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As filed with the Securities and Exchange Commission on October 9, 1998
Registration No. 333-
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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 governing instrument)
Maryland 36-3857664
(State of Organization) (I.R.S. Employer Identification Number)
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
(Address of principal executive offices)
Howard Walker
President and Chief Executive Officer
Manufactured Home Communities, Inc.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
(Name and address of agent for service)
Copies to:
Ruth Pinkham Haring, Esq.
ROSENBERG & LIEBENTRITT, P.C
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
(312) 466-3612
Ellen Kelleher, Esq.
Executive Vice President and General Counsel
MANUFACTURED HOME COMMUNITIES, INC.
Two North Riverside Plaza, Suite 800
Chicago, Illinois 60606
(312) 466-3647
Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective.
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, 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, 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, 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, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AGGREGATE AGGREGATE AMOUNT OF
TITLE OF CLASS AMOUNT TO BE PRICE PER OFFERING REGISTRATION
OF SECURITIES BEING REGISTERED REGISTERED SHARE(1) PRICE (1)(2) FEE(1)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share................ 3,365,575 $23.00 $77,408,225 $22,836
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(footnote on next page)
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the New York Stock Exchange on October 7,
1998.
(2) Or the equivalent in foreign currencies based on the exchange rate at
the time of sale.
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.
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement relating to these
securities has been declared effective by the Securities and Exchange
Commission. This Prospectus is neither an offer to sell nor a solicitation of an
offer to buy these securities in any jurisdiction where such offer or sale is
unlawful.
SUBJECT TO COMPLETION DATED OCTOBER __, 1998
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PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 9, 1998
3,365,575 SHARES
MANUFACTURED HOME COMMUNITIES, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time (the
"Offering") by certain holders (the "Selling Stockholders"), of up to 3,365,575
of our shares of common stock, $.01 par value per share (the "Offered Stock").
We may issue the 3,365,575 shares of Offered Stock to Selling Stockholders
holding up to 3,365,575 units of limited partnership interest in MHC Operating
Limited Partnership ("Units"), if and to the extent that such Selling
Stockholders redeem their Units and we issue them shares of Common Stock in
exchange therefor. We are registering the resale of the Offered Stock as
required under the terms of certain agreements between the Selling Stockholders
and us. The registration of the resale of the Offered Stock does not necessarily
mean that any of the shares of Offered Stock will be offered or sold by the
Selling Stockholders. We will receive no proceeds of any sales of the Offered
Stock, but will incur expenses in connection with the offering. See "Selling
Stockholders" and "Plan of Distribution."
Our shares of common stock, par value $.01 per share (the "Common
Stock"), is listed on the New York Stock Exchange (the "NYSE") under the symbol
"MHC."
Neither the Securities and Exchange Commission nor any state securities
commission has approved the offering of these shares of Offered Stock, or
determined if this prospectus is truthful or complete. It is illegal for any
person to tell you otherwise.
The Selling Stockholders may from time to time offer and sell all or a
portion of the Offered Stock in transactions on the NYSE, in the
over-the-counter market, on any other national securities exchange on which the
Common Stock is listed or traded, in negotiated transactions or otherwise, at
prices then prevailing or related to the then-current market price or at
negotiated prices. The Offered Stock may be sold directly or through agents or
broker-dealers acting as principal or agent, or in block trades or pursuant to a
distribution by one or more underwriters on a firm commitment or best-efforts
basis. To the extent required, the names of any agents or broker-dealers and
applicable commissions or discounts and any other required information with
respect to any particular offer will be set forth in this Prospectus under the
caption "Plan of Distribution" or in any accompanying Prospectus Supplement. The
Selling Stockholders reserve the right to accept or reject, in whole or in part,
any proposed purchase of the Offered Stock to be made directly or through
agents. The Selling Stockholders and any agents or broker-dealers participating
in the distribution of the Offered Stock may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any profit on the sale of Offered Stock by the Selling Stockholders
and any commissions received by any such agents or broker-dealers may be deemed
to be underwriting commissions or discounts under the Securities Act.
The date of this Prospectus is October __, 1998.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information contained in or incorporated by reference into this
Prospectus and any accompanying Prospectus Supplement contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act. We intend
the forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act. These
forward-looking statements relate to, without limitation, future economic
performance, our plans and objectives for future operations and projections of
revenue and other financial items, which can be identified by the use of
forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The cautionary statements under
the caption "Risk Factors" and other similar statements contained in this
Prospectus or any accompanying Prospectus Supplement identify important factors
with respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from those
in such forward-looking statements.
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, is required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of the
reports, proxy statements and other information can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, upon payment of
prescribed rates, or in certain cases by accessing the Commission's World Wide
Web site at http://www.sec.gov. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Common Stock is listed on the NYSE under the symbol "MHC".
Such reports, proxy statements and other information concerning the Company can
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement"), of which this Prospectus is a part,
under the Securities Act, with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete, and
in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Offered Stock,
reference is hereby made to the Registration Statement and such exhibits and
schedules which may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission. The
Commission maintains a "web site" that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended to date.
b. The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998.
c. The Company's Current Reports on Form 8-K, filed with the
Commission on June 18, 1998, and Current Reports on Form
8-K/A, filed with the Commission on February 24, 1998 and
August 11, 1998.
d. 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 all securities to which this
Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and to be 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 in the Prospectus (in the case of a statement in a previously filed
document incorporated or deemed to be incorporated by reference herein), in any
applicable Prospectus Supplement or in any other subsequently filed document
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 or any accompanying Prospectus Supplement. Subject to the foregoing,
all information appearing in this Prospectus and each accompanying Prospectus
Supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, 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).
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As used herein and in any accompanying Prospectus Supplement, "Company"
means Manufactured Home Communities, Inc., a Maryland corporation, and one or
more of its subsidiaries (including MHC Operating Limited Partnership, an
Illinois limited partnership (the "Operating Partnership")) or as the context
may require Manufactured Home Communities, Inc. only or the Operating
Partnership only.
THE COMPANY
The Company is a fully integrated company which owns and operates
manufactured home communities. The Company, a self-administered and self-managed
equity real estate investment trust, is the general partner of the Operating
Partnership. The Company owns all of its assets and conducts substantially all
of its business through the Operating Partnership and its subsidiaries.
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.
RISK FACTORS
Set forth below are the risks that we believe are material to investors
who purchase or own the Company's shares of Common Stock (which we refer to as
the "Stock") or Units of limited partnership interest of the Operating
Partnership, which are exchangeable on a one-for-one basis for shares of Stock
or their cash equivalent. We refer to the Stock and the Units together as our
"securities," and the investors who own Stock and/or Units as our
"securityholders."
OUR PERFORMANCE AND STOCK VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE REAL
ESTATE INDUSTRY
GENERAL. If our assets do not generate income sufficient to pay our
expenses, service our debt and maintain our properties, we may not be able to
make expected distributions to our securityholders. Several factors may
adversely affect the economic performance and value of our portfolio of
manufactured home community properties (the "Properties"). These factors include
changes in the national, regional and local economic climate, local conditions
such as an oversupply of manufactured home sites or a reduction in demand for
manufactured home sites in the area, the attractiveness of our properties to
tenants, competition from other available manufactured home communities and
alternative forms of housing (such as apartment buildings and site-built single
family homes). Our performance also depends on our ability to collect rent from
tenants and pay maintenance, insurance and other operating costs (including real
estate taxes), which could increase over time. The expenses of owning and
operating a property are not necessarily reduced when circumstances such as
market factors and competition cause a reduction in income from the property. If
a property is mortgaged and we are unable to meet the mortgage payments, the
lender could foreclose on the mortgage and take the property. In addition,
interest rate levels, the availability of financing, changes in laws and
governmental regulations (including those governing usage, zoning and taxes) may
adversely affect our financial condition.
NEW ACQUISITIONS MAY FAIL TO PERFORM AS EXPECTED AND COMPETITION FOR
ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR PROPERTIES. We intend to
continue to acquire manufactured home community properties. Newly acquired
properties may fail to perform as expected. We may underestimate the costs
necessary to bring an acquired property up to standards established for its
intended market position. Additionally, we expect that other real estate
investors with significant capital will compete with us for attractive
investment opportunities. These competitors include publicly traded REITs,
private REITs and other types of investors. This competition has increased
prices for manufactured home community properties. We expect to acquire
properties with cash from secured or unsecured financings and proceeds from
offerings of equity or debt. We may not be in a position or have the opportunity
in the future to make suitable property acquisitions on favorable terms.
BECAUSE REAL ESTATE INVESTMENTS ARE ILLIQUID, WE MAY NOT BE ABLE TO
SELL PROPERTIES WHEN APPROPRIATE. Real estate investments generally cannot be
sold quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. This inability to respond promptly to changes in
the performance of our investments could adversely affect our financial
condition and ability to service debt and make distributions to our
securityholders.
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SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE. We carry
comprehensive liability, fire, extended coverage and rental loss insurance on
all of our properties. We believe the policy specifications and insured limits
of these policies are adequate and appropriate. There are, however, certain
types of losses, such as lease and other contract claims, that generally are not
insured. Should an uninsured loss or a loss in excess of insured limits occur,
we could lose all or a portion of the capital we have invested in a property, as
well as the anticipated future revenue from the property. In such an event, we
might nevertheless remain obligated for any mortgage debt or other financial
obligations related to the property.
DEBT FINANCING, FINANCIAL COVENANTS AND DEGREE OF LEVERAGE COULD ADVERSELY
AFFECT OUR ECONOMIC PERFORMANCE
SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
Our business is subject to risks normally associated with debt financing. Cash
flow could be insufficient to pay distributions at expected levels and meet
required payments of principal and interest. We may not be able to refinance
existing indebtedness (which in virtually all cases requires substantial
principal payments at maturity) and, if we can, the terms of such refinancing
might not be as favorable as the terms of existing indebtedness. The total
principal amount of our outstanding indebtedness was $745 million as of June 30,
1998. If principal payments due at maturity cannot be refinanced, extended or
paid with proceeds of other capital transactions, such as new equity capital,
our cash flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors at the time of refinancing (such as
the possible reluctance of lenders to make commercial real estate loans) result
in higher interest rates, increased interest expense would adversely affect cash
flow and our ability to service debt and make distributions to securityholders.
FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. If
a property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, the mortgagee could foreclose on the property, resulting
in loss of income and asset value. The mortgages on our properties contain
customary negative covenants which, among other things, limit our ability,
without the prior consent of the lender, to further mortgage the property, and
to discontinue insurance coverage. In addition, our credit facilities contain
certain customary restrictions, requirements and other limitations on our
ability to incur indebtedness, including total debt to assets ratios, secured
debt to total assets ratios, debt service coverage ratios and minimum ratios of
unencumbered assets to unsecured debt. Foreclosure on mortgaged properties or an
inability to refinance existing indebtedness would likely have a negative impact
on our financial condition and results of operations.
OUR DEGREE OF LEVERAGE COULD LIMIT OUR ABILITY TO OBTAIN ADDITIONAL
FINANCING. Our Debt to Market Capitalization Ratio (total debt as a percentage
of total debt plus the market value of the outstanding Common Stock and Units)
is approximately 49% as of June 30, 1998. The degree of leverage could have
important consequences to securityholders, including affecting our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, development or other general corporate purposes and
making us more vulnerable to a downturn in business of the economy generally.
STOCKHOLDERS' ABILITY TO EFFECT CHANGES IN CONTROL OF THE COMPANY IS LIMITED
PROVISIONS OF OUR CHARTER AND BYLAWS COULD INHIBIT CHANGES IN CONTROL.
Certain provisions of our Charter and Bylaws may delay or prevent a change in
control of the Company or other transaction that could provide our stockholders
with a premium over the then-prevailing market price of their Stock or which
might otherwise be in the best interest of our securityholders. These include a
staggered Board of Directors and the Ownership Limit described below. Also, any
future series of preferred stock may have certain voting provisions that could
delay or prevent a change of control or other transaction that might involve a
premium price or otherwise be good for our securityholders.
WE COULD ADOPT MARYLAND LAW LIMITATIONS ON CHANGES IN CONTROL. Certain
provisions of Maryland law prohibit "business combinations" (including certain
issuances of equity securities) with any person who beneficially owns ten
percent or more of the voting power of outstanding Stock, or with an affiliate
of the Company who, at any time within the two-year period prior to the date in
question, was the owner of ten percent or more of the voting power of the
outstanding voting Stock (an "Interested Stockholder"), or with an affiliate of
an Interested Stockholder. These prohibitions last for five years after the most
recent date on which the Interested Stockholder became an Interested
Stockholder. After the five-year period, a business
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combination with an Interested Stockholder must be approved by two
super-majority stockholder votes unless, among other conditions, our common
stockholders receive a minimum price 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 of common stock. The Board of Directors has exempted
from these provisions under the Maryland law any business combination with Mr.
Zell, certain holders of Units who received them at the time of the Company's
initial public offering, the General Motors Hourly Rate Employes Pension Trust
and the General Motors Salaried Employes Pension Trust, which we sometimes refer
to as the "GM Trusts", our officers and the officer of Realty Systems, Inc.,
which we call "RSI," who acquired Stock at the time the Company was formed and
each and every affiliate of theirs.
WE HAVE A STOCK OWNERSHIP LIMIT FOR REIT TAX PURPOSES. To remain
qualified as a REIT for federal income tax purposes, not more than 50% in value
of our outstanding Stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the federal income tax laws applicable to REITs) at
any time during the last half of any year. See "Certain Federal Income Tax
Considerations--Taxation of the Company--Stock Ownership Test." To facilitate
maintenance of our REIT qualification, our Charter, subject to certain
exceptions, prohibits ownership by any single stockholder of more than 5% (in
value or number of shares, whichever is more restrictive) of any class or series
of stock. We refer to this as the "Ownership Limit." Our Charter permits the
Board of Directors to increase the Ownership Limit with respect to any class or
series of stock. Further, the Board of Directors is required to waive or modify
the Ownership Limit with respect to a stockholder who would not be treated as an
"individual" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code") if such stockholder's ownership in excess of the Ownership Limit will
not cause a stockholder who is an individual to be treated as owning Stock in
excess of the Ownership Limit or otherwise jeopardize our REIT status. Absent
any such exemption or waiver, Stock acquired or held in violation of the
Ownership Limit will be transferred by operation of law to the Company as
trustee for the benefit of the person to whom such Stock is ultimately
transferred, and the stockholder's rights to distributions and to vote would
terminate. Such stockholder would be entitled to receive, from the proceeds of
any subsequent sale of the Stock transferred to the Company as trustee, the
lesser of (i) the price paid for the Stock or, if the owner did not pay for the
Stock (for example, in the case of a gift, devise of other such transaction),
the market price of the Stock on the date of the event causing the Stock to be
transferred to the Company as trustee or (ii) the amount realized from such
sale. A transfer of Stock may be void if it causes a person to violate the
Ownership Limit. The Ownership Limit could delay or prevent a change in control
of the Company and, therefore, could adversely affect our stockholders' ability
to realize a premium over the then-prevailing market price for their Stock.
WE DO NOT CONTROL RSI
RSI provides sales, leasing, brokerage and construction services to our
properties and we provide RSI with an unsecured credit line to purchase
inventory. Certain persons with significant business relationships with Mr. Zell
control the voting stock and management of RSI, although we own 95% of the
economic interests in RSI. We therefore do not control the timing or amount of
distributions or the management and operations of RSI. As a result, decisions
relating to the declaration and payment of distributions, the credit line and
the business policies and operations of RSI could be adverse to our interests or
could lead to adverse financial results, which could adversely affect our
financial condition and results of operations.
CONFLICTS OF INTEREST COULD RESULT IN DECISIONS NOT IN THE COMPANY'S BEST
INTEREST
MR. ZELL'S AFFILIATES CONTROL OUR MANAGEMENT CORPORATIONS. LP
Management Corp. and DeAnza Group, Inc., which we call the "Management
Corporations", are limited partners of MHC Management Limited Partnership and
MHC-DAG Management Limited Partnership, respectively, which we sometimes refer
to as the "Management Partnerships." The Management Partnerships provide
property management services and asset management services to certain of our
properties which are encumbered by mortgages. The management contracts for these
services were not negotiated on an arms length basis. While we believe that the
management fees the Management Partnerships receive from these properties are at
current market rates, there is no assurance that these management fees will
equal at all times those fees that would be charged by an unaffiliated third
party. While we generally own 95% of the economic interest in the Management
Corporations, Mr. Zell controls and has a substantial interest in the private
company which has voting control of the Management Corporations. Mr. Zell may
have a conflict with respect to his position at the Company, to enforce the
terms of such management contracts, which could adversely affect our financial
condition and results of operations.
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CERTAIN DIRECTORS, OFFICERS AND STOCKHOLDERS HAVE CONFLICTS OF INTEREST
AND COULD EXERCISE INFLUENCE IN A MANNER INCONSISTENT WITH STOCKHOLDERS' BEST
INTEREST. As of March 13, 1998, Mr. Zell and Ms. Sheli Z. Rosenberg (one of the
Company's directors) own (as determined in accordance with the Commission's
rules) approximately 8.8%, and all other directors and executive officers of the
Company as a group own approximately 13.2% of the outstanding Stock (in each
case including Stock issuable upon exchange of Units). In addition, options to
purchase an aggregate of 662,832 shares of Stock have been granted to our
directors and our executive officers as a group. In addition, the GM Trusts own
approximately 9.2% of the Stock (assuming conversion of all Units). Accordingly,
such persons have significant influence on our management and operation. Such
influence might be exercised in a manner that is inconsistent with the interests
of other securityholders.
MR. ZELL AND HIS AFFILIATES CONTINUE TO BE INVOLVED IN OTHER INVESTMENT
ACTIVITIES. Although Mr. Zell entered into a noncompetition agreement at the
time of our initial public offering, he and his affiliates have a broad and
varied range of investment interests, including interests in other real estate
investment companies involved in other forms of housing, including multifamily
housing. Mr. Zell and his affiliates may acquire interests in other companies.
He may not be able to control whether any such company competes with the
Company. Consequently, Mr. Zell's continued involvement in other investment
activities could result in competition to the Company as well as management
decisions which might not reflect the interests of our securityholders.
WE LEASE OUR CORPORATE OFFICES FROM AN AFFILIATE OF MR. ZELL. Our
corporate offices are at Two North Riverside Plaza in Chicago, Illinois. We
lease our office space there from one of Mr. Zell's affiliates. We believe that
the lease terms, including the rental rates, reflect current market terms.
ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND CAN BE COSTLY
Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic
substances or petroleum product releases at such property. The owner or operator
may have to pay a governmental entity or third parties for property damage and
for investigation and clean-up costs incurred by such parties in connection with
the contamination. Such laws typically impose clean-up responsibility and
liability without regard to whether the owner or operator knew of or caused the
presence of the contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the environmental laws
may be held responsible for all of the clean-up costs incurred. In addition,
third parties may sue the owner or operator of a site for damages and costs
resulting from environmental contamination emanating from that site.
Environmental laws also govern the presence, maintenance and removal of
asbestos. Such laws require that owners or operators of property containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. Such laws may impose
fines and penalties on real property owners or operators who fail to comply with
these requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.
Independent environmental consultants have conducted Phase I
environmental site assessments at all of our properties. These assessments
included, at a minimum, a visual inspection of the properties and the
surrounding areas, an examination of current and historical uses of the
properties and the surrounding areas and a review of relevant federal, state,
and historical documents. Where appropriate, on a property by property basis,
these consultants have conducted additional testing, including sampling for
asbestos, for lead in drinking water, for soil contamination where underground
storage tanks are or were located or where other past site usages create a
potential environmental problem, and for contamination in groundwater.
These environmental assessments have not revealed any environmental
liabilities at the properties that we believe would have a material adverse
effect on our business, assets, financial condition or results of operations nor
are we aware of any such material environmental liability.
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THE MARKET VALUE OF OUR STOCK CAN BE ADVERSELY AFFECTED BY A NUMBER OF FACTORS
CHANGES IN MARKET CONDITIONS COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR STOCK. As with other publicly traded equity securities, the value of our
Stock depends on various market conditions, which may change from time to time.
Among the market conditions that may affect the value of our publicly traded
securities are the following: the extent of institutional investor interest in
the Company; the reputation of REITs and manufactured home community REITs
generally and the attractiveness of their equity securities in comparison to
other equity securities (including securities issued by other real estate
companies); our financial condition and performance; and general financial
market conditions.
OUR EARNINGS AND CASH DISTRIBUTIONS WILL AFFECT THE MARKET PRICE OF OUR
STOCK. We believe that the market value of a REIT's equity securities is based
primarily upon the market's perception of the REIT's growth potential and its
current and potential future cash distributions, and is secondarily based upon
the real estate market value of the underlying assets. For that reason, the
Stock may trade at prices that are higher or lower than the net asset value per
share. To the extent we retain operating cash flow for investment purposes,
working capital reserves or other purposes, these retained funds, while
increasing the value of our underlying assets, may not correspondingly increase
the market price of our Stock. Our failure to meet the market's expectations
with regard to future earnings and cash distributions would likely adversely
affect the market price of our publicly traded securities.
MARKET INTEREST RATES MAY HAVE AN EFFECT ON THE VALUE OF OUR STOCK. One
of the factors that investors consider important in deciding whether to buy or
sell shares of a REIT is the distribution rates with respect to such shares (as
a percentage of the price of such shares) relative to market interest rates. If
market interest rates go up, prospective purchasers of REIT shares may expect a
higher distribution rate. Higher interest rates would not, however, result in
more funds for us to distribute and, in fact, would likely increase our
borrowing costs and potentially decrease funds available for distribution. Thus,
higher market interest rates could cause the market price of our publicly traded
securities to go down.
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL
To qualify as a REIT, we must distribute to our stockholders each year
at least 95% of our net taxable income (excluding any net capital gain). See
"Certain Federal Income Tax Considerations--Taxation of the Company--Annual
Distribution Requirements." Because of these distribution requirements, it is
not likely that we will be able to fund all future capital needs, including for
acquisitions, from income from operations. We therefore will have to rely on
third-party sources of capital, which may or may not be available on favorable
terms or at all. Our access to third-party sources of capital depends on a
number of things, including the market's perception of our growth potential and
our current and potential future earnings. Moreover, additional equity offerings
may result in substantial dilution of securityholders' interests, and additional
debt financing may substantially increase our leverage.
OUR QUALIFICATION AS A REIT IS DEPENDENT ON COMPLIANCE WITH FEDERAL INCOME TAX
REQUIREMENTS
FAILURE OF THE COMPANY TO QUALIFY AS A REIT WOULD HAVE SERIOUS ADVERSE
CONSEQUENCES TO OUR SECURITYHOLDERS. We believe that, since our initial public
offering in March 1993, the Company has qualified for taxation as a REIT for
federal income tax purposes. We plan to continue to meet the requirements for
taxation as a REIT. Many of these requirements, however, are highly technical
and complex. The determination that the Company is a REIT requires an analysis
of various factual matters and circumstances that may not be totally within our
control. For example, to qualify as a REIT, at least 95% of our gross income
must come from certain sources that are itemized in the REIT tax laws. The
Company is also required to distribute to stockholders at least 95% of its REIT
taxable income (excluding capital gains). The fact that we hold our assets
through the Operating Partnership and its subsidiaries further complicates the
application of the REIT requirements. Even a technical or inadvertent mistake
could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue
Service (the "Service") might make changes to the tax laws and regulations, and
the courts might issue new rulings that make it more difficult, or impossible,
for the Company to remain qualified as a REIT. We do not believe, however, that
any pending or proposed tax law changes would jeopardize our REIT status.
8
<PAGE> 11
In addition, although REITs are prohibited from holding more than 10%
of the voting securities of any corporation, a REIT is not currently prohibited
from holding more than 10% of the value of the stock of a corporation, subject
to the general REIT asset requirements. See "Certain Federal Income Tax
Considerations." As a part of the Federal budget for 1999, President Clinton has
made several proposals affecting REITs. One such proposal, if enacted in its
present form, would prohibit a REIT from holding securities representing more
than 10% of the vote or value of all classes of stock of a corporation, other
than stock of a qualified REIT subsidiary or another REIT. Although stock
currently owned in existing subsidiaries, such as RSI, would be grandfathered
under such proposal, such subsidiaries would be prohibited from acquiring
substantial new assets or engaging in a new trade or business. If enacted in its
present form, the proposal may limit the future activities and growth of the
Company. At this time, it is not possible to predict whether any such proposals,
as currently proposed or as modified by Congress, will be enacted. See "Certain
Federal Income Tax Considerations--Taxation of the Company - Clinton
Administration's Proposed Changes to REIT Asset Test."
If the Company fails to qualify for taxation as a REIT and the relief
provisions of the Code do not apply, the Company would be subject to Federal
income tax at regular corporate rates. Also, unless the Service granted the
Company relief under certain statutory provisions, the Company would be
ineligible for qualification as a REIT for four years following the year the
Company first failed to qualify. If the Company failed to qualify as a REIT, the
Company would have to pay significant income taxes and would therefore have less
money available for investments or for distributions to stockholders. This would
likely have a significant adverse affect on the value of our securities. In
addition, the Company would no longer be required to make any distributions to
stockholders. See "Certain Federal Income Tax Considerations--Taxation of the
Company--Failure to Qualify."
WE PAY SOME TAXES. Even if the Company qualifies as a REIT, it is
required to pay certain federal, state and local taxes on its income and
property. In addition, any net taxable income earned directly by certain
noncontrolled subsidiaries is subject to federal and state income tax. See
"Certain Federal Income Tax Considerations--Taxation of the Company."
NO PROCEEDS TO THE COMPANY
The Company will not receive any of the proceeds from sales of Offered
Stock by the Selling Stockholders. All costs and expenses incurred in connection
with the registration under the Securities Act of the offering made hereby will
be paid by the Company, other than any brokerage fees and commissions, fees and
disbursements of legal counsel for the Selling Stockholders and stock transfer
and other taxes attributable to the sale of the Offered Stock, which will be
paid by the Selling Stockholders.
9
<PAGE> 12
SELLING STOCKHOLDERS
The Company may issue the 3,365,575 shares of Offered Stock to Selling
Stockholders holding up to 3,365,575 Units, if and to the extent that such
Selling Stockholders redeem their Units and we issue them shares of Common Stock
in exchange therefor. The following table provides the name of each Selling
Stockholder, the number of shares of Common Stock to be owned upon exchange of
Units by each Selling Stockholder before the offering to which this Prospectus
relates, and the number of shares of Offered Stock offered by each Selling
Stockholder. Since the Selling Stockholders may sell all or some of their
Offered Stock, no estimate can be made of the number of shares of Offered Stock
that will be sold by the Selling Stockholders or that will be owned by the
Selling Stockholders upon completion of the offering. There is no assurance that
the Selling Stockholders will sell any of the Offered Stock. The Offered Stock
represents approximately 10.5% of the total shares of Common Stock (assuming
redemption of all outstanding Units for shares of Common Stock) outstanding as
of June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME OF SELLING STOCKHOLDER OWNED AND OFFERED HEREBY
- --------------------------- ------------------------
<S> <C>
Alanson L. Howard 11,637
Allan Family Trust, Robert M. Allan Jr. or Harriet S. Allan, Trustees 15,239
Barbara H. Tippett Revocable Trust, Barbara H. Tippett, Trustee 2,790
Robert Blair White 35,123
Bond Family 1996 Revocable Living Trust dated 10/22/96, Robert G. Bond
and Carolyn A. Bond, Trustees 32,290
Brock Family Trust, William and Jane E. Brock, Trustees 8,362
Corey C. and Jill A. Anderson 11,650
Charles Darin Brassfield Revocable Trust, Joseph A. Sperske, Trustee 19,703
Carrier Family 1989 Trust, David and Joyce Carrier, Trustees 29,130
Chamberlain 1991 Trust, Lowell and Patsy Chamberlain, Trustees 3,847
Charles S. and Alice B. Knight 7,432
Charles E. Jacobson and Claire R. Jacobson 380,580
Frank A. Christopher IRA Rollover 4,059
Colvin Revocable Trust, Oliver P. and Margaret Colvin, Jr., Trustees 47,111
Don E. and Michele G. Parmiter 46,006
David Ash Johnson Living Trust of 3/7/88, David Ash Johnson, Trustee 21,923
David and Elizabeth Johnson 962
Deel Revocable Trust, Boyd B. and Marilyn Deel, Trustees 370,925
Donald C. Christopher 3,954
Eugene and Arlene S. Weston Trust, Eugene and Arlene S. Weston, Trustees 122,352
Elin M. Johnson 6,340
FA & AN Christopher Trust, Frank A. and Anna Noreen Christopher, Trustees 12,540
Frank A. Christopher 10,289
Fetters Family Trust, Weir Fetters, Trustee 12,414
Ivan F. Finley Family Revocable Trust dated 12/28/81, Ivan F. and Thelma K.
Finley, Trustees 10,618
G. Gervaise Davis, III and Kathleen A. Davis 38,343
Harold D. and Lael N. Arbon 20,794
Jerry G. Brassfield Living Trust, Jerry G. Brassfield, Trustee 327,765
Jo Ann Brassfield Living Trust, Jo Ann Brassfield, Trustee 364,578
Juli Lynn Christopher Trust, Anna Noreen Christopher, Trustee 1,143
Kapp Family Trust, Lloyd G. and Joan L. Kapp, Trustees 18,820
Kyne Family Trust, Stephen E. and Sheila A. Kyne, Trustees 53,663
Lenora M. Huett Trust, Lenora M. Huett, Trustee 24,047
Liddicoat Family Trust, Douglas and Marilyn D. Liddicoat, Trustees 22,230
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME OF SELLING STOCKHOLDER OWNED AND OFFERED HEREBY
- --------------------------- ------------------------
<S> <C>
Lilienstein Family, LP 2,564
Lisa Karen Christopher Trust, Anna Noreen Christopher, Trustee 1,143
Lori Ann Christopher Trust, Frank A. Christopher, Trustee 1,143
Melissa Brassfield Revocable Trust, Joseph A. Sperske, Trustee 19,703
The Melvin S. Campbell Revocable Living Trust dated 4/16/90,
Melvin S. Campbell, Trustee 24,016
Oregon Land Company 65,547
Robin J. and Roger Best 11,650
Williams Living Trust dated 9/26/86, Raellen Williams, Trustee 17,481
R.E.B. Brassfield Revocable Trust, Robert E. & Judith Brassfield, Trustees 89,690
Robert Anthony Brassfield Revocable Trust, Joseph A. Sperske, Trustee 19,703
Roger W.A. Howard 11,938
Shann Michael Brassfield Revocable Trust, Joseph A. Sperske, Trustee 19,703
Sharon J. Attermann 12,177
Marianne C. Snell Survivors Trust, Marianne C. Snell, Trustee 15,372
Andrew Ulrich Jr. and Arline P. Ulrich UAD 9/19/89 FBO by Andrew Ulrich,
et al 4,064
The Virginia M. Campbell Revocable Living Trust dated
4/16/90, 24,016
Virginia M. Campbell, Trustee
Volney E. Howard III 11,938
V.E. Howard Family Trust, Roger W.A. Howard, Managing Trustee 86,366
W. Scott Hroza 4,605
Walter A. Hachman 8,362
Wesley H. Evans 8,716
Western Mobileparks, Inc. 273,219
William C. and Marjorie A. Iverson 26,110
Wilmot J. Nicholson Revocable Living Trust, Wilmot J. Nicholson and Ruth R.
Nicholson, Trustees 8,540
James Buell Lindgren and for Joyce Arleen Lindgren, deceased 2,175
David Domingo, as Trustee of the Mobileparks West Liquidating Trust 13,029
David Domingo, as Trustee of the All Seasons Mobilehome Community 3,970
Liquidating Trust
David Domingo, as Trustee of The Bluffs Mobilehome Community Liquidating 8,861
Trust
David Domingo, as Trustee of the Coralwood Mobilehome Community 9,660
Liquidating Trust
David Domingo, as Trustee of the Eugene Mobilepark West Liquidating Trust 8,443
David Domingo, as Trustee of the Fairview Mobilepark West Liquidating 6,490
David Domingo, as Trustee of the Four Seasons Mobilehome Community 3,969
Liquidating Trust
David Domingo, as Trustee of the Kloshe lllahee Mobilehome Community 10,674
Liquidating Trust
David Domingo, as Trustee of the Monte del Lago Mobilehome Community 20,995
Liquidating Trust
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
NAME OF SELLING STOCKHOLDER OWNED AND OFFERED HEREBY
- --------------------------- ------------------------
<S> <C>
David Domingo, as Trustee of the Royal Oaks Mobilehome Community Liquidating
Trust 4,208
David Domingo, as Trustee of the San Jose Mobilepark West #2 Liquidating Trust 7,976
David Domingo, as Trustee of the San Jose Mobilepark West #3 Liquidating Trust 5,622
David Domingo, as Trustee of the San Jose Mobilepark West #4 Liquidating Trust 7,120
David Domingo, as Trustee of the Sea Oaks Mobilehome Community Liquidating
Trust 6,293
David Domingo, as Trustee of the Sedona Venture Liquidating Trust 4,185
David Domingo, as Trustee of the Sunshadow Mobilehome Community
Liquidating Trust 10,160
David Domingo, as Trustee of the Villa Borega Mobilehome Community
Liquidating Trust 14,995
David Domingo, as Trustee of the Westwood Village Mobilehome Community
Liquidating Trust 6,308
Casimer and Angeline Kay 5,785
Herbert C. and Karen E. Driver 808
Scott A. and Julie H. Ford Family Trust, Scott A. and Julie H. Ford, Trustees 658
Mahendra R. Patel 1985 Revocable Trust, Mahendra R. Patel, Trustee 1,317
Robert A. Lasley 1,317
Helen S. Ullmann 1,317
Bright Living Trust, Albert and Virginia Bright, Trustees 24,858
Lucy Valletta 6,525
Winby Family Trust, Ivor W.S. and Jane Winby, Trustees 18,644
James D. and Joy L. Verboncouer 1,169
Barry L. Haase 121,304
Robert E. C. Wegner 30,326
Frank P. Scalzo 23,111
Boulder Scalzo, L.P. 4,968
Hanson Family Revocable Trust u/d/t dated 6/6/91, Rondell B. Hanson, Trustee 44,003
Krueger Family Revocable Trust u/d/t dated 6/27/89, James M. Krueger, Trustee
Dan G. Olsen 44,003
13,904
---------
TOTAL 3,365,575
=========
</TABLE>
12
<PAGE> 15
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of all material Federal income tax
consequences to the Company and holders of Common Stock of the treatment of the
Company as a REIT. This Prospectus addresses the taxation of the Company and the
impact on the Company of its election to be taxed as a REIT. The following
discussion assumes that the Company continues to qualify as a REIT during all
relevant periods. 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). As discussed below, the Taxpayer Relief Act of 1997 (the "1997 Act")
contains certain changes to the REIT qualification requirements and to the
taxation of REITs that may be material to a holder of Common Stock but which are
effective only for the Company's taxable years commencing on or after January 1,
1998. In addition, the Internal Revenue Service Restructuring and Reform Act of
1998 (the "1998 Act"), enacted on July 22, 1998, contains certain changes to the
capital gain rules that may be material to a holder of Common Stock.
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 COMMON 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, 1996
and 1997, 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, sub-partnerships of the Operating
Partnership created to (i) facilitate mortgage financing (the "Financing
Partnerships") and (ii) facilitate the Company's ability to provide financing to
the owners of manufactured home communities (the "Lending Partnership"), RSI, LP
Management Corp. and De Anza Group, Inc. (collectively, 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, the Lending 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 (i) matters
related to 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
13
<PAGE> 16
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 stockholders, 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 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.
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
uses 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 capital stock of the Company must be held by
a minimum of 100 persons for at least 335 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 its capital 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 capital 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 capital stock disclosing the
actual owners of such capital 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 capital stock and certain other information. The Company's
Charter provides restrictions regarding the transfer of its capital stock that
are intended to assist the Company in continuing to satisfy the stock ownership
requirements. See "Risk Factors -- We Have a Common Stock Ownership Limit for
REIT Tax Purposes". Pursuant to the 1997 Act, for the Company's taxable years
commencing on or after January 1, 1998, if the Company complies with regulatory
rules pursuant to which it is required to send annual letters to holders of
capital stock requesting information regarding the actual ownership of capital
stock, but does not know, or exercising reasonable diligence would not have
known, whether it failed to meet the requirement that it not be closely held,
the Company will be treated as having met the requirement.
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,
14
<PAGE> 17
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 in accordance with its
capital interest. 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 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 the Offering, and as the holders of 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 the Lending 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. The Company may in the future form one or more
additional qualified REIT subsidiaries. For the Company's year ended on December
31, 1997, all of the stock of such subsidiaries must be owned by the Company
from the commencement of each such subsidiary's existence. For taxable years of
the Company beginning on and after January 1, 1998, the Company must own all of
the stock of each such subsidiary, although it will not be required to own such
stock of such subsidiary from the commencement of such subsidiary's existence.
Clinton Administration's Proposed Changes to REIT Asset Test. The
Clinton Administration's budget proposal announced on February 2, 1998 includes
a proposal to amend the REIT asset tests with respect to non-qualified REIT
subsidiaries, such as the Management Corporations and RSI. The proposal would
prohibit a REIT from owning more than 10% of the vote or value of the
outstanding stock of any non-qualified REIT subsidiary. Existing non-qualified
REIT subsidiaries would be grandfathered, and therefore subject only to the 5%
asset test and 10% voting securities test of current law (see "-- Taxation of
the Company -- Asset Tests"), except that such grandfathering would terminate if
the subsidiary engaged in a new trade or business or acquired substantial new
assets. As a result, if the proposal were to be enacted, the Management
Corporations and RSI would become subject to the new 10%-vote-and-value
limitation if they commenced new trade or business activities or acquired
substantial new assets after the specified effective date. The Company could not
satisfy the new test because it would be considered to own more than 10% of the
value of the stock of the Management Corporations and RSI. Accordingly, the
proposal, if enacted, could materially impede the ability of the Company to
engage in other activities without jeopardizing its REIT status.
15
<PAGE> 18
Gross Income Tests For years before 1998, 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 years after 1997, there are two
such percentage tests. 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 "--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 to the
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 (a "Related Party Tenant"). For the Company's taxable year which
began on January 1, 1998 and for all taxable years thereafter, only partners who
own 25% or more of the capital or profits interest in a partnership are included
in the determination of whether a tenant is a "Related Party 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". Pursuant to the 1997 Act, for the Company's taxable years
commencing on or after January 1, 1998, rents received generally will qualify as
rents from real property notwithstanding the fact that the Company provides
non-customary services so long as the amount received for such services is de
minimis. If the value of the non-customary service income received with respect
to a property (valued at no less than 150% of the Company's direct costs of
performing such services) is 1% or less of the total income derived from the
property, then all rental income with respect to the property, except the
non-customary service income, will qualify as "rents from real property."
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 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% gross income test or for purposes of the 95%
gross income test as described below.
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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 a note receivable from
RSI (the "RSI Note") if the RSI Note is not collateralized by RSI's inventory
and interests in notes secured by real property) are included for purposes of
the 95% gross income test, but not for purposes of the 75% gross income test.
Similarly, for tax years beginning prior to January 1, 1998, any payments made
to the Company under an interest rate swap or cap agreement entered into by the
Company to hedge certain of its variable rate indebtedness is included as
qualifying income for purposes of the 95% gross income test, but not for
purposes of the 75% gross income test. For the Company's tax years commencing on
or after January 1, 1998, such payments made to the Company will so qualify even
though the Company's indebtedness does not bear interest at a variable rate, and
payments pursuant to certain similar financial instruments entered into to
reduce interest rate risks will be treated in a similar manner.
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 and, as a result of the 1997 Act, effective for
the Company's taxable year beginning January 1, 1998, dispositions of property
that occur due to involuntary conversion. See "--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 provided that the obligation is collateralized by RSI's
inventory and interests in notes secured by real property 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 "--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 1997 Act repeals the 30%
gross income test for taxable years beginning after its enactment. Therefore,
the 30% gross income test will not apply for the Company's taxable year
beginning January 1, 1998 and thereafter. However if the 30% income test is not
met for the taxable years of the Company beginning before January 1, 1998, the
Company would cease to qualify as a REIT. See "--Failure to Qualify." 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.
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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 (including, as a result of the 1997 Act,
cancellation of indebtedness and original issue discount 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. See "Taxation of Taxable Domestic
Stockholders--General." 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 corporate tax rates. Furthermore, 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 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.
Pending Legislation. Bills have been introduced in both the Senate and
House of Representatives that would provide that no dividends-paid deduction is
allowed with respect to distributions made in liquidation of a REIT, when at
least 80 percent of the liquidating REIT is owned by a single corporation. It is
not expected that this legislation, if enacted, would have a material impact on
the Company.
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.
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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 the Lending Partnership and certain other partnerships (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 Company's initial public offering) 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 certain of 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) of the Code 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 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 "--Taxation of the Company--Annual Distribution
Requirements." In addition, to the extent that the carryover basis of the
contributed assets will cause the Company to have greater current and
accumulated earnings and profits, the amount, if any, of distributions to
stockholders that may be treated as a tax-free return of capital will be
reduced. See "--Taxation of Taxable Domestic Stockholders--General."
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 "--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. In addition,
the Partnerships may 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.
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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.
On November 10, 1997, the Service issued IRS Notice 97-64, which
provides generally that the Company may classify portions of its designated
capital gains dividend as (i) a 20% rate gain distribution (which would be
taxable to taxable domestic stockholders who are individuals, estates or trusts
at a maximum rate of 20%), (ii) an unrecaptured Section 1250 gain distribution
(which would be taxable to taxable domestic stockholders who are individuals,
estates or trusts at a maximum rate of 25%), or (iii) a 28% rate gain
distribution (which would be taxable to taxable domestic stockholders who are
individuals, estates or trusts at a maximum rate of 28%). If no designation is
made, the entire designated capital gain dividend will be treated as a 28% rate
gain distribution. Notice 97-64 provides that a REIT must determine the maximum
amounts that it may designate as 20% and 25% rate capital gain dividends by
performing the computation required by the Code as if the REIT were an
individual whose ordinary income were subject to a marginal tax rate of at least
28%. Notice 97-64 further provides that designations made by the REIT only will
be effective to the extent that they comply with Revenue Ruling 89-81, which
requires that distributions made to different classes of shares be composed
proportionately of dividends of a particular type. Distributions that are
properly designated by the Company as capital gain dividends will be taxable to
taxable corporate domestic stockholders as long-term capital gain (to the extent
that capital gains dividends do not exceed the Company's actual net capital gain
for the taxable year) without regard to the period for which such corporate
domestic stockholder has held its Common Stock. Corporate domestic stockholders
may, however, be required to treat up to 20% of certain capital gain dividends
as ordinary income.
The 1998 Act reduces the required holding period for the application of
the 20% and 25% capital gain tax rates from more than 18 months to more than one
year for capital gain properly taken into account on or after January 1, 1998.
It is expected that the Service will issue clarifying guidance (most likely
applying the same principles set forth in IRS Notice 97-64) regarding the
application of the new holding period requirements to capital gain dividend
designations by REITs.
If, for any taxable year, the Company elects to designate as "capital
gain dividends" (as defined in Section 857 of the Code) any portion (the
"Capital Gains Amount") of the dividends (within the meaning of the Code) paid
or made available for the year to holders of all classes of shares of beneficial
interest (the "Total Dividends"), then the portion of the Capital Gains Amount
that will be allocable to the holders of Common Stock will be the Capital Gains
Amount multiplied by a fraction, the numerator of which will be the total
dividends (within the meaning of the Code) paid or made available to the holders
of the Common Stock for the year and the denominator of which will be the Total
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 taxable 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, upon any sale or other disposition of Common Stock, a
stockholder will recognize gain or loss for Federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and (ii)
the holder's adjusted basis in such Common Stock for tax purposes. Such gain or
loss will be capital gain or loss if the Common Stock has been held as a capital
asset. In the case of a stockholder that is a corporation, such capital gain or
loss will be long-term capital gain or loss if such Common Stock has been held
for more
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than one year. Pursuant to the 1998 Act, generally, in the case of a taxable
domestic stockholder who is an individual or an estate or trust, such capital
gain (i) taken into account on or after January 1, 1998, will be taxed at a
maximum rate of 20% if such Common Stock has been held for more than one year;
and (ii) taken into account on or after December 31, 2000, will be taxed at a
maximum rate of 18% if the Common Stock has been held for more than five years.
The 1997 Act allows the Service to issue regulations relating to the manner in
which the capital gain rates will apply to sales of capital assets by
"pass-through entities," which include REITs such as the Company, and to sales
of interests in "pass-through entities." To date, the Service has not issued
such regulations (but see discussion of Notice 97-64 above), but if issued, such
regulations could affect the taxation of gain and loss realized on the
disposition of Common Stock. Stockholders are urged to consult with their own
tax advisors with respect to the new rules contained in the 1997 Act and the
1998 Act.
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. For stockholders who are
individuals, trusts and estates, the long-term capital loss will be apportioned
among the 20% and 25% long-term capital gain rate groups to the extent that
distributions received by such stockholder were previously included in such rate
groups.
Pursuant to the 1997 Act, the Company may elect to require holders of
Common Stock to include the Company's undistributed net capital gains in their
income for the Company's taxable year beginning January 1, 1998 and thereafter.
If the Company makes such an election, holders of Common Stock will (i) include
in their income as long-term capital gains their proportionate share of such
undistributed capital gains and (ii) be deemed to have paid their proportionate
share of the tax paid by the Company on such undistributed capital gains and
thereby receive a credit or refund for such amount. A holder of Common Stock
will increase its basis in the Common Stock by the difference between the amount
of capital gain included in its income and the amount of the tax it is deemed to
have paid. The earnings and profits of the Company will be adjusted
appropriately.
In addition, distributions from the Company and gain from the
disposition 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.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated United States
Federal income tax consequences of the ownership and disposition of Common Stock
applicable to Non-United States Holders of such stock. A "Non-United States
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 persons 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 United States
Federal income taxation. Final regulations dealing with withholding tax on
income paid to foreign persons and related matters (the "New
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Withholding Regulations") were promulgated on October 6, 1997. In general, the
New Withholding Regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify and modify reliance standards. The New Withholding
Regulations are generally effective for payments made on or after January 1,
1999, subject to certain transition rules. The Service announced on March 27,
1998 that it intends to amend the New Withholding Regulations to provide that
such regulations will generally be applicable beginning January 1, 2000 and to
provide certain new transition rules for satisfying the withholding certificate
or statement requirements of the New Withholding Regulations. Accordingly,
prospective Non-United States Holders are urged to consult their tax advisors
concerning the adoption of the New Withholding Regulations.
Distributions From the Company.
1. Ordinary Dividends. The portion of dividends received by Non-United
States 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 United States trade or business of
the Non-United States Holder will be subject to United States withholding tax on
a gross basis at the rate of 30% (unless reduced by treaty). Any amounts
withheld should be creditable against the Non-United States Holder's United
States Federal income tax liability. In general, Non-United States Holders will
not be considered engaged in a United States trade or business solely as a
result of their ownership of Common Stock. In cases where the dividend income
from a Non-United States Holder's investment in Common Stock is (or is treated
as) effectively connected with the Non-United States Holder's conduct of a
United States trade or business, the Non-United States Holder generally will be
subject to United States tax at graduated rates, in the same manner as United
States stockholders are taxed with respect to such dividends (and may also be
subject to the 30% branch profits tax (unless reduced by treaty) in the case of
a Non-United States 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-United States Holder's Common Stock, will
not be subject to United States income tax but rather will reduce the adjusted
basis of such Common Stock. Nevertheless, the Company anticipates that tax at
the rate applicable to dividends will be withheld for all distributions to Non
United States Holders. However, the Non-United States Holder may seek a refund
of such amounts from the Service if it is 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-United States Holder's Common Stock, it will give rise to tax liability if
the Non-United States 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-United States Holder, to the extent attributable to gains from dispositions
of United States Real Property Interests ("USRPIs") such as the Properties
("USRPI Capital Gains"), will be considered effectively connected with a United
States trade or business of the Non-United States Holder and subject to United
States Federal income tax at the rate applicable to United States 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-United States Holder's United States Federal income tax
liability. Distributions subject to FIRPTA may also be subject to a 30% branch
profits tax (unless reduced by treaty) in the hands of a foreign corporate
stockholder that is not entitled to treaty exemption.
Although the law is not entirely clear, it appears that amounts
designated by the Company pursuant to the 1997 Act as undistributed capital
gains in respect of shares would be treated with respect to Non-United States
Holders in the manner outlined in the preceding paragraph for actual
distributions by the Company of capital gain dividends. Under that approach, the
Non-United States Holders would be able to offset as a credit against their
United States Federal income tax liability resulting therefrom their
proportionate share of the tax paid by the Company on such undistributed capital
gains (and to receive from the
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Service a refund to the extent their proportionate share of such tax paid by the
Company were to exceed their actual United States Federal income tax liability).
Dispositions of Common Stock. Unless the Common Stock constitutes a
USRPI, a sale of Common Stock by a Non-United States Holder generally will not
be subject to United States 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-United States 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-United States 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-United States 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 United States Treasury Department regulations) on an established
securities market (e.g., the NYSE, on which the Common Stock is listed) and (ii)
the selling Non-United States Holder held 5% or less of the 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-United States Holder would be subject to the same treatment as a
United States 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-United States Holder in two cases: (i) if the Non-United
States Holder's investment in Common Stock is effectively connected with a
United States trade or business conducted by such Non-United States Holder, the
Non-United States Holder will be subject to the same treatment as a United
States stockholder with respect to such gain, or (ii) if the Non-United States
Holder is a nonresident alien individual who was present in the United States
for 183 days or more during the taxable year and has a "tax home" in the United
States, 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. 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.
PLAN OF DISTRIBUTION
Any of the Selling Stockholders may from time to time, in one or more
transactions, sell all or a portion of the Offered Stock on the NYSE, in the
over-the-counter market, on any other national securities exchange on which the
Common Stock is listed or traded, in negotiated transactions, in underwritten
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The offering price of the Offered
Stock from time to time will be determined by the Selling Stockholders and, at
the time of such determination, may be higher or lower than the market price of
the Common Stock on the NYSE. In connection with an underwritten offering,
underwriters or agents may receive compensation in the form of discounts,
concessions or commissions from a Selling Stockholder or from purchasers of
Offered Stock for whom they may
23
<PAGE> 26
act as agents, and underwriters may sell Offered Stock 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
Offered Stock 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 Offered Stock may be sold directly or
through broker-dealers acting as principal or agent, or pursuant to a
distribution by one or more underwriters on a firm commitment or best-efforts
basis. The methods by which the Offered Stock may be sold include: (a) a block
trade in which the broker-dealer so engaged will attempt to sell the Offered
Stock as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by such broker-dealer for its account pursuant to this Prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; (d) an exchange distribution in accordance with the rules of the
NYSE; (e) privately negotiated transactions; and (f) underwritten transactions.
The Selling Stockholders and any underwriters, dealers or agents participating
in the distribution of the Offered Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any profit on the sale of the
Offered Stock by the Selling Stockholders and any commissions received by any
such broker-dealers may be deemed to be underwriting commissions under the
Securities Act.
When a Selling Stockholder elects to make a particular offer of Offered
Stock, a prospectus supplement, if required, will be distributed which will
identify any underwriters, dealers or agents and any discounts, commissions and
other terms constituting compensation from such Selling Stockholder and any
other required information.
In order to comply with the securities laws of certain states, if
applicable, the Offered Stock may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the shares of Offered Stock
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.
The Company has agreed to pay all costs and expenses incurred in
connection with the registration under the Securities Act of the Offered Stock,
including, without limitation, all registration and filing fees, printing
expenses and fees and disbursements of counsel and accountants for the Company.
The Selling Stockholders will pay any brokerage fees and commissions, fees and
disbursements of legal counsel for the Selling Stockholders and stock transfer
and other taxes attributable to the sale of the Offered Stock. The Company also
has agreed to indemnify each of the Selling Stockholders and their respective
officers, directors and trustees and each person who controls (within the
meaning of the Securities Act) such Selling Stockholder against certain losses,
claims, damages, liabilities and expenses arising under the securities laws in
connection with this offering. Each of the Selling Stockholders has agreed to
indemnify the Company, its officers and directors and each person who controls
(within the meaning of the Securities Act) the Company, and each of the other
Selling Stockholders, against any losses, claims, damages, liabilities and
expenses arising under the securities laws in connection with this offering with
respect to written information furnished to the Company by such Selling
Stockholder; provided, however, that the indemnification obligation is several,
not joint, as to each Selling Stockholder.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on (Form 10-K) for the years ended December 31, 1997 and
December 31, 1996 have been audited by Ernst & Young LLP, independent auditors
and for the year ended December 31, 1995 have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their
respective reports thereon included therein and incorporated herein by reference
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
24
<PAGE> 27
LEGAL MATTERS
The legality of the shares of Offered Stock has been passed upon for
the Company by Rosenberg & Liebentritt, P.C., Chicago, Illinois. Certain tax
matters have been passed upon by Steptoe & Johnson LLP, special tax counsel to
the Company. Rosenberg & Liebentritt, P.C. will rely on Steptoe & Johnson LLP as
to certain matters of Maryland law.
25
<PAGE> 28
========================================= ================================
NO DEALER, SALESPERSON OR OTHER
INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR
INCORPORATED BY REFERENCE 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. 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 3,365,575 SHARES
SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN MANUFACTURED HOME
ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR IN THE COMMUNITIES, INC.
AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
--------------
COMMON STOCK
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
Page
---- ----------
<S> <C>
Special Note Regarding..................... PROSPECTUS
Forward-Looking Statements.............. 2
Available Information...................... 2 ----------
Incorporation of Certain Documents
By Reference............................. 3
The Company................................ 4
Risk Factors............................... 4
No Proceeds to the Company................. 9
Selling Stockholders....................... 10
Certain Federal Income Tax Considerations.. 13
Plan of Distribution....................... 23
Experts.................................... 24
Legal Matters.............................. 25
</TABLE>
OCTOBER __, 1998
========================================= ================================
<PAGE> 29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses payable
by the Company in connection with the issuance and distribution of the
securities being registered:
<TABLE>
<S> <C>
Registration Fee $ 22,836
Printing and Duplicating Expenses 3,000
Legal Fees and Expenses 30,000
Accounting Fees and Expenses 6,000
Miscellaneous 3,164
-------
Total $ 65,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Maryland General Corporation Law (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 liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Company's charter, as amended from time to time, and as filed with the State
Department of Assessments and Taxation of Maryland (the "Charter"), contains
such a provision which eliminates 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.
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
II - 1
<PAGE> 30
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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
ITEM 16. EXHIBITS
3.1 Amended and Restated Articles of Incorporation of Manufactured
Home Communities, Inc. (incorporated by reference to Exhibits
3.1 and 3.2 to the Registrant's Registration Statement on Form
S-11 (File No. 33-55994)).
3.2 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)).
5. Opinion of Rosenberg & Liebentritt, P.C. regarding the
legality of the securities being registered.
8.1 Opinion of Steptoe & Johnson LLP regarding certain tax
matters.
23. Consent of Rosenberg & Liebentritt, P.C. (included as part of
Exhibit 5.1)
23.2 Consent of Steptoe & Johnson LLP (included as part of Exhibit
8.1)
23.3 Consent of Ernst & Young LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included in signature page)
II - 2
<PAGE> 31
ITEM 17. UNDERTAKINGS
(a) 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 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in this registration statement;
provided, however, that subparagraphs (i) and (ii) above shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the 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.
(b) 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.
(c) 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 existing provisions or
arrangements whereby the Registrant may indemnify a director, officer
or controlling person of the Registrant against liabilities arising
under the Securities Act of 1933, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act of 1933 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
II - 3
<PAGE> 32
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II - 4
<PAGE> 33
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
of 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 Chicago, Illinois, on this 9th day of October, 1998.
MANUFACTURED HOME COMMUNITIES, INC.
By: /s/ Howard Walker
--------------------------------------------
Howard Walker
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Manufactured Home
Communities, Inc., do hereby constitute and appoint Thomas P. Heneghan and
Howard Walker and each and either of them, our true and lawful attorneys-in-fact
and agents, to do any and all acts and things in our names and our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
Company to comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
registration statement, or any registration statement for this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, including specifically, but without limitation, any and all amendments
(including post-effective amendments) hereto; and we hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated as of the 9th day of October, 1998.
NAME TITLE DATE
- ---- ----- ----
/s/Samuel Zell
- ------------------------
Samuel Zell Chairman of the Board October 9, 1998
/s/Howard Walker
- ------------------------ Chief Executive Officer and
Howard Walker President and Director October 9, 1998
/s/Thomas P. Heneghan
- ------------------------ Executive Vice President and
Thomas P. Heneghan Chief Financial Officer October 9, 1998
/s/Judy A. Pultorak
- ------------------------
Judy A. Pultorak Chief Accounting Officer October 9, 1998
/s/Sheli Z. Rosenberg
- ------------------------
Sheli Z. Rosenberg Director October 9, 1998
- ------------------------
David Helfand Director
/s/Donald S. Chisholm
- ------------------------
Donald S. Chisholm Director October 6, 1998
/s/Michael A. Torres
- ------------------------
Michael A. Torres Director October 9, 1998
/s/Thomas E. Dobrowski
- ------------------------
Thomas E. Dobrowski Director October 9, 1998
/s/Louis H. Masotti
- ------------------------
Louis H. Masotti Director October 9, 1998
/s/Gary Waterman
- ------------------------
Gary Waterman Director October 9, 1998
/s/John F. Podjasek, Jr.
- ------------------------
John F. Podjasek, Jr. Director October 9, 1998
<PAGE> 34
INDEX TO EXHIBITS
3.1 Amended and Restated Articles of Incorporation of Manufactured
Home Communities, Inc. (incorporated by reference to Exhibits
3.1 and 3.2 to the Registrant's Registration Statement on Form
S-11 (File No. 33-55994)).
3.2 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)).
5.1 Opinion of Rosenberg & Liebentritt, P.C. regarding the
legality of the securities being registered.
8.1 Opinion of Steptoe & Johnson LLP regarding certain tax
matters.
23.1 Consent of Rosenberg & Liebentritt, P.C. (included as part of
Exhibit 5.1)
23.2 Consent of Steptoe & Johnson LLP (included as part of Exhibit
8.1)
23.3 Consent of Ernst & Young LLP
23.4 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included in signature page)
II - 6
<PAGE> 1
EXHIBIT 5.1
[ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD]
October 9, 1998
Board of Directors
Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
RE: REGISTRATION STATEMENT ON FORM S-3
DATED OCTOBER 9, 1998
Ladies and Gentlemen:
We are acting as counsel to Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), in connection with the registration of
3,365,575 shares (the "Exchange Shares") of common stock, $.01 par value per
share, of the Company ("Common Stock") for resale from time to time by certain
holders thereof (the "Selling Shareholders") pursuant to 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"). The Company may issue such Exchange
Shares to Selling Shareholders holding up to 3,365,575 units of limited
partnership interest ("OP Units") in MHC Operating Limited Partnership, an
Illinois limited partnership (the "Operating Partnership"), if and to the extent
that such Selling Shareholders exchange such OP Units for shares of Common Stock
from the Company. 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 identified 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 first transmitted to the
Commission under the 1933 Act;
2. The charter of the Company, as amended, 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
the Secretary of the Company;
<PAGE> 2
[ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD]
Board of Directors
Manufactured Home Communities, Inc.
October 9, 1998
Page 2
4. Resolutions adopted by the Board of Directors of the
Company (the "Board") relating to the issuance and registration of the Exchange
Shares, 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 October 9, 1998; 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 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 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 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 Exchange Shares will not be issued or transferred in
violation of any restriction or limitation contained in the Charter.
<PAGE> 3
[ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD]
Board of Directors
Manufactured Home Communities, Inc.
October 9, 1998
Page 3
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 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 Steptoe & Johnson
LLP, 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 Exchange Shares are duly authorized and, if and when issued in
exchange for OP Units duly tendered to the Company 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 Exchange
Shares are actually issued (not including any of the Exchange Shares), and (c)
the Exchange Shares will not exceed the total number of shares of Common Stock
that the Company is authorized to issue) validly issued, fully paid and
nonassessable.
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.
<PAGE> 4
[ROSENBERG & LIEBENTRITT, P.C. LETTERHEAD]
Board of Directors
Manufactured Home Communities, Inc.
October 9, 1998
Page 4
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 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.
By: /s/ Ruth Pinkham Haring
-------------------------------
Vice President
<PAGE> 5
EXHIBIT A
---------
October 9, 1998
Manufactured Home Communities, Inc.
Two North Riverside Plaza
Chicago, Illinois 60606
Re: Registration Statement on Form S-3
Dated October 9, 1998
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 3,365,575 shares (the "Exchange
Shares") of common stock, $.01 par value per share, of the Company ("Common
Stock") for resale from time to time by certain holders thereof (the "Selling
Shareholders") pursuant to 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"). The Company may issue such Exchange Shares to Selling Shareholders
holding up to 3,365,575 units of limited partnership interest ("OP Units") in
MHC Operating Limited Partnership, an Illinois limited partnership (the
"Operating Partnership"), if and to the extent that such Selling Shareholders
exchange such OP Units for shares of Common Stock from the Company. 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 identified 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 first transmitted to the Commission under
the 1933 Act;
<PAGE> 6
Manufactured Home Communities, Inc.
October 9, 1998
Page 2
2. The charter of the Company, as amended, 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 the
Secretary of the Company;
4. Resolutions adopted by the Board of Directors of the Company (the
"Board") relating to the issuance and registration of the Exchange Shares,
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
October 9, 1998; 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 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
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 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.
<PAGE> 7
Manufactured Home Communities, Inc.
October 9, 1998
Page 3
5. The Exchange Shares 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 Exchange Shares are duly authorized and, if and when issued in
exchange for OP Units duly tendered to the Company 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 Exchange
Shares are actually issued (not including any of the Exchange Shares), and (c)
the Exchange Shares will not exceed the total number of shares of Common Stock
that the Company is authorized to issue) 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.
The only jurisdiction where all the members of this office are members of
the Bar is the District of Columbia. However, this opinion has been reviewed by
a partner who is licensed to practice in 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.
<PAGE> 8
Manufactured Home Communities, Inc.
October 9, 1998
Page 5
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 admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.
Very truly yours,
STEPTOE & JOHNSON LLP
<PAGE> 1
EXHIBIT 8.1
[STEPTOE & JOHNSON LLP LETTERHEAD]
October 9, 1998
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 shares of common stock of the Company (the "Stock"), as more fully described
in the Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on October 9, 1998, as amended through the date hereof (the
"Registration Statement," which includes the Prospectus, as defined therein). In
connection with the registration of the Stock, 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
<PAGE> 2
Manufactured Home Communities, Inc.
October 9, 1998
Page 2
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 which the Operating Partnership has an interest (collectively, the
"Subsidiary Partnerships") (for a list of the wholly-owned 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
Management Partnerships, the Management Corporations, the QRS Corporations, RSI
and the Subsidiary Partnerships, may be collectively referred to herein as the
"Subsidiary Entities." 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.
<PAGE> 3
Manufactured Home Communities, Inc.
October 9, 1998
Page 3
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, December 31, 1996 and December 31, 1997, 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;
2. The discussion in the Prospectus under the heading "Certain 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 section of the Prospectus under the heading "Certain Federal
Income Tax Considerations."
<PAGE> 4
Manufactured Home Communities, Inc.
October 9, 1998
Page 4
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> 5
Manufactured Home Communities, Inc.
October 9, 1998
Page 5
EXHIBIT A
WHOLLY-OWNED SUBSIDIARY PARTNERSHIPS
MHC Lending Limited Partnership;
MHC-DeAnza Financing Limited Partnership;
MHC-Bay Indies Financing Limited Partnership;
MHC Financing Limited Partnership;
MHC Financing Limited Partnership Two;
Blue Ribbon Communities Limited Partnership; and
Gold Medal Communities Limited Partnership.
<PAGE> 6
Manufactured Home Communities, Inc.
October 9, 1998
Page 6
EXHIBIT B
QRS CORPORATIONS
1. MHC Lending QRS, Inc.;
2. MHC-QRS DeAnza, Inc.
3. MHC-QRS Bay Indies, Inc.;
4. MHC-QRS, Inc.;
5. MHC-QRS Two, Inc.;
6. MHC-QRS Blue Ribbon Communities, Inc.;
7. QRS Gold Medal Communities, Inc.; and
8. MHC-QRS Western, Inc.
<PAGE> 1
EXHIBIT 23.3
------------
Consent of Independent Auditors
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. for the registration of 3,365,575 shares of its common stock
and to the incorporation by reference therein of our report dated January 28,
1998, except for Note 15, as to which the date is February 23, 1998, with
respect to the consolidated financial statements and schedules of Manufactured
Home Communities, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Chicago, Illinois
October 6, 1998
<PAGE> 1
EXHIBIT 23.4
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report dated February 16, 1996, on our audit of the consolidated
statement of operations, changes in stockholders' equity and cash flows and the
financial statement schedules of Manufactured Home Communities, Inc. for the
year ended December 31, 1995 which report is included in the Annual Report on
Form 10-K, as amended. We also consent to the reference to our Firm under the
caption "Experts."
/s/ PricewaterhouseCoopersLLP
------------------------------
PricewaterhouseCoopers LLP
Chicago, Illinois
October 6, 1998
