<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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
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<CAPTION>
<S> <C>
Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
</TABLE>
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/A or any amendment to this Form 10-KSB/A. [ X]
State issuer's revenues for its most recent fiscal year: $1,784,642
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional small business disclosure format (check one): Yes [ ] No [X]
1
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<TABLE>
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TABLE OF CONTENTS
PART I
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Page
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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
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PART II
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<S> <C>
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 22
<CAPTION>
PART III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of The Exchange Act 22
Item 10. Executive Compensation 23
Item 11. Security Ownership of Certain Beneficial Owners and Management 23
Item 12. Certain Relationships and Related Transactions 24
Item 13. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
</TABLE>
2
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PART I
------
Item 1. DESCRIPTION OF BUSINESS
-----------------------
Certain matters discussed under the captions "Description of Business,"
"Description of Properties," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Annual Report on Form
10-KSB/A may constitute forward-looking statements, and as such involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Windsor Park Properties 3, a California
Limited Partnership, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
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 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.
The General Partners are currently exploring possible strategic alternatives for
the Partnership with a view towards providing limited partners with the
opportunity to achieve liquidity in their investment. There can, however, be no
assurances that any such strategic alternative will be consummated or that the
Partnership will not continue in its current form until the end of its stated
term.
3
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The Partnership owns interests in the following manufactured home communities at
December 31, 1998:
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<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, 1998 was approximately 91%. 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, 1998. 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
Pondarosa Eagle The Pines Shady Hills
--------- ----- --------- -----------
Indianapolis, Indianapolis, Charleston, Nashville,
Location Indiana Indiana South 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 93 204 249
Monthly Rents (1) $ 217 $ 198 $ 143 $ 185
Occupancy Level:
December 31,
1998 98% 92% 80% 90%
Real Estate Taxes $ 13,300 $ 7,700 $ 7,500 $ 47,400
Federal Tax
Basis (4) $ 780,500 $536,800 $1,134,200 $1,940,700
Mortgage
Information:
Balance payable $1,800,000 (2) -- (2)
Interest rate 8.97% (2) -- (2)
Amortization
period -- (2) -- (2)
Maturity date 1/03 (2) -- (2)
Balance due at
maturity $1,800,000 (2) -- (2)
</TABLE>
5
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<TABLE>
<CAPTION>
Item 2. DESCRIPTION OF PROPERTIES (continued)
-------------------------
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 193 253 131 123 162
Monthly Rents (1) $ 241 $ 210 $ 239 $ 228 $ 228
Occupancy Level:
December 31,
1998
87% 95% 100% 93% 91%
Real Estate Taxes $ 36,800 $ 10,100 $ 10,200 $ 17,500 $ 24,100
Federal Tax
Basis (4) $ 434,700 $819,900 $ 1,724,100 $ 630,400 $813,100
Mortgage
Information:
Balance payable $1,200,000 -- $ 1,170,400 $3,009,395 (3)
Interest rate 8.87% -- 8.41% 8.38% (3)
Amortization
period -- -- -- 24 years (3)
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, 1998.
(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.
6
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PART II
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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, 1998, there were approximately 3,100 holders of
record holding an aggregate of 190,213 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 1998 $135,200 $6.73
February 1998 $133,700 $6.65
August 1997 $140,000 $6.96
February 1997 $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.
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," and as
such 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 principal sources of liquidity during the years ended December
31, 1998 and 1997 were its cash flow generated from the operation of its
communities and distributions from investments in joint ventures and limited
partnerships. Net cash provided by operating activities was $415,700 and
$515,400 for the years ended December 31, 1998 and 1997, respectively. At
December 31, 1998, the Partnership's cash amounted to $640,800.
The Partnership's primary uses of its capital resources during the same periods
were for cash distributions to partners, debt service, and the purchase of an
interest in two manufactured home communities in 1997. Cash distributions to
partners totaled $283,600 and $294,700 for the years ended December 31, 1998 and
1997, respectively.
In February 1997, the Partnership purchased a 29% interest in Windsor Park 345,
a limited partnership that acquired the Apache East and Denali Park manufactured
home communities located in Apache Junction, Arizona. The remaining interests
in Windsor Park 345 were purchased by entities affiliated with the Partnership.
The Partnership's cost of its equity interest in Windsor Park 345 was $636,000.
In connection with the purchase of the communities, a mortgage loan of
$3,040,000, collateralized by the communities, was obtained. The amount of the
loan attributable to the Partnership 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 three-year Treasury Note plus 2.2%.
The loan is due in March 2006.
The Partnership's principal long-term liquidity requirement will be the
repayment of principal on its outstanding
7
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mortgage debt. At December 31, 1998, the Partnership's total mortgage debt,
including its proportionate share of joint venture and limited partnership 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, 1998.
The Partnership and the affiliated entities are contingently liable for the full
amounts of the loans obtained jointly through joint ventures and limited
partnerships.
The future sources of liquidity for the Partnership will be provided from
property operations, cash reserves and ultimately from the sale of its
communities and investments in joint ventures and limited partnerships. The
Partnership expects to meet its short-term liquidity requirements, including
capital expenditures, administration expenses, debt service, and distributions
to partners, from cash flow provided from property operations and distributions
from investments in joint ventures and limited partnerships. The Partnership
expects to meet its long-term liquidity requirement through the sale of its
communities and investments in joint ventures and limited partnerships, and cash
reserves.
Results of Operations
- ---------------------
The Partnership realized net income of $180,400 and $74,600 for the years ended
December 31, 1998 and 1997, respectively. Net income per limited partnership
unit was $.93 in 1998 and $.38 in 1997.
Rent and utility revenues increased from $1,610,600 in 1997 to $1,687,000 in
1998. The increase is primarily due to rent increases in the wholly owned
properties.
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 $8,100 and $18,200 for the years ended
December 31, 1998 and 1997, respectively. The overall occupancy of the four
joint venture properties increased from 87% at December 31, 1997 to 92% at
December 31, 1998.
Interest income decreased from $33,000 in 1997 to $27,900 in 1998 due mainly to
lower cash balances maintained by the Partnership.
Property operating expenses decreased from $1,039,200 in 1997 to $995,900 in
1998.
Depreciation expense increased from $207,400 at December 1997 to $227,100 at
December 1998.
Interest expense remained virtually unchanged at $279,800 and $279,900 for 1998
and 1997, respectively.
General and administrative expense increased slightly from $101,000 in 1997 to
$101,400 in 1998.
Inflation
- ---------
All of the leases or terms of tenants' occupancies at the properties allow for
at least annual rental adjustments. In addition, all of the leases are month-
to-month and enable the Partnership to seek market rentals upon reletting the
sites. Such leases generally minimize the risk to the Partnership of any
adverse effect of inflation.
Year 2000 Compliance
- --------------------
The general partners have assessed the impact of the year 2000 issue on its
reporting systems and operations. The year 2000 issue exists because many
computer systems and applications abbreviate dates by eliminating the first two
digits of the year, assuming that these two digits are always "19". As a
result, date-sensitive computer programs may recognize a date using "00" as the
year 1900 rather than the year 2000. Unless corrected, the potential exists for
computer system failures or incorrect processing of financial and operational
information, which could disrupt operations.
Substantially all of the computer systems and applications in use by the Windsor
Corporation and the properties have been, or are in the process of being
upgraded and modified. The Partnership is of the opinion
8
<PAGE>
that, in connection with those upgrades and modifications, it has addressed
applicable year 2000 issues as they might affect the computer systems and
applications located in the Partnership's offices and properties. The
Partnership anticipates that implementation of solutions to any year 2000 issue
which it may discover will require the expenditure of sums which the Partnership
does not expect to be material.
The Partnership is exposed to the risk that one or more of its vendors or
service providers may experience year 2000 problems which impact the ability of
such vendor or service provider to provide goods and services. Due to the
availability of alternative suppliers, this is not considered as significant a
risk with respect to the suppliers of goods. The disruption of certain
services, however, such as utilities, could, depending upon the extent of the
disruption, have a material adverse impact on the Partnership's operations. To
date, the Partnership is not aware of any vendor or service provider year 2000
issue that management believes would have a material adverse impact on the
Partnership's operations. The Partnership, however, has no means of ensuring
that its vendors or service providers will be year 2000 ready. The inability of
vendors or service providers to complete the year 2000 resolution process in a
timely fashion could have an adverse impact on the Partnership and the effect of
non-compliance by vendors or service providers is not determinable at this time.
Residents who pay rent to the Partnership do not pose year 2000 problems for the
Partnership given the type and nature of the Partnership's properties and
residents.
Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from year 2000 issues, or
in certain industries, such as commercial or investment banks, could also have
an adverse impact on the Partnership. The likelihood and effect of such
disruptions is not determinable at this time.
The Partnership expects to have all systems appropriately modified before any
significant processing malfunctions could occur and does not expect the year
2000 issue will materially impact the financial condition or operations of the
Partnership.
9
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Item 7. FINANCIAL STATEMENTS
--------------------
The following financial statements are filed as a part of this report:
Page
----
Report of Independent Accountants 11
Balance Sheet as of December 31, 1998 12
Statements of Operations for the years ended
December 31, 1998 and 1997 13
Statements of Partners' Equity for the years ended
December 31, 1998 and 1997 14
Statements of Cash Flows for the years ended
December 31, 1998 and 1997 15
Notes to Financial Statements 16
10
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Windsor Park Properties 3,
(a California Limited Partnership)
In our opinion, the accompanying balance sheet and the related statements of
operations, partners' equity and cash flows present fairly, in all material
respects, the financial position of Windsor Park Properties 3, a California
Limited Partnership (the "Partnership") at December 31, 1998, and the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
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 audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Denver, Colorado
March 19, 1999
11
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<CAPTION>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
BALANCE SHEET
-------------
December 31, 1998
-----------------------
ASSETS
- ------
<S> <C>
Property held for investment, net $ 3,368,400
Property held for sale, net 444,200
Investments in joint ventures and limited partnerships 1,256,000
Cash and cash equivalents 640,800
Deferred financing costs, net 90,000
Other assets 101,600
-----------------------
Total Assets $ 5,901,000
=======================
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Liabilities:
Mortgage notes payable $ 2,970,400
Accounts payable 5,200
Accrued expenses 214,100
Tenant deposits and other liabilities 42,400
Due to general partners and affiliates 24,200
-----------------------
Total Liabilities 3,256,300
-----------------------
Commitments and Contingencies (Note 9) -
Partners' Equity:
Limited partners 2,696,800
General partners (52,100)
-----------------------
Total Partners' Equity 2,644,700
-----------------------
Total Liabilities and Partners' Equity $ 5,901,000
=======================
</TABLE>
See accompanying notes to financial statements.
12
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<TABLE>
<CAPTION>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
For the Year Ended December 31,
-----------------------------------------------------
1998 1997
-------------------------- -----------------------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 1,687,000 $ 1,610,600
Equity in earnings of joint ventures and limited partnerships 8,100 18,200
Interest 27,900 33,000
Other 61,600 40,300
-------------------------- -----------------------
1,784,600 1,702,100
-------------------------- -----------------------
COSTS AND EXPENSES
- ------------------
Property operating 995,900 1,039,200
Interest 279,800 279,900
Depreciation 227,100 207,400
General and administrative:
Related parties 36,200 63,700
Other 65,200 37,300
-------------------------- -----------------------
1,604,200 1,627,500
-------------------------- -----------------------
Net income $ 180,400 $ 74,600
========================== =======================
Net income - general partners $ 1,800 $ 700
========================== =======================
Net income - limited partners $ 178,600 $ 73,900
========================== =======================
Basic and diluted earnings per limited partnership unit $ .93 $ .38
========================== =======================
</TABLE>
See accompaying notes financial statements.
13
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<TABLE>
<CAPTION>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
----------------------------------------------
General Partners Limited Partners Total
-------------------- --------------------- ---------------
<S> <C> <C> <C>
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
--------- ----------- -----------
Cash distributions (14,700) (268,900) (283,600)
Net Income 1,800 178,600 180,400
Repurchase of limited partnership
units (110,900) (110,900)
--------- ----------- -----------
Balance at December 31, 1998 $ (52,100) $ 2,696,800 $ 2,644,700
========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
14
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<TABLE>
<CAPTION>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
For The Year Ended December 31,
----------------------------------------------------
1998 1997
---------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 180,400 $ 74,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 227,100 207,400
Equity in earnings of joint ventures and limited partnerships (8,100) (18,200)
Joint ventures' and limited partnerships cash distributions 8,100 18,200
Loss on sale of property held for
Investment 36,900
Amortization of deferred financing costs 20,000 19,900
Changes in operating assets and liabilities:
Increase (decrease) in other assets (30,800) 127,600
(Decrease) increase in accounts payable (29,900) 1,300
Increase (decrease) in accrued expenses 115,100 (21,900)
Decrease in tenant deposits and other liabilities (20,100) (700)
(Decrease) increase due to general partner and (46,100) 70,300
affiliates
---------------------- ----------------------
Net cash provided by operating activities 415,700 515,400
---------------------- ----------------------
Cash flows from investing activities:
Increase in property held for investment (133,900) (216,700)
Joint ventures' and limited partnerships' cash distributions 189,400 92,600
Proceeds from sale of property held for
Investment 3,000
Investment in joint venture and limited partnership (22,000) (658,000)
---------------------- ----------------------
Net cash provided by (used in) investing activities 33,500 (779,100)
---------------------- ----------------------
Cash flows from financing activities:
Cash distributions to partners (283,600) (294,700)
Repurchase of limited partnership units (110,900) (47,300)
---------------------- ----------------------
Net cash used in financing activities (394,500) (342,000)
---------------------- ----------------------
Net increase (decrease) in cash and cash equivalents 54,700 (605,700)
Cash and cash equivalents at beginning of year 586,100 1,191,800
---------------------- ----------------------
Cash and cash equivalents at end of year $ 640,800 $ 586,100
====================== ======================
</TABLE>
See accompanying notes to financial statements.
15
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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
----------------------------------------------------------------
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.
Property Held For Investment
- ----------------------------
Property held for investment is carried at cost unless facts and circumstances
indicate that the carrying value of the property may be impaired. Impairment is
determined by comparing the estimated future cash flows (undiscounted and
without interest charges) from an individual property to its carrying value. If
such cash flows are less than the property's carrying value, the carrying value
of the project is written down to its estimated fair value. No such writedowns
were recorded for the years ended December 31, 1998 or 1997.
Property held for investment is 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.
Property Held for Sale
- ----------------------
During 1998, property held for sale was recorded at the lower of cost or net
realizable value. Subsequent to December 31, 1998, the Partnership entered into
an agreement to sell Little Eagle. The sale would result in a net gain of
approximately $426,000. In connection with the sale, the Partnership will pay
off a related mortgage note payable of approximately $1,800,000 resulting in an
extraordinary loss on early extinguishment of debt of approximately $18,000.
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.
16
<PAGE>
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 Diluted Earnings per Limited Partnership Unit
- -------------------------------------------------------
Basic and diluted 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 diluted 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, 1998 and 1997 was 192,006 and 195,411, respectively.
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.
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, 1998 and 1997 was 190,213
and 194,039, respectively, which represented capital contributions of
$19,021,300 and $19,403,900, respectively. During the years ended December 31,
1998 and 1997, the Partnership repurchased 3,826 units and 2,386 units,
respectively, for $110,900 and $47,300, respectively from the limited partners.
The General Partners owned 1,010 units at both December 31, 1998 and 1997.
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 $36,200 and $73,600 for such costs during the years
ended December 31, 1998 and 1997, respectively. These costs are included in
property operating and general and administrative expenses in the accompanying
statements of operations. As of December 31, 1998,
17
<PAGE>
the partnership owed TWC $24,200.
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, 1998 and 1997, the
total amounts paid to TWC were $9,300 and $8,900 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, 1998 and 1997.
NOTE 3. PROPERTY HELD FOR INVESTMENT
----------------------------
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
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, 1998
-----------------------------
<S> <C>
Land $ 974,500
Buildings and improvements 4,717,500
Fixtures and equipment 125,300
-----------------------------
5,817,300
Less accumulated depreciation (2,448,900)
-----------------------------
$ 3,368,400
=============================
</TABLE>
18
<PAGE>
NOTE 4. INVESTMENTS IN JOINT VENTURES AND LIMITED PARTNERSHIPS
------------------------------------------------------
The Partnership's investments in joint ventures and limited partnerships 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.
The combined condensed financial position and results of operations of the joint
ventures and limited partnerships are as follows:
<TABLE>
<CAPTION>
Financial Position December 31, 1998
- ------------------ -----------------------------
<S> <C>
Property held for investment, net $ 7,917,100
Cash 23,200
Other assets 191,500
-----------------------------
Total assets $ 8,131,800
=============================
Mortgage note payable $ 4,209,400
Accounts payable 10,200
Other liabilities 141,200
-----------------------------
Total liabilities 4,360,800
Partners' equity 3,771,000
-----------------------------
Total liabilities and partners' equity $ 8,131,800
=============================
</TABLE>
<TABLE>
<CAPTION>
For The Year Ended December 31,
Results of Operations 1998 1997
- --------------------- --------------------------- -----------------------------
<S> <C> <C>
Property revenues $ 1,762,400 $ 1,567,000
--------------------------- -----------------------------
Expenses:
Property operating 905,100 806,300
Depreciation 473,400 413,300
Interest 405,100 320,100
--------------------------- -----------------------------
1,783,600 1,539,700
--------------------------- -----------------------------
Net income (loss) $ (21,200) $ 27,300
=========================== =============================
</TABLE>
19
<PAGE>
NOTE 5. MORTGAGE NOTES PAYABLE
----------------------
The Partnership has two loans: $1,800,000 loan collateralized by the Pondarosa,
Little Eagle and Shady Hills manufactured home communities, is due in January
2003 bearing interest at 8.97%.
The second loan, in connection with the purchase of the Trailmont manufactured
home community, $1,170,400 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.
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, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------- -------------------------------------------
Per Per
Amount Unit Amount Unit
----- ---- ------ ----
<S> <C> <C> <C> <C>
Net income
- Limited Partners $ 178,600 $ .93 $ 73,900 $ 0.38
Return of capital 90,300 .47 206,100 1.05
---------------------- -------------- --------------------- --------------
Total Distribution $ 268,900 $ 1.40 $ 280,000 $ 1.43
====================== ============== ===================== ==============
</TABLE>
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts of cash equivalents, other assets, 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.
NOTE 8. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
1998 1997
----------------------- -------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
<S> <C> C>
Interest (none capitalized) $ 258,100 $280,8000000
======================= ==================
</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.
The Partnership is jointly and severally liable for $4,209,400 of debt issued by
affiliated entities in which it has a joint venture or limited partnership
investment.
20
<PAGE>
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 $77,200 and $72,600
for the years ended December 31, 1998 and 1997, respectively. In addition
certain direct expenses are paid by Chateau on behalf of the Partnership and
then reimbursed by the Partnership. These amounts were $254,300 and $251,800 and
for the years ended December 31, 1998 and 1997, respectively.
21
<PAGE>
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.
PART III
--------
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 entities 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:
Name Age Office
- --------------------- ------------- ----------------
Steven G. Waite 44 President and Director
Gary P. McDaniel 53 Director
C.G. Kellogg 55 Director
A brief background of the general partners, directors and certain executive
officers of The Windsor Corporation follows.
Steven G. Waite (44) 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 (53), 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.
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 N'Tandem Trust, 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
22
<PAGE>
Manufactured Housing Institute. He is a graduate of the University of Wyoming
and served as a Captain in the United States Air Force.
C.G. ("Jeff") Kellogg (55) 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, Inc., 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. (59), 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, 1998.
<TABLE>
<CAPTION>
Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of 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 .526%
------------------------- ------------------
Units of Limited All General Partners
Partnership Interest As a group 1,010 .531%
========================= ==================
</TABLE>
23
<PAGE>
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, 1998 and 1997.
Form of Compensation and Entity Receiving 1998 1997
- ----------------------------------------- ---- ----
Expense reimbursement - The Windsor Corporation $36,200 $73,600
Cash distributions - The Windsor Corporation $14,700 $14,700
Management Fee-The Windsor Corporation $ 9,300 $ 8,900
24
<PAGE>
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/A.
25
<PAGE>
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 3rd day of February
2000.
WINDSOR PARK PROPERTIES 3
A California Limited Partnership by:
THE WINDSOR CORPORATION
By:/s/ Steven G. Waite
-------------------
STEVEN G. WAITE
President
26
