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EXCEL - IDEA: XBRL DOCUMENT - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v377896_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v377896_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/v377896_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarter Ended March 31, 2014

 

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

 

Commission File No. 0-16701

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

a Michigan Limited Partnership

(Exact name of registrant as specified in its charter)

 

MICHIGAN

(State or other jurisdiction of

incorporation or organization)

 

38-2702802

(I.R.S. employer

identification number)

 

280 Daines Street, Birmingham, Michigan 48009

(Address of principal executive offices) (Zip Code)

 

(248) 645-9220

(Registrant's telephone number, including area code)

 

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

units of beneficial assignments of limited partnership interest

 

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

Yes x   No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨   No ¨

 

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

 

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

 

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

 

As of March 31, 2014, the number of units of limited partnership interest of the registrant outstanding was 3,303,387.  The Partnership units of interest are not traded in any public market.

 

 
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

INDEX

 

    Page
     
PART I FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS  
     
  Balance Sheets March 31, 2014 (Unaudited) and December 31, 2013  3
     
  Statements of Operations Three months ended March 31, 2014 and 2013 (Unaudited)  4
     
  Statement of Partners’ Equity Three months ended March 31, 2014 (Unaudited) 4
     
  Statements of Cash Flows Three months ended March 31, 2014 and 2013 (Unaudited)  5
     
  Notes to Financial Statements March 31, 2014 (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 10
     
ITEM 4.        CONTROLS AND PROCEDURES 10
     
PART II OTHER INFORMATION 11
     
ITEM 1. LEGAL PROCEEDINGS 11
     
ITEM 1A. RISK FACTORS 11
     
ITEM 6. EXHIBITS 12

 

 
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

ASSETS  March 31,2014   December 31, 2013 
    (Unaudited)      
Properties:          
Buildings And Improvements  $42,434,357   $42,431,157 
Land   8,952,937    8,952,937 
Furniture And Equipment   684,177    678,866 
    52,071,471    52,062,960 
           
  Less Accumulated Depreciation   (36,159,640)   (35,774,653)
           
Net Property and Equipment   15,911,831    16,288,307 
           
Cash And Cash Equivalents   8,425,124    8,584,140 
Manufactured Homes and Improvements   4,125,108   4,075,639 
Unamortized Finance Costs   991,649    1,013,113 
Deferred Home Relocation Costs   537,703    605,239 
Other Assets   1,157,646    841,522 
Total Assets  $31,149,061   $31,407,960 

 

LIABILITIES & PARTNERS' EQUITY  March 31,2014   December 31, 2013 
   (Unaudited)     
         
Accounts Payable  $89,547   $52,932 
Other Liabilities   644,571    522,009 
Notes Payable   28,505,621    28,674,370 
           
Total Liabilities  $29,239,739   $29,249,311 
           
Partners’ Equity:          
General Partner   419,207    419,057 
Unit Holders   1,490,115    1,739,592 
           
Total Partners’ Equity   1,909,322    2,158,649 
           
Total Liabilities And          
 Partners’ Equity  $31,149,061   $31,407,960 

 

 See Notes to Financial Statements

 

3
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

 

STATEMENTS OF OPERATIONS  THREE MONTHS ENDED 
(Unaudited)  March 31, 2014   March 31, 2013 
         
Income:          
Rental Income  $1,793,963   $1,735,269 
Home Sale Income   139,455    40,404 
Other   229,546    215,999 
           
Total Income   2,162,964    1,991,672 
           
Operating Expenses:          
Administrative Expenses (Including $103,990 and $98,541, in Property Management Fees Paid to an Affiliate for the Three Month Period Ended March 31, 2014 and 2013, respectively)   684,986    642,580 
Property Taxes   190,347    206,898 
Utilities   153,868    154,170 
Property Operations   210,972    198,016 
Depreciation   414,987    428,979 
Interest   383,090    360,681 
Home Sale Expense   109,770    48,360 
           
Total Operating Expenses   2,148,020    2,039,684 
           
Net Income (Loss)  $14,944   ($48,012)
           
Net Income (Loss) per Limited Partnership Unit  $0.00   ($0.01)
           
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, 2014 and 2013   3,303,387    3,303,387 

 

STATEMENT OF PARTNERS’ EQUITY (Unaudited)

   General Partner   Unit Holders   Total 
             
Balance, December 31, 2013  $419,057   $1,739,592   $2,158,649 
Distributions   -    (264,271)   (264,271)
Net Income   150    14,794    14,944 
                
Balance as of March 31, 2014  $419,207   $1,490,115   $1,909,322 

 

  See Notes to Financial Statements

 

4
 

  

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

(Unaudited) 

   THREE MONTHS ENDED 
   March 31, 2014   March 31, 2013 
         
Cash Flows From Operating Activities:          
Net Income (Loss)  $14,944   ($48,012)
           
Adjustments To Reconcile Net Income (Loss)          
To Net Cash Provided By          
Operating Activities:          
Depreciation   414,987    428,979 
Amortization of Financing Costs   21,464    6,938 
Amortization of Home Relocation Costs   69,036    34,241 
Payment of Home Relocation Costs   (1,500)   (463,618)
Increase in Manufactured Homes and Home Improvements   (79,469)   (141,211)
(Increase) Decrease In Other Assets   (316,124)   28,125 
Increase In Accounts Payable   36,616    96,969 
Increase In Other Liabilities   122,562    29,726 
           
Total Adjustments   267,572    20,149 
           
Net Cash Provided By (Used In) Operating Activities   282,516    (27,863)
           
Cash Flows Used In Investing Activities:          
Purchase of property and equipment   (8,512)   (7,355)
           
Net Cash Used In Investing Activities   (8,512)   (7,355)
           
Cash Flows Used In Financing Activities:          
Distributions To Unit Holders   (264,271)   (264,271)
Payments On Notes Payable   (168,749)   (121,503)
           
Net Cash Used In Financing Activities   (433,020)   (385,774)
           
Decrease In Cash   (159,016)   (420,992)
Cash, Beginning   8,584,140    5,117,789 
           
Cash, Ending  $8,425,124   $4,696,797 

 

See Notes to Financial Statements

 

5
 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

 

NOTES TO FINANCIAL STATEMENTS

March 31, 2014 (Unaudited)

 

1. Basis of Presentation and Accounting Policies:

 

The accompanying unaudited 2014 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, 2013 has been derived from the audited financial statements at that date. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014, 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, 2013.

 

During the fourth quarter of 2012, Management initiated the Sunshine Village Paid Home Relocation Program (“Program”). The Program was offered exclusively to residents of Seminole Estates, a 704 site, 55 and over manufactured home community in Hollywood, Florida that announced its closure. The Program expired in the first quarter of 2013. As of March 31, 2014, all 41 residents have successfully relocated. The Partnership has incurred expenditures of $903,232, of which $816,203 has been capitalized and is being amortized as a reduction of rental revenue over the life of the residents’ three year rental period. The Program is completed and Management estimates no additional relocation costs will be incurred. At March 31, 2014, $537,703 remains unamortized.

 

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:

 

During 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable with StanCorp Mortgage Investors LLC (“StanCorp”) in the 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. These mortgages were payable in monthly installments of interest and principal through September 2033. The Partnership incurred $693,798 in financing costs as a result of the 2008 refinancing which was being amortized over the original term of the loans. These costs included a 1% fee payable to an affiliate of the General Partner. Unamortized finance costs of $179,395 related to the refinanced mortgage notes payable were written off in 2013 as a result of the refinancing discussed below.

 

6
 

On July 18, 2013, the Partnership refinanced two of the existing mortgage notes payable and executed two new mortgage notes payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, Florida and West Valley, located in Las Vegas, Nevada with a new lender, namely Cantor Commercial Real Estate. The mortgages are payable in monthly installments of interest and principal through August, 2023. These refinanced notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of March 31, 2014 the balance on these notes was $19,098,873.

 

The Partnership incurred $676,321 in financing costs as a result of the 2013 refinancing which is being amortized over the life of the loans. This included a 1% fee payable to Uniprop AM LLC, an affiliate of the General Partner. Unamortized finance costs of $179,395 related to the refinanced mortgage notes payable were written off in 2013 as a result of the refinancing and reflected in amortization expense. Additionally, the Partnership incurred a fee with StanCorp totaling $72,020 related to the refinancing, which was reflected as part of interest expense on the statement operations for the year ending December 31, 2013.

 

Effective September 1, 2013, the available interest rate re-set option was accepted on the five remaining mortgage notes with StanCorp. The new rate on these five notes is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of March 31, 2014 the balance on these five notes was $9,406,748.

 

Future maturities on the notes payable for the next five years and thereafter are as follows: 2014 - $505,661; 2015 - $709,585; 2016 - $744,498; 2017 - $785,396; 2018 - $826,361 and thereafter - $24,934,120.

  

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, 2013 filed with the SEC on March 14, 2014 for accounting policies and related estimates we believe are the most critical to understanding condensed consolidated financial statements, financial conditions and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

 

Liquidity and Capital Resources

 

Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership’s (the “Partnership”) liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. 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.

 

7
 

 

The Partnership expects to meet its short-term liquidity needs generally through its working capital and cash provided by operating activities.

 

The Partnership's capital resources consist primarily of its seven manufactured home communities. As described in Note 2, the Partnership refinanced its existing mortgage note payable and executed seven new mortgage notes 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 in August, 2008. 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 were payable in monthly installments of interest and principal through September 2033. The Partnership incurred $693,798 in financing costs as a result of the 2008 refinancing which were being amortized over the term of the loans. These costs included a 1% fee payable to an affiliate of the General Partner. Unamortized finance costs of $179,375 were written off during 2013 as a result of the refinancing discussed below.

 

On July 18, 2013, the Partnership refinanced two of the existing mortgage notes payable and executed two new mortgages payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, FL and West Valley, located in Las Vegas, NV with a new lender, namely Cantor Commercial Real Estate. The mortgage notes are payable in monthly installments of interest and principal through August, 2023. The refinanced notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of March 31, 2014 the balance on these notes was $19,098,873.

 

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

 

Net closing proceeds after deducting the payoff of the prior mortgages of $11,383,289 and the payment of closing costs and fees to third parties of $665,193 were $7,271,518. The net loan proceeds have been added to cash reserves of the Partnership.

 

Effective September 1, 2013, the interest rate re-set option was accepted on the five remaining notes with StanCorp. The new rate on these five notes is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of March 31, 2014 the balance on these notes was $9,406,748.

 

The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the first quarter ended March 31, 2014. 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, 2014, the Partnership’s cash balance amounted to $8,425,124. The level of cash balance maintained is at the discretion of the General Partner.

 

8
 

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 2014, versus 47% at the end of March 2013. The average monthly homesite rent as of March 31, 2014 was approximately $523 versus $514 from March 2013 (average rent not a weighted average).

  

   Total  Occupied  Occupancy  Average*
   Capacity  Sites  Rate  Rent
Ardmor Village  339  147  43%  $554
Camelot Manor  335  111  33%  424
Dutch Hills  278  105  38%  428
El Adobe  367  168  46%  561
Stonegate Manor  308  98  32%  418
Sunshine Village  356  255  72%  643
West Valley  421  298  71%  636
             
Total on 3/31/14:  2,404  1,182  48%  $523
Total on 3/31/13:  2,404  1,174  47%  $514

 *Not a weighted average

  

   Gross Revenue   Net Operating Income  and
Net Income (Loss)
 
   3/31/2014   3/31/2013   3/31/2014   3/31/2013 
   three months ended   three months ended 
                 
Ardmor  $249,559   $229,117   $110,332   $96,620 
Camelot Manor   223,956    176,958    89,641    42,176 
Dutch Hills   163,480    170,986    57,766    54,120 
El Adobe   244,847    255,390    85,197    117,527 
Stonegate   171,463    164,678    44,121    69,593 
Sunshine   509,070    420,043    217,576    188,814 
West Valley   596,061    571,526    426,649    406,331 
    2,158,436    1,988,698    1,031,282    975,181 
                     
Partnership Management   4,528    2,974    (149,496)   (160,530)
Other Expense   --    --    (68,765)   (73,003)
                     
Interest Expense   --    --    (383,090)   (360,681)
                     
Depreciation   --    --    (414,987)   (428,979)
   $2,162,964   $1,991,672   $14,944   ($48,012)

 

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.

 

9
 

 

Comparison of Quarter Ended March 31, 2014 to Quarter Ended March 31, 2013

 

Net revenues increased $171,292 to $2,162,964 in 2014, from $1,991,672 in 2013. This was due to increased rental income as a result of the increased occupancy at Sunshine Village related to the success of the relocation program. There were also increases in home sale income and other income, specifically lease home income.

 

As described in the Statements of Operations, total operating expenses increased $108,336, to $2,148,020 in 2014, as compared to $2,039,684 in 2013. This was the result of increases in administrative and home sale expenses.

 

As a result of the aforementioned factors, the Partnership experienced Net Income of $14,944 for the first quarter of 2014 compared to a Net Loss of $48,012 for the first quarter of 2013.

  

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.

 

Notes Payable: At March 31, 2014 the Partnership had notes payable outstanding in the amount of $28,505,621. Interest on two of these notes is at a fixed annual rate of 5.09% through August 2023. Interest on the five remaining notes is at a fixed rate of 5.00% through August 2018, at which time a rate reset option is available.

 

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

  

ITEM 4. CONTROLS AND PROCEDURES

 

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

 

10
 

 

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, 2013, 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.

 

 

11
 

 

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.

 

 

12
 

 

 

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 Kehrig
        Susann Kehrig, Principal Financial Officer

 

Dated: May 13, 2014

 

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