<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 1997
-------------------
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
Commission file number 33-85492
--------
CP LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
MARYLAND 38-3140664
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
6430 SOUTH QUEBEC STREET, ENGLEWOOD, CO 80111
(Address of principal executive offices, including zip code)
(303) 741-3707
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- -----
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CP LIMITED PARTNERSHIP
FORM 10-Q
INDEX
PAGE NUMBER
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income
for the Three and Nine Months Ended
September 30, 1997 and 1996 1
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1997
and 1996 3
Notes to Condensed Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------------------------
1997 1996 1997 1996
-------- -------- --------- --------
Revenues:
Rental income $ 34,032 $ 16,954 $ 95,723 $ 50,100
Management fee, interest
and other income 1,263 29 2,514 103
-------- -------- -------- --------
35,295 16,983 98,237 50,203
Expenses:
Property operating and
maintenance 9,582 4,873 25,302 13,882
Real estate taxes 2,578 1,232 7,272 3,607
Depreciation and
amortization 8,968 2,838 24,144 8,517
Administrative 1,740 886 5,311 2,905
Interest and related
amortization 6,757 3,199 18,828 9,417
-------- ------ ------- -------
29,625 13,028 80,857 38,328
-------- ------ ------- -------
Net income 5,670 3,955 17,380 11,875
Net income attributed to:
General partner $ 5,113 $ 1,615 $ 15,135 $ 4,858
Limited partner 557 2,340 2,245 7,017
-------- ------ ------- -------
$ 5,670 $ 3,955 $ 17,380 $ 11,875
-------- ------ ------- -------
-------- ------ ------- -------
Net income per OP unit
outstanding $ .20 $ .26 $ .66 $ .80
-------- ------ ------- -------
-------- ------ ------- -------
Distribution declared per
OP unit outstanding $ .43 $ .405 $ 1.29 $ 1.215
-------- ------ ------- -------
-------- ------ ------- -------
Weighted average OP units
outstanding 28,064 14,936 26,510 14,907
-------- ------ ------- -------
-------- ------ ------- -------
The accompanying notes are an integral
part of the financial statements.
1
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CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1997 1996
------------- ------------
Rental property:
Land $ 111,198 $ 33,821
Land and improvements for expansion sites 13,751 1,988
Depreciable property 692,698 264,822
--------- --------
817,647 300,631
Less accumulated depreciation 105,148 81,293
--------- --------
712,499 219,338
Cash and cash equivalents 315 586
Receivables 12,689 5,403
Notes receivable 9,218 90
Prepaid expenses and other assets 15,073 6,649
--------- --------
Total assets $ 749,794 $ 232,066
--------- ---------
--------- ---------
LIABILITIES
Debt $ 350,239 $ 168,315
Accounts payable and accrued expenses 17,781 10,285
Tenants' security deposits and rents received
in advance 7,180 4,852
Accrued dividends and distributions 12,185 5,871
--------- ---------
Total liabilities 387,385 189,323
SHAREHOLDERS' EQUITY
PARTNERS' CAPITAL, Unlimited Authorized units;
28,225,417 and 14,497,270 OP units outstanding
at September 30, 1997 and December 31, 1996,
respectively
General partners 326,932 16,191
Limited partners 35,477 26,552
--------- ---------
Total partners' capital 362,409 42,743
--------- ---------
Total liabilities and partners'
capital $ 749,794 $ 232,066
--------- ---------
--------- ---------
The accompanying notes are an integral
part of the financial statements.
2
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CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996.
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
---- ----
Cash Flows From Operating Activities:
Net income $ 15,135 $ 4,858
Adjustments to reconcile net income to net cash
provided by operating activities: 2,245 7,017
Depreciation and amortization 24,144 8,517
Amortization of deferred financing costs 354 329
Decrease (increase) in operating assets (4,803) (1,994)
Increase (decrease) in operating liabilities (1,380) 2,602
---------- ---------
Net cash from operating activities 35,695 21,329
Cash flows from financing activities:
Net borrowing on line of credit 16,917 21,500
Mortgage principal payments (1,124) (856)
Distributions to OP unit holders (29,929) (18,016)
OP units reacquired and retired (19,851) (932)
Proceeds from the issuance of OP units 25,477 -
Other financing activities 3,109 94
---------- ---------
Net cash provided by (used in)
financing activities (5,401) 1,790
Cash flows from investing activities:
Acquisition of rental properties (2,930) (18,540)
Additions to rental property (15,178) (3,579)
Payment of deferred merger costs (12,457) (1,697)
Net cash used in investing activities (30,565) (23,816)
Decrease in cash and cash equivalents (271) (697)
Cash and cash equivalents, beginning of period 586 944
---------- ---------
Cash and cash equivalents, end of period $ 315 $ 247
---------- ---------
---------- ---------
Supplemental cash flow information:
OP Units issued in connection with the acquisition
of rental properties 3,121 $ 1,964
---------- ---------
---------- ---------
The accompanying notes are an integral
part of the financial statements.
3
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CP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY:
-----------------------------------------------
The accompanying unaudited condensed consolidated financial
statements of CP Limited Partnership. (the "Company"), have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for
a fair presentation have been included, and such adjustments are of a
normal recurring nature. The year-end condensed consolidated balance
sheet was derived from audited consolidated financial statements, but
does not include all disclosures required by generally accepted
accounting principles. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended
December 31, 1996.
Chateau Communities, Inc. ("Chateau"), a Real Estate Investment Trust
("REIT"), is the sole general partner of the Company. On November 23,
1993, Chateau completed a public offering of 5,700,000 shares of $.01
par value common stock (the "Equity Offering"). Simultaneous with
the Equity Offering, Chateau contributed the net proceeds from the
Equity Offering and was admitted as the sole general partner of the
Company.
2. MERGER WITH ROC COMMUNITIES, INC.
---------------------------------
In February 1997, Chateau completed its merger with ROC Communities,
Inc. (the "Merger"). The Merger and related transactions were
accounted for using the purchase method of accounting in accordance
with generally accepted accounting principles. Accordingly, the
assets and liabilities of ROC were adjusted to fair value for
financial accounting purposes and the results of operations of ROC
are included in the results of operations of the Company beginning
February 1, 1997.
In connection with the Merger, the following related transactions
occurred:
- The Company repurchased and retired 1,200,000 OP units from
Chateau, in late 1996 and early 1997.
- ROC purchased 350,000 shares of Chateau common stock, which were
retired along with a equivalent number of units at the time of the
merger.
- The Company issued 1.042 OP units to Chateau to reflect an
equivalent number of shares issued by Chateau for each share of
ROC stock outstanding.
- The Company paid a distribution equal to .0326 units per OP Unit
outstanding, to reflect an equivalent stock dividend by Chateau.
4
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- Certain limited partners converted 6,170,908 OP Units for common
shares which results in those units being held by Chateau. These
Unitholders waived their right to receive the above distribution
with respect to those OP units exchanged and as a result it was
allocated to Chateau, resulting in an effective distribution to
the general partner of .068 OP units.
- The exchanging limited partners purchased 984,423 additional
shares of common stock from Chateau with the proceeds.
In connection with the Merger, Chateau issued common stock valued at
approximately $351 million, including the costs incurred to complete the
Merger, which was allocated as follows:
Rental property $ 501.3
Net working capital 15.8
Debt assumed (166.1)
---------
351.0
---------
---------
As of September 30, 1997, the Company owned 128 communities with an aggregate
of approximately 43,300 residential homesites. In addition, it fee managed and
controlled 6,700 residential homesites in 32 communities.
The following unaudited pro forma income statement information has been
prepared as if the Merger and related transactions had occurred on January 1,
1996. In addition, the pro forma information is presented as if the
acquisition of 13 properties made in 1996 by the Company and ROC had occurred
on January 1, 1996. The pro forma income statement information is not
necessarily indicative of the results which actually would have occurred if
the Merger had been consummated on January 1, 1996.
Three Months Ended Nine Months Ended
September 30 September 30
-----------------------------------------------
(In thousands, except per share data)
1997 1996 1997 1996
--------- -------- --------- ---------
Revenues $ 35,295 $ 33,311 $ 103,672 $ 99,143
Expenses:
Property, operating,
maintenance and administrative 13,900 13,863 39,758 40,591
Depreciation and amortization 8,968 8,335 26,003 25,202
Interest and related amortization 6,757 6,310 20,100 18,973
--------- -------- --------- ---------
Total expenses 29,625 28,508 85,861 84,766
--------- -------- --------- ---------
Net income 5,670 4,803 17,811 14,377
--------- -------- --------- ---------
Per OP unit $ .20 $ .17 $ .64 $ .52
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average
OP Units outstanding 28,070 27,923 27,997 27,893
--------- -------- --------- ---------
--------- -------- --------- ---------
5
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3. EQUITY TRANSACTIONS:
In September, 1997, Chateau issued 101,239 shares of common stock in a
private placement, under section 4(2) of the Securities Act of 1933, as
amended, and $750,000 in cash, in exchange for all of the outstanding
shares of The Windsor Corporation ("Windsor"). Windsor Corporation is the
general partner of five public limited partnerships and trust advisor for
one public, REIT owning, in the aggregate, 28 manufactured home communities
containing approximately 5,700 homesites, currently managed by the Company.
On August 21, 1997, Chateau declared a cash dividend/distribution of $.43
per share/OP unit to shareholders and OP Unitholders of record as of
September 30, 1997. The dividend was paid on October 15, 1997 and is
included in accrued dividends and distributions in the accompanying
condensed consolidated balance sheet as of September 30, 1997.
On May 22, 1997, Chateau declared a cash dividend/distribution of $.43 per
share/OP Unit to shareholders and OP Unitholders of record as of September
30, 1997. The dividend/distribution was paid on July 15, 1997.
On March 20, 1997, Chateau declared a cash dividend/distribution of $.43
per share/OP Unit to shareholders and OP Unitholders of record as of March
31, 1997. The dividend/distribution was paid on April 14, 1997.
On November 13, 1996, Chateau declared a cash dividend/distribution of
$.405 per share/OP unit to shareholders and OP Unitholders of record as of
December 31, 1996. The dividend/ distribution was paid on January 15, 1997
and is included in accrued dividends and distributions in the accompanying
condensed consolidated balance sheet as of December 31, 1996.
4. DEBT:
-----
The following table sets forth certain information regarding debt at
September 30, 1997.
Weighted
Interest Rate Maturity Date Principal Balance
------------- ------------- -----------------
Fixed Rate Mortgage Debt 7.94% 1998-2011 115,486
Unsecured Senior Notes 8.16% 2000-2003 145,000
Unsecured Lines of Credit 6.77% - 87,751
Other notes payable various various 2,002
---------------
350,239
---------------
---------------
5. CONTINGENCIES:
--------------
Several claims and legal actions arising from the normal course of
business, none of which are environmental related matters, have been
asserted against the Company, and are pending final resolution. Although
the amount of liability at September 30, 1997, if any, with respect to
these matters is not determinable, in the opinion of management, none of
these matters will result in material liability.
6
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6. SUBSEQUENT EVENT:
-----------------
On November 6, 1997, the Company announced the acquisition of four
manufactured home communities for an aggregate purchase price of $20
million. The acquisition was financed with the issuance of 16,480 OP units
and the remainder with cash funded by its line of credit and a bridge
facility issued as an extension to its line of credit. The communities are
located near Boston, Massachusetts and contain more than 600 homesites.
7
<PAGE>
ITEM 2. Management's Discussion And Analysis of Financial Condition And
Results Of Operations
The following discussion and analysis of interim results of operations and
financial condition covers the three and nine months ended September 30, 1997
and 1996 and should be read in conjunction with the Condensed Consolidated
Financial Statements and Notes thereto included in this report. Certain
statements in this report constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
On February 11, 1997, Chateau completed its merger ("the "Merger") with ROC
Communities, Inc. ("ROC"). The historical results of the Company in 1997
include the results of operations of ROC since February 1, 1997.
Historical Results Of Operations
Comparison Of Three Months Ended September 30, 1997 To Three Months ended
September 30, 1996
For the three months ended September 30, 1997, net income was $5,670,000, an
increase of $1,715,000 from the three months ended September 30, 1996. The
increase was due primarily to the Merger, as well as acquisitions that were
consummated in 1997 and 1996 by the Company or ROC, and increased net
operating income from communities owned by the Company and ROC at the
beginning of the period (the "Core 1996 Portfolio"). The increase in net
operating income from the Company's Core 1996 Portfolio was due to increased
occupancy and rental increases partially offset by general operating expense
increases.
Rental revenue in the three months ended September 30, 1997 was $34,032,000,
an increase of $17,078,000 from the three months ended September 30, 1996.
Approximately 85 percent of the increase was due to the Merger, and 6 percent
was due to 1997 and 1996 acquisitions made by the Company or ROC. The
remaining 9 percent increase was due to rental increases and occupancy gains
in the Company's Core 1996 Portfolio. Weighted average occupancy for the
three months ended September 30, 1997 was 39,653 compared with 19,064 for the
same period in 1996. The occupancy rate was 91.7 percent on approximately
43,300 sites as of September 30, 1997, compared to 95.4 percent on
approximately 20,000 sites as of September 30, 1996. The decrease in the
occupancy rate is due to the increase in available sites added through
expansions of existing communities and the acquisition of six development
communities in 1996. The occupancy rate on the stabilized portfolio was 94.2
percent as of September 30, 1997. On a per site basis, weighted average
monthly rental revenue for the three months ended September 30, 1997 was $288
compared with $289 in the same period of 1996. The decrease is due to the
properties acquired having a lower per site monthly rent. For the Company's
Core 1996 Portfolio, on a per site basis, weighted average monthly rental
revenue for the three months ended September 30, 1997 was $291 compared with
$279 for the same period in 1996, an increase of 4.5 percent.
Management fee, interest and other income primarily include management fee
income for the management of 32 manufactured home communities, equity
earnings from the Company's sales subsidiary and interest income on notes
receivable. The increase in 1997 from 1996 is due primarily to business
activities acquired in conjunction with the Merger.
8
<PAGE>
Property operating and maintenance expense for the three months ended
September 30, 1997 increased by $4,709,000 or 97 percent from the same period
a year ago. The majority of the increase was due to the Merger and 1997 and
1996 acquisitions. The remaining increase was due to increases in the
Company's Core 1996 Portfolio. On a per site basis, monthly weighted average
property operating and maintenance expense decreased 5.5 percent from
approximately $85 in 1996 to approximately $81 in 1997.
Real estate taxes for the three months ended September 30, 1997, increased by
$1,346,000 or 109 percent from the three months ended September 30, 1996.
The increase is due primarily to the Merger, acquisitions and expansions of
communities and general increases. Real estate taxes may increase or
decrease due to inflation, expansions and improvements of communities, as
well as changes in taxation in the tax jurisdictions in which the Company
operates.
Administrative expense for the three months ended September 30, 1997 increased
due to the Merger. Administrative expense in 1997 was 4.9 percent of revenues
as compared to 5.2 percent in 1996.
Interest and related amortization costs increased for the three months ended
September 30, 1997 by $3,558,000, as compared with the three months ended
September 30, 1996. The increase is attributable to the indebtedness
incurred in connection with the Merger and to finance the 1997 and 1996
acquisitions. Interest expense as a percentage of average debt outstanding
decreased to approximately 7.7 percent in 1997 from approximately 8.4 percent
in 1996. The decrease is due primarily to the ROC debt assumed in the Merger
having a lower average interest rate as well as much of the financing in
connection with the Merger and the 1997 and 1996 acquisitions being done with
the Company's lines of credit which have a lower average interest rate. In
addition, in July 1997, the Company renegotiated its lines of credit into a
new line with a lower borrowing rate of 110 basis points over LIBOR versus
150 basis points over LIBOR on the old lines.
Depreciation expense for the three months ended September 30, 1997, increased
$6.1 million from the same period a year ago. The increase is directly
attributable to the Merger and acquisitions. Depreciation expense as a
percentage of average depreciable rental property in 1997 remained relatively
unchanged from 1996.
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996
For the nine months ended September 30, 1997, income was $17,380,000, an
increase of $5,505,000 from the nine months ended September 30, 1996. The
increase was due primarily to the Merger, as well as acquisitions that were
consummated in 1997 and 1996 by the Company or ROC, and increased net
operating income from the Core 1996 Portfolio. The increase in net operating
income from the Company's Core 1996 Portfolio was due to increased occupancy
and rental increases partially offset by general operating expense increases.
Rental revenue in the first nine months of 1997 was $95,723,000 an increase
of $45,623,000 from the first nine months of 1996. Approximately 77 percent
of the increase was due to the Merger, and 12 percent was due to 1997 and
1996 acquisitions made by the Company or ROC. The remaining 11 percent
increase was due to rental increases and occupancy gains in the Company's
Core 1996 Portfolio. Weighted average occupancy for the nine months ended
September 30, 1997 was 37,390 compared with 18,813 for the same period in
1996. On a per site basis, weighted average monthly rental revenue for the
nine months ended September 30, 1997 was $286 compared with $287 in the same
period of 1996. The decrease is due to the properties acquired having a lower
per site monthly rent. For the Company's Core 1996 Portfolio, on a per site
basis, weighted average monthly rental revenue for the nine months ended
September 30, 1997 was $293 compared with $277 for the same period in 1996,
an increase of 5.9 percent.
9
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Management fee, interest and other income primarily includes management fee
income for the management of 32 manufactured home communities, equity
earnings form the Company's sales subsidiary and interest income on notes
receivable. The increase in 1997 from 1996 is due primarily to business
activities acquired in conjunction with the Merger.
Property operating and maintenance expense for the nine months ended
September 30, 1997 increased by $11,420,000 or 82 percent from the same
period a year ago. The majority of the increase was due to the Merger and
1997 and 1996 acquisitions. The remaining increase was due to increases in
the Company's Core 1996 Portfolio. On a per site basis, monthly weighted
average property operating and maintenance expense decreased 8.3 percent from
approximately $82 in 1996 to approximately $75 in 1997
Real estate taxes for the first nine months ended September 30, 1997,
increased by $3,665,000 or 102 percent from the first nine months ended
September 30, 1996. The increase is due primarily to the Merger,
acquisitions and expansions of communities and general increases. Real
estate taxes may increase or decrease due to inflation, expansions and
improvements of communities, as well as changes in taxation in the tax
jurisdictions in which the Company operates.
Administrative expense for the first nine months of 1997 increased due to the
Merger. Administrative expense in 1997 was 5.4 percent of revenues as
compared to 5.8 percent in 1996.
Interest and related amortization costs increased for the nine months ended
September 30, 1997 by $9,411,000, as compared with the nine months ended
September 30, 1996. The increase is attributable to the indebtedness incurred
in connection with the Merger and to finance the 1997 and 1996 acquisitions.
Interest expense as a percentage of average debt outstanding decreased to
approximately 7.7 percent in 1997 from approximately 8.6 percent in 1996. The
decrease is due primarily to the ROC debt assumed in the Merger having a lower
average interest rate as well as much of the financing in connection with the
Company's Merger and the 1997 and 1996 acquisitions being done with the
Company's lines of credit which have a lower average interest rate. In
addition, in July 1997, the Company renegotiated its lines of credit into a
new line with a lower borrowing rate of 110 basis points over LIBOR versus 150
basis points over LIBOR on the old lines.
Depreciation expense for the nine months ended September 30, 1997, increased
$15.6 million from the same period a year ago. The increase is directly
attributable to the Merger and acquisitions. Depreciation expense as a
percentage of average depreciable rental property in 1997 remained relatively
unchanged from 1996.
Liquidity and Capital Resources
Net cash provided by operating activities was $35,695,000 for the nine months
ended September 30, 1997, compared to $21,329,000 for the nine months ended
September 30, 1996. The increase in cash provided by operating activities
was due primarily to the increase in net operating income.
Net cash used in financing activities for the nine months ended September 30,
1997 was $5,401,000. Use of cash included distributions made to OP
Unitholders of $29,929,000; net borrowings on the lines of credit of
$16,917,000 and the payment of $19,851,000 to repurchase and retire 750,000 OP
Units in connection with the Merger. The OP Units purchased in 1997 and 1996
as a part of the program were purchased at an average price of approximately
$25.75 per unit. This use of cash was offset partially by proceeds of
$25,477,000 from the issuance of 984,423 OP Units at approximately $25.88 per
share.
10
<PAGE>
Net cash used in investing activities for the nine months ended September 30,
1997 was $30,565,000. This amount represented joint venture investments,
acquisitions, capital expenditures and construction and development costs.
Also included in this is the investment in the Windsor Corporation financed
with the issuance of 101,239 OP Units at a price of approximately $29 per
share and $750,000 in cash. For the nine months ended September 30, 1997,
construction and development costs, including joint ventures, were
approximately $7.2 million, while recurring property capital expenditures,
other than construction and development costs, were approximately $2.9
million. Recurring property capital expenditures in 1997 increased due to the
Company's larger size. Capital expenditures have historically been financed
with funds from operations and it is the Company's intention that such future
expenditures will be financed with funds from operations.
On November 6, 1997 the Company announced the acquisition of four manufactured
home communities for an aggregate purchase price of $20 million. The
acquisition was financed with the issuance of 16,480 OP units and the remainder
with cash funded by its line of credit and an interim bridge facility issued in
connection with its line of credit. The communities are located near Boston,
Massachusetts and contain more than 600 homesites.
Future acquisitions of communities and land for development of sites will be
financed through borrowings on the line of credit, the issuance of additional
equity or debt securities, assumption of existing secured or unsecured
indebtedness, the issuance of OP units or capital contributions by Chateau. The
development of expansion sites will be financed primarily by cash flow from
operations and borrowings on the line of credit. At September 30, the Company
had available a credit facility of $100 million, including a term loan for $25
million. As of September 30, 1997, there was $87.8 million outstanding under
the line of credit.
The line of credit has First Chicago/NBD acting as lead agent. It is unsecured
and bears interest at 110 basis points over LIBOR.
The Company expects to meet its short-term liquidity requirements through cash
flow from operations and, if necessary, borrowings under its line of credit.
The Company anticipates meeting its long-term liquidity requirements from
borrowings under its line of credit, from the issuance of additional debt or
equity securities, capital contributions and cash flows from Chateau.
OTHER
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts (NAREIT) as net income excluding gains (or losses) from
debt restructuring and sales of property plus rental property depreciation and
amortization. Management believes that FFO is an important and widely used
measure of the operating performance of REITs which provides a relevant basis
for comparison among REITs. FFO (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing activities;
and (iii) is not an alternative to cash flows as a measure of liquidity. FFO is
calculated as follows:
11
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FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1997 1996 1997 1996
------- ------ --------- ---------
Net Income $ 5,670 $3,955 $17,380 $11,875
Depreciation of rental property 8,796 2,814 23,674 8,448
Amortization of other intangibles 110 - 296 -
------- ------ ------- -------
Funds from operations $14,576 $6,769 $41,350 $20,323
------- ------ ------- -------
------- ------ ------- -------
On a pro forma basis, FFO is calculated as follows:
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
Net Income $ 5,670 $ 4,802 $17,811 $14,377
Depreciation of rental property 8,796 8,129 25,484 24,645
Amortization of other intangibles 110 146 333 386
------- ------- ------- -------
Funds from operations $14,576 $13,077 $43,628 $39,408
------- ------- ------- -------
------- ------- ------- -------
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Three separate purported class actions have been filed against Chateau and its
directors in the Circuit Court of Montgomery County, Maryland alleging breaches
of fiduciary duty for agreeing to the Merger with ROC and refusing to endorse
alternative transactions proposed by Manufactured Home Communities, Inc. or Sun
Communities, Inc. The three class actions are entitled HARBOR FINANCE PARTNERS
V. CHATEAU PROPERTIES, et al. (Case No. 157467), NILES V. CHATEAU PROPERTIES, ET
AL. (Case No. 158284), AND ZSA ASSET ALLOCATION FUND V. BOLL, ET AL. (Case No.
158652) and were filed on or about September 12, 1996, September 27, 1996 and
October 4, 1996, respectively.
Chateau believes that such litigation (which has been consolidated) is entirely
without merit and intends to vigorously defend such litigation if pursued.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters for a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
13
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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, and in the capacities
indicated, on the 14th day of November, 1997.
CP LIMITED PARTNERSHIP
By: Chateau Communities, Inc.
By: /s/ Tamara D. Fischer
------------------------------------
Tamara D. Fischer
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statements of Income and Consolidated Balance Sheets found on pages
2 and 3 of the Company 10-Q for the three and nine months ended September 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 315
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 817,647
<DEPRECIATION> 105,148
<TOTAL-ASSETS> 749,794
<CURRENT-LIABILITIES> 0
<BONDS> 387,385
0
0
<COMMON> 0
<OTHER-SE> 362,409
<TOTAL-LIABILITY-AND-EQUITY> 749,794
<SALES> 0
<TOTAL-REVENUES> 98,237
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 62,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,828
<INCOME-PRETAX> 17,380
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,380
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
