<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- ----- Act of 1934
FOR THE YEAR ENDED DECEMBER 31, 1996
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 I.R.S. Employer
of incorporation or organization) Identification No.)
6430 South Quebec Street, Englewood, Colorado 80111
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 741-3707
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 whether the registrant: (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
----- -----
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.
<PAGE>
CP LIMITED PARTNERSHIP
FORM 10-K ANNUAL REPORT
for the year ended December 31, 1996
TABLE OF CONTENTS
_______
ITEM PAGES
---- -----
PART I
1. Business......................................................... 1
2. Properties....................................................... 6
3. Legal Proceedings................................................ 7
4. Submission of Matters to a Vote of Security Holders.............. 8
PART II
5. Market for Registrant's Common Equity and
Related Security Holder Matters............................. 8
6. Selected Financial Data.......................................... 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 11
8. Financial Statements and Supplementary Data...................... 17
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 34
PART III
10. Directors and Executive Officers of the Registrant............... 35
11. Executive Compensation........................................... 35
12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 35
13. Certain Relationships and Related Transactions................... 35
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K......................................... 36
Signatures....................................................... 41
FINANCIAL STATEMENT SCHEDULES
CP Limited Partnership Financial Statement Schedules............. F1
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS.
CP Limited Partnership (the "Company") is a Maryland limited partnership.
Chateau Properties, Inc. ("Chateau"), a Maryland corporation and the sole
general partner of the Company, is a self-administered and self-managed equity
real estate investment trust ("REIT"). The Company is engaged in the ownership,
management, leasing, expansion and acquisition of manufactured home communities.
The Company began operations through a predecessor in 1966, and today, is one of
the United States largest owners and operators of manufactured home community
properties with a portfolio of 47 communities in Michigan, Illinois, Florida,
Minnesota and North Dakota (the "Properties"). The Company also has a 50
percent interest in a joint venture with ROC Communities, Inc. ("ROC") that owns
6 development communities.
On February 11, 1997, the Company completed its merger with ROC (the "Merger").
The Merger and related transactions will be accounted for using the purchase
method of accounting in accordance with generally accepted accounting
principles. Accordingly, the assets and liabilities of ROC will be adjusted to
fair value for financial accounting purposes and the results of operations of
ROC will be included in the results of operations of the Company in 1997.
In connection with the Merger, the following related transactions occurred:
- The Company repurchased and retired 1,200,000 OP units from Chateau,
of which 450,000 were repurchased in 1996
- ROC purchased 350,000 shares of Common Stock of Chateau, 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 OP units per OP unit
outstanding, to reflect an equivalent stock dividend by Chateau
- Certain limited partners exchanged 6,170,908 OP units for common
shares, which resulted 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
re-allocated to Chateau, resulting in a distribution to the general
partner of .068 OP units
- These exchanging limited partners purchased 984,423 shares of Common
Stock from Chateau at $25.88 per share, and Chateau purchased the same
number of units from the Company with these proceeds.
Since the Merger, the Company now owns 128 communities with an aggregate 42,986
residential homesites. In addition, it now fee manages 6,953 residential
homesites in 34 communities.
1
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FORMATION OF THE COMPANY
The Company was formed by Chateau, as general partner, and Chateau Estates, as
the initial limited partner on September 16, 1993.
In November 1993, the Company engaged in the following transactions:
* Chateau Estates, a Michigan co-partnership, contributed fee title to
twenty of the Properties to the Company in exchange for partnership
interests in the Company ("OP units").
* InterCoastal Communities, Inc. a Florida corporation and its
affiliates (collectively "InterCoastal"), contributed fee title to one
Property and partnership interests in partnerships which own fee title
to six of the Properties to the Company in exchange for OP units.
* A group of six Michigan co-partnerships affiliated with Leonard Maas
(collectively "Maas") contributed fee title to six of the Properties
to the Company in exchange for OP units.
* Chateau contributed the net proceeds of its initial public offering
(the "IPO") of $103.8 million to the Company, in exchange for a 40.8
percent partnership interest in the Company as its sole general
partner.
* The Company used the capital contribution from Chateau after the IPO
to repay approximately $88.2 million of indebtedness (including
related prepayment penalties) collaterialized by mortgages on certain
of the Properties and the balance was retained for working capital and
for the possible acquisition of additional manufactured home
communities or development of expansion sites.
Chateau Estates, InterCoastal, and Maas are referred to together as the Chateau
Properties Group or the Predecessor.
INDUSTRY OVERVIEW
A manufactured home 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 variety of architectural styles and floor
plans, offering many amenities, custom options and on-site built additional
structures.
Modern manufactured home communities are similar to typical residential
subdivisions usually containing centralized entrances, paved streets, curbs and
gutters and parkways. These communities frequently provide a clubhouse for
social activities and recreation and other amenities, which may include swimming
pools, shuffleboard courts, tennis courts and laundry facilities. Utilities
are provided or arranged for by the owner of the community. Some communities
provide water and sewer service through public or private utilities, while
others provide these services to residents from on-site facilities.
2
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The owner of each home in a manufactured home community leases a site from the
community. The manufactured home community is the owner of 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. Each owner within the manufactured home community
is responsible for the maintenance of his home and leased site.
OPERATING AND INVESTMENT STRATEGIES
The Company seeks to maximize long-term growth in income and portfolio value
through active management and expansion of certain of its existing manufactured
home communities and the selective acquisition of additional communities. The
Company focuses on manufactured home communities that have above-average cash
flow growth potential and expects to hold such properties for long-term
investment and capital appreciation. The Company's investment and operating
strategies include:
OPERATIONS
* Providing the most attractive and desirable manufactured home
communities in its markets.
* Offering a more extensive selection of amenities than other
manufactured home communities in its markets.
* Maintaining and upgrading on a systematic basis its manufactured home
communities through a regular preventive maintenance and replacement
program.
* Offering residents on-site services and accessibility to on-site
managers to maximize retention, encourage home maintenance and
improvements and minimize turnover.
* Providing frequent personal contact between on-site managers and
residents to foster a sense of pride in the community.
* Through a subsidiary of Chateau, offer potential community residents
the convenience of purchasing a home in place.
ACQUISITIONS, DEVELOPMENT AND EXPANSIONS
* Selectively acquiring well-located manufactured home communities that
demonstrate the potential for increases in revenue and cash flow by
providing a professional property management team, correcting
operating inefficiencies, aggressively leasing and/or renovating sites
and developing additional sites.
* Acquiring properties in existing markets in order to achieve economies
of scale in management and operations, and in new markets where
portfolios may be acquired with regional management in place.
* Selectively developing new communities in regions where the Company
already does business and further development is supported by
demographics and strong market demand.
3
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* Capitalizing on opportunities to renovate and expand properties
consistent with local market demand.
* Utilizing the expertise and relationships developed by the Company's
management to identify acquisition opportunities and complete
acquisitions directly with sellers prior to the active public
marketing of the properties.
Important factors to the Company when evaluating potential acquisitions include:
* Quality of the design and construction of the communities.
* Current condition and appearance of the communities.
* Current cash flow and ability of the Company to increase cash flow
through rental increases, enhanced operating efficiencies and site
expansions.
* Existing and potential competition from other manufactured home
communities.
* Economic strength of the surrounding area.
The Company intends to finance its acquisitions and expansions through its $50
million unsecured line of credit with Huntington National Bank, as lead agent,
along with Bank of America and First Chicago NBD, and/or through additional debt
offerings, the issuance of OP units or contributions from Chateau from
additional equity offerings. The Company also intends to maintain debt-to-total
market capitalization (i.e., total debt of the Company as a percentage of the
market value of the outstanding OP Units of the Company, plus total debt) of 40
percent or less. Assuming the market value of an OP unit is equivalent to the
market value of Chateau's common stock, at December 31, 1996, the Company had
debt-to-total market capitalization of approximately 30 percent.
EXPANSION AND IMPROVEMENT OF MANUFACTURED HOME COMMUNITY PROPERTIES
The Company will seek to increase the income generated from the Properties and
from any additional properties acquired by expanding the number of sites
available to be leased to residents if justified by local market conditions and
permitted by zoning and other applicable laws. During 1996, the Company
developed 276 expansion sites. As of December 31, 1996 the Company had 20,279
total sites, of which 1,131 were vacant. The Company owned at such date
undeveloped land adjacent to existing communities containing approximately 1,200
expansion sites which are zoned for manufactured housing. All necessary
utilities are available at these expansion sites, however, building permits
would need to be obtained prior to development. This undeveloped land will
facilitate additional growth to the extent conditions warrant. In addition,
where appropriate, the Company will consider upgrading or adding facilities and
amenities to certain communities in order to make those communities more
attractive in their markets.
During 1996, the Company expanded its Anchor Bay community by completing the
development of 103 sites, expanded its Algoma community by developing 53 sites,
expanded its Fairways community by completing the development of 10 sites and
developed 110 sites on land adjacent to its Macomb community.
4
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1996 ACQUISITIONS
During 1996, the Company completed the following acquisitions:
<TABLE>
<CAPTION>
Amount
Allocated OP
Community Name and to Assets Units
Date Location Acquired Issued Cash
------ ------------------ -------- ------ ----------
<S> <C> <C> <C> <C>
March, 1996 Chestnut Creek Farm $ 3,400 - $ 3,400
DAVISON, MI
May, 1996 Maple Valley and $ 5,800 $ 1,000 $ 4,800
Maple Ridge
MANTENO, IL
September, 1996 Joint venture with ROC $ 10,300 - $ 10,300
purchase of six communities
in six states
Various Other joint ventures $ 4,200 $ 1,000 $ 3,200
</TABLE>
LEASES
The typical lease entered into between the resident and one of the Company's
manufactured home communities 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. Pursuant to Michigan Mobile Home Commission Act Section
28 which governs the leasing of manufactured home sites in Michigan,
prospective residents must be given the opportunity to sign a lease for a fixed
term for their site. The Company's experience has been that a majority of
Michigan residents decline to execute a lease, but like all residents of the
Company's properties, do execute less formal documentation which sets forth the
general terms of occupancy. Leases or other terms of residents' occupancy are
cancelable for non-payment of rent, violation of community rules and regulations
or other specified defaults.
COMPETITION
All of the Properties are located in developed areas that include other
manufactured home community properties. The number of competitive manufactured
home community properties in a particular area could have a material effect on
the Company's ability to lease sites at the Properties or at any newly acquired
properties and on the rents charged. Although the Company believes it has
adequate capital resources and its officers and directors have significant
experience, the Company competes with others that may have greater resources
than the Company and whose officers and directors may have more experience than
the Company's officers and directors. In addition, other forms of multi-family
residential properties and single-family housing provide housing alternatives to
potential residents of the Properties.
5
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EMPLOYEES
As of December 31, 1996, the Company had approximately 276 full and part-time
employees. The Company utilizes a resident administrator for the on-site
administration of each of the Properties. Important duties of on-site
administrators as well as the office manager include extensive contact with
residents through initial introduction to community rules and on-going
accessibility for resident assistance. The communities have extensive rules and
regulations to maintain their appearance at the highest level. Administrators
notify residents who are in violation of these rules and regulations.
Typically, clerical and maintenance workers are employed to assist these
individuals in the management and care of the Properties. Direct supervision of
on-site administrators is the responsibility of the Company's regional vice
presidents. These individuals have significant experience in addressing the
needs of residents and in finding or creating innovative approaches to value
maximization and increased cash flow from property operations. Complementing
this field management staff are 23 corporate employees who assist on-site
administrators in all property functions.
Commitment to resident satisfaction is demonstrated by the ongoing training that
the Company provides for on-site staff. Community administrators meet
periodically at regional seminars to review Company philosophy and policy, to
discuss relevant administration issues and solutions and to share ideas and
experiences.
TAX STATUS
The Company is not liable for Federal income taxes as the partners recognize
their proportionate share of income or loss in their tax returns, therefore, no
provision for income taxes is made in the financial statements.
ITEM 2. PROPERTIES
At December 31, 1996 the Properties consisted of 47 manufactured home
communities containing 20,279 sites with amenities designed for either
retirement or family living of which 25 were located in Michigan, 13 in Florida,
4 in Minnesota, 3 in North Dakota and 2 in Illinois. The Company also owned
land adjacent to certain existing communities containing approximately 1,200
expansion sites which, although not yet developed, were zoned for manufactured
housing. Of the 47 Properties, 38 have 200 or more sites, with the largest
having 1,533 sites.
The Company also has a 50 percent interest in a joint venture with ROC that owns
6 development communities.
At December 31, 1996, the Properties had an average occupancy rate of
approximately 94.4 percent with weighted average rent for the year ended
December 31, 1996 of $285 per month. Weighted average rent is calculated as net
rental income for the period, on a monthly basis, divided by the weighted
average occupied sites. Weighted average occupancy is computed by averaging the
occupied sites at the end of each month in the period.
6
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The Company believes that the Properties provide amenities and common facilities
that create a safe and attractive community for the residents. All of the
Properties provide residents with attractive amenities with most offering a
clubhouse, a swimming pool and a library. Many Properties offer additional
amenities such as sauna/whirlpool spas, indoor pools, tennis courts,
shuffleboard courts, basketball courts, golf courses, day care facilities,
exercise rooms and a marina.
Since residents own their homes, it is their responsibility to maintain their
homes and the surrounding area. It is management's role to insure that
residents comply with community policies and to provide maintenance of the
common areas, facilities and amenities. The Company continually monitors
compliance by residents with its residents' regulations to assure that the
communities are maintained at the highest standards. The Company holds periodic
meetings of its property management personnel for training and implementation of
the Company's strategies, and property administrators make a daily inspection of
the Properties. The Company believes that, due in part to this strategy, the
Properties historically have had and will continue to have low turnover and high
occupancy rates. Since 1989, the Properties have averaged an annual turnover of
homes (where the home is moved out of the community) of less than 3 percent.
During this period, the average annual turnover of residents in the Properties
(where the home is sold and remains within the community, typically without
interruption of rental income) has been approximately 10-12 percent.
The Company owns a 100 percent beneficial interest in all of the Properties,
(other than the six properties held in the joint venture with ROC, in which it
has a 50 percent interest), except for Emerald Lake, Fairways, Lakeland
Junction, Lakes at Leesburg, Palm Beach Colony, Winter Haven Oaks and Del Tura
in which it owns a 99 percent beneficial interest and in which Chateau owns the
remaining 1 percent beneficial interest.
INDEBTEDNESS
At December 31, 1996, the aggregate amount of indebtedness encumbering the
Properties was approximately $54.4 million. The amounts outstanding as of
December 31, 1996 for the indebtedness encumbering each of these Properties is
set forth (in thousands) in the following table. Prepayment of these debt
obligations may result in significant prepayment penalties.
<TABLE>
<CAPTION>
Amount of
Amount of Interest Indebtedness
Property Pledged as Collateral Indebtedness Rate Maturity due at Maturity
- ------------------------------ ------------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Del Tura $ 33,323 8.40% 2000 $ 31,138
Macomb 16,328 9.82% 1999 15,574
Norton Shores/Ferrand Estates 3,535 8.00% 1999 3,327
Oak Hill 1,255 8.00% 1998 1,219
--------- ---------
Total $ 54,441 $ 51,258
--------- ---------
--------- ---------
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
In connection with a tender offer by Manufactured Home Communities, Inc.'s
("MHC") operating partnership for shares of Chateau's Common Stock in September
1996, Chateau commenced litigation against MHC and its operating partnership in
United States District Court in Baltimore, Maryland seeking a declaratory
judgment with respect to, among other things, the 7 percent ownership limit set
forth in the Company's Articles. MHC filed a counterclaim against Chateau, its
directors and ROC in the litigation
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alleging, among other things, various breaches of fiduciary duty. Despite
the withdrawal by MHC of its tender offer, this litigation remains pending.
In addition, 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 a merger with ROC and
refusing to endorse the MHC Tender Offer or the proposal received from Sun
Communities, Inc.
The Company believes the MHC counterclaim and the State Court litigation (which
has been consolidated) are entirely without merit and intends to vigorously
defend these cases if pursued.
The information contained in the Schedule 14D-9 filed by the Company, including
amendments previously filed and those which may be filed after the date hereof,
is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
Not applicable.
8
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth summary financial information of the Company and
the Predecessor for the periods and dates indicated.
<TABLE>
<CAPTION>
Predecessor
--------------------------
For the period For the
For the Year Ended November 23- January 1 - year ended
December 31, December 31, December 31, December 31, November 22, December 31,
In thousands, except per OP Unit data 1996 (1) 1995 1994 (2) 1993 1993 1992
------------ ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income $ 64,695 $ 59,912 $ 47,318 $ 4,577 $ 38,242 $ 40,826
Interest and other income 2,689 1,943 749 110 684 541
------------ ------------ ------------ ------------- ------------ ------------
Total revenues 67,384 61,855 48,067 4,687 38,926 41,367
Expenses:
Property operating and administrative 26,870 24,410 19,944 1,867 16,909 17,712
Depreciation 11,452 11,014 7,230 707 5,823 6,431
Interest and related amortization 12,962 12,452 5,996 576 12,101 14,303
Reorganization costs 1,699
------------ ------------ ------------ ------------- ------------ ------------
Total expenses 51,284 47,876 33,170 4,849 34,833 38,446
------------ ------------ ------------ ------------- ------------ ------------
Income (loss) before
extraordinary item 16,100 13,979 14,897 (162) 4,093 2,921
Extraordinary item (3) (829) (2,738)
------------ ------------ ------------ ------------- ------------ ------------
Net income (loss) 16,100 13,150 14,897 (2,900) 4,093 2,921
------------ ------------ ------------ ------------- ------------ ------------
------------ ------------ ------------ ------------- ------------ ------------
Net income (loss) attributed to
General partner $ 6,534 $ 5,303 6,037 $ (1,183)
Limited partners 9,566 7,847 8,860 (1,717)
------------ ------------ ------------ -------------
$ 16,100 $ 13,150 $ 14,897 $ (2,900) $ 4,093 $ 2,921
------------ ------------ ------------ ------------- ------------ ------------
------------ ------------ ------------ ------------- ------------ ------------
Weighted average OP Units
outstanding 14,837 14,779 14,189 14,081
Earnings per OP Unit Data:
Income (loss) before extraordinary
item $ 1.09 $ .95 $ 1.05 $ (.01)
Extraordinary item $ - $ (.06) $ - $ (.20)
Net income (loss) $ 1.09 $ .89 $ 1.05 $ (.21)
Distributions declared $ 1.62 $ 1.525 $ 1.425 $ .15
CASH FLOW DATA:
Net cash provided by operating
activities $ 29,755 $ 28,097 $ 22,584 $ 4,980 $ 8,659 $ 8,853
Net cash provided by (used in)
financing activities $ (595) $(24,365) $ 7,056 $ 15,591 $ (5,983) $ (5,933)
Net cash provided by (used in) investing
activities $(29,518) $ (6,158) $(46,214) $ (639) $ (3,416) $ (3,140)
BALANCE SHEET DATA:
Rental property, before accumulated
depreciation $300,631 $276,423 $266,833 $151,069 $ 147,107
Rental property, net of accumulated
depreciation $219,338 $206,555 $207,977 $ 97,755 $ 100,230
Total assets $232,066 $212,034 $215,418 $120,524 $ 106,449
Total debt $168,315 $132,700 $132,747 $ 52,831 $ 143,148
Total Partners' Capital (owners'
deficit) $ 42,743 $ 60,572 $ 67,111 $ 58,865 $ (46,016)
</TABLE>
9
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ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
OTHER DATA:
<TABLE>
<CAPTION>
Predecessor
------------------------------------------
For the period For the
For the Year Ended November 23- January 1 - year ended
December 31, December 31, December 31, December 31, November 22, December 31,
Dollars in thousands 1996(1) 1995 1994(2) 1993 1993 1992
------------ ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Total properties (at end of period) 47 44 43 33 33
Total sites (at end of period) 20,279 19,594 19,185 15,261 15,072
Weighted average occupied sites 18,889 18,051 14,913 14,025 14,025 13,683
Funds from operations (4) $ 27,460 $ 24,898 $ 22,015 $ 536 $ 9,822 $ 9,252
</TABLE>
(1) In February 1997, the Company completed a merger with ROC Communities,
Inc. See Note 11 to the Consolidated Financial Statements for
information regarding the merger.
(2) The Company acquired eight communities in the fourth quarter of 1994.
(3) The extraordinary items represent prepayment penalties and certain
other related costs associated with the early extinguishment of debt.
(4) 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. For all periods presented, depreciation of rental
property is the only non-cash adjustment. 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:
<TABLE>
<CAPTION>
Predecessor
------------------------------------------
For the period For the
For the Year Ended November 23- January 1 - year ended
December 31, December 31, November 22, December 31,
In thousands 1996(1) 1995 1994(2) 1993 1993 1992
------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item $ 16,100 $ 13,979 $ 14,897 $ (162) $ 4,093 $ 2,921
Depreciation of rental
property 11,360 10,919 7,118 698 5,729 6,331
------------- ------------ ------------ ------------- ------------ ------------
Funds from Operations $ 27,460 $ 24,898 $ 22,015 $ 536 $ 9,822 $ 9,252
</TABLE>
10
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion and analysis of results of operations and financial
condition covers the years ended December 31, 1996, 1995 and 1994 and should be
read in conjunction with the consolidated financial statements of the Company
included elsewhere herein.
On February 11, 1997, the Company completed its merger with ROC Communities,
Inc. ("ROC") (the "Merger"). The pro forma discussion covers the years ended
December 31, 1996 and 1995 assuming the Merger and related transactions had
occurred on January 1, 1995. This pro forma discussion should be read in
conjunction with Note 11 to the financial statements of the Company included
elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
For the year ended December 31, 1996, net income was $16,100,000, an increase
of $2,121,000 from the year ended December 31, 1995. The increase was due
primarily to increased net operating income from communities owned by the
Company on January 1, 1995 (the "Core 1995 Portfolio") and to a lesser extent,
the acquisition of three communities in 1996 and one community in 1995. The
increase in net operating income from the Company's Core 1995 Portfolio was due
to increased occupancy and rental increases offset by general operating expense
increases.
Rental revenue in 1996 was $64,695,000, an increase of $4,783,000 or 8.0
percent from 1995. Approximately 2.3 percent of the increase was due to the
acquisitions of three communities in 1996 and one in 1995, 3.9 percent
represented the effect of annual rent increases in the Core 1995 Portfolio
and 1.8 percent was due to increased occupancy in the Core 1995 Portfolio.
Weighted average occupancy for the year ended December 31, 1996, was 18,889
sites, or 4.6 percent higher than weighted average occupancy for the year
ended December 31, 1995. Weighted average occupancy increased in 1996 due to
the 1996 and 1995 acquisitions and the filling of 265 additional sites that
were either vacant at January 1, 1996 or developed in 1996. The occupancy
rate was 94.4 percent on 20,279 sites as of December 31, 1996, as compared
with 94.3 percent on 19,594 sites as of December 31, 1995. On a per site
basis, weighted average monthly rental revenue for the year ended December
31, 1996 increased to $285 from $277 in 1995 or 3.2 percent due to rental
increases in the Core 1995 Portfolio in 1996.
Interest and other income increased approximately $746,000, or 38 percent, in
1996 from 1995. The increase is due primarily to the inclusion of the
results of operations of four golf courses and a marina for the period
beginning January 1, 1996. These operations were previously conducted by GC
Properties, Inc. ("GCI"), a corporation wholly owned by an OP Unitholder of
the Company, in order to permit Chateau's qualification as a REIT under the
Internal Revenue Code. From November 23, 1993 through December 31, 1995, the
Company recognized net lease income from GCI which was classified as other
income. In early 1996, Chateau received a ruling from the Internal Revenue
Service allowing Chateau to conduct these operations. Effective January 1,
1996, as a result of acquiring the operations of GCI, the Company has
consolidated these operations.
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Property operating and maintenance expense for the year ended December 31,
1996 increased by $2,180,000 or 13.6 percent from the same period a year ago.
Approximately $1,028,000 of the increase represents the operating costs of
the golf course and marina operations discussed above. The remaining
increase of $1,152,000 or a 7.2 percent increase over the prior year, is due
primarily to the acquisition of three communities in 1996 and one in 1995.
On a per site basis, monthly weighted average property operating and
maintenance expense increased from $74 in 1995 to $80 in 1996, or 8.6
percent. Excluding the golf course and marina operations, monthly weighted
average property operating and maintenance expense increased 2.4 percent, on
a per site basis, year over year.
Real estate taxes for the year ended December 31, 1996, increased by $333,000,
or 7.4 percent, from the year ended December 31, 1995. The increase is due
primarily to acquisitions and expansions of communities and general increases.
On a per site basis, monthly weighted average real estate taxes were $21.40 in
1996 compared to $20.90 in 1995, an increase of 2.6 percent. 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 1996 was relatively constant with 1995.
Administrative expense in 1996 was 5.7 percent of revenues as compared to 6.3
percent in 1995.
Interest and related amortization costs increased for the year ended December
31, 1996, by $510,000, as compared with the year ended December 31, 1995.
The increase is attributable to the indebtedness incurred to finance the 1996
acquisitions of three communities and one in 1995, as well as the investment
in a joint venture with ROC that owns six development communities. Interest
expense also increased due to the financing of the Company's repurchase and
retirement of 450,000 OP units in connection with the Merger. Interest
expense as a percentage of average debt outstanding decreased to
approximately 8.1 percent in 1996 from approximately 8.9 percent in 1995.
Depreciation expense for the year ended December 31, 1996, increased $438,000
from the same period a year ago. The increase is due to acquisitions and
expansions. Depreciation expense as a percentage of average depreciable
rental property in 1996 remained relatively unchanged from 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
For the year ended December 31, 1995, net income was $13,979,000, a decrease
of $918,000 from the year ended December 31, 1994. The decrease was due to
an increase in depreciation of $3,784,000 and increased interest costs of
$6,456,000, which were offset by increased net operating income of
$9,322,000. These increases were primarily due to the acquisitions of one
community in 1995 and 10 communities in 1994, as well as an increase in net
rental revenue from the communities owned by the Company on January 1, 1994
(the "Core 1994 Portfolio"). The increase in net operating income from the
Company's Core 1994 Portfolio was due to increased occupancy and rental
increases offset by general operating expense increases. In the first
quarter 1995, the Company recognized an extraordinary charge of $829,000
related to the early extinguishment of debt.
12
<PAGE>
Rental revenue in 1995 was $59,912,000, an increase of $12,594,000 or 26.6
percent from 1994. Approximately 84.8 percent of the increase was due to the
acquisition of one community in September 1995 and 10 communities in 1994, eight
of which were acquired in the fourth quarter, 9.2 percent represents the effect
of annual rent increases in the Core 1994 Portfolio and 6.0 percent was due to
increased occupancy in the Core 1994 Portfolio.
Weighted average occupancy for the year ended December 31, 1995, was 18,051
sites, or 21 percent higher than weighted average occupancy for the year ended
December 31, 1994. Weighted average occupancy increased in 1995 due to the 1995
and 1994 acquisitions and the filling of 381 additional sites that were either
vacant at January 1, 1995, or developed in 1995. The occupancy rate was 94.3
percent on 19,594 sites as of December 31, 1995, as compared with 92.7 percent
on 19,185 sites as of December 31, 1994.
On a per site basis, weighted average monthly rental revenue for the year ended
December 31, 1995 increased to $277 from $264 in 1994 or 4.6 percent. This
increase was due to acquisitions made in 1995 and 1994 and rental increases in
the Core 1994 Portfolio in 1995, partially offset by a weighted average $2 per
month per site rebate that the Company passed through to its Michigan residents.
The rebate represented the net savings realized by the Company from a change in
real estate taxation in Michigan.
Interest and other income increased approximately $1,194,000, or 159 percent, in
1995 from 1994 primarily due to other operating revenues generated by the
communities acquired by the Company in November 1994.
Property operating and maintenance expense for the year ended December 31, 1995,
increased by $3,524,000 or 28.2 percent from the same period a year ago. The
increase is due primarily to the 1995 and 1994 acquisitions. On a per site
basis, monthly weighted average property operating and maintenance expense
increased from $70 in 1994 to $74 in 1995, or 5.9 percent. The increase on a
per site basis is due principally to certain of the communities acquired in 1994
having a higher per site operating cost, an increase in advertising and other
costs incurred to fill sites and utility rate increases. The higher per site
operating cost in certain of the acquired communities is due, in part, to the
costs associated with the other operating revenues generated by these
communities. The increase in advertising spending resulted in the net filling
of 381 sites for 1995, while only 170 sites were filled for the year ended
December 31, 1994.
Real estate taxes for the year ended December 31, 1995, increased by $688,000,
or 17.9 percent, from the year ended December 31, 1994. The increase is due
primarily to acquisitions and expansions of communities. On a per site basis,
monthly weighted average real estate taxes were $20.90 in 1995 compared to
$21.40 in 1994, a decrease of 2.6 percent. The decrease was due primarily to a
change in real estate taxation in Michigan and acquisitions which had a lower
per site real estate tax cost, offset by general tax increases. The change in
real estate taxation decreased real estate taxes beginning in the third and
fourth quarter of 1994, and first and second quarter of 1995. 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 year ended December 31, 1995, increased $254,000,
or 7.0 percent, from the year ended December 31, 1994. Administrative expense in
1995 was 6.3 percent of revenues as compared to 7.5 percent in 1994.
13
<PAGE>
Interest and related amortization costs increased for the year ended December
31, 1995, by $6,456,000, as compared with the year ended December 31, 1994. The
increase is attributable to the indebtedness incurred to finance the 1995 and
1994 acquisitions of 10 communities. Interest expense as a percentage of
average debt outstanding decreased to approximately 8.9 percent in 1995 from
approximately 9.4 percent in 1994 due to debt refinancing that occurred in the
first quarter of 1995.
Depreciation expense for the year ended December 31, 1995, increased $3,784,000
from the same period a year ago. The increase is due to the 1995 and 1994
acquisitions of 10 communities for a combined purchase price of approximately
$117 million. Depreciation expense as a percentage of average depreciable
rental property in 1995 remained relatively unchanged from 1994.
PRO FORMA RESULTS OF OPERATIONS
PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31,1995
Rental revenue increased $7,200,000 or 6 percent in 1996 over 1995 due to
increased occupancy and rental increases in communities owned by the Company on
January 1, 1995. Other revenues increased approximately $800,000 or 20 percent
for the year ended December 31, 1996 over 1995 due primarily to golf course and
marina operations which were consolidated in 1996 and recorded as net lease
income in 1995 as discussed above.
Property, operating, maintenance and administrative expense increased $4,100,000
or 8.3 percent in 1996 as compared to 1995. Excluding the expenses of the golf
course and marina operations discussed above, the increase would have been
$3,000,000 or 6.1 percent. This increase is due to the increased number of
occupied sites, as well as general increases.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $29,755,000 for the year ended
December 31, 1996, compared to $28,097,000 for the year ended December 31, 1995.
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 year ended December 31, 1996, was
$595,000. Use of cash included distributions made to OP Unit holders of
$24,065,000; the payment of $932,000 to reacquire 43,333 OP units at $21.50 per
Unit and the payment of $11,239,000 to repurchase and retire 450,000 OP units in
connection with the Merger. The units were repurchased in October 1996 at an
average price of approximately $25.00 per OP unit. This use of cash was offset
partially by net borrowings under the Company's line of credit of $36,750,000.
Net cash used in investing activities for the year ended December 31, 1996 was
$29,518,000. This amount represented the acquisition of three communities,
joint venture investments, capital expenditures and construction and development
costs. The acquisition of the three communities for an aggregate purchase price
of $9,200,000 were financed by $8,200,000 borrowed on the Company's line of
credit and $1,000,000 through the issuance of 43,884 OP units. The investment
in the joint venture with ROC of $10,300,000 was financed by a borrowing on the
Company's line of credit. The Company also invested approximately
14
<PAGE>
$3,200,000 in cash in other joint ventures. For the year ended December 31,
1996, construction and development costs approximated $3,700,000, while
recurring property capital expenditures, other than construction and
development costs, were approximately $635,000. Recurring property capital
expenditures in 1996 increased $94,000, or 17 percent, over the same period
in 1995, due to the increased number of communities in the Company's
portfolio. 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.
Future acquisitions of communities and land for development of sites will be
financed through borrowings on the line of credit, the issuance of additional
debt securities, assumption of existing secured or unsecured indebtedness, the
issuance of OP units or from contributions from Chateau from additional equity
offerings. The development of expansion sites will be financed primarily by
cash flow from operations and borrowings on the line of credit. Huntington
National Bank, as lead agent, along with Bank of America and First Chicago NBD,
have agreed, until January, 1999, to lend the Company up to $50 million which,
subject to customary conditions, is available to finance the development of
expansion sites, the acquisition of additional properties and general business
obligations. This line of credit is unsecured and bears interest at 150 basis
points over LIBOR. At December 31, 1996, there was $36,750,000 outstanding
under the line of credit.
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
securities or from contributions from Chateau from additional equity offerings
and cash flows from operations.
The Company, as an owner of real estate, is subject to various environmental
laws. Compliance by the Company with existing laws has not had a material
adverse financial effect on results of operations or financial position during
the three year period ended December 31, 1996, nor does management believe it
will have a material impact in the future.
PRO FORMA INDEBTEDNESS
On a pro forma basis as of December 31, 1996, the Company had the following debt
outstanding (in thousands):
Fixed rate mortgages $ 113,979
Fixed rate unsecured debt 145,000
Unsecured lines of credit 66,993
Other debt 2,124
----------
$ 328,096
----------
----------
The weighted average interest rate and remaining term of the fixed rate debt was
approximately 8.1 percent and 4.3 years, respectively. The only variable rate
debt outstanding is drawn on lines of credit. After the Merger, the Company has
two available credit facilities aggregating $100 million, each of which is
unsecured and bears interest at 150 basis points over LIBOR.
15
<PAGE>
INFLATION
All of the leases or terms of tenants' occupancies at the communities allow for
at least annual rental adjustments. In addition, all leases are short-term
(generally one year or less) and enable the Company to seek market rentals upon
reletting the sites. Such leases generally minimize the risk to the Company of
any adverse effect of inflation.
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 REIT's which provides a relevant basis
for comparison among REITs. For all periods presented, depreciation of rental
property is the only non-cash adjustment. 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:
<TABLE>
<CAPTION>
For the year
ended December 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Income before extraordinary item $ 16,100 $ 13,979 $ 14,897
Depreciation of rental property 11,360 10,919 7,118
---------- ---------- ----------
Funds from operations $27,460 $ 24,898 $ 22,015
</TABLE>
On a pro forma basis, FFO is calculated as follows:
<TABLE>
<CAPTION>
For the year
ended December 31,
-------------------
1996 1995
----- ----
<S> <C> <C>
Net income $ 18,000 $ 13,100
Depreciation of rental property 34,300 34,200
Amortization of other intangibles 400 500
--------- ---------
Funds from operations $ 52,700 $ 47,800
</TABLE>
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of CP Limited Partnership:
We have audited the accompanying consolidated balance sheets of CP Limited
Partnership (the "Company") as of December 31, 1996 and 1995, and the related
consolidated statements of income, partners' capital and cash flows for the
three years in the period ended December 31, 1996. We have also audited the
financial statement schedule as identified in item 14(a) (2) of this Form 10-K.
These financial statements and the financial statement schedule are the
responsibility of the management of CP Limited Partnership. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CP Limited Partnership as of
December 31, 1996 and 1995, and the results of operations and cash flows for the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Detroit, Michigan
February 12, 1997
17
<PAGE>
CP LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
PRO FORMA DECEMBER 31, DECEMBER 31, DECEMBER 31,
In thousands, except per OP Unit data 1996* 1996 1995 1994
--------- ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 64,695 $ 59,912 $ 47,318
Interest and other income 2,689 1,943 749
--------- --------- ---------
$ 132,800 67,384 61,855 48,067
Expenses:
Property operating and maintenance 18,201 16,021 12,497
Real estate taxes 4,856 4,523 3,835
Depreciation 11,452 11,014 7,230
Administrative 3,813 3,866 3,612
Interest and related amortization 12,962 12,452 5,996
--------- --------- ---------
114,800 51,284 47,876 33,170
--------- --------- --------- ---------
Income before extraordinary item 18,000 16,100 13,979 14,897
Extraordinary charge from early
extinguishment of debt - - (829) -
--------- --------- --------- ---------
Net income 18,000 16,100 13,150 14,897
Net income (loss) attributed to:
General partner 16,200 6,534 5,303 6,037
Limited partner 1,800 9,566 7,847 8,860
--------- --------- --------- ---------
$ 18,000 $ 16,100 $ 13,150 $ 14,897
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per OP Unit:
Income before extraordinary item $ .64 $ 1.09 $ .95 $ 1.05
Extraordinary item - - (.06) -
--------- --------- --------- ---------
Net income $ .64 $ 1.09 $ .89 $ 1.05
--------- --------- --------- ---------
--------- --------- --------- ---------
Distributions declared per OP unit
outstanding $ 1.62 $ 1.525 $ 1.425
--------- --------- ---------
--------- --------- ---------
Weighted average OP Units outstanding 27,873 14,837 14,779 14,189
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
*See Note 11
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
CP LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31 DECEMBER 31,
In thousands, except per OP Unit data 1996* 1996 1995
----------- ---------- ---------
(unaudited)
<S> <C> <C> <C>
ASSETS
Rental property:
Land $ 33,821 $ 32,891
Land and improvements for expansion sites 1,988 2,434
Manufactured home community improvements 239,514 216,591
Community buildings 17,607 17,231
Furniture and other equipment 7,701 7,276
--------- ---------
Total rental property $ 796,000 300,631 276,423
Less accumulated depreciation 81,000 81,293 69,868
---------- --------- ---------
Net rental property 715,000 219,338 206,555
----------
----------
Cash and cash equivalents 586 944
Rent and other receivables 5,403 2,142
Prepaid expenses and other assets 6,739 2,393
--------- ---------
Total assets $ 736,000 $ 232,066 $ 212,034
---------- --------- ---------
---------- --------- ---------
LIABILITIES
Debt $ 168,315 $ 132,700
Accrued interest payable 2,796 2,447
Accounts payable and other accrued expenses 7,489 5,997
Rents received in advance and security deposits 4,852 4,364
Distributions payable 5,871 5,954
--------- ---------
Total liabilities 363,000 189,323 151,462
PARTNERS' CAPITAL, Unlimited Authorized Units:
27,889,000 units on a pro forma basis
and 14,497,270 and 14,886,214 OP units
outstanding
December 31, 1996 and 1995, respectively
General partner 336,000 16,191 24,308
Limited partners 37,000 26,552 36,264
---------- --------- ---------
Total partners' capital 373,000 42,743 60,572
---------- --------- ---------
Total liabilities and partners'
capital $ 736,000 $ 232,066 $ 212,034
---------- --------- ---------
---------- --------- ---------
</TABLE>
*See Note 11
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
CP LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS, EXCEPT PER OP UNIT DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
------------------------ ------------------------ ------------------------
General Limited General Limited General Limited
<S> <C> <C> <C> <C> <C> <C>
PARTNERS' CAPITAL
Balance at beginning of period $ 24,308 $ 36,264 $ 25,542 $ 41,569 $ 23,424 $ 35,441
Net income 6,534 9,566 5,303 7,847 6,037 8,860
Issuance of 100,640 in 1996,
172,114 in 1995 and
676,868 in 1994 of OP units 239 1,964 150 3,434 13,521
Transfer from limited partners
to general partners resulting
from issuance of OP units 6,031 (6,031) 2,327 (2,327) 4,266 (4,266)
OP units reacquired and
retired 493,333 units in 1996
and 44,085 units in 1995 (11,239) (932) (882)
Distributions declared $1.62
in 1996, $1.525 in 1995
and $1.425 in 1994 (9,703) (14,279) (9,164) (13,377) (8,194) (11,987)
Other 21 150 9
--------- --------- --------- --------- --------- ---------
Balance at end of period $ 16,191 $ 26,552 $ 24,308 $ 36,264 $ 25,542 $ 41,569
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
CP LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
In thousands, except per OP unit data 1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 16,100 $ 13,150 $ 14,897
Adjustments to reconcile to net
cash provided by operating activities:
Extraordinary item - 829 -
Depreciation 11,452 11,014 7,230
Amortization of debt issuance costs 437 538 436
Increase in operating assets (562) (77) (1,280)
Increase in operating liabilities 2,328 2,643 1,301
--------- --------- ---------
Net cash provided by operating activities 29,755 28,097 22,584
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of 8 3/4% Senior Notes - 74,866 -
Net borrowings (payments) on line of credit 36,750 (30,000) 30,000
Principal payments on mortgages (1,135) (45,066) (6,055)
Prepayment penalties - (667) -
Payment of debt issuance costs (234) (954) -
Distributions to OP Unitholders (24,065) (21,982) (16,898)
OP Units repurchased (12,171) (882) -
Other 260 320 9
--------- --------- ---------
Net cash provided by (used in)
financing activities (595) (24,365) 7,056
--------- --------- ---------
Cash flows from investing activities:
Acquisition of rental properties (21,727) (2,766) (42,947)
Additions to rental properties (4,731) (3,392) (3,267)
Merger costs (3,060) - -
--------- --------- ---------
Net cash used in investing activities (29,518) (6,158) (46,214)
--------- --------- ---------
Decrease in cash and cash equivalents (358) (2,426) (16,574)
--------- --------- ---------
Cash and cash equivalents, beginning of period 944 3,370 19,944
--------- --------- ---------
Cash and cash equivalents, end of period $ 586 $ 944 $ 3,370
--------- --------- ---------
--------- --------- ---------
Supplemental information:
Cash paid for interest $ 12,176 $ 9,987 $ 5,148
--------- --------- ---------
--------- --------- ---------
OP units issued for rental property $ 1,964 $ 3,434 $ 13,521
--------- --------- ---------
--------- --------- ---------
Liabilities assumed for rental property $ 57,685
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
_______
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY:
The accompanying financial statements consist of the consolidated
financial statements of CP Limited Partnership (the "Company"). The
Company is engaged in the business of owning and operating 47 manufactured
housing community properties in Michigan, Illinois, Florida, Minnesota and
North Dakota. In addition, the Company owns 6 properties through a joint
venture with ROC Communities, Inc. A manufactured housing community is
real estate designed and improved with sites for placement of manufactured
homes. The owner of the home leases the site from the Company on generally
a one year or less term basis.
Chateau Properties, Inc. ("Chateau"), 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,
Chateau 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 Chateau for the net
expenses incurred by Chateau. Amounts paid on behalf of Chateau by the
Company are reflected in the statement of income as general and
administrative expenses. The balance sheet of Chateau as of December 31,
1996 is identical to the accompanying balance sheet of the Company, except
as follows:
<TABLE>
<CAPTION>
(in 000's)
--------------------------------------------------------
As Presented
Herein Chateau Properties, Inc.
December 31, 1996 Adjustments December 31, 1996
----------------- ----------- -----------------
<S> <C> <C> <C>
Majority interest $ 26,552 $ 26,552
General partner $ 16,191 (16,191)
Limited partners 26,552 (26,552)
Common stock 57 57
Additional paid-in capital 28,187 28,187
Dividends in excess of
accumulated earnings (11,233) (11,233)
Notes receivables, officers (820) 820
--------- --------- ---------
Partners' capital/
Shareholders' equity $ 42,743 $ 16,191
--------- ---------
--------- ---------
</TABLE>
Continued
22
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY CONTINUED:
On November 23, 1993, Chateau completed its public offering of
5,700,000 shares of $.01 par value common stock (the "IPO"). Simultaneous
with the IPO, Chateau contributed the net proceeds from the IPO and was
admitted as the sole general partner, with an approximate 41 percent
interest, in the Company which had become the successor owner of 33
manufactured housing community properties. These properties were
contributed by the owners of Chateau Properties Group ("the Predecessor")
to the Company in exchange for limited partnership interests (OP units)
which, subject to certain limitation, are exchangeable at any time at the
option of the holders for common stock of Chateau on a one-for-one basis.
The Predecessor consisted of the manufactured housing community properties
of Chateau Estates, a Michigan co-partnership, of InterCoastal Communities,
Inc. and its affiliates and of six co-partnerships affiliated with Leonard
Maas (the "Contributing Parties"). This business combination was accounted
for as a reorganization of entities under common control, and accordingly,
there were no changes in the basis of assets and liabilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES:
The accompanying financial statements include the accounts of the
Company and its six 99 percent owned subsidiary partnerships. All
significant inter-entity balances and transactions have been eliminated in
consolidation. Minority interests represented by Chateau's one percent
indirect interest in the aforementioned six partnerships is not separately
recognized in the Company's financial statements because the Company
reimburses Chateau for all of its expenses in excess of the income Chateau
earns through its one percent interest.
Estimates
The preparation of these financial statements involves the use of
certain management estimates and assumptions that affect reported amounts
and disclosures, such as the useful lives of rental properties. Actual
results could differ from estimates.
Continued
23
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
Revenue Recognition
Rental income is recognized when earned and due from residents. The
leases entered into by residents for the rental of a site are generally for
terms not longer than one year and renewable upon the consent of both
parties or, in some instances, as provided by statute.
Rental Property
Rental property is carried at the lower of cost, less accumulated
depreciation, or fair value. Management evaluates the recoverability of
its investment in rental property in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for Impairment of Long-
Lived Assets and Long-Lived Assets To Be Disposed Of". This statement
requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that full asset recoverability is
questionable. Management's assessment of recoverability of its rental
property under this statement includes, but is not limited to, recent
operating results, expected net operating cash flow and management's plans
for future operations. The Company adopted SFAS No. 121 in 1995 and the
adoption had no effect on the results of operations or financial condition
of the Company.
Depreciation on manufactured home communities is computed primarily on
the straight-line method over the estimated useful lives of the assets.
The estimated useful lives of the various classes of rental property assets
are primarily as follows:
ESTIMATED USEFUL
CLASS OF ASSET LIVES (YEARS)
-------------- -------------
Manufactured home community improvements 20 to 30
Community buildings 25 to 30
Furniture and other equipment 4 to 10
Maintenance, repairs and minor improvements to rental properties are
expensed when incurred. Major improvements and renewals are capitalized.
When rental property assets are sold or otherwise retired, the cost of such
property assets, net of accumulated depreciation compared to the sale
proceeds, are recognized in income as gains or losses on disposition.
Continued
24
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
Income Taxes
The Company is not liable for Federal income taxes as the partners
recognize their proportionate share of income or loss in their tax returns,
therefore, no provision for income taxes is made in the accompanying
financial statements.
Per OP Unit
Earnings per OP unit are computed based upon the weighted average
number of OP units outstanding during the period. A total of 5,660,960 OP
units were held by Chateau as of December 31, 1996. SFAS No. 128,
"Earnings per Share" when adopted in 1997 will not have an impact on
reported earnings per share.
Stock-Based Compensation
During 1996 the Company adopted SFAS No. 123 for "Accounting for
Stock-Based Compensation." The Company has elected to continue to account
for employee stock based compensation under Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
therefore the disclosure method as permitted and required by SFAS No. 123
is presented in Note 6.
Cash Equivalents
All highly liquid investments with an initial maturity of three months
or less are considered to be cash equivalents.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments"
requires disclosures about the fair value of financial instruments whether
or not such instruments are recognized in the balance sheet. Due to the
short-term nature of the Company's financial instruments, other than debt,
fair values are not materially different from their carrying values.
Based on the borrowing rates available to the Company, the carrying
value of debt approximates fair value.
Continued
25
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES CONTINUED:
Debt Issuance Costs
Costs incurred related to obtaining financing such as service and
commitment fees are deferred and are amortized over the term of the related
commitment/loans. These costs net of accumulated amortization are included
in prepaid expenses and other assets in the accompanying balance sheets.
Financial Statement Reclassifications
Certain amounts in prior year financial statements have been
reclassified to conform with presentations adopted in the current year.
3. ACQUISITIONS OF RENTAL PROPERTY:
<TABLE>
<CAPTION>
Amount
Allocated OP
Acquisition Property Name to Assets Units
Date and Location Acquired Issued Cash
----------- ------------- --------- ------ ----
<S> <C> <C> <C> <C>
Acquisitions - 1996:
March, 1996 Chestnut Creek Farm-
DAVISON, MI $ 3,400 $ 3,400
May, 1996 Maple Valley and Maple Ridge-
MANTENO, IL $ 5,800 $ 1,000 $ 4,800
September, 1996 Joint venture with ROC
purchase of six
communities in six states (1) $ 10,300 $ 10,300
Various Other joint ventures (2) $ 4,200 $ 1,000 $ 3,200
- ----------------------------------------------------------------------------------------------------
Acquisitions - 1995:
September, 1995 Hidden Valley
LAKE BUENA VISTA, FL $ 6,200 $ 3,400 $ 2,800
- ---------------------------------------------------------------------------------------------------
</TABLE>
Continued
26
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
3. ACQUISITIONS OF RENTAL PROPERTY CONTINUED:
<TABLE>
<CAPTION>
Amount
Allocated OP
Acquisition Property Name to Assets Units
Date and Location Acquired Issued Cash
----------- ------------- --------- ------ ----
<S> <C> <C> <C> <C>
Acquisitions - 1994:
January, 1994 Forest Lake Estates
SPRING LAKE TWP, MI $ 2,400 - $ 2,400
July, 1994 Lake in the Hills
AUBURN HILLS, MI $ 7,300 - $ 7,300
November, 1994 (3) NHD portfolio purchase
of seven communities in
two states $ 49,000 $ 9,200 $ 18,200
Del Tura
NORTH FT. MYERS, FL $ 55,400 $ 4,300 $ 16,700
</TABLE>
(1) Represents a 50 percent interest in a joint venture with ROC accounted
for as a property acquisition and included in rental properties.
(2) In connection with a joint venture, the Company may guarantee up to $8
million of debt in return for a guarantee fee.
(3) In connection with these two acquisitions, the Company assumed
approximately $56 million in debt.
4. FINANCING:
At December 31, 1996, the Company had a $50 million line of credit
arrangement with Huntington National Bank as lead agent for a bank group to
provide financing for future construction, acquisitions and general
business obligations. The line of credit is unsecured, bears interest at
the prime rate of interest or, at the Company's option, LIBOR plus 150
basis points. At December 31,
Continued
27
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
4. FINANCING CONTINUED:
1996, there was $36.7 million in borrowings outstanding on the line of
credit. The commitment contains customary covenants, including a debt
service coverage ratio and a restriction on the incurrence of additional
collateralized indebtedness without a corresponding increase in rental
property. The line is renewable annually through January 1999. The terms
of the line of credit provide for the payment of a fee of up to 12.5 basis
points on the average daily unused amount of the line of credit.
On March 2, 1995, the Company received approximately $74.3 million in
net proceeds from the issuance of $75 million of unsecured Senior Notes
(the "Notes"). The Notes have semi-annual interest payments, an effective
fixed interest rate of 8.79 percent per annum and mature on March 2, 2000.
The Notes contain certain covenants including a restriction on the
incurrence of collateralized indebtedness subject to certain provisions.
The following table sets forth certain information regarding debt at
December 31:
Maturity Principal Balance
Interest Rate Date 1996 1995
------------- ---- ---- ----
(in thousands)
Fixed rate mortgages 8.0-9.82% 1998-2000 $ 54,441 $ 55,425
Other notes payable Various 1997-2020 2,124 2,275
Unsecured Senior Notes 8.75% 3/00 75,000 75,000
Unsecured line of credit 1/99 36,750
-------- --------
$168,315 $132,700
-------- --------
The aggregate amount of principal maturities on the fixed rate
mortgages and $75 million Senior Notes payable subsequent to December 31,
1996 (in thousands) is as follows:
YEARS ENDING
DECEMBER 31,
------------
1997 $ 1,074
1998 2,347
1999 19,582
2000 106,438
--------
$129,441
--------
--------
Continued
28
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
5. CHATEAU STOCK OPTION PLAN:
The Company adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," effective with the 1996
financial statements. The Company, however, has elected to measure
compensation cost using the intrinsic value method, in accordance with APB
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."
Chateau's 1993 Long Term Incentive Stock Plan, as amended on May 18,
1995, (the "Plan") provides for up to 1,000,000 shares of Chateau common
stock that may be granted to directors, executive officers and other key
employees. The proceeds received by Chateau from the issuance of Chateau's
common stock are contributed to the Company in exchange for the issuance of
the same number of OP units to Chateau. Options granted under the Plan
generally vest at a rate of 25 percent per year and expire in 10 years.
The Plan provides for the grant of options at "fair market value" per
share, which represents the quoted market price of Chateau's common stock
on the date of grant. The Plan also provides for the grant of restricted
stock awards and stock appreciation rights.
Information concerning stock options is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Shares subject to option
Outstanding at beginning of year 454,150 $ 20.08 193,000 $20.43 163,000 $20.00
Granted 308,150 23.99 315,550 19.82 30,000 22.75
Exercised (11,250) 21.21 (7,500) 20.00 - -
Forfeited (15,750) 22.11 (46,900) 19.74 - -
-------- ------- -------- ------ ------- ------
Outstanding at end of year 735,300 $*21.66 454,150 $20.08 193,000 $20.43
Options exercisable at year-end 176,287 74,000 40,750
Options available for grant at year-end 238,900 535,350 307,000
</TABLE>
* Ranging in price from $19.50 - $24.25
Continued
29
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
5. CHATEAU STOCK OPTION PLAN CONTINUED:
The fair value of each option grant was estimated as of date of grant
using an option-pricing model with the following assumptions used for
options granted in:
1996 1995
---- ----
Estimated fair value per share of
options granted during the year $3.39 $2.72
Assumptions:
Annualized dividend yield 6.7% 7.6%
Common Stock price volatility 20.0% 20.0%
Risk-free rate of return 6.56% 7.57%
Expected option term (in years) 10 10
If compensation cost for stock option grants had been recognized based
on the fair value at the grant dates for 1996 and 1995 consistent with the
method prescribed by SFAS 123, net income and net income per OP unit would
have been $15,911,000 and $1.07 for the year ended December 31, 1996 and
$13,063,000 and $.88 for the year ended December 31, 1995.
6. SAVINGS PLAN:
The Company has a qualified retirement plan designed to qualify under
Section 401 of the Internal Revenue Code (the "Plan"). The Plan allows the
employees of the Company to defer a portion of their eligible compensation
on a pre-tax basis subject to certain maximum amounts. Contributions by
the Company are discretionary and determined by the Company's management.
Company contributions are allocated to each participant based on the
relative compensation of the participant to the compensation of all
participants. The Company contributed approximately $300,000 and $275,000
to the 401(k) Plan for the Plan years ended December 31, 1996 and 1995,
respectively.
7. RELATED PARTY TRANSACTIONS:
In order to permit Chateau's qualification as a REIT under the
Internal Revenue Code, the operations of four golf courses and a marina
were previously conducted by GC Properties, Inc. ("GCI"), a corporation
wholly owned by an OP unitholder of the Company. Prior to 1996, the
Company recognized net lease income from GCI which was classified as other
income. In early 1996, Chateau received a ruling from the Internal Revenue
Service allowing it to conduct these operations. Effective January 1,
1996, as a result of acquiring the operations of GCI, the Company has
consolidated these operations. For the year ended December 31, 1996 the
Company has included
Continued
30
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
7. RELATED PARTY TRANSACTIONS CONTINUED:
approximately $1.7 million in revenues and $1.0 million in operating
expenses for these operations. For the years ended December 31, 1995 and
1994 net lease income of approximately $695,000 and $100,000, respectively
was recognized. Rental expense of approximately $100,000 annually has been
incurred for leasing space in an office building owned by certain officers
and equity owners. The lease expires November 2001.
8. EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT:
The extraordinary charge in the accompanying statements of income
represent prepayment penalties and certain other related costs incurred in
connection with the early extinguishment of debt.
9. CONTINGENCIES:
The Company, as an owner of real estate, is subject to various
environmental laws. Compliance by the Company with existing laws has not
had a material adverse financial effect during the three year period ended
December 31, 1996, nor does management believe it will have a material
impact in the future. However, management cannot predict the impact of new
or changed laws or regulations on its current properties or properties that
it may acquire.
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 December 31, 1996, if any, with respect to these
matters is not determinable, in the opinion of management, none of these
matters will result in material liability.
Continued
31
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
The following is quarterly financial information for the years ended
December 31, 1996 and 1995; (Amounts in thousands except per share data.)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
1996
Total revenues $16,391 $16,829 $16,983 $17,181
------- ------- ------- -------
------- ------- ------- -------
Operating income (a) $10,132 $ 9,685 $ 9,992 $10,705
------- ------- ------- -------
------- ------- ------- -------
Net Income $ 4,321 $ 3,599 $ 3,955 $ 4,225
------- ------- ------- -------
------- ------- ------- -------
Weighted average OP units
outstanding 14,887 14,896 14,936 14,630
------- ------- ------- -------
------- ------- ------- -------
Net income per OP unit (b) $ .29 $ .24 $ .26 $ .29
------- ------- ------- -------
------- ------- ------- -------
1995
Total revenues $15,238 $15,271 $15,479 $15,867
------- ------- ------- -------
------- ------- ------- -------
Operating income (a) $ 9,568 $ 9,063 $ 8,936 $ 9,878
------- ------- ------- -------
------- ------- ------- -------
Extraordinary charge from early
extinguishment of debt $ 829 - - -
------- ------- ------- -------
------- ------- ------- -------
Net income $ 2,890 $ 3,247 $ 3,103 $ 3,910
------- ------- ------- -------
------- ------- ------- -------
Weighted average OP units
outstanding 14,760 14,724 14,747 14,885
------- ------- ------- -------
------- ------- ------- -------
Income before extraordinary
charge per OP unit (b) $ .25 $ .22 $ .21 $ .26
------- ------- ------- -------
------- ------- ------- -------
Net income per OP unit (b) $ .20 $ .22 $ .21 $ .26
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(a) Operating income represents total revenues less property operating and
maintenance expense, real estate taxes and administrative expense.
Operating income is a measure of the performance of the properties
before the effects of depreciation and interest and related
amortization costs.
(b) Quarterly earnings per OP unit amounts may not total to the full year
amounts due to rounding and to the change in the number of OP units
outstanding.
Continued
32
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
11. SUBSEQUENT EVENT - MERGER WITH ROC COMMUNITIES, INC.
On February 11, 1997, the Company completed its merger with ROC
Communities, Inc. (the "Merger"). The Merger and related transactions will
be accounted for using the purchase method of accounting in accordance with
generally accepted accounting principles. Accordingly, the assets and
liabilities of ROC will be adjusted to fair value for financial accounting
purposes and the results of operations of ROC will be included in the
results of operations of the Company in 1997.
In connection with the Merger, the related transactions occurred
- The Company repurchased and retired 1,200,000 OP units from Chateau,
of which 450,000 were repurchased in 1996
- ROC purchased 350,000 shares of Common Stock of Chateau, 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 OP units per OP unit
outstanding, to reflect an equivalent stock dividend by Chateau
- Certain limited partners exchanged 6,170,908 OP units for common
shares, which resulted 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
re-allocated to Chateau, resulting in a distribution to the general
partner of .068 OP units
- These exchanging limited partners purchased 984,423 shares of Common
Stock from Chateau at $25.88 per share, and Chateau purchased the same
number of units from the Company with these proceeds.
Following the Merger, the Company owns 128 communities with an aggregate
42,986 residential homesites. In addition, it fee manages 6,953 residential
homesites in 34 communities.
Continued
33
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_______
11. SUBSEQUENT EVENT - MERGER WITH ROC COMMUNITIES, INC. CONTINUED
The following unaudited pro forma income statement information has been
prepared as if the Merger and related transactions had occurred on January 1,
1995. In addition, the pro forma information is presented as if the
acquisitions of 14 properties made in 1996 and 1995 by the Company and ROC
had occurred on January 1, 1995. 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, 1995.
(In thousands, except per share data)
1996 1995
---- ----
Revenues $132,800 $124,800
Expenses:
Property, operating, maintenance and administrative 53,700 49,700
Depreciation 34,900 34,900
Interest and related amortization 26,200 27,100
-------- --------
Total expenses 114,800 111,700
-------- --------
Net income $ 18,000 $ 13,100
-------- --------
Per OP unit $ .64 $ .47
-------- --------
Weighted average OP Units outstanding 27,873 27,879
-------- --------
The pro forma balance sheet has been prepared as if the Merger had occurred
on December 31,1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None.
34
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
N/A
ITEM 11. EXECUTIVE COMPENSATION
N/A
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
N/A
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
N/A
35
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Report of Independent Accountants
Statements of Income for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994
Balance Sheets as of December 31, 1996 and 1995
for the Company
Statements of Partners' Capital for
the years ended December 31, 1996, December 31, 1995 and
December 31, 1994
Statements of Cash Flows for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULE
III - Real Estate and Accumulated Depreciation
36
<PAGE>
3. Exhibits
Exhibit Number
(Referenced to Item 601 OF
Regulation S-K)
Exhibit Description
-------------------
3(i) (a) Chateau Properties, Inc. Articles of Amendment and Restatement
3(ii) (b) Chateau Properties, Inc. Bylaws
4.1 (b) Form of Stock Certificate
4.2* (c) Note and Mortgage on Del Tura Community
4.3(i) (c) $75,000,000 8-3/4% Global Note dated March 2, 1995 of CP Limited
Partnership
4.3(ii) (c) Indenture Agreement dated as of February 1, 1995 between CP
Limited Partnership and The First National Bank of Chicago
4.4 (d) Amended and Restated Loan Agreement dated as of January 8, 1996
between The Huntington National Bank and CP Limited Partnership
10.1 (b) Agreement of Limited Partnership of CP Limited Partnership
10.2 (b) Lease of 19500 Hall Road
10.3 (b) Form of Noncompetition Agreement (Boll and Allen)
10.4 (b) Employment Agreement (Kellogg)
10.5 (b) Form of Registration Rights Agreement
10.6 (b) Long-Term Incentive Stock Plan
10.7 (b) Profit Sharing Plan
10.8 (b) Form of Ground Lease
10.9 (d) Management Compensation Plan
10.10 (c) Consulting Agreement dated as of November 1, 1994 between
Newman, Herfurth and Durand, Inc. and CP Limited Partnership
10.11 (c) Deferred Compensation Agreement dated as of November 1, 1994
for the benefit of Graydon K. Newman, Jr.
21 (d) List of Subsidiaries of Chateau Properties, Inc.
99 (e) Company's Schedule 14D-9
* Other instruments defining long-term debt not exceeding 10 percent of total
assets have been omitted in reliance on Item 601(b)4)(iii)(A) of Regulation
S-K but will be filed upon the request of the Commission.
(a) Incorporated by reference to the Exhibits filed with Chateau's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995
filed with the Commission on August 10, 1995 (Commission File No. 1-12496).
(b) Incorporated by reference to the Exhibits filed with Chateau's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150).
37
<PAGE>
(c) Incorporated by reference to the Exhibits filed with Chateau's Annual
Report on Form 10-K for the year ended December 31, 1994 filed with the
Commission on March 30, 1995 (Commission File No. 1-12496).
(d) Incorporated by reference to the exhibits filed with Chateau's Annual
Report in Form 10-K for the year ended December 31, 1995 filed with the
commission on March 29, 1996 (Commission File No. 1-12496).
(e) Incorporated by reference to Chateau's Schedule 14D-9 filed with the
Commission on September 19, 1996.
b. REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the last quarter of 1996.
38
<PAGE>
EXHIBIT
INDEX
Exhibit Number
(Referenced to Item 601 of
Regulation S-K)
Sequential
Page
Exhibit Description Number
------------------- ---------
3(i) (a) Chateau Properties, Inc. Articles of Amendment
and Restatement
3(ii) (b) Chateau Properties, Inc. Bylaws
4.1 (b) Form of Stock Certificate
4.2* (c) Note and Mortgage on Del Tura Community
4.3(i) (c) $75,000,000 8-3/4% Global Note dated
March 2, 1995 of CP Limited Partnership
4.3(ii) (c) Indenture Agreement dated as of February 1, 1995
between CP Limited Partnership and The First National
Bank of Chicago
4.4 (d) Amended and Restated Loan Agreement dated
as of January 8, 1996 between The Huntington
National Bank and CP Limited Partnership
10.1 (b) Agreement of Limited Partnership of CP
Limited Partnership
10.2 (b) Lease of 19500 Hall Road
10.3 (b) Form of Noncompetition Agreement (Boll and Allen)
10.4 (b) Employment Agreement (Kellogg)
10.5 (b) Form of Registration Rights Agreement
10.6 (b) Long-Term Incentive Stock Plan
10.7 (b) Profit Sharing Plan
10.8 (b) Form of Ground Lease
10.9 (d) Management Compensation Plan
10.10 (c) Consulting Agreement dated as of
November 1, 1994 between Newman, Herfurth
and Durand, Inc. and CP Limited Partnership
10.11 (c) Deferred Compensation Agreement dated as of
November 1, 1994 for the benefit of
Graydon K. Newman, Jr.
21 (d) List of Subsidiaries of Chateau Properties, Inc.
99 (e) Company's Schedule 14D-9
39
<PAGE>
EXHIBIT
INDEX
* Other instruments defining long-term debt not exceeding 10 percent of total
assets have been omitted in reliance on Item 601(b)4)(iii)(A) of Regulation
S-K but will be filed upon the request of the Commission.
(a) Incorporated by reference to the Exhibits filed with Chateau's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995
filed with the Commission on August 10, 1995 (Commission File No. 1-12496).
(b) Incorporated by reference to the Exhibits filed with Chateau's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150).
(c) Incorporated by reference to the Exhibits filed with Chateau's Annual
Report on Form 10-K for the year ended December 31, 1994 filed with the
Commission on March 30, 1995 (Commission File No. 1-12496).
(d) Incorporated by reference to the exhibits filed with Chateau's Annual
Report in Form 10-K for the year ended December 31, 1995 filed with the
commission on March 29, 1996 (Commission File No. 1-12496).
(e) Incorporated by reference to Chateau's Schedule 14D-9 filed with the
Commission on September 19, 1996.
b. REPORTS ON FORM 8-K
No reports were filed on Form 8-K during the last quarter of 1996.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 28th day of March, 1997.
CP LIMITED PARTNERSHIP
By:/s/ Gary P. McDaniel
____________________________________
Gary P. McDaniel
Director and Chief Executive Officer
(Principal Executive Officer)
By:/s/ Tamara D. Fischer
____________________________________
Tamara D. Fischer
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 27, 1997.
SIGNATURE TITLE
/s/ John A. Boll Chairman of the Board of Directors
___________________________
John A. Boll
/s/ C.G. Kellogg Director and President
___________________________
C.G. Kellogg
/s/ Gary P. McDaniel Director and Chief Executive Officer
___________________________
Gary P. McDaniel
/s/ Edward R. Allen Director
___________________________
Edward R. Allen
/s/ Gebran S. Anton, Jr. Director
___________________________
Gebran S. Anton, Jr.
41
<PAGE>
/s/ James L. Clayton Director
___________________________
James L. Clayton
/s/ Steven G. Davis Director
___________________________
Steven G. Davis
/s/ James M. Hankins Director
___________________________
James M. Hankins
/s/ James M. Lane Director
___________________________
James M. Lane
/s/ Donald E. Miller Director
___________________________
Donald E. Miller
42
<PAGE>
CP LIMITED PARTNERSHIP
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
for the year ended December 31, 1996
CP LIMITED PARTNERSHIP
FINANCIAL STATEMENT SCHEDULE
Pages
-----
III. Real Estate and Accumulated Depreciation. . . . . . . . . . . . . . . F-2
No other financial statement schedules are required as the amounts are not
significant, or not applicable, or reported in the Company's financial
statements or notes thereto.
F-1
<PAGE>
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -------------------------
Description Building & Building &
Community Location Land Fixtures Land Fixtures
- ---------------------- ----------------------------------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Algoma Algoma Township, MI $ 60 $ 19 $ 1,783
Anchor Bay Ira Township, MI 432 $ 80 2,841 13,414
Avon Rochester Hills, MI 621 484 640 6,878
Central Office Clinton Township, MI - 938
Chesterfield Chesterfield Township, MI 405 262 1,995
Chestnut Creek Davison, MI 274 7 3,198
Clinton Clinton Township, MI 989 430 5,355
Colonial Kalamazoo, MI 816 195 4 7,499
Country Estates Spring Lake Township, MI 30 - 1,806
Cranberry Lake White Lake Township, MI 432 220 - 2,785
Ferrand Estates Wyoming, MI 257 1,579 - 210
Forest Lake Estates Spring Lake Township, MI 414 2,293 9 14
Grand Blanc Grand Blanc, MI 1,749 219 7,239
Holiday Estates Byron Township, MI 93 - 1,689
Howell Howell,MI 345 151 2,679
Lake in the Hills Auburn Hills, MI 952 6,389 - (13)
Leonard Gardens Walker, MI 94 139 2,870
Macomb Macomb Township, MI 1,459 2,137 15,848
Maintenance Clinton Township, MI - 218
Norton Shores Norton Shores, MI 103 118 4,707
Novi Novi, MI 896 393 4,689
Oak Hill Groveland Township, MI 115 2,165 - 3,960
Old Orchard Davison, MI 211 182 - 2,608
Orion Orion Township, MI 423 198 - 4,457
Torrey Hills Flint, MI 346 205 1 4,230
Villa Flint, MI 135 332 (6) 2,684
------- ------- ------- -------
Michigan Subtotal 11,651 14,322 7,364 103,740
</TABLE>
<TABLE>
<CAPTION>
Gross Amount
Carried at Close of
Period 12/31/96
------------------------ Date of
Description Building & Accumulated Construction(C)
Community Location Land Fixtures Total Depreciation Acquisition(A)
- ----------------------- -------------------------------- -------- ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Algoma Algoma Township, MI 79 $ 1,783 $ 1,862 $ 686 1974(C)
Anchor Bay Ira Township, MI 3,273 13,494 16,767 5,897 1968(C)
Avon Rochester Hills, MI 1,261 7,362 8,623 4,416 1988(A)
Central Office Clinton Township, MI - 938 938 768
Chesterfield Chesterfield Township, MI 667 1,995 2,662 1,478 1969(C)
Chestnut Creek Davison, MI 281 3,198 3,479 80 1996(A)
Clinton Clinton Township, MI 1,419 5,355 6,774 4,195 1969(C)
Colonial Kalamazoo, MI 820 7,694 8,514 4,374 1985(A)
Country Estates Spring Lake Township, MI 30 1,806 1,836 1,131 1974(C)
Cranberry Lake White Lake Township, MI 432 3,005 3,437 1,506 1986(A)
Ferrand Estates Wyoming, MI 257 1,789 2,046 1,398 1989(A)
Forest Lake Estates Spring Lake Township, MI 423 2,307 2,730 304 1994(A)
Grand Blanc Grand Blanc, MI 1,968 7,239 9,207 1,459 1990(C)
Holiday Estates Byron Township, MI 93 1,689 1,782 1,027 1984(C)
Howell Howell,MI 496 2,679 3,175 2,049 1972(C)
Lake in the Hills Auburn Hills, MI 952 6,376 7,328 799 1994(A)
Leonard Gardens Walker, MI 233 2,870 3,103 976 1987(C)
Macomb Macomb Township, MI 3,596 15,848 19,444 7,193 1973(C)
Maintenance Clinton Township, MI - 218 218 159
Norton Shores Norton Shores, MI 221 4,707 4,928 2,319 1978(C)
Novi Novi, MI 1,289 4,689 5,978 4,381 1973(C)
Oak Hill Groveland Township, MI 115 6,125 6,240 2,710 1983(A)
Old Orchard Davison, MI 211 2,790 3,001 1,203 1988(A)
Orion Orion Township, MI 423 4,655 5,078 2,466 1986(A)
Torrey Hills Flint, MI 347 4,435 4,782 2,162 1987(A)
Villa Flint, MI 129 3,016 3,145 1,885 1984(A)
------- ------- ------- -------
Michigan Subtotal 19,015 118,062 137,077 57,021
</TABLE>
F-2
<PAGE>
CP LIMITED PARTNERSHIP
SCHEDULE III, REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cost Capitalized
Subsequent to Acquisition
Initial Cost to Company (Improvements)
----------------------- -------------------------
Description Building & Building &
Community Location Land Fixtures Land Fixtures
- ---------------------- --------------------------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Audubon Orlando, FL 281 296 2 2,902
Del Tura Fort Meyers, FL 4,360 50,508 77 1,095
Emerald Lake Punta Gorda, FL 399 1,150 - 220
Fairways Country Club Orlando, FL 955 5,823 8 1,435
Hidden Valley Orlando, FL 492 5,714 - 7
Lakeland Harbor Lakeland, FL 875 - 3,251
Lakeland Junction Lakeland, FL 471 972 1 92
Lakes at Leesburg Leesburg, FL 1,178 39 3,379
Oak Springs Sorrento, FL 206 1,461 2 263
Orange Lake Clermont, FL 246 85 1 1,974
Palm Beach Colony West Palm Beach, FL 691 1,962 - 64
Pedaler's Pond Lake Wales, FL 350 285 - 2,293
Winter Haven Oaks Winter Haven, FL 490 705 362 1,303
------- -------- ------ --------
Florida Subtotal 10,994 68,961 492 18,278
Maple Valley Manteno, IL 338 - 3,887
Maple Ridge Manteno, IL 126 - 1,450
------- -------- ------ --------
Illinois Subtotal 464 - - 5,337
Cimarron Park St. Paul, MN 1,424 12,882 - 23
Cedar Knolls Minneapolis, MN 1,217 11,006 - 23
Rosemount Woods Minneapolis/St. Paul, MN 475 4,297 - 6
Twenty-Nine Pines St. Paul, MN 317 2,871 - 13
------- -------- ------ --------
Minnesota Subtotal 3,433 31,056 - 65
Buena Vista Fargo, ND 713 6,248 - 55
Meadow Park Fargo, ND 133 1,183 - 2
Columbia Heights Grand Forks, ND 588 5,282 - -
------- -------- ------ --------
North Dakota Subtotal 1,434 12,713 - 57
------- -------- ------ --------
Joint Venture Properties with ROC - 10,270 - -
------- -------- ------ --------
Joint Venture Subtotal - 10,270 - -
------- -------- ------ --------
Total $27,976 $137,322 $7,856 $127,477
------- -------- ------ --------
------- -------- ------ --------
</TABLE>
<TABLE>
<CAPTION>
Gross Amount
Carried at Close of
Period 12/31/96
------------------- Date of
Description Building & Accumulated Construction(C)
Community Location Land Fixtures Total Depreciation Acquisition(A)
- ----------------------- ------------------------ -------- ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Audubon Orlando, FL 283 3,198 3,481 1,367 1988(A)
Del Tura Fort Meyers, FL 4,437 51,603 56,040 4,711 1994(A)
Emerald Lake Punta Gorda, FL 399 1,370 1,769 533 1988(A)
Fairways Country Club Orlando, FL 963 7,258 8,221 4,433 1979(A)(C)
Hidden Valley Orlando, FL 492 5,721 6,213 293 1995(A)
Lakeland Harbor Lakeland, FL 875 3,251 4,126 1,993 1983(C)
Lakeland Junction Lakeland, FL 472 1,064 1,536 721 1981(C)
Lakes at Leesburg Leesburg, FL 1,217 3,379 4,596 1,744 1984(C)
Oak Springs Sorrento, FL 208 1,724 1,932 1,172 1981(A)
Orange Lake Clermont, FL 247 2,059 2,306 805 1988(A)
Palm Beach Colony West Palm Beach, FL 691 2,026 2,717 584 1983(A)
Pedaler's Pond Lake Wales, FL 350 2,578 2,928 930 1990(A)
Winter Haven Oaks Winter Haven, FL 852 2,008 2,860 780 1988(A)(C)
------- -------- -------- -------
Florida Subtotal 11,486 87,239 98,725 20,066
Maple Valley Manteno, IL 338 3,887 4,225 96 1996(A)
Maple Ridge Manteno, IL 126 1,450 1,576 36 1996(A)
------- -------- -------- -------
Illinois Subtotal 464 5,337 5,801 132
Cimarron Park St. Paul, MN 1,424 12,905 14,329 1,208 1994(A)
Cedar Knolls Minneapolis, MN 1,217 11,029 12,246 1,035 1994(A)
Rosemount Woods Minneapolis/St. Paul, MN 475 4,303 4,778 393 1994(A)
Twenty-Nine Pines St. Paul, MN 317 2,884 3,201 268 1994(A)
------- -------- -------- -------
Minnesota Subtotal 3,433 31,121 34,554 2,904
Buena Vista Fargo, ND 713 6,303 7,016 577 1994(A)
Meadow Park Fargo, ND 133 1,185 1,318 109 1994(A)
Columbia Heights Grand Forks, ND 588 5,282 5,870 484 1994(A)
------- -------- -------- -------
North Dakota Subtotal 1,434 12,770 14,204 1,170
------- -------- -------- -------
Joint Venture Properties with ROC - 10,270 10,270 -
------- -------- -------- -------
Joint Venture Subtotal - 10,270 10,270 -
------- -------- -------- -------
Total $35,832 $264,799 $300,631 $81,293
------- -------- -------- -------
------- -------- -------- -------
</TABLE>
F-3
<PAGE>
SCHEDULE III
CONTINUED
CHATEAU PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
_______
The changes in total real estate for the years ended December 31, 1996 and
1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Balance, beginning of year $276,423 $266,833 $151,069
Acquisitions 19,531 6,922 113,214
Improvements 4,731 2,670 3,070
Dispositions and other (54) (2) (520)
-------- -------- --------
Balance, end of year $300,631 $276,423 $266,833
-------- -------- --------
-------- -------- --------
The change in accumulated depreciation for the years ended December 31, 1996,
1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Balance, beginning of year $ 69,868 $ 58,856 $ 53,314
Depreciation for the period 11,452 11,014 7,230
Disposition and other (27) (2) (1,688)
-------- -------- --------
Balance, end of year $ 81,293 $ 69,868 $ 58,856
-------- -------- --------
-------- -------- --------
F-4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON
PAGES 18 AND 19 OF THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR END AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 586
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 300631
<DEPRECIATION> 81293
<TOTAL-ASSETS> 232066
<CURRENT-LIABILITIES> 0
<BONDS> 168315
0
0
<COMMON> 0
<OTHER-SE> 42743
<TOTAL-LIABILITY-AND-EQUITY> 232066
<SALES> 0
<TOTAL-REVENUES> 67384
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12962
<INCOME-PRETAX> 16100
<INCOME-TAX> 0
<INCOME-CONTINUING> 16100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16100
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.09
</TABLE>
