1
FORM 10-K/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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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)
STATE OF MICHIGAN 38-2702802
State of incorporation I.R.S. employer I.D. No.
280 DAINES STREET, BIRMINGHAM, MICHIGAN 48009
(810) 645-9261
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(g) of the Act:
$20 PER UNIT, UNITS OF BENEFICIAL ASSIGNMENTS OF LIMITED PARTNERSHIP INTERESTS
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 (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
As of October 4, 1996, 3,303,387 units of limited partnership interest of the
registrant were outstanding and the estimated aggregate market value of the
units as of such date held by non-affiliates, as estimated by the General
Partner (based on a 1996 appraisal of Partnership properties), was
approximately $40,668,000.
DOCUMENTS INCORPORATED BY REFERENCE
SEE ITEM 14.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity
During 1995, the Partnership's distributable cash from operations was
$1,932,955. The distributable cash from operations does not include income
reported from the Partnership's 20.98% residual interest ("Class R
Certificates") of the trust fund which was established as part of the 1993
financing transaction (See Note 3 of the Financial Statements). However, the
distributable cash from operations does include approximately $112,669 of
interest income from the mortgage backed securities ("Class D Certificates")
purchased as part of the 1993 financing transaction (See Note 1 of the
Financial Statements). The Partnership made distributions of $2,195,720 to
the Unit Holders during the calender year 1995. In order to fund the
distributions, the Partnership used $262,765 of its reserves.
As a result of the Partnership generating lower than anticipated
distributable cash from operations, the General Partner adjusted the level of
quarterly distributions paid to the Unit Holders during the second quarter of
1995. The adjustment of the quarterly distribution was approximatley $240,000
lower than previous quarters. The General Partner expects the Partnership to
generate sufficient distributable cash from operations in the future to meet
the adjusted distribution target and maintain an adequate level of reserves.
As of December 31, 1994, the Partnership had $2, 373,000 in reserves.
Through the 1995 calender year, the Partnership funded from reserves
approximatley $262,000 to pay distributions to the Unit Holders and $740,000 to
make capital improvements at the Partnership's properties. On December 31,
1995, the Partnership had $1,345,081 in reserves, of which $388,328 was in
cash and $957,753 was in short term marketable securities. (See Note 1 to the
Financial Statements).
The Partnership borrowed $30,045,000 in December of 1993 through the
Mortgage Financing. The net proceeds from the Mortgage Financing, after
expenses and repayment of $2,350,523 in unsecured debt, were approximately
$24,800,000. With the financing proceeds, the Partnership's Statement of Cash
Flows for the year ended December 31, 1993 reflected Cash and Cash Equivalents,
at year end of $25,701,460. However, as discussed under the section entitled
"Capital Resources," $23,119,767 of the net proceeds of the Mortgage Financing
was distributed to the Unit Holders in February, 1994.
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
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Properties after deducting sales commissions, advisory fees and other
organization and offering costs.
In an effort to provide Unit Holders with a return of capital and
eliminate the cumulative preferred return deficit owed to them, the General
Partner, with majority consent from the Unit Holders, mortgaged seven of its
nine Properties through the Mortgage Financing at approximately 56.0% of their
appraised value, or $30,045,000.
On or around February 15, 1994, the Partnership distributed $23,119,767 to
the Unit Holders or $6.99 per $20.00 Unit held. $13,572,978 (or $4.11 per
Unit), restored the shortfall in the Unit Holders 10.0% cumulative preferred
return, and $9,546,789 (or $2.89 per unit), was a partial return of the Limited
Partners' original capital contributions.
After payment of the $23,119,767 distribution to the Unit Holders, the
Partnership had sufficient cash to establish a long-term capital improvement
reserve of $1,500,000. This capital improvement reserve will be used to cover
expenses associated with the long term capital improvements budgeted for the
Properties over the next five years.
As described in Note 3 to the Financial Statements, the term of the
mortgage notes executed in connection with the Mortgage Financing payable are
for a period of 30 years with interest only payments required for the first 5
years. Beginning in year 6, principal and interest payments are required on a
self amortizing basis through December of 2023. The minimum mortgage interest
rate is 7.0% per annum through December 2003 and 8.0% thereafter. The maximum
mortgage interest rate is 9.9% per annum through December 2003 and 10.9%
thereafter. Each of the seven mortgaged Properties is cross-collateralized.
As part of the Mortgage Financing, the Partnership was required to
purchase $1,502,250 in mortgage-backed securities. These mortgage-backed
securities equal approximately 5.0% of the seven mortgage notes payable and pay
interest computed at a monthly fixed rate of 7.5% per annum. As described in
Note 1 of the Financial Statements the interest income, as well as the future
value of the Class D Certificates could be adversely affected by a foreclosure
or a significant decline in operating results involving any of the twenty-eight
properties participating in the financing transaction, (including any of the
seven Properties mortgaged by the Partnership).
The General Partner acknowledges that the mortgages impose some risks to
the Partnership, but that such risks are not greater than risks typically
associated with real estate financing. In addition, as a result of the
borrowing, there is potential adverse impact on the amount of distributions to
the Unit Holders in future years. However, the General Partner anticipates,
based on 1996 projections, that distributions to the Unit Holders will be
approximately 3.0% to 4.5% through 1997.
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Results of Operations
Distributable Cash From Operations
Distributable cash from operations totaled $1,932,955 in 1995, $2,806,877
in 1994, and $29,160,330 in 1993 (Includes $24,619,767 from the 1993 financing
transaction). Distributions paid to the Unit Holders totalled $2,195,720 in
1995, $25,098,000 in 1994 (Includes $23,119,767 distribution from the 1993
financing transaction), and $4,624,742 in 1993.
As reflected in the table on page 6, distributable cash from operations
declined from 1993 to 1994 due to the 1993 financing transaction and
establishment of mortgage debt service. Furthermore, because the interest rate
on the mortgage debt floats above the LIBOR rate, the Partnership's mortgage
payments increase or decrease monthly based on fluctuations in the LIBOR rate.
Between 1994 and 1995, the LIBOR rate increased. As a result, the Partnership's
distributable cash from operations between 1994 and 1995 declined, due in part,
to an increase in the debt service of approximatley $389,600. In addition,
distributable cash from operations between 1994 and 1995 was also affected by
higher operating expenses and lower than anticipated occupancy rates at the
Properties. (See Property Operations for more detailed information)
In February 1994, $23,119,767, a part of the Mortgage Financing proceeds,
was distributed to the Unit Holders, of which $13,572,978 represented the
elimination of the preferred return deficit that existed and $9,546,789
represented a partial return of capital.
Annual distributable cash from operations was less than the amount
required for the annual 10% preferred return to Unit Holders in 1995, 1994 and
1993. As described in Note 3 to the Partnership's financial statements, the
cumulative preferred return deficit, through December 1993 was paid in full in
February 1994. The cumulative unpaid preferred return deficit that has
accumulated during 1995 totalled approximately $3,456,000. No distributions
can be made to the General Partner until the cumulative preferred return
deficit has been distributed to the Unit Holders. At December 31, 1995, the
unpaid amount to be distributed to the General Partner from future capital
transactions was approximately $5,300,000.
Net Income
As reflected in the Statement of Income included in the Financial
Statements, net income was $540,151 in 1995, $1,444,879 in 1994, and $2,852,634
in 1993. The decline in net income between 1993 and 1994 was primarily due to
the 1993 financing transaction and the establishment of mortgage debt service.
In addition, increases in property operating expenses of approximately
$490,000 also contributed to the decline in net income. The increases in
operating expenses and interest expense were partially offset by higher
interest income on cash reserves and the reflection of equity in the net income
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of the LLC, which is not a cash item (See Note 1 to the Financial Statements).
The decline in net income between 1994 and 1995 was primarily due to an
increase in mortage debt service of $389,600 and an increase in property
operating expenses of approximately $340,000. The increase in property
operating expenses is primarily attributable to capital improvements,
maintenance, and marketing expenses related to the Properties. As stated in
the Partnership's quarterly reports, the increases in these operating expenses
were budgeted as part of management's long-term property improvement program.
Partnership Management
Net expenses for the management of the Partnership (i.e. gross expenses
for such management, less transfer fees, interest on reserves, interest on
funds awaiting distribution, and certain non-recurring income) were $149,523 in
1995, $49,897 in 1994 and $288,651 in 1993.
The decrease in net management expenses between 1994 and 1993 was due to
interest income on the proceeds of the 1993 financing transaction prior to
being distributed to the Unit Holders. Net partnership management expenses in
1995, remain lower than in 1993 due to interest on the Partnership's reserves.
Property Operations
Overall, as illustrated in the table below, the Partnership's nine
properties had a combined average occupancy of 88.2% (2,936/3,330 sites) as of
December 1995, versus 89.3% in December 1994; and 86.7% in December 1993. The
average collected monthly rent was approximately $316 per home site in December
1995, versus $307 in December, 1994 and $289 in December, 1993, an increase
each year of 2.9% and 6.2%, respectively.
TOTAL
SITES OCCUPIED SITES OCCUPANCY RATE AVERAGE RENT
1995 1994 1993 1995 1994 1993 1995 1994 1993
----- ----- ----- ----- ----- ----- ----- ---- ---- ----
Ardmor Village 339 298 290 283 87.9% 85.5% 83.5% $304 $297 $291
Camelot Manor 335 316 318 310 94.3 94.9 92.5 290 281 274
Country Roads 312 265 257 227 84.9 82.4 72.8 205 205 206
Dutch Hills 278 260 252 255 93.5 90.6 91.7 289 281 270
El Adobe 371 347 342 346 93.5 92.2 93.3 347 337 316
Paradise Village 611 435 487 434 71.2 79.7 71.0 257 246 233
Stonegate Manor 308 292 285 291 94.8 92.5 94.5 291 283 274
Sunshine Village 356 331 342 345 93.0 96.1 96.9 368 364 342
West Valley 420 392 400 397 93.3 95.2 94.5 428 412 396
----- ----- ----- ----- ---- ---- ---- ---- ---- ----
Overall 3,330 2,936 2,973 2,888 88.2% 89.3% 86.7% $316 $307 $289
===== ===== ===== ===== ==== ==== ==== ==== ==== ====
During the 1995 fiscal year, before Partnership management and
nonrecurring expenses and debt service, the Partnership's nine properties
generated net operating
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income of $5,069,250 or 47.4% of total revenues compared to $5,424,401 or 51.2%
of total revenues; and $5,082,161 or 50.3% of total revenues, in 1994 and 1993,
respectively.
The decrease in net operating income between 1995 and 1994, is a direct
result of higher operating expenses associated with managements long-term
property improvement plan.
The table below summarizes gross revenues and net operating income for the
Properties during 1995, 1994 and 1993.
GROSS REVENUE DISTRIBUTABLE CASH FROM OPERATIONS(1)
----------------------------------- -------------------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
Ardmor Village $ 1,058,592 $ 997,311 $ 932,822 $ 563,269 $ 548,538 $ 471,314
Camelot Manor 1,050,043 1,022,205 953,944 560,413 486,508 430,512
Country Roads 624,061 582,832 553,547 (43,518) 54,916 (5,398)
Dutch Hills 859,073 834,170 810,431 449,811 449,401 440,281
El Adobe 1,436,567 1,355,322 1,348,107 902,642 861,757 831,487
Paradise Village 1,236,377 1,479,452 1,346,439 78,478 304,769 378,482
Stonegate Manor 956,926 959,618 944,586 474,846 529,542 520,687
Sunshine Village 1,448,518 1,451,896 1,306,554 881,978 904,305 733,381
West Valley 1,931,920 1,902,286 1,897,928 1,201,331 1,284,665 1,281,415
----------- ----------- ----------- ----------- ----------- ----------
10,602,077 10,585,092 10,094,358 5,069,250 5,424,401 5,082,161
Partnership
Mgmt. 110,365 216,241 19,722 (149,523) (49,897) (288,651)
Other nonrecurring
expenses (229,647) (200,126) (252,939)
Debt Service (2,757,125) (2,367,501) N/A
----------- ----------- ----------- ----------- ----------- -----------
TOTAL: $10,712,442 $10,801,333 $10,114,080 $ 1,932,955 $ 2,806,877 $ 4,540,571
=========== =========== =========== =========== =========== ===========
(1) Distributable cash from operations does not include depreciation,
amortization, or net income from the LLC.
Each of the following three Properties had occupancy rates well below the
other six Properties which had occupancy rates between 90% and 97%.
Ardmor Village, in Lakeville, Minnesota, had an occupancy of 87.9%
(298/339 sites) as of December, 1995 compared to 85.5% as of December, 1994 and
83.5% in 1993. The average rent in December, 1995 was $304 per home site
versus $297 in December, 1994 and $291 in December, 1993, an increase of 2.4%
and 2.0% in each year, respectively.
The property's 1995 net operating income of $563,269 represented 53.2% of
revenues versus $548,538 or 55.0% of revenues in 1994 and $471,314 or 50.5% in
1993. The increase in net operating income is primarily due to increased
occupancy and higher rents. The General Partner has stopped placing
lease/purchase homes at the community and started a new home sales program,
which the General Partner anticipates will continue to help improve occupancy
during 1996.
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Country Roads, in Jacksonville, Florida, reported an occupancy of 84.9%
(265/312 sites) as of December, 1995 compared to 82.4% in 1994 and 72.8% in
1993. The average rent in December, 1995 was $205, which represents no
increase from the $205 reported in December 1994 and is a slight decrease from
the $206 reported in December 1993.
The property's 1995 net operating income loss of ($43,518) represented
- -7.0% of revenues versus $54,916 or 9.4% of revenues in 1994 and $5,398 or
- -1.0% of revenues in 1993. The decrease in net operating income from 1994 to
1995 is primarily due to higher marketing expenses.
Paradise Village, in Tampa, Florida, reported an occupancy of 71.2%
(435/611 sites) as of December, 1995 compared to 79.7% in 1994 and 71.0% in
1993. The average rent in December, 1995 was $257, versus $246 in 1994 and
$233 in 1993, an increase of 4.5% and 5.6% respectively.
The property's 1995 net operating income of $78,478 represented 6.3% of
revenues compared to $304,769 or 20.6% of revenues in 1994 and $378,482 or
28.1% in 1993. During 1995, management has started to phase out the
lease/purchase program. As a result, lease home income declined significantly
and expenses to repair the lease homes increased.
In 1996 and for the foreseeable future, the Partnership expects to meet
its expenditures from operating revenues and to distribute excess cash flow,
after retention of an adequate cash reserve, to its Unit Holders and Partners.
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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, President
Dated: October 4, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Gloria Koster By: /s/ Paul M. Zlotoff
------------------------------ ----------------------------------------
Gloria Koster Paul M. Zlotoff, Director of Uniprop, Inc.
(Principal Financial Officer of
Uniprop, Inc.)
Date: October 4, 1996 Date: October 4, 1996
By: /s/ Andrew Feuereisen
------------------------------
Andrew Feuereisen
(Controller of Uniprop, Inc.)
Date: October 4, 1996
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UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
10
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
--------------------------------------------
11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Uniprop Manufactured Housing
Communities Income Fund II
(a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing
Communities Income Fund II (a Michigan limited partnership), as of December 31,
1995 and 1994 and the related statements of income, partners' equity and cash
flows for each of the three years in the period ended December 31, 1995. We
have also audited the schedule listed under Item 14 of Form 10-K. These
financial statements and the schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the schedule
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements and the schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and the
schedule. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Uniprop Manufactured Housing
Communities Income Fund II at December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, the schedule listed under Item 14 of Form 10-K presents
fairly, in all material respects, the information set forth therein.
BDO SEIDMAN, LLP
Troy, Michigan
February 9, 1996
12
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
- --------------------------------------------------------------------------------
December 31, 1995 1994
- --------------------------------------------------------------------------------------------------------------
ASSETS
PROPERTY AND EQUIPMENT (Note 3)
Buildings and improvements $ 48,305,293 $ 47,691,900
Land 11,644,603 11,562,361
Manufactured homes and improvements 2,456,505 2,430,221
Furniture and equipment 295,715 246,821
- --------------------------------------------------------------------------------------------------------------
62,702,116 61,931,303
Less accumulated depreciation 13,566,058 11,834,802
- --------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 49,136,058 50,096,501
Cash 388,328 1,373,182
Marketable securities 956,753 1,000,000
Mortgage-backed securities (Note 3) 1,502,250 1,502,250
Unamortized financing costs 964,585 998,958
Investment (Note 3) 998,995 500,896
Other assets (Note 2) 525,227 622,151
- --------------------------------------------------------------------------------------------------------------
$ 54,472,196 $ 56,093,938
==============================================================================================================
LIABILITIES AND PARTNERS' EQUITY
Notes payable (Note 3) $ 29,894,586 $ 29,786,033
Accounts payable 154,712 239,888
Other liabilities (Note 4) 827,387 816,937
- --------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 30,876,685 30,842,858
- --------------------------------------------------------------------------------------------------------------
PARTNERS' EQUITY
Unit holders 23,380,956 25,041,927
General partner 214,555 209,153
- --------------------------------------------------------------------------------------------------------------
TOTAL PARTNERS' EQUITY 23,595,511 25,251,080
- --------------------------------------------------------------------------------------------------------------
$ 54,472,196 $ 56,093,938
==============================================================================================================
See accompanying notes to financial statements.
13
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
INCOME
Rental $ 10,257,258 $ 10,275,710 $ 9,880,687
Interest 224,027 330,581 22,119
Equity in net income of LLC (Note 3) 498,099 500,896 -
Other 231,157 195,042 211,274
- ---------------------------------------------------------------------------------------------------------------
11,210,541 11,302,229 10,114,080
- ---------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Property operations 4,230,166 3,885,849 3,391,164
Depreciation and amortization 1,890,903 1,862,892 1,687,937
Administrative (Note 5) 956,742 915,617 933,865
Property taxes 835,454 825,491 924,002
Interest 2,757,125 2,367,501 324,478
- ---------------------------------------------------------------------------------------------------------------
10,670,390 9,857,350 7,261,446
- ---------------------------------------------------------------------------------------------------------------
NET INCOME $ 540,151 $ 1,444,879 $ 2,852,634
===============================================================================================================
INCOME PER LIMITED PARTNERSHIP
UNIT (Note 7) $ .16 $ .43 $ .85
===============================================================================================================
DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT (Note 7) $ .66 $ 7.60 $ 1.40
===============================================================================================================
NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 3,303,387 3,303,387 3,303,387
===============================================================================================================
NET INCOME ALLOCABLE TO
GENERAL PARTNER $ 5,402 $ 14,449 $ 28,526
===============================================================================================================
DISTRIBUTIONS ALLOCABLE TO
GENERAL PARTNER $ - $ - $ -
===============================================================================================================
See accompanying notes to financial statements.
14
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
General
Partner Unit Holders TOTAL
- --------------------------------------------------------------------------------------------------------------
BALANCE, January 1, 1993 $ 166,178 $ 50,510,131 $ 50,676,309
Distributions to unit holders - (4,624,742) (4,624,742)
Net income for the year 28,526 2,824,108 2,852,634
- --------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1993 $ 194,704 $ 48,709,497 $ 48,904,201
Distributions to unit holders - (25,098,000) (25,098,000)
Net income for the year 14,449 1,430,430 1,444,879
- --------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1994 $ 209,153 $ 25,041,927 $ 25,251,080
Distributions to unit holders - (2,195,720) (2,195,720)
Net income for the year 5,402 534,749 540,151
- --------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 $ 214,555 $ 23,380,956 $ 23,595,511
==============================================================================================================
See accompanying notes to financial statements.
15
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Year Ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 540,151 $ 1,444,879 $ 2,852,634
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 1,747,977 1,704,979 1,687,937
Amortization 142,926 157,913 -
Equity in net income of LLC (498,099) (500,896) -
Loss (gain) loss on sale of property and equipment (1,933) 1,394 (6,901)
Decrease (increase) in other assets 96,924 156,428 (97,129)
(Decrease) increase in accounts payable (85,176) 105,459 (5,782)
Increase (decrease) in other liabilities 10,450 (682,944) 346,076
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,953,220 2,387,212 4,776,835
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment (961,537) (805,848) (458,647)
Proceeds from sale of marketable securities 525,000 - -
Purchase of marketable securities (481,753) (1,000,000) -
Proceeds from sale of property and equipment 175,936 188,358 331,958
Purchase of mortgage-backed securities - - (1,502,250)
- ---------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (742,354) (1,617,490) (1,628,939)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to unit holders (2,195,720) (25,098,000) (4,624,742)
Proceeds from notes payable borrowings - - 29,660,353
Repayment of notes payable borrowings - - (2,350,523)
Payment for financing costs - - (1,051,547)
- ---------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (2,195,720) (25,098,000) 21,633,541
- ---------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH (984,854) (24,328,278) 24,781,437
CASH, at beginning of year 1,373,182 25,701,460 920,023
- ---------------------------------------------------------------------------------------------------------------
CASH, at end of year $ 388,328 $ 1,373,182 $ 25,701,460
===============================================================================================================
See accompanying notes to financial statements.
16
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Summary of ORGANIZATION AND BUSINESS
Accounting
Policies Uniprop Manufactured Housing Communities Income Fund II,
a Michigan Limited Partnership (the "Partnership")
acquired, maintains, operates and will ultimately dispose
of income producing residential real properties consisting
of nine manufactured housing communities (the
"properties") located in Florida, Michigan, Nevada and
Minnesota. The Partnership was organized and formed under
the laws of the State of Michigan on November 7, 1986.
In accordance with its Prospectus dated December 1986, the
Partnership sold 3,303,387 units of beneficial
assignment of limited partnership interest ("Units") for
$66,067,740. The Partnership purchased the properties for
an aggregate purchase price of approximately $56,000,000.
Three of the properties costing approximately $16,008,000
were previously owned by entities which were affiliates of
the general partner.
The general partner is Genesis Associates Limited
Partnership. Uniprop Beneficial Corporation was the
initial limited partner who assigned to those persons
purchasing units a beneficial limited partnership interest
when the minimum number of units were sold.
USE OF ESTIMATES
In preparing financial statements in conformity with
generally accepted accounting principles, management is
required to make estimates and assumptions that affect (1)
the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the
date of the financial statements, and (2) revenues and
expenses during the reporting period. Actual results could
differ from these estimates.
17
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and marketable securities
approximate fair value because of the relative short
maturity of these items.
The carrying amounts of notes payable approximate fair
value because the interest rates change with market rates.
The fair value of the mortgage-backed securities could not
be reasonably estimated due to their lack of
liquidity and their unique nature. The Partnership has the
positive intent and ability to hold these securities to
maturity (see "Mortgage-Backed Securities" below).
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the
following estimated useful lives:
Buildings and improvements 30 years
Manufactured homes and improvements 30 years
Furniture and equipment 3-10 years
Accumulated depreciation for tax purposes was $12,057,650
and $10,490,657 as of December 31, 1995 and 1994,
respectively.
MARKETABLE SECURITIES
Marketable securities consist mainly of U.S. Government
and Federal Agency Bonds with maturity dates ranging from
November 1996 to April 1998. These securities are stated
at amortized cost and management intends to hold such
securities to maturity. The rate of return on these
securities ranged from 4.37% to 7.87%.
During 1995, two of the Partnership's marketable
securities were called by the issuer, thereby
accelerating their maturity, and, consequently, such
securities were not held to maturity. The amortized cost
of the securities called was approximately $395,000,
resulting in a realized gain of $5,000. In addition,
marketable securities totalling $125,000 matured during
1995.
18
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
In connection with the Partnership's 1993 financing
transaction (see Note 3), the Partnership was required to
use approximately 5% of its mortgage proceeds to purchase
a subordinated portion of the trust fund's mortgage-backed
securities ("Class D Certificates"). These Class D
Certificates are not rated, carry a fixed interest rate of
7.5% per annum and are subordinated to the Class A, B and
C mortgage certificates issued as part of the
aforementioned financing transaction. The Partnership was
issued a Class D Certificate in 1993 with a face amount of
$1,502,250.
These securities are carried at cost and the
Partnership intends to hold such securities to maturity.
The actual maturity date, which is dependent upon future
interest rates and other factors, is anticipated to occur
before or during the year 2023. The future value of the
Class D Certificates would be adversely affected by a
foreclosure or a significant decline in operating results
involving any of the twenty-eight properties participating
in the financing transaction (including any of the seven
properties mortgaged by the Partnership) (see Note 3);
however, all scheduled payments to the trust fund have
been made to date by the participating properties and
management is not aware of any situations that would
adversely affect future scheduled payments. The
Partnership currently intends to pay its notes payable
underlying the Class D Certificates in accordance with
their scheduled terms.
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 notes payable.
INVESTMENT
The "Investment" reflected on the Partnership's balance
sheets represents a 20.98% residual interest ("Class R
Certificates") of the trust fund which was established as
part of the 1993 financing transaction (see Note 3). The
owners of the Class R Certificates are the respective
owners of the properties participating in the
mortgage-backed securities transaction, with their
ownership interest based on the amount each property
contributed to the
19
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
value of the Class R Certificates. These certificates have
no principal or interest amount associated with them,
but represent the amount which the Partnership will be
entitled to receive after all other classes of certificates
have been reduced to zero, which is anticipated to occur
before or during the year 2023; the actual maturity date is
dependent upon future interest rates and other factors. The
future value of the Class R Certificates would be adversely
affected by a foreclosure or a significant decline in
operating results involving any of the twenty-eight
properties participating in the financing transaction
(including any of the seven properties mortgaged by the
Partnership) (see Note 3); however, all scheduled payments
to the trust fund have been made to date by the
participating properties and management is not aware of any
situations that would adversely affect future scheduled
payments. The Partnership currently intends to pay its notes
payable underlying the Class R Certificates in accordance
with their scheduled terms.
The Partnership's "Investment" is accounted for using the
equity method of accounting, whereby 20.98% of the trust
fund's residual interest (which generally represents
mortgage interest payments to the trust fund in excess of
amounts paid to certificate holders) is recorded in the
accompanying financial statements.
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.
2. OTHER ASSETS At December 31, 1995 and 1994, "Other assets" included cash
of approximately $88,000 in a security deposit escrow
account for two of the Partnership's properties, as required
by the laws of the state in which they are located, which is
restricted from operating use.
20
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. NOTES PAYABLE Notes payable consisted of:
December 31, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage notes payable totalling $30,045,000, less
unamortized discount of $150,414 and $258,967 in 1995 and
1994, respectively (See further description below) $ 29,894,586 $ 29,786,033
- ------------------------------------------------------------------------------------------------------------------------------------
In December 1993, the Partnership mortgaged seven of its
properties in connection with a financing transaction
which involved twenty-one other properties, thirteen of
which are owned in part by affiliates of the general
partner. The borrowings, which are secured by the
mortgages on the Partnership's properties as well as the
mortgages on the other twenty-one properties, were funded
through the issuance of mortgage-backed securities. As
part of the financing, the Partnership was required to
purchase $1,502,250 in mortgage-backed securities. The
entity that issued these securities was a newly created
trust fund.
The proceeds of the mortgage notes payable were obtained
primarily to eliminate the cumulative preferred return
deficit owed to the unit holders that existed as of
December 31, 1993, and also to distribute a return of
capital to the unit holders. In February 1994, $23,119,767
was distributed to the unit holders, of which $13,572,978
represented the elimination of the preferred return
deficit that existed, and $9,546,789 which represented a
return of capital.
The mortgage notes payable require monthly payments of
interest only through December 1998. Thereafter, monthly
payments of principal and interest are required through
December 2023. Principal payments to be made in 1999 and
2000 are approximately $363,000 and $395,000,
respectively. The minimum mortgage interest rate is 7.0%
per annum through December 2003 and 8.0% thereafter. The
maximum mortgage interest rate is 9.9% per annum through
December 2003 and 10.9% thereafter. These minimum and
maximum rates are determined based on formulas specified
in the borrowing agreement. Each of the seven mortgaged
properties of the Partnership is cross-collateralized
under the terms of the agreement.
21
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Partnership also has a 20.98% interest in the residual
interest of the trust fund and will be entitled to receive a
pro-rata share of the proceeds of the remaining assets of the
trust fund after the principal balance of the regular
security holders have been paid. The residual interest of the
trust fund is a separate legal entity and is organized as a
Limited Liability Company ("LLC") for federal income tax
purposes. At December 31, 1995 and 1994, the Partnership's
equity in the LLC was $998,995 and $500,896, respectively,
which was determined using the equity method of accounting.
Under this method, the investment is carried in the
accompanying balance sheets at an amount which approximates
the Partnership's equity in the underlying net assets of the
LLC. The Partnership recognizes its share of the net income
of the LLC for financial statement purposes in the statements
of income. During 1995 and 1994, $498,099 and $500,896,
respectively, was recognized in the statements of income;
however, as reflected in the statements of cash flows, no
cash was received by the Partnership for these amounts.
4. OTHER Other liabilities consisted of:
LIABILITIES
December 31, 1995 1994
---------------------------------------------------------
Tenants' security deposits $ 462,178 $ 450,105
Accrued interest 229,221 232,491
Other 135,988 134,341
---------------------------------------------------------
TOTAL $ 827,387 $ 816,937
=========================================================
5. RELATED PARTY MANAGEMENT AGREEMENT
TRANSACTIONS The Partnership has an agreement with an affiliate of the
general partner to manage the properties owned by the
Partnership. The management agreement is automatically
renewable annually, but may be terminated by either party
upon sixty days written notice. The property management fee
is the lesser of 5% of annual gross receipts from the
properties managed, or the amount which would be payable to
an unaffiliated third party for comparable services.
22
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
REPORT OF FEES
During the years ended December 31, 1995, 1994 and 1993, the affiliate
earned property management fees of $524,609, $523,331 and $503,855,
respectively, as permitted in the Agreement of Limited Partnership.
These operating expenses are included with "Administrative" expenses
in the respective statements of income. The Partnership was owed
$37,677 and $9,469 by the affiliate at December 31, 1995 and 1994,
respectively, for overpayments made.
Certain employees of the Partnership are also employees of affiliates
of the general partner. These employees were paid by the Partnership
$164,657, $119,734 and $109,536 in 1995, 1994 and 1993, respectively,
to perform local property management and investor relations services
for the Partnership.
During 1994, the Partnership paid approximately $161,000 to an
affiliate, representing an accrued incentive acquisition fee.
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
with respect to these properties, when and if the properties are sold
and the sellers become entitled thereto. 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.
23
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. RECONCILIATION OF Year Ended December 31, 1995 1994 1993
FINANCIAL INCOME and -------------------------------------------------------------------------------
TAXABLE
INCOME Income per the financial
statements $ 540,151 $1,444,879 $ 2,852,634
Adjustments to depreciation
for difference in methods 168,185 174,624 170,680
Adjustments for prepaid rent,
meals and entertainment 25,580 9,609 2,460
Adjustment to loss on disposal
of assets for difference in
basis - - (9,328)
-------------------------------------------------------------------------------
Income Per the Partnership's
Tax Return $ 733,916 $1,629,112 $ 3,016,446
==============================================================================
7. PARTNERS' Subject to the orders of priority under certain specified conditions more fully
CAPITAL 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 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.
24
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Annual disributable cash from operations was less than the
amount required for the annual 10% preferred return to the
unit holders by approximately $3,456,000 in 1995 and
$3,833,000 in 1994. No distributions can be made to the
general partner until the cumulative preferred return
deficit of approximately $7,289,000 has been distributed to
the unit holders.
At December 31, 1995, the unpaid amount to be distributed to
the general partner from future capital transactions was
approximately $5.3 million.
ALLOCATION OF NET INCOME
Net income is principally allocated 99% to the unit holders
and 1% to the general partner until the cumulative amount of
net income allocated to the unit holders equals the
aggregate cumulative amount of cash distributable to the
unit holders. After sufficient net income has been allocated
to the unit holders to equal the amount of cash
distributable to them, all the net income is to be allocated
to the general partner until it equals the amount of cash
distributed to it.
8. SUPPLEMENTAL Interest paid during 1995, 1994 and 1993 was approximately
CASH FLOW $2,760,000, $2,307,000 and $150,000, respectively.
INFORMATION
25
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Column A Column B Column C Column D
- ---------------------- ----------- --------------------------- ------------------------------
Costs Capitalized
Initial Cost Subsequent to Acquisition
---------------------------- ------------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- ---------------------------------------------------------------------------------------------------------
Ardmor Village
(Lakeville, MN) $ 2,930,000 $ 1,063,253 $ 4,253,011 $ - $ 630,415
Sunshine Village
(Davie, FL) 4,290,000 1,215,862 4,875,878 - 83,790
Camelot Manor
(Grand Rapids, MI) 3,490,000 918,949 3,681,051 - 513,639
Country Roads
(Jacksonville, FL) - 636,550 2,546,200 38,106 487,802
Paradise Village
(Tampa, FL) - 1,760,000 7,040,000 279,553 764,275
Dutch Hills
(Haslett, MI) 2,580,000 839,693 3,358,771 23,104 295,679
Stonegate Manor
(Lansing, MI) 3,015,000 930,307 3,721,229 40,552 234,035
El Adobe
(Las Vegas, NV) 5,530,000 1,480,000 5,920,000 39,964 322,854
West Valley
(Las Vegas NV) 8,210,000 2,289,700 9,158,800 89,010 417,864
- ---------------------------------------------------------------------------------------------------------
$ 30,045,000 $ 11,134,314 $ 44,554,940 $ 510,289 $ 3,750,353
=========================================================================================================
Column E Column F Column G Column H
--------------------------------------------- -------------- ---------- ---------------
Gross Amount at Which Carried Life on Which
at Close of Period Depreciation in
----------------------------- Latest Income
Buildings and Accumulated Date Statement is
Land Improvements Total Depreciation Acquired Computed
- -----------------------------------------------------------------------------------------------------------------------
Ardmor Village
(Lakeville, MN) $1,063,253 $4,883,426 $ 5,946,679 $1,285,940 1987 30 years
Sunshine Village
(Davie, FL) 1,215,862 4,959,668 6,175,530 1,443,752 1987 30 years
Camelot Manor
(Grand Rapids, MI) 918,949 4,194,690 5,113,639 1,144,260 1987 30 years
Country Roads
(Jacksonville, FL) 674,656 3,034,002 3,708,658 819,550 1987 30 years
Paradise Village
(Tampa, FL) 2,039,553 7,804,275 9,843,828 2,099,000 1987 30 years
Dutch Hills
(Haslett, MI) 862,797 3,654,450 4,517,247 1,010,089 1987 30 years
Stonegate Manor
(Lansing, MI) 970,859 3,955,264 4,926,123 1,085,828 1987 30 years
El Adobe
(Las Vegas, NV) 1,519,964 6,242,854 7,762,818 1,651,972 1988 30 years
West Valley
(Las Vegas NV) 2,378,710 9,576,664 11,955,374 2,540,201 1988 30 years
- -----------------------------------------------------------------------------------------------------------------------
$11,644,603 $48,305,293 $ 59,949,896 $ 13,080,592
=======================================================================================================================
26
UNIPROP MANUFACTURED HOUSING
COMMUNITIES INCOME FUND II
(A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III
DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
1. RECONCILIATION OF The following table reconciles the land from January 1, 1993 to December 31,
LAND 1995:
1995 1994 1993
---------------------------------------------------------------------------------
BALANCE, at January 1 $ 11,562,361 $ 11,412,361 $ 11,412,361
Additions to land 82,242 150,000 -
---------------------------------------------------------------------------------
BALANCE, at December 31 $ 11,644,603 $ 11,562,361 $ 11,412,361
=================================================================================
2. RECONCILIATION OF The following table reconciles the buildings and improvements from January 1,
BUILDINGS AND 1993 to December 31, 1995:
IMPROVEMENTS
1995 1994 1993
---------------------------------------------------------------------------------
BALANCE, at January 1 $ 47,691,900 $ 47,223,775 $ 47,183,927
Additions to buildings
and improvements 613,393 468,125 39,848
---------------------------------------------------------------------------------
BALANCE, at December 31 $ 48,305,293 $ 47,691,900 $ 47,223,775
=================================================================================
3. RECONCILIATION OF The following table reconciles the accumulated depreciation from January 1, 1993
ACCUMULATED to December 31, 1995:
DEPRECIATION
1995 1994 1993
----------------------------------------------------------------------------------
BALANCE, at January 1 $ 11,449,637 $ 9,855,036 $ 8,269,748
Current year
depreciation expense 1,630,955 1,594,601 1,585,288
----------------------------------------------------------------------------------
BALANCE, at December 31 $ 13,080,592 $ 11,449,637 $ 9,855,036
==================================================================================
4. TAX BASIS OF The aggregate cost of buildings and improvements for federal income tax purposes
BUILDINGS AND is equal to the cost basis used for financial statement purposes.
IMPROVEMENTS