1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001.
OR
| | Transition pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
COMMISSION FILE NUMBER 333-2522-01
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-3144240
(State of Incorporation) (I.R.S. Employer Identification No.)
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (248) 932-3100
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Page 1 of 17
2
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX
PAGES
-----
PART I
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2001 and
December 31, 2000 3
Consolidated Statements of Income for the Periods
Ended June 30, 2001 and 2000 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
PART II
Item 2. Changes in Securities and Use of Proceeds 16
Item 6.(a) Exhibits required by Item 601 of Regulation S-K 16
Item 6.(b) Reports on Form 8-K 16
Signatures 17
2
3
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
(IN THOUSANDS)
ASSETS 2001 2000
--------- ---------
Investment in rental property, net $ 783,735 $ 751,820
Cash and cash equivalents 7,665 18,466
Notes and other receivables 139,488 158,949
Investment in and advances to affiliates 11,230 7,930
Other assets 28,556 32,063
--------- ---------
Total assets $ 970,674 $ 969,228
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Line of credit $ 73,000 $ 12,000
Debt 389,494 452,508
Accounts payable and accrued expenses 19,195 16,304
Deposits and other liabilities 9,699 8,839
--------- ---------
Total liabilities 491,388 489,651
--------- ---------
Series B Cumulative Preferred Operating Partnership
Units ("Series B Units"), mandatory redeemable,
82 and 36 issued and outstanding for 2001 and 2000 respectively 8,175 3,564
Preferred Operating Partnership Units ("POP Units"),
convertible, redeemable, 1,326 issued and outstanding 35,783 35,783
Partners' Capital:
Series A Perpetual Preferred Operating Partnership Units
("Series A Units"), unlimited authorized,
2,000 issued and outstanding 50,000 50,000
Operating Partnership Units ("OP Units"), unlimited
authorized; 20,145 and 20,194 issued and
outstanding for 2001 and 2000, respectively
General partner 341,200 343,380
Limited partners 51,678 51,596
Unearned compensation (7,550) (4,746)
--------- ---------
Total partners' capital 435,328 440,230
--------- ---------
Total liabilities and partners' capital $ 970,674 $ 969,228
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
3
4
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2001 2000 2000 2001
----------- ---------- ----------- -----------
Revenues:
Income from property $ 34,616 $ 32,947 $ 69,241 $ 66,076
Other income 3,532 3,117 7,998 6,021
----------- ---------- ----------- -----------
Total revenues 38,148 36,064 77,239 72,097
----------- ---------- ----------- -----------
Expenses:
Property operating and maintenance 6,975 6,703 14,386 13,875
Real estate taxes 2,334 2,271 4,590 4,518
Property management 652 709 1,436 1,449
General and administrative 1,200 1,001 2,342 2,052
Depreciation and amortization 8,216 7,678 16,070 15,224
Interest 7,886 7,306 16,266 14,153
----------- ---------- ----------- -----------
Total expenses 27,263 25,668 55,090 51,271
----------- ---------- ----------- -----------
Income before gain from property
dispositions, net and distribution
to Preferred OP Units 10,885 10,396 22,149 20,826
Gain from property dispositions, net 758 -- 4,275 --
----------- ---------- ----------- -----------
Income before distribution to Preferred OP Units 11,643 10,396 26,424 20,826
Less distribution to Preferred OP Units 2,041 1,956 4,017 3,871
----------- ---------- ----------- -----------
Earnings attributable to OP Units $ 9,602 $ 8,440 $ 22,407 $ 16,955
=========== ========== =========== ===========
Earnings attributed to:
General Partner $ 8,320 $ 7,305 $ 2,983 $ 2,293
Limited Partners 1,282 1,135 19,424 14,662
----------- ---------- ----------- -----------
$ 9,602 $ 8,440 $ 22,407 $ 16,955
=========== ========== =========== ===========
Earnings per OP Unit:
Basic $ 0.48 $ 0.42 $ 1.12 $ 0.85
=========== ========== =========== ===========
Diluted $ 0.48 $ 0.42 $ 1.11 $ 0.84
=========== ========== =========== ===========
Weighted average OP Units outstanding:
Basic 19,856 19,999 19,940 20,003
=========== ========== =========== ===========
Diluted 20,028 20,122 20,089 20,094
=========== ========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
4
5
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(IN THOUSANDS)
2001 2000
------------- ------------
Cash flows from operating activities:
Earnings attributable to OP Units $ 22,407 $ 16,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain from property dispositions, net (4,275) --
Depreciation and amortization 16,070 15,224
Amortization of deferred financing costs 524 317
(Increase) decrease in other assets 857 (3,140)
Increase (decrease) in accounts payable and other liabilities 3,751 (207)
------------- ------------
Net cash provided by operating activities 39,334 29,149
------------- ------------
Cash flows from investing activities:
Investment in rental properties (41,376) (35,565)
Proceeds related to property dispositions 17,331 --
Investment in and advances to affiliates (3,300) (18,592)
Repayments of (investments in) notes receivable, net 19,582 (2,311)
------------- ------------
Net cash used in investing activities (7,763) (56,468)
------------- ------------
Cash flows from financing activities:
Borrowings on line of credit, net 61,000 45,000
Repayments on notes payable and other debt (75,514) (1,063)
Capital withdrawals (6,066) (267)
Distributions (21,792) (20,975)
------------- ------------
Net cash provided by (used in) financing activities (42,372) 22,695
------------- ------------
Net decrease in cash and cash equivalents (10,801) (4,624)
Cash and cash equivalents, beginning of period 18,466 11,330
------------- ------------
Cash and cash equivalents, end of period $ 7,665 $ 6,706
============= ============
Supplemental information:
Preferred OP Units issued for rental properties $ 4,612 $ 3,564
Debt assumed for rental properties $ 12,500 $ --
Restricted common stock issued as unearned
compensation by the general partner, net of cancellations $ 3,233 --
Conversion of partnership interest to notes receivable -- $ 11,011
The accompanying notes are an integral part of the consolidated financial
statements.
5
6
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
These unaudited condensed consolidated financial statements of Sun
Communities Operating Limited Partnership (the "Company"), have been
prepared pursuant to the Securities and Exchange Commission ("SEC") rules
and regulations and should be read in conjunction with the financial
statements and notes thereto of the Company as of December 31, 2000. The
following notes to consolidated financial statements present interim
disclosures as required by the SEC. The accompanying consolidated financial
statements reflect, in the opinion of management, all adjustments necessary
for a fair presentation of the interim financial statements. All such
adjustments are of a normal and recurring nature. Certain reclassifications
have been made to the prior period financial statements to conform with
current period presentation.
The Company owns 100 percent of the preferred stock of an affiliate, Sun
Home Services, Inc. ("Sun Homes"), is entitled to 95 percent of the
operating cash flow of Sun Homes, and accounts for its investment utilizing
the equity method of accounting. The common stock is owned by two officers
of the Company and the estate of a former officer of the Company who are
entitled to receive five percent of the operating cash flow.
Sun Communities, Inc. ("Sun"), a self-administered and self-managed REIT
with no independent operations of its own, is the sole general partner of
the Company. As general partner, Sun has unilateral control and complete
responsibility for management of the Company. The balance sheet of Sun as
of June 30, 2001 is identical to the accompanying Company balance sheet,
except as follows:
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION: CONTINUED
As Presented
Herein Sun Communities, Inc.
June 30, 2001 Adjustments June 30, 2001
--------------- -------------- -------------
(in thousands)
Notes and other receivables................ $ 139,488 $ (2,600) $ 136,888
=============== ============== =============
Total assets............................... $ 970,674 $ (2,600) $ 968,074
=============== ============== =============
Minority interests......................... $ 145,636 $ 145,636
=============
Series B Units............................. $ 8,175 (8,175)
POP Units.................................. 35,783 (35,783)
Series A Units............................. 50,000 (50,000)
General partner............................ 341,200 (341,200)
Limited partners........................... 51,678 (51,678)
Common stock............................... 177 $ 177
Additional paid-in capital................. 397,116 397,116
Distributions in excess of.................
accumulated earnings.................... (41,173) (41,173)
Officers' notes............................ (11,136) (11,136)
Unearned compensation...................... (7,550) -- (7,550)
Treasury Stock............................. -- (6,384) (6,384)
--------------- -------------- -------------
Partners' capital/Stockholders'.........
equity............................... $ 435,328 $ (2,600) $ 331,050
=============== ============== =============
Total liabilities and partners'
capital/Stockholders' equity............ $ 970,674 $ (2,600) $ 968,074
=============== ============== =============
2. RENTAL PROPERTY:
The following summarizes rental property (in thousands):
June 30, December 31,
2001 2000
------------- -------------
Land $ 78,381 $ 76,120
Land improvements and buildings 767,426 739,858
Furniture, fixtures, equipment 18,587 17,498
Land held for future development 16,174 12,042
Property under development 29,094 21,859
------------- -------------
909,662 867,377
Accumulated depreciation (125,927) (115,557)
------------- -------------
Rental property, net $ 783,735 $ 751,820
============= =============
7
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. RENTAL PROPERTY: CONTINUED:
In April 2001, in conjunction with a property acquisition, the Company
issued 46,117 Series B-1 Preferred OP Units at a $100 mandatory redemption
price with interest rates ranging from 6.85 percent to 9.19 percent and a
maturity of April 16, 2012. The Series B-1 Preferred OP Units are subject
to earlier redemption subsequent to April 15, 2006 or upon specified
events.
3. NOTES RECEIVABLE:
Notes receivable consisted of the following (in thousands):
June 30, December 31,
2001 2000
---------- -----------
Mortgage notes receivable with minimum monthly
interest payments at LIBOR based floating rates
of approximately LIBOR + 3.0%, maturing at various
dates from September 2001 through June 2012,
collateralized by manufactured home communities. $ 57,762 $ 60,491
Note receivable, subordinated, collateralized by all assets of
the borrower, bears interest at the higher of LIBOR +
2.30% or 8% and payable on demand. 32,083 35,849
Note receivable, subordinated, bears interest at 9.75%
and matures September 2005. 4,000 4,000
Installment loans on manufactured homes with interest
payable monthly at a weighted average interest rate
and maturity of 8.6% and 18 years, respectively. 14,757 32,426
Other receivables 28,286 23,583
10 year note receivable from an officer of the general partner
bearing interest at LIBOR + 1.75%, with a minimum
and maximum interest rate of 6% and 9%, respectively,
collateralized by 80,000 shares of Sun's common
stock with personal liability up to $1.3 million 2,600 2,600
---------- ----------
$ 139,488 $ 158,949
========== ==========
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT:
The following table sets forth certain information regarding debt (in
thousands):
June 30, December 31,
2001 2000
------------- -------------
Collateralized term loan, interest at 7.01%,
due September 9, 2007 $ 43,112 $ 43,393
Senior notes, interest at 8.20%, due August 15, 2008 100,000 100,000
Senior notes, interest at 7.375%, due May 1, 2001 -- 65,000
Senior notes, interest at 7.625%, due May 1, 2003 85,000 85,000
Senior notes, interest at 6.97%, due December 3, 2007 35,000 35,000
Callable/redeemable notes, interest at 6.77%,
due May 14, 2015, callable/redeemable
May 16, 2005 65,000 65,000
Capitalized lease obligations, interest at 6.1%
due through December 2003 26,333 36,009
Mortgage notes, other 35,049 23,106
------------- -------------
$ 389,494 $ 452,508
============= =============
The Company had $52 million of its $125 million line of credit available
to borrow at June 30, 2001. Borrowings under the line of credit bear
interest at the rate of LIBOR plus 1.0% and mature January 1, 2003.
5. OTHER INCOME:
The components of other income are as follows for the periods ended June
30, 2001 and 2000 (in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
-------- -------- -------- --------
Interest income $ 2,668 $ 2,174 $ 6,121 $ 4,398
Income (loss) from affiliate (27) 172 138 91
Other income 891 771 1,739 1,532
-------- -------- -------- --------
$ 3,532 $ 3,117 $ 7,998 $ 6,021
======== ======== ======== ========
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10
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EARNINGS PER OP UNIT (IN THOUSANDS):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Earnings used for basic and diluted earnings per
OP unit computation $ 9,602 $ 8,440 $ 22,407 $ 16,955
========== ========== ========== ==========
Total units used for basic earnings per OP unit 19,856 19,999 19,940 20,003
Dilutive securities, principally Sun's stock options 172 123 149 91
---------- ---------- ---------- ----------
Total shares used for diluted earnings per OP unit
computation 20,028 20,122 20,089 20,094
========== ========== ========== ==========
Diluted earnings per OP unit reflect the potential dilution that would
occur if securities were exercised or converted into OP units. Convertible
Preferred OP Units are excluded from the computations as their inclusion
would have an anti-dilutive effect on earnings per share in 2001 and 2000.
10
11
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and the notes thereto. Capitalized terms are used as
defined elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
Comparison of the six months ended June 30, 2001 and 2000
For the six months ended June 30, 2001, income before gain from property
dispositions, net and distribution to Preferred OP Units increased by 6.4
percent from $20.8 million to $22.1 million, when compared to the six months
ended June 30, 2000. The increase was due to increased revenues of $5.1 million
while expenses increased by $3.8 million.
Income from property increased by $3.1 million from $66.1 million to $69.2
million, or 4.8 percent, due to rent increases and other community revenues
($3.2 million) and acquisitions ($2.1 million), offset by a revenue reduction of
$2.2 million due to property dispositions.
Other income increased by $2.0 million from $6.0 million to $8.0 million due
primarily to an increase in interest income.
Property operating and maintenance expenses increased by $0.5 million from $13.9
million to $14.4 million, or 3.7 percent, representing general cost increases
($0.8 million) and acquisitions ($0.3 million) offset by an expense reduction of
$0.6 million due to property dispositions.
Real estate taxes increased by $0.1 million from $4.5 million to $4.6 million.
Property management expenses remained constant at approximately $1.4 million for
both periods representing 2.1 percent and 2.2 percent of income from property in
2001 and 2000, respectively.
General and administrative expenses increased by $0.3 million from $2.0 million
to $2.3 million, representing 3.0 percent and 2.8 percent of total revenues in
2001 and 2000, respectively.
Earnings before interest, taxes, depreciation and amortization ("EBITDA", an
alternative financial performance measure that may not be comparable to
similarly titled measures reported by other companies, defined as total revenues
less property operating and maintenance, real estate taxes, property management,
and general and administrative expenses)) increased by $4.3 million from $50.2
million to $54.5 million. EBITDA as a percent of revenues increased to 70.5
percent in 2001 compared to 69.6 percent in 2000.
Depreciation and amortization increased by $0.8 million from $15.2 million to
$16.1 million, or 5.6 percent, due primarily to the net additional investment in
rental properties.
Interest expense increased by $2.1 million from $14.2 million to $16.3 million,
or 14.9 percent, due primarily to financing additional investments in rental
property.
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
Comparison of the three months ended June 30, 2001 and 2000
For the three months ended June 30, 2001, income before gain from property
dispositions, net and distribution to Preferred OP Units increased by 4.7
percent from $10.4 million to $10.9 million, when compared to the three months
ended June 30, 2000. The increase was due to increased revenues of $2.1 million
while expenses increased by $1.6 million.
Income from property increased by $1.7 million from $32.9 million to $34.6
million, or 5.1 percent, due to rent increases and other community revenues
($1.5 million), and acquisitions ($1.3 million), offset by a revenue reduction
of $1.1 million due to property dispositions.
Other income increased by $0.4 million from $3.1 million to $3.5 million due
primarily to an increase in interest income.
Property operating and maintenance expenses increased by $0.3 million from $6.7
million to $7.0 million, or 4.1 percent, representing general cost increases
($0.4 million) and property acquisitions ($0.2 million), offset by an expense
reduction of $0.2 million due to property dispositions.
Real estate taxes remained constant at $2.3 million for both periods.
Property management expenses remained constant at approximately $0.7 million for
both periods representing 1.9 percent and 2.2 percent of income from property in
2001 and 2000, respectively.
General and administrative expenses increased by $0.2 million from $1.0 million
to $1.2 million, representing 3.1 percent and 2.8 percent of total revenues in
2001 and 2000, respectively.
EBITDA increased by $1.6 million from $25.4 million to $27.0 million. EBITDA as
a percent of revenues increased to 70.7 percent in 2001 compared to 70.4 percent
in 2000.
Depreciation and amortization increased by $0.5 million from $7.7 million to
$8.2 million, or 7.0 percent, due primarily to the net additional investment in
rental properties.
Interest expense increased by $0.6 million from $7.3 million to $8.4 million, or
7.9 percent, due primarily to financing additional investments in rental
properties.
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13
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of and for
the six months ended June 30, 2001 and 2000. The "Same Property" data represents
information regarding the operation of communities owned as of January 1, 2000
and June 30, 2001. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The "Total Portfolio"
column differentiates from the "Same Property" column by including financial
information for managed but not owned communities, recreational vehicle
communities, new development and acquisition communities.
SAME PROPERTY TOTAL PORTFOLIO
------------------------- ----------------------------
2001 2000 2001 2000
----------- ---------- ----------- ----------
Income from property $ 52,245 $ 49,437 $ 69,241 $ 66,076
----------- ---------- ----------- ----------
Property operating expenses:
Property operating and maintenance 8,993 8,726 14,386 13,875
Real estate taxes 3,902 3,720 4,590 4,518
----------- ---------- ----------- ----------
Property operating expenses 12,895 12,446 18,976 18,393
----------- ---------- ----------- ----------
Property EBITDA $ 39,350 $ 36,991 $ 50,265 $ 47,683
=========== ========== =========== ==========
Number of operating properties 90 90 112 111
Developed sites 30,196 29,981 39,010 38,641
Occupied sites 28,677 28,641 36,087 36,631
Occupancy % 95.0% 95.5% 94.5%(1) 95.4%(1)
Weighted average monthly rent per site $ 298 $ 285 $ 296(1) $ 284(1)
Sites available for development 2,564 2,159 5,109 5,844
Sites planned for development in current year 345 427 753 1,190
(1) Occupancy % and weighted average rent relates to manufactured housing sites,
excluding recreational vehicle sites.
On a same property basis, property EBITDA increased by $2.4 million from $37.0
million to $39.4 million, or 6.4 percent. Property revenues increased by $2.8
million from $49.4 million to $52.2 million, or 5.7 percent, due primarily to
increases in rents and occupancy related charges including water and property
tax pass through.
Property operating expenses increased by $0.4 million from $12.5 million to
$12.9 million or 3.6 percent, due to increased occupancies and costs.
13
14
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $10.8 million to $7.7 million at June 30,
2001 from $18.5 million at December 31, 2000 because cash used for financing and
investing activities exceeded cash provided by operating activities.
Net cash provided by operating activities increased by $10.2 million to $39.3
million for the six months ended June 30, 2001 compared to $29.1 million for the
same period in 2000. This increase was primarily due to accounts payable and
other liabilities increasing by $4.0 million, other assets decreasing by $4.0
million and a $2.2 million increase in earnings attributable to OP Units before
depreciation and amortization and gain from property dispositions, net.
Net cash used in investing activities decreased by $48.7 million to $7.8 million
for the six months ended June 30, 2001 compared to $56.5 million for the same
period in 2000. This decrease was primarily due to a $21.9 million decrease in
investments in notes receivable, net, proceeds related to property dispositions
of $17.3 million and $15.3 million related to investments in and advances to
affiliates, offset by a $5.8 million increase in rental property acquisition
activities.
Net cash used in financing activities was $42.4 million for the six months ended
June 30, 2001 compared to $22.7 million provided by financing activities during
the same period in 2000. This change was primarily because of $74.5 million in
additional repayments on notes payable and other debt, capital withdrawals
increasing by $5.8 million, distributions increasing by $0.8 million, offset by
$16.0 million in additional line of credit borrowings.
The Company expects to meet its short-term liquidity requirements generally
through its working capital provided by operating activities. The Company
expects to meet certain long-term liquidity requirements such as scheduled debt
maturities and property acquisitions through the issuance of debt securities or
partnership interests. The Company considers these sources to be adequate and
anticipates they will continue to be adequate to meet operating requirements,
capital improvements, investment in development, and payment of distributions by
the Company in accordance with REIT requirements in both the short and long
term. The Company may also meet these short-term and long-term requirements by
utilizing its $125 million line of credit which bears interest at LIBOR plus
1.0% and is due January 1, 2003.
At June 30, 2001, the Company's debt to total market capitalization approximated
36.1% (assuming conversion of all Common OP Units to shares of common stock and
including Preferred OP Units). The debt has a weighted average maturity of
approximately 5.9 years and a weighted average interest rate of 7.0%.
Recurring capital expenditures approximated $1.9 million and $2.0 million for
the six months ended June 30, 2001 and 2000, respectively.
14
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER
Special Note Regarding Forward-Looking Statements
This Form 10-Q contains various "forward-looking statements" within the meaning
of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions identify
forward-looking statements. These forward-looking statements reflect the
Company's current views with respect to future events and financial performance,
but are based upon current assumptions regarding the Company's operations,
future results and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment which may cause
the actual results of the Company to be materially different from any future
results expressed or implied by such forward-looking statements. Please see the
section entitled "Factors That May Affect Future Results" of the Company's
Annual Report on Form 10-K for the year ended December 31,2000 filed with the
Securities and Exchange Commission for a list of uncertainties and factors.
Such factors include, but are not limited to, the following: (i) changes in the
general economic climate; (ii) increased competition in the geographic areas in
which the Company owns and operates manufactured housing communities; (iii)
changes in government laws and regulations affecting manufactured housing
communities; and (iv) the ability of the Company to continue to identify,
negotiate and acquire manufactured housing communities and/or vacant land which
may be developed into manufactured housing communities on terms favorable to the
Company. The Company undertakes no obligation to publicly update or revise any
forward-looking statements whether as a result of new information, future
events, or otherwise.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") approved
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141
requires, among other things, that the purchase method of accounting for
business combinations be used for all business combinations initiated after June
30, 2001. SFAS 142 addresses the accounting for goodwill and other intangible
assets subsequent to their acquisition. SFAS 142 requires, among other things,
that goodwill and other indefinite-lived intangible assets no longer be
amortized and that such assets be tested for impairment at least annually. SFAS
142 is effective for fiscal years beginning after December 15, 2001. The Company
is currently evaluating the impact these standards will have on its financial
statements.
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The Company adopted SFAS 133 as amended
by SFAS 137 and 138 effective January 1, 2001. There was no effect from the
application of SFAS 133 on the earnings and financial position of the Company as
the Company had no derivative instruments at June 30, 2001 and December 31,
2000.
15
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
PART II
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the quarter ended June 30, 2001, the Company issued an aggregate of
46,117 Series B-1 Preferred OP Units to one seller of real estate to the Company
with an agreed upon value of $4.6 million. The Company also issued 1,018 Common
OP Units to the General Partner for a capital contribution to the Company equal
to the proceeds received by the General Partner from the issuance of 1,018
shares of Common Stock pursuant to its Dividend Reinvestment and Stock Purchase
Plan.
The above-referenced Series B-1 Preferred OP Units and Common OP Units were
issued in private placements in reliance on Section 4(2) of the Securities Act
of 1933, as amended, including Regulation D promulgated thereunder. The
recipients of such OP Units are accredited investors as defined in Rule 501 of
Regulation D.
ITEM 6.(A) - EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
None
ITEM 6.(B) - REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the period covered by
this Form 10-Q.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 13, 2001
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
BY: Sun Communities, Inc., General Partner
BY: /s/ Jeffrey P. Jorissen
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Jeffrey P. Jorissen, Chief Financial Officer
and Secretary
(Duly authorized officer and principal financial officer)
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