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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998 Commission File No. 0-15940
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2593067
(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) 645-9261
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
$1,000 per unit, units 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 [ ]
As of March 1, 1999, 30,000 units of limited partnership interest of the
registrant were outstanding and the estimated aggregate market value of the
units as of such date (based on a 1999 appraisal of Partnership properties) held
by non-affiliates was approximately $16,393,514.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
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PART I
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund, a Michigan
Limited Partnership (the "Partnership"), acquired, maintains, operates and
ultimately will dispose of income producing residential real properties
consisting of four manufactured housing communities (the "Properties"). The
Partnership was organized and formed under the laws of the State of Michigan on
May 16, 1985. Its principal offices are located at 280 Daines Street,
Birmingham, Michigan 48009 and its telephone number is (248) 645-9261.
The Partnership filed an S-11 Registration Statement (Registration No.
2-98180) in June 1985 which was declared effective by the Securities and
Exchange Commission on September 24, 1985. The Partnership thereafter offered a
maximum of 30,000 units of limited partnership interest representing capital
contributions by the limited partners to the Partnership of $1,000 per unit (the
"Units"). The sale of all 30,000 Units was completed in March 1986, generating
$30 million of contributed capital to the Partnership.
On February 10, 1986, the Partnership acquired Aztec Estates, a
645-space manufactured housing community in Margate, Florida and Kings Manor, a
314-space manufactured housing community in Ft. Lauderdale, Florida. On March 4,
1986, the Partnership acquired Old Dutch Farms, a 293-space manufactured housing
community in Novi, Michigan. On March 27, 1986, the Partnership acquired The
Park of the Four Seasons, a 572-space manufactured housing community in Blaine,
Minnesota.
The Partnership operates the Properties as manufactured housing
communities with the primary investment objectives of: (1) obtaining net cash
from operations; (2) obtaining capital appreciation; and (3) preserving capital.
There can be no assurance that such objectives can be achieved.
On March 25, 1997 the Partnership borrowed $33,500,000 from Nomura
Asset Capital Corporation and secured the borrowing with liens on its
Properties. The interest rate on the financing is 8.24% and the term is 120
months. The loan is amortized over 360 months. On March 26, 1997 the Partnership
distributed $30,000,000 to the Limited Partners, representing a full return of
original capital contributions of $1,000 per unit held. The Partnership
continues to own and operate its properties and expects to be able to continue
to pay cash distributions to the Limited Partners, although in amounts
substantially lower than the distributions paid prior to the financing. Limited
Partners will continue to have an interest in the Partnership because their
original capital contributions have appreciated since their initial investments
were made and only the original capital contribution was returned on March 26,
1997.
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Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation
of its four manufactured housing communities. For a description of the
Partnership's revenues, operating profit and assets, please refer to Items 6
and 8.
Narrative Description of Business
General
The Properties were selected from 23 manufactured housing communities
then owned by affiliates of P.I. Associates Limited Partnership, a Michigan
limited partnership, the General Partner (the "General Partner") of the
Partnership. The Partnership rents space in the Properties to owners of
manufactured homes thereby generating rental revenues. It was intended that the
Partnership would hold the Properties for extended periods of time, originally
anticipated to be seven to ten years after their acquisition. The General
Partner has the discretion to determine when a Property is to be sold; provided,
however, that the determination of whether a particular Property should be
disposed of will be made by the General Partner only after consultation with
Manufactured Housing Services Inc. (the "Consultant"). In making their decisions
they will consider relevant factors, including, current operating results of the
particular Property, prevailing economic conditions and with a view to achieving
maximum capital appreciation to the Partnership considering relevant tax
consequences and the Partnership's investment objectives.
Competition
The business of owning and operating residential manufactured housing
communities is highly competitive, and the Partnership may be competing with a
number of established companies having greater financial resources. Moreover,
there has been a trend for manufactured housing community residents to purchase
(where zoning permits) their manufactured homesites on a collective basis. This
trend may result in increased competition with the Partnership for tenants. In
addition, the General Partner, its affiliates or both, have participated, and
may in the future participate, directly or through other partnerships or
investment vehicles in the acquisition, ownership, development, operation and
sale of projects which may be in direct competition with one or more of the
Properties.
Each of the Properties competes with numerous similar facilities
located in its geographic area. The Margate/Fort Lauderdale area contains
approximately seven communities offering approximately 2,713 housing sites
competing with Aztec Estates. The Davie/Fort Lauderdale area contains
approximately five communities offering approximately 1,765 housing sites
competing with Kings Manor. Old Dutch Farms competes with approximately seven
communities offering approximately 3,455 housing sites. Park of the Four Seasons
competes with approximately 11 communities offering approximately 3,207 housing
sites. The Properties also compete against other forms of housing, including
apartment and condominium complexes.
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Governmental Regulations
The Properties owned by the Partnership are subject to certain state
regulations regarding the conduct of the Partnership operations. For example,
the State of Florida regulates agreements and relationships between the
Partnership and the residents of Aztec Estates and Kings Manor. Under Florida
law, the Partnership is required to deliver to new residents of those Properties
a prospectus describing the Property and all tenant rights, Property rules and
regulations, and changes to Property rules and regulations. Florida law also
requires minimum lease terms, requires notice of rent increases, grants to
tenant associations certain rights to purchase the community if being sold by
the owner and regulates other aspects of the management of such properties. The
Partnership is required to give 90 days notice to the residents of Florida
properties of any rate increase, reduction in services or utilities or change in
rules and regulations. If a majority of the residents object to such changes as
unreasonable, the matter must be submitted to the Florida Department of Business
Regulations for mediation prior to any legal adjudication of the matter. In
addition, if the Partnership seeks to sell Florida Properties to the general
public, it must notify any homeowners association for the residents, and the
association shall have the right to purchase the Property for the price, terms
and conditions being offered to the public within 45 days of notification by the
owner. If the Partnership receives an unsolicited bona fide offer to purchase
the Property from any party that it is considering or negotiating, it must
notify any such homeowners association that it has received an offer, state to
the homeowners association the price, terms and conditions upon which the
Partnership would sell the Property, and consider (without obligation) accepting
an offer from the homeowners association. The Partnership has, to the best of
its knowledge, complied in all material respects with all requirements of the
States of Florida, Michigan and Minnesota, where its operations are conducted.
Employees
The Partnership employs three part-time employees to perform
Partnership management and investor relations' services. The Partnership retains
an affiliate, Uniprop, Inc., as the property manager for each of its Properties.
Uniprop, Inc. is paid a fee equal to the lesser of 5% of the annual gross
receipts from each of the Properties or the amount which would be payable to
unaffiliated third parties for comparable services. Uniprop, Inc. retains local
managers on behalf of the Partnership at each of the Properties. Salaries and
fringe benefits of such local managers are paid by the Partnership and are not
included in any property management fee payable to Uniprop, Inc. Local managers
are employees of the Partnership and are paid semi-monthly. The yearly salaries
and expenses for local managers range from $20,000 to $40,000. Local managers
have no direct management authority, make no decisions regarding operations and
act only in accordance with instructions from the property manager. They are
utilized by the Partnership to provide on-site maintenance and administrative
services. Uniprop, Inc., as property manager, has overall management authority
for each Property.
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ITEM 2. PROPERTIES
The Partnership purchased all four manufactured housing communities for
cash. As a result of the 1997 financing, the Properties are now encumbered with
mortgages.
Each of the Properties is a modern manufactured housing community
containing lighted and paved streets, side-by-side off-street parking and
complete underground utility systems. The Properties consist of only the
underlying real estate and improvements, not the actual homes themselves. Each
of the Properties has a community center which includes offices, meeting rooms
and game rooms. Each of the Properties, except Old Dutch Farms, has a swimming
pool and tennis courts.
The table below contains certain information concerning the
Partnership's four properties.
PROPERTY NAME YEAR NUMBER OF
------------- ---- ---------
AND LOCATION CONSTRUCTED ACREAGE SITES
------------ ----------- ------- -----
Aztec Estates
Sundial Circle
Margate, FL 1970 100 645
Kings Manor
State Road 84
& Flamingo Road
Ft. Lauderdale, FL 1972 45 314
Old Dutch Farms
Novi Road
Novi, MI 1972 47 293
Park of the Four
Seasons
University Avenue
Blaine, MN 1972 107 572
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Partnership and its legal counsel, there are no
material legal proceedings pending except such ordinary routine matters as are
incident to the kind of business conducted by the Partnership. To the knowledge
of the Partnership and its counsel, no legal proceedings have been instituted or
are being contemplated by any governmental authority against the Partnership.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the limited partners are restricted to certain
matters of fundamental significance to the Partnership. The Limited Partners
must approve certain major decisions of the General Partner if the General
Partner proposes to act without the approval of the Consultant. The Limited
Partners also have a right to vote upon removal and replacement of the General
Partner, dissolution of the Partnership, material amendments to the partnership
agreement and the sale or other disposition of all or substantially all of the
Partnership's assets, except in the ordinary course of the Partnership's
disposing of the Properties. Such matters must be approved by Limited Partners,
as a group, holding more than 50% of the then outstanding Units. No matters were
submitted to Limited Partners for vote during 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY
HOLDER MATTERS
There is no established public trading market for the Units and it is
not anticipated that one will ever develop. During the last two years, less than
four percent of the Units have been transferred each year, excluding transfers
on account of death or intra-family transfers. The Partnership believes there is
no secondary market, or the substantial equivalent thereof, and none will
develop.
The General Partner calculates the estimated net asset value of each
Unit by dividing the amount of distributions that would be made to the Limited
Partners in the event of the current sale of the Properties at their current
appraised value, less sales expenses (but without consideration to tax
consequences of the sale), by 30,000. In March 1999, the Properties were
appraised at an aggregate fair market value of $57,300,000. Assuming a sale of
the four properties at the appraised value in March 1999, less payment of 3.0%
selling expenses, mortgage debt of $33,119,108, the $1,970,000 Contingent
Purchase Price due to certain partners of the General Partner, and after the
80/20% split of sale or financing proceeds with the General Partner, the net
aggregate proceeds available for distribution to the Limited Partners is
estimated to be $16,393,514 or $546 per unit as of March 31, 1999. There can be
no assurance that the estimated net asset value could ever be realized. As of
March 31, 1999, the Partnership had approximately 2,650 limited partners holding
Units.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for Uniprop Manufactured
Housing Communities Income Fund, a Michigan Limited Partnership, for the periods
ended December 31, 1998, 1997, 1996, 1995 and 1994:
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<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $22,508,884 $ 23,052,433 $21,307,555 $21,822,565 $22,113,778
=========== ============ =========== =========== ===========
Income $ 8,451,561 $ 8,234,904 $ 7,751,358 $ 7,502,221 $ 7,321,328
Expenses (7,934,674) (7,175,119) (4,776,905) (4,513,031) (4,436,966)
---------- ------------ ----------- ----------- -----------
Net Income $ 516,887 $ 1,059,785 $ 2,974,453 $ 2,989,190 $ 2,884,362
=========== ============ =========== =========== ===========
Distributions to
Limited Partners,
per Unit $ 8 $ 1,052 $ 100 $ 100 $ 100
Income per Unit:
Class A $ 2 $ 17 $ 69 $ 69 $ 69
Class B $ 39 $ 52 $ 100 $ 100 $ 100
Weighted average
number of Units
outstanding:
Class A
Class B 20,230 20,230 20,230 20,230 20,230
9,770 9,770 9,770 9,770 9,770
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Capital Resources
The capital formation phase of the Partnership began on February 10,
1986, when Aztec Estates and Kings Manor were purchased by the Partnership and
operations commenced. On March 4, 1986, and March 27, 1986, Old Dutch Farms and
Park of the Four Seasons were purchased, respectively. From the $30,000,000
capital raised from the sale of the units, $26,400,000 was used to purchase the
four Properties after deducting sales commissions, advisory fees and other
organization and offering costs.
The Partnership had no capital expenditure commitments as of December
31, 1998 and does not anticipate any during the next fiscal year.
In an effort to provide Limited Partners with a full return of original
capital contributions of $1,000 per unit, the General Partner, with majority
consent from the Limited Partners, mortgaged the four Properties owned by the
Partnership on March 25, 1997 in the aggregate amount of $33,500,000. The
General Partner acknowledges that the
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mortgages impose some risks to the Partnership, but that such risks are not
greater than risks typically associated with real estate financing.
Liquidity
The Partnership has, since inception, generated adequate amounts of
cash to meet its operating needs. The Partnership retains cash reserves, which
it considers adequate to maintain the Properties. All funds in excess of
operating needs, amounts sufficient to pay debt service, and cash reserves have
been distributed to the Partners, quarterly.
While the Partnership is not required to maintain a working capital
reserve, it has not distributed all the cash generated from operations in order
to build cash reserves. As of December 31, 1998, the Partnership cash reserves
amounted to $537,777. The amount of any funds placed in reserves is at the
discretion of the General Partner. The Partnership expects to generate adequate
amounts of cash to meet its operating needs and debt service during the next
fiscal year.
The Partnership has a renewable line of credit of $600,000 with
National City Bank of Michigan/Illinois (formerly First of America Bank). The
interest rate floats 180 basis points above 1 month LIBOR, which on December 31,
1998 was 5.08%. The sole purpose for the line of credit is to purchase new and
used homes to be used as model homes and offered for sale with the Partnership's
communities. Over the past three years, sales of the new and used model homes
has been growing and the General Partner believes that continuing the model home
program is in the best interest of the Partnership. As of December 31, 1998, the
outstanding balance on the line of credit was $469,523.
On March 25, 1997 the Partnership completed the financing pursuant to
which the Partnership borrowed $33,500,000 from Nomura Asset Capital Corporation
and secured the borrowing with liens on its Properties. The interest rate on the
financing is 8.24%, and the term is 120 months. The loan is amortized over 360
months. On March 26, 1997, the Partnership distributed $30,000,000 of the
financing proceeds to the Limited Partners, representing a full return of
original capital contributions of $1,000 per unit held. The Partnership
continues its operations and expects to be able to continue to pay cash
distributions to the Limited Partners, although, due to payment of debt service
resulting from the financing, in amounts substantially lower than paid prior to
the financing. Limited Partners will continue to have an interest in the
Partnership because their original capital contributions have appreciated since
their initial investments were made. Only the original capital contribution was
returned on March 26, 1997.
Net Cash from Operations available for aggregate distributions to all
Partners in UMHCIF during the year ended December 31, 1998 amounted to
$1,453,460. Management considers Net Cash from Operations to be a supplemental
measure of the Partnership's operating performance. Net Cash from Operations is
defined to mean net income computed in accordance with generally accepted
accounting principles ("GAAP"), plus real estate related depreciation and
amortization. Net Cash from Operations does not represent
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cash generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs. Net Cash from
Operations should not be considered as an alternative to net income as the
primary indicator of the Partnership's operating performance or as an
alternative to cash flow as a measure of liquidity.
The yearly Partnership Management Distribution due and paid to the
General Partner for 1998 was $551,500, or 1.0% of the most recent appraised
value of the properties held by the Partnership.
The cash available, after payment of the Partnership Management
Distribution of $551,500 from Net Cash from Operations was $901,960. From this
amount the General Partner elected to make a total distribution of $300,000 for
1998, 80.0% of which, or $240,000, was paid to the Limited Partners and 20.0% of
which, or $60,000, was paid to the General Partner. The remaining Net Cash from
Operations was used to reduce debt and purchase certain equipment.
Results of Operations
a. Distributions
For the year ended December 31, 1998, the Partnership made
distributions to Limited Partners of $8.00 per unit held, or $240,000. In 1997
the Partnership made distributions to Limited Partners of $1,052 per unit held,
or $31,568,400. In 1996 the Partnership made distributions to Limited Partners
equal, on an annualized basis, to 10.0% of their original capital contributions
(their 10.0% Preferred Return), or $3,000,000. The General Partner received
distributions totaling $611,500, $871,000, and $600,000 during the same periods.
Included in the 1997 distributions was $30,000,000, which was the result of the
1997 financing, constituting a complete return of the Limited Partners original
capital contributions of $1,000 per unit.
b. Net Income
For the years ended December 31, 1998, 1997 and 1996 net income was
$516,887, $1,059,785 and $2,974,453 on total revenues of $8,451,561, $8,234,904
and $7,751,358. The decline in net income from 1997 to 1998 is due primarily to
the Partnership's first full year of interest payments associated with the 1997
financing and an increase in property operating expenses. The decline in net
income from 1996 to 1997 was primarily the result of the mortgage interest
incurred related to the 1997 financing.
Net income, plus depreciation and amortization, less distributions to
all Partners, was $601,960, $650,476 and $159,195, for the years ended December
31,1998, 1997, and 1996, respectively. The $650,476 indicated for 1997 excludes
the effects of the 1997 financing, which resulted in a $30,000,000 distribution
to Limited Partners.
c. Partnership Management
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Net expenses for the management of the Partnership (i.e. gross expenses
for such management, less transfer fees, interest on reserves and interest on
funds awaiting distribution) were $246,847 in 1998, $459,343 in 1997 and
$357,469 in 1996.
The decrease in net expenses for the management of the Partnership from
1997 to 1998 is due to lower legal and professional fees. The increase in net
expenses from 1996 to 1997 is a result of higher legal expenses associated with
the Proxy Statement that was submitted to the Limited Partners in connection
with the 1997 financing.
d. Property Operations
Overall, the four Properties had a combined average occupancy of 97.4%
(1,776/1,824 sites) as of December 1998; 98.2% as of December 1997; and 97.0% as
of December 1996. The average collected monthly rent as of December 1998 was
approximately $398 per homesite versus $386 as of December 1997 and $373 as of
December 1996, an increase each year of 3.1% and 3.5%, respectively.
<TABLE>
<CAPTION>
=====================================================================================================================
TOTAL
SITES OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
- ---------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aztec Estates 645 616 628 608 95.5% 97.4% 94.3% $441 $427 $411
Kings Manor 314 304 308 304 96.8 98.1 96.8 422 405 388
Old Dutch Farms 293 284 288 290 96.9 98.3 99.0 388 393 381
Park 4 Seasons 572 572 568 568 100.0 99.3 99.3 347 332 321
----- ----- ----- ----- ----- ----- ----- ----- ---- ----
Overall 1,824 1,776 1,792 1,770 97.4% 98.2% 97.0% $398 $386 $373
=====================================================================================================================
</TABLE>
The table below summarizes gross revenues and net operating income for
the Partnership and Properties during 1998, 1997 and 1996.
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<TABLE>
<CAPTION>
==============================================================================================================================
GROSS REVENUE NET OPERATING INCOME
AND NET INCOM
- ------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Aztec Estates $ 3,187,994 $ 3,101,572 $ 3,029,937 $ 1,652,513 $ 1,643,833 $ 1,587,687
Kings Manor 1,470,598 1,405,468 1,358,209 923,980 892,472 843,448
Old Dutch Farms 1,378,539 1,319,097 1,240,630 897,758 873,242 770,431
Park of the Four Seasons 2,373,946 2,345,585 2,105,820 1,426,937 1,378,661 1,219,270
--------- --------- --------- --------- --------- ---------
8,411,077 $ 8,171,722 $ 7,734.596 4,901,188 4,788,208 4,420,836
Partnership
Management 40,484 63,182 16,762 (246,847) (459,343) (357,469)
Other Non-Recurring
Expenses (345,512) (304,172)
(235,746)
Debt Service (2,855,369) (2,142,196) -
Depreciation and
Amortization (936,573) (891,138) (784,742)
--------- --------- --------- --------- --------- ---------
TOTAL: $ 8,451,561 $ 8,234,904 $ 7,751,356 $ 516,887 $ 1,059,785 $ 2,974,453
==============================================================================================================================
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Gross revenues increased $216,657, or 2.6%, to $8,451,561 in 1998,
compared to $8,234,904 in 1997. The increase was primarily the result of the
increase in rental income due to higher average monthly rents. (See table on
previous page.)
As described in the Statements of Income, the Partnership's operating
expenses increased $759,555, or 10.6%, to $7,934,674 in 1998, compared to
$7,175,119 in 1997. The increase is primarily due to the Partnership's first
full year of interest payments associated with the mortgage debt and an increase
in property operating expenses. The increase in property operating expenses is
specifically related to non-recurring costs associated with the removal of older
homes from the Properties and expenses incurred related to improvements to the
vacant homesites. The higher operating expenses were partially offset by a
decrease in administrative costs in 1998 from 1997.
As a result of the foregoing factors, net income decreased from
$1,059,785 in 1997 to $516,887 in 1998.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Gross revenues increased $483,548, or 6.2%, to $8,234,904 in 1997,
compared to $7,751,356 in 1996. The increase is primarily due to higher
occupancy and higher average monthly rents. (See table on previous page.)
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As described in the Statements of Income, the Partnership's operating
expenses increased $2,398,214, or 50.2%, to $7,175,119 in 1997, compared to
$2,974,453 in 1996. The significant increase in operating expenses is the result
of the 1997 financing. In 1996, the Partnership had no mortgage debt.
As a result of the foregoing factors, net income decreased from
$2,974,453 in 1996 to $1,059,785 in 1997.
Year 2000 Costs
The Partnership is currently assessing its significant business
relations with external parties, including its banking and vendor relations, to
determine if the failure of such parties to be year 2000 compliant would have a
material adverse effect upon the Partnership. In the event that any banks,
vendors or other parties with whom the Partnership conducts significant business
do not successfully and timely achieve year 2000 compliance, the Partnership's
operations may be affected. To date, nothing has come to the attention of
Management that leads it to conclude that such adverse effect may be likely.
Management, however, cannot provide assurance that the year 2000 issue will not
have an impact on the Partnerships operations. The Partnership has completed a
review of its information systems and believes its business technologies are
fully compliant with any issues that may arise as a result of year 2000 issues.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal years ended
December 31, 1998, 1997 and 1996, and supplementary data are filed with this
Report under Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in the Partnership's independent public
accountants nor have there been any disagreements during the past two fiscal
years.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any officers or directors.
The General Partner of the Partnership is P.I. Associates Limited Partnership.
P.I. Associates is a Michigan limited partnership. From November 1985 until
March 19, 1997, Paul M. Zlotoff served as the sole general partner of P.I.
Associates. In order to address concerns raised by the lender in connection with
the Financing, on March 19, 1997, GP P.I. Associates Corp. was admitted as a
corporate General Partner of the Partnership. GP P.I. Associates Corp. is wholly
owned by Paul M. Zlotoff. Under the amended partnership agreement of
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P.I. Associates, all actions taken by P.I. Associates must be approved by both
general partners.
Information concerning Mr. Zlotoff's age and principal occupations
during the last five years or more is as follows:
Paul M. Zlotoff, 49, is and has been an individual general partner of
P.I. Associates since its inception in May 1985. Mr. Zlotoff became the Chairman
of Uniprop, Inc. in May 1986 and was its President from 1979 through 1997. He is
also an individual general partner of Genesis Associates Limited Partnership,
the general partner of Uniprop Manufactured Housing Communities Income Fund II,
a public limited partnership which owns and operates nine manufactured housing
communities. Mr. Zlotoff currently, and in the past, has acted as the general
partner for various other limited partnerships owning manufactured home
communities, as well as some commercial properties.
The following individuals are the directors and officer of GP P.I.
Associates Corp.:
Name and Age Position Held
- ------------ -------------
Paul M. Zlotoff, 49 Director and President, Secretary and
Treasurer
Arthur Weiss, 50 Director
Steve Adler, 48 Director
Arthur Weiss, 50 has been practicing law at Jaffe, Raitt, Heuer &
Weiss, Professional Corporation ("JRH&W"), which has represented the company in
various matters since 1976. Mr. Weiss is currently a shareholder, director and
vice president of JRH&W.
Arthur Weiss is an Independent Director, meaning that he has not been,
at any time, in the five years preceding his appointment: (a) a stockholder,
director, officer, employee, or partner of GP P.I. Associates Corp., P.I.
Associates, or the Partnership; (b) a customer, supplier, or other person who
derives more than 10% of its purchases or revenues from its activities with GP
P.I. Associates Corp., P.I. Associates, or the Partnership; (c) a person or
other entity controlling or under common control with any such stockholder,
partner, customer, supplier or other person referenced in subparagraph (a) or
(b) above; or (d) a member of the immediate family of any such stockholder,
director, officer employee, partner, customer, supplier or other person
referenced in subparagraph (a) or (b) above.
Steve Adler, 48, became President of Uniprop, Inc. on January 1, 1998.
Previously, Mr. Adler had been Vice President of acquisitions and development
and director of operations for Uniprop since 1984 when he joined Uniprop. Mr.
Adler is also the president
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<PAGE> 14
of Uniprop Homes, the marketing affiliate of Uniprop. In this capacity, he is
responsible for developing new home sales, and establishing resale operations in
each of Uniprop's 39 family and adult retirement communities.
Under the Articles of Incorporation of GP P.I. Associates Corp., until
such time as the notes payable to the lender, in connection with the 1997
financing, have been discharged and the liens have been released from the
Properties, certain major corporate actions may be taken only with the unanimous
vote of the directors of GP P.I. Associates Corp. These actions include:
a) Filing or consenting to the filing of any bankruptcy, insolvency or
reorganization case or proceeding, instituting any proceedings under any
applicable insolvency law or otherwise seeking relief under any laws relating to
the relief from debts or the protection of debtors generally;
b) Seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for GP P.I.
Associates Corp., P.I. Associates, or the Partnership or a substantial portion
of any of their properties;
c) Making any assignment for the benefit of the creditors of GP P.I.
Associates Corp., P.I. Associates, or the Partnership; or
d) Taking any action in furtherance of the foregoing subparagraphs (a)
through (c).
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and therefore, no officers
received a salary or remuneration exceeding $100,000 during the last fiscal
year. The General Partner of the Partnership and an affiliate, Uniprop, Inc.,
received certain compensation and fees during the fiscal year in the amounts
described in Item 13. The Partnership anticipates that it will provide similar
compensation to the General Partner and Uniprop, Inc. during the next fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership is a limited partnership formed pursuant to the
Michigan Uniform Limited Partnership Act, as amended. The General Partner, P.I.
Associates Limited Partnership, is vested with full authority as to the general
management and supervision of the business and other affairs of the Partnership,
subject to certain constraints in the partnership agreement and consulting
agreement. Limited Partners have no right to participate in the management of
the Partnership and have limited voting privileges only on certain matters of
fundamental significance. No person owns of record or beneficially, more than
five percent of the Partnership's Units.
-14-
<PAGE> 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes all of the types of compensation,
fees or other distributions paid by the Partnership or others to the General
Partner or its affiliates from the operations of the Partnership during the last
fiscal year, as well as certain of such items which may be payable during the
next fiscal year. Certain of the following arrangements for compensation and
fees were not determined by arm's length negotiations between the General
Partner, its affiliates and the Partnership.
Paul M. Zlotoff has an interest in the successors to the sellers of all
the Properties acquired by the Partnership and may be entitled to share in a
contingent purchase price with respect to each Property, when and if the
successors to the sellers become entitled thereto. Each of the sellers has been
dissolved and liquidated and their interests in the Contingent Purchase Price
have been assigned to certain partners of the General Partner. The contingent
purchase price for each Property was determined by reference to the average of
two independent real estate appraisals that were obtained by the General
Partner. Such appraisals are only estimates of value and are not necessarily
indicative of the actual real estate value. Each seller becomes entitled to any
unpaid contingent purchase price upon the sale, financing or other disposition
of one or more Properties, but, only after the receipt by each Limited Partner
of any shortfall in his 9% cumulative preferred return plus the return of his
adjusted capital contribution. Because the Financing resulted in a complete
return of the Limited Partners' capital contributions, and because the Limited
Partners have received their cumulative preferred return in full, the successors
to the sellers did receive $1,500,000 in partial payment of the Contingent
Purchase Price on or about May 15, 1997. The maximum amounts which could be
payable to the successors to the sellers are as follows: Aztec Estates,
$1,374,323; Kings Manor, $529,724; Old Dutch Farms, $452,359; and Park of the
Four Seasons, $1,113,594. The partial payment made for each property was as
follows: Aztec Estates, $594,088; Kings Manor, $228,987; Old Dutch Farms,
$195,544; and Park of the 4 Seasons, $481,381. The maximum amount remaining
which could be payable to the successors of the sellers are as follows: Aztec
Estates, $780,235; Kings Manor, $300,737; Old Dutch Farms, $256,815; and Park of
the Four Seasons, $632,213. The actual amounts to be received, if any, will
depend upon the results of the Partnership's operations and the amounts received
upon the sale, financing or other disposition of the Properties and are not
determinable at this time.
The Partnership paid and will continue to pay an Incentive Management
Interest to the General Partner for managing the Partnership's affairs,
including: determining distributions, negotiating agreements, selling or
financing properties, preparing records and reports, and performing other
ongoing Partnership responsibilities. As a result of the March 25, 1997
Financing and full return of the $30,000,000 original capital contributions of
the Limited Partners, no further Preferred Return or Cumulative Return will
apply, and the payment of the Incentive Management Interest will not be
contingent on the satisfaction of those returns. The Incentive Management
Interest is 20% of the net cash from operations (cash revenues less cash
operating expenses and specified reserves) in any
-15-
<PAGE> 16
taxable year. As of December 31, 1998, the General Partner had earned and was
entitled to an incentive management interest of $195,000. The actual amount to
be received in future years will depend upon the results of the Partnership's
operations and is not determinable at this time. Because the Limited Partners
have received the return of their adjusted capital contributions, the General
Partner also has a right to receive 20% of any sale or financing proceeds.
The General Partner is also entitled to a quarterly Partnership
Management Distribution equal to one-fourth of 1% of the most recent appraised
value of the Properties of the Partnership. The Partnership Management
Distribution for each quarter is paid in arrears, 45 days after the end of each
fiscal quarter. The Partnership Management Distribution was proposed by the
General Partner and approved by the Limited Partners to compensate, in part, for
the substantial reduction in the amounts expected to be paid to the General
Partner pursuant to the Incentive Management Interest following the financing.
Based on the Properties' March 1998 aggregate appraised value of $55,800,000,
the Partnership Management Distribution due to the General Partner was 558,000.
The Partnership Management Distribution paid to the General Partner during 1998
was $551,500, a portion of which was calculated on the 1997 aggregate appraised
value of $53,200,000. As of December 31, 1998, the Partnership Management
Distribution due the General Partner totaled $139,500. This amount was paid to
the General Partner on February 15, 1999 from cash reserves. Based on the
Properties' March 1999 aggregate appraised value of $57,300,000, the Partnership
Management Distribution due the General Partner for the Partnership's 1999
fiscal year will be $573,000 ($57,300,000 x 1.0% = $573,000).
Uniprop, Inc., an affiliate of the General Partner, received and will
receive property management fees for each Property managed by it. Uniprop, Inc.
is primarily responsible for the day-to-day management of the Properties and for
the payment of the costs of operating each Property out of the rental income
collected. The property management fees are equal to the lesser of 5% of the
annual gross receipts from the Properties managed by Uniprop, Inc., or the
amount which would be payable to an unaffiliated third party for comparable
services. During the last fiscal year, Uniprop, Inc. received the following
property management fees totaling $419,223: Aztec Estates, $158,345; Kings
Manor, $73,140; Old Dutch Farms, $68,927; and Park of the Four Seasons,
$118,811. In addition, certain employees of the Partnership are also employees
of affiliates of the General Partner. During the last fiscal year, these
employees received an aggregate of $141,046 for performing local property
management, data processing and investor relations' services for the
Partnership. The actual amounts to be received during the next fiscal year will
depend upon the results of the Partnership's operations and are not determinable
at this time.
-16-
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
The following financial statements and related documents are filed with
this Report:
(1) Report of Independent Certified Public Accountants
(2) Balance Sheets as of December 31, 1998 and 1997
and Statements of Income for the fiscal years ended
December 31, 1998, 1997 and 1996
(3) Statements of Partners' Equity for the fiscal years
ended December 31, 1998, 1997 and 1996
(4) Statements of Cash Flows for the fiscal years ended
December 31, 1998, 1997 and 1996
(5) Schedule III - Real Estate and Accumulated
Depreciation for the fiscal years ended December 31,
1998, 1997 and 1996
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth quarter of
1998.
(c) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed June 4, 1985, as amended on
August 1, 1985 and September 11, 1985:
3(a) Amended Certificate of Limited Partnership for the Partnership
3(b) Agreement of Limited Partnership for the Partnership
10(a) Form of Management Agreement between the Partnership and
Uniprop, Inc.
10(b) Form of Consulting Agreement between the Partnership, the
General Partner and Consultant
The following exhibits are incorporated by reference to the Form 10-K
for fiscal year ended December 31, 1997:
-17-
<PAGE> 18
3(c) Certificate of Amendment to the Certificate of Limited
Partnership for the Partnership (originally filed with Form
10-Q for the fiscal quarter ended June 30, 1986).
4 Form of Certificate of Limited Partnership Interest in the
Partnership (Originally filed with Form 10-K for the fiscal
year ended December 31, 1986)
10(c) Contingent Purchase Price Agreement between the Partnership,
Aztec Estates (Originally filed with Form 10-K for the fiscal
year ended December 31, 1987)
10(d) Contingent Purchase Price Agreement between the Partnership
and O.D.F. Mobile Home Park (Originally filed with Form 10-K
for the fiscal year ended December 31, 1987)
10(e) Contingent Purchase Price Agreement between the Partnership
and The Park of the Four Seasons (Originally filed with Form
10-K for the fiscal year ended December 31, 1987)
The following exhibits are attached to this Report:
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the
Partnership's four Manufactured housing communities, as of
March 1, 1999.
(d) Other Financial Statements
There are no other financial statements required by the instructions
contained in Regulation S-X or, the information is included elsewhere in the
financial statements or the notes thereto.
-18-
<PAGE> 19
[IBDO LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund (a Michigan limited partnership), as of December 31,
1998 and 1997, and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1998. We have
also audited the schedule listed under Item 14 of Form 10-K. These financial
statements and the schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
the schedule. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and the schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund at December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule listed under Item 14 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 5, 1999
<PAGE> 20
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
===================================================================================================================
December 31, 1998 1997
===================================================================================================================
<S> <C> <C>
ASSETS
PROPERTY AND EQUIPMENT (Note 2)
Buildings and improvements $ 23,934,391 $ 23,862,182
Land 5,280,000 5,280,000
Manufactured homes and improvements 748,657 668,108
Furniture and equipment 127,800 117,847
- -------------------------------------------------------------------------------------------------------------------
30,090,848 29,928,137
Less accumulated depreciation 9,654,556 8,805,795
- -------------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 20,436,292 21,122,342
Cash 537,777 649,137
Unamortized financing costs 710,548 796,547
Other assets (Note 3) 824,267 484,407
- -------------------------------------------------------------------------------------------------------------------
$ 22,508,884 $ 23,052,433
===================================================================================================================
LIABILITIES AND PARTNERS' DEFICIT
Note payable (Note 2) $ 33,119,108 $ 33,355,940
Line-of-credit (Note 4) 469,523 358,916
Accounts payable 76,588 116,066
Other liabilities (Note 5) 847,840 891,073
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 34,513,059 34,721,995
- -------------------------------------------------------------------------------------------------------------------
PARTNERS' DEFICIT
Class A limited partners (9,636,980) (9,509,936)
Class B limited partners (597,167) (897,721)
General partner (1,770,028) (1,261,905)
- -------------------------------------------------------------------------------------------------------------------
TOTAL PARTNERS' DEFICIT (12,004,175) (11,669,562)
- -------------------------------------------------------------------------------------------------------------------
$ 22,508,884 $ 23,052,433
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 21
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
===================================================================================================================
Year Ended December 31, 1998 1997 1996
===================================================================================================================
<S> <C> <C> <C>
INCOME
Rental $ 8,004,749 $ 7,821,138 $ 7,490,744
Interest 45,423 73,543 30,760
Other 401,389 340,223 229,854
- -------------------------------------------------------------------------------------------------------------------
8,451,561 8,234,904 7,751,358
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 2,568,006 2,354,635 2,386,289
Depreciation and amortization 936,573 891,138 784,742
Property taxes 797,971 792,452 820,688
Administrative (Note 6) 776,755 994,698 785,186
Interest 2,855,369 2,142,196 -
- -------------------------------------------------------------------------------------------------------------------
7,934,674 7,175,119 4,776,905
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 516,887 $ 1,059,785 $ 2,974,453
===================================================================================================================
INCOME PER LIMITED PARTNERSHIP
UNIT (Note 8)
Class A $ 2 $ 17 $ 69
Class B $ 39 $ 52 $ 100
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT (Note 8)
Class A $ 8 $ 1,052 $ 100
Class B $ 8 $ 1,052 $ 100
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING
Class A 20,230 20,230 20,230
Class B 9,770 9,770 9,770
NET INCOME ALLOCABLE TO
GENERAL PARTNER $ 103,377 $ 211,957 $ 600,712
DISTRIBUTIONS ALLOCABLE TO
GENERAL PARTNER $ 611,500 $ 871,000 $ 600,000
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
===================================================================================================================
Class A Class B
General Limited Limited
Partner Partners Partners TOTAL
===================================================================================================================
<S> <C> <C> <C> <C>
BALANCE, January 1, 1996 $ (603,574) $ 12,064,399 $ 8,874,775 $ 20,335,600
Distributions to partners (600,000) (2,023,000) (977,000) (3,600,000)
Net income for the year 600,712 1,396,741 977,000 2,974,453
- -----------------------
===================================================================================================================
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 (602,862) 11,438,140 8,874,775 19,710,053
Distributions to partners (871,000) (21,287,624) (10,280,776) (32,439,400)
Net income for the year 211,957 339,548 508,280 1,059,785
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 (1,261,905) (9,509,936) (897,721) (11,669,562)
Distributions to partners (611,500) (161,840) (78,160) (851,500)
Net income for the year 103,377 34,796 378,714 516,887
- -------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1998 $ (1,770,028) $ (9,636,980) $ (597,167) $ (12,004,175)
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
===================================================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 516,887 $ 1,059,785 $ 2,974,453
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 850,574 826,638 784,742
Amortization 85,999 64,500 --
(Gain) loss on disposals of property and equipment (99,577) (86,216) 38,386
(Increase) decrease in other assets (339,860) 123,349 82,721
Increase (decrease) in accounts payable (39,478) 5,483 (59,630)
Increase (decrease) in other liabilities (43,233) (100,546) 18,077
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 931,312 1,892,993 3,838,749
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,285,501) (956,133) (726,175)
Proceeds from disposals of property and equipment 1,220,554 653,082 506,758
Payment of contingent purchase price -- (1,500,000) --
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (64,947) (1,803,051) (219,417)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (851,500) (32,439,400) (3,600,000)
Repayment of note payable (236,832) (144,060) --
Net advances (payments) under line of credit 110,607 (136,384) 152,090
Proceeds from note payable -- 33,500,000 --
Payment for financing costs -- (861,047) --
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (977,725) (80,891) (3,447,910)
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (111,360) 9,051 171,422
CASH, at beginning of year 649,137 640,086 468,664
- -------------------------------------------------------------------------------------------------------------------
CASH, at end of year $ 537,777 $ 649,137 $ 640,086
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Uniprop Manufactured Housing Communities Income Fund, a Michigan Limited
Partnership (the "Partnership") acquired, maintains, operates and will
ultimately dispose of income producing residential real properties
consisting of four manufactured housing communities (the "properties")
located in Florida, Minnesota and Michigan. The Partnership was organized
and formed under the laws of the State of Michigan on May 16, 1985.
The general partner of the Partnership is P. I. Associates Limited Partner
ship. Taxable investors acquired 20,230 Class A units, and 9,770 Class B
units were acquired by tax exempt investors. Depreciation is allocated
only to holders of Class A units and to the general partner.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (1) the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities as of the date of
the financial statements, and (2) revenues and expenses during the
reporting period. Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's financial instruments, which
consist of the line of credit and note payable, approximate their fair
values.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the following estimated useful lives:
Buildings and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
<PAGE> 25
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
Accumulated depreciation for tax purposes was $10,989,216 and $10,060,608
as of December 31, 1998 and 1997, respectively.
Long-lived assets, such as property and equipment, are evaluated for
impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value.
No impairment loss recognition has been required through December 31,
1998.
FINANCING COSTS
As a result of management's present intent to refinance the note payable
after ten years, costs to obtain the 1997 financing (see Note 2) are
amortized over a ten-year period.
INCOME TAXES
Federal income tax regulations provide that any taxes on income of a
partnership are payable by the partners as individuals. Therefore, no
provision for such taxes has been made at the partnership level.
COMPREHENSIVE INCOME
On January 1, 1998, the Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
which establishes standards for the reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. For the
year ended December 31, 1998, comprehensive income for the Partnership did
not differ from net income.
<PAGE> 26
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
2. NOTE PAYABLE
In 1997, the Partnership entered into a $33,500,000 note payable
agreement. The borrowings are secured by mortgages on the Partnership's
properties and the assignment of all current and future leases and rents.
The note is payable in monthly installments of $251,439, including
interest, through March 2027. The interest rate is 8.24% per annum through
June 2007; thereafter, the interest rate will be adjusted based on the
provisions of the note agreement. The loan may be prepaid without penalty
beginning in January 2007. There are certain requirements and restrictions
contained in the note payable agreement. The Partnership is in compliance
with these requirements.
The proceeds of the note were used primarily to return to the limited
partners their original $30,000,000 capital contribution, to pay certain
amounts to the general partner and affiliates of the general partner as
described in Notes 6 and 8, and to pay related financing costs.
Future maturities on the note payable for the next five years are as
follows: 1999 - $250,000; 2000 - $265,000; 2001 - $295,000; 2002 -
$320,000; and 2003 - $350,000.
3. OTHER ASSETS
At December 31, 1998 and 1997, "Other assets" included cash of
approximately $372,000 and $56,000, respectively, in an escrow account for
property taxes, capital improvements, and debt service payments, as
required by the Partnership's note payable agreement, which is restricted
from operating use.
At December 31, 1998 and 1997, "Other assets" also included cash of
$241,000 and $211,000, respectively, in a security deposit escrow account
for two of the Partnership's properties, as required by the laws of the
state in which they are located, which is restricted from operating use.
4. LINE-OF-CREDIT
The Partnership currently has an unsecured $600,000 revolving
line-of-credit agreement with a bank. Interest on outstanding balances is
charged at 1.80% in excess of LIBOR; the Partnership's interest rate at
December 31, 1998 was 7.06%.
<PAGE> 27
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
5. OTHER LIABILITIES
Other liabilities consisted of:
<TABLE>
<CAPTION>
December 31, 1998 1997
---------------------------------------------------------------
<S> <C> <C>
Tenants' security deposits $ 528,008 $ 505,166
Accrued interest 158,691 157,786
Accrued property taxes 11,894 81,584
Other 149,247 146,537
---------------------------------------------------------------
TOTAL $ 847,840 $ 891,073
===============================================================
</TABLE>
6. RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
The Partnership has an agreement with an affiliate of the general partner
to manage the properties owned by the Partnership. The management
agreement is automatically renewable annually, but may be terminated by
either party upon sixty days written notice. The property management fee
is the lesser of 5% of annual gross receipts from the properties managed,
or the amount which would be payable to an unaffiliated third party for
comparable services.
REPORT OF FEES
During the years ended December 31, 1998, 1997 and 1996, the affiliate
earned property management fees of $419,223, $404,514 and $387,855,
respectively, as permitted in the Agreement of Limited Partnership. These
fees are included with "Administrative" expenses in the respective
statements of income. The Partnership was owed $776 and $9,230 by the
affiliate at December 31, 1998 and 1997, respectively.
Certain employees of the Partnership are also employees of affiliates of
the general partner. These employees were paid by the Partnership the
amounts of $141,046, $128,094 and $130,321, in 1998, 1997 and 1996,
respectively, to perform local property management and investor relations
services for the Partnership.
<PAGE> 28
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
CONTINGENT PURCHASE PRICE
The general partner of P.I. Associates has an interest in the sellers of
all the properties acquired by the Partnership and is entitled to share in
a contingent purchase price with respect to each property. Each seller
will become entitled to any unpaid contingent purchase price upon the
sale, financing or other distribution of one or more of the properties,
but, only after the receipt by the limited partners of any shortfall in
their 9% cumulative preferred return, plus the return of their adjusted
capital contribution.
Since inception of the Partnership, there has been no shortfall in the 9%
cumulative return and, as described in Note 2, the Partnership used a
portion of the proceeds from the 1997 financing to return the limited
partners' original capital contribution. As a result, $1,500,000 of the
proceeds from the financing transaction was used to make a partial payment
in 1997 on the contingent purchase price. This amount was recorded as
"Buildings and Improvements" in the accompanying balance sheets. The total
remaining contingent purchase price will not exceed $1,970,000. Additional
amounts to be paid, if any, will depend upon the results of the
Partnership's operations and the amounts received upon the sale, financing
or other disposition of the properties; such amounts are not determinable
at this time. Therefore, no liability related to this remaining
contingency has been recorded at December 31, 1998.
FINANCING COSTS
In 1997, as part of the financing transaction described in Note 2, the
Partnership paid approximately $335,000 in financing costs to an affiliate
of the general partner.
<PAGE> 29
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
7. RECONCILIATION OF FINANCIAL STATEMENT INCOME AND TAXABLE INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income per the financial
statements $ 516,887 $ 1,059,785 $ 2,974,453
Adjustments to depreciation
for difference in methods (79,790) (74,828) (69,114)
Adjustments for prepaid rent,
meals and entertainment 6,079 3,379 7,468
- --------------------------------------------------------------------------------
Income Per The Partnership's
Tax Return $ 443,176 $ 988,336 $ 2,912,807
================================================================================
</TABLE>
8. PARTNERS' CAPITAL
Subject to the orders of priority under certain specified conditions more
fully described in the Agreement of Limited Partnership (as amended on
February 6, 1997), distributions of partnership funds and allocations of
net income from operations are principally determined as follows:
DISTRIBUTIONS
The general partner receives a Partnership Management Distribution equal
to .25% quarterly of the appraised value of the properties of the
Partnership (equal to $551,500 annually based on current appraisals).
Thereafter, distributions are made at the discretion of the general
partner, and are allocated 20% to the general partner as an Incentive
Management Interest and 80% to the limited partners.
The Partnership Management Distribution and the Incentive Management
Interest represent payment for managing the Partnership's affairs. At
December 31, 1998, the general partner had earned but not yet received a
Partnership Management Distribution and an Incentive Management Interest
of approximately $139,500 and $195,000, respectively. These amounts are
not yet considered payable at December 31, 1998; they will be charged to
the general partner's capital account when paid.
<PAGE> 30
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
================================================================================
ALLOCATION OF NET INCOME
Net income is to be allocated in the same manner as distributions except
that:
a) Depreciation expense is allocated only to the general partner and the
Class A (taxable) limited partners and,
b) In all cases, the general partner is to be allocated at least 1% of all
Partnership items.
9. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest totaled approximately $2,854,000, $1,984,000 and
$35,000 in 1998, 1997 and 1996, respectively.
<PAGE> 31
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ----------------------- ----------- ------------------------------ -------------------------
Costs
Capitalized
Subsequent to
Initial Cost Acquisition
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aztec Estates
(Margate, FL) $12,524,686 $ 2,199,868 $ 8,799,475 $ -- $ 779,465
Kings Manor
(Ft. Lauderdale, FL) 6,353,843 847,923 3,391,694 -- 367,494
Park of the Four Seasons
(Blaine, MN) 8,579,325 1,508,121 6,032,483 -- 719,156
Old Dutch Farms
(Novi, MI) 5,661,254 724,088 2,896,348 -- 948,276
- ---------------------------------------------------------------------------------------------------
$33,119,108 $ 5,280,000 $21,120,000 $ -- $ 2,814,391
===================================================================================================
<CAPTION>
Column E Column F Column G Column H
---------------------------------- ------------- ----------- ----------
Gross Amount at Which Carried Life on Which
at Close of Period Depreciation in
---------------------------------- Latest Income
Buildings and Accumulated Date Statement is
Description Land Improvements Total Depreciation Acquired Computed
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aztec Estates
(Margate, FL) $ 2,199,868 $ 9,578,940 $11,778,808 $3,930,301 1986 30 years
Kings Manor
(Ft. Lauderdale, FL) 847,923 3,759,188 4,607,111 1,521,885 1986 30 years
Park of the Four Seasons
(Blaine, MN) 1,508,121 6,751,639 8,259,760 2,668,251 1986 30 years
Old Dutch Farms
(Novi, MI) 724,088 3,844,624 4,568,712 1,429,934 1986 30 years
- ----------------------------------------------------------------------------------------------------------------
$ 5,280,000 $23,934,391 $29,214,391 $9,550,371
================================================================================================================
</TABLE>
<PAGE> 32
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 1998
================================================================================
1. RECONCILIATION OF BUILDINGS AND IMPROVEMENTS
The following table reconciles buildings and improvements from January 1,
1996 to December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 23,862,182 $ 22,128,664 $ 22,087,145
Partial payment of contingent
purchase price -- 1,500,000 --
Additions to buildings and
improvements 72,209 233,518 41,519
--------------------------------------------------------------------------------
BALANCE, at December 31 $ 23,934,391 $ 23,862,182 $ 22,128,664
================================================================================
</TABLE>
There were no additions to land during this three-year period.
2. RECONCILIATION OF ACCUMULATED DEPRECIATION
The following table reconciles the accumulated depreciation from January
1, 1996 to December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 8,711,473 $ 7,905,581 $ 7,142,041
Current year
depreciation expense 838,898 805,892 763,540
-------------------------------------------------------------------------------------
BALANCE, at December 31 $ 9,550,371 $ 8,711,473 $ 7,905,581
=====================================================================================
</TABLE>
3. TAX BASIS OF BUILDINGS AND IMPROVEMENTS
The aggregate cost of buildings and improvements for federal income tax
purposes is equal to the cost basis used for financial statement purposes.
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund, a
Michigan Limited Partnership, has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Uniprop Maufactured Housing Communities
Income Fund, a Michigan Limited Partnership
BY: P.I. Associates Limited Partnership,
General Partner
Dated: March 31, 1999 BY: /s/ Paul M. Zlotoff
--------------------------------
Paul M. Zlotoff, General Partner
BY: GP P.I. Associates Corp.
BY: /s/ Paul M. Zlotoff
--------------------------------
Paul M. Zlotoff, President
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------ ----------- ---------------- ----
<S> <C> <C> <C>
3(a) Amended Certificate of Incorporated by reference to
Limited Partnership for the the S-11 Registration
Partnership Statement of the Partnership
filed June 4, 1985, as amended
on August 1, 1985 and
September 11, 1985
("Registration Statement").
3(b) Agreement of Limited Incorporated by reference to
Partnership for the The Registration Statement.
Partnership
3(c) Certificate of Amendment to Incorporated by reference to
the Certificate of Limited Form 10-K for fiscal year
Partnership for the ended December 31, 1992.
Partnership (originally filed
with Form 10-Q for the fiscal
Quarter ended June 30, 1986).
3(d) First Amendment to Agreement Incorporated by reference to
of Limited Partnership Form 10-K for the fiscal year
ended December 31, 1996.
3(e) Second Amendment to Agreement Incorporated by reference to
of Limited Partnership Form 10-K for the fiscal year
ended December 31, 1996.
4 Form of Certificate of Limited Incorporated by reference to
Partnership Interest in the Form 10-K for fiscal year
Partnership (originally filed with ended December 1997.
Form 10-K for the fiscal year ended
December 31, 1986).
10(a) Form of Management Incorporated by reference to
Agreement between the The Registration Statement.
Partnership and Uniprop, Inc.
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
10(b) Form of Consulting Incorporated by reference to
Agreement between the The Registration Statement.
Partnership, the General
Partner and Consultant
10(c) Contingent Purchase Price Incorporated by reference to Form
Agreement between the 10-K for fiscal year ended
Partnership, Aztec Estates, December 1997.
Ltd., and Kings Manor
Associates (originally filed
with Form 10-K for the fiscal
year ended December 31, 1987)
10(d) Contingent Purchase Price Incorporated by reference to Form
Agreement between the 10-K for fiscal year ended
Partnership and O.D.F. December 1997.
Mobile Home Park (originally filed
with Form 10-K for the fiscal year
ended December 31, 1987
10(e) Contingent Purchase Price Incorporated by reference to Form
Agreement between the 10-K for fiscal year ended
Partnership and The Park of December 1997.
the Four Seasons (originally
filed with Form 10-K for the
fiscal year ended December
31, 1987)
27 Financial Data Schedule Filed herewith.
28 Letter summary of the Estimated fair Filed herewith.
market values of the Partnership's
four manufactured housing
Communities, as of March 1, 1999
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 537,777
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,362,044
<PP&E> 30,090,848
<DEPRECIATION> 9,654,556
<TOTAL-ASSETS> 22,508,884
<CURRENT-LIABILITIES> 1,393,951
<BONDS> 33,119,108
0
0
<COMMON> 0
<OTHER-SE> (12,004,175)
<TOTAL-LIABILITY-AND-EQUITY> 22,508,884
<SALES> 0
<TOTAL-REVENUES> 8,451,561
<CGS> 0
<TOTAL-COSTS> 6,998,101
<OTHER-EXPENSES> 936,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,941,368
<INCOME-PRETAX> 516,887
<INCOME-TAX> 0
<INCOME-CONTINUING> 516,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,887<F1>
<EPS-PRIMARY> 2<F2>
<EPS-DILUTED> 39<F3>
<FN>
<F1>5-03(b)(20) EPS-Primary-In this RELP there are two classes of LP units
<F2>EPS - Primary are earnings per Class A unit
<F3>EPS - Diluted are earnings per Class B unit
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 28
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND
1999 PROPERTY APPRAISALS
Cushman & Wakefield recently completed market value appraisals of UMHCIF's four
properties as of March 1999. The table below sets forth certain appraisal
information for each property, as well as relevant comparisons:
<TABLE>
<CAPTION>
MARCH 99 MARCH 98 VARIANCE
PROPERTY APPRAISALS APPRAISALS IN %
<S> <C> <C> <C>
Aztec Estates, FL $21,100,000 $21,000,000 0.5%
Kings Manor, FL 10,700,000 10,400,000 2.9%
Old Dutch Farms, MI 10,000,000 9,700,000 3.1%
Park of Four Seasons, MN 15,500,000 14,700,000 5.4%
----------- ----------- -----
GRAND TOTAL: $57,300,000 $55,800,000 2.7%
Other Comparisons versus March 1999 Appraisal:
Original Cash Purchase Price of Properties: 26,400,000 +117.0%
</TABLE>
1999 ESTIMATED NET ASSET VALUE OF UNITS
Based on the March 1999 appraisal of the Partnership's properties, the General
Partner has calculated the estimated net asset value of each unit, based on the
following assumptions:
- - Sale of the Properties in March 1999 for there appraised value.
- - Costs and selling expenses are 3.0% of the sale price.
- - Amount payable to creditors other than the mortgage debt, is negligible.
- - Tax consequences of a sale are not taken into consideration.
Calculations:
<TABLE>
<CAPTION>
<S> <C>
March 1999 appraised value of the properties: $57,300,000
-----------
Minus: Costs and selling expenses (3.0%): 1,719,000
Mortgage Debt: 33,119,108
Sellers' Contingent Purchase Price: 1,970,000*
-----------
Net Sale Proceeds: $20,491,892
===========
Limited Partners' Share of Net Sales Proceeds (80.0%) $16,393,514
ESTIMATED CURRENT NET ASSET VALUE PER UNIT: $ 546
===========
</TABLE>
* Reflects the $1,500,000 partial payment of Contingent Purchase Price which
was paid on May 15, 1997 out of operating cash reserves.
