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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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-K or any amendment to this
Form 10-K [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [ ] No [X]
The estimated aggregate net asset value of the units as of June 30, 2003 held by
non-affiliates, as estimated by the General Partner (based on a 2003 appraisal
of Partnership properties), was approximately $49,569,376. As of March 1, 2004
the number of units of limited partnership interest of the registrants
outstanding was 3,303,387.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I-
This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based on assumptions and expectations which may not be realized and are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future events and
actual results, financial and otherwise, may differ materially from the results
discussed in the forward-looking statements. Risks and other factors that might
cause such a difference include, but are not limited to, the effect of economic
and market conditions; financing risks, such as the inability to obtain debt
financing on favorable terms; the level and volatility of interest rates; and
failure of the Partnership's properties to generate additional income to offset
increases in operating expenses, as well as other risks listed herein under Item
1.
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund II, a Michigan
Limited Partnership (the "Partnership"), acquired, maintains, operates and
ultimately will dispose of income producing residential real properties
consisting of nine manufactured housing communities (the "Properties"). The
Partnership was organized and formed under the laws of the State of Michigan on
November 7, 1986. Its principal offices are located at 280 Daines Street,
Birmingham, Michigan 48009 and its telephone number is (248) 645-9261.
The Partnership filed an S-11 Registration Statement in November 1986,
which was declared effective by the Securities and Exchange Commission on
December 23, 1986. The Partnership thereafter sold 3,303,387 units (the "Units")
of beneficial assignment of limited partnership interest representing capital
contributions by unit holders (the "Unit Holders") to the Partnership of $20 per
unit. The sale of all 3,303,387 Units was completed in December 1987, generating
$66,067,740 of contributed capital to the Partnership.
The Partnership acquired seven of the Properties in 1987 and acquired
two additional Properties in 1988.
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The Partnership operates the Properties as manufactured housing
communities with the primary investment objectives of: (1) providing cash from
operations to investors; (2) obtaining capital appreciation; and (3) preserving
capital of the Partnership. There can be no assurance that such objectives can
be achieved.
On August 20, 1998, the Partnership borrowed $30,000,000 (the "Loan")
from GMAC Commercial Mortgage Corporation. It secured the Loan by placing new
mortgages on seven of its nine properties. The note is payable in monthly
installments of $188,878, including interest at 6.37% through March 2009.
Thereafter, the monthly installment and interest rate will be adjusted based on
the provisions of the Loan Agreement through the note maturity date of September
2028. The Partnership used the proceeds from the Loan to refinance the
Partnership's outstanding indebtedness of $30,045,000, which was incurred in a
1993 the mortgage financing transaction.
Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation
of its nine manufactured housing communities. Partnership operations commenced
in April 1987 upon the acquisition of the first two Properties. For a
description of the Partnership's revenues, operating profit and assets, please
refer to Items 6 and 8.
Narrative Description of Business
General
The Sunshine Village, Ardmor Village and Camelot Manor Properties were
selected from 25 manufactured housing communities then owned by affiliates of
Genesis Associates Limited Partnership, the General Partner of the Partnership
(the "General Partner"). The other six communities were purchased from
unaffiliated third parties. The Partnership rents home sites in the Properties
to owners of manufactured homes. It was intended that the Partnership would hold
the Properties for extended periods of time, originally anticipated to be seven
to ten years after their acquisition. The General Partner has the discretion to
determine when a Property is to be sold; provided, however, that the
determination of whether a particular Property should be disposed of will be
made by the General Partner only after consultation with an independent
consultant, Manufactured Housing Services Inc. (the "Consultant"). In making
their decision, the General Partner and Consultant will consider relevant
factors, including, current operating results of the particular Property and
prevailing economic conditions, with a view to achieving maximum capital
appreciation to the Partnership while considering relevant tax consequences and
the Partnership's investment objectives.
Competition
The business of owning and operating residential manufactured housing
communities is highly competitive, and the Partnership may be competing with a
number of established companies having greater financial resources. Moreover,
there has been a
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trend for manufactured housing community residents to purchase (where zoning
permits) their manufactured home sites on a collective basis. This trend may
result in increased competition with the Partnership for residents. In addition,
the General Partner, its affiliates or both, has and may in the future
participate directly or through other partnerships or investment vehicles in the
acquisition, ownership, development, operation and sale of projects which may be
in direct competition with one or more of the Properties.
Each of the Properties competes with numerous similar facilities
located in its geographic area. The Davie/Fort Lauderdale area contains
approximately seven communities offering approximately 3,441 housing sites
competing with Sunshine Village. Ardmor Village competes with approximately nine
communities in the Lakeville, Minnesota area offering approximately 2,663
housing sites. Camelot Manor competes with approximately 16 communities in the
Grand Rapids, Michigan area offering approximately 3,631 housing sites. In the
Jacksonville, Florida area, Country Roads competes with approximately nine
communities offering approximately 3,636 housing sites. The Tampa, Florida area
contains approximately four communities offering approximately 1,190 housing
sites competing with Paradise Village. Dutch Hills and Stonegate Manor compete
with approximately 11 other communities in the Lansing, Michigan area offering
approximately 3,438 housing sites. In the Las Vegas, Nevada area, West Valley
and El Adobe compete with approximately 13 other communities offering
approximately 3,719 housing sites. The Properties also compete against other
forms of housing, including apartment and condominium complexes, and site built
homes.
Governmental Regulations
The Properties owned by the Partnership are subject to certain state
regulations regarding the conduct of the Partnership operations. For example,
the State of Florida regulates agreements and relationships between the
Partnership and the residents of Sunshine Village, Country Roads and Paradise
Village. Under Florida law, the Partnership is required to deliver to new
residents of those Properties a prospectus describing the property and all
tenant rights, Property rules and regulations, and changes to Property rules and
regulations. Florida law also requires minimum lease terms, requires notice of
rent increases, grants to tenant associations certain rights to purchase the
community if being sold by the owner and regulates other aspects of the
management of such properties. The Partnership is required to give 90 days
notice to the residents of Florida Properties of any rate increase, reduction in
services or utilities, or change in rules and regulations. If a majority of the
residents object to such changes as unreasonable, the matter must be submitted
to the Florida Department of Professional Business Regulations for mediation
prior to any legal adjudication of the matter. In addition, if the Partnership
seeks to sell Florida Properties to the general public, it must notify any
homeowners' association for the residents, and the association shall have the
right to purchase the Property on the price, terms and conditions being offered
to the public within 45 days of notification by the owner. If the Partnership
receives an unsolicited bona fide offer to purchase the Property, it must notify
any such homeowners' association that it has received an offer, state to the
homeowners' association the price, terms and conditions upon which the
Partnership would sell the Property, and consider (without obligation) accepting
an offer from the homeowners' association. The Partnership has, to the best of
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its knowledge, complied in all material respects with all requirements of the
States of Florida, Michigan, Minnesota and Nevada, where its operations are
conducted.
Employees
The Partnership employs two part-time employees to perform Partnership
management and investor relations' services. The Partnership retains an
affiliate, Uniprop AM, LLC, as the property manager for each of its Properties.
Uniprop AM, LLC is paid a fee equal to the lesser of 5% of the annual gross
receipts from each of the Properties or the amount which would be payable to
unaffiliated third parties for comparable services. Uniprop AM, LLC retains
local managers on behalf of the Partnership at each of the Properties. Salaries
and fringe benefits of such local managers are paid by the Partnership and are
not included in any property management fee payable to Uniprop AM, LLC. Local
managers are employees of the Partnership and are paid semi-monthly. The yearly
salaries and expenses for local managers range from $15,000 to $42,000. Local
managers have no direct management authority, make no decisions regarding
operations and act only in accordance with instructions from the property
manager. They are utilized by the Partnership to provide on-site maintenance and
administrative services. Uniprop AM, LLC as property manager, has overall
management authority for each property.
ITEM 2. PROPERTIES
The Partnership purchased all nine manufactured housing communities for
cash. As a result of the Loan, however, seven of the nine Properties are now
encumbered with mortgages.
Each of the Properties is a modern manufactured housing community
containing lighted and paved streets, side-by-side off-street parking and
complete underground utility systems. The Properties consist of only the
underlying real estate and improvements, not the actual homes themselves. Each
of the Properties has a community center, which includes offices, meeting rooms
and game rooms. Each of the Properties, except Stonegate Manor, has a swimming
pool. Several of the Properties also have laundry rooms, playground areas,
garage and maintenance areas and recreational vehicle or boat storage areas.
-5-
The table below contains certain information concerning the Partnership's nine
properties.
PROPERTY NAME NUMBER
AND LOCATION YEAR CONSTRUCTED ACREAGE OF SITES
- ------------------ ---------------- ------- --------
Ardmor Village
Cedar Avenue S.
Lakeville, MN 1974 74 339
Camelot Manor
South Division
Grand Rapids, MI 1973 57 335
Country Roads
Townsend Road
Jacksonville, FL 1967 37 311
Dutch Hills
Upton Road
Haslett, MI 1975 42.8 278
El Adobe
N. Lamb Blvd.
Las Vegas, NV 1975 36 367
Paradise Village
Paradise Drive
Tampa, FL 1971 91 614
Stonegate Manor
Eaton Rapids Drive
Lansing, MI 1968 43.6 308
Sunshine Village
Southwest 5th St.
Davie, FL 1972 45 356
West Valley
W. Tropicana Ave
Las Vegas, NV 1972 53 421
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Partnership and its legal counsel, there are no
material legal proceedings pending except such ordinary routine matters as are
incident to the kind of business conducted by the Partnership. To the knowledge
of the Partnership and its counsel, no legal proceedings have been instituted or
are being contemplated by any governmental authority against the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the Unit Holders are restricted to certain
matters of fundamental significance to the Partnership. The Unit Holders must
approve certain major decisions of the General Partner if the General Partner
proposes to act without the approval of the Consultant. The Unit Holders also
have a right to vote on the removal and
-6-
replacement of the General Partner, dissolution of the Partnership, material
amendments to the Partnership Agreement and the sale or other disposition of all
or substantially all of the Partnership's assets, except in the ordinary course
of the Partnership's disposing of the Properties. Such matters must be approved
by Unit Holders holding in the aggregate more than 50% of the then outstanding
interests. No matters were submitted to the Unit Holders for a vote during 2003.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
There is no established public trading market for the Units of the
Partnership and it is not anticipated that one will ever develop. During the
last twelve months, less than five percent (5.0%) of the Units have been
transferred, excluding transfers due to death or intra-family transfers. The
Partnership believes there is no formal secondary market, or the substantial
equivalent thereof, and none will develop.
The General Partner calculates the estimated net asset value of each
Unit by dividing (i) the amount of distributions that would be made to the Unit
Holders in the event of the current sale of the Properties at their current
appraised value, less the outstanding balances of the mortgages on the mortgaged
Properties and sales expenses (but without consideration to tax consequences of
the sale), by (ii) 3,303,387. In March 2004, the Properties were appraised at an
aggregate fair market value of $80,600,000. Assuming a sale of the nine
properties in March 2004, at the appraised value, less payment of selling
expenses and mortgage debt, the net aggregate proceeds available for
distribution to the Unit Holders is estimated to be $50,362,764 or $15.25 per
Unit. There can be no assurance that the estimated net asset value could ever be
realized. As of March 1, 2004, the Partnership had approximately 3,947 Unit
Holders.
The following table sets forth the distributions per limited partnership unit
for each calendar quarter in the last two fiscal years. Distributions were paid
in the periods immediately subsequent to the periods in which such distributions
were declared.
Distribution per
Limited Partnership Unit
------------------------
Quarter Ended
March 31, 2003 $0.23
June 30, 2003 $0.23
September 30, 2003 $0.23
December 31, 2003 $0.23
March 31, 2002 $0.21
June 30, 2002 $0.23
September 30, 2002 $0.23
December 31, 2002 $0.23
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The Partnership intends to continue to declare quarterly distributions. However,
distributions are determined by the General Partner and will depend on the
results of the Partnership's operations.
The Partnership has no equity compensation plans.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for the
Partnership for the periods ended December 31, 2003, 2002, 2001, 2000 and 1999:
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 2003 31, 2002 31, 2001 31, 2000 31, 1999
------------- ------------- ------------- ------------- -------------
Total Assets $ 42,826,320 $ 44,130,856 $ 45,616,944 $ 46,542,559 $ 47,525,657
============= ============= ============= ============= =============
Long Term
Debt $ 27,819,236 $ 28,273,124 $ 28,817,758 $ 29,209,358 $ 29,572,116
============= ============= ============= ============= =============
Income 14,402,693 13,741,599 14,530,327 14,474,625 12,718,010
Operating Expenses (12,290,990) (11,623,613) (12,419,504) (12,484,761) (11,077,253)
------------- ------------- ------------- ------------- -------------
Total Net Income $ 2,111,703 $ 2,117,986 $ 2,110,823 $ 1,989,864 $ 1,640,757
============= ============= ============= ============= =============
Distributions to Unit
Holders,
per Unit: $ .92 $ .90 $ .82 $ .76 $ .73
Income per Unit: $ .63 $ .63 $ .63 $ .60 $ .49
Weighted average
Number of Units
Outstanding: 3,303,387 3,303,387 3,303,387 3,303,387 3,303,387
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Capital Resources
The capital formation phase of the Partnership began on April 1, 1987
when Sunshine Village and Ardmor Village were purchased by the Partnership and
operations commenced. It ended on January 15, 1988 when El Adobe, the
Partnership's last property, was purchased. The total capital raised through
December 1987 was
-8-
$66,067,740 of which approximately $58,044,000 was used to purchase the nine
Properties after deducting sales commissions, advisory fees and other
organization and offering costs.
As described in Item 1, the Partnership borrowed $30,000,000 from GMAC
Commercial Mortgage Corporation in August 1998. The note is payable in monthly
installments of $188,878, including interest at 6.37% through March, 2009.
Thereafter, the monthly installment and interest rate will be adjusted based on
the provisions of the agreement through the note maturity date of September
2028. The Loan was secured by mortgages on the Partnership's Ardmor Village,
Camelot Manor, Dutch Hills, El Adobe, Stonegate Manor, Sunshine Village and West
Valley Properties. The Partnership used the proceeds from the Loan to refinance
the Partnership's outstanding indebtedness of $30,045,000.
Future maturities on the note payable for the next five years are as
follows: 2004 - $470,000; 2005 - $506,000; 2006 - $540,000 and 2007 - $587,000;
and 2008 - $622,000.
The General Partner acknowledges that the mortgages pose some risks to
the Partnership, but believes that such risks are not greater than risks
typically associated with real estate financing.
Liquidity
The Partnership has, since inception, generated adequate amounts of
cash to meet its operating needs. The Partnership retains cash reserves, which
it believes will be adequate to maintain the Properties. All funds in excess of
operating needs, amounts sufficient to pay debt service, and cash reserves are
distributed to the Unit Holders on a quarterly basis. While the Partnership is
not required to maintain a working capital reserve, the Partnership has not
distributed all of the cash generated from operations in order to build capital
reserves. As of December 31, 2003, the Partnership had $2,652,394 in cash
balances.
In February of 1994, the Partnership distributed $23,119,767 to the
Unit Holders, or $7.00 per $20.00 Unit held. Of this amount, $13,572,978 (or
$4.11 per Unit), was applied to the then shortfall in the Unit Holders' 10.0%
cumulative preferred return, and $9,546,789 (or $2.89 per Unit), was a partial
return of the Limited Partners' original capital contributions.
Results of Operations
Distributions
For the year ended December 31, 2003, the Partnership made
distributions to the Unit Holders of $3,039,116, which is equal, on an
annualized basis, to a 5% return on their adjusted capital contributions ($.92
per $17.11 Unit). Distributions paid to Unit Holders in 2002 totaled $2,973,048,
and $2,708,777 was paid in 2001.
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The distributions paid in 2003 were less than the amount required for
the annual 10.0% preferred return to the Unit Holders by approximately
$2,613,000. As described in Note 7 to the Partnership's financial statements,
the cumulative preferred return deficit through December 2003 was approximately
$30,241,000. No distributions can be made to the General Partner in regard to
its incentive management interest until the cumulative preferred return deficit
has been distributed to the Unit Holders. At December 31, 2003, the unpaid
amount to be distributed to the General Partner was approximately $9,400,000.
Revenue and Net Income
For the years ended December 31, 2003, 2002 and 2001, net income was
$2,111,703, $2,117,986 and $2,110,823 and gross revenue was $14,402,693,
$13,741,599 and $14,530,327, respectively.
The manufactured housing industry in general has experienced lower
retail sales over the past three years due to restrictive financing. In
addition, the U.S. economy has been sluggish. Nonetheless, the Partnership has
maintained stable Net Income for the last three fiscal years.
Partnership Management
Certain employees of the Partnership are also employees of affiliates
of the General Partner. The Partnership paid these employees an aggregate of
$113,501, $96,345, and $89,494, in 2003, 2002 and 2001 respectively, to perform
partnership management and investor relation services for the Partnership.
Recent Accounting Pronouncements
There are no recent accounting pronouncements that the Fund is required
to adopt.
Critical Accounting Policies
In the course of developing and evaluating accounting policies and
procedures, we use estimates, assumptions and judgments to determine the most
appropriate methods to be applied. Such processes are used in determining
capitalization of costs related to real estate investments and potential
impairment of real estate investments.
Real estate assets are stated at cost less accumulated depreciation.
Expenditures for property maintenance are charged to operations as incurred,
while significant renovations are capitalized. Depreciation of the buildings is
recorded on the straight-line method using as estimated useful life of forty
years.
-10-
In determining the fair value of real estate investments, we consider
future cash flow projections on a property by property basis, current interest
rates and current market conditions of the geographical location of each
property.
The following table outlines our contractual obligations (in thousands)
as of December 31, 2003.
Total Yr 1 2-3 Yrs 4-5 Yrs Over 5 Yrs
------- ----- ------- ------- ----------
Mortgages payable $27,819 $ 470 $ 1,046 $ 1,209 $ 25,094
Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 76% for the year ended December
31, 2003, as compared to 81% for the fiscal year December 31, 2002, and 86% for
the fiscal year ended December 31, 2001. The average monthly rent (not weighted
average) was approximately $397 per home site for the year ended December 31,
2003, as compared to $384 for the year ended December 31, 2002 and $373 for the
year ended December 31, 2001, an increase of 3.4% and 2.8%, respectively. The
decline in occupancy is due primarily to an increase in foreclosures on homes
financed by third-party lenders. The rate of new foreclosures has abated.
OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
TOTAL ------------------------ ------------------------ ------------------------
SITES 2003 2002 2001 2003 2002 2001 2003 2002 2001
----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Ardmor Village 339 301 316 331 89% 93% 98% $ 394 $ 374 $ 358
Camelot Manor 335 257 266 297 77% 79% 89% 372 365 355
Country Roads 311 227 249 268 73% 80% 87% 272 261 251
Dutch Hills 278 248 262 266 89% 94% 96% 374 360 351
El Adobe 367 266 282 299 72% 77% 82% 450 432 424
Paradise Village 614 356 390 431 58% 64% 71% 335 325 315
Stonegate Manor 308 233 244 271 76% 79% 88% 374 363 356
Sunshine Village 356 322 333 335 90% 94% 95% 494 477 462
West Valley 421 334 357 380 79% 85% 91% 512 494 486
----- ------ ------ ------ ------ ------ ------ ------ ------ ------
Overall 3,329 2,544 2,699 2,878 76% 81% 86% $ 397 $ 384 $ 373
===== ====== ====== ====== ====== ====== ====== ====== ====== ======
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The following table summarizes gross revenues and net operating income
for the Partnership and Properties during 2003, 2002 and 2001.
NET OPERATING INCOME
GROSS REVENUE AND NET INCOME
-------------------------------------------- ------------------------------------------
2003 2002 2001 2003 2002 2001
------------ ------------ ------------ ------------ ----------- -----------
Ardmor Village $ 2,048,194 $ 1,739,467 $ 2,043,593 $ 801,896 $ 864,742 $ 857,734
Camelot Manor 1,384,266 1,268,160 1,275,744 527,365 510,157 631,982
Country Roads 878,556 805,292 895,231 307,423 311,401 160,166
Dutch Hills 1,219,250 1,239,154 1,092,465 593,790 591,862 527,537
El Adobe 1,542,349 1,538,618 1,563,480 786,259 824,163 879,277
Paradise Village 1,825,944 1,724,890 1,880,534 450,805 335,509 481,810
Stonegate Manor 1,196,556 1,194,174 1,226,436 461,438 498,340 567,852
Sunshine Village 2,086,697 2,056,581 2,195,235 1,101,982 1,108,979 1,024,580
West Valley 2,206,617 2,143,653 2,244,655 1,331,024 1,301,637 1,379,525
------------ ------------ ------------ ------------ ----------- -----------
14,388,429 13,709,989 14,417,373 6,361,982 6,346,790 6,510,463
Partnership $ 14,264 $ 31,610 $ 112,954 (303,092) (281,991) (242,249)
Mgmt.
- -
Other
Expenses (333,947) (343,093) (524,039)
Debt Service (1,810,959) (1,840,845) (1,875,951)
Depreciation and
Amortization (1,802,281) (1,762,875) (1,757,401)
------------ ----------- -----------
TOTAL: $ 14,402,693 $ 13,741,599 $ 14,530,327 $ 2,111,703 $ 2,117,986 $ 2,110,823
============ ============ ============ ============ =========== ===========
COMPARISON OF YEAR ENDED DECEMBER 31, 2003 TO YEAR ENDED DECEMBER 31, 2002
Gross revenue increased $661,094 to $14,402,693 in 2003, compared to
$13,741,599 in 2002. The increase is primarily the result of a increase in home
sales. The decrease in occupancy is due primarily to increased foreclosures on
home mortgages, which frequently results in the home being moved out of the
property. Rental Income decreased $145,007 due to lower occupancy. Home Sale
Income increased $925,624 due to an aggressive marketing of home sales.
The Partnership's operating expenses increased $667,377, to $12,290,990
in 2003, compared to $11,623,613 in 2002. Home sale expense increased due to the
increased volume of home sales.
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As a result of the forgoing factors, net income decreased $6,283 from
$2,117,986 in 2002 to $2,111,703 in 2003.
COMPARISON OF YEAR ENDED DECEMBER 31, 2002 TO YEAR ENDED DECEMBER 31, 2001
Gross revenue decreased $788,728 or 5% to $13,741,599 in 2002, compared
to $14,530,327 in 2001. The decrease was primarily the result of a decrease in
home sales and lower occupancy, partially offset by increased monthly rental
rates. The decrease in occupancy was due primarily to increased foreclosures on
home mortgages, which frequently results in the home being moved out of the
property. Rental Income decreased $421,000 or 3% due to lower occupancy. Home
Sale Income declined $435,000 or 28% due to lower home sales as a result of more
restrictive retail financing.
The Partnership's operating expenses decreased $795,891, or 6.4% to
$11,623,613 in 2002, compared to $12,419,504 in 2001. Property operations
expense decreased by approximately $157,000 or 8% as staffing and other expenses
were reduced in response to lower revenues. Home sale expense also declined by
$584,000 due to lower sales volumes.
As a result of the forgoing factors, net income increased slightly from
$2,110,823 in 2001 to $2,117,986 in 2002, as the General Partner was able to
reduce the Partnership's expenses to adjust the cost structure in response to a
weaker economy.
IMPORTANT DISCLOSURES
The General Partner believes it is important to disclose certain recent
events to the Unit Holders along with a description of the actions taken by the
General Partner to respond to the events.
During 2003, industry conditions remained depressed due to the lack of
available retail financing. Declining retail home sales for manufactured homes
and high default rates on chattel mortgage loans for manufactured homes
continued through 2003. The increase in foreclosures has created a surplus of
pre-owned homes for sale in the market place. The availability of pre-owned home
inventory contributed to the reduced purchase of new homes for the industry as a
whole. The Partnership has aggressively pursued home sales by increasing
marketing efforts including but not limited to the addition of sales personnel.
The surplus of pre-owned homes available in the market has presented an
opportunity for the Partnership to purchase homes at low prices. On a limited
basis, these homes have been purchased by the Partnership and reviewed on a case
by case basis for retail sale. The maximum term of the typical retail contract
provided by the Partnership is ten years, significantly less than is generally
available from retail lenders. This shorter amortization period allows for a
faster return of principal for the Partnership and reduces the risk of loss
through repossession. The total amount of retail loans at this time is not
material relative to the total assets and revenues of the Partnership. The
General Partner believes that its retail sales and finance activity can help
increase occupancy and thereby
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rental income. To date, the delinquency and default rates of the retail loans
are not significant. However the General Partner will continue to monitor the
portfolio and adjust its underwriting criteria accordingly.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate risk 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 December 31, 2003 the Partnership had a note payable
outstanding in the amount of $27,819,236. Interest on this note is at a fixed
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Partnership financial statements for the fiscal years
ended December 31, 2003, 2002 and 2001, and supplementary data are filed with
this Report:
(i) Report of Independent Certified Public Accountants
(ii) Balance Sheets as of December 31, 2003 and 2002
(iii) Statements of Income for the fiscal years ended
December 31, 2003, 2002 and 2001
(iv) Statements of Partners' Equity for the fiscal years
ended December 31, 2003, 2002 and 2001
(v) Statements of Cash Flows for the fiscal years ended
December 31, 2003, 2002 and 2001
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There has been no change in the Partnership's independent public
accountants nor have there been any disagreements during the Partnership's most
recent two fiscal years.
-14-
ITEM 9A. CONTROLS AND PROCEDURES
The Partnership maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Partnership's Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms, and that such information is accumulated and
communicated to the Partnership's management, including its Principal Executive
Officer and Principal Financial Officer, as appropriate to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a - 14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. As of the end of
the period covered by this report (the-evaluation date), the Partnership
conducted an evaluation under the supervision and with the participation of its
Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rule 13a - 14(c) under the Securities Exchange Act of
1934 ("the Exchange Act")). Based on this evaluation, the Principal Executive
Officer and Principal Financial Officer concluded that, as of the evaluation
date, the Partnership's disclosure controls and procedures were effective to
reasonably ensure that information required to be disclosed by us in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
There was no significant change in the Partnership's internal control
over financial reporting during its most recently completed fiscal year that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any officers or directors.
The General Partner, Genesis Associates Limited Partnership, is a Michigan
limited partnership which has two general partners, Uniprop, Inc., the Managing
General Partner, and Paul M. Zlotoff.
Information concerning Mr. Zlotoff's age and principal occupations, as
well as for other officers of Uniprop, Inc., during the last five years or more
is as follows:
Paul M. Zlotoff, 54, is and has been an individual general partner of
Genesis Associates since its inception in November 1986. Mr. Zlotoff became the
Chairman of Uniprop, Inc. in May 1986 and was its President from 1979 through
1997. He is also an individual general partner of P.I. Associates Limited
Partnership, the general partner of Uniprop Manufactured Housing Communities
Income Fund, a public limited partnership
-15-
which owns and operates four manufactured housing communities. Mr. Zlotoff
currently, and in the past, has acted as the general partner for various other
limited partnerships owning manufactured housing communities and some commercial
properties.
Charles Soberman, 55, joined Uniprop, Inc. in June 1999 as its Chief
Executive Officer and Executive Vice President. Mr. Soberman's responsibilities
include supervision of property operations and corporate oversight. Mr. Soberman
has a law degree from The Harvard Law School and a M.B.A. from Michigan State
University. Mr. Soberman also has a B.A. from the University of Michigan. From
1979 through 1996, he was president of Mercury Paint Company, a manufacturer and
retailer of coatings and allied products. From 1996 to 1999, Mr. Soberman was a
Senior Lecturer at Wayne State University School of Business Administration.
Gloria Koster, 50, became Chief Financial Officer of Uniprop, Inc. on
January 1, 1998. Previously, Ms. Koster had been Vice President - Finance of
Uniprop, Inc. since July 1989. She is responsible for accounting, financial
controls, data processing, cash management, financial reporting, budgeting,
financing, and tax matters. Prior to joining Uniprop, Inc., Ms. Koster had been
with Michigan National Bank for 13 years, most recently as a first
vice-president. Ms. Koster has a M.B.A. from the University of Detroit.
Roger Zlotoff, 43, became Chief Investment Officer of Uniprop, Inc. on
October 18, 1999. Mr. Zlotoff is primarily responsible for raising equity
capital, managing partnership investments, evaluating acquisitions of existing
properties and leading the development process for new properties. From 1997 to
1999, Mr. Zlotoff served as Director of Business Development for Vistana, Inc.
in Orlando, FL. Previously, Mr. Zlotoff was Managing Director for Sterling
Finance International from 1994 to 1997 and was a corporate banker with First
Union National Bank from 1988 to 1994. Mr. Zlotoff received his B.A. from the
University of Central Florida as a philosophy major, and received his Masters
Degree in International Business from the University of South Carolina.
Paul M. Zlotoff and Roger Zlotoff are brothers.
CODE OF ETHICS
Because the Partnership has no executive officers, the Partnership has
not adopted a code of ethics for the Partnership. A code of ethics has been
established for the Directors, Officers, and Employees of Uniprop. A copy of the
Code of ethics is available at no charge upon request.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and therefore, no officers
received a salary or remuneration exceeding $100,000 during the last fiscal
year. The General Partner of the Partnership and an affiliate, Uniprop AM, LLC,
received certain compensation and fees during the fiscal year in the amounts
described in Item 13.
-16-
Depending upon the results of operations and other factors, the Partnership
anticipates that it will provide similar compensation to the General Partner and
Uniprop AM, LLC. during the next fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED UNITHOLDER MATTERS
The Partnership is a limited partnership duly formed pursuant to the
Uniform Limited Partnership Act, as amended, of the State of Michigan. The
General Partner, Genesis Associates Limited Partnership, is vested with full
authority as to the general management and supervision of business and the other
affairs of the Partnership, subject to certain constraints in the Partnership
Agreement and consulting agreement. Unit holders have no right to participate in
the management of the Partnership and have limited voting privileges only on
certain matters of fundamental significance. To the knowledge of the
Partnership, no person owns of record or beneficially, more than five percent of
the Partnership's Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes all of the types of compensation,
fees or other distributions paid by the Partnership or others to the General
Partner or its affiliates from the operations of the Partnership during the last
fiscal year, as well as certain of such items which may be payable during the
next fiscal year. Certain of the following arrangements for compensation and
fees were not determined by arm's length negotiations between the General
Partner, its affiliates and the Partnership.
Paul M. Zlotoff has an interest in the original sellers of Sunshine
Village and Ardmor Village and is entitled to share in a contingent purchase
price with respect to each Property, when and if the Properties are sold and the
sellers become entitled thereto. The maximum amounts which could be payable to
the sellers are as follows: Sunshine Village, $1,108,260 and Ardmor Village,
$946,236. The cash purchase price and contingent purchase price for each
Property were determined by reference to the average of two independent real
estate appraisals which were obtained by the General Partner. Such appraisals
are only estimates of value and are not necessarily indicative of the actual
real estate value. Each seller will become entitled to any unpaid contingent
purchase price upon the sale, financing or other disposition of each such
Property, but, only after the receipt by each Unit Holder of aggregate
distributions equal to the sum of (i) his 10% cumulative preferred return plus
(ii) 125% of his capital contribution. The actual amounts to be received, if
any, will depend upon the results of the Partnership's operations and the
amounts received upon the sale, financing or other disposition of the Properties
and are not determinable at this time. The Partnership does not anticipate any
such amount will become payable during the next fiscal year.
The Partnership will pay an Incentive Management Interest to the
General Partner for managing the Partnership's affairs, including: determining
distributions, negotiating agreements, selling or financing properties,
preparing records and reports, and performing
-17-
other ongoing Partnership responsibilities. This incentive management interest
is 15% of distributable cash from operations in any quarter. However, in each
quarter, the General Partner's right to receive any net cash from operations is
subordinated to the extent necessary to first provide each Unit Holder his 10%
cumulative preferred return. During the last fiscal year, the General Partner
received no distributions on account of its Incentive Management Interest from
operations because distributions were approximately $2,613,000 less than the 10%
cumulative preferred return due Unit Holders. Any such amounts of Incentive
Management Interest unpaid in a taxable year will be accumulated and paid from
distributable cash from capital transactions, but only after each Unit Holder
has first received his 10% cumulative preferred return and 125% of his capital
contribution. For 2003, approximately $600,000 was accumulated for the General
Partner, and the General Partner's aggregate accumulated Incentive Management
Interest as of December 2003 was $9,400,000. The actual Incentive Management
Interest from operations to be accumulated or paid during the next fiscal year
will depend upon the results of the Partnership's operations and is not
determinable at this time. The Partnership does not anticipate any such amount
will be distributed to the General Partner during the next fiscal year and will
again be accumulated with payment deferred. No distributions of Incentive
Management Interest may be made to the General Partner until the 10% cumulative
preferred return of approximately $30,241,000, as of December 31, 2003, is first
distributed to the Unit Holders. In February of 1994, as part of the 1993
mortgage financing, $23,119,767 was distributed to the Unit Holders, $13,572,978
of which eliminated the Unit Holders' preferred return deficit through December
31, 1993.
The Partnership must also pay an Incentive Management Interest from
capital transactions to the General Partner for its services rendered to the
Partnership. The General Partner will be entitled to receive its share of
distributable cash from capital transactions after (i) each Unit Holder has
received aggregate distributions in an amount equal to the sum of (a) his 10%
cumulative preferred return plus (b) 125% of his capital contribution, (ii) any
contingent purchase prices have been paid, and (iii) any property disposition
fees to Uniprop AM, LLC have been paid. The General Partner's share of
distributable cash from capital transactions so payable will be (i) 100% of such
distributable cash from capital distributions until the General Partner's share
of the aggregate capital distributions made under section 11c(iii) and 11c(v) of
the Partnership Agreement equal 25% and (ii) thereafter, 25% of such
distributable cash from capital transactions. No Incentive Management Interest
from capital transactions was paid to the General Partner for the fiscal year
ended December 31, 2003. The Partnership does not anticipate that any such
amounts will be paid or become payable to the General Partner during the next
fiscal year.
Uniprop AM, LLC received and will receive property management fees for
each Property managed by it. Uniprop AM, LLC is primarily responsible for the
day-to-day management of the Properties and for the payment of the costs of
operating each Property out of the rental income collected. The property
management fees are equal to the lesser of 5% of the annual gross receipts from
the Properties managed by Uniprop AM, LLC, or the amount which would be payable
to an unaffiliated third party for comparable services. During the last fiscal
year, Uniprop AM, LLC received property management fees totaling
-18-
$613,980. The actual amounts to be received during the next fiscal year will
depend upon the results of the Partnership's operations and are not determinable
at this time.
Uniprop Inc. was replaced as the Partnership's management entity by
Uniprop AM, LLC in 2003.
Certain employees of affiliates of the General Partner were paid an
aggregate of $113,289 during 2003 to perform local management, data processing
and investor relation services for the Partnership. It is anticipated comparable
amounts will be paid in the next fiscal year. Uniprop Homes, Inc., a related
entity, received commissions totaling $110,600 for certain services provided as
a broker/dealer of manufactured homes for the communities. Uniprop Homes, Inc.
represented the communities in the sale of new and pre-owned homes to community
residents.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership retained BDO Seidman, LLP to audit its financial statements for
the year ended December 31, 2003. The Partnership also retained BDO Seidman to
provide other services in 2003.
The Aggregate fees billed to the Partnership for professional services performed
by BDO Seidman were as follows.
2003 2002
-------- --------
(1) Audit Fees $ 30,800 $ 28,890
(2) Audit-Related Fees $ 0 $ 0
(3) Tax Fees $ 13,900 $ 13,110
(4) All Other Fees $ 0 $ 0
(5) Total $ 44,700 $ 42,000
AUDIT FEES: pertain to the audit of the Partnerships annual financial
statements, Including reviews of the interim financial statements contained in
the Partnerships Quarterly Reports of Form 10-Q.
TAX FEES: pertain to services performed for tax compliance, tax planning and tax
advice, including preparation of tax returns and partners Schedule K-1
processing. Tax Planning and advice also includes assistance with tax audits and
appeals, and tax advice related to specific transactions.
The services performed by BDO Seidman in 2003 were pre-approved by the General
Partner.
-19-
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a) Financial Statements
(1) The following financial statements and related documents are
filed with this report:
(i) Report of Independent Certified Public Accountants
(ii) Balance Sheets as of December 31, 2003 and 2002
(iii) Statements of Income for the fiscal years ended
December 31, 2003, 2002 and 2001
(iv) Statements of Partners' Equity for the fiscal years
ended December 31, 2003, 2002 and 2001
(v) Statements of Cash Flows for the fiscal years ended
December 31, 2003, 2002 and 2001
(2) The following financial statement schedule is filed with this
report:
Schedule III - Real Estate and Accumulated
Depreciation for the fiscal years ended December 31,
2003, 2002 and 2001
(3) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed November 12, 1986, as amended on
December 22, 1986 and January 16, 1987:
3(a) Certificate of Limited Partnership for the Partnership
3(b) Uniprop Income Fund II Agreement of Limited Partnership
4(a) First Amendment to Uniprop Income Fund II Agreement of Limited
Partnership (April 1, 1987)
10(a) Form of Management Agreement between the Partnership and
Uniprop AM, LLC.
-20-
10(b) Form of Consulting Agreement among the Partnership, the
General Partner and Consultant
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth
quarter of 2003.
The following exhibits are incorporated by reference to the Form 10-K
for the fiscal year ended December 31, 1997:
4(b) Form of Beneficial Assignment Certificate (BAC) for the
Partnership (Originally submitted with Form 10-K for the
fiscal year ended December 31, 1987.)
10(c) Contingent Purchase Price Agreement with Sunrise Broward
Associates, Ltd. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
10(d) Contingent Purchase Price Agreement with Ardmor Associates
Limited Partnership. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
10(e) Incentive Acquisition Fee Agreement between the Partnership
and Uniprop, Inc. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1997.)
The following exhibit is incorporated by reference to the Form 8-K that
was filed on September 8, 1998:
Mortgage notes, made as of August 20, 1998, between Uniprop
Manufactured Housing Communities Income Fund II and GMAC CMC.
The following exhibits are attached to this Report:
28 Letter summary of the estimated fair market values of the
Partnership's nine manufactured housing communities, as of
March 1, 2004
-21-
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund II (a Michigan limited partnership), as of December 31,
2003 and 2002, and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 2003. We have
also audited the schedule listed under Item 15 of Form 10-K. These financial
statements and the schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and the schedule. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements and the
schedule. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund II at December 31, 2003 and 2002 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.
Also, in our opinion, the schedule listed under Item 15 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
February 6, 2004
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 2003 2002
- ----------------------------------- ----------- -----------
ASSETS
PROPERTY AND EQUIPMENT (Note 2)
Buildings and improvements $51,610,447 $51,212,057
Land 11,666,645 11,647,745
Furniture and equipment 628,258 616,662
----------- -----------
63,905,350 63,476,464
Less accumulated depreciation 27,361,187 25,618,711
----------- -----------
NET PROPERTY AND EQUIPMENT 36,544,163 37,857,753
Cash 2,652,394 3,118,034
Manufactured homes and improvements 1,210,686 1,110,202
Unamortized financing costs 515,904 536,820
Other assets (Note 3) 1,903,173 1,508,047
----------- -----------
$42,826,320 $44,130,856
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Note payable (Note 2) $27,819,236 $28,273,124
Accounts payable 257,209 178,328
Other liabilities (Note 4) 702,419 704,535
----------- -----------
TOTAL LIABILITIES 28,778,864 29,155,987
----------- -----------
PARTNERS' EQUITY
Unit holders 13,705,732 14,654,262
General partner 341,724 320,607
----------- -----------
TOTAL PARTNERS' EQUITY 14,047,456 14,974,869
----------- -----------
$42,826,320 $44,130,856
=========== ===========
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
Year Ended December 31, 2003 2002 2001
- --------------------------------------------------- ----------- ----------- -----------
INCOME
Rental $11,680,032 $11,825,039 $12,246,049
Home sale income 2,060,894 1,135,270 1,570,982
Other 661,767 781,290 713,296
----------- ----------- -----------
14,402,693 13,741,599 14,530,327
----------- ----------- -----------
OPERATING EXPENSES
Administrative (Note 5) 3,274,642 3,243,321 3,264,387
Property taxes 1,097,809 1,068,910 1,077,617
Utilities 826,225 857,262 852,880
Property operations 1,540,609 1,701,880 1,858,650
Depreciation and amortization 1,802,281 1,762,875 1,757,401
Interest 1,810,959 1,840,845 1,875,951
Home sale expense 1,938,465 1,148,520 1,732,618
----------- ----------- -----------
12,290,990 11,623,613 12,419,504
----------- ----------- -----------
NET INCOME $ 2,111,703 $ 2,117,986 $ 2,110,823
=========== =========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT (Note 7) $ .63 $ .63 $ .63
=========== =========== ===========
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT (Note 7) $ .92 $ .90 $ .82
=========== =========== ===========
NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
=========== =========== ===========
NET INCOME ALLOCABLE TO GENERAL PARTNER (Note 7) $ 21,117 $ 21,180 $ 21,108
=========== =========== ===========
DISTRIBUTIONS ALLOCABLE TO GENERAL PARTNER $ - $ - $ -
=========== =========== ===========
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
General
Partner Unit Holders TOTAL
------------ ------------ ------------
BALANCE, January 1, 2001 $ 278,319 $ 16,149,566 $ 16,427,885
Distributions to unit holders - (2,708,777) (2,708,777)
Net income for the year 21,108 2,089,715 2,110,823
------------ ------------ ------------
BALANCE, December 31, 2001 299,427 15,530,504 15,829,931
Distributions to unit holders - (2,973,048) (2,973,048)
Net income for the year 21,180 2,096,806 2,117,986
------------ ------------ ------------
BALANCE, December 31, 2002 320,607 14,654,262 14,974,869
Distributions to unit holders - (3,039,116) (3,039,116)
Net income for the year 21,117 2,090,586 2,111,703
------------ ------------ ------------
BALANCE, December 31, 2003 $ 341,724 $ 13,705,732 $ 14,047,456
============ ============ ============
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
Year Ended December 31, 2003 2002 2001
- ----------------------------------------------------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,111,703 $ 2,117,986 $ 2,110,823
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,781,365 1,741,959 1,736,485
Amortization 20,916 20,916 20,916
Gain on sale of property and equipment (8,846) (95,221) -
(Increase)decrease in manufactured homes and
improvements (100,484) 32,377 352,958
Increase in other assets (395,126) (360,087) (5,154)
Increase (decrease) in accounts payable 78,881 (86,709) 85,595
Increase (decrease) in other liabilities (2,116) 317 (21,656)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,486,293 3,371,538 4,279,967
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (467,775) (586,838) (593,744)
Proceeds from sale of property and equipment 8,846 110,000 -
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (458,929) (476,838) (593,744)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to unit holders (3,039,116) (2,973,048) (2,708,777)
Repayments of notes payable (453,888) (544,634) (391,600)
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (3,493,004) (3,517,682) (3,100,377)
----------- ----------- -----------
NET INCREASE (DECREASE ) IN CASH (465,640) (622,982) 585,846
CASH, at beginning of year 3,118,034 3,741,016 3,155,170
----------- ----------- -----------
CASH, at end of year $ 2,652,394 $ 3,118,034 $ 3,741,016
=========== =========== ===========
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING ORGANIZATION AND BUSINESS
POLICIES
Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited
Partnership (the "Partnership")
acquired, maintains, operates and will
ultimately dispose of income producing
residential real properties consisting
of nine manufactured housing communities
(the "properties") located in Florida,
Michigan, Nevada and Minnesota. The
Partnership was organized and formed
under the laws of the State of Michigan
on November 7, 1986.
In accordance with its Prospectus dated
December 1986, the Partnership sold
3,303,387 units of beneficial assignment
of limited partnership interest
("Units") for $66,067,740. The
Partnership purchased the properties for
an aggregate purchase price of
approximately $56,000,000. Three of the
properties costing approximately
$16,008,000 were previously owned by
entities which were affiliates of the
general partner.
The general partner is Genesis
Associates Limited Partnership. Uniprop
Beneficial Corporation was the initial
limited partner who assigned to those
persons purchasing units a beneficial
limited partnership interest when the
minimum number of units were sold.
USE OF ESTIMATES
The preparation of financial statements
in conformity with generally accepted
accounting principles requires
management to make estimates and
assumptions that affect the reported
amounts of (1) assets and liabilities
and the disclosure of contingent assets
and liabilities as of the date of the
financial statements, and (2) revenues
and expenses during the reporting
period. Actual results could differ from
these estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and notes
payable approximate their fair values.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
Property and equipment are stated at
cost. Depreciation is provided using the
straight-line method over a period of
thirty years except for furniture and
equipment which is depreciated over a
period ranging from three to ten years.
Accumulated depreciation for tax
purposes was $25,022,310 and $23,163,344
as of December 31, 2003 and 2002,
respectively.
Long-lived assets such as property and
equipment are evaluated for impairment
when events or changes in circumstances
indicate that the carrying amount of the
assets may not be recoverable through
the estimated undiscounted future cash
flows from the use of these assets. When
any such impairment exists, the related
assets will be written down to fair
value. No impairment loss recognition
has been required through December 31,
2003.
MANUFACTURED HOMES AND IMPROVEMENTS
Manufactured homes and improvements are
stated at the lower of cost or market
and represent manufactured homes held
for sale.
FINANCING COSTS
Costs to obtain financing have been
capitalized and are amortized using the
straight-line method over the 30-year
term of the related mortgage note
payable.
REVENUE RECOGNITION
Rental income attributable to leases is
recorded when due from the lessees.
INCOME TAXES
Federal income tax regulations provide
that any taxes on income of a
partnership are payable by the partners
as individuals. Therefore, no provision
for such taxes has been made at the
partnership level.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
2. NOTE PAYABLE In 1998, the Partnership entered into a
$30,000,000 note payable agreement. The
borrowings are secured by mortgages on
the Partnership's properties. The note
is payable in monthly installments of
$188,878, including interest at 6.37%,
through March, 2009. Thereafter, the
monthly installment and interest rate
will be adjusted based on the provisions
of the agreement through the note
maturity date of September 2028.
Future maturities on the note payable
for the next five years are as follows:
2004 - $470,000; 2005 - $506,000; 2006 -
$540,000; 2007 - $587,000 and 2008 -
$622,000.
3. OTHER ASSETS At December 31, 2003 and 2002, "Other
Assets" included cash of approximately
$330,000 and $332,000, respectively, in
an escrow account for property taxes,
insurance, and capital improvements, as
required by the Partnership's note
payable agreement. The cash is
restricted from operating use.
At December 31, 2003 and 2002, "Other
assets" also included cash of
approximately $263,000 in a security
deposit escrow account for three of the
Partnership's properties, which is
required by the laws of the state in
which they are located and is restricted
from operating use.
4. OTHER LIABILITIES Other liabilities consisted of:
December 31, 2003 2002
- -------------------------- -------- --------
Tenants' security deposits $536,510 $540,733
Accrued interest 103,372 105,058
Other 62,537 58,744
-------- --------
TOTAL $702,419 $704,535
======== ========
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
5. RELATED PARTY MANAGEMENT AGREEMENT
TRANSACTIONS
The Partnership has an agreement with an
affiliate of the general partner to
manage the properties owned by the
Partnership. The management agreement is
automatically renewable annually, but
may be terminated by either party upon
sixty days written notice. The property
management fee is the lesser of 5% of
annual gross receipts from the
properties managed, or the amount which
would be payable to an unaffiliated
third party for comparable services.
FEES AND EXPENSES
During the years ended December 31,
2003, 2002 and 2001, the affiliate
earned property management fees of
$613,980, $624,188, and $643,915,
respectively, as permitted in the
Agreement of Limited Partnership. These
fees are included with "Administrative"
expenses in the respective statements of
income. The Partnership was owed $34,020
and $29,812 by the affiliate at December
31, 2003 and 2002, respectively.
CONTINGENT PURCHASE PRICE
A general partner of Genesis Associates
Limited Partnership has an interest in
the sellers of two of the properties
acquired by the Partnership and is
entitled to share in a contingent
purchase price that will not exceed
$2,054,000. Additional amounts to be
paid, if any, will depend upon the
results of the Partnership's operations
and the amounts received upon the sale,
financing or other disposition of the
properties, and are not determinable at
this time. The Partnership does not
anticipate any such amount will become
payable during the next fiscal year.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
6. RECONCILIATION OF
FINANCIAL STATEMENT
INCOME AND TAXABLE
INCOME
Year Ended December 31, 2003 2002 2001
- --------------------------- ----------- ----------- -----------
Income per the financial
statements $ 2,111,703 $ 2,117,986 $ 2,110,823
Adjustments to depreciation
for difference in methods (106,175) (69,998) 80,367
Adjustments for prepaid
rent, meals and
entertainment 7,881 14,250 (7,263)
----------- ----------- -----------
INCOME PER THE PARTNER-
SHIP'S TAX RETURN $ 2,013,409 $ 2,062,238 $ 2,183,927
=========== =========== ===========
7. PARTNERS' CAPITAL Subject to the orders of priority under
certain specified conditions more fully
described in the Agreement of Limited
Partnership, distributions of
partnership funds and allocations of net
income from operations are principally
determined as follows:
DISTRIBUTIONS
Distributable cash from operations in
the Agreement (generally defined as net
income plus depreciation and
amortization) is to be distributed to
unit holders until they have received a
10% cumulative preferred return. After
the unit holders have received their 10%
cumulative preferred return, all
remaining cash from operations is
distributed to the general partner in
the form of an incentive management
interest until the total amount received
by the general partner is equal to 15%
of the aggregate amount of cash
distributed from operations in a given
year. Amounts payable to but not paid to
the general partner will be accumulated
and paid from future capital
transactions after the unit holders have
first received their 10% preferred
return and 125% of their capital
contributions. Thereafter, 85% of
distributable cash from operations is to
be paid to the unit holders and 15% to
the general partner.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Annual distributable cash from
operations was less than the amount
required for the annual 10% preferred
return to the unit holders by
approximately $2,613,000 and $2,679,000
in 2003 and 2002, respectively. No
distributions can be made to the general
partner until the cumulative preferred
return deficit of approximately
$30,241,000 has been distributed to the
unit holders.
At December 31, 2003, the general
partner's cumulative incentive
management interest to be distributed
was approximately $9.4 million. The
actual amount to be accumulated or paid
in the future depends on the results of
the Partnership's operations and is not
currently determinable; however, no such
distribution to the general partner is
anticipated during fiscal 2004.
ALLOCATION OF NET INCOME
Net income is principally allocated 99%
to the unit holders and 1% to the
general partner until the cumulative
amount of net income allocated to the
unit holders equals the aggregate
cumulative amount of cash distributable
to the unit holders. After sufficient
net income has been allocated to the
unit holders to equal the amount of cash
distributable to them, all the net
income is to be allocated to the general
partner until it equals the amount of
cash distributed to it.
8. SUPPLEMENTAL CASH FLOW Interest paid during 2003, 2002 and 2001
INFORMATION was approximately $1,813,000,
$1,843,000, and $1,875,000,
respectively.
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
9. INTERIM RESULTS The following summary represents the
unaudited results of operations of the
(UNAUDITED) Partnership, expressed in
thousands except per unit amounts, for
the periods from January 1, 2002 through
December 31, 2003:
Three Months Ended
- -------------------------------------------------------------------------------------------
2003 March 31, June 30, September 30, December 31,
- ------------------------------------ --------- -------- ------------ -----------
REVENUES $ 3,251 $ 3,756 $ 3,675 $ 3,721
========= ======== ============ ===========
NET INCOME $ 522 $ 632 $ 457 $ 501
========= ======== ============ ===========
INCOME PER LIMITED PARTNERSHIP UNIT $ .16 $ .19 $ .14 $ .15
========= ======== ============ ===========
Three Months Ended
- ------------------------------------------------------------------------------------------
2002 March 31, June 30, September 30, December 31,
- ----------------------------------- --------- -------- ------------ -----------
REVENUES $ 3,319 $ 3,408 $ 3,502 $ 3,513
========= ======== ============ ===========
NET INCOME $ 503 $ 655 $ 432 $ 528
========= ======== ============ ===========
INCOME PER LIMITED PARTNERSHIP UNIT $ .15 $ .20 $ .13 $ .15
========= ======== ============ ===========
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2003
Column D
----------------------------
Costs
Column C Capitalized
--------------------------- Subsequent to
Initial Cost Acquisition
Column A Column B --------------------------- ----------------------------
- --------------------- ----------- Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- --------------------- ----------- ----------- ------------- -------- -------------
Ardmor Village
(Lakeville, MN) $ 2,576,173 $ 1,063,253 $ 4,253,011 $ 4,120 $ 1,153,700
Sunshine Village
(Davie, FL) 3,997,517 1,215,862 4,875,878 - 232,802
Camelot Manor
(Grand Rapids, MI) 3,228,764 918,949 3,681,051 - 1,020,838
Country Roads
(Jacksonville, FL) - 636,550 2,546,200 38,106 721,592
Paradise Village
(Tampa, FL) - 1,760,000 7,040,000 279,053 1,381,560
Dutch Hills
(Haslett, MI) 2,404,101 839,693 3,358,771 41,526 639,658
Stonegate Manor
(Lansing, MI) 2,809,444 930,307 3,721,229 40,552 762,410
El Adobe
(Las Vegas, NV) 5,152,977 1,480,000 5,920,000 39,964 401,415
West Valley
(Las Vegas NV) 7,650,260 2,289,700 9,158,800 89,010 741,532
----------- ----------- ------------- -------- -------------
$27,819,236 $11,134,314 $ 44,554,940 $532,331 $ 7,055,507
=========== =========== ============= ======== =============
Column E Column H
------------------------------------------------- ----------------
Gross Amount at Which Carried Life on Which
at Close of Period Column F Column G Depreciation in
Column A ------------------------------------------------- ------------ --------- Latest Income
- --------------------- Buildings and Accumulated Date Statement is
Description Land Improvements Total Depreciation Acquired Computed
- --------------------- ----------- --------------- ----------- ------------ -------- ---------------
Ardmor Village
(Lakeville, MN) $ 1,067,373 $ 5,406,711 $ 6,474,084 $ 2,711,961 1987 30 years
Sunshine Village
(Davie, FL) 1,215,862 5,108,680 6,324,542 2,829,064 1987 30 years
Camelot Manor
(Grand Rapids, MI) 918,949 4,701,889 5,620,838 2,336,612 1987 30 years
Country Roads
(Jacksonville, FL) 674,656 3,267,792 3,942,448 1,745,465 1987 30 years
Paradise Village
(Tampa, FL) 2,039,053 8,421,560 10,460,613 4,515,129 1987 30 years
Dutch Hills
(Haslett, MI) 881,219 3,998,429 4,879,648 2,033,279 1987 30 years
Stonegate Manor
(Lansing, MI) 970,859 4,483,639 5,454,498 2,193,318 1987 30 years
El Adobe
(Las Vegas, NV) 1,519,964 6,321,415 7,841,379 3,351,305 1988 30 years
West Valley
(Las Vegas NV) 2,378,710 9,900,332 12,279,042 5,192,520 1988 30 years
----------- ------------- ----------- ------------
$11,666,645 $ 51,610,447 $63,277,092 $ 26,908,653
=========== ============= =========== ============
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 2003
1. RECONCILIATION OF LAND The following table reconciles the land
from January 1, 2001 to December 31,
2003:
2003 2002 2001
------------ ------------ ------------
BALANCE, at January 1 $ 11,647,745 $ 11,662,525 $ 11,662,525
Additions to land 18,900 - -
Cost of land sold - (14,780) -
------------ ------------ ------------
BALANCE, at December 31 $ 11,666,645 $ 11,647,745 $ 11,662,525
============ ============ ============
2. RECONCILIATION OF BUILDINGS The following table reconciles the
AND IMPROVEMENTS buildings and improvements from January
1, 2001 to December 31, 2003:
2003 2002 2001
----------- ----------- -----------
BALANCE, at January 1 $51,212,057 $50,708,179 $50,263,748
Additions to buildings and
improvements 398,390 503,878 444,431
Cost of assets sold - -
----------- ----------- -----------
BALANCE, at December 31 $51,610,447 $51,212,057 $50,708,179
=========== =========== ===========
3. RECONCILIATION OF ACCUMULATED The following table reconciles the
DEPRECIATION accumulated depreciation from January
1, 2001 to December 31, 2003:
2003 2002 2001
----------- ----------- -----------
BALANCE, at January 1 $25,177,324 $23,473,656 $21,830,404
Current year
depreciation expense 1,731,329 1,703,668 1,643,252
Accumulated depreciation
on assets sold - -
----------- ----------- -----------
BALANCE, at December 31 $26,908,653 $25,177,324 $23,473,656
=========== =========== ===========
4. TAX BASIS OF BUILDINGS AND The aggregate cost of buildings and
IMPROVEMENTS improvements for federal income tax
purposes is equal to the cost basis used
for financial statements purposes.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund II, a
Michigan Limited Partnership, 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., Managing General Partner
By: /s/ Paul M. Zlotoff
------------------------------------
Paul M. Zlotoff, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: March 29, 2004
By: /s/ Gloria A. Koster By: /s/ Paul M. Zlotoff
-------------------------------- ------------------------------------
Gloria A. Koster Paul M. Zlotoff, Chairman of
Principal Financial Officer Uniprop, Inc.
(Chief Financial Officer of (Principal Executive Officer)
Uniprop, Inc.)
By: /s/ Susann Szepytowski
--------------------------------
Susann Szepytowski
Principal Accounting Officer
(Controller of Uniprop, Inc.)
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------- ----------- ---------------- ----
3(a) Certificate of Limited Partnership for Incorporated by
the Partnership reference to the S-11 Registration
Statement of the Partnership filed
November 12, 1986, as amended on
December 22, 1986 and January 16, 1987
(the "Registration Statement").
3(b) Uniprop Income Fund II Agreement of Incorporated by reference to the Registration
Limited Partnership Statement.
4(a) First Amendment to Uniprop Income Fund II Incorporated by reference to
Agreement of Limited Partnership the Registration Statement.
(April 1, 1987)
4(b) Form of Beneficial Assignment Certificate Incorporated by reference to
(BAC) for the Partnership (originally Form 10-K for fiscal year ended
with Form 10-K for the fiscal year ended December 31, 1997.
December 31, 1987)
10(a) Form of Management Agreement between the Incorporated by reference to the Registration
Partnership and Uniprop, Inc. Statement.
10(b) Form of Consulting Agreement among the Incorporated by reference to the Registration
Partnership, the General Partner and Statement.
Consultant
10(c) Contingent Purchase Price Agreement with Incorporated by reference to Form 10-K for
Sunrise Broward Associates, Ltd. fiscal year ended December 31, 1997.
(originally filed with Form 10-K for the
fiscal year ended December 31, 1987)
10(d) Contingent Purchase Price Agreement with Incorporated by reference to Form 10-K for
Ardmor Associates Limited Partnership fiscal year ended December 31, 1997.
(originally filed with Form 10-K for the
fiscal year ended December 31, 1987)
10(e) Incentive Acquisition Fee Agreement Incorporated by reference to Form 10-K for
between the Partnership and Uniprop, Inc. fiscal year ended December 31, 1997.
(originally filed with Form 10-K for the
fiscal year ended December 31, 1987)
10(f) Mortgage Notes, made on August 20, 1998 Incorporated by reference to the Form 8-K filed
between Uniprop Income Fund II and GMAC on September 8, 1998.
CMC
28 Letter summary of the estimated fair Filed herewith.
market values of the Partnership's nine
manufactured housing communities, as of
March 1, 2004.
31.1 Certificate of Principal Executive Filed herewith.
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certificate of Principal Financial Filed herewith.
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
*32.1 Certification Pursuant to Section 906 of Filed herewith.
the Sarbanes-Oxley Act of 2002
*32.2 Certification Pursuant to Section 906 of Filed herewith.
the Sarbanes-Oxley Act of 2002
* This certificate is being furnished solely to accompany the report pursuant to
18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the
Securities and Exchange Act of 1934, as amended, and is not to be incorporated
by reference into any filing of the Partnership, whether made before or after
the date hereof, regardless of any general incorporation language in such
filing.