ITEM 1: BUSINESS
It should be noted that this 10-K contains forward-looking information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risk and uncertainty, including trends in the real estate investment market, projected leasing and sales, and the future prospects for the Registrant. Actual results could differ materially from those contemplated by such statements.
Nooney Income Fund Ltd., L.P. (the "Registrant") is a limited partnership formed under the Missouri Uniform Limited Partnership Law on October 12, 1983, to invest, on an all-cash basis, in income-producing real properties such as shopping centers, office buildings and office/warehouse properties. The Registrant originally invested in three real properties. One of the properties was sold in 1991. The remaining two properties are described in Item 2
ITEM 2: PROPERTIES
On January 24, 1984, the Registrant purchased Oak Grove Commons, an office/warehouse complex located on Brook Drive in the city of Downer's Grove, Illinois, a suburb of Chicago. The purchase price of the complex was $5,218,569. Oak Grove Commons consists of three adjoining single-story buildings constructed of brick veneer with concrete block backing which contain a total of approximately 137,000 net rentable square feet and are located on a 7.6 acre site which provides paved parking for 303 cars. The complex, which is 40% office space and 60% bulk warehouse, was 95% leased by 26 tenants at December 31, 1996.
On February 20, 1985, the Registrant acquired a 76% interest as a tenant in common in Leawood Fountain Plaza, a three building office complex in Leawood, Kansas. Constructed in two phases in 1982 and 1983, the buildings contain approximately 29,000, 28,000 and 25,000 net rentable square feet, respectively, or an aggregate of approximately 82,000 net rentable square feet of office space. Paved parking is provided for 403 cars. The purchase price of the complex was $9,626,576, of which $7,316,197 was paid by the Registrant for its 76% interest. The remaining 24% interest was purchased by Nooney Income Fund Ltd. II, L.P., an affiliate of the Registrant, as the other tenant in common. All costs and revenues attributable to the operation of the complex are shared by the Registrant and Nooney Income Fund Ltd. II, L.P. in proportion to their respective percentage interests. The complex was 92% leased by 39 tenants at December 31, 1996.
Reference is made to Note 4 of Notes to Financial Statements filed herewith as Exhibit 99.3 in response to Item 8 for a description of the indebtedness secured by the Registrant's real property investments.
The following table sets forth certain information as of December 31, 1996, relating to the properties owned by the Partnership.
ITEM 3:
ITEM 3: LEGAL PROCEEDINGS
The Registrant is not a party to any material pending legal proceedings.
ITEM 4:
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of the year ended December 31, 1996.
PART II
ITEM 5:
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of February 1, 1997, there were 1,415 record holders of Interests in the Registrant. There is no public market for the Interests and it is not anticipated that a public market will develop.
CASH DISTRIBUTIONS PAID PER LIMITED PARTNERSHIP UNIT
First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- 1995 -0- $ 6.25 -0- $ 6.25
1996 -0- $ 6.25 -0- $ 12.50
ITEM 6:
ITEM 6: SELECTED FINANCIAL DATA
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash on hand as of December 31, 1996, is $797,225, an increase of $140,321 from the year ended December 31, 1995. The increase in cash can be attributable to a decrease in capital expenditures at both properties when comparing 1996 to 1995. The Registrant expects the capital expenditures during 1997 will be adequately funded by current cash reserves and the properties' operating cash flow. The anticipated capital expenditures in 1997 by property are as follows:
Other Leasing Capital Capital Total ----------------------------------
Oak Grove Commons $119,982 $133,151 $253,133 Leawood Fountain Plaza (76%) 153,081 95,570 248,651 ----------------------------------- $273,063 $228,721 $501,784 ===================================
At Oak Grove Commons and Leawood Fountain Plaza, the Registrant anticipates leasing capital in the amount of $228,721 to fund tenant alterations and lease commissions for new and renewal tenants. At Oak Grove Commons, the Registrant anticipates spending other capital for resurfacing the parking lot ($64,298) and structural repairs to one end of the building which is sinking ($55,000). At Leawood Fountain Plaza, the Registrant anticipates spending other capital for sidewalk and structural repairs, remodeling the second floor restrooms and replacing the exterior lighting. In addition, $76,000 is anticipated to be spent to upgrade the sprinkler system throughout all three buildings of the complex to bring it in compliance with the current city codes.
Results of Operations
The results of operations for the Registrant's properties for the years ended December 31, 1996, 1995 and 1994 are detailed in the schedule below. Expenses of the Registrant are excluded.
Oak Grove Leawood Fountain Commons Plaza (76%) ------------------------------- ----
Revenues $881,453 $907,803 Expenses 718,405 881,027 --------------------------- Net Income $163,048 $ 26,776 ===========================
----
Revenues $830,756 $884,141 Expenses 696,118 817,258 --------------------------- Net Income $134,638 $ 66,883 ===========================
----
Revenues $618,665 $816,099 Expenses 660,503 781,593 ---------------------------- Net Income (Loss) $(41,838) $ 34,506 ============================
At Oak Grove Commons net income increased for the third year in a row. The change from 1995 to 1996 is attributable to an increase in the base rental revenues and an increase in the common area maintenance reimbursement income accrued at year end. As indicated in last year's report, the large increase in income between 1994 and 1995 was the result of significant re-leasing of the property during 1995. As revenues have increased, expenses have also. Expenses increased from $696,118 to $718,405 in 1996. This increase is attributable to the installation of upgraded fire alert equipment ($30,373). The first phase of this project was completed in 1995. Parking lot expenditures ($26,780) increased due to the first phase of the parking lot overlay being completed, real estate taxes ($9,193), offset by a decrease in building repair and maintenance ($7,915).
At Leawood Fountain Plaza, revenues increased for the third year in a row increasing $23,662 between 1995 and 1996. This increase in revenue during 1996 is attributable to an increase in the common area maintenance reimbursements from tenants ($68,729) offset by a decrease in miscellaneous income ($50,996). In 1995, a termination payment was received from a tenant who vacated their space during 1995 which caused a non-reoccurring increase in revenues that year. During 1995, expenses increased $35,665 when compared to 1994 expenses. The increases were related to increases in amortization ($12,003), real estate taxes ($6,808), repairs and maintenance ($9,369), and administrative costs ($6,735) offset by decreases in cleaning and parking lot expenditures. Expenses increased $63,769 from 1995 to 1996. The increase in expenses was attributable to increases in electric ($11,240), parking lot ($8,077), heating, ventilating and air conditioning repair and maintenance ($7,190), and real estate taxes ($37,728).
The occupancy at the Registrant's properties at year-end remain at a high level. The occupancy rates as of December 31 are as follows:
1996 1995 1994 --------------------------
Oak Grove Commons 95% 100% 90% Leawood Fountain Plaza 92% 92% 90%
During the fourth quarter, the occupancy level at Oak Grove Commons decreased by 1% due to one tenant vacating 3,833 square feet and one new tenant occupying 2,103 square feet of space. For the year, leasing activity included new leases of 8,054 square feet, renewal leases of 6,771 square feet, while tenants vacated 14,887 square feet. Oak Grove Commons has no tenants who occupy more than 10% of the available space. At Leawood Fountain Plaza, occupancy increased during the fourth quarter from 90% to 92%. The increase is attributable to new leases with three tenants for a total of 3,207 square feet while one tenant occupying 811 square feet renewed and two tenants vacated 1,537 square feet. Occupancy at year-end 1995 and 1996 was 92%. During 1996, the Registrant signed eight new leases for 7,009 square feet, renewed leases with six tenants occupying 7,289 square feet, while seven tenants occupying 7,093 square feet vacated. The
property has two major tenants, one who occupies approximately 11% of the available space whose lease expires in July 1998 and the second major tenant who occupies approximately 10% of the available space whose lease expires in July of 1999.
1996 Comparisons
As of December 31, 1996, the Registrant's consolidated revenues are $1,798,369 compared to $1,707,296 for the year ended December 31, 1995. The increase in revenue was $91,073, an increase of 5%. The increase in revenue is attributable to rental increases at both properties. As previously stated, occupancies remained high at both properties throughout all of 1996. The Registrants consolidated expenses for the year ended December 31, 1996 are $1,623,084 compared to $1,519,520 for the year ended December 31, 1995. The increase in expenses of $103,564 was a 7% increase. The increase is attributable mainly to an increase in real estate taxes ($46,925), repairs and maintenance at both properties ($38,506) and other operating expenses ($40,033), offset by decreases in interest ($13,347) and depreciation and amortization ($29,163).
Net income for 1996 decreased $12,491 or $1.44 per partnership unit when compared to the 1995 operating results. Cash flow provided from operations for the year ended December 31, 1996, was $571,343 which allowed the Registrant to fund capital expenditures of $113,980, distribute $316,282 to the partners and reduce Oak Grove Commons debt by $64,800.
1995 Comparisons
As of December 31, 1995, the Registrant's consolidated revenues are $1,707,296 compared to $1,449,536 for the year ended December 31, 1994. The increase in revenues was $257,760 or 18%. The significant increase in revenues is attributable to both properties, with a majority coming from Oak Grove Commons. Leawood Fountain Plaza's revenues increased $68,042 and Oak Grove Commons revenues increased $212,091. As previously stated, the increase in revenues at Leawood Fountain Plaza is due primarily to a termination payment received from a tenant who vacated their space during 1995. At Oak Grove Commons, the Registrant, through the use of an aggresive marketing plan, was able to increase occupancy from 90% as of January 1, 1995 to 100% by September 30, 1995. This factor along with a slight increase in rental rate resulted in the significant increase in revenues.
The Registrant's consolidated expenses for the year ended December 31, 1995 are $1,519,520 compared to $1,442,913 for the year ended December 31, 1994. The increase in expenses of $76,607 or 5.31% can be attributable to increases in interest, amortization, management fees, and repairs and maintenance, offset by a decrease in other operating expenses. The increase in interest expense relates to the increase in the Registrant's variable interest rate. Though prime rate decreased in the fourth quarter of 1995, the average rate paid throughout the year increased when compared to 1994. The increase in amortization expense directly correlates with the significant tenant alterations and lease commissions expenditures over the past two years which correlates with the increase in occupancy over the past two years. With the increase in revenues, management fees, which are based on a percentage of revenues, increased from 1994 to 1995. Repairs and maintenance expense increase relates to repairs to the building exteriors at both Oak Grove Commons and Leawood Fountain Plaza.
Although several expenses increased in 1995 when compared to 1994, other operating expenses decreased due primarily to decreases in vacancy expense ($32,174) and snow removal ($9,493), offset by increases in adminstrative costs ($9,098).
With the increase in revenues offset by a smaller increase in expenses, the Registrant had favorable operating results for the year ended December 31, 1995 when compared to the same period ended 1994. Net income increased $181,153 or $11.81 per limited partnership unit when comparing the 1995 operating results to those of 1994. Cash flow provided by operations for the year ended December 31, 1995, is $628,127 which enabled the Registrant to fund capital expenditures of $444,649, distribute $210,857 to the partners, and reduce Oak Grove Common's debt by $60,600.
Inflation
The effects of inflation did not have a material impact upon the Registrant's operation in fiscal l995 and 1996.
Interest Rates
Interest rates on floating rate debt remained flat during 1996. Future increases in the prime interest rate can adversely affect the operations of the Registrant.
ITEM 8:
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements of the Registrant are filed herewith as Exhibit 99.3 and are incorporated herein by reference (see Item 14(a)1). The supplementary financial information specified by Item 302 of Regulation S-K is provided in Item 7.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10:
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partners of the Registrant responsible for all aspects of the Registrant's operations are Gregory J. Nooney, Jr., age 66, Nooney Ltd., L.P., a Missouri limited partnership and Nooney Income Investments, Inc., a Missouri corporation. Gregory J. Nooney, Jr. is a senior officer of Nooney Company, the sponsor of the Registrant.
The background and experience of the General Partners are as follows:
Gregory J. Nooney, Jr. joined Nooney Company in 1954 and is currently Chairman of the Board and Chief Executive Officer.
John J. Nooney is a Special General Partner of the Partnership and as such, does not exercise control of the affairs of the Partnership.
John J. Nooney joined Nooney Company in 1958 and was President and Treasurer until he resigned in 1992. Mr. Nooney is currently Chairman of the Board of Dalton Investments, a real estate asset management firm.
Nooney Ltd., L.P. is a Missouri limited partnership formed in August 1983 for the purpose of being a general and/or limited partner in the Registrant and other limited partnerships. Gregory J. Nooney, Jr. is the general partner of Nooney Ltd., L.P.
Nooney Income Investments, Inc. was formed in August 1983 for the purpose of being a general and/or limited partner in the Registrant and other limited partnerships. Gregory J. Nooney, Jr. is an officer and director of Nooney Income Investments, Inc.
Gregory J. Nooney, Jr. and John J. Nooney are brothers. Gregory J. Nooney, Jr. and Faith L. Nooney (wife of John J. Nooney) are stockholders of Nooney Company, with Gregory J. Nooney, Jr. controlling all voting stock of Nooney Company.
The General Partners will continue to serve as General Partners until their withdrawal or their removal from office by the Limited Partners.
Certain of the General Partners act as general partners of limited partnerships and hold directorships of companies with a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of the Act. A list of such directorships, and the limited partnerships for which the General Partners serve as general partners, is filed herewith as Exhibit 99.1 and incorporated herein by reference.
During 1993 Lindbergh Boulevard Partners, L.P. filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. Gregory J. Nooney, Jr. is the general partner of Nooney Ltd. II, L.P, which in turn is the general partner of Nooney Development Partners, L.P., which in turn is the general partner of Nooney-Hazelwood Associates, L.P. which is the general partner of Lindbergh Boulevard Partners, L.P. Lindbergh Boulevard Partners, L.P. emerged from bankruptcy on May 17, 1994, when its Plan of Reorganization was confirmed.
ITEM 11:
ITEM 11: EXECUTIVE COMPENSATION
The General Partners are entitled to a share of distributions and a share of profits and losses as more fully described under the headings "Compensation to General Partners and Affiliates" on pages 9-10 and "Profits and Losses for Tax Purposes; Distributions; and Expenses of General Partners" on pages A-17 to A-21
of the Prospectus of the Registrant dated November 9, 1983, as supplemented and filed pursuant to Rule 424(c) of the Securities Act of 1933 (the "Prospectus"), which are incorporated herein by reference.
During 1996, cash distributions of $31,645 were paid to the General Partners by the Registrant.
See Item 13 below for a discussion of transactions between the Registrant and certain affiliates of the General Partners.
ITEM 12:
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners.
No person is known to the Registrant to be the beneficial owner of more than 5% of the outstanding Interests of the Registrant.
(b) Security Ownership of Management.
None of the General Partners is known to the Registrant to be the beneficial owner, either directly or indirectly, of any Interests in the Registrant.
(c) Changes in Control.
There are no arrangements known to the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others.
Certain affiliates of the General Partners are entitled to certain fees and other payments from the Registrant in connection with certain transactions of the Registrant as more fully described under the headings "Compensation to General Partners and Affiliates" on pages 9-10 and "Management" on pages 23-25 of the Prospectus, which are incorporated herein by reference.
Nooney Krombach Company, the manager of Registrant's properties, is a wholly-owned subsidiary of Nooney Company. Nooney Krombach Company is entitled to receive monthly compensation from the Registrant for property management and leasing services, plus reimbursement of expenses. During the year ended December 31, 1996, the Registrant paid property management fees of $107,341 to Nooney Krombach Company.
In addition, during 1996, the Registrant paid to Nooney Krombach Company $25,000 for reimbursement for certain administrative services including accounting, issuing and transferring of units, data processing, investor communications and other administrative services.
See Item 11 above for a discussion of cash distributions paid to the General Partners during the year ended December 31, 1996.
(b) Certain Business Relationships.
The relationship of certain of the General Partners to certain of their affiliates is set forth in Item 13(a) above. Also see Item 13(a) above for a discussion of amounts paid by the Registrant to the General Partners or their affiliates during the year ended December 31, 1996, in connection with various transactions.
(c) Indebtedness of Management.
Not Applicable.
(d) Transactions with promoters.
Not Applicable.
PART IV
ITEM 14:
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements (filed herewith as Exhibit 99.3):
Independent auditors' report Balance sheets Statements of operations Statements of partners' equity (deficiency in assets) Statements of cash flows Notes to financial statements
2. Financial Statement Schedules (filed herewith as Exhibit 99.3):
Schedule - Reconciliation of partners' equity (deficiency in assets) Schedule III - Real estate and accumulated depreciation
All other schedules are omitted because they are inapplicable or not required under the instructions.
3. Exhibits:
See Exhibit Index on Page 16.
(b) Reports on Form 8-K
During the last quarter of the period covered by this report, the Registrant filed no reports on Form 8-K.
(c) Exhibits:
See Exhibit Index on Page 16.
(d) Not Applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) under 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., L.P.
Date: March 31 , 1997 /s/ Gregory J. Nooney, Jr. ------------------------------ ------------------------------ Gregory J. Nooney, Jr. General Partner
Nooney Ltd., L.P.
By: /s/ Gregory J. Nooney, Jr. ------------------------------ Gregory J. Nooney, Jr. General Partner
Nooney Income Investments, Inc.
By: /s/ Gregory J. Nooney, Jr. ------------------------------ Gregory J. Nooney, Jr. - Director Chairman of the Board and Chief Executive Officer
By: /s/ Patricia A. Nooney ------------------------------ Patricia A. Nooney - Director Senior Vice President and Treasurer
BEING A MAJORITY OF THE DIRECTORS
EXHIBIT INDEX
Exhibit Page Number Description Number - ------ ----------- ------
3 Amended and Restated Agreement and Certificate of Limited Partnership dated November 7, 1983, is incorporated by reference to the Prospectus contained in Post-Effective Amendment No. 1 to the Registration Statement on Form S-11 under the Securities Act of 1933 (File No. 2-85683). N/A
10 Management Contract between Nooney Income Fund Ltd. and Nooney Company is incorporated by reference to Exhibit 10(a) to the Registration Statement on Form S-11 under the Securities Act of 1933 (File No. 2-85683). The Management Contract was assigned by Nooney Company to Nooney Management Company (now Nooney Krombach Company), a wholly-owned subsidiary of Nooney Company, on April 1, 1985, and is identical in all material respects. N/A
99.1 List of Directorships in Response to Item 10. 17
99.2 Pages 9-10, 23-25, and A-17 - A-21 of the Prospectus of the Registrant dated November 9, 1983, as supplemented and filed pursuant to Rule 424(c) of the Securities Act of 1933 are incorporated by reference. N/A
99.3 Financial Statements and Schedules. 18-28