UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ - FORM 10-Q

Attached files

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EX-31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/	v221112_ex31-2.htm
EX-31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/	v221112_ex31-1.htm
EX-32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/	v221112_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2011

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-16701

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

a Michigan Limited Partnership

(Exact name of registrant as specified in its charter)

MICHIGAN		38-2702802
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification number)

280 Daines Street, Birmingham, Michigan 48009

(Address of principal executive offices) (Zip Code)

(248) 645-9220

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

units of beneficial assignments of limited partnership interest

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).Yes ¨ No x

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

INDEX

		Page

PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Balance Sheets
	March 31, 2011 (Unaudited) and
	December 31, 2010	3

	Statements of Operations
	Three months ended March 31, 2011
	and 2010 (Unaudited)	4

	Statement of Partners’ Equity
	Three months ended March 31, 2011 (Unaudited)	5

	Statements of Cash Flows
	Three months ended March 31, 2011
	and 2010 (Unaudited)	6

	Notes to Financial Statements
	March 31, 2011 (Unaudited)	7

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS
	OF FINANCIAL CONDITION AND RESULTS
	OF OPERATIONS	8

ITEM 3.	QUANTITATIVE AND QUALITATIVE
	DISCLOSURES ABOUT MARKET RISK	10

ITEM 4.	CONTROLS AND PROCEDURES	10

PART II	OTHER INFORMATION	11

ITEM 1.	LEGAL PROCEEDINGS	11

ITEM 1A.	RISK FACTORS	11

ITEM 6.	EXHIBITS	11

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

BALANCE SHEETS

ASSETS	March 31,2011			December 31, 2010
	(Unaudited)

Properties:
Land	$	8,952,937		$	8,952,937
Buildings And Improvements		41,673,315			41,670,535
Furniture And Fixtures		622,572			615,260
		51,248,824			51,238,732

Less Accumulated Depreciation		(31,554,079	)		(31,175,620	)
		19,694,745			20,063,112

Cash And Cash Equivalents		6,908,787			5,671,854
Investments, at Fair Value		0			1,423,003
Unamortized Finance Costs		617,480			624,418
Manufactured Homes and Improvements		1,264,890			1,064,356
Other Assets		1,270,914			1,131,641

Total Assets	$	29,756,816		$	29,978,384

LIABILITIES & PARTNERS' EQUITY	March 31,2011		December 31, 2010
	(Unaudited)

Accounts Payable	$	114,739	$	137,898
Other Liabilities		496,203		338,643
Notes Payable		22,235,512		22,341,976

Total Liabilities	$	22,846,454	$	22,818,517

Partners' Equity:
General Partner		419,667		419,519
Unit Holders		6,490,695		6,740,348

Total Partners' Equity		6,910,362		7,159,867

Total Liabilities And Partners' Equity	$	29,756,816	$	29,978,384

See Notes to Financial Statements

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS	THREE MONTHS ENDED
(Unaudited)	March 31, 2011		March 31, 2010

Income:
Rental Income	$	1,788,038	$	1,837,609
Home Sale Income		57,399		49,500
Other		137,360		173,556

Total Income		1,982,797		2,060,665

Operating Expenses:
Administrative Expenses
(Including $95,446 and $97,698, in Property Management
Fees Paid to an Affiliate for the Three Month Period Ended
March 31, 2011 and 2010, respectively)		662,607		644,917
Property Taxes		229,062		254,004
Utilities		143,902		163,580
Property Operations		119,650		145,279
Depreciation		378,459		370,548
Interest		375,804		382,648
Home Sale Expense		58,547		76,501

Total Operating Expenses		1,968,031		2,037,477

Net Income	$	14,766	$	23,188

Income per Limited Partnership Unit		0.00		0.01

Distribution Per Unit:		0.08		0.08

Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
March 31, 2011 and 2010		3,303,387		3,303,387

See Notes to Financial Statements

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

STATEMENT OF PARTNERS' EQUITY (Unaudited)
	General Partner		Unit Holders			Total

Balance, December 31, 2010	$	419,519	$	6,740,348		$	7,159,867
Distributions		-		(264,271	)		(264,271	)
Net Income		148		14,618			14,766

Balance as of March 31, 2011	$	419,667	$	6,490,695		$	6,910,362

See Notes to Financial Statements

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

(Unaudited)

	THREE MONTHS ENDED
	March 31,2011			March 31,2010

Cash Flows From Operating Activities:
Net Income	$	14,766		$	23,188

Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation		378,459			370,548
Amortization		6,938			6,938
Increase in Manufactured Homes and Home Improvements		(200,534	)		(5,967	)
(Increase) Decrease In Other Assets		(139,273	)		120,352
(Decrease) Increase In Accounts Payable		(23,159	)		25,410
Increase In Other Liabilities		157,560			69,729

Total Adjustments		179,991			587,010

Net Cash Provided By
Operating Activities		194,757			610,198

Cash Flows Used In Investing Activities:
Redemption of Investments		1,423,003			0
Purchase of property and equipment		(10,092	)		(23,715	)

Cash Flows From Financing Activities:		1,412,911
Distributions To Unit Holders		(264,271	)		(264,271	)
Payments On Mortgage		(106,464	)		(99,657	)

Net Cash Used In
Financing Activities		(370,735	)		(363,928	)

Increase In Cash and Equivalents		1,236,933			222,555
Cash, Beginning		5,671,854			7,370,544

Cash, Ending	$	6,908,787		$	7,593,099

See Notes to Financial Statements

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

March 31, 2011 (Unaudited)

1.	Basis of Presentation:

The accompanying unaudited 2011 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 notes 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, 2010 has been derived from the audited financial statements at that date. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, 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, 2010.

We have evaluated subsequent events through the date of this filing. We do not believe there are any material subsequent events which would require further disclosure.

2.	Mortgage Payable:

On August 29, 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes is accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lender’s then prevailing market rate. As of March 31, 2011, the balance on these notes was $22,235,512.

The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the mortgage of 25 years. This included a 1% fee payable to an affiliate of the General Partner.

Future maturities on the note payable for the next five years and thereafter are as follows: remainder of 2011 - $330,148; 2012 - $466,432; 2013 - $498,289; 2014 - $532,321; 2015 - $568,678; and thereafter - $19,839,644.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies

See Part II, Item 7 – Critical Accounting Policies, our consolidated financial statements and related notes in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on February 22, 2011 for accounting policies and related estimates we believe are the most critical to understanding condensed consolidated financial statements, financial conditions and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

Liquidity and Capital Resources

Partnership liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. All of the properties have been owned by the Partnership for more than ten years. The General Partner may elect to have the Partnership own the properties for as long as, in the opinion of the General Partner, it is in the best interest of the Partnership to do so.

The Partnership's capital resources consist primarily of its seven manufactured home communities. On August 29, 2008, the Partnership refinanced these properties with Stancorp Mortgage Investors, LLC (the “Refinancing”) in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes are accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lenders then prevailing market rate. As of March 31, 2011 the balance on these notes was $22,235,512.

The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the loan. This included a 1% fee payable to an affiliate of the General Partner.

As a result of the Refinancing, all of the Partnership’s seven properties are mortgaged. At the time of the Refinancing, the aggregate principal amount due under the seven mortgage notes was $23,225,000 and the aggregate fair market value of the Partnership’s mortgaged properties was $73,550,000. The Partnership expects to meet its short-term liquidity needs generally through its working capital provided by operating activities.

The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the first quarter ended March 31, 2011. The General Partner will continue to monitor cash flow generated by the Partnership’s seven properties during the coming quarters. If cash flow generated is greater or lesser than the amount needed to maintain the current distribution level, the General Partner may elect to reduce or increase the level of future distributions paid to Unit Holders.

As of March 31, 2011, the Partnership’s cash balance amounted to $6,908,787. The level of cash balance maintained is at the discretion of the General Partner.

Results of Operations

Overall, as illustrated in the following table, the Partnership's seven properties reported combined occupancy of 50% at the end of March 2011, versus 51% at the end of March 2010. The average monthly homesite rent as of March 31, 2011 was approximately $492 versus $482 from March 2010 (average rent not a weighted average).

	Total		Occupied		Occupancy			Average*
	Capacity		Sites		Rate			Rent
Ardmor Village		339		161		48	%	$	510
Camelot Manor		335		100		30	%		403
Dutch Hills		278		113		41	%		412
El Adobe		367		202		55	%		522
Stonegate Manor		308		108		35	%		402
Sunshine Village		356		227		64	%		605
West Valley		421		318		76	%		588

Total on 3/31/11:		2,404		1,229		50	%	$	492
Total on 3/31/10:		2,404		1,267		51	%	$	482

*Not a weighted average

	Gross Revenue				Net Operating Income and Net Income (Loss)
	3/31/2011		3/31/2010		3/31/2011			3/31/2010
	three months ended				three months ended

Ardmor	$	249,117	$	254,984	$	130,373		$	129,052
Camelot Manor		146,706		140,755		23,002			39,468
Dutch Hills		141,456		147,858		42,301			55,893
El Adobe		290,555		316,494		166,207			168,355
Stonegate		149,355		165,126		42,142			47,291
Sunshine		437,208		450,562		200,612			201,953
West Valley		564,024		578,398		394,112			386,504
		1,978,421		2,054,177		998,749			1,028,516
Partnership Management		4,376		6,488		(205,312	)		(220,368	)
Other Expense		—		—		(24,408	)		(31,764	)

Interest Expense		—		—		(375,804	)		(382,648	)

Depreciation		—		—		(378,459	)		(370,548	)
	$	1,982,797	$	2,060,665	$	14,766		$	23,188

Net Operating Income (“NOI”) is a non-GAAP financial measure equal to net income, the most comparable GAAP financial measure, plus depreciation, interest expense, partnership management expense, and other expenses. The Partnership believes that NOI is useful to investors and the Partnership’s management as an indication of the Partnership’s ability to service debt and pay cash distributions. NOI presented by the Partnership may not be comparable to NOI reported by other companies that define NOI differently, and should not be considered as an alternative to net income as an indication of performance or to cash flows as a measure of liquidity or ability to make distributions.

Comparison of Quarter Ended March 31, 2011 to Quarter Ended March 31, 2010

Gross revenues decreased $77,868 to $1,982,797 in 2009, from $2,060,665 in 2010. This was due to decreased rental and other income as a result of lower occupancy.

As described in the Statements of Operations, total operating expenses decreased $69,446, to $1,968,031 in 2011, as compared to $2,037,477 in 2010. This was a result of decreased expenditures overall, offset by a slight increase in administrative expenses during 2011.

As a result of the aforementioned factors, the Partnership experienced Net Income of $14,766 for the first quarter of 2011 compared to Net Income of $23,188 for the first quarter of 2010.

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 March 31, 2011 the Partnership had notes payable outstanding in the amount of $22,235,512. Interest on these notes is at a fixed annual rate of 6.625% through September 2013, at which time, the rate will reset to the lender’s then prevailing market rate.

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.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or operating results.

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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited Partnership

BY:	Genesis Associates Limited Partnership,
	General Partner

	BY:	Uniprop, Inc.,
		its Managing General Partner

		By:	/s/ Paul M. Zlotoff
			Paul M. Zlotoff, President

		By:	/s/ Joel Schwartz
		Joel Schwartz, Principal Financial Officer

Dated: May 6, 2011

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ - FORM 10-Q - May 6, 2011

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ Reports