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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, 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
September 30, 2003 (Unaudited) and
December 31, 2002 3
Statements of Income
Nine months ended September 30, 2003 and 2002
(Unaudited)
Three months ended September 30, 2003 and 2002
(Unaudited) 4
Statement of Partners' Deficit
Nine months ended September 30, 2003 (Unaudited) 4
Statements of Cash Flows
Nine months ended September 30, 2003 and 2002 (Unaudited) 5
Notes to Financial Statements
September 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. CONTROLS AND PROCEDURES 11
PART II OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS SEPTEMBER 30,2003 DECEMBER 31, 2002
----------------- -----------------
(UNAUDITED) (AUDITED)
Properties:
Land $ 5,280,000 $ 5,280,000
Buildings And Improvements 25,296,552 25,249,181
Furniture And Fixtures 218,518 213,513
----------- -----------
30,795,070 30,742,694
Less Accumulated Depreciation 13,649,113 13,011,689
----------- -----------
17,145,957 17,731,005
Cash And Cash Equivalents 321,893 607,207
Cash -Security Escrow 305,158 305,158
Unamortized Finance Costs 302,048 366,548
Manufactured Homes and Improvements 1,519,140 1,152,759
Other Assets 1,394,869 727,650
----------- -----------
Total Assets $20,989,065 $20,890,327
----------- -----------
LIABILITIES AND PARTNERS' DEFICIT SEPTEMBER 30,2003 DECEMBER 31, 2002
----------------- -----------------
(UNAUDITED)
Line of Credit $ 105,000 $ 195,755
Accounts Payable 231,310 120,004
Other Liabilities 1,187,868 773,368
Mortgage Payable 31,664,590 31,939,585
----------- -----------
Total Liabilities $33,188,768 $33,028,712
Partners' Equity (Deficit):
General Partner (4,032,314) (3,661,251)
Class A Limited Partners (9,395,359) (9,421,318)
Class B Limited Partners 1,227,970 944,184
----------- -----------
Total Partners' Deficit (12,199,703) (12,138,385)
----------- -----------
Total Liabilities And
Partners' Equity $20,989,065 $20,890,327
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME (UNAUDITED) NINE MONTHS ENDED THREE MONTHS ENDED
SEPT. 30,2003 SEPT. 30,2002 SEPT. 30,2003 SEPT. 30,2002
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 6,281,306 $6,425,105 $2,060,571 $2,119,749
Home Sale Income $ 1,276,035 $1,529,562 $ 396,379 $ 443,450
Other 366,894 344,515 104,533 114,697
----------- ---------- ---------- ----------
Total Income $ 7,924,235 $8,299,182 $2,561,483 $2,677,896
----------- ---------- ---------- ----------
Operating Expenses:
Administrative Expenses
(Including $331,917,$337,754,$108,075 and
$111,499 in Property Management
Fees Paid to An Affiliate for the Nine
and Three Month Periods
Ended Sept. 30, 2003 and 2002, Respectively) 1,459,360 1,377,000 490,877 460,214
Property Taxes 693,254 652,590 231,377 217,488
Utilities 410,570 408,533 134,657 133,995
Property Operations 798,252 900,878 283,941 300,346
Depreciation And Amortization 701,923 684,112 243,029 227,550
Interest 1,986,633 2,010,884 667,642 675,111
Home Sale Expense 1,149,561 1,437,898 357,562 422,370
----------- ---------- ---------- ----------
Total Operating Expenses $ 7,199,553 $7,471,895 $2,409,085 $2,437,074
----------- ---------- ---------- ----------
Net Income $ 724,682 $ 827,287 $ 152,398 $ 240,822
----------- ---------- ---------- ----------
INCOME PER LIMITED PARTNERSHIP UNIT:
CLASS A $ 10.28 $ 12.99 $ 0.93 $ 3.41
CLASS B $ 38.05 $ 40.84 $ 10.55 $ 12.66
DISTRIBUTION PER LIMITED PARTNERSHIP UNIT
CLASS A $ 9.00 $ 9.00 $ 3.00 $ 3.00
CLASS B $ 9.00 $ 9.00 $ 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 PARTNERS' DEFICIT (UNAUDITED)
General Partner Class A Limited Class B Limited Total
Beginning Balance as of December 31, 2002 ($3,661,251) ($9,421,318) $ 944,184 ($12,138,385)
Net Income 144,936 208,029 371,716 724,682
Distributions (516,000) (182,070) (87,930) (786,000)
----------- ----------- ---------- ------------
BALANCE AS OF SEPTEMBER 30,2003 ($4,032,315) ($9,395,359) $1,227,970 ($12,199,703)
----------- ----------- ---------- ------------
See Notes to Financial Statements
4
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30,2002
------------------ -----------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $ 724,682 $ 827,287
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 637,423 619,612
Amortization 64,500 64,500
(Increase) Decrease In Homes & Improvements (366,381) 78,699
(Increase) Decrease In Other Assets (667,219) (287,092)
Increase (Decrease) In Accounts Payable 111,306 53,035
Increase (Decrease) In Other Liabilities 414,500 269,553
----------- -----------
Total Adjustments: 194,129 798,307
----------- -----------
Net Cash Provided By
Operating Activities 918,811 1,625,594
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (52,375) (781,162)
----------- -----------
Net Cash Used In
Investing Activities Activities (52,375) (781,162)
----------- -----------
Cash Flows From Financing Activities:
Net Payment on Line of Credit (90,755) (75,000)
Distributions To Partners (786,000) (778,750)
Principal Payments on Mortgage (274,995) (245,918)
----------- -----------
Net Cash Used In Financing Activities (1,151,750) (1,099,668)
----------- -----------
Decrease In Cash and Cash Equivalents (285,314) (255,236)
Cash and Cash Equivalents, Beginning 607,207 902,752
----------- -----------
Cash and Cash Equivalents, Ending $ 321,893 $ 647,516
----------- -----------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 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 nine months
ended September 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
ending 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
September 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 September 30, 2003 the outstanding balance on the line of credit was
$105,000. Net Cash from Operations available for aggregate distributions to all
Partners in UMHCIF during the quarter ended September 30, 2003 amounted to
$395,427.
-7-
The amount available during the same period in 2002 was $468,372. 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 third quarter based on second 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 = $603,500 / 4 = $150,875).
The cash available after payment of the Partnership Management Distribution
amounted to $395,427. From this amount, the General Partner elected to make a
total distribution of $112,500 for the third quarter of 2003 equal to the amount
distributed for the third quarter of 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 September 30, 2003, the Partnership's cash balance
amounted to $321,893. 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 89% at the end of September 2003 compared to 93% in 2002
for the same period. The average monthly rent in September 2003 was
approximately $485, or 7% more than the $453 average monthly rent in September
2002 (average rent not a weighted average).
-8-
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
Aztec Estates 645 516 80% $ 505
Kings Manor 314 307 98 495
Old Dutch Farms 293 252 86 447
Park of the Four Seasons 572 527 92 493
----- ----- ----- -----
Total on 9/30/03: 1,824 1,602 89% $ 485
Total on 9/30/02: 1,824 1,689 93% $ 453
*Not a weighted average
FOR THE THREE MONTHS ENDING SEPTEMBER 30, 2003
GROSS REVENUES NET INCOME
9/30/03 9/30/02 9/30/03 9/30/02
Aztec Estates $ 890,323 $ 1,016,123 $ 348,807 $ 396,110
Kings Manor 535,653 517,827 286,211 287,313
Old Dutch Farms 349,630 408,057 184,186 189,621
Park of the Four Seasons 783,923 731,842 397,049 404,959
----------- ----------- ----------- -----------
2,559,529 2,673,849 1,216,253 $ 1,278,003
Partnership Management: 1,954 4,047 (53,788) (43,236)
Other Non Recurring expenses: -- -- (99,396) (91,284)
Debt Service (667,642) (675,111)
Depreciation and Amortization -- -- (243,029) (227,550)
----------- ----------- ----------- -----------
$ 2,561,483 $ 2,677,896 $ 152,398 $ 240,822
COMPARISON OF QUARTER ENDED SEPTEMBER 30, 2003 TO QUARTER ENDED
SEPTEMBER 30, 2002
Gross revenues decreased $116,413 to $2,561,483 in 2003, as compared to
$2,677,896 in 2002. (See table in previous section). The decrease in revenue was
due to decreases in site rental and income from home sales.
As described in the Statements of Income, total operating expenses were lower,
decreasing from $2,437,074 in 2002 to $2,409,085 in 2003. This was due primarily
to a decrease in Home Sale Expense.
As a result of the aforementioned factors, Net Income decreased 37% for the
third quarter of 2003 compared to the same quarter of the prior year, decreasing
from $240,822 for 2002 to $152,398 for 2003.
-9-
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 AND NINE MONTHS ENDED
SEPTEMBER 30, 2002
For the first nine months of 2003, Gross Revenues were $7,924,235, a decrease of
$374,947 compared to $8,299,182 for the same period of 2002. The decrease was
due to a decrease in site rental and income from home sales. Total Operating
Expenses for the first three quarters of 2003 were $7,199,553, a decrease of
$272,342 compared to $7,471,895 for 2002. Net Income for the first nine months
ending September 30, 2002 was $827,287 a decrease of $102,605 compared to the
$724,682 reported for the first nine months ending September 30, 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 September 30, 2003 the Partnership had a note payable
outstanding in the amount of $31,664,590. Interest on this note is at a fixed
annual rate of 8.24% through June 2007.
Line-of-Credit: At September 30, 2003 the Partnership owed $105,000
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 on 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. 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 6. REPORTS ON FORM 8-K
(A) Reports of Form 8-K
There were no reports filed on Form 8-K during the
three months ended September 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. 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,
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: November 12, 2003
-12-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-31.1 Certification of Chief Executive Officer pursuant to Section
302
EX-31.2 Certification of Chief Financial Officer pursuant to Section
302
EX-32 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002