SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The Trust has qualified and elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code. The Trust intends to continue to qualify as a REIT and to distribute substantially all of its taxable income to its shareholders. Accordingly, no provision for income taxes is reflected in the financial statements. At December 31, 1996, the Trust has net operating loss carryforwards of approximately $835,000 for tax purposes which expire in various amounts through 2005. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment property is recorded at the lower of cost or net realizable value. Impairment is determined if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property. Buildings and improvements are depreciated over their estimated useful lives using the straight-line method. Deferred expenses consist of lease fees and financing costs and are amortized over the terms of the respective leases or notes. Amortization of such costs charged to expense amounted to $132,000 in 1996 ($107,000 and $115,000 in 1995 and 1994, respectively). Lease agreements are accounted for as operating leases and rentals from such leases are reported as revenues ratably over the terms of the leases. Certain lease agreements provide for rent concessions. At December 31, 1996, accounts receivable include approximately $166,000 ($165,000 in 1995) of accrued rent concessions which is not yet due under the terms of the various lease agreements. Included in rental and other income are amounts received from tenants under provisions of lease agreements which require the tenants to pay additional rent equal to specified portions of certain expenses such as real estate taxes, insurance, utilities and common area maintenance. The income is recorded in the same period that the related expense is incurred. TWELVE ------------ =============================================================================== NOONEY REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX (XONTINUED) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 Net income per share was computed based upon the weighted average number of shares of common stock outstanding during each year. Distributions per share are stated at the amount per share declared by the Directors. The taxability of all distributions paid is based upon earnings and profits as defined by the Internal Revenue Code. The taxability of distributions declared but unpaid is determined in the year the dividend is paid. NOTE 3--MORTGAGE NOTE PAYABLE: Mortgage note payable at December 31 consists of the following: 1996 1995 ---- ---- 8.4%, due in monthly installments of $40,976 including interest to November 2001 when remaining principal payment of $4,330,508 is due.................................................................. $ 4,830,236 $ 4,912,421 =========== =========== The mortgage note is collateralized by deeds of trust and assignments of rents on all investment properties. Principal payments required during the next five years are as follows: 1997....................................................................... $ 89,360 1998....................................................................... 97,162 1999....................................................................... 105,646 2000....................................................................... 114,870 2001....................................................................... 4,423,198 In accordance with Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, the estimated fair value of mortgage notes payable with maturities greater than one year is determined based on rates currently available to the Partnership for mortgage notes with similar terms and remaining maturities. The carrying amount and estimated fair value of the Trust's debt at December 31, 1996 and 1995 are summarized as follows: 1996 1995 ----------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Mortgage notes payable............................ $ 4,830,236 $ 4,858,000 $4,912,421 $5,090,000 Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Trust's debt obligation at fair value may not be possible and may not be a prudent management decision. The potential loss on extinguishment at December 31, 1996 does not take into consideration expenses that would be incurred to settle the debt obligation at fair value. THIRTEEN ------------ =============================================================================== NOONEY REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX (XONTINUED) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 Minimum future rental revenues under noncancelable operating leases in effect as of December 31, 1996 are as follows: 1997.............................................. $2,544,000 1998.............................................. 2,210,000 1999.............................................. 1,557,000 2000.............................................. 276,000 2001.............................................. 159,000 Thereafter........................................ 295,000 ---------- Total......................................... $7,041,000 ========== NOTE 5--RELATED PARTY TRANSACTIONS: The Trust has entered into an agreement with Nooney Advisors Ltd., L.P. (the "Advisor"), a Missouri limited partnersxxx, xo advise the Trust with respect to the Trust's investments and investment policies and to administer the operations of the Trust. This advisory agreement is renewable annually by a vote of the Directors. Its current term expires on March 31, 1997. An Officer and Director of the Trust is a general partner of Nooney Advisors Ltd., L.P. The Advisor receives a fee for its services xxxxx upon net invested assets or net operating income as defined in the agreement. The fees were $117,864, $116,309 and $115,704 for the years ended December 31, 1996, 1995 and 1994, respectively. Certain other affiliates of the Advisor receive lease commissions and property management fees in connection with the operation of investment real estate owned by the Trust. In 1996, lease commissions of $35,746 ($67,837 and $43,595 in 1995 and 1994, respectively) were paid by the Trust to Nooney Krombach Company, an affiliate of the Advisor. Additionally, proxxxxx xxxxxxxxxt fees paid to Nooney Krombach Company were $112,982, $106,367 and $100,943 for the yexxx xxxxx Xxxxxber 31, 1996, 1995 and 1994, respectively. A substantial amount of the Trust's revenue in 1996 was derived from three major tenants whose rentals amounted to $1,035,600, $463,000 and $343,900 or 34.3%, 15.4% and 11.4%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1995 was derived from three major tenants whose rentals amounted to $978,000, $411,000 and $335,000 or 34%, 14% and 12%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1994 was derived from four major tenants whose rentals amounted to $996,000, $391,000 and $329,000 or 37%, 14% and 12%, respectively, of total revenues. FOURTEEN ------------ =============================================================================== DIRECTORS AND OFFICERS Board of Directors
Appears in 1 contract
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The Trust has qualified and elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code. The Trust intends to continue to qualify as a REIT and to distribute substantially all of its taxable income to its shareholdersshareholders (See Note 7). Accordingly, no provision for income taxes is reflected in the financial statements. At December 31, 19961997, the Trust has net operating loss carryforwards of approximately $835,000 for tax purposes which expire in various amounts through 2005. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment property is recorded at the lower of cost or net realizable value. Impairment is determined if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property. Buildings and improvements are depreciated over their estimated useful lives (35 years) using the straight-line method. Tenant improvements are depreciated over the term of the lease. Deferred expenses consist of lease fees and financing costs and are amortized over the terms of the respective leases or notes. Amortization of such costs charged to expense amounted to $132,000 in 1996 ($107,000 and $115,000 in 1995 and 1994, respectively). Lease agreements are accounted for as operating leases and rentals from such leases are reported as revenues ratably over the terms of the leases. Certain lease agreements provide for rent concessions. At December 31, 19961997, accounts receivable include approximately $166,000 140,000 ($165,000 166,000 in 19951996) of accrued rent concessions which is not yet due under the terms of the various lease agreements. Included in rental and other income are amounts received from tenants under provisions of lease agreements which require the tenants to pay additional rent equal to specified portions of certain expenses such as real estate taxes, insurance, utilities and common area maintenance. The income is recorded in the same period that the related expense is incurred. TWELVE ------------ =15 ============================================================================== NOONEY REALTY NOXXXX XEALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX STATEMENTS (XONTINUEDCONTINUED) YEARS ENDED DECEMBER 31, 19961997, 1996 AND 1995 AND 1994 In February 1997, Statement of Financial Accounting Standards ("SFAS") 128, Earnings Per Share, ("EPS") was issued. The statement is applicable to the Trust for the year ended December 31, 1997. The Trust displays only basic EPS on the face of the statement of operations as there were no items having a dilutive effect on EPS. Net income (loss) per share was computed based upon the weighted average number of shares of common stock outstanding during each year. Distributions per share are stated at the amount per share declared by the Directors. The taxability of all distributions paid is based upon earnings and profits as defined by the Internal Revenue Code. The taxability of distributions declared but unpaid is determined in the year the dividend is paid. NOTE 3--MORTGAGE NOTE PAYABLE: Mortgage note payable at December 31 consists of the following: 1997 1996 1995 ---- ---- 8.4%, due in monthly installments of $40,976 including interest to November 2001 when remaining principal payment of $4,330,508 is due.................................................................. $ $4,740,875 $4,830,236 $ 4,912,421 =========== =========== The mortgage note is collateralized by deeds of trust and assignments of rents on all investment properties. Principal payments required during the next five years are as follows: 1997....................................................................... $ 89,360 1998....................................................................... ......................................................... 97,162 1999....................................................................... ......................................................... 105,646 2000....................................................................... ......................................................... 114,870 2001....................................................................... ......................................................... 4,423,198 ---------- $4,740,875 ========== In accordance with Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, the estimated fair value of mortgage notes payable with maturities greater than one year is determined based on rates currently available to the Partnership Trust for mortgage notes with similar terms and remaining maturities. The carrying amount and estimated fair value of the Trust's debt at December 31, 1997 and 1996 and 1995 are summarized as follows: 1997 1996 1995 ----------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Mortgage notes payable............................ $ $4,740,875 $4,802,000 $4,830,236 $ $4,858,000 $4,912,421 $5,090,000 Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Trust's debt obligation at fair value may not be possible and may not be a prudent management decision. The potential loss on THIRTEEN ------------ 16 ============================================================================== NOXXXX XEALTY TRUST, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 extinguishment at December 31, 1996 1997 does not take into consideration expenses that would be incurred to settle the debt obligation at fair value. THIRTEEN NOTE 4--RENTAL REVENUES UNDER OPERATING LEASES: Minimum future rental revenues under noncancelable operating leases in effect as of December 31, 1997 are as follows: 1998.............................................. $2,482,000 1999.............................................. 1,838,000 2000.............................................. 441,000 2001.............................................. 164,000 ---------- Total......................................... $4,925,000 ========== In addition, certain lease agreements require tenant participation in certain operating expenses and additional contingent rentals based upon percentages of tenant sales in excess of minimum amounts. Tenant participation in expenses included in revenues approximated $403,000 for the year ended December 31, 1997, $417,000 in 1996, and $411,000 in 1995. Contingent rentals were not significant for the years ended December 31, 1997, 1996 and 1995. NOTE 5--RELATED PARTY TRANSACTIONS: The Trust has entered into an agreement with Noxxxx Xdvisors Ltd., L.P. (the "Advisor"), a Missouri limited partnership, to advise the Trust with respect to the Trust's investments and investment policies and to administer the operations of the Trust. This advisory agreement is renewable annually by a vote of the Directors. A notice to terminate the contract effective February 9, 1998 was approved on December 10, 1997 (See Note 8). An Officer and Director of the Trust is a general partner of Noxxxx Xdvisors Ltd., L.P. The Advisor receives a fee for its services based upon net invested assets or net operating income as defined in the agreement. The fees were $118,906, $117,864 and $116,309 for the years ended December 31, 1997, 1996 and 1995, respectively. Certain other affiliates of the Advisor receive lease commissions and property management fees in connection with the operation of investment real estate owned by the Trust. In 1997, lease commissions of $41,330 ($21,014 in 1996) were paid by the Trust to Noxxxx Xxxxxxxx Xompany, an affiliate of the Advisor. Lease commissions are capitalized as deferred expenses and amortized over the life of the lease. Additionally, property management fees paid to Noxxxx Xxxxxxxx Xompany were $98,558 for the period January 1, 1997 through October 31, 1997, and $112,982 and $106,367 for the years ended December 31, 1996 and 1995, respectively. On October 31, 1997, Noxxxx Xompany sold its property management business operated through its wholly-owned subsidiary, Noxxxx Xxxxxxxx Xompany, to Noxxxx Xeal Estate Company D/B/A Noxxxx Xnc., an indirect wholly-owned subsidiary of CGS Real Estate Company, Inc., a Texas corporation. Simultaneously Noxxxx Xompany, Grxxxxx X. Xxxxxx, Xx. xnd PAN, Inc. sold their general and limited partnership interest in Noxxxx Xdvisors Ltd., L.P., the FOURTEEN ------------ 17 =============================================================================== NOONEY REALTY - NOXXXX XEALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX STATEMENTS (XONTINUEDCONTINUED) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 Minimum future rental revenues under noncancelable operating leases in effect as of December 311997, 1996 are as follows: 1997.............................................. $2,544,000 1998.............................................. 2,210,000 1999.............................................. 1,557,000 2000.............................................. 276,000 2001.............................................. 159,000 Thereafter........................................ 295,000 ---------- Total......................................... $7,041,000 ========== NOTE 5AND 1995 external advisor to the Registrant to S--RELATED PARTY TRANSACTIONS: The Trust has entered into an agreement with Nooney Advisors Ltd.P Properties, L.P. (the "Advisor")Inc., a Missouri limited partnersxxxCalifornia corporation, xo advise the Trust with respect which also is a wholly-owned subsidiary of CGS Real Estate Company. Prior to the Trust's investments and investment policies and to administer sale, the operations independent Directors of the Trust. This advisory agreement is renewable annually by a vote of Registrant approved the Directors. Its current term expires on March 31, 1997. An Officer and Director of the Trust is a general partner of Nooney Advisors Ltd., L.P. The Advisor receives a fee for its services xxxxx upon net invested assets or net operating income as defined change in the agreement. The fees were $117,864, $116,309 and $115,704 for the years ended December 31, 1996, 1995 and 1994, respectively. Certain other affiliates control of the Advisor receive lease commissions and property authorized a new management fees in connection contract for the Registrant's properties with Noxxxx Xnc., with the operation of investment real estate owned by same terms and expiration dates as the Trustexisting advisory and management contracts. In 19961997, lease commissions of $35,746 ($67,837 and $43,595 in 1995 and 1994, respectively) 8,266 were paid by the Trust to Nooney Krombach CompanyNoxxxx Xnc. for the period from November 1, an affiliate 1997 to December 31, 1997. In the same period, the Trust paid Noxxxx Xnc. management fees of $19,711. NOTE 6--MAJOR TENANTS: A substantial amount of the Advisor. AdditionallyTrust's revenue in 1997 was derived from three major tenants, proxxxxx xxxxxxxxxt fees paid revenue from which amounted to Nooney Krombach Company were $112,9821,093,649, $106,367 418,928 and $100,943 for the yexxx xxxxx Xxxxxber 31337,813 or 35.2%, 199613.5%, 1995 and 199410.9%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1996 was derived from three major tenants whose rentals amounted to $1,035,600, $463,000 and $343,900 or 34.3%, 15.4% and 11.4%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1995 was derived from three major tenants whose rentals amounted to $978,000, $411,000 and $335,000 or 3434.2%, 1414.4% and 1211.7%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1994 was derived from four major tenants whose rentals amounted to $996,000, $391,000 and $329,000 or 37%, 14% and 12%, respectively, of total revenues. FOURTEEN ------------ =============================================================================== DIRECTORS AND OFFICERS Board of DirectorsNOTE 7--LAWSUITS:
Appears in 1 contract
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The Trust has qualified and elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code. The Trust intends to continue to qualify as a REIT and to distribute substantially all of its taxable income to its shareholders. Accordingly, no provision for income taxes is reflected in the financial statements. At December 31, 19961995, the Trust has net operating loss carryforwards of approximately $835,000 for tax purposes which expire in various amounts through 2005. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment property is recorded at the lower of cost or net realizable value. Impairment is determined if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property. Buildings and improvements are depreciated over their estimated useful lives using the straight-line method. Deferred expenses consist of lease fees and financing costs and are amortized over the terms of the respective leases or notes. Amortization of such costs charged to expense amounted to $132,000 in 1996 ($107,000 and $115,000 in 1995 and 1994, respectively). Lease agreements are accounted for as operating leases and rentals from such leases are reported as revenues ratably over the terms of the leases. Certain lease agreements provide for rent concessions. At December 31, 19961995, accounts receivable include approximately $166,000 165,000 ($165,000 151,000 in 19951994) of accrued rent concessions which is not yet due under the terms of the various lease agreements. Included in rental and other income are amounts received from tenants under provisions of lease agreements which require the tenants to pay additional rent equal to specified portions of certain expenses such as real estate taxes, insurance, utilities and common area maintenance. The income is recorded in the same period that the related expense is incurred. TWELVE ------------ =============================================================================== NOONEY REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX (XONTINUED) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 Net income per share was computed based upon the weighted average number of shares of common stock outstanding during each year. Distributions per share are stated at the amount per share declared by the Directors. The taxability of all distributions paid is based upon earnings and profits as defined by the Internal Revenue Code. The taxability of distributions declared but unpaid is determined in the year the dividend is paid. NOTE Deferred expenses consist of lease fees and financing costs and are amortized over the terms of the respective leases or notes. Amortization of such costs charged to expense amounted to $107,000 in 1995 ($115,000 and $113,000 in 1994 and 1993, respectively). Note 3--MORTGAGE NOTE PAYABLEMortgage Note Payable: Mortgage note payable at December 31 consists of the following: 1996 1995 ---- ---- 8.4%, due in monthly installments of $40,976 including interest to November 2001 when remaining principal payment of $4,330,508 is due.................................................................. $ 4,830,236 $ 4,912,421 =========== =========== The mortgage note is collateralized by deeds of trust and assignments of rents on all investment properties. Principal payments required during the next five years are as follows: 1997....................................................................... $ 89,360 1998....................................................................... 97,162 1999....................................................................... 105,646 2000....................................................................... 114,870 2001....................................................................... 4,423,198 In accordance with Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, the estimated fair value of mortgage notes payable with maturities greater than one year is determined based on rates currently available to the Partnership for mortgage notes with similar terms and remaining maturities. The carrying amount and estimated fair value of the Trust's debt at December 31, 1996 and 1995 are summarized as follows: 1996 1995 ----------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Mortgage notes payable............................ $ 4,830,236 $ 4,858,000 $4,912,421 $5,090,000 Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Trust's debt obligation at fair value may not be possible and may not be a prudent management decision. The potential loss on extinguishment at December 31, 1996 does not take into consideration expenses that would be incurred to settle the debt obligation at fair value. THIRTEEN 1994 1993 ------------ =============================================================================== NOONEY REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX (XONTINUED) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 Minimum future rental revenues under noncancelable operating leases in effect as of December 31, 1996 are as follows: 1997.............................................. $2,544,000 1998.............................................. 2,210,000 1999.............................................. 1,557,000 2000.............................................. 276,000 2001.............................................. 159,000 Thereafter........................................ 295,000 ---------- Total......................................... $7,041,000 ========== NOTE 5--RELATED PARTY TRANSACTIONS: The Trust has entered into an agreement with Nooney Advisors Ltd., L.P. (the "Advisor"), a Missouri limited partnersxxx, xo advise the Trust with respect to the Trust's investments and investment policies and to administer the operations of the Trust. This advisory agreement is renewable annually by a vote of the Directors. Its current term expires on March 31, 1997. An Officer and Director of the Trust is a general partner of Nooney Advisors Ltd., L.P. The Advisor receives a fee for its services xxxxx upon net invested assets or net operating income as defined in the agreement. The fees were $117,864, $116,309 and $115,704 for the years ended December 31, 1996, 1995 and 1994, respectively. Certain other affiliates of the Advisor receive lease commissions and property management fees in connection with the operation of investment real estate owned by the Trust. In 1996, lease commissions of $35,746 ($67,837 and $43,595 in 1995 and 1994, respectively) were paid by the Trust to Nooney Krombach Company, an affiliate of the Advisor. Additionally, proxxxxx xxxxxxxxxt fees paid to Nooney Krombach Company were $112,982, $106,367 and $100,943 for the yexxx xxxxx Xxxxxber 31, 1996, 1995 and 1994, respectively. A substantial amount of the Trust's revenue in 1996 was derived from three major tenants whose rentals amounted to $1,035,600, $463,000 and $343,900 or 34.3%, 15.4% and 11.4%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1995 was derived from three major tenants whose rentals amounted to $978,000, $411,000 and $335,000 or 34%, 14% and 12%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1994 was derived from four major tenants whose rentals amounted to $996,000, $391,000 and $329,000 or 37%, 14% and 12%, respectively, of total revenues. FOURTEEN ------------ =============================================================================== DIRECTORS AND OFFICERS Board of Directors------------
Appears in 1 contract
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The Trust has qualified and elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code. The Trust intends to continue to qualify as a REIT and to distribute substantially all of its taxable income to its shareholdersshareholders (See Note 7). Accordingly, no provision for income taxes is reflected in the financial statements. At December 31, 19961998, the Trust has net operating loss carryforwards of approximately $835,000 1,208,000 for tax purposes which expire in various amounts from 2000 through 20052013. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment property is recorded at the lower of cost or net realizable value. Impairment is determined The Trust reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. The Trust considers a history of operating losses or a change in occupancy to be primary indicators of potential impairment. The Trust deems the property to be impaired if the sum a forecast of the expected undiscounted future operating cash flows (undiscounted and without interest charges) directly related to the property, including disposal value if any, is less than its carrying amount. If the property is determined to be impaired, the loss is measured as the amount by which the carrying amount of the propertyProperty exceeds its fair value. Fair value is based on quoted market prices in active markets, if available. If quoted market prices are not available, an estimate of fair value is based on the best information available, including prices for similar properties or the results of valuation techniques such as discounting estimated future cash flows. Considerable management judgment is necessary to estimate fair value. Accordingly, actual results could vary significantly from such estimates. Buildings and improvements are depreciated over their estimated useful lives (35 years) using the straight-line method. Tenant improvements are depreciated over the term of the lease. Deferred expenses consist of lease fees and financing costs and are amortized over the terms of the respective leases or notes. Amortization of such costs charged to expense amounted to $132,000 in 1996 ($107,000 and $115,000 in 1995 and 1994, respectively). Lease agreements are accounted for as operating leases and rentals from such leases are reported as revenues ratably over the terms of the leases. Certain lease agreements provide for rent concessions. At December 31, 1996, accounts receivable include approximately $166,000 ($165,000 in 1995) of accrued rent concessions which is not yet due under the terms of the various lease agreements. Included in rental and other income are amounts received from tenants under provisions of lease agreements which require the tenants to pay additional rent equal to specified portions of certain expenses such as real estate taxes, insurance, utilities and common area maintenance. The income is recorded in the same period that the related expense is incurred. TWELVE ------------ THIRTEEN ---------------- 16 ================================================================================ NOONEY XXXXXX REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX STATEMENTS (XONTINUEDCONTINUED) YEARS ENDED DECEMBER 31, 19961998, 1995 1997 AND 1994 1996 rent concessions. At December 31, 1998 and 1997, accounts receivable include approximately $65,000 and $140,000, respectively, of accrued rent concessions which is not yet due under the terms of the various lease agreements. Included in rental and other income are amounts received from tenants under provisions of lease agreements which require the tenants to pay additional rent equal to specified portions of certain expenses such as real estate taxes, insurance, utilities and common area maintenance. The income is recorded in the same period that the related expense is incurred. Net income (loss) per share was computed based upon the weighted average number of shares of common stock outstanding during each year. Basic and diluted weighted average shares outstanding are the same as the impact of the options outstanding is antidilutive. Distributions per share are stated at the amount per share declared by the Directors. The taxability of all distributions paid is based upon earnings and profits as defined by the Internal Revenue Code. The taxability of distributions declared but unpaid is determined in the year the dividend is paid. NOTE 3--MORTGAGE NOTE PAYABLE: The Trust adopted SFAS No. 130, Reporting Comprehensive Income, which requires entities to report changes in equity that result from transactions and economic events other than those with shareholders. The Trust had no other comprehensive income items, accordingly net income and other comprehensive income are the same. Certain reclasses have been made to the prior year amounts to conform to the current year presentation. Mortgage note payable at December 31 consists of the following: 1996 1995 1998 1997 ---- ---- 8.4%, due in monthly installments of $40,976 including interest to November 2001 when remaining principal payment of $4,330,508 is due.................................................................. $ 4,830,236 $ 4,912,421 =$4,643,712 $4,740,875 ========== =========== The mortgage note is collateralized by deeds of trust and assignments of rents on all investment properties. Principal payments required during the next five years are as follows: 1997....................................................................... 1999.................................................... $ 89,360 1998....................................................................... 97,162 1999....................................................................... 105,646 2000....................................................................... .................................................... 114,870 2001....................................................................... 4,423,198 .................................................... 4,423,196 ---------- Total............................................... $4,643,712 ========== In accordance with Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, the estimated fair value of mortgage notes payable with maturities greater than one year is determined based on rates currently available to the Partnership Trust for mortgage notes with similar terms and remaining maturities. The carrying amount and estimated fair value of the Trust's debt at December 31, 1996 and 1995 are summarized as follows: 1996 1995 ----------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Mortgage notes payable............................ $ 4,830,236 $ 4,858,000 $4,912,421 $5,090,000 Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Trust's debt obligation at fair value may not be possible and may not be a prudent management decision. The potential loss on extinguishment at December 31, 1996 does not take into consideration expenses that would be incurred to settle the debt obligation at fair value. THIRTEEN ------------ FOURTEEN ---------------- 17 ================================================================================ NOONEY XXXXXX REALTY TRUST, INC. NOTES TO FINANCIAL STATEMEXXX STATEMENTS (XONTINUEDCONTINUED) YEARS ENDED DECEMBER 31, 19961998, 1995 1997 AND 1994 1996 mortgage notes with similar terms and remaining maturities. The carrying amount and estimated fair value of the Trust's debt at December 31, 1998 and 1997 are summarized as follows: 1998 1997 --------------------- --------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- Mortgage notes payable............................ $4,643,712 $4,707,000 $4,740,875 $4,802,000 Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement of the Trust's debt obligation at fair value may not be possible and may not be a prudent management decision. The potential loss on extinguishment at December 31, 1998 does not take into consideration expenses that would be incurred to settle the debt obligation at fair value. Minimum future rental revenues under noncancelable operating leases in effect as of December 31, 1996 1998 are as follows: 1997.............................................. $2,544,000 1998.............................................. 2,210,000 1999.............................................. 1,557,000 $ 2,103,000 2000.............................................. 276,000 1,412,000 2001.............................................. 159,000 1,232,000 2002.............................................. 1,152,000 2003.............................................. 1,136,000 Thereafter........................................ 295,000 ---------- 5,645,000 ----------- Total......................................... $7,041,000 12,680,000 =========== In addition, certain lease agreements require tenant participation in certain operating expenses and additional contingent rentals based upon percentages of tenant sales in excess of minimum amounts. Tenant participation in expenses included in revenues approximated $391,000 for the year ended December 31, 1998, $403,000 in 1997, and $417,000 in 1996. Contingent rentals were not significant for the years ended December 31, 1998, 1997 and 1996. NOTE 5--RELATED PARTY TRANSACTIONS: The Trust has had entered into an agreement with Nooney Xxxxxx Advisors Ltd., L.P. (the "Advisor"), a Missouri limited partnersxxxpartnership, xo to advise the Trust with respect to the Trust's investments and investment policies and to administer the operations of the Trust. This advisory agreement is was renewable annually by a vote of the Directors. Its current term expires A notice to terminate the contract effective February 9, 1998 was approved on March 31December 10, 1997. An Officer and Director of the Trust is was a general partner of Nooney Xxxxxx Advisors Ltd., L.P. The Advisor receives received a fee for its services xxxxx based upon net invested assets or net operating income as defined in the agreement. The fees were $117,86413,367, $116,309 118,906 and $115,704 117,864 for the years ended December 31, 1998, 1997 and 1996, 1995 and 1994, respectively. Certain other affiliates of the Advisor receive lease commissions and property management fees in connection with the operation of investment real estate owned by the Trust. In 1996Effective February 10, lease commissions of $35,746 ($67,837 and $43,595 in 1995 and 19941998, respectively) were paid by the Trust to Nooney Krombach Company, became self-advised. The Trust reimburses an affiliate of the Advisor. Additionally, proxxxxx xxxxxxxxxt fees paid to Nooney Krombach Company were $112,982, $106,367 and $100,943 for the yexxx xxxxx Xxxxxber 31, 1996, 1995 and 1994, respectively. A substantial amount of the Trust's revenue in 1996 was derived from three major tenants whose rentals amounted to $1,035,600, $463,000 and $343,900 or 34.3%, 15.4% and 11.4%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1995 was derived from three major tenants whose rentals amounted to $978,000, $411,000 and $335,000 or 34%, 14% and 12%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1994 was derived from four major tenants whose rentals amounted to $996,000, $391,000 and $329,000 or 37%, 14% and 12%, respectively, of total revenues. FOURTEEN ------------ FIFTEEN ---------------- 18 ================================================================================ DIRECTORS XXXXXX REALTY TRUST, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 1998, 1997 AND OFFICERS Board 1996 affiliate, Xxxxxx, Inc. for certain general and administrative fees. The Trust reimbursed Xxxxxx, Inc. $188,100 in general and administrative fees for the year ended December 31, 1998. Certain other affiliates of Directorsthe Advisor received lease commissions and property management fees in connection with the operation of investment real estate owned by the Trust. In 1997, lease commissions of $41,330 were paid by the Trust to Xxxxxx Xxxxxxxx Company, an affiliate of the Advisor. Lease commissions were capitalized as deferred expenses and amortized over the life of the lease. Additionally, property management fees paid to Xxxxxx Xxxxxxxx Company were $98,558 for the period January 1, 1997 through October 31, 1997 and $112,982 for the year ended December 31, 1996. On October 31, 1997, Xxxxxx Company sold its property management business operated through its wholly-owned subsidiary, Xxxxxx Xxxxxxxx Company, to Xxxxxx Real Estate Company D/B/A Xxxxxx Inc., an indirect wholly-owned subsidiary of CGS Real Estate Company, Inc., a Texas corporation. Simultaneously Xxxxxx Company, Xxxxxxx X. Xxxxxx, Xx. and PAN, Inc. sold their general and limited partnership interest in Xxxxxx Advisors Ltd., L.P., the external advisor to the Trust to S-P Properties, Inc., a California corporation, which also is a wholly-owned subsidiary of CGS Real Estate Company. Prior to the sale, the independent Directors of the Trust approved the change in control of the Advisor and authorized a new management contract for the Trust's properties with Xxxxxx Inc., with the same terms and expiration dates as the existing advisory and management contracts. Lease commissions of $102,229 and $8,266 were paid by the Trust to Xxxxxx Inc. for the years ended December 31, 1998 and 1997, respectively. Lease commissions are capitalized as deferred expenses and amortized over the life of the lease. Additionally, the Trust paid Xxxxxx Inc. property management fees of $10,160 and $19,711 for the years ended December 31, 1998 and 1997, respectively. A substantial amount of the Trust's revenue in 1998 was derived from three major tenants, whose rentals amounted to $1,096,366, $435,016 and $323,195 or 34.4%, 13.6% and 10.1%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1997 was derived from three major tenants whose rentals amounted to $1,093,649, $418,928 and $337,813 or 35.2%, 13.5% and 10.9%, respectively, of total revenues. A substantial amount of the Trust's revenue in 1996 was derived from three major tenants whose rentals amounted to $1,035,600, $463,000 and $343,900 or 34.3%, 15.4% and 11.4%, respectively, of total revenues. NOTE 7--LEGAL PROCEEDINGS: During 1998, the Trust successfully completed litigation of State of Missouri ex rel. KelCor, Inc. x. Xxxxxx Realty Trust, Inc. On August 7, 1997, KelCor, Inc., a shareholder of the Trust, filed a Petition for mandamus relief against the Trust. KelCor's Petition sought a writ of mandamus compelling the Trust to hold an Annual Meeting of shareholders by October 31, 1997. The Trust opposed KelCor's Petition on the basis that the Trust was unable to hold a valid meeting because of uncertainty over the validity of certain shares of the Trust and that the determination of the validity of those shares needed to first be determined. The case was tried before the Court on December 1, 1997, on which date the Court entered a permanent order of mandamus requiring SIXTEEN ----------------
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