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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 March 31, 2003 Commission File No. 0-15940
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
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:
$1,000 per unit, units 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [ ] No [X]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
----
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
March 31, 2003 (Unaudited) and
December 31, 2002 3
Statements of Income
Three months ended March 31, 2003
and 2002 (Unaudited) 4
Statement of Partner's Equity
Three months ended March 31, 2003 (Unaudited) 4
Statements of Cash Flows
Three months ended March 31, 2003
and 2002 (Unaudited) 5
Notes to Financial Statements
March 31, 2003 (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. CONTROL'S AND PROCEDURES 10
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
CERTIFICATION EXHIBITS 11
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEET
ASSETS MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
(UNAUDITED)
Properties:
Land $5,280,000 $5,280,000
Buildings And Improvements 25,249,181 25,249,181
Furniture And Fixtures 213,513 213,513
----------- -----------
30,742,694 30,742,694
Less Accumulated Depreciation 13,219,601 13,011,689
----------- -----------
17,523,093 17,731,005
Cash And Cash Equivalents 753,459 607,207
Cash - Security Escrow 305,158 305,158
Unamortized Finance Costs 345,048 366,548
Manufactured Homes and Improvements 1,115,255 1,152,759
Other Assets 1,014,211 727,650
----------- -----------
Total Assets $21,056,224 $20,890,327
----------- -----------
LIABILITIES AND PARTNERS' DEFICIT MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
(UNAUDITED)
Line of Credit $195,755 $195,755
Accounts Payable 133,806 120,004
Other Liabilities 977,925 773,368
Mortgage Payable 31,842,556 31,939,585
----------- -----------
Total Liabilities $33,150,042 $33,028,712
Partners' (Deficit) Equity:
General Partner (3,769,738) (3,661,251)
Class A Limited Partners (9,377,892) (9,421,318)
Class B Limited Partners 1,053,812 944,184
----------- -----------
Total Partners' Deficit (12,093,818) (12,138,385)
----------- -----------
Total Liabilities And
Partners' Deficit $21,056,224 $20,890,327
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME THREE MONTHS ENDED
March 31, 2003 March 31, 2002
-------------- --------------
(Unaudited) (Unaudited)
Income:
Rental Income $2,113,837 $2,143,837
Home Sale Income 244,735 325,920
Other 156,108 108,040
---------- ----------
Total Income $2,514,680 $2,577,797
---------- ----------
Operating Expenses:
Administrative Expenses
(Including $113,371 and $113,284 in Property
Management Fees Paid to An Affiliate for the
Three Month Period Ended March 31, 2003 and
2002, Respectively) 492,948 482,851
Property Taxes 230,940 217,569
Utilities 148,850 138,029
Property Operations 239,355 279,273
Depreciation And Amortization 229,412 220,193
Interest 651,884 663,951
Home Sale Expense 217,474 306,948
------- -------
Total Operating Expenses $2,210,863 $2,308,814
---------- ----------
Net Income $303,817 $268,983
---------- ----------
Income Per Limited Partnership Unit:
Class A $5.15 $4.25
Class B $14.22 $13.22
Distribution Per Limited Partnership Unit
Class A $3.00 $3.00
Class B $3.00 $3.00
Weighted Average Number Of Limited
Partnership Units Outstanding
Class A 20,230 20,230
Class B 9,770 9,770
STATEMENT OF PARTNER'S EQUITY (UNAUDITED)
Total General Partner Class A Limited Class B Limited
Beginning Balance of December 31, 2002 (12,138,385) (3,661,251) (9,421,318) 944,184
Net Income 303,817 60,763 104,116 138,938
Distributions (259,250) (169,250) (60,690) (29,310)
------------ ----------- ----------- ---------
BALANCE AS OF MARCH 31, 2003 (12,093,818) (3,769,738) (9,377,892) 1,053,812
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
March 31, 2003 March 31, 2002
-------------- --------------
Cash Flows From Operating Activities:
Net Income $303,817 $268,983
-------- --------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 207,912 198,693
Amortization 21,500 21,500
(Increase) Decrease in Homes and Improvements 37,504 (305,102)
(Increase) Decrease In Other Assets (286,561) (136,943)
Increase (Decrease) In Accounts Payable 13,802 478,556
Increase (Decrease) In Other Liabilities 204,557 203,537
-------- --------
Total Adjustments: 198,714 460,241
-------- --------
Net Cash Provided By
Operating Activities 502,531 729,224
-------- --------
Cash Flows Used In Investing Activities:
Capital Expenditures 0 (377,919)
-------- --------
Cash Flows From Financing Activities:
Distributions To Partners (259,250) (260,250)
Principal Payments on Mortgage (97,029) (89,934)
-------- --------
Net Cash Used In (356,279) (350,184)
-------- --------
Financing Activities
Increase (Decrease) In Cash and Equivalents 146,252 1,121
Cash and Equivalents, Beginning 607,207 902,752
-------- --------
Cash and Equivalents, Ending $753,459 $903,873
-------- --------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2003 (Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited 2003 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, 2002 has been derived from the
audited financial statements at that date. Operating results for the three
months ended March 31, 2003 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2003, 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, 2002.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Partnership's capital resources consist primarily of its four manufactured
housing communities. On March 25, 1997 the Partnership borrowed $33,500,000 from
Nomura Asset Capital Corporation (the "Financing"). It secured the Financing by
placing liens on its four communities. As a result of the Financing, the
Partnership distributed $30,000,000 to the Limited Partners, which represented a
full return of the original capital contributions of $1,000 per unit.
Liquidity
As a result of the Financing, the Partnership's four properties are mortgaged.
At the time of the Financing, the aggregate principal amount due under the four
mortgage notes was $33,500,000 and the aggregate fair market value of the
Partnership's mortgaged properties was $53,200,000. The Partnership expects to
meet its short-term liquidity needs generally through its working capital
provided by operating activities.
The Partnership's long-term liquidity is based, in part, upon its investment
strategy. The properties owned by the Partnership were anticipated to be held
for seven to ten years after their acquisition. All of the properties have been
owned by the Partnership 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.
The Partnership has a renewable $1,000,000 line of credit with National City
Bank of Michigan/Illinois (formerly First of America Bank). The interest rate,
on such line of credit, floats 180 basis points above 1 month LIBOR, which on
March 31, 2003 was 1.310%. The sole purpose of the line of credit is to purchase
new and used homes to be used as model homes offered for sale within the
Partnership's communities. Over the past three years, sales of the new and used
model homes has been growing and the General Partner believes that continuing
the model home program is in the best interest of the Partnership. As of March
31, 2003 the outstanding balance on the line of credit was $195,755.
Net Cash from Operations available for aggregate distributions to all Partners
in UMHCIF during the quarter ended March 31, 2003 amounted to $533,229.
-7-
The amount available during the same period in 2002 was $489,176. Net Cash from
Operations is meant to be a supplemental measure of the Partnership's operating
performance. Net Cash from Operations is defined as net income computed in
accordance with generally accepted accounting principles ("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.
The quarterly Partnership Management Distribution paid to the General Partner
during the first quarter based on prior quarter results was $146,750.00, or
one-fourth of 1.0% of the most recent appraised value of the properties held by
the Partnership ($58,700,000 x .01/4 = $146,750.00).
The cash available after payment of the Partnership Management Distribution
amounted to $386,479. From this amount, the General Partner elected to make a
total distribution of $112,500 for the first quarter of 2003 (unchanged from
2002), 80.0% or $90,000, was paid to the Limited Partners and 20.0% or $22,500
was paid to the General Partner.
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 cash reserves. As of March 31, 2003, the Partnership's cash balance
amounted to $753,459. The amount placed in reserves is at the discretion of the
General Partner.
Results of Operations
OVERALL, as illustrated in the tables below, the four properties had a combined
average occupancy of 90% at the end of March 2003, versus 93% a year ago. The
average monthly rent in March 2003 was approximately $462, or 3% more than the
$449 average monthly rent in March 2002 (average rent not a weighted average).
-8-
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
Aztec Estates 645 546 85% $505
Kings Manor 314 305 97 495
Old Dutch Farms 293 252 86 441
Park of the Four Seasons 572 542 95 406
--- --- --- ---
Total on 3/31/03: 1,824 1,645 90% $462
Total on 3/31/02: 1,824 1,693 93% $449
*Not a weighted average
GROSS REVENUES NET INCOME
3/31/03 3/31/02 3/31/03 3/31/02
Aztec Estates $ 879,073 $ 1,000,905 $ 399,320 $ 411,834
Kings Manor 598,064 558,829 298,794 274,388
Old Dutch Farms 392,455 359,810 237,706 206,913
Park of the Four Seasons 643,363 653,376 365,723 412,289
----------- ----------- ---------- -----------
2,512,955 2,572,920 1,301,543 $ 1,305,424
Partnership Management: 1,725 4,877 (75,818) (74,334)
Other Non Recurring expenses: --- --- (40,612) (77,963)
Debt Service (651,884) (663,951)
Depreciation and Amortization --- --- (229,412) (220,193)
----------- ----------- ---------- -----------
$ 2,514,680 $ 2,577,797 $ 303,817 $ 268,983
COMPARISON OF QUARTER ENDED MARCH 31, 2003 TO QUARTER ENDED MARCH 31, 2002
Gross revenues decreased $63,117 to $2,514,680 in 2003, as compared to
$2,577,797 in 2002. The decrease was the result of lower occupancy due to weak
economic conditions. (See table in previous section.)
As described in the Statements of Income, total operating expenses were $97,951
lower, moving from $2,308,814 to $2,210,863. The decrease was due to a decrease
in home sale expense and interest expense.
As a result of the aforementioned factors, Net Income increased, $34,834 for the
first quarter of 2003 compared to the same quarter of the prior year, moving
from $268,983 for 2002 to $303,817 for 2003.
-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 March 31, 2003 the Partnership had a note payable
outstanding in the amount of $31,842,556. Interest on this note is at a fixed
annual rate of 8.24% through June 2007.
Line-of-Credit: At March 31, 2003 the Partnership owed $195,755 under its
line-of-credit agreement, whereby interest is charged at a variable rate of
1.80% in excess of LIBOR.
A 10% adverse change in interest rates of the portion of the Partnership's debt
bearing interest at variable rates would result in an increase in interest
expense of less than $10,000 annually.
The Partnership does not enter into financial instruments transactions for
trading or other speculative purposes or to manage its interest rate exposure.
ITEM 4. CONTROL'S AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Director and Chief Financial Officer of Uniprop, Inc. 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)) within 90 days
before the filing of this quarterly report. Based on that evaluation, we have
concluded that our current disclosure controls and procedures are effective and
timely, providing them with material information relating to that 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.
-10-
PART II - OTHER INFORMATION
ITEM 6. REPORTS OF 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 of Form 8-K
There were no reports filed on Form 8-K during
the three months ended March 31, 2003.
-11-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Uniprop Manufactured Housing
Communities Income Fund,
A Michigan Limited Partnership
BY: P.I. Associates Limited Partnership,
A Michigan Limited Partnership,
its General Partner
BY: /s/ Paul M. Zlotoff
----------------------------------
Paul M. Zlotoff, General Partner
BY: /s/ Gloria A. Koster
---------------------------------------------
Gloria A. Koster, Principal Financial Officer
Dated: May 13, 2003
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul M Zlotoff, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop
Manufactured Housing Income Fund;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by the quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 13, 2003 Signature: /s/ Paul M. Zlotoff
--------------------
Paul M. Zlotoff, Principal Executive Officer
President & Director of GP P.I. Associates Corp.
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gloria A. Koster, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop
Manufactured Housing Income Fund;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by the quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the of the disclosure controls and procedures
based on our evaluation as the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 13, 2003 Signature: /s/ Gloria A. Koster
--------------------
Gloria A. Koster, Chief Financial Officer
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