<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
Transition pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
COMMISSION FILE NUMBER 333-2522-01
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-3144240
(State of Organization) (I.R.S. Employer Identification No.)
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (810) 932-3100
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes. [X] No [ ]
Page 1 of 12
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SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX
___________
PAGES
-----
PART I
- ------
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II
- -------
Item 5. Ratios of Earnings to Fixed Charges 11
Item 6.(a) Exhibits required by Item 601 of Regulation S-K 11
Item 6.(b) Reports on Form 8-K 11
Signatures 12
2
<PAGE> 3
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(IN THOUSANDS)
__________
ASSETS 1997 1996
-------- ---------
Investment in rental property, net $562,955 $558,278
Cash and cash equivalents 10,552 9,236
Investment in Sun Home Services, Inc. ("SHS") 9,592 5,103
Other assets 12,864 12,439
-------- --------
Total assets $595,963 $585,056
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt $185,000 $185,000
Accounts payable and accrued expenses 10,899 7,718
Deposits and other liabilities 9,487 9,123
Distributions payable 9,113 --
-------- --------
Total liabilities 214,499 201,841
-------- --------
Partners' Capital:
Preferred Operating Partnership Units
("POP Units"), unlimited authorized,
1,325 issued and outstanding in 1997
and 1996 35,783 35,783
Operating Partnership Units ("OP Units"),
unlimited authorized, 18,058 and 17,751
issued and outstanding in 1997 and 1996,
respectively
General partner 300,328 300,932
Limited partners 45,353 46,500
-------- --------
Total partners' capital 381,464 383,215
-------- --------
Total liabilities and partners'
capital $595,963 $585,056
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE> 4
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
--------
1997 1996
Revenues: -------- --------
Rental income $ 22,638 $ 11,995
Other income 755 447
-------- --------
Total revenues 23,393 12,442
Expenses: -------- --------
Property operating and maintenance 5,147 2,621
Real estate taxes 1,863 868
General and administrative 1,078 699
Depreciation and amortization 4,821 2,760
Interest 3,445 2,038
-------- --------
Total expenses 16,354 8,986
-------- --------
Net income 7,039 3,456
Less distribution to Preferred OP Units 626 --
-------- --------
Earnings attributable to OP Units $ 6,413 $ 3,456
======== ========
Earnings attributed to:
General Partner $ 5,568 $ 2,937
Limited Partners 845 519
-------- --------
$ 6,413 $ 3,456
======== ========
Earnings per OP unit $ .36 $ .29
======== ========
Weighted average OP units outstanding 18,005 11,766
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
4
<PAGE> 5
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS)
__________
1997 1996
Cash flows from operating activities: --------- --------
Net income $ 6,413 $ 3,456
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization costs 4,821 2,760
Deferred financing costs 39 113
Increase in prepaid expenses and other assets (669) (27)
Increase (decrease) in accounts payable and other
liabilities 4,171 (361)
------- -------
Net cash provided by operating activities 14,775 5,941
------- -------
Cash flows from investing activities:
Investment in rental properties (9,277) (1,577)
Investment in SHS (4,489) 70
------- -------
Net cash used in investing activities (13,766) (1,507)
------- -------
Cash flows from financing activities:
Distributions (7,886) (5,211)
Proceeds from borrowings -- 4,524
Repayments on borrowings -- (370)
Payments for deferred financing costs (16) (35)
Capital contribution 8,209 765
------- -------
Net cash provided by (used in) financing
activities 307 (327)
------- -------
Net increase in cash and cash equivalents 1,316 4,107
Cash and cash equivalents, beginning of period 9,236 121
------- -------
Cash and cash equivalents, end of period $10,552 $ 4,228
======= =======
The accompanying notes are an integral part of the consolidated
financial statements
5
<PAGE> 6
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
1. BASIS OF PRESENTATION:
---------------------
These unaudited condensed consolidated financial statements of Sun Communities
Operating Limited Partnership, (the "Company"), have been prepared pursuant to
the Securities and Exchange Commission ("SEC") rules and regulations and should
be read in conjunction with the financial statements and notes thereto of the
Company as of December 31, 1996. The following notes to consolidated financial
statements present interim disclosures as required by the SEC. The
accompanying consolidated financial statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring
nature. Certain reclassifications have been made to the prior period financial
statements to conform with current period presentation.
Sun Communities, Inc. ("Sun"), a self-administered and self-managed Real
Estate Investment Trust with no independent operations of its own, is the sole
general partner of the Company. As general partner, Sun has unilateral control
and complete responsibility for management of the Company. Pursuant to the
terms of the Company's partnership agreement, the Company is required to
reimburse Sun for the net expenses incurred by Sun. Amounts paid on behalf of
Sun by the Company are reflected in the statement of operations as general and
administrative expenses. The balance sheet of Sun as of March 31, 1997 is
identical to the accompanying Company balance sheet, except as follows:
<TABLE>
<CAPTION>
AS PRESENTED
HEREIN SUN COMMUNITIES, INC.
MARCH 31, 1997 ADJUSTMENTS MARCH 31, 1997
-------------- ----------- ---------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Minority interests . . . . . . . . -- $ 81,136 $ 81,136
=========
Preferred OP Units . . . . . . . . $ 35,783 (35,783)
General partner . . . . . . . . . . 300,328 (300,328)
Limited partners. . . . . . . . . . 45,353 (45,353)
Common stock. . . . . . . . . . . . 157 $ 157
Additional paid-in capital. . . . . 336,527 336,527
Distributions in excess of
accumulated earnings. . . . . . . (27,183) (27,183)
Officers' notes . . . . . . . . . . (9,173) (9,173)
---------- ---------
Partners' capital/Stockholders'
equity. . . . . . . . . . $ 381,464 $ 300,328
========== =========
</TABLE>
6
<PAGE> 7
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
2. RENTAL PROPERTY:
---------------
The following summarizes rental property (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Land $ 59,809 $ 58,943
Land improvements and buildings 518,856 510,726
Furniture, fixtures, equipment 10,477 9,826
Property under development 8,948 9,318
---------- ----------
598,090 588,813
Accumulated depreciation (35,135) (30,535)
---------- ----------
Rental property, net $ 562,955 $ 558,278
========== ==========
</TABLE>
3. DEBT:
The following table sets forth certain information regarding debt at
March 31, 1997 (in thousands):
<TABLE>
<S> <C>
Secured term loan, interest at LIBOR
plus 1.50%, due November 1, 1997 $ 35,000
Senior notes, interest at 7.375%, due
May 1, 2001 65,000
Senior notes, interest at 7.625%, due
May 1, 2003 85,000
----------
$ 185,000
==========
</TABLE>
4. OTHER INCOME:
The components of other income are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
1997 1996
---- ----
<S> <C> <C>
Interest:
Notes and mortgages $ 436 $ 366
Other 124 39
Other property revenues 152 112
Equity earnings (loss) - SHS 43 (70)
-------- -------
$ 755 $ 447
======== =======
</TABLE>
7
<PAGE> 8
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
________
OVERVIEW
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and Notes thereto. Capitalized terms are used as defined
elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 1997 and 1996
For the three months ended March 31, 1997, net income before distribution to
Preferred OP Units increased 103.7 percent from $3.5 million to $7.0 million,
when compared to the three months ended March 31, 1996. The increase was due
to increased revenues of $10.9 million while expenses increased by $7.4
million.
Rental income increased by $10.6 million from $12.0 million to $22.6 million or
88.7 percent, due to acquisitions ($9.7 million), lease up of sites ($0.3
million) and increases in rents and other community revenues ($0.6 million).
Other income increased by $0.3 million from $0.4 million to $0.7 million or
68.9 percent due primarily to increased interest income and improved results of
SHS.
Property operating and maintenance increased by $2.5 million from $2.6 million
to $5.1 million or 96.4 percent due primarily to acquisitions ($2.2 million).
Real estate taxes increased by $1.0 million from $0.9 million to $1.9 million
or 114.6 percent due primarily to acquisitions ($0.9 million).
General and administrative expenses increased by $0.4 million from $.7 million
to $1.1 million or 54.2 percent due primarily to increased staffing to manage
the growth of the company. General and administrative expenses as a percentage
of rental income declined from 5.8 percent to 4.8 percent of rental revenues as
a result of economies of scale resulting from the company's growth.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $7.0 million from $8.3 million to $15.3 million or 85.4 percent.
EBITDA decreased as a percentage of revenues from 66.3 percent to 65.4 percent.
Depreciation and amortization increased by $2.0 million from $2.8 million to
$4.8 million or 74.7 percent due primarily to acquisitions.
Interest expense increased by $1.4 million from $2.0 million to $3.4 million or
69.0 percent primarily due to increased average debt outstanding.
8
<PAGE> 9
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
________
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of and for
the three months ended March 31, 1997 and 1996. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1996. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The table excludes the
1,200 sites where the Company's interest is in the form of a shared
appreciation mortgage note.
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
----------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Property revenues, including other $ 13,007 $ 12,107 $ 22,790 $ 12,107
--------- --------- --------- ----------
Property operating expenses:
Property operating and maintenance 2,859 2,621 5,147 2,621
Real estate taxes 964 868 1,863 868
--------- --------- --------- ----------
Property operating expenses 3,823 3,489 7,010 3,489
--------- --------- --------- ----------
Property EBITDA $ 9,184 $ 8,618 $ 15,780 $ 8,618
========= ========= ========= ==========
Number of properties 52 52 84 52
Developed sites 17,400 16,900 30,000 16,900
Occupied sites 16,370 15,969 27,458 15,969
Occupancy % 94.1% 94.5% 94.7%(1) 94.5%
Weighted average monthly rent per site $ 250 $ 240 $ 254 $ 240
Sites available for development 1,889 2,368 3,552 2,368
Sites in development 481 412 849 412
</TABLE>
(1) Occupancy % relates to manufactured housing sites, excluding recreational
vehicle sites.
On a same property basis, property revenues increased by $0.9 million from
$12.1 million to $13.0 million, or 7.4 percent, due primarily to increases in
rents and occupancy related charges including water and property tax pass
throughs. Also contributing to revenue growth was the increase of 401 leased
sites at March 31, 1997 compared to March 31, 1996.
Property operating expenses increased by $0.3 million from $3.5 million to $3.8
million, or 9.6 percent, due to increased occupancies and costs and increases
in assessments and millage rates by local taxing authorities. Property EBITDA
increased by $0.6 million from $8.6 million to $9.2 million, or 6.6 percent.
Sites available for development in the total portfolio increased by 1,184 from
2,368 to 3,552 with 778 sites added in conjunction with acquisitions in
Michigan, Florida and Indiana, and 885 in new communities under development in
Texas and Michigan.
9
<PAGE> 10
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
________
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1.3 million to $10.5 million at March
31, 1997 compared to $9.2 million at December 31, 1996 primarily because cash
provided by operating and financing activities exceeded cash used in investing
activities.
Net cash provided by operating activities increased by $8.8 million to $14.8
million for the three months ended March 31, 1997 compared to $6.0 million for
the same period in 1996. $5.0 million of this increase was due to increases in
net income before depreciation and amortization and minority interests with the
remaining balance attributable to changes in working capital.
Net cash used in investing activities was $13.8 million for the three months
ended March 31, 1997 compared to $1.5 million for the same period in 1996.
$7.7 million of this increase was due to acquisition related activities with
the remaining balance attributable to the Company's investment in SHS.
Net cash provided by financing activities was $0.3 million for the three months
ended March 31, 1997 and net cash used in financing activities for the three
months ended March 31, 1996 was $0.3 million. The change was primarily due to
a $7.4 million increase in capital contributions offset by a $4.5 million
decrease in proceeds from borrowings and a $2.7 million increase in
distributions paid.
The Company expects to meet its short-term liquidity requirements generally
through its working capital provided by operating activities and additional
capital contributions. The Company considers these sources to be adequate and
anticipates they will continue to be adequate to meet operating requirements,
capital improvements, investment in expansions, and payment of distributions by
the Company in accordance with REIT requirements in both the short and long
term.
The Company expects to meet certain long-term liquidity requirements such as
scheduled debt maturities and property acquisitions through the issuance of
equity or debt securities. The Company can also meet these requirements by
utilizing its $75 million line of credit which bears interest at LIBOR plus
1.25% (effective May 1 1997) and is due November 1, 1999.
At March 31, 1997, the Company's debt to total market capitalization
approximated 23% (assuming conversion of all Common and Preferred OP Units to
shares of common stock), with a weighted average maturity of approximately 4.3
years and a weighted average interest rate of 7.4%.
Recurring capital expenditures approximated $0.8 million for the three months
ended March 31, 1997.
10
<PAGE> 11
PART II
ITEM 5. - RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges for the years December 31,
1992, 1993, 1994, 1995 and 1996, and the three months ended March 31, 1997 were
1.05:1, 1.05:1, 2.79:1, 3.03:1, 2.49:1, and 2.52:1, respectively.
ITEM 6.(a) - EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT NO. DESCRIPTION
12.1 Ratios of Earnings to Fixed Charges
27 Financial Data Schedule
ITEM 6.(b) - REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the period covered by
this Form 10-Q.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 9, 1997
SUN COMMUNITIES OPERATING
LIMITED PARTNERSHIP
By: Sun Communities, Inc., General Partner
BY: /s/ Gary A. Shiffman
---------------------------------
Gary A. Shiffman, President
BY: /s/ Jeffrey P. Jorissen
---------------------------------
Jeffrey P. Jorissen, Chief
Financial Officer and
Secretary
12
<PAGE> 13
EXHIBIT INDEX
PAGE
FILED NUMBER
EXHIBIT NO. DESCRIPTION HEREWITH HEREIN
12.1 Ratio of Earnings to Fixed Charges X
27 Financial Data Schedule X
13
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The ratio of earnings to fixed charges for the Company (including its
predecessor-in-interest, Sundance Enterprises, Inc., the partnerships
affiliated with Sundance Enterprises, Inc., and the Company's subsidiaries and
majority-owned partnerships) presents the relationship of the Company's
earnings to its fixed charges. "Earnings" as used in the computation, is based
on net income (loss) from continuing operations (which includes a charge to
income for depreciation and amortization expense) before income taxes, plus
fixed charges. "Fixed charges" is comprised of (i) interest charges, whether
expensed or capitalized, and (ii) amortization of loan costs and discounts or
premiums relating to indebtedness of the Company and its subsidiaries and
majority-owned partnerships, excluding in all cases items which would be or are
eliminated in consolidation.
<TABLE>
<CAPTION>
YEAR ENED
3 MONTHS DECEMBER 31,
ENDED ---------------------------------------------------------------------
3/31/97 1996 1995 1994 1993 1992
--------- -------- ----------- ---------- ---------- -----------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) $ 7,039 $ 21,953 (1) $ 13,591 $ 8,924 $ 288 $ 272
Add fixed charges other
than capitalized interest 3445 11,277 6,420 4,894 5,280 5,522
----------- --------- ---------- ---------- ---------- ----------
$ 10,484 $ 33,230 $ 20,011 $ 13,818 $ 5,568 $ 5,794
=========== ========= ========== ========== ========== ==========
Fixed Charges:
Interest expense $ 3,445 $ 11,277 $ 6,420 $ 4,894 $ 5,280 $ 5,522
Preferred OP distribution 626 1,670 -- -- -- --
Capitalized interest 90 380 192 58 -- --
----------- --------- ----------- ---------- ---------- ----------
Total fixed charges $ 4,161 $ 13,327 $ 6,612 $ 4,952 $ 5,280 $ 5,522
=========== ========== =========== ========== ========== ==========
Ratio of Earnings to
Fixed Charges: 2.52:1 2.49:1 3.03:1 2.79:1 1.05:1 1.05:1
</TABLE>
(1) Before extraordinary item
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,552
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 598,090
<DEPRECIATION> 35,135
<TOTAL-ASSETS> 595,963
<CURRENT-LIABILITIES> 0
<BONDS> 185,000
0
0
<COMMON> 0
<OTHER-SE> 381,464
<TOTAL-LIABILITY-AND-EQUITY> 595,963
<SALES> 0
<TOTAL-REVENUES> 23,393
<CGS> 0
<TOTAL-COSTS> 7,010
<OTHER-EXPENSES> 4,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,445
<INCOME-PRETAX> 7,039
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,039
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,413
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
