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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
DECEMBER 18, 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 OF ASSETS
Manufactured Home Communities, Inc. and its subsidiaries (the "Company") have
acquired thirty-nine manufactured home communities and two commercial properties
during the period from January 1, 1997 through December 18, 1997. Twenty-one of
the manufactured home communities and the two commercial properties were
reported on Form 8-K/A dated August 29, 1997. The acquisitions of the remaining
eighteen manufactured home communities, along with the probable acquisitions of
additional communities, are discussed below.
ARROWHEAD VILLAGE, LANTANA, FLORIDA
DESCRIPTION OF PROPERTY
On September 18, 1997, the Company acquired Arrowhead Village, a 602-site senior
community located in Palm Beach County, Florida. Amenities include: a clubhouse,
two swimming pools, shuffleboard, billiards and a library. As of September 30,
1997, occupancy was 95%.
TERMS OF PURCHASE
The purchase price of Arrowhead Village was approximately $20.3 million. The
Company purchased the property from Arrowhead Village, Inc., a Florida
corporation. The acquisition was funded with a borrowing under the Company's
line of credit.
THE ELLENBURG TRANSACTION
On September 4, 1997, the Company entered into a portfolio purchase agreement to
acquire 35 manufactured home communities (the "Ellenburg Communities") from
partnerships having Ellenburg Capital Corporation ("ECC") as the general partner
for a purchase price of approximately $306 million. The Ellenburg Communities
are being sold pursuant to an order of the Superior Court for the State of
California (the "California Court"), by which ECC was involuntarily dissolved
and the California Court appointed the Winding-Up Agents to liquidate and
wind-up the affairs of ECC. In December 1997, the Company entered into a
supplemental agreement (the "Supplemental Agreement") which was approved by the
California Court. Sales pursuant to the Supplemental Agreement are subject to
limited partner approval. The Company has received limited partner approval from
partnerships owning 23 of the Ellenburg Communities and approval of an
additional partnership which owns a portion of another Ellenburg Community. As
of the date of this filing, the Company closed on the acquisition of 18 of the
Ellenburg Communities. In addition, the Company has funded a loan on one other
Ellenburg Community, the terms of which result in effective ownership of such
property. For financial accounting purposes, this loan will be accounted for as
an investment in real estate. The Company is in the process of getting limited
partner approval to acquire the remaining Ellenburg Communities. The Company has
120 days to complete certain post-closing due diligence procedures and adjust
the purchase price to the extent that (i) the net operating income of the
communities is less than the amount used to determine the purchase price; (ii)
the community requires environmental, structural engineering, deferred
maintenance and other physical or legal costs which may be in excess of
anticipated amounts for such items, and (iii) the community has negative working
capital. The maximum amount for such adjustments will be an amount equal to 25%
of the net equity value of the community which will be held in escrow for 120
days from closing. Therefore, the Company has not made an allocation of the
purchase price to the various communities. The acquisition was financed through
an additional borrowing with a bank and through the Company's line of credit.
On December 18, 1997, the Company acquired the following seventeen Ellenburg
Communities:
BEAR CREEK VILLAGE, SHERIDAN, COLORADO
DESCRIPTION OF PROPERTY
Bear Creek Village is a 127-site senior community located in Arapahoe County,
Colorado. Amenities include: a clubhouse, swimming pool and laundry facilities.
As of September 30, 1997, occupancy was 99%.
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BROOK GARDENS, LACKAWANNA, NEW YORK
DESCRIPTION OF PROPERTY
Brook Gardens is a 426-site family community with no amenities located in Erie
County, New York. As of September 30, 1997, occupancy was 99%.
CAREFREE MANOR, PHOENIX, ARIZONA
DESCRIPTION OF PROPERTY
Carefree Manor is a 127-site family community located in Maricopa County,
Arizona. Amenities include: a clubhouse, swimming pool, jacuzzi, billiards, a
playground and laundry facilities. As of September 30, 1997, occupancy was 98%.
CARRIAGE COVE, DAYTONA BEACH, FLORIDA
DESCRIPTION OF PROPERTY
Carriage Cove is a 418-site senior community located in Volusia County, Florida.
Amenities include: a clubhouse, swimming pool, jacuzzi, shuffleboard, putting
green and laundry facilities. As of September 30, 1997, occupancy was 99%.
COLONY PARK, CERES, CALIFORNIA
DESCRIPTION OF PROPERTY
Colony Park is a 187-site senior community located in Modesto County,
California. Amenities include: a clubhouse, swimming pool, jacuzzi, and laundry
facilities. As of September 30, 1997, occupancy was 77%.
CREEKSIDE, WYOMING, MICHIGAN
DESCRIPTION OF PROPERTY
Creekside is a 165-site family community located in Kent County, Michigan.
Amenities include a clubhouse with a kitchen, library and meeting room. As of
September 30, 1997, occupancy was 98%.
DESERT SKIES, PHOENIX, ARIZONA
DESCRIPTION OF PROPERTY
Desert Skies is a 170-site senior community located in Maricopa County, Arizona
adjacent to Carefree Manor. Amenities include: a clubhouse, swimming pool,
jacuzzi, putting green, billiards and laundry facilities. As of September 30,
1997, occupancy was 97%.
EM JA HA, PHOENIX, ARIZONA
DESCRIPTION OF PROPERTY
Em Ja Ha is a 115-site senior community located in Maricopa County, Arizona.
Amenities include: a clubhouse, swimming pool, shuffleboard, laundry facilities,
horseshoes and billiards. As of September 30, 1997, occupancy was 100%.
FAIRVIEW MANOR, TUCSON, ARIZONA
DESCRIPTION OF PROPERTY
Fairview Manor is a 235-site senior community located in Pima County, Arizona.
Amenities include: a clubhouse, swimming pool, jacuzzi, laundry facilities,
shuffleboard, horseshoes, and billiards. As of September 30, 1997, occupancy was
99%.
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FIVE SEASONS, CEDAR RAPIDS, IOWA
DESCRIPTION OF PROPERTY
Five Seasons is a 389-site family community located in Linn County, Iowa.
Amenities include: a clubhouse, swimming pool and laundry facilities. As of
September 30, 1997, occupancy was 91%.
HILLCREST, CLEARWATER, FLORIDA
DESCRIPTION OF PROPERTY
Hillcrest is a 279-site senior community located in Pinellas County, Florida.
Amenities include: a clubhouse, swimming pool, shuffleboard and laundry
facilities. As of September 30, 1997, occupancy was 90%.
HOLIDAY RANCH, LARGO, FLORIDA
DESCRIPTION OF PROPERTY
Holiday Ranch is a 150-site senior community located in Pinellas County,
Florida. Amenities include: a clubhouse, swimming pool, shuffleboard and laundry
facilities. As of September 30, 1997, occupancy was 89%.
INDIAN OAKS, ROCKLEDGE, FLORIDA
DESCRIPTION OF PROPERTY
Indian Oaks is a 211-site senior community with two lakes located in Brevard
County near Vero Beach, Florida. Amenities include: a clubhouse, swimming pool,
shuffleboard and laundry facilities. As of September 30, 1997, occupancy was
80%.
THE LANDINGS, PORT ORANGE, FLORIDA
DESCRIPTION OF PROPERTY
The Landings is a 436-site senior community located in Volusia County near
Daytona Beach, Florida. Amenities include: a clubhouse, two swimming pools,
jacuzzi, shuffleboard, library, and billiards. As of September 30, 1997,
occupancy was 91%.
MESA REGAL, MESA, ARIZONA
DESCRIPTION OF PROPERTY
Mesa Regal is a 2,005-site senior recreational vehicle community located in
Maricopa County, Arizona. Amenities include: seven buildings with a restaurant,
barber shop, beauty shop, meeting rooms, workshops, two ballrooms and a library,
four swimming pools, three jacuzzis, two laundry facilities, a golf cage, a
softball field, horseshoes, bocci ball, three tennis courts, twenty-four
shuffleboard courts, and three volleyball courts.
Occupancy fluctuates based on seasonality.
PICKWICK VILLAGE, PORT ORANGE, FLORIDA
DESCRIPTION OF PROPERTY
Pickwick Village is a 432-site senior community located in Flagler County near
Daytona Beach, Florida. Amenities include: a clubhouse, swimming pool, laundry
facilities, shuffleboard, billiards and horseshoes. As of September 30, 1997,
occupancy was 94%.
WINDMILL MANOR, BRADENTON, FLORIDA
DESCRIPTION OF PROPERTY
Windmill Manor is a 292-site senior community located in Manatee County,
Florida. Amenities include: a clubhouse, swimming pool, shuffleboard, and
laundry facilities. As of September 30, 1997, occupancy was 98%.
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In 1998, the Company closed on the acquisition of Country Meadows and funded a
loan on Countryside North. These two Ellenburg Communities,along with the
sixteen Ellenburg Communities which the Company has not yet closed on, are
discussed below:
BOULDER CASCADE, LAS VEGAS, NEVADA
DESCRIPTION OF PROPERTY
Boulder Cascade is a 300-site family community located in Clark County, Nevada.
Amenities include: a clubhouse, swimming pool, jacuzzi, sauna, and laundry
facilities. As of September 30, 1997, occupancy was 100%.
COUNTRY MEADOWS, PLANT CITY, FLORIDA
DESCRIPTION OF PROPERTY
Country Meadows is a 736-site senior community located in Hillsborou County,
Florida. Amenities include: two clubhouses, two swimming pools, two jacuzzis,
shuffleboard, tennis courts, a golf course, and laundry facilities. As of
September 30, 1997, occupancy was 99%.
COUNTRYSIDE NORTH, VERO BEACH, FLORIDA
DESCRIPTION OF PROPERTY
Countryside North is a 646-site family community located in Indian River County,
Florida. Amenities include: a clubhouse, swimming pool, jacuzzi,and laundry
facilities. As of September 30, 1997, occupancy was 93% .
GREENWOOD VILLAGE, MANORVILLE, NEW YORK
DESCRIPTION OF PROPERTY
Greenwood Village is a 425-site senior community located in Suffolk County, New
York. Amenities include: a clubhouse, swimming pool, tennis courts, and laundry
facilities. As of September 30, 1997, occupancy was 83%.
GULF COAST, SAN BENITO, CALIFORNIA
DESCRIPTION OF PROPERTY
Gulf Coast is a 1,494-site recreational vehicle community located in Cameron
County, Texas. Amenities include: a clubhouse, swimming pool, and laundry
facilities. Occupancy fluctuates based on seasonality.
HOLIDAY VILLAGE, VERO BEACH, FLORIDA
DESCRIPTION OF PROPERTY
Holiday Village is a 128-site family community located in Indian River County,
Florida. Amenities include: a clubhouse, swimming pool, and laundry facilities.
As of September 30, 1997, occupancy was 82%.
LAGUNA LAKES, SAN LUIS OBISPO, CALIFORNIA
DESCRIPTION OF PROPERTY
Laguna Lakes is a 300-site family community located in San Luis Obispo County,
California. Amenities include: two clubhouses, a swimming pool, jacuzzi, two
saunas, shuffleboard, and laundry facilities. As of September 30, 1997,
occupancy was 100%.
MEADOWBROOK, SANTEE, CALIFORNIA
DESCRIPTION OF PROPERTY
Meadowbrook is a 332-site senior community located in San Diego County,
California. Amenities include: a clubhouse, swimming pool, jacuzzi,
shuffleboard, and laundry facilities. As of September 30, 1997, occupancy was
94%.
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MON DAK, MESA, ARIZONA
DESCRIPTION OF PROPERTY
Mon Dak is a 215-site senior community located in Maricopa County, Arizona.
Amenities include: a clubhouse, swimming pool, and laundry facilities. As of
September 30, 1997, occupancy was 75%.
RANCHO MESA, EL CAJON, CALIFORNIA
DESCRIPTION OF PROPERTY
Rancho Mesa is a 158-site family community located in Santee County, California.
Amenities include: a clubhouse, swimming pool, and laundry facilities. As of
September 30, 1997, occupancy was 93% .
REHOBOTH PROPERTIES, REHOBOTH BEACH, DELAWARE
DESCRIPTION OF PROPERTY
The Rehoboth Properties consist of four communities (Aspen Meadows, Camelot
Meadows, McNicol and Sweetbriar) with a total of 734 sites, located in Sussex
County, Delaware. Amenities include: a clubhouse and two swimming pools. As of
September 30, 1997, occupancy was 95%, 98%, 99% and 99% at Aspen Meadows,
Camelot Meadows, McNicol and Sweetbriar, respectively.
ROYAL HOLIDAY, HEMET, CALIFORNIA
DESCRIPTION OF PROPERTY
Royal Holiday is a 199-site senior community located in Stanislaus County,
California. Amenities include: a clubhouse, swimming pool, two jacuzzis, and
laundry facilities. As of September 30, 1997, occupancy was 81%.
SANTIAGO ESTATES, SYLMAR, CALIFORNIA
DESCRIPTION OF PROPERTY
Santiago Estates is a 303-site family community located in Los Angeles County,
California. Amenities include: a clubhouse, swimming pool, two jacuzzis,
volleyball, and a playground. As of September 30, 1997, occupancy was 94%.
SOUTHERN PALMS, EUSTIS, FLORIDA
DESCRIPTION OF PROPERTY
Southern Palms is a 1,133-site family recreational vehicle community located in
Lake County, Florida. Amenities include: two clubhouses, two swimming pools, and
horseshoes. Occupancy fluctuates based on seasonality.
WINDSONG, INDIANAPOLIS, INDIANA
DESCRIPTION OF PROPERTY
Windsong is a 268-site family community located in Marion County, Florida.
Amenities include: a clubhouse, swimming pool, and large park with picnic
tables. As of September 30, 1997, occupancy was 99%.
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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 acquisition of the Ellenburg Communities. The following
unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine
months ended September 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, the acquisition of Golf Vista Estates on
March 27, 1997, the capital lease on Golden Terrace South, which was accounted
for as a purchase, entered into on May 29, 1997, and the acquisition of
Arrowhead Village on September 16, 1997 (collectively, the "1997 Previously
Acquired Properties"); (ii) the acquisition of seventeen manufactured home
communities, a 50% general partnership interest in one community, and two
commercial properties (collectively, the "MPW Properties") on August 29, 1997,
and (iii) the acquisition of the Ellenburg Communities. The 1997 Previously
Acquired Properties and the MPW Properties are included in the Historical
Balance Sheet as of September 30, 1997 and the acquisition of the Ellenburg
Communities is described in Note A of the Pro Forma Condensed Consolidated
Balance Sheet as of September 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; (iv) the
acquisitions of the 1997 Previously Acquired Properties (collectively, the
"Previously Acquired Properties"); (v) the acquisition of the MPW Properties,
and (vi) the acquisition of the Ellenburg Communities.
The following 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 SEPTEMBER 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Historical Ellenburg Pro Forma
------------ --------------- ------------
Communities (A)
---------------
ASSETS
Rental property, net ....................................... $ 676,593 $ 306,120 $ 982,713
Cash and cash equivalents .................................. 413 -- 413
Short term investments ..................................... 2,816 -- 2,816
Notes receivable ........................................... 2,818 -- 2,818
Investment in and advances to affiliates ................... 6,586 -- 6,586
Investment in partnerships ................................. 34,429 (29,886) 4,543
Deferred financing costs, net .............................. 1,496 -- 1,496
Other assets ............................................... 3,174 -- 3,174
------------ ------------ ------------
Total assets .......................................... $ 728,325 $ 276,234 $ 1,004,559
============ ============ ============
LIABILITIES AND EQUITY
Liabilities
Mortgage notes payable ................................ $ 211,333 $ 239,076 $ 450,409
Term loan ............................................. 60,000 -- 60,000
Line of credit ........................................ 55,500 37,158 92,658
Other notes payable ................................... 6,625 -- 6,625
Other liabilities ..................................... 45,412 -- 45,412
------------ ------------ ------------
Total liabilities ..................................... 378,870 276,234 655,104
------------ ------------ ------------
Minority interests ......................................... 71,844 -- 71,844
------------ ------------ ------------
Stockholders' equity
Common stock, $.01 par value .......................... 247 -- 247
Paid-in capital ....................................... 315,790 -- 315,790
Employee notes ........................................ (6,069) -- (6,069)
Distributions in excess of accumulated earnings ....... (32,357) -- (32,357)
------------ ------------ ------------
Total stockholders' equity ............................ 277,611 -- 277,611
------------ ------------ ------------
Total liabilities and stockholders' equity ............ $ 728,325 $ 276,234 $ 1,004,559
============ ============ ============
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(A) Reflects the acquisition of the Ellenburg Communities, nineteen of which
have been acquired (one through mortgage funding) as of the date of this
filing, and sixteen probable acquisitions. In connection with the Ellenburg
transaction the amounts presented include the initial purchase price as
well as liabilities assumed and subsequent closing costs incurred in the
acquisition. The amounts also reflect debt assumed and additional
borrowings under the Company's line of credit for the acquisition of the
Ellenburg Communities. In addition, for certain acquired properties the
Company's purchase price includes an obligation to make specified payments
over a period of six to eight years. These specified payments have been
discounted at a rate of 8.5% for purposes of calculating the purchase
price. The Company owns limited partnership units in certain limited
partnerships which own the Ellenburg Communities. Accordingly, rental
property has been increased and investment in partnerships decreased to
reflect the acquisition of these communities.
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997
Previously
Acquired MPW Ellenburg
Properties Properties Communities Adjustments
---------- ---------- ---------- ----------
Historical (A) (B) (C) (D) Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
Revenues:
Base rental income ................. $ 78,439 $ 2,749 $ 11,314 $ 27,053 $ -- $ 119,555
Utility and other income ........... 8,447 278 1,455 2,361 -- 12,541
Equity in income of affiliates ..... 511 -- -- -- -- 511
Interest income .................... 1,670 -- 231 -- (263) 1,638
---------- ---------- ---------- ---------- ---------- ----------
Total revenues ................. 89,067 3,027 13,000 29,414 (263) 134,245
---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Property operating & maintenance ... 23,520 821 5,841 10,422 (1,258) 39,346
Real estate taxes .................. 5,966 255 542 2,505 -- 9,268
Property management ................ 3,649 -- -- -- 1,720 5,369
General and administrative ......... 3,241 -- -- -- 450 3,691
Interest and related amortization .. 15,573 86 -- -- 20,124 35,783
Depreciation on corporate assets ... 437 -- -- -- -- 437
Depreciation on real estate assets
and other costs .................. 12,136 -- -- -- 7,999 20,135
---------- ---------- ---------- ---------- ---------- ----------
Total expenses ................. 64,522 1,162 6,383 12,927 29,035 114,029
---------- ---------- ---------- ---------- ---------- ----------
Income before allocation to minority
interests .......................... 24,545 $ 1,865 $ 6,617 $ 16,487 $ (29,298) 20,216
========== ========== ========== =========
(Income) allocated to minority
interests........................... (2,695) (3,799)
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Net income............................... $ 21,850 $ 16,417
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Net income per common share.............. $ .88 $ .66
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Weighted Average Common
Shares Outstanding.................. 24,709 24,709
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(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 of the MPW Properties. The amounts
presented represent the historical amounts for certain revenues and
expenses for the periods from January 1, 1997 through the date of
acquisition and are based on the Combined Statement of Revenue and Certain
Expenses which were included in the Company's Form 8-K/A dated August 29,
1997.
(C) Reflects the results of operations of the Ellenburg Communities. The
amounts presented for rental revenues, property operating and maintenance
and real estate taxes are the revenues and certain expenses for the
Ellenburg Communities for the nine months ended September 30, 1997 as
contained in the Combined Statement of Revenue 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 ......... $ (263)
==========
Property operating and maintenance:
The elimination of third-party management fees where the Company will be providing
on-site property management services ........................................................... $ (1,258)
==========
Property management:
Incremental cost associated with self management of the MPW Properties and Ellenburg
Communities for the nine months ended September 30, 1997 ....................................... $ 1,720
==========
General and administrative:
Incremental overhead cost associated with the Ellenburg transaction .............................. $ 450
==========
Interest and related amortization:
Interest associated with debt assumed and additional borrowings in the Ellenburg transaction
of $239 million bearing interest at an average rate of 7.0%, which reflects the
effective rates ................................................................................ $ 12,547
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 774 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% ............................................. 373
Interest associated with $2.4 million Golden Terrace South note payable bearing
interest at 9.05% .............................................................................. 163
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% (a) ..................................................................... 6,271
Adjustment of unused facility fee on the Company's unused portion of the line of credit .......... (4)
----------
$ 20,124
==========
Depreciation:
Reflects depreciation based on real property acquired in the amount $504 million,
less approximately 25% allocated to land, excluding those MPW Properties covered by ground
leases, in the amount of $112 million and depreciated over a 30-year life for real
property. Depreciation for the 1997 Previously Acquired Properties and MPW Properties
reflects depreciation from January 1, 1997 through the respective acquisition dates
for each property .............................................................................. $ 7,999
==========
(a) For 1998, the Company has a $100 million swap in place at an all-in rate of
approximately 7.4% which will increase interest expense under the line of
credit by approximately $318,000 or $.01 per weighted average common share.
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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)
Previously MPW
Acquired Properties Ellenburg Adjustments
Properties ---------- Communities ----------
Historical (A) (B) (C) (D) Pro Forma
---------- ---------- ---------- ---------- ---------- ----------
Revenues:
Base rental income ............... $ 93,109 $ 8,198 $ 14,372 $ 36,623 $ -- $ 152,302
Utility and other income ......... 8,821 1,001 2,181 2,906 -- 14,909
Equity in income of .............. 853 -- -- -- -- 853
affiliates
Interest income .................. 2,420 -- -- -- (499) 1,921
---------- ---------- ---------- ---------- ---------- ----------
Total revenues ............... 105,203 9,199 16,553 39,529 (499) 169,985
---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Property operating &
maintenance .................... 28,399 2,982 6,102 14,065 (571) 50,977
Real estate taxes ................ 7,947 632 650 3,214 -- 12,443
Property management .............. 4,338 -- -- -- 2,755 7,093
General & administrative ......... 4,062 -- -- -- 600 4,662
Interest and related
amortization ................... 17,782 -- -- -- 28,830 46,612
Depreciation on
corporate assets ............... 488 -- -- -- -- 488
Depreciation on real estate
assets and other costs ......... 15,244 -- -- -- 11,742 26,986
---------- ---------- ---------- ---------- ---------- ----------
Total expenses ............... 78,260 3,614 6,752 17,279 43,356 149,261
---------- ---------- ---------- ---------- ---------- ----------
Income before allocation to
minority interests ............... 26,943 $ 5,585 $ 9,801 $ 22,250 $ (43,855) 20,724
========== ========== ========== ==========
(Income) allocated to minority
interests ........................ (2,671) (3,892)
---------- ----------
Net income ............................ $ 24,272 $ 16,832
========== ==========
Net income per common share ........... $ .98 $ .68
========== ==========
Weighted Average Common
Shares Outstanding ............... 24,693 24,693
========== ==========
- ----------
(A) Reflects the results of operations of the Previously Acquired Properties.
The amounts presented are based on 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 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 in the Company's Form
8-K/A dated August 29, 1997.
(C) Reflects results of operations of the Ellenburg Communities. The amounts
presented for rental revenues, property operating and maintenance and real
estate taxes are the revenues and certain expenses of the Ellenburg
Communities 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 ........................................................... (1,871)
--------
$ (571)
========
Property management:
Incremental cost associated with self management of MPW Properties and Ellenburg
Communities for the year ended December 31, 1996 ............................................... $ 2,755
========
General and administrative:
Incremental overhead cost associated with Ellenburg transaction .................................. $ 600
========
Interest and related amortization:
Interest associated with debt assumed and additional borrowings in the Ellenburg transaction
of $239 million bearing interest at an average rate of 7.0%, which reflects the
effective rates ................................................................................ $ 16,730
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% (a)................ 10,362
Adjustment of unused facility fee on the Company's unused portion of the line of credit .......... (8)
--------
$ 28,830
========
Depreciation:
Reflects depreciation based on real property acquired in the amount $504 million,
less approximately 25% allocated to land, excluding those MPW Properties covered by ground
leases, in the amount of $112 million and depreciated over a 30-year life for real
property. Depreciation for the Previously Acquired Properties and MPW Properties
reflects depreciation from January 1, 1996 through the respective acquisition dates
for each property .............................................................................. $ 11,742
========
(a) For 1998, the Company has a $100 million swap in place at an all-in rate of
approximately 7.4% which will increase interest expense under the line of
credit by approximately $424,000 or $.02 per weighted average common share.
14
Ellenburg Capital Corporation
Combined Statement of Revenue and Certain Expenses
Year Ended December 31, 1996
with Report of Independent Auditors
15
Ellenburg Capital Corporation
Combined Statement of Revenue and Certain Expenses
TABLE OF CONTENTS
Report of Independent Auditors........................................1
Combined Statements of Revenue and Certain Expenses for the
year ended December 31, 1996, and for the nine months
ended September 30, 1997 (unaudited)..............................2
Notes to Combined Statements of Revenue and Certain Expenses..........3
16
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 35 Ellenburg Capital Corporation Communities (the "1997 Acquired
Properties and Probable 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 Acquired Properties and Probable Properties' management.
Our responsibility is to express an opinion on the combined 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
is 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 principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined 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 the Current Report on Form 8-K of
Manufactured Home Communities, Inc. as described in Note 1, and is not intended
to be a complete presentation of the 1997 Acquired Properties and Probable
Properties' combined revenue and expenses.
In our opinion, the combined statement of revenue and certain expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses described in Note 1 of the 1997 Acquired Properties and
Probable Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
February 6, 1998
1
17
Ellenburg Capital Corporation
Combined Statements of Revenue
and Certain Expenses
(AMOUNTS IN THOUSANDS)
FOR THE
FOR THE NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1997
DECEMBER 31, 1996 (UNAUDITED)
----------------- ------------------
REVENUE
Rental revenue $ 36,623 $ 27,053
Other income 2,906 2,361
------------- -------------
Total revenue 39,529 29,414
------------- -------------
EXPENSES
Utilities 5,567 4,274
Repairs and maintenance 2,635 2,198
Management fees 1,089 566
Real estate taxes 3,214 2,505
Payroll and benefits 2,731 2,187
General and administrative 1,558 899
Insurance 485 298
------------- -------------
Total expenses 17,279 12,927
------------- -------------
Revenue in excess of certain expenses $ 22,250 $ 16,487
============= =============
See accompanying notes.
2
18
Ellenburg Capital Corporation
Notes to the Combined Statements
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 nine months ended September 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 1997 Acquired Properties and
Probable 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 statements of revenue and certain expenses have been
presented on a combined basis because Ellenburg Capital Corporation is the
General Partner of all of the 1997 Acquired Properties and Probable Properties.
Use of Estimates
The preparation of the combined statements 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
The combined statement of revenue and certain expenses for the nine months ended
September 30, 1997, is unaudited. 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
19
Ellenburg Capital Corporation
Notes to the Combined Statement
of Revenue and Certain Expenses (continued)
2. DESCRIPTION OF PROPERTIES
The following properties are included in the combined statements of revenue and
certain expenses:
Date Number
Property Name Location Acquired of Sites
- ------------------------------------------------------------------------------
Bear Creek Village (C) Sheridan, CO 12/18/97 127
Em Ja Ha (C) Phoenix , AZ 12/18/97 115
Colony Park (C) Ceres, CA 12/18/97 187
Creekside (C) Wyoming, MI 12/18/97 165
The Landings (C) Port Orange, FL 12/18/97 436
Pickwick Village (C) Port Orange, FL 12/18/97 432
Indian Oaks (C) Rockledge, FL 12/18/97 211
Hillcrest (C) Clearwater, FL 12/18/97 279
Holiday Ranch (C) Largo, FL 12/18/97 150
Desert Skies (C) Phoenix, AZ 12/18/97 170
Carefree Manor (C) Phoenix, AZ 12/18/97 127
Brook Gardens (C) Lackawanna, NY 12/18/97 426
Five Seasons (C) Cedar Rapids, IA 12/18/97 389
Carriage Cove (C) Daytona, Beach FL 12/18/97 418
Windmill Manor (C) Bradenton, FL 12/18/97 292
Mesa Regal (B) Mesa, AZ 12/18/97 2,005
Fairview Manor (C) Tucson, AZ 12/18/97 235
Boulder Cascade (C) Las Vegas, NV (A) 300
Country Meadows (C) Plant City, FL 02/02/98 736
Countryside North (C) Vero Beach, FL 02/03/98 646
Greenwood Village (C) Manorville, NY (A) 425
Holiday Village (C) Vero Beach, FL (A) 128
Laguna Lakes (C) San Luis Obispo, CA (A) 300
Meadowbrook (C) Santee, CA (A) 332
Mon Dak (C) Mesa, AZ (A) 215
Rancho Mesa (C) El Cason, CA (A) 158
Rehoboth - Aspen Meadows (C) Rehoboth Beach, DE (A) 200
Rehoboth - Camelot (C) Rehoboth Beach, DE (A) 302
Rehoboth - McNicol (C) Rehoboth Beach, DE (A) 93
Rehoboth - Sweetbriar (C) Rehoboth Beach, DE (A) 139
Royal Holiday (C) Hemet, CA (A) 199
Santiago Estates (C) Sylmar, CA (A) 303
Windsong (C) Indianapolis, IN (A) 268
Gulf Coast (B) San Benito, TX (A) 1,494
Southern Palms (B) Eustis, FL (A) 1,133
-------
13,535
=======
4
20
Ellenburg Capital Corporation
Notes to the Combined Statement
of Revenue and Certain Expenses
2. DESCRIPTION OF PROPERTIES (CONTINUED)
Notes:
(A) The Company has a commitment to acquire this property or has reached
an agreement in principle and is in the final stages of documenting
the acquisition of this property.
(B) This property is an RV Park.
(C) This is a manufactured home community.
3. RELATED PARTY TRANSACTION
Certain of the 1997 Acquired Properties and Probable Properties had management
agreements with an affiliated management company during 1996. Management fees
paid to the related party during 1996 for management of certain of the 1997
Acquired Properties and Probable Properties was approximately $102,000 in the
year ended December 31, 1996. No such fees were paid in the nine months ended
September 30, 1997.
5
21
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: February 20, 1998
22
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 report
with respect to the financial statements indicated below included in the Current
Report on Form 8-K/A of Manufactured Home Communities, Inc., filed with the
Securities and Exchange Commission.
Financial Statements Date of Auditors' Report
-------------------- ------------------------
Combined Statement of Revenue and
Certain Expenses of Ellenburg Capital
Corporation for the year ended December
31, 1996 February 6, 1998
Ernst & Young LLP
Chicago, Illinois
February 23, 1998
