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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. 0-15940
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
----
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' Deficit
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 11
PART II OTHER INFORMATION 11
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS 12
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30,2004 DECEMBER 31, 2003
----------------- -----------------
(UNAUDITED)
ASSETS
Properties:
Land $ 5,280,000 $ 5,280,000
Buildings And Improvements 25,642,571 25,419,430
Furniture And Fixtures 223,996 218,518
------------ ------------
31,146,567 30,917,948
Less Accumulated Depreciation 14,516,487 13,866,583
------------ ------------
16,630,080 17,051,365
Cash And Cash Equivalents 305,896 258,423
Cash -Security Deposit Escrow 305,158 305,158
Unamortized Finance Costs 216,048 280,548
Manufactured Homes and Improvements 1,241,098 1,312,787
Other Assets 1,267,512 1,258,312
------------ ------------
Total Assets $ 19,965,792 $ 20,466,593
============ ============
SEPTEMBER 30,2004 DECEMBER 31, 2003
----------------- -----------------
(UNAUDITED)
LIABILITIES AND PARTNERS' DEFICIT
Line of Credit-Bank $ 0 $ 235,000
Line of Credit-Related Party 361,236 0
Accounts Payable 197,944 149,213
Other Liabilities 1,200,374 885,533
Mortgage Payable 31,294,181 31,576,444
------------ ------------
Total Liabilities $ 33,053,735 $ 32,846,190
Partners' Equity (Deficit):
General Partner (4,704,962) (4,188,993)
Class A Limited Partners (9,789,108) (9,473,234)
Class B Limited Partners 1,406,127 1,282,630
------------ ------------
Total Partners' Deficit (13,087,943) (12,379,597)
------------ ------------
Total Liabilities And
Partners' Deficit $ 19,965,792 $ 20,466,593
============ ============
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
SEPT. 30,2004 SEPT. 30,2003 SEPT. 30,2004 SEPT. 30,2003
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Income:
Rental Income $ 6,044,621 $6,281,306 $ 1,973,889 $2,060,571
Home Sale Income 1,434,245 1,276,035 432,320 396,379
Other 308,393 366,894 105,953 104,533
------------ ---------- ------------ ----------
Total Income $ 7,787,259 $7,924,235 $ 2,512,162 $2,561,483
============ ========== =========== ==========
Operating Expenses:
Administrative Expenses
(Including $316,947,$331,917,$103,722 and
$108,075 in Property Management
Fees Paid to An Affiliate for the Nine and Three Month Periods
Ended Sept. 30, 2004 and 2003, Respectively) 1,547,813 1,459,360 499,642 490,877
Property Taxes 731,601 693,254 243,867 231,377
Utilities 404,965 410,570 125,307 134,657
Property Operations 961,991 798,252 335,813 283,941
Depreciation And Amortization 714,405 701,923 237,531 243,029
Interest 1,974,475 1,986,633 659,046 667,642
Home Sale Expense 1,354,980 1,149,561 456,684 357,562
------------ ---------- ------------ ----------
Total Operating Expenses $ 7,690,230 $7,199,553 $ 2,557,890 $2,409,085
============ ========== =========== ==========
Net Income(Loss) $ 97,029 $ 724,682 ($ 45,728) $ 152,398
============ ========== =========== ==========
INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT:
CLASS A ($ 6.61) $ 10.28 ($ 4.27) $ 0.93
CLASS B $ 21.64 $ 38.05 $ 5.11 $ 10.55
DISTRIBUTION PER LIMITED PARTNERSHIP UNIT
CLASS A $ 9.00 $ 9.00 $ 3.00 $ 3.00
CLASS B $ 9.00 $ 9.00 $ 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 Partner Class A Limited Class B Limited Total
Beginning Balance as of December 31, 2003 ($4,188,993) ($9,473,234) $ 1,282,630 ($12,379,597)
Net Income (Loss) 19,406 (133,804) 211,427 $ 97,029
Distributions (535,375) (182,070) (87,930) ($ 805,375)
----------- ----------- ----------- ------------
BALANCE AS OF SEPTEMBER 30,2004 ($4,704,962) ($9,789,108) $ 1,406,127 ($13,087,943)
=========== =========== =========== ============
See Notes to Financial Statements
4
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 $ 97,029 $ 724,682
----------- -----------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 649,905 637,423
Amortization 64,500 64,500
(Increase) Decrease In Homes & Improvements 71,689 (366,381)
(Increase) Decrease In Other Assets (9,200) (667,219)
Increase (Decrease) In Accounts Payable 48,731 111,306
Increase (Decrease) In Other Liabilities 314,841 414,500
----------- -----------
Total Adjustments: 1,140,466 194,129
----------- -----------
Net Cash Provided By
Operating Activities 1,237,495 918,811
----------- -----------
Cash Flows From Investing Activities:
Capital Expenditures (228,620) (52,375)
----------- -----------
Net Cash Used In
Investing Activities Activities (228,620) (52,375)
----------- -----------
Cash Flows From Financing Activities:
Net Borrowing (Payment) on Line of Credit 126,236 (90,755)
Distributions To Partners (805,375) (786,000)
Principal Payments on Mortgage (282,263) (274,995)
----------- -----------
Net Cash Used In Financing Activities (961,402) (1,151,750)
----------- -----------
Increase (Decrease) In Cash and Cash Equivalents 47,473 (285,314)
Cash and Cash Equivalents, Beginning 258,423 607,207
----------- -----------
Cash and Cash Equivalents, Ending $ 305,896 $ 321,893
=========== ===========
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
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
ending December 31, 2003.
2. COMMITMENTS AND CONTINGENCIES
The City of Novi, Michigan, as of February 11, 2004 filed a lawsuit in the
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 has reached a settlement agreement with the City of
Novi. The Partnership will pay a tap fee of $730,000 based on an estimated water
use by the residents, subject to adjustments after a three year monitoring
period based on actual meter reading water usage. The cost of connection and
removal of the current sanitary sewer system is estimated to be approximately
$200,000.
-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 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 Uniprop Home
Finance, an affiliated entity. The interest rate is the prime minus .5%. 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 September 30, 2004 the outstanding
balance on the line of credit was $361,000.
The Partnership has a renewable $1,000,000 line of credit with National City
Bank of Michigan/Illinois. The interest rate floats at 180 basis points above 1
month LIBOR. As of September 30, 2004 the outstanding balance on this credit
facility is zero.
-7-
The quarterly Partnership Management Distribution paid to the General Partner
during the third quarter based on second 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).
The General Partner elected to make a total distribution of $112,500 for the
third quarter of 2004 equal to the amount distributed for the third quarter of
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 September 30, 2004, the Partnership's cash balance
amounted to $305,896. The amount placed in reserves is at the discretion of the
General Partner.
Results of Operations
OVERALL, as illustrated in the following tables , the four properties had a
combined average occupancy of 81% at the end of September 2004 compared to 89%
in 2003 for the same period. The average monthly rent in September 2004 was
approximately $478, compared to the $485 average monthly rent in September 2003
(average rent not a weighted average).
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
Aztec Estates 645 483 75% $517
Kings Manor 314 301 96 514
Old Dutch Farms 293 213 73 450
Park of the Four Seasons 572 472 83 432
----- ----- -- ----
Total on 9/30/04: 1,824 1,469 81% $478
Total on 9/30/03: 1,824 1,602 89% $485
*Not a weighted average
-8-
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
------------------------- ------------------------- ------------------------ -------------------------
Aztec Estates $ 931,725 $ 890,323 $ 320,067 $ 348,807 $ 3,306,761 $2,800,013 $ 1,082,552 $ 1,150,418
Kings Manor 547,348 535,653 282,713 286,211 1,586,015 1,720,699 815,406 881,642
Old Dutch Farms 339,227 349,630 127,408 184,186 966,286 1,108,839 442,052 589,722
Park of Four Seasons 691,856 783,923 301,272 397,049 1,922,730 2,288,913 1,029,409 1,187,348
2,510,156 2,559,529 1,031,460 1,216,253 7,781,792 7,918,464 3,369,419 3,809,130
Partnership Management 2,006 1,954 (41,331) (53,788) 5,467 5,771 (217,045) (202,174)
Non Recurring Expense -- -- (139,280) (99,396) -- -- (366,465) (193,718)
Interest Expense
-- -- (659,046) (667,642) -- -- (1,974,475) (1,986,633)
Depreciation and
Amortization -- -- (237,531) (243,029) -- -- (714,405) (701,923)
----------- ----------- ----------- ----------- ----------- ---------- ----------- -----------
$ 2,512,162 $ 2,561,483 ($ 45,728) $ 152,398 $ 7,787,259 $7,924,235 $ 97,029 $ 724,682
=========== =========== =========== =========== =========== ========== =========== ===========
COMPARISON OF QUARTER ENDED SEPTEMBER 30, 2004 TO QUARTER ENDED SEPTEMBER 30,
2003
Gross revenues decreased $49,321 to $2,512,162 in 2004, as compared to
$2,561,483 in 2003. (See table in previous section). The decrease in revenue was
due to a decrease in site rental income as a result of lower occupancy level.
As described in the Statements of Income, total operating expenses were higher,
increasing from $2,409,085 in 2003 to $2,557,890 in 2004. This was due primarily
to increases in property operations expense and Home Sale Expense.
As a result of the aforementioned factors, Net Income decreased in the third
quarter of 2004 compared to the same quarter of the prior year from $152,398 for
2003 to ($45,728) for 2004.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 AND NINE MONTHS ENDED
SEPTEMBER 30, 2002
For the first nine months of 2004, Gross Revenues were $7,787,259, a decrease of
$136,976 compared to $7,924,235 for the same period of 2003. The decrease was
due to a decrease in site rental. Total Operating Expenses for the first three
quarters of 2004 were $7,690,230, an increase of $490,677 compared to $7,199,553
for 2003. Net Income for the first nine months ending September 30, 2004 was
$97,029 a decrease of $627,653 compared to the $724,682 reported for the first
nine months ending September 30, 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 $31,294,181. Interest on this note is at a fixed
annual rate of 8.24% through June 2007.
Line-of-Credit: At September 30, 2004 the Partnership owed $361,236 under
its line-of-credit.
A 10% adverse change in interest rates on 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.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure 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.
-10-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See note 2 of the Notes to Unaudited Financial Statements for
information concerning legal proceedings.
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.
-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 there unto 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: November 11, 2004
-12-
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.