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, 2006 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 if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15 (d) of the Act.
Yes [ ] No [X]
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-K or any amendment to this
Form 10-K [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act
Large Accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the Registrant is a shell company (as defined in
Exchange Act Rule 12b-2).
Yes [ ] No [X]
The estimated aggregate net asset value of the units as of March 1, 2007 held by
non-affiliates, as estimated by the General Partner (based on a 2007 appraisal
of Partnership properties), was $66,554,922. As of March 1, 2007 the number of
units of limited partnership interest of the registrants outstanding was
3,303,387.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
PART I-
This Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
based on assumptions and expectations which may not be realized and are
inherently subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future events and
actual results, financial and otherwise, may differ materially from the results
discussed in the forward-looking statements. Risks and other factors that might
cause such a difference include, but are not limited to, the effect of economic
and market conditions; financing risks, such as the inability to obtain debt
financing on favorable terms; the level and volatility of interest rates; and
failure of the Partnership's properties to generate additional income to offset
increases in operating expenses, as well as other risks listed herein under Item
1.
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) 645-9220.
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.
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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 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 Loan Agreement through the note maturity date of September
2028. The Partnership used the proceeds from the Loan to refinance the
Partnership's outstanding indebtedness of $30,045,000, which was incurred in 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.
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 home sites in the Properties
to owners of manufactured homes. 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 an independent
consultant, 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, with a view to achieving maximum capital
appreciation to the Partnership while 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)
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their manufactured home sites on a collective basis. This trend may result in
increased competition with the Partnership for residents. 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 seven
communities offering approximately 3,441 housing sites competing with Sunshine
Village. Ardmor Village competes with approximately ten communities in the
Lakeville, Minnesota area offering approximately 2,509 housing sites. Camelot
Manor competes with approximately twelve communities in the Grand Rapids,
Michigan area offering approximately 2,624 housing sites. In the Jacksonville,
Florida area, Country Roads competes with approximately eleven communities
offering approximately 4,013 housing sites. The Tampa, Florida area contains
approximately sixteen communities offering approximately 4,066 housing sites
competing with Paradise Village. Dutch Hills and Stonegate Manor compete with
approximately 13 other communities in the Lansing, Michigan area offering
approximately 4,186 housing sites. In the Las Vegas, Nevada area, West Valley
competes with approximately eight other communities offering approximately 2,088
housing sites and El Adobe competes with 18 other communities offering 5,862
home sites. The Properties also compete against other forms of housing,
including apartment and condominium complexes, and site built homes.
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, 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
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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 AM, LLC, as the property manager for each of its Properties.
Uniprop AM, LLC 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 AM, LLC 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 AM, LLC. The
yearly salaries and expenses for local managers range from $15,000 to $42,000.
Community Managers are utilized by the Partnership to provide on-site
maintenance and administrative services. Uniprop AM, LLC as property manager,
has overall management authority for each property.
ITEM 1A. RISK FACTORS
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The following risks and uncertainties could cause our business, financial
condition or results of operations to be materially adversely affected. In that
case, we might not be able to pay distributions on our Units, the net asset
values of the Units could decline, and a Unit holder might lose all or a portion
of its investment.
1. REAL ESTATE INVESTMENTS. The Partnership's investments are subject to
the same risks generally incident to the ownership of real estate
including: the uncertainty of cash flow to meet fixed or variable
obligations, adverse changes in economic conditions, changes in the
investment climate for real estate, adverse changes in local market
conditions, changes in interest rates and the availability of mortgage
funds or chattel financing, changes in real estate tax rates,
governmental rules and regulations, acts of God and the inability to
attract or retain residential tenants.
Residential real estate, including manufactured housing communities,
is subject to adverse housing pattern changes and uses, vandalism,
rent controls, rising operating costs and adverse changes in local
market conditions such as a decrease in demand for residential housing
due to a decrease in employment. State governments also often regulate
the relationship between manufactured housing community owners and
residents.
2. THE GENERAL PARTNER AND ITS AFFILIATES HAVE CONFLICTS OF INTEREST.
Although the General Partner has a fiduciary duty to manage the
Partnership in a manner
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beneficial to the Unit holders, the directors and officers of the
General Partner have a fiduciary duty to manage the General Partner in
a manner beneficial to its owners. Furthermore, certain directors and
officers of the General Partner are directors or officers of
affiliates of the General Partner. Conflicts of interest may arise
between the General Partner and its affiliates and the Unit holders.
As a result of these conflicts, the General Partner may favor its own
interests and the interests of its affiliates over the interests of
the Unit holders.
3. RELIANCE ON GENERAL PARTNER'S DIRECTION AND MANAGEMENT OF THE
PROPERTIES. The success of the Partnership will, to a large extent,
depend on the quality of the management of the Properties by the
General Partner and affiliates of the General Partner and their
collective judgment with respect to the operation, financing and
disposition of the Properties. To the extent that the General Partner
and its affiliates are unable to hire and retain quality management
talent, the Partnership's financial results and operations may be
adversely affected.
4. FEDERAL INCOME TAX RISKS. Federal income tax considerations will
affect materially the economic consequences of an investment in the
Properties. The tax consequences of the Partnership's activities are
complex and subject to many uncertainties. Changes in the federal
income tax laws or regulations may adversely affect the Partnership's
financial results and its ability to make distributions to the Unit
holders. Additionally, the tax benefits enjoyed by the Unit holders
may be reduced or eliminated.
5. LIMITED LIQUIDITY OF THE UNITS. The transfer of Units is subject to
certain limitations. The public market for such Units is limited. Unit
Holders may not be able to liquidate their investment promptly or at
favorable prices, if at all.
6. COMPETITION. The business of owning and operating residential
manufactured housing communities is highly competitive. The
Partnership competes with a number of established communities having
greater financial resources. Moreover, there has been a trend for
manufactured housing community residents to purchase home sites either
collectively or individually. Finally, the popularity and
affordability of site built homes has also increased in recent years
while the availability of chattel financing has decreased. These
trends have resulted in increased competition for tenants to occupy
the Partnership properties.
7. MANAGEMENT AND CONTROL OF PARTNERSHIP AFFAIRS. The General Partner is
vested with full authority as to the general management and
supervision of the business affairs of the Partnership. The Unit
Holders do not have the right to participate in the management of the
Partnership or its operations. However, the vote of Unit Holders
holding more than 50% of the outstanding voting interests is required
to: (a) amend the Partnership Agreement; (b) approve or disprove the
sale of one property or a series of transactions of all or
substantially all of the assets of the Partnership; (c) dissolve the
Partnership; (d) remove the General Partner; or (e) approve certain
actions by the General Partner that the Consultant recommends against.
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8. UNINSURED LOSSES. The Partnership carries comprehensive insurance,
including liability, fire and extended coverage, and rent loss
insurance which is customarily obtained for real estate projects.
There are certain types of losses, however, that may be uninsurable or
not economically insurable such as certain damage caused by a
hurricane. If such losses were to be incurred, the financial position
and operations of the Partnership as well as the Partnership's ability
to make distributions would be adversely affected.
9. ENVIRONMENTAL MATTERS. Because the Partnership deals with real estate,
it is subject to various federal, state and local environmental laws,
rules and regulations. Changes in such laws, rules and regulations may
cause the Partnership to incur increased costs of compliance which may
have a material adverse effect on the operations of the Partnership
and its ability to make distributions to Unit holders.
10. NO GUARANTEE OF DISTRIBUTIONS. The General Partner may withhold cash
for extended periods of time if such cash is necessary to build cash
reserves or for the conduct of the Partnership's business. A Unit
holder will be required to pay federal income taxes, and, in some
cases, state and local income taxes on the Unit holder's share of the
Partnership's taxable income, whether or not cash distributions are
made by the Partnership. A Unit holder may not receive cash
distributions from the Partnership equal to the holder's share of
taxable income or even equal to the tax liability that results from
the Unit holder's share of the Partnership's taxable income.
11. THE PARTNERSHIP MAY NOT BE ABLE TO GENERATE SUFFICIENT WORKING CAPITAL
TO FUND ITS OPERATIONS. There can be no assurance that the Partnership
will generate sufficient working capital from operations to operate
the business or to fund distributions. Further, there can be no
assurance that the Partnership will be able to borrow additional funds
on terms favorable to the Partnership, if at all, to meet
unanticipated working capital needs or to make distributions to the
Unit holders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Partnership purchased all nine manufactured housing communities for
cash. As a result of the Loan, 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. Each
of the Properties has a community center, which includes offices, meeting rooms
and game rooms. Each of the Properties, except Stonegate Manor, has a swimming
pool. Several of the Properties also have laundry
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rooms, playground areas, garage and maintenance areas and recreational vehicle
or boat storage areas.
The table below contains certain information concerning the Partnership's nine
properties.
PROPERTY NAME NUMBER
AND LOCATION YEAR CONSTRUCTED ACREAGE OF SITES
- ------------- ---------------- ------- --------
Ardmor Village
Cedar Avenue S.
Lakeville, MN 1974 74 339
Camelot Manor
Camelot Blvd. S.W.
Grand Rapids, MI 1973 57 335
Country Roads
Townsend Road
Jacksonville, FL 1967 37 311
Dutch Hills
Upton Road
E. Lansing, MI 1975 42.8 278
El Adobe
N. Lamb Blvd.
Las Vegas, NV 1975 36 367
Paradise Village
Paradise Drive
Tampa, FL 1971 91 614
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 53 421
ITEM 3. LEGAL PROCEEDINGS
During 2006, All Parks Alliance for Change ("APAC") filed a civil action
alleging the Partnership was in violation of Minnesota law by not allowing APAC
unlimited access to solicit the residents of Ardmor Village located in
Lakeville, MN for membership in APAC. While the Partnership prevailed at both
the District and Appellate Courts, the matter was then appealed to the Minnesota
Supreme Court.
The Supreme Court trial took place on October 11, 2006, and the matter
remains under advisement with a decision expected shortly. As a result, the
Partnership has accrued $40,000 in December 2006, to cover plaintiff's asserted
costs and legal fees
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associated with this action. The Partnership anticipates no financial liability
relating to the original access claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the Unit Holders are restricted to certain matters
of fundamental significance to the Partnership. The Unit Holders 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 also have a
right to vote on the 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 holding in the
aggregate more than 50% of the then outstanding voting interests. No matters
were submitted to the Unit Holders for a vote during 2006.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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, including transfers due to death or intra-family transfers. The
Partnership believes there is no formal 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 Unit
Holders 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 2007, the Properties were appraised at an
aggregate fair market value of $95,700,000. Assuming a sale of the nine
properties in March 2007, at the appraised value, less payment of 3% selling
expenses and mortgage debt, the net aggregate proceeds available for
distribution to the Unit Holders is estimated to be $66,554,922 or $20.14 per
Unit. There can be no assurance that the estimated net asset value could ever be
realized. As of December 31, 2006, the Partnership had 3,519 Unit Holders.
The following table sets forth the distributions per limited partnership unit
for each calendar quarter in the last two fiscal years. Distributions were paid
in the periods immediately subsequent to the periods in which such distributions
were declared.
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Distribution per
Quarter Ended Limited Partnership Unit
- ------------- ------------------------
March 31, 2006 $0.08
June 30, 2006 $0.08
September 30, 2006 $0.08
December 31, 2006 $0.08
March 31, 2005 $0.23
June 30, 2005 $0.23
September 30, 2005 $0.23
December 31, 2005 $0.12
The Partnership intends to continue to declare quarterly distributions. However,
distributions are determined by the General Partner and will depend on the
results of the Partnership's operations.
The Partnership has no equity compensation plans.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for the Partnership
for the periods ended December 31, 2006, 2005, 2004, 2003 and 2002:
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
31, 2006 31, 2005 31, 2004 31, 2003 31, 2002
------------ ------------ ------------ ------------ ------------
Total Assets $ 36,187,560 $ 37,788,488 $ 40,749,401 $ 42,826,320 $ 44,130,856
============ ============ ============ ============ ============
Note Payable $ 26,274,078 $ 26,824,354 $ 27,340,304 $ 27,819,236 $ 28,723,124
============ ============ ============ ============ ============
Revenue 11,987,136 12,842,270 12,979,388 14,402,693 13,741,599
Operating Expenses (11,919,201) (12,320,039) (11,604,261) (12,290,990) (11,623,613)
------------ ------------ ------------ ------------ ------------
Total Net Income $ 67,935 $ 522,231 $ 1,375,127 $ 2,111,703 $ 2,117,986
============ ============ ============ ============ ============
Distributions to Unit
Holders, per Unit: $ .36 $ .81 $ .92 $ .92 $ .90
Income per Unit: $ .02 $ .16 $ .42 $ .64 $ .63
Weighted average
Number of Units
Outstanding: 3,303,387 3,303,387 3,303,387 3,303,387 3,303,387
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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.
As described in Item 1, the Partnership borrowed $30,000,000 from GMAC
Commercial Mortgage Corporation in August 1998. 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 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.
Future maturities on the note payable for the next five years are as
follows: 2007 - $587,000; 2008 - $622,000; 2009 - $660,000, 2010 - $712,000 and
2011 - $757,000. .
The General Partner acknowledges that the mortgages pose some risks to the
Partnership, but believes 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
believes will be 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 of the cash generated from operations in order to maintain
capital reserves. As of December 31, 2006, the Partnership had $350,659 in cash
balances.
The Partnership established a renewable line of credit of $1,500,000 with
National City Bank that expires in October, 2007. The interest rate floats 180
basis points above the one month LIBOR rate. As of December 31, 2006, there was
no outstanding balance. The primary purpose of the line of credit is to meet any
short-term or seasonal cash flow needs. The Partnership plans to renew the line
of credit at the expiration.
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), was applied
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to the then 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.
Results of Operations
Distributions
For the year ended December 31, 2006, the Partnership made distributions to
the Unit Holders of $1,189,219, which is equal, on an annualized basis, to a
2.1% return on their adjusted capital contributions ($.36 per $17.11 Unit).
Distributions paid to Unit Holders in 2005 totaled $2,675,743 and $3,039,115 was
paid in 2004.
The distributions paid in 2006 were less than the amount required for the
annual 10.0% preferred return to the Unit Holders by approximately $4,463,000.
As described in Note 8 to the Partnership's financial statements, the cumulative
preferred return deficit through December 2006 was approximately $40,294,000. No
distributions can be made to the General Partner in regard to its incentive
management interest until the cumulative preferred return deficit has been
distributed to the Unit Holders. At December 31, 2006, the unpaid amount to be
distributed to the General Partner was approximately $10,549,000.
Revenue and Net Income
For the years ended December 31, 2006, 2005 and 2004, net income was
$67,935, $522,231 and $1,375,127 and gross revenue was $11,987,136, $12,842,270
and $12,979,388, respectively.
Partnership Management
Certain employees of the Partnership are also employees of affiliates of
the General Partner. The Partnership paid these employees an aggregate of
$138,288, $120,077, and $116,571, in 2006, 2005 and 2004 respectively, to
perform partnership management and investor relation services for the
Partnership.
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Recent Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 is effective for
fiscal years beginning after December 15, 2006. This interpretation clarifies
the accounting for uncertainty in income taxes recognized in accordance with
SFAS 109, "Accounting for Income Taxes" and prescribes a recognition threshold
and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return.
This Interpretation also provides guidance on various related matters such as
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The Partnership is a tax-free entity, and
under FIN 48, the Partnership does not expect any impact.
In September 2006, the Securities and Exchange Commission Staff issued
Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in the Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 was issued to eliminate the diversity
in practice surrounding how public companies quantify financial misstatements.
SAB No. 108 requires that registrants quantify errors using both a balance sheet
and income statement approach and evaluate whether either approach results in a
misstated amount that, when all relevant quantitative and qualitative factors
are considered, is material. The adoption of SAB No. 108 did not have any impact
on the Partnership's financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS No. 157 does not require any new
fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007. The Partnership is
currently evaluating the impact of this pronouncement on the Partnership's
financial position and results of operations.
In February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities ("SFAS 159"), which provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
159 is to reduce both complexity in accounting for financial instruments and the
volatility in earnings caused by measuring related assets and liabilities
differently. SFAS 159 establishes presentation and disclosure requirements
designed to facilitate comparisons between companies that choose different
measurement attributes for similar types of assets and liabilities and to more
easily understand the effect of the company's choice to use fair value on its
earnings. SFAS 159 also requires entities to display the fair value of the
selected assets and liabilities on the face of the balance sheet. SFAS 159 does
not eliminate disclosure requirements of other accounting standards, including
fair value measurement disclosures in SFAS 157. This statement is effective as
of the beginning of an entity's first fiscal year beginning after November 15,
2007. Early adoption is permitted as of the beginning of the previous fiscal
year provided that the entity makes that choice in the first 120 days of that
fiscal year and also elects to
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apply the provisions of Statement 157. The Partnership is currently evaluating
the impact of this pronouncement on the Partnership's financial position and
results of operations.
Critical Accounting Policies
In the course of developing and evaluating accounting policies and
procedures, we use estimates, assumptions and judgments to determine the most
appropriate methods to be applied. Such processes are used in determining
capitalization of costs related to real estate investments and potential
impairment of real estate investments.
Real estate assets are stated at cost less accumulated depreciation.
Expenditures for property maintenance are charged to operations as incurred,
while significant renovations are capitalized. Depreciation of the buildings is
recorded on the straight-line method using an estimated useful life of thirty
years.
In determining the fair value of real estate investments, we consider
future cash flow projections on a property by property basis, current interest
rates and current market conditions of the geographical location of each
property.
The following table outlines our contractual obligations (in thousands) as
of December 31, 2006.
Total Yr1 2-3 Yrs 4-5 Yrs Over 5 Yrs
------- ---- ------- ------- ----------
Mortgages payable $26,274 $587 $1,282 $1,469 $22,936
The future payments listed above for long-term debt repayments exclude interest
payments.
Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 57% for the year ended December
31, 2006, as compared to 64% for the fiscal year December 31, 2005, and 68% for
the fiscal year ended December 31, 2004. The average monthly rent (not weighted
average) was approximately $418 per home site for the year ended December 31,
2006, as compared to $410 for the year ended December 31, 2005 and $397 for the
year ended December 31, 2004. The manufactured housing industry in general has
experienced lower retail sales over the past three years due to restrictive
financing and the ease at which site-built homes can be acquired and financed.
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OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
TOTAL --------------------- ------------------ ------------------
SITES 2006 2005 2004 2006 2005 2004 2006 2005 2004
----- ----- ----- ----- ---- ---- ---- ---- ---- ----
Ardmor Village 339 209 227 265 62% 67% 78% $438 $429 $414
Camelot Manor 335 146 175 216 44% 52% 65% 378 378 366
Country Roads 311 149 161 182 48% 52% 59% 295 286 278
Dutch Hills 278 156 182 213 56% 66% 77% 386 386 386
El Adobe 367 227 224 235 62% 61% 64% 459 447 437
Paradise Village 614 266 286 308 43% 47% 50% 361 343 340
Stonegate Manor 308 154 176 206 50% 57% 67% 372 372 385
Sunshine Village 356 262 355 311 74% 100% 87% 550 534 512
West Valley 421 311 313 317 74% 74% 75% 525 413 499
----- ----- ----- ----- --- --- --- ---- ---- ----
Overall 3,329 1,880 2,099 2,253 57% 64% 68% $418 $410 $397
===== ===== ===== ===== === === === ==== ==== ====
The following table summarizes gross revenues and net operating income for
the Partnership and Properties during 2006, 2005, 2004 twelve month period.
NET OPERATING INCOME
GROSS REVENUE AND NET INCOME
--------------------------------------- ---------------------------------------
2006 2005 2004 2006 2005 2004
----------- ----------- ----------- ----------- ----------- -----------
Ardmor Village $ 1,201,160 $ 1,477,396 $ 1,591,966 $ 491,524 $ 600,601 $ 815,426
Camelot Manor 800,237 968,492 1,137,522 228,264 320,186 517,127
Country Roads 698,586 730,116 811,738 158,214 194,688 267,828
Dutch Hills 828,800 972,186 1,124,377 218,426 360,577 514,329
El Adobe 1,293,961 1,331,273 1,374,120 560,289 639,801 666,732
Paradise Village 1,363,518 1,516,067 1,698,099 372,874 419,436 477,613
Stonegate Manor 812,032 952,569 1,173,422 225,170 293,779 439,779
Sunshine Village 2,645,150 2,441,728 2,104,982 1,366,778 1,079,952 1,074,067
West Valley 2,341,063 2,442,362 1,955,140 1,095,981 1,182,155 1,115,613
----------- ----------- ----------- ----------- ----------- -----------
11,984,507 12,832,189 12,971,366 4,717,520 5,091,175 5,888,514
Partnership Mgmt. $ 2,629 $ 10,081 $ 8,022 (384,639) (343,196) (380,865)
--
Other Expenses (622,818) (580,075) (522,779)
Interest Expense (1,735,128) (1,769,583) (1,806,738)
Depreciation and Amortization (1,907,000) (1,876,090) (1,803,005)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL: $11,987,136 $12,842,270 $12,979,388 $ 67,935 $ 522,231 $ 1,375,127
=========== =========== =========== =========== =========== ===========
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.
-15-
COMPARISON OF YEAR ENDED DECEMBER 31, 2006 TO YEAR ENDED DECEMBER 31, 2005
Total revenues decreased $855,134 to $11,987,136 in 2006, compared to
$12,842,270 in 2005. The decrease is primarily the result of a decrease in
occupancy, and lower home sale volume. The decrease in occupancy is due
primarily to increased foreclosures on home mortgages, which frequently results
in the home being moved out of the property and lower new home sales.
The Partnership's operating expenses decreased $400,838, to $11,919,201 in
2006, compared to $12,320,039 in 2005. Home sale expense decreased due to the
decreased volume of home sales.
As a result of the aforementioned factors, net income decreased $454,296
from $522,231 in 2005 to $67,935 in 2006.
COMPARISON OF YEAR ENDED DECEMBER 31, 2005 TO YEAR ENDED DECEMBER 31, 2004
Total revenues decreased $137,118 to $12,842,270 in 2005, compared to
$12,979,388 in 2004. The decrease is primarily the result of a decrease in
occupancy, offset by an increase in home sale revenue. The decrease in occupancy
is due primarily to increased foreclosures on home mortgages and lower new home
sales. Rental Revenue decreased $873,973 due to lower occupancy.
The Partnership's operating expenses increased $715,778, to $12,320,039 in
2005, compared to $11,604,261 in 2004. Home sale expense increased due to the
increased volume of home sales and write down of selected inventory to current
market values.
As a result of the aforementioned factors, net income decreased $852,896
from $1,375,127 in 2004 to $522,231 in 2005.
IMPORTANT DISCLOSURES
The General Partner believes it is important to disclose certain recent
events to the Unit Holders along with a description of the actions taken by the
General Partner to respond to the events.
During 2006, industry conditions remained depressed due to the lack of
available retail financing. Reduced retail home sales for manufactured homes and
high default rates on chattel mortgage loans for manufactured homes continued
through 2006. In addition, the affordability and ease of financing site built
homes continued to provide competition for the manufactured housing industry. As
a result, occupancy levels have decreased in recent years, and management does
not expect a short term turnaround. As lending
-16-
standards for site built homes begin to tighten because of high default rates in
that market, demand for manufactured housing may increase but this increase, if
it occurs, may take years to materialize.
The Partnership continued to receive payments from FEMA for the housing of
displaced residents due to Hurricane Wilma in 2005 at Sunshine Village, located
in Davie, Florida. However, as these residents find permanent housing, the
number of FEMA paying sites has decreased in 2006, and will continue to decrease
in 2007. The contract is on a month to month basis and can be cancelled at any
time by either FEMA or the Partnership.
During 2006, the management team of Uniprop Manufactured Housing
Communities Income Fund II, hired a real estate broker to look into the
potential offering for sale of the Paradise Village community located in Tampa,
Florida. The purpose of this action was to establish the fair market value of
the property, the marketability of the property, its highest and best use and to
determine the market terms required for such a sale.
In January of 2007, following the receipt of a number of offers, management
developed a strategic plan to demonstrate the value of creating liquidity for
the Fund and the potential benefit of this liquidity in light of other
strategies under consideration. At the January Board meeting, the Board of
Directors approved a plan to enter into a contract for sale of the community. As
of this date, however, this contract has been terminated by the buyer.
Management is currently anticipating other potential offers that may be received
and will reassess the decision to sell at that time. The carrying amounts of the
major classes of assets and liabilities of Paradise Village as of December 30,
2006 are as follows: Total Assets of $6,123,495 consist of Current Assets of
$759,479 and Fixed Assets of $10,830,023 less Accumulated Depreciation of
$5,466,007. Total Liabilities consist only of Current Liabilities of $117,866,
since the property has no long term debt.
ITEM 7A. 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 December 31, 2006 the Partnership had a note payable
outstanding in the amount of $26,274,078. Interest on this note is at a fixed
rate of 6.37% through March 2009. This note is collateralized by certain
properties within the fund.
Line of Credit: At December 31, 2006, the Partnership holds a line of
credit with National City Bank for $1,500,000. Interest on this note is accrued
at a variable rate of 1.80% in excess of One Month LIBOR. This line of credit
was established to meet any short term or seasonal cash flow needs. There is no
outstanding balance as of December 31, 2006.
The Partnership does not enter into financial instruments transactions for
trading or other speculative purposes or to manage its interest rate exposure.
-17-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Partnership financial statements for the fiscal years ended
December 31, 2006, 2005 and 2004, and supplementary data are filed with this
Report:
(i) Report of Independent Registered Public Accounting Firm
(ii) Balance Sheets as of December 31, 2006 and 2005
(iii) Statements of Operations for the fiscal years ended December 31,
2006, 2005 and 2004
(iv) Statements of Partners' Equity for the fiscal years ended
December 31, 2006, 2005 and 2004
(v) Statements of Cash Flows for the fiscal years ended December 31,
2006, 2005 and 2004
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change in the Partnership's independent registered public
accounting firm nor have there been any disagreements during the Partnership's
most recent two fiscal years.
ITEM 9A. CONTROLS AND PROCEDURES
The Partnership maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the
Partnership's Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms, and that such information is accumulated and
communicated to the Partnership's management, including its Principal Executive
Officer and Principal Financial Officer, as appropriate to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a - 14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. As of the end of
the period covered by this report (the-evaluation date), the Partnership
conducted an evaluation under the supervision and with the participation of its
Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rule 13a - 14(c) under the Securities Exchange Act of
1934 ("the Exchange Act")). Based on this evaluation, the Principal Executive
Officer and Principal Financial Officer concluded that, as of the evaluation
date, the Partnership's disclosure controls and procedures were effective to
reasonably ensure
-18-
that information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms.
There was no change in the Partnership's internal control over financial
reporting during its most recently completed quarter that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
PART III
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 Uniprop, Inc. is the General Partner.
Information concerning officers of Uniprop, Inc., during the last five
years or more is as follows:
Paul M. Zlotoff, 57, became the Chairman of Uniprop, Inc. in May 1986 and
was its President from 1979 through 1997. He is also the sole owner of GP P.I.
Associates Corp, the general partner of P.I. Associates, 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.
Joel Schwartz, CPA, 45, became Chief Financial Officer of Uniprop Inc. on
June 1, 2004. Mr. Schwartz is responsible for all financial affairs including
accounting operations, banking relationships, raising mortgage capital, asset
management and investor relations. From 1998 to 2004, Mr. Schwartz was Chief
Financial Officer for Village Green Companies. From 1990 to 1998, Mr. Schwartz
was Project Manager for Ford Motor Land Services Corporation. Mr. Schwartz was
also an Associate at Plante & Moran CPA's from 1983 to.1989. Mr. Schwartz
received his B.A. from Michigan State University in 1983 with a major in
accounting and received an MBA from the University of Michigan in 1990.
Bob Sher, CPA, 68, became Independent Director of Genesis Associates on
September 1, 2004. As Independent Director, Mr. Sher is responsible for the
oversight and approval of management decisions and strategic planning for the
Fund. He also serves as the Audit Committee. Currently, a semi-retired real
estate investor and Business Coach, Mr. Sher was Chief Financial Officer,
Partner and Director of Schostak Brothers and Company, Inc, a family owned
realty company from 1970 to 2004. Previously, Mr. Sher was an associate and
partner with S. J. Bechek & Company, CPA's from 1964 to 1970.
Roger Zlotoff, 46, is Vice President and became Chief Operating Officer of
Uniprop, Inc. in 2004. He has been with Uniprop since October 18, 1999. Mr.
Zlotoff is primarily
-19-
responsible for raising equity capital, managing partnership investments,
evaluating acquisitions of existing properties and leading the development
process for new properties. From 1997 to 1999, Mr. Zlotoff served as Director of
Business Development for Vistana, Inc. in Orlando, FL. Previously, Mr. Zlotoff
was Managing Director for Sterling Finance International from 1994 to 1997 and
was a corporate banker with First Union National Bank from 1988 to 1994. Mr.
Zlotoff received his B.A. from the University of Central Florida as a philosophy
major, and received his Masters Degree in International Business from the
University of South Carolina.
Paul M. Zlotoff and Roger Zlotoff are brothers.
CODE OF ETHICS
Because the Partnership has no executive officers, the Partnership has not
adopted a code of ethics for the Partnership. A code of ethics has been
established for the Directors, Officers, and Employees of Uniprop. A copy of the
Code of ethics is available at no charge upon request.
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 AM, LLC,
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 AM, LLC. during the next fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED UNITHOLDER MATTERS
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 have no right to participate in
the management of the Partnership and have limited voting privileges only on
certain matters of fundamental significance. To the knowledge of the
Partnership, 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
-20-
the operations of the Partnership during the last fiscal year, as well as
certain of such items which may be payable during the next fiscal year. Certain
of the following arrangements for compensation and fees were not determined by
arm's length negotiations between the General Partner, its affiliates and the
Partnership.
Paul M. Zlotoff has an interest in the original sellers of Sunshine Village
and Ardmor Village and is entitled to share in a contingent purchase price with
respect to each Property, when and if the Properties are sold and the sellers
become entitled thereto. The maximum amounts which could be payable to the
sellers are as follows: Sunshine Village, $1,108,260 and Ardmor Village,
$946,236. The cash purchase price and contingent purchase price for each
Property were determined by reference to the average of two independent real
estate appraisals which were obtained by the General Partner. Such appraisals
are only estimates of value and are not necessarily indicative of the actual
real estate 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 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 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 $4,463,000 less than the 10% cumulative
preferred return due Unit Holders. Any such amounts of Incentive Management
Interest unpaid in a taxable year will be accumulated and paid from
distributable cash from capital transactions, but only after each Unit Holder
has first received his 10% cumulative preferred return and 125% of his capital
contribution. For 2005, approximately $299,000 was accumulated for the General
Partner, and the General Partner's aggregate accumulated Incentive Management
Interest as of December 2005 was $10,549,000. 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 of Incentive
Management Interest may be made to the General Partner until the 10% cumulative
preferred return of approximately $40,294,000, as of December 31, 2006, is first
distributed to the Unit Holders. In February of 1994, as part of the 1993
mortgage financing with mortgage backed securities held with Bankers Trust,
$23,119,767 was distributed to the
-21-
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 has
received aggregate distributions in an amount equal to the sum of (a) his 10%
cumulative preferred return plus (b) 125% of his capital contribution, (ii) any
contingent purchase prices have been paid, and (iii) any property disposition
fees to Uniprop AM, LLC 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, 2006. 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 AM, LLC received and will receive property management fees for each
Property managed by it. Uniprop AM, LLC 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 AM, LLC, or the amount which would be payable
to an unaffiliated third party for comparable services. During the last fiscal
year, Uniprop AM, LLC received property management fees totaling $526,830. 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 $138,288 during 2006 to perform partnership management, and
investor relation services for the Partnership. It is anticipated comparable
amounts will be paid in the next fiscal year. Uniprop Homes, Inc., a related
entity, received commissions totaling $70,518 for certain services provided as a
broker/dealer of manufactured homes for the communities. Uniprop Homes, Inc.
represented the communities in the sale of new and pre-owned homes to community
residents.
-22-
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership retained BDO Seidman, LLP to audit its financial statements for
the year ended December 31, 2006. The Partnership also retained BDO Seidman, LLP
to provide other services in 2006.
The aggregate fees billed to the Partnership for professional services performed
by BDO Seidman, LLP were as follows.
2006 2005
------- -------
(1) Audit Fees $49,800 $35,400
(2) Audit-Related Fees $ 0 $ 0
(3) Tax Fees $15,000 $14,300
(4) All Other Fees $ 0 $ 0
(5) Total $64,800 $49,700
AUDIT FEES: pertain to the audit of the Partnerships annual financial
statements, including reviews of the interim financial statements contained in
the Partnerships Quarterly Reports of Form 10-Q.
TAX FEES: pertain to services performed for tax compliance, including
preparation of tax returns and partners Schedule K-1 processing.
The services performed by BDO Seidman in 2006 were pre-approved by the General
Partner.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements
(1) The following financial statements and related documents are filed with
this report:
(i) Report of Independent Registered Public Accounting Firm
(ii) Balance Sheets as of December 31, 2006 and 2005
(iii) Statements of Income for the fiscal years ended December 31,
2006, 2005 and 2004
-23-
(iv) Statements of Partners' Equity for the fiscal years ended
December 31, 2006, 2005 and 2004
(v) Statements of Cash Flows for the fiscal years ended December 31,
2006, 2005 and 2004
(2) The following financial statement schedule is filed with this report:
Schedule III - Real Estate and Accumulated Depreciation for the
fiscal years ended December 31, 2006, 2005 and 2004
(3) 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 Manufactured Housing Communities Income Fund II Agreement of
Limited Partnership
4(a) First Amendment to Uniprop Manufactured Housing Communities Income
Fund II Agreement of Limited Partnership (April 1, 1987)
10(a) Form of Management Agreement between the Partnership and Uniprop AM,
LLC.
10(b) Form of Consulting Agreement among 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.)
-24-
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:
10(f) Mortgage notes, made as of August 20, 1998, between Uniprop
Manufactured Housing Communities Income Fund II and GMAC CMC.
The following exhibit is incorporated by reference to the Form 10-K for the
fiscal year ended December 31, 2005:
10(g) Second Amended and Restated Consulting Agreement among the
Partnership, the General Partner, and Consultant, January 9, 2005
10(h) Line of Credit Loan Agreement between the Partnership and National
City Bank, October 19, 2005.
The following exhibit is incorporated by reference to the Form 8-K that was
filed on January 17, 2007
10(i) Contract for Sale and Purchase of Real and Personal Property between
Uniprop Manufactured Housing Communities Income Fund II and Nelson C.
Steiner for the sale of Paradise Village.
The following exhibits are attached to this Report:
10(j) Line of Credit Loan Agreement between the Partnership and National
City Bank, October 19, 2006
99.28 Letter summary of the estimated fair market values of the
Partnership's nine manufactured housing communities, as of March 1,
2007
-25-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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,
2006 and 2005, and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 2006. We have
also audited the schedule listed under Item 15 of Form 10-K. These financial
statements and schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). These standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and schedule are free of material misstatement. The Partnership is
not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Partnership's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and schedule, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and 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, 2006 and 2005 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2006 in conformity with accounting principles generally accepted in
the United States of America.
Also, in our opinion, the schedule listed under Item 15 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
/s/ BDO Seidman, LLP
Troy, Michigan
March 15, 2007
26
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 2006 2005
- ------------ ----------- -----------
ASSETS
PROPERTY AND EQUIPMENT
Buildings and improvements $52,903,043 $52,591,224
Land 11,666,645 11,666,645
Furniture and equipment 710,920 668,106
----------- -----------
65,280,608 64,925,975
Less accumulated depreciation 32,947,281 31,040,281
----------- -----------
NET PROPERTY AND EQUIPMENT 32,333,327 33,885,694
Cash 350,659 266,128
Manufactured homes and improvements 1,144,329 1,121,118
Unamortized financing costs 453,156 474,072
Other assets 1,906,089 2,041,476
----------- -----------
$36,187,560 $37,788,488
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Note payable $26,274,078 $26,824,354
Accounts payable 301,406 175,004
Other liabilities 503,404 559,174
----------- -----------
TOTAL LIABILITIES 27,078,888 27,558,532
----------- -----------
PARTNERS' EQUITY
Unit holders 8,747,295 9,869,259
General partner 361,377 360,697
----------- -----------
TOTAL PARTNERS' EQUITY 9,108,672 10,229,956
----------- -----------
$36,187,560 $37,788,488
=========== ===========
See accompanying notes to financial statements.
-27-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
Year Ended December 31, 2006 2005 2004
- ----------------------- ----------- ----------- -----------
REVENUE
Rental $ 9,604,308 $10,095,859 $10,969,832
Home sale income 1,350,854 1,990,214 1,195,191
Other 1,031,974 756,197 814,365
----------- ----------- -----------
11,987,136 12,842,270 12,979,388
----------- ----------- -----------
OPERATING EXPENSES
Administrative 3,453,639 3,117,632 3,413,401
Property taxes 1,104,506 1,132,287 1,071,516
Utilities 767,664 699,413 730,202
Property operations 1,512,045 1,528,526 1,573,191
Depreciation 1,907,000 1,876,090 1,803,005
Interest 1,735,128 1,769,583 1,806,738
Home sale expense 1,439,219 2,196,508 1,206,208
----------- ----------- -----------
11,919,201 12,320,039 11,604,261
----------- ----------- -----------
NET INCOME $ 67,935 $ 522,231 $ 1,375,127
=========== =========== ===========
INCOME PER LIMITED PARTNERSHIP UNIT $ .02 $ .16 $ .42
=========== =========== ===========
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ .36 $ .81 $ .92
=========== =========== ===========
NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
=========== =========== ===========
NET INCOME ALLOCABLE TO GENERAL PARTNER $ 679 $ 5,222 $ 13,751
=========== =========== ===========
DISTRIBUTIONS ALLOCABLE TO GENERAL PARTNER $ -- $ -- $ --
=========== =========== ===========
See accompanying notes to financial statements.
-28-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
General
Partner Unit Holders TOTAL
-------- ------------ -----------
BALANCE, January 1, 2004 $341,724 $13,705,732 $14,047,456
Distributions to unit holders -- (3,039,115) (3,039,115)
Net income for the year 13,751 1,361,376 1,375,127
-------- ----------- -----------
BALANCE, December 31, 2004 355,475 12,027,993 12,383,468
Distributions to unit holders -- (2,675,743) (2,675,743)
Net income for the year 5,222 517,009 522,231
-------- ----------- -----------
BALANCE, December 31, 2005 360,697 9,869,259 10,229,956
Distributions to unit holders -- (1,189,219) (1,189,219)
Net income for the year 680 67,255 67,935
-------- ----------- -----------
BALANCE, December 31, 2006 $361,377 $ 8,747,295 $ 9,108,672
======== =========== ===========
See accompanying notes to financial statements.
-29-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
Year Ended December 31, 2006 2005 2004
- ----------------------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 67,935 $ 522,231 $ 1,375,127
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,907,000 1,876,090 1,803,005
Amortization 20,916 20,916 20,916
Decrease (increase) in manufactured
homes and improvements (23,211) 38,256 (161,586)
(Increase) decrease in other assets 135,387 (227,046) 88,743
(Decrease) increase in accounts payable 126,402 (237,509) 155,304
Decrease in other liabilities (55,770) (53,942) (89,303)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,178,659 1,938,996 3,192,206
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (354,633) (498,688) (309,040)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (354,633) (498,688) (309,040)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to unit holders (1,189,219) (2,675,743) (3,039,115)
Repayments of notes payable (550,276) (515,950) (478,932)
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (1,739,495) (3,191,693) (3,518,047)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 84,531 (1,751,385) (634,881)
CASH, at beginning of year 266,128 2,017,513 2,652,394
----------- ----------- -----------
CASH, at end of year $ 350,659 $ 266,128 $ 2,017,513
=========== =========== ===========
See accompanying notes to financial statements.
-30-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING ORGANIZATION AND BUSINESS
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 numbers 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 the
reported amounts of (1) 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 notes payable
approximate their fair values.
-31-
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 a period of thirty
years except for furniture and equipment which
is depreciated over a period ranging from three
to ten years.
Accumulated depreciation for tax purposes was
$30,307,061 and $28,530,687 as of December 31,
2006 and 2005, 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.
MANUFACTURED HOMES AND IMPROVEMENTS
Manufactured homes and improvements are stated
at the lower of cost or market and represent
manufactured homes held for sale.
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.
REVENUE RECOGNITION
Rental income attributable to leases is
recorded when due from the lessees.
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.
-32-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting
Standards Board ("FASB") issued FASB
Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes-an interpretation
of FASB Statement No. 109" ("FIN 48"). FIN 48
is effective for fiscal years beginning after
December 15, 2006. This interpretation
clarifies the accounting for uncertainty in
income taxes recognized in accordance with SFAS
109, "Accounting for Income Taxes" and
prescribes a recognition threshold and
measurement attribute for the financial
statement recognition and measurement of a tax
position taken or expected to be taken in a tax
return. This Interpretation also provides
guidance on various related matters such as
derecognition, classification, interest and
penalties, accounting in interim periods,
disclosure, and transition. The Partnership is
a tax-free entity, and under FIN 48, the
Partnership does not expect any impact.
In September 2006, the Securities and Exchange
Commission Staff issued Staff Accounting
Bulletin No. 108, "Considering the Effects of
Prior Year Misstatements when Quantifying
Misstatements in the Current Year Financial
Statements" ("SAB No. 108"). SAB No. 108 was
issued to eliminate the diversity in practice
surrounding how public companies quantify
financial misstatements. SAB No. 108 requires
that registrants quantify errors using both a
balance sheet and income statement approach and
evaluate whether either approach results in a
misstated amount that, when all relevant
quantitative and qualitative factors are
considered, is material. The adoption of SAB
No. 108 did not have any impact on the
Partnership's financial position or results of
operations.
In September 2006, the FASB issued SFAS No.
157, "Fair Value Measurements" ("SFAS No.
157"). SFAS No. 157 defines fair value,
establishes a framework for measuring fair
value in generally accepted accounting
principles and expands disclosures about fair
value measurements. SFAS No. 157 does not
require any new fair value measurements. This
Statement is effective for financial statements
issued for fiscal years beginning after
November 15, 2007. The Partnership is currently
evaluating the impact of this pronouncement on
the Partnership's financial position and
results of operations.
-33-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
In February 2007, the FASB issued Statement of
Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and
Financial Liabilities ("SFAS 159"), which
provides companies with an option to report
selected financial assets and liabilities at
fair value. The objective of SFAS 159 is to
reduce both complexity in accounting for
financial instruments and the volatility in
earnings caused by measuring related assets and
liabilities differently. SFAS 159 establishes
presentation and disclosure requirements
designed to facilitate comparisons between
companies that choose different measurement
attributes for similar types of assets and
liabilities and to more easily understand the
effect of the company's choice to use fair
value on its earnings. SFAS 159 also requires
entities to display the fair value of the
selected assets and liabilities on the face of
the balance sheet. SFAS 159 does not eliminate
disclosure requirements of other accounting
standards, including fair value measurement
disclosures in SFAS 157. This statement is
effective as of the beginning of an entity's
first fiscal year beginning after November 15,
2007. Early adoption is permitted as of the
beginning of the previous fiscal year provided
that the entity makes that choice in the first
120 days of that fiscal year and also elects to
apply the provisions of Statement 157. The
Partnership is currently evaluating the impact
of this pronouncement on the Partnership's
financial position and results of operations.
2. OTHER ASSETS At December 31, 2006 and 2005, "Other Assets"
included cash of approximately $168,000 and
$248,000, respectively, in an escrow account
for property taxes, insurance, and capital
improvements, as required by the Partnership's
note payable agreement. The cash is restricted
from operating use.
At December 31, 2006 and 2005, "Other assets"
also included cash of approximately $193,000
and $263,000 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. Also included
are accounts receivable of $1,170,000 and
$1,284,000 and prepaid costs of $375,000 and
$246,000, respectively.
-34-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
3. NOTE PAYABLE In 1998, the Partnership entered into a
$30,000,000 note payable agreement. The
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.
Future maturities on the note payable for the
next five years are as follows: 2007 -
$587,000; 2008 - $622,000; 2009 - $660,000;
2010 - $712,000; and 2011 - $757,000.
4. LINE-OF-CREDIT The Partnership has a $1,500,000 renewable line
of credit with a bank that expires in October
2007. Interest on outstanding balances is
charged at 1.80% in excess of the one month
LIBOR rate. There was no outstanding balance at
December 31, 2006.
5. OTHER LIABILITIES Other liabilities consisted of:
December 31, 2006 2005
------------ -------- --------
Tenants' security deposits $380,142 $429,717
Accrued interest 97,630 99,675
Other 25,632 29,782
-------- --------
TOTAL $503,404 $559,174
======== ========
6. 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.
-35-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
FEES AND EXPENSES
During the years ended December 31, 2006, 2005
and 2004, the affiliate earned property
management fees of $526,830, $537,856, and
$584,865, respectively, as permitted in the
Agreement of Limited Partnership. These fees
are included with "Administrative" expenses in
the respective statements of operations. The
Partnership was owed $16,470 and $5,744 by the
affiliate at December 31, 2006 and 2005,
respectively.
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.
-36-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
7. RECONCILIATION OF Year Ended
FINANCIAL STATEMENT December 31, 2006 2005 2004
INCOME AND TAXABLE INCOME ------------------ -------- -------- ----------
Income per the
financial
statements $ 67,935 $522,231 $1,375,127
Adjustments to
depreciation
for difference
in methods 130,626 210,670 19,982
Adjustments for
prepaid rent,
meals and
entertainment 40 (3,025) (26,521)
-------- -------- ----------
Income Per the
Partnership's
Tax Return $198,601 $729,876 $1,368,588
======== ======== ==========
8. PARTNERS' CAPITAL Subject to the orders of priority under certain
specified 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 capital contributions. Thereafter, 85% of
distributable cash from operations is to be
paid to the unit holders and 15% to the general
partner.
-37-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Annual distributable cash from operations was
less than the amount required for the annual
10% preferred return to the unit holders by
approximately $4,463,000 and $2,976,000 in 2006
and 2005, respectively. No distributions can be
made to the general partner until the
cumulative preferred return deficit of
approximately $40,294,000 has been distributed
to the unit holders.
At December 31, 2006, the general partner's
cumulative incentive management interest to be
distributed was approximately $10,549,000
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 year 2006.
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.
9. SUPPLEMENTAL CASH FLOW Interest paid during 2006, 2005 and 2004 was
INFORMATION approximately $1,716,000, $1,751,000, and
$1,788,000, respectively.
As a result of Hurricane Wilma in October 2005,
the Partnership received insurance proceeds
during 2006 totaling $137,104 for damage at the
Sunshine Village property. The proceeds covered
$75,300 for losses pertaining to business
income, and $61,804 relating to property
damage.
-38-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
10. INTERIM The following summary represents the unaudited results of
RESULTS operations of the Partnership, expressed in thousands except
(UNAUDITED) per unit amounts, for the periods from January 1, 2005
through December 31, 2006:
Three Months Ended
------------------------------------------------
2006 March 31, June 30, September 30, December 31,
---- --------- -------- ------------- ------------
REVENUES $2,945 $3,069 $3,340 $2,633
====== ====== ====== ======
NET INCOME
(LOSS) $ 225 $ 36 $ 77 $ (270)
====== ====== ====== ======
INCOME (LOSS)
PER LIMITED
PARTNERSHIP
UNIT $ .07 $ .01 $ .02 $ (.08)
====== ====== ====== ======
Three Months Ended
------------------------------------------------
2005 March 31, June 30, September 30, December 31,
---- --------- -------- ------------- ------------
REVENUES $3,032 $3,200 $3,215 $3,395
====== ====== ====== ======
NET INCOME
(LOSS) $ 180 $ 273 $ 113 $ (44)
====== ====== ====== ======
INCOME (LOSS)
PER LIMITED
PARTNERSHIP
UNIT $ .06 $ .08 $ .03 $ (.01)
====== ====== ====== ======
11. CONTINGENCIES During 2006, All Parks Alliance for Change ("APAC") filed a
civil action alleging the Partnership was in violation of
Minnesota law by not allowing APAC unlimited access to
solicit the residents of Ardmor Village located in
Lakeville, MN for membership in APAC. While the Partnership
prevailed at both the District and Appellate Courts, the
matter was then appealed to the Minnesota Supreme Court. The
Supreme Court trial took place on October 11, 2006, and the
matter remains under advisement with a decision expected
shortly.
As a result of the aforementioned legal contingency, the
Partnership made an adjustment that was material to the
fourth quarter results. This adjustment was to accrue
$40,000 to cover the expected plaintiff's asserted costs and
legal fees in December 2006. The Partnership anticipates no
financial liability relating to the original access claim.
-39-
UNIPROP MANUFACTURED
HOUSING COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2006
Column A Column B Column C Column D
- --------------------- ----------- -------------------------- -----------------------
Costs
Capitalized
Subsequent to
Initial Cost Acquisition
-------------------------- -----------------------
Buildings Buildings
and and
Description Encumbrance Land Improvements Land Improvements
- ----------- ----------- ----------- ------------ -------- ------------
Ardmor Village
(Lakeville, MN) $ 2,401,043 $ 1,063,253 $ 4,253,011 $ 4,120 $1,226,457
Sunshine Village
(Davie, FL) 3,780,692 1,215,862 4,875,878 -- 362,506
Camelot Manor
(Grand Rapids, MI) 3,053,055 918,949 3,681,051 -- 1,139,331
Country Roads
(Jacksonville, FL) -- 636,550 2,546,200 38,106 852,247
Paradise Village
(Tampa, FL) -- 1,760,000 7,040,000 279,053 1,496,119
Dutch Hills
(Haslett, MI) 2,273,438 839,693 3,358,771 41,526 839,310
Stonegate Manor
(Lansing, MI) 2,657,059 930,307 3,721,229 40,552 962,191
El Adobe
(Las Vegas, NV) 4,873,480 1,480,000 5,920,000 39,964 439,137
West Valley
(Las Vegas NV) 7,235,311 2,289,700 9,158,800 89,010 979,152
----------- ----------- ----------- -------- ----------
$26,274,078 $11,134,314 $44,554,940 $532,331 $8,296,450
=========== =========== =========== ======== ==========
Column A Column E Column F Column G Column H
- --------------------- ---------------------------------------- ------------ -------- ---------------
Gross Amount at Which Carried
at Close of Period Life on Which
---------------------------------------- Depreciation in
Buildings Latest Income
and Accumulated Date Statement is
Description Land Improvements Total Depreciation Acquired Computed
- ----------- ----------- ------------ ----------- ------------ -------- ---------------
Ardmor Village
(Lakeville, MN) $ 1,067,373 $ 5,479,468 $ 6,546,841 $ 3,303,782 1987 30 years
Sunshine Village
(Davie, FL) 1,215,862 5,238,384 6,454,246 3,342,298 1987 30 years
Camelot Manor
(Grand Rapids, MI) 918,949 4,820,382 5,739,331 2,837,403 1987 30 years
Country Roads
(Jacksonville, FL) 674,656 3,398,447 4,073,103 2,129,622 1987 30 years
Paradise Village
(Tampa, FL) 2,039,053 8,536,119 10,575,172 5,387,741 1987 30 years
Dutch Hills
(Haslett, MI) 881,219 4,198,081 5,079,300 2,475,936 1987 30 years
Stonegate Manor
(Lansing, MI) 970,859 4,683,420 5,654,279 2,686,920 1987 30 years
El Adobe
(Las Vegas, NV) 1,519,964 6,359,137 7,879,101 3,992,347 1988 30 years
West Valley
(Las Vegas NV) 2,378,710 10,137,952 12,516,662 6,202,639 1988 30 years
----------- ----------- ----------- -----------
$11,666,645 $52,851,390 $64,518,035 $32,358,688
=========== =========== =========== ===========
-40-
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 2006
1. RECONCILIATION The following table reconciles the land from
OF LAND January 1, 2004 to December 31, 2006:
2006 2005 2004
----------- ----------- -----------
BALANCE, at January 1 $11,666,645 $11,666,645 $11,666,645
Additions to land -- --
Cost of land sold -- --
----------- ----------- -----------
BALANCE, at December 31 $11,666,645 $11,666,645 $11,666,645
=========== =========== ===========
2. RECONCILIATION The following table reconciles the buildings and improvements
OF BUILDINGS from January 1, 2004 to December 31, 2006:
AND IMPROVEMENTS
2006 2005 2004
----------- ----------- -----------
BALANCE, at January 1 $52,591,224 $52,109,160 $51,823,345
Additions to buildings
and improvements 260,166 482,064 285,815
Cost of assets sold -- --
----------- ----------- -----------
BALANCE, at December 31 $52,851,390 $52,591,224 $52,109,160
=========== =========== ===========
3. RECONCILIATION The following table reconciles the accumulated
OF ACCUMULATED depreciation from January 1, 2004 to December
DEPRECIATION 31, 2006:
2006 2005 2004
----------- ----------- -----------
BALANCE, at January 1 $30,496,006 $28,663,373 $26,908,653
Current year
depreciation expense 1,862,682 1,832,633 1,754,720
Accumulated
depreciation on
assets sold -- --
----------- ----------- -----------
BALANCE, at December 31 $32,358,688 $30,496,006 $28,663,373
=========== =========== ===========
4. TAX BASIS OF The aggregate cost of buildings and improvements for federal
BUILDINGS AND income tax purposes is equal to the cost basis used for
IMPROVEMENTS financial statements purposes.
-41-
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
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.
Dated: March 29, 2007
By: /s/ Joel Schwartz By: /s/ Paul M Zlotoff
--------------------------------- ------------------------------------
Joel Schwartz Paul M. Zlotoff, Chairman of
Principal Financial Officer Uniprop, Inc.
(Chief Financial Officer of (Principal Executive Officer)
Uniprop, Inc.)
By: /s/ Susann Szepytowski
---------------------------------
Susann Szepytowski
Principal Accounting Officer
(Controller of Uniprop, Inc.)
-42-
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING PAGE
- ------- ------------------------------- ------------------------------- ----
3(a) Certificate of Limited Incorporated by reference to
Partnership for the Partnership the S-11 Registration Statement
of the Partnership filed
November 12, 1986, as amended
on December 22, 1986 and
January 16, 1987 (the
"Registration Statement").
3(b) Uniprop Manufactured Housing Incorporated by reference to
Communities Income Fund II the Registration Statement.
Agreement of Limited
Partnership
4(a) First Amendment to Uniprop Incorporated by reference to
Manufactured Housing the Registration Statement.
Communities Income Fund II
Agreement of 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 ended
Partnership (originally filed 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 AM, LLC
10(b) Form of Consulting Agreement Incorporated by reference to
among the Partnership, the the Registration Statement.
General Partner and Consultant
10(c) Contingent Purchase Price Incorporated by reference to
Agreement with Sunrise Broward Form 10-K for fiscal year ended
Associates, Ltd. (originally December 31, 1997.
filed with Form 10-K for the
fiscal year ended December 31,
1987)
10(d) Contingent Purchase Price Incorporated by reference to
Agreement with Ardmor Form 10-K for fiscal year ended
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Associates Limited Partnership December 31, 1997.
(originally filed with Form
10-K for the fiscal year ended
December 31, 1987)
10(e) Incentive Acquisition Fee Incorporated by reference to
Agreement between the Form 10-K for fiscal year ended
Partnership and Uniprop, Inc. December 31, 1997.
(originally filed with Form
10-K for the fiscal year ended
December 31, 1987)
10(f) Mortgage Notes, made on August Incorporated by reference to
20, 1998 between Uniprop the Form 8-K filed on September
Manufactured Home Communities 8, 1998.
Income Fund II and GMAC CMC
10(g) Second Amended and Restated Incorporated by reference to
Consulting Agreement among the Form 10-K for fiscal year ended
Partnership, the General December 31, 2005.
Partner and Consultant January
9, 2005
10(h) Line of Credit Loan Agreement Incorporated by reference to
between the Partnership and Form 10-K for fiscal year ended
National City Bank October 19, December 31, 2005.
2006
10(i) Contract for Sale and Purchase Incorporated by reference to
of Real and Personal Property the Form 8-K filed on January
for the sale of Paradise 17, 2007.
Village January 17, 2007.
10(j) Line of Credit Loan Agreement Filed herewith.
between the Partnership and
National City Bank, October 19,
2006
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of the Partnership's nine
manufactured housing communities, as
of March 1, 2007.
31.1 Certificate of Principal Executive Filed herewith.
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31.2 Certificate of Principal Financial Filed herewith.
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
*32.1 Certification Pursuant to Section Filed herewith.
906 of the Sarbanes-Oxley Act of
2002
*32.2 Certification Pursuant to Section Filed herewith.
906 of the Sarbanes-Oxley Act of
2002
99.28 Letter summary of the estimated fair Filed herewith.
market values
* This certificate is being furnished solely to accompany the report pursuant
to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the
Securities and Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Partnership, whether made
before or after the date hereof, regardless of any general incorporation
language in such filing.
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