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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. 0-16701
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 [ ]
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 II,
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 Partners 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 9
ITEM 4. CONTROLS 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 II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS March 31,2003 December 31, 2002
------------- -----------------
(Unaudited)
Properties:
Land $ 11,647,745 $ 11,647,745
Buildings And Improvements 51,229,021 51,212,057
Furniture And Fixtures 605,838 616,662
------------ ------------
63,482,604 63,476,464
Less Accumulated Depreciation (26,037,811) (25,618,711)
------------ ------------
37,444,793 37,857,753
Cash And Cash Equivalents 2,957,348 3,118,034
Unamortized Finance Costs 531,591 536,820
Manufactured Homes and Improvements 1,455,910 1,110,202
Other Assets 1,341,811 1,508,047
------------ ------------
Total Assets $ 43,731,453 $ 44,130,856
------------ ------------
LIABILITIES & PARTNERS EQUITY March 31,2003 December 31, 2002
------------- -----------------
(Unaudited)
Accounts Payable $ 131,341 $ 178,328
Other Liabilities 706,486 704,535
Notes Payable 28,156,219 28,273,124
------------ ------------
Total Liabilities 28,994,046 29,155,987
Partners' Equity:
General Partner 325,830 320,607
Unit Holders 14,411,577 14,654,262
------------ ------------
Total Partners' Equity 14,737,407 14,974,869
------------ ------------
Total Liabilities And
Partners' Equity $ 43,731,453 $ 44,130,856
------------ ------------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME THREE MONTHS ENDED
March 31, 2003 March 31, 2002
-------------- --------------
(unaudited) (unaudited)
Income:
Rental Income $2,924,202 $3,003,960
Other 144,688 146,337
Home Sale Income 182,301 168,436
---------- ----------
Total Income $3,251,191 $3,318,733
---------- ----------
Operating Expenses:
Administrative Expenses
(Including $152,931 and $156,921, in Property Management
Fees Paid to an Affiliate for the Three Month Period Ending
March 31, 2003 and 2002 Respectively) 827,174 840,742
Property Taxes 268,752 270,234
Utilities 201,413 214,815
Property Operations 352,227 415,672
Depreciation And Amortization 440,907 431,227
Interest 449,294 458,046
Home Sale Expense 189,107 185,095
---------- ----------
Total Operating Expenses $2,728,874 $2,815,831
---------- ----------
Net Income $ 522,317 $ 502,902
---------- ----------
Income Per Unit: 0.16 0.15
Distribution Per Unit: 0.23 0.21
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
March 31, 2003 and 2002 3,303,387 3,303,387
STATEMENT OF PARTNERS' EQUITY (Unaudited)
General Partner Unit Holders Total
--------------- ------------ -----
Balance, January 1, 2003 $ 320,607 $ 14,654,262 $ 14,974,869
Distributions (759,779) (759,779)
Net Income 5,223 517,094 522,317
-------------------------------------------------------
Balance as of March 31, 2003 $ 325,830 $ 14,411,577 $ 14,737,407
=======================================================
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
March 31, 2003 March 31, 2002
-------------- --------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 522,317 $ 502,902
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 435,678 424,628
Amortization 5,229 5,229
Gain on Sale of Property and Equipment (3,000) 0
(Increase) Decrease in Manufactured Homes & Improvements (345,708) (132,088)
(Increase) Decrease In Other Assets 166,236 155,483
Increase (Decrease) In Accounts Payables (46,987) (86,614)
Increase (Decrease) In Other Liabilities 1,951 17,064
----------- -----------
Total Adjustments 213,399 383,702
----------- -----------
Net Cash Provided By
Operating Activities 735,716 886,604
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (22,718) (160,785)
Proceeds from sale of Equipment 3,000
----------- -----------
Net Cash Used In
Investing Activities (19,718) $ (160,785)
----------- -----------
Cash Flows From Financing Activities:
Distributions To Partners (759,779) (693,711)
Payment On Mortgage (116,905) (108,185)
----------- -----------
Net Cash Provided By (Used In)
Financing Activities (876,684) (801,896)
----------- -----------
Increase (Decrease) In Cash and Equivalents (160,686) (76,077)
Cash and Equivalents, Beginning 3,118,034 3,741,016
----------- -----------
Cash and Equivalents, Ending $ 2,957,348 $ 3,664,939
=========== ===========
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
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
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.
Distributable Cash from Operations totaled $963,224 and $932,759 for the
quarters ended March 31, 2003 and 2002, respectively. Distributable Cash from
Operations is defined as net income computed in accordance with generally
accepted accounting principals ("GAAP"), plus real estate related depreciation
and amortization. Distributable 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. Distributable 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 Distributable Cash from
Operations the General Partner has decided to distribute $759,779, or $.23 per
unit, to the unit holders as of March 31, 2003. 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. The remaining $203,445 was added to reserves, as of
March 31, 2003, the Partnership's
7
cash reserves amounted to $2,957,348. The level of cash reserves maintained is
at the discretion of the General Partner.
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 80% at the end of March 2003, versus
88% for March 2002. The average monthly homesite rent as of March 31, 2003 was
approximately $387, versus $376, an increase of 3% from March 2002.
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
Ardmor Village 339 312 92% $ 378
Camelot Manor 335 260 78% 366
Country Roads 312 242 77% 261
Dutch Hills 278 261 94% 364
El Adobe 367 280 76% 432
Paradise Village 614 381 62% 325
Stonegate Manor 308 243 79% 368
Sunshine Village 356 333 94% 493
West Valley 421 355 84% 494
--- --- --- ----
TOTAL ON 3/31/03: 3,330 2,667 80% $ 387
TOTAL ON 3/31/02: 3,330 2,925 88% $ 376
*NOT A WEIGHTED AVERAGE
GROSS REVENUES NET INCOME
3/31/03 3/31/02 3/31/03 3/31/02
Ardmor Village $ 440,400 $ 357,087 $ 177,126 $ 178,191
Camelot Manor 275,746 356,513 135,949 152,390
Country Roads 195,992 205,559 76,784 71,969
Dutch Hills 277,199 273,421 154,274 143,786
El Adobe 354,625 379,877 188,987 206,647
Paradise Village 417,812 432,475 95,169 108,916
Stonegate Manor 296,079 277,999 132,323 135,209
Sunshine Village 452,344 498,483 273,508 268,572
West Valley 536,386 528,145 324,691 299,101
----------- ----------- ----------- -----------
3,246,583 3,309,559 1,558,811 1,564,781
Partnership Management: 4,608 9,174 (92,807) (114,096)
Other Non Recurring expenses: -- -- (53,486) (58,510)
Debt Service (449,294) (458,046)
Depreciation and Amortization -- -- (440,907) (431,227)
----------- ----------- ----------- -----------
$ 3,251,191 $ 3,318,733 $ 522,317 $ 502,902
8
COMPARISON OF QUARTER ENDED MARCH 31, 2003 TO QUARTER ENDED MARCH 31, 2002
Gross revenues decreased $67,542 to $3,251,191 in 2003, as compared to
$3,318,733 in 2002. The decrease was primarily the result of weak economic
conditions.
(See table on previous page.)
As described in the Statements of Income, total operating expenses decreased
$86,957, or 3%, to $2,728,874 in 2003, as compared to $2,815,831 in 2002. The
decrease is due to controlling property expenses as well as lower utilities and
property taxes.
As a result of the aforementioned factors, Net Income increased to $522,317 for
the first quarter of 2003 compared to $502,902 for the first quarter of 2002.
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 $28,156,219. 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 PROCEDURE'S
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
9
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.
PART II - OTHER INFORMATION
ITEM 6. 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 March 31, 2003.
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, thereunto duly authorized.
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, President
By: /s/ Gloria A. Koster
------------------------------
Gloria A. Koster, Principal
Financial Officer
Dated: May 13, 2003
11
I, Paul M. Zlotoff, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop
Manufactured Housing Income Fund II;
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/ Paul M. Zlotoff
-------------------
Paul M. Zlotoff, Principal Executive Officer
President & Director of GP Genesis Corp.
12
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 II.
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 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 and 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
13
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