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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. 0-16701
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
June 30, 2004 (Unaudited) and
December 31, 2003 3
Statements of Income
Six month ended June 30, 2004 and 2003
Three months ended June 30, 2004
and 2003 (Unaudited) 4
Statement of Partners Equity
Six months ended June 30, 2004(Unaudited) 4
Statements of Cash Flows
Six month ended June 30, 2004(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 9
ITEM 4. CONTROLS AND PROCEDURES 10
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
ASSETS
Properties:
Land $11,666,645 $11,666,645
Buildings And Improvements 51,790,589 51,610,447
Furniture And Fixtures 648,872 628,258
----------- -----------
64,106,106 63,905,350
Less Accumulated Depreciation 28,260,209 27,361,187
----------- -----------
35,845,897 36,544,163
Cash And Cash Equivalents 2,427,152 2,652,394
Unamortized Finance Costs 505,446 515,904
Manufactured Homes and Improvements 1,469,762 1,210,686
Other Assets 1,815,619 1,903,173
----------- -----------
Total Assets $42,063,876 $42,826,320
----------- -----------
JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
(UNAUDITED)
LIABILITIES & PARTNERS EQUITY
Accounts Payable $ 154,266 $ 257,209
Other Liabilities 936,526 702,419
Notes Payable 27,583,636 27,819,236
----------- -----------
Total Liabilities 28,674,428 28,778,864
Partners' Equity:
General Partner 350,339 341,724
Unit Holders 13,039,109 13,705,732
----------- -----------
Total Partners' Equity 13,389,448 14,047,456
----------- -----------
Total Liabilities And
Partners' Equity $42,063,876 $42,826,320
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
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 $ 5,652,293 $ 5,863,051 2,819,895 2,938,849
Other 383,881 349,635 220,835 204,947
Home Sale Income 411,045 794,101 193,425 611,800
------------ ------------ ------------ ------------
Total Income $ 6,447,219 $ 7,006,787 3,234,155 3,755,596
------------ ------------ ------------ ------------
Operating Expenses:
Administrative Expenses
(Including $299,949, $309,459, $151,004 and $156,528, in
Property Management Fees Paid to an Affiliate for the Six
and Three Month Period Ending June 30,2004 and 2003 Respectively) 1,701,371 1,643,519 816,639 816,345
Property Taxes 556,835 537,456 278,262 268,704
Utilities 356,910 407,117 174,037 205,704
Property Operations 754,939 754,994 392,643 402,767
Depreciation And Amortization 909,480 884,411 455,354 443,504
Interest 893,485 903,291 446,557 453,997
Home Sale Expense 412,650 721,918 186,259 532,811
------------ ------------ ------------ ------------
Total Operating Expenses $ 5,585,670 $ 5,852,706 $ 2,749,751 $ 3,123,832
------------ ------------ ------------ ------------
Net Income $ 861,549 $ 1,154,081 $ 484,404 $ 631,764
------------ ------------ ------------ ------------
Income Per Unit: 0.26 0.35 0.15 0.19
Distribution Per Unit: 0.46 0.46 0.23 0.23
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
June 30, 2004 and 2003 3,303,387 3,303,387 3,303,387 3,303,387
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
General Partner Unit Holders Total
--------------- ------------ -----
Balance, January 1, 2004 $ 341,724 $ 13,705,732 $ 14,047,456
Distributions 0 (1,519,557) ($ 1,519,557)
Net Income 8,615 852,934 $ 861,549
------------ ------------ ------------
Balance as of June 30, 2004 $ 350,339 $ 13,039,109 $ 13,389,448
------------ ------------ ------------
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30,2003
------------- ------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 861,549 $ 1,154,081
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 899,022 873,953
Amortization 10,458 10,458
Gain on Sale of Equipment 0 (8,846)
(Increase) Decrease in Manufactured Homes and Improvements (259,076) (187,248)
(Increase) Decrease In Other Assets 87,554 4,097
Increase (Decrease) In Accounts Payables (102,943) 7,524
Increase (Decrease) In Other Liabilities 234,107 206,441
----------- -----------
Total Adjustments 869,122 906,379
----------- -----------
Net Cash Provided By
Operating Activities 1,730,671 2,060,460
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (200,756) (196,927)
Proceeds from sale of Equipment 0 8,846
----------- -----------
Net Cash Used In
Investing Actvities (200,756) ($ 188,081)
----------- -----------
Cash Flows From Financing Activities:
Distributions To Partners (1,519,557) (1,519,558)
Payment On Mortgage (235,600) (225,776)
----------- -----------
Net Cash Used In
Financing Activities (1,755,157) (1,745,334)
----------- -----------
Increase (Decrease) In Cash and Equivalents (225,242) 127,045
Cash and Equivalents, Beginning 2,652,394 3,118,034
----------- -----------
Cash and Equivalents, Ending $ 2,427,152 $ 3,245,079
----------- -----------
See Notes to Financial Statements
5
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
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Partnership's capital resources consist primarily of its nine manufactured
home communities. On August 20, 1998, the Partnership refinanced seven of its
nine properties with GMAC Commercial Mortgage Corporation (the "Refinancing").
Liquidity
As a result of the Refinancing, seven of the Partnership's nine properties are
mortgaged. At the time of the Refinancing, the aggregate principal amount due
under the seven mortgage notes was $30,000,000 and the aggregate fair market
value of the Partnership's mortgaged properties was $66,000,000. The Partnership
expects to meet its short-term liquidity needs generally through its working
capital provided by operating activities.
Partnership liquidity is based, in part, upon its investment strategy. Upon
acquisition, the Partnership anticipated owning the properties for seven to ten
years. All of the properties have been owned by the Partnership for more than
ten years. The General Partner may elect to have the Partnership own the
properties for as long as, in the opinion of the General Partner, it is in the
best interest of the Partnership to do so.
The General Partner has decided to distribute $759,779, or $.23 per unit, to the
unit holders as of June 30, 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 June 30, 2004, the Partnership's cash reserves amounted to $2,427,152. The
level of cash reserves maintained is at the discretion of the General Partners
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 72% at the end of June 2004, versus
82% for June 2003. The average monthly homesite rent as of June 30, 2004 was
approximately $404, versus $393 in June 2003.
7
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
Ardmor Village 339 288 85% $ 403
Camelot Manor 335 236 70% 397
Country Roads 311 205 66% 277
Dutch Hills 278 232 84% 380
El Adobe 367 252 69% 437
Paradise Village 614 335 55% 340
Stonegate Manor 308 218 71% 381
Sunshine Village 356 321 90% 512
West Valley 421 324 77% 509
----- ----- ----- -----
TOTAL ON 6/30/04: 3,329 2,411 72% $ 404
TOTAL ON 6/30/03: 3,330 2,648 82% $ 393
*NOT A WEIGHTED AVERAGE
GROSS REVENUES NET INCOME GROSS REVENUES 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 six months ended
Ardmor Village $ 414,656 $ 692,951 $ 214,757 $ 209,174 $ 780,537 $1,133,351 $ 417,902 386,300
Camelot Manor 272,202 386,277 138,348 180,894 611,138 662,023 295,363 316,843
Country Roads 207,985 248,032 45,048 85,987 406,932 444,024 114,391 162,771
Dutch Hills 274,573 305,638 150,106 153,124 574,900 582,837 269,340 307,398
El Adobe 375,432 371,515 241,227 195,227 730,455 726,140 416,138 384,214
Paradise Village 368,265 427,806 114,404 108,535 777,491 845,618 221,633 203,704
Stonegate Manor 294,506 271,672 84,660 117,358 593,276 567,751 212,708 249,681
Sunshine Village 514,177 455,853 271,819 275,913 971,464 908,197 536,774 549,421
West Valley 510,922 591,195 315,080 348,047 998,049 1,127,581 586,968 672,738
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
3,232,718 3,750,939 1,575,449 1,674,259 6,444,242 6,997,522 3,071,217 3,233,070
Partnership Management: 1,437 4,657 (102,210) (80,919) 2,977 9,265 (231,305) (173,726)
Other expenses: - - (86,924) (64,075) - - (175,398) (117,561)
Interest Expense - - (446,557) (453,997) - - (893,485) (903,291)
Depreciation and Amortization - - (455,354) (443,504) - - (909,480) (884,411)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$3,234,155 $3,755,596 $ 484,404 $ 631,764 $6,447,219 $7,006,787 $ 861,549 $1,154,081
8
COMPARISON OF THREE MONTHS AND QUARTER ENDED JUNE 30, 2004 TO THREE MONTHS AND
QUARTER ENDED JUNE 30, 2003
Gross revenues for the three months decreased $521,441 to $3,234,155 in 2004, as
compared to $3,755,596 in 2003. The decrease was primarily the result of lower
occupancy.
As described in the Statements of Income, Total Operating Expenses for the three
months decreased by $374,081 from $3,123,832 in 2003 , as compared to $2,749,751
for the same three months in 2004. The decrease is due primarily to lower home
sale expense.
As a result of the aforementioned factors, Net Income for the three month period
decreased to $484,404, compared to $631,764 in 2003.
COMPARISON OF SIX MONTHS AND QUARTER ENDED JUNE 30, 2004 TO SIX MONTHS AND
QUARTER ENDED JUNE 30, 2003
Gross revenues for the six months decreased $559,568 to $6,447,219 in 2004, as
compared to $7,006,787 in 2003. The decrease was primarily the result of a
decrease in home sale revenue as well as rent income due to lower occupancy.
(See table on previous page.)
As described in the Statements of Income, Total Operating Expenses for the six
months decreased to $5,585,670, in 2004, as compared to $5,852,706 for the same
six months in 2003. The decrease is due to lower home sale expenses.
As a result of the aforementioned factors, Net Income for the six month period
of 2004 decreased to $861,549, compared to $1,154,081 in 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 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 $27,583,636. 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.
9
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 June 30, 2004.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, 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, Principal Executive Officer
By: /s/ Joel Schwartz
-----------------------------------
Joel Schwartz, Principal Financial Officer
Dated: August 11, 2004
11
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