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 June 30, 2015

¨ 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

 

As of June 30, 2015, 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 June 30, 2015 (Unaudited) and December 31, 2014		3
	Statements of Operations Six and Three months ended June 30, 2015 and 2014 (Unaudited)		4
	Statement of Partners’ Equity Six months ended June 30, 2015 (Unaudited)		5
	Statements of Cash Flows Six months ended June 30, 2015 and 2014 (Unaudited)		6
	Notes to Financial Statements June 30, 2015 (Unaudited)		7
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		9
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		13
ITEM 4.	CONTROLS AND PROCEDURES		13
PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		14
ITEM 1A.	RISK FACTORS		15
ITEM 6.	EXHIBITS		15

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

BALANCE SHEETS

 

ASSETS		June 30,2015				December 31, 2014
		(Unaudited)
Properties:
Land		$	4,661,946			$	4,661,946
Buildings And Improvements			22,218,906				22,199,759
Furniture And Equipment			343,996				343,996
Manufactured Homes and Improvements			2,620,326				2,350,758
			29,845,174				29,556,459
Less Accumulated Depreciation			(20,104,267	)			(19,629,412	)
			9,740,907				9,927,047
Cash And Cash Equivalents			7,064,660				7,383,116
Unamortized Finance Costs			884,326				927,256
Deferred Home Relocation Costs			192,494				330,595
Other Assets			1,065,175				635,326
Assets Held for Sale			10,427,046				10,472,850
Total Assets		$	29,374,608			$	29,676,190

 

LIABILITIES & PARTNERS' EQUITY		June 30,2015				December 31, 2014
		(Unaudited)
Accounts Payable		$	66,642			$	27,056
Other Liabilities			478,502				339,417
Notes Payable			21,228,861				21,473,993
Liabilities of Assets Held for Sale			6,939,454				6,841,887
Total Liabilities			28,713,459				28,682,353
Partners' Equity:
General Partner			419,939				417,980
Unit Holders			241,210				575,857
Total Partners' Equity			661,149				993,837
Total Liabilities And
Partners' Equity		$	29,374,608			$	29,676,190

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF OPERATIONS		SIX MONTHS ENDED								THREE MONTHS ENDED
(unaudited)		June 30, 2015				June 30, 2014				June 30, 2015				June 30, 2014
Income:
Rental Income		$	2,414,221			$	2,361,001			$	1,201,201			$	1,177,040
Home Sale Income			5,112				76,838				5,107				2,001
Other			263,801				217,737				115,407				117,315
Total Income			2,683,134				2,655,576				1,321,715				1,296,356
Operating Expenses:
Administrative Expenses
(Including $218,463, $207,493, $107,778 and $103,990, in Property Management Fees Paid to an Affiliate for the Six and Three Month Period Ended June 30, 2015 and 2014, respectively)			921,313				857,850				469,983				426,427
Property Taxes			207,600				233,400				103,800				116,700
Utilities			151,369				131,567				75,410				65,323
Property Operations			246,161				290,472				108,902				162,639
Depreciation			474,855				469,025				237,427				234,132
Interest			587,781				599,932				294,420				300,562
Home Sale Expense			2,000				69,194				2,000				4,576
Total Operating Expenses			2,591,079				2,651,440				1,291,942				1,310,359
Income from Continuing Operations		$	92,055			$	4,136			$	29,773			$	(14,003	)
Income (Loss) from Discontinued Operations		$	103,799			$	(95,886	)		$	4,755			$	(92,691	)
Net Income		$	195,854			$	(91,750	)		$	34,528			$	(106,694	)
Income Per Unit:
Continuing Operations		$	0.03			$	0.00			$	0.01			$	0.00
Discontinued Operations		$	0.03			$	(0.03	)		$	0.00			$	(0.03	)
Total Income Per Unit		$	0.06			$	(0.03	)		$	0.01			$	(0.03	)
Distribution Per Unit:		$	0.16			$	0.16			$	0.08			$	0.08
Weighted Average Number Of Units Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Six and Three Month Period Ended June 30, 2015 and 2014.			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, 2014		$	417,980			$	575,857			$	993,837
Distributions			0				(528,542	)			(528,542	)
Net Income			1,959				193,895				195,854
Balance as of June 30, 2015		$	419,939			$	241,210			$	661,149

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

STATEMENTS OF CASH FLOWS

(Unaudited)

		SIX MONTHS ENDED
		June 30,2015				June 30,2014
Cash Flows From Operating Activities:
Net Income		$	195,854			$	(91,750	)
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation			733,999				829,062
Amortization of Financing Costs			42,929				42,929
Amortization of Home Relocation Costs			138,101				138,072
Payment of Home Relocation Costs			0				(1,500	)
Gain on Sale of Manufactured Homes			18,067				23,852
Increase In Other Assets			(471,882	)			(556,985	)
Increase In Accounts Payable			119,114				95,734
Increase In Other Liabilities			263,596				231,083
Total Adjustments			843,924				802,247
Net Cash Provided By (Used In) Operating Activities			1,039,778				710,497
Cash Flows Used In Investing Activities:
Investment in Manufactured Homes and Improvements			(492,748	)			(549,850	)
Purchase of Property and Equipment			(19,147	)			(94,860	)
Proceeds from Sale of Manufactured Homes			46,276				211,928
Net Cash Used In Investing Activities			(465,619	)			(432,782	)
Cash Flows Used In Financing Activities:
Distributions To Unit Holders			(528,542	)			(528,542	)
Payments On Notes Payable			(351,604	)			(334,267	)
Net Cash Used In Financing Activities			(880,146	)			(862,809	)
Decrease In Cash			(305,987	)			(585,094	)
Cash, Beginning			7,317,400				8,584,140
Cash, Ending		$	7,011,413			$	7,999,046

 

See Notes to Financial Statements

 

 

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,

A MICHIGAN LIMITED PARTNERSHIP

 

NOTES TO FINANCIAL STATEMENTS

June 30, 2015 (Unaudited)

 

1.

Basis of Presentation and Accounting Policies:

 

The accompanying unaudited 2015 financial statements of Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership (the “Partnership”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, 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, 2014.

 

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. By the end of the first quarter of 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 June 30, 2015, $192,495 remains unamortized.

 

The carrying amounts of cash and accounts payable approximate their fair values due to their short-term nature. The fair value of mortgage notes payable approximates their carrying amounts based on current borrowing rates.

 

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:

 

The Partnership has two mortgage notes payable with Cantor Commercial Real Estate collateralized by Sunshine Village, located in Davie, Florida and West Valley, located in Las Vegas, Nevada. 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 June 30, 2015 the balance on these notes was $18,609,493.

 

 

The Partnership also has five mortgage notes payable with StanCorp Mortgage Investors LLC (“StanCorp”) collateralized by the five remaining properties of the Partnership. These mortgages are payable in monthly installments of interest and principal through September 2033. 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 2018. As of June 30, 2015 the balance on these five notes was $9,038,863, of which $6,419,495 is classified as liabilities of assets held for sale.

 

Future maturities on the notes payable for the next five years and thereafter are as follows: 2015 - $357,981; 2016 - $744,498; 2017 - $785,396; 2018 - $826,361; 2019 - $869,465 and thereafter - $24,064,655.

 

3.

Asset Held for Sale:

 

A long-lived asset is required to be classified as “held for sale” in the period in which certain criteria are met. The Partnership classifies real estate assets as held for sale after the following conditions have been satisfied: (1) management, having the appropriate authority, commits to a plan to sell the asset, (2) the initiation of an active program to sell the asset, and (3) the asset is available for immediate sale and it is probable that the sale of the asset will be completed within one year.

 

During March 2015, the Board of Directors and Consultant approved a sale of the El Adobe Community located in Las Vegas, Nevada. As described in Form 8-K dated April 8, 2015, the Partnership has entered into a Contract for Sale and Purchase of Real and Personal Property with a potential buyer for the sale of El Adobe, with an expected closing date in June 2015.

 

As described in the Form 8-K dated June 8, 2015, this buyer terminated the contract prior to the expiration of the investigation period. The Fund has entered into a new Contract for Sale and Purchase of Real and Personal Property with another buyer for the sale of El Adobe, with an expected closing date in third quarter 2015.

 

As described in the Form 8-K dated June 23, 2015, the Partnership has entered into a Contract for Sale and Purchase of Real and Personal Property with a potential buyer for the sale of Camelot Manor, Dutch Hills and Stonegate, all communities which are located in Michigan, with an expected closing date in late August 2015.

 

Based on the information outlined, the Partnership has concluded that these properties meet the criteria as an asset held for sale on the accompanying Balance Sheets. Similarly, the communities and associated financial results are classified as “discontinued operations” on the accompanying Statements of Operations.

 

The assets and liabilities related to the communities classified as “assets held for sale” as of June 30, 2015 are as follows: Total Assets of $10,427,046 consist of Current Assets of $313,083 and Fixed Assets of $28,387,466 less Accumulated Depreciation of $18,273,503. Total Liabilities of $6,939,454 consist of Current Liabilities of $519,959 and Long Term Liabilities of $6,419,495.

 

The assets and liabilities related to the “assets held for sale” as of December 31, 2014 are as follows: Total Assets of $10,472,850 consist of Current Assets of $258,581 and Fixed Assets of $28,228,628 less Accumulated Depreciation of $18,014,359. Total Liabilities of $6,841,887 consist of Current Liabilities of $315,920 and Long Term Liabilities of $6,525.967.

 

 

The following is a summary of results of operations of the properties classified as “discontinued operations” for the six month periods ended June 30, 2015 and 2014: Total Revenue was $1,620,393 and Total Operating Expenses were $1,516,594 for the period ended June 30, 2015. For the same period in 2014, Total Revenue was $1,604,190 and Total Operating Expenses were $1,700,076.

 

The following is a summary of results of operations of the properties classified as “discontinued operations” for the three months periods ended June 30, 2015 and 2014: Total Revenue was $803,002 and Total Operating Expenses were $798,247 for the period ended June 30, 2015. For the same period in 2014, Total Revenue was $800,446 and Total Operating Expenses were $893,137.

 

Total Cash Flows provided by Operating Activities of the properties classified as “discontinued operations” for the periods ended June 30, 2015 and 2014 were $539,904 and $322,902. In addition, Total Cash Flows used in Investing Activities of the properties classified as “discontinued operations” for the periods ended June 30, 2015 and 2014 were $0, and $3,200, respectively.

 

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, 2014 filed with the SEC on March 17, 2015 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.

 

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. 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.

 

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 June 30, 2015 the balance on these notes was $18,609,493.

 

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.

 

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 June 30, 2015 the balance on these notes was $9,038,863.

 

On April 7, 2015, the Partnership entered, into a Contract for Sale and Purchase of Real and Personal Property with Casa Feliz LLC for the sale of El Adobe, one of the Fund’s communities located in Las Vegas, Nevada. As allowed under the contract, Casa Feliz LLC terminated the contract prior to the expiration of the investigation period. Casa Feliz LLC has no further obligations of any kind to the Fund and has satisfied all the conditions for return of the earnest money deposit.

 

On June 8, 2015, the Fund entered into a new Contract for Sale and Purchase of Real and Personal Property with Lakeshore Communities Inc. for the sale of El Adobe for a selling price of $7,050,000, and a proposed closing date in the third quarter, 2015. Net cash proceeds from the sale upon closing are estimated to be approximately $2,500,000.

 

On June 22, 2015, the Fund entered into a Contract for Sale and Purchase of Real and Personal Property with Meritus Communities, LLC for the sale of Camelot Manor, Dutch Hills and Stonegate, all communities which are located in Michigan for an unsolicited selling price of $14,200,000, following an affirmative recommendation from the Consultant and approval of the Board of Directors. A proposed closing date is expected in late August 2015. Net cash proceeds from the sale upon closing are estimated to be approximately $9,500,000.

 

While the Fund’s management believes that these buyers are financially capable of completing the proposed transactions and fully intends to consummate the purchases, there can be no assurance that the closings will occur.

 

The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the second quarter ended June 30, 2015. 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 June 30, 2015, the Partnership’s cash balance amounted to $7,011,413. 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 June 2015 versus 48% at the end of June 2014. The average monthly homesite rent as of June 30, 2015 was approximately $534; versus $523 from June 2014 (average rent not a weighted average). 

 

		Total				Occupied				Occupancy				Average*
		Capacity				Sites				Rate				Rent
Ardmor Village			339				147				43	%		$	568
Camelot Manor			335				111				33	%			433
Dutch Hills			278				107				38	%			428
El Adobe			367				164				45	%			574
Stonegate Manor			308				104				33	%			418
Sunshine Village			356				255				71	%			665
West Valley			421				290				72	%			654
Total on 6/30/15:			2,404				1,178				48	%		$	534
Total on 6/30/14:			2,404				1,182				48	%		$	523

 

*Not a weighted average

 

 

		Gross Revenue								Net Operating Income and Net Income (Loss)								Gross Revenue								Net Operating Income and Net (Loss)
		6/30/2015				6/30/2014				6/30/2015				6/30/2014				06/30/2015				06/30/2014				06/30/2015				06/30/2014
		three months ended								three months ended								six months ended								six months ended
Ardmor		$	265,678			$	254,122			$	133,562			$	113,282			$	541,207			$	503,681			$	271,582			$	223,614
Sunshine			452,342				432,249				205,499				198,491				936,495				941,319				451,695				416,067
West Valley			600,427				596,364				399,350				416,058				1,196,992				1,192,427				794,138				842,707
			1,318,447				1,282,735				738,411				727,831				2,674,694				2,637,427				1,517,415				1,482,388
Partnership Management			3,266				13,621				(171,699	)			(143,089	)			8,438				18,149				(316,645	)			(292,585	)
Other Expense			—				—				(5,092	)			(64,051	)			—				—				(46,079	)			(116,710	)
Interest Expense			—				—				(294,420	)			(300,562	)			—				—				(587,781	)			(599,932	)
Depreciation			—				—				(237,427	)			(234,132	)			—				—				(474,855	)			(469,025	)
Continuing Operations		$	1,321,713			$	1,296,356			$	29,773			$	(14,003	)		$	2,683,132			$	2,655,576			$	92,055			$	4,136
Discontinued Operations		$	803,002			$	800,446			$	4,755			$	(92,691	)		$	1,620,393			$	1,604,190			$	103,799			$	(95,886	)
		$	2,124,715			$	2,096,802			$	34,528			$	(106,694	)		$	4,303,525			$	4,259,766			$	195,854			$	(91,750	)

 

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 June 30, 2015 to Three Months Ended June 30, 2014

 

Gross revenues from continuing operations increased $25,359 to $1,321,715 in 2015, from $1,296,356 in 2014. This was due to an increase in market rent value from the prior year. Gross revenues from discontinued operations increased $2,556 to $803,002 in 2015 from $800,446 in 2014. This was mainly due to increases in rental and other income offset by a decrease in home sale income.

 

As described in the Statements of Operations, total operating expenses from continuing operations decreased $18,417, to $1,291,942 in 2015, as compared to $1,310,359 in 2014. This was mainly due to decreases in property tax, property operations, interest, and home sale expenses, offset by increases in administrative and utility expenses compared to the prior year. Total operating expenses from discontinued operations decreased $94,890 to $798,247 in 2015, as compared to $893,137 in 2014. This was mainly due to a decrease in home sale expense and the discontinuance of depreciation expense related to those properties classified as Assets Held for Sale.

 

As a result of the aforementioned factors, the Partnership experienced Net Income from continuing operations of $29,773 for the second quarter of 2015 compared to a Net Loss of $14,003 for the second quarter of 2014. Net Income from discontinued operations for the second quarter of 2015 was $4,755 compared to a Net Loss of $92,691 for the same period in 2014.

 

 

Comparison of Six Months Ended June 30, 2015 to Six Months Ended June 30, 2014

 

Gross revenues from continuing operations increased $27,558 to $2,683,134 in 2015, from $2,655,576 in 2014. This was mainly due to increases in rental income and other income, offset by a decrease in home sale income. Gross revenues from discontinued operations increased $16,203 to $1,620,393 in 2015, as compared to $1,604,190 in 2014. This was mainly due to increases in rental and other income, offset by a decrease in home sale income.

 

As described in the Statements of Operations, total operating expenses from continuing operations decreased $60,361 to $2,591,079 in 2015, as compared to $2,651,440 in 2014. This was mainly due to decreases in property tax, property operations, and interest and home sale expenses compared to the prior year. Total operating expenses from discontinued operations decreased $183,482 to $1,516,594 in 2015, as compared to $1,700,076 in 2014. This was mainly due to a decrease in home sale expense and the discontinuance of depreciation expense related to those properties classified as Assets Held for Sale.

 

As a result of the aforementioned factors, the Partnership experienced Net Income from continuing operations of $92,055 in 2015 as compared to Net Income of $4,136 in 2014. Net Income from discontinued operations was $103,799 compared to a Net Loss of $95,886 in 2014.

  

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 June 30, 2015 the Partnership had notes payable outstanding in the amount of $27,648,356. 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.

 

 

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

 

A hearing was held before Judge Stefany Miley on December 9, 2014 in the District Court of Clark County, Nevada. The Plaintiff is Uniprop Manufactured Housing Income Fund II on behalf of El Adobe, and the Defendant is the City of Las Vegas.

 

On March 6, 2015 the Court issued the following orders:

 

Court orders Defendant’s Motion for Summary Judgement GRANTED as to the dismissal of Plaintiff’s Equal Protection Claim and General Applicability Clause claim;

 

Court finds a genuine issue of material fact exists as to whether assessing a service fee on a capped sewer line with no occupant does qualify as a service fee;

 

Court orders Defendants Motion for Summary Judgment DENIED as to the dismissal of Plaintiff’s claim that the city’s sewer billing procedure conflicts with the City charter;

 

Court orders Plaintiff’s Motion for Summary Judgment DENIED as to the claim that the subject provisions of Section 14.04 of the City Code violate the Equal Protection Clause of the 14^th Amendment of the U. S. Constitution as applied to vacant sites in manufactured home communities;

 

Court orders Plaintiff’s Motion for Summary Judgment DENIED as to the claim that the subject provisions of Section 14.04 of the City Code violate the General Applicability Clause of Article 4, Section 21 of the Nevada State Constitution as applied to vacant sites in manufactured home communities.

 

Court orders the Plaintiff’s Motion for Summary Judgement DENIED as to the claim that the provisions of Section 14.04 of the City Code identified herein are invalid because they are not authorized by Section 2.290(3) of the Las Vegas city charter.

 

In summary, the Court denied three of the Plaintiff’s Motions for Summary Judgment, however, the Court found a “genuine issue of material facts exists as to whether assessing a service fee on a capped sewer line with no occupant does qualify as a service fee”, and denied the Defendant’s Motion for Summary Judgment on that issue.

 

We believe our claim still has merit and that the Court allowed us a narrow avenue to pursue a claim regarding a service fee on a vacant site for which Plaintiff has already paid a connection fee, and no service is provided. Clark County reclamation, which provides sewer treatment to West Valley, has already agreed to waive the service fee for West Valley; Clark County reclamation also provides the treatment services for the City of Las Vegas at El Adobe, but the City is the intermediary between El Adobe and Clark County Reclamation. We expect to have a trial in August of this year.

 

 

During the litigation, the City of Las Vegas has placed liens on El Adobe for unpaid sewer service fees. El Adobe has accrued those fees on its financial statements, and management has made arrangements to pay those fees in full, if necessary, in order to close on the sale of El Adobe pursuant to the Purchase and Sale Agreement with Lakeshore Communities Inc. Management also made provisions in the Purchase and Sale Agreement for El Adobe to deal with the costs and potential future benefits of the litigation in the event that a sale of the community closes before the outcome of the trial is known.

 

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, 2014, 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.

 

101.1NS

XBRL Instance Document

 

101.SCH

XBRL Taxonomy Extension Schema Document

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

101.DEF

XBRL Taxonomy Extension Definitions Linkbase Document

 

 

SIGNATURES

 

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

 

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

 

Dated: August 13, 2015