Attached files

file filename
EX-32.1 - EXHIBIT 32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v423903_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v423903_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v423903_ex31-1.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 September 30, 2015

 

¨ 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 ¨

 

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

 

As of September 30, 2015, the number of units of limited partnership interest of the registrant outstanding was 3,303,387. The Partnership units of interest are not traded in any public market.

 

 

 

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, 2015 (Unaudited) and December 31, 2014 3
     
  Statements of Operations Nine and Three months ended September 30, 2015 and 2014 (Unaudited) 4
     
  Statement of Partners’ Equity Nine months ended September 30, 2015 (Unaudited) 5
     
  Statements of Cash Flows Nine months ended September 30, 2015 and 2014 (Unaudited) 6
     
  Notes to Financial Statements September 30, 2015 (Unaudited) 7
     
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK         12
     
ITEM 4. CONTROLS AND PROCEDURES 12
       
PART II OTHER INFORMATION
     
ITEM 1. LEGAL PROCEEDINGS 13
     
ITEM 1A. RISK FACTORS 13
     
ITEM 6. EXHIBITS 13

 

 

-2

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

 

ASSETS  September 30,2015   December 31, 2014 
   (Unaudited)     
Properties:          
Buildings And Improvements  $22,188,474   $4,661,946 
Land   4,661,946    22,199,759 
Furniture And Equipment   343,996    343,996 
Manufactured Homes and Improvements   2,684,483    2,350,758 
    29,878,899    29,556,459 
           
Less Accumulated Depreciation   (20,307,592)   (19,629,412)
           
Net Property and Equipment   9,571,307    9,927,047 
           
Cash And Cash Equivalents   18,417,482    7,383,116 
Unamortized Finance Costs   620,078    927,256 
Deferred Home Relocation Costs   123,444    330,595 
Other Assets   1,320,243    635,326 
Assets of Discontinued Operations   0    10,472,850 
           
Total Assets  $30,052,554   $29,676,190 
           

 

LIABILITIES & PARTNERS' EQUITY  September 30,2015   December 31, 2014 
   (Unaudited)     
           
Accounts Payable  $109,661   $27,056 
Other Liabilities   643,039    339,417 
Notes Payable   21,106,551    21,473,993 
Liabilities of Discontinued Operations   0    6,841,887 
           
Total Liabilities  $21,859,251   $28,682,353 
           
Partners' Equity:          
General Partner   497,903    417,980 
Unit Holders   7,695,400    575,857 
           
Total Partners' Equity   8,193,303    993,837 
           
Total Liabilities And Partners' Equity  $30,052,554   $29,676,190 

 

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, 2015   September 30, 2014   September 30, 2015   September 30, 2014 
                 
                 
Income:                    
Rental Income  $3,631,821   $3,537,134   $1,217,600   $1,176,133 
Home Sale Income   50,114    76,840    45,002    2 
Other   392,657    322,322    128,856    104,585 
                     
Total Income   4,074,592    3,936,296    1,391,458    1,280,720 
                     
Operating Expenses:                    
Administrative Expenses                    
(Including $312,773, $312,100, $94,310 and $104,607, in Property Management Fees Paid to an Affiliate for the Nine and Three Month Period Ended September 30, 2015 and 2014, respectively)   1,779,048    1,286,067    857,735    428,214 
Property Taxes   311,400    350,100    103,800    116,700 
Utilities   226,619    210,474    75,250    78,907 
Property Operations   393,350    432,123    147,189    141,651 
Depreciation   678,181    706,014    203,326    236,989 
Interest   872,957    901,686    285,176    301,754 
Home Sale Expense   42,060    69,194    40,060    0 
                     
Total Operating Expenses   4,303,615    3,955,658    1,712,536    1,304,215 
                     
Income from Continuing Operations  $(229,023)  $(19,362)  $(321,078)  $(23,495)
                     
Income (Loss) from Discontinued Operations  $8,221,302   $(138,087)  $8,117,503   $(42,204)
                     
Net Income  $7,992,279   $(157,449)  $7,796,425   $(65,699)
                     
Income Per Unit:                    
Continuing Operations  $(0.07)  $(0.01)  $(0.10)  $(0.01)
Discontinued Operations  $2.49   $(0.04)  $2.46   $(0.01)
                     
Total Income Per Unit  $2.42   $(0.05)  $2.36   $(0.02)
                     
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, 2015 and 2014.   3,303,387    3,303,387    3,303,387    3,303,387 

 

See Notes to Financial Statements

 

-4

 

 

STATEMENT OF PARTNERS' EQUITY (Unaudited)            
   General Partner   Unit Holders   Total 
             
Balance, December 31, 2014  $417,980   $575,857   $993,837 
Distributions   0    (792,813)   (792,813)
Net Income   79,923    7,912,356    7,992,279 
                
Balance as of September 30, 2015  $497,903   $7,695,400   $8,193,303 

 

See Notes to Financial Statements

 

-5

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A  MICHIGAN LIMITED PARTNERSHIP  

 

 

STATEMENTS OF CASH FLOWS        
(Unaudited)        
   NINE MONTHS ENDED 
   September 30, 2015   September 30, 2014 
         
Cash Flows From Operating Activities:          
Net Income  $7,992,279   $(157,449)
           
Adjustments To Reconcile Net Income          
To Net Cash (Used In) Provided By          
Operating Activities:          
Depreciation   678,181    1,247,921 
Amortization of Financing Costs   307,179    64,394 
Amortization of Home Relocation Costs   207,151    207,108 
Payment of Home Relocation Costs   0    (1,500)
Gain on Sale of Discontinued Operations   (9,937,675)   0 
Gain on Sale of Manufactured Homes   21,577    16,824 
Increase In Other Assets   (360,620)   (499,437)
(Decrease) Increase In Accounts Payable   (34,581)   136,599 
Increase In Other Liabilities   104,888    251,538 
           
Total Adjustments   (9,013,900)   1,423,447 
           
Net Cash (Used In) Provided By Operating Activities   (1,021,621)   1,265,998 
           
Cash Flows Provided By (Used In) Investing Activities:          
Investment in Manufactured Homes and Improvements   (562,483)   (967,772)
Purchase of Property and Equipment   (19,147)   (253,721)
Proceeds from Sale of Discontinued Operations   20,267,770    0 
Proceeds from Sale of Manufactured Homes   121,785    211,934 
           
Net Cash Provided By (Used In) Investing Activities   19,807,925    (1,009,559)
           
Cash Flows Used In Financing Activities:          
Distributions To Unit Holders   (792,813)   (792,813)
Payments On Notes Payable   (6,893,409)   (501,928)
           
Net Cash Used In Financing Activities   (7,686,222)   (1,294,741)
           
Increase (Decrease) In Cash   11,100,082    (1,038,302)
Cash, Beginning   7,317,400    8,584,140 
           
Cash, Ending  $18,417,482   $7,545,838 

 

See Notes to Financial Statements

 

-6

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2015 (Unaudited)

 

  1. Basis of Presentation and Accounting Policies:

 

The accompanying unaudited 2015 financial statements of Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership (the “Partnership”) 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, 2014 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, 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, 2014.

 

During the fourth quarter of 2012, Management initiated the Sunshine Village Paid Home Relocation Program (“Program”). The Program was offered exclusively to residents of Seminole Estates, a 704 site, 55 and over manufactured home community in Hollywood, Florida that announced its closure. The Program expired in the first quarter of 2013. By the end of the first quarter of 2014, all 41 residents have successfully relocated. The Partnership has incurred expenditures of $903,232, of which $816,203 has been capitalized and is being amortized as a reduction of rental revenue over the life of the residents’ three year rental period. The Program is completed and Management estimates no additional relocation costs will be incurred. At September 30, 2015, $123,444 remains unamortized.

 

The carrying amounts of cash, cash equivalents, and accounts payable approximate their fair values due to their short-term nature. The fair value of mortgage notes payable approximates their carrying amounts based on current borrowing rates.

 

2.Discontinued Operations:

 

As described in the Form 8-K dated August 20, 2015, the Partnership closed on the sale of the three manufactured housing communities located in Michigan, namely Camelot Manor, Dutch Hills and Stonegate with Meritus Communities LLC for a purchase price of $14,200,000, less closing costs resulting in net proceeds in the amount of $13,777,650. The Partnership recognized a gain of $6,022,387. The mortgage obligations related to these properties of $3,052,889 were paid in full at the time of closing with proceeds from the sale. As part of the repayment on the mortgage notes, the Partnership incurred $346,693 in prepayment penalties. The Partnership also wrote off $116,113 of unamortized deferred financing costs related to the mortgage notes in connection with this transaction. The net cash proceeds resulting from the sale and pay off of the mortgage notes were approximately $10,108,000.

 

-7

 

 

As described in the Form 8-K dated September 28, 2015, the Partnership closed on the sale of the El Adobe manufactured housing community located in Las Vegas, Nevada with Lakeshore Communities Inc. for a purchase price of $6,700,000, less closing costs resulting proceeds in the amount of $6,490,120. The Partnership recognized a gain of $3,915,288. The mortgage obligation related to this property of $3,321,049 was paid in full at the time of closing. As part of the repayment on the mortgage notes, the Partnership incurred a prepayment penalty of $370,612. The Partnership also wrote off $126,672 of unamortized deferred financing costs related to the mortgage note in connection with this transaction. The net cash proceeds resulting from the sale and pay off of the mortgage note were approximately $2,458,000.

 

As a result of the sales, the Partnership has classified the four communities and the associated financial results as “discontinued operations” in the accompanying statement of operations for all historical periods. The major classes of revenue and expenses of discontinued operations for the period ending September 30, 2015 were as follows:

 

  

Three months ended

September 30, 2015

  

Nine months ended

September 30, 2015

 
Rent revenue   351,623    1,611,630 
Home sale revenue   30,507    71,671 
Other revenue   128,229    1,081,426 
      Total revenue   510,359    2,764,727 
           
Administrative expense   949,991    2,106,097 
Property taxes   91,060    226,076 
Utilities   63,775    243,655 
Property operations   175,097    397,410 
Depreciation   0    259,144 
Interest expense   58,578    230,480 
Home sale expenses   31,940    58,148 
       Total operating expenses   1,370,441    3,521,010 
           
Income (loss) from property operations   (860,082)   (756,283)
           
Gain on sale of the properties   9,937,675    9,937,675 
Prepayment penalties and write-off of deferred charges on debt extinguishment   (960,090)   (960,090)
           
   Net income from discontinued operations  $8,117,503   $8,221,302 

 

The assets and liabilities related to discontinued operations as of December 31, 2014 are as follows: Total Assets of $10,472,850 consist of Current Assets of $258,581 and Fixed Assets of $28,228,628 less Accumulated Depreciation of $18,014,359. Total Liabilities of $6,841,887 consist of Current Liabilities of $315,920 and Long Term Liabilities of $6,525.967.

 

3.Mortgage Payable:

 

The Partnership has two mortgage notes payable with Cantor Commercial Real Estate collateralized by Sunshine Village, located in Davie, Florida and West Valley, located in Las Vegas, Nevada. The mortgages are payable in monthly installments of interest and principal through August, 2023. These refinanced notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of September 30, 2015 the balance on these notes was $18,509,312.

 

The Partnership also has a mortgage note payable with StanCorp Mortgage Investors LLC (“StanCorp”) collateralized by Ardmor Village, located in Lakeville, Minnesota. This mortgage is payable in monthly installments of interest and principal through September 2033. Effective September 1, 2013, the available interest rate re-set option was accepted on the mortgage note with StanCorp. The new rate on this note is 5.00% and the amortization period is twenty years. Another rate re-set option is available in 2018. As of September 30, 2015 the balance on this note was $2,597,239.

 

Future maturities on the notes payable for the next five years and thereafter are as follows: 2015 - $126,509; 2016 - $517,231; 2017 - $547,132; 2018 - $575,908; 2019 - $606,197 and thereafter - $18,733,574.

 

In connection with the sale of the four properties discussed above, the mortgages payable with StanCorp related to those properties were paid off. See Note 2 for additional information.

 

-8

 

 

 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, 2014 filed with the SEC on March 17, 2015 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

 

Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership’s (the “Partnership”) liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. The three remaining 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 expects to meet its short-term liquidity needs generally through its working capital and cash provided by operating activities.

 

On July 18, 2013, the Partnership refinanced two of the existing mortgage notes payable and executed two new mortgages payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, FL and West Valley, located in Las Vegas, NV with a new lender, namely Cantor Commercial Real Estate. The mortgage notes are payable in monthly installments of interest and principal through August, 2023. The refinanced notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of September 30, 2015 the balance on these notes was $18,509,312.

 

The Partnership incurred $676,321 in financing costs as a result of the 2013 refinancing which is being amortized over the term of the loans. These costs included a 1% fee payable to an affiliate of the General Partner.

 

-9

 

  

Effective September 1, 2013, the interest rate re-set option was accepted on the remaining note with StanCorp. The new rate on this note is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of September 30, 2015 the balance on this note was $2,597,239.

 

As described in the Form 8-K dated August 20, 2015, the Partnership closed on the sale of the three manufactured housing communities located in Michigan, namely Camelot Manor, Dutch Hills and Stonegate with Meritus Communities LLC for a purchase price of $14,200,000, less closing costs for proceeds in the amount of $13,777,650. The Partnership recognized a gain of $6,022,387. The mortgage obligations related to these properties of $3,052,889 were paid in full at the time of closing. As part of the repayment on the mortgage notes, the Partnership incurred $346,693 in prepayment penalties. The Partnership wrote off $116,113 of unamortized deferred financing costs related to the mortgage notes in connection with this transaction. The net cash proceeds resulting from the sale and pay off of the mortgage notes were approximately $10,108,000.

 

As described in the Form 8-K dated September 28, 2015, the Partnership closed on the sale of the El Adobe manufactured housing community located in Las Vegas, Nevada with Lakeshore Communities Inc. for a purchase price of $6,700,000, less closing costs for proceeds in the amount of approximately $6,490,120. The Partnership recognized a gain of approximately $3,915,288. The mortgage obligation related to this property of $3,321,049 was paid in full at the time of closing. As part of the repayment on the mortgage note, the Partnership incurred a prepayment penalty of $370,612. The Partnership also wrote off $126,672 of unamortized deferred financing costs related to the mortgage note in connection with this transaction. The net cash proceeds resulting from the sale and pay off of the mortgage note were approximately $2,458,000.

 

Subsequent to September 30, 2015, the General Partner has decided to distribute $7,003,180, or $2.12 per unit, to the unit holders for the third quarter ended September 30, 2015. The distribution is expected to be made during the quarter ending December 31, 2015.

 

As of September 30, 2015, the Partnership’s cash balance amounted to $18,417,482. 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 three remaining properties reported combined occupancy of 62% at the end of September 2015 versus 62% at the end of September 2014. The average monthly homesite rent as of September 30, 2015 was approximately $629; versus $611 from September 2014 (average rent not a weighted average).

 

-10

 

 

   Total   Occupied   Occupancy   Average* 
   Capacity   Sites   Rate   Rent 
                 
Ardmor Village   339    148    44%  $568 
Sunshine Village   356    256    72%   665 
West Valley   421    292    69%   654 
                     
Total on 9/30/15:   1,116    696    62%  $629 
Total on 9/30/14:   1,116    705    62%  $611 

 

*Not a weighted average

 

   Gross Revenue  

Net Operating Income and

Net Income (Loss)

   Gross Revenue  

Net Operating Income

and Net Income (Loss)

 
   9/30/2015   9/30/2014   9/30/2015   9/30/2014   09/30/2015   09/30/2014   09/30/2015   09/30/2014 
   three months ended   three months ended   nine months ended   nine months ended 
                                 
Ardmor  $310,806   $257,893   $134,658   $120,273   $852,013   $761,574   $406,240   $343,887 
Sunshine   469,332    434,632    236,843    176,975    1,405,827    1,375,951    688,538    593,042 
West Valley   606,920    584,569    379,155    345,843    1,803,914    1,776,996    1,173,292    1,188,550 
    1,387,058    1,277,094    750,656    643,091    4,061,754    3,914,521    2,268,070    2,125,479 
Partnership Management   4,400    3,626    (545,089)   (107,022)   12,838    21,775    (861,734)   (399,607)
Other Expense   -----    -------    (38,143)   (20,821)   -------    -------    (84,221)   (137,534)
                                         
Interest Expense   -----    -------    (285,176)   (301,754)   --------    -------    (872,957)   (901,686)
                                         
                                         
Depreciation   -----    -------    (203,326)   (236,989)   -------    --------    (678,181)   (706,014)
Continuing Operations  $1,391,458   $1,280,720   $(321,078)  $(23,495)  $4,074,592   $3,936,296   $(229,023)  $(19,362)
Discontinued Operations  $11,082,009   $755,779   $8,117,503   $(42,204)  $12,702,402   $2,359,969   $8,221,302   $(138,087)
   $12,473,467   $2,036,499   $7,796,425   $(65,699)  $16,776,994   $6,296,265   $7,992,279   $(157,449)

 

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, 2015 to Three Months Ended September 30, 2014

 

Gross revenues from continuing operations increased $110,738 to $1,391,458 in 2015, from $1,280,720 in 2014. This was due to an increase in market rent value and lease home income from the prior year.

 

As described in the Statements of Operations, total operating expenses operations increased $408,321, to $1,712,536 in 2015, as compared to $1,304,215 in 2014. This was mainly due to an increase in administrative expenses, specifically management bonuses associated with the sales transactions.

 

-11

 

  

As a result of the aforementioned factors, the Partnership experienced a Net Loss from continuing operations of $321,078 for the third quarter of 2015 compared to a Net Loss of $23,495 for the third quarter of 2014.

 

Comparison of Nine Months Ended September 30, 2015 to Nine Months Ended September 30, 2014

 

Gross revenues from continuing operations increased $138,296 to $4,074,592 in 2015, from $3,936,296 in 2014. This was mainly due to increases in rental income and other income.

 

As described in the Statements of Operations, total operating expenses increased $347,957 to $4,303,615 in 2015, as compared to $3,955,658 in 2014. This was mainly due to an increase in administrative expenses, specifically management bonuses associated with the sales transactions.

 

As a result of the aforementioned factors, the Partnership experienced a Net Loss from continuing operations of $229,023 in 2015 as compared to a Net Loss of $19,362 in 2014. Net Income from discontinued operations, before the gain on sale of the four properties and pay off of the related mortgage notes, was $103,799 compared to a Net Loss of $95,886 in 2014.

 

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.

 

Note Payable: At September 30, 2015 the Partnership had notes payable outstanding in the amount of $21,106,551. Interest on two of these notes is at a fixed annual rate of 5.09% through August 2023. Interest on the remaining note is at a fixed rate of 5.00% through August 2018, at which time a rate reset option is available.

 

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.

 

-12

 

  

PART II - OTHER INFORMATION

 

 

ITEM 1. LEGAL PROCEEDINGS

 

The Partnership on behalf of El Adobe had filed a lawsuit against the City of Las Vegas. The primary complaint was that the City of Las Vegas charged what was being viewed as a “discriminatory” monthly service fee to keep sewer capacity available on vacant manufactured home community sites, but does not charge the same monthly service fee on vacant site built home sites. During the litigation, the City of Las Vegas had placed liens on El Adobe for unpaid sewer service fees. The Partnership has accrued those fees on its financial statements.

 

A trial on the matter was held on September 29, 2015 and on October 29, 2015 Judge Stefany A. Miley ruled to deny all of the claims made by El Adobe, and as a result El Adobe will not receive any relief. El Adobe has elected not to file an appeal. Thus, the matter is now concluded. 

 

To close on the sale of El Adobe, the Partnership  posted a bond with the title company equal to 150% of the existing liens, or $330,564.  These funds will be used to extinguish any and all obligations of the Partnership  related to this matter . Any remaining funds will be returned to the Partnership.

  

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, 2014, 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.

 

101.1NS XBRL Instance Document

 

101.SCH XBRL Taxonomy Extension Schema Document

 

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

 

101.LAB XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

101.DEF XBRL Taxonomy Extension Definitions Linkbase Document

 

 

-13

 

 

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 E. Kehrig
          Susann E. Kehrig, Principal Financial Officer

 

Dated: November 12, 2015

  

-14