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 June 30, 2003 Commission
File No. 0-15940
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
a Michigan Limited Partnership
(Exact name of registrant as specified in its charter)
| MICHIGAN | | 38-2593068
|
| (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) 645-9261
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
$1,000 per unit, units 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 [ ]
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
INDEX
Page
PART I FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
|
| Balance Sheets
|
| June 30, 2003(Unaudited) and
|
| December 31, 2002 | | | 3
|
|
| Statements of Income
|
| Six months ended June 30, 2003 and 2002
|
| Three months ended June 30, 2003
|
| and 2002(Unaudited) | | | 4
|
|
| Statement of Partners' Equity
|
| Six months ended June 30, 2003(Unaudited) | | | 4
|
|
|
| Statements of Cash Flows
|
| Six months ended June 30, 2003
|
| and 2002(Unaudited) | | | 5
|
|
|
| Notes to Financial Statements | | |
|
| June 30, 2003(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 | | | 10
|
| ITEM 4. | CONTROLS AND PROCEDURES
| | | 10
|
PART II OTHER INFORMATION
| ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K | | |
11
|
| | CERTIFICATION EXHIBITS
|
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 2003(Unaudited)
1. Basis of Presentation:
The accompanying unaudited 2003 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, 2002 has been derived from the
audited financial statements at that date. Operating results for the six months ended June 30, 2003 are
not necessarily indicative of the results that may be expected for the year ending December 31, 2003, 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, 2002.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources
The Partnership's capital resources consist primarily of its four manufactured housing communities. On
March 25, 1997 the Partnership borrowed $33,500,000 from Nomura Asset Capital Corporation (the
"Financing"). It secured the Financing by placing liens on its four communities. As a result of the
Financing, the Partnership distributed $30,000,000 to the Limited Partners, which represented a full
return of the original capital contributions of $1,000 per unit.
Liquidity
As a result of the Financing, the Partnership's four properties are mortgaged. At the time of the
Financing, the aggregate principal amount due under the four mortgage notes was $33,500,000 and the
aggregate fair market value of the Partnership's mortgaged properties was $53,200,000. The Partnership
expects to meet its short-term liquidity needs generally through its working capital provided by
operating activities.
The Partnership's long-term liquidity is based, in part, upon its investment strategy. The properties
owned by the Partnership were anticipated to be held for seven to ten years after their acquisition. All
of the properties have been owned by the Partnership more than ten years. The General Partner may elect
to have the Partnership own the properties for as long as, in the opinion of the General Partner, it is
in the best interest of the Partnership to do so.
The Partnership has a renewable $1,000,000 line of credit with National City Bank of Michigan/Illinois
(formerly First of America Bank). The interest rate, on such line of credit, floats 180 basis points
above 1 month LIBOR, which on June 30, 2003 was 1.12%. The sole purpose of the line of credit is to
purchase new and used homes to be used as model homes offered for sale within the Partnership's
communities. Over the past three years, sales of the new and used model homes has been growing and the
General Partner believes that continuing the model home program is in the best interest of the
Partnership. As of June 30, 2003 the outstanding balance on the line of credit was $145,755.
Net Cash from Operations available for aggregate distributions to all Partners in UMHCIF during the
quarter ended June 30, 2003 amounted to $497,949.
The amount available during the same period in 2002 was $553,851. Net Cash from
Operations is meant to be a supplemental measure of the Partnership's operating performance. Net Cash
from Operations is defined as net income computed in accordance with generally accepted accounting
principles ("GAAP"), plus real estate related depreciation and amortization.
Net Cash from Operations does not represent cash generated from operating activities in accordance with
GAAP and is not necessarily indicative of cash available to fund cash needs. Net Cash from Operations
should not be considered as an alternative to net income as the primary indicator of the Partnership's
operating performance nor as an alternative to cash flow as a measure of liquidity.
The quarterly Partnership Management Distribution paid to the General Partner during the second quarter
based on prior quarter results was$150,875, or one-fourth of 1.0% of the most recent appraised value of
the properties held by the Partnership ($60,350,000 x .01 1/4 = $150,875.00).
The cash available after payment of the Partnership Management Distribution amounted to $347,074. From
this amount, the General Partner elected to make a total distribution of $112,500 for the second quarter
of 2003 (unchanged from 2002), 80.0% or $90,000, was paid to the Limited Partners and 20.0% or $22,500
was paid to the General Partner.
While the Partnership is not required to maintain a working capital reserve, the Partnership has not
distributed all the cash generated from operations in order to build cash reserves. As of June 30, 2003,
the Partnership's cash balance amounted to $456,011. The amount placed in reserves is at the discretion
of the General Partner.
Results of
Operations
Overall,
as illustrated in the tables below, the four properties had a combined average occupancy of 90% at the
end of June 2003, versus 94% a year ago. The average monthly rent in June 2003 was approximately $464,
or 3% more than the $450 average monthly rent in June 2002 (average rent not a weighted average).
|
| Total Capacity | Occupied Sites
| Occupancy Rate | Average Rent*
|
| Aztec Estates | 645 | 542 | 84% | $505
|
| Kings Manor | 314 | 302 | 96% | 495
|
| Old Dutch Farms | 293 | 251 | 86% | 444
|
| Park of the Four Seasons | 572 | 542 | 95% | 412
|
|
| Total on 6/30/03: | 1,824 | 1,637 | 90% |
$464
|
| Total on 6/30/02: | 1,824 | 1,703 | 94% |
$450
|
*Not a weighted average
Gross Revenues Net Income
6/30/03 6/30/02 6/30/03 6/30/02
Aztec Estates $1,030,617 $1,243,202 $402,291 $ 427,283
Kings Manor 586,982 664,254 296,637 311,644
Old Dutch Farms 366,754 390,209 167,830 199,709
Park of the Four Seasons 861,627 741,167 424,576 450,078
2,845,980 3,038,832 1,291,334 1,388,714
Partnership Management: 2,092 4,657 (72,568) (48,989)
Other Non Recurring expenses: ---- ---- (53,710) (114,052)
Debt Service (667,107) (671,822)
Depreciation and Amortization ---- ---- (229,482) (236,369)
$2,848,072 $ 3,043,489 $268,467 $317,482
Comparison of Three months and Quarter Ended June 30, 2003 to Three months Ended June 30, 2002
Gross revenues decreased $195,417 to $2,848,072 in 2003, as compared to $3,043,489 in 2002. The decrease
was the result of lower occupancy due to weak economic conditions.
(See table in previous section.)
As described in the Statements of Income, total operating expenses were $146,402 lower,
moving from $2,726,007 to $2,579,605. The decrease was due to a decrease in home sale expense and
interest expense.
As a result of the aforementioned factors, Net Income decreased, $49,015 for the second quarter of 2003
compared to the same quarter of the prior year, moving from $317,482 for 2002 to $268,467 for 2003.
Comparison of Six months and Quarter Ended June 30, 2003 to Six months Ended June 30, 2002
Gross revenues decreased $258,534 to $5,362,752 in 2003, as compared to $5,621,286 in 2002. The decrease
was the result of lower occupancy due to weak economic conditions.
(See table in previous section.)
As described in the Statements of Income, total operating expenses were $244,353 lower,
moving from $5,034,821 to $4,790,468. The decrease was due to a decrease in home sale expense and
interest expense.
As a result of the aforementioned factors, Net Income decreased, $14,181 for the first six month period
of 2003 compared to the same period of the prior year, moving from $586,465 for 2002 to $572,284 for
2003.
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 June 30, 2003 the Partnership had a note payable outstanding in the amount of
$31,750,850. Interest on this note is at a fixed annual rate of 8.24% through June 2007.
Line-of-Credit: At June 30, 2003 the Partnership owed $145,755 under its line-of-credit agreement,
whereby interest is charged at a variable rate of 1.80% in excess of LIBOR.
A 10% adverse change in interest rates of the portion of the Partnership's debt bearing interest at
variable rates would result in an increase in interest expense of less than $10,000 annually.
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
Evaluation of Disclosure Controls and Procedures
The Director and Chief Financial Officer of Uniprop, Inc. have reviewed and evaluated the effectiveness
of our disclosure controls and procedures ( as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)
) within 90 days before the filing of this quarterly report. Based on that evaluation, we have concluded
that our current disclosure controls and procedures are effective and timely, providing them with
material information relating to that required to be disclosed in the reports we file or submit under the
Exchange Act.
Changes in Internal Controls
There have not been any significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation. We are not aware of any
significant deficiencies or material weaknesses, therefore no corrective actions were taken.
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports of Form 8-K
(A) Reports of Form 8-K
There were no reports filed on Form 8-K during
the three months ended June 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities and 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,
A Michigan Limited Partnership
BY: P.I. Associates Limited Partnership,
A Michigan Limited Partnership,
its General Partner
BY: /s/ Paul M. Zlotoff
Paul M. Zlotoff, General Partner
BY: /s/ Gloria A. Koster
Gloria A. Koster, Principal Financial Officer
Dated: August 12, 2003
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul M Zlotoff, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop Manufactured Housing Income Fund;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by
the quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of the of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent
evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 12, 2003 Signature: /s/ Paul M. Zlotoff
Paul M. Zlotoff, Principal Executive Officer
President & Director of GP P.I. Associates Corp.
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gloria A. Koster, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop Manufactured Housing
Income Fund;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by
the quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of the of the
disclosure controls and procedures based on our evaluation as the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our most recent
evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 12, 2003 Signature: /s/ Gloria A. Koster
Gloria A. Koster, Chief Financial Officer