1
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 February 28, 2003
------------------------
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
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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
February 28, November 30,
2003 2002
(Unaudited)
ASSETS:
Investment property
Land $ 1,014,000 1,014,000
Buildings and improvements 15,967,000 15,940,000
------------ -----------
16,981,000 16,954,000
Less accumulated depreciation 10,610,000 10,456,000
------------ -----------
Total investment property 6,371,000 6,498,000
Cash and cash equivalents 718,000 911,000
Prepaid expenses 73,000 86,000
Deferred expenses, less accumulated amortization 80,000 82,000
Income tax deposit 18,000 18,000
------------ -----------
Total assets $ 7,260,000 7,595,000
============ ===========
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Mortgage notes payable $ 9,900,000 9,900,000
Accounts payable and accrued expenses 178,000 232,000
Real estate taxes payable 23,000 126,000
Refundable tenant deposits 74,000 75,000
------------ -----------
Total liabilities 10,175,000 10,333,000
Partners' deficit (2,915,000) (2,738,000)
------------ -----------
Total liabilities and partners' deficit $ 7,260,000 7,595,000
============ ===========
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MAXUS REAL PROPERTY INVESTORS - FOUR, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
February 28, February 28,
2003 2002
Revenues:
Rental $ 682,000 655,000
Other 53,000 71,000
---------- ----------
Total revenues 735,000 726,000
---------- ----------
Expenses:
Depreciation and amortization 156,000 150,000
Repairs and maintenance 72,000 87,000
Real estate taxes 37,000 35,000
Interest 184,000 184,000
Professional fees 28,000 67,000
Utilities 28,000 27,000
Property management fees - related parties 43,000 43,000
Other 104,000 113,000
---------- ----------
Total expenses 652,000 706,000
---------- ----------
Net Income $ 83,000 20,000
========== ==========
Net income allocation:
General partner $ 1,000 ---
Limited partners 82,000 20,000
---------- ----------
$ 83,000 20,000
========== ==========
Limited partners' data:
Net income per unit $ 6.97 1.61
========== ==========
Weighted average limited partnership units outstanding 11,764 12,173
========== ==========
4
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
February 28, February 28,
2003 2002
Cash flows from operating activities:
Net income $ 83,000 20,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 156,000 150,000
Changes in accounts affecting operations:
Accounts receivable --- 30,000
Prepaid expenses 13,000 8,000
Accounts payable and accrued expenses (54,000) 5,000
Real estate taxes payable (103,000) (102,000)
Refundable tenant deposits (1,000) (6,000)
---------- ----------
Net cash provided by operating activities 94,000 105,000
---------- ----------
Cash flows from investing activities:
Capital expenditures (27,000) (97,000)
---------- ----------
Cash flows from financing activities:
Distributions (118,000) (121,000)
Repurchase of Partnership Units (142,000) ---
---------- ----------
Net cash used in financing activities (260,000) (121,000)
---------- ----------
Net decrease in cash (193,000) (113,000)
Cash and cash equivalents, beginning of period 911,000 1,048,000
---------- ----------
Cash and cash equivalents, end of period $ 718,000 935,000
========== ==========
Supplemental disclosure of cash flow information -
cash paid during the period for interest $ 184,000 184,000
========== ==========
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MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
(A LIMITED PARTNERSHIP)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE MONTHS ENDED FEBRUARY 28, 2003 AND 2002
(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, 2002, 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 February 28, 2003 and for all periods
presented have been made. The results for the three-month period ended February
28, 2003 are not necessarily indicative of the results that 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.
(2) Repurchase of Partnership Interests
On November 14, 2002, the Partnership commenced an odd-lot offer to purchase up
to 2,209 of the Registrant's limited partnership units from limited partners
holding 12 units or fewer (the "Offer"). The Offer expired on December 31, 2002.
In connection with the Offer, the Registrant redeemed 332 limited partnership
units of the Registrant at $430 per unit. As a result, as of March 15, 2003
there are 11,596 outstanding limited partnership units.
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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, 2002, 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, capital expenditures 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
The Partnership leases its property pursuant to operating leases with terms
generally of six or twelve months. Rental income is recognized when received;
this method approximates recognition using the straight-line method over the
related lease term.
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, vinyl,
appliance, 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
capitalization.
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.
The Partnership follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". The Partnership assesses the carrying value of its
long-lived asset whenever events or changes in circumstances indicate that the
carrying amount of the underlying asset may not be recoverable. Certain factors
that may occur and indicate that an impairment exists include, but are not
limited to: significant underperformance relative to projected future operating
results; significant changes in the manner of the use of the asset; and
significant adverse industry or market economic trends. If the carrying value of
the property may not be recoverable based upon the existence of one or more of
the above indicators of impairment, management measures the impairment based on
projected discounted cash flows using a discount rate determined by management
to be commensurate with the risk inherent in the Partnership, compared to the
property's current carrying value.
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LIQUIDITY AND CAPITAL RESOURCES
Cash as of February 28, 2003 was $718,000, a decrease of $193,000 from November
30, 2002. Cash provided from operating activities for the three months ended
February 28, 2003 was $94,000, which is consistent with results from the same
period in 2002. Investing activities used $27,000 due to investment in property
improvements. Cash used in financing activities was $260,000, comprised of
$118,000 of distributions of $10 per limited partner unit, which were paid in
January of 2003, and $142,000 to repurchase 332 limited partner 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.
Management believes the Partnership's current cash position and the property's
ability to provide operating cash flow should enable the Partnership to fund
anticipated capital expenditures and meet debt obligations.
RESULTS OF OPERATIONS
For the three-month period ended February 28, 2003, the Partnership's revenues
were $735,000. Revenues increased by $9,000 (1.2%) for the three-month period
ended February 28, 2003 as compared to the same period in 2002. This increase
was due primarily to an increase in rental rates and a decrease in vacancy loss.
For the three-month period ended February 28, 2003, the Partnership's expenses
were $652,000. Expenses decreased by $54,000 (7.6%) for the three-month period
ended February 28, 2003 as compared to the same period in 2002. The decrease in
expenses was primarily due to a decrease in professional fees of $39,000 due
primarily to a property tax study completed in the first quarter of 2002 for
$37,000; and a decrease in repairs and maintenance of $15,000.
Woodhollow was 94% occupied at February 28, 2003. 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 may lead to a decrease in the unemployment rate.
INFLATION
The effects of inflation did not have a material impact upon the Registrant's
operations in fiscal 2002 and are not expected to materially affect the
Registrant's operations in 2003.
OFF-BALANCE SHEET ARRANGEMENTS
The Partnership does not have any "off-balance sheet arrangements" as defined in
Item 303 (c) of Regulations S-B promulgated under the Securities Exchange Act of
1934, as amended.
ITEM 3: CONTROLS AND PROCEDURES.
Under the supervision and with the participation of the management of Maxus
Capital Corp., the Partnership's managing general partner, including Maxus
Capital Corp.'s Chief Executive Officer and Chief Financial Officer, the
Registrant has established a system of controls and other procedures designed to
ensure that information required to be disclosed in its periodic reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's ruled and forms. These disclosure controls and procedures
have been evaluated under the direction of the Chief Executive Officer and Chief
Financial Officer within the last 90 days. Based on such evaluations, the Chief
8
Executive Officer and Chief Financial Officer have concluded that the disclosure
controls and procedures are effective. There have been no significant changes in
the system of internal controls or in other factors that could significantly
affect internal controls subsequent to the evaluation by the Chief Executive
Officer and Chief Financial Officer.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
O. BRUCE MILLS V. MAXUS CAPITAL CORP. AND MAXUS REAL PROPERTY INVESTORS-FOUR,
L.P., CASE NO. 01CC-004237, CIRCUIT COURT OF ST. LOUIS COUNTY, MISSOURI.
On December 11, 2001, Mills filed suit against the Registrant and Maxus Capital
Corp., the Managing General Partner, in St. Louis County, Missouri alleging that
the Registrant 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
Registrant 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 asking that Mills be recorded on the books and records
of the Registrant as the owner of units that were tendered to him during his
tender offer and seeking the escrow of any distributions made by the Registrant
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 Registrant, but the Court did require that the Registrant
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. The
Registrant and Maxus Capital Corp. filed a motion for summary judgment on August
23, 2002 asserting that they had sole discretion to deny Mills Substituted
Limited Partner status. Mills responded on September 23, 3002. On January 19,
2003, the Court granted the Registrant and Maxus Capital Corp. summary judgment
on all claims. The only remaining issue in the case is release of the
distributions that have been escrowed during this litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 14, 2002, the Partnership commenced an odd-lot offer to purchase up
to 2,209 of the Registrant's limited partnership units from limited partners
holding 12 units or fewer (the "Offer"). The Offer expired on December 31, 2002.
In connection with the Offer, the Registrant redeemed 332 limited partnership
units of the Registrant at $430 per unit. As a result, as of March 15, 2003
there are 11,596 outstanding limited partnership units.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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ITEM 5. OTHER INFORMATION
The Board of Directors of the Partnership's general partner (Maxus Capital
Corp.) declared cash distributions of $10 per limited partnership unit, payable
to holders of record as of January 1, 2003 and April 1, 2003, that were paid on
January 10, 2003 and are payable on April 10, 2003, 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
first quarter of 2003.
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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: April 1, 2003 By: /s/ Danley K. Sheldon
------------------------
Danley K. Sheldon
President and Chief Executive Officer
(Principal Executive Officer)
Dated: April 1, 2003 By: /s/ John W. Alvey
------------------------
John W. Alvey
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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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: April 1, 2003 /s/ Danley K. Sheldon
---------------------------
Danley K. Sheldon
President and Chief Executive Officer of
Maxus Capital Corp.,
General Partner of the Registrant
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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: April 1, 2003 /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.
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