<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended September 30, 1999
------------------
OR
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-12496
-------------------
CHATEAU COMMUNITIES, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 38-3132038
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6160 South Syracuse Way, Greenwood Village, CO 80111
(Address of principal executive offices, including zip code)
(303) 741-3707
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
-----
The number of shares outstanding of Registrant's Common Stock, $0.01 par value,
on November 11, 1999 was 28,387,115 shares.
<PAGE>
CHATEAU COMMUNITIES, INC.
FORM 10-Q
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1999
and 1998 1
Condensed Consolidated Balance Sheets as of September
30, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Cash Flows for
the Nine months Ended September 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II. OTHER INFORMATION 14-19
SIGNATURES 20
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHATEAU COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 44,607 $ 42,729 $132,896 $124,036
Management fee, interest and other income 3,499 1,336 7,655 3,983
-------- -------- -------- --------
48,106 44,065 140,551 128,019
Expenses:
Property operating and maintenance 13,218 12,631 37,792 35,517
Real estate taxes 3,115 3,136 9,488 9,162
Depreciation and amortization 10,383 10,577 31,032 29,535
Administrative 2,863 1,639 7,170 5,762
Interest and related amortization 7,618 7,670 23,707 23,226
-------- -------- -------- --------
37,197 35,653 109,189 103,202
-------- -------- -------- --------
Income before net gain on sales of properties
and minority interests 10,909 8,412 31,362 24,817
Net gain on sales of properties - - 2,805 -
-------- -------- -------- --------
Income before minority interests 10,909 8,412 34,167 24,817
Less income allocated to minority interests:
Preferred OP Units 1,523 1,523 4,570 2,725
Common OP Units 1,037 809 3,296 2,522
-------- -------- -------- --------
Net income available to common shareholders $ 8,349 $ 6,080 $ 26,301 $ 19,570
======== ======== ======== ========
Per share/OP Unit information:
Basic earnings per common share $ .30 $ .22 $ .94 $ .72
======== ======== ======== ========
Diluted earnings per common share $ .30 $ .22 $ .93 $ .72
======== ======== ======== ========
Dividend/distribution declared per common
share/OP Unit outstanding $ .485 $ .455 $ 1.455 $ 1.365
======== ======== ======== ========
Weighted average common shares
outstanding - basic 28,115 27,509 28,052 27,068
======== ======== ======== ========
Weighted average common shares
and OP Units outstanding - assuming dilution 31,760 31,337 31,731 30,751
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
CHATEAU COMMUNITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
------------- ------------
<S> <C> <C>
Rental property:
Land $ 134,827 $ 135,444
Land and improvements for expansion sites 22,856 22,184
Depreciable property 879,126 868,881
------------- ------------
1,036,809 1,026,509
Less accumulated depreciation 181,165 151,260
------------- ------------
Net rental property 855,644 875,249
Cash and cash equivalents 2,593 450
Receivables 3,384 3,123
Notes receivable 8,873 7,163
Investment in and advances to affiliates 104,991 65,473
Prepaid expenses and other assets 8,496 7,736
------------- ------------
Total assets $ 983,981 $ 959,194
============= ============
LIABILITIES
Debt $ 461,726 $ 427,778
Accounts payable and accrued expenses 21,336 21,030
Rents received in advance and security deposits 8,934 6,898
Dividends and distributions payable 16,115 15,078
------------- ------------
Total liabilities 508,111 470,784
Minority interests in Operating Partnership 118,362 120,475
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 2 million shares
authorized; no shares issued or outstanding
Common stock; $.01 par value, 90 million shares
authorized; 28,114,666 and 27,936,016 shares
issued and outstanding at September 30, 1999
and December 31, 1998, respectively 281 279
Additional paid-in capital 436,468 432,711
Dividends in excess of accumulated earnings (71,184) (56,637)
Notes receivable from officers, 371,698 and
406,569 shares at September 30, 1999 and
December 31, 1998, respectively (8,057) (8,418)
------------- ------------
Total shareholders' equity 357,508 367,935
------------- ------------
Total liabilities and shareholders' equity $ 983,981 $ 959,194
============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CHATEAU COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998.
(DOLLARS IN THOUSANDS)
Nine months Ended
September 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 26,301 $ 19,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of property (2,805) -
Income attributable to minority interests 3,296 2,522
Increase in accrued preferred distributions - 762
Depreciation and amortization 31,032 29,535
Amortization of debt issuance costs 575 567
Increase in operating assets (3,959) (5,416)
(Decrease) increase in operating liabilities 2,342 6,449
---------- ----------
Net cash provided by operating activities 56,782 53,989
Cash flows from financing activities:
Borrowings on the line of credit 84,318 83,917
Payments on the line credit (26,048) (94,800)
Payoff of mortgages and other debt (23,448) (1,390)
Mortgage principal payments (874) (1,716)
Dividends/distributions to shareholders/OP Unitholders (44,914) (40,104)
Common shares OP Units reacquired and retired (76) (932)
Proceeds from the issuance of common shares - 53,777
Net Proceeds from the issuance of Preferred OP Units - 73,002
Exercise of common stock options and other financing activities 2,563 203
---------- ----------
Net cash (used in) provided by financing activities (8,479) 71,957
Cash flows from investing activities:
Acquisition of rental properties (6,228) (109,033)
Additions to rental property (13,883) (9,195)
Disposition of rental property 13,201 -
Investment in and advances to joint ventures/affiliates (39,250) (22,214)
---------- ----------
Net cash used in investing activities (46,160) (140,442)
---------- ----------
Increase (decrease) in cash and cash equivalents 2,143 (14,496)
Cash and cash equivalents, beginning of period 450 14,910
---------- ----------
Cash and cash equivalents, end of period $ 2,593 $ 414
========== ==========
Supplemental cash flow information:
Fair Market Value of OP Units/common shares issued in connection
with acquisitions/development $ 1,327 $ 28,927
========== ==========
Debt assumed in connection with acquisitions $ - $ 32,579
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CHATEAU COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
----------------------
The accompanying unaudited condensed consolidated financial statements of
Chateau Communities, Inc. (the "Company"), a real estate investment trust
("REIT"), have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a
fair presentation have been included, and such adjustments are of a normal
recurring nature. The year-end condensed consolidated balance sheet was
derived from audited consolidated financial statements, but does not include
all disclosures required by generally accepted accounting principles. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1998.
2. Rental Property
---------------
On April 15, 1999 the Company sold one manufactured home community located
at Bradenton, Florida with 295 home sites for a gross sales price of $8.5
million, resulting in a gain of $3.1 million.
On April 1, 1999, the Company purchased a manufactured home community
located in Montgomery, Alabama with 309 homesites for a purchase price of
approximately $4 million.
On January 25, 1999, the Company sold one manufactured home community
located in Melbourne, Florida with 217 sites for a gross sales price of $3.2
million. Upon the sale of the property, the Company recognized a net loss of
$336,000.
As of September 30, 1999, the Company owned 164 communities with an
aggregate of 51,296 residential homesites and 1,359 park model/RV sites. In
addition, it fee managed approximately 9,200 residential homesites and 175
park model/RV sites in 43 communities.
3. Common Stock and Related Transactions:
--------------------------------------
On August 18, 1999, the Company declared a cash dividend/distribution of
$.485 per share/OP Unit to shareholders and OP Unitholders of record as of
September 30, 1999. The dividend/distribution was paid on October 15, 1999,
and is included in the dividends and distributions payable in the
accompanying condensed consolidated balance sheet as of September 30, 1999.
On May 20, 1999, the Company declared a cash dividend/distribution of $.485
per share/OP Unit to shareholders and OP Unitholders of record as of June
30, 1999. The dividend/distribution was paid on July 15, 1999.
On February 25, 1999, the Company declared a cash dividend/distribution of
$.485 per share/OP Unit to shareholders and OP Unitholders of record as of
March 31, 1999. The dividend/distribution was paid on April 14, 1999.
On November 18, 1998, the Company declared a cash dividend/distribution of
$.455 per share/OP Unit to shareholders and OP Unitholders of record as of
December 28, 1998. The dividend/distribution was paid on January 15, 1999,
and is included in dividends and distributions payable in the accompanying
condensed consolidated balance sheet as of December 31, 1998.
4
<PAGE>
<TABLE>
<CAPTION>
CHATEAU COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
3. Common Stock and Related Transactions Continued:
------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
For the three months ended September 30,
----------------------------------------
1999 1998
---- ----
Basic EPS:
Income (1) $ 9,386 $ 6,889
Weighted average common shares outstanding 28,115 27,509
Weighted average common OP Units outstanding 3,494 3,660
---------- ----------
Weighted average common shares/OP Units - basic 31,609 31,169
---------- ----------
Per share - basic $ .30 $ .22
========== ==========
Diluted EPS:
Income (1) $ 9,386 $ 6,889
Weighted average common shares outstanding 28,115 27,509
Weighted average common OP Units outstanding 3,494 3,660
Employee stock options 151 168
---------- ----------
Weighted average common shares/OP
Units -- assuming dilution 31,760 31,337
---------- ----------
Per share - assuming dilution $ .30 $ .22
========== ==========
For the nine months ended September 30,
---------------------------------------
1999 1998
---- ----
Basic EPS:
Income (1) $ 29,597 $ 22,092
Weighted average common shares outstanding 28,052 27,068
Weighted average common OP Units outstanding 3,512 3,488
---------- ----------
Weighted average common shares/OP Units - basic 31,564 30,556
---------- ----------
Per share - basic $ .94 $ .72
========== ==========
Diluted EPS:
Income (1) $ 29,597 $ 22,092
Weighted average common shares outstanding 28,052 27,068
Weighted average common OP Units outstanding 3,512 3,488
Employee stock options 167 195
---------- ----------
Weighted average common shares/OP
Units - assuming dilution 31,731 30,751
---------- ----------
Per share - assuming dilution $ .93 $ .72
========== ==========
(1) Represents income before minority interests less the income allocated to the Preferred OP Units.
</TABLE>
5
<PAGE>
CHATEAU COMMUNITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------------------
<TABLE>
<CAPTION>
4. Debt:
-----
The following table sets forth certain information regarding debt of the Company at September 30, 1999.
<S> <C> <C> <C>
Weighted Average
Dollars in thousands: Interest Rate Maturity Date Principal Balance
---------------- ------------- -----------------
Fixed Rate Mortgage Debt 7.62 % 2000-2011 $ 106,058
Unsecured Senior Notes 7.46 % 2000-2004 245,000
Unsecured Lines of Credit 6.21 % - 95,005
Other notes payable various various 15,663
----------
$ 461,726
==========
</TABLE>
5. Subsequent Events:
------------------
On October 19, 1999, the Company completed the acquisition of Greenpark
South, a community located in Alabama with 315 homesites and
approximately 76 expandable sites, for approximately $8.7 million.
In order to finance this acquisition, as well as increased advances to
its affiliates, the Company entered into a $15 million bridge loan. This
bridge loan is with its primary lender, Bank One NA, bears interest at
6.71% and matures on November 29, 1999. The Company expects its
affiliates to repay advances sufficient to retire the bridge loan at
maturity.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the consolidated
financial statements and Notes thereto included elsewhere in this Quarterly
Report. Certain statements in this discussion constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Such forward-looking statements may involve the Company's
plans, objectives and expectations, which are dependent upon a number of
factors, including site expansions, acquisitions, development and other new
business initiatives that are subject to a number of contingency factors such as
the effects of national and local economic conditions, changes in interest
rates, supply and demand for affordable housing and the condition of the capital
markets that may prevent the Company from achieving its objectives.
Results of Operations
The following table summarizes certain information relative to the Company's
properties as of and for the three and nine months ended September 30, 1999 and
1998. The Company considers all communities owned by the Company at the
beginning of the period as the "Core Portfolio."
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Core Portfolio Total
------------------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ----------- ------------
Dollars in thousands, except per site
As of September 30,
Number of communities 163 163 164 166
Total manufactured homesites 50,986 50,535 51,296 51,154
Occupied sites 46,890 46,588 47,143 47,100
Occupancy % 92.0% 92.2% 91.9% 92.1%
For the three months ended September 30,
Rental income $ 44,480 $ 42,224 $ 44,607 $ 42,729
Property operating expenses $ 16,271 $ 15,545 $ 16,333 $ 15,767
Net operating income $ 28,209 $ 26,679 $ 28,274 $ 26,962
Weighted average monthly rent per $ 305 $ 293 $ 304 $ 294
site
For the nine months ended September 30,
Rental income $ 121,374 $ 115,677 $ 132,896 $ 124,036
Property operating expenses $ 43,407 $ 41,690 $ 47,280 $ 44,679
Net operating income $ 77,967 $ 73,987 $ 85,616 $ 79,357
Weighted average monthly rent per $ 306 $ 294 $ 301 $ 292
site
</TABLE>
Comparison of three months ended September 30, 1999 to three months ended
September 30, 1998
For the three months ended September 30, 1999, income before minority interests
was $10,909,000 an increase of $2,497,000 from the three months ended September
30, 1998. The increase was due primarily to increased net operating income from
the Core Portfolio. The increase in net operating income in the Company's Core
Portfolio is primarily due to increases in occupancy and rental increases
partially offset by general operating expense increases.
7
<PAGE>
Rental revenue for the three months ended September 30, 1999 was $44,607,000, an
increase of $1,878,000 from the three months ended September 30, 1998. The
increase is primarily due to rental increases and occupancy gains in the
Company's Core Portfolio.
Weighted average occupancy for the three months ended September 30, 1999 was
47,159 sites compared with 46,955 sites for the same period in 1998. The
occupancy rate was 91.9 percent on 51,296 sites as of September 30, 1999,
compared to 92.1 percent on 51,154 sites as of September 30, 1998. The
occupancy rate on the stabilized portfolio was 93.5 percent as of September 30,
1999. The stabilized portfolio includes communities where the Company does not
have, or has not recently had, expansion of the community. On a per site basis,
weighted average monthly rental revenue for the three months ended September 30,
1999 was $304 compared with $294 in the same period of 1998. For the Company's
Core Portfolio, on a per site basis, weighted average monthly rental revenue for
the three months ended September 30, 1999 was $305 compared with $293 for the
same period in 1998, an increase of 4.1 percent.
Management fee, interest and other income primarily includes management and
transaction fee income for the management of 43 manufactured home communities,
equity earnings from the Company's sales subsidiary and interest income on notes
receivable and advances to joint ventures/affiliates. The increase in the three
months ended September 30, 1999 from the same period in 1998 is due primarily to
increased development activities in which the Company funds the development of
joint ventures and increased management and transaction fee income.
Property operating and maintenance expense for the three months ended September
30, 1999 increased by $587,000 or 4.7 percent from the same period a year ago.
The majority of the increase was due to increases in the Company's Core
Portfolio.
Administrative expense for the three months ended September 30, 1999 increased
by $1,224,000 from the same period a year ago. Administrative expense in 1999
was 6.0 percent of revenues as compared to 3.7 percent in 1998.
Depreciation and amortization expense for the three months ended September 30,
1999 decreased $194,000 from the same period a year ago. Depreciation expense
as a percentage of average depreciable rental property in 1999 remained
relatively unchanged from 1998.
Comparison of nine months ended September 30, 1999 to nine months ended
September 30, 1998
For the nine months ended September 30, 1999, income before minority interests
was $34,167,000, an increase of $9,350,000 from the nine months ended September
30, 1998. The increase was due primarily to acquisitions and increased net
operating income from the Core Portfolio as well as a net gain recorded on the
sales of two properties. The increase in net operating income in the Company's
Core Portfolio is primarily due to increases in occupancy and rental increases
partially offset by general operating expense increases.
8
<PAGE>
Rental revenue for the nine months ended September 30, 1999 was $132,896,000, an
increase of $8,860,000 from the nine months ended September 30, 1998.
Approximately 35 percent was due to acquisitions, net of dispositions, and the
remaining 65 percent was due to rental increases and occupancy gains in the
Company's Core Portfolio.
Weighted average occupancy for the nine months ended September 30, 1999 was
47,126 sites compared with 45,481 sites for the same period in 1998. On a per
site basis, weighted average monthly rental revenue for the nine months ended
September 30, 1999 was $301 compared with $292 in the same period of 1998. For
the Company's Core Portfolio, on a per site basis, weighted average monthly
rental revenue for the nine months ended September 30, 1999 was $306 compared
with $294 for the same period in 1998, an increase of 4.0 percent.
Property operating and maintenance expense for the nine months ended September
30, 1999 increased by $2,275,000 or 6.4 percent from the same period a year ago.
The majority of the increase was due to the 1998 acquisitions and increases in
the Company's Core Portfolio.
Real estate taxes for the nine months ended September 30, 1999, increased by
$326,000 or 3.6 percent from the nine months ended September 30, 1998. On a per
site basis, monthly weighted real estate taxes were $22.37 for the nine months
ended September 30, 1999 compared to $22.38 for the same period in 1998. 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 nine months ended September 30, 1999 increased by
approximately $1,408,000 from the same period a year ago. Administrative
expense in 1999 was 5.1 percent of revenues as compared to 4.5 percent in 1998.
Interest and related amortization costs increased for the nine months ended
September 30, 1999 by $481,000, as compared with the nine months ended September
30, 1998. The increase was due to financing of acquisitions, advances to
affiliates and development activity. Interest expense as a percentage of
average debt outstanding decreased to approximately 7.3 percent in 1999 from
approximately 7.7 percent in 1998. The decrease is due to higher borrowing on
the lines of credit as a percentage of total debt and the payoff of higher rate
mortgages.
Depreciation and amortization expense for the nine months ended September 30,
1999 increased $1,497,000 from the same period a year ago. The increase is
directly attributable to the 1998 acquisitions. Depreciation expense as a
percentage of average depreciable rental property in 1999 remained relatively
unchanged from 1998.
Liquidity and Capital Resources
Net cash provided by operating activities was $56,782,000 for the nine months
ended September 30, 1999, compared with $53,989,000 for the nine months ended
September 30, 1998. 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 nine months ended September 30,
1999 was $8,479,000. This was due primarily to $44,914,000 in dividends and
distributions paid to common shareholders and OP Unitholders in the first half
of 1999, the payoff of mortgage and other debt of $23,448,000 offset partially
by net borrowings on the lines of credit of $58,270,000.
9
<PAGE>
Net cash used in investing activities for the nine months ended September 30,
1999 was $46,160,000. This amount represented joint venture advances, capital
expenditures and construction and development costs. For the nine months ended
September 30, 1999, acquisition costs were $6.2 million, including the
acquisition of one manufactured home community with 309 homesites for a purchase
price of $4.0 million. Construction and development costs were approximately
$7.4 million, recurring property capital expenditures were approximately $5.2
million, and advances to joint ventures and affiliates, including construction
costs were $39.2 million. 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.
The Company has available a line of credit with Bank One, N.A., acting as lead
agent, for $100 million (the "Bank One Credit Facility"). The interest rate on
the Bank One Credit Facility is LIBOR plus 80 basis points. In addition, the
Company has a $7.5 million revolving line of credit from US Bank which bears
interest at a rate of LIBOR plus 125 basis points (the "USB Facility" and,
together with the Bank One Credit Facility, the "Credit Facilities"). As of
September 30, 1999, approximately $95 million was outstanding under the Credit
Facilities and the Company had available $12.5 million in additional borrowing
capacity.
As of September 30, 1999, the Company had outstanding, in addition to the Credit
Facilities, $245 million of other unsecured senior debt with a weighted average
interest rate and maturity of 7.5 percent and 3.5 years, respectively, and $106
million of secured mortgage debt with a weighted average interest rate and
maturity of 7.6 percent and 2.0 years, respectively. For the Company's total
fixed rate debt, the weighted average interest rate and maturity was 7.5 percent
and 3.0 years, respectively.
On October 19, 1999, the Company completed the acquisition of Greenpark South, a
community located in Alabama with 315 homesites and approximately 76 expandable
sites, for approximately $8.7 million.
In order to finance this acquisition, as well as increased advances to its
affiliates, the Company entered into a $15 million bridge loan. This bridge
loan is with its primary lender, Bank One NA, bears interest at 6.71% and
matures on November 29, 1999. The Company expects its affiliates to repay
advances sufficient to retire the bridge loan at maturity.
Repayment of long-term borrowings and amounts outstanding under the Credit
Facilities, future acquisitions of communities and land for development and
community development activities represent the principal long-term liquidity
needs of the Company. The Company does not expect to generate sufficient funds
from operations to finance these long-term liquidity needs and instead intends
to meet its long-term liquidity requirements through additional borrowing under
the Credit Facilities or other lines of credit, the issuance of additional
equity or debt securities and the assumption of existing secured or unsecured
indebtedness.
The Company expects to meet its short-term liquidity requirements, including
dividends, expansion activities and capital expenditure requirements, through
cash flow from operations and, if necessary, borrowings under the Credit
Facilities and other lines of credit.
10
<PAGE>
Year 2000
Management has assessed the impact of the year 2000 issue on its reporting
systems and operations. The year 2000 issue exists because many computer systems
and applications abbreviate dates by eliminating the first two digits of the
year, assuming that these two digits are always "19". As a result, date-
sensitive computer programs may recognize a date using "00" as the year 1900
rather than the year 2000. Unless corrected, the potential exists for computer
system failures or incorrect processing of financial and operational
information, which could disrupt operations.
To help facilitate the Company's continued growth, substantially all of the
computer systems and applications and other operating systems in use in its home
office and properties have been, or are in the process of being upgraded and
modified. The Company is of the opinion that, in connection with those upgrades
and modifications, it has addressed applicable year 2000 issues as they might
affect the computer systems and applications located in the Company's offices
and properties. The Company anticipates that implementation of solutions to any
year 2000 issue which it may discover will require the expenditure of sums which
the Company does not expect to be material.
The Company is exposed to the risk that one or more of its vendors or service
providers may experience year 2000 problems which impact the ability of such
vendor or service provider to provide goods and services. Due to the
availability of alternative suppliers, this is not considered as significant a
risk with respect to the suppliers of goods. The disruption of certain services,
however, such as utilities, could, depending upon the extent of the disruption,
have a material adverse impact on the Company's operations. To date, the
Company is not aware of any vendor or service provider year 2000 issue that
management believes would have a material adverse impact on the Company's
operations.
The Company, however, has no means of ensuring that its vendors or service
providers will be year 2000 ready. The inability of vendors or service
providers to complete the year 2000 resolution process in a timely fashion could
have an adverse impact on the Company and the effect of non-compliance by
vendors or service providers is not determinable at this time. Residents do not
pose year 2000 problems for the Company in view of the nature of the Company's
properties.
Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from year 2000 issues, or
in certain industries, such as commercial or investment banks, could also have
an adverse impact on the Company. The likelihood and effect of such disruptions
is not determinable at this time.
The Company expects to have all systems appropriately modified before any
significant processing malfunctions could occur and does not expect the year
2000 issue will materially impact the financial condition or operations of the
Company.
11
<PAGE>
Other
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as consolidated net income of the Company
without giving effect to gains (or losses) from debt restructuring and sales of
property, certain non-recurring items and rental property depreciation and
amortization. Management believes that FFO is an important and widely used
measure of the operating performance of REITs which provides a relevant basis
for comparison among REITs. FFO (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing activities;
and (iii) is not an alternative to cash flows as a measure of liquidity. FFO is
calculated as follows:
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
-------------------- -------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
------- ------- ------- -------
Income before minority interests $10,909 $ 8,412 $34,167 $24,817
Plus:
Depreciation and amortization 10,383 10,577 31,032 29,535
Less:
Non-recurring item (1) - - 2,805 -
Depreciation expense on corporate assets 65 62 195 187
Distribution on Preferred OP Units 1,523 1,523 4,570 2,725
------- ------- ------- -------
FFO $19,704 $17,404 $57,629 $51,440
======= ======= ======= =======
</TABLE>
(1) Represents net gain recorded on sales of properties.
12
<PAGE>
<TABLE>
<CAPTION>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The following table sets forth certain information relating to the secured and unsecured indebtedness of the Company outstanding
as of September 30, 1999.
<S> <C> <C> <C> <C>
Weighted
Average
Amount of Percent of Interest Maturity
Indebtedness Total Debt Rate Date
------------ ---------- ---- ----
(dollars in thousands)
Mortgage Debt:
Del Tura $ 31,618 7.1% 8.40% 2000
Other (8 properties) 19,706 4.4% 7.68% 2002-2011
Pacific Life (36 properties) 54,734 12.3% 7.16% 2000
-------- ---- ----
Total Mortgage 106,058 23.8% 7.62%
Unsecured Debt:
Unsecured Senior Notes 70,000 15.7% 7.52% 2003
Unsecured Senior Notes 75,000 16.8% 8.75% 2000
Unsecured Senior Notes 100,000 22.4% 6.44% 2004
-------- ---- ----
Total Unsecured 245,000 54.9% 7.46%
-------- ---- ----
Total Fixed Rate 351,058 78.7% 7.51%
Variable Rate Debt:
Credit Facilities 95,005 21.3% 6.21%
--------
Total Secured and Unsecured Debt $446,063
========
</TABLE>
Based on the amount outstanding under the Credit Facilities at September 30,
1999 of $95,005,000, if the interest rate under the Credit Facilities was 100
basis points higher or lower during the nine months ended September 30, 1999,
then the Company's interest expense (net of adjustments for capitalized items),
for the period would have increased or decreased by approximately $713,000.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
14
<PAGE>
Item 5. Other Information
Property Information
The Company classifies all of its properties in either the Stable Portfolio or
the Active Expansion Portfolio. The Stable Portfolio includes the communities
where the Company does not have, or has not recently had, expansion of the
community. These communities generally have stable occupancy rates. The Active
Expansion Portfolio are those properties where the Company is currently, or has
recently, expanded the community by adding homesites to the available homesites
for rental. Generally, these communities will have a lower occupancy rate than
our Stable Portfolio as they are in the lease-up phase. In addition, the
Company owns three park model/RV communities.
The following table sets forth certain information, as of September 30, 1999,
regarding the Properties.
* These properties are included in the Active Expansion Portfolio.
<TABLE>
<CAPTION>
Weighted
Total Average
Total Number of Occupancy Monthly Rent
Location Comm- Sites as of per Site
Community State (Closest Major City) unities 9/30/99 9/30/99 9/30/99
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
100 Oaks AL Fultondale 231 90% $ 207
Lakewood AL Montgomery 310 87% $ 155
Total Alabama 2 541 88% $ 178
Bermuda Palms CA Palm Springs 185 96% $ 335
Eastridge CA San Jose 187 99% $ 639
La Quinta Ridge CA Palm Springs 152 89% $ 411
The Colony CA Palm Springs 220 98% $ 641
The Orchard CA San Francisco 233 100% $ 577
Total California 5 977 97% $ 532
CV-Denver CO Denver 345 94% $ 365
CV-Longmont CO Longmont 310 99% $ 376
Friendly Village CO Greeley 226 98% $ 290
Pine Lakes Ranch CO Denver 762 98% $ 334
Redwood Estates CO Denver 753 98% $ 328
Total Colorado 5 2,396 97% $ 338
Cedar Grove CT New Haven 60 100% $ 291
Evergreen CT New Haven 102 98% $ 293
Green Acres CT New Haven 64 95% $ 288
Highland CT New Haven 50 94% $ 305
Total Connecticut 4 276 97% $ 293
Anchor North FL Tampa Bay 94 95% $ 266
Audubon FL Orlando 280 98% $ 266
Colony Cove FL Sarasota 2,211 100% $ 335
Conway Circle FL Orlando 111 95% $ 303
Crystal Lake FL St. Petersburg 166 95% $ 264
Crystal Lakes* FL Tampa 330 55% $ 152
CV-Jacksonville FL Jacksonville 643 97% $ 305
Del Tura FL Fort Myers 1,344 86% $ 428
Eldorado Estates FL Daytona Beach 126 97% $ 259
Emerald Lake FL Fort Myers 201 100% $ 291
Fairways Country Club FL Orlando 1,141 99% $ 293
Foxwood Farms* FL Orlando 375 75% $ 198
Hidden Valley FL Orlando 303 99% $ 295
Indian Rocks FL Clearwater 148 66% $ 238
Jade Isle FL Orlando 101 95% $ 310
Lakeland Harbor FL Tampa 504 100% $ 251
Lakeland Junction FL Tampa 191 100% $ 196
Lakes at Leesburg FL Orlando 640 100% $ 261
Land O' Lakes FL Orlando 173 99% $ 255
Midway Estates FL Vero Beach 204 81% $ 321
Oak Springs FL Orlando 438 74% $ 246
Orange Lake FL Orlando 242 94% $ 247
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Weighted
Total Average
Total Number of Occupancy Monthly Rent
Location Comm- Sites as of per Site
Community State (Closest Major City) unities 9/30/99 9/30/99 9/30/99
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Palm Beach Colony FL West Palm Beach 285 94% $ 308
Pedaler's Pond FL Orlando 214 86% $ 196
Pinellas Cascades FL Clearwater 238 93% $ 370
Shady Lane FL Clearwater 108 94% $ 262
Shady Oak FL Clearwater 250 98% $ 323
Shady Village FL Clearwater 156 97% $ 306
Southwind Village FL Naples 337 93% $ 300
Starlight Ranch FL Orlando 783 94% $ 294
Tarpon Glen FL Clearwater 170 89% $ 294
Town & Country FL Orlando 73 96% $ 313
Whispering Pines FL Clearwater 392 95% $ 362
Winter Haven Oaks FL Orlando 343 52% $ 210
Total Florida 34 13,315 92% $ 300
Atlanta Meadows GA Atlanta 75 99% $ 230
Butler Creek* GA Augusta 376 81% $ 186
Camden Point GA Kingsland 268 54% $ 168
Castlewood Estates GA Atlanta 334 85% $ 309
Colonial Coach Estates GA Atlanta 481 86% $ 278
Golden Valley GA Atlanta 131 95% $ 255
Landmark GA Atlanta 524 94% $ 274
Marnelle GA Atlanta 205 98% $ 269
Oak Grove Estates GA Albany 174 98% $ 135
Paradise Village GA Albany 226 96% $ 145
Total Georgia 10 2,794 87% $ 235
Lakewood Estates IA Davenport 180 98% $ 250
Terrace Heights IA Dubuque 317 96% $ 255
Total Iowa 2 497 97% $ 253
Coach Royale ID Boise 91 99% $ 277
Maple Grove Estates ID Boise 270 99% $ 292
Shenandoah Estates ID Boise 154 97% $ 275
Total Idaho 3 515 98% $ 284
Falcon Farms IL Moline 215 91% $ 229
Maple Ridge IL Kankakee 75 100% $ 229
Maple Valley IL Kankakee 201 100% $ 181
Total Illinois 3 491 96% $ 209
Broadmore* IN South Bend 350 82% $ 237
Forest Creek IN South Bend 167 99% $ 289
Fountainvue* IN Marion 121 87% $ 154
Hickory Knoll IN Indianapolis 325 98% $ 293
Mariwood IN Indianapolis 296 94% $ 289
Oak Ridge IN South Bend 204 99% $ 241
Pendleton IN Indianapolis 102 97% $ 216
Sherwood IN Marion 89 80% $ 158
Skyway IN Indianapolis 156 97% $ 286
Twin Pines IN Goshen 238 97% $ 230
Total Indiana 10 2,048 93% $ 252
Mosby's Point KY Cincinnati 150 97% $ 289
Rolling Hills KY Louisville 158 97% $ 204
Total Kentucky 2 308 97% $ 245
Pinecrest Village LA Shreveport 445 72% $ 155
Stonegate, LA LA Shreveport 157 98% $ 176
Total Louisiana 2 602 79% $ 160
Hillcrest MA Boston 83 93% $ 305
Leisurewoods Rockland MA Boston 394 99% $ 313
Leisurewoods Taunton* MA Boston 181 69% $ 278
The Glen MA Boston 36 100% $ 380
Total Massachusetts 4 694 90% $ 306
Algoma Estates MI Grand Rapids 294 96% $ 285
Anchor Bay* MI Detroit 1,384 94% $ 339
Arbor Village MI Jackson 266 98% $ 250
Avon MI Detroit 617 99% $ 396
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Weighted
Total Average
Total Number of Occupancy Monthly Rent
Location Comm- Sites as of per Site
Community State (Closest Major City) unities 9/30/99 9/30/99 9/30/99
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canterbury Estates MI Grand Rapids 209 80% $ 240
Chesterfield MI Detroit 345 97% $ 362
Chestnut Creek MI Flint 221 70% $ 310
Clinton MI Detroit 1,000 99% $ 359
Colonial Acres MI Kalamazoo 612 95% $ 281
Colonial Manor MI Kalamazoo 195 96% $ 268
Country Estates MI Grand Rapids 254 95% $ 268
Cranberry MI Pontiac 232 99% $ 352
Ferrand Estates MI Grand Rapids 420 99% $ 328
Forest Lake Estates* MI Grand Rapids 221 79% $ 272
Grand Blanc* MI Flint 478 84% $ 333
Holiday Estates MI Grand Rapids 205 100% $ 314
Howell MI Lansing 455 98% $ 369
Huron Estates MI Flint 111 71% $ 220
Lake in the Hills MI Detroit 238 100% $ 373
Leonard Gardens* MI Grand Rapids 271 68% $ 288
Macomb MI Detroit 1,426 98% $ 360
Norton Shores MI Grand Rapids 656 86% $ 252
Novi MI Detroit 725 98% $ 405
Oakhill MI Flint 504 89% $ 352
Old Orchard MI Flint 200 100% $ 315
Orion MI Detroit 423 98% $ 344
Pinewood MI Columbus 380 98% $ 300
Pleasant Ridge MI Lansing 305 85% $ 216
Royal Estates MI Kalamazoo 183 93% $ 303
Science City MI Midland 171 98% $ 288
Springbrook MI Utica 398 98% $ 330
Sun Valley MI Jackson 195 97% $ 245
Swan Creek MI Ann Arbor 294 100% $ 341
The Highlands* MI Flint 682 90% $ 270
Torrey Hills MI Flint 346 97% $ 343
Valley Vista MI Grand Rapids 137 92% $ 323
Villa MI Flint 319 96% $ 335
Westbrook* MI Detroit 247 55% $ 370
Yankee Spring MI Grand Rapids 284 92% $ 249
Total Michigan 39 15,903 93% $ 324
Cedar Knolls MN Minneapolis 458 98% $ 386
Cimmaron MN St. Paul 505 99% $ 383
President's Park MN Grand Forks 174 84% $ 220
Rosemount MN Minneapolis/St. Paul 182 100% $ 376
Twenty-Nine Pines MN St. Paul 152 93% $ 308
Total Minnesota 5 1,471 96% $ 356
Springfield Farms* MO Springfield 134 71% $ 173
Total Missouri 1 134 71% $ 173
Countryside Village G.F. MT Great Falls 226 97% $ 199
Total Montana 1 226 97% $ 199
Autumn Forest NC Greensboro 299 98% $ 224
Foxhall Village NC Raleigh 315 97% $ 300
Oakwood Forest NC Greensboro 481 93% $ 263
Woodlake NC Greensboro 308 99% $ 235
Total North Carolina 4 1,403 96% $ 247
Buena Vista ND Fargo 400 96% $ 258
Columbia Heights ND Grand Forks 302 99% $ 267
Meadow Park ND Fargo 117 90% $ 192
Total North Dakota 3 819 96% $ 252
Casual Estates NY Syracuse 961 73% $ 321
Meadowbrook NY Ithaca 237 75% $ 257
Oak Orchard Estates NY Rochester 235 93% $ 282
Shadybrook NY Syracuse 89 73% $ 321
Total New York 4 1,522 76% $ 305
Hunter's Chase* OH Lima 135 42% $ 167
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Weighted
Total Average
Total Number of Occupancy Monthly Rent
Location Comm- Sites as of per Site
Community State (Closest Major City) unities 9/30/99 9/30/99 9/30/99
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vance OH Columbus 110 95% $ 214
Willo-Arms OH Cleveland 262 100% $ 195
Yorktowne OH Cincinnati 354 97% $ 322
Total Ohio 4 861 89% $ 245
Crestview OK Stillwater 237 88% $ 198
Total Oklahoma 1 237 88% $ 198
Knoll Terrace OR Salem 212 98% $ 350
Riverview OR Portland 133 99% $ 380
Total Oregon 2 345 98% $ 362
Carnes Crossing* SC 535 96% $ 172
Conway Plantation* SC Myrtle Beach 299 66% $ 181
Saddlebrook SC 426 97% $ 187
Total South Carolina 3 1,260 89% $ 179
Eagle Creek* TX Tyler 198 44% $ 158
Homestead Ranch TX McAllen 126 87% $ 220
Leisure World TX Brownsville 201 90% $ 199
The Homestead TX McAllen 99 97% $ 222
Trail's End TX Brownsville 307 79% $ 194
Total Texas 5 931 77% $ 194
Regency Lakes* VA Winchester 384 72% $ 207
Total Virginia 1 384 72% $ 207
Eagle Point WA Seattle 230 98% $ 451
Total Washington 1 230 98% $ 451
Breazeale WY Laramie 116 97% $ 234
Total Wyoming 1 116 97% $ 234
Totals 161 51,296 91.9% $ 301
</TABLE>
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Index of Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the third quarter of
1999.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, and in the capacities indicated, on the
11th day of November, 1999.
CHATEAU COMMUNITIES, INC.
By: /s/ Tamara D. Fischer
-------------------------------------
Tamara D. Fischer
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,593
<SECURITIES> 0
<RECEIVABLES> 12,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,036,809
<DEPRECIATION> 181,165
<TOTAL-ASSETS> 983,981
<CURRENT-LIABILITIES> 46,385
<BONDS> 461,726
0
0
<COMMON> 357,508
<OTHER-SE> 118,362
<TOTAL-LIABILITY-AND-EQUITY> 983,981
<SALES> 0
<TOTAL-REVENUES> 140,551
<CGS> 0
<TOTAL-COSTS> 47,280
<OTHER-EXPENSES> 38,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,707
<INCOME-PRETAX> 26,301
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,301
<EPS-BASIC> .94
<EPS-DILUTED> .93
</TABLE>
