ITEM 1. BUSINESS
General Development of Business
Uniprop Manufactured Housing Communities Income Fund, a Michigan Limited Partnership (the "Partnership"), acquired, maintains, operates and ultimately will dispose of income producing residential real properties consisting of four manufactured housing communities (the "Properties"). The Partnership was organized and formed under the laws of the State of Michigan on May 16, 1985. Its principal offices are located at 280 Daines Street, Birmingham, Michigan 48009 and its telephone number is (810) 645-9261.
The Partnership filed an S-11 Registration Statement (Registration No. 2-98180) in June 1985 which was declared effective by the Securities and Exchange Commission on September 24, 1985. The Partnership thereafter offered a maximum of 30,000 units of limited partnership interest representing capital contributions by the limited partners to the Partnership of $1,000 per unit (the "Units"). The sale of all 30,000 Units was completed in March, 1986 generating $30 million of contributed capital to the Partnership.
On February 10, 1986, the Partnership acquired Aztec Estates, a 645-space manufactured housing community in Margate, Florida and Kings Manor, a 314-space manufactured housing community in Ft. Lauderdale, Florida. On March 4, 1986, the Partnership acquired Old Dutch Farms, a 293-space manufactured housing community in Novi, Michigan. On March 27, 1986, the Partnership acquired The Park of the Four Seasons, a 572-space manufactured housing community in Blaine, Minnesota.
The Partnership operates the Properties as manufactured housing communities with the primary investment objectives of: (1) obtaining net cash from operations; (2) obtaining capital appreciation; and (3) preserving capital. There can be no assurance that such objectives can be achieved.
Financial Information About Industry Segment
The Partnership's business and only industry segment is the operation of its four manufactured housing communities. Partnership operations commenced in February 1986 upon the acquisition of the first two Properties. The Partnership's first full year of operations was the fiscal year ended December 31, 1987. For a description of the Partnership's revenues, operating profit and assets, please refer to Items 6 and 8.
Narrative Description of Business
General
The Properties were selected from 23 manufactured housing communities then owned by affiliates of P.I. Associates Limited Partnership, a Michigan limited partnership,
the General Partner (the "General Partner") of the Partnership. The Partnership rents space in the Properties to owners of manufactured homes thereby generating rental revenues. It is intended that the Partnership will hold the Properties for extended periods of time, originally anticipated to be seven to ten years after their acquisition, although a Property may be disposed of earlier or later, if in the opinion of the General Partner, it is in the best interest of the Partnership to do so. The determination of whether a particular Property should be disposed of will be made by the General Partner only after consultation with Manufactured Housing Services Inc. (the "Consultant") and after consideration of relevant factors, including, current operating results of the particular Property, prevailing economic conditions and with a view to achieving maximum capital appreciation to the Partnership considering relevant tax consequences and the Partnership's investment objectives.
Competition
The business of owning and operating residential manufactured housing communities is highly competitive, and the Partnership may be competing with a number of established companies having greater financial resources. Moreover, there has been a trend for manufactured housing community residents to purchase (where zoning permits) their manufactured homesites on a collective basis. This trend may result in increased competition with the Partnership for tenants. In addition, the General Partner, its affiliates or both, has participated, and may in the future participate, directly or through other partnerships or investment vehicles in the acquisition, ownership, development, operation and sale of projects which may be in direct competition with one or more of the Properties.
Each of the Properties competes with numerous similar facilities located in its geographic area. The Margate/Fort Lauderdale area contains approximately 15 communities offering approximately 6,165 housing sites competing with Aztec Estates. The Davie/Fort Lauderdale area contains approximately seven communities offering approximately 3,483 housing sites competing with Kings Manor. Park of the Four Seasons competes with approximately 11 communities offering approximately 3,031 housing sites. Old Dutch Farms competes with approximately eight communities offering approximately 3,652 housing sites. The Properties also compete against other forms of housing, including apartment and condominium complexes.
Governmental Regulations
The Properties owned by the Partnership are subject to certain state regulations regarding the conduct of the Partnership operations. For example, the State of Florida regulates agreements and relationships between the Partnership and the residents of Aztec Estates and Kings Manor. Under Florida law, the Partnership is required to deliver
to new residents of those Properties a prospectus describing the Property and all tenant rights, Property rules and regulations, and changes to Property rules and regulations. Florida law also requires minimum lease terms, requires notice of rent increases, grants to tenant associations certain rights to purchase the community if being sold by the owner and regulates other aspects of the management of such properties. The Partnership is required to give 90 days notice to the residents of Florida properties of any rate increase, reduction in services or utilities or change in rules and regulations. If a majority of the residents object to such changes as unreasonable, the matter must be submitted to the Florida Department of Business Regulations for mediation prior to any legal adjudication of the matter. In addition, if the Partnership seeks to sell Florida Properties to the general public, it must notify any homeowners association for the residents, and the association shall have the right to purchase the Property for the price, terms and conditions being offered to the public within 45 days of notification by the owner. If the Partnership receives an unsolicited bona fide offer to purchase the Property from any party that it is considering or negotiating, it must notify any such homeowners association that it has received an offer, state to the homeowners association the price, terms and conditions upon which the Partnership would sell the Property, and consider (without obligation) accepting an offer from the homeowners association. The Partnership has, to the best of its knowledge, complied in all material respects with all requirements of the States of Florida, Michigan and Minnesota, where its operations are conducted.
Employees
The Partnership employs three part-time employees to perform Partnership management and investor relations services. The Partnership retains an affiliate, Uniprop, Inc., as the property manager for each of its Properties. Uniprop, Inc. is paid a fee equal to the lesser of 5% of the annual gross receipts from each of the Properties or the amount which would be payable to unaffiliated third parties for comparable services. Uniprop, Inc. retains local managers on behalf of the Partnership at each of the Properties. Salaries and fringe benefits of such local managers are paid by the Partnership and are not included in any property management fee payable to Uniprop, Inc. Local managers are employees of the Partnership and are paid semi-monthly. The yearly salaries and expenses for local managers range from $20,000 to $40,000. Local managers have no direct management authority, make no decisions regarding operations and act only in accordance with instructions from the property manager. They are utilized by the Partnership to provide on-site maintenance and administrative services. Uniprop, Inc., as property manager, has overall management authority for each Property.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership purchased all four manufactured housing communities for cash and the Properties are unencumbered, except for normal zoning, building and use restrictions for properties of that kind. Each of the Properties is a modern manufactured housing community containing lighted and paved streets, side-by-side off-street parking and complete underground utility systems. The Properties consist of only the underlying real estate and improvements, not the actual homes themselves. Each of the Properties has a community center which includes offices, meeting rooms and game rooms. Each of the Properties, except Old Dutch Farms, has a swimming pool and tennis courts.
Overall, as illustrated in the table below, the Properties reported, as of December 31, 1995, a combined occupancy of 95.1% and an average monthly homesite rent of $362.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In the opinion of the Partnership and its legal counsel, there are no material legal proceedings pending except such ordinary routine matters as are incident to the kind of business conducted by the Partnership. To the knowledge of the Partnership and its counsel, no legal proceedings have been instituted or are being contemplated by any governmental authority against the Partnership.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The voting privileges of the limited partners are restricted to certain matters of fundamental significance to the Partnership. The limited partners must approve certain major decisions of the General Partner if the General Partner proposes to act without the approval of the Consultant. The limited partners also have a right to vote upon removal and replacement of the General Partner, dissolution of the Partnership, material amendments to the partnership agreement and the sale or other disposition of all or substantially all of the Partnership's assets, except in the ordinary course of the Partnership's disposing of the Properties. There have been no matters submitted to a vote of the limited partners during the last fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units and it is not anticipated that one will ever develop. During the last two years, less than two percent of the Units have been transferred each year, excluding transfers on account of death or intra-family transfers. The Partnership believes there is no secondary market, or the substantial equivalent thereof, and none will develop.
The General Partner calculates the estimated net asset value of each Unit by dividing (i) the amount of distributions that would be made to the limited partners in the event of the current sale of the Properties at their current appraised value, less sales expenses (but without consideration to tax consequences of the sale), by (ii) 30,000. In March, 1996, the Properties were appraised at an aggregate fair market value of $51,400,000. Assuming a sale of the four properties in March 1996, at the appraised value, less payment of selling expenses, the contingent purchase price due to sellers, and after the 80/20% split of sale or financing proceeds with the General Partner, the net aggregate proceeds available for distribution to the limited partners is estimated to be $43,110,400 or $1,437 per unit. There can be no assurance that the estimated net asset value could ever be realized. As of March 1st, 1996, the Partnership had approximately 2,720 limited partners holding Units.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data for Uniprop Manufactured Housing Communities Income Fund, a Michigan Limited Partnership, for the periods ended December 31, 1995, 1994, 1993, 1992 and 1991:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Liquidity
The Partnership has, since inception, generated adequate amounts of cash to meet its operating needs. The Partnership retains cash reserves which it considers adequate to maintain the Properties. All funds in excess of the operating needs and cash reserves have been distributed to the Partners, quarterly. 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. For the year ended December 31, 1995 the Partnership added $178,017 to reserves. The amount of any funds placed in reserves is at the discretion of the General Partner. The Partnership expects to
generate adequate amounts of cash to meet its operating needs during the next fiscal year.
On August 24, 1994, the Partnership obtained a $200,000 line of credit with Comerica Bank. On June 1, 1995, the line was increased to $400,000 to add additional models. This is a result of the existing homes being purchased quickly. Proceeds from the line of credit are being used to purchase new and used manufactured homes for resale in the communities owned by the Fund. As of December 31, 1995, the outstanding balance was $343,210.
Capital Resources
The capital formation phase of the Partnership began on February 10, 1986, when Aztec Estates and Kings Manor were purchased by the Partnership and operations commenced. On March 4, 1986, and March 27, 1986, Old Dutch Farms and Park of the Four Seasons were purchased, respectively. From the $30,000,000 capital raised from the sale of the Units, $26,400,000 was used to purchase the four Properties after deducting sales commissions, advisory fees and other organization and offering costs. The Partnership had no capital expenditure commitments as of December 31, 1995 and does not anticipate any during the next fiscal year.
Results of Operations
a. Distributions
During the years ended December 31, 1995, 1994 and 1993, cash generated by operations, and available for distribution, was $3,773,017, $3,652,772 and $3,461,959 respectively. For the years ended December 31, 1995, 1994 and 1993, respectively, the Partnership made distributions to limited partners equal, on an annualized basis, to 10% of their original capital contributions. These distributions totaled $3,000,000 in each year. The General Partner received distributions totaling $595,000, $400,000 and $600,000 during the same periods. No distributions made to the limited partners to date constitute, in whole or in part, a return of their capital contributions.
b. Net Income
For the years ended December 31, 1995, 1994 and 1993 net income was $2,989,190, $2,884,362 and $2,704,752 on total revenues of $7,502,221, $7,321,328 and $6,997,507.
Net income plus depreciation and amortization less distributions to all Partners was $178,017, $252,772 and $(138,041), for the same periods. This fluctuation results from differences in the timing of distributions to the Partners and the fact that the Partnership had established cash reserves when deemed necessary from time to time.
c. Partnership Management
Net expenses for the management of the Partnership (i.e. gross expenses for such management, less transfer fees, interest on reserves and interest on funds awaiting distribution) were $249,760 in 1995, $266,907 in 1994 and $343,633 in 1993. The decrease in Partnership management expenses in 1995 versus 1994 was due to higher legal expenses.
d. Property Operations
Overall, the four Properties had a combined average occupancy of 95.1% (1,735/1,824 sites) as of December, 1995; 94.8% as of December, 1994; and 94.9% as of December, 1993. The average collected monthly rent as of December, 1995 was approximately $362 per homesite versus $352 as of December, 1994 and $337 as of December, 1993, an increase each year of 2.8% and 4.4%, respectively.
During the 1995, 1994 and 1993 fiscal years, the Properties generated a net operating income of $4,253,489 or 56.7% of total revenues; $4,140,507 or 56.6% of total revenues; and $3,975,678 or 56.8% of total revenues, respectively. Net operating income is computed before deduction of (i) certain non-recurring expenses of $230,712, $335,243 and $170,086, respectively, and (ii) depreciation and amortization of $783,827, $768,410, and $757,207. The large increase in non-recurring expense between 1994 and 1993 was the result of required capital improvements to the sewage treatment facility at Old Dutch Farms in Novi, MI.
Aztec Estates, in Margate, Florida, had an occupancy of 95.9% (619/645 sites) as of December, 1995 compared to 98.4% as of December, 1994 and 98.9% in 1993. The average rent in December, 1995 was $395 per homesite versus $385 in December, 1994 and $363 in December, 1993, an increase each year of 2.6% and 6.0%, respectively.
The property's 1995 net operating income of $1,614,553 represented 53.7% of revenues versus $1,559,113 or 51.9% of revenues in 1994, and $1,543,235 or 54.2% of revenues in 1993. The increase in net operating income from 1994 to 1995 was due to higher average rents and lower operating expenses.
Kings Manor, in Fort Lauderdale, Florida, had an occupancy of 96.5% (303/314 sites) as of December, 1995 compared to 99.0% as of December, 1994 and 99.0% in 1993. The average rent in December, 1995 was $372 per homesite versus $354 in December 1994 and $334 in December, 1993, an increase each year of 5.1% and 6.0% respectively.
The property's 1995 net operating income of $821,053 represented 60.6% of revenues, versus $781,390 or 59.5% in 1994, and $701,322 or 59.1% in 1993. The increase in income was the result of higher rental income.
Old Dutch Farms, in Novi, Michigan, had an occupancy of 96.9% (284/293 sites) as of December, 1995 compared to 94.2% in 1994 and 99.0% in 1993. The average rent in December, 1995 was $371 per homesite versus $359 in December, 1994 and $345 in December, 1993, an increase each year of 3.3% and 4.1%, respectively.
The property's 1995 net operating income of $731,943 represented 61.5% of revenues, versus $744,447 or 64.3% in 1994, and $721,439 or 63.0% in 1993. The decrease in income was the result of higher operating expenses.
The Park of the Four Seasons, in Blaine, Minnesota, had an occupancy of 92.5% (529/572 sites) as of December, 1995 compared to 88.6% in 1994 and 86.2% in 1993. The average rent in December, 1995 was $312 per homesite versus $306 in December, 1994 and $302 in December, 1993, an increase each year of 2.0% and 1.3%, respectively.
The property's 1995 net operating income of $1,085,940 represented 56.1% of revenues versus $1,055,557 or 56.3% in 1994, and $1,009,682 or 55.9% in 1993. The increase in net operating income from 1994 to 1995 was primarily due to reduced operating expenses and increased rental rates. Vacancy in the area is still greater than 10% and the Partnership will continue offering some rental incentives during 1996.
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 partners.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the fiscal years ended December 31, 1995, 1994 and 1993, and supplementary data are filed with this Report under Item 14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in the Partnership's independent public accountants nor have there been any disagreements during the past two fiscal years.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership, as an entity, does not have any officers or directors. The General Partner of the Partnership is P.I. Associates Limited Partnership. P.I. Associates is a Michigan limited partnership and its general partner is Paul M. Zlotoff.
Information concerning Mr. Zlotoff's age and principal occupations during the last five years or more is as follows:
Paul M. Zlotoff, 46, is and has been an individual general partner of P.I. Associates since its inception in May 1985. Mr. Zlotoff became the Chairman and Chief Executive Officer of Uniprop, Inc. in May 1986 and has been its President since 1979. He is also an individual general partner of Genesis Associates Limited Partnership, the general partner of Uniprop Manufactured Housing Communities Income Fund II, a public limited partnership which owns and operates nine manufactured housing communities. Mr. Zlotoff currently, and in the past, has acted as the general partner for various other limited partnerships owning manufactured home communities, as well as some commercial properties.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and therefore, no officers received a salary or remuneration exceeding $100,000 during the last fiscal year. The General Partner of the Partnership and an affiliate, Uniprop, Inc., received certain compensation and fees during the fiscal year in the amounts described in Item 13. The Partnership anticipates that it will provide similar compensation to the General Partner and Uniprop, Inc. during the next fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership is a limited partnership formed pursuant to the Michigan Uniform Limited Partnership Act, as amended. The General Partner, P.I. Associates Limited Partnership, is vested with full authority as to the general management and supervision of the business and other affairs of the Partnership, subject to certain constraints in the partnership agreement and consulting agreement. Limited partners have no right to participate in the management of the Partnership and have limited voting privileges only on certain matters of fundamental significance. No person owns of record or beneficially, more than five percent of the Partnership's Units.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes all of the types of compensation, fees or other distributions paid by the Partnership or others to the General Partner or its affiliates from the operations of the Partnership during the last fiscal year, as well as certain of such items which may be payable during the next fiscal year. Certain of the following arrangements for compensation and fees were not determined by arm's length negotiations between the General Partner, its affiliates and the Partnership.
Paul M. Zlotoff has an interest in the sellers of all the Properties acquired by the Partnership and may be entitled to share in a contingent purchase price with respect to each Property, when and if the Properties are sold and the sellers become entitled thereto. The maximum amounts which could be payable to the sellers are as follows: Aztec Estates, $1,374,323; Kings Manor, $529,724; Park of the Four Seasons, $1,113,594; and Old Dutch Farms, $452,359. The contingent purchase price for each Property was determined by reference to the average of two independent real estate appraisals which were obtained by the General Partner. Such appraisals are only estimates of value and are not necessarily indicative of the actual real estate value. Each seller will become entitled to any unpaid contingent purchase price upon the sale, financing or other disposition of one or more Properties, but, only after the receipt by each limited partner of any shortfall in his 9% cumulative preferred return plus the return of his adjusted capital contribution. 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.
The Partnership paid and will pay an incentive management interest to the General Partner for managing the Partnership's affairs, including: determining distributions, negotiating agreements, selling or financing properties, preparing records and reports, and performing other ongoing Partnership responsibilities. This incentive management interest could be up to 20% of the net cash from operations (cash revenues less cash operating expenses and specified reserves) in any taxable year. However, in each taxable year the General Partner's right to receive any net cash from operations is subordinated to the extent necessary to first provide each limited partner his 10% preferred return plus any shortfall in his 9% cumulative preferred return. During the last fiscal year, the General Partner was entitled to an incentive management interest of $773,017. The actual amount of incentive management interest paid to the General Partner during 1995 was $595,000. The actual amount to be received during the next fiscal year will depend upon the results of the Partnership's operations and is not determinable at this time. The General Partner also has a right to receive 20% of any sale or financing proceeds remaining after each limited partner has received an amount equal to any shortfall in his 9% cumulative preferred return, plus the return of his adjusted capital contribution.
Uniprop, Inc., an affiliate of the General Partner, received and will receive property management fees for each Property managed by it. Uniprop, Inc. is primarily responsible for the day-to-day management of the Properties and for the payment of the costs of operating each Property out of the rental income collected. The property management fees are equal to the lesser of 5% of the annual gross receipts from the Properties managed by Uniprop, Inc., or the amount which would be payable to an unaffiliated third party for comparable services. During the last fiscal year, Uniprop, Inc. received the following property management fees totaling $371,984: Aztec Estates, $149,006; Kings Manor, $67,569; Old Dutch Farms, $59,149; and Park of the Four Seasons, $96,260. In addition, certain employees of the Partnership are also employees of affiliates of the General Partner. During the last fiscal year, these employees received an aggregate of $105,798 for performing local property management, data processing and investor
relations services for the Partnership. The actual amounts to be received during the next fiscal year will depend upon the results of the Partnership's operations and are not determinable at this time.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
The following financial statements and related documents are filed with this Report:
(1) Report of Independent Certified Public Accountants
(2) Balance Sheets as of December 31, 1995 and 1994 and Statements of Income for the fiscal years ended December 31, 1995, 1994 and 1993
(3) Statements of Partners' Equity for the fiscal years ended December 31, 1995, 1994 and 1993
(4) Statements of Cash Flows for the fiscal years ended December 31, 1995, 1994 and 1993
(5) Schedule III - Real Estate and Accumulated Depreciation for the fiscal years ended December 31, 1995, 1994 and 1993
(b) Reports on Form 8-K
The Partnership did not file any Forms 8-K during the fourth quarter of 1995.
(c) Exhibits
The following exhibits are incorporated by reference to the S-11 Registration Statement of the Partnership filed June 4, 1985, as amended on August 1, 1985 and September 11, 1985:
3(a) Amended Certificate of Limited Partnership for the Partnership
3(b) Agreement of Limited Partnership for the Partnership
10(a) Form of Management Agreement between the Partnership and Uniprop, Inc.
10(b) Form of Consulting Agreement between the Partnership, the General Partner and Consultant
The following exhibits are incorporated by reference to the Form 10-K for fiscal year ended December 31, 1992.
3(c) Certificate of Amendment to the Certificate of Limited Partnership for the Partnership (originally filed with Form 10-Q for the fiscal quarter ended June 30, 1986).
4 Form of Certificate of Limited Partnership Interest in the Partnership (originally filed with Form 10-K for the fiscal year ended December 31, 1986)
10(c) Contingent Purchase Price Agreement between the Partnership, Aztec Estates
10(d) Contingent Purchase Price Agreement between the Partnership and O.D.F. Mobile Home Park (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
10(e) Contingent Purchase Price Agreement between the Partnership and The Park of the Four Seasons (originally filed with Form 10-K for the fiscal year ended December 31, 1987)
The following exhibit is attached to this Report:
27 Financial Data Schedule
28 Letter summary of the estimated fair market values of the Partnership's four manufactured housing communities, as of March 23, 1996.
(d) Other Financial Statements
There are no other financial statements required by the instructions contained in Regulation S-X or, the information is included elsewhere in the financial statements or the notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Uniprop Manufactured Housing Communities Income Fund, 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, a Michigan Limited Partnership
BY: P.I. Associated Limited Partnership, General Partner
Dated: March 29, 1996 BY: /s/ Paul M. Zlotoff ---------------------------------------- Paul M. Zlotoff, General Partner
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners Uniprop Manufactured Housing Communities Income Fund (a Michigan limited partnership)
We have audited the accompanying balance sheets of Uniprop Manufactured Housing Communities Income Fund (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 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
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
BALANCE SHEETS
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ORGANIZATION AND BUSINESS ACCOUNTING POLICIES Uniprop Manufactured Housing Communities Income Fund, a Michigan Limited Partnership (the "Partnership") acquired, maintains, operates and will ultimately dispose of income producing residential real properties consisting of four manufactured housing communities (the "properties") located in Florida, Minnesota and Michigan. The Partnership was organized and formed under the laws of the State of Michigan on May 16, 1985.
The general partner of the Partnership is P. I. Associates Limited Partnership. Taxable investors acquired 20,230 Class A units, and 9,770 Class B units were acquired by tax exempt investors. Depreciation is allocated only to holders of Class A units and to the general partner.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Partnership's financial instruments, which consist of cash, its line of credit and accounts payable, approximate their fair values.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the following estimated useful lives:
Building and improvements 30 years Manufactured homes and improvements 30 years Furniture and equipment 3-10 years
Accumulated depreciation for tax purposes was $8,324,900 and $7,472,706 as of December 31, 1995 and 1994, respectively.
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 $171,000 and $137,000, respectively, 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.
3. REVOLVING The Partnership currently has a $400,000 CREDIT revolving line of credit agreement with a bank. AGREEMENT Interest accrues on outstanding balances at 3/4% above the bank's prime rate (prime was 8.5% at December 31, 1995). The amounts outstanding were $343,210 and $135,000 at December 31, 1995 and 1994, respectively.
4. OTHER Other liabilities consisted of: LIABILITIES
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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.
REPORT OF FEES
During the years ended December 31, 1995, 1994 and 1993, the affiliate earned property management fees of $371,984, $362,755, and $348,935, 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 $8,415 and $8,042 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 the amounts of $105,798, $120,876, and $120,205, in 1995, 1994 and 1993, respectively, to perform local property management and investor relations services for the Partnership.
CONTINGENT PURCHASE PRICE
The general partner of P.I. Associates has an interest in the sellers of all the properties acquired by the Partnership and is entitled to share in a contingent purchase price with respect to each property, 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.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
7. PARTNERS' Subject to the orders of priority under certain CAPITAL specified conditions more fully described in the Agreement of Limited Partnership, distributions of partnership funds and allocations of net income from operations are principally determined as follows:
DISTRIBUTIONS
Net cash from operations (generally defined in the Agreement as net income plus depreciation) is to be distributed to the limited partners until they have received their 10% preferred return plus any shortfall in their 9% cumulative return. Secondly, the general partner will receive 20% of net cash from operations. Thereafter, all remaining net cash from operations is to be distributed to the limited partners.
ALLOCATION OF NET INCOME
Net income is to be allocated in the same manner as distributions except that:
a) Depreciation expense is allocated only to the general partner and the Class A (taxable) limited partners and,
b) In all cases, the general partner is to be a alocated at least 1% of all Partnership items.
Since inception, the Fund earned sufficient cash from operations to distribute the 10% preferred return to the limited partners and therefore, there has been no shortfall in the 9% cumulative return.
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
UNIPROP MANUFACTURED HOUSING COMMUNITIES INCOME FUND (A MICHIGAN LIMITED PARTNERSHIP)
NOTES TO SCHEDULE III DECEMBER 31, 1995
1. RECONCILIATION OF The following table reconciles buildings and improvements BUILDINGS AND from January 1, 1993 to December 31, 1995: IMPROVEMENTS
There were no additions to land during this three-year period.
2. RECONCILIATION The following table reconciles the accumulated ACCUMULATED depreciation from January 1, 1993 to December 31, 1995: OF DEPRECIATION
3. TAX BASIS OF The aggregate cost of buildings and improvements for BUILDINGS federal income tax purposes is equal to the cost basis AND IMPROVEMENTS used for financial statement purposes.
EXHIBIT INDEX