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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2004 Commission File No. 0-16701
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2702802
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
280 DAINES STREET, BIRMINGHAM, MICHIGAN 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9261
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
units of beneficial assignments of limited partnership interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [ ] No [X]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
----
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
March 31, 2004 (Unaudited) and
December 31, 2003 3
Statements of Income
Three months ended March 31, 2004
and 2003 (Unaudited) 4
Statement of Partners Equity
Three months ended March 31, 2004(Unaudited) 4
Statements of Cash Flows
Three months ended March 31, 2004
and 2003 (Unaudited) 5
Notes to Financial Statements
March 31, 2004 (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 6
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 9
ITEM 4. CONTROLS AND PROCEDURES 10
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
CERTIFICATION EXHIBITS 11
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
MARCH 31,2004 DECEMBER 31, 2003
------------ -----------------
(UNAUDITED)
ASSETS
Properties:
Land $ 11,666,645 $ 11,666,645
Buildings And Improvements 51,726,764 51,610,447
Furniture And Fixtures 636,152 628,258
------------ ------------
64,029,561 63,905,350
Less Accumulated Depreciation (27,810,083) (27,361,187)
------------ ------------
36,219,478 36,544,163
Cash And Cash Equivalents 2,421,835 2,652,394
Unamortized Finance Costs 510,675 515,904
Manufactured Homes and Improvements 1,400,554 1,210,686
Other Assets 1,767,566 1,903,173
------------ ------------
Total Assets $ 42,320,108 $ 42,826,320
------------ ------------
MARCH 31,2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
LIABILITIES & PARTNERS EQUITY
Accounts Payable $ 220,349 $ 257,209
Other Liabilities 734,962 702,419
Notes Payable 27,699,974 27,819,236
----------- -----------
Total Liabilities 28,655,285 28,778,864
Partners' Equity:
General Partner 345,495 341,724
Unit Holders 13,319,328 13,705,732
----------- -----------
Total Partners' Equity 13,664,823 14,047,456
----------- -----------
Total Liabilities And Partners' Equity $42,320,108 $42,826,320
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
THREE MONTHS ENDED
MARCH 31, 2004 MARCH 31, 2003
-------------- --------------
(unaudited) (unaudited)
STATEMENTS OF INCOME
Income:
Rental Income $2,832,398 $2,924,202
Other 163,046 144,688
Home Sale Income 217,620 182,301
---------- ----------
Total Income $3,213,064 $3,251,191
---------- ----------
Operating Expenses:
Administrative Expenses
(Including $148,945 and $152,931, in Property Management
Fees Paid to an Affiliate for the Three Month Period Ending
March 31, 2004 and 2003 Respectively) 884,732 827,174
Property Taxes 278,573 268,752
Utilities 182,873 201,413
Property Operations 362,296 352,227
Depreciation And Amortization 454,126 440,907
Interest 446,928 449,294
Home Sale Expense 226,391 189,107
---------- ----------
Total Operating Expenses $2,835,919 $2,728,874
---------- ----------
Net Income $ 377,145 $ 522,317
---------- ----------
Income Per Unit: 0.11 0.16
Distribution Per Unit: 0.23 0.23
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
March 31, 2004 and 2003 3,303,387 3,303,387
STATEMENT OF PARTNERS' EQUITY (Unaudited)
General Partner Unit Holders Total
--------------- ------------ -------------
Balance, January 1, 2004 $ 341,724 $ 13,705,732 $ 14,047,456
Distributions (759,778) (759,778)
Net Income 3,771 373,374 377,145
------------ ------------ ------------
Balance as of March 31, 2004 $ 345,495 $ 13,319,328 $ 13,664,823
============ ============ ============
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,2004 MARCH 31,2003
------------- -------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 377,145 $ 522,317
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 448,897 435,678
Amortization 5,229 5,229
Gain on Sale of Equipment 0 (3,000)
(Increase) Decrease in Manufactured Homes and Improvements (189,868) (345,708)
(Increase) Decrease In Other Assets 135,607 166,236
Increase (Decrease) In Accounts Payables (36,860) (46,987)
Increase (Decrease) In Other Liabilities 32,543 1,951
----------- -----------
Total Adjustments 395,548 213,399
----------- -----------
Net Cash Provided By
Operating Activities 772,693 735,716
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (124,212) (22,718)
Proceeds from sale of Equipment 0 3,000
----------- -----------
Net Cash Used In
Investing Activities (124,212) ($ 19,718)
----------- -----------
Cash Flows From Financing Activities:
Distributions To Partners (759,778) (759,779)
Payment On Mortgage (119,262) (116,905)
----------- -----------
Net Cash Used In
Financing Activities (879,040) (876,684)
----------- -----------
Decrease In Cash and Equivalents (230,559) (160,686)
Cash and Equivalents, Beginning 2,652,394 3,118,034
----------- -----------
Cash and Equivalents, Ending $ 2,421,835 $ 2,957,348
----------- -----------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2004 (Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited 2004 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, 2003 has been derived from the
audited financial statements at that date. Operating results for the three
months ended March 31, 2004 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2004, 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, 2003.
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.
6
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.
The General Partner has decided to distribute $759,778, or $.23 per unit, to the
unit holders as of March 31, 2004. 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.
As of March 31, 2004, the Partnership's cash reserves amounted to $2,421,835.
The level of cash reserves maintained is at the discretion of the General
Partner.
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 75% at the end of March 2004, versus
80% for March 2003. The average monthly homesite rent as of March 31, 2004 was
approximately $401, versus $387, an increase of 3% from March 2003.
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
Ardmor Village 339 296 87% $399
Camelot Manor 335 253 76% 372
Country Roads 312 214 69% 272
Dutch Hills 278 243 87% 377
El Adobe 367 264 72% 450
Paradise Village 614 348 57% 335
Stonegate Manor 308 229 74% 379
Sunshine Village 356 322 90% 512
West Valley 421 321 76% 512
----- ----- --- ----
TOTAL ON 3/31/04: 3,330 2490 75% $401
TOTAL ON 3/31/03: 3,330 2,667 80% $387
*NOT A WEIGHTED AVERAGE
7
GROSS REVENUES NET INCOME
3/31/04 3/31/03 3/31/04 3/31/03
Ardmor Village $ 365,881 $ 440,400 $ 203,145 $ 177,126
Camelot Manor 338,936 275,746 157,015 135,949
Country Roads 198,947 195,992 69,343 76,784
Dutch Hills 300,327 277,199 119,234 154,274
El Adobe 355,023 354,625 174,911 188,987
Paradise Village 409,226 417,812 107,229 95,169
Stonegate Manor 298,770 296,079 128,048 132,323
Sunshine Village 457,287 452,344 264,955 273,508
West Valley 487,127 536,386 271,888 324,691
---------- ---------- ---------- ----------
3,211,524 3,246,583 1,495,768 1,558,881
Partnership Management: 1,540 4,608 (129,095) (92,807)
Other expenses: ----- ---- (88,474) (53,486)
Debt Service (446,928) (449,294)
Depreciation and Amortization ----- ---- (454,126) (440,907)
---------- ---------- ---------- ----------
$3,213,064 $3,251,191 $ 377,145 $ 522,317
COMPARISON OF QUARTER ENDED MARCH 31, 2004 TO QUARTER ENDED MARCH 31, 2003
Gross revenues decreased $38,127 to $3,213,064 in 2004, as compared to
$3,251,191 in 2003. The decrease was the result of lower occupancy due to weak
economic conditions.
(See table on previous page.)
As described in the Statements of Income, total operating expenses increased
$107,045, or 4%, to $2,835,919 in 2004, as compared to $2,728,874 in 2003. The
increase is due to higher property taxes, higher home sale expense as well as
higher property operating cost.
As a result of the aforementioned factors, Net Income decreased to $377,145 for
the first quarter of 2004 compared to $522,317 for the first quarter of 2003.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise primarily through its borrowing
activities. There is inherent roll over risk for borrowings as they mature and
are renewed at
8
current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and the Partnership's future
financing requirements.
Note Payable: At March 31, 2004 the Partnership had a note payable outstanding
in the amount of $27,699,974. 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
As of the end of the period covered by this report, the Partnership carried out
an evaluation, under the supervision and with the participation of the Principal
Executive Officer and the Principal Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation,
the Principal Executive Officer and the Principal Financial Officer concluded
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the quarterly report is recorded,
processed, summarized and reported as and when required.
There was no change in the Partnership's internal controls over financial
reporting that occurred during the most recent completed quarter that has
materially affected, or is reasonably likely to materially affect, the
Partnership's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. 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 March 31, 2004.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited Partnership
BY: Genesis Associates Limited Partnership,
General Partner
BY: Uniprop, Inc.,
its Managing General Partner
By: /s/ Paul M. Zlotoff
-----------------------------------------------
Paul M. Zlotoff, President
By: /s/ Gloria A. Koster
-----------------------------------------------
Gloria A. Koster, Principal Financial Officer
Dated: May 11, 2004
10
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
EX-31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
EX-32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
EX-32.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.