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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Amendment to Application of Report
Pursuant to Section 12, 13 or 15(d) of
The Securities Exchange Act of 1934
AUGUST 29, 1997
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its Charter)
1-11718
(Commission File No.)
MARYLAND 36-3857664
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 474-1122
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Manufactured Home Communities, Inc. and its subsidiaries (the "Company") have
acquired twenty-one manufactured home communities and two commercial properties
during the period from January 1, 1997 through August 29, 1997. The combined
purchase price for these properties was approximately $133.7 million.
CALIFORNIA HAWAIIAN MOBILE ESTATES, SAN JOSE, CALIFORNIA
DESCRIPTION OF PROPERTY
On March 14, 1997, the Company acquired California Hawaiian Mobile Estates
("California Hawaiian"), located in San Jose, California. California Hawaiian
consists of 412 developed sites situated around four lakes. The property is a
family community with a majority of senior residents and a full amenity package
including: a clubhouse, two heated pools, a jacuzzi and sauna, billiards, a
playground, shuffleboard courts, and a beauty salon. As of June 30, 1997,
occupancy was 100%.
TERMS OF PURCHASE
The purchase price of California Hawaiian was approximately $23.3 million. The
Company purchased the property from California Hawaiian Associates, L.P., a
California limited partnership. The acquisition was funded with a borrowing
under the Company's line of credit.
GOLF VISTA ESTATES, MONEE, ILLINOIS
DESCRIPTION OF PROPERTY
On March 27, 1997, the Company acquired Golf Vista Estates ("Golf Vista"),
located in Monee, Illinois, approximately 35 miles south of Chicago. Golf
Vista consists of 200 developed sites and 319 expansion sites. The property is
a senior community and features a 9-hole golf course and clubhouse. As of June
30, 1997, occupancy was 81% at the developed sites.
TERMS OF PURCHASE
The purchase price of approximately $7.4 million was funded with available cash
on hand. The Company purchased Golf Vista from Abart Investment Corporation,
an Illinois corporation.
GOLDEN TERRACE SOUTH, GOLDEN, COLORADO
DESCRIPTION OF PROPERTY
On May 29, 1997, the Company entered into a capital lease with East Tincup
Village, Inc., a Colorado corporation, for Golden Terrace South (formerly known
as East Tincup Village). The property is located adjacent to two of the
Company's existing properties in Golden, Colorado. Golden Terrace South is a
family community consisting of 80 developed sites and 86 recreational vehicle
("RV") sites, and includes a common building with restrooms and showers. As of
June 30, 1997, occupancy was 99% at the developed sites.
TERMS OF LEASE
The lease term is 110 months commencing on May 29, 1997, with monthly rental
payments of approximately $18,000. The Company paid a $550,000 lease deposit
at closing. The lease contains an option for the Company to purchase Golden
Terrace South at the termination of the lease for $2.4 million. For financial
accounting purposes, the Company accounted for the lease as a direct financing
lease, and, accordingly, the Company has recorded an investment in real estate
and note payable.
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THE MOBILEPARKS WEST TRANSACTION
On August 29, 1997, the Company acquired 17 manufactured home communities, a
50% general partnership interest in San Jose Mobilepark West I, and two
commercial properties (collectively, the "MPW Properties") from limited
partnerships and joint ventures affiliated with Mobileparks West, a California
limited partnership. The aggregate purchase price of the MPW Properties was
approximately $103 million. Approximately $64 million of the purchase price
was in the form of units of limited partnership interest ("OP Units") which are
convertible into an equivalent number of shares of the Company's common stock,
approximately $6 million was in the form of installment notes payable,
approximately $17 million was in the form of cash funded from a borrowing under
the Company's line of credit, and the Company assumed debt of approximately $13
million.
ALL SEASONS MOBILEHOME COMMUNITY, SALT LAKE CITY, UTAH
DESCRIPTION OF PROPERTY
All Seasons Mobilehome Community is a 121-site senior community located in Salt
Lake County, Utah. Amenities include: a clubhouse with a kitchen, a swimming
pool, a recreation center with billiards and a library, laundry facilities, and
an RV storage area. As of June 30, 1997, occupancy was 100%.
CORALWOOD MOBILEHOME COMMUNITY, MODESTO, CALIFORNIA
DESCRIPTION OF PROPERTY
Coralwood Mobilehome Community is a 194-site senior community located in
Stanislaus County near San Jose, California. Amenities include: a clubhouse,
a spa and swimming pool, tennis courts, a recreation center, and laundry
facilities. As of June 30, 1997, occupancy was 93%.
FALCON WOOD VILLAGE, EUGENE, OREGON
DESCRIPTION OF PROPERTY
Falcon wood Village is a 183-site senior community located in Lane County,
Oregon. Amenities include: a clubhouse, shuffleboard, a spa and swimming
pool, laundry and car wash facilities, and an RV parking area. As of June 30,
1997, occupancy was 100%.
FOUR SEASONS MOBILEHOME COMMUNITY, FRESNO, CALIFORNIA
DESCRIPTION OF PROPERTY
Four Seasons Mobilehome Community is a 242-site family community located in
Fresno County, California. Amenities include: a clubhouse, a swimming pool, a
tennis court, two basketball courts, a playground and play field, a barbecue
area, laundry facilities, and an RV parking area. As of June 30, 1997,
occupancy was 69%.
KLOSHE ILLAHEE MOBILEHOME COMMUNITY, FEDERAL WAY, WASHINGTON
DESCRIPTION OF PROPERTY
Kloshe Illahee Mobilehome Community is a 258-site senior community located in
King County near Seattle, Washington. Amenities include: a community room,
game room, sauna, jacuzzi, swimming pool, tennis court, library, kitchen,
laundry facilities, and an RV storage area. As of June 30, 1997, occupancy was
100%.
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MONTE DEL LAGO MOBILEHOME COMMUNITY, CASTROVILLE, CALIFORNIA
DESCRIPTION OF PROPERTY
Monte Del Lago Mobilehome Community is a 310-site senior community located in
Monterey County near San Jose, California. Amenities include: a clubhouse,
spa, 2 outdoor pools, recreation center, basketball court, small playground,
laundry facilities, and an RV storage area. As of June 30, 1997, occupancy was
86%.
QUAIL HOLLOW, FAIRVIEW, OREGON
DESCRIPTION OF PROPERTY
Quail Hollow is a 137-site senior community located in Multnomah County near
Portland, Oregon. Amenities include: a clubhouse, swimming pool, and laundry
facilities. As of June 30, 1997, occupancy was 100%.
ROYAL OAKS MOBILEHOME COMMUNITY, VISALIA, CALIFORNIA
DESCRIPTION OF PROPERTY
Royal Oaks Mobilehome Community is a 149-site senior community located in
Tulare County near Fresno, California. Amenities include: a clubhouse,
swimming pool, recreation center, basketball court, playground, barbecue area,
laundry facilities, and an RV storage area. As of June 30, 1997, occupancy was
87%.
SAN JOSE MOBILEPARK WEST I-IV, SAN JOSE, CALIFORNIA
DESCRIPTION OF PROPERTY
San Jose MobilePark West I-IV consists of four adjacent family communities and
a day care center located in Santa Clara County, California with 179 sites, 182
sites, 189 sites and 173 sites, respectively. Amenities include: two laundry
buildings, a recreation building, RV storage, three swimming pools with spas,
two tennis courts, a basketball court, three playground areas, two saunas, a
carwash, and shuffleboard. As of June 30, 1997, occupancy was 100% at all four
of the communities.
SEA OAKS MOBILEHOME COMMUNITY, LOS OSOS, CALIFORNIA
DESCRIPTION OF PROPERTY
Sea Oaks Mobilehome Community is a 125-site senior community located in San
Luis Obispo County near San Jose, California. Amenities include: a recreation
center, outdoor pool, and a barbecue area. As of June 30, 1997, occupancy was
100%.
SEDONA SHADOWS, SEDONA, ARIZONA
DESCRIPTION OF PROPERTY
Sedona Shadows is a 200-site senior community located in Yavapai County,
Arizona. Amenities include: two community rooms, a game room, tennis court,
sauna, jacuzzi, swimming pool, kitchen, barbecue area, and an RV storage area.
As of June 30, 1997, occupancy was 86%.
SHADOWBROOK, CLACKAMAS, OREGON
DESCRIPTION OF PROPERTY
Shadowbrook is a 156-site family community located in Clackamas County near
Portland, Oregon. Amenities include: a clubhouse, swimming pool, laundry
facilities, and an RV storage area. As of June 30, 1997, occupancy was 100%.
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SUNSHADOW MOBILEHOME COMMUNITY, SAN JOSE, CALIFORNIA
DESCRIPTION OF PROPERTY
Sunshadow Mobilehome Community is a 121-site family community located in Santa
Clara County, California. Amenities include: a clubhouse, spa, swimming pool,
and laundry facilities. As of June 30, 1997, occupancy was 100%.
VILLA BOREGA MOBILEHOME COMMUNITY, LAS VEGAS, NEVADA
DESCRIPTION OF PROPERTY
Villa Borega Mobilehome Community is a 293-site senior community located in
Clark County, Nevada. Amenities include: a clubhouse, recreation center, a
swimming pool and spa, tennis courts, and laundry facilities. As of June 30,
1997, occupancy was 99%.
WESTWOOD VILLAGE MOBILEHOME COMMUNITY, FARR WEST, UTAH
DESCRIPTION OF PROPERTY
Westwood Village Mobilehome Community is a 293-site senior community located in
Weber County near Salt Lake City, Utah. Amenities include: a clubhouse,
recreation center, library, swimming pool, kitchen, laundry facilities, and an
RV storage area. As of June 30, 1997, occupancy was 100%.
GARDEN WEST OFFICE PLAZA, MONTEREY, CALIFORNIA
DESCRIPTION OF PROPERTY
Garden West Office Plaza is a 23,000 square foot office building located in
Monterey, California. The building holds the office of Mobileparks West, the
general partner of the MPW Properties, along with smaller scale professional
tenants, including a state employment agency and an accounting agency. As of
June 30, 1997, occupancy was 95%.
NICHOLSON PLAZA, SAN JOSE, CALIFORNIA
DESCRIPTION OF PROPERTY
Nicholson Plaza is a 17,000 square foot retail strip center located in front of
the San Jose Mobile Park West I-IV properties. Tenants include fast food
restaurants and a brokerage firm. As of June 30, 1997, occupancy was 93%.
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MANUFACTURED HOME COMMUNITIES, INC.
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
REQUIRED UNDER ITEM 7(b) OF FORM 8-K
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
The following unaudited Pro Forma Condensed Consolidated Balance Sheet presents
the effect of the MPW transaction which transpired subsequent to June 30, 1997.
The following unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 1997 presents the effect of the
following transactions as if they had occurred on January 1, 1997: (i) the
acquisition of California Hawaiian on March 14, 1997; (ii) the acquisition of
Golf Vista on March 27, 1997; (iii) the capital lease on Golden Terrace South,
which was accounted for as a purchase, entered into on May 29, 1997,
(collectively, the "1997 Previously Acquired Properties"), and (iv) the
acquisition of the MPW Properties on August 29, 1997. The 1997 Previously
Acquired Properties are included in the Historical Balance Sheet as of June 30,
1997 and the MPW transaction is described in Note A of the Pro Forma Condensed
Consolidated Balance Sheet as of June 30, 1997.
The following unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1996 has been presented as if the
following transactions had occurred on January 1, 1996: (i) the acquisition of
Waterford on February 28, 1996; (ii) the funding of the Candlelight Village
loan, which was accounted for as a purchase, on May 9, 1996; (iii) the
acquisition of Casa del Sol Resort No. 1 and Casa del Sol Resort No. 2 on
October 23, 1996, (collectively, the "1996 Acquisitions"); (iv) the
acquisitions of the 1997 Previously Acquired Properties, and (v) the
acquisition of the MPW Properties.
The unaudited Pro Forma Condensed Consolidated Financial Statements are not
necessarily indicative of the results of future operations, nor the results of
historical operations, had all the transactions occurred as described above on
either January 1, 1996 or January 1, 1997.
The unaudited Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the accompanying Notes to Pro Forma Condensed
Consolidated Financial Statements and Combined Statements of Revenue and
Certain Expenses (included elsewhere herein).
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Historical MPW Properties (A) Pro Forma
---------- ------------------ ---------
ASSETS
Rental property, net........................... $ 555,380 $ 103,238 $ 658,618
Cash and cash equivalents...................... 1,613 --- 1,613
Short term investments......................... 3,820 (1,799) 2,021
Notes receivable............................... 15,607 --- 15,607
Investment in and advances to affiliates....... 5,807 --- 5,807
Deferred financing costs, net.................. 1,770 --- 1,770
Other assets................................... 4,826 --- 4,826
---------- ---------- ----------
Total assets............................... $ 588,823 $ 101,439 $ 690,262
========== ========== ==========
LIABILITIES AND EQUITY
Liabilities
Mortgage notes payable..................... $ 199,135 $ 12,610 $ 211,745
Term loan.................................. 60,000 --- 60,000
Line of credit............................. 19,000 17,826 36,826
Other notes payable........................ --- 6,625 6,625
Other liabilities.......................... 31,958 603 32,561
---------- ---------- ----------
Total liabilities.......................... 310,093 37,664 347,757
---------- ---------- ----------
Minority interests............................. 28,401 36,725 65,126
---------- ---------- ----------
Stockholders' equity
Common stock, $.01 par value............... 247 --- 247
Paid-in capital............................ 288,023 27,050 315,073
Employee notes............................. (6,100) --- (6,100)
Distributions in excess of accumulated
earnings................................. (31,841) --- (31,841)
---------- ---------- ----------
Total stockholders' equity................. 250,329 27,050 277,379
---------- ---------- ----------
Total liabilities and stockholders'
equity................................... $ 588,823 $ 101,439 $ 690,262
========== ========== ==========
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(A) Reflects the acquisition of the MPW Properties on August 29, 1997. In
connection with such acquisition the amounts presented include the initial
purchase price as well as liabilities assumed and subsequent closing costs
incurred as identified in the acquisition process. The amounts also
reflect debt assumed, installment notes payable issued, OP Units issued,
and additional borrowings under the line of credit for the acquisition of
the MPW Properties. The issuance of OP Units is treated as a capital
transaction in the Company's financial statements. As a result, the $63.8
million increase in the underlying equity of MHC Operating Limited
Partnership is allocated between stockholders equity and minority
interests (to the extent represented by OP Units) to account for the
change in their respective percentage ownership of the underlying equity
resulting in a $27.0 million adjustment to paid-in capital.
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997
Previously
Acquired Properties MPW
Historical (A) Properties (B) Adjustments(C) Pro Forma
---------- ------------------- ------------------ -------------- ---------
Revenues:
Base rental income.................. $ 50,978 $ 862 $ 7,543 $ --- $ 59,383
Utility and other income............ 5,483 228 970 --- 6,681
Equity in income of affiliates...... 207 --- --- --- 207
Interest income..................... 1,246 --- 154 (143) 1,257
---------- --------- ---------- --------- --------
Total revenues.................... 57,914 1,090 8,667 (143) 67,528
---------- --------- ---------- --------- --------
Expenses:
Property operating & maintenance.... 15,274 302 3,894 (461) 19,009
Real estate taxes................... 3,914 73 361 --- 4,348
Property management................. 2,412 --- --- 461 2,873
General and administrative.......... 2,212 --- --- --- 2,212
Interest and related amortization... 10,017 86 --- 1,790 11,893
Depreciation on corporate assets.... 289 --- --- --- 289
Depreciation on real estate assets
and other costs................... 8,034 --- --- 1,635 9,669
---------- --------- ---------- --------- --------
Total expenses.................. 42,152 461 4,255 3,425 50,293
---------- --------- ---------- --------- --------
Income before allocation to minority
interests............................. 15,762 $ 629 $ 4,412 $ (3,568) 17,235
(Income) allocated to minority ========= ========== =========
interests............................. (1,585) (3,240)
---------- --------
Net income............................ $ 14,177 $ 13,995
========== ========
Net income per common share........... $ .57 $ .56
========== ========
Weighted Average Common
Shares Outstanding.................... 24,777 24,777
========== ========
(A) Reflects the results of operations of the 1997 Previously Acquired
Properties. The amounts presented represent the historical amounts for
certain revenues and expenses for the periods from January 1, 1997 through
the respective acquisition dates for each of the properties.
(B) Reflects the results of operations for the MPW Properties. The amounts
presented for rental revenues, property operating and maintenance and real
estate taxes are the revenues and certain expenses for the MPW Properties
for the six months ended June 30, 1997 as contained in the Combined
Statements of Revenue and Certain Expenses included elsewhere herein.
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(C) Reflects the following adjustments to the 1997 Previously Acquired
Properties and the MPW Properties results of operations as follows:
Interest income:
Reduction of interest income due to the use of working capital for property acquisitions ... $ (143)
======
Property operating and maintenance:
The elimination of third-party management fees where the Company will be providing
on-site property management services .................................................... $ (461)
======
Property management:
Incremental cost associated with self management of the MPW Properties for the
six months ended June 30, 1997 .......................................................... $ 461
======
Interest and related amortization:
Interest associated with debt assumed in the MPW transaction of $12.6 million
bearing interest at an average rate of 8.2%, which reflects the actual rates ........... $ 516
Interest associated with other notes payable issued in connection with the MPW transaction
of $6.6 million bearing interest at a rate of 7.5% ...................................... 248
Interest associated with $2.4 million Golden Terrace South note payable bearing
interest at 9.05% ....................................................................... 91
Interest associated with amounts borrowed under the Company's line of credit bearing
interest at Libor plus 1.125%, which based on the 30-day Libor rate at the time
of borrowings was 6.8% .................................................................. 936
Adjustment of unused facility fee on the Company's unused portion of the line of credit .... (1)
------
$1,790
======
Depreciation:
Reflects depreciation based on real property acquired in the amount $137.1 million,
less approximately 25% allocated to land, excluding those properties covered by ground
leases, in the amount of $25.9 million and depreciated over a 30-year life for real
property. Depreciation for the 1997 Previously Acquired Properties reflects depreciation
from January 1, 1997 through the respective acquisition dates for each property ......... $1,635
======
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997
Previously
1996 Acquired MPW
Historical Acquisitions (A) Properties (B) Transaction (C)
---------- ----------------- -------------- ---------------
Revenues:
Base rental income.................. $ 93,109 $ 2,346 $ 3,405 $ 14,372
Utility and other income............ 8,821 52 900 2,181
Equity in income of affiliates...... 853 --- --- ---
Interest income..................... 2,420 --- --- ---
---------- --------- --------- ----------
Total revenues.................. 105,203 2,398 4,305 16,553
---------- --------- --------- ----------
Expenses:
Property operating & maintenance.... 28,399 638 1,713 6,102
Real estate taxes................... 7,947 85 406 650
Property management................. 4,338 --- --- ---
General & administrative............ 4,062 --- --- ---
Interest and related amortization... 17,782 --- --- ---
Depreciation on corporate assets.... 488 --- --- ---
Depreciation on real estate assets
and other costs................... 15,244 --- --- ---
---------- --------- --------- ----------
Total expenses.................. 78,260 723 2,119 6,752
---------- --------- --------- ----------
Income before allocation to minority
interests......................... 26,943 $ 1,675 $ 2,186 $ 9,801
========= ========= ==========
(Income) allocated to minority
interests......................... (2,671)
----------
Net income............................ $ 24,272
==========
Net income per common share........... $ .98
==========
Weighted Average Common
Shares Outstanding................ 24,693
==========
Adjustments (D) Pro Forma
--------------- ---------
Revenues:
Base rental income.................. $ --- $ 113,232
Utility and other income............ --- 11,954
Equity in income of affiliates...... --- 853
Interest income..................... (499) 1,921
-------- ---------
Total revenues.................. (499) 127,960
-------- ---------
Expenses:
Property operating & maintenance.... 516 37,368
Real estate taxes................... --- 9,088
Property management................. 784 5,122
General & administrative............ --- 4,062
Interest and related amortization... 5,923 23,705
Depreciation on corporate assets.... --- 488
Depreciation on real estate assets
and other costs................... 4,217 19,461
-------- ---------
Total expenses.................. 11,440 99,294
-------- ---------
Income before allocation to minority
interests......................... $(11,939) 28,666
========
(Income) allocated to minority
interests......................... (5,389)
---------
Net income............................ $ 23,277
=========
Net income per common share........... $ .94
=========
Weighted Average Common
Shares Outstanding................ 24,693
=========
- -----------------------
(A) Reflects the results of operations for the 1996 Acquisitions. The
amounts presented represent the historical amounts for certain revenues
and expenses for the periods from January 1, 1996 through the respective
acquisition dates for each property.
(B) Reflects the results of operations of the 1997 Previously Acquired
Properties. The amounts presented for rental revenues, property operating
and maintenance and real estate taxes are based on the revenues and
certain expenses of the 1997 Previously Acquired Properties for the year
ended December 31, 1996.
(C) Reflects results of operations of the MPW Properties. The amounts
presented for rental revenues, property operating and maintenance and real
estate taxes are the revenues and certain expenses of the MPW Properties
for the year ended December 31, 1996 as contained in the Combined
Statements of Revenues and Certain Expenses included elsewhere herein.
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(D) Reflects the following adjustments:
Interest income:
Reduction of interest income due to the use of working capital for property acquisitions ... $ (499)
=======
Property operating and Maintenance:
Increase of ground lease expense to reflect new leases entered into on January 1, 1997
related to the MPW Properties ........................................................... 1,300
The elimination of third-party management fees where the Company will be providing
on-site property management services .................................................... $ (784)
=======
$ $516
=======
Property management:
Incremental cost associated with self management of MPW Properties for the year
ended December 31, 1996 ................................................................. $ 784
=======
Interest and related amortization:
Interest associated with debt assumed in the MPW Transaction of $12.6 million bearing
interest at an average rate of 8.2%, which reflects the actual rates ................... $ 1,033
Interest associated with other notes payable issued in the MPW Transaction of $6.6 million
bearing interest at a rate of 7.5% ...................................................... 497
Interest associated with $2.4 million Golden Terrace South note payable bearing
interest at 9.05% ....................................................................... 216
Interest associated with amounts borrowed under the Company's line of credit bearing
interest at Libor plus 1.125%, which based on the 30-day Libor rate at the time
of the 1996 borrowings was 7.1% and at the time of the 1997 borrowings was 6.8% ......... 4,182
Adjustment of unused facility fee on the Company's unused portion of the line of credit .... (5)
-------
$ 5,923
=======
Depreciation:
Reflects depreciation based on real property acquired in the amount $144.5 million,
less approximately 25% allocated to land, excluding those properties covered by ground
leases, in the amount of $37.2 million and depreciated over a 30-year life for real
property. Depreciation for the 1997 Previously Acquired Properties reflects depreciation
from January 1, 1996 through the respective acquisition dates for each property ......... $ 4,217
=======
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Mobileparks West
Combined Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
with Report of Independent Auditors
Required under Item 7(a) of Form 8-K
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Mobileparks West
Statement Of Revenue And Certain Expenses
CONTENTS
Report of Independent Auditors......................................1
Combined Statements of Revenue and Certain Expenses for the year
ended December 31, 1997 and for the six months ended June 30,
1997 (unaudited)....................................................2
Notes to Combined Statements of Revenue and Certain Expenses........3
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Report of Independent Auditors
The Board of Directors of
Manufactured Home Communities, Inc.
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of 20 Mobileparks West Communities (the "Properties") as described in
Note 2 for the year ended December 31, 1996. The combined Statement of Revenue
and Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the Statement of Revenue and Certain
Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined Statement of Revenue and
Certain Expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined Statement of Revenue and Certain Expenses. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the Statement of
Revenue and Certain Expenses. We believe that our audit provides a reasonable
basis for our opinion.
The accompanying combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, for inclusion in Manufactured Home
Communities, Inc.'s Current Report on Form 8-K as described in Note 1, and is
not intended to be a complete presentation of the Properties' revenue and
expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 1 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
May 30,1997
1
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Mobileparks West
Combined Statements Of Revenue
And Certain Expenses
(AMOUNTS IN THOUSANDS)
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------------------------------------
REVENUE
Rental revenue $7,543 $14,372
Utility income 970 2,065
Other income 154 116
------------------------------------------------
Total revenue 8,667 16,553
------------------------------------------------
EXPENSES
Utilities 1,325 2,572
Repairs and maintenance 546 880
Management fees 461 784
Ground leases 1,000 699
Real estate taxes 361 650
Payroll and benefits 269 604
General and administrative 273 418
Insurance 20 145
------------------------------------------------
Total expenses 4,255 6,752
------------------------------------------------
Revenue in excess of
certain expenses $4,412 $9,801
================================================
See accompanying notes.
2
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Mobileparks West
Notes to the Combined Statement
of Revenue And Certain Expenses
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying combined Statements of Revenue and Certain Expenses for the
year ended December 31, 1996, and the six months ended June 30, 1997
(unaudited), were prepared for the purposes of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
Current Report on Form 8-K of Manufactured Home Communities, Inc. (the
"Company"). The accompanying combined financial statements are not
representative of the actual operations of the Properties for the periods
presented as certain expenses, which may not be comparable to the expenses to
be incurred by the Company in the proposed future operations of the Properties,
have been excluded. Expenses excluded consist of interest, depreciation and
amortization, and other costs not directly related to the future operations of
the Properties.
Basis of Combination
The accompanying combined Statement of Revenue and Certain Expenses has been
presented on a combined basis because all of the Properties are commonly owned
and managed by Mobile Parks West, the seller of the Properties. All
inter-property balances and transactions have been eliminated in the
combination.
Use of Estimates
The preparation of the combined Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.
Revenue and Expense Recognition
Revenue is recorded in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All such adjustments are of a normal, recurring nature.
3
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DESCRIPTION OF PROPERTIES
The Company expects to acquire the following manufactured home communities
("MHC"s), office plaza and retail plaza, which are included in the combined
statements of revenue and certain expenses:
Number
of Units / Total
Property Name Location Square feet Investment (A)
- -------------------------------------------------------------------------------------------------------
All Seasons MHC Salt Lake City, UT 121 $2,131
Coralwood MHC (B) Modesto, CA 194 5,040
Falcon Wood Village MHC Eugene, OR 183 4,536
Four Seasons MHC Fresno, CA 242 3,112
Kloshe Illahee MHC Federal Way, WA 258 9,689
Monte Del Lago MHC Castroville, CA 310 12,699
Quail Hollow MHC (B) Fairview, OR 137 3,245
Royal Oaks MHC Visalia, CA 149 2,516
San Jose Mobile Park West I (B) (C) San Jose, CA 179 2,755
San Jose Mobile Park West II (B) San Jose, CA 182 4,823
San Jose Mobile Park West III (B) San Jose, CA 189 5,485
San Jose Mobile Park West IV (B) San Jose, CA 173 4,615
Sea Oaks MHC Los Osos, CA 125 3,570
Sedona Shadows MHC Sedona, AZ 200 4,521
Shadowbrook MHC Clackamas, OR 156 4,885
Sunshadow MHC (B) San Jose, CA 121 5,698
Villa Borega MHC Las Vegas, NV 293 11,661
Westwood Village MHC Farr West, UT 293 5,522
------------------------------------
Total MHC 3,505 $96,503
------------------------------------
Garden West Office Plaza Monterey, CA 23,000 2,230
Nicholson Retail Plaza San Jose, CA 17,000 4,505
------------------
Total $103,238
==================
(A) Includes the initial purchase price and closing costs.
(B) Property is purchased subject to a ground lease.
(C) The Company purchased only the 50% General Partnership interest in the
Property.
3. GROUND LEASES
Certain Properties lease land under noncancellable operating leases expiring in
various years from 2022 to 2031 with terms which require twelve equal payments
per year plus additional rents
4
19
3. GROUND LEASES (CONTINUED)
calculated as a percent of gross revenues. For the year ended December 31,
1996, ground rent was $861,000. Minimum future rental payments under the lease
for each of the next five years and in the aggregate are as follows:
1997 $ 1,529,242
1998 1,529,242
1999 1,529,242
2000 1,529,242
2001 1,529,242
Thereafter 33,402,071
-------------
Total $ 41,048,281
=============
5
20
CALIFORNIA HAWAIIAN MOBILE ESTATES
STATEMENT OF REVENUE AND CERTAIN EXPENSES
Year ended December 31, 1996
with Report of Independent Auditors
Required under Item 7(a) of Form 8-K
21
CALIFORNIA HAWAIIAN MOBILE ESTATES
STATEMENT OF REVENUE AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
CONTENTS
Report of Independent Auditors................................................1
Statement of Revenue and Certain Expenses.....................................2
Notes to Statement of Revenue and Certain Expenses............................3
22
Report of Independent Auditors
The Board of Directors
Manufactured Home Communities, Inc.
We have audited the accompanying Statement of Revenue and Certain Expenses of
California Hawaiian Mobile Estates (the "Property") for the year ended December
31, 1996. This Statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on the Statement of Revenue and
Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statement.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the Statement of Revenue and Certain Expenses. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the Form 8-K filed by Manufactured Home
Communities, Inc. as described in Note 2, and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2 of California Hawaiian Mobile Estates for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
Ernst & Young, LLP
Chicago, Illinois
February 14, 1997
1
23
California Hawaiian Mobile Estates
Statement of Revenue and Certain Expenses (in 000's)
Year ended December 31, 1996
(amounts in thousands)
REVENUE
Rental income $ 2,599
Utility income 592
Other income 90
------------
Total revenue 3,281
------------
EXPENSES
Utilities 479
Repairs and maintenance 227
Management fees 89
Real estate taxes 368
Payroll and benefits 107
General and administrative 18
Insurance 24
------------
Total expenses 1,312
------------
Revenue in excess of certain expenses $ 1,969
============
See accompanying notes.
2
24
California Hawaiian Mobile Estates
Notes to Statement of Revenue and Certain Expenses
December 31, 1996
1. BUSINESS
The accompanying Statement of Revenue and Certain Expenses relates to the
operations of California Hawaiian Mobile Estates, a 412-unit manufactured home
community located in San Jose, California (the "Property"). The Property is
expected to be acquired in March 1997, by Manufactured Home Communities, Inc.,
from an unrelated entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statement of Revenue and Certain Expenses for the year ended
December 31, 1996 was prepared for the purposes of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
Current Report 8-K of Manufactured Home Communities, Inc. (the "Company"). The
accompanying financial statements are not representative of the actual
operations of the Property for the period presented as certain expenses, which
may not be comparable to the expenses to be incurred by the Company in the
proposed future operations of the Property, have been excluded. Expenses
excluded consist of interest, depreciation and amortization, and other costs
not directly related to the future operations of the Properties.
Revenue and Expense Recognition
Revenue is recorded in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statement of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.
3
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANUFACTURED HOME COMMUNITIES, INC.
By: \s\ Thomas P. Heneghan
--------------------------
Thomas P. Heneghan
Executive Vice President, Treasurer and
Chief Financial Officer
By: \s\ Judy A. Pultorak
--------------------------
Judy A. Pultorak
Principal Accounting Officer
Date: November 3, 1997
1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-25297) of Manufactured Home Communities, Inc. of our reports
with respect to the financial statements indicated below included in the
Current Report on Form 8-K of Manufactured Home Communities, Inc., filed with
the Securities and Exchange Commission.
Financial Statements Date of Auditors' Report
-------------------- ------------------------
Statement of Revenues and Certain Expenses February 14, 1997
of California Hawaiian Mobile Estates
for the year ended December 31, 1996
Statement of Revenues and Certain Expenses May 30, 1997
of Mobile Parks West for the year ended
December 31, 1996
Chicago, Illinois Ernst & Young, LLP
October 31, 1997
