<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, 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 38-2593067
(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, 1999, 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 1999 appraisal of Partnership properties), was
approximately $47,296,025.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
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PART I
ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund 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.
The Partnership acquired seven of the Properties in 1987 and acquired two
additional Properties in 1988.
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 August 20, 1998, the Partnership borrowed $30,000,000 (the "Loan") from
GMAC Commercial Mortgage Corporation. It secured the Loan by placing new
mortgages on seven of its nine properties. The Loan carries a fixed interest
rate of 6.37% over its term of 126 months and is amortized over 360 months.
The Partnership used the proceeds from the Loan to refinance the Partnership's
outstanding indebtedness of $30,045,000, which was the result of a 1993
mortgage financing transaction.
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.
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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.
Each of the Properties competes with numerous similar facilities located
in its geographic area. The Davie/Fort Lauderdale area contains approximately
five communities offering approximately 2,045 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 3,631 housing sites. In the Jacksonville,
Florida area, Country Roads competes with approximately nine communities
offering approximately 3,636 housing sites. The Tampa, Florida area contains
approximately four communities offering approximately 1,190 housing sites
competing with Paradise Village. Dutch Hills and Stonegate Manor compete with
approximately 11 other communities in the Lansing, Michigan area offering
approximately 3,438 housing sites. In the Las Vegas, Nevada area, West Valley
and El
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Adobe compete with approximately 13 other communities offering approximately
3,719 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.
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
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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 Loan, however, seven of the nine Properties are now
encumbered with mortgages.
Each of the Properties is a modern manufactured housing community
containing lighted and paved streets, side-by-side off-street parking and
complete underground utility systems. The Properties consist of only the
underlying real estate and improvements, not the actual homes themselves. 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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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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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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.
On or about June 8, 1998, the General Partner mailed out a proxy statement
to Unit Holders. The Unit Holders and Limited Partners were asked to consent
to the mortgage refinancing proposal, pursuant to which the Partnership would
refinance seven of its nine properties at a fixed interest rate, as opposed to
the former variable interest rate on its existing mortgage debt. On Monday,
August 3, 1998, a special meeting of the Unit Holders and Limited Partners was
held to vote on the proposals described in the proxy statement. At the meeting,
all proposals considered and voted on by the Unit Holders and Limited Partners
were approved by majority consent.
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 five percent (5.0%) 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, 1999, the Properties
were appraised at an aggregate fair market value of $79,600,000. Assuming a
sale of the nine properties in March 1999, 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 $47,296,025 or $14.32 per
unit. There can be no assurance that the estimated net asset value could ever
be realized. As of March 1, 1999, the Partnership had approximately 4,675 Unit
Holders.
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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, 1998, 1997, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
------------- ------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Total Assets $ 48,834,623 $ 52,652,238 $ 53,583,381 $ 54,472,196 $56,093,938
============ ============ ================ ================ ================
Long Term
Debt $ 29,915,975 $ 30,045,000 $ 30,025,487 $ 29,894,586 $29,786,033
------------ ------------ ---------------- ---------------- ----------------
Income 12,419,636 11,922,526 11,250,156 11,210,541 11,302,229
Extraordinary Item 250,998 - - - -
Operating Expenses (11,488,193) (10,755,270) (10,854,181) (10,670,390) (9,857,350)
------------ ------------ ---------------- ---------------- ----------------
Net Income $ 1,182,441 $ 1,167,256 $ 395,975 $ 540,151 $ 1,444,879
============ ============ ================ ================ ================
Distributions to
Unit Holders,
per Unit: $ 1.43 $ .64 $ .54 $ .66 $ 7.60
Income per unit:
Before Extra. Item $ .28 $ .35 $ .12 $ .16 $ .43
Extraordinary Item $ .08 - - - -
Weighted average
Number of Units
Outstanding: 3,303,387 3,303,387 3,303,387 3,303,387 3,303,387
</TABLE>
-8-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Capital Resources
The capital formation phase of the Partnership began on 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 August 1998, in an effort to reduce the Partnership's interest payments
associated with the 1993 mortgage financing, the General Partner, with majority
consent from the Unit Holders and Limited Partners, refinanced seven of the
nine Properties owned by the Partnership. As described in Item 1, the
Partnership borrowed $30,000,000 from GMAC Commercial Mortgage Corporation. The
Loan carries a fixed interest rate of 6.37% over its term of 120 months,
amortized over 30 years. The Loan was secured by mortgages on the Partnership's
Ardmor Village, Camelot Manor, Dutch Hills, El Adobe, Stonegate Manor, Sunshine
Village and West Valley Properties. The Partnership used the proceeds from the
Loan to refinance the Partnership's outstanding indebtedness of $30,045,000.
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.
Liquidity
The Partnership has, since inception, generated adequate amounts of cash
to meet its operating needs. The Partnership retains cash reserves, which it
considers adequate to maintain the Properties. All funds in excess of operating
needs, amounts sufficient to pay debt service, and cash reserves are
distributed to the Unit Holders on a quarterly basis. While the Partnership
is not required to maintain a working capital reserve, the Partnership has not
distributed all the cash generated from operations in order to build capital
reserves. As of December 31, 1998, the Partnership had $2,482,314 in reserves.
In February of 1994, the Partnership distributed $23,119,767 to the Unit
Holders or $7.00 per $20.00 Unit held. Of this amount, $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.
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As a result of the Loan, the Partnership liquidated its Class D
Certificate at cost, or $1,502,250 and realized $2,427,994 from the liquidation
of its 20.98% interest in the Class R Certificate. On November 13, 1998 the
Partnership distributed net proceeds from the liquidation of the Class D and R
Certificates of $2,543,608 to the Unit Holders, or $.77 per unit held.
Results of Operations
Distributions
For the year ended December 31, 1998, the Partnership made distributions
to the Unit Holders of $4,723,832, which is equal, on an annualized basis, to
8.4% on their adjusted capital contributions, or $1.43 per $17.11 unit. Of the
$1.43 distributed to Unit Holders in 1998, $.77 was the result of the
liquidation of the Class D and R Certificates. Distributions paid to Unit
Holders totaled $2,114,171 in 1997 and $1,783,868 in 1996.
The distributions paid in 1998 were less than the amount required for the
annual 10.0% preferred return to the Unit Holders by approximately $928,252.
As described in Note 7 to the Partnership's financial statements, the
cumulative preferred return deficit through December 1998 was approximately
$15,624,000. 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, 1998, the unpaid amount to be distributed to the General
Partner approximately $6,600,000.
Net Income
For the years ended December 31, 1998, 1997 and 1996 income before
extraordinary item was $931,443, $1,167,256 and $395,975 on total revenues of
$12,419,636, $11,922,526 and $11,250,156, respectively. The decrease from 1997
to 1998 was due primarily to property operating expenses, which increased
approximately $707,000, whereas total revenues increased only $497,000. The
increase in net income from 1996 to 1997 was the result of higher occupancy and
higher average rent at the properties.
Net income plus depreciation and amortization less distributions to Unit
Holders, was ($1,694,214), $903,864 and $556,384, for the years ended December
31, 1998, 1997 and 1996, respectively. The shortfall reflected in 1998 was
funded with proceeds from the liquidation of the Class D and R Certificates.
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
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distribution, and certain non-recurring income) were $413,691 in 1998, $155,024
in 1997 and $177,328 in 1996.
The increase in partnership management expenses from 1997 to 1998 was due
to costs associated with the proxy completed in 1998. The decrease from 1996 to
1997 was due to higher interest income on cash reserves and lower
administrative expenses.
Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 93.4% (3,111/3,330 sites) as of
December 1998, versus 92.5% in December 1997, and 91.0% in December 1996. The
average monthly rent was approximately $348 per home site in December 1998,
versus $333 in December 1997 and $327 in December 1996, an increase each year
of 4.5% and 1.8%, respectively.
<TABLE>
<CAPTION>
TOTAL
SITES OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
- -----------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
----- ----- ----- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmor Village 339 329 326 323 97.1% 96.2% 95.3% $319 $306 $314
Camelot Manor 335 321 323 325 95.8 96.4 97.0 320 308 299
Country Roads 312 287 288 273 92.0 92.3 97.5 240 225 215
Dutch Hills 278 261 260 266 93.9 93.5 95.7 321 309 297
El Adobe 371 363 366 360 97.8 98.7 97.0 384 374 359
Paradise Village 611 504 480 437 82.5 78.6 71.5 297 282 272
Stonegate Manor 308 295 293 298 95.8 95.1 96.8 326 312 299
Sunshine Village 356 336 326 331 94.4 91.6 93.0 418 399 381
West Valley 420 415 418 418 98.8 99.5 99.5 449 429 438
----- ----- ----- ----- ---- ---- ---- ---- ---- ----
Overall 3,330 3,111 3,080 3,031 93.4% 92.5% 91.0% $348 $333 $327
</TABLE>
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The table below summarizes gross revenues and net operating income for the
Partnership and Properties during 1998, 1997 and 1996.
<TABLE>
<CAPTION>
NET OPERATING INCOME
GROSS REVENUE AND NET INCOME
1998 1997 1996 1998 1997 1996
-------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ardmor Village $ 1,241,339 $ 1,129,735 $ 1,104,595 $ 664,873 $ 523,625 $ 613,967
Camelot Manor 1,131,841 1,123,127 1,085,052 519,695 614,242 564,878
Country Roads 836,800 763,727 708,498 43,923 109,568 100,722
Dutch Hills 958,776 918,958 886,536 500,881 481,335 458,055
El Adobe 1,731,799 1,646,510 1,542,026 1,137,530 1,051,448 955,055
Paradise Village 1,448,095 1,460,543 1,308,743 297,217 326,009 191,971
Stonegate Manor 1,110,040 1,035,924 973,178 544,209 578,851 440,726
Sunshine Village 1,547,644 1,513,820 1,462,935 950,739 901,389 850,925
West Valley 2,326,778 2,240,418 2,098,742 1,548,420 1,510,414 1,271,269
-------------- ----------- ----------- ----------- ----------- ----------
12,333,112 11,832,762 11,170,305 6,207,487 6,096,881 5,447,568
Partnership
Mgmt. 86,524 89,764 79,851 (413,691) (155,024) (177,328)
Extinguisment of Debt
Other nonrecurring 250,998 - -
Expenses (589,597) (262,257) (316,627)
Debt Service
Depreciation and (2,425,579) (2,661,565) (2,613,361)
Amortization (1,847,177) (1,850,779) (1,944,277)
-------------- ----------- ----------- ----------- ----------- ----------
TOTAL: $12,419,636 $11,922,526 $11,250,156 $ 1,182,441 $ 1,167,256 $ 395,975
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
Gross revenues increased $497,110, or 4.2%, to $12,419,636 in 1998,
compared to $11,922,526 in 1997. The increase was primarily the result of
higher average occupancy and an increase in rental income due to higher average
monthly rents. (See table on previous page.)
As described in the Statements of Income, the Partnership's operating
expenses increased $707,033, or 16.3%, to $5,054,906 in 1998, compared to
$4,347,873 in 1997. The increase is due primarily to increases in marketing
expenses, repairs and maintenance to the Properties and wages. The
Partnership's administrative expenses also increased $234,784, or 23.5%, to
$1,233,734 in 1998, compared to $998,950 in 1997. The increase
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<PAGE> 13
in administrative expenses is due to costs associated with the proxy completed
in 1998.
Also reported in the Statements of Income is a gain of $250,998 on the
extinguishment of debt, which includes the gain on the liquidation of the Class
R Certificate, less loan prepayment penalties and the write-off of unamortized
financing costs related to the original 1993 financing.
As a result of the foregoing factors, net income increased slightly from
$1,167,256 in 1997 to $1,182,441 in 1998.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Gross revenues increased $672,370, or 6.0%, to $11,922,526 in 1997,
compared to $11,250,156 in 1996. The increase was primarily the result of
higher average occupancy and an increase in rental income due to higher average
monthly rents.
As described in the Statements of Income, the Partnership's operating
expenses decreased $98,911, or .09%, to $10,755,270 in 1997, compared to
$10,854,181 in 1996. The decrease is the result of lower property operating
expenses and lower depreciation and amortization.
As a result of the foregoing factors, net income increased significantly
from $395,975 in 1996 to $1,167,256 in 1997.
Year 2000 Costs
The Partnership is currently assessing its significant business relations
with external parties, including its banking and vendor relations, to determine
if the failure of such parties to be year 2000 compliant would have a material
adverse effect upon the Partnership. In the event that any banks, vendors or
other parties with whom the Partnership conducts significant business do not
successfully and timely achieve year 2000 compliance, the Partnership's
operations may be affected. To date, nothing has come to the attention of
Management that leads it to conclude that such adverse effect may be likely.
Management, however, cannot provide assurance that the year 2000 issue will not
have an impact on the Partnerships operations. The Partnership has completed a
review of its information systems and believes its business technologies are
fully compliant with any issues that may arise as a result of year 2000 issues.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal year ended December
31, 1998, 1997 and 1996, and supplementary data are filed with this Report
under Item 14.
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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, 49, 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 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.
Steven P. Adler, 48, 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, 45, 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. Ms. Koster has a M.B.A. from the University of Detroit.
Terry Winter, 39, 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
-14-
<PAGE> 15
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.
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,
-15-
<PAGE> 16
$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 value. 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 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 $928,252 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 1998, approximately $500,000 was accumulated for the General
Partner, and the General Partner's aggregate accumulated incentive management
interest as of December 1998 was approximately $6,600,000. 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 the approximately
$15,624,000, 10% cumulative preferred return deficit as of December 31, 1998,
is first distributed to the Unit Holders. In February of 1994, as part of the
1993 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
-16-
<PAGE> 17
(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, 1998. The Partnership does not anticipate that any such amounts will be
paid or become payable to the General Partner during the next fiscal year.
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
$611,741: Ardmor Village, $61,605; Camelot Manor, $56,054; Country Roads,
$41,840; Dutch Hills, $47,536; El Adobe, $85,696; Paradise Village, $72,272;
Stonegate Manor, $55,033; Sunshine Village, $76,643; and West Valley, $115,062.
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 $222,949 during 1998 to perform local property management, data
processing and investor relation 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, 1998 and 1997
(3) Statements of Income for the fiscal years ended
December 31, 1998, 1997 and 1996
-17-
<PAGE> 18
(4) Statements of Partners' Equity for the fiscal years ended
December 31, 1998, 1997 and 1996
(5) Statements of Cash Flows for the fiscal years ended
December 31, 1998, 1997 and 1996
(6) Schedule III - Real Estate and Accumulated Depreciation for
the fiscal years ended December 31, 1998, 1997 and 1996
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth
quarter of 1998.
(c) Exhibits
The following exhibits are incorporated by reference to the S-11
Registration Statement of the Partnership filed 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 10-K
for the fiscal year ended December 31, 1997:
4(b) Form of Beneficial Assignment Certificate (BAC) for the
Partnership (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, 1997.)
-18-
<PAGE> 19
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, 1997.)
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, 1997.)
The following exhibit is incorporated by reference to the Form 8-K that
was filed on September 8, 1998:
2 Mortgage notes, made as of August 20, 1998, between Uniprop
Manufactured Housing Communities Income Fund II and GMACCM.
The following exhibits are attached to this Report:
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the
Partnership's nine manufactured housing communities, as of
March 1, 1999
(d) Other Financial Statements
There are no other financial statements required by the instructions
contained in Regulation S-X or, the information is included elsewhere in the
financial statements or the notes thereto.
-19-
<PAGE> 20
[BDO SEIDMAN, LLP LETTERHEAD]
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,
1998 and 1997 and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1998. We have
also audited the schedule listed under Item 14 of Form 10-K. These financial
statements and the schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
the schedule. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and the schedule. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund II at December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule listed under Item 14 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 5, 1999
<PAGE> 21
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 1997
- ------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
PROPERTY AND EQUIPMENT (Note 2)
Buildings and improvements $ 49,421,935 $ 49,099,290
Land 11,644,103 11,644,103
Manufactured homes and improvements 2,100,666 2,082,250
Furniture and equipment 400,872 369,274
- ------------------------------------------------------------------------------
63,567,576 63,194,917
Less accumulated depreciation 18,819,413 17,057,071
- ------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 44,748,163 46,137,846
Cash 2,482,314 1,630,552
Marketable securities - 875,859
Unamortized financing costs (Note 2) 622,800 891,000
Mortgage-backed securities (Note 2) - 1,502,250
Investment (Note 2) - 998,995
Other assets (Note 3) 981,346 615,736
- ------------------------------------------------------------------------------
$ 48,834,623 $ 52,652,238
==============================================================================
LIABILITIES AND PARTNERS' EQUITY
Notes payable (Note 2) $ 29,915,975 $ 30,045,000
Accounts payable 322,340 126,063
Other liabilities (Note 4) 876,996 1,220,472
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 31,115,311 31,391,535
- ------------------------------------------------------------------------------
PARTNERS' EQUITY
Unit holders 17,477,300 21,030,515
General partner 242,012 230,188
- ------------------------------------------------------------------------------
TOTAL PARTNERS' EQUITY 17,719,312 21,260,703
- ------------------------------------------------------------------------------
$ 48,834,623 $ 52,652,238
==============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $ 11,737,284 $ 11,340,654 $ 10,824,604
Interest 183,803 203,570 194,493
Other 498,549 378,302 231,059
- -------------------------------------------------------------------------------------------------------------------
12,419,636 11,922,526 11,250,156
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 5,054,906 4,347,873 4,417,300
Depreciation and amortization 1,847,177 1,850,779 1,944,277
Administrative (Note 5) 1,233,734 998,950 1,009,113
Property taxes 926,797 896,103 870,130
Interest 2,425,579 2,661,565 2,613,361
- -------------------------------------------------------------------------------------------------------------------
11,488,193 10,755,270 10,854,181
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM 931,443 1,167,256 395,975
EXTRAORDINARY ITEM - GAIN ON
EXTINGUISHMENT OF DEBT (Note 2) 250,998 - -
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,182,441 $ 1,167,256 $ 395,975
===================================================================================================================
INCOME PER LIMITED PARTNERSHIP UNIT (Note 7)
Income before extraordinary item $ .28 $ .35 $ .12
Extraordinary item .08 - -
- -------------------------------------------------------------------------------------------------------------------
.36 .35 .12
===================================================================================================================
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT (Note 7) $ 1.43 $ .64 $ .54
===================================================================================================================
NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
===================================================================================================================
NET INCOME ALLOCABLE TO GENERAL PARTNER (Note 7)
Income before extraordinary item $ 9,314 $ 11,673 $ 3,960
Extraordinary item 2,510 - -
- -------------------------------------------------------------------------------------------------------------------
11,824 11,673 3,960
===================================================================================================================
DISTRIBUTIONS ALLOCABLE TO GENERAL PARTNER $ - $ - $ -
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
General
Partner Unit Holders TOTAL
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, January 1, 1996 $ 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
Distributions to unit holders - (4,723,832) (4,723,832)
Net income for the year 11,824 1,170,617 1,182,441
- ------------------------------------------------------------------------------
BALANCE, December 31, 1998 $ 242,012 $ 17,477,300 $ 17,719,312
==============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,182,441 $ 1,167,256 $ 395,975
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,817,628 1,792,127 1,778,930
Amortization 29,549 58,652 165,347
Extraordinary item - gain on extinguishment of debt (250,998) - -
Gain on sale of property and equipment (188,583) (18,850) (40,188)
(Increase) decrease in other assets (365,610) (178,077) 87,568
Increase (decrease) in accounts payable 196,277 (29,826) 1,177
Increase (decrease) in other liabilities (343,476) 26,085 367,000
- ---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,077,228 2,817,367 2,755,809
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from redemption of investment 2,418,891 - -
Proceeds from redemption of mortgage backed securities 1,502,250 - -
Purchase of property and equipment (1,422,431) (982,115) (1,115,173)
Proceeds from sale of property and equipment 1,183,069 822,721 760,760
Proceeds from sale of marketable securities 875,859 450,000 200,000
Purchase of marketable securities - (507,677) (61,429)
- ---------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 4,557,638 (217,071) (215,842)
- ---------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable (30,129,025) - -
Proceeds from note payable 30,000,000 - -
Distributions to unit holders (4,723,832) (2,114,171) (1,783,868)
Payment for financing costs (930,247) - -
- ---------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (5,783,104) (2,114,171) (1,783,868)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 851,762 486,125 756,099
CASH, at beginning of year 1,630,552 1,144,427 388,328
- ---------------------------------------------------------------------------------------------------------
CASH, at end of year $ 2,482,314 $ 1,630,552 $ 1,144,427
=========================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
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
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect (1)
the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the
date of the financial statements, and (2) revenues and
expenses during the reporting period. Actual results could
differ from these estimates.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents,
marketable securities, and notes payable approximate their
fair values.
<PAGE> 26
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the
following estimated useful lives:
Buildings and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
Accumulated depreciation for tax purposes was $16,805,437
and $15,210,638 as of December 31, 1998 and 1997,
respectively.
Long-lived assets such as property and equipment are
evaluated for impairment when events or changes in
circumstances indicate that the carrying amount of the
assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets.
When any such impairment exists, the related assets will be
written down to fair value. No impairment loss recognition
has been required through December 31, 1998.
MORTGAGE-BACKED SECURITIES
In connection with the Partnership's 1993 financing
transaction (see Note 2), the Partnership was required to
use approximately 5% of its mortgage proceeds to purchase a
subordinated portion of the mortgage-backed securities
("Class D Certificates"). These Class D Certificates were
not rated, carried a fixed interest rate of 7.5% per annum
and were 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, which
represented cost.
In 1998, as part of the refinancing of its note payable
(see Note 2), the Partnership redeemed the Class D
Certificate at cost.
<PAGE> 27
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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 note payable.
INVESTMENT
The "Investment" of $998,995 reflected on the
Partnership's 1997 balance sheet represents a 20.98%
residual interest ("Class R Certificates") of the trust fund
which was established as part of the original 1993 financing
transaction (see Note 2). 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 had no principal or
interest amount associated with them, but represented the
amount which the Partnership would be entitled to receive
after all other classes of certificates had been reduced to
zero. The "Investment" had been accounted for using the
equity method of accounting, subject to management's
estimation of the carrying value of the investment.
In 1998, as part of the refinancing of its note payable
(see Note 2), the Partnership redeemed the Class R
Certificates. As a result, the Partnership recognized a gain
of $1,419,896 on the redemption of the certificates, which
has been included in the calculation of the extraordinary
gain on the extinguishment of debt (see Note 2).
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> 28
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
COMPREHENSIVE INCOME
On January 1, 1998, the Partnership adopted Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", which establishes standards for the
reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is
defined to include all changes in equity except those
resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS 130 requires that all
items that are required to be recognized under current
accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with
the same prominence as other financial statements. For the
year ended December 31, 1998, comprehensive income for the
Partnership did not differ from net income.
2. NOTES PAYABLE In 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 totalled $30,045,000, were secured by the
mortgages on the Partnership's properties as well as the
mortgages on the other twenty-one properties, and were
funded through the issuance of mortgage-backed securities.
The proceeds of the mortgage notes payable were used
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.
In 1998, the Partnership refinanced the aforementioned
note payable by entering into a new note agreement totalling
$30,000,000. These borrowings are secured by mortgages on
the Partnership's properties. The note is payable in monthly
installments of $188,878, including interest at 6.37%,
through March, 2009. Thereafter, the monthly installment and
interest rate will be adjusted based on the provisions of
the agreement through the note maturity date of September
2028. The outstanding balance on the note payable at
December 31, 1998 was $29,915,975.
<PAGE> 29
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
In connection with the refinancing, the Partnership
recorded a gain on the extinguishment of debt of $250,998,
which includes the gain on the redemption of the Class R
Certificates ($1,419,896), less loan prepayment penalties
($300,450) and the write-off of unamortized financing costs
related to the original 1993 financing ($868,448).
Future maturities on the note payable for the next five
years are as follows: 1999 - $345,000; 2000 - $362,000; 2001
- $392,000; 2002 - $418,000; and 2003 - $445,000.
3. OTHER ASSETS At December 31, 1998, "Other Assets" included cash of
approximately $425,000 in an escrow account for
property taxes, insurance, and capital improvements, as
required by the Partnership's note payable agreement. The
account is restricted from operating use.
At December 31, 1998 and 1997, "Other assets" also
included cash of approximately $216,000, in a security
deposit escrow account for three 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.
4. OTHER Other liabilities consisted of:
LIABILITIES
<TABLE>
<CAPTION>
December 31, 1998 1997
--------------------------------------------------------
<S> <C> <C>
Tenants' security deposits $ 509,707 $ 502,086
Accrued property taxes 106,481 339,508
Accrued interest 124,050 229,730
Other 136,758 149,148
--------------------------------------------------------
TOTAL $ 876,996 $ 1,220,472
========================================================
</TABLE>
<PAGE> 30
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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, 1998, 1997 and
1996, the affiliate earned property management fees of
$611,741, $585,394 and $552,846, respectively, as permitted
in the Agreement of Limited Partnership. These fees are
included with "Administrative" expenses in the respective
statements of income. The Partnership owed $335 to the
affiliate at December 31, 1998, and was owed $19,765 by the
affiliate at December 31, 1997.
Certain employees of the Partnership are also employees
of affiliates of the general partner. These employees were
paid by the Partnership $222,949, $177,046 and $196,491 in
1998, 1997 and 1996, respectively, to perform local property
management and investor relations services for the
Partnership.
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 that will not exceed
$2,054,000. Additional amounts to be paid, if any, will
depend upon the results of the Partnership's operations and
the amounts received upon the sale, financing or other
disposition of the properties, and are not determinable at
this time. The Partnership does not anticipate any such
amount will become payable during the next fiscal year.
<PAGE> 31
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FINANCING COSTS
In 1998, as part of the financing transaction described
in Note 2, the Partnership paid approximately $300,000 in
financing costs to an affiliate of the general partner.
6. RECONCILIATION
OF FINANCIAL
STATEMENT
INCOME AND
TAXABLE
INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C>
Income per the financial
statements $ 1,182,441 $ 1,167,256 $ 395,975
Adjustments to depreciation
for difference in methods 168,071 175,340 159,898
Adjustments for prepaid rent,
meals and entertainment 3,448 (3,100) 8,198
Adjustment for LLC income (1,106,973) 576,904 530,069
----------------------------------------------------------------------
Income Per the Partnership's
Tax Return $ 246,987 $ 1,916,400 $1,094,140
======================================================================
</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 in the form of an
incentive management interest until the total 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
<PAGE> 32
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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 $928,000 and $3,538,000 in
1998 and 1997, respectively. No distributions can be made to
the general partner until the cumulative preferred return
deficit of approximately $15,624,000 has been distributed to
the unit holders.
At December 31, 1998, the general partner's cumulative
incentive management interest to be distributed was
approximately $6.6 million. The actual amount to be
accumulated or paid in the future depends on the results of
the Partnership's operations and is not currently
determinable; however, no such distribution to the general
partner is anticipated during fiscal 1999.
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 1998, 1997 and 1996 was approximately
CASH FLOW $2,531,000, $2,654,000 and $2,621,000, respectively.
INFORMATION
<PAGE> 33
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ---------------- ------------- ----------------------------- -------------------------
Costs Capitalized
Initial Cost Subsequent to Acquisition
----------------------------- -------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ardmor Village
(Lakeville, MN) $ 2,901,850 $ 1,063,253 $4,253,011 $ - $ 891,751
Sunshine Village
(Davie, FL) 4,277,984 1,215,862 4,875,878 - 130,761
Camelot Manor
(Grand Rapids, MI) 3,455,295 918,949 3,681,051 - 565,736
Country Roads
(Jacksonville, FL) - 636,550 2,546,200 38,106 554,320
Paradise Village
(Tampa, FL) - 1,760,000 7,040,000 279,053 1,034,747
Dutch Hills
(Haslett, MI) 2,572,774 839,693 3,358,771 23,104 404,399
Stonegate Manor
(Lansing, MI) 3,006,556 930,307 3,721,229 40,552 333,328
El Adobe
(Las Vegas, NV) 5,514,511 1,480,000 5,920,000 39,964 360,339
West Valley
(Las Vegas NV) 8,187,005 2,289,700 9,158,800 89,010 591,614
- --------------------------------------------------------------------------------------------------
$29,915,975 $11,134,314 $44,554,940 $ 509,789 $ 4,866,995
==================================================================================================
<CAPTION>
Column A Column E Column F Column G Column H
- ---------------- ----------------------------------------- -------- -------- --------
Gross Amount at Which Carried Life on Which
at Close of Period Depreciation in
----------------------------------------- Latest Income
Buildings and Accumulated Date Statement is
Description Land Improvements Total Depreciation Acquired Computed
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ardmor Village
(Lakeville, MN) $ 1,063,253 $5,144,762 $6,208,015 $1,828,428 1987 30 years
Sunshine Village
(Davie, FL) 1,215,862 5,006,639 6,222,501 1,963,532 1987 30 years
Camelot Manor
(Grand Rapids, MI) 918,949 4,246,787 5,165,736 1,587,380 1987 30 years
Country Roads
(Jacksonville, FL) 674,656 3,100,520 3,775,176 1,137,540 1987 30 years
Paradise Village
(Tampa, FL) 2,039,053 8,074,747 10,113,800 2,911,084 1987 30 years
Dutch Hills
(Haslett, MI) 862,797 3,763,170 4,625,967 1,378,905 1987 30 years
Stonegate Manor
(Lansing, MI) 970,859 4,054,557 5,025,416 1,487,534 1987 30 years
El Adobe
(Las Vegas, NV) 1,519,964 6,280,339 7,800,303 2,287,095 1988 30 years
West Valley
(Las Vegas NV) 2,378,710 9,750,414 12,129,124 3,520,376 1988 30 years
- ------------------------------------------------------------------------------------------------------------
$ 11,644,103 $49,421,935 $61,066,038 $18,101,874
============================================================================================================
</TABLE>
<PAGE> 34
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 1998
1. RECONCILIATION OF The following table reconciles the land from
LAND January 1, 1996 to December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 11,644,103 $ 11,644,603 $ 11,644,603
Additions to land, net - (500) -
---------------------------------------------------------------------
BALANCE, at December 31 $ 11,644,103 $ 11,644,103 $ 11,644,603
=====================================================================
</TABLE>
2. RECONCILIATION OF The following table reconciles the buildings and
BUILDINGS AND improvements from January 1, 1996 to
IMPROVEMENTS December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 49,099,290 $ 48,558,632 $ 48,305,293
Additions to buildings
and improvements 322,645 540,658 253,339
---------------------------------------------------------------------
BALANCE, at December 31 $ 49,421,935 $ 49,099,290 $ 48,558,632
=====================================================================
</TABLE>
3. RECONCILIATION OF The following table reconciles the accumulated
ACCUMULATED depreciation from January 1, 1996 to
DEPRECIATION December 31, 1998:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, at January 1 $ 16,399,511 $ 14,735,004 $ 13,080,592
Current year
depreciation expense 1,702,363 1,664,507 1,654,412
---------------------------------------------------------------------
BALANCE, at December 31 $ 18,101,874 $ 16,399,511 $ 14,735,004
=====================================================================
</TABLE>
4. TAX BASIS OF The aggregate cost of buildings and improvements for
BUILDINGS AND federal income tax purposes is equal to the cost
IMPROVEMENTS basis used for financial statement purposes.
<PAGE> 35
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 31, 1999
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 A. Koster By: /s/ Paul M. Zlotoff
-------------------------------- ---------------------------
Gloria A. Koster Paul M. Zlotoff, Chairman of
(Chief Financial Officer of Uniprop, Inc.
Uniprop, Inc.)
Dated: March 31, 1999 Dated: March 31, 1999
By: /s/ Andrew Feuereisen
--------------------------------
Andrew Feuereisen
(Controller of Uniprop, Inc.)
Dated: March 31, 1999
-20-
<PAGE> 36
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------ ----------- ---------------- ----
<S> <C> <C> <C>
2 Mortgage Notes, made on August Incorporated by reference to
20, 1998 between Uniprop the Form 8-K filed on
Income Fund II and GMACCM September 8, 1998.
3(a)
Certificate of Limited Incorporated by reference to
Partnership for the the S-11 Registration
Partnership Statement of 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 to
Agreement of Limited the Registration Statement.
Partnership
4(a) First Amendment to Uniprop Incorporated by reference to
Income Fund II Agreement of the Registration Statement.
Limited Partnership (April 1,
1987)
4(b) Form of Beneficial Assignment Incorporated by reference to
Certificate (BAC) for the Form 10-K for fiscal year
Partnership (originally filed ended December 31, 1997.
with Form 10-K for the fiscal
year ended December 31, 1987)
10(a) Form of Management Agreement Incorporated by reference to
between the Partnership and the Registration Statement.
Uniprop, Inc.
10(b) Form of Consulting Agreement Incorporated by reference to
between the Partnership, the the Registration Statement.
General Partner and Consultant
</TABLE>
-21-
<PAGE> 37
<TABLE>
<S> <C> <C>
10(c) Contingent Purchase Price Agreement Incorporated by reference to
with Sunrise Broward Associates, Form 10-K for fiscal year ended
Ltd. (originally filed with Form December 31, 1997.
10-K for the fiscal year ended
December 31, 1987)
10(d) Contingent Purchase Price Agreement Incorporated by reference to
with Ardmor Associates Limited Form 10-K for fiscal year ended
Partnership (originally filed with December 31, 1997.
Form 10-K for the fiscal year ended
December 31, 1987)
10(e) Incentive Acquisition Fee Agreement Incorporated by reference to
between the Partnership and Form 10-K for fiscal year ended
Uniprop, Inc. (originally filed December 31, 1997.
with Form 10-K for the fiscal year
ended December 31, 1987)
27 Financial Data Schedule Filed herewith.
28 Letter summary of the estimated Filed herewith.
fair market values of the
Partnership's nine manufactured
housing communities, as of March 1,
1999.
</TABLE>
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,482,314
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,463,660
<PP&E> 63,567,576
<DEPRECIATION> 18,819,413
<TOTAL-ASSETS> 48,834,623
<CURRENT-LIABILITIES> 1,199,336
<BONDS> 29,915,975
0
0
<COMMON> 0
<OTHER-SE> 17,719,312
<TOTAL-LIABILITY-AND-EQUITY> 48,834,623
<SALES> 0
<TOTAL-REVENUES> 12,419,636
<CGS> 0
<TOTAL-COSTS> 9,641,016
<OTHER-EXPENSES> 1,817,628
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,455,128
<INCOME-PRETAX> 931,443
<INCOME-TAX> 0
<INCOME-CONTINUING> 931,443
<DISCONTINUED> 0
<EXTRAORDINARY> 250,998
<CHANGES> 0
<NET-INCOME> 1,182,441
<EPS-PRIMARY> .36<F1>
<EPS-DILUTED> 0
<FN>
<F1>5-03(b)(20) EPS Primary-In this RELP the earnings per share indicates earning
per LP unit. Included in EPS-Primary is .08 per unit related to the
extraoridnary item.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 28
UNIPROP INCOME FUND II
1999 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:
(In $1,000)
<TABLE>
<CAPTION>
CASH
3/99 3/98 98/99 PURCHASE 99CPP
PROPERTY APPRAISALS APPRAISALS VARIANCE PRICE VARIANCE
<S> <C> <C> <C> <C> <C>
Ardmor Village $ 7,500 $ 7,400 1.4% $ 5,316 41.1%
Camelot Manor 7,000 7,000 0.0% 4,600 52.2%
Country Roads 2,500 2,300 8.7% 3,183 (17.9%)
Dutch Hills 6,000 5,900 1.7% 4,198 42.9%
El Adobe 12,300 11,700 5.1% 7,400 66.2%
Paradise Village 8,800 8,900 (1.1%) 8,800 0.0%
Stonegate Manor 6,800 6,700 1.5% 4,652 46.2%
Sunshine Village 11,400 11,000 3.6% 6,092 87.1%
West Valley 17,300 16,300 6.1% 11,448 51.1%
------- ------- ---- ------- ------
Grand Total: $79,600 $77,200 3.1% $55,689 42.9%
</TABLE>
1999 ESTIMATED NET ASSET VALUE OF UNITS
Based on the March 1999 appraisal of the Partnership's properties, the General
Partner has calculated the estimated net asset value of each Unit, based on the
following assumptions:
o Sale of the Properties in March 1999 for their appraised value.
o Costs and selling expenses are 3.0% of the sale price.
o 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 $14.32 calculated as follows:
Aggregate appraised value: $79,600,000
Less: Selling Expenses (3.0%) 2,388,000
Mortgage Debt: 29,915,975
-----------
Net Sales Proceeds: $47,296,025
-----------
Number of Units: 3,303,387
Net Sales Proceeds per unit: $ 14.32
