<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 Quarter Ended September 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)
Securities registered pursuant to Section 12(g) of the Act:
$20 per unit, units of limited partnership interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
<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
September 30, 1998 (Unaudited) and
December 31, 1997 3
Statements of Income
Nine months ended September 30, 1998
and 1997 and Three Months ended
September 30, 1998 and 1997 (Unaudited) 4
Statements of Cash Flows
Nine months ended September 30, 1998
and 1997 (Unaudited) 5
Notes to Financial Statements
September 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
-2-
<PAGE> 3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
Properties:
<S> <C> <C>
Land $11,644,103 $11,644,103
Buildings And Improvements 49,482,481 49,099,290
Furniture And Fixtures 396,832 369,274
Manufactured Homes 1,892,931 2,082,250
----------- -----------
63,416,347 63,194,917
Less Accumulated Depreciation 18,401,071 17,057,071
----------- -----------
45,015,276 46,137,846
Cash And Cash Equivalents 5,088,141 1,630,552
Marketable Securities 100,000 875,859
Mortgage-Backed Securities 0 1,502,250
Unamortized Finance Costs 598,368 891,000
Investments 0 998,995
Other Assets 924,681 615,736
----------- -----------
Total Assets $51,726,466 $52,652,238
----------- -----------
LIABILITIES SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
Accounts Payable $ 560,764 $ 126,063
Other Liabilities 787,737 1,220,472
Notes Payable 30,000,000 30,045,000
----------- -----------
Total Liabilities $31,348,501 $31,391,535
Partners' Equity:
General Partner 238,208 230,188
Unit Holders 20,139,757 21,030,515
Total Partners' Equity 20,377,965 21,260,703
----------- -----------
Total Liabilities And
Partners' Equity $51,726,466 $52,652,238
----------- -----------
</TABLE>
See Notes to Financial Statements
3
<PAGE> 4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
STATEMENTS OF INCOME NINE MONTHS ENDED THREE MONTHS ENDED
(UNAUDITED) SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1997
-------------- -------------- -------------- --------------
Income:
<S> <C> <C> <C> <C>
Rental Income $ 8,652,931 $ 8,298,191 $ 2,945,129 $ 2,765,264
Other 626,757 555,324 235,541 210,524
R Security Income 1,019,075 0 1,019,075 0
----------- ----------- ----------- -----------
Total Income $10,298,763 $ 8,853,515 $ 4,199,745 $ 2,975,788
----------- ----------- ----------- -----------
Operating Expenses:
Administrative Expenses
(Including $457,304, $438,866, $156,547, And $147,961
In Property Management Fees Paid
To An Affiliate For The Nine and Three Month
Periods Ended Sept. 30, 1998 and 1997
Respectively) 2,679,039 2,349,908 961,010 800,299
Property Taxes 706,863 672,137 235,464 224,066
Utilities 747,219 688,404 248,690 180,280
Property Operations 1,196,644 1,077,160 409,256 459,685
Depreciation And Amortization 2,254,082 1,366,762 1,334,082 452,596
Interest 1,912,926 1,981,539 572,909 665,282
----------- ----------- ----------- -----------
Total Operating Expenses $ 9,496,773 $ 8,135,910 $ 3,761,411 $ 2,782,208
----------- ----------- ----------- -----------
Net Income $ 801,990 $ 717,605 $ 438,334 $ 193,580
----------- ----------- ----------- -----------
Income Per Unit: $ 0.24 $ 0.22 $ 0.13 $ 0.06
Distribution Per Unit: $ 0.51 $ 0.47 $ 0.17 $ 0.17
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
September 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
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER. 30, 1997
------------------ -------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 801,990 $ 717,605
Adjustments To Reconcile Net Income
(Loss) To Net Cash Provided By
Operating Activities:
Depreciation 1,344,000 1,320,000
Amortization 910,082 46,762
(Increase) Decrease In Other Assets From Operations 1,574,850 (77,319)
Increase (Decrease) In Accounts Payables 434,701 4,583
Increase (Decrease) Other Liabilities From Operations (432,735) (244,162)
----------- -----------
Total Adjustments 3,830,898 1,049,864
----------- -----------
Net Cash Provided By (Used In)
Operating Activities 4,632,888 1,767,469
----------- -----------
Cash Flows From Investing Activities:
Redemption Of Marketable Securities 775,859 0
Capital Expenditures (410,749) (373,023)
Sale Of Fixed Assets 189,319 332,815
Payment On Mortgage (45,000) 0
----------- -----------
Net Cash Provided By (Used In)
Investing Activities 509,429 (40,208)
----------- -----------
Cash Flows From Financing Activities:
Distributions To Partners (1,684,728) (1,552,595)
----------- -----------
Net Cash Provided By (Used In)
Financing Activities (1,684,728) (1,552,595)
----------- -----------
Increase (Decrease) In Cash 3,457,589 174,666
Cash, Beginning 1,630,552 1,144,427
----------- -----------
Cash, Ending $ 5,088,141 $ 1,319,093
----------- -----------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 6
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Presentation:
The balance sheet as of September 30, 1998, the related statements of income and
statements of cash flow for the periods ended September 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:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30,1998 SEPT. 30,1997
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Property management fee
to Uniprop, Inc.: $457,304 $438,866 $156,547 $147,961
</TABLE>
3. MORTGAGE FINANCING:
The note payable of $30,045,000 was refinanced on August 20, 1998. The principal
amount of $30,000,000 carries an interest rate of 6.37% with an amortization
period of 30 years. The note is due in 10 years. As part of the Refinancing, the
Partnership redeemed the "D" and "R" Securities. The "D" Security was redeemed
at par value of $1,502,250. The "R" Security was redeemed for $2,318,520. This
amount was higher than the carrying amount and because the Partnership
recognized income with respect to portions of the value in previous years, only
$1,019,075 was recognized during the current period.
-6-
<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. On August 20, 1998 the Partnership refinanced seven of its
nine properties with GMAC Commercial Mortgage (the "Refinancing). As a result of
the Refinancing, the Partnership redeemed its "Class D Certificate" for par
value of $1,502,250 (See Note 3 of Notes to Financial Information).
Liquidity
As a result of the Refinancing, seven of the Partnership's nine properties are
mortgaged. At the time of the Refinancing, the aggregate principal amounts due
under the seven mortgage notes was $30,000,000 and the aggregate fair market
value of the Partnership's mortgage properties was $66,000,000. 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. Not
withstanding, the Partnership anticipated owning the properties for seven to ten
years, all of the properties have been owned by the Partnership at least ten
years. The General Partner may elect to have the Partnership own the properties
for as long as, in the opinion of the General Partner, it is in the best
interest of the Partnership to do so.
Distributable Cash from Operations totaled $1,772,416 for the quarter ending
September 30, 1998. Included in Distributable Cash from Operations is income
recognized from the "R" Certificate value.(See Note 3 of the Notes to Financial
Information). Had the "R" Certificate value had not been recognized at this
time, Distribution Cash from Operations would have been $753,341. The
Partnership received proceeds of $2,556,800 resulting from the redemption of the
"D" and "R" Certificates, issued in connection with the original 1993 financing.
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 and net proceeds received from the redemption of the "D" and "R"
Certificates, the General Partner has decided to distribute $3,039,116, or $.92
per unit, to the Unit Holders. 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.
-7-
<PAGE> 8
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 September 30, 1998, the Partnership's cash
reserves amounted to $5,088,141. Once the third quarter distribution is paid to
Unit Holders, the cash reserve amount will be approximately $2,049,025. The
level of cash reserves maintained is at the discretion of the General Partner.
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported a combined occupancy of 93.9%, (3,126/3,330 sites), versus
92.3% (3,072/3,330) for September 1997. The average monthly homesite rent as of
September 30, 1998 was approximately $346, versus $333, an increase of 3.9% from
September 1997.
<TABLE>
<CAPTION>
TOTAL OCCUPIED OCCUPANCY AVERAGE
CAPACITY SITES RATE RENT
<S> <C> <C> <C> <C>
Ardmor Village 339 334 98.5% $ 316
Camelot Manor 335 316 94.3 316
Country Roads 312 279 89.4 240
Dutch Hills 278 266 95.7 318
El Adobe 371 363 97.8 384
Paradise Village 611 510 83.5 297
Stonegate Manor 308 207 99.7 323
Sunshine Village 356 334 93.8 417
West Valley 420 417 99.3 449
---- -----
Total on 9/30/98: 3,330 3,126 93.9% $ 346
Total on 9/30/97: 3,330 3,072 92.3% $ 333
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
GROSS REVENUES NET OPERATING
INCOME
9/30/98 9/30/97 9/30/98 9/30/97
<S> <C> <C> <C> <C>
Ardmor Village $ 298,044 $ 271,585 $ 193,707 $ 110,533
Camelot Manor 286,259 284,376 128,252 147,806
Country Roads 212,653 198,097 (13,030) 35,733
Dutch Hills 240,935 235,160 128,999 120,478
El Adobe 443,717 417,441 276,682 263,947
Paradise Village 385,047 351,209 67,206 54,156
Stonegate Manor 281,105 284,370 144,995 154,769
Sunshine Village 384,805 370,967 227,375 203,741
West Valley 599,570 559,686 405,860 366,566
----------- ----------- ----------- -----------
3,132,135 2,972,891 1,560,046 1,457,729
Partnership Management: 1,067,610 2,897 962,578 (43,128)
Other Non Recurring expenses: -- -- (177,299) (103,143)
Debt Service: (572,909) (665,282)
Depreciation and Amortization: -- -- (1,334,082) (452,596)
----------- ----------- ----------- -----------
$ 4,199,745 $ 2,975,788 $ 438,334 $ 193,580
</TABLE>
COMPARISON OF QUARTER ENDED SEPTEMBER 30, 1998 TO QUARTER ENDED
SEPTEMBER 30, 1997
Gross revenues increased $1,223,957, or 41.1%, to $4,199,745 in 1998, as
compared to $2,975,788 in 1997. The significant increase was the result of the
liquidation of the "R" Certificate, issued in connection to the original 1993
financing. The total liquidation proceeds amounted to $2,318,520. Because the
Partnership, in previous years, recognized a portion of income from the "R"
Certificate value, the amount remaining to be recognized at this time is
$1,019,075 and has been added to partnership management gross revenues.
Operating expenses increased $160,711, or 20.1%, to $961,010 in 1998, as
compared to $800,299 in 1997. The increase in operating expenses was the result
of legal and professional fees associated with the Refinancing. However,
expenses relating to property operations decreased $50,429, or 11%, to $409,256
in 1998, from $459,685 in 1997. The decrease in property operation expense is
the result of higher than normal expenses in 1997 related to repair &
maintenance, marketing and legal expenses.
Depreciation and amortization costs increased $881,486, to $1,334,082 in 1998,
as compared to $452,596 in 1997. The increase is the result of mortgage costs
from the original 1993 finance transaction being included.
As a result of the foregoing factors, net income increased to $438,334 for the
quarter ended September 30, 1998 from $193,580 for the quarter ended September
30, 1997.
-9-
<PAGE> 10
MANAGEMENT EXPENSES
Net Partnership management expenses for the quarter amounted to $156,497.
Expenses of $105,032 (data processing, accounting and legal expenses, appraisal
fees and wages to employees of the Partnership) were offset by gross income of
$1,067,610, generated by interest on the Partnership's reserves, transfer fees
and liquidation proceeds from the "R" certificate. The equivalent figures for
the third quarter of 1997 were $43,128, $46,025 and $2,897, 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
On or about September 4, 1998 the Partnership filed a
report on Form 8-K describing the mortgage refinancing
on seven of the Partnership's nine properties for a
total aggregate loan amount of $30,000,000.
On or about September 15, 1998 the Partnership filed a
report on Form 8-K/A describing proforma financial
information relating to the mortgage refinancing as
though the Refinancing had occurred on January 1, 1997
and June 30, 1998.
-10-
<PAGE> 11
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: November 16, 1998
-11-
<PAGE> 12
EXHIBIT INDEX
Exhibit
No. Description Page
------- ----------- ----
27 Financial Data Schedule
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,088,141
<SECURITIES> 100,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,711,190
<PP&E> 63,416,347
<DEPRECIATION> 18,401,071
<TOTAL-ASSETS> 51,726,466
<CURRENT-LIABILITIES> 1,348,501
<BONDS> 30,000,000
0
0
<COMMON> 0
<OTHER-SE> 20,377,965
<TOTAL-LIABILITY-AND-EQUITY> 51,726,466
<SALES> 0
<TOTAL-REVENUES> 10,298,763
<CGS> 0
<TOTAL-COSTS> 7,242,691
<OTHER-EXPENSES> 1,344,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,823,008
<INCOME-PRETAX> 801,990
<INCOME-TAX> 0
<INCOME-CONTINUING> 801,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 801,990
<EPS-PRIMARY> .24<F1>
<EPS-DILUTED> 0
<FN>
<F1>In this RELP the earnings per share indicate income per LP unit.
</FN>
</TABLE>
