UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2009
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 (State or other jurisdiction of incorporation or organization) | 38-2702802 (I.R.S. employer identification number) |
280 Daines Street, Birmingham, Michigan 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9220
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
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 ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Q or any amendment to this Form 10-Q ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer ¨ | Accelerated filer ¨ |
| |
Non-accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x
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, 2009 (Unaudited) and December 31, 2008 | 3 |
| | |
| Statements of Operations Nine and Three months ended September 30, 2009 and 2008 (Unaudited) | 4 |
| | |
| Statement of Partners’ Equity Nine months ended September 30, 2009 (Unaudited) | 4 |
| | |
| Statements of Cash Flows Nine months ended September 30, 2009 and 2008 (Unaudited) | 5 |
| | |
| Notes to Financial Statements September 30, 2009 (Unaudited) | 6 |
| | |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 8 |
| | |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 11 |
| | |
ITEM 4. | CONTROLS AND PROCEDURES | 11 |
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PART II | OTHER INFORMATION | 12 |
| | |
ITEM 1. | LEGAL PROCEEDINGS | 12 |
| | |
ITEM 1A. | RISK FACTORS | 12 |
| | |
ITEM 6. | EXHIBITS | 12 |
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
ASSETS | | September 30, 2009 | | | December 31, 2008 | |
| | (Unaudited) | | | | |
| | | | | | |
Properties: | | | | | | |
Land | | $ | 8,952,937 | | | $ | 8,952,937 | |
Buildings And Improvements | | | 41,399,648 | | | | 41,241,255 | |
Furniture And Fixtures | | | 576,801 | | | | 560,906 | |
| | | 50,929,386 | | | | 50,755,098 | |
| | | | | | | | |
Less Accumulated Depreciation | | | (29,295,273 | ) | | | (28,197,016 | ) |
| | | 21,634,113 | | | | 22,558,082 | |
| | | | | | | | |
Cash And Cash Equivalents | | | 7,204,981 | | | | 7,469,961 | |
Unamortized Finance Costs | | | 659,108 | | | | 679,922 | |
Manufactured Homes and Improvements | | | 513,548 | | | | 787,563 | |
Other Assets | | | 1,725,220 | | | | 1,383,357 | |
| | | | | | | | |
Total Assets | | $ | 31,736,970 | | | $ | 32,878,885 | |
| | | | | | | | |
LIABILITIES & PARTNERS' EQUITY | | September 30, 2009 | | | December 31, 2008 | |
| | (Unaudited) | | | | | |
| | | | | | | | |
Accounts Payable | | $ | 139,587 | | | $ | 91,120 | |
Other Liabilities | | | 625,156 | | | | 489,596 | |
Notes Payable | | | 22,848,698 | | | | 23,133,242 | |
| | | | | | | | |
Total Liabilities | | $ | 23,613,441 | | | $ | 23,713,958 | |
| | | | | | | | |
Partners' Equity: | | | | | | | | |
General Partner | | | 415,942 | | | | 418,428 | |
Unit Holders | | | 7,707,587 | | | | 8,746,499 | |
| | | | | | | | |
Total Partners' Equity | | | 8,123,529 | | | | 9,164,927 | |
| | | | | | | | |
Total Liabilities And | | | | | | | | |
Partners' Equity | | $ | 31,736,970 | | | $ | 32,878,885 | |
See Notes to Financial Statements
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS | | NINE MONTHS ENDED | | | THREE MONTHS ENDED | |
(unaudited) | | September 30, 2009 | | | September 30, 2008 | | | September 30, 2009 | | | September 30, 2008 | |
| | | | | | | | | | | | |
Income: | | | | | | | | | | | | |
Rental Income | | $ | 5,468,039 | | | $ | 5,330,020 | | | $ | 1,839,168 | | | $ | 1,761,758 | |
Home Sale Income | | | 449,200 | | | | 694,084 | | | | 64,060 | | | | 269,450 | |
Other | | | 420,905 | | | | 591,614 | | | | 139,892 | | | | 167,614 | |
| | | | | | | | | | | | | | | | |
Total Income | | | 6,338,144 | | | $ | 6,615,718 | | | | 2,043,120 | | | | 2,198,822 | |
| | | | | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | | | | |
Administrative Expenses | | | | | | | | | | | | | | | | |
(Including $290,395, $297,765, $97,602 and $95,990, in Property Management Fees Paid to an Affiliate for the Nine and Three Month Period Ended September 30, 2009 and 2008 Respectively) | | | 1,753,150 | | | | 1,649,193 | | | | 553,394 | | | | 545,898 | |
Property Taxes | | | 738,670 | | | | 691,560 | | | | 245,691 | | | | 230,451 | |
Utilities | | | 474,517 | | | | 466,773 | | | | 162,623 | | | | 165,064 | |
Property Operations | | | 733,064 | | | | 567,097 | | | | 181,513 | | | | 232,256 | |
Depreciation | | | 1,098,257 | | | | 1,093,150 | | | | 370,160 | | | | 366,905 | |
Interest | | | 1,162,450 | | | | 1,729,548 | | | | 385,904 | | | | 895,576 | |
Home Sale Expense | | | 626,621 | | | | 819,908 | | | | 108,505 | | | | 342,131 | |
| | | | | | | | | | | | | | | | |
Total Operating Expenses | | | 6,586,729 | | | | 7,017,229 | | | | 2,007,790 | | | | 2,778,281 | |
| | | | | | | | | | | | | | | | |
(Loss) Income from Continuing Operations | | | (248,585 | ) | | | (401,511 | ) | | | 35,330 | | | | (579,459 | ) |
| | | | | | | | | | | | | | | | |
(Loss) Income from Discontinued Operations | | | 0 | | | | 816,796 | | | | 0 | | | | 820,513 | |
| | | | | | | | | | | | | | | | |
Net (Loss) Income | | $ | (248,585 | ) | | $ | 415,285 | | | $ | 35,330 | | | $ | 241,054 | |
| | | | | | | | | | | | | | | | |
(Loss) Income Per Unit: | | | | | | | | | | | | | | | | |
Continued Operations | | | (0.08 | ) | | | (0.12 | ) | | | 0.01 | | | | (0.18 | ) |
Discontinued Operations | | | 0.00 | | | | 0.25 | | | | 0.00 | | | | 0.25 | |
| | | | | | | | | | | | | | | | |
Distribution Per Unit: | | | 0.24 | | | | 0.24 | | | | 0.08 | | | | 0.08 | |
| | | | | | | | | | | | | | | | |
Weighted Average Number Of Units Of Beneficial Assignment Of Limited Partnership Interest Outstanding During The Nine and Three Month Period Ended September 30, 2009 and 2008. | | | 3,303,387 | | | | 3,303,387 | | | | 3,303,387 | | | | 3,303,387 | |
STATEMENT OF PARTNERS' EQUITY (Unaudited) | | | | | | | |
| | General Partner | | | Unit Holders | | | Total | |
| | | | | | | | | |
Balance, December 31, 2008 | | $ | 418,428 | | | $ | 8,746,499 | | | $ | 9,164,927 | |
Distributions | | | | | | | (792,813 | ) | | | (792,813 | ) |
Net (Loss) Income | | | (2,486 | ) | | | (246,099 | ) | | | (248,585 | ) |
| | | | | | | | | | | | |
Balance as of September 30, 2009 | | $ | 415,942 | | | $ | 7,707,587 | | | $ | 8,123,529 | |
See Notes to Financial Statements
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
| | NINE MONTHS ENDED | |
| | September 30, 2009 | | | September 30, 2008 | |
| | | | | | |
Cash Flows From Operating Activities: | | | | | | |
Net (Loss) Income | | $ | (248,585 | ) | | $ | 415,285 | |
| | | | | | | | |
Adjustments To Reconcile Net (Loss) Income | | | | | | | | |
To Net Cash Provided By | | | | | | | | |
Operating Activities: | | | | | | | | |
Depreciation | | | 1,098,257 | | | | 1,152,724 | |
Amortization | | | 20,814 | | | | 17,396 | |
Gain on Sale of Discontinued Operations | | | 0 | | | | (880,656 | ) |
Decrease (Increase) in Manufactured Homes and Improvements | | | 274,015 | | | | (6,561 | ) |
Increase In Other Assets | | | (341,863 | ) | | | (572,158 | ) |
Increase (Decrease) In Accounts Payable | | | 48,467 | | | | (19,309 | ) |
Increase In Other Liabilities | | | 135,560 | | | | 68,168 | |
| | | | | | | | |
Total Adjustments | | | 1,235,250 | | | | (240,396 | ) |
| | | | | | | | |
Net Cash Provided By | | | | | | | | |
Operating Activities | | | 986,665 | | | | 174,889 | |
| | | | | | | | |
Cash Flows (Used In) Provided By Investing Activities: | | | | | | | | |
Purchase of property and equipment | | | (174,288 | ) | | | (207,496 | ) |
Proceeds from Sale of Discontinued Operations | | | 0 | | | | 2,934,000 | |
| | | | | | | | |
Net Cash (Used In) Provided By Investing Activities | | | (174,288 | ) | | | 2,726,504 | |
| | | | | | | | |
Cash Flows From Financing Activities: | | | | | | | | |
Distributions To Unit Holders | | | (792,813 | ) | | | (792,813 | ) |
Payment On Mortgage | | | (284,544 | ) | | | (25,687,191 | ) |
Proceeds From Mortgage Refinancing | | | 0 | | | | 23,225,000 | |
| | | | | | | | |
Net Cash Used In | | | | | | | | |
Financing Activities | | | (1,077,357 | ) | | | (3,255,004 | ) |
| | | | | | | | |
Decrease In Cash and Equivalents | | | (264,980 | ) | | | (353,611 | ) |
Cash and Equivalents, Beginning | | | 7,469,961 | | | | 8,715,423 | |
| | | | | | | | |
Cash and Equivalents, Ending | | $ | 7,204,981 | | | $ | 8,361,812 | |
See Notes to Financial Statements
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 2009 (Unaudited)
1. Basis of Presentation:
The accompanying unaudited 2009 financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009, or for any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership’s Form 10-K for the year ended December 31, 2008.
We have evaluated subsequent events through the date of this filing. We do not believe there are any material subsequent events which would require further disclosure.
2. Recent Accounting Pronouncements:
In June 2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 168 approved the FASB Accounting Standards Codification (the Codification) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission, have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification is effective for interim or annual periods ending after September 15, 2009. There have been no changes to the content of our financial statements or disclosures as a result of implementing the Codification during the quarter ended September 30, 2009. However, as a result of implementation of the Codification, previous references to new accounting standards and literature are no longer applicable. All future references to authoritative accounting literature in our consolidated financial statements will be referenced in accordance with the Codification.
3. Discontinued Operation:
As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida. On August 7, 2008, the sale closed with a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000. The Partnership recognized a gain on the sale of approximately $ 881,000. The Partnership distributed approximately $562,000 from the sale to its unit holders with the balance of the proceeds being maintained in reserve until such time as the General Partner determines the optimal use of the funds. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all historical periods.
The major classes of revenue and expenses of Discontinued operations for the period ending September 30, 2008, were as follows:
(1) Total Revenue of $291,239 consisting of Rent Revenue of $251,239 and Other Revenue of $40,097; and (2) Total Operating Expenses of $355,190, consisting of Administrative Expenses of $179,838, Property Tax Expenses of $34,093, Utility Expenses of $46,919, Property Operation Expenses of $34,766, and Depreciation Expense of $59,574.
4. Mortgage Payable:
On August 29, 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes is accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lender’s then prevailing market rate. As of September 30, 2009 the balance on these notes was $22,848,698.
The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the loan. This included a 1% fee payable to an affiliate of the General Partner.
Future maturities on the note payable for the next five years and thereafter are as follows: remainder of 2009 - $95,024; 2010 - $408,698; 2011 - $436,612; 2012 - $466,432; 2013 - $498,289; and thereafter - $20,940,643.
5. Fair Value Measurements:
The Partnership does not have assets or liabilities which are measured at fair value on a recurring basis. Effective January 1, 2009, all other nonfinancial assets and liabilities measured at fair values in financial statements on a nonrecurring basis are subject to SFAS No. 157. Nonfinancial nonrecurring assets and liabilities included on our balance sheets include long lived assets that are measured at fair value to test for and measure an impairment change, when necessary. No such nonfinancial assets or liabilities were subject to SFAS No. 157 for the quarter ended September 30, 2009.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies
See Part II, Item 7 – Critical Accounting Policies, our consolidated financial statements and related notes in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 30, 2009 for accounting policies and related estimates we believe are the most critical to understanding condensed consolidated financial statements, financial conditions and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.
Recent Accounting Pronouncements
See Note 2 – Recent Accounting Pronouncements of this Report for recent accounting pronouncements that may have an impact on the Company’s consolidated financial statements.
Liquidity and Capital Resources
Partnership liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. All of the properties have been owned by the Partnership for more than 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.
The Partnership's capital resources consist primarily of its seven manufactured home communities. On August 29, 2008, the Partnership refinanced these properties with Stancorp Mortgage Investors, LLC (the “Refinancing”) in the amount of $23,225,000 secured by the seven properties of the Partnership. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages are payable in monthly installments of interest and principal through September 2033. Interest on these notes are accrued at a fixed rate of 6.625% for five years, at which time, the rate will reset to the lenders then prevailing market rate. As of September 30, 2009 the balance on these notes was $22,848,698. The Partnership incurred $693,798 in financing costs as a result of the refinancing which is being amortized over the life of the loan. This included a 1% fee payable to an affiliate of the General Partner.
As described in Form 8-K dated July 28, 2008, the Partnership had entered into a Contract for Sale and Purchase of Real and Personal Property with a private buyer for the Country Roads Manufactured Housing Community located in Jacksonville, Florida. On August 7, 2008, the buyer closed on a purchase price of $3,000,000, less closing costs for proceeds in the amount of $2,934,000. The Partnership recognized a gain on the sale of approximately $ 881,000. As a result of the sale, the Partnership has classified the Country Roads community and associated financial results as “discontinued operations” in the accompanying financial statements for all historical periods.
As a result of the Refinancing, all of the Partnership’s seven properties are mortgaged. At the time of the Refinancing, the aggregate principal amount due under the seven mortgage notes was $23,225,000 and the aggregate fair market value of the Partnership’s mortgaged properties was $73,550,000. The Partnership expects to meet its short-term liquidity needs generally through its working capital provided by operating activities.
The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the third quarter ended September 30, 2009. The General Partner will continue to monitor cash flow generated by the Partnership’s seven properties during the coming quarters. If cash flow generated is greater or lesser 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.
As of September 30, 2009, the Partnership’s cash balance amounted to $7,204,981. The level of cash balance maintained is at the discretion of the General Partner.
Results of Operations
Overall, as illustrated in the following table, the Partnership's seven properties reported combined occupancy of 54% at the end of September 2009 versus 54% at the end of September 2008. The average monthly homesite rent as of September 30, 2009 was approximately $475, versus $466 from September 2008 (average rent not a weighted average).
| | Total | | | Occupied | | | Occupancy | | | Average* | |
| | Capacity | | | Sites | | | Rate | | | Rent | |
Ardmor Village | | | 339 | | | | 176 | | | | 52 | % | | $ | 480 | |
Camelot Manor | | | 335 | | | | 118 | | | | 35 | % | | | 403 | |
Dutch Hills | | | 278 | | | | 127 | | | | 46 | % | | | 404 | |
El Adobe | | | 367 | | | | 200 | | | | 55 | % | | | 498 | |
Stonegate Manor | | | 308 | | | | 121 | | | | 39 | % | | | 390 | |
Sunshine Village | | | 356 | | | | 230 | | | | 65 | % | | | 586 | |
West Valley | | | 421 | | | | 325 | | | | 77 | % | | | 564 | |
| | | | | | | | | | | | | | | | |
Total on 9/30/09: | | | 2,404 | | | | 1,297 | | | | 54 | % | | $ | 475 | |
Total on 9/30/08: | | | 2,404 | | | | 1,309 | | | | 54 | % | | $ | 466 | |
*Not a weighted average
| | Gross Revenue | | | Net Operating Income and Net (Loss) Income | | | Gross Revenue | | | Net Operating Income and Net (Loss) Income | |
| | 9/30/2009 | | | 9/30/2008 | | | 9/30/2009 | | | 9/30/2008 | | | 09/30/2009 | | | 09/30/2008 | | | 09/30/2009 | | | 09/30/2008 | |
| | three months ended | | | three months ended | | | nine months ended | | | nine months ended | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Ardmor | | $ | 257,752 | | | $ | 265,005 | | | $ | 128,054 | | | $ | 116,062 | | | $ | 787,985 | | | $ | 816,361 | | | $ | 355,530 | | | $ | 373,895 | |
Camelot Manor | | | 169,522 | | | | 184,381 | | | | 24,648 | | | | 39,239 | | | | 508,554 | | | | 578,054 | | | | 109,819 | | | | 147,742 | |
Dutch Hills | | | 157,367 | | | | 174,237 | | | | 66,564 | | | | 63,771 | | | | 494,773 | | | | 561,462 | | | | 207,259 | | | | 198,137 | |
El Adobe | | | 302,348 | | | | 321,375 | | | | 143,383 | | | | 157,225 | | | | 946,062 | | | | 958,007 | | | | 464,001 | | | | 498,101 | |
Stonegate | | | 160,338 | | | | 178,757 | | | | 61,136 | | | | 38,328 | | | | 498,828 | | | | 585,443 | | | | 166,051 | | | | 241,977 | |
Sunshine | | | 384,719 | | | | 364,469 | | | | 169,634 | | | | 88,456 | | | | 1,191,566 | | | | 1,032,441 | | | | 512,151 | | | | 404,096 | |
West Valley | | | 604,319 | | | | 670,336 | | | | 340,001 | | | | 295,557 | | | | 1,885,828 | | | | 1,943,354 | | | | 961,592 | | | | 939,875 | |
| | | 2,036,365 | | | | 2,158,560 | | | | 933,420 | | | | 798,638 | | | | 6,313,596 | | | | 6,475,122 | | | | 2,776,403 | | | | 2,803,823 | |
Partnership Management | | | 6,755 | | | | 40,262 | | | | (100,279 | ) | | | (43,560 | ) | | | 24,548 | | | | 140,596 | | | | (418,195 | ) | | | (237,783 | ) |
Other Expense | | | — | | | | — | | | | (41,747 | ) | | | (72,057 | ) | | | — | | | | — | | | | (346,086 | ) | | | (144,853 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Expense | | | — | | | | — | | | | (385,904 | ) | | | (895,576 | ) | | | — | | | | — | | | | (1,162,450 | ) | | | (1,729,548 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | | — | | | | — | | | | (370,160 | ) | | | (366,905 | ) | | | — | | | | — | | | | (1,098,257 | ) | | | (1,093,150 | ) |
Continuing Operations | | $ | 2,043,120 | | | $ | 2,198,822 | | | $ | 35,330 | | | $ | (579,460 | ) | | $ | 6,338,144 | | | $ | 6,615,718 | | | $ | (248,585 | ) | | $ | (401,511 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Discontinued Operations | | | — | | | | 996,607 | | | | — | | | | 820,514 | | | | — | | | | 1,237,986 | | | | — | | | | 816,796 | |
| | $ | 2,043,120 | | | $ | 3,195,429 | | | $ | 35,330 | | | $ | 241,054 | | | $ | 6,338,144 | | | $ | 7,853,704 | | | $ | (248,585 | ) | | $ | 415,285 | |
Net Operating Income (“NOI”) is a non-GAAP financial measure equal to net income, the most comparable GAAP financial measure, plus depreciation, interest expense, partnership management expense, and other expenses. The Partnership believes that NOI is useful to investors and the Partnership’s management as an indication of the Partnership’s ability to service debt and pay cash distributions. NOI presented by the Partnership may not be comparable to NOI reported by other companies that define NOI differently, and should not be considered as an alternative to net income as an indication of performance or to cash flows as a measure of liquidity or ability to make distributions.
Comparison of Three Months Ended September 30, 2009 to Three Months Ended September 30, 2008
Gross revenues from continuing operations decreased $155,702 to $2,043,120 in 2009, from $2,198,822 in 2008. This was mainly due to decreased home sale activity and other revenue. This was offset by an increase in rental revenue due to higher occupancy at the Sunshine Village property, in Davie Florida, as a result of the relocation of residents from a neighboring, closed manufactured home community.
As described in the Statements of Operations, total operating expenses decreased $770,491, to $2,007,790 in 2009, as compared to $2,778,281 in 2008. This was mainly a result of decreased interest expense due to the mortgage refinancing. Property operations and home sale expenditures also decreased.
As a result of the aforementioned factors, the Partnership experienced Net Income from continuing operations of $35,330 for the third quarter of 2009 compared to a Net Loss of $579,459 for the third quarter of 2008.
Comparison of Nine Months Ended September 30, 2009 to Nine Months Ended September 30, 2008
Gross revenues from continuing operations decreased $277,574 to $6,338,144 in 2009, from $6,615,718 in 2008. The decrease was mainly due to a decrease in other income and home sale income. This was offset by an increase in rental revenue due to higher occupancy at the Sunshine Village property, in Davie Florida, as a result of the relocation of residents from a neighboring, closed manufactured home community.
As described in the Statements of Operations, total operating expenses from continuing operations decreased $430,500, to $6,586,729 in 2009, as compared to $7,017,229 in 2008. The decrease was primarily a result of decreased interest expense due to the mortgage refinancing.
As a result of the aforementioned factors, the Partnership experienced a Net Loss from continuing operations of $248,585 in 2009 as compared to a Net Loss of $401,511 in 2008.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise primarily through its borrowing activities.
There is inherent roll over risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Partnership’s future financing requirements.
Note Payable: At September 30, 2009 the Partnership had notes payable outstanding in the amount of $22,848,698. Interest on these notes is at a fixed annual rate of 6.625% through September 2013, at which time, the rate will reset to the lender’s then prevailing market rate.
The Partnership does not enter into financial instruments transactions for trading or other speculative purposes or to manage its interest rate exposure.
ITEM 4.
CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Partnership carried out an evaluation, under the supervision and with the participation of the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the quarterly report is recorded, processed, summarized and reported as and when required.
There was no change in the Partnership’s internal controls over financial reporting that occurred during the most recent completed quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or operating results.
ITEM 6. EXHIBITS
Exhibit 31.1 | Principal Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) ofThe Securities and Exchange Act of 1934, as amended |
Exhibit 31.2 | Principal Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) ofThe Securities and Exchange Act of 1934, as amended |
Exhibit 32.1 | Certifications pursuant to 18 U.S C. Section 1350, as adopted pursuant to Section906 of the Sarbanes –Oxley Act of 2002. |
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/ Joel Schwartz |
| | | Joel Schwartz, Principal Financial Officer |
Dated: November 12, 2009