UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended March 31, 2012

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 0-16701

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

a Michigan Limited Partnership

(Exact name of registrant as specified in its charter)

 

MICHIGAN		38-2702802
(State or other jurisdiction of		(I.R.S. employer
incorporation or organization)		identification number)

 

280 Daines Street, Birmingham, Michigan 48009

(Address of principal executive offices) (Zip Code)

(248) 645-9220

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(g) of the Act:

units of beneficial assignments of limited partnership interest

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨   No ¨

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).             Yes ¨         No x

  

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

INDEX

 

		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Balance Sheets March 31, 2012 (Unaudited) and December 31, 2011	3
	Statements of Operations Three months ended March 31, 2012 and 2011 (Unaudited)	4
	Statement of Partners’ Equity Three months ended March 31, 2012 (Unaudited)	4
	Statements of Cash Flows Three months ended March 31, 2012 and 2011 (Unaudited)	5
	Notes to Financial Statements March 31, 2012 (Unaudited)	6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	7
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
ITEM 4.	CONTROLS AND PROCEDURES	9
PART II	OTHER INFORMATION	10
ITEM 1.	LEGAL PROCEEDINGS	10
ITEM 1A.	RISK FACTORS	10
ITEM 6.	EXHIBITS	10

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

ASSETS

 

		March 31,2012				December 31, 2011
		(Unaudited)
Properties:
Land		$	8,952,937			$	8,952,937
Buildings And Improvements			42,031,798				42,031,798
Furniture And Fixtures			648,279				633,279
			51,633,014				51,618,014
Less Accumulated Depreciation			(33,092,076	)			(32,697,748	)
			18,540,938				18,920,266
Cash And Cash Equivalents			5,974,141				6,239,427
Unamortized Finance Costs			589,728				596,666
Manufactured Homes and Improvements			2,350,352				2,049,935
Other Assets			977,442				955,929
Total Assets		$	28,432,601			$	28,762,223

 

LIABILITIES & PARTNERS' EQUITY

 

		March 31,2012				December 31, 2011
		(Unaudited)
Accounts Payable		$	75,615			$	166,483
Other Liabilities			520,903				446,440
Notes Payable			21,791,629				21,905,364
Total Liabilities		$	22,388,147			$	22,518,287
Partners' Equity:
General Partner			421,579				420,931
Unit Holders			5,622,875				5,823,005
Total Partners' Equity			6,044,454				6,243,936
Total Liabilities And Partners' Equity		$	28,432,601			$	28,762,223

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF OPERATIONS

(Unaudited)

 

		THREE MONTHS ENDED
		March 31, 2012				March 31, 2011
Income:
Rental Income		$	1,833,756			$	1,788,038
Home Sale Income			20,100				57,399
Other			201,248				137,360
Total Income			2,055,104				1,982,797
Operating Expenses:
Administrative Expenses (Including $100,303 and $95,446, in Property Management Fees Paid to an Affiliate for the Three Month Period Ended March 31, 2012 and 2011, respectively)			668,745				662,607
Property Taxes			226,269				229,062
Utilities			150,824				143,902
Property Operations			155,081				119,650
Depreciation			394,328				378,459
Interest			368,492				375,804
Home Sale Expense			26,576				58,547
Total Operating Expenses			1,990,315				1,968,031
Net Income		$	64,789			$	14,766
Income per Limited Partnership Unit		$	0.02			$	0.00
Distribution Per Unit:		$	0.08			$	0.08
Weighted Average Number Of Units Of Beneficial Assignment Of Limited Partnership Interest Outstanding During The Period Ending March  31, 2012 and 2011			3,303,387				3,303,387

 

STATEMENT OF PARTNERS' EQUITY (Unaudited)

 

		General Partner				Unit Holders				Total
Balance, December 31, 2011		$	420,931			$	5,823,005			$	6,243,936
Distributions			-				(264,271	)			(264,271	)
Net Income			648				64,141				64,789
Balance as of March 31, 2012		$	421,579			$	5,622,875			$	6,044,454

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		THREE MONTHS ENDED
		March 31,2012				March 31,2011
Cash Flows From Operating Activities:
Net Income		$	64,789			$	14,766
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation			394,328				378,459
Amortization			6,938				6,938
Increase in Manufactured Homes and Home Improvements			(300,417	)			(200,534	)
Increase In Other Assets			(21,513	)			(139,273	)
Decrease In Accounts Payable			(90,868	)			(23,159	)
Increase In Other Liabilities			74,463				157,560
Total Adjustments			62,931				179,991
Net Cash Provided By Operating Activities			127,720				194,757
Cash Flows From Investing Activities:
Redemption of Investments			0				1,423,003
Purchase of property and equipment			(15,000	)			(10,092	)
Net Cash (Used In) Provided By Investing Activities			(15,000	)			1,412,911
Cash Flows Used In Financing Activities:
Distributions To Unit Holders			(264,271	)			(264,271	)
Payments On Mortgage			(113,735	)			(106,464	)
Net Cash (Used In) Provided By Financing Activities			(378,006	)			(370,735	)
(Decrease) Increase In Cash			(265,286	)			1,236,933
Cash, Beginning			6,239,427				5,671,854
Cash, Ending		$	5,974,141			$	6,908,787

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

NOTES TO FINANCIAL STATEMENTS

March 31, 2012 (Unaudited)

 

1.

Basis of Presentation:

 

The accompanying unaudited 2012 financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012, or for any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership’s Form 10-K for the year ended December 31, 2011.

 

We have evaluated subsequent events through the date of this filing. We do not believe there are any material subsequent events which would require further disclosure.

 

2.

Mortgage Payable:

 

On August 29, 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes is accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lender’s then prevailing market rate. As of March 31, 2012, the balance on these notes was $21,791,629.

 

The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the mortgage of 25 years. This included a 1% fee payable to an affiliate of the General Partner.

 

Future maturities on the note payable for the next five years and thereafter are as follows: remainder of 2012 - $352,697; 2013 - $498,289; 2014 - $532,321; 2015 - $568,678; 2016 - $607,519; and thereafter - $19,232,125.

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Critical Accounting Policies

 

See Part II, Item 7 – Critical Accounting Policies, our consolidated financial statements and related notes in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 9, 2012 for accounting policies and related estimates we believe are the most critical to understanding condensed consolidated financial statements, financial conditions and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

 

Liquidity and Capital Resources

 

Partnership liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. All of the properties have been owned by the Partnership for more than ten years. The General Partner may elect to have the Partnership own the properties for as long as, in the opinion of the General Partner, it is in the best interest of the Partnership to do so.

 

The Partnership's capital resources consist primarily of its seven manufactured home communities. On August 29, 2008, the Partnership refinanced these properties with Stancorp Mortgage Investors, LLC (the “Refinancing”) in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes are accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lenders then prevailing market rate. As of March 31, 2012 the balance on these notes was $21,791,629.

 

The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the loan. This included a 1% fee payable to an affiliate of the General Partner.

 

As a result of the Refinancing, all of the Partnership’s seven properties are mortgaged. At the time of the Refinancing, the aggregate principal amount due under the seven mortgage notes was $23,225,000 and the aggregate fair market value of the Partnership’s mortgaged properties was $73,550,000. The Partnership expects to meet its short-term liquidity needs generally through its working capital provided by operating activities.

 

The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the first quarter ended March 31, 2012. The General Partner will continue to monitor cash flow generated by the Partnership’s seven properties during the coming quarters. If cash flow generated is greater or lesser than the amount needed to maintain the current distribution level, the General Partner may elect to reduce or increase the level of future distributions paid to Unit Holders.

 

 

As of March 31, 2012, the Partnership’s cash balance amounted to $5,974,141. The level of cash balance maintained is at the discretion of the General Partner.

 

Results of Operations

 

Overall, as illustrated in the following table, the Partnership's seven properties reported combined occupancy of 48% at the end of March 2012, versus 50% at the end of March 2011. The average monthly homesite rent as of March 31, 2012 was approximately $505 versus $492 from March 2011 (average rent not a weighted average).

 

		Total Capacity				Occupied Sites				Occupancy Rate				Average* Rent
Ardmor Village			339				149				44	%		$	524
Camelot Manor			335				100				30	%			417
Dutch Hills			278				109				39	%			420
El Adobe			367				193				53	%			535
Stonegate Manor			308				109				35	%			410
Sunshine Village			356				223				63	%			627
West Valley			421				303				72	%			603
Total on 3/31/12:			2,404				1,186				48	%		$	505
Total on 3/31/11:			2,404				1,229				50	%		$	492

*Not a weighted average

 

		Gross Revenue								Net Operating Income and Net Income
		3/31/2012				3/31/2011				3/31/2012				3/31/2011
		three months ended								three months ended
Ardmor		$	254,814			$	249,117			$	114,024			$	130,373
Camelot Manor			137,564				146,706				34,148				23,002
Dutch Hills			150,006				141,456				43,291				42,301
El Adobe			300,073				290,555				160,596				166,207
Stonegate			174,779				149,355				37,077				42,142
Sunshine			437,967				437,208				226,032				200,612
West Valley			579,499				564,024				410,066				394,112
			2,034,702				1,978,421				1,025,234				998,749
Partnership Management			20,402				4,376				(164,364	)			(205,312	)
Other Expense			—				—				(33,261	)			(24,408	)
Interest Expense			—				—				(368,492	)			(375,804	)
Depreciation			—				—				(394,328	)			(378,459	)
		$	2,055,104			$	1,982,797			$	64,789			$	14,766

 

 

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 Quarter Ended March 31, 2012 to Quarter Ended March 31, 2011

 

Gross revenues increased $72,307 to $2,055,104 in 2012, from $1,982,797 in 2011. This was due to increased rental and other income as a result of an increase in market rent values and lease home income.

 

As described in the Statements of Operations, total operating expenses increased $22,284, to $1,990,315 in 2011, as compared to $1,968,031 in 2011. This was a result of an increase in property operations expenses, mainly due to repair and maintenance expenses during 2012.

 

As a result of the aforementioned factors, the Partnership experienced Net Income of $64,789 for the first quarter of 2012 compared to Net Income of $14,766 for the first quarter of 2011.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

 

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

 

Note Payable: At March 31, 2012 the Partnership had notes payable outstanding in the amount of $21,791,629. Interest on these notes is at a fixed annual rate of 6.625% through September 2013, at which time, the rate will reset to the lender’s then prevailing market rate.

 

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

 

ITEM 4.

CONTROLS AND PROCEDURES

 

As of the end of the period covered by this report, the Partnership carried out an evaluation, under the supervision and with the participation of the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the quarterly report is recorded, processed, summarized and reported as and when required.

 

 

There was no change in the Partnership’s internal controls over financial reporting that occurred during the most recent completed quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

None.

 

ITEM 1A.

RISK FACTORS

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or operating results.

 

ITEM 6.

 

		EXHIBITS
Exhibit 31.1		Principal Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended
Exhibit 31.2		Principal Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended
Exhibit 32.1		Certifications pursuant to 18 U.S C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes –Oxley Act of 2002.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Uniprop Manufactured Housing Communities
	Income Fund II, a Michigan Limited Partnership
	BY:	Genesis Associates Limited Partnership,
		General Partner
		BY:	Uniprop, Inc.,
			its Managing General Partner
			By:	/s/ Roger I. Zlotoff
				Roger I. Zlotoff, President
			By:	/s/ Susann Szepytowski
				Susann Szepytowski, Principal Financial Officer

 

Dated: May 15, 2012