Attached files

file filename
EX-32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v178028_ex32-1.htm
EX-31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v178028_ex31-2.htm
EX-31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v178028_ex31-1.htm
EX-32.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v178028_ex32-2.htm
EX-99.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v178028_ex99-1.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2009
 
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-15940

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.                       Yes ¨         No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act of 1934.              Yes ¨         No x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

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

The estimated aggregate net asset value of the units as of March 1, 2010 held by non-affiliates, as estimated by the General Partner (based on a 2010 appraisal of Partnership properties), was $32,828,870.  As of March 1, 2010, 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.

DOCUMENTS INCORPORATED BY REFERENCE
NONE
 

 
PART I

This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Risks and other factors that might cause such a difference include, but are not limited to, the effect of economic and market conditions; financing risks, such as the inability to obtain debt financing on favorable terms; the level and volatility of interest rates; and failure of the Partnership’s properties to generate additional income to offset increases in operating expenses, as well as other risks listed herein under Item 1.

ITEM 1. 
BUSINESS

General Development of Business

Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership (the "Partnership"), acquired, maintains, leases, operates and ultimately will dispose of income producing residential real properties consisting of seven manufactured housing communities (the "Properties"). The Partnership was organized and formed under the laws of the State of Michigan on November 7, 1986.  Its principal offices are located at 280 Daines Street, Birmingham, Michigan 48009 and its telephone number is (248) 645-9220.

 
-2-

 

The Partnership filed an S-11 Registration Statement in November 1986, which was declared effective by the Securities and Exchange Commission on December 23, 1986. The Partnership thereafter sold 3,303,387 units (the "Units") of beneficial assignment of limited partnership interest representing capital contributions by unit holders (the "Unit Holders") to the Partnership of $20 per unit.  The sale of all 3,303,387 Units was completed in December 1987, generating $66,067,740 of contributed capital to the Partnership.

The Partnership originally acquired seven properties in 1987 and acquired two additional Properties in 1988.  Paradise Village was sold in 2007, and Country Roads was sold in 2008.  Today the Partnership owns seven manufactured home communities.  They are Ardmor Village, Camelot Manor, Dutch Hills, El Adobe, Stonegate, Sunshine Village and West Valley.  The Partnership does not intend to acquire any other communities.

The Partnership operates the Properties as manufactured housing communities with the primary investment objectives of: (1) providing cash from operations to investors; (2) obtaining capital appreciation; and (3) preserving capital of the Partnership.  There can be no assurance that such objectives can continue to be achieved.

On August 20, 1998, the Partnership borrowed $30,000,000 (the “Loan”) from GMAC Commercial Mortgage Corporation.  It secured the Loan by placing new mortgages on seven of its nine properties.  The note was payable in monthly installments of $188,878, including interest at 6.37%.  The Partnership used the proceeds from the Loan to refinance the Partnership’s outstanding indebtedness of $30,045,000, which was incurred in a 1993 mortgage financing transaction.

On August 29, 2008, the Partnership refinanced the GMAC mortgage note payable and executed seven new mortgages payable with StanCorp Mortgage Investors, LLC in the aggregate amount of $23,225,000 secured by the seven remaining 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 December 31, 2009, the balance on these notes was $22,750,674.  In connection with the new mortgage debt, the Partnership incurred $693,798 in financing costs as a result of the refinancing, which are being amortized over the life of the mortgage of 25 years.

Financial Information About Industry Segment

The Partnership's business and only industry segment is the operation of its seven manufactured housing communities.  Partnership operations commenced in April 1987, upon the acquisition of the first two Properties.  For a description of the Partnership's revenues, operating profit and assets please refer to Items 7 and 8.

 
-3-

 

Description of Business

General

The Sunshine Village, Ardmor Village and Camelot Manor Properties were acquired from affiliates of Genesis Associates Limited Partnership, the General Partner of the Partnership (the "General Partner").  The other six communities were purchased from unaffiliated third parties, of which, two have been sold as of December 31, 2009.  The Partnership rents home sites in the Properties to owners of manufactured homes.  It was intended that the Partnership would hold the Properties for extended periods of time, originally anticipated to be seven to ten years after their acquisition.  The General Partner has the discretion to determine when a Property is to be sold; provided, however, that the determination of whether a particular Property should be disposed of will be made by the General Partner only after consultation with an independent consultant, Manufactured Housing Services Inc. (the "Consultant").  In making their decision, the General Partner and Consultant will consider relevant factors including current operating results of the particular Property and prevailing economic conditions, with a view to achieving maximum capital appreciation to the Partnership while considering relevant tax consequences and the Partnership's investment objectives.

As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida.  On August 7, 2008, the sale closed with a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000.  The Partnership recognized a gain on the sale of approximately $ 881,000. The Partnership distributed approximately $562,000 from the sale to its unit holders with the balance of the proceeds being maintained in reserve until such time as the General Partner determines the optimal use of the funds. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all historical periods.

Competition

The business of owning and operating residential manufactured housing communities is highly competitive, and the Partnership may be competing with a number of established companies having greater financial resources.  Moreover, there has been a trend for manufactured housing community residents to purchase (where zoning permits) their manufactured home sites on a collective basis.  This trend may result in increased competition with the Partnership for residents.  In addition, the General Partner, its affiliates or both, has and may in the future participate directly or through other partnerships or investment vehicles in the acquisition, ownership, development, operation and sale of projects which may be in direct competition with one or more of the Properties.
 
-4-


Each of the Properties competes with numerous similar facilities located in its geographic area.  The Davie/Fort Lauderdale area contains approximately five communities offering approximately 2,148 housing sites competing with the Partnership’s Sunshine Village.  The Partnership’s Ardmor Village competes with approximately fourteen communities in the Lakeville, Minnesota area offering approximately 3,655 housing sites.  The Partnership’s Camelot Manor competes with approximately twelve communities in the Grand Rapids, Michigan area offering approximately 2,700 housing sites. The Partnership’s Dutch Hills and Stonegate Manor compete with approximately twelve other communities in the Lansing, Michigan area offering approximately 3,938 housing sites.  In the Las Vegas, Nevada area, the Partnership’s West Valley competes with approximately ten other communities offering approximately 2,428 housing sites and the Partnership’s El Adobe competes with seventeen other communities offering 5,578 home sites.  The Properties also compete against other forms of housing including apartments, condominium complexes and site built homes.

Governmental Regulations

The Properties owned by the Partnership are subject to certain state regulations regarding the conduct of the Partnership operations.  For example, the State of Florida regulates agreements and relationships between the Partnership and the residents of Sunshine Village. Under Florida law, the Partnership is required to deliver to new residents of those Properties a prospectus describing the property and all tenant rights, Property rules and regulations, and changes to Property rules and regulations.  Florida law also requires minimum lease terms, requires notice of rent increases, grants to tenant associations certain rights to purchase the community if being sold by the owner and regulates other aspects of the management of such properties.  The Partnership is required to give 90 days notice to the residents of Sunshine Village of any rate increase, reduction in services or utilities, or change in rules and regulations.  If a majority of the residents object to such changes as unreasonable, the matter must be submitted to the Florida Department of Professional Business Regulations for mediation prior to any legal adjudication of the matter.  In addition, if the Partnership seeks to sell Sunshine Village to the general public, it must notify any homeowners’ association for the residents, and the association shall have the right to purchase the Property on the price, terms and conditions being offered to the public within 45 days of notification by the owner.  If the Partnership receives an unsolicited bona fide offer to purchase the Property, it must notify any such homeowners’ association that it has received an offer, state to the homeowners’ association the price, terms and conditions upon which the Partnership would sell the Property, and consider (without obligation) accepting an offer from the homeowners’ association.  The Partnership has, to the best of its knowledge, complied in all material respects with all requirements of the States of Florida, Michigan, Minnesota and Nevada, where its operations are conducted.

 
-5-

 

Employees

The Partnership employs three part-time employees to perform Partnership management and investor relations’ services.  The Partnership retains an affiliate, Uniprop AM, LLC, as the property manager for each of its Properties.  Uniprop AM, LLC is paid a fee equal to the lesser of 5% of the annual gross receipts from each of the Properties or the amount which would be payable to unaffiliated third parties for comparable services.  Uniprop AM, LLC retains local managers on behalf of the Partnership at each of the Properties.  Salaries and fringe benefits of such local managers are paid by the Partnership and are not included in any property management fee payable to Uniprop AM, LLC.  The yearly salaries and expenses for local managers range from $25,000 to $50,000.  Community Managers are utilized by the Partnership to provide on-site maintenance and administrative services.  Uniprop AM, LLC, as property manager, has overall management authority for each property.

ITEM 1A. 
RISK FACTORS

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

The following risks and uncertainties could cause our business, financial condition or results of operations to be materially adversely affected.  In that case, we might not be able to pay distributions on our Units, the net asset values of the Units could decline, and a Unit holder might lose all or a portion of its investment.

1.
Real Estate Investments.  The Partnership’s investments are subject to the same risks generally incident to the ownership of real estate including:  the uncertainty of cash flow to meet fixed or variable obligations, adverse changes in economic conditions, changes in the investment climate for real estate, adverse changes in local market conditions, changes in interest rates and the availability of mortgage funds or chattel financing, changes in real estate tax rates, governmental rules and regulations, acts of God and the inability to attract or retain residential tenants.

Residential real estate, including manufactured housing communities, is subject to adverse housing pattern changes and uses, vandalism, rent controls, rising operating costs and adverse changes in local market conditions such as a decrease in demand for residential housing due to a decrease in employment.  State governments also often regulate the relationship between manufactured housing community owners and residents.
 
The manufactured housing industry is now in the eighth consecutive year of declining unit sales due, in part, to lack of financing for the purchase of manufactured homes intended to be sited in land-lease communities.

As a result of the geographic concentration of our properties in Michigan, Florida and Nevada, we are exposed to the risks of downturns in the local economy or other local real estate market conditions due to plants closing and industry slowdowns which could adversely affect occupancy rates, rental rates and property values in these markets. Our income would also be adversely affected if residents were unable to pay rent or if sites were unable to be rented on favorable terms.

 
-6-

 

2.
The General Partner and its Affiliates have Conflicts of Interest.  Although the General Partner has a fiduciary duty to manage the Partnership in a manner beneficial to the Unit holders, the directors and officers of the General Partner have a fiduciary duty to manage the General Partner in a manner beneficial to its owners.  Furthermore, certain directors and officers of the General Partner are directors or officers of affiliates of the General Partner.  Conflicts of interest may arise between the General Partner and its affiliates and the Unit holders.  As a result of these conflicts, the General Partner may favor its own interests and the interests of its affiliates over the interests of the Unit holders.

3.
Reliance on General Partner’s Direction and Management of the Properties.  The success of the Partnership will, to a large extent, depend on the quality of the management of the Properties by the General Partner and affiliates of the General Partner and their collective judgment with respect to the operation, financing and disposition of the Properties.  To the extent that the General Partner and its affiliates are unable to hire and retain quality management talent, the Partnership’s financial results and operations may be adversely affected.

4.
Federal Income Tax Risks.  Federal income tax considerations will materially affect the economic consequences of an investment in the Properties.  The tax consequences of the Partnership’s activities are complex and subject to many uncertainties.  Changes in the federal income tax laws or regulations may adversely affect the Partnership’s financial results and its ability to make distributions to the Unit holders.  Additionally, the tax benefits enjoyed by the Unit holders may be reduced or eliminated.

5.
Limited Liquidity of the Units.  The transfer of Units is subject to certain limitations.  The public market for such Units is very limited.  Unit Holders may not be able to liquidate their investment promptly or at favorable prices, if at all.

6.
Competition.  The business of owning and operating residential manufactured housing communities is highly competitive.  The Partnership competes with a number of established communities having greater financial resources.  Moreover, there has been a trend for manufactured housing community residents to purchase home sites either collectively or individually.  Finally, the popularity and affordability of site built homes has also increased in recent years while the availability of chattel financing has decreased.  These trends have resulted in increased competition for tenants to occupy the Partnership properties.

7.
Management and Control of Partnership Affairs.  The General Partner is vested with full authority as to the general management and supervision of the business affairs of the Partnership.  The Unit Holders do not have the right to participate in the management of the Partnership or its operations.  However, the vote of Unit Holders holding more than 50% of the outstanding voting interests is required to:  (a) amend the Partnership Agreement; (b) approve or disprove the sale of one property or a series of transactions of all or substantially all of the assets of the Partnership; (c) dissolve the Partnership; (d) remove the General Partner; or (e) approve certain actions by the General Partner that the Consultant recommends against.

 
-7-

 

8.
Uninsured Losses. The Partnership carries comprehensive insurance, including liability, fire and extended coverage, and rent loss insurance which is customarily obtained for real estate projects.  There are certain types of losses, however, that may be uninsurable or not economically insurable such as certain damage caused by a hurricane.  If such losses were to be incurred, the financial position and operations of the Partnership as well as the Partnership’s ability to make distributions would be adversely affected.

9.
Environmental Matters.  Because the Partnership deals with real estate, it is subject to various federal, state and local environmental laws, rules and regulations.  Changes in such laws, rules and regulations may cause the Partnership to incur increased costs of compliance which may have a material adverse effect on the operations of the Partnership and its ability to make distributions to Unit holders.

10.
No Guarantee of Distributions.  The General Partner may withhold cash for extended periods of time if such cash is necessary to build cash reserves or for the conduct of the Partnership’s business.  A Unit holder will be required to pay federal income taxes, and, in some cases, state and local income taxes on the Unit holder’s share of the Partnership’s taxable income, whether or not cash distributions are made by the Partnership.  A Unit holder may not receive cash distributions from the Partnership equal to the holder’s share of taxable income or even equal to the tax liability that results from the Unit holder’s share of the Partnership’s taxable income.

11.
The Partnership May Not be Able to Generate Sufficient Working Capital to Fund its Operations.  There can be no assurance that the Partnership will generate sufficient working capital from operations to operate the business or to fund distributions.  Further, there can be no assurance that the Partnership will be able to borrow additional funds on terms favorable to the Partnership, if at all, to meet unanticipated working capital needs or to make distributions to the Unit holders.

ITEM 1B. 
UNRESOLVED STAFF COMMENTS

None.

ITEM 2. 
PROPERTIES

The Partnership purchased all seven remaining manufactured housing communities for cash. As a result of the StanCorp Financing, all Properties are now encumbered with mortgages.

 
-8-

 

Each of the Properties is a modern manufactured housing community containing lighted and paved streets, side-by-side off-street parking and complete underground utility systems.  The Properties consist of only the underlying real estate and improvements, not the actual homes themselves.    Each of the Properties has a community center, which includes offices, meeting rooms and game rooms. Each of the Properties, except Stonegate Manor, has a swimming pool.  Several of the Properties also have laundry rooms, playground areas, garage and maintenance areas and recreational vehicle or boat storage areas.

The table below contains certain information concerning the Partnership's seven properties.

Property Name
and Location
 
Year Constructed
 
Acreage
 
Number
of Sites
             
Ardmor Village
           
Cedar Avenue S.
           
Lakeville, MN
 
1974
 
74
 
339
             
Camelot Manor
           
Camelot Blvd. S.W.
           
Grand Rapids, MI
 
1973
 
57
 
335
             
Dutch Hills
           
Upton Road
           
E. Lansing, MI
 
1975
 
42.8
 
278
             
El Adobe
           
N. Lamb Blvd.
           
Las Vegas, NV
 
1975
 
36
 
367
             
Stonegate Manor
           
Eaton Rapids Drive
           
Lansing, MI
 
1968
 
43.6
 
308
             
Sunshine Village
           
Southwest 5th St.
           
Davie, FL
 
1972
 
45
 
356
             
West Valley
           
W. Tropicana Ave
           
Las Vegas, NV
 
1972
 
53
 
421

ITEM 3. 
LEGAL PROCEEDINGS

None.
 
-9-

 
ITEM 4. 
RESERVED

PART II

ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established public trading market for the Units of the Partnership and it is not anticipated that one will ever develop.  During the last twelve months, less than ten percent (10.0%) of the Units have been transferred, including transfers due to death or intra-family transfers.  The Partnership believes there is no formal secondary market, or the substantial equivalent thereof, and none will develop.

The General Partner calculates the estimated net asset value of each Unit by dividing (i) the amount of distributions that would be made to the Unit Holders in the event of the current sale of the Properties at their current appraised value, plus cash reserves less the outstanding balances of the mortgages on the mortgaged Properties and sales expenses (but without consideration to tax consequences of the sale), by (ii) 3,303,387.   In March 2010, the Properties were appraised at an aggregate fair market value of $49,700,000 plus cash reserves of $7,370,544, as of December 31, 2009. Assuming a sale of the seven properties at March 1, 2010, at the appraised value plus the cash reserves less payment of 3% selling expenses and mortgage debt, the net aggregate proceeds available for distribution to the Unit Holders is estimated to be $32,828,870 or $9.94 per Unit.  There can be no assurance that the estimated net asset value could ever be realized.  As of December 31, 2009, the Partnership had 3,043 Unit Holders holding 3,303,387 units.

The following table sets forth the distributions per limited partnership unit for each calendar quarter in the last two fiscal years.  Distributions were paid in the periods immediately subsequent to the periods in which such distributions were declared.

   
Distribution per
 
   
Limited Partnership Unit
 
Quarter Ended
     
March 31, 2009
  $ 0.08  
June 30, 2009
  $ 0.08  
September 30, 2009
  $ 0.08  
December 31, 2009
  $ 0.08  
March 31, 2008
  $ 0.08  
June 30, 2008
  $ 0.08  
September 30, 2008
  $ 0.25  
December 31, 2008
  $ 0.08  

The Partnership intends to continue to declare quarterly distributions.  However, distributions are determined by the General Partner and will depend on the results of the Partnership’s operations.

 
-10-

 

The Partnership has no equity compensation plans.

ITEM 6. 
SELECTED FINANCIAL DATA

Not required.

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

Capital Resources

The capital formation phase of the Partnership began on April 1, 1987 when Sunshine Village and Ardmor Village were purchased by the Partnership and operations commenced.  It ended on January 15, 1988 when El Adobe, the Partnership's last property, was purchased.  The total capital raised through December 1987 was $66,067,740 of which approximately $58,044,000 was used to purchase the nine Properties after deducting sales commissions, advisory fees and other organization and offering costs.

As described in Item 1, the Partnership borrowed $30,000,000 from GMAC Commercial Mortgage Corporation in August 1998. The note was payable in monthly installments, including interest at 6.37% through March, 2009. The Loan was secured by mortgages on the Partnership’s Ardmor Village, Camelot Manor, Dutch Hills, El Adobe, Stonegate Manor, Sunshine Village and West Valley Properties. The Partnership used the proceeds from the Loan to refinance the Partnership’s outstanding indebtedness of $30,045,000, which was incurred in a 1993 mortgage transaction.

In August, 2008, the Partnership refinanced the GMAC mortgage note payable and executed seven new mortgages payable with StanCorp Mortgage Investors, LLC (the “StanCorp Financing”) in the aggregate 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 December 31, 2009 the balance on these notes was $22,750,674.

Future principal and interest payments under the StanCorp Financing are scheduled to be $1,903,668 each year for the period from 2010 through 2014.

In connection with the new mortgage debt, The Partnership incurred $693,798 in financing costs as a result of the refinancing which are being amortized over the life of the mortgage of 25 years.  This included a 1% refinance fee of $232,250 paid to Uniprop AM LLC.
 
The General Partner acknowledges that the mortgages pose some risks to the Partnership, but believes that such risks are not greater than risks typically associated with real estate financing.

 
-11-

 

As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida.  On August 7, 2008, the sale closed with a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000.  The Partnership recognized a gain on the sale of approximately $ 881,000. The Partnership distributed approximately $562,000 from the sale to its unit holders with the balance of the proceeds being maintained in reserve until such time as the General Partner determines the optimal use of the funds. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all historical periods.

Liquidity

The Partnership has, since inception, generated adequate amounts of cash to meet its operating needs.  The Partnership retains cash reserves, which it believes will be adequate to maintain the Properties. All funds in excess of operating needs, amounts sufficient to pay debt service, and cash reserves are distributed to the Unit Holders on a quarterly basis.   While the Partnership is not required to maintain a working capital reserve, the Partnership has not distributed all of the cash generated from operations or from property sales in order to maintain capital reserves.  As of December 31, 2009, the Partnership had $7,370,544 in cash balances.

In February 1994, the Partnership distributed $23,119,767 to the Unit Holders, or $7.00 per $20.00 Unit held.  Of this amount, $13,572,978 (or $4.11 per Unit), was applied to the then shortfall in the Unit Holders’ 10.0% cumulative preferred return, and $9,546,789 (or $2.89 per Unit), was a partial return of the Limited Partners' original capital contributions.

Results of Operations

Distributions

For the year ended December 31, 2009, the Partnership made distributions to the Unit Holders of $1,057,084, which is equal, on an annualized basis, to a 1.9% return on their adjusted capital contributions ($0.32 per $17.11 Unit).  Distributions paid to Unit Holders in 2008 totaled $1,618,660 and $4,030,132 was paid in 2007.

The distributions paid in 2009 were less than the amount required for the annual 10.0% preferred return to the Unit Holders by approximately $4,595,000.  As described in Note 8 to the Partnership’s financial statements, the cumulative preferred return deficit through December 2009 was approximately $50,544,000.  No distributions can be made to the General Partner in regard to its incentive management interest until the cumulative preferred return deficit has been distributed to the Unit Holders.  At December 31, 2009, the unpaid amount to be distributed to the General Partner was approximately $12,122,000.

 
-12-

 

Revenue and Net (Loss) Income

For the years ended December 31, 2009 and 2008, net loss from Continuing Operations was ($240,394) and ($904,383) and gross revenue from Continuing Operations was $8,407,246 and $8,767,517, respectively.

For the year ended December 31, 2008, net income from Discontinued Operations was $825,036 and gross revenue from Discontinued Operations was $300,720.

Partnership Management

Certain employees of the Partnership are also employees of affiliates of the General Partner.  The Partnership paid these employees an aggregate of $283,624, and $225,649, in 2009 and 2008 respectively, to perform partnership management and investor relation services for the Partnership.

Critical Accounting Policies

In the course of developing and evaluating accounting policies and procedures, we use estimates, assumptions and judgments to determine the most appropriate methods to be applied.  Such processes are used in determining capitalization of costs related to real estate investments and potential impairment of real estate investments.

Real estate assets are stated at cost less accumulated depreciation.  Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sale transactions. Expenditures for property maintenance are charged to operations as incurred, while significant renovations are capitalized.  Depreciation of the buildings is recorded on the straight-line method using an estimated useful life of thirty years.

In determining the fair value of real estate investments, the Partnership engaged an independent valuation firm to appraise the fair value of each property using the discounted cash flow or comparable sale methods.  These methods consider future cash flow projections on a property by property basis, future capitalization rates, current interest rates and current market conditions of the geographical location of each property. In preparing these financial statements, the Partnership’s management has made its best estimates and judgment of certain amounts included in the financial statements. Nevertheless, actual results may differ from these estimates under different assumptions or conditions.

Property Operations

Overall, as illustrated in the table below, the Partnership's seven remaining properties had a combined average occupancy of 52% for the year ended December 31, 2009, as compared to 54% for the year ended December 31, 2008.  The average monthly rent (not weighted average) was approximately $475 per home site for the year ended December 31, 2009, as compared to $465 for the year ended December 31, 2008.  The manufactured housing industry in general has experienced lower retail sales over the past two years due to restrictive financing and the ease at which site-built homes, until recently, could be acquired and financed.

 
-13-

 

   
Total
Sites
   
Occupied Sites
   
Occupancy Rate
   
Average Rent
 
         
2009
   
2008
   
2009
   
2008
   
2009
   
2008
 
Ardmor Village
    339       172       183       51 %     54 %   $ 480     $ 466  
Camelot Manor
    335       112       124       33 %     37 %     403       394  
Dutch Hills
    278       121       133       44 %     48 %     404       395  
El Adobe
    367       200       208       55 %     57 %     498       483  
Stonegate Manor
    308       119       129       39 %     42 %     390       381  
Sunshine Village
    356       228       224       64 %     63 %     587       587  
West Valley
    421       324       328       77 %     78 %     564       552  
Overall
    2,404       1,276       1,329       52 %     54 %   $ 475     $ 465  

The following table summarizes gross revenues and net operating income for the Partnership and Properties during 2009 and 2008.

   
GROSS REVENUE
   
NET OPERATING INCOME (LOSS)
AND NET INCOME (LOSS)
 
   
2009
   
2008
   
2009
   
2008
 
Ardmor Village
  $ 1,049,799     $ 1,136,131     $ 459,860     $ 520,106  
Camelot Manor
    714,262       751,211       141,810       199,064  
Dutch Hills
    646,720       729,895       249,199       259,814  
El Adobe
    1,261,232       1,281,040       626,913       608,861  
Stonegate Manor
    648,007       767,659       205,234       266,387  
Sunshine Village
    1,582,957       1,440,829       748,713       427,743  
West Valley
    2,473,756       2,509,790       1,326,840       1,237,676  
      8,376,733       8,616,555       3,758,569       3,519,651  
Partnership Management Income and Expense
  $ 30,513     $ 150,962       (525,401 )     (333,621 )
                                 
Other Expenses
                    (449,061 )     (513,324 )
 
-14-

 
   
GROSS REVENUE
   
NET OPERATING INCOME (LOSS)
AND NET INCOME (LOSS)
 
   
2009
   
2008
   
2009
   
2008
 
Interest Expense
                    (1,546,739 )     (2,120,139 )
                                 
Depreciation
                    (1,477,762 )     (1,456,950 )
                                 
Continuing Operations
    8,407,246       8,767,517       (240,394 )     (904,383 )
                                 
Discontinued Operations
    -       300,720       -       825,036  
                                 
TOTAL
  $ 8,407,246     $ 9,068,237     $ (240,394 )   $ (79,347 )
 
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 Year Ended December 31, 2009 to Year Ended December 31, 2008

Total revenues from continuing operations decreased $360,271 to $8,407,246 in 2009, compared to $8,767,517 in 2008.  The decrease is primarily the result of a decrease in occupancy.  The decrease in occupancy is due primarily to increased foreclosures on home mortgages, which frequently results in the home being moved out of the property.

The Partnership’s operating expenses from continuing operations decreased $1,024,260, to $8,647,640 in 2009, compared to $9,671,900 in 2008.  The decrease is primarily due to lower interest expense as a result of the mortgage refinancing in August of 2008.  Property operations expense was also reduced due to the conclusion of the Sunshine Village resident relocation program in early 2009.  In addition, expenses associated with home sales decreased as a result of lower sales volumes.

As a result of the aforementioned factors, continuing operations experienced a net loss of $240,394 in 2009 compared to a net loss of $904,383 in 2008.

 
-15-

 

IMPORTANT DISCLOSURES

The General Partner believes it is important to disclose certain recent events to the Unit Holders along with a description of the actions taken by the General Partner to respond to the events.

Industry conditions remained depressed due to the lack of available retail financing.  Reduced retail home sales for manufactured homes and high default rates on chattel mortgage loans for manufactured homes continued through 2009.  In addition, the affordability and ease of financing site built homes, until recently, continued to provide competition for the manufactured housing industry.  As a result, occupancy levels have decreased in recent years, and management does not expect a short term turnaround.  As lending standards for site built homes begin to tighten because of high default rates in that market, demand for manufactured housing may increase but this increase, if it occurs, may take years to materialize.

As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida.  On August 7, 2008, the sale closed with a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000.  The Partnership recognized a gain on the sale of approximately $ 881,000. The Partnership distributed approximately $562,000 from the sale to its unit holders with the balance of the proceeds being maintained in reserve until such time as the General Partner determines the optimal use of the funds. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all historical periods.

In August 2008, the Partnership refinanced the GMAC mortgage note payable and executed seven new mortgages payable with StanCorp Mortgage Investors, LLC (the “StanCorp Financing”) in the aggregate 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% until August, 2014, at which time, the rate will reset to the lender’s then prevailing market rate.  As of December 31, 2009 the balance on these notes was $22,750,674.

ITEM 7A. 
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.

 
-16-

 

Notes Payable: At December 31, 2009 the Partnership had notes payable outstanding in the amount of $22,750,674, collateralized by the seven remaining properties within the Partnership.  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.

The Partnership does not enter into financial instruments transactions for trading or other speculative purposes or to manage its interest rate exposure.

ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Partnership’s financial statements for the fiscal years ended December 31, 2009 and 2008, and supplementary data are filed with this Report:

 
(i)
Reports of Independent Registered Public Accounting Firm

 
(ii)
Balance Sheets as of December 31, 2009 and 2008

 
(iii)
Statements of Income for the fiscal years ended December 31, 2009 and 2008.

 
(iv)
Statements of Partners' Equity for the fiscal years ended December 31, 2009 and 2008.

 
(v)
Statements of Cash Flows for the fiscal years ended December 31, 2009 and 2008.

(vi)
Schedule III - Real Estate and Accumulated Depreciation as of  December 31, 2009

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

As described in Form 8-K dated July 14, 2009, a change was made in the Partnership's independent registered public accounting firm.  The Board of Directors of the General Partner dismissed BDO Seidman, LLP and named Plante & Moran, PLLC as the successor accounting firm.  During the Partnership’s most recent two fiscal years including the interim period ended July 13, 2009, there were no disagreements with BDO Seidman, LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, that contributed to this decision.

 
-17-

 

ITEM 9A(T). 
CONTROLS AND PROCEDURES

The Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Partnership’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Partnership’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a – 14(c).  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.   As of the end of the period covered by this report (the-evaluation date), the Partnership conducted an evaluation under the supervision and with the participation of its Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a – 14(c) under the Securities Exchange Act of 1934 (“the Exchange Act”)).  Based on this evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the evaluation date, the Partnership’s disclosure controls and procedures were effective to reasonably ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. There has been no change in the Partnership’s internal control over financial reporting during its most recently completed quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  Based on our assessment of the effectiveness of internal control over financial reporting, management concluded that our internal control over financial reporting was effective as of December 31, 2009.

This annual report does not include an attestation report from the Partnership’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

PART III

ITEM 10. 
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership, as an entity, does not have any officers or directors.  The General Partner, Genesis Associates Limited Partnership is a Michigan limited partnership, of which Uniprop, Inc. is the General Partner.

Information concerning officers of Uniprop, Inc., during the last five years or more is as follows:
 
-18-


Paul M. Zlotoff, 60 became the Chairman of Uniprop, Inc. in May 1986 and was its President from 1979 through 1997.  He is also the sole owner of GP P.I. Associates Corp., the general partner of P.I. Associates, the general partner of Uniprop Manufactured Housing Communities Income Fund.  Mr. Zlotoff currently, and in the past, has acted as the general partner for various other limited partnerships owning manufactured housing communities and some commercial properties.

Joel Schwartz, CPA, 48, became Chief Financial Officer of Uniprop Inc. on June 1, 2004.  Mr. Schwartz is responsible for all financial affairs including accounting operations, banking relationships, raising mortgage capital, asset management and investor relations.  From 1998 to 2004, Mr. Schwartz was Chief Financial Officer for Village Green Companies.  From 1990 to 1998, Mr. Schwartz was Project Manager for Ford Motor Land Services Corporation.  Mr. Schwartz was also an Associate at Plante & Moran CPA’s from 1983 to 1989.  Mr. Schwartz received his B.A. from Michigan State University in 1983 with a major in accounting and received an MBA from the University of Michigan in 1990.

Jody Burttram, 49, became Independent Director of Genesis Associates in 2007.  As Independent Director, Mr. Burttram is responsible for the oversight and approval of management decisions and planning for the Partnership. Currently, Mr. Burttram is Principal of Harbinger Capital Advisors LLC, a boutique investment banking firm located in Orlando, Florida. Mr. Burttram was Chief Operating Officer of Century Capital Markets and CNL Capital Corp. from 1998 to 2005. Previously, Mr. Burttram was Vice President of International Banking, First Union National Bank from 1983 to 1992.

Roger Zlotoff, 49, is President and Chief Operating Officer of Uniprop, Inc.  He has been with Uniprop since October 18, 1999.  Mr. Zlotoff is primarily responsible for raising equity capital, managing partnership investments, evaluating acquisitions of existing properties and leading the development process for new properties.  From 1997 to 1999, Mr. Zlotoff served as Director of Business Development for Vistana, Inc. in Orlando, FL.  Previously, Mr. Zlotoff was Managing Director for Sterling Finance International from 1994 to 1997 and was a corporate banker with First Union National Bank from 1988 to 1994.  Mr. Zlotoff received his B.A. from the University of Central Florida as a philosophy major, and received his Masters Degree in International Business from the University of South Carolina.

Paul M. Zlotoff and Roger Zlotoff are brothers.

CODE OF ETHICS

Because the Partnership has no executive officers, the Partnership has not adopted a code of ethics for the Partnership.  A code of ethics has been established for the Directors, Officers, and Employees of Uniprop.  A copy of the Code of ethics is available at no charge upon request.

 
-19-

 

ITEM 11. 
EXECUTIVE COMPENSATION

The Partnership has no executive officers and therefore, no officers received a salary or remuneration exceeding $100,000 during the last fiscal year.  The General Partner of the Partnership and an affiliate, Uniprop AM, LLC, received certain compensation and fees during the fiscal year in the amounts described in Item 13.  Depending upon the results of operations and other factors, the Partnership anticipates that it will provide similar compensation to the General Partner and Uniprop AM, LLC. during the next fiscal year.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS

The Partnership is a limited partnership duly formed pursuant to the Uniform Limited Partnership Act, as amended, of the State of Michigan.  The General Partner, Genesis Associates Limited Partnership, is vested with full authority as to the general management and supervision of business and the other affairs of the Partnership, subject to certain constraints in the Partnership Agreement and consulting agreement.   Unit holders have no right to participate in the management of the Partnership and have limited voting privileges only on certain matters of fundamental significance.  To the knowledge of the Partnership, no person owns of record or beneficially, more than five percent of the Partnership's Units.

ITEM 13. 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following discussion describes all of the types of compensation, fees or other distributions paid by the Partnership or others to the General Partner or its affiliates from the operations of the Partnership during the last fiscal year, as well as certain of such items which may be payable during the next fiscal year.  Certain of the following arrangements for compensation and fees were not determined by arm's length negotiations between the General Partner, its affiliates and the Partnership.

Paul M. Zlotoff has an interest in the original sellers of Sunshine Village and Ardmor Village and is entitled to share in a contingent purchase price with respect to each Property, when and if the Properties are sold and the sellers become entitled thereto.  The maximum amounts which could be payable to Paul M. Zlotoff are as follows: Sunshine Village, $1,108,260 and Ardmor Village, $946,236.  The cash purchase price and contingent purchase price for each Property were determined by reference to the average of two independent real estate appraisals which were obtained by the General Partner.  Such appraisals are only estimates of value and are not necessarily indicative of the actual real estate value.  Each seller will become entitled to any unpaid contingent purchase price upon the sale, financing or other disposition of each such Property, but, only after the receipt by each Unit Holder of aggregate distributions equal to the sum of (i) his 10% cumulative preferred return plus (ii) 125% of his capital contribution.  The actual amounts to be received, if any, will depend upon the results of the Partnership's operations and the amounts received upon the sale, financing or other disposition of the Properties and are not determinable at this time.  The Partnership does not anticipate any such amount will become payable during the next fiscal year, nor do unpaid amounts carry over from year to year.

 
-20-

 
The Partnership will pay an Incentive Management Interest to the General Partner for managing the Partnership's affairs, including: determining distributions, negotiating agreements, selling or financing properties, preparing records and reports, and performing other ongoing Partnership responsibilities.  This incentive management interest is 15% of distributable cash from operations in any quarter.  However, in each quarter, the General Partner's right to receive any net cash from operations is subordinated to the extent necessary to first provide each Unit Holder his 10% cumulative preferred return.  During the last fiscal year, the General Partner received no distributions on account of its Incentive Management Interest from operations because distributions were approximately $4,595,000 less than the 10% cumulative preferred return due Unit Holders.  Any such amounts of Incentive Management Interest unpaid in a taxable year will be accumulated and paid from distributable cash from capital transactions, but only after each Unit Holder has first received his 10% cumulative preferred return and 125% of his capital contribution.  For 2009, approximately $190,000 was accumulated for the General Partner, and the General Partner's aggregate accumulated Incentive Management Interest as of December 2009 was $12,122,000.  The actual Incentive Management Interest from operations to be accumulated or paid during the next fiscal year will depend upon the results of the Partnership's operations and is not determinable at this time.  The Partnership does not anticipate any such amount will be distributed to the General Partner during the next fiscal year and will again be accumulated with payment deferred.  No distributions of Incentive Management Interest may be made to the General Partner until the 10% cumulative preferred return of approximately $50,544,000, as of December 31, 2009, is first distributed to the Unit Holders.  In February of 1994, as part of the 1993 mortgage financing with mortgage backed securities held with Bankers Trust, $23,119,767 was distributed to the Unit Holders, $13,572,978 of which eliminated the Unit Holders' preferred return deficit through December 31, 1993.

The Partnership must also pay an Incentive Management Interest from capital transactions to the General Partner for its services rendered to the Partnership. The General Partner will be entitled to receive its share of distributable cash from capital transactions after (i) each Unit Holder has received aggregate distributions in an amount equal to the sum of (a) his 10% cumulative preferred return plus (b) 125% of his capital contribution, (ii) any contingent purchase prices have been paid, and (iii) any property disposition fees to Uniprop AM, LLC have been paid.  The General Partner's share of distributable cash from capital transactions so payable will be (i) 100% of such distributable cash from capital distributions until the General Partner's share of the aggregate capital distributions made under section 11c(iii) and 11c(v) of the Partnership Agreement equal 25% and (ii) thereafter, 25% of such distributable cash from capital transactions.  No Incentive Management Interest from capital transactions was paid to the General Partner for the fiscal year ended December 31, 2009.  The Partnership does not anticipate that any such amounts will be paid or become payable to the General Partner during the next fiscal year.

 
-21-

 

Uniprop AM, LLC received and will receive property management fees for each Property managed by it.  Uniprop AM, LLC is primarily responsible for the day-to-day management of the Properties and for the payment of the costs of operating each Property out of the rental income collected.  The property management fees are equal to the lesser of 5% of the annual gross receipts from the Properties managed by Uniprop AM, LLC, or the amount which would be payable to an unaffiliated third party for comparable services.  During the last fiscal year, Uniprop AM, LLC received property management fees totaling $387,000.  The actual amounts to be received during the next fiscal year will depend upon the results of the Partnership's operations and are not determinable at this time.

Certain employees of affiliates of the General Partner were paid an aggregate of $283,624 during 2009 to perform partnership management, and investor relation services for the Partnership.  It is anticipated comparable amounts will be paid in the next fiscal year.  Uniprop Homes, Inc., a related entity, received commissions totaling $29,491 in 2009 for certain services provided as a broker/dealer of manufactured homes for the communities.  Uniprop Homes, Inc. represented the communities in the sale of new and pre-owned homes to community residents.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Partnership retained Plante & Moran, PLLC to audit its financial statements and provide other services for the year ended December 31, 2009.  BDO Seidman, LLP performed the same for the year ended December 31, 2008.

The aggregate fees billed to the Partnership for professional services performed by Plante & Moran, PLLC during 2009 and BDO Seidman, LLP during 2008 were as follows.

   
2009
   
2008
 
(1)  Audit Fees
  $ 64,000     $ 80,000  
(2)  Audit-Related Fees
  $ 0     $ 0  
(3)  Tax Fees
  $ 15,000     $ 16,500  
(4) All Other Fees
  $ 0     $ 0  
                 
(5) Total
  $ 79,000     $ 96,500  

Audit fees:  pertain to the audit of the Partnership’s annual financial statements, including reviews of the interim financial statements contained in the Partnership’s Quarterly Reports on Form 10-Q.

Tax fees:  pertain to services performed for tax compliance, including preparation of tax returns and partners Schedule K-1 processing.

The services performed by Plante & Moran, PLLC and BDO Seidman, LLP in 2009 and 2008 were pre-approved by the General Partner.

 
-22-

 

PART IV

ITEM 15.
EXHIBITS AND  FINANCIAL STATEMENT SCHEDULES

 
(a)
Financial Statements

 
(1)
The following financial statements and related documents are filed with this report:

 
(i)
Reports of Independent Registered Public Accounting Firm

 
(ii)
Balance Sheets as of December 31, 2009 and 2008

 
(iii)
Statements of Income for the fiscal years ended December 31, 2009 and 2008.

 
(iv)
Statements of Partners' Equity for the fiscal years ended December 31, 2009 and 2008.

 
(v)
Statements of Cash Flows for the fiscal years ended December 31, 2009 and 2008.

 
(2)
The following financial statement schedule is filed with this report:

Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2009.

 
(3)
Exhibits

The following exhibits are incorporated by reference to the S-11 Registration Statement of the Partnership filed November 12, 1986, as amended on December 22, 1986 and January 16, 1987:

 
3(a)
Certificate of Limited Partnership for the Partnership

 
3(b)
Uniprop Manufactured Housing Communities Income Fund II Agreement of Limited  Partnership

 
4(a)
First Amendment to Uniprop Manufactured Housing Communities Income Fund II Agreement of Limited Partnership (April 1, 1987)

10(a)
Form of Management Agreement between the Partnership and Uniprop AM, LLC.

 
-23-

 

10(b)
Form of Consulting Agreement among the Partnership, the General Partner and Consultant

The following exhibits are incorporated by reference to the Form 10-K for the fiscal year ended December 31, 1997:

 
4(b)
Form of Beneficial Assignment Certificate (BAC) for the Partnership (Originally submitted with Form 10-K for the fiscal year ended December 31, 1987.)

10(c)
Contingent Purchase Price Agreement with Sunrise Broward Associates, Ltd. (As last submitted with Form 10-K for the fiscal year ended December 31, 1997.)

10(d)
Contingent Purchase Price Agreement with Ardmor Associates Limited Partnership.  (As last submitted with Form 10-K for the fiscal year ended December 31, 1997.)

10(e)
Incentive Acquisition Fee Agreement between the Partnership and Uniprop, Inc. (As last submitted with Form 10-K for the fiscal year ended December 31, 1997.)

The following exhibit is incorporated by reference to the Form 8-K that was filed on September 8, 1998:

10(f)
Mortgage notes, made as of August 20, 1998, between Uniprop Manufactured Housing Communities Income Fund II and GMAC CMC.

The following exhibit is incorporated by reference to the Form 10-K for the fiscal year ended December 31, 2005:

10(g)
Second Amended and Restated Consulting Agreement among the Partnership, the General Partner, and Consultant, January 9, 2005

10(h)
Line of Credit Loan Agreement between the Partnership and National City Bank, October 19, 2005.

The following exhibit is incorporated by reference to the Form 8-K that was filed on January 17, 2007

10(i)
Contract for Sale and Purchase of Real and Personal Property between Uniprop Manufactured Housing Communities Income Fund II and Nelson C. Steiner for the sale of Paradise Village.
 
 
-24-

 
 
The following exhibit is incorporated by reference to the Form 8-K that was filed on March 13, 2007
 
10(j)
Termination of Contract for Sale and Purchase of Real and Personal Property between Uniprop Manufactured Housing Communities Income Fund II and Nelson C. Steiner for the sale of Paradise Village and Contract for Sale and Purchase of Real and Personal Property between Uniprop Manufactured Housing Communities Income Fund II and a private buyer for the sale of  Paradise Village.

The following exhibit is incorporated by reference to the Form 8-K that was filed on May 17, 2007

10(k)
Closure of the Sale of Paradise Village between Uniprop Manufactured Housing Communities Income Fund II and a private buyer.

The following exhibit is incorporated by reference to the Form 8-K that was filed on August 27, 2008.

10(l)
Closure of the Sale of Country Roads between Uniprop Manufactured Housing Communities Income Fund II and a private buyer.

The following exhibit is incorporated by reference to the Form 8-K that was filed on July 14, 2009.

10(m)
Change in Registrant’s Certifying Accountant from BDO Seidman, LLP to Plante & Moran, PLLC.

The following exhibits are attached to this Report:

99.1
Letter summary of the estimated fair market values of the Partnership's seven manufactured housing communities, as of March 1, 2010.

31.1
Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2
Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
-25-

 
 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership, 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., Managing General Partner
       
     
By:    
/s/ Paul M Zlotoff
       
Paul M. Zlotoff, Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated:  March 22, 2010

By:
/s/ Joel Schwartz
 
By:
/s/ Paul M Zlotoff
 
 
Joel Schwartz
Paul M. Zlotoff, Chairman of Uniprop, Inc.
 
Principal Financial Officer
(Principal Executive Officer)
 
(Chief Financial Officer of
 
 
Uniprop, Inc.)
 
     
By:
/s/ Susann Szepytowski
   
 
Susann Szepytowski
 
 
Principal Accounting Officer
 
 
(Controller of Uniprop, Inc.)
 
 
 
-26-

 

EXHIBIT INDEX

EXHIBIT
NUMBER
 
DESCRIPTION
 
METHOD OF FILING
 
PAGE
             
3(a)
 
Certificate of Limited Partnership for the Partnership
 
Incorporated by reference to the S-11 Registration Statement of the Partnership filed November 12, 1986, as amended on December 22, 1986 and January 16, 1987 (the "Registration Statement").
   
             
3(b)
 
Uniprop Manufactured Housing Communities Income Fund II Agreement of Limited Partnership
 
Incorporated by reference to the Registration Statement.
   
             
4(a)
 
First Amendment to Uniprop Manufactured Housing Communities Income Fund II Agreement of Limited Partnership (April 1, 1987)
 
Incorporated by reference to the Registration Statement.
   
             
4(b)
 
Form of Beneficial Assignment Certificate (BAC) for the Partnership (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 1997.
   
             
10(a)
 
Form of Management Agreement between the Partnership and Uniprop AM, LLC
 
Incorporated by reference to the Registration Statement.
   
             
10(b)
 
Form of Consulting Agreement among the Partnership, the General Partner and Consultant
 
Incorporated by reference to the Registration Statement.
   
             
10(c)
 
Contingent Purchase Price Agreement with Sunrise Broward Associates, Ltd. (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 1997.
   
 
 
-27-

 

10(d)
 
Contingent Purchase Price Agreement with Ardmor Associates Limited Partnership (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 1997.
   
             
10(e)
 
Incentive Acquisition Fee Agreement between the Partnership and Uniprop, Inc. (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 1997.
   
             
10(f)
 
Mortgage Notes, made on August 20, 1998 between Uniprop Manufactured Home Communities Income Fund II and GMAC CMC
 
Incorporated by reference to the Form 8-K filed on September 8, 1998.
   
             
10(g)
 
Second Amended and Restated Consulting Agreement among the Partnership, the General Partner and Consultant January 9, 2005
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 2005.
   
             
10(h)
 
Line of Credit Loan Agreement between the Partnership and National City Bank October 19, 2006
 
Incorporated by reference to Form 10-K for fiscal year ended December 31, 2005.
   
             
10(i)
 
Contract for Sale and Purchase of Real and Personal Property for the sale of Paradise Village January 17, 2007.
 
Incorporated by reference to the Form 8-K filed on January 17, 2007.
   
             
10(j)
 
Termination of Contract for Sale and Purchase of Real and Personal Property for the sale of Paradise Village January 17, 2007. Contract for Sale and Purchase of Real and Personal Property for the sale of Paradise Village March 13, 2007.
 
Incorporated by reference to the Form 8-K filed on March 13, 2007.
   
             
10(k)
 
Closure of the Sale of Paradise Village May 17, 2007.
 
Incorporated by reference to the Form 8-K filed on May 17, 2007.
   
 
 
-28-

 
 
10(l)
 
Closure of the Sale of Country Roads August 27, 2008.
 
Incorporated by reference to the Form 8-K filed on August 27, 2008.
   
             
10(m)
 
Change in Registrant’s Certifying Accountant July 14, 2009.
 
Incorporated by reference to the Form 8-K filed on July 14, 2009.
   
             
99.1
 
Letter summary of the estimated fair market values of the Partnership's seven manufactured housing communities, as of March 1, 2010.
 
Filed herewith.
   
             
31.1
 
Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
   
             
31.2
 
Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
   
             
*32.1
 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
   
             
*32.2
 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Filed herewith.
   

*      This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Partnership, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 
-29-

 
Report of Independent Registered Public Accounting Firm

To the Partners
Uniprop Manufactured Housing
  Communities Income Fund II
  (A Michigan limited partnership)

We have audited the accompanying balance sheet of Uniprop Manufactured Housing Communities Income Fund II (a Michigan limited partnership) as of December 31, 2009, and the related statements of income, partners' equity and cash flows for the period ended December 31, 2009. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.  Accordingly, we express no such opinion.   Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Uniprop Manufactured Housing Communities Income Fund II at December 31, 2009, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/S/ Plante & Moran, PLLC
Auburn Hills, Michigan
March 22, 2010

 
 

 
BDO Seidman, LLP
Accountants and Consultants
755 West Big Beaver, Suite 1900
Troy, Michigan 48084-0178
Telephone: (248) 362-2100
Fax: (248) 362-5258

Report of Independent Registered Public Accounting Firm
 
To the Partners
Uniprop Manufactured Housing
  Communities Income Fund II
(a Michigan Limited Partnership)
 
We have audited the accompanying balance sheet of Uniprop Manufactured Housing Communities Income Fund II as of December 31, 2008 and the related statements of income, partners’ equity and cash flow for the year ended December 31, 2008.  In connection with our audit of the financial statements, we have also audited the 2008 information in the financial statement schedule listed under Item 15 of Form 10-K.  These financial statements and schedule are the responsibility of the Partnership’s management.  Our responsibility is to express an opinion on the 2008 financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Uniprop Manufactured Housing Communities Income Fund II at December 31, 2008, and the results of its operations and its cash flows for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
 
Also, in our opinion, the 2008 information in the financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
 
 

Troy, Michigan
March 27, 2009

 
 

 

 
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Balance Sheets

 
December 31,
 
2009
   
2008
 
             
Assets
           
             
Property and Equipment
           
Buildings and improvements
  $ 41,422,578     $ 41,241,255  
Land
    8,952,937       8,952,937  
Furniture and equipment
    576,801       560,906  
                 
      50,952,316       50,755,098  
Less accumulated depreciation
    29,674,778       28,197,016  
                 
Net Property and Equipment
    21,277,538       22,558,082  
                 
Cash
    7,370,544       7,469,961  
Manufactured homes and improvements
    412,635       787,563  
Unamortized financing costs
    652,170       679,922  
Other assets
    1,417,425       1,383,357  
                 
    $ 31,130,312     $ 32,878,885  
                 
Liabilities and Partners’ Equity
               
                 
Note payable
  $ 22,750,674     $ 23,133,242  
Accounts payable
    95,517       91,120  
Other liabilities
    416,672       489,596  
                 
Total Liabilities
    23,262,863       23,713,958  
                 
Partners’ Equity
               
Unit holders - 3,303,387 units issued and outstanding
    7,451,425       8,746,499  
General partner
    416,024       418,428  
                 
Total Partners’ Equity
    7,867,449       9,164,927  
                 
    $ 31,130,312     $ 32,878,885  
 
See accompanying notes to financial statements.

 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Statements of Income

Year Ended December 31,
 
2009
   
2008
 
Revenue
           
Rental
  $ 7,288,627     $ 7,088,651  
Home sale income
    545,248       889,568  
Other
    573,371       789,298  
                 
      8,407,246       8,767,517  
                 
Operating Expenses
               
Administrative
    2,304,801       2,267,489  
Property taxes
    939,089       1,003,404  
Utilities
    628,350       612,573  
Property operations
    953,345       1,111,854  
Depreciation
    1,477,762       1,456,950  
Interest
    1,546,739       2,120,139  
Home sale expense
    797,554       1,099,491  
                 
      8,647,640       9,671,900  
                 
(Loss)from Continuing Operations
    (240,394 )     (904,383 )
                 
Discontinued Operations
               
Loss from discontinued operations
    -       (55,620 )
Net gain on sale of discontinued operations
    -       880,656  
                 
Income from Discontinued Operations
    -       825,036  
                 
Net Loss
  $ (240,394 )   $ (79,347 )
                 
Loss Per Limited Partnership Unit - Continuing Operations
  $ (.07 )   $ (.27 )
Income Per Limited Partnership Unit  - Discontinued Operations
  $  -     $ .25  
                 
Total Loss Per Limited Partnership Unit
  $ (.07 )   $ (.02 )
                 
Distributions Per Limited Partnership Unit
  $ .32     $ .49  
                 
Weighted Average Number of Limited Partnership Units Outstanding
    3,303,387       3,303,387  
                 
Net Loss Allocable to General Partner
  $ (2,404 )   $ (793 )
                 
Distributions Allocable to General Partner
  $ -     $ -  
 
See accompanying notes to financial statements.

 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Statements of Partners’ Equity
Years Ended December 31, 2009 and 2008

   
General
             
   
Partner
   
Unit Holders
   
Total
 
                   
Balance, January 1, 2008
    419,221       10,443,713       10,862,934  
                         
Distributions to unit holders
    -       (1,618,660 )     (1,618,660 )
                         
Net loss for the year
    (793 )     (78,554 )     (79,347 )
                         
Balance, December 31, 2008
    418,428       8,746,499       9,164,927  
                         
Distributions to unit holders
    -       (1,057,084 )     (1,057,084 )
                         
Net loss for the year
    (2,404 )     (237,990 )     (240,394 )
                         
Balance, December 31, 2009
  $ 416,024     $ 7,451,425     $ 7,867,449  
 
See accompanying notes to financial statements.

 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Statements of Cash Flows

Year Ended December 31,
 
2009
   
2008
 
             
Cash Flows From Operating Activities
           
Net loss
  $ (240,394 )   $ (79,347 )
Adjustments to reconcile net (loss) income to net cash provided by operating activities
               
Depreciation
    1,477,762       1,516,524  
Amortization and write off of deferred financing costs
    27,752       442,417  
Gain on sale of property
    -       (880,656 )
Decrease (increase) in manufactured homes and improvements
    374,928       (76,350 )
Increase  in other assets
    (34,068 )     (34,497 )
Increase (decrease) in accounts payable
    4,397       (67,727 )
(Decrease) increase in other liabilities
    (72,924 )     109,761  
                 
Net Cash Provided By Operating Activities
    1,537,453       930,125  
                 
Cash Flows From Investing Activities
               
Purchase of property and equipment
    (197,218 )     (243,180 )
Net proceeds from sale of property
    -       2,934,000  
                 
Net Cash (Used In) Provided By Investing Activities
    (197,218 )     2,690,820  
                 
Cash Flows From Financing Activities
               
Distributions to unit holders
    (1,057,084 )     (1,618,660 )
Payment on prior mortgage
    -       (25,687,191 )
Proceeds from mortgage refinancing
    -       23,225,000  
Repayments of notes payable
    (382,568 )     (91,758 )
Debt issuance costs
    -       (693,798 )
                 
Net Cash Used In Financing Activities
    (1,439,652 )     (4,866,407 )
                 
Net (Decrease) Increase In Cash
    (99,417 )     (1,245,462 )
Cash, at beginning of year
    7,469,961       8,715,423  
                 
Cash, at end of year
  $ 7,370,544     $ 7,469,961  
 
See accompanying notes to financial statements.

 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

1.
Summary of Accounting Policies
 
Organization and Business
     
Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership (the “Partnership”) acquired, maintains, operates and will ultimately dispose of income producing residential real properties consisting of seven manufactured housing communities (the “properties”) at December 31, 2009, and 2008,  located in Florida, Michigan, Nevada and Minnesota. The Partnership was organized and formed under the laws of the State of Michigan on November 7, 1986.  The general partner is Genesis Associates Limited Partnership.
       
     
In accordance with its Prospectus dated December 1986, the Partnership sold 3,303,387 units of beneficial assignment of limited partnership interest (“Units”) for $66,068,000. The Partnership purchased nine properties for an aggregate purchase price of approximately $58,000,000. Three of the properties costing approximately $16,008,000 were previously owned by entities which were affiliates of the general partner.  One property was sold in 2007 and one was sold in 2008 leaving a total of seven properties on December 31, 2009.
       
     
Use of Estimates
     
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from these estimates.
       
     
Fair Values of Financial Instruments
 
     
The carrying amounts of cash, accounts payable and notes payable approximate their fair values.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

   
Property and Equipment
     
   
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over a period of thirty years except for furniture and equipment which is depreciated over a period ranging from three to ten years.
     
   
Accumulated depreciation on continuing properties for tax purposes was $29,675,000 and $28,197,000 as of December 31, 2009 and 2008, respectively.
     
   
Long-lived assets such as property and equipment are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When any such impairment exists, the related assets will be written down to fair value.
     
   
Manufactured Homes and Improvements
     
   
Manufactured homes and improvements are stated at the lower of cost or market and represent manufactured homes held for sale.
     
   
Financing Costs
     
   
As a result of the refinance of the mortgage note payable during 2008, costs to obtain the financing (see Note 2) have been capitalized and are being amortized over the 25-year term of the related mortgage note payable. Previously deferred financing costs were written off.
 
Accumulated amortization on continuing properties was $27,752 and $13,876 as of December 31, 2009 and 2008, respectively.
     
   
Revenue Recognition
     
   
Rental income attributable to leases is recorded when due from the lessees.  Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sale transaction.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

     
Other Revenue
       
     
Other revenue consists of interest income, rental late fees, utility charges and miscellaneous income. Income from utility charges is recognized based upon actual monthly usage.
       
     
Income Taxes
       
     
Federal income tax regulations provide that any taxes on income of a partnership are payable by the partners as individuals. Therefore, no provision for such taxes has been made at the partnership level.
       
2. 
Note Payable
 
In 1998, the Partnership entered into a $30,000,000 note payable agreement.  The note was payable in monthly installments of $188,878, including interest at 6.37%. The note was secured by mortgages on the Partnership’s Ardmor Village, Camelot Manor, Dutch Hills, El Adobe, Stonegate Manor, Sunshine Village and West Valley properties. The Partnership used the proceeds from the note to refinance the Partnership’s outstanding indebtedness of $30,045,000, which was incurred in a 1993 mortgage transaction.
       
     
During 2008, the Partnership refinanced the mortgage note payable and executed new notes payable to StanCorp Mortgage Investors, LLC  in the aggregate amount of $23,225,000 secured by the seven remaining 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 December 31, 2009, the balance on these notes was $22,750,674. In connection with the new mortgage debt, the Partnership incurred $693,798 in financing costs as a result of the refinancing which are being amortized over the life of the mortgage of 25 years. This included a 1% refinance fee of $232,250 paid to Uniprop AM LLC, a related party.  In addition, the Partnership recognized additional interest expense of $418,083 related to the write off of previously unamortized financing costs in 2008.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

   
Future maturities on the note payable for the next five years and thereafter are as follows:  2010 - $408,698; 2011 - $436,612; 2012 - $466,432; 2013 - $498,289; 2014 - $532,321 and thereafter - $20,408,322.
     
   
At December 31, 2009 and 2008, “Other Assets” included cash of approximately $299,000 and $242,000, respectively, in an escrow account for property taxes, insurance, and capital improvements, as required by the Partnership’s note payable agreement. The cash is restricted from operating use.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

 
3.
Related Party Transactions
 
Management Agreement
     
The Partnership has an agreement with an affiliate of the general partner to manage the properties owned by the Partnership. The management agreement is automatically renewable annually, but may be terminated by either party upon sixty days written notice. The property management fee is the lesser of 5% of annual gross receipts from the properties managed, or the amount which would be payable to an unaffiliated third party for comparable services.
       
     
Certain employees of affiliates of the General Partner were paid an aggregate of $283,624 during 2009 to perform partnership management, and investor relation services for the Partnership.  Uniprop Homes, Inc., a related entity, received commissions totaling $29,491 in 2009 for certain services provided as a broker/dealer of manufactured homes for the properties. Uniprop Homes, Inc. represented the properties in the sale of new and pre-owned homes to property residents.
       
     
Fees and Expenses
       
     
During the years ended December 31, 2009 and 2008, Uniprop AM LLC, an affiliate earned property management fees from continuing operations of $387,000, and $380,000, respectively, as permitted in the Agreement of Limited Partnership. These fees are included with “Administrative” expenses in the respective statements of income. The Partnership was owed $9,700 and $9,100 by the affiliate at December 31, 2009 and 2008, respectively, for previously overpaid fees.
       
     
Contingent Purchase Price
       
     
A general partner of Genesis Associates Limited Partnership has an interest in the sellers of two of the properties acquired by the Partnership and is entitled to share in a contingent purchase price that will not exceed $2,054,000. Additional amounts to be paid, if any, will depend upon the results of the Partnership's operations and the amounts received upon the sale, financing or other disposition of the related properties, and are not determinable at this time. The Partnership does not anticipate any such amount will become payable during the next fiscal year.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

 
4.
Reconciliation of
 
Year Ended December 31,
   
2009
 
2008
 
 
Financial Statement
               
 
Income and Taxable
 
Loss per the financial statements
 
$
(240,394
)
(79,347
)
 
Income
               
     
Loss on disposal of assets
   
-
 
(206,918
)
                   
     
Adjustments to depreciation for difference in methods
   
(452,908
)
8,751
 
                   
     
Adjustments for prepaid rent, meals and entertainment
   
9,783
 
2,250
 
                   
     
Loss Per the Partnership’s Tax Return
 
$
(683,519
)
(275,264
)
       
5.
Partners’ Capital
 
Subject to the orders of priority under certain specified conditions more fully described in the Agreement of Limited Partnership (the “Agreement”) distributions of partnership funds and allocations of net income from operations are principally determined as follows:
       
     
Distributions
       
     
Distributable cash from operations in the Agreement (generally defined as net income plus depreciation and amortization, less mortgage amortization) is to be distributed to unit holders until they have received a 10% cumulative preferred return. After the unit holders have received their 10% cumulative preferred return, all remaining cash from operations is distributed to the general partner in the form of an incentive management interest until the total amount received by the general partner is equal to 15% of the aggregate amount of cash distributed from operations in a given year. Amounts payable to but not paid to the general partner will be accumulated and paid from future capital transactions after the unit holders have first received their 10% preferred return and 125% of their capital contributions. Thereafter, 85% of distributable cash from operations is to be paid to the unit holders and 15% to the general partner.
 
 
 

 
 
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements
 
     
Annual distributable cash from operations was less than the amount required for the annual 10% preferred return to the unit holders by approximately $4,595,000 and $4,033,000, in 2009, and 2008, respectively. No distributions can be made to the general partner until the cumulative preferred return deficit of approximately $50,544,000 as of December 31, 2009 has been distributed to the unit holders.
       
     
At December 31, 2009, the general partner’s cumulative incentive management interest to be distributed was approximately $12,122,000. The actual amount to be accumulated or paid in the future depends on the results of the Partnership’s operations and is not currently determinable; however, no such distribution to the general partner is anticipated during fiscal year 2010.
       
     
Allocation of Net Income
       
     
Net income is principally allocated 99% to the unit holders and 1% to the general partner until the cumulative amount of net income allocated to the unit holders equals the aggregate cumulative amount of cash distributed to the unit holders. After sufficient net income has been allocated to the unit holders to equal the amount of cash distributed to them, all the net income is to be allocated to the general partner until it equals the amount of cash distributed to it.
 
 
 

 

Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements

 
6.
Supplemental Cash Flow Information
 
Interest paid during 2009 and 2008 was approximately $1,521,000, and $1,678,000, respectively.
       
7.
Discontinued Operations
 
As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida.  On August 7, 2008, the sale closed with a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000.  The Partnership recognized a gain on the sale of approximately
$881,000. The Partnership distributed approximately $562,000 from the sale to its unit holders with the balance of the proceeds being maintained in reserve until such time as the General Partner determines the optimal use of the funds. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all years presented.
       
     
Below is a summary of the results of operations of the Country Roads property through disposition date:
       
     
Year Ended December 31,
 
2008
 
             
     
Rental income
$
254,000
 
     
Other Income
 
47,000
 
     
Administrative expenses
 
(183,000
)
     
Property tax expense
 
(32,000
)
     
Utilities expense
 
(47,000
)
     
Property operations
 
(35,000
)
     
Depreciation expense
 
(60,000
)
     
Home sale expense
 
-
 
             
     
Loss From Discontinued Operations
 
(56,000
)
             
     
Gain on Sale of Discontinued Operations
 
881,000
 
             
     
Income From Discontinued Operations
$
825,000
 
 
 
 

 
 
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)

Notes to Financial Statements


8.
Interim Results (Unaudited)
 
The following summary represents the unaudited results of operations of the Partnership, expressed in thousands except per unit amounts, for the periods from January 1, 2008 through December 31, 2009:

     
Three Months Ended
 
 
2009
 
March 31,
   
June 30,
   
September 30,
   
December 31,
 
                           
 
Revenues From Continuing Operations
  $ 2,108     $ 2,187     $ 2,043     $ 2,069  
                                   
 
(Loss) Income from Continuing Operations
  $ (246 )   $ (38 )   $ 35     $ 9  
                                   
 
(Loss) Income  Per Limited Partnership Unit  from Continuing Operations
  $ (.07 )   $ (.02 )   $ .01     $ .01  
     
     
Three Months Ended
 
 
2008
 
March 31,
   
June 30,
   
September 30,
   
December 31,
 
                                   
 
Revenues From Continuing Operations
  $ 2,274     $ 2,143     $ 2,199     $ 2,152  
                                   
 
Income (Loss) from Continuing Operations
  $ 83     $ 95     $ (579 )   $ (503 )
                                   
 
Income (Loss) from Discontinued Operations
    3       (7 )     821       8  
                                   
 
Income (Loss) Per Limited Partnership Unit from Continuing Operations
  $ .03     $ .03     $ (.18 )   $ (.15 )
                                   
 
Income Per Limited Partnership Unit from Discontinued Operations
    -       -       .25       -  
 
 
 

 
 
Uniprop Manufactured
Housing Communities Income Fund II
(a Michigan limited partnership)

Schedule III - Real Estate and Accumulated Depreciation
December 31, 2009
 
Column A
 
Column B
   
Column C
   
Column D
   
Column E
   
Column F
 
Column G
 
Column H
                     
Costs
                   
                     
Capitalized
                 
Life on Which
                     
Subsequent to
   
Gross Amount at Which Carried
           
Depreciation in
         
Initial Cost
         
Acquisition
   
at Close of Period
           
Latest Income
               
Buildings and
         
Buildings and