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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 000-21470
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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(Exact name of small business issuer as specified in its charter)
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California 33-6109499
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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6430 S. Quebec Street, Englewood, Colorado 80111
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(Address of principal executive offices)
(303) 741-3707
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(Issuer's telephone number)
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 [ ]
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TABLE OF CONTENTS
PART I
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Page
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Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
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2
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
BALANCE SHEET
(unaudited)
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<CAPTION>
March 31,1998
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ASSETS
Property held for investment:
Land $ 3,501,300
Buildings and improvements 6,687,400
Fixtures and equipment 58,100
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10,246,800
Less accumulated depreciation (705,600)
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9,541,200
Investments in joint ventures and limited partnerships 851,700
Cash and cash equivalents 99,500
Deferred financing costs 50,200
Other assets 229,300
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$ 10,771,900
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage note payable $ 2,050,000
Accounts payable 400
Accrued expenses 167,400
Tenant deposits and other liabilities 41,800
Due to Advisor and affiliates 5,315,300
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7,574,900
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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; 109,308 shares issued and outstanding 2,401,400
Cumulative net loss (67,900)
Cumulative distributions (1,258,200)
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3,197,000
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$ 10,771,900
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See Accompanying Notes to Financial Statements
3
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
STATEMENTS OF OPERATIONS
(unaudited)
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Three Months Ended March 31
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1998 1997
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REVENUES
Rent and utilities $ 221,000 $ 293,100
Equity in earnings of joint ventures and limited partnerships (7,500) (3,800)
Interest 600 1,100
Other 2,300 4,300
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216,400 294,700
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COSTS AND EXPENSES
Property operating 90,900 144,600
Interest 48,200 78,100
Depreciation 40,800 40,600
Advisory fee 24,900 20,100
General and administrative:
Related parties 3,800 8,500
Other 10,700 8,800
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219,300 300,700
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Net loss $ (2,900) $ (6,000)
========= =========
Preferred dividends paid (36,800) (36,800)
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Net loss attributable to common shares $ 39,700 $ 42,800
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Basic and dilutive loss per common share $ (0.44) $ (0.47)
========= =========
Dividends per common share $ 0.38 $ 0.37
========= =========
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See Accompanying Notes to Financial Statements
4
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
STATEMENTS OF CASH FLOWS
(unaudited)
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Three Months Ended March 31
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1998 1997
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Cash flows from operating activities:
Net loss $ (2,900) $ (6,000)
Adjustments to reconcile net loss to net cash
Provided by operating activities:
Depreciation 40,800 40,600
Proportionate share of losses of joint ventures and 7,500 3,800
limited partnerships
Joint ventures' and limited partnerships cash distributions (7,500) (3,800)
Amortization of deferred financing costs 3,100 4,200
Loss on sale of property 0 1,100
Changes in operating assets and liabilities:
Other assets (127,500) 1,300
Accounts payable (5,400) 1,200
Accrued expenses 134,200 13,100
Tenant deposits and other liabilities 41,800 (6,200)
Due to Advisor and affiliates 20,000 20,100
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Net cash provided by operating activities 104,100 74,700
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Cash flows from investing activities:
Proceeds from sale of property 0 7,300
Acquisition of and additions to property (5,669,200) (25,400)
Investment in joint ventures and limited partnerships 0 (8,000)
Joint venture and limited partnerships cash distributions 7,500 700
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Net cash used in investing activities (5,661,700) (25,400)
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Cash flows from financing activities:
Issuance of common Shares 478,500 0
Proceeds from note due to Chateau for property purchase 5,166,500 0
Dividends paid (70,700) (70,600)
Repayment of mortgage notes payable 0 (5,300)
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Net cash (used in) provided by financing activities 5,574,300 (75,900)
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Net increase (decrease) in cash and cash equivalents 16,700 (26,600)
Cash and cash equivalents at beginning of period 82,800 142,000
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Cash and cash equivalents at end of period $ 99,500 $ 115,400
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See Accompanying Notes to Financial Statements
5
<PAGE> 6
WINDSOR REAL ESTATE INVESTMENT TRUST 8
NOTES TO FINANCIAL STATEMENTS
NOTE 1. 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 ("TWC"), a California corporation. In September
1997, Chateau Communities, Inc ("Chateau"), a publicly held real estate
investment trust, purchased 100% of the shares of The Windsor Corporation.
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
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.
On March 31, 1998, the Trust completed the purchase of one manufactured home
community in Montgomery, Alabama for a purchase price of approximately $5.7
million. The purchase was financed by an approximate $500,000 equity
contribution by Chateau and by two loans made by Chateau, one secured by a
mortgage of the Trust's assets and one unsecured, in the aggregate principal
amount of approximately $5.2 million. These loans bear interest at 100 basis
points over prime.
NOTE 2. BASIS OF PRESENTATION
The balance sheet at March 31, 1998 and the related statements of operations for
the three months ended March 31, 1998 and 1997 and the statements of cash flows
for the three months ended March 31, 1998 and 1997 are unaudited. However, in
the opinion of the Advisor, they contain all adjustments, of a normal recurring
nature, necessary for a fair presentation of such financial statements. Interim
results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-QSB and
do not contain certain information included in the Trust's annual financial
statements and notes on form 10-KSB for the year ended December 31, 1997.
6
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NOTE 3. INVESTMENTS IN JOINT VENTURES AND LIMITED PARTNERSHIPS
The Trust's investments in joint ventures and limited partnerships consist of
interests in three manufactured home communities at March 31, 1998. The combined
condensed results of operations of the joint venture and limited partnership
properties for the three months ended March 31, 1998 and 1997 are as follows:
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1998 1997
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Total revenues $ 325,900 $ 228,300
Expenses:
Property operating 175,400 127,100
Interest 125,800 64,600
Depreciation 68,700 36,300
G&A 2,100 0
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372,000 228,000
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Net income (loss) $ (46,100) $ 300
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NOTE 4. EQUITY TRANSACTIONS
The number of common shares issued and outstanding include 19,139 shares issued
to Chateau Communities, Inc. which was not completed until May 11, 1998.
NOTE 5. BASIC AND DILUTIVE LOSS PER COMMON SHARE
Basic and dilutive loss per common share is calculated and based on the weighted
average number of common shares outstanding during the period and income or loss
available to the common shareholders. The weighted average number of common
shares outstanding during the three months ended March 31, 1998 and 1997 was
90,169.
In 1997, the Trust adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share." This accounting standard specifies new
computation, presentation, and disclosure requirements for earnings per share
to be applied retroactively. Among other things, SFAS 128 requires presentation
of basic and diluted earnings per share on the face of the income statement.
The adoption of SFAS 128 resulted in the restatement of the per share results
previously reported increasing the loss per share by $0.44.
7
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended March 31, 1998 as compared to three months ended March 31,
1997
Results of Operations
The results of operations for the three months ended March 31, 1998 and 1997 are
not directly comparable due to the purchase of interests in the Apache East
Estates and Denali Park Estates manufactured home communities in February 1997
and due to the sale of the Griffwood manufactured home community in April 1997.
The Trust incurred a net loss of $2,900 and $6,000 for the three months ended
March 31, 1998 and 1997, respectively. The net loss per common share was $0.02
in 1998 compared to a net loss of $0.03 in 1997.
As a result of the sale of the Griffwood community, all major revenue and
expense categories decreased in the first quarter of 1998, specifically, rent
and utilities revenues, property operating costs and interest.
Equity in earnings of joint ventures and limited partnerships represents the
Trust's share of the net income (loss) of three joint venture and limited
partnership properties. Equity in earnings or share of losses of joint ventures
and limited partnerships increased from a loss of $3,800 in 1997 to a $7,500
loss in 1998, due to the acquisition of Apache East and Denali Park communities
in February 1997.
Interest income decreased from $1,100 in 1997 to $600 in 1998, due mainly to
lower cash balances maintained by the Trust.
Interest expense decreased from $78,100 in 1997 to $48,200 in 1998, due mainly
to the pay off of related mortgage debt.
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 $20,100 to $24,900 for the first quarters of 1997 and 1998,
respectively.
General and administrative expenses decreased from $17,300 in 1997 to $14,500 in
1998 due mainly to lower employee time charges from the Advisor.
8
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Changes in Financial Condition
The Trust's primary sources of cash during the three months ended March 31, 1998
were from the operations of its investment properties, and an advance and
investment from Chateau Communities, Inc ("Chateau"). The primary uses of cash
during the same period were for the purchase of a manufactured home community,
cash dividends, and debt service.
On March 31, 1998, the Trust completed the purchase of one manufactured home
community in Montgomery, Alabama for a purchase price of approximately $5.7
million. The purchase was financed by an approximate $500,000 equity
contribution by Chateau and by two loans made by Chateau, one secured by a
mortgage of the Trusts assets and one unsecured, in the aggregate principal
amount of approximately $5.2 million. These loans bear interest at 100 basis
points over prime. The equity contribution by Chateau includes 19,139 shares
issued which was not completed until May 11, 1998.
At March 31, 1998, the Trust's total mortgage debt, including its proportionate
share of joint venture and limited partnership debt, was $3,024,400, consisting
entirely of variable rate debt. The average rate of interest on the variable
rate debt was 8.7% at March 31, 1998. Approximately, $1.3 million of mortgage
debt was repaid in April 1997 in connection with the sale of the Griffwood
community, as discussed previously.
The future sources of cash for the Trust will be provided from property
operations, cash reserves, and ultimately from the sale of property. The future
uses of cash will be for property and Trust operations, debt service and cash
dividends 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.
The Trust is currently in the process of preparing proxy materials relating to
an Annual Meeting of Shareholders expected to be held in June of this year where
the Trustees of the Trust anticipate that they will propose that the
Shareholders approve the amendment of the Declaration of Trust of the Trust to
convert the Trust form a finite-life to an infinite life entity.
If the proposal is approved by the Shareholders, it is anticipated that Chateau
will make an additional equity investment in the Trust and the Trust will begin
implementing a growth-oriented business plan designed to cause the Trust to
attain greater size and asset diversity and to achieve greater total returns for
its Shareholders. The terms of the proposal and the above described changes will
be set forth in the Proxy statement.
In 1997, the Partnership adopted Statement of Financial Accounting Standards
No. 128 (SFAS 128), "Earnings Per Share." This accounting standard specifies
new computation, presentation, and disclosure requirements for earnings per
share to be applied retroactively. Among other things, SFAS 128 requires
presentation of basic and diluted earnings per share on the face of the income
statement. The adoption of SFAS 128 had no effect on the per unit results
previously reported.
9
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PART II
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits and Index of Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
Form 8-K filed with the Commission on January 27, 1998.
Form 8-K/A filed with the Commission on February 3, 1998.
10
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINDSOR REAL ESTATE INVESTMENT TRUST 8
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(Registrant)
By /s/ Steven G. Waite
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STEVEN G. WAITE
President
Date: May 13, 1998
11
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EXHIBIT INDEX
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EXHIBIT
NO. DESCRIPTION
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27 Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 99,500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,246,800
<DEPRECIATION> 705,600
<TOTAL-ASSETS> 10,771,900
<CURRENT-LIABILITIES> 5,524,900
<BONDS> 2,050,000
0
0
<COMMON> 0
<OTHER-SE> 3,197,000
<TOTAL-LIABILITY-AND-EQUITY> 10,771,900
<SALES> 0
<TOTAL-REVENUES> 216,400
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 171,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,800
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,900)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
