1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
JUNE 4, 1998
(Date of Report)
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
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 or gained a controlling interest in 31 manufactured home communities
during the period from January 1, 1998 through June 4, 1998. Of these
communities, ten were reported on Form 8-K/A dated December 18, 1997. The
remaining 21 manufactured home communities are discussed below. The combined
purchase price for these 21 manufactured home communities was approximately
$110.5 million.
QUAIL MEADOWS, RIVERBANK, CALIFORNIA
DESCRIPTION OF PROPERTY
On January 8, 1998, the Company acquired Quail Meadows located in Stanislaus
County, California. Quail Meadows is a 146-site family manufactured home
community. Amenities include: a swimming pool, playground, and basketball
courts. As of March 31, 1998, occupancy was 98%.
TERMS OF PURCHASE
The purchase price of Quail Meadows was approximately $4.7 million. The
Company purchased the community from the Guido G. Segarini Family Trust and the
Ubaldi Living Trust. The acquisition was funded with a borrowing under the
Company's line of credit.
SHERWOOD FOREST RV RESORT, KISSIMMEE, FLORIDA
DESCRIPTION OF PROPERTY
On April 30, 1998, the Company acquired Sherwood Forest RV Resort. Sherwood
Forest RV Resort is a 512-site recreational vehicle ("RV") community located
adjacent to one of the Company's communities in Osceola County, Florida. The
acquisition included an adjacent 33-acre parcel available for expansion sites.
Amenities include: a swimming pool, spa, playground, laundry facilites, barbeque
area, clubhouse and tennis courts. Occupancy fluctuates based on seasonality.
TERMS OF PURCHASE
The purchase price of Sherwood Forest RV Resort was approximately $7.0 million.
The Company purchased the property from Florida Sherwood Forest, Ltd., a
California Limited Partnership. The acquisition was funded with a borrowing
under the Company's line of credit.
CASA DEL SOL III, PEORIA, ARIZONA
DESCRIPTION OF PROPERTY
On May 14, 1998, the Company acquired Casa del Sol III. Casa del Sol III is a
238-site senior community located adjacent to one of the Company's communities
in Maricopa County, Arizona. Amenities include: a swimming pool, jacuzzi, and
clubhouse with billiards, a library, card room, exercise room and laundry
facilities. As of March 31, 1998, occupancy was 94%.
TERMS OF PURCHASE
The purchase price of Casa Del Sol III was approximately $9.8 million. The
Company purchased the property from Buzz Kroger's Casa Del Sol Resorts L.L.C.,
an Arizona limited liability company. The acquisition was funded with a
borrowing under the Company's line of credit.
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THE COLLEGE HEIGHTS TRANSACTION
On June 4, 1998, the Company entered into a joint venture agreement with
Wolverine Investors L.L.C. to acquire the following 18 manufactured home
communities (the "College Heights Communities"). The aggregate purchase price
for the College Heights Communities was approximately $89 million. The Company
contributed approximately $19 million to the joint venture; Wolverine Investors
L.L.C. contributed approximately $2.0 million to the joint venture and the
remainder of the acquisition was funded with a borrowing from a bank of
approximately $68 million. The Company's $19 million contribution to the joint
venture was funded with a borrowing under the Company's line of credit.
AMERICANA ESTATES, KALAMAZOO, MICHIGAN
DESCRIPTION OF PROPERTY
Americana Estates is a 161-site family community located in Kalamazoo County,
Michigan. Amenities include: a clubhouse, playground, swimming pool and
laundry facilities. As of March 31, 1998, occupancy was 98%.
APPLETREE, WALKER, MICHIGAN
DESCRIPTION OF PROPERTY
Appletree is a 238-site family community located in Kent County, Michigan.
Amenities include: a clubhouse, laundry facilities, fenced storage area,
swimming pool, playground and lake. As of March 31, 1998, occupancy was 95%.
BRIGHTON VILLAGE, BRIGHTON, MICHIGAN
DESCRIPTION OF PROPERTY
Brighton Village is a 196-site family community located in Livingston County,
Michigan. Amenities include: a clubhouse and a fenced storage area. As of
March 31, 1998, occupancy was 83%.
COLLEGE HEIGHTS PARK, AUBURN HILLS, MICHIGAN
DESCRIPTION OF PROPERTY
College Heights Park is a 161-site senior community located in Oakland County,
Michigan. Amenities include: a clubhouse, storage area, swimming pool and
laundry facilities. As of March 31, 1998, occupancy was 97%.
GROVELAND MANOR, HOLLY, MICHIGAN
DESCRIPTION OF PROPERTY
Groveland Manor is a 186-site family community located in Oakland County,
Michigan. Amenities include: a swimming pool, playground, basketball court,
storage building and fenced RV storage area. As of March 31, 1998, occupancy
was 92%.
HILLCREST ACRES, KALAMAZOO, MICHIGAN
DESCRIPTION OF PROPERTY
Hillcrest Acres is a 150-site mixed family and adult community located in
Kalamazoo County, Michigan. Amenities include: a clubhouse, swimming pool,
storage facility, and laundry facilities. As of March 31, 1998, occupancy was
98%.
METRO PARK, ROMULUS, MICHIGAN
DESCRIPTION OF PROPERTY
Metro Park is a 227-site family community located in Wayne County, Michigan.
Amenities include: a clubhouse, swimming pool and laundry facilities. As of
March 31, 1998, occupancy was 89%.
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RIVERVIEW ESTATES, BAY CITY, MICHIGAN
DESCRIPTION OF PROPERTY
Riverview Estates is a 198-site family community located in Bay County,
Michigan. Amenities include: a clubhouse, fenced storage area and utility
garage, playground, and basketball courts. As of March 31, 1998, occupancy was
88%.
ROYAL VILLAGE, TOLEDO, OHIO
DESCRIPTION OF PROPERTY
Royal Village is a 233-site family community located in Lucas County, Ohio.
Amenities include: a clubhouse, swimming pool, and fenced storage area. As of
March 31, 1998, occupancy was 98%.
SOUTH LYON WOODS, SOUTH LYON, MICHIGAN
DESCRIPTION OF PROPERTY
South Lyon Woods is a 211-site family community located in Oakland County,
Michigan. Amenities include: a clubhouse, laundry facilities, two playgrounds,
and a RV storage area. As of March 31, 1998, occupancy was 99%.
WILLOW RUN ESTATES, YPSILANTI, MICHIGAN
DESCRIPTION OF PROPERTY
Willow Run Estates is a 184-site family community located in Washtenaw County,
Michigan. Amenities include: a clubhouse, swimming pool, playground, basketball
court and laundry facilities. As of March 31, 1998, occupancy was 97%.
BOULEVARD ESTATES, CLEARWATER, FLORIDA
DESCRIPTION OF PROPERTY
Boulevard Estates is a 288-site senior community located in Pinellas County,
Florida. Amenities include: a clubhouse, laundry and storage facilities,
swimming pool, and shuffleboard courts. As of March 31, 1998, occupancy was
93%.
BRITTANY ESTATES, TALLAHASSEE, FLORIDA
DESCRIPTION OF PROPERTY
Brittany Estates is a 298-site senior community located in Leon County, Florida.
Amenities include: a clubhouse, playground, tennis courts, fenced storage area,
and laundry facilities. As of March 31, 1998, occupancy was 90%.
CHALET VILLAGE, TAMPA, FLORIDA
DESCRIPTION OF PROPERTY
Chalet Village is a 60-site senior community located in Pinellas County,
Florida. Amenities include: a clubhouse and swimming pool. As of March 31,
1998, occupancy was 89%.
DOWN YONDER, LARGO, FLORIDA
DESCRIPTION OF PROPERTY
Down Yonder is a 361-site senior community located in Pinellas County, Florida.
Amenities include: two clubhouses with a kitchen and library/pool room, a
swimming pool, shuffleboard, and laundry facilities. As of March 31, 1998,
occupancy was 98%.
FERNWOOD, DELAND, FLORIDA
DESCRIPTION OF PROPERTY
Fernwood is a 92-site senior community located in Volusia County near Daytona
Beach, Florida. Amenities include: laundry facilities, a storage facility and
basketball court. As of March 31, 1998, occupancy was 97%.
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FRIENDLY VILLAGE OF KAPOK, CLEARWATER, FLORIDA
DESCRIPTION OF PROPERTY
Friendly Village of Kapok is a 236-site senior community located in Pinellas
County, Florida. Amenities include: a clubhouse with a kitchen, billiards room
and laundry facilities, swimming pool, shuffleboard, playground, and barbeque
area. As of March 31, 1998, occupancy was 88%.
SATELLITE PARK, CLEARWATER, FLORIDA
DESCRIPTION OF PROPERTY
Satellite Park is a 87-site senior community located in Pinellas County,
Florida. Amenities include: a clubhouse and laundry facilities. As of March
31, 1998, occupancy was 92%.
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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 College Heights Communities, Sherwood
Forest RV Resort, Casa del Sol III, and the Ellenburg Communities which the
Company closed on the second quarter of 1998. Quail Meadows is included in the
Historical Balance Sheet as of March 31, 1998 and the acquisition of the
remaining 1998 Previously Acquired Properties (as defined below) and the College
Heights Communities is described in Note A and Note B of the Pro Forma Condensed
Consolidated Balance Sheet as of March 31, 1998.
The following unaudited Pro Forma Condensed Consolidated Statement of Operations
for the quarter ended March 31, 1998 presents the effect of the following
acquisitions as if they had occurred on January 1, 1998: (i) Quail Meadows on
January 8, 1998; Sherwood Forest RV Resort on April 30, 1998; Casa del Sol III
on May 14, 1998; and the Ellenburg Communities which the Company closed on in
1998 (collectively, the "1998 Previously Acquired Properties"); and (ii) the
College Heights Communities on June 4, 1998.
The following unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997 has been presented as if the following
transactions 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 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; (iii) the acquisition
of the Ellenburg Communities; (iv) the acquisition of the 1998 Previously
Acquired Properties, and (v) the acquisition of the College Heights Communities.
In addition, the Pro Forma Condensed Consolidated Financial Statements include
1,048,049 shares of common stock issued by the Company on April 23, 1998. The
Company sold the shares to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
who deposited the shares of common stock with the trustee of the Equity Investor
Fund Cohen & Steers Realty Majors Portfolio, a unit investment trust
(the"Trust") in exchange for units in the Trust. The offering price per share
was $25.4375, the closing price on April 23, 1998, resulting in gross offering
proceeds of approximately $26.7 million. Net of the underwriter's discount and
offering expenses, the Company received approximately $25 million.
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, 1997 or January 1, 1998.
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 MARCH 31, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
1998 Previously College Heights
Acquired Properties Communities
Historical (A) (B) Pro Forma
---------- --- --- ----------
ASSETS
Rental property, net.................................... $ 910,433 $ 123,935 $ 84,562 $1,118,930
Cash and cash equivalents............................... 3,454 --- 2,343 5,797
Short term investments.................................. 9,370 --- --- 9,370
Notes receivable........................................ 13,488 --- --- 13,488
Investment in and advances to affiliates................ 6,958 --- --- 6,958
Investment in joint ventures............................ 6,507 --- --- 6,507
Rents receivable........................................ 973 --- --- 973
Deferred financing costs, net........................... 3,259 --- 716 3,975
Other assets............................................ 5,703 --- 1,810 7,513
---------- ------------ ----------- ----------
Total assets......................................... $ 960,145 $ 123,935 $ 89,431 $1,173,511
========== ============ =========== ==========
LIABILITIES AND EQUITY
Liabilities
Mortgage notes payable............................... $ 409,515 $ 25,762 $ 67,640 $ 502,917
Term loan............................................ 60,000 40,000 --- 100,000
Line of credit....................................... 84,000 32,900 19,100 136,000
Other notes payable.................................. 6,500 --- --- 6,500
Other liabilities.................................... 41,164 --- 791 41,955
---------- ------------ ----------- ----------
Total liabilities.................................... 601,179 98,662 87,531 787,372
---------- ------------ ----------- ----------
Minority interests...................................... 68,309 --- 1,900 70,209
---------- ------------ ----------- ----------
Stockholders' equity
Common stock, $.01 par value......................... 250 10 --- 260
Paid-in capital...................................... 332,732 25,263 --- 357,995
Employee notes....................................... (5,062) --- --- (5,062)
Distributions in excess of accumulated earnings...... (37,263) --- --- (37,263)
---------- ------------ ----------- ----------
Total stockholders' equity........................... 290,657 25,273 --- 315,930
---------- ------------ ----------- ----------
Total liabilities and stockholders' equity........... $ 960,145 $ 123,935 $ 89,431 $1,173,511
========== ============ =========== ==========
_______________
(A) Reflects the acquisitions of Sherwood Forest RV Resort on April 30, 1998,
Casa del Sol III on May 14, 1998, and the Ellenburg Communities closed
during the second quarter of 1998. The amounts presented include the
initial purchase price as well as assets and liabilities assumed and
subsequent closing costs incurred in the acquisitions. The amounts also
reflect additional borrowings under the Company's line of credit for the
acquisitions. Also, the amounts reflect the issuance of 1,048,049 shares
of common stock on April 23, 1998 for approximately $25 million which was
used to paydown the Company's line of credit.
(B) Reflects the acquisition of the College Heights Communities on June 4,
1998. In connection with this acquisition, the amounts presented include
the initial purchase price as well as assets and liabilities assumed and
subsequent closing costs incurred in the acquisition. The amounts also
reflect a $67.6 million borrowing from a bank, a borrowing under the
Company's line of credit for the acquisition of the College Heights
Communities and the minority interest contribution.
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1998 Previously College Heights
Acquired Properties Communities Adjustments
Historical (A) (B) (C) Pro Forma
---------- ------------------- --------------- ----------- ---------
Revenues:
Base rental income........................... $37,208 $3,564 $2,783 $ -- $43,555
Utility and other income..................... 6,711 1,061 172 -- 7,944
Equity in income of affiliates............... 169 -- -- -- 169
Interest income.............................. 784 -- -- 3 787
------- ------ ------ ------- -------
Total revenues............................. 44,872 4,625 2,955 3 52,455
------- ------ ------ ------- -------
Expenses:
Property operating & maintenance............. 12,112 1,627 918 -- 14,657
Real estate taxes............................ 3,558 375 279 -- 4,212
Property management.......................... 1,782 -- 168 (49) 1,901
General and administrative................... 1,596 -- -- -- 1,596
Interest and related amortization............ 10,121 -- -- 3,603 13,724
Depreciation on corporate assets............. 294 -- -- -- 294
Depreciation on real estate assets
and other costs............................. 5,823 -- -- 636 6,459
------- ------ ------ ------- -------
Total expenses............................. 35,286 2,002 1,365 4,190 42,843
------- ------ ------ ------- -------
Income before allocation to minority
interests..................................... 9,586 $2,623 $1,590 $(4,187) 9,612
====== ====== =======
(Income) allocated to minority
interests..................................... (1,821) (1,825)
------- -------
Net income..................................... $ 7,765 $ 7,787
======= =======
Net income per common share - basic............ $ .31 $ .30
======= =======
Net income per common share - diluted.......... $ .31 $ .30
======= =======
Weighted average common
shares outstanding - basic.................... 24,805 1,048 25,853
======= ====== =======
Weighted average common
shares outstanding - fully diluted............ 31,095 1,048 32,143
======= ====== =======
- ---------------
(A) Reflects the results of operations of the 1998 Previously Acquired
Properties. The amounts presented represent the historical amounts for
certain revenues and expenses for the periods from January 1, 1998 through
the earlier of the respective acquisition dates or March 31, 1998 for each
of the properties.
(B) Reflects the results of operations of the College Heights Communities.
The amounts presented for rental revenues, property operating and
maintenance and real estate taxes are the revenues and certain expenses
for the College Heights Communities for the quarter ended March 31, 1998
as contained in the Combined Statement of Revenue and Certain Expenses
included elsewhere herein.
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(C) Reflects the following adjustments:
Interest income:
Interest income on amounts deposited into escrow in connection with the acquisition of the
College Heights Communities .................................................................. $ 1
Interest income on working capital contribution in connection with the acquisition of the
College Height Communities ................................................................... 2
------
$ 3
======
Property management:
Adjustment of management fees to actual percentage to be paid by Company ........................ $ (49)
======
Interest and related amortization:
Interest associated with a $67.6 million borrowing from a bank for the acquisition
of the College Heights Communities bearing interest at 7.19% ................................ $1,216
Amortization of loan fees ....................................................................... 18
Interest associated with debt assumed in the Ellenburg transaction bearing interest at an average
rate of 7.0%, which reflects effective rates ................................................. 1,716
Interest associated with amounts borrowed under the Company's line of credit bearing
interest at Libor plus 1.125%. For 1998, the Company has a $100 million swap in place
at an all-in rate of 7.4%. ................................................................... 664
Adjustment of unused facility fee on the Company's unused portion of the line of credit ......... (11)
------
$3,603
======
Depreciation:
Reflects depreciation based on real property acquired in the amount $101.8 million,
less approximately 25% allocated to land, and depreciated over a 30-year life for real
property. Depreciation for the 1998 Previously Acquired Properties reflects depreciation
from January 1, 1998 through the earlier of the acquisition dates or March 31, 1998
for each property ............................................................................ $ 636
======
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MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 Acquired Ellenburg
Historical Properties (A) MPW Properties (B) Communities (C)
---------- ----------------- ------------------ ---------------
Revenues:
Base rental income.............................. $108,984 $2,749 $11,314 $36,771
Utility and other income........................ 11,785 278 1,455 3,148
Equity in income of affiliates.................. 800 -- -- --
Interest income................................. 1,941 -- 231 --
-------- ------ ------- -------
Total revenues................................ 123,510 3,027 13,000 39,919
-------- ------ ------- -------
Expenses:
Property operating & maintenance................ 32,343 821 5,841 13,896
Real estate taxes............................... 8,352 255 542 3,340
Property management............................. 5,079 -- -- --
General and administrative...................... 4,559 -- -- --
Interest and related amortization............... 21,753 86 -- --
Depreciation on corporate assets................ 590 -- -- --
Depreciation on real estate assets
and other costs................................ 17,365 -- -- --
-------- ------ ------- -------
Total expenses................................ 90,041 1,162 6,383 17,236
-------- ------ ------- -------
Income before allocation to
minority interests and extraordinary loss
on early extinguishment of debt.................. 33,469 $1,865 $ 6,617 $22,683
====== ======= =======
Income allocated to minority
interests........................................ (4,373)
--------
Income before extraordinary loss
on early extinguishment of debt.................. 29,096
Extraordinary loss on early
extinguishment of debt (net of
$105 allocated to minority interests)............ (451)
--------
Net income........................................ $ 28,645
========
Net income per common share before
extraordinary item - basic........................ $ 1.18
========
Net income per common share.......
before extraordinary item - diluted............... $ 1.16
========
Net income per common share - basic............... $ 1.16
========
Net income per common share - diluted............. $ 1.15
========
Weighted average common shares
outstanding - basic............................... 24,689
========
Weighted average common
shares outstanding - diluted..................... 28,762 $ 1,985
======== =======
1998 Previously
Acquired Properties College Heights Adjustments
(D) Communities (E) (F) Pro Forma
------------------- --------------- ----------- ---------
Revenues:
Base rental income................................ $4,817 $10,769 $ -- $175,404
Utility and other income.......................... 1,224 621 -- 18,511
Equity in income of affiliates.................... -- -- -- 800
Interest income................................... -- -- 109 2,281
------ ------- --------- --------
Total revenues.................................. 6,041 11,390 109 196,996
------ ------- --------- --------
Expenses:
Property operating & maintenance.................. 2,132 3,389 (1,677) 56,745
Real estate taxes................................. 239 1,190 13,918
Property management............................... -- 647 2,101 7,827
General and administrative........................ -- -- 600 5,159
Interest and related amortization................. -- -- 33,501 55,340
Depreciation on corporate assets.................. -- -- -- 590
Depreciation on real estate assets
and other costs.................................. -- -- 13,050 30,415
------ ------- --------- --------
Total expenses.................................. 2,371 5,226 47,575 169,994
------ ------- --------- --------
Income before allocation to
minority interests and extraordinary loss
on early extinguishment of debt.................... $3,670 $ 6,164 $ (47,466) 27,002
====== ======= =========
Income allocated to minority
interests.......................................... (3,527)
--------
Income before extraordinary loss
on early extinguishment of debt.................... 23,475
Extraordinary loss on early
extinguishment of debt (net of
$105 allocated to minority interests).............. (451)
--------
Net income.......................................... $ 23,024
========
Net income per common share before
extraordinary item - basic......................... $ .91
========
Net income per common share.......
before extraordinary item - diluted................ $ .90
========
Net income per common share - basic................. $ .89
========
Net income per common share - diluted............... $ .88
========
Weighted average common shares
outstanding - basic................................ 1,048 25,737
========= ========
Weighted average common
shares outstanding - diluted........................ 1,048 31,795
========= ========
- -------------
(A) Reflects the results of operations of the 1997 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.
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(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 Ellenberg 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, 1997 based on
annualizing the Combined Statement of Revenues and Certain Expenses for
the nine months ended September 30, 1997 included in the Company's Form
8-K/A dated December 18, 1997.
(D) Reflects the results of operations of the 1998 Previously Acquired
Properties. The amounts presented represent the historical amounts for
certain revenues and expenses for the periods from January 1, 1997 through
December 31, 1997.
(E) Reflects results of operations of the College Heights Communities. The
amounts presented for rental revenues, property operating and maintenance
and real estate taxes are the revenues and certain expenses of the College
Heights Communities for the year ended December 31, 1997 as contained in
the Combined Statements of Revenues and Certain Expenses included
elsewhere herein.
(F) Reflects the following adjustments:
Interest income:
Interest income on amounts deposited into escrow in connection with the acquisition of the
College Heights Communities ............................................................. $ 83
Interest income on working capital contribution in connection with the acquisition of the
College Height Communities .............................................................. 122
Reduction of interest income due to the use of working capital for property acquisitions ... (96)
---------
$ 109
=========
Property operating and maintenance:
The elimination of third-party management fees where the Company will be providing
on-site property management ............................................................. $ (1,677)
=========
Property management:
Adjustment of management fees at College Heights Communities to reflect actual
percentage to be paid by the Company .................................................... $ (192)
Incremental cost associated with self management of the MPW Properties and Ellenburg
Communities for the year ended December 31, 1997 ........................................ 2,293
---------
$ 2,101
=========
General and administrative:
Incremental overhead cost associated with the Ellenburg transaction ........................ $ 600
=========
Interest and related amortization:
Interest associated with a $67.6 million borrowing from a bank for the acquisition
of the College Heights Communities bearing interest at 7.19% ........................... $ 4,863
Amortization of loan fees .................................................................. 72
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 ........... 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% ....................................................................... 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 7.4% .................................................................. 10,779
Adjustment of unused facility fee on the Company's unused portion of the line of credit .... (181)
---------
$ 33,501
=========
Depreciation:
Reflects depreciation based on real property acquired in the amount $570 million,
less approximately 25% allocated to land, excluding those MPW Properties covered by ground
leases, in the amount of $134 million and depreciated over a 30-year life for real
property. Depreciation for the 1997 Acquired Properties, MPW Properties and Ellenburg
Communities reflects depreciation from January 1, 1997 through the respective acquisition
dates for each property ................................................................. $ 13,050
=========
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COLLEGE HEIGHTS COMMUNITIES
COMBINED STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1997 AND
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
14
COLLEGE HEIGHTS COMMUNITIES
CONTENTS
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES 4
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES 5-7
2
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of
Manufactured Home Communities, Inc.
Chicago, Illinois
We have audited the accompanying combined statement of revenue and certain
expenses of College Heights Communities, consisting of 18 manufactured homes
communities, for the year ended December 31, 1997. The combined statement of
revenue and certain expenses is the responsibility of the Company's management.
Our responsibility is to express an opinion 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 accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined statement of revenue and certain expenses
presentation. 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 regulation of the Securities and
Exchange Commission, for inclusion in the Form 8-K/A of Manufactured Home
Communities, Inc. As described in Note 1, this financial statement excludes
certain expenses and is not intended to be a complete presentation of College
Heights Communities' 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 of College Heights Communities for the year ended December 31,
1997, pursuant to the basis of presentation as described in Note 1, in
conformity with generally accepted accounting principles.
Troy, Michigan BDO SEIDMAN, LLP
July 15, 1998
3
16
COLLEGE HEIGHTS COMMUNITIES
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
================================================================================
Year Ended Three Months
December 31, 1997 Ended March 31, 1998
(Unaudited)
- -----------------------------------------------------------------------------
REVENUE
Rental income $10,768,706 $2,782,812
Other 620,819 171,516
- -----------------------------------------------------------------------------
TOTAL REVENUE 11,389,525 2,954,328
- -----------------------------------------------------------------------------
EXPENSES
Real estate taxes 1,190,425 278,535
Repairs and maintenance 1,138,381 251,294
Utilities 1,038,333 285,038
Management fees (Note 3) 647,356 167,539
General and administrative 580,255 218,982
Payroll and benefits 436,832 113,360
Insurance 194,742 50,240
- -----------------------------------------------------------------------------
TOTAL EXPENSES 5,226,324 1,364,988
- -----------------------------------------------------------------------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 6,163,201 $1,589,340
=============================================================================
See accompanying notes to the combined statements of revenue and certain
expenses.
4
17
COLLEGE HEIGHTS COMMUNITIES
NOTES TO THE COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
================================================================================
1. SUMMARY OF BASIS OF PRESENTATION
ACCOUNTING
POLICIES The accompanying combined statements of revenue and certain
expenses for the year ended December 31, 1997, and the
three months ended March 31, 1998 (unaudited), were
prepared for the purposes of complying with the rules and
regulations of the Securities and Exchange Commission for
inclusion in the Form 8-K/A of Manufactured Home
Communities, Inc. (the "Company"). The accompanying
financial statements are not representative of the actual
operations of the College Heights Communities for the
periods presented as certain expenses have been excluded.
Excluded expenses consist of interest, depreciation and
amortization and other costs not directly related to the
future operations of the properties.
The accompanying statements of revenue and certain expenses
are presented on a combined basis because of common
ownership by the general partners and common management.
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.
5
18
COLLEGE HEIGHTS COMMUNITIES
NOTES TO THE COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
================================================================================
UNAUDITED INTERIM FINANCIAL STATEMENT
The combined statement of revenue and certain expenses
for the three months ended March 31, 1998, is unaudited.
In the opinion of management, the interim financial
statement reflects all adjustments necessary for a fair
presentation of the combined revenue and certain expenses
of the interim period. All such adjustments are of a
normal, recurring nature.
2. DESCRIPTION OF The following manufactured home communities are included
PROPERTIES in the combined statements of revenue and certain
expenses:
Number
Property Name Location of Sites
---------------------------------------------------------
Americana Estates Kalamazoo, MI 161
Appletree Walker, MI 238
Brighton Village Brighton, MI 196
College Heights Park Auburn Hills, MI 161
Groveland Manor Holly, MI 186
Hillcrest Acres Kalamazoo, MI 150
Metro Park Romulus, MI 227
Riverview Estates Bay City, MI 198
Royal Village Toledo, OH 233
South Lyon Woods South Lyon, MI 211
Willow Run Estates Ypsilanti, MI 184
Boulevard Estates Clearwater, FL 288
Brittany Estates Tallahassee, FL 298
Chalet Village Tampa, FL 60
Down Yonder Largo, FL 361
Fernwood Deland, FL 92
Friendly Village of Kapok Clearwater, FL 236
Satellite Park Clearwater, FL 87
---------------------------------------------------------
3,567
=========================================================
6
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COLLEGE HEIGHTS COMMUNITIES
NOTES TO THE COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
================================================================================
3. RELATED PARTY Management fees paid to an affiliated management company
TRANSACTIONS were approximately $647,500 for the year ended December
31, 1997 and $167,500 (unaudited) for the three months
ended March 31, 1998.
7
20
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: August 6, 1998
