SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended June 30, 1997
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 0-13754
NOONEY REALTY TRUST, INC.
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(Exact name of Registrant as specified in its charter)
Missouri
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(State or other jurisdiction of incorporation or organization)
43-1339136
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(I.R.S. Employer Identification No.)
7701 Forsyth Boulevard, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-7700
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12,13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date. As of June 30, 1997 there were 866,624 shares of the Registrant's common
stock, par value $1 per share, issued and outstanding.
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PART I
Item 1 - Financial Statements:
NOONEY REALTY TRUST, INC.
(A REAL ESTATE INVESTMENT TRUST)
BALANCE SHEETS
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
ASSETS:
Cash ........................................ $ 419,360 $ 641,127
Accounts receivable ......................... 282,804 353,619
Prepaid expenses ............................ 51,273 29,266
Investment property, at cost:
Land .................................... 2,568,955 2,568,955
Buildings and improvements .............. 17,725,315 17,593,831
------------ ------------
20,294,270 20,162,786
Less accumulated depreciation ........... (6,257,327) (5,948,166)
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14,036,943 14,214,620
Deferred expenses - at amortized cost ... 250,093 243,006
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$ 15,040,473 $ 15,481,638
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Accounts payable and accrued expenses ....... $ 406,018 $ 370,347
Mortgage notes payable ...................... 4,786,490 4,830,236
Refundable tenant deposits .................. 45,790 36,600
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Total liabilities ....................... 5,238,298 5,237,183
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Shareholders' Equity:
Common Stock, $1 par value;
Authorized, 5,000,000 shares; Issued and
outstanding, 866,624 in 1996 and 1995 ... 866,624 866,624
Additional paid-in capital .................. 14,252,532 14,252,532
Distributions in excess of net income ....... (5,316,981) (4,874,701)
------------ ------------
Total Shareholder's Equity .................. 9,802,175 10,244,455
------------ ------------
$ 15,040,473 $ 15,481,638
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SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY REALTY TRUST, INC.
(A REAL ESTATE INVESTMENT TRUST)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
REVENUES:
Rental and other income ........ $ 746,845 $ 712,899 $ 1,488,447 $ 1,435,726
Interest ....................... 2,776 4,340 5,335 7,987
----------- ----------- ----------- -----------
749,621 717,239 1,493,782 1,443,713
EXPENSES:
Interest ....................... 100,826 102,601 202,110 205,623
Depreciation and amortization .. 187,198 178,722 357,516 357,964
Real estate taxes .............. 139,608 135,131 279,216 289,870
Professional services .......... 125,431 10,535 152,583 18,855
Electric ....................... 63,658 63,820 113,388 115,927
Advisory fee ................... 29,876 29,424 59,378 58,650
Property management fees paid to
Nooney Krombach Company .... 28,231 26,611 57,285 53,576
Cleaning ....................... 26,601 28,598 52,206 56,736
Payroll ........................ 22,703 16,610 44,512 34,426
Repairs & maintenance .......... 33,082 11,383 43,124 27,617
Insurance ...................... 18,676 16,615 36,487 34,536
Office expense ................. 12,613 15,356 18,267 22,121
Other operating expenses ....... 65,815 52,329 138,675 114,029
----------- ----------- ----------- -----------
854,318 687,735 1,554,747 1,389,930
----------- ----------- ----------- -----------
EARNINGS (LOSS) FROM OPERATIONS ..... $ (104,697) $ 29,504 $ (60,965) $ 53,783
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE ........... $ (0.12) $ 0.03 $ (0.07) $ 0.06
=========== =========== =========== ===========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY REALTY TRUST, INC.
(A REAL ESTATE INVESTMENT TRUST)
STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
COMMON STOCK
-------------------- ADDITIONAL DISTRIBUTION
NUMBER OF PAID-IN IN EXCESS OF
SHARES AMOUNT CAPITAL NET INCOME
--------- --------- ----------- ------------
Balance, January 1, 1997....... 866,624 $866,624 $14,252,532 $(4,874,701)
Loss from Operations........... (60,965)
Distributions to Shareholders.. (381,315)
Balance, June 30, 1997......... 866,624 $866,624 $14,252,532 $(5,316,981)
========= ========= =========== ============
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY REALTY TRUST, INC.
(A REAL ESTATE INVESTMENT TRUST)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (Loss) from operations ...........................$ (60,965) $ 53,782
Adjustments to reconcile earnings (loss) from
operations to net cash provided by operating activities:
Depreciation and amortization ......................... 357,516 357,964
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable ........ 70,815 21,315
(Increase) decrease in prepaid expenses ........... (22,007) 29,421
Decrease (Increase) in deferred expenses .......... (55,442) 1,598
(Decrease) Increase in tenant deposits ............ 9,190 (13,340)
Increase in accounts payable and accrued expenses . 35,671 816
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Total Adjustments ................................. 395,743 397,774
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Net cash provided by operating activities ............. 334,778 451,556
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CASH FLOWS FROM INVESTING ACTIVITIES:
Adjustments to investment property ........................ (131,484) (8,595)
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Net cash used in investing activities ..................... (131,484) (8,595)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to shareholders ........................ (381,315) (346,650)
Payments on mortgage notes payable ........................ (43,746) (40,233)
Net cash used in financing activities ................. (425,061) (386,883)
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NET INCREASE (DECREASE) IN CASH ................................ (221,767) 56,078
CASH, Beginning of period ...................................... 641,127 517,317
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CASH, End of period ............................................$ 419,360 $ 573,395
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid during period for interest ........$ 202,110 $ 205,623
========= =========
SEE NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
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NOONEY REALTY TRUST, INC.
(A REAL ESTATE INVESTMENT TRUST)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NOTE A:
Refer to the Registrant's financial statements for the year ended December 31,
1996, which are contained in the Registrant's Annual Report on Form 10-K, for a
description of the accounting policies which have been continued without change
except as noted below. Also, refer to the footnotes to those statements for
additional details of the Registrant's financial condition. The details in those
notes have not changed except as a result of normal transactions in the interim
or as noted below.
NOTE B:
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at June 30, 1997 and for all periods
presented have been made. The results of operations for the three and six month
periods ended June 30, 1997, are not necessarily indicative of the results which
may be expected for the entire year.
NOTE C:
The Registrant has employed Nooney Advisors, Ltd., a Missouri limited
partnership, to serve as the Registrant's investment and financial counselor and
to supervise the day-to-day operations of the Registrant. The agreement between
the Registrant and Nooney Advisors, Ltd. has been renewed for a period of one
year effective April 1, 1997. Certain General Partners of Nooney Advisors, Ltd.
are also officers and directors of the Registrant. Advisory fees of $29,876 and
$59,378 were paid to Nooney Advisors, Ltd. for the three and six months ended
June 30, 1997. Advisory fees of $29,424 and $58,650 were paid to Nooney
Advisors, Ltd. for the three and six months ended June 30, 1996, respectively.
The Registrant's properties are managed by Nooney Krombach Company, a wholly
owned subsidiary of Nooney Company. Certain officers and directors of the
Registrant are also officers and directors of Nooney Company or one of its
subsidiaries.
NOTE D:
The earnings per share for the three and six months ended June 30, 1997 and 1996
has been computed based on 866,624 shares, the number outstanding during the
periods.
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
It should be noted that this 10-Q contains forward-looking information (as
defined in the Private Securities Litigation Reform Act of 1995) that involves
risk and uncertainty, including trends in the real estate investment market,
projected leasing and sales, and the future prospects for the Registrant. Actual
results could differ materially from those contemplated by such statements.
Liquidity and Capital Resources
Cash on hand as of June 30, 1997 is $419,360, a decrease of $221,767 from the
year end December 31, 1996. During the first six months of 1997 the operations
of the properties provided cash flow of $334,778. The Trust paid a dividend of
$.22 per share in each of the first two quarters and reduced the mortgage debt
by $43,746. The Trust paid capital expenditures at the properties of $131,484
during the first six months of 1997. The Trust paid approximately $111,000 in
legal fees during the second quarter in connection with a lawsuit filed by a
shareholder, on preparation of materials for a Special Board of Directors
meeting, and on legal review of proxy materials. Refer to Item 1 of Part II.
Other Information on page 11 of this report for additional information on this
lawsuit. Based on the current cash position and the properties' ability to
provide operating cash flow, the Trust expects the properties to fund capital
expenditures for the remainder of 1997. The anticipated capital expenditures by
property are as follows:
Leasing Capital Other Capital Total
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Atrium at Alpha Business Center $69,500 $17,400 $ 86,900
Applied Communications Building 0 0 0
Franklin Park Distribution Center 0 15,000 15,000
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$69,500 $32,400 $101,900
=============== ============= =============
The leasing capital at Atrium at Alpha includes funds for tenant alterations and
lease commissions for new and renewal tenants. Other Capital at Atrium at Alpha
will be expended for restroom fixtures and faucets and heating, ventilation and
air conditioning control boards. At Franklin Park Distribution Center, a capital
contingency reserve has been established.
Results of Property Operations
The results of operations for the Trust's properties for the quarters ended June
30, 1997 and 1996 are detailed in the schedule below. Expenses of the Trust are
excluded.
Funds from Operations
The white paper on Funds from Operations approved by the board of governors of
NAREIT in March 1995 defines funds from operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnership and joint
ventures. The Trust computes Funds from Operations in accordance with the
standards established by the white paper which may differ from the methodology
for calculating Funds from Operations utilized by other equity REITs, and,
accordingly, may not be comparable to such other REITs. Funds from Operations do
not represent amounts available for management's discretionary use because of
needed capital
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replacement or expansion, debt service obligations, distributions, or other
commitments and uncertainties. Funds from Operations should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indication of the Trust financial performance or to cash flows from operating
activities (determined in accordance with GAAP) as a measure of the Trust
liquidity, nor is it indicative of funds available to fund the Trust cash needs
including its ability to make distributions. The Trust believes Funds from
Operations are helpful to investors as measures of the performance of the Trust
because along with cash flows from operating activities, financing activities
and investing activities, they provide investors with an understanding of the
ability of the Trust to incur and service debt and make capital expenditures.
Franklin Park Applied
Atrium at Alpha Distribution Communications
Business Center Center Building
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1997
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Revenues ....................... $ 295,542 $ 184,065 $ 271,524
Expenses ....................... 273,672 154,948 235,445
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Net Income ..................... 21,870 29,117 36,079
Depreciation and Amortization .. 90,869 44,546 47,601
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Funds from Operations .......... $ 112,739 $ 73,663 $ 83,680
=============== ============= ==============
1996
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Revenues ....................... $ 274,508 $ 188,632 $ 249,289
Expenses ....................... 242,128 142,934 231,501
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Net Income ..................... 32,380 45,698 17,788
Depreciation and Amortization .. 82,453 44,546 47,601
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Funds from Operations .......... $ 114,833 $ 90,244 $ 65,389
=============== ============= ==============
Net income at Atrium at Alpha for the quarters ended June 30, 1997 and 1996 is
$21,870 and $32,380, respectively. Revenues increased $21,034 from increases in
rental income due to higher base rental rates and escalation income. Expenses
increased approximately $31,000 due to increases in electric, administrative
costs, repairs and maintenance - building, real estate taxes and amortization.
Revenue at Franklin Park Distribution Center were relatively stable when
comparing the two quarters. Expenses increased $12,041 due to an adjustment made
for incorrect postings in the prior year. A combination of expenses increasing
and revenues decreasing resulted in net income decreasing $16,581 when comparing
the two quarters. The slight decrease in net income can be attributable to a
decrease in revenue because common area maintenance reimbursements were lower
due to lower expenses. At the Applied Communications Building, revenues and
expenses increased during the quarter ended June 30, 1997 when compared to the
quarter ended June 30, 1996. The increase in revenue is due to an increase in
escalation income as well as an increase in the base rental income offset by a
decrease in electric income. Operating expenses increased slightly when
comparing the two quarters due to an increase in repairs and maintenance-
building, offset by a decrease in parking lot expenses and
supplies-building/cleaning.
Occupancy levels at the Trust's properties during the second quarter remain at a
high level. This can be attributable to the Trust's ability to renew the
properties major tenants as their leases mature. The occupancy levels at June
30, 1997, 1996 and 1995 are as follows:
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Occupancy levels as of June 30,
Property 1997 1996 1995
- ----------------------------------------------- --------- --------- ---------
Atrium at Alpha Business Center 93% 95% 95%
Franklin Park Distribution Center 100% 100% 100%
Applied Communications Building 100% 100% 100%
The leasing activity at Atrium at Alpha during the second quarter resulted in a
decrease in occupancy by 2% to 93% as of June 30, 1997. During the quarter,
three tenants signed new leases to occupy 11,836 square feet. Existing tenants
renewed leases for 3,219 square feet and one tenant vacated 14,200 square feet.
The building has two major tenants who lease approximately 11% and 20% of the
available space with leases expiring in 1999 and 2001, respectively.
Franklin Park Distribution Center currently is fully leased by two tenants. The
larger of the two tenants occupies approximately 57% of the building while the
other occupies approximately 43% of the building. These leases expire in
December 1999 and June 1998, respectively.
The Applied Communications Building has a single tenant who occupies the entire
building. The tenant's lease expires August 1999.
1997 Comparisons
As of June 30, 1997, the Trust's consolidated revenues for the quarter ended and
six month period ended are $749,621 and $1,493,782, respectively, an increase of
$32,382 and $50,069 when compared to the results of the same periods ended June
30, 1996. The increase in revenues for the three and six month periods ended can
be attributable to increases in base rental income $16,790 and $36,355 and
escalation income $28,874 and $32,135 when compared to the three and six months
ended June 30, 1996. The increase in incomes is attributable to the Atrium at
Alpha Business Center and the Applied Communications Building.
Consolidated expenses are $854,318 and $1,554,747 for the quarter ended and the
six month period ended June 30, 1997, respectively. For the same periods ended
June 30, 1996, consolidated expenses were $687,735 and $1,389,930. Consolidated
expenses increased $166,583 for the three month period ended June 30, 1997 when
compared to June 30, 1996. Consolidated expenses increase $164,817 when
comparing the six months ended June 30, 1997, to the six month period ended June
30, 1996. The increase in consolidated expenses for the three month period ended
June 30, 1997 can be attributable to increases in professional services
($114,896), repairs and maintenance ($21,699), depreciation and amortization
($8,476) and payroll ($6,093). The increase in expenses for the six month period
ending June 30, 1997 can be attributable to increases in professional services
($133,728), other operating expenses ($24,646), repairs and maintenance
($15,506) and payroll ($10,087), partially offset by decreases in real estate
taxes ($10,653) and interest ($3,512). The most significant increase is in
professional services which is due to the legal fees incurred in connection with
the lawsuit filed against the Trust by one of its shareholders. Legal fees were
incurred for preparation and advice to the board of directors in connection with
a special meeting held during the second quarter, appearance in court and
preparation of court materials in defense of the suite, and review of proxy
materials prior to mailing to shareholders. A more complete description of the
lawsuit can be found by referring to Item 1 of Part II. Other Information on
page 11 of this report. The legal fees incurred in connection with this lawsuit
were approximately $111,000 or $.13 per share for the three month period ended
June 30, 1997.
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1996 Comparisons
As of June 30, 1996, the Trust's consolidated revenues for the quarter ended and
six month period ended are $717,239 and $1,443,713, respectively, an increase of
$4,330 and $32,968 when compared to the results of the same periods ended June
30, 1995. The increase in revenues for the six month periods ended can be
attributed to increases in rental income offset by decreases in expense recovery
income. Rental income increased $42,816 while expense recovery income decreased
$11,741 for the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995. The increase in rental income relates to increases at
Atrium at Alpha ($28,818) and Applied Communications Building ($13,998). The
increase at Atrium at Alpha is a direct result of an increase in occupancy when
comparing average occupancy during the first and second quarters of 1996 to the
average occupancy during the same periods in 1995. The increase at Applied
Communications Building is attributable to rent step-ups for the single tenant
user. The decrease in escalation income relates to a decrease in expenses that
may be passed through to the tenant, resulting in a reduction in expense
recovery income.
Consolidated expenses are $687,736 and $1,389,931 for the quarter ended and six
month period ended June 30, 1996, respectively. For the same periods ended June
30, 1995 consolidated expense were $678,048 and $1,339,127, respectively.
Consolidated expenses increased $9,688 and $50,804 when comparing the three and
six month periods ended June 30, 1996 to June 30, 1995. The increase in
consolidated expenses for the six month periods ended June 30, 1996 and 1995
relate to increases in real estate taxes ($34,483) and other operating expenses
($19,539). The increase in real estate taxes can be attributed to an increase in
the property assessment and tax rates at Atrium at Alpha. Operating expenses
increased $19,539 or 4.83%. The increase relates to several expense categories
and they are as follows: parking lot expenditures ($13,224) due to timing of
various landscaping projects at Atrium at Alpha, cleaning ($7,280) due to
increases in occupancy at Atrium at Alpha, snow removal ($4,020), and
administrative costs ($4,002). These increases are partially offset by a
decrease in professional services ($9,147) relating to legal services rendered
in prior year pertaining to a single legal matter.
Inflation
The effects of inflation did not have a material impact upon the Trust's
operations.
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PART II. OTHER INFORMATION
Item 1. Litigation
On June 5, 1997, Kelcor, Inc., a shareholder of the Trust filed a lawsuit in the
Circuit Court of St. Louis County, Missouri, against the Trust. The lawsuit
sought, among other things, (i) a Declaratory Judgement to the effect that all
excess shares owned by the PICO group (another shareholder) are not entitled to
vote, or to be considered in determining the presence of a quorum, on any matter
on which shares of the Trust are otherwise permitted to vote, and (ii) an
Injunction in joining the Trust from, among other things, soliciting or voting
any proxies in connection with any special or annual meeting of the shareholders
and conducting any special or annual meeting of shareholders of the Trust.
Kelcor also filed a motion for a temporary restraining order to prevent the
Trust from the soliciting proxies in connection with any Special or Annual
Meeting of Shareholders and to prevent the Trust from conducting any Special
Meeting or Annual Meeting of Shareholders.
On June 6, 1997, the Court denied Kelcor's motion for a temporary restraining
order and set June 13, 1997 as the date for a hearing on Kelcor's motion for the
injunction described above. On June 13, 1997, the judge instructed the two
parties to work to reach a settlement. On June 24, 1997, the Trust and Kelcor,
agreed, among other things, to postpone the Annual Meeting of Shareholders
scheduled for July 3, 1997 and to schedule a Special Meeting of Shareholders for
August 8, 1997 only to consider and vote upon the Bylaw Amendment. Refer to
proxy statement filed July 9, 1997 for complete description of the Bylaw
Amendment.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NOONEY REALTY TRUST, INC.
Dated: August 14, 1997 By: /s/ Gregory J. Nooney, Jr.
------------------------------------
Gregory J. Nooney, Jr.
Chief Executive Officer
/s/ Patricia A. Nooney
------------------------------------
Patricia A. Nooney
President and Treasurer
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EXHIBIT INDEX
Exhibit Number Description
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3.1 Articles of Incorporation dated June 12, 1984 are incorporated
by reference to Exhibit 3(a) to the Registration Statement on
Form S-11 under the Securities and Exchange Act of 1933, as
amended, (File No. 2-91851)
3.2 Bylaws of the Registrant, as amended, are incorporated by
reference to Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K, for fiscal year ended December 31, 1987, as filed
pursuant to Rule 13a-1 under the Securities Exchange Act of
1934, as amended, (File No. 0-13754)
27 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
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