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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 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
September 30, 2004 (Unaudited) and
December 31, 2003 3
Statements of Income
Nine months ended September 30, 2004 and 2003
(Unaudited)
Three months ended September 30, 2004 and 2003
(Unaudited) 4
Statement of Partners' Equity
Nine months ended September 30, 2004 (Unaudited) 4
Statements of Cash Flows
Nine months ended September 30, 2004
and 2003 (Unaudited) 5
Notes to Financial Statements
September 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 10
PART II OTHER INFORMATION 10
ITEM 6. EXHIBITS 10
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------ -----------------
(UNAUDITED)
Properties:
Land $11,666,645 $11,666,645
Buildings And Improvements 51,872,877 51,610,447
Furniture And Fixtures 651,482 628,258
----------- -----------
64,191,004 63,905,350
Less Accumulated Depreciation 28,712,435 27,361,187
----------- -----------
35,478,569 36,544,163
Cash And Cash Equivalents 2,455,429 2,652,394
Unamortized Finance Costs 500,217 515,904
Manufactured Homes & Improvements 1,407,145 1,210,686
Other Assets 1,781,753 1,903,173
----------- -----------
Total Assets $41,623,113 $42,826,320
=========== ===========
LIABILITIES & PARTNERS' EQUITY SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------ -----------------
(UNAUDITED)
Accounts Payable $ 189,286 $ 257,209
Other Liabilities 979,643 702,419
Notes Payable 27,465,360 27,819,236
----------- -----------
Total Liabilities $28,634,289 $28,778,864
Partners' Equity:
General Partner 353,931 341,724
Unit Holders 12,634,893 13,705,732
----------- -----------
Total Partners' Equity 12,988,824 14,047,456
----------- -----------
Total Liabilities And
Partners' Equity $41,623,113 $42,826,320
=========== ===========
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NINE MONTHS ENDED THREE MONTHS ENDED
STATEMENTS OF INCOME SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------ ------------------ ------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 8,368,107 $ 8,795,386 $ 2,715,814 $ 2,932,335
Other 626,072 495,566 242,191 145,931
Home Sale Income 746,359 1,390,689 335,314 596,588
------------ ------------ ------------ ------------
Total Income $ 9,740,538 $ 10,681,641 $ 3,293,319 $ 3,674,854
============ ============ ============ ============
Operating Expenses:
Administrative Expenses
(Including $446,888, $462,613, $146,939 and
$153,154 in Property Management
Fees Paid to an Affiliate for the Nine and
Three Month Period Ending September 30, 2004
and 2003 Respectively) 2,510,318 2,486,090 808,947 842,571
Property Taxes 834,821 806,037 277,986 268,581
Utilities 553,085 628,639 196,175 221,522
Property Operations 1,151,541 1,149,396 396,602 394,402
Depreciation And Amortization 1,366,935 1,330,375 457,455 445,964
Interest 1,341,418 1,358,840 447,933 455,549
Home Sale Expense 761,716 1,311,503 349,066 589,585
------------ ------------ ------------ ------------
Total Operating Expenses $ 8,519,834 $ 9,070,880 $ 2,934,164 $ 3,218,174
============ ============ ============ ============
Net Income $ 1,220,704 $ 1,610,761 $ 359,155 $ 456,680
============ ============ ============ ============
Income Per Unit: 0.37 0.48 0.11 0.14
Distribution Per Unit: 0.69 0.69 0.23 0.23
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
September 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 (2,279,336) (2,279,336)
Net Income 12,207 1,208,497 1,220,704
------------ ------------ ------------
Balance as of September 30, 2004 $ 353,931 $ 12,634,893 $ 12,988,824
============ ============ ============
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
(unaudited) (unaudited)
Cash Flows From Operating Activities:
Net Income $ 1,220,704 $ 1,610,761
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 1,351,248 1,314,688
Amortization 15,687 15,687
Gain on Sale of Property and Equipment 0 (8,846)
(Increase ) Decrease in Manufactured Homes & Improvements (196,459) (314,670)
(Increase) Decrease In Other Assets 121,420 (182,609)
Increase (Decrease) In Accounts Payables (67,923) 187,730
Increase (Decrease) In Other Liabilities 277,224 272,968
----------- -----------
Total Adjustments 1,501,197 1,284,948
----------- -----------
Net Cash Provided By
Operating Activities 2,721,901 2,895,709
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (285,654) (381,057)
Proceeds from sale of Property and Equipment 0 8,846
----------- -----------
Net Cash Provided By (Used In)
Investing Activities (285,654) (372,211)
Cash Flows From Financing Activities:
Distributions To Partners (2,279,336) (2,279,337)
Payment On Mortgage (353,876) (336,461)
----------- -----------
Net Cash Provided By (Used In)
Financing Activities (2,633,212) (2,615,798)
----------- -----------
Increase (Decrease) In Cash and Equivalents (196,965) (92,300)
Cash and Equivalents, Beginning 2,652,394 3,118,034
----------- -----------
Cash and Equivalents, Ending $ 2,455,429 $ 3,025,734
=========== ===========
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 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 nine months
ended September 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 during the quarter ending September 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 September 30, 2004, the Partnership's cash reserves amounted to
$2,455,429.
-7-
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 70% at the end of September 2004,
versus 82% for September 2003. The average monthly homesite rent as of September
30, 2004 was approximately $401, versus $382 for the quarter ending September
2003.
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
-------- ----- ---- ----
Ardmor Village 339 279 82% $ 409
Camelot Manor 335 226 67% 367
Country Roads 311 196 63% 278
Dutch Hills 278 226 81% 384
El Adobe 367 242 66% 437
Paradise Village 614 327 53% 340
Stonegate Manor 308 213 69% 383
Sunshine Village 356 317 89% 512
West Valley 421 317 75% 499
----- ----- ----- -----
TOTAL ON 9/30/04: 3,329 2,343 70%* $ 401*
TOTAL ON 9/30/03: 3,329 2,735 82%* $ 382*
*NOT A WEIGHTED AVERAGE
-8-
For the three and nine months ending September 30, 2004 and September 30, 2003
GROSS REVENUE NET INCOME GROSS REVENUE NET INCOME
9/30/2004 9/30/2003 9/30/2004 9/30/2003 9/30/2004 9/30/2003 9/30/2004 9/30/2003
three months ended three months ended nine months ended nine months ended
Ardmor $ 473,380 $ 489,779 $ 208,208 $ 206,728 $ 1,253,917 $ 1,623,130 $ 626,110 $ 593,028
Camelot Manor 254,250 329,917 117,616 112,297 865,388 991,940 412,979 429,140
Country Roads 179,297 214,006 71,496 85,130 586,229 658,030 185,887 247,901
Dutch Hills 259,514 318,059 130,969 148,999 834,414 900,896 400,309 456,397
El Adobe 352,915 401,153 148,324 193,537 1,083,370 1,127,293 564,462 577,751
Paradise 487,858 439,015 123,158 81,409 1,265,349 1,284,633 344,791 285,113
Stonegate 287,595 300,631 149,814 103,608 880,871 868,382 362,522 353,289
Sunshine 508,717 605,727 267326 272,019 1,480,181 1,513,924 804,100 821,440
West Valley 487,820 573,533 270,416 327,846 1,485,869 1,701,114 857,384 1,000,584
3,291,346 3,671,820 1,487,327 1,531,573 9,735,588 10,669,342 4,558,544 4,764,643
Partnership Management 1,973 3,034 (69,820) (70,652) 4,950 12,299 (301,125) (244,378)
Other Expense -- -- (152,964) (102,728) -- -- (328,362) (220,289)
Interest Expense -- -- (447,933) (455,549) -- -- (1,341,418) (1,358,840)
Depreciation and
Amortization -- -- (457,455) (445,964) -- -- (1,366,935) (1,330,375)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 3,293,319 $ 3,674,854 $ 359,155 $ 456,680 $ 9,740,538 $10,681,641 $ 1,220,704 $ 1,610,761
COMPARISON OF NINE MONTHS AND QUARTER ENDED SEPTEMBER 30, 2004 TO NINE MONTHS
AND QUARTER ENDED SEPTEMBER 30, 2003
Gross revenues for the first nine months of 2004 decreased to $9,740,538 as
compared to $10,681,641 for the same nine months of 2003. Gross revenues for the
quarter ended September 30, 2004 decreased to $3,293,319, as compared to
$3,674,854 the same three months of 2003. The decrease was the result of the
decrease in occupancy and lower home sale income.
As described in the Statements of Income, Total Operating Expenses for the first
nine months of 2004 decreased to $8,519,834 compared to $9,070,880 for the same
nine months of 2003. Total Operating Expenses for the three months ended
September 30, 2004 decreased $284,010, to $2,934,164 compared to $3,218,174 in
2003, due to a decrease in home purchases.
As a result of the aforementioned factors, Net Income for the nine month period
of 2004 decreased to $1,220,704, compared to $1,610,761 for the same nine months
in 2003. Net Income for the three months ended September 30, 2004 decreased to
$359,155 compared to $456,680 for the same three months of 2003.
-9-
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise primarily through its borrowing
activities. There is inherent roll over risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Partnership's future financing requirements.
Note Payable: At September 30, 2004 the Partnership had a note payable
outstanding in the amount of $27,465,360. 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 recently completed quarter that has
materially affected, or is reasonably likely to materially affect the
Partnership's internal control over financial reporting.
ITEM 6. EXHIBITS
Exhibit 31.1 Principal Executive Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of
1934, as amended
Exhibit 31.2 Principal Financial Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of
1934, as amended
Exhibit 32.1 Certifications pursuant to 18 U.S C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-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 there unto 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, Chairman
By: /s/ Joel Schwartz
----------------------------------
Joel Schwartz, Principal Financial Officer
Dated: November 11, 2004
EXHIBIT INDEX
EX. No. Description
------- -----------
Exhibit 31.1 Principal Executive Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of
1934, as amended
Exhibit 31.2 Principal Financial Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of
1934, as amended
Exhibit 32.1 Certifications pursuant to 18 U.S C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
-12-