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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999 Commission File No. 0-16701
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2593067
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
280 DAINES STREET, BIRMINGHAM, MICHIGAN 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9261
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
units of beneficial assignments of limited partnership interest
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 [ ]
As of March 1, 2000, 3,303,387 units of limited partnership interest of the
registrant were outstanding and the estimated aggregate market value of the
units as of such date held by non-affiliates, as estimated by the General
Partner (based on a 2000 appraisal of Partnership properties), was approximately
$48,658,384.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
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PART I
This form 10-K contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21e of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund II, a Michigan
Limited Partnership (the "Partnership"), acquired, maintains, operates and
ultimately will dispose of income producing residential real properties
consisting of nine manufactured housing communities (the "Properties"). The
Partnership was organized and formed under the laws of the State of Michigan on
November 7, 1986. Its principal offices are located at 280 Daines Street,
Birmingham, Michigan 48009 and its telephone number is (248) 645-9261.
The Partnership filed an S-11 Registration Statement in November 1986,
which was declared effective by the Securities and Exchange Commission on
December 23, 1986. The Partnership thereafter sold 3,303,387 units (the "Units")
of beneficial assignment of limited partnership interest representing capital
contributions by unit holders (the "Unit Holders") to the Partnership of $20 per
unit. The sale of all 3,303,387 Units was completed in December 1987, generating
$66,067,740 of contributed capital to the Partnership.
The Partnership acquired seven of the Properties in 1987 and acquired
two additional Properties in 1988.
The Partnership operates the Properties as manufactured housing
communities with the primary investment objectives of: (1) providing cash from
operations to investors; (2) obtaining capital appreciation; and (3) preserving
capital of the Partnership. There can be no assurance that such objectives can
be achieved.
On August 20, 1998, the Partnership borrowed $30,000,000 (the "Loan")
from GMAC Commercial Mortgage Corporation. It secured the Loan by placing new
mortgages on seven of its nine properties. The Loan carries a fixed interest
rate of 6.37% over its term of 126 months and is amortized over 360 months. The
Partnership used the proceeds from the Loan to refinance the Partnership's
outstanding indebtedness of $30,045,000, which was the result of a 1993 mortgage
financing transaction.
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Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation
of its nine manufactured housing communities. Partnership operations commenced
in April 1987 upon the acquisition of the first two Properties. For a
description of the Partnership's revenues, operating profit and assets, please
refer to Items 6 and 8.
Narrative Description of Business
General
The Sunshine Village, Ardmor Village and Camelot Manor Properties were
selected from 25 manufactured housing communities then owned by affiliates of
Genesis Associates Limited Partnership, the General Partner of the Partnership
(the "General Partner"). The other six communities were purchased from
unaffiliated third parties. The Partnership rents space in the Properties to
owners of manufactured homes thereby generating rental revenues. It was intended
that the Partnership would hold the Properties for extended periods of time,
originally anticipated to be seven to ten years after their acquisition. The
General Partner has the discretion to determine when a Property is to be sold;
provided, however, that the determination of whether a particular Property
should be disposed of will be made by the General Partner only after
consultation with Manufactured Housing Services Inc. (the "Consultant"). In
making their decision, the General Partner and Consultant will consider relevant
factors, including current operating results of the particular Property and
prevailing economic conditions, and will make the decision with a view to
achieving maximum capital appreciation to the Partnership considering relevant
tax consequences and the Partnership's investment objectives.
Competition
The business of owning and operating residential manufactured housing
communities is highly competitive, and the Partnership may be competing with a
number of established companies having greater financial resources. Moreover,
there has been a trend for manufactured housing community residents to purchase
(where zoning permits) their manufactured home sites on a collective basis. This
trend may result in increased competition with the Partnership for tenants. In
addition, the General Partner, its affiliates or both, has and may in the future
participate directly or through other partnerships or investment vehicles in the
acquisition, ownership, development, operation and sale of projects which may be
in direct competition with one or more of the Properties.
Each of the Properties competes with numerous similar facilities
located in its geographic area. The Davie/Fort Lauderdale area contains
approximately five communities offering approximately 2,045 housing sites
competing with Sunshine Village. Ardmor Village competes with approximately nine
communities in the Lakeville, Minnesota area offering approximately 2,363
housing sites. Camelot Manor competes with approximately 16 communities in the
Grand Rapids, Michigan area offering approximately
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3,631 housing sites. In the Jacksonville, Florida area, Country Roads competes
with approximately nine communities offering approximately 3,636 housing sites.
The Tampa, Florida area contains approximately four communities offering
approximately 1,190 housing sites competing with Paradise Village. Dutch Hills
and Stonegate Manor compete with approximately 11 other communities in the
Lansing, Michigan area offering approximately 3,438 housing sites. In the Las
Vegas, Nevada area, West Valley and El Adobe compete with approximately 13 other
communities offering approximately 3,719 housing sites. The Properties also
compete against other forms of housing, including apartment and condominium
complexes.
Governmental Regulations
The Properties owned by the Partnership are subject to certain state
regulations regarding the conduct of the Partnership operations. For example,
the State of Florida regulates agreements and relationships between the
Partnership and the residents of Sunshine Village, Country Roads and Paradise
Village. Under Florida law, the Partnership is required to deliver to new
residents of those Properties a prospectus describing the property and all
tenant rights, Property rules and regulations, and changes to Property rules and
regulations. Florida law also requires minimum lease terms, requires notice of
rent increases, grants to tenant associations certain rights to purchase the
community if being sold by the owner and regulates other aspects of the
management of such properties. The Partnership is required to give 90 days
notice to the residents of Florida Properties of any rate increase, reduction in
services or utilities, or change in rules and regulations. If a majority of the
residents object to such changes as unreasonable, the matter must be submitted
to the Florida Department of Professional Business Regulations for mediation
prior to any legal adjudication of the matter. In addition, if the Partnership
seeks to sell Florida Properties to the general public, it must notify any
homeowners association for the residents, and the association shall have the
right to purchase the Property on the price, terms and conditions being offered
to the public within 45 days of notification by the owner. If the Partnership
receives an unsolicited bona fide offer to purchase the Property from any party
that it is considering or negotiating with, it must notify any such homeowners
association that it has received an offer, state to the homeowners association
the price, terms and conditions upon which the Partnership would sell the
Property, and consider (without obligation) accepting an offer from the
homeowners association. The Partnership has, to the best of its knowledge,
complied in all material respects with all requirements of the States of
Florida, Michigan, Minnesota and Nevada, where its operations are conducted.
Employees
The Partnership employs two part-time employees to perform Partnership
management and investor relations' services. The Partnership retains an
affiliate, Uniprop, Inc., as the property manager for each of its Properties.
Uniprop, Inc. is paid a fee equal to the lesser of 5% of the annual gross
receipts from each of the Properties or the amount which would be payable to
unaffiliated third parties for comparable services. Uniprop, Inc.
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retains local managers on behalf of the Partnership at each of the Properties.
Salaries and fringe benefits of such local managers are paid by the Partnership
and are not included in any property management fee payable to Uniprop, Inc.
Local managers are employees of the Partnership and are paid semi-monthly. The
yearly salaries and expenses for local managers range from $20,000 to $40,000.
Local managers have no direct management authority, make no decisions regarding
operations and act only in accordance with instructions from the property
manager. They are utilized by the Partnership to provide on-site maintenance and
administrative services. Uniprop, Inc., as property manager, has overall
management authority for each Property.
ITEM 2. PROPERTIES
The Partnership purchased all nine manufactured housing communities for
cash. As a result of the Loan, however, seven of the nine Properties are now
encumbered with mortgages.
Each of the Properties is a modern manufactured housing community
containing lighted and paved streets, side-by-side off-street parking and
complete underground utility systems. The Properties consist of only the
underlying real estate and improvements, not the actual homes themselves. In
January 1990, the Partnership did begin acquiring some homes in conjunction with
its home purchase/lease program for Country Roads and Paradise Village. Each of
the Properties has a community center, which includes offices, meeting rooms and
game rooms. The Ardmor Village community includes a resident manager's
apartment. Country Roads has a 1,200 square foot rental cottage. Each of the
Properties, except Stonegate Manor, has a swimming pool. Several of the
Properties also have laundry rooms, playground areas, garage and maintenance
areas and recreational vehicle or boat storage areas.
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The table below contains certain information concerning the Partnership's nine
properties.
- ----------------------------------------------------------------------------------------------------------------
PROPERTY NAME NUMBER
AND LOCATION YEAR CONSTRUCTED ACREAGE OF SITES
- ------------ ---------------- ------- --------
- ----------------------------------------------------------------------------------------------------------------
Ardmor Village
Cedar Avenue S.
Lakeville, MN 1974 74 339
Camelot Manor
South Division
Grand Rapids, MI 1973 57 335
Country Roads
Townsend Road
Jacksonville, FL 1967 37 312
Dutch Hills
Upton Road
Haslett, MI 1975 42.8 278
El Adobe
N. Lamb Blvd.
Las Vegas, NV 1975 36 371
Paradise Village
Paradise Drive
Tampa, FL 1971 91 611
Stonegate Manor
Eaton Rapids Drive
Lansing, MI 1968 43.6 308
Sunshine Village
Southwest 5th St.
Davie, FL 1972 45 356
West Valley
W. Tropicana Ave
Las Vegas, NV 1972 53 420
- ----------------------------------------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Partnership and its legal counsel, there are no
material legal proceedings pending except such ordinary routine matters as are
incident to the kind of business conducted by the Partnership. To the knowledge
of the Partnership and its counsel, no legal proceedings have been instituted or
are being contemplated by any governmental authority against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the Unit Holders and Limited Partners are
restricted to certain matters of fundamental significance to the Partnership.
The Unit Holders and
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Limited Partners must approve certain major decisions of the General Partner if
the General Partner proposes to act without the approval of the Consultant. The
Unit Holders and Limited Partners also have a right to vote upon removal and
replacement of the General Partner, dissolution of the Partnership, material
amendments to the partnership agreement and the sale or other disposition of all
or substantially all of the Partnership's assets, except in the ordinary course
of the Partnership's disposing of the Properties. Such matters must be approved
by Unit Holders and Limited Partners, as a group, holding more than 50% of the
then outstanding interests. No matters were submitted to Unit Holders for vote
during 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units of the
Partnership and it is not anticipated that one will ever develop. During the
last twelve months, less than five percent (5.0%) of the Units have been
transferred, excluding transfers on account of death or intra-family transfers.
The Partnership believes there is no secondary market, or the substantial
equivalent thereof, and none will develop.
The General Partner calculates the estimated net asset value of each
Unit by dividing (i) the amount of distributions that would be made to the
Limited Partners in the event of the current sale of the Properties at their
current appraised value, less the outstanding balances of the mortgages on the
mortgaged Properties and sales expenses (but without consideration to tax
consequences of the sale), by (ii) 3,303,387. In March 2000, the Properties were
appraised at an aggregate fair market value of $80,650,000. Assuming a sale of
the nine properties in March 2000, at the appraised value, less payment of
selling expenses and mortgage debt, the net aggregate proceeds available for
distribution to the Unit Holders is estimated to be $48,658,384 or $14.72 per
Unit. There can be no assurance that the estimated net asset value could ever be
realized. As of March 1, 2000, the Partnership had approximately 4,675 Unit
Holders.
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for the
Partnership for the periods ended December 31, 1999, 1998, 1997, 1996 and 1995:
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1999 31, 1998 31, 1997 31, 1996 31, 1995
-------- -------- -------- -------- --------
Total Assets $47,525,657 $48,834,623 $52,652,238 $53,583,381 $ 53,583,381
=========== =========== =========== =========== ============
Long Term
Debt $29,572,116 $29,915,975 $30,045,000 $30,025,487 $ 29,894,581
=========== =========== =========== =========== ============
Income 12,718,010 12,419,636 11,922,526 11,250,156 11,210,541
Operating Expenses (11,077,253) (11,488,193) (10,755,270) (10,854,181) (10,670,390)
----------- ----------- ----------- ----------- -----------
Extraordinary Item: $ 1,640,757 $ 931,443 $ 1,167,256 $ 395,975 $ 540,151
Extraordinary Item: - 250,998 - - -
----------- ----------- ----------- ----------- -----------
Net Income: $ 1,640,757 $ 1,182,441 $ 1,167,256 $ 395,975 $ 395,975
=========== =========== =========== =========== ============
Distributions to Unit
Holders,
per Unit: $ .73 $ 1.43 $ .64 $ .54 $ .66
Income per Unit:
Before Extra. Item $ .50 $ .28 $ .35 $ .12 $ .16
Extraordinary Item - .08 - - -
Weighted average
Number of Units
Outstanding: 3,303,387 3,303,387 3,303,387 3,303,387 3,303,387
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION Capital Resources
The capital formation phase of the Partnership began on April 1, 1987
when Sunshine Village and Ardmor Village were purchased by the Partnership and
operations commenced. It ended on January 15, 1988 when El Adobe, the
Partnership's last property, was purchased. The total capital raised through
December 1987 was $66,067,740 of which approximately $58,044,000 was used to
purchase the nine Properties after deducting sales commissions, advisory fees
and other organization and offering costs.
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The Partnership had no capital expenditure commitments as of December
31, 1999 and does not anticipate any during the next fiscal year.
As described in Item 1, the Partnership borrowed $30,000,000 from GMAC
Commercial Mortgage Corporation. The Loan carries a fixed interest rate of 6.37%
over its term of 120 months, amortized over 30 years. The Loan was secured by
mortgages on the Partnership's Ardmor Village, Camelot Manor, Dutch Hills, El
Adobe, Stonegate Manor, Sunshine Village and West Valley Properties. The
Partnership used the proceeds from the Loan to refinance the Partnership's
outstanding indebtedness of $30,045,000.
The General Partner acknowledges that the mortgages pose some risks to
the Partnership, but believes that such risks are not greater than risks
typically associated with real estate financing.
Liquidity
The Partnership has, since inception, generated adequate amounts of
cash to meet its operating needs. The Partnership retains cash reserves, which
it considers adequate to maintain the Properties. All funds in excess of
operating needs, amounts sufficient to pay debt service, and cash reserves are
distributed to the Unit Holders on a quarterly basis. While the Partnership is
not required to maintain a working capital reserve, the Partnership has not
distributed all the cash generated from operations in order to build capital
reserves. As of December 31, 1999, the Partnership had $2,821,681 in reserves.
In February of 1994, the Partnership distributed $23,119,767 to the
Unit Holders, or $7.00 per $20.00 Unit held. Of this amount, $13,572,978 (or
$4.11 per Unit), restored the then shortfall in the Unit Holders' 10.0%
cumulative preferred return, and $9,546,789 (or $2.89 per Unit), was a partial
return of the Limited Partners' original capital contributions.
Results of Operations
Distributions
For the year ended December 31, 1999, the Partnership made
distributions to the Unit Holders of $2,411,473, which is equal, on an
annualized basis, to 4.3% on their adjusted capital contributions, or $.73 per
$17.11 Unit. Distributions paid to Unit Holders in 1998 totaled $4,723,832, (of
which $2,543,608 was the result of the liquidation of the Class D and R
certificates, which were issued as a result of the original 1993 financing
transaction), and $2,114,171 in 1997.
The distributions paid in 1999 were less than the amount required for
the annual 10.0% preferred return to the Unit Holders by approximately
$3,240,000. As described in Note 7 to the Partnership's financial statements,
the cumulative preferred return deficit
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through December 1999 was approximately $18,864,000. No distributions can be
made to the General Partner in regard to its incentive management interest until
the cumulative preferred return deficit has been distributed to the Unit
Holders. At December 31, 1999, the unpaid amount to be distributed to the
General Partner was approximately $7,100,000.
Net Income
For the years ended December 31, 1999, 1998 and 1997, income before
extraordinary item was $1,640,757, $931,443 and $1,167,256 on total revenues of
$12,718,010, $12,419,636 and $11,922,526, respectively. The increase in 1999
from 1998 was due primarily to lower operating expenses, specifically the
reduction in interest paid on the Partnership's mortgage debt. The decrease from
1997 to 1998 was due primarily to property operating expenses, which increased
approximately $707,000, whereas total revenues increased only $497,000.
Net income plus depreciation and amortization less distributions to
Unit Holders, was $1,072,491, ($1,694,214) and $903,864, for the years ended
December 31, 1999, 1998 and 1997, respectively. The shortfall reflected in 1998
was funded with proceeds from the liquidation of the Class D and R Certificates.
Partnership Management
Net expenses for the management of the Partnership (i.e. gross expenses
for such management, less transfer fees, interest on reserves, interest on funds
awaiting distribution, and certain non-recurring income) were $213,440 in 1999,
$413,691 in 1998 and $155,024 in 1997.
The decrease in Partnership management expenses from 1998 to 1999 was
due to the absence of costs associated with the proxy completed in 1998. The
increase in Partnership management expenses from 1997 to 1998, again, was due to
costs associated with the 1998 proxy.
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Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 92.8% (3,090/3,330 sites) as of
December 1999, versus 93.4% in December 1998, and 92.5% in December 1997. The
average monthly rent was approximately $357 per home site in December 1999,
versus $348 in December 1998 and $333 in December 1997, an increase each year of
2.6% and 4.5%, respectively.
TOTAL
SITES OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
Ardmor Village 339 335 329 326 98.8% 97.1% 96.2% $333 $319 $306
Camelot Manor 335 323 321 323 96.4 95.8 96.4 331 320 308
Country Roads 312 283 287 288 90.7 92.0 92.3 253 240 225
Dutch Hills 278 269 261 260 96.8 93.9 93.5 331 321 309
El Adobe 371 344 363 366 93.7 97.8 98.7 404 384 374
Paradise Village 611 504 504 480 82.1 82.5 78.6 291 297 282
Stonegate Manor 308 302 295 293 98.1 95.8 95.1 336 326 312
Sunshine Village 356 327 336 326 91.9 94.4 91.6 434 418 399
West Valley 420 403 415 418 95.7 98.8 99.5 467 449 429
--- --- --- --- ---- ---- ---- --- --- ---
Overall 3,330 3,090 3,111 3,080 92.8% 93.4% 92.5% $357 $348 $333
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The table below summarizes gross revenues and net operating income for
the Partnership and Properties during 1999, 1998 and 1997.
GROSS REVENUE NET OPERATING INCOME
AND NET INCOME
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
Ardmor Village $1,267,773 $1,241,339 $1,129,735 $ 614,910 $ 664,873 $ 523,625
Camelot Manor 1,172,434 1,131,841 1,123,127 508,750 519,695 614,242
Country Roads 864,405 836,800 763,727 284,374 43,923 109,568
Dutch Hills 989,591 958,776 918,958 487,671 500,881 481,335
El Adobe 1,748,554 1,731,799 1,646,510 1,128,435 1,137,530 1,051,448
Paradise Village 1,570,490 1,448,095 1,460,543 248,023 297,217 326,009
Stonegate Manor 1,146,597 1,110,040 1,035,924 568,042 544,209 578,851
Sunshine Village 1,595,829 1,547,644 1,513,820 913,078 950,739 901,389
West Valley 2,288,155 2,326,778 2,240,418 1,458,086 1,548,420 1,510,414
----------- ---------- ---------- ---------- ---------- ----------
12,643,828 12,333,112 11,832,762 6,211,369 6,207,487 6,096,881
Partnership
Mgmt. 74,182 86,524 89,764 (213,440) (413,691) (155,024)
Extinguisment of Debt - 250,998 -
Other nonrecurring
Expenses (578,247) (589,597) (262,257)
Debt Service (1,935,712) (2,425,579) (2,661,565)
Depreciation and
Amortization (1,843,213) (1,847,177) (1,850,779)
----------- ---------- ---------- ---------- ---------- ----------
TOTAL: $12,718,010 $12,419,636 $11,922,526 $1,640,757 $1,182,441 $1,167,256
=========== =========== =========== ========== ========== ==========
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
Gross revenues increased $298,374, or 2.4%, to $12,718,010 in 1999,
compared to $12,419,636 in 1998. The increase is primarily the result of an
increase in rental income due to higher average monthly rents. (See table on
previous page).
As described in the Statements of Income, the Partnership's operating
expenses decreased $410,940, or 3.6%, to $11,077,253 in 1999, compared to
$11,488,193 in 1998. The decrease in due primarily to lower interest expense
associated with the Partnership's mortgage debt and lower administrative
expenses due to the absence of costs associated with the 1998 proxy.
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As a result of the foregoing factors, net income increased from
$1,182,441 in 1998 to $1,640,757 in 1999.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Gross revenues increased $497,110, or 4.2%, to $12,419,636 in 1998,
compared to $11,922,526 in 1997. The increase was primarily the result of higher
average occupancy and an increase in rental income due to higher average monthly
rents. (See table on previous page.)
As described in the Statements of Income, the Partnership's operating
expenses increased $707,033, or 16.3%, to $5,054,906 in 1998, compared to
$4,347,873 in 1997. The increase is due primarily to increases in marketing
expenses, repairs and maintenance to the Properties, and wages. The
Partnership's administrative expenses also increased $234,784, or 23.5%, to
$1,233,734 in 1998, compared to $998,950 in 1997. The increase in administrative
expenses is due to costs associated with the proxy completed in 1998.
Also reported in the Statements of Income is a gain of $250,998 on the
extinguishment of debt, which includes the gain on the liquidation of the Class
R Certificate, less loan prepayment penalties and the write-off of unamortized
financing costs related to the original 1993 financing.
As a result of the foregoing factors, net income increased slightly from
$1,167,256 in 1997 to $1,182,441 in 1998.
Year 2000 Costs
The Partnership's significant business relations with external parties,
including its banking and vendor relations, along with its information systems
were fully "Year 2000" compliant and therefore, there were no adverse effects
related to "Year 2000".
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Partnership is exposed to interest rate risk primarily through its
borrowing activities. There is inherent roll over risk for borrowings as they
mature and are renewed at current market rates. The extent of this risk is not
quantifiable or predictable because of the variability of future interest rates
and the Partnership's future financing requirements.
Note Payable: At December 31, 1999 the Partnership had a note payable
outstanding in the amount of $29,572,116. Interest on this note is at a fixed
rate of 6.37% through March 2009.
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The Partnership does not enter into financial instruments transactions
for trading or other speculative purposes or to manage its interest rate
exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal year ended
December 31, 1999, 1998 and 1997, and supplementary data are filed with this
Report under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in the Partnership's independent public
accountants nor have there been any disagreements during the past two fiscal
years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any officers or directors.
The General Partner, Genesis Associates Limited Partnership, is a Michigan
limited partnership which has two general partners, Uniprop, Inc., the managing
General Partner, and Paul M. Zlotoff.
Information concerning Mr. Zlotoff's age and principal occupations, as
well as for other officers of Uniprop, Inc., during the last five
years or more is as follows:
Paul M. Zlotoff, 50, is and has been an individual general partner of
Genesis Associates since its inception in November 1986. Mr. Zlotoff became the
Chairman of Uniprop, Inc. in May 1986 and was its President from 1979 through
1997. He is also an individual general partner of P.I. Associates Limited
Partnership, the general partner of Uniprop Manufactured Housing Communities
Income Fund, a public limited partnership which owns and operates four
manufactured housing communities. Mr. Zlotoff currently, and in the past, has
acted as the general partner for various other limited partnerships owning
manufactured housing communities and some commercial properties.
Charles Soberman, 50, joined Uniprop, Inc. in June 1999 as its Chief
Executive Officer and Executive Vice President. Mr. Soberman's responsibilities
include supervision of property operations and corporate oversight. Mr. Soberman
has a law degree from The Harvard Law School and a M.B.A. from Michigan State
University. Mr. Soberman also has a B.A. from the University of Michigan. From
1979 through 1996, he was president of Mercury Paint Company, a manufacturer and
retailer of coatings and allied products. From 1996 to 1999 Mr. Soberman was a
Senior Lecturer at Wayne State University School of Business Administration.
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Gloria Koster, 46, became Chief Financial Officer of Uniprop, Inc. on
January 1, 1998. Previously, Ms. Koster had been Vice President - Finance of
Uniprop, Inc. since July 1989. She is responsible for accounting, financial
controls, data processing, cash management, financial reporting, budgeting,
financing, and tax matters. Prior to joining Uniprop, Inc., Ms. Koster had been
with Michigan National Bank for 13 years, most recently as a first
vice-president. Ms. Koster has a M.B.A. from the University of Detroit.
Roger Zlotoff, 38, became Chief Investment Officer of Uniprop, Inc. on
October 18, 1999. Mr. Zlotoff is primarily responsible for raising equity
capital, managing partnership investments, evaluating acquisitions of existing
properties and leading the development process for new properties. From 1997 to
1999, Mr. Zlotoff served as Director of Business Development for Vistana, Inc.
in Orlando, FL. Previously, Mr. Zlotoff was Managing Director for Sterling
Finance International from 1994 to 1997 and was a corporate banker with First
Union National Bank from 1988 to 1994. Mr. Zlotoff received his B.A. from the
University of Central Florida as a philosophy major, and received his Masters
Degree in International Business from the University of South Carolina.
Paul M. Zlotoff and Roger Zlotoff are brothers.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and therefore, no officers
received a salary or remuneration exceeding $100,000 during the last fiscal
year. The General Partner of the Partnership and an affiliate, Uniprop, Inc.,
received certain compensation and fees during the fiscal year in the amounts
described in Item 13. Depending upon the results of operations and other
factors, the Partnership anticipates that it will provide similar compensation
to the General Partner and Uniprop, Inc. during the next fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership is a limited partnership duly formed pursuant to the
Uniform Limited Partnership Act, as amended, of the State of Michigan. The
General Partner, Genesis Associates Limited Partnership, is vested with full
authority as to the general management and supervision of business and the other
affairs of the Partnership, subject to certain constraints in the partnership
agreement and consulting agreement. Unit holders and/or Limited Partners have no
right to participate in the management of the Partnership and have limited
voting privileges only on certain matters of fundamental significance. To the
knowledge of the Partnership, no person owns of record or beneficially, more
than five percent of the Partnership's Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes all of the types of compensation,
fees or other distributions paid by the Partnership or others to the General
Partner or its affiliates from
-15-
16
the operations of the Partnership during the last fiscal year, as well as
certain of such items which may be payable during the next fiscal year. Certain
of the following arrangements for compensation and fees were not determined by
arm's length negotiations between the General Partner, its affiliates and the
Partnership.
Paul M. Zlotoff has an interest in the original sellers of Sunshine
Village and Ardmor Village and is entitled to share in a contingent purchase
price with respect to each Property, when and if the Properties are sold and the
sellers become entitled thereto. The maximum amounts which could be payable to
the sellers are as follows: Sunshine Village, $1,108,260 and Ardmor Village,
$946,236. The cash purchase price and contingent purchase price for each
Property were determined by reference to the average of two independent real
estate appraisals which were obtained by the General Partner. Such appraisals
are only estimates of value and are not necessarily indicative of the actual
real estate value. Each seller will become entitled to any unpaid contingent
purchase price upon the sale, financing or other disposition of each such
Property, but, only after the receipt by each Unit Holder and Limited Partner of
aggregate distributions equal to the sum of (i) his 10% cumulative preferred
return plus (ii) 125% of his capital contribution. The actual amounts to be
received, if any, will depend upon the results of the Partnership's operations
and the amounts received upon the sale, financing or other disposition of the
Properties and are not determinable at this time. The Partnership does not
anticipate any such amount will become payable during the next fiscal year.
The Partnership will pay an incentive management interest to the
General Partner for managing the Partnership's affairs, including: determining
distributions, negotiating agreements, selling or financing properties,
preparing records and reports, and performing other ongoing Partnership
responsibilities. This incentive management interest is 15% of distributable
cash from operations in any quarter. However, in each quarter, the General
Partner's right to receive any net cash from operations is subordinated to the
extent necessary to first provide each Unit Holder and Limited Partner his 10%
cumulative preferred return. During the last fiscal year, the General Partner
received no distributions on account of its incentive management interest from
operations because distributions were approximately $3,240,000 less than the 10%
cumulative preferred return due Unit Holders. Any such amounts of incentive
management interest unpaid in a taxable year will be accumulated and paid from
distributable cash from capital transactions, but only after each Unit Holder
and Limited Partner has first received his 10% cumulative preferred return and
125% of his capital contribution. For 1999, approximately $500,000 was
accumulated for the General Partner, and the General Partner's aggregate
accumulated incentive management interest as of December 1999 was approximately
$7,100,000. The actual incentive management interest from operations to be
accumulated or paid during the next fiscal year will depend upon the results of
the Partnership's operations and is not determinable at this time. The
Partnership does not anticipate any such amount will be distributed to the
General Partner during the next fiscal year and will again be accumulated with
payment deferred. No distributions of incentive management interest could be
made to the General Partner until the 10% cumulative preferred return of
approximately
-16-
17
$18,864,000, as of December 31, 1999, is first distributed to the Unit Holders.
In February of 1994, as part of the 1993 mortgage financing, $23,119,767 was
distributed to the Unit Holders, $13,572,978 of which eliminated the Unit
Holders' preferred return deficit through December 31, 1993.
The Partnership must also pay an incentive management interest from
capital transactions to the General Partner for its services rendered to the
Partnership. The General Partner will be entitled to receive its share of
distributable cash from capital transactions after (i) each Unit Holder and
Limited Partner has received aggregate distributions in an amount equal to the
sum of (a) his 10% cumulative preferred return plus (b) 125% of his capital
contribution, (ii) any contingent purchase prices have been paid, and (iii) any
property disposition fees to Uniprop, Inc. have been paid. The General Partner's
share of distributable cash from capital transactions so payable will be (i)
100% of such distributable cash from capital distributions until the General
Partner's share of the aggregate capital distributions made under section
11c(iii) and 11c(v) of the partnership agreement equal 25% and (ii) thereafter,
25% of such distributable cash from capital transactions. No incentive
management interest from capital transactions was paid to the General Partner
for the fiscal year ended December 31, 1999. The Partnership does not anticipate
that any such amounts will be paid or become payable to the General Partner
during the next fiscal year.
Uniprop, Inc. received and will receive property management fees for
each Property managed by it. Uniprop, Inc. is primarily responsible for the
day-to-day management of the Properties and for the payment of the costs of
operating each Property out of the rental income collected. The property
management fees are equal to the lesser of 5% of the annual gross receipts from
the Properties managed by Uniprop, Inc., or the amount which would be payable to
an unaffiliated third party for comparable services. During the last fiscal
year, Uniprop, Inc. received the following property management fees totaling
$631,175: Ardmor Village, $63,248; Camelot Manor, $58,604; Country Roads,
$43,724; Dutch Hills, $49,454; El Adobe, $87,309; Paradise Village, $77,699;
Stonegate Manor, $57,232; Sunshine Village, $79,509; and West Valley, $114,396.
The actual amounts to be received during the next fiscal year will depend upon
the results of the Partnership's operations and are not determinable at this
time.
Certain employees of affiliates of the General Partner were paid an
aggregate of $208,593 during 1999 to perform local property management, data
processing and investor relation services for the Partnership. It is anticipated
comparable amounts will be paid in the next fiscal year.
-17-
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The following financial statements and related documents are
filed with this report:
(i) Report of Independent Certified Public Accountants
(ii) Balance Sheets as of December 31, 1999 and 1998
(iii) Statements of Income for the fiscal years ended
December 31, 1999, 1998 and 1997
(iv) Statements of Partners' Equity for the fiscal years ended
December 31, 1999, 1998 and 1997
(v) Statements of Cash Flows for the fiscal years ended
December 31, 1999, 1998 and 1997
(2) The following financial statement schedule is file with this
report:
Schedule III - Real Estate and Accumulated Depreciation
for the fiscal years ended December 31,
1999, 1998 and 1997
(3) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed November 12, 1986, as amended on
December 22, 1986 and January 16, 1987:
3(a) Certificate of Limited Partnership for the Partnership
3(b) Uniprop Income Fund II Agreement of Limited Partnership
4(a) First Amendment to Uniprop Income Fund II Agreement of Limited
Partnership (April 1, 1987)
10(a) Form of Management Agreement between the Partnership and Uniprop,
Inc.
-18-
19
10(b) Form of Consulting Agreement among the Partnership, the
General Partner and Consultant
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth
quarter of 1999.
The following exhibits are incorporated by reference to the Form 10-K
for the fiscal year ended December 31, 1997:
4(b) Form of Beneficial Assignment Certificate (BAC) for the
Partnership (Originally submitted with Form 10-K for the
fiscal year ended December 31, 1987.)
10(c) Contingent Purchase Price Agreement with Sunrise Broward
Associates, Ltd. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
10(d) Contingent Purchase Price Agreement with Ardmor Associates
Limited Partnership. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
10(e) Incentive Acquisition Fee Agreement between the Partnership
and Uniprop, Inc.(As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
The following exhibit is incorporated by reference to the Form 8-K that
was filed on September 8, 1998:
2 Mortgage notes, made as of August 20, 1998, between Uniprop
Manufactured Housing Communities Income Fund II and GMACCM.
The following exhibits are attached to this Report:
10(f) First Amended and Restated Consulting Agreement among the
Partnership, the General Partner and the Consultant.
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the
Partnership's nine manufactured housing communities, as of
March 1, 2000
-19-
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund II, a
Michigan Limited Partnership, has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited Partnership
BY: Genesis Associates Limited Partnership,
General Partner
BY: Uniprop, Inc., Managing General Partner
By: /s/ Paul M. Zlotoff
-------------------------
Paul M. Zlotoff, Chairman
Dated: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Gloria A. Koster By: /s/ Paul M. Zlotoff
-------------------------------- --------------------------------
Gloria A. Koster Paul M. Zlotoff, Chairman and
Director of Uniprop, Inc.
(Chief Financial Officer of (Principal Executive Officer)
Uniprop, Inc.)
Dated: March 30, 2000 Dated: March 30, 2000
By: /s/ Susann Szepytowski
--------------------------------
Susann Szepytowski
(Controller of Uniprop, Inc.)
Dated: March 30, 2000
-20-
21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------ ----------- ---------------- ----
2 Mortgage Notes, made on August 20, Incorporated by reference to the Form
1998 between Uniprop Income Fund II 8-K filed on September 8, 1998.
and GMACCM
3(a)
Incorporated by reference to the S-11
Certificate of Limited Partnership Registration Statement of the
for the Partnership Partnership filed November 12, 1986, as
amended on December 22, 1986 and
January 16, 1987 (the "Registration
Statement").
3(b) Uniprop Income Fund II Agreement of Incorporated by reference to the
Limited Partnership Registration Statement.
4(a) First Amendment to Uniprop Income Incorporated by reference to the
Fund II Agreement of Limited Registration Statement.
Partnership (April 1, 1987)
4(b) Form of Beneficial Assignment Incorporated by reference to Form 10-K
Certificate (BAC) for the for fiscal year ended December 31, 1997.
Partnership (originally filed with
Form 10-K for the fiscal year ended
December 31, 1987)
10(a) Form of Management Agreement Incorporated by reference to the
between the Partnership and Registration Statement.
Uniprop, Inc.
10(b) Form of Consulting Agreement among Incorporated by reference to the
the Partnership, the General Registration Statement.
Partner and Consultant
-21-
22
10(c) Contingent Purchase Price Agreement Incorporated by reference to Form 10-K
with Sunrise Broward Associates, for fiscal year ended December 31, 1997.
Ltd. (originally filed with Form
10-K for the fiscal year ended
December 31, 1987)
10(d) Contingent Purchase Price Agreement Incorporated by reference to Form 10-K
with Ardmor Associates Limited for fiscal year ended December 31, 1997.
Partnership (originally filed with
Form 10-K for the fiscal year ended
December 31, 1987)
10(e) Incentive Acquisition Fee Agreement Incorporated by reference to Form 10-K
between the Partnership and for fiscal year ended December 31, 1997.
Uniprop, Inc. (originally filed
with Form 10-K for the fiscal year
ended December 31, 1987)
10(f) First Amended and Restated Filed herwith.
Consulting Agreement among the
Partnership, the General Partner
and the Consultant.
27 Financial Data Schedule Filed herewith.
28 Letter summary of the estimated Filed herewith.
fair market values of the
Partnership's nine manufactured
housing communities, as of March 1,
2000.
-22-
23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund II (a Michigan limited partnership), as of December 31,
1999 and 1998, and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1999. We have
also audited the schedule listed under Item 14 of Form 10-K. These financial
statements and the schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
the schedule. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and the schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund II at December 31, 1999 and 1998 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule listed under Item 14 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
February 4, 2000
24
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 1999 1998
===========================================================================================
ASSETS
PROPERTY AND EQUIPMENT (Note 2)
Buildings and improvements $49,776,786 $49,421,935
Land 11,644,103 11,644,103
Manufactured homes and improvements 1,875,567 2,100,666
Furniture and equipment 453,437 400,872
- -------------------------------------------------------------------------------------------
63,749,893 63,567,576
Less accumulated depreciation 20,587,823 18,819,413
- -------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 43,162,070 44,748,163
Cash 2,821,681 2,482,314
Unamortized financing costs (Note 2) 597,528 622,800
Other assets (Note 3) 944,378 981,346
- -------------------------------------------------------------------------------------------
$47,525,657 $48,834,623
===========================================================================================
LIABILITIES AND PARTNERS' EQUITY
Notes payable (Note 2) $29,572,116 $29,915,975
Accounts payable 235,098 322,340
Other liabilities (Note 4) 769,853 876,996
- -------------------------------------------------------------------------------------------
TOTAL LIABILITIES 30,577,067 31,115,311
- -------------------------------------------------------------------------------------------
PARTNERS' EQUITY
Unit holders 16,690,170 17,477,300
General partner 258,420 242,012
- -------------------------------------------------------------------------------------------
TOTAL PARTNERS' EQUITY 16,948,590 17,719,312
- -------------------------------------------------------------------------------------------
$47,525,657 $48,834,623
===========================================================================================
See accompanying notes to financial statements.
25
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
Year Ended December 31, 1999 1998 1997
=======================================================================================================================
INCOME
Rental $12,091,007 $11,737,284 $11,340,654
Interest 76,964 183,803 203,570
Other 550,039 498,549 378,302
- ------------------------------------------------------------------------------------------------------------------------
12,718,010 12,419,636 11,922,526
- ------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 5,170,508 5,054,906 4,347,873
Depreciation and amortization 1,843,213 1,847,177 1,850,779
Administrative (Note 5) 1,134,947 1,233,734 998,950
Property taxes 992,873 926,797 896,103
Interest 1,935,712 2,425,579 2,661,565
- -----------------------------------------------------------------------------------------------------------------------
11,077,253 11,488,193 10,755,270
- -----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 1,640,757 931,443 1,167,256
EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT
OF DEBT (Note 2) -- 250,998 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,640,757 $ 1,182,441 $ 1,167,256
=======================================================================================================================
INCOME PER LIMITED PARTNERSHIP UNIT (Note 7)
Income before extraordinary item $ .50 $ .28 $ .35
Extraordinary item -- .08 --
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT (Note 7) .73 1.43 .64
=======================================================================================================================
NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
=======================================================================================================================
NET INCOME ALLOCABLE TO GENERAL PARTNER (Note 7)
Income before extraordinary item $ 16,408 $ 9,314 $ 11,673
Extraordinary item -- 2,510 --
- -----------------------------------------------------------------------------------------------------------------------
16,408 11,824 11,673
=======================================================================================================================
DISTRIBUTIONS ALLOCABLE TO GENERAL PARTNER $ -- $ -- $ --
=======================================================================================================================
See accompanying notes to financial statements.
26
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
General
Partner Unit Holders TOTAL
================================================================================================================
BALANCE, January 1, 1997 $ 218,515 $ 21,989,103 $ 22,207,618
Distributions to unit holders -- (2,114,171) (2,114,171)
Net income for the year 11,673 1,155,583 1,167,256
- -----------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 230,188 21,030,515 21,260,703
Distributions to unit holders -- (4,723,832) (4,723,832)
Net income for the year 11,824 1,170,617 1,182,441
- -----------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1998 242,012 17,477,300 17,719,312
Distributions to unit holders -- (2,411,479) (2,411,479)
Net income for the year 16,408 1,624,349 1,640,757
- -----------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1999 $ 258,420 $ 16,690,170 $ 16,948,590
=================================================================================================================
See accompanying notes to financial statements.
27
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
Year Ended December 31, 1999 1998 1997
=================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,640,757 $ 1,182,441 $ 1,167,256
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,817,941 1,817,628 1,792,127
Amortization 25,272 29,549 58,652
Gain on sale of property and equipment (70,903) (188,583) (18,850)
Extraordinary item - gain on extinguishment of debt -- (250,998) --
Decrease (increase) in other assets 36,968 (365,610) (178,077)
(Decrease) increase in accounts payable (87,242) 196,277 (29,826)
(Decrease) increase in other liabilities (107,143) (343,476) 26,085
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,255,650 2,077,228 2,817,367
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (994,655) (1,422,431) (982,115)
Proceeds from sale of property and equipment 833,710 1,183,069 822,721
Proceeds from redemption of investment -- 2,418,891 --
Proceeds from redemption of mortgage backed securities -- 1,502,250 --
Proceeds from sale of marketable securities -- 875,859 450,000
Purchase of marketable securities -- -- (507,677)
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (160,945) 4,557,638 (217,071)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to unit holders (2,411,479) (4,723,832) (2,114,171)
Repayments of notes payable (343,859) (30,129,025) --
Payment for financing costs -- (930,247) --
Proceeds from note payable -- 30,000,000 --
- -----------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (2,755,338) (5,783,104) (2,114,171)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 339,367 851,762 486,125
CASH, at beginning of year 2,482,314 1,630,552 1,144,427
- -----------------------------------------------------------------------------------------------------------------
CASH, at end of year $ 2,821,681 $ 2,482,314 $ 1,630,552
=================================================================================================================
See accompanying notes to financial statements.
28
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING ORGANIZATION AND BUSINESS
POLICIES
Uniprop Manufactured Housing Communities Income
Fund II, a Michigan Limited Partnership (the
"Partnership") acquired, maintains, operates and
will ultimately dispose of income producing
residential real properties consisting of nine
manufactured housing communities (the "properties")
located in Florida, Michigan, Nevada and Minnesota.
The Partnership was organized and formed under the
laws of the State of Michigan on November 7, 1986.
In accordance with its Prospectus dated December
1986, the Partnership sold 3,303,387 units of
beneficial assignment of limited partnership
interest ("Units") for $66,067,740. The Partnership
purchased the properties for an aggregate purchase
price of approximately $56,000,000. Three of the
properties costing approximately $16,008,000 were
previously owned by entities which were affiliates
of the general partner.
The general partner is Genesis Associates Limited
Partnership. Uniprop Beneficial Corporation was the
initial limited partner who assigned to those
persons purchasing units a beneficial limited
partnership interest when the minimum number of
units were sold.
USE OF ESTIMATES
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
(1) assets and liabilities and the disclosure of
contingent assets and liabilities as of the date of
the financial statements, and (2) revenues and
expenses during the reporting period. Actual
results could differ from these estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and notes payable
approximate their fair values.
29
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost.
Depreciation is provided using the straight-line
method over the following estimated useful lives:
Buildings and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
Accumulated depreciation for tax purposes was
$18,414,221 and $16,805,437 as of December 31, 1999
and 1998, respectively.
Long-lived assets such as property and equipment
are evaluated for impairment when events or changes
in circumstances indicate that the carrying amount
of the assets may not be recoverable through the
estimated undiscounted future cash flows from the
use of these assets. When any such impairment
exists, the related assets will be written down to
fair value. No impairment loss recognition has been
required through December 31, 1999.
MORTGAGE-BACKED SECURITIES
In connection with the Partnership's 1993 financing
transaction (see Note 2), the Partnership was
required to use approximately 5% of its mortgage
proceeds to purchase a subordinated portion of the
mortgage-backed securities ("Class D
Certificates"). These Class D Certificates were not
rated, carried a fixed interest rate of 7.5% per
annum and were subordinated to the Class A, B and C
mortgage certificates issued as part of the
aforementioned financing transaction. The
Partnership was issued a Class D Certificate in
1993 with a face amount of $1,502,250, which
represented cost.
In 1998, as part of the refinancing of its note
payable (see Note 2), the Partnership redeemed the
Class D Certificate at cost.
30
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FINANCING COSTS
Costs to obtain financing have been capitalized and
are amortized using the straight-line method over
the 30-year term of the related mortgage note
payable.
INVESTMENT
In 1998, as part of the refinancing of its note
payable (see Note 2), the Partnership redeemed the
Class R Certificates. As a result, the Partnership
recognized a gain of $1,419,896 on the redemption
of the certificates, which has been included in the
calculation of the extraordinary gain on the
extinguishment of debt (see Note 2).
INCOME TAXES
Federal income tax regulations provide that any
taxes on income of a partnership are payable by the
partners as individuals. Therefore, no provision
for such taxes has been made at the partnership
level.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This
statement, which was subsequently amended by SFAS
No. 137, will become effective in fiscal 2001, and
is not expected to have an impact on the
Partnership's financial statements.
31
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
2. NOTES PAYABLE In 1998, the Partnership refinanced its outstanding
long-term debt by entering into a new note
agreement totaling $30,000,000. These borrowings
are secured by mortgages on the Partnership's
properties. The note is payable in monthly
installments of $188,878, including interest at
6.37%, through March, 2009. Thereafter, the monthly
installment and interest rate will be adjusted
based on the provisions of the agreement through
the note maturity date of September 2028. The
outstanding balance on the note payable at December
31, 1999 and 1998 was $29,572,116 and $29,915,975,
respectively.
In connection with the refinancing, the Partnership
recorded a gain in 1998 on the extinguishment of
debt of $250,998, which includes the gain on the
redemption of the Class R Certificates
($1,419,896), less loan prepayment penalties
($300,450) and the write-off of unamortized
financing costs related to the original 1993
financing ($868,448).
Future maturities on the note payable for the next
five years are as follows: 2000 - $362,000; 2001 -
$392,000; 2002 - $418,000; 2003 - $445,000; and
2004 - $470,000.
3. OTHER ASSETS At December 31, 1999 and 1998, "Other Assets"
included cash of approximately $319,000 and
$425,000 in an escrow account for property taxes,
insurance, and capital improvements, as required by
the Partnership's note payable agreement. The
account is restricted from operating use.
At December 31, 1999 and 1998, "Other assets" also
included cash of approximately $216,000, in a
security deposit escrow account for three of the
Partnership's properties, which is required by the
laws of the state in which they are located and is
restricted from operating use.
32
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
4. OTHER LIABILITIES Other liabilities consisted of:
December 31, 1999 1998
===========================================================
Tenants' security deposits $ 548,434 $ 509,707
Accrued interest 125,049 124,050
Accrued property taxes - 106,481
Other 96,370 136,758
-----------------------------------------------------------
TOTAL $ 769,853 $ 876,996
===========================================================
5. RELATED PARTY MANAGEMENT AGREEMENT
TRANSACTIONS
The Partnership has an agreement with an affiliate
of the general partner to manage the properties
owned by the Partnership. The management agreement
is automatically renewable annually, but may be
terminated by either party upon sixty days written
notice. The property management fee is the lesser
of 5% of annual gross receipts from the properties
managed, or the amount which would be payable to an
unaffiliated third party for comparable services.
FEES AND EXPENSES
During the years ended December 31, 1999, 1998 and
1997, the affiliate earned property management fees
of $631,175, $611,741 and $585,394, respectively,
as permitted in the Agreement of Limited
Partnership. These fees are included with
"Administrative" expenses in the respective
statements of income. The Partnership owed $13,231
to the affiliate at December 31, 1999, and owed
$335 to the affiliate at December 31, 1998.
Certain employees of the Partnership are also
employees of affiliates of the general partner.
These employees were paid by the Partnership
$208,593, $222,949 and $177,046 in 1999, 1998 and
1997, respectively, to perform local property
management and investor relations services for the
Partnership.
33
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
CONTINGENT PURCHASE PRICE
A general partner of Genesis Associates Limited
Partnership has an interest in the sellers of two
of the properties acquired by the Partnership and
is entitled to share in a contingent purchase price
that will not exceed $2,054,000. Additional amounts
to be paid, if any, will depend upon the results of
the Partnership's operations and the amounts
received upon the sale, financing or other
disposition of the properties, and are not
determinable at this time. The Partnership does not
anticipate any such amount will become payable
during the next fiscal year.
FINANCING COSTS
In 1998, as part of the financing transaction
described in Note 2, the Partnership paid
approximately $300,000 in financing costs to an
affiliate of the general partner.
6. RECONCILIATION OF
FINANCIAL STATEMENT
INCOME AND TAXABLE
INCOME
Year Ended December 31, 1999 1998 1997
=============================================================================
Income per the financial
statements $ 1,640,757 $ 1,182,441 $ 1,167,256
Adjustments to depreciation
for difference in methods 158,545 168,071 175,340
Adjustments for prepaid
rent, meals and
entertainment (7,920) 3,448 (3,100)
Adjustment for LLC income - (1,106,973) 576,904
-----------------------------------------------------------------------------
INCOME PER THE PARTNER-
SHIP'S TAX RETURN $ 1,791,382 $ 246,987 $ 1,916,400
=============================================================================
34
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
7. PARTNERS' CAPITAL Subject to the orders of priority under certain
specified conditions more fully described in the
Agreement of Limited Partnership, distributions of
partnership funds and allocations of net income
from operations are principally determined as
follows:
DISTRIBUTIONS
Distributable cash from operations in the Agreement
(generally defined as net income plus depreciation
and amortization) is to be distributed to unit
holders until they have received a 10% cumulative
preferred return. After the unit holders have
received their 10% cumulative preferred return, all
remaining cash from operations is distributed to
the general partner in the form of an incentive
management interest until the total amount received
by the general partner is equal to 15% of the
aggregate amount of cash distributed from
operations in a given year. Amounts payable to but
not paid to the general partner will be accumulated
and paid from future capital transactions after the
unit holders have first received their 10%
preferred return and 125% of their capital
contributions. Thereafter, 85% of distributable
cash from operations is to be paid to the unit
holders and 15% to the general partner.
Annual distributable cash from operations was less
than the amount required for the annual 10%
preferred return to the unit holders by
approximately $3,240,000 and $928,000 in 1999 and
1998, respectively. No distributions can be made to
the general partner until the cumulative preferred
return deficit of approximately $18,864,000 has
been distributed to the unit holders.
At December 31, 1999, the general partner's
cumulative incentive management interest to be
distributed was approximately $7.1 million. The
actual amount to be accumulated or paid in the
future depends on the results of the Partnership's
operations and is not currently determinable;
however, no such distribution to the general
partner is anticipated during fiscal 2000.
35
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
ALLOCATION OF NET INCOME
Net income is principally allocated 99% to the unit
holders and 1% to the general partner until the
cumulative amount of net income allocated to the
unit holders equals the aggregate cumulative amount
of cash distributable to the unit holders. After
sufficient net income has been allocated to the
unit holders to equal the amount of cash
distributable to them, all the net income is to be
allocated to the general partner until it equals
the amount of cash distributed to it.
8. CONTINGENCY The Partnership is currently undergoing a sales and
use tax audit which is being conducted by the
Florida Department of Revenue. No provision for any
expense related to this ongoing audit has been
recorded in the accompanying financial statements
since management believes the eventual liability
(if any) that may result will not be a material
amount.
9. SUPPLEMENTAL CASH FLOW Interest paid during 1999, 1998 and 1997 was
INFORMATION approximately $1,935,000, $2,531,000 and
$2,654,000, respectively.
36
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
Column A Column B Column C Column D Column E
- ----------------------- ----------- -------------------------- -------------------------- -----------------------------------
Costs
Capitalized
Subsequent to Gross Amount at Which Carried
Initial Cost Acquisition at Close of Period
-------------------------- -------------------------- -----------------------------------
Buildings and Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
Ardmor Village
(Lakeville, MN) ...... $2,868,425 $1,063,253 $ 4,253,011 $ -- $ 932,695 $ 1,063,253 $ 5,185,706 $ 6,248,959
Sunshine Village
(Davie, FL) .......... 4,229,436 1,215,862 4,875,878 -- 168,960 1,215,862 5,044,838 6,260,700
Camelot Manor
(Grand Rapids, MI) ... 3,415,495 918,949 3,681,051 -- 619,687 918,949 4,300,738 5,219,687
Country Roads
(Jacksonville, FL) ... -- 636,550 2,546,200 38,106 559,300 674,656 3,105,500 3,780,156
Paradise Village
(Tampa, FL) .......... -- 1,760,000 7,040,000 279,053 1,139,954 2,039,053 8,179,954 10,219,007
Dutch Hills
(Haslett, MI) ........ 2,543,140 839,693 3,358,771 23,104 458,816 862,797 3,817,587 4,680,384
Stonegate Manor
(Lansing, MI) ........ 2,971,924 930,307 3,721,229 40,552 337,604 970,859 4,058,833 5,029,692
El Adobe
(Las Vegas, NV) ...... 5,450,993 1,480,000 5,920,000 39,964 366,492 1,519,964 6,286,492 7,806,456
West Valley
(Las Vegas NV) ....... 8,092,703 2,289,700 9,158,800 89,010 638,338 2,378,710 9,797,138 12,175,848
---------- ----------- ----------- --------- ----------- ------------ ----------- -----------
$29,572,116 $11,134,314 $44,554,940 $509,789 $5,221,846 $ 11,644,103 $49,776,786 $61,420,889
=========== =========== =========== ======== ========== ============ =========== ===========
Column A Column F Column G Column H
- ------------------------ ----------- -------- --------------
Life on Which
Depreciation in
Latest Income
Accumulated Date Statement is
Description Depreciation Acquired Computed
- ------------------------------------------------------------------
Ardmor Village
(Lakeville, MN) ...... $ 2,010,007 1987 30 years
Sunshine Village
(Davie, FL) .......... 2,144,133 1987 30 years
Camelot Manor
(Grand Rapids, MI) ... 1,734,778 1987 30 years
Country Roads
(Jacksonville, FL) ... 1,249,232 1987 30 years
Paradise Village
(Tampa, FL) .......... 3,194,330 1987 30 years
Dutch Hills
(Haslett, MI) ........ 1,505,621 1987 30 years
Stonegate Manor
(Lansing, MI) ........ 1,624,045 1987 30 years
El Adobe
(Las Vegas, NV) ...... 2,499,333 1988 30 years
West Valley
(Las Vegas NV) ....... 3,851,988 1988 30 years
----------- ---- --------
$19,813,467
=========== ==== ========
37
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTE TO SCHEDULE III
DECEMBER 31, 1999
1. RECONCILIATION OF LAND The following table reconciles the
land from January 1, 1997 to
December 31, 1999:
1999 1998 1997
------------------------------ ----------------- ---------------- ----------------
BALANCE, at January 1 $ 11,644,103 $ 11,644,103 $ 11,644,603
Additions to land, net - - (500)
------------------------------ ----------------- ---------------- ----------------
BALANCE, at December 31 $ 11,644,103 $ 11,644,103 $ 11,644,103
------------------------------ ----------------- ---------------- ----------------
2. RECONCILIATION OF BUILDINGS The following table reconciles the
AND IMPROVEMENTS buildings and improvements from
January 1, 1997 to December 31,
1999:
1999 1998 1997
------------------------------ ----------------- ---------------- ----------------
BALANCE, at January 1 $ 49,421,935 $ 49,099,290 $ 48,558,632
Additions to buildings and
improvements 354,851 322,645 540,658
------------------------------ ----------------- ---------------- ----------------
BALANCE, at December 31 $ 49,776,786 $ 49,421,935 $ 49,099,290
------------------------------ ----------------- ---------------- ----------------
3. RECONCILIATION OF The following table reconciles the
ACCUMULATED DEPRECIATION accumulated depreciation from
January 1, 1997 to December 31,
1999:
1999 1998 1997
------------------------------ ----------------- ---------------- ----------------
BALANCE, at January 1 $ 18,101,874 $ 16,399,511 $ 14,735,004
Current year
depreciation expense 1,711,593 1,702,363 1,664,507
------------------------------ ----------------- ---------------- ----------------
BALANCE, at December 31 $ 19,813,467 $ 18,101,874 $ 16,399,511
------------------------------ ----------------- ---------------- ----------------
4. TAX BASIS OF BUILDINGS AND The aggregate cost of buildings and
IMPROVEMENTS improvements for federal income tax
purposes is equal to the cost basis
used for financial statements
purposes.