<PAGE> 1
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, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission file number 000-21470
WINDSOR REAL ESTATE INVESTMENT TRUST 8
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(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)
6430 South Quebec Street, Englewood, Colorado 80111
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(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
Common Shares of Beneficial Interest
Securities registered under 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: $942,200
DOCUMENTS INCORPORATED BY REFERENCE: None
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page
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<S> <C> <C>
Item 1. Description of Business 3
Item 2. Description of Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Trust's Common Shares and Related Shareholder Matters 6
Item 6. Management's Discussion and Analysis 7
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 23
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of The Exchange Act 23
Item 10. Executive Compensation 24
Item 11. Security Ownership of Certain Beneficial Owners and Management 24
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
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). In September 1997, Chateau Communities, Inc, a
publicly held real estate investment trust, ("Chateau") purchased all of the
outstanding capital stock of The Windsor Corporation for 101,239 common shares
in Chateau, and $750,000 in cash. Following the purchase of The Windsor
Corporation the existing directors of The Windsor Corporation resigned. Chateau
then appointed a new Board of Directors and elected Steven G. Waite as the
President of The Windsor Corporation. Following Chateau's acquisition of The
Windsor Corporation shares, the Trustees of the Trust resigned, and three new
Trustees, including two independent trustees, were appointed. 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 February 1997, the Trust purchased an 11% interest in a limited partnership
which owns two manufactured home communities located in Phoenix, Arizona, Apache
East Estates and Denali Park Estates. 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 Trust owns interests in the following manufactured home communities at
December 31, 1997:
<TABLE>
<CAPTION>
Ownership
Name of Property Percentage Date Acquired Location
- ---------------- ---------- ------------- --------
<S> <C> <C> <C>
West Star 100% January 1993 Tucson, Arizona
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>
3
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The overall occupancy of the five communities owned by the Trust at December 31,
1997 was approximately 87%. The Advisor continues to maintain the properties in
good condition and promote them to improve occupancy.
In March 1998, the Trust entered into a contract to purchase one manufactured
home community in Montgomery, Alabama for a purchase price of approximately
$5.7 million. The purchase will be financed by an approximate $500,000 equity
contribution by Chateau and an approximately $5.2 million loan from Chateau.
PROPOSED FUTURE AMENDMENT OF DECLARATION OF TRUST
The Trust is currently in the process of preparing proxy materials relating to
an Annual and Special Meeting of Shareholders expected to be held in May 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 from 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
are in the process of being developed and once finalized will be set forth in
the Proxy Statement.
CAPITAL RESOURCES FOR FUTURE ACQUISITION
If the amendment to the Trust's Declaration of Trust expected to be proposed
later this year is approved, it is anticipated that the Trust will attempt to
implement a growth-oriented business plan, subject to the availability of funds
for such plan. The Trust anticipates that funds for such acquisitions are
likely to come from (i) additional investments from Chateau, or unaffiliated
third parties, and (ii) traditional mortgage financing or additional sales of
equity and debt securities.
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 Chateau
Communities, Inc. which employs all of the properties' on-site personnel and is
reimbursed by the Trust for all such costs.
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Item 2. DESCRIPTION OF PROPERTIES
The Trust owns interests in five properties at December 31, 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 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>
West Star El Frontier Long Lake
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Tucson, Tucson, West Palm Beach,
Location Arizona Arizona Florida
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of Ownership 100% 100% 40%
Date Acquired 1/93 2/94 6/95
Acreage 13 19 19
Number of Spaces 89 179 134
Monthly Rents (1) $ 232 $ 238 $ 356
Occupancy Level:
December 31, 1997 100% 97% 81%
Real Estate Taxes $ 8,700 $ 18,100 $ 67,100
Federal Tax Basis (2) $1,175,000 $ 2,909,900 $1,239,000
Mortgage Information:
Balance payable $2,050,000 (3) $1,600,000
Interest rate 8.97% (3) 8.97%
Amortization period -- (3) --
Maturity date 6/02 (3) 6/02
Balance due at maturity $2,050,000 (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, 1997 81% 81%
Real Estate Taxes $ 17,400 $ 23,600
Federal Tax Basis (3) $ 246,600 $ 318,200
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>
5
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(1) Average rental rates in effect on December 31, 1997.
(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.
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, 1997, there were approximately 200 shareholders
holding an aggregate of 90,169 common shares.
Cash dividends paid to common shareholders since December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Date Paid Amount Per Share
- --------- ------ ---------
<S> <C> <C>
November 1997 $ 33,800 $ 0.375
August 1997 $ 33,800 $ 0.375
May 1997 $ 33,800 $ 0.375
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
</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 1996 and 1997
preferred dividend rates were 6%, as established by the Board of Trustees.
6
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the financial
statements and Notes thereto included elsewhere in this Annual Report. Certain
statements in this discussion constitute "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the partnership or industry to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
Liquidity and Capital Resources
The Trust's primary sources of cash during the years ended December 31, 1997 and
1996 were from property operations and proceeds from the sale of the Griffwood
manufactured home community. 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 payable, debt service and dividends.
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 limited partnership 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, which was repaid during 1997. 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.
In April 1997, the Trust sold the wholly-owned Griffwood property in Leesburg,
Florida for proceeds of $1,892,000, which includes a note receivable of
$188,000.
At December 31, 1997, the Trust's total mortgage debt, including its
proportionate share of joint venture debt, was $3,024,400, consisting entirely
of variable rate debt. The average rate of interest on the variable rate debt
was 8.9% at December 31, 1997.
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. Future acquisitions of properties will be financed by
Chateau Communities, Inc. ("Chateau"), the new sponsor and advisor of the Trust
as of September 1997, or by other third parties or by additional issuance of
debt.
Results of Operations
The Trust incurred net losses of $121,500 and $22,400 for the years ended
December 31, 1996 and 1997, respectively. The net loss per common share was
$2.98 in 1996 and $1.88 in 1997.
Rent and utilities revenues decreased from $1,144,100 in 1996 to $956,100 in
1997. The decreases were due to the sale of the Griffwood community in April
1997. The overall occupancy of the Trust's two wholly-owned properties was 98%
at December 31, 1997. Recent rent increases implemented include $7 per month at
West Star effective January 1997 and $10 per month at El Frontier effective
August 1997.
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<PAGE> 8
Equity in earnings (loss) of joint ventures, which represents the Trust's 40%
interest in the net income of the Long Lake manufactured home community, and 11%
interest in Apache and Denali, decreased from earnings of $6,100 in 1996 to
losses of ($30,600) in 1997. The Long Lake community was 81% occupied at
December 31, 1997 compared to 87% at December 31, 1996. Occupancy in both Apache
and Denali was 81% in 1997. 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 Trust believes that the decrease in occupancy is
temporary.
Interest income decreased from $9,600 in 1996 to $5,000 in 1997 due mainly to
lower cash balances maintained by the Trust.
Property operating expenses decreased from $580,700 in 1996 to $456,800 in 1997
due mainly to the sale of the Griffwood community.
Interest expense decreased from $299,900 in 1996 to $227,700 in 1997 due mainly
to the sale of the Griffwood community.
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 decreased from $80,500 in 1996 to $54,500 in 1997 due mainly to the
sale of Griffwood.
General and administrative expenses decreased slightly from $66,800 in 1996 to
$62,500 in 1997.
In March 1998, the Trust entered into a contract to purchase one manufactured
home community in Montgomery, Alabama for a purchase price of approximately $5.7
million. The purchase will be financed by an approximate $500,000 equity
contribution by Chateau and an approximate $5.2 million loan from Chateau.
New Accounting Standards
In 1997, the Trust adopted SFAS No. 128, "Earnings Per Share." This accounting
standard specifies new computation, presentation and disclosure requirements
for earnings per share to be applied retroactively. Among other things, SFAS
No. 128 requires presentation of basic and diluted earnings per share on the
face of the income statement. The adoption of SFAS 128 resulted in the
restatement of the per share results previously reported.
Year 2000 Compliance
The Trust is currently engaged in a review with its software vendors to ensure
all systems are modified for year 2000 compliance. Since all systems are owned
and maintained by third party vendors, the Trust believes that the additional
cost for compliance will not be material to future results of operations,
financial condition or cash flows of the Trust.
8
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Item 7. FINANCIAL STATEMENTS
The following financial statements are filed as a part of this report:
<TABLE>
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Page
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Report of Independent Accountants 10
Balance Sheet as of December 31, 1997 12
Statements of Operations for the years ended
December 31, 1997 and 1996 13
Statements of Shareholders' Equity for
the years ended December 31, 1997 and 1996 14
Statements of Cash Flows for the years ended
December 31, 1997 and 1996 15
Notes to Financial Statements 16
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To 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, 1997 and the related statements of
operations, shareholders' equity and cash flows for the year ended December 31,
1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Windsor Real Estate Investment
Trust 8 as of December 31, 1997 and the results of its operations and its cash
flows for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L. L. P.
Denver, Colorado
March 30, 1998
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INDEPENDENT AUDITORS' REPORT
To the Shareholders
Windsor Real Estate Investment Trust 8
Escondido, California
We have audited the accompanying statements of operations, shareholders' equity
and cash flows of Windsor Real Estate Investment Trust 8 (the Trust) for the
year ended December 31, 1996. These financial statements are the responsibility
of the Trusts' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations of Windsor Real Estate Investment Trust 8
and its cash flows for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Costa Mesa, California
February 28, 1997
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1997
<S> <C>
ASSETS
Property held for investment, net $ 3,912,800
Investments in joint ventures and limited partnerships 859,300
Cash and cash equivalents 82,800
Deferred financing costs, net 53,200
Other assets 213,600
-----------
Total Assets $ 5,121,700
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 2,050,000
Accounts payable 5,800
Accrued expenses 33,200
Other liabilities 111,900
Due to Advisor and affiliates 128,800
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Total Liabilities 2,329,700
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
Dividends in excess of accumulated earnings (1,252,600)
-----------
2,792,000
-----------
Total Liabilities and shareholders' equity $ 5,121,700
===========
</TABLE>
See accompanying notes to financial statements
12
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
REVENUES
Rent and utilities $ 956,100 $ 1,144,100
Equity in earnings (losses) of joint
ventures and limited partnerships (30,600) 6,100
Interest 5,000 9,600
Other 11,700 15,000
------------- -------------
942,200 1,174,800
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COSTS AND EXPENSES
Property operating 456,800 580,700
Interest 227,700 299,900
Depreciation 163,100 268,400
Advisory fee 54,500 80,500
General and administrative:
Related parties 29,800 29,300
Other 32,700 37,500
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964,600 1,296,300
------------- -------------
Net loss $ (22,400) $ (121,500)
============= =============
Preferred Dividends Paid (147,100) (147,100)
------------- -------------
Net loss attributable to common shares $ (169,500) $ (268,600)
============= =============
Basic and dilutive loss per common share $ (1.88) $ (2.98)
============= =============
Dividends per common share $ 1.50 $ 1.50
============= =============
</TABLE>
See accompanying notes to financial statements
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 and 1996
<TABLE>
<CAPTION>
Dividends
in excess of
Preferred Common Accumulated
Shares Shares Earnings Total
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Balance at
December 31, 1995 $ 2,121,700 $ 1,922,900 $(543,900) $ 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 (947,800) 3,096,800
Net Loss (22,400) (22,400)
Dividends preferred (147,100) (147,100)
Dividends Common (135,300) (135,300)
----------- ----------- ----------- -----------
Balance at
December 31, 1997 $ 2,121,700 $ 1,922,900 $(1,252,600) $ 2,792,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (22,400) $ (121,500)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 163,100 268,400
Equity in (earnings) losses of joint ventures
and limited partnerships 30,600 (6,100)
Loss on sale of property 3,000 21,400
Amortization of deferred financing costs 13,200 16,900
Changes in operating assets and liabilities:
Other assets 34,200 (13,900)
Accounts payable (8,900) (4,600)
Accrued expenses (25,000) (7,000)
Other liabilities (20,800) 2,500
Due to Advisor and affiliates (26,700) 80,500
------------- -------------
Net cash provided by operating activities 140,300 236,600
------------- -------------
Cash flows from investing activities:
Increase in property held for investment (45,900) (57,100)
Increase in investment in joint ventures
and limited partnerships (26,100) (10,000)
Proceeds from sale of property 1,704,000 9,200
Joint Ventures' and Limited Partnerships
cash distributions 6,000 --
------------- -------------
Net cash provided by (used in) investing activities 1,638,000 (57,900)
------------- -------------
Cash flows from financing activities:
Dividends paid (282,400) (282,400)
Repayment of mortgage notes payable (1,313,800) (20,500)
Repayment of loan from affiliate (241,300) --
------------- -------------
Net cash used in financing activities (1,837,500) (302,900)
------------- -------------
Net decrease in cash and cash equivalents (59,200) (124,200)
Cash and cash equivalents at beginning of year 142,000 266,200
------------- -------------
Cash and cash equivalents at end of year $ 82,800 $ 142,000
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (none capitalized) $ 238,100 $ 284,300
============= =============
</TABLE>
See accompanying notes to financial statements
15
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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 ("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 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
Property held for investment is recorded at the lower of cost or net realizable
value, and depreciated over various estimated useful lives (building and
improvements - 5 to 20 years; fixtures and equipment - 3 to 5 years) using the
straight-line method. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and any gain
or loss is included in net income. Repairs and maintenance are charged to
operations as incurred.
In 1996, the Trust adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Assets to be
Disposed of." SFAS 121 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. The adoption of SFAS 121 had no effect on
reported results in 1996.
Investment in Joint Ventures and Limited Partnerships
The investment 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 are 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> 17
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.
Basic and Dilutive loss per Common Share
Basic and dilutive loss per common share is calculated is based on the weighted
average number of common shares outstanding during the year and income or loss
available to the common shareholders. Basic and dilutive earnings per common
share are the same, as the Trust has no dilutive securities. The weighted
average number of common shares outstanding during the years ended December 31,
1997 and 1996 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 by increasing the loss per share by $2.33.
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.
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.
17
<PAGE> 18
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,
1997 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
$54,500 and $80,500 were accrued during the years ended December 31, 1997 and
1996, 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 $34,500 and $35,700 for such costs during the years ended
December 31, 1997 and 1996, respectively. These costs are included in property
operating and general and administrative expenses in the accompanying Statements
of Operations. As of December 31, 1997, the partnership owed TWC $115,800.
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.
18
<PAGE> 19
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, 1997
-----------------
<S> <C>
Land $ 1,564,200
Buildings and improvements 2,940,100
Furniture and equipment 73,200
-----------------
4,577,500
Less accumulated depreciation (664,700)
-----------------
$ 3,912,800
=================
</TABLE>
NOTE 4. PROPERTY SALE
In January 1997, the Trust sold the Griffwood manufactured home community
located in Leesburg, Florida, for $1,892,000, which includes a note receivable
of $188,000. The Property was originally purchased in October 1993.
NOTE 5. INVESTMENT IN JOINT VENTURES AND LIMITED PARTNERSHIPS
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 limited partnership obtained
a $3,040,000 loan, collateralized by the communities. The Trust also obtained a
$253,000 loan from an affiliated limited partnership in order to make the
investment. The loan was repaid in 1997.
The Trust also has a 40% interest in the Long Lake community.
19
<PAGE> 20
The condensed financial position and results of operations of the joint ventures
and limited partnerships (including Apache East and Denali Park since their
date of purchase) are as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------
Financial Position
<S> <C>
Property held for investment, net $ 8,178,200
Cash 27,800
Other assets 216,100
-----------------
Total assets $ 8,422,100
=================
Mortgage note payable $ 4,640,000
Accounts payable 29,900
Other liabilities 57,400
-----------------
Total liabilities 4,727,300
Partners' equity 3,694,800
-----------------
Total liabilities and Partners' equity $ 8,422,100
=================
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31,1997 December 31, 1996
---------------- -----------------
<S> <C> <C>
Results of Operations
Property revenues $ 1,089,100 $ 589,100
Expenses:
Property operating 654,300 354,800
Interest 353,200 144,600
Depreciation 242,400 74,300
---------------- -----------------
1,249,900 573,700
---------------- -----------------
Net (loss) Income $ (160,800) $ 15,400
================ =================
</TABLE>
20
<PAGE> 21
NOTE 6. MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following at December 31, 1997:
Note payable, collateralized by property held for investment, payable in monthly
interest only installments bearing interest at 90-day LIBOR plus 2.95% (8.97% at
December 31, 1997), due in May 2002.
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 6.0% for both the
years ended December 31, 1997 and 1996.
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 equivalents, receivables, accounts payable, accrued
expenses and other liabilities approximate fair value because of the short
maturity of these financial instruments. The mortgage note 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.
NOTE 9. CONTINGENCIES
The Company, as an owner of real estate, is subject to various environmental
laws. Compliance by the Company with existing laws has not had a material effect
on the results of operations, financial condition or cash flows of the Company,
nor does management believe it will have a material impact in the future.
NOTE 10. RELATED PARTY TRANSACTIONS
Chateau and/or its predecessor have been providing property management services
to the Partnership since 1992. For this service, Chateau is paid a property
management fee, which is based on a percentage of actual gross receipts of the
properties. The total management fees paid to Chateau were $48,200 and $57,700
for the years ended December 31, 1997 and 1996, respectively. In addition
certain direct expenses are paid by Chateau on behalf of the Partnership and
then reimbursed by the Partnership. These amounts were $78,000 and $109,000 for
the years ended December 31, 1997 and 1996, respectively.
NOTE 11. SUBSEQUENT EVENTS
In March 1998, the Trust entered into a contract to purchase one manufactured
home community in Montgomery, Alabama for a purchase price of approximately $5.7
million. The purchase will be financed by an approximate $500,000 equity
contribution by Chateau and an approximate $5.2 million loan from Chateau.
21
<PAGE> 22
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 Directors and executive
officers of the Trust follow:
<TABLE>
<CAPTION>
Name Age Office
---------------------- ------- ----------------------
<S> <C> <C>
Gary P. McDaniel 52 Chairman of the Board of Trustees
Kenneth G. Pinder 62 Trustee
Richard B. Ray 47 Trustee
</TABLE>
A brief background of the Directors and executive officers of the Trust follows.
Gary P. McDaniel (52) has been Chief Executive Officer and a director of Chateau
Communities, Inc. since February 1997. He served as the Chairman of the Board,
President and Chief Executive Officer for ROC Communities, inc. since 1993, has
been a principal of ROC and its predecessors since 1979, and has been active in
the manufactured home industry since 1972. Mr. McDaniel has been active in
several state and national manufactured home associations, including
associations in Florida and Colorado. In 1996, he was named "Industry Person of
the Year" by the National Manufactured Housing Industry Association. Mr.
McDaniel is on the Board of Directors of the Manufactured Housing Institute. He
is a graduate of the University of Wyoming and served as a Captain in the United
States Air Force.
Richard B. Ray (47); Since 1995 Co-Chairman of the board and Chief Financial
Officer of 21st Century Mortgage Corporation, (a lender to the manufactured home
industry); Director of the following companies: BankFirst, Radio Systems
Corporation, and Windsor Real Estate Investment Trust #8; Director of Knox
Housing Partnership (a not for profit developer of low income housing in Knox
County, Tennessee). Previously, Executive Vice President, Chief Financial
Officer, and Director of Clayton Homes Inc. (a vertically integrated
manufactured housing company) from 1982-1994; a Director of Palm Harbor Homes,
Inc. (a national producer of manufactured homes) from 1994-1995.
Kenneth G. Pinder (62); Entered the housing business in 1970 managing a
Manufactured Housing site rental Community. Formed American Living Homes Inc., a
Manufactured Housing Dealership, in 1974. Continues to be the owner and
president of this corporation. Sole owner of Able Mobile Housing Inc., a
temporary housing company for fire loss victims. He has developed mobile home
sites and purchased and sold numerous communities over the past twenty years.
Mr. Pinder has been a member of the Michigan Manufactured Housing Association
for over 25 years. In 1992 he was elected to the Michigan Manufactured Housing
Board of Directors. He was also elected to the Executive Committee of the Board.
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 fees for the years ended December 31, 1997 and
1996 were $3,700 and $6,000, 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.
22
<PAGE> 23
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, 1997.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Title Beneficial Owner Ownership Class
- ----------------------------- ----------------------- ----------------- ----------
<S> <C> <C>
Shares of Beneficial Interest The Windsor Corporation 320 preferred .33%
Englewood, CO 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, 1997 and 1996.
<TABLE>
<CAPTION>
Form of Compensation and Entity Receiving 1997 1996
---- ----
<S> <C> <C>
Advisory fee - The Windsor Corporation $ 54,500 $ 80,500
Expense reimbursements - The Windsor Corporation $ 34,500 $ 35,700
</TABLE>
23
<PAGE> 24
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.
(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.
24
<PAGE> 25
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 31st day of
March, 1998.
WINDSOR REAL ESTATE INVESTMENT TRUST 8
By: /s/ Gary P. McDaniel
-----------------------
GARY P. MCDANIEL
Trustee
Date: March 31, 1998
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/ Gary P. McDaniel Chairman of the Board of Trustees March 31, 1998
- ------------------------
GARY P. MCDANIEL
/s/ Kenneth G. Pinder Trustee March 31, 1998
- ------------------------
KENNETH G. PINDER
/s/ Richard B. Ray Trustee March 31, 1998
- ------------------------
RICHARD B. RAY
</TABLE>
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
(3) - Declaration of Trust filed as Exhibit 3.1 to Registration
Statement No. 33-44206 and incorporated herein by reference.
(27) - Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 82,800
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,577,500
<DEPRECIATION> 664,700
<TOTAL-ASSETS> 5,121,700
<CURRENT-LIABILITIES> 279,700
<BONDS> 2,050,000
0
0
<COMMON> 0
<OTHER-SE> 2,792,100
<TOTAL-LIABILITY-AND-EQUITY> 5,121,700
<SALES> 0
<TOTAL-REVENUES> 942,200
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 736,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227,700
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,400)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
