MANUFACTURED HOME COMMUNITIES INC, PRE 14A, 1999-03-19

MANUFACTURED HOME COMMUNITIES INC
PRE 14A, 1999-03-19
REAL ESTATE INVESTMENT TRUSTS

Previous: ARGOSY GAMING CO, 10-K, 1999-03-19

Next: CHIC BY H I S INC, 10-Q, 1999-03-19

<PAGE> 1

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934

Filed by the registrant |X|
Filed by a party other than the registrant | |

Check the appropriate box:

Name of Registrant as Specified in Its Charter:

Manufactured Home Communities, Inc.

Name of Person(s) Filing Proxy Statement if other than the Registrant:

Payment of filing fee (Check the appropriate box):

|X| No fee required

| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

1. Title of each class of securities to which transaction applies:

2. Aggregate number of securities to which transaction applies.

3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)

4. Proposed maximum aggregate value of transaction:

5. Total fee paid:

| | Fee paid previously with preliminary materials.

| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

1. Amount previously paid:
2. Form, schedule or registration statement no:
3. Filing party:
4. Date filed:

[FN]
_____________
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
</FN>

<PAGE> 2

MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606
------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
------------------

You are cordially invited to attend the 1999 Annual Meeting of Stockholders
("Meeting") of MANUFACTURED HOME COMMUNITIES, INC., a Maryland corporation (the
"Company"), to be held at One North Franklin Street, Third Floor, Chicago,
Illinois, on Tuesday, May 11, 1999, at 10:00 A.M. Central Daylight Time, for the
following purposes:

(1) To elect three (3) directors of the Board of Directors to terms
expiring in 2002;

(2) To consider and vote upon the adoption of the Company's Articles of
Amendment and Restatement of its Articles of Incorporation deleting Article VI,
Section 5. -- Indemnification; and

(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.

Only stockholders of record at the close of business on March 17, 1999,
will be entitled to vote at the Meeting or any adjournment thereof.

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE
SIGN AND DATE THE ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF
DIRECTORS, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Susan Obuchowski
Susan Obuchowski, Secretary
<PAGE> 3

MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA
CHICAGO, IL 60606

PROXY STATEMENT

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Manufactured Home Communities, Inc., a
Maryland corporation ("MHC" or the "Company"), of proxies to be voted at the
Annual Meeting of Stockholders (the "Meeting") to be held on Tuesday, May 11,
1999, and any adjournment or postponement thereof. The Company has retained the
services of Mac Kenzie Partners, Inc. to assist in obtaining proxies from
stockholders for the Meeting. The estimated cost of such service is $5,000 plus
out-of-pocket expenses. In addition to solicitation by mail, employees of the
Company may solicit proxies by telegraph, telephone, telecopy and personal
interviews. Brokers and other nominees who held of record stock of the Company
on March 17, 1999, the record date for determining stockholders entitled to
notice of and to vote at the Meeting, will be asked to contact the beneficial
owners of the shares which they hold.

This Proxy Statement and accompanying proxy are being mailed to
stockholders commencing on or about March 31, 1999. The proxy, if properly
executed and returned, will be voted according to your instructions, but it may
be revoked at any time before it is exercised by giving notice of revocation in
writing to the Secretary of the Company, by voting in person at the Meeting or
by a subsequently dated proxy. The mere presence at the Meeting of a stockholder
who appointed a representative does not itself revoke the appointment.

Only stockholders of record at the close of business on March 17, 1999 (the
"Record Date") will be entitled to vote at the Meeting. On such date 26,580,209
shares of common stock, par value $.01 per share ("Common Stock"), were
outstanding. Each share of Common Stock outstanding on the Record Date entitles
the holder thereof to one vote upon each matter to be voted upon at the Meeting.
The presence in person or by proxy of stockholders entitled to cast a majority
of all the votes entitled to be cast at the Meeting (including shares
represented by proxies that reflect abstentions) shall constitute a quorum.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. An abstention
as to any particular matter when passage requires the vote of a majority of the
votes entitled to be cast at the Meeting, however, does not constitute a vote
"for" or "against" and will be disregarded in calculating the votes cast as to
such matter. With respect to approval of the Articles of Amendment and
Restatement of the Company's Articles of Incorporation, however, which requires
a vote of two-thirds of all shares outstanding, an abstention will have the same
effect as a negative vote. "Broker non-votes" (i.e., where a broker or nominee
submits a proxy specifically indicating the lack of discretionary authority to
vote on a matter) will be treated in the same manner as abstentions. If, there
is not a quorum at the Meeting, the stockholders entitled to vote at the
Meeting, whether present in person or represented by proxy, shall only have the
power to adjourn the Meeting until such time as there is a quorum. At such time
as there is a quorum, the Meeting will reconvene without notice to stockholders,
other than an announcement at the prior adjournment of the Meeting, unless the
adjournment is to a date not more than 120 days after the Record Date.

If a proxy in the form enclosed is duly executed and returned, the shares
of Common Stock represented thereby will be voted in accordance with the
specifications made thereon by the stockholder. If no such specifications are
made, such proxy will be voted (i) FOR election of the three nominees for
directors to terms expiring in 2002; (ii) FOR the approval of the Company's
Articles of Amendment and Restatement of its Articles of Incorporation deleting
Article VI, Section 5 -- Indemnification; and (iii) at the discretion of Samuel
Zell and Howard Walker, the Board's designated

1
<PAGE> 4

representatives for the Meeting, with respect to such other business as may
properly come before the Meeting or any adjournment or postponement thereof.

1998 ANNUAL REPORT

Stockholders are concurrently being furnished with a copy of the Company's
1998 Annual Report, which contains its audited financial statements as of
December 31, 1998. Additional copies of the Annual Report and of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 as filed with
the Securities and Exchange Commission (the "SEC") may be obtained by contacting
Cynthia McHugh, Senior Vice President -- Investor Relations of the Company, at
Two North Riverside Plaza, Suite 800, Chicago, IL 60606, 312-928-1905, and it
will be furnished promptly at no additional expense.

ELECTION OF DIRECTORS
(PROPOSAL 1)

The Board consists of ten members. The charter of the Company provides that
the directors of the Company shall be divided into three classes as nearly equal
in number as possible, with each class having a term of three years. The Board
has nominated David A. Helfand, Michael A. Torres and Samuel Zell for election
to serve as directors of the Company until the 2002 Meeting and until their
successors are duly elected and qualified. Biographical information for each of
the nominees is set forth under the caption "Management." The affirmative vote
of a plurality of all votes cast at the Meeting, if a quorum is present, is
sufficient to elect the three directors. Abstentions and broker non-votes will
have no effect on the outcome of the election of directors.

Each nominee has consented to be named in this proxy statement and to serve
if elected. All nominees are currently directors. In the event that any nominee
should become unable to serve as a director (which is not anticipated), the
persons designated as representatives will cast votes for the remaining nominees
and for such other person or persons as the Board may recommend.

THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.

2
<PAGE> 5

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
executive officers and directors of the Company as of March 17, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Samuel Zell 57 Chairman of the Board of Directors (term expires in 1999)
Howard Walker 59 President, Chief Executive Officer and Director (term
expires in 2000)
Ellen Kelleher 38 Executive Vice President, General Counsel and Assistant
Secretary
Thomas P. Heneghan 35 Executive Vice President, Chief Financial Officer and
Treasurer
Gary W. Powell 58 Executive Vice President -- Operations
Donald S. Chisholm 64 Director (term expires in 2000)
Thomas E. Dobrowski 55 Director (term expires in 2000)
David A. Helfand 34 Director (term expires in 1999)
Louis H. Masotti, Ph.D. 64 Director (term expires in 2001)
John F. Podjasek Jr. 57 Director (term expires in 2000)
Sheli Z. Rosenberg 57 Director (term expires in 2001)
Michael A. Torres 38 Director (term expires in 1999)
Gary L. Waterman 57 Director (term expires in 2001)
</TABLE>

The following is a biographical summary of the experience of the executive
officers and directors of the Company. For information concerning membership on
committees of the Board, see "Committees of the Board of Directors; Meetings"
below.

SAMUEL ZELL has been Chairman of the Board since March 31, 1995 and had
been Chief Executive Officer from March 31, 1995 until August 1996. Mr. Zell had
been Co-Chairman of the Board of the Company from its formation until March 31,
1995. Mr. Zell was a director of Mobile Home Communities, Inc. ("MH Inc."), the
former manager of the Company's manufactured home communities, from 1983 until
its dissolution in 1993. Mr. Zell is chairman of the board of directors of
Equity Group Investments, L.L.C. ("EGI"), an investment company since 1999 and
had been Chairman of the Board of Equity Group Investments, Inc. for more than
five years. Mr. Zell is also Chairman of the Board of American Classic Voyages
Co. ("American Classic"), a provider of overnight cruises in the United States;
Anixter International Inc. ("Anixter"), a distributor of electrical and cable
products; Capital Trust, Inc., a specialized finance company; Chart House
Enterprises, Inc., an owner and operator of restaurants; and Jacor
Communications, Inc. ("Jacor"), an owner and operator of radio stations. Mr.
Zell is chairman of the board of trustees of Equity Office Properties Trust
("Equity Office"), an equity real estate investment trust ("REIT") primarily
focused on office buildings; and Equity Residential Properties Trust ("Equity
Residential"), an equity REIT primarily focused on multifamily residential
properties. He is a director of Davel Communications, Inc., an operator of pay
telephones in the United States; Fred Meyer, Inc., an owner and operator of
grocery stores and discount stores; and Ramco Energy plc, an independent oil
company in the United Kingdom.

HOWARD WALKER has been a director of the Company since November 4, 1997,
President since September 5, 1997 and Chief Executive Officer since December 31,
1997. He has been President of Realty Systems, Inc. since March 30, 1995. Realty
Systems, Inc. is an affiliate of the Company. Mr. Walker is also a member of the
Company's management committee, which was created in 1995 and is comprised of
the Company's senior executives. Mr. Walker had been a Vice President of the
Company from January 16, 1995 until March 30, 1995. From August 1994 until
January 1995, Mr. Walker had been the principal of Walker Realty Co., a
full-service real estate company. From January 1989

3
<PAGE> 6

until July 1994, Mr. Walker had been a principal and partner in The Markin
Group, a full-service real estate company.

ELLEN KELLEHER has been Executive Vice President and General Counsel of the
Company since March 1997. Ms. Kelleher is also a member of the Company's
management committee. She had been Senior Vice President and General Counsel of
the Company from March 1994 until March 1997. Ms. Kelleher had been a vice
president of the law firm, Rosenberg & Liebentritt, P.C., from January 1993
until December 1995. Ms. Kelleher had been an associate of Rosenberg &
Liebentritt, P.C. from October 1990 until January 1993.

THOMAS P. HENEGHAN has been Executive Vice President, Chief Financial
Officer and Treasurer of the Company since March 1997. Mr. Heneghan is also a
member of the Company's management committee. Mr. Heneghan had been Vice
President, Chief Financial Officer and Treasurer from February 1995 until March
1997. Mr. Heneghan had been a member of the accounting firm of Greenberg &
Pociask, Ltd. from January 1994 until February 1995. Mr. Heneghan had been vice
president of Capsure Holdings Corp. ("Capsure") from May 1993 until June 1994
and controller of Capsure from January 1993 until November 1993.

GARY W. POWELL has been Executive Vice President -- Operations of the
Company since May 1995. Mr. Powell is also a member of the Company's management
committee. Mr. Powell had been President -- Northern Division of the Company
from August 1994 until May 1995. Mr. Powell had been President and Chief
Operating Officer of the Company from its formation until August 1994. Mr.
Powell had been with MH Inc. or its predecessors from 1971, serving as president
from 1984 until its dissolution in 1993. Mr. Powell was a director of the
Company from its formation until May 1994.

DONALD S. CHISHOLM has been a director of the Company since March 1993. Mr.
Chisholm is president of Vernon Development Co., the developer of a 650-acre
golf course community, and of Ann Arbor Associates Inc., a real estate
development and management company, both for more than five years.

THOMAS E. DOBROWSKI has been a director of the Company since March 1993.
Mr. Dobrowski is the managing director of real estate and alternative
investments of General Motors Investment Management Corporation ("GMIMCo."). Mr.
Dobrowski is a director of Capital Trust, Inc.; and Red Roof Inns, Inc., an
owner and operator of hotels. He is also a trustee of Equity Office.

DAVID A. HELFAND has been a director of the Company since May 1995;
President of the Company from January 1995 until September 1997; and Chief
Executive Officer of the Company from August 1996 until December 31, 1997. He
had been Chief Financial Officer of the Company from December 1992 until
February 1995 and Senior Vice President from March 1994 until January 1995. Mr.
Helfand had been Vice President of the Company from December 1992 until March
1994. Mr. Helfand had been a managing director of Equity International
Properties, a division of EGI, from December 31, 1997 until July 1998. Since
July 1998, Mr. Helfand has been senior vice president of Equity Office.

LOUIS H. MASOTTI, Ph.D., has been a director of the Company since March
1993. Dr. Masotti is president of Louis H. Masotti, Ltd., a management, real
estate, and urban development consultancy. Dr. Masotti was professor of
management and urban development and director of the program in real estate
management for the Graduate School of Management of the University of California
at Irvine from 1992 until 1998. He is a professor emeritus of Northwestern
University's Kellogg Graduate School of Management.

JOHN F. PODJASEK, JR. has been a director of the Company since May 1994.
Mr. Podjasek has been managing director -- private asset management of
Forstmann -- Leff International, Inc. since July 1997. Mr. Podjasek was retired
from November 1995 until July 1997. Mr. Podjasek had been employed by Allstate
Insurance Company from 1966 until November 1995, most recently serving as vice
president -- venture capital and real estate.

4
<PAGE> 7

SHELI Z. ROSENBERG has been a director of the Company since August 1996.
Mrs. Rosenberg has been chief executive officer and president of EGI since
January 1999. Mrs. Rosenberg had been chief executive officer and president of
Equity Group Investments, Inc. from November 1994 until December 1998. She was a
principal in the law firm of Rosenberg & Liebentritt P.C. from 1980 until
September 1997. Mrs. Rosenberg is a director of CVS Corporation, an owner and
operator of drug stores; Anixter; Capital Trust, Inc.; Illinova Inc. and its
subsidiary Illinois Power Company, a supplier of electricity and natural gas in
Illinois; and Jacor. She is a trustee of Equity Office and Equity Residential.
Mrs. Rosenberg was a vice president of First Capital Benefit Administrators,
Inc., which filed a petition under the federal bankruptcy laws on January 3,
1995, which resulted in its liquidation on November 15, 1995.

MICHAEL A. TORRES has been a director of the Company since March 1993. Mr.
Torres has been president and a principal of Lend Lease Rosen Real Estate
Securities LLC, an investment management firm, since February 1995. Mr. Torres
had been employed by Wilshire Associates Incorporated, an investment consulting
firm, from June 1990 until February 1995, most recently serving as a vice
president directing real estate consulting services for its institutional
investors.

GARY L. WATERMAN has been a director of the Company since March 1993. Since
1989, Mr. Waterman has been president of Waterman Limited, a real estate
services and investment company that he founded.

COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS

Meetings: During the year ended December 31, 1998, the Board held five
meetings. Each of the present directors attended over 75% of the total number of
the meetings of the Board and of its committees which they were eligible to
attend.

Executive Committee: The Executive Committee of the Board is composed of
Messrs. Zell, Walker and Chisholm. The Executive Committee has the authority,
within certain parameters set by the Board, to acquire, dispose of and finance
investments for the Company (including the issuance of additional limited
partnership interests of MHC Operating Limited Partnership ("OP Units")) and
execute contracts and agreements, including those related to the borrowing of
money by the Company, and generally exercise all other powers of the Board
except as prohibited by law. During the year ended December 31, 1998, the
Executive Committee did not hold any meetings, but took various actions pursuant
to resolutions adopted by unanimous written consent.

Compensation Committee: The Compensation Committee of the Board is composed
of Messrs. Chisholm, Masotti and Waterman and Mrs. Rosenberg. The Compensation
Committee determines compensation for the Company's executive officers and it
exercises all powers of the Board in connection with compensation matters,
including incentive compensation and benefit plans. The Compensation Committee
also has the authority to grant stock options, stock appreciation rights and
restricted stock awards in accordance with the Second Amended and Restated 1992
Stock Option and Stock Award Plan to the management of the Company and its
subsidiaries, other employees and consultants. During the year ended December
31, 1998, the Compensation Committee held one meeting and took various actions
pursuant to resolutions adopted by unanimous written consent.

Audit Committee: The Audit Committee of the Board is composed of Messrs.
Dobrowski, Podjasek and Torres. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the Company's independent public
accountants, reviews the independence of the Company's independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls. During the year ended
December 31, 1998, the Audit Committee held two meetings.

5
<PAGE> 8

EXECUTIVE COMPENSATION

The following tables show information with respect to the annual
compensation (including option grants) for services rendered to the Company for
the fiscal years ended December 31, 1998, December 31, 1997 and December 31,
1996 by the chief executive officer and those persons who were, at December 31,
1998, the other most highly compensated executive officers of the Company.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------------
AWARDS
-------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND STOCK AWARDS OPTIONS ALL OTHER
PRINCIPAL OCCUPATION YEAR SALARY ($) BONUS ($) ($)(1) GRANTED(#) COMPENSATION ($)(2)
-------------------- ---- ---------- --------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Howard Walker, ............... 1998 240,000 75,000 1,049,978 10,000 9,600
President, Chief Executive 1997 200,000 75,008 684,086 0 6,500
Officer and Member of 1996 200,000 41,014 744,986 0 9,000
Management Committee
Thomas P. Heneghan,........... 1998 230,000 75,000 928,103 0 9,600
Executive Vice President, 1997 215,000 75,008 622,492 0 9,500
Chief Financial Officer, 1996 200,000 41,014 1,008,986 0 9,000
Treasurer and Member
of Management Committee
Ellen Kelleher, .............. 1998 215,000 75,000 684,353 0 9,600
Executive Vice President, 1997 200,000 75,008 560,898 0 9,500
General Counsel and Member 1996 200,000 41,014 744,986 0 9,000
of Management
Committee
Gary W. Powell, .............. 1998 215,000 75,000 684,353 0 9,600
Executive Vice 1997 200,000 75,008 560,898 0 9,500
President -- Operations 1996 200,000 41,014 744,986 0 9,000
and Member of
Management Committee
</TABLE>

- ---------------
(1) The total number of shares of Restricted Common Stock held by each named
executive officer and the value of such shares at December 31, 1998, the
last trading date of the year, was as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE AT 12/31/98
---------------- -----------------
<S> <C> <C>
Howard Walker.......... 64,249 $1,610,241
Thomas P. Heneghan..... 63,486 1,591,118
Ellen Kelleher......... 48,124 1,206,108
Gary W. Powell......... 48,124 1,206,108
</TABLE>

The total number of shares of Restricted Common Stock which were granted on
November 24, 1998 and vest 60% on December 31, 2001; 20% on December 31,
2002; and 20% on December 31, 2003, if certain performance benchmarks are
achieved are as follows:

<TABLE>
<S> <C>
Howard Walker............................... 40,000
Thomas P. Heneghan.......................... 35,000
Ellen Kelleher.............................. 25,000
Gary W. Powell.............................. 25,000
</TABLE>

6
<PAGE> 9

The number of shares of Restricted Stock Awards awarded in 1998, which will
vest in their entirety on December 11, 2000 are as follows:

<TABLE>
<S> <C>
Howard Walker.............................. 3,076
Thomas P. Heneghan......................... 3,076
Ellen Kelleher............................. 3,076
Gary W. Powell............................. 3,076
</TABLE>

The total number of Restricted Common Stock Units which were granted on
December 30, 1997 and converted to Restricted Stock Awards on a one-for-one
basis on May 12, 1998; vested 50% on June 30, 1998 and 25% on December 31,
1998 and 25% will vest on December 31, 1999; are as follows:

<TABLE>
<S> <C>
Howard Walker.............................. 22,250
Thomas P. Heneghan......................... 20,000
Ellen Kelleher............................. 17,750
Gary W. Powell............................. 17,750
</TABLE>

The number of shares of Restricted Stock Awards awarded in 1997, which will
vest in their entirety on December 16, 1999 are as follows:

<TABLE>
<S> <C>
Howard Walker.............................. 2,810
Thomas P. Heneghan......................... 2,810
Ellen Kelleher............................. 2,810
Gary W. Powell............................. 2,810
</TABLE>

The number of shares of Restricted Stock Awards awarded in 1996 which vested
60% on December 31, 1998, and will vest 20% on December 31, 1999 and 20% on
December 31, 2000 since certain performance benchmarks were achieved are as
follows:

<TABLE>
<S> <C>
Howard Walker.............................. 32,000
Thomas P. Heneghan......................... 44,000
Ellen Kelleher............................. 32,000
Gary W. Powell............................. 32,000
</TABLE>

The number of shares of Restricted Stock Awards awarded in 1996, which
vested in their entirety on December 13, 1998 are as follows:

<TABLE>
<S> <C>
Howard Walker.............................. 1,863
Thomas P. Heneghan......................... 1,863
Ellen Kelleher............................. 1,863
Gary W. Powell............................. 1,863
</TABLE>

All holders of Restricted Stock receive any dividends paid on such shares.

- ---------------
(2) Includes employer matching contributions and/or profit sharing contributions
to the MHC Advantage Retirement Plan or affiliated company's 401(k) plans.

7
<PAGE> 10

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(#)(1) YEAR ($/SH) DATE 5% ($)(2) 10% ($)(3)
---- ------------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard Walker............... 10,000 3.0 26.75 5/12/08 168,229 426,326
Thomas P. Heneghan.......... 0 0 0 -- 0 0
Ellen Kelleher.............. 0 0 0 -- 0 0
Gary W. Powell.............. 0 0 0 -- 0 0
</TABLE>

- ---------------
(1) One-third of the options granted on May 12, 1998, are exercisable six months
after initial grant, one-third are exercisable one year following such grant
date and one-third are exercisable two years following such grant date.
(2) Assumes stock price of $43.57.
(3) Assumes stock price of $69.38.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT
ON VALUE FY-END(#) FY-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Howard Walker................................... 0 0 18,333/6,667 139,688/0
Thomas P. Heneghan.............................. 0 0 33,000/0 265,313/0
Ellen Kelleher.................................. 0 0 21,000/0 99,188/0
Gary W. Powell.................................. 14,000 192,500 50,000/0 444,375/0
</TABLE>

- ---------------
(1) Assumes a value equal to the year-end stock price of $25.0625 less the
exercise price of in-the-money options.

COMPENSATION OF DIRECTORS

The Company paid each of its non-employee directors an annual fee of
$30,000 in 1998. In addition, directors who serve on the Audit Committee,
Executive Committee or Compensation Committee receive an additional $1,000 per
annum for each committee on which they serve. Committee chairs receive an
additional $500 per annum. Directors who are employees of the Company are not
paid any directors' fees or committee fees. The Company reimburses the directors
for travel expenses incurred in connection with their activities on behalf of
the Company. Additionally, on the date of the first Board of Directors' meeting
after each Annual Meeting of Stockholders, each director then in office will
receive an annual grant of options to purchase 10,000 shares of Common Stock at
the then-current market price.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee members for 1998 were Messrs. Chisholm, Masotti
and Waterman and Mrs. Rosenberg.

No Compensation Committee interlocking relationships existed in 1998.

8
<PAGE> 11

Mr. Zell and Mrs. Rosenberg serve as members of the board of directors of
numerous non-public companies owned or controlled in whole or in part by Mr.
Zell or his affiliates which do not have compensation committees, and in many
cases, the executive officers of those companies include Mr. Zell and Mrs.
Rosenberg.

For a description of certain transactions with Board members or their
affiliates, see "Certain Relationships and Related Transactions."

Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the Compensation Committee Report on
Executive Compensation presented below and the Performance Graph following such
report shall not be incorporated by reference into any such filings.

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board determines the compensation of the
Company's executive officers, including those named in the Summary Compensation
Table. The Compensation Committee believes that the compensation of the
Company's Chief Executive Officer and all of the Company's executive officers
should be both competitive and based on individual and Company performance.

The Company's compensation policy takes into account a review of local and
national peer group salary surveys focusing primarily on the SNL Executive
Compensation Review 1998 for REITs ("SNL Survey"). The SNL Survey contains
detailed compensation and performance data on publicly traded REITs. The
Committee believes the SNL Survey provides comparable salary data for the
Company. The Committee believes that its compensation levels compare favorably
to its peer groups described in the surveys and targets median to high
compensation levels for its executive officers. This is not the same peer group
that is used in the Performance Graph on page 12.

During the fiscal year ended December 31, 1998, there were three major
components of executive compensation: base salary, bonuses, and restricted
stock. This salary structure is designed to attract and retain highly qualified
executives. This is accomplished by providing competitive base salaries and
meaningful incentives, including short-term, mid-term and long-term incentives,
intended to reward performance. Benchmarks for determining base salary and bonus
levels include targeted funds from operations ("FFO") levels, strength of the
balance sheet, and creation of stockholder value. Each performance measure
carries equal weight.

The Company's overall salary structure is reviewed annually by the
Compensation Committee using the SNL Survey for guidance. Where salary
information is unavailable for a particular position, other positions having
similar responsibilities either within the Company or in companies of comparable
size are used. Salary increases are based both upon each executive's, including
the Chief Executive Officer's, performance and contribution to the Company's
performance.

Further short-term and mid-term incentives for executive officers are
accomplished through the Company's management-by-objective ("MBO") bonus plan.
The MBO bonus plan involves the Company and the executive officer setting goals
for such executive officer at the beginning of each year. The Compensation
Committee established the following bonus ranges for its executive officers
based on salary for 1998:

<TABLE>
<S> <C>
President and Chief Executive Officer 0 -- 75%
Executive Vice Presidents 0 -- 50%
Senior Vice Presidents 0 -- 35%
Vice Presidents 0 -- 20%
</TABLE>

9
<PAGE> 12

In determining the amount of the bonuses for 1998, the following criteria
were taken into account: achieving targeted FFO levels; identifying and
consummating acquisitions; and the strength of the balance sheet. In 1998, the
Company exceeded targeted FFO levels through reduction of expenses, and
increases in revenue achieved through increases in rental rates and increases in
occupancy at the Company's communities. In addition, during 1998 the Company
successfully integrated approximately 21,100 sites into its portfolio. While
achieving this growth, the Company maintained its balance sheet at an
appropriate debt-to-equity level.

It is the Compensation Committee's intention to tie executive officers',
including the Chief Executive Officer's, compensation to the continued
performance of the Company. The Company accomplishes this by awarding each
executive officer 50% of his MBO bonus in restricted Common Stock. Requiring
executive officers to "invest" 50% of their bonuses in Common Stock facilitates
better alignment of such executive officer's compensation with the Common
Stock's performance. These restricted stock awards accomplish the Company's
objective of mid-term incentives.

To provide long-term incentives for executive officers and as a means to
retain qualified executives, the Company created two performance based
Restricted Stock Award Programs ("Programs"), one based on targeted increases in
FFO per share from an identified base year and another based on the creation of
stockholder value. Under these Programs, in 1996, the Company implemented a
five-year incentive program by issuing Restricted Stock Awards tied to achieving
targeted levels of FFO per share through the year 2000 (the "1996 Program").
Based on the Company's performance through 1998, the targeted level of FFO per
share has already been exceeded, as a result the executives have earned
Restricted Stock issued in the 1996 Program, subject to vesting. As of December
31, 1998, the vesting on 60% of these Restricted Stock Awards had lapsed. In
1997, a five-year incentive program tied to increases in stockholder value was
implemented (the "1997 Program"). Under the 1997 Program, based on dividends
paid and the increase in the Company's Common Stock price during 1997, the
executives earned an award of Restricted Stock, subject to vesting. As of
December 31, 1998, the vesting on 75% of these Restricted Stock Awards had
lapsed. As a result of the Company's Common Stock price decline during 1998, no
Restricted Stock Awards were granted to executive officers under the 1997
Program.

Since the targeted levels of FFO per share under the 1996 Program have been
exceeded, the Company implemented a new five-year incentive program in 1998 tied
to achieving targeted levels of FFO per share through the year 2003 (the "1998
Program"). On November 24, 1998, Restricted Stock Awards were granted to
executive officers and other senior management. The restricted stock will vest
over a five-year period, with lapsing of restrictions tied to achieving targeted
levels of FFO per share.

The vesting of Restricted Stock Awards under the 1996, 1997 and 1998
Programs is subject to acceleration in the case of death, disability, and
involuntary termination not for cause or change of control. The Compensation
Committee recognizes the while the MBO bonus program provides for positive
short-term and mid-term performance, the interests of stockholders are best
served by giving key employees the opportunity to participate in the
appreciation of the Company's Common Stock.

At the end of 1998, the Compensation Committee granted options to purchase
Common Stock to many of the Company's employees. The executive officers of the
Company were not granted options. Mr. Walker was granted an option to purchase
10,000 shares in his capacity as a director as were all other directors of the
Company on May 12, 1998.

The Compensation Committee believes that the compensation program properly
rewards its executive officers for achieving improvements in the Company's
performance and serving the interest of its stockholders.

Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code"),
generally disallows a Federal income tax deduction for compensation in excess of
$1 million paid in any year to any of the Company's executive officers listed in
the Summary Compensation Table who are employed by the Company on the last day
of a taxable year. Section 162(m), however, does allow a deduction for

10
<PAGE> 13

payments of "performance based" compensation, which includes most stock options
and other incentive arrangements, the material terms of which have been approved
by stockholders. Stock awards under the Company's Amended and Restated 1992
Stock Option and Stock Award Plan may, but need not, satisfy the requirements of
Section 162(m). The Company believes that because it qualifies as a REIT under
the Code and therefore is not subject to Federal income taxes, the payment of
compensation that does not satisfy the requirements of Section 162(m) will not
affect the Company's taxable income, although to the extent that compensation
does not qualify for deduction under Section 162(m), a larger portion of
stockholder distributions may be subject to Federal income taxation as dividend
income rather that return of capital. The Company does not believe that Section
162(m) will materially affect the taxability of stockholders' distributions,
although no assurance can be given in this regard due to the variety of factors
that affect the tax position of individual stockholders. For the above reasons,
the Company may or may not structure compensation arrangements to satisfy the
requirements for performance based compensation under Section 162(m).

Respectfully submitted,
Donald S. Chisholm
Louis H. Masotti
Sheli Z. Rosenberg
Gary L. Waterman

11
<PAGE> 14

PERFORMANCE GRAPH

The following performance graph compares total stockholders' return on the
Common Stock since February 24, 1993, the date of commencement of the Company's
initial public offering ("IPO") with the Standard and Poors ("S&P") 500 Stock
Index and the index of equity REITs prepared by the National Association of Real
Estate Investment Trusts ("NAREIT"). The Common Stock price performance graph
assumes an investment of $100 in the Common Stock on December 31, 1993 and an
investment of $100 in the two indexes on December 31, 1993 and further assumes
the reinvestment of all dividends. The graph also shows the amount that would
have needed to be invested on the IPO date in the Company and the two indexes to
achieve a $100 investment as of December 31, 1993. The Company believes its
performance since the IPO is a relevant performance indicator for its
stockholders. Equity REITs are defined as those REITs which derive more than 75%
of their income from equity investments in real estate assets. The NAREIT equity
index includes all tax qualified REITs listed on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ Stock Market. Common Stock price
performance presented for the period from February 24, 1993 through December 31,
1998 is not necessarily indicative of future results.
Performance Graph

<TABLE>
<CAPTION>
Feb. 1993 Dec. 1993 Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997 Dec. 1998 CAGR (1)
--------- --------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MHC (%) 74.04 -2.29 -5.41 41.44 22.57 -1.70 18.84
MHC ($) $57.46 $100.00 $97.71 $92.43 $130.73 $160.23 $157.50
S&P 500 Stock Index(%) 9.17 1.32 37.58 22.96 33.36 28.58 22.09
S&P 500 Stock Index($) $91.60 $100.00 $101.32 $139.40 $171.40 $228.59 $293.91
NAREIT Index (%) 6.70 3.17 15.27 35.27 20.26 -17.50 9.54
NAREIT Index ($) $93.72 $100.00 $103.17 $118.92 $160.87 $193.46 $159.60
</TABLE>

(1) CAGR is the Compounded Annual Growth Rate for the Company's Common Stock
from the IPO through December 31, 1998.

12
<PAGE> 15

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information as of March 17, 1999 (except as
noted), with respect to each person who is known by the management of the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND BUSINESS ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------------- -------------------- ----------
<S> <C> <C>
Samuel Zell and entities controlled by Samuel Zell.......... 3,042,019 10.6%
and Ann Lurie and entities
controlled by Ann Lurie(2)(3)
Two North Riverside Plaza
Chicago, Illinois 60606
General Motors Hourly-Rate Employes......................... 2,271,198 8.5%
Pension Trust and
General Motors Salaried
Employes Pension Trust (4)
c/o General Motors Investment
Management Corporation
767 Fifth Avenue
New York, New York 10153
Goldman Sachs & Co. and..................................... 1,578,408 5.9%
The Goldman Sachs Group, L.P.(5)
85 Broad Street
New York, NY 10004
FMR Corp(6)................................................. 1,326,900 5.0%
82 Devonshire Street
Boston, MA 02109
</TABLE>

- ---------------
(1) The amounts of Common Stock beneficially owned is reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of March 17, 1999 to acquire Common Stock
held by the person are exercised and that no options to acquire Common Stock
held by other persons are exercised.

13
<PAGE> 16

(2) Includes Common Stock, OP Units which are exchangeable for Common Stock, and
options to purchase Common Stock which are currently exercisable or
exercisable within 60 days owned as follows:

<TABLE>
<CAPTION>
COMMON STOCK OP UNITS OPTIONS
------------ -------- -------
<S> <C> <C> <C>
ENTITIES CONTROLLED BY SAMUEL ZELL:
Samuel Zell......................................... 3,540 -- 173,332
Samuel Zell Revocable Trust......................... 10,551 -- --
Samstock/SZRT, L.L.C................................ 294,133 13,641 --
Samstock/ZGPI, L.L.C................................ 6,003 -- --
Samstock, L.L.C..................................... 346,000 601,665 --
Samstock/ZFT, L.L.C................................. -- 187,278 --
Donald S. Chisholm Trust............................ 7,000 -- --
ENTITIES CONTROLLED BY ANN LURIE:
Anda Partnership.................................... -- 233,694 --
LFT Partnership..................................... -- 5,436 --
ENTITIES CONTROLLED BY SAMUEL ZELL & ANN LURIE:
EGI Holdings, Inc................................... -- 579,873 --
EGIL Investments, Inc............................... -- 579,873 --
------- --------- -------
TOTALS:............................................. 667,227 2,201,460 173,332
======= ========= =======
</TABLE>

Mr. Zell disclaims beneficial ownership of 7,000 shares of Common Stock and
819,003 OP Units. Mrs. Lurie disclaims beneficial ownership of 667,227
shares of Common Stock, 1,382,457 OP Units and options to purchase 173,332
shares of Common Stock.

(3) Includes 1,962,330 OP Units (exchangeable into 1,962,330 shares of Common
Stock) and 646,136 shares of Common Stock which are pledged as collateral
for loans to five financial institutions. Under the loan agreements, the
institutions cannot vote (assuming exchange of the OP Units for Common
Stock) or exercise ownership rights relating to the pledged OP Units or
Common Stock unless there is an event of default.

(4) The shares reported herein are held of record by Mellon Bank, N.A. acting as
the trustee (the "Trustee") for the General Motors Hourly-Rate Employes
Pension Plan and the General Motors Salaried Employes Pension Plan
(collectively, the "GM Trusts"). The GM Trusts are trusts under and for the
benefit of certain employee benefit plans of General Motors Corporation
("GM") and its subsidiaries. These shares may be deemed to be owned
beneficially by GMIMCo, a wholly owned subsidiary of GM. GMIMCo's principal
business is providing investment advice and investment management services
with respect to the assets of certain employee benefit plans of GM and its
subsidiaries and associated entities. GMIMCo is serving as the GM Trusts'
investment manager with respect to these shares and in that capacity it has
the sole power to direct the Trustee as to the voting and disposition of
these shares. Because of the Trustee's limited role, beneficial ownership of
the shares by the Trustee is disclaimed.

(5) Pursuant to a Schedule 13G filed with the SEC for calendar 1998, the Goldman
Sachs Group, L.P. ("GS Group") and Goldman Sachs & Co. ("Goldman Sachs")
each disclaim beneficial ownership of the Common Stock beneficially owned by
(i) managed accounts and (ii) certain investment limited partnerships, of
which a subsidiary of GS Group or Goldman Sachs is the general partner or
managing general partner, to the extent partnership interests in such
partnerships are held by persons other than GS Group, Goldman Sachs or their
affiliates.

(6) Pursuant to a Schedule 13G filed with the SEC for calendar 1998, Fidelity
Management & Research Company ("Fidelity"), a wholly owned subsidiary of FMR
Corp. and an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940 ("Investment Act"),

14
<PAGE> 17

is the beneficial owner of 1,326,900 shares of Common Stock as a result of
acting as investment advisor to various investment companies under the
Investment Act.

Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 200 shares of Common Stock as a result of
its serving as investment manager of institutional account(s).

15
<PAGE> 18

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of March 17, 1999, certain information
with respect to the Common Stock that may be deemed to be beneficially owned by
each director of MHC, by the four executive officers named in the Summary
Compensation Table and by all directors and executive officers as a group:

<TABLE>
<CAPTION>
SHARES OF SHARES UPON PERCENT
COMMON EXERCISE OF OF
NAME OF BENEFICIAL HOLDER STOCK(1) OPTIONS(2) TOTAL(1) CLASS
------------------------- --------- ----------- -------- -------
<S> <C> <C> <C> <C>
Donald S. Chisholm.............................. 26,607(3) 46,666 73,273 *
Thomas E. Dobrowski............................. 0 56,666 56,666 *
David A. Helfand................................ 138,107 138,666 276,773 1.0%
Thomas P. Heneghan.............................. 168,676 33,000 201,676 *
Ellen Kelleher.................................. 146,764 21,000 167,764 *
Louis H. Masotti................................ 1,870 30,000 31,870 *
John F. Podjasek, Jr............................ 4,487 46,666 51,153 *
Gary W. Powell.................................. 286,307 50,000 336,307 1.3%
Sheli Z. Rosenberg.............................. 64,297(4) 60,665 124,962 *
Michael A. Torres............................... 4,178 51,666 55,844 *
Howard Walker................................... 158,311 21,666 179,977 *
Gary L. Waterman................................ 3,487 56,666 60,153 *
Samuel Zell..................................... 2,629,557(3)(5) 173,332 2,802,889 9.8%
All directors and executive officers as a group
(14 persons) including the above-named
persons....................................... 3,625,984 792,658 4,418,642 15.1%
</TABLE>

- ---------------
* Less than 1%

(1) The amounts of Common Stock beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial ownership
of securities. The percentage of Common Stock beneficially owned by a person
assumes that all OP Units held by the person are exchanged for Common Stock,
that none of the OP Units held by other persons are so exchanged, that all
options exercisable within 60 days of March 17, 1999 to acquire Common Stock
held by the person are exercised and that no options to acquire Common Stock
held by other persons are exercised.

(2) The amounts shown in this column reflect shares of Common Stock subject to
options granted under the Company's Second Amended and Restated 1992 Stock
Option and Stock Award Plan which are currently exercisable or exercisable
within 60 days of the date of this table.

(3) Includes 7,000 shares owned by the Donald S. Chisholm Trust, Samuel Zell,
Trustee. Under the regulations of the SEC, Mr. Zell may be deemed to be the
beneficial owner of all the shares which are beneficially owned by the
Donald S. Chisholm Trust. Mr. Zell disclaims beneficial ownership of the
shares owned by the Donald S. Chisholm Trust.

(4) Includes 11,530 OP Units beneficially owned by Mrs. Rosenberg which are
exchangeable into 11,530 shares of Common Stock.

(5) Includes 1,962,330 OP Units which are exchangeable into 1,962,330 shares of
Common Stock and 646,136 shares of Common Stock beneficially owned by
entities in which Mr. Zell has a pecuniary interest or which he may be
deemed to control. See "Security Ownership of Certain Beneficial Owners."
Mr. Zell disclaims beneficial ownership of 579,873 OP Units owned which are
exchangeable into 579,873 shares of Common Stock.

16
<PAGE> 19

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company occupies office space owned by an affiliate of EGI, an entity
controlled by Mr. Zell, at Two North Riverside Plaza, Chicago, Illinois 60606.
In addition, pursuant to an administrative services agreement, EGI or certain of
its affiliates provides the Company and its subsidiaries with office space and
certain administrative, office facility and other services with respect to
certain aspects of the Company's business, including, but not limited to,
administrative support, real estate tax evaluation services, and marketing
consulting and research services and other services. Amounts incurred for these
services amounted to approximately $104,000 for the year ended December 31,
1998. Amounts due to these affiliates at December 31, 1998 were $7,000. Other
affiliates of Mr. Zell provided legal services, insurance brokerage services
(excluding reimbursements for insurance premiums paid to third parties), and
office space to the Company. Amounts incurred for these services amounted to
approximately $850,000 for the year ended December 31, 1998. Amounts due to
these affiliates at December 31, 1998 were $35,000.

The independent members of the Board annually review and approve the rates
charged by EGI and its affiliates for services rendered to the Company and its
subsidiaries. Additionally, the budget for such services are submitted, reviewed
and approved by the Audit Committee of the Company.

The executive officers listed below are indebted to the Company as a result
of purchasing stock from the Company. The loans accrue interest, payable
quarterly in arrears at the applicable federal rate, as defined in the Code in
effect at the time the loans were made. The loans are recourse to the respective
individuals; are collateralized by a pledge of the shares of Common Stock
purchased; and are due and payable of the first to occur of the employee leaving
the Company or March 3, 2003 for the loans bearing interest at 6.77% and January
2, 2005 for the loans bearing interest at 5.91%. All dividends paid on pledged
shares in excess of the then marginal tax rate are used to pay interest and
principal on the loans.

<TABLE>
<CAPTION>
LARGEST AGGREGATE BALANCE AS OF
NAME AMOUNT OWED IN 1998 DECEMBER 31, 1998 INTEREST RATE
---- ------------------- ----------------- -------------
<S> <C> <C> <C>
Howard Walker................................ $896,963 $896,963 5.91%
Thomas P. Heneghan........................... 862,604 838,101 5.91%
Ellen Kelleher............................... 869,856 863,561 5.91%
Gary W. Powell............................... 890,543 805,453 6.77%
Gary W. Powell............................... 883,801 881,691 5.91%
</TABLE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of its Common Stock,
to file reports of ownership and changes of ownership with the SEC and the New
York Stock Exchange. Officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on the Company's review of the copies of those forms received
by the Company, or written representations from directors and officers that no
Forms 5 were required to be filed, that for 1998: Gary W. Powell and Louis H.
Masotti each filed one Form 4 late which reported one transaction.

17
<PAGE> 20

PROPOSAL TO AMEND AND RESTATE THE COMPANY'S ARTICLES OF INCORPORATION TO DELETE
A PROVISION RELATING TO INDEMNIFICATION OF OFFICERS AND DIRECTORS (PROPOSAL 2)

On March 18, 1999 the Board of Directors adopted a resolution to amend and
restate the Company's Articles of Amendment and Restatement of its Articles of
Incorporation (the "Articles") by deleting Article VI, Section 5 relating to
indemnification of officers and directors. Presently, both the Company's
Articles and Bylaws contain provisions respecting the indemnification of
officers, directors, employees and agents of the Company. The Board proposes to
delete the indemnification provisions in its Articles and to rely solely on
indemnification provisions in the Company's Bylaws.

In recent years there has been an increase in the amount of litigation
seeking to impose liability on directors and officers of publicly-held
corporations. The costs of defending or settling these actions, whether or not
they are well founded, may be substantial. Although the Company has not
experienced difficulty in attracting and retaining well qualified directors and
officers in the past, the Board of Directors believes that the continued success
of the Company in attracting and retaining qualified directors, officers and
employees, is dependent, at least in part, on the Company's ability to be
competitive with other corporations which have adopted arrangements providing
directors, officers and employees with the maximum possible protection from
personal financial risks.

The Company's Articles grant the Company the "power . . . to obligate
itself" to indemnify officers and directors "to the maximum extent permitted by
Maryland law" (a copy of Article VI, Section 5 is attached as Exhibit A). Under
the Articles, indemnification is extended to present and former officers and
directors and any individual who, while a director of the Company and at the
request of the Company, serves or has served another corporation, partnership or
other enterprise as a director, officer, partner or trustee. While the Board
believes that under its current governance documents the Company's officers and
directors are entitled to indemnification and reimbursement of litigation
expenses to the fullest permissible extent, the Articles do not set forth
procedures for advancement of expenses incurred in defending or settling an
action.

The Company's Bylaws extend indemnification as a matter of right "to the
fullest extent authorized" by Maryland law to present and former officers and
directors and any individual who, at the request of the Company, serves or has
served another corporation, partnership or other enterprise as a director,
officer, partner, trustee, employee or agent. The Bylaws provide procedures for
an indemnified party to receive an advancement of permissible expenses,
including the right to bring suit to enforce such party's right to
indemnification and reimbursement of expenses. Under the Articles and Bylaws,
the Company may, with the approval of the Board of Directors, indemnify an
employee or agent of the Company. (A copy of Article XII of the
Bylaws -- Indemnification -- is attached as Exhibit B.)

The Board of Directors believes that amending and restating the Articles to
delete the indemnification provision will serve two purposes. First, it will
eliminate any inconsistency between the Company's Articles and the Bylaws.
Second, the Maryland legislature may in the future make amendments to the law
respecting indemnification. The realignment of the Company's governance
documents, by eliminating Article VI, Section 5 from the Articles and providing
for indemnification solely in the Bylaws, will provide the Company with greater
flexibility to adapt its provision relating to indemnification to any changes in
state law.

The Board of Directors acknowledges that current and future directors and
officers could benefit from the approval of the proposed amendment and
restatement of the Articles and, in this connection, the directors may be
considered to have a conflict of interest.

The affirmative vote of two-thirds of the votes entitled to be cast on the
proposed amendment and restatement of the Articles is required for its approval.
As of the date of this Proxy Statement, all of the directors of the Company have
expressed the intent to vote their shares (representing approximately 6.2% of
the votes entitled to be cast) in favor of the proposed amendment.

18
<PAGE> 21

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" PROPOSAL 2 UNLESS INSTRUCTIONS TO
ABSTAIN OR TO VOTE AGAINST ARE GIVEN.

AUDITORS

Ernst & Young LLP served as the Company's auditors for the year ended
December 31, 1998. The Audit Committee intends to make a future recommendation
to the Board concerning the selection of the Company's auditors for the current
fiscal year which began January 1, 1999. There have been no disagreements
between the Company and its auditors relating to accounting procedures,
financial statement disclosures, or related items. Representatives of Ernst &
Young LLP are expected to be available at the Meeting and will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.

STOCKHOLDER PROPOSALS

Under regulations adopted by the SEC, stockholder proposals intended to be
presented at the 2000 Annual Meeting of Stockholders must be received by the
Secretary of the Company no later than December 2, 1999, in order to be
considered for inclusion in the Company's proxy statement and on the proxy card
that will be solicited by the Board in connection with the 2000 Meeting.

In addition, the Bylaws of the Company provide that in order for a
stockholder to nominate a candidate for election as a director at a Meeting or
propose business for consideration at such Meeting, notice must generally be
given to the Secretary of the Company no more than 90 days nor less than 60 days
prior to the first anniversary of the preceding year's Meeting. The fact that
the Company may not insist upon compliance with these requirements should not be
construed as a waiver by the Company of its right to do so at any time in the
future. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.

OTHER MATTERS

The Board is not aware of any business which will be presented at the
Meeting other than those matters set forth in the accompanying Notice of Annual
Meeting of Stockholders. If any other matters are properly presented at the
Meeting for action, it is intended that the persons named in the accompanying
Proxy and acting thereunder will vote in accordance with their best judgment on
such matters.

By Order of the Board of Directors
SUSAN OBUCHOWSKI
Susan Obuchowski
Secretary

March 31, 1999
Chicago, Illinois

19
<PAGE> 22

EXHIBIT A

EXCERPT FROM COMPANY'S ARTICLES OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION
(PROPOSED TO BE DELETED)

ARTICLE VI, SECTION 5. INDEMNIFICATION. The Corporation shall have the
power, to the maximum extent permitted by Maryland law in effect from time to
time, to obligate itself to indemnify, and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to, (i) any individual
who is a present or former director or officer of the Corporation or (ii) any
individual who, while a director of the Corporation and at the request of the
Corporation, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise. The Corporation shall have the
power, with the approval of its Board of Directors, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (i) or (ii) above and
to any employee or agent of the Corporation or a predecessor of the Corporation.

A-1
<PAGE> 23

EXHIBIT B

EXCERPT FROM COMPANY'S BYLAWS

ARTICLE XII
INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 1. Right to Indemnification. (a) Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter, a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter, an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, partner, trustee, employee or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the General
Corporation Law of the State of Maryland, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all liability, loss and reasonable expenses
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) actually incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, partner, trustee, employee
or agent and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 3 of this
Article with respect to proceedings to enforce rights to indemnification, the
Corporation shall be required to indemnify a person in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation.

(b) The Corporation's obligation, if any, to indemnify any person who was
or is serving at its request as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, enterprise
or nonprofit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or nonprofit entity.

Section 2. Right to Advancement of Expenses. The right to indemnification
conferred in Section 1 of this Article shall include the right to be paid by the
Corporation the reasonable expenses (including attorneys' fees (which may be of
counsel selected by the indemnitee)) incurred by the indemnitee in connection
with any proceeding for which such right to indemnification is applicable in
advance of its final disposition, without requiring a preliminary determination
of the ultimate entitlement to indemnification; provided, however, that the
Corporation shall have first received a written affirmation by such indemnitee
of the indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Corporation as authorized by the General Corporation Law
of the State of Maryland has been met, and a written undertaking by or on behalf
of such indemnitee to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee did not meet the applicable standard of conduct.

Section 3. Right of Indemnitee to Bring Suit. The rights to
indemnification and to the advancement of expenses conferred in Sections 1 and 2
of this Article shall be contract rights. If a claim under Sections 1 and 2 of
this Article is not paid in full by the Corporation within sixty days after a
written claim therefor has been received by the Corporation, except in case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of

B-1
<PAGE> 24

expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense of the Corporation that, and (ii)
any suit by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the General Corporation Law
of the State of Maryland. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such suit that indemnification of
the indemnitee is proper under the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Maryland, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Section or
otherwise, shall be on the Corporation.

Section 4. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Corporation's Articles of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.

Section 5. Insurance. The Corporation may maintain insurance (including
self-insurance), at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the General Corporation Law of the
State of Maryland.

Section 6. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article with respect to indemnification and advancement of
expenses of directors and officers of the Corporation.

Section 7. Repeals and Modifications. Any repeal or modification of the
foregoing provisions of this Article shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.

B-2
<PAGE> 25

MANUFACTURED HOME COMMUNITIES, INC.
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Manufactured Home Communities, Inc., a
Maryland corporation (the "Company"), hereby appoints SAMUEL ZELL and HOWARD
WALKER, or either of them, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders of the Company to be held on Tuesday,
May 11, 1999, at 10:00 a.m., Chicago time, and any adjournment or postponement
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at
the meeting with all powers possessed by the undersigned if personally present
at the meeting. The undersigned hereby acknowledges receipt of the Notice of the
Annual Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.

The votes entitled to be cast by the undersigned will be cast as instructed
on the reverse side. If this proxy is executed but no instruction is given, the
votes entitled to be cast by the undersigned will be cast "for" each of the
nominees for director and "for" each of the other proposals as described in the
Proxy Statement and in the discretion of the proxy holder on any other matter
that may properly come before the meeting or any adjournment or postponement
thereof.

_________________________________________________________________________
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE

(Continued and to be signed on other side)

FOLD AND DETACH HERE

<PAGE> 26

PLEASE MARK YOUR
VOTES AS INDICATED [X]
IN THIS EXAMPLE.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND PROPOSAL 2.

1. ELECTION OF DIRECTORS

FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary) [ ] listed to the right [ ]

Nominees: David A. Helfand, Michael A. Torres and Samuel Zell.

WITHHELD FOR (Write name of nominee(s) in space provided below).

_________________________________________________________________________

2. APPROVAL OF THE COMPANY'S Articles of Amendment and Restatement
removing Article VI, Section 5. Indemnification.

FOR [ ] AGAINST [ ] ABSTAIN [ ]

And on any other matter which may properly come before the meeting or any
adjournment or postponement thereof in the discretion of the Proxy holder.

I PLAN TO ATTEND MEETING [ ]

COMMENTS/ADDRESS CHANGE
PLEASE MARK THIS BOX IF YOU HAVE
ANY WRITTEN COMMENTS/ADDRESS
CHANGE ON THE REVERSE SIDE. [ ]

SIGNATURE _______________SIGNATURE____________________DATE___________________

Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee, guardian or officer,
please give full title under signature.

FOLD AND DETACH HERE