<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000.
OR
| | Transition pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
COMMISSION FILE NUMBER 333-2522-01
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Certificate)
Michigan 38-3144240
(State of Organization) (I.R.S. Employer Identification No.)
31700 Middlebelt Road
Suite 145
Farmington Hills, Michigan 48334
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (248) 932-3100
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Page 1 of 19
<PAGE> 2
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
INDEX
<TABLE>
<CAPTION>
PAGES
-----
<S> <C> <C>
PART I
------
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the Periods
Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-16
PART II
-------
Item 6.(a) Exhibits required by Item 601 of Regulation S-K 17
Item 6.(b) Reports on Form 8-K 17
Signatures 18
</TABLE>
2
<PAGE> 3
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Investment in rental property, net $ 785,791 $ 755,138
Cash and cash equivalents 21,088 11,330
Notes and other receivables 119,397 103,758
Investment in and advances to affiliate 7,163 8,605
Other assets 32,533 27,801
------------- -------------
Total assets $ 965,972 $ 906,632
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Line of credit $ - $ 47,000
Debt 452,884 354,564
Accounts payable and accrued expenses 23,669 17,616
Deposits and other liabilities 8,137 8,660
------------- -------------
Total liabilities 484,690 427,840
------------- -------------
Redeemable preferred operating partnership units 39,347 35,783
------------- -------------
Partners' Capital:
Series A Perpetual Preferred Operating Partnership
Units, unlimited authorized, 1,000 issued and
outstanding 50,000 50,000
Operating Partnership Units ("OP Units"), unlimited
authorized; 20,188 and 20,163 issued and
outstanding in 2000 and 1999, respectively
General partner 345,077 346,417
Limited partners 51,825 52,051
Unearned compensation (4,967) (5,459)
------------- -------------
Total partners' capital 441,935 443,009
------------- -------------
Total liabilities and partners' capital $ 965,972 $ 906,632
============= =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------ ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Income from property $ 33,141 $ 31,310 $ 99,217 $ 93,251
Other income 3,872 2,823 9,893 6,643
------------ ----------- ----------- -----------
Total revenues 37,013 34,133 109,110 99,894
------------ ----------- ----------- -----------
Expenses:
Property operating and maintenance 7,504 7,118 21,379 20,407
Real estate taxes 2,300 2,255 6,818 6,666
Property management 732 713 2,181 1,970
General and administrative 928 890 2,980 2,752
Depreciation and amortization 7,846 7,277 23,070 21,294
Interest 7,503 7,153 21,656 20,413
------------ ----------- ----------- -----------
Total expenses 26,813 25,406 78,084 73,502
------------ ----------- ----------- -----------
Income before other, net and distribution
to Preferred OP Units 10,200 8,727 31,026 26,392
Other, net 4,619 - 4,619 -
------------ ----------- ----------- ------------
Income before distribution to Preferred
OP units 14,819 8,727 35,645 26,392
Less distribution to Preferred OP Units 1,977 627 5,848 1,879
------------ ----------- ----------- -----------
Earnings attributable to OP Units $ 12,842 $ 8,100 $ 29,797 $ 24,513
============ =========== =========== ===========
Net income attributed to:
General Partner $ 11,117 $ 6,985 $ 25,779 $ 21,084
Limited Partners 1,725 1,115 4,018 3,429
------------ ----------- ----------- -----------
$ 12,842 $ 8,100 $ 29,797 $ 24,513
============ =========== =========== ===========
Earnings per OP Unit:
Basic $ 0.64 $ 0.41 $ 1.49 $ 1.23
============ =========== =========== ===========
Diluted $ 0.64 $ 0.40 $ 1.48 $ 1.21
============ =========== =========== ===========
Weighted average OP Units outstanding:
Basic 19,998 19,971 20,001 19,957
============ =========== =========== ===========
Diluted 20,090 20,148 20,092 20,118
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Earnings attributable to OP Units $ 29,797 $ 24,513
Adjustments to reconcile net income to net
cash provided by operating activities:
Other, net (4,619) --
Depreciation and amortization 23,070 21,294
Amortization of deferred financing costs 658 658
Increase in other assets (6,896) (9,713)
Decrease in accounts payable and other liabilities 5,530 6,900
------------- ------------
Net cash provided by operating activities 47,540 43,652
------------- ------------
Cash flows from investing activities:
Investment in rental properties (50,177) (57,963)
Investment in and advances to affiliate 1,442 1,693
Proceeds related to asset sales 7,720 12,534
Investment in notes receivable, net (15,444) (24,298)
------------- ------------
Net cash used in investing activities (56,459) (68,034)
------------- ------------
Cash flows from financing activities:
Borrowings (repayments) on line of credit, net (47,000) 12,000
Proceeds from notes payable 100,000 -
Repayments on notes payable and other debt (1,680) (1,277)
Capital contribution 84 51,726
Distributions (31,642) (30,352)
Payments for deferred financing costs (1,085) (1,387)
------------- ------------
Net cash provided by financing activities 18,677 30,710
------------- ------------
Net increase in cash and cash equivalents 9,758 6,328
Cash and cash equivalents, beginning of period 11,330 9,646
------------- ------------
Cash and cash equivalents, end of period $ 21,088 $ 15,974
============= ============
Supplemental information:
Preferred OP Units issued for rental properties $ 3,564 $ --
Debt assumed for rental properties $ -- $ 1,700
Capitalized lease obligation for rental properties $ -- $ 10,605
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
5
<PAGE> 6
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
These unaudited condensed consolidated financial statements of Sun
Communities Operating Limited Partnership (the "Company"), have been
prepared pursuant to the Securities and Exchange Commission ("SEC") rules
and regulations and should be read in conjunction with the financial
statements and notes thereto of the Company as of December 31, 1999. The
following notes to consolidated financial statements present interim
disclosures as required by the SEC. The accompanying consolidated
financial statements reflect, in the opinion of management, all
adjustments necessary for a fair presentation of the interim financial
statements. All such adjustments are of a normal and recurring nature.
Certain reclassifications have been made to the prior period financial
statements to conform with current period presentation.
The Company owns 100 percent of the preferred stock of an affiliate, Sun
Home Services, Inc. ("Sun Homes"), is entitled to 95 percent of the
operating cash flow of Sun Homes, and accounts for its investment
utilizing the equity method of accounting. The common stock of Sun Homes
is owned by two officers of Sun (as defined below) and the estate of a
former officer of Sun who collectively are entitled to receive 5 percent
of the operating cash flow of Sun Homes.
Sun Communities, Inc. ("Sun"), a self-administered and self-managed Real
Estate Investment Trust with no independent operations of its own, is the
sole general partner of the Company. As general partner, Sun has
unilateral control and complete responsibility for management of the
Company. Pursuant to the terms of the Company's partnership agreement,
the Company is required to reimburse Sun for the net expenses incurred by
Sun. Amounts paid on behalf of Sun by the Company are reflected in the
statement of operations as general and administrative expenses. The
balance sheet of Sun as of September 30, 2000 is identical to the
accompanying Company balance sheet, except as follows:
6
<PAGE> 7
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION: CONTINUED
<TABLE>
<CAPTION>
As Presented Herein Sun Communities, Inc
September 30, 2000 Adjustments September 30, 2000
------------------ ----------- -------------------
(in thousands)
<S> <C> <C> <C>
Notes and other receivables................ $ 119,397 $ (2,600) $ 116,797
================= ============== ================
Total assets............................... $ 965,972 $ (2,600) $ 963,372
================= ============== ================
Minority interests......................... $ 141,172 $ 141,172
============== ================
Redeemable preferred operating
partnership units ....................... $ 39,347 (39,347)
================= ==============
Series A Perpetual Preferred Operating
Partnership Units........................ $ 50,000 $ (50,000)
General partner............................ 345,077 (345,077)
Limited partners........................... 51,825 (51,825)
Common stock............................... 175 $ 175
Additional paid-in capital................. 393,460 393,460
Distributions in excess of.................
accumulated earnings................... (39,901) (39,901)
Officers' notes............................ (11,257) (11,257)
Unearned compensation...................... (4,967) -- (4,967)
----------------- -------------- ----------------
Partners' capital/Stockholders'........
equity............................. $ 441,935 $ (104,425) $ 337,510
================= ============== ================
Total liabilities and partners'
capital/Stockholders' equity........... $ 965,972 $ (2,600) $ 963,372
================= ============== ================
</TABLE>
2. RENTAL PROPERTY:
The following summarizes rental property (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------------- ----------------
<S> <C> <C>
Land $ 77,878 $ 76,069
Land improvements and buildings 749,750 720,662
Furniture, fixtures, equipment 18,008 16,943
Land held for future development 16,490 17,046
Property under development 35,641 16,976
------------- ---------------
897,767 847,696
Accumulated depreciation 111,976 92,558
------------- ---------------
Rental property, net $ 785,791 $ 755,138
============= ===============
</TABLE>
7
<PAGE> 8
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. NOTES AND OTHER RECEIVABLES:
Notes receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- ---------------
<S> <C> <C>
Mortgage notes receivable with minimum monthly interest payments
ranging from 7% to LIBOR + 5.0% maturing from May 2002 through
June 2012, collateralized by manufactured home communities $ 54,615 $ 23,277
Note receivable, bears interest at LIBOR + 2.35%
and payable on demand 27,560 40,794
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 16,886 18,635
10 year note receivable from an officer of Sun 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
Other receivables 13,736 14,452
------------- ---------------
$ 119,397 $ 103,758
============= ===============
</TABLE>
8
<PAGE> 9
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT:
The following table sets forth certain information regarding debt (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ---------------
<S> <C> <C>
Collateralized term loan, interest at 7.01%,
due September 9, 2007 $ 43,530 $ 43,927
Senior notes, interest at 8.20%, due August 15, 2008 100,000 -
Senior notes, interest at 7.375%, due May 1, 2001 65,000 65,000
Senior notes, interest at 7.625%, due May 1, 2003 85,000 85,000
Senior notes, interest at 6.97%, due December 3, 2007 35,000 35,000
Callable/redeemable notes, interest at 6.77%,
due May 14, 2015, callable/redeemable
May 16, 2005 65,000 65,000
Capitalized lease obligations, interest ranging
from 5.5% to 6.3%, due March 2001 through
January 2004 36,169 36,620
Mortgage notes, other 23,185 24,017
------------- ---------------
$ 452,884 $ 354,564
============= ===============
</TABLE>
The Company had its entire $125 million line of credit in available
borrowings at September 30, 2000. Borrowings under the line of credit
bear interest at the rate of LIBOR plus 1.0% and mature January 1, 2003.
5. OTHER INCOME:
The components of other income are as follows for the periods ended
September 30, 2000 and 1999. (in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Income from affiliate $ 167 $ 768 $ 259 $ 1,618
Development fee income 983 250 1,742 250
Other income, principally interest 2,722 1,805 7,892 4,775
------------ ----------- ----------- -----------
$ 3,872 $ 2,823 $ 9,893 $ 6,643
============ =========== =========== ===========
</TABLE>
The $4.6 million gain included in other, net primarily relates to
proceeds from the condemnation of certain land in two communities by the
state transportation department.
9
<PAGE> 10
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EARNINGS PER OP UNIT (IN THOUSANDS):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Earnings used for basic and diluted
earnings per OP unit computation $ 12,842 $ 8,100 $ 29,797 $ 24,513
============ =========== =========== ===========
Total units for basic earnings per
OP unit 19,998 19,971 20,001 19,957
Dilutive securities, principally
Sun's stock options 92 177 91 161
------------ ----------- ----------- -----------
Total units for diluted
earnings per OP unit computation 20,090 20,148 20,092 20,118
============ =========== =========== ===========
</TABLE>
Diluted earnings per OP unit reflect the potential dilution that would
occur if securities were exercised or converted into OP units.
Convertible Preferred OP Units are excluded from the computations as
their inclusion would have an antidilutive effect on earnings per share
in 2000 and 1999.
10
<PAGE> 11
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and the notes thereto.
RESULTS OF OPERATIONS
Comparison of the nine months ended September 30, 2000 and 1999
For the nine months ended September 30, 2000, income before other, net and
distribution to Preferred OP Units increased by 17.6 percent from $26.4 million
to $31.0 million, when compared to the nine months ended September 30, 1999. The
increase was due to increased revenues of $9.2 million while expenses increased
by $4.6 million.
Income from property increased by $6.0 million from $93.2 million to $99.2
million, or 6.4 percent, due primarily to rent increases and other community
revenues ($4.5 million), lease up of manufactured home sites including new
developments ($2.5 million), and acquisitions ($2.5 million), offset by a
revenue reduction of $3.5 million due to the sale of four communities during
1999.
Other income increased by $3.3 million from $6.6 million to $9.9 million due
primarily to an increase in interest income from notes receivable ($2.7 million)
and development fee income ($1.5 million) offset by a $1.3 million reduction in
income from affiliate.
Property operating and maintenance expenses increased by $1.0 million from $20.4
million to $21.4 million, or 4.8 percent, due primarily to acquisitions.
Real estate taxes increased by $0.1 million from $6.7 million to $6.8 million
primarily due to acquisitions.
Property management expenses increased by $0.2 million from $2.0 million to $2.2
million representing 2.2 percent and 2.1 percent of income from property in 2000
and 1999, respectively.
General and administrative expenses increased by $0.2 million from $2.8 million
to $3.0 million, representing 2.7 percent of total revenues in 2000 and 1999.
Earnings before interest, taxes, depreciation and amortization ("EBITDA" defined
as total revenues less property operating and maintenance, real estate taxes,
property management and general and administrative expenses) increased by $7.6
million from $68.1 million to $75.7 million. EBITDA as a percent of revenues
increased to 69.4 percent in 2000 compared to 68.2 percent in 1999.
Depreciation and amortization increased by $1.8 million from $21.3 million to
$23.1 million, or 8.3 percent, due primarily to acquisitions and development of
communities in 2000 and 1999.
Interest expense increased by $1.2 million from $20.4 million to $21.6 million,
or 6.1 percent, due primarily to additional investments in rental property and
notes receivable.
The $4.6 million gain included in other, net primarily relates to proceeds from
the condemnation of certain land in two communities by the state transportation
department.
11
<PAGE> 12
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
Comparison of the three months ended September 30, 2000 and 1999
For the three months ended September 30, 2000, income before other, net and
distribution to Preferred OP Units increased by 16.9 percent from $8.7 million
to $10.2 million, when compared to the three months ended September 30, 1999.
The increase was due to increased revenues of $2.9 million while expenses
increased by $1.4 million.
Income from property increased by $1.8 million from $31.3 million to $33.1
million, or 5.8 percent, due primarily to rent increases and other community
revenues ($1.3 million), acquisitions ($1.0 million) and lease up of
manufactured home sites including new developments ($0.6 million), offset by a
revenue reduction of $1.1 million due to the sale of four communities during
1999.
Other income increased by $1.1 million from $2.8 million to $3.9 million due
primarily to an increase in interest income from notes receivable ($0.7 million)
and development fee income ($0.7 million) offset by a $0.6 million reduction in
income from affiliate.
Property operating and maintenance expenses increased by $0.4 million from $7.1
million to $7.5 million, or 5.4 percent, due primarily to acquisitions.
Real estate taxes remained constant at $2.3 million.
Property management expenses remained constant at $0.7 million representing 2.2
percent and 2.3 percent of income from property in 2000 and 1999, respectively.
General and administrative expenses remain constant at $0.9 million,
representing 2.5 percent and 2.6 percent of total revenues in 2000 and 1999,
respectively.
EBITDA increased by $2.4 million from $23.1 million to $25.5 million. EBITDA as
a percent of revenues increased to 69.0 percent in 2000 compared to 67.8 percent
in 1999.
Depreciation and amortization increased by $0.6 million from $7.3 million to
$7.9 million, or 7.8 percent, due primarily to acquisitions and development of
communities in 2000 and 1999.
Interest expense increased by $0.3 million from $7.2 million to $7.5 million, or
4.9 percent, due primarily to additional investments in rental property and
investment in and advances to affiliates.
The $4.6 million gain included in other, net primarily relates to proceeds from
the condemnation of certain land in two communities by the state transportation
department.
12
<PAGE> 13
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SAME PROPERTY INFORMATION
The following table reflects property-level financial information as of and for
the nine months ended September 30, 2000 and 1999. The "Same Property" data
represents information regarding the operation of communities owned as of
January 1, 1999 and September 30, 2000. Site, occupancy, and rent data for those
communities is presented as of the last day of each period presented. The total
portfolio column differentiates from the same property column by including
financial information for managed but not owned communities, recreational
vehicle communities, new development and acquisition communities and income
related to dealer and manufacturer agreements.
<TABLE>
<CAPTION>
SAME PROPERTY TOTAL PORTFOLIO
------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- --------------------------
<S> <C> <C> <C> <C>
Income from property $ 74,946 $ 71,169 $ 99,217 $ 93,251
----------- ---------- ----------- ----------
Property operating expenses:
Property operating and maintenance 13,708 13,162 21,379 20,407
Real estate taxes 5,805 5,328 6,818 6,666
----------- ---------- ----------- ----------
Property operating expenses 19,513 18,490 28,197 27,073
----------- ---------- ----------- ----------
Property EBITDA $ 55,433 $ 52,679 $ 71,020 $ 66,178
=========== ========== =========== ==========
Number of operating properties 88 88 113 110
Developed sites 30,119 29,764 39,340 39,336
Occupied sites 28,662 28,392 36,546 36,325
Occupancy % 95.2% 95.4% 95.0%(1) 94.7%(1)
Weighted average monthly rent per site $ 289 $ 277 $ 287(1) $ 276(1)
Sites available for development 1,595 1,854 5,481 6,500
Sites planned for development in current year 59 299 522 550
</TABLE>
(1) Occupancy % and weighted average rent relates to manufactured housing sites,
excluding recreational vehicle sites
On a same property basis, property revenues increased by $3.8 million from $71.2
million to $75.0 million, or 5.3 percent, due primarily to increases in rents
and occupancy related charges including water and property tax pass through.
Also contributing to revenue growth was the increase of 270 leased sites at
September 30, 2000 compared to September 30, 1999.
Property operating expenses increased by $1.0 million from $18.5 million to
$19.5 million or 5.5 percent, due to increased occupancies and costs. Property
EBITDA increased by $2.7 million from $52.7 million to $55.4 million, or 5.2
percent.
13
<PAGE> 14
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $9.8 million to $21.1 million at
September 30, 2000 compared to $11.3 million at December 31, 1999 because cash
provided by operating and financing activities exceeded cash used in investing
activities.
Net cash provided by operating activities increased by $3.9 million to $47.5
million for the nine months ended September 30, 2000 compared to $43.6 million
for the same period in 1999. This increase was primarily due to a $2.5 million
increase in earnings attributable to OP Units before other, net and depreciation
and amortization and a $2.8 million change in other assets offset by a $1.4
million change in accounts payable and other liabilities.
Net cash used in investing activities decreased by $11.6 million to $56.4
million from $68.0 million primarily due to a $8.8 million decrease in
investments in notes receivable, net and a $7.8 million decrease in investment
in rental properties offset by a $4.8 million reduction of proceeds related to
asset sales.
Net cash provided by financing activities decreased by $12.0 million to $18.7
million for the nine months ended September 30, 2000 compared to $30.7 million
for the same period in 1999. This decrease was primarily because of a $59.0
million reduction in borrowings on the line of credit, a $51.6 million reduction
in capital contributions and a $1.3 million increase in distributions offset by
proceeds of $100 million received from the August 2000 issuance of senior notes
which bear interest at 8.2% and mature August 15, 2008.
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% and is due January 1, 2003. See "Special Note Regarding
Forward-Looking Statements."
The terms of $35.8 million of Convertible Preferred Operating Partnership Units
were renegotiated in the first quarter of 2000. The conversion price increased
from $27 to $36 and the coupon raised from 7% to 9% with equal serialized
maturities in January 2003, 2004, 2005 and 2007.
At September 30, 2000, the Company's debt to total market capitalization ratio
approximated 37.2% (assuming conversion of all Common and Preferred OP Units
into shares of common stock). The debt has a weighted average maturity of
approximately 6.3 years and a weighted average interest rate of 7.35%.
Recurring capital expenditures approximated $3.2 million for the nine months
ended September 30, 2000.
14
<PAGE> 15
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER
Year 2000 Update
In February 2000, the Company officially concluded its Year 2000 compliance
program as no events had occurred that significantly affected either the
Company's operation or its financial statements.
Special Note Regarding Forward-Looking Statements
This Form 10-Q 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. Such
uncertainties and factors include the ability of manufactured home buyers to
obtain financing, the level of repossessions by manufactured home lenders, and
those referenced in the section entitled "Risk Factors" of the Company's
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on February 15, 2000.
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.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101"). This statement represents guidance and interpretations of basic
principles of revenue recognition in existing generally accepted accounting
principles (GAAP). As amended, SAB 101 should be implemented no later than
fourth quarter of fiscal years beginning after December 15, 1999. The Company is
in the process of evaluating the effect of SAB 101 but does not expect a
financial impact.
15
<PAGE> 16
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OTHER CONTINUED:
Recent Accounting Pronouncements, continued
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 effective
January 1, 2001. There is no effect from the application of SFAS 133 on the
earnings and financial position of the Company as the Company had no derivative
instruments at September 30, 2000 and December 31, 1999.
16
<PAGE> 17
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
PART II
ITEM 6.(A) - EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
ITEM 6.(B) - REPORTS ON FORM 8-K
On August 16, 2000, the Company filed a Form 8-K reporting its issuance of $100
million aggregate principal amount of 8.20% Medium-Term Notes due August 15,
2008.
17
<PAGE> 18
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 13, 2000
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
BY: Sun Communities, Inc., General Partner
BY: /s/ Jeffrey P. Jorissen
-------------------------------------------------
Jeffrey P. Jorissen, Chief Financial Officer
and Secretary
18
<PAGE> 19
SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE FILED NUMBER
EXHIBIT NO. DESCRIPTION HEREWITH HEREIN
----------- ----------- -------- ------
<S> <C> <C> <C>
27 Financial Data Schedule X
</TABLE>
19
