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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, 2005 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 March 31, 2005 (Unaudited) and December 31, 2004 3
Statements of Operations Three months ended March 31, 2005 and 2004 (Unaudited) 4
Statement of Partner's Equity (Deficit) Three months ended March 31, 2005 (Unaudited) 4
Statements of Cash Flows Three months ended March 31, 2005 and 2004 (Unaudited) 5
Notes to Financial Statements March 31, 2005(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 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS 11
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEET
ASSETS
MARCH 31,2005 DECEMBER 31, 2004
------------- -----------------
(UNAUDITED)
Properties:
Land $ 5,280,000 $ 5,280,000
Buildings And Improvements 26,042,127 25,898,323
Furniture And Fixtures 229,878 229,879
------------- -------------
31,552,005 31,408,202
Less Accumulated Depreciation 14,966,592 14,734,193
------------- -------------
16,585,413 16,674,009
Cash And Cash Equivalents 202,514 200,760
Cash - Security Escrow 305,158 305,158
Unamortized Finance Costs 173,048 194,548
Manufactured Homes and Improvements 1,172,948 1,204,893
Other Assets 1,069,885 751,371
------------- -------------
Total Assets $ 19,508,966 $ 19,330,739
------------- -------------
LIABILITIES AND PARTNERS' DEFICIT
MARCH 31, 2005 DECEMBER 31, 2004
-------------- -----------------
(UNAUDITED)
Line of Credit $ 305,000 $ 40,000
Accounts Payable 217,130 176,661
Other Liabilities 929,570 708,052
Note Payable-Affiliate 658,164 565,190
Mortgage Payable 31,078,126 31,190,519
------------- -------------
Total Liabilities $ 33,187,990 $ 32,680,422
Partners' Equity (Deficit) :
General Partner (5,076,778) (4,884,110)
Class A Limited Partners (10,065,447) (9,907,130)
Class B Limited Partners 1,463,201 1,441,557
------------- -------------
Total Partners' Deficit (13,679,024) (13,349,683)
------------- -------------
Total Liabilities And
Partners' Deficit $ 19,508,966 $ 19,330,739
------------- -------------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,2005 MARCH 31,2004
-------------- --------------
(Unaudited) (Unaudited)
Income:
Rental Income $ 1,938,347 $ 2,037,344
Home Sale Income 394,700 215,485
Other 103,262 104,873
------------- -------------
Total Income $ 2,436,309 $ 2,357,702
------------- -------------
Operating Expenses:
Administrative Expenses
(Including $101,811 and $106,918 in Property Management
Fees Paid to An Affiliate for the Three Month Period
Ended March 31, 2005 and 2004, Respectively) 502,452 551,109
Property Taxes 244,308 243,867
Utilities 141,221 142,882
Property Operations 312,316 291,194
Depreciation And Amortization 253,899 238,714
Interest 641,384 657,298
Home Sale Expense 399,070 196,175
------------- -------------
Total Operating Expenses $ 2,494,650 $ 2,321,239
------------- -------------
Net Income (Loss) ($ 58,341) $ 36,463
------------- -------------
Income (Loss) Per Limited Partnership Unit:
Class A ($ 4.83) ($ 2.10)
Class B $ 5.22 $ 7.34
Distribution Per Limited Partnership Unit
Class A $ 3.00 $ 3.00
Class B $ 3.00 $ 3.00
Weighted Average Number Of Limited
Partnership Units Outstanding
Class A 20,230 20,230
Class B 9,770 9,770
STATEMENT OF PARTNER'S EQUITY (DEFICIT) (UNAUDITED)
Total General Partner Class A Limited Class B Limited
Beginning Balance of December 31, 2004 (13,349,683) (4,884,110) (9,907,130) 1,441,557
Net Income (58,341) (11,668) (97,627) 50,954
Distributions (271,000) (181,000) (60,690) (29,310)
----------- ---------- ----------- ---------
BALANCE AS OF MARCH 31, 2005 (13,679,024) (5,076,778) (10,065,447) 1,463,201
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 2005 MARCH 31, 2004
-------------- --------------
Cash Flows From Operating Activities:
Net Income (Loss) ($ 58,341) $ 36,463
----------- -----------
Adjustments To Reconcile Net Income (Loss)
To Net Cash Provided By
Operating Activities:
Depreciation 232,399 217,214
Amortization 21,500 21,500
(Increase) Decrease in Homes and Improvements 31,945 (332,215)
(Increase) Decrease In Other Assets (318,514) 112,579
Increase (Decrease) In Accounts Payable 40,469 (28,406)
Increase (Decrease) In Other Liabilities 221,518 106,636
----------- -----------
Total Adjustments: 229,317 97,308
----------- -----------
Net Cash Provided By
Operating Activities 170,976 133,771
----------- -----------
Cash Flows Used In Investing Activities:
Capital Expenditures (143,803) (21,893)
----------- -----------
Cash Flows From Financing Activities:
Net Borrowing on Line of Credit 265,000 35,000
Distributions To Partners (271,000) (263,375)
Proceeds from Note Payable to Affiliate 92,974 0
Principal Payments on Mortgage (112,393) (96,555)
----------- -----------
Net Cash Used In Financing Activities (25,419) (324,930)
----------- -----------
Increase (Decrease) In Cash and Equivalents 1,754 (213,052)
Cash and Equivalents, Beginning 200,760 258,423
----------- -----------
Cash and Equivalents, Ending $ 202,514 $ 45,371
----------- -----------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2005 (Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited 2005 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, 2004 has been derived from the
audited financial statements at that date. Operating results for the three
months ended March 31, 2005 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2005, 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, 2004.
2. COMMITMENTS AND CONTINGENCES
A group of current residents, on March 4, 2005 filed a class action lawsuit in
the Circuit Court of Oakland County against the Partnership and the General
Partner of the Partnership claiming that the Old Dutch Farms community did not
honor its obligations with respect to operating various aspects of the
community. The complaint requests damages, costs and injunctive relief. Counsel
for the Partnership is presently reviewing and preparing an answer to the
complaint on behalf of the Partnership. While the discovery process has not yet
begun, the Partnership intends to vigorously defend against this claim. The
amount of potential liability, if any, is indeterminable at the time.
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. 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. The
Partnership anticipates these cost will be incurred during 2005.
In connection with the settlement agreement, the partnership has obtained an
unsecured $750,000 note payable to a bank requiring monthly payments of $12,500
plus interest at LIBOR plus 1.8% and is due on December 2009. There was no
outstanding balance under this agreement at March 31, 2005.
-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% which
was 5.25% at March 31,2005. The sole purpose of the line of credit is to
purchase new and used homes to use 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 March
31, 2005 the outstanding balance on the line of credit was $658,164.
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 which was 2.79% at March 31, 2005. As of March 31, 2005 the
outstanding balance of this credit facility was $305,000.
-7-
The quarterly Partnership Management Distribution paid to the General Partner
during the first 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
first quarter of 2005 (unchanged from 2004), 80% or $90,000, was paid to the
Limited Partners and 20% 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 March 31, 2005, the Partnership's cash balance
amounted to $202,514. The level of cash balance maintained 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 77% at the end of March 2005, versus 85% a year ago. The
average monthly rent in March 2005 was approximately $487, compared to the $477
average monthly rent in March 2004 (average rent not a weighted average).
Total Occupied Occupancy Average*
Capacity Sites Rate Rent
-------- -------- --------- --------
Aztec Estates 645 478 74% $ 529
Kings Manor 314 296 94 535
Old Dutch Farms 293 191 65 450
Park of the Four Seasons 572 432 76 435
----- ----- -- --------
Total on 3/31/05: 1,824 1,397 77% $ 487
Total on 3/31/04: 1,824 1,559 85% $ 477
*Not a weighted average
-8-
GROSS REVENUE NET INCOME (LOSS)
Three months ended THREE MONTHS ENDED
----------------------- -----------------------
3/31/2005 3/31/2004 3/31/2005 3/31/2004
---------- ---------- ---------- ----------
Aztec Estates $ 966,447 $ 990,005 $ 353,356 $ 336,254
Kings Manor 591,368 424,504 284,461 261,971
Old Dutch Farms 252,693 322,372 95,708 151,841
Park of the Four Seasons 623,630 619,496 331,718 370,788
---------- ---------- ---------- ----------
$2,434,138 $2,356,377 $1,065,243 $1,120,854
Partnership
Management $ 2,171 $ 1,325 (83,910) (89,554)
Other Expenses (144,391) (98,825)
Interest Expense (641,384) (657,298)
Depreciation and
Amortization (253,899) (238,714)
---------- ----------
TOTAL: $2,436,309 $2,357,702 $ (58,341) $ 36,463
========== ========== ========== ==========
COMPARISON OF QUARTER ENDED MARCH 31, 2005 TO QUARTER ENDED MARCH 31, 2004
Gross revenues increased $78,607 to $2,436,309 in 2005, as compared to
$2,357,702 in 2004. The increase was the result of higher home sale income.
As described in the Statements of Income, total operating expenses were $173,411
higher, moving from $2,321,239 to $2,494,650. The increase was due to an
increase in property operating expenses as well as an increase in home sale
expenses.
As a result of the aforementioned factors, the Partnership had a net loss of
$58,541 for the first quarter of 2005 compared to net income of $36,463 for the
same quarter of the prior year.
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.
-9-
Note Payable: At March 31, 2005 the Partnership had a note payable
outstanding in the amount of $31,078,126. Interest on this note is at a fixed
annual rate of 8.24% through July 2007.
Line-of-Credit: At March 31, 2005 the Partnership owed $305,000 under its
line-of-credit agreement, whereby interest is charged at a variable rate of
1.80% in excess of One Month LIBOR which was 2.79% as of March 31, 2005.
Term-Note: The Partnership has obtained an unsecured term note with
National City Bank of the Midwest for $750,000. The monthly payments of $12,500
plus interest at LIBOR plus 1.80% which was 2.79% at March 31, 2005, will be due
for five years from funding. Currently this note has not been funded. This term
note was established for the cost of the sewer connection at Old Dutch Farms.
Line-of- Credit for Homes: At March 31, 2005 the partnership had a line of
credit outstanding to an affiliated entity in the amount of $658,164, whereby
interest is accrued at prime minus .5% (5.25 at March 31, 2005).
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.
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.
-10-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
See Note 2 of the Notes to Unaudited Financial Statements for information
concerning legal proceedings.
ITEM 6. EXHIBITS
EXHIBIT 31.1 Section 302 Certification from the Principal Executive Officer
EXHIBIT 31.2 Section 302 Certification from the Principal Financial Officer
EXHIBIT 32.1 Section 906 Certification from the Principal Executive Officer and
the Principal Financial Officer
-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: May 10, 2005
Exhibit Index
Exhibit No. Exhibit description
- ----------- -------------------
EXHIBIT 31.1 Section 302 Certification from the Principal Executive Officer
EXHIBIT 31.2 Section 302 Certification from the Principal Financial Officer
EXHIBIT 32.1 Section 906 Certification from the Principal Executive Officer
and the Principal Financial Officer