<PAGE> 1
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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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
(248) 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 2, 1998, the aggregate market value of the Registrant's
partnership units held by non-affiliates of the Registrant was approximately
$66,921,986 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.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Sun Communities Operating Limited Partnership, a Michigan limited
partnership (the "Company"), owns, operates and finances 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.
At December 31, 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 95 properties
located in twelve states (the "Properties"), including eighty-four manufactured
housing communities, five recreational vehicle communities and six properties
containing both manufactured housing and recreational vehicle sites. At
December 31, 1997, the Properties contained an aggregate of 28,752 developed
manufactured home sites, approximately 3,600 manufactured home sites suitable
for development and 5,200 recreational vehicle sites. In order to enhance
property performance and cash flow, the Company, through Sun Home Services,
Inc., a Michigan corporation ("Home Services" or "SHS"), actively markets and
sells new and used manufactured homes for placement in the Properties.
The General Partner made an election to be taxed as a REIT for federal
income tax purposes commencing with the calendar year beginning January 1,
1994, and is 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 (248) 932-3100. The Company has regional property
management offices located in Elkhart, Indiana and Tampa, Florida. The
Company employed 547 people as of December 31, 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.
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
other services to current and prospective tenants of the Properties. The
Company owns 100% of the non-voting
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preferred stock of Home Services, which entitles the Company to 95% of the cash
flow from operating activities of Home Services. The voting common stock of
Home Services is 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.
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 547 employees, 499 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 28
years of property management experience, three Vice Presidents and eleven
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.
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<PAGE> 4
HOME SALES
Home Services offers manufactured home 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 sales services were conducted solely
through third-party brokers.
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, 29 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
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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. At December 31, 1997, the Properties consisted of eighty-four
manufactured housing communities, five recreational vehicle communities and six
properties containing both manufactured housing and recreational vehicle sites
concentrated in twelve states in the midwestern and southeastern United States.
At December 31, 1997, the Properties contained 28,752 developed manufactured
home sites, approximately 3,600 manufactured home sites suitable for
development and 5,200 recreational vehicle sites. Most of the Properties
include amenities oriented towards family and retirement living. Of the 95
Properties, forty-four have more than 300 developed manufactured home sites,
with the largest having 913 developed manufactured home sites.
The Properties had an aggregate occupancy rate of 95% as of December 31,
1997, excluding recreational vehicle sites. Since January 1, 1997, the
Properties have averaged an aggregate annual turnover of homes (where the home
is moved out of the community) of approximately 2.8% 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 8.5%.
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 five Properties located in Texas and one property
located in Colorado, 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. Because the Company believes that
geographic diversification will help insulate the portfolio from regional
economic influences, the Company is also interested in acquiring properties in
the western United States.
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The following table sets forth certain information relating to the
Properties owned as of December 31, 1997:
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/97 (1) 12/31/95 (1) 12/31/96 (1) 12/31/97(1)
- --------------------- -------------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
MIDWEST
MICHIGAN
Allendale 281 96% 97% 80%(2)
Allendale, MI
Alpine 381 96% 99% 99%
Grand Rapids, MI
Bedford Hills 339 94% 94% 98%
Battle Creek, MI
Brentwood 197 97% 99% 99%
Kentwood, MI
Byron Center 143 92% 97% 100%
Byron Center, MI
Candlewick Court 211 100% 99% 98%
Owosso, MI
College Park Estates 230 98% 99% 99%
Canton, MI
Continental Estates 385 (4) 93% 92%
Davison, MI
Continental North 334 (4) 95% 96%
Davison, MI
Country Acres 182 98% 98% 96%
Cadillac, MI
Country Meadows 577 99% 99% 96%(2)
Flat Rock, MI
Countryside Village 359 99% 96% 96%
Perry, MI
Creekwood (3) 140 --- --- 98%
Burton, MI
Cutler Estates 281 96% 98% 98%
Grand Rapids, MI
Davison East 190 (5) 99% 97%
Davison, MI
Fisherman's Cove 162 98% 97% 97%
Flint, MI
Grand 311 95% 98% 99%
Grand Rapids, MI
Hamlin 146 99% 100% 98%
Webberville, MI
Kensington Meadows 251 94% 67% (6) 77%(2)
Lansing, MI
Kings Court 613 94% 92% (6) 95%(2)
Traverse City, MI
Lincoln Estates 191 98% 97% 100%
Holland, MI
Maple Grove Estates 46 100% 100% 98%
Dorr, MI
Meadow Lake Estates 425 97% 100% 100%
White Lake, MI
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/97 (1) 12/31/95 (1) 12/31/96 (1) 12/31/97(1)
- --------------------- -------------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
Meadowbrook Estates 453 0% 100% 100%
Monroe, MI
Meadowstream Village 159 8% 99% 99%
Sodus, MI
Parkwood 249 6% 97% 98%
Grand Blanc, MI
Presidential 364 6% 98% 92%(2)
Hudsonville, MI
Scio Farms 913 00% 99% 100%
Ann Arbor, MI
Sherman Oaks 366 00% 99% 98%
Jackson, MI
Timberline Estates 296 8% 100% 100%
Grand Rapids, MI
Town & Country 192 8% 100% 99%
Traverse City, MI
White Lake 268 (5) (5) 97%
White Lake, Michigan
White Oak Estates 376 (5) (5) 97%
Mt. Morris, Michigan ------ ---- ---- ----
10,011 97% 98% 97%
Michigan Total ====== ==== ==== ====
INDIANA
Brookside Village 430 99% 99% 84%(2)
Goshen, IN
Carrington Pointe 170 (5) (5) 76%
Ft. Wayne, IN
Clear Water Village 202 93% 97% 94%(2)
South Bend, IN
Cobus Green 386 98% 98% 98%
Elkhart, IN
Holiday Village 326 98% 99% 98%
Elkhart, IN
Liberty Farms 220 100% 92%(2) 100%
Valparaiso, IN
Maplewood 207 97% 99% 97%
Lawrence, IN
Meadows 330 96% 98% 99%
Nappanee, IN
Meadowbrook 444 96% 98% 81%(2)
Indianapolis, IN
Pine Hills 126 99% 96% 94%
Middlebury, IN
Timberbrook 567 84% 88%(2) 97%
Bristol, IN
Valley Mills 356 99% 98% 98%
Indianapolis, IN
West Glen Village 552 99% 99% 99%
Indianapolis, IN
Woods Edge 430 92% 99% 98%
West Lafayette, IN ------ ---- ---- ----
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/97 (1) 12/31/95 (1) 12/31/96 (1) 12/31/97(1)
- --------------------- -------------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
Indiana Total 4,746 96% 97% 94%
===== === === ===
OTHER
Autumn Ridge 400 100% 98% 99%
Ankeny, IA
Boulder Ridge 135 -- -- 18%(6)
Pflugerville, TX
Branch Creek Estates 392 98% 94%(6) 99%
Austin, TX
Candlelight 309 93% 95% 99%
Chicago Heights, IL
Casa del Valle (9) 114 (5) (5) 96%
Alamo, TX
Catalina Community 462 98% 99% 97%
Middletown, OH
Chisholm Point Estates 405 98% 83%(2) 98%
Pflugerville, TX
Douglas 203 89% 95% 96%
Atlanta, GA
Edwardsville 634 90% 93% 90%(2)
Edwardsville, KS
Flagview 198 93% 98% 100%
Atlanta, GA
Paradise 278 99% 98% 100%
Chicago Heights, IL
Pine Ridge 245 100% 98% 99%
Petersburg, VA
Pin Oak Parc 400 99% 99% 96%(2)
O'Fallon, MO
Snow to Sun (9) 176 (5) (5) 98%
Weslaco, TX
Southfork 476 (5) (5) 98%
Belton, MO
Timber Ridge 582 100% 100% 100%
Ft. Collins, CO
Willowbrook (8) 266 (5) (5) 97%
Toledo, OH
Woodside Terrace (8) 439 (5) (5) 98%
Springfield, OH
Worthington Arms 224 99% 100% 99%
Delaware, OH ----- --- --- ---
Other Total 6,338 97% 96% 96%
===== === === ===
SOUTHEAST
FLORIDA
Arbor Terrace (7) 100% 100% 100%
Bradenton, FL
Ariana Village 210 72%(6) 78%(6) 79%
Lakeland, FL
Bonita Lake (7) 100% 100% 100%
Bonita Springs, FL
</TABLE>
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<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/97 (1) 12/31/95 (1) 12/31/96 (1) 12/31/97(1)
- --------------------- -------------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
Breezy Hills (9) 169 100% 99% 94%
Pompano Beach, FL
Chain O'Lakes 308 97% 95% 95%
Grand Island, FL
Elmwood Mobile Home Park 100 (5) (5) 100%
Daytona Beach, FL
Gold Coaster (9) 222 (5) (5) 100%
Florida City, FL
Golden Lakes 426 91% 92% 94%
Plant City, FL
Groves RV Resort (7) (5) (5) 100%
Lee County, FL
Holly Forrest Estates 402 (5) (5) 100%
Holly Hill, FL
Indian Creek (9) 353 100% 100% 100%
Ft. Myers Beach, FL
Island Lakes 301 100% 100% 99%
Merritt Island, FL
Kings Lake 245 62%(6) 66%(6) 76%
Debary, FL
Kings Pointe 229 43%(6) 48%(6) 52%
Winter Haven, FL
Kissimmee Gardens 239 99% 100% 100%
Kissimmee, FL
Lake Juliana 293 54%(6) 57%(6) 59%
Auburndale, FL
Lake San Marino (7) 100% 100% 100%
Naples, FL
Leesburg Landing 96 (4) 54%(6) 50%
Lake County, FL
Meadowbrook Village 257 100% 97% 100%
Tampa, FL
Orange Tree 246 78%(6) 83%(6) 89%
Orange City, FL
Plantation Manor 376 95% 97% 97%
Ft. Pierce, FL
Pleasure Cove 209 95% 95% 94%
Ft. Pierce, FL
Royal Country 864 100% 99% 99%
Miami, FL
Saddle Oak Club 376 98% 100% 99%
Ocala, FL
Siesta Bay (7) 100% 100% 100%
Ft. Myers Beach, FL
Silver Star 426 96% 96% 95%
Orlando, FL
Tallowwood 273 62% 63% 68%
Coconut Creek, FL
Water Oak Country Club
Estates 713 100% 100% 100%
Lady Lake, FL
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/97 (1) 12/31/95 (1) 12/31/96 (1) 12/31/97(1)
- --------------------- -------------------- -------------------- --------------- -----------
<S> <C> <C> <C> <C>
Whispering Palm(9) 324 100% 96% 92%
Sebastian, FL ------ --- -- --
Florida Total 7,657 89% 93% 92%
====== === == ==
TOTAL/AVERAGE 28,752 93% 95% 95%
====== === == ==
</TABLE>
(1) Excludes 5,200 recreational vehicle sites owned at December 31, 1997.
(2) Occupancy in these Properties reflects the recent development of sites
which are in their initial lease-up phase.
(3) This Property is owned by a joint venture in which the Company has a
50% interest.
(4) Acquired in 1996.
(5) Acquired in 1997.
(6) Occupancy in these Properties reflects the fact that these communities
are in their initial lease-up phase.
(7) This Property contains only recreational vehicle sites.
(8) The Company leases this Property. The Company has the option to purchase
the Property upon the expiration of the lease. If the Company does not
exercise its option to purchase, the lessor has the right to cause the
Company to purchase the Property at the expiration of the lease at the
option price.
(9) This Property also contains recreational vehicle sites.
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 Properties. All such proceedings, taken
together, are not expected to have a material adverse impact on the Company's
business or financial condition.
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.
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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 2, 1998, partnership units of the Company were
held by 107 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 2, 1998, the closing sales price of the Common Stock was $34 7/8 and the
Common Stock was held by approximately 1,671 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, 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
FISCAL YEAR ENDED DECEMBER 31, 1997
First Quarter of 1997.............. 33 5/8 31 1/2 .47
Second Quarter of 1997............. 34 3/4 30 1/2 .47
Third Quarter of 1997.............. 37 7/8 33 9/16 .47
Fourth Quarter of 1997............. 36 9/16 33 7/8 .47
</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)
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Income from property....................... $ 93,188 $ 71,312 $ 44,048 $ 30,461 $ 14,222
Income from SHS and BFSC................... 1,518 506 325 432 --
Other income............................... 1,535 1,381 739 1,450 199
---------- --------- -------- -------- --------
Total revenues...................... 96,241 73,199 45,112 32,343 14,421
---------- --------- -------- -------- --------
Expenses:
Property operating and maintenance......... 21,111 15,970 9,838 7,404 3,222
Real estate taxes.......................... 7,481 5,654 2,981 2,167 1,024
General and administrative................. 4,520 3,458 2,535 2,005 893
Depreciation and amortization.............. 20,668 14,887 9,747 6,949 2,611
Interest................................... 14,534 11,277 6,420 4,894 5,280
Predecessor business expenses.............. - - - - 1,315
---------- --------- -------- -------- --------
Total expenses...................... 68,314 51,246 31,521 23,419 14,345
---------- --------- -------- -------- --------
Income before extraordinary item............. 27,927 21,953 13,591 8,924 76
Extraordinary item, early extinguishment
of debt...................................... - (6,896) - - -
---------- --------- -------- -------- --------
Less loss allocated to predecessor business.. - - - - (247)
---------- --------- -------- -------- --------
Net Income................................... 27,927 15,057 13,591 8,924 323
Less distribution to Preferred OP Units...... 2,505 1,670 - - -
---------- --------- -------- -------- --------
Earnings attributable to OP Units............ $ 25,422 $ 13,387 $ 13,591 $ 8,924 $ 323
========== ========= ======== ======== ========
Earnings attributed to:
General partner............................ $ 22,255 $ 11,704 $ 11,661 $ 7,786 $ 288
Limited partners........................... 3,167 1,683 1,930 1,138 35
---------- --------- -------- -------- --------
$ 25,422 $ 13,387 $ 13,591 $ 8,924 $ 323
========== ========= ======== ======== ========
Earnings per OP Unit: $ 1.38 $ .85 $ 1.19 $ 1.05 $ .05
Basic...................................... ========== ========= ======== ======== ========
Diluted.................................... $ 1.37 $ .85 $ 1.19 $ 1.04 $ .05
========== ========= ======== ======== ========
Weighted average OP Units
outstanding................................ 18,444 15,646 11,420 8,535 5,964
========== ========= ======== ======== ========
Distribution per OP Unit (1)................. $ 1.865 $ 1.81 $ 1.335 $ 1.78 $ .077
========== ========= ======== ======== ========
OTHER DATA:
Total properties (at end of period)(3)..... 99 83 54 46 31
Total sites (at end of period)(3).......... 35,936 30,026 18,145 14,318 9,036
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation............................... $ 684,821 $588,813 $326,613 $257,030 $148,668
Total assets............................... $ 693,514 $585,056 $325,104 $267,370 $157,462
Total debt................................. $ 264,264 $185,000 $107,055 $ 62,931 $ 46,413
Partners' capital.......................... $ 411,632 $383,215 $209,475 $195,680 $106,729
</TABLE>
- 12 -
<PAGE> 13
(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.
(3) Includes communities financed by the Company.
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, 1997 to year ended December 31, 1996
For the year ended December 31, 1997, income before extraordinary item
increased by $5.9 million from $22.0 million to $27.9 million, when compared to
the year ended December 31, 1996. The increase was due to increased revenues
of $23.0 million while expenses increased by $17.1 million.
Income from property increased by $21.9 million from $71.3 million to
$93.2 million due primarily to the acquisition of communities comprising
approximately 5,200 developed sites during 1997 and 29 communities comprising
in excess of 11,300 developed sites during 1996.
Income from Home Services and Bingham Financial Services Corporation
("Bingham" or "BFSC") increased by $1.0 million to $1.5 million from $.5
million due to increased sales of homes and the financing operations of the
Company's newly formed affiliate, Bingham.
Property operating and maintenance expenses increased by $5.1 million from
$16.0 million to $21.1 million due primarily to the acquired communities.
Real estate taxes increased by $1.8 million from $5.7 million to $7.5
million due primarily to the acquired communities.
General and administrative expenses increased by $1.0 million from $3.5
million to $4.5 million due primarily to additional staff as a result of the
Company's growth.
Interest expense increased by $3.2 million from $11.3 million to $14.5
million due primarily to $150 million Senior Notes which were issued May 1,
1996. Included in interest is amortization of deferred finance costs of $.2
million in 1997 and 1996.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $15.0 million from $48.1 million to $63.1 million. EBITDA as a
percent of revenues was 65.6% compared to 65.7% in 1996.
Depreciation and amortization expense increased by $5.8 million from $14.9
million to $20.7 million due primarily to the acquisition of communities in
1997 and 1996.
- 13 -
<PAGE> 14
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.
Income from property increased by $27.3 million from $44.0 million to
$71.3 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 $.7 million from $.7 million to $1.4 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.
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 % 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.
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of
and for the years ended December 31, 1997 and 1996. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1996. Site, occupancy, and rent data for those communities is
presented as of the last day of each period presented. The table includes
sites where the Company's interest is in the form of shared appreciation notes
or where the Company is providing financing and managing the properties. Such
amounts relate to 1,873 sites in 1997 and 1,218 sites in 1996 and were formerly
classified in other income.
- 14 -
<PAGE> 15
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
----------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Property revenues, including other $52,241 $48,725 $93,188 $71,312
------- ------- ------- -------
Property operating expenses:
Property operating and maintenance 10,135 9,720 21,111 15,970
Real estate taxes 3,857 3,640 7,481 5,654
------- ------- ------- -------
Property operating expenses 13,992 13,360 28,592 21,624
------- ------- ------- -------
Property EBITDA $38,249 $35,365 $64,596 $49,688
======= ======= ======= =======
Number of properties 54 54 99 83
Developed sites 18,904 18,539 35,936 30,026
Occupied sites 17,954 17,404 33,415 27,949
Occupancy % 95.0% 93.9% 95.0%(1) 94.4%(1)
Weighted average monthly rent per site $ 251 $ 241 $ 255(1) $ 250(1)
Sites available for development 1,423 1,943 3,641(2) 3,268
Sites in development 291 509 904 779
</TABLE>
- --------------------
(1) Occupancy % and weighted average rent relates to manufactured housing
sites, excluding recreational vehicle sites.
(2) Includes 750 sites related to zoned land.
On a same property basis, property revenues increased by $3.5 million from
$48.7 million to $52.2 million, or 7.2 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 550 leased
sites at December 31, 1997 compared to December 31, 1996 and the increase in
weighted average monthly rent per site from $241 in 1996 to $251 in 1997.
Property operating expenses increased by $.6 million from $13.4 million to
$14.0 million, or 4.7 percent, due to increased occupancies and costs and
increases in assessments and millage by local taxing authorities. Property
EBITDA increased by $2.9 million from $35.4 million to $38.3 million, or 8.2
percent.
Sites available for development in the total portfolio increased by 373
from 3,268 to 3,641.
LIQUIDITY SOURCES AND REQUIREMENTS
Cash and cash equivalents decreased by $7.0 million to $2.2 million at
December 31, 1997 compared to $9.2 million at December 31, 1996 primarily
because cash used in investing activities exceeded cash provided by operating
and financing activities.
- 15 -
<PAGE> 16
Net cash provided by operating activities increased by $4.8 million from
$35.4 million to $40.2 million for the year ended December 31, 1997 as compared
to the year ended December 31, 1996. This increase was due primarily to a
$16.4 million increase in income before depreciation and amortization and
extraordinary item offset by a $4.3 million increase in other assets and a $7.4
million decrease in accounts payable and other liabilities.
Net cash used in investing activities increased by $30.8 million from
$76.9 million to $107.7 million for the year ended December 31, 1997 as
compared to the year ended December 31, 1996. This was due to increased
investments in notes and affiliates.
Net cash provided by financing activities increased by $9.8 million from
$50.6 million to $60.5 million for the year ended December 31, 1997 as compared
to the year ended December 31, 1996. This increase was due to an increase in
net borrowings, including deferred financing costs, of $113.9 million offset
by a reduction in capital contributons net of distributions of $104.1 million.
The Company expects to meet its short-term liquidity requirements
generally through its working capital provided by operating activities. 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
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 can also meet these short-term and long-term
requirements by utilizing its $75 million line of credit which bears interest
at LIBOR plus .90% and is due November 1, 1999.
At December 31, 1997, the Company's debt to total market capitalization
approximated 28.8% (assuming conversion of all Preferred OP Units), with a
weighted average maturity of approximately 5.9 years and a weighted average
interest rate of 7.23%.
Capital expenditures for 1997 included recurring capital expenditures of
$4.6 million, including $.4 million for additional space and related costs at
corporate headquarters, and revenue producing capital expenditures of $1.2
million which principally consisted of water metering programs.
Development costs including land acquisitions of $0.2 million aggregated
$17.5 million for the year ended December 31, 1997.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 1995, 1996, and 1997 was 3.03:1, 2.49:1, and 2.40:1,
respectively.
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.
OTHER
The Company does not anticipate the Year 2000 compliance requirements will
have a material impact on earnings. The Company has initiated replacement of
the Company's most significant computer programs with new updates that are
warranted to be Year 2000 compliant. Installation of
- 16 -
<PAGE> 17
these updates is anticipated to be completed prior to December 31, 1998. All
other programs subject to Year 2000 concerns will be evaluated utilizing
internal and external resources to re-program, replace or test each of them. A
formal communication plan with significant third party vendors will be
initiated during 1998 to determine their Year 2000 compliance programs.
Industry analysts consider funds from operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. It is defined as
income before minority interests 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.
The following table presents FFO for each of the quarters during 1997,
1996 and 1995:
<TABLE>
<CAPTION>
QUARTERS ENDED 1997 1996 1995
----------------------- -------- -------- -------
<S> <C> <C> <C>
March 31 $ 11,204 $ 6,201 $ 5,288
June 30 11,178 8,960 5,878
September 30 11,485 9,652 5,998
December 31 12,081 10,282 6,114
-------- -------- -------
$ 45,948 $ 35,095 $23,278
======== ======== =======
Weighted average OP
Units used for basic
FFO per unit: 18,444 15,646 11,420
Dilutive securities:
Stock options 187 87 34
Convertible preferred
OP Units 1,224 883 --
-------- -------- -------
Weighted average OP
Units used for diluted
FFO per unit: 19,855 16,616 11,454
======== ======== =======
</TABLE>
Diluted FFO per unit reflects the potential dilution that would occur if
securities were exercised or converted into OP Units. For purposes of
calculating diluted FFO per OP Unit, $2,505 and $1,670 would be added to FFO in
1997 and 1996, respectively.
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.
- 17 -
<PAGE> 18
PART III
The General Partner is the sole general partner of the Company and,
therefore, the information required by ITEMS 10, 11, 12 AND 13 will be included
in the General Partner's proxy statement for its 1998 Annual Meeting of
Shareholders, and is incorporated herein by reference.
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 filed a report on Form 8-K detailing the twelve (12)
manufactured housing communities which it acquired during the 1997 calendar
year. The date of the report was December 31, 1997. The following financial
statements were filed as exhibits to such report: (i) Historical Summaries of
Gross Income and Direct Operating Expenses for each of Southfork Mobile Home
Park, White Oak Estates, Willowbrook Place and Woodside Terrace; (ii)
Pro-Forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1997 (unaudited); and (iii) Pro-Forma Condensed Consolidated
Balance Sheet as of December 31, 1997 (unaudited).
- 18 -
<PAGE> 19
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGES
Report of Independent Accountants............................. F-2
Financial Statements:
Consolidated Balance Sheet as of December 31, 1997 and 1996.. F-3
Consolidated Statement of Income
for the Years Ended December 31, 1997, 1996 and 1995..... F-4
Consolidated Statement of Partners' Capital for the Years
Ended December 31, 1997, 1996 and 1995................... F-5
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1997, 1996 and 1995............. F-6
Notes to Consolidated Financial Statements................... F-7 - F-13
Schedule III - Real Estate and Accumulated Depreciation....... F-14 - F-17
F-1
<PAGE> 20
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, 1997 and 1996, and the related
consolidated statements of income, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1997. 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, 1997 and 1996 and the
consolidated results of its operations and cash flows for each of the three
years in the period ended December 31, 1997 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.
Coopers & Lybrand L.L.P.
Detroit, Michigan
February 23, 1998
F-2
<PAGE> 21
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
-------- --------
<S> <C> <C>
Investment in rental property, net $634,737 $558,278
Cash and cash equivalents 2,198 9,236
Investment in Sun Home Services, Inc. ("SHS") 11,973 5,103
Investment in Bingham Financial Services, Corp. ("BFSC") 4,586 --
Notes receivable 21,869 4,176
Other assets 18,151 8,263
-------- --------
Total assets $693,514 $585,056
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Line of credit $ 17,000 $ --
Debt 247,264 185,000
Accounts payable and accrued expenses 8,765 7,718
Deposits and other liabilities 8,853 9,123
-------- --------
281,882 201,841
-------- --------
Partners' Capital:
Preferred Operating Partnership Units
("POP Units"), unlimited authorized, 1,325
issued and outstanding in 1997 and 1996 35,783 35,783
Operating Partnership ("OP Units") unlimited
authorized, 18,946 and 17,751 issued and
outstanding in 1997 and 1996, respectively
General partner 329,380 300,932
Limited partners 46,469 46,500
-------- --------
Total partners' capital 411,632 383,215
-------- --------
Total liabilities and partners' capital $693,514 $585,056
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 22
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Income from property ............................$ 93,188 $ 71,312 $ 44,048
Income from SHS and BFSC ........................ 1,518 506 325
Other income, principally interest .............. 1,535 1,381 739
-------- -------- --------
Total revenues ................................. 96,241 73,199 45,112
-------- -------- --------
EXPENSES
Property operating and maintenance .............. 21,111 15,970 9,838
Real estate taxes ............................... 7,481 5,654 2,981
General and administrative ...................... 4,520 3,458 2,535
Depreciation and amortization ................... 20,668 14,887 9,747
Interest ........................................ 14,534 11,277 6,420
-------- -------- --------
Total expenses ................................. 68,314 51,246 31,521
-------- -------- --------
Income before extraordinary item .................... 27,927 21,953 13,591
Extraordinary item, early extinguishment of debt .... -- 6,896 --
-------- -------- --------
Net income .......................................... 27,927 15,057 13,591
Less distribution to Preferred OP Units ............. 2,505 1,670 --
-------- -------- --------
Earnings attributable to OP Units ...................$ 25,422 $ 13,387 $ 13,591
======== ======== ========
Earnings attributed to:
General Partner.................................$ 22,255 $ 11,704 $ 11,661
Limited Partners................................ 3,167 1,683 1,930
-------- -------- --------
$ 25,422 $ 13,387 $ 13,591
======== ======== ========
Basic earnings per OP Unit:
Income before extraordinary item ...............$ 1.38 $ 1.29 $ 1.19
Extraordinary item ............................. -- .44 --
-------- -------- --------
$ 1.38 $ .85 $ 1.19
======== ======== ========
Weighted average OP Units outstanding ............... 18,444 15,646 11,420
======== ======== ========
Diluted earnings per OP Unit:
Income before extraordinary item ...............$ 1.37 $ 1.29 $ 1.19
Extraordinary item ............................. -- .44 --
-------- -------- --------
$ 1.37 $ .85 $ 1.19
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 23
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
POP UNITS GENERAL PARTNER LIMITED PARTNERS
--------- --------------- ----------------
<S> <C> <C> <C>
Balance, January 1, 1995 $ 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 and conversion of limited partnership
interests 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 and conversion of limited partnership
interests 1,303 (1,303)
-------- --------- -------
Balance, December 31, 1996 35,783 300,932 46,500
Issuance of OP Units for rental property 19
Net contributions 36,724
Net income 22,255 3,167
Distributions declared of $1.865 per OP Unit (29,548) (4,200)
Reclassification and conversion of limited partnership
interests (983) 983
-------- --------- -------
Balance, December 31, 1997 $ 35,783 $ 329,380 $46,469
======== ========= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 24
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................. $ 25,422 $ 13,387 $ 13,591
Adjustments to reconcile net income to
cash provided by operating activities:
Extraordinary item, net of prepayment penalties ........... -- 1,390 --
Depreciation and amortization costs ....................... 20,668 14,887 9,747
Deferred financing costs .................................. 235 236 598
Increase in other assets .................................. (6,919) (2,659) (3,474)
Increase in accounts payable and
other liabilities ...................................... 796 8,173 4,521
--------- --------- --------
Net cash provided by operating activities ................. 40,202 35,414 24,983
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in rental properties ............................. (78,552) (78,722) (38,214)
Notes receivable ............................................ (17,693) -- (4,143)
Investment in SHS. .......................................... (6,870) 1,804 1,872
Investment in BFSC .......................................... (4,586) -- --
--------- --------- --------
Net cash used in investing activities ..................... (107,701) (76,918) (40,485)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions ....................................... 36,724 132,975 887
Proceeds from borrowings .................................... 62,000 185,000 41,257
Repayments on borrowings .................................... (189) (241,114) (10,077)
Payments for deferred financing costs ....................... (4,326) (277) (990)
Distributions ............................................... (33,748) (25,965) (19,832)
Retirement of OP Units ...................................... -- -- (1,001)
--------- --------- --------
Net cash provided by financing activities ................. 60,461 50,619 10,244
--------- --------- --------
Net increase (decrease) in cash and cash equivalents ........ (7,038) 9,115 (5,258)
Cash and cash equivalents, beginning of year ................ 9,236 121 5,379
--------- --------- --------
Cash and cash equivalents, end of year ...................... $ 2,198 $ 9,236 $ 121
========= ========= ========
SUPPLEMENTAL INFORMATION
Cash paid for interest including capitalized amounts of $645,
$380 and $192 in 1997, 1996 and 1995, respectively ..... $ 14,742 $ 9,958 $ 5,499
Noncash investing and financing activities:
Issuance of OP and POP Units for rental properties and
other assets ......................................... -- 53,437 15,444
Debt assumed for rental properties and other ............ -- 134,059 12,944
Capitalized lease obligations for rental properties
and other ............................................ 17,453 -- --
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> 25
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. BASIS OF PRESENTATION:
Sun Communities Operating Limited Partnership (the "Company") owns and
operates or finances manufactured housing community properties. 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, 1997 is identical to the accompanying Company balance sheet,
except as follows:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
-------------------------------------------------------
AS PRESENTED
HEREIN SUN COMMUNITIES, INC.
DECEMBER 31, 1997 ADJUSTMENTS DECEMBER 31, 1997
------------------- ---------------- --------------------
<S> <C> <C> <C>
Notes receivable ....................... $ 21,869 $ (2,600) $ 19,269
=================== ================ ================
Total assets ........................... $ 693,514 $ (2,600) $ 690,914
=================== ================ ================
Minority interests ..................... -- $ 82,252 $ 82,252
================
Preferred OP Units ..................... $ 35,783 (35,783)
General partner ........................ 329,380 (329,380)
Limited partners ....................... 46,469 (46,469)
Common stock ........................... 166 $ 166
Additional paid-in capital ............. 364,050 364,050
Distributions in excess of accumulated
earnings ........................... (25,663) (25,663)
Officers' notes ........................ (11,773) (11,773)
------------------- ---------------- ----------------
Partners' capital/Stockholders'
equity ......................... $ 411,632 $ (2,600) $ 326,780
=================== ================ ================
Total liabilities and partners' capital/
stockholders' equity ............... $ 693,514 $ (2,600) $ 690,914
=================== ================ ================
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
A. BUSINESS: The Company and its subsidiaries own and operate or finance 99
manufactured housing communities located in 13 states concentrated
principally in the Midwest and Southeast comprising approximately 36,000
developed sites and approximately 3,600 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> 26
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
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. The limited partnership interests are
adjusted to their relative ownership interest by reclassification
to/from general partnership interests. 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. Had conversion occurred at Sun's December 31, 1997
stock price of $35.94, the 1.325 million POP Units Sun's would have
converted into 1.161 million OP Units.
SHS provides home sales 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.
BFSC provides financing to current and prospective tenants. The
Company owns 25,000 common shares or 2% of BFSC. The Company has
730,000 warrants exercisable at prices ranging from $10 to $14 per
share from 2001 through 2018. The market price of BFSC stock at
December 31, 1997 was $10.
C. RENTAL PROPERTY: Rental property is recorded at the lower
of cost, less accumulated depreciation or fair value. Management
evaluates the recoverability of its investment in rental property
whenever events or changes in circumstances such as recent operating
results, expected net operating cash flow and plans for future
operations indicate that full asset recoverability is questionable.
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 AND 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.
F-8
<PAGE> 27
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, CONTINUED:
H. CASH FLOW HEDGES: The Company periodically enters into hedge
transactions utilizing Treasury securities to lock-in the basic
interest cost of financing acquisitions. The gain or loss on such
hedges is amortized as an adjustment to interest expense over the term
of the related financing.
I. RECLASSIFICATIONS: Certain 1995 and 1996 amounts have been
reclassified to conform with the 1997 financial statement presentation.
Such reclassifications have no effect on operations as originally
presented.
3. ACQUISITIONS:
During 1997, the Company acquired 12 manufactured housing communities
comprising 4,258 developed sites and 425 sites suitable for development.
The cost of acquisitions aggregated $69.8 million excluding $4.5 million of
future payments contingent upon certain events. Consideration consisted of
$51.3 million in cash and $18.5 million in capitalized lease obligations.
During 1996, the Company acquired 29 manufactured housing communities
comprising in excess of 11,350 developed sites and 500 sites suitable for
development for $247.9 million. Consideration consisted of $134.1 million in
the assumption or issuance of debt, $53.4 million in issuance of Common and
Preferred OP Units and $60.4 million of cash.
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 over the
expected lease-up of the community 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 29 manufactured housing communities in
1996 and 12 manufactured housing communities in 1997 had occurred as of
January 1, 1996. 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)
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues.................... $ 103,401 $ 95,126
Operating income............ $ 67,697 $ 61,980
Net income.................. $ 24,762 $ 20,981
Net income per OP Unit...... $ 1.34 $ 1.21
</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> 28
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
4. NOTES RECEIVABLE:
Mortgage notes receivable consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Mortgage notes receivable with minimum
monthly interest payments at 7%,
maturing June 30, 2012, collateralized
by manufactured housing/recreational
vehicle communities located in Dover, DE (a) ............. $ 15,093 $ --
Second mortgage and third shared appreciation
mortgage notes with monthly interest
payments at an average rate of 17%
and excess interest as defined, maturing
May 1, 2001, collateralized by manufactured
housing communities located in Alberta, Canada ........... 4,176 4,176
10 year note to an officer of the general partner
bearing interest at LIBOR + 1.75%, with a
minimum and maximum interest rate of 6% and 9%,
respectively, collateralized by 80,000 shares of Sun's
common stock with personal liability up to $1.3 million .. 2,600 --
----------- -------
$ 21,869 $ 4,176
=========== =======
</TABLE>
(a) The stated interest rate is 12%. The excess of the interest rate
earned at the stated rate over the pay rate is added to the principal balance
and will also accrue interest at the stated rate.
5. RENTAL PROPERTY:
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------
1997 1996
-------- --------
<S> <C> <C>
Land ............................. $ 67,677 $ 58,943
Land improvements and buildings .. 598,699 510,726
Furniture, fixtures, equipment ... 12,676 9,826
Property under development ....... 5,769 9,318
-------- --------
684,821 588,813
Less accumulated depreciation ... (50,084) (30,535)
-------- --------
$634,737 $558,278
======== ========
</TABLE>
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, and clubhouses, maintenance buildings and amenities. Included in
rental property at December 31, 1997 are net carrying amounts related to
capitalized leases of $18.4 million.
F-10
<PAGE> 29
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
6. DEBT:
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1997 1996
--------- ---------
<S> <C> <C>
Collateralized term loan, interest at 7.01%, due
September 9, 2007 ................................... $ 44,889 --
Collateralized term loan, interest at LIBOR plus 1.50%
due November 1, 1997 ................................ -- $ 35,000
Senior notes, interest at 7.375%, due May 1, 2001 ...... 65,000 65,000
Senior notes, interest at 7.625%, due May 1, 2003 ...... 85,000 85,000
Senior notes, interest at 6.97%, due December 3, 2007 .. 35,000 --
Collateralized lease obligations, interest at 6.1%, due
December 1, 2002 .................................... 17,375 --
--------- ---------
$ 247,264 $ 185,000
========= =========
</TABLE>
The Company has a $75 million unsecured line of credit at LIBOR plus .90%
maturing in November, 1999, of which $58 million was available at December 31,
1997. The interest rate at December 31, 1997 was 6.89%.
The term loan is collateralized by 7 communities comprising approximately
3,400 sites. Annual payments under capitalized lease obligations range from
$1.3 million to $1.4 million during their terms. The extraordinary item of
$6.9 million in 1996 results from the early extinguishment of debt and includes
prepayment penalties and related deferred financing costs.
At December 31, 1997, the Company has Treasury Rate Locks for a total notional
amount of $88.7 million and an unrealized loss of $1.5 million for the purpose
of hedging against the potential for increased interest expense on anticipated
future fixed rate financings. At the present time, the Company anticipates
issuing fixed rate securities in 1998 with a maturity of at least five to ten
years. Should medium term interest rates increase, the value of the Treasury
Rate Locks will increase offsetting a portion of the additional interest
expense incurred. Alternatively, should medium term interest rates decrease,
the Company will incur costs which would be offset by lower interest expense.
At December 31, 1997, the maturities of debt during the next five years were
approximately as follows: 1998 - $.8 million; 1999 - $.8 million; 2000 - $.9
million; 2001 $66.0 million; and 2002 - $16.6 million.
F-11
<PAGE> 30
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
7. SUN'S STOCK OPTIONS:
Data pertaining to Sun's stock option plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Options outstanding, January 1 ...... 767,434 301,167 300,000
Options granted ..................... 262,000 482,950 375,430
Option price....................... $27-$34.91 $26.625-$28.637 $21.625-$24.875
Options exercised.................... 61,033 16,683 356,763
Option price....................... $20-$28.64 $20-$23.125 $20-$21.625
Options forfeited ................... 2,501 -- 17,500
Option price ....................... $24.88-$28.64 -- $22.-$23.125
Options outstanding, December 31 .... 965,900(a) 767,434 301,167
Option price ...................... $20-$35.39 $20-$28.637 $20-$24.875
Options exercisable, December 31..... 482,651(a) 392,949 232,833
</TABLE>
(a) There are 337,700 and 300,031 options outstanding and exercisable,
respectively, which range from $20.00 - $27.99. The weighted average
exercise price for these outstanding and exercisable options is $22.78 and
$22.28, respectively. There are 628,200 and 182,620 options outstanding
and exercisable, respectively, which range from $28.00 - $35.99. The
weighted average exercise price for these outstanding and exercisable
options is $30.26 and $28.70, respectively. The weighted average
contractual life of outstanding options is 6.9 years.
Sun's stock option plans provide for up to 1.6 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, 1997,
432,000 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. In addition, the Company established a Long-Term Incentive Plan
for its nonexecutive officer employees permitting a grant of up to 240,000
options which were granted in 1997, and become exercisable in equal
installments in 2002-2004 based on corporate profit performance.
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 Black-Scholes option-pricing model with the following
assumptions for options granted in:
<TABLE>
<CAPTION>
1997 1996
----- ----
<S> <C> <C>
Estimated fair value per share/unit of options granted during year .. $2.82 $1.94
Assumptions:
Annualized dividend yield........................................ 7.1% 6.9%
Common stock/partnership interest price volatility............... 15.6% 15.1%
Risk-free rate of return......................................... 6.7% 6.2%
Expected option term (in years).................................. 7 8
</TABLE>
If compensation cost for stock option grants had been recognized based on the
fair value at the grant date, this would have resulted in net income of $25.0
million and $13.2 million and net income per OP Unit of $1.36 and $.84 in 1997
and 1996, respectively.
F-12
<PAGE> 31
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997, 1996 AND 1995
8. EARNINGS PER OP UNIT:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Earnings used for basic and diluted earnings per
OP Unit computation $ 25,422 $ 13,387 $ 13,591
======== ======== ========
Total units used for basic earnings per OP Unit 18,444 15,646 11,420
Dilutive securities:
Sun's stock options 187 87 34
-------- -------- --------
Total shares used for diluted earnings per
OP Unit computation 18,631 15,733 11,454
======== ======== ========
</TABLE>
Diluted earnings per OP Unit reflect the potential dilution that would occur
if securities were exercised or converted into OP Units. Convertible POP
Units are excluded from the computations as their inclusion would have an
anti-dilutive effect on earnings per OP Unit in 1997 and 1996.
9. 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 SEPT. 30 DEC. 31
---------- -------- -------- -------
<S> <C> <C> <C> <C>
1997
Total revenues ..................... $23,393 $23,233 $24,117 $25,498
Operating income (a) ............... $15,305 $15,188 $15,740 $16,896
Earnings attributable to OP Units .. $ 6,413 $ 6,252 $ 6,365 $ 6,392
Weighted average OP Units .......... 18,005 18,282 18,602 18,885
Earnings per OP Unit ............... $ 0.36 $ 0.34 $ 0.34 $ 0.34
<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
Earnings attributable to OP Units .. $ 3,456 $ 5,230 $ 5,652 $ 5,945
Weighted average OP Units .......... 11,766 16,363 17,018 17,434
Earnings per OP Unit ............... $ 0.29 $ 0.32 $ 0.33 $ 0.34
</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 $6,896 or $.44 per OP Unit.
F-13
<PAGE> 32
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(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 - $ 1,154
Alpine Grand Rapids, MI - 729 6,692 - 517
Arbor Terrace Bradenton, FL - 481 4,410 - 46
Ariana Village Lakeland, FL - 240 2,195 - 222
Autumn Ridge Ankeny, IO - 890 8,054 - 142
Bedford Hills Battle Creek, MI - (1) 1,265 11,562 - 116
Bonita Lake Bonita Springs, FL - 285 2,641 - 37
Boulder Creek Pflugerville, TX - 1,000 500 $ 493 1,564
Branch Creek Austin, TX - 796 3,716 - 3,837
Breezy Hill Pompano Beach, FL - 1,778 16,085 - 53
Brentwood Kentwood, MI - 385 3,592 - 64
Brookside Village Goshen, IN - 260 1,080 386 3,919
Byron Center Byron Center, MI - 257 2,402 - 63
Candlelight Village Chicago Heights, IL - 600 5,623 - 120
Candlewick Court Owosso, MI - 125 1,900 132 769
Carrington Pointe Ft. Wayne, IN - 1,076 3,632 - -
Casa Del Valle Alamo, TX - 246 2,316 - -
Catalina Middletown, OH - 653 5,858 - 207
Chain O'Lakes Grand Island, FL - 551 5,003 - 55
Chisholm Point Pflugerville, TX - 609 5,286 - 1,206
Clearwater Village South Bend, IN - 80 1,270 61 1,119
Cobus Green Elkhart, IN - 762 7,037 - 279
College Park Estates Canton, MI - 75 800 174 4,309
Continental Estates Davison, MI - 1,625 16,581 150 63
Country Acres Cadillac, MI - 380 3,495 - 46
Country Meadows Flat Rock, MI - 924 7,583 296 7,409
Countryside Village Perry, MI - (1) 275 3,920 185 1,411
Creekwood Meadows Burton, MI - 808 2,043 404 1,588
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1997
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- -------------------- ----------------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Allendale Allendale, MI $ 393 $ 4,838 $ 5,231 $ 222 1996
Alpine Grand Rapids, MI 729 7,209 7,938 360 1996
Arbor Terrace Bradenton, FL 481 4,456 4,937 233 1996
Ariana Village Lakeland, FL 240 2,417 2,657 287 1994
Autumn Ridge Ankeny, IO 890 8,196 9,086 415 1996
Bedford Hills Battle Creek, MI 1,265 11,678 12,943 599 1996
Bonita Lake Bonita Springs, FL 285 2,678 2,963 138 1996
Boulder Creek Pflugerville, TX 1,493 2,064 3,557 36 1996
Branch Creek Austin, TX 796 7,553 8,349 339 1995
Breezy Hill Pompano Beach, FL 1,778 16,138 17,916 840 1996
Brentwood Kentwood, MI 385 3,656 4,041 192 1996
Brookside Village Goshen, IN 646 4,999 5,645 547 1985
Byron Center Byron Center, MI 257 2,465 2,722 132 1996
Candlelight Village Chicago Heights, IL 600 5,743 6,343 298 1996
Candlewick Court Owosso, MI 257 2,669 2,926 363 1985
Carrington Pointe Ft. Wayne, IN 1,076 3,632 4,708 64 1997
Casa Del Valle Alamo, TX 246 2,316 2,562 42 1997
Catalina Middletown, OH 653 6,065 6,718 856 1993
Chain O'Lakes Grand Island, FL 551 5,058 5,609 319 1996
Chisholm Point Pflugerville, TX 609 6,492 7,101 460 1995
Clearwater Village South Bend, IN 141 2,389 2,530 253 1986
Cobus Green Elkhart, IN 762 7,316 8,078 999 1993
College Park Estates Canton, MI 249 5,109 5,358 591 1978
Continental Estates Davison, MI 1,775 16,644 18,419 840 1996
Country Acres Cadillac, MI 380 3,541 3,921 183 1996
Country Meadows Flat Rock, MI 1,220 14,992 16,212 1,243 1994
Countryside Village Perry, MI 460 5,331 5,791 664 1987
Creekwood Meadows Burton, MI 1,212 3,631 4,843 52 1996
</TABLE>
F-14
<PAGE> 33
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>
Cutler Estates Grand Rapids, MI - (1) 822 7,604 - 47
Douglas Estates Austell, GA - 508 2,125 - 521
Edwardsville Edwardsville, KS - (1) 425 8,805 541 1,350
Elmwood Holly Hill, FL - 230 2,076 - -
Fisherman's Cove Flint, MI - 380 3,438 - 313
Flagview Village Douglasville, GA - 508 2,125 - 391
Goldcoaster Homestead, FL - 446 4,234 - -
Golden Lakes Plant City, FL - 1,092 7,161 1 393
Grand Grand Rapids, MI - 578 5,396 - 49
Groves Ft. Myers, FL - 249 2,396 - -
Hamlin Webberville, MI - 125 1,675 77 638
Holly Forest Holly Hill, FL - 920 8,376 - -
Holiday Village Elkhart, IN - 100 3,207 143 819
Indian Creek Ft. Myers Beach, FL - 3,832 34,660 - 119
Island Lake Merritt Island, FL - 700 6,431 - 61
Kensington Meadows Lansing, MI - 250 2,699 - 1,612
King's Court Traverse City, MI - 1,473 13,782 - 220
King's Lake Debary, FL - 280 2,542 - 870
King's Pointe Winter Haven, FL - 262 2,359 - 142
Kissimmee Gardens Kissimmee, FL - 594 5,522 - 147
Lake Juliana Auburndale, FL - 335 2,848 - 247
Lake San Marino Naples, FL - 650 5,760 - 41
Leesburg Landing Leesburg, FL - 50 429 - 70
Liberty Farms Valparaiso, IN - 66 1,201 116 1,606
Lincoln Estates Holland, MI - 455 4,201 - 82
Maple Grove Estates Dorr, MI - 15 210 19 222
Maplewood Lawrence, IN - 280 2,122 - 484
Meadow Lake Estates White Lake, MI - 1,188 11,498 127 1,146
Meadowbrook Indianapolis, IN - 927 3,833 350 2,164
Meadowbrook Estates Monroe, MI - 431 3,320 379 5,370
Meadowbrook Village Tampa, FL - 519 4,728 - 130
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1997
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- -------------------- ----------------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Cutler Estates Grand Rapids, MI 822 7,651 8,473 395 1996
Douglas Estates Austell, GA 508 2,646 3,154 331 1988
Edwardsville Edwardsville, KS 966 10,155 11,121 1,342 1987
Elmwood Holly Hill, FL 230 2,076 2,306 35 1997
Fisherman's Cove Flint, MI 380 3,751 4,131 501 1993
Flagview Village Douglasville, GA 508 2,516 3,024 330 1988
Goldcoaster Homestead, FL 446 4,234 4,680 77 1997
Golden Lakes Plant City, FL 1,093 7,554 8,647 1,044 1993
Grand Grand Rapids, MI 578 5,445 6,023 284 1996
Groves Ft. Myers, FL 249 2,396 2,645 96 1997
Hamlin Webberville, MI 202 2,313 2,515 303 1984
Holly Forest Holly Hill, FL 920 8,376 9,296 142 1997
Holiday Village Elkhart, IN 243 4,026 4,269 564 1986
Indian Creek Ft. Myers Beach, FL 3,832 34,779 38,611 1,813 1996
Island Lake Merritt Island, FL 700 6,492 7,192 542 1995
Kensington Meadows Lansing, MI 250 4,311 4,561 270 1995
King's Court Traverse City, MI 1,473 14,002 15,475 712 1996
King's Lake Debary, FL 280 3,412 3,692 355 1994
King's Pointe Winter Haven, FL 262 2,501 2,763 300 1994
Kissimmee Gardens Kissimmee, FL 594 5,669 6,263 821 1993
Lake Juliana Auburndale, FL 335 3,095 3,430 373 1994
Lake San Marino Naples, FL 650 5,801 6,451 303 1996
Leesburg Landing Leesburg, FL 50 499 549 25 1996
Liberty Farms Valparaiso, IN 182 2,807 2,989 341 1985
Lincoln Estates Holland, MI 455 4,283 4,738 221 1996
Maple Grove Estates Dorr, MI 34 432 466 61 1979
Maplewood Lawrence, IN 280 2,606 2,886 351 1989
Meadow Lake Estates White Lake, MI 1,315 12,644 13,959 1,493 1994
Meadowbrook Indianapolis, IN 1,277 5,997 7,274 660 1989
Meadowbrook Estates Monroe, MI 810 8,690 9,500 1,181 1986
Meadowbrook Village Tampa, FL 519 4,858 5,377 654 1994
</TABLE>
F-15
<PAGE> 34
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>
Meadows Nappanee, IN - 300 2,300 -1 1,732
Meadowstream Village Sodus, MI - 100 1,175 109 1,044
Orange Tree Orange City, FL - 283 2,530 15 235
Paradise Chicago Heights, IL - 723 6,638 - 41
Parkwood Grand Blanc, MI - 477 4,279 - 338
Pin Oak Parc St. Louis, MO - 1,038 3,250 44 1,423
Pine Hills Middlebury, IN - 72 544 52 1,348
Pine Ridge Petersburg, VA - 405 2,397 - 889
Plantation Manor Ft. Pierce, FL - 950 8,891 - 68
Pleasure Cove Ft. Pierce, FL - 550 5,005 - -
Presidential Hudsonville, MI - 680 6,314 - 535
Royal Country Miami, FL - (1) 2,290 20,758 - 275
Saddle Oak Club Ocala, FL - 730 6,743 - 196
Scio Farms Ann Arbor, MI - 2,300 22,659 - 2,178
Sherman Oaks Jackson, MI - (1) 200 2,400 240 2,974
Siesta Bay Ft. Myers Beach, FL - 2,051 18,549 - 72
Silver Star Orlando, FL - 1,067 9,685 - 57
Southfork Belton, MO - 1,000 9,011 - -
Snow to Sun Weslaco, TX - 190 2,143 - -
Tallowwood Coconut Creek, FL - 510 5,099 - 437
Timber Ridge Ft. Collins, CO - 990 9,231 - 148
Timberbrook Bristol, IN - (1) 490 3,400 101 4,151
Timberline Estates Grand Rapids, MI - 536 4,867 - 252
Town and Country Traverse City, MI - 406 3,736 - 38
Valley Mills Indianapolis, IN - 150 3,500 - 533
Water Oak Country Club Est. Lady Lake, FL - 2,503 17,478 - 1,364
West Glen Village Indianapolis, IN - 1,100 10,028 - 385
Whispering Palm Sebastian, FL - 975 8,754 - 26
White Lake White Lake, MI - 673 6,179 - -
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1997
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- -------------------- ----------------- --------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Meadows Nappanee, IN 299 4,032 4,331 512 1987
Meadowstream Village Sodus, MI 209 2,219 2,428 319 1984
Orange Tree Orange City, FL 298 2,765 3,063 321 1994
Paradise Chicago Heights, IL 723 6,679 7,402 347 1996
Parkwood Grand Blanc, MI 477 4,617 5,094 619 1993
Pin Oak Parc St. Louis, MO 1,082 4,673 5,755 467 1994
Pine Hills Middlebury, IN 124 1,892 2,016 255 1980
Pine Ridge Petersburg, VA 405 3,286 3,691 441 1986
Plantation Manor Ft. Pierce, FL 950 8,959 9,909 1,073 1994
Pleasure Cove Ft. Pierce, FL 550 5,005 5,555 606 1994
Presidential Hudsonville, MI 680 6,849 7,529 339 1996
Royal Country Miami, FL 2,290 21,033 23,323 2,839 1994
Saddle Oak Club Ocala, FL 730 6,939 7,669 732 1995
Scio Farms Ann Arbor, MI 2,300 24,837 27,137 1,993 1995
Sherman Oaks Jackson, MI 440 5,374 5,814 730 1986
Siesta Bay Ft. Myers Beach, FL 2,051 18,621 20,672 970 1996
Silver Star Orlando, FL 1,067 9,742 10,809 508 1996
Southfork Belton, MO 1,000 9,011 10,011 - 1997
Snow to Sun Weslaco, TX 190 2,143 2,333 40 1997
Tallowwood Coconut Creek, FL 510 5,536 6,046 647 1994
Timber Ridge Ft. Collins, CO 990 9,379 10,369 484 1996
Timberbrook Bristol, IN 591 7,551 8,142 891 1987
Timberline Estates Grand Rapids, MI 536 5,119 5,655 618 1994
Town and Country Traverse City, MI 406 3,774 4,180 195 1996
Valley Mills Indianapolis, IN 150 4,033 4,183 548 1989
Water Oak Country Club Est. Lady Lake, FL 2,503 18,842 21,345 2,606 1993
West Glen Village Indianapolis, IN 1,100 10,413 11,513 1,224 1994
Whispering Palm Sebastian, FL 975 8,780 9,755 456 1996
White Lake White Lake, MI 673 6,179 6,852 104 1997
</TABLE>
F-16
<PAGE> 35
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>
White Oak Mt. Morris, MI - 782 7,245 - -
Willowbrook Toledo, OH - 781 7,054 - -
Woods Edge West Lafayette, IN - 100 2,600 3 1,581
Woodside Terrace Holland, OH - 1,064 9,625 - -
Worthington Arms Delaware, OH - 376 2,624 - 800
Corporate Headquarters Farmington Hills, MI - - - - 1,851
Property Under Development - - 190 - -
---------- ----------- ------- ---------
$ 63,080 $ 542,604 $ 4,597 $ 74,540
========== =========== ======= =========
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31,1997
--------------------------
BUILDING
AND ACCUMULATED DATE OF
PROPERTY NAME LOCATION LAND FIXTURES TOTAL DEPRECIATION ACQUISITION
- -------------------- ----------------- --------- ---------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
White Oak Mt. Morris, MI 782 7,245 8,027 124 1997
Willowbrook Toledo, OH 781 7,054 7,835 - 1997
Woods Edge West Lafayette, IN 103 4,181 4,284 512 1985
Woodside Terrace Holland, OH 1,064 9,625 10,689 162 1997
Worthington Arms Delaware, OH 376 3,424 3,800 467 1990
Corporate Headquarters Farmington Hills, MI - 1,851 1,851 448 Various
Property Under Development - 190 190 - 1997
----------- ----------- ----------- -----------
$ 67,677 $ 617,144 $ 684,821 $ 50,084
=========== =========== =========== ===========
</TABLE>
(1) These communities collateralize $45 million of secured debt.
F-17
<PAGE> 36
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 20, 1998
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.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Milton M. Shiffman
- ----------------------- Chairman of the Board of
Milton M. Shiffman Directors March 20, 1998
/s/ Gary A. Shiffman Chief Executive Officer, President and
- ----------------------- Director March 20, 1998
Gary A. Shiffman
/s/ Jeffrey P. Jorissen Senior Vice President,
- ----------------------- Chief Financial Officer, Treasurer,
Jeffrey P. Jorissen Secretary
and Principal Accounting Officer March 20, 1998
/s/ Paul D. Lapides
- ----------------------- Director March 20, 1998
Paul D. Lapides
/s/ Ted J. Simon
- ----------------------- Director March 20, 1998
Ted J. Simon
/s/ Clunet R. Lewis
- ----------------------- Director March 20, 1998
Clunet R. Lewis
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
Director March , 1998
- ------------------- --
Ronald L. Piasecki
March 20, 1998
/s/ Arthur A. Weiss Director
- -------------------
Arthur A. Weiss
</TABLE>
<PAGE> 38
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 Agreement of Sale pertaining to White Oak Estates (9)
2.3 Agreement of Sale pertaining to Southfork (9)
2.4 Agreement of Sale pertaining to Holly Forest Estates and Elmwood (9)
Mobile Home Park
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)
4.4 First Supplemental Indenture, dated as of August 20, 1997, by and (9)
between the Company and Bankers Trust Company, as Trustee
4.5 Form of Medium-Term Note (Floating Rate) (9)
4.6 Form of Medium-Term Note (Fixed Rate) (9)
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 (5)
General Partner and certain directors#
10.6 Employment Agreement between the Company 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 Senior Unsecured Line of Credit Agreement with Lehman Brothers (9)
Holdings Inc.
10.10 Amended and Restated Loan Agreement between Sun Communities Funding (9)
Limited Partnership and Lehman Brothers Holdings Inc.
10.11 Amended and Restated Loan Agreement among Miami Lakes Venture (9)
Associates, Sun Communities Funding Limited Partnership and Lehman
Brothers Holdings Inc.
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------- ------------
<S> <C> <C>
10.12 Form of Indemnification Agreement between each officer and director (9)
of the General Partner and the General Partner
10.13 Loan Agreement among the Company, Sea Breeze Limited Partnership (9)
and High Point Associates, LP.
10.14 Option Agreement by and between the Company and Sea Breeze Limited (9)
Partnership
10.15 Option Agreement by and between the Company and High Point (9)
Associates, LP
10.16 Purchase Agreement with respect to Mortgage Debt (1)
10.17 Credit Agreement between Fort McMurray Housing Inc. and Sun (3)
Communities Alberta Limited Partnership
10.18 First Amending Agreement to Credit Agreement between Fort McMurray (3)
Housing Inc. and Sun Communities Alberta Limited Partnership
10.19 Demand Note Agreement from the Company to NBD Bank, Canada (3)
10.20 Fee and Commission Agreement between the Company and Fort McMurray (3)
Housing Inc.
10.21 $1,022,538.12 Promissory Note from Gary A. Shiffman to the Company (7)
10.22 $1,022,538.13 Promissory Note from Gary A. Shiffman to the Company (7)
10.23 $6,604,923.75 Promissory Note from Gary A. Shiffman to the Company (7)
10.24 Stock Pledge Agreement between Gary A. Shiffman and the Company for (7)
94,570 shares of Common Stock
10.25 Stock Pledge Agreement between Gary A. Shiffman and the Company for (7)
305,430 shares of Common Stock
10.26 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to the Company (9)
10.27 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to the Company (9)
10.28 Stock Pledge Agreement between Gary A. Shiffman and the Company (9)
with respect to 80,000 shares of Common Stock
10.29 Registration Rights Agreement between Gary A. Shiffman and the (3)
Company
10.30 Registration Rights and Lock Up Agreement among the General Partner (3)
and the partners of Miami Lakes Venture Associates, as amended
10.31 Registration Rights and Lock Up Agreement among the General Partner (3)
and the partners of Scio Farms Estates Limited Partnership
10.32 Registration Rights and Lock Up Agreement among the General Partner (3)
and the partners of Kensington Meadows Associates
10.33 Registration Rights and Lock Up Agreement among the General Partner (8)
and certain affiliates of Aspen Enterprises, Ltd. (Preferred OP
Units)
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------------------------------------------------------------------- ------------
<S> <C> <C>
10.34 Registration Rights and Lock Up Agreement among the General Partner (8)
and certain affiliates of Aspen Enterprises, Ltd. (Common OP Units)
10.35 Registration Rights Agreement among the General Partner and the (8)
partners of S&K Smith Co.
10.36 Employment Agreement between the General Partner and Jeffrey P. (8)
Jorissen#
10.37 Long Term Incentive Plan (9)
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.
(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.
(9) Incorporated by reference to the General Partner's Annual Report on
Form 10-K for the year ended December 31, 1997.
# 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
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
Aspen-Lincoln Investment Limited Partnership, a Michigan limited
partnership
Aspen-Town & Country Investment Limited Partnership, a Michigan limited
partnership
<PAGE> 2
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
SCF Manager, Inc., a Michigan corporation
Sun Communities Nevada Limited Partnership, a Michigan limited partnership
Sun Communities Funding Limited Partnership, a Michigan limited
partnership
SCN Manager, Inc., a Michigan corporation
Sun Communities Funding GP L.L.C., a Michigan limited liability company
Sun Communities Nevada GP LLC, a Michigan limited liability company
Sun Acquiring, Inc., a Kansas corporation
<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 23, 1998 on our audits of the
consolidated financial statements and financial statement schedule of Sun
Communities Operating Limited Partnership as of December 31, 1997 and 1996, and
for the years ended December 31, 1997, 1996 and 1995, which report is included
in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,198
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 684,821
<DEPRECIATION> 50,084
<TOTAL-ASSETS> 693,514
<CURRENT-LIABILITIES> 17,000
<BONDS> 247,264
0
0
<COMMON> 0
<OTHER-SE> 411,632
<TOTAL-LIABILITY-AND-EQUITY> 693,514
<SALES> 0
<TOTAL-REVENUES> 96,241
<CGS> 0
<TOTAL-COSTS> 28,592
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,534
<INCOME-PRETAX> 27,927
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,422
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.37
</TABLE>
