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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. 0-16701
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
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 Equity
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 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 30,2003 DECEMBER 31, 2002
----------------- -----------------
(UNAUDITED) (AUDITED)
Properties:
Land $11,666,645 $11,647,745
Buildings And Improvements 51,528,902 51,212,057
Furniture And Fixtures 623,085 616,662
----------- -----------
63,818,632 63,476,464
Less Accumulated Depreciation 26,894,510 25,618,711
----------- -----------
36,924,122 37,857,753
Cash And Cash Equivalents 3,025,734 3,118,034
Unamortized Finance Costs 521,133 536,820
Manufactured Homes & Improvements 1,424,872 1,110,202
Other Assets 1,690,656 1,508,047
----------- -----------
Total Assets $43,586,517 $44,130,856
----------- -----------
LIABILITIES & PARTNERS' EQUITY SEPTEMBER 30,2003 DECEMBER 31, 2002
------------------- -----------------
(UNAUDITED) (AUDITED)
Accounts Payable $ 366,058 $ 178,328
Other Liabilities 977,503 704,535
Notes Payable 27,936,663 28,273,124
----------- -----------
Total Liabilities $29,280,224 $29,155,987
Partners' Equity:
General Partner 336,715 320,607
Unit Holders 13,969,578 14,654,262
----------- -----------
Total Partners' Equity 14,306,293 14,974,869
----------- -----------
Total Liabilities And
Partners' Equity $43,586,517 $44,130,856
----------- -----------
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, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30,2003 SEPTEMBER 30, 2002
------------------ ------------------ ----------------- ------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 8,795,386 $ 8,866,525 2,932,335 2,913,136
Other 495,566 567,558 145,931 157,277
Home Sale Income 1,390,689 794,882 596,588 431,882
----------- ----------- ---------- ----------
Total Income $10,681,641 $10,228,965 3,674,854 3,502,295
----------- ----------- ---------- ----------
Operating Expenses:
Administrative Expenses
(Including $462,613, $464,380,
$153,154 and $152,835 in Property
Management Fees Paid to an Affiliate
for the Nine and Three Month Period Ending
September 30, 2003 and 2002 Respectively) 2,486,090 2,335,621 842,571 765,708
Property Taxes 806,037 810,330 268,581 270,000
Utilities 628,639 651,611 221,522 225,538
Property Operations 1,149,396 1,323,899 394,402 448,844
Depreciation And Amortization 1,330,375 1,323,462 445,964 443,134
Interest 1,358,840 1,381,415 455,549 462,768
Home Sale Expense 1,311,503 813,106 589,585 454,669
----------- ----------- ---------- ----------
Total Operating Expenses $ 9,070,880 $ 8,639,444 $3,218,174 $3,070,661
----------- ----------- ---------- ----------
Net Income $ 1,610,761 $ 1,589,521 $ 456,680 $ 431,634
----------- ----------- ---------- ----------
Income Per Unit: 0.48 0.48 0.14 0.13
Distribution Per Unit: 0.69 0.67 0.23 0.23
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited
Partnership Interest Outstanding
During The Period Ending
September 30, 2003 and 2002 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, 2003 $320,607 $14,654,262 $14,974,869
Distributions 0 (2,279,337) (2,279,337)
Net Income 16,108 1,594,653 1,610,761
-------- ----------- -----------
Balance as of September 30, 2003 $336,715 $13,969,578 $14,306,293
-------- ----------- -----------
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 30,2003 SEPTEMBER 30,2002
----------------- -----------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $ 1,610,761 $ 1,589,521
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 1,314,688 1,307,775
Amortization 15,687 15,687
Gain on Sale of Property and Equipment (8,846) (107,668)
(Increase) Decrease in Manufactured Homes & Improvements (314,670) (106,780)
(Increase) Decrease In Other Assets (182,609) (298,752)
Increase (Decrease) In Accounts Payables 187,730 (133,710)
Increase (Decrease) In Other Liabilities 272,968 229,390
----------- -----------
Total Adjustments 1,284,948 905,942
----------- -----------
Net Cash Provided By
Operating Activities 2,895,709 2,495,463
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (381,057) (424,616)
Proceeds from Sale of Property and Equipment 8,846 122,468
----------- -----------
Net Cash Provided By (Used In)
Investing Activities (372,211) (302,148)
----------- -----------
Cash Flows From Financing Activities:
Distributions To Partners (2,279,337) (2,213,269)
Payment On Mortgage (336,461) (434,438)
----------- -----------
Net Cash Provided By (Used In)
Financing Activities (2,615,798) (2,647,707)
----------- -----------
Increase (Decrease) In Cash and Equivalents (92,300) (454,392)
Cash and Equivalents, Beginning 3,118,034 3,741,016
----------- -----------
Cash and Equivalents, Ending $ 3,025,734 $ 3,286,624
----------- -----------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
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 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.
Net Cash from Operations totaled $902,644 and $874,768 for the quarters ended
September 30, 2003 and 2002, 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, 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. As of September 30, 2003, the Partnership's cash
reserves amounted to $3,025,734.
-7-
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 78% at the end of September 2003,
versus 82% for September 2002. The average monthly homesite rent as of September
30, 2003 was approximately $397, versus $382, an increase of 4% from September
2002.
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
Ardmor Village 339 306 90% $ 388
Camelot Manor 335 255 76% 374
Country Roads 311 230 74% 271
Dutch Hills 278 250 90% 372
El Adobe 367 269 73% 450
Paradise Village 614 361 59% 335
Stonegate Manor 308 236 77% 372
Sunshine Village 356 334 94% 493
West Valley 421 339 81% 512
----- ----- ----- -----
TOTAL ON 9/30/03: 3,329 2,580 78%* $ 397*
TOTAL ON 9/30/02: 3,329 2,735 82%* $ 382*
*NOT A WEIGHTED AVERAGE
-8-
GROSS REVENUES NET INCOME
9/30/03 9/30/02 9/30/03 9/30/02
Ardmor Village $ 489,779 $ 424,075 $ 206,728 $ 184,097
Camelot Manor 329,917 308,861 112,297 122,594
Country Roads 214,006 203,426 85,130 90,515
Dutch Hills 318,059 352,476 148,999 129,161
El Adobe 401,153 387,119 193,537 182,444
Paradise Village 439,015 439,567 81,409 63,642
Stonegate Manor 300,631 305,257 103,608 120,744
Sunshine Village 605,727 548,944 272,019 277,063
West Valley 573,533 524,898 327,846 325,209
----------- ----------- ----------- -----------
3,671,820 3,494,623 1,531,573 1,495,469
Partnership Management: 3,034 7,672 (70,652) (43,045)
Other Non Recurring expenses: -- -- (102,728)
(114,888)
Debt Service (455,549) (462,768)
Depreciation and Amortization -- -- (445,964) (443,134)
----------- ----------- ----------- -----------
$ 3,674,854 $ 3,502,295 $ 456,680 $ 431,634
COMPARISON OF NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 2003 TO NINE MONTHS
AND QUARTER ENDED SEPTEMBER 30, 2002
Gross revenues for the first nine months of 2003 increased to $10,681,641 as
compared to $10,228,965 for the same nine months of 2002. Gross revenues for the
quarter ended September 30, 2003 increased to $3,674,854, as compared to
$3,502,295 the same three months of 2002. The increase was the result of the
increase in home sales income.
As described in the Statements of Income, Total Operating Expenses for the first
nine months of 2003 were $9,070,880 a 5% increase from $8,639,444 for the same
nine months of 2002. Total Operating Expenses for the three months ended
September 30, 2003 increased $147,513, to $3,218,174 compared to $3,070,661 in
2002.
As a result of the aforementioned factors, Net Income for the nine month period
increased to $1,610,761, compared to $1,589,521 in 2002. Net Income for the
three months ended September 30, 2003 increased to $456,680 compared to $431,634
for the same three months of 2002, a 5.8% increase.
-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, 2003 the Partnership had a note payable
outstanding in the amount of $27,936,663. 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. REPORTS ON FORM 8-K
(a) Reports on Form 8-K
There were no reports filed on Form 8-K during the three
months ended September 30, 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. 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 12, 2003
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