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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the year ended December 31, 1997
OR
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-85492
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CP LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
MARYLAND 38-3140664
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6430 South Quebec Street, Englewood, Colorado 80111
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 741-3707
Securities registered pursuant to section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes |X| No |_|
2
CP LIMITED PARTNERSHIP
FORM 10-K ANNUAL REPORT
for the year ended December 31, 1997
TABLE OF CONTENTS
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Item Pages
- ---- -----
PART I
1. Business .............................................................. 3
2. Properties ............................................................ 7
3. Legal Proceedings ..................................................... 13
4. Submission of Matters to a Vote of Security Holders ................... 13
PART II
5. Market for Registrant's Common Equity and Related
Security Holder Matters ............................................... 13
6. Selected Financial Data ............................................... 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 16
8. Financial Statements and Supplementary Data ........................... 22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................................... 41
PART III
10. Directors and Executive Officers of the Registrant .................... 42
11. Executive Compensation ................................................ 42
12. Security Ownership of Certain Beneficial Owners and
Management ............................................................ 42
13. Certain Relationships and Related Transactions ........................ 42
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ........................................................... 43
Signatures ............................................................ 48
FINANCIAL STATEMENT SCHEDULES
CP LIMITED PARTNERSHIP Financial Statement Schedules .................. F1
3
PART I
Item 1. Business
General Development of Business.
CP LIMITED PARTNERSHIP (the "Company") is a Maryland limited partnership.
Chateau Communities, Inc. ("Chateau"), a Maryland Corporation, is a
self-administered and self-managed equity real estate investment trust ("REIT"),
the largest owner/manager of manufactured home communities in the United States,
based both on the number of communities and the number of residential homesites
owned. Chateau conducts substantially all of its activities through the Company,
in which it owns, directly and through ROC Communities, Inc. ("ROC"), the other
general partner of the Company, an approximate 89% general partner interest. The
Company owns and operates 153 manufactured home community properties containing
47,650 homesites and 1,350 park model/RV sites in 29 states. The Company also
fee manages 32 manufactured home community properties containing 6,600
homesites.
Formation of the Company
The Company was formed by Chateau, as general partner, and Chateau Estates, as
the initial limited partner, on September 16, 1993.
On February 11, 1997, the Company completed a strategic merger of equals with
ROC (the "Merger"). The Merger and related transactions were accounted for using
the purchase method of accounting in accordance with generally accepted
accounting principles. Accordingly, the assets and liabilities of ROC were
adjusted to fair value for financial accounting purposes and the results of
operations of ROC were included in the results of operations of the Company
beginning in February 1997.
Industry Overview
A manufactured home community is a residential subdivision designed and improved
with homesites for the placement of manufactured homes including related
improvements and amenities. Manufactured homes are detached, single-family homes
which are produced off-site by manufacturers and installed on sites within the
community. Manufactured homes are available in a variety of architectural styles
and floor plans, offering a variety of amenities, custom options and on-site
built additional structures.
Modern manufactured home communities are similar to typical residential
subdivisions and generally contain centralized entrances, paved streets, curbs
and gutters and parkways. In addition, such communities often provide a variety
of amenities to residents which may include a clubhouse , swimming pools and
jacuzzis, playgrounds, basketball courts, picnic areas, shuffleboard courts,
tennis courts, cable television service, golf courses, marinas and laundry
facilities. Utilities are provided or arranged for by the owner of the
community. Some communities provide water and sewer service through public or
private utilities, while others provide these services to residents from on-site
facilities.
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4
The owner of each home in a manufactured home community leases a site from the
community. The manufactured home community is the owner of the underlying land,
utility connections, streets, lighting, driveways, common area amenities and
other capital improvements and is responsible for enforcement of community
guidelines and maintenance. Each owner within the manufactured home community is
responsible for the maintenance of his home and leased site. Additionally,
manufactured home communities tend to have relatively stable resident bases,
with relatively few residents moving manufactured homes out of the communities.
Management thus tends to be less intensive, and capital expenditure needs less
significant, relative to multi-family rental apartment complexes.
Operating and Investment Strategies
The Company seeks to maximize long-term growth in income and portfolio value
through active management and expansion of certain of its manufactured home
communities and the acquisition and selective development of additional
communities. The Company focuses on manufactured home communities that have
growth potential and expects to hold such properties for long-term investment
and capital appreciation. The Company's operating and investment strategies
include:
Operations
* Providing attractive and desirable manufactured home communities for
existing and prospective residents;
* Aggressively managing properties to increase operating margins
through rent and occupancy increases and expense controls;
* Maintaining and upgrading communities on a continuous basis through
a program of regular and preventive maintenance and replacement;
* Offering residents accessibility to on-site managers to maximize
retention, encourage home maintenance and improvements and to
minimize turnover;
* Providing frequent personal contact between on-site managers and
residents to foster a sense of pride in the community and to promote
desirability of each Property; and
* Offering potential community residents the convenience of purchasing
a home already in place within the community.
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5
Acquisitions, Development and Expansions
* Selectively acquiring well-located manufactured home communities
that demonstrate the potential for increases in revenue and cash
flow through professional property management, improved operating
efficiencies, aggressive leasing and, where appropriate, expansion
or development;
* Acquiring properties in existing markets in order to achieve
economies of scale in operations, and in new markets where
portfolios may be acquired with regional management in place;
* Utilizing the expertise and relationships developed by the Company's
management to identify acquisition and development opportunities;
* Selectively developing new communities in regions where management
has significant experience and where further development is
supported by favorable demographics and strong market demand; and
* Capitalizing on opportunities to renovate and expand properties
consistent with local market demand.
Financing Strategies
The Company intends to maintain a conservative and flexible capital structure
that enables it to (i) continue to access the capital markets on favorable
terms; (ii) enhance potential earnings growth; (iii) minimize its level of
encumbered assets; and (iv) limit its exposure to variable rate debt. The
Company intends to maintain a debt-to-market capitalization ratio of
approximately 50% or less. The Company, however, may from time to time
re-evaluate this policy and decrease or increase such ratio accordingly in light
of then current economic conditions, relative costs to the Company of debt and
equity capital, market values of the properties and other factors.
Expansion and Improvement of Manufactured Home Community Properties
The Company will seek to increase the income generated from the manufactured
home communities and from any additional properties acquired by expanding the
number of sites available to be leased to residents if justified by local market
conditions and permitted by zoning and other applicable laws. During 1997, the
Company substantially completed the development of 509 expansion sites. As of
December 31, 1997, the Company had 43,800 total sites, of which approximately
3,500 were vacant. The Company owned at such date undeveloped land adjacent to
existing communities containing approximately 4,700 expansion sites which are
zoned for manufactured housing. All necessary utilities are available at these
expansion sites, however, building permits would need to be obtained prior to
development. This undeveloped land will facilitate additional growth to the
extent conditions warrant. In addition, where appropriate, the Company will
consider upgrading or adding facilities and amenities to certain communities in
order to make those communities more attractive in their markets.
5
6
1997 Property Acquisitions
During 1997, the Company completed the following acquisitions:
Amount Fair Market
Allocated Value of
Acquisition Property Name to Assets OP Units
Date and Location Acquired Issued Cash
----------- ------------- --------- ------ ----
February, 1997 75 communities acquired through see Note 3 to the Consolidated Financial
Merger with ROC Statements
November, 1997 Purchase of 4 communities in
Boston, Massachusetts $20,000 $ 500 $ 19,500
Various Investment in joint ventures $ 4,259 $ -- $ 4,259
Community Sales, Inc. ("CSI")
Prior to the Merger, new home sales and commercial brokerage activities at the
Company's communities were conducted by third parties. As a result of the
Merger, the Company acquired the sales and brokerage capabilities of CSI, which
had previously been operated as a taxable subsidiary of ROC, and which is now
operated as a taxable subsidiary of the Company.
The Windsor Corporation ("Windsor")
In September 1997, the Company completed the acquisition of Windsor, the general
partner of five partnerships and advisor to one REIT owning 28 manufactured home
communities (containing 5,700 homesites), all of which had been managed by ROC
on a fee basis since 1993 and by the Company since the Merger. The acquisition
was financed with the issuance of 101,239 OP Units and $750,000 in cash.
Competition
Many of the Properties are located in developed areas that include other
manufactured home community properties. The number of competitive manufactured
home community properties in a particular area could have a material effect on
the Company's ability to lease sites at the Properties or at any newly acquired
properties and on the rents charged. In addition, other forms of multi-family
residential properties and single-family housing provide housing alternatives to
potential residents of the Properties.
6
7
Employees
As of December 31, 1997, the Company had approximately 1,000 full and part-time
employees. The Company utilizes a resident administrator for the on-site
administration of each of the Properties. Important duties of on-site
administrators as well as the office manager include extensive contact with
residents through initial introduction to community rules and on-going
accessibility for resident assistance. Administrators notify residents who are
in violation of these rules and regulations. Typically, clerical and maintenance
workers are employed to assist these individuals in the management and care of
the Properties. Direct supervision of on-site administrators is the
responsibility of the Company's regional vice presidents and managers and
divisional senior vice presidents. These individuals have significant experience
in addressing the needs of residents and in finding or creating innovative
approaches to value maximization and increased cash flow from property
operations. Complementing this field management staff are 49 corporate employees
who assist on-site administrators in all property functions.
Commitment to resident satisfaction is demonstrated by the ongoing training that
the Company provides for on-site staff. Community administrators meet
periodically at regional seminars to review Company philosophy and policy, to
discuss relevant administration issues and solutions and to share ideas and
experiences.
Tax Status
The Company is not liable for Federal income taxes as the partners recognize
their proportionate share of income or loss in their tax returns, therefore, no
provision for income taxes is indicated in the financial statements.
Item 2. Properties
At December 31, 1997 the Properties consisted of 131 manufactured home
communities containing 43,800 sites, in 28 states, with amenities designed for
either retirement or family living. The Company also fee managed 31 manufactured
home communities containing 6,500 sites in 13 states. The Company also owned
land adjacent to certain existing communities containing approximately 4,700
expansion sites which, although not yet developed, was zoned for manufactured
housing.
At December 31, 1997, the Properties had an average occupancy rate of
approximately 92 percent with weighted average rent for the year ended December
31, 1997 of $287 per month. Weighted average rent is calculated as rental and
utility income for the period, on a monthly basis, divided by the weighted
average occupied sites. Weighted average occupancy is computed by averaging the
number of revenue producing sites at the end of each month in the period.
The Company believes that the Properties provide amenities and common facilities
that create a safe and attractive community for the residents. All of the
Properties provide residents with attractive amenities with most offering a
clubhouse, a swimming pool and a library. Many Properties offer additional
amenities such as sauna/whirlpool spas, indoor pools, tennis courts,
shuffleboard courts, basketball courts, golf courses, day care facilities,
exercise rooms and marinas.
7
8
Since residents own their homes, it is their responsibility to maintain their
homes and the surrounding area. The communities have extensive rules and
regulations to maintain their appearance at the highest level. It is
management's role to insure that residents comply with community policies and to
provide maintenance of the common areas, facilities and amenities. The Company
continually monitors compliance by residents with its residents' regulations to
assure that the communities are maintained at the highest standards. The Company
holds periodic meetings of its property management personnel for training and
implementation of the Company's strategies, and property administrators make a
daily inspection of the Properties. The Company believes that, due in part to
this strategy, the Properties historically have had and will continue to have
low turnover and high occupancy rates. Since 1989, the Properties have averaged
an annual turnover of homes (where the home is moved out of the community) of
3-4 percent. During this period, the average annual turnover of residents in the
Properties (where the home is sold and remains within the community, typically
without interruption of rental income) has been approximately 10-12 percent.
The Company owns a 100 percent beneficial interest in all of the Properties,
except for Emerald Lake, Fairways, Lakeland Junction, Lakes at Leesburg, Palm
Beach Colony, Winter Haven Oaks and Del Tura in which it owns a 99 percent
beneficial interest and in which Chateau owns the remaining 1 percent beneficial
interest.
Leases
The typical lease entered into between the resident and one of the Company's
manufactured home communities for the rental of a site is month-to-month or
year-to-year, renewable upon the consent of both parties or, in some instances,
as provided by statute. In some cases, leases are for one-year terms with up to
ten renewal options exercisable by the resident, with rent adjusted according to
yearly rent reviews, or by the consumer price index. Leases or other terms of
residents' occupancy are cancelable for non-payment of rent, violation of
community rules and regulations or other specified defaults.
Indebtedness
At December 31, 1997, the aggregate amount of indebtedness encumbering the
Properties was approximately $114 million. The amounts outstanding as of
December 31, 1997 for the indebtedness encumbering each of these Properties is
set forth (in thousands) in the following table. Prepayment of these debt
obligations may result in significant prepayment penalties.
Weighted
Average
Amount of Interest
Property Pledged as Collateral Indebtedness Rate Maturity
- ------------------------------ ------------ ---- --------
Del Tura $32,747 8.40% 2000
Macomb 15,972 9.82% 1999
Other (9 properties) 7,222 8.13% 1998-2011
Pacific Life (38 properties) 58,028 7.16% 2000
----------
Total $113,969
========
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9
The following table sets forth certain information, as of December 31, 1997,
regarding the properties.
Property
Information Weighted
Average
Core Portfolio Number Occupancy Monthly Rent
Location of Sites as of per Site
Community State (Closest Major City) 12/31/97 12/31/97 1997
- -------------------------------------------------------------------------------------------
100 Oaks AL Fultondale 230 90% $ 190
Bermuda Palms CA Palm Springs 185 94% 326
Eastridge CA San Jose 187 99% 597
La Quinta Ridge CA Palm Springs 152 85% 396
The Colony CA Palm Springs 220 96% 651
The Orchard CA San Francisco 233 100% 530
CV-Denver CO Denver 345 94% 339
CV-Longmont CO Longmont 310 99% 348
Friendly Village CO Greeley 226 99% 263
Pine Lakes Ranch CO Denver 762 97% 289
Redwood Estates CO Denver 753 97% 288
Audubon FL Orlando 280 94% 236
Colony Cove FL Sarasota 2207 100% 308
Conway Circle FL Orlando 111 95% 284
CV-Jacksonville FL Jacksonville 643 95% 265
Del Tura FL Fort Myers 1342 88% 422
Eldorado Estates FL Daytona Beach 126 95% 240
Emerald Lake FL Fort Myers 201 99% 278
Fairways Country Club FL Orlando 1142 98% 278
Hidden Valley FL Orlando 303 99% 268
Jade Isle FL Orlando 101 96% 287
Lakeland Harbor FL Tampa 504 100% 240
Lakeland Junction FL Tampa 191 100% 187
Lakes at Leesburg FL Orlando 640 100% 248
Land O' Lakes FL Orlando 173 99% 231
Midway Estates FL Vero Beach 204 87% 289
Mobiland-by-the-Sea FL Melbourne 217 65% 303
Orange Lake FL Orlando 244 94% 219
Palm Beach Colony FL West Palm Beach 285 96% 288
Pedaler's Pond FL Orlando 214 81% 176
Pinellas Cascades FL Clearwater 238 95% 335
Southwind Village FL Naples 338 92% 277
Starlight Ranch FL Orlando 783 94% 264
Town & Country FL Orlando 73 92% 276
Whispering Pines FL Clearwater 392 98% 329
Winter Haven Oaks FL Orlando 343 51% 198
Atlanta Meadows GA Atlanta 75 95% 214
Camden Point GA Kingsland 268 47% 167
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Property
Information Weighted
Average
Core Portfolio Number Occupancy Monthly Rent
Location of Sites as of per Site
Community State (Closest Major City) 12/31/97 12/31/97 1997
- -------------------------------------------------------------------------------------------
Castlewood Estates GA Atlanta 334 80% $ 296
Colonial Coach Estates GA Atlanta 481 74% 250
Golden Valley GA Atlanta 131 92% 222
Landmark GA Atlanta 524 96% 248
Marnelle GA Atlanta 205 96% 239
Oak Grove Estates GA Albany 174 98% 131
Paradise Village GA Albany 225 95% 132
Lakewood Estates IA Davenport 172 95% 226
Terrace Heights IA Dubuque 317 97% 231
Coach Royale ID Boise 91 100% 245
Maple Grove Estates ID Boise 270 96% 256
Shenandoah Estates ID Boise 147 99% 250
Maple Ridge IL Kankakee 201 100% 216
Maple Valley IL Kankakee 75 100% 216
Hickory Knoll IN Indianapolis 325 97% 267
Mariwood IN Indianapolis 296 90% 265
Pendleton IN Indianapolis 102 97% 192
Skyway IN Indianapolis 156 100% 259
Twin Pines IN Goshen 238 93% 207
Mosby's Point KY Cincinnati 150 99% 265
Rolling Hills KY Louisville 158 97% 179
Pinecrest Village LA Shreveport 448 66% 133
Stonegate, LA LA Shreveport 157 98% 164
Hillcrest MA Boston 83 95% 325
The Glen MA Boston 36 100% 377
Leisurewoods Rockland MA Boston 395 99% 304
Leisurewoods Taunton MA Boston 128 85% 250
Algoma Estates MI Grand Rapids 281 89% 266
Chesterfield MI Detroit 345 99% 333
Chestnut Creek MI Flint 134 100% 290
Clinton MI Detroit 1000 99% 338
Colonial Acres MI Kalamazoo 611 98% 259
Colonial Manor MI Kalamazoo 195 98% 259
Country Estates MI Grand Rapids 254 97% 249
Cranberry MI Pontiac 232 100% 317
Ferrand Estates MI Grand Rapids 420 100% 304
Forest Lake Estates MI Grand Rapids 221 72% 262
Holiday Estates MI Grand Rapids 205 100% 290
Howell MI Lansing 455 100% 342
10
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Property
Information Weighted
Average
Core Portfolio Number Occupancy Monthly Rent
Location of Sites as of per Site
Community State (Closest Major City) 12/31/97 12/31/97 1997
- -------------------------------------------------------------------------------------------
Lake in the Hills MI Detroit 238 100% $ 345
Leonard Gardens MI Grand Rapids 168 98% 274
Norton Shores MI Grand Rapids 656 85% 231
Novi MI Detroit 725 98% 371
Oakhill MI Flint 504 93% 329
Old Orchard MI Flint 200 100% 292
Orion MI Detroit 423 98% 317
Royal Estates MI Kalamazoo 183 90% 279
Science City MI Midland 171 98% 263
Torrey Hills MI Flint 346 99% 298
Villa MI Flint 319 97% 291
Cedar Knolls MN Minneapolis 458 98% 347
Cimmaron MN St. Paul 504 97% 351
President's Park MN Grand Forks 174 71% 214
Rosemount MN Minneapolis/St. Paul 182 100% 339
Twenty-Nine Pines MN St. Paul 152 91% 280
Countryside Village MT Great Falls 222 89% 197
Foxhall Village NC Raleigh 315 97% 283
Oakwood Forest NC Greensboro 481 96% 232
Buena Vista ND Fargo 400 97% 227
Columbia Heights ND Grand Forks 302 99% 240
Meadow Park ND Fargo 118 86% 169
Casa Linda NV Las Vegas 107 99% 383
Casual Estates NY Syracuse 961 84% 308
Shadybrook NY Syracuse 89 84% 308
Meadowbrook NY Ithaca 237 73% 249
Oak Orchard Estates NY Rochester 235 97% 261
Vance OH Columbus 110 96% 196
Willo-Arms OH Cleveland 262 100% 173
Yorktowne OH Cincinnati 354 97% 302
Crestview OK Stillwater 237 88% 169
Knoll Terrace OR Salem 212 99% 303
Riverview OR Portland 133 99% 343
Homestead Ranch TX McAllen 127 91% 200
Leisure World TX Brownsville 201 90% 181
The Homestead TX McAllen 99 94% 189
Trail's End TX Brownsville 307 80% 176
Eagle Point WA Seattle 230 98% 408
Breazeale WY Laramie 116 96% 208
- -------------------------------------------------------------------------------------------
Core Portfolio
Subtotal 37,422 93.6% $ 289
- -------------------------------------------------------------------------------------------
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Property
Information
Weighted
Active Expansion Average
Portfolio Number Occupancy Monthly Rent
Location of Sites as of per Site
Community State (Closest Major City) 12/31/97 12/31/97 1997
- -------------------------------------------------------------------------------------------
Butler Creek GA Augusta 358 82% $ 166
Crystal Lakes FL Tampa 329 49% 144
Foxwood Farms FL Orlando 375 74% 178
Gold Tree FL Tampa 295 88% 313
Oak Springs FL Orlando 438 76% 224
Falcon Farms IL Moline 215 86% 205
Anchor Bay MI Detroit 1319 95% 304
Avon MI Detroit 617 100% 372
Grand Blanc MI Flint 415 88% 319
MaComb/Westbrook MI Detroit 1537 95% 341
Springfield Farms MO Springfield 134 65% 154
Hunter's Chase OH Lima 135 33% 151
Conway Plantation SC Myrtle Beach 299 61% 157
Eagle Creek TX Tyler 174 44% 159
Regency Lakes VA Winchester 289 87% 196
- -------------------------------------------------------------------------------------------
Active Expansion
Portfolio Subtotal 6,378 82.6% $ 253
===========================================================================================
Total 43,800 92% $ 287
===========================================================================================
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Item 3. Legal Proceedings
Three separate purported class actions have been filed against the Company and
its directors in the Circuit Court of Montgomery County, Maryland alleging
breaches of fiduciary duty for agreeing to the Merger with ROC and refusing to
endorse alternative transactions proposed by Manufactured Home Communities, Inc.
or Sun Communities, Inc. The three class actions are entitled Harbor Finance
Partners v. Chateau Properties, et al. (Case No. 157467), Niles v. Chateau
Properties, et al. (Case No. 158284), and ZSA Asset Allocation Fund v. Boll, et
al. (Case No. 158652) and were filed on or about September 12, 1996, September
27, 1996 and October 4, 1996, respectively.
Chateau agreed to settle the Harbor, Niles, and ZSA actions brought in 1996 for
$287,000 plus expenses not to exceed $25,000, subject to court approval.
Reimbursement from Chateau's directors' and officers' liability insurer, Genesis
Insurance Co., is being pursued in the amount of approximately $1.1 million
which includes the amount of the settlement plus expenses incurred in the course
of the defense and settlement of these actions.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
Not Applicable
13
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Item 6. Selected Financial Data
The following table sets forth summary financial information of the Company and
its Predecessor for the periods and dates indicated.
Predecessor
-----------
For the period
For the Year Ended November 23 - January 1 -
December 31, December 31, November22,
In thousands, except per OP Unit data 1997 (1) 1996 1995 1994 1993 1993
--------- --------- --------- --------- --------- ---------
Operating Data:
Revenues:
Rental income $ 134,801 $ 67,233 $ 61,558 $ 47,318 $ 4,577 $ 38,242
Management, interest and other income 3,368 151 297 749 110 684
--------- --------- --------- --------- --------- ---------
Total revenues 138,169 67,384 61,855 48,067 4,687 38,926
Expenses:
Property operating and
administrative 56,053 26,870 24,410 19,944 1,867 16,909
Depreciation 31,510 11,452 11,014 7,230 707 5,823
Interest and related amortization 25,918 12,962 12,452 5,996 576 12,101
Reorganization costs 1,699
--------- --------- --------- --------- --------- ---------
Total expenses 113,481 51,284 47,876 33,170 4,849 34,833
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
Item 24,688 16,100 13,979 14,897 (162) 4,093
Extraordinary item (2) (829) (2,738)
--------- --------- --------- --------- --------- ---------
Net income (loss) $ 24,688 $ 16,100 $ 13,150 $ 14,897 $ (2,900) $ 4,093
========= ========= ========= ========= ========= =========
Net income (loss) attributed to:
General Partner $ 21,702 $ 6,534 $ 5,303 $ 6,037 $ (1,183) --
Limited Partners 2,986 9,566 7,847 8,860 (1,717) --
--------- --------- --------- --------- --------- ---------
$ 24,688 $ 16,100 $ 13,150 $ 14,897 $ (2,900) $ 4,093
========= ========= ========= ========= ========= =========
Weighted average OP Units outstanding 26,947 14,837 14,779 14,189 14,081
Earnings per OP Unit Data:
Income (loss) before extraordinary
item $ .92 $ 1.09 $ .95 $ 1.05 $ (.01)
Extraordinary item $ -- $ -- $ (.06) $ -- $ (.20)
Net income (loss) - basic $ .92 $ 1.09 $ .89 $ 1.05 $ (.21)
Net income (loss) - diluted $ .91 $ 1.08 $ .89 $ 1.05 $ (.21)
Distributions declared $ 1.72 $ 1.62 $ 1.525 $ 1.425 $ .15
Cash Flow Data:
Net cash provided by operating
activities $ 54,545 $ 29,755 $ 28,097 $ 22,584 $ 4,980 $ 8,659
Net cash provided by (used in)
financing activities $ 21,088 $ (595) $ (24,365) $ 7,056 $ 15,591 $ (5,983)
Net cash (used in) investing activities $ (61,309) $ (29,518) $ (6,158) $ (46,214) $ (639) $ (3,416)
Balance Sheet Data:
Rental property, before accumulated
depreciation $ 836,175 $ 300,631 $ 276,423 $ 266,833 $ 151,069
Rental property, net of accumulated
depreciation $ 723,861 $ 219,338 $ 206,555 $ 207,977 $ 97,755
Total assets $ 782,738 $ 232,066 $ 212,034 $ 215,418 $ 120,524
Total debt $ 387,015 $ 168,315 $ 132,700 $ 132,747 $ 52,831
Total Partner's Capital $ 358,238 $ 42,743 $ 60,572 $ 67,111 $ 58,865
14
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Item 6. Selected Financial Data, Continued
Predecessor
-----------
For the period
For the Year Ended November 23 - January 1 -
Other Data: December 31, December 31, November22,
Dollars in thousands 1997 (1) 1996 1995 1994 1993 1993
--------- --------- --------- --------- --------- ---------
Total properties (at end of period) 131 47 44 43 33
Total sites (at end of period) 43,800 20,279 19,594 19,185 15,261
Weighted average occupied sites 38,053 18,889 18,051 14,913 14,025 14,025
Funds from operations (3) $ 55,962 $ 27,460 $ 24,898 $ 22,015 $ 536 $ 9,822
(1) In February 1997, the Company completed the Merger with ROC. See
Note 3 to the Consolidated Financial Statements for information
regarding the merger.
(2) The extraordinary items represent prepayment penalties and certain
other related costs associated with the early extinguishment of
debt.
(3) Funds from operations ("FFO") is defined by the National Association
of Real Estate Investment Trusts ("NAREIT") as consolidated net
income of the Company without giving effect to gains (or losses)
from debt restructuring and sales of property and rental property
depreciation and amortization. Management believes that FFO is an
important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs.
For all periods presented, depreciation of rental property and
amortization of intangibles are the only non-cash adjustments. FFO
(i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be
considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing
activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. FFO is calculated as follows:
Predecessor
-----------
For the period
For the Year Ended November 23 - January 1 -
December 31, December 31, November22,
In thousands 1997 (1) 1996 1995 1994 1993 1993
--------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary item $ 24,688 $ 16,100 $ 13,979 $ 14,897 $ (162) $ 4,093
Depreciation of rental
property 30,867 11,360 10,919 7,118 698 5,729
Amortization of intangibles 407
--------- --------- ---------- --------- --------- ---------
Funds from Operations $ 55,962 $ 27,460 $ 24,898 $ 22,015 $ 536 $ 9,822
========= ========= ========== ========= ========= =========
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the consolidated
financial statements and Notes thereto included elsewhere in this Annual Report.
Certain statements in this discussion constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company or industry to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
Overview
The Company is the largest owner/manager of manufactured home communities in the
United States, based both on the number of communities and the number of
residential homesites owned. The Company added 89 manufactured home communities
to its portfolio over the three-year period ended December 31, 1997. At the end
of this period, the Company's portfolio was comprised of 131 manufactured home
communities containing 43,800 homesites in 28 states.
A substantial portion of the Company's growth since the beginning of 1995 can be
attributed to the Company's Merger with ROC on February 11, 1997. The historical
results of the Company in 1997 include the results of operations of ROC since
February 1, 1997. In addition, as a result of the Merger, the Company acquired
ROC's third-party property management operations and its taxable sales and
brokerage subsidiary, CSI.
Company growth since the beginning of 1995 can also be attributed to increased
operating results at existing communities, community expansions, new community
development and additional acquisition activities.
Historical Results of Operations
Comparison of the year ended December 31, 1997 to the year ended December 31,
1996
For the year ended December 31, 1997, net income was $24,688,000, an increase of
$8,588,000 from the year ended December 31, 1996. The increase was due primarily
to the Merger, as well as acquisitions that were consummated in 1997 and 1996 by
the Company or ROC, and increased net operating income from communities owned by
the Company and ROC at the beginning of the period (the "Core 1996 Portfolio").
The increase in net operating income from the Company's Core 1996 Portfolio was
due to increased occupancy and rental increases partially offset by general
operating expense increases.
Rental revenue for the year ended December 31, 1997 was $134,801,000, an
increase of $67,568,000 from 1996. Approximately 80 percent of the increase was
due to the Merger, and 9 percent was due to 1997 and 1996 acquisitions made by
the Company or ROC. The remaining 11 percent increase was due to rental
increases and occupancy gains in the Company's Core 1996 Portfolio.
16
17
Weighted average occupancy for the year ended December 31, 1997 was 38,053 sites
compared with 18,889 sites for the same period in 1996. During 1997, the Company
increased occupancy by nearly 400 sites, primarily in its active expansion
communities. The occupancy rate for the total portfolio was 92.0 percent on
approximately 43,800 sites as of December 31, 1997, compared to 94.4 percent on
approximately 20,279 sites as of December 31, 1996. The decrease in the
occupancy rate is due to the increase in available sites added through
expansions of existing communities. The occupancy rate on the stabilized
portfolio was 93.6 percent as of December 31, 1997. On a per site basis,
weighted average monthly rental revenue for the year ended December 31, 1997 was
$287 which is consistent with the same period of 1996. For the Company's Core
1996 Portfolio, on a per site basis, weighted average monthly rental revenue for
the year ended December 31, 1997 was $289 compared with $278 for the same period
in 1996, an increase of 4.1 percent.
Management fee, interest and other income primarily include management fee
income for the management of 32 manufactured home communities, equity earnings
from the Company's sales subsidiary, CSI, and interest income on notes
receivable. The increase in 1997 from 1996 is due primarily to business
activities acquired in conjunction with the Merger.
Property operating and maintenance expense for the year ended December 31, 1997
increased by $20,945,000 or 115 percent from the same period a year ago. The
majority of the increase was due to the Merger and 1997 and 1996 acquisitions.
The remaining increase was due to increases in the Company's Core 1996
Portfolio. On a per site basis, monthly weighted average property operating and
maintenance expense increased 6.8 percent from approximately $80 in 1996 to
approximately $86 in 1997. A portion of this increase is due to the operating
expenses related to the properties managed by the Company for a management fee
beginning in 1997.
Real estate taxes for the year ended December 31, 1997 increased by $5,090,000
or 105 percent from the year ended December 31, 1996. The increase is due
primarily to the Merger, acquisitions and expansions of communities and general
increases. On a per site basis, monthly weighted average real estate taxes were
$21.78 in 1997 compared to $21.42 in 1996, an increase of 1.7 percent. Real
estate taxes may increase or decrease due to inflation, expansions and
improvements of communities, as well as changes in taxation in the tax
jurisdictions in which the Company operates.
Administrative expense for the year ended December 31, 1997 increased due to the
Merger. Administrative expense in 1997 was 5.0 percent of total revenues as
compared to 5.7 percent in 1996.
Interest and related amortization costs increased for the year ended December
31, 1997 by $12,956,000, as compared with the year ended December 31, 1996. The
increase is attributable to the indebtedness incurred in connection with the
Merger and to finance the 1997 and 1996 acquisitions. Interest expense as a
percentage of average debt outstanding decreased to approximately 7.7 percent in
1997 from approximately 8.1 percent in 1996. The decrease is due primarily to
the ROC debt assumed in the Merger having a lower average interest rate as well
as much of the financing in connection with the Merger and the 1997 and 1996
acquisitions being done with the Company's lines of credit which had a lower
average interest rate. In addition, in July 1997, the Company renegotiated its
lines of credit into a new line with a lower borrowing rate of 110 basis points
over LIBOR versus 150 basis points over LIBOR on the old lines.
Depreciation expense for the year ended December 31, 1997, increased $20.1
million from the same period a year ago. The increase is directly attributable
to the Merger and acquisitions. Depreciation expense as a percentage of average
depreciable rental property in 1997 remained relatively unchanged from 1996.
17
18
Comparison of year ended December 31, 1996 to year ended December 31, 1995
For the year ended December 31, 1996, net income was $16,100,000, an increase of
$2,121,000 from the year ended December 31, 1995. The increase was due primarily
to increased net operating income from communities owned by the Company on
January 1, 1995 (the "Core 1995 Portfolio") and to a lesser extent, the
acquisition of three communities in 1996 and one community in 1995. The increase
in net operating income from the Company's Core 1995 Portfolio was due to
increased occupancy and rental increases offset by general operating expense
increases.
Rental revenue in 1996 was $67,233,000, an increase of $5,675,000 or 9.2 percent
from 1995. Approximately 2.3 percent of the increase was due to the acquisitions
of three communities in 1996 and one in 1995; 3.9 percent represented the effect
of annual rent increases in the Core 1995 Portfolio; 1.8 percent was due to
increased occupancy in the Core 1995 Portfolio and 1 percent was due to an
increase in amenity income. Weighted average occupancy for the year ended
December 31, 1996, was 18,889 sites, or 4.6 percent higher than weighted average
occupancy for the year ended December 31, 1995. Weighted average occupancy
increased in 1996 due to the 1996 and 1995 acquisitions and the filling of 265
additional sites that were either vacant at January 1, 1996 or developed in
1996. The occupancy rate was 94.4 percent on 20,279 sites as of December 31,
1996, as compared with 94.3 percent on 19,594 sites as of December 31, 1995. On
a per site basis, weighted average monthly rental revenue for the year ended
December 31, 1996 increased to $285 from $277 in 1995 or 3.2 percent due to
rental increases in the Core 1995 Portfolio in 1996.
The increase in amenity income of approximately $600,000 was due primarily to
the inclusion of the results of operations of four golf courses and a marina for
the period beginning January 1, 1996. These operations were previously conducted
by GC Properties, Inc. ("GCI"), a corporation wholly owned by an equity owner of
the Company, in order to permit Chateau's qualification as a REIT under the
Internal Revenue Code. From November 23, 1993 through December 31, 1995, the
Company recognized net lease income from GCI which was classified as other
income. In early 1996, Chateau received a ruling from the Internal Revenue
Service allowing Chateau to conduct these operations. Effective January 1, 1996,
as a result of acquiring the operations of GCI, the Company has consolidated
these operations.
Property operating and maintenance expense for the year ended December 31, 1996
increased by $2,180,000 or 13.6 percent from the same period a year ago.
Approximately $1,028,000 of the increase represents the operating costs of the
golf course and marina operations discussed above. The remaining increase of
$1,152,000 or a 7.2 percent increase over the prior year, is due primarily to
the acquisition of three communities in 1996 and one in 1995. On a per site
basis, monthly weighted average property operating and maintenance expense
increased from $74 in 1995 to $80 in 1996, or 8.6 percent. Excluding the golf
course and marina operations, monthly weighted average property operating and
maintenance expense increased 2.4 percent, on a per site basis, year over year.
Real estate taxes for the year ended December 31, 1996, increased by $333,000,
or 7.4 percent, from the year ended December 31, 1995. The increase is due
primarily to acquisitions and expansions of communities and general increases.
On a per site basis, monthly weighted average real estate taxes were $21.40 in
1996 compared to $20.90 in 1995, an increase of 2.6 percent. Real estate taxes
may increase or decrease due to inflation, expansions and improvements of
communities, as well as changes in taxation in the tax jurisdictions in which
the Company operates.
Administrative expense for 1996 was relatively constant with 1995.
Administrative expense in 1996 was 5.7 percent of revenues as compared to 6.3
percent in 1995.
18
19
Interest and related amortization costs increased for the year ended December
31, 1996, by $510,000, as compared with the year ended December 31, 1995. The
increase is attributable to the indebtedness incurred to finance the 1996
acquisitions of three communities and one in 1995, as well as the investment in
a joint venture with ROC that owns six development communities. Interest expense
also increased due to the financing of the Company's repurchase and retirement
of 450,000 shares of its common stock in connection with the Merger. Interest
expense as a percentage of average debt outstanding decreased to approximately
8.1 percent in 1996 from approximately 8.9 percent in 1995.
Depreciation expense for the year ended December 31, 1996, increased $438,000
from the same period a year ago. The increase is due to acquisitions and
expansions. Depreciation expense as a percentage of average depreciable rental
property in 1996 remained relatively unchanged from 1995.
Liquidity and Capital Resources
Net cash provided by operating activities was $54,545,000 for the year ended
December 31, 1997, compared to $29,755,000 for the year ended December 31, 1996.
The increase in cash provided by operating activities was due primarily to the
increase in net operating income as a result of the Company's larger size.
Net cash provided by financing activities for the year ended December 31, 1997,
was $21,088,000. This amount includes net proceeds of $102 million received from
the issuance of senior notes and proceeds of $25,477,000 from the issuance of
984,423 OP Units to certain OP Unitholders at the time of the Merger. Use of
cash included distributions made to OP Unitholders of $42,111,000; the payment
of $19,851,000 to repurchase and retire 750,000 OP Units in connection with the
Merger, and net payment on the line of credit of $45,834,000 with the proceeds
from the senior notes. The units purchased in 1997 and 1996 as a part of the
Merger were purchased at an average price of approximately $25.75.
Net cash used in investing activities for the year ended December 31, 1997 was
$61,309,000. This amount primarily represented the acquisition of four
communities, payment of merger costs, joint venture investments, advances to
CSI, capital expenditures and construction and development costs. The
acquisition of the four communities for an aggregate purchase price of $20
million was financed by $19.5 million borrowed on the Company's line of credit
and $500,000 through the issuance of 16,480 OP Units. The Company invested
approximately $4 million in cash in other joint ventures. The Company also
advanced approximately $9 million to CSI. For the year ended December 31, 1997,
construction and development costs approximated $8.1 million, while recurring
property capital expenditures, other than construction and development costs,
were approximately $3.7 million. Recurring property capital expenditures in 1997
increased significantly over the same period in 1996, due to the increased
number of communities in the Company's portfolio. Capital expenditures have
historically been financed with funds from operations and it is the Company's
intention that such future expenditures will be financed with funds from
operations.
In July 1997, the Company entered into two new credit facilities with the First
National Bank of Chicago and other lenders, consisting of a $25 million term
loan and a $75 million revolving line of credit (the "First Chicago Credit
Facilities"). Effective July 1997, the interest rate on the revolving credit
facility was reduced to LIBOR plus 110 basis points (from LIBOR plus 150 basis
points). In addition, in September 1997, the Company secured a $7.5 million
revolving line of credit from Colorado National Bank which bears interest at a
rate of LIBOR plus 125 basis points (the "CNB Facility" and , together with the
First Chicago Credit Facilities, the "Credit Facilities"). As of December 31,
1997, approximately $25 million was outstanding under the Credit Facilities and
the Company had available $82.5 million in additional borrowing capacity.
19
20
On December 23, 1997, the Company issued 6.92% MandatOry Par Put Remarketed
Securities(SM) ("MOPPRS(SM)" ) due December 10, 2014. The net proceeds to the
Company from the issuance before deducting offering expenses, was approximately
$102.0 million. The net proceeds from the MOPPRS(SM) were utilized primarily to
reduce outstanding balances under the Credit Facilities and to finance
acquisitons. The MOPPRS(SM) are rated as "BBB" by Standard & Poor's Rating
Service and "Baa3" by Moody's Investors Service.
In connection with the issuance of the MOPPRS(SM), the Company and Chateau
entered into a Remarketing Agreement, dated as of December 23, 1997 (the
"Remarketing Agreement"), with the Remarketing Dealer named therein (the
"Remarketing Dealer"), pursuant to which the MOPPRS(SM) are subject to mandatory
tender in favor of the Remarketing Dealer on December 10, 2004 (the "Remarketing
Date"), for a purchase price equal to 100% of the principal amount of the
outstanding MOPPRS(SM). Upon the Remarketing Dealer's election to remarket the
MOPPRS(SM), the interest rate to the December 10, 2014 maturity date of the
MOPPRS will be adjusted to equal the sum of 5.75% plus the Applicable Spread (as
defined in the Remarketing Agreement). In the event the Remarketing Dealer does
not elect to remarket the MOPPRS(SM), the MOPPRS(SM) will mature on the
Remarketing Date.
As of December 31, 1997, the Company had outstanding, in addition to the Credit
Facilities and the MOPPRS(SM), $145 million of other unsecured senior debt with
a weighted average interest rate and maturity of 8.2 percent and 4 years,
respectively, and $114 million of secured mortgage debt with a weighted average
interest rate and maturity of 7.95 percent and 2.5 years, respectively.
Repayment of long-term borrowings and amounts outstanding under the Credit
Facilities, future acquisitions of communities and land for development and new
community development activities represent the principal long-term liquidity
needs of the Company. The Company does not expect to generate sufficient funds
from operations to finance these long-term liquidity needs and instead intends
to meet its long-term liquidity requirements through additional borrowing under
the Credit Facilities or other lines of credit, the issuance of additional
equity or debt securities and the assumption of existing secured or unsecured
indebtedness.
The Company expects to meet its short-term liquidity requirements, including
expansion activities and capital expenditure requirements, through cash flow
from operations and, if necessary, borrowings under the Credit Facilities and
other lines of credit.
In January 1998, the Company completed the acquisition of 16 properties, in
Connecticut, South Carolina, and Florida, containing approximately 2,333
homesites and 1,359 park/model RV sites, for a total of approximately $55.4
million. These acquisitions were financed by $33.7 million in borrowings under
the Company's line of credit, the issuance of 412,480 OP Units and $5.7 million
in cash available from the proceeds of the December 1997 Debt Offering. Nine of
the above communities, containing approximately 900 homesites and 1,100 park
model/RV sites, are subject to long-term ground leases.
In February 1998, Chateau received net proceeds of approximately $53.9 million
from the issuance of 1,850,000 shares of its common stock. The proceeds from the
offering were contributed to the Company, in exchange for the issuance of
1,850,000 OP Units, and were used to reduce outstanding balances under the
Company's line of credit from the January 1998 acquisitions and for the March
1998 acquisitions.
20
21
In March 1998, the Company completed the acquisition of 6 properties, 1 in
Michigan and 5 in Indiana, containing approximately 1,500 homesites, for a total
of approximately $36.7 million. These acquisitions were financed by the issuance
of common stock in February 1998 and by borrowings on the Company's line of
credit. In addition, CSI purchased a 60 percent interest in three retail sales
centers in Indiana, for approximately $1.2 million.
Inflation
All of the leases or terms of tenants' occupancies at the communities allow for
at least annual rental adjustments. In addition, all leases are short-term
(generally one year or less) and enable the Company to seek market rentals upon
reletting the sites. Such leases generally minimize the risk to the Company of
any adverse effect of inflation.
New Accounting Standards
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." This accounting
standard specifies new computation, presentation and disclosure requirements for
earnings per share to be applied retroactively. Among other things, SFAS No. 128
requires presentation of basic and diluted earnings per share on the face of the
income statement.
Year 2000 Compliance
The Company is currently engaged in a review with its software vendors to ensure
all systems are modified for year 2000 compliance. Since all systems are owned
and maintained by third party vendors, the Company believes that the additional
costs for compliance will not be material to future results of operations,
financial condition or cash flows of the Company.
Other
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as consolidated net income of the Company
without giving effect to gains (or losses) from debt restructuring and sales of
property and rental property depreciation and amortization. Management believes
that FFO is an important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs. For all
periods presented, depreciation of rental property and amortization of
intangibles are the only non-cash adjustments. FFO (i) does not represent cash
flow from operations as defined by generally accepted accounting principles;
(ii) should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and financing
activities; and (iii) is not an alternative to cash flows as a measure of
liquidity. FFO is calculated as follows:
For the year
ended December 31,
-----------------------------------------
1997 1996 1995
-------- -------- --------
Income before extraordinary item $ 24,688 $ 16,100 $ 13,979
Depreciation of rental property 30,867 11,360 10,919
Amortization of intangibles 407 -- --
-------- -------- --------
Funds from operations $ 55,962 $ 27,460 $ 24,898
======== ======== ========
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Item 8. Financial Statements and Supplementary Data
Report of Independent Accountants
To the Partners of CP LIMITED PARTNERSHIP:
We have audited the accompanying consolidated balance sheets of CP LIMITED
PARTNERSHIP (the "Company") as of December 31, 1997 and 1996, and the related
consolidated statements of income, partners' capital and cash flows for each of
the three years in the period ended December 31, 1997. We have also audited the
financial statement schedule as identified in item 14(a)(2) of this Form 10-K.
These financial statements and the financial statement schedule are the
responsibility of the management of CP LIMITED PARTNERSHIP. Our responsibility
is to express an opinion on these financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
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 CP LIMITED PARTNERSHIP as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
February 4, 1998, except for Note 15
for which the date is March 10, 1998
22
23
CP LIMITED PARTNERSHIP
CONDSOLIDATED STATEMENTS OF INCOME
For the Year Ended
December 31,
In thousands, except per OP Unit data 1997 1996 1995
-------- -------- --------
Revenues:
Rental income $134,801 $ 67,233 $ 61,558
Management, interest and other income 3,368 151 297
-------- -------- --------
138,169 67,384 61,855
Expenses:
Property operating and maintenance 39,146 18,201 16,021
Real estate taxes 9,946 4,856 4,523
Depreciation 31,510 11,452 11,014
Administrative 6,961 3,813 3,866
Interest and related amortization 25,918 12,962 12,452
-------- -------- --------
113,481 51,284 47,876
-------- -------- --------
Income before extraordinary
Item 24,688 16,100 13,979
Extraordinary charge from early
extinguishment of debt -- -- (829)
-------- -------- --------
Net income $ 24,688 $ 16,100 $ 13,150
Net income (loss) attributed to:
General partner $ 21,702 $ 6,534 $ 5,303
Limited partner 2,986 9,566 7,847
-------- -------- --------
$ 24,688 $ 16,100 $ 13,150
======== ======== ========
Basic earnings per OP Unit:
Income before extraordinary item $ .92 $ 1.09 $ .95
Extraordinary item -- -- (.06)
-------- -------- --------
Net Income $ .92 $ 1.09 $ .89
======== ======== ========
Diluted earnings per OP Unit:
Income before extraordinary item $ .91 $ 1.08 $ .94
Extraordinary item -- -- (.05)
-------- -------- --------
Net Income $ .91 $ 1.08 $ .89
======== ======== ========
Distributions declared per OP Unit
outstanding $ 1.72 $ 1.62 $ 1.525
======== ======== ========
Weighted average OP Units outstanding 26,947 14,837 14,779
======== ======== ========
The accompanying notes are an integral part of the financial statements.
23
24
CP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
December 31
Dollars in thousands, except per OP Unit data 1997 1996
-------- --------
Assets
Rental property:
Land $111,832 $ 33,821
Land and improvements for expansion sites 14,437 1,988
Manufactured home community improvements 647,388 239,514
Community buildings 44,406 17,607
Furniture and other equipment 18,112 7,701
-------- --------
Total rental property 836,175 300,631
Less accumulated depreciation 112,314 81,293
-------- --------
Net rental property 723,861 219,338
Cash and cash equivalents 14,910 586
Rents, notes and other receivables 11,079 3,157
Investment in and advances to affiliates 21,646 3,408
Prepaid expenses and other assets 11,242 5,577
-------- --------
Total assets $782,738 $232,066
======== ========
Liabilities
Debt $387,015 $168,315
Accrued interest payable 3,909 2,796
Accounts payable and other accrued expenses 15,848 7,489
Rents received in advance and security deposits 5,580 4,852
Distributions payable 12,148 5,871
-------- --------
Total liabilities 424,500 189,323
Partners' Capital, Unlimited Authorized Units:
28,250,803 and 14,497,270 OP Units outstanding
at December 31, 1997 and 1996 respectively
General Partner 322,966 16,191
Limited Partners 35,272 26,552
-------- --------
Total partners' capital 358,238 42,743
-------- --------
Total liabilities and partners' capital $782,738 $232,066
======== ========
The accompanying notes are an integral part of the financial statements.
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25
CP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
Dollars in thousands, except per OP Unit data. For the Year Ended
December 31,
1997 1996 1995
---------------------- ---------------------- ---------------------
General Limited General Limited General Limited
Partners' Capital
Balance at beginning of period 16,191 26,552 $ 24,308 $ 36,264 $ 25,542 $ 41,569
Net Income 21,702 2,986 6,534 9,566 5,303 7,847
Issuance of units in connection
with the Merger 359,780
Issuance of units at fair market
value 7,517 660 239 1,964 150 3,434
Transfer from limited
partners to general
partners resulting from
issuance of OP Units (9,819) 9,819 6,031 (6,031) 2,237 (2,237)
OP Units reacquired and
retired (28,687) (11,239) (923) (882)
Distributions declared
$1.72 in 1997, $1.62 in
1996 and $1.525 in 1995 (43,643) (4,745) (9,703) (14,279) (9,164) (13,377)
Other (75) 21 150
--------- --------- --------- --------- --------- ---------
Balance at end of period $ 322,966 $ 35,272 $ 16,191 $ 26,552 $ 24,308 $ 36,264
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
25
26
CP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
In thousands 1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
Net income $ 24,688 $ 16,100 $ 13,150
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item -- 829
Depreciation and amortization 31,510 11,452 11,014
Amortization of debt issuance costs 480 437 538
Decrease (increase) in operating assets 1,495 (562) (77)
Increase (decrease) in operating liabilities (3,628) 2,328 2,643
--------- --------- ---------
Net cash provided by operating activities 54,545 29,755 28,097
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of Senior Notes 102,630 -- 74,866
Borrowings on line of credit (105,111) 36,750
Payments on line of credit (150,945) (30,000)
Principal payments on mortgages (1,596) (1,135) (45,066)
Prepayment penalties -- -- (667)
Payment of debt issuance costs (895) (234) (954)
Distributions to OP Unitholders (42,111) (24,065) (21,982)
OP Units repurchased (19,851) (12,171) (882)
Proceeds from the issuance of OP Units 25,477 -- --
Other 3,268 260 320
--------- --------- ---------
Net cash provided by (used in)
financing activities 21,088 (595) (24,365)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of rental properties (22,655) (21,727) (2,766)
Disposition of rental property 2,455 -- --
Additions to rental properties (15,544) (4,731) (3,392)
Investment in joint ventures (4,259) -- --
Advances to Community Sales, Inc. ("CSI") (8,849) -- --
Merger costs (12,457) (3,060) --
--------- --------- ---------
Net cash used in investing activities (61,309) (29,518) (6,158)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents 14,324 (358) (2,426)
Cash and cash equivalents, beginning of period 586 944 3,370
--------- --------- ---------
Cash and cash equivalents, end of period $ 14,910 $ 586 $ 944
========= ========= =========
Supplemental information:
Cash paid for interest $ 24,325 $ 12,176 $ 9,987
========= ========= =========
Fair market value of OP Units issued
for acquisitions $ 3,683 $ 1,964 $ 3,434
========= ========= =========
The accompanying notes are an integral part of the financial statements.
26
27
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. Organization and Formation of Company:
The Company is a limited partnership and was formed by Chateau Communities, Inc.
("Chateau"), a real estate investment trust ("REIT"), as general partner and
Chateau Estates, as the initial limited partner, on September 16, 1993. In 1997,
the Company merged with ROC Communities, Inc, (ROC). Chateau is engaged in the
business of owning and operating manufactured housing community properties
primarily through the Company. As of December 31, 1997, the Company owned 131
properties containing an aggregate of 43,800 homesites, located in 28 states.
Approximately 29 percent of these homesites were in Florida and 27 percent were
in Michigan. The Company also fee managed 31 properties containing an aggregate
of 6,500 homesites. A manufactured housing community is real estate designed and
improved with sites for placement of manufactured homes. The owner of the home
leases the site from the Company generally for a term of one year or less.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements of the Company include all
accounts of the Company and its subsidiaries. Chateau and ROC are the general
partners, and as such, Chateau has unilateral control and complete
responsibility for management of the Company, including the right and power to
make all decisions and actions with respect to the acquisition, mortgage and
sale of properties and the other business affairs of the Company. As of December
31, 1997, Chateau owned on a combined basis, a 90 percent general partner
interest. Pursuant to the terms of the operating partnership agreement, the
Company is required to reimburse Chateau for the net expenses incurred by
Chateau. Amounts paid on behalf of Chateau by the Company are reflected in the
statement of income as general and administrative expenses. The balance sheet of
Chateau as of December 31, 1997 is identical to the accompanying balance sheet
of the Company, except as follows:
(in 000,s)
---------------------------------------------------
As Presented Chateau
Herein Communities,Inc.
December 31, 1997 Adjustments December 31, 1997
----------------- ----------- -----------------
Minority Interest $ 35,272 $ 35,272
General partner $ 322,966 (322,966)
Limited partner 35,272 (35,272)
Common Stock 255
Additional paid-in capital 356,780
Dividends in excess of
accumulated earnings (33,174)
Notes receivables, officers 895
--------- ---------
Partners' equity/Shateholders' equity $ 358,238 $ 322,966
========= =========
All significant inter-entity balances and transactions have been eliminated in
consolidation.
27
28
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
2. Summary of Significant Accounting Policies Continued:
Investments in and Advances to Affiliates
The Company conducts manufactured home sales and brokerage activities through
its taxable subsidiary Community Sales, Inc. ("CSI"). The Company owns 100% of
the preferred stock of CSI and is entitled to 100% of its cash flow. The Company
accounts for its investment in CSI utilizing the equity method of accounting.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles involves the use of certain management estimates and
assumptions that affect reported amounts and disclosures, such as the useful
lives of rental properties. Actual results could differ from those estimates.
Revenue Recognition
Rental income is recognized when earned and due from residents. The leases
entered into by residents for the rental of a site are generally for terms not
longer than one year and renewable upon the consent of both parties or, in some
instances, as provided by statute.
Rental Property
Rental property is carried at the lower of cost, less accumulated depreciation,
or fair value. Management evaluates the recoverability of its investment in
rental property in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived
Assets To Be Disposed Of". This statement requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that full asset recoverability is questionable. Management's assessment of
recoverability of its rental property under this statement includes, but is not
limited to, recent operating results, expected net operating cash flow and
management's plans for future operations.
Depreciation
Depreciation on manufactured home communities is computed primarily on the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives of the various classes of rental property assets are
primarily as follows:
Estimated Useful
Class of Asset Lives (Years)
- -------------- -------------
Manufactured home community improvements 20 to 30
Community buildings 25 to 30
Furniture and other equipment 4 to 10
28
29
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
2. Summary of Significant Accounting Policies Continued:
Maintenance, repairs and minor improvements to rental properties are expensed
when incurred. Major improvements and renewals are capitalized. When rental
property assets are sold or otherwise retired, the cost of such assets, net of
accumulated depreciation compared to the sale proceeds, are recognized in income
as gains or losses on disposition.
Capitalized Interest
Interest is capitalized on projects during periods of construction. Interest
capitalized by the Company during 1997 was $708,000.
Income Taxes
The Company is not liable for Federal income taxes as the partners recognize
their proportionate share of income or loss in their tax returns, therefore, no
provision for income taxes is indicated in the accompanying financial
statements.
Per OP Unit data
Basic earnings per OP Unit are computed based upon the weighted average number
of OP Units outstanding during the period. Diluted earnings per OP Unit are
computed assuming the exercise of all outstanding stock options of Chateau,
which would have a dilutive effect, resulting in the issuance of an OP Unit to
Chateau for each option exercised. The conversion of an OP Unit to a share of
Chateau's common stock has no effect on earnings per OP Unit or OP Units
outstanding.
Stock-Based Compensation
During 1996 the Company adopted SFAS No. 123 for "Accounting for Stock-Based
Compensation." The Company has elected to continue to account for employee stock
based compensation under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and therefore the disclosure method
as permitted and required by SFAS No. 123 is presented in Note 8.
Cash Equivalents
All highly liquid investments with an initial maturity of three months or less
are considered to be cash equivalents.
29
30
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
3. Summary of Significant Accounting Policies Continued:
Reclassifications
Certain reclassifications have been made to the prior year financial statements
to conform to the current year financial statement presentation. These
reclassifications have no impact on net operating results previously reported.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" requires
disclosures about the fair value of financial instruments whether or not such
instruments are recognized in the balance sheet. Due to the short-term nature of
the Company's financial instruments, other than debt, fair values are not
materially different from their carrying values. The carrying value of debt
approximates fair value.
Debt Issuance Costs
Costs incurred related to obtaining financing such as service and commitment
fees are deferred and are amortized over the term of the related
commitment/loans. These costs net of accumulated amortization are included in
prepaid expenses and other assets in the accompanying balance sheets.
2. Merger with ROC Communities, Inc.
On February 11, 1997, the Company completed its merger with ROC Communities,
Inc. (the "Merger"). The Merger and related transactions was accounted for using
the purchase method of accounting in accordance with generally accepted
accounting principles. Accordingly, the assets and liabilities of ROC were
adjusted to fair value for financial accounting purposes and the results of
operations of ROC were included in the results of operations of the Company
beginning in February 1997.
In connection with the Merger, the related transactions occurred
- - The Company repurchased and retired 1,200,000 OP Units from Chateau, of
which 750,000, and 450,000 were repurchased in 1997 and 1996, respectively
- - ROC purchased 350,000 shares of common stock of Chateau, in 1996, which
was retired, along with an equivalent number of units, at the time of the
Merger
- - The Company issued 1.042 OP Units to Chateau, to reflect an equivalent
number of shares issued by Chateau, for each share of ROC stock
outstanding
- - The Company paid a distribution equal to .0326 OP Units per OP Unit
outstanding, to reflect an equivalent stock dividend by Chateau
30
31
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
3. Merger with ROC Communities, Inc. Continued
- - Certain limited partners converted 6,170,908 OP Units into common shares,
which results in those units being held by Chateau. These limited partners
waived their right to receive the above distribution with respect to those
OP Units exchanged and as a result it was re-allocated, resulting in a
distribution to the general partners of .068 shares of common stock
- - These exchanging limited partners purchased 984,423 additional shares of
common stock from Chateau at $25.88 per share and Chateau purchased the
same number of units from the Company with these proceeds.
The total price of $351 million was allocated as follows:
Rental property $ 501.3
Net working capital 15.8
Debt assumed (166.1)
--------
$ 351.0
========
The following unaudited pro forma income statement information has been prepared
as if the Merger and related transactions had occurred on January 1, 1996. In
addition, the pro forma information is presented as if the acquisitions of 14
properties made in 1996 by the Company and ROC had occurred on January 1, 1996.
No adjustments were made for the 1997 acquisitions made by the Company. The pro
forma income statement information is not necessarily indicative of the results
which actually would have occurred if the Merger had been consummated on January
1, 1996.
(In thousands, except per OP Unit data) 1997 1996
---- ----
Revenues $ 142,600 $ 132,800
========== =========
Total expenses $ 117,500 $ 113,200
========== =========
Net income $ 25,100 $ 19,600
========== =========
Per OP Unit $ .89 $ .70
========== =========
31
32
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
4. Equity Transactions
The following table presents the changes in the Company's outstanding OP Units
for the years ended December 31, 1997, 1996, and 1995.
1997 1996 1995
---- ---- ----
OP Units outstanding at January 1 14,497,270 14,886,214 14,758,185
Units repurchased and retired (1,100,100) (493,334) (44,085)
Units issued in exchange for ROC
common stock outstanding 13,109,941
Units issued in connection with the dividend 397,198
Units issued to certain OP Unitholders for cash 984,423
Units issued through stock awards, sales to key
employees and the exercise of Chateau stock options 238,478 15,000 10,500
Units issued in connection with acquisitions 123,593 89,390 161,614
---------- ---------- ----------
OP Units outstanding at December 31 28,250,803 14,497,270 14,886,214
========== ========== ==========
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Accounting Standards ("SFAS") No. 128, "Earnings
Per Share". SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and replaces the presentation of primary EPS with a
presentation of basic EPS and diluted EPS, as summarized in the table below:
(in thousands, except per OP Unit data) For the year ended December 31,
1997 1996 1995
---- ---- ----
Basic EPS:
Net income ...................... $24,688 $16,100 $13,150
OP Units ........................ 26,947 14,837 14,779
Per Unit ........................ $ .92 $ 1.09 $ .89
Diluted EPS:
Net income ....................... $24,688 $16,100 $13,150
OP Units (1) ..................... 27,192 14,957 14,825
Per Unit ......................... $ .91 $ 1.08 $ .89
(1) Represents the weighted average OP Units outstanding, as well as dilutive
Chateau stock options
32
33
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
4. Acquisitions of Rental Property:
(in thousands) Amount Fair Market
Allocated Value of OP
Acquisition Property Name to Assets Units
Date and Location Acquired Issued Cash
----------- ------------- -------- ------ ----
Acquisitions - 1997:
February, 1997 75 communities acquired through the
Merger with ROC see note 3
November, 1997 Purchase of 4 communities in
Boston, Massachusetts $20,000 $ 500 $ 19,500
Various Investment in joint ventures (2) $ 4,259 $ -- $ 4,259
- --------------------------------------------------------------------------------------------------------------
Acquisitions - 1996
March, 1996 Chestnut Creek Farm-
Davison, MI $ 3,400 $ 3,400
May, 1996 Maple Valley and Maple Ridge-
Manteno, IL $ 5,800 $ 1,000 $ 4,800
September, 1996 Joint venture with ROC
purchase of six
communities in six states (1) $10,300 $ 10,300
Various Other joint ventures (2) $ 4,200 $ 1,000 $ 3,200
- --------------------------------------------------------------------------------------------------------------
Acquisitions - 1995:
September, 1995 Hidden Valley
Lake Buena Vista, FL $ 6,200 $ 3,400 $ 2,800
33
34
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
5. Acquisitions of Rental Property Continued:
(1) Represents a 50 percent interest in a joint venture with ROC
accounted for as a property acquisition and included in rental
properties. After the merger with ROC in February, the Company now
owns 100% of these properties.
(2) In connection with a joint venture, the Company may guarantee up to
$8 million of debt in return for a guarantee fee. As of December 31,
1997, the Company has guaranteed $8 million of debt.
In September 1997, the Company completed the acquisition of Windsor, the general
partner of five partnerships and advisor to one REIT owning 28 manufactured home
communities (containing 5,700 homesites), all of which had been managed by ROC
on a fee basis since 1993 and by the Company since the Merger. The acquisition
was financed with the issuance of 101,239 OP Units and $750,000 in cash.
6. Investments in and Advances to Affiliates:
Investments in and advances to affiliates as of December 31, consisted primarily
of the following:
1997 1996
---- ----
(in thousands)
Investments in and amounts due from Community Sales, Inc. ("CSI") $12,950 --
Investments in and amounts due from joint ventures $ 8,696 $ 3,408
------- -------
$21,646 $ 3,408
======= =======
34
35
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
7. Financing:
The following table sets forth certain information regarding debt at December
31:
Weighted Principal Balance
Average Maturity -----------------
Interest Rate Date 1997 1996
------------- ---- ---- ----
(in thousands)
Fixed rate mortgages 7.95% 1998-2011 $113,969 $ 54,441
Unsecured Senior Notes 7.52% 2003 70,000 --
Unsecured Senior Notes 8.75% 2000 75,000 75,000
Unsecured Senior Notes 6.92% 2004 100,000 --
Unsecured line of credit 6.75% 1999 25,000 36,750
Other notes payable 3,046 2,124
-------- --------
$387,015 $168,315
======== ========
At December 31, 1997, the Company had a $100 million line of credit arrangement,
including a $25 million term loan, with First National Bank of Chicago/NBD
acting as lead agent for a bank group to provide financing for future
construction, acquisitions and general business obligations. The line of credit
arrangement is unsecured, bears interest at the prime rate of interest or, at
the Company's option, LIBOR plus 110 basis points. At December 31, 1997, there
was $25 million in borrowings outstanding under the term loan. The line matures
in May 1999 and the term loan matures May 1998. The terms of the line of credit
provide for the payment of a fee on the average daily unused amount of the line
of credit. In addition, in September 1997, the Company secured a $7.5 million
revolving line of credit from Colorado National Bank which bears interest at a
rate of LIBOR plus 125 basis points. As of December 31, 1997, approximately $25
million was outstanding under the Company's line of credit and the Company had
available $82.5 million in additional borrowing capacity. The financing
arrangements contain customary covenants, including a debt service coverage
ratio and a restriction on the incurrence of additional collateralized
indebtedness without a corresponding increase in rental property.
On December 23, 1997, the Company issued 6.92% MandatOry Par Put Remarketed
Securities(SM) ("MOPPRS(SM)" ) due December 10, 2014. The net proceeds to the
Company from the issuance before deducting offering expenses, was approximately
$102.0 million. The additional $2 million represents a payment made by the
Remarketing Dealer for the right to remarket the securities in 2004. This amount
will be amortized over the life of the related debt.
35
36
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
7. Financing Continued:
In connection with the issuance of the MOPPRS(SM), the Company and Chateau
entered into a Remarketing Agreement, dated as of December 23, 1997 (the
"Remarketing Agreement"), with the remarketing dealer named therein (the
Remarketing Dealer"), pursuant to which the MOPPRS(SM) are subject to mandatory
tender in favor of the Remarketing Dealer on December 10, 2004 (the "Remarketing
Date"), for a purchase price equal to 100% of the principal amount of the
outstanding MOPPRS(SM). Upon the remarketing dealer's election to remarket the
MOPPRS(SM), the interest rate to the December 10, 2014 maturity date of the
MOPPRS will be adjusted to equal the sum of 5.75% plus the Applicable Spread (as
defined in the Remarketing Agreement). In the event the Remarketing Dealer does
not elect to remarket the MOPPRS(SM), the MOPPRS(SM) will mature on the
Remarketing Date.
The aggregate amount of principal maturities on the fixed rate mortgages and
Senior Notes payable subsequent to December 31, 1997 (in thousands) is as
follows:
Years Ending
December 31,
- ------------
1998 $ 2,884
1999 19,938
2000 164,581
2001 125
2002 136
Thereafter 171,305
--------
$358,969
========
36
37
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
8. Stock Option Plan:
The Company adopted the disclosure requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation," effective with the year ended December 31, 1996. The
Company measures compensation cost using the intrinsic value method, in
accordance with APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees."
Chateau's 1997 Equity Compensation Plan and 1993 Long Term Incentive Stock Plan
(the "Plans") provide for up to 950,000 shares of common stock that may be
granted to directors, executive officers and other key employees. The proceeds
received by Chateau from the issuance of Chateau's common stock are contributed
to the Company in exchange for the issuance of the same number of OP Units to
Chateau. The Plan provides for the grant of options restricted stock awards and
stock appreciation rights. The Plans provide for the grant of options at "fair
market value" which represents the quoted market price of Chateau's common stock
on the date of grant. The Compensation Committee will determine the vesting
schedule of each option and the term, which term shall not exceed ten years from
the date of grant.
Information concerning stock options is as follows:
1997 1996 1995
-------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Price Shares Price Shares Price
--------- ------- ------- -------- ------- ------
Shares subject to option:
Outstanding at beginning of year 735,300 $ 21.66 454,150 $ 20.08 193,000 $20.43
Granted (1) 60,000 25.62 308,150 23.99 315,550 19.82
Issued in connection with the merger (2) 557,334 21.06
Exercised (155,228) 21.00 (11,250) 21.21 (7,500) 20.00
Forfeited -- -- (15,750) 22.11 (46,900) 19.74
--------- ------- ------- -------- ------- ------
Outstanding at end of year 1,197,406 $ 21.66* 735,300 $ 21.66* 454,150 $20.08
========= ======= ======= ======== ======= ======
Options exercisable at year-end 1,182,406 -- 176,287 74,000
========= ======= =======
Options available for grant at year-end 811,200 -- 238,900 535,350
========= ======= =======
Weighted average remaining
contractual life (in years) 7.3 -- 8.2 8.4
========= ======= =======
(1) The options granted do not include the grant of 80,000 shares of
restricted stock to executive officers of Chateau.
(2) These represent options issued in exchange for existing ROC options at the
time of the Merger and the adjustments for the 6.8 percent stock dividend
paid on Chateau's common stock, also in connection with the Merger.
* Ranging in price from $18.18-$29.94 and $19.50 - $24.25 at December 31,
1997 and 1996, respectively.
37
38
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
9. Stock Option Plan Continued:
The fair value of each option was estimated as of date of grant using an
option-pricing model with the following assumptions used for options granted in:
1997 1996 1995
---- ---- ----
Estimated fair value per share of
options granted during the year $ 3.58 $ 3.39 $ 2.72
1997 1996 1995
---- ---- ----
Assumptions:
Annualized dividend yield 6.1% 6.7% 7.6%
Common Stock price volatility 20.0% 20.0% 20.0%
Risk-free rate of return 6.35% 6.56% 7.57%
Expected option term (in years) 10 10 10
If compensation cost for stock option grants had been recognized based on the
fair value at the grant dates for 1997, 1996 and 1995 consistent with the method
prescribed by SFAS 123, net income and net income per OP Unit would have been:
1997 1996 1995
---- ---- ----
Net income $ 22,854,000 $ 15,911,000 $ 13,063,000
Net income per OP Unit-basic $ .85 $ 1.07 $ .88
Net income per OP Unit-diluted $ .84 $ 1.06 $ .88
10. Savings Plan:
The Company has two qualified retirement plans designed to qualify under Section
401 of the Internal Revenue Code (the "Plan"). The Plans allow the employees of
the Company to defer a portion of their eligible compensation on a pre-tax basis
subject to certain maximum amounts. Contributions by the Company are
discretionary and determined by the Company's management. Company contributions
are allocated to each participant based on the relative compensation of the
participant to the compensation of all participants. The Company contributed
approximately $421,000, $300,000 and $275,000 to the 401(k) Plan for the Plan
years ended December 31, 1997, 1996 and 1995, respectively.
38
39
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
11. Related Party Transactions:
Rental expense of approximately $100,000 annually has been incurred for leasing
space in an office building owned by certain officers and equity owners. The
office lease expires November 2001. For the year ended December 31, 1995 net
lease income of approximately $695,000 was recognized from a ground lease with a
corporation wholly owned by an equity owner to the Company.
The Company, through CSI, purchases manufactured home inventory for resale from
Clayton Homes, Inc., which is affiliated with one of Chateau's directors. During
1997, CSI purchased approximately 94 homes for a cost of $2.2 million. In
certain instances, the Company finances the purchase of these homes with
Vanderbilt Mortgage and Finance, Inc. ("Vanderbilt"), which is also affiliated
with the same director . As of December 31, 1997 the Company has a payable to
Vanderbilt for $656,000.
In addition, when CSI sells these homes, the purchaser often finances them with
Vanderbilt. In certain cases, Vanderbilt has recourse to the Company if these
loans are not repaid. As of December 31, 1997 there is a total of $11.7 million
of such amounts that are recourse to the Company.
As of December 31, 1997 the Company has a receivable of $3.3 million from a
partnership with which several officers of Chateau are affiliated. The
partnership owns a manufactured home community property that the Company has the
option to purchase. The receivable is collateralized by the property and was
approved by the directors of the Company who have no interest in the
partnership.
12. Extraordinary Item - Early Extinguishment of Debt:
The extraordinary charge in the accompanying statements of income represent
prepayment penalties and certain other related costs incurred in connection with
the early extinguishment of debt.
13. Contingencies:
The Company, as an owner of real estate, is subject to various environmental
laws. Compliance by the Company with existing laws has not had a material effect
on the results of operations, financial condition or cash flows of the Company,
nor does management believe it will have a material impact in the future.
However, management cannot predict the impact of new or changed laws or
regulations on its current properties or properties that it may acquire.
Several claims and legal actions arising from the normal course of business,
none of which are environmental related matters, have been asserted against the
Company, and are pending final resolution. Although the amount of liability at
December 31, 1997, if any, with respect to these matters is not determinable, in
the opinion of management, none of these matters will be material to future
results of operations, financial condition or cash flows of the Company.
39
40
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
14. Quarterly Financial Information (Unaudited):
The following is quarterly financial information for the years ended December
31, 1997 and 1996; (Amounts in thousands except per OP Unit data.)
First Second Third Fourth
Quarter Quarter Quarter Quarter
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
1997
Total revenues $ 29,376 $ 35,600 $ 36,560 $36,633
======== ======== ======== =======
Operating income (a) $ 17,693 $ 21,264 $ 21,395 $21,764
======== ======== ======== =======
Net income $ 5,588 $ 6,123 $ 5,670 $ 7,307
======== ======== ======== =======
Weighted average OP Units outstanding 23,480 28,009 28,064 28,242
======== ======== ======== =======
Net income per OP Unit - basic (b) $ .24 $ .22 $ .20 $ .25
======== ======== ======== =======
Net income per OP Unit - diluted (b) $ .24 $ .22 $ .20 $ .25
======== ======== ======== =======
1996
Total revenues $ 16,391 $ 16,829 $ 16,983 $17,181
======== ======== ======== =======
Operating income (a) $ 10,132 $ 9,685 $ 9,992 $10,705
======== ======== ======== =======
Net income $ 4,321 $ 3,599 $ 3,955 $ 4,225
======== ======== ======== =======
Weighted OP Units outstanding 14,887 14,896 14,936 14,630
======== ======== ======== =======
Net income per OP Unit - basic (b) $ .29 $ .24 $ .26 $ .29
======== ======== ======== =======
Net income per OP Unit - diluted (b) $ .29 $ .24 $ .26 $ .29
======== ======== ======== =======
(a) Operating income represents total revenues less property operating and
maintenance expense, real estate taxes and administrative expense.
Operating income is a measure of the performance of the properties before
the effects of depreciation and interest and related amortization costs.
(b) Quarterly earnings per OP Unit amounts may not total to the full year
amounts due to rounding and to the change in the number of OP Units
outstanding.
40
41
CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
-------
15. Subsequent Events:
In January 1998, the Company completed the acquisition of 16 properties, in
Connecticut, South Carolina, and Florida, containing approximately 2,333
homesites and 1,359 park/model RV sites, for a total of approximately $55.4
million. These acquisitions were financed by $33.7 million in borrowings under
the Company's line of credit, the issuance of 412,480 OP Units and $5.7 million
in cash available from the proceeds of the December 1997 Debt Offering. Nine of
the above communities, containing approximately 900 homesites and 1,100 park
model/RV sites, are subject to long-term ground leases.
In February 1998, Chateau received net proceeds of approximately $53.9 million
from the issuance of 1,850,000 shares of its common stock. The proceeds from the
offering were contributed to the Company in exchange for the issuance of
1,850,000 OP Units, and were used to reduce outstanding balances under it's line
of credit from the January 1998 acquisitions and for the March 1998
acquisitions.
In March 1998, the Company completed the acquisition of 6 properities, 1 in
Michigan and 5 in Indiana, containing approximately 1,500 homesites, for a total
of approximately $36.7 million. These acquisitions were financed by the issuance
of Chateau's common stock in February 1998 and by borrowings on the Company's
line of credit. In addition, CSI purchased a 60 percent interest in three retail
sales centers in Indiana, for approximately $1.2 million.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
41
42
PART III
Item 10. Directors and Executive Officers of the Registrant
Not Applicable
Item 11. Executive Compensation
Not Applicable
Item 12. Security Ownership of Certain Beneficial Owners and Management
Not Applicable
Item 13. Certain Relationships and Related Transactions
Not Applicable
42
43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Partners' Capital for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
III - Real Estate and Accumulated Depreciation
43
44
3. Exhibits
Exhibit Number
(Referenced to Item 601 of
Regulation S-K)
Exhibit Description
-------------------
3(i) (a) Amended and Restated Agreement of Limited Partnership of CP
Limited Partnership dated January 22, 1997.
4.1 (b) Form of Stock Certificate
4.2(i) (f)Indenture dated as of December 19, 1997 between CP Limited
Partnership and The First National Bank of Chicago, as supplemented
4.2(ii) (f)First Supplemental Indenture dated as of December 19, 1997
between CP Limited Partnership and The First National Bank of
Chicago related to the $100,000,000 MadatOry Par Put Remarketed
Securities(SM) ("MOPPRS(SM)") due December 10, 2014.
4.2(iii) (f) Remarketing Agreement dated as of December 23, 1997 among
Chateau Communities, Inc., CP Limited Partnership and the
"Remarketing Dealer" named therein.
4.3* $75,000,000 8 3/4% Indenture, dated March 2, 1995, of CP Limited
Partnership.
4.4* Note Purchase Agreement dated as of November 4, 1996, between
Pacific Mutual and ROC Communities, Inc. for $70,000,000 in Senior
Notes due November 4, 2003
4.5* Deed to secure Debt and Security Agreement from ROCF, Inc. to
Pacific Mutual, dated as of August 25, 1993
10.1 (b) Lease of 19500 Hall Road
10.2 (b) Form of Noncompetition Agreement (Boll and Allen)
10.3(i) (e) Employment Agreement (McDaniel)
10.3(ii) (e) Employment Agreement (Kellogg)
10.3(iii) (e) Employment Agreement (Fischer)
10.3(iv) (e) Employment Agreement (Grange)
10.3(v) (e) Employment Agreement (Davis)
10.4 (g)Amended and restated agreement and plan of Merger between Chateau
Properties, Inc., it's subsidiary and ROC Communities, Inc., dated
September 17, 1996.
10.5 (a)1997 Equity Compensation Plan
10.6 (b) Long-Term Incentive Stock Plan
21 (d)List of Subsidiaries of Chateau Communities, Inc.
23 Consent of Coopers & Lybrand L.L.P.
* Other instruments defining long-term debt not exceeding 10 percent of
total assets have been omitted in reliance on Item 601(b)4)(iii)(A) of
Regulation S-K but will be filed upon the request of the Commission.
44
45
(a) Incorporated by reference to the Exhibits filed with the Chateau
Communities, Inc's. ("Chateau") Annual Report on Form 10-K filed with the
Commission on March 20, 1998.
(b) Incorporated by reference to the Exhibits filed with Chateau's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150).
(c) Incorporated by reference to the Exhibits filed with Chateau's Form 8-K
filed with the Commission on May 23, 1997 .
(d) Incorporated by reference to the exhibits filed with Chateau's Annual
Report in Form 10-K for the year ended December 31, 1995 filed with the
commission on March 29, 1996 (Commission File No. 1-12496).
(e) Incorporated by reference to Chateau's Quarterly Report on Form 10Q filed
with the Commission on May 14, 1997.
(f) Incorporated by reference to Chateau's Form 8-K filed with the Securities
Exchange Commission on December 23, 1997.
(g) Incorporated by reference to Chateau's Form S-4 filed with the Commission
on September 24, 1996.
b. Reports on Form 8-K
A report on Form 8-K was filed with the Securities Exchange Commission on
December 10, 1997 and December 23, 1997.
45
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, and in the capacities
indicated, on the 19th day of March, 1998.
CP LIMITED PARTNERSHIP
BY: CHATEAU COMMUNITIES, INC.
By:/s/ Gary P. McDaniel
---------------------------------
Gary P. McDaniel
Director and Chief Executive Officer
(Principal Executive Officer)
By:/s/ Tamara D. Fischer
---------------------------------
Tamara D. Fischer
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 19, 1998.
Signature Title
--------- -----
/s/ John Boll Chairman of the Board of Directors
- -------------------------------
John A. Boll
/s/C.G. Kellogg Director and President
- -------------------------------
C.G. Kellogg
/s/Gary P. McDaniel Director and Chief Executive Officer
- -------------------------------
Gary P. McDaniel
/s/Edward R. Allen Director
- -------------------------------
Edward R. Allen
/s/Gebran S. Anton, Jr. Director
- -------------------------------
Gebran S. Anton, Jr.
48
47
/s/James L. Clayton Director
- -------------------------------
James L. Clayton
/s/Steven G. Davis Director
- -------------------------------
Steven G. Davis
/s/James M. Hankins Director
- -------------------------------
James M. Hankins
/s/Rhonda Hogan Director
- -------------------------------
Rhonda Hogan
/s/James M. Lane Director
- -------------------------------
James M. Lane
/s/Donald E. Miller Director
- -------------------------------
Donald E. Miller
49
48
CP LIMITED PARTNERSHIP
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
for the year ended December 31, 1997
CP LIMITED PARTNERSHIP
FINANCIAL STATEMENT SCHEDULE
Pages
-----
III. Real Estate and Accumulated Depreciation................................F-2
No other financial statement schedules are required as the amounts are not
significant, or not applicable, or reported in the Company's financial
statements or notes thereto.
F-1
49
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION
for the year ended December 31, 1997
(in thousands)
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -------------------------
Building & Building &
Community Location Encumbrance Land Fixtures Land Fixtures
- --------------------------------------------------------------------------------------------- -------------------------
Algoma Algoma Township, MI 60 66 1,951
Anchor Bay Ira Township, MI 432 80 2,877 14,482
Atlanta Meadows Atlanta, GA 554 625 435 - 11
Audubon Orlando, FL 281 296 2 2,907
Avon Rochester Hills, MI 621 484 640 6,946
Bermuda Palms Indio, CA 1,291 2,477 - 50
Breazeale Laramie, WY. 1,094 251 1,618 - 11
Buena Vista Fargo, ND 713 6,248 - 58
Butler Creek Augusta, GA 1,238 2,309 - 53
Camden Point Kingsland, GA 466 1,701 - 21
Casa Linda Las Vegas, NV. 849 586 1,659 - 31
Castlewood Estates Mabelton, GA 656 2,918 - 95
Casual Estates Syracuse, NY 9,208 2,135 14,324 - 145
Cedar Knolls Minneapolis, MN 1,217 11,006 - 43
Central Office Englewood, CO - - 80 4,081
Chesterfield Chesterfield Township, MI 405 - 262 2,051
Chestnut Creek Davison, MI 274 - - 3,280
Cimarron Park St. Paul, MN 1,424 12,882 - 128
Clinton Clinton Township, MI 989 - 430 5,415
Coach Royale Boise, ID 197 1,065 11
Colonial Kalamazoo, MI 816 195 4 7,533
Colonial Coach Riverdale, GA 1,052 4,277 - 60
Colony Cove Ellenton, FL 5,683 28,256 - 129
Columbia Heights Grand Forks, ND 588 5,282 - 47
Conway Circle Orlando, FL 931 544 864 - 3
Conway Plantation Conway, SC 428 3,696 - -
Country Estates Spring Lake Township, MI 30 - - 1,810
Countryside Great Falls Great Falls, MT 629 361 1,650 - (36)
Countryside Village Denver Denver, CO 1,459 4,384 - 33
Countryside Village Jackson. Jacksonville, FL 962 4,796 - 110
Countryside Village Longmont Longmont, CO 1,481 4,455 - 12
Cranberry Lake White Lake Township, MI 432 220 - 2,748
Crestview Stillwater, OK 689 362 963 - (28)
Crystal Lake Zephryhills, FL 1,323 2,239 - 119
Del Tura Fort Myers, FL 32,747 4,360 50,508 420 3,120
Eagle Creek Tyler, TX 1,291 1,761 299 277
Eastridge San Jose, CA 2,476 4,671 - 5
Eldorado Daytona Bch, FL 967 408 1,248 - 22
Emerald Lake Punta Gorda, FL 399 1,150 - 224
Fairways Country Club Orlando, FL 955 5,823 8 1,553
Ferrand Estates Wyoming, MI 257 1,579 - 219
Forest Lake Estates Spring Lake Township, MI 414 2,293 18 368
Gross Amount
Carried at Close of
Period 12/31/97
------------------- Date of
Building & Accumulated Construction (C)
Community Location Land Fixtures Total Depreciation Acquisition (A)
- ------------------------------------------------------------------------------------------ ---------------------------------------
Algoma Algoma Township, MI 126 1,951 2,077 758 1974(C)
Anchor Bay Ira Township, MI 3,309 14,562 17,871 6,542 1968(C)
Atlanta Meadows Atlanta, GA 625 446 1,071 20 08/25/93(A)
Audubon Orlando, FL 283 3,203 3,486 1,521 1988(A)
Avon Rochester Hills, MI 1,261 7,430 8,691 4,778 1988(A)
Bermuda Palms Indio, CA 1,291 2,527 3,818 87 08/29/94(A)
Breazeale Laramie, WY. 251 1,629 1,880 50 08/25/93(A)
Buena Vista Fargo, ND 713 6,306 7,019 847 1994(A)
Butler Creek Augusta, GA 1,238 2,362 3,600 84 08/25/93(A)
Camden Point Kingsland, GA 466 1,722 2,188 59 08/25/93(A)
Casa Linda Las Vegas, NV. 586 1,690 2,276 58 08/25/93(A)
Castlewood Estates Mabelton, GA 656 3,013 3,669 106 2/1/97(A)
Casual Estates Syracuse, NY 2,135 14,469 16,604 598 08/25/93(A)
Cedar Knolls Minneapolis, MN 1,217 11,049 12,266 1,514 1994(A)
Central Office Englewood, CO 80 4,081 4,161 974
Chesterfield Chesterfield Township, MI 667 2,051 2,718 1,576 1969(C)
Chestnut Creek Davison, MI 274 3,280 3,554 241 1996(A)
Cimarron Park St. Paul, MN 1,424 13,010 14,434 1,768 1994(A)
Clinton Clinton Township, MI 1,419 5,415 6,834 4,440 1969(C)
Coach Royale Boise, ID 197 1,076 1,273 43 01/01/94(A)
Colonial Kalamazoo, MI 820 7,728 8,548 4,766 1985(A)
Colonial Coach Riverdale, GA 1,052 4,337 5,389 157 2/1/97(A)
Colony Cove Ellenton, FL 5,683 28,385 34,068 992 08/02/94(A)
Columbia Heights Grand Forks, ND 588 5,329 5,917 711 1994(A)
Conway Circle Orlando, FL 544 867 1,411 30 08/25/93(A)
Conway Plantation Conway, SC 428 3,696 4,124 140 2/1/97(A)
Country Estates Spring Lake Township, MI 30 1,810 1,840 1,206 1974(C)
Countryside Great Falls Great Falls, MT 361 1,614 1,975 58 08/25/93(A)
Countryside Village Denver Denver, CO 1,459 4,417 5,876 156 08/25/93(A)
Countryside Village Jackson. Jacksonville, FL 962 4,906 5,868 175 08/25/93(A)
Countryside Village Longmont Longmont, CO 1,481 4,467 5,948 160 08/25/93(A)
Cranberry Lake White Lake Township, MI 432 2,968 3,400 1,636 1986(A)
Crestview Stillwater, OK 362 935 1,297 28 08/25/93(A)
Crystal Lake Zephryhills, FL 1,323 2,358 3,681 100 2/1/1997(A)
Del Tura Fort Myers, FL 4,780 53,628 58,408 6,975 1994(A)
Eagle Creek Tyler, TX 1,590 2,038 3,628 80 2/1/97(A)
Eastridge San Jose, CA 2,476 4,676 7,152 164 08/29/94(A)
Eldorado Daytona Bch, FL 408 1,270 1,678 42 08/25/93(A)
Emerald Lake Punta Gorda, FL 399 1,374 1,773 600 1988(A)
Fairways Country Club Orlando, FL 963 7,376 8,339 4,774 1979(A)(C)
Ferrand Estates Wyoming, MI 257 1,798 2,055 1,439 1989(A)
Forest Lake Estates Spring Lake Township, MI 432 2,661 3,093 427 1994(A)
F-3
50
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION
for the year ended December 31, 1997
(in thousands)
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -------------------------
Building & Building &
Community Location Encumbrance Land Fixtures Land Fixtures
- --------------------------------------------------------------------------------------------- -------------------------
Foxhall Village Raleigh, NC 521 5,283 - 383
Foxwood Farms Ocala, FL 691 1,502 - 74
Friendly Village Greely, CO 523 2,702 (5) 87
Gold Tree Bradenton, FL 1,285 3,850 - 65
Golden Citrus/
Homestead Ranch McAllen, TX 500 195 1,108 - 124
Golden Valley Douglasville, TX 254 800 - 143
Grand Blanc Grand Blanc, MI 1,749 - 289 7,435
Hickory Knoll Indianapolis, IN 3,029 356 2,669 - 6
Hidden Valley Orlando, FL 492 5,714 - 49
Hillcrest Rockland, MA 236 1,285 - -
Holiday Estates Byron Township, MI 93 - - 1,696
Howell Howell, MI 345 151 2,683
Hunters Chase Lima, OH 921 1246 - 127
Jade Isle Orlando, FL 863 273 1,076 - 3
Knoll Terrace Salem, OR 1,986 1,379 2,050 - 20
La Quinta Ridge Indio, CA 1,013 1,873 - 267
Lake in the Hills Auburn Hills, MI 952 6,389 - 20
Lakeland Harbor Lakeland, FL 875 - - 3,272
Lakeland Junction Lakeland, FL 471 972 1 108
Lakes at Leesburg Leesburg, FL 1,178 - 39 3,398
Lakewood Davenport, LA 892 442 1,210 - 188
Land O'Lakes Orlando, FL 1,416 472 2,507 - 7
Landmark Village Fairburn, GA 2,539 4,352 - 85
Leisure Woods - Rockland Rockland, MA 831 14,326 - -
Leisure Woods - Tauton Tauton, MA 256 2,780 - -
Leisure World Weslaco, TX 228 1,639 - 35
Leonard Gardens Walker, MI 94 - 247 3,261
Macomb Macomb Township, MI 15,972 1,459 - 2,173 16,348
Maintenance Clinton, Township, MI - - - 248
Maple Grove Boise, ID 1,139 702 2,384 - 9
Maple Ridge Manteno, IL 126 - - 1,455
Maple Valley Manteno, IL 338 - - 3,897
Mariwood Indianapolis, IN 2,138 324 2,415 51
Marnelle Fayetteville, GA 1,209 464 2,635 - 319
Marysville Meadows/
Eagle Point Seattle, WA 2,738 1,048 3,514 - -
Meadow Park Fargo, ND 133 1,183 - 15
Meadowbrook Ithaca, NY 1,849 291 4,029 - 18
Midway Estates Vero Bch., FL 1,841 1,313 2,095 2 32
Mobet/Falcon Farms Moline, IL 801 295 1,576 - 198
Mobiland Melbourne, FL 1,942 1,247 2,238 - 20
Mobile Village/The Homestead McAllen, TX 672 100 742 - 161
Mosby's Point Florence, KY 1,201 608 1,574 - 7
Gross Amount
Carried at Close of
Period 12/31/97
------------------- Date of
Building & Accumulated Construction (C)
Community Location Land Fixtures Total Depreciation Acquisition (A)
- ------------------------------------------------------------------------------------------ --------------------------------------
Foxhall Village Raleigh, NC 521 5,666 6,187 203 2/1/97(A)
Foxwood Farms Ocala, FL 691 1,576 2,267 53 07/26/94(A)
Friendly Village Greely, CO 518 2,789 3,307 98 01/18/94(A)
Gold Tree Bradenton, FL 1,285 3,915 5,200 121 11/23/93(A)
Golden Citrus/
Homestead Ranch McAllen, TX 195 1,232 1,427 50 2/1/97(A)
Golden Valley Douglasville, TX 254 943 1,197 35 2/1/97(A)
Grand Blanc Grand Blanc, MI 2,038 7,435 9,473 1,807 1990(C)
Hickory Knoll Indianapolis, IN 356 2,675 3,031 98 08/25/93(A)
Hidden Valley Orlando, FL 492 5,763 6,255 491 1995(A)
Hillcrest Rockland, MA 236 1,285 1,521 3 11/5/97(A)
Holiday Estates Byron Township, MI 93 1,696 1,789 1,112 1984(C)
Howell Howell, MI 496 2,683 3,179 2,177 1972(C)
Hunters Chase Lima, OH 921 1,373 2,294 54 2/1/97(A)
Jade Isle Orlando, FL 273 1,079 1,352 36 08/25/93(A)
Knoll Terrace Salem, OR 1,379 2,070 3,449 72 08/25/93(A)
La Quinta Ridge Indio, CA 1,013 2,140 3,153 65 08/29/94(A)
Lake in the Hills Auburn Hills, MI 952 6,409 7,361 1,120 1994(A)
Lakeland Harbor Lakeland, FL 875 3,272 4,147 2,139 1983(C)
Lakeland Junction Lakeland, FL 472 1,080 1,552 768 1981(C)
Lakes at Leesburg Leesburg, FL 1,217 3,398 4,615 1,908 1984(C)
Lakewood Davenport, LA 442 1,398 1,840 49 08/25/93(A)
Land O'Lakes Orlando, FL 472 2,514 2,986 88 08/25/93(A)
Landmark Village Fairburn, GA 2,539 4,437 6,976 161 07/15/94(A)
Leisure Woods - Rockland Rockland, MA 831 14,326 15,157 30 11/5/97(A)
Leisure Woods - Tauton Tauton, MA 256 2,780 3,036 6 11/5/97(A)
Leisure World Weslaco, TX 228 1,674 1,902 58 05/06/94(A)
Leonard Gardens Walker, MI 341 3,261 3,602 1,119 1987(C)
Macomb Macomb Township, MI 3,632 16,348 19,980 7,953 1973(C)
Maintenance Clinton, Township, MI - 248 248 180 2/1/97(A)
Maple Grove Boise, ID 702 2,393 3,095 84 08/25/93(A)
Maple Ridge Manteno, IL 126 1,455 1,581 109 2/1/97(A)
Maple Valley Manteno, IL 338 3,897 4,235 288 2/1/97(A)
Mariwood Indianapolis, IN 324 2,466 2,790 87 08/25/93(A)
Marnelle Fayetteville, GA 464 2,954 3,418 118 2/1/97(A)
Marysville Meadows/
Eagle Point Seattle, WA 1,048 3,514 4,562 123 08/25/93(A)
Meadow Park Fargo, ND 133 1,198 1,331 160 1994(A)
Meadowbrook Ithaca, NY 291 4,047 4,338 118 08/25/93(A)
Midway Estates Vero Bch., FL 1,315 2,127 3,442 74 08/25/93(A)
Mobet/Falcon Farms Moline, IL 295 1,774 2,069 57 08/25/93(A)
Mobiland Melbourne, FL 1,247 2,258 3,505 79 08/25/93(A)
Mobile Village/The Homestead McAllen, TX 100 903 1,003 32 2/1/97(A)
Mosby's Point Florence, KY 608 1,581 2,189 56 08/25/83(A)
F-4
51
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION
for the year ended December 31, 1997
(in thousands)
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -------------------------
Building & Building &
Community Location Encumbrance Land Fixtures Land Fixtures
- --------------------------------------------------------------------------------------------- -------------------------
Norton Shores Norton Shores, MI 3,435 103 - 118 4,724
Novi Novi, MI 896 - 393 4,794
Oak Grove Albany, GA 416 418 764 - 15
Oak Hill Groveland Township, MI 1,216 115 2,165 - 3,996
Oak Orchard Albion, NY 701 3,425 - 14
Oak Springs Sorrento, FL 206 1,461 2 312
Oakwood Forest Greensboro, NC 1,111 3,843 - 136
Old Orchard Davison, MI 211 182 - 2,618
One Hundred Oaks Fultondale, AL 345 1,839 - 5
Orange Lake Clermont, FL 246 85 1 1,994
Orion Orion Township, MI 423 198 - 4,529
Palm Beach Colony West Palm Beach, FL 691 1,962 - 98
Paradise Village Albany, GA 492 340 918 - 7
Pedaler's Pond Lake Wales, FL 350 285 - 2,314
Pendleton Indianapolis, IN 634 122 964 - 2
Pine Lakes Ranch Thorton,CO 2,463 10,099 34 202
Pinecrest Village Shreveport, LA 93 719 - 420
Pinellas Cascades Clearwater, FL 2,169 1,747 2,313 - (2)
Presidents Park Grand Forks, ND 258 1,283 - 22
Redwood Estates Thorton,CO 2,473 10,044 - 81
Regency Lakes Winchester, VA 1,176 3,705 - 916
Riverview Portland, OR 1,429 537 1,942 - 29
Rolling Hills Louisville, KY 736 342 1,034 - 9
Rosemount Woods Minneapolis/St. Paul, MN 475 4,297 - 6
Royal Estates Kalamazoo, MI 190 1,015 2,475 - 24
Science City Midland, MI 1,496 870 1,760 - 45
Shenandoah Boise, ID 443 2,528 - 3
Skyway Indianapolis, IN 1,207 178 1,366 - 8
Southwind Naples, FL 2,619 1,476 3,463 - 45
Springfield Farms Brookline, MO 1,698 2,157 - 1,491
Starlight Ranch Orlando, FL 5,597 8,859 - 36
Stonegate, LA Shreveport, LA 455 160 642 - 89
Terrace Heights Dubuque, IA 1,686 919 2,413 - 8
The Colony Rancho Mirage, CA 2,259 4,745 - 30
The Glen Rockland, MA 261 252 - -
The Orchard Sanat Rosa, CA 2,794 6,363 - 8
Torrey Hills Flint, MI 346 205 1 4,271
Town & Country, FL Orlando, FL 458 245 896 - 7
Trails End Weslaco, TX 260 1,804 - 40
Twenty-Nine Pines St. Paul, MN 317 2,871 - 17
Twin Pines Goshen, IN 1,078 197 1,934 - 26
Vance Columbus, OH 670 200 993 - 19
Gross Amount
Carried at Close of
Period 12/31/97
------------------- Date of
Building & Accumulated Construction (C)
Community Location Land Fixtures Total Depreciation Acquisition (A)
- ------------------------------------------------------------------------------------------ --------------------------------------
Norton Shores Norton Shores, MI 221 4,724 4,945 2,557 1978(C)
Novi Novi, MI 1,289 4,794 6,083 4,595 1973(C)
Oak Grove Albany, GA 418 779 1,197 26 08/25/93(A)
Oak Hill Groveland Township, MI 115 6,161 6,276 2,977 1983(A)
Oak Orchard Albion, NY 701 3,439 4,140 129 2/1/97(A)
Oak Springs Sorrento, FL 208 1,773 1,981 1,254 1981(A)
Oakwood Forest Greensboro, NC 1,111 3,979 5,090 139 08/25/93(A)
Old Orchard Davison, MI 211 2,800 3,011 1,340 1988(A)
One Hundred Oaks Fultondale, AL 345 1,844 2,189 30 2/1/97(A)
Orange Lake Clermont, FL 247 2,079 2,326 905 1988(A)
Orion Orion Township, MI 423 4,727 5,150 2,687 1986(A)
Palm Beach Colony West Palm Beach, FL 691 2,060 2,751 655 1983(A)
Paradise Village Albany, GA 340 925 1,265 31 08/25/93(A)
Pedaler's Pond Lake Wales, FL 350 2,599 2,949 1,056 1990(A)
Pendleton Indianapolis, IN 122 966 1,088 33 08/25/93(A)
Pine Lakes Ranch Thorton,CO 2,497 10,301 12,798 378 2/1/97(A)
Pinecrest Village Shreveport, LA 93 1,139 1,232 35 2/1/97(A)
Pinellas Cascades Clearwater, FL 1,747 2,311 4,058 78 08/25/93(A)
Presidents Park Grand Forks, ND 258 1,305 1,563 47 01/01/94(A)
Redwood Estates Thorton,CO 2,473 10,125 12,598 374 2/1/97(A)
Regency Lakes Winchester, VA 1,176 4,621 5,797 168 2/1/97(A)
Riverview Portland, OR 537 1,971 2,508 68 08/25/93(A)
Rolling Hills Louisville, KY 342 1,043 1,385 37 08/25/93(A)
Rosemount Woods Minneapolis/St. Paul, MN 475 4,303 4,778 575 1994(A)
Royal Estates Kalamazoo, MI 1,015 2,499 3,514 91 08/25/93(A)
Science City Midland, MI 870 1,805 2,675 63 08/25/93(A)
Shenandoah Boise, ID 443 2,531 2,974 86 05/06/94(A)
Skyway Indianapolis, IN 178 1,374 1,552 48 08/25/93(A)
Southwind Naples, FL 1,476 3,508 4,984 120 08/25/93(A)
Springfield Farms Brookline, MO 1,698 3,648 5,346 95 2/1/97(A)
Starlight Ranch Orlando, FL 5,597 8,895 14,492 319 2/1/97(A)
Stonegate, LA Shreveport, LA 160 731 891 20 08/25/93(A)
Terrace Heights Dubuque, IA 919 2,421 3,340 86 08/25/93(A)
The Colony Rancho Mirage, CA 2,259 4,775 7,034 160 09/02/94(A)
The Glen Rockland, MA 261 252 513 - 11/5/97(A)
The Orchard Sanat Rosa, CA 2,794 6,371 9,165 200 08/29/94(A)
Torrey Hills Flint, MI 347 4,476 4,823 2,379 1987(A)
Town & Country, FL Orlando, FL 245 903 1,148 30 08/25/93(A)
Trails End Weslaco, TX 260 1,844 2,104 60 05/06/94(A)
Twenty-Nine Pines St. Paul, MN 317 2,888 3,205 392 1994(A)
Twin Pines Goshen, IN 197 1,960 2,157 70 08/25/93(A)
Vance Columbus, OH 200 1,012 1,212 29 08/25/93(A)
F-5
52
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION
For the year ended December 31, 1997
(in thousands)
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -----------------------------
Building & Building &
Community Location Encumbrance Land Fixtures Land Fixtures
- --------------------------------------------------------------------------------------------- -----------------------------
Villa Flint, MI 135 332 (6) 2,713
Whispering Pines Clearwater, FL 4,165 4,208 4,071 - 18
Willo Arms Cleveland, OH 1,563 473 2,146 - 15
Winter Haven Oaks Winter Haven, FL 490 705 362 1,305
Yorktowne Sharonville, OH 2,130 6,311 145
Difference between allocated
purchase price and
historical cost of
properties acquired in
the ROC Acquistion 959 180,377
======== ======= ======= ===== =======
113,970 109,567 392,348 9,867 324,393
======== ======= ======= ===== =======
Gross Amount
Carried at Close of
Period 12/31/97
------------------- Date of
Building & Accumulated Construction (C)
Community Location Land Fixtures Total Depreciation Acquisition (A)
- ------------------------------------------------------------------------------------------ --------------------------------------
Villa Flint, MI 129 3,045 3,174 2,033 1984(A)
Whispering Pines Clearwater, FL 4,208 4,089 8,297 62 08/25/93(A)
Willo Arms Cleveland, OH 473 2,161 2,634 77 08/25/93(A)
Winter Haven Oaks Winter Haven, FL 852 2,010 2,862 890 1988(A)(C)
Yorktowne Sharonville, OH 2,130 6,456 8,586 242 2/1/97(A)
Difference between allocated
purchase price and
historical cost of
properties acquired in
the ROC Acquistion 959 180,378 181,337 10,269
======= ======= ======= =======
119,434 716,741 836,175 112,314
======= ======== ======== ========
F-6
53
SCHEDULE III
Continued
CP LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
-------
The changes in total real estate for the years ended December 31, 1997 and 1996
and 1995 are as follows:
1997 1996 1995
---- ---- ----
Balance, beginning of year $ 300,631 $ 276,423 $ 266,833
Acquisitions 525,625 19,531 6,922
Improvements 13,250 4,731 2,670
Dispositions and other (3,331) (54) (2)
--------- --------- ---------
Balance, end of year $ 836,175 $ 300,631 $ 276,423
========= ========= =========
The change in accumulated depreciation for the years ended December 31, 1997,
1996 and 1995 are as follows:
1997 1996 1995
--------- --------- ---------
Balance, beginning of year $ 81,293 $ 69,868 $ 58,856
Depreciation for the period 31,103 11,452 11,014
Disposition and other (82) (27) (2)
--------- --------- ---------
Balance, end of year $ 112,314 $ 81,293 $ 69,868
========= ========= =========
F-7
54
Exhibits
Index
Exhibit Number
(Referenced to Item 601 of
Regulation S-K)
Exhibit Description
-------------------
3(i) (a) Amended and Restated Agreement of Limited Partnership of CP
Limited Partnership dated January 22, 1997.
4.1 (b) Form of Stock Certificate
4.2(i) (f)Indenture dated as of December 19, 1997 between CP Limited
Partnership and The First National Bank of Chicago, as supplemented
4.2(ii) (f)First Supplemental Indenture dated as of December 19, 1997
between CP Limited Partnership and The First National Bank of
Chicago related to the $100,000,000 MadatOry Par Put Remarketed
Securities(SM) ("MOPPRS(SM)") due December 10, 2014.
4.2(iii) (f) Remarketing Agreement dated as of December 23, 1997 among
Chateau Communities, Inc., CP Limited Partnership and the
"Remarketing Dealer" named therein.
4.3* $75,000,000 8 3/4% Indenture, dated March 2, 1995, of CP Limited
Partnership.
4.4* Note Purchase Agreement dated as of November 4, 1996, between
Pacific Mutual and ROC Communities, Inc. for $70,000,000 in Senior
Notes due November 4, 2003
4.5* Deed to secure Debt and Security Agreement from ROCF, Inc. to
Pacific Mutual, dated as of August 25, 1993
10.1 (b) Lease of 19500 Hall Road
10.2 (b) Form of Noncompetition Agreement (Boll and Allen)
10.3(i) (e) Employment Agreement (McDaniel)
10.3(ii) (e) Employment Agreement (Kellogg)
10.3(iii) (e) Employment Agreement (Fischer)
10.3(iv) (e) Employment Agreement (Grange)
10.3(v) (e) Employment Agreement (Davis)
10.4 (g)Amended and restated agreement and plan of Merger between Chateau
Properties, Inc., it's subsidiary and ROC Communities, Inc., dated
September 17, 1996.
10.5 (a)1997 Equity Compensation Plan
10.6 (b) Long-Term Incentive Stock Plan
21 (d)List of Subsidiaries of Chateau Communities, Inc.
23 Consent of Coopers & Lybrand L.L.P.
* Other instruments defining long-term debt not exceeding 10 percent of
total assets have been omitted in reliance on Item 601(b)4)(iii)(A) of
Regulation S-K but will be filed upon the request of the Commission.
55
Exhibit
Index
(a) Incorporated by reference to the Exhibits filed with the Chateau
Communities, Inc's. ("Chateau") Annual Report on Form 10-K filed with the
Commission on March 20, 1998.
(b) Incorporated by reference to the Exhibits filed with Chateau's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150).
(c) Incorporated by reference to the Exhibits filed with Chateau's Form 8-K
filed with the Commission on May 23, 1997 .
(d) Incorporated by reference to the exhibits filed with Chateau's Annual
Report in Form 10-K for the year ended December 31, 1995 filed with the
commission on March 29, 1996 (Commission File No. 1-12496).
(e) Incorporated by reference to Chateau's Quarterly Report on Form 10Q filed
with the Commission on May 14, 1997.
(f) Incorporated by reference to Chateau's Form 8-K filed with the Securities
Exchange Commission on December 23, 1997.
(g) Incorporated by reference to Chateau's Form S-4 filed with the Commission
on September 24, 1996.
b. Reports on Form 8-K
A report on Form 8-K was filed with the Securities Exchange Commission on
December 10, 1997 and December 23, 1997.