ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS.
CP Limited Partnership (the "Company") is a Maryland limited partnership. Chateau Properties, Inc. ("Chateau"), a Maryland corporation and the sole general partner of the Company, is a self-administered and self-managed equity real estate investment trust ("REIT"). The Company is engaged in the ownership, management, leasing, expansion and acquisition of manufactured home communities. The Company began operations through a predecessor in 1966, and today, is one of the United States largest owners and operators of manufactured home community properties with a portfolio of 47 communities in Michigan, Illinois, Florida, Minnesota and North Dakota (the "Properties"). The Company also has a 50 percent interest in a joint venture with ROC Communities, Inc. ("ROC") that owns 6 development communities.
On February 11, 1997, the Company completed its merger with ROC (the "Merger"). The Merger and related transactions will be accounted for using the purchase method of accounting in accordance with generally accepted accounting principles. Accordingly, the assets and liabilities of ROC will be adjusted to fair value for financial accounting purposes and the results of operations of ROC will be included in the results of operations of the Company in 1997.
In connection with the Merger, the following related transactions occurred:
- The Company repurchased and retired 1,200,000 OP units from Chateau, of which 450,000 were repurchased in 1996
- ROC purchased 350,000 shares of Common Stock of Chateau, which were retired along with a 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
- Certain limited partners exchanged 6,170,908 OP units for common shares, which resulted in those units being held by Chateau. These Unitholders waived their right to receive the above distribution with respect to those OP units exchanged and as a result it was re-allocated to Chateau, resulting in a distribution to the general partner of .068 OP units
- These exchanging limited partners purchased 984,423 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.
Since the Merger, the Company now owns 128 communities with an aggregate 42,986 residential homesites. In addition, it now fee manages 6,953 residential homesites in 34 communities.
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.
In November 1993, the Company engaged in the following transactions:
* Chateau Estates, a Michigan co-partnership, contributed fee title to twenty of the Properties to the Company in exchange for partnership interests in the Company ("OP units").
* InterCoastal Communities, Inc. a Florida corporation and its affiliates (collectively "InterCoastal"), contributed fee title to one Property and partnership interests in partnerships which own fee title to six of the Properties to the Company in exchange for OP units.
* A group of six Michigan co-partnerships affiliated with Leonard Maas (collectively "Maas") contributed fee title to six of the Properties to the Company in exchange for OP units.
* Chateau contributed the net proceeds of its initial public offering (the "IPO") of $103.8 million to the Company, in exchange for a 40.8 percent partnership interest in the Company as its sole general partner.
* The Company used the capital contribution from Chateau after the IPO to repay approximately $88.2 million of indebtedness (including related prepayment penalties) collaterialized by mortgages on certain of the Properties and the balance was retained for working capital and for the possible acquisition of additional manufactured home communities or development of expansion sites.
Chateau Estates, InterCoastal, and Maas are referred to together as the Chateau Properties Group or the Predecessor.
INDUSTRY OVERVIEW
A manufactured home community is a residential subdivision designed and improved with sites for the placement of manufactured homes and 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 many amenities, custom options and on-site built additional structures.
Modern manufactured home communities are similar to typical residential subdivisions usually containing centralized entrances, paved streets, curbs and gutters and parkways. These communities frequently provide a clubhouse for social activities and recreation and other amenities, which may include swimming pools, shuffleboard courts, tennis courts 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.
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.
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 existing manufactured home communities and the selective acquisition of additional communities. The Company focuses on manufactured home communities that have above-average cash flow growth potential and expects to hold such properties for long-term investment and capital appreciation. The Company's investment and operating strategies include:
OPERATIONS
* Providing the most attractive and desirable manufactured home communities in its markets.
* Offering a more extensive selection of amenities than other manufactured home communities in its markets.
* Maintaining and upgrading on a systematic basis its manufactured home communities through a regular preventive maintenance and replacement program.
* Offering residents on-site services and accessibility to on-site managers to maximize retention, encourage home maintenance and improvements and minimize turnover.
* Providing frequent personal contact between on-site managers and residents to foster a sense of pride in the community.
* Through a subsidiary of Chateau, offer potential community residents the convenience of purchasing a home in place.
ACQUISITIONS, DEVELOPMENT AND EXPANSIONS
* Selectively acquiring well-located manufactured home communities that demonstrate the potential for increases in revenue and cash flow by providing a professional property management team, correcting operating inefficiencies, aggressively leasing and/or renovating sites and developing additional sites.
* Acquiring properties in existing markets in order to achieve economies of scale in management and operations, and in new markets where portfolios may be acquired with regional management in place.
* Selectively developing new communities in regions where the Company already does business and further development is supported by demographics and strong market demand.
* Capitalizing on opportunities to renovate and expand properties consistent with local market demand.
* Utilizing the expertise and relationships developed by the Company's management to identify acquisition opportunities and complete acquisitions directly with sellers prior to the active public marketing of the properties.
Important factors to the Company when evaluating potential acquisitions include:
* Quality of the design and construction of the communities.
* Current condition and appearance of the communities.
* Current cash flow and ability of the Company to increase cash flow through rental increases, enhanced operating efficiencies and site expansions.
* Existing and potential competition from other manufactured home communities.
* Economic strength of the surrounding area.
The Company intends to finance its acquisitions and expansions through its $50 million unsecured line of credit with Huntington National Bank, as lead agent, along with Bank of America and First Chicago NBD, and/or through additional debt offerings, the issuance of OP units or contributions from Chateau from additional equity offerings. The Company also intends to maintain debt-to-total market capitalization (i.e., total debt of the Company as a percentage of the market value of the outstanding OP Units of the Company, plus total debt) of 40 percent or less. Assuming the market value of an OP unit is equivalent to the market value of Chateau's common stock, at December 31, 1996, the Company had debt-to-total market capitalization of approximately 30 percent.
EXPANSION AND IMPROVEMENT OF MANUFACTURED HOME COMMUNITY PROPERTIES
The Company will seek to increase the income generated from the Properties 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 1996, the Company developed 276 expansion sites. As of December 31, 1996 the Company had 20,279 total sites, of which 1,131 were vacant. The Company owned at such date undeveloped land adjacent to existing communities containing approximately 1,200 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.
During 1996, the Company expanded its Anchor Bay community by completing the development of 103 sites, expanded its Algoma community by developing 53 sites, expanded its Fairways community by completing the development of 10 sites and developed 110 sites on land adjacent to its Macomb community.
1996 ACQUISITIONS
During 1996, the Company completed the following acquisitions:
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. Pursuant to Michigan Mobile Home Commission Act Section 28 which governs the leasing of manufactured home sites in Michigan, prospective residents must be given the opportunity to sign a lease for a fixed term for their site. The Company's experience has been that a majority of Michigan residents decline to execute a lease, but like all residents of the Company's properties, do execute less formal documentation which sets forth the general terms of occupancy. Leases or other terms of residents' occupancy are cancelable for non-payment of rent, violation of community rules and regulations or other specified defaults.
COMPETITION
All 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. Although the Company believes it has adequate capital resources and its officers and directors have significant experience, the Company competes with others that may have greater resources than the Company and whose officers and directors may have more experience than the Company's officers and directors. In addition, other forms of multi-family residential properties and single-family housing provide housing alternatives to potential residents of the Properties.
EMPLOYEES
As of December 31, 1996, the Company had approximately 276 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. The communities have extensive rules and regulations to maintain their appearance at the highest level. 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. 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 23 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 made in the financial statements.
ITEM 2.
ITEM 2. PROPERTIES
At December 31, 1996 the Properties consisted of 47 manufactured home communities containing 20,279 sites with amenities designed for either retirement or family living of which 25 were located in Michigan, 13 in Florida, 4 in Minnesota, 3 in North Dakota and 2 in Illinois. The Company also owned land adjacent to certain existing communities containing approximately 1,200 expansion sites which, although not yet developed, were zoned for manufactured housing. Of the 47 Properties, 38 have 200 or more sites, with the largest having 1,533 sites.
The Company also has a 50 percent interest in a joint venture with ROC that owns 6 development communities.
At December 31, 1996, the Properties had an average occupancy rate of approximately 94.4 percent with weighted average rent for the year ended December 31, 1996 of $285 per month. Weighted average rent is calculated as net rental income for the period, on a monthly basis, divided by the weighted average occupied sites. Weighted average occupancy is computed by averaging the occupied 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 a marina.
Since residents own their homes, it is their responsibility to maintain their homes and the surrounding area. 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 less than 3 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, (other than the six properties held in the joint venture with ROC, in which it has a 50 percent interest), 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.
INDEBTEDNESS
At December 31, 1996, the aggregate amount of indebtedness encumbering the Properties was approximately $54.4 million. The amounts outstanding as of December 31, 1996 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.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In connection with a tender offer by Manufactured Home Communities, Inc.'s ("MHC") operating partnership for shares of Chateau's Common Stock in September 1996, Chateau commenced litigation against MHC and its operating partnership in United States District Court in Baltimore, Maryland seeking a declaratory judgment with respect to, among other things, the 7 percent ownership limit set forth in the Company's Articles. MHC filed a counterclaim against Chateau, its directors and ROC in the litigation
alleging, among other things, various breaches of fiduciary duty. Despite the withdrawal by MHC of its tender offer, this litigation remains pending.
In addition, three separate purported class actions have been filed against Chateau and its directors in the Circuit Court of Montgomery County, Maryland alleging breaches of fiduciary duty for agreeing to a merger with ROC and refusing to endorse the MHC Tender Offer or the proposal received from Sun Communities, Inc.
The Company believes the MHC counterclaim and the State Court litigation (which has been consolidated) are entirely without merit and intends to vigorously defend these cases if pursued.
The information contained in the Schedule 14D-9 filed by the Company, including amendments previously filed and those which may be filed after the date hereof, is incorporated herein by reference.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
Not applicable.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary financial information of the Company and the Predecessor for the periods and dates indicated.
ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
OTHER DATA:
(1) In February 1997, the Company completed a merger with ROC Communities, Inc. See Note 11 to the Consolidated Financial Statements for information regarding the merger.
(2) The Company acquired eight communities in the fourth quarter of 1994.
(3) The extraordinary items represent prepayment penalties and certain other related costs associated with the early extinguishment of debt.
(4) Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income excluding gains (or losses) from debt restructuring and sales of property plus 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 is the only non-cash adjustment. 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:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis of results of operations and financial condition covers the years ended December 31, 1996, 1995 and 1994 and should be read in conjunction with the consolidated financial statements of the Company included elsewhere herein.
On February 11, 1997, the Company completed its merger with ROC Communities, Inc. ("ROC") (the "Merger"). The pro forma discussion covers the years ended December 31, 1996 and 1995 assuming the Merger and related transactions had occurred on January 1, 1995. This pro forma discussion should be read in conjunction with Note 11 to the financial statements of the Company included elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
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 $64,695,000, an increase of $4,783,000 or 8.0 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 and 1.8 percent was due to increased occupancy in the Core 1995 Portfolio. 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.
Interest and other income increased approximately $746,000, or 38 percent, in 1996 from 1995. The increase is 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 OP Unitholder 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.
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 OP units 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.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
For the year ended December 31, 1995, net income was $13,979,000, a decrease of $918,000 from the year ended December 31, 1994. The decrease was due to an increase in depreciation of $3,784,000 and increased interest costs of $6,456,000, which were offset by increased net operating income of $9,322,000. These increases were primarily due to the acquisitions of one community in 1995 and 10 communities in 1994, as well as an increase in net rental revenue from the communities owned by the Company on January 1, 1994 (the "Core 1994 Portfolio"). The increase in net operating income from the Company's Core 1994 Portfolio was due to increased occupancy and rental increases offset by general operating expense increases. In the first quarter 1995, the Company recognized an extraordinary charge of $829,000 related to the early extinguishment of debt.
Rental revenue in 1995 was $59,912,000, an increase of $12,594,000 or 26.6 percent from 1994. Approximately 84.8 percent of the increase was due to the acquisition of one community in September 1995 and 10 communities in 1994, eight of which were acquired in the fourth quarter, 9.2 percent represents the effect of annual rent increases in the Core 1994 Portfolio and 6.0 percent was due to increased occupancy in the Core 1994 Portfolio.
Weighted average occupancy for the year ended December 31, 1995, was 18,051 sites, or 21 percent higher than weighted average occupancy for the year ended December 31, 1994. Weighted average occupancy increased in 1995 due to the 1995 and 1994 acquisitions and the filling of 381 additional sites that were either vacant at January 1, 1995, or developed in 1995. The occupancy rate was 94.3 percent on 19,594 sites as of December 31, 1995, as compared with 92.7 percent on 19,185 sites as of December 31, 1994.
On a per site basis, weighted average monthly rental revenue for the year ended December 31, 1995 increased to $277 from $264 in 1994 or 4.6 percent. This increase was due to acquisitions made in 1995 and 1994 and rental increases in the Core 1994 Portfolio in 1995, partially offset by a weighted average $2 per month per site rebate that the Company passed through to its Michigan residents. The rebate represented the net savings realized by the Company from a change in real estate taxation in Michigan.
Interest and other income increased approximately $1,194,000, or 159 percent, in 1995 from 1994 primarily due to other operating revenues generated by the communities acquired by the Company in November 1994.
Property operating and maintenance expense for the year ended December 31, 1995, increased by $3,524,000 or 28.2 percent from the same period a year ago. The increase is due primarily to the 1995 and 1994 acquisitions. On a per site basis, monthly weighted average property operating and maintenance expense increased from $70 in 1994 to $74 in 1995, or 5.9 percent. The increase on a per site basis is due principally to certain of the communities acquired in 1994 having a higher per site operating cost, an increase in advertising and other costs incurred to fill sites and utility rate increases. The higher per site operating cost in certain of the acquired communities is due, in part, to the costs associated with the other operating revenues generated by these communities. The increase in advertising spending resulted in the net filling of 381 sites for 1995, while only 170 sites were filled for the year ended December 31, 1994.
Real estate taxes for the year ended December 31, 1995, increased by $688,000, or 17.9 percent, from the year ended December 31, 1994. The increase is due primarily to acquisitions and expansions of communities. On a per site basis, monthly weighted average real estate taxes were $20.90 in 1995 compared to $21.40 in 1994, a decrease of 2.6 percent. The decrease was due primarily to a change in real estate taxation in Michigan and acquisitions which had a lower per site real estate tax cost, offset by general tax increases. The change in real estate taxation decreased real estate taxes beginning in the third and fourth quarter of 1994, and first and second quarter of 1995. 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, 1995, increased $254,000, or 7.0 percent, from the year ended December 31, 1994. Administrative expense in 1995 was 6.3 percent of revenues as compared to 7.5 percent in 1994.
Interest and related amortization costs increased for the year ended December 31, 1995, by $6,456,000, as compared with the year ended December 31, 1994. The increase is attributable to the indebtedness incurred to finance the 1995 and 1994 acquisitions of 10 communities. Interest expense as a percentage of average debt outstanding decreased to approximately 8.9 percent in 1995 from approximately 9.4 percent in 1994 due to debt refinancing that occurred in the first quarter of 1995.
Depreciation expense for the year ended December 31, 1995, increased $3,784,000 from the same period a year ago. The increase is due to the 1995 and 1994 acquisitions of 10 communities for a combined purchase price of approximately $117 million. Depreciation expense as a percentage of average depreciable rental property in 1995 remained relatively unchanged from 1994.
PRO FORMA RESULTS OF OPERATIONS
PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31,1995
Rental revenue increased $7,200,000 or 6 percent in 1996 over 1995 due to increased occupancy and rental increases in communities owned by the Company on January 1, 1995. Other revenues increased approximately $800,000 or 20 percent for the year ended December 31, 1996 over 1995 due primarily to golf course and marina operations which were consolidated in 1996 and recorded as net lease income in 1995 as discussed above.
Property, operating, maintenance and administrative expense increased $4,100,000 or 8.3 percent in 1996 as compared to 1995. Excluding the expenses of the golf course and marina operations discussed above, the increase would have been $3,000,000 or 6.1 percent. This increase is due to the increased number of occupied sites, as well as general increases.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $29,755,000 for the year ended December 31, 1996, compared to $28,097,000 for the year ended December 31, 1995. The increase in cash provided by operating activities was due primarily to the increase in net operating income.
Net cash used in financing activities for the year ended December 31, 1996, was $595,000. Use of cash included distributions made to OP Unit holders of $24,065,000; the payment of $932,000 to reacquire 43,333 OP units at $21.50 per Unit and the payment of $11,239,000 to repurchase and retire 450,000 OP units in connection with the Merger. The units were repurchased in October 1996 at an average price of approximately $25.00 per OP unit. This use of cash was offset partially by net borrowings under the Company's line of credit of $36,750,000.
Net cash used in investing activities for the year ended December 31, 1996 was $29,518,000. This amount represented the acquisition of three communities, joint venture investments, capital expenditures and construction and development costs. The acquisition of the three communities for an aggregate purchase price of $9,200,000 were financed by $8,200,000 borrowed on the Company's line of credit and $1,000,000 through the issuance of 43,884 OP units. The investment in the joint venture with ROC of $10,300,000 was financed by a borrowing on the Company's line of credit. The Company also invested approximately
$3,200,000 in cash in other joint ventures. For the year ended December 31, 1996, construction and development costs approximated $3,700,000, while recurring property capital expenditures, other than construction and development costs, were approximately $635,000. Recurring property capital expenditures in 1996 increased $94,000, or 17 percent, over the same period in 1995, 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.
Future acquisitions of communities and land for development of sites will be financed through borrowings on the line of credit, the issuance of additional debt securities, assumption of existing secured or unsecured indebtedness, the issuance of OP units or from contributions from Chateau from additional equity offerings. The development of expansion sites will be financed primarily by cash flow from operations and borrowings on the line of credit. Huntington National Bank, as lead agent, along with Bank of America and First Chicago NBD, have agreed, until January, 1999, to lend the Company up to $50 million which, subject to customary conditions, is available to finance the development of expansion sites, the acquisition of additional properties and general business obligations. This line of credit is unsecured and bears interest at 150 basis points over LIBOR. At December 31, 1996, there was $36,750,000 outstanding under the line of credit.
The Company expects to meet its short-term liquidity requirements through cash flow from operations and, if necessary, borrowings under its line of credit.
The Company anticipates meeting its long-term liquidity requirements from borrowings under its line of credit, from the issuance of additional debt securities or from contributions from Chateau from additional equity offerings and cash flows from operations.
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 adverse financial effect on results of operations or financial position during the three year period ended December 31, 1996, nor does management believe it will have a material impact in the future.
PRO FORMA INDEBTEDNESS
On a pro forma basis as of December 31, 1996, the Company had the following debt outstanding (in thousands):
Fixed rate mortgages $ 113,979 Fixed rate unsecured debt 145,000 Unsecured lines of credit 66,993 Other debt 2,124 ---------- $ 328,096 ---------- ----------
The weighted average interest rate and remaining term of the fixed rate debt was approximately 8.1 percent and 4.3 years, respectively. The only variable rate debt outstanding is drawn on lines of credit. After the Merger, the Company has two available credit facilities aggregating $100 million, each of which is unsecured and bears interest at 150 basis points over LIBOR.
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.
OTHER
Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income excluding gains (or losses) from debt restructuring and sales of property plus rental property depreciation and amortization. Management believes that FFO is an important and widely used measure of the operating performance of REIT's which provides a relevant basis for comparison among REITs. For all periods presented, depreciation of rental property is the only non-cash adjustment. 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:
On a pro forma basis, FFO is calculated as follows:
ITEM 8.
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, 1996 and 1995, and the related consolidated statements of income, partners' capital and cash flows for the three years in the period ended December 31, 1996. 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 and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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, 1996 and 1995, and the results of operations and cash flows for the three years in the period ended December 31, 1996, 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.
Detroit, Michigan February 12, 1997
CP LIMITED PARTNERSHIP STATEMENTS OF INCOME
*See Note 11
The accompanying notes are an integral part of the financial statements.
CP LIMITED PARTNERSHIP BALANCE SHEETS
*See Note 11
The accompanying notes are an integral part of the financial statements.
CP LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (IN THOUSANDS, EXCEPT PER OP UNIT DATA)
The accompanying notes are an integral part of the financial statements.
CP LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the financial statements.
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS _______
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY:
The accompanying financial statements consist of the consolidated financial statements of CP Limited Partnership (the "Company"). The Company is engaged in the business of owning and operating 47 manufactured housing community properties in Michigan, Illinois, Florida, Minnesota and North Dakota. In addition, the Company owns 6 properties through a joint venture with ROC Communities, Inc. 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 on generally a one year or less term basis.
Chateau Properties, Inc. ("Chateau"), a self-administered and self-managed Real Estate Investment Trust with no independent operations of its own, is the sole general partner of the Company. As general partner, Chateau has unilateral control and complete responsibility for management of the Company. 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, 1996 is identical to the accompanying balance sheet of the Company, except as follows:
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY CONTINUED:
On November 23, 1993, Chateau completed its public offering of 5,700,000 shares of $.01 par value common stock (the "IPO"). Simultaneous with the IPO, Chateau contributed the net proceeds from the IPO and was admitted as the sole general partner, with an approximate 41 percent interest, in the Company which had become the successor owner of 33 manufactured housing community properties. These properties were contributed by the owners of Chateau Properties Group ("the Predecessor") to the Company in exchange for limited partnership interests (OP units) which, subject to certain limitation, are exchangeable at any time at the option of the holders for common stock of Chateau on a one-for-one basis. The Predecessor consisted of the manufactured housing community properties of Chateau Estates, a Michigan co-partnership, of InterCoastal Communities, Inc. and its affiliates and of six co-partnerships affiliated with Leonard Maas (the "Contributing Parties"). This business combination was accounted for as a reorganization of entities under common control, and accordingly, there were no changes in the basis of assets and liabilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
The accompanying financial statements include the accounts of the Company and its six 99 percent owned subsidiary partnerships. All significant inter-entity balances and transactions have been eliminated in consolidation. Minority interests represented by Chateau's one percent indirect interest in the aforementioned six partnerships is not separately recognized in the Company's financial statements because the Company reimburses Chateau for all of its expenses in excess of the income Chateau earns through its one percent interest.
Estimates
The preparation of these financial statements 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 estimates.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
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. The Company adopted SFAS No. 121 in 1995 and the adoption had no effect on the results of operations or financial condition of the Company.
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
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 property assets, net of accumulated depreciation compared to the sale proceeds, are recognized in income as gains or losses on disposition.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
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 made in the accompanying financial statements.
Per OP Unit
Earnings per OP unit are computed based upon the weighted average number of OP units outstanding during the period. A total of 5,660,960 OP units were held by Chateau as of December 31, 1996. SFAS No. 128, "Earnings per Share" when adopted in 1997 will not have an impact on reported earnings per share.
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 6.
Cash Equivalents
All highly liquid investments with an initial maturity of three months or less are considered to be cash equivalents.
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.
Based on the borrowing rates available to the Company, the carrying value of debt approximates fair value.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
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.
Financial Statement Reclassifications
Certain amounts in prior year financial statements have been reclassified to conform with presentations adopted in the current year.
3. ACQUISITIONS OF RENTAL PROPERTY:
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
3. 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.
(2) In connection with a joint venture, the Company may guarantee up to $8 million of debt in return for a guarantee fee.
(3) In connection with these two acquisitions, the Company assumed approximately $56 million in debt.
4. FINANCING:
At December 31, 1996, the Company had a $50 million line of credit arrangement with Huntington National Bank as lead agent for a bank group to provide financing for future construction, acquisitions and general business obligations. The line of credit is unsecured, bears interest at the prime rate of interest or, at the Company's option, LIBOR plus 150 basis points. At December 31,
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
4. FINANCING CONTINUED:
1996, there was $36.7 million in borrowings outstanding on the line of credit. The commitment contains 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. The line is renewable annually through January 1999. The terms of the line of credit provide for the payment of a fee of up to 12.5 basis points on the average daily unused amount of the line of credit.
On March 2, 1995, the Company received approximately $74.3 million in net proceeds from the issuance of $75 million of unsecured Senior Notes (the "Notes"). The Notes have semi-annual interest payments, an effective fixed interest rate of 8.79 percent per annum and mature on March 2, 2000. The Notes contain certain covenants including a restriction on the incurrence of collateralized indebtedness subject to certain provisions.
The following table sets forth certain information regarding debt at December 31:
Maturity Principal Balance Interest Rate Date 1996 1995 ------------- ---- ---- ---- (in thousands) Fixed rate mortgages 8.0-9.82% 1998-2000 $ 54,441 $ 55,425 Other notes payable Various 1997-2020 2,124 2,275 Unsecured Senior Notes 8.75% 3/00 75,000 75,000 Unsecured line of credit 1/99 36,750 -------- -------- $168,315 $132,700 -------- --------
The aggregate amount of principal maturities on the fixed rate mortgages and $75 million Senior Notes payable subsequent to December 31, 1996 (in thousands) is as follows:
YEARS ENDING DECEMBER 31, ------------ 1997 $ 1,074 1998 2,347 1999 19,582 2000 106,438 -------- $129,441 -------- --------
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
5. CHATEAU STOCK OPTION PLAN:
The Company adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation," effective with the 1996 financial statements. The Company, however, has elected to measure compensation cost using the intrinsic value method, in accordance with APB Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Chateau's 1993 Long Term Incentive Stock Plan, as amended on May 18, 1995, (the "Plan") provides for up to 1,000,000 shares of Chateau 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. Options granted under the Plan generally vest at a rate of 25 percent per year and expire in 10 years. The Plan provides for the grant of options at "fair market value" per share, which represents the quoted market price of Chateau's common stock on the date of grant. The Plan also provides for the grant of restricted stock awards and stock appreciation rights.
Information concerning stock options is as follows:
* Ranging in price from $19.50 - $24.25
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
5. CHATEAU STOCK OPTION PLAN CONTINUED:
The fair value of each option grant was estimated as of date of grant using an option-pricing model with the following assumptions used for options granted in:
1996 1995 ---- ----
Estimated fair value per share of options granted during the year $3.39 $2.72
Assumptions: Annualized dividend yield 6.7% 7.6% Common Stock price volatility 20.0% 20.0% Risk-free rate of return 6.56% 7.57% Expected option term (in years) 10 10
If compensation cost for stock option grants had been recognized based on the fair value at the grant dates for 1996 and 1995 consistent with the method prescribed by SFAS 123, net income and net income per OP unit would have been $15,911,000 and $1.07 for the year ended December 31, 1996 and $13,063,000 and $.88 for the year ended December 31, 1995.
6. SAVINGS PLAN:
The Company has a qualified retirement plan designed to qualify under Section 401 of the Internal Revenue Code (the "Plan"). The Plan allows 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 $300,000 and $275,000 to the 401(k) Plan for the Plan years ended December 31, 1996 and 1995, respectively.
7. RELATED PARTY TRANSACTIONS:
In order to permit Chateau's qualification as a REIT under the Internal Revenue Code, the operations of four golf courses and a marina were previously conducted by GC Properties, Inc. ("GCI"), a corporation wholly owned by an OP unitholder of the Company. Prior to 1996, 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 it to conduct these operations. Effective January 1, 1996, as a result of acquiring the operations of GCI, the Company has consolidated these operations. For the year ended December 31, 1996 the Company has included
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
7. RELATED PARTY TRANSACTIONS CONTINUED:
approximately $1.7 million in revenues and $1.0 million in operating expenses for these operations. For the years ended December 31, 1995 and 1994 net lease income of approximately $695,000 and $100,000, respectively was recognized. 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 lease expires November 2001.
8. 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.
9. 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 adverse financial effect during the three year period ended December 31, 1996, 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, 1996, if any, with respect to these matters is not determinable, in the opinion of management, none of these matters will result in material liability.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following is quarterly financial information for the years ended December 31, 1996 and 1995; (Amounts in thousands except per share data.)
(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.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
11. SUBSEQUENT EVENT - 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 will be accounted for using the purchase method of accounting in accordance with generally accepted accounting principles. Accordingly, the assets and liabilities of ROC will be adjusted to fair value for financial accounting purposes and the results of operations of ROC will be included in the results of operations of the Company in 1997.
In connection with the Merger, the related transactions occurred
- The Company repurchased and retired 1,200,000 OP units from Chateau, of which 450,000 were repurchased in 1996
- ROC purchased 350,000 shares of Common Stock of Chateau, which were retired along with a 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
- Certain limited partners exchanged 6,170,908 OP units for common shares, which resulted in those units being held by Chateau. These Unitholders waived their right to receive the above distribution with respect to those OP units exchanged and as a result it was re-allocated to Chateau, resulting in a distribution to the general partner of .068 OP units
- These exchanging limited partners purchased 984,423 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.
Following the Merger, the Company owns 128 communities with an aggregate 42,986 residential homesites. In addition, it fee manages 6,953 residential homesites in 34 communities.
Continued
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED _______
11. SUBSEQUENT EVENT - MERGER WITH ROC COMMUNITIES, INC. CONTINUED
The following unaudited pro forma income statement information has been prepared as if the Merger and related transactions had occurred on January 1, 1995. In addition, the pro forma information is presented as if the acquisitions of 14 properties made in 1996 and 1995 by the Company and ROC had occurred on January 1, 1995. 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, 1995.
(In thousands, except per share data) 1996 1995 ---- ---- Revenues $132,800 $124,800 Expenses: Property, operating, maintenance and administrative 53,700 49,700 Depreciation 34,900 34,900 Interest and related amortization 26,200 27,100 -------- -------- Total expenses 114,800 111,700 -------- -------- Net income $ 18,000 $ 13,100 -------- -------- Per OP unit $ .64 $ .47 -------- -------- Weighted average OP Units outstanding 27,873 27,879 -------- --------
The pro forma balance sheet has been prepared as if the Merger had occurred on December 31,1996.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
N/A
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
N/A
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
N/A
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
N/A
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Statements of Income for the years ended December 31, 1996, December 31, 1995 and December 31, 1994
Balance Sheets as of December 31, 1996 and 1995 for the Company
Statements of Partners' Capital for the years ended December 31, 1996, December 31, 1995 and December 31, 1994
Statements of Cash Flows for the years ended December 31, 1996, December 31, 1995 and December 31, 1994
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULE
III - Real Estate and Accumulated Depreciation
3. Exhibits
Exhibit Number (Referenced to Item 601 OF Regulation S-K)
Exhibit Description ------------------- 3(i) (a) Chateau Properties, Inc. Articles of Amendment and Restatement 3(ii) (b) Chateau Properties, Inc. Bylaws 4.1 (b) Form of Stock Certificate 4.2* (c) Note and Mortgage on Del Tura Community 4.3(i) (c) $75,000,000 8-3/4% Global Note dated March 2, 1995 of CP Limited Partnership 4.3(ii) (c) Indenture Agreement dated as of February 1, 1995 between CP Limited Partnership and The First National Bank of Chicago 4.4 (d) Amended and Restated Loan Agreement dated as of January 8, 1996 between The Huntington National Bank and CP Limited Partnership 10.1 (b) Agreement of Limited Partnership of CP Limited Partnership 10.2 (b) Lease of 19500 Hall Road 10.3 (b) Form of Noncompetition Agreement (Boll and Allen) 10.4 (b) Employment Agreement (Kellogg) 10.5 (b) Form of Registration Rights Agreement 10.6 (b) Long-Term Incentive Stock Plan 10.7 (b) Profit Sharing Plan 10.8 (b) Form of Ground Lease 10.9 (d) Management Compensation Plan 10.10 (c) Consulting Agreement dated as of November 1, 1994 between Newman, Herfurth and Durand, Inc. and CP Limited Partnership 10.11 (c) Deferred Compensation Agreement dated as of November 1, 1994 for the benefit of Graydon K. Newman, Jr. 21 (d) List of Subsidiaries of Chateau Properties, Inc. 99 (e) Company's Schedule 14D-9
* 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.
(a) Incorporated by reference to the Exhibits filed with Chateau's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 filed with the Commission on August 10, 1995 (Commission File No. 1-12496).
(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 Annual Report on Form 10-K for the year ended December 31, 1994 filed with the Commission on March 30, 1995 (Commission File No. 1-12496).
(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 Schedule 14D-9 filed with the Commission on September 19, 1996.
b. REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the last quarter of 1996.
EXHIBIT INDEX
Exhibit Number (Referenced to Item 601 of Regulation S-K)
Sequential Page Exhibit Description Number ------------------- --------- 3(i) (a) Chateau Properties, Inc. Articles of Amendment and Restatement 3(ii) (b) Chateau Properties, Inc. Bylaws 4.1 (b) Form of Stock Certificate 4.2* (c) Note and Mortgage on Del Tura Community 4.3(i) (c) $75,000,000 8-3/4% Global Note dated March 2, 1995 of CP Limited Partnership 4.3(ii) (c) Indenture Agreement dated as of February 1, 1995 between CP Limited Partnership and The First National Bank of Chicago 4.4 (d) Amended and Restated Loan Agreement dated as of January 8, 1996 between The Huntington National Bank and CP Limited Partnership 10.1 (b) Agreement of Limited Partnership of CP Limited Partnership 10.2 (b) Lease of 19500 Hall Road 10.3 (b) Form of Noncompetition Agreement (Boll and Allen) 10.4 (b) Employment Agreement (Kellogg) 10.5 (b) Form of Registration Rights Agreement 10.6 (b) Long-Term Incentive Stock Plan 10.7 (b) Profit Sharing Plan 10.8 (b) Form of Ground Lease 10.9 (d) Management Compensation Plan 10.10 (c) Consulting Agreement dated as of November 1, 1994 between Newman, Herfurth and Durand, Inc. and CP Limited Partnership 10.11 (c) Deferred Compensation Agreement dated as of November 1, 1994 for the benefit of Graydon K. Newman, Jr. 21 (d) List of Subsidiaries of Chateau Properties, Inc. 99 (e) Company's Schedule 14D-9
EXHIBIT INDEX
* 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.
(a) Incorporated by reference to the Exhibits filed with Chateau's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 filed with the Commission on August 10, 1995 (Commission File No. 1-12496).
(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 Annual Report on Form 10-K for the year ended December 31, 1994 filed with the Commission on March 30, 1995 (Commission File No. 1-12496).
(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 Schedule 14D-9 filed with the Commission on September 19, 1996.
b. REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the last quarter of 1996.
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 28th day of March, 1997.
CP LIMITED PARTNERSHIP
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 27, 1997.
SIGNATURE TITLE
/s/ John A. 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.
/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/ James M. Lane Director ___________________________ James M. Lane
/s/ Donald E. Miller Director ___________________________ Donald E. Miller
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, 1996
CP LIMITED PARTNERSHIP
FINANCIAL STATEMENT SCHEDULE
Pages -----
III. Real Estate and Accumulated Depreciation. . . . . . . . . . . . . . .
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.
CP LIMITED PARTNERSHIP SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
CP LIMITED PARTNERSHIP SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
SCHEDULE III CONTINUED
CHATEAU PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued _______
The changes in total real estate for the years ended December 31, 1996 and 1995 and 1994 are as follows:
1996 1995 1994 ---- ---- ---- Balance, beginning of year $276,423 $266,833 $151,069 Acquisitions 19,531 6,922 113,214 Improvements 4,731 2,670 3,070 Dispositions and other (54) (2) (520) -------- -------- -------- Balance, end of year $300,631 $276,423 $266,833 -------- -------- -------- -------- -------- --------
The change in accumulated depreciation for the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994 ---- ---- ---- Balance, beginning of year $ 69,868 $ 58,856 $ 53,314 Depreciation for the period 11,452 11,014 7,230 Disposition and other (27) (2) (1,688) -------- -------- -------- Balance, end of year $ 81,293 $ 69,868 $ 58,856 -------- -------- -------- -------- -------- --------