<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ................to...............
Commission file number 000-21470
WINDSOR REAL ESTATE INVESTMENT TRUST 8
-----------------------------------------------------------
(Name of small business issuer in its charter)
California 33-6109499
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 W. Grand Avenue, Suite 202, Escondido, California 92025
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (619) 746-2411
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Common Shares of Beneficial Interest
Section 12(g) of the Exchange Act: Preferred Shares of Beneficial 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: $1,174,800
DOCUMENTS INCORPORATED BY REFERENCE: None
1
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TABLE OF CONTENTS
PART I
------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Item 1. Description of Business 3
Item 2. Description of Properties 4
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
-------
Item 5. Market for the Trust's Common Shares and Related
Shareholder Matters 6
Item 6. Management's Discussion and Analysis 6
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 21
PART III
--------
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of The Exchange Act 21
Item 10. Executive Compensation 21
Item 11. Security Ownership of Certain Beneficial Owners
and Management 22
Item 12. Certain Relationships and Related Transactions 22
Item 13. Exhibits and Reports on Form 8-K 23
SIGNATURES 25
</TABLE>
2
<PAGE>
PART I
------
Item 1. DESCRIPTION OF BUSINESS
-----------------------
Business Development
- --------------------
Windsor Real Estate Investment Trust 8, an unincorporated business trust (the
Trust) was formed in November 1991 under the laws of the State of California.
The sponsor and advisor of the Trust is The Windsor Corporation, a California
corporation (the Advisor). The Declaration of Trust provides for the Trust's
termination not later than December 2006.
The Trust was organized to invest in existing, substantially developed and
occupied manufactured home communities. Its investment objectives are to
provide to its shareholders (i) preservation, protection, and eventual return of
the shareholder's investment; (ii) quarterly dividends of cash from operations,
some of which may be a return of capital for tax purposes rather than taxable
income; (iii) realization of long-term appreciation in value of the properties
acquired by the Trust; and (iv) a hedge against inflation.
The Trust operates so as to qualify as a real estate investment trust (a REIT)
under Sections 856-860 of the Internal Revenue Code of 1986, as amended. As a
REIT, the Trust distributes to its shareholders substantially all of its cash
flow from operations and, in any event, at least 95% of its real estate
investment trust taxable income.
The Trust was funded through a public offering of common and preferred shares,
commencing in April 1992 and terminating in April 1993. Common and preferred
shares of 98,169 and 98,323, respectively, were sold for gross proceeds
aggregating $2,454,225 and $2,458,075, respectively.
In October 1993, at a special meeting of shareholders, an amendment to the
Declaration of Trust was approved permitting the Trust to incur permanent
mortgage financing, not to exceed 50% of the value of the Trust's portfolio.
In May 1995, the Trust obtained a $2,050,000 loan, collateralized by the El
Frontier and West Star manufactured home communities. The loan proceeds were
used primarily to retire a loan originally assumed in connection with the
purchase of the El Frontier community, and to acquire an interest in one
additional manufactured home community.
In June 1995, the Trust purchased a 40% undivided interest in the Long Lake
Village manufactured home community located in West Palm Beach, Florida. The
remaining undivided interest in the community was acquired by an affiliated
limited partnership. The Trust's cost of its equity interest in the community
was $578,700. The Trust and the affiliated limited partnership jointly obtained
a $1,600,000 loan, collateralized by the community, in connection with the
purchase. The Trust's share of the loan is $640,000.
In February 1997, the Trust purchased an 11% 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 limited partnerships. The Trust's cost of its equity interest in the
communities was $253,000. In connection with the purchase, the joint venture
obtained a $3,040,000 loan, collateralized by the communities. The Trust's
share of this loan is $334,400. The Trust also obtained a $253,000 loan from an
affiliated limited partnership.
The Advisor is negotiating the sale of the Griffwood manufactured home community
in Leesburg, Florida. A sale is currently expected to occur in the second
quarter of 1997.
3
<PAGE>
The Trust owns interests in the following manufactured home communities at
February 28, 1997:
<TABLE>
<CAPTION>
Ownership
Name of Property Percentage Date Acquired Location
- ------------------- ----------- ------------- ------------------------
<S> <C> <C> <C>
West Star 100% January 1993 Tucson, Arizona
Griffwood 100% October 1993 Leesburg, Florida
El Frontier 100% February 1994 Tucson, Arizona
Long Lake 40% June 1995 West Palm Beach, Florida
Apache East 11% February 1997 Phoenix, Arizona
Denali Park 11% February 1997 Phoenix, Arizona
</TABLE>
The overall occupancy of the four communities owned by the Trust at December 31,
1996 was approximately 93%. The Advisor continues to maintain the properties in
good condition and promote them to improve occupancy.
No further investment property acquisitions are planned by the Advisor.
Business of Issuer
- ------------------
The Trust is in the business of acquiring, managing, holding for investment, and
eventually selling manufactured home communities. Competitors of the Trust
include 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.
Trust 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 Trust's properties are located in or near large 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 Trust's profitability also depends on the minimization of both property and
Trust 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 Trust has no employees. The administrative services for the Trust are
provided by The Windsor Corporation, which is reimbursed for costs incurred on
behalf of the Trust. The investment properties are managed by an independent
company which employs all of the properties' on-site personnel and is reimbursed
by the Trust for all such costs.
Item 2. DESCRIPTION OF PROPERTIES
-------------------------
The Trust owns interests in six properties at February 28, 1997. The Trust
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
4
<PAGE>
apartments in their local markets. All of the properties are encumbered. It is
the Advisor's opinion that the properties are in good condition and are
adequately insured.
<TABLE>
<CAPTION>
Long Lake
West Star Griffwood El Frontier -----------
------------ ------------ ----------- West Palm
Tucson, Leesburg, Tucson, Beach,
Location Arizona Florida Arizona Florida
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Percentage of Ownership 100% 100% 100% 40%
Date Acquired 1/93 10/93 2/94 6/95
Acreage 13 16 19 19
Number of Spaces 89 118 179 134
Monthly Rents (1) $ 232 $ 267 $ 227 $ 347
Occupancy Level:
December 31, 1996 100% 90% 98% 87%
Real Estate Taxes $ 9,000 $ 28,200 $ 18,600 $ 41,800
Federal Tax Basis (2) $1,207,500 $1,809,400 $2,951,000 $1,219,300
Mortgage Information:
Balance payable $2,050,000 $1,313,800 (3) $1,600,000
Interest rate 8.47% 8.37% (3) 8.47%
Amortization period -- 30 years (3) --
Maturity date 6/02 11/98 (3) 6/02
Balance due at maturity $2,050,000 $1,272,200 (3) $1,600,000
</TABLE>
<TABLE>
<CAPTION>
Apache East Denali Park
----------- -----------
Phoenix, Phoenix,
Location Arizona Arizona
- -----------------------------------------------------------------------------
<S> <C> <C>
Percentage of Ownership 11% 11%
Date Acquired 2/97 2/97
Acreage 16 33
Number of Spaces 123 162
Monthly Rents (1) $ 220 $ 202
Occupancy Level:
December 31, 1996 77% 68%
Real Estate Taxes $ 16,300 $ 23,200
Federal Tax Basis (3) $ 244,700 $ 321,700
Mortgage Information:
Balance payable $3,040,000 (4)
Interest rate 8.38% (4)
Amortization period 24 years (4)
Maturity date 3/06 (4)
Balance due at maturity $2,583,200 (4)
</TABLE>
(1) Average rental rates in effect on December 31, 1996.
(2) For income tax purposes, the property and its components are depreciated
using both straight-line and accelerated methods over useful lives ranging
from 5 to 40 years.
(3) Same mortgage note payable as West Star.
(4) Same mortgage note payable as Apache East.
5
<PAGE>
Item 3. LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Trust is a party of or to 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.
PART II
-------
Item 5. MARKET FOR THE TRUST'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS
--------------------------------------------------------------------
A public market for the Trust's common shares does not exist and is not likely
to develop. As of December 31, 1996, there were approximately 200 shareholders
holding an aggregate of 90,169 common shares.
Cash dividends paid to common shareholders since December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
Date Paid Amount Per Share
- ---------------- -------- ---------
<S> <C> <C>
February 1997 $33,800 $0.375
November 1996 $33,800 $0.375
August 1996 $33,800 $0.375
May 1996 $33,800 $0.375
February 1996 $33,800 $0.375
November 1995 $33,800 $0.375
August 1995 $33,800 $0.375
May 1995 $33,800 $0.375
February 1995 $31,000 $0.344
</TABLE>
Common shareholder dividends are subordinated to a minimum of 6% and a maximum
of 7% cumulative dividend to preferred shareholders. After the payment of
dividends to preferred shareholders, dividends may be paid to common
shareholders to an amount per common share, noncumulative, equal to the
preferred shareholder annual dividend preference for the year. The balance, if
any, of dividends declared and paid in any year will be paid equally on a per
share basis to all common and preferred shareholders as one class.
Future dividends will be determined by the Trust's Board of Trustees and will be
dependent upon the earnings, financial position, and cash requirements of the
Trust and other relevant factors existing at the time. The 1995 and 1996
preferred dividend rates were 6%, as established by the Board of Trustees.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
a) Liquidity and Capital Resources
-------------------------------
The Trust's primary sources of cash during the years ended December 31, 1996 and
1995 were from property operations and mortgage note proceeds. The Trust's
primary uses of cash during the same period were for the purchase of an interest
in investment property, the repayment of a mortgage note
6
<PAGE>
payable, debt service and dividends.
In May 1995, the Trust obtained a $2,050,000 loan, collateralized by the El
Frontier and West Star communities. The loan is payable in monthly interest
only installments bearing interest at 90 day LIBOR plus 2.95% (8.47% at December
31, 1996) and is due in June 2002. The proceeds from the loan were used to
retire an existing note on the El Frontier community and for the acquisition of
an interest in an additional investment property.
In June 1995, the Trust purchased a 40% undivided interest in the Long Lake
Village manufactured home community located in West Palm Beach, Florida. The
remaining undivided interest in the community was acquired by an affiliated
limited partnership. The Trust's cost of its undivided interest was $578,700.
In connection with the purchase, the Trust and an affiliated limited partnership
jointly obtained a $1,600,000 loan, collateralized by the community. The
Trust's share of the loan is $640,000. The loan is payable in monthly interest
only installments bearing interest at 90 day LIBOR plus 2.95% (8.47% at December
31, 1996), and is due in June 2002. The Trust and the affiliated limited
partnership are both contingently liable for the full amount of the loan.
In February 1997, the Trust purchased an 11% 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 limited partnerships. The Trust's cost of its equity interest in the
communities was $253,000. In connection with the purchase, the joint venture
obtained a $3,040,000 loan, collateralized by the communities. The Trust's
share of this loan is $334,400. The Trust also obtained a $253,000 loan from an
affiliated limited partnership to fund its investment. The $3,040,000 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. The $253,000 loan bears interest at prime plus 2% and is due
no later than July 1997.
The Advisor is negotiating the sale of the Griffwood manufactured home community
in Leesburg, Florida. A sale is currently expected to occur in the second
quarter of 1997. The proceeds from the sale will be used to retire the $253,000
loan described above and to replenish cash reserves.
At December 31, 1996, the Trust's total mortgage debt, including its
proportionate share of joint venture debt, was $4,003,800, consisting entirely
of variable rate debt. The average rate of interest on the variable rate debt
was 8.4% at December 31, 1996.
The Trust owns interests in the following manufactured home communities at
February 28, 1997:
<TABLE>
<CAPTION>
Ownership
Name of Property Percentage Date Acquired Location
- ------------------- ----------- ------------- ------------------------
<S> <C> <C> <C>
West Star 100% January 1993 Tucson, Arizona
Griffwood 100% October 1993 Leesburg, Florida
El Frontier 100% February 1994 Tucson, Arizona
Long Lake 40% June 1995 West Palm Beach, Florida
Apache East 11% February 1997 Phoenix, Arizona
Denali Park 11% February 1997 Phoenix, Arizona
</TABLE>
The future sources of cash for the Trust will be provided from property
operations, cash reserves, and from the sale of property. The future uses of
cash will be for property and Trust operations, debt service and dividend
payments to shareholders. The Advisor believes that the future sources of cash
are sufficient to meet the working capital requirements of the Trust for the
foreseeable future.
7
<PAGE>
b) Results of Operations
---------------------
The results of operations for the years ended December 31, 1996 and 1995 are not
directly comparable due to the purchase of an interest in the Long Lake Village
manufactured home community in June 1995. The Trust incurred net losses of
$121,500 and $69,700 for the years ended December 31, 1996 and 1995,
respectively. The net loss per common share was $0.65 in 1996 and $0.39 in
1995.
Rent and utilities revenues increased from $1,101,200 in 1995 to $1,144,100 in
1996. The overall occupancy of the Trust's three wholly-owned properties was
96% at both December 31, 1996 and 1995. Recent rent increases implemented
include $8 per month at West Star effective January 1996; $11 and $7 per month
at El Frontier effective August 1996 and August 1995, respectively; and $6 and
$12 per month at Griffwood effective May 1996 and May 1995, respectively.
Equity in earnings of joint venture, which represents the Trust's 40% interest
in the net income of the Long Lake manufactured home community, decreased from
$23,700 in 1995 to $6,100 in 1996. The Long Lake community was 87% occupied at
December 31, 1996 compared to 99% at December 31, 1995. The Advisor feels that
the best long term course of action is to reduce the number of non-owner
occupied mobile homes located in the community. Several of these homes were
removed from the community in 1996 resulting in a decrease in occupancy. The
vacant spaces are being marketed for owner occupied homes and the General
Partners believe that the decrease in occupancy is temporary.
Interest income decreased from $21,000 in 1995 to $9,600 in 1996 due mainly to
lower cash balances maintained by the Trust.
Property operating expenses increased from $540,700 in 1995 to $580,700 in 1996
due mainly to higher wage and utility costs, and losses incurred on the sale of
park owned mobile homes at the Griffwood community.
Interest expense increased from $282,900 in 1995 to $299,900 in 1996 due mainly
to approximately $570,000 of additional long-term indebtedness incurred by the
Trust in connection with the refinancing of El Frontier in May 1995.
Advisory fee expense represents a fee payable to the Advisor for management of
the Trust's business. The fee is computed based on invested and uninvested
asset levels and is subject to certain subordination provisions. Advisory fee
expense increased from $75,000 in 1995 to $80,500 in 1996 due to a higher
invested asset level subsequent to the acquisition of the 40% interest in the
Long Lake Village community in June 1995.
General and administrative expenses decreased slightly from $68,000 in 1995 to
$66,800 in 1996.
8
<PAGE>
Item 7. FINANCIAL STATEMENTS
--------------------
The following financial statements are filed as a part of this report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 10
Balance Sheet at December 31, 1996 11
Statements of Operations for the years ended
December 31, 1996 and 1995 12
Statements of Shareholders' Equity for
the years ended December 31, 1996 and 1995 13
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 14
Notes to Financial Statements 15
</TABLE>
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders
Windsor Real Estate Investment Trust 8
Escondido, California
We have audited the accompanying balance sheet of Windsor Real Estate Investment
Trust 8 (the Trust) as of December 31, 1996 and the related statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Windsor Real Estate Investment Trust 8 as of
December 31, 1996 and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Costa Mesa, California
February 28, 1997
10
<PAGE>
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
BALANCE SHEET
-------------
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
ASSETS
- ------
Property held for investment, net $ 4,031,900
Property held for sale, net 1,773,700
Investment in joint venture 628,500
Cash and cash equivalents 142,000
Deferred financing costs 72,800
Other assets 59,800
--------------------
$ 6,708,700
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Mortgage notes payable $ 3,363,800
Accounts payable 14,700
Accrued expenses 58,200
Tenant deposits and other liabilities 19,700
Due to Advisor 155,500
--------------------
3,611,900
--------------------
Shareholders' equity:
Preferred shares of beneficial interest, no par value; unlimited
shares authorized; 98,073 shares issued and outstanding 2,121,700
Common shares of beneficial interest, no par value; unlimited
shares authorized; 90,169 shares issued and outstanding 1,922,900
Cumulative net loss (42,600)
Cumulative distributions (905,200)
--------------------
3,096,800
--------------------
$ 6,708,700
====================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For The Year Ended December 31,
---------------------------------
1996 1995
---------------- ------------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 1,144,100 $ 1,101,200
Equity in earnings of joint venture 6,100 23,700
Interest 9,600 21,000
Other 15,000 12,800
---------------- ------------
1,174,800 1,158,700
---------------- ------------
COSTS AND EXPENSES
- ------------------
Property operating 580,700 540,700
Interest 299,900 282,900
Depreciation 268,400 261,800
Advisory fee 80,500 75,000
General and administrative:
Related parties 29,300 29,200
Other 37,500 38,800
---------------- ------------
1,296,300 1,228,400
---------------- ------------
Net loss $ (121,500) $ (69,700)
================ ============
Net loss attributable to common shares $ (58,200) $ (34,800)
================ ============
Net loss per common share $ (0.65) $ (0.39)
================ ============
Dividends per common share $ 1.50 $ 1.47
================ ============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
STATEMENTS OF SHAREHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
----------------------------------------------
<TABLE>
<CAPTION>
Cumulative
Preferred Common Net Income Cumulative
Shares Shares (Loss) Distributions Total
------------ ------------ ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
January 1,
1995 $ 2,126,200 $ 1,922,900 $ 148,600 $ (346,000) $ 3,851,700
Net loss (69,700) (69,700)
Dividends -
preferred (144,400) (144,400)
Dividends -
common (132,400) (132,400)
Shares
repurchased (4,500) (4,500)
------------ ------------ ------------ ---------------- ------------
Balance at
December 31,
1995 2,121,700 1,922,900 78,900 (622,800) 3,500,700
Net loss (121,500) (121,500)
Dividends -
preferred (147,100) (147,100)
Dividends -
common (135,300) (135,300)
------------ ------------ ------------ ---------------- ------------
Balance at
December 31,
1996 $ 2,121,700 $ 1,922,900 $ (42,600) $ (905,200) $ 3,096,800
============ ============ ============ ================ ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For The Year Ended December 31,
------------------------------
1996 1995
------------ --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (121,500) $ (69,700)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 268,400 261,800
Equity in earnings of joint venture (6,100) (23,700)
Loss on sale of property 21,400 8,400
Amortization of deferred financing costs 16,900
Changes in operating assets and liabilities:
Other assets (13,900) (4,600)
Accounts payable (4,600) (400)
Accrued expenses (7,000) 17,200
Tenant deposits and other liabilities 2,500 (6,500)
Due to Advisor 80,500 75,000
------------ --------------
Net cash provided by operating activities 236,600 257,500
------------ --------------
Cash flows from investing activities:
Increase in property (57,100) (119,100)
Investment in joint venture (10,000) (588,700)
Proceeds from sale of property 9,200 11,800
------------ --------------
Net cash used in investing activities (57,900) (696,000)
------------ --------------
Cash flows from financing activities:
Dividends paid (282,400) (276,800)
Repayment of mortgage notes payable (20,500) (1,490,000)
Proceeds from mortgage note payable 2,050,000
Payment of deferred financing costs (84,300)
Shares repurchased (4,500)
------------ --------------
Net cash (used in) provided by financing activities (302,900) 194,400
------------ --------------
Net decrease in cash and cash equivalents (124,200) (244,100)
Cash and cash equivalents at beginning of year 266,200 510,300
------------ --------------
Cash and cash equivalents at end of year $ 142,000 $ 266,200
============ ==============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (none capitalized) $ 284,300 $ 264,300
============ ==============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1. THE TRUST AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------------
The Trust
- ---------
Windsor Real Estate Investment Trust 8, an unincorporated California business
trust (the Trust), was formed in November 1991 for the purpose of acquiring,
managing and selling existing manufactured home communities. The Advisor of the
Trust is The Windsor Corporation, a California corporation.
The Trust was funded through a public offering of common and preferred shares
which commenced in April 1992 and terminated in April 1993. The Declaration of
Trust provides for the Trust's termination not later than December 2006.
The following is a summary of the Trust's significant accounting policies:
Property Held for Investment or for Sale
- ----------------------------------------
Property held for investment or for sale is recorded at the lower of cost or
estimated net realizable value after disposition costs, and depreciated over
various estimated useful lives (building and improvements - 10 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 Trust adopted Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". Accordingly, property held for investment or for
sale is reviewed for impairment annually or whenever events or changes in
circumstances indicate that the carrying values of the properties may not be
recoverable. Impairment is measured as the difference between the carrying
value of the property and its fair value. The adoption of SFAS No. 121 did not
have an effect on the 1996 financial statements of the Trust.
Investment in Joint Venture
- ---------------------------
The investment in joint venture is accounted for by the equity method of
accounting as the Trust does not exercise control over the venture.
Financing Costs
- ---------------
Financing costs are amortized to interest expense over the life of the note
using the level yield method.
Income Taxes
- ------------
The Trust operates in a manner intended to enable it to qualify as a real estate
investment trust under Sections 856-860 of the Internal Revenue Code. Under
those sections, a trust which distributes at least 95% of its investment trust
taxable income to its shareholders each year and which meets certain other
conditions will not be taxed on that portion of its taxable income which is
distributed to its shareholders. The Trust intends to continue to qualify and
to distribute substantially all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes is required.
15
<PAGE>
Net Loss per Common Share
- -------------------------
Net loss per common share is calculated using the two-class method and is based
on the weighted average number of common shares outstanding during the year and
the net loss allocated to the common shareholders. The weighted average number
of common shares outstanding during the years ended December 31, 1996 and 1995
was 90,169.
Statements of Cash Flows
- ------------------------
For purposes of the statements of cash flows, the Trust 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.
Reclassification
- ----------------
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
NOTE 2. DECLARATION OF TRUST
--------------------
In accordance with the Declaration of Trust, no shareholder shall be personally
liable for any liabilities, debts or obligations of, or claims against the
Trust. The number of common and preferred shares outstanding at December 31,
1996 was 90,169 and 98,073, respectively, which represented capital
contributions of $2,254,225 and $2,451,825, respectively.
The Advisor is entitled to receive from the Trust various fees and compensation
which are summarized as follows:
Operational Stage
- -----------------
For management of the Trust's business, the Advisor earns an advisory fee of 1%
of invested assets and .5% of uninvested assets. The fee is subject to
limitation if the Trust's total operating expenses (as defined) exceed the
greater of 2% of the Trust's average invested assets or 25% of the Trust's net
income. The fee is also subordinated to preferred shareholders receiving a
minimum of 6% and maximum of 7% annual cumulative dividend, and to common
shareholders receiving a 6% annual noncumulative dividend. Advisory fees of
$80,500 and $75,000 were accrued during the years ended December 31, 1996 and
1995, respectively.
The Trust reimburses the Advisor for certain direct expenses and employee,
executive and administrative time which are incurred on the Trust's behalf. The
Trust was charged $35,700 and $34,600 for such costs during the years ended
December 31, 1996 and 1995, respectively. These costs are included in property
operating and general and administrative expenses in the accompanying Statements
of Operations.
16
<PAGE>
Liquidation Stage
- -----------------
During the Trust's liquidation stage, the total compensation paid to all persons
for the sale of Trust properties is limited to competitive real estate brokerage
fees, not to exceed 6% of the contract price for the sale of the property. The
Advisor may receive up to one-half of the competitive real estate brokerage
fees, not to exceed 3%, if it provides a substantial amount of the services in
the sales effort.
The Advisor also receives 15% of cash distributions from the sale or financing
of Trust properties. The participation is subordinated to preferred
shareholders receiving a return of capital plus an 8% per annum cumulative, non-
compounded return; and to common stockholders receiving a return of capital plus
a 10% per annum cumulative, non-compounded return. Returns are computed on a
property-by-property basis.
NOTE 3. PROPERTY HELD FOR INVESTMENT
----------------------------
Property held for investment consists of two manufactured home communities
summarized as follows:
<TABLE>
<CAPTION>
Name of Property Date Acquired Location
- -------------------------------- ----------------- ----------------
<S> <C> <C>
West Star January 15, 1993 Tucson, Arizona
El Frontier February 18, 1994 Tucson, Arizona
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Land $ 1,564,100
Buildings and improvements 2,912,400
Furniture and equipment 57,000
-----------------
4,533,500
Less accumulated depreciation (501,600)
-----------------
$ 4,031,900
=================
</TABLE>
NOTE 4. PROPERTY HELD FOR SALE
----------------------
Property held for sale consists of the Griffwood manufactured home community
located in Leesburg, Florida, which was originally purchased in October 1993.
The Trust decided to market the community for sale in December 1996.
Accordingly, the community is classified as property held for sale in the
accompanying balance sheet.
NOTE 5. INVESTMENT IN JOINT VENTURE
---------------------------
In June 1995, the Trust purchased a 40% undivided interest in the Long Lake
Village manufactured home community located in West Palm Beach, Florida, for a
cost of $578,700. The remaining undivided interest in the community was
acquired by an affiliated limited partnership. In connection with the purchase,
the Trust and the affiliated limited partnership jointly obtained a $1,600,000
loan collateralized by the community. The Trust's share of the loan is
$640,000. The loan is payable in monthly interest only installments bearing
interest at 90-day LIBOR plus 2.95% (8.47% at December
17
<PAGE>
31, 1996) and is due in June 2002. The Trust and the affiliated limited
partnership are both contingently liable for the full amount of the loan.
The condensed financial position and results of operations of the joint venture
since its date of purchase follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Financial Position
- ------------------
Property held for investment, net $ 3,077,700
Cash 23,900
Other assets 100,800
-----------------
Total assets $ 3,202,400
=================
Mortgage note payable $ 1,600,000
Accounts payable 10,000
Other liabilities 21,100
-----------------
Total liabilities 1,631,100
Partners' equity 1,571,300
-----------------
$ 3,202,400
=================
</TABLE>
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Results of Operations
- ------------------------
Property revenues $ 589,100 $ 322,900
----------------- -----------------
Expenses:
Property operating 354,800 153,600
Interest 144,600 76,600
Depreciation 74,300 33,600
----------------- -----------------
573,700 263,800
----------------- -----------------
Net Income $ 15,400 $ 59,100
================= =================
</TABLE>
18
<PAGE>
NOTE 6. MORTGAGE NOTES PAYABLE
----------------------
Mortgage notes payable consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Note payable, collateralized by property held for sale, payable in monthly
installments of $10,919, including interest at the 6-month Treasury Bill
rate plus 3% (8.37% at December 31, 1996), due in November 1998 $ 1,313,800
Note payable, collateralized by property held for investment, payable in
monthly interest only installments bearing interest at 90-day LIBOR plus
2.95% (8.47% at December 31, 1996), due in June 2002 2,050,000
-------------
$ 3,363,800
=============
</TABLE>
In May 1995, the Trust repaid a $1,461,600 mortgage note payable.
Maturities on mortgage notes payable for the next five years, assuming no
changes in interest or payment rates, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 21,900
1998 1,291,900
Thereafter 2,050,000
-------------
$ 3,363,800
=============
</TABLE>
NOTE 7. COMMON AND PREFERRED SHARES
---------------------------
Preferred shareholders receive a minimum of 6% and a maximum of 7% cumulative,
preferred dividend, the preferred dividend rate to be established annually by
the Board of Trustees. After the payment of preferred dividends, common
shareholders are eligible to receive a noncumulative dividend equal to the
preferred dividend rate for that year. Any further dividends declared are paid
equally on a per share basis to common and preferred shareholders. The
preferred dividend rate, as established by the Board of Trustees, was 6% for
both the years ended December 31, 1996 and 1995.
For federal income tax purposes, earnings and profits of the Trust will be
allocated to preferred and common shareholders in accordance with their dividend
priorities. Accordingly, taxable income is first allocated to preferred
shareholders to the extent of their dividend priority.
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts payable, accrued
expenses and other liabilities approximate fair value because of the short
maturity of these financial instruments. The mortgage notes payable bear
interest at a variable rate indexed to either Treasury Bills or LIBOR;
therefore, the Advisor believes the carrying values of the notes approximate
fair value.
19
<PAGE>
NOTE 9. SUBSEQUENT EVENT
----------------
In February 1997, the Trust purchased an 11% 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 limited partnerships. The Trust's cost of its equity interest in the
communities was $253,000. In connection with the purchase, the joint venture
obtained a $3,040,000 loan, collateralized by the communities. The Trust's
share of this loan is $334,400. The Trust also obtained a $253,000 loan from an
affiliated partnership to fund its investment. The $3,040,000 loan initially
bears interest at 8.375%. In March 2000 and 2003, the interest rate adjusts to
the yield on the 3-year Treasury Note plus 2.2%. The loan is due in March 2006.
The $253,000 loan bears interest at prime plus 2% and is due no later than July
1997.
20
<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 Trust.
PART III
--------
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
The names, ages, and nature of the positions held by the Trustees and executive
officers of the Trust follow:
<TABLE>
<CAPTION>
Name Age Office
- ------------------------ ---- -----------------------------------
<S> <C> <C>
John A. Coseo, Jr. 58 Chairman, Chief Executive Officer,
President, Chief Financial Officer,
Secretary
Jerry D. Swanger, Sr. 62 Independent Trustee
Vincent R. Ciruzzi 68 Independent Trustee
</TABLE>
A brief background of the Trustees and executive officers of the Trust follows.
John A. Coseo, Jr. (58) was the founder of The Windsor Corporation in 1974 and
has been actively involved in all facets of the manufactured housing business
since that time. From 1979 to the present, Mr. Coseo and The Windsor
Corporation have acted as the General Partners in the acquisition and management
of 56 manufactured home communities throughout the United States. Mr. Coseo is
the Chairman and Chief Executive Officer of The Windsor Corporation. Mr. Coseo
is a general partner of seven limited partnerships which have registered their
securities under the Securities and Exchange Act of 1934.
Jerry D. Swanger, Sr. (62) has been president of Mark II Properties, a San Diego
based real estate development firm, since 1975. Mark II Properties has
developed residential, commercial, office and industrial projects located in
Southern California and Nevada. Most of the properties developed by Mark II
have been retained for Mark II's portfolio and are currently under management by
Mark II.
Vincent R. Ciruzzi (68). From 1985 to 1991 Mr. Ciruzzi was president and chief
executive officer of San Diego Entertainment, Inc., which operated the San Diego
Sports Arena. He is president of his own company, Vincent R. Ciruzzi
Investments, Inc., and consults in real estate oriented investments. He is also
affiliated with University Financial Associates, Inc. which specializes in real
estate investments. He was also a senior executive of Sears, where his
assignments concentrated on the management and development of new stores and
shopping centers.
Item 10. EXECUTIVE COMPENSATION
----------------------
The Trust pays each Independent Trustee an annual fee of $2,000 plus $500 for
each meeting of Trustees attended in person ($150 if attended via telephone) and
reimburses the Trustees for their travel expenses and other out-of-pocket
expenses incurred in connection with attending meetings and for carrying on the
business of the Trust. Independent Trustees receive additional compensation
(and expense reimbursements) for on-site reviews of prospective property
acquisitions. Independent Trustee
21
<PAGE>
fees for the years ended December 31, 1996 and 1995 were $6,000 and $5,000,
respectively.
Trustees and officers who are affiliated with the Advisor receive no
compensation from the Trust for their services as Trustees and officers. Such
Trustees and officers are, however, compensated indirectly by their relationship
with the Advisor, and are reimbursed for their expenses in attending meetings of
the Trustees and for carrying on the business of the Trust.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
No person is known by the Trust to be the beneficial owner of more than 5%
of the common shares.
(b) Security Ownership of Management
No executive officer or Trustee of the Trust is the owner of common or
preferred shares of the Trust. The Advisor of the Trust, The Windsor
Corporation held the following stock ownership at December 31, 1996.
<TABLE>
<CAPTION>
Amount and
Nature
of Beneficial Percent of
Title Beneficial Owner Ownership Class
- -------------------- ----------------------- --------------- -----------
<S> <C> <C> <C>
Shares of Beneficial The Windsor Corporation 320 preferred .33%
Interest Escondido, CA 200 common .22%
</TABLE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The following table reflects all compensation accrued or paid to the Advisor and
affiliates during the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Form of Compensation and Entity Receiving 1996 1995
- --------------------------------------------------- ---------- ----------
<S> <C> <C>
Advisory fee - The Windsor Corporation $ 80,500 $ 75,000
Expense reimbursements - The Windsor Corporation $ 35,700 $ 34,600
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits and Index of Exhibits
(3) - Declaration of Trust filed as Exhibit 3.1 to Registration
Statement No. 33-44206 and incorporated herein by reference.
(11) - Computation of Net Loss Per Common Share
(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.
</TABLE>
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 24 day of
March, 1997.
WINDSOR REAL ESTATE INVESTMENT TRUST 8
By: /s/ John A. Coseo, Jr.
---------------------------------------------------------
JOHN A. COSEO, JR.
Chairman, Chief Executive Officer,
President, Chief Financial Officer,
Secretary
Date: March 24, 1997
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/ John A. Coseo, Jr. Trustee March 24, 1997
- ----------------------------
JOHN A. COSEO, JR.
/s/ Jerry D. Swanger, Sr. Trustee March 24, 1997
- ----------------------------
JERRY D. SWANGER, SR.
/s/ Vincent R. Ciruzzi
- ---------------------------- Trustee March 24, 1997
VINCENT R. CIRUZZI
</TABLE>
24
<PAGE>
Exhibit 11
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
COMPUTATION OF NET LOSS PER COMMON SHARE (1)
----------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
-------------------------------
1996 1995
--------------- ------------
<S> <C> <C>
Net loss $ (121,500) $ (69,700)
Less dividends paid:
Preferred (147,100) (144,400)
Common (135,300) (132,400)
Unpaid Preferred (3,100)
--------------- ------------
Overdistributed Earnings $ (403,900) $ (349,600)
=============== ============
Allocation of Overdistributed Earnings (2)
- ------------------------------------------
Preferred $ (210,400) $ (182,400)
Common (193,500) (167,200)
--------------- ------------
$ (403,900) $ (349,600)
=============== ============
Earnings Per Common Share
- -------------------------
Dividends Paid $ 135,300 $ 132,400
Allocation of Overdistributed Earnings (193,500) (167,200)
--------------- ------------
Net loss attributable to common shares $ (58,200) $ (34,800)
=============== ============
Weighted Average Common Shares Outstanding 90,169 90,169
=============== ============
Net Loss Per Common Share $ (0.65) $ (0.39)
=============== ============
</TABLE>
Note
- ----
(1) Net loss per common share is computed using the two class method.
(2) Overdistributed earnings are allocated evenly, on a per share basis,
between common and preferred shares.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF WINDSOR REAL ESTATE INVESTMENT TRUST 8 AS OF DECEMBER 31, 1996 AND THE
RELATED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE YEAR THEN ENDED AND
IS QUALIFIED IN THE ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 142,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,634,900
<DEPRECIATION> 829,300
<TOTAL-ASSETS> 6,708,700
<CURRENT-LIABILITIES> 0
<BONDS> 3,363,800
0
2,121,700
<COMMON> 1,922,900
<OTHER-SE> (947,800)
<TOTAL-LIABILITY-AND-EQUITY> 6,708,700
<SALES> 0
<TOTAL-REVENUES> 1,174,800
<CGS> 0
<TOTAL-COSTS> 580,700
<OTHER-EXPENSES> 415,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (299,900)
<INCOME-PRETAX> (121,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,500)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> 0
