FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 333-2522-01
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
STATE OF MICHIGAN 38-3144240
State of Organization I.R.S. Employer I.D. No.
31700 MIDDLEBELT ROAD
SUITE 145
FARMINGTON HILLS, MICHIGAN 48334
(248) 932-3100
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ ]
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 required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of March 4, 2002, the aggregate market value of the Registrant's
partnership Units held by non-affiliates of the Registrant was approximately
$68,669,413 based on the closing sales price of one share of Sun Communities,
Inc. common stock (into which the partnership units are convertible on a
one-for-one basis) on such date.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement to be filed by Sun
Communities, Inc. for its 2002 Annual Meeting of Shareholders are incorporated
by reference into Part III of this Report.
As used in this report, "Company", "Us", "We", "Our" and similar terms
means Sun Communities Operating Limited Partnership, a Michigan limited
partnership, and one or more of its Subsidiaries, (as defined below).
PART I
ITEM 1. BUSINESS
GENERAL
We own, operate and finance manufactured housing communities
concentrated in the midwestern and southeastern United States. Sun Communities,
Inc., a Maryland corporation and our sole general partner ("General Partner"),
is a fully integrated real estate company which, together with its affiliates
and predecessors, has been in the business of acquiring, operating and expanding
manufactured housing communities since 1975. As of December 31, 2001, we owned
and operated or financed a portfolio of 116 developed properties located in
fifteen states (the "Properties"), including 105 manufactured housing
communities, 5 recreational vehicle communities, and 6 properties containing
both manufactured housing and recreational vehicle sites. As of December 31,
2001, the Properties contained an aggregate of 40,544 developed sites comprised
of 35,390 developed manufactured home sites and 5,154 recreational vehicle sites
and an additional 4,385 manufactured home sites suitable for development. In
order to enhance Property performance and cash flow, the Company, through Sun
Home Services, Inc., a Michigan corporation ("SHS"), actively markets and sells
new and used manufactured homes for placement in the Properties.
Our executive and principal property management office is located at
31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334 and our
telephone number is (248) 932-3100. We have regional property management offices
located in Austin, Texas, Dayton, Ohio, Elkhart, Indiana, Grand Rapids,
Michigan, and Orlando, Florida, and we employed an aggregate of 546 people as of
December 31, 2001.
STRUCTURE OF THE COMPANY
Our General Partner is a self-administered and self-managed real estate
investment trust, or REIT. The Company is structured as an umbrella partnership
REIT, or UPREIT, and is the entity through which our General Partner conducts
substantially all of its operations, and which owns, either directly or
indirectly, through subsidiaries (the "Subsidiaries"), all of the General
Partner's assets. This UPREIT structure enables the General Partner to comply
with certain complex requirements under the Federal tax rules and regulations
applicable to REITs, and to acquire manufactured housing communities in
transactions that defer some or all of the sellers' tax consequences. Our
Subsidiaries include SHS, which provides manufactured home sales and other
services to current and prospective tenants of the Properties. Along with
several other subsidiaries, SHS wholly owns Sun Water Oak Golf, Inc., which was
organized to own and operate the golf course, restaurant and related facilities
located on the Water Oak Property that was acquired in November 1994, and SUI
TRS, Inc., which was organized to hold our investment in Origen Financial,
L.L.C. See "Factors that May Affect Future Results -- Relationship with Origen"
in our General Partner's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
2
THE MANUFACTURED HOUSING COMMUNITY INDUSTRY
A manufactured housing 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 wide array of designs,
providing owners with a level of customization generally unavailable In other
forms of multifamily housing.
Modern manufactured housing communities, such as the Properties,
contain improvements similar to other garden-style residential developments,
including centralized entrances, paved streets, curbs and gutters, and parkways.
In addition, these communities also often provide a number of amenities, such as
a clubhouse, a swimming pool, shuffleboard courts, tennis courts, laundry
facilities and cable television service.
The owner of each home on our Properties leases the site on which the
home is located. We own the underlying land, utility connections, streets,
lighting, driveways, common area amenities and other capital improvements and
are responsible for enforcement of community guidelines and maintenance. Some of
the Properties provide water and sewer service through public or private
utilities, while others provide these services to residents from on-site
facilities. Each owner within our Properties is responsible for the maintenance
of his or her home and leased site. As a result, capital expenditure needs tend
to be less significant, relative to multi-family rental apartment complexes.
PROPERTY MANAGEMENT
Our property management strategy emphasizes intensive, hands-on
management by dedicated, on-site district and community managers. We believe
that this on-site focus enables us to continually monitor and address tenant
concerns, the performance of competitive properties and local market conditions.
Of the 546 Company employees, 487 are located on-site as property managers,
support staff, or maintenance personnel.
Our community managers are overseen by Brian W. Fannon, our General
Partner's Chief Operating Officer, who has 32 years of property management
experience, a Senior-Vice President-Operations, three Vice Presidents of
Operations and ten Regional Property Managers. In addition, the Regional
Property Managers are responsible for semi-annual market surveys of competitive
communities, interaction with local manufactured home dealers and regular
property inspections.
Each district or community manager performs regular inspections in
order to continually monitor the Property's physical condition and provides
managers with the opportunity to understand and effectively address tenant
concerns. In addition to a district or community manager, each district or
property has an on-site maintenance personnel and management support staff. We
hold periodic training sessions for all property management personnel to ensure
that management policies are implemented effectively and professionally.
3
HOME SALES
SHS offers manufactured home sales services to tenants and prospective
tenants of our Properties. Since tenants often purchase a home already on-site
within a community, such services enhance occupancy and property performance.
Additionally, because many of the homes in the Properties are sold through SHS,
better control of home quality in our communities can be maintained than if
sales services were conducted solely through third-party brokers.
REGULATIONS AND INSURANCE
General. Manufactured housing community properties are subject to
various laws, ordinances and regulations, including regulations relating to
recreational facilities such as swimming pools, clubhouses and other common
areas. We believe that each Property has the necessary operating permits and
approvals.
Americans with Disabilities Act ("ADA"). The Properties and any newly
acquired manufactured housing communities must comply with the ADA. The ADA has
separate compliance requirements for "public accommodations" and "commercial
facilities," but generally requires that public facilities such as clubhouses,
pools and recreation areas be made accessible to people with disabilities.
Compliance with ADA requirements could require removal of access barriers and
other capital improvements at our Properties. Noncompliance could result in
imposition of fines or an award of damages to private litigants. We do not
believe the ADA will have a material adverse impact on our results of
operations. If required property improvements involve a greater expenditure than
we currently anticipate, or if the improvements must be made on a more
accelerated basis than we anticipate, our ability to make expected distributions
could be adversely affected. We believe that our competitors face similar costs
to comply with the requirements of the ADA.
Insurance. Our management believes that the Properties are covered by
adequate fire, flood, property and business interruption insurance provided by
reputable companies with commercially reasonable deductibles and limits. We
maintain a blanket policy that covers all of our Properties. We have obtained
title insurance insuring fee title to the Properties in an aggregate amount
which we believe to be adequate.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Our prospects are subject to certain uncertainties and risks. Our
future results could differ materially from our current results, and our actual
results could differ materially from those projected in the forward-looking
statements as a result of certain risk factors. These risk factors include, but
are not limited to, the risk factors set forth in the General Partner's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, other one-time
events and other important factors disclosed previously and from time to time in
the Company's other filings with the Securities and Exchange Commission. This
report contains certain forward-looking statements.
ITEM 2. PROPERTIES
General. As of December 31, 2001, the Properties consisted of 104
manufactured housing communities, 5 recreational vehicle communities, and 7
properties containing both manufactured housing and recreational vehicle sites
located in fifteen states concentrated in the midwestern and
4
southeastern United States. As of December 31, 2001, the Properties contained
40,544 developed sites comprised of 35,340 developed manufactured home sites and
5,154 recreational vehicle sites and an additional 4,385 manufactured home sites
suitable for development. Most of the Properties include amenities oriented
towards family and retirement living. Of the 116 Properties, 61 have more than
300 developed manufactured home sites, with the largest having 1,554 developed
manufactured home sites.
The Properties had an aggregate occupancy rate of 93% as of December
31, 2001, excluding recreational vehicle sites. Since January 1, 2001, the
Properties have averaged an aggregate annual turnover of homes (where the home
is moved out of the community) of approximately 3.2% and an average annual
turnover of residents (where the home is sold and remains within the community,
typically without interruption of rental income) of approximately 7.4%.
We believe that our Properties' high amenity levels contribute to low
turnover and generally high occupancy rates. All of the Properties provide
residents with attractive amenities with most offering a clubhouse, a swimming
pool, laundry facilities and cable television service. Many Properties offer
additional amenities such as sauna/whirlpool spas, tennis, shuffleboard and
basketball courts and/or exercise rooms.
We have tried to concentrate our communities within certain geographic
areas in order to achieve economies of scale in management and operation. The
Properties are principally concentrated in the midwestern and southeastern
United States. We believe that geographic diversification will help insulate the
portfolio from regional economic influences and we are also interested in
expanding our operations in the western United States.
The following table sets forth certain information relating to the
Properties owned or financed as of December 31, 2001:
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/01 12/31/99(1) 12/31/00(1) 12/31/01(1)
--------------------- -------- ----------- ----------- -----------
MIDWEST
MICHIGAN
Academy/West Pointe 441 (2) 99% 98%
Canton, MI
Allendale Meadows Mobile Village 352 95% 98% 96%
Allendale, MI
Alpine Meadows Mobile Village 403 99% 99% 96%
Grand Rapids, MI
Bedford Hills Mobile Village 339 99% 98% 98%
Battle Creek, MI
Brentwood Mobile Village 195 99% 99% 99%
Kentwood, MI
Byron Center Mobile Village 143 99% 99% 98%
Byron Center, MI
Candlewick Court Manufactured Housing Community 211 96% 95% 97%
Owosso, MI
College Park Estates Manufactured Housing 230 98% 100% 95%
Community
Canton, MI
Continental Estates Manufactured Housing Community 385 88% 84% 84%
Davison, MI
Continental North Manufactured Housing Community 474 84% 88% 89%
5
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/01 12/31/99(1) 12/31/00(1) 12/31/01(1)
--------------------- -------- ----------- ----------- -----------
Davison, MI
Country Acres Mobile Village 182 99% 96% 96%
Cadillac, MI
Country Meadows Mobile Village 577 100% 100% 99%
Flat Rock, MI
Countryside Village Manufactured Housing Community 359 96% 96% 98%
Perry, MI
Creekwood Meadows Mobile Home Park 336 94% 96% 88%
Burton, MI
Cutler Estates Mobile Village 256 99% 98% 97%
Grand Rapids, MI
Davison East Manufactured Housing Community 190 95% 89% 80%
Davison, MI
Fisherman's Cove Manufactured Housing Community 162 97% 99% 95%
Flint, MI
Grand Mobile Estates 224 98% 99% 93%
Grand Rapids, MI
Hamlin Manufactured Housing Community 147 100% 100% 99%
Webberville, MI
Kensington Meadows Mobile Home Park 290 95% 97% 98%
Lansing, MI
Kings Court Mobile Village 639 100% 98% 100%
Traverse City, MI
Knollwood Estates 161 (3) (3) 97%
Allendale, MI
Lafayette Place 254 99% 98% 97%
Metro Detroit, MI
Lincoln Estates Mobile Home Park 191 98% 99%, 96%
Holland, MI
Maple Grove Estates Manufactured Housing Community 46 100% 100% 100%
Dorr, MI
Meadow Lake Estates Manufactured Housing Community 425 99% 100% 100%
White Lake, MI
Meadowbrook Estates Manufactured Housing Community 453 100% 99% 98%
Monroe, MI
Meadowstream Village Manufactured Housing 159 97% 98% 97%
Community
Sodus, MI
Parkwood Manufactured Housing Community 249 94% 93% 90%
Grand Blanc, MI
Presidential Estates Mobile Village 364 98% 98% 99%
Hudsonville, MI
Richmond Place (6) 117 99% 99% 97%
Metro Detroit, MI
River Haven Village 721 (3) (3) 78%
Grand Haven, MI
Scio Farms Estates 913 100% 100% 99%
Ann Arbor, MI
Sherman Oaks Manufactured Housing Community 366 98% 99% 97%
Jackson, MI
St. Clair Place (6) 100 99% 99% 100%
Metro Detroit, MI
Sunset Ridge (4) 144 (3) (3) 13%(4)
Portland Township, MI
Timberline Estates Manufactured Housing Community 296 97% 100% 96%
Grand Rapids, MI
6
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/01 12/31/99(1) 12/31/00(1) 12/31/01(1)
--------------------- -------- ----------- ----------- -----------
Town & Country Mobile Village 192 99% 99% 99%
Traverse City, MI
Village Trails 100 64%(4) 77% 77%
Howard City, MI
White Lake Mobile Home Village 315 100% 100% 85%(4)
White Lake, MI
White Oak Estates 480 92% 85% 88%
Mt. Morris, MI
Windham Hills Estates 353 78%(4) 88% 91%
Jackson, MI
Woodhaven Place (6) 220 99% 99% 100%
------ ------ ------ ------
Metro Detroit, MI
MICHIGAN TOTAL 13,154 96% 96% 94%
====== ====== ====== ======
INDIANA
Brookside Mobile Home Village 570 87%(4) 93% 93%
Goshen, IN
Carrington Pointe 320 88%(4) 89% 81%
Ft. Wayne, IN
Clear Water Mobile Village 227 98% 95% 90%
South Bend, IN
Cobus Green Mobile Home Park 386 97% 94% 87%
Elkhart, IN
Deerfield Run Manufactured Home 175 59%(4) 75%(4) 60%(4)
Community (4)
Anderson, IN
Four Seasons Mobile Home Park 218 (2) 96% 98%
Elkhart, IN
Holiday Mobile Home Village 326 98% 99% 97%
Elkhart, IN
Liberty Farms Communities 220 98% 100% 98%
Valparaiso, IN
Maplewood Mobile Home Park 207 97% 94% 91%
Lawrence, IN
Meadows Mobile Home Park 330 97% 95% 89%
Nappanee, IN
Pine Hills Mobile Home Subdivision 130 95% 91% 96%
Middlebury, IN
Roxbury Park 398 (3) (3) 92%
Goshen, IN
Timberbrook Mobile Home Park 567 93% 90% 90%
Bristol, IN
Valley Brook Mobile Home Park 799 97% 95% 95%
Indianapolis, IN
West Glen Village Mobile Home Park 552 98% 99% 98%
Indianapolis, IN
Woodlake Estates (4) 338 97%(4) 67%(4) 69%(4)
Ft. Wayne, IN
Woods Edge Mobile Village 598 91% 93% 84%
------ ------ ------ ------
West Lafayette, IN
INDIANA TOTAL 6,361 94% 92% 90%
====== ====== ====== ======
OTHER
Apple Creek Manufactured Home Community and Self 176 99% 98% 91%
Storage
Cincinnati, OH
Autumn Ridge Mobile Home Park 413 99% 100% 99%
Ankeny, IA
Bell Crossing Manufactured Home 239 81% 84% 53%(4)
Community (4)
Clarksville, TN
7
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/01 12/31/99(1) 12/31/00(1) 12/31/01(1)
--------------------- -------- ----------- ----------- -----------
Boulder Ridge 362 96% 98% 98%
Pflugerville, TX
Branch Creek Estates 392 100% 99% 100%
Austin, TX
Byrne Hill Village Manufactured Home 236 97% 97% 97%
Community
Toledo, OH
Candlelight Village Mobile Home Park 309 97% 96% 98%
Chicago Heights, IL
Casa del Valle (7) 408 100% 100% 100%
Alamo, TX
Catalina Mobile Home Park 462 94% 90% 83%
Middletown, OH
Chisholm Point Estates 416 100% 99% 98%
Pflugerville, TX
Desert View Village 93 (4) 6%(4) 25%(4)
West Wendover, NV
Eagle Crest 150 (3) (3) 84%
Firestone, CO
Edwardsville Mobile Home Park 634 94% 97% 97%
Edwardsville, KS
Forest Meadows 76 86% 88% 83%
Philomath, OR
High Pointe (8) 411 95% 95% 93%
Frederica, DE
Kenwood RV and Mobile Home Plaza (7) 289 100% 100% 100%
LaFeria, TX
North Point Estates (4) 108 (3) (3) 38%(4)
Pueblo, CO
Oakwood Village 511 75%(6) 78% 73%
Dayton, OH
Orchard Lake Manufactured Home Community 147 99% 98% 97%
Cincinnati, OH
Paradise Park 277 98% 99% 96%
Chicago Heights, IL
Pecan Branch (4) 69 (3) (3) 67%(4)
Williamson County, TX
Pin Oak Parc Mobile Home Park 502 91% 98% 99%
O'Fallon, MO
Pine Ridge Mobile Home Park 245 98% 98% 98%
Petersburg, VA
Sea Air (7) (8) 527 99% 100% 99%
Rehoboth Beach, DE
Snow to Sun (7) 493 99% 99% 100%
Weslaco, TX
Southfork Mobile Home Park 477 96% 96% 95%
Belton, MO
Sun Villa Estates 324 100% 100% 100%
Reno, NV
Timber Ridge Mobile Home Park 582 99% 98% 99%
Ft. Collins, CO
Westbrook Village (6) 344 99% 98% 99%
Toledo, OH
Westbrook Senior Village 112 (3) (3) 94%
Toledo, OH
Willowbrook Place (6) 266 100% 99% 98%
Toledo, OH
Woodland Park Estates 399 99% 99% 98%
Eugene, OR
Woodside Terrace Manufactured Home 439 98% 96% 98%
Community (6)
Holland, OH
8
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/01 12/31/99(1) 12/31/00(1) 12/31/01(1)
--------------------- -------- ----------- ----------- -----------
Worthington Arms Mobile Home Park 224 100% 99% 99%
------ ------ ------ ------
Lewis Center, OH
OTHER TOTAL 11,112 91% 95% 93%
====== ====== ====== ======
SOUTHEAST
FLORIDA
Arbor Terrace RV Park 402 (5) (5) (5)
Bradenton, FL
Ariana Village Mobile Home Park 208 83% 85% 86%
Lakeland, FL
Bonita Lake Resort 167 (5) (5) (5)
Bonita Springs, FL
Buttonwood Bay (7) 941 (3) (3) 100%
Sebring, FL
Gold Coaster Manufactured Home Community (7) 548 100% 100% 100%
Florida City, FL
Groves RV Resort 306 (5) (5) (5)
Lee County, FL
Holly Forest Estates 402 100% 100% 100%
Holly Hill, FL
Indian Creek Park (7) 1,554 100% 100% 100%
Ft. Myers Beach, Fl
Island Lakes Mobile Home Park 301 100% 100% 100%
Merritt Island, FL
Kings Lake Mobile Home Park 245 91% 96% 99%
Debary, FL
Kings Pointe Mobile Home Park (9) 227 56% 56% 57%
Winter Haven, FL
Lake Juliana Landings Mobile Home Park 287 69% 71% 74%
Auburndale, FL
Lake San Marino RV Park 415 (5) (5) (5)
Naples, FL
Leesburg Landing 96 66% 68% 68%
Lake County, FL
Meadowbrook Village Mobile Home Park 257 100% 98% 99%
Tampa, Fl,
Orange Tree Village Mobile Home Park 246 96% 99% 100%
Orange City, FL
Royal Country Mobile Home Park 864 100% 100% 99%
Miami, FL
Saddle Oak Club Mobile Home Park 376 100% 99% 100%
Ocala Fl,
Siesta Bay RV Park 859 (5) (5) (5)
Ft. Myers Beach, FL
Silver Star Mobile Village 408 95% 96% 98%
Orlando, FL
Water Oak Country Club Estates/Water Oak Mobile 808 100% 100% 100%
------ ------ ------ ------
Home Park
Lady Lake, FL,
Florida Total 9,917 94% 94% 96%
====== ====== ====== ======
TOTAL/AVERAGE 40,544 95% 95% 93%
====== ====== ====== ======
(1) Occupancy percentage relates to manufactured housing sites,
excluding recreational vehicle sites.
(2) Acquired in 2000.
(3) Acquired in 2001.
9
(4) Occupancy in these Properties reflects the fact that these
communities are in their initial lease-up phase following an
expansion or ground up development.
(5) This Property contains only recreational vehicle sites.
(6) The Company leases this Property. The Company has the option
and intends to purchase the Property upon the expiration of
the lease. If the Company does not exercise its option to
purchase, the lessor has the right to cause the Company to
purchase the Property at the expiration of the lease at the
then outstanding lease obligation.
(7) This Property contains recreational vehicle sites.
(8) This Property is financed and managed by the Company.
(9) This Property was sold in February 2002.
Leases. The typical lease we enter into with a tenant for the rental of
a site is month-to-month or year-to-year, renewable upon the consent of both
parties, or, in some instances, as provided by statute. In some cases, leases
are for one-year terms, with up to ten renewal options exercisable by the
tenant, with rent adjusted for increases in the consumer price index. These
leases are cancelable for non-payment of rent, violation of community rules and
regulations or other specified defaults. See "Regulations and Insurance."
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal proceedings arising in the ordinary
course of business. All such proceedings, taken together, are not expected to
have a material adverse impact on our results of operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
10
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no established public market for any class of the Company's equity
securities. On March 5, 2002, partnership units of the Company were held by
approximately 123 holders of record.
The General Partners' Common Stock has been listed on the New York
Stock Exchange ("NYSE") since December 8, 1993 under the symbol "SUI." On March
4, 2002, the closing sales price of the Common Stock was $38.73 and the Common
Stock was held by approximately 675 holders of record. The following table sets
forth the high and low closing sales prices per share for the Common Stock for
the periods indicated as reported by the NYSE and the distributions paid by the
General Partner with respect to each such period (we paid equivalent
distributions per common partnership unit to our partners during such periods).
High Low Distribution
---- --- ------------
FISCAL YEAR ENDED DECEMBER 31, 2000
First Quarter of 2000.......................................... 34.9375 27.375 .51
Second Quarter of 2000......................................... 33.625 29.375 .53
Third Quarter of 2000.......................................... 33.75 30.1875 .53
Fourth Quarter of 2000......................................... 35.625 29.00 .53
FISCAL YEAR ENDED DECEMBER 31, 2001
First Quarter of 2001.......................................... 34.6875 30.80 .53
Second Quarter of 2001......................................... 35.50 31.45 .55
Third Quarter of 2001.......................................... 36.85 34.73 .55
Fourth Quarter of 2001......................................... 38.55 36.00 .55
RECENT SALES OF UNREGISTERED SECURITIES
On April 16, 2001, we issued 46,117 Series B-1 Preferred Units to River
Haven Village, Inc. in exchange for property with an agreed upon value of
$4,611,692.48 (the "Series B-1 Units"). Holders of the Series B-1 Units may
require the Company to redeem all of the outstanding Series B-1 Units within the
ninety (90) day period following any anniversary of the Series B-1 Unit issuance
date beginning on April 16, 2006, or the death of River Haven's current
president. On or after July 16, 2012, we may redeem all of the outstanding
Series B-1 Units on written notice to the Series B-1 Unit holders. We will pay a
redemption price of $100.00 per Series B-1 Unit redeemed.
On January 2, 2002, we issued 100,000 Series B-2 Preferred Units to Bay
Area Limited Partnership and assumed approximately $10,500,000 of debt, in
exchange for property with a net agreed upon value of $15,000,000 (the "Series
B-2 Units"). Holders of the Series B-2 Units may require the Company to redeem
all of the outstanding Series B-2 Units within the ninety (90) day period
following the fifth anniversary of the Series B-2 Unit issuance date, the death
of Bay Area's president, or the occurrence of a change of control as defined in
our limited partnership agreement, but in no event may the Series B-2 Unit
holders require the redemption of the Series B-2 Units prior to the January 31,
2007. We will pay a redemption price of $45.00 per Series B-2 Unit redeemed. In
11
addition, holders of the Series B-2 Units may convert such units into Common OP
Units at a conversion price of $45 per unit within the ninety (90) day period
following the third anniversary of the Series B-2 Unit issuance date.
In 2001, our General Partner issued an aggregate of 98,036 shares of
its Common Stock upon conversion of an aggregate of 98,036 Common OP Units.
All of the above OP Units and shares of Common Stock were issued in
private placements in reliance on Section 4(2) of the Securities Act of 1933, as
amended, including Regulation D promulgated thereunder. No underwriters were
used in connection with any of such issuances.
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ITEM 6 SELECTED FINANCIAL DATA
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
OPERATING DATA: (IN THOUSANDS EXCEPT FOR PER SHARE AND OTHER DATA)
Revenues:
Income from property ............... $139,022 $132,440 $125,424 $114,346 $ 93,188
Other income ....................... 14,532 14,105 9,530 5,984 2,942
-------- -------- -------- -------- --------
Total revenues ............. 153,554 146,545 134,954 120,330 96,130
-------- -------- -------- -------- --------
Expenses:
Property operating and maintenance . 29,154 28,592 27,300 25,647 21,111
Real estate taxes .................. 9,524 9,115 8,888 8,728 7,481
Property management ................ 2,746 2,934 2,638 2,269 1,903
General and administrative ......... 4,627 4,079 3,682 3,339 2,617
Depreciation and amortization ...... 33,516 30,671 28,551 24,961 20,668
Interest ........................... 31,016 29,651 27,289 23,987 14,423
-------- -------- -------- -------- --------
Total expenses ............. 110,583 105,042 98,348 88,931 68,203
-------- -------- -------- -------- --------
Income before gain from property
dispositions, net and distribution
to Preferred OP Units .............. 42,971 41,503 36,606 31,399 27,927
Gain from property dispositions, net..... 4,275 4,801 829 655(A) --
-------- -------- -------- -------- --------
Income before distribution to
Preferred OP Units ................. 47,246 46,304 37,435 32,054 27,927
Less distribution to preferred OP Units . 8,131 7,826 3,663 2,505 2,505
-------- -------- -------- -------- --------
Earnings attributable to OP Units ....... $ 39,115 $ 38,478 $ 33,772 $ 29,549 $ 25,422
======== ======== ======== ======== ========
Earnings attributed to
General Partner .................... $ 33,910 $ 33,294 $ 29,089 $ 26,096 $ 22,255
Limited Partners ................... 5,205 5,184 4,683 3,453 3,167
-------- -------- -------- -------- --------
$ 39,115 $ 38,478 $ 33,772 $ 29,549 $ 25,422
======== ======== ======== ======== ========
Earnings per OP Unit:
Basic .............................. $ 1.96 $ 1.92 $ 1.69 $ 1.55 $ 1.38
======== ======== ======== ======== ========
Diluted ............................ $ 1.94 $ 1.91 $ 1.68 $ 1.53 $ 1.37
======== ======== ======== ======== ========
Weighted average OP Units outstanding:
Basic .............................. 19,907 19,999 19,961 19,101 18,444
======== ======== ======== ======== ========
Diluted ............................ 20,089 20,085 20,113 19,276 18,631
======== ======== ======== ======== ========
Distribution per OP Unit ................ $ 2.18 $ 2.10 $ 2.02 $ 1.94 $ 1.865
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation ....................... $953,656 $867,377 $847,696 $803,152 $684,821
Total assets ............................ $994,449 $969,228 $906,632 $824,039 $693,514
Total debt .............................. $495,198 $464,508 $401,564 $365,164 $264,264
Redeemable preferred operating
partnership units .................. $ 43,958 $ 39,347 $ 35,783 $ 35,783 $ 35,783
Partners' capital ....................... $431,281 $440,230 $443,009 $398,336 $375,849
OTHER DATA (AT END OF PERIOD):
Total properties ........................ 116 109 110 104 99
Total sites ............................. 40,544 38,282 38,217 37,566 35,936
(A) Includes an $875 expense related to an unsuccessful portfolio acquisition
13
ITEM 7. 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 notes thereto elsewhere herein.
The Company owns, operates and finances manufactured housing
communities concentrated in the midwestern and southeastern United States. Sun
Communities, Inc. ("Sun"), a self-administered and self-managed Real Estate
Investment Trust is the sole general partner of the Company. As of December 31,
2001, the Company owned and operated or financed a portfolio of 116 developed
properties located in 15 states, including 104 manufactured housing communities,
5 recreational vehicle communities, and 7 properties containing both
manufactured housing and recreational vehicle sites.
During 2001, the Company acquired five manufactured housing
communities, comprising 2,332 developed sites, for $55.8 million and two
development communities, comprising 1,273 sites, for $4.3 million and the
Company sold two manufactured housing communities for $16.2 million.
SIGNIFICANT ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses the Company's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. In preparing these financial statements,
management has made its best estimates and judgment of certain amounts included
in the financial statements. Nevertheless, actual results may differ from these
estimates under different assumptions or conditions.
Management believes the following significant accounting policies,
among others, affect its more significant judgments and estimates used in the
preparation of its consolidated financial statements:
Principles of Consolidation. The financial statements include the
accounts of the Company and all its wholly and 99 percent owned subsidiary
partnerships and limited liability companies.
Notes Receivable. The Company evaluates the recoverability of its notes
receivable whenever events occur or there are changes in circumstances such that
management believes it is probable that it will be unable to collect all amounts
due according to the contractual terms of the loan agreement. The loan is then
measured based on the present value of the expected future cash flow discounted
at the loan's effective interest rate or the fair value of the collateral if the
loan is collateral dependent.
14
Rental Property. Rental property is recorded at cost, less accumulated
depreciation. Management evaluates the recoverability of its investment in
rental property whenever events or changes in circumstances, such as recent
operating results, expected net operating cash flow and plans for future
operations, indicate that full asset recoverability is questionable.
Recoverability of these assets is measured by a comparison of the carrying
amount of such assets to the future undiscounted net cash flows expected to be
generated by the assets. If such assets were deemed to be impaired as a result
of this measurement, the impairment that would be recognized is measured by the
amount by which the carrying amount of the asset exceeds the fair value of the
asset as determined on a discounted net cash flow basis.
Revenue Recognition. Rental income attributable to leases is recorded
on a straight-line basis when earned from tenants. Leases entered into by
tenants generally range from month-to-month to one year and are renewable by
mutual agreement of the Company and the resident.
Income Taxes. As a partnership, the Company does not pay federal or
state income taxes.
RESULTS OF OPERATIONS
Comparison of year ended December 31, 2001 to year ended December 31, 2000
For the year ended December 31, 2001, income before gain from property
dispositions, net and distribution to Preferred OP Units increased by $1.5
million from $41.5 million to $43.0 million, when compared to the year ended
December 31, 2000. The increase was due to increased revenues of $7.0 million
while expenses increased by $5.5 million.
Income from property increased by $6.6 million from $132.4 million to
$139.0 million, or 5.0 percent, due to rent increases and other community
revenues ($6.5 million) and acquisitions ($4.4 million), offset by a revenue
reduction of $4.3 million due to property dispositions.
Other income increased by $0.4 million from $14.1 million to $14.5
million due primarily to an increase in interest income ($1.3 million) offset by
reductions in income from affiliate ($0.5 million) and other income ($0.4
million).
Property operating and maintenance expenses increased by $0.6 million
from $28.6 million to $29.2 million, or 2.0 percent, representing general cost
increases ($1.0 million) and acquisitions ($0.7 million), offset by an expense
reduction of $1.1 million due to property dispositions.
Real estate taxes increased by $0.4 million from $9.1 million to $9.5
million, or 4.5 percent, due to the acquired communities ($0.2 million) and
changes in certain assessments.
Property management expenses decreased by $0.2 million from $2.9
million to $2.7 million, representing 2.0 percent and 2.2 percent of income from
property in 2001 and 2000, respectively.
15
General and administrative expenses increased by $0.5 million from $4.1
million to $4.6 million, representing 3.0 percent and 2.8 percent of total
revenues in 2001 and 2000, respectively.
Interest expense increased by $1.4 million from $29.6 million to $31.0
million due primarily to financing additional investments in rental property
offset by decreasing rates on variable rate debt.
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 $5.7
million from $101.8 million to $107.5 million. EBITDA as a percent of revenues
increased to 70.0 percent in 2001 compared to 69.5 percent in 2000.
Depreciation and amortization expense increased by $2.8 million from
$30.7 million to $33.5 million due primarily to the net additional investments
in rental properties.
Comparison of year ended December 31, 2000 to year ended December 31, 1999
For the year ended December 31, 2000, income before gain from property
dispositions, net and distribution to Preferred OP Units increased by $4.9
million from $36.6 million to $41.5 million, when compared to the year ended
December 31, 1999. The increase was due to increased revenues of $11.6 million
while expenses increased by $6.7 million.
Income from property increased by $7.0 million from $125.4 million to
$132.4 million, or 5.6 percent, due to rent increases and other community
revenues ($5.3 million), acquisitions ($3.1 million), lease up of manufactured
home sites ($2.2 million), offset by a revenue reduction of $3.6 million due to
the sale of communities during 1999.
Other income increased by $4.6 million from $9.5 million to $14.1
million due primarily to an increase in interest income ($3.0 million) and other
income ($2.7 million), offset by a $1.1 million reduction in income from
affiliate.
Property operating and maintenance expenses increased by $1.3 million
from $27.3 million to $28.6 million, or 4.7 percent, due primarily to
acquisitions ($0.8 million).
Real estate taxes increased by $0.2 million from $8.9 million to $9.1
million, or 2.5 percent, due primarily to the acquired communities.
Property management expenses increased by $0.3 million from $2.6
million to $2.9 million, or 11.2 percent, representing 2.2 percent and 2.1
percent of income from property in 2000 and 1999, respectively.
General and administrative expenses increased by $0.4 million from $3.7
million to $4.1 million, or 10.8 percent, representing 2.8 percent and 2.7
percent of total revenues in 2000 and 1999, respectively.
16
Interest expense increased by $2.4 million from $27.3 million to $29.7
million due primarily to investments in rental property and notes receivable.
EBITDA increased by $9.4 million from $92.4 million to $101.8 million.
EBITDA as a percent of revenues increased to 69.5 percent in 2000 compared to
68.5 percent in 1999.
Depreciation and amortization expense increased by $2.1 million from
$28.6 million to $30.7 million due primarily to the acquisition and
development/expansion of communities in 2000 and 1999.
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of
and for the years ended December 31, 2001 and 2000. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 2000 and December 31, 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 (2) TOTAL PORTFOLIO
--------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------
(in thousands) (in thousands)
Income from property $105,311 $ 99,955 $139,022 $132,440
-------- -------- -------- --------
Property operating expenses:
Property operating and maintenance 18,331 18,141 29,154 28,592
Real estate taxes 8,079 7,440 9,524 9,115
-------- -------- -------- --------
Property operating expenses 26,410 25,581 38,678 37,707
-------- -------- -------- --------
Property EBITDA $ 78,901 $ 74,374 $100,344 $ 94,733
======== ======== ======== ========
Number of properties 90 90 116 109
Developed sites 30,385 30,208 40,544 38,282
Occupied sites (1) 28,465 28,710 36,935 35,546
Occupancy % (1) 93.7% 95.0% 93.0% 95.0%
Weighted average monthly rent per site $ 303 $ 290 $ 301 $ 288
Sites available for development 2,364 1,917 3,887 4,248
Sites planned for development in next year 257 190 613 659
(1) Occupancy % and weighted average rent relates to manufactured housing
sites, excluding recreational vehicle sites.
(2) Includes 3 properties sold in December 2000.
On a same property basis, property revenues increased by $5.4 million from $99.9
million to $105.3 million, or 5.4 percent, due primarily to increases in rents
and related charges including water and property tax pass through.
Property operating expenses increased by $0.8 million from $25.6 million to
$26.4 million, or 3.2 percent, due to increased costs. Property EBITDA increased
by $4.5 million from $74.4 million to $78.9 million, or 6.1 percent.
17
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity demands have historically been, and
are expected to continue to be, distributions to Sun's stockholders and the
Company's unitholders, property acquisitions, development and expansion of
properties, capital improvements of properties and debt repayment.
The Company expects to meet its short-term liquidity requirements
through its working capital provided by operating activities and its line of
credit, as described below. The Company considers its ability to generate cash
from operations (anticipated to be approximately $70 million) to be adequate to
meet all operating requirements, including recurring capital improvements,
routinely amortizing debt and other normally recurring expenditures of a capital
nature, pay distributions to Sun's stockholders to maintain Sun's qualification
as a REIT in accordance with the Internal Revenue Code and make distributions to
the Company's unitholders.
The Company plans to invest approximately $25 to $30 million in
developments consisting of expansions to existing communities and the new or
continuing development of new communities. The Company expects to finance these
investments by using net cash flows provided by operating activities and by
drawing upon its line of credit.
Furthermore, the Company expects to invest in the range of $40 to $60
million in the acquisition of properties in 2002, depending upon market
conditions. The Company plans to finance these investments by using net cash
flows provided by operating activities and by drawing upon its line of credit.
Cash and cash equivalents decreased by $13.9 million to $4.6 million at
December 31, 2001 compared to $18.5 million at December 31, 2000 because cash
used in investing and financing activities exceeded cash provided by operating
activities. Net cash provided by operating activities increased by $9.2 million
to $65.9 million for the year ended December 31, 2001 compared to $56.7 million
for the year ended December 31, 2000. This increase was primarily due to
earnings attributable to OP Units before depreciation and amortization and gain
from property dispositions, net increasing by $4.0 million and other assets
decreasing by $2.6 million, offset by accounts payable and other liabilities
increasing by $2.5 million.
The Company's net cash flows provided by operating activities may be
adversely impacted by, among other things: (a) the market and economic
conditions in the Company's current markets generally, and specifically in
metropolitan areas of the Company's current markets; (b) lower occupancy and
rental rates of the Properties; (c) increased operating costs, including
insurance premiums, real estate taxes and utilities, that cannot be passed on to
the Company's tenants; and (d) decreased sales of manufactured homes. See
"Factors that May Affect Future Results."
The Company's $150 million unsecured line of credit, which expires in
January 2003, bears interest at the annual rate of LIBOR plus 1.0%. At December
31, 2001, the average interest rate of outstanding borrowings under the line of
credit was 3.22%, $93 million was outstanding and $57 million was available to
be drawn. The line of credit facility contains
18
various leverage, debt service coverage, net worth maintenance and other
customary covenants all of which the Company was in compliance with at December
21, 2001.
The Company's primary long-term liquidity needs are principal payments
on outstanding indebtedness. At December 31, 2001, the Company's outstanding
contractual obligations were as follows:
PAYMENTS DUE BY PERIOD
(IN THOUSANDS)
----------------------------------------------------
CONTRACTUAL CASH OBLIGATIONS(1) TOTAL DUE 1 YEAR 2-3 YEARS 4-5 YEARS AFTER 5 YEARS
--------- -------- --------- --------- -------------
Line of credit $ 93,000 $ 93,000
Collateratized term loan 42,820 $ 614 1,365 $ 1,569 $ 39,272
Senior notes 285,000 85,000 200,000
Mortgage notes, other 48,333 857 2,719 7,986 36,771
Capitalized lease obligations 26,045 16,176 9,869
Redeemable Preferred OP Units 43,958 3,564 40,394
-------- -------- -------- -------- --------
$539,156 $ 17,647 $191,953 $ 13,119 $316,437
======== ======== ======== ======== ========
(1) The Company is the guarantor of $23.2 million in personal bank loans
which is not reflected in the balance sheet, maturing in 2004, made to
Sun's and the Company's directors, employees and consultants for the
purpose of purchasing shares of Sun's common stock or the Company's OP
Units pursuant to Sun's Stock Purchase Plan. The Company is obligated
under the Guaranty only in the event that one or more of the borrowers
cannot repay their loan when due.
The Company anticipates meeting its long-term liquidity requirements,
such as scheduled debt maturities, large property acquisitions and Operating
Partnership unit redemptions, through the issuance of debt or equity securities,
including equity units in the Operating Partnership, or from selective asset
sales. Along with OrigenLLC's other investors, the Company may be requested to
make additional capital contributions to maintain its respective ownership
interest. The Company has maintained investment grade ratings with Fitch ICBA,
Moody's Investor Service and Standard & Poor's, which facilitates access to the
senior unsecured debt market. Since 1993, the Company has raised, in the
aggregate, $263.4 million from the sale of Sun's shares of common stock, $84.2
million from the issuance of OP units in the Company and $430 million from
secured and unsecured debt securities. In addition, at December 31, 2001,
ninety-six of the Properties were unencumbered by debt, therefore, providing
substantial financial flexibility. The ability of the Company to finance its
long-term liquidity requirements in such manner will be affected by numerous
economic factors affecting the manufactured housing community industry at the
time, including the availability and cost of mortgage debt, the financial
condition of the Company, the operating history of the Properties, the state of
the debt and equity markets, and the general national, regional and local
economic conditions. See "Factors that May Affect Future Results". If the
Company is unable to obtain additional equity or debt financing on acceptable
terms, the Company's business, results of operations and financial condition
will be harmed.
The terms of the $35.8 million Preferred OP units were renegotiated
effective December 31, 2001. The conversion price increased from $27 per unit to
at least $68 per unit and the coupon rate was decreased from nine percent (9%)
to seven percent (7%) for the first two years followed by a variable rate
ranging from 6.5% to 8.5% with mandatory redemption on January 2, 2014.
19
At December 31, 2001, the Company's debt to total market capitalization
approximated 36.7 percent (assuming conversion of all Common OP Units to shares
of common stock). The debt has a weighted average maturity of approximately 5.3
years and a weighted average interest rate of 6.6 percent.
Capital expenditures for the years ended December 31, 2001 and 2000
included recurring capital expenditures of $4.8 million and $4.6 million,
respectively.
Net cash used in investing activities decreased by $34.2 million to
$35.1 million from $69.3 million due to a $84.5 million increase in repayments
from financing notes receivable, net offset by a $20.7 million increase in
investment in and advances to affiliates, a $17.1 million decrease in proceeds
related to property dispositions and a $12.5 million increase in rental property
acquisition activities.
Net cash used in financing activities increased by $64.4 million to
$44.7 million for the year ended December 31, 2001. This increase was primarily
because of a $74.5 million increase in repayments on notes payable, $100 million
reduced proceeds from notes payable and $7.1 million in capital withdrawals and
distributions offset by a $116.0 million increase in borrowings on the line of
credit.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 2001, 2000, and 1999 was 1.83:1, 1.87:1, and 1.95:1 respectively.
INDUSTRY CONDITIONS
According to the Manufactured Housing Institute, the shipments of new
manufactured homes has declined from 373,000 in 1998 to 193,000 in 2001. This
decline was caused primarily by the tightening of credit standards in response
to an increasing number of repossessions. Beginning in 1999, repossessions
increased as unqualified borrowers defaulted on their manufactured home loans.
Financing standards tightened significantly reducing demand at a time of
excessive inventories. Exacerbating this excess supply was the competition of
aggressively priced repossessed homes which further slowed new home sales.
The Company expects these conditions to work themselves back into
equilibrium. New home shipments increased in October 2001 as compared to October
2000, representing the first such year to year monthly increase since March
1999. Fourth quarter 2001 shipments exceeded fourth quarter 2000 shipments and
the trend has continued through January 2002 with no sign of inventory
accumulation. Repossessions are expected to remain at high levels throughout
most, if not all, of 2002.
These conditions adversely impact the sale of new homes by SHS, which
harms the Company's profitability. Furthermore, these conditions cause a
slow-down in the leasing of the Company's communities, especially newly
developed expansions and new communities, which in turn slows the development of
new sites causing the Company to hold non-income producing land inventory
longer.
20
INFLATION
Most of the leases allow for periodic rent increases which provide the
Company with the opportunity to achieve increases in rental income as each lease
expires. Such types of leases generally minimize the risk of inflation to the
Company.
SAFE HARBOR STATEMENT
This Form 10-K 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
"Factors That May Affect Future Results" for a representative example of such
uncertainties and factors. 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 August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." This Statement supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations --
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the disposal of
a segment of a business (as previously defined in that Opinion). The provisions
of this SFAS 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The provisions of this standard are
generally to be applied prospectively. The Company does not expect a material
impact from the adoption of this standard.
In June 2001, the FASB approved 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 September 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 does not expect
these pronouncements to have a material impact on its financial statements.
21
OTHER
Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as "net income (computed in accordance
with generally accepted accounting principles) excluding gains (or losses) from
sales of property, plus rental property depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures." Industry
analysts consider FFO to be an appropriate supplemental measure of the operating
performance of an equity REIT primarily because the computation of FFO excludes
historical cost depreciation as an expense and thereby facilitates the
comparison of REITs which have different cost bases in their assets. Historical
cost accounting for real estate assets implicitly assumes that the value of real
estate assets diminishes predictably over time, whereas real estate values have
instead historically risen or fallen based upon market conditions. FFO does not
represent cash flow from operations as defined by generally accepted accounting
principles and is a supplemental measure of performance that does not replace
net income as a measure of performance or net cash provided by operating
activities as a measure of liquidity. In addition, FFO is not intended as a
measure of a REIT's ability to meet debt principal repayments and other cash
requirements, nor as a measure of working capital. The following table
calculates FFO data for both basic and diluted purposes for the years ended
December 31, 2001, 2000 and 1999 (in thousands):
2001 2000 1999
-------- -------- --------
Net income $ 33,910 $ 33,294 $ 29,089
Deduct Gain from property dispositions, net (4,275) (4,801) (829)
Add:
Minority interest in earnings to
common OP Unit holders 5,205 5,184 4,683
Depreciation and amortization, net
of corporate office depreciation 33,246 30,393 28,310
-------- -------- --------
Funds from operations - basic 68,086 64,070 61,253
Add distributions on
Convertible preferred OP Units -- -- 2,505
-------- -------- --------
Funds from operations - diluted $ 68,086 $ 64,070 $ 63,758
======== ======== ========
2001 2000 1999
-------- -------- --------
Weighted average common shares and OP Units
outstanding for basic per share/unit data 19,907 19,999 19,961
Dilutive securities:
Stock options and awards 182 86 152
Convertible preferred OP Units -- -- 1,245
-------- -------- --------
Weighted average common shares and OP Units
outstanding for diluted per share/unit data 20,089 20,085 21,358
======== ======== ========
22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's principal market risk exposure is interest rate risk. The
Company does not hedge interest rate risk using financial instruments nor is the
Company subject to foreign currency risk on its long-term debt, mortgage notes
and other notes receivable. The Company's exposure to market risk for changes in
interest rates relates primarily to refinancing long-term fixed rate
obligations, the opportunity cost of fixed rate obligations in a falling
interest rate environment and its variable rate line of credit. The Company
primarily enters into debt obligations to support general corporate purposes
including acquisitions, capital improvements and working capital needs.
The Company manages its exposure to interest rate risk on its variable rate
indebtedness by borrowing on a short term basis under its line of credit until
such time as it is able to retire the short term variable rate debt with a long
term fixed rate debt offering on terms that are advantageous.
The Company's variable rate debt is limited to its $150 million line of
credit ($93.0 million outstanding as of December 31, 2001) which bears interest
at LIBOR plus 1.0 percent. If LIBOR increased or decreased by 1.0 percent during
2001 and 2000, the Company believes its interest expense would have increased or
decreased by approximately $0.7 million and $0.5 million based on the $69.2
million and $49.9 million average balance outstanding under the Company's line
of credit for the year ended December 31, 2001 and 2000, respectively.
Additionally, the Company has $49.0 million LIBOR based variable rate
mortgage and other notes receivables at December 31, 2001. If LIBOR increased or
decreased by 1.0 percent during 2001 and 2000, the Company believes interest
income would have increased or decreased by approximately $0.8 million and $0.7
million based on the $79.5 million and $68.0 million average balance outstanding
on all variable rate notes receivables for the year ended December 31, 2001 and
2000, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are filed herewith under
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
23
PART III
The General Partner is the sole general partner of the Company and,
therefore, the information required by ITEMS 10, 11, 12 AND 13 will be included
in the General Partner's proxy statement for its 2002 Annual Meeting of
Shareholders, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed herewith as part of this
Form 10-K:
(1) A list of the financial statements required to be
filed as a part of this Form 10-K is shown in the "Index to the Consolidated
Financial Statements and Financial Statement Schedule" filed herewith.
(2) A list of the financial statement schedules required
to be filed as it part of this Form 10-K is shown in the "Index to the
Consolidated Financial Statements and Financial Statement Schedule" filed
herewith.
(3) A list of the exhibits required by Item 601 of
Regulation S-K to be tiled as a part of this Form 10-K is shown on the "Exhibit
Index" filed herewith.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed during the last
fiscal quarter for the year ended December 31, 2001.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 27, 2002
SUN COMMUNITIES OPERATING
LIMITED PARTNERSHIP
By: Sun Communities, Inc., General
Partner
By: __________________________________
Gary A. Shiffman, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- ---- ----- ----
Chief Executive Officer, President and Chairman of the
Board of Directors of the General Partner March 27, 2002
___________________________
Gary A. Shiffman
Senior Vice President, Chief Financial Officer,
Treasurer, Secretary and Principal Accounting Officer March 27, 2002
___________________________ of the General Partner
Jeffrey P. Jorissen
Director of the General Partner March 27, 2002
___________________________
Paul D. Lapides
Director of the General Partner March 27, 2002
___________________________
Ted J. Simon
Director of the General Partner March 27, 2002
___________________________
Clunet R. Lewis
Director of the General Partner March 27, 2002
___________________________
Ronald L. Piasecki
Director of the General Partner March 27, 2002
___________________________
Arthur A. Weiss
25
EXHIBIT INDEX
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------ ----------- ------
2.1 Form of Sun Communities, Inc.'s Common Stock Certificate (1)
3.1 Amended and Restated Articles of Incorporation of Sun Communities, Inc. (1)
3.2 Bylaws of Sun Communities, Inc. (3)
4.1 Indenture, dated as of April 24, 1996, among Sun Communities, Inc., Sun (4)
Communities Operating Limited Partnership (the "Company") and Bankers Trust
Company, as Trustee
4.2 Form of Note for the 2001 Notes (4)
4.3 Form of Note for the 2003 Notes (4)
4.4 First Supplemental Indenture, dated as of August 20, 1997, by and between the (9)
Company and Bankers Trust Company, as Trustee
4.5 Form of Medium-Term Note (Floating Rate) (9)
4.6 Form of Medium-Term Note (Fixed Rate) (9)
4.7 Articles Supplementary of Board of Directors of Sun Communities, Inc. (11)
Designating a Series of Preferred Stock and Fixing Distribution and other
Rights in such Series
4.8 Articles Supplementary of Board of Directors of Sun Communities, Inc. (13)
Designating a Series of Preferred Stock
10.1 Second Amended and Restated Agreement of Limited Partnership of Sun (8)
Communities Operating Limited Partnership
10.2 Second Amended and Restated 1993 Stock Option Plan# (12)
10.3 Amended and Restated 1993 Non-Employee Director Stock Option Plan# (8)
10.4 Form of Stock Option Agreement between Sun Communities, Inc. and certain (1)
directors, officers and other individuals#
10.5 Form of Non-Employee Director Stock Option Agreement between Sun Communities, (5)
Inc. and certain directors#
10.6 Employment Agreement between Sun Communities, Inc. and Gary A. Shiffman# (8)
10.7 Senior Unsecured Line of Credit Agreement with Lehman Brothers Holdings Inc. (9)
10.8 Amended and Restated Loan Agreement between Sun Communities Funding Limited (9)
Partnership and Lehman Brothers Holdings Inc.
26
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------ ----------- ------
10.9 Amended and Restated Loan Agreement among Miami Lakes Venture Associates, Sun (9)
Communities Funding Limited Partnership and Lehman Brothers Holdings Inc.
10.10 Form of Indemnification Agreement between each officer and director of Sun (9)
Communities, Inc. and the Company
10.11 Loan Agreement among the Company, Sea Breeze Limited Partnership and High (9)
Point Associates, LP.
10.12 Option Agreement by and between the Company and Sea Breeze Limited Partnership (9)
10.13 Option Agreement by and between the Company and High Point Associates, LP (9)
10.14 $1,022,538.12 Promissory Note from Gary A. Shiffman to the Company (7)
10.15 $1,022,538.13 Promissory Note from Gary A. Shiffman to the Company (7)
10.16 $6,604,923.75 Promissory Note from Gary A. Shiffman to the Company (7)
10.17 Stock Pledge Agreement between Gary A. Shiffman and the Company for 94,570 (7)
shares of Common Stock
10.18 Stock Pledge Agreement between Gary A. Shiffman and the Company for 305,430 (7)
shares of Common Stock
10.19 $1,300,195.40 Promissory Note from Gary A. Shiffman to the Company (9)
10.20 $1,300,195.40 Promissory Note from Gary A. Shiffman to the Company (9)
10.21 Stock Pledge Agreement between Gary A. Shiffman and the Company with respect (9)
to 80,000 shares of Common Stock
10.22 Employment Agreement between Sun Communities, Inc. and Jeffrey P. Jorissen# (11)
10.23 Long Term Incentive Plan (9)
10.24 Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. (11)
Shiffman, dated June 5, 1998#
10.25 Restricted Stock Award Agreement between Sun Communities, Inc. and Jeffrey P. (11)
Jorissen, dated June 5, 1998#
10.26 Restricted Stock Award Agreement between Sun. Communities, Inc. and Jonathan (11)
M. Colman, dated June 5, 1998#
27
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------ ----------- ------
10.27 Restricted Stock Award Agreement between Sun Communities, Inc. and Brian W. (11)
Fannon, dated June 5, 1998#
10.28 Sun Communities, Inc. 1998 Stock Purchase Plan# (11)
10.29 Employment Agreement between Sun Home Services, Inc. and Brian Fannon# (11)
10.30 Facility and Guaranty Agreement among Sun Communities, Inc., the Company, (11)
Certain Subsidiary Guarantors and First National Bank of Chicago, dated
December 10, 1998
10.31 Rights Agreement between Sun Communities, Inc. and State Street Bank and (10)
Trust Company, dated April 24, 1998
10.32 Employment Agreement between Sun Communities, Inc. and Brian W. Fannon# (11)
10.33 Contribution Agreement, dated as of September 29, 1999, by and among Sun (13)
Communities, Inc., the Company, Belcrest Realty Corporation and Belair Real
Estate Corporation
10.34 One Hundred Third Amendment to Second Amended and Restated Limited (13)
Partnership Agreement of the Company
10.35 One Hundred Eleventh Amendment to Second Amended and Restated Limited (16)
Partnership Agreement of the Company
10.36 One Hundred Thirty-Sixth Amendment to Second Amended and Restated Limited (16)
Partnership Agreement of the Company
10.37 One Hundred Forty-Fifth Amendment to Second Amended and Restated Limited (16)
Partnership Agreement of the Company
10.38 Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. (16)
Shiffman, dated March 30, 2001
10.39 Restricted Stock Award Agreement between Sun Communities, Inc. and Jeffrey P. (16)
Jorissen, dated March 30, 2001
10.40 Restricted Stock Award Agreement between Sun Communities, Inc. and Jonathan (16)
M. Colman, dated March 30, 2001
10.41 Restricted Stock Award Agreement between Sun Communities, Inc. and Brian W. (16)
Fannon, dated March 30, 2001
10.42 Membership Pledge Agreement dated December 13, 1999 between Bingham Financial (14)
Services Corporation ("Bingham") and the Company
10.43 Amended and Restated Security Agreement dated December 13, 1999 between (14)
Bingham and the Company
28
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------ ----------- ------
10.44 Stock Pledge Agreement dated December 13, 1999 between Bingham and the (14)
Operating Partnership
10.45 Supplemental Agreement Regarding Assignment of Notes, Loan Agreements and (14)
Security Agreements as Collateral Security dated December 13, 1999 between
Bingham and the Company
10.46 Supplemental Agreement Regarding Assignment of Note, Loan Agreement and (15)
Security Agreement as Collateral Security dated December 13, 1999 between
Bingham and the Company
10.47 Supplemental Agreement Regarding Assignment of Note and Security Agreement as (14)
Collateral Security dated March 16, 2000 between Bingham and the Company
10.48 Stock Pledge Agreement dated October 20, 2000 between Bingham and the Company (14)
10.49 Amendment to Amended and Restated Security Agreement dated October 20, 2000 (14)
between Bingham and the Company
10.50 Supplemental Agreement Regarding Assignment of Notes, Loan Agreements and (15)
Security Agreements as Collateral Security dated December 13, 1999 between
Bingham and the Company
10.51 Amended and Restated Subordinated Loan Agreement dated February 1, 2002 among (16)
the Company, Origen Financial, Inc. and Origen Financial, L.L.C., amended by
First Amendment to Amended and Restated Subordinated Loan Agreement dated
March 22, 2002
10.52 Third Amended and Restated Promissory Note dated March 22, 2002 executed by (16)
Origen Financial, Inc. and Origen Financial, L.L.C. in favor of the Company
10.53 Amended and Restated Security Agreement dated February 1, 2002 between the (16)
Company and Origen Financial, Inc.
10.54 Amended and Restated Stock Pledge Agreement dated February 1, 2002 between (16)
Origen Financial, Inc. and the Company
10.55 Amended and Restated Limited Liability Company Interest Security and Pledge (16)
Agreement dated February 1, 2002 between Origen Financial, Inc. and the
Company
10.56 Security Agreement dated February 1, 2002 between the Company and Origen (16)
Financial, L.L.C.
10.57 Limited Liability Company Interest Security and Pledge Agreement dated (16)
February 1, 2002 between the Company and Origen Financial, L.L.C.
29
EXHIBIT METHOD OF
NUMBER DESCRIPTION FILING
- ------ ----------- ------
10.58 Amended and Restated Guaranty made February 1, 2002 by Bingham in favor of (16)
the Company
10.59 Investment Agreement dated July 20, 2001 between SUI TRS, Inc., Shiffman (16)
Family LLC, Bingham and Woodward Holdings, LLC, amended by Amendment to
Investment Agreement dated August 13, 2001
10.60 Limited Liability Company Agreement of Origen Financial, L.L.C. dated (16)
December 18, 2001 by and among SUI TRS, Inc., Shiffman Family LLC, Bingham
and Woodward Holdings LLC
10.61 Participation Agreement dated February 28, 2002 between the Company and (16)
Woodward Holdings, LLC
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to (17)
Combined Fixed Charges and Preferred Dividends
21 List of Subsidiaries of Sun Communities Operating Limited Partnership (17)
23 Consent of PricewaterhouseCoopers LLP, independent accountants (17)
- --------------------------------
(1) Incorporated by reference to Sun Communities, Inc.'s
Registration Statement No. 33-69340.
(2) Incorporated by reference to Sun Communities, Inc.'s Current
Report on Form 8-K dated March 20, 1996.
(3) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1995.
(4) Incorporated by reference to Sun Communities, Inc.'s Current
Report on Form 8-K dated April 24, 1996.
(5) Incorporated by reference to Sun Communities, Inc.'s
Registration Statement No. 33-80972.
(6) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1994.
(7) Incorporated by reference to Sun Communities, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
(8) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.
30
(9) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997.
(10) Incorporated by reference to Sun Communities, Inc.'s Current
Report on Form 8-K dated April 24, 1998.
(11) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998.
(12) Incorporated by reference to Sun Communities, Inc.'s Proxy
Statement, dated April 20, 1999
(13) Incorporated by reference to Sun Communities, Inc.'s Current
Report on Form 8-K dated October 14, 1999.
(14) Incorporated by reference to Sun Communities, Inc.'s
Registration Statement on Form S-3, Amendment No. 1, No.
333-54718.
(15) Incorporated by reference to Sun Communities Operating Limited
Partnership's Annual Report on Form 10-K for the year ended
December 31, 2000, No. 333-2522-01.
(16) Incorporated by reference to Sun Communities, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2001, No.
1-12616.
(17) Filed herewith.
# Management contract or compensatory plan or arrangement
required to be identified by Form 10-K Item 14.
31
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGES
Report of Independent Accountants............................................F-2
Financial Statements:
Consolidated Balance Sheets as of December 31, 2001 and 2000..............F-3
Consolidated Statements of Income
for the Years Ended December 31, 2001, 2000 and 1999.................F-4
Consolidated Statements of Partners' Capital for the Years
Ended December 31, 2001, 2000 and 1999...............................F-5
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2001, 2000 and 1999.........................F-6
Notes to Consolidated Financial Statements.........................F-7 - F-16
Schedule III - Real Estate and Accumulated Depreciation..............F-17 - F-21
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Communities
Operating Limited Partnership:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, partners' capital and of cash flows present
fairly, in all material respects, the financial position of Sun Communities
Operating Limited Partnership and subsidiaries (the "Company") at December 31,
2001 and December 31, 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule referred
to in the index appearing under Item 14(a)(2) presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Detroit, Michigan
February 19, 2002
F-2
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS)
ASSETS 2001 2000
--------- ---------
Investment in rental property, net $ 813,334 $ 751,820
Cash and cash equivalents 4,587 18,466
Notes and other receivables 107,993 158,949
Investment in and advances to affiliates 38,856 7,930
Other assets 32,279 32,063
--------- ---------
Total assets $ 997,049 $ 969,228
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Line of credit $ 93,000 $ 12,000
Debt 402,198 452,508
Accounts payable and accrued expenses 17,683 16,304
Deposits and other liabilities 8,929 8,839
--------- ---------
Total liabilities 521,810 489,651
--------- ---------
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"),
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 ("OP Units") unlimited authorized,
20,173 and 20,194 issued and outstanding in 2001 and
2000, respectively
General partner 339,240 343,380
Limited partners 49,040 51,596
Unearned Compensation (6,999) (4,746)
--------- ---------
Total partners' capital 431,281 440,230
--------- ---------
Total liabilities and partners' capital $ 997,049 $ 969,228
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)
2001 2000 1999
-------- -------- --------
REVENUES
Income from property ............................. $139,022 $132,440 $125,424
Other income ..................................... 14,532 14,105 9,530
-------- -------- --------
Total revenues ................................ 153,554 146,545 134,954
-------- -------- --------
EXPENSES
Property operating and maintenance ............... 29,154 28,592 27,300
Real estate taxes ................................ 9,524 9,115 8,888
Property management .............................. 2,746 2,934 2,638
General and administrative ....................... 4,627 4,079 3,682
Depreciation and amortization .................... 33,516 30,671 28,551
Interest ......................................... 31,016 29,651 27,289
-------- -------- --------
Total expenses ................................ 110,583 105,042 98,348
-------- -------- --------
Income before gain from property dispositions, net and
distribution to Preferred OP Units ............... 42,971 41,503 36,606
Gain from property dispositions, net ................. 4,275 4,801 829
-------- -------- --------
Income before distribution to Preferred OP Units ..... 47,246 46,304 37,435
Less distribution to Preferred OP Units .............. 8,131 7,826 3,663
-------- -------- --------
Earnings attributable to OP Units .................... $ 39,115 $ 38,478 $ 33,772
======== ======== ========
Earnings attributed to:
General Partner ............................... $ 33,910 $ 33,294 $ 29,089
Limited Partners .............................. 5,205 5,184 4,683
-------- -------- --------
$ 39,115 $ 38,478 $ 33,772
======== ======== ========
Earnings per OP Unit:
Basic ......................................... $ 1.96 $ 1.92 $ 1.69
======== ======== ========
Diluted ....................................... $ 1.94 $ 1.91 $ 1.68
======== ======== ========
Weighted average OP Units outstanding:
Basic ......................................... 19,907 19,999 19,961
======== ======== ========
Diluted ....................................... 20,089 20,085 20,113
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)
GENERAL LIMITED UNEARNED
PARTNER PARTNER COMPENSATION
--------- --------- ------------
Balance, January 1, 1999 ............................. $ 348,266 $ 55,372 $ (5,302)
Issuance (disposition) of OP Units, net .............. (74)
Net contributions .................................... 1,754
Net income ........................................... 29,089 4,683
Distributions declared of $2.02 per OP Unit .......... (35,009) (5,613)
Reclassification and conversion of limited partnership
interests ........................................ 2,317 (2,317)
Issuance of General Partner's restricted common
stock awards, net ................................ (157)
--------- --------- ---------
Balance, December 31, 1999 ........................... 346,417 52,051 (5,459)
Issuance (disposition) of OP Units, net .............. (16)
Net contributions .................................... 420
Net income ........................................... 33,294 5,184
Distributions declared of $2.10 per OP Unit .......... (36,717) (5,657)
Reclassification and conversion of limited partnership
interests ........................................ (34) 34
Amortization ......................................... 713
--------- --------- ---------
Balance, December 31, 2000 ........................... 343,380 51,596 (4,746)
Issuance (disposition) of OP Units, net .............. (19)
Net contributions (withdrawals) ...................... (1,830)
Net income ........................................... 33,910 5,205
Distributions declared of $2.18 per OP Unit .......... (38,161) (5,801)
Reclassification and conversion of limited partnership
interests ........................................ 1,941 (1,941)
Issuance of General Partner's restricted common
stock awards, net ................................ (3,188)
Amortization ......................................... 935
--------- --------- ---------
Balance, December 31, 2001 ........................... $ 339,240 $ 49,040 $ (6,999)
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(AMOUNTS IN THOUSANDS)
2001 2000 1999
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings attributable to OP Units ................................ $ 39,115 $ 38,478 $ 33,772
Adjustments to reconcile earnings attributable to OP Units to
cash provided by operating activities:
Gain from property dispositions, net ......................... (4,275) (4,801) (1,781)
Depreciation and amortization costs .......................... 33,516 30,671 28,551
Amortization of deferred financing costs ..................... 1,065 943 865
Increase in other assets ......................................... (4,879) (7,480) (9,329)
Increase (decrease) in accounts payable and other liabilities .... 1,329 (1,133) 1,616
--------- --------- ---------
Net cash provided by operating activities .................... 65,871 56,678 53,694
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in rental properties .................................. (70,331) (57,832) (67,588)
Proceeds related to property dispositions ........................ 17,331 34,460 36,720
Investment in and advances to affiliates ......................... (20,056) 675 2,854
Investment in notes receivable, net .............................. 37,968 (46,577) (52,218)
--------- --------- ---------
Net cash used in investing activities ........................ (35,088) (69,274) (80,232)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions (withdrawals) .............................. (5,101) 404 51,176
Borrowings on line of credit, net ................................ 81,000 (35,000) 21,000
Proceeds from notes payable and other debt ....................... -- 100,000 --
Repayments on notes payable and other debt ....................... (76,599) (2,056) (1,741)
Payments for deferred financing costs ............................ -- (1,242) (1,533)
Distributions .................................................... (43,962) (42,374) (40,622)
--------- --------- ---------
Net cash provided by (used in) financing activities .......... (44,662) 19,732 28,280
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ............. (13,879) 7,136 1,742
Cash and cash equivalents, beginning of year ..................... 18,466 11,330 9,588
--------- --------- ---------
Cash and cash equivalents, end of year ........................... $ 4,587 $ 18,466 $ 11,330
========= ========= =========
SUPPLEMENTAL INFORMATION
Cash paid for interest including capitalized amounts of
$3,704, $3,148 and $2,230 in 2001, 2000 and 1999, respectively $ 30,048 $ 31,882 $ 28,422
Noncash investing and financing activities:
Debt assumed for rental properties ........................... 26,289 -- 10,445
Capitalized lease obligations for rental properties .......... -- -- 10,605
Property acquired through the exchange of similar property ... -- -- 7,700
Restricted common stock issued as unearned
compensation by the general partner, net .................. 3,188 -- 720
Property acquired (sold) in satisfaction of note receivable .. 1,338 (8,614) 4,400
Issuance of partnership units for rental properties .......... 4,612 3,564 --
Notes receivable reclassified to advances to affiliates ...... 11,210 -- --
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
1. BASIS OF PRESENTATION:
Sun Communities Operating Limited Partnership (the "Company") owns and
operates or finances manufactured housing community properties. Sun
Communities, Inc. ("Sun"), 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, Sun has unilateral
control and complete responsibility for management of the Company. Pursuant
to the terms of the Company's partnership agreement, the Company is
required to reimburse Sun for the net expenses incurred by Sun. The amounts
reimbursed by the Company are reflected in the statement of income as
general and administrative expenses. The balance sheet of Sun as of
December 31, 2001 is identical to the accompanying Company balance sheet,
except as follows:
(AMOUNTS IN THOUSANDS)
-----------------------------------------------------------
AS PRESENTED
HEREIN SUN COMMUNITIES, INC.
DECEMBER 31, 2001 ADJUSTMENTS DECEMBER 31, 2001
----------------- ----------- ---------------------
Notes and other receivables ............ $ 107,993 $ (2,600) $ 105,393
========= ========= =========
Total assets ........................... $ 997,049 $ (2,600) $ 994,449
========= ========= =========
Minority interests ..................... -- 142,998 $ 142,998
=========
Series B Units ......................... $ 8,175 (8,175)
POP Units .............................. 35,783 (35,783)
Series A Units ......................... 50,000 (50,000)
General partner ........................ 339,240 (339,240)
Limited partners ....................... 49,040 (49,040)
Common stock ........................... 178 $ 178
Additional paid-in capital ............. 399,789 399,789
Unearned compensation .................. (6,999) -- (6,999)
Distributions in excess of accumulated
earnings .......................... (45,939) (45,939)
Officers' notes ........................ (11,004) (11,004)
Treasury stock ......................... (6,384) (6,384)
--------- --------- ---------
Partners' capital/Stockholders'
equity ....................... $ 431,281 $ (2,600) $ 329,641
========= ========= =========
Total liabilities and partners' capital/
Stockholders' equity .............. $ 997,049 $ (2,600) $ 994,449
========= ========= =========
F-7
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. BUSINESS: The Company owns and operates or finances 116 manufactured
housing communities located in 15 states concentrated principally in
the Midwest and Southeast comprising approximately 40,544 developed
sites and approximately 4,385 sites suitable for development.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
b. PRINCIPLES OF CONSOLIDATION: The accompanying financial statements
include the accounts of the Company and all its wholly and 99 percent
owned subsidiary partnerships and limited liability companies. All
significant inter-entity balances and transactions have been eliminated
in consolidation. The limited partnership interests are adjusted to
their relative ownership interest by reclassification to/from general
partnership interests. Minority interests represented by Sun's one
percent indirect interest in the aforementioned subsidiaries are not
separately recognized in the Company's financial statements, but rather
are included in general and administrative expenses since the amounts
involved are immaterial.
c. RENTAL PROPERTY: Rental property is recorded at cost, less accumulated
depreciation. Management evaluates the recoverability of its investment
in rental property whenever events or changes in circumstances such as
recent operating results, expected net operating cash flow and plans
for future operations indicate that full asset recoverability is
questionable. Recoverability of these assets is measured by a
comparison of the carrying amount of such assets to the future
undiscounted net cash flows expected to be generated by the assets. If
such assets were deemed to be impaired as a result of this measurement,
the impairment that would be recognized is measured by the amount by
which the carrying amount of the asset exceeds the fair value of the
asset as determined on a discounted cash flow basis.
In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." The
provisions of this SFAS 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001. The Company
does not expect a material impact from the adoption of this standard.
Depreciation is computed on a straight-line basis over the estimated
useful lives of the assets. Useful lives are 30 years for land
improvements and buildings and 7 to 15 years for furniture, fixtures
and equipment.
Expenditures for ordinary maintenance and repairs are charged to
operations as incurred and significant renovations and improvements,
which improve and/or extend the useful life of the asset, are
capitalized and depreciated over their estimated useful lives.
Construction costs related to new community or expansion sites
development including interest are capitalized until the property is
substantially complete.
F-8
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
d. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
and cash equivalents.
e. NOTES RECEIVABLE: The Company evaluates the recoverability of its notes
receivable whenever events occur or there are changes in circumstances
such that management believes it is probable that it will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. The loan is then measured based on the present value of the
expected future cash flow discounted at the loan's effective interest
rate or the fair value of the collateral if the loan is collateral
dependent.
f. INVESTMENTS IN AND ADVANCES TO AFFILIATES: Sun Home Services ("SHS")
provides home sales and other services to current and prospective
tenants. Through the Operating Partnership, the Company owns 100
percent of the outstanding preferred stock of SHS, is entitled to
ninety-five percent (95%) of the operating cash flow, and accounts for
its investment utilizing the equity method of accounting. The common
stock is owned by one officer of the Company and the estate of a former
officer of the Company who collectively are entitled to receive five
percent (5%) of the operating cash flow.
Bingham Financial Services Corporation ("BFSC") was formed by Sun in
1997 in response to demand for financing from purchasers and residents
in the Company's communities. As BFSC's business developed, its
objectives and opportunities expanded and the Company concluded that
its business could be operated and grown more effectively as a separate
public entity. BFSC's initial public offering occurred in November
1997. The Company has continued to provide financial support to BFSC.
In December 2001, the Company, through SHS, made a $15 million equity
investment in a newly formed company Origen Financial, L.L.C., that
will merge with Origen Financial, Inc., subsidiary of BFSC, as part of
the recapitalization of BFSC. As a result of this equity investment,
the Company will own approximately a thirty percent (30%) interest in
the surviving company ("Origen"), which company will hold all of the
operating assets of BFSC and its subsidiaries. BFSC owns approximately
a twenty percent (20%) interest in Origen and the Company (together
with the other investors in Origen) has the right to purchase its
pro-rata share of BFSC's interest in Origen at fair value as determined
by an independent nationally recognized investment banking firm's
application of generally accepted valuation methodologies at any time
between the third and fifth anniversaries of the closing date of the
Company's investment in Origen. Coincident with the recapitalization of
BFSC, Gary A. Shiffman, Sun's Chairman, Chief Executive Officer and
President, invested on behalf of himself and his family $5 million in
Origen and holds approximately a ten percent (10%) interest in Origen.
An unrelated third party also invested $20 million all on the same
terms as the Company and Mr. Shiffman. Mr. Shiffman and Arthur A.
Weiss, the Company's legal counsel, are directors of BFSC and Sun and
Mr. Shiffman currently serves as Chairman of both companies.
F-9
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
f. INVESTMENTS IN AND ADVANCES TO AFFILIATES (CONTINUED):
Additionally, the Company (together with the unrelated third party)
provides financing to Origen and is subject to the risks of being a
lender. These risks include the risks relating to borrower delinquency
and default and the adequacy of the collateral for such loans. This
financing consists of a $21.25 million standby line of credit of which
the Company's commitment is $12.5 million ($11.2 million was
outstanding as of December 31, 2001), bearing interest at a per annum
rate equal to 700 basis points over LIBOR, with a minimum interest rate
of 11 percent and a maximum interest rate of 15 percent. This line of
credit is collateralized by a security interest in Origen's assets,
which is subordinate in all respects to all institutional indebtedness
of Origen, and a guaranty and pledge of assets by Bingham. Under the
participation agreement, each lender participates pari passu in all
proceeds from the line of credit, provided that, if additional funds in
excess of $17.5 million are loaned to Origen and both lenders do not
participate therein, such additional amounts funded will be subordinate
in all respects to all indebtedness of Origen in which both lenders
have participated.
Summarized financial information of the Company's equity investments
presented before elimination of intercompany transactions follows:
2001 2000
--------- ---------
Loans receivable, net ............. $ 127,412 $ --
SHS assets ........................ 35,545 14,364
Other assets ...................... 30,580 --
--------- ---------
Total assets ............... $ 193,537 $ 14,364
========= =========
Advances under
repurchase agreements ......... $ 105,564 $ --
Debt payable to the Company ....... 39,729 7,242
Other liabilities ................. 29,592 7,657
--------- ---------
Total liabilities .......... 174,885 14,899
Equity (deficit) .................. 18,652 (535)
--------- ---------
Total liabilities and equity $ 193,537 $ 14,364
========= =========
Revenues .......................... $ 27,731(1) $ 24,500
Expenses .......................... 28,788(1) 25,539
--------- ---------
Net loss .......................... $ (1,057) $ (1,039)
========= =========
(1) Includes Origen's financial data for the period from December 19, 2001 to
December 31, 2001.
g. REVENUE RECOGNITION: Rental income attributable to leases is recorded
on a straight-line basis when earned from tenants. Leases entered into
by tenants generally range from month-to-month to one year and are
renewable by mutual agreement of the Company and resident or, in some
cases, as provided by state statute.
F-10
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
h. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of financial
instruments which includes cash and cash investments, mortgages and
notes receivable and debt approximates fair value. Fair values have
been determined through information obtained from market sources and
management estimates.
i. TAXES: As a partnership, the Company does not pay federal or state
income taxes.
j. RECLASSIFICATIONS: Certain 2000 and 1999 amounts have been
reclassified to conform with the 2000 financial statement presentation.
Such reclassifications had no effect on operations as originally
presented.
RENTAL PROPERTY (AMOUNTS IN THOUSANDS):
AT DECEMBER 31
-------------------------
2001 2000
--------- ---------
Land ............................. $ 82,326 $ 76,120
Land improvements and buildings .. 818,043 739,858
Furniture, fixtures, equipment ... 20,700 17,498
Land held for future development . 16,810 12,042
Property under development ....... 15,777 21,859
--------- ---------
953,656 867,377
Less accumulated depreciation (140,322) (115,557)
--------- ---------
$ 813,334 $ 751,820
========= =========
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, and clubhouses, maintenance buildings and amenities. Included
in rental property at December 31, 2001 and 2000 are net carrying amounts
related to capitalized leases of $28.6 million and $39.7 million,
respectively.
During 2001, the Company acquired five communities comprising 2,332
developed sites for $55.8 million and two development communities
comprising 1,273 sites for $4.3 million. During 2000, the Company acquired
three manufactured housing communities comprising 659 developed sites for
$21.1 million. These transactions have been accounted for as purchases, and
the statements of income include the operations of the acquired communities
from the dates of their respective acquisitions. As of December 31, 2001,
in conjunction with a 1993 acquisition, the Company is obligated to issue
$8.2 million of OP Units through 2009 based on the per unit price of the OP
Units on the issuance date. This obligation was accounted for as part of
the purchase price of the original acquisition.
F-11
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
4. NOTES AND OTHER RECEIVABLES (AMOUNTS IN THOUSANDS):
AT DECEMBER 31
----------------------
2001 2000
-------- --------
Mortgage and other notes receivable primarily with minimum monthly
interest payments at LIBOR based floating rates of approximately
LIBOR + 3.0%, maturing at various dates from January 2002 through
June 2012, substantially collateralized by manufactured
communities $ 77,424 $ 71,775
Installment loans on manufactured homes with interest payable monthly
at a weighted average interest rate
and maturity of 8.5% and 20 years, respectively 13,474 32,426
Other receivables 14,495 12,299
BFSC related receivables -- 39,849
10 year note to 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
-------- --------
$107,993 $158,949
======== ========
At December 31, 2001, the maturities of mortgage and other notes
receivables are approximately as follows: 2002 - $40.7 million; 2003 -
$13.1 million; 2004 - $3.5 million; 2005 and after - $20.1 million.
5. DEBT (AMOUNTS IN THOUSANDS):
AT DECEMBER 31
----------------------
2001 2000
-------- --------
Collateralized term loan, interest at 7.01%, due September 9, 2007 $ 42,820 $ 43,393
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
Senior notes, interest at 8.20%, due August 15, 2008 ............. 100,000 100,000
Senior notes, interest at 6.77%, due May 14, 2015,
callable/redeemable May 16, 2005 ............................ 65,000 65,000
Senior notes, interest at 7.375%, paid in May 1, 2001 ............ -- 65,000
Capitalized lease obligations, interest at 6.1%
due through December 2003 ................................... 26,045 36,009
Mortgage notes, other ............................................ 48,333 23,106
-------- --------
$402,198 $452,508
======== ========
F-12
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
5. DEBT (AMOUNTS IN THOUSANDS) (CONTINUED):
The Company has a $150 million unsecured line of credit at LIBOR plus 1.0
percent maturing in January, 2003, of which $57 million was available at
December 31, 2001. The average interest rate of outstanding borrowings at
December 31, 2001 was 3.22 percent.
The term loan is collateralized by seven communities comprising
approximately 3,400 sites. The capitalized lease obligations and mortgage
notes are collateralized by eleven communities comprising approximately
4,440 sites. At the lease expiration date of the capitalized leases, the
Company has the right and intends to purchase the properties for the amount
of the then outstanding lease obligation. Annual payments under capitalized
lease obligations are $2.1 million in 2002 and $0.8 million in 2003.
At December 31, 2001, the maturities of debt, excluding the line of credit,
during the next five years are approximately as follows: 2002 - $17.6
million; 2003 - $86.7 million; 2004 - $12.2 million; 2005 - $1.6 million;
and 2006 - $7.9 million.
The Company is the guarantor of $23.2 million in personal bank loans
maturing in 2004, made to Sun's directors, employees and consultants to
purchase common stock of the general partner and OP Units pursuant to Sun's
Stock Purchase Plan. No compensation expense was recognized in respect to
the guarantees as the fair value therefore was not material nor have there
been any defaults.
6. SUN'S STOCK OPTIONS:
Data pertaining to Sun's stock option plans are as follows:
2001 2000 1999
--------- --------- ---------
Options outstanding, January 1.............................. 1,109,250 1,121,000 1,055,600
Options granted............................................. 137,900 17,500 102,000
Option price......................................... $27.03-$32.81 $35.37 $30.03-$32.96
Options exercised........................................... 59,773 16,667 35,099
Option price......................................... $22.75-$33.75 $28.64-$30.03 $22.75-$33.75
Options forfeited........................................... 96,133 12,583 1,501
Option price......................................... $27.03-$33.82 $30.03-$33.75 $33.75
Options outstanding, December 31............................ 1,090,794(a) 1,109,250 1,121,000
Option price............................................ $20-$35.39 $20-$35.39 $20-$35.39
Options exercisable, December 31............................ 823,227(a) 827,329 709,811
(a) There are 365,675 and 279,409 options outstanding and exercisable,
respectively, which range from $20.00 - $27.99 with a weighted average life
of 5.1 years related to the outstanding options. The weighted average
exercise price for these outstanding and exercisable options is $24.33 and
$23.50, respectively. There are 725,119 and 543,868 options outstanding and
exercisable, respectively, which range from $28.00 - $35.39 with a weighted
average life of 4.3 years related to the outstanding options. The weighted
average exercise price for these outstanding and exercisable options is
$30.89 and $30.24, respectively.
F-13
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
6. SUN'S STOCK OPTIONS (CONTINUED):
Sun's stock option plans provide for up to 2.2 million shares of common
stock that may be granted to directors, executive officers and other key
employees of Sun or the Company. At December 31, 2001, 369,764 shares of
common stock were available for the granting of options. Options are
granted at fair market value and generally vest over a two-year period and
may be exercised for 10 years after date of grant. In addition, the Company
established a Long-Term Incentive Plan in 1997 for certain employees
granting 168,000 options which become exercisable in equal installments in
2002-2004.
The Company has opted to measure compensation cost utilizing the intrinsic
value method. The fair value of each option grant was estimated as of the
date of grant using the Black-Scholes option-pricing model with the
following assumptions for options granted in:
2001 2000 1999
------ ------ ------
Estimated fair value per share/unit of options granted during year $ 6.19 $ 2.43 $ 2.43
Assumptions:
Annualized dividend yield ...................................... 5.9% 7.1% 7.1%
Common stock/partnership interest price volatility ............. 16.4% 15.3% 15.3%
Risk-free rate of return ....................................... 5.3% 6.4% 6.4%
Expected option term (in years) ................................ 4 6 6
If compensation cost for stock option grants had been recognized based on
the fair value at the grant date, this would have resulted in net income
of $38.7 million, $38.2 million and $33.4 million and net income per OP
Unit of $1.95, $1.91 and $1.68 in 2001, 2000 and 1999, respectively.
7. PARTNERS' CAPITAL:
There are approximately $8.2 million of $100 mandatory redemption price
Series B Units outstanding at December 31, 2001 with mandatory dividends at
rates ranging from 6.85 percent to 9.19 percent and maturing between 2003
and 2012.
The Company issued 2 million Series A Units at $25 per unit in September
1999 bearing an annual coupon rate of 8.875 percent. The Series A Units may
be called by the Company at par on or after September 29, 2004, have no
stated maturity or mandatory redemption and are convertible into Sun's
preferred stock under certain circumstances.
The terms of the POP Units issued at $27 per unit were renegotiated
effective December 31, 2001. The conversion price increased to at least $68
per unit and the annual coupon rate was decreased from 9.0 percent to 7.0
percent for the first two years followed by a variable rate ranging from
6.5 percent to 8.5 percent with mandatory redemption on January 2, 2014.
F-14
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
7. PARTNERS' CAPITAL (CONTINUED):
In March 2001 and December 1999, the Company's general partner issued
additional restricted stock awards of 99,422 at $33.00 per unit and 24,750
at $30.00 per unit, respectively, to officers and certain employees which
are being amortized over their five to ten year vesting period.
Compensation cost recognized in income for all restricted stock awards was
$0.9 million, $0.7 million and $0.6 million in 2001, 2000 and 1999,
respectively.
8. OTHER INCOME (AMOUNTS IN THOUSANDS):
The components of other income are as follows for the years ended December
31, 2000, 1999 and 1998:
2001 2000 1999
------- ------- -------
Interest income $10,706 $ 9,385 $ 6,345
Income from affiliate 131 607 1,726
Other income 3,695 4,113 1,459
------- ------- -------
$14,532 $14,105 $ 9,530
======= ======= =======
9. EARNINGS PER OP UNIT (AMOUNTS IN THOUSANDS):
2001 2000 1999
------- ------- -------
Earnings used for basic and diluted earnings per
OP Unit computation $39,115 $38,478 $33,772
======= ======= =======
Total units used for basic earnings per OP Unit 19,907 19,999 19,961
Dilutive securities:
Stock options 182 86 152
------- ------- -------
Total shares used for diluted earnings per OP Unit
computation 20,089 20,085 20,113
======= ======= =======
Diluted earnings per OP Unit reflect the potential dilution that would
occur if securities were exercised or converted into OP Units.
F-15
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 2001, 2000 AND 1999
10. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following unaudited quarterly amounts are in thousands, except for per
unit amounts:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
2001
Total revenues ............................. $39,091 $38,148 $38,309 $38,006
Operating income(a) ........................ $27,498 $26,987 $26,553 $26,465
Income before other, net and distribution to
Preferred OP Units ...................... $11,264 $10,885 $11,149 $ 9,673
Earnings attributable to OP Units(b) ....... $12,805 $ 9,602 $ 9,092 $ 7,616
Weighted average OP Units .................. 20,025 19,856 19,863 19,885
Earnings per OP Unit-basic ................. $ 0.64 $ 0.48 $ 0.46 $ 0.38
2000
Total revenues ............................. $36,033 $36,064 $37,013 $37,435
Operating income(a) ........................ $24,823 $25,380 $25,549 $26,073
Income before other, net and distribution to
Preferred OP Units ...................... $10,430 $10,396 $10,200 $10,477
Earnings attributable to OP Units(b) ....... $ 8,515 $ 8,440 $12,842 8,681
Weighted average OP Units .................. 20,006 19,999 19,998 19,994
Earnings per OP Unit-basic ................. $ 0.43 $ 0.42 $ 0.64 $ 0.43
(a) Operating income is defined as total revenues less property operating and
maintenance expense, real estate tax expense, property management, and
general and administrative expenses. Operating income is a measure of the
performance of the operations of the properties before the effects of
depreciation, amortization and interest expense. Operating income is not
necessarily an indication of the performance of the Company or a measure of
liquidity.
(b) Earnings attributable to OP Units includes net gains on the disposition of
properties of $3,517 in the first quarter of 2001, $758 in the second
quarter of 2001, $4,619 in the third quarter of 2000 and $182 in the fourth
quarter of 2000.
F-16
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III
DECEMBER 31, 2001
(AMOUNT IN THOUSANDS)
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT
INITIAL COST ACQUISITION CARRIED AT
TO COMPANY IMPROVEMENTS DECEMBER 31, 2001
--------------------- --------------------- -----------------------
BUILDING BUILDING BUILDING
AND AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES LAND FIXTURES
- ---------------------- -------------------- ----------- --------- --------- --------- --------- --------- ---------
Academy/Westpoint Canton, MI -- $ 1,485 $ 14,278 -- $ 34 $ 1,485 $ 14,312
Allendale Allendale, MI -- 372 3,684 -- 3,542 372 7,226
Alpine Grand Rapids, MI -- 729 6,692 -- 3,431 729 10,123
Apple Creek Amelia, OH (3) 543 5,480 -- 70 543 5,550
Arbor Terrace Brandenton, FL -- 481 4,410 -- 275 481 4,685
Ariana Village Lakeland, FL -- 240 2,195 -- 467 240 2,662
Autumn Ridge Ankeny, IO -- 890 8,054 -- 776 890 8,830
Bedford Hills Battle Creek, MI (1) 1,265 11,562 -- 385 1,265 11,947
Bell Crossing Clarksville, TN -- 717 1,916 -- 2,796 717 4,712
Bonita Lake Bonita Springs, FL -- 285 2,641 -- 166 285 2,807
Boulder Ridge Pflugerville, TX -- 1,000 500 $ 3,324 11,890 4,324 12,390
Branch Creek Austin, TX -- 796 3,716 -- 4,419 796 8,135
Brentwood Kentwood, MI -- 385 3,592 -- 214 385 3,806
Byrne Hill Village Toledo, OH -- 383 3,903 -- 168 383 4,071
Brookside Village Goshen, IN -- 260 1,080 386 7,236 646 8,316
Buttonwood Bay Sebring, IN 13,789(8) 1,952 18,294 -- -- 1,952 18,294
Byron Center Byron Center, MI -- 253 2,402 -- 143 253 2,545
Country Acres Cadillac, MI -- 380 3,495 -- 220 380 3,715
Candlewick Court Owosso, MI -- 125 1,900 132 1,026 257 2,926
Carrington Pointe Ft. Wayne, IN -- 1,076 3,632 -- 3,787 1,076 7,419
Casa Del Valle Alamo, TX -- 246 2,316 -- 373 246 2,689
Catalina Middletown, OH -- 653 5,858 -- 713 653 6,571
Candlelight Village Chicago Heights, IL -- 600 5,623 -- 550 600 6,173
Chisholm Point Pflugerville, TX -- 609 5,286 -- 1,775 609 7,061
Clearwater Village South Bend, IN -- 80 1,270 61 1,838 141 3,108
Country Meadows Flat Rock, MI -- 924 7,583 296 9,284 1,220 16,867
Continental North Davison, MI -- (7) (7) -- 3,555 -- 3,555
Cobus Green Elkhart, IN -- 762 7,037 -- 609 762 7,646
College Park Estates Canton, MI -- 75 800 174 4,627 249 5,427
Continental Estates Davison, MI -- 1,625 16,581 150 1,299 1,775 17,880
Countryside Village Perry, MI (1) 275 3,920 185 1,990 460 5,910
Creekwood Meadows Burton, MI -- 808 2,043 404 6,317 1,212 8,360
Cutler Estates Grand Rapids, MI (1) 749 6,941 -- 233 749 7,174
Davison East Davison, MI (7) (7) -- -- -- --
Deerfield Run Anderson, MI 1,700 990 1,607 -- 2,555 990 4,162
DATE OF
ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LOCATION TOTAL DEPRECIATION ACQUISITION (A)
- ---------------------- -------------------- --------- ------------ ----------------
Academy/Westpoint Canton, MI $ 15,797 $ 721 2000(A)
Allendale Allendale, MI 7,598 1,151 1996(A)
Alpine Grand Rapids, MI 10,852 1,569 1996(A)
Apple Creek Amelia, OH 6,093 436 1999(A)
Arbor Terrace Brandenton, FL 5,166 883 1996(A)
Ariana Village Lakeland, FL 2,902 653 1994(A)
Autumn Ridge Ankeny, IO 9,720 1,588 1996(A)
Bedford Hills Battle Creek, MI 13,212 2,227 1996(A)
Bell Crossing Clarksville, TN 5,429 256 1999(A)
Bonita Lake Bonita Springs, FL 3,092 522 1996(A)
Boulder Ridge Pflugerville, TX 16,714 1,144 1998(C)
Branch Creek Austin, TX 8,931 1,401 1995(A)
Brentwood Kentwood, MI 4,191 728 1996(A)
Byrne Hill Village Toledo, OH 4,454 354 1999(A)
Brookside Village Goshen, IN 8,962 1,563 1985(A)
Buttonwood Bay Sebring, IN 20,246 296 2001(A)
Byron Center Byron Center, MI 2,798 492 1996(A)
Country Acres Cadillac, MI 4,095 680 1996(A)
Candlewick Court Owosso, MI 3,183 778 1985(A)
Carrington Pointe Ft. Wayne, IN 8,495 889 1997(A)
Casa Del Valle Alamo, TX 2,935 437 1997(A)
Catalina Middletown, OH 7,224 1,753 1993(A)
Candlelight Village Chicago Heights, IL 6,773 1,149 1996(A)
Chisholm Point Pflugerville, TX 7,670 1,398 1995(A)
Clearwater Village South Bend, IN 3,249 689 1986(A)
Country Meadows Flat Rock, MI 18,087 3,385 1994(A)
Continental North Davison, MI 3,555 225 1996(A)
Cobus Green Elkhart, IN 8,408 2,051 1993(A)
College Park Estates Canton, MI 5,676 1,310 1978(A)
Continental Estates Davison, MI 19,655 3,391 1996(A)
Countryside Village Perry, MI 6,370 1,429 1987(A)
Creekwood Meadows Burton, MI 9,572 924 1997(C)
Cutler Estates Grand Rapids, MI 7,923 1,337 1996(A)
Davison East Davison, MI -- -- 1996(A)
Deerfield Run Anderson, MI 5,152 240 1999(A)
F-17
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III
DECEMBER 31, 2001
(AMOUNT IN THOUSANDS)
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT
INITIAL COST ACQUISITION CARRIED AT
TO COMPANY IMPROVEMENTS DECEMBER 31, 2001
--------------------- --------------------- -----------------------
BUILDING BUILDING BUILDING
AND AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES LAND FIXTURES
- ---------------------- -------------------- ----------- --------- --------- --------- --------- --------- ---------
Desert View Village West Wendover, NV -- 1,180 -- 423 5,035 1,603 5,035
Eagle Crest Firestone, CO -- 4,073 150 197 11,740 4,270 11,890
Edwardsville Edwardsville, KS (1) 425 8,805 541 2,398 966 11,203
Fisherman's Cove Flint, MI -- 380 3,438 -- 454 380 3,892
Forest Meadows Philomath, OR -- 1,031 2,064 -- 85 1,031 2,149
Four Seasons Elkhart, IN -- 500 4,813 -- 23 500 4,836
Goldcoaster Homestead, FL -- 446 4,234 155 1,709 601 5,943
Grand Grand Rapids, MI -- 374 3,587 -- 158 374 3,745
Groves Ft. Meyers, FL -- 249 2,396 -- 527 249 2,923
Hamlin Webberville, MI -- 125 1,675 536 1,849 661 3,524
Holly Forest Holly Hill, FL -- 920 8,376 -- 291 920 8,667
Holiday Village Elkhart, IN -- 100 3,207 143 1,148 243 4,355
Indian Creek Ft. Meyers Beach, FL -- 3,832 34,660 -- 976 3,832 35,636
Island Lake Merritt Island, FL -- 700 6,431 -- 269 700 6,700
King's Court Traverse City, MI -- 1,473 13,782 -- 1,291 1,473 15,073
Kensington Meadows Lansing, MI -- 250 2,699 -- 3,457 250 6,156
King's Lake Debary, FL -- 280 2,542 -- 2,131 280 4,673
Knollwood Estates Allendale, MI (4) 400 4,101 -- -- 400 4,101
King's Pointe Winter Haven, FL -- 262 2,359 -- 431 262 2,790
Kenwood La Feria, TX -- 145 1,857 -- 3 145 1,860
Lafayette Place Warren, MI -- 669 5,979 -- 683 669 6,662
Lake Juliana Auburndale, FL -- 335 2,848 -- 772 335 3,620
Leesburg Landing Leesburg, FL -- 50 429 921 394 971 823
Liberty Farms Valparaiso, IN -- 66 1,201 116 1,834 182 3,035
Lincoln Estates Holland, MI -- 455 4,201 -- 284 455 4,485
Lake San Marino Naples, FL -- 650 5,760 -- 371 650 6,131
Maple Grove Estates Dorr, MI -- 15 210 19 280 34 490
Meadowbrook Village Tampa, FL -- 519 4,728 -- 351 519 5,079
Meadowbrook Estates Monroe, MI -- 431 3,320 379 5,808 810 9,128
Meadow Lake Estates White Lake, MI -- 1,188 11,498 126 1,688 1,314 13,186
Meadows Nappanee, IN -- 287 2,300 -- 2,281 287 4,581
Meadowstream Village Sodus, MI -- 100 1,175 109 1,357 209 2,532
Maplewood Mobile Lawrence, IN -- 280 2,122 -- 802 280 2,924
North Point Estates Pueblo, CO -- 1,582 3,027 -- -- 1,582 3,027
Oakwood Village Miamisburg, OH -- 1,964 6,401 -- 5,640 1,964 12,041
DATE OF
ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LOCATION TOTAL DEPRECIATION ACQUISITION (A)
- ---------------------- -------------------- --------- ------------ ----------------
Desert View Village West Wendover, NV 6,638 236 1998(C)
Eagle Crest Firestone, CO 16,160 194 1998(C)
Edwardsville Edwardsville, KS 12,169 2,824 1987(A)
Fisherman's Cove Flint, MI 4,272 1,037 1993(A)
Forest Meadows Philomath, OR 3,180 167 1999(A)
Four Seasons Elkhart, IN 5,336 247 2000(A)
Goldcoaster Homestead, FL 6,544 833 1997(A)
Grand Grand Rapids, MI 4,119 581 1996(A)
Groves Ft. Meyers, FL 3,172 546 1997(A)
Hamlin Webberville, MI 4,185 648 1984(A)
Holly Forest Holly Hill, FL 9,587 1,310 1997(A)
Holiday Village Elkhart, IN 4,598 1,173 1986(A)
Indian Creek Ft. Meyers Beach, FL 39,468 6,763 1996(A)
Island Lake Merritt Island, FL 7,400 1,472 1995(A)
King's Court Traverse City, MI 16,546 2,785 1996(A)
Kensington Meadows Lansing, MI 6,406 1,047 1995(A)
King's Lake Debary, FL 4,953 953 1994(A)
Knollwood Estates Allendale, MI 4,501 67 2001(A)
King's Pointe Winter Haven, FL 3,052 694 1994(A)
Kenwood La Feria, TX 2,005 156 1999(A)
Lafayette Place Warren, MI 7,331 797 1998(A)
Lake Juliana Auburndale, FL 3,955 865 1994(A)
Leesburg Landing Leesburg, FL 1,794 147 1996(A)
Liberty Farms Valparaiso, IN 3,217 764 1985(A)
Lincoln Estates Holland, MI 4,940 844 1996(A)
Lake San Marino Naples, FL 6,781 1,160 1996(A)
Maple Grove Estates Dorr, MI 524 126 1979(A)
Meadowbrook Village Tampa, FL 5,598 1,338 1994(A)
Meadowbrook Estates Monroe, MI 9,938 2,382 1986(A)
Meadow Lake Estates White Lake, MI 14,500 3,396 1994(A)
Meadows Nappanee, IN 4,868 1,113 1987(A)
Meadowstream Village Sodus, MI 2,741 652 1984(A)
Maplewood Mobile Lawrence, IN 3,204 746 1989(A)
North Point Estates Pueblo, CO 4,609 59 2001(C)
Oakwood Village Miamisburg, OH 14,005 1,139 1998(A)
F-18
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III
DECEMBER 31, 2001
(AMOUNT IN THOUSANDS)
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT
INITIAL COST ACQUISITION CARRIED AT
TO COMPANY IMPROVEMENTS DECEMBER 31, 2001
--------------------- --------------------- -----------------------
BUILDING BUILDING BUILDING
AND AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES LAND FIXTURES
- ---------------------- -------------------- ----------- --------- --------- --------- --------- --------- ---------
Orange Tree Orange City, FL -- 283 2,530 15 714 298 3,244
Orchard Lake Milford, OH (3) 395 4,025 -- 6 395 4,031
Paradise Chicago Heights, IL -- 723 6,638 -- 517 723 7,155
Pecan Branch Georgetown, TX -- 1,379 -- 331 3,291 1,710 3,291
Pine Hills Middlebury, IN -- 72 544 60 1,681 132 2,225
Pin Oak Parc St. Louis, MO -- 1,038 3,250 467 4,564 1,505 7,814
Pine Ridge Petersburg, VA -- 405 2,397 -- 1,189 405 3,586
Presidential Hudsonville, MI -- 680 6,314 -- 1,105 680 7,419
Parkwood Mobile Grand Blanc, MI -- 477 4,279 -- 670 477 4,949
Richmond Richmond, MI -- 501 2,040 -- 336 501 2,376
Roxbury Goshen, IN -- 1,058 9,974 -- -- 1,058 9,974
Royal Country Miami, FL (1) 2,290 20,758 -- 691 2,290 21,449
River Haven Grand Haven, MI (4) 1,800 17,121 -- -- 1,800 17,121
Saddle Oak Club Ocala, FL -- 730 6,743 -- 623 730 7,366
Scio Farms Ann Arbor, MI -- 2,300 22,659 -- 3,445 2,300 26,104
Sherman Oaks Jackson, FL (1) 200 2,400 240 3,930 440 6,330
Siesta Bay Ft. Meyers Beach, FL -- 2,051 18,549 -- 602 2,051 19,151
Silver Star Orlando, FL -- 1,022 9,306 -- 367 1,022 9,673
Southfork Belton, MO -- 1,000 9,011 -- 1,093 1,000 10,104
Sunset Ridge Portland, MI -- 2,044 -- -- 7,241 2,044 7,241
St. Clair Place St. Clair, MI -- 501 2,029 -- 329 501 2,358
Stonebridge Richfield Twp., MI 1,119 2,044 -- 180 1,725 2,224 1,725
Snow to Sun Weslaco, TX 93 190 2,143 15 771 205 2,914
Sun Villa Reno, NV 6,756 2,385 11,773 -- 759 2,385 12,532
Timber Ridge Ft. Collins, CO -- 990 9,231 -- 772 990 10,003
Timberbrook Bristol, IN (1) 490 3,400 101 4,800 591 8,200
Timberline Estates Grand Rapids, MI -- 536 4,867 -- 569 536 5,436
Town and Country Traverse City, MI -- 406 3,736 -- 214 406 3,950
Valley Brook Indianapolis, IN -- 150 3,500 1,277 8,726 1,427 12,226
Village Trails Howard City, MI 183 988 1,472 -- 658 988 2,130
Water Oak Country
Club Est. Lady Lake, FL -- 2,503 17,478 -- 3,281 2,503 20,759
Woodhaven Place Woodhaven, MI -- 501 4,541 -- 752 501 5,293
Woodland Park Estates Eugene, OR 7,545 1,593 14,398 -- 264 1,593 14,662
Woodside Terrace Holland, OH (2) 1,064 9,625 -- 1,413 1,064 11,038
West Glen Village Indianapolis, IN -- 1,100 10,028 -- 743 1,100 10,771
DATE OF
ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LOCATION TOTAL DEPRECIATION ACQUISITION (A)
- ---------------------- -------------------- --------- ------------ ----------------
Orange Tree Orange City, FL 3,542 747 1994(A)
Orchard Lake Milford, OH 4,426 361 1999(A)
Paradise Chicago Heights, IL 7,878 1,321 1996(A)
Pecan Branch Georgetown, TX 5,001 52 1999(C)
Pine Hills Middlebury, IN 2,357 550 1980(A)
Pin Oak Parc St. Louis, MO 9,319 1,342 1994(A)
Pine Ridge Petersburg, VA 3,991 918 1986(A)
Presidential Hudsonville, MI 8,099 1,368 1996(A)
Parkwood Mobile Grand Blanc, MI 5,426 1,288 1993(A)
Richmond Richmond, MI 2,877 292 1998(A)
Roxbury Goshen, IN 11,032 166 2001(A)
Royal Country Miami, FL 23,739 5,767 1994(A)
River Haven Grand Haven, MI 18,921 298 2001(A)
Saddle Oak Club Ocala, FL 8,096 1,767 1995(A)
Scio Farms Ann Arbor, MI 28,404 5,465 1995(A)
Sherman Oaks Jackson, FL 6,770 1,532 1986(A)
Siesta Bay Ft. Meyers Beach, FL 21,202 3,623 1996(A)
Silver Star Orlando, FL 10,695 1,815 1996(A)
Southfork Belton, MO 11,104 1,187 1997(A)
Sunset Ridge Portland, MI 9,285 130 1998(C)
St. Clair Place St. Clair, MI 2,859 345 1998(A)
Stonebridge Richfield Twp., MI 3,949 -- 1998(C)
Snow to Sun Weslaco, TX 3,119 439 1997(A)
Sun Villa Reno, NV 14,917 1,426 1998(A)
Timber Ridge Ft. Collins, CO 10,993 1,859 1996(A)
Timberbrook Bristol, IN 8,791 2,026 1987(A)
Timberline Estates Grand Rapids, MI 5,972 1,350 1994(A)
Town and Country Traverse City, MI 4,356 754 1996(A)
Valley Brook Indianapolis, IN 13,653 2,880 1989(A)
Village Trails Howard City, MI 3,118 228 1998(A)
Water Oak Country
Club Est. Lady Lake, FL 23,262 5,315 1993(A)
Woodhaven Place Woodhaven, MI 5,794 635 1998(A)
Woodland Park Estates Eugene, OR 16,255 1,737 1998(A)
Woodside Terrace Holland, OH 12,102 1,612 1997(A)
West Glen Village Indianapolis, IN 11,871 2,665 1994(A)
F-19
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III
DECEMBER 31, 2001
(AMOUNT IN THOUSANDS)
COST CAPITALIZED
SUBSEQUENT TO GROSS AMOUNT
INITIAL COST ACQUISITION CARRIED AT
TO COMPANY IMPROVEMENTS DECEMBER 31, 2001
--------------------- --------------------- -----------------------
BUILDING BUILDING BUILDING
AND AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES LAND FIXTURES
- ---------------------- -------------------- ----------- --------- --------- --------- --------- --------- ---------
White Lake White Lake, MI -- 673 6,179 -- 3,535 673 9,714
White Oak Mt. Morris, MI -- 782 7,245 112 3,350 894 10,595
Willowbrook Toledo, OH (2) 781 7,054 -- 367 781 7,421
Windham Hills Jackson, MI -- 2,673 2,364 -- 6,206 2,673 8,570
Woodlake Estates Yoder, IN -- 632 3,674 -- 2,207 632 5,881
Woods Edge West Lafayette, IN -- 100 2,600 3 7,536 103 10,136
Worthington Arms Lewis Center, OH -- 376 2,624 -- 1,107 376 3,731
Westbrook Senior Toledo, OH -- 355 3,295 -- -- 355 3,295
Westbrook Toledo, OH (2) 1,110 10,462 -- 574 1,110 11,036
Corporate Headquarters Farmington Hills, MI -- -- -- -- 6,030 -- 6,030
--------- --------- --------- --------- --------- ---------
$ 91,120 $ 628,922 $ 11,578 $ 222,036 $ 102,698(5) $ 850,958(6)
========= ========= ========= ========= ========= =========
DATE OF
ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LOCATION ENCUMBRANCE TOTAL DEPRECIATION ACQUISITION (A)
- ---------------------- -------------------- ----------- --------- ------------ ----------------
White Lake White Lake, MI -- 10,387 1,197 1997(A)
White Oak Mt. Morris, MI -- 11,489 1,410 1997(A)
Willowbrook Toledo, OH (2) 8,202 873 1997(A)
Windham Hills Jackson, FL -- 11,243 734 1998(A)
Woodlake Estates Yoder, IN -- 6,513 573 1998(A)
Woods Edge West Lafayette, IN -- 10,239 1,592 1985(A)
Worthington Arms Delaware, OH -- 4,107 982 1990(A)
Westbrook Senior Toledo, OH -- 3,650 55 2001(A)
Westbrook Toledo, OH (2) 12,146 921 1999(A)
Corporate Headquarters Farmington Hills, MI -- 6,030 1,415 Various
--------- ---------
$ 953,656 $ 140,322
========= =========
(1) These communities collaterize $42.8 million of secured debt.
(2) These communities are financed by $26 million of collaterized lease
obligations.
(3) These communities collaterize $4.7 million of secured debt.
(4) These communities collaterize $12.4 million of secured debt.
(5) Includes $3.6 million of land in property under development in Footnote 2
"Rental Property" to the Company's Consolidated Financial Statements
included elsewhere herein.
(6) Includes $12.2 million of property under development in Footnote 2 "Rental
Property" to the Company's Consolidated Financial Statements included
elsewhere herein.
(7) The initial cost for this property is included in the initial cost reported
for Continental Estates.
(8) Mortgage paid in full in March 2002.
F-20
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
The change in investment in real estate for the years ended December 31, 2001,
2000 and 1999 is as follows:
2001 2000 1999
--------- --------- ---------
Balance, beginning of year $ 867,377 $ 847,696 $ 803,152
Community and land acquisitions, including
immediate improvements 62,775 24,339 41,083
Community expansion and development 30,958 30,795 42,480
Improvements, other 8,690 4,595 7,022
Dispositions and other (16,144) (40,048) (46,041)
--------- --------- ---------
Balance, end of year $ 953,656 $ 867,377 $ 847,696
========= ========= =========
The change in accumulated depreciation for the years ended December 31, 2001,
2000 and 1999 is as follows:
2001 2001 1999
--------- --------- ---------
Balance, beginning of year $ 115,557 $ 92,558 $ 70,940
Depreciation for the period 28,011 26,170 25,112
Dispositions and other (3,246) (3,171) (3,494)
--------- --------- ---------
Balance, end of year $ 140,322 $ 115,557 $ 92,558
========= ========= =========
F-21