<PAGE> 1
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, 1997 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 38-2593067
(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: $20 per
unit, units of beneficial assignments of limited partnership interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of March 1, 1998, 3,303,387 units of limited partnership interest of the
registrant were outstanding and the estimated aggregate market value of the
units as of such date held by non-affiliates, as estimated by the General
Partner (based on a 1998 appraisal of Partnership properties), was approximately
$44,839,000.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
<PAGE> 2
PART I
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund II, a Michigan
Limited Partnership (the "Partnership"), acquired, maintains, operates and
ultimately will dispose of income producing residential real properties
consisting of nine manufactured housing communities (the "Properties"). The
Partnership was organized and formed under the laws of the State of Michigan on
November 7, 1986. 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 in November 1986
which was declared effective by the Securities and Exchange Commission on
December 23, 1986. The Partnership thereafter sold 3,303,387 units (the "Units")
of beneficial assignment of limited partnership interest representing capital
contributions by unit holders (the "Unit Holders") to the Partnership of $20 per
unit. The sale of all 3,303,387 Units was completed in December, 1987,
generating $66,067,740 of contributed capital to the Partnership.
On April 1, 1987, the Partnership acquired Sunshine Village, a
356-space manufactured housing community located in Davie, Florida and Ardmor
Village, a 339-space manufactured housing community located in Lakeville,
Minnesota. On May 22, 1987, the Partnership acquired Camelot Manor, a 335-space
manufactured housing community located in Grand Rapids, Michigan. On July 1,
1987, Country Roads, a 312-space manufactured housing community located in
Jacksonville, Florida and Paradise Village, a 611-space manufactured housing
community located in Tampa, Florida, were acquired by the Partnership. On
September 1, 1987, Dutch Hills, a 278-space manufactured housing community
located in Haslett, Michigan and Stonegate Manor, a 308-space manufactured
housing community located in Lansing, Michigan, were acquired by the
Partnership. On January 8 and 15, 1988, respectively, the Partnership acquired
West Valley, a 420-space manufactured housing community, and El Adobe, a
371-space manufactured housing community, both located in Las Vegas, Nevada.
The Partnership operates the Properties as manufactured housing
communities with the primary investment objectives of: (1) providing cash from
operations to investors; (2) obtaining capital appreciation; and (3) preserving
capital of the Partnership. There can be no assurance that such objectives can
be achieved.
On December 27, 1993, the Partnership participated in a financing
transaction (the "Mortgage Financing") which created mortgage financing for 28
manufactured housing communities (collectively, the "Projects," and
individually, a "Project"). Seven (7) of the Projects are owned by the
Partnership; thirteen (13) are owned by affiliates of Genesis Associates Limited
Partnership, the general partner of the Partnership (the "General
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Partner"), and eight (8) are owned by unrelated third parties. The Projects
owned by the Partnership (the "Fund II Projects") are as follows:
Ardmor Village
Camelot Manor
Dutch Hills
El Adobe
Stonegate
Sunshine Village
West Valley
Essentially, mortgage notes executed by the owners of each of the
Projects were issued in favor of Neutron-Uniprop, Inc. ("Neutron"), a
wholly-owned subsidiary of Uniprop, Inc. (an affiliate of the General Partner),
and assigned by Neutron to an independent trustee of a newly-formed trust (the
"Trust"). The specific purpose of the Trust is to hold the mortgage notes and
the mortgages and other security provided in connection therewith for the
benefit of the owners of the newly-issued Uniprop MHC Mortgage Pass-Through
Certificates (the "Mortgage Certificates"). The proceeds derived from the sale
of the Mortgage Certificates were used to fund the mortgage loans made to the
Project owners and pay the various expenses of the transaction.
Five classes of Mortgage Certificates were issued with varying
seniority and carrying different interest rates. The interest rate on the senior
securities (i.e. the Class A Certificates) floats and equals 1.67% in excess of
the LIBOR rate, computed monthly. The Class B and D Certificates carry fixed
rates of interest of 7.04% and 7.5%, respectively. The interest rate on the
Class C Certificate floats and equals 2.5% in excess of the LIBOR rate, computed
monthly. The Class R Certificates do not have a principal balance or accrue
interest.
The original principal amounts of the mortgage loans for the Fund II
Projects and their terms are as follows:
Ardmor Village $2,930,000
Camelot Manor $3,490,000
Dutch Hills $2,580,000
El Adobe $5,530,000
Stonegate $3,015,000
Sunshine Village $4,290,000
West Valley $8,210,000
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Term: 30 years
Amortization: Years 1-5; none
Years 6-30; 25 year schedule
Interest Rate: Weighted average cost of the Mortgage Certificates
plus 135 basis points (the "Excess Interest"), computed
monthly, but in no event greater than 9.9% per annum
in years 1 through 10 and 10.9% per annum in years 11
through 30, or less than 7% per annum in years 1
through 10 or 8% per annum in years 11 through 30.
After payment of certain servicing expenses and the
costs of administering the Trust, the Excess Interest
will be used to reduce the principal balance of the
Mortgage Certificates, which could ultimately result in
an increase in the value of the Class R Certificates.
Prepayment: Penalty of 5%, 4%, 3%, 2%, and 1% of the principal
amount outstanding for prepayment in years 1, 2, 3, 4,
and 5, respectively. No prepayment penalty after
year 5.
All prepayments of principal made under any of the mortgage notes will
be applied in reduction of the principal balance of the Mortgage Certificates
according to their respective payment priorities. To the extent the Excess
Interest is not used to pay servicing fees and other costs of the trustee and
servicers, it will be applied first in reduction of the principal balance of the
Class B Certificates and Class C Certificates, pro rata until reduced to zero,
then in reduction of the principal balance of the Class A Certificates until
reduced to zero, and then in reduction of the Class D Certificates until reduced
to zero. As a result of the foregoing, the weighted average cost of the Mortgage
Certificates and, therefore, the interest rate charged to each Project owner,
may increase due to prepayment by another borrower and as the principal amount
of the Mortgage Certificates is reduced. In addition, because the Fund II
Projects all have a common owner, the loans to each of the Fund II Projects are
cross-defaulted and cross-collateralized with one another, such that a default
by Uniprop Income Fund II with respect to any one of its loans will permit the
enforcement of remedies on behalf of the Trust against all seven (7) Fund II
Projects and recovery against each Fund II Project in excess of the amount of
its mortgage loan.
As a condition to participating in the mortgage-backed securities
transaction, each Project owner was required to use approximately 5% of its
mortgage proceeds to purchase a subordinated portion of the mortgage-backed
securities, the Class D Certificates. The Class D Certificates are not rated,
carry a fixed interest rate of 7.5% per annum and are subordinated to the Class
A, Class B and Class C Mortgage Certificates, although, as long as there are
sufficient funds in the Trust, the holders of the Class D Certificates are
entitled to receive monthly payments of interest. The Partnership was issued a
Class D Certificate with a face amount of $1,502,250.
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The Class R Certificates, which constitute the residual interest in the
Trust, are owned by Uniprop MHC Residual L.L.C., a newly created Michigan
limited liability company (the "R Holder" or "LLC"). The owners of the R Holder
are the respective owners of the Projects participating in this mortgage-backed
securities financing, with their ownership interest determined based on the
amount each Project owner contributes to the value of the Class R Certificates.
Initially, the Partnership holds a 20.986% interest in the R Holder.
Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation
of its nine manufactured housing communities. Partnership operations commenced
in April 1987 upon the acquisition of the first two Properties. 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 Sunshine Village, Ardmor Village and Camelot Manor Properties were
selected from 25 manufactured housing communities then owned by affiliates of
Genesis Associates Limited Partnership, the General Partner of the Partnership
(the "General Partner"). The other six communities were purchased from
unaffiliated third parties. 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 decision, the General Partner and Consultant will consider relevant
factors, including, current operating results of the particular Property and
prevailing economic conditions, and will make the decision 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 home sites 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, has 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.
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Each of the Properties competes with numerous similar facilities
located in its geographic area. The Davie/Fort Lauderdale area contains
approximately seven communities offering approximately 3,441 housing sites
competing with Sunshine Village. Ardmor Village competes with approximately nine
communities in the Lakeville, Minnesota area offering approximately 2,363
housing sites. Camelot Manor competes with approximately 16 communities in the
Grand Rapids, Michigan area offering approximately 3,697 housing sites. In the
Jacksonville, Florida area, Country Roads competes with approximately nine
communities offering approximately 2,181 housing sites. The Tampa, Florida area
contains approximately five communities offering approximately 1,566 housing
sites competing with Paradise Village. Dutch Hills and Stonegate Manor compete
with approximately 11 other communities in the Lansing, Michigan area offering
approximately 3,386 housing sites. In the Las Vegas, Nevada area, West Valley
and El Adobe compete with approximately 10 other communities offering
approximately 2,897 housing sites. The Properties also compete against other
forms of housing, including apartment and condominium complexes.
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 Sunshine Village, Country Roads and Paradise
Village. 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 Professional 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 on 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, Minnesota and Nevada, where its operations are conducted.
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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.
ITEM 2. PROPERTIES
The Partnership purchased all nine manufactured housing communities for
cash. As a result of the Mortgage Financing, seven of the nine Properties are
encumbered with mortgages in the following original principal amounts:
Ardmor Village $2,930,000
Camelot Manor $3,490,000
Dutch Hills $2,580,000
El Adobe $5,530,000
Stonegate $3,015,000
Sunshine Village $4,290,000
West Valley $8,210,000
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. In January 1990, the
Partnership did begin acquiring some homes in conjunction with its home
purchase/lease program for Country Roads and Paradise Village. Each of the
Properties has a community center which includes offices, meeting rooms and game
rooms. The Ardmor Village community includes a resident manager's apartment.
Country Roads has a 1,200 square foot rental cottage. Each of the Properties,
except Stonegate Manor, has a swimming pool. Several of the Properties also have
laundry rooms, playground areas, garage and maintenance areas and recreational
vehicle or boat storage areas.
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<PAGE> 8
The table below contains certain information concerning the Partnership's nine
properties.
<TABLE>
<CAPTION>
PROPERTY NAME NUMBER
AND LOCATION YEAR CONSTRUCTED ACREAGE OF SITES
- ------------ ---------------- ------- --------
<S> <C> <C> <C>
Ardmor Village
Cedar Avenue S.
Lakeville, MN 1974 74 339
Camelot Manor
South Division
Grand Rapids, MI 1973 57 335
Country Roads
Townsend Road
Jacksonville, FL 1967 37 312
Dutch Hills
Upton Road
Haslett, MI 1975 42.8 278
El Adobe
N. Lamb Blvd.
Las Vegas, NV 1975 36 371
Paradise Village
Paradise Drive
Tampa, FL 1971 91 611
Stonegate Manor
Eaton Rapids Drive
Lansing, MI 1968 43.6 308
Sunshine Village
Southwest 5th St.
Davie, FL 1972 45 356
West Valley
W. Tropicana Ave
Las Vegas, NV 1972 53 420
</TABLE>
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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<PAGE> 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the Unit Holders and limited partners are
restricted to certain matters of fundamental significance to the Partnership.
The Unit Holders and 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 Unit Holders and 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 Unit Holders and Limited Partners, as a group,
holding more than 50% of the then outstanding interests. There have been no
matters submitted to a vote of the limited partners during the last fiscal year.
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 of the
Partnership and it is not anticipated that one will ever develop. During the
last twelve months, less than two and one-half percent (2.5%) of the Units have
been transferred, 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 (i) 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 the outstanding balances of the mortgages on the
mortgaged Properties and sales expenses (but without consideration to tax
consequences of the sale), by (ii) 3,303,387. In March, 1998, the Properties
were appraised at an aggregate fair market value of $77,200,000. Assuming a sale
of the nine properties in March 1998, at the appraised value, less payment of
selling expenses and mortgage debt, the net aggregate proceeds available for
distribution to the Unit Holders is estimated to be $44,839,000 or $13.57 per
unit. There can be no assurance that the estimated net asset value could ever be
realized. As of March 1, 1998, the Partnership had approximately 4,850 Limited
Partners holding Units.
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for the
Partnership for the periods ended December 31, 1997, 1996, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1995 31, 1994 31, 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Assets $52,652,238 $53,583,381 $54,472,196 $56,093,938 $80,219,220
=========== =========== =========== =========== ===========
Long Term
Debt $30,045,000 $30,025,487 $29,894,586 $29,786,033 $29,660,353
----------- ----------- ----------- ------------ ------------
Income 11,922,526 11,250,156 11,210,541 11,302,229 10,114,080
Expenses (10,755,270) (10,854,181) (10,670,390) (9,857,350) (7,261,446)
------------- ------------ ------------ ---------- -----------
Net Income $1,167,256 $395,975 $540,151 $1,444,879 $2,852,634
========== ======== ========= ========== ===========
Distributions to
Unit Holders,
per Unit: $ .64 $.54 $.66 $7.60 $1.40
Income per
Unit: $ .35 $.12 $.16 $.43 $.85
Weighted
average
number of
Units
outstanding: 3,303,387 3,303,387 3,303,387 3,303,387 3,303,387
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity
The Partnership retains cash reserves which it considers adequate to
maintain the Properties. All funds in excess of operating needs and cash
reserves are distributed to the Unit Holders, quarterly.
As of December 31, 1996, the Partnership had $1,962,609 in reserves.
Through the 1997 calender year, the Partnership funded into reserves
approximately $903,864. On December 31, 1997, the Partnership had $2,506,411 in
reserves, of which $1,630,552 was in cash and $875,859 was in short term
marketable securities. (See Note 1 to the Financial Statements).
Capital Resources
The capital formation phase of the Partnership began on April 1, 1987
when Sunshine Village and Ardmor Village were purchased by the Partnership and
operations commenced. It ended on January 15, 1988 when El Adobe, the
Partnership's last property, was purchased. The total capital raised through
December 1987 was $66,067,740 of which approximately $58,044,000 was used to
purchase the nine Properties after deducting sales commissions, advisory fees
and other organization and offering costs.
In an effort to provide Unit Holders with a return of capital and
eliminate the cumulative preferred return deficit owed to them, the General
Partner, with majority consent from the Unit Holders, mortgaged seven of its
nine Properties through the Mortgage Financing at approximately 56.0% of their
appraised value, or $30,045,000.
On or around February 15, 1994, the Partnership distributed $23,119,767
to the Unit Holders or $7.00 per $20.00 Unit held. $13,572,978 (or $4.11 per
Unit), restored the shortfall in the Unit Holders 10.0% cumulative preferred
return, and $9,546,789 (or $2.89 per unit), was a partial return of the Limited
Partners' original capital contributions.
As described in Note 3 to the Financial Statements, the term of the
mortgage notes executed in connection with the Mortgage Financing payable are
for a period of 30 years with interest only payments required for the first 5
years. Beginning in 1999, principal and interest payments are required on a self
amortizing basis through December of 2023. The minimum mortgage interest rate is
7.0% per annum through December 2003 and 8.0% thereafter. The maximum mortgage
interest rate is 9.9% per annum through December 2003 and 10.9% thereafter. Each
of the seven mortgaged Properties is cross- collateralized.
As part of the Mortgage Financing, the Partnership was required to
purchase $1,502,250 in mortgage-backed securities. These mortgage-backed
securities equal
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<PAGE> 12
approximately 5.0% of the seven mortgage notes payable and pay interest computed
at a monthly fixed rate of 7.5% per annum. As described in Note 1 of the
Financial Statements 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 twenty-eight
properties participating in the financing transaction, (including any of the
seven Properties mortgaged by the Partnership).
The General Partner acknowledges that the mortgages impose some risks
to the Partnership, but that such risks are not greater than risks typically
associated with real estate financing. In addition, as a result of the
borrowing, there is potential adverse impact on the amount of distributions to
the Unit Holders in future years. However, the General Partner anticipates,
based on 1998 projections, that distributions to the Unit Holders will be
approximately 3.0% to 4.5% through 1998.
Results of Operations
Distributions
For the year ended December 31, 1997, the Partnership made
distributions to the Unit Holders equal, on an annualized basis, to 3.47% on
their adjusted capital contributions, or $ .64 per $17.11 unit.
Distributions paid to the Unit Holders totaled $2,114,171 in 1997, $1,783,868 in
1996, and $2,195,720 in 1995.
Annual distributable cash from operations was less than the amount
required for the annual 10.0% preferred return to the Unit Holders by
approximatley $3,538,000. As described in Note 7 to the Partnership's financial
statements, the cumulative preferred return deficit through December 1997 was
approximatley $14,696,000. No distributions can be made to the General Partner
until the cumulative preferred return deficit has been distributed to the Unit
Holders. At December 31, 1997, the unpaid amount to be distributed to the
General Partner from future capital transactions was approximately $6,100,000.
In February 1994, $23,119,767, a part of the Mortgage Financing
proceeds, was distributed to the Unit Holders, of which $13,572,978 represented
the elimination of the preferred return deficit that existed and $9,546,789
represented a partial return of capital.
Net Income
The Partnership generated net income of $1,167,256 in 1997, $395,975 in
1996, and $540,151 in 1995.
There were increases in net income between 1996 and 1997 at eight of
the nine properties. The approximately 12.0% increase in 1997 combined net
income at the properties resulted from higher occupancy and rental increases.
The decline in net income from 1995 to 1996 was due to managements decision to
no longer recognize any income associated with the equity interest in the LLC.
(See Note 3 to the Financial Statements).
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<PAGE> 13
Net income plus depreciation and amortization less distributions to
Unit Holders, and Net Income from the LLC were $903,864, $556,384 and
$(262,765). Approximately 12.0% of the distributions to the Unit Holders in 1995
were funded with cash reserves.
Partnership Management
Net expenses for the management of the Partnership (i.e. gross expenses
for such management, less transfer fees, interest on reserves, interest on funds
awaiting distribution, and certain non-recurring income) were $155,024 in 1997,
$177,328 in 1996 and $149,523 in 1995.
The increase from 1995 to 1996 was due to higher legal fees and lower
interest income on cash reserves. The decrease from 1996 to 1997 was due to
higher interest income on cash reserves and lower adminstrative expenses.
Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 92.5% (3,080/3,330 sites) as of
December 1997, versus 91.0% in December 1996, and 88.2% in December 1995. The
average monthly rent was approximately $333 per home site in December 1997,
versus $327 in December 1996 and $316 in December 1995, an increase each year of
1.8% and 3.5%, respectively.
<TABLE>
<CAPTION>
TOTAL
SITES OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
------ --------------------- -------------------- --------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmor Village 339 326 323 298 96.2% 95.3% 87.9% $306 $314 $304
Camelot Manor 335 323 325 316 96.4 97.0 94.3 308 299 290
Country Roads 312 288 273 265 92.3 97.5 84.9 225 215 205
Dutch Hills 278 260 266 260 93.5 95.7 93.5 309 297 289
El Adobe 371 366 360 347 98.7 97.0 93.5 374 359 347
Paradise Village 611 480 437 435 78.6 71.5 71.2 282 272 257
Stonegate Manor 308 293 298 292 95.1 96.8 94.8 312 299 291
Sunshine Village 356 326 331 331 91.6 93.0 93.0 399 381 368
West Valley 420 418 418 392 99.5 99.5 93.3 429 438 428
------ ----- ------ ------ ------- ------- ------ ----- ---- ----
Overall 3,330 3,080 3,031 2,936 92.5% 91.0% 88.2% $333 $327 $316
====== ===== ====== ====== ======= ======= ====== ===== ==== ====
</TABLE>
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<PAGE> 14
The table below summarizes gross revenues and net operating income for
the Partnership and Properties during 1997, 1996 and 1995.
<TABLE>
<CAPTION>
GROSS REVENUE NET OPERATING INCOME
--------------------------------------- -----------------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ardmor Village $1,129,735 $1,104,595 $1,058,592 $523,625 $ 613,967 $ 563,269
Camelot Manor 1,123,127 1,085,052 1,050,043 614,242 564,878 560,413
Country Roads 763,727 708,498 624,061 109,568 100,722 (43,518)
Dutch Hills 918,958 886,536 859,073 481,335 458,055 449,811
El Adobe 1,646,510 1,542,026 1,436,567 1,051,448 955,055 902,642
Paradise Village 1,460,543 1,308,743 1,236,377 326,009 191,971 78,478
Stonegate Manor 1,035,924 973,178 956,926 578,851 440,726 474,846
Sunshine Village 1,513,820 1,462,935 1,448,518 901,389 850,925 881,978
West Valley 2,240,418 2,098,742 1,931,920 1,510,414 1,271,269 1,201,331
------------ ------------ ------------ ------------ ----------- -----------
1,832,762 11,170,305 10,602,077 6,096,881 5,447,568 5,069,250
Partnership
Mgmt. 89,764 79,851 110,455 (155,024) (177,328) (149,523)
Equity in Net Income
of LLC(1) - - 498,099 - - 498,099
Other nonrecurring (262,257) (316,627) (229,647)
expenses
Debt Service (2,661,565) (2,613,361) (2,757,125)
Depreciation and
Amortization (1,850,779) (1,944,277) (1,890,903)
------------ ------------ ------------ ------------ ----------- -----------
TOTAL: $11,922,526 $11,250,156 $11,210,541 $ 1,167,256 $ 395,975 $ 540,151
</TABLE>
(1) Refer to Note 3 of the Financial Statements
As illustrated in the table above, the Partnership's nine properties
generated net operating income of $6,096,881 or 51.5% of total revenues compared
to $5,447,568 or 48.4% of total revenues; and $5,069,250 or 47.4% of total
revenues, in 1997, 1996, and 1995 respectively.
When compared, the following two Properties have not performed as well
as the other seven Properties:
Country Roads, in Jacksonville, Florida, reported an occupancy of 92.3%
(288/312 sites) as of December 1997 compared to 87.5% in 1996 and 84.9% in 1995.
The average rent in December 1997 was $225, versus $215 in 1996 and $205 in
1995, an increase of 4.7 and 4.9%, respectively.
The property's 1997 net operating income of $109,568 represented 14.3%
of revenues versus $100,722 or 14.2% of revenues in 1996 and a net operating
income loss of ($43,518) or -7.0% of revenues in 1995. The increase in net
operating income from 1996 to 1997 is primarily due to higher occupancy and
higher average rent.
-14-
<PAGE> 15
Paradise Village, in Tampa, Florida, reported an occupancy of 78.6%
(480/611 sites) as of December 1997 compared to 71.5% in 1996 and 71.2% in 1995.
The average rent in December 1997 was $282, versus $272 in 1996 and $257 in
1995, an increase of 3.7% and 5.8%, respectively.
The property's 1997 net operating income of $326,009 represented 22.3%
of revenues compared to $191,971 or 14.7% of revenues in 1996 and $78,478 or
6.3% in 1995. The increase in net operating income from 1996 to 1997 was due to
lower operating expenses, increased occupancy and higher average rents.
It is management's belief that the properties listed above will
continue to improve in occupancy and performance during 1998.
Year 2000 Costs
The Partnership, like most users of computer software, will be
required to modify certain portions of its software so that it will function
properly in the year 2000. Maintenance or modification costs will be expensed
as incurred, while the costs of any new software will be capitalized and
amortized over the software's useful life life. Management believes these
"year 2000" costs will be immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal year ended
December 31, 1997, 1996 and 1995, 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, Genesis Associates Limited Partnership, is a Michigan
limited partnership which has two general partners, Uniprop, Inc., the managing
General Partner and Paul M. Zlotoff.
Information concerning Mr. Zlotoff's age and principal occupations, as
well as for other officers and directors of Uniprop, Inc., during the last five
years or more is as follows:
Paul M. Zlotoff, 48, is and has been an individual general partner of
Genesis Associates since its inception in November 1986. 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 P.I. Associates Limited
Partnership, the general partner of
-15-
<PAGE> 16
Uniprop Manufactured Housing Communities Income Fund, a public limited
partnership which owns and operates four manufactured housing communities. Mr.
Zlotoff currently, and in the past, has acted as the general partner for various
other limited partnerships owning manufactured housing communities and some
commercial properties.
Peter J. Martz, 49, joined Uniprop, Inc. as Executive-Vice President
and CEO on January 1, 1998. Mr. Martz will be active in all areas relating to
the acquisition and financing of new and existing real estate projects. Mr.
Martz graduated from the University of Detroit in 1970 with a B.S. in
accounting. He became a tax partner with Ernst & Ernst in 1980, specializing in
real estate transactions. In 1983, he became Executive Vice President and CFO of
Lamb Technicon, a large, privately held, machine tool holding company. Since
1988, Mr. Martz has been with a private investment company specializing in
mergers, acquisitions and real estate investments. Mr. Martz is a member of the
Michigan Association of CPA's and the American Institute of CPA's.
Steven P. Adler, 47, became President of Uniprop, Inc. on January 1,
1998. Previously, Mr. Adler had been Vice President - Acquisitions and Director
of Operations for Uniprop, Inc. since 1984. Mr. Adler is a past member of the
Michigan Mobile Home Commission. He has been involved in the manufactured
housing industry since 1978. Mr. Adler's responsibilities on behalf of Uniprop,
Inc. include property acquisitions, and the overall direction for the operation
of properties, including management, marketing and construction. Mr. Adler
obtained a B.A. from Bard College, a M.S. in Resource Management and a M.A. in
Sociology from the University of New Hampshire.
Gloria Koster, 44, became Chief Financial Officer of Uniprop, Inc. on
January 1, 1998. Previously, Ms. Koster had been Vice President - Finance of
Uniprop, Inc. since July 1989. She is responsible for accounting, financial
controls, data processing, cash management, financial reporting, budgeting,
financing, and tax matters. Prior to joining Uniprop, Inc., Ms. Koster had been
with Michigan National Bank for 13 years, most recently as a first
vice-president. She has an M.B.A. from the University of Detroit.
Terry Winter, 38, became Chief Investment Officer of Uniprop, Inc. on
January 1, 1998. Previously, Mr. Winter had been Vice President - Public
Programs of Uniprop, Inc. since August 1990. He is responsible for financial
analysis of properties, placement of investments, management and marketing for
public and private programs. From March 1989 until August 1990, Mr. Winter was
vice president of marketing/business development in Dallas, Texas, with Home
Owners Funding Corp. of America, a mortgage banking originator and servicer
specializing in loans for manufactured homes and manufactured housing
communities. From February 1987 to March 1989, he had been Vice President of
loan services at Home Owners. From July 1982 until February 1987, before assets
of that company were acquired by Home Owners in 1987, Mr. Winter had been Vice
President of real estate management with Commodore Financial Services Corp. Mr.
Winter has a B.B.A. in finance from Wayne State University.
-16-
<PAGE> 17
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. Depending upon the results of operations and other
factors, 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 duly formed pursuant to the
Uniform Limited Partnership Act, as amended, of the State of Michigan. The
General Partner, Genesis Associates Limited Partnership, is vested with full
authority as to the general management and supervision of business and the other
affairs of the Partnership, subject to certain constraints in the partnership
agreement and consulting agreement. Unit holders and/or 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.
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 original sellers of Sunshine
Village and Ardmor Village and is entitled to share in a contingent purchase
price with respect to each Property, when and if the Properties are sold and the
sellers become entitled thereto. The maximum amounts which could be payable to
the sellers are as follows: Sunshine Village, $1,108,260 and Ardmor Village,
$946,236. The cash purchase price and contingent purchase price for each
Property were determined by reference to the average of two independent real
estate appraisals which were obtained by the General Partner. Such appraisals
are only estimates of value and are not necessarily indicative of the actual
real estate. Each seller will become entitled to any unpaid contingent purchase
price upon the sale, financing or other disposition of each such Property, but,
only after the receipt by each Unit Holder and Limited Partner of aggregate
distributions equal to the sum of (I) his 10% cumulative preferred return plus
(ii) 125% of his capital contribution. The actual amounts to be received, if
any, will depend upon the results of the Partnership's operations
-17-
<PAGE> 18
and the amounts received upon the sale, financing or other disposition
of the Properties and are not determinable at this time. The Partnership does
not anticipate any such amount will become payable during the next fiscal year.
The Partnership will 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. This incentive management interest is 15% of distributable
cash from operations in any quarter. However, in each quarter, the General
Partner's right to receive any net cash from operations is subordinated to the
extent necessary to first provide each Unit Holder and Limited Partner his 10%
cumulative preferred return. During the last fiscal year, the General Partner
received no distributions on account of its incentive management interest from
operations because distributions were approximately $3,538,000 less than the
10% cumulative preferred return due Unit Holders. Any such amounts unpaid in a
taxable year will be accumulated and paid from distributable cash from capital
transactions, but only after each Unit Holder and Limited Partner has first
received his 10% cumulative preferred return and 125% of his capital
contribution. For 1997, approximately $400,000 was accumulated for the General
Partner, and the General Partner's aggregate accumulated incentive management
interest as of December 1997 was approximately $6,100,000. The actual incentive
management interest from operations to be accumulated or paid during the next
fiscal year will depend upon the results of the Partnership's operations and is
not determinable at this time. The Partnership does not anticipate any such
amount will be distributed to the General Partner during the next fiscal year
and will again be accumulated with payment deferred. No distributions could be
made to the General Partner until an approximately $14,696,000, 10% cumulative
preferred return deficit as of December 31, 1997, is first distributed to the
Unit Holders. In February of 1994, as part of the Mortgage Financing,
$23,119,767 was distributed to the Unit Holders, $13,572,978 of which
eliminated the Unit Holders' preferred return deficit through December 31,
1993.
The Partnership must also pay an incentive management interest from
capital transactions to the General Partner for its services rendered to the
Partnership. The General Partner will be entitled to receive its share of
distributable cash from capital transactions after (I) each Unit Holder and
Limited Partner has received aggregate distributions in an amount equal to the
sum of (a) his 10% cumulative preferred return plus (b) 125% of his capital
contribution, (ii) any contingent purchase prices have been paid, and (iii) any
property disposition fees to Uniprop, Inc. have been paid. The General Partner's
share of distributable cash from capital transactions so payable will be (I)
100% of such distributable cash from capital distributions until the General
Partner's share of the aggregate capital distributions made under section
11c(iii) and 11c(v) of the partnership agreement equal 25% and (ii) thereafter,
25% of such distributable cash from capital transactions. No incentive
management interest from capital transactions was paid to the General Partner
for the fiscal year ended December 31, 1997. The Partnership does not anticipate
that any such amounts will be paid or become payable to the General Partner
during the next fiscal year.
-18-
<PAGE> 19
Uniprop, Inc. 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
$585,394: Ardmor Village, $56,791; Camelot Manor, $55,433; Country Roads,
$38,701; Dutch Hills, $45,230; El Adobe, $81,229; Paradise Village, $71,965;
Stonegate Manor, $50,893; Sunshine Village, $74,669; and West Valley, $110,483.
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.
Certain employees of affiliates of the General Partner were paid an
aggregate of $177,046 during 1997 to perform local property management, data
processing and investor relations services for the Partnership. It is
anticipated comparable amounts will be paid in the next fiscal year.
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, 1997 and 1996
(3) Statements of Income for the fiscal years ended
December 31, 1997, 1996 and 1995
(4) Statements of Partners' Equity for the fiscal years
ended December 31, 1997, 1996 and 1995
(5) Statements of Cash Flows for the fiscal years ended
December 31, 1997, 1996 and 1995
(6) Schedule III - Real Estate and Accumulated Depreciation
for the fiscal years ended December 31,
1997, 1996 and 1995
(b) Reports on Form 8-K
-19-
<PAGE> 20
The Partnership did not file any Forms 8-K during the fourth quarter of
1997.
(c) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed November 12, 1986, as amended on
December 22, 1986 and January 16, 1987:
3(a) Certificate of Limited Partnership for the Partnership
3(b) Uniprop Income Fund II Agreement of Limited Partnership
4(a) First Amendment to Uniprop Income Fund II Agreement of Limited
Partnership (April 1, 1987)
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 8-K
filed January 7, 1994:
28(a) Specimen Mortgage Note (without exhibit)
28(b) Specimen Open-End Mortgage, Deed of Trust, Security Agreement,
Fixture Financing Statement and Assignment of Leases and Rents
(without exhibits), with: Specimen Rider for properties
located in Michigan; Specimen Rider for property located in
Minnesota; Specimen Rider for property located in Florida; and
Specimen Rider for properties located in Nevada
28(c) Specimen Assignment of Rents and Leases (without
exhibits), with: Specimen Rider for property located
in Minnesota; Specimen Rider for properties located
in Nevada
The following exhibits are attached to this Report:
4(b) Form of Beneficial Assignment Certificate (BAC) for the
Partnership (As last submitted with Form 10-K for the fiscal
year ended December 31, 1992 and originally submitted with
Form 10-K for the fiscal year ended December 31, 1987.)
10(c) Contingent Purchase Price Agreement with Sunrise Broward
Associates, Ltd. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1992.)
-20-
<PAGE> 21
10(d) Contingent Purchase Price Agreement with Ardmor Associates
Limited Partnership. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1992.)
10(e) Incentive Acquisition Fee Agreement between the Partnership
and Uniprop, Inc. (As last submitted with Form 10-K for the
fiscal year ended December 31, 1992.)
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the
Partnership's nine manufactured housing communities, as of
March 1, 1998
(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.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund II, a
Michigan Limited Partnership, 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., Managing General Partner
By: /s/ Paul M. Zlotoff
-------------------------------------
Paul M. Zlotoff, Chairman
Dated: March 30, 1998
-21-
<PAGE> 22
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Gloria Koster By: /s/ Paul M. Zlotoff
----------------------------- ------------------------------------------
Gloria Koster Paul M. Zlotoff, Chairman of Uniprop, Inc.
(Chief Financial Officer of
Uniprop, Inc.)
Dated: March 30, 1998 Dated: March 30, 1998
By: /s/ Andrew Feuereisen
-----------------------------
Andrew Feuereisen
(Controller of Uniprop, Inc.)
Dated: March 30, 1998
-22-
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund II (a Michigan limited partnership), as of December 31,
1997 and 1996 and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1997. 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 II at December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 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 12, 1998
<PAGE> 24
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
PROPERTY AND EQUIPMENT (Note 3)
Buildings and improvements $ 49,099,290 $ 48,558,632
Land 11,644,103 11,644,603
Manufactured homes and improvements 2,082,250 2,535,831
Furniture and equipment 369,274 342,651
- ---------------------------------------------------------------------------------------------------------------
63,194,917 63,081,717
Less accumulated depreciation 17,057,071 15,329,988
- ---------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 46,137,846 47,751,729
Cash and cash equivalents 1,630,552 1,144,427
Marketable securities 875,859 818,182
Mortgage-backed securities (Note 3) 1,502,250 1,502,250
Unamortized financing costs 891,000 930,139
Investment (Note 3) 998,995 998,995
Other assets (Note 2) 615,736 437,659
- ---------------------------------------------------------------------------------------------------------------
$ 52,652,238 $ 53,583,381
===============================================================================================================
LIABILITIES AND PARTNERS' EQUITY
Notes payable (Note 3) $ 30,045,000 $ 30,025,487
Accounts payable 126,063 155,889
Other liabilities (Note 4) 1,220,472 1,194,387
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 31,391,535 31,375,763
- ---------------------------------------------------------------------------------------------------------------
PARTNERS' EQUITY
Unit holders 21,030,515 21,989,103
General partner 230,188 218,515
- ---------------------------------------------------------------------------------------------------------------
TOTAL PARTNERS' EQUITY 21,260,703 22,207,618
- ---------------------------------------------------------------------------------------------------------------
$ 52,652,238 $ 53,583,381
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $ 11,340,654 $ 10,824,604 $ 10,257,258
Interest 203,570 194,493 224,027
Equity in net income of LLC (Note 3) - - 498,099
Other 378,302 231,059 231,157
- ---------------------------------------------------------------------------------------------------------------
11,922,526 11,250,156 11,210,541
- ---------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 4,347,873 4,417,300 4,230,166
Depreciation and amortization 1,850,779 1,944,277 1,890,903
Administrative (Note 5) 998,950 1,009,113 956,742
Property taxes 896,103 870,130 835,454
Interest 2,661,565 2,613,361 2,757,125
- ---------------------------------------------------------------------------------------------------------------
10,755,270 10,854,181 10,670,390
- ---------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,167,256 $ 395,975 $ 540,151
===============================================================================================================
INCOME PER LIMITED PARTNERSHIP
UNIT (Note 7) $ .35 $ .12 $ .16
===============================================================================================================
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT (Note 7) $ .64 $ .54 $ .66
===============================================================================================================
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
===============================================================================================================
NET INCOME ALLOCABLE TO
GENERAL PARTNER $ 11,673 3,960 $ 5,402
===============================================================================================================
DISTRIBUTIONS ALLOCABLE TO
GENERAL PARTNER $ - $ - $ -
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 26
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
General
Partner Unit Holders TOTAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, January 1, 1995 $ 209,153 $ 25,041,927 $ 25,251,080
Distributions to unit holders - (2,195,720) (2,195,720)
Net income for the year 5,402 534,749 540,151
- ---------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 214,555 23,380,956 23,595,511
Distributions to unit holders - (1,783,868) (1,783,868)
Net income for the year 3,960 392,015 395,975
- ---------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 218,515 21,989,103 22,207,618
Distributions to unit holders - (2,114,171) (2,114,171)
Net income for the year 11,673 1,155,583 1,167,256
- ---------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1997 $ 230,188 $ 21,030,515 $ 21,260,703
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 27
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,167,256 $ 395,975 $ 540,151
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,792,127 1,778,930 1,747,977
Amortization 58,652 165,347 142,926
Equity in net income of LLC (Note 3) - - (498,099)
Gain on sale of property and equipment (18,850) (40,188) (1,933)
(Increase) decrease in other assets (178,077) 87,568 96,924
Increase (decrease) in accounts payable (29,826) 1,177 (85,176)
Increase (decrease) in other liabilities 26,085 367,000 10,450
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,817,367 2,755,809 1,953,220
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment (982,115) (1,115,173) (961,537)
Proceeds from sale of property and equipment 822,721 760,760 175,936
Purchase of marketable securities (507,677) (61,429) (481,753)
Proceeds from redemption of marketable securities 450,000 200,000 525,000
- ---------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (217,071) (215,842) (742,354)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to unit holders (2,114,171) (1,783,868) (2,195,720)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 486,125 756,099 (984,854)
CASH AND CASH EQUIVALENTS,
at beginning of year 1,144,427 388,328 1,373,182
- ---------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
at end of year $ 1,630,552 $ 1,144,427 $ 388,328
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 28
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ORGANIZATION AND BUSINESS
ACCOUNTING
POLICIES Uniprop Manufactured Housing Communities Income Fund II, a
Michigan Limited Partnership (the "Partnership")
acquired, maintains, operates and will ultimately dispose of
income producing residential real properties consisting of
nine manufactured housing communities (the "properties")
located in Florida, Michigan, Nevada and Minnesota. The
Partnership was organized and formed under the laws of the
State of Michigan on November 7, 1986.
In accordance with its Prospectus dated December 1986,
the Partnership sold 3,303,387 units of beneficial
assignment of limited partnership interest ("Units") for
$66,067,740. The Partnership purchased the properties for an
aggregate purchase price of approximately $56,000,000. Three
of the properties costing approximately $16,008,000 were
previously owned by entities which were affiliates of the
general partner.
The general partner is Genesis Associates Limited
Partnership. Uniprop Beneficial Corporation was the initial
limited partner who assigned to those persons purchasing
units a beneficial limited partnership interest when the
minimum number of units were sold.
USE OF ESTIMATES
In preparing financial statements in conformity with
generally accepted accounting principles, management is
required 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.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments
purchased with a maturity term of less than three months to
be cash equivalents.
<PAGE> 29
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, and
marketable securities approximate fair value because of the
relative short maturity of these items.
The carrying amounts of notes payable approximate fair
value because the interest rates change with market rates.
The fair value of the mortgage-backed securities could
not be reasonably estimated due to their lack of liquidity
and their unique nature. The Partnership has the positive
intent and ability to hold these securities to maturity (see
"Mortgage-Backed Securities" below).
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the
following estimated useful lives:
Building and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
Accumulated depreciation for tax purposes was
$15,210,638 and $13,658,919 as of December 31, 1997 and
1996, 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, 1997.
<PAGE> 30
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARKETABLE SECURITIES
Marketable securities at December 31, 1997 include U.S.
Government and Federal Agency Bonds with maturity dates
ranging from April 1998 to May 1999. These securities are
stated at amortized cost and management intends to hold such
securities to maturity. The rate of return on these
securities ranged from 6.37% to 7.87%. During 1997, $450,000
of marketable securities matured.
MORTGAGE-BACKED SECURITIES
In connection with the Partnership's 1993 financing
transaction (see Note 3), the Partnership was required to
use approximately 5% of its mortgage proceeds to purchase a
subordinated portion of the trust fund's mortgage-backed
securities ("Class D Certificates"). These Class D
Certificates are not rated, carry a fixed interest rate of
7.5% per annum and are subordinated to the Class A, B and C
mortgage certificates issued as part of the aforementioned
financing transaction. The Partnership was issued a Class D
Certificate in 1993 with a face amount of $1,502,250.
These securities are carried at cost and the Partnership
intends to hold such securities to maturity. The actual
maturity date, which is dependent upon future interest rates
and other factors, is anticipated to occur before or during
the year 2023. The future value of the Class D Certificates
would be adversely affected by a foreclosure or a
significant decline in operating results involving any of
the twenty-eight properties participating in the financing
transaction (including any of the seven properties mortgaged
by the Partnership) (see Note 3); however, all scheduled
payments to the trust fund have been made to date by the
participating properties and management is not aware of any
situations that would adversely affect future scheduled
payments. The Partnership currently intends to pay its notes
payable underlying the Class D Certificates in accordance
with their scheduled terms.
FINANCING COSTS
Costs to obtain financing have been capitalized and are
amortized using the straight-line method over the 30-year
term of the related mortgage notes payable.
<PAGE> 31
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
INVESTMENT
The "Investment" reflected on the Partnership's balance
sheets represents a 20.98% residual interest ("Class R
Certificates") of the trust fund which was established as
part of the 1993 financing transaction (see Note 3). The
owners of the Class R Certificates are the respective owners
of the properties participating in the mortgage-backed
securities transaction, with their ownership interest based
on the amount each property contributed to the value of the
Class R Certificates. These certificates have no principal
or interest amount associated with them, but represent the
amount which the Partnership will be entitled to receive
after all other classes of certificates have been reduced to
zero, which is anticipated to occur before or during the
year 2023; the actual maturity date is dependent upon future
interest rates and other factors. The future value of the
Class R Certificates would be adversely affected by a
foreclosure or a significant decline in operating results
involving any of the twenty-eight properties participating
in the financing transaction, including any of the seven
properties mortgaged by the Partnership (see Note 3);
however, all scheduled payments to the trust fund have been
made to date by the participating properties and management
is not aware of any situations that would adversely affect
future scheduled payments. The Partnership currently intends
to pay its notes payable underlying the Class R Certificates
in accordance with their scheduled terms.
The Partnership's "Investment" is accounted for using
the equity method of accounting, whereby 20.98% of the trust
fund's residual interest (which generally represents
mortgage interest payments to the trust fund in excess of
amounts paid to certificate holders) is recorded in the
accompanying financial statements, subject to management's
estimation of the carrying value of the investment (see Note
3).
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.
<PAGE> 32
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
2. Other Assets At December 31, 1997 and 1996, "Other assets"
included cash of approximately $216,000 and $88,000,
respectively, in a security deposit escrow account for two
of the Partnership's properties, which is required by the
laws of the state in which they are located and is
restricted from operating use.
3. Notes Payable Notes payable consisted of:
<TABLE>
<CAPTION>
December 31, 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C>
Mortgage notes payable totalling $30,045,000,
less unamortized discount of $19,513
in 1996 (See further description below) $ 30,045,000 $ 30,025,487
==================================================================================
</TABLE>
In December 1993, the Partnership mortgaged seven of its
properties in connection with a financing transaction which
involved twenty-one other properties, thirteen of which are
owned in part by affiliates of the general partner. The
borrowings, which are secured by the mortgages on the
Partnership's properties as well as the mortgages on the
other twenty-one properties, were funded through the
issuance of mortgage-backed securities. As part of the
financing, the Partnership was required to purchase
$1,502,250 in mortgage-backed securities. The entity that
issued these securities was a newly created trust fund.
The proceeds of the mortgage notes payable were obtained
primarily to eliminate the cumulative preferred return
deficit owed to the unit holders that existed as of December
31, 1993, and also to distribute a return of capital to the
unit holders.
<PAGE> 33
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
The mortgage notes payable require monthly payments of
interest only through December 1998. Thereafter, monthly
payments of principal and interest are required through
December 2023. Principal payments to be made in 1999, 2000,
2001 and 2002 are approximately $363,000, $395,000, $430,000
and $468,000, respectively. The minimum mortgage interest
rate is 7.0% per annum through December 2003 and 8.0%
thereafter. The maximum mortgage interest rate is 9.9% per
annum through December 2003 and 10.9% thereafter. These
minimum and maximum rates are determined based on formulas
specified in the borrowing agreement. Each of the seven
mortgaged properties of the Partnership is
cross-collateralized under the terms of the agreement.
The Partnership also has a 20.98% interest in the
residual interest of the trust fund and will be entitled to
receive a pro-rata share of the proceeds of the remaining
assets of the trust fund after the principal balances of the
regular security holders have been paid. The residual
interest of the trust fund is a separate legal entity and is
organized as a Limited Liability Corporation ("LLC") for
federal income tax purposes. At December 31, 1997 and 1996,
the Partnership's equity in the LLC reflected in the
accompanying balance sheets was $998,995, which was
determined using the equity method of accounting. The
Partnership recognized its share of the net income of the
LLC for financial statement purposes in the statements of
income prior to 1996. In subsequent periods, the Partnership
did not recognize any income related to the LLC due to
management's belief that any further increases in the
carrying amount of the investment may not be recoverable.
Management anticipates that the current carrying value of
$998,995 is fully recoverable and therefore no impairment
loss has been recorded in these financial statements.
During 1995, $498,099 was recognized in the statements
of income; however, as reflected in the statements of cash
flows, no cash was received by the Partnership for this
amount.
<PAGE> 34
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
4. Other Other liabilities consisted of:
Liabilities
<TABLE>
<CAPTION>
December 31, 1997 1996
----------------------------------------------------------------------------------
<S> <C> <C>
Tenants' security deposits $ 502,086 $ 495,522
Accrued property taxes 339,508 344,090
Accrued interest 229,730 221,761
Other 149,148 133,014
----------------------------------------------------------------------------------
TOTAL $ 1,220,472 $ 1,194,387
==================================================================================
</TABLE>
5. Related Party MANAGEMENT AGREEMENT
Transactions
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, 1997, 1996 and 1995,
the affiliate earned property management fees of $585,394,
$552,846 and $524,609, respectively, as permitted in the
Agreement of Limited Partnership. These operating expenses
are included with "Administrative" expenses in the
respective statements of income. The Partnership was owed
$19,765 and $13,559 by the affiliate at December 31, 1997
and 1996, respectively, for overpayments made.
Certain employees of the Partnership are also employees
of affiliates of the general partner. These employees were
paid by the Partnership $177,046, $196,491 and $164,657 in
1997, 1996 and 1995, respectively, to perform local property
management and investor relations services for the
Partnership.
<PAGE> 35
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
CONTINGENT PURCHASE PRICE
A general partner of Genesis Associates Limited
Partnership has an interest in the sellers of two of the
properties acquired by the Partnership and is entitled to
share in a contingent purchase price of approximately
$2,054,000 with respect to these properties, when and if the
properties are sold and the sellers become entitled thereto.
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 does not anticipate any such amount will become
payable during the next fiscal year.
<TABLE>
<S> <C> <C> <C> <C>
6. Reconciliation Year Ended December 31, 1997 1996 1995
of Financial -------------------------------------------------------------------------------
Income and Income per the financial
Taxable statements $ 1,167,256 $ 395,975 $ 540,151
Income
Adjustments to depreciation
for difference in methods 175,340 159,898 168,185
Adjustments for prepaid rent,
meals and entertainment (3,100) 8,198 25,580
Adjustment for LLC income 576,904 530,069 -
-------------------------------------------------------------------------------
Income Per the Partnership's
Tax Return $ 1,916,400 $ 1,094,140 $ 733,916
===============================================================================
</TABLE>
7. Partners' Subject to the orders of priority under certain specified
Capital conditions more fully described in the Agreement of
Limited Partnership, distributions of partnership
funds and allocations of net income from operations are
principally determined as follows:
DISTRIBUTIONS
Distributable cash from operations in the Agreement
(generally defined as net income plus depreciation and
amortization) is to be distributed to unit holders until
they have received a 10% cumulative preferred return. After
the unit holders have received their 10% cumulative
preferred return, all remaining cash from operations is
distributed to the general partner until the total
<PAGE> 36
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
amount received by the general partner is equal to 15%
of the aggregate amount of cash distributed from operations
in a given year. Amounts payable to but not paid to the
general partner will be accumulated and paid from future
capital transactions after the unit holders have first
received their 10% preferred return and 125% of their
capital contributions. Thereafter, 85% of distributable
cash from operations is to be paid to the unit holders and
15% to the general partner.
Annual distributable cash from operations was less than
the amount required for the annual 10% preferred return to
the unit holders by approximately $3,538,000 in 1997 and
$3,868,000 in 1996. No distributions can be made to the
general partner until the cumulative preferred return
deficit of approximately $14,696,000 has been distributed
to the unit holders.
At December 31, 1997, the unpaid amount to be
distributed to the general partner from future capital
transactions was approximately $6.1 million.
ALLOCATION OF NET INCOME
Net income is principally allocated 99% to the unit
holders and 1% to the general partner until the cumulative
amount of net income allocated to the unit holders equals
the aggregate cumulative amount of cash distributable to
the unit holders. After sufficient net income has been
allocated to the unit holders to equal the amount of cash
distributable to them, all the net income is to be
allocated to the general partner until it equals the amount
of cash distributed to it.
8. Supplemental Interest paid during 1997, 1996 and 1995 was approximately
Cash Flow $2,654,000, $2,621,000, and $2,760,000, respectively.
Information
<PAGE> 37
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------- ----------------- ----------------------------------- ------------------------- -------------------------------
Costs Capitalized Gross Amount at Which Carried
Initial Cost Subsequent to Acquisition at Close of Period
-------------------------------- -------------------------- -----------------------------------
Buildings and Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements Land Improvements Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmor Village
(Lakeville, MN) $ 2,930,000 $ 1,063,253 $ 4,253,011 $ - $ 843,906 $ 1,063,253 $ 5,096,917 $ 6,160,170
Sunshine Village
(Davie, FL) 4,290,000 1,215,862 4,875,878 - 109,271 1,215,862 4,985,149 6,201,011
Camelot Manor
(Grand Rapids, MI) 3,490,000 918,949 3,681,051 - 540,057 918,949 4,221,108 5,140,057
Country Roads
(Jacksonville, FL) - 636,550 2,546,200 38,106 536,383 674,656 3,082,583 3,757,239
Paradise Village
(Tampa, FL) - 1,760,000 7,040,000 279,053 1,002,185 2,039,053 8,042,185 10,081,238
Dutch Hills
(Haslett, MI) 2,580,000 839,693 3,358,771 23,104 328,041 862,797 3,686,812 4,549,609
Stonegate Manor
(Lansing, MI) 3,015,000 930,307 3,721,229 40,552 265,065 970,859 3,986,294 4,957,153
El Adobe
(Las Vegas, NV) 5,530,000 1,480,000 5,920,000 39,964 354,499 1,519,964 6,274,499 7,794,463
West Valley
(Las Vegas NV) 8,210,000 2,289,700 9,158,800 89,010 564,943 2,378,710 9,723,743 12,102,453
- ------------------------------------------------------------------------------------------------------------------------------------
$30,045,000 $11,134,314 $44,554,940 $ 509,789 $ 4,544,350 $ 11,644,103 $49,099,290 $60,743,393
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Column A Column F Column G Column H
- ---------------- ------------- --------- ----------------
Life on Which
Depreciation in
Latest Income
Accumulated Date Statement is
Description Depreciation Acquired Computed
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Ardmor Village
(Lakeville, MN) $ 1,639,525 1987 30 years
Sunshine Village
(Davie, FL) 1,784,823 1987 30 years
Camelot Manor
(Grand Rapids, MI) 1,438,955 1987 30 years
Country Roads
(Jacksonville, FL) 1,029,976 1987 30 years
Paradise Village
(Tampa, FL) 2,634,809 1987 30 years
Dutch Hills
(Haslett, MI) 1,254,434 1987 30 years
Stonegate Manor
(Lansing, MI) 1,352,182 1987 30 years
El Adobe
(Las Vegas, NV) 2,074,665 1988 30 years
West Valley
(Las Vegas NV) 3,190,142 1988 30 years
- ------------------------------------------------------------------
$16,399,511
==================================================================
</TABLE>
<PAGE> 38
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 1997
1. RECONCILIATION The following table reconciles the land from
OF LAND January 1, 1995 to December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 11,644,603 $ 11,644,603 $ 11,562,361
Additions to land, net (500) - 82,242
---------------------------------------------------------------------------------
BALANCE, at December 31 $ 11,644,103 $ 11,644,603 $ 11,644,603
=================================================================================
</TABLE>
2. RECONCILIATION The following table reconciles the buildings and
OF BUILDINGS improvements from January 1, 1995 to December 31, 1997:
AND IMPROVEMENTS
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 48,558,632 $ 48,305,293 $ 47,691,900
Additions to buildings
and improvements 540,658 253,339 613,393
---------------------------------------------------------------------------------
BALANCE, at December 31 $ 49,099,290 $ 48,558,632 $ 48,305,293
=================================================================================
</TABLE>
3. RECONCILIATION The following table reconciles the accumulated Depreciation
OF ACCUMULATED from January 1, 1995 to December 31, 1997:
DEPRECIATION
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 14,735,004 $ 13,080,592 $ 11,449,637
Current year
depreciation expense 1,664,507 1,654,412 1,630,955
---------------------------------------------------------------------------------
BALANCE, at December 31 $ 16,399,511 $ 14,735,004 $ 13,080,592
=================================================================================
</TABLE>
4. TAX BASIS The aggregate cost of buildings and improvements for
OF BUILDINGS federal income tax purposes is equal to the cost basis
AND IMPROVEMENTS used for financial statement purposes.
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------- ----------- ---------------- ----
<S> <C> <C>
3(a) Certificate of Limited Incorporated by reference to the
Partnership for the S-11 Registration Statement of
Partnership the Partnership filed November 12,
1986, as amended on December 22,
1986 and January 16, 1987
(the "Registration Statement").
3(b) Uniprop Income Fund II Incorporated by reference
Agreement of Limited to the Registration Statement.
Partnership
4(a) First Amendment to Incorporated by reference
Uniprop Income Fund II to the Registration Statement.
Agreement of Limited
Partnership (April 1, 1987)
4(b) Form of Beneficial Filed herewith.
Assignment Certificate Under cover of Form SE
(BAC) for the Partnership
(originally filed with
Form 10-K for the fiscal
year ended December
31, 1987)
10(a) Form of Management Incorporated by reference to the
Agreement between the Registration Statement.
Partnership and Uniprop,
Inc.
10(b) Form of Consulting Incorporated by reference
Agreement between the to the Registration Statement.
Partnership, the General
Partner and Consultant
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C>
10(c) Contingent Purchase Price Filed herewith.
Agreement with Sunrise Under cover of Form SE
Broward Associates, Ltd.
(originally filed with Form
10-K for the fiscal year
ended December 31, 1987)
10(d) Contingent Purchase Price Filed herewith.
Agreement with Ardmor Under cover of Form SE
Associates Limited
Partnership (originally
filed with Form 10-K
for the fiscal year
ended December 31, 1987)
10(e) Incentive Acquisition Fee Filed herewith.
Agreement between the Under cover of Form SE
Partnership and Uniprop,
Inc. (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 Filed herewith.
estimated fair market
values of the
Partnership's nine
manufactured housing
communities, as of
March 1, 1998.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,630,552
<SECURITIES> 2,378,109
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,122,147
<PP&E> 63,194,917
<DEPRECIATION> 17,057,071
<TOTAL-ASSETS> 52,652,238
<CURRENT-LIABILITIES> 1,346,535
<BONDS> 30,045,000
0
0
<COMMON> 0
<OTHER-SE> 21,260,703
<TOTAL-LIABILITY-AND-EQUITY> 52,652,238
<SALES> 0
<TOTAL-REVENUES> 11,922,526
<CGS> 0
<TOTAL-COSTS> 8,904,491
<OTHER-EXPENSES> 1,792,127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,652
<INCOME-PRETAX> 1,167,256
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,167,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,167,256
<EPS-PRIMARY> .35<F1>
<EPS-DILUTED> .00
<FN>
<F1>IN THIS RELP THE EARNINGS PER SHARE INDICATES EARNINGS PER LP UNIT.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 28
UNIPROP INCOME FUND II
1998 PROPERTY APPRAISALS
Cushman & Wakefield has recently completed market value appraisals of Uniprop
Income Fund II's nine properties. The table below sets forth certain appraisal
information for each property, as well as a comparison to the original cash
purchase price:
<TABLE>
<CAPTION>
(IN $1,000)
CASH
3/98 3/97 97/98 PURCHASE 98CPP
PROPERTY APPRAISALS APPRAISALS VARIANCE PRICE VARIANCE
<S> <C> <C> <C> <C> <C>
Ardmor Village $ 7,400 $ 7,250 2.1% $ 5,316 39.2%
Camelot Manor 7,000 6,700 4.5% 4,600 52.2%
Country Roads 2,300 2,200 4.5% 3,183 (27.7%)
Dutch Hills 5,900 5,750 2.6% 4,198 41.0%
El Adobe 11,700 11,000 6.4% 7,400 58.1%
Paradise Village 8,900 8,800 1.1% 8,800 1.1%
Stonegate Manor 6,700 6,400 4.7% 4,652 44.0%
Sunshine Village 11,000 11,000 0.0% 6,092 80.6%
West Valley 16,300 15,500 5.2% 11,448 42.4%
------- ------- ------ ------- ------
Grand Total: $77,200 $74,600 3.5% $55,689 38.6%
</TABLE>
1998 ESTIMATED NET ASSET VALUE OF UNITS
Based on the March 1998 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 1998 for their appraised value.
- - Costs and selling expenses are 3.0% of the sale price.
- - Tax consequences of a sale are not taken into consideration.
The estimated net asset value of each unit, assuming the sale of the properties
at their present appraised value is $13.57 calculated as follows:
<TABLE>
<S> <C>
Aggregate appraised value: $77,200,000
Less: Selling Expenses (3.0%) 2,316,000
Mortgage Debt: 30,045,000
-----------
Net Sales Proceeds: 44,839,000
===========
Number of Units: 3,303,387
Net Sales Proceeds per unit: $13.57
</TABLE>
