<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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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.
[ ]
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 6, 2000, the aggregate market value of the Registrant's
partnership units held by non-affiliates of the Registrant was approximately
$142,000,000 based on the closing sales price of Sun Communities, Inc. (into
which the partnership units are convertible on a one-for-one basis) on such date
using beneficial ownership of stock rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934 to exclude partnership units owned by directors
and officers of Sun Communities, Inc., some of whom may not be held to be
affiliates upon judicial determination.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement to be filed by Sun
Communities, Inc. for its 1999 Annual Meeting of Shareholders are incorporated
by reference into Part III of this Report.
<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, 1999, the Company owned and operated or financed a portfolio of
111 developed properties located in sixteen states (the "Properties"), including
94 manufactured housing communities, 5 recreational vehicle communities and 12
properties containing both manufactured housing and recreational vehicle sites.
At December 31, 1999, the Properties contained an aggregate of 33,950 developed
manufactured home sites, approximately 7,350 manufactured home sites suitable
for development and approximately 4,650 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 639 people as of December 31, 1999.
STRUCTURE OF THE COMPANY
The operations of the General Partner are carried on through certain
subsidiaries (the "Subsidiaries"), including the Company, 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, 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 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
currently owned by Gary A. Shiffman and Jeffrey P. Jorissen, executive officers
of the General Partner, and the Estate of Milton M. Shiffman, a former executive
officer 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
<PAGE> 3
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 community 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 639 employees, 577 are located on-site as property
managers, support staff, or maintenance personnel.
The Company's community managers are overseen by Brian W. Fannon,
Senior Vice President and Chief Operating Officer of the General Partner, who
has 30 years of property management experience, two Senior Vice Presidents, four
Regional Vice Presidents and fourteen Regional Property Managers. In addition,
the Regional Property Managers are responsible for semi-annual market surveys of
competitive communities, interaction with local manufactured home dealers and
regular property inspections.
Each community 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 community 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.
<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, 25 of the Properties are located in Florida, which has
enacted a law which provides that a majority of tenants in a manufactured
housing community may require that a proposed increase in site rental rates,
reduction in services or utilities or change in the community's rules and
regulations be submitted for formal mediation or arbitration if they believe
that the proposal is unreasonable.
<PAGE> 5
Insurance. Management believes that the Properties are covered by
adequate fire, flood, property and business interruption insurance provided by
reputable companies and with commercially reasonable deductibles and limits. The
Company maintains a blanket policy that covers all of the Properties. The
Company has obtained title insurance insuring fee title to the Properties in an
aggregate amount which the Company believes to be adequate.
ITEM 2. PROPERTIES
General. At December 31, 1999, the Properties consisted of 94
manufactured housing communities, 5 recreational vehicle communities and 12
properties containing both manufactured housing and recreational vehicle sites
located in sixteen states concentrated in the midwestern and southeastern United
States. At December 31, 1999, the Properties contained 33,950 developed
manufactured home sites, approximately 7,350 manufactured home sites suitable
for development and approximately 4,650 recreational vehicle sites. In addition,
at December 31, 1999, the Company owned seven undeveloped properties on which
the Company plans to develop approximately 3,400 manufactured home sites. Most
of the Properties include amenities oriented towards family and retirement
living. Of the 111 Properties, 51 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 94.0% as of December
31, 1999, excluding recreational vehicle sites. Since January 1, 1999, the
Properties have averaged an aggregate annual turnover of homes (where the home
is moved out of the community) of approximately 3.1% 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. The Properties are principally 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. Nevertheless, because the Company believes
that geographic diversification will help insulate the portfolio from regional
economic influences, the Company is also interested in expanding its operations
in the western United States.
<PAGE> 6
The following table sets forth certain information relating to the Properties
owned or financed as of December 31, 1999:
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1)
- --------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
MIDWEST
MICHIGAN
Allendale 352 80%(5) 82% 95%
Allendale, MI
Alpine 381 99% 99% 99%
Grand Rapids, MI
Bedford Hills 339 98% 100% 99%
Battle Creek, MI
Brentwood 195 99% 98% 99%
Kentwood, MI
Byron Center 143 100% 99% 99%
Byron Center, MI
Candlewick Court 211 98% 100% 96%
Owosso, MI
College Park Estates 230 99% 99% 98%
Canton, MI
Continental Estates 385 92% 93% 88%
Davison, MI
Continental North 474 96% 70%(5) 84%
Davison, MI
Country Acres 182 96% 99% 99%
Cadillac, MI
Country Meadows 577 96%(5) 100% 100%
Flat Rock, MI
Countryside Village 360 96% 97% 96%
Perry, MI
Creekwood (2) 336 98% 86%(5) 94%
Burton, MI
Cutler Estates 281 98% 98% 99%
Grand Rapids, MI
Davison East 190 97% 97% 95%
Davison, MI
Fisherman's Cove 162 97% 98% 97%
Flint, MI
Grand 311 99% 96% 98%
Grand Rapids, MI
Hamlin 147 98% 99% 100%
Webberville, MI
Kensington Meadows 289 77%(5) 80% 95%
Lansing, MI
Kings Court 639 95%(5) 98% 100%
Traverse City, MI
Lafayette Place 254 (4) 97% 99%
Metro Detroit, MI
Lincoln Estates 191 100% 99% 98%
Holland, MI
Maple Grove Estates 46 98% 100% 100%
Dorr, MI
Meadow Lake Estates 425 100% 100% 99%
White Lake, MI
Meadowbrook Estates 453 100% 100% 100%
Monroe, MI
Meadowstream Village 159 99% 97% 97%
Sodus, MI
Parkwood 249 98% 99% 94%
Grand Blanc, MI
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1)
- --------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Presidential 364 92%(5) 99% 98%
Hudsonville, MI
Richmond Place (7) 117 (4) 98% 99%
Metro Detroit, MI
Scio Farms 913 100% 100% 100%
Ann Arbor, MI
Sherman Oaks 366 98% 99% 98%
Jackson, MI
St. Clair Place (7) 100 (4) 99% 99%
Metro Detroit, MI
Timberline Estates 296 100% 98% 97%
Grand Rapids, MI
Town & Country 192 99% 99% 99%
Traverse City, MI
White Lake 268 97% 99% 100%
White Lake, MI
White Oak Estates 440 97% 88%(5) 92%
Mt. Morris, MI
Windham Estates 352 (4) 59%(5) 78%(5)
Jackson, MI
Woodhaven Place (7) 220 (4) 100% 99%
Metro Detroit, MI
Village Trails 100 (4) 82% 64%(5)
Howard City, MI
------ ------ ------ ------
Michigan Total 11,689 97% 95% 96%
====== ====== ====== ======
INDIANA
Brookside Village 570 84%(5) 84%(5) 87%(5)
Goshen, IN
Carrington Pointe 320 76% 55%(5) 88%(5)
Ft. Wayne, IN
Clear Water Village 227 94%(5) 96% 98%
South Bend, IN
Cobus Green 386 98% 99% 97%
Elkhart, IN
Deerfield Run 81 (3) (3) 59%(5)
Anderson, IN
Holiday Village 326 98% 99% 98%
Elkhart, IN
Liberty Farms 220 100% 100% 98%
Valparaiso, IN
Maplewood 207 97% 98% 97%
Lawrence, IN
Meadows 330 99% 98% 97%
Nappanee, IN
Pine Hills 128 94% 92% 95%
Middlebury, IN
Timberbrook 567 97% 98% 93%
Bristol, IN
Valleybrook 799 98% 98% 97%
Indianapolis, IN
West Glen Village 552 99% 100% 98%
Indianapolis, IN
Woodlake 225 (4) 93% 97%
Ft. Wayne, IN
Woods Edge 598 98% 84%(5) 91%
West Lafayette, IN
------ ------ ------ ------
Indiana Total 5,536 94% 93% 94%
====== ====== ====== ======
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1)
- --------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
OTHER
Apple Creek 177 (3) (3) 99%
Cincinnati, OH
Autumn Ridge 413 99% 97% 99%
Ankeny, IA
Bell Crossing 134 (3) (3) 81%
Clarksville, TN
Boulder Ridge 362 18%(5) 82%(5) 96%
Pflugerville, TX
Branch Creek Estates 392 99% 99% 100%
Austin, TX
Byrne Hill 236 (3) (3) 97%
Toledo, OH
Candlelight 309 99% 98% 97%
Chicago Heights, IL
Casa del Valle (8) 408 96% 100% 100%
Alamo, TX
Catalina Community 462 97% 98% 94%
Middletown, OH
Chateau Philomath 76 (3) (3) 86%
Philomath, OR
Chisholm Point Estates 412 98% 99% 100%
Pflugerville, TX
Comal (2) 139 (3) (3) 22%(5)
New Braunfels, TX
Edwardsville 634 90%(6) 95% 94%
Edwardsville, KS
High Point (9) 411 97% 96% 95%
Frederica, DE
Kenwood (8) 291 (3) (3) 100%
LaFeria, TX
Oakwood Village 511 (5) 100% 75%(5)
Dayton, Ohio
Orchard Lake 147 (3) (3) 99%
Cincinnati, OH
Paradise Park 277 100% 97% 98%
Chicago Heights, IL
Pine Ridge 245 99% 98% 98%
Petersburg, VA
Pin Oak Parc 502 96%(5) 79%(5) 91%
O'Fallon, MO
Pine Trace 209 (3) (3) 67%(5)
Houston, TX
Sea Air (9) 527 99% 99% 99%
Rehoboth Beach, DE
Snow to Sun (8) 486 98% 99% 99%
Weslaco, TX
Southfork 477 98% 95% 96%
Belton, MO
Sun Villa Estates 324 (4) 100% 100%
Reno, NV
Superstition Falls (2) 251 (4) (4) 0%(5)
Apache Junction, AZ
Timber Ridge 581 100% 99% 99%
Ft. Collins, CO
Westbrook Park (7) 344 (3) (3) 99%
Toledo, OH
Willowbrook (7) 266 97% 98% 100%
Toledo, OH
Woodland Park Estates 399 (4) 100% 99%
Eugene, OR
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1)
- --------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Woodside Terrace (7) 439 98% 99% 98%
Holland, OH
Worthington Arms 224 99% 99% 100%
Delaware, OH
----- ---- ---- ----
Other Total 11,065 96% 96% 91%
====== ===== ===== =====
SOUTHEAST
FLORIDA
Arbor Terrace (8) 430 (6) (6) (6)
Bradenton, FL
Ariana Village 209 79% 82% 83%
Lakeland, FL
Bonita Lake (8) 166 (6) (6) (6)
Bonita Springs, FL
Chain O'Lakes (8) 321 95% 92% 92%
Grand Island, FL
Elmwood Mobile Home Park 100 100% 100% 99%
Daytona Beach, FL
Gold Coaster (8) 545 100% 100% 100%
Florida City, FL
Golden Lakes 426 94% 94% 95%
Plant City, FL
Groves RV Resort (8) 306 (6) (6) (6)
Lee County, FL
Holly Forest Estates 402 100% 100% 100%
Holly Hill, FL
Indian Creek (8) 1,554 100% 100% 100%
Ft. Myers Beach, FL
Island Lakes 301 99% 100% 100%
Merritt Island, FL
Kings Lake 245 76% 82% 91%
Debary, FL
Kings Pointe 227 52% 53% 56%
Winter Haven, FL
Kissimmee Gardens 239 100% 100% 99%
Kissimmee, FL
Lake Juliana 289 59% 63% 69%
Auburndale, FL
Lake San Marino (8) 400 (6) (6) (6)
Naples, FL
Leesburg Landing 96 50% 59% 66%
Lake County, FL
Meadowbrook Village 257 100% 99% 100%
Tampa, FL
Orange Tree 246 89% 92% 96%
Orange City, FL
Royal Country 864 99% 99% 100%
Miami, FL
Saddle Oak Club 376 99% 99% 100%
Ocala, FL
Siesta Bay (8) 859 (6) (6) (6)
Ft. Myers Beach, FL
Silver Star 426 95% 93% 95%
Orlando, FL
Tallowwood 261 68% 71% 76%
Coconut Creek, FL
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY
SITES AS OF AS OF AS OF AS OF
PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1)
- --------------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Water Oak Country Club 772 100% 100% 100%
Estates
Lady Lake, FL
Florida Total 10,317 92% 92% 94%
====== ====== ====== ======
TOTAL/AVERAGE 38,607 95% 94% 94%
====== ====== ====== ======
</TABLE>
(1) Occupancy percentage relates to manufactured housing sites, excluding
recreational vehicle sites.
(2) This Property is owned by a joint venture in which the Company
owns or controls a 50% interest.
(3) Acquired in 1999.
(4) Acquired in 1998.
(5) Occupancy in these Properties reflects the fact that these communities
are in their initial lease-up phase following an expansion or ground up
development.
(6) This Property contains only recreational vehicle sites.
(7) 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.
(8) This Property contains recreational vehicle sites.
(9) This Property is financed and managed by the Company.
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
The Company is involved in various legal proceedings arising in the
ordinary course of business. All such proceedings, taken together, are not
expected to have a material adverse impact on the Company's results of
operations 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.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
There is no established public market for any class of the Company's
equity securities. On March 6, 2000, partnership units of the Company were held
by approximately 115 holders of record.
<PAGE> 11
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
6, 2000, the closing sales price of the Common Stock was $29.00 and the Common
Stock was held by approximately 1,110 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 common partnership unit to its partners during such
periods).
<TABLE>
<CAPTION>
High Low Distribution
---- --- ------------
<S> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1998
First Quarter of 1998.......................................... 36 1/4 33 3/4 .49
Second Quarter of 1998......................................... 35 32 3/8 .49
Third Quarter of 1998.......................................... 34 30 1/2 .49
Fourth Quarter of 1998......................................... 34 13/16 31 1/2 .49
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter of 1999.......................................... 35 3/8 30 1/2 .51
Second Quarter of 1999......................................... 37 31 3/8 .51
Third Quarter of 1999.......................................... 35 15/16 33 1/16 .51
Fourth Quarter of 1999......................................... 33 3/8 29 7/8 .51
</TABLE>
RECENT SALES OF UNREGISTERED SECURITIES
In 1997, the Company issued an aggregate of 38,021 units ("OP
Units") to certain sellers in exchange for property. In 1998, the Company issued
an aggregate of 90,704 OP Units to certain sellers in exchange for property. On
December 15, 1998, pursuant to the terms of the General Partner's 1998 Stock
Purchase Plan, the Company issued an aggregate of 679,025 OP Units to certain
officers, directors and consultants of the General Partner and its subsidiaries
for a purchase price of $31.75 per OP Unit. In 1999, the Company issued an
aggregate 27,606 OP Units to a seller in exchange for property. On September 29,
1999, the Company issued an aggregate of 2,000,000 Series A Cumulative
Redeemable Perpetual Preferred Units to Belcrest Realty Corporation and Belair
Real Estate Corporation for an aggregate of $50 million.
In 1997, the General Partner issued an aggregate of 41,621 shares
of Common Stock upon conversion of an aggregate of 41,621 OP Units. In 1998, the
General Partner issued an aggregate of 312,870 shares of Common Stock upon
conversion of an aggregate of 312,870 OP Units. On June 5, 1998, the General
Partner issued, as compensation, an aggregate of 165,000 shares of Common Stock
to certain of its officers, which shares are restricted by the terms of certain
Restricted Stock Award Agreements. On December 15, 1998, pursuant to the terms
of the General Partner's 1998 Stock Purchase Plan, the General Partner issued an
aggregate of 122,600 shares of Common Stock to certain employees and consultants
of the General Partner and its subsidiaries for a purchase price of $31.75 per
share. In 1999, the General Partner issued an aggregate of 139,706 shares of
Common Stock upon conversion of an aggregate of 139,706 OP Units.
All of the above OP Units and shares of Common Stock were issued
in private placements in reliance on Section 4(2) of the Securities Act of 1933,
as amended, including Regulation D promulgated thereunder. No underwriters were
used in connection with any of such issuances.
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (2)
--------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------
OPERATING DATA: (IN THOUSANDS EXCEPT FOR PER OP UNIT AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Income from property...................... $ 125,424 $ 114,346 $ 93,188 $ 71,312 $ 44,048
Income from affiliate..................... 1,726 2,147 1,154 506 325
Other income.............................. 7,266 3,549 1,788 1,381 739
----------- ----------- ----------- ----------- ----------
Total revenues..................... 134,416 120,042 96,130 73,199 45,112
----------- ----------- ----------- ----------- ----------
Expenses:
Property operating and maintenance........ 27,300 25,647 21,111 15,970 9,838
Real estate taxes......................... 8,888 8,728 7,481 5,654 2,981
Property management....................... 2,638 2,269 1,903 1,246 937
General and administrative................ 3,682 3,339 2,617 2,212 1,598
Depreciation and amortization............. 28,551 24,961 20,668 14,887 9,747
Interest.................................. 26,751 23,699 14,423 11,277 6,420
----------- ----------- ----------- ----------- ----------
Total expenses..................... 97,810 88,643 68,203 51,246 31,521
----------- ----------- ----------- ----------- ----------
Income before other, net and
extraordinary item........................ 36,606 31,399 27,927 21,953 13,591
Other, net................................... 829 655 -- -- --
Extraordinary item, early extinguishment
of debt................................... -- -- -- (6,896) --
----------- ----------- ----------- ----------- ----------
Net income................................... 37,435 32,054 27,927 15,057 13,591
Less distribution to Preferred OP Units...... 3,663 2,505 2,505 1,670 --
----------- ----------- ----------- ----------- ----------
Earnings attributable to OP Units............ $ 33,772 $ 29,549 $ 25,422 $ 13,387 $ 13,591
=========== =========== =========== =========== ==========
Earnings attributed to:
General Partner........................... $ 29,089 $ 26,096 $ 22,255 $ 11,704 $ 11,661
Limited Partners.......................... 4,683 3,453 3,167 1,683 1,930
----------- ----------- ----------- ----------- ----------
$ 33,772 $ 29,549 $ 25,422 $ 13,387 $ 13,591
=========== =========== =========== =========== ==========
Earnings per OP Unit:
Basic..................................... $ 1.69 $ 1.55 $ 1.38 $ .85 $ 1.19
=========== =========== =========== =========== ==========
Diluted................................... $ 1.68 $ 1.53 $ 1.37 $ .85 $ 1.19
=========== =========== =========== =========== ==========
Weighted average OP Units
outstanding - basic....................... 19,961 19,101 18,444 15,646 11,420
=========== =========== =========== =========== ==========
Distribution per OP Unit (1)................. $ 2.02 $ 1.94 $ 1.865 $ 1.81 $ 1.335
=========== =========== =========== =========== ==========
OTHER DATA:
Total properties (at end of period).......... 111 104 99 83 54
Total sites (at end of period)............... 38,607 37,566 35,936 30,026 18,145
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation.............................. $ 866,191 $ 803,152 $ 684,821 $ 588,813 $ 326,613
Total assets................................. $ 913,683 $ 824,039 $ 693,514 $ 585,056 $ 325,104
Total debt................................... $ 405,473 $ 365,164 $ 264,264 $ 185,000 $ 107,055
Partners' capital............................ $ 481,292 $ 434,187 $ 411,632 $ 383,215 $ 209,475
</TABLE>
(1) The distribution of $.445 per OP Unit for the fourth quarter of 1995 was
declared and paid in January 1996, and accordingly is not included in the
$1.335.
(2) See the Consolidated Financial Statements of the Company included elsewhere
herein.
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & 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, 1999 to year ended December 31, 1998
For the year ended December 31, 1999, income before other, net
increased by $5.2 million from $31.4 million to $36.6 million, when compared to
the year ended December 31, 1998. The increase was due to increased revenues of
$14.4 million while expenses increased by $9.2 million.
Income from property increased by $11.1 million from $114.3 million to
$125.4 million, or 9.7 percent, due to acquisitions ($4.0 million), rent
increases ($4.1 million), lease up of manufactured home sites ($1.7 million) and
other community revenues ($1.3 million).
Income from affiliate decreased $0.5 million from $2.2 million to $1.7
million due to the Company no longer providing floorplan financing of the model
home inventories of Sun Home Services, Inc. ("SHS").
Other income increased by $3.7 million from $3.6 million to $7.3
million due primarily to a $2.7 million increase in interest income and fees of
$0.6 million from development services.
Property operating and maintenance expenses increased by $1.7 million
from $25.6 million to $27.3 million, or 6.4 percent, due primarily to
acquisitions ($1.0 million).
Real estate taxes increased by $0.2 million from $8.7 million to $8.9
million, or 1.8 percent, due primarily to the acquired communities.
Property management expenses increased by $0.3 million from $2.3
million to $2.6 million, or 16.3 percent, representing 2.1 percent and 2.0
percent of income from property in 1999 and 1998, respectively.
General and administrative expenses increased by $0.4 million from $3.3
million to $3.7 million, or 10.3 percent, due primarily to increased staffing to
manage the growth of the Company. General and administrative expenses as a
percentage of income from property remained constant at 2.9 percent in both
periods.
Interest expense increased by $3.1 million from $23.7 million to $26.8
million due primarily to investments in rental property and notes receivable.
Included in interest is amortization of deferred finance costs of $0.9 million
and $0.7 million in 1999 and 1998, respectively.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased by $11.8 million from $80.1 million to $91.9 million.
EBITDA as a percent of revenues increased to 68.4 percent compared to 66.7
percent in 1998.
Depreciation and amortization expense increased by $3.6 million from
$25.0 million to $28.6 million due primarily to the acquisition and development
of communities in 1999 and 1998.
-13-
<PAGE> 14
Comparison of year ended December 31, 1998 to year ended December 31, 1997
For the year ended December 31, 1998, income before other, net
increased by $3.5 million from $27.9 million to $31.4 million, when compared to
the year ended December 31, 1997. The increase was due to increased revenues of
$23.9 million while expenses increased by $20.4 million.
Income from property increased by $21.1 million from $93.2 million to
$114.3 million due primarily to the acquisition of 10 communities comprising
approximately 2,100 developed sites during 1998 and 14 communities comprising
approximately 5,200 developed sites during 1997.
Income from affiliate increased $1.0 million from $1.2 million to $2.2
million due primarily to increased sales of homes by SHS.
Other income increased by $1.8 million from $1.8 million to $3.6
million primarily due to a $1.1 million increase in interest income.
Property operating and maintenance expenses increased by $4.5 million
from $21.1 million to $25.6 million, or 21.5 percent, due primarily to the
acquired communities.
Real estate taxes increased by $1.2 million from $7.5 million to $8.7
million, or 16.7 percent, due primarily to the acquired communities.
Property management expenses increased by $0.4 million from $1.9
million to $2.3 million, or 19.2 percent, representing 2.0 percent of income
from property in 1998 and 1997.
General and administrative expenses increased by $0.7 million from
$2.6 million to $3.3 million, or 27.6 percent, due primarily to additional staff
and facilities as a result of the Company's growth.
Interest expense increased by $9.3 million from $14.4 million to $23.7
million due primarily to investments in rental property. Included in interest is
amortization of deferred finance costs of $0.7 million and $0.2 million in 1998
and 1997, respectively.
EBITDA increased by $17.1 million from $63.0 million to $80.1 million.
EBITDA as a percent of revenues was 66.7 percent compared to 65.6 percent in
1997.
Depreciation and amortization expense increased by $4.3 million from
$20.7 million to $25.0 million due primarily to the acquisition of communities
in 1998 and 1997.
-14-
<PAGE> 15
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of
and for the years ended December 31, 1999 and 1998. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1998, and December 31, 1999. 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 is providing financing and managing the
properties. Such amounts relate to the total portfolio data and include 938
sites in 1999 and 924 sites in 1998.
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
-------------------------- ------------------------------
1999 1998 1999 1998
--------- --------- ---------- ---------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Income from property $ 87,093 $ 81,911 $ 125,424 $ 114,346
--------- --------- ---------- ---------
Property operating expenses:
Property operating and maintenance 15,929 15,441 27,300 25,647
Real estate taxes 6,831 6,932 8,888 8,728
--------- --------- ---------- ---------
Property operating expenses 22,760 22,373 36,188 34,375
--------- --------- ---------- ---------
Property EBITDA $ 64,333 $ 59,538 $ 89,236 $ 79,971
========= ========= ========== =========
Number of properties 77 77 111 (2) 104
Developed sites 27,118 26,950 38,607 (2) 37,566
Occupied sites 25,925 25,379 35,565 34,644
Occupancy % 95.6%(1) 94.2%(1) 94.0%(1) 94.3%(1)
Weighted average monthly rent per site $ 278 (1) $ 266 (1) $ 277 (1) $ 267 (1)
Sites available for development 1,262 1,369 7,348 (3) 6,924 (3)
Sites planned for development in next year 131 164 1,677 (3) 2,019
</TABLE>
(1)Occupancy % and weighted average rent relates to manufactured housing
sites, excluding recreational vehicle sites.
(2)Includes two communities and 390 developed sites owned through a joint
venture.
(3)Includes 1,138 and 717 sites available for development in 1999 and 1998,
respectively, and 322 sites planned for development owned through a
joint venture.
On a same property basis, property revenues increased by $5.2 million
from $81.9 million to $87.1 million, or 6.3 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 546 leased
sites at December 31, 1999 compared to December 31, 1998.
Property operating expenses increased by $0.4 million from $22.4 million
to $22.8 million, or 1.7 percent, due to increased occupancies and costs.
Property EBITDA increased by $4.8 million from $59.5 million to $64.3 million,
or 8.1 percent.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1.7 million to $11.4 million at
December 31, 1999 compared to $9.7 million at December 31, 1998 because cash
provided by operating and financing activities exceeded cash used in investing
activities.
-15-
<PAGE> 16
Net cash provided by operating activities increased by $8.2 million to
$61.4 million for the year ended December 31, 1999 compared to $53.2 million for
the year ended December 31, 1998. This increase was primarily due to income
before depreciation and amortization and other, net increasing by $6.7 million
and other assets decreasing by $6.4 million, offset by accounts payable and
other liabilities decreasing by $5.0 million.
Net cash used in investing activities decreased by $16.1 million to
$90.4 million from $106.5 million due to a $29.2 million decrease in rental
property acquisition activities and an increase of $15.9 in proceeds related to
asset sales, offset by an increase of $29.1 million used to finance notes
receivable.
Net cash provided by financing activities decreased by $30.0 million to
$30.7 million for the year ended December 31, 1999 as compared to $60.7 million
for the year ended December 31, 1998. This decrease was primarily because $65.0
million of notes payable were issued in 1998 and none issued in 1999 and
distributions increasing by $3.5 million offset by $26.0 million of additional
capital contributions and increased borrowings on the line of credit of $12.0
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 accordance with REIT requirements
in both the short and long-term. The Company may also meet these short-term and
long-term requirements by utilizing its $125 million line of credit which bears
interest at LIBOR plus 1.0 percent and is due January 1, 2003. See "Special Note
Regarding Forward-Looking Statements."
On September 29, 1999, the Company completed a private placement of 2
million Series A Perpetual Preferred Units to institutional investors in
exchange for a capital contribution of $50 million. Series A Perpetual Preferred
Units, which may be called by the Company at par on or after September 29, 2004,
have no stated maturity or mandatory redemption and pay a cumulative, quarterly
dividend at an annualized rate of 8.875 percent. The Series A Perpetual
Preferred Units are convertible into preferred stock under certain
circumstances. The Company used the proceeds from such private placement to
reduce outstanding indebtedness under its revolving credit facility.
At December 31, 1999, the Company's debt to total market capitalization
approximated 34.7 percent (assuming conversion of all Common and Preferred OP
Units to shares of common stock), with a weighted average maturity of
approximately 5.3 years and a weighted average interest rate of 7.12 percent.
Capital expenditures for 1999 included recurring capital expenditures of
$5.9 million including $0.4 million for additional space and related costs at
corporate headquarters and revenue producing capital expenditures of $1.1
million which principally consisted of water metering programs.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 1999, 1998, and 1997 was 1.96:1, 2.04:1, 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.
-16-
<PAGE> 17
SAFE HARBOR STATEMENT
This Form 10-K contains various "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions identify
forward-looking statements. These forward-looking statements reflect the
Company's current views with respect to future events and financial performance,
but are based upon current assumptions regarding the Company's operations,
future results and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment which may cause
the actual results of the Company to be materially different from any future
results expressed or implied by such forward-looking statements. Please see the
section entitled "Risk Factors" of the General Partner's Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on February 15,
2000 for a list of uncertainties and factors.
Such factors include, but are not limited to, the following: (i) changes
in the general economic climate; (ii) increased competition in the geographic
areas in which the Company owns and operates manufactured housing communities;
(iii) changes in government laws and regulations affecting manufactured housing
communities; and (iv) the ability of the Company to continue to identify,
negotiate and acquire manufactured housing communities and/or vacant land which
may be developed into manufactured housing communities on terms favorable to the
Company. The Company undertakes no obligation to publicly update or revise any
forward-looking statements whether as a result of new information, future
events, or otherwise.
YEAR 2000 UPDATE
The Year 2000 ("Y2K") issue concerns the inability of computerized information
systems to accurately calculate, store and process data using a date after 1999.
The Company's Y2K compliance program consisted of three phases, (i)
inventory and assessment, (ii) upgrade, replacement and testing, and (iii)
assurance from material third-party service providers and vendors, all of which
were successfully completed prior to December 31, 1999. In February 2000, the
Company officially concluded its Y2K compliance program as no events had
occurred that significantly affected either the Company's operations or its
financial statements.
The Company believes that its expenditures for assessing Y2K issues,
though difficult to quantify, have not been material as the Company's Y2K
evaluation has been conducted primarily by its own personnel or by its vendors
in connection with their servicing agreements.
-17-
<PAGE> 18
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. This statement will be adopted
effective January 1, 2001. The Company has no derivative instruments at December
31, 1999 so there is no effect from the application of SFAS 133 on the earnings
and financial position of the Company.
OTHER
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 1999, 1998
and 1997:
<TABLE>
<CAPTION>
Quarters Ended 1999 1998 1997
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
March 31 $ 15,134 $ 13,271 $ 11,204
June 30 15,176 13,366 11,178
September 30 15,317 13,473 11,485
December 31 15,626 13,577 12,081
---------- ---------- ----------
$ 61,253 $ 53,687 $ 45,948
========== ========== ==========
<CAPTION>
For the year ended December 31, 1999 1998 1997
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average
OP Units used for basic FFO per share 19,961 19,101 18,444
Dilutive securities:
Stock options and other 152 176 187
Convertible Preferred OP Units 1,245 1,210 1,224
---------- ---------- ----------
Weighted average OP
Units used for diluted FFO per share 21,358 20,487 19,855
========== ========== ==========
</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 would be added to FFO in 1999, 1998
and 1997, respectively.
-18-
<PAGE> 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's principle market risk exposure is interest rate risk. The
Company's exposure to market risk for changes in interest rates relates
primarily to refinancing long-term fixed rate obligations, the opportunity cost
of fixed rate obligations in a falling interest rate environment and its
variable rate line of credit. The Company primarily enters into debt obligations
to support general corporate purposes including acquisitions, capital
improvements and working capital needs.
The table below presents principal, interest and related weighted average
interest rates by year of maturity (in thousands):
<TABLE>
<CAPTION>
Cash Flows
----------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
--------- --------- --------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt (all fixed rate except line
of credit)
Unsecured debt
Principal $ -- $ 65,000 $ -- $ 85,000 $ -- $100,000 $ 250,000 $ 250,000
Interest $ 18,115 $ 14,919 $ 13,321 $ 9,000 $ 6,840 $ 52,784 $ 114,980
Average interest rate 7.25% 7.22% 7.20% 7.01% 6.84% 6.80% 6.98%
Mortgage notes
Principal amortization $ 1,473 $ 1,471 $ 1,212 $ 1,098 $ 2,301 $ 64,207 $ 71,853 $ 71,853
Interest $ 5,184 $ 5,112 $ 5,034 $ 4,954 $ 4,879 $ 17,683 $ 42,846
Average interest rate 7.25% 7.29% 7.29% 7.29% 7.30% 7.18% 7.24%
Capitalized lease obligations
Principal $ 611 $ 9,965 $ 16,176 $ 263 9,606 -- $ 36,620 $ 36,620
Interest $ 2,173 $ 1,694 $ 1,465 $ 537 44 -- $ 5,913
Average interest rate 5.98% 5.88% 5.85% 5.51% 5.51% -- 5.87%
Line of Credit
Principal $ 47,000 $ 47,000 $ 47,000
Interest $ 3,349 $ 3,349
Average interest rate 7.13% 7.13%
</TABLE>
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.
-19-
<PAGE> 20
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 2000 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
On October 15, 1999, the General Partner filed a Form 8-K.
This Form 8-K, dated October 14, 1999, reported the Company's issuance of an
aggregate of 2,000,000 Series A Cumulative Redeemable Perpetual Preferred Units
to Belcrest Realty Corporation and Belair Real Estate Corporation for $50
million in the aggregate.
<PAGE> 21
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
<S> <C>
Report of Independent Accountants.............................................................................F-2
Financial Statements:
Consolidated Balance Sheet as of December 31, 1999 and 1998................................................F-3
Consolidated Statement of Income
for the Years Ended December 31, 1999, 1998 and 1997................................................F-4
Consolidated Statement of Partners' Capital for the Years
Ended December 31, 1999, 1998 and 1997..............................................................F-5
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1999, 1998 and 1997........................................................F-6
Notes to Consolidated Financial Statements..........................................................F-7 - F-13
Schedule III - Real Estate and Accumulated Depreciation...............................................F-14 - F-18
</TABLE>
F-1
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Communities
Operating Limited Partnership:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, partners' capital and of cash flows present
fairly, in all material respects, the financial position of Sun Communities
Operating Limited Partnership (the "Company") at December 31, 1999 and December
31, 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule listed in the index appearing
under Item 14(a)(2) presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Detroit, Michigan
February 11, 2000
F-2
<PAGE> 23
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Investment in rental property, net $ 773,633 $ 732,212
Cash and cash equivalents 11,355 9,646
Notes and other receivables 96,692 49,966
Other assets 32,003 32,215
------------ -----------
Total assets $ 913,683 $ 824,039
============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Line of credit $ 47,000 $ 26,000
Debt 358,473 339,164
Accounts payable and accrued expenses 18,258 12,637
Deposits and other liabilities 8,660 12,051
------------ -----------
Total liabilities 432,391 389,852
------------ -----------
Partners' Capital:
Preferred Operating Partnership Units,
unlimited authorized, 3,325 and 1,325 issued
and outstanding in 1999 and 1998, respectively 85,783 35,783
Operating Partnership ("OP Units") unlimited authorized, 20,163 and 20,072
issued and outstanding in 1999 and 1998, respectively
General partner 346,417 348,266
Limited partners 54,551 55,440
Unearned Compensation (5,459) (5,302)
------------ -----------
Total partners' capital 481,292 434,187
------------ -----------
Total liabilities and partners' capital $ 913,683 $ 824,039
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 24
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- ----------
<S> <C> <C> <C>
REVENUES
Income from property................................................................$ 125,424 $ 114,346 $ 93,188
Income from affiliates.............................................................. 1,726 2,147 1,154
Other income........................................................................ 7,266 3,549 1,788
----------- --------- ----------
Total revenues................................................................... 134,416 120,042 96,130
----------- ---------- ----------
EXPENSES
Property operating and maintenance.................................................. 27,300 25,647 21,111
Real estate taxes................................................................... 8,888 8,728 7,481
Property management................................................................. 2,638 2,269 1,903
General and administrative.......................................................... 3,682 3,339 2,617
Depreciation and amortization....................................................... 28,551 24,961 20,668
Interest............................................................................ 26,751 23,699 14,423
----------- ---------- ----------
Total expenses................................................................... 97,810 88,643 68,203
----------- ---------- ----------
Income before other, net................................................................ 36,606 31,399 27,927
Other, net.............................................................................. 829 655 --
----------- ---------- ----------
Net income.............................................................................. 37,435 32,054 27,927
Less distribution to Preferred OP Units................................................. 3,663 2,505 2,505
----------- ---------- ----------
Earnings attributable to OP Units.......................................................$ 33,772 $ 29,549 $ 25,422
=========== ========== ==========
Earnings attributed to:
General Partner..................................................................$ 29,089 $ 26,096 $ 22,255
Limited Partners................................................................. 4,683 3,453 3,167
----------- ---------- ----------
$ 33,772 $ 29,549 $ 25,422
=========== ========== ==========
Earnings per OP Unit:
Basic............................................................................$ 1.69 $ 1.55 $ 1.38
=========== ========== ==========
Diluted..........................................................................$ 1.68 $ 1.53 $ 1.37
=========== ========== ==========
Weighted average OP Units outstanding - basic........................................... 19,961 19,101 18,444
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 25
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)
<TABLE>
<CAPTION>
UNEARNED
GENERAL PARTNER LIMITED PARTNERS COMPENSATION
--------------- ---------------- ------------
<S> <C> <C>
Balance, January 1, 1997.......................................$ 300,932 $ 46,500
Issuance of OP Units .......................................... 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..................................... 329,380 46,469
Issuance of OP Units........................................... 23,808
Net contributions.............................................. 11,587
Net income..................................................... 26,096 3,453
Distributions declared of $1.94 per OP Unit.................... (32,777) (4,310)
Reclassification and conversion of limited partnership
interests.................................................. 13,980 (13,980)
Issuance of General Partner's restricted common
stock awards, net.......................................... $ (5,302)
-------------- ----------- ---------------
Balance, December 31, 1998..................................... 348,266 55,440 (5,302)
Issuance of OP Units........................................... 2,358
Net contributions.............................................. 1,754
Net income..................................................... 29,089 4,683
Distributions declared of $2.02 per OP Unit.................... (35,009) (5,613)
Reclassification and conversion of limited partnership
interests.................................................. 2,317 (2,317)
Issuance of General Partner's restricted common
stock awards, net.......................................... (157)
-------------- ----------- ---------------
Balance, December 31, 1999.....................................$ 346,417 $ 54,551 $ (5,459)
============== =========== ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 26
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................................$ 33,772 $ 29,549 $ 25,422
Adjustments to reconcile net income to
cash provided by operating activities:
Other, net.................................................................... (1,781) (655) --
Depreciation and amortization costs........................................... 28,551 24,961 20,668
Amortization of deferred financing costs...................................... 865 681 235
Increase in other assets...................................................... (2,001) (8,363) (14,054)
Increase in accounts payable and other liabilities............................ 2,080 7,070 796
----------- ----------- ---------
Net cash provided by operating activities..................................... 61,486 53,243 33,067
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in rental properties................................................... (76,062) (105,268) (78,552)
Proceeds related to asset sales................................................... 36,720 20,773 --
Investment in notes receivable, net............................................... (51,126) (22,044) (22,014)
----------- ----------- ---------
Net cash used in investing activities......................................... (90,468) (106,539) (100,566)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions............................................................. 53,608 27,560 36,724
Borrowings on line of credit, net................................................. 21,000 9,000 17,000
Proceeds from notes payable and other debt........................................ -- 65,000 45,000
Repayments on notes payable and other debt........................................ (1,741) (935) (189)
Payments for deferred financing costs............................................. (1,554) (2,794) (4,326)
Distributions..................................................................... (40,622) (37,087) (33,748)
----------- ----------- ---------
Net cash provided by financing activities..................................... 30,691 60,744 60,461
----------- ----------- ---------
Net increase (decrease) in cash and cash equivalents.............................. 1,709 7,448 (7,038)
Cash and cash equivalents, beginning of year...................................... 9,646 2,198 9,236
----------- ----------- ---------
Cash and cash equivalents, end of year............................................$ 11,355 $ 9,646 $ 2,198
=========== =========== =========
SUPPLEMENTAL INFORMATION
Cash paid for interest including capitalized amounts of $2,322,
$1,333 and $756 in 1999, 1998 and 1997, respectively.......................$ 28,422 $ 23,517 $ 14,742
Noncash investing and financing activities:
Debt assumed for rental properties and other.................................. 10,445 18,356 --
Capitalized lease obligations for rental properties and other ................ 10,605 9,479 17,453
Property acquired through the exchange of similar property.................... 7,700 -- --
Restricted common stock issued as unearned
compensation by the general partner........................................ 720 5,631 --
Property acquired in satisfaction of note receivable.......................... 4,400 -- --
Issuance of partnership units for rental properties and other................. -- 2,204 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 27
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
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, 1999 is identical to the accompanying Company balance
sheet, except as follows:
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
AS PRESENTED
HEREIN SUN COMMUNITIES, INC.
DECEMBER 31, 1999 ADJUSTMENTS DECEMBER 31, 1999
----------------- ----------- -----------------------
<S> <C> <C> <C>
Notes and other receivables.................. $ 96,692 $ (2,600) $ 94,092
=========== ============= ===========
Total assets................................. $ 913,683 $ (2,600) $ 911,083
=========== ============= ===========
Minority interests........................... -- $ 140,334 $ 140,334
===========
Preferred OP Units........................... $ 85,783 (85,783)
General partner.............................. 346,417 (346,417)
Limited partners............................. 54,551 (54,551)
Common stock................................. 174 $ 174
Additional paid-in capital................... 393,360 393,360
Unearned compensation........................ (5,459) -- ( 5,459)
Distributions in excess of accumulated
earnings................................ (38,265) (38,265)
Officers' notes.............................. (11,452) (11,452)
----------- ------------- -----------
Partners' capital/Stockholders'
equity............................. $ 481,292 $ (2,600) $ 338,358
=========== ============= ===========
Total liabilities and partners' capital/
Stockholders' equity.................... $ 913,683 $ (2,600) $ 911,083
=========== ============= ===========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
A. BUSINESS: The Company and its subsidiaries own and operate or finance
111 manufactured housing communities located in 16 states concentrated
principally in the Midwest and Southeast comprising approximately
38,600 developed sites and approximately 7,350 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> 28
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
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.
Included in Preferred Operating Partnership Units at December 31, 1999
are 2 million Series A Perpetual Preferred OP Units ("PPOP Units")
issued at $25 per unit in September 1999 bearing an annual coupon rate
of 8.875 percent. The PPOP Units may be called by the Company at par on
or after September 29, 2004, have no stated maturity or mandatory
redemption and are convertible into Sun's preferred stock under certain
circumstances.
Also included in Preferred Operating Partnership Units are 1.3 million
Preferred OP Units ("POP Units") issued at $27 per unit bearing an
annual cumulative 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, 1999 stock price of $32.188, the 1.325 million POP Units
would have converted into 1.297 million OP Units.
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.
Construction costs related to new community or expansion sites
development including interest are capitalized until the property is
open for occupancy.
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. INVESTMENTS IN AND ADVANCES TO AFFILIATES: Sun Home Services ("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. Included in
other assets at December 31, 1999 and 1998 is $6.4 million and $11.3
million, respectively, related to the Company's investment in SHS.
On December 31, 1999 "SunChamp", a 50 percent controlled joint venture
of the Company and Champion Enterprises, Inc., acquired three
communities under initial development. The Company intends to account
for the investment utilizing the equity method of accounting.
F-8
<PAGE> 29
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, CONTINUED:
F. REVENUE RECOGNITION: Rental income attributable to leases is recorded
on a straight-line basis when earned from tenants. Leases entered into
by tenants generally range from month-to-month to one year and are
renewable by mutual agreement of the Company and resident or, in some
cases, as provided by statute.
G. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of financial
instruments which includes cash and cash investments, mortgages and
notes receivable and debt approximates fair value.
H. TAXES: As a partnership, the Company does not pay federal or state
income taxes.
I. CASH FLOW HEDGES: The Company periodically enters into hedge
transactions to lock-in the basic interest cost of financing
acquisitions. The gain or loss on such hedges is amortized as an
adjustment to interest expense over the term of the related financing.
J. RECLASSIFICATIONS: Certain 1998 and 1997 amounts have been reclassified
to conform with the 1999 financial statement presentation. Such
reclassifications have no effect on operations as originally presented.
3. RENTAL PROPERTY (AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------------
1999 1998
---------- ------------
<S> <C> <C>
Land....................................................................................$ 76,745 $ 71,930
Land improvements and buildings......................................................... 724,574 679,755
Furniture, fixtures, equipment ......................................................... 16,943 15,209
Land held for future development........................................................ 22,943 9,747
Property under development.............................................................. 24,986 26,511
---------- -----------
866,191 803,152
Less accumulated depreciation...................................................... (92,558) (70,940)
---------- -----------
$ 773,633 $ 732,212
========== ===========
</TABLE>
Land improvements and buildings consist primarily of infrastructure, roads,
landscaping, and clubhouses, maintenance buildings and amenities. Included
in rental property at December 31, 1999 and 1998 are net carrying amounts
related to capitalized leases of $40.8 million and $29.8 million,
respectively.
During 1999, the Company acquired nine manufactured housing communities
comprising 1,624 developed sites and 534 sites suitable for development for
$37.1 million and five development communities comprising 2,046 sites, some
of which are partially developed, for $13.1 million. During 1998, the
Company acquired ten communities comprising 2,100 developed sites and 1,000
sites suitable for development for $65.5 million and eight development
communities comprising 3,650 sites for $20.1 million. 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 a prior year acquisition, the
Company is obligated to issue $10.2 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.
F-9
<PAGE> 30
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
4. NOTES AND OTHER RECEIVABLES (AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------------
1999 1998
--------- ----------
<S> <C> <C>
Mortgage notes receivable with minimum monthly interest payments at 7%,
maturing June 2012, collateralized by manufactured
housing/recreational vehicle communities (a).
$ 15,093 $ 15,093
Note receivable, collateralized by all assets of the borrower,
bears interest at LIBOR + 2.35% and payable on demand 40,794 10,774
Note receivable, bears interest at 9.75%
and matures September 2005 4,000 4,000
Installment loans on manufactured homes with interest payable monthly
at a weighted average interest rate
and maturity of 11% and 21 years, respectively. 18,635 5,339
Notes receivable, other, various interest rates ranging from 6% to 9.5%
or prime + 1.5%, various maturity dates through December 31, 2003.
1,562 1,853
Other receivables 14,008 10,307
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 2,600
------------- ------------
$ 96,692 $ 49,966
============= ============
</TABLE>
(a) The stated interest rate is 12%. The excess of the interest
earned at the stated rate over the pay rate is recognized upon
receipt of payment.
5. DEBT (AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Collateralized term loan, interest at 7.01%, due September 9, 2007......................$ 43,927 $ 44,425
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 35,000
Senior notes, interest at 6.77%, due May 14, 2015,
callable/redeemable May 16, 2005................................................... 65,000 65,000
Capitalized lease obligations, interest ranging from 6.1% to
6.3%, due March 2001 through December 2002......................................... 36,620 26,542
Mortgage notes, other................................................................... 27,926 18,197
---------- ----------
$ 358,473 $ 339,164
========== ==========
</TABLE>
F-10
<PAGE> 31
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
5. DEBT, CONTINUED:
The Company has a $125 million unsecured line of credit at LIBOR plus 1.0%
maturing in January, 2003, of which $78 million was available at December
31, 1999. The average interest rate of outstanding borrowings at December
31, 1999 was 6.68%.
The term loan is collateralized by seven communities comprising
approximately 3,400 sites. The capitalized lease obligations and mortgage
notes are collateralized by fifteen communities comprising approximately
3,850 sites. $27.1 million of the capitalized lease obligations are
convertible into OP Units at prices ranging from $35 to $40 per OP unit.
Annual payments under capitalized lease obligations range from $1.3 million
to $1.4 million during their terms.
At December 31, 1999, the maturities of debt, excluding the line of credit,
during the next five years are approximately as follows: 2000 - $2.1
million; 2001 - $76.4 million; 2002 - $17.4 million; 2003 $133.5 million;
and 2004 - $11.9 million.
6. SUN'S STOCK OPTIONS:
Data pertaining to Sun's stock option plans are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
Options outstanding, January 1.............................. 1,055,600 965,900 767,434
Options granted............................................. 99,000 162,500 262,000
Option price.......................................... $30.03-$32.96 $33.75-$34.13 $27-$34.91
Options exercised........................................... 35,099 66,800 61,033
Option price.......................................... $22.75-$33.75 $20-$33.75 $20-$28.64
Options forfeited........................................... 1,501 6,000 2,501
Option price.......................................... $33.75 $33.75-$34.91 $24.88 - $28.64
Options outstanding, December 31............................ 1,118,000(a) 1,055,600 965,900
Option price............................................ $20-$35.39 $20-$35.39 $20-$35.39
Options exercisable, December 31............................ 709,811(a) 601,410 482,651
</TABLE>
(a) There are 273,400 options outstanding and exercisable,
respectively, which range from $20.00 - $27.99 with a weighted
average life of 5.0 years related to the outstanding options. The
weighted average exercise price for these outstanding and
exercisable options is $22.81. There are 844,600 and 436,433
options outstanding and exercisable, respectively, which range from
$28.00 - $35.99 with a weighted average life of 6.0 years related
to the outstanding options. The weighted average exercise price for
these outstanding and exercisable options is $30.96 and $29.96,
respectively.
Sun's stock option plans provide for up to 2.1 million shares/units of
common stock/partnership interests that may be granted to directors,
executive officers and other key employees of Sun or the Company. At
December 31, 1999, 512,875 shares/units of common stock/partnership
interests were available for the granting of options. Options are
granted at fair market value and generally vest over a two-year period
and may be exercised for 10 years after date of grant. In addition, the
Company established a Long-Term Incentive Plan for certain employees
granting up to 240,000 options in 1997, which become exercisable in
equal installments in 2002-2004 based on the Company's profit
performance.
F-11
<PAGE> 32
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
6. SUN'S STOCK OPTIONS CONTINUED:
The Company has opted to measure compensation cost utilizing the intrinsic
value method. The fair value of each option grant was estimated as of the
date of grant using the Black-Scholes option-pricing model with the
following assumptions for options granted in:
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
Estimated fair value per share/unit of options granted during year......................$ 2.43 $ 2.43 $ 2.82
Assumptions:
Annualized dividend yield.......................................................... 7.1% 7.0% 7.1%
Common stock/partnership interest price volatility................................. 15.3% 15.9% 15.6%
Risk-free rate of return........................................................... 6.4% 5.4% 6.7%
Expected option term (in years).................................................... 6 4 7
</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
$33.4 million, $29.3 million and $25.0 million and net income per OP Unit
of $1.68, $1.53 and $1.36 in 1999, 1998 and 1997 respectively.
7. PARTNERS' CAPITAL:
In December 1999 and June 1998, the Company's general partner issued stock
awards of 24,000 and 165,00 restricted shares, respectively, to officers
and certain employees which are being amortized over their five to ten year
vesting period.
In December 1998, the Company and its general partner issued common stock
and OP units aggregating $25.5 million to directors, employees and
consultants. The purchase was financed by personal bank loans guaranteed by
the Company until January 2004.
8. EARNINGS PER OP UNIT (AMOUNTS IN THOUSANDS):
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Earnings used for basic and diluted earnings per
OP Unit computation $ 33,772 $ 29,549 $ 25,422
=========== =========== ===========
Total units used for basic earnings per OP Unit 19,961 19,101 18,444
Dilutive securities:
Sun's stock options 152 175 187
----------- ----------- -----------
Total shares used for diluted earnings per OP Unit
computation 20,113 19,276 18,631
=========== =========== ===========
</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 1999, 1998 and 1997.
F-12
<PAGE> 33
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1999, 1998 AND 1997
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>
1999
Total revenues..................................................$ 32,884 $ 32,635 $ 33,990 $ 34,907
Operating income (a)............................................$ 22,309 $ 22,391 $ 23,014 $ 24,194
Income before other, net........................................$ 8,938 $ 8,727 $ 8,727 $ 10,214
Other, net (b)..................................................$ -- $ -- $ -- $ 829
Earnings attributable to OP Units...............................$ 8,312 $ 8,101 $ 8,100 $ 9,259
Weighted average OP Units....................................... 19,937 19,964 19,971 19,973
Earnings per OP Unit-basic......................................$ 0.42 $ 0.40 $ 0.41 $ 0.46
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>
1998
Total revenues..................................................$ 29,417 $ 29,715 $ 30,164 $ 30,746
Operating income (a)............................................$ 19,515 $ 19,977 $ 20,081 $ 20,486
Income before other, net........................................$ 7,999 $ 7,968 $ 8,027 $ 7,405
Other, net (b)..................................................$ 937 $ -- $ 2,093 $ (2,375)
Earnings attributable to OP Units...............................$ 8,310 $ 7,342 $ 9,493 $ 4,404
Weighted average OP Units....................................... 19,017 19,051 19,075 19,261
Earnings per OP Unit-basic......................................$ 0.44 $ 0.38 $ 0.50 $ 0.23
</TABLE>
(a) Operating income is defined as total revenues less property operating and
maintenance expense, real estate tax expense, property management, 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) Other, net consists principally of net gains (losses) on the
sale/dispositions of depreciated properties.
F-13
<PAGE> 34
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
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 - $ 3,349
Alpine Grand Rapids, MI - 729 6,692 - 2,528
Apple Creek Amelia, OH (3) 543 5,480 - -
Arbor Terrace Bradenton, FL - 481 4,410 - 179
Ariana Village Lakeland, FL - 240 2,195 - 387
Autumn Ridge Ankeny, IO - 890 8,054 - 648
Bedford Hills Battle Creek, MI (1) 1,265 11,562 - 232
Bell Crossing Clarksville, TN - 717 1,916 - 95
Bonita Lake Bonita Springs, FL - 285 2,641 - 80
Boulder Ridge Pflugerville, TX - 1,000 500 $ 518 9,088
Branch Creek Austin, TX - 796 3,716 - 4,202
Brentwood Kentwood, MI - 385 3,592 - 138
Brookside Village Goshen, IN - 260 1,080 386 6,711
Byrne Hill Village Toledo, OH - 383 3,903 - 5
Byron Center Byron Center, MI - 257 2,402 -4 101
Candlelight Village Chicago Heights, IL - 600 5,623 - 422
Candlewick Court Owosso, MI - 125 1,900 132 929
Carrington Pointe Ft. Wayne, IN - 1,076 3,632 - 2,692
Casa Del Valle Alamo, TX - 246 2,316 - 274
Catalina Middletown, OH - 653 5,858 - 414
Cave Creek Evans, CO - 2,170 - 71 575
Chain O'Lakes Grand Island, FL - 551 5,003 - 163
Chisholm Point Pflugerville, TX - 609 5,286 - 1,507
Clearwater Village South Bend, IN - 80 1,270 61 1,732
Cobus Green Elkhart, IN - 762 7,037 - 502
College Park Estates Canton, MI - 75 800 174 4,404
Comal Farms New Braunfels, TX (4) 1,474 1,843 - -
Continental Estates Davison, MI - 1,625 16,581 150 879
Continental North Davison, MI - - - - 3,002
Country Acres Cadillac, MI - 380 3,495 - 111
Country Meadows Flat Rock, MI - 924 7,583 296 8,939
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1999
-----------------------
BUILDING DATE OF
AND ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A)
- -------------- ---- -------- ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Allendale $393 $ 7,033 $ 7,426 $655 1996(A)
Alpine 729 9,220 9,949 907 1996(A)
Apple Creek 543 5,480 6,023 78 1999(A)
Arbor Terrace 481 4,589 5,070 556 1996(A)
Ariana Village 240 2,582 2,822 464 1994(A)
Autumn Ridge 890 8,702 9,592 994 1996(A)
Bedford Hills 1,265 11,794 13,059 1,407 1996(A)
Bell Crossing 717 2,011 2,728 36 1999(A)
Bonita Lake 285 2,721 3,006 328 1996(A)
Boulder Ridge 1,518 9,588 11,106 468 1998(C)
Branch Creek 796 7,918 8,714 839 1995(A)
Brentwood 385 3,730 4,115 457 1996(A)
Brookside Village 646 7,791 8,437 1,004 1985(A)
Byrne Hill Village 383 3,908 4,291 70 1999(A)
Byron Center 253 2,503 2,756 312 1996(A)
Candlelight Village 600 6,045 6,645 716 1996(A)
Candlewick Court 257 2,829 3,086 568 1985(A)
Carrington Pointe 1,076 6,324 7,400 418 1997(A)
Casa Del Valle 246 2,590 2,836 232 1997(A)
Catalina 653 6,272 6,925 1,293 1993(A)
Cave Creek 2,241 575 2,816 0 1998(A)
Chain O'Lakes 551 5,166 5,717 683 1996(A)
Chisholm Point 609 6,793 7,402 920 1995(A)
Clearwater Village 141 3,002 3,143 463 1986(A)
Cobus Green 762 7,539 8,301 1,520 1993(A)
College Park Estates 249 5,204 5,453 948 1978(A)
Comal Farms 1,474 1,843 3,317 - 1999(A)
Continental Estates 1,775 17,460 19,235 2,145 1996(A)
Continental North - 3,002 3,002 - 1996(A)
Country Acres 380 3,606 3,986 433 1996(A)
Country Meadows 1,220 16,522 17,742 2,301 1994(A)
</TABLE>
F-14
<PAGE> 35
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
TO COMPANY IMPROVEMENTS
------------------------ --------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- -------------- -------- ----------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Countryside Village Perry, MI (1) 275 3,920 185 1,781
Creekside Reidsville, NC (4) 369 1,403 - -
Creekwood Meadows Burton, MI - 808 2,043 404 4,435
Cutler Estates Grand Rapids, MI (1) 822 7,604 - 165
Davison Davison, MI - - - - 2
Deerfield Run Anderson, MI 1,700 990 1,607 - 116
Desert View Village West Wendover, NV - 1,180 - 423 940
Eagle Crest Firestone, CO - 4,073 150 45 4,679
Edwardsville Edwardsville, KS (1) 425 8,805 541 2,081
Elmwood Holly Hill, FL - 230 2,076 - 45
Fisherman's Cove Flint, MI - 380 3,438 - 397
Goldcoaster Homestead, FL - 446 4,234 74 915
Golden Lakes Plant City, FL - 1,092 7,161 - 891
Grand Grand Rapids, MI - 578 5,396 - 99
Groves Ft. Myers, FL - 249 2,396 - 430
Hamlin Webberville, MI - 125 1,675 280 887
Holiday Village Elkhart, IN - 100 3,207 143 1,096
Holly Forest Holly Hill, FL - 920 8,376 - 177
Hunter's Glen Leighton Twp., MI - 1,063 - 39 1,573
Indian Creek Ft. Myers Beach, FL - 3,832 34,660 - 544
Island Lake Merritt Island, FL - 700 6,431 - 188
Kensington Meadows Lansing, MI - 250 2,699 - 3,354
Kenwood La Feria, TX - 145 1,857 - -
King's Court Traverse City, MI - 1,473 13,782 - 1,100
King's Lake Debary, FL - 280 2,542 - 1,690
King's Pointe Winter Haven, FL - 262 2,359 - 318
Kissimmee Gardens Kissimmee, FL - 594 5,522 - 236
Lafayette Place Warren, MI - 669 5,979 - 561
Lake Juliana Auburndale, FL - 335 2,848 - 519
Lake San Marino Naples, FL - 650 5,760 - 259
Leesburg Landing Leesburg, FL - 50 429 921 365
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1999
-----------------------
BUILDING DATE OF
AND ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A)
- -------------- ---- -------- ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Countryside Village 460 5,701 6,161 1,036 1987(A)
Creekside 369 1,403 1,772 - 1999(A)
Creekwood Meadows 1,212 6,478 7,690 387 1997(C)
Cutler Estates 822 7,769 8,591 931 1996(A)
Davison - 2 2 - 1996(A)
Deerfield Run 990 1,723 2,713 30 1999(A)
Desert View Village 1,603 940 2,543 - 1998(A)
Eagle Crest 4,118 4,829 8,947 - 1998(A)
Edwardsville 966 10,886 11,852 2,074 1987(A)
Elmwood 230 2,121 2,351 176 1997(A)
Fisherman's Cove 380 3,835 4,215 772 1993(A)
Goldcoaster 520 5,149 5,669 424 1997(A)
Golden Lakes 1,092 8,052 9,144 1,605 1993(A)
Grand 578 5,495 6,073 672 1996(A)
Groves 249 2,826 3,075 231 1997(A)
Hamlin 405 2,562 2,967 475 1984(A)
Holiday Village 243 4,303 4,546 866 1986(A)
Holly Forest 920 8,553 9,473 719 1997(A)
Hunter's Glen 1,102 1,573 2,675 - 1998(A)
Indian Creek 3,832 35,204 39,036 4,263 1996(A)
Island Lake 700 6,619 7,319 1,003 1995(A)
Kensington Meadows 250 6,053 6,303 624 1995(A)
Kenwood 145 1,857 2,002 29 1999(A)
King's Court 1,473 14,882 16,355 1,727 1996(A)
King's Lake 280 4,232 4,512 633 1994(A)
King's Pointe 262 2,677 2,939 490 1994(A)
Kissimmee Gardens 594 5,758 6,352 1,243 1993(A)
Lafayette Place 669 6,540 7,209 338 1998(A)
Lake Juliana 335 3,367 3,702 610 1994(A)
Lake San Marino 650 6,019 6,669 723 1996(A)
Leesburg Landing 971 794 1,765 86 1996(A)
</TABLE>
F-15
<PAGE> 36
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
TO COMPANY IMPROVEMENTS
------------------------- ----------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- --------------------- ----------------- ------------ --------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Liberty Farms Valparaiso, IN - 66 1,201 116 1,711
Lincoln Estates Holland, MI - 455 4,201 - 232
Maple Grove Estates Dorr, MI - 15 210 19 256
Maplewood Lawrence, IN - 280 2,122 - 611
Meadow Lake Estates White Lake, MI - 1,188 11,498 126 1,363
Meadowbrook Estates Monroe, MI - 431 3,320 379 5,580
Meadowbrook Village Tampa, FL - 519 4,728 - 214
Meadows Nappanee, IN - 300 2,300 -13 2,098
Meadowstream Village Sodus, MI - 100 1,175 109 1,216
Oakwood Village Miamisburg, OH 704 1,964 6,401 - 3,073
Orange Tree Orange City, FL - 283 2,530 15 520
Orchard Lake Milford, OH (3) 395 4,064 - -
Paradise Chicago Heights, IL - 723 6,638 - 408
Parkwood Grand Blanc, MI - 477 4,279 - 535
Pecan Branch Georgetown, TX - 1,379 - - 65
Chateau Philomath Philomath, OR - 1,031 2,064 - 15
Pin Oak Parc St. Louis, MO - 1,038 3,250 467 4,088
Pine Hills Middlebury, IN - 72 544 56 1,532
Pine Ridge Petersburg, VA - 405 2,397 - 1,088
Pine Trace Houston, TX - 2,907 4,272 - 1,812
Presidential Hudsonville, MI - 680 6,314 - 1,000
Richmond Richmond, MI (2) 501 2,040 - 264
Royal Country Miami, FL (1) 2,290 20,758 - 455
Saddle Oak Club Ocala, FL - 730 6,743 - 409
Scio Farms Ann Arbor, MI - 2,300 22,659 - 3,306
Sherman Oaks Jackson, MI (1) 200 2,400 240 3,280
Siesta Bay Ft. Myers Beach, FL - 2,051 18,549 - 304
Silver Star Orlando, FL - 1,067 9,685 - 191
Snow to Sun Weslaco, TX 97 190 2,143 15 629
Southfork Belton, MO - 1,000 9,011 - 847
St. Clair Place St. Clair, MI (2) 501 2,029 1 283
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1999
-------------------------
BUILDING DATE OF
AND ACCUMULATED CONSTRUCTION (C)
PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A)
- --------------------- -------- --------- ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Liberty Farms 182 2,912 3,094 553 1985(A)
Lincoln Estates 455 4,433 4,888 527 1996(A)
Maple Grove Estates 34 466 500 92 1979(A)
Maplewood 280 2,733 3,013 544 1989(A)
Meadow Lake Estates 1,314 12,861 14,175 2,448 1994(A)
Meadowbrook Estates 810 8,900 9,710 1,783 1986(A)
Meadowbrook Village 519 4,942 5,461 989 1994(A)
Meadows 287 4,398 4,685 804 1987(A)
Meadowstream Village 209 2,391 2,600 481 1984(A)
Oakwood Village 1,964 9,474 11,438 399 1998(A)
Orange Tree 298 3,050 3,348 520 1994(A)
Orchard Lake 395 4,064 4,459 68 1999(A)
Paradise 723 7,046 7,769 825 1996(A)
Parkwood 477 4,814 5,291 951 1993(A)
Pecan Branch 1,379 65 1,444 - 1999(C)
Chateau Philomath 1,031 2,079 3,110 32 1999(A)
Pin Oak Parc 1,505 7,338 8,843 845 1994(A)
Pine Hills 128 2,076 2,204 397 1980(A)
Pine Ridge 405 3,485 3,890 672 1986(A)
Pine Trace 2,907 6,084 8,991 103 1999(C)
Presidential 680 7,314 7,994 843 1996(A)
Richmond 501 2,304 2,805 123 1998(A)
Royal Country 2,290 21,213 23,503 4,298 1994(A)
Saddle Oak Club 730 7,152 7,882 1,235 1995(A)
Scio Farms 2,300 25,965 28,265 3,714 1995(A)
Sherman Oaks 440 5,680 6,120 1,119 1986(A)
Siesta Bay 2,051 18,853 20,904 2,281 1996(A)
Silver Star 1,067 9,876 10,943 1,193 1996(A)
Snow to Sun 205 2,772 2,977 226 1997(A)
Southfork 1,000 9,858 10,858 498 1997(A)
St. Clair Place 502 2,312 2,814 145 1998(A)
</TABLE>
F-16
<PAGE> 37
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COST CAPITALIZED
SUBSEQUENT TO
INITIAL COST ACQUISITION
TO COMPANY IMPROVEMENTS
--------------------------- -------------------
BUILDING BUILDING
AND AND
PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES
- ------------------------- ----------------- ------------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stonebridge Richfield Twp., MI 1,119 2,044 - 17 380
Sun Villa Reno, NV 6,916 2,385 11,773 - 294
Sunset Ridge Portland, MI - 2,044 - - 54
Superstition Falls Apache Junction, AZ - 5,368 - 51 6,114
Tallowwood Coconut Creek, FL - 510 5,099 140 817
Timber Ridge Ft. Collins, CO - 990 9,231 - 438
Timberbrook Bristol, IN (1) 490 3,400 101 4,539
Timberline Estates Grand Rapids, MI - 536 4,867 - 444
Town and Country Traverse City, MI - 406 3,736 - 174
Valley Brook Indianapolis, IN - 150 3,500 1,277 8,371
Village Trails Howard City, MI 648 988 1,472 - 451
Water Oak Country Club Est. Lady Lake, FL - 2,503 17,478 - 2,419
Westbrook Toledo, OH (2) 1,110 10,462 - 2
West Glen Village Indianapolis, IN - 1,100 10,028 - 611
White Lake White Lake, MI - 673 6,179 - 2,302
White Oak Mt. Morris, MI - 782 7,245 112 2,406
Willowbrook Toledo, OH (2) 781 7,054 - 293
Windham Hills Jackson, MI - 2,673 2,364 - 3,591
Woodhaven Place Wood Haven, MI (2) 501 4,541 - 632
Woodlake Estates Yoder, IN - 632 3,674 - 998
Woodlake Trails San Antonio, TX (4) 1,206 668 - -
Woodland Park Estates Eugene, OR 8,005 1,593 14,398 - 108
Woods Edge West Lafayette, IN - 100 2,600 3 5,758
Woodside Terrace Holland, OH (2) 1,064 9,625 - 1,113
Worthington Arms Delaware, OH - 376 2,624 - 1,039
Corporate Headquarters Farmington Hills, MI - - - - 3,419
--------- ---------- ------- ---------
$ 99,882 $ 589,956 $ 8,070 $ 168,283
========= ========== ======= =========
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT
CARRIED AT
DECEMBER 31, 1999
---------------------
BUILDING DATE OF
AND ACCUMULATED CONSTRUCTION(C)
PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION(A)
- ------------------------- --------- ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Stonebridge 2,061 380 2,441 - 1998(A)
Sun Villa 2,385 12,067 14,452 608 1998(A)
Sunset Ridge 2,044 54 2,098 - 1998(A)
Superstition Falls 5,419 6,114 11,533 - 1998(A)
Tallowwood 650 5,916 6,566 1,060 1994(A)
Timber Ridge 990 9,669 10,659 1,163 1996(A)
Timberbrook 591 7,939 8,530 1,443 1987(A)
Timberline Estates 536 5,311 5,847 989 1994(A)
Town and Country 406 3,910 4,316 471 1996(A)
Valley Brook 1,427 11,871 13,298 2,018 1998(A)
Village Trails 988 1,923 2,911 92 1998(A)
Water Oak Country Club Est. 2,503 19,897 22,400 3,934 1993(A)
Westbrook 1,110 10,464 11,574 180 1999(A)
West Glen Village 1,100 10,639 11,739 1,932 1994(A)
White Lake 673 8,481 9,154 627 1997(A)
White Oak 894 9,651 10,545 712 1997(A)
Willowbrook 781 7,347 8,128 372 1997(A)
Windham Hills 2,673 5,955 8,628 235 1998(A)
Woodhaven Place 501 5,173 5,674 269 1998(A)
Woodlake Estates 632 4,672 5,304 206 1998(A)
Woodlake Trails 1,206 668 1,874 - 1999(A)
Woodland Park Estates 1,593 14,506 16,099 741 1998(A)
Woods Edge 103 8,358 8,461 947 1985(A)
Woodside Terrace 1,064 10,738 11,802 864 1997(A)
Worthington Arms 376 3,663 4,039 720 1990(A)
Corporate Headquarters - 3,419 3,419 885 Various
--------- ----------- ----------- -----------
$ 107,952(5) $ 758,239(6) $ 866,191 $ 92,558
========= =========== =========== ===========
</TABLE>
(1) These communities collateralize $43.9 million of term debt.
(2) These communities are financed by $36.6 million of collateralized lease
obligations.
(3) These communities collateralize $4.8 million of mortgage debt.
(4) These communities collateralize $3.9 million of mortgage debt.
(5) Includes $8.3 million of land in property under development in Footnote 2
"Rental Property" to the Company's Consolidated Financial Statements
included elsewhere herein.
(6) Includes $16.7 million of property under development in Footnote 2 "Rental
Property" to the Company's Consolidated Financial Statements included
elsewhere herein.
F-17
<PAGE> 38
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
(AMOUNTS IN THOUSANDS)
The change in investment in real estate for the years ended December 31, 1999,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $ 803,152 $ 684,821 $ 588,813
Community and land acquisitions, including
immediate improvements 59,578 102,248 73,065
Community expansion and development 42,480 26,874 17,300
Improvements, other 7,022 6,193 5,643
Dispositions and other (46,041) (16,984) --
----------- ----------- -----------
Balance, end of year $ 866,191 $ 803,152 $ 684,821
=========== =========== ===========
</TABLE>
The change in accumulated depreciation for the years ended December 31, 1999,
1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $ 70,940 $ 50,084 $ 30,535
Depreciation for the period 25,112 22,765 19,549
Dispositions and other (3,494) (1,909) --
----------- ----------- -----------
Balance, end of year $ 92,558 $ 70,940 $ 50,084
=========== =========== ===========
</TABLE>
F-18
<PAGE> 39
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, 2000
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/ Gary A. Shiffman
- -------------------------- Chief Executive Officer, March 20, 2000
Gary A. Shiffman President and Director
/s/ Jeffrey P. Jorissen
- -------------------------- Senior Vice President, March 20, 2000
Jeffrey P. Jorissen Chief Financial Officer,
Treasurer, Secretary
And Principal Accounting
Officer
/s/ Paul D. Lapides
- -------------------------- Director March 20, 2000
Paul D. Lapides
/s/ Ted J. Simon
- -------------------------- Director March 20, 2000
Ted J. Simon
/s/ Clunet R. Lewis
- -------------------------- Director March 20, 2000
Clunet R. Lewis
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Ronald L. Piasecki
- -------------------------- Director March 20, 2000
Ronald L. Piasecki
/s/ Arthur A. Weiss
- -------------------------- Director March 20, 2000
Arthur A. Weiss
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
<S> <C> <C>
2.1 Form of Sun Communities, Inc.'s Common Stock Certificate (1)
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 Sun Communities, Inc., Sun Communities (4)
Operating Limited Partnership 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 Sun Communities Operating (9)
Limited Partnership 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)
4.7 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series (11)
of Preferred Stock and Fixing Distribution and other Rights in such Series
4.8 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series (13)
of Preferred Stock
10.1 Second Amended and Restated Agreement of Limited Partnership of Sun Communities Operating (8)
Limited Partnership
10.2 Second Amended and Restated 1993 Stock Option Plan# (12)
10.3 Amended and Restated 1993 Non-Employee Director Stock Option Plan# (8)
10.4 Form of Stock Option Agreement between Sun Communities, Inc. and certain directors, officers (1)
and other individuals#
10.5 Form of Non-Employee Director Stock Option Agreement between Sun Communities, Inc. and (5)
certain directors#
10.6 Employment Agreement between Sun Communities, Inc. and Gary A. Shiffman# (8)
10.7 Senior Unsecured Line of Credit Agreement with Lehman Brothers Holdings Inc. (9)
10.8 Amended and Restated Loan Agreement between Sun Communities Funding Limited Partnership and (9)
Lehman Brothers Holdings Inc.
10.9 Amended and Restated Loan Agreement among Miami Lakes Venture Associates, Sun Communities (9)
Funding Limited Partnership and Lehman
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
<S> <C> <C>
Brothers Holdings Inc.
10.10 Form of Indemnification Agreement between each officer and director of Sun Communities, Inc. (9)
and Sun Communities, Inc.
10.11 Loan Agreement among Sun Communities Operating Limited Partnership, Sea Breeze Limited (9)
Partnership and High Point Associates, LP.
10.12 Option Agreement by and between Sun Communities Operating Limited Partnership and Sea Breeze (9)
Limited Partnership
10.13 Option Agreement by and between Sun Communities Operating Limited Partnership and High Point (9)
Associates, LP
10.14 $1,022,538.12 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7)
Partnership
10.15 $1,022,538.13 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7)
Partnership
10.16 $6,604,923.75 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7)
Partnership
10.17 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (7)
Partnership for 94,570 shares of Common Stock
10.18 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (7)
Partnership for 305,430 shares of Common Stock
10.19 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (9)
Partnership
10.20 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (9)
Partnership
10.21 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (9)
Partnership with respect to 80,000 shares of Common Stock
10.22 Employment Agreement between Sun Communities, Inc. and Jeffrey P. Jorissen# (11)
10.23 Long Term Incentive Plan (9)
10.24 Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. Shiffman, dated (11)
June 5, 1998#
10.25 Restricted Stock Award Agreement between Sun Communities, Inc. and Jeffrey P. Jorissen, (11)
dated June 5, 1998#
10.26 Restricted Stock Award Agreement between Sun Communities, Inc. and Jonathan M. Colman, dated (11)
June 5, 1998#
10.27 Restricted Stock Award Agreement between Sun Communities, Inc. and Brian W. Fannon, dated (11)
June 5, 1998#
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
<S> <C> <C>
10.28 Sun Communities, Inc. 1998 Stock Purchase Plan# (11)
10.29 Employment Agreement between Sun Home Services, Inc. and Brian Fannon# (11)
10.30 Facility and Guaranty Agreement among Sun Communities, Inc., Sun Communities Operating (11)
Limited Partnership, Certain Subsidiary Guarantors and First National Bank of Chicago, dated
December 10, 1998
10.31 Rights Agreement between Sun Communities, Inc. and State Street Bank and Trust Company, (10)
dated April 24, 1998
10.32 Employment Agreement between Sun Communities, Inc. and Brian W. Fannon# (11)
10.33 Contribution Agreement, dated as of September 29, 1999, by and among the Company, the (13)
General Partner, Belcrest Realty Corporation and Belair Real Estate Corporation
10.34 One Hundred Third Amendment to Second Amended and Restated Limited Partnership Agreement of (13)
the Company
21 List of Subsidiaries of Sun Communities Operating Limited Partnership (14)
23 Consent of PricewaterhouseCoopers LLP, independent accountants (14)
27 Financial Data Schedule (14)
</TABLE>
- -----------------------
(1) Incorporated by reference to Sun Communities, Inc.'s Registration Statement
No. 33-69340.
(2) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form
8-K dated March 20, 1996.
(3) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1995.
(4) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form
8-K dated April 24, 1996.
(5) Incorporated by reference to Sun Communities, Inc.'s Registration Statement
No. 33-80972.
(6) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1994.
(7) Incorporated by reference to Sun Communities, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
(8) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996.
<PAGE> 44
(9) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997.
(10) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form
8-K dated April 24, 1998.
(11) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1998.
(12) Incorporated by reference to Sun Communities, Inc.'s Proxy Statement, dated
April 20, 1999
(13) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form
8-K dated October 14, 1999.
(14) Filed herewith.
# Management contract or compensatory plan or arrangement required to be
identified by Form 10-K Item 14.
<PAGE> 1
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
EXHIBIT 21 - LIST OF SUBSIDIARIES
8920 Associates, a Florida general partnership
Apache Junction MHC, LLC, a Michigan limited liability company
Apple Orchard, LLC, a Michigan limited liability company
Arizona Finance L.L.C., a Michigan limited liability company
Aspen-Allendale Project, L.L.C., a Michigan limited liability company
Aspen-Alpine Project, L.L.C., a Michigan limited liability company
Aspen-Arbor Terrace, L.P., a Delaware limited partnership
Aspen-Bonita Lake Resort Limited Partnership, a Michigan limited partnership
Aspen-Breezy Project Limited Partnership, a Michigan limited partnership
Aspen-Brentwood Project, L.L.C., a Michigan limited liability company
Aspen-Byron Project, L.L.C., a Michigan limited liability company
Aspen-Country Project, L.L.C., a Michigan limited liability company
Aspen-Cutler Associates, L.L.C., a Michigan limited liability company
Aspen-Ft. Collins Limited Partnership, a Michigan limited partnership
Aspen-Grand Project, L.L.C., a Michigan limited liability company
Aspen-Holland Estates, L.L.C., a Michigan limited liability company
Aspen-Indian Project Limited Partnership, a Michigan limited partnership
Aspen-Kings Court, L.L.C., a Michigan limited liability company
Aspen-Paradise Park II Limited Partnership, a Michigan limited partnership
Aspen-Presidential Project, L.L.C., a Michigan limited liability company
Aspen-Siesta Bay Limited Partnership, a Michigan limited partnership
Aspen-Silver Star II Limited Partnership, a Michigan limited partnership
Aspen-Town & Country Associates II, L.L.C., a Michigan limited liability company
Bedford Hills Mobile Village, L.L.C., a Michigan limited liability company
CM-GL Services, Inc., a Florida corporation
Family Retreat, Inc., a Michigan corporation
<PAGE> 2
K.S. Park Property, Owners Association, Inc., a Florida non-profit corporation
Miami Lakes Venture Associates, a Florida general partnership
Mt. Morris MHC, L.L.C., a Michigan limited liability company
Snowbird Concessions, Inc., a Texas corporation
SunChamp, LLC, a Michigan limited liability company
Sun Communities Acquisitions, LLC, a Michigan limited liability company
Sun Communities Financing, LLC, a Michigan limited liability company
Sun Communities Funding Limited Partnership, a Michigan limited partnership
Sun Communities Houston Limited Partnership, a Michigan limited partnership
Sun Communities Nevada GP L.L.C., a Michigan limited liability company
Sun Communities Nevada Limited Partnership, a Michigan limited partnership
Sun Communities Texas Limited Partnership, a Michigan limited partnership
Sun Communities Funding GP L.L.C., a Michigan limited liability company
Sun/Forest, LLC, a Michigan limited liability company
Sun GP L.L.C., a Michigan limited liability company
Sun Home Services, Inc., a Michigan corporation
Sun Texas Financial, LLC, a Michigan limited liability company
Sun Water Oak Golf, Inc., a Michigan corporation
Sun/York L.L.C., a Michigan limited liability company
Tallowwood Property Owners Association, Inc., a Florida non-profit corporation
White Oak Estates, L.L.C., a Michigan limited liability company
White Oak Estates Holding, LLC, a Michigan limited liability company
<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 11, 2000 on our audits of the
consolidated financial statements and financial statement schedule of Sun
Communities Operating Partnership as of December 31, 1999 and 1998, and for
the years ended December 1999, 1998 and 1997, which report is included in this
Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
March 16, 2000
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 11,355
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 866,191
<DEPRECIATION> 92,558
<TOTAL-ASSETS> 913,683
<CURRENT-LIABILITIES> 47,000
<BONDS> 358,473
0
0
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<OTHER-SE> 481,292
<TOTAL-LIABILITY-AND-EQUITY> 913,683
<SALES> 0
<TOTAL-REVENUES> 134,416
<CGS> 0
<TOTAL-COSTS> 38,826
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,751
<INCOME-PRETAX> 37,435
<INCOME-TAX> 0
<INCOME-CONTINUING> 37,435
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,772
<EPS-BASIC> 1.69
<EPS-DILUTED> 1.68
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