SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 ------
For the quarter period ended August 31, 2002
---------------------------
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 000-11023
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
----------------------------------------
(Exact name of small business issuer as specified in its charter)
Missouri 43-1250566
- --------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 Armour Road, North Kansas City, Missouri 64116
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 303-4500
-----------------
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
------- -------
1
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS 7
ITEM 3. CONTROLS AND PROCEDURES 8
PART II - OTHER INFORMATION 9
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
EXHIBIT INDEX 14
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAXUS REAL PROPERTY INVESTORS - FOUR, L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
August 31, November 30,
2002 2001
(Unaudited)
ASSETS:
Investment property
Land $ 1,014,000 1,014,000
Buildings and improvements 15,878,000 15,615,000
------------ -----------
16,892,000 16,629,000
Less accumulated depreciation 10,300,000 9,844,000
------------ -----------
Total investment property 6,592,000 6,785,000
Cash 999,000 1,048,000
Accounts receivable, less allowance for doubtful accounts --- 30,000
Prepaid expenses 14,000 48,000
Deferred expenses, less accumulated amortization 85,000 93,000
Income tax deposit 18,000 109,000
------------ -----------
Total assets $ 7,708,000 8,113,000
============ ===========
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Mortgage notes payable $ 9,900,000 9,900,000
Accounts payable and accrued expenses 259,000 216,000
Real estate taxes payable 92,000 125,000
Refundable tenant deposits 79,000 94,000
------------ -----------
Total liabilities 10,330,000 10,335,000
Partners' deficit (2,622,000) (2,222,000)
------------ -----------
Total liabilities and partners' deficit $ 7,708,000 8,113,000
============ ===========
3
MAXUS REAL PROPERTY INVESTORS - FOUR, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
2002 2001 2002 2001
Revenues:
Rental $ 658,000 681,000 1,982,000 1,999,000
Other 66,000 70,000 208,000 183,000
-------- -------- --------- ---------
Total revenues 724,000 751,000 2,190,000 2,182,000
-------- -------- --------- ---------
Expenses:
Depreciation and amortization 159,000 154,000 463,000 441,000
Repairs and maintenance, including common
area maintenance 89,000 120,000 257,000 272,000
Real estate taxes 34,000 34,000 103,000 102,000
Interest 184,000 184,000 553,000 553,000
Professional fees 59,000 73,000 155,000 161,000
Utilities 57,000 44,000 117,000 113,000
Property management fees - related parties 50,000 50,000 136,000 135,000
Other 111,000 121,000 341,000 344,000
---------- ---------- --------- ---------
Total expenses 743,000 780,000 2,125,000 2,121,000
---------- ---------- --------- ---------
Net Income (loss) $ (19,000) (29,000) 65,000 61,000
========== ========== ========= =========
Net income (loss) allocation:
General partners $ --- (1,000) 1,000 1,000
Limited partners (19,000) (28,000) 64,000 60,000
---------- --------- --------- ---------
$ (19,000) (29,000) 65,000 61,000
========== ========= ========= =========
Limited partners' data:
Net income (loss) per unit $ (1.58) (2.31) 5.28 4.61
========== ========= ========= =========
Weighted average limited partnership units outstanding 12,033 12,247 12,126 13,098
========== ========= ========= =========
4
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
August 31, August 31,
2002 2001
Cash flows from operating activities:
Net income $ 65,000 61,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 463,000 441,000
Changes in accounts affecting operations:
Accounts receivable 30,000 (88,000)
Prepaid expenses 34,000 5,000
Accounts payable and accrued expenses 43,000 194,000
Real estate taxes payable (33,000) ---
Refundable tenant deposits (15,000) 2,000
Deferred expenses --- (11,000)
Income tax deposit 91,000 ---
---------- --------
Net cash provided by operating activities 678,000 604,000
---------- --------
Cash flows from investing activities:
Capital expenditures (262,000) (177,000)
---------- --------
Cash flows from financing activities:
Distributions (365,000) (122,000)
Repurchase of Partnership Units (100,000) --------
Net cash used in financing activities (465,000) (528,000)
---------- --------
Net decrease in cash (49,000) (101,000)
Cash, beginning of period 1,048,000 1,186,000
--------- ---------
Cash, end of period $ 999,000 1,085,000
========== =========
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 553,000 553,000
========== =========
5
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31, 2002 AND AUGUST 31, 2001
(1) Summary of Significant Accounting Policies
Refer to the financial statements of Maxus Real Property Investors - Four, L.P.,
formerly known as Nooney Real Property Investors - Four, L.P. (the "Partnership"
or the "Registrant"), for the year ended November 30, 2001, which are contained
in the Partnership's Annual Report on Form 10-KSB, 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 Partnership's
financial condition and results of operations. The details in those notes have
not changed except as a result of normal transactions in the interim. In the
opinion of the general partner, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at August 31, 2002 and for all periods
presented have been made. The results for the three and nine-month periods ended
August 31, 2002 are not necessarily indicative of the results which may be
expected for the entire year.
Certain reclassifications have been made to the prior period amounts to conform
to the current period presentation.
(a) Description of Business
The Partnership is a limited partnership organized under the laws of the State
of Missouri on February 9, 1982. The Partnership was organized to invest
primarily in income-producing real properties such as shopping centers, office
buildings and other commercial properties, apartment buildings, warehouses, and
light industrial properties. The Partnership's portfolio is comprised of a
402-unit apartment building located in West St. Louis County, Missouri
(Woodhollow Apartments).
(b) Basis of Accounting
The financial statements include only those assets, liabilities, and results of
operations of the partners which relate to the business of Maxus Real Property
Investors-Four, 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 partners.
(The remainder of this page left blank intentionally.)
6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This 10-QSB 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, general market
conditions, projected leasing and sales, and future prospects for the
Partnership. Actual results could differ materially from those contemplated by
such statements.
CRITICAL ACCOUNTING POLICIES
Refer to the Financial Statements of the Partnership for the year ended November
30, 2001, which are contained in the Partnership's Annual Report in Form 10-KSB,
for a description of the accounting policies, which have been continued without
change, unless otherwise noted herein.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect amounts reported in the accompanying financial
statements. The most significant assumptions and estimates relate to revenue
recognition for leases, treatment of capital expenditures, depreciable lives of
investment property and the valuation of investment property. Application of
these assumptions requires the exercise of judgment as to future uncertainties
and, as a result, actual results could differ from these estimates.
Revenue Recognition
Lease agreements are accounted for as operating leases, and rentals from such
leases are reported as revenues ratably over the terms of the leases.
Investment Property Useful Lives
The Partnership is required to make subjective assessments as to the useful
lives of its property for the purposes of determining the amount of depreciation
to reflect on an annual basis with respect to the property. These assessments
have a direct impact on the Partnership's net income.
Investment property is depreciated over its estimated useful life of 30 years
using the straight-line method. Furnishings and appliances are depreciated from
5 to 7 years using the straight-line method.
Capital Expenditures
For reporting purposes, the Partnership capitalizes all carpet, flooring, vinyl,
and HVAC replacements. The Partnership expenses all other expenditures that
total less than $10,000. Expenditures over $10,000 and expenditures related to
contracts over $10,000 are evaluated individually for proper treatment.
Impairment of Investment Property Values
The Partnership is required to make subjective assessments as to whether there
are impairments in the value of its investment property. Management's estimates
of impairment in the value of the investment property have a direct impact on
the Partnership's net income.
Effective January 1, 2002, the Partnership applies Statement of Financial
Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, for the recognition and measurement of impairment of
long-lived assets to be held and used and assets to be disposed of. Management
reviews the property for impairment whenever events or changes in circumstances
indicate that the carrying value of the property may not be recoverable.
7
LIQUIDITY AND CAPITAL RESOURCES
Cash as of August 31, 2002 was $999,000, a decrease of $49,000 from November 30,
2001. Cash provided from operating activities for the nine months ended August
31, 2002 was $678,000, which is consistent with results from the same period in
2001. Investing activities used $262,000 due to investment in property
improvements. Cash used in financing activities was $465,000, comprised of
$365,000 of distributions of $10 per limited partner unit, which were paid in
each of January, April, and July of 2002, and $97,000 to repurchase 228 limited
partner units. An additional $3,000 of transfer fees were paid to repurchase the
units.
Contractual Obligations
The mortgage note payable is secured by Woodhollow Apartments and calls for
monthly interest payments of $61,000, with interest fixed at 7.45%. The
principal balance is due December 1, 2010. In the event of prepayment by the
Partnership, the note requires a substantial prepayment penalty.
The Partnership does not utilize any off balance sheet financing or leasing
transaction of any kind.
RESULTS OF OPERATIONS
For the three and nine month periods ended August 31, 2002, the Partnership's
revenues were $724,000 and $2,190,000, respectively. Revenues decreased by
$27,000 (3.6%) for the three-month period ended August 31, 2002 as compared to
the same period in 2001. This decrease was due primarily to an increase in
vacancy loss. Revenues increased by $8,000 (.4%) for the nine-month period ended
August 31, 2002, due primarily to an increase in miscellaneous income (primarily
laundry income) of $29,000 offset by a decrease in net rental income of $18,000.
For the three and nine month periods ended August 31, 2002, the Partnership's
expenses were $743,000 and $2,125,000, respectively. Expenses decreased by
$37,000 (4.7%) for the three-month period ended August 31, 2002 as compared to
the same period in 2001. The decrease in expenses was primarily due to a
decrease in repairs and maintenance of $31,000, and professional fees of
$14,000. Expenses increased $4,000 (.2%) for the nine-month period ended August
31, 2002 as compared to the same period in 2001.
Woodhollow was 95% occupied at August 31, 2002. Based on industry information,
the average occupancy of the sub-market Woodhollow competes with is in the low
to mid 90% range. In 2002, unemployment rose above 6% in the St. Louis area for
the first time since 1993. The rate is expected to continue to stay at higher
levels until the end of 2003. Interest rates remain low, which normally
increases losses of tenants who move out of apartments when they purchase
homes. Economic development is expected to continue in St. Louis, with various
projects such as new retail developments and an airport expansion being
planned. These developments are expected lead to a decrease in the unemployment
rate.
ITEM 3: CONTROLS AND PROCEDURES.
Under the supervision and with the participation of the management of Maxus
Capital Corp., the Partnership's general partner, including Maxus Capital
Corp.'s chief executive officer and chief financial officer, the Partnership has
evaluated the effectiveness of the design and operation of the Partnership's
disclosure controls and procedures within 90 days of the filing date of this
quarterly report, and, based on their evaluation, Maxus Capital Corp.'s chief
executive officer and chief financial officer have concluded that these controls
and procedures are effective. There were no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
8
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
O. Bruce Mills v. Maxus Capital Corp. and Maxus Real Property Investors-Four,
L.P., Cause No. 01CC-004237, Circuit Court of St. Louis County, Missouri.
On December 11, 2001, Mills filed suit against the Partnership and the
Partnership's General Partner, Maxus Capital Corp., in St. Louis County,
Missouri alleging that the Partnership and Maxus Capital Corp. had refused to
recognize Mills as the owner and limited partner of units that were tendered to
him and that the Partnership and Maxus Capital Corp. had converted distributions
allegedly owed to Mills. Mills also brought a claim for injunctive relief. On
December 19, 2001, a hearing was held on Mills' request for injunctive relief in
which Mills sought an order from the Court recording on the books and records of
the Partnership Mills as the owner for units that were tendered to him during
his tender offer and seeking the escrow of any distributions made by the
Partnership for the units tendered to Mills. The Court refused to exempt Mills
from complying with the transfer requirements to have units transferred on
the books and records of the Partnership but the Court did require that the
Partnership escrow any distributions made for units tendered to Mills until such
time as the Court can determine who should receive the distributions. Mills was
required to post a $7,000 bond as security for the relief granted by the Court.
During the past nine months the parties have pursued discovery regarding the
issues in dispute to prepare the case for trial, scheduled for October 7, 2002.
However, before the scheduled trial date, the Partnership and Maxus Capital
Corp. filed a motion for summary judgment seeking a decision from the Court on
certain key issues. Because of this pending motion, the parties and the Court
agreed to reschedule the trial for sometime early next year, if the case
is not resolved by the Court's decision on the summary judgment motion.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Partnership commenced an odd-lot offer to purchase the units of holders of
nine units or less on May 24, 2002. This offer expired on June 24, 2002 and as
of August 31, 2002, the Partnership purchased 228 units at $425 per unit. At
August 31, 2002, there were 11,945 outstanding units. An additional 17 units
were received by the Partnership, which the Partnership intends to purchase when
the transfer document deficiencies related to these units are cured.
Deficiencies related to 12 units were cured by September 16, 2002, and as a
result, there are 11,933 units outstanding as of October 1, 2002.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
9
ITEM 5. OTHER INFORMATION
The Board of Directors of the Partnership's general partner (Maxus Capital
Corp.) declared a cash distribution of $10 per limited partnership unit that was
paid on each of January 10, April 10, July 10, and October 10, 2002 to holders
of record as of January 1, April 1, July 1, and October 1, 2002, respectively.
The Partnership anticipates continuing such quarterly distributions, at least in
the near future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index on Page 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
third quarter of 2002.
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
By: MAXUS CAPITAL CORP.
General Partner
Dated: October 14, 2002 By: /s/ Danley K. Sheldon
---------------------
Danley K. Sheldon
President and Chief Executive Officer
(Principal Executive Officer)
Dated: October 14, 2002 By: /s/ John W. Alvey
---------------------
John W. Alvey
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
CERTIFICATION OF THE QUARTERLY REPORT
OF
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
I, Danley K. Sheldon, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Maxus Real
Property Investors-Four, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 14, 2002
/s/ Danley K. Sheldon
---------------------
Danley K. Sheldon
President and Chief Executive Officer of
Maxus Capital Corp.,
General Partner of the Registrant
12
CERTIFICATION OF THE QUARTERLY REPORT
OF
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
I, John W. Alvey, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Maxus Real
Property Investors-Four, L.P.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 14, 2002
/s/ John W. Alvey
-----------------
John W. Alvey
Vice President, Treasurer, and
Chief Financial Officer of
Maxus Capital Corp.,
General Partner of the Registrant
13
EXHIBIT INDEX
Exhibit Number Description
3.1 Amended and Restated Agreement and Certificate of Limited Partnership dated
April 7, 1982 is incorporated by reference to the Form 10-K for the year
ended November 30, 1999 filed by the Registrant under the Securities Act of
1933 (File No. 000-11023).
3.2 Amendment of Certificate of Limited Partnership date December 21, 1999 is
incorporated by reference to the Form 8-K filed by the Registrant on
January 21, 2000 under the Securities Act of 1933 (File No. 000-11023).
99.1 Certification of Chief Executive Officer Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant To 18 U.S.C. Section
1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002.
14