<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period
Ended June 30, 1998 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) 645-9261
(Registrant's telephone number, including area code)
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 [ ]
<PAGE> 2
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, 1998 (Unaudited) and
December 31, 1997 3
Statements of Income
Six months ended June 30, 1998
and 1997 and Three Months ended
June 30, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows
Six months ended June 30, 1998
and 1997 (Unaudited) 5
Notes to Financial Statements
June 30, 1998 (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 7
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
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<PAGE> 3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
Properties:
Land $11,644,103 $11,644,103
Buildings And Improvements 49,348,994 49,099,290
Furniture And Fixtures 396,833 369,274
Manufactured Homes 2,102,987 2,082,250
--------- ---------
$63,492,917 $63,194,917
Less Accumulated Depreciation 17,953,071 17,057,071
---------- ----------
$45,539,846 $46,137,846
Cash And Cash Equivalents 1,310,695 1,630,552
Marketable Securities 875,859 875,859
Mortgage-backed Securities 1,502,250 1,502,250
Unamortized financing costs 917,677 891,000
Investment 998,995 998,995
Other Assets 494,752 615,736
------- -------
Total Assets $51,640,074 $52,652,238
LIABILITIES AND PARTNERS' EQUITY
Accounts Payable $149,431 $126,063
Other Liabilities 944,436 1,220,472
Note Payable 30,045,000 30,045,000
---------- ----------
Total Liabilities $31,138,867 $31,391,535
Partners' Equity:
General Partner 233,825 230,188
Unit Holders 20,267,382 21,030,515
---------- ----------
Total Partners' Equity $20,501,207 $21,260,703
Total Liabilities And
Partners' Equity $51,640,074 $52,652,238
</TABLE>
See Notes To Financial Statements
3
<PAGE> 4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income:
Rental Income $5,707,802 $5,532,927 $2,856,394 $2,786,045
Other 391,216 344,800 204,163 156,175
------- ------- ------- -------
Total Income $6,099,018 $5,877,727 $3,060,557 $2,942,220
Operating Expenses:
Administrative Expenses
(Including $300,757, $290,905, $150,411 and $146,288
In Property Management Fees Paid To
An Affliate For The Six and Three Month Periods
Ended June 30, 1998 And 1997, Respectively) 1,718,029 1,549,609 892,338 781,469
Property Taxes 471,399 448,071 236,136 224,046
Utilities 498,529 508,124 260,393 251,389
Property Operations 787,388 617,475 379,374 300,088
Depreciation And Amortization 920,000 914,166 460,000 457,083
Interest 1,340,017 1,316,257 665,659 659,917
--------- --------- ------- -------
Total Operating Expenses $5,735,362 $5,353,702 $2,893,900 $2,673,992
--------- --------- --------- ---------
Net Income $ 363,656 $ 524,025 $ 166,657 $ 268,228
Income Per Unit: $ 0.11 $ 0.16 $ 0.05 $ 0.08
Distribution Per Unit $ 0.34 $ 0.30 $ 0.17 $ 0.13
Weighted Average Number Of Units Of Beneficial
Assignment Of Limited Partnership Interest
Outstanding During The Periods Ending
June 30, 1998 And 1997 3,303,387 3,303,387 3,303,387 3,303,387
</TABLE>
See Notes To Financial Statements
4
<PAGE> 5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash Flows From Operations:
Net Income $363,656 $524,025
Adjustments To Reconcile Net Income To Net Cash
Provided By Operating Activities:
Depreciation 896,000 880,000
Amortization 24,000 34,166
(Increase) Decrease In Other Assets 70,307 (40,146)
Increase (Decrease) In Accounts Payables 23,368 (37,594)
Increase (Decrease) In Other Liabilities (276,036) (246,696)
------- -------
Total Adjustments 737,639 589,730
Net Cash Provided By
Operating Activities 1,101,295 1,113,755
Cash Flows From Investing Activities:
Purchase of Marketable Securities 0 0
Capital Expenditures (277,263) (237,912)
Sale of Fixed Assets (20,737) 206,180
------ -------
Net Cash Provided By (Used In)
Investing Activities (298,000) (31,732)
Cash Flows From Financing Activities:
Distributions To Partners (1,123,152) (991,019)
Net Cash Provided By (Used In)
Financing Activities (1,123,152) (991,019)
Increase (Decrease) In Cash (319,857) 91,004
Cash, Beginning 1,630,552 1,144,427
Cash, Ending $1,310,695 $1,235,431
---------- ----------
</TABLE>
See Notes To Financial Statements
5
<PAGE> 6
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Presentation:
The balance sheet as of June 30, 1998, the related statements of income and
statements of cash flow for the periods ended June 30, 1998 and 1997 have been
prepared by management, pursuant to the rules and regulations of the Securities
and Exchange Commission, without audit by independent public accountants. In the
opinion of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of such financial statements have
been included.
The financial statements and notes are presented as permitted by the rules and
regulations of the Securities and Exchange Commission for Form 10-Q and do not
contain certain information included in the Company's annual financial
statements and notes, which should be consulted.
2. PAYMENTS TO AFFILIATES:
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30,1998 JUNE 30,1997
------------- -------------- ------------ ------------
Property management fee
to Uniprop, Inc.: $300,757 $290,905 $150,411 $146,288
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<PAGE> 7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
- -----------------
The Partnership's capital resources consist primarily of its nine manufactured
home communities. As part of the mortgage financing the Partnership completed in
1993, the Partnership was required to purchase $1,502,250 in mortgage-backed
securities, known as the "Class D Certificates". These mortgage-backed
securities equal approximately 5.0% of the seven mortgage notes payable and pay
interest monthly computed at a fixed rate of 7.5% per annum. The interest
income, as well as the future value of the Class D Certificates, could be
adversely affected by a foreclosure or a significant decline in operating
results involving any of the 28 properties participating in the financing
transaction, which include 21 properties not owned by the Partnership.
Liquidity
- ---------
As a result of the 1993 mortgage financing, seven of the Partnership's nine
properties are mortgaged. At the time of the mortgage financing, the aggregate
principal amounts due under the seven mortgage notes was $30,045,000 and the
aggregate fair market value of the Partnership's mortgage properties was
$56,400,000. The Partnership expects to meet its short-term liquidity needs
generally through its working capital provided by operating activities.
Partnership liquidity is based, in part, upon its investment strategy. Upon
acquisition, the Partnership anticipated owning the properties for seven to ten
years, although it was expected that they could be disposed of earlier or later.
All of the properties have been owned by the Partnership at least ten years and
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.
Distributable Cash from Operations totaled $626,657 for the quarter ending
June 30, 1998. Included in Distributable Cash from Operations is interest
income of $28,130 from the Class D Certificates. Management considers
Distributable Cash from Operations to be a supplemental measure of the
Partnership's operating performance. Distributable Cash from Operations is
defined to mean net income computed in accordance with generally accepted
accounting principals ("GAAP"), plus real estate related depreciation and
amortization. Distributable Cash from Operations does not represent cash
generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs. Distributable 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. From Distributable Cash
from Operations, the General Partner has decided to distribute $561,575.79, or
4.0%, on an annualized basis, to the Unit Holders.
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<PAGE> 8
The General Partner will continue to monitor on-going Distributable Cash from
Operations generated by the Partnership during the coming quarters. If
Distributable Cash from Operations generated is lower or higher 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.
While the Partnership is not required to maintain a working capital reserve,
the Partnership has not distributed all the Distributable Cash from Operations
in order to build reserves. As of June 30, 1998, the Partnership's cash
reserves amounted to $1,310,695. The level of cash reserves maintained is at
the discretion of the General Partner.
The Partnership's General Partner mailed out, on or about June 8, 1998, a proxy
statement to the Unit Holders. The Unit Holders and Limited Partners were asked
to consent to a mortgage refinancing proposal, pursuant to which the Partnership
will refinance seven of its nine properties at a fixed interest rate, as opposed
to the current variable interest rate on its existing mortgage debt. Having a
fixed interest rate on the Partnership's mortgage debt is expected to have
the effect of lower monthly mortgage payments. On Monday, August 3, 1998, a
special meeting of the Unit Holders and Limited Partners was held to vote on the
proposals described in the proxy statement. At the meeting, all proposals
considered and voted on by the Unit Holders and Limited Partners were approved
by a majority consent. Accordingly, the General Partner is proceeding with the
refinancing of the Partnership's seven properties.
Results of Operations
- ---------------------
Overall, as illustrated in the following table, the Partnership's nine
properties reported a combined occupancy of 93.2%, (3,104/3,330 sites), versus
92.2% (3,071/3,330) for June 1997. The average monthly homesite rent as of June
30, 1998 was approximately $342, versus $334, an increase of 2.4% from June
1997.
TOTAL OCCUPIED OCCUPANCY AVERAGE
CAPACITY SITES RATE RENT
Ardmor Village 339 325 95.9% $312
Camelot Manor 335 321 95.8 313
Country Roads 312 277 88.8 238
Dutch Hills 278 267 96.0 315
El Adobe 371 362 97.6 384
Paradise Village 611 501 82.0 297
Stonegate Manor 308 306 99.4 319
Sunshine Village 356 326 91.6 417
West Valley 420 419 99.8 429
--- --- ---- ----
Total on 6/30/98: 3,330 3,104 93.2% $342
Total on 6/30/97: 3,330 3,071 92.2% $334
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<PAGE> 9
<TABLE>
<CAPTION>
GROSS REVENUES NET OPERATING
INCOME
6/30/98 6/30/97 6/30/98 6/30/97
<S> <C> <C> <C> <C>
Ardmor Village $ 317,444 $ 266,167 $ 149,879 $ 139,911
Camelot Manor 286,236 278,563 139,658 148,768
Country Roads 212,915 186,063 44,623 36,374
Dutch Hills 237,784 227,273 117,772 121,673
El Adobe 418,692 404,558 261,764 266,349
Paradise Village 345,288 380,427 58,551 62,927
Stonegate Manor 271,971 265,023 119,389 146,279
Sunshine Village 398,266 377,330 245,504 237,009
West Valley 568,359 555,299 371,239 383,168
------ ------- ------- -------
3,056,955 2,940,703 1,508,389 1,542,458
Partnership Management: 3,602 1,517 (127,289) (94,898)
Other Non Recurring expenses: --- --- (88,774) (62,332)
Debt Service (665,659) (659,917)
Depreciation and Amortization --- --- (460,000) (457,083)
----------- ----------- ---------- ----------
$ 3,060,557 $ 2,942,220 $ 166,657 $ 268,228
</TABLE>
COMPARISON OF QUARTER ENDED JUNE 30, 1998 TO QUARTER ENDED JUNE 30, 1997
Gross revenues increased $118,337, or 4.0%, to $3,060,557 in 1998, as compared
to $2,942,220 in 1997. The increase was the result of the increase in average
monthly rents and an increase in overall occupancy. (See table on previous
page.)
Operating expenses increased $219,908, or 8.2%, to $2,893,900 in 1998, as
compared to $2,673,992 in 1997. The increase was the result of an increase in
administrative expenses of $110,869, or 14.2%, to $892,338 in 1998, as compared
to $781,469 in 1997. This increase is the result of higher legal and
professional fees associated with the proxy. Additionally, expenses relating to
property operations increased $79,286, or 26.4%, to $379,374 in 1998, as
compared to $300,088 in 1997. This increase is the result of additional expenses
associated with marketing and additional legal expenses associated with
evictions.
As a result of the foregoing factors, net income decreased to $166,657 for the
quarter ended June 30, 1998 from $268,228 for the quarter ended June 30, 1997.
MANAGEMENT EXPENSES
- -------------------
Net Partnership management expenses for the quarter amounted to $127,289.
Expenses of $130,891 (data processing, accounting and legal expenses, appraisals
and wages to employees of the Partnership) were offset by gross income of
$3,602, generated by inter-
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<PAGE> 10
est on the Partnership's reserves and transfer fees. The equivalent figures for
the second quarter of 1997 were $94,898,$96,415 and $1,517, respectively.
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the three
months ended June 30, 1998.
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/ Paul M. Zlotoff
-----------------------------------
Paul M. Zlotoff, President
By: /s/ Gloria A. Koster
-----------------------------------
Gloria A. Koster, Principal Financial Officer
Dated: August 14, 1998
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<PAGE> 11
EXHIBIT INDEX
Exhibit
No. Description Page
- -------- ----------- ----
27 Financial Data Schedule
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,310,695
<SECURITIES> 875,859
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,311,958
<PP&E> 63,492,917
<DEPRECIATION> 17,953,071
<TOTAL-ASSETS> 51,640,074
<CURRENT-LIABILITIES> 1,093,867
<BONDS> 30,045,000
0
0
<COMMON> 0
<OTHER-SE> 20,501,207
<TOTAL-LIABILITY-AND-EQUITY> 51,640,074
<SALES> 0
<TOTAL-REVENUES> 6,099,018
<CGS> 0
<TOTAL-COSTS> 3,475,345
<OTHER-EXPENSES> 896,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,364,017
<INCOME-PRETAX> 363,656
<INCOME-TAX> 0
<INCOME-CONTINUING> 363,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363,656
<EPS-PRIMARY> .11<F1>
<EPS-DILUTED> 0
<FN>
<F1>5-03(b)(20) EPS Primary - In this RELP the earnings per share indicate income
per LP unit
</FN>
</TABLE>
