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

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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 June 30, 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

(State or other jurisdiction of

incorporation or organization)

38-2702802

(I.R.S. employer

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 o

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 o No o

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 o Accelerated filer o Non-accelerated filer o 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 o No x

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

INDEX

		Page

PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Balance Sheets
	June 30, 2011 (Unaudited) and
	December 31, 2010	3

	Statements of Operations
	Six and Three months ended June 30, 2011
	and 2010 (Unaudited)	4

	Statement of Partners’ Equity
	Six months ended June 30, 2011 (Unaudited)	4

	Statements of Cash Flows
	Six months ended June 30, 2011 and 2010 (Unaudited)	5

	Notes to Financial Statements
	June 30, 2011 (Unaudited)	6

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS
	OF FINANCIAL CONDITION AND RESULTS
	OF OPERATIONS	7

ITEM 3.	QUANTITATIVE AND QUALITATIVE
	DISCLOSURES ABOUT MARKET RISK	9

ITEM 4.	CONTROLS AND PROCEDURES	10

PART II	OTHER INFORMATION	10

ITEM 1.	LEGAL PROCEEDINGS	10

ITEM 1A.	RISK FACTORS	10

ITEM 6.	EXHIBITS	11

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP

BALANCE SHEETS

ASSETS	June 30,2011			December 31, 2010
	(Unaudited)
Properties:
Land	$	8,952,937		$	8,952,937
Buildings And Improvements		41,816,584			41,670,535
Furniture And Fixtures		626,072			615,260
		51,395,593			51,238,732

Less Accumulated Depreciation		(31,937,054	)		(31,175,620	)
		19,458,539			20,063,112

Cash And Cash Equivalents		6,610,765			5,671,854
Investments, at Fair Value		0			1,423,003
Unamortized Finance Costs		610,542			624,418
Manufactured Homes and Improvements		1,460,196			1,064,356
Other Assets		1,491,962			1,131,641

Total Assets	$	29,632,004		$	29,978,384




LIABILITIES & PARTNERS' EQUITY	June 30,2011			December 31, 2010
	(Unaudited)

Accounts Payable	$	147,966		$	137,898
Other Liabilities		643,291			338,643
Notes Payable		22,127,276			22,341,976

Total Liabilities	$	22,918,533		$	22,818,517

Partners' Equity:
General Partner		420,340			419,519
Unit Holders		6,293,131			6,740,348

Total Partners' Equity		6,713,471			7,159,867

Total Liabilities And
Partners' Equity	$	29,632,004		$	29,978,384

See Notes to Financial Statements

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS	SIX MONTHS ENDED				THREE MONTHS ENDED
(unaudited)	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010


Income:
Rental Income	$	3,598,177	$	3,650,561	$	1,810,139	$	1,812,952
Home Sale Income		60,399		112,635		3,000		63,135
Other		297,495		397,044		160,135		223,488

Total Income		3,956,071		4,160,240		1,973,274		2,099,575

Operating Expenses:
Administrative Expenses
(Including $192,910, $193,954, $97,464 and $96,256, in Property
Management Fees Paid to an Affiliate for the Six and Three Month
Period Ended June 30, 2011 and 2010, respectively)		1,256,480		1,171,729		593,873		526,812
Property Taxes		458,109		507,951		229,047		253,947
Utilities		295,871		311,243		151,969		147,663
Property Operations		280,409		281,967		160,759		136,688
Depreciation		761,434		746,573		382,975		376,025
Interest		749,824		763,626		374,020		380,978
Home Sale Expense		71,798		140,189		13,251		63,688

Total Operating Expenses		3,873,925		3,923,278		1,905,894		1,885,801

Net Income	$	82,146	$	236,962	$	67,380	$	213,774

Income per Limited Partnership Unit:		0.02		0.07		0.02		0.06

Distribution Per Unit:		0.16		0.16		0.08		0.08

Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Six and Three Month
Period Ended June 30, 2011 and 2010.		3,303,387		3,303,387		3,303,387		3,303,387

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

Balance, December 31, 2010	$	419,519	$	6,740,348		$	7,159,867
Distributions		0		(528,542	)		(528,542	)
Net Income		821		81,325			82,146

Balance as of June 30, 2011	$	420,340	$	6,293,131		$	6,713,471

See Notes to Financial Statements

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
(Unaudited)
	SIX MONTHS ENDED
	June 30,2011			June 30,2010

Cash Flows From Operating Activities:
Net Income	$	82,146		$	236,962

Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation		761,434			746,573
Amortization		13,876			13,876
Increase in Manufactured Homes and Home Improvements		(395,840	)		(317,861	)
Increase In Other Assets		(360,321	)		(173,270	)
Increase In Accounts Payable		10,068			36,123
Increase In Other Liabilities		304,648			232,013

Total Adjustments		333,865			537,454

Net Cash Provided By Operating Activities		416,011			774,416

Cash Flows From Investing Activities:
Redemption of Investments		1,423,003			0
Purchase of property and equipment		(156,861	)		(156,814	)

Net Cash Provided By (used in) Investing Activities		1,266,142			(156,814	)

Cash Flows Used In Financing Activities:
Distributions To Unit Holders		(528,542	)		(528,542	)
Payments On Mortgage		(214,700	)		(200,974	)

Net Cash Used In Financing Activities		(743,242	)		(729,516	)

Increase (Decrease) In Cash and Equivalents		938,911			(111,914	)
Cash, Beginning		5,671,854			7,370,544

Cash, Ending	$	6,610,765		$	7,258,630

See Notes to Financial Statements

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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

June 30, 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 and six months ended June 30, 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 June 30, 2011 the balance on these notes was $22,127,276.

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.

Future maturities on the note payable for the next five years and thereafter are as follows: remainder of 2011 - $221,911; 2012 - $466,432; 2013 - $498,289; 2014 - $532,321; 2015 - $568,678; and thereafter - $19,839,644.

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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 June 30, 2011 the balance on these notes was $22,127,276.

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 second quarter ended June 30, 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.

-7-

As of June 30, 2011, the Partnership’s cash balance amounted to $6,610,765. 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 49% at the end of June 2011 versus 51% at the end of June 2010. The average monthly homesite rent as of June 30, 2011 was approximately $493; versus $482 from June 2010 (average rent not a weighted average).

	Total Capacity		Occupied Sites		Occupancy Rates			Average* Rent
Ardmor Village		339		158		47	%	$	510
Camelot Manor		335		99		30	%		409
Dutch Hills		278		112		40	%		412
El Adobe		367		198		54	%		522
Stonegate Manor		308		107		35	%		402
Sunshine Village		356		226		64	%		605
West Valley		421		316		75	%		588

Total on 6/30/11:		2,404		1,216		49	%	$	493
Total on 6/30/10:		2,404		1,262		51	%	$	482

*Not a weighted average

	Gross Revenue				Net Operating Income and Net Income						Gross Revenue				Net Operating Income and Net Income
	6/30/2011		6/30/2010		6/30/2011			6/30/2010			06/30/2011		06/30/2010		06/30/2011			06/30/2010
	three months ended				three months ended						six months ended				six months ended

Ardmor	$	243,275	$	254,616	$	100,366		$	127,103		$	492,392	$	509,600	$	230,739		$	256,155
Camelot Manor		130,130		150,025		27,985			33,661			276,836		290,780		50,987			73,129
Dutch Hills		144,186		140,969		41,024			48,329			285,642		288,827		83,325			104,222
El Adobe		318,774		359,846		170,741			227,276			609,329		676,340		336,948			395,631
Stonegate		149,490		146,355		36,184			50,326			298,845		311,481		78,326			97,617
Sunshine		412,136		438,276		204,200			189,017			849,344		888,838		404,812			390,970
West Valley		570,267		602,916		405,408			414,019			1,134,291		1,181,314		799,520			800,523
		1,968,258		2,093,003		985,908			1,089,731			3,946,679		4,147,180		1,984,657			2,118,247
Partnership Management		5,016		6,572		(123,568	)		(96,231	)		9,392		13,060		(328,880	)		(316,599	)
Other Expense		-----		-------		(37,965	)		(22,723	)		-------		-------		(62,373	)		(54,487	)

Interest Expense		-----		-------		(374,020	)		(380,978	)		--------		-------		(749,824	)		(763,626	)


Depreciation		-----		-------		(382,975	)		(376,025	)		-------		--------		(761,434	)		(746,573	)
	$	1,973,274	$	2,099,575	$	67,380		$	213,774		$	3,956,071	$	4,160,240	$	82,146		$	236,962

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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 Three Months Ended June 30, 2011 to Three Months Ended June 30, 2010

Gross revenues decreased $126,301 to $1,973,274 in 2011, from $2,099,575 in 2010. This was due to lower occupancy and decreased home sale activity.

As described in the Statements of Operations, total operating expenses increased $20,093, to $1,905,894 in 2011, as compared to $1,885,801 in 2010. This was due to increases in administrative and property operations expenses, offset by decreased home sale activity.

As a result of the aforementioned factors, the Partnership experienced Net Income of $67,380 for the second quarter of 2011 compared to a Net Income of $213,774 for the second quarter of 2010.

Comparison of Six Months Ended June 30, 2011 to Six Months Ended June 30, 2010

Gross revenues decreased $204,169 to $3,956,071 in 2011, from $4,160,240 in 2010. The decrease was due to decreases in occupancy and home sale activity.

As described in the Statements of Operations, total operating expenses decreased $49,353, to $3,873,925 in 2011, as compared to $3,923,278 in 2010. The decrease was primarily a result of decreased home sale expenses.

As a result of the aforementioned factors, the Partnership experienced Net Income of $82,146 in 2011 as compared to Net Income of $236,962 in 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 June 30, 2011 the Partnership had notes payable outstanding in the amount of $22,127,276. 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.

-9-

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.

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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.

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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/ Roger I. Zlotoff
				Roger I. Zlotoff, President


			By:	/s/ Susann Szepytowski
				Susann E. Szepytowski, Principal Financial Officer



Dated: August 9, 2011

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