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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2004 Commission File No. 0-15940
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2593067
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
280 DAINES STREET, BIRMINGHAM, MICHIGAN 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9261
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
$1,000 per unit, units of limited partnership interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [ ] No [X]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
June 30, 2004 (Unaudited) and
December 31, 2003 3
Statements of Income
Six months ended June 30, 2004 and 2003
Three months ended June 30, 2004
and 2003 (Unaudited) 4
Statement of Partner's Equity (Deficit)
Six months ended June 30, 2004 (Unaudited) 4
Statements of Cash Flows
Six months ended June 30, 2004
and 2003 (Unaudited) 5
Notes to Financial Statements
June 30, 2004 (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 7
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK 10
ITEM 4. CONTROLS AND PROCEDURES 11
PART II OTHER INFORMATION
ITEM I. LEGAL 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
CERTIFICATION EXHIBITS
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEET
ASSETS JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
Properties:
Land $ 5,280,000 $ 5,280,000
Buildings And Improvements 25,464,279 25,419,430
Furniture And Fixtures 221,518 218,518
----------- -----------
30,965,797 30,917,948
Less Accumulated Depreciation 14,300,456 13,866,583
----------- -----------
16,665,341 17,051,365
Cash And Cash Equivalents 358,886 258,423
Cash -Security Escrow 305,158 305,158
Unamortized Finance Costs 237,548 280,548
Manufactured Homes and Improvements 1,475,184 1,312,787
Other Assets 1,139,199 1,258,312
----------- -----------
Total Assets $20,181,316 $20,466,593
----------- -----------
LIABILITIES AND PARTNERS' DEFICIT JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
Line of Credit $ 270,000 $ 235,000
Accounts Payable 183,222 149,213
Other Liabilities 1,110,295 885,533
Mortgage Payable 31,389,014 31,576,444
------------ ------------
Total Liabilities $ 32,952,531 $ 32,846,190
Partners' Equity (Deficit):
General Partner (4,514,817) (4,188,993)
Class A Limited Partners (9,641,859) (9,473,234)
Class B Limited Partners 1,385,461 1,282,630
------------ ------------
Total Partners' Deficit (12,771,215) (12,379,597)
------------ ------------
Total Liabilities And
Partners' Deficit $ 20,181,316 $ 20,466,593
------------ ------------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2003
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 4,070,732 $ 4,220,735 $ 2,033,388 $ 2,106,898
Home Sale Income 1,001,925 879,656 786,440 634,921
Other 202,440 262,361 97,567 106,253
----------- ----------- ----------- -----------
Total Income $ 5,275,097 $ 5,362,752 $ 2,917,395 $ 2,848,072
----------- ----------- ----------- -----------
Operating Expenses:
Administrative Expenses
(Including $213,225, $223,842,$106,337 and
$110,471 in Property Management
Fees Paid to An Affiliate for the
Six and Three Month Period
Ended June 30, 2004 and 2003, respectively) 1,048,171 968,483 497,062 475,535
Property Taxes 487,734 461,877 243,867 230,937
Utilities 279,658 275,913 136,776 127,063
Property Operations 626,178 514,311 334,984 274,956
Depreciation And Amortization 476,874 458,894 238,160 229,482
Interest 1,315,429 1,318,991 658,131 667,107
Home Sale Expense 898,296 791,999 702,121 574,525
----------- ----------- ----------- -----------
Total Operating Expenses $ 5,132,340 $ 4,790,468 $ 2,811,101 $ 2,579,605
----------- ----------- ----------- -----------
Net Income (Loss) $ 142,757 $ 572,284 $ 106,294 $ 268,467
----------- ----------- ----------- -----------
Income (Loss) Per Limited Partnership Unit:
Class A ($ 2.34) $ 9.35 ($ 0.24) $ 4.20
Class B $ 16.53 $ 27.50 $ 9.19 $ 13.28
Distribution Per Limited Partnership Unit
Class A $ 6.00 $ 6.00 $ 3.00 $ 3.00
Class B $ 6.00 $ 6.00 $ 3.00 $ 3.00
Weighted Average Number Of Limited
Partnership Units Outstanding
Class A 20,230 20,230 20,230 20,230
Class B 9,770 9,770 9,770 9,770
STATEMENT OF PARTNERS' EQUITY (DEFICIT) (UNAUDITED)
General Class A Class B
Partner Limited Limited Total
Beginning Balance as of December 31, 2003 (4,188,993) (9,473,234) 1,282,630 (12,379,597)
Net Income (Loss) 28,551 (47,245) 161,451 142,757
Distributions (354,375) (121,380) (58,620) (534,375)
BALANCE AS OF JUNE 30,2004 (4,514,817) (9,641,859) 1,385,461 2,771,215)
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
------------- -------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $ 142,757 $ 572,284
--------- ---------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 433,874 415,894
Amortization 43,000 43,000
(Increase) Decrease In Homes & Improvements (162,397) (60,059)
(Increase) Decrease In Other Assets 119,113 (653,987)
Increase (Decrease) In Accounts Payable 34,009 (13,671)
Increase (Decrease) In Other Liabilities 224,762 317,489
--------- ---------
Total Adjustments: 692,361 48,666
--------- ---------
Net Cash Provided By
Operating Activities 835,118 620,950
--------- ---------
Cash Flows Used In Investing Activities:
Capital Expenditures (47,850) (10,786)
--------- ---------
Cash Flows From Financing Activities:
Net Proceeds (Payment) on Line of Credit 35,000 (50,000)
Distributions To Partners (534,375) (522,625)
Principal Payments on Mortgage (187,430) (188,735)
--------- ---------
Net Cash Used In Financing Activities (686,805) (761,360)
--------- ---------
Increase (Decrease) In Cash and Equivalents 100,463 (151,196)
Cash and Equivalents, Beginning 258,423 607,207
--------- ---------
Cash and Equivalents, Ending $ 358,886 $ 456,011
--------- ---------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 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 six months
ended June 30, 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.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Partnership's capital resources consist primarily of its four manufactured
housing communities. On March 25, 1997 the Partnership borrowed $33,500,000 from
Nomura Asset Capital Corporation (the "Financing"). It secured the Financing by
placing liens on its four communities. As a result of the Financing, the
Partnership distributed $30,000,000 to the Limited Partners, which represented a
full return of the original capital contributions of $1,000 per unit.
Liquidity
As a result of the Financing, the Partnership's four properties are mortgaged.
At the time of the Financing, the aggregate principal amount due under the four
mortgage notes was $33,500,000 and the aggregate fair market value of the
Partnership's mortgaged properties was $53,200,000. The Partnership expects to
meet its short-term liquidity needs generally through its working capital
provided by operating activities.
The Partnership's long-term liquidity is based, in part, upon its investment
strategy. The properties owned by the Partnership were anticipated to be held
for seven to ten years after their acquisition. All of the properties have been
owned by the Partnership more than ten years. The General Partner may elect to
have the Partnership own the properties for as long as, in the opinion of the
General Partner, it is in the best interest of the Partnership to do so.
The Partnership has a renewable $1,000,000 line of credit with National City
Bank of Michigan/Illinois. The interest rate, on such line of credit, floats 180
basis points above 1 month LIBOR, which on June 30, 2004 was 1.37%. The sole
purpose of the line of credit is to purchase new and used homes to be used as
model homes offered for sale within the Partnership's communities. Over the past
three years, sales of the new and used model homes have been growing and the
General Partner believes that continuing the model home program is in the best
interest of the Partnership. As of June 30, 2004 the outstanding balance on the
line of credit was $270,000.
-7-
The quarterly Partnership Management Distribution paid to the General Partner
during the second quarter based on prior quarter results was$158,500, or
one-fourth of 1.0% of the most recent appraised value of the properties held by
the Partnership ($63,400,000 x 1/4 = $158,500.00).
The General Partner elected to make a total distribution of $112,500 for the
second quarter of 2004 (unchanged from 2003), 80.0% or $90,000, was paid to the
Limited Partners and 20.0% or $22,500 was paid to the General Partner.
While the Partnership is not required to maintain a working capital reserve, the
Partnership has not distributed all the cash generated from operations in order
to build cash reserves. As of June 30, 2004, the Partnership's cash balance
amounted to $358,886. The amount placed in reserves is at the discretion of the
General Partner.
Results of Operations
OVERALL, as illustrated in the tables below, the four properties had a combined
average occupancy of 83% at the end of June 2004, versus 90% a year ago. The
average monthly rent in June 2004 was approximately $478, or 3% more than the
$464 average monthly rent in June 2003 (average rent not a weighted average).
-8-
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
Aztec Estates 645 493 76% $517
Kings Manor 314 303 97 514
Old Dutch Farms 293 226 77 450
Park of the Four Seasons 572 496 87 429
----- ----- -- ----
Total on 6/30/04: 1,824 1,518 83% $478
Total on 6/30/03: 1,824 1,637 90% $464
*Not a weighted average
GROSS REVENUE NET INCOME GROSS REVENUE NET INCOME
6/30/04 6/30/03 6/30/04 6/30/03 6/30/04 6/30/03 6/30/04 6/30/03
three months ended three months ended six months ended six months ended
Aztec Estates $ 1,385,031 $ 1,030,617 $ 426,231 $ 402,291 $2,375,036 $1,909,690 $ 762,485 $ 801,611
Kings Manor 614,163 586,982 270,722 296,637 1,038,667 1,185,046 532,693 595,431
Old Dutch Farms 304,687 366,754 162,803 167,830 627,059 759,209 314,644 405,536
Park of the Four Seasons 611,378 861,627 357,349 424,576 1,230,874 1,504,990 728,137 790,299
----------- ----------- ----------- ----------- ---------- ---------- ----------- -----------
2,915,259 2,845,980 1,217,105 1,291,334 5,271,636 5,358,935 2,337,959 2,592,877
Partnership Management: 2,136 2,092 (86,160) (72,568) 3,461 3,817 (175,714) (148,386)
Other expenses: -- -- (128,360) (53,710) -- -- (227,185) (94,322)
Interest Expense -- -- (658,131) (667,107) -- -- (1,315,429) (1,318,991)
Depreciation and
Amortization -- -- (238,160) (229,482) -- -- (476,874) (458,894)
----------- ----------- ----------- ----------- ---------- ---------- ----------- -----------
$ 2,917,395 $ 2,848,082 $ 106,294 $ 268,467 $5,275,097 $5,362,752 $ 142,757 $ 572,284
COMPARISON OF THREE MONTHS ENDED JUNE 30, 2004 TO THREE MONTHS ENDED JUNE 30,
2003
Gross revenues increased $69,323 to $2,917,395 in 2004, as compared to
$2,848,082 in 2003. The increase was the result of improved home sales offset by
lower occupancy. As described in the Statements of Income, total operating
expenses were $231,496 higher, moving to $2,811,101 from $2,579,605. The
increase was due to an increase in home sale expense and property operation
costs.
As a result of the aforementioned factors, Net Income decreased, $162,173 for
the second quarter of 2004 compared to the same quarter of the prior year,
moving from $268,467 for 2003 to $106,294 for 2004.
-9-
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2004 TO SIX MONTHS ENDED JUNE 30, 2003
Gross revenues decreased $87,655 to $5,275,097 in 2004, as compared to
$5,362,752 in 2003. The decrease was the result of lower occupancy due to weak
economic conditions.
(See table in previous section.)
As described in the Statements of Income, total operating expenses were $341,872
higher, moving from $4,790,468 to $5,132,340. The increase was due to a increase
in home sale expense and property operations costs.
As a result of the aforementioned factors, Net Income decreased, $429,527 for
the first six month period of 2004 compared to the same period of the prior
year, moving from $572,284 for 2003 to $142,757 for 2004.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise primarily through its borrowing
activities. There is inherent roll over risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Partnership's future financing requirements.
Note Payable: At June 30, 2004 the Partnership had a note payable
outstanding in the amount of $31,389,014. Interest on this note is at a fixed
annual rate of 8.24% through June 2007.
Line-of-Credit: At June 30, 2004 the Partnership owed $270,000 under its
line-of-credit agreement, whereby interest is charged at a variable rate of
1.80% in excess of one month LIBOR.
A 10% adverse change in interest rates of the portion of the Partnership's debt
bearing interest at variable rates would result in an increase in interest
expense of less than $10,000 annually.
The Partnership does not enter into financial instruments transactions for
trading or other speculative purposes or to manage its interest rate exposure.
-10-
ITEM 4. 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 recently 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 1. LEGAL PROCEEDINGS
The City of Novi, Michigan, on February 11, 2004 filed a lawsuit in
Circuit Court of Oakland County against the Partnership to compel the Old Dutch
Farms community to connect to the City of Novi sanitary sewer system. Legal
counsel for the Partnership is currently in negotiations with the City and the
Department of Environmental Quality to resolve this matter. Estimates for the
connection fees and the cost of abandonment of that Property's waste water
treatment plant range from $850,000 to $1,000,000. Negotiations are progressing
but as of this date have not been finalized.
ITEM 6. REPORTS OF FORM 8-K
(A) Reports of Form 8-K
There were no reports filed on Form 8-K during the three
months ended June 30, 2004.
-11-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Uniprop Manufactured Housing
Communities Income Fund,
A Michigan Limited Partnership
BY: P.I. Associates Limited Partnership,
A Michigan Limited Partnership,
its General Partner
BY: /s/ Paul M. Zlotoff
-------------------------------------
Paul M. Zlotoff, General Partner
BY: /s/ Joel Schwartz
--------------------------------------
Joel Schwartz, Principal Financial Officer
Dated: August 11, 2004
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-31.1 Certification of Chief Executive Officer pursuant to Section 302
EX-31.2 Certification of Chief Financial Officer pursuant to Section 302
EX-32.1 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