<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11718
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its Charter)
MARYLAND 36-3857664
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 474-1122
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
24,703,640 SHARES OF COMMON STOCK AS OF OCTOBER 31, 1996.
<PAGE> 2
MANUFACTURED HOME COMMUNITIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
INDEX TO FINANCIAL STATEMENTS
Page
----
<S> <C>
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995................................ 3
Consolidated Statements of Operations for the nine months and
quarters ended September 30, 1996 and 1995............................................................... 4
Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995................ 5
Notes to Consolidated Financial Statements................................................................. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................................. 11
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings..................................................................................... 18
ITEM 6. Exhibits and Reports on Form 8-K...................................................................... 18
</TABLE>
2
<PAGE> 3
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Investment in rental property:
Land...................................................... $133,995 $127,229
Land improvements......................................... 355,067 328,667
Buildings and other depreciable property.................. 88,134 87,059
-------- --------
577,196 542,955
Accumulated depreciation.................................. (67,555) (56,403)
-------- --------
Net investment in rental property....................... 509,641 486,552
Cash and cash equivalents..................................... 2,307 760
Short-term investments (at cost, which approximates market)... 3,779 1,682
Marketable securities (at fair value)......................... 10,302 ---
Notes receivable.............................................. 15,303 15,010
Investment in and advances to affiliates...................... 9,877 10,987
Rents receivable.............................................. 855 935
Deferred financing costs, net................................. 2,667 3,268
Prepaid expenses and other assets............................. 2,898 3,430
Due from affiliates........................................... 199 501
-------- --------
Total assets.............................................. $557,828 $523,125
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.................................... $197,847 $199,066
Line of credit............................................ 43,000 12,900
Accounts payable and accrued expenses..................... 16,282 8,759
Accrued interest payable.................................. 1,316 1,258
Rents received in advance and security deposits........... 3,814 1,792
Distributions payable..................................... 8,364 7,998
Due to affiliates......................................... 186 547
-------- --------
Total liabilities....................................... 270,809 232,320
-------- --------
Commitments and contingencies
Minority interests............................................ 28,816 29,305
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value
10,000,000 shares authorized; none issued............... --- ---
Common stock, $.01 par value
50,000,000 shares authorized; 24,703,640 and
24,502,877 shares issued and 24,703,640 and 24,393,149
shares outstanding for 1996 and 1995, respectively...... 246 244
Paid-in capital........................................... 291,833 288,533
Unrealized gain on available-for-sale securities.......... 274 ---
Treasury stock, 109,728 shares of common stock............ --- (1,987)
Employee notes............................................ (6,185) (1,565)
Distributions in excess of accumulated earnings........... (27,965) (23,725)
-------- --------
Total stockholders' equity.............................. 258,203 261,500
-------- --------
Total liabilities and stockholders' equity................ $557,828 $523,125
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Quarter Ended
September 30, September 30,
------------------------- ----------------------
1996 1995 1996 1995
-------- --------- ------- -------
<S> <C> <C> <C> <C>
REVENUES
Base rental income........................ $69,089 $63,768 $23,429 $21,397
Utility and other income.................. 6,601 6,535 2,062 2,089
Equity in income of affiliates............ 513 795 306 493
Interest income........................... 1,802 1,766 611 588
------- ------- ------- -------
Total revenues.......................... 78,005 72,864 26,408 24,567
------- ------- ------- -------
EXPENSES
Property operating and maintenance........ 21,004 20,507 7,006 6,928
Real estate taxes......................... 6,048 5,619 2,032 1,725
Property management....................... 3,272 3,537 1,047 1,089
General and administrative................ 2,955 3,489 1,003 1,108
Interest:
Interest incurred....................... 12,265 12,845 4,189 4,201
Amortization of deferred
financing costs........................ 802 1,674 238 430
Depreciation.............................. 11,291 10,780 3,748 3,600
------- ------- ------- -------
Total expenses.......................... 57,637 58,451 19,263 19,081
------- ------- ------- -------
Income from operations.................... 20,368 14,413 7,145 5,486
Gain on sale of properties................ --- 1,273 --- 838
------- ------- ------- -------
Income before allocation to
minority interests...................... 20,368 15,686 7,145 6,324
(Income) allocated to minority interests.. (2,019) (1,569) (708) (633)
------- ------- ------- -------
Net income................................ $18,349 $14,117 $ 6,437 $ 5,691
======= ======= ======= =======
Net income per weighted average common
share outstanding....................... $ .74 $ .58 $ .26 $ .23
======= ======= ======= =======
Distributions declared
per common share outstanding............ $ .915 $ .885 $ .305 $ .295
======= ======= ======= =======
Weighted average common shares outstanding 24,683 24,346 24,697 24,372
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 18,349 $ 14,117
Adjustments to reconcile net income to
cash provided by operating activities:
Income allocated to minority interests........................ 2,019 1,569
Depreciation and amortization expense......................... 12,093 12,454
Equity in income of affiliates................................ (513) (795)
(Gain) on sale of rental properties........................... --- (1,273)
Decrease in rents receivable.................................. 80 587
Decrease (increase) in prepaid expenses and other assets...... 401 (388)
Increase in accounts payable and accrued expenses............. 7,220 7,012
Increase in rents received in advance and security deposits... 2,022 2,082
-------- --------
Net cash provided by operating activities........................ 41,671 35,365
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) redemption of short-term investments, net............. (2,097) 5,565
Purchase of marketable securities................................ (10,028) ---
Distributions from affiliates.................................... 1,623 156
Collection of principal payments on notes receivable............. 140 1,625
Acquisition of rental properties................................. (28,968) (600)
Improvements:
Improvements - corporate...................................... (758) (546)
Improvements - rental properties.............................. (2,755) (2,062)
Site development costs........................................ (1,899) (1,934)
Net proceeds from sale of rental property........................ --- 4,820
-------- --------
Net cash (used in) provided by investing activities.............. (44,742) 7,024
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options...................... 514 713
Distributions to common stockholders and minority interests...... (24,708) (23,971)
Treasury stock acquired.......................................... --- (1,987)
Collection of principal payments on employee notes............... 72 2,466
Proceeds from line of credit..................................... 33,600 ---
Repayments on mortgage notes payable and line of credit.......... (4,719) (14,867)
Debt issuance costs and other.................................... (141) (221)
-------- --------
Net cash provided by (used in) financing activities.............. 4,618 (37,867)
-------- --------
Net increase in cash and cash equivalents............................ 1,547 4,522
Cash and cash equivalents, beginning of period....................... 760 1,924
-------- --------
Cash and cash equivalents, end of period............................. $ 2,307 $ 6,446
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest............................. $ 12,207 $ 12,199
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PRESENTATION:
These unaudited Consolidated Financial Statements of Manufactured Home
Communities, Inc., a Maryland corporation, and its subsidiaries (collectively,
the "Company"), have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the financial statements and notes thereto included in the Company's 1995
Annual Report on Form 10-K. The following Notes to Consolidated Financial
Statements highlight significant changes to the Notes included in the 1995
Annual Report on Form 10-K and present interim disclosures as required by the
SEC. The accompanying Consolidated Financial Statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation of the
interim financial statements. All such adjustments are of a normal and
recurring nature. Certain reclassifications have been made to the prior
periods' financial statements in order to conform with current period
presentation.
NOTE 1 - RENTAL PROPERTY
On February 28, 1996, the Company acquired Waterford, located near
Wilmington, Delaware, for a purchase price of approximately $21 million. The
acquisition was funded with an $18.6 million borrowing under the Company's line
of credit with a bank and approximately $2.4 million of working capital.
Waterford consists of 621 developed sites and 110 expansion sites; the cost of
completing the expansion sites will be paid by the seller.
On May 9, 1996, the Company funded a recourse real estate loan for
$6,050,000 to the partnership which owns Candlelight Village, located in
Columbus, Indiana. The loan has an interest rate of 9.5%, 9.75% and 10% for
the first, second and third years of the loan, respectively, which interest is
payable monthly. Interest and principal are guaranteed by the general partner
of the partnership which owns Candlelight Village. The loan matures May 8,
1999 at which time the Company has the option to purchase Candlelight Village.
Candlelight Village consists of 512 sites and 73 expansion sites. For
financial accounting purposes, the Company accounts for the loan as an
investment in real estate.
On October 23, 1996, the Company acquired two properties, Casa del Sol
Resort No. 1 and Casa del Sol Resort No. 2 (collectively, the "Casa del Sol
Resorts"), located near Phoenix, Arizona, for a purchase price of approximately
$17 million. The acquisition was funded with a borrowing under the Company's
line of credit with a bank. The Casa del Sol Resorts consist of 485 sites.
The Company is actively seeking to acquire additional communities and
currently is engaged in negotiations relating to the possible acquisition of a
number of communities. At any time these negotiations are at varying stages
which may include contracts outstanding to acquire certain manufactured home
communities which are subject to satisfactory completion of the Company's due
diligence review.
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets To Be Disposed Of"
("SFAS No. 121") is effective for fiscal years beginning after December 15,
1995. The Company evaluates rental properties for impairment when conditions
exist which may indicate that it is probable that the sum of expected future
cash flows (undiscounted) from a rental property is less than its carrying
value. Upon determination that a permanent impairment has occurred, rental
properties are reduced to fair value. For the quarter and nine months ended
September 30, 1996, permanent impairment conditions did not exist at any of the
Company's properties.
6
<PAGE> 7
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTES RECEIVABLE
At September 30, 1996 and December 31, 1995, notes receivable consisted of
the following (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
$2.0 million note receivable with monthly principal and interest
payments at 9.0%, maturing on 6/10/2003............................ $ 1,639 $ 1,768
$1.2 million purchase money notes with monthly principal and
interest payments at 7%, maturing on 4/30/2001..................... 1,164 1,174
$10 million leasehold mortgage loan with interest accruing at a
stated rate of 12.5% with a pay rate of 8.5%, maturing on
9/1/2013........................................................... 10,922 10,558
$1.9 million note receivable with monthly interest payments at
prime plus 1.6%, maturing on 4/15/2000............................. 1,578 1,510
------- -------
Total notes receivable.............................................. $15,303 $15,010
======= =======
</TABLE>
NOTE 3 - LONG-TERM BORROWINGS
At September 30, 1996 and December 31, 1995, long-term borrowings
consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
$100.0 million mortgage note payable with monthly interest only
payments at LIBOR plus 1.05%, maturing on 3/3/98 (a)............... $100,000 $100,000
First mortgage loan with monthly principal and interest payments
at 7.40%, maturing on 3/1/2004..................................... 8,658 8,767
Purchase money note with structured principal and interest payments
at an imputed rate of 7.38%, maturing on 7/13/2004................. 1,334 1,516
First mortgage loan with monthly principal and interest payments
at a rate of 7.48%, maturing on 8/1/2004........................... 24,628 24,859
$65.0 million first mortgage loan with monthly principal and
interest payments at 8%, maturing on 8/18/2001..................... 63,227 63,924
-------- --------
Total collateralized borrowings..................................... 197,847 199,066
$100.0 million line of credit at LIBOR plus 1.375% (b).............. 43,000 12,900
-------- --------
Total long-term borrowings.......................................... $240,847 $211,966
======== ========
</TABLE>
(a) In December 1995, the Company entered into an agreement fixing the London
Interbank Offered Rate ("LIBOR") on the $100.0 million mortgage note payable
(the "Mortgage Debt") at 5.24% effective January 10, 1996 through January 10,
1997. The value of this agreement is impacted by changes in the market rate of
interest. Had the agreement been entered into on September 30, 1996, the
applicable LIBOR swap rate would have been 5.6%. Each 0.01% increase or
decrease in the applicable swap rate for this agreement increases or decreases
the value of the agreement entered into by the Company versus its current value
by approximately $3,400.
7
<PAGE> 8
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - LONG-TERM BORROWINGS (CONTINUED)
The Company has an interest rate cap for the term of the Mortgage Debt
which eliminates exposure to increases in LIBOR over 6%, plus 1.05%. In
connection with the agreement effective January 10, 1996, discussed above, the
Company sold a portion of the interest rate cap related to 1996 and recorded a
non-cash write-off of approximately $650,000 in the fourth quarter of 1995. As
of September 30, 1996, the fair market value of the interest rate cap was
approximately $136,000 as compared to book value of $762,000.
In July 1995, the Company entered into an interest rate swap agreement
(the "Swap") beginning at the maturity of the Mortgage Debt fixing LIBOR on the
refinancing of the Mortgage Debt at 6.4% for the period 1998 through 2003. The
cost of the Swap consisted only of legal costs which were deemed immaterial.
In the event that the Company does not refinance the Mortgage Debt, the risk
associated with the Swap is that the Company would be obligated to perform its
obligations under the terms of the Swap or would have to pay to terminate the
Swap. In either event, the impact of such transaction would be reflected in
the Company's statement of operations. The value of the Swap is impacted by
changes in the market rate of interest. Had the Swap been entered into on
September 30, 1996, the applicable LIBOR swap rate would have been 6.9%. Each
0.01% increase or decrease in the applicable swap rate for the Swap increases
or decreases the value of the Swap entered into by the Company versus its
current value by approximately $39,000.
In October 1996, the Company entered into an interest rate swap agreement
fixing LIBOR on the Mortgage Debt at 5.57% effective January 1, 1997 through
March 3, 1998. In connection with this agreement, the Company sold the
remainder of the interest rate cap, discussed above, and will record a non-cash
write-off of $482,000 in the fourth quarter of 1996.
(b) On May 7, 1996, the Company amended the credit agreement increasing the
$50.0 million line of credit to $100.0 million at LIBOR plus 1.375% and
extending the maturity date to August 17, 1998. In addition, the fee on the
average unused amount was reduced to .15% of such amount from .25%. The
Company paid a $200,000 loan fee which is being amortized over the remaining
period of the amended agreement.
As of September 30, 1996, the carrying value of the property
collateralizing the long-term borrowings was approximately $334 million.
NOTE 4 - COMMON STOCK AND RELATED TRANSACTIONS
The Company paid a $.305 per share distribution on April 12, 1996, July
12, 1996 and October 11, 1996, for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, respectively, to stockholders of record on March
29, 1996, June 28, 1996 and September 27, 1996, respectively.
On January 2, 1996, certain members of management of the Company each
entered into subscription agreements with the Company to acquire a total of
270,000 shares of the Company's common stock at $17.375 per share, the market
price on that date. The Company received from these individuals notes (the
"1996 Employee Notes") in exchange for their shares. The 1996 Employee Notes
accrue interest at 5.91%, mature on January 2, 2005, and are recourse against
the employees in the event the pledged shares are insufficient to repay the
obligations.
In September 1996, the Company retired 109,728 shares of common stock
which were held in treasury.
NOTE 5 - STOCK OPTIONS
Pursuant to the Amended and Restated 1992 Stock Option and Stock Award
Plan (the "Plan") as discussed in Note 12 to the 1995 Annual Report on Form
10-K, certain officers, directors, key employees and consultants have been
offered the opportunity to acquire shares of common stock of the Company
through stock options ("Options"). During the nine months ended September 30,
1996, Options for 38,332 shares of common stock were exercised.
8
<PAGE> 9
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCK OPTIONS (CONTINUED)
In 1995, the FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). Under the
provisions of SFAS No. 123, companies can elect to account for stock-based
compensation plans using a fair-value-based method or continue measuring
compensation expense for those plans using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". SFAS No. 123 requires that companies electing to continue
using the intrinsic value method must make pro-forma disclosures of net income
and earnings per share as if the fair-value-based method of accounting had been
applied.
The Company elected to continue to account for stock-based compensation
using the intrinsic value method. As such, SFAS No. 123 did not have an impact
on the Company's results of operations or financial position for the nine
months ended September 30, 1996. The pro-forma information required by SFAS No.
123 will be included in the footnotes to the Company's 1996 year-end
consolidated financial statements.
NOTE 6 - PROPOSED MERGER
On August 16, 1996, the Company offered to merge Chateau Properties, Inc.
("Chateau") with and into the Company in a transaction whereby each stockholder
of Chateau would receive either $26.00 per Chateau common share (a "Share") in
cash, the Company's common shares at a ratio of 1.15 of the Company's common
shares for each Share or a combination of cash at $26.00 per Share and the
Company's common shares at such ratio. On September 4, 1996, MHC Operating
Limited Partnership ("MHC OP"), a limited partnership controlled by the
Company, commenced a tender offer ("MHC Offer") to purchase all outstanding
Shares of Chateau for $26.00 per Share in cash. The MHC Offer expired on
November 6, 1996. In connection with the expiration, the Company offered a
restructured merger proposal to Chateau that included an alternative of $26
cash or convertible preferred securities valued at $26. Pending the outcome of
the Company's proposal, the Company has capitalized all costs related to the
merger proposal. The restructured merger proposal is the subject of certain
litigation as discussed in Note 7 below.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is involved in a variety of legal proceedings arising in the
ordinary course of business. All such proceedings, taken together, are not
expected to have a material adverse impact on the financial condition or
results of operations of the Company.
On September 17, 1996 Chateau filed suit in the United States District
Court for the District of Maryland against the Company and MHC OP alleging,
among other things, that (i) the MHC Offer is in violation of the federal
securities laws because it contains untrue statements of material fact and
omits to state material facts and (ii) the Company and MHC OP have begun a
proxy solicitation in opposition to Chateau's proposed merger with ROC
Communities, Inc. ("ROC") and have made material misstatements of facts and
omitted to disclose other material facts as part of that solicitation effort in
violation of applicable federal law. The Company has filed counterclaims
against Chateau and ROC and intends to vigorously defend itself against
Chateau's claims which it believes are frivolous. At this time it is not
possible to predict the outcome of these matters, but the Company does not
anticipate that the impact of this litigation will be material.
9
<PAGE> 10
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
In a separate matter, residents of DeAnza Santa Cruz, a Property located
in Santa Cruz, California, (the "City") previously brought several actions
opposing certain fees and charges in connection with water service at the
Property, specifically opposing a monthly "readiness to serve" charge. One
group of residents, who have elected to be covered under the City's rent
control ordinance ("Ordinance"), had their case heard before the City's rent
control board. On June 29, 1995, the City's hearing officer found that the
Company may charge only its actual costs. The Company appealed the decision of
the hearing officer by means of a writ of mandamus to the Superior Court of the
State of California (Case Number 130845) alleging that an internally consistent
state statutory framework, including the California Mobilehome Residency Law,
the California Public Utilities Code, and California Code of Regulations,
requires the Company to charge residents exactly the same rates and charges as
those tenants would pay if receiving water directly from the local water
utility (i.e. including the monthly readiness to serve charge). The Superior
Court issued judgment on July 23, 1996 denying the petition for writ of
mandamus, finding no prejudicial abuse of discretion by the hearing officer,
that the hearing officer's findings were supported by substantial evidence, and
that the hearing officer proceeded within the proper jurisdiction.
The court awarded costs of approximately $50,000 to the residents. The
Company continues to believe that its fees and charges are consistent with the
requirements of California law and will appeal the decision. The effect on the
Company if the verdict is upheld would be a reduction in the fees and charges
collected in connection with the provision of water service of less than
$20,000 annually. The Company may also have to rebate such fees and charges
collected since its acquisition of the Property in August, 1994. The impact of
this decision on the financial condition or results of operations of the
Company is not expected to be material.
The Santa Cruz Homeowners Association, representing approximately fifteen
residents not covered by the Ordinance, separately filed suit in the Superior
Court of the State of California (Case Number 128001) opposing the same fees
and charges in connection with water service and seeking damages arising out of
the imposition of such monthly fees and charges. A trial date has been set for
January 6, 1997 and the Company intends to vigorously defend itself in the
matter. The Company believes that its fees and charges are consistent with the
requirements of California law. Should the residents be successful, the impact
on the financial condition or results of operations of the Company is not
expected to be material.
10
<PAGE> 11
MANUFACTURED HOME COMMUNITIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following is a discussion of the interim results of operations,
financial condition and liquidity and capital resources of the Company for the
quarter and nine months ended September 30, 1996 compared to the corresponding
periods in 1995. It should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included herein and the 1995 Annual
Report on Form 10-K.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Since September 30, 1995, the gross investment in rental property has
increased from $543 million to $577 million due to the acquisition of Waterford
on February 28, 1996 and the funding of the Candlelight Village loan, which was
accounted for as a purchase, on May 9, 1996. The total number of sites has
increased from 25,370 as of September 30, 1995 to 26,864 as of September 30,
1996.
The following table summarizes certain weighted average occupancy
statistics for the three months ended September 30, 1996 and 1995. "Core
Portfolio" represents an analysis of properties owned during both periods of
comparison.
<TABLE>
<CAPTION>
Core Portfolio Total Portfolio
-------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total sites 25,552 25,370 26,868 25,370
Occupied sites 24,113 23,826 25,252 23,826
Occupancy % 94.4% 93.9% 94.0% 93.9%
Monthly base rent per site $ 312 $ 298 $ 309 $ 298
</TABLE>
Base rental income ($23.4 million) increased $2.0 million or 9.5%. For
the Core Portfolio, base rental income increased approximately $1.3 million or
6.1%, reflecting a 4.9% increase in base rental rates and a 1.2% increase
related to occupancy. Base rental income at Waterford and Candlelight Village
was approximately $834,000 for the quarter ended September 30, 1996. Partially
offsetting this increase was a $107,000 decrease in base rental income
resulting from the sale of two properties in 1995.
The increase in monthly base rent per site reflected annual rent increases
which went into effect in the first nine months of 1996 at approximately 91% of
the properties, as well as annual rent increases that occurred in the last
three months of 1995. The 1.2% increase in occupied sites for the Core
Portfolio was primarily due to improved occupancy in the Southeastern Region's
expansion communities.
Utility and other income ($2.1 million) decreased $27,000 or 1.3%
primarily due to a decrease in other income resulting from the one-time
collection of water/sewer impact fees at one property in 1995, partially offset
by increased utility income and real estate tax pass-ons.
Interest income ($611,000) increased $23,000 or 3.9%, primarily due to
interest earned on the 1996 Employee Notes granted on January 2, 1996,
partially offset by decreased interest earned on short-term investments.
Short-term investments had average balances for the quarters ended September
30, 1996 and 1995 of approximately $3.5 million and $6.6 million, respectively,
which earned interest income at an effective rate of 5.6% and 5.5% per annum,
respectively. As of September 30, 1996, the Company had cash and cash
equivalents and short-term investments of approximately $6.1 million.
11
<PAGE> 12
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Property operating and maintenance expenses ($7.0 million) increased
$78,000 or 1.1%. Waterford and Candlelight Village comprised $186,000 of this
increase, along with an increase in property payroll of approximately $48,000.
Partially offsetting these increases was decreased utility expense of
approximately $84,000 and decreased property general and administrative expense
of approximately $72,000. Property operating and maintenance expenses
represented 26.5% of total revenues in 1996 and 28.2% in 1995.
Real estate taxes ($2.0 million) increased $307,000 or 17.8% due to the
expected increase in assessed values at certain properties in 1996. Real
estate taxes represented 7.7% of total revenues in 1996 and 7.0% in 1995.
Property management expenses ($1.0 million) decreased $42,000 or 3.9%.
The decrease was primarily due to an overall decrease in expenses resulting
from staffing reductions which occurred in 1995, partially offset by increased
travel costs and computer software costs. Property management expenses
represented 4.0% of total revenues in 1996 and 4.4% in 1995.
General and administrative ("G&A") expenses ($1.0 million) decreased
$105,000 or 9.5%. The decrease was primarily due to (i) decreased professional
fees resulting from the write-off in the third quarter of 1995 of legal due
diligence and related costs associated with acquisitions which did not
materialize; (ii) decreased public company costs, and (iii) decreased income
and franchise taxes. G&A expenses represented 3.8% of total revenues in 1996
and 4.5% in 1995.
Interest expense ($4.2 million) decreased $12,000 or 0.3%. The decrease
was due to a decrease in the interest rate on the Mortgage Debt resulting from
the interest rate swap agreement entered into in December 1995 (see discussion
below), partially offset by an increase in interest on the line of credit
resulting from additional borrowings in 1996. The weighted average outstanding
debt balances for the quarters ended September 30, 1996 and 1995 were $235.1
million and $224.4 million, respectively. The effective interest rates were
7.1% and 7.5% for the quarters ended September 30, 1996 and 1995, respectively.
Interest expense represented 15.9% of total revenues in 1996 and 17.1% in
1995.
In December 1995, the Company entered into an agreement fixing the LIBOR
rate on the Mortgage Debt at 5.24% effective January 10, 1996 through January
10, 1997. The value of this agreement is impacted by changes in the market
rate of interest. Had the agreement been entered into on September 30, 1996,
the applicable LIBOR swap rate would have been 5.6%. Each 0.01% increase or
decrease in the applicable swap rate for this agreement increases or decreases
the value of the agreement entered into by the Company versus its current value
by approximately $3,400.
The Company has an interest rate cap for the term of the Mortgage Debt
which eliminates exposure to increases in LIBOR over 6%, plus 1.05%. In
connection with the agreement effective January 10, 1996, discussed above, the
Company sold a portion of the interest rate cap related to 1996 and recorded a
non-cash loss of approximately $650,000 in the fourth quarter of 1995. As of
September 30, 1996, the fair market value of the interest rate cap was
approximately $136,000 as compared to book value of $762,000.
12
<PAGE> 13
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
In July 1995, the Company entered into the Swap beginning at the maturity
of the Mortgage Debt fixing LIBOR on the refinancing of the Mortgage Debt at
6.4% for the period 1998 through 2003. The cost of the Swap consisted only of
legal costs which were deemed immaterial. In the event that the Company does
not refinance the Mortgage Debt, the risk associated with the Swap is that the
Company would be obligated to perform its obligations under the terms of the
Swap or would have to pay to terminate the Swap. In either event, the impact
of such transaction would be reflected in the Company's statement of
operations. The value of the Swap is impacted by changes in the market rate of
interest. Had the Swap been entered into on September 30, 1996, the applicable
LIBOR swap rate would have been 6.9%. Each 0.01% increase or decrease in the
applicable swap rate for the Swap increases or decreases the value of the Swap
entered into by the Company versus its current value by approximately $39,000.
In October 1996, the Company entered into an interest rate swap agreement
fixing LIBOR on the Mortgage Debt at 5.57% effective January 1, 1997 through
March 3, 1998. In connection with this agreement, the Company sold the
remainder of the interest rate cap, discussed above, and will record a non-cash
write-off of $482,000 in the fourth quarter of 1996.
On May 7, 1996, the Company amended its credit agreement on the $50.0
million line of credit ("Credit Facility") increasing the Credit Facility to
$100.0 million at LIBOR plus 1.375% and extending the maturity date to August
17, 1998. In addition, the fee on the average unused amount was reduced to
0.15% of such amount from 0.25%. The Company borrowed $18.5 million under the
Credit Facility on October 23, 1996 to finance the acquisition of the Casa del
Sol Resorts, located near Phoenix, Arizona, on such date.
Amortization of deferred financing costs ($238,000) decreased $192,000 or
44.7% as a result of the sale of the portion of the interest rate cap on the
Mortgage Debt related to 1996 (see discussion above). Amortization of deferred
financing costs represented 0.9% of total revenues in 1996 and 1.8% in 1995.
Depreciation expense ($3.7 million) increased $148,000 or 4.1%.
Depreciation expense on corporate assets was approximately $122,000 and $84,000
for the quarters ended September 30, 1996 and 1995, respectively. Depreciation
expense represented 14.2% of total revenues in 1996 and 14.6% in 1995.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
The acquisition of Waterford and the financing of Candlelight Village in
1996 increased base rental income, property operating and maintenance expenses,
real estate taxes and depreciation for the nine months ended September 30,
1996. These increases were partially offset by the sale of two properties in
1995.
The following table summarizes certain weighted average occupancy
statistics for the nine months ended September 30, 1996 and 1995. "Core
Portfolio" represents an analysis of properties owned during both periods of
comparison.
<TABLE>
<CAPTION>
Core Portfolio Total Portfolio
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total sites 25,555 25,348 26,432 25,348
Occupied sites 24,059 23,742 24,804 23,742
Occupancy % 94.1% 93.7% 93.8% 93.7%
Monthly base rent per site $ 311 $ 296 $ 309 $ 296
</TABLE>
13
<PAGE> 14
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Base rental income ($69.1 million) increased $5.3 million or 8.3%. For
the Core Portfolio, base rental income increased approximately $4.1 million or
6.4%, reflecting a 5.0% increase in base rental rates and a 1.4% increase
related to occupancy. Base rental income at Waterford and Candlelight Village
was approximately $1,752,000 for the nine months ended September 30, 1996.
Partially offsetting this increase was a $503,000 decrease in base rental
income resulting from the sale of two properties in 1995.
The increase in monthly base rent per site reflected annual rent increases
which went into effect in the first nine months of 1996 at approximately 91% of
the properties, as well as annual rent increases that occurred in the last
three months of 1995. The 1.4% increase in occupied sites for the Core
Portfolio was primarily due to improved occupancy in the Southeastern Region's
expansion communities.
Utility and other income ($6.6 million) increased $66,000 or 1.0%
primarily due to increased utility income and real estate tax pass-on income,
partially offset by decreased other income resulting from the one-time
collection of water/sewer impact fees at one property in 1995.
Interest income ($1.8 million) increased $36,000 or 2.0%, primarily due to
interest earned on the 1996 Employee Notes granted on January 2, 1996,
partially offset by a decrease in interest earned on short-term investments.
Short-term investments had average balances for the nine months ended September
30, 1996 and 1995 of approximately $3.5 million and $8.9 million, respectively,
which earned interest income at an effective rate of 5.4% and 4.8% per annum,
respectively.
Property operating and maintenance expenses ($21.0 million) increased
$496,000 or 2.4%. Waterford and Candlelight Village comprised $454,000 of this
increase, partially offset by a decrease in expense of $199,000 resulting from
the sale of two properties in 1995. The remaining $241,000 increase was
primarily due to an increase in utility expense of approximately $395,000, an
increase in insurance and other expenses of approximately $222,000, and an
increase in repairs and maintenance of $110,000, partially offset by a decrease
in property payroll of $396,000 and property G&A expense of $90,000. Property
operating and maintenance expenses represented 26.9% of total revenues in 1996
and 28.1% in 1995.
Real estate taxes ($6.0 million) increased $430,000 or 7.7% due to the
expected increase in assessed values at certain properties in 1996. Real
estate taxes represented 7.8% of total revenues in 1996 and 7.7% in 1995.
Property management expenses ($3.3 million) decreased $265,000 or 7.5%.
The decrease was primarily due to a decrease in management company payroll as a
result of the staffing reductions in 1995. Partially offsetting this decrease
was the receipt in 1995 of a termination fee related to certain fee-managed
contracts. Property management expenses represented 4.2% of total revenues in
1996 and 4.9% in 1995.
G&A expenses ($3.0 million) decreased $534,000 or 15.3%. The decrease was
due to: (i) decreased professional fees resulting from the write-off in the
first nine months of 1995 of legal due diligence and related costs associated
with acquisitions which did not materialize; (ii) decreased public company
costs, and (iii) decreased income and franchise taxes. G&A expenses
represented 3.8% of total revenues in 1996 and 4.8% in 1995.
Interest expense ($12.3 million) decreased by $580,000 or 4.5%. The
decrease was due to a decrease in the interest rate on the Mortgage Debt
resulting from the interest rate swap agreement entered into in December 1995
(see discussion above). The effective interest rates were 7.2% and 7.6% for
the nine months ended September 30, 1996 and 1995, respectively. The weighted
average outstanding debt balances for the nine months ended September 30, 1996
and 1995 were $228.4 million and $225.8 million, respectively. Interest
expense represented 15.7% of total revenues in 1996 and 17.6% in 1995.
14
<PAGE> 15
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Amortization of deferred financing costs ($802,000) decreased $872,000 or
52.1% primarily due to the write-off in 1995 of approximately $385,000 of loan
costs related to the $50 million line of credit with General Electric Credit
Corp. which expired in March 1995. In addition, the Company sold a portion of
the interest rate cap on the Mortgage Debt related to 1996. Amortization of
deferred financing costs represented 1.0% of total revenues in 1996 and 2.3%
in 1995.
Depreciation expense ($11.3 million) increased $511,000 or 4.7%.
Depreciation expense on corporate assets was approximately $342,000 and
$250,000 for the nine months ended September 30, 1996 and 1995, respectively.
Depreciation expense represented 14.5% of total revenues in 1996 and 14.8% in
1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1.5 million when compared to
December 31, 1995. The major components of this increase were the $33.6
million borrowings under the line of credit and increased cash provided by
operating activities, partially offset by the acquisition of Waterford and the
financing of Candlelight Village, payment of distributions, purchase of
short-term investments and marketable securities, and improvements to rental
properties.
Net cash provided by operating activities increased $6.3 million from
$35.4 million for the nine months ended September 30, 1995 to $41.7 million for
the same period in 1996. This increase reflected a $6.0 million increase in
funds from operations ("FFO"), as discussed below, an increase in the accrual
for real estate taxes of which the Company expects to pay approximately $4.7
million in November, 1996, and decreased prepaid expenses.
FFO was defined by the National Association of Real Estate Investment
Trusts in March 1995 as net income (computed in accordance with generally
accepted accounting principles ["GAAP"]), before allocation to minority
interests, plus real estate depreciation and after adjustments for significant
non-recurring items, if any. In the first quarter of 1996, the Company adopted
this new definition of FFO which is effective for periods ending after December
31, 1995. Prior to this adoption, FFO was defined as income before allocation
to minority interests plus certain non-cash items, primarily depreciation and
amortization. Funds available for distribution ("FAD") is defined as FFO less
non-revenue producing capital expenditures. The Company believes that FFO and
FAD are useful to investors as a measure of the performance of an equity REIT
because, along with cash flows from operating activities, financing activities
and investing activities, they provide investors an understanding of the
ability of the Company to incur and service debt and to make capital
expenditures. FFO and FAD in and of themselves do not represent cash generated
from operating activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indication of the Company's
performance or to net cash flows from operating activities as determined by
GAAP as a measure of liquidity and are not necessarily indicative of cash
available to fund cash needs.
15
<PAGE> 16
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The following table presents a calculation of FFO and FAD for the nine
months and quarters ended September 30, 1996 and 1995 (amounts in the
thousands):
<TABLE>
<CAPTION>
For the Nine Months Ended For the Quarters Ended
September 30, September 30,
--------------------------- ------------------------
1996 1995 1996 1995
--------- ---------- -------- --------
<S> <C> <C> <C> <C>
Computation of funds from operations:
Income before allocation to
minority interests................................. $20,368 $15,686 $ 7,145 $6,324
Depreciation on real estate assets............... 10,949 10,530 3,626 3,516
Amortization of non recurring items.............. --- 385 --- ---
Gain on sale of assets........................... --- (1,273) --- (838)
------- ------- ------- ------
Funds from operations (a)............................ $31,317 $25,328 $10,771 $9,002
======= ======= ======= ======
Computation of funds available for distribution:
Funds from operations (a)............................ $31,317 $25,328 $10,771 $9,002
Non-revenue producing improvements -
rental properties............................... (2,755) (2,062) (1,294) (911)
------- ------- ------- ------
Funds available for distribution......................... $28,562 $23,266 $ 9,477 $8,091
======= ======= ======= ======
</TABLE>
(a) FFO for the quarter and nine months ended September 30, 1995 has been
restated pursuant to the new definition of FFO adopted by the Company for
periods ending after December 31, 1995.
Net cash used in investing activities increased $51.7 million from $7.0
million provided by investing activities for the nine months ended September
30, 1995 to $44.7 million used in investing activities for the nine months
ended September 30, 1996, primarily due to the acquisition of Waterford and the
financing of Candlelight Village and the purchase of marketable securities and
short-term investments. During the third quarter of 1996, the Company
purchased common stock of other companies ("Marketable Securities"). As of
September 30, 1996, the Company recorded the Marketable Securities at a fair
value of approximately $10.3 million based on stock prices as of that date.
On February 28, 1996, the Company acquired Waterford, located near
Wilmington, Delaware, for a purchase price of approximately $21 million. The
acquisition was funded with an $18.6 million borrowing under the Company's line
of credit and approximately $2.4 million of working capital. Waterford
consists of 621 developed sites and 110 expansion sites; the cost of developing
the expansion sites will be paid by the seller.
On May 9, 1996, the Company funded a recourse real estate loan for
$6,050,000 to the partnership which owns Candlelight Village, located in
Columbus, Indiana. The loan has an interest rate of 9.5%, 9.75% and 10% for
the first, second and third years of the loan, respectively, which interest is
payable monthly. Interest and principal are guaranteed by the general partner
of the partnership which owns Candlelight Village. The loan matures May 8,
1999 at which time the Company has the option to purchase Candlelight Village.
Candlelight Village consists of 512 sites and 73 expansion sites. For
financial accounting purposes, the Company accounts for the loan as an
investment in real estate.
16
<PAGE> 17
MANUFACTURED HOME COMMUNITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Capital expenditures for improvements were approximately $5.4 million for
the nine months ended September 30, 1996 compared to $4.5 million for the nine
months ended September 30, 1995. Of the $5.4 million, approximately $2.8
million represented improvements to existing sites. The Company anticipates
spending approximately $1.0 million on improvements to existing sites during
the remainder of 1996. The Company believes these improvements are necessary
in order to increase and/or maintain occupancy levels and maximize rental rates
charged to new and renewing residents. Of the remaining $2.6 million, $1.9
million represented costs to develop expansion sites at certain of the
Company's properties and $758,000 represented costs associated with the
Company's conversion to a new accounting software system and other corporate
headquarter expenditures. The Company is currently developing an additional
104 sites which should be available for occupancy in 1996.
Net cash provided by financing activities increased $42.5 million from
$37.9 million used in financing activities for the nine months ended September
30, 1995 to $4.6 million provided by financing activities for the nine months
ended September 30, 1996 primarily due to $33.6 million of borrowings under the
line of credit for the acquisition of Waterford and the financing of
Candlelight Village.
Distributions to common stockholders and minority interests remained
relatively stable at $24.7 million and $24.0 million for the nine months ended
September 30, 1996 and 1995, respectively. On January 12, 1996, the Company
paid a $0.295 per share distribution for the fourth quarter of 1995 to
stockholders of record on December 29, 1995. The Company paid a $0.305 per
share distribution on April 12, 1996, July 12, 1996 and October 11, 1996, for
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996,
respectively, to stockholders of record on March 29, 1996, June 28, 1996 and
September 27, 1996, respectively. Return of capital on a GAAP basis was
$0.065, $0.065 and $0.045 for the quarters ended March 31, 1996, June 30, 1996
and September 30, 1996, respectively.
On January 2, 1996, certain members of management of the Company each
entered into subscription agreements with the Company to acquire a total of
270,000 shares of the Company's common stock at $17.375 per share, the market
price on that date. The Company received from these individuals the 1996
Employee Notes in exchange for their shares. The 1996 Employee Notes accrue
interest at 5.91%, mature on January 2, 2005, and are recourse against the
employees in the event the pledged shares are insufficient to repay the
obligations.
The Company expects to meet its short-term liquidity requirements,
including its distributions, generally through its working capital, net cash
provided by operating activities and availability under the existing line of
credit. The Company expects to meet certain long-term liquidity requirements
such as scheduled debt maturities, property acquisitions and capital
improvements by long-term collateralized and uncollateralized borrowings
including its existing line of credit and the issuance of debt securities or
additional equity securities in the Company, in addition to working capital.
17
<PAGE> 18
MANUFACTURED HOME COMMUNITIES, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The discussion in Note 7 of Notes to Consolidated Financial
Statements is incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated October 8, 1996, filed October 15, 1996, relating
to Item 4 - "Changes in Registrant's Certifying Accountants" and
Item 7 - "Financial Statements and Exhibits".
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements 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.
MANUFACTURED HOME COMMUNITIES, INC.
BY: /s/ Thomas P. Heneghan
------------------------------------------
Thomas P. Heneghan
Vice President and Chief Financial Officer
(a duly authorized officer and Chief
Accounting Officer of the Company)
DATE: November 11, 1996
------------------
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of operations and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000895417
<NAME> MANUFACTURED HOME COMMUNITIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,086
<SECURITIES> 10,302
<RECEIVABLES> 855
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 48,187
<PP&E> 577,196
<DEPRECIATION> (67,555)
<TOTAL-ASSETS> 557,828
<CURRENT-LIABILITIES> 29,962
<BONDS> 0
<COMMON> 246
0
0
<OTHER-SE> 257,957
<TOTAL-LIABILITY-AND-EQUITY> 557,828
<SALES> 75,690
<TOTAL-REVENUES> 78,005
<CGS> 0
<TOTAL-COSTS> 30,324
<OTHER-EXPENSES> 2,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,265
<INCOME-PRETAX> 20,368
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,349
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
</TABLE>
