As filed with the Securities and Exchange Commission on January 24, 1997
Registration No. 333-18807
- - -----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1 to
FORM S-4/A-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHATEAU PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 6515 38-3132038
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Employer
incorporation or Classification Identification
organization) Code Number) Number)
19500 HALL ROAD
CLINTON TOWNSHIP, MI 48038
(810) 286-3600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
C.G. KELLOGG
PRESIDENT
19500 HALL ROAD
CLINTON TOWNSHIP, MI 48038
(810) 286-3600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
HENRY J. BRENNAN, III, ESQ. JAY L. BERNSTEIN, ESQ.
CHARLES W. ROYER, ESQ. DAVID A. SAKOWITZ, ESQ.
TIMMIS & INMAN L.L.P. ROGERS & WELLS
300 TALON CENTRE 200 PARK AVENUE
DETROIT, MI 48207 NEW YORK, NY 10166
(313) 396-4200 (212) 878-8000
---------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES
EFFECTIVE AND THE SATISFACTION OR WAIVER OF ALL OTHER CONDITIONS TO THE
EXCHANGE DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED HEREIN.
---------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
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.
<PAGE>
CHATEAU PROPERTIES, INC.
19500 Hall Road
Clinton Township, Michigan 48038
January 31, 1997
To the Stockholders of Chateau Properties, Inc.:
In July of 1996, Chateau Properties, Inc. ("Chateau") announced its
intention to complete a strategic business combination with ROC Communities,
Inc. ("ROC") in order to create the largest owner of manufactured housing
communities in the United States.
Accordingly, you are cordially invited to attend a special meeting
of stockholders of Chateau which will be held at the Crowne Plaza
Pontchartrain Hotel, Two Washington Boulevard, Detroit, Michigan, on February
11, 1997, at 9:00 a.m., Eastern Standard Time (the "Chateau Special
Meeting"). At the Chateau Special Meeting, we will seek your approval of a
proposal (the "Chateau Merger Proposal") calling for the issuance of
13,109,941 shares of Common Stock of Chateau (the "Merger Consideration") in
connection with an Amended and Restated Agreement and Plan of Merger, dated
as of September 17, 1996, as amended by the Amendment thereto dated as of
December 20, 1996 (collectively, the "Merger Agreement"), among ROC, Chateau
and R Acquisition Sub, Inc., a Maryland corporation and a direct subsidiary
of Chateau ("RSub"), and we will also seek your approval of a proposal (the
"Chateau Share Issuance Proposal" and, together with the Chateau Merger
Proposal, the "Chateau-ROC Proposals") to issue and sell an aggregate of
978,073 shares of Common Stock of Chateau to holders of limited partnership
units ("OP Units") in CP Limited Partnership, a Maryland limited partnership
of which Chateau is the general partner, who have agreed to exchange their OP
Units for shares of Common Stock of Chateau, which issuance and sale will be
at an average price per share, payable in cash, of not less than the greater
of the average price paid by Chateau in connection with the Chateau Share
Repurchase Program (as defined in the Joint Proxy Statement/Prospectus and
Supplement) or the average of the closing prices on the New York Stock
Exchange of the shares of Common Stock of Chateau on the two trading days
immediately preceding the date of issuance as determined in good faith by the
Chateau Board of Directors. Pursuant to the Merger Agreement, RSub will merge
with ROC, with ROC surviving such merger (the "Merger"), and the stockholders
of ROC will become stockholders of Chateau. Chateau will make a distribution
equal to .068 shares of Chateau Common Stock for each share of Chateau Common
Stock outstanding, payable as soon as practicable after the effectiveness of
the Merger to stockholders (other than to exchanging OP Unitholders, with
respect to the shares acquired pursuant to the OP Unit Exchange) of record on
January 30, 1997, contingent on the effectiveness of the Merger.
The Board of Directors of Chateau (the "Chateau Board") has
carefully considered the terms and conditions of the proposed Merger and has
concluded that the Chateau Merger Proposal is advisable, fair to, and in the
best interests of Chateau and its stockholders. The Chateau Board has
obtained opinions from its independent financial advisors, Merrill Lynch &
Co. and Goldman Sachs & Co., to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
consideration to be issued in connection with the Merger is fair from a
financial point of view to Chateau and its stockholders. Accordingly, the
Chateau Board of Directors unanimously recommends that you vote FOR the
Chateau Merger Proposal.
As a part of the Merger, the Chateau Board has carefully considered
the terms and conditions of the proposed Share Issuance Proposal and has
concluded that the Chateau Share Issuance Proposal is advisable, fair to, and
in the best interests of Chateau and its stockholders. Accordingly, the
Chateau Board of Directors unanimously recommends that you vote FOR the
Chateau Share Issuance Proposal.
<PAGE>
In the event there are not sufficient votes to approve the
Chateau-ROC Proposals at the Chateau Special Meeting, and the Chateau Special
Meeting is not adjourned in order to permit further solicitation of proxies,
the Chateau Proposals cannot be approved at the Chateau Special Meeting. In
order to allow proxies that have been received by Chateau at the time of the
Chateau Special Meeting to be voted for such adjournment, if necessary,
Chateau has submitted the question of adjournment (the "Adjournment
Proposal") under such circumstances, and only under such circumstances, to
its stockholders as a separate matter for their consideration. A majority of
the shares represented and voting at the Chateau Special Meeting is required
in order to approve the Adjournment Proposal. Chateau's Board of Directors
recommends that stockholders vote their proxies FOR the Adjournment Proposal
so that their proxies may be used for such purpose in the event it should
become necessary. Properly executed proxies will be voted FOR the Adjournment
Proposal unless otherwise indicated thereon. If it is necessary to adjourn
the Chateau Special Meeting, no notice of the time and place of the adjourned
meeting is required to be given to stockholders other than an announcement of
such time and place at the Chateau Special Meeting. The Adjournment Proposal
relates only to an adjournment occurring for the purpose of soliciting
additional proxies for the Chateau-ROC Proposals in the event that there are
insufficient votes to approve either such Proposal at the Chateau Special
Meeting. Chateau's Board of Directors retains full authority to postpone the
Chateau Special Meeting prior to its being convened without the consent of
any stockholder.
Although the Chateau-ROC Proposals are being voted on as separate
Proposals, neither will become effective unless both Proposals are approved
by Chateau's Stockholders.
THE ACCOMPANYING NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND JOINT
PROXY STATEMENT/PROSPECTUS AND SUPPLEMENT THERETO PROVIDE DETAILED
INFORMATION CONCERNING MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING, THE
REASONS FOR YOUR BOARD OF DIRECTORS' RECOMMENDATION OF THE APPROVAL OF THE
ISSUANCE OF THE MERGER CONSIDERATION AND THE CHATEAU SHARE ISSUANCE PROPOSAL
AND CERTAIN ADDITIONAL INFORMATION, INCLUDING, WITHOUT LIMITATION,
INFORMATION ON BOTH CHATEAU AND ROC. YOU ARE URGED TO CAREFULLY CONSIDER ALL
OF THE INFORMATION IN THE ACCOMPANYING OR PRECEDING MATERIAL. YOU WILL NOT
NEED TO SEND ANY SHARE CERTIFICATES.
It is important that your shares of Chateau common stock be
represented at the Chateau Special Meeting, regardless of the number of
shares you hold. Therefore, please sign, date and return your proxy cards as
soon as possible, whether or not you plan to attend the Chateau Special
Meeting. This will not prevent you from voting your shares in person if you
subsequently choose to attend the Chateau Special Meeting.
Very truly yours,
C.G. Kellogg
President and Chief Executive Officer
<PAGE>
CHATEAU PROPERTIES, INC.
19500 Hall Road
Clinton Township, Michigan 48038
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 11, 1997
To the Stockholders of Chateau Properties, Inc.:
PLEASE TAKE NOTICE that a Special Meeting of Stockholders of Chateau
Properties, Inc., a Maryland corporation ("Chateau"), will be held at the
Crowne Plaza Pontchartrain, Two Washington Boulevard, Detroit, Michigan, on
February 11, 1997 at 9:00 a.m., Eastern Standard Time, for the following
purposes:
1. To consider and vote on a proposal (the "Chateau Merger
Proposal") to issue 13,109,941 shares of Common Stock of Chateau in
connection with an Amended and Restated Agreement and Plan of Merger, dated
as of September 17, 1996, as amended by the Amendment thereto dated as of
December 20, 1996 (collectively, the "Merger Agreement"), by and among
Chateau, ROC Communities, Inc., a Maryland corporation ("ROC"), and R
Acquisition Sub, Inc., a direct subsidiary of Chateau ("RSub"), providing for
the merger of RSub with ROC, with ROC surviving such merger (the "Merger").
The consummation of the Merger and related transactions will result in, among
other things, the exchange of the outstanding common stock, par value $.01
per share, of ROC for common stock, par value $.01 per share, of Chateau, all
as more fully described in the accompanying Joint Proxy Statement/Prospectus
and Supplement thereto. A copy of the Merger Agreement is attached as
Appendix A to the Joint Proxy Statement/Prospectus.
2. To consider and vote on a proposal (the "Chateau Share Issuance
Proposal" and, together with the Chateau Merger Proposal, the "Chateau-ROC
Proposals") to issue and sell an aggregate of 978,073 shares of Common Stock
of Chateau to holders of limited partnership units ("OP Units") in CP Limited
Partnership, a Maryland limited partnership of which Chateau is the general
partner, who have agreed to exchange their OP Units for shares of Common
Stock of Chateau, which issuance and sale shall be at an average price per
share, payable in cash, of not less than the greater of the average price
paid by Chateau in connection with the Chateau Share Repurchase Program (as
defined in the Joint Proxy Statement/Prospectus and Supplement) or the
average of the closing price on the New York Stock Exchange of the shares of
Common Stock of Chateau on the two trading days immediately preceding the
date of issuance as determined in good faith by the Chateau Board.
3. In the event there are not sufficient votes to approve the
Chateau-ROC Proposals at the Chateau Special Meeting, and the Chateau Special
Meeting is not adjourned in order to permit further solicitation of proxies,
the Chateau-ROC Proposals cannot be approved at the Chateau Special Meeting.
In order to allow proxies that have been received by Chateau at the time of
the Chateau Special Meeting to be voted for such adjournment, if necessary,
Chateau has submitted the question of adjournment (the "Adjournment
Proposal") under such circumstances, and only under such circumstances, to
its stockholders as a separate matter for their consideration.
4. To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
The Board of Directors of Chateau has fixed the close of business on
January 30, 1997 as the record date for the determination of the holders of
Common Stock entitled to notice of, and to vote at, the Chateau Special
Meeting and adjournments or postponements thereof. Each of the Chateau-ROC
Proposals and the Adjournment Proposal requires the affirmative vote of the
holders of at least a majority of the shares of Chateau Common Stock
<PAGE>
voted at the Chateau Special Meeting assuming a quorum is present at the
meeting. Chateau stockholders will not be entitled to dissenters' appraisal
rights under Maryland law in connection with the Merger.
Information regarding the proposed Merger, the Merger Agreement and
related matters is contained in the Joint Proxy Statement/Prospectus and the
annexes and Supplement thereto, which are incorporated by reference herein
and form a part of this Notice.
We cordially invite you to attend the Chateau Special Meeting, but
whether or not you plan to be present, please promptly date, mark, sign and
mail the enclosed proxy in the envelope provided, which requires no
additional postage if mailed in the United States. Any stockholder who
executes and delivers the proxy may revoke the authority granted thereunder
at any time prior to its use by giving written notice of such revocation to
the undersigned at 19500 Hall Road, Clinton Township, Michigan 48038, by
executing and delivering a proxy bearing a later date or by attending and
voting at the Chateau Special Meeting. Your vote is important, regardless of
the number of shares you own.
By Order of the Board of Directors
of Chateau Properties, Inc.
Pamela R. Davis
Secretary
Clinton Township, Michigan
January 31, 1997
YOU WILL NOT NEED TO SEND IN YOUR SHARE CERTIFICATES
IF THE MERGER IS APPROVED.
2
<PAGE>
SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUS
CHATEAU PROPERTIES, INC.
SUPPLEMENT DATED JANUARY 31, 1997
to
JOINT PROXY STATEMENT OF
CHATEAU PROPERTIES, INC. and ROC COMMUNITIES, INC.
[LOGO] [LOGO]
dated December 24, 1996
THE JOINT PROXY STATEMENT ALSO SERVES AS
THE PROSPECTUS OF CHATEAU PROPERTIES, INC.
--------------------------
This Supplement (the "Supplement") supplements the Joint Proxy
Statement/Prospectus, dated December 24, 1996 (the "Joint Proxy
Statement/Prospectus"), of ROC Communities, Inc., a Maryland corporation
("ROC"), and Chateau Properties, Inc., a Maryland corporation ("Chateau").
This Supplement is being furnished together with the Joint Proxy
Statement/Prospectus to the holders of Chateau Common Stock in connection
with the solicitation of proxies by the Board of Directors of Chateau (the
"Chateau Board") from holders of outstanding shares of Chateau Common Stock
for use at the special meeting of stockholders of Chateau scheduled to be
held at the Crowne Plaza Pontchartrain, Two Washington Boulevard, Detroit,
Michigan, on February 11, 1997 at 9:00 a.m., Eastern Standard Time, and at
any adjournment or postponement thereof. January 30, 1997 has been
established as the record date for voting at the special meeting of
stockholders of Chateau.
Unless otherwise defined herein, capitalized terms used in this
Supplement have the meanings ascribed to them in the Joint Proxy
Statement/Prospectus. This Supplement contains additional information related
to the Merger and should be read in conjunction with the Joint Proxy
Statement/Prospectus. At a special meeting held on January 28, 1997, ROC
stockholders approved the Merger.
Chateau has filed a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") covering up to 13,109,941 shares of Chateau Common Stock to be
issued in connection with the Merger. The Joint Proxy Statement/Prospectus,
together with this Supplement, also constitutes the Prospectus of Chateau
filed as part of the Registration Statement with respect to the shares of
Chateau Common Stock to be issued in connection with the Merger.
This Supplement is first being mailed to stockholders of Chateau on
or about January 31, 1997. The Joint Proxy Statement/Prospectus was first
mailed on or about December 30, 1996 to stockholders of record of Chateau on
December 23, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
No person is authorized to give any information or to make any
representations other than those contained herein, and, if given or made,
such information or representations must not be relied upon as having been
authorized. This document does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to any person to whom it is unlawful to make such offer or
solicitation.
--------------------------
The date of this Supplement is January 31, 1997.
3
<PAGE>
Introduction
This Supplement (the "Supplement") supplements the Joint Proxy
Statement/Prospectus, dated December 24, 1996 (the "Joint Proxy
Statement/Prospectus"), of ROC Communities, Inc., a Maryland corporation
("ROC"), and Chateau Properties, Inc., a Maryland corporation ("Chateau").
The Joint Proxy Statement/Prospectus, which also constitutes a prospectus of
Chateau, relates to the special meeting of stockholders of ROC and the
special meeting of stockholders of Chateau (the "ROC Special Meeting" and the
"Chateau Special Meeting", respectively, and, collectively, the "Special
Meetings"). This Supplement contains additional information to be considered
by stockholders of Chateau and should be read in conjunction with the Joint
Proxy Statement/Prospectus. Capitalized terms used herein and not defined
have the meanings ascribed to them in the Joint Proxy Statement/Prospectus.
Matters to be Considered at the Chateau Special Meeting
At the Chateau Special Meeting, the Chateau stockholders will
consider a proposal (the "Chateau Merger Proposal") involving the strategic
business combination of Chateau and ROC (following such combination, the
"Combined Company"). The combination of the two companies will be
accomplished through the proposed merger of R Acquisition Sub, Inc., a
Maryland corporation and a directly-owned subsidiary of Chateau ("RSub"),
with ROC (the "Merger"). The Chateau Merger Proposal asks Chateau
stockholders to approve the issuance of the Merger Consideration to the ROC
stockholders in connection with the Merger. The Merger and the series of
transactions related thereto will be effected pursuant to an Amended and
Restated Agreement and Plan of Merger, dated as of September 17, 1996, as
amended by the Amendment thereto dated as of December 20, 1996 (collectively,
the "Merger Agreement"), among ROC, Chateau and RSub, a copy of which is
attached to the Joint Proxy Statement/Prospectus as Appendix A. See "THE
MERGER--Terms of the Merger" in the Joint Proxy Statement/Prospectus. The
Merger Agreement amends and restates an earlier agreement entered into by the
parties dated as of July 17, 1996 (the "Original Merger Agreement"). At the
Chateau Special Meeting, the Chateau stockholders will also consider a
proposal (the "Chateau Share Issuance Proposal" and, together with the
Chateau Merger Proposal, the "Chateau-ROC Proposals") to issue and sell up to
an aggregate of 978,073 shares of Common Stock of Chateau to holders of
limited partnership units ("OP Units") in CP Limited Partnership, a Maryland
limited partnership of which Chateau is the general partner, who have agreed
to exchange their OP Units for shares of Common Stock of Chateau, which
issuance and sale will be at an average price per share, payable in cash, of
not less than the greater of the average price paid by Chateau in connection
with the Chateau Share Repurchase Program or the average of the closing
prices on the New York Stock Exchange of the shares of Common Stock of
Chateau on the two trading days immediately preceding the date of issuance as
determined in good faith by the Chateau Board of Directors.
In the event there are not sufficient votes to approve the
Chateau-ROC Proposals at the Chateau Special Meeting, and the Chateau Special
Meeting is not adjourned in order to permit further solicitation of proxies,
the Chateau Proposals cannot be approved at the Chateau Special Meeting. In
order to allow proxies that have been received by Chateau at the time of the
Chateau Special Meeting to be voted for such adjournment, if necessary,
Chateau has submitted the question of adjournment (the "Adjournment
Proposal") under such circumstances, and only under such circumstances, to
its stockholders as a separate matter for their consideration.
Although the Chateau-ROC Proposals are being voted on as separate
Proposals, neither will become effective unless both Proposals are approved
by Chateau's stockholders.
The holders of Chateau Common Stock will also be asked to consider
and vote upon any such other matters as may properly come before the Chateau
Special Meeting.
Recent Developments
ROC Special Meeting; ROC Stockholder Approval
The Joint Proxy Statement/Prospectus was first mailed to holders of
ROC Common Stock on or about December 24, 1996. On January 28, 1997, the ROC
Special Meeting was held. Stockholders constituting a quorum for the purpose
of the ROC Special Meeting were present or represented by proxy at such
meeting.
<PAGE>
At the ROC Special Meeting, (i) the holders of ___________ shares of
ROC Common Stock, representing __% of the outstanding shares of ROC Common
Stock, voted in favor of the ROC Proposal, (ii) the holders of ___________
shares of ROC Common Stock, representing __% of the outstanding shares of ROC
Common Stock, voted against the ROC Proposal, and (iii) the holders of
___________ shares of ROC Common Stock, representing __% of the outstanding
shares of ROC Common Stock, abstained from voting on the ROC Proposal. To
achieve the ROC Stockholder Approval, an aggregate of at least _________
shares of ROC Common Stock, representing at least two-thirds of the
outstanding shares of ROC Common Stock, needed to be voted in favor of the
ROC Proposal. The ROC Stockholder Approval was therefore achieved, and ROC
stockholders have approved the authorization of the Merger and the adoption
of the Merger Agreement. No other matters were voted upon by ROC stockholders
at the ROC Special Meeting.
Chateau Share Repurchase Program
Pursuant to the Chateau Share Repurchase Program, since the mailing
of the Joint Proxy Statement/Prospectus to ROC stockholders (and after the
date of the ROC Special Meeting), Chateau has repurchased an additional
___________ shares of Chateau Common Stock which, when added to the 450,000
shares previously purchased, represents _______ shares of the total of
1,200,000 shares of Chateau Common Stock to be repurchased under the Chateau
Share Repurchase Program. Chateau no longer intends to repurchase up to an
aggregate of 1,450,000 shares of Chateau Common Stock because the Merger and
the OP Unit Exchange are expected to qualify as transfers of property under
Section 351 of the Code after giving effect to, among other things, an
aggregate repurchase by Chateau of 1,200,000 such shares. See "THE
MERGER--Certain Transactions and Agreements Relating to the Merger--Chateau
Share Repurchase Program" in the Joint Proxy Statement/Prospectus.
Chateau Stock Dividend
Each share of Chateau Common Stock outstanding as of the close of
business on January 30, 1997 will receive promptly after the Merger a
distribution of .068 shares of Chateau Common Stock, contingent upon
effectiveness of the Merger. This distribution reflects the Chateau Board's
declaration of a stock dividend equal to .0316 shares of Chateau Common Stock
(increased to reflect the repurchase of shares prior to the date of the Joint
Proxy Statement/Prospectus in the Chateau Share Repurchase Program) for each
share of Common Stock outstanding, payable to stockholders of record on
January 30, 1997 (other than to exchanging OP Unitholders, with respect to
the shares acquired pursuant to the OP Unit Exchange) contingent on the
effectiveness of the Merger, and the reallocation to holders of shares of
Chateau Common Stock of shares of Common Stock which would have been
distributed to Exchanging OP Unitholders had they not waived the right to
receive the Chateau Stock Dividend.
Exchange of OP Units Pursuant to the Chateau Securityholder Agreements and
Waiver of the Chateau Stock Dividend
On or before the Chateau Record Date, pursuant to the separate
Chateau Securityholder Agreements with ROC, Chateau and the Operating
Partnership, Exchanging OP Unitholders have exchanged an aggregate of
3,768,391 OP Units in the Operating Partnership for an equal number of shares
of Chateau Common Stock. Certain of the Exchanging OP Unitholders have also
agreed, pursuant to the Chateau Securityholder Agreements and subject to the
satisfaction of certain conditions, to exercise rights they currently hold to
exchange an aggregate of an additional 2,359,184 OP Units for an equal number
of shares of Chateau Common Stock contemporaneously with the closing of the
Merger. See "THE MERGER--Certain Transactions and Agreements Relating to the
Merger--Chateau Securityholder Agreement" in the Joint Proxy
Statement/Prospectus for a detailed discussion of the Chateau Securityholder
Agreement.
The Exchanging OP Unitholders also agreed, pursuant to the Chateau
Securityholder Agreement, to waive the shares of Chateau Common Stock that
they would otherwise receive from Chateau as a result of the Chateau Stock
Dividend for reallocation to the other Chateau stockholders. The waiver of
the Chateau Stock Dividend with respect to an aggregate of 6,127,575 OP Units
by the Exchanging OP Unitholders increases the amount of the distribution to
other Chateau stockholders to .068 shares of Chateau Common Stock for each
share outstanding and improves the effective Exchange Ratio from 1.01 to one
to 0.98 to one.
2
<PAGE>
Market Data
During the period from December 24, 1996 to January 24, 1997, the
high and low closing prices per share on the NYSE for Chateau Common Stock
were $____ and $____, respectively, and the distribution declared per share
with respect to the fourth quarter of 1996 was $.405 per share. At the
Chateau Record Date, there were approximately ______________ holders of
record of Chateau Common Stock.
Litigation
[Information supplementing the Proxy Statement to be included.]
Recommendations of the Chateau Board
For the reasons indicated in the Joint Proxy Statement/Prospectus
under "THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the Chateau
Board; Reasons for the Merger," the Chateau Board has determined that the
Merger is advisable, fair to and in the best interests of the stockholders of
Chateau. Accordingly, the Chateau Board has unanimously approved the Merger,
the Merger Agreement, the Other Transactions and issuance of the Merger
Consideration to the ROC stockholders and recommends that the stockholders of
Chateau vote FOR the issuance of the Merger Consideration to the ROC
stockholders.
As a part of the Merger, the Chateau Board has carefully considered
the terms and conditions of the proposed Share Issuance Proposal and has
concluded that the Chateau Share Issuance Proposal is advisable, fair to, and
in the best interests of Chateau and its stockholders, since it will
facilitate the Merger and Other Transactions qualifying for treatment under
Section 351 of the Code and provide additional capital to Chateau to
partially replace capital used in the Chateau Share Repurchase Program.
Accordingly, the Chateau Board of Directors unanimously recommends that you
vote FOR the Chateau Share Issuance Proposal.
In the event there are not sufficient votes to approve the
Chateau-ROC Proposals at the Chateau Special Meeting, and the Chateau Special
Meeting is not adjourned in order to permit further solicitation of proxies,
the Chateau Proposals cannot be approved at the Chateau Special Meeting. In
order to allow proxies that have been received by Chateau at the time of the
Special Meeting to be voted for such adjournment, if necessary, Chateau has
submitted the question of adjournment (the "Adjournment Proposal") under such
circumstances, and only under such circumstances, to its stockholders as a
separate matter for their consideration. A majority of the shares represented
and voting at the Chateau Special Meeting is required in order to approve the
Adjournment Proposal. Chateau's Board of Directors recommends that
stockholders vote their proxies FOR the Adjournment Proposal so that their
proxies may be used for such purpose in the event it should become necessary.
Opinions of Financial Advisors to Chateau
On September 17, 1996, Goldman Sachs delivered its written opinion
to the Chateau Board to the effect that, as of the date of such opinion, the
Exchange Ratio pursuant to the Merger Agreement is fair to Chateau. Also on
September 17, 1996, Merrill Lynch delivered its written opinion to the
Chateau Board to the effect that, as of such date, the proposed consideration
to be paid by Chateau in the Merger is fair to Chateau and its stockholders
(other than ROC and its affiliates) from a financial point of view. Each of
Goldman Sachs and Merrill Lynch has confirmed its opinion as of the date of
this Supplement. See "THE PROPOSED MERGER AND RELATED MATTERS--Opinions of
Financial Advisors to Chateau" in the Joint Proxy Statement/Prospectus.
The Chateau Special Meeting
Date, Time and Place of Meeting
The Chateau Special Meeting will be held at the Crowne Plaza
Pontchartrain, Two Washington Boulevard, Detroit, Michigan, on February 11,
1997 at 9:00 a.m., Eastern Standard Time.
3
<PAGE>
Record Date and Vote Required
The Chateau Board has fixed the close of business on January 30,
1997 as the record date (the "Chateau Record Date") for the Chateau Special
Meeting and for the Chateau Stock Dividend. As of such date, there were
_______ shares of Chateau Common Stock outstanding and entitled to vote at
the Chateau Special Meeting.
The presence in person or by proxy of stockholders owning shares of
Chateau Common Stock representing a majority of the outstanding shares of
Chateau Common Stock is necessary to constitute a quorum at the Chateau
Special Meeting. To achieve the Chateau Stockholder Approval, at least a
majority of the shares of Chateau Common Stock present at the Chateau Special
Meeting will need to be voted in favor of each of the Chateau-ROC Proposals,
assuming a quorum is present.
John A. Boll, Chairman of the Chateau Board, C.G. ("Jeff") Kellogg,
Chateau's President and Chief Executive Officer and a Chateau director, and
Tamara D. Fischer, Chateau's Chief Financial Officer (the "Chateau
Principals"), who together hold an aggregate of 26,973 shares of Chateau
Common Stock (excluding shares they have acquired in the OP Unit Exchange),
have executed proxies (as amended, the "Chateau Principal Proxies") granting
to ROC the full power to vote all shares of Chateau Common Stock held by them
in favor of the Chateau-ROC Proposals and against any proposal made in
opposition to or in competition with the Chateau-ROC Proposals. In addition,
certain other officers and directors of Chateau, who together hold an
aggregate of 89,328 shares of Chateau Common Stock, have expressed to ROC an
intention to vote all shares of Chateau Common Stock held by them as of the
Chateau Record Date in favor of the Chateau-ROC Proposals. Since the date of
the Joint Proxy Statement/Prospectus, an officer of Chateau holding 43,333 OP
Units has indicated an intention to exchange these OP Units for an equal
number of shares of Chateau Common Stock prior to the Chateau Record Date and
vote these shares in favor of the Chateau-ROC Proposals. Further, the
Exchanging OP Unitholders, who include Messrs. Boll and Kellogg, acquired
3,768,391 shares of Chateau Common Stock in the OP Unit Exchange prior to the
Chateau Record Date. With regard to these shares, the Exchanging OP
Unitholders will be entitled to vote at the Chateau Special Meeting and they
are expected to vote in favor of the Chateau-ROC Proposals because they would
be subject to a significant tax liability as a result of the exchange of
their OP Units if the Merger does not occur. Further, ROC has agreed with
Chateau to vote the 350,000 shares of Chateau Common Stock it holds in favor
of the Chateau-ROC Proposals and against any proposal made in opposition to
or in competition with the Chateau-ROC Proposals. After giving effect to the
OP Unit Exchange and the 450,000 shares purchased prior to the Chateau Record
Date by Chateau in the Chateau Share Repurchase Program, it is anticipated
that, as of the Chateau Record Date, (i) there will be 9,461,434 shares of
Chateau Common Stock outstanding and (ii) the individuals that have executed
the Chateau Principal Proxies and the other Exchanging OP Unitholders,
combined with the shares of Chateau Common Stock held by ROC, represent in
the aggregate 4,237,416 shares of Chateau Common Stock, whereas 4,730,717
shares are required to approve the Chateau-ROC Proposals, assuming all shares
of Chateau Common Stock outstanding on the Chateau Record Date are voted at
the Chateau Special Meeting. These Chateau stockholders will therefore hold
approximately 45% of the outstanding shares of Chateau Common Stock, which is
nearly sufficient voting power to approve the Chateau-ROC Proposals. See "THE
STOCKHOLDERS MEETINGS" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT."
For the Chateau-ROC Proposals, broker non-votes and abstentions will
be considered as not present and entitled to vote at the Special Meetings.
Because neither of the Chateau-ROC Proposals requires the affirmative vote of
a specified number of shares of Chateau Common Stock (but instead the
approval of a majority of votes cast on the Chateau-ROC Proposals at the
Chateau Special Meeting), broker non-votes and abstentions will not affect
the determination of the Chateau-ROC Proposals if a quorum is present at the
Chateau Special Meeting. The Chateau Board does not know of any other matter
that will be presented for action at the Chateau Special Meeting. If,
however, any other matter properly comes before the Chateau Special Meeting,
the persons named in the proxy or their substitutes will vote thereon in
accordance with their best discretion.
Proxies
Proxy cards for use at the Chateau Special Meeting have been mailed
with copies of this Supplement and the Joint Proxy Statement/Prospectus to
Chateau stockholders. A stockholder may use the proxy card if he or she is
unable to attend the meeting in person or wishes to have his or her shares
voted by proxy even if he or she does
4
<PAGE>
attend the meeting. A proxy may be revoked by the person giving it at any
time before it is exercised, by providing written notice of such revocation
to the Secretary of Chateau, by submitting a proxy having a later date or by
appearing at the meeting and electing to vote in person. Any proxy validly
submitted and not revoked will be voted in the manner specified therein by
the stockholder. If a stockholder executes a proxy with no instructions
indicated thereon, shares represented by such proxy will be voted in favor of
each of the Chateau-ROC Proposals and the Adjournment Proposal.
Solicitation of Proxies
Chateau will bear the expenses of its proxy solicitation. Such
solicitation will be by mail but also may be by telephone or in person by the
directors, officers or employees of Chateau who will not receive any
additional compensation therefor. In addition, Chateau has retained D.F. King
& Co., Inc., a proxy soliciting firm, to assist in the solicitation of
proxies. Chateau anticipates that the cost of such proxy soliciting firm to
Chateau, in aggregate, will not exceed $15,000, plus expenses. The telephone
number of D.F. King & Co., Inc. is (212) 269- 5550.
No Dissenters' Rights
Under the MGCL, stockholders of Chateau who do not vote in favor of
the Chateau-ROC Proposals will have no appraisal rights in connection with
the Merger if it is approved by Chateau stockholders, i.e., they may not
demand the fair value of their stock and are bound by the terms of the
Merger.
STOCKHOLDERS SHOULD NOT SEND ANY
SHARE CERTIFICATES WITH THEIR PROXY CARDS.
5
<PAGE>
Information Regarding Chateau Properties, Inc.
Properties
The Properties consist of 44 manufactured home communities containing 19,594
sites with amenities designed for either retirement or family living of which
24 are located in Michigan, 13 in Florida, 4 in Minnesota and 3 in North
Dakota. The Company also owns land adjacent to certain existing communities
containing an additional 1,466 expansion sites which, although not yet
developed, are zoned for manufactured housing. Of the 44 Properties, 37 have
200 or more sites, with the largest having 1,423 sites.
At December 31, 1995, the Properties had an average occupancy rate of
approximately 94 percent with weighted average rent for the year ended
December 31, 1995 of $277 per month. Weighted average rent is calculated as
net rental income for the period, on a monthly basis, divided by the weighted
average occupied sites. Weighted average occupancy is computed by averaging
the occupied sites at the end of each month in the period.
The Company believes that the Properties provide amenities and common
facilities that create a safe and attractive community for the residents. All
of the Properties provide residents with attractive amenities with most
offering a clubhouse, a swimming pool and a library. Many Properties offer
additional amenities such as sauna/whirlpool spas, indoor pools, tennis
courts, shuffleboard courts, basketball courts, golf courses, day care
facilities, exercise rooms and a marina.
Since residents own their homes, it is their responsibility to maintain their
homes and the surrounding area. It is management's role to insure that
residents comply with community policies and to provide maintenance of the
common areas, facilities and amenities. The Company continually monitors
compliance by residents with its residents' regulations to assure that the
communities are maintained at the highest standards. The Company holds
periodic meetings of its property management personnel for training and
implementation of the Company's strategies, and property administrators make
a daily inspection of the Properties. The Company believes that, due in part
to this strategy, the Properties historically have had and will continue to
have low turnover and high occupancy rates. Since 1989, the Properties have
averaged an annual turnover of homes (where the home is moved out of the
community) of less than 3 percent. During this period, the average annual
turnover of residents in the Properties (where the home is sold and remains
within the community, typically without interruption of rental income) has
been approximately 10 percent or less.
The Operating Partnership owns a 100 percent beneficial interest in all of
the Properties, except for Emerald Lake, Fairways, Lakeland Junction, Lakes
at Leesburg, Palm Beach Colony, Winter Haven Oaks and Del Tura in which it
owns a 99 percent beneficial interest and in which the Company owns the
remaining 1 percent beneficial interest.
<PAGE>
Indebtedness
At December 31, 1995, the aggregate amount of indebtedness encumbering the
Properties was approximately $55.4 million. In March 1995, the Operating
Partnership used the proceeds from the issuance of the Notes to repay the $30
million borrowing under the Company's line of credit and approximately $44
million of indebtedness. The amounts outstanding as of December 31, 1995 for
the indebtedness encumbering each of these Properties is set forth (in
thousands) in the following table. Prepayment of these debt obligations may
result in significant prepayment penalties.
<TABLE>
<CAPTION>
Amount of
Amount of Interest Indebtedness
Property Pledged as Collateral Indebtedness Rate Maturity due at Maturity
- - ------------------------------ ------------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Del Tura $33,854 8.40% 2000 $31,138
Macomb 16,654 9.82% 1999 15,574
Norton Shores/Ferrand Estates 3,626 8.00% 1999 3,327
Oak Hill 1,291 8.00% 1998 1,219
------- -------
Total $55,425 $51,258
======= =======
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Financial Condition,
and Results of Operations
The following discussion and analysis of results of operations and financial
condition covers the years ended December 31, 1995, 1994 and 1993 and should
be read in conjunction with the financial statements of the Company included
elsewhere herein.
Results of Operations
Comparison of year ended December 31, 1995 to year ended December 31, 1994
For the year ended December 31, 1995, income before majority interest and
extraordinary item was $13,979,000, a decrease of $918,000 from the year
ended December 31, 1994. The decrease was due to an increase in depreciation
of $3,784,000 and increased interest costs of $6,456,000, which were offset
by increased net operating income of $9,322,000. These increases were
primarily due to the acquisitions of one community in 1995 and 10 communities
in 1994, as well as an increase in net rental revenue from the communities
owned by the Company on January 1, 1994 (the "Core Portfolio"). The increase
in net operating income from the Company's Core Portfolio was due to
increased occupancy and rental increases offset by general operating expense
increases. In the first quarter 1995, the Company recognized an extraordinary
charge of $829,000 related to the early extinguishment of debt.
Rental revenue in 1995 was $59,912,000, an increase of $12,594,000 or 26.6
percent from 1994. Approximately 84.8 percent of the increase was due to the
acquisition of one community in September 1995 and 10 communities in 1994,
eight of which were acquired in the fourth quarter, 9.2 percent represents
the effect of annual rent increases in the Core Portfolio and 6.0 percent was
due to increased occupancy in the Core Portfolio.
2
<PAGE>
Weighted average occupancy for the year ended December 31, 1995, was 18,051
sites, or 21 percent higher than weighted average occupancy for the year
ended December 31, 1994. Weighted average occupancy increased in 1995 due to
the 1995 and 1994 acquisitions and the filling of 381 additional sites that
were either vacant at January 1, 1995, or developed in 1995. The occupancy
rate was 94.3 percent on 19,594 sites as of December 31, 1995, as compared
with 92.7 percent on 19,185 sites as of December 31, 1994.
On a per site basis, weighted average monthly rental revenue for the year
ended December 31, 1995 increased to $277 from $264 in 1994 or 4.6 percent.
This increase was due to acquisitions made in 1995 and 1994 and rental
increases in the Core Portfolio in 1995, partially offset by a weighted
average $2 per month per site rebate that the Company passed through to its
Michigan residents. The rebate represented the net savings realized by the
Company from a change in real estate taxation in Michigan.
Interest and other income increased approximately $1,194,000, or 159 percent,
in 1995 from 1994 primarily due to other operating revenues generated by the
communities acquired by the Company in November 1994. On a per site basis,
weighted average monthly rental revenue and other operating revenues
increased to $284 for the year ended December 31, 1995 from $266 for the year
ended December 31, 1994, or 6.8 percent.
Property operating and maintenance expense for the year ended December 31,
1995, increased by $3,524,000 or 28.2 percent from the same period a year
ago. The increase is due primarily to the 1995 and 1994 acquisitions. On a
per site basis, monthly weighted average property operating and maintenance
expense increased from $70 in 1994 to $74 in 1995, or 5.9 percent. The
increase on a per site basis is due principally to certain of the communities
acquired in 1994 having a higher per site operating cost, an increase in
advertising and other costs incurred to fill sites and utility rate
increases. The higher per site operating cost in certain of the acquired
communities is due, in part, to the costs associated with the other operating
revenues generated by these communities. The increase in advertising spending
resulted in the net filling of 381 sites for 1995, while only 170 sites were
filled for the year ended December 31, 1994.
Real estate taxes for the year ended December 31, 1995, increased by
$688,000, or 17.9 percent, from the year ended December 31, 1994. The
increase is due primarily to acquisitions and expansions of communities. On a
per site basis, monthly weighted average real estate taxes were $20.90 in
1995 compared to $21.40 in 1994, a decrease of 2.6 percent. The decrease was
due primarily to a change in real estate taxation in Michigan and
acquisitions which had a lower per site real estate tax cost, offset by
general tax increases. The change in real estate taxation decreased real
estate taxes beginning in the third and fourth quarter of 1994, and first and
second quarter of 1995. Real estate taxes may increase or decrease due to
inflation, expansions and improvements of communities, as well as changes in
taxation in the tax jurisdictions in which the Company operates.
Administrative expense for the year ended December 31, 1995, increased
$254,000, or 7.0 percent, from the year ended December 31, 1994.
Administrative expense in 1995 was 6.3 percent of revenues as compared to 7.5
percent in 1994.
Interest and related amortization costs increased for the year ended December
31, 1995, by $6,456,000, as compared with the year ended December 31, 1994.
The increase is attributable to the indebtedness incurred to finance the 1995
and 1994 acquisitions of 10 communities. Interest expense as a percentage of
average debt outstanding decreased to approximately 8.9 percent in 1995 from
approximately 9.4 percent in 1994 due to debt refinancing that occurred in
the first quarter of 1995.
3
<PAGE>
Depreciation expense for the year ended December 31, 1995, increased
$3,784,000 from the same period a year ago. The increase is due to the 1995
and 1994 acquisitions of 10 communities for a combined purchase price of
approximately $117 million. Depreciation expense as a percentage of average
depreciable rental property in 1995 remained relatively unchanged from 1994.
Comparison of year ended December 31, 1994 to year ended December 31, 1993
For the year ended December 31, 1994, income before majority interest was
$14,897,000, an increase of $13,704,000 from the year ended December 31,
1993. The increase in income before majority interest in 1994 as compared
with 1993 was attributable to increased revenues of $4,454,000, decreased
real estate taxes of $406,000, decreased interest and related amortization of
$6,681,000, one-time reorganization costs of $1,699,000 and an extraordinary
charge of $2,738,000 in 1993, partially offset by increased operating and
administrative expenses of $1,574,000 and depreciation of $700,000.
Rental revenue in 1994 was $47,318,000, an increase of $4,449,000, or 10.5
percent, from 1993. This increase is due to an increase in occupied sites,
including the acquisition of 10 communities in 1994, as well as annual rent
increases. Weighted average occupancy for the year ended December 31, 1994
was 14,913, or 6.3 percent higher than weighted average occupancy in 1993.
During 1994 the Company acquired 10 communities comprised of 3,826 sites, of
which 3,459 were acquired in the fourth quarter. As of December 31, 1994, the
10 communities have an occupancy rate, exclusive of 1994 expansions, of
approximately 91.5 percent and monthly weighted average rent of $278 per
site. On a per site basis, rental revenue increased to $3,173 in 1994 (or
$264 per month) from $3,053 in 1993 (or $254 per month), or an increase of
3.9 percent. The increase, on a per site basis, is due to annual rent
increases and the effect of the acquisitions, which had an average rent
higher than the average rent of the Core Portfolio.
Property operating and maintenance expense for the year ended December 31,
1994 increased by $1,082,000, or 9.5 percent, from the year ended December
31, 1993. The increase is due primarily to the increased number of sites. On
a per site basis, property operating and maintenance expense increased from
$814 in 1993 to $838 in 1994, or 2.9 percent. The increase in per site
operating costs is due to general cost increases and higher per site
operating costs at certain communities acquired in 1994.
Real estate taxes for the year ended December 31, 1994, decreased by
$406,000, or 9.6 percent from the year ended December 31, 1993. On a per site
basis, real estate taxes were $257 as compared with $302, a decreased of 14.9
percent. The decrease was due primarily to a change in real estate taxation
in Michigan, offset by increases due to acquisitions and expansions of
communities. The Company is passing through to its Michigan residents the net
savings realized by the Company through reduced rental rates beginning in the
fourth quarter of 1994 and continuing into the first quarter of 1995.
Administrative expense for the year ended December 31, 1994, increased
$492,000, or 15.8 percent, from the year ended December 31, 1993. The
increase was due primarily to the incremental costs incurred by the Company
as a public entity. Administrative expense in 1994 was 7.5 percent of
revenues as compared to 7.2 percent in 1993. As these costs are higher in a
company's first year as a public company, the Company expects this percentage
to decrease in 1995.
Interest and related amortization costs decreased for the year ended December
31, 1994 by $6,681,000 as compared to the year ended December 31, 1993. This
was due primarily to repayment of $93.4 million (including related prepayment
penalties) of indebtedness with the proceeds of the Offering in November
1993, offset by the
4
<PAGE>
increase in interest expense in the fourth quarter 1994 due to indebtedness
of approximately $86 million incurred to finance the acquisition of eight
communities in November 1994.
Liquidity and Capital Resources
Net cash provided by operating activities was $28,097,000 for the year ended
December 31, 1995, compared to $22,584,000 for the year ended December 31,
1994. The increase in cash provided by operating activities was due primarily
to the increase in net operating income.
Net cash used in financing activities for the year ended December 31, 1995,
was $24,365,000. Use of cash included the repayment of $24,384,000 of fixed
rate mortgage debt; $49,468,000 of variable rate debt incurred in November
1994 to finance the acquisitions of eight communities, including a
$30,000,000 borrowing under the Company's line of credit; $667,000 in
prepayment penalties incurred in connection with the early extinguishment of
the fixed rate mortgage debt; dividends/distributions made to shareholders/OP
unit holders of $21,982,000; payment of debt issuance costs of $954,000 and
the payment of $882,000 to reacquire 44,085 OP units. This use of cash was
offset partially by the proceeds received from the issuance of $75,000,000 of
8 3/4 percent Senior Unsecured Notes (the "Notes"). The Notes, issued by the
Operating Partnership, have semi-annual interest payments, an effective fixed
interest rate of 8.79 percent per annum and mature on March 2, 2000. The OP
units were reacquired at approximately $20 per OP unit.
Net cash used in investing activities for the year ended December 31, 1995
was $6,158,000. This amount represented the acquisition of a 303-site
community on September 15, 1995, capital expenditures and construction and
development costs. The acquisition was financed by $2,766,000 in cash, of
which $2,600,000 was borrowed on the Company's line of credit, which was
repaid in December, and $3,434,000 through the issuance of 161,614 OP units.
For the year ended December 31, 1995, construction and development costs
approximated $2,095,000, while recurring property capital expenditures, other
than construction and development costs, were approximately $541,000.
Recurring property capital expenditures in 1995 increased $160,000, or 42
percent, over the same period in 1994, due to the increased number of
communities in the Company's portfolio. Aggregate recurring property capital
expenditures for 1996 for existing communities are anticipated to be
approximately $600,000. Capital expenditures have historically been financed
with funds from operations and it is the Company's intention that such future
expenditures will be financed with funds from operations.
Future acquisitions of communities and land for development of sites will be
financed through borrowings on the line of credit, the issuance of additional
equity or debt securities, assumption of existing secured or unsecured
indebtedness or the issuance of OP units. The development of expansion sites
will be financed primarily by cash flow from operations and borrowings on the
line of credit. Huntington National Bank, as lead agent, along with Bank of
America and NBD Bank, have agreed, until January, 1999, to lend the Company
up to $50 million which, subject to customary conditions, is available to
finance the development of expansion sites, the acquisition of additional
properties and general business obligations. This line of credit is unsecured
and currently bears interest at 150 basis points over LIBOR. At December 31,
1995, there were no line of credit borrowings.
The Company expects to meet its short-term liquidity requirements through
cash flow from operations and, if necessary, borrowings under its line of
credit.
The Company anticipates meeting its long-term liquidity requirements from
borrowings under its line of credit, from the issuance of additional debt or
equity securities and cash flows from operations.
5
<PAGE>
The Company, as an owner of real estate, is subject to various environmental
laws. Compliance by the Company with existing laws has not had a material
adverse financial effect on results of operations or financial position
during the three year period ended December 31, 1995, nor does management
believe it will have a material impact in the future.
Inflation
All of the leases or terms of tenants' occupancies at the communities allow
for at least annual rental adjustments. In addition, all leases are
short-term (generally one year or less) and enable the Company to seek market
rentals upon reletting the sites. Such leases generally minimize the risk to
the Company of any adverse effect of inflation.
Other
Management considers Funds from Operations ("FFO") to be a supplemental
measure of the Company's operating performance. FFO is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net
income excluding financing costs and gains (or losses) from debt
restructuring and sales of property plus depreciation and amortization and
other non-cash items. For all periods, depreciation and amortization of
deferred financing costs are the only non-cash items. FFO should not be
considered as an alternative to net income, as the primary indicator of
operating performance, or to cash flows as a measure of liquidity, nor does
it indicate that cash flows are sufficient to fund all cash needs.
FFO for the year ended December 31, 1995 was $25,531,000 (including
depreciation and amortization of deferred financing costs of $11,552,000)
compared with $22,563,000 (including depreciation and amortization of
deferred financing costs of $7,666,000) for the same period in 1994, an
increase of $2,968,000 or 13.2 percent. The increase in FFO is due to
increased revenues of $13,788,000, offset partially by increased operating
and administrative expenses of $4,466,000 and increased interest charges of
$6,354,000
FFO for the year ended December 31, 1994, increased $11,807,000 or 109.8
percent, from the year ended December 31, 1993. The increased FFO in 1994 was
attributable to increased revenues in the amount of $4,454,000, decreased
interest expense of $6,821,000, decreased real estate taxes of $407,000 and
one-time reorganization costs of $1,699,000 in 1993, offset partially by
increased operating and administrative expenses of $1,574,000.
NAREIT has revised the FFO definition to discontinue the add back of
amortization of deferred financing costs and depreciation on corporate
assets. Assuming the proposed definition had been adopted for all periods,
FFO would have been $24,898,000 for 1995 and $22,015,000 for 1994, an
increase of $2,883,000 or 13 percent.
6
<PAGE>
Information Regarding ROC Communities, Inc.
Properties
As of December 31, 1995, the Company's properties consist of 66 manufactured
home communities in 24 states, aggregating 18,078 residential sites. The
communities contain an average of 274 residential sites, with 52 of the 66
Properties containing 150 or more sites. Eleven of the communities have the
potential to be expanded (consistent with existing zoning regulations) by an
aggregate of approximately 2,000 sites (11% of the current portfolio). During
1995, the Company completed a 28-site expansion at Terrace Heights located in
Dubuque, Iowa.
Significant Property
The Company owns one property, Colony Cove, which as of December 31, 1995
represented in excess of 10% of the Company's total assets and 10% of the
Company's gross revenues. Colony Cove is located in Ellenton, Florida, which
is north of Sarasota, on approximately 495 acres and includes 2,212 home
sites, which are leased to individual homeowners on one-year leases. The
weighted average monthly rent per site was $242, $229 and $211 for the years
ended December 31, 1995, 1994 and 1993, respectively. Among the amenities
included at the community are five clubhouses, five swimming pools, laundry
facilities, shuffleboard courts, game rooms and RV storage. Approximately 209
acres of the community, covering 1,153 residential sites, are leased by the
Company under three separate ground leases with unaffiliated parties. The
ground leases extend through May 2022. Total ground rent for 1995 and 1994
was $1,003,000 and $407,000, respectively. Depreciation is taken utilizing a
straight line method over 20 years with a tax basis of approximately
$32,001,000 and $31,753,000 at December 31, 1995 and 1994, respectively.
The Company purchased Colony Cove on August 2, 1994 for a purchase price of
approximately $40,459,000. In further consideration of the purchase price for
Colony Cove, the seller has assigned to the Company three mortgage loans,
having an aggregate principal balance of $3,892,000 and $3,940,000 as of
December 31, 1995 and 1994, respectively. The loans, which are secured by
three separate fee interests underlying the three land parcels, bear interest
at an annual rate of 9.5%. Payments of principal and interest under the three
loans, which are fully amortizing over their terms, aggregate approximately
$420,000 per annum. Final principal payments under the loans are due and
payable to the Company on May 1, 2017, March 1, 2019 and April 1, 2019. In
addition, the Company has been assigned a $1,050,000 fully amortizing blanket
mortgage loan secured by the fee interests described above. The loan bears
interest at a variable rate equal to the prime rate plus 2%, adjusted
quarterly, is due and payable in full on February 28, 2014, and currently
provides for annual payments of principal and interest of approximately
$115,000.
The Company considers nine other communities located in the vicinity of
Colony Cove as competition. Occupancies of those properties averaged
approximately 99% and comparative rents ranged from $250 to $335 per month.
Real estate taxes for Colony Cove totalled approximately $648,000 and
$264,000 in 1995 and 1994, respectively. These are no present plans to
improve or further develop the community. The Company believes Colony Cove
and its other communities are adequately insured.
PROPERTIES
7
<PAGE>
The following table summarizes certain information regarding the Company's
properties which were owned as of December 31, 1995. Occupancy levels are
presented for the periods set forth below for each property.
<TABLE>
<CAPTION>
Number
Location of Sites Occupancy Levels at
--------------------------------------
(Closest Major City) Community 12/31/95 12/31/95 12/31/94 12/31/93 12/31/92
- - -------------------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fultondale AZ 100 Oaks 241 98% (1) (1) (1)
Yuma AZ May Avenue 113 99% 99% 100% 98%
Palm Springs CA Bermuda Palms 186 95% 97% 99% (2)
Palm Springs CA The Colony (3) 220 100% 100% 100% (2)
Palm Springs CA La Quinta Ridge 152 82% 85% 88% (2)
San Francisco CA The Orchard 233 100% 100% 100% (2)
San Jose CA Eastridge Estates 187 100% 99% 100% (2)
Denver CO Countryside Village 344 99% 96% 93% 84%
Denver CO Friendly Village 226 100% 100% 100% (2)
Longmont CO Countryside Village 310 100% 100% 98% 100%
Clearwater FL Pinellas Cascades 238 96% 98% 99% 100%
Clearwater FL Whispering Pines 397 99% 100% 99% 100%
Daytona Beach FL Eldorado Estates 126 98% 98% 98% 98%
Jacksonville FL Countryside Village 643 94% 88% 87% 86%
Melbourne FL Mobiland 214 90% 95% 97% 98%
Naples FL Southwind Village 338 92% 93% 92% 93%
Orlando FL Starlight Ranch 783 95% (1) (1) (1)
Orlando FL Conway Circle 111 98% 99% 99% 97%
Orlando FL Foxwood Farms 375 71% 68% 60% (2)
Orlando FL Jade Isle 101 100% 100% 100% 99%
Orlando FL Land O'Lakes 177 99% 99% 100% 98%
</TABLE>
8
<PAGE>
PROPERTIES (Continued)
<TABLE>
<CAPTION>
Location Number
of Sites
Location Occupancy Levels at
--------------------------
(Closest Major City) Community 12/31/95 12/31/95 12/31/94 12/31/93 12/31/92
- - -------------------- --------- ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Orlando FL Town & Country 72 94% 94% 94% 97%
Tampa FL Goldtree 295 85% 84% 78% (4)
Vero Beach FL Midway Estates 204 97% 97% 98% 99%
Sarasota FL Colony Cove (3) 2,212 100% 100% 100% (2)
Albany GA Oak Grove 173 100% 100% 95% 94%
Albany GA Paradise Village 226 100% 99% 84% 85%
Atlanta GA Landmark 524 93% 95% 86% (2)
Atlanta GA Atlanta Meadows 75 99% 99% 99% 99%
Atlanta GA Castlewood Estates 325 80% (1) (1) (1)
Atlanta GA Colonial Coach Estates 481 76% (1) (1) (1)
Augusta GA Butler Creek 172 97% 100% 98% 100%
Kingsland GA Camden Point 269 62% 65% 79% 79%
Boise ID Coach Royale 93 100% 100% 100% (2)
Boise ID Shenandoah 147 100% 100% 100% (2)
Boise ID Maple Grove 270 100% 97% 95% 95%
Moline IL Mobet 191 99% 91% 92% 90%
Goshen IN Twin Pines 200 99% 98% 97% 98%
Indianapolis IN Hickory Knoll 325 98% 100% 98% 99%
Indianapolis IN Mariwood 296 99% 98% 97% 98%
Indianapolis IN Pendleton 102 100% 100% 100% 100%
Indianapolis IN Skyway 156 100% 96% 99% 99%
Davenport IA Lakewood 172 100% 97% 95% 97%
Dubuque IA Terrace Heights 315 100% 100% 100% 100%
Louisville KY Rolling Hills 159 100% 100% 100% 99%
Shreveport LA Stonegate 157 93% 83% 77% 84%
Kalamazoo MI Royal Estates 154 99% 97% 93% 90%
Midland MI Science City 170 100% 99% 98% 99%
Great Falls MT Countryside Village 222 89% 94% 95% 91%
Las Vegas NV Casa Linda 107 96% 98% 96% 100%
Ithaca NY Meadowbrook 254 89% 93% 92% 98%
Syracuse NY Casual Estates 960 95% 96% 98% 99%
Syracuse NY Shady Brook 89 95% 96% 98% 96%
Greensboro NC Oakwood Forest 477 100% 97% 86% 88%
Grand Forks ND President's Park 174 99% 99% 99% (2)
Cincinnati OH Mosby's Point 150 98% 99% 99% 100%
Cleveland OH Willo Arms 262 99% 99% 97% 97%
Columbus OH Vance 134 98% 100% 98% 95%
Stillwater OK Crestview 237 89% 84% 72% 64%
Portland OR Riverview 133 100% 100% 100% 100%
Salem OR Knoll Terrace 211 100% 100% 100% 100%
Brownsville TX Leisure World 179 83% 85% (2) (2)
Brownsville TX Trails End 290 85% 81% (2) (2)
9
<PAGE>
Richland WA Flamingo Village 201 100% 99% 99% 96%
Seattle WA Marysville Meadows 230 98% 97% 98% 99%
Laramie WY Breazeale 118 98% 98% 98% 100%
------ --- --- --- ----
Total 18,078 94% 95% 95% 94%
====== === === === ====
<FN>
(1) Acquired during 1995
(2) Acquired during 1994
(3) Community is subject to ground lease(s)
(4) Acquired December 1993
</TABLE>
10
<PAGE>
Item 6 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company owned 66 (18,078 homesites) and 62 (16,220 homesites) communities
as of December 31, 1995 and 1994, respectively. In addition, the Company fee
managed 41 (9,832 homesites) and 39 (9,534 homesites) communities as of
December 31, 1995 and 1994, respectively.
At December 31, 1995, the Company had total assets of $285,202,000,
consisting primarily of its manufactured housing communities, and total
liabilities of $93,568,000, consisting primarily of mortgage debt of
$60,390,000, line of credit borrowings of $24,253,000 and distributions
payable of $4,845,000.
The Company derives its revenues principally from the rental of home sites at
its manufactured home communities and, to a lesser extent, fee income from
its property management business.
The following discussion should be read in connection with the Selected
Financial Data and all of the financial statements included herein.
Results of Operations
Year ended December 31, 1995 as compared to 1994.
During the first quarter of 1994, the Company acquired four communities
aggregating 640 homesites for a combined purchase price of $9,942,000. During
the second quarter of 1994, two communities aggregating 469 homesites were
acquired for a combined purchase price of $3,750,000. The Company completed
its second public offering during the third quarter of 1994 and acquired
eight communities aggregating 4,089 homesites for a combined purchase price
of $76,502,000 and $4,999,000 of mortgages receivable acquired in connection
with the acquisition of Colony Cove.
During the first quarter of 1995, the Company acquired one community
aggregating 241 homesites for $2,275,000. During the third quarter of 1995,
the Company acquired three communities aggregating 1,589 homesites for a
combined purchase price of $23,060,000.
The Company had revenues of $51,502,000 and $37,531,000 for the years ended
December 31, 1995 and 1994, respectively. Rental income increased $13,210,000
(37%), which included $2,284,000 (6%) for the communities owned during both
periods as a result of rental increases of 5% and occupancy increases of 1%
at the communities. Management income increased $304,000 (31%) due to the
October 1994 acquisition of management contracts for 22 manufactured home
communities. Other income increased $457,000 (91%) primarily due to interest
income from the acquisition of three mortgage loans ($4.9 million) as part of
the purchase of the Colony Cove community in August 1994.
Total property operating expenses increased $5,672,000 (39%) and $655,000
(4.8%) for communities owned during both periods. Property operations and
maintenance increased $4,956,000 (44%) primarily resulting from the
acquisitions of communities noted above and an increase of $617,000 (6%) for
communities owned during both periods. Primary components of the increase for
communities owned during both periods are increases in payroll of $98,000,
utilities of $241,000 and repairs and maintenance
11
<PAGE>
of $125,000. Real estate taxes increased $716,000 (23%) primarily due to the
communities acquired in 1995 and 1994.
General and administrative expenses increased $511,000 (20%) as a result of
the acquisitions during 1994. Depreciation and amortization expenses
increased $3,304,000, of which $1,460,000 was attributed to the communities
owned during both periods.
The Company had net income of $11,527,000 and $7,261,000 for the years ended
December 31, 1995 and 1994, respectively. The increase of $4,266,000 (59%)
was primarily a result of the operations noted above and the acquisition of
the 14 communities during 1994.
The Company year ended December 31, 1994 as compared to the combined Company
and its predecessor year ended December 31, 1993.
Rental income increased $20,338,000 (125%) as a result of rental increases of
approximately $499,000 (5%) at the 20 communities owned during both periods,
and $19,839,000 from the acquisition of 28 communities between August 24,
1993 and December 31, 1993 and the acquisition of 14 communities during 1994.
Management income decreased $432,000 (31%) as a result of the acquisition by
the Company on August 24, 1993 of 20 communities. Prior to the acquisition,
those communities were fee managed by the Company.
Property operations and maintenance expenses increased $6,267,000 (126%) as a
result of utility, payroll and maintenance cost increases at the communities
owned during both periods of approximately $155,000, and $6,112,000 from the
acquisition of 28 communities between August 24, 1993 and December 31, 1993
and 14 communities during 1994. Real estate taxes increased $1,545,000 (95%)
primarily as a result of the acquisition of 28 communities from August 24,
1993 and December 31, 1993 and the acquisition of 14 communities in 1994.
General and administrative expenses increased $1,594,000 (160%) primarily as
a result of costs associated with operating as a public company from August
19, 1993 and the acquisition of 28 communities between August 24, 1993 and
December 31, 1993 and the acquisition of 14 communities in 1994.
Interest, depreciation, and amortization expenses are not comparable as the
20 communities owned by the Company's predecessor were purchased by the
Company on August 24, 1993 along with 27 other communities for cash from the
proceeds of the Company's IPO and the proceeds of the Company's mortgage debt
on that date. As a result, each community acquired from the predecessor
assumed a new cost basis and debt structure. This resulted in non-comparable
depreciation and interest expense.
Net income is not comparable due to the material changes in depreciation and
interest noted above.
Liquidity and Capital Resources
At December 31, 1995, the Company had cash of $652,000, cash reserves,
established pursuant to the terms of the Company's mortgage debt for capital
replacements and real property taxes, expected to be incurred during the
following year, of $876,000, and other current assets of $1,287,000. At
December 31, 1995, the Company had accounts payable and accrued expenses of
$2,616,000 including property taxes payable of $908,000, dividends payable of
$4,845,000, and other current liabilities of $553,000. At December 31, 1995,
the Company had $2,000,000 available under its $3 million working capital
line
12
<PAGE>
of credit and $21,747,000 available under its $45 million line of credit. The
Company has $60,390,000 of mortgage debt (the "Mortgage Debt") which bears
interest at a fixed rate of 7.16%. The mortgage debt is due and payable on
August 1, 2000. On December 31, 1995, the Company had $23,253,000 outstanding
on its $45 million line of credit and $1,000,000 outstanding on its $3
million line of credit.
Liquidity Sources and Requirements
The Company expects to meet its short-term liquidity requirements,
principally distributions to stockholders and capital improvements to its
communities, through funds generated from operations and working capital,
including cash reserves established pursuant to the terms of the Mortgage
Debt.
The Company declared a distribution of $4,845,000, or $0.39 per share, on
December 15, 1995 for stockholders of record on December 31, 1995. The
distribution was paid on January 12, 1996.
Expansion of existing manufactured home communities, acquisition of
additional communities and the repayment of principal on the Mortgage Debt or
any other debt incurred by the Company, represent the Company's principal
long-term capital requirements. The Company does not expect to generate
sufficient funds from operating cash flow to meet its long-term liquidity
needs described above and intends to finance them primarily through
additional equity offerings, borrowings under its $45 million line of credit
or alternative forms of financing. The Company intends to incur additional
borrowings for such purposes in a manner consistent with its policy of
maintaining a ratio of debt-to-total market capitalization of less than 50%.
Net cash provided by operating activities was $23,324,000 and $15,716,000 for
the years ended December 31, 1995 and 1994, respectively. The reasons for the
increase in net cash provided by operating activities are described above.
Cash outflows for investing activities primarily included the acquisition of
rental property of $28,023,000 and $94,459,000 in 1995 and 1994,
respectively, and capital improvements to the communities of $5,266,000 and
$2,851,000 in 1995 and 1994, respectively. Cash flows in 1995 from financing
activities included $28,114,000 of proceeds from the Company's $45 million
line of credit that were used to purchase five communities, and to make
principal repayments of $3,861,000 on the $45 million line of credit and
distributions to stockholders of $19,256,000. The result of these activities
resulted in the Company reducing its cash balance $6,068,000 during 1995.
Cash flows in 1994 from financing activities included $58,003,000 in proceeds
from the Company's $45 million line of credit used to purchase eight
communities. The $45 million line of credit was repaid in full with proceeds
of $95,199,000 from the Company's common stock offering (August 18, 1994).
The remaining proceeds were used to purchase six additional communities and
$4,999,000 of mortgages receivable in connection with the Colony Cove
acquisition. Additionally, the Company paid $12,761,000 in distributions to
stockholders in 1994. As a result of these activities, the Company's cash
balance decreased $4,641,000 during 1994.
Inflation
Substantially all of the leases at the communities allow for monthly or
annual rent increases which provide the Company with the opportunity to
achieve increases in rental income as each lease matures. Such types of
leases generally minimize the risk of inflation to the Company.
13
<PAGE>
CHATEAU PROPERTIES, INC.
STATEMENTS OF INCOME
The financial statements of the Company and the Predecessor are not
comparable in all respects (Note 1).
<TABLE>
<CAPTION>
Predecessor
-----------
For the Period For the Period
For the Year For the Year November 23, January 1,
Ended Ended through through
December 31, December 31, December 31, November 22,
1995 1994 1993 1993
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 59,912 $ 47,318 $ 4,577 $ 38,242
Interest and other income 1,943 749 110 684
61,855 48,067 4,687 38,926
Expenses:
Property operating and maintenance 16,021 12,497 1,047 10,368
Real estate taxes 4,523 3,835 416 3,825
Depreciation 11,014 7,230 707 5,823
Administrative 3,866 3,612 404 2,716
Interest and related amortization 12,452 5,996 576 12,101
Reorganization costs -- -- 1,699 --
-------- -------- -------- --------
47,876 33,170 4,849 34,833
======== ======== ======== ========
Income (loss) before
extraordinary
item and majority interest 13,979 14,897 (162) 4,093
Extraordinary charge from early
extinguishment of debt (829) -- (2,738) --
Income (loss) before
majority interest 13,150 14,897 (2,900) 4,093
Majority interest in
(income) loss of
Operating Partnership (7,847) (8,860) 1,717 --
--------
Net income (loss) $ 5,303 $ 6,037 $ (1,183) $ 4,093
-------- -------- -------- --------
Earnings per share:
Income (loss) before
extraordinary item $ .95 $ 1.05 $ (.01)
Extraordinary item (.06) -- (.20)
--------
Net income (loss) $ .89 $ 1.05 $ (.21)
-------- -------- --------
Dividends/distributions declared per
common share/OP unit outstanding $ 1.525 $ 1.425 $ .15
-------- -------- --------
Tax status of dividends,
return of capital $ .53 $ .41 $ .15
-------- -------- --------
Weighted average common shares
outstanding 5,959 5,750 5,750
-------- -------- --------
Weighted average common
shares and OP units outstanding 14,779 14,189 14,081
-------- -------- --------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CHATEAU PROPERTIES, INC.
BALANCE SHEET
December 31,
In thousands, except per share data 1995 1994
---------- -------
Assets
<S> <C> <C>
Rental property;
Manufactured home community improvements $216,591 $208,001
Community buildings 17,231 16,942
Furniture and other equipment 7,276 6,980
-------- --------
241,098 231,923
69,868 58,856
-------- --------
171,230 173,067
Land 32,891 32,081
Land and improvements for expansion sites 2,434 2,829
206,555 207,977
-------- --------
Cash and cash equivalents 944 3,370
Rent and other receivables 1,855 1,680
Prepaid expenses and other assets 2,680 2,391
-------- --------
Total assets 212,034 215,418
======== ========
Liabilities
Debt $132,700 $132,747
Accrued interest payable 2,447 520
Accounts payable and accrued expenses 5,997 5,425
Tenants' security deposits and rents received in advance 4,364 4,220
Accrued dividends/distributions 5,954 5,395
-------- --------
Total liabilities 151,462 148,307
======== ========
Majority interest in Operating Partnership 36,264 41,569
Shareholders' Equity
Preferred stock, $.01 par value, 2 million shares
authorized; no shares issued or outstanding
Common stock, $.01 par value, 30 million shares
authorized; 6,095,960 and
5,750,000 shares issued and outstanding
at December 31, 1995 and 1994, respectively 61 58
Additional paid-in capital 33,152 30,678
Dividends in excess of accumulated earning (8,064) (4,203)
Notes receivable, officers, 43,125 and 50,000 shares
outstanding at December 31, 1995 and 1994, respectively (841) (991)
-------- ---------
15
<PAGE>
Total shareholders' equity 24,308 25,542
-------- --------
Total liabilities and shareholders' equity $212,034 $215,418
======== ========
</TABLE>
16
<PAGE>
CHATEAU PROPERTIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY/OWNERS' DEFICIT
The financial statements of the Company and the Predecessor are not
comparable in all respects (Note 1).
<TABLE>
<CAPTION>
Predecessor
--------------
For the Period For the Period
For the Year For the Year November 23, January 1,
Ended Ended through through
December 31, December 31, December 31, November 22,
1995 1994 1993 1993
------------ ------------ ------------ -------------
In thousands, except per share data
<S> <C> <C> <C> <C>
Common stock:
Balance at beginning of period $ 58 $ 58 $ --
Issuance of 5,750,000 shares 58
Issuance of 10,500 shares from awards
and exercise of options --
Issuance of 335,460 shares of common
stock in exchange for units in
Operating Partnership 3
--------- --------- ---------
Balance at end of period $ 61 $ 58 $ 58
--------- --------- ---------
Additional paid-in capital (owners' accumulated
deficit):
Balance at beginning of period $ 30,678 $ 26,412 $ (39,913) $ (46,016)
Net income 4,093
Contributions from owners, net 2,010
Issuance of 5,750,000 shares 104,732
Exercise of common stock options, 7,500 shares 150
Majority interest in Operating Partnership
as of November 23, 1993 (38,407)
Issuance of 335,460 shares 1,544
Allocation for majority interest ownership
in Operating Partnership 780 4,266
--------- --------- --------- ---------
Balance at end of period $ 33,152 $ 30,678 $ 26,412 $ (39,913)
--------- --------- --------- ---------
Dividends in excess of accumulated earnings: --
Balance at beginning of period $ (4,203) $ (2,046) $ (1,183)
Net income (loss) 5,303 6,037 (863)
Dividends declared, $1.525, $1.425 and
$.15 per share (9,164) (8,194) $
--------- --------- ---------
Balance at end of period $ (8,064) $ (4,203) (2,046)
--------- --------- ---------
Notes receivable, officers: $ (991) $ (1,000) --
Balance at beginning of period $ (1,000)
Issuance of 50,000 shares of common stock 150 9 -3-
--------- --------- ---------
Payments received $ (841) $ (991) $ (1,000)
--------- --------- ---------
Balance at end of period
Total shareholders' equity/ (owners' deficit balance),
end of period $ 24,308 $ 25,542 $ 23,424 $ (39,913)
--------- --------- --------- ---------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
17
<PAGE>
CHATEAU PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
The financial statements of the Company and the Predecessor are not
comparable in all respects (Note 1).
<TABLE>
<CAPTION>
Predecessor
--------------
For the Period For the Period
For the Year For the Year November 23, January 1,
Ended Ended through through
December 31, December 31, December 31, November 22,
1995 1994 1993 1993
------------ ------------ ------------ -------------
In thousands, except per share data
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,303 $ 6,037 $ (1,183) $ 4,093
Adjustments to reconcile to net cash
provided by operating activities:
Income (loss) attributable to majority interest 7,847 8,860 (1,717)
Extraordinary items 829 2,738
Depreciation 11,014 7,230 707 5,823
Amortization of debt issuance costs 538 436 26 269
Decrease (increase) in operating assets (77) (1,280) 3,936 (151)
Increase (decrease) in operating liabilities 2,643 1,301 473 (1,375)
--------- --------- --------- ---------
Net cash provided by operation activities $ 28,097 $ 22,584 $ 4,980 $ 8,659
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of 8 3/4% Senior Notes 74,866
Borrowing 9,174
Net borrowing (payments) on line of credit (30,000) 30,000
Repayment of mortgages (43,953) (5,210) (85,998) (11,505)
Prepayment penalties (667) (2,201)
Principal payments (1,113) (845)
Payment of debt issuance cost (954)
Dividends/distributions to shareholders/
OP unit holder (21,982) (16,898)
OP units reacquired (882)
Capital contributions, net 103,790 (3,652)
Exercise of common stock options and other 320 9
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (24,365) 7,056 15,591 (5,983)
--------- --------- --------- ---------
Cash flows from investing activities:
Acquisition of rental properties (2,766) (42,947)
Additions to rental properties (3,392) (3,267) (639) (3,416)
--------- --------- --------- ---------
Net cash used equivalents, end of period (6,158) (46,214) (639) (3,416)
--------- --------- --------- ---------
Increase (decrease) in case and cash equivalents (2,426) (16,574) 19,932 (740)
--------- --------- --------- ---------
Cash and cash equivalents, beginning of period 3,370 19,944 12 752
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 944 $ 3,370 $ 19,944 $ 12
--------- --------- --------- ---------
Supplemental cash flow information:
Cash paid during period for interest $ 9,987 $ 5,148 $ 442 $ 11,506
--------- --------- --------- ---------
OP units issued for rental property $ 3,434 $ 13,521
--------- ---------
Liabilities assumed for rental property $ 57,685
---------
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
18
<PAGE>
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
-------
1. Basis of Presentation and Formation of Company:
The accompanying financial statements consist of the consolidated
financial statements of Chateau Properties, Inc. (the "Company"), a
Real Estate Investment Trust (REIT), and the combined financial
statements of Chateau Properties Group (the "Predecessor"). The Company
is engaged in the business of owning and operating 44 manufactured
housing community properties in Michigan, Florida, Minnesota and North
Dakota. A manufactured housing community is real estate designed and
improved with sites for placement of manufactured homes. The owner of
the home leases the site from the Company generally for a term of one
year or less.
On November 23, 1993, the Company completed a public offering of
5,700,000 shares of $.01 par value common stock (the "Offering"). The
offering price per share was $20.00 resulting in gross offering
proceeds of $114 million. Net of underwriters discount and offering
expenses, the Company received approximately $104 million in proceeds.
Simultaneous with the Offering, the Company contributed the net
proceeds from the Offering and was admitted as the sole general
partner, with an approximate 41 percent interest, in an operating
partnership (the "Operating Partnership") representing the successor
owner of 33 manufactured housing community properties. These properties
were contributed by the owners of the Predecessor to the Operating
Partnership in exchange for limited partnership interests (OP units)
which, subject to certain limitations, are exchangeable at any time at
the option of the holders for common stock of the Company on a
one-for-one basis. The Predecessor consisted of the manufactured
housing community properties of Chateau Estates, a Michigan
co-partnership, of InterCoastal Communities, Inc. and its affiliates
and of six co- partnerships affiliated with Leonard Maas (the
"Contributing Parties").
This business combination was accounted for as a reorganization of
entities under common control, and accordingly, there were no changes
in the basis of assets and liabilities. However, because a substantial
portion of the net proceeds of the Offering were used to retire
existing indebtedness of the Operating Partnership and certain other
operating changes were made, the results of operations of the Company
and the Predecessor are not comparable and, therefore, the financial
statements of the Predecessor have been prominently identified as
Predecessor in these financial statements.
19
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
2. Summary of Significant Accounting Policies:
Principles of Consolidation
As the sole general partner, the Company has unilateral control and complete
responsibility for management of the Operating Partnership and therefore, the
consolidated financial statements include the accounts of Chateau Properties,
Inc. and the Operating Partnership. All significant inter-entity balances and
transactions have been eliminated in consolidation.
Estimates
The preparation of these financial statements involves the use of certain
management estimates and assumptions that affect reported amounts and
disclosures, such as the useful lives of rental properties. Actual results
could differ from estimates.
Revenue Recognition
Rental income is recognized when earned and due from residents. The leases
entered into by residents for the rental of a site are generally for terms
not longer than one year, renewable upon the consent of both parties or, in
some instances, as provided by statute.
Rental Property
Rental property is carried at the lower of cost, less accumulated
depreciation, or net realizable value. Management believes that the net
realizable value of its investments in real estate exceed the carrying value
of the assets determined generally by comparison of the carrying value to the
expected net operating income of the properties.
Depreciation on manufactured home communities is computed primarily on the
straight-line method over the estimated useful lives of the assets.
The estimated useful lives of the various classes of rental property assets
are primarily as follows:
<TABLE>
<CAPTION>
Estimated Useful
----------------
Class of Asset Lives (Years)
- - -------------- -------------
<S> <C>
Manufactured home community improvements 20 to 30
Community buildings 25 to 30
Furniture and other equipment 4 to 10
</TABLE>
20
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
2. Summary of Significant Accounting Policies, continued:
Maintenance, repairs and minor improvements to rental properties are
expensed when incurred. Major improvements and renewals are
capitalized. When rental property is disposed of or retired, the cost
of such property, net of accumulated depreciation and sale proceeds, is
recognized in income.
Income Taxes
The Company has elected to be taxed as a real estate investment trust
("REIT") under Section 856(c) of the Internal Revenue Code of 1986, as
amended. The Company generally will not be subject to Federal income
tax to the extent it distributes its REIT taxable income to its
shareholders. REITs are subject to a number of organizational and
operational requirements. If the Company fails to qualify as a REIT in
any taxable year, the Company will be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. The Company remains subject to
certain state and local taxes on its income and property as well as
Federal income and excise taxes on its undistributed income.
Prior to November 23, 1993 and in accordance with partnership and
S-corporation taxation, each equity owner was responsible for reporting
their share of taxable income; accordingly, the Predecessor's statement
of income contains no provision for Federal income taxes.
Per Share Data
Earnings per share are computed based upon the weighted average number
of common shares outstanding during the period. The conversion of an OP
unit to common stock has no effect on earnings per common share since
the allocation of earnings to an OP unit is equivalent to earnings
allocated to a share of common stock. Common stock equivalents are not
significant.
21
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
2. Summary of Significant Accounting Policies, continued:
Stock-Based Compensation
Accounting for SFAS No. 123 Stock-Based Compensation, will not have a
material impact on the financial position or the results of operations
of the Company when adopted in 1996. The Company expects to continue to
account for employee stock based compensation under APB Opinion No. 25,
Accounting for Stock Issued to Employees, and present the pro forma
disclosures as permitted and required by SFAS No. 123.
Cash Equivalents
All highly liquid investments with an initial maturity of three months
or less are considered to be cash equivalents.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" requires disclosures about the
fair value of financial instruments whether or not such instruments are
recognized in the balance sheet. Due to the short-term nature of the
Company's financial instruments, other than debt, fair values are not
materially different from their carrying or contract values. Based on
the borrowing rates available to the Company, the carrying value of
debt approximates fair value.
Debt Issuance Costs
Costs incurred related to obtaining financing such as service and
commitment fees are deferred and are amortized over the term of the
related commitment/loans. These costs net of accumulated amortization
are included in prepaid expenses and other assets in the accompanying
balance sheets.
Financial Statement Reclassifications
Certain amounts in prior year financial statements have been
reclassified to conform with presentations adopted in the current year.
22
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
3. Acquisition of Rental Property
On September 15, 1995, the Company acquired Hidden Valley, a 303-site
community in Lake Buena Vista, Florida. The purchase price of
$6,200,000 was paid with $2,766,000 in cash, of which $2,600,000 was
borrowed on the Company's line of credit and $3,434,000 through the
issuance of 161,614 OP units. The borrowing on the line of credit
was repaid in December 1995.
During 1994, the Company acquired ten communities. Each community was
purchased from an unaffiliated third party. The acquisitions have been
accounted for utilizing the purchase method of accounting, and
accordingly the results of operations are included in the statement of
income from the date of acquisition of which 95 percent of the sites
acquired were purchased in November 1994. The Del Tura community was
acquired through the acquisition of partnership interests in
partnerships owning the community. The purchase price includes rental
property and other assets.
The purchase price of the acquired communities was paid (in thousands)
as follows:
<TABLE>
<S> <C>
Bank borrowings $ 30,000
Mortgages and other notes 55,971
Other liabilities 1,714
Available cash, net of cash acquired 12,947
Issuance of 676,868 OP units at approximately $20 per unit 13,521
--------
Total purchase price (a) $114,153
--------
<FN>
(a) In addition to the purchase price paid at the time of acquisition,
the Company committed to pay up to $6.2 million ratably to the sellers
of the Del Tura Community as approximately 190 sites that were vacant
at the time of purchase, become occupied over a period of up to ten
years.
</TABLE>
23
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
4. Financing:
At December 31, 1995, the Company had $40 million available under a
line of credit. On January 8, 1996, the Company entered into a
renegotiated line of credit agreement for $50 million ("Line of
Credit") with Huntington National Bank as lead agent for a bank group
to provide funding for future construction, acquisitions and general
business obligations. The Line of Credit is unsecured, currently bears
interest at the prime rate of interest or, at the Company's option,
LIBOR plus 150 basis points and extends until January 1999. The
commitment contains customary covenants, including a debt service
coverage ratio and a restriction on the incurrence of additional
collateralized indebtedness without a corresponding increase in rental
property. The line is renewable annually through December 31, 1998. The
terms of the Line of Credit provide for the payment of a fee of up to
25 basis points on the average daily unused amount of the Line of
Credit.
On March 2, 1995, the Company received approximately $74.3 million in
net proceeds from the issuance of $75 million of unsecured Senior Notes
(the "Notes") by the Operating Partnership. The Notes have semi-annual
interest payments, an effective fixed interest rate of 8.79 percent per
annum and mature on March 2, 2000. The Notes contain certain covenants
including a restriction on the incurrence of collateralized
indebtedness subject to certain provisions.
The proceeds from the issuance of the Notes were used to repay
approximately $25 million in fixed rate mortgages, including prepayment
penalties of $700 thousand and $49 million in indebtedness incurred in
the acquisition of eight communities in November 1994.
25
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
4. Financing:, continued
The following table sets forth certain information regarding debt at
December 31:
<TABLE>
<CAPTION>
Maturity Principal Balance
Fixed Rate Mortgages: Interest Rate Date 1995 1994
------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Community
Macomb 9.82% 9/99 $ 16,654 $ 16,949
Norton Shores/Ferrand Estates 8.00% 4/99 3,626 3,712
Oak Hill 8.00% 9/98 1,291 1,324
Del Tura 8.40% 6/00 33,854 34,341
-------- --------
55,425 56,326
Other notes payable Various 1996-2020 2,275 2,505
Unsecured Senior Notes 8.75% 3/00 75,000 --
Debt repaid in March 1995 with proceeds
from issuance of Senior Notes:
Fixed rate mortgages -- 24,408
Variable rate mortgages -- 19,508
Line of credit -- 30,000
-------- --------
-- 73,916
-------- --------
$132,700 $132,747
-------- --------
</TABLE>
The aggregate amount of principal maturities on the fixed rate
mortgages and $75 million Senior Notes payable subsequent to December
31, 1995 (in thousands) is as follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
1996 $ 984
1997 1,074
1998 2,347
1999 19,580
2000 106,440
--------
$130,425
--------
</TABLE>
26
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
5. Majority Interest in Operating Partnership:
Majority interest in the accompanying balance sheets represents the
ownership interest in the Operating Partnership held by other than the
Company. As of December 31, 1995 and as of December 31, 1994, the
majority interest was approximately 59 percent and 61 percent
respectively.
On May 23, 1995, certain Operating Partnership unit holders exercised
their right to exchange their OP units into 335,460 shares of common
stock of the Company at a one for one exchange rate. This transaction
resulted in an increase to outstanding common shares, and a
corresponding decrease in outstanding OP units. In connection with this
transaction, there were no proceeds received nor expenses incurred by
the Company.
During 1995, the Company, through the Operating Partnership, purchased
and retired 44,085 OP units at approximately $20 per unit. Pursuant to
the terms of certain acquisition agreements entered into in 1994, the
Company may be required to retire up to an additional 43,333 OP units
in each of 1996 and 1998 at a price of $20-$22 per unit depending on
the then closing price of the Company's stock.
26
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
5. Majority Interest in Operating Partnership:, continued
The following is a summary of activity of the majority interest in the
Operating Partnership for the periods presented including the
adjustment to/from shareholders' equity to reflect the appropriate
ownership percentage at the end of the period.
<TABLE>
<CAPTION>
Operating
Partnership Majority
Units Interest
----------- --------
(in thousands)
<S> <C> <C>
Majority interest in Operating
Partnership, November 23, 1993 8,331 $ 38,407
Majority interest in loss -- (1,717)
Distributions declared, $.15 per unit -- (1,249)
----- --------
Majority interest in Operating
Partnership, December 31, 1993 8,331 35,441
Majority interest in income -- 8,860
Distributions declared, $1.425 per unit -- (11,987)
Issuance of OP units in connection with 677 13,521
acquisitions
Allocation for shareholders' equity -- (4,266)
----- --------
Majority interest in Operating Partnership
at December 31, 1994 9,008 41,569
Majority interest in income -- 7,847
Distributions declared, $1.525 per unit -- (13,377)
Issuance of OP units in connection with
acquisitions 162 3,434
Exchange of OP units for shares of common
stock (336) (1,547)
OP units reacquired and retired by Operating
Partnership (44) (882)
Allocation for shareholders' equity -- (780)
----- --------
Majority interest in Operating Partnership
at December 31, 1995 8,790 $ 36,264
===== ========
</TABLE>
27
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
6. Stock Option Plan:
The Company's 1993 Long Term Incentive Stock Plan, as amended on May
18, 1995, (the "Plan") provides for up to 1,000,000 shares of common
stock that may be granted to directors, executive officers and other
key employees. Options granted under the Plan generally vest at a rate
of 25 percent per year and expire in 10 years. The Plan provides for
the grant of options at "fair market value" per share, which represents
the quoted market price of the Company's common stock on the date of
grant. The Plan also provides for the grant of restricted stock awards
and stock appreciation rights.
The Company has granted options to purchase shares of common stock to
certain officers, employees, and non-employee directors and consultants
of the Company as follows:
<TABLE>
<CAPTION>
Shares Subject Option Price
to Option Per Share
-------------- ------------
<S> <C> <C>
Balance at November 23, 1993 -- --
Options granted 163,000 $20.00
-------
Balance at December 31, 1993 163,000 $20.00
Options granted 30,000 $22.75
--------
Balance at December 31, 1994 193,000 $20.00-$22.75
Options granted 315,550 $19.50-$22.125
Options exercised (7,500) $20.00
Options forfeited (46,900) $19.50-$20.00
--------
Balance at December 31, 1995 454,150 $19.50 - $22.75
--------
</TABLE>
28
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
6. Stock Option Plan:, continued
On November 9, 1995, the Company issued restricted stock awards
representing 3,000 shares of stock.
As of December 31, 1995, 535,350 options remain available for grant and
74,000 options are exercisable.
7. Savings Plan:
Effective January 1, 1995, the Company established a qualified
retirement plan designed to qualify under Section 401 of the Internal
Revenue Code (the "401(k) Plan"). The 401(k) Plan allows the employees
of the Company to defer a portion of their eligible compensation on a
pre-tax basis subject to certain maximum amounts. Contributions by the
Company are discretionary and determined by the Company's management.
Company contributions are allocated to each participant based on the
relative compensation of the participant to the compensation of all
participants. The Company contributed approximately $275,000 to the
401(k) Plan for the year ended December 31, 1995.
8. Related Party Transactions:
Certain operations of the Predecessor, principally the golf courses and
marina operations, have not been conducted by the Company since the
Offering. The real estate constituting these operations has been leased
to GC Properties, Inc. ("GCI"), a corporation wholly owned by an equity
owner of the Company, in order to permit the Company's qualification as
a REIT under the Code. Additionally, golf course operations acquired
since the Offering are conducted by GCI. For the years ended December
31, 1995 and 1994, the Company recognized approximately $695,000, and
$100,000, respectively, of revenue related to these leases.
Rental expense of approximately $100,000 annually has been incurred for
leasing space in an office building owned by certain officers and
equity owners. The lease expires November 2001.
In connection with the formation of the Operating Partnership, the
Contributing Parties retained approximately $5.7 million of net
liabilities which has been reflected as a capital contribution in the
predecessor period January 1, 1993 through November 22, 1993.
29
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
9. Reorganization Costs:
Reorganization costs which represent costs incurred in the formation of
the Company and in integrating the Predecessor's operations into the
Company, consisted of the following (in thousands):
<TABLE>
<S> <C>
Merger commissions to third parties $ 1,016
Professional fees 520
Other costs 163
---------
$ 1,699
=========
</TABLE>
10. Extraordinary Item - Early Extinguishment of Debt:
The extraordinary charges in the accompanying statements of income
represent prepayment penalties and certain other related costs incurred
in connection with the early extinguishment of debt. Debt of $74
million was repaid in March 1995 with the proceeds from the issuance of
the Senior Notes (see Note 4) and $86 million was repaid in December
1993 with the proceeds from the Offering.
11. Contingencies:
The Company, as an owner of real estate, is subject to various
environmental laws. Compliance by the Company with existing laws has
not had a material adverse financial effect during the three year
period ended December 31, 1995, nor does management believe it will
have a material impact in the future. However, management cannot
predict the impact of new or changed laws or regulations on its current
properties or properties that it may acquire.
Several claims and legal actions arising from the normal course of
business, none of which are environmental related matters, have been
asserted against the Company, and are pending final resolution.
Although the amount of liability at December 31, 1995, if any, with
respect to these matters is not determinable, in the opinion of
management, none of these matters will result in material liability.
30
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
12. Quarterly Financial Information (Unaudited):
The following is quarterly financial information for the years ended
December 31, 1995 and 1994; (Amounts in thousands except per share data.)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
In thousands, except per share data March 31, June 30, September 30, December 31,
--------- -------- ------------- -----------
1995
------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 15,238 $ 15,271 $ 15,479 $ 15,867
========= ======== ======== ========
Operating income (a) $ 9,568 $ 9,063 $ 8,936 $ 9,878
========= ======== ======== ========
Extraordinary charge from early
extinguishment of debt $ 829 -- -- --
========= ======== ======== ========
Income before majority interest $ 2,890 $ 3,247 $ 3,103 $ 3,910
Majority interest in income of
Operating Partnership 1,764 1,948 1,822 2,313
--------- -------- -------- --------
Net income $ 1,126 $ 1,299 $ 1,281 $ 1,597
========= ======== ======== ========
Weighted average common shares
outstanding 5,752 5,897 6,089 6,095
========= ======== ======== ========
Weighted average common shares
and OP units outstanding 14,760 14,724 14,747 14,885
========= ======== ======== ========
Income before extraordinary
charge per share (a) $ .25 $ .22 $ .21 $ .26
========= ======== ======== ========
Net income per share (b) $ .20 $ .22 $ .21 $ .26
========= ======== ======== ========
</TABLE>
31
<PAGE>
Continued
CHATEAU PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
-------
12. Quarterly Financial Information (Unaudited):, continued
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
March 31, June 30, September 30, December 31,
--------- -------- ------------- -----------
1994
------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues $ 11,335 $ 11,479 $ 11,664 $ 13,589
========= ======== ======== ========
Operating income (a) $ 6,870 $ 6,135 $ 6,669 $ 8,449
========= ======== ======== ========
Income before majority interest $ 3,982 $ 3,370 $ 3,750 $ 3,795
Majority interest in income of
Operating Partnership 2,357 1,995 2,220 2,288
--------- -------- -------- --------
Net income $ 1,625 $ 1,375 $ 1,530 $ 1,507
========= ======== ======== ========
Weighted average common shares
outstanding 5,750 5,750 5,750 5,750
========= ======== ======== ========
Weighted average common shares
and OP units outstanding 14,081 14,081 14,081 14,509
========= ======== ======== ========
Net income per share (b) $ .28 $ .24 $ .27 $ .26
========= ======== ======== ========
<FN>
(a) Operating income represents total revenues less property operating
and maintenance expense, real estate taxes and administrative
expense. Operating income is a measure of the performance of the
properties before the effects of depreciation and interest and
related amortization costs.
(b Quarterly earnings per common share amounts may not total to the
full year amounts due to rounding and to the change in the number of
common shares outstanding.
</TABLE>
32
<PAGE>
33
<PAGE>
Item 7 - Financial Statements and Supplementary Data
ROC COMMUNITIES, INC.
INDEX TO FINANCIAL STATEMENTS
Page Number
I. Financial Statements of ROC Communities, Inc.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Income for the years ended
December 31, 1995 and 1994, and the period
August 25, 1993 to December 31, 1993
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995 and 1994, and the period August
25, 1993 to December 31, 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994, and the period August 25,
1993 to December 31, 1993
Notes to Consolidated Financial Statements
Supplemental Financial Information
II. Financial Statements of ROC Controlled Properties
Independent Auditors' Report
Combined Statement of Income for the period
January 1, 1993 to August 24, 1993
Combined Statement of Equity (Deficit) for the period
January 1, 1993 to August 24, 1993
Combined Statement of Cash Flows for the period
January 1, 1993 to August 24, 1993
Notes to Combined Financial Statements
III. Financial Statement Schedule for ROC Communities, Inc.
Real Estate and Accumulated Depreciation
All other schedules are omitted as the required information is
included in the financial statements or is not applicable.
34
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of ROC Communities, Inc.:
We have audited the accompanying consolidated balance sheets of ROC
Communities, Inc. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash
flows for the years ended December 31, 1995 and 1994, and the period August
25, 1993 to December 31, 1993. Our audits also included the financial
statement schedule listed in the index at Item 8. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of ROC Communities, Inc. and
subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended December 31, 1995 and
1994, and the period August 25, 1993 to December 31, 1993 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 2, 1996
35
<PAGE>
<TABLE>
<CAPTION>
ROC COMMUNITIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
December 31,
----------------------
1995 1994
--------- --------
<S> <C> <C>
Rental property, net $ 271,550 $ 248,672
Mortgages receivable 4,913 4,978
Cash and cash equivalents 652 6,720
Deferred financing costs, net 2,450 3,125
Prepaid expenses and other assets, net 5,637 6,283
--------- ---------
Total $ 285,202 $ 269,778
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
<S> <C> <C>
Mortgage debt $ 60,390 $ 61,618
Line of credit 24,253
Accounts payable and accrued expenses 2,616 2,690
Interest payable 553 395
Other liabilities 911 866
Distributions payable 4,845 4,721
-------- ---------
Total Liabilities 93,568 70,290
--------- ---------
<CAPTION>
Commitments and Contingencies
<S> <C> <C>
Stockholders' Equity:
Preferred stock ($.01 par value;
10,000,000 shares authorized, no
shares issued)
Common stock ($.01 par value;
90,000,000 shares authorized;
12,423,500 shares issued and outstanding) 124 124
Additional paid-in capital 208,868 208,868
Cumulative net income 20,577 9,050
Cumulative distributions (37,935) (18,554)
--------- ---------
Total Stockholders' Equity 191,634 199,488
--------- ---------
Total $ 285,202 $ 269,778
========= =========
</TABLE>
36
<PAGE>
See accompanying notes.
37
<PAGE>
<TABLE>
<CAPTION>
ROC COMMUNITIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
Year Year For the Period
Ended Ended August 25, 1993
December 31, December 31, to December 31,
1995 1994 1993
----------------------------------------------------
Revenues:
<S> <C> <C> <C>
Rental income $49,260 $36,050 $ 9,270
Management income 1,282 978 344
Other income 960 503 167
------- ------- -------
Total Revenue 51,502 37,531 9,781
------- ------- -------
Expenses:
Property operations and maintenance 16,194 11,238 2,693
Real estate taxes 3,892 3,176 835
General and administrative 3,100 2,589 718
Interest 4,882 4,664 1,511
Amortization of debt costs 1,073 724 185
Depreciation and amortization 10,834 7,879 2,050
------- ------- -------
Total Expenses 39,975 30,270 7,992
------- ------- -------
Net Income $11,527 $ 7,261 $ 1,789
======= ======= =======
Net Income Per Share $ .93 $ .80 $ .25
======= ======= =======
Weighted Average Shares of
Common Stock Outstanding 12,424 9,071 7,149
======= ======= =======
</TABLE>
38
<PAGE>
See accompanying notes.
40
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Shares Note
of Additional Receivable Cumulative
Common Par Paid-In for Common Net Cumulative
Stock Value Capital Stock Income Distributions Total
--------- ------ ---------- ----------- ---------- ------------- -----
<S> <C> <C> <C> <C> <C>
Shares issued upon formation 766 $ 7 $ 212 $(250) $ (31)
Shares sold to public, net of issuance costs
of $11,043 6,383 64 116,543 116,607
Deemed distributions to existing stockholders (5,008) (5,008)
Net income $ 1,789 1,789
Distributions declared ($.52 per share)
classified as:
Dividend ($.39 per share) $ (2,788) (2,788)
Return of capital ($.13 per share) (929) (929)
Collection of note receivable 250 250
--------- ----- -------- ----- ------- ---------- ---------
Balance, December 31, 1993 7,149 71 111,747 0 1,789 (3,717) 109,890
Shares sold to public, net of issuance costs
of $6,360 5,175 52 95,147 95,199
Shares issued for acquisitions (Note 7) 100 1 1,974 1,975
Net income 7,261 7,261
Distributions declared ($1.52 per share)
classified as:
Dividend ($.65 per share) (6,345) (6,345)
Return of capital ($.87 per share) (8,492) (8,492)
--------- ----- --------- ----- ------- -------- ---------
Balance, December 31, 1994 12,424 124 208,868 0 9,050 (18,554) 199,488
Net income 11,527 11,527
Distributions declared ($1.56 per share)
classified as:
Dividend ($.90 per share) (11,182) (11,182)
<PAGE>
Return of capital ($.66 per share) (8,199) (8,199)
--------- ----- --------- ----- ------- ---------- ---------
Balance, December 31, 1995 12,424 $ 124 $ 208,868 $ 0 $20,577 $ (37,935) $ 191,634
========= ====== ========= ===== ======= ========== =========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Year For the Period
Ended Ended August 25, 1993
December 31, December 31, to December 31,
1995 1994 1993
------------ ----------- -----------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net income $ 11,527 $ 7,261 $ 1,789
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,834 7,879 2,050
Amortization of debt costs 1,073 724 185
Changes in operating assets and liabilities:
Prepaid expenses and other assets (239) (1,415) (3,289)
Accounts payable, accrued expenses, and other
liabilities 129 1,267 2,217
--------- --------- ---------
Net cash provided by operating activities 23,324 15,716 2,952
--------- --------- ---------
Cash Flows From Investing Activities:
Acquisition of rental properties (28,023) (94,459) (162,964)
Capital expenditures (5,266) (2,851) (786)
Disposition of rental properties 63 83
Collection of mortgages receivable 65 21
---------- --------- ---------
Net cash used in investing activities (33,161) (97,206) (163,750)
--------- --------- ---------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net 95,199 116,607
Proceeds from line of credit 28,114 58,003
Principal payments on line of credit (3,861) (58,003)
Principal payments on mortgages (1,228) (590) (6)
Distributions paid (19,256) (12,761) (1,072)
Purchase of mortgages receivable (4,999)
Proceeds from issuance of long-term debt, net 56,380
Payment received on note issued for common stock 250
--------- --------- ---------
Net cash provided by financing activities 3,769 76,849 172,159
--------- --------- ---------
Net Change In Cash and Cash Equivalents (6,068) (4,641) 11,361
Cash and Cash Equivalents at Beginning of Period 6,720 11,361
--------- --------- ---------
Cash and Cash Equivalents at End of Period $ 652 $ 6,720 $ 11,361
========= ========= =========
Supplemental Cash Flow Information -
Interest paid $ 4,773 $ 4,709 $ 1,149
========= ========= =========
Supplemental Disclosure of Non-cash Investing and
Financing Activities:
Issuance of common stock for acquisitions $ 1,975 $ 219
Assumption of note receivable in merger 250
Assumption of debt for property acquisition 2,214
42
<PAGE>
ROC Controlled Properties organizers' basis adjustment
to reflect preacquisition historical cost 5,008
Deferred income resulting from property acquisition 300
<FN>
See accompanying notes.
</TABLE>
43
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business
ROC Communities, Inc. and ROCF, Inc. ("Subsidiary") (collectively, the
"Company") were organized on March 31, 1993 in Maryland. The Company
operates as a real estate investment trust. The Company and its
predecessors have been engaged in the ownership, management,
acquisition, operation and expansion of manufactured home communities
since 1979. The Company owned 66 communities (18,078 sites) located in
24 states and fee managed an additional 41 communities (9,832 sites)
as of December 31, 1995. The Company provides management services for
third party owners and affiliated entities.
Basis of Presentation
The accompanying financial statements include the accounts of ROC
Communities, Inc. and its wholly-owned subsidiary, ROCF Inc. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results could differ
from those estimates.
Rental Property
Expenditures for significant renovations and improvements which
improve or extend the useful life of rental property are capitalized.
Maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight line method over estimated
useful lives of 20 years for land improvements, 40 years for buildings
and 5 to 10 years for furniture, fixtures and equipment.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and liquid investments with
a maturity less than three months from the date of purchase.
44
<PAGE>
Deferred Financing Costs
Included in deferred financing costs are certain costs of obtaining
the Company's mortgage debt and line of credit which are amortized
over the term of the loan. Accumulated amortization was $1,983,000 and
$911,000 at December 31, 1995 and 1994, respectively.
Revenue Recognition
Rental income and management income is recognized when earned and due
from residents and customers.
Per Share Data and Distributions
Net income per share was calculated using a weighted average of
12,423,500, 9,071,000 and 7,149,000 shares of common stock outstanding
for the years ended December 31, 1995 and 1994 and the period August
25, 1993 to December 31, 1993, respectively. The potential dilutive
effect of stock options is not material. The Company declared a
distribution of $.39 on December 15, 1995 payable to stockholders of
record on December 31, 1995. The distribution was paid on January 12,
1996. The Company declared a distribution of $.38 on December 15, 1994
payable to stockholders of record on December 31, 1994. The
distribution was paid on January 17, 1995.
Income Taxes
The Company files a consolidated federal income tax return. The
Company qualified as a Real Estate Investment Trust under Sections 856
to 860 of the Internal Revenue Code effective with its taxable year
ended December 31, 1993. Accordingly, no provision for federal income
taxes has been reflected in the financial statements.
Earnings and profits, which will determine the taxability of
distributions to stockholders, will differ from net income reported
for financial reporting purposes due to differences in the cost basis
of the rental property and in methods used to compute depreciation and
amortization. The net tax basis of rental property at December 31,
1995 and 1994 was $292,745,000 and $252,602,000, respectively.
2. Public Offerings
On December 29, 1995, the Company filed an S-3 registration statement
with the Securities and Exchange Commission (SEC), to register an
aggregate of $200,000,000 of securities that the Company may offer in
the future, including one or more series of debt, common stock, common
stock warrants, preferred stock and/or depository shares representing
preferred stock.
On August 18, 1994, the Company sold 5,175,000 shares of Common Stock,
including the underwriters over-allotment of 675,000 shares, at
$19.625 per share. The net proceeds from the sale of such common
shares totalled $95,199,000. These proceeds were used to acquire five
45
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
communities ($31,542,000), to repay in full the Company's line of
credit balance of $57,503,000 which was previously used to purchase
six communities, and to provide working capital of $6,154,000.
The Company sold 6,382,500 shares of Common Stock, including the
underwriters over-allotment of 832,500 shares, as part of its IPO at
$20.00 per share on August 19, 1993. The net proceeds from the sale of
such shares totalled $116,607,000. Simultaneously with the IPO, the
Company issued mortgage indebtedness of $56,970,000 secured by first
mortgages on 40 manufactured home communities. Such funds were used to
purchase 47 manufactured home communities and to provide working
capital of approximately $15,795,000 that was used for the purchase of
additional manufactured home communities.
3. Acquisitions of Rental Properties
During 1995, the Company acquired four manufactured home communities
aggregating 1,830 sites for $25,335,000. Three of the communities were
purchased from an affiliate of the Company pursuant to an option
agreement (see Note 12).
During 1994, the Company acquired fourteen manufactured home
communities aggregating 5,198 homesites for $90,194,000 and $4,999,000
of mortgages receivable acquired in connection with the acquisition of
Colony Cove (see Note 5).
4. Rental Property
The following summarizes rental property (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
------------ ---------
<S> <C> <C>
Land $ 62,769 $ 54,979
Land improvements and buildings 225,719 201,250
Furniture, fixtures and equipment 3,173 2,288
--------- ---------
291,661 258,517
Accumulated depreciation (20,111) (9,845)
--------- ---------
Rental property, net $ 271,550 $ 248,672
========= =========
</TABLE>
Land improvements and buildings consist primarily of infrastructure,
roads, landscaping and clubhouses, storage buildings and common
amenities.
5. Mortgages Receivable
In connection with the purchase of the Colony Cove community, the
seller assigned to the Company three mortgage loans, having an
aggregate principal balance of $3,892,000 and
46
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
$3,940,000 as of December 31, 1995 and 1994, and the Company assumed
obligations under existing ground leases that expire 2017-2019. The
loans, which are secured by three separate fee interests underlying
the three land parcels leased by Colony Cove, bear interest at an
annual rate of 9.5%. Payments of principal and interest under the
three loans, which are fully amortizing over their terms, aggregate
approximately $420,000 per annum. Final principal payments under the
loans are due and payable to the Company on May 1, 2017, March 1, 2019
and April 1, 2019. The future minimum lease payments under the ground
leases are as follows: 1996 - $1,033,000; 1997 - $1,064,000; 1998 -
$1,097,000; 1999 - $1,131,000; 2000 - $1,168,000 and $36,556,000
thereafter. In addition, the Company has been assigned a $1,050,000
fully amortizing blanket mortgage loan secured by the fee interests
described above. The loan bears interest at a variable rate equal to
the prime rate plus 2%, adjusted quarterly, is due and payable in full
on February 28, 2014, and currently provides for annual payments of
principal and interest of approximately $115,000. The loan balance at
December 31, 1995 and 1994 was $1,021,000 and $1,038,000. The Company
has a right to offset all payments due under the mortgage loans
against rents due under the ground leases.
6. Mortgages Payable
A summary of the Company's outstanding mortgage debt is as follows:
<TABLE>
<CAPTION>
December 31
------------------------- Interest
Security 1995 1994 Rate Due Date
-------- --------- ------- -------- --------------
(in thousands)
<S> <C> <C> <C> <C>
40 properties (1) $ 60,000 $ 60,000 7.16% August 1, 2000
1 property 390 1,618 6.00% August 25, 1998
--------- --------
$ 60,390 $ 61,618
========= ========
<FN>
(1) As a condition of the $60 million Mortgage Debt, the Company was
required to establish reserves for capital improvements and
potential costs associated with possible replacement for sewage
treatment plants at two properties and potential hook-up to city
water and sewer systems at another property. These reserves
totalled $85,000 and $745,000 as of December 31, 1995 and 1994,
respectively. Additionally, property taxes of $791,000 and
$937,000 as of December 31, 1995 and 1994, respectively, were
escrowed by the lender. These amounts are included in prepaid
expenses and other assets in the accompanying balance sheets.
</TABLE>
7. Lines of Credit
The Company has a $45 million line of credit for acquisitions of new
properties. As collateral for the line of credit, the lender was
granted a first mortgage lien on 11 of the properties. During 1995,
the commitment was extended to June 30, 1996 at which time the
balance is due
47
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
in full; however, the Company expects to extend or replace the line of
credit before such date. Interest was modified and will accrue on the
outstanding balance at 30 day LIBOR plus 1.75%. The line of credit
balance was $23,253,000 at December 31, 1995 and unused at December
31, 1994.
The Company has a $3 million unsecured working capital revolving line
of credit with a bank. The commitment is through August 10, 1997 and
interest will accrue on the outstanding balance at 30 day LIBOR plus
1.75%. The balance at December 31, 1995 was $1,000,000.
8. Acquisition of Property Management Contracts
On December 1, 1994, the Company acquired management contracts for 22
manufactured home communities through the acquisition of a wholly
owned subsidiary of The Windsor Corporation ("Windsor"). Affiliates
of Windsor own the 22 manufactured home communities. The acquired
subsidiary had no other assets and no known liabilities. The Company
issued 100,000 shares of its Common Stock, valued at $1,975,000, to
Windsor to acquire the subsidiary, which was dissolved upon
completion of the transaction. Additional consideration may be
required if management fees earned by the Company during the
five-year period after the acquisition reach certain levels. A
portion of the common stock issued to Windsor is subject to return to
the Company if the revenues from Windsor affiliates decline below
certain levels over a five-year period.
9. Estimated Fair Value of Financial Instruments
The estimated fair value of assets and liabilities considered to be
financial instruments has been determined using available market
information and appropriate valuation methodologies. However,
considerable judgement is necessarily required to interpret market
data to develop the estimates of fair value. Accordingly, the
estimates presented are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have
a material effect on the estimated fair value amounts. At December
31, 1995 and 1994 the estimated fair value of the mortgages
receivable was $4,706,000 and $4,774,000, respectively. The fair
value is based upon discounted cash flows using estimated market
interest rates. Based upon market interest rates as of December 31,
1995 and 1994, the estimated fair value of the Company's mortgage
indebtedness was $59,905,000 and $54,736,000, respectively. Based on
the variable interest rate, the Company estimates the fair value of
its borrowings under the lines of credit to be equal to the recorded
amounts.
10. Stock Option Plan
The Company has established the 1993 Stock Option and Stock
Appreciation Rights Plan (the "Plan"). During 1995, the Plan was
amended to increase the number of shares of the Company's common
stock reserved for issuance under the Plan from 240,000 to 490,000
shares. The Plan
48
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
allows for the grant of "incentive" and "non-qualified" options
(within the meaning of the Internal Revenue Code of 1986, as amended)
and stock appreciation rights ("SARs"). A participant who holds SARs
may receive cash or shares of common stock for any appreciation of
such rights at the discretion of the Executive Compensation Committee
of the Board of Directors.
The Company has granted options to purchase shares of common stock to
certain officers and non-employee directors of the Company as
follows:
<TABLE>
<CAPTION>
Number of Shares Option Price
Granted Per Share
---------------- -----------
<S> <C> <C>
Balance at December 31, 1993 117,000 $20.00 - $21.00
Granted 90,000 $20.25 - $23.75
------- ---------------
Balance at December 31, 1994 207,000 $20.00 - $23.75
Granted 171,000 $20.38 - $21.75
------- ---------------
Balance at December 31, 1995 378,000 $20.00 - $23.75
======= ===============
</TABLE>
All options are granted at the fair market value of the Company's
stock on the date of grant and expire after ten years. Non-employee
members of the Board of Directors were each granted options to
purchase 6,000 shares of common stock in 1995. Such options vest
immediately. Options granted to officers of the Company generally vest
20% per year after the date of grant. There are 113,000 options that
vest one-third after each of 12, 18 and 24 months. At December 31,
1995 and 1994, 162,400 and 62,500 options, respectively, were
exercisable.
11. Commitments and Contingencies
The Company has agreed to purchase 312 expansion sites at Butler
Creek. The Company will purchase the sites in phases once each phase
has achieved a 90% occupancy rate. The purchase price will be based
upon a 9.5% capitalization rate applied to the trailing twelve months
net operating income at the time of purchase.
The Company has entered into employment agreements with its four
executive officers for aggregate annual compensation of $550,000. The
employment agreements commenced upon completion of the IPO and
continue in effect through December 31, 1995. Commencing January 1,
1994, each executive officer's base salary will increase each year in
the amount of the percentage increase of the Company's funds from
operations per share of Common Stock over the previous year. The
Company has established an incentive compensation plan for its
executive officers beginning in 1995. These arrangements provide that
each executive officer will earn a cash bonus for a calendar year
("Bonus Year"), as follows: if, in a Bonus year, the Company's funds
from operations per share increases between 5% and 10%, between 10%
and 15%, or in excess of 15% over the previous Bonus Year, each
participant will receive a 10%, 18% or 25%
49
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
cash bonus, respectively, based on such participant's base
compensation for the Bonus Year in which the increase occurred.
The Company has established a 401(k) plan for all employees and has
committed to make contributions to the plan. Beginning January 1,
1995, generally all employees employed prior to July 1, 1994 were
eligible to receive contributions of 3% of their annual salary.
Company contributions are used to purchase the Company's common stock.
Employees hired July 1, 1994 or later are eligible to enter the plan
following attainment of age 21 and one year of service. Employees must
be employed at the end of the year to receive the Company
contributions. Vesting occurs ratably over a five year period of
continuous service. The Company's contribution in 1995 was $90,000.
12. Option Agreements
The Company has option agreements with certain affiliates of the
Company providing the Company with individual options to purchase 12
properties currently held by those affiliates. The Option Agreements
are for a term of three years and expire on June 30, 1996.
13. Related Party Transactions
The Company rents office space from certain of its executive officers.
This operating lease has a five-year term through 1998, minimum annual
rent of $120,000 and is non-cancelable. Rent expense was $135,000,
$131,000 and $43,200 for the years ended December 31, 1995 and 1994
and the period August 25, 1993 to December 31, 1993, respectively.
The Company provides management services for properties owned by
certain entities that are affiliated with the executive officers of
the Company. The Company's management fee revenues from affiliates
were $429,000, $487,000 and $182,000 for the years ended December 31,
1995 and 1994 and the period August 25, 1993 to December 31, 1993,
respectively.
14. Recent Accounting Pronouncements
In 1996, the Company will be required to adopt Statement of Financial
Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (FAS
121). The Company has reviewed the requirements of FAS 121 and does
not expect the effect to be material to its financial position.
The Financial Accounting Standards Board has issued SFAS No. 123
"Accounting for Stock-Based Compensation" (FAS 123) effective in 1996.
The Company has elected to continue to account for stock options and
other plans for employees in accordance with Accounting Principles
Board Opinion No. 25; therefore there will be no financial statement
effect of adopting FAS 123.
50
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
SUPPLEMENTAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Interim Results
Quarters Ended
----------------------------------------------------
March 31, June 30, September 30, December 31,
----------------------------------------------------
1995 (in thousands except per share data)
- - --------------
<S> <C> <C> <C> <C>
Total revenues $ 12,341 $ 12,465 $ 13,082 $ 13,614
Total expenses 9,528 9,507 10,150 10,790
Net income 2,813 2,958 2,932 2,824
Net income per share .23 .24 .24 .23
Weighted average shares outstanding 12,424 12,424 12,424 12,424
1994
- - -------------
Total revenues $ 7,549 $ 7,778 $ 10,243 $ 11,961
Total expenses 6,341 6,569 8,285 9,075
Net income 1,208 1,209 1,958 2,886
Net income per share .17 .17 .20 .23
Weighted average shares outstanding 7,149 7,149 9,567 12,357
</TABLE>
Annual per share amounts for 1994 will not equal the sum of quarterly per
share amounts due to the computation of weighted average shares outstanding.
The significant increases in revenues, expenses and net income in the third
and fourth quarters of 1994 were primarily related to community acquisitions.
51
<PAGE>
ROC COMMUNITIES, INC. AND SUBSIDIARY
SUPPLEMENTAL FINANCIAL INFORMATION
(Continued)
Funds From Operations
The Company believes that funds from operations ("FFO") is an appropriate
measure of performance of an equity REIT. Funds from operations is defined by
the National Association of Real Estate Investment Trusts ("NAREIT") as "net
income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures". While the Company believes
that FFO is the most relevant and widely used measure of its operating
performance, it does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
indicative of cash available to fund cash needs. FFO should not be considered
as an alternative to net income as an indication of the Company's operating
performance or as an alternative to cash flow as a measure of liquidity.
In March 1995, NAREIT issued a White Paper which discusses NAREIT's views on
certain interpretative issues under the definition of FFO and also encourages
certain expanded disclosures relating to FFO in the periodic reports issued
by REITs. The White Paper suggests that amortization of deferred financing
costs and depreciation of non-rental real estate assets should no longer be
added back to net income in calculating FFO. The Company plans to report FFO
in accordance with the interpretative positions set forth in the White Paper
beginning with the first quarter of 1996. In addition, the Company has
already commenced providing in its periodic reports the expanded disclosures
encouraged by the White Paper. Accordingly, Item A presents FFO for 1995 and
1994 in accordance with the NAREIT definition without giving effect to the
interpretive positions of the White Paper. Item B sets forth the expanded
disclosures encouraged by the White Paper.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994
---------- -------
(in thousands)
A. Funds From Operations
<S> <C> <C>
Net Income $ 11,527 $ 7,261
Add:
Depreciation 10,351 7,804
Amortization of debt costs 1,073 724
Amortization of other intangibles 483 75
--------- -------
Funds from operations (1) $ 23,434 $15,864
========= =======
52
<PAGE>
<CAPTION>
B. Capital Expenditures
Year Ended December 31,
1995 1994
---------- -------
(in thousands)
<S> <C> <C>
Normal recurring $ 2,759 $1,150
Revenue producing 2,321 1,640
Corporate leasehold improvements 4 41
Construction in progress - expansions 1,426 481
--------- ------
$ 6,510 $3,312
========= ======
<FN>
(1) If the Company had applied the interpretative positions set forth in
the White Paper in calculating FFO for the periods presented, FFO in
1995 would have been reduced by $1,073,000 (amortization of debt
costs) and $99,000 (depreciation of non-rental real estate assets)
and in 1994 by $724,000 (amortization of debt costs) and $48,000
(depreciation of non-rental real estate assets).
</TABLE>
53
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of ROC Communities, Inc.:
We have audited the accompanying combined statements of income, equity
(deficit) and cash flows of ROC Controlled Properties (described in Note 1)
for the period January 1, 1993 to August 24, 1993. These financial statements
are the responsibility of the management of ROC Controlled Properties. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the results of ROC Controlled Properties' operations and
its cash flows for the period January 1, 1993 to August 24, 1993 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 23, 1994
54
<PAGE>
ROC CONTROLLED PROPERTIES
COMBINED STATEMENT OF INCOME
(in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1993
August 24, 1993
----------------
Revenues:
<S> <C>
Rental income $6,761
Management income 1,066
Other income 17
--------
Total Revenue 7,844
--------
Expenses:
Property operations and maintenance 2,278
Real estate taxes 796
General and administrative 277
Interest 2,438
Depreciation and amortization 1,517
--------
Total Expenses 7,306
Net Income $ 538
========
</TABLE>
See accompanying notes.
55
<PAGE>
<TABLE>
<CAPTION>
ROC CONTROLLED PROPERTIES
COMBINED STATEMENT OF EQUITY (DEFICIT)
(in thousands)
ROC Properties, Inc.
-------------------------------
Common Retained Note Deficit-
Stock Earnings Receivable ROC Affiliates Net Deficit
------ -------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 100 46 (6,912) (6,766)
Dividends/deemed cash
distributions (448) (448)
Net income (loss) 593 (55) 538
Issuance of common stock 276 $ (250) 26
------ ------- ------ --------- --------
Balance, August 24, 1993 $ 376 $ 639 $ (250) $ (7,415) $ (6,650)
====== ======= ====== ========= ========
<FN>
See accompanying notes.
</TABLE>
56
<PAGE>
ROC CONTROLLED PROPERTIES
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Period
January 1, 1993
to August 24, 1993
------------------
Cash Flows From Operating Activities:
<S> <C>
Net income $ 538
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,517 Changes in
operating assets and liabilities:
Accounts receivable (73)
Prepaid expenses and other assets (67)
Accounts payable and accrued expenses (460)
--------
Net cash provided by operating activities 1,455
--------
Cash Flows Used in Investing Activities -
Additions to rental property (365)
Cash Flows From Financing Activities:
Sale of common stock 26
Deemed cash distributions (448)
Proceeds from issuance of mortgages 485
Principal payments on mortgages (508)
--------
Net cash used in financing activities (445)
--------
Increase in Cash and Cash Equivalents 645
Cash and Cash Equivalents at Beginning of Period 328
--------
Cash and Cash Equivalents at End of Period $ 973
========
Supplemental Cash Flow Information - Interest paid $ 2,371
========
</TABLE>
See accompanying notes.
57
<PAGE>
ROC CONTROLLED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business
ROC Properties, Inc. ("ROC") was engaged in the management of
manufactured home communities. ROC provided services for manufactured
home communities owned by third parties and affiliated limited
partnerships. Certain of the officers and directors of ROC are the
general partners and certain of the limited partners of entities
affiliated with ROC (the "ROC Affiliates"). The ROC Affiliates sold
certain of their manufactured home communities to ROC Communities,
Inc. (the "Company") upon completion of an initial public offering of
the common stock and the issuance of debt by the Company on August
19, 1993. The Company also acquired ROC at that time in a stock for
stock merger.
Principles of Combination
The accompanying combined financial statements include the accounts
of ROC and the properties of the ROC Affiliates sold to the Company.
All significant intercompany balances and transactions have been
eliminated.
Revenue Recognition
Rental income and management income is recorded when due from
residents and customers.
Rental Property
Expenditures for significant renovations and improvements which
improve and/or extend the useful life of fixed assets are
capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight line method over
estimated useful lives of the respective assets.
Income Taxes
ROC, a Subchapter S Corporation until August 18, 1993, was not
subject to taxation at the corporate level. The manufactured home
communities were owned by entities whose partners are required to
include their respective shares of profits and losses in their
individual tax returns. Therefore, the combined statements of
operations contain no provision for federal income taxes.
2. Transactions with Affiliates
58
<PAGE>
As provided in the various organizational documents of the ROC
Affiliates, $361,000 of management fees related to the management of
the properties not owned by the Company were paid to ROC by the ROC
Affiliates.
ROC CONTROLLED PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Concluded)
3. Equity (Deficit)
Each manufactured home community was owned by one of the ROC
Affiliates. These combined financial statements reflect only the
results of operations of the property management business of ROC and
of the properties sold by the ROC Affiliates to the Company. Deemed
cash distributions included in the combined statement of equity
(deficit) represent generally the net cash flows generated by the ROC
Controlled Properties for the benefit of the ROC Affiliates.
59
<PAGE>
<TABLE>
<CAPTION>
ROC COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
SCHEDULE XI (in thousands)
Initial Cost
Description To Company Cost
- - ------------------------------- ------------------ Capitalized
Manufactured Buildings Subsequent to
Home Community Location Encumbrances Land and Fixtures Acquisition
- - ------------------ -------- ------------ ---- ------------ -------------
<S> <C> <C> <C> <C> <C>
100 Oaks Fultondale, AZ $ 0 $ 345 $ 1,984 $ 87
Atlanta Meadows Atlanta, GA 558 625 511 13
Bermuda Palms Indio, CA 0 1,291 2,734 90
Breazeale Laramie, WA 1,101 251 1,842 47
Butler Creek Augusta, GA 258 354 2,106 131
Camden Point Kingsland, GA 0 466 2,970 196
Casa Linda Las Vegas, NV 849 586 1,961 41
Castlewood
Estates Mableton, GA 0 655 2,947 2
Casual Estates Syracuse, NY 9,274 2,134 16,858 592
Coach Royale Boise, ID 357 197 1,213 40
Colonial Coach Riverdale, GA 0 1,052 4,342 2
Colony Cove Ellenton, FL 12,893 5,169 31,749 469
Conway Circle Orlando, FL 937 544 1,010 24
Countryside Great Falls, MT 629 361 1,896 61
Countryside
Village Denver, CO 1,455 1,458 5,171 165
Countryside
Village Jacksonville, FL 1,882 964 5,487 249
Countryside
Village Longmont, CO 2,102 1,481 5,250 106
Crestview Stillwater, OK 694 362 1,213 650
Eastridge San Jose, CA 0 2,476 5,015 249
Eldorado Daytona Beach, FL 974 408 1,368 137
Flamingo Village Richland, WA 976 789 1,235 84
Foxwood Farms Ocala, FL 0 689 1,534 163
Friendly Village Greeley, CO 827 523 3,002 198
Gold Tree Bradenton, FL 0 1,282 5,596 581
Hickory Knoll Indianapolis, IN 3,051 356 3,205 72
Jade Isle Orlando, FL 869 273 1,245 47
Knoll Terrace Salem, OR 2,000 1,379 2,348 122
Lakewood Davenport, LA 898 439 1,316 108
Landmark Village Fairburn, GA 0 2,534 4,854 83
Land O'Lakes Orlando, FL 1,426 503 2,852 120
LaQuinta Ridge Indio, CA 0 1,013 2,105 42
Leisure World Weslaco, TX 0 228 1,581 352
Maple Grove Boise, ID 1,140 702 2,808 77
Mariwood Indianapolis, IN 2,153 324 2,915 158
Marysville
Meadows Seattle, WA 2,757 1,048 3,944 217
May Avenue Yuma, AZ 602 116 935 34
Meadowbrook Ithaca, NY 1,862 293 3,372 276
Midway Estates Vero Beach, FL 1,854 1,313 2,438 52
Mobet Moline, IL 806 295 1,256 451
Mobiland Melbourne, FL 1,956 1,247 2,531 122
Mosby's Point Florence, KY 1,209 610 1,736 139
Oak Grove Albany, GA 420 418 1,074 73
Oakwood Forest Greensboro, NC 1,620 1,106 4,835 359
Orchard (The) Santa Rosa, CA 0 2,794 7,097 83
Paradise Village Albany, GA 495 340 1,358 397
Pendleton Indianapolis, IN 639 122 1,100 42
Pinellas
Cascades Clearwater, FL 2,184 1,747 2,732 26
President's
Park Grand Forks, ND 415 258 1,470 21
Riverview Portland, OR 1,439 457 1,949 443
Rolling Hills Louisville, KY 742 342 1,027 236
Royal Estates Kalamazoo, MI 1,131 368 2,724 693
Science City Midland, MI 1,506 869 2,041 84
Shenandoah Boise, ID 703 443 2,936 36
Skyway Indianapolis, IN 1,216 178 1,601 31
Southwind Naples, FL 2,637 1,476 3,990 136
Starlight Ranch Orlando, FL 0 5,594 9,152 48
Stonegate Shreveport, LA 458 160 682 308
Terrace Heights Dubuque, IA 1,699 833 2,435 528
The Colony Rancho Mirage, CA 0 2,258 4,943 469
Town & Country Orlando, FL 461 245 520 490
Trails End Weslaco, TX 0 260 1,862 207
Twin Pines Goshen, IN 1,086 196 1,761 74
Vance Columbus, OH 675 200 1,048 63
Whispering Pines Clearwater, FL 4,195 4,208 4,745 118
Willo Arms Cleveland, OH 1,573 472 2,483 91
ROC Communities, Inc. 1,000 0 68 1,209
----- ------- -------- -------
TOTAL $84,643 $62,479 $216,068 $13,114
======= ======= ======== =======
<PAGE>
<CAPTION>
ROC COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(Continued)
SCHEDULE XI (in thousands)
Gross Amount
Carried at Close of Life Used
Description Period 12/31/95(a) to Compute
- - ------------------------------- ------------------------------ Depreciation in
Manufactured Buildings Accumulated Date of Latest Income
Home Community Location Land and Fixtures Total Depreciation Acquisition Statement
- - --------------- -------------- --------- ------------ ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
100 Oaks Fultondale, AZ $ 345 $ 2,071 $ 2,416 $ 93 2/15/95 20 years
Atlanta Meadows Atlanta, GA 625 524 1,149 62 8/25/93 20 years
Bermuda Palms Indio, CA 1,291 2,824 4,115 183 8/29/94 20 years
Breazeale Laramie, WA 251 1,889 2,140 186 8/25/93 20 years
Butler Creek Augusta, GA 356 2,235 2,591 214 8/25/93 20 years
Camden Point Kingsland, GA 466 3,166 3,632 296 8/25/93 20 years
Casa Linda Las Vegas, NV 586 2,002 2,588 231 8/25/93 20 years
Castlewood
Estates Mableton, GA 655 2,949 3,604 47 9/1/95 20 years
Casual Estates Syracuse, NY 2,136 17,448 19,584 1,973 8/25/93 20 years
Coach Royale Boise, ID 197 1,253 1,450 120 1/1/94 20 years
Colonial Coach Riverdale, GA 1,052 4,344 5,396 72 9/1/95 20 years
Colony Cove Ellenton, FL 5,265 32,122 37,387 2,192 8/2/94 20 years
Conway Circle Orlando, FL 544 1,034 1,578 119 8/25/93 20 years
Countryside Great Falls, MT 361 1,957 2,318 224 8/25/93 20 years
Countryside
Village Denver, CO 1,459 5,335 6,794 603 8/25/93 20 years
Countryside
Village Jacksonville, FL 962 5,738 6,700 653 8/25/93 20 years
Countryside
Village Longmont, CO 1,481 5,356 6,837 625 8/25/93 20 years
Crestview Stillwater, OK 362 1,863 2,225 138 8/25/93 20 years
Eastridge San Jose, CA 2,476 5,264 7,740 331 8/29/94 20 years
Eldorado Daytona Beach, FL 408 1,505 1,913 168 8/25/93 20 years
Flamingo Village Richland, WA 789 1,319 2,108 146 8/25/93 20 years
Foxwood Farms Ocala, FL 691 1,695 2,386 108 7/26/94 20 years
Friendly Village Greeley, CO 523 3,201 3,723 304 1/18/94 20 years
Gold Tree Bradenton, FL 1,285 6,174 7,459 406 11/23/93 20 years
Hickory Knoll Indianapolis, IN 356 3,277 3,633 387 8/25/93 20 years
Jade Isle Orlando, FL 273 1,291 1,565 141 8/25/93 20 years
Knoll Terrace Salem, OR 1,379 2,470 3,849 280 8/25/93 20 years
Lakewood Davenport, LA 442 1,421 1,863 160 8/25/93 20 years
Landmark Village Fairburn, GA 2,539 4,933 7,471 362 7/15/94 20 years
Land O'Lakes Orlando, FL 508 2,967 3,475 337 8/25/93 20 years
LaQuinta Ridge Indio, CA 1,013 2,147 3,160 142 8/29/94 20 years
Leisure World Weslaco, TX 228 1,933 2,161 135 5/6/94 20 years
Maple Grove Boise, ID 702 2,885 3,587 325 8/25/93 20 years
Mariwood Indianapolis, IN 324 3,073 3,397 344 8/25/93 20 years
Marysville
Meadows Seattle, WA 1,048 4,160 5,209 464 8/25/93 20 years
May Avenue Yuma, AZ 116 969 1,085 113 8/25/93 20 years
Meadowbrook Ithaca, NY 291 3,649 3,941 389 8/25/93 20 years
Midway Estates Vero Beach, FL 1,313 2,490 3,803 281 8/25/93 20 years
Mobet Moline, IL 295 1,707 2,002 165 8/25/93 20 years
Mobiland Melbourne, FL 1,247 2,653 3,900 305 8/25/93 20 years
Mosby's Point Florence, KY 608 1,877 2,485 205 8/25/93 20 years
Oak Grove Albany, GA 418 1,147 1,565 116 8/25/93 20 years
Oakwood Forest Greensboro, NC 1,111 5,189 6,300 571 8/25/93 20 years
Orchard (The) Santa Rosa, CA 2,794 7,180 9,974 418 8/29/94 20 years
Paradise Village Albany, GA 340 1,756 2,095 148 8/25/93 20 years
Pendleton Indianapolis, IN 122 1,142 1,264 128 8/25/93 20 years
Pinellas
Cascades Clearwater, FL 1,747 2,759 4,505 305 8/25/93 20 years
President's
Park Grand Forks, ND 258 1,491 1,749 149 1/1/94 20 years
Riverview Portland, OR 537 2,312 2,849 247 8/25/93 20 years
Rolling Hills Louisville, KY 342 1,262 1,605 140 8/25/93 20 years
Royal Estates Kalamazoo, MI 372 3,412 3,785 265 8/25/93 20 years
Science City Midland, MI 869 2,124 2,994 237 8/25/93 20 years
Shenandoah Boise, ID 443 2,973 3,415 279 1/1/94 20 years
Skyway Indianapolis, IN 178 1,632 1,810 186 8/25/93 20 years
Southwind Naples, FL 1,476 4,126 5,602 460 8/25/93 20 years
Starlight Ranch Orlando, FL 5,594 9,200 14,794 151 9/1/95 20 years
Stonegate Shreveport, LA 160 990 1,150 83 8/25/93 20 years
Terrace Heights Dubuque, IA 919 2,877 3,796 284 8/25/93 20 years
The Colony Rancho Mirage, CA 2,259 5,411 7,670 332 9/2/94 20 years
Town & Country Orlando, FL 245 1,010 1,255 61 8/25/93 20 years
Trails End Weslaco, TX 260 2,069 2,329 155 5/6/94 20 years
Twin Pines Goshen, IN 196 1,836 2,031 208 8/25/93 20 years
Vance Columbus, OH 200 1,111 1,311 100 8/25/93 20 years
Whispering Pines Clearwater, FL 4,208 4,863 9,071 557 8/25/93 20 years
Willo Arms Cleveland, OH 473 2,573 3,046 295 8/25/93 20 years
ROC Communities, Inc. 0 1,277 1,277 207 8/19/93 10 years
------- -------- -------- -------
TOTAL $62,769 $228,892 $291,661 $20,111
======= ======== ======== =======
<FN>
(a) The aggregate cost for federal income tax purposes at December 31, 1995
is $292,745,000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROC COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED
DEPRECIATION
(in thousands)
Balance at
Beginning Additions Balance at End
Description of Period at Cost Retirements of Period
----------- ---------- --------- ----------- -------------
<CAPTION>
The changes in real estate are as follows:
<CAPTION>
Period ended August 25, 1993 to December 31, 1993:
<S> <C> <C> <C> <C>
Acquisitions $ 0 160,256 0 $ 160,256
Improvements 0 1,036 0 1,036
--------- ------- ------ ---------
$ 0 161,292 0 $ 161,292
========= ======= ====== =========
<CAPTION>
Year ended December 31, 1994:
<S> <C> <C> <C> <C>
Acquisitions $ 160,256 92,353 $ 252,609
Improvements 1,036 4,955 (83) 5,908
--------- ------- ------ ---------
$ 161,292 97,308 (83) $ 258,517
========= ======= ====== =========
<CAPTION>
Year ended December 31, 1995:
<S> <C> <C> <C> <C>
Acquisitions $ 252,609 25,938 $ 278,547
Improvements 5,908 7,269 (63) 13,114
--------- ------- ------ ---------
$ 258,517 33,207 (63) $ 291,661
========= ======= ====== =========
</TABLE>
The changes in accumulated depreciation of real estate are as follows:
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Balance at End
Description of Period Expenses Retirements of Period
----------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Period ended August 25
to December 31, 1993 $ 0 2,044 0 $ 2,044
Year ended December 31, 1994 $ 2,044 7,804 (3) $ 9,845
Year ended December 31, 1995 $ 9,845 10,351 (85) $20,111
</TABLE>
64
<PAGE>
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 a filing on Form S-4/A and has duly caused this
Amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Township of Clinton, State of
Michigan, on the 24th day of January, 1997.
Chateau Porperties, Inc.
By:/s/ Tamara D. Fischer
--------------------------------
Tamara D. Fischer
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ John A. Boll* Chairman of the Board of January 24, 1997
- - --------------------- Directors
John A. Boll
/s/ C. G. Kellogg* Director, President and January 24, 1997
- - --------------------- Chief Executive Officer
C. G. Kellogg (Principal Executive Officer)
/s/ Tamara D. Fischer Executive Vice President January 24, 1997
- - --------------------- and Chief Financial Officer
Tamara D. Fischer (Principal Financial and
Accounting Officer)
/s/ Gebran S. Anton, Jr.* Director January 24, 1997
- - ---------------------
Gebran S. Anton, Jr.
Director
- - ---------------------
Kenneth E. Myers
Director
- - ---------------------
Jay G. Rudolph
/s/ James M. Lane* Director January 24, 1997
- - ---------------------
James M. Lane
/s/ Edward R. Allen* Director January 24, 1997
- - ---------------------
Edward R. Allen
*By Tamara D. Fischer, attorney in fact
<PAGE>
[ Form of Proxy -- side 1 ]
PROXY
CHATEAU PROPERTIES, INC.
19500 Hall Road
Clinton Township, Michigan 48038
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints each of C.G. Kellogg, T.D. Fischer
and H.J. Brennan as proxies, each with the power to appoint his or her
substitute, and authorizes each of them to represent and to vote, as
designated below, all shares of common stock of Chateau Properties, Inc.
("Chateau") held of record by the undersigned on January 30, 1997 at a
special meeting of stockholders of Chateau to be held on February 11, 1997 or
any adjournment or postponement thereof. This proxy when properly executed
will be voted in the manner directed herein by the undersigned stockholder
with respect to all shares of Chateau held of record by the undersigned
stockholder. If no direction is made, this proxy will be voted FOR Proposals
1, 2 and 3 and in the best discretion of such proxies upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof. The Board of Directors recommends a vote for each of
the Proposals.
1. To consider and vote on a proposal to issue 13,109,941 shares of
Common Stock of Chateau in connection with an Amended and Restated
Agreement and Plan of Merger, dated as of September 17, 1996, as
amended by the Amendment thereto dated as of December 20, 1996, by
and among Chateau, ROC Communities, Inc., a Maryland corporation
("ROC") and R Acquisition Sub, Inc., a Maryland corporation and a
direct subsidiary of Chateau ("RSub"), providing for the merger of
RSub with ROC, with ROC surviving such merger (the "Merger"). The
consummation of the Merger and related transactions will result in,
among other things, the exchange of the outstanding common stock, par
value $.01 per share, of ROC and non-voting redeemable stock, par
value $.01 per share, of ROC for common stock, par value $.01 per
share, of Chateau.
/ / FOR / / AGAINST / / ABSTAIN
(continued and to be signed on the other side)
<PAGE>
[ Form of Proxy -- side 2 ]
2. To consider and vote on a proposal to issue and sell up to 1,450,000
shares of Common Stock of Chateau to holders of limited partnership
units ("OP Units") in CP Limited Partnership, a Maryland limited
partnership of which Chateau is the general partner, who have agreed
to exchange their OP Units for shares of Common Stock of Chateau,
which issuance and sale shall be at an average price per share,
payable in cash, of not less than the greater of the average price
paid by Chateau in connection with Chateau Share Repurchase Program
(as defined in the Joint Proxy Statement/Prospectus and Supplement)
or the average of the closing prices on the New York Stock Exchange
of the shares of Common Stock on the two trading days immediately
preceding the date of issuance as determined in good faith by the
Chateau Board.
/ / FOR / / AGAINST / / ABSTAIN
3. To adjourn the Chateau Special Meeting to permit further solicitation
of proxies in the event that there are not sufficient votes to
approve the Chateau Proposals at the time of the Chateau Special
Meeting.
/ / FOR / / AGAINST / / ABSTAIN
4. In the best discretion of such proxies upon such other business as
may properly come before the meeting or any adjournment or
postponement thereof.
Please sign this proxy in the space
provided below. Execution by stockholders
who are not individuals must be made by
an authorized signatory.
Dated: __________________________________
_________________________________________
Name of Record Owner
_________________________________________
Signature
Please sign exactly as name appears
hereon. If signing as attorney, executor,
administrator, trustee or guardian,
please give full title of such, and if
signing for a corporation, give your
title. When shares are in the names of
more than one person, any one may sign.
Please sign, date and return this Proxy promptly using the enclosed envelope.
