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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 June 30, 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
June 30, 2003 (Unaudited) and
December 31, 2002 3
Statements of Income Six months ended June 30, 2003 and 2002
Three months ended June 30, 2003
and 2002 (Unaudited) 4
Statement of Partner's Equity
Six months ended June 30, 2003 (Unaudited) 4
Statements of Cash Flows
Six months ended June 30, 2003
and 2002 (Unaudited) 5
Notes to Financial Statements
June 30, 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 11
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
CERTIFICATION EXHIBITS
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEET
ASSETS JUNE 30,2003 DECEMBER 31, 2002
------------ -----------------
(UNAUDITED)
Properties:
Land $5,280,000 $5,280,000
Buildings And Improvements 25,254,962 25,249,181
Furniture And Fixtures 218,518 213,513
-------- -------
30,753,480 30,742,694
Less Accumulated Depreciation 13,427,583 13,011,689
----------- ----------
17,325,897 17,731,005
Cash And Cash Equivalents 456,011 607,207
Cash - Security Escrow 305,158 305,158
Unamortized Finance Costs 323,548 366,548
Manufactured Homes and Improvements 1,212,818 1,152,759
Other Assets 1,381,637 727,650
---------- -------
Total Assets $21,005,069 $20,890,327
------------ -----------
LIABILITIES AND PARTNERS' DEFICIT JUNE 30, 2003 DECEMBER 31, 2002
------------- -----------------
(UNAUDITED)
Line of Credit $145,755 $195,755
Accounts Payable 106,333 120,004
Other Liabilities 1,090,857 773,368
Mortgage Payable 31,750,850 31,939,585
----------- ----------
Total Liabilities $33,093,795 $33,028,712
------------ -----------
Partners' (Deficit) Equity:
General Partner (3,889,419) (3,661,251)
Class A Limited Partners (9,353,555) (9,421,318)
Class B Limited Partners 1,154,248 944,184
---------- -------
Total Partners' Deficit (12,088,726) (12,138,385)
------------ ------------
Total Liabilities And
Partners' Deficit $21,005,069 $20,890,327
------------ -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30,2003 JUNE 30,2002 JUNE 30, 2003 JUNE 30,2002
------------ ------------ ------------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $4,220,735 $4,305,356 $2,106,898 $2,161,519
Home Sale Income 879,656 1,086,112 634,921 760,192
Other 262,361 229,818 106,253 121,778
------- ------- ------- -------
Total Income $5,362,752 $5,621,286 $2,848,072 $3,043,489
========== ========== ========== ==========
Operating Expenses:
Administrative Expenses
(Including $223,842, $226,255,$110,471 and $113,284
in Property Management
Fees Paid to An Affiliate for the Six and Three Month Period
Ended June 30, 2003 and 2002, respectively) 968,483 916,786 475,535 433,935
Property Taxes 461,877 435,102 230,937 217,533
Utilities 275,913 274,538 127,063 136,509
Property Operations 514,311 600,532 274,956 321,259
Depreciation And Amortization 458,894 456,562 229,482 236,369
Interest 1,318,991 1,335,773 667,107 671,822
Home Sale Expense 791,999 1,015,528 574,525 708,580
------- --------- ------- -------
Total Operating Expenses $4,790,468 $5,034,821 $2,579,605 $2,726,007
---------- ---------- ---------- ----------
Net Income $572,284 $586,465 $268,467 $317,482
-------- -------- -------- --------
Income Per Limited Partnership Unit:
Class A $9.35 $9.58 $4.20 $5.33
Class B $27.50 $28.18 $13.28 $14.96
Distribution Per Limited Partnership Unit
Class A $6.00 $6.00 $3.00 $3.00
Class B $6.00 $6.00 $3.00 $3.00
Weighted Average Number Of Limited
Partnership Units Outstanding
Class A 20,230 20,230 20,230 20,230
Class B 9,770 9,770 9,770 9,770
STATEMENT OF PARTNER'S EQUITY (UNAUDITED)
General Partner Class A Limited Class B Limited Total
Beginning Balance of December 31, 2002 (3,661,251) (9,421,318) 944,184 (12,138,385)
Net Income 114,457 189,143 268,684 572,284
Distributions (342,625) (121,380) (58,620) (522,625)
BALANCE AS OF JUNE 30, 2003 (3,889,419) (9,353,555) 1,154,248 (12,088,726)
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 2003 JUNE 30,2002
------------- ------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $572,284 $586,465
-------- --------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 415,894 413,562
Amortization 43,000 43,000
(Increase) Decrease In Homes & Improvements (60,059) (46,380)
(Increase) Decrease In Other Assets (653,987) (148,011)
Increase (Decrease) In Accounts Payable (13,671) (42,804)
Increase (Decrease) In Other Liabilities 317,489 299,858
------- -------
Total Adjustments: 48,666 519,225
------ -------
Net Cash Provided By
Operating Activities 620,950 1,105,690
------- ---------
Cash Flows Used In Investing Activities:
Capital Expenditures (10,786) (708,424)
------- --------
Cash Flows From Financing Activities:
Net Payment on Line of Credit (50,000) (75,000)
Distributions To Partners (522,625) (519,500)
Principal Payments on Mortgage (188,735) (167,080)
Net Cash Used In Financing Activities (761,360) (761,580)
-------- --------
Increase (Decrease) In Cash and Equivalents (151,196) (364,314)
Cash and Equivalents, Beginning 607,207 902,752
------- -------
Cash and Equivalents, Ending $456,011 $538,438
-------- --------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 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 six months
ended June 30, 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
June 30, 2003 was 1.12%. 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 June
30, 2003 the outstanding balance on the line of credit was $145,755.
Net Cash from Operations available for aggregate distributions to all Partners
in UMHCIF during the quarter ended June 30, 2003 amounted to $497,949.
-7-
The amount available during the same period in 2002 was $553,851. 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 second quarter based on prior quarter results was $150,875, or
one-fourth of 1.0% of the most recent appraised value of the properties held by
the Partnership ($60,350,000 x .01 1/4 = $150,875.00).
The cash available after payment of the Partnership Management Distribution
amounted to $347,074. From this amount, the General Partner elected to make a
total distribution of $112,500 for the second 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 June 30, 2003, the Partnership's cash balance
amounted to $456,011. 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 June 2003, versus 94% a year ago. The
average monthly rent in June 2003 was approximately $464, or 3% more than the
$450 average monthly rent in June 2002 (average rent not a weighted average).
-8-
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
Aztec Estates 645 542 84% $505
Kings Manor 314 302 96 495
Old Dutch Farms 293 251 86 444
Park of the Four Seasons 572 542 95 412
--- --- -- ---
Total on 6/30/03: 1,824 1,637 90% $464
Total on 6/30/02: 1,824 1,703 94% $450
*Not a weighted average
GROSS REVENUES NET INCOME
6/30/03 6/30/02 6/30/03 6/30/02
Aztec Estates $1,030,617 $1,243,202 $402,291 $427,283
Kings Manor 586,982 664,254 296,637 311,644
Old Dutch Farms 366,754 390,209 167,830 199,709
Park of the Four Seasons 861,627 741,167 424,576 450,078
---------- ---------- -------- --------
2,845,980 3,038,832 1,291,334 1,388,714
Partnership Management: 2,092 4,657 (72,568) (48,989)
Other Non Recurring expenses: -- -- (53,710) (114,052)
Debt Service (667,107) (671,822)
Depreciation and Amortization -- -- (229,482) (236,369)
---------- ---------- -------- --------
$2,848,072 $3,043,489 $268,467 $317,482
COMPARISON OF THREE MONTHS AND QUARTER ENDED JUNE 30, 2003 TO THREE MONTHS ENDED
JUNE 30, 2002
Gross revenues decreased $195,417 to $2,848,072 in 2003, as compared to
$3,043,489 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 $146,402
lower, moving from $2,726,007 to $2,579,605. The decrease was due to a decrease
in home sale expense and interest expense.
As a result of the aforementioned factors, Net Income decreased, $49,015 for the
second quarter of 2003 compared to the same quarter of the prior year, moving
from $317,482 for 2002 to $268,467 for 2003.
-9-
COMPARISON OF SIX MONTHS AND QUARTER ENDED JUNE 30, 2003 TO SIX MONTHS ENDED
JUNE 30, 2002
Gross revenues decreased $258,534 to $5,362,752 in 2003, as compared to
$5,621,286 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 $244,353
lower, moving from $5,034,821 to $4,790,468. The decrease was due to a decrease
in home sale expense and interest expense.
As a result of the aforementioned factors, Net Income decreased, $14,181 for the
first six month period of 2003 compared to the same period of the prior year,
moving from $586,465 for 2002 to $572,284 for 2003.
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 June 30, 2003 the Partnership had a note payable
outstanding in the amount of $31,750,850. Interest on this note is at a fixed
annual rate of 8.24% through June 2007.
Line-of-Credit: At June 30, 2003 the Partnership owed $145,755 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.
-10-
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.
PART II - OTHER INFORMATION
ITEM 6. REPORTS OF FORM 8-K
(A) Reports of Form 8-K
There were no reports filed on Form 8-K
during the three months ended June 30, 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: August 12, 2003
10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX-31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
EX-31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
EX-32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.