News Column

UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND II /MI/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 12, 2014

Critical Accounting Policies

See Part II, Item 7 - Critical Accounting Policies, our consolidated financial statements and related notes in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 14, 2014 for accounting policies and related estimates we believe are the most critical to understanding condensed consolidated financial statements, financial conditions and results of operations and which require complex management judgment and assumptions or involve uncertainties. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report. - 7 -



Liquidity and Capital Resources

Uniprop Manufactured Housing Communities Income Fund II, a Michigan Limited Partnership's (the "Partnership") liquidity is based, in part, upon its investment strategy. Upon acquisition, the Partnership anticipated owning the properties for seven to ten years. All of the properties have been owned by the Partnership for more than ten years. The General Partner may elect to have the Partnership own the properties for as long as, in the opinion of the General Partner, it is in the best interest of the Partnership to do so.



The Partnership expects to meet its short-term liquidity needs generally through its working capital and cash provided by operating activities.

The Partnership's capital resources consist primarily of its seven manufactured home communities. As described in Note 2, the Partnership refinanced its existing mortgage note payable and executed seven new mortgage notes payable with StanCorp Mortgage Investors, LLC (the "StanCorp Financing") in the aggregate amount of $23,225,000 secured by the seven properties of the Partnership in August, 2008. To pay off the prior mortgage balance of $25,277,523 and the costs of refinancing, the Partnership transferred $2,735,555 from cash reserves. The mortgages were payable in monthly installments of interest and principal through September 2033. The Partnership incurred $693,798 in financing costs as a result of the 2008 refinancing which were being amortized over the term of the loans. These costs included a 1% fee payable to an affiliate of the General Partner. Unamortized finance costs of $179,375 were written off during 2013 as a result of the refinancing discussed below. On July 18, 2013, the Partnership refinanced two of the existing mortgage notes payable and executed two new mortgages payable in the amount of $19,320,000 secured by Sunshine Village, located in Davie, FL and West Valley, located in Las Vegas, NV with a new lender, namely Cantor Commercial Real Estate. The mortgage notes are payable in monthly installments of interest and principal through August, 2023. The refinanced notes bear interest at a fixed rate of 5.09% with principal payments based on a twenty-five year amortization period. As of June 30, 2014 the balance on these notes was $19,005,108. The Partnership incurred $676,321 in financing costs as a result of the 2013 refinancing which is being amortized over the term of the loans. These costs included a 1% fee payable to an affiliate of the General Partner.



Net closing proceeds after deducting the payoff of the prior mortgages of $11,383,289 and the payment of closing costs and fees to third parties of $665,193 were $7,271,518. The net loan proceeds have been added to cash reserves of the Partnership.

Effective September 1, 2013, the interest rate re-set option was accepted on the five remaining notes with StanCorp. The new rate on these five notes is 5.00% and the amortization period is twenty years. Another rate re-set option is available in five years. As of June 30, 2014 the balance on these notes was $9,334,995. The General Partner has decided to distribute $264,271, or $.08 per unit, to the unit holders for the second quarter ended June 30, 2014. The General Partner will continue to monitor cash flow generated by the Partnership's seven properties during the coming quarters. If cash flow generated is greater or lesser than the amount needed to maintain the current distribution level, the General Partner may elect to reduce or increase the level of future distributions paid to Unit Holders. - 8 -



As of June 30, 2014, the Partnership's cash balance amounted to $7,999,046. The level of cash balance maintained is at the discretion of the General Partner.

Results of Operations Overall, as illustrated in the following table, the Partnership's seven properties reported combined occupancy of 48% at the end of June 2014 versus 48% at the end of June 2013. The average monthly homesite rent as of June 30, 2014 was approximately $523; versus $515 from June 2013 (average rent not a weighted average). Total Occupied Occupancy Average* Capacity Sites Rate Rent Ardmor Village 339 146 43 % $ 554 Camelot Manor 335 111 33 % 424 Dutch Hills 278 105 38 % 428 El Adobe 367 166 45 % 561 Stonegate Manor 308 101 33 % 418 Sunshine Village 356 251 71 % 643 West Valley 421 302 72 % 636 Total on 6/30/14: 2,404 1,182 48 % $ 523 Total on 6/30/13: 2,404 1,195 48 % $ 515 *Not a weighted average Net Operating Income and Net Net Operating Income Gross Revenue (Loss) Income Gross Revenue and Net (Loss) 6/30/2014 6/30/2013 6/30/2014



6/30/201306/30/201406/30/201306/30/201406/30/2013

three months ended three months ended six months ended six months ended Ardmor $ 254,122$ 240,693$ 113,282$ 107,988$ 503,681$ 469,810$ 223,614$ 204,608 Camelot Manor 218,075 163,932 70,418 54,633 442,031 340,890 160,059 96,809

Dutch Hills 158,444 160,142 38,264

49,232 321,924 331,128 96,030 103,352 El Adobe 240,852 248,118 78,396 103,650 485,699 503,508 163,593 221,177 Stonegate 183,072 162,558 34,500 62,643 354,535 327,236 78,621 132,236 Sunshine 432,249 429,818 198,491



181,227 941,319 849,861 416,067 370,041 West Valley 596,367 569,714

416,058



394,247 1,192,428 1,141,240 842,707 800,578

2,083,181 1,974,975 949,409



953,620 4,241,617 3,963,673 1,980,691 1,928,801 Partnership Management 13,621

2,033 (143,089 ) (157,165 ) 18,149 5,007 (292,585 ) (317,695

) Other Expense -- -- (115,291 ) (81,911 ) -- -- (184,056 ) (154,914 ) Interest Expense -- -- (383,648 ) (358,647 ) -- -- (766,738 ) (719,328 ) Depreciation -- -- (414,075 ) (429,742 ) -- -- (829,062 ) (858,721 ) $ 2,096,802$ 1,977,008 ($ 106,694 ) ($ 73,845 ) $ 4,259,766$ 3,968,680 ($ 91,750 ) ($ 121,857 ) - 9 - Net Operating Income ("NOI") is a non-GAAP financial measure equal to net income, the most comparable GAAP financial measure, plus depreciation, interest expense, partnership management expense, and other expenses. The Partnership believes that NOI is useful to investors and the Partnership's management as an indication of the Partnership's ability to service debt and pay cash distributions. NOI presented by the Partnership may not be comparable to NOI reported by other companies that define NOI differently, and should not be considered as an alternative to net income as an indication of performance or to cash flows as a measure of liquidity or ability to make distributions.



Comparison of Three Months Ended June 30, 2014 to Three Months Ended June 30, 2013

Gross revenues increased $119,794 to $2,096,802 in 2014, from $1,977,008 in 2013. This was due to increased rental income as a result of the increased occupancy at Sunshine Village related to the success of the relocation program. There were also increases in home sale income and other income, specifically lease home income. As described in the Statements of Operations, total operating expenses increased $152,643, to $2,203,496 in 2014, as compared to $2,050,853 in 2013. This was mainly due to increases in administrative, property operations, interest and home sale expense compared to the prior year.



As a result of the aforementioned factors, the Partnership experienced a Net Loss of $106,694 for the second quarter of 2014 compared to a Net Loss of $73,845 for the second quarter of 2013.

Comparison of Six Months Ended June 30, 2014 to Six Months Ended June 30, 2013

Gross revenues increased $291,086 to $4,259,766 in 2014, from $3,968,680 in 2013. This was due to increased rental income as a result of the increased occupancy at Sunshine Village related to the success of the relocation program. There were also increases in home sale income and other income, specifically lease home income. As described in the Statements of Operations, total operating expenses increased $260,979, to $4,351,516 in 2014, as compared to $4,090,537 in 2013. This was mainly due to increases in administrative, property operations, interest and home sale expense compared to the prior year.



As a result of the aforementioned factors, the Partnership experienced a Net Loss of $91,750 in 2014 as compared to a Net Loss of $121,857 in 2013.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters