<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 June 30, 2000
-----------------
[ ] 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 Identification No.)
incorporation or organization)
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 May 1, 2000, 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
------
Page
----
Item 1. Financial Statements 2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II
-------
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
<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 27A of the Securities Act of 1933, as amended, and 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
<PAGE>
Item 1. Financial Statements
-------
N'TANDEM TRUST
--------------
CONSOLIDATED BALANCE SHEET
--------------------------
(unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 2000
------ --------------
<S> <C>
Property held for investment, net $ 58,890,500
Investments in joint ventures and limited partnerships 10,902,000
Cash and cash equivalents 1,413,100
Restricted cash 788,500
Deferred financing costs, net 1,187,300
Other assets 880,100
---------------
Total Assets $ 74,061,500
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Mortgage notes payable $ 39,221,600
Line of credit 9,593,500
Note payable to Chateau Communities, Inc. 19,972,400
Accounts payable 63,000
Accrued expenses 2,251,300
Other liabilities 1,883,400
Due to general partners and affiliates 2,557,300
---------------
Total Liabilities 75,542,500
---------------
Shareholders' Equity:
Preferred shares of beneficial interest, $0.01 par value; unlimited
shares authorized; 98,073 shares issued and outstanding 2,121,700
Common shares of beneficial interest, $0.01 par value; unlimited
shares authorized; 109,308 shares issued and outstanding 2,401,400
Dividends in excess of accumulated earnings (6,004,100)
---------------
Total Shareholders' Equity (1,481,000)
---------------
Total Liabilities and Shareholders' Equity $ 74,061,500
===============
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
N'TANDEM TRUST
--------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
------------------------------------
2000 1999
REVENUES ------------- ------------
--------
<S> <C> <C>
Rent and utilities $ 2,056,000 $ 859,400
Equity in earnings (losses) of joint ventures and limited
partnerships 28,000 (8,400)
Interest 7,600 100
Other 56,700 38,500
------------- ------------
2,148,300 889,600
------------- ------------
COSTS AND EXPENSES
------------------
Property operating expenses 895,900 425,900
Interest 1,435,100 391,100
Depreciation 599,500 220,100
Advisory fee 168,200 57,000
General and administrative:
Related parties - 2,400
Other 34,200 21,900
------------- ------------
3,132,900 1,118,400
------------- ------------
Net loss $ (984,600) $ (228,800)
------------- ------------
Preferred dividends paid $ (36,800) $ (36,800)
------------- ------------
Net loss attributable to common shares $ (1,021,400) $ (265,600)
============= ============
Basic and diluted loss per common share $ (9.34) $ (2.43)
============= ============
Dividends per common share $ 0.38 $ 0.38
============= ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
N'TANDEM TRUST
--------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------
2000 1999
REVENUES -------------- --------------
--------
<S> <C> <C>
Rent and utilities $ 3,835,100 $ 1,594,000
Equity in losses of joint ventures and limited
partnerships (6,800) (16,700)
Interest 7,700 100
Other 112,100 76,700
-------------- --------------
3,948,100 1,654,100
-------------- --------------
COSTS AND EXPENSES
------------------
Property operating expenses 1,736,400 822,800
Interest 2,573,700 692,600
Depreciation 1,082,300 379,300
Advisory fee 306,600 106,100
General and administrative:
Related parties - 10,300
Other 69,200 35,000
-------------- --------------
5,768,200 2,046,100
-------------- --------------
Net loss $ (1,820,100) $ (392,000)
-------------- --------------
Preferred dividends paid $ (73,600) $ (73,600)
-------------- --------------
Net loss attributable to common shares $ (1,893,700) $ (465,600)
============== ==============
Basic and diluted loss per common share $ (17.32) $ (4.26)
============== ==============
Dividends per common share $ .75 $ 0.75
============== ==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
N'TANDEM TRUST
--------------
CONSOLIDATED STATEMENTS OF STATEMENTS OF CASH FLOWS
---------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------
2000 1999
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,820,100) $ (392,000)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 1,082,300 379,300
Equity in losses of joint ventures
and limited partnerships 6,800 16,700
Joint ventures' cash distributions (6,800) (16,700)
Amortization of deferred financing costs 89,100 7,000
Changes in operating assets and liabilities:
Increase in other assets (244,700) (136,200)
Increase in accounts payable 51,600 9,600
Increase in accrued expenses 564,600 704,900
(Decrease) increase in other liabilities (47,100) 70,400
Increase in due to advisor and affiliates 1,047,400 404,500
--------------- -------------
Net cash provided by operating activities 723,100 1,047,500
--------------- -------------
Cash flows from investing activities:
Acquisition of and additions to property (11,013,300) (10,420,600)
Increase in escrow accounts (572,000) -
Joint ventures' and limited partnerships' cash distributions 253,700 16,700
Investment in joint ventures and limited partnerships (7,970,800) (4,722,500)
--------------- -------------
Net cash used in investing activities (19,302,400) (15,126,400)
--------------- -------------
Cash flows from financing activities:
Dividends paid (155,600) (155,600)
Proceeds from mortgages payable 31,300,000 -
Proceeds from line of credit 11,823,400 -
Repayment of line of credit (17,229,900) -
Principal payments (2,102,000) -
Loan origination fees (716,000) (50,000)
Repayment of note due to Chateau Communities, Inc. (3,540,200) -
Proceeds from note due to Chateau Communities Inc. - 14,478,700
--------------- -------------
Net cash provided by financing activities 19,379,700 14,273,100
--------------- -------------
Net increase in cash and cash equivalents 800,400 194,200
Cash and cash equivalents at beginning of period 612,700 26,300
--------------- -------------
Cash and cash equivalents at end of period $ 1,413,100 $ 220,500
=============== =============
Non-cash investing and financing activities:
Assumption of mortgage payable $ 1,200,000 $ -
Increase in property due to acquisition of
joint venture interests 3,124,900 -
Accrual of costs related to the acquisition of the
2000 Acquired Properties 1,146,000 -
Accrual of fees due to advisor 1,092,700 -
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
N'TANDEM TRUST
NOTES TO THE 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 June 30, 2000, the Trust's portfolio was comprised
of 19 wholly-owned and eight partially-owned manufactured home communities
located in eleven 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 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 continue 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 underwritten public
offerings and private offerings 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
6
<PAGE>
and will benefit from Chateau's expertise in effectively and efficiently
managing properties. At June 30, 2000, 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. During 1999, the Trust, through its limited partnership
subsidiary, N'Tandem Properties, L.P., acquired six wholly-owned manufactured
home communities and partial ownership interests in six other manufactured home
communities (together, the "1999 Acquired Properties"). In addition, during the
first half of 2000, the Trust, through N'Tandem Properties L.P., acquired, in
separate transactions, five wholly-owned manufactured home communities and
partial ownership interests in nine other manufactured home communities from
Windsor Park Properties 3, A California Limited Partnership ("WPP 3"), and
Windsor Park Properties 6, A California Limited Partnership ("WPP 6"). As a
result of these acquisitions and the combination of the Trust's partial
ownership interests into wholly-owned manufactured home communities, the Trust
currently owns 19 wholly-owned manufactured home communities and partial
ownership interests in eight other manufactured home communities.
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 June 30, 2000 and the related statements of operations for
the three and six months ended June 30, 2000 and 1999 and the statements of cash
flows for the six months ended June 30, 2000 and 1999 are unaudited. However,
in the opinion of the Advisor, they contain all adjustments, of a normal
recurring nature, necessary for a fair presentation of such financial
statements. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented as permitted by Form 10-QSB and
do not contain certain information included in the Trust's annual financial
statements and notes on Form 10-KSB for the year ended December 31, 1999.
Certain reclassifications of prior year information have been made to conform to
current year presentation.
NOTE 3. ACQUISITIONS OF PROPERTY
------------------------
On May 31, 2000, the Trust, through its limited partnership subsidiary, N'Tandem
Properties, L.P., acquired, in two separate transactions, four manufactured home
communities and partial ownership interests in four other manufactured home
communities (collectively, the "WPP 3 Properties") from WPP 3, and one
manufactured home community and partial ownership interests in five other
manufactured home communities (collectively, the "WPP 6 Properties" and,
together with the WPP 3 Properties, the "2000 Acquired Properties") from WPP 6.
Both WPP 3 and WPP 6 are affiliates of the Trust.
The WPP 3 Properties consisted of:
. Ponderosa, a 148-site manufactured home community, located in
Indianapolis, Indiana;
. The Pines, a 204-site manufactured home community, located in
Charleston, South Carolina;
7
<PAGE>
. Shady Hills, a 249-site manufactured home community, located in Ladson,
Tennessee;
. Trailmont, a 131-site manufactured home community, located in Nashville,
Tennessee;
. a 40% ownership interest in Big Country Estates, a 253-site manufactured
home community, located in Cheyenne, Wyoming;
. a 29% ownership interest in Apache East, a 123-site manufactured home
community, located in Apache Junction, Arizona;
. a 29% ownership interest in Denali Park Estates, a 162-site manufactured
home community, located in Apache Junction, Arizona; and
. a 25% ownership interest in Harmony Ranch, a 193-site manufactured home
community, located in Thonotosassa, Florida.
The WPP 6 Properties consisted of:
. Chisholm Creek, a 251-site manufactured home community, located in
Wichita, Kansas;
. a 58% ownership interest in Town and Country Estates, a 320-site
manufactured home community, located in Tucson, Arizona;
. a 44% ownership interest in Carefree Village, a 406-site manufactured
home community, located in Tampa, Florida;
. a 41% ownership interest in Rancho Margate, a 245-site manufactured home
community, located in Margate, Florida;
. a 41% ownership interest in Winter Haven, a 238-site manufactured home
community, located in Winter Haven, Florida; and
. a 31% ownership interest in Garden Walk, a 484-site manufactured home
community, located in Palm Beach Gardens, Florida.
The aggregate purchase price for the 2000 Acquired Properties was approximately
$25,989,600, of which $11 million was borrowed from SunAmerica Life Insurance
Company ("SunAmerica") pursuant to mortgage indebtedness on six of the Trust's
properties, a $1.2 million mortgage was assumed, and the remainder of the
purchase price was funded through the Trust's acquisition line of credit with US
Bank N.A. In connection with the acquisition of the 2000 Acquired Properties,
the Trust also assumed debt attributable to the nine partial ownership interests
in the amount of $7,162,000.
The following unaudited pro forma income statement information has been prepared
as if the 2000 Acquired Properties had been acquired on January 1, 1999. The
pro forma income statement is not indicative of the results which actually would
have occurred if these acquisitions had been consummated on January 1, 1999.
Six Months Ended June 30,
-------------------------
2000 1999
------------ ------------
Revenues $ 4,997,300 $ 1,768,800
============ ============
Total Expenses $ 7,425,400 $ 2,621,200
============ ============
Net loss attributable to common shares $ (2,428,100) $ (889,200)
============ ============
Basic and diluted loss per common share $ (22.89) $ (8.13)
============ ============
8
<PAGE>
NOTE 4. INVESTMENTS IN JOINT VENTURES AND LIMITED PARTNERSHIPS
------------------------------------------------------
The Trust's investments in joint ventures and limited partnerships consist of
interests in eight and seven manufactured home communities at June 30, 2000 and
1999, respectively. The combined condensed results of operations of the joint
venture and limited partnership properties for the six months ended June 30,
2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Results of Operations 2000 1999
--------------------- ----------------------- -----------------------
<S> <C> <C>
Property revenues $ 1,949,900 $ 629,100
----------------------- -----------------------
Expenses:
Property operating 998,700 358,900
Interest 526,900 200,100
Depreciation 337,900 140,300
General and Administrative 14,100 5,500
----------------------- -----------------------
1,877,600 704,800
----------------------- -----------------------
Net income (loss) $ 72,300 $ (75,700)
======================= =======================
</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 loss available
to the holders of common shares. The weighted average number of common shares
outstanding during the three and six months ended June 30, 2000 and 1999 was
109,308.
NOTE 6. DEBT
----
The following table sets forth certain information regarding the Trust's
outstanding indebtedness at June 30, 2000.
<TABLE>
<CAPTION>
Interest Maturity Principal
Rate Date Balance
-------------------------------------------
<S> <C> <C> <C>
Mortgage notes 8.69% 2003 $ 6,741,100
8.56% 2005 20,280,500
8.60% 2005 11,000,000
8.87% 2002 1,200,000
Promissory note 8.75% 2006 875,500 (1)
Line of credit 7.12% 2001 9,593,500
Unsecured notes to Chateau 10.00% 2001 19,972,400
-----------------
$ 69,663,000
=================
</TABLE>
_________________________________________
(1) Amount included in Other liabilities
9
<PAGE>
On May 31, 2000, the Trust obtained $11 million of mortgage financing from
SunAmerica secured by six of the Trust's wholly-owned properties. The loans bear
interest at 8.60% and mature on May 31, 2005. The net proceeds from the
financing were used towards the funding of the acquisition of the 2000 Acquired
Properties. Also on May 31, 2000 in conjunction with the acquisition of the 2000
Acquired Properties, the Trust assumed a $1.2 million mortgage payable, and drew
$7.4 million on its line of credit.
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 six months ended June 30, 2000 was $168,200 and $306,600,
respectively; and $57,000 and $106,100 for the three and six months ended June
30, 1999, 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 $91,500 and $171,000 for the
three and six months ended June 30, 2000, respectively, and $29,500 and $55,500
for the three and six months ended June 30, 1999, respectively. In addition,
certain direct expenses are paid by Chateau on behalf of the Trust and then
reimbursed by the Trust. These amounts were $210,900 and $402,107 for the three
and six months ended June 30, 2000, respectively, and $84,900 and $153,900 for
the three and six months ended June 30, 1999, respectively.
In conjunction with the acquisition by the Trust of the 2000 Acquired
Properties, the Trust recorded a $779,700 acquisition fee payable to Chateau
which was capitalized as part of the acquisition price of the 2000 Acquired
Properties.
In conjunction with the May 31, 2000 SunAmerica financing, the Trust recorded an
$110,000 subordination fee payable to Chateau.
For additional information concerning the Trust's relationship and transactions
with Chateau, see Note 1.
10
<PAGE>
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 June 30, 2000 as compared to three months ended June 30, 1999
--------------------------------------------------------------------------------
Results of Operations
---------------------
The results of operations for the three months ended June 30, 2000 and 1999 are
not directly comparable due to the acquisition of the 1999 Acquired Properties
and the 2000 Acquired Properties. The Trust incurred a net loss of $1,021,400
and $265,600 for the three months ended June 30, 2000 and 1999, respectively.
The net loss per Common Share was $9.34 in 2000 compared to a net loss of $2.43
in 1999.
As a result of the acquisition of the 1999 Acquired Properties and 2000 Acquired
Properties, all major revenue and expense categories increased in the second
quarter of 2000, specifically rent and utilities revenue, property operating
costs, advisory fee expense and depreciation.
For the properties owned during both periods, rent and utilities revenue
increased from $735,500 to $766,500 (4.2%), primarily due to rental increases.
Property operating expenses decreased from $383,300 to $371,000 (3.2%),
primarily due to lower repairs and maintenance expenses.
Equity in earnings (losses) of joint ventures and limited partnerships, which
represents the Trust's share of the net income (loss) of eight manufactured home
communities held by joint ventures and limited partnerships, increased from a
loss of $8,400 in 1999 to income of $28,000 in 2000 due to the Trust's
acquisition of additional joint venture and limited partnership interests.
Interest expense increased from $391,100 in 1999 to $1,435,100 in 2000, due to
the acquisition of the 1999 Acquired Properties and 2000 Acquired Properties.
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 $57,000 in 1999 to $168,200 for the second quarter of 2000, due
to the acquisition of the 1999 Acquired Properties and 2000 Acquired Properties.
General and administrative expenses increased from $24,300 in 1999 to $34,200 in
2000 due mainly to an increase in professional fees.
Six months ended June 30, 2000 as compared to six months ended June 30, 1999
----------------------------------------------------------------------------
Results of Operations
---------------------
The results of operations for the six months ended June 30, 2000 and 1999 are
not directly comparable due to the acquisition of the 1999 Acquired Properties
and the 2000 Acquired Properties. The Trust incurred a net loss of $1,893,700
and $465,600 for the six months ended June 30, 2000 and 1999, respectively. The
net loss per Common Share was $17.32 in 2000 compared to a net loss of $4.26 in
1999.
As a result of the acquisition of the 1999 Acquired Properties and 2000 Acquired
Properties, all major revenue and expense categories increased in the first six
months of 2000, specifically rent and utilities
11
<PAGE>
revenue, property operating costs, advisory fee expense and depreciation.
For the properties owned during both periods, rent and utilities revenue
increased from $1,468,800 to $1,536,100 (4.6%), primarily due to rental
increases. Weighted average occupancy increased slightly from 84% to 86%.
Property operating expenses increased from $765,100 to $783,400 (2.4%).
Equity in earnings (losses) of joint ventures and limited partnerships, which
represents the Trust's share of the net income (loss) of eight manufactured home
communities held by joint ventures and limited partnerships, decreased from a
loss of $16,700 in 1999 to a loss of $6,800 in 2000.
Interest expense increased from $692,600 in 1999 to $2,573,700 in 2000, due to
the 1999 Acquired Properties and 2000 Acquired Properties.
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 $106,100 in 1999 to $306,600 for the first six months of 2000,
due to the acquisition of the 1999 Acquired Properties and 2000 Acquired
Properties.
General and administrative expenses increased from $45,300 in 1999 to $69,200 in
2000 due mainly to an increase in professional fees.
Liquidity and Capital Resources
-------------------------------
The Trust's principal sources of liquidity during the six months ended June 30,
2000 and 1999 were its cash flow generated from the operation of its
communities, distributions from investments in joint ventures and limited
partnerships and financing activities. Net cash provided by operating activities
was $723,100 and $1,047,500 for the six months ended June 30, 2000 and 1999,
respectively. Net cash used in investing activities was $19,302,400 and
$15,126,400 for the six months ended June 30, 2000 and 1999, respectively. The
increase in cash used in investing activities during 2000 was primarily due to
the acquisition of the 2000 Acquired Properties. Net cash provided by financing
activities was $19,379,700 and $14,273,100 for the six months ended June 30,
2000 and 1999, respectively. The increase in cash provided by financing
activities was related to proceeds received from the SunAmerica financings, net
of the repayment of certain outstanding amounts under the Trust's line of credit
and mortgage note payable. As of June 30, 2000, the Trust's cash and restricted
cash amounted to approximately $2,201,600.
The Trust's primary uses of its capital resources during the same periods were
for cash distributions to shareholders, payment of advisory and management fees,
and 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 Code. The Trust
declared a quarterly distribution on its Common Shares of $.38 per share in each
of the first two quarters of 2000 and 1999. In addition, the Trust paid
quarterly distributions on its Preferred Shares of $.38 per share in each of the
first two quarters of 2000 and 1999. Future distributions on the Common Shares
will be determined based on actual results of operations and cash available for
distribution.
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 in connection with the implementation of its Business Plan. At June
30, 2000, the Trust's total mortgage debt, including its proportionate share of
joint venture and limited partnership debt, was $43,490,000, consisting of fixed
rate and variable rate debt. In addition, the Trust had $19,972,400 of unsecured
notes payable to Chateau at June 30, 2000. The weighted average rate of
interest on the fixed rate and variable rate debt was 8.61% and 9.05%,
respectively, at June 30, 2000. The Trust and affiliated entities are jointly
and severally liable for the full amounts of the loans obtained jointly.
12
<PAGE>
On March 31, 2000, the Trust obtained $20.3 million of mortgage financing from
SunAmerica, secured by seven of the Trust's wholly-owned properties. The loans
bear interest at 8.56% and mature March 31, 2005. The net proceeds from the
financing were used to pay down $17.2 million on the Trust's line of credit and
pay off an existing mortgage of $2,050,000.
On May 31, 2000, the Trust obtained $11 million of mortgage financing from
SunAmerica secured by six of the Trust's wholly-owned properties. The loans
bear interest at 8.60% and mature on May 31, 2005. The net proceeds from the
financing were used towards the funding of the acquisition of the 2000 Acquired
Properties. Also on May 31, 2000 in conjunction with the acquisition of the
2000 Acquired Properties, the Trust assumed a $1.2 million mortgage payable, and
drew $7.4 million on its line of credit.
During 1999, the Trust, through its limited partnership subsidiary, N'Tandem
Properties, L.P., acquired six wholly-owned manufactured home communities and
partial ownership interests in six other manufactured home communities. In
addition, during the first half of 2000, the Trust, through N'Tandem Properties
L.P., acquired, in separate transactions, five wholly-owned manufactured home
communities and partial ownership interests in nine other manufactured home
communities. As a result of these acquisitions and the combination of the
Trust's partial ownership interests into wholly-owned manufactured home
communities, the Trust currently owns 19 wholly-owned manufactured home
communities and partial ownership interests in eight other manufactured home
communities.
The future sources of liquidity for the Trust will be provided from property
operations, cash reserves and distributions from investments in joint ventures
and limited partnerships. The Trust expects to meet its short-term liquidity
requirements, including capital expenditures, administration expenses, advisory
fees, debt service, and distributions to shareholders, from cash flow provided
from property operations and distributions from investments in joint ventures
and limited partnerships. 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.
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.
13
<PAGE>
PART II
-------
Item 3. LEGAL PROCEDINGS
----------------
In connection with the Trust's acquisition of the 1999 Acquired Properties from
Windsor Park Properties 4, A California Limited Partnership ("WPP 4"), a
purported 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 asserted causes of action
alleging the following: (i) wrongful failure to liquidate timely WPP 4 in that
its term expired on December 31, 1997 thus allegedly tying up the limited
partners' money for longer than was contemplated or allowed under the WPP 4
agreement of limited partnership, (ii) breach of fiduciary duty owed by the
Defendants to the limited partners and WPP 4 by allegedly failing to take steps
to assure the entire fairness of the transaction and that the selling prices for
WPP 4's assets fairly and adequately represented their present value; and (iii)
breach of the WPP 4 agreement of limited partnership by allegedly proposing to
sell partnership assets to a sponsor of WPP 4 without prior consent of the
limited partners.
On December 3, 1999, the plaintiff, also a limited partner of WPP 3 and WPP 6,
amended the Complaint, in response to the proposed acquisition of the 2000
Acquired Properties, by filing an amended purported class action and derivative
complaint (the "Amended Complaint"), on behalf of himself and other similarly
situated limited partners, against the Defendants in the Superior Court of the
State of California, County of San Diego. In addition to the original
allegations set forth in the Complaint concerning WPP 4, the Amended Complaint
also alleges generally breach of fiduciary duty and contractual duties owed by
the Defendants to WPP 3 and WPP 6 and their limited partners by allegedly
failing to take steps to ensure the entire fairness of the acquisition of the
2000 Acquired Properties by proposing to sell the partnerships' assets at prices
that were improperly discounted from the appraisal values and without taking
steps to seek out alternative purchases or otherwise maximize value to the
limited partners. The Complaint and the Amended Complaint both sought monetary
damages, an award of expenses, dissolution of WPP 4, and the appointment of an
independent liquidating trustee to liquidate WPP 4's assets.
Although the Defendants disputed each claim set forth in the Complaint and
Amended Complaint, they concluded that the further defense of this action would
be protracted, expensive and distracting to their operations. To that end, on
February 17, 2000, the Defendants executed a settlement agreement with the
plaintiff and the class he sought to represent providing for the total payment
of more than $1 million plus the costs of administering the settlement fund
(including the mailing of notice to class members), in return for releases from
all actual and potential claims concerning the management or operation of WPP 3,
WPP 4 and WPP 6 against all of the Defendants and any affiliated persons or
entities. On May 2, 2000, the Superior Court approved the settlement and entered
a Final Order and Judgment discharging all claims and enjoining the class from
commencing suit at any time on any claim related to the management or operation
of WPP 3, WPP 4 and WPP 6. As a result of indemnification obligations of the
Trust, the settlement was funded by the Trust on July 20, 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
An Annual Meeting of Shareholders was held on June 15, 2000, in Greenwood
Village, Colorado. At the Annual Meeting, the shareholders voted to elect three
trustees to serve on the Trust's Board of Trustees until the 2001 Annual Meeting
of Shareholders and to ratify the appointment of PricewaterhouseCoopers LLP as
the Trust's independent auditors for the fiscal year ending December 31, 2000.
14
<PAGE>
The following votes were cast by the shareholders of the Trust with respect to
the election of trustees named in the Proxy Statement:
Shares Shares
Voted For Withheld
------------ --------------
Gary P. McDaniel 107,390 2,924
Richard B. Ray 107,390 2,924
Kenneth G. Pinder 107,390 2,924
The following votes were cast by the shareholders with respect to the resolution
to ratify the Board of Trustees' appointment of PricewaterhouseCoopers LLP as
the Trust's independent auditors for the fiscal year ending December 31, 2000.
Shares Shares Shares
Voted For Voted Against Abstained
--------- ------------- ---------
105,047 1,200 4,067
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 June 12, 2000, the Trust filed a Current Report on Form 8-K, dated May
31, 2000, reporting, under Item 2, the acquisitions of four manufactured
home communities and partial ownership interests in four other
manufactured home communities from WPP 3, and one manufactured home
community and partial ownership interests in five other manufactured home
communities from WPP6.
15
<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: August 14, 2000
16
