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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2002 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 38-2702802
(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 [ ]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
----
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
September 30, 2002 (Unaudited) and
December 31, 2001 3
Statements of Income
Nine months ended September 30, 2002 and 2001
(Unaudited)
Three months ended September 30, 2002 and 2001
(Unaudited) 4
Statement of Partners Equity
Nine months ended September 30, 2002 (Unaudited) 4
Statements of Cash Flows
Nine months ended September 30, 2002
and 2001 (Unaudited) 5
Notes to Financial Statements
September 30, 2002 (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 7
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 10
ITEM 4. CONTROLS AND PROCEDURES 10
PART II OTHER INFORMATION 10
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K 10
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS SEPTEMBER 30,2002 DECEMBER 31, 2001
----------------- -----------------
(Unaudited)
Properties:
Land $11,647,745 $11,662,525
Buildings And Improvements 51,080,345 50,708,179
Furniture And Fixtures 602,171 551,111
----------- -----------
63,330,261 62,921,815
Less Accumulated Depreciation 25,201,937 23,894,162
----------- -----------
38,128,324 39,027,653
Cash And Cash Equivalents 3,286,624 3,741,016
Unamortized Finance Costs 543,419 557,736
Manufactured Homes & Improvements 1,249,359 1,142,579
Other Assets 1,446,712 1,147,960
----------- -----------
Total Assets $44,654,438 $45,616,944
----------- -----------
LIABILITIES & PARTNER EQUITY SEPTEMBER 30,2002 DECEMBER 31, 2001
----------------- -----------------
(Unaudited)
Accounts Payable $ 131,327 $ 265,037
Other Liabilities 933,608 704,218
Notes Payable 28,383,320 28,817,758
----------- -----------
Total Liabilities $29,448,255 $29,787,013
Partners' Equity:
General Partner 315,322 299,427
Unit Holders 14,890,861 15,530,504
----------- -----------
Total Partners' Equity 15,206,183 15,829,931
----------- -----------
Total Liabilities And
Partners' Equity $44,654,438 $45,616,944
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2002 SEPTEMBER 30, 2001 SEPTEMBER 30,2002 SEPTEMBER 30, 2001
----------------- ------------------ ----------------- ------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 8,866,525 $ 9,212,541 2,913,136 3,048,193
Other 567,558 557,984 157,277 192,686
Home Sale Income 794,882 1,072,004 431,882 460,851
------------ ------------ ------------ ------------
Total Income $ 10,228,965 $ 10,842,529 3,502,295 3,701,730
------------ ------------ ------------ ------------
Operating Expenses:
Administrative Expenses
(Including $464,380,$483,395,$152,835
and $159,840 in Property Management
Fees Paid to an Affiliate for the nine
and Three Month Period Ending
September 30, 2002 and 2001 Respectively) 2,335,621 2,440,567 765,708 849,309
Property Taxes 810,330 771,216 270,000 272,347
Utilities 651,611 649,353 225,538 225,384
Property Operations 1,323,899 1,409,417 448,844 474,300
Depreciation And Amortization 1,323,462 1,324,367 443,134 442,880
Interest 1,381,415 1,407,748 462,768 471,430
Home Sale Expense 813,106 1,177,198 454,669 457,112
------------ ------------ ------------ ------------
Total Operating Expenses $ 8,639,444 $ 9,179,866 $ 3,070,661 $ 3,192,762
------------ ------------ ------------ ------------
Net Income $ 1,589,521 $ 1,662,663 $ 431,634 $ 508,968
------------ ------------ ------------ ------------
Income Per Unit: 0.48 0.50 0.13 0.15
Distribution Per Unit: 0.67 0.61 0.23 0.21
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
September 30, 2002 and 2001 3,303,387 3,303,387 3,303,387 3,303,387
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
General Partner Unit Holders Total
--------------- ------------ -----
Balance, January 1, 2002 $ 299,427 $ 15,530,504 $ 15,829,931
Distributions 0 (2,213,269) (2,213,269)
Net Income 15,895 1,573,626 $ 1,589,521
------------ ------------ ------------
Balance as of September 30, 2002 $ 315,322 $ 14,890,861 $ 15,206,183
------------ ------------ ------------
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
September 30,2002 September 30,2001
----------------- -----------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $1,589,521 $1,662,663
---------- ----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 1,307,775 1,308,608
Amortization 15,687 15,759
Gain on Sale of Property and Equipment (107,668) 0
(Increase ) Decrease in Manufactured Homes & Improvements (106,780) 98,783
(Increase) Decrease In Other Assets (298,752) 53,933
Increase (Decrease) In Accounts Payables (133,710) 4,055
Increase (Decrease) In Other Liabilities 229,390 311,454
---------- ----------
Total Adjustments 905,942 1,792,592
---------- ----------
Net Cash Provided By
Operating Activities 2,495,463 3,455,255
---------- ----------
Cash Flows From Investing Activities:
Capital Expenditures (424,616) (266,089)
Proceeds from Sale of Property and Equipment 122,468 0
---------- ----------
Net Cash Provided By (Used In)
Investing Activities (302,148) (266,089)
---------- ----------
Cash Flows From Financing Activities:
Distributions To Partners (2,213,269) (2,015,066)
Payment On Mortgage (434,438) (290,080)
---------- ----------
Net Cash Provided By (Used In)
Financing Activities (2,647,707) (2,305,146)
---------- ----------
Increase (Decrease) In Cash and Equivalents (454,392) 884,020
Cash and Equivalents, Beginning 3,741,016 3,155,170
---------- ----------
Cash and Equivalents, Ending $3,286,624 $4,039,190
---------- ----------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 2002 (Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited 2002 financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The balance sheet at December 31, 2001 has been derived from the
audited financial statements at that date. Operating results for the nine months
ended September 30, 2002 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2002, or for any other interim
period. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Partnership's Form 10-K for the year ended
December 31, 2001.
2. RECLASSIFICATION
Certain prior year amounts have been reclassified in the financial statements to
conform with current year presentation with respect to manufactured homes and
the sales of those homes. As of result, total revenue and total operating
expenses in the statement of income for the nine months and quarter ended
September 30, 2001 increased by $1,072,004 and $474,980, respectively; net
income was not affected by the reclassification.
-6-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Partnership's capital resources consist primarily of its nine manufactured
home communities. On August 20, 1998, the Partnership refinanced seven of its
nine properties with GMAC Commercial Mortgage Corporation (the "Refinancing").
Liquidity
As a result of the Refinancing, seven of the Partnership's nine properties are
mortgaged. At the time of the Refinancing, the aggregate principal amount due
under the seven mortgage notes was $30,000,000 and the aggregate fair market
value of the Partnership's mortgaged properties was $66,000,000. The Partnership
expects to meet its short-term liquidity needs generally through its working
capital provided by operating activities.
Partnership liquidity is based, in part, upon its investment strategy. Upon
acquisition, the Partnership anticipated owning the properties for seven to ten
years. All of the properties have been owned by the Partnership for more than
ten years. The General Partner may elect to have the Partnership own the
properties for as long as, in the opinion of the General Partner, it is in the
best interest of the Partnership to do so.
Net Cash from Operations totaled $874,768 and $951,848 for the quarters ended
September 30, 2002 and 2001, respectively. Net Cash from Operations is defined
as net income computed in accordance with generally accepted accounting
principals ("GAAP"), plus real estate related depreciation and amortization. Net
Cash from Operations does not represent cash generated from operating activities
in accordance with GAAP and is not necessarily indicative of cash available to
fund cash needs. Net Cash from Operations should not be considered as an
alternative to net income as the primary indicator of the Partnership's
operating performance nor as an alternative to cash flow as a measure of
liquidity. From Net Cash from Operations the General Partner has decided to
distribute $759,779, or $.23 per unit, to the unit holders during the quarter
ending September 30, 2002. The General Partner will continue to monitor cash
flow generated by the Partnership's nine properties during the coming quarters.
If cash flow generated is greater or lesser than the amount needed to maintain
the current distribution level, the General Partner may elect to reduce or
increase the level of future distributions paid to Unit Holders.
While the Partnership is not required to maintain a working capital reserve, the
Partnership has not distributed all the Distributable Cash from Operations in
order to build reserves. As of September 30, 2002, the Partnership's cash
reserves amounted to $3.3 million.
-7-
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 84% (2,796/3,329 sites) at the end of
September 2002, versus 87% (2,908/3,329) for September 2001. The average monthly
homesite rent as of September 30, 2002 was approximately $382, versus $372, an
increase of 3% from September 2001.
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
Ardmor Village 339 327 94% $369
Camelot Manor 335 276 81% 363
Country Roads 311 261 82% 261
Dutch Hills 278 269 94% 358
El Adobe 367 291 77% 432
Paradise Village 614 404 65% 325
Stonegate Manor 308 262 83% 362
Sunshine Village 356 341 94% 477
West Valley 421 365 85% 494
--- ---- --- ---
TOTAL ON 9/30/02: 3,329 2,796 84% $382*
TOTAL ON 9/30/01: 3,329 2,908 87% $372*
*NOT A WEIGHTED AVERAGE
-8-
GROSS REVENUES NET INCOME
9/30/02 9/30/01 9/30/02 9/30/01
Ardmor Village $ 424,075 $ 543,132 $ 184,097 $ 218,295
Camelot Manor 308,861 347,291 122,594 151,471
Country Roads 203,426 210,666 90,515 54,865
Dutch Hills 352,476 274,630 129,161 125,872
El Adobe 387,119 380,335 182,444 203,879
Paradise Village 439,567 457,380 63,642 122,061
Stonegate Manor 305,257 337,691 120,744 145,599
Sunshine Village 548,944 566,182 277,063 248,481
West Valley 524,898 559,596 325,209 337,140
---------- ---------- ------------ ----------
3,494,623 3,676,903 1,495,469 1,607,663
Partnership Management: 7,672 24,827 (43,045) (70,655)
Other Non Recurring expenses: ----- ---- (114,888) (113,730)
Debt Service (462,768) (471,430)
Depreciation and Amortization ----- ---- (443,134) (442,880)
---------- ---------- ------------ ----------
$3,502,295 $3,701,730 $ 431,634 $ 508,968
COMPARISON OF NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 2002 TO NINE MONTHS
AND QUARTER ENDED SEPTEMBER 30, 2001
Gross revenues for the first nine months of 2002 decreased to $10,228,965 as
compared to $10,842,529 for the same nine months of 2001. Gross revenues for the
quarter ended September 30, 2002 decreased to $3,502,295 in 2002, as compared to
$3,701,730 the same three months of 2001. The decrease was the result of the
decrease in site rentals and income from home sales.
As described in the Statements of Income, Total Operating Expenses for the first
nine months of 2002 were $8,639,444 a 6% decrease from $9,179,866 for the same
nine months of 2001. Total Operating Expenses for the three months ended
September 30, 2002 decreased $122,101, or 3.8%, to $3,070,661 in 2002, as
compared to $3,192,762 in 2001.
As a result of the aforementioned factors, Net Income for the nine month period
decreased to $1,589,521, compared to $1,662,663 in 2001. Net Income for the
three months ended September 30,2002 decreased to $431,634 compared to $508,968
for the same three months of 2001, a 15% decrease.
-9-
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise 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 September 30, 2002 the Partnership had a note payable
outstanding in the amount of $28,383,320. Interest on this note is at a fixed
annual rate of 6.37% through March 2009.
The Partnership does not enter into financial instruments transactions for
trading or other speculative purposes or to manage its interest rate exposure
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The General Partner and Principal Financial Officer have reviewed and
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of a date within
90 days before the filing date of this quarterly report. Based on that
evaluation, The General Partner and Principal Financial Officer the have
concluded that our current disclosure controls and procedures are effective and
timely, providing them with material information relating to us required to be
disclosed in the reports we file or submit under the Exchange Act.
Changes in Internal Controls
There have not been any significant changes in our internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation. We are not aware of any significant deficiencies
or material weaknesses, therefore no corrective actions were taken.
PART II - OTHER INFORMATION
ITEM 5. Exhibits and REPORTS ON FORM 8-K
(a) Exhibit
EX-99.1 Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during
the three months ended September 30, 2002.
-10-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned. We the undersigned certify to the best of our knowledge neither the
report nor the financial statements therein, contain any untrue statements of
material fact. The financial information included in the report fairly
represents the financial condition and result of operations for the periods
presented herein.
Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited Partnership
BY: Genesis Associates Limited Partnership,
General Partner
BY: Uniprop, Inc.,
its Managing General Partner
By: /s/ Paul M. Zlotoff
-------------------------------------------------------
Paul M. Zlotoff, Chairman
By: /s/ Gloria A. Koster
-------------------------------------------------------
Gloria A. Koster, Principal Financial Officer
Dated: November 13, 2002
10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002