10QSB 1 mrp4_10q3qtr04.txt 10Q FOR MAXUS REAL PROPERTY INVESTORS-FOUR, L.P. 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, 2004 ----------------------- 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) (816) 303-4500 -------------- (Issuer's telephone number) 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 OR PLAN OF OPERATION 7 ITEM 3. CONTROLS AND PROCEDURES 9 PART II - OTHER INFORMATION 9 ITEM 1. LEGAL PROCEEDINGS 9 ITEM 2. UNREGISTERED SALES OF EQUITY 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 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, 2004 2003 (Unaudited) ----------- ----------- ASSETS: Investment property Land $ 1,014,000 1,014,000 Buildings and improvements 16,660,000 16,273,000 ------------ ------------ 17,674,000 17,287,000 Less accumulated depreciation 11,551,000 11,080,000 ------------ ------------ Total investment property 6,123,000 6,207,000 Cash and cash equivalents 379,000 651,000 Prepaid expenses 82,000 60,000 Deferred expenses, less accumulated amortization 65,000 72,000 Accounts receivable 35,000 --- Income tax deposit 17,000 14,000 ------------ ------------ Total assets $ 6,701,000 7,004,000 ============ ============ LIABILITIES AND PARTNERS' DEFICIT: Liabilities: Mortgage notes payable $ 9,900,000 9,900,000 Accounts payable and accrued expenses 360,000 228,000 Real estate taxes payable 126,000 144,000 Refundable tenant deposits 56,000 60,000 ------------ ------------ Total liabilities 10,442,000 10,332,000 Partners' deficit (3,741,000) (3,328,000) ------------ ------------ Total liabilities and partners' deficit $ 6,701,000 7,004,000 ============ ============
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, 2004 2003 2004 2003 ---- ---- ---- ---- Revenues: Rental $ 622,000 645,000 1,914,000 1,978,000 Other 47,000 57,000 140,000 165,000 ---------- ---------- ---------- ---------- Total revenues 669,000 702,000 2,054,000 2,143,000 ---------- ---------- ---------- ---------- Expenses: Depreciation and amortization 158,000 160,000 479,000 472,000 Repairs and maintenance 68,000 97,000 205,000 240,000 Real estate taxes 34,000 39,000 149,000 123,000 Professional fees 25,000 13,000 74,000 61,000 Utilities 29,000 39,000 109,000 107,000 Property management fees - related parties 44,000 35,000 133,000 126,000 Other 151,000 139,000 355,000 381,000 ---------- ---------- ---------- ---------- Total expenses 509,000 522,000 1,504,000 1,510,000 ---------- ---------- ---------- ---------- Net operating income 160,000 180,000 550,000 633,000 ---------- ---------- ---------- ---------- Interest: Interest income (20,000) (1,000) (26,000) (15,000) Interest expense 184,000 184,000 553,000 553,000 ---------- ---------- ---------- ---------- Net income $ (4,000) (3,000) 23,000 95,000 ========== ========== ========== ========== Net income allocation: General partner $ --- --- --- 2,000 Limited partners (4,000) (3,000) 23,000 93,000 ---------- ---------- ---------- ---------- $ (4,000) (3,000) 23,000 95,000 ========== ========== ========== ========== Limited partners' data: Net income per unit $ (.35) (.26) 2.02 8.00 ========== ========== ========== ========== Weighted average limited partnership units outstanding 11,313 11,517 11,370 11,624 ========== ========== ========== ==========
4 MAXUS REAL PROPERTY INVESTORS-FOUR, L.P. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended August 31, August 31, 2004 2003 Cash flows from operating activities: Net income $ 23,000 95,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 479,000 472,000 Changes in accounts affecting operations: Accounts receivable (35,000) (2,000) Prepaid expenses (22,000) 72,000 Accounts payable and accrued expenses 132,000 (21,000) Real estate taxes payable (18,000) (16,000) Refundable tenant deposits (4,000) (8,000) Income tax deposit (3,000) 4,000 ----------- ---------- Net cash provided by operating activities 552,000 596,000 ----------- ---------- Cash flows from investing activities: Capital expenditures (387,000) (226,000) ----------- ---------- Cash flows from financing activities: Distributions (342,000) (347,000) Repurchase of Partnership Units (95,000) (198,000) ----------- ---------- Net cash used in financing activities (437,000) (545,000) ----------- ---------- Net decrease in cash and cash equivalents (272,000) (175,000) Cash and cash equivalents, beginning of period 651,000 911,000 ----------- ---------- Cash and cash equivalents, end of period $ 379,000 736,000 =========== ========== 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, 2004 AND AUGUST 31, 2003 (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, 2003, 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, 2004 and for all periods presented have been made. The results for the periods ended August 31, 2004 are not necessarily indicative of the results that may be expected for the entire year. (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 25, 2003 the Partnership commenced an odd-lot offer to purchase up to 3,887 of the Partnership's limited partnership units. In connection with the offer, the Partnership redeemed 95 limited partnership units at $450 per unit. On June 14, 2004, the Partnership commenced an odd-lot offer to purchase up to 4,874 of the Partnership's limited partnership units from limited partners holding 25 units or fewer (the "June Offer") at $507 per unit. The June Offer expired on July 16, 2004. In connection with the offer, the Partnership redeemed 100 units of the Partnership at $507 per unit during the quarter ended August 31, 2004. As of August 31, 2004 there were 11,256 outstanding limited partnership units. (Remainder of page left intentionally blank) 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, 2003, 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 over periods ranging 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 property, compared to the property's current carrying value. 7 Liquidity and Capital Resources Cash and cash equivalents as of August 31, 2004 was $379,000, a decrease of $272,000 from November 30, 2003. Cash provided from operating activities for the nine months ended August 31, 2004 was $552,000, comparable with the same period in 2003. Investing activities used $387,000 primarily due to a renovation of the clubhouse for $108,000 and pool and deck improvements for $45,000 along with other investments in property improvements including carpet, flooring, HVAC and appliance replacements of $178,000. Cash used in financing activities was $437,000, comprised primarily of $342,000 of distributions of $10 per limited partner unit, which were paid in each of January, April, and July 2004, and $95,000 to repurchase 195 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 May 31, 2004, the Partnership's revenues were $669,000 and $2,054,000, respectively. Revenues decreased by $33,000 (4.7%) and $89,000 (4.2%) respectively for the three and nine-month periods ended August 31, 2004 as compared to the same periods ended August 31, 2003. This decrease was primarily due to an increase in vacancy loss of $40,000 and $81,000 for the three and nine-month periods ended August 31, 2004, respectively. For the three and nine month periods ended August 31, 2004, the Partnership's operating expenses were $509,000 and $1,504,000, respectively. Expenses for the three and nine month periods ended August 31, 2004 are comparable in total to the same periods ended August 31, 2003. However, several expense categories had offsetting increases or decreases caused by changes in several expenses within those categories significant only as a whole. Woodhollow was 89% occupied at August 31, 2004, as compared to 92% as of August 31, 2003. Twenty-two (22) units, or approximately 5% of the property, are vacant due to the fire described below. Based on industry information, the average occupancy of the sub-market Woodhollow competes with is in the low to mid 90% range. Interest rates remain low, which normally increases losses of tenants who move out of apartments when they purchase homes. On April 16, 2004, Woodhollow incurred a fire in one building. The damage was limited to the 22 units in that building. Management estimates that most of the damages (estimated to be $260,000) are covered by insurance, less a $10,000 deductible and approximately $10,000 of make-ready expenses. The insurance policy also covers loss of rents and management is currently in discussions with the insurance company as to the amount of rental loss the partnership will be reimbursed for. Management believes that the repairs were substantially completed in September 2004, and the units will be available for rental after inspection by the city is complete in early October. Inflation The effects of inflation did not have a material impact upon the Registrant's operations in fiscal 2003 or the nine months ended August 31, 2004 and are not expected to materially affect the Registrant's operations in the remainder of 2004. 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. 8 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 May 31, 2004. 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 has been no change in internal control over financial reporting that has materially affected or is reasonably likely to materially affect, the Partnership's internal control over financial reporting during the period covered by this report. PART II. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS None ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Equity Repurchases for Quarter Ended August 31, 2004: Maximum Number (or Approximate Total Number of Dollar Value) of Average Total Units Purchased Units That May Equity Security Price Number As Part of Publicly Yet Be Purchased Repurchased By Period of Paid of Units Announced Under the Plans Partnership Repurchase Per Unit Purchased Plans or Programs Or Programs ------------------------- -------------- -------- --------- ----------------- ---------------- Limited Partnership Units 6/1/04-6/30/04 --- --- --- --- Limited Partnership Units 7/1/04-7/31/04 $507 100 --- --- Limited Partnership Units 8/1/04-8/31/04 --- --- --- --- --------- ----------------- ---------------- 100 --- ---
On June 14, 2004, the Partnership commenced an odd-lot offer to purchase up to 4,874 of the Partnership's limited partnership units from limited partners holding 25 units or fewer (the "June Offer") at $507 per unit. The June Offer expired on July 16, 2004. In connection with the offer, the Partnership redeemed 100 units of the Partnership at $507 per unit during the quarter ended August 31, 2004. As a result, as of August 31, 2004 there were 11,256 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, April 1, July 1, and October 1, 2004, that were paid on January 10, April 10, July 10, 2004, and are payable on October 10, 2004, respectively. The Partnership anticipates, subject to continued performance and availability of funds, continuing such quarterly distributions, at least in the near future. 9 ITEM 6. EXHIBITS See Exhibit Index on Page 12 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 04, 2004 By: /s/ David L. Johnson -------------------- David L. Johnson President and Chief Executive Officer (Principal Executive Officer) Dated: October 04, 2004 By: /s/ John W. Alvey -------------------- 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 from Exhibit 3.1 to the Form 10-K for the fiscal year ended November 30, 1999 filed by the Registrant (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