UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the Quarter Ended September 30, 2012

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

 

Commission File No. 0-16701

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

a Michigan Limited Partnership

(Exact name of registrant as specified in its charter)

 

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

 

280 Daines Street, Birmingham, Michigan 48009

(Address of principal executive offices) (Zip Code)

(248) 645-9220

(Registrant's telephone number, including area code)

 

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

units of beneficial assignments of limited partnership interest

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x    No ¨

 

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

 

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

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

 

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

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

INDEX

 

			Page
PART I		FINANCIAL INFORMATION
ITEM 1.		FINANCIAL STATEMENTS
		Balance Sheets September 30, 2012 (Unaudited) and December 31, 2011	3
		Statements of Operations Nine and Three months ended September 30, 2012 and 2011 (Unaudited)	4
		Statement of Partners’ Equity Nine months ended September 30, 2012 (Unaudited)	4
		Statements of Cash Flows Nine months ended September 30, 2012 and 2011 (Unaudited)	5
		Notes to Financial Statements September 30, 2012 (Unaudited)	6
ITEM 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	7
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
ITEM 4.		CONTROLS AND PROCEDURES	10
PART II		OTHER INFORMATION	10
ITEM 1.		LEGAL PROCEEDINGS	10
ITEM 1A.		RISK FACTORS	10
ITEM 6.		EXHIBITS	11

 

  

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

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

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

  

STATEMENTS OF OPERATIONS		NINE MONTHS ENDED								THREE MONTHS ENDED
(unaudited)		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Income:
Rental Income		$	5,425,966			$	5,410,713			$	1,801,379			$	1,812,536
Home Sale Income			206,185				66,199				58,464				5,800
Other			604,070				465,174				214,008				167,679
Total Income			6,236,221				5,942,086				2,073,851				1,986,015
Operating Expenses:
Administrative Expenses
(Including $298,011, $291,009, $99,454 and $98,099, in Property Management Fees Paid to an Affiliate for the Nine and Three Month Period Ended September 30, 2012 and 2011, respectively)			1,808,294				1,814,367				572,352				557,887
Property Taxes			678,885				687,135				233,448				229,026
Utilities			441,007				429,949				148,592				134,078
Property Operations			536,351				451,524				164,373				171,115
Depreciation			1,186,199				1,142,663				395,671				381,229
Interest			1,099,731				1,121,725				364,651				371,901
Home Sale Expense			217,258				85,353				71,569				13,555
Total Operating Expenses			5,967,725				5,732,716				1,950,656				1,858,791
Net Income		$	268,496			$	209,370			$	123,195			$	127,224
Income per Limited Partnership Unit:		$	0.08			$	0.06			$	0.04			$	0.04
Distribution Per Unit:		$	0.24			$	0.24			$	0.08			$	0.08
Weighted Average Number Of Units Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Nine and Three Month Period Ended September 30, 2012 and 2011.			3,303,387				3,303,387				3,303,387				3,303,387

 

STATEMENT OF PARTNERS' EQUITY (Unaudited)
		General Partner				Unit Holders				Total
Balance, December 31, 2011		$	420,931			$	5,823,005			$	6,243,936
Distributions			0				(792,813	)			(792,813	)
Net Income			2,685				265,811				268,496
Balance as of September 30, 2012		$	423,616			$	5,296,003			$	5,719,619

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

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

 

See Notes to Financial Statements

 

  

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2012 (Unaudited)

 

1.

Basis of Presentation:

 

The accompanying unaudited 2012 financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012, or for any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership’s Form 10-K for the year ended December 31, 2011.

 

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

 

2.

Mortgage Payable:

 

On August 29, 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes is accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lender’s then prevailing market rate. As of September 30, 2012 the balance on these notes was $21,558,445.

 

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

 

Future maturities on the note payable for the next five years and thereafter are as follows: remainder of 2012 - $119,513; 2013 - $498,289; 2014 - $532,321; 2015 - $568,678; 2016 - $607,519 and thereafter - $19,232,125.

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Critical Accounting Policies

 

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

 

Liquidity and Capital Resources

 

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

 

The Partnership's capital resources consist primarily of its seven manufactured home communities. On August 29, 2008, the Partnership refinanced these properties with Stancorp Mortgage Investors, LLC (the “Refinancing”) in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes are accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lenders then prevailing market rate. As of September 30, 2012 the balance on these notes was $21,558,445.

 

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

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

 

The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the third quarter ended September 30, 2012. The General Partner will continue to monitor cash flow generated by the Partnership’s seven properties during the coming quarters. If cash flow generated is greater or lesser than the amount needed to maintain the current distribution level, the General Partner may elect to reduce or increase the level of future distributions paid to Unit Holders.

 

 

As of September 30, 2012, the Partnership’s cash balance amounted to $5,241,760. The level of cash balance maintained is at the discretion of the General Partner.

 

Results of Operations

 

Overall, as illustrated in the following table, the Partnership's seven properties reported combined occupancy of 48% at the end of September 2012 versus 49% at the end of September 2011. The average monthly homesite rent as of September 30, 2012 was approximately $505; versus $493 from September 2011 (average rent not a weighted average).

 

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

*Not a weighted average

 

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

 

 

Net Operating Income (“NOI”) is a non-GAAP financial measure equal to net income, the most comparable GAAP financial measure, plus depreciation, interest expense, partnership management expense, and other expenses. The Partnership believes that NOI is useful to investors and the Partnership’s management as an indication of the Partnership’s ability to service debt and pay cash distributions. NOI presented by the Partnership may not be comparable to NOI reported by other companies that define NOI differently, and should not be considered as an alternative to net income as an indication of performance or to cash flows as a measure of liquidity or ability to make distributions.

 

Comparison of Three Months Ended September 30, 2012 to Three Month Ended September 30, 2011

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

 

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

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

 

 

Note Payable: At September 30, 2012 the Partnership had notes payable outstanding in the amount of $21,558,445. Interest on these notes is at a fixed annual rate of 6.625% through September 2013, at which time, the rate will reset to the lender’s then prevailing market rate.

 

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

 

ITEM 4.

CONTROLS AND PROCEDURES

 

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

 

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

 

PART II - OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

None.

 

ITEM 1A.

RISK FACTORS

 

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

 

 

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: November 07, 2012