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, 2005 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 | | 38-2593067
|
| (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 [ ]
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 an accelerated filer (as defined in Exchange Act Rule 12b-2).
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
|
| March 31, 2005(Unaudited) and
|
| December 31, 2004 | | |
3
|
|
| Statements of Income
|
| Three months ended March 31, 2005 and 2004(Unaudited) | | | 4
|
|
| Statement of Partners' Equity (Deficit)
|
| Three months ended March 31, 2005(Unaudited) | | |
4
|
|
|
| Statements of Cash Flows
|
| Three months ended March 31, 2005
|
| and 2004(Unaudited) | | | 5
|
|
|
| Notes to Financial Statements
|
| March 31, 2005(Unaudited) | | | 6
|
|
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS
|
| OF FINANCIAL CONDITION AND RESULTS
|
| OF OPERATIONS | | | 9
|
| ITEM 3. | QUANTITATIVE AND QUALITATIVE
|
| DISCLOSURES ABOUT MARKET RISK | | | 10
|
| ITEM 4. | CONTROLS AND PROCEDURES
| | | 11
|
PART II OTHER INFORMATION
| ITEM 5. | LEGAL PROCEEDINGS | | |
11
|
| ITEM 6. | EXHIBITS | | |
12
|
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND,
A MICHIGAN LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 2005(Unaudited)
1. Basis of Presentation:
The accompanying unaudited 2005 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, 2004 has been derived from the audited financial statements at that date. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005, 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, 2004.
2. Commitments and Contingencies
A group of current residents, on March 4, 2005 filed a class action lawsuit in the Circuit Court of Oakland County against the Partnership and the General Partner of the Partnership claiming that the Old Dutch Farms community did not honor its obligations with respect to operating various aspects of the community. The complaint requests damages, costs and injunctive relief. Counsel for the Partnership is presently reviewing and preparing an answer to the complaint on behalf of the Partnership. While the discovery process has not yet begun, the Partnership intends to vigorously defend against this claim. The amount of potential liability, if any, is indeterminable at the time.
The City of Novi, Michigan, as of February 11, 2004 filed a lawsuit in the Circuit Court of Oakland County against the Partnership to compel the Old Dutch Farms community to connect to the City of Novi sanitary sewer system. The Partnership has reached a settlement agreement with the City of Novi. The Partnership will pay a tap fee of $730,000 based on an estimated water use by the residents, subject to adjustments after a three year monitoring period based on actual meter reading water usage. The cost of connection and removal of the current sanitary sewer system is estimated to be approximately $200,000. The Partnership anticipates these cost will be incurred during 2005.
In connection with the settlement agreement, the partnership has obtained an unsecured $750,000 note payable to a bank requiring monthly payments of $12,500 plus interest at LIBOR plus 1.8% and is due on December 2009. There was no outstanding balance under this agreement at March 31, 2005.
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 Uniprop Home Finance, an affiliated entity. The interest rate is the prime minus .5% which was 5.25% at March 31,2005. The sole purpose of the line of credit is to purchase new and used homes to use as model homes offered for sale within the Partnership’s communities. Over the past three years, sales of the new and used model homes have been growing and the General Partner believes that continuing the model home program is in the best interest of the Partnership. As of March 31, 2005 the outstanding balance on the line of credit was $658,164.
The Partnership has a renewable $1,000,000 line of credit with National City Bank of Michigan/Illinois. The interest rate floats at 180 basis points above 1 month LIBOR which was 2.79% at March 31, 2005. As of March 31, 2005 the outstanding balance of this credit facility was $305,000.
The quarterly Partnership Management Distribution paid to the General Partner during the first quarter results was $158,500, or one-fourth of 1.0% of the most recent appraised value of the properties held by the Partnership ($63,400,000 x Ľ %= $158,500).
The General Partner elected to make a total distribution of $112,500 for the first quarter of 2005 (unchanged from 2004), 80% or $90,000, was paid to the Limited Partners and 20% 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 March 31, 2005, the Partnership’s cash balance amounted to $202,514. The level of cash balance maintained 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 77% at the end of March 2005, versus 85% a year ago. The average monthly rent in March 2005 was approximately $487, compared to the $477 average monthly rent in March 2004 (average rent not a weighted average).
|
| Total
Capacity | Occupied
Sites
| Occupancy
Rate | Average
Rent*
|
| Aztec Estates | 645 | 478 | 74% | $529
|
| Kings Manor | 314 | 296 | 94% | 535
|
| Old Dutch Farms | 293 | 191 | 65% | 450
|
| Park of the Four Seasons | 572 | 432 | 76% | 435
|
|
| Total on
3/31/04: | 1,824 | 1,397 | 77% |
$487
|
| Total on
3/31/03: | 1,824 | 1,559 | 85% |
$477
|
*Not a weighted average
|
|
GROSS
REVENUE
Three months ended
|
NET INCOME (LOSS)
Three months ended
|
|
|
3/31/2005
|
3/31/2004
|
|
3/31/2005
|
3/31/2004
|
|
|
Aztec
Estates
|
$966,447
|
$990,005
|
|
$353,356
|
$336,254
|
|
|
Kings
Manor
|
591,368
|
424,504
|
|
284,461
|
261,971
|
|
|
Old
Dutch Farms
|
252,693
|
322,372
|
|
95,708
|
151,841
|
|
|
Park of
the Four Seasons
|
623,630
|
619,496
|
|
331,718
|
370,788
|
|
|
|
$2,434,138
|
$2,356,377
|
|
$1,065,243
|
$1,120,854
|
|
|
Partnership
Management
|
$2,171
|
$1,325
|
|
(83,910)
|
(89,554)
|
|
|
|
|
|
|
|
|
|
|
Other
Expenses
|
|
|
|
(144,391)
|
(98,825)
|
|
|
Interest
Expense
Depreciation
and
Amortization
|
|
|
|
(641,384)
(253,899)
|
(657,298)
(238,714)
|
|
|
TOTAL:
|
$2,436,309
|
$2,357,702
|
|
($58,341)
|
$36,463
|
|
Comparison of Quarter Ended March 31, 2005 to Quarter Ended March 31, 2004
Gross revenues increased $78,607 to $2,436,309 in 2005, as compared to $2,357,702 in 2004. The increase was the result of higher home sale income.
As described in the Statements of Income, total operating expenses were $173,411 higher, moving from $2,321,239 to $2,494,650. The increase was due to an increase in property operating expenses as well as an increase in home sale expenses.
As a result of the aforementioned factors, the Partnership had a net loss of $58,541 for the first quarter of 2005 compared to net income of $36,463 for the same quarter of the prior year.
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, 2005 the Partnership had a note payable outstanding in the amount of $31,078,126. Interest on this note is at a fixed annual rate of 8.24% through July 2007.
Line-of-Credit: At March 31, 2005 the Partnership owed $305,000 under its line-of-credit agreement, whereby interest is charged at a variable rate of 1.80% in excess of One Month LIBOR which was 2.79% as of March 31, 2005.
Term-Note: The Partnership has obtained an unsecured term note with National City Bank of the Midwest for $750,000. The monthly payments of $12,500 plus interest at LIBOR plus 1.80% which was 2.79% at March 31, 2005, will be due for five years from funding. Currently this note has not been funded. This term note was established for the cost of the sewer connection at Old Dutch Farms.
Line-of- Credit for Homes: At March 31, 2005 the partnership had a line of credit outstanding to an affiliated entity in the amount of $658,164, whereby interest is accrued at prime minus .5% (5.25 at March 31, 2005).
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
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 5. Legal Proceeding
See note 2 of the Notes to Unaudited Financial Statements for information concerning
legal proceedings.
ITEM
6. Exhibits
Exhibit 31.1 Section 302 Certification from the Principal Executive Officer
Exhibit 31.2 Section 302 Certification from the Principal Financial Officer
Exhibit 32.1 Section 906 Certification from the Principal Executive Officer
and the Principal Financial Officer
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/ Joel Schwartz
Joel Schwartz, Principal Financial Officer
Dated: May 10, 2005
Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 312 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 Communities
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 (the
"Evaluation Date"); and the end of the period covered by this report.
c) presented in this quarterly report our conclusions about the effectiveness 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;
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: May 10, 2005 Signature: /s/ Paul M. Zlotoff
Paul M. Zlotoff, Principal Executive Officer
President & Director of GP P.I. Associates Corp.
Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 312 OF THE SARBANES-OXLEY ACT OF 2002
I, Joel Schwartz , certify that:
1. I have reviewed this quarterly report on Form 10-Q of Uniprop Manufactured Housing
Communities 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 (the
"Evaluation Date"); and the end of the period covered by this report.
c. presented in this quarterly report our conclusions about the effectiveness 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;
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: May 10, 2005 Signature: Signature: /s/ Joel Schwartz
Joel Schwartz, Principal Financial Officer
Chief Financial Officer of Uniprop, INC
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Uniprop Manufactured Housing Communities Income Fund (the "Company")
on Form 10-Q for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), Paul M Zlotoff, Principal Executive Officer of the Company, Joel Schwartz, Principal
Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and
2. The information contained in the Report fairly presents, in all material respect, the financial condition and
results of operations of the Company.
/s/ Paul M Zlotoff
Principal Executive Officer,
General Partner of P.I. Associates Limited Partnership
President & Director of GP P.I. Associated Corp.
s/s Joel Schwartz
Joel Schwartz
Principal Financial Officer of Uniprop, Inc.
May 10, 2005