Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ | tv506709_ex32-1.htm |
| EX-31.2 - EXHIBIT 31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ | tv506709_ex31-2.htm |
| EX-31.1 - EXHIBIT 31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ | tv506709_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, 2018
¨ 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 x 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, 2018, 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
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
| September 30,2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Properties: | ||||||||
| Land | $ | 0 | $ | 2,378,711 | ||||
| Buildings And Improvements | 0 | 10,945,634 | ||||||
| Furniture And Equipment | 0 | 93,805 | ||||||
| Manufactured Homes and Improvements | 0 | 2,322,344 | ||||||
| 0 | 15,740,494 | |||||||
| Less Accumulated Depreciation | 0 | (10,727,875 | ) | |||||
| 0 | 5,012,619 | |||||||
| Cash And Cash Equivalents | 8,470,671 | 6,618,956 | ||||||
| Other Assets | 0 | 193,126 | ||||||
| Total Assets | $ | 8,470,671 | $ | 11,824,701 | ||||
| September 30,2018 | December 31, 2017 | |||||||
| (Unaudited) | ||||||||
| LIABILITIES & PARTNERS' EQUITY | ||||||||
| Accounts Payable | $ | 1,408 | $ | 34,196 | ||||
| Other Liabilities | 0 | 118,615 | ||||||
| Notes Payable - net of deferred finance costs | 0 | 11,192,547 | ||||||
| Total Liabilities | 1,408 | 11,345,358 | ||||||
| Partners' Equity: | ||||||||
| General Partner | 1,191,070 | 842,936 | ||||||
| Unit Holders | 7,278,193 | (363,593 | ) | |||||
| Total Partners' Equity | 8,469,263 | 479,343 | ||||||
| Total Liabilities And Partners' Equity | $ | 8,470,671 | $ | 11,824,701 | ||||
See Notes to Financial Statements
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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY (Unaudited)
| General Partner | Unit Holders | Total | ||||||||||
| Balance, December 31, 2017 | $ | 842,936 | $ | (363,593 | ) | $ | 479,343 | |||||
| Distributions | $ | 0 | $ | (26,823,501 | ) | $ | (26,823,501 | ) | ||||
| Net Income | 348,134 | 34,465,287 | 34,813,421 | |||||||||
| Balance as of September 30, 2018 | $ | 1,191,070 | $ | 7,278,193 | $ | 8,469,263 | ||||||
See Notes to Financial Statements
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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
See Notes to Financial Statements
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UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
September 30, 2018 (Unaudited)
| 1. | Basis of Presentation and Accounting Policies: |
The accompanying unaudited 2018 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, 2017 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, 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, 2017.
The carrying amounts of cash and accounts payable approximate their fair values due to their short-term nature.
| 2. | Discontinued Operations: |
As described in the Form 8-K dated January 17, 2017, a special meeting of the unit holders and the limited partners of the Fund was held on January 17, 2017. At the special meeting, the unit holders and limited partners voted on the proposed plan of dissolution of the Partnership. At the special meeting, 2,066,861 units were represented either in person or by proxy, which represented 62.568% of the units outstanding and entitled to vote.
The votes cast regarding the proposed plan of dissolution were as follows: 1,988,742 For; 61,220 Against; and 16,899 Abstain.
The affirmative vote represented a majority in interest outstanding as of the record date of the unit holders and limited partners, as a group. Accordingly, the plan of dissolution was approved, which is consistent with the provisions of the Partnership Agreement. A specific course of action to implement the approved plan of dissolution by The Board of Directors was established, resulting in the sale of the Sunshine Village and West Valley properties.
As described in the Form 8-K dated November 2, 2017, the Partnership closed on the sale of Sunshine Village for a sale price of $33,000,000 less closing costs resulting in proceeds in the amount of $32,957,625 and the gain on the sale was approximately $29,580,000. The mortgage payable outstanding related to this property of $6,124,075 and defeasance premium of $961,521, totaling $7,085,596, was paid in full at the time of closing. The Partnership also wrote off $134,947 of unamortized deferred financing costs related to the mortgage note in connection with this transaction. The net proceeds resulting from the sale and defeasance of the mortgage note were approximately $25,448,000.
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As described in the Form 8-K dated August 29, 2018 the Partnership closed on the sale of West Valley for a sale price of $43,471,000 less closing costs resulting in proceeds in the amount of $42,095,095 and the gain on the sale, which includes approximately $1,087,000 in disposition fees paid to an affiliate, was approximately $36,761,000. The mortgage payable outstanding related to this property of $11,228,225 and defeasance premium of $1,197,745, totaling $12,425,970, was paid in full at the time of closing. The Partnership also wrote off $212,129 of unamortized deferred financing costs related to the mortgage note in connection with this transaction. The net proceeds resulting from the sale and defeasance of the mortgage note were approximately $30,756,000.
The following is a summary of results of operations of the properties classified as discontinued operations for the nine month periods ended September 30, 2018 and 2017: Total Revenue was $2,100,268, Total Operating Expenses were $3,522,795 and the Gain on Sale was $36,761,104 for the period ended September 30, 2018. For the same period in 2017, Total Revenue was $3,844,842 and Total Operating Expenses were $2,968,898.
The following is a summary of results of operations of the properties classified as discontinued operations for the three month periods ended September 30, 2018 and 2017: Total Revenue was $657,824 and Total Operating Expenses were $2,558,106 for the period ended September 30, 2018. For the same period in 2017, Total Revenue was $1,299,033 and Total Operating Expenses were $979,528.
Total Cash Flows Used in Operating Activities of the property classified as discontinued operations for the period ended September 30, 2018 were $1,620,439 which includes the defeasance premium noted above. Total Cash Flows Provided by Operating Activities of the properties classified as discontinued operations for the period ended September 30, 2017 were $1,469,415. In addition, Total Cash Flows Provided by Investing Activities of the property classified as discontinued operations for the period ended September 30, 2018 were $41,773,723 and Total Cash Flows Used in Investing Activities of the properties classified as discontinued operations for the period ended September 30, 2017 were $661,886.
| 3. | Recently Adopted Accounting Pronouncement |
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede the current revenue recognition requirements in Topic 605, Revenue Recognition. The ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company has adopted ASC Topic 606 effective January 1, 2018 using the modified retrospective method. The Company has concluded that the adoption of the ASC Topic 606 in fiscal 2018 has no significant impact on the Company’s financial condition or results of operations. The majority of the Company’s revenue was historically earned based on or is related to tenant lease agreements, which is outside the scope of Topic 606. The sale of West Valley Includes only a single performance obligation, the delivery of the property and revenue on the sale is appropriately recorded at the closing of the sale. Other revenue earned that would not be related to leases would primarily be attributable to the sales of manufactured homes. During the quarter ended September 30, 2018 and for the year ending December 31, 2017, there were no sales of manufactured homes. There was no impact to the Company’s financial position, results of operations, or cash flows as a result of the adoption. As discussed above, following the sale of the West Valley community in August, 2018, the Fund expects to have insignificant revenue until such time as the Fund liquidates.
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In November 2016, the FASB issued ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash." This update requires inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company has adopted the provisions of Topic 230 effective January 1, 2018. As of September 30, 2018, the Fund has no restricted cash, therefore the impact of adopting this standard did not impact amounts presented as cash as of that date. The impact of adopting this standard increased the amounts presented as cash in the statement of cash flows by $858,631 as of September 30, 2017, which are the amounts required to be set aside by the mortgagor related to required escrow reserves per the terms of the mortgage. As of December 31, 2017, the restricted cash amounts are reflected in other assets.
| 4. | Subsequent Event |
As described in the Form 8-K dated November 5, 2018, the Partnership has completed the disposition of its final property, and is in the second phase of its Plan of Dissolution. In addition, the Partnership has filed a Certificate of Cancellation with the State of Michigan and is now in the process of winding up its affairs. Liquidation of the Partnership’s remaining assets will be conducted by the General Partner in accordance with the provisions of the Plan of Dissolution, the Partnership Agreement and Article 8 of the Michigan Revised Uniform Limited Partnership Act.
| 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, 2017 filed with the SEC on March 2, 2018 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. On October 31, 2017 the sale of Sunshine Village closed and on August 28, 2018 the sale of West Valley closed, as described previously.
As a result, management intends dissolve the Fund in accordance with the Partnership Agreement, as described previously.
The Partnership expects to meet its short-term liquidity needs through its existing cash reserves.
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As described in the Form 8-K dated November 5, 2018, per the Plan of Dissolution, no further ordinary or quarterly distributions to the unit holders of the Partnership are to occur.
As of September 30, 2018, the Partnership’s cash balance amounted to $8,470,671. The level of cash balance maintained is at the discretion of the General Partner.
Results of Operations
| Gross Revenue | Net Operating Income and Net Income (Loss) | Gross Revenue | Net Operating Income and Net (Loss) | |||||||||||||||||||||||||||||
| 9/30/2018 | 9/30/2017 | 9/30/2018 | 9/30/2017 | 09/30/2018 | 09/30/2017 | 09/30/2018 | 09/30/2017 | |||||||||||||||||||||||||
| three months ended | three months ended | nine months ended | nine months ended | |||||||||||||||||||||||||||||
| Partnership Management | 40,266 | 3,252 | (120,430 | ) | (104,922 | ) | 79,384 | 10,017 | (525,156 | ) | (442,907 | ) | ||||||||||||||||||||
| Continuing Operations | $ | 40,266 | $ | 3,252 | $ | (120,430 | ) | $ | (104,922 | ) | $ | 79,384 | $ | 10,017 | $ | (525,156 | ) | $ | (442,907 | ) | ||||||||||||
| Discontinued Operations | $ | 737,208 | $ | 1,299,033 | $ | 34,860,822 | $ | 319,505 | $ | 2,100,268 | $ | 3,844,842 | $ | 35,338,557 | $ | 875,944 | ||||||||||||||||
| $ | 777,474 | $ | 1,302,285 | $ | 34,740,392 | $ | 214,583 | $ | 2,179,652 | $ | 3,854,859 | $ | 34,813,421 | $ | 433,037 | |||||||||||||||||
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, 2018 to Three Months Ended September 30, 2017
Gross revenues from continuing operations increased $37,014 to $40,266 in 2018, from $3,252 in 2017. This was mainly due to an increase in interest income from the prior year.
As described in the Statements of Operations, total operating expenses from continuing operations increased $52,522 to $160,696 in 2018, as compared to $108,174 in 2017. This was due to an increase in administrative expenses compared to the prior year.
As a result of the aforementioned factors, the Partnership experienced a Net Loss from continuing operations of $120,430 for the third quarter of 2018 compared to a Net Loss of $104,922 for the third quarter of 2017.
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Comparison of Nine Months Ended September 30, 2018 to Nine Months Ended September 30, 2017
Gross revenues from continuing operations increased $69,367 to $79,384 in 2018, from $10,017 in 2017. This was due to an increase in interest income and receipt of a refund of insurance premiums resulting from the Sunshine Village sale in 2017.
As described in the Statements of Operations, total operating expenses from continuing operations increased $151,616 to $604,540 in 2018, as compared to $452,924 in 2017. This was due to an increase in administrative expenses compared to the prior year.
As a result of the aforementioned factors, the Partnership experienced a Net Loss from continuing operations of $525,156 in 2018 as compared to a Net Loss of $442,907 in 2017.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
None.
| 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.
| 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, 2017, 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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EXHIBITS
| 101.1NS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
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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 E. Kehrig | |||
| Susann E. Kehrig, Principal Financial Officer |
Dated: November 13, 2018
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