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, 2013
¨ 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 | 38-2702802 |
(State or other jurisdiction of | (I.R.S. employer |
incorporation or organization) | identification number) |
280 Daines Street, Birmingham, Michigan 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9220
(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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
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, 2013 (Unaudited) and December 31, 2012 | 3 |
| | |
| Statements of Operations Nine and Three months ended September 30, 2013 and 2012 (Unaudited) | 4 |
| | |
| Statement of Partners’ Equity Nine months ended September 30, 2013 (Unaudited) | |
| | |
| Statements of Cash Flows Nine months ended September 30, 2013 and 2012 (Unaudited) | 5 |
| | |
| Notes to Financial Statements September 30, 2013 (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 | 12 |
| | |
PART II | OTHER INFORMATION | 12 |
| | |
ITEM 1. | LEGAL PROCEEDINGS | 12 |
| | |
ITEM 1A. | RISK FACTORS | 12 |
| | |
ITEM 6. | EXHIBITS | 13 |
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
| | September 30,2013 | | December 31, 2012 | |
| | (Unaudited) | | | |
ASSETS | | | | | | | |
| | | | | | | |
Properties: | | | | | | | |
Land | | $ | 8,952,937 | | $ | 8,952,937 | |
Buildings And Improvements | | | 42,391,907 | | | 42,321,607 | |
Furniture And Fixtures | | | 678,866 | | | 651,604 | |
| | | 52,023,710 | | | 51,926,148 | |
| | | | | | | |
Less Accumulated Depreciation | | | (35,550,630) | | | (34,266,824) | |
| | | 16,473,080 | | | 17,659,324 | |
| | | | | | | |
Cash And Cash Equivalents | | | 8,990,774 | | | 5,117,789 | |
Unamortized Finance Costs | | | 1,034,578 | | | 568,914 | |
Manufactured Homes and Improvements | | | 3,952,605 | | | 3,208,757 | |
Other Assets | | | 1,187,901 | | | 1,079,723 | |
Deferred Home Relocation Costs | | | 640,183 | | | 0 | |
| | | | | | | |
Total Assets | | $ | 32,279,121 | | $ | 27,634,507 | |
| | September 30,2013 | | December 31, 2012 | |
| | (Unaudited) | | | | |
LIABILITIES & PARTNERS' EQUITY | | | | | | | |
| | | | | | | |
Accounts Payable | | $ | 92,144 | | $ | 27,904 | |
Other Liabilities | | | 748,900 | | | 568,830 | |
Notes Payable | | | 28,838,348 | | | 21,438,933 | |
| | | | | | | |
Total Liabilities | | $ | 29,679,392 | | $ | 22,035,667 | |
| | | | | | | |
Partners' Equity: | | | | | | | |
General Partner | | | 420,825 | | | 425,050 | |
Unit Holders | | | 2,178,904 | | | 5,173,790 | |
| | | | | | | |
Total Partners' Equity | | | 2,599,729 | | | 5,598,840 | |
| | | | | | | |
Total Liabilities And | | | | | | | |
Partners' Equity | | $ | 32,279,121 | | $ | 27,634,507 | |
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, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | |
| | | | | | | | | | | | | |
Income: | | | | | | | | | | | | | |
Rental Income | | $ | 5,271,959 | | $ | 5,425,966 | | $ | 1,780,389 | | $ | 1,801,379 | |
Home Sale Income | | | 70,506 | | | 206,185 | | | 23,102 | | | 58,464 | |
Other | | | 633,975 | | | 604,070 | | | 204,269 | | | 214,008 | |
| | | | | | | | | | | | | |
Total Income | | | 5,976,440 | | | 6,236,221 | | | 2,007,760 | | | 2,073,851 | |
| | | | | | | | | | | | | |
Operating Expenses: | | | | | | | | | | | | | |
Administrative Expenses (Including $300,931, $298,011, $101,866 and $99,454, in Property Management Fees Paid to an Affiliate for the Nine and Three Month Period Ended September 30, 2013 and 2012, respectively) | | | 1,905,780 | | | 1,808,294 | | | 607,828 | | | 572,352 | |
Property Taxes | | | 620,658 | | | 678,885 | | | 206,865 | | | 233,448 | |
Utilities | | | 451,975 | | | 441,007 | | | 151,408 | | | 148,592 | |
Property Operations | | | 670,823 | | | 536,351 | | | 227,642 | | | 164,373 | |
Depreciation | | | 1,283,806 | | | 1,186,199 | | | 425,085 | | | 395,671 | |
Interest | | | 1,387,981 | | | 1,099,731 | | | 668,653 | | | 364,651 | |
Home Sale Expense | | | 77,886 | | | 217,258 | | | 20,891 | | | 71,569 | |
| | | | | | | | | | | | | |
Total Operating Expenses | | | 6,398,909 | | | 5,967,725 | | | 2,308,372 | | | 1,950,656 | |
| | | | | | | | | | | | | |
Net (Loss) Income | | $ | (422,469) | | $ | 268,496 | | $ | (300,612) | | $ | 123,195 | |
| | | | | | | | | | | | | |
(Loss) Income per Limited Partnership Unit: | | $ | (0.13) | | $ | 0.08 | | $ | (0.09) | | $ | 0.04 | |
| | | | | | | | | | | | | |
Distribution Per Unit: | | $ | 0.78 | | $ | 0.24 | | $ | 0.62 | | $ | 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, 2013 and 2012. | | | 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, 2012 | | $ | 425,050 | | $ | 5,173,790 | | $ | 5,598,840 |
Distributions | | | 0 | | | (2,576,642) | | | (2,576,642) |
Net (Loss) Income | | | (4,225) | | | (418,244) | | | (422,469) |
| | | | | | | | | |
Balance as of September 30, 2013 | | $ | 420,825 | | $ | 2,178,904 | | $ | 2,599,729 |
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 30,2013 | | September 30,2012 | |
Cash Flows From Operating Activities: | | | | | | | |
Net (Loss) Income | | $ | (422,469) | | $ | 268,496 | |
| | | | | | | |
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities: | | | | | | | |
Depreciation | | | 1,283,806 | | | 1,186,199 | |
Amortization of Financing Costs | | | 210,657 | | | 20,814 | |
Amortization of Deferred Home Relocation Costs | | | 149,457 | | | 0 | |
Payment of Deferred Home Relocation Costs | | | (789,640) | | | 0 | |
Increase in Manufactured Homes and Home Improvements | | | (743,848) | | | (996,728) | |
Increase In Other Assets | | | (108,178) | | | (393,126) | |
Increase (Decrease) In Accounts Payable | | | 64,240 | | | (78,725) | |
Increase In Other Liabilities | | | 180,070 | | | 286,299 | |
| | | | | | | |
Total Adjustments | | | 246,564 | | | 24,733 | |
| | | | | | | |
Net Cash (Used In) Provided By Operating Activities | | | (175,905) | | | 293,229 | |
| | | | | | | |
Cash Flows Used In Investing Activities: | | | | | | | |
Purchase of property and equipment | | | (97,562) | | | (151,164) | |
| | | | | | | |
Net Cash Used In By Investing Activities | | | (97,562) | | | (151,164) | |
| | | | | | | |
Cash Flows Provided By (Used In) Financing Activities: | | | | | | | |
Distributions To Unit Holders | | | (2,576,642) | | | (792,813) | |
Proceeds from Refinance | | | 19,320,000 | | | 0 | |
Payments On Mortgage | | | (11,920,585) | | | (346,919) | |
Payments Of Deferred Financing Costs | | | (676,321) | | | 0 | |
| | | | | | | |
Net Cash Provided By (Used In) Financing Activities | | | 4,146,452 | | | (1,139,732) | |
| | | | | | | |
Increase (Decrease) In Cash | | | 3,872,985 | | | (997,667) | |
Cash, Beginning | | | 5,117,789 | | | 6,239,427 | |
| | | | | | | |
Cash, Ending | | $ | 8,990,774 | | $ | 5,241,760 | |
See Notes to Financial Statements
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 2013 (Unaudited)
The accompanying unaudited 2013 financial statements of Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership (the “Partnership”) 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, 2012 has been derived from the audited financial statements at that date. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, 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, 2012.
As described in the Form 10K for year ended December 31, 2012, management initiated the Sunshine Village Paid Home Relocation Program (the “Program”). The Program was offered exclusively to residents of Seminole Estates, a 704 site, age 55 and over manufactured home community in Hollywood, Florida that announced its closure. As of September 30, 2013, 40 residents have successfully relocated. The Partnership has incurred expenditures of $858,485, of which $789,640 has been capitalized and is being amortized over the life of the residents’ three year rental period. Management estimates an additional $80,000 of relocation costs will be incurred to complete the Program.
As described in the Form 8K dated July 26, 2013, the Partnership closed on the refinancing of the first mortgage loans secured by Sunshine Village, located in Davie, Florida and West Valley, located in Las Vegas, Nevada with a new lender, namely Cantor Commercial Real Estate. The gross loan amount secured by the first mortgage on the Sunshine Village property is $6,720,000. The gross loan amount secured by the first mortgage on the West Valley property is $12,600,000. Both loans mature in August, 2023 and bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period.
To satisfy the requirements of Cantor Commercial Real Estate, the ownership of the fee title of each of the properties was transferred into bankruptcy remote special purpose entities. The fee title to the Sunshine Village real property is now held by Sunshine Village MHP, LLC. The fee title to the West Valley real property is now held by West Valley MHP, LLC. Both of these entities are wholly owned by IF II, Holdings, LLC, a newly formed holding company which is wholly owned by the Partnership. Sunshine Village MHP, LLC, West Valley MHP, LLC and IF II, Holdings, LLC are all disregarded entities for federal income tax purposes.
The ownership transfers were made solely to meet the requirements of the lender and do not change the beneficial or economic ownership of the properties by the Partnership. In addition, to facilitate credit approval from the lender, Roger Zlotoff, President of Uniprop, Inc., and his spouse provided a “Guaranty of Recourse Obligations” for both loans. The Board of Directors has approved a guaranty fee of $25,000 per year for Sunshine Village and $37,500 per year for West Valley payable to Mr. Zlotoff. This fee effectively adds 30 basis points to the annual cost of the financing. Net closing proceeds after deducting the payoff of the prior mortgages of $11,383,289 and the payment of closing costs and fees to third parties of $665,193 were $7,271,518. The net loan proceeds have been added to cash reserves of the Partnership. Unamortized financing costs from the previous mortgages for these properties in the amount of $179,395 were written off during the quarter.
The interest rates on the mortgage loans for the other five properties owned by the Partnership were recently adjusted with Standard Insurance Corporation or “StanCorp” by accepting the interest rate re-set option available under those mortgage loans. The new interest rate on those five notes is 5.00% and the amortization period is twenty years. Another interest rate re-set option is available in five years.
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.
On August 29, 2008, the Partnership refinanced its existing mortgage note payable and executed seven new mortgages payable with StanCorp 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. The Partnership incurred $693,798 in financing costs as a result of the 2008 refinancing which is being amortized over the life of the loans. This included a 1% fee payable to an affiliate of the General Partner. Unamortized finance costs of $179,395 were written off during the quarter as a result of the refinancing discussed below.
On July 18, 2013, the Partnership refinanced two of the existing mortgage notes payable and executed two new mortgages payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, Florida and West Valley, located in Las Vegas, Nevada with a new lender, namely Cantor Commercial Real Estate. The mortgages are payable in monthly installments of interest and principal through August, 2023. These notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of September 30, 2013 the balance on these notes was $19,290,752.
The Partnership incurred $665,193 in financing costs as a result of the 2013 refinancing which is being amortized over the life of the loans. This included a 1% fee payable to an affiliate of the General Partner.
Effective September 1, 2013, the interest rate re-set option was accepted on the five remaining mortgage notes with StanCorp. The new rate on these five notes is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of September 30, 2013 the balance on these five notes was $9,547,596.
Future maturities on the notes payable for the next five years and thereafter are as follows: remainder of 2013 - $163,978; 2014 - $674,410; 2015 - $709,585; 2016 - $744,498; 2017 - $785,396 and thereafter - $25,760,481.
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, 2012 filed with the SEC on March 21, 2013 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.
Liquidity and Capital Resources
Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership’s (the “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 expects to meet its short-term liquidity needs generally through its working capital and cash provided by operating activities.
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. The Partnership incurred $693,798 in financing costs as a result of the 2008 refinancing which is being amortized over the life of the loans. This included a 1% fee payable to an affiliate of the General Partner. Unamortized finance costs of $179,395 were written off during the quarter as a result of the refinancing discussed below.
On July 18, 2013, the Partnership refinanced the remaining two mortgage notes payable and executed two new mortgages payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, FL and West Valley, located in Las Vegas, NV with a new lender, namely Cantor Commercial Real Estate. The mortgages are payable in monthly installments of interest and principal through August, 2023. The notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of September 30, 2013 the balance on these notes was $19,290,752.
The Partnership incurred $665,193 in financing costs as a result of the 2013 refinancing which is being amortized over the life of the loans. This included a 1% fee payable to an affiliate of the General Partner.
Effective September 1, 2013, the interest rate re-set option was accepted on the five remaining notes with StanCorp. The new rate on these five notes is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of September 30, 2013 the balance on these notes was $9,547,596.
To satisfy the requirements of Cantor Commercial Real Estate, the ownership of the fee title of each of the properties was transferred into bankruptcy remote special purpose entities. The fee title to the Sunshine Village real property is now held by Sunshine Village MHP, LLC. The fee title to the West Valley real property is now held by West Valley MHP, LLC. Both of these entities are wholly owned by IF II, Holdings, LLC, a newly formed holding company which is wholly owned by the Partnership. Sunshine Village MHP, LLC, West Valley MHP, LLC and IF II, Holdings, LLC are all disregarded entities for federal income tax purposes.
The ownership transfers were made solely to meet the requirements of the lender and do not change the beneficial or economic ownership by the Partnership. In addition, to facilitate credit approval from the lender, Roger Zlotoff, President of Uniprop AM, LLC and his spouse provided a “Guaranty of Recourse Obligations” for both loans. The Board of Directors has approved a guaranty fee of $25,000 per year for Sunshine Village and $37,500 per year for West Valley payable to Mr. Zlotoff. This fee effectively adds 30 basis points to the annual cost of the financing. Net closing proceeds after deducting the payoff of the prior mortgages of $11,383,289 and the payment of closing costs and fees to third parties of $665,193 were $7,271,518. The net loan proceeds have been added to cash reserves of the Partnership. Unamortized financing costs from the previous mortgages for these properties in the amount of $179,395 were written off during the quarter.
The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the third quarter ended September 30, 2013. 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.
The General Partner made a Special Distribution of $1,783,829, or $.54 per unit to the unit holders during the third quarter ended September 30, 2013. This Special Distribution was made as a result of the refinancing of Sunshine Village and West Valley.
As of September 30, 2013, the Partnership’s cash balance amounted to $8,990,774. 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 48% at the end of September 2013 versus 48% at the end of September 2012. The average monthly homesite rent as of September 30, 2013 was approximately $515; versus $505 from September 2012 (average rent not a weighted average).
| | Total | | Occupied | | Occupancy | | | Average* | |
| | Capacity | | Sites | | Rate | | | Rent | |
| | | | | | | | | | | |
Ardmor Village | | 339 | | 148 | | 44 | % | | $ | 539 | |
Camelot Manor | | 335 | | 109 | | 33 | % | | | 424 | |
Dutch Hills | | 278 | | 106 | | 38 | % | | | 428 | |
El Adobe | | 367 | | 163 | | 44 | % | | | 548 | |
Stonegate Manor | | 308 | | 105 | | 34 | % | | | 418 | |
Sunshine Village | | 356 | | 257 | | 72 | % | | | 627 | |
West Valley | | 421 | | 302 | | 72 | % | | | 618 | |
| | | | | | | | | | | |
Total on 9/30/13: | | 2,404 | | 1,190 | | 48 | % | | $ | 515 | |
Total on 9/30/12: | | 2,404 | | 1,180 | | 48 | % | | $ | 505 | |
*Not a weighted average
| | | | | | | | Net Operating Income | | | | | | | | Net Operating Income | |
| | Gross Revenue | | and Net (Loss) Income | | Gross Revenue | | and Net (Loss) Income | |
| | 9/30/2013 | | 9/30/2012 | | 9/30/2013 | | 9/30/2012 | | 09/30/2013 | | 09/30/2012 | | 09/30/2013 | | 09/30/2012 | |
| | three months ended | | three months ended | | nine months ended | | nine months ended | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Ardmor | | $ | 256,377 | | $ | 240,875 | | $ | 123,104 | | $ | 116,228 | | $ | 726,187 | | $ | 730,793 | | $ | 327,712 | | $ | 342,275 | |
Camelot Manor | | | 175,268 | | | 170,325 | | | 56,315 | | | 65,597 | | | 516,158 | | | 451,667 | | | 153,124 | | | 143,071 | |
Dutch Hills | | | 159,848 | | | 216,018 | | | 48,260 | | | 56,840 | | | 490,976 | | | 555,334 | | | 151,612 | | | 161,643 | |
El Adobe | | | 240,479 | | | 275,507 | | | 99,376 | | | 124,672 | | | 743,987 | | | 868,297 | | | 320,553 | | | 448,921 | |
Stonegate | | | 170,984 | | | 161,287 | | | 67,602 | | | 52,461 | | | 498,220 | | | 509,318 | | | 199,838 | | | 140,952 | |
Sunshine | | | 429,123 | | | 431,432 | | | 198,190 | | | 197,530 | | | 1,278,984 | | | 1,369,088 | | | 568,231 | | | 624,906 | |
West Valley | | | 573,745 | | | 567,053 | | | 392,571 | | | 397,550 | | | 1,714.985 | | | 1,717,202 | | | 1,193,149 | | | 1,220,784 | |
| | | 2,005,824 | | | 2,063,497 | | | 985,418 | | | 1,010,878 | | | 5,969,497 | | | 6,201,699 | | | 2,914,219 | | | 3,082,552 | |
Partnership Management | | | 1,936 | | | 10,354 | | | (119,119) | | | (84,526) | | | 6,943 | | | 34,522 | | | (436,814) | | | (366,431) | |
Other Expense | | | —— | | | ——- | | | (73,173) | | | (42,835) | | | ——- | | | ——- | | | (228,087) | | | (161,695) | |
Interest Expense | | | —— | | | ——- | | | (668,653) | | | (364,651) | | | ——— | | | ——- | | | (1,387,981) | | | (1,099,731) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation | | | —— | | | ——- | | | (425,085) | | | (395,671) | | | ——- | | | ——— | | | (1,283,806) | | | (1,186,199) | |
| | $ | 2,007,760 | | $ | 2,073,851 | | $ | (300,612) | | $ | 123,195 | | $ | 5,976,440 | | $ | 6,236,221 | | $ | (422,469) | | $ | 268,496 | |
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, 2013 to Three Month Ended September 30, 2012
Gross revenues decreased $66,091 to $2,007,760 in 2013, from $2,073,851 in 2012. This was mainly due to decreased home sale activity. In addition, the amortization of relocation expenses relating to the Sunshine Village relocation program decreased rental income for the period.
As described in the Statements of Operations, total operating expenses increased $357,716, to $2,308,372 in 2013, as compared to $1,950,656 in 2012. This was mainly due to the write off of certain unamortized finance costs as a result of the 2013 refinancing disclosed above, and expenses associated with the relocation program at Sunshine Village.
As a result of the aforementioned factors, the Partnership experienced a Net Loss of $300,612 for the third quarter of 2013 as compared to Net Income of $123,195 for the third quarter of 2012.
Comparison of Nine Months Ended September 30, 2013 to Nine Months Ended September 30, 2012
Gross revenues decreased $259,781 to $5,976,440 in 2012, from $6,236,221 in 2012. The decrease was mainly due to decreased home sale activity, as well as decreased rental income resulting from the amortization of relocation expenses relating to the Sunshine Village relocation program.
As described in the Statements of Operations, total operating expenses increased $431,184, to $6,398,909 in 2013, as compared to $5,967,725 in 2012. The increase was mainly due to the write off of certain unamortized finance costs as a result of the 2013 refinancing disclosed above, and expenses associated with the Sunshine Village relocation program.
As a result of the aforementioned factors, the Partnership experienced a Net Loss of $422,469 in 2013 as compared to Net Income of $268,496 in 2012.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate risk 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, 2013 the Partnership had five notes payable outstanding in the amount of $9,547,596. Interest on these notes is at a fixed annual rate of 5.00% through September 2018.
At September 30, 2013 the Partnership had two notes payable outstanding in the amount of $19,290,752. Interest on these notes is at a fixed annual rate of 5.09% through August 2023.
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
The Partnership has filed a lawsuit against the City of Las Vegas. The primary complaint is that the City of Las Vegas charges what is being viewed as a “discriminatory” monthly service fee to keep sewer capacity available on vacant manufactured home community sites, but does not charge the same monthly service fee on vacant site built home sites. It is unknown at this time what the outcome of the lawsuit will be.
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, 2012, 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 10 | Mortgage notes, made as of July 18, 2013, between Sunshine Village MHP, LLC, West Valley MHP, LLC and Cantor Commercial Real Estate. |
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Exhibit 31.1 | Principal Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended |
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Exhibit 31.2 | Principal Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as amended |
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Exhibit 32.1 | Certifications pursuant to 18 U.S C. Section 1350, as adopted pursuant to Section 906 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/ Roger I. Zlotoff |
| | | | Roger I. Zlotoff, President |
| | | | |
| | | By: | /s/ Susann Kehrig |
| | | | Susann Kehrig, Principal Financial Officer |
Dated: November 8, 2013