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EXCEL - IDEA: XBRL DOCUMENT - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v325852_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v325852_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v325852_ex31-2.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 September 30, 2012

¨ 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 September 30, 2012 (Unaudited) and December 31, 2011 3
       
    Statements of Operations Nine and Three months ended September 30, 2012 and 2011 (Unaudited) 4
       
    Statement of Partners’ Equity Nine months ended September 30, 2012 (Unaudited) 4
       
    Statements of Cash Flows Nine months ended September 30, 2012 and 2011 (Unaudited) 5
       
    Notes to Financial Statements September 30, 2012 (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

 

 
 

  

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

ASSETS  September 30,2012   December 31, 2011 
   (Unaudited)     
Properties:          
Land  $8,952,937   $8,952,937 
Buildings And Improvements   42,167,962    42,031,798 
Furniture And Fixtures   648,279    633,279 
    51,769,178    51,618,014 
           
Less Accumulated Depreciation   (33,883,947)   (32,697,748)
    17,885,231    18,920,266 
           
Cash    5,241,760    6,239,427 
Unamortized Finance Costs   575,852    596,666 
Manufactured Homes and Improvements   3,046,663    2,049,935 
Other Assets   1,349,055    955,929 
           
Total Assets  $28,098,561   $28,762,223 
           
LIABILITIES & PARTNERS' EQUITY   September 30,2012    December 31, 2011 
    (Unaudited)      
           
Accounts Payable  $87,758   $166,483 
Other Liabilities   732,739    446,440 
Notes Payable   21,558,445    21,905,364 
           
Total Liabilities  $22,378,942   $22,518,287 
           
Partners' Equity:          
General Partner   423,616    420,931 
Unit Holders   5,296,003    5,823,005 
           
Total Partners' Equity   5,719,619    6,243,936 
           
Total Liabilities And Partners' Equity  $28,098,561   $28,762,223 

 

See Notes to Financial Statements

 

3
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

  

STATEMENTS OF OPERATIONS  NINE MONTHS ENDED   THREE MONTHS ENDED 
(unaudited)  September 30, 2012   September 30, 2011   September 30, 2012   September 30, 2011 
                 
Income:                    
Rental Income  $5,425,966   $5,410,713   $1,801,379   $1,812,536 
Home Sale Income   206,185    66,199    58,464    5,800 
Other   604,070    465,174    214,008    167,679 
               
                     
Total Income   6,236,221    5,942,086    2,073,851    1,986,015 
                     
Operating Expenses:                    
Administrative Expenses                    
(Including $298,011, $291,009, $99,454 and $98,099, in Property Management Fees Paid to an Affiliate for the Nine and Three Month Period Ended September 30, 2012 and 2011, respectively)   1,808,294    1,814,367    572,352    557,887 
Property Taxes   678,885    687,135    233,448    229,026 
Utilities   441,007    429,949    148,592    134,078 
Property Operations   536,351    451,524    164,373    171,115 
Depreciation   1,186,199    1,142,663    395,671    381,229 
Interest   1,099,731    1,121,725    364,651    371,901 
Home Sale Expense   217,258    85,353    71,569    13,555 
                     
Total Operating Expenses   5,967,725    5,732,716    1,950,656    1,858,791 
                     
Net Income  $268,496   $209,370   $123,195   $127,224 
                     
Income per Limited Partnership Unit:  $0.08   $0.06   $0.04   $0.04 
                     
Distribution Per Unit:  0.24   0.24   0.08   0.08 
                     
Weighted Average Number Of Units Of Beneficial Assignment Of Limited Partnership                    
Interest Outstanding During The Nine and Three Month Period Ended September 30, 2012 and 2011.   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, 2011  $420,931   $5,823,005   $6,243,936 
Distributions   0    (792,813)   (792,813)
Net Income   2,685    265,811    268,496 
                
Balance as of September 30, 2012  $423,616   $5,296,003   $5,719,619 

 

See Notes to Financial Statements

 

4
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

   NINE MONTHS ENDED 
   September 30,2012   September 30,2011 
         
Cash Flows From Operating Activities:          
Net Income  $268,496   $209,370 
           
Adjustments To Reconcile Net Income          
To Net Cash Provided By          
Operating Activities:          
Depreciation   1,186,199    1,142,663 
Amortization   20,814    20,814 
Increase in Manufactured Homes and Home Improvements   (996,728)   (865,597)
Increase In Other Assets   (393,126)   (244,720)
Decrease In Accounts Payable   (78,725)   (47,016)
Increase In Other Liabilities   286,299    328,629 
           
Total Adjustments   24,733    334,773 
           
Net Cash Provided By Operating Activities   293,229    544,143 
           
Cash Flows From Investing Activities:          
Redemption of Investments   0    1,423,003 
Purchase of property and equipment   (151,164)   (231,730)
           
Net Cash (Used In) Provided By Investing Activities   (151,164)   1,191,273 
           
Cash Flows Used In Financing Activities:          
Distributions To Unit Holders   (792,813)   (792,813)
Payments On Mortgage   (346,919)   (325,047)
           
Net Cash Used In Financing Activities   (1,139,732)   (1,117,860)
           
(Decrease) Increase In Cash and Equivalents   (997,667)   617,660 
Cash, Beginning   6,239,427    5,671,854 
           
Cash, Ending  $5,241,760   $6,289,514 

 

See Notes to Financial Statements

 

5
 

  

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2012 (Unaudited)

 

1.Basis of Presentation:

 

The accompanying unaudited 2012 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, 2011 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012, 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, 2011.

 

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 September 30, 2012 the balance on these notes was $21,558,445.

 

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 2012 - $119,513; 2013 - $498,289; 2014 - $532,321; 2015 - $568,678; 2016 - $607,519 and thereafter - $19,232,125.

 

6
 

 

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, 2011 filed with the SEC on March 9, 2012 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 September 30, 2012 the balance on these notes was $21,558,445.

 

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 third quarter ended September 30, 2012. 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 September 30, 2012, the Partnership’s cash balance amounted to $5,241,760. 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 48% at the end of September 2012 versus 49% at the end of September 2011. The average monthly homesite rent as of September 30, 2012 was approximately $505; versus $493 from September 2011 (average rent not a weighted average).

 

   Total   Occupied   Occupancy   Average* 
   Capacity   Sites   Rate   Rent 
Ardmor Village   339    147    43%  $524 
Camelot Manor   335    104    31%   417 
Dutch Hills   278    108    39%   420 
El Adobe   367    190    52%   535 
Stonegate Manor   308    108    35%   410 
Sunshine Village   356    218    61%   627 
West Valley   421    305    72%   603 
                     
Total on 9/30/12:   2,404    1,180    48%  $505 
Total on 9/30/11:   2,404    1,210    49%  $493 

*Not a weighted average

 

   Gross Revenue   Net Operating Income 
and Net Income
   Gross Revenue   Net Operating Income 
 and Net Income
 
   9/30/2012   9/30/2011   9/30/2012   9/30/2011   09/30/2012   09/30/2011   09/30/2012   09/30/2011 
   three months ended   three months ended   nine months ended   nine months ended 
                                 
Ardmor  $240,875   $244,685   $116,228   $119,546   $730,793   $737,077   $342,275   $350,285 
Camelot Manor   170,325    133,491    65,597    28,675    451,667    410,327    143,071    79,662 
Dutch Hills   216,018    157,017    56,840    58,412    555,334    442,659    161,643    141,737 
El Adobe   275,507    298,559    124,672    149,384    868,297    907,888    448,921    486,332 
Stonegate   161,287    157,574    52,461    59,999    509,318    456,419    140,952    138,325 
Sunshine   431,432    425,485    197,530    213,105    1,369,088    1,274,829    624,906    617,917 
West Valley   567,053    565,136    397,550    391,213    1,717.202    1,699,427    1,220,784    1,190,733 
    2,063,497    1,981,947    1,010,878    1,020,334    6,201,699    5,928,626    3,082,552    3,004,991 
Partnership Management   10,354    4,068    (84,526)   (90,288)   34,522    13,460    (366,431)   (419,168)
Other Expense           (42,835)   (49,692)           (161,695)   (112,065)
                                         
Interest Expense       —-    (364,651)   (371,901)           (1,099,731)   (1,121,725)
                                         
Depreciation           (395,671)   (381,229)           (1,186,199)   (1,142,663)
   $2,073,851   $1,986,015   $123,195   $127,224   $6,236,221   $5,942,086   $268,496   $209,370 

 

8
 

 

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 September 30, 2012 to Three Month Ended September 30, 2011

 

Gross revenues increased $87,836 to $2,073,851 in 2012, from $1,986,015 in 2011. This was mainly due to higher lease home income, as part of new home leasing programs at the Camelot Manor property in Grand Rapids, Michigan, the Dutch Hills property in East Lansing, Michigan, and the Stonegate property in Lansing, Michigan.

 

As described in the Statements of Operations, total operating expenses increased $91,865, to $1,950,656 in 2012, as compared to $1,858,791 in 2011. This was mainly due to increased home sale activity.

 

As a result of the aforementioned factors, the Partnership experienced Net Income of $123,195 for the third quarter of 2012 as compared to Net Income of $127,224 for the third quarter of 2011.

 

Comparison of Nine Months Ended September 30, 2012 to Nine Months Ended September 30, 2011

 

Gross revenues increased $294,135 to $6,236,221 in 2012, from $5,942,086 in 2011. The increase was mainly due to higher lease income as mentioned above, and increased home sale activity.

 

As described in the Statements of Operations, total operating expenses increased $235,009, to $5,967,725 in 2012, as compared to $5,732,716 in 2011. The increase was primarily a result of increased home sale expenses.

 

As a result of the aforementioned factors, the Partnership experienced Net Income of $268,496 in 2012 as compared to Net Income of $209,370 in 2011.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

 

The Partnership is exposed to interest rate risk primarily through its borrowing activities.

There is inherent roll over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Partnership’s future financing requirements.

 

9
 

 

Note Payable: At September 30, 2012 the Partnership had notes payable outstanding in the amount of $21,558,445. 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, 2011, 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.

 

10
 

 

ITEM 6.EXHIBITS

 

Exhibit 31.1Principal Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended

 

Exhibit 31.2Principal Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended

 

Exhibit 32.1Certifications pursuant to 18 U.S C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes –Oxley Act of 2002.

 

11
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities 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 Szepytowski, Principal Financial Officer

 

Dated: November 07, 2012

 

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