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As filed with the Securities and Exchange Commission on April 16, 1997
Registration NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of Registrant as specified in its charter)
Maryland 36-3857664
(State or other jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
(312) 474-1122
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
David A. Helfand
President and Chief Executive Officer
Manufactured Home Communities, Inc.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
(312) 474-1122
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Ruth Pinkham Haring, Esq.
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1515
Chicago, Illinois 60606
Ellen Kelleher, Esq.
Executive Vice President and General Counsel
Manufactured Home Communities, Inc.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
Approximate date of commencement of proposed sale to the public: As soon
as possible after the effective date of this Registration Statement and from
time to time as determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box./ /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box./X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box./ /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum
Title of stock Amount Proposed maximum aggregate offer Amount of
to be registered to be registered price per share(1) price(1) registration fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.01 par value 491,117 $21.57 $10,593,393.69 $3,215
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(footnote on next page)
================================================================================
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
(Footnote from previous page)
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 based on
the average of the high and low reported sales prices on the New York Stock
Exchange on April 15, 1997.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion
Preliminary Prospectus dated April 16, 1997
PROSPECTUS
491,117 SHARES
MANUFACTURED HOME COMMUNITIES, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time by the
holders thereof of up to (i) 221,117 shares of common stock, $.01 par value per
share ("Common Stock"), that may be issued by Manufactured Home Communities,
Inc., a Maryland corporation (the "Company"), to holders (the "OP Unitholders")
of up to 221,117 units of limited partnership interest ("OP Units") in MHC
Operating Limited Partnership, an Illinois limited partnership (the "Operating
Partnership"), of which the Company is the sole general partner and owns a
controlling interest, if and to the extent that the OP Unitholders exchange
such OP Units for shares of Common Stock, and (ii) 270,000 shares of Common
Stock (the "Officer Stock") held by certain officers of the Company or its
affiliates. The Company is registering for resale by such holders the shares
of Common Stock that may be issued to the OP Unitholders and the shares of
Officer Stock (collectively, the "Shares") as required under the terms of
certain registration rights and subscription agreements between the Company and
the holders of securities exchangeable for the Shares, as the case may be (the
"Selling Stockholders"). The registration of the Shares does not necessarily
mean that any of the Shares will be offered for sale or sold by the Selling
Stockholders.
The aforesaid 221,117 OP Units were issued to the OP Unitholders in a
private acquisition transaction in 1994. The Officer Stock was issued in
private transactions in 1996.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "MHC". To ensure that the Company maintains its qualification
as a real estate investment trust (a "REIT") under the Federal tax laws,
ownership by any person is limited to 5% of the lesser of the number or value
of the Company's outstanding shares of Common Stock, with certain exceptions.
See "Description of Common Stock -- Restrictions on Transfer."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELATING TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The Selling Stockholders from time to time may offer for sale and sell the
Shares held by them directly or through agents or broker-dealers on terms to be
determined at the time of sale. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in the
section of this Prospectus entitled "Plan of Distribution" or in an
accompanying Prospectus Supplement. Each of the Selling Stockholders reserves
the sole right to accept or reject, in whole or in part, any proposed purchase
of the Shares to be made directly or through agents or broker-dealers.
The Company will not receive any of the proceeds from the sale of any
Shares by the Selling Stockholders, but has agreed to bear certain expenses of
registration of the Shares under Federal and state securities laws.
The Selling Stockholders and any agents or broker-dealers that participate
with the Selling Stockholders in the distribution of Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), and any commissions received by them and any profit on
the resale of the Shares may be deemed to be underwriting commissions or
discounts under the Securities Act.
THE DATE OF THIS PROSPECTUS IS __________, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), pursuant to the Exchange
Act. Such reports, proxy statements and other information filed by the Company
may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and are also
available for inspection and copying at the regional offices of the Commission
located at Seven World Trade Center, New York, New York 10048 and at 500 West
Madison Street, Chicago, Illinois 60661-2511. The Commission maintains a web
site that contains reports, proxy information and statements, and other
information regarding registrants that file electronically with the Commission.
The web site address is http://www.sec.gov. The Company files electronically.
The Common Stock of the Company is listed on the NYSE and such material can
also be inspected and copied at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, with respect to the Shares. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. For further information
concerning the Company and the Shares, reference is made to the Registration
Statement and the exhibits filed therewith, which may be examined without
charge at, or copies obtained upon payment of prescribed fees from, the
Commission and its regional offices at the locations listed above. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below filed by the Company with the Commission (File
No. 1-11718) are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, filed March 11, 1997;
b. The Company's definitive proxy statement dated March 28, 1997
relating to the annual meeting of stockholders to be held on May 13,
1997;
c. The Company's Current Reports on Form 8-K dated March 14, 1997,
filed March 25, 1997 and dated March 27, 1997, filed April 3, 1997;
d. The Company's Articles of Amendment and Restatement and Bylaws,
filed as exhibits to the Company's Registration Statement on Form
S-11, File No. 33-67750, dated August 20, 1993; and
e. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A/A filed on February 22, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and made a part hereof from the
date of filing such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein, in any applicable Prospectus Supplement or in any
other document subsequently filed with the Commission which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
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Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents unless such exhibits are specifically
incorporated by reference in such document) will be provided without charge to
each person, including any stockholder, to whom this Prospectus is delivered,
upon written or oral request. Requests should be directed to Manufactured Home
Communities, Inc., Two North Riverside Plaza, Suite 800, Chicago, Illinois
60606, Attention: Cynthia McHugh (telephone number: (312) 474-1122).
THE COMPANY
The following summary is qualified in its entirety by the more detailed
descriptions and the financial information and statements, and the notes
thereto, appearing elsewhere and incorporated by reference in this Prospectus.
As used herein, the term "Company" includes Manufactured Home Communities, Inc.
and those entities owned or controlled by Manufactured Home Communities, Inc.
(collectively, the "Subsidiaries"), unless the context indicates otherwise.
GENERAL
The Company is a self-administered and self-managed equity REIT which was
formed to continue the property operations, business objectives and acquisition
strategies of Mobile Home Communities, Inc. ("MH Inc.") and certain affiliated
entities. MH Inc. and its predecessors had owned and operated manufactured
home community properties since 1969. As of March 31, 1997, the Company
controlled a portfolio of 71 manufactured home communities (the "Properties")
located in 19 states throughout the United States containing approximately
27,968 residential sites. The Company believes that it will continue to
qualify as a REIT for Federal income tax purposes, and does not engage or pay a
REIT advisor.
A manufactured home community is designed and improved with sites for the
placement of manufactured homes and related infrastructure and amenities.
Manufactured homes are detached, single-family homes that are built off-site by
manufacturers and installed on sites within each community. The owner of each
home in the Properties leases the site on which the home is located. Modern
manufactured home communities are similar to typical residential subdivisions
containing centralized entrances, paved streets, curbs, gutters and parkways.
In addition, these communities often provide a clubhouse for social activities,
recreation and other amenities, which may include swimming pools, shuffleboard
courts, tennis courts, laundry facilities and cable television service.
From the initial public offering of 10,120,000 shares of Common Stock in
March, 1993 (the "IPO") through March 31, 1997, the Company acquired 35 of the
Properties (the "Acquired Properties") containing approximately 17,120 sites
for an aggregate purchase price of approximately $435 million. In addition, in
connection with the acquisition of 13 of the Acquired Properties, the Company
issued an additional 437,236 OP Units in the Operating Partnership to the
sellers. Since the IPO, the Company has sold five properties for an aggregate
sales price of approximately $9.5 million.
The Company was formed as a Maryland corporation on December 4, 1992. The
Company's executive offices are located at Two North Riverside Plaza, Suite
800, Chicago, Illinois 60606 and its telephone number is (312) 474-1122. The
Company has regional management offices in Denver, Colorado; Clearwater,
Florida; Baltimore, Maryland; and Phoenix, Arizona.
THE OPERATING SUBSIDIARIES OF THE COMPANY AND INVESTMENT IN AFFILIATES
The operations of the Company are conducted through its Subsidiaries, so
that, among other things, the Company is able to comply with certain
requirements under the Federal tax laws relating to the assets and income that
a REIT may hold or earn. In this regard, the Company has established (i) the
Operating Partnership, which benefited those entities (the "Original Owners")
that contributed 41 Properties to the Company in exchange for OP Units in
connection with the IPO by allowing them to partially defer certain tax
consequences, and which structure allows the Company to acquire additional
manufactured home community properties in transactions that may defer some or
all of the sellers' tax consequences; (ii) MHC Management Limited Partnership
and MHC-DAG Management Limited Partnership (collectively, the "Management
Partnerships"), which were formed to manage the Properties; (iii) MHC Financing
Limited Partnership ("MHC Financing Partnership"), which allowed the Company to
borrow $100 million in mortgage indebtedness on a more favorable basis
utilizing a securitized financing structure as opposed to utilizing other real
estate financing structures; and (iv) two other limited partnerships formed to
enable the Company to obtain certain other mortgage financing (together with
MHC Financing Partnership, the "Financing Partnerships").
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Substantially all of the Company's assets are owned directly by or through the
Operating Partnership, in which the Company has an approximately 90% interest
and is the sole general partner.
The Company controls the management of all of the Properties, and believes
that holders of Common Stock have substantially the same economic benefits that
direct ownership, operation and management of the Properties by the Company
would provide. In addition, the Company is entitled to 95% of all dividends
and distributions from (i) Realty Systems, Inc. ("RSI"), and (ii) LP Management
Corp. and DeAnza Group, Inc. (collectively, the "Management Corporations").
RSI provides sales, brokerage, leasing and construction services to the
Company. The Management Corporations are limited partners in the Management
Partnerships. Approximately 5% of the dividends and distributions, if any,
produced from RSI and the Management Corporations will be distributed to
affiliates of Mr. Samuel Zell, the Chairman of the Board of the Company.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below prior to making an investment decision regarding the
Shares offered hereby.
ADVERSE CONSEQUENCES OF DEBT FINANCING
General Risks. The Company is subject to the risks normally associated
with debt financing, including the risk that the Company's cash from operating
activities will be insufficient to meet required payments of principal and
interest, the risk that the Company will not be able to refinance existing
indebtedness or that the terms of such refinancing will not be as favorable as
the terms of such indebtedness and the risk that the Company will not be able
to finance necessary capital expenditures for such purposes as renovations and
other improvements on favorable terms or at all. If a Property is mortgaged to
secure payment of indebtedness and the Company is unable to meet mortgage
payments, the Property could be transferred to the mortgagee with a consequent
loss of income and asset value to the Company.
Defaults under the Mortgage Debt. Concurrently with the IPO, MHC
Financing Partnership borrowed $100 million mortgage indebtedness (the
"Mortgage Debt") from a limited purpose trust (the "Lender"), which issued
mortgage pass-through certificates to an institutional investor. The payment
and other obligations under the Mortgage Debt are secured by a first mortgage
lien on 32 of the Properties. If the Company fails to meet its obligations
under the Mortgage Debt, the Lender would be entitled to foreclose on the 32
Properties securing such Mortgage Debt, which could have a material adverse
effect on the Company and its ability to make expected distributions and could
threaten the continued viability of the Company.
Risk of Rising Interest Rates. The Mortgage Debt bears a floating
interest rate of the London Interbank Offered Rate ("LIBOR") plus 1.05% per
annum. In October 1996, the Company entered into an interest rate swap
agreement relating to the Mortgage Debt which effectively fixes the Company's
interest expense on the Mortgage Debt at a rate of 6.6% during the remainder of
the loan term.
POSSIBLE CONFLICTS OF INTEREST
Failure to Enforce Terms of Contributions. The terms of the contribution
of the 41 Properties by the Original Owners, and the contribution by Equity
Financial and Management Corp. ("EF&M"), an entity controlled by Mr. Zell, of
the preferred stock of the Management Corporations, the preferred stock of RSI,
the former leasing and brokerage subsidiary of MH Inc., and a note receivable
from RSI (the "RSI Note") to the Operating Partnership in exchange for OP Units
at the time of the IPO were not determined through arms-length negotiation. As
of January 1, 1994, each of the Original Owners distributed its OP Units to its
respective partners. All of such partners who were entities affiliated with
Mr. Zell, together with EF&M, contributed their OP Units to a limited
partnership controlled by Mr. Zell (the "Zell Partnership"). The remaining
partners of the Original Owners were individuals (the "Executives" and,
together with the Zell Partnership, the "New Original Owners") who now hold the
OP Units originally held by the Original Owners. Mr. Zell indirectly controls
and has a substantial economic interest in the Zell Partnership. Consequently,
Mr. Zell has a conflict of interest with respect to his obligations as an
officer and director of the Company to enforce the terms of the agreements
relating to such contributions to the Operating Partnership. The failure to
enforce the material terms of these agreements, particularly the
indemnification provisions and the remedy provisions for breaches of
representations and warranties, could result in a monetary loss to the Company.
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Failure to Enforce Terms of Management Contracts. Through its ownership
of all of the common stock of the Management Corporations, EF&M has an
approximate 5% indirect interest in the Management Partnerships of which the
Operating Partnership is the sole general partner. The Management Partnerships
have entered into management contracts with the Operating Partnership and each
of the limited partnerships formed to own the beneficial interest in certain of
the Properties that are encumbered by mortgage indebtedness with respect to
each of the Properties. Such management contracts were not negotiated on an
arms-length basis. Mr. Zell has a conflict with respect to his obligations as
an officer and director of the Company, which through the Operating Partnership
controls the Management Partnerships as sole general partner, to enforce the
terms of the management contracts. The failure to enforce the material terms
of these management contracts could have an adverse effect on the Company. The
Operating Partnership is entitled to approximately 95% of the income of the
Management Partnerships.
Failure to Enforce Terms of RSI Agreements. The Management Partnerships
have entered into services agreements with RSI whereby RSI provides sales,
leasing, brokerage and construction services to the Properties and the
Operating Partnership provides the RSI Note, an $18 million revolving credit
line to RSI for inventory financing, approximately $3.8 million of which is
currently outstanding. RSI recently entered into a financing with a third
party and the Operating Partnership has converted certain amounts it is owed
under the RSI Note to additional preferred stock of RSI, the result of which is
a reduction in the principal amount outstanding under the RSI Note. These
arrangements, and the agreements documenting such arrangements, were not
negotiated on an arms-length basis. Certain persons with significant business
relationships with Mr. Zell control the board of directors, management and
operating policies of RSI. The failure to enforce the terms of the RSI Note
would result in a reduction of income to the Company and the failure to enforce
the RSI services agreements could result in a disruption of services to the
Properties. RSI's certificate of incorporation provides that RSI must
distribute quarterly all of its net operating cash flow as distributions, 95%
of which will be distributed to the Operating Partnership as holder of all of
the preferred stock of RSI. RSI's certificate of incorporation further
provides that no changes to such policy may be made without the consent of the
Operating Partnership, as the holder of preferred stock. Since RSI is an
operating company and not a passive entity, the Company's investment in RSI is
subject to the risk that the persons controlling RSI might have economic or
business interests or goals which are inconsistent with the business interests
or goals of the Company, and that such persons could act in a manner so as to
adversely affect the Company's investment in RSI.
Competitive Real Estate Activities of Certain Officer and Directors. Mr.
Zell and Mr. Randall K. Rowe, a former officer and director of the Company have
agreed for the period they are directors or officers of the Company and for one
year thereafter not to engage in the manufactured home community business in
competition with the Company. However, each currently invests in, operates,
manages and finances other forms of housing, including multi-family residential
and single-family housing, and may continue to do so in the future, which may
be competitive with manufactured home community properties owned by the
Company.
Competition from Properties Controlled by EF&M or Mr. Zell. Entities
affiliated with or controlled by EF&M or Mr. Zell hold equity interests in
residential properties other than manufactured home communities that were not
contributed to the Company because such interests are inconsistent with the
Company's investment objective of focusing exclusively on manufactured home
communities. Some of these properties are located in the same geographical
areas as the Properties and compete with the Properties. Prospective tenants
of sites at the Properties may determine to rent space in such properties
controlled by EF&M and Mr. Zell. Although officers and directors of the
Company are restricted by law with respect to decisions that affect competition
with the Company, there can be no assurance that these legal restraints will be
effective to prevent decisions by officers and directors of the Company that do
not fully represent the interests of stockholders of the Company rather than
EF&M and Mr. Zell and their affiliates. In addition, the directors and
officers of the Company who will remain directors or officers of EF&M may have
conflicts of interest in allocating their time between the activities of the
Company and the activities of EF&M and its subsidiaries.
Tax Consequences Upon Sale of Properties. Prior to the exchange of OP
Units for Common Stock, the New Original Owners will suffer different and more
adverse tax consequences than the Company upon the sale of any of the Initial
Properties and, therefore, the New Original Owners and the Company, as partners
in the Operating Partnership, may have different objectives regarding the
appropriate pricing and timing of any sale of the Initial Properties.
Consequently, the New Original Owners may influence the Company not to sell an
Initial Property even though such sale might otherwise be financially
advantageous to the Company. See "Federal Income Tax Considerations -- Tax
Aspects of the Company's Investments in Partnerships -- Tax Allocations with
Respect to the Properties." During 1994 and 1995, the Operating Partnership
sold four of the Initial Properties (Midwest, Ferrelwoods, Coachlight and
Catalina).
Role of Legal Counsel. Rosenberg & Liebentritt, P.C. provides
representation to the Company and each of the Subsidiaries. At times, the
interests of the Company may not be identical to the interests of the
Subsidiaries. In addition, Rosenberg & Liebentritt, P.C. has in the past
represented Mr. Zell, the New Original Owners and their respective affiliates
and will continue to represent Mr. Zell, the New Original Owners, and their
respective affiliates. Officers and associates of Rosenberg & Liebentritt,
P.C. beneficially own less than 1% of the outstanding shares of Common Stock,
either directly or upon the exercise of options.
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Agreements with Affiliates of Mr. Zell. The Company occupies office space
leased from Equity Office Properties, Inc., an entity controlled by Mr. Zell,
at Two North Riverside Plaza, Chicago, Illinois. Pursuant to an administrative
services agreement, Equity Group Investments, Inc. ("EGI"), an entity
controlled by Mr. Zell, provides the Company and each of the Subsidiaries with
certain administrative and office facility services and other services with
respect to certain aspects of the Company's business, including, but not
limited to, financial and accounting services, tax services, investor
relations, corporate secretarial, computer and support services. In addition,
RSI has entered into an administrative services agreement with EGI for certain
administrative, financial and accounting services, tax services, computer and
support services. Neither of these administrative service agreements with EGI
was negotiated at arms-length and, as a result, the fees paid under these
agreements may exceed the fees that would be paid pursuant to an agreement with
an unaffiliated party. The Company believes, however, that such agreements are
on terms no less favorable than could be obtained with unaffiliated parties.
CONTROL AND INFLUENCE BY DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT
STOCKHOLDERS
The Zell Partnership, certain officers of the Company and other entities
controlled by Mr. Zell own in the aggregate approximately 10.5% of the Common
Stock (assuming that all of the OP Units are exchanged for shares of Common
Stock), and the General Motors Hourly-Rate Employes Pension Trust and the
General Motors Salaried Employes Trust (collectively, the "GM Trusts") own
approximately 9.1% of the Common Stock (assuming that all of the OP Units are
exchanged for shares of Common Stock). Accordingly, such persons (assuming
conversion of their OP Units, if applicable) may have substantial influence on
the Company, which influence might not be consistent with the interests of
other stockholders, and on the outcome of any matters submitted to the
Company's stockholders for approval. In addition, although there is no current
agreement, understanding or arrangement for these stockholders to act together
on any matter, these stockholders would be in a position to exercise
significant influence over the affairs of the Company if they were to act
together in the future.
POTENTIAL ENVIRONMENTAL LIABILITY AFFECTING THE COMPANY
Under various Federal, state and local laws, ordinances and regulations,
an owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such real estate. Such laws
often impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure to remediate properly such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the costs of removal or remediation of such substances at a disposal
or treatment facility, whether or not such facility is owned or operated by
such person. Certain environmental laws impose liability for release of
asbestos-containing materials ("ACMs") into the air, and third parties may seek
recovery from owners or operators of real property for personal injury
associated with ACMs. In connection with the ownership (direct or indirect),
operation, management and development of real property, the Company or its
Subsidiaries, as the case may be, may be considered an owner or operator of
such properties or as having arranged for the disposal or treatment of
hazardous or toxic substances and, therefore, may be potentially liable for
removal or remediation costs, as well as certain other related costs, including
governmental fines and injuries to persons and property.
The Properties generally have been subjected to a Phase I or similar
environmental audit (which involves general inspections without soil sampling
or ground water analysis) completed by independent environmental consultants.
These environmental audits have not revealed, nor is the Company aware of, any
significant environmental liability that the Company believes would have a
material adverse effect on the Company's business, results of operations,
financial condition or liquidity.
No assurance can be given that existing environmental studies with respect
to any of the Properties reveal all environmental liabilities, that any prior
owner of a Property did not create any material adverse environmental condition
not known to the Company, or that a material adverse environmental condition
does not otherwise exist as to any one or more Properties.
REAL ESTATE INVESTMENT CONSIDERATIONS
Income from real property investments, and the Company's resulting ability
to make expected distributions to stockholders, may be adversely affected by
the general economic climate, local conditions such as oversupply of
manufactured home sites or a reduction in demand for manufactured home sites in
the area, the attractiveness of the Properties to tenants, zoning or other
regulatory restrictions, changes in laws, competition from other available
manufactured home communities and alternative forms of housing (such as
apartment buildings and site-built single-family homes), the ability of the
Company to provide adequate maintenance and insurance, and increased operating
costs (including insurance premiums and real estate taxes). The Company's
income would also be adversely affected if tenants were unable to pay rent or
if the Company were unable to rent sites on favorable terms. If the Company
were unable to promptly relet or renew the leases for a significant number of
sites, or if the rental rates upon such renewal or reletting were significantly
lower than expected rates, then the Company's funds from operations and ability
to make expected distributions to stockholders may be adversely affected. In
addition, certain
6
<PAGE> 9
expenditures associated with each equity investment (such as real estate taxes
and maintenance costs) generally are not reduced when circumstances cause a
reduction in income from the investment. Furthermore, real estate investments
are relatively illiquid and, therefore, will tend to limit the ability of the
Company to vary its portfolio promptly in response to changes in economic or
other conditions.
OWNERSHIP LIMIT AND LIMITS ON CHANGES IN CONTROL
5% Ownership Limit; Inapplicability to Zell and Lurie Interests, EF&M and
the GM Trusts. In order to maintain the Company's qualification as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code"), not more than
50% of the value of the outstanding shares of the capital stock of the Company
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code to include certain entities). Certain beneficial owners (i.e.,
beneficiaries of trusts established for the benefit of Mr. Zell and his family
and for the family of Mr. Robert Lurie, a deceased partner of Mr. Zell) of the
New Original Owners (through their potential rights of ownership in Common
Stock) together constitute two individuals for purposes of this test and, after
giving effect to this offering, will be deemed to own approximately 10% of the
value of the outstanding stock of the Company. Due to such concentration of
ownership of the Company, ownership of more than 5% of the number or value of
the outstanding stock of the Company by any single stockholder has been
restricted, with certain exceptions, for the purpose of maintaining the
Company's qualification as a REIT under the Code. Such restrictions in the
Company's Articles of Amendment and Restatement (the "Charter") do not apply to
the ownership of the 2,071,198 shares acquired by the GM Trusts simultaneously
with the IPO or the 2,279,812 shares issuable to the New Original Owners upon
the exchange of their OP Units. Additionally, the Company's Charter allows
certain transfers of such shares without the transferees being subject to the
5% ownership limit, provided such transfers do not result in increased
concentration in the ownership of the Company. The Company's Board of
Directors, upon receipt of a ruling from the Internal Revenue Service (the
"Service"), an opinion of counsel or other evidence satisfactory to the Board
of Directors and upon such other conditions as the Board of Directors may
direct, may also exempt a proposed transferee from these restrictions. See
"Description of Common Stock -- Restrictions on Transfer."
The 5% ownership limit, as well as the ability of the Company to issue
additional shares of Common Stock or shares of other stock (which may have
rights and preferences senior to the Common Stock), may delay, defer or prevent
a change in control of the Company and may also (i) deter tender offers for the
Common Stock, which offers may be advantageous to stockholders, and (ii) limit
the opportunity for stockholders to receive a premium for their Common Stock
that might otherwise exist if an investor were attempting to assemble a block
of Common Stock in excess of 5% of the outstanding shares of the Company or
otherwise effect a change in control of the Company.
Staggered Board. The Board of Directors of the Company has been divided
into three classes of directors. The terms of the current classes will expire
in 1997, 1998 and 1999, respectively. As the term of each class expires, the
directors in each class will be elected for a three-year term and the directors
in the other two classes will continue in office. The staggered terms for
directors may delay, defer or prevent a change in control of the Company even
if a change in control were in the stockholders' interest.
POTENTIAL ADVERSE TAX CONSEQUENCES AFFECTING STOCKHOLDERS
Taxation as a Corporation. The Company believes that it has qualified and
will continue to qualify as a REIT under the Code, commencing with its taxable
year ended December 31, 1993. However, no assurance can be given that the
Company was organized or will be able to continue to operate in a manner so as
to qualify or remain so qualified. Qualification as a REIT involves the
satisfaction of numerous requirements (some on an annual and quarterly basis)
established under highly technical and complex Code provisions for which there
are only limited judicial or administrative interpretations, and involve the
determination of various factual matters and circumstances not entirely within
the Company's control.
If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to Federal income tax (including any applicable
minimum tax) on its taxable income at corporate rates. Moreover, unless
entitled to relief under certain statutory provisions, the Company also would
be disqualified from treatment as a REIT for the four taxable years following
the year during which qualification was lost. This treatment would reduce the
net earnings of the Company available for investment, or distribution to
stockholders, because of the additional tax liability to the Company for the
years involved. In addition, the Company would no longer be required to make
distributions to stockholders. See "Federal Income Tax Considerations."
Other Tax Liabilities. Even if the Company qualifies as a REIT, it will
be subject to certain Federal, state and local taxes on its income and
property. See "Federal Income Tax Considerations -- Taxation of the Company --
General" and "Federal Income Tax Considerations -- Other Tax Considerations --
State and Local Taxes." In addition, the Company's management operations,
which are conducted through the Management Partnerships and the activities of
RSI, generally will be subject to Federal income tax at regular corporate
rates. See "Federal Income Tax Considerations -- Other Tax Considerations --
The Management Corporations and RSI."
7
<PAGE> 10
EFFECT ON PRICE OF SHARES AVAILABLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices
for shares of Common Stock. Up to 4,955,370 shares of Common Stock may be sold
in the future by certain holders of shares of Common Stock and OP Units
(exchangeable for shares of Common Stock) that are currently covered by an
effective shelf registration statement. Up to 491,117 shares of Common Stock
may be issued in the future by the Company to the Selling Stockholders. In
addition, 1,000,000 shares of Common Stock have been reserved for issuance
pursuant to the Company's stock option plan. All such shares may be sold
pursuant to registration rights or available exemptions from registration. No
prediction can be made regarding the effect that future sales of shares of
Common Stock will have on the market prices of shares.
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that may influence the market price of the Common Stock
is annual distributions per share. An increase in market interest rates may
lead purchasers of shares of Common Stock to demand a higher return on their
investment, which could adversely affect the market price of the Common Stock.
CHANGES IN INVESTMENT AND FINANCING POLICIES AFFECTING THE COMPANY
The investment and financing policies of the Company, and its policies
with respect to certain other activities, including its growth, debt,
capitalization, distributions, REIT status and operating policies, are
determined by the Board of Directors. Although the Board of Directors has no
present intention to do so, these policies may be amended or revised from time
to time at the discretion of the Board of Directors without notice to or a vote
of the stockholders of the Company. Accordingly, stockholders have no control
over changes in policies of the Company and changes in the Company's policies
may not fully serve the interests of all stockholders.
No Limitation on Debt. The Company currently has a policy of maintaining a
ratio of debt-to-total market capitalization (i.e., total debt of the Company
as a percentage of the market value of issued and outstanding shares of Common
Stock and OP Units plus total debt) of approximately 50% or less, but the
organizational documents of the Company do not contain any limitation on the
amount or percentage of indebtedness that the Company might incur.
Accordingly, the Board of Directors could alter or eliminate the current
limitation on borrowing. If this policy were changed, the Company could become
more highly leveraged, resulting in an increase in debt service, which could
adversely affect the Company's funds from operations and its ability to make
expected distributions to stockholders, and result in an increased risk of
default on its obligations.
The Company has established its debt policy relative to the total market
capitalization of the Company rather than relative to the book value of its
assets, a ratio that is frequently employed. The Company has used market
capitalization because it believes that the book value of its assets (which to
a large extent is the depreciated historic cost of real property, the Company's
primary tangible asset) does not accurately reflect its ability to borrow and
to meet debt service requirements. The market capitalization of the Company,
however, is more variable than book value, and does not necessarily reflect the
fair market value of the underlying assets of the Company at all times.
Although the Company will consider factors other than market capitalization in
making decisions regarding the incurrence of debt (such as the purchase price
of properties to be acquired with debt financing, the estimated market value of
properties upon refinancing, and the ability of particular properties and the
Company as a whole to generate cash flow to cover expected debt service), there
can be no assurance that the ratio of debt-to-total market capitalization (or
to any other measure of asset value) will be consistent with the expected level
of distributions to stockholders.
8
<PAGE> 11
DESCRIPTION OF COMMON STOCK
The summary of the terms of the Common Stock of the Company set forth
below does not purport to be complete and is subject to and qualified in its
entirety by reference to the Charter and the bylaws (the "Bylaws") of the
Company, which are incorporated by reference into this Registration Statement.
GENERAL
The Charter provides that the Company may issue up to 60,000,000 shares of
stock, consisting of 50,000,000 shares of Common Stock, $0.01 par value per
share, and 10,000,000 shares of preferred stock, $0.01 par value per share.
Assuming the exchange of all of the OP Units currently outstanding for Common
Stock, 27,721,833 shares of Common Stock would be issued (or reserved for
issuance upon exchange of OP Units) and outstanding and no shares of preferred
stock would be issued and outstanding. Under Maryland law, no stockholder of
the Company will be liable for any debt or obligation of the Company solely as
a result of such stockholder's status as a stockholder of the Company.
COMMON STOCK
All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other shares
of stock and to the provisions of the Charter regarding Excess Stock (as
defined below), holders of shares of Common Stock are entitled to receive
distributions on such stock if, as and when authorized and declared by the
Board of Directors out of assets legally available therefor and to share
ratably in the assets of the Company legally available for distribution to its
stockholders in the event of its liquidation, dissolution or winding-up after
payment of, or adequate provision for, all known debts and liabilities of the
Company. The Company currently pays regular quarterly distributions.
Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of such shares of
Common Stock will possess the exclusive voting power. There is no cumulative
voting in the election of directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the directors then
standing for election and the holders of the remaining shares, if any, will not
be able to elect any directors.
Holders of shares of Common Stock have no conversion, sinking fund,
redemption or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Charter regarding Excess Stock, shares of
a particular class of issued Common Stock will have equal dividend,
distribution, liquidation and other rights, and have no preference, exchange or
appraisal rights.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a
corporation generally cannot dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business, unless approved
by the affirmative vote of stockholders holding at least two-thirds of the
shares entitled to vote on the matter unless a lesser percentage (but not less
than a majority of all of the votes entitled to be cast on the matter) is set
forth in the corporation's charter. The Charter does not provide for a lesser
percentage in such situations.
9
<PAGE> 12
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, shares of Common
Stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months (other than the first year of its
existence) or during a proportionate part of a shorter taxable year. Also, not
more than 50% of the value of the issued and outstanding shares of capital
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year. Certain beneficial owners of the New Original Owners
(i.e., trusts established for the benefit of Mr. Zell and his family and for
the family of Mr. Lurie) constitute two individuals for purposes of this test
and, under the Service's rules applicable to determining percentages of
ownership, are deemed to own approximately 10% of the value of the outstanding
shares of Common Stock.
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Charter, subject to certain exceptions,
provides that no stockholder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 5% (the "Ownership Limit") of the
number or value of the issued and outstanding shares of stock of the Company.
The Board of Directors, upon receipt of a ruling from the Service, an opinion
of counsel or other evidence satisfactory to the Board of Directors and upon
such other conditions as the Board of Directors may direct, may exempt a
proposed transferee from the Ownership Limit. As a condition of such
exemption, the intended transferee must give written notice to the Company of
the proposed transfer no later than the fifteenth day prior to any transfer
which, if consummated, would result in the intended transferee owning shares of
stock in excess of the Ownership Limit. The Board of Directors may require
such opinions of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Company's status as
a REIT. Any transfer of shares of Common Stock that would (i) create a direct
or indirect ownership of stock in excess of the Ownership Limit, (ii) result in
the stock being owned by fewer than 100 persons, or (iii) result in the Company
being "closely held" within the meaning of Section 856(h) of the Code will be
null and void, and the intended transferee will acquire no rights to such
Common Stock. The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT.
Pursuant to the Charter, the GM Trusts and certain beneficial owners of
the holders of Original OP Units who would exceed the Ownership Limit as a
result of the exchange of the Original OP Units for Common Stock have been
excluded from the ownership limit. These persons may also acquire additional
Common Stock through the Company's stock option plan, pursuant to which the
Company grants stock options ("Options") from time to time to officers,
directors and consultants, the Company's 401(k) plan or a dividend reinvestment
plan approved by the Board of Directors, but in no event will such persons be
entitled to acquire additional stock such that the five largest beneficial
owners of stock of the Company hold more than 50% of the total outstanding
stock.
Any purported transfer of stock that would result in a person owning stock
in excess of the Ownership Limit or cause the Company to become "closely held"
under Section 856(h) of the Code that is not otherwise permitted as provided
above will constitute excess shares of stock ("Excess Stock"), which will be
transferred by operation of law to the Company as trustee for the exclusive
benefit of the person or persons to whom the Excess Stock is ultimately
transferred, until such time as the intended transferee retransfers the Excess
Stock. While shares of Excess Stock are held in trust, the beneficial owners
thereof will not be entitled to vote or to share in any dividends or other
distributions (except upon liquidation) with respect to such Excess Stock.
Subject to the Ownership Limit, the Excess Stock may be retransferred by the
intended transferee to any person (if the Excess Stock would not be Excess
Stock in the hands of such person) at a price not to exceed the price paid by
the intended transferee or, if the intended transferee did not give value for
such Excess Stock (e.g., a transfer by gift or devise), the fair market value
(as described below) at the time of the proposed transfer that resulted in the
Excess Stock, at which point the Excess Stock will automatically be exchanged
for the stock to which the Excess Stock is attributable. In addition, such
Excess Stock held in trust is subject to purchase by the Company at a purchase
price equal to the lesser of the price paid for the stock by the intended
transferee (or, in the case of a devise or gift, the fair market value at the
time of such devise or gift) and the fair market value of the Excess Stock on
the date the Company exercises its right to purchase. Fair market value shall
be the last reported sales price of such stock on the NYSE on the trading day
immediately preceding the relevant date, or if not then traded on the NYSE, the
last reported sales price of such stock on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system
over which such stock may be traded, or if not then traded over any exchange or
quotation system, then the fair market value of such stock on the relevant date
as determined in good faith by the Board of Directors. The Company's right to
purchase shall be effective for a period of 90 days after the later of the date
of the purported transfer which resulted in the Excess Stock and the date the
Board of Directors determines in good faith that such a transfer has occurred.
From and after the intended
10
<PAGE> 13
transfer to the intended transferee of the Excess Stock, the intended
transferee shall cease to be entitled to distributions (except upon
liquidation), voting rights and other benefits with respect to such stock
except the right to payment of the purchase price for the stock limited as
described above or the retransfer of stock as provided above. Any dividend or
distribution paid to a proposed transferee on Excess Stock prior to the
discovery by the Company that such stock has been transferred in violation of
the provisions of the Charter shall be repaid to the Company upon demand. If
the foregoing transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the intended
transferee of any Excess Stock may be deemed, at the option of the Company, to
have acted as an agent on behalf of the Company in acquiring such Excess Stock
and to hold such Excess Stock on behalf of the Company.
All certificates representing shares of Common Stock shall bear a legend
referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 5% (or such other percentage between 1/2 of 1% and 5%
as provided in the rules and regulations promulgated under the Code) of the
lesser of the number or value of the outstanding shares of stock of the Company
must give a written notice to the Company by January 31 of each year. In
addition, each stockholder will upon demand be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of shares of Common Stock as the Board of Directors
deems reasonably necessary to comply with the provisions of the Code applicable
to a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
These ownership limitations could have the effect of delaying, deferring
or preventing a change in control or other transaction in which holders of some
or a majority of shares of Common Stock might receive a premium for their
Common Stock over the then prevailing market price or which such holders might
believe to be otherwise in their best interest.
MARYLAND LAW
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting
power of the corporation's shares or an affiliate of the corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation (an "Interested Stockholder") or an affiliate
thereof are prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder. After five years
after any person becomes an Interested Stockholder, any such business
combination must be recommended by the Board of Directors of such corporation
and approved by the affirmative vote of at least (i) 80% of the votes entitled
to be cast by holders of outstanding voting shares of the corporation and (ii)
two-thirds of the votes entitled to be cast by holders of outstanding voting
shares of the corporation other than shares held by the Interested Stockholder
with whom the business combination is to be effected, unless, among other
things, the corporation's stockholders receive a minimum price (as defined in
the MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares.
These provisions of the MGCL do not apply, however, to business combinations
that are approved or exempted by the board of directors of the corporation
prior to the time the Interested Stockholder becomes an Interested Stockholder.
The Board of Directors has exempted from these provisions of the MGCL any
business combination with Mr. Zell, the holders of Original OP Units, the GM
Trusts or the officers of the Company and the officer of RSI who acquired
Common Stock in connection with the formation of the Company, and each and
every "affiliate" (as defined in the MGCL to be any person that directly or
indirectly controls, is controlled by or is under common control with a
specified person) of theirs.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Chemical Mellon
Shareholder Services.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the Shares sold by
the Selling Stockholders nor will any such proceeds be available for use by the
Company or otherwise for the Company's benefit.
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<PAGE> 14
SELLING STOCKHOLDERS
The Shares issuable upon conversion of the OP Units are being registered
by the Company under the terms of certain registration rights agreements dated
November 3, 1994 by and between the Company and the OP Unitholders. The Shares
issuable upon conversion of the Officer Stock are being registered by the
Company under terms of certain subscription agreements dated January 2, 1996
which granted certain registration rights to the holders of such Officer Stock.
The following table provides the names of each Selling Stockholder and the
number of Shares owned or to be owned upon exchange of OP Units, as applicable,
by each Selling Stockholder that are being registered hereunder. Since the
Selling Stockholders may sell all, some or none of their Shares, no estimate
can be made of the aggregate number of Shares that are to be offered hereby or
that will be owned by each Selling Stockholder upon completion of the offering
to which this Prospectus relates. If, however, each of the Selling
Stockholders were to sell all of the Shares set forth across from its name, the
Selling Stockholders would no longer own any Common Stock or OP Units, except
as otherwise indicated below. The Selling Stockholders may, however, continue
to own Options.
The Shares offered by this Prospectus may be offered from time to time by
the Selling Stockholders named below:
<TABLE>
<CAPTION>
Percent of Total
----------------------
Name Number of Shares Shares Outstanding (1)
------------------------- ---------------- ----------------------
<S> <C> <C>
Pine Lakes Venture (2) 41,460 (3)
Stephen A. Brown 44,914 (3)
G. Scott Brown 44,914 (3)
Grover C. Brown (4) 44,915 (3)
Robert D. Brown 44,914 (3)
David A. Helfand (5) 50,000 (3)
Thomas P. Heneghan (6) 50,000 (3)
Ellen Kelleher (7) 50,000 (3)
Gary W. Powell (8) 50,000 (3)
Howard Walker (9) 50,000 (3)
Thomas H. Keenan (10) 5,000 (3)
Peter Underhill (11) 5,000 (3)
William Dorsey (12) 5,000 (3)
Ronald L. Edmondson (13) 5,000 (3)
-------
491,117
=======
</TABLE>
- --------------
(1) Assumes the issuance of all of the Shares.
(2) Pine Lakes Venture is a general partnership consisting of four partners
with equal ownership interests: Stephen A. Brown, G. Scott Brown, Grover
C. Brown and Robert D. Brown.
(3) Less than 1%.
(4) Grover C. Brown, Jr. as Trustee under the Separate Property Trust
Agreement dated February 12, 1987 for the benefit of Grover C. Brown.
(5) The amount reported represents Officer Stock only. David A. Helfand is
President and Chief Executive Officer of the Company. Mr. Helfand also
owns 85,107 shares of Common Stock that are not included in the Shares.
(6) The amount reported represents Officer Stock only. Thomas P. Heneghan is
Executive Vice President and Chief Financial Officer of the Company. Mr.
Heneghan also owns 48,720 shares of Common Stock that are not included in
the Shares.
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<PAGE> 15
(7) The amount reported represents Officer Stock only. Ellen Kelleher is
Executive Vice President of and general counsel to the Company. Ms.
Kelleher also owns 37,935 shares of Common Stock that are not included in
the Shares.
(8) The amount reported represents Officer Stock only. Gary W. Powell is an
Executive Vice President of the Company. Mr. Powell also owns 187,402
shares of Common Stock that are not included in the Shares.
(9) The amount reported represents Officer Stock only. Howard Walker is
President of RSI. Mr. Walker also owns 36,720 shares of Common Stock that
are not included in the Shares.
(10) The amount reported represents Officer Stock only. Thomas H. Keenan is a
Senior Vice President of the Company. Mr. Keenan also owns 71,944 shares
of Common Stock that are not included in the Shares.
(11) The amount reported represents Officer Stock only. Peter Underhill is a
Regional Vice President of the Company. Mr. Underhill also owns 1,131
shares of Common Stock that are not included in the Shares.
(12) The amount reported represents Officer Stock only. William Dorsey is a
Regional Vice President of the Company. Mr. Dorsey also owns 1,471 shares
of Common Stock that are not included in the Shares.
(13) The amount reported represents Officer Stock only. Ronald L. Edmondson
is a Senior Vice President of the Company. Mr. Edmondson also owns 31,987
shares of Common Stock that are not included in the Shares.
13
<PAGE> 16
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of all material Federal income tax
consequences to the Company and its stockholders of the treatment of the
Company as a REIT. Since these provisions are highly technical and complex,
and because the following discussion is not exhaustive of all possible tax
considerations, each prospective purchaser of Common Stock is urged to consult
his or its own tax advisor with respect to the Federal, state, local, foreign
and other tax consequences of the purchase, ownership and disposition of the
Common Stock. This discussion does not purport to deal with the Federal income
or other tax consequences applicable to all investors in light of their
particular investment circumstances or to all categories of investors, some of
whom may be subject to special rules (including, for example, insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the
United States).
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING,
AND EACH PROSPECTIVE STOCKHOLDER IS ENCOURAGED TO CONSULT WITH HIS OR ITS TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
SALE OF STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
If certain detailed conditions imposed by the REIT provisions of the Code
are met, entities, such as the Company, that invest primarily in real estate
and that otherwise would be treated for Federal income tax purposes as
corporations generally are not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from the use of corporate investment
vehicles.
If the Company fails to qualify as a REIT in any year, however, it will be
subject to Federal income tax as if it were a domestic corporation, and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities, and therefore the amount of cash available for
distribution to its stockholders would be reduced.
The Company elected REIT status commencing with its taxable year ended
December 31, 1993. In the opinion of Steptoe & Johnson LLP, which has acted as
special tax counsel to the Company, the Company was organized and has operated
in conformity with the requirements for qualification and taxation as a REIT
under the Code for its taxable years ended December 31, 1993, 1994, 1995 and
1996, and the Company's current organization and method of operation should
enable it to continue to meet the requirements for qualification and taxation
as a REIT. It must be emphasized that this opinion is based on various
assumptions relating to the organization and operation of the Company, the
Operating Partnership, the Management Partnerships, the Financing Partnerships,
MHC Lending Limited Partnership, RSI, the Management Corporations and the
various qualified REIT subsidiaries wholly-owned by the Company (each a "QRS
Corporation") (collectively, the Management Partnerships, the Financing
Partnerships, MHC Lending Limited Partnership, RSI, the Management Corporations
and the QRS Corporations may be referred to herein as the "Subsidiary
Entities") and is conditioned upon the accuracy of certain representations made
by the Company and the Operating Partnership to Steptoe & Johnson LLP as to
certain relevant factual matters, including matters related to (i) the
organization, past operation, expected future operation, and assets of the
Company, the Operating Partnership and the Subsidiary Entities, and (ii) that
certain services rendered are those usually or customarily rendered in
connection with the rental of space for occupancy only at particular
manufactured home communities. The Company's qualification and taxation as a
REIT depend upon (i) the Company having met for each of its taxable years,
through actual annual operating and other results, the various requirements
under the Code and described in this Prospectus with regard to, among other
things, the sources of its gross income, the composition of its assets, the
level of its distributions to shareholders, and the diversity of its share
ownership, and (ii) the Company's ability to meet such requirements on a
continuing basis. Steptoe & Johnson LLP will not review the Company's
compliance with these requirements on a continuing basis. No assurance can be
given that the actual results of the operations of the Company, the Operating
Partnership and the Subsidiary Entities, the sources of their income, the
nature of their assets, the level of the Company's distributions to
shareholders and the diversity of its share ownership for any given taxable
year will satisfy the requirements under the Code for qualification and
taxation as a REIT.
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TAXATION OF THE COMPANY
General. In any year in which the Company qualifies as a REIT, in
general it will not be subject to Federal income tax on that portion of its
REIT taxable income or capital gain which is distributed to stockholders. The
Company may, however, be subject to tax at normal corporate rates upon any
taxable income or capital gain not distributed.
If the Company should fail to satisfy either the 75% or the 95% gross
income test (as discussed below), and nonetheless maintains its qualification
as a REIT because certain other requirements are met, it will be subject to a
100% tax on the greater of the amount by which it fails the 75% or the 95%
test, multiplied by a fraction intended to reflect its profitability. The
Company will also be subject to a tax of 100% on net income from any
"prohibited transaction," as described below. In addition, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
net income for such year, and (iii) any undistributed taxable income from prior
years, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Company may
also be subject to the corporate "alternative minimum tax," as well as tax in
certain situations and on certain transactions not presently contemplated. The
Company will use the calendar year both for Federal income tax purposes and for
financial reporting purposes.
In order to qualify as a REIT, the Company must meet, among others, the
following requirements:
Stock Ownership Test. The Common Stock must be held by a minimum of 100
persons for at least, approximately, 92% of the days in each taxable year
subsequent to 1993. In addition, at all times during the second half of each
taxable year subsequent to 1993, no more than 50% in value of the capital stock
of the Company may be owned, directly or indirectly and by applying certain
constructive ownership rules, by five or fewer individuals. The Company
believes that it has satisfied both of these tests, and it believes it will
continue to do so. In order to ensure compliance with this test, the Company
has placed certain restrictions on the transfer of the Common Stock to prevent
further concentration of stock ownership. Moreover, to evidence compliance
with these requirements, the Company must maintain records which disclose the
actual ownership of its outstanding Common Stock. In fulfilling its
obligations to maintain records, the Company must demand written statements
each year from the record holders of designated percentages of its Common Stock
disclosing the actual owners of such Common Stock. A list of those persons
failing or refusing to comply with such demand must be maintained as a part of
the Company's records. A stockholder failing or refusing to comply with the
Company's written demand must submit with his tax returns a similar statement
disclosing the actual ownership of Common Stock and certain other information.
In addition, the Company's Charter provides restrictions regarding the
transfer of its stock that are intended to assist the Company in continuing to
satisfy the stock ownership requirements. See "Description of Common
Stock-Restrictions on Transfer."
Asset Tests. At the close of each quarter of the Company's taxable year,
the Company must satisfy two tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by "real estate assets" (including any combination of interests in
real property, interests in mortgages on real property, and stock in other
REITs), cash, cash items and certain government securities. Second, although
the remaining 25% of the Company's assets generally may be invested without
restriction, securities in this class may not exceed either (i) 5% of the value
of the Company's total assets as to any one issuer (other than an interest in a
partnership) or (ii) 10% of the outstanding voting securities of any one issuer
(other than an interest in a partnership or stock of a qualified REIT
subsidiary or another REIT). Where the Company invests in a partnership, it
will be deemed to own a proportionate share of the partnership's assets. The
Company's investment in the Properties through its interest in the Operating
Partnership will constitute qualified assets for purposes of the 75% asset
test.
The Operating Partnership has not owned and will not own any of the voting
stock, but owns 100% of the non-voting stock, of the Management Corporations
and RSI. By virtue of its partnership interest in the Operating Partnership,
the Company is deemed to own its pro rata share of the assets of the Operating
Partnership, including the stock of the Management Corporations and RSI as
described above.
The Operating Partnership has not owned and will not own more than 10% of
the voting securities of the Management Corporations and RSI. In addition,
based upon its analysis of the estimated value of the stock of the Management
Corporations and RSI owned by the Operating Partnership relative to the
estimated value of the other assets owned by the Operating Partnership, the
Company believes that its pro rata share of the stock of the Management
Corporations and RSI held by the Operating Partnership together has not and
will not exceed 5% of the total value of the
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Company's assets. No independent appraisals have been obtained, however, to
support this conclusion. This 5% limitation must be satisfied not only on the
date that the Company first acquired stock of the Management Corporations and
RSI, but also at the end of each quarter in which the Company increases its
interest in the Management Corporations and RSI (including as a result of
increasing its interest in the Operating Partnership as a result of this
offering, and as the holders of OP Units exercise their exchange rights).
Although the Company plans to take steps to ensure that it satisfies the 5%
value test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps always will be successful or will not
require a reduction in the Operating Partnership's overall interest in the
Management Corporations or RSI.
The Company's indirect interests as a general partner in the Financing
Partnerships and MHC Lending Limited Partnership are held through the QRS
Corporations, each of which is organized and operated as a "qualified REIT
subsidiary" within the meaning of the Code. Qualified REIT subsidiaries are
not treated as separate entities from their parent REIT for Federal income tax
purposes. Instead, all assets, liabilities and items of income, deduction and
credit of the QRS Corporations will be treated as assets, liabilities and items
of the Company. The QRS Corporations therefore will not be subject to Federal
corporate income taxation, although they may be subject to state or local
taxation. In addition, the Company's ownership of the voting stock of each QRS
Corporation will not violate the general restriction against ownership of more
than 10% of the voting securities of any issuer.
Gross Income Tests. There are three separate percentage tests relating to
the sources of the Company's gross income which must be satisfied for each
taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its proportionate share
of the income and loss of the partnership, and the gross income of the
partnership will retain the same character in the hands of the Company as it
has in the hands of the partnership. See "Federal Income Tax
Considerations--Tax Aspects of the Company's Investments in
Partnerships--General" below.
1. The 75% Test. At least 75% of the Company's gross income for each
taxable year must be "qualifying income." Qualifying income generally includes
(i) rents from real property (except as modified below); (ii) interest on
obligations collateralized by mortgages on, or interests in, real property;
(iii) gains from the sale or other disposition of interests in real property
and real estate mortgages, other than gain from property held primarily for
sale to customers in the ordinary course of the Company's trade or business
("dealer property"); (iv) dividends or other distributions on stock in other
REITs, as well as gain from the sale of such stock; (v) abatements and refunds
of real property taxes; (vi) income from the operation, and gain from the sale,
of real property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such real property ("foreclosure property"); (vii) commitment
fees received for agreeing to make loans collateralized by mortgages on real
property or to purchase or lease real property; and (viii) certain qualified
temporary investment income attributable to the investment of new capital
received by the Company in exchange for its stock (including Common Stock
issued pursuant this offering) during the one-year period following the receipt
of such new capital.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% gross income test (or the 95% gross income test
described below) if the Company, or a direct or indirect owner of 10% or more
of the stock of the Company, directly or constructively owns 10% or more of
such tenant. In addition, if rent attributable to personal property leased in
connection with a lease of real property is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to such
personal property will not qualify as rents from real property. Moreover, an
amount received or accrued will not qualify as rents from real property (or as
interest income) for purposes of the 75% and 95% gross income tests if it is
based in whole or in part on the income or profits of any person. However, an
amount received or accrued generally will not fail to qualify as rents from
real property solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Finally, for rents received to qualify as
rents from real property, the Company generally must not operate or manage the
real property or furnish or render services to tenants, other than through an
"independent contractor" from whom the Company derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent
that the services provided by the Company are "usually or customarily rendered"
in connection with the rental of space for occupancy only, and are not
otherwise considered "rendered for the convenience of the occupant".
The Company, through the Management Partnerships and RSI (none of which
are independent contractors), undertakes certain activities and provides
certain services with respect to the Properties and will do the same for any
newly acquired manufactured home community properties. The Company believes
that such activities and services (i) primarily benefit the Company by
maintaining and enhancing occupancy and/or (ii) are activities and services
usually or customarily rendered in connection with the rental of space in
manufactured home communities in the geographic market in which the
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particular communities are located and are not services rendered primarily for
the convenience of the occupant. Accordingly, the Company believes that the
activities of the Management Partnerships and RSI have not caused and will not
cause the rents received with respect to the Properties to fail to qualify as
rents from real property for purposes of the 75% and 95% gross income tests.
2. The 95% Test. In addition to the requirement that the Company derive
at least 75% of its gross income from the sources listed above, at least 95% of
the Company's gross income for the taxable year must be derived from the
above-described qualifying income, or from dividends, interest or gains from
the sale or disposition of stock or other securities that are not dealer
property. Dividends (including the Company's share of dividends paid by the
Management Corporations or RSI) and interest on any obligations not
collateralized by an interest in real property (including interest received on
the RSI Note) are included for purposes of the 95% gross income test, but not
for purposes of the 75% gross income test. Similarly, any payments made on
behalf of the Company by a financial institution pursuant to a rate protection
agreement are included as qualifying income for purposes of the 95% gross
income test, but not for purposes of the 75% gross income test.
For purposes of determining whether the Company complies with the 75% and
95% gross income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding certain dealer property held by the Company for at least four years
and excluding foreclosure property. See "Federal Income Tax
Considerations--Taxation of the Company--General" and "--Tax Aspects of the
Company's Investments in Partnerships-Sale of the Properties."
The Company's investment in the Properties, through the Operating
Partnership and the Financing Partnerships, in major part gives rise to rental
income qualifying under the 75% and 95% gross income tests. Gains on sales of
the Properties or of the Company's interest in the Operating Partnership or the
Financing Partnerships generally qualify under the 75% and 95% gross income
tests. The Company believes that income on its other investments, including
its indirect investment in the Management Corporations and in RSI, has not
resulted in the Company failing the 75% or 95% gross income test for any year,
and the Company anticipates that this will continue to be the case. The
Company has received a ruling from the Service that interest income received by
the Operating Partnership with respect to the RSI Note qualifies for purposes
of the 75% gross income test on the condition that the RSI Note constitutes the
indebtedness of RSI.
Even if the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
was due to reasonable cause and not to willful neglect; (ii) the Company
reports the nature and amount of each item of its income included in the tests
on a schedule attached to its tax return; and (iii) any incorrect information
on this schedule is not due to fraud with intent to evade tax. It is not
possible to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions. If these relief provisions apply, the
Company will, however, still be subject to a special tax based upon the greater
of the amount by which it fails either the 75% or 95% gross income test for
that year, less associated expenses. See "Federal Income Tax
Considerations--Taxation of the Company--General."
3. The 30% Test. The Company must derive less than 30% of its gross
income for each taxable year from the sale or other disposition of (i) real
property held for less than four years (other than foreclosure property and
involuntary conversions), (ii) stock or securities held for less than one year,
and (iii) property in a prohibited transaction. The Company has not had and
does not anticipate that it will have any substantial difficulty in complying
with this test. For the purpose of applying the 30% gross income test, the
holding period of properties and other assets generally will commence on the
date the same are acquired.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, generally is required to make distributions (other than capital gain
distributions) to its stockholders each year in an amount at least equal to (A)
the sum of (i) 95% of the Company's REIT taxable income (computed without
regard to the dividends paid deduction and the Company's net capital gain) and
(ii) 95% of the net income (after tax), if any, from foreclosure property,
minus (B) the sum of certain items of non-cash income. Such distributions must
be paid in the taxable year to which they relate, or in the following taxable
year if declared before the Company timely files its tax return for such year
and if paid on or before the first regular dividend payment after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its REIT
taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case
may be. Furthermore, if the
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Company should fail to distribute during each calendar year at least the sum of
(i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital
gain income for such year, and (iii) any undistributed taxable income from
prior periods, the Company would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
The Company has made and intends to make timely distributions sufficient
to satisfy the annual distribution requirements. In this regard, the
Partnership Agreement of the Operating Partnership authorizes the Company, as
general partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that the
Company may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement, due to timing differences between the actual receipt
of income and actual payment of expenses on one hand, and the inclusion of such
income and deduction of such expenses in computing the Company's REIT taxable
income on the other hand, or if the amount of nondeductible expenses such as
principal amortization or capital expenditures exceed the amount of non-cash
deductions such as depreciation. In order to satisfy the 95% distribution
requirement, the Company will closely monitor the relationship between its REIT
taxable income and cash flow and, if necessary, will borrow funds (or cause the
Operating Partnership or other affiliates to borrow funds) in order to satisfy
the distribution requirement.
If the Company fails to meet the 95% distribution requirement as a result
of an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
Failure to Qualify. If the Company fails to qualify for taxation as a
REIT in any taxable year and the relief provisions of the Code do not apply,
the Company will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Distributions
to stockholders in any year in which the Company fails to so qualify will not
be required and, if made, will not be deductible by the Company. In such
event, to the extent of current and accumulated earnings and profits, all
distributions to stockholders will be taxable as ordinary income, and, subject
to certain limitations in the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company also will be ineligible for qualification as
a REIT for the four taxable years following the year during which qualification
was lost.
TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
General. The Company holds direct or indirect interests in the Operating
Partnership, the Management Partnerships, the Financing Partnerships and MHC
Lending Limited Partnership (each individually a "Partnership", and
collectively the "Partnerships").
Tax Allocations with Respect to the Properties. Pursuant to Section
704(c) of the Code, income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership (such as certain of the Properties
contributed at the time of the IPO) must be allocated in a manner such that the
contributing partner is charged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time of
the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of contributed
property at the time of contribution and the adjusted tax basis of such
property at the time of contribution (a "Book-Tax Difference"). Such
allocations are solely for Federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners. The Operating Partnership and the Financing Partnerships were formed
by way of contributions of appreciated property. Consequently, the partnership
agreements for such Partnerships require such allocations to be made in a
manner consistent with Section 704(c) of the Code.
In general, the contributing partners will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on sale by the Partnerships of the contributed assets, than would have been
allocated to them if the assets had a tax basis equal to their fair market
value at the time of contribution. The allocations will tend to eliminate the
Book-Tax Difference over the life of the Partnerships. However, the special
allocation rules of Section 704(c) as applied by the Company do not always
entirely rectify the Book-Tax Difference on an annual basis or with respect to
a specific taxable transaction such as a sale. Thus, the carryover basis of
the contributed assets in the hands of the Partnerships will cause the Company
to be allocated lower depreciation and other deductions, and possibly greater
amounts of taxable income in the event of a sale of such contributed assets in
excess of the economic or book income allocated to it as a result of
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such sale. This may cause the Company to recognize taxable income in excess of
cash proceeds, which might adversely affect the Company's ability to comply
with the REIT distribution requirements. See "Federal Income Tax
Considerations--Taxation of the Company--Annual Distribution Requirements."
With respect to any Property purchased or to be purchased by any of the
Partnerships subsequent to the formation of the Company, such Property will
initially have a tax basis equal to its fair market value and Section 704(c) of
the Code will not apply.
Sale of the Properties. The Company's share of any gain realized by a
Partnership on the sale of any dealer property generally will be treated as
income from a prohibited transaction that is subject to a 100% penalty tax, and
will have an adverse effect upon the Company's ability to satisfy the income
tests for qualification as a REIT. See "Federal Income Tax
Considerations--Taxation of the Company--General" and "--Gross Income
Tests--The 95% Test." Under existing law, whether property is dealer property
is a question of fact that depends on all the facts and circumstances with
respect to the particular transaction. The Partnerships have held and intend
to hold the Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating the
Properties and other manufactured home communities and to make such occasional
sales of the Properties as are consistent with the Company's investment
objectives. Based upon such investment objectives, the Company believes that
in general the Properties should not be considered dealer property and that the
amount of income from prohibited transactions, if any, will not be material.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
General. As long as the Company qualifies as a REIT, distributions made
to the Company's taxable domestic stockholders out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by them as ordinary income and will not be eligible for the
dividends received deduction for stockholders that are corporations.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held its Common Stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income and will not be allowed a dividends received
deduction with respect to capital gain dividends. To the extent that the
Company makes distributions in excess of current and accumulated earnings and
profits, these distributions are treated first as a tax-free return of capital
to the stockholder, reducing the tax basis of a stockholder's Common Stock by
the amount of such distribution (but not below zero), with distributions in
excess of the stockholder's tax basis included in income as capital gains (if
the Common Stock is held as a capital asset). In addition, any dividend
declared by the Company in October, November or December of any year and
payable to a stockholder of record on a specific date in any such month shall
be treated as both paid by the Company and received by the stockholder on
December 31 of such year, provided that the dividend is actually paid by the
Company during January of the following calendar year. Stockholders may not
include in their individual income tax returns any net operating losses or
capital losses of the Company.
In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such Common Stock for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions from the Company required to be treated by
such stockholder as long-term capital gains.
In addition, distributions from the Company and gain from the disposition
of shares of Common Stock will not be treated as "passive activity" income and
therefore stockholders will not be able to apply losses from "passive
activities" to offset such income.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Most tax-exempt employees' pension trusts are not subject to Federal
income tax except to the extent of their receipt of "unrelated business taxable
income" as defined in Section 512(a) of the Code ("UBTI"). Distributions by
the Company to a stockholder that is a tax-exempt entity should not constitute
UBTI, provided that the tax-exempt entity has not financed the acquisition of
its stock with "acquisition indebtedness" within the meaning of the Code and
the shares of Common Stock held by such stockholder are not otherwise used in
an unrelated trade or business of the tax-exempt entity. However, certain
pension trusts that own more than 10% of a "pension-held REIT" must report a
portion of the dividends that they receive from such a REIT as UBTI. The
Company, though, has not been and does not expect to be treated as a
pension-held REIT for purposes of this rule.
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TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. Federal income
tax consequences of the ownership and disposition of Common Stock applicable to
Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person other than
(i) a citizen or resident of the United States, (ii) a domestic partnership or
corporation, (iii) any estate (other than a foreign estate the income of which,
from sources without the United States which are not effectively connected with
the conduct of a trade or business within the United States, is not includable
in gross income under subtitle A of the Code), or (iv) any trust, if a court
within the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust. The discussion is
based on current law and is for general information only. The discussion
addresses only certain and not all aspects of U.S. Federal income taxation.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, could affect the U.S. Federal
income taxation of distributions by the Company to Non-U.S. Holders. The
Proposed Regulations are generally proposed to be effective with respect to
payments made after December 31, 1997, subject to certain transition rules. It
cannot be predicted at this time whether the Proposed Regulations will become
effective as proposed or what modifications, if any, may be made to them. The
discussion below does not include a description of the Proposed Regulations.
Accordingly, prospective Non-U.S. Holders are urged to consult their tax
advisors with respect to the effect the Proposed Regulations may have if
adopted.
Distributions From the Company
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of the Company's earnings and profits which are not
attributable to capital gains of the Company or of the Operating Partnership
and which are not effectively connected with a U.S. trade or business of the
Non-U.S. Holder will be subject to U.S. withholding tax on a gross basis at
the rate of 30% (unless reduced by treaty). Any amounts withheld should be
creditable against the Non-U.S. Holder's U.S. Federal income tax liability. In
general, Non-U.S. Holders will not be considered engaged in a U.S. trade or
business solely as a result of their ownership of Common Stock. In cases where
the dividend income from a Non-U.S. Holder's investment in Common Stock is (or
is treated as) effectively connected with the Non-U.S. Holder's conduct of a
U.S. trade or business, the Non-U.S. Holder generally will be subject to U.S.
tax at graduated rates, in the same manner as U.S. stockholders are taxed with
respect to such dividends (and may also be subject to the 30% branch profits
tax in the case of a Non-U.S. Holder that is a foreign corporation).
2. Non-Dividend Distributions. Distributions by the Company which are not
dividends out of the earnings and profits of the Company, and which do not
exceed the adjusted basis of the Non-U.S. Holder's Common Stock, will not be
subject to U.S. income or withholding tax but rather will reduce the adjusted
basis of such Common Stock. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the entire distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Holder may seek a refund of such amounts from the Service if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company.
To the extent such a distribution exceeds the adjusted basis of a Non-U.S.
Holder's Common Stock, it will give rise to tax liability if the Non-U.S.
Stockholder otherwise would be subject to tax on any gain from the sale or
disposition of his Common Stock as described below.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-U.S.
Holder, to the extent attributable to gains from dispositions of United States
Real Property Interests ("USRPIs") such as the Properties beneficially owned by
the Company ("USRPI Capital Gains"), will be considered effectively connected
with a U.S. trade or business of the Non-U.S. Holder and subject to U.S.
Federal income tax at the rate applicable to U.S. individuals or corporations
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) without regard to
whether such distribution is designated as a capital gain dividend. In
addition, the Company will be required to withhold tax equal to 35% (unless
reduced by treaty) of the amount of dividends to the extent such dividends
constitute USRPI Capital Gains. Any amounts withheld should be creditable
against the Non-U.S. Holder's U.S. Federal income tax liability. Distributions
subject to
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FIRPTA may also be subject to a 30% branch profits tax in the hands of a
foreign corporate stockholder that is not entitled to treaty exemption.
Dispositions of Common Stock. Unless the Common Stock constitutes a
USRPI, a sale of Common Stock by a Non-U.S. Holder generally will not be
subject to U.S. taxation under FIRPTA. The Common Stock will not constitute a
USRPI if the Company is a "domestically controlled REIT." A domestically
controlled REIT is a REIT in which, at all times during a specified testing
period, less than 50% in value of its stock is held directly or indirectly by
Non-U.S. Holders. The Company believes that it has been and anticipates that
it will continue to be a domestically controlled REIT, and therefore that the
sale of Common Stock by a Non-U.S. Holder will not be subject to taxation under
FIRPTA. Because the Common Stock will be publicly traded, however, no
assurance can be given that the Company will continue to be a domestically
controlled REIT. If the Company does not constitute a domestically controlled
REIT, a Non-U.S. Holder's sale of Common Stock generally still will not be
subject to tax under FIRPTA as a sale of a USRPI provided that (i) the Common
Stock is "regularly traded" (as defined by applicable U.S. Treasury Department
regulations) on an established securities market (e.g., the NYSE, on which the
Common Stock is listed) and (ii) the selling Non-U.S. Holder held 5% or less
of the Company's outstanding Common Stock at all times during a specified
testing period.
If gain on the sale of Common Stock were subject to taxation under FIRPTA,
the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals) and the purchaser of Common Stock could be required to
withhold 10% of the purchase price and remit such amount to the Service.
Capital gains not subject to FIRPTA will nonetheless be taxable in the United
States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's
investment in Common Stock is effectively connected with a U.S. trade or
business conducted by such Non-U.S. Holder, the Non-U.S. Holder will be subject
to the same treatment as a U.S. stockholder with respect to such gain, or (ii)
if the Non-U.S. Holder is a nonresident alien individual who was present in
the U.S. for 183 days or more during the taxable year and has a "tax home" in
the U.S., the nonresident alien individual will be subject to a 30% tax on the
individual's capital gain.
OTHER TAX CONSIDERATIONS
The Management Corporations and RSI. A portion of the cash to be used by
the Operating Partnership to fund distributions to its partners, including the
Company, comes from the Management Corporations and RSI through payments of
interest on the RSI Note and dividends on the non-voting stock of these
entities which is held by the Operating Partnership. The Management
Corporations and RSI pay Federal and state income tax at the full applicable
corporate rates. The Management Corporations and RSI will attempt to minimize
the amount of such taxes, but there can be no assurance regarding whether or
the extent to which measures taken to minimize taxes will be successful. To
the extent that the Management Corporations and RSI are required to pay
Federal, state or local taxes, the cash available for distribution by the
Company to stockholders will be reduced accordingly.
State and Local Taxes. The Company and its stockholders may be subject to
state or local taxation in various jurisdictions, including those in which it
or they transact business or reside. The state and local tax treatment of the
Company and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Common Stock.
21
<PAGE> 24
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the
holders of up to (i) 221,117 shares of Common Stock that may be issued by the
Company to the OP Unitholders in exchange for their OP Units and (ii) 270,000
shares of Officer Stock by certain officers of the Company and its affiliates.
The Company has registered the Shares for sale pursuant to certain registration
rights agreements, but registration of the Shares does not necessarily mean
that any of the Shares will be offered for sale or sold by the Selling
Stockholders.
The Company will not receive any of the proceeds from the sale of any
Shares by the Selling Stockholders; however, the Company will receive the OP
Units held by the OP Unitholders and thereby increase its ownership interest in
the Operating Partnership upon the issuance of any Shares in exchange therefor.
The distribution of the Shares may be effected from time to time in one or
more underwritten transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any such
underwritten offering may be on a "best efforts" or a "firm commitment" basis.
In connection with any such underwritten offering, underwriters or agents may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or from purchasers of Shares for whom they may act as
agents. Underwriters may sell Shares to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents.
Under agreements that may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Shares may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such underwriters, dealers or agents may be required to make
in respect thereof.
The Selling Stockholders and any underwriters, dealers or agents that
participate in the distribution of Shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any profit on the sale of Shares
by them and any discounts, commissions or concessions received by any such
underwriters, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
At the time a particular offer of Shares is made, a Prospectus Supplement,
if required, will be distributed that will set forth the name or names of any
underwriters, dealers or agents and any discounts, commissions and other terms
constituting compensation from the Selling Stockholders and any other required
information.
The sale of the Shares by the Selling Stockholders may also be effected
from time to time by selling the Shares directly to purchasers or to or through
broker-dealers. In connection with any such sale, any such broker-dealer may
act as agent for the Selling Stockholders or may purchase from the Selling
Stockholders all or a portion of the Shares as principal, and any such sale may
be made pursuant to any of the methods described below. Such sales may be made
on the NYSE or other exchanges on which the Common Stock is then traded, in the
over-the-counter market, in negotiated transactions or otherwise at prices and
at terms then prevailing or at prices related to the then-current market prices
or at prices otherwise negotiated.
The Shares may also be sold in one or more of the following transactions:
(i) block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (ii)
purchases by any such broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to a Prospectus Supplement; (iii) a
special offering, an exchange distribution or a secondary distribution in
accordance with applicable NYSE or other stock exchange rules; (iv) ordinary
brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (v) sales "at the market" to or through a market maker or
into an existing trading market, on an exchange or otherwise, for such Shares;
and (vi) sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers. In effecting sales,
broker-dealers engaged by the Selling Stockholders may arrange for other
broker-dealers to participate. Broker-dealers will receive commissions or
other compensation from the Selling Stockholders in amounts to be negotiated
immediately prior to the sale that will not exceed those customary in the types
of transactions involved. Broker-dealers may also receive compensation from
purchasers of the Shares which is not expected to exceed that customary in the
types of transactions involved.
22
<PAGE> 25
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the Shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is
complied with.
All expenses incident to the offering and sale of the Shares, other than
commissions, discounts and fees of underwriters, broker-dealers or agents,
shall be paid by the Company. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors and for the years ended
December 31, 1995 and 1994, have been audited by Coopers & Lybrand L.L.P.,
independent auditors, as set forth in their respective reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firms as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Rosenberg & Liebentritt, P.C., Chicago,
Illinois. Rosenberg & Liebentritt, P.C. will rely on Ballard Spahr Andrews and
Ingersoll, Baltimore, Maryland, as to certain matters of Maryland law. Certain
tax matters will be passed upon by Steptoe & Johnson LLP.
Sheli Z. Rosenberg, a principal of Rosenberg & Liebentritt, P.C., owns
8,576 shares of Common Stock and an economic interest in 11,530 Original OP
Units. In addition, Ellen Kelleher, an executive vice president of and general
counsel to the Company, is of counsel to Rosenberg & Liebentritt, P.C., and
David W. Fell, associate general counsel to the Company, is of counsel to
Rosenberg & Liebentritt, P.C. Officers and associates of Rosenberg &
Liebentritt, P.C. beneficially own less than 1% of the outstanding shares of
Common Stock.
23
<PAGE> 26
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................... 2
Incorporation of Certain Documents by Reference.......... 2
The Company.............................................. 3
Risk Factors............................................. 4
Description of Common Stock.............................. 9
Use of Proceeds.......................................... 11
Selling Stockholders..................................... 12
Federal Income Tax Considerations........................ 14
Plan of Distribution..................................... 22
Experts.................................................. 23
Legal Matters............................................ 23
</TABLE>
491,117 SHARES
MANUFACTURED HOME
COMMUNITIES, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
___________, 1997
================================================================================
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth those expenses for distribution to be
incurred in connection with the issuance and distribution of the securities
being registered.
<TABLE>
<S> <C>
Registration Fee....................................$ 3,215
Printing and Duplicating Expenses..................... 3,000
Legal Fees and Expenses.............................. 30,000
Accounting Fees and Expenses.......................... 6,000
Miscellaneous....................................... 2,785
--------
Total...............................................$ 45,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for (i) actual
receipt of an improper benefit or profit in money, property or services or (ii)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Charter of the Company contains such a
provision which limits such liability to the maximum extent permitted by the
MGCL.
The Charter of the Company authorizes it to obligate itself to indemnify
its present and former officers and directors and to pay or reimburse expenses
for such individuals in advance of the final disposition of a proceeding to the
maximum extent permitted from time to time by the laws of Maryland. The Bylaws
of the Company obligate it to indemnify and advance expenses to present and
former directors and officers to the maximum extent permitted by Maryland law
from time to time. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property or services,
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. However, a
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as
conditions to advancing expenses, to obtain (i) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
applicable Bylaws and (ii) a written agreement by him or on his behalf to repay
the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Bylaws of the Company
and each of its corporate Subsidiaries and the partnership agreements for each
of the partnership Subsidiaries also permit the Company to provide
indemnification and advance of expenses to a present or former director or
officer who served a predecessor of the Company in such capacity, and to any
employee or agent of the Company or a predecessor of the Company. Finally, the
MGCL requires a corporation (unless its charter provides otherwise, which the
Company's Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity.
II-1
<PAGE> 28
The partnership agreements of the Operating Partnership, the Management
Partnerships and the Financing Partnerships also provide for indemnification of
the Company and its officers and directors to the same extent indemnification
is provided to officers and directors of the Company in its Charter, and limits
the liability of the Company and its officers and directors to the Operating
Partnership, the Management Partnerships and the Financing Partnerships and
their respective partners to the same extent the liability of the officers and
directors of the Company to the Company and its stockholders is limited under
the Company's Charter.
ITEM 16. EXHIBITS
4.1- - Amended and Restated Articles of Incorporation of Manufactured Home
Communities, Inc. (incorporated by reference to Exhibits 3.1 and
3.2 to Registrant's Registration Statement on Form S-11 (File No.
33-55994))
4.2- - Bylaws of Manufactured Home Communities, Inc. (incorporated by
reference to Exhibit 3.3 to Registrant's Registration Statement on
Form S-11 (File No. 33-55994))
4.3- - Second Amended and Restated MHC Operating Limited Partnership
Agreement of Limited Partnership dated as of March 15, 1996
(incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
filed August 12, 1996)
4.4* - Form of Registration Rights and Lock-Up Agreement between the
Company and the holders of OP Units
4.5 - Form of Subscription Agreement between the Company and certain
members of management of the Company (incorporated by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, filed May 10, 1996)
5.1* - Opinion of Rosenberg & Liebentritt, P.C. regarding legality
8.1* - Opinion of Steptoe & Johnson LLP regarding certain tax matters
23.1* - Consent of Ernst & Young, LLP
23.2* - Consent of Coopers & Lybrand L.L.P.
23.3 - Consent of Rosenberg & Liebentritt, P.C. (included in Exhibit 5.1)
23.4 - Consent of Steptoe & Johnson LLP (included in Exhibit 8.1)
24* - Powers of Attorney (included on Page II-4)
- ---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
II-2
<PAGE> 29
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the Securities offered herein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the Securities offered herein, and the offering of such
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on April 16, 1997.
MANUFACTURED HOME COMMUNITIES, INC.
By: /s/ David A. Helfand
----------------------------------------
David A. Helfand, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below, hereby constitutes and appoints David A. Helfand and Sheli Z. Rosenberg,
or either of them, his attorneys-in-fact and agents, with full power of
substitution and resubstitution for him in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto and other documents in
connection therewith or in connection with the registration of the Securities
under the Exchange Act, with the Securities and Exchange Commission, granting
unto each of such attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary in connection
with such matters as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Name Title Date
- ---- ----- ----
/s/ Samuel Zell
- ------------------------- Chairman of the Board April 16, 1997
Samuel Zell
/s/ David A. Helfand Chief Executive Officer, President
- ------------------------- and Director April 16, 1997
David A. Helfand
/s/ Thomas P. Heneghan Executive Vice President and Chief
- ------------------------- Financial Officer April 16, 1997
Thomas P. Heneghan
/s/ Judy A. Pultorak
- ------------------------- Principal Accounting Officer April 16, 1997
Judy A. Pultorak
/s/ Timothy H. Callahan
- ------------------------- Director April 16, 1997
Timothy H. Callahan
/s/ Sheli Z. Rosenberg
- ------------------------- Director April 16, 1997
Sheli Z. Rosenberg
/s/ Donald S. Chisholm
- ------------------------- Director April 16, 1997
Donald S. Chisholm
/s/ Michael A. Torres
- ------------------------- Director April 16, 1997
Michael A. Torres
/s/ Thomas E. Dobrowski
- ------------------------- Director April 16, 1997
Thomas E. Dobrowski
/s/ Louis H. Masotti
- ------------------------- Director April 16, 1997
Louis H. Masotti
/s/ Gary Waterman
- ------------------------- Director April 16, 1997
Gary Waterman
/s/ John F. Podjasek, Jr.
- ------------------------- Director April 16, 1997
John F. Podjasek, Jr.
II-4
<PAGE> 31
EXHIBIT INDEX
Exhibit Exhibit
Number Description
------- -----------
4.1 Amended and Restated Articles of Incorporation
of Manufactured Home Communities, Inc.
(incorporated by reference to Exhibits 3.1 and 3.2
to Registrant's Registration Statement on
Form S-11 (File No. 33-55994))
4.2 Bylaws of Manufactured Home Communities, Inc.
(incorporated by reference to Exhibit 3.3 to
Registrant's Registration Statement on Form S-11
(File No. 33-55994))
4.3 Second Amended and Restated MHC Operating Limited
Partnership Agreement of Limited Partnership dated as of
March 15, 1996 (incorporated by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 filed August 12, 1996)
4.4* Form of Registration Rights and Lock-Up Agreement
between the Company and the holders of OP Units
4.5 Form of Subscription Agreement between the Company and
certain members of management of the Company (incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996, filed May 10, 1996)
5.1* Opinion of Rosenberg & Liebentritt, P.C. regarding
legality
8.1* Opinion of Steptoe & Johnson LLP regarding certain
tax matters
23.1* Consent of Ernst & Young, LLP
23.2* Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Rosenberg & Liebentritt, P.C. (included in
Exhibit 5.1)
23.4 Consent of Steptoe & Johnson LLP (included in
Exhibit 8.1)
24* Powers of Attorney (included on Page II-4)
- ------------
* Filed herewith.
II-5
<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is made
and entered into as of November 1, 1994 by and among MANUFACTURED HOME
COMMUNITIES, INC., a Maryland corporation (the "Company"), MHC OPERATING
LIMITED PARTNERSHIP, an Illinois limited partnership (the "Operating
Partnership"), and ____________ (the "Investor").
RECITALS
A. The Investor is a partner in Pine Lakes Venture which is a partner in
Pine Lakes Venture, Ltd. ("Partnership"), a Florida limited partnership. The
Investor is also a partner in LRB Co., a Florida general partnership ("LRB
Co."). The Operating Partnership is acquiring (the "Acquisition") two
properties, one from the Partnership and the second from LRB Co. pursuant to
the terms of Agreements for Contribution of Real Estate and Related Property
dated as of July 27, 1994, as amended. In connection with the consummation of
the Acquisition, the Investor will be the holder of limited partnership
interests ("OP Units") in the Operating Partnership, which OP Units are
exchangeable for shares of the Company's common stock (the "Common Stock"). In
order to induce the Investor to consummate the closing of the Acquisition, the
Company has agreed to grant to Investor the Registration Rights (as defined in
Section I hereof). In order to induce the Operating Partnership to consummate
the closing of the Acquisition, the Investor has agreed to the Lock-up (as
defined in Section 2 hereof).
B. The Company, Operating Partnership and Investor, in consideration of
the foregoing, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, hereby agree as follows:
1. Registration Rights.
In connection with the issuance of shares of Common Stock (the
"Registrable Shares") of the Company upon exchange by Investor of the OP Units
pursuant to the terms of the agreement of limited partnership of the Operating
Partnership (the "Partnership Agreement"), Investor shall be entitled to
registration of the Registrable Shares under the Securities Act of 1933, as
amended (the "Act"), subject to the terms and conditions set forth herein (the
"Registration Rights").
A. Initial Registration. No later than 30 days following the date which
is the first anniversary (the "Anniversary Date") of the closing of the
Acquisition, the Company shall have caused or cause to be filed with the
Securities and Exchange Commission (the "SEC") a shelf registration statement
("Registration Statement") and related prospectus ("Prospectus") that comply in
all material respects with applicable SEC rules providing for registration
under the Act of the total number of Registrable Shares that the Investor would
own if they were to redeem all OP Units owned by them on the Anniversary Date.
The Company will use its reasonable efforts to keep a
<PAGE> 2
Registration Statement pursuant to this paragraph effective until the earlier
of (i) such time as Form S-3 (or similar successor form of registration
statement) is not available to the Company for registration of the Registrable
Shares, or (ii) if Investor has exchanged their OP Units for Shares, the later
of (A) the date on which Investor has received registered Shares in exchange
for OP Units, and (B) the date on which Investor, if Investor has received
unregistered Shares in exchange for OP Units, consummates the sale of all of
such Shares.
B. Demand Registration. In the event that Form S-3 (or similar form) is
not available to the Company for registration of the Registrable Shares, then,
upon the written request of Investor, following the Lock-Up, holding 100% of
the number of OP Units issued to Investor and Investor's family in connection
with the Acquisition, the Company shall file a Registration Statement on an
appropriate form under the Securities Act for all of the Registrable Shares
requested to be registered. The Company shall file any Registration Statement
required by this paragraph with the SEC within 180 days of receipt of the
requisite Investor request. The Company will (subject to Section 1(H) hereof)
use its reasonable efforts to keep any such Registration Statement effective
until the earlier of (i) the date that is one (1) month after the date of
effectiveness of the Registration Statement (plus the number of days, if any,
during which Investor was not permitted to make offers or sales under the
Registration Statement by reason of Section 1(H)), or (ii) if Investor has
exchanged its OP Units for Shares, the later of (A) the date on which Investor
has received registered Shares in exchange for OP Units, and (B) the date on
which Investor, if Investor has received unregistered Shares in exchange for OP
Units, consummates the sale of all of such Shares. Investor shall not be
entitled to make or join in a demand pursuant to this Section 1(B) more than
once, provided that if no Registration Statement is declared effective with
respect to a demand by Investor, such demand shall not be counted for purposes
of this limit. The demand registration right granted by this Section 1(B)
expires after the Company has filed and had declared effective a Registration
Statement in response to the demand made pursuant to this Section 1(B).
C. Piggyback Registration. If the Company at any time after the Lock-Up
proposes to file a Registration Statement (other than in connection with an
exchange offer or a Registration Statement on Form S-4 or S-8 or other form of
Registration Statement that would not permit registration of the Registrable
Shares for sale to the public) under the Act with respect to any of its Common
Stock, whether or not for sale for its own account, on a form and in a manner
which would permit the registration of shares of Registrable Shares for sale to
public under the Act, the Company shall give written notice of the proposed
registration to the holders of Registrable Shares not later than 30 days prior
to the filing thereof. The holders of Registrable Shares shall have the right
to request that all or any part of the Registrable Shares be included in such
registration by giving written notice to the Company within 15 days after the
giving of such notice by the Company; provided, however, that (A) if the
registration relates to an underwritten primary offering on behalf of the
Company and the managing underwriters of such offering determine that the
aggregate amount of securities of the Company which such holders and the
Company propose to
-2-
<PAGE> 3
include in such Registration Statement exceeds the maximum amount of
securities that could practicably be included therein, the Company will
include in such registration, first, the securities which the Company proposes
to sell; second, pro rata, any securities of any existing holders of other
piggyback registration rights and the Registrable Shares of the Investor;
and third, the securities of any subsequent holders of other piggyback
registration rights, and (B) if the registration is an underwritten secondary
registration on behalf of any of the other security holders of the Company and
the managing underwriters determine that the aggregate amount of securities
which the holders of Registrable Shares and such security holders propose to
include in such registration exceeds the maximum amount of securities that
could practicably be included therein, the Company will include in such
registration, first, the securities to be sold for the account of any other
holders entitled to demand registration, second, the Registrable Shares of the
Investor and third, other securities to be sold for the account of other
holders electing to include (but not being entitled to demand inclusion of)
securities in such registration. It being agreed and understood, however, that
such underwriters shall have the right to terminate entirely the participation
therein of the holders of Registrable Shares if such underwriters eliminate
entirely the participation in such registration of all such other holders
electing to include (but not be entitled to demand inclusion of) securities in
such registration. If the registration is not an underwritten registration,
then all of the Registrable Shares requested to be included in the registration
shall be included if the Company deems such inclusion to be feasible.
Registrable Shares proposed to be registered and sold pursuant to an
underwritten offering for the account of the holders of Registrable Shares
shall be sold to prospective underwriters selected or approved by the Company
and on the terms and subject to the conditions of one or more underwriting
agreements negotiated between the Company, the holders of Registrable Shares
and any other holders demanding registration and the prospective underwriters.
The Company may withdraw any Registration Statement at any time before it
becomes effective, or postpone the offering of securities, without obligation
or liability to the holders of Registrable Shares. Registrable Shares need not
be included in any Registration Statement pursuant to this provision if in the
opinion of counsel to the Company registration under the Securities Act is not
required for public distribution of such Registrable Shares.
D. Inability to Deliver Registered Shares. Whenever Investor notifies the
Company that Investor intends to exercise a right of exchange, the Company
shall deliver to Investor a statement as to whether registered shares are
immediately available and if shares are not immediately available, an estimate
of the time when such shares, will be available. If the Company estimates that
registered shares will be available after thirty days, then the Investor will
have the option to exchange OP Units for unregistered shares, or to wait until
shares become available; provided, however, the Company shall not be obligated
to issue unregistered shares unless there are available exemptions from
registration under the Act and from qualification under applicable state
securities laws. The determination as to whether an exemption is available in
accordance with the foregoing shall be made by the Company in its sole
discretion. If the Company issues unregistered Registrable Shares, then for a
period of one year after such issuance holders of such unregistered
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<PAGE> 4
shares shall have the right to request inclusion of such shares in any
registration statement filed in accordance with this Agreement, to the same
extent as holders of Registrable Shares.
E. Additional Registration Procedures.
(i) The Company will provide Investor with a copy of any final
Prospectus and any amendments or supplements thereto.
(ii) The Company will use its reasonable efforts to register
or qualify the Registrable Shares under such other securities or
blue sky laws of such jurisdictions as any Investor reasonably
requests and do any and all other acts and things which may be
reasonably necessary or advisable in connection with the issuance
to (if such shares are registered for issuance) or the disposition
of (if such shares are registered for resale) the Registrable
Shares owned by Investor; provided that the Company will not be
required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any
such jurisdiction, (iii) consent to general service of process in
any such jurisdiction, or (iv) qualify such Registrable Shares in a
given jurisdiction where such qualification would require the
Company to register as a broker or dealer in such jurisdiction.
(iii) The Company will cause all Registrable Shares to be
listed on each securities exchange on which similar securities
issued by the Company are listed and to be qualified for trading on
each system on which similar securities issued by the Company are
from time to time qualified.
F. Cooperation. Investor agrees to provide in a timely manner information
regarding the proposed distribution by Investor of the Registrable Shares and
such other information reasonably requested by the Company in connection with
preparation of and for inclusion in the Registration Statement.
G. Additional Shares. The Company, Operating Partnership and Investor
agree that any Registration Statement may register shares that are not
Registrable Shares but are shares of common stock of the Company held by
others, or to be issued to others, and subject to registration rights;
provided, however that the other shares to be registered are to be or were
received in exchange for OP Units.
H. Suspension of Offering. Notwithstanding the foregoing provisions of
this Agreement, the Company shall not be required to file a Registration
Statement or to keep the Registration Statement effective if the negotiation or
consummation of a transaction by the Company or its subsidiaries is pending or
an event has occurred, which negotiation, consummation
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<PAGE> 5
or event would require additional disclosure by the Company in the Registration
Statement of material information which the Company has a bona fide business
purpose for keeping confidential and the nondisclosure of which in the
Registration Statement might cause the Registration Statement to fail to
comply with applicable disclosure requirements. Upon receipt of any notice
from the Company of the happening of any event during the period the
Registration Statement is effective which is of a type specified in the
preceding sentence or as a result of which the Registration Statement or
related Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made
(in the case of the Prospectus) not misleading, Investor agrees that it will
immediately discontinue offers and sales of the Registerable Shares under the
Registration Statement until Investor receives copies of a supplemented or
amended Prospectus that corrects the misstatements) or omissions) referred to
above and receives notice that any post-effective amendment has become
effective. If so directed by the Company, Investor will deliver to the Company
any copies of the Prospectus covering the Registrable Shares in their
possession at the time of receipt of such notice.
I. Expenses. The Company shall pay all expenses incident to the
performance by it of its obligations under this Agreement, including (i) all
SEC or stock exchange registration, listing and filing fees, (ii) all expenses
incurred in connection with the preparation, printing and distributing of any
Registration Statement and Prospectus, and (iii) fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company. Investor shall be responsible for the payment of any and all other
expenses incurred by them in connection with the exchange of their OP Units and
sale of their Registrable Shares, including, without limitation, brokerage and
sales commissions, fees and disbursements of Investor's counsel, and any
transfer taxes relating to the sale or disposition the Registrable Shares by
Investor.
2. Lock-up Agreement
A. Lock-up. Investor agrees not to offer, sell, contract to sell or
otherwise dispose of (or announce any offer, sale, contract of sale or other
disposition) ("Transfer"), directly or indirectly, any shares of Common Stock,
or any securities convertible into or exchangeable for shares of Common Stock,
including, without limitation, OP Units in the Operating Partnership (all of
such securities being hereinafter referred to as "Restricted Securities"), for
a period of 12 months after the closing of the Acquisition (the "Lock-up").
B. Permitted Transfers. The restrictions contained in this Section 2 will
not apply with respect to any Transfer of the Restricted Securities by Investor
pursuant to applicable laws of descent and distribution or among Investor's
Family Group or Affiliates (collectively referred to herein as "Permitted
Transferee"); provided that the restrictions contained in this Section 2 shall
continue to be applicable to the Restricted Securities after any such Transfer
and provided further that the transferee of such Restricted Securities prior to
any Transfer shall have agreed in
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<PAGE> 6
writing to be bound by the provisions of this Agreement affecting the
Restricted Securities so transferred. "Family Group" means Investor's spouse
and descendants (whether natural or adopted), parents, siblings, and sons or
daughters-in-law, and any trust for the benefit of the Investor and/or
Investor's spouse, descendants, parents, siblings, and sons or
daughters-in-law, or any entity controlled (directly or indirectly) by any such
person. The term "Affiliate" shall have the meaning provided under the Act and
regulations thereunder.
-6-
<PAGE> 7
C. Subject to the foregoing restrictions, the Company and Investor hereby
agree that any subsequent holder of Registrable Securities shall be entitled to
all benefits hereunder as a holder of Registrable Securities; provided,
however, that, in any event, if the Company's Articles of Incorporation as in
effect on the date hereof, or as amended by a vote of the Company's
shareholders, prohibit the acquisition of the desired number of shares by such
subsequent holder, such number shall be reduced to the amount of shares of
Registrable Securities such holder may acquire and such holder's transferee
shall also be entitled to all benefits hereunder as a holder of Registrable
Securities.
D. In the event that from the date hereof through January 1, 1996, the
Operating Partnership or the Company has not permitted Investor to guarantee a
portion of the Partnership's indebtedness and Investor is faced with making a
cash payment of taxes to the Internal Revenue Service as a result of not having
such guaranty, then the Company agrees that such number of Restricted
Securities as are required to be sold by Investor to pay such taxes may be
released from the Lock-up.
3. Indemnification, Contribution.
A. Indemnification by the Company. The Company agrees to indemnify and
hold harmless Investor and each person, if any, who controls any Investor
within the meaning of Section 15 of the Securities Act of 1933 as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto) pursuant
to which the Registrable Shares were registered under the
Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained
in any Prospectus (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent
of the Company, which shall not be unreasonably withheld; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel),
reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case
whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
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<PAGE> 8
provided, however, that the indemnity provided pursuant to this Section 3(a)
does not apply to any Investor with respect to any loss, liability, claim,
damage or expense to the extent arising out of (x) any untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by Investor expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or (y) Investor's failure to deliver an amended or
supplemental Prospectus if such loss, liability, claim, damage or expense would
not have arisen had such delivery occurred.
B. Indemnification by Investor. Investor agrees to indemnify and hold
harmless the Company, and each of its directors and officers (including each
director and officer of the Company who signed the Registration Statement), and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, to the same extent as the indemnity contained in Section
3(a) hereof (except that any settlement described in Section 3(a)(ii) shall be
effected with the written consent of Investor), but only insofar as such loss,
liability, claim, damage or expense arises out of or is based upon (x) any
untrue statement or omission, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by Investor expressly for use in
such Registration Statement (or any amendment thereto) or such Prospectus (or
any amendment or supplement thereto) (y) Investor's failure to deliver an
amended or supplemental Prospectus if such loss, liability, claim, damage or
expense would not have arisen had such delivery occurred or (z) Investor's
failure to comply with the terms of this Agreement.
C. Conduct of Indemnification Proceedings. The indemnified party shall
give reasonably prompt notice to the indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 3(a), unless and to the extent it did not otherwise learn
of such action and the lack of notice by the indemnified party results in the
forfeiture by the indemnifying party of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to the indemnified party other than the indemnification obligation
provided under Section 3(a). If the indemnifying party so elects within a
reasonable time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's own
expense with counsel chosen by the indemnifying party and approved by the
indemnified party, which approval shall not be unreasonably withheld; provided,
however, that, if the indemnified party reasonably determines that a conflict
of interest exists where it is advisable for the indemnified party to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it which are different from or in addition to those
available to the indemnifying party, then the indemnifying party shall not be
entitled to assume such defense and the indemnified party shall be entitled to
separate counsel at the indemnifying party's expense. If the indemnifying
party is not entitled to assume the defense of such action or proceeding as a
result of the proviso to the preceding sentence, the indemnifying party's
counsel shall be entitled to conduct the indemnifying party's defense and
counsel for the indemnified party shall be entitled to conduct the defense of
the indemnified party, it being understood that both such counsel will
cooperate with each other to conduct the defense of such action or proceeding
as efficiently as possible. If the indemnifying party is not so entitled to
assume the defense of such action or does not assume such defense, after having
received the notice referred to in the first sentence of this
8
<PAGE> 9
paragraph, the indemnifying party will pay the reasonable fees and expenses of
counsel for the indemnified party. In such event, however, the indemnifying
party will not be liable for any settlement effected without the written
consent of the indemnifying party which shall not be unreasonably withheld or
delayed. If an indemnifying party is entitled to assume, and assumes, the
defense of such action or proceeding in accordance with this paragraph, the
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified party incurred thereafter in connection with such action or
proceeding. Unless and until a final judgment that Investor is not entitled to
the costs of defense under the foregoing provision, the Company shall
reimburse promptly as they are incurred, the Investor's cost of defense.
D. Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in this Section
3 is for any reason held to be unenforceable although applicable in accordance
with its terms, the Company and Investor shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Company and Investor, in such
proportion as is appropriate to reflect the relative fault of the Company on
the one hand and of Investor on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and indemnified party shall be determined by
reference to, among other things, whether the action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, the indemnifying party or the indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 3(D) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 3(D), Investor shall
not be required to contribute any amount in excess of the lesser of (i) amount
by which the total price at which the Registrable Shares of Investor were sold
to the public or (ii) the amount of any damages which Investor would otherwise
have been required to pay by reason of such untrue statement or omission.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 3(D), each person,
if any, who controls Investor within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as Investor, and each
director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as the Company.
4. Miscellaneous.
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<PAGE> 10
A. Amendments and Waivers. The provisions of this Agreement may not be
amended, modified, supplemented or waived without the written consent of the
Company and Investor holding a majority of the then outstanding Registrable
Shares.
B. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail (return receipt requested), telex, telecopier, or any courier
guaranteeing overnight delivery, to Investor at the address indicated on the
records of the Company and to the Company at the address indicated below:
Two North Riverside Drive
Suite 1515
Chicago, IL 60606
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three (3)
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; or
at the time delivered, if delivered by an air courier guaranteeing overnight
delivery.
C. Assignment; Successors and Assigns. This Agreement and the rights
granted hereunder may not be assigned by any Investor without the written
consent of the Company; provided, however, that Investor may assign its rights
and obligations hereunder to a Permitted Transferee in connection with a
transfer of the OP Units in accordance with the terms of Section 2 hereof.
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of all of the parties hereto.
D. Governing Law. The corporate laws of the State of Maryland will govern
all questions concerning the relative rights of the Company or its stockholders
and the laws of Illinois will govern all questions concerning the relative
rights of holders of OP Units. All other questions concerning the
construction, validity and interpretation of this Agreement will be governed by
and construed in accordance with the domestic laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Illinois.
E. Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
F. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be
10
<PAGE> 11
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
G. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
H. Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
I. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same Agreement.
11
<PAGE> 12
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first written above.
COMPANY:
Manufactured Home Communities, Inc.
By:_________________________
Name:_______________________
Title:______________________
OPERATING PARTNERSHIP:
MHC Operating Limited Partnership
By: Manufactured Home Communities, Inc.
General Partner
By:_____________________
Name:___________________
Title:__________________
INVESTOR:
(Signature)
Name:
Address:_______________
_______________
_______________
Social Security Number or Taxpayer
Identification Number:____________________
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<PAGE> 1
EXHIBIT 5
[ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD]
April 16, 1997
Board of Directors
Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Re: Registration Statement on Form S-3
Dated April 16, 1997
----------------------------------
Ladies and Gentlemen:
We are acting as counsel to Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), in connection with the registration of
the following securities (collectively, the "Securities"): (a) 221,117 shares
(the "Exchange Shares") of common stock, $.01 par value per share, of the
Company ("Common Stock") issuable if, and to the extent that, holders of up to
221,117 units of limited partnership interest ("OP Units") in MHC Operating
Limited Partnership, an Illinois limited partnership (the "Operating
Partnership"), tender such OP Units for exchange, and (b) 270,000 shares (the
"Officer Shares") of Common Stock held by certain officers of the Company (or
its affiliates thereof) covered by a Registration Statement on Form S-3 (the
"Registration Statement"), filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "1933 Act"). Capitalized terms used but not defined herein shall
have the meanings given to them in the Registration Statement. This opinion
letter is furnished to you at your request to enable the Company to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section
229.601(b)(5), in connection with the Registration Statement.
In connection with our representation of the Company and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise indemnified to our satisfaction, of the following
documents (collectively, the "Documents"):
1. The Registration Statement and the related form of prospectus included
therein in the form in which it was transmitted to the Commission under the
1933 Act;
<PAGE> 2
Board of Directors
Manufactured Home Communities, Inc.
April 16, 1997
Page 2
2. The charter of the Company, as amended (the "Charter"), certified as of
a recent date by the State Department of Assessments and Taxation of Maryland
(the "SDAT");
3. The Bylaws of the Company, certified as of a recent date by its
Secretary;
4. Resolutions adopted by the Board of Directors of the Company (the
"Board") relating to the sale, issuance and registration of the Securities,
certified as of a recent date by the Secretary of the Company (the
"Resolutions");
5. A specimen of the form of certificate representing a share of Common
Stock, certified as of a recent date by the Secretary of the Company;
6. A certificate as of a recent date of the SDAT as to the good standing
of the Company;
7. A certificate executed by the Secretary of the Company, dated April 14,
1997; and
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far as
is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms except as limited (a) by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other laws relating to or affecting the
enforcement of creditors' rights or (b) by general equitable principles.
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.
<PAGE> 3
Board of Directors
Manufactured Home Communities, Inc.
April 16, 1997
Page 3
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to the
Documents, by action or omission of the parties or otherwise.
5. The Securities will not be issued or transferred in violation of any
restriction or limitation contained in the Charter.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the transactions giving rise to the issuance of
this opinion.
We call your attention to the fact that our firm only requires lawyers to
be qualified to practice law in the State of Illinois and, in rendering the
opinions set forth herein, we express no opinion with respect to any laws
relevant to this opinion other than the law and regulations identified herein.
With respect to the opinions below that relate to the laws of the State of
Maryland, with your consent, we rely solely on the opinion of Ballard Spahr
Andrews & Ingersoll, a copy of which is attached hereto as Exhibit A.
Based upon the foregoing, and subject to the assumptions, limitations and
qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under and
by virtue of the laws of the State of Maryland and is in good standing with the
SDAT.
2. The Exchange Shares are duly authorized and, if and when issued in
accordance with the Resolutions will be (assuming that the sum of (a) all
shares of Common Stock issued as of the date hereof, (b) any shares of Common
Stock issued and outstanding between the date hereof and the dates on which any
of the Securities are actually issued (not including any of the Securities),
and (c) the Securities will not exceed the total number of shares of Common
Stock that the Company is authorized to issue) validly issued, fully paid and
nonassessable.
3. The Officer Shares are duly authorized, validly issued, fully paid and
nonassessable.
<PAGE> 4
Board of Directors
Manufactured Home Communities, Inc.
April 16, 1997
Page 4
We assume no obligation to supplement this opinion if any applicable law
changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to the Company solely for submission to
the Commission as an exhibit to the Registration Statement and, accordingly,
may not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
ROSENBERG & LIEBENTRITT, P.C.
<PAGE> 5
EXHIBIT A
[BALLARD SPAHR ANDREWS & INGERSOLL LETTERHEAD]
FILE NUMBER
847719
April 16, 1997
Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Re: Registration Statement on Form S-3
Dated April 16, 1997
----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Manufactured Home Communities, Inc.,
a Maryland corporation (the "Company"), in connection with certain matters of
Maryland law arising out of the registration of the following securities
(collectively, the "Securities"): (a) 221,117 shares (the "Exchange Shares") of
common stock, $.01 par value per share, of the Company ("Common Stock")
issuable if, and to the extent that, holders of up to 221,117 units of limited
partnership interest ("OP Units") in MHC Operating Limited Partnership, an
Illinois limited partnership (the "Operating Partnership"), tender such OP
Units for exchange, and (b) 270,000 shares (the "Officer Stock") of Common
Stock held by certain officers of the Company (or its affiliates thereof)
covered by the above-referenced Registration Statement (the "Registration
Statement"), filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "1933
Act"). Capitalized terms used but not defined herein shall have the meanings
given to them in the Registration Statement.
In connection with our representation of the Company and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise indemnified to our satisfaction, of the following
documents (collectively, the "Documents"):
<PAGE> 6
Manufactured Home Communities, Inc.
April 16, 1997
Page 2
1. The Registration Statement and the related form of prospectus included
therein in the form in which it was transmitted to the Commission under the
1933 Act;
2. The charter of the Company, as amended (the "Charter"), certified as of
a recent date by the State Department of Assessments and Taxation of Maryland
(the "SDAT");
3. The Bylaws of the Company, certified as of a recent date by its
Secretary;
4. Resolutions adopted by the Board of Directors of the Company (the
"Board") relating to the sale, issuance and registration of the Securities,
certified as of a recent date by the Secretary of the Company (the
"Resolutions");
5. A specimen of the form of certificate representing a share of Common
Stock, certified as of a recent date by the Secretary of the Company;
6. A certificate as of a recent date of the SDAT as to the good standing
of the Company;
7. A certificate executed by the Secretary of the Company, dated April 14,
1997; and
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far as
is known to us there are no facts inconsistent with, the following:
1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents, whether on behalf of
such individual or another person, is legally competent to do so.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the
<PAGE> 7
Manufactured Home Communities, Inc.
April 16, 1997
Page 3
Documents are true and complete. There are no oral or written modifications or
amendments to the Documents, by action or ommission of the parties or otherwise.
5. The Securities will not be issued or transferred in violation of any
restriction or limitation contained in the Charter.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the transactions giving rise to the issuance of
this opinion.
Based upon the foregoing, and subject to the assumptions, limitations and
qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under and
by virtue of the laws of the State of Maryland and is in good standing with the
SDAT.
2. The Exchange Shares are duly authorized and, if and when issued in
accordance with the Resolutions will be (assuming that the sum of (a) all
shares of Common Stock issued as of the date hereof, (b) any shares of Common
Stock issued and outstanding between the date hereof and the dates on which any
of the Securities are actually issued (not including any of the Securities),
and (c) the Securities will not exceed the total number of shares of Common
Stock that the Company is authorized to issue) validly issued, fully paid and
nonassessable.
3. The Officer Shares are duly authorized, validly issued, fully paid and
nonassessable.
The foregoing opinion is limited to the laws of the State of Maryland and
we do not express any opinion herein concerning any other law. The opinion
expressed herein is subject to the effect of judicial decisions which may
permit the introduction of parol evidence to modify the terms or the
interpretation of agreements. We express no opinion as to compliance with the
securities (or "blue sky") laws of the State of Maryland.
We assume no obligation to supplement this opinion if any applicable law
changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to the Company solely for submission to
the Commission as an exhibit to the Registration Statement and, accordingly,
may not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not
<PAGE> 8
Manufactured Home Communities, Inc.
April 16, 1997
Page 4
admit that we are within the category of persons whose consent is required by
Section 7 of the 1933 Act.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL
<PAGE> 1
[STEPTOE & JOHNSON LLP LETTERHEAD]
EXHIBIT 8
April 16, 1997
Manufactured Home Communities, Inc.
MHC Operating Limited Partnership
Two North Riverside Plaza
Chicago, Illinois 60606
Dear Sirs/Madams:
We have acted as counsel to Manufactured Home Communities, Inc. a Maryland
corporation (the "Company"), in connection with the registration of common
shares of stock of the Company (the "Common Shares"), as more fully described
in the Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on April 16, 1997, as amended through the date hereof (the
"Registration Statement," which includes the "Prospectus"). In connection with
the registration of the Common Shares, we have been asked to provide an opinion
regarding certain federal income tax matters related to the Company.
Capitalized terms used in this letter and not otherwise defined herein have the
meanings set forth in the Prospectus.
The opinion set forth in this letter is based on relevant provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations thereunder (including proposed and temporary Treasury Regulations),
and interpretations of the foregoing as expressed in court decisions,
administrative determinations, and the legislative history, all as of the date
hereof. These provisions and interpretations are subject to change, which may
or may not be retroactive in effect, that might result in modifications of our
opinion.
In rendering our opinion, we have examined such statutes, regulations,
records, certificates and other documents as we have considered necessary or
appropriate as a basis for such opinion, including the following: (1) the
Registration Statement (including the exhibits thereto and all amendments
thereto made through the date hereof); (2) the Articles of Amendment and
Restatement of the Company as in effect on the date hereof; (3) the Second
Amended and Restated Partnership Agreement for MHC Operating Limited
Partnership, dated as of March 15, 1996; (4) the MHC Management Limited
Partnership Agreement of Limited Partnership, dated as of March 3, 1993, and
the MHC-DAG Management Limited Partnership Agreement of Limited Partnership,
dated as of August 18, 1994 (collectively, these two partnerships will be
referred to herein as the "Management Partnerships"); (5) the articles of
incorporation, by-laws and stock ownership information for the Management
Corporations and RSI; (6) the partnership agreements of the Financing
Partnerships and all other partnerships in
<PAGE> 2
Manufactured Home Communities, Inc.
April 16, 1997
Page 2
which the Operating Partnership has an interest (collectively, the "Subsidiary
Partnerships") (for a list of the Subsidiary Partnerships, see Exhibit A
attached hereto); and (7) the articles of incorporation, by-laws and stock
ownership information of the QRS Corporations (for a list of the QRS
Corporations, see Exhibit B attached hereto). The opinion set forth in this
letter also is premised on certain representations made to us by you.
In our review, we have assumed, with your consent, that all of the
representations and statements set forth in the documents we reviewed are true
and correct in all material respects, and all of the obligations imposed by any
such documents on the parties thereto have been and will be performed or
satisfied substantially in accordance with their terms. Moreover, we have
assumed that the Company, the Operating Partnership, and the Subsidiary
Entities each have operated and will continue to operate substantially in the
manner described in the relevant partnership agreement, articles of
incorporation or other organizational documents and in the Prospectus. We also
have assumed the genuineness of all signatures, the proper execution of all
documents, the authenticity of all documents submitted to us as copies, and the
authenticity of the originals from which any copies were made.
For the purposes of our opinion, we have not made an independent
investigation of the facts set forth in documents we reviewed or of
representations made to us by you. We consequently have assumed that the
information presented in such documents or otherwise furnished to us accurately
and completely describes all material facts relevant to our opinion. In
particular, but without limiting the foregoing, we have assumed that, based on
representations made to us by you, all amenities and services provided to
tenants of the Properties by the Operating Partnership, the Management
Partnerships, RSI or any other Subsidiary Entity are usually or customarily
rendered in connection with the rental of space for occupancy only of the same
asset type as the Properties in the respective geographic markets in which the
Properties are located, and are not services rendered primarily for the
convenience of the tenant. We also have assumed for the purposes of this
opinion that the Company is a validly organized and duly incorporated
corporation under the laws of the State of Maryland, that the Management
Corporations, RSI and the QRS Corporations are validly organized and duly
incorporated corporations under the laws of the states in which they are
incorporated, and that the Operating Partnership, the Management Partnerships,
and the Subsidiary Partnerships are duly organized and validly existing
partnerships under the laws of the states in which they are organized.
Based upon, and subject to, the foregoing and the next paragraph below, we
are of the opinion that:
1. The Company was organized and has operated in conformity with the
requirements for qualification and taxation as a REIT under the Code for its
taxable years ended December 31, 1993, December 31, 1994, December 31, 1995,
and December 31, 1996,
<PAGE> 3
Manufactured Home Communities, Inc.
April 16, 1997
Page 3
and the Company's current organization and method of operation should enable it
to continue to meet the requirements for qualification and taxation as a REIT
under the Code; and
2. The discussion in the Prospectus under the heading "Federal Income Tax
Considerations," to the extent that it constitutes matters of law or legal
conclusions, is correct in all material respects.
The Company's qualification and taxation as a REIT under the Code depend
upon the Company's ability to meet on a continuing basis, through actual annual
operating and other results, the various requirements under the Code and
described in the Prospectus with regard to, among other things, the sources of
its gross income, the composition of its assets, the level of its distributions
to stockholders, and the diversity of its share ownership. Steptoe & Johnson
LLP will not review the Company's compliance with these requirements on a
continuing basis. No assurance can be given that the actual results of the
operations of the Company, the Operating Partnership, and the Subsidiary
Entities, the sources of their gross income, the composition of their assets,
the level of the Company's distributions to stockholders and the diversity of
its share ownership for any given taxable year will satisfy the requirements
under the Code for qualification and taxation as a REIT.
For a discussion relating the law to the facts and the legal analysis
underlying the opinion set forth in this letter, we incorporate by reference
the discussion of federal income tax issues, which we assisted in preparing, in
the sections of the Prospectus under the heading "Federal Income Tax
Considerations."
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein.
Very truly yours,
Steptoe & Johnson LLP
<PAGE> 4
Manufactured Home Communities, Inc.
April 16, 1997
Page 4
Exhibit A
SUBSIDIARY PARTNERSHIPS
1. MHC Lending Limited Partnership;
2. MHC-DeAnza Financing Limited Partnership;
3. MHC-Bay Indies Financing Limited Partnership; and
4. MHC Financing Limited Partnership.
<PAGE> 5
Manufactured Home Communities, Inc.
April 16, 1997
Page 5
Exhibit B
QRS CORPORATIONS
1. MHC Lending QRS, Inc.;
2. MHC-QRS DeAnza, Inc.;
3. MHC-QRS Bay Indies, Inc.; and
4. MHC-QRS, Inc.
<PAGE> 1
EXHIBIT 23.1
MANUFACTURED HOME COMMUNITIES, INC.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Manufactured Home
Communities, Inc. (the Company) for the registration of 491,117 shares of
common stock and to the incorporation by reference therein of our report dated
January 27, 1997, except for Note 15, as to which the date is February 11,
1997, with respect to the consolidated financial statements and schedules of
the Company included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
April 16, 1997
<PAGE> 1
EXHIBIT 23.2
MANUFACTURED HOME COMMUNITIES, INC.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Manufactured Home Communities, Inc. on Form S-3 of our report dated February
16, 1996, on our audits of the consolidated financial statements and financial
statement schedules of Manufactured Home Communities, Inc. as of December 31,
1995, and for each of the years ended December 31, 1995 and 1994, which report
is included in the 1996 Annual Report on Form 10-K. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 16, 1997
