<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [Fee Required]
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from to
--------- ---------
Commission file number 0-15699
WINDSOR PARK PROPERTIES 3, A CALIFORNIA LIMITED PARTNERSHIP
-----------------------------------------------------------
(Exact name of small business issuer in its charter)
California 33-0115651
- -------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6430 South Quebec Street, Englewood, Colorado 80111
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 741-3707
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,557,800
DOCUMENTS INCORPORATED BY REFERENCE: None
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page
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<S> <C> <C>
Item 1. Description of Business 3
Item 2. Description of Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Partnership's Units and Related Security Holder Matters 7
Item 6. Management's Discussion and Analysis 7
Item 7. Financial Statements 10
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 24
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of The Exchange Act 24
Item 10. Executive Compensation 25
Item 11. Security Ownership of Certain Beneficial Owners and Management 25
Item 12. Certain Relationships and Related Transactions 26
Item 13. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
</TABLE>
2
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PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development
Windsor Park Properties 3, a California Limited Partnership (the Partnership),
was formed in August 1985 pursuant to the provisions of the California Uniform
Limited Partnership Act. The General Partners of the Partnership are The Windsor
Corporation, a California corporation, ("The Windsor Corporation") and John A.
Coseo, Jr. In September 1997, Chateau Communities, Inc. (Chateau), a publicly
held real estate investment trust, purchased all of the outstanding capital
stock of The Windsor Corporation for 101,239 common shares of Chateau, and
$750,000 in cash. Following the purchase of The Windsor Corporation, Chateau
appointed a new Board of Directors and elected Steven G. Waite as the President
of the Windsor Corporation. The Partnership term is set to expire in December
1999; however, the Partnership may either be dissolved and liquidated earlier or
extended under certain circumstances. The Partnership may be extended at the
recommendation of the General Partners with approval of a majority of the
Limited Partners.
The Partnership was organized to acquire and hold existing manufactured home
communities for investment. Its principal investment objectives are to provide
to its Limited Partners: (i) distributions of cash from operations, (ii)
preservation, protection and eventual return of the Limited Partners'
investment, and (iii) realization of appreciation in the value of the properties
acquired.
The Partnership was funded through a public offering of 200,000 limited
partnership units (Units). All Units were sold for gross proceeds aggregating
$20,000,000. In addition, the General Partners initially purchased 1,000 Units
for $100,000. The offering commenced in October 1985 and terminated in September
1986. The net proceeds from the offering were originally expended for the
acquisition of undivided interests in 10 fully-developed properties located in
Oregon, Florida, Indiana, Idaho, South Carolina, Iowa, Tennessee, and Wyoming.
The Partnership paid all cash for these properties.
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The Partnership's total cost of the
property was $2,114,500. The Partnership obtained a $1,050,000 loan,
collateralized by the community, in connection with the purchase. In December
1996, after achieving certain net operating income levels, the Partnership
received $120,400 of additional loan proceeds.
In February 1997, the Partnership purchased a 29% interest in the Apache East
Estates and Denali Park Estates manufactured home communities located in
Phoenix, Arizona. The remaining interests in the communities were purchased by
affiliated entities. The Partnership's cost of its equity interest in the
communities was $636,000. In connection with the purchase, the joint venture
obtained a loan for $3,040,000, collateralized by the communities. The
Partnership's share of this loan is $881,600.
3
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The Partnership owns interests in the following manufactured home communities at
December 31, 1997:
<TABLE>
<CAPTION>
Date
Name of Property Ownership % Acquired Location
- ---------------- ----------- -------- --------
<S> <C> <C> <C>
Pondarosa 100% March 1986 Indianapolis, Indiana
Little Eagle 100% March 1986 Indianapolis, Indiana
The Pines 100% August 1986 Charleston, South Carolina
Shady Hills 100% September 1986 Nashville, Tennessee
Harmony Ranch 25% December 1986 Thonotosassa, Florida
Big Country Estates 40% December 1986 Cheyenne, Wyoming
Trailmont 100% January 1996 Nashville, Tennessee
Apache East 29% February 1997 Phoenix, Arizona
Denali Park 29% February 1997 Phoenix, Arizona
</TABLE>
The above described ownership interests, where the Partnership owns less than
100% of a property consist of ownership interests in joint ventures or limited
partnerships that own one or more manufactured home communities.
No further investment property acquisitions are planned by the General Partners.
The overall occupancy of the nine properties owned by the Partnership at
December 31, 1997 was approximately 90%. The General Partners continue to
maintain the properties in good condition and promote them to improve occupancy.
Business of Issuer
The Partnership is currently in the business of managing, holding for
investment, and eventually selling the existing manufactured home communities.
Competitors of the Partnership include other public and private limited
partnerships, individuals, corporations, and other entities engaged in real
estate investment activities. Competition for such properties varies with
changes in the supply or demand for similar or competing properties in a given
area, changes in interest rates and the availability of mortgage funds, and
changes in tax, real estate, environmental, and zoning laws.
Partnership profitability depends in part on maximizing occupancy and rental
rates in its manufactured home communities. Rents and occupancy rates are
affected by both changes in general economic conditions and changes in local
conditions such as levels of employment, supply of other comparable units or
competitive housing alternatives, zoning laws, and the availability and cost of
energy and transportation.
All of the Partnership's properties are located in or near urban areas.
Accordingly, they compete for rentals not only with other manufactured home
communities, but with apartments and any other form of low cost housing that
might exist.
The Partnership's profitability also depends on the minimization of both
property and partnership administration expenses. Expenses are affected by
changes in general economic trends and changes in local conditions, such as
prevailing wages, utility rates, insurance costs, and real estate taxation
practices.
The Partnership has no employees. Partnership administrative services are
provided by The Windsor Corporation, which is reimbursed for costs incurred on
behalf of the Partnership. Chateau Communities, Inc. employs all of the
properties' on-site personnel and is reimbursed by the Partnership for all such
costs.
4
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Item 2. DESCRIPTION OF PROPERTIES
The Partnership owns interests in nine properties at December 31, 1997. The
Partnership operates the properties as manufactured home communities, renting
space to manufactured home tenants on a month-to-month basis. The properties
compete for rentals with other manufactured home communities and apartments in
their local markets. All properties are encumbered, except for The Pines and Big
Country. It is the General Partners' opinion that the properties are in good
condition and are adequately insured.
<TABLE>
<CAPTION>
Little The Pines
Pondarosa Eagle --------- Shady Hills
--------- ----- Charleston, -----------
Indianapolis, Indianapolis, South Nashville,
Location Indiana Indiana Carolina Tennessee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Percentage of
Ownership 100% 100% 100% 100%
Date Acquired 3/86 3/86 8/86 9/86
Acreage 18 14 24 25
Number of
Spaces 148 96 204 249
Monthly Rents (1) $ 202 $ 183 $ 124 $ 162
Occupancy Level:
December 31,
1997 98% 95% 81% 90%
Real Estate Taxes $ 12,900 $ 7,500 $ 7,000 $ 38,300
Federal Tax
Basis (4) $ 801,400 $ 538,200 $ 1,123,500 $ 2,030,600
Mortgage Information:
Balance payable $ 1,800,000 (2) -- (2)
Interest rate 8.97% (2) -- (2)
Amortization -- (2) -- (2)
period
Maturity date 1/03 (2) -- (2)
Balance due at
maturity $ 1,800,000 (2) -- (2)
</TABLE>
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Item 2. DESCRIPTION OF PROPERTIES (continued)
<TABLE>
<CAPTION>
Big
Harmony Country Apache Denali
Ranch Estates Trailmont East Park
----- ------- --------- ---- ----
Thonotosassa, Cheyenne, Nashville, Phoenix, Phoenix,
Location Florida Wyoming Tennessee Arizona Arizona
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Percentage of
Ownership 25% 40% 100% 29% 29%
Date Acquired 12/86 12/86 1/96 2/97 2/97
Acreage 29 28 30 16 33
Number of
Spaces 193 255 131 123 162
Monthly Rents (1) $ 235 $ 190 $ 204 $ 220 $ 202
Occupancy Level:
December 31,
1997 89% 98% 100% 81% 81%
Real Estate Taxes $ 37,300 $ 11,200 $ 14,900 $ 17,400 $ 23,600
Federal Tax
Basis (4) $ 434,800 $ 806,300 $1,885,800 $ 650,100 $ 838,900
Mortgage
Information:
Balance payable $1,200,000 -- $1,170,400 $3,040,000 (3)
Interest rate 8.87% -- 8.41% 8.38% (3)
Amortization -- -- -- 24 years (3)
period
Maturity date 9/02 -- 1/03 3/06 (3)
Balance due at
maturity $1,200,000 -- $1,170,400 $2,583,200 (3)
</TABLE>
(1) Average rental rates in effect on December 31, 1997.
(2) Same mortgage note payable as Pondarosa.
(3) Same mortgage note payable as Apache East
(4) For income tax purposes, the properties and their components are
depreciated using both straight-line and accelerated methods over
useful lives ranging from 5 to 40 years.
Item 3. LEGAL PROCEEDINGS
There are no pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Partnership is a party or of which any
of its properties is the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for a vote during the fourth
quarter of the fiscal year covered by this report.
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PART II
Item 5. MARKET FOR THE PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
A public market for the Partnership's units does not exist and is not likely to
develop. As of December 31, 1997, there were approximately 3,100 persons holding
an aggregate of 194,039 Units.
Cash distributions paid to the limited partners since December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Per $1,000
Originally
Date Paid Amount (1) Invested (2)
- --------- ---------- ------------
<S> <C> <C>
August 1997 $140,000 $6.96
February 1997 $140,000 $6.96
August 1996 $140,000 $6.96
February 1996 $140,000 $6.96
</TABLE>
(1) Amounts exclude General Partner participation.
(2) Computed based on $20,100,000 original investment.
Cash distributions paid to the General Partners since December 31, 1995 were
$29,400. The General Partners expect that the Partnership will make cash
distributions on a semi-annual basis in the future.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the financial
statements and Notes thereto included elsewhere in this Annual Report. Certain
statements in this discussion constitute "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Partnership or industry to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Liquidity and Capital Resources
The Partnership's primary sources of cash during the years ended December 31,
1997 and 1996 were from the operations of its investment properties, cash
distributions from joint ventures and proceeds from mortgage notes payable. The
primary uses of cash during the same period were for the purchase of an
investment property and cash distributions to partners.
In January 1996, the Partnership obtained a $1,800,000 loan collateralized by
the Pondarosa, Little Eagle and Shady Hills manufactured home communities. The
loan, which was originally payable in monthly interest only installments bearing
interest at 90 day LIBOR plus 2.95%, is due in January 2003. In March 1996, the
loan was converted to a fixed rate loan bearing interest at 8.97%. All other
terms remained the same.
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The Partnership's total cost of the
property was $2,114,500. In connection with the purchase, the Partnership
obtained a $1,050,000 loan, collateralized by the community. The loan, which is
due in January 2003, bears interest at a fixed rate of 8.41% and is payable in
monthly interest only installments. In December 1996, after achieving certain
net operating income levels, the Partnership received $120,400 of additional
loan proceeds, at the same terms.
7
<PAGE> 8
In February 1997, the Partnership purchased a 29% interest in the Apache East
and Denali Park manufactured home communities located in Phoenix, Arizona. The
remaining interests in the communities were purchased by affiliated entities.
The Partnership's cost of its equity interest in the properties was $636,000. In
connection with the purchase, the joint venture obtained a mortgage loan of
$3,040,000, collateralized by the communities. The Partnership's share of the
loan is $881,600. The loan initially bears interest at 8.375%. In March 2000 and
March 2003, the interest rate and variable rate adjusts to the yield on the 3
year Treasury Note plus 2.2%. The loan is due in March 2006.
At December 31, 1997, the Partnership's total mortgage debt, including its
proportionate share of joint venture debt, was approximately $4,152,000,
consisting of $3,270,400 of fixed rate debt and $881,600 of variable rate debt.
The average rate of interest on the fixed rate debt and variable rate was 8.8%
and 8.4% respectively at December 31, 1997.
The future sources of cash for the Partnership will be provided from property
operations, cash reserves and ultimately from the sale of property. The future
uses of cash will be for Partnership administration, capital expenditures and
distributions to partners. The General Partners believe that the future sources
of cash are sufficient to meet the working capital requirements of the
Partnership for the foreseeable future.
Due to exceptional weather conditions in the Florida area in the winter of 1997,
portions of the Harmony Ranch property experienced flood conditions. The flooded
areas affect approximately 25 homesites and have caused these sites to be
unusable. Although this condition is expected to correct itself, the flood may
have negative effects on the amount of proceeds that the Partnership is able to
realize on the sale of the property. The Partnership does expect to realize the
carrying value of the property.
Results of Operations
The results of operations for the years ended December 31, 1997 and 1996 are not
directly comparable due to the purchase of the Trailmont community in January
1996 and the purchase of the Apache East and Denali park communities in February
1997. The Partnership realized net income of $74,600 and $59,100 for the years
ended December 31, 1997 and 1996, respectively. Net income per limited
partnership unit was $.38 in 1997 and $.30 in 1996.
Rent and utility revenues increased from $1,421,700 in 1996 to $1,610,600 in
1997. The increase is due mainly to increased occupancy in the Partnerships'
five wholly owned communities from 89 percent at December of 1996 to 92 percent
at December 1997. The Partnership implemented a $20 per month rent increase at
Shady Hills, effective in January 1997 and a $9 per month rent increase at
Trailmont in April of 1997. The partnership also implemented a $20 per month
water/sewer charge at The Pines, effective in April 1997 and a $5 per month
trash charge at Ponderosa, effective in January 1997.
Equity in earnings of joint ventures, which reflects the Partnership's share of
the net income of the Big Country Estates, Harmony Ranch, Apache and Denali
manufactured home communities, was $18,200 and $49,700 for the years ended
December 31, 1997 and 1996, respectively. The overall occupancy of the four
joint venture properties decreased from 92% at December 31, 1996 to 90% at
December 31, 1997. The decrease in equity is attributable to the losses recorded
at Apache East and Denali Park in 1997.
Property operating expenses increased from $929,400 in 1996 to $1,039,200 in
1997 due mainly to the increased occupancy realized by the Partnership's wholly
owned communities.
Interest income decreased from $50,400 in 1996 to $33,000 in 1997 due mainly to
lower cash balances maintained by the Partnership.
8
<PAGE> 9
Depreciation expense remained relatively flat at December 1997 compared to the
same period in 1996.
Interest expense increased from $256,600 in 1996 to $279,900 in 1997 due to the
loan obtained by the Partnership in February 1997, as discussed previously.
General and administrative expense decreased slightly from $108,300 in 1996 to
$101,000 in 1997.
New Accounting Standards
In 1997, the Partnership adopted SFAS No. 128 ("SFAS 128"), "Earnings Per
Share." This accounting standard specifies new computation, presentation and
disclosure requirements for earnings per share to be applied retroactively.
Among other things, SFAS No. 128 requires presentation of basic and diluted
earnings per share on the face of the income statement. The adoption of SFAS 128
had no effect on the per unit results reported.
Year 2000 Compliance
The Partnership is currently engaged in a review with its software vendors to
ensure all systems are modified for year 2000 compliance. Since all systems are
owned and maintained by third party vendors, the Partnership believes that the
additional cost for compliance will not be material to future results of
operations, financial condition or cash flows of the Partnership.
9
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Item 7. FINANCIAL STATEMENTS
The following financial statements are filed as a part of this report:
<TABLE>
<CAPTION>
Page
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<S> <C>
Report of Independent Accountants 11
Balance Sheet as of December 31, 1997 13
Statements of Operations for the years ended
December 31, 1997 and 1996 14
Statements of Partners' Equity for the years ended
December 31, 1997 and 1996 15
Statements of Cash Flows for the years ended
December 31, 1997 and 1996 16
Notes to Financial Statements 17
</TABLE>
10
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Windsor Park Properties 3
(A California Limited Partnership)
Englewood, CO
We have audited the accompanying balance sheet of Windsor Park Properties 3, a
California Limited Partnership, (the Partnership) as of December 31, 1997 and
the related statements of operations, partners' equity and cash flows for the
year ended December 31, 1997. These financial statements are the responsibility
of the General Partners. Our responsibility is to express an opinion on these
financial statements 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Windsor Park Properties 3 as of
December 31, 1997 and the results of its operations and its cash flows for the
year ended December 31, 1997 in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Denver, Colorado
March 30, 1998
11
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INDEPENDENT AUDITORS' REPORT
The Partners
Windsor Park Properties 3
(A California Limited Partnership)
Escondido, California
We have audited the accompanying statements of operations, partners' equity and
cash flows of Windsor Park Properties 3 (the Partnership) for the year ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations of Windsor Park Properties 3 and its cash
flows for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Costa Mesa, California
February 28, 1997
12
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WINDSOR PARK PROPERTIES 3
(A California Limited Partnership)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C>
ASSETS
Property held for investment, net $ 3,905,800
Investments in joint ventures and limited partnerships 1,423,400
Cash and cash equivalents 586,100
Deferred financing costs, net 109,900
Other assets 70,900
----------------
Total Assets $ 6,096,100
================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage notes payable $ 2,970,400
Accounts payable 35,100
Accrued expenses 99,000
Tenant deposits and other liabilities 62,500
Due to General Partners and affiliates 70,300
---------------
Total Liabilities 3,237,300
---------------
Partners' equity:
Limited partners 2,898,000
General partners (39,200)
---------------
2,858,800
===============
Total Liabilities and Partners' Equity $ 6,096,100
===============
</TABLE>
See accompanying notes to financial statements.
13
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WINDSOR PARK PROPERTIES 3
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
REVENUES
Rent and utilities $1,610,600 $1,421,700
Equity in earnings of joint ventures and limited partnerships 18,200 49,700
Interest 33,000 50,400
Other 40,300 36,000
---------- ----------
1,702,100 1,557,800
---------- ----------
COSTS AND EXPENSES
Property operating 1,039,200 929,400
Interest 279,900 256,600
Depreciation and amortization 207,400 204,400
General and administrative:
Related parties 63,700 69,700
Other 37,300 38,600
---------- ----------
1,627,500 1,498,700
---------- ----------
Net income $ 74,600 $ 59,100
========== ==========
Net income - general partners $ 700 $ 600
========== ==========
Net income - limited partners $ 73,900 $ 58,500
========== ==========
Basic and dilutive earnings per limited partnership unit $ .38 $ .30
========== ==========
</TABLE>
See accompanying notes to financial statements.
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WINDSOR PARK PROPERTIES 3
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
General Partners Limited Partners Total
---------------- ---------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1995 $ (11,100) $ 3,419,900 $ 3,408,800
Cash distributions (14,700) (280,000) (294,700)
Net income 600 58,500 59,100
Repurchase of limited
partnership units (47,000) (47,000)
----------- ----------- -----------
Balance at December 31, 1996 (25,200) 3,151,400 3,126,200
----------- ----------- -----------
Cash distributions (14,700) (280,000) (294,700)
Net Income 700 73,900 74,600
Repurchase of limited partnership
units (47,300) (47,300)
----------- ----------- -----------
Balance at December 31, 1997 $ (39,200) $ 2,898,000 $ 2,858,800
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
15
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WINDSOR PARK PROPERTIES 3
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1997 1996
----------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 74,600 $ 59,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 207,400 204,400
Equity in earnings of joint ventures and limited partnerships (18,200) (49,700)
Joint ventures' and limited partnerships cash distributions 18,200 49,700
Loss on sale of property held for
investment 36,900 3,400
Amortization of deferred financing costs 19,900 19,000
Changes in operating assets and liabilities: --
Decrease (increase) in other assets 127,600 (86,500)
Increase (decrease) in accounts payable 1,300 (14,500)
(Decrease) increase in accrued expenses (21,900) 21,200
(Decrease) increase tenant deposits and other liabilities (700) 17,700
Increase due to General Partner and affiliates 70,300 --
----------- -----------
Net cash provided by operating activities 515,400 223,800
----------- -----------
Cash flows from investing activities:
Increase in property held for investment (216,700) (135,100)
Joint ventures' and limited partnerships cash distributions 92,600 79,500
Proceeds from sale of property held for
Investment 3,000 11,800
Investment in joint ventures and limited partnerships (658,000) --
----------- -----------
Net cash used in investing activities (779,100) (43,800)
----------- -----------
Cash flows from financing activities:
Proceeds from mortgage notes payable -- 898,900
Cash distributions (294,700) (294,700)
Repurchase of limited partnership units (47,300) (47,000)
Payment of deferred financing costs -- (48,100)
----------- -----------
Net cash provided by (used in) financing activities (342,000) 509,100
----------- -----------
Net (decrease) increase in cash and cash equivalents (605,700) 689,100
Cash and cash equivalents at beginning of year 1,191,800 502,700
----------- -----------
Cash and cash equivalents at end of year $ 586,100 $ 1,191,800
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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WINDSOR PARK PROPERTIES 3
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership
Windsor Park Properties 3, A California Limited Partnership ("the Partnership"),
was formed in August 1985 for the purpose of acquiring and holding existing
manufactured home communities for investment. The General Partners of the
Partnership are The Windsor Corporation ("TWC"), a California corporation, and
John A. Coseo, Jr. In September 1997, Chateau Communities, Inc. ("Chateau"), a
publicly held real estate investment trust, purchased 100 percent of the shares
of the Windsor Corporation.
The Partnership was funded through a public offering of 200,000 limited
partnership units at $100 per unit which commenced in October 1985 and
terminated in September 1986. The Partnership term is set to expire in December
1999; however, the Partnership may either be dissolved earlier or extended under
certain circumstances. The Partnership may be extended at the recommendation of
the General Partners with approval of a majority of the Limited Partners.
The following is a summary of the Partnership's significant accounting policies:
Property Held For Investment
Property held for investment is recorded at the lower of cost or net realizable
value and depreciated over various estimated useful lives (buildings and
improvements - 5 to 20 years; fixtures and equipment - 3 to 5 years) using the
straight-line method. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and any gain
or loss is included in net income. Repairs and maintenance are charged to
operations as incurred.
In 1996, the Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS 121 requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances indicate
that their carrying value may not be recoverable. The adoption of SFAS No. 121
had no effect on the reported results in 1996.
For the years ended December 31, 1997 and 1996, permanent impairment conditions
did not exist at the Partnership's properties.
Investments in Joint Ventures and Limited Partnerships
The investments in joint ventures are accounted for utilizing the equity method
as the properties are subject to joint control requiring approval or mutual
agreement of the investees. The investment in Limited Partnerships is also
accounted for utilizing the equity method as the Limited Partners have
significant rights.
Financing Costs
Financing costs are amortized to interest expense over the life of the note
utilizing a method, which approximates the effective interest method.
17
<PAGE> 18
Income Taxes
Under provisions of the Internal Revenue Code and the California Revenue and
Taxation Code, partnerships are generally not subject to income taxes. The tax
effect of any income or loss accrues to the individual partners.
Basic and Dilutive Earnings per Limited Partnership Unit
Basic and dilutive earnings per limited partnership unit are calculated based on
the weighted average number of limited partnership units outstanding during the
year and the net income allocated which is the same as income available to the
Limited Partners. Basic and dilutive earnings per limited partnership unit are
the same, as the Partnership has no dilutive securities. The weighted average
number of limited partnership units outstanding during the years ended December
31, 1997 and 1996 was 195,411 and 197,276, respectively.
In 1997, the Partnership adopted Statement of Financial Accounting Standards No.
128 (SFAS 128), "Earnings Per Share." This accounting standard specifies new
computation, presentation, and disclosure requirements for earnings per share to
be applied retroactively. Among other things, SFAS 128 requires presentation of
basic and diluted earnings per share on the face of the income statement. The
adoption of SFAS 128 had no effect on the per unit results previously reported.
Statements of Cash Flows
For purposes of the statements of cash flows, the Partnership considers all
highly-liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Rental income is recognized when earned and due from residents. The leases
entered into by residents for the rental of a site are generally for terms not
longer than one year and renewable upon the consent of both parties or, in some
instances, as provided by statute.
18
<PAGE> 19
NOTE 2. PARTNERSHIP AGREEMENT
In accordance with the Partnership Agreement, the maximum liability of the
Limited Partners is the amount of their capital contributions. The number of
limited partnership units outstanding at December 31, 1997 and 1996 was 194,039
and 196,425, respectively, which represented capital contributions of
$19,403,900 and $19,642,500, respectively. During the years ended December 31,
1997 and 1996, the Partnership repurchased 2,386 units and 2,799 units,
respectively, for $47,300 and $47,000, respectively. The General Partners owned
1,010 units at both December 31, 1997 and 1996.
The General Partners are entitled to receive from the Partnership various fees
and compensation which are summarized as follows:
Operational Stage
The profits and losses of the Partnership during the operational stage are
allocated 99% to the Limited Partners and 1% to the General Partners. Cash
distributions from operations are allocated 95% to the Limited Partners and 5%
to the General Partners.
The Partnership reimburses TWC for certain direct expenses, and employee,
executive and administrative time incurred on the Partnership's behalf. The
Partnership was charged $73,600 and $81,500 for such costs during the years
ended December 31, 1997 and 1996, respectively. These costs are included in
property operating and general and administrative expenses in the accompanying
statements of operations. As of December 31, 1997, the partnership owed TWC
$14,000.
TWC is paid a management fee which is based on a percentage of actual gross
receipts collected from the operations of the properties. TWC receives 2.5% for
the Trailmont community. For the years ended December 31, 1997 and 1996, the
total amounts paid to TWC were $8,900 and $7,900 respectively.
Liquidation Stage
The General Partners receive 1% of cash distributions from the sale or financing
of Partnership properties. This participation increases to 15% after the Limited
Partners have received their original invested capital plus a 9% cumulative,
non-compounded, annual return.
The General Partners generally receive 1% of profits and losses from the sale of
Partnership properties. However, if applicable, profits on sale will first be
allocated 100% to the General Partners to the extent of their negative capital
account.
The General Partners received cash distributions of $14,700 in each of the years
ended December 31, 1997 and 1996.
19
<PAGE> 20
NOTE 3. PROPERTY HELD FOR INVESTMENT
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The community is situated on 30 acres
of land and contains 131 manufactured home sites. The Partnership's cost of the
property was $2,114,500.
Property held for investment consists of five manufactured home communities
summarized as follows:
<TABLE>
<CAPTION>
Name of Property Date Acquired Location
- ---------------- ------------- --------
<S> <C> <C>
Pondarosa March 31, 1986 Indianapolis, Indiana
Little Eagle March 31, 1986 Indianapolis, Indiana
The Pines August 1, 1986 Charleston, South Carolina
Shady Hills September 30, 1986 Nashville, Tennessee
Trailmont January 17, 1996 Nashville, Tennessee
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------
<S> <C>
Land $ 1,192,500
Buildings and improvements 5,203,600
Fixtures and equipment 114,300
-----------
6,510,400
Less accumulated depreciation (2,604,600)
-----------
$ 3,905,800
===========
</TABLE>
NOTE 4. INVESTMENTS IN JOINT VENTURES AND LIMITED PARTNERSHIPS
The Partnership's investments in joint ventures consist of interests in four
manufactured home communities summarized as follows:
<TABLE>
<CAPTION>
Ownership
Name of Property Percentage Date Acquired Location
- ---------------- ---------- ------------- --------
<S> <C> <C> <C>
Big Country Estates 40% December 1, 1986 Cheyenne, Wyoming
Harmony Ranch 25% December 15, 1986 Thonotosassa, Florida
Apache East 29% February 18, 1997 Phoenix, AZ
Denali Park 29% February 18, 1997 Phoenix, AZ
</TABLE>
The remaining interests in the communities are owned by affiliated California
limited partnerships, which have the same General Partners as the Partnership.
In February 1997, the Partnership purchased a 29% interest in the Apache East
and Denali Park manufactured home communities located in Phoenix, Arizona. The
remaining interests in the communities were purchased by affiliated entities.
The Partnership's cost of its equity interest in the properties was $636,000. In
connection with the purchase, the limited partnership obtained a mortgage loan
of $3,040,000, collateralized by the communities. The loan initially bears
interest at 8.375%. In March 2000 and March 2003, the interest rate adjusts to
the yield on the 3 year Treasury Note plus 2.2%. The loan is due in March 2006.
20
<PAGE> 21
Due to exceptional weather conditions in the Florida area in the winter of 1997,
portions of the Harmony Ranch property experienced flood conditions. The flooded
areas affect approximately 25 homesites and have caused these sites to be
unusable. Although this condition is expected to correct itself, the flood may
have negative effects on the amount of proceeds that we are able to realize on
the sale of the property.
The combined condensed financial position and results of operations of the joint
ventures and limited partnerships (including Apache East and Denali Park since
their purchase) are as follows:
<TABLE>
<CAPTION>
Financial Position December 31, 1997
------------------
<S> <C>
Property held for investment, net $8,296,600
Cash 170,900
Other assets 222,700
----------
Total assets $8,690,200
==========
Mortgage note payable $4,240,000
Accounts payable 43,800
Other liabilities 94,200
----------
Total liabilities 4,378,000
Partners' equity 4,312,200
----------
$8,690,200
==========
</TABLE>
<TABLE>
<CAPTION>
For The Year Ended December 31,
Results of Operations 1997 1996
----------- -----------
<S> <C> <C>
Property revenues $ 1,567,000 $ 1,050,700
----------- -----------
Expenses:
Property operating 806,300 541,400
Depreciation 413,300 264,400
Interest 320,100 114,300
----------- -----------
1,539,700 920,100
----------- -----------
Net income $ 27,300 $ 130,600
=========== ===========
</TABLE>
NOTE 5. MORTGAGE NOTES PAYABLE
In January 1996, the Partnership obtained a $1,800,000 loan collateralized by
the Pondarosa, Little Eagle and Shady Hills manufactured home communities. The
loan, which was originally payable in monthly interest only installments bearing
interest at 90-day LIBOR plus 2.95%, is due in January 2003. In March 1996, the
loan was converted to a fixed rate loan bearing interest at 8.97%. All other
terms remain the same.
21
<PAGE> 22
In January 1996, in connection with the purchase of the Trailmont manufactured
home community, the Partnership obtained a $1,050,000 loan collateralized by the
property. The loan is payable in monthly interest only installments bearing
interest at a fixed rate of 8.41% and is due in January 2003. In December 1996,
after achieving certain net operating income levels, the Partnership obtained
$120,400 of additional loan proceeds at the same terms.
NOTE 6. DISTRIBUTIONS TO LIMITED PARTNERS
Distributions to limited partners in excess of net income allocated to limited
partners are considered a return of capital. A breakdown of cash distributions
to the Limited Partners for the years ended December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------------- -----------------------------------
Per Per
Amount Unit Amount Unit
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net income
- Limited Partners $ 73,900 $ .38 $ 58,500 $ 0.30
Return of capital 206,100 1.05 221,500 1.12
--------------- --------------- --------------- ---------------
$ 280,000 $ 1.43 $ 280,000 $ 1.42
=============== =============== =============== ===============
</TABLE>
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value because of the
short maturity of the financial instruments. The General Partners believe the
carrying value of the mortgage notes payable approximates fair value based upon
interest rates available for the issuance of debt with similar terms and
maturities.
22
<PAGE> 23
NOTE 8. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (none capitalized) $280,800 $216,700
======== ========
</TABLE>
Supplemental schedule of noncash investing and financing activities:
In 1996, the Partnership acquired the Trailmont community. A new note payable
was obtained and a portion of the proceeds from the refinancing of existing
Partnership properties was remitted directly to the seller, as follows:
<TABLE>
<CAPTION>
<S> <C>
Total property cost $ 2,114,500
Note payable proceeds, net (1,005,000)
Existing property financing proceeds to seller (1,021,500)
-------------
Cash paid $ 88,000
=============
</TABLE>
NOTE 9. CONTINGENCIES
The Partnership, as an owner of real estate, is subject to various environmental
laws. Compliance by the Partnership with existing laws has not had a material
effect on the results of operations, financial condition or cash flows of the
Partnership, nor does management believe it will have a material impact in the
future.
NOTE 10. RELATED PARTY TRANSACTIONS
Chateau and/or its predecessor have been providing property management services
to the Partnership since 1992. For this service, Chateau is paid a property
management fee, which is based on a percentage of actual gross receipts of the
properties. The total management fees paid to Chateau were $72,600 and $63,000
for the years ended December 31, 1997 and 1996, respectively. In addition
certain direct expenses are paid by Chateau on behalf of the Partnership and
then reimbursed by the Partnership. These amounts were $251,800 and $206,900 for
the years ended December 31, 1997 and 1996, respectively.
23
<PAGE> 24
PART III
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements over accounting or financial disclosure with the
independent accountants for the Partnership.
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The general partners of the Partnership are The Windsor Corporation, and John A.
Coseo, Jr.
In July 1994, The Windsor Corporation merged into Windsor Group, Inc., a
majority-owned subsidiary. In conjunction with the merger, Windsor Group, Inc.
changed its name to The Windsor Corporation, hereafter, ("The Windsor
Corporation").
These utilities were incorporated in 1977 and 1992, respectively, to engage in
the real estate syndication business. Historically, they have concentrated
solely on the acquisition, management, and sale of fully-developed manufactured
home communities through the investment programs which they sponsor.
The executive officers of The Windsor Corporation do not receive direct
compensation from the Partnership in these capacities and are only required to
spend such time on the Partnership's affairs as is deemed necessary. Substantial
amounts of these officers' time is spent on matters unrelated to the
Partnership.
The names, ages, and nature of the positions held by the directors and executive
officers of The Windsor Corporation follow:
<TABLE>
<CAPTION>
Name Age Office
--------------------- ---------- ----------------------
<S> <C> <C>
Steven G. Waite 43 President and Director
Gary P. McDaniel 52 Director
C.G. Kellogg 54 Director
</TABLE>
A brief background of the general partners, directors and certain executive
officers of The Windsor Corporation follows.
Steven G. Waite (43) joined The Windsor Corporation in August 1997 as President.
Since 1991, until his involvement with Windsor, Mr. Waite served as Vice
President/General Manager of the Communities Division at Clayton Homes. He was
responsible for the original start up of this division, and subsequently built
it into a successful and profitable area of Clayton Homes, expanding from eight
communities to 67 communities. In addition, Mr. Waite has over eight years of
experience in the manufactured home community-lending arena. He earned a
Bachelor of Arts degree from the University of Colorado and a Master of Business
Administration from the University of Alabama. Mr. Waite is active in the
Manufactured Housing Institute.
Gary P. McDaniel (52), a director of The Windsor Corporation has been Chief
Executive Officer and a director of Chateau Communities, Inc., ("Chateau") since
February 1997. He served as the Chairman of the Board, President and Chief
Executive Officer for ROC Communities, Inc., which merged with Chateau in 1997.
Since 1993, he has been an executive and shareholder of ROC and its predecessors
since 1979, and has been active in the manufactured home industry since 1972,
Mr. McDaniel is also a Trustee of Windsor Real Estate Trust 8, which is advised
by The Windsor Corporation. Mr. McDaniel has been active in several state and
national manufactured home associations, including associations in Florida and
Colorado. In 1996, he was named "Industry Person of the Year" by the National
Manufactured Housing Industry Association. Mr. McDaniel is on the Board of
Directors of the Manufactured Housing Institute. He is a graduate of the
University of Wyoming and served as a Captain in the United States Air Force.
24
<PAGE> 25
C.G. ("Jeff") Kellogg (54) has been President and a director of Chateau since
its inception and was Chief Executive Officer of Chateau from its inception to
February 1997. For the five years preceding the formation of Chateau, Mr.
Kellogg was President and Chief Operating Officer of Chateau Estates. He is
extremely active in local and national industry associations, often in
leadership positions. Mr. Kellogg is a past President of the Michigan
Manufactured Housing Association and served on the Manufactured Housing
Institute's Community Operations Committee. He is a graduate of Michigan
Technological University with a B.S. in Civil Engineering.
John A. Coseo, Jr. (58), the other general partner of the Partnership was the
founder of The Windsor Corporation in 1977 and has been actively involved in all
facets of the manufactured housing business since that time. Mr. Coseo resigned
from his positions as a director and executive officer of The Windsor
Corporation in 1997. From 1979 to the present, Mr. Coseo has acted as general
partner or advisor in the acquisition and management of 56 manufactured home
communities throughout the United States. Mr. Coseo is a general partner of
seven limited partnerships which have registered their securities under the
Securities and Exchange Act of 1934.
Item 10. EXECUTIVE COMPENSATION
The Partnership has not paid and does not propose to pay any remuneration or
retirement benefits to John A. Coseo, Jr. and the directors or executive
officers of The Windsor Corporation. Refer to Item 12 (Certain Relationships and
Related Transactions) for cash distributions and expense reimbursements paid to
The Windsor Corporation by the Partnership.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
No person is known by the Partnership to be the beneficial owner of more
than 5%. of the limited partnership units.
(b) Security Ownership of Management
The following table presents certain information regarding the number of
units owned, directly or indirectly, by (i) each General Partner and (ii)
all General Partners as a group as of December 31, 1997.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
- ----------------------- ------------------------ -------------------- -----------
<S> <C> <C> <C>
Units of Limited John A. Coseo, Jr.
Partnership Interest A General Partner 10 .005%
Units of Limited The Windsor Corporation
Partnership Interest A General Partner 1,000 .509%
--------- ------
Units of Limited All General Partners
Partnership Interest As a group 1,010 .514%
========= ======
</TABLE>
25
<PAGE> 26
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following table reflects all compensation accrued or paid to the General
Partners during the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
Form of Compensation and Entity Receiving 1997 1996
---- ----
<S> <C> <C>
Expense reimbursement - The Windsor Corporation $82,500 $89,400
Cash distributions - The Windsor Corporation $14,700 $14,700
Management Fee - The Windsor Corporation 8,900 7,900
</TABLE>
26
<PAGE> 27
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Index of Exhibits
(3) - Certificate and Agreement of Limited Partnership filed as
Exhibit A to Registration Statement No. 2-99697 and
incorporated herein by reference.
(27) - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter of
the period covered by this Form 10-KSB.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on this 31st day of March, 1998
WINDSOR PARK PROPERTIES 3
A California Limited Partnership by:
By: THE WINDSOR CORPORATION
By:/s/ Steven G. Waite
---------------------------------
STEVEN G. WAITE
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Steven G. Waite President of The Windsor Corporation, a general March 31, 1998
- ------------------------ partner
STEVEN G. WAITE
/s/ Gary P. McDaniel Director of The Windsor Corporation, March 31, 1998
- ------------------------ a general partner
GARY P. MCDANIEL
/s/ C.G. Kellogg Director of The Windsor Corporation, March 31, 1998
- ----------------------- a general partner
C.G. KELLOGG
/s/ John A. Coseo, Jr. General Partner March 31, 1998
- -----------------------
JOHN A. COSEO, JR.
</TABLE>
28
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
(3) - Certificate and Agreement of Limited Partnership filed as
Exhibit A to Registration Statement No. 2-99697 and
incorporated herein by reference.
(27) - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 586,100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,510,500
<DEPRECIATION> 2,604,600
<TOTAL-ASSETS> 6,096,100
<CURRENT-LIABILITIES> 266,900
<BONDS> 2,970,400
0
0
<COMMON> 0
<OTHER-SE> 2,858,800
<TOTAL-LIABILITY-AND-EQUITY> 6,096,100
<SALES> 0
<TOTAL-REVENUES> 1,702,100
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,347,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,600
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
