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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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission File No. 1-12616
SUN COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
STATE OF MARYLAND 38-2730780
State of Incorporation I.R.S. Employer I.D. No.
31700 MIDDLEBELT ROAD
SUITE 145
FARMINGTON HILLS, MICHIGAN 48334
(810) 932-3100
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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.
[X]
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---
As of March 3, 1997, the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was approximately $475,000,000
determined in accordance with the highest price at which the stock was sold on
such date as reported by the New York Stock Exchange.
As of March 3, 1997, there were 15,697,365 shares of the Registrant's
common stock issued and outstanding.
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PART I
ITEM 1. BUSINESS
GENERAL
Sun Communities, Inc. (the "Company") owns and operates manufactured
housing communities concentrated in the midwestern and southeastern United
States. The Company 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
March 1, 1997, the Company owned and managed a portfolio of 83 manufactured
housing community properties (the "Properties") located in 12 states. The
Properties contain an aggregate of 29,500 developed sites and approximately
3,500 sites suitable for development. In order to enhance property performance
and cash flow, the Company, through Sun Home Services, Inc., a Michigan
corporation ("Home Services"), actively markets and sells new and used
manufactured homes for placement in the Properties.
The Company expects to qualify and has made an election to be taxed as a
REIT for federal income tax purposes commencing with the calendar year
beginning January 1, 1994, and will be self-administered and self-managed.
The Company's executive and principal property management office is
located at 31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334
and its telephone number is (810) 932-3100. The Company has regional
property management offices located in Elkhart, Indiana and Tampa, Florida.
The Company, which is a Maryland corporation, employed 437 people as of March
1, 1997.
HISTORY OF THE COMPANY
The immediate predecessor to Sun Communities, Inc. was incorporated in
January 1985 to continue and expand the business of acquiring, owning and
operating manufactured housing communities that was originally started in 1975.
Since its inception, the Company's strategy has been to acquire and in many
cases expand or renovate existing manufactured housing communities. The
Company has maintained this strategy because it believes attractive investment
returns can be obtained by purchasing existing properties with expansion
potential.
MAJOR ACQUISITION
On May 1, 1996, the Company, through Sun Communities Operating Limited
Partnership, a Michigan limited partnership (the "Operating Partnership"), and
a wholly-owned subsidiary, Sun GP L.L.C., a Michigan limited liability company
("GP"), acquired 25 manufactured housing communities (the "Aspen Properties")
from affiliates of Aspen Enterprises, Ltd., (collectively, "Aspen") for a
purchase price of $226.0 million (excluding related transaction costs). The
Aspen Properties are located primarily in Florida and Michigan and, as of March
1, 1997, contained a total of 10,367 developed sites and approximately 286
sites suitable for development.
Of the $226.0 million purchase price for the Aspen Properties, $4.2
million was issued in the form of limited partnership interests in the
Operating Partnership (the "Common OP Units"), and $35.8 million was issued in
the form of convertible preferred units in the Operating Partnership (the
"Preferred OP Units"). Both the Common OP Units and the Preferred OP Units
were issued to Aspen affiliates, including certain former Aspen employees who
became employees of the Company upon the closing of the acquisition of the
Aspen Properties. For tax and other purposes, the Company acquired 100% of the
partnership interests in certain Aspen Properties rather than directly
acquiring such properties.
The 1,325,275 Preferred OP Units represent equity interests in the
Operating Partnership and have the effect of increasing the minority interest
reflected on the Company's consolidated financial
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statements. The issue price of the Preferred OP Units was $27 per unit (the
"Issue Price"). The Preferred OP Units are entitled to a fixed quarterly
distribution equal to 7.00% per annum of the Issue Price, which distribution is
payable by the Operating Partnership prior to any distributions to its other
general or limited partners, including distributions in respect of the shares
of the Company's common stock (the "Common Stock"). To the extent the Company
issues additional preferred securities, payment of distributions for such
preferred securities must rank pari passu or junior to distribution payments on
the Preferred OP Units. The distributions payable to holders of Preferred OP
Units will not increase to the extent the Operating Partnership increases the
distributions to its other partners.
In June 2002, the Preferred OP Units will be convertible into Common OP
Units or redeemable for cash at the Issue Price, at the option of the holder.
If converted, holders of Preferred OP Units will receive a number of Common OP
Units that will give them the benefit of: (i) 100% of the first $4.50 per share
increase in the average closing price of the shares of Common Stock for the ten
business days prior to conversion (the "Conversion Date Price") over the Issue
Price; (ii) none of the increase in the Conversion Date Price over the Issue
Price to the extent such difference is greater than $4.50 per share but less
than $9.00 per share; and (iii) 25% of the increase in the Conversion Date
Price over the Issue Price to the extent such difference exceeds $9.00 per
share. The Company structured this conversion formula to encourage holders of
the Preferred OP Units to convert, rather than redeem, their units to the
extent the market price of the Common Stock increases by June 2002. If the
Company fails to make any Preferred OP Unit distribution payment within 20 days
of its due date, the Company's redemption obligation is subject to acceleration
by the holders of the Preferred OP Units.
The Company's obligation to redeem the Preferred OP Units is currently
unsecured. If the Company and Aspen do not agree upon appropriate security for
the Company's obligation to redeem the Preferred OP Units and the Company (i)
does not maintain an investment-grade credit rating for the Company's unsecured
debt for any consecutive 60-day period or (ii) issues additional equity
securities that do not rank junior to the Preferred OP Units, the Company's
obligation to redeem the Preferred OP Units can be accelerated by the holders
of the Preferred OP Units. The Company has continuously maintained an
investment-grade credit rating for the Company's unsecured debt since the
issuance of the Preferred OP Units.
The acquisition of the Aspen Properties was funded by utilizing a portion
of the proceeds of the offering of 4,700,000 shares of the Common Stock that
closed on April 8, 1996, and, through the Operating Partnership, a $150 million
debt offering of investment-grade, senior unsecured notes that closed on April
29, 1996.
STRUCTURE OF THE COMPANY
The operations of the Company are carried on through certain subsidiaries
(the "Subsidiaries"), including the Operating Partnership, which, among other
things, enables the Company to comply with certain complex requirements under
the Federal tax rules and regulations applicable to REITs. The Company
established the Operating Partnership to allow the Company to acquire
manufactured housing communities in transactions that defer some or all of the
sellers' tax consequences. Substantially all of the Company's assets are held
by or through the Operating Partnership, of which the Company is the sole
general partner, and wholly-owned subsidiaries of the Company. In addition to
the Operating Partnership, the Subsidiaries include Home Services, which
provides manufactured home sales and brokerage services to current and
prospective tenants of the Properties. The Operating Partnership owns 100% of
the non-voting preferred stock of Home Services, which entitles the Operating
Partnership to 95% of the cash flow from operating activities of Home Services.
As of March 1, 1997, the voting common stock of Home Services was owned by
Milton M. Shiffman, Gary A. Shiffman and Jeffrey P. Jorissen, executive
officers of the Company, entitling them to the remaining 5% of such cash flow
from operating activities. Sun Water Oak Golf, Inc. ("Sun Golf") is a
wholly-owned subsidiary of Home Services. Sun Golf was organized to own and
operate the golf course, restaurant and related facilities located on the Water
Oak Property that were acquired in November 1994.
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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 multi-family 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 in the Company's communities leases the site on
which the home is located. The Company owns the underlying land, utility
connections, streets, lighting, driveways, common area amenities and other
capital improvements and is responsible for enforcement of community guidelines
and maintenance. Some communities provide water and sewer service through
public or private utilities, while others provide these services to residents
from on-site facilities. Each owner within the Company's communities is
responsible for the maintenance of his home and leased site. As a result,
capital expenditure needs tend to be less significant, relative to multi-family
rental apartment complexes.
PROPERTY MANAGEMENT
The Company's property management strategy emphasizes intensive, hands-on
management by dedicated, on-site property managers. The Company believes that
this on-site focus enables it to continually monitor and address tenant
concerns, the performance of competitive properties and local market
conditions. Of the Company's 437 employees, 396 are located on-site as
property managers, support staff, or maintenance personnel.
The Company's property managers are overseen by Brian W. Fannon, Senior
Vice President and Chief Operating Officer, who has 27 years of property
management experience, three Vice Presidents and eight Regional Property
Managers. In addition, the Regional Property Managers are responsible for
semi-annual market surveys of competitive parks, interaction with local
manufactured home dealers and regular property inspections.
Each property 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 property manager, each property has an on-site maintenance person and
management support staff. The Company holds periodic training sessions for all
property management personnel to ensure that management policies are
implemented effectively and professionally.
BROKERAGE AND HOME SALES
Home Services offers manufactured home brokerage and sales services to
tenants and prospective tenants in the Company's communities. Since tenants
often purchase a home already on-site within a community, such services enhance
occupancy and property performance. Additionally, since many of the homes in
the Properties are sold through Home Services, better control of home quality
in the Company's communities can be maintained than if brokerage and sales
services were conducted solely through third-party brokers.
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COMPETITION
All of the Properties are located in developed areas that include other
manufactured housing community properties. The number of competitive
manufactured housing community properties in a particular area could have a
material effect on the Company's ability to lease sites and on rents charged at
the Properties or at any newly acquired properties. The Company may be
competing with others that have greater resources than the Company and whose
officers and directors have more experience than the Company's officers and
directors. In addition, other forms of multi-family residential properties,
such as private and federally funded or assisted multi-family housing and
single-family housing, provide housing alternatives to potential tenants of
manufactured housing communities.
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. The Company believes 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 the Company's properties.
Noncompliance could result in imposition of fines or an award of damages to
private litigants. The Company does not believe the ADA will have a material
adverse impact on the Company's results of operations. If required property
improvements involve a greater expenditure than the Company currently
anticipates, or if the improvements must be made on a more accelerated basis
than it anticipates, the Company's ability to make expected distributions could
be adversely affected. The Company believes that its competitors face similar
costs to comply with the requirements of the ADA.
Rent Control Legislation. State and local rent control laws in certain
jurisdictions limit the Company's ability to increase rents and to recover
increases in operating expenses and the costs of capital improvements.
Enactment of such laws has been considered from time to time in other
jurisdictions. The Company presently expects to continue to operate
manufactured housing community properties, and may purchase additional
properties, in markets that are either subject to rent control or in which
rent-limiting legislation exists or may be enacted. For example, 25 of the
Properties are located in Florida, which has enacted a law which provides that
a majority of tenants in a manufactured housing community may require that a
proposed increase in site rental rates, reduction in services or utilities or
change in the community's rules and regulations be submitted for formal
mediation or arbitration if they believe that the proposal is unreasonable.
Insurance. Management believes that the Properties are covered by
adequate fire, flood, property and business interruption insurance provided by
reputable companies and with commercially reasonable deductibles and limits.
The Company maintains a blanket policy that covers all of the Properties. The
Company has obtained title insurance insuring fee title to the Properties in an
aggregate amount which the Company believes to be adequate.
ITEM 2. PROPERTIES
General. As of March 1, 1997, the Properties consisted of 83 manufactured
housing communities concentrated in 12 states in the midwestern and
southeastern United States, containing 29,500 developed sites and approximately
3,500 sites suitable for development. Most of the Properties include amenities
oriented towards family and retirement living. Of the 83 Properties, 67 have
more than 200 sites, with the largest having 1,272 sites.
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The Properties had an aggregate occupancy rate of 95% as of December 31,
1996, excluding seasonal RV sites. Since January 1, 1996, the Properties have
averaged an aggregate annual turnover of homes (where the home is moved out of
the community) of approximately 3% 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 9%.
The Company believes that its 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.
The Company has sought to concentrate its communities within certain
geographic areas in order to achieve economies of scale in management and
operation. Except for three Properties located in Texas, the Properties are
located in the midwestern and southeastern United States. The Company has
identified Florida as a key market in which to expand its existing operations
in the southeast because of Florida's stable tenant base, relatively low cost
of living and attractive acquisition opportunities. Additionally, the
Company's midwestern operations serve as a source of prospective tenants for
the Florida Properties, which are generally oriented towards retirement living.
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The following table sets forth certain information relating to the
Properties owned as of March 1, 1997:
DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
MIDWEST
MICHIGAN
Allendale
Allendale, MI........ 223 98% 96% 97%
Alpine
Grand Rapids, MI..... 381 99% 96% 99%
Bedford Hills
Battle Creek, MI..... 340 95% 94% 94%
Brentwood
Kentwood, MI......... 197 98% 97% 99%
Creekwood
Burton, MI (2)....... 0 --- --- ---
Byron Center
Byron Center, MI..... 143 96% 92% 97%
Candlewick Court
Owosso, MI........... 211 99% 100% 99%
College Park Estates
Canton, MI........... 230 98% 98% 99%
Continental Estates
Davison, MI.......... 386 (3) (3) 93%
Continental North
Davison, MI.......... 334 (3) (3) 95%
Country Acres
Cadillac, MI......... 182 98% 98% 98%
Country Meadows
Flat Rock, MI........ 489 87% 99% 99%
Countryside Village
Perry, MI............ 359 96% 99% 96%
Cutler Estates
Grand Rapids, MI..... 281 97% 96% 98%
Davison East
Davison, MI.......... 190 (3) (3) 99%
Fisherman's Cove
Flint, MI............ 162 99% 98% 97%
Grand
Grand Rapids, MI..... 312 97% 95% 98%
Hamlin
Webberville, MI...... 146 100% 99% 100%
Kensington Meadows
Lansing, MI.......... 206 (4) 94% 67% (6)
Kings Court
Traverse City, MI.... 588 93% 94% 92% (6)
Lincoln Estates
Holland, MI.......... 191 98% 98% 97%
Maple Grove Estates
Dorr, MI............. 46 100% 100% 100%
Meadow Lake Estates
White Lake, MI....... 425 98% 97% 100%
Meadowbrook Estates
Monroe, MI........... 453 100% 100% 100%
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DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
Meadowstream Village
Sodus, MI............. 159 99% 98% 99%
Parkwood
Grand Blanc, MI....... 250 97% 96% 97%
Presidential
Hudsonville, MI....... 326 98% 96% 98%
Scio Farms
Ann Arbor, MI......... 913 (4) 100% 99%
Sherman Oaks
Jackson, MI........... 366 92% 100% 99%
Timberline Estates
Grand Rapids, MI...... 296 99% 98% 100%
Town & Country
Traverse City, MI..... 192 100% 98% 100%
----- ---- ---- -------
Michigan Total........ 8,977 97% 97% 98%
===== ==== ==== =======
INDIANA
Brookside Village
Goshen, IN............ 338 99% 99% 99%
Carrington Pointe
Ft. Wayne, IN......... 170 (5) (5) (5)
Clear Water Village
South Bend, IN........ 162 98% 93% 97%
Cobus Green
Elkhart, IN........... 386 94% 98% 98%
Holiday Village
Elkhart, IN........... 326 96% 98% 99%
Liberty Farms
Valparaiso, IN........ 220 96% 100% 92%(6)
Maplewood
Lawrence, IN.......... 207 95% 97% 99%
Meadows
Nappanee, IN.......... 330 93% 96% 98%
Meadowbrook
Indianapolis, IN...... 343 94% 96% 98%
Pine Hills
Middlebury, IN........ 126 98% 99% 96%
Timberbrook
Bristol, IN........... 567 92% 84% 88% (6)
Valley Mills
Indianapolis, IN...... 357 97% 99% 98%
West Glen Village
Indianapolis, IN...... 552 99% 99% 99%
Woods Edge
West Lafayette, IN.... 430 97% 92% 99%
----- ---- ---- -------
Indiana Total......... 4,514 96% 96% 97%
===== ==== ==== =======
OTHER
Branch Creek Estates
Austin, TX............ 321 (4) 98% 94% (6)
Candlelight
Chicago Heights, IL... 309 97% 93% 95%
Catalina Community
Middletown, OH........ 462 99% 98% 99%
Chisholm Point Estates
Pflugerville, TX...... 405 (4) 98% 83% (6)
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DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
Douglas
Atlanta, GA.......... 204 74% 89% 95%
Edwardsville
Edwardsville, KS..... 597 82% 90% 93%
Flagview
Atlanta, GA.......... 196 75% 93% 98%
Four Seasons
Ankeny, IA........... 400 100% 100% 98%
Paradise
Chicago Heights, IL.. 278 99% 99% 98%
Pine Ridge
Petersburg, VA....... 245 98% 100% 98%
Pin Oak Parc
O'Fallon, MO......... 380 98% 99% 99%
Snow to Sun
Weslaco, TX.......... 497 (5) (5) (5)
Timber Ridge
Ft. Collins, CO...... 582 99% 100% 100%
Worthington Arms
Delaware, OH......... 224 98% 99% 100%
----- ------ ------- -------
Other Total.......... 5,100 96% 97% 96%
===== ====== ======= =======
SOUTHEAST
FLORIDA
Arbor Terrace
Bradenton, FL........ 213 100% 100% 100%
Ariana Village
Lakeland, FL......... 210 72% (7) 72% (7) 78% (7)
Bonita Lake
Bonita Springs, FL... 65 100% 100% 100%
Breezy Hills
Pompano Beach, FL.... 578 100% 100% 99%
Chain O'Lakes
Grand Island, FL..... 325 92% 97% 95%
Golden Lakes
Plant City, FL....... 426 93% 91% 92%
Indian Creek
Ft. Myers Beach, FL.. 1272 100% 100% 100%
Island Lakes
Merritt Island, FL... 301 (4) 100% 100%
Kings Lake
Debary, FL........... 245 53% (7) 62% (7) 66% (7)
Kings Pointe
Winter Haven, FL..... 229 39% (7) 43% (7) 48% (7)
Kissimmee Gardens
Kissimmee, FL........ 239 100% 99% 100%
Lake Juliana
Auburndale, FL....... 293 52% (7) 54% (7) 57% (7)
Lake San Marino
Naples, FL........... 272 100% 100% 100%
Leesburg Landing
Lake County, FL...... 94 (3) (3) 54% (7)
Meadowbrook Village
Tampa, FL............ 257 95% 100% 97%
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DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
Orange Tree
Orange City, FL....... 246 76% (7) 78% (7) 83% (7)
Plantation Manor
Ft. Pierce, FL........ 376 97% 95% 97%
Pleasure Cove
Ft. Pierce, FL........ 209 98% 95% 95%
Royal Country
Miami, FL............. 863 100% 100% 99%
Saddle Oak Club
Ocala, FL............. 376 (4) 98% 100%
Siesta Bay
Ft. Myers Beach, FL... 703 100% 100% 100%
Silver Star
Orlando, FL........... 426 98% 96% 96%
Tallowwood
Coconut Creek, FL..... 279 62% 62% 63%
Water Oak Country Club
Estates
Lady Lake, FL......... 688 100% 100% 100%
Whispering Palm
Sebastian, FL......... 428 100% 100% 96%
------ ------- ------- -------
Florida Total......... 9,613 88% 89% 93%
====== ======= ======= =======
TOTAL/AVERAGE......... 28,204 93% 93% 95%
====== ======= ======= =======
(1) Excludes 1,223 seasonal RV Sites owned at December 31, 1996, which are
leased during the season.
(2) This Property is owned by a joint venture in which the Operating
Partnership has a 50% interest.
(3) Acquired in 1996.
(4) Acquired in 1995.
(5) Acquired in 1997.
(6) Occupancy in these communities reflects the recent development of sites
which are in their initial lease-up phase.
(7) Occupancy in these communities reflects the fact that these communities
are in their initial lease-up phase.
Leases. The typical lease entered into between a tenant and the Company
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
Certain partnerships which previously owned twenty-four of the Properties
(the "Sun Partnerships") were involved in a variety of legal proceedings
arising in the ordinary course of business prior to the transfer of the
Properties to the Operating Partnership, and the Company has become a
successor party-in-interest to these proceedings as a result of the
contribution of the Properties to the Company, as well as other proceedings
that have arose in the ordinary course of
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operating the Properties. All such proceedings, taken together, are not
expected to have a material adverse impact on the Company.
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.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock has been listed on the New York Stock Exchange
("NYSE") since December 8, 1993 under the symbol "SUI." On March 3, 1997, the
closing sales price of the Common Stock was $32 1/8 and the Common Stock was
held by approximately 1,213 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
Company with respect to each such period.
High Low Distribution
---- ------ ------------
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter of 1995.............. 23 1/8 21 1/8 .445
Second Quarter of 1995............. 25 21 1/8 .445
Third Quarter of 1995.............. 26 24 1/4 .445
Fourth Quarter of 1995............. 26 3/8 24 5/8 .445
FISCAL YEAR ENDED DECEMBER 31, 1996
First Quarter of 1996.............. 27 5/8 25 1/4 .455
Second Quarter of 1996............. 27 3/8 24 7/8 .455
Third Quarter of 1996.............. 29 25 5/8 .455
Fourth Quarter of 1996............. 34 3/4 28 1/8 .455
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ITEM 6. SELECTED FINANCIAL DATA
SUN COMMUNITIES, INC. AND PREDECESSOR BUSINESS
YEAR ENDED DECEMBER 31,(2)
--------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT OTHER DATA AND PROPERTY DATA)
OPERATING DATA:
Revenues:
Rental income.......................... $69,849 $42,909 $30,461 $14,222 $12,989
Other income........................... 3,350 2,203 1,882 199 199
-------- ------------- ------------- ------------- -------------
Total revenues......................... 73,199 45,112 32,343 14,421 13,188
-------- ------------- ------------- ------------- -------------
Expenses:
Property operating and maintenance..... 15,970 9,838 7,404 3,222 2,995
Real estate taxes...................... 5,654 2,981 2,167 1,024 980
General and administrative............. 3,458 2,535 2,005 893 764
Depreciation and amortization.......... 14,887 9,747 6,949 2,611 2,655
Interest............................... 11,277 6,420 4,894 5,280 5,522
Predecessor business expenses.......... - - - 1,315 -
-------- ------------- ------------- ------------- -------------
Total expenses......................... 51,246 31,521 23,419 14,345 12,916
-------- ------------- ------------- ------------- -------------
Income (loss) of predecessor
business............................... $272
-------------
Income before extraordinary
item/minority interests/predecessor
business............................... 21,953 13,591 8,924 76
Extraordinary item, early
extinguishment of
debt................................... (6,896) - - -
-------- ------------- ------------- -------------
Income before allocation to minority
interests/predecessor business......... 15,057 13,591 8,924 76
Income (loss) allocated to minority
interests/predecessor business, net.... 3,353 1,930 1,138 (212)
-------- ------------- ------------- -------------
Net income............................. $11,704 $11,661 $7,786 $288
======== ============= ============= =============
Net income per weighted average
share.................................. $.85 $1.19 $1.05 $.05
======== ============= ============= =============
Weighted average common shares
outstanding............................ 13,733 9,792 7,416 5,326
======== ============= ============= =============
Distribution per common share(1)....... $1.81 $1.335 $1.78 $.077
======== ============= ============= =============
OTHER DATA:
Total properties (at end of period).... 81 52 46 31 24
Total sites (at end of period)......... 28,785 16,888 14,318 9,036 6,349
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation........................... $588,813 $326,613 $257,030 $148,668 $74,145
Total assets........................... $585,056 $325,104 $267,370 $157,462 $62,978
Total debt............................. $185,000 $107,055 $62,931 $46,413 $60,629
Predecessor Business equity (deficit).. _ _ _ _ $(275)
Stockholders' equity................... $300,932 $177,593 $174,978 $92,985 _
(1) The distribution of $.445 per share for the fourth quarter of 1995 was
declared and paid in January, 1996, and accordingly is not included in the
$1.335.
(2) See the Consolidated Financial Statements of the Company included
elsewhere herein.
12
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.
RESULTS OF OPERATIONS
Comparison of year ended December 31, 1996 to year ended December 31, 1995
For the year ended December 31, 1996, income before extraordinary item and
minority interests increased by $8.4 million from $13.6 million to $22.0
million, when compared to the year ended December 31, 1995. The increase was
due to increased revenues of $28.1 million while expenses increased by $19.7
million.
Rental income increased by $26.9 million from $42.9 million to $69.8
million due primarily to the acquisition of 29 communities comprising in excess
of 11,300 developed sites during 1996 and six additional communities comprising
in excess of 2,200 developed sites during 1995.
Other income increased by $1.1 million from $2.2 million to $3.3 million
due to higher levels of interest income resulting primarily from investment of
proceeds of financings and interest on mortgage notes receivable for a full
year in 1996.
Property operating and maintenance expenses increased by $6.2 million from
$9.8 million to $16.0 million due primarily to the acquired communities.
Real estate taxes increased by $2.7 million from $3.0 million to $5.7
million due primarily to the acquired communities.
General and administrative expenses increased by $1.0 million from $2.5
million to $3.5 million due primarily to additional staff as a result of the
Company's growth.
Interest expense increased by $4.9 million from $6.4 million to $11.3
million due to higher levels of borrowings at a slightly higher weighted
average interest rate. Included in interest is amortization of deferred finance
costs of $.2 million and $.6 million in 1996 and 1995, respectively.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $18.3 million from $29.8 million to $48.1 million. EBITDA as a
percent of revenues was 65.7% compared to 66.0 percent in 1995.
Depreciation and amortization expense increased by $5.2 million from $9.7
million to $14.9 million due primarily to the acquisition of communities in
1996 and 1995.
13
14
Comparison of year ended December 31, 1995 to year ended December 31, 1994
For the year ended December 31, 1995, income before minority interests
increased by $4.7 million from $8.9 million to $13.6 million, when compared to
the year ended December 31, 1994. The increase was due to increased revenues
of $12.7 million while expenses increased by $8.1 million.
Rental income increased by $12.4 million from $30.5 million to $42.9
million due primarily to the acquisition of fifteen communities comprising in
excess of 5,100 developed sites during 1994 and six additional communities
throughout 1995 comprising in excess of 2,200 developed sites.
Property operating and maintenance expenses increased by $2.4 million from
$7.4 million to $9.8 million due primarily to the acquired communities.
Real estate taxes increased by $.8 million from $2.2 million to $3.0
million due primarily to the acquired communities.
General and administrative expenses increased by $.5 million from $2.0
million to $2.5 million due primarily to additional staff as a result of the
Company's growth.
Interest expense increased by $1.5 million from $4.9 million to $6.4
million due to higher levels of borrowings partially offset by lower interest
rates and increased capitalization of interest in conjunction with the
Company's community expansions. Included in interest is amortization of
deferred finance costs of $.6 million and $.3 million in 1995 and 1994,
respectively.
EBITDA increased by $9.0 million from $20.8 million to $29.8 million.
EBITDA as a percent of revenues was 66.0 percent compared to 64.2 percent in
1994.
Depreciation and amortization expense increased by $2.8 million from $6.9
million to $9.7 million due primarily to the acquisition of communities in 1994
and 1995.
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of
and for the years ended December 31, 1996 and 1995. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1995. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The table excludes the
1,218 sites where the Company's interest is in the form of a shared
appreciation mortgage note.
14
15
SAME PROPERTY TOTAL PORTFOLIO
------------------ ----------------
1996 1995 1996 1995
-------- -------- ------- -------
(in thousands) (in thousands)
Property revenues, including other $42,278 $39,125 $70,359 $43,544
-------- -------- ------- -------
Property operating expenses:
Property operating and maintenance 9,705 9,158 15,970 9,838
Real estate taxes 3,059 2,713 5,654 2,981
-------- -------- ------- -------
Property operating expenses 12,764 11,871 21,624 12,819
-------- -------- ------- -------
Property EBITDA $29,514 $27,254 $48,735 $30,725
======== ======== ======= =======
Number of properties 46 46 81 52
Developed sites 14,805 14,646 28,785 16,888
Occupied sites 13,961 13,624 26,865 15,846
Occupancy % 94.3% 93.0% 93.3% 93.8%
Weighted average monthly rent per site $ 242 $ 231 $ 250 $ 234
Sites available for development 1,795 1,729 3,268 2,324
Sites in development 401 167 779 474
On a same property basis, property revenues increased by $3.2 million from
$39.1 million to $42.3 million, or 8.1 percent, due primarily to increases in
rents and occupancy related charges including water and property tax
pass-throughs. Also contributing to revenue growth was the increase of 337
leased sites at December 31, 1996 compared to December 31, 1995.
Property operating expenses increased by $.9 million from $11.9 million to
$12.8 million, or 7.5 percent, due to increased occupancies and costs and
increases in assessments and millage by local taxing authorities. Property
EBITDA increased by $2.2 million from $27.3 million to $29.5 million, or 8.3
percent.
Sites available for development in the total portfolio increased by 944
from 2,324 to 3,268 with 779 of those sites in development in our markets in
Michigan, Indiana and Texas.
LIQUIDITY SOURCES AND REQUIREMENTS
Cash and cash equivalents increased by $9.1 million to $9.2 million at
December 31, 1996 compared to $.1 million at December 31, 1995 primarily
because cash provided by operating and financing activities exceeded
investments in rental properties.
Net cash provided by operating activities increased by $10.4 million from
$25.0 million to $35.4 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This increase was due primarily to
increases in non-cash expenses and accounts payable and other liabilities.
Net cash used in investing activities increased by $36.4 million from
$40.5 million to $76.9 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This was due primarily to an increased
level of acquisitions and investments in rental properties.
Net cash provided by financing activities increased by $40.4 million from
$10.2 million to $50.6 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This was due to increased proceeds from
equity offerings and the dividend reinvestment plan partially offset by the
change in net borrowings.
During the second quarter the Company (I) issued 4.8 million shares of
common stock at $26.125 per share resulting in net proceeds of approximately
$118.3 million; (ii) sold $150 million of five and seven year notes resulting
in net proceeds of approximately $148.7 million; (iii) obtained a $30 million
18 month secured term loan; (iv) issued $4.2 million of common OP units and
$35.8
15
16
million of preferred OP units; and (v) replaced an $85 million secured line of
credit with a $75 million, 42 month unsecured line of credit.
These proceeds were utilized to acquire the Aspen Properties for
approximately $226 million and to retire substantially all of the Company's
previously outstanding secured debt. At December 31, 1996, seven of the
Company's properties comprising approximately 3,400 sites collateralized
secured borrowings. The $150 million of notes are rated "Baa3" by Moody's
Investors Service, "BBB-" by Standard & Poor's Ratings Services and "BBB-" by
Fitch Investors Service.
The Company expects to meet its short-term liquidity requirements
generally through its working capital provided by operating activities and
proceeds from the Company's Dividend Reinvestment Plan. The Company considers
these sources to be adequate and anticipates they will continue to be adequate
to meet operating requirements, capital improvements, investment in
development, and payment of distributions by the Company in accordance with
REIT requirements in both the short and long term.
The Company expects to meet certain long-term liquidity requirements such
as scheduled debt maturities and property acquisitions through the issuance of
equity or debt securities, or interests in the Operating Partnership. The
Company can also meet these requirements by utilizing its $75 million line of
credit which bears interest at LIBOR plus 1.50% and is due November 1, 1999.
At December 31, 1996, the Company's debt to total market capitalization
approximated 22% (assuming conversion of all Common and Preferred OP Units to
shares of common stock), with a weighted average maturity of approximately 4.6
years and a weighted average interest rate of 7.42%.
Capital expenditures for 1996 included recurring capital expenditures of
$2.5 million and revenue producing capital expenditures of $1.2 million which
principally consisted of water metering programs.
Development costs, including land acquisitions of $2.7 million, aggregated
$13.2 million for the year ended at December 31, 1996. The acquisition of
incremental sites in owned communities where sites are being leased by the
former owners aggregated $1.4 million in 1996.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 1993, 1994, 1995, and 1996 was 1.05:1, 2.79:1, 3.03:1, and 2.49:1,
respectively.
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.
16
17
OTHER
Industry analysts consider funds from operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. It is defined as
income before minority interests plus non-cash items such as depreciation and
amortization. FFO should not be considered as an alternative to net income as
an indication of the Company's performance or to cash flows as a measure of
liquidity.
Quarters
Ended 1994 1995 1996
---------------------------------------
March 31 $ 3,359 $ 5,288 $ 6,201
June 30 3,357 5,878 8,960
September 30 4,096 5,998 9,652
December 31 5,021 6,114 10,282
------- ------- -------
$15,833 $23,278 $35,095
======= ======= =======
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standards No. 128 Earnings Per Share ("EPS").
This Statement simplifies the previous standards for computing EPS and makes
such standards comparable to international EPS standards. This Statement
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and it requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
The Company will adopt Statement 128 as of December 31, 1997 (earlier
adoption is not permitted). The Company cannot presently determine the impact
of adoption of Statement 128 as it cannot anticipate its capital structure and
stock prices at December 31, 1997. Had the Company adopted Statement 128 in
1996, the impact would have been immaterial as the Company has few dilutive
securities.
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
There have been no changes in the Company's independent public
accountants during the past two fiscal years and the Company does not disagree
with such accountants on any matter of accounting principles, practices or
financial statement disclosure.
PART III
The information required by ITEMS 10, 11, 12 AND 13 will be included in
the Company's proxy statement for its 1997 Annual Meeting of Shareholders, and
is incorporated herein by reference.
17
18
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 a 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 filed as a part of this Form 10-K is shown on the "Exhibit
Index" filed herewith.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K regarding events
occurring during the months included in the fourth quarter of the
Company's fiscal year.
18
19
SUN COMMUNITIES, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGES
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . F-2
Financial Statements:
Consolidated Balance Sheet as of December 31, 1996 and 1995 . . . . . F-3
Consolidated Statement of Income
for the Years Ended December 31, 1996, 1995 and 1994 . . . . . . F-4
Consolidated Statement of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . F-5
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-7
Schedule III - Real Estate and Accumulated Depreciation . . . . . . . . . F-12
F-1
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Sun Communities, Inc.:
We have audited the accompanying consolidated balance sheet of Sun Communities,
Inc. as of December 31, 1996 and 1995, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. We have also audited the consolidated
financial statement schedule listed under 14(a)(2) of this form 10-K. These
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sun Communities,
Inc. as of December 31, 1996 and 1995 and the consolidated results of its
operations and cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule referred to
above, when considered in relation to the consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
stated therein.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Detroit, Michigan
February 25, 1997
F-2
21
SUN COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
ASSETS 1996 1995
---- ----
Investment in rental property, net $ 558,278 $ 310,030
Cash and cash equivalents 9,236 121
Investment in Sun Home Services, Inc. ("SHS") 5,103 3,187
Other assets 12,439 11,766
----------- -----------
Total assets $ 585,056 $ 325,104
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Debt $ 185,000 $ 107,055
Accounts payable and accrued expenses 7,718 2,451
Deposits and other liabilities 9,123 6,123
----------- -----------
201,841 115,629
----------- -----------
Minority interests 82,283 31,882
----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000 shares
authorized, none issued
Common stock, $.01 par value, 100,000 shares
authorized, 15,389 and 9,931 issued and
outstanding in 1996 and 1995, respectively 154 99
Paid-in capital 328,321 193,575
Officers' notes (9,173) (8,650)
Distributions in excess of accumulated earnings (18,370) (7,431)
----------- -----------
Total stockholders' equity 300,932 177,593
----------- -----------
Total liabilities and stockholders' equity $ 585,056 $ 325,104
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
22
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
1996 1995 1994
---- ---- ----
REVENUES
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,849 $ 42,909 $ 30,461
Income from SHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 325 432
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,844 1,878 1,450
--------- --------- ---------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,199 45,112 32,343
--------- --------- ---------
EXPENSES
Property operating and maintenance . . . . . . . . . . . . . . . . . . . . . . . 15,970 9,838 7,404
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,654 2,981 2,167
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,458 2,535 2,005
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 14,887 9,747 6,949
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,277 6,420 4,894
--------- --------- ---------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,246 31,521 23,419
--------- --------- ---------
Income before extraordinary item and minority interests . . . . . . . . . . . . . . 21,953 13,591 8,924
Extraordinary item, early extinguishment of debt . . . . . . . . . . . . . . . . . . (6,896) -- --
--------- --------- ---------
Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . 15,057 13,591 8,924
Less income allocated to minority interests:
Preferred OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,670 -- --
Common OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,683 1,930 1,138
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,704 $ 11,661 $ 7,786
========= ========= =========
Earnings per share:
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . $ 1.35 $ 1.19 $ 1.05
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.50) -- --
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .85 $ 1.19 $ 1.05
========= ========= =========
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . . 13,733 9,792 7,416
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
23
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
DISTRIBUTIONS
COMMON PAID-IN IN EXCESS
STOCK CAPITAL OF EARNINGS
---------- ------- ---------------
Balance, January 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53 $ 93,053 $ (122)
Issuance of 4,131 shares of common stock . . . . . . . . . . . . . . . . . . . . 42 85,765
Reclassification of minority interests . . . . . . . . . . . . . . . . . . . . . 2,126
Net income for the year ended December 31, 1994 . . . . . . . . . . . . . . . . . 7,786
Cash distributions of $1.78 per share . . . . . . . . . . . . . . . . . . . . . . (13,725)
----- ---------- ----------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 180,944 (6,061)
Issuance of 400 shares of common stock for officer notes . . . . . . . . . . . . 4 8,646
Exercise of stock options and other, net . . . . . . . . . . . . . . . . . . . . 887
Reclassification and conversion of minority interests . . . . . . . . . . . . . . 3,098
Net income for the year ended December 31, 1995 . . . . . . . . . . . . . . . . . 11,661
Cash distributions declared of $1.335 per share . . . . . . . . . . . . . . . . . (13,031)
----- ---------- ----------
Balance, December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 193,575 (7,431)
Issuance of 4,807 shares of common stock . . . . . . . . . . . . . . . . . . . . 48 118,245
Dividend reinvestment plan and other, net . . . . . . . . . . . . . . . . . . . . 7 15,198
Reclassification and conversion of minority interests . . . . . . . . . . . . . . 1,303
Net income for the year ended December 31, 1996 . . . . . . . . . . . . . . . . . 11,704
Cash distributions declared of $1.81 per share . . . . . . . . . . . . . . . . . (22,643)
----- ---------- ----------
Balance, December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154 $ 328,321 $ (18,370)
===== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
24
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
1996 1995 1994
------------ ------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,704 $ 11,661 $ 7,786
Adjustments to reconcile net income to
cash provided by operating activities:
Income allocated to minority interests . . . . . . . . . . . . . . . . . 1,683 1,930 1,138
Extraordinary item, net of prepayment penalties . . . . . . . . . . . . . 1,390 -- --
Depreciation and amortization costs . . . . . . . . . . . . . . . . . . . 14,887 9,747 6,949
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . 236 598 325
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . (2,659) (3,474) (1,505)
Increase in accounts payable and
other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 8,173 4,521 192
----------- ---------- -----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . 35,414 24,983 14,885
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in rental properties . . . . . . . . . . . . . . . . . . . . . . . (78,722) (38,214) (78,644)
Investment in notes receivable . . . . . . . . . . . . . . . . . . . . . . . -- (4,143) --
Investment in SHS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,804 1,872 (7,131)
----------- ---------- -----------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (76,918) (40,485) (85,775)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sales of common stock . . . . . . . . . . . . . . . . . . . 117,770 -- 85,806
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000 41,257 --
Repayments on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . (241,114) (10,077) (3,587)
Payments for deferred financing costs . . . . . . . . . . . . . . . . . . . . (277) (990) (675)
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,965) (19,832) (11,463)
Retirement of operating partnership units . . . . . . . . . . . . . . . . . . -- (1,001) --
Dividend reinvestment plan and other, net . . . . . . . . . . . . . . . . . . 15,205 887 --
----------- ---------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . . . . 50,619 10,244 70,081
----------- ---------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 9,115 (5,258) (809)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . 121 5,379 6,188
----------- ---------- -----------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . $ 9,236 $ 121 $ 5,379
=========== ========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest including capitalized amounts of $380,
$192 and $58 in 1996, 1995 and 1994, respectively . . . . . . . . . . $ 9,958 $ 5,499 $ 4,458
Noncash investing and financing activities:
Increase in minority interests for rental properties and other assets . . 53,437 15,444 9,934
Debt assumed for rental properties and other . . . . . . . . . . . . . . 134,059 12,944 20,105
Transfer of rental homes with SHS . . . . . . . . . . . . . . . . . . . . (3,720) 4,018 --
Issuance of common stock for officers' notes . . . . . . . . . . . . . . 523 8,650 --
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
25
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
A. BUSINESS: Sun Communities, Inc. and its subsidiaries (the "Company")
is a real estate investment trust ("REIT") which owns and operates 81
manufactured housing communities located in 12 states concentrated
principally in the Midwest and Southeast comprising approximately
28,800 developed sites and approximately 3,300 sites suitable for
development. The Company generally will not be subject to federal or
state income taxes to the extent it distributes its REIT taxable income
to its stockholders.
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 majority-owned
subsidiaries. The minority interests include Common Operating
Partnership Units ("OP Units") which are convertible into an equivalent
number of shares of the Company's common stock. Such conversion would
have no effect on earnings per share since the allocation of earnings
to an OP Unit is equivalent to earnings allocated to a share of common
stock. Of the 17.8 million OP Units outstanding, the Company owns 15.4
million or 86.7 percent. The minority interest is adjusted to its
relative ownership interest annually by reclassification to paid in
capital.
Also included in minority interest are 1.3 million Preferred OP Units
("POP Units") issued at $27 per unit bearing an annual dividend of 7%
and redeemable at par in June, 2002. The POP Units are convertible
one-for-one into OP Units at prices up to $31.50 per share. At prices
above $31.50 per share, the POP Units are convertible into OP Units
based on a formula the numerator of which is $31.50 plus 25 percent of
stock price appreciation above $36 per share. The denominator is the
then stock price.
SHS provides sales, brokerage and other services to current and
prospective tenants. The Company owns 100 percent of the outstanding
preferred stock of SHS, is entitled to 95 percent of the operating cash
flow, and accounts for its investment utilizing the equity method of
accounting. The common stock is owned by three officers of the Company
who are entitled to receive 5 percent of the operating cash flow.
C. RENTAL PROPERTY: Rental property is recorded at cost, less accumulated
depreciation. 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.
D. CASH & CASH EQUIVALENTS: The Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
and cash equivalents.
F-7
26
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, CONTINUED:
E. REVENUE RECOGNITION: Rental income attributable to leases is recorded
on a straight-line basis when earned from tenants. Leases entered into
by tenants range from month-to-month to twelve years and are renewable
by mutual agreement of the Company and resident or, in some cases, as
provided by statute.
F. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amount of financial
instruments which includes cash and cash investments, mortgages and
notes receivable, and debt approximates fair value.
G. TAX STATUS OF DIVIDENDS: Approximately 56.6, 47.8, and 40.2 percent of
the distributions paid in 1996, 1995, and 1994, respectively, represent
a return of capital. The return of capital is subject to significant
variability depending primarily on the extent and financing of
acquisitions and the incurrence of nonoperating transactions entering
into the determination of taxable income.
H. RECLASSIFICATIONS: Certain 1994 and 1995 amounts have been
reclassified to conform with the 1996 financial statement presentation.
Such reclassifications have no effect on operations as originally
presented.
2. ACQUISITIONS:
During 1996, the Company acquired 29 manufactured housing communities
comprising in excess of 11,350 development sites and 500 sites suitable for
development. The cost of acquisitions aggregated $247.9 million,
consisting of $229.2 million in the second quarter and $18.7 million in the
fourth quarter. Consideration consisted of $134.1 million in the
assumption or issuance of debt, $53.4 million in issuance of Common and
Preferred OP Units and $60.4 million of cash.
During 1995, the Company acquired six manufactured housing communities
comprising in excess of 2,200 developed sites and 425 expansion sites. The
cost of the acquisitions aggregated $52 million, consisting of $24 million,
$17 million, and $11 million in the first three quarters, respectively.
Consideration consisted of $12 million in the assumption or issuance of
debt, $15 million in issuance of OP Units and $25 million of cash borrowed
under the Company's line of credit.
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. In conjunction with an
acquisition, the Company is obligated to issue $12.1 million of OP Units
through 2009 based on the per unit price of the OP Units on each annual
date.
The following unaudited table of pro forma information has been prepared as
if the Company's acquisition of six manufactured housing communities in
1995 and 29 manufactured housing communities in 1996 had occurred as of
January 1, 1995. In management's opinion, the pro forma information is not
necessarily indicative of consolidated results of operations that may have
occurred had the above transactions taken place on January 1 of each year.
In the following table, the amounts are in thousands except per share
amounts:
F-8
27
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
2. ACQUISITIONS, CONTINUED:
PRO FORMA FOR THE
YEAR ENDED
DECEMBER 31
------------------------------
(UNAUDITED)
------------------------------
1996 1995
----------- ----------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,080 $ 80,071
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,527 $ 52,611
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,900 $ 17,744
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.26 $ 1.04
Net income has not been reduced for minority interests and net income per
share assumes that all OP Units have been converted to shares of the
Company's common stock. Operating income is defined as total revenues less
property operating and maintenance expense, real estate tax expense and
general and administrative expense. Operating income is not necessarily an
indication of the performance of the Company or a measure of liquidity.
3. RENTAL PROPERTY: AT DECEMBER 31
----------------------------
1996 1995
----------- ----------
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,943 $ 32,565
Land improvements and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . 510,726 282,121
Furniture, fixtures, equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 9,826 9,852
Property under development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,318 2,075
----------- ----------
588,813 326,613
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . (30,535) (16,583)
----------- ----------
$ 558,278 $ 310,030
=========== ==========
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, and clubhouses, maintenance buildings and amenities.
4. NOTES RECEIVABLE:
Included in other assets are $4.2 million of second and third mortgage
notes collateralized by manufactured housing communities located in
Alberta, Canada bearing interest at an average rate of 17 percent. The
principal is due in April 2000 and the Company is entitled to 73 percent of
excess cash flow, as defined.
The officers' notes are 10 year, LIBOR +1.75% notes collateralized by
420,000 shares of the Company's common stock with personal liability up to
approximately $5 million. Interest income of $.6 million has been
recognized in 1996 and 1995. At December 31, 1996, accrued interest
approximated $.3 million of which $.2 million was paid in January, 1997.
F-9
28
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
5. DEBT:
AT DECEMBER 31
------------------------------
1996 1995
----------- ----------
Secured term loan, interest at LIBOR plus
1.50% (7% at December 31, 1996), due
November 1, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,000
Senior notes, interest at 7.375%, due May 1, 2001 . . . . . . . . . . . . . . . . . 65,000
Senior notes, interest at 7.625%, due May 1, 2003 . . . . . . . . . . . . . . . . . 85,000
Prior year debt, repaid April, 1996 . . . . . . . . . . . . . . . . . . . . . . . . -- $ 107,055
----------- ----------
$ 185,000 $ 107,055
=========== ==========
The Company has a $75 million unsecured line of credit at LIBOR plus 1.50%
on which no balance was owing at December 31, 1996. Fees and costs incurred
to obtain financing are amortized on a straight-line basis over the terms of
the respective loans.
The Company intends to refinance the secured term loan for a ten year
period during 1997 and has hedged its interest rate exposure utilizing
10-year U.S. Treasury Bonds. The realized gain or loss on the hedged
position (unrealized loss of $1.3 million at December 31, 1996) will be
amortized as an adjustment to interest expense over the term of the
refinanced secured debt.
The extraordinary item of $6.9 million results from the early
extinguishment of debt and includes prepayment penalties and related
deferred financing costs.
6. STOCK OPTIONS:
Data pertaining to stock option plans are as follows:
1996 1995 1994
----------- ----------- ----------
Options outstanding, January 1 . . . . . . . . . . . . . . . . 301,167 300,000 200,000
Options granted . . . . . . . . . . . . . . . . . . . . . . . . 482,950 375,430 100,000
Option price . . . . . . . . . . . . . . . . . . . . $26.625-$28.637 $21.625-$24.875 $22.50-$22.75
Options exercised . . . . . . . . . . . . . . . . . . . . . . . 16,683 356,763 --
Option price . . . . . . . . . . . . . . . . . . . . . . $20-$23.125 $20-$21.625
Options forfeited . . . . . . . . . . . . . . . . . . . . . . . -- 17,500 --
Option price . . . . . . . . . . . . . . . . . . . . . . . $22.00-$23.125
Options outstanding, December 31 . . . . . . . . . . . . . . . 767,434 301,167 300,000
Option price . . . . . . . . . . . . . . . . . . . . . . $20-$28.637 $20-$24.875 $20-$22.75
Options exercisable, December 31 . . . . . . . . . . . . . . . 359,616 232,833 220,000
At December 31, 1996, 322,000 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. The plans provide for the grant of up to 1,485,000
options. At December 31, 1996, the weighted average remaining contractual
life relating to options was 8.5 years.
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 Block-Scholes option-pricing model with the
following assumptions for options granted in:
F-10
29
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
6. STOCK OPTIONS, CONTINUED:
1996 1995
----------- ----------
Estimated fair value per share of options granted during year . . . . . . . . . . . $1.94 $2.22
Assumptions:
Annualized dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9% 7.7%
Common stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . 15.1% 15.3%
Risk-free rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2% 6.4%
Expected option term (in years) . . . . . . . . . . . . . . . . . . . . . . . 8 8
This accounting would have resulted in net income of $11.5 million and
$11.1 million and net income per share of $.84 and $1.13 in 1996 and 1995,
respectively.
7. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following unaudited quarterly amounts are in thousands, except for per
share amounts:
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
MARCH 31 JUNE 30(B) SEPT. 30 DEC. 31
-------- ---------- -------- -------
1996
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 12,442 $ 18,149 $ 20,862 $ 21,746
Operating income (a) . . . . . . . . . . . . . . . . . . . $ 8,254 $ 12,063 $ 13,538 $ 14,262
Income before allocation to minority interests . . . . . . $ 3,456 $ 5,647 $ 6,278 $ 6,572
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,937 $ 4,631 $ 5,012 $ 5,230
Weighted average common shares outstanding . . . . . . . . 10,013 14,489 15,092 15,337
Earnings per common share . . . . . . . . . . . . . . . . . $ .29 $ .32 $ .33 $ .34
1995
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 9,770 $ 11,250 $ 11,906 $ 12,186
Operating income (a) . . . . . . . . . . . . . . . . . . . $ 6,420 $ 7,386 $ 7,780 $ 8,172
Income before allocation to minority interests . . . . . . $ 3,206 $ 3,567 $ 3,525 $ 3,293
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,867 $ 3,018 $ 2,984 $ 2,792
Weighted average common shares outstanding . . . . . . . . 9,458 9,890 9,906 9,924
Earnings per common share . . . . . . . . . . . . . . . . . $ 0.30 $ 0.31 $ 0.30 $ 0.28
(a) Operating income is defined as total revenues less property operating
and maintenance expense, real estate tax expense, 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) Net income and earnings per share are presented before an
extraordinary item arising from debt extinguishment of which $6,106
or $.42 per share is attributable to common stockholders.
F-11
30
SUN COMMUNITIES, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
COST CAPITALIZED
INITIAL COST SUBSEQUENT TO
TO COMPANY ACQUISITION
---------------------- ------------
BUILDING IMPROVEMENTS
AND ------------
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND
------------- -------- ----------- ---- -------- ----
Allendale Allendale, MI $ 393 $ 3,684 -
Alpine Grand Rapids, MI 729 6,692 -
Arbor Terrace Bradenton, FL 481 4,410 -
Ariana Village Lakeland, FL - 240 2,195 -
Bedford Hills Battle Creek, MI - (1) 1,265 11,562 -
Bonita Lake Bonita Springs, FL - 285 2,641 -
Boulder Creek Pflugerville, TX - 1,000 500 -
Branch Creek Austin, TX - 796 3,716 -
Breezy Hill Pompano Beach, FL - 1,778 16,085 -
Brentwood Kentwood, MI - 385 3,592 -
Brookside Village Goshen, IN - 260 1,080 $ 386
Byron Center Byron Center, MI - 257 2,402 -
Candlelight Village Chicago Heights, IL - 600 5,623 -
Candlewick Court Owosso, MI - 125 1,900 132
Catalina Middletown, OH - 653 5,858 -
Chain O'Lakes Grand Island, FL - 551 5,003 -
Chisholm Point Pflugerville, TX - 609 5,286 -
Clearwater Village South Bend, IN - 80 1,270 61
Cobus Green Elkhart, IN - 762 7,037 -
College Park Estates Canton, MI - 75 800 174
Continental Estates Davison, MI - 1,625 16,581 -
Country Acres Cadillac, MI - 380 3,495 -
Country Meadows Flat Rock, MI - 924 7,583 296
Countryside Village Perry, MI - (1) 275 3,920 185
Creekwood Meadows Burton, MI - 808 2,043 -
Cutler Estates Grand Rapids, MI - (1) 822 7,604 -
Douglas Estates Austell, GA - 508 2,125 -
Edwardsville Edwardsville, KS - (1) 425 8,805 541
Fisherman's Cove Flint, MI - 380 3,438 -
Flagview Village Douglasville, GA - 508 2,125 -
Four Seasons Ankeny, IO - 890 8,054 -
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION GROSS AMOUNT
-------------- CARRIED AT
IMPROVEMENTS DECEMBER 31, 1996
-------------- -----------------------
BUILDING BUILDING
AND AND ACCUMULATED DATE OF
PROPERTY NAME FIXTURES LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
------------- -------- ---- -------- ----- ------------ -----------
Allendale - $ 393 $ 3,684 $ 4,077 $ 62 1996
Alpine - 729 6,692 7,421 115 1996
Arbor Terrace - 481 4,410 4,891 76 1996
Ariana Village $ 159 240 2,354 2,594 202 1994
Bedford Hills - 1,265 11,562 12,827 200 1996
Bonita Lake - 285 2,641 2,926 45 1996
Boulder Creek - 1,000 500 1,500 - 1996
Branch Creek 1,982 796 5,698 6,494 180 1995
Breezy Hill - 1,778 16,085 17,863 281 1996
Brentwood - 385 3,592 3,977 61 1996
Brookside Village 3,242 646 4,322 4,968 394 1985
Byron Center - 257 2,402 2,659 41 1996
Candlelight Village - 600 5,623 6,223 98 1996
Candlewick Court 702 257 2,602 2,859 267 1985
Catalina 95 653 5,953 6,606 643 1993
Chain O'Lakes - 551 5,003 5,554 143 1996
Chisholm Point 758 609 6,044 6,653 255 1995
Clearwater Village 570 141 1,840 1,981 179 1986
Cobus Green 213 762 7,250 8,012 745 1993
College Park Estates 4,254 249 5,054 5,303 418 1978
Continental Estates - 1,625 16,581 18,206 286 1996
Country Acres - 380 3,495 3,875 60 1996
Country Meadows 5,469 1,220 13,052 14,272 778 1994
Countryside Village 1,313 460 5,233 5,693 494 1987
Creekwood Meadows - 808 2,043 2,851 - 1996
Cutler Estates - 822 7,604 8,426 130 1996
Douglas Estates 191 508 2,316 2,824 243 1988
Edwardsville 743 966 9,548 10,514 1,001 1987
Fisherman's Cove 240 380 3,678 4,058 371 1993
Flagview Village 167 508 2,292 2,800 245 1988
Four Seasons - 890 8,054 8,944 140 1996
F-12
31
SUN COMMUNITIES, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
COST CAPITALIZED
INITIAL COST SUBSEQUENT TO
TO COMPANY ACQUISITION
---------------------- ------------
BUILDING IMPROVEMENTS
AND ------------
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND
------------- -------- ----------- ---- -------- ----
Golden Lakes Plant City, FL - 1,092 7,161 1
Grand Grand Rapids, MI - 578 5,396 -
Hamlin Webberville, MI - 125 1,675 77
Holiday Village Elkhart, IN - 100 3,207 143
Indian Creek Ft. Myers Beach, FL - 3,832 34,660 -
Island Lake Merritt Island, FL - 700 6,431 -
Kensington Meadows Lansing, MI - 250 2,699 -
King's Court Traverse City, MI - 1,473 13,782 -
King's Lake Debary, FL - 280 2,542 -
King's Pointe Winter Haven, FL - 262 2,359 -
Kissimmee Gardens Kissimmee, FL - 594 5,522 -
Lake Juliana Auburndale, FL - 335 2,848 -
Lake San Marino Naples, FL - 650 5,760 -
Leesburg Landing Leesburg, FL - 50 429 -
Liberty Farms Valparaiso, IN - 66 1,201 116
Lincoln Estates Holland, MI - 455 4,201 -
Maple Grove Estates Dorr, MI - 15 210 19
Maplewood Lawrence, IN - 280 2,122 -
Meadow Lake Estates White Lake, MI - 1,188 11,498 127
Meadowbrook Indianapolis, IN - 927 3,833 331
Meadowbrook Estates Monroe, MI - 431 3,320 379
Meadowbrook Village Tampa, FL - 519 4,728 -
Meadows Nappanee, IN - 300 2,300 3
Meadowstream Village Sodus, MI - 100 1,175 109
Orange Tree Orange City, FL - 283 2,530 -
Paradise Chicago Heights, IL - 723 6,638 -
Parkwood Grand Blanc, MI - 477 4,279 -
Pin Oak Parc St. Louis, MO - 1,038 3,250 44
Pine Hills Middlebury, IN - 72 544 52
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION GROSS AMOUNT
-------------- CARRIED AT
IMPROVEMENTS DECEMBER 31, 1996
-------------- -----------------------
BUILDING BUILDING
AND AND ACCUMULATED DATE OF
PROPERTY NAME FIXTURES LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
------------- -------- ---- -------- ----- ------------ -----------
Golden Lakes 189 1,093 7,350 8,443 777 1993
Grand - 578 5,396 5,974 91 1996
Hamlin 490 202 2,165 2,367 226 1984
Holiday Village 692 243 3,899 4,142 421 1986
Indian Creek - 3,832 34,660 38,492 606 1996
Island Lake 23 700 6,454 7,154 316 1995
Kensington Meadows 827 250 3,526 3,776 143 1995
King's Court - 1,473 13,782 15,255 233 1996
King's Lake 380 280 2,922 3,202 240 1994
King's Pointe 63 262 2,422 2,684 211 1994
Kissimmee Gardens 45 594 5,567 6,161 616 1993
Lake Juliana 119 335 2,967 3,302 264 1994
Lake San Marino - 650 5,760 6,410 100 1996
Leesburg Landing - 50 429 479 9 1996
Liberty Farms 1,520 182 2,721 2,903 239 1985
Lincoln Estates - 455 4,201 4,656 72 1996
Maple Grove Estates 216 34 426 460 47 1979
Maplewood 371 280 2,493 2,773 260 1989
Meadow Lake Estates 1,059 1,315 12,557 13,872 1,119 1994
Meadowbrook 708 1,258 4,541 5,799 471 1989
Meadowbrook Estates 5,285 810 8,605 9,415 881 1986
Meadowbrook Village 30 519 4,758 5,277 488 1994
Meadows 1,644 303 3,944 4,247 375 1987
Meadowstream Village 1,016 209 2,191 2,400 241 1984
Orange Tree 63 283 2,593 2,876 225 1994
Paradise - 723 6,638 7,361 114 1996
Parkwood 215 477 4,494 4,971 465 1993
Pin Oak Parc 1,058 1,082 4,308 5,390 335 1994
Pine Hills 1,263 124 1,807 1,931 188 1980
F-13
32
SUN COMMUNITIES, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
COST CAPITALIZED
INITIAL COST SUBSEQUENT TO
TO COMPANY ACQUISITION
---------------------- ------------
BUILDING IMPROVEMENTS
AND ------------
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND
------------- -------- ----------- ---- -------- ----
Pine Ridge Petersburg, VA - 405 2,397 -
Plantation Manor Ft. Pierce, FL - 950 8,891 -
Pleasure Cove Ft. Pierce, FL - 550 5,005 -
Presidential Hudsonville, MI - 680 6,314 -
Royal Country Miami, FL - (1) 2,290 20,758 -
Saddle Oak Club Ocala, FL - 730 6,743 -
Scio Farms Ann Arbor, MI - 2,300 22,659 -
Sherman Oaks Jackson, MI - (1) 200 2,400 240
Siesta Bay Ft. Myers Beach, FL - 2,051 18,549 -
Silver Star Orlando, FL - 1,067 9,685 -
Tallowwood Coconut Creek, FL - 510 5,099 -
Timber Ridge Ft. Collins, CO - 990 9,231 -
Timberbrook Bristol, IN - (1) 490 3,400 101
Timberline Estates Grand Rapids, MI - 536 4,867 -
Town and Country Traverse City, MI - 406 3,736 -
Valley Mills Indianapolis, IN - 150 3,500 -
Water Oak Country Club Est. Lady Lake, FL - 2,503 17,478 -
West Glen Village Indianapolis, IN - 1,100 10,028 -
Whispering Palm Sebastian, FL - 975 8,754 -
Woods Edge West Lafayette, IN - 100 2,600 3
Worthington Arms Delaware, OH - 376 2,624 -
Corporate Headquarters Farmington Hills, MI - - - -
----------- --------- ---------- --------
$ 55,423 $ 478,127 $ 3,520
========= ========== ========
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION GROSS AMOUNT
-------------- CARRIED AT
IMPROVEMENTS DECEMBER 31, 1996
-------------- -----------------------
BUILDING BUILDING
AND AND ACCUMULATED DATE OF
PROPERTY NAME FIXTURES LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
------------- -------- ---- -------- ----- ------------ -----------
Pine Ridge 809 405 3,206 3,611 327 1986
Plantation Manor 16 950 8,907 9,857 765 1994
Pleasure Cove - 550 5,005 5,555 434 1994
Presidential - 680 6,314 6,994 107 1996
Royal Country 160 2,290 20,918 23,208 2,123 1994
Saddle Oak Club 167 730 6,910 7,640 485 1995
Scio Farms 1,749 2,300 24,408 26,708 1,157 1995
Sherman Oaks 2,874 440 5,274 5,714 544 1986
Siesta Bay - 2,051 18,549 20,600 324 1996
Silver Star - 1,067 9,685 10,752 169 1996
Tallowwood 126 510 5,225 5,735 455 1994
Timber Ridge - 990 9,231 10,221 156 1996
Timberbrook 3,668 591 7,068 7,659 640 1987
Timberline Estates 198 536 5,065 5,601 439 1994
Town and Country - 406 3,736 4,142 64 1996
Valley Mills 336 150 3,836 3,986 404 1989
Water Oak Country
Club Est. 873 2,503 18,351 20,854 1,968 1993
West Glen Village 270 1,100 10,298 11,398 870 1994
Whispering Palm - 975 8,754 9,729 152 1996
Woods Edge 1,192 103 3,792 3,895 376 1985
Worthington Arms 740 376 3,364 3,740 347 1990
Corporate Headquarters 1,191 - 1,191 1,191 303 VARIOUS
-------- -------- ----------- ----------- ---------
$ 51,743 $ 58,943 $ 529,870 $ 588,813 $ 30,535
======== ======== =========== =========== =========
(1) These communities collateralize $35 million of secured debt.
F-14
33
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 28, 1997
SUN COMMUNITIES, INC.
By /s/ Gary A. Shiffman
---------------------------
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
- ---- ---------------------- --------------
/s/ Milton M. Shiffman Chairman of the Board March 28, 1997
- ---------------------- of Directors
Milton M. Shiffman
/s/ Gary A. Shiffman Chief Executive March 28, 1997
- -------------------- Officer, President
Gary A. Shiffman and Director
/s/ Jeffrey P. Jorissen Senior Vice President, March 28, 1997
- ----------------------- Chief Financial
Jeffrey P. Jorissen Officer, Treasurer,
Secretary
and Principal
Accounting Officer
/s/ Carl R. Weinert Director March 28, 1997
- -------------------
Carl R. Weinert
/s/ Paul D. Lapides Director March 28, 1997
- -------------------
Paul D. Lapides
/s/ Ted J. Simon Director March 28, 1997
- ----------------
Ted J. Simon
34
/s/ Clunet R. Lewis Director March 28, 1997
- -------------------
Clunet R. Lewis
/s/ Ronald L. Piasecki Director March 28, 1997
- ----------------------
Ronald L. Piasecki
/s/ Arthur A. Weiss Director March 28, 1997
- -------------------
Arthur A. Weiss
35
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
2.1 Form of Common Stock Certificate (1)
2.2 Master Contribution and Sale Agreement pertaining to the Aspen Properties (2)
2.3 Contribution Agreement pertaining to Leesburg Landing
2.4 Contribution Agreement pertaining to Continental Estates
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 the Operating Partnership, (4)
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)
10.1 Second Amended and Restated Agreement of Limited Partnership of Sun
Communities Operating Limited Partnership
10.2 Amended and Restated 1993 Stock Option Plan#
10.3 Amended and Restated 1993 Non-Employee Director Stock Option Plan#
10.4 Form of Stock Option Agreement between the Company and certain (1)
directors, officers and other individuals#
10.5 Form of Non-Employee Director Stock Option Agreement between the Company (5)
and certain directors#
10.6 Employment Agreement between the Company and Gary A. Shiffman#
10.7 Agreement regarding termination of Robert B. Bayer's Employment (6)
Agreement#
10.8 Registration Rights and Lock-Up Agreement with the Company (5)
10.9 Revolving Credit Agreement with NBD Bank, N.A. (5)
10.10 Line of Credit Agreement with Lehman Brothers Holdings Inc. (3)
10.11 Property Management and Leasing Agreement between the Financing (5)
Partnership and Sun Management, Inc.
10.12 Property Management and Leasing Termination Agreement between the
Financing Partnership and Sun Management, Inc.
10.13 Purchase Agreement with respect to Mortgage Debt (1)
10.14 Credit Agreement between Fort McMurray Housing Inc. and Sun Communities (3)
Alberta Limited Partnership
10.15 First Amending Agreement to Credit Agreement between Fort McMurray (3)
Housing Inc. and Sun Communities Alberta Limited Partnership
10.16 Demand Note Agreement from Sun Communities Operating Limited Partnership (3)
to NBD Bank, Canada
10.17 Fee and Commission Agreement between Sun Communities Operating Limited (3)
Partnership and Fort McMurray Housing Inc.
36
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
10.18 $1,022,538.12 Promissory Note from Gary A. Shiffman to the Company (7)
10.19 $1,022,538.13 Promissory Note from Gary A. Shiffman to the Company (7)
10.20 $6,604,923.75 Promissory Note from Gary A. Shiffman to the Company (7)
10.21 Stock Pledge Agreement between Gary A. Shiffman and the Company (7)
for 94,570 shares of Company stock
10.22 Stock Pledge Agreement between Gary A. Shiffman and the Company (7)
for 305,430 shares of Company stock
10.23 Registration Rights Agreement between Gary A. Shiffman and the (3)
Company
10.24 Registration Rights and Lock Up Agreement among the Company and (3)
the partners of Miami Lakes Venture Associates, as amended
10.25 Registration Rights and Lock Up Agreement among the Company and (3)
the partners of Scio Farms Estates Limited Partnership
10.26 Registration Rights and Lock Up Agreement among the Company and (3)
the partners of Kensington Meadows Associates
10.27 Registration Rights and Lock Up Agreement among the Company and
certain affiliates of Aspen Enterprises, Ltd. (Preferred OP
Units)
10.28 Registration Rights and Lock Up Agreement among the Company and
certain affiliates of Aspen Enterprises, Ltd. (Common OP Units)
10.29 Registration Rights Agreement among the Company and the partners
of S&K Smith Co.
10.30 Employment Agreement between the Company and Jeffrey P. Jorissen#
12.1 Calculation of Ratios of Earnings to Fixed Charges
21 List of Subsidiaries
23 Consent of Coopers & Lybrand L.L.P., independent accountants
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement No.
33-69340.
(2) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 20, 1996.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
(4) Incorporated by reference to the Company's Current Report on Form 8-K
dated April 24, 1996.
(5) Incorporated by reference to the Company's Registration Statement No.
33-80972.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
37
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
# Management contract or compensatory plan or arrangement required to be
identified by Form 10-K Item 14.