SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2007 Commission File No. 0-16701
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2702802
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
280 DAINES STREET, BIRMINGHAM, MICHIGAN 48009
(Address of principal executive offices) (Zip Code)
(248) 645-9220
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
units of beneficial assignments of limited partnership interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to this
Form 10-Q [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
----
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
March 31, 2007 (Unaudited) and
December 31, 2006 3
Statements of Operations
Three months ended March 31, 2007
and 2006 (Unaudited) 4
Statement of Partners' Equity
Three months ended March 31, 2007 (Unaudited) 4
Statements of Cash Flows
Three months ended March 31, 2007
and 2006 (Unaudited) 5
Notes to Financial Statements
March 31, 2007 (Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 11
ITEM 4. CONTROLS AND PROCEDURES 11
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 1A. RISK FACTORS 12
ITEM 6. EXHIBITS 14
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
BALANCE SHEETS
MARCH 31, 2007 DECEMBER 31, 2006
-------------- -----------------
(UNAUDITED)
ASSETS
Properties:
Land $ 9,627,592 $ 9,627,592
Buildings And Improvements 44,375,063 44,366,924
Furniture And Fixtures 606,205 594,953
------------ ------------
54,608,860 54,589,469
Less Accumulated Depreciation (27,882,347) (27,481,274)
------------ ------------
26,726,513 27,108,195
Cash And Cash Equivalents 523,677 371,700
Unamortized Finance Costs 444,228 449,457
Manufactured Homes and Improvements 1,029,731 1,005,444
Other Assets 1,429,152 1,443,961
Asset held for Sale 5,786,994 5,808,803
------------ ------------
Total Assets $ 35,940,295 $ 36,187,560
------------ ------------
LIABILITIES & PARTNERS' EQUITY MARCH 31, 2007 DECEMBER 31, 2006
- ------------------------------ -------------- -----------------
(UNAUDITED)
Accounts Payable $ 243,224 $ 258,140
Other Liabilities 441,531 428,801
Notes Payable 26,125,169 26,274,078
Liabilities of Operation Held for Sale 161,384 117,869
----------- -----------
Total Liabilities 26,971,308 27,078,888
Partners' Equity:
General Partner 362,623 361,377
Unit Holders 8,606,364 8,747,295
----------- -----------
Total Partners' Equity 8,968,987 9,108,672
----------- -----------
Total Liabilities And
Partners' Equity $35,940,295 $36,187,560
----------- -----------
See Notes to Financial Statements
3
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
2007 2006
----------- -----------
(unaudited) (unaudited)
Income:
Rental Income $2,030,439 $2,182,289
Home Sale Income 185,646 126,296
Other 174,205 322,207
---------- ----------
Total Income $2,390,290 $2,630,792
---------- ----------
Operating Expenses:
Administrative Expenses
(Including $124,157 and $136,697, in Property Management
Fees Paid to an Affiliate for the Three Month Period Ended
March 31, 2007 and 2006 Respectively) 639,478 733,630
Property Taxes 241,695 237,024
Utilities 173,558 181,180
Property Operations 280,951 295,709
Depreciation And Amortization 401,072 404,659
Interest 422,400 431,243
Home Sale Expense 171,853 143,355
---------- ----------
Total Operating Expenses $2,331,007 $2,426,800
---------- ----------
Income from Continued Operations $ 59,283 $ 203,992
---------- ----------
Income from Discontinued Operations $ 65,303 $ 20,757
---------- ----------
Net Income $ 124,586 $ 224,749
---------- ----------
Income Per Unit:
Continued Operations 0.02 0.06
Discontinued Operations 0.02 0.01
Distribution Per Unit: 0.08 0.12
Weighted Average Number Of Units
Of Beneficial Assignment Of Limited Partnership
Interest Outstanding During The Period Ending
March 31, 2007 and 2006 3,303,387 3,303,387
STATEMENT OF PARTNERS' EQUITY (Unaudited)
General Partner Unit Holders Total
--------------- ------------ ----------
Balance, December 31, 2006 $361,377 $8,747,295 $9,108,672
Distributions (264,271) (264,271)
Net Income 1,246 123,340 $ 124,586
-------- ---------- ----------
Balance as of March 31, 2007 $362,623 $8,606,364 $8,968,987
======== ========== ==========
See Notes to Financial Statements
4
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
2007 2006
----------- -----------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Income $ 124,586 $ 224,749
--------- ---------
Adjustments To Reconcile Net Income
To Net Cash Provided By
Operating Activities:
Depreciation 401,072 473,086
Amortization 5,229 5,229
Increase in Manufactured Homes and Home Improvements (24,287) (338,485)
Decrease In Other Assets 36,618 42,947
(Decrease) Increase In Accounts Payable (14,916) 111,017
Increase In Other Liabilities 56,246 36,558
--------- ---------
Total Adjustments 459,962 330,352
--------- ---------
Net Cash Provided By
Operating Activities 584,548 555,101
--------- ---------
Cash Flows Used In Investing Activities:
Capital Expenditures (19,391) (67,753)
--------- ---------
Cash Flows From Financing Activities:
Distributions To Partners (264,271) (396,406)
Payment On Mortgage (148,909) (140,099)
--------- ---------
Net Cash Used In
Financing Activities (413,180) (536,505)
--------- ---------
Increase (Decrease) In Cash and Equivalents 151,977 (49,157)
Cash and Equivalents, Beginning 371,700 266,128
--------- ---------
Cash and Equivalents, Ending $ 523,677 $ 216,971
--------- ---------
See Notes to Financial Statements
5
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited 2007 financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The balance sheet at December 31, 2006 has been derived from the
audited financial statements at that date. Operating results for the three
months ended March 31, 2007 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2007, or for any other interim
period. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Partnership's Form 10-K for the year ended
December 31, 2006.
2. 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
was therefore not impacted by FIN 48.
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.
-6-
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 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.
3. ASSET HELD FOR SALE:
During March 2007, the Board of Directors approved a sale of the Paradise
Village Community located in Tampa, Florida. The Partnership executed a contract
for sale with two potential buyers for sale of the Paradise Village community
with an expected closing date in May of 2007. Based on this sale contract, the
Partnership has determined to classify the property as "held for sale" on the
accompanying Balance Sheets. Similarly, the Paradise Village community and
associated financial results are classified as "discontinued operations" on the
accompanying Statements of Operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
-7-
periods, disclosure, and transition. The Partnership is a tax-free entity, and
was therefore not impacted by FIN 48.
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 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.
Capital Resources
The Partnership's capital resources consist primarily of its nine manufactured
home communities. On August 20, 1998, the Partnership refinanced seven of its
nine properties with GMAC Commercial Mortgage Corporation (the "Refinancing").
Liquidity
As a result of the Refinancing, seven of the Partnership's nine properties are
mortgaged. At the time of the Refinancing, the aggregate principal amount due
under the seven mortgage notes was $30,000,000 and the aggregate fair market
value of the Partnership's mortgaged properties was
-8-
$66,000,000. The Partnership expects to meet its short-term liquidity needs
generally through its working capital provided by operating activities.
Partnership liquidity is based, in part, upon its investment strategy. Upon
acquisition, the Partnership anticipated owning the properties for seven to ten
years. All of the properties have been owned by the Partnership for more than
ten years. The General Partner may elect to have the Partnership own the
properties for as long as, in the opinion of the General Partner, it is in the
best interest of the Partnership to do so.
The General Partner has decided to distribute $264,271, or $.08 per unit, to the
unit holders for the first quarter ended March 31, 2007. The General Partner
will continue to monitor cash flow generated by the Partnership's nine
properties during the coming quarters. If cash flow generated is greater or
lesser than the amount needed to maintain the current distribution level, the
General Partner may elect to reduce or increase the level of future
distributions paid to Unit Holders.
As of March 31, 2007, the Partnership's cash balance amounted to $523,677. The
level of cash balance maintained is at the discretion of the General Partner.
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 was no outstanding balance as of March 31, 2007.
Results of Operations
Overall, as illustrated in the following table, the Partnership's nine
properties reported combined occupancy of 55% at the end of March 2007, versus
62% for March 2006. The average monthly homesite rent as of March 31, 2007 was
approximately $423, versus $412 from March 2006 (average rent not a weighted
average).
TOTAL OCCUPIED OCCUPANCY AVERAGE*
CAPACITY SITES RATE RENT
-------- -------- --------- --------
Ardmor Village 339 204 60% $452
Camelot Manor 335 145 43% 378
Country Roads 312 141 45% 295
Dutch Hills 278 153 55% 386
El Adobe 367 224 61% 459
Paradise Village 614 262 43% 361
Stonegate Manor 308 150 49% 373
Sunshine Village 356 249 70% 578
West Valley 421 315 75% 525
----- ----- -- ----
TOTAL ON 3/31/07: 3,330 1,843 55% $423
TOTAL ON 3/31/06: 3,330 2,056 62% $412
* NOT A WEIGHTED AVERAGE
-9-
NET OPERATING
INCOME AND NET
GROSS REVENUE INCOME
----------------------- -----------------------
3/31/2007 3/31/2006 3/31/2007 3/31/2006
---------- ---------- ---------- ----------
three months ended three months ended
Ardmor $ 308,066 $ 293,998 $ 141,027 $ 158,799
Camelot Manor 185,143 191,949 50,180 66,804
Country Roads 134,019 164,078 39,534 36,338
Dutch Hills 183,154 204,795 76,135 74,917
El Adobe 312,794 330,158 160,630 163,427
Stonegate 173,041 231,266 59,164 73,705
Sunshine 464,271 680,442 264,334 454,908
West Valley 628,508 533,498 319,398 287,141
---------- ---------- ---------- ----------
2,388,996 2,630,184 1,110,402 1,316,039
Partnership Management 1,294 608 (96,355) (161,198)
Other Expense -- -- (131,292) (114,947)
Interest Expense -- -- (422,400) (431,243)
Depreciation -- -- (401,072) (404,659)
---------- ---------- ---------- ----------
Continuing Operations $2,390,290 $2,630,792 $ 59,283 $ 203,992
Discontinued
Operations 296,000 314,124 65,303 20,757
---------- ---------- ---------- ----------
$2,686,290 $2,944,916 $ 124,586 $ 224,749
Net Operating Income ("NOI") is a non-GAAP financial measure equal to net
income, the most comparable GAAP financial measure, plus depreciation, interest
expense, partnership management expense, and other expenses. The Partnership
believes that NOI is useful to investors and the Partnership's management as an
indication of the Partnership's ability to service debt and pay cash
distributions. NOI presented by the Partnership may not be comparable to NOI
reported by other companies that define NOI differently, and should not be
considered as an alternative to net income as an indication of performance or to
cash flows as a measure of liquidity or ability to make distributions.
COMPARISON OF QUARTER ENDED MARCH 31, 2007 TO QUARTER ENDED MARCH 31, 2006
Gross revenues decreased $240,502 to $2,390,290 in 2007, as compared to
$2,630,792 in 2006. The decrease was the result of lower occupancy due to weak
economic conditions. (See table on previous page.)
As described in the Statements of Operations, total operating expenses decreased
$95,793, to $2,331,007 in 2007, as compared to $2,426,800 in 2006. The decrease
was a result of reduced expenditures relating to lower occupancy, as well.
As a result of the aforementioned factors, Net Income from continuing operations
decreased to $59,283 for the first quarter of 2007 compared to $203,992 for the
first quarter of 2006.
-10-
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to interest rate rise primarily through its borrowing
activities. There is inherent roll over risk for borrowings as they mature and
are renewed at current market rates. The extent of this risk is not quantifiable
or predictable because of the variability of future interest rates and the
Partnership's future financing requirements.
Note Payable: At March 31, 2007 the Partnership had a note payable outstanding
in the amount of $26,125,169. Interest on this note is at a fixed annual rate of
6.37% through March 2009.
Line of Credit: At March 31, 2007, 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 March 31, 2007.
The Partnership does not enter into financial instruments transactions for
trading or other speculative purposes or to manage its interest rate exposure.
ITEM 4.
CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Partnership carried out
an evaluation, under the supervision and with the participation of the Principal
Executive Officer and the Principal Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon, and as of the date of, this evaluation,
the Principal Executive Officer and the Principal Financial Officer concluded
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in the quarterly report is recorded,
processed, summarized and reported as and when required.
There was no change in the Partnership's internal controls over financial
reporting that occurred during the most recent completed quarter that has
materially affected, or is reasonably likely to materially affect, the
Partnership's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
-11-
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 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.
-12-
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 interests is required to: (a)
amend the Partnership Agreement; (b) approve or disprove the sale in
one, 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.
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.
-13-
ITEM 6.
EXHIBITS
EXHIBIT 31.1 Principal Executive Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as
amended
EXHIBIT 31.2 Principal Financial Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of The Securities and Exchange Act of 1934, as
amended
EXHIBIT 32.1 Certifications pursuant to 18 U.S C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes -Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Uniprop Manufactured Housing Communities
Income Fund II, a Michigan Limited Partnership
BY: Genesis Associates Limited Partnership,
General Partner
BY: Uniprop, Inc.,
its Managing General Partner
By: /s/ Paul M. Zlotoff
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Paul M. Zlotoff, President
By: /s/ Joel Schwartz
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Joel Schwartz, Principal Financial Officer
Dated: May 14, 2007
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