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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997 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 [ ]
As of March 1, 1998, 30,000 units of limited partnership interest of the
registrant were outstanding and the estimated aggregate market value of the
units as of such date (based on a 1998 appraisal of Partnership properties) held
by non-affiliates was approximately $14,924,800.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
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PART I
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund, a Michigan Limited
Partnership (the "Partnership"), acquired, maintains, operates and ultimately
will dispose of income producing residential real properties consisting of four
manufactured housing communities (the "Properties"). The Partnership was
organized and formed under the laws of the State of Michigan on May 16, 1985.
Its principal offices are located at 280 Daines Street, Birmingham, Michigan
48009 and its telephone number is (248) 645-9261.
The Partnership filed an S-11 Registration Statement (Registration No.
2-98180) in June 1985 which was declared effective by the Securities and
Exchange Commission on September 24, 1985. The Partnership thereafter offered a
maximum of 30,000 units of limited partnership interest representing capital
contributions by the limited partners to the Partnership of $1,000 per unit (the
"Units"). The sale of all 30,000 Units was completed in March, 1986 generating
$30 million of contributed capital to the Partnership.
On February 10, 1986, the Partnership acquired Aztec Estates, a 645-space
manufactured housing community in Margate, Florida and Kings Manor, a 314-space
manufactured housing community in Ft. Lauderdale, Florida. On March 4, 1986, the
Partnership acquired Old Dutch Farms, a 293-space manufactured housing community
in Novi, Michigan. On March 27, 1986, the Partnership acquired The Park of the
Four Seasons, a 572-space manufactured housing community in Blaine, Minnesota.
The Partnership operates the Properties as manufactured housing communities
with the primary investment objectives of: (1) obtaining net cash from
operations; (2) obtaining capital appreciation; and (3) preserving capital.
There can be no assurance that such objectives can be achieved.
On March 25, 1997 the Partnership borrowed $33,500,000 from Nomura Asset
Capital Corporation and secured the borrowing with liens on its Properties. The
interest rate on the Nomura Financing is 8.24% and the term is 120 months. The
loan is amortized over 360 months. On March 26, 1997 the Partnership distributed
$30,000,000 to the Limited Partners, representing a full return of original
capital contributions of $1,000 per Unit held. The Partnership will continue to
own and operate its properties and expects to be able to continue to pay cash
distributions to the Limited Partners, although in amounts substantially lower
than in the past. Limited Partners will continue to have an interest in the
Partnership because their original capital contributions have appreciated since
their initial investments were made. Only the original capital contribution was
returned on March 26, 1997.
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Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation of
its four manufactured housing communities. Partnership operations commenced in
February 1986 upon the acquisition of the first two Properties. The
Partnership's first full year of operations was the fiscal year ended December
31, 1987. For a description of the Partnership's revenues, operating profit and
assets, please refer to Items 6 and 8.
Narrative Description of Business
General
The Properties were selected from 23 manufactured housing communities then
owned by affiliates of P.I. Associates Limited Partnership, a Michigan limited
partnership, the General Partner (the "General Partner") of the Partnership. The
Partnership rents space in the Properties to owners of manufactured homes
thereby generating rental revenues. It was intended that the Partnership would
hold the Properties for extended periods of time, originally anticipated to be
seven to ten years after their acquisition. The General Partner has the
discretion to determine when a Property is to be sold; provided, however, that
the determination of whether a particular Property should be disposed of will be
made by the General Partner only after consultation with Manufactured Housing
Services Inc. (the "Consultant"). In making their decisions they will consider
relevant factors, including, current operating results of the particular
Property, prevailing economic conditions and with a view to achieving maximum
capital appreciation to the Partnership considering relevant tax consequences
and the Partnership's investment objectives.
Competition
The business of owning and operating residential manufactured housing
communities is highly competitive, and the Partnership may be competing with a
number of established companies having greater financial resources. Moreover,
there has been a trend for manufactured housing community residents to purchase
(where zoning permits) their manufactured homesites on a collective basis. This
trend may result in increased competition with the Partnership for tenants. In
addition, the General Partner, its affiliates or both, have participated, and
may in the future participate, directly or through other partnerships or
investment vehicles in the acquisition, ownership, development, operation and
sale of projects which may be in direct competition with one or more of the
Properties.
Each of the Properties competes with numerous similar facilities located in
its geographic area. The Margate/Fort Lauderdale area contains approximately 12
communities offering approximately 5,435 housing sites competing with Aztec
Estates. The Davie/Fort Lauderdale area contains approximately five communities
offering approximately 1,765 housing sites competing with Kings Manor. Park of
the Four Seasons competes with approximately 11 communities offering
approximately 3,031 housing sites. Old Dutch Farms competes with approximately
eight communities offering approximately
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3,592 housing sites. The Properties also compete against other forms of housing,
including apartment and condominium complexes.
Governmental Regulations
The Properties owned by the Partnership are subject to certain state
regulations regarding the conduct of the Partnership operations. For example,
the State of Florida regulates agreements and relationships between the
Partnership and the residents of Aztec Estates and Kings Manor. Under Florida
law, the Partnership is required to deliver to new residents of those Properties
a prospectus describing the Property and all tenant rights, Property rules and
regulations, and changes to Property rules and regulations. Florida law also
requires minimum lease terms, requires notice of rent increases, grants to
tenant associations certain rights to purchase the community if being sold by
the owner and regulates other aspects of the management of such properties. The
Partnership is required to give 90 days notice to the residents of Florida
properties of any rate increase, reduction in services or utilities or change in
rules and regulations. If a majority of the residents object to such changes as
unreasonable, the matter must be submitted to the Florida Department of Business
Regulations for mediation prior to any legal adjudication of the matter. In
addition, if the Partnership seeks to sell Florida Properties to the general
public, it must notify any homeowners association for the residents, and the
association shall have the right to purchase the Property for the price, terms
and conditions being offered to the public within 45 days of notification by the
owner. If the Partnership receives an unsolicited bona fide offer to purchase
the Property from any party that it is considering or negotiating, it must
notify any such homeowners association that it has received an offer, state to
the homeowners association the price, terms and conditions upon which the
Partnership would sell the Property, and consider (without obligation) accepting
an offer from the homeowners association. The Partnership has, to the best of
its knowledge, complied in all material respects with all requirements of the
States of Florida, Michigan and Minnesota, where its operations are conducted.
Employees
The Partnership employs three part-time employees to perform Partnership
management and investor relations services. The Partnership retains an
affiliate, Uniprop, Inc., as the property manager for each of its Properties.
Uniprop, Inc. is paid a fee equal to the lesser of 5% of the annual gross
receipts from each of the Properties or the amount which would be payable to
unaffiliated third parties for comparable services. Uniprop, Inc. retains local
managers on behalf of the Partnership at each of the Properties. Salaries and
fringe benefits of such local managers are paid by the Partnership and are not
included in any property management fee payable to Uniprop, Inc. Local managers
are employees of the Partnership and are paid semi-monthly. The yearly salaries
and expenses for local managers range from $20,000 to $40,000. Local managers
have no direct management authority, make no decisions regarding operations and
act only in accordance with instructions from the property manager. They are
utilized by the Partnership to provide on-site maintenance and administrative
services. Uniprop, Inc., as property manager, has overall management authority
for each Property.
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ITEM 2. PROPERTIES
The Partnership purchased all four manufactured housing communities for
cash. As a result of the Financing, the Properties are now encumbered with
mortgages.
Each of the Properties is a modern manufactured housing community
containing lighted and paved streets, side-by-side off-street parking and
complete underground utility systems. The Properties consist of only the
underlying real estate and improvements, not the actual homes themselves. Each
of the Properties has a community center which includes offices, meeting rooms
and game rooms. Each of the Properties, except Old Dutch Farms, has a swimming
pool and tennis courts.
Overall, as illustrated in the table below, the Properties reported, as of
December 31, 1997, a combined occupancy of 98.3% and an average monthly homesite
rent of $386.
CURRENT CURRENT
PROPERTY NAME YEAR NUMBER OF OCCUPIED OCCUPANCY AVERAGE
AND LOCATION CONSTRUCTED ACREAGE SITES SITES LEVELS RENTS
------------ ----------- ------- ----- ----- ------ -----
Aztec Estates
Sundial Circle
Margate, FL 1970 100 645 608 97.4% $427
Kings Manor
State Road 84
& Flamingo Road
Ft. Lauderdale, FL 1972 45 314 304 98.1 $405
Park of the Four
Seasons
University Avenue
Blaine, MN 1972 107 572 568 99.3 $332
Old Dutch Farms
Novi Road
Novi, MI 1972 47 293 290 98.3 $393
--- --- ---- ----
Total on
12/31/97 1,824 1,792 98.3% $386
12/31/96 1,824 1,770 97.0% $373
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Partnership and its legal counsel, there are no
material legal proceedings pending except such ordinary routine matters as are
incident to the kind of business conducted by the Partnership. To the knowledge
of the Partnership and its counsel, no legal proceedings have been instituted or
are being contemplated by any governmental authority against the Partnership.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the limited partners are restricted to certain
matters of fundamental significance to the Partnership. The Limited Partners
must approve certain major decisions of the General Partner if the General
Partner proposes to act without the approval of the Consultant. The Limited
Partners also have a right to vote upon removal and replacement of the General
Partner, dissolution of the Partnership, material amendments to the partnership
agreement and the sale or other disposition of all or substantially all of the
Partnership's assets, except in the ordinary course of the Partnership's
disposing of the Properties. Such matters must be approved by Limited Partners,
as a group, holding more than 50% of the then outstanding Units.
On February 6, 1997, the Limited Partners voted at a special meeting
("Special Meeting") and approved: (i) the Financing; (ii) the amendment of the
Partnership Agreement; (iii) the payment, on an on-going basis, of a Partnership
Management Distribution; and (iv) payment of certain specified fees to an
affiliate of the General Partner.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
There is no established public trading market for the Units and it is not
anticipated that one will ever develop. During the last two years, less than
three percent of the Units have been transferred each year, excluding transfers
on account of death or intra-family transfers. The Partnership believes there is
no secondary market, or the substantial equivalent thereof, and none will
develop.
The General Partner calculates the estimated net asset value of each Unit
by dividing the amount of distributions that would be made to the Limited
Partners in the event of the current sale of the Properties at their current
appraised value, less sales expenses (but without consideration to tax
consequences of the sale), by 30,000. In March 1998, the Properties were
appraised at an aggregate fair market value of $55,800,000. Assuming a sale of
the four properties at the appraised value in March 1998, less payment of 3.0%
selling expenses, mortgage debt of $33,500,000, the $1,970,000 Contingent
Purchase Price due to certain partners of the General Partner, and after the
80/20% split of sale or financing proceeds with the General Partner, the net
aggregate proceeds available for distribution to the Limited Partners is
estimated to be $14,924,800 or $497 per unit as of March 31, 1998. There can be
no assurance that the estimated net asset value could ever be realized. As of
March 31, 1998, the Partnership had approximately 2,750 limited partners holding
Units.
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for Uniprop Manufactured
Housing Communities Income Fund, a Michigan Limited Partnership, for the periods
ended December 31, 1997, 1996, 1995, 1994 and 1993:
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
-------- -------- -------- -------- --------
Total Assets $23,052,433 $21,307,555 $21,822,565 $22,113,778 $22,701,925
=========== =========== =========== =========== ===========
Income $8,234,904 $7,751,358 $7,502,221 $7,321,328 $6,997,507
Expenses (7,175,119) (4,776,905) (4,513,031) (4,436,966) (4,292,755)
---------- ---------- ----------- ---------- -----------
Net Income $1,059,785 $2,974,453 $2,989,190 $2,884,362 $2,704,752
========== ========== ========== ========== ==========
Distributions to
Limited Partners,
per Unit $1,052 $100 $100 $100 $100
Income per Unit:
Class A $17 $69 $69 $69 $68
Class B $52 $100 $100 $100 $100
Weighted average
number of Units
outstanding:
Class A 20,230 20,230 20,230 20,230 20,230
Class B 9,770 9,770 9,770 9,770 9,770
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity
The Partnership has, since inception, generated adequate amounts of cash to
meet its operating needs. The Partnership retains cash reserves which it
considers adequate to maintain the Properties. All funds in excess of the
operating needs and cash reserves have been distributed to the Partners,
quarterly. 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. For the year ended December 31, 1997
the Partnership added $650,476 to reserves. This amount was funded from the
March 25, 1997 Financing proceeds. The amount of any funds placed in reserves is
at the discretion of the General Partner. The Partnership expects to generate
adequate amounts of cash to meet its operating needs during the next fiscal
year.
On July 17, 1997, the Partnership replaced an existing $600,000 line of
credit with Comerica Bank with a renewable line of credit of $600,000 with First
of America Bank.
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The interest rate floats 180 basis points above 1 month LIBOR, which on December
31, 1997 was 5.74%. The sole purpose for the line of credit is to purchase new
and used homes to be used as model homes and offered for sale with the
Partnership's communities. Over the past two years, sales of the new and used
model homes has been growing and the General Partner believes that continuing
the model home program is in the best interest of the Partnership. As of
December 31, 1997, the outstanding balance on the line of credit was $358,916.
On March 25, 1997 the Partnership completed the Financing that the Limited
Partners approved at the Special Meeting held on February 6, 1997, as described
in Item 4. The Partnership borrowed $33,500,000 from Nomura Asset Capital
Corporation (the "Lender") on March 25, 1997 and secured the borrowing with
liens on its Properties. The interest rate on the Financing is 8.24%, and the
term is 120 months. The loan is amortized over 360 months. As contemplated in
the Proxy Statement, on March 26, 1997 the Partnership distributed $30,000,000
to the Limited Partners, representing a full return of original capital
contributions of $1,000 per Unit held. The Partnership will continue its
operations and expects to be able to continue to pay cash distributions to the
Limited Partners, although, due to payment of debt service resulting from the
Financing, in amounts substantially lower than in the past. Limited Partners
will continue to have an interest in the Partnership because their original
capital contributions have appreciated since their initial investments were
made. Only the original capital contribution was returned on March 26, 1997.
Capital Resources
The capital formation phase of the Partnership began on February 10, 1986,
when Aztec Estates and Kings Manor were purchased by the Partnership and
operations commenced. On March 4, 1986, and March 27, 1986, Old Dutch Farms and
Park of the Four Seasons were purchased, respectively. From the $30,000,000
capital raised from the sale of the Units, $26,400,000 was used to purchase the
four Properties after deducting sales commissions, advisory fees and other
organization and offering costs. The Partnership had no capital expenditure
commitments as of December 31, 1997 and does not anticipate any during the next
fiscal year.
In an effort to provide Limited Partners with a full return of original
capital contributions of $1000 per unit held, the General Partner, with majority
consent from the Limited Partners, mortgaged the four Properties owned by the
Partnership on March 25, 1997.
The General Partner acknowledges that the mortgages impose some risks to
the Parntership, but that such risks are not greater than risks typically
associated with real estate financing.
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Results of Operations
a. Distributions
For the years ended December 31, 1997, 1996 and 1995, respectively, the
Partnership made distributions to Limited Partners equal, on an annualized
basis, to 10.0% of their original capital contributions (their 10.0% Preferred
Return). These distributions totaled $1,568,400, $3,000,000, and $3,000,000 in
each year respectively. The General Partner received distributions totaling
$871,000, $600,000, and $595,000 during the same periods. As a result of the
March 25, 1997 Financing, also distributed in 1997 was $30,000,000, which
consitutes a complete return of the Limited Partners original capital
contributions of $30,000,000 or $1,000 per unit.
b. Net Income
For the years ended December 31, 1997, 1996 and 1995 net income was
$1,059,785, $2,974,453 and $2,989,190 on total revenues of $8,234,904,
$7,751,358 and $7,502,221. The decline in net income from 1995 to 1996 was the
result of higher operating and administrative expenses. The decline in net
income from 1996 to 1997 was due to approximately $2,142,196 of mortgage
interest related to the March 25, 1997 Financing.
Net income, plus depreciation and amortization, and the $33,500,000
Financing proceeds, less distributions to all Partners, payment for Financing
costs and the partial payment towards the Contingent Purchase Price was
$650,476, $159,195 and $178,017, for the same periods.
c. Partnership Management
Net expenses for the management of the Partnership (i.e. gross expenses for
such management, less transfer fees, interest on reserves and interest on funds
awaiting distribution) were $459,343 in 1997, $357,469 in 1996 and $249,760 in
1995.
The increase in net expenses for the management of Partnership from 1996 to
1997 is a result of higher legal expenses associated with the Proxy Statement
that was submitted to the Limited Partners, as described in Item 4.
d. Property Operations
Overall, the four Properties had a combined average occupancy of 98.3%
(1,792/1,824 sites) as of December 1997; 97.0% as of December 1996; and 95.1% as
of December 1995. The average collected monthly rent as of December 1997 was
approximately $386 per homesite versus $373 as of December 1996 and $362 as of
December 1995, an increase each year of 3.5% and 3.0%, respectively.
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During the 1997, 1996 and 1995 fiscal years, the Properties generated a net
operating income of $4,325,089 or 52.6% of total revenues; $4,420,836 or 57.1%
of total revenues; and $4,253,489 or 56.7% of total revenues, respectively. Net
operating income is computed before deduction of (i) certain non-recurring
expenses of $231,970, $304,172 and $230,712, respectively, (ii) depreciation and
amortization of $891,138, $784,743, and $783,827, and (iii) partnership
management expenses of $463,119, $357,469, and $249,760.
Aztec Estates, in Margate, Florida, had an occupancy of 97.4% (628/645
sites) as of December 1997 compared to 94.3% as of December 1996 and 95.9% in
1995. The average rent in December 1996 was $427 per homesite versus $411 in
December 1996 and $395 in December 1995, an increase each year of 3.9% and 4.0%,
respectively.
The property's 1997 net operating income of $1,643,833 represented 53.0% of
revenues versus $1,587,687 or 52.4% of revenues in 1996, and $1,614,553 or 53.7%
of revenues in 1995. The increase in income is a result of higher occupancy and
higher average rents.
Kings Manor, in Fort Lauderdale, Florida, had an occupancy of 98.1%
(308/314 sites) as of December 1997 compared to 96.8% as of December 1996 and
96.5% in 1995. The average rent in December 1997 was $405 per homesite versus
$388 in December 1996 and $372 in December 1995, an increase each year of 4.1%
and 4.3% respectively.
The property's 1997 net operating income of $892,472 represented 63.5% of
revenues, versus $843,448 or 62.1% in 1996, and $821,053 or 60.6% in 1995. The
increase in income is a result of lower operating expenses.
Old Dutch Farms, in Novi, Michigan, had an occupancy of 98.3% (288/293
sites) as of December 1997 compared to 99.0% in 1996 and 96.9% in 1995. The
average rent in December 1997 was $393 per homesite versus $381 in December 1996
and $371 in December 1995, an increase each year of 3.1% and 2.7%, respectively.
The property's 1997 net operating income of $873,242 represented 66.2% of
revenues, versus $770,431 or 62.1% in 1996, and $731,943 or 61.5% in 1995. The
increase in income was the result of higher occupancy.
The Park of the Four Seasons, in Blaine, Minnesota, had an occupancy of
99.3% (568/572 sites) as of December 1997, the same as reported in 1996 and
92.5% in 1995. The average rent in December 1997 was $332 per homesite versus
$321 in December 1996 and $312 in December 1995, an increase each year of 3.4%
and 2.9%, respectively.
The property's 1997 net operating income of $1,378,661 represented 58.77%
of revenues versus $1,219,270 or 57.9% in 1996, and $1,085,940 or 56.1% in 1995.
The increase in income is a result of higher occupancy and higher rents.
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Year 2000 Costs
The Partnership, like most users of computer software, will be required to
modify certain portions of its software so that it will function properly in the
year 2000. Maintenance or modification costs will be expensed as incurred, while
the costs of any new software will be capitalized and amortized over the
software's useful life. Management believes these "year 2000" costs will be
immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal years ended December
31, 1997, 1996 and 1995, and supplementary data are filed with this Report under
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in the Partnership's independent public
accountants nor have there been any disagreements during the past two fiscal
years.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any officers or directors. The
General Partner of the Partnership is P.I. Associates Limited Partnership. P.I.
Associates is a Michigan limited partnership. From November, 1985 until March
19, 1997, Paul M. Zlotoff served as the sole general partner of P.I. Associates.
In order to address concerns raised by the Lender in connection with the
Financing, on March 19, 1997, GP P.I. Associates Corp. was admitted as a
corporate General Partner of the Partnership. GP P.I. Associates Corp. is
wholly-owned by Paul M. Zlotoff. Under the amended partnership agreement of P.I.
Associates, all actions taken by P.I. Associates must be approved by both
general partners.
Information concerning Mr. Zlotoff's age and principal occupations during
the last five years or more is as follows:
Paul M. Zlotoff, 48, is and has been an individual general partner of P.I.
Associates since its inception in May 1985. Mr. Zlotoff became the Chairman of
Uniprop, Inc. in May 1986 and was its President from 1979 through 1997. He is
also an individual general partner of Genesis Associates Limited Partnership,
the general partner of Uniprop Manufactured Housing Communities Income Fund II,
a public limited partnership which owns and operates nine manufactured housing
communities. Mr. Zlotoff currently, and in the past, has acted as the general
partner for various other limited partnerships owning manufactured home
communities, as well as some commercial properties.
The following individuals are the directors and officer of GP P.I.
Associates Corp.:
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Name and Age Position Held
- ------------ -------------
Paul M. Zlotoff, 48 Director and President, Secretary and
Treasurer
Arthur Weiss, 49 Director
Steve Adler, 47 Director
Arthur Weiss, 49 has been practicing law at Jaffe, Raitt, Heuer & Weiss,
P.C. ("JRH&W") which represents the company in various matters, since 1976. Mr.
Weiss is currently a shareholder, director and vice president of JRH&W.
Arthur Weiss is an Independent Director, meaning that he has not been, at
any time, in the five years preceding his appointment: (a) a stockholder,
director, officer, employee, or partner of GP P.I. Associates Corp., P.I.
Associates, or the Partnership; (b) a customer, supplier, or other person who
derives more than 10% of its purchases or revenues from its activities with GP
P.I. Associates Corp., P.I. Associates, or the Partnership; (c) a person or
other entity controlling or under common control with any such stockholder,
partner, customer, supplier or other person referenced in subparagraph (a) or
(b) above; or (d) a member of the immediate family of any such stockholder,
director, officer employee, partner, customer, supplier or other person
referenced in subparagraph (a) or (b) above.
Steve Adler, 47, became President of Uniprop, Inc. on January 1, 1998.
Previously, Mr. Adler had been Vice President of acquisitions and development
and director of operations for Uniprop since 1984 when he joined Uniprop. As an
officer of Uniprop, he became president of Uniprop Homes, the marketing
affiliate of Uniprop. In this capacity, he is responsible for developing new
home sales, and establishing resale operations in each of Uniprop's 40 family
and adult retirement communities.
Under the Articles of Incorporation of GP P.I. Associates Corp., until such
time as the notes payable to the Lender have been discharged and the liens have
been released from the Properties, certain major corporate actions may be taken
only with the unanimous vote of the directors of GP P.I. Associates Corp. These
actions include:
a) filing or consenting to the filing of any bankruptcy, insolvency or
reorganization case or proceeding, instituting any proceedings under any
applicable insolvency law or otherwise seeking relief under any laws relating to
the relief from debts or the protection of debtors generally;
b) seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for GP P.I.
Associates Corp., P.I. Associates, or the Partnership or a substantial portion
of any of their properties;
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c) making any assignment for the benefit of the creditors of GP P.I.
Associates Corp., P.I. Associates, or the Partnership; or
d) taking any action in furtherance of the foregoing subparagraphs (a)
through (c).
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and therefore, no officers
received a salary or remuneration exceeding $100,000 during the last fiscal
year. The General Partner of the Partnership and an affiliate, Uniprop, Inc.,
received certain compensation and fees during the fiscal year in the amounts
described in Item 13. The Partnership anticipates that it will provide similar
compensation to the General Partner and Uniprop, Inc. during the next fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The Partnership is a limited partnership formed pursuant to the Michigan
Uniform Limited Partnership Act, as amended. The General Partner, P.I.
Associates Limited Partnership, is vested with full authority as to the general
management and supervision of the business and other affairs of the Partnership,
subject to certain constraints in the partnership agreement and consulting
agreement. Limited Partners have no right to participate in the management of
the Partnership and have limited voting privileges only on certain matters of
fundamental significance. No person owns of record or beneficially, more than
five percent of the Partnership's Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes all of the types of compensation, fees
or other distributions paid by the Partnership or others to the General Partner
or its affiliates from the operations of the Partnership during the last fiscal
year, as well as certain of such items which may be payable during the next
fiscal year. Certain of the following arrangements for compensation and fees
were not determined by arm's length negotiations between the General Partner,
its affiliates and the Partnership.
Paul M. Zlotoff has an interest in the successors to the sellers of all the
Properties acquired by the Partnership and may be entitled to share in a
contingent purchase price with respect to each Property, when and if the
successors to the sellers become entitled thereto. Each of the sellers has been
dissolved and liquidated and their interests in the Contingent Purchase Price
have been assigned to certain partners of the General Partner. The contingent
purchase price for each Property was determined by reference to the average of
two independent real estate appraisals which were obtained by the General
Partner. Such appraisals are only estimates of value and are not necessarily
indicative of the actual real estate value. Each seller becomes entitled to any
unpaid contingent purchase price upon the sale, financing or other disposition
of one or more Properties, but,
-13-
14
only after the receipt by each Limited Partner of any shortfall in his 9%
cumulative preferred return plus the return of his adjusted capital
contribution. Because the Financing resulted in a complete return of the Limited
Partners' capital contributions, and because the Limited Partners have received
their cumulative preferred return in full, the successors to the sellers did
receive $1,500,000 in partial payment of the Contingent Purchase Price on or
about May 15, 1997. The maximum amounts which could be payable to the successors
to the sellers are as follows: Aztec Estates, $1,374,323; Kings Manor, $529,724;
Old Dutch Farms, $452,359; and Park of the Four Seasons, $1,113,594. The partial
payment made for each property was as follows: Aztec Estates, $594,088; Kings
Manor, $228,987; Old Dutch Farms, $195,544; and Park of the 4 Seasons, $481,381.
The maximum amount remaining which could be payable to the successors of the
sellers are as follows: Aztec Estates, $780,235; Kings Manor, $300,737; Old
Dutch Farms, $256,815; and Park of the Four Seasons, $632,213. The actual
amounts to be received, if any, will depend upon the results of the
Partnership's operations and the amounts received upon the sale, financing or
other disposition of the Properties and are not determinable at this time.
The Partnership paid and will continue to pay an Incentive Management Interest
to the General Partner for managing the Partnership's affairs, including:
determining distributions, negotiating agreements, selling or financing
properties, preparing records and reports, and performing other ongoing
Partnership responsibilities. As a result of the March 25, 1997 Financing and
full return of the $30,000,000 original capital contributions of the Limited
Partners, no further Preferred Return or Cumulative Return will apply, and the
payment of the Incentive Management Interest will not be contingent on the
satisfaction of those returns. As of April 1, 1997, the Incentive Management
Interest is 20% of the net cash from operations (cash revenues less cash
operating expenses and specified reserves) in any taxable year. During 1997, the
General Partner earned and was entitled to an incentive management interest of
$195,000. The actual amount of Incentive Management Interest paid to the General
Partner during 1997 was $605,000, all of which was earned during prior years but
not paid. The Partnership anticipates payment of the $195,000 Incentive
Management Interest from cash reserves during 1998. The actual amount to be
received in future years will depend upon the results of the Partnership's
operations and is not determinable at this time. The General Partner also has a
right to receive 20% of any sale or financing proceeds remaining after each
limited partner has received an amount equal to any shortfall in his 9%
cumulative preferred return, plus the return of his adjusted capital
contribution.
At the Special Meeting, the Limited Partners approved an amendment to the
Partnership Agreement to provide that the Partnership will pay the General
Partner a quarterly Partnership Management Distribution equal to one-fourth of
1% of the most recent appraised value of the Properties of the Partnership. The
Partnership Management Distribution for each quarter will be paid in arrears, 45
days after the end of each fiscal quarter. The General Partner proposed the
Partnership Management Distribution to compensate, in part, for the substantial
reduction in the amounts expected to be paid to the General Partner pursuant to
the Incentive Management Interest following the Financing. Based on the
Properties' March 1997 aggregate appraised value of
-14-
15
$53,200,000, the Partnership Management Distribution due to the General Partner
was $399,000 ($53,200,000 x 1.0% = $532,000 x 75.0% = $399,000). The Partnership
Management Distribution paid to the General Partner during 1997 was $266,000. As
of December 31, 1997, the Partnership Management Distribution due the General
Partner totaled $133,000. This amount was paid to the General Partner on
February 15, 1998 from cash reserves. Based on the Properties' March 1998
aggregate appraised value of $55,800,000, the Partnership Management
Distribution due the General Partner for the Partnership's 1998 fiscal year will
be $558,000 ($55,800,000 x 1.0% = $558,000).
Also at the Special Meeting, the Limited Partners approved the payment of a
one time finance fee to Uniprop, Inc., an affiliate of the General Partner,
equal to 1% of the amount borrowed in the Financing. Because the amount borrowed
was $33,500,000, the finance fee paid to Uniprop, Inc. on March 25, 1997 was
$335,000. The finance fee is payable for unusual services rendered in arranging
financing for all the Properties.
Uniprop, Inc., an affiliate of the General Partner, received and will
receive property management fees for each Property managed by it. Uniprop, Inc.
is primarily responsible for the day-to-day management of the Properties and for
the payment of the costs of operating each Property out of the rental income
collected. The property management fees are equal to the lesser of 5% of the
annual gross receipts from the Properties managed by Uniprop, Inc., or the
amount which would be payable to an unaffiliated third party for comparable
services. During the last fiscal year, Uniprop, Inc. received the following
property management fees totaling $404,514: Aztec Estates, $155,265; Kings
Manor, $70,227; Old Dutch Farms, $65,960; and Park of the Four Seasons,
$113,062. In addition, certain employees of the Partnership are also employees
of affiliates of the General Partner. During the last fiscal year, these
employees received an aggregate of $128,094 for performing local property
management, data processing and investor relations services for the Partnership.
The actual amounts to be received during the next fiscal year will depend upon
the results of the Partnership's operations and are not determinable at this
time.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) Financial Statements
The following financial statements and related documents are filed with
this Report:
(1) Report of Independent Certified Public Accountants
(2) Balance Sheets as of December 31, 1997 and 1996 and Statements of
Income for the fiscal years ended December 31, 1997, 1996 and
1995
-15-
16
(3) Statements of Partners' Equity for the fiscal years ended
December 31, 1997, 1996 and 1995
(4) Statements of Cash Flows for the fiscal years ended December 31,
1997, 1996 and 1995
(5) Schedule III - Real Estate and Accumulated Depreciation for the
fiscal years ended December 31, 1997, 1996 and 1995
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth quarter of
1997.
(c) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed June 4, 1985, as amended on
August 1, 1985 and September 11, 1985:
3(a) Amended Certificate of Limited Partnership for the Partnership
3(b) Agreement of Limited Partnership for the Partnership
10(a) Form of Management Agreement between the Partnership and Uniprop,
Inc.
10(b) Form of Consulting Agreement between the Partnership, the General
Partner and Consultant
The following exhibits are attached to this Report:
3(c) Certificate of Amendment to the Certificate of Limited Partnership
for the Partnership (originally filed with Form 10-Q for the fiscal
quarter ended June 30, 1986).
4 Form of Certificate of Limited Partnership Interest in the
Partnership (As last submitted with Form 10-K for the fiscal year
ended December 31, 1992 and originally filed with Form 10-K for the
fiscal year ended December 31, 1986)
10(c) Contingent Purchase Price Agreement between the Partnership, Aztec
Estates (As last submitted with Form 10-K for the fiscal year ended
December 31, 1992 and originally filed with Form 10-K for the fiscal
year ended December 31, 1987)
10(d) Contingent Purchase Price Agreement between the Partnership and
O.D.F. Mobile Home Park (As last submitted with Form 10-K for the
fiscal year
-16-
17
ended December 31, 1992 and originally filed with Form 10-K for the
fiscal year ended December 31, 1987)
10(e) Contingent Purchase Price Agreement between the Partnership and The
Park of the Four Seasons (As last submitted with Form 10-K for the
fiscal year ended December 31, 1992 and originally filed with Form
10-K for the fiscal year ended December 31, 1987)
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the
Partnership's four manufactured housing communities, as of March 1,
1998.
(d) Other Financial Statements
There are no other financial statements required by the instructions
contained in Regulation S-X or, the information is included elsewhere in the
financial statements or the notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund, a
Michigan Limited Partnership, 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,
General Partner
Dated: March 31, 1998 BY: /s/ Paul M. Zlotoff
--------------------------------
Paul M. Zlotoff, General Partner
BY: GP P.I. Associates Corp.
BY: /s/ Paul M. Zlotoff
---------------------------------
Paul M. Zlotoff, President
-17-
18
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund (a Michigan limited partnership), as of December 31,
1997 and 1996, and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1997. We have
also audited the schedule listed under Item 14 of Form 10-K. These financial
statements and the schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
the schedule. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and the schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund at December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule listed under Item 14 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 12, 1998
19
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
- --------------------------------------------------------------------------------
December 31, 1997 1996
- --------------------------------------------------------------------------------
ASSETS
PROPERTY AND EQUIPMENT (Note 2)
Buildings and improvements $ 23,862,182 $ 22,128,664
Land 5,280,000 5,280,000
Manufactured homes and improvements 668,108 538,914
Furniture and equipment 117,847 101,700
- --------------------------------------------------------------------------------
29,928,137 28,049,278
Less accumulated depreciation 8,805,795 7,989,565
- --------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 21,122,342 20,059,713
Cash 649,137 640,086
Unamortized financing costs 796,547 -
Other assets (Note 3) 484,407 607,756
- --------------------------------------------------------------------------------
$ 23,052,433 $ 21,307,555
================================================================================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Note payable (Note 2) $ 33,355,940 $ -
Line-of-credit (Note 4) 358,916 495,300
Accounts payable 116,066 110,583
Other liabilities (Note 5) 891,073 991,619
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 34,721,995 1,597,502
- --------------------------------------------------------------------------------
PARTNERS' EQUITY (DEFICIT)
Class A limited partners (9,509,936) 11,438,140
Class B limited partners (897,721) 8,874,775
General partner (1,261,905) (602,862)
- --------------------------------------------------------------------------------
TOTAL PARTNERS' EQUITY (DEFICIT) (11,669,562) 19,710,053
- --------------------------------------------------------------------------------
$ 23,052,433 $ 21,307,555
================================================================================
See accompanying notes to financial statements.
20
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Year Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------
INCOME
Rental $7,821,138 $7,490,744 $7,183,229
Interest 73,543 30,760 28,057
Other 340,223 229,854 290,935
- --------------------------------------------------------------------------------
8,234,904 7,751,358 7,502,221
- --------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 2,354,635 2,386,289 2,252,437
Administrative (Note 6) 994,698 785,186 665,407
Depreciation and amortization 891,138 784,742 783,827
Property taxes 792,452 820,688 811,360
Interest 2,142,196 -- --
- --------------------------------------------------------------------------------
7,175,119 4,776,905 4,513,031
- --------------------------------------------------------------------------------
NET INCOME $1,059,785 $2,974,453 $2,989,190
================================================================================
INCOME PER LIMITED PARTNERSHIP
UNIT (Note 8)
Class A $ 17 $ 69 $ 69
Class B $ 52 $ 100 $ 100
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT (Note 8)
Class A $ 1,052 $ 100 $ 100
Class B $ 1,052 $ 100 $ 100
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING
Class A 20,230 20,230 20,230
Class B 9,770 9,770 9,770
NET INCOME ALLOCABLE TO
GENERAL PARTNER $ 211,957 $ 600,712 $ 612,411
DISTRIBUTIONS ALLOCABLE TO
GENERAL PARTNER $ 871,000 $ 600,000 $ 595,000
================================================================================
See accompanying notes to financial statements.
21
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
Class A Class B
General Limited Limited
Partner Partners Partners TOTAL
- -------------------------------------------------------------------------------------------------------------------
BALANCE, January 1, 1995 $ (620,985) $ 12,687,620 $ 8,874,775 $ 20,941,410
Distributions to partners (595,000) (2,023,000) (977,000) (3,595,000)
Net income for the year 612,411 1,399,779 977,000 2,989,190
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 (603,574) 12,064,399 8,874,775 20,335,600
Distributions to partners (600,000) (2,023,000) (977,000) (3,600,000)
Net income for the year 600,712 1,396,741 977,000 2,974,453
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 (602,862) 11,438,140 8,874,775 19,710,053
Distributions to partners (871,000) (21,287,624) (10,280,776) (32,439,400)
Net income for the year 211,957 339,548 508,280 1,059,785
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 $ (1,261,905) $ (9,509,936) $ (897,721) $ (11,669,562)
===================================================================================================================
See accompanying notes to financial statements.
22
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Year Ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,059,785 $ 2,974,453 $ 2,989,190
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 826,638 784,742 783,827
Amortization 64,500 - -
(Gain) loss on disposals of property and equipment (86,216) 38,386 (34,074)
(Increase) decrease in other assets 123,349 82,721 (274,628)
Increase (decrease) in accounts payable 5,483 (59,630) 78,297
Increase (decrease) in other liabilities (100,546) 18,077 28,090
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,892,993 3,838,749 3,570,702
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Payment of contingent purchase price (1,500,000) - -
Purchase of property and equipment (956,133) (726,175) (564,061)
Proceeds from disposals of property and equipment 653,082 506,758 475,645
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,803,051) (219,417) (88,416)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from note payable 33,500,000 - -
Distributions to partners (32,439,400) (3,600,000) (3,595,000)
Payment for financing costs (861,047) - -
Repayment of note payable (144,060) - -
Net advances (payments) under line of credit (136,384) 152,090 208,210
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (80,891) (3,447,910) (3,386,790)
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 9,051 171,422 95,496
CASH, at beginning of year 640,086 468,664 373,168
- -------------------------------------------------------------------------------------------------------------------
CASH, at end of year $ 649,137 $ 640,086 $ 468,664
===================================================================================================================
See accompanying notes to financial statements.
23
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF ORGANIZATION AND BUSINESS
ACCOUNTING
POLICIES Uniprop Manufactured Housing Communities Income Fund, a
Michigan Limited Partnership (the "Partnership") acquired,
maintains, operates and will ultimately dispose of income
producing residential real properties consisting of four
manufactured housing communities (the "properties") located
in Florida, Minnesota and Michigan. The Partnership was
organized and formed under the laws of the State of Michigan
on May 16, 1985.
The general partner of the Partnership is P. I. Associates
Limited Partnership. Taxable investors acquired 20,230 Class
A units, and 9,770 Class B units were acquired by tax exempt
investors. Depreciation is allocated only to holders of
Class A units and to the general partner.
USE OF ESTIMATES
In preparing financial statements in conformity with
generally accepted accounting principles, management is
required to make estimates and assumptions that affect (1)
the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the
date of the financial statements, and (2) revenues and
expenses during the reporting period. Actual results could
differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's financial
instruments, which consist of the line of credit and note
payable, approximate their fair values.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the following
estimated useful lives:
Building and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
24
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Accumulated depreciation for tax purposes was $10,060,608
and $9,169,549 as of December 31, 1997 and 1996,
respectively.
Long-lived assets, such as property and equipment, are
evaluated for impairment when events or changes in
circumstances indicate that the carrying amount of the
assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets.
When any such impairment exists, the related assets will be
written down to fair value. No impairment loss recognition
has been required through December 31, 1997.
FINANCING COSTS
As a result of management's present intent to refinance the
note payable after ten years, costs to obtain the 1997
financing (see Note 2) are amortized over a ten-year period.
INCOME TAXES
Federal income tax regulations provide that any taxes on
income of a partnership are payable by the partners as
individuals. Therefore, no provision for such taxes has been
made at the partnership level.
2. NOTE PAYABLE On March 24, 1997, the Partnership entered into a
$33,500,000 note payable agreement. The borrowings are
secured by mortgages on the Partnership's properties and the
assignment of all current and future leases and rents. The
note is payable in monthly installments of $251,439,
including interest, through March 2027. The interest rate is
8.24% per annum through June 2007; thereafter, the interest
rate will be adjusted based on the provisions of the note
agreement. The loan may be prepaid without penalty beginning
in January 2007. These are certain requirements and
restrictions contained in the note payable agreement. The
Partnership is in compliance with these requirements.
25
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The proceeds of the note were used primarily to return to
the limited partners their original $30,000,000 capital
contribution, to pay certain amounts to the general partner
and affiliates of the general partner as described in Notes
6 and 8, and to pay related financing costs.
Future maturities on the note payable for the next five
years are as follows:
1998 - $230,000; 1999 - $250,000; 2000 - $265,000; 2001 -
$295,000; and 2002 - $320,000.
3. OTHER ASSETS At December 31, 1997 and 1996, "Other assets" included cash
of $211,000 and $171,000, respectively, in a security
deposit escrow account for two of the Partnership's
properties, as required by the laws of the state in which
they are located, which is restricted from operating use.
4. LINE-OF-CREDIT The Partnership currently has an unsecured $600,000
revolving line-of-credit agreement with a bank. Interest on
outstanding balances is charged at 1.80% in excess of LIBOR;
the Partnership's interest rate at December 31, 1997 was
7.54%.
5. OTHER Other liabilities consisted of:
LIABILITIES
December 31, 1997 1996
------------------------------------------------------------
Tenants' security deposits $ 505,166 $ 483,809
Accrued interest 157,786 -
Accrued property taxes 81,584 496,898
Other 146,537 10,912
------------------------------------------------------------
TOTAL $ 891,073 $ 991,619
============================================================
26
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. RELATED PARTY MANAGEMENT AGREEMENT
TRANSACTIONS
The Partnership has an agreement with an affiliate of the
general partner to manage the properties owned by the
Partnership. The management agreement is automatically
renewable annually, but may be terminated by either party
upon sixty days written notice. The property management fee
is the lesser of 5% of annual gross receipts from the
properties managed, or the amount which would be payable to
an unaffiliated third party for comparable services.
REPORT OF FEES
During the years ended December 31, 1997, 1996 and 1995, the
affiliate earned property management fees of $404,514,
$387,855 and $371,984, respectively, as permitted in the
Agreement of Limited Partnership. These operating expenses
are included with "Administrative" expenses in the
respective statements of income. The Partnership was owed
$9,230 and $6,945 by the affiliate at December 31, 1997 and
1996, respectively.
Certain employees of the Partnership are also employees of
affiliates of the general partner. These employees were paid
by the Partnership the amounts of $128,094, $130,321 and
$105,798, in 1997, 1996 and 1995, respectively, to perform
local property management and investor relations services
for the Partnership.
CONTINGENT PURCHASE PRICE
The general partner of P.I. Associates has an interest in
the sellers of all the properties acquired by the
Partnership and is entitled to share in a contingent
purchase price with respect to each property. Each seller
will become entitled to any unpaid contingent purchase price
upon the sale, financing or other distribution of one or
more of the properties, but, only after the receipt by the
limited partners of any shortfall in their 9% cumulative
preferred return, plus the return of their adjusted capital
contribution.
27
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Since inception of the Partnership, there has been no
shortfall in the 9% cumulative return and, as described in
Note 2, the Partnership used a portion of the proceeds from
the 1997 financing to return the limited partners' original
capital contribution. As a result, $1,500,000 of the
proceeds from the financing transaction were used to make a
partial payment on the contingent purchase price. This
amount has been capitalized as "Buildings and Improvements"
in the accompanying December 31, 1997 balance sheet.
Management estimates that the total remaining contingent
purchase price at December 31, 1997 is approximately
$1,970,000. Additional amounts to be paid, if any, would
depend upon the results of the Partnership's operations and
the amounts received upon the sale, financing or other
disposition of the properties; such amounts are not
determinable at this time. Therefore, no liability related
to this remaining contingency has been recorded at December
31, 1997.
FINANCING COSTS
As part of the financing transaction described in Note 2,
the Partnership paid approximately $335,000 in financing
costs to an affiliate of the general partner.
7. RECONCILIATION
OF FINANCIAL
INCOME AND
TAXABLE
INCOME
Year Ended December 31, 1997 1996 1995
---------------------------------------------------------------------------
Income per the financial
statements $ 1,059,785 $ 2,974,453 $ 2,989,190
Adjustments to depreciation
for difference in methods (74,828) (69,114) (68,563)
Adjustments for prepaid rent,
meals and entertainment 3,379 7,468 (2,877)
---------------------------------------------------------------------------
Income Per The Partnership's
Tax Return $ 988,336 $ 2,912,807 $ 2,917,750
===========================================================================
28
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. PARTNERS' Subject to the orders of priority under certain specified
CAPITAL conditions more fully described in the Agreement of Limited
Partnership (as amended on February 6, 1997), distributions
of partnership funds and allocations of net income from
operations are principally determined as follows:
DISTRIBUTIONS
Net cash from operations (generally defined in the Agreement
as net income plus depreciation and amortization) is to be
distributed first to the limited partners until they have
received their 10% preferred return plus any shortfall in
their 9% cumulative return. Second, the general partner will
receive a Partnership Management Distribution equal to .25%
quarterly of the appraised value of the properties of the
Partnership (equal to $532,000 annually based on current
appraisals). Thereafter, remaining net cash from operations
is to be distributed 20% to the general partner as an
Incentive Management Interest and 80% to the limited
partners.
The Partnership Management Distribution and the Incentive
Management Interest represent payment for managing the
Partnership's affairs. At December 31, 1997, the general
partner had earned but not yet received a Partnership
Management Distribution and an Incentive Management Interest
of approximately $133,000 and $195,000, respectively. These
amounts are not yet considered payable at 1997 year-end;
they will be charged to the general partner's capital
account when paid.
At December 31, 1996, the general partner had earned but not
yet received an Incentive Management Interest of $605,000.
This $605,000 was paid in 1997 from a portion of the
proceeds of the financing transaction described in Note 2.
ALLOCATION OF NET INCOME
Net income is to be allocated in the same manner as
distributions except that:
a) Depreciation expense is allocated only to the general
partner and the Class A (taxable) limited partners and,
b) In all cases, the general partner is to be allocated at
least 1% of all Partnership items.
29
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. SUPPLEMENTAL Cash paid for interest totaled approximately $1,984,000,
CASH FLOW $35,000 and $15,000 in 1997, 1996 and 1995, respectively.
INFORMATION
30
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Column A Column B Column C Column D
- ------------------------ ----------- ------------------------------ ------------------------------
Costs
Capitalized
Subsequent to
Initial Cost Acquisition
------------------------------ ------------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- -------------------------------------------------------------------------------------------------------
Aztec Estates
(Margate, FL) $12,612,418 $ 2,199,868 $ 8,799,475 $ -- $ 771,636
Kings Manor
(Ft. Lauderdale, FL) 6,399,844 847,923 3,391,694 -- 362,248
Park of the Four Seasons
(Blaine, MN) 8,641,438 1,508,121 6,032,483 -- 675,876
Old Dutch Farms
(Novi, MI) 5,702,240 724,088 2,896,348 -- 932,422
- --------------------------------------------------------------------------------------------------------
$33,355,940 $ 5,280,000 $21,120,000 $ -- $ 2,742,182
========================================================================================================
Column A Column E Column F Column G Column H
- ------------------------ ------------------------------------------ ------------- -------- ---------------
Gross Amount at Which Carried Life on Which
at Close of Period Depreciation in
------------------------------------------ Latest Income
Buildings and Accumulated Date Statement is
Description Land Improvements Total Depreciation Acquired Computed
- -------------------------------------------------------------------------------------------------------------------
Aztec Estates
(Margate, FL) $ 2,199,868 $ 9,571,111 $11,770,979 $ 3,591,064 1986 30 years
Kings Manor
(Ft. Lauderdale, FL) 847,923 3,753,942 4,601,865 1,388,190 1986 30 years
Park of the Four Seasons
(Blaine, MN) 1,508,121 6,708,359 8,216,480 2,438,518 1986 30 years
Old Dutch Farms
(Novi, MI) 724,088 3,828,770 4,552,858 1,293,701 1986 30 years
- -------------------------------------------------------------------------------------------------------------------
$ 5,280,000 $23,862,182 $29,142,182 $ 8,711,473
===================================================================================================================
31
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. RECONCILIATION OF The following table reconciles buildings and
BUILDINGS AND improvements from January 1, 1995 to December 31, 1997:
IMPROVEMENTS
1997 1996 1995
--------------------------------------------------------------------
BALANCE, at January 1 $22,128,664 $22,087,145 $22,033,371
Partial payment of contingent
purchase price 1,500,000 -- --
Additions to buildings and
improvements 233,518 41,519 53,774
--------------------------------------------------------------------
BALANCE, at December 31 $23,862,182 $22,128,664 $22,087,145
====================================================================
There were no additions to land during this three-year
period.
2. RECONCILIATION OF The following table reconciles the accumulated
ACCUMULATED depreciation from January 1, 1995 to December 31, 1997:
DEPRECIATION
1997 1996 1995
-------------------------------------------------------------
BALANCE, at January 1 $7,905,581 $7,142,041 $6,377,185
Current year
depreciation expense 805,892 763,540 764,856
-------------------------------------------------------------
BALANCE, at December 31 $8,711,473 $7,905,581 $7,142,041
=============================================================
3. TAX BASIS OF The aggregate cost of buildings and improvements for
BUILDINGS AND federal income tax purposes is equal to the cost basis
IMPROVEMENTS used for financial statement purposes.
32
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------ ----------- ---------------- ----
3(a) Amended Certificate of Incorporated by
Limited Partnership for reference to the S-11
the Partnership Registration Statement
of the Partnership
filed June 4, 1985, as
amended on August 1,
1985 and September 11,
1985 ("Registration
Statement").
3(b) Agreement of Limited Incorporated by
Partnership for the reference to the
Partnership Registration Statement.
3(c) Certificate of Incorporated by
Amendment to the reference to Form 10-K
Certificate of Limited for fiscal year ended
Partnership for the December 31, 1992.
Partnership (originally
filed with Form 10-Q
for the fiscal quarter
ended June 30, 1986).
3(d) First Amendment to Incorporated by
Agreement of Limited reference to Form 10-K
Partnership for the fiscal year
ended December 31,
1996.
3(e) Second Amendment to Incorporated by
Agreement of Limited reference to Form 10-K
Partnership for the fiscal year
ended December 31,
1996.
4 Form of Certificate of Filed herewith. Under
Limited Partnership cover of Form SE
Interest in the
Partnership (originally
filed with Form 10-K
for the fiscal year
ended December 31,
1986).
10(a) Form of Management Incorporated by
Agreement between the reference to the
Partnership and Registration Statement.
Uniprop, Inc.
10(b) Form of Consulting Incorporated by
Agreement between the reference to the
Partnership, the Registration Statement.
General Partner and
Consultant
33
10(c) Contingent Purchase Filed herewith. Under
Price Agreement between cover of Form SE
the Partnership, Aztec
Estates, Ltd., and
Kings Manor Associates
(originally filed with
Form 10-K for the
fiscal year ended
December 31, 1987)
10(d) Contingent Purchase Filed herewith. Under
Price Agreement between cover of Form SE
the Partnership and
O.D.F. Mobile Home Park
(originally filed with
Form 10-K for the
fiscal year ended
December 31, 1987
10(e) Contingent Purchase Filed herewith. Under
Price Agreement between cover of Form SE
the Partnership and The
Park of the Four
Seasons (originally
filed with Form 10-K
for the fiscal year
ended December 31,
1987)
27 Financial Data Schedule Filed herewith.
28 Letter summary of the Filed herewith.
estimated fair market
values of the
Partnership's four
manufactured housing
communities, as of
March 1, 1998