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FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO
Commission File No. 333-2522-01
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
STATE OF MICHIGAN 38-3144240
State of Organization I.R.S. Employer I.D. No.
31700 MIDDLEBELT ROAD
SUITE 145
FARMINGTON HILLS, MICHIGAN 48334
(810) 932-3100
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X]
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 _____
As of March 3, 1997, the aggregate market value of the Registrant's
partnership units held by non-affiliates of the Registrant was approximately
$108,970,000 determined in accordance with the highest price at which the stock
of Sun Communities, Inc. (into which the partnership units are convertible on a
one-for-one basis) was sold on such date as reported by the New York Stock
Exchange.
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PART I
ITEM 1. BUSINESS
GENERAL
Sun Communities Operating Limited Partnership, a Michigan limited
partnership (the "Company"), owns and operates manufactured housing communities
concentrated in the midwestern and southeastern United States. Sun
Communities, Inc., a Maryland corporation and the sole general partner of the
Company ("General Partner"), is a fully integrated real estate company which,
together with its affiliates and predecessors, has been in the business of
acquiring, operating and expanding manufactured housing communities since 1975.
As of March 1, 1997, the Company, in conjunction with its subsidiary, Sun
Communities Finance Limited Partnership, a Michigan limited partnership (the
"Financing Partnership"), owned and managed a portfolio of 83 manufactured
housing community properties (the "Properties") located in 12 states. The
Properties contain an aggregate of 29,500 developed sites and approximately
3,500 sites suitable for development. In order to enhance property performance
and cash flow, the Company, through Sun Home Services, Inc., a Michigan
corporation ("Home Services"), actively markets and sells new and used
manufactured homes for placement in the Properties.
The General Partner expects to qualify and has made an election to be
taxed as a REIT for federal income tax purposes commencing with the calendar
year beginning January 1, 1994, and will be self-administered and self-managed.
The Company's executive and principal property management office is
located at 31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334
and its telephone number is (810) 932-3100. The Company has regional
property management offices located in Elkhart, Indiana and Tampa, Florida.
The Company employed 437 people as of March 1, 1997.
HISTORY OF THE COMPANY
The immediate predecessor to Sun Communities, Inc. was incorporated in
January 1985 to continue and expand the business of acquiring, owning and
operating manufactured housing communities that was originally started in 1975.
Since its inception, the General Partner's strategy has been to acquire and in
many cases expand or renovate existing manufactured housing communities. The
General Partner has maintained this strategy because it believes attractive
investment returns can be obtained by purchasing existing properties with
expansion potential.
MAJOR ACQUISITION
On May 1, 1996, the Company and a wholly-owned subsidiary, Sun GP L.L.C.,
a Michigan limited liability company ("GP"), acquired 25 manufactured housing
communities (the "Aspen Properties") from affiliates of Aspen Enterprises,
Ltd., (collectively, "Aspen") for a purchase price of $226.0 million (excluding
related transaction costs). The Aspen Properties are located primarily in
Florida and Michigan and, as of March 1, 1997, contained a total of 10,367
developed sites and approximately 286 sites suitable for development.
Of the $226.0 million purchase price for the Aspen Properties, $4.2
million was issued in the form of limited partnership interests in the Company
(the "Common OP Units"), and $35.8 million was issued in the form of
convertible preferred units in the Company (the "Preferred OP Units"). Both
the Common OP Units and the Preferred OP Units were issued to Aspen affiliates,
including certain former Aspen employees who became employees of the Company
upon the closing of the acquisition of the Aspen Properties. For tax and other
purposes, the Company acquired 100% of the partnership interests in certain
Aspen Properties rather than directly acquiring such properties.
The 1,325,275 Preferred OP Units represent equity interests in the General
Partner and have the effect of increasing the minority interest reflected on
the General Partner's consolidated
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financial statements. The issue price of the Preferred OP Units was $27 per
unit (the "Issue Price"). The Preferred OP Units are entitled to a fixed
quarterly distribution equal to 7.00% per annum of the Issue Price, which
distribution is payable by the Company prior to any distributions to its other
general or limited partners, including distributions in respect of the shares of
the General Partner's common stock (the "Common Stock"). To the extent the
Company issues additional preferred securities, payment of distributions for
such preferred securities must rank pari passu or junior to distribution
payments on the Preferred OP Units. The distributions payable to holders of
Preferred OP Units will not increase to the extent the Company increases the
distributions to its other partners.
In June 2002, the Preferred OP Units will be convertible into Common OP
Units or redeemable for cash at the Issue Price, at the option of the holder.
If converted, holders of Preferred OP Units will receive a number of Common OP
Units that will give them the benefit of: (i) 100% of the first $4.50 per share
increase in the average closing price of the shares of Common Stock for the ten
business days prior to conversion (the "Conversion Date Price") over the Issue
Price; (ii) none of the increase in the Conversion Date Price over the Issue
Price to the extent such difference is greater than $4.50 per share but less
than $9.00 per share; and (iii) 25% of the increase in the Conversion Date
Price over the Issue Price to the extent such difference exceeds $9.00 per
share. The Company structured this conversion formula to encourage holders of
the Preferred OP Units to convert, rather than redeem, their units to the
extent the market price of the Common Stock increases by June 2002. If the
Company fails to make any Preferred OP Unit distribution payment within 20 days
of its due date, the Company's redemption obligation is subject to acceleration
by the holders of the Preferred OP Units.
The Company's obligation to redeem the Preferred OP Units is currently
unsecured. If the Company and Aspen do not agree upon appropriate security for
the Company's obligation to redeem the Preferred OP Units and the Company (i)
does not maintain an investment-grade credit rating for the Company's unsecured
debt for any consecutive 60-day period or (ii) issues additional equity
securities that do not rank junior to the Preferred OP Units, the Company's
obligation to redeem the Preferred OP Units can be accelerated by the holders
of the Preferred OP Units. The Company has continuously maintained an
investment-grade credit rating for the Company's unsecured debt since the
issuance of the Preferred OP Units.
The acquisition of the Aspen Properties was funded by utilizing a portion
of the proceeds of the offering of 4,700,000 shares of the Common Stock that
closed on April 8, 1996 and a $150 million debt offering of investment-grade,
senior unsecured notes that closed on April 29, 1996.
STRUCTURE OF THE COMPANY
The operations of the General Partner are carried on through certain
subsidiaries (the "Subsidiaries"), including the Company and the Financing
Partnership, which, among other things, enables the General Partner to comply
with certain complex requirements under the Federal tax rules and regulations
applicable to REITs. The General Partner established the Company to allow the
General Partner to acquire manufactured housing communities in transactions
that defer some or all of the sellers' tax consequences. Substantially all of
the General Partner's assets are held by or through the Company, of which the
General Partner is the sole general partner, and wholly-owned subsidiaries of
the Company. In addition to the Company and the Financing Partnership, the
Subsidiaries include Home Services, which provides manufactured home sales and
brokerage services to current and prospective tenants of the Properties. The
Company owns 100% of the non-voting preferred stock of Home Services, which
entitles the Company to 95% of the cash flow from operating activities of Home
Services. As of March 1, 1997, the voting common stock of Home Services was
owned by Milton M. Shiffman, Gary A. Shiffman and Jeffrey P. Jorissen,
executive officers of the General Partner, entitling them to the remaining 5%
of such cash flow from operating activities. Sun Water Oak Golf, Inc. ("Sun
Golf") is a wholly-owned subsidiary of Home Services. Sun Golf was organized
to own and operate the golf course, restaurant and related facilities located
on the Water Oak Property that were acquired in November 1994.
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THE MANUFACTURED HOUSING COMMUNITY INDUSTRY
A manufactured housing community is a residential subdivision designed and
improved with sites for the placement of manufactured homes and related
improvements and amenities. Manufactured homes are detached, single-family
homes which are produced off-site by manufacturers and installed on sites
within the community. Manufactured homes are available in a wide array of
designs, providing owners with a level of customization generally unavailable
in other forms of multi-family housing.
Modern manufactured housing communities, such as the Properties, contain
improvements similar to other garden-style residential developments, including
centralized entrances, paved streets, curbs and gutters, and parkways. In
addition, these communities also often provide a number of amenities, such as a
clubhouse, a swimming pool, shuffleboard courts, tennis courts, laundry
facilities and cable television service.
The owner of each home in the Company's communities leases the site on
which the home is located. The Company owns the underlying land, utility
connections, streets, lighting, driveways, common area amenities and other
capital improvements and is responsible for enforcement of community guidelines
and maintenance. Some communities provide water and sewer service through
public or private utilities, while others provide these services to residents
from on-site facilities. Each owner within the Company's communities is
responsible for the maintenance of his home and leased site. As a result,
capital expenditure needs tend to be less significant, relative to multi-family
rental apartment complexes.
PROPERTY MANAGEMENT
The Company's property management strategy emphasizes intensive, hands-on
management by dedicated, on-site property managers. The Company believes that
this on-site focus enables it to continually monitor and address tenant
concerns, the performance of competitive properties and local market
conditions. Of the Company's 437 employees, 396 are located on-site as
property managers, support staff, or maintenance personnel.
The Company's property managers are overseen by Brian W. Fannon, Senior
Vice President and Chief Operating Officer of the General Partner, who has 27
years of property management experience, three Vice Presidents and eight
Regional Property Managers. In addition, the Regional Property Managers are
responsible for semi-annual market surveys of competitive parks, interaction
with local manufactured home dealers and regular property inspections.
Each property manager performs regular inspections in order to continually
monitor the property's physical condition and provides managers with the
opportunity to understand and effectively address tenant concerns. In addition
to a property manager, each property has an on-site maintenance person and
management support staff. The Company holds periodic training sessions for all
property management personnel to ensure that management policies are
implemented effectively and professionally.
BROKERAGE AND HOME SALES
Home Services offers manufactured home brokerage and sales services to
tenants and prospective tenants in the Company's communities. Since tenants
often purchase a home already on-site within a community, such services enhance
occupancy and property performance. Additionally, since many of the homes in
the Properties are sold through Home Services, better control of home quality
in the Company's communities can be maintained than if brokerage and sales
services were conducted solely through third-party brokers.
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COMPETITION
All of the Properties are located in developed areas that include other
manufactured housing community properties. The number of competitive
manufactured housing community properties in a particular area could have a
material effect on the Company's ability to lease sites and on rents charged at
the Properties or at any newly acquired properties. The Company may be
competing with others that have greater resources than the Company and whose
officers and directors have more experience than the Company's officers and
directors. In addition, other forms of multi-family residential properties,
such as private and federally funded or assisted multi-family housing and
single-family housing, provide housing alternatives to potential tenants of
manufactured housing communities.
REGULATIONS AND INSURANCE
General. Manufactured housing community properties are subject to various
laws, ordinances and regulations, including regulations relating to
recreational facilities such as swimming pools, clubhouses and other common
areas. The Company believes that each Property has the necessary operating
permits and approvals.
Americans with Disabilities Act ("ADA"). The Properties and any newly
acquired manufactured housing communities must comply with the ADA. The ADA
has separate compliance requirements for "public accommodations" and
"commercial facilities," but generally requires that public facilities such as
clubhouses, pools and recreation areas be made accessible to people with
disabilities. Compliance with ADA requirements could require removal of access
barriers and other capital improvements at the Company's properties.
Noncompliance could result in imposition of fines or an award of damages to
private litigants. The Company does not believe the ADA will have a material
adverse impact on the Company's results of operations. If required property
improvements involve a greater expenditure than the Company currently
anticipates, or if the improvements must be made on a more accelerated basis
than it anticipates, the Company's ability to make expected distributions could
be adversely affected. The Company believes that its competitors face similar
costs to comply with the requirements of the ADA.
Rent Control Legislation. State and local rent control laws in certain
jurisdictions limit the Company's ability to increase rents and to recover
increases in operating expenses and the costs of capital improvements.
Enactment of such laws has been considered from time to time in other
jurisdictions. The Company presently expects to continue to operate
manufactured housing community properties, and may purchase additional
properties, in markets that are either subject to rent control or in which
rent-limiting legislation exists or may be enacted. For example, 25 of the
Properties are located in Florida, which has enacted a law which provides that
a majority of tenants in a manufactured housing community may require that a
proposed increase in site rental rates, reduction in services or utilities or
change in the community's rules and regulations be submitted for formal
mediation or arbitration if they believe that the proposal is unreasonable.
Insurance. Management believes that the Properties are covered by
adequate fire, flood, property and business interruption insurance provided by
reputable companies and with commercially reasonable deductibles and limits.
The Company maintains a blanket policy that covers all of the Properties. The
Company has obtained title insurance insuring fee title to the Properties in an
aggregate amount which the Company believes to be adequate.
ITEM 2. PROPERTIES
General. As of March 1, 1997, the Properties consisted of 83 manufactured
housing communities concentrated in 12 states in the midwestern and
southeastern United States, containing 29,500 developed sites and approximately
3,500 sites suitable for development. Most of the Properties include amenities
oriented towards family and retirement living. Of the 83 Properties, 67 have
more than 200 sites, with the largest having 1,272 sites.
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The Properties had an aggregate occupancy rate of 95% as of December 31,
1996, excluding seasonal RV sites. Since January 1, 1996, the Properties have
averaged an aggregate annual turnover of homes (where the home is moved out of
the community) of approximately 3% and an average annual turnover of residents
(where the home is sold and remains within the community, typically without
interruption of rental income) of approximately 9%.
The Company believes that its Properties' high amenity levels contribute
to low turnover and generally high occupancy rates. All of the Properties
provide residents with attractive amenities with most offering a clubhouse, a
swimming pool, laundry facilities and cable television service. Many
Properties offer additional amenities such as sauna/whirlpool spas, tennis,
shuffleboard and basketball courts and/or exercise rooms.
The Company has sought to concentrate its communities within certain
geographic areas in order to achieve economies of scale in management and
operation. Except for three Properties located in Texas, the Properties are
located in the midwestern and southeastern United States. The Company has
identified Florida as a key market in which to expand its existing operations
in the southeast because of Florida's stable tenant base, relatively low cost
of living and attractive acquisition opportunities. Additionally, the
Company's midwestern operations serve as a source of prospective tenants for
the Florida Properties, which are generally oriented towards retirement living.
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The following table sets forth certain information relating to the
Properties owned as of March 1, 1997:
<TABLE>
<CAPTION>
DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
MIDWEST
MICHIGAN
Allendale
Allendale, MI......... 223 98% 96% 97%
Alpine
Grand Rapids, MI...... 381 99% 96% 99%
Bedford Hills
Battle Creek, MI...... 340 95% 94% 94%
Brentwood
Kentwood, MI.......... 197 98% 97% 99%
Creekwood
Burton, MI (2)........ 0 --- --- ---
Byron Center
Byron Center, MI...... 143 96% 92% 97%
Candlewick Court
Owosso, MI............ 211 99% 100% 99%
College Park Estates
Canton, MI............ 230 98% 98% 99%
Continental Estates
Davison, MI........... 386 (3) (3) 93%
Continental North
Davison, MI........... 334 (3) (3) 95%
Country Acres
Cadillac, MI.......... 182 98% 98% 98%
Country Meadows
Flat Rock, MI......... 489 87% 99% 99%
Countryside Village
Perry, MI............. 359 96% 99% 96%
Cutler Estates
Grand Rapids, MI...... 281 97% 96% 98%
Davison East
Davison, MI........... 190 (3) (3) 99%
Fisherman's Cove
Flint, MI............. 162 99% 98% 97%
Grand
Grand Rapids, MI...... 312 97% 95% 98%
Hamlin
Webberville, MI....... 146 100% 99% 100%
Kensington Meadows
Lansing, MI........... 206 (4) 94% 67% (6)
Kings Court
Traverse City, MI..... 588 93% 94% 92% (6)
Lincoln Estates
Holland, MI........... 191 98% 98% 97%
Maple Grove Estates
Dorr, MI.............. 46 100% 100% 100%
Meadow Lake Estates
White Lake, MI........ 425 98% 97% 100%
Meadowbrook Estates
Monroe, MI............ 453 100% 100% 100%
Meadowstream Village
Sodus, MI............. 159 99% 98% 99%
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Parkwood
Grand Blanc, MI....... 250 97% 96% 97%
Presidential
Hudsonville, MI....... 326 98% 96% 98%
Scio Farms
Ann Arbor, MI......... 913 (4) 100% 99%
Sherman Oaks
Jackson, MI........... 366 92% 100% 99%
Timberline Estates
Grand Rapids, MI...... 296 99% 98% 100%
Town & Country
Traverse City, MI..... 192 100% 98% 100%
-------------------- -------------------- -------------------- ---------------
Michigan Total........ 8,977 97% 97% 98%
==================== ==================== ==================== ===============
INDIANA
Brookside Village
Goshen, IN............ 338 99% 99% 99%
Carrington Pointe
Ft. Wayne, IN......... 170 (5) (5) (5)
Clear Water Village
South Bend, IN........ 162 98% 93% 97%
Cobus Green
Elkhart, IN........... 386 94% 98% 98%
Holiday Village
Elkhart, IN........... 326 96% 98% 99%
Liberty Farms
Valparaiso, IN........ 220 96% 100% 92% (6)
Maplewood
Lawrence, IN.......... 207 95% 97% 99%
Meadows
Nappanee, IN.......... 330 93% 96% 98%
Meadowbrook
Indianapolis, IN...... 343 94% 96% 98%
Pine Hills
Middlebury, IN........ 126 98% 99% 96%
Timberbrook
Bristol, IN........... 567 92% 84% 88% (6)
Valley Mills
Indianapolis, IN...... 357 97% 99% 98%
West Glen Village
Indianapolis, IN...... 552 99% 99% 99%
Woods Edge
West Lafayette, IN.... 430 97% 92% 99%
-------------------- -------------------- -------------------- ---------------
Indiana Total......... 4,514 96% 96% 97%
==================== ==================== ==================== ===============
OTHER
Branch Creek Estates
Austin, TX............ 321 (4) 98% 94% (6)
Candlelight
Chicago Heights, IL... 309 97% 93% 95%
Catalina Community
Middletown, OH........ 462 99% 98% 99%
Chisholm Point Estates
Pflugerville, TX...... 405 (4) 98% 83% (6)
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Douglas
Atlanta, GA........... 204 74% 89% 95%
Edwardsville
Edwardsville, KS...... 597 82% 90% 93%
Flagview
Atlanta, GA........... 196 75% 93% 98%
Four Seasons
Ankeny, IA............ 400 100% 100% 98%
Paradise
Chicago Heights, IL... 278 99% 99% 98%
Pine Ridge
Petersburg, VA........ 245 98% 100% 98%
Pin Oak Parc
O'Fallon, MO.......... 380 98% 99% 99%
Snow to Sun
Weslaco, TX........... 497 (5) (5) (5)
Timber Ridge
Ft. Collins, CO....... 582 99% 100% 100%
Worthington Arms
Delaware, OH.......... 224 98% 99% 100%
-------------------- -------------------- -------------------- ---------------
Other Total........... 5,100 96% 97% 96%
==================== ==================== ==================== ===============
SOUTHEAST
FLORIDA
Arbor Terrace
Bradenton, FL......... 213 100% 100% 100%
Ariana Village
Lakeland, FL.......... 210 72% (7) 72% (7) 78% (7)
Bonita Lake
Bonita Springs, FL.... 65 100% 100% 100%
Breezy Hills
Pompano Beach, FL..... 578 100% 100% 99%
Chain O'Lakes
Grand Island, FL...... 325 92% 97% 95%
Golden Lakes
Plant City, FL........ 426 93% 91% 92%
Indian Creek
Ft. Myers Beach, FL... 1272 100% 100% 100%
Island Lakes
Merritt Island, FL.... 301 (4) 100% 100%
Kings Lake
Debary, FL............ 245 53% (7) 62% (7) 66% (7)
Kings Pointe
Winter Haven, FL...... 229 39% (7) 43% (7) 48% (7)
Kissimmee Gardens
Kissimmee, FL......... 239 100% 99% 100%
Lake Juliana
Auburndale, FL........ 293 52% (7) 54% (7) 57% (7)
Lake San Marino
Naples, FL............ 272 100% 100% 100%
Leesburg Landing
Lake County, FL....... 94 (3) (3) 54% (7)
Meadowbrook Village
Tampa, FL............. 257 95% 100% 97%
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED
SITES AS OF OCCUPANCY AS OF OCCUPANCY AS OF OCCUPANCY AS OF
PROPERTY AND LOCATION 12/31/96 (1) 12/31/94 (1) 12/31/95 (1) 12/31/96 (1)
- --------------------- -------------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Orange Tree
Orange City, FL....... 246 76% (7) 78% (7) 83% (7)
Plantation Manor
Ft. Pierce, FL........ 376 97% 95% 97%
Pleasure Cove
Ft. Pierce, FL........ 209 98% 95% 95%
Royal Country
Miami, FL............. 863 100% 100% 99%
Saddle Oak Club
Ocala, FL............. 376 (4) 98% 100%
Siesta Bay
Ft. Myers Beach, FL... 703 100% 100% 100%
Silver Star
Orlando, FL........... 426 98% 96% 96%
Tallowwood
Coconut Creek, FL..... 279 62% 62% 63%
Water Oak Country Club
Estates
Lady Lake, FL......... 688 100% 100% 100%
Whispering Palm
Sebastian, FL......... 428 100% 100% 96%
-------------------- -------------------- -------------------- ---------------
Florida Total......... 9,613 88% 89% 93%
==================== ==================== ==================== ===============
TOTAL/AVERAGE......... 28,204 93% 93% 95%
==================== ==================== ==================== ===============
</TABLE>
(1) Excludes 1,223 seasonal RV Sites owned at December 31, 1996, which are
leased during the season.
(2) This Property is owned by a joint venture in which the Company has a 50%
interest.
(3) Acquired in 1996.
(4) Acquired in 1995.
(5) Acquired in 1997.
(6) Occupancy in these communities reflects the recent development of sites
which are in their initial lease-up phase.
(7) Occupancy in these communities reflects the fact that these communities
are in their initial lease-up phase.
Leases. The typical lease entered into between a tenant and the Company
for the rental of a site is month-to-month or year-to-year, renewable upon the
consent of both parties, or, in some instances, as provided by statute. In
some cases, leases are for one-year terms, with up to ten renewal options
exercisable by the tenant, with rent adjusted for increases in the consumer
price index. These leases are cancelable for non-payment of rent, violation
of community rules and regulations or other specified defaults. See
"Regulations and Insurance."
ITEM 3. LEGAL PROCEEDINGS
Certain partnerships which previously owned twenty-four of the Properties
(the "Sun Partnerships") were involved in a variety of legal proceedings
arising in the ordinary course of business prior to the transfer of the
Properties to the Company, and the Company has become a successor
party-in-interest to these proceedings as a result of the contribution of the
Properties to the Company, as well as other proceedings that have arose in the
ordinary course of operating the
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Properties. All such proceedings, taken together, are not expected to have a
material adverse impact on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public market for any class of the Company's
equity securities. On March 3, 1997, partnership units of the Company were
held by 95 holders of record.
The General Partner's Common Stock has been listed on the New York Stock
Exchange ("NYSE") since December 8, 1993 under the symbol "SUI." On March 3,
1997, the closing sales price of the Common Stock was $32 1/8 and the Common
Stock was held by approximately 1,213 holders of record. The following table
sets forth the high and low closing sales prices per share for the Common
Stock for the periods indicated as reported by the NYSE and the distributions
paid by the General Partner with respect to each such period (the Company paid
equivalent distributions per partnership unit to its partners during such
periods).
<TABLE>
<CAPTION>
High Low Distribution
---- ------ ------------
<S> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter of 1995.............. 23 1/8 21 1/8 .445
Second Quarter of 1995............. 25 21 1/8 .445
Third Quarter of 1995.............. 26 24 1/4 .445
Fourth Quarter of 1995............. 26 3/8 24 5/8 .445
FISCAL YEAR ENDED DECEMBER 31, 1996
First Quarter of 1996.............. 27 5/8 25 1/4 .455
Second Quarter of 1996............. 27 3/8 24 7/8 .455
Third Quarter of 1996.............. 29 25 5/8 .455
Fourth Quarter of 1996............. 34 3/4 28 1/8 .455
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP AND PREDECESSOR BUSINESS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(2)
1996 1995 1994 1993 1992
-------- ------------- ------------- ------------ ------------
(IN THOUSANDS EXCEPT OTHER DATA AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income......................... $ 69,849 $ 42,909 $ 30,461 $ 14,222 $12,989
Other income.......................... 3,350 2,203 1,882 199 199
-------- ------------- ------------- ------------ ------------
Total revenues...................... 73,199 45,112 32,343 14,421 13,188
-------- ------------- ------------- ------------ ------------
Expenses:
Property operating and maintenance.... 15,970 9,838 7,404 3,222 2,995
Real estate taxes..................... 5,654 2,981 2,167 1,024 980
General and administrative............ 3,458 2,535 2,005 893 764
Depreciation and amortization......... 14,887 9,747 6,949 2,611 2,655
Interest.............................. 11,277 6,420 4,894 5,280 5,522
Predecessor business expenses......... - - - 1,315 -
-------- ------------- ------------- ------------ ------------
Total expenses...................... 51,246 31,521 23,419 14,345 12,916
-------- ------------- ------------- ------------ ------------
Income of predecessor business......... $ 272
============
Income before extraordinary item and
allocation to predecessor business.... 21,953 13,591 8,924 76
Extraordinary item, early
extinguishment of debt............... (6,896) - - -
Less loss allocated to predecessor
business............................... - - - (247)
-------- ------------- ------------- ------------
Net income............................. 15,057 13,591 8,924 323
Less distribution to Preferred
OP Units............................... 1,670 - - -
-------- ------------- ------------- ------------
Earnings attributable to OP Units... $ 13,387 $ 13,591 $ 8,924 $ 323
======== ============= ============= ============
Earnings attributed to:
General partner....................... $ 11,704 $ 11,661 $ 7,786 $ 288
Limited partners...................... 1,683 1,930 1,138 35
-------- ------------- ------------- ------------
$ 13,387 $ 13,591 $ 8,924 $ 323
======== ============= ============= ============
Earnings per OP Unit................... $ .85 $ 1.19 $ 1.05 $ .05
======== ============= ============= ============
Weighted average OP Units
outstanding........................... 15,646 11,420 8,535 5,964
======== ============= ============= ============
Distribution per OP Unit(1)............ $ 1.81 $ 1.335 $ 1.78 $ .077
======== ============= ============= ============
OTHER DATA:
Total properties (at end of period)... 81 52 46 31 24
Total sites (at end of period)........ 28,785 16,888 14,318 9,036 6,349
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation.......................... $588,813 $326,613 $257,030 $148,668 $74,145
Total assets.......................... $585,056 $325,104 $267,370 $157,462 $62,978
Total debt............................ $185,000 $107,055 $ 62,931 $ 46,413 $60,629
Predecessor business equity (deficit). _ _ _ _ $ (275)
Partners' capital..................... $383,215 $209,475 $195,680 $106,729 _
</TABLE>
(1) The distribution of $.445 per OP Unit for the fourth quarter of 1995 was
declared and paid in January, 1996, and accordingly is not included in the
$1.335.
(2) See the Consolidated Financial Statements of the Company included
elsewhere herein.
<PAGE> 13
ITEM 7. 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.
RESULTS OF OPERATIONS
Comparison of year ended December 31, 1996 to year ended December 31, 1995
For the year ended December 31, 1996, income before extraordinary item
increased by $8.4 million from $13.6 million to $22.0 million, when compared to
the year ended December 31, 1995. The increase was due to increased revenues
of $28.1 million while expenses increased by $19.7 million.
Rental income increased by $26.9 million from $42.9 million to $69.8
million due primarily to the acquisition of 29 communities comprising in excess
of 11,300 developed sites during 1996 and six additional communities comprising
in excess of 2,200 developed sites during 1995.
Other income increased by $1.1 million from $2.2 million to $3.3 million
due to higher levels of interest income resulting primarily from investment of
proceeds of financings and interest on mortgage notes receivable for a full
year in 1996.
Property operating and maintenance expenses increased by $6.2 million from
$9.8 million to $16.0 million due primarily to the acquired communities.
Real estate taxes increased by $2.7 million from $3.0 million to $5.7
million due primarily to the acquired communities.
General and administrative expenses increased by $1.0 million from $2.5
million to $3.5 million due primarily to additional staff as a result of the
Company's growth.
Interest expense increased by $4.9 million from $6.4 million to $11.3
million due to higher levels of borrowings at a slightly higher weighted
average interest rate. Included in interest is amortization of deferred finance
costs of $.2 million and $.6 million in 1996 and 1995, respectively.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $18.3 million from $29.8 million to $48.1 million. EBITDA as a
percent of revenues was 65.7% compared to 66.0 percent in 1995.
Depreciation and amortization expense increased by $5.2 million from $9.7
million to $14.9 million due primarily to the acquisition of communities in
1996 and 1995.
13
<PAGE> 14
Comparison of year ended December 31, 1995 to year ended December 31, 1994
For the year ended December 31, 1995, income increased by $4.7 million
from $8.9 million to $13.6 million, when compared to the year ended December
31, 1994. The increase was due to increased revenues of $12.7 million while
expenses increased by $8.1 million.
Rental income increased by $12.4 million from $30.5 million to $42.9
million due primarily to the acquisition of fifteen communities comprising in
excess of 5,100 developed sites during 1994 and six additional communities
throughout 1995 comprising in excess of 2,200 developed sites.
Property operating and maintenance expenses increased by $2.4 million from
$7.4 million to $9.8 million due primarily to the acquired communities.
Real estate taxes increased by $.8 million from $2.2 million to $3.0
million due primarily to the acquired communities.
General and administrative expenses increased by $.5 million from $2.0
million to $2.5 million due primarily to additional staff as a result of the
Company's growth.
Interest expense increased by $1.5 million from $4.9 million to $6.4
million due to higher levels of borrowings partially offset by lower interest
rates and increased capitalization of interest in conjunction with the
Company's community expansions. Included in interest is amortization of
deferred finance costs of $.6 million and $.3 million in 1995 and 1994,
respectively.
EBITDA increased by $9.0 million from $20.8 million to $29.8 million.
EBITDA as a percent of revenues was 66.0 percent compared to 64.2 percent in
1994.
Depreciation and amortization expense increased by $2.8 million from $6.9
million to $9.7 million due primarily to the acquisition of communities in 1994
and 1995.
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of
and for the years ended December 31, 1996 and 1995. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1995. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The table excludes the
1,218 sites where the Company's interest is in the form of a shared
appreciation mortgage note.
14
<PAGE> 15
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
------------------ ----------------
1996 1995 1996 1995
-------- -------- ------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Property revenues, including other $42,278 $39,125 $70,359 $43,544
-------- -------- ------- -------
Property operating expenses:
Property operating and maintenance 9,705 9,158 15,970 9,838
Real estate taxes 3,059 2,713 5,654 2,981
-------- -------- ------- -------
Property operating expenses 12,764 11,871 21,624 12,819
-------- -------- ------- -------
Property EBITDA $29,514 $27,254 $48,735 $30,725
======== ======== ======= =======
Number of properties 46 46 81 52
Developed sites 14,805 14,646 28,785 16,888
Occupied sites 13,961 13,624 26,865 15,846
Occupancy % 94.3% 93.0% 93.3% 93.8%
Weighted average monthly rent per site $242 $231 $250 $234
Sites available for development 1,795 1,729 3,268 2,324
Sites in development 401 167 779 474
</TABLE>
On a same property basis, property revenues increased by $3.2 million from
$39.1 million to $42.3 million, or 8.1 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 337
leased sites at December 31, 1996 compared to December 31, 1995.
Property operating expenses increased by $.9 million from $11.9 million to
$12.8 million, or 7.5 percent, due to increased occupancies and costs and
increases in assessments and millage by local taxing authorities. Property
EBITDA increased by $2.2 million from $27.3 million to $29.5 million, or 8.3
percent.
Sites available for development in the total portfolio increased by 944
from 2,324 to 3,268 with 779 of those sites in development in our markets in
Michigan, Indiana and Texas.
LIQUIDITY SOURCES AND REQUIREMENTS
Cash and cash equivalents increased by $9.1 million to $9.2 million at
December 31, 1996 compared to $.1 million at December 31, 1995 primarily
because cash provided by operating and financing activities exceeded
investments in rental properties.
Net cash provided by operating activities increased by $10.4 million from
$25.0 million to $35.4 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This increase was due primarily to
increases in non-cash expenses and accounts payable and other liabilities.
Net cash used in investing activities increased by $36.4 million from
$40.5 million to $76.9 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This was due primarily to an increased
level of acquisitions and investments in rental properties.
Net cash provided by financing activities increased by $40.4 million from
$10.2 million to $50.6 million for the year ended December 31, 1996 as compared
to the year ended December 31, 1995. This was due to increased proceeds from
capital contributions partially offset by the change in net borrowings.
During the second quarter the Company (I) received a capital contribution
of approximately $118.3 million; (ii) sold $150 million of five and seven year
notes resulting in net proceeds of approximately $148.7 million; (iii) obtained
a $30 million 18 month secured term loan; (iv) issued $4.2 million of common OP
units and $35.8 million of preferred OP units; and (v) replaced an $85
15
<PAGE> 16
million secured line of credit with a $75 million, 42 month unsecured line of
credit.
These proceeds were utilized to acquire the Aspen Properties for
approximately $226 million and to retire substantially all of the Company's
previously outstanding secured debt. At December 31, 1996, seven of the
Company's properties comprising approximately 3,400 sites collateralized
secured borrowings. The $150 million of notes are rated "Baa3" by Moody's
Investors Service, "BBB-" by Standard & Poor's Ratings Services and "BBB-" by
Fitch Investors Service.
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 development, and payment of
distributions by the Company 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
debt securities or general or limited partnership interests. The Company can
also meet these requirements by utilizing its $75 million line of credit which
bears interest at LIBOR plus 1.50% and is due November 1, 1999.
At December 31, 1996, the Company's debt to total market capitalization
approximated 22% (assuming conversion of all Preferred OP Units), with a
weighted average maturity of approximately 4.6 years and a weighted average
interest rate of 7.42%.
Capital expenditures for 1996 included recurring capital expenditures of
$2.5 million and revenue producing capital expenditures of $1.2 million which
principally consisted of water metering programs.
Development costs, including land acquisitions of $2.7 million, aggregated
$13.2 million for the year ended at December 31, 1996. The acquisition of
incremental sites in owned communities where sites are being leased by the
former owners aggregated $1.4 million in 1996.
INFLATION
Most of the leases allow for periodic rent increases which provide the
Company with the opportunity to achieve increases in rental income as each
lease expires. Such types of leases generally minimize the risk of inflation
to the Company.
16
<PAGE> 17
OTHER
Industry analysts consider funds from operations ("FFO") to be an
appropriate measure of the performance for a real estate enterprise. It is
defined as income plus non-cash items such as depreciation and amortization.
FFO should not be considered as an alternative to net income as an indication
of the Company's performance or to cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
Quarters
Ended 1994 1995 1996
- ---------------------------------------
<S> <C> <C> <C>
March 31 $ 3,359 $ 5,288 $ 6,201
June 30 3,357 5,878 8,960
September 30 4,096 5,998 9,652
December 31 5,021 6,114 10,282
------- ------- -------
$15,833 $23,278 $35,095
======= ======= =======
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Financial Accounting Standards No. 128 Earnings Per Share ("EPS").
This Statement simplifies the previous standards for computing EPS and makes
such standards comparable to international EPS standards. This Statement
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and it requires a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation.
The Company will adopt Statement 128 as of December 31, 1997 (earlier
adoption is not permitted). The Company cannot presently determine the impact
of adoption of Statement 128 as it cannot anticipate its capital structure and
OP Unit prices at December 31, 1997. Had the Company adopted Statement 128 in
1996, the impact would have been immaterial as the Company has few dilutive
securities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are filed herewith under
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no changes in the Company's independent public
accountants during the past two fiscal years and the Company does not disagree
with such accountants on any matter of accounting principles, practices or
financial statement disclosure.
17
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company does not have any directors or executive officers.
However, as the general partner of the Company, the General Partner is
responsible for all aspects of the management of the Company. The
directors and executive officers of the General Partner, their ages and
their positions and offices are set forth in the following table:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ------------------- --- --------------------------------------------------
<S> <C> <C>
Milton M. Shiffman. 68 Chairman of the Board
Gary A. Shiffman... 43 Chief Executive Officer, President and Director
Jeffrey P. Jorissen 52 Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Brian W. Fannon.... 48 Senior Vice President and Chief Operating Officer
Jonathan M. Colman. 41 Senior Vice President-Acquisitions
Paul D. Lapides.... 42 Director
Clunet R. Lewis.... 50 Director
Ronald L. Piasecki. 58 Director
Ted J. Simon....... 66 Director
Arthur A. Weiss.... 48 Director
Carl R. Weinert.... 73 Director
</TABLE>
MILTON M. SHIFFMAN is the Chairman of the General Partner's Board of
Directors (the "Board"), and has been an executive officer of the General
Partner since its inception. In his 18 years of experience in the manufactured
housing community industry, Mr. Shiffman has played an active role in the
financing decisions and corporate structuring of the Company. Since 1964, he
has also been involved in the development, acquisition, construction and
operations of diverse real estate holdings including multi-family, community
and regional shopping centers, nursing homes and various other commercial
properties. Mr. Shiffman retired from medical practice in 1981 in order to
devote his full time to real estate activities. He is also Chairman of the
Board of Directors of Home Services, Sun Management, Inc. ("Sun Management"),
Sun QRS, Inc. ("Sun QRS") and Sun Florida QRS, Inc. ("Sun Florida QRS").
GARY A. SHIFFMAN is the President and Chief Executive Officer, and has
been an executive officer of the General Partner since its inception. He has
been actively involved in the management, acquisition, construction and
development of manufactured housing communities and has developed an extensive
network of industry relationships over the past 13 years. He has overseen the
land acquisition, rezoning, development and marketing of numerous manufactured
home expansion projects. Mr. Shiffman is also the President and a director of
Home Services, Sun Management, Sun QRS, Sun Florida QRS and Sun Water Oak Golf,
Inc. ("Sun Golf"). Gary A. Shiffman is the son of Milton M. Shiffman.
JEFFREY P. JORISSEN has been Chief Financial Officer and Secretary since
August 1993, and Senior Vice President and Treasurer since December 1993. As a
certified public accountant, he was with the international accounting firm of
Coopers & Lybrand for sixteen years, including eight years as a partner.
During his tenure at Coopers & Lybrand, Mr. Jorissen specialized in real estate
and directed financial statement examinations of numerous public companies.
From 1987 to 1991, he was President and Treasurer of Stoneridge Resources,
Inc., the holding entity for three public companies. Mr. Jorissen is also the
Chief Financial Officer and Secretary of Home Services, Sun Management, Sun QRS
and Sun Florida QRS, and Mr. Jorissen is also the Secretary and Treasurer of
Sun Golf.
18
<PAGE> 19
BRIAN W. FANNON joined the General Partner in May 1994 as Senior Vice
President-Operations and became Chief Operating Officer in 1995. Prior to
joining the Company, he worked for Lautrec, Ltd., then the largest manufactured
housing community owner-operator in the United States, where he was responsible
for operations comprising 25,000 sites and 300 employees, and Quality Homes,
Inc., its sales and marketing division. He joined that organization in 1978 as
a regional manager and became President in 1986. Mr. Fannon was appointed by
Governor Milliken to the Michigan Mobile Home Commission in 1977, the year of
its inception. Subsequent appointments by Governors Blanchard and Engler have
enabled Mr. Fannon to serve on such commission, including serving as its
chairman from 1986 to 1994. Mr. Fannon is also the Vice President-Operations
of Sun Golf.
JONATHAN M. COLMAN joined the General Partner in 1994 as Vice
President-Acquisitions and became a Senior Vice President in 1995. A certified
public accountant, Mr. Colman has over thirteen years of experience in the
manufactured housing community industry. He has been involved in the
acquisition, financing and management of over 75 manufactured housing
communities for two of the 10 largest manufactured housing community owners,
including Uniprop, Inc. during its syndication of over $90 million in public
limited partnerships in the late 1980s. Mr. Colman is also the Vice President
of Sun Golf.
PAUL D. LAPIDES has been a director since December 1993. Mr. Lapides is a
director of the Corporate Governance Center in the Coles College of Business at
Kennesaw State University, where he is an assistant professor of management. He
is the author of numerous articles and books on real estate and management. Mr.
Lapides is a consultant with BDO Seidman, an international accounting and
consulting firm, where he specializes in the areas of asset management,
marketing, and strategic planning. His real estate experience includes managing
a $3 billion national portfolio of income-producing real estate consisting of
42,000 multi-family units and 16 million square feet of commercial space.
CLUNET R. LEWIS has been a director since December 1993. Since August,
1995, Mr. Lewis has been a director of Eltrax Systems, Inc. ("Eltrax"), a
company that provides data networking products and services. Mr. Lewis
currently serves as Chief Financial Officer of Eltrax. From 1993 to September
1994, Mr. Lewis was the Executive Vice President of Military Communications
Center, Inc., a company that provides long distance telecommunication services
to military personnel. From 1973 to 1993, he practiced law with the law firm of
Jaffe, Raitt, Heuer & Weiss, Professional Corporation, which represents the
Company in various matters.
RONALD L. PIASECKI has been a director since May 1996, upon completion of
the Company's acquisition of the Aspen Properties owned by affiliates of Aspen.
Mr. Piasecki is the President, Chief Executive Officer and a director of HGI
Realty, Inc., a REIT that specializes in the ownership and operation of factory
outlet centers. In addition, Mr. Piasecki is the executive vice president and
a director of Aspen, which he co-founded in 1973. Prior to the Company's
acquisition of the Aspen Properties, Aspen was one of the largest
privately-held developers and owners of manufactured housing communities in the
U.S. Mr. Piasecki also serves as chairman of the board of directors of
Kurdziel Industries, Inc., the world's largest producer of counter weights for
the material handling industry.
TED J. SIMON has been a director since December 1993. Mr. Simon currently
serves as Vice President-Real Estate Development (Western Division) of The
Great Atlantic & Pacific Tea Company. Since 1981, Mr. Simon has served as Vice
President-Real Estate of Borman's Inc., a wholly owned subsidiary of The Great
Atlantic & Pacific Tea Company, Inc. From 1976-1981, he was the President of
Schostak Bros. & Co., a major, full service commercial/ industrial real estate
company based in Michigan.
CARL R. WEINERT has been a director since December 1993. Mr. Weinert has
been in the banking industry since 1942. He served as a director and President
of Bank of Commerce for 25 years until its merger with Security Bank, at which
time he became a member of the Board
19
<PAGE> 20
of Directors of Security Bank. Mr. Weinert also provided investment advice to
Lutheran Fraternal Life Company as its financial advisor until 1992.
ARTHUR A. WEISS has been a director since October 1996. Since 1976, Mr.
Weiss has practiced law with the law firm of Jaffe, Raitt, Heuer & Weiss,
Professional Corporation ("JRH&W"), which represents the Company in various
matters. Mr. Weiss is currently a shareholder, director and Vice President of
JRH&W.
To the best of the Company's knowledge, there are no material proceedings
to which any director or executive officer of the General Partner is a party,
or has a material interest, adverse to the Company. To the best of the
Company's knowledge, there have been no events under any bankruptcy act, no
criminal proceedings and no judgments or injunctions that are material to the
evaluation of the ability or integrity of any director or executive officer of
the General Partner during the past five years.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid to the Chief
Executive Officer and each executive officer whose remuneration from the
General Partner exceeded $100,000 during the fiscal year ended December 31,
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
COMPENSATION COMPENSATION
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ---------- ---------- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
Gary A. Shiffman, 1996 $210,000 $35,000 300,000 0
Chief Executive Officer and 1995 $200,000 0 305,430 $177,319(1)
President......................... 1994 $187,150 0 0 0
Jeffrey P. Jorissen,
Senior Vice President, Treasurer, 1996 $160,125 $35,000 37,500 0
Chief Financial Officer and 1995 $149,800 $15,000 35,000 0
Secretary......................... 1994 $118,654 0 0 $ 27,383(2)
Brian W. Fannon, 1996 $160,225 $50,000 15,000 0
Senior Vice President and Chief 1995 $133,275 $15,000 0 0
Operating Officer................. 1994 $65,027 0 45,000 0
Jonathan M. Colman, 1996 $105,000 $10,000 12,500 0
Senior Vice President-Acquisitions 1995 $100,000 $10,000 0 0
1994 $55,192 $6,000 20,000 0
</TABLE>
(1) On May 11, 1995, the General Partner issued 94,570 shares of Common Stock
to Mr. Gary Shiffman in consideration for promissory notes aggregating
$2,045,076, or $21.625 per share (the "Consideration"). The Consideration
was based on the average of the closing sales prices of the Common Stock
as quoted on the New York Stock Exchange for the ten (10) business day
period immediately preceding and including May 4, 1995, which was the date
that the proposed transaction with Mr. Gary Shiffman was presented to and
approved by the General Partner's Board of Directors. However, in
accordance with the rules and regulations promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
General Partner is required to report the difference between the
Consideration (i.e., $21.625 per share) and the fair market value of the
Common Stock on the date of issuance (i.e., $23.50 per share) as "Other
Compensation" in the Summary Compensation Table.
20
<PAGE> 21
(2) Aggregate value of shares of Common Stock transferred from Milton M.
Shiffman, Gary A. Shiffman and Robert B. Bayer at various times in the
fiscal year ended December 31, 1994. Mr. Milton Shiffman assigned 411
shares of Common Stock to Mr. Jorissen on June 16, 1994, Mr. Gary Shiffman
assigned 411 shares of Common Stock to Mr. Jorissen on March 3, 1994 and
Mr. Bayer assigned 411 shares of Common Stock to Mr. Jorissen on January
18, 1994. The closing sales prices on June 16, 1994, March 3, 1994 and
January 18, 1994 were $23.625, $22.25 and $20.75, respectively.
OPTION/SAR GRANTS TABLE
<TABLE>
<CAPTION>
SHARES % OF TOTAL POTENTIAL REALIZABLE
UNDERLYING OPTIONS/SARS VALUE AT ASSUMED
OPTIONS/SARS GRANTED TO EXERCISE ANNUAL RATES OF STOCK
GRANTED EMPLOYEES PRICE EXPIRATION PRICE APPRECIATION
NAME IN 1996 IN 1996 ($/SH.) DATE FOR OPTION TERM
-----------------------
5% 10%
($) ($)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gary A. Shiffman 25,000 5.18% $ 26.625 3/11/06 $ 418,608 $ 1,060,835
275,000 56.94% $28.6375 10/28/06 $4,952,742 $12,551,220
Jeffrey P. Jorissen 15,000 3.11% $ 27 2/26/06 $ 254,702 $ 645,466
22,500 4.66% $28.6375 10/28/06 $ 405,224 $ 1,026,918
Brian W. Fannon 10,000 2.07% $ 27 2/26/06 $ 169,802 $ 430,311
5,000 1.04% $28.6375 10/28/06 $ 90,050 $ 228,204
Jonathan M. Colman 7,500 1.55% $ 27 2/26/06 $ 127,351 $ 322,733
5,000 1.04% $28.6375 10/28/06 $ 90,050 $ 228,204
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
<TABLE>
<CAPTION>
NO. OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
SHARES ACQUIRED
ON EXERCISE VALUE
NAME IN 1996 RECEIVED EXERCISABLE NOT EXERCISABLE EXERCISABLE NOT EXERCISABLE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gary A. Shiffman(2) 0 N/A 116,666 233,334 $1,132,599.59 $1,401,462.90
Jeffrey P. Jorissen(3) 0 N/A 55,833 36,667 $ 663,131.25 $ 308,775.00
Brian W. Fannon(4) 0 N/A 49,999 10,001 $ 574,764.43 $ 69,548.08
Jonathan M. Colman(5) 0 N/A 24,166 8,334 $ 268,516.93 $ 57,045.58
</TABLE>
(1) Value based on the last reported sales price on December 31, 1996 which
was $34.50 per share.
(2) Includes: (a) 50,000 stock options granted December 21, 1993 pursuant to
the General Partner's Amended and Restated 1993 Stock Option Plan (the
"Employee Option Plan") with an exercise price of $20.00 per share, which
options must be exercised by December 21, 2003; (b) 25,000 stock options
granted March 11, 1996 pursuant to the Employee Option Plan with an
exercise price of $26.625 per share, which options must be exercised by
March 11, 2006; and (c) 275,000 stock options granted October 28, 1996
pursuant to the Employee Option Plan with an exercise price of $28.6375
per share, which options must be exercised by October 28, 2006
(3) Includes: (a) 20,000 stock options granted December 1, 1993 pursuant to
the Employee Option Plan with an exercise price of $20.00 per share, which
options must be exercised by December 1, 2003; (b) 35,000 stock options
granted May 23, 1995 pursuant to the Employee Option Plan with an exercise
price of $22.00 per share, which options must be exercised by May 23,
2005; (c) 15,000 stock options granted February 26, 1996 pursuant to the
Employee Option Plan with an exercise price of $27.00 per share, which
options must be exercised by February 26, 2006; and (d) 22,500 stock
options granted
21
<PAGE> 22
October 28, 1996 pursuant to the Employee Option Plan with
an exercise price of $28.6375 per share, which options must be exercised
by October 28, 2006.
(4) Includes: (a) 45,000 stock options granted July 18, 1994 pursuant to the
Employee Option Plan with an exercise price of $22.50 per share, which
options must be exercised by July 18, 2004; (b) 10,000 stock options
granted February 26, 1996 pursuant to the Employee Option Plan with an
exercise price of $27.00 per share, which options must be exercised by
February 26, 2006; and (c) 5,000 stock options granted October 28, 1996
pursuant to the Employee Option Plan with an exercise price of $28.6375
per share, which options must be exercised by October 28, 2006.
(5) Includes: (a) 20,000 stock options granted July 18, 1994 pursuant to the
Employee Option Plan with an exercise price of $22.50 per share, which
options must be exercised by July 18, 2004; (b) 7,500 stock options
granted February 26, 1996 pursuant to the Employee Option Plan with an
exercise price of $27.00 per share, which options must be exercised by
February 26, 2006; and (c) 5,000 stock options granted October 28, 1996
pursuant to the Employee Option Plan with an exercise price of $28.6375
per share, which options must be exercised by October 28, 2006.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Policy of Executive Officer Compensation
The executive compensation program of the General Partner is administered
by the Compensation Committee of the Board (the "Committee") which is comprised
of Non-Employee Directors, Messrs. Ted J. Simon, Carl R. Weinert and Ronald L.
Piasecki. The program supports the General Partner's commitment to providing
superior shareholder value. It is designed to attract and retain high-quality
executives, to encourage them to make career commitments to the General
Partner, and to accomplish the General Partner's short and long term
objectives. The Committee attempts to structure a compensation program for the
General Partner that will reward its top executives with bonuses and stock and
option awards upon attainment of specified goals and objectives while striving
to maintain salaries at reasonably competitive levels. The Committee reviews
the compensation (including salaries, bonuses and stock options) of the General
Partner's officers and performs such other duties as may be delegated to it by
the Board.
In reviewing the compensation to be paid to the General Partner's
executive officers during the fiscal year ended December 31, 1996, the
Committee sought to ensure that executive officers were rewarded for long term
strategic management, for increasing the General Partner's value for its
shareholders, and for achieving internal goals established by the Board.
The key components of executive officer compensation are salary, bonuses
and stock option awards. Salary is generally based on factors such as an
individual officer's level of responsibility, prior years' compensation,
comparison to compensation of other officers in the General Partner, and
compensation provided at competitive companies and companies of similar size.
Bonuses and stock option awards are intended to reward exceptional
performances. Stock option awards are also intended to increase an officer's
interest in the General Partner's long-term success as measured by the market
and book value of its Common Stock. Stock awards may be granted to officers
and directors of the General Partner and its subsidiaries and to certain
employees who have managerial or supervisory responsibilities under the
Employee Option Plan. Stock awards may be stock options, stock appreciation
rights, restricted share rights or any variation thereof. Four executive
officers and twenty-six key employees received stock options under the Employee
Option Plan during the fiscal year ended December 31, 1996.
CEO Compensation
During the fiscal year ended December 31, 1996, Gary A. Shiffman served in
the capacity of Chief Executive Officer of the General Partner. Under Mr.
Shiffman's leadership, the Company's net income before extraordinary item
increased by more than 62% in 1996 as compared to 1995, and the Company
continued its growth by acquiring an additional 29 manufactured housing
communities in 1996.
Prior to the General Partner's initial public offering and the formation
of the Committee, the General Partner entered into an employment agreement with
Mr. Shiffman which governed the salary and bonus paid to Mr. Shiffman during
the fiscal year ended December 31, 1996. Consequently, the Committee did not
establish the compensation for Mr. Shiffman. Pursuant to this
22
<PAGE> 23
employment agreement, Mr. Shiffman was paid a salary of $ 210,000 and received
incentive compensation of $35,000.00 on the basis of the General Partner's
performance. Although Mr. Shiffman may have been entitled to greater incentive
compensation on the basis of the General Partner's performance, Mr. Shiffman
requested that the General Partner not pay him any additional incentive
compensation at that time and the Committee honored this request. Based upon
market studies of pay levels for chief executive officers of REITs ( conducted
by the National Association of Real Estate Investment Trusts), the Committee
believes that Mr. Shiffman's salary and bonus compensation is competitive with,
if not below, the appropriate level for his position, particularly in view of \
his performance. See "Certain Transactions."
Ted J. Simon Carl R. Weinert Ronald L. Piasecki
EMPLOYMENT AGREEMENTS
Gary A. Shiffman
The General Partner has entered into an employment agreement with Gary A.
Shiffman pursuant to which Mr. Shiffman serves as Chief Executive Officer and
President of the General Partner. Mr. Shiffman's employment agreement is for
an initial term of five years ending December 31, 2001. Pursuant to his
employment agreement, Mr. Shiffman will be paid a base salary of $250,000 in
1997 and a base salary of $350,000 for each year thereafter, which shall be
increased by an annual cost of living adjustment beginning with calendar year
1999. In addition to his base salary and in accordance with the terms of his
employment agreement, Mr. Shiffman: (a) received a $50,000 signing bonus; (b)
received an option to purchase 250,000 shares of Common Stock in accordance
with the terms of the Employee Option Plan, and (c) is entitled to incentive
compensation of up to 50% of his then base salary in the event that the General
Partner's funds from operations per share increases by more than 5.0% from the
preceding year. A copy of Mr. Shiffman's employment agreement is attached as an
exhibit to the General Partner's periodic filings under the Exchange Act.
The non-competition clauses of Mr. Shiffman's employment agreement
preclude him from engaging, directly or indirectly: (a) in the real estate
business or any ancillary business of the Company during the period he is
employed by the General Partner; and (b) in the manufactured housing community
business or any ancillary business of the General Partner for a period of
eighteen months following the period he is employed by the General
Partner. However, Mr. Shiffman's employment agreement does allow him to make
passive investments relating to real estate in general or the housing industry
in particular (other than in manufactured housing communities) during the period
he is employed by the General Partner.
Jeffrey P. Jorissen
The General Partner has entered into an employment agreement with Jeffrey
P. Jorissen pursuant to which Mr. Jorissen serves as Senior Vice President,
Chief Financial Officer, Treasurer and Secretary of the General Partner. Mr.
Jorissen's employment agreement is for an initial term of three years ending
December 31, 1998. Pursuant to his employment agreement, Mr. Jorissen must
devote his entire productive time, ability and attention to the General Partner
and, in consideration for his services, Mr. Jorissen will be paid an annual
base salary of $190,000 which will be increased by five percent per year. In
addition to this base salary, Mr. Jorissen is entitled to an annual bonus
(which bonus will not exceed 50% of Mr. Jorissen's then annual base salary) in
accordance with the terms of an executive bonus plan to be agreed upon by the
General Partner and Mr. Jorissen. A copy of Mr. Jorissen's employment
agreement is attached as an exhibit to the General Partner's periodic filings
under the Exchange Act.
23
<PAGE> 24
The non-competition clauses of Mr. Jorissen's employment agreement
preclude him from engaging, directly or indirectly, in the real estate business
or any ancillary business of the General Partner during the period he is
employed by the General Partner and for a period of eighteen months thereafter.
OUTSIDE DIRECTOR COMPENSATION
Directors who are not employees of the General Partner are entitled
to an annual retainer fee of $12,000, payable $3,000 per calendar quarter,
plus a $1,000 fee for each quarterly meeting of the Board. For services
during the fiscal year ended December 31, 1996, Ted J. Simon, Carl R.
Weinert, Paul D. Lapides and Clunet R. Lewis each earned directors' fees
of $16,000 and Ronald L. Piasecki earned director's fees of $8,000.
Although Arthur A. Weiss earned director's fees of $4,000 for services
during the fiscal year ended December 31, 1996, he declined such fees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of March 3, 1997, the ownership of: (a)
each person known to the Company to be the beneficial owner of more than five
percent (5%) of the Company's voting securities; (b) each director of the
General Partner; (c) each executive officer listed in the Summary Compensation
Table; and (d) all executive officers and directors of the General Partner as a
group, based upon information available to the Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING UNITS (1)
- ------------------------------------ -------------------- ---------------------
<S> <C> <C>
Sun Communities, Inc. 15,697,365 81.00%
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
Milton M. Shiffman (2) 141,794 .73%
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
Gary A. Shiffman (2) 127,794 .66%
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
Jeffrey P. Jorissen 0 0
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
Brian W. Fannon 0 0
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
Jonathan M. Colman 0 0
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING UNITS (1)
- ------------------------------------ -------------------- ---------------------
<S> <C> <C>
Ted J. Simon 0 0
P.O. Box 33446
Detroit, Michigan 48232
Carl R. Weinert 0 0
15658 Mok
Eastpointe, Michigan 48021
Paul D. Lapides 0 0
1000 Chastain Road
Kennesaw, Georgia 30144
Clunet R. Lewis 0 0
2000 Town Center
Suite 690
Southfield, Michigan 48075
Ronald L. Piasecki 34,875(3) .18%
5000 Hakes Street
Muskegon, Michigan 49441
Arthur A. Weiss 0 0
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
All current executive officers and 304,463 1.57%
directors as a group (11 persons)
==================================== ================= ====================
</TABLE>
(1) Percentage calculations based on 19,380,645 OP Units issued and outstanding
as of March 3, 1997.
(2) Does not include OP Units held by other family members as to which
beneficial ownership is disclaimed.
(3) Includes 13,889 Common OP Units convertible into shares of Common
Stock held by Aspen Group, a Michigan co-partnership, which are
attributable to Mr. Piasecki because of his 25% general partnership
interest in Aspen Group. Includes 20,986 Common OP Units convertible
into shares of Common Stock held by Aspen Group-KC, a Michigan
co-partnership, which are attributable to Mr. Piasecki because of his
25% general partnership interest in Aspen Group-KC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the General Partner issued Mr. Gary A. Shiffman, the General
Partner's Chief Executive Officer and President, 400,000 shares of Common Stock
for $8,650,000 (the "Purchase Price"). The Purchase Price is evidenced by
three (3) separate 10-year promissory notes that bear interest at a rate equal
to six months' LIBOR plus 175 basis points, with a maximum interest rate of 9%
per annum and a minimum interest rate of 6% per annum (the "Promissory Notes").
Two of the Promissory Notes are secured by shares of Common Stock (the
"Secured Shares") and/or OP Units (the "Secured Units") and the last Promissory
Note is unsecured but fully recourse to Mr. Shiffman. Mr. Shiffman's personal
liability on the secured Promissory Notes is limited to all accrued interest on
such notes plus fifty percent (50%) of the deficiency, if any, after
application of the proceeds from the sale of the Secured Shares and/or the
Secured Units to the then outstanding principal balance of the Promissory
Notes. The Promissory Notes provide for quarterly interest only payments and
provide that all cash distributions and dividends paid to Mr. Gary Shiffman on
the Secured Shares and the Secured Units (the "Distributions") will first be
applied toward the accrued and unpaid interest under the Promissory Notes and
sixty percent (60%) of the remainder of the Distributions, if any, will be
applied toward the outstanding principal balance of the Promissory Notes. The
largest aggregate indebtedness outstanding under the Promissory Notes since
January 1, 1996 was $8,958,372. As of March 1, 1997, the amount outstanding
under the Promissory Notes
25
<PAGE> 26
was approximately $8,751,371. Copies of the Promissory Notes have been filed
as exhibits to the General Partner's periodic filings under the Exchange Act.
On April 8, 1996, the General Partner completed a $122.8 million public
offering of 4.7 million shares of its Common Stock (the "Equity Offering").
Jeffrey P. Jorissen, the General Partner's Senior Vice President, Treasurer,
Chief Financial Officer and Secretary, Brian W. Fannon, the General Partner's
Senior Vice President and Chief Operating Officer, and Jonathan M. Colman, the
General Partner's Senior Vice President - Acquisitions, collectively, purchased
20,000 shares of Common Stock in the Equity Offering at the public offering
price of $26.125 per share. Such purchases in the Equity Offering were
financed with loans from the Company on terms substantially identical to the
terms of the Company's loan to Mr. Gary Shiffman described above. The largest
aggregate indebtedness outstanding under Mr. Jorissen's promissory notes to the
Company, Mr. Fannon's promissory notes to the Company and Mr. Colman's
promissory notes to the Company since January 1, 1996 were $270,314, $162,188
and $108,125, respectively. As of March 1, 1997, the total amounts outstanding
under Mr. Jorissen's promissory notes to the Company, Mr. Fannon's promissory
notes to the Company and Mr. Colman's promissory notes to the Company were
approximately $264,364, $158,619 and $105,746, respectively.
On May 1, 1996, the Company acquired the Aspen Properties from affiliates
of Aspen. Of the $226.0 million purchase price for the Aspen Properties: (i)
$144.0 million was used to retire existing mortgage debt secured by the Aspen
Properties; (ii) $42.1 million was distributed to the limited and general
partners of certain partnerships affiliated with Aspen, including Mr. Ronald
L. Piasecki; (iii) $4.2 million was issued in the form of Common OP Units in
the Company; and (iv) $35.8 million was issued in the form of Preferred OP
Units. Both the Common OP Units and the Preferred OP Units were issued to
affiliates of Aspen, including, either directly or indirectly, Mr. Piasecki.
Upon completion of the acquisition of the Aspen Properties, Mr. Piasecki was
appointed to the Board of Directors of the General Partner.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) The following documents are filed herewith as part of this Form 10-K:
(1) A list of the financial statements required to be filed as a
part of this Form 10-K is shown in the "Index to the Consolidated
Financial Statements and Financial Statement Schedule" filed
herewith.
(2) A list of the financial statement schedules required to be
filed as a part of this Form 10-K is shown in the "Index to the
Consolidated Financial Statements and Financial Statement Schedule"
filed herewith.
(3) A list of the exhibits required by Item 601 of Regulation S-K
to be filed as a part of this Form 10-K is shown on the "Exhibit
Index" filed herewith.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K regarding events
occurring during the months included in the fourth quarter of the
Company's fiscal year.
26
<PAGE> 27
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . F - 2
Financial Statements:
Consolidated Balance Sheet as of December 31, 1996 and 1995 . . . . . . . . . F - 3
Consolidated Statement of Income
for the Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . F - 4
Consolidated Statement of Partners' Capital for the Years
Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . F - 5
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . F - 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . F - 7
Schedule III - Real Estate and Accumulated Depreciation . . . . . . . . . . . . . F - 13
</TABLE>
F-1
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Communities
Operating Limited Partnership:
We have audited the accompanying consolidated balance sheet of Sun Communities
Operating Limited Partnership as of December 31, 1996 and 1995, and the related
consolidated statements of income, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1996. We have also audited
the consolidated financial statement schedule listed under 14(a)(2) of this
form 10-K. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sun Communities
Operating Limited Partnership as of December 31, 1996 and 1995 and the
consolidated results of its operations and cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information stated therein.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand LLP
Detroit, Michigan
February 25, 1997
F-2
<PAGE> 29
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
Investment in rental property, net $ 558,278 $ 310,030
Cash and cash equivalents 9,236 121
Investment in Sun Home Services, Inc. ("SHS") 5,103 3,187
Other assets 12,439 11,766
----------- -----------
Total assets $ 585,056 $ 325,104
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt $ 185,000 $ 107,055
Accounts payable and accrued expenses 7,718 2,451
Deposits and other liabilities 9,123 6,123
----------- -----------
201,841 115,629
----------- -----------
Partners' Capital:
Preferred Operating Partnership Units
("POP Units"), unlimited authorized, 1,325
issued and outstanding in 1996 35,783 --
Operating Partnership ("OP Units") unlimited
authorized, 17,751 and 11,714 issued and
outstanding in 1996 and 1995, respectively
General partner 300,932 177,593
Limited partners 46,500 31,882
----------- -----------
Total partners' capital 383,215 209,475
----------- -----------
Total liabilities and partners' capital $ 585,056 $ 325,104
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
<PAGE> 30
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
REVENUES
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,849 $ 42,909 $ 30,461
Income from SHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506 325 432
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,844 1,878 1,450
--------- --------- ---------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,199 45,112 32,343
--------- --------- ---------
EXPENSES
Property operating and maintenance . . . . . . . . . . . . . . . . . . . . . . . 15,970 9,838 7,404
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,654 2,981 2,167
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,458 2,535 2,005
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 14,887 9,747 6,949
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,277 6,420 4,894
--------- --------- ---------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,246 31,521 23,419
--------- --------- ---------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . 21,953 13,591 8,924
Extraordinary item, early extinguishment of debt . . . . . . . . . . . . . . . . . . (6,896) -- --
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,057 13,591 8,924
Less distribution to Preferred OP Units . . . . . . . . . . . . . . . . . . . . . . . 1,670 -- --
--------- --------- ---------
Earnings attributable to OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,387 $ 13,591 $ 8,924
========= ========= =========
Earnings attributed to:
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,704 $ 11,661 $ 7,786
Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,683 1,930 1,138
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,387 $ 13,591 $ 8,924
========= ========= =========
Earnings per OP Unit outstanding:
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . $ 1.29 $ 1.19 $ 1.05
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.44) -- --
--------- --------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .85 $ 1.19 $ 1.05
========= ========= =========
Weighted average OP Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . 15,646 11,420 8,535
========= ========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE> 31
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
POP UNITS GENERAL PARTNER
--------- ---------------
LIMITED PARTNERS
----------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ 92,984 $ 13,744
Issuance of OP Units for rental property 9,934
Net contributions 85,807
Net income 7,786 1,138
Distribution declared of $1.78 per OP Unit (13,725) (1,988)
Reclassification 2,126 (2,126)
----------- ---------
Balance, December 31, 1994 174,978 20,702
Issuance of OP Units for rental property 15,444
Net contributions 887
Net income 11,661 1,930
Distributions declared of $1.335 per OP Unit (13,031) (3,096)
Reclassification 3,098 (3,098)
----------- ---------
Balance, December 31, 1995 177,593 31,882
Issuance of POP and OP Units for rental property $
35,783 17,654
Net contributions 132,975
Net income 11,704 1,683
Distributions declared of $1.81 per OP Unit (22,643) (3,416)
Reclassification 1,303 (1,303)
--------- ----------- ---------
Balance, December 31, 1996 $ 35,783 $ 300,932 $ 46,500
========= =========== =========
</TABLE>
The accompanying notes are an integral part
of the consolidated and combined financial statements.
F-5
<PAGE> 32
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,387 $ 13,591 $ 8,924
Adjustments to reconcile net income to
cash provided by operating activities:
Extraordinary item, net of prepayment penalties . . . . . . . . . . . . . 1,390 -- --
Depreciation and amortization costs . . . . . . . . . . . . . . . . . . . 14,887 9,747 6,949
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . 236 598 325
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . (2,659) (3,474) (1,505)
Increase in accounts payable and
other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 8,173 4,521 192
----------- ---------- -----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . 35,414 24,983 14,885
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in rental properties . . . . . . . . . . . . . . . . . . . . . . . (78,722) (38,214) (78,644)
Investment in notes receivable . . . . . . . . . . . . . . . . . . . . . . . -- (4,143) --
Investment in SHS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,804 1,872 (7,131)
----------- ---------- -----------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . (76,918) (40,485) (85,775)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,975 887 85,806
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000 41,257 --
Repayments on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . (241,114) (10,077) (3,587)
Payments for deferred financing costs . . . . . . . . . . . . . . . . . . . . (277) (990) (675)
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,965) (19,832) (11,463)
Retirement of OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,001) --
----------- ---------- -----------
Net cash provided by financing activities . . . . . . . . . . . . . . . . 50,619 10,244 70,081
----------- ---------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 9,115 (5,258) (809)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . 121 5,379 6,188
----------- ---------- -----------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . $ 9,236 $ 121 $ 5,379
=========== ========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest including capitalized amounts of $380,
$192 and $58 in 1996, 1995 and 1994, respectively . . . . . . . . . . $ 9,958 $ 5,499 $ 4,458
Noncash investing and financing activities:
Issuance of OP and POP Units for rental properties and other assets . . . 53,437 15,444 9,934
Debt assumed for rental properties and other . . . . . . . . . . . . . . 134,059 12,944 20,105
Transfer of rental homes with SHS . . . . . . . . . . . . . . . . . . . . (3,720) 4,018 --
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE> 33
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. BASIS OF PRESENTATION:
Sun Communities Operating Limited Partnership (the "Company") owns and
operates manufactured housing community properties. A manufactured housing
community is real estate designed and improved with sites for placement of
manufactured homes.
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 operating 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 income as general and administrative expenses. The balance sheet of Sun
as of December 31, 1996 is identical to the accompanying Company balance
sheet, except as follows:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
----------------------------------------------------------------------
AS PRESENTED
HEREIN SUN COMMUNITIES, INC.
DECEMBER 31, 1996 ADJUSTMENTS DECEMBER 31, 1996
----------------- ----------- ---------------------
<S> <C> <C> <C>
Minority interests . . . . . . . . . . . -- $ 82,283 $ 82,283
===========
Preferred OP Units . . . . . . . . . . . $ 35,783 (35,783)
General partner . . . . . . . . . . . . . 300,932 (300,932)
Limited partners . . . . . . . . . . . . 46,500 (46,500)
Common stock . . . . . . . . . . . . . . 154 $ 154
Additional paid-in capital . . . . . . . 328,321 328,321
Distributions in excess of accumulated .
earnings . . . . . . . . . . . . . . (18,370) (18,370)
Notes receivable, officers . . . . . . . . (9,173) (9,173)
----------- -----------
Partners' capital/Stockholders'
equity . . . . . . . . . . . . . $ 383,215 $ 300,932
=========== ===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
c. BUSINESS: The Company and its subsidiaries own and operate 81
manufactured housing communities located in 12 states concentrated
principally in the Midwest and Southeast comprising approximately
28,800 developed sites and approximately 3,300 sites suitable for
development.
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
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
F-7
<PAGE> 34
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, CONTINUED:
b. PRINCIPLES OF CONSOLIDATION: The accompanying financial statements
include the accounts of the Company and all its 99 percent owned
subsidiary partnerships and limited liability companies. All
significant inter-entity balances and transactions have been eliminated
in consolidation. Minority interests represented by Sun's one percent
indirect interest in the aforementioned subsidiaries is not separately
recognized in the Company's financial statements because the Company
reimburses Sun for all of its expenses in excess of the income Sun
earns through its one percent interest.
Also included in these financial statements are 1.3 million Preferred
OP Units ("POP Units") issued at $27 per unit bearing a quarterly
distribution of 7% and are redeemable at par in June, 2002. The POP
Units are convertible one-for-one into OP Units based upon the current
trading price of Sun's common stock up to $31.50 per unit. At prices
above $31.50 per unit, the POP Units are convertible into OP Units
based on a formula the numerator of which is $31.50 plus 25 percent of
unit price appreciation above $36 per unit. The denominator is the
then unit price.
SHS provides sales, brokerage and other services to current and
prospective tenants. The Company owns 100 percent of the outstanding
preferred stock of SHS, is entitled to 95 percent of the operating cash
flow, and accounts for its investment utilizing the equity method of
accounting. The common stock is owned by three officers of the Company
who are entitled to receive 5 percent of the operating cash flow.
c. RENTAL PROPERTY: Rental property is recorded at cost, less accumulated
depreciation. Depreciation is computed on a straight-line basis over
the estimated useful lives of the assets. Useful lives are 30 years
for land improvements and buildings and 7 to 15 years for furniture,
fixtures and equipment. Expenditures for ordinary maintenance and
repairs are charged to operations as incurred and significant
renovations and improvements, which improve and/or extend the useful
life of the asset, are capitalized and depreciated over their estimated
useful lives.
d. CASH & CASH EQUIVALENTS: The Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
and cash equivalents.
e. REVENUE RECOGNITION: Rental income attributable to leases is recorded
on a straight-line basis when earned from tenants. Leases entered into
by tenants range from month-to-month to twelve years and are renewable
by mutual agreement of the Company and resident or, in some cases, as
provided by statute.
f. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amount of financial
instruments which includes cash and cash investments, mortgages and
notes receivable, and debt approximates fair value.
g. TAXES: As a partnership, the Company does not pay federal or state
income taxes.
h. RECLASSIFICATIONS: Certain 1994 and 1995 amounts have been
reclassified to conform with the 1996 financial statement presentation.
Such reclassifications have no effect on operations as originally
presented.
F-8
<PAGE> 35
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
3. ACQUISITIONS:
During 1996, the Company acquired 29 manufactured housing communities
comprising in excess of 11,350 development sites and 500 sites suitable for
development. The cost of acquisitions aggregated $247.9 million,
consisting of $229.2 million in the second quarter and $18.7 million in the
fourth quarter. Consideration consisted of $134.1 million in the
assumption or issuance of debt, $53.4 million in issuance of partnership
interests and $60.4 million of cash.
During 1995, the Company acquired six manufactured housing communities
comprising in excess of 2,200 developed sites and 425 expansion sites. The
cost of the acquisitions aggregated $52 million, consisting of $24 million,
$17 million, and $11 million in the first three quarters, respectively.
Consideration consisted of $12 million in the assumption or issuance of
debt, $15 million in issuance of partnership interests and $25 million of
cash borrowed under the Company's line of credit.
These transactions have been accounted for as purchases, and the statements
of income include the operations of the acquired communities from the
dates of their respective acquisitions. In conjunction with an
acquisition, the Company is obligated to issue $12.1 million of OP Units
through 2009 based on the per unit price of the OP Units on each annual
date.
The following unaudited table of pro forma information has been prepared as
if the Company's acquisition of six manufactured housing communities in
1995 and 29 manufactured housing communities in 1996 had occurred as of
January 1, 1995. In management's opinion, the pro forma information is not
necessarily indicative of consolidated results of operations that may have
occurred had the above transactions taken place on January 1 of each year.
In the following table, the amounts are in thousands except per unit
amounts:
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEAR ENDED
DECEMBER 31
------------------------------
(UNAUDITED)
------------------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,080 $ 80,071
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,527 $ 52,611
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,900 $ 17,744
Net income per OP Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.26 $ 1.04
</TABLE>
Operating income is defined as total revenues less property operating and
maintenance expense, real estate tax expense and general and administrative
expense. Operating income is not necessarily an indication of the
performance of the Company or a measure of liquidity.
F-9
<PAGE> 36
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
4. RENTAL PROPERTY: AT DECEMBER 31
----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,943 $ 32,565
Land improvements and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . 510,726 282,121
Furniture, fixtures, equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 9,826 9,852
Property under development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,318 2,075
----------- ----------
588,813 326,613
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . ( 30,535) (16,583)
----------- ----------
$ 558,278 $ 310,030
=========== ==========
</TABLE>
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, and clubhouses, maintenance buildings and amenities.
5. NOTES RECEIVABLE:
Included in other assets are $4.2 million of second and third mortgage
notes collateralized by manufactured housing communities located in
Alberta, Canada bearing interest at an average rate of 17 percent. The
principal is due in April 2000 and the Company is entitled to 73 percent of
excess cash flow, as defined.
6. DEBT:
<TABLE>
<CAPTION>
AT DECEMBER 31
----------------------
1996 1995
----------- ----------
<S> <C> <C>
Secured term loan, interest at LIBOR plus
1.50% (7% at December 31, 1996), 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
Prior year debt, repaid April, 1996 . . . . . . . . . . . . . . . . . . . . . . . . -- $ 107,055
----------- ----------
$ 185,000 $ 107,055
=========== ==========
</TABLE>
The Company has a $75 million unsecured line of credit at LIBOR plus 1.50%
on which no balance was owing at December 31, 1996. Fees and costs
incurred to obtain financing are amortized on a straight-line basis
over the terms of the respective loans.
The Company intends to refinance the secured term loan for a ten year
period during 1997 and has hedged its interest rate exposure utilizing
10-year U.S. Treasury Bonds. The realized gain or loss on the hedged
position (unrealized loss of $1.3 million at December 31, 1996) will be
amortized as an adjustment to interest expense over the term of the
refinanced secured debt.
The extraordinary item of $6.9 million results from the early
extinguishment of debt and includes prepayment penalties and related
deferred financing costs.
F-10
<PAGE> 37
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
7. SUN'S STOCK OPTIONS:
Data pertaining to Sun's stock option plans are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Options outstanding, January 1 . . . . . . . . . . . . . . . . 301,167 300,000 200,000
Options granted . . . . . . . . . . . . . . . . . . . . . . . . 482,950 375,430 100,000
Option price . . . . . . . . . . . . . . . . . . . . $26.625-$28.637 $21.625-$24.875 $22.50-$22.75
Options exercised . . . . . . . . . . . . . . . . . . . . . . . 16,683 356,763 --
Option price . . . . . . . . . . . . . . . . . . . . . . $20-$23.125 $20-$21.625
Options forfeited . . . . . . . . . . . . . . . . . . . . . . . -- 17,500 --
Option price . . . . . . . . . . . . . . . . . . . . . . . $22.00-$23.125
Options outstanding, December 31 . . . . . . . . . . . . . . . 767,434 301,167 300,000
Option price . . . . . . . . . . . . . . . . . . . . . . $20-$28.637 $20-$24.875 $20-$22.75
Options exercisable, December 31 . . . . . . . . . . . . . . . 392,949 232,833 220,000
</TABLE>
Sun's stock option plans provide for up to 1.5 million shares/units of
common stock/partnership interests that may be granted to directors,
executive officers and other key employees of Sun or the Company. At
December 31, 1996, 322,000 shares/units of common stock/partnership
interests were available for the granting of options. Options are granted
at fair market value and generally vest over a two-year period and may be
exercised for 10 years after date of grant. The plans provide for the
grant of up to 1,485,000 options. At December 31, 1996, the weighted
average remaining contractual life relating to options was 8.5 years.
The Company has opted to measure compensation cost utilizing the intrinsic
value method. The fair value of each option grant was estimated as of the
date of grant using the Block-Scholes option-pricing model with the
following assumptions for options granted in:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Estimated fair value per share/unit of options granted during year . . . . . . . . $1.94 $2.22
Assumptions:
Annualized dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9% 7.7%
Common stock/partnership interest price volatility . . . . . . . . . . . . . 15.1% 15.3%
Risk-free rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2% 6.4%
Expected option term (in years) . . . . . . . . . . . . . . . . . . . . . . . 8 8
</TABLE>
This accounting would have resulted in net income of $13.2 million and
$12.9 million and net income per OP Unit of $.84 and $1.13 in 1996 and
1995, respectively.
F-11
<PAGE> 38
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
8 QUARTERLY FINANCIAL DATA (UNAUDITED):
The following unaudited quarterly amounts are in thousands, except for per unit
amounts:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
MARCH 31 JUNE 30(B) SEPT. 30 DEC. 31
----------- ---------- -------- -------
<S> <C> <C> <C> <C>
1996
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 12,442 $ 18,149 $ 20,862 $ 21,746
Operating income (a) . . . . . . . . . . . . . . . . . . . $ 8,254 $ 12,063 $ 13,538 $ 14,262
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,456 $ 5,647 $ 6,278 $ 6,572
Weighted average OP Units . . . . . . . . . . . . . . . . . 11,766 16,363 17,018 17,434
Earnings per OP Unit . . . . . . . . . . . . . . . . . . . $ .29 $ .32 $ .33 $ .34
1995
Total revenues . . . . . . . . . . . . . . . . . . . . . . $ 9,770 $ 11,250 $ 11,906 $ 12,186
Operating income (a) . . . . . . . . . . . . . . . . . . . $ 6,420 $ 7,386 $ 7,780 $ 8,172
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,206 $ 3,567 $ 3,525 $ 3,293
Weighted average OP Units . . . . . . . . . . . . . . . . . 10,576 11,678 11,702 11,713
Earnings per OP Unit . . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.31 $ 0.30 $ 0.28
</TABLE>
(a) Operating income is defined as total revenues less property operating
and maintenance expense, real estate tax expense, and general and
administrative expenses. Operating income is a measure of the
performance of the operations of the properties before the effects of
depreciation, amortization and interest expense. Operating income is
not necessarily an indication of the performance of the Company or a
measure of liquidity.
(b) Net income and earnings per share are presented before an
extraordinary item arising from debt extinguishment of which $6,896 or
$.44 per OP Unit.
F-12
<PAGE> 39
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION
INITIAL COST -----------------------
TO COMPANY IMPROVEMENTS
-------------------------- -----------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- ------------- ----------------- ----------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Allendale Allendale, MI $ 393 $ 3,684 - -
Alpine Grand Rapids, MI 729 6,692 - -
Arbor Terrace Bradenton, FL 481 4,410 - -
Ariana Village Lakeland, FL - 240 2,195 - $ 159
Bedford Hills Battle Creek, MI - (1) 1,265 11,562 - -
Bonita Lake Bonita Springs, FL - 285 2,641 - -
Boulder Creek Pflugerville, TX - 1,000 500 - -
Branch Creek Austin, TX - 796 3,716 - 1,982
Breezy Hill Pompano Beach, FL - 1,778 16,085 - -
Brentwood Kentwood, MI - 385 3,592 - -
Brookside Village Goshen, IN - 260 1,080 $ 386 3,242
Byron Center Byron Center, MI - 257 2,402 - -
Candlelight Village Chicago Heights, IL - 600 5,623 - -
Candlewick Court Owosso, MI - 125 1,900 132 702
Catalina Middletown, OH - 653 5,858 - 95
Chain O'Lakes Grand Island, FL - 551 5,003 - -
Chisholm Point Pflugerville, TX - 609 5,286 - 758
Clearwater Village South Bend, IN - 80 1,270 61 570
Cobus Green Elkhart, IN - 762 7,037 - 213
College Park Estates Canton, MI - 75 800 174 4,254
Continental Estates Davison, MI - 1,625 16,581 - -
Country Acres Cadillac, MI - 380 3,495 - -
Country Meadows Flat Rock, MI - 924 7,583 296 5,469
Countryside Village Perry, MI - (1) 275 3,920 185 1,313
Creekwood Meadows Burton, MI - 808 2,043 - -
Cutler Estates Grand Rapids, MI - (1) 822 7,604 - -
Douglas Estates Austell, GA - 508 2,125 - 191
Edwardsville Edwardsville, KS - (1) 425 8,805 541 743
Fisherman's Cove Flint, MI - 380 3,438 - 240
Flagview Village Douglasville, GA - 508 2,125 - 167
Four Seasons Ankeny, IO - 890 8,054 - -
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1996
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- ------------- ----------------- -------- ---------- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Allendale Allendale, MI $ 393 $ 3,684 $ 4,077 $ 62 1996
Alpine Grand Rapids, MI 729 6,692 7,421 115 1996
Arbor Terrace Bradenton, FL 481 4,410 4,891 76 1996
Ariana Village Lakeland, FL 240 2,354 2,594 202 1994
Bedford Hills Battle Creek, MI 1,265 11,562 12,827 200 1996
Bonita Lake Bonita Springs, FL 285 2,641 2,926 45 1996
Boulder Creek Pflugerville, TX 1,000 500 1,500 - 1996
Branch Creek Austin, TX 796 5,698 6,494 180 1995
Breezy Hill Pompano Beach, FL 1,778 16,085 17,863 281 1996
Brentwood Kentwood, MI 385 3,592 3,977 61 1996
Brookside Village Goshen, IN 646 4,322 4,968 394 1985
Byron Center Byron Center, MI 257 2,402 2,659 41 1996
Candlelight Village Chicago Heights, IL 600 5,623 6,223 98 1996
Candlewick Court Owosso, MI 257 2,602 2,859 267 1985
Catalina Middletown, OH 653 5,953 6,606 643 1993
Chain O'Lakes Grand Island, FL 551 5,003 5,554 143 1996
Chisholm Point Pflugerville, TX 609 6,044 6,653 255 1995
Clearwater Village South Bend, IN 141 1,840 1,981 179 1986
Cobus Green Elkhart, IN 762 7,250 8,012 745 1993
College Park Estates Canton, MI 249 5,054 5,303 418 1978
Continental Estates Davison, MI 1,625 16,581 18,206 286 1996
Country Acres Cadillac, MI 380 3,495 3,875 60 1996
Country Meadows Flat Rock, MI 1,220 13,052 14,272 778 1994
Countryside Village Perry, MI 460 5,233 5,693 494 1987
Creekwood Meadows Burton, MI 808 2,043 2,851 - 1996
Cutler Estates Grand Rapids, MI 822 7,604 8,426 130 1996
Douglas Estates Austell, GA 508 2,316 2,824 243 1988
Edwardsville Edwardsville, KS 966 9,548 10,514 1,001 1987
Fisherman's Cove Flint, MI 380 3,678 4,058 371 1993
Flagview Village Douglasville, GA 508 2,292 2,800 245 1988
Four Seasons Ankeny, IO 890 8,054 8,944 140 1996
</TABLE>
F-13
<PAGE> 40
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION
INITIAL COST -----------------------
TO COMPANY IMPROVEMENTS
-------------------------- -----------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- ------------- ----------------- ----------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Golden Lakes Plant City, FL - 1,092 7,161 1 189
Grand Grand Rapids, MI - 578 5,396 - -
Hamlin Webberville, MI - 125 1,675 77 490
Holiday Village Elkhart, IN - 100 3,207 143 692
Indian Creek Ft. Myers Beach, FL - 3,832 34,660 - -
Island Lake Merritt Island, FL - 700 6,431 - 23
Kensington Meadows Lansing, MI - 250 2,699 - 827
King's Court Traverse City, MI - 1,473 13,782 - -
King's Lake Debary, FL - 280 2,542 - 380
King's Pointe Winter Haven, FL - 262 2,359 - 63
Kissimmee Gardens Kissimmee, FL - 594 5,522 - 45
Lake Juliana Auburndale, FL - 335 2,848 - 119
Lake San Marino Naples, FL - 650 5,760 - -
Leesburg Landing Leesburg, FL - 50 429 - -
Liberty Farms Valparaiso, IN - 66 1,201 116 1,520
Lincoln Estates Holland, MI - 455 4,201 - -
Maple Grove Estates Dorr, MI - 15 210 19 216
Maplewood Lawrence, IN - 280 2,122 - 371
Meadow Lake Estates White Lake, MI - 1,188 11,498 127 1,059
Meadowbrook Indianapolis, IN - 927 3,833 331 708
Meadowbrook Estates Monroe, MI - 431 3,320 379 5,285
Meadowbrook Village Tampa, FL - 519 4,728 - 30
Meadows Nappanee, IN - 300 2,300 3 1,644
Meadowstream Village Sodus, MI - 100 1,175 109 1,016
Orange Tree Orange City, FL - 283 2,530 - 63
Paradise Chicago Heights, IL - 723 6,638 - -
Parkwood Grand Blanc, MI - 477 4,279 - 215
Pin Oak Parc St. Louis, MO - 1,038 3,250 44 1,058
Pine Hills Middlebury, IN - 72 544 52 1,263
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1996
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- ------------- ----------------- -------- ---------- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Golden Lakes Plant City, FL 1,093 7,350 8,443 777 1993
Grand Grand Rapids, MI 578 5,396 5,974 91 1996
Hamlin Webberville, MI 202 2,165 2,367 226 1984
Holiday Village Elkhart, IN 243 3,899 4,142 421 1986
Indian Creek Ft. Myers Beach, FL 3,832 34,660 38,492 606 1996
Island Lake Merritt Island, FL 700 6,454 7,154 316 1995
Kensington Meadows Lansing, MI 250 3,526 3,776 143 1995
King's Court Traverse City, MI 1,473 13,782 15,255 233 1996
King's Lake Debary, FL 280 2,922 3,202 240 1994
King's Pointe Winter Haven, FL 262 2,422 2,684 211 1994
Kissimmee Gardens Kissimmee, FL 594 5,567 6,161 616 1993
Lake Juliana Auburndale, FL 335 2,967 3,302 264 1994
Lake San Marino Naples, FL 650 5,760 6,410 100 1996
Leesburg Landing Leesburg, FL 50 429 479 9 1996
Liberty Farms Valparaiso, IN 182 2,721 2,903 239 1985
Lincoln Estates Holland, MI 455 4,201 4,656 72 1996
Maple Grove Estates Dorr, MI 34 426 460 47 1979
Maplewood Lawrence, IN 280 2,493 2,773 260 1989
Meadow Lake Estates White Lake, MI 1,315 12,557 13,872 1,119 1994
Meadowbrook Indianapolis, IN 1,258 4,541 5,799 471 1989
Meadowbrook Estates Monroe, MI 810 8,605 9,415 881 1986
Meadowbrook Village Tampa, FL 519 4,758 5,277 488 1994
Meadows Nappanee, IN 303 3,944 4,247 375 1987
Meadowstream Village Sodus, MI 209 2,191 2,400 241 1984
Orange Tree Orange City, FL 283 2,593 2,876 225 1994
Paradise Chicago Heights, IL 723 6,638 7,361 114 1996
Parkwood Grand Blanc, MI 477 4,494 4,971 465 1993
Pin Oak Parc St. Louis, MO 1,082 4,308 5,390 335 1994
Pine Hills Middlebury, IN 124 1,807 1,931 188 1980
</TABLE>
F-14
<PAGE> 41
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
ACQUISITION
INITIAL COST -----------------------
TO COMPANY IMPROVEMENTS
-------------------------- -----------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- ------------- ----------------- ----------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Pine Ridge Petersburg, VA - 405 2,397 - 809
Plantation Manor Ft. Pierce, FL - 950 8,891 - 16
Pleasure Cove Ft. Pierce, FL - 550 5,005 - -
Presidential Hudsonville, MI - 680 6,314 - -
Royal Country Miami, FL - (1) 2,290 20,758 - 160
Saddle Oak Club Ocala, FL - 730 6,743 - 167
Scio Farms Ann Arbor, MI - 2,300 22,659 - 1,749
Sherman Oaks Jackson, MI - (1) 200 2,400 240 2,874
Siesta Bay Ft. Myers Beach, FL - 2,051 18,549 - -
Silver Star Orlando, FL - 1,067 9,685 - -
Tallowwood Coconut Creek, FL - 510 5,099 - 126
Timber Ridge Ft. Collins, CO - 990 9,231 - -
Timberbrook Bristol, IN - (1) 490 3,400 101 3,668
Timberline Estates Grand Rapids, MI - 536 4,867 - 198
Town and Country Traverse City, MI - 406 3,736 - -
Valley Mills Indianapolis, IN - 150 3,500 - 336
Water Oak Country
Club Est. Lady Lake, FL - 2,503 17,478 - 873
West Glen Village Indianapolis, IN - 1,100 10,028 - 270
Whispering Palm Sebastian, FL - 975 8,754 - -
Woods Edge West Lafayette, IN - 100 2,600 3 1,192
Worthington Arms Delaware, OH - 376 2,624 - 740
Corporate
Headquarters Farmington Hills, MI - - - - 1,191
----- --------- ---------- -------- --------
$ 55,423 $ 478,127 $ 3,520 $ 51,743
========= ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1996
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- ------------- ----------------- -------- ---------- ---- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Pine Ridge Petersburg, VA 405 3,206 3,611 327 1986
Plantation Manor Ft. Pierce, FL 950 8,907 9,857 765 1994
Pleasure Cove Ft. Pierce, FL 550 5,005 5,555 434 1994
Presidential Hudsonville, MI 680 6,314 6,994 107 1996
Royal Country Miami, FL 2,290 20,918 23,208 2,123 1994
Saddle Oak Club Ocala, FL 730 6,910 7,640 485 1995
Scio Farms Ann Arbor, MI 2,300 24,408 26,708 1,157 1995
Sherman Oaks Jackson, MI 440 5,274 5,714 544 1986
Siesta Bay Ft. Myers Beach, FL 2,051 18,549 20,600 324 1996
Silver Star Orlando, FL 1,067 9,685 10,752 169 1996
Tallowwood Coconut Creek, FL 510 5,225 5,735 455 1994
Timber Ridge Ft. Collins, CO 990 9,231 10,221 156 1996
Timberbrook Bristol, IN 591 7,068 7,659 640 1987
Timberline Estates Grand Rapids, MI 536 5,065 5,601 439 1994
Town and Country Traverse City, MI 406 3,736 4,142 64 1996
Valley Mills Indianapolis, IN 150 3,836 3,986 404 1989
Water Oak Country
Club Est. Lady Lake, FL 2,503 18,351 20,854 1,968 1993
West Glen Village Indianapolis, IN 1,100 10,298 11,398 870 1994
Whispering Palm Sebastian, FL 975 8,754 9,729 152 1996
Woods Edge West Lafayette, IN 103 3,792 3,895 376 1985
Worthington Arms Delaware, OH 376 3,364 3,740 347 1990
Corporate
Headquarters Farmington Hills, MI - 1,191 1,191 303 VARIOUS
-------- ----------- ----------- ---------
$ 58,943 $ 529,870 $ 588,813 $ 30,535
======== =========== =========== =========
</TABLE>
(1) These communities collateralize $35 million of secured debt.
F-15
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 28, 1997
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
By: Sun Communities, Inc., General Partner
By: /s/ Gary A. Shiffman
-------------------------------
Gary A. Shiffman, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
NAME TITLE DATE
- ---- -------------------------- --------------
/s/ Milton M. Shiffman Chairman of the Board of
- ---------------------- Directors March 28, 1997
Milton M. Shiffman
/s/ Gary A. Shiffman Chief Executive Officer,
- -------------------- President and Director March 28, 1997
Gary A. Shiffman
/s/ Jeffrey P. Jorissen Senior Vice President,
- ----------------------- Chief Financial Officer,
Jeffrey P. Jorissen Treasurer, Secretary
and Principal Accounting
Officer March 28, 1997
/s/ Carl R. Weinert
- ------------------- Director March 28, 1997
Carl R. Weinert
/s/ Paul D. Lapides
- ------------------- Director March 28, 1997
Paul D. Lapides
/s/ Ted J. Simon
- ---------------- Director March 28, 1997
Ted J. Simon
<PAGE> 43
/s/ Clunet R. Lewis
- ------------------- Director March 28, 1997
Clunet R. Lewis
/s/ Ronald L. Piasecki
- ---------------------- Director March 28, 1997
Ronald L. Piasecki
/s/ Arthur A. Weiss
- ------------------- Director March 28, 1997
Arthur A. Weiss
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<S> <C> <C>
2.1 Form of General Partner's Common Stock Certificate (1)
2.2 Master Contribution and Sale Agreement pertaining to the Aspen Properties (2)
2.3 Contribution Agreement pertaining to Leesburg Landing (8)
2.4 Contribution Agreement pertaining to Continental Estates (8)
3.1 Amended and Restated Articles of Incorporation of Sun Communities, Inc. (1)
3.2 Bylaws of Sun Communities, Inc. (3)
4.1 Indenture, dated as of April 24, 1996, among the General Partner, the (4)
Company and Bankers Trust Company, as Trustee
4.2 Form of Note for the 2001 Notes (4)
4.3 Form of Note for the 2003 Notes (4)
10.1 Second Amended and Restated Agreement of Limited Partnership of Sun (8)
Communities Operating Limited Partnership
10.2 Amended and Restated 1993 Stock Option Plan# (8)
10.3 Amended and Restated 1993 Non-Employee Director Stock Option Plan# (8)
10.4 Form of Stock Option Agreement between the General Partner and certain (1)
directors, officers and other individuals#
10.5 Form of Non-Employee Director Stock Option Agreement between the General (5)
Partner and certain directors#
10.6 Employment Agreement between the General Partner and Gary A. Shiffman# (8)
10.7 Agreement regarding termination of Robert B. Bayer's Employment (6)
Agreement#
10.8 Registration Rights and Lock-Up Agreement with the General Partner (5)
10.9 Revolving Credit Agreement with NBD Bank, N.A. (5)
10.10 Line of Credit Agreement with Lehman Brothers Holdings Inc. (3)
10.11 Property Management and Leasing Agreement between the Financing (5)
Partnership and Sun Management, Inc.
10.12 Property Management and Leasing Termination Agreement between the (8)
Financing Partnership and Sun Management, Inc.
10.13 Purchase Agreement with respect to Mortgage Debt (1)
10.14 Credit Agreement between Fort McMurray Housing Inc. and Sun Communities (3)
Alberta Limited Partnership
10.15 First Amending Agreement to Credit Agreement between Fort McMurray (3)
Housing Inc. and Sun Communities Alberta Limited Partnership
10.16 Demand Note Agreement from Sun Communities Operating Limited Partnership (3)
to NBD Bank, Canada
10.17 Fee and Commission Agreement between Sun Communities Operating Limited (3)
Partnership and Fort McMurray Housing Inc.
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------- ------------
<S> <C> <C>
10.18 $1,022,538.12 Promissory Note from Gary A. Shiffman to the General (7)
Partner
10.19 $1,022,538.13 Promissory Note from Gary A. Shiffman to the General (7)
Partner
10.20 $6,604,923.75 Promissory Note from Gary A. Shiffman to the General (7)
Partner
10.21 Stock Pledge Agreement between Gary A. Shiffman and the General Partner (7)
for 94,570 shares of Common Stock
10.22 Stock Pledge Agreement between Gary A. Shiffman and the General Partner (7)
for 305,430 shares of Common Stock
10.23 Registration Rights Agreement between Gary A. Shiffman and the General (3)
Partner
10.24 Registration Rights and Lock Up Agreement among the General Partner and (3)
the partners of Miami Lakes Venture Associates, as amended
10.25 Registration Rights and Lock Up Agreement among the General Partner and (3)
the partners of Scio Farms Estates Limited Partnership
10.26 Registration Rights and Lock Up Agreement among the General Partner and (3)
the partners of Kensington Meadows Associates
10.27 Registration Rights and Lock Up Agreement among the General Partner and (8)
certain affiliates of Aspen Enterprises, Ltd. (Preferred OP Units)
10.28 Registration Rights and Lock Up Agreement among the General Partner and (8)
certain affiliates of Aspen Enterprises, Ltd. (Common OP Units)
10.29 Registration Rights Agreement among the General Partner and the partners (8)
of S&K Smith Co.
10.30 Employment Agreement between the General Partner and Jeffrey P. Jorissen# (8)
21 List of Subsidiaries
23 Consent of Coopers & Lybrand L.L.P., independent accountants
27 Financial Data Schedule
</TABLE>
- -----------------
(1) Incorporated by reference to the General Partner's Registration Statement
No. 33-69340.
(2) Incorporated by reference to the General Partner's Current Report on Form
8-K dated March 20, 1996.
(3) Incorporated by reference to the General Partner's Annual Report on Form
10-K for the year ended December 31, 1995.
(4) Incorporated by reference to the General Partner's Current Report on Form
8-K dated April 24, 1996.
(5) Incorporated by reference to the General Partner's Registration Statement
No. 33-80972.
(6) Incorporated by reference to the General Partner's Annual Report on Form
10-K for the year ended December 31, 1994.
<PAGE> 46
(7) Incorporated by reference to the General Partner's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
(8) Incorporated by reference to the General Partner's Annual Report on Form
10-K for the year ended December 31, 1996.
# Management contract or compensatory plan or arrangement required to be
identified by Form 10-K Item 14.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
Sun Communities Finance Limited Partnership, a Michigan limited
partnership
Sun Home Services, Inc., a Michigan corporation
Sun Management, Inc., a Michigan corporation
Manufactured Home Lending Corporation, a Michigan corporation
Sun QRS, Inc., a Michigan corporation
Sun Florida QRS, Inc., a Michigan corporation
Sun Water Oak Golf, Inc., a Michigan corporation
Sun Texas QRS, Inc., a Michigan corporation
Sun Communities Texas Limited Partnership, a Michigan limited
partnership
8920 Associates, a Florida partnership
Miami Lakes Venture Associates, a Florida partnership
Sun Communities Alberta Limited Partnership, a Michigan limited
partnership
Family Retreat, Inc., a Michigan corporation
Sun GP L.L.C., a Michigan limited liability company
Aspen-West Michigan Holdings L.L.C., a Michigan limited liability
company
Aspen-Alpine Limited Partnership, a Michigan limited partnership
Aspen-Bedford Investment Limited Partnership, a Michigan limited
partnership
Aspen Brentwood Holdings L.L.C., a Michigan limited liability company
Byron Center Mobile Village, a Michigan limited partnership
Aspen-Country Acres Investment Limited Partnership, a Michigan limited
partnership
Aspen-Cutler Investment Limited Partnership, a Michigan limited
partnership
Aspen-Grand Holdings L.L.C., a Michigan limited liability company
Aspen-Kings Investment Limited Partnership, a Michigan limited
partnership
<PAGE> 2
Aspen-Lincoln Investment Limited Partnership, a Michigan limited
partnership
Aspen-Town & Country Investment Limited Partnership, a Michigan limited
partnership
Aspen-Allendale Project Limited Partnership, a Michigan limited
partnership
Aspen-Presidential Project Limited Partnership, a Michigan limited
partnership
Aspen-Alpine Project Limited Partnership, a Michigan limited
partnership
Bedford Hills Mobile Village, a Michigan limited partnership
Aspen-Brentwood Project Limited Partnership, a Michigan limited
partnership
Aspen-Byron Project Limited Partnership, a Michigan limited partnership
Aspen-Country Project Limited Partnership, a Michigan limited
partnership
Aspen-Cutler Associates, a Michigan limited partnership
Aspen-Grand Project Limited Partnership, a Michigan limited partnership
Aspen-Kings Court Limited Partnership, a Michigan limited partnership
Aspen-Holland Estates Limited Partnership, a Michigan limited
partnership
Aspen-Town & Country Associates II Limited Partnership, a Michigan
limited partnership
Aspen-Paradise Park II Limited Partnership, an Illinois limited
partnership
Aspen-Arbor Terrace L.P., a Florida limited partnership
Aspen-Bonita Lake Resort Limited Partnership, a Florida limited
partnership
Aspen-Breezy Project Limited Partnership, a Florida limited partnership
Aspen-Indian Project Limited Partnership, a Florida limited partnership
Aspen-Siesta Bay Limited Partnership, a Florida limited partnership
Aspen-Silver Star II Limited Partnership, a Florida limited partnership
Aspen-Ft. Collins Limited Partnership, a Colorado limited partnership
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Sun Communities Operating Limited Partnership on Forms S-3 (File No. 333-2522;
File No. 333-14595) of our report dated February 25, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Sun
Communities Operating Limited Partnership as of December 31, 1996 and 1995, and
for the years ended December 31, 1996, 1995, and 1994, which report is included
in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,236
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 588,813
<DEPRECIATION> 30,535
<TOTAL-ASSETS> 585,056
<CURRENT-LIABILITIES> 0
<BONDS> 185,056
0
0
<COMMON> 0
<OTHER-SE> 383,215
<TOTAL-LIABILITY-AND-EQUITY> 585,056
<SALES> 0
<TOTAL-REVENUES> 73,199
<CGS> 0
<TOTAL-COSTS> 21,624
<OTHER-EXPENSES> 14,887
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,277
<INCOME-PRETAX> 21,953
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,953
<DISCONTINUED> 0
<EXTRAORDINARY> (6,896)
<CHANGES> 0
<NET-INCOME> 13,387
<EPS-PRIMARY> 1.29<F1>
<EPS-DILUTED> 1.29
<FN>
<F1>EPS excludes extraordinary loss of $.44 per share.
</FN>
</TABLE>
