<PAGE>
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 September 30, 1999
------------------
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ___________
Commission file number 000-21470
---------
N'TANDEM TRUST
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 33-6109499
- ------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6160 So. Syracuse Way, Greenwood Village, Colorado 80111
---------------------------------------------------------
(Address of principal executive offices)
303) 741-3707
---------------------------
(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 ( )
--- ---
At November 1, 1999, the issuer had 109,308 Common Shares of Beneficial Interest
and 98,073 Preferred Shares of Beneficial Interest outstanding.
Transitional small business disclosure format (check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
PART I
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<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II
-------
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 17
</TABLE>
<PAGE>
PART I
------
Certain matters discussed under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Quarterly
Report on Form 10-QSB may constitute forward-looking statements for purposes of
Section 21E of the Securities Exchange Act of 1934, as amended, and as such
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of N'Tandem Trust to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
1
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Item 1. Financial Statements
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N'TANDEM TRUST
--------------
BALANCE SHEET
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(unaudited)
<TABLE>
<CAPTION>
September 30,1999
------------------------
<S> <C>
ASSETS
- ------
Property held for investment:
Land $ 8,948,600
Buildings and improvements 36,272,700
Fixtures and equipment 276,400
------------------------
45,497,700
Less accumulated depreciation (1,764,000)
------------------------
43,733,700
Investments in joint ventures and limited partnerships 5,466,700
Cash and cash equivalents 495,300
Deferred financing costs 99,300
Other assets 946,600
------------------------
Total Assets $ 50,741,600
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Mortgage note payable $ 9,682,800
Note payable to affiliate 34,249,200
Accounts payable 42,200
Accrued expenses 2,237,700
Tenant deposits and other liabilities 1,133,300
Due to Advisor and affiliates 1,881,900
------------------------
49,227,100
------------------------
Shareholders' equity:
Preferred shares of beneficial interest, $0.01 par value,
500,000,000 shares authorized; 98,073 shares issued and outstanding 2,121,700
Common shares of beneficial interest, $0.01 par value,
100,000,000 shares authorized; 109,308 shares issued and outstanding 2,401,400
Dividends in excess of accumulated earnings (3,008,600)
------------------------
1,514,500
------------------------
Total Liabilities and Shareholders' equity $ 50,741,600
========================
</TABLE>
See accompanying notes to financial statements.
2
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N'TANDEM TRUST
--------------
STATEMENTS OF OPERATIONS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1999 1998
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<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 1,300,300 $ 465,800
Equity in earnings (losses) of joint ventures and
limited partnerships 30,900 (5,100)
Interest 500 600
Other 52,200 5,700
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1,383,900 467,000
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COSTS AND EXPENSES
- ------------------
Property operating 589,600 251,000
Interest 738,100 163,900
Depreciation 371,400 109,500
Advisory fee 103,600 39,100
General and administrative:
Related parties 3,900 7,600
Other 51,000 25,900
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1,857,600 597,000
-------------- ---------------
Net loss $ (473,700) $ (130,000)
============== ===============
Preferred dividends paid (36,800) (36,800)
============== ===============
Net loss attributable to common shares $ (510,500) $ (166,800)
============== ===============
Basic and diluted loss per common share $ (4.33) $ (1.53)
============== ===============
Dividends per common share $ 0.38 $ 0.31
============== ===============
</TABLE>
See accompanying notes to financial statements.
3
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N'TANDEM TRUST
--------------
STATEMENTS OF OPERATIONS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 2,894,200 $ 1,146,000
Equity in earnings (losses) of joint ventures and
limited partnerships 14,200 (22,100)
Interest 700 1,400
Other 128,800 13,300
-------------- ---------------
3,037,900 1,138,600
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COSTS AND EXPENSES
- ------------------
Property operating 1,412,500 552,700
Interest 1,430,600 387,000
Depreciation 750,700 259,900
Advisory fee 209,600 102,900
General and administrative:
Related parties 14,100 19,000
Other 86,000 48,200
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3,903,500 1,369,700
-------------- ---------------
Net loss $ (865,600) $ (231,100)
============== ===============
Preferred dividends paid (110,400) (110,400)
============== ===============
Net loss attributable to common shares $ (976,000) $ (341,500)
============== ===============
Basic and diluted loss per common share $ (7.92) $ (3.31)
============== ===============
Dividends per common share $ 1.13 $ 0.93
============== ===============
</TABLE>
See accompanying notes to financial statements.
4
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N'TANDEM TRUST
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STATEMENTS OF CASH FLOWS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (865,600) $ (231,100)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 750,700 259,900
Equity in (earnings) losses of joint ventures and
limited partnerships (14,200) 22,100
Joint ventures' cash distributions 14,200 (22,100)
Amortization of deferred financing costs (57,200) 8,100
Changes in operating assets and liabilities:
Other assets (477,600) (215,600)
Accounts payable 35,200 9,500
Accrued expenses 1,611,500 409,500
Tenant deposits and other liabilities 111,600 44,100
Due to Advisor and affiliates 1,154,800 114,600
-------------- ---------------
Net cash provided by operating activities 2,263,400 399,000
-------------- ---------------
Cash flows from investing activities:
Acquisition of and additions to property (28,131,600) (5,698,100)
Investment in joint ventures and limited partnerships (4,722,600) 0
Joint venture and limited partnerships cash
distributions 62,500 42,900
-------------- ---------------
Net cash used in investing activities (32,791,700) (5,655,200)
-------------- ---------------
Cash flows from financing activities:
Issuance of common shares 0 478,500
Proceeds from notes due to Chateau Communities, Inc.
for property purchase 23,597,700 5,001,500
Proceeds from notes payable 7,632,900 0
Dividends paid (233,300) (211,300)
-------------- ---------------
Net cash (used in) provided by financing activities 30,997,300 5,268,700
-------------- ---------------
Net increase (decrease) in cash and cash equivalents 469,000 12,500
Cash and cash equivalents at beginning of period 26,300 82,800
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Cash and cash equivalents at end of period $ 495,300 $ 95,300
============== ===============
</TABLE>
See accompanying notes to financial statements.
5
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N'TANDEM TRUST
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1. THE TRUST
---------
N'Tandem Trust, an unincorporated business trust (the "Trust"), was formed in
November 1991 under the laws of the State of California. The Trust was organized
to invest in existing, substantially developed and occupied manufactured home
communities. The sponsor and advisor of the Trust is The Windsor Corporation, a
California corporation (the "Advisor"). The Trust was funded through a public
offering of common shares of beneficial interest (the "Common Shares") and
preferred shares of beneficial interest, which commenced in April 1992 and
terminated in April 1993. At September 30, 1999, the Trust's portfolio was
comprised of twelve wholly-owned and seven partially-owned manufactured home
communities located in seven states.
The Trust operates so as to qualify as a real estate investment trust (a "REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"). As a REIT, the Trust is required to distribute at least 95% of its
REIT taxable income.
On October 23, 1998, at the 1998 Annual Meeting of Shareholders, the Trust's
shareholders approved, among other things, (i) the conversion of the Trust from
a finite-life entity to an infinite-life entity; and (ii) the amendment and
restatement of the Trust's Declaration of Trust (the "Amended Declaration") and
the adoption of By-laws for the Trust (collectively, the "Organizational
Amendments"). The principal purposes of the Organizational Amendments were to
convert the Trust from a finite-life to an infinite-life entity and to remove
various restrictions, limitations and other requirements contained in the
Trust's previous Declaration of Trust which are not typically found in the more
modern organizational documents of leading REITs. The Amended Declaration also
provided for changing the name of the Trust from "Windsor Real Estate Investment
Trust 8" to "N'Tandem Trust."
As a result of the approval of the Organizational Amendments, the Trust now
intends to move forward with certain transactions and to effect certain changes
including the following: (i) the Trust will complete its restructuring as an
"umbrella partnership" REIT in order to facilitate tax-free and/or tax-deferred
acquisitions of additional properties, (ii) the Trust will begin implementing a
growth-oriented business plan (the "Business Plan") intended to cause the Trust
to attain greater size and asset diversity; and (iii) if successful in the
implementation of the Business Plan, the Trust anticipates that it will seek to
list the Common Shares on a national securities exchange or NASDAQ and, if
deemed appropriate, raise additional capital through an underwritten public
offering of the Common Shares or other securities of the Trust.
Additionally, Chateau Communities, Inc., a publicly traded REIT which is one of
the largest owner/operators of manufactured home communities in the United
States ("Chateau"), has announced that the Trust will be a primary vehicle
through which Chateau will make investments in manufactured home communities
that do not fit the core asset type typical of the existing Chateau portfolio,
which is characterized by large, stable, institutional-quality, full amenitized
properties. The Trust will employ higher levels of leverage than Chateau and
will focus primarily on "lower profile assets," meaning properties that (i) are
typically not part of a portfolio of manufactured housing community properties;
(ii) are located in tertiary demographic and geographic markets; (iii) are not
managed by a nationally known manufactured home community operator; (iv) may be
smaller and are likely to have fewer amenities; and (v) have a greater
proportion of single-section homes than the typical Chateau community. The Trust
believes that its affiliation with Chateau will benefit the Trust by providing
it with access to Chateau's national organization, management team and
investment and management philosophies. Through its affiliation with Chateau,
the Trust believes that it will be exposed to a wider range of acquisition
opportunities as a result of Chateau's national organization and knowledge of
the manufactured housing community industry and will benefit from Chateau's
expertise in effectively and efficiently managing properties. At September
6
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30, 1999, Chateau held 9.8% of the Trust's outstanding shares.
The Trust believes that significant opportunities exist to acquire additional
properties that fit the investment objectives and guidelines set forth in its
Business Plan. On June 30, 1999, the Trust, through its limited partnership
subsidiary, N'Tandem Properties, L.P., acquired one wholly-owned manufactured
home community and partial ownership interests in six other manufactured home
communities (together, the "Acquired Properties") from Windsor Park Properties
4, A California Limited Partnership ("WPP4"). In addition, the Trust is
currently in separate discussions with each of Windsor Park Properties 3, A
California Limited Partnership, and Windsor Park Properties 6, A California
Limited Partnership, regarding a possible sale of their assets, which consist of
wholly-owned and partially-owned manufactured home communities, to the Trust.
The Trust anticipates that it will focus on acquisitions where the Trust
believes there is substantial opportunity to improve operational and financial
results or where for some reason, because of poor management or otherwise, a
property is operating substantially below its potential. The Trust anticipates
that the funds required to implement its Business Plan are likely to come from
(i) additional investments from Chateau or unaffiliated third parties and (ii)
traditional mortgage financing or refinancing or sales of equity and debt
securities. In addition, the Trust will seek to engage in consolidation and
acquisition transactions with other owners of manufactured home communities,
which meet the Trust's property and acquisition criteria, using its equity
securities or limited partner units of N'Tandem Properties, L.P. to facilitate
such transactions.
NOTE 2. BASIS OF PRESENTATION
---------------------
The balance sheet at September 30, 1999 and the related statements of operations
for the three and nine months ended September 30, 1999 and 1998 and the
statements of cash flows for the nine months ended September 30, 1999 and 1998
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/A for the year ended December 31, 1998.
NOTE 3. ACQUISITIONS OF PROPERTY
------------------------
During the first nine months of 1999, the Trust acquired six manufactured home
communities and ownership interests in six other manufactured home communities.
On May 11, 1999, the Trust acquired Southpointe Village, a 282-homesite
community located in Albuquerque, New Mexico. The purchase price was $6,200,000,
of which $6,044,800 was borrowed from Chateau pursuant to a note entered into
between the parties. This note bears interest at 1% per annum above the prime
rate established by Bank One, N.A.
On June 30, 1999, the Trust acquired the Acquired Properties from WPP 4. The
Acquired Properties consisted of:
. Sunset Vista, a 207-site manufactured home community, located in Magna,
Utah;
. a 60% ownership interest in Big Country Estates, a 255-site manufactured
home community, located in Cheyenne, Wyoming;
. a 75% ownership interest in Harmony Ranch, a 193-site manufactured home
community, located in Thonotosassa, Florida;
. a 33% ownership interest in Rancho Margate, a 245-site manufactured home
community, located in
7
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Margate, Florida;
. a 33% ownership interest in Winter Haven, a 238-site manufactured home
community, located in Winter Haven, Florida;
. a 25% ownership interest in Apache East, a 123-site manufactured home
community, located in Apache Junction, Arizona; and
. a 25% ownership interest in Denali Park Estates, a 162-site manufactured
home community, located in Apache Junction, Arizona.
The aggregate purchase price for the Acquired Properties was $8,509,850, of
which $8,433,800 was borrowed from Chateau pursuant to a note entered into
between Chateau and the Trust and the remainder of the purchase price was
related to adjustments and prorations at closing. The note bears interest at 1%
per annum above the prime rate established by Bank One, N.A. In connection with
the acquisition of the Acquired Properties, N'Tandem also assumed debt
attributable to the six partial ownership interests in the amount of $3,361,900.
On July 1, 1999, the Trust acquired Longview Mobile Home Community, a
manufactured home community containing 93 homesites located in Albuquerque, New
Mexico, for $1.8 million. To purchase Longview, N'Tandem borrowed $1,767,300
from Chateau at an annual interest rate equal to 1% per annum above the prime
rate established by Bank One, N.A.
On September 15, 1999, the Trust acquired Aztec Village, a manufactured home
community containing 163 homesites located in Albuquerque, New Mexico, and The
Village Park, a manufactured home community containing 180 homesites located in
Albuquerque, New Mexico, for an aggregate of $11.3 million. To purchase these
communities, N'Tandem borrowed $4,314,400 from Chateau at an annual interest
rate equal the prime rate established by Bank One, N.A. Additionally, in
connection with the acquisition of these communities the Trust assumed two
promissory notes in the amounts of $3,199,300 and $3,590,100 payable to Anchor
National Life Insurance Company. The notes bear interest at 8.69% per annum and
are due October 1, 2003. The notes are cross-collateralized by the real
property.
On September 30, 1999, the Trust acquired Sea Pines, a manufactured home
community containing 400 homesites located in Mobile, Alabama for $4 million.
To purchase Sea Pines, N'Tandem borrowed $3,017,000 from Chateau at an annual
interest rate equal to 1% per annum above the prime rate established by Bank
One, N.A. Additionally, the Trust issued a promissory note in the amount of
$1,100,000, payable to Compass Bank. The note shall be paid in six consecutive
annual installments as follows: the first five payments shall be in the amount
of $200,000 and the sixth payment shall be in the amount of $100,000. The first
installment shall be payable on September 30, 2000, and each successive
installment shall be payable on the same day of each consecutive year thereafter
until paid in full.
NOTE 4. INVESTMENTS IN JOINT VENTURES AND LIMITED PARTNERSHIPS
------------------------------------------------------
The Trust's investments in joint ventures and limited partnerships consist of
interests in seven manufactured home communities at September 30, 1999. The
combined condensed results of operations of the joint venture and limited
partnership properties for the nine months ended September 30, 1999 and 1998 are
as follows:
8
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<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Total revenues $ 1,682,600 $ 915,600
Expenses:
Property operating 862,600 519,600
Interest 444,600 334,900
Depreciation 367,700 206,200
General and administrative 17,300 7,200
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1,692,200 1,067,900
------------- -------------
Net income (loss) $ (9,600) $ (152,300)
============= =============
</TABLE>
NOTE 5. BASIC AND DILUTED LOSS PER COMMON SHARE
---------------------------------------
Basic and diluted 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 holders of Common Shares. The weighted average number of
Common Shares outstanding during the three and nine months ended September 30,
1999 was 109,308; and during the three and nine months ended September 30, 1998,
the weighted average was 109,308 and 103,069, respectively.
NOTE 6. DEBT
----
The following table sets forth certain information regarding debt at September
30, 1999.
<TABLE>
<CAPTION>
Interest Rate Maturity Principal Balance
------------- -------- -----------------
<S> <C> <C> <C>
Variable rate mortgage debt 8.47% 2002 2,050,000
Mortgage notes 8.69% 2003 6,789,300
Promissory note 8.75% 2006 843,500
Secured notes to Chateau 9.25% 1999 32,898,300
Unsecured notes to Chateau 9.25% 1999 1,350,900
-----------
$43,932,000
===========
</TABLE>
NOTE 7. RELATED PARTY TRANSACTIONS
---------------------------
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
for the three and nine months ended September 30, 1999 was $103,600 and
$209,600, respectively, and $39,100 and $102,900 for the three and nine months
ended September 30,1998, respectively.
Chateau and/or its predecessor has been providing property management services
to the Trust 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 $57,200 and $112,300
for the three and nine months ended September 30, 1999, respectively, and
$22,900 and
9
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$55,600 for the three and nine months ended September 30, 1998, respectively.
In addition certain direct expenses are paid by Chateau on behalf of the Trust
and then reimbursed by the Trust. These amounts were $3,900 and $14,100 for the
three and nine months ended September 30, 1999, respectively, and $7,600 and
$19,000 for the three and nine months ended September 30, 1998, respectively.
For additional information concerning the Trust's relationship and transactions
with Chateau, see Notes 1 and 3 herein.
10
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Item 2.
- ------
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Form 10-QSB.
Three months ended September 30, 1999 as compared to three months ended
- -----------------------------------------------------------------------
September 30, 1998
- ------------------
Results of Operations
- ---------------------
The results of operations for the three months ended September 30, 1999 and 1998
are not directly comparable due to the purchase of the Southern, Lexington, and
Suburban communities in December 1998, the purchase of the Southpointe Village
community in May 1999, the purchase of the Acquired Properties in June 1999, the
purchase of the Longview community on July 1, 1999, the purchase of the Aztec
Village and Village Park communities on September 15, 1999, and the purchase of
the Sea Pines community on September 30, 1999. The Trust incurred a net loss of
$473,700 and $130,000 for the three months ended September 30, 1999 and 1998,
respectively. The net loss per Common Share was $4.33 in 1999 compared to a net
loss of $1.53 in 1998.
As a result of the 1998 and 1999 acquisitions, all major revenue and expense
categories increased in the third quarter of 1999, specifically rent and
utilities revenue, property operating costs, advisory fee expense and
depreciation.
Equity in earnings (losses) of joint ventures, which represents the Trust's
share of the net income (loss) of seven joint venture properties increased from
a loss of $5,100 in 1998 to income of $30,900 in 1999.
Interest expense increased from $163,900 in 1998 to $738,100 in 1999, due to the
1998 and 1999 acquisitions.
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 $39,100 in 1998 to $103,600 for the third quarter of 1999, due to
the 1998 and 1999 acquisitions.
General and administrative expenses increased from $33,500 in 1998 to $54,900 in
1999 due mainly to an increase in professional fees and costs incurred to
appraise three of the Trust's properties.
Nine months ended September 30, 1999 as compared to nine months ended September
- -------------------------------------------------------------------------------
30, 1998
- --------
Results of Operations
- ---------------------
The results of operations for the nine months ended September 30, 1999 and 1998
are not directly comparable due to the purchase of the Woodland Hills community
in March 1998, the purchase of the Southern, Lexington, and Suburban communities
in December 1998, the purchase of the Southpointe Village community in May 1999,
the purchase of the Acquired Properties in June 30, 1999, the purchase of the
Longview community on July 1, 1999, the purchase of the Aztec Village and
Village Park communities on September 15, 1999, and the purchase of the Sea
Pines community on September 30, 1999. The Trust incurred a net loss of
$865,600 and $231,100 for the nine months ended September 30, 1999 and 1998,
respectively. The net loss per Common Share was $7.92 in 1999 compared to a net
loss of $3.31 in 1998.
11
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As a result of the 1998 and 1999 acquisitions, all major revenue and expense
categories increased in the first nine months of 1999, specifically rent and
utilities revenue, property operating costs, advisory fee expense and
depreciation.
Equity in earnings (losses) of joint ventures, which represents the Trust's
share of the net income (loss) of seven joint venture properties increased from
a loss of $22,100 in 1998 to income of $14,200 in 1999.
Interest expense increased from $387,000 in 1998 to $1,430,600 in 1999, due to
the 1998 and 1999 acquisitions.
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 $102,900 in 1998 to $209,600 in 1999, due to the 1998 and 1999
acquisitions.
General and administrative expenses increased from $67,200 in 1998 to $100,100
in 1999 due mainly to an increase in professional fees and costs incurred to
appraise three of the Trust's properties.
Liquidity and Capital Resources
- -------------------------------
The Trust's principal uses of its liquidity and capital resources have
historically been for distributions to shareholders, property acquisitions,
payment of advisory and management fees and payment of debt service. To
maintain its qualification as a REIT under the Code, the Trust is required to
distribute to its shareholders at least 95% of its "Real Estate Investment Trust
Taxable Income" as defined in the Internal Revenue Code of 1986. The Trust
declared a quarterly distribution on its Common Shares of $.38 per share in each
of the first three quarters of 1999 and 1998. In addition, the Trust paid
quarterly distributions on its Preferred Shares of $.38 per share in each of the
first three quarters of 1999 and 1998. Future distributions on the Common Shares
will be determined based on actual results of operations and cash available for
distribution.
The Trust's principal source of liquidity is its cash flow generated from the
operation of its real estate investments. Net cash provided by operating
activities was $2,263,400 for the nine months ended September 30, 1999. At
September 30, 1999, the Trust's cash and restricted cash amounted to
approximately $495,300.
During 1999, the Trust has acquired six manufactured home communities and
partial ownership interests in six other manufactured home communities.
On May 11, 1999, the Trust acquired Southpointe Village, a 282-homesite
community located in Albuquerque, New Mexico. The purchase price was $6,200,000,
of which $6,044,800 was borrowed from Chateau pursuant to a note entered into
between the parties. This note bears interest at 1% per annum above the prime
rate established by Bank One, N.A.
On June 30, 1999, the Trust acquired the Acquired Properties from WPP 4. The
Acquired Properties consisted of:
. Sunset Vista, a 207-site manufactured home community, located in Magna,
Utah;
. a 60% ownership interest in Big Country Estates, a 255-site manufactured
home community, located in Cheyenne, Wyoming;
. a 75% ownership interest in Harmony Ranch, a 193-site manufactured home
community, located in Thonotosassa, Florida;
. a 33% ownership interest in Rancho Margate, a 245-site manufactured home
community, located in
12
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Margate, Florida;
. a 33% ownership interest in Winter Haven, a 238-site manufactured home
community, located in Winter Haven, Florida;
. a 25% ownership interest in Apache East, a 123-site manufactured home
community, located in Apache Junction, Arizona; and
. a 25% ownership interest in Denali Park Estate, a 162-site manufactured
home community, located in Apache Junction, Arizona.
The aggregate purchase price for the Acquired Properties was $8,509,850, of
which $8,433,800 was borrowed from Chateau pursuant to a note entered into
between Chateau and the Trust and the remainder of the purchase price was
related to adjustments and prorations at closing. The note bears interest at 1%
per annum above the prime rate established by Bank One, N.A. In connection with
the acquisition of the Acquired Properties, N'Tandem also assumed debt
attributable to the six partial ownership interests in the amount of $3,361,900.
On July 1, 1999, the Trust acquired Longview Mobile Home Community, a
manufactured home community containing 93 homesites located in Albuquerque, New
Mexico, for $1.8 million. To purchase Longview, N'Tandem borrowed $1,767,300
from Chateau at an annual interest rate equal to 1% per annum above the prime
rate established by Bank One, N.A.
On September 15, 1999, the Trust acquired Aztec Village, a manufactured home
community containing 163 homesites located in Albuquerque, New Mexico, and The
Village Park, a manufactured home community containing 180 homesites located in
Albuquerque, New Mexico, for an aggregate of $11.3 million. To purchase these
communities, N'Tandem borrowed $4,314,400 from Chateau at an annual interest
rate equal the prime rate established by Bank One, N.A. Additionally, the Trust
assumed two promissory notes in the amounts of $3,199,300 and $3,590,100,
payable to Anchor National Life Insurance Company. The notes bear interest at
8.69% per annum and are due October 1, 2003. The notes are cross-collateralized
by the real property.
On September 30, 1999, the Trust acquired Sea Pines, a manufactured home
community containing 400 homesites located in Mobile, Alabama for $4 million.
To purchase Sea Pines, N'Tandem borrowed $3,017,000 from Chateau at an annual
interest rate equal to 1% per annum above the prime rate established by Bank
One, N.A. Additionally, in connection with the acquisition of these
communities, the Trust issued a promissory note in the amount of $1,100,000,
payable to Compass Bank. The note shall be paid in six consecutive annual
installments as follows: the first five payments shall be in the amount of
$200,000 and the sixth payment shall be in the amount of $100,000. The first
installment shall be payable on September 30, 2000, and each successive
installment shall be payable on the same day of each consecutive year thereafter
until paid in full.
The Trust's principal long-term liquidity requirements will be the repayment of
principal on its outstanding mortgage debt and the acquisition of additional
properties pursuant to the Trust's Business Plan. At September 30, 1999, the
Trust's total mortgage debt, including its proportionate share of joint venture
and limited partnership debt, was $43,932,000, consisting of fixed rate and
variable rate debt. At September 30, 1999, $34,249,200 of the debt consisted of
secured and unsecured notes payable to Chateau. The average rate of interest on
the fixed rate and variable rate debt was 8.9% and 8.7%, respectively, at
September 30, 1999. The Trust and affiliated entities are jointly and severally
liable for the full amounts of the loans obtained jointly.
The Trust intends to fund the repayment of its mortgage debt with equity or
other debt financings, including public financings. In addition, future
acquisitions of properties will be funded through investments by Chateau or by
other third parties in the Trust or with equity or other debt financings,
including public financings. The availability of such investments or such
financings will influence the Trust's decision to proceed with, and the pace of,
future acquisition activities.
13
<PAGE>
Inflation
- ---------
All of the leases or terms of tenants' occupancies at the properties allow for
at least annual rental adjustments. In addition, all of the leases are month-
to-month and enable the Trust to seek market rentals upon reletting the sites.
Such leases generally minimize the risk to the Trust of any adverse effect of
inflation.
Year 2000 Compliance
- --------------------
The Advisor has assessed the impact of the year 2000 issue on its reporting
systems and operations. The year 2000 issue exists because many computer
systems and applications abbreviate dates by eliminating the first two digits of
the year, assuming that these two digits are always 19. As a result, date-
sensitive computer programs may recognize a date using "00" as the year 1900
rather than the year 2000. Unless, corrected, the potential exists for computer
system failures or incorrect processing of financial and operational
information, which could disrupt operations
Substantially all of the computer systems and applications and operating systems
in use by the Advisor and Chateau and properties have been, or are in the
process of being upgraded and modified. The Trust is of the opinion that, in
connection with those upgrades and modifications, it, as well as the Advisor and
Chateau, have addressed applicable year 2000 issues as they might affect the
computer systems and applications in use by the Advisor and Chateau and located
at the Trust's properties. The Trust anticipates that implementation of
solutions to any year 2000 issue which it may discover will require the
expenditure of sums which the Trust does not expect to be material.
The Trust is exposed to the risk that one or more of its vendors or service
providers may experience year 2000 problems which impact the ability of such
vendor or service provider to provide goods and services. Due to the
availability of alternative suppliers, this is not considered as significant a
risk with respect to the suppliers of goods. The disruption of certain
services, however, such as utilities, could, depending upon the extent of the
disruption, have a material adverse impact on the Trust's operations. To date,
the Trust is not aware of any vendor or service provider year 2000 issue that
management believes would have a material adverse impact on the Trust's
operations if the Trust, however, has no means of ensuring that its vendors or
service providers will be year 2000 ready. The inability of vendors or service
providers to complete the year 2000 resolution process in a timely fashion could
have an adverse impact on the Trust and the effect of non-compliance by vendors
or service providers is not determinable at this time. Residents who pay rent
to the Trust do not pose Year 2000 problems for the Trust given the type and
nature of the Trust's properties and residents.
Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from year 2000 issues, or
in certain industries, such as commercial or investment banks, could also have
an adverse impact on the Trust. The likelihood and effect of such disruptions
is not determinable at this time.
The Advisor expects to have all systems appropriately modified before any
significant processing malfunctions could occur and does not expect the year
2000 issue will materially impact the financial condition or operations of the
Trust.
14
<PAGE>
PART II
-------
Item 1. LEGAL PROCEEDINGS
-----------------
In connection with the Trust's acquisition of the Acquired Properties from WPP
4, a class action and derivative complaint (the "Complaint") entitled Ira
Gaines, on behalf of himself and others similarly situated, as plaintiff, vs.
The Windsor Corporation, John A. Coseo Jr., C.G. Kellogg, Gary P. McDaniel and
Steven G. Waite, as defendants, and WPP 4, as nominal defendant (collectively,
the "Defendants"), was filed on May 10, 1999 in the Superior Court of the State
of California, County of San Diego. The Complaint states causes of action
alleging the following: (i) wrongful failure to liquidate timely WPP 4 in that
WPP 4's term expired on December 31, 1997 and the Defendants failed to engage in
sustained efforts to liquidate the remaining assets, thus unnecessarily tying up
the limited partners' money for longer than was contemplated or allowed under
the partnership agreement, (ii) breach of fiduciary duty owed by the Defendants
to the limited partners and WPP 4 in that Defendants failed to take steps to
ensure the entire fairness of the transaction and that the selling prices for
WPP 4's assets do not fairly and adequately represent their present value; (iii)
breach of the Defendants' contractual duties owed to the limited partners and
WPP 4 in that the partnership agreement prohibits sales of the property to a
sponsor of WPP 4. In the lawsuit, the plaintiff is seeking relief in the form
of monetary damages and an award of expenses, and a dissolution of WPP 4 and the
appointment of an independent liquidating trustee to liquidate WPP 4's assets.
Thus far, the Trust has not been named as a defendant to the Complaint. As a
result of the Complaint, it is not anticipated that there will be a material
adverse effect on the Trust or its assets.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits and Index of Exhibits
3.1) Amended and Restated Declaration of Trust*
3.2) By-laws of the Company**
10.1) 1998 Equity Compensation Plan***
10.2) Investment Agreement by and between Windsor Real Estate
Investment Trust 8 and Chateau Communities, Inc.****
21) List of Subsidiaries*****
27) Financial Data Schedule
__________
* Filed as Appendix A to the Trust's Proxy Statement for its 1998 Annual
Meeting of Shareholders filed with the Commission on September 17, 1998.
** Filed as Appendix B to the Trust's Proxy Statement for its 1998 Annual
Meeting of Shareholders filed with the Commission on September 17, 1998.
*** Filed as an attachment the Trust's Proxy Statement for its 1998 Annual
Meeting of Shareholders filed with the Commission on September 17, 1998.
**** Filed as Exhibit 7.1 to Schedule 13D (Amendment No. 2) of Chateau
Communities, Inc. filed with the Commission on December 18, 1998.
***** Filed as Exhibit 21 to the Trust's Annual Report on Form 10-KSB/A for
the year ended December 31, 1998.
b) Reports on Form 8-K
On July 15, 1999, the Trust filed a current report on Form 8-K, dated July 2,
1999, reporting under Item 2, the acquisition of the Longview Mobile Home
Community located in Albuquerque, New Mexico and containing the financial
statements relating to the Longview acquisition and the acquisition reported on
the Form 8-K, dated May 20, 1999.
The financial statements filed were as follows:
15
<PAGE>
Historical Summary of Revenues and Direct Operating Expenses for
Southpointe Village Manufactured Home Community for the year ended
December 31, 1998 (Audited) and three months ended March 31, 1999
(Unaudited).
Historical Summary of Revenues and Direct Operating Expenses for
Longview Mobile Home Community for the year ended December 31, 1998
(Audited) and three months ended March 31, 1999 (Unaudited).
The pro forma financial statements filed were as follows:
Pro Forma Condensed Statements of Operations of the Trust for the
three months ended March 31, 1999 and for the year ended December 31,
1998 (Unaudited).
Pro Forma Condensed Balance Sheet of the Trust as of March 31, 1999
(Unaudited).
On July 15, 1999, the Trust filed a current report on Form 8-K, dated June 30,
1999, reporting under Item 2, the acquisition of the Acquired Properties.
On August 23, 1999, the Trust filed a current report on Form 8-K/A amending the
financial statements contained in the current report on Form 8-K filed on July
15, 1999.
The financial statements filed were as follows:
Balance Sheets of Windsor Park Properties 4, A California Limited
Partnership, as of December 31, 1998 (Audited) and March 31, 1999
(Unaudited)
Statements of Operations for the years ended December 31, 1998 and
1997 (Audited) and the three months ended March 31, 1999 and 1998
(Unaudited)
Statements of Cash Flows for the years ended December 31, 1998 and
1997 (Audited) and the three months ended March 31, 1999 and 1998
(Unaudited)
The pro forma financial statements filed were as follows:
Pro Forma Condensed Statements of Operations of the Trust for the
three months ended March 31, 1999 and for the year ended December 31,
1998 (Unaudited).
Pro Forma Condensed Balance Sheet of the Trust as of March 31, 1999
(Unaudited).
On September 27, 1999, the Trust filed a Current Report on Form 8-K, dated
September 15, 1999, reporting under Item 2, the acquisition of Aztec Village and
Village Park, located in Albuquerque, New Mexico.
16
<PAGE>
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.
N'TANDEM TRUST
By /s/ Gary P. McDaniel
-----------------------
GARY P. MCDANIEL
Trustee
Date: November 15, 1999
17
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 495,300
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 45,497,700
<DEPRECIATION> (1,764,000)
<TOTAL-ASSETS> 50,741,600
<CURRENT-LIABILITIES> 0
<BONDS> 43,932,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,741,600
<SALES> 0
<TOTAL-REVENUES> 3,037,900
<CGS> 0
<TOTAL-COSTS> 1,412,500
<OTHER-EXPENSES> 1,060,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,430,600
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (865,600)
<EPS-BASIC> (7.92)
<EPS-DILUTED> (7.92)
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