130,676 95,831
Northeast Commerce Center 60,385 65,966 166,881 194,127
NorthCreek Office Park 78,331 89,652 234,454 269,967
---------- ---------- -------- -----------
209,353 225,293 610,961 664,462
========== ========== ======== ===========
Assets:
As of: September 30, 2000 December 31, 1999
------------------ -----------------
Leawood Fountain Plaza (24%) $ 990,261 $ 946,803
Tower Industrial 1,008,497 985,935
Countryside Office Park 3,175,104 3,126,218
Northeast Commerce Center 3,737,543 3,512,653
NorthCreek Office Park 6,317,691 6,410,529
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15,229,096 14,982,138
========== ==========
Reconciliation of segment data to the Partnership's consolidated data follow:
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Segments $ 966,517 $ 897,362 $ 3,002,443 $ 2,666,662
Corporate and other 9,418 18,958 25,712 35,184
----------- ----------- ----------- -----------
975,935 916,320 3,028,155 2,701,846
=========== =========== =========== ===========
Operating Profit:
Segments $ 107,170 $ 98,356 $ 512,629 $ 10,808
Corporate and other income 9,418 18,958 25,712 34,884
General and admin expenses (35,533) 52,637 (108,006) 78,198
----------- ----------- ----------- -----------
81,055 64,677 430,335 (32,506)
=========== =========== =========== ===========
Depreciation and Amortization
Segments $ 209,353 $ 225,293 $ 610,961 $ 664,462
Corporate and other 0 (38,430) 0 (115,169)
----------- ----------- ----------- -----------
209,353 186,863 610,961 549,293
=========== =========== =========== ===========
Assets:
As of: September 30, 2000 December 31, 1999
------------------ -----------------
Segments $15,229,096 $14,982,138
Corporate and other 1,029,306 1,126,462
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16,258,402 16,108,600
========== ==========
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NOTE H:
In December 1999, the SEC (Security and Exchange Commission) issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, which summarizes certain of the SEC staff's views on applying
generally accepted accounting principles to revenue recognition in financial
statements. The Registrant will adopt the accounting provisions of SAB 101 in
the fourth quarter of 2000. Management believes that the implementation of SAB
101 will not have a significant effect on the Registrant's financial condition
or results of operations.
NOTE I:
The partnership stopped making distributions in 1999 although it had cash
available for distribution. The cash was retained in anticipation of the
consolidation transaction or liquidation of the fund as discussed in Note E.
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 Registrant. Actual
results could differ materially from those contemplated by such statements.
Liquidity and Capital Resources
-------------------------------
Cash on hand as of September 30, 2000 is $1,366,280 an increase of $176,069 when
compared to the year end December 31, 1999. During the nine month period ending
September 30, 2000, net cash provided by operating activities was $723,086. Cash
was used for capital and tenant improvements in the amount of $460,733 and
payment on mortgage notes payable in the amount of $86,284. 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. These anticipated capital expenditures by property are as
follows:
Other Leasing
Capital Capital Total
------- ------- -----
NorthCreek Office Park $ 44,000 $ 37,924 $ 81,924
Tower Industrial Building 0 0 0
Northeast Commerce Center 0 169,557 169,557
Countryside Office Park 6,305 0 6,305
Leawood Fountain Plaza (24%) 0 24,901 24,901
-------- -------- --------
$ 50,305 $232,382 $282,687
======== ======== ========
Leasing capital at the Registrant's properties include funds for tenant
alterations and lease commissions for new and renewal leases. Other capital at
NorthCreek Office Park is for parking lot resurfacing and at Countryside Office
Park, other capital is reserved for the replacement of common area ceiling
tiles. 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 Office Park should be sold. Management has increased the
occupancy level to 93% at September 30, 2000 from 85% at September 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.
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The future liquidity of the Registrant is dependent on its ability to fund
future capital expenditures from operations and cash reserves and maintain
occupancy. Until such time as the real estate market recovers and profitable
sale of the properties is feasible, the Registrant will continue to manage their
properties to achieve its investment objectives.
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<PAGE>
Results of Operations by Property
---------------------------------
The results of operations for the Registrant's properties for the quarters ended
September 30, 2000 and 1999 are detailed in the schedule below. Revenues and
expenses of the Registrant are excluded.
Tower Northeast Countryside Leawood
NorthCreek Industrial Commerce Office Fountain
Office Park Building Center Park Plaza (24%)
----------- -------- ------ ------ -----------
2000
----
Revenues $ 366,328 $ 53,941 $ 103,814 $ 355,416 $ 87,018
Expenses 324,108 29,832 175,806 266,880 62,721
--------- --------- --------- --------- ---------
Net Income (Loss) $ 42,220 $ 24,109 $ (71,992) $ (88,536) $ 24,297
========= ========= ========= ========= =========
1999
----
Revenues $ 366,013 $ 51,421 $ 108,512 $ 288,900 $ 82,516
Expenses 284,126 28,588 160,226 250,653 75,413
--------- --------- --------- --------- ---------
Net Income (Loss) $ 81,887 $ 22,833 $ (51,714) $ 38,247 $ 7,103
========= ========= ========= ========= =========
At NorthCreek Office Park net income for the three month period ended September
30, 2000 was $42,220 compared to net income of $81,887 in 1999. Revenues
remained consistent with only a $315 increase when comparing the two periods.
Expenses increased $39,982 when comparing the two quarters. This increase can
primarily be attributed to increases in interest expense ($9,813), bad debt
expense ($10,001), repairs and maintenance related expenses ($11,168), utilities
($3,041), professional services ($11,589), and vacancy related expenses
($2,422). These increases were partially offset by a decrease in depreciation
and amortization expense ($11,321). The increased interest expense is attributed
to the higher prime interest rate than that of prior year. The increase in bad
debt expense is due to a reserve set up for accounts receivable balances 90 days
and over in 2000 only. The increase in professional services can be attributed
to zoning and survey fees ($13,642) incurred in the third quarter of 2000 and
not in prior year. The decrease in depreciation and amortization is primarily
due to a property level entry posted in 2000 only to record contra- depreciation
for a previously recorded valuation allowance. Repairs and maintenance related
expenses increased due to additional air-conditioning maintenance and repair
services necessary in 2000.
Operating results at Tower Industrial Building remained relatively stable when
comparing the three month periods ended September 30, 2000 and September 30,
1999. The increase in net income of $1,276, when comparing the two periods, is
primarily due to an increase in revenues ($2,520), partially offset by an
increase in expenses ($1,244). The increase in revenues is attributable to
increased base rental rates and the increased expenses is due to an increase in
the annual real estate tax.
At Northeast Commerce Center the net loss for the three month period ended
September 30, 2000 was $(71,992) compared to the net loss of $(51,714) in 1999.
Revenues were $103,814 and $108,512 for the three month periods ended September
30, 2000 and 1999, respectively. The decrease in revenues of $4,698 can be
attributed to a decrease in escalation revenue based on reimbursable expenses.
Expenses increased $15,580 when comparing the two three-month periods. This
increase in expenses can primarily be attributed to increases in interest
expense ($4,996) and legal fees ($15,802), partially offset by a decrease in
depreciation and amortization expense ($5,581). The additional legal fees
incurred in 2000 can be attributable to new and renewal lease structuring.
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At Countryside Office Park net income for the three month period ended September
30, 2000 was $88,536 compared to the net income of $38,247 in 1999. Revenues
increased $66,516 when comparing the two periods. The increase in revenue is
attributable to an increase in base rental revenue ($63,188) due to an 8%
increase in the occupancy level and increased rental rates when compared to same
period last year. Expenses increased $16,227 when comparing the periods. This
increase in expenses can be attributed to increases in interest expense
($3,033), amortization expense ($11,607), bad debt expense ($5,397), and real
estate tax expense ($10,228), partially offset by decreases in repairs and
maintenance related expenses ($5,676) and utilities ($8,434). The increased
amortization expense can be attributed to the tenant improvements incurred due
to increasing occupancy since that of prior year. The increase in real estate
tax is due to a higher annual real estate tax amount due in 2000. The decrease
in utilities is primarily due to electric expense, which is directly related to
the increase in occupancy.
At Leawood Fountain Plaza, net income for the three month periods ended
September 30, 2000 and 1999 was $24,297 and $7,103, respectively, resulting in
an increase of $17,194. Revenues increased $4,502 when comparing the two periods
due primarily to an increase in escalation revenue and interest income. Expenses
decreased $12,692 due primarily to decreases in depreciation and amortization
($9,026), landscaping expense ($1,671), and contract cleaning services ($1,632).
The occupancy levels at September 30 are as follows:
Occupancy Levels at September 30,
---------------------------------
PROPERTY 2000 1999 1998
-------- ---- ---- ----
NorthCreek Office Park 96% 99% 96%
Tower Industrial Building 100% 100% 100%
Northeast Commerce Center 65% 60% 94%
Countryside Office Park 93% 85% 75%
Leawood Fountain Plaza (24%) 89% 98% 95%
At NorthCreek Office Park occupancy remained consistent at 96% during the
quarter. Leasing activity consisted of three new tenants signing leases for
3,699 square feet, one tenant signing a renewal lease who occupies 1,900 square
feet, and two tenants vacating 3,065 square feet. The Office Park has one major
tenant with two leases that comprise approximately 26% and 7% of the available
space. These two leases expire December 2003.
The Tower Industrial Building is leased to a single tenant whose lease expires
on December 31, 2001.
At Northeast Commerce Center, occupancy remained consistent at 65% during the
quarter. There was no leasing activity during the third quarter. The property
has three major tenants who occupy 23%, 11% and 16% of the available space with
leases that expire September 2003, December 2006, and August 2005, respectively.
The Registrant is working with a Cincinnati brokerage firm to handle the leasing
of the remaining space at the property.
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Occupancy at Countryside Office Park increased from 91% to 93% during the third
quarter 2000. Leasing activity during the quarter consisted of the Registrant
signing two new leases totaling 2,161 square feet, and one tenant vacating 937
square feet. The property has two major tenants who occupy 14% and 13% of the
available space with leases which expire February 2005 and August 2002,
respectively.
During the third quarter of 2000 occupancy at Leawood Fountain Plaza decreased
9%, to 89% during the quarter. Leasing activity consisted of one new tenant
signing a lease for 1,654 square feet, the Registrant renewing three leases for
4,926 square feet, and five tenants vacating the property with square footage
totaling 9,526 square feet. 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
---------------------------------------
For the three-month periods ended September 30, 2000 and 1999, consolidated
revenues were $975,935 and $916,320, respectively. Consolidated revenues
increased $59,615 when comparing the periods, primarily due to increases in base
in base rental revenue at Countryside Office Park, as mentioned in the property
comparisons. For the nine-month periods ended September 30, 2000 and 1999,
consolidated revenues were $3,028,155 and $2,701,846, respectively. This
increase of $326,309 is due primarily to increases in base rental revenue
($213,254) and real estate tax reimbursement revenue ($105,522). The increase in
base rental revenue can be attributed to higher occupancy levels and rental
rates at three of the Registrant's properties. The increase in real estate tax
revenue is due to amounts recaptured from tenants at Countryside Office Park for
the appeal fees paid in 1999.
Consolidated expenses for the three-month periods ended September 30, 2000 and
1999 were $894,880 and $851,643 respectively. The increase of $43,237 can
primarily be attributed to increases in interest expense ($17,842), depreciation
and amortization expense ($22,490), real estate tax expense ($11,204),
management fees ($3,808), repairs and maintenance related expenses ($2,301),
payroll expense ($7,410), cleaning expense ($2,919), insurance ($5,135), and
various other operating expenses ($20,787). These increases were partially
offset by decreases in professional services ($25,436), utility expense
($4,757), and landscaping expense ($20,466). The increased interest expense is a
direct result of the higher interest rates for the third quarter 2000. The
overall increase in depreciation and amortization is due to additional assets
added since the prior year reporting period. The increase in real estate tax
expense is primarily due to the additional annual tax at Countryside, as
addressed in the property comparisons. The increase in other operating expense
is primarily due to the recording of an allowance for all accounts receivable
balances 90 days and over in the third quarter 2000 at the Registrant's
properties. The decrease in professional services is primarily due to property
appraisals performed in 1999 only. The decrease reflected in landscaping expense
is due to less exterior improvement costs incurred in 2000. Consolidated
expenses for the nine-month periods ended September 30, 2000 and 1999 were
$2,597,820 and $2,734,352, respectively. The decrease of $136,532 can be
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to decreases in real estate tax expense ($162,506), repairs and maintenance
related expenses ($46,950), professional services ($43,526), insurance ($1,891),
landscaping expense ($19,564), and various other operating expenses ($28,417),
partially offset by increases in interest expense ($49,905), depreciation and
amortization ($61,668), management fees ($19,723), utility expenses ($10,079),
payroll expense ($15,214), and cleaning expense ($9,733). The decrease in real
estate tax expense is due to appeal fees paid for Countryside Office Park in
1999 only (that cost was partially passed along to the tenants and contributes
to the increase in real estate tax revenue, as mentioned previously. The
decrease in repairs and maintenance expense is primarily due to a lower amount
of electrical repairs and upgrades, as well as general building repairs at
Countryside Office Park and NorthCreek Office Park. The decrease in professional
services and landscaping, as well as the increase in interest expense and
depreciation and amortization have been previously addressed above in the
three-month consolidated comparisons. The decrease in other operating expense is
primarily due to a higher year-to-date bad debt expense balance than prior year.
Results of Consolidated Operations 1999
---------------------------------------
For the three month periods ended September 30, 1999 and 1998, consolidated
revenues were $916,320 and $892,677, respectively. Consolidated revenues
increased $23,643 when comparing the periods. This increase in revenues is
primarily due to an increase in escalation revenue ($12,240), miscellaneous
revenues ($2,578), and a decrease in the amount of receivables written off to
bad debt expense once considered uncollectible in 1999 ($19,409). These positive
income results were partially offset by a decrease in base rental revenue
($11,264). The decrease in base rental revenues is primarily due to the lower
occupancy levels and related revenues at Northeast Commerce Center. All of the
other Registrant's properties reflected positive base rental revenue results for
the three month period ending September 30, 1999. For the nine month period
ended September 30, 1999 and 1998, consolidated revenues were $2,701,846 and
$2,667,034, respectively. Consolidated revenues for the nine month period
increased $34,812 when compared to prior year. This increase in revenues is
primarily due to increases in escalation ($55,526) at the Registrant's
properties, in addition to a prior year tax refund for Countryside Office Park
received during second quarter 1999 ($19,545). These increases in income were
partially offset by a decrease in base rental revenue ($32,689) at Northeast
Commerce Center, as mentioned above, and an increase in uncollectible charges
written off to bad debt ($19,705). The increase in escalation revenue can be
attributed to higher reimbursable expenses.
Consolidated expenses for the three month periods ended September 30, 1999 and
1998 were $851,643 and $851,429, respectively. Although overall expenses reflect
only a $214 increase, the following fluctuations should be noted: increases in
professional services ($59,064), utilities ($2,367), payroll ($3,359),
landscaping ($11,333), and other operating expenses ($14,031), were partially
offset by decreases in interest ($8,553), depreciation and amortization
($2,552), real estate tax expense ($30,804), repairs and maintenance related
expenses ($40,081), cleaning ($4,820), and insurance ($3,798). Professional
services increased for the three month period due to appraisals performed at all
of the Registrant's properties and partnership legal fees. The increase in
landscaping can be attributed to exterior improvements at Countryside Office
Park. The increase in other operating expenses is primarily due to the common
area improvements at Countryside. The decrease in real estate tax expense is
primarily due to the lower annual tax at Countryside. The lower repairs and
maintenance related expenses are as a result of decreased heating, ventilation,
and air-conditioning repairs and replacements at both Northeast Commerce Center
and Countryside Office Park. Consolidated expenses for the nine month period
ended September 30, 1999 and 1998 were $2,734,352 and $2,539,500, respectively.
Consolidated expenses increased $194,852 when comparing the nine month periods
due to increases in real estate tax expense ($93,155), management fees ($2,250),
professional services ($92,724), utilities ($2,892), payroll ($13,881),
landscaping ($4,630), and other operating expenses ($59,030). These increases
were partially offset by decreases in interest ($34,196), depreciation and
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<PAGE>
amortization ($18,866), and cleaning expense ($19,590). The increase in real
estate tax expense can be attributed to a tax appeal fee payment at Countryside
Office Park in second quarter 1999 resulting in previously addressed tax
savings. The increase in payroll can primarily be attributed to additional
temporary office staff during first and second quarter 1999 at Countryside
Office Park and NorthCreek Office Park. The increase in other operating expenses
can primarily be attributed to increases in snow removal at the Registrant's
properties and vacancy expenses at Northeast Commerce Center. The decrease in
interest expenses is due to declining principal balances and outstanding debt.
The decrease in depreciation and amortization can be attributed to fully
depreciated and amortized assets. The cleaning expense decrease is due to the
lower occupancy level at Northeast Commerce Center. The increase in professional
fees has been addressed above in the three month period comparisons.
Inflation
---------
The effects of inflation did not have a material impact upon the Registrant's
operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
See Exhibit Index
(b) Reports on Form 8-K
None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOONEY INCOME FUND LTD. II, L.P.
Dated: November 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
13-a1 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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