<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the quarterly period ended September 30, 1999
------------------
OR
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-85492
--------------------
CP LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
MARYLAND 38-3140664
(State or other jurisdiction (IRS Employer
of incorporation or organization) (Identification No.)
6160 South Syracuse Way, Greenwood Village, CO 80111
(Address of principal executive offices, including zip code)
(303) 741-3707
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-----
<PAGE>
CP LIMITED PARTNERSHIP
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
<S> <C>
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1999 and 1998 1
Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998 2
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II. OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER OP UNIT DATA)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Revenues:
Rental income $ 44,607 $ 42,729 $ 132,896 $ 124,036
Management fee, interest and other income 3,499 1,336 7,655 3,983
---------- ---------- ---------- ----------
48,106 44,065 140,551 128,019
Expenses:
Property operating and maintenance 13,218 12,631 37,792 35,517
Real estate taxes 3,115 3,136 9,488 9,162
Depreciation and amortization 10,383 10,577 31,032 29,535
Administrative 2,863 1,639 7,170 5,762
Interest and related amortization 7,618 7,670 23,707 23,226
---------- ---------- ---------- ----------
37,197 35,653 109,189 103,202
---------- ---------- ---------- ----------
Income before net gain on sales of properties 10,909 8,412 31,362 24,817
Net gain on sales of properties - - 2,805 -
---------- ---------- ---------- ----------
Net income 10,909 8,412 34,167 24,817
Preferred OP Units 1,523 1,523 4,570 2,725
---------- ---------- ---------- ----------
Net income attributed to common OP Unitholders $ 9,386 $ 6,889 $ 29,597 $ 22,092
========== ========== ========== ==========
Net income attributed to common OP Unitholders:
General Partner $ 8,349 $ 6,080 26,301 19,570
Limited Partners 1,037 809 3,296 2,522
---------- ---------- ---------- ----------
$ 9,386 $ 6,889 $ 29,597 $ 22,092
========== ========== ========== ==========
OP Unit information:
Basic earnings per common OP Unit $ .30 $ .22 $ .94 $ .72
========== ========== ========== ==========
Diluted earnings per common OP Unit $ .30 $ . 22 $ .93 $ .72
========== ========== ========== ==========
Distribution declared per common
OP Unit outstanding $ .485 $ .455 $ 1.455 $ 1.365
========== ========== ========== ==========
Weighted average common
OP Units outstanding - assuming dilution 31,760 31,337 31,731 30,751
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
ASSETS 1999 1998
------------- ------------
Rental property:
Land $ 134,827 $ 135,444
Land and improvements for expansion sites 22,856 22,184
Depreciable property 879,126 868,881
------------- ------------
1,036,809 1,026,509
Less accumulated depreciation 181,165 151,260
------------- ------------
Net rental property 855,644 875,249
Cash and cash equivalents 2,593 450
Receivables 3,384 3,123
Notes receivable 8,873 7,163
Investment in and advances to affiliates 104,991 65,473
Prepaid expenses and other assets 8,496 7,736
------------- ------------
Total assets $ 983,981 $ 959,194
============= ============
LIABILITIES
Debt $ 461,726 $ 427,778
Accounts payable and accrued expenses 21,336 21,030
Rents received in advance and security deposits 8,934 6,898
Distributions payable 16,115 15,078
------------- ------------
Total liabilities 508,111 470,784
PARTNERS' CAPITAL, Unlimited authorized units; 31,606,617 and 31,459,888
Common OP units outstanding at September 30, 1999 and December
31, 1998, respectively; 1,500,000 Preferred OP Units outstanding
at September 30, 1999 and December 31, 1998, respectively
General partner 357,508 367,935
Limited partners 45,360 47,473
Preferred OP Units, Series A 73,002 73,002
------------- ------------
Total partners' capital 475,870 488,410
------------- ------------
Total liabilities and partners' capital $ 983,981 $ 959,194
============= ============
</TABLE>
The accompanying notes are an integral
part of the financial statements.
2
<PAGE>
CP LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1999 1998
---------- ----------
<S> <C>
Cash flows from operating activities:
Net income $ 29,597 $ 22,854
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of property (2,805) -
Depreciation and amortization 31,032 29,535
Amortization of debt issuance costs 575 567
Increase in operating assets (3,959) (5,416)
Increase in operating liabilities 2,342 6,449
---------- ----------
Net cash provided by operating activities 56,782 53,989
Cash flows from financing activities:
Borrowings on the line of credit 84,318 83,917
Payments on the line credit (26,048) (94,800)
Payoff of mortgages and other debt (23,448) (1,390)
Mortgage principal payments (874) (1,716)
Distributions to OP Unitholders (44,914) (40,104)
Common OP Units reacquired and retired (76) (932)
Proceeds from the issuance of common OP Units - 53,777
Net Proceeds from the issuance of Preferred OP Units - 73,002
Other financing activities 2,563 203
---------- ----------
Net cash (used in) provided by financing activities (8,479) 71,957
Cash flows from investing activities:
Acquisition of rental properties (6,228) (109,033)
Additions to rental property (13,883) (9,195)
Disposition of rental property 13,201 -
Investment in and advances to joint ventures/affiliates (39,250) (22,214)
---------- ----------
Net cash used in investing activities (46,160) (140,442)
---------- ----------
Increase (decrease) in cash and cash equivalents 2,143 (14,496)
Cash and cash equivalents, beginning of period 450 14,910
---------- ----------
Cash and cash equivalents, end of period $ 2,593 $ 414
========== ==========
Supplemental cash flow information:
Fair Market Value of OP Units issued in connection
with acquisitions/development $ 1,327 $ 28,927
========== ==========
Debt assumed in connection with acquisitions $ - $ 32,579
========== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
----------------------
The accompanying unaudited condensed consolidated financial statements of CP
Limited Partnership (the "Company"), have been prepared in accordance with
generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included, and such adjustments
are of a normal recurring nature. The year-end condensed consolidated
balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted
accounting principles. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1998. Chateau
Communities, Inc. ("Chateau"), a Real Estate Investment Trust ("REIT") is
the sole general partner of the Company.
2. Rental Property
---------------
On April 15, 1999 the Company sold one manufactured home community located
at Bradenton, Florida with 295 home sites for a gross sales price of $8.5
million, resulting in a gain of $3.1 million.
On April 1, 1999, the Company purchased a manufactured home community
located in Montgomery, Alabama with 309 homesites for a purchase price of
approximately $4 million.
On January 25, 1999, the Company sold one manufactured home community
located in Melbourne, Florida with 217 sites for a gross sales price of
$3.2 million. Upon the sale of the property, the Company recognized a net
loss of $336,000.
As of September 30, 1999, the Company owned 164 communities with an
aggregate of 51,296 residential homesites and 1,359 park model/RV sites.
In addition, it fee managed approximately 9,200 residential homesites and
175 park model/RV sites in 43 communities.
3. Equity Transactions:
--------------------
On August 18, 1999, the Company declared a cash distribution of $.485 per
OP Unit to OP Unitholders of record as of September 30, 1999. The
distribution was paid on October 15, 1999, and is included in the
distributions payable in the accompanying condensed consolidated balance
sheet as of September 30, 1999.
On May 20, 1999, the Company declared a cash distribution of $.485 per OP
Unit to OP Unitholders of record as of June 30, 1999. The distribution was
paid on July 15, 1999.
On February 25, 1999, the Company declared a cash distribution of $.485 per
OP Unit to OP Unitholders of record as of March 31, 1999. The distribution
was paid on April 14, 1999.
On November 18, 1998, the Company declared a cash distribution of $.455 per
OP Unit to OP Unitholders of record as of December 28, 1998. The
distribution was paid on January 15, 1999, and is included in distributions
payable in the accompanying condensed consolidated balance sheet as of
December 31, 1998.
4
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
<TABLE>
<CAPTION>
3. Equity Transactions Continued:
------------------------------
(In thousands, except per OP Unit data) For the three months ended September 30,
----------------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Basic EPS:
Net income available to common OP Unitholders $ 9,386 $ 6,889
============ ============
Weighted average common OP Units - basic 31,609 31,169
============ ============
Per OP Unit - basic $ .30 $ .22
============ ============
Diluted EPS:
Net Income available to common OP Unitholders $ 9,386 $ 6,889
============ ============
Weighted average common OP Units outstanding 31,609 31,169
Dilutive Chateau employee stock options 151 168
------------ ------------
Weighted average common OP
Units - assuming dilution 31,760 31,337
============ ============
Per OP Unit - assuming dilution $ .30 $ .22
============ ============
For the three months ended September 30,
----------------------------------------
1999 1998
------------ ------------
Basic EPS:
Net income available to common OP Unitholders $ 29,597 $ 22,092
============ ============
Weighted average common OP Units - basic 31,564 30,556
============ ============
Per OP Unit - basic $ .94 $ .72
============ ============
Diluted EPS:
Net income available to common OP Unitholders $ 29,597 $ 22,092
============ ============
Weighted average common OP Units outstanding 31,564 30,556
Dilutive Chateau employee stock options 167 195
------------ ------------
Weighted average common OP
Units - assuming dilution 31,731 30,751
------------ ------------
Per OP Unit - assuming dilution $ .93 $ .72
============ ============
</TABLE>
5
<PAGE>
CP LIMITED PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. Debt:
-----
The following table sets forth certain information regarding debt of the
Company at September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Weighted Average
Dollars in thousands: Interest Rate Maturity Date Principal Balance
---------------- ------------- -----------------
Fixed Rate Mortgage Debt 7.62 % 2000-2011 $106,058
Unsecured Senior Notes 7.46 % 2000-2004 245,000
Unsecured Lines of Credit 6.21 % - 95,005
Other notes payable various various 15,663
-------------
$ 461,726
=============
</TABLE>
5. Subsequent Event:
-----------------
On October 19, 1999, the Company completed the acquisition of Greenpark
South, a community located in Alabama with 315 homesites and
approximately 76 expandable sites, for approximately $8.7 million.
In order to finance this acquisition, as well as increased advances to
its affiliates, the Company entered into a $15 million bridge loan. This
bridge loan is with its primary lender, Bank One NA, bears interest at
6.71% and matures on November 29, 1999. The Company expects its
affiliates to repay advances sufficient to retire the bridge loan at
maturity.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the consolidated
financial statements and Notes thereto included elsewhere in this Quarterly
Report. Certain statements in this discussion constitute "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Such forward-looking statements may involve the Company's
plans, objectives and expectations, which are dependent upon a number of
factors, including site expansions, acquisitions, development and other new
business initiatives that are subject to a number of contingency factors such as
the effects of national and local economic conditions, changes in interest
rates, supply and demand for affordable housing and the condition of the capital
markets that may prevent the Company from achieving its objectives.
Results of Operations
The following table summarizes certain information relative to the Company's
properties as of and for the three and nine months ended September 30, 1999 and
1998. The Company considers all communities owned by the Company at the
beginning of the period as the "Core Portfolio."
<TABLE>
<CAPTION>
Core Portfolio Total
---------------------------------- -----------------------------------
1999 1998 1999 1998
-------------- ------------------ ----------------- ----------------
<S> <C> <C> <C> <C>
Dollars in thousands, except per site
As of September 30,
Number of communities 163 163 164 166
Total manufactured homesites 50,986 50,535 51,296 51,154
Occupied sites 46,890 46,588 47,143 47,100
Occupancy % 92.0% 92.2% 91.9% 92.1%
For the three months ended September 30,
Rental income $ 44,480 $ 42,224 $ 44,607 $ 42,729
Property operating expenses $ 16,271 $ 15,545 $ 16,333 $ 15,767
Net operating income $ 28,209 $ 26,679 $ 28,274 $ 26,962
Weighted average monthly rent per $ 305 $ 293 $ 304 $ 294
site
For the nine months ended September 30,
Rental income $121,374 $115,677 $132,896 $124,036
Property operating expenses $ 43,407 $ 41,690 $ 47,280 $ 44,679
Net operating income $ 77,967 $ 73,987 $ 85,616 $ 79,357
Weighted average monthly rent per $ 306 $ 294 $ 301 $ 292
site
</TABLE>
Comparison of three months ended September 30, 1999 to three months ended
September 30, 1998
For the three months ended September 30, 1999, net income was $10,909,000 an
increase of $2,497,000 from the three months ended September 30, 1998. The
increase was due primarily to increased net operating income from the Core
Portfolio. The increase in net operating income in the Company's Core Portfolio
is primarily due to increases in occupancy and rental increases partially offset
by general operating expense increases.
7
<PAGE>
Rental revenue for the three months ended September 30, 1999 was $44,607,000, an
increase of $1,878,000 from the three months ended September 30, 1998. The
increase is primarily due to rental increases and occupancy gains in the
Company's Core Portfolio.
Weighted average occupancy for the three months ended September 30, 1999 was
47,159 sites compared with 46,955 sites for the same period in 1998. The
occupancy rate was 91.9 percent on 51,296 sites as of September 30, 1999,
compared to 92.1 percent on 51,154 sites as of September 30, 1998. The
occupancy rate on the stabilized portfolio was 93.5 percent as of September 30,
1999. The stabilized portfolio includes communities where the Company does not
have, or has not recently had, expansion of the community. On a per site basis,
weighted average monthly rental revenue for the three months ended September 30,
1999 was $304 compared with $294 in the same period of 1998. For the Company's
Core Portfolio, on a per site basis, weighted average monthly rental revenue for
the three months ended September 30, 1999 was $305 compared with $293 for the
same period in 1998, an increase of 4.1 percent.
Management fee, interest and other income primarily includes management and
transaction fee income for the management of 43 manufactured home communities,
equity earnings from the Company's sales subsidiary and interest income on notes
receivable and advances to joint ventures/affiliates. The increase in the three
months ended September 30, 1999 from the same period in 1998 is due primarily to
increased development activities in which the Company funds the development of
joint ventures and increased management and transaction fee income.
Property operating and maintenance expense for the three months ended September
30, 1999 increased by $587,000 or 4.7 percent from the same period a year ago.
The majority of the increase was due to increases in the Company's Core
Portfolio.
Administrative expense for the three months ended September 30, 1999 increased
by $1,224,000 from the same period a year ago. Administrative expense in 1999
was 6.0 percent of revenues as compared to 3.7 percent in 1998.
Depreciation and amortization expense for the three months ended September 30,
1999 decreased $194,000 from the same period a year ago. Depreciation expense
as a percentage of average depreciable rental property in 1999 remained
relatively unchanged from 1998.
Comparison of nine months ended September 30, 1999 to nine months ended
September 30, 1998
For the nine months ended September 30, 1999, net income was $34,167,000, an
increase of $9,350,000 from the nine months ended September 30, 1998. The
increase was due primarily to acquisitions and increased net operating income
from the Core Portfolio as well as a net gain recorded on the sales of two
properties. The increase in net operating income in the Company's Core
Portfolio is primarily due to increases in occupancy and rental increases
partially offset by general operating expense increases.
8
<PAGE>
Rental revenue for the nine months ended September 30, 1999 was $132,896,000, an
increase of $8,860,000 from the nine months ended September 30, 1998.
Approximately 35 percent of the increase was due to acquisitions, net of
dispositions, and the remaining 65 percent was due to rental increases and
occupancy gains in the Company's Core Portfolio.
Weighted average occupancy for the nine months ended September 30, 1999 was
47,126 sites compared with 45,481 sites for the same period in 1998. On a per
site basis, weighted average monthly rental revenue for the nine months ended
September 30, 1999 was $301 compared with $292 in the same period of 1998. For
the Company's Core Portfolio, on a per site basis, weighted average monthly
rental revenue for the nine months ended September 30, 1999 was $306 compared
with $294 for the same period in 1998, an increase of 4.0 percent.
Property operating and maintenance expense for the nine months ended September
30, 1999 increased by $2,275,000 or 6.4 percent from the same period a year ago.
The majority of the increase was due to the 1998 acquisitions and increases in
the Company's Core Portfolio.
Real estate taxes for the nine months ended September 30, 1999, increased by
$326,000 or 3.6 percent from the nine months ended September 30, 1998. On a per
site basis, monthly weighted real estate taxes were $22.37 for the nine months
ended September 30, 1999 compared to $22.38 for the same period in 1998. 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 nine months ended September 30, 1999 increased by
approximately $1,408,000 from the same period a year ago. Administrative
expense in 1999 was 5.1 percent of revenues as compared to 4.5 percent in 1998.
Interest and related amortization costs increased for the nine months ended
September 30, 1999 by $481,000, as compared with the nine months ended September
30, 1998. The increase was due to financing of acquisitions, advances to
affiliates and development activity. Interest expense as a percentage of
average debt outstanding decreased to approximately 7.3 percent in 1999 from
approximately 7.7 percent in 1998. The decrease is due to higher borrowing on
the lines of credit as a percentage of total debt and the payoff of higher rate
mortgages.
Depreciation and amortization expense for the nine months ended September 30,
1999 increased $1,497,000 from the same period a year ago. The increase is
directly attributable to the 1998 acquisitions. Depreciation expense as a
percentage of average depreciable rental property in 1999 remained relatively
unchanged from 1998.
Liquidity and Capital Resources
Net cash provided by operating activities was $56,782,000 for the nine months
ended September 30, 1999, compared with $53,989,000 for the nine months ended
September 30, 1998. The increase in cash provided by operating activities was
due primarily to the increase in net operating income.
Net cash used in financing activities for the nine months ended September 30,
1999 was $8,479,000. This was due primarily to $44,914,000 in distributions
paid to common OP Unitholders in the first nine months of 1999, the payoff of
mortgage and other debt of $23,448,000 offset partially by net borrowings on the
lines of credit of $58,270,000.
9
<PAGE>
Net cash used in investing activities for the nine months ended September 30,
1999 was $46,160,000. This amount represented joint venture advances, capital
expenditures and construction and development costs. For the nine months ended
September 30, 1999, acquisition costs were $6.2 million, including the
acquisition of one manufactured home community with 309 homesites for a
purchase price of $4.0 million. Construction and development costs were
approximately $7.4 million, recurring property capital expenditures were
approximately $5.2 million, and advances to joint ventures and affiliates,
including construction costs were $39.2 million. 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.
The Company has available a line of credit with Bank One, N.A., acting as lead
agent, for $100 million (the "Bank One Credit Facility"). The interest rate on
the Bank One Credit Facility is LIBOR plus 80 basis points. In addition, the
Company has a $7.5 million revolving line of credit from US Bank which bears
interest at a rate of LIBOR plus 125 basis points (the "USB Facility" and,
together with the Bank One Credit Facility, the "Credit Facilities"). As of
September 30, 1999, approximately $95 million was outstanding under the Credit
Facilities and the Company had available $12.5 million in additional borrowing
capacity.
As of September 30, 1999, the Company had outstanding, in addition to the Credit
Facilities, $245 million of other unsecured senior debt with a weighted average
interest rate and maturity of 7.5 percent and 3.5 years, respectively, and $106
million of secured mortgage debt with a weighted average interest rate and
maturity of 7.6 percent and 2.0 years, respectively. For the Company's total
fixed rate debt, the weighted average interest rate and maturity was 7.5 percent
and 3.0 years, respectively.
On October 19, 1999, the Company completed the acquisition of Greenpark South, a
community located in Alabama with 315 homesites and approximately 76 expandable
sites, for approximately $8.7 million.
In order to finance this acquisition, as well as increased advances to its
affiliates, the Company entered into a $15 million bridge loan. This bridge
loan is with its primary lender, Bank One NA, bears interest at 6.71% and
matures on November 29, 1999. The Company expects its affiliates to repay
advances sufficient to retire the bridge loan at maturity.
Repayment of long-term borrowings and amounts outstanding under the Credit
Facilities, future acquisitions of communities and land for development and
community development activities represent the principal long-term liquidity
needs of the Company. The Company does not expect to generate sufficient funds
from operations to finance these long-term liquidity needs and instead intends
to meet its long-term liquidity requirements through additional borrowing under
the Credit Facilities or other lines of credit, the issuance of additional
equity or debt securities and the assumption of existing secured or unsecured
indebtedness.
The Company expects to meet its short-term liquidity requirements, including
dividends, expansion activities and capital expenditure requirements, through
cash flow from operations and, if necessary, borrowings under the Credit
Facilities and other lines of credit.
10
<PAGE>
Year 2000
Management has assessed the impact of the year 2000 issue on its reporting
systems and operations. The year 2000 issue exists because many computer systems
and applications abbreviate dates by eliminating the first two digits of the
year, assuming that these two digits are always "19". As a result, date-
sensitive computer programs may recognize a date using "00" as the year 1900
rather than the year 2000. Unless corrected, the potential exists for computer
system failures or incorrect processing of financial and operational
information, which could disrupt operations.
To help facilitate the Company's continued growth, substantially all of the
computer systems and applications and other operating systems in use in its home
office and properties have been, or are in the process of being upgraded and
modified. The Company is of the opinion that, in connection with those upgrades
and modifications, it has addressed applicable year 2000 issues as they might
affect the computer systems and applications located in the Company's offices
and properties. The Company anticipates that implementation of solutions to any
year 2000 issue which it may discover will require the expenditure of sums which
the Company does not expect to be material.
The Company is exposed to the risk that one or more of its vendors or service
providers may experience year 2000 problems which impact the ability of such
vendor or service provider to provide goods and services. Due to the
availability of alternative suppliers, this is not considered as significant a
risk with respect to the suppliers of goods. The disruption of certain services,
however, such as utilities, could, depending upon the extent of the disruption,
have a material adverse impact on the Company's operations. To date, the
Company is not aware of any vendor or service provider year 2000 issue that
management believes would have a material adverse impact on the Company's
operations.
The Company, however, has no means of ensuring that its vendors or service
providers will be year 2000 ready. The inability of vendors or service
providers to complete the year 2000 resolution process in a timely fashion could
have an adverse impact on the Company and the effect of non-compliance by
vendors or service providers is not determinable at this time. Residents do not
pose year 2000 problems for the Company in view of the nature of the Company's
properties.
Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from year 2000 issues, or
in certain industries, such as commercial or investment banks, could also have
an adverse impact on the Company. The likelihood and effect of such disruptions
is not determinable at this time.
The Company expects to have all systems appropriately modified before any
significant processing malfunctions could occur and does not expect the year
2000 issue will materially impact the financial condition or operations of the
Company.
11
<PAGE>
Other
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as consolidated net income of the Company
without giving effect to gains (or losses) from debt restructuring and sales of
property, certain non-recurring items and rental property depreciation and
amortization. Management believes that FFO is an important and widely used
measure of the operating performance of REITs which provides a relevant basis
for comparison among REITs. FFO (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii) should
not be considered as an alternative to net income as a measure of operating
performance or to cash flows from operating, investing and financing activities;
and (iii) is not an alternative to cash flows as a measure of liquidity. FFO is
calculated as follows:
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
-------------------- -------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
------- ------- ------- -------
Net Income $10,909 $ 8,412 $34,167 $24,817
Plus:
Depreciation and amortization 10,383 10,577 31,032 29,535
Less:
Non-recurring item (1) - - 2,805 -
Depreciation expense on corporate assets 65 62 195 187
Distribution on Preferred OP Units 1,523 1,523 4,570 2,725
------- ------- ------- -------
FFO $19,704 $17,404 $57,629 $51,440
======= ======= ======= =======
</TABLE>
(1) Represents net gain recorded on sales of properties.
12
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The following table sets forth certain information relating to the secured and
unsecured indebtedness of the Company outstanding as of September 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Weighted
Average
Amount of Percent of Interest Maturity
Indebtedness Total Debt Rate Date
------------ ---------- ---- ----
(dollars in thousands)
Mortgage Debt:
Del Tura $ 31,618 7.1% 8.40% 2000
Other (8 properties) 19,706 4.4% 7.68% 2002-2011
Pacific Life (36 properties) 54,734 12.3% 7.16% 2000
-------- ---- ----
Total Mortgage 106,058 23.8% 7.62%
Unsecured Debt:
Unsecured Senior Notes 70,000 15.7% 7.52% 2003
Unsecured Senior Notes 75,000 16.8% 8.75% 2000
Unsecured Senior Notes 100,000 22.4% 6.44% 2004
-------- ---- ----
Total Unsecured 245,000 54.9% 7.46%
-------- ---- ----
Total Fixed Rate 351,058 78.7% 7.51%
Variable Rate Debt:
Credit Facilities 95,005 21.3% 6.21%
--------
Total Secured and Unsecured Debt $446,063
========
</TABLE>
Based on the amount outstanding under the Credit Facilities at September 30,
1999 of $95,005,000, if the interest rate under the Credit Facilities was 100
basis points higher or lower during the nine months ended September 30, 1999,
then the Company's interest expense (net of adjustments for capitalized items),
for the period would have increased or decreased by approximately $713,000.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, and in the capacities indicated, on the
11th day of November, 1999.
CP LIMITED PARTNERSHIP
By: CHATEAU COMMUNITIES, INC.
By: /s/ Tamara D. Fischer
----------------------
Tamara D. Fischer
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE>5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,593
<SECURITIES> 0
<RECEIVABLES> 12,257
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,036,809
<DEPRECIATION> 181,165
<TOTAL-ASSETS> 983,981
<CURRENT-LIABILITIES> 46,385
<BONDS> 461,726
0
0
<COMMON> 475,870
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 983,981
<SALES> 0
<TOTAL-REVENUES> 140,551
<CGS> 0
<TOTAL-COSTS> 47,280
<OTHER-EXPENSES> 38,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,707
<INCOME-PRETAX> 34,167
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,167
<EPS-BASIC> .94
<EPS-DILUTED> .93
</TABLE>
