UNITED STATES
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, 2003
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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
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Commission file number 000-11023
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MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
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(Exact name of small business issuer as specified in its charter)
Missouri 43-1250566
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 Armour Road, North Kansas City, Missouri 64116
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(Address of principal executive offices)
(816) 303-4500
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(Issuer's telephone number, including area code)
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 OR PLAN
OF OPERATION 7
ITEM 3. CONTROLS AND PROCEDURES 9
PART II - OTHER INFORMATION 9
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
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,
2003 2002
(Unaudited)
ASSETS:
Investment property
Land $ 1,014,000 1,014,000
Buildings and improvements 16,166,000 15,940,000
------------ ------------
17,180,000 16,954,000
Less accumulated depreciation 10,921,000 10,456,000
------------ ------------
Total investment property 6,259,000 6,498,000
Cash and cash equivalents 736,000 911,000
Prepaid expenses 14,000 86,000
Deferred expenses, less accumulated amortization 75,000 82,000
Accounts receivable 2,000 ---
Income tax deposit 14,000 18,000
------------ ------------
Total assets $ 7,100,000 7,595,000
============ ============
LIABILITIES AND PARTNERS' DEFICIT:
Liabilities:
Mortgage notes payable $ 9,900,000 9,900,000
Accounts payable and accrued expenses 211,000 232,000
Real estate taxes payable 110,000 126,000
Refundable tenant deposits 67,000 75,000
------------ ------------
Total liabilities 10,288,000 10,333,000
Partners' deficit (3,188,000) (2,738,000)
------------ ------------
Total liabilities and partners' deficit $ 7,100,000 7,595,000
============ ============
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,
2003 2002 2003 2002
Revenues:
Rental $ 645,000 658,000 1,978,000 1,982,000
Other 57,000 59,000 165,000 181,000
----------- ---------- ---------- ----------
Total revenues 702,000 717,000 2,143,000 2,163,000
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization 160,000 159,000 472,000 463,000
Repairs and maintenance 97,000 89,000 240,000 257,000
Real estate taxes 39,000 34,000 123,000 103,000
Professional fees 13,000 59,000 61,000 155,000
Utilities 39,000 57,000 107,000 117,000
Property management fees - related parties 35,000 50,000 126,000 136,000
Other 139,000 111,000 381,000 341,000
---------- ---------- ---------- ----------
Total expenses 522,000 559,000 1,510,000 1,572,000
---------- ---------- --------- ---------
Net operating income 180,000 158,000 633,000 591,000
---------- ---------- ---------- ----------
Interest
Interest income (1,000) (7,000) (15,000) (27,000)
Interest expense 184,000 184,000 553,000 553,000
---------- ---------- ---------- ----------
Net income (loss) $ (3,000) (19,000) 95,000 65,000
========== ========== ========== ==========
Net income (loss) allocation:
General partner $ --- --- 2,000 1,000
Limited partners (3,000) (19,000) 93,000 64,000
---------- ---------- ---------- ---------
$ (3,000) (19,000) 95,000 65,000
========== ========== ========== =========
Limited partners' data:
Net income (loss) per unit $ (.26) (1.58) 8.00 5.28
========== ========== ========== =========
Weighted average limited partnership
units outstanding 11,517 12,033 11,624 12,126
========== ========== ========== =========
4
MAXUS REAL PROPERTY INVESTORS-FOUR, L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
August 31, August 31,
2003 2002
Cash flows from operating activities:
Net income $ 95,000 65,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 472,000 463,000
Changes in accounts affecting operations:
Accounts receivable (2,000) 30,000
Prepaid expenses 72,000 34,000
Accounts payable and accrued expenses (21,000) 43,000
Real estate taxes payable (16,000) (33,000)
Refundable tenant deposits (8,000) (15,000)
Income tax deposit 4,000 91,000
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Net cash provided by operating activities 596,000 678,000
----------- -----------
Cash flows from investing activities:
Capital expenditures (226,000) (262,000)
----------- -----------
Cash flows from financing activities:
Distributions (347,000) (365,000)
Repurchase of Partnership Units (198,000) (100,000)
----------- -----------
Net cash used in financing activities (545,000) (465,000)
----------- -----------
Net increase (decrease) in cash
and cash equivalents (175,000) 49,000
Cash and cash equivalents, beginning of period 911,000 1,048,000
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Cash and cash equivalents, end of period $ 736,000 999,000
=========== ===========
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, 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 August 31, 2003 and for all periods
presented have been made. The results for the three and nine month periods ended
August 31, 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 May 23, 2003, the Partnership commenced an odd-lot offer to purchase up to
3,468 of the Registrant's limited partnership units from limited partners
holding 12 units or fewer (the "Offer"). The Offer expired on June 27, 2003. In
connection with the Offer, the Registrant redeemed 135 limited partnership units
of the Registrant at $430 per unit. The redemption of units held by one limited
partner, totaling 5 units, is being held pending receipt of all necessary
documents to satisfy the Registrant's redemption requirements. Previously, the
Partnership commenced an odd-lot offer to purchase up to 3,840 of the
Registrant's limited partnership units from limited partners holding 12 units or
fewer, which expired on December 31, 2002. At that time, the Registrant redeemed
332 limited partnership units at $430 per unit. As a result, as of October 1,
2003 there are 11,461 outstanding limited partnership units.
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, 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.
7
Liquidity and Capital Resources
Cash as of August 31, 2003 was $736,000, a decrease of $175,000 from November
30, 2002. Cash provided from operating activities for the nine months ended
August 31, 2003 was $596,000, which is $82,000 less than results from the same
period in 2002. This decrease is primarily caused by a reduction in the cash
received from the IRS in 2003 for the income tax deposit, versus the amounts
received in 2002. Investing activities used $226,000 due to investment in
property improvements including roof replacements of $62,000 and HVAC and
appliance replacements of $90,000. Cash used in financing activities was
$545,000, comprised of $347,000 of distributions of $10 per limited partner
unit, which were paid in January, April and July of 2003, and $198,000 to
repurchase 462 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 and nine month periods ended August 31, 2003, the Partnership's
revenues were $702,000 and $2,143,000, respectively. Revenues decreased by
$15,000 (2.1%) and $20,000 (.9%) respectively for the three and nine-month
periods ended August 31, 2003 as compared to the same periods ended August 31,
2002. This decrease was primarily due to an increase in vacancy loss of $15,000
and $24,000 for the three and nine-month periods ended August 31, 2003,
respectively.
For the three and nine month periods ended August 31, 2003, the Partnership's
operating expenses were $522,000 and $1,510,000, respectively. Expenses
decreased by $37,000 (6.6%) for the three-month period ended August 31, 2003 as
compared to the same period ended August 31, 2002. The decrease in expenses was
primarily due to a decrease in professional fees of $46,000, with $32,000 of the
reduction resulting from lower legal fees due to the completion of the Mills
case in May 2003. Operating expenses decreased $62,000 (3.9%) for the nine-month
period ended August 31, 2003 as compared to the same period ended August 31,
2002. The decrease in expenses was primarily due to a decrease in professional
fees of $94,000, which included a $51,000 reduction in legal fees due to the
completion of the Mills case in May 2003. The decrease in professional fees was
also partially the result of a property tax study completed in 2002. This
expense was not recurring in nature and did not recur in 2003. This decrease was
offset by an increase in other operating expenses of $40,000 of which $37,000 is
due to an increase in property insurance.
Woodhollow was 92% occupied at August 31, 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 or the nine months ended August 31, 2003 and are not
expected to materially affect the Registrant's operations in the remainder of
2003.
8
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., including the Partnership's Chief Executive Officer and Chief
Financial Officer, the Partnership 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
(the "Exchange Act"), is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms. These disclosure controls and procedures have been evaluated under the
direction of the Chief Executive Officer and Chief Financial Officer as of
August 31, 2003. Based on such evaluations, the Chief Executive Officer and
Chief Financial Officer have concluded that the disclosure controls and
procedures (as defined in the Exchange Act Rule 13a-15(e) and Rule 15d-15(e))
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
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 23, 2003, the Partnership commenced an odd-lot offer to purchase up to
3,468 of the Registrant's limited partnership units from limited partners
holding 12 units or fewer (the "Offer"). The Offer expired on June 27, 2003. In
connection with the Offer, the Registrant redeemed 135 limited partnership units
of the Registrant at $430 per unit. The redemption of units held by one limited
partner, totaling 5 units, is being held pending receipt of all necessary
documents to satisfy the Registrant's redemption requirements. Previously, the
Partnership commenced an odd-lot offer to purchase up to 3,840 of the
Registrant's limited partnership units from limited partners holding 12 units or
fewer, which expired on December 31, 2002. At that time, the Registrant redeemed
332 limited partnership units at $430 per unit. As a result, as of October 1,
2003 there are 11,461 outstanding limited partnership units.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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, April 1, 2003, July 1, 2003, and
October 1, 2003 that were paid on January 10, 2003, April 10, 2003, July 10,
2003, and will be paid on October 10, 2003 respectively. The Partnership
anticipates continuing such quarterly distributions, at least in the near
future.
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index on Page 12
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
third quarter of 2003.
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 7, 2003 By: /s/ Danley K. Sheldon
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Danley K. Sheldon
President and Chief Executive Officer
(Principal Executive Officer)
Dated: October 7, 2003 By: /s/ John W. Alvey
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John W. Alvey
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
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 dated 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)
31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
12