-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WoTwAa6mi2/Y3qr//drQFjQ+JbwHWXMXX7Sin2AygM/roR0/q6YMt8Ozw4vPX2a3 6lgmRP+PoOe84huimytmwA== 0000950124-00-001398.txt : 20000322 0000950124-00-001398.hdr.sgml : 20000322 ACCESSION NUMBER: 0000950124-00-001398 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN COMMUNITIES INC CENTRAL INDEX KEY: 0000912593 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 382730780 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-72461 FILM NUMBER: 574655 BUSINESS ADDRESS: STREET 1: 31700 MIDDLEBELT RD STREET 2: STE 145 CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 BUSINESS PHONE: 2489323100 MAIL ADDRESS: STREET 1: 31700 MIDDLEBELT RD STREET 2: STE 145 CITY: FARMINGTON HILLS STATE: MI ZIP: 48334 10-K 1 FORM 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-12616 SUN COMMUNITIES, INC. (Exact name of registrant as specified in its charter) STATE OF MARYLAND 38-2730780 State of Incorporation I.R.S. Employer I.D. No. 31700 MIDDLEBELT ROAD SUITE 145 FARMINGTON HILLS, MICHIGAN 48334 (248) 932-3100 (Address of principal executive offices and telephone number) Securities Registered Pursuant to Section 12(b) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of March 6, 2000, the aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was approximately $482,828,018 based on the closing sales price of $29.00 on such date using beneficial ownership of stock rules adopted pursuant to Section 13 of the Securities Exchange Act of 1934 to exclude voting stock owned by directors and officers of the Registrant, some of whom may not be held to be affiliates upon judicial determination. As of March 6, 2000, there were 17,467,417 shares of the Registrant's common stock issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's definitive Proxy Statement to be filed for its 1999 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. 2 PART I ITEM 1. BUSINESS GENERAL Sun Communities, Inc. (the "Company") owns, operates and finances manufactured housing communities concentrated in the midwestern and southeastern United States. The Company is a fully integrated real estate company which, together with its affiliates and predecessors, has been in the business of acquiring, operating and expanding manufactured housing communities since 1975. At December 31, 1999, the Company owned and operated or financed a portfolio of 111 developed properties located in sixteen states (the "Properties"), including 94 manufactured housing communities, 5 recreational vehicle communities, and 12 properties containing both manufactured housing and recreational vehicle sites. At December 31, 1999, the Properties contained an aggregate of 33,950 developed manufactured home sites, approximately 7,350 manufactured home sites suitable for development and approximately 4,650 recreational vehicle sites. In order to enhance property performance and cash flow, the Company, through Sun Home Services, Inc., a Michigan corporation ("Home Services" or "SHS"), actively markets and sells new and used manufactured homes for placement in the Properties. The Company made an election to be taxed as a REIT for federal income tax purposes commencing with the calendar year beginning January 1, 1994, and is self-administered and self-managed. The Company's executive and principal property management office is located at 31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334 and its telephone number is (248) 932-3100. The Company has regional property management offices located in Elkhart, Indiana, and Tampa, Florida. The Company, which is a Maryland corporation, employed 639 people as of December 31, 1999. STRUCTURE OF THE COMPANY The operations of the Company are carried on through certain subsidiaries (the "Subsidiaries"), including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the "Operating Partnership") which, among other things, enables the Company to comply with certain complex requirements under the Federal tax rules and regulations applicable to REITs. The Company established the Operating Partnership to allow the Company to acquire manufactured housing communities in transactions that defer some or all of the sellers' tax consequences. Substantially all of the Company's assets are held by or through the Operating Partnership, of which the Company is the sole general partner, and wholly-owned subsidiaries of the Company. In addition to the Operating Partnership, the Subsidiaries include Home Services, which provides manufactured home sales and other services to current and prospective tenants of the Properties. The Operating Partnership owns 100% of the non-voting preferred stock of Home Services, which entitles the Operating Partnership to 95% of the cash flow from operating activities of Home Services. The voting common stock of Home Services is currently owned by Gary A. Shiffman and Jeffrey P. Jorissen, executive officers of the Company, and the Estate of Milton M. Shiffman, a former executive officer of the Company, entitling them to the remaining 5% of such cash flow from operating activities. Sun Water Oak Golf, Inc. ("Sun Golf") is a wholly-owned subsidiary of Home Services. Sun Golf was organized to own and operate the golf course, restaurant and related facilities located on the Water Oak Property that were acquired in November 1994. -2- 3 THE MANUFACTURED HOUSING COMMUNITY INDUSTRY A manufactured housing community is a residential subdivision designed and improved with sites for the placement of manufactured homes and related improvements and amenities. Manufactured homes are detached, single-family homes which are produced off-site by manufacturers and installed on sites within the community. Manufactured homes are available in a wide array of designs, providing owners with a level of customization generally unavailable in other forms of multi-family housing. Modern manufactured housing communities, such as the Properties, contain improvements similar to other garden-style residential developments, including centralized entrances, paved streets, curbs and gutters, and parkways. In addition, these communities also often provide a number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts, tennis courts, laundry facilities and cable television service. The owner of each home in the Company's communities leases the site on which the home is located. The Company owns the underlying land, utility connections, streets, lighting, driveways, common area amenities and other capital improvements and is responsible for enforcement of community guidelines and maintenance. Some communities provide water and sewer service through public or private utilities, while others provide these services to residents from on-site facilities. Each owner within the Company's communities is responsible for the maintenance of his home and leased site. As a result, capital expenditure needs tend to be less significant, relative to multi-family rental apartment complexes. PROPERTY MANAGEMENT The Company's property management strategy emphasizes intensive, hands-on management by dedicated, on-site community managers. The Company believes that this on-site focus enables it to continually monitor and address tenant concerns, the performance of competitive properties and local market conditions. Of the Company's 639 employees, 577 are located on-site as property managers, support staff, or maintenance personnel. The Company's community managers are overseen by Brian W. Fannon, Senior Vice President and Chief Operating Officer, who has 30 years of property management experience, two Senior Vice Presidents, four Regional Vice Presidents and fourteen Regional Property Managers. In addition, the Regional Property Managers are responsible for semi-annual market surveys of competitive communities, interaction with local manufactured home dealers and regular property inspections. Each community manager performs regular inspections in order to continually monitor the property's physical condition and provides managers with the opportunity to understand and effectively address tenant concerns. In addition to a community manager, each property has an on-site maintenance person and management support staff. The Company holds periodic training sessions for all property management personnel to ensure that management policies are implemented effectively and professionally. HOME SALES Home Services offers manufactured home sales services to tenants and prospective tenants in the Company's communities. Since tenants often purchase a home already on-site within a community, such services enhance occupancy and property performance. Additionally, because many of the homes in the Properties are sold through Home Services, better control of home quality in the Company's communities can be maintained than if sales services were conducted solely through third-party brokers. -3- 4 COMPETITION All of the Properties are located in developed areas that include other manufactured housing community properties. The number of competitive manufactured housing community properties in a particular area could have a material effect on the Company's ability to lease sites and on rents charged at the Properties or at any newly acquired properties. The Company may be competing with others that have greater resources than the Company and whose officers and directors have more experience than the Company's officers and directors. In addition, other forms of multi-family residential properties, such as private and federally funded or assisted multi-family housing and single-family housing, provide housing alternatives to potential tenants of manufactured housing communities. REGULATIONS AND INSURANCE General. Manufactured housing community properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses and other common areas. The Company believes that each Property has the necessary operating permits and approvals. Americans with Disabilities Act ("ADA"). The Properties and any newly acquired manufactured housing communities must comply with the ADA. The ADA has separate compliance requirements for "public accommodations" and "commercial facilities," but generally requires that public facilities such as clubhouses, pools and recreation areas be made accessible to people with disabilities. Compliance with ADA requirements could require removal of access barriers and other capital improvements at the Company's properties. Noncompliance could result in imposition of fines or an award of damages to private litigants. The Company does not believe the ADA will have a material adverse impact on the Company's results of operations. If required property improvements involve a greater expenditure than the Company currently anticipates, or if the improvements must be made on a more accelerated basis than it anticipates, the Company's ability to make expected distributions could be adversely affected. The Company believes that its competitors face similar costs to comply with the requirements of the ADA. Rent Control Legislation. State and local rent control laws in certain jurisdictions limit the Company's ability to increase rents and to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. The Company presently expects to continue to operate manufactured housing community properties, and may purchase additional properties, in markets that are either subject to rent control or in which rent-limiting legislation exists or may be enacted. For example, 25 of the Properties are located in Florida, which has enacted a law which provides that a majority of tenants in a manufactured housing community may require that a proposed increase in site rental rates, reduction in services or utilities or change in the community's rules and regulations be submitted for formal mediation or arbitration if they believe that the proposal is unreasonable. Insurance. Management believes that the Properties are covered by adequate fire, flood, property and business interruption insurance provided by reputable companies and with commercially reasonable deductibles and limits. The Company maintains a blanket policy that covers all of the Properties. The Company has obtained title insurance insuring fee title to the Properties in an aggregate amount which the Company believes to be adequate. ITEM 2. PROPERTIES General. At December 31, 1999, the Properties consisted of 94 manufactured housing communities, 5 recreational vehicle communities, and 12 properties containing both manufactured -4- 5 housing and recreational vehicle sites located in sixteen states concentrated in the midwestern and southeastern United States. At December 31, 1999, the Properties contained 33,950 developed manufactured home sites, approximately 7,350 manufactured home sites suitable for development and approximately 4,650 recreational vehicle sites. In addition, at December 31, 1999, the Company owned seven undeveloped properties on which the Company plans to develop approximately 3,400 manufactured home sites. Most of the Properties include amenities oriented towards family and retirement living. Of the 111 Properties, 51 have more than 300 developed manufactured home sites, with the largest having 913 developed manufactured home sites. The Properties had an aggregate occupancy rate of 94.0% as of December 31, 1999, excluding recreational vehicle sites. Since January 1, 1999, the Properties have averaged an aggregate annual turnover of homes (where the home is moved out of the community) of approximately 3.1% and an average annual turnover of residents (where the home is sold and remains within the community, typically without interruption of rental income) of approximately 8.5%. The Company believes that its Properties' high amenity levels contribute to low turnover and generally high occupancy rates. All of the Properties provide residents with attractive amenities with most offering a clubhouse, a swimming pool, laundry facilities and cable television service. Many Properties offer additional amenities such as sauna/whirlpool spas, tennis, shuffleboard and basketball courts and/or exercise rooms. The Company has sought to concentrate its communities within certain geographic areas in order to achieve economies of scale in management and operation. The Properties are principally concentrated in the midwestern and southeastern United States. The Company has identified Florida as a key market in which to expand its existing operations in the southeast because of Florida's stable tenant base, relatively low cost of living and attractive acquisition opportunities. Additionally, the Company's midwestern operations serve as a source of prospective tenants for the Florida Properties, which are generally oriented towards retirement living. Nevertheless, because the Company believes that geographic diversification will help insulate the portfolio from regional economic influences, the Company is also interested in expanding its operations in the western United States. -5- 6 The following table sets forth certain information relating to the Properties owned or financed as of December 31, 1999:
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY SITES AS OF AS OF AS OF AS OF PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1) - --------------------- --------- ------------ ----------- ----------- MIDWEST MICHIGAN Allendale 352 80%(5) 82% 95% Allendale, MI Alpine 381 99% 99% 99% Grand Rapids, MI Bedford Hills 339 98% 100% 99% Battle Creek, MI Brentwood 195 99% 98% 99% Kentwood, MI Byron Center 143 100% 99% 99% Byron Center, MI Candlewick Court 211 98% 100% 96% Owosso, MI College Park Estates 230 99% 99% 98% Canton, MI Continental Estates 385 92% 93% 88% Davison, MI Continental North 474 96% 70%(5) 84% Davison, MI Country Acres 182 96% 99% 99% Cadillac, MI Country Meadows 577 96%(5) 100% 100% Flat Rock, MI Countryside Village 360 96% 97% 96% Perry, MI Creekwood (2) 336 98% 86%(5) 94% Burton, MI Cutler Estates 281 98% 98% 99% Grand Rapids, MI Davison East 190 97% 97% 95% Davison, MI Fisherman's Cove 162 97% 98% 97% Flint, MI Grand 311 99% 96% 98% Grand Rapids, MI Hamlin 147 98% 99% 100% Webberville, MI Kensington Meadows 289 77%(5) 80% 95% Lansing, MI Kings Court 639 95%(5) 98% 100% Traverse City, MI Lafayette Place 254 (4) 97% 99% Metro Detroit, MI Lincoln Estates 191 100% 99% 98% Holland, MI Maple Grove Estates 46 98% 100% 100% Dorr, MI Meadow Lake Estates 425 100% 100% 99% White Lake, MI Meadowbrook Estates 453 100% 100% 100% Monroe, MI Meadowstream Village 159 99% 97% 97% Sodus, MI Parkwood 249 98% 99% 94% Grand Blanc, MI
-6- 7
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY SITES AS OF AS OF AS OF AS OF PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1) - --------------------- --------- ------------ ----------- ----------- Presidential 364 92%(5) 99% 98% Hudsonville, MI Richmond Place (7) 117 (4) 98% 99% Metro Detroit, MI Scio Farms 913 100% 100% 100% Ann Arbor, MI Sherman Oaks 366 98% 99% 98% Jackson, MI St. Clair Place (7) 100 (4) 99% 99% Metro Detroit, MI Timberline Estates 296 100% 98% 97% Grand Rapids, MI Town & Country 192 99% 99% 99% Traverse City, MI White Lake 268 97% 99% 100% White Lake, MI White Oak Estates 440 97% 88%(5) 92% Mt. Morris, MI Windham Estates 352 (4) 59%(5) 78%(5) Jackson, MI Woodhaven Place (7) 220 (4) 100% 99% Metro Detroit, MI Village Trails 100 (4) 82% 64%(5) --- --- --- --- Howard City, MI Michigan Total 11,689 97% 95% 96% ====== === === === INDIANA Brookside Village 570 84%(5) 84%(5) 87%(5) Goshen, IN Carrington Pointe 320 76% 55%(5) 88%(5) Ft. Wayne, IN Clear Water Village 227 94%(5) 96% 98% South Bend, IN Cobus Green 386 98% 99% 97% Elkhart, IN Deerfield Run 81 (3) (3) 59%(5) Anderson, IN Holiday Village 326 98% 99% 98% Elkhart, IN Liberty Farms 220 100% 100% 98% Valparaiso, IN Maplewood 207 97% 98% 97% Lawrence, IN Meadows 330 99% 98% 97% Nappanee, IN Pine Hills 128 94% 92% 95% Middlebury, IN Timberbrook 567 97% 98% 93% Bristol, IN Valleybrook 799 98% 98% 97% Indianapolis, IN West Glen Village 552 99% 100% 98% Indianapolis, IN Woodlake 225 (4) 93% 97% Ft. Wayne, IN Woods Edge 598 98% 84%(5) 91% --- --- --- -- West Lafayette, IN Indiana Total 5,536 94% 93% 94% ===== === === === OTHER Apple Creek 177 (3) (3) 99% Cincinnati, OH
-7- 8
DEVELOPED OCCUPANCY OCCUPANCY OCCUPANCY SITES AS OF AS OF AS OF AS OF PROPERTY AND LOCATION 12/31/99 12/31/97 (1) 12/31/98(1) 12/31/99(1) - --------------------- --------- ------------ ----------- ----------- Autumn Ridge 413 99% 97% 99% Ankeny, IA Bell Crossing 134 (3) (3) 81% Clarksville, TN Boulder Ridge 362 18%(5) 82%(5) 96% Pflugerville, TX Branch Creek Estates 392 99% 99% 100% Austin, TX Byrne Hill 236 (3) (3) 97% Toledo, OH Candlelight 309 99% 98% 97% Chicago Heights, IL Casa del Valle (8) 408 96% 100% 100% Alamo, TX Catalina Community 462 97% 98% 94% Middletown, OH Chateau Philomath 76 (3) (3) 86% Philomath, OR Chisholm Point Estates 412 98% 99% 100% Pflugerville, TX Comal (2) 139 (3) (3) 22%(5) New Braunfels, TX Edwardsville 634 90%(6) 95% 94% Edwardsville, KS High Point(9) 411 97% 96% 95% Frederica, DE Kenwood (8) 291 (3) (3) 100% LaFeria, TX Oakwood Village 511 (5) 100% 75%(5) Dayton, Ohio Orchard Lake 147 (3) (3) 99% Cincinnati, OH Paradise Park 277 100% 97% 98% Chicago Heights, IL Pine Ridge 245 99% 98% 98% Petersburg, VA Pin Oak Parc 502 96%(5) 79%(5) 91% O'Fallon, MO Pine Trace 209 (3) (3) 67%(5) Houston, TX Sea Air(9) 527 99% 99% 99% Rehoboth Beach, DE Snow to Sun (8) 486 98% 99% 99% Weslaco, TX Southfork 477 98% 95% 96% Belton, MO Sun Villa Estates 324 (4) 100% 100% Reno, NV Superstition Falls (2) 251 (4) (4) 0%(5) Apache Junction, AZ Timber Ridge 581 100% 99% 99% Ft. Collins, CO Westbrook Park (7) 344 (3) (3) 99% Toledo, OH Willowbrook (7) 266 97% 98% 100% Toledo, OH Woodland Park Estates 399 (4) 100% 99% Eugene, OR Woodside Terrace (7) 439 98% 99% 98% Holland, OH Worthington Arms 224 99% 99% 100% --- --- --- --- Delaware, OH Other Total 11,065 96% 96% 91% ====== === === ===
-8- 9 SOUTHEAST FLORIDA Arbor Terrace (8) 430 (6) (6) (6) Bradenton, FL Ariana Village 209 79% 82% 83% Lakeland, FL Bonita Lake (8) 166 (6) (6) (6) Bonita Springs, FL Chain O'Lakes (8) 321 95% 92% 92% Grand Island, FL Elmwood Mobile Home Park 100 100% 100% 99% Daytona Beach, FL Gold Coaster (8) 545 100% 100% 100% Florida City, FL Golden Lakes 426 94% 94% 95% Plant City, FL Groves RV Resort (8) 306 (6) (6) (6) Lee County, FL Holly Forest Estates 402 100% 100% 100% Holly Hill, FL Indian Creek (8) 1,554 100% 100% 100% Ft. Myers Beach, FL Island Lakes 301 99% 100% 100% Merritt Island, FL Kings Lake 245 76% 82% 91% Debary, FL Kings Pointe 227 52% 53% 56% Winter Haven, FL Kissimmee Gardens 239 100% 100% 99% Kissimmee, FL Lake Juliana 289 59% 63% 69% Auburndale, FL Lake San Marino (8) 400 (6) (6) (6) Naples, FL Leesburg Landing 96 50% 59% 66% Lake County, FL Meadowbrook Village 257 100% 99% 100% Tampa, FL Orange Tree 246 89% 92% 96% Orange City, FL Royal Country 864 99% 99% 100% Miami, FL Saddle Oak Club 376 99% 99% 100% Ocala, FL Siesta Bay (8) 859 (6) (6) (6) Ft. Myers Beach, FL Silver Star 426 95% 93% 95% Orlando, FL Tallowwood 261 68% 71% 76% Coconut Creek, FL Water Oak Country Club 772 100% 100% 100% Estates Lady Lake, FL Florida Total 10,317 92% 92% 94% ====== === === === TOTAL/AVERAGE 38,607 95% 94% 94% ====== === === ===
(1) Occupancy percentage relates to manufactured housing sites, excluding recreational vehicle sites. (2) This Property is owned by a joint venture in which the Operating Partnership owns or controls a 50% interest. (3) Acquired in 1999. -9- 10 (4) Acquired in 1998. (5) Occupancy in these Properties reflects the fact that these communities are in their initial lease-up phase following an expansion or ground up development. (6) This Property contains only recreational vehicle sites. (7) The Company leases this Property. The Company has the option to purchase the Property upon the expiration of the lease. If the Company does not exercise its option to purchase, the lessor has the right to cause the Company to purchase the Property at the expiration of the lease at the option price. (8) This Property contains recreational vehicle sites. (9) This Property is financed and managed by the Company. Leases. The typical lease entered into between a tenant and the Company for the rental of a site is month-to-month or year-to-year, renewable upon the consent of both parties, or, in some instances, as provided by statute. In some cases, leases are for one-year terms, with up to ten renewal options exercisable by the tenant, with rent adjusted for increases in the consumer price index. These leases are cancelable for non-payment of rent, violation of community rules and regulations or other specified defaults. See "Regulations and Insurance." ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on the Company's results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Common Stock has been listed on the New York Stock Exchange ("NYSE") since December 8, 1993 under the symbol "SUI." On March 6, 2000, the closing sales price of the Common Stock was $29.00 and the Common Stock was held by approximately 1,110 holders of record. The following table sets forth the high and low closing sales prices per share for the Common Stock for the periods indicated as reported by the NYSE and the distributions paid by the Company with respect to each such period.
High Low Distribution ---- --- ------------ FISCAL YEAR ENDED DECEMBER 31, 1998 First Quarter of 1998.......................................... 36 1/4 33 3/4 .49 Second Quarter of 1998......................................... 35 32 3/8 .49 Third Quarter of 1998.......................................... 34 30 1/2 .49 Fourth Quarter of 1998......................................... 34 13/16 31 1/2 .49 FISCAL YEAR ENDED DECEMBER 31, 1999 First Quarter of 1999.......................................... 35 3/8 30 1/2 .51
-10- 11 Second Quarter of 1999......................................... 37 31 3/8 .51 Third Quarter of 1999.......................................... 35 15/16 33 1/16 .51 Fourth Quarter of 1999......................................... 33 3/8 29 7/8 .51
RECENT SALES OF UNREGISTERED SECURITIES In 1997, the Operating Partnership issued an aggregate of 38,021 units ("OP Units") to certain sellers in exchange for property. In 1998, the Operating Partnership issued an aggregate of 90,704 OP Units to certain sellers in exchange for property. On December 15, 1998, pursuant to the terms of the Company's 1998 Stock Purchase Plan, the Operating Partnership issued an aggregate of 679,025 OP Units to certain officers, directors and consultants of the Company and its subsidiaries for a purchase price of $31.75 per OP Unit. In 1999, the Operating Partnership issued an aggregate 27,606 OP Units to a seller in exchange for property. On September 29, 1999, the Operating Partnership issued an aggregate of 2,000,000 Series A Cumulative Redeemable Perpetual Preferred Units to Belcrest Realty Corporation and Belair Real Estate Corporation for an aggregate of $50 million. In 1997, the Company issued an aggregate of 41,621 shares of Common Stock upon conversion of an aggregate of 41,621 OP Units. In 1998, the Company issued an aggregate of 312,870 shares of Common Stock upon conversion of an aggregate of 312,870 OP Units. On June 5, 1998, the Company issued, as compensation, an aggregate of 165,000 shares of Common Stock to certain of its officers, which shares are restricted by the terms of certain Restricted Stock Award Agreements. On December 15, 1998, pursuant to the terms of the Company's 1998 Stock Purchase Plan, the Company issued an aggregate of 122,600 shares of Common Stock to certain employees and consultants of the Company and its subsidiaries for a purchase price of $31.75 per share. In 1999, the Company issued an aggregate of 139,706 shares of Common Stock upon conversion of an aggregate of 139,706 OP Units. All of the above OP Units and shares of Common Stock were issued in private placements in reliance on Section 4(2) of the Securities Act of 1933, as amended, including Regulation D promulgated thereunder. No underwriters were used in connection with any of such issuances. -11- 12 ITEM 6. SELECTED FINANCIAL DATA SUN COMMUNITIES, INC.
YEAR ENDED DECEMBER 31, (2) ---------------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS EXCEPT FOR PER SHARE AND OTHER DATA) OPERATING DATA: Revenues: Income from property................... $ 125,424 $ 114,346 $ 93,188 $ 71,312 $ 44,048 Income from affiliate.................. 1,726 2,147 1,154 506 325 Other income........................... 7,266 3,549 1,788 1,381 739 --------- --------- --------- --------- --------- Total revenues................. 134,416 120,042 96,130 73,199 45,112 --------- --------- --------- --------- --------- Expenses: Property operating and maintenance..... 27,300 25,647 21,111 15,970 9,838 Real estate taxes...................... 8,888 8,728 7,481 5,654 2,981 Property management.................... 2,638 2,269 1,903 1,246 937 General and administrative............. 3,682 3,339 2,617 2,212 1,598 Depreciation and amortization.......... 28,551 24,961 20,668 14,887 9,747 Interest............................... 26,751 23,699 14,423 11,277 6,420 --------- --------- --------- --------- --------- Total expenses................. 97,810 88,643 68,203 51,246 31,521 --------- --------- --------- --------- --------- Income before other, net, extraordinary item and minority interests............ 36,606 31,399 27,927 21,953 13,591 Other, net ............................... 829 655 - - - Extraordinary item, early extinguishment of debt ............................... - - - (6,896) - --------- --------- --------- --------- --------- Income before minority interests............ 37,435 32,054 27,927 15,057 13,591 Income allocated to minority interests...... 8,346 5,958 5,672 3,353 1,930 --------- --------- --------- --------- --------- Net income ............................... 29,089 $ 26,096 $ 22,255 $ 11,704 $ 11,661 ========= ========= ========= ========= ========= Net income per weighted average share: Basic ............................... $ 1.69 $ 1.55 $ 1.38 $ .85 $ 1.19 ========= ========= ========= ========= ========= Diluted ............................... $ 1.68 $ 1.53 $ 1.37 $ .85 $ 1.19 ========= ========= ========= ========= ========= Weighted average common shares outstanding-basic...................... 17,191 16,856 16,081 13,733 9,792 ========= ========= ========= ========= ========= Distribution per common share (1)........... $ 2.02 $ 1.94 $ 1.865 $ 1.81 $ 1.335 ========= ========= ========= ========= ========= BALANCE SHEET DATA: Rental property, before accumulated depreciation........................... $ 866,191 $ 803,152 $ 684,821 $ 588,813 $ 326,613 Total assets ............................... $ 911,083 $ 821,439 $ 690,914 $ 585,056 $ 325,104 Total debt ............................... $ 405,473 $ 365,164 $ 264,264 $ 185,000 $ 107,055 Stockholders' equity........................ $ 338,358 $ 340,364 $ 326,780 $ 300,932 $ 177,593 OTHER DATA: Total properties (at end of period)......... 111 104 99 83 54 Total sites (at end of period).............. 38,607 37,566 35,936 30,026 18,145
(1) The distribution of $.445 per share for the fourth quarter of 1995 was declared and paid in January 1996, and accordingly, is not included in the $1.335. (2) See the Consolidated Financial Statements of the Company included elsewhere herein. 12 13 ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS OVERVIEW The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto. RESULTS OF OPERATIONS Comparison of year ended December 31, 1999 to year ended December 31, 1998 For the year ended December 31, 1999, income before other, net and minority interests increased by $5.2 million from $31.4 million to $36.6 million, when compared to the year ended December 31, 1998. The increase was due to increased revenues of $14.4 million while expenses increased by $9.2 million. Income from property increased by $11.1 million from $114.3 million to $125.4 million, or 9.7 percent, due to acquisitions ($4.0 million), rent increases ($4.1 million), lease up of manufactured home sites ($1.7 million) and other community revenues ($1.3 million). Income from affiliate decreased $0.5 million from $2.2 million to $1.7 million due to the Company no longer providing floorplan financing of the model home inventories of Sun Home Services ("SHS"). Other income increased by $3.7 million from $3.6 million to $7.3 million due primarily to a $2.7 million increase in interest income. Property operating and maintenance expenses increased by $1.7 million from $25.6 million to $27.3 million, or 6.4 percent, due primarily to acquisitions ($1.0 million). Real estate taxes increased by $0.2 million from $8.7 million to $8.9 million, or 1.8 percent, due primarily to the acquired communities. Property management expenses increased by $0.3 million from $2.3 million to $2.6 million, or 16.3 percent, representing 2.1 percent and 2.0 percent of income from property in 1999 and 1998, respectively. General and administrative expenses increased by $0.4 million from $3.3 million to $3.7 million, or 10.3 percent, due primarily to increased staffing to manage the growth of the Company. General and administrative expenses as a percentage of income from property remained constant at 2.9 percent in both periods. Interest expense increased by $3.1 million from $23.7 million to $26.8 million due primarily to investments in rental property and notes receivable. Included in interest is amortization of deferred finance costs of $0.9 million and $0.7 million in 1999 and 1998, respectively. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased by $11.8 million from $80.1 million to $91.9 million. EBITDA as a percent of revenues increased to 68.4 percent in 1999 compared to 66.7 percent in 1998. Depreciation and amortization expense increased by $3.6 million from $25.0 million to $28.6 million due primarily to the acquisition and development of communities in 1999 and 1998. 13 14 Comparison of year ended December 31, 1998 to year ended December 31, 1997 For the year ended December 31, 1998, income before other, net and minority interests increased by $3.5 million from $27.9 million to $31.4 million, when compared to the year ended December 31, 1997. The increase was due to increased revenues of $23.9 million while expenses increased by $20.4 million. Income from property increased by $21.1 million from $93.2 million to $114.3 million due primarily to the acquisition of 10 communities comprising approximately 2,100 developed sites during 1998 and 14 communities comprising approximately 5,200 developed sites during 1997. Income from affiliate increased $1.0 million from $1.2 million to $2.2 million due primarily to increased sales of homes by SHS. Other income increased by $1.8 million from $1.8 million to $3.6 million primarily due to a $1.1 million increase in interest income. Property operating and maintenance expenses increased by $4.5 million from $21.1 million to $25.6 million, or 21.5 percent, due primarily to the acquired communities. Real estate taxes increased by $1.2 million from $7.5 million to $8.7 million, or 16.7 percent, due primarily to the acquired communities. Property management expenses increased by $0.4 million from $1.9 million to $2.3 million, or 19.2 percent, representing 2.0 percent of income from property in 1998 and 1997. General and administrative expenses increased by $0.7 million from $2.6 million to $3.3 million, or 27.6 percent, due primarily to additional staff and facilities as a result of the Company's growth. Interest expense increased by $9.3 million from $14.4 million to $23.7 million due primarily to investments in rental property. Included in interest is amortization of deferred finance costs of $0.7 million and $0.2 million in 1998 and 1997, respectively. EBITDA increased by $17.1 million from $63.0 million to $80.1 million. EBITDA as a percent of revenues was 66.7 percent compared to 65.6 percent in 1997. Depreciation and amortization expense increased by $4.3 million from $20.7 million to $25.0 million due primarily to the acquisition of communities in 1998 and 1997. 14 15 SAME PROPERTY INFORMATION The following table reflects property-level financial information as of and for the years ended December 31, 1999 and 1998. The "Same Property" data represents information regarding the operation of communities owned as of January 1, 1998 and December 31, 1999. Site, occupancy, and rent data for those communities is presented as of the last day of each period presented. The table includes sites where the Company is providing financing and managing the properties. Such amounts relate to the total portfolio data and include 938 sites in 1999 and 924 sites in 1998.
SAME PROPERTY TOTAL PORTFOLIO ------------------------------ ------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- (in thousands) (in thousands) Income from property $ 87,093 $ 81,911 $125,424 $114,346 -------- -------- -------- -------- Property operating expenses: Property operating and maintenance 15,929 15,441 27,300 25,647 Real estate taxes 6,831 6,932 8,888 8,728 -------- -------- -------- -------- Property operating expenses 22,760 22,373 36,188 34,375 -------- -------- -------- -------- Property EBITDA $ 64,333 $ 59,538 $ 89,236 $ 79,971 ======== ======== ======== ======== Number of properties 77 77 111 (2) 104 Developed sites 27,118 26,950 38,607 (2) 37,566 Occupied sites 25,925 25,379 35,565 34,644 Occupancy % 95.6%(1) 94.2%(1) 94.0%(1) 94.3%(1) Weighted average monthly rent per site $ 278 (1) $ 266 (1) $ 277 (1) $ 267 (1) Sites available for development 1,262 1,369 7,348 (3) 6,924 (3) Sites planned for development in next year 131 164 1,677 (3) 2,019
(1) Occupancy % and weighted average rent relates to manufactured housing sites, excluding recreational vehicle sites. (2) Includes two communities and 390 developed sites owned through a joint venture. (3) Includes 1,138 and 717 sites available for development in 1999 and 1998, respectively, and 322 sites planned for development owned through a joint venture. On a same property basis, property revenues increased by $5.2 million from $81.9 million to $87.1 million, or 6.3 percent, due primarily to increases in rents and occupancy related charges including water and property tax pass through. Also contributing to revenue growth was the increase of 546 leased sites at December 31, 1999 compared to December 31, 1998. Property operating expenses increased by $0.4 million from $22.4 million to $22.8 million, or 1.7 percent, due to increased occupancies and costs. Property EBITDA increased by $4.8 million from $59.5 million to $64.3 million, or 8.1 percent. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased by $1.7 million to $11.4 million at December 31, 1999 compared to $9.7 million at December 31, 1998 because cash provided by operating and financing activities exceeded cash used in investing activities. 15 16 Net cash provided by operating activities increased by $8.2 million to $61.4 million for the year ended December 31, 1999 compared to $53.2 million for the year ended December 31, 1998. This increase was primarily due to income before minority interests, depreciation and amortization and other, net increasing by $6.7 million and other assets decreasing by $6.4 million, offset by accounts payable and other liabilities decreasing by $5.0 million. Net cash used in investing activities decreased by $16.1 million to $90.3 million from $106.4 million due to a $29.2 million decrease in rental property acquisition activities and an increase of $15.9 in proceeds related to asset sales, offset by an increase of $29.1 million used to finance notes receivable. Net cash provided by financing activities decreased by $30.1 million to $30.5 million for the year ended December 31, 1999 compared to $60.6 million for the year ended December 31, 1998. This decrease was primarily because $65.0 million of notes payable were issued in 1998 and none issued in 1999 and distributions increasing by $3.5 million offset by $26.1 million of additional proceeds from common stock and operating partnership units and increased borrowings on the line of credit of $12.0 million. The Company expects to meet its short-term liquidity requirements generally through its working capital provided by operating activities. The Company expects to meet certain long-term liquidity requirements such as scheduled debt maturities and property acquisitions through the issuance of equity or debt securities, or interests in the Operating Partnership. The Company considers these sources to be adequate and anticipates they will continue to be adequate to meet operating requirements, capital improvements, investment in development, and payment of distributions by the Company in accordance with REIT requirements in both the short and long term. The Company may also meet these short-term and long-term requirements by utilizing its $125 million line of credit which bears interest at LIBOR plus 1.0 percent and is due January 1, 2003. See "Special Note Regarding Forward-Looking Statements." On September 29, 1999, through the Operating Partnership, the Company completed a private placement of 2 million Series A Perpetual Preferred Units to institutional investors in exchange for a capital contribution of $50 million. Series A Preferred Units, which may be called by the Company at par on or after September 29, 2004, have no stated maturity or mandatory redemption and pay a cumulative, quarterly dividend at an annualized rate of 8.875 percent. The Series A Preferred Units are convertible into preferred stock under certain circumstances. The Company used the proceeds from such private placement to reduce outstanding indebtedness under its revolving credit facility. At December 31, 1999, the Company's debt to total market capitalization approximated 34.7 percent (assuming conversion of all Common and Preferred OP Units to shares of common stock), with a weighted average maturity of approximately 5.3 years and a weighted average interest rate of 7.12 percent. Capital expenditures for 1999 included recurring capital expenditures of $5.9 million including $0.4 million for additional space and related costs at corporate headquarters and revenue producing capital expenditures of $1.1 million which principally consisted of water metering programs. RATIO OF EARNINGS TO FIXED CHARGES The Company's ratio of earnings to fixed charges for the years ended December 31, 1999, 1998, and 1997 was 1.96:1, 2.04:1, and 2.40:1 respectively. INFLATION Most of the leases allow for periodic rent increases which provide the Company with the opportunity to achieve increases in rental income as each lease expires. Such types of leases generally minimize the risk of inflation to the Company. 16 17 SAFE HARBOR STATEMENT This Form 10-K contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "may", "will", "expect", "believe", "anticipate", "should", "estimate", and similar expressions identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors relating to the Company's operations and business environment which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Please see the section entitled "Risk Factors" of the Company's Registration Statement on Form S-3 filed with the Securities and Exchange Commission on February 15, 2000 for a list of uncertainties and factors. Such factors include, but are not limited to, the following: (i) changes in the general economic climate; (ii) increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; (iii) changes in government laws and regulations affecting manufactured housing communities; and (iv) the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. YEAR 2000 UPDATE The Year 2000 ("Y2K") issue concerns the inability of computerized information systems to accurately calculate, store and process data using a date after 1999. The Company's Y2K compliance program consisted of three phases, (i) inventory and assessment, (ii) upgrade, replacement and testing, and (iii) assurance from material third-party service providers and vendors, all of which were successfully completed prior to December 31, 1999. In February 2000, the Company officially concluded its Y2K compliance program as no events had occurred that significantly affected either the Company's operations or its financial statements. The Company believes that its expenditures for assessing Y2K issues, though difficult to quantify, have not been material as the Company's Y2K evaluation has been conducted primarily by its own personnel or by its vendors in connection with their servicing agreements. 17 18 RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. This statement will be adopted effective January 1, 2001. There is no effect from the application of SFAS 133 on the earnings and financial position of the Company as the Company has no derivative instruments at December 31, 1999. OTHER Industry analysts consider funds from operations ("FFO") to be an appropriate measure of the performance of an equity REIT. It is defined as income before minority interests plus non-cash items such as depreciation and amortization. FFO should not be considered as an alternative to net income as an indication of the Company's performance or to cash flows as a measure of liquidity. The following table presents FFO for each of the quarters during 1999, 1998 and 1997:
Quarters Ended 1999 1998 1997 - -------------------------------------------------------------------------------------------------------- March 31 $ 15,134 $ 13,271 $ 11,204 June 30 15,176 13,366 11,178 September 30 15,317 13,473 11,485 December 31 15,626 13,577 12,081 -------- -------- -------- $ 61,253 $ 53,687 $ 45,948 ======== ======== ======== For the year ended December 31, 1999 1998 1997 --------------------------------------------------------------------------------------------------- Weighted average OP Units used for basic FFO per share 19,961 19,101 18,444 Dilutive securities: Stock options and other 152 176 187 Convertible preferred OP Units 1,245 1,210 1,224 -------- -------- -------- Weighted average OP Units used for diluted FFO per share 21,358 20,487 19,855 ======== ======== ========
Diluted FFO per unit reflects the potential dilution that would occur if securities were exercised or converted into OP Units. For purposes of calculating diluted FFO per OP Unit, $2,505 would be added to FFO in 1999, 1998 and 1997. 18 19 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's principle market risk exposure is interest rate risk. The Company's exposure to market risk for changes in interest rates relates primarily to refinancing long-term fixed rate obligations, the opportunity cost of fixed rate obligations in a falling interest rate environment and its variable rate line of credit. The Company primarily enters into debt obligations to support general corporate purposes including acquisitions, capital improvements and working capital needs. The table below presents principal, interest and related weighted average interest rates by year of maturity (in thousands):
Cash Flows ---------------------------------------------------------------------------------------------- 2000 2001 2002 2003 2004 Thereafter Total Fair Value --------- --------- --------- --------- --------- --------- -------- --------- Debt (all fixed rate except line of credit) Unsecured debt Principal $ - $65,000 $ - $85,000 $ - $100,000 $250,000 $250,000 Interest $18,115 $14,919 $13,321 $ 9,000 $ 6,840 $ 52,784 $114,980 Average interest rate 7.25% 7.22% 7.20% 7.01% 6.84% 6.80% 6.98% Mortgage notes Principal amortization $ 1,473 $ 1,471 $ 1,212 $ 1,098 $ 2,301 $ 64,207 $ 71,853 $ 71,853 Interest $ 5,184 $ 5,112 $ 5,034 $ 4,954 $ 4,879 $ 17,683 $ 42,846 Average interest rate 7.25% 7.29% 7.29% 7.29% 7.30% 7.18% 7.24% Capitalized lease obligations Principal $ 611 $ 9,965 $16,176 $ 263 $ 9,606 - $ 36,620 $ 36,620 Interest $ 2,173 $ 1,694 $ 1,465 $ 537 $ 44 - $ 5,913 Average interest rate 5.98% 5.88% 5.85% 5.51% 5.51% - 5.87% Line of Credit Principal $47,000 $ 47,000 $ 47,000 Interest $ 3,349 $ 3,349 Average interest rate 7.13% 7.13%
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are filed herewith under Item 14 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in the Company's independent public accountants during the past two fiscal years. 19 20 PART III The information required by ITEMS 10, 11, 12 AND 13 will be included in the Company's proxy statement for its 2000 Annual Meeting of Shareholders, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed herewith as part of this Form 10-K: (1) A list of the financial statements required to be filed as a part of this Form 10-K is shown in the "Index to the Consolidated Financial Statements and Financial Statement Schedule" filed herewith. (2) A list of the financial statement schedules required to be filed as a part of this Form 10-K is shown in the "Index to the Consolidated Financial Statements and Financial Statement Schedule" filed herewith. (3) A list of the exhibits required by Item 601 of Regulation S-K to be filed as a part of this Form 10-K is shown on the "Exhibit Index" filed herewith. (b) Reports on Form 8-K On October 15, 1999, the Company filed a Form 8-K. This Form 8-K, dated October 14, 1999, reported the Operating Partnership's issuance of an aggregate of 2,000,000 Series A Cumulative Redeemable Perpetual Preferred Units to Belcrest Realty Corporation and Belair Real Estate Corporation for $50 million in the aggregate. 20 21 SUN COMMUNITIES, INC. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGES Report of Independent Accountants F-2 Financial Statements: Consolidated Balance Sheet as of December 31, 1999 and 1998 F-3 Consolidated Statement of Income for the Years Ended December 31, 1999, 1998 and 1997 F-4 Consolidated Statement of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997 F-5 Consolidated Statement of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997 F-6 Notes to Consolidated Financial Statements F-7 - F-13 Schedule III - Real Estate and Accumulated Depreciation F-14 - F-18
F-1 22 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Sun Communities, Inc.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Sun Communities, Inc. (the "Company") at December 31, 1999 and December 31, 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Detroit, Michigan February 11, 2000 F-2 23 SUN COMMUNITIES, INC. CONSOLIDATED BALANCE SHEET DECEMBER 31, 1999 AND 1998 (AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
ASSETS 1999 1998 ---- ---- Investment in rental property, net $ 773,633 $ 732,212 Cash and cash equivalents 11,355 9,646 Notes and other receivables 94,092 47,366 Other assets 32,003 32,215 ------------ ------------ Total assets $ 911,083 $ 821,439 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Line of credit $ 47,000 $ 26,000 Debt 358,473 339,164 Accounts payable and accrued expenses 18,258 12,637 Deposits and other liabilities 8,660 12,051 ------------ ------------ Total liabilities 432,391 389,852 ------------ ------------ Minority interests 140,334 91,223 ------------ ------------ Stockholders' equity: Preferred stock, $.01 par value, 10,000 shares authorized, none issued Common stock, $.01 par value, 100,000 shares authorized, 17,459 and 17,256 issued and outstanding in 1999 and 1998, respectively 174 172 Paid-in capital 393,360 389,448 Officers' notes (11,452) (11,609) Unearned compensation (5,459) (5,302) Distributions in excess of accumulated earnings (38,265) (32,345) ------------- ------------ Total stockholders' equity 338,358 340,364 ------------ ------------ Total liabilities and stockholders' equity $ 911,083 $ 821,439 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. F-3 24 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
1999 1998 1997 ---- ---- ---- REVENUES Income from property.............................................................$ 125,424 $ 114,346 $ 93,188 Income from affiliate............................................................ 1,726 2,147 1,154 Other income..................................................................... 7,266 3,549 1,788 ---------- ---------- ---------- Total revenues............................................................... 134,416 120,042 96,130 ---------- ---------- ---------- EXPENSES Property operating and maintenance.............................................. 27,300 25,647 21,111 Real estate taxes............................................................... 8,888 8,728 7,481 Property management............................................................. 2,638 2,269 1,903 General and administrative...................................................... 3,682 3,339 2,617 Depreciation and amortization................................................... 28,551 24,961 20,668 Interest........................................................................ 26,751 23,699 14,423 ---------- ---------- ---------- Total expenses............................................................... 97,810 88,643 68,203 ---------- ---------- ---------- Income before other, net and minority interests ................................... 36,606 31,399 27,927 Other, net......................................................................... 829 655 - ---------- ---------- ---------- Income before minority interests................................................... 37,435 32,054 27,927 Less income allocated to minority interests: Preferred OP Units........................................................... 3,663 2,505 2,505 Common OP Units.............................................................. 4,683 3,453 3,167 ---------- ---------- ---------- Net income.........................................................................$ 29,089 $ 26,096 $ 22,255 ========== ========== ========== Earnings per common share: Basic........................................................................$ 1.69 $ 1.55 $ 1.38 ========== ========== ========== Diluted......................................................................$ 1.68 $ 1.53 $ 1.37 ========== ========== ========== Weighted average common shares outstanding-basic................................... 17,191 16,856 16,081 ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statement F-4 25 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
DISTRIBUTIONS COMMON PAID-IN UNEARNED IN EXCESS STOCK CAPITAL COMPENSATION OF EARNINGS ----- ------- ------------ ----------- Balance, January 1, 1997................................................... $ 154 $ 328,321 $ (18,370) Issuance of common stock, net.............................................. 12 36,712 Reclassification and conversion of minority interests...................... (983) Net income................................................................. 22,255 Cash distributions declared of $1.865 per share............................ (29,548) -------- ---------- ---------- ---------- Balance, December 31, 1997................................................. 166 364,050 (25,663) Issuance of common stock, net.............................................. 6 11,418 $ (5,302) Reclassification and conversion of minority interests...................... 13,980 Net income................................................................. 26,096 Cash distributions declared of $1.94 per share............................. (32,778) -------- ---------- ---------- ----------- Balance, December 31, 1998................................................. 172 389,448 (5,302) (32,345) Issuance of common stock, net.............................................. 2 1,595 (157) Reclassification and conversion of minority interests...................... 2,317 Net income................................................................. 29,089 Cash distributions declared of $2.02 per share............................. (35,009) -------- ---------- ---------- ----------- Balance, December 31, 1999................................................. $ 174 $ 393,360 $ (5,459) $ (38,265) ======== ========== ========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-5 26 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (AMOUNTS IN THOUSANDS)
1999 1998 1997 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income.......................................................................$ 29,089 $ 26,096 $ 22,255 Adjustments to reconcile net income to cash provided by operating activities: Income allocated to minority interests........................................ 4,683 3,453 3,167 Other, net and gain from asset sales.......................................... (1,781) (655) - Depreciation and amortization costs........................................... 28,551 24,961 20,668 Amortization of deferred financing costs...................................... 865 681 235 Increase in other assets...................................................... (2,001) (8,363) (14,054) Increase in accounts payable and other liabilities............................ 2,080 7,070 796 ----------- ----------- ------------ Net cash provided by operating activities..................................... 61,486 53,243 33,067 ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in rental properties................................................... (76,062) (105,268) (78,552) Proceeds related to asset sales................................................... 36,720 20,773 - Investment in notes receivable, net............................................... (51,126) (22,044) (19,414) Officer note...................................................................... 157 164 (2,600) ----------- ----------- ------------ Net cash used in investing activities......................................... (90,311) (106,375) (100,566) ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of common stock and operating partnership units............................................................. 53,451 27,396 36,724 Borrowings on line of credit, net................................................. 21,000 9,000 17,000 Proceeds from notes payable and other debt........................................ - 65,000 45,000 Repayments on notes payable and other debt........................................ (1,741) (935) (189) Payments for deferred financing costs............................................. (1,554) (2,794) (4,326) Distributions..................................................................... (40,622) (37,087) (33,748) ----------- ----------- ------------ Net cash provided by financing activities..................................... 30,534 60,580 60,461 ----------- ----------- ------------ Net increase (decrease) in cash and cash equivalents.............................. 1,709 7,448 (7,038) Cash and cash equivalents, beginning of year...................................... 9,646 2,198 9,236 ----------- ----------- ------------ Cash and cash equivalents, end of year............................................$ 11,355 $ 9,646 $ 2,198 =========== =========== ============ SUPPLEMENTAL INFORMATION Cash paid for interest including capitalized amounts of $2,322, $1,333 and $756 in 1999, 1998 and 1997, respectively.......................$ 28,422 $ 23,517 $ 14,742 Noncash investing and financing activities: Debt assumed for rental properties and other.................................. 10,445 18,356 - Capitalized lease obligations for rental properties and other................. 10,605 9,479 17,453 Property acquired through the exchange of similar property.................... 7,700 - - Common stock issued as unearned compensation.................................. 720 5,631 - Property acquired in satisfaction of note receivable.......................... 4,400 - - Issuance of partnership units for rental properties and other ................ - 2,204 -
The accompanying notes are an integral part of the consolidated financial statements. F-6 27 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: A. BUSINESS: Sun Communities, Inc. and its subsidiaries (the "Company") is a real estate investment trust ("REIT") which owns and operates or finances 111 manufactured housing communities located in 16 states concentrated principally in the Midwest and Southeast comprising approximately 38,600 developed sites and approximately 7,350 sites suitable for development. The Company, which has elected to be taxed under Section 856(c) of the Internal Revenue Code of 1986, generally will not be subject to federal or state income taxes to the extent it distributes its REIT taxable income to its stockholders. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. B. PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include the accounts of the Company and all majority-owned and controlled subsidiaries. The minority interests include Common Operating Partnership Units ("OP Units") which are convertible into an equivalent number of shares of the Company's common stock. Such conversion would have no effect on earnings per share since the allocation of earnings to an OP Unit is equivalent to earnings allocated to a share of common stock. Of the 20.2 million OP Units outstanding, the Company owns 17.5 million or 86.6 percent. The minority interests are adjusted to their relative ownership interest whenever OP Units or common stock are issued, converted or retired by reclassification to/from paid-in capital. Included in minority interests at December 31, 1999 are 2 million Series A Perpetual Preferred OP Units ("PPOP Units") issued at $25 per unit in September 1999 bearing an annual coupon rate of 8.875 percent. The PPOP Units may be called by the Company at par on or after September 29, 2004, have no stated maturity or mandatory redemption and are convertible into preferred stock under certain circumstances. Also included in minority interests are 1.3 million Preferred OP Units ("POP Units") issued at $27 per unit bearing an annual cumulative dividend of $1.89 and redeemable at par or convertible in June, 2002. The POP Units are convertible one-for-one into OP Units at prices up to $31.50 per share. At prices above $31.50 per share, the POP Units are convertible into OP Units based on a formula the numerator of which is $31.50 plus 25 percent of stock price appreciation above $36 per share. The denominator is the then stock price. Had conversion occurred at the December 31, 1999 stock price of $32.188, the 1.325 million POP Units would have converted into 1.297 million OP Units. C. RENTAL PROPERTY: Rental property is recorded at the lower of cost, less accumulated depreciation or fair value. Management evaluates the recoverability of its investment in rental property whenever events or changes in circumstances such as recent operating results, expected net operating cash flow and plans for future operations indicate that full asset recoverability is questionable. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are 30 years for land improvements and buildings and 7 to 15 years for furniture, fixtures and equipment. Expenditures for ordinary maintenance and repairs are charged to operations as incurred and significant renovations and improvements, which improve and/or extend the useful life of the asset, are capitalized and depreciated over their estimated useful lives. Construction costs related to new community or expansion sites development including interest are capitalized until the property is open for occupancy. F-7 28 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 1999, 1998 AND 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: D. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments with an initial maturity of three months or less to be cash and cash equivalents. E. INVESTMENTS IN AND ADVANCES TO AFFILIATES: Sun Home Services ("SHS") provides home sales and other services to current and prospective tenants. The Company owns 100 percent of the outstanding preferred stock of SHS, is entitled to 95 percent of the operating cash flow, and accounts for its investment utilizing the equity method of accounting. The common stock is owned by three officers of the Company who are entitled to receive 5 percent of the operating cash flow. Included in other assets at December 31, 1999 and 1998 is $6.4 million and $11.3 million, respectively, related to the Company's investment in SHS. On December 31, 1999, "SunChamp", a 50 percent controlled joint venture of the Company and Champion Enterprises, Inc., acquired three communities under initial development. The Company intends to account for its investment utilizing the equity method of accounting. F. REVENUE RECOGNITION: Rental income attributable to leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants generally range from month-to-month to one year and are renewable by mutual agreement of the Company and resident or, in some cases, as provided by statute. G. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of financial instruments which includes cash and cash investments, mortgages and notes receivable and debt approximates fair value. H. TAX STATUS OF DIVIDENDS: Approximately 19.4, 19.8, and 31.2 percent of the distributions paid in 1999, 1998, and 1997, respectively, represent a return of capital. The distributions paid included a 16.6 and 14.6 percent capital gain in 1999 and 1998, respectively. I. CASH FLOW HEDGES: The company has periodically entered into hedge transactions to lock-in the basic interest cost of financing acquisitions. The gain or loss on such hedges is amortized as an adjustment to interest expense over the term of the related financing. J. RECLASSIFICATIONS: Certain 1998 and 1997 amounts have been reclassified to conform with the 1999 financial statement presentation. Such reclassifications have no effect on results of operations as originally presented. 2. RENTAL PROPERTY (AMOUNTS IN THOUSANDS):
AT DECEMBER 31 ----------------------------- 1999 1998 ---------- ----------- Land....................................................................................$ 76,745 $ 71,930 Land improvements and buildings......................................................... 724,574 679,755 Furniture, fixtures, and equipment ..................................................... 16,943 15,209 Land held for future development........................................................ 22,943 9,747 Property under development.............................................................. 24,986 26,511 ---------- ----------- 866,191 803,152 Less accumulated depreciation...................................................... (92,558) (70,940) ---------- ----------- $ 773,633 $ 732,212 ========== ===========
F-8 29 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 1999, 1998 AND 1997 2. RENTAL PROPERTY, CONTINUED: Land improvements and buildings consist primarily of infrastructure, roads, landscaping, clubhouses, maintenance buildings and amenities. Included in rental property at December 31, 1999 and 1998 are net carrying amounts related to capitalized leases of $40.8 million and $29.8 million, respectively. During 1999, the Company acquired nine manufactured housing communities comprising 1,624 developed sites and 534 sites suitable for development for $37.1 million and five development communities comprising 2,046 sites, some of which are partially developed, for $13.1 million. During 1998, the Company acquired ten communities comprising 2,100 developed sites and 1,000 sites suitable for development for $65.5 million and eight development communities comprising 3,650 sites for $20.1 million. These transactions have been accounted for as purchases, and the statements of income include the operations of the acquired communities from the dates of their respective acquisitions. In conjunction with a prior year acquisition, the Company is obligated to issue $10.2 million of OP Units over the expected lease-up of the community through 2009 based on the per unit price of the OP Units on each annual date. 3. NOTES AND OTHER RECEIVABLES (AMOUNTS IN THOUSANDS):
DECEMBER 31 ------------------------ 1999 1998 --------- --------- Mortgage notes receivable with minimum monthly interest payments at 7%, maturing June 2012, collateralized by manufactured housing/recreational vehicle communities (a). $ 15,093 $ 15,093 Note receivable, collateralized by all assets of the borrower, bears interest at LIBOR + 2.35% and payable on demand 40,794 10,774 Note receivable, bears interest at 9.75% and matures September 2005 4,000 4,000 Installment loans on manufactured homes with interest payable monthly at a weighted average interest rate and maturity of 11% and 21 years, respectively. 18,635 5,339 Notes receivable, other, various interest rates ranging from 6% to 9.5% or prime + 1.5%, various maturity dates through December 2003. 1,562 1,853 Other receivables 14,008 10,307 --------- --------- $ 94,092 $ 47,366 ========= =========
(a) The stated interest rate is 12%. The excess of the interest earned at the stated rate over the pay rate is recognized upon receipt of payment. F-9 30 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 1999, 1998 AND 1997 3. NOTES AND OTHER RECEIVABLES, CONTINUED: Officers' notes are 10 year, LIBOR + 1.75% notes, with a minimum and maximum interest rate of 6% and 9%, respectively, collateralized by 366,206 shares of the Company's common stock and 127,794 OP Units with substantial personal recourse. Interest income of $0.8 million, $0.9 million and $0.8 million has been recognized in 1999, 1998 and 1997, respectively. 4. DEBT (AMOUNTS IN THOUSANDS):
AT DECEMBER 31 ------------------------------ 1999 1998 ---------- ---------- Collateralized term loan, interest at 7.01%, due September 9, 2007......................$ 43,927 $ 44,425 Senior notes, interest at 7.375%, due May 1, 2001....................................... 65,000 65,000 Senior notes, interest at 7.625%, due May 1, 2003....................................... 85,000 85,000 Senior notes, interest at 6.97%, due December 3, 2007................................... 35,000 35,000 Senior notes, interest at 6.77%, due May 14, 2015, callable/redeemable May 16, 2005................................................... 65,000 65,000 Capitalized lease obligations, interest ranging from 6.1% to 6.3%, due March 2001 through December 2002......................................... 36,620 26,542 Mortgage notes, other................................................................... 27,926 18,197 ---------- ---------- $ 358,473 $ 339,164 ========== ==========
The Company has a $125 million unsecured line of credit at LIBOR plus 1.0% maturing in January 2003, of which $78 million was available at December 31, 1999. The average interest rate of outstanding borrowings at December 31, 1999 was 6.68%. The term loan is collateralized by seven communities comprising approximately 3,400 sites. The capitalized lease obligations and mortgage notes are collateralized by fifteen communities comprising approximately 3,850 sites. $27.1 million of the capitalized lease obligations are convertible into OP units at prices ranging from $35 to $40 per OP Unit. Annual payments under capitalized lease obligations range from $1.3 million to $1.4 million during their terms. At December 31, 1999, the maturities of debt, excluding the line of credit, during the next five years are approximately as follows: 2000 - $2.1 million; 2001 - $76.4 million; 2002 - $17.4 million; 2003 - $133.5 million; and 2004 - $11.9 million. F-10 31 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 5. STOCK OPTIONS: Data pertaining to stock option plans are as follows:
1999 1998 1997 ---- ---- ---- Options outstanding, January 1............................... 1,055,600 965,900 767,434 Options granted.............................................. 99,000 162,500 262,000 Option price................................................. $30.03-$32.96 $33.75-$34.13 $27-$35.39 Options exercised............................................ 35,099 66,800 61,033 Option price............................................. $22.75-$33.75 $20-$33.75 $20-$28.64 Options forfeited............................................ 1,501 6,000 2,501 Option price............................................. $33.75 $33.75-$34.91 $24.88-$28.64 Options outstanding, December 31............................. 1,118,000(a) 1,055,600 965,900 Option price............................................. $20-$35.39 $20-$35.39 $20-$35.39 Options exercisable, December 31............................. 709,811(a) 601,410 482,651
(a) There are 273,400 options outstanding and exercisable, respectively, which range from $20.00 - $27.99 with a weighted average life of 5.0 years related to the outstanding options. The weighted average exercise price for these outstanding and exercisable options is $22.81. There are 844,600 and 436,433 options outstanding and exercisable, respectively, which range from $28.00 - $35.99 with a weighted average life of 6.0 years related to the outstanding options. The weighted average exercise price for these outstanding and exercisable options is $30.96 and $29.96, respectively. At December 31, 1999, 512,875 shares of common stock were available for the granting of options. Options are granted at fair value and generally vest over a two-year period and may be exercised for 10 years after date of grant. The stock option plans provide for the grant of up to 2,116,000 options. In addition, the Company established a Long-Term Incentive Plan for certain employees granting up to 240,000 options in 1997, which become exercisable in equal installments in 2002-2004 based on corporate profit performance. The Company has opted to measure compensation cost utilizing the intrinsic value method. The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions for options granted
1999 1998 1997 ---- ---- ---- Estimated fair value per share of options granted during year.................$ 2.43 $ 2.43 $ 2.82 Assumptions: Annualized dividend yield..................................................... 7.1% 7.0% 7.1% Common stock price volatility................................................. 15.3% 15.9% 15.6% Risk-free rate of return...................................................... 6.4% 5.4% 6.7% Expected option term (in years)............................................... 6 4 7
If compensation cost for stock option grants had been recognized based on the fair value at the grant date, this would have resulted in net income of $28.8 million, $25.8 million and $21.9 million and basic net income per share of $1.68, $1.53 and $1.36 in 1999, 1998 and 1997, respectively. F-11 32 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 6. STOCKHOLDERS' EQUITY: In April 1998, the Company declared a dividend of one Preferred Stock Purchase Right (Right) for each outstanding share of common stock. The Rights are not presently exercisable. Each Right entitles the holder, upon the occurrence of certain specified events, including a material change in the ownership of the Company, to purchase preferred stock and common stock, from the Company and/or from another person into which the Company is merged or which acquires control of the Company. The Rights may be generally redeemed by the Company at a price of $0.01 per Right. The Rights expire on June 8, 2008. In December 1999, and June 1998, the Company issued stock awards of 24,000 and 165,000 restricted shares, respectively, to officers and certain employees which are being amortized over their five to ten year vesting period. In December 1998, the Company issued common stock and OP units aggregating $25.5 million to directors, employees and consultants. The purchase was financed by personal bank loans guaranteed by the Company until January 2004. 7. EARNINGS PER SHARE (AMOUNTS IN THOUSANDS):
1999 1998 1997 ---- ---- ---- Earnings used for basic and diluted earnings per share computation $ 29,089 $ 26,096 $ 22,255 ========= ========== ========== Total shares used for basic earnings per share 17,191 16,856 16,081 Dilutive securities: Stock options and other 152 175 187 --------- ---------- ---------- Total weighted average shares used for diluted earnings per share computation 17,343 17,031 16,268 ========= ========== ==========
Diluted earnings per share reflect the potential dilution that would occur if dilutive securities were exercised or converted into common stock. Convertible POP Units are excluded from the computations as their inclusion would have an anti-dilutive effect on earnings per share in 1999, 1998 and 1997. 8. QUARTERLY FINANCIAL DATA (UNAUDITED): The following unaudited quarterly amounts are in thousands, except for per share amounts:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- 1999 Total revenues..................................................$ 32,884 $ 32,635 $ 33,990 $ 34,907 Operating income (a)............................................$ 22,309 $ 22,391 $ 23,014 $ 24,194 Income before other, net and allocation to minority interests........................................$ 8,938 $ 8,727 $ 8,727 $ 10,214 Other, net (b)..................................................$ - $ - $ - $ 829 Net income......................................................$ 7,135 $ 6,964 $ 6,985 $ 8,005 Weighted average common shares outstanding...................... 17,113 17,160 17,223 17,269 Earnings per common share-basic.................................$ 0.42 $ 0.40 $ 0.41 $ 0.46
F-12 33 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 8. QUARTERLY FINANCIAL DATA (UNAUDITED) CONTINUED:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- 1998 Total revenues..................................................$ 29,417 $ 29,715 $ 30,164 $ 30,746 Operating income (a)............................................$ 19,515 $ 19,977 $ 20,081 $ 20,486 Income before other, net and allocation to minority interests........................................$ 7,999 $ 7,968 $ 8,027 $ 7,405 Other, net (b)..................................................$ 937 $ - $ 2,093 $ (2,375) Net income......................................................$ 7,301 $ 6,503 $ 8,410 $ 3,882 Weighted average common shares outstanding...................... 16,682 16,867 16,900 16,978 Earnings per common share-basic.................................$ .44 $ .38 $ .50 $ .23
(a) Operating income is defined as total revenues less property operating and maintenance expense, real estate tax expense, property management, and general and administrative expenses. Operating income is a measure of the performance of the operations of the properties before the effects of depreciation, amortization and interest expense. Operating income is not necessarily an indication of the performance of the Company or a measure of liquidity. (b) Other, net consists principally of net gains (losses) on the sale/dispositions of depreciated properties. F-13 34 SUN COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
COST CAPITALIZED SUBSEQUENT TO INITIAL COST ACQUISITION TO COMPANY IMPROVEMENTS -------------------- ---------------------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES - ------------- -------- ----------- ---- -------- ---- -------- Allendale Allendale, MI - 393 $ 3,684 - $ 3,349 Alpine Grand Rapids, MI - 729 6,692 - 2,528 Apple Creek Amelia, OH (3) 543 5,480 - - Arbor Terrace Bradenton, FL - 481 4,410 - 179 Ariana Village Lakeland, FL - 240 2,195 - 387 Autumn Ridge Ankeny, IO - 890 8,054 - 648 Bedford Hills Battle Creek, MI (1) 1,265 11,562 - 232 Bell Crossing Clarksville, TN - 717 1,916 - 95 Bonita Lake Bonita Springs, FL - 285 2,641 - 80 Boulder Ridge Pflugerville, TX - 1,000 500 $ 518 9,088 Branch Creek Austin, TX - 796 3,716 - 4,202 Brentwood Kentwood, MI - 385 3,592 - 138 Brookside Village Goshen, IN - 260 1,080 386 6,711 Byrne Hill Village Toledo, OH - 383 3,903 - 5 Byron Center Byron Center, MI - 257 2,402 -4 101 Candlelight Village Chicago Heights, IL - 600 5,623 - 422 Candlewick Court Owosso, MI - 125 1,900 132 929 Carrington Pointe Ft. Wayne, IN - 1,076 3,632 - 2,692 Casa Del Valle Alamo, TX - 246 2,316 - 274 Catalina Middletown, OH - 653 5,858 - 414 Cave Creek Evans, CO - 2,170 - 71 575 Chain O'Lakes Grand Island, FL - 551 5,003 - 163 Chisholm Point Pflugerville, TX - 609 5,286 - 1,507 Clearwater Village South Bend, IN - 80 1,270 61 1,732 Cobus Green Elkhart, IN - 762 7,037 - 502 College Park Estates Canton, MI - 75 800 174 4,404 Comal Farms New Braunfels, TX (4) 1,474 1,843 - - Continental Estates Davison, MI - 1,625 16,581 150 879 Continental North Davison, MI - - - - 3,002 Country Acres Cadillac, MI - 380 3,495 - 111 Country Meadows Flat Rock, MI - 924 7,583 296 8,939 GROSS AMOUNT CARRIED AT DECEMBER 31, 1999 --------------------- BUILDING DATE OF AND ACCUMULATED CONSTRUCTION (C) PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A) - ------------- ---- -------- ----------- ------------ ----------- Allendale $ 393 $ 7,033 $ 7,426 $ 655 1996(A) Alpine 729 9,220 9,949 907 1996(A) Apple Creek 543 5,480 6,023 78 1999(A) Arbor Terrace 481 4,589 5,070 556 1996(A) Ariana Village 240 2,582 2,822 464 1994(A) Autumn Ridge 890 8,702 9,592 994 1996(A) Bedford Hills 1,265 11,794 13,059 1,407 1996(A) Bell Crossing 717 2,011 2,728 36 1999(A) Bonita Lake 285 2,721 3,006 328 1996(A) Boulder Ridge 1,518 9,588 11,106 468 1998(C) Branch Creek 796 7,918 8,714 839 1995(A) Brentwood 385 3,730 4,115 457 1996(A) Brookside Village 646 7,791 8,437 1,004 1985(A) Byrne Hill Village 383 3,908 4,291 70 1999(A) Byron Center 253 2,503 2,756 312 1996(A) Candlelight Village 600 6,045 6,645 716 1996(A) Candlewick Court 257 2,829 3,086 568 1985(A) Carrington Pointe 1,076 6,324 7,400 418 1997(A) Casa Del Valle 246 2,590 2,836 232 1997(A) Catalina 653 6,272 6,925 1,293 1993(A) Cave Creek 2,241 575 2,816 - 1998(A) Chain O'Lakes 551 5,166 5,717 683 1996(A) Chisholm Point 609 6,793 7,402 920 1995(A) Clearwater Village 141 3,002 3,143 463 1986(A) Cobus Green 762 7,539 8,301 1,520 1993(A) College Park Estates 249 5,204 5,453 948 1978(A) Comal Farms 1,474 1,843 3,317 - 1999(A) Continental Estates 1,775 17,460 19,235 2,145 1996(A) Continental North - 3,002 3,002 - 1996(A) Country Acres 380 3,606 3,986 433 1996(A) Country Meadows 1,220 16,522 17,742 2,301 1994(A)
F-14 35 SUN COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
COST CAPITALIZED SUBSEQUENT TO INITIAL COST ACQUISITION TO COMPANY IMPROVEMENTS -------------------- ---------------------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES - ------------- -------- ----------- ---- -------- ---- -------- Countryside Village Perry, MI (1) 275 3,920 185 1,781 Creekside Reidsville, NC (4) 369 1,403 - - Creekwood Meadows Burton, MI - 808 2,043 404 4,435 Cutler Estates Grand Rapids, MI (1) 822 7,604 - 165 Davison Davison, MI - - - - 2 Deerfield Run Anderson, MI 1,700 990 1,607 - 116 Desert View Village West Wendover, NV - 1,180 - 423 940 Eagle Crest Firestone, CO - 4,073 150 45 4,679 Edwardsville Edwardsville, KS (1) 425 8,805 541 2,081 Elmwood Holly Hill, FL - 230 2,076 - 45 Fisherman's Cove Flint, MI - 380 3,438 - 397 Goldcoaster Homestead, FL - 446 4,234 74 915 Golden Lakes Plant City, FL - 1,092 7,161 - 891 Grand Grand Rapids, MI - 578 5,396 - 99 Groves Ft. Myers, FL - 249 2,396 - 430 Hamlin Webberville, MI - 125 1,675 280 887 Holiday Village Elkhart, IN - 100 3,207 143 1,096 Holly Forest Holly Hill, FL - 920 8,376 - 177 Hunter's Glen Leighton Twp., MI - 1,063 - 39 1,573 Indian Creek Ft. Myers Beach, FL - 3,832 34,660 - 544 Island Lake Merritt Island, FL - 700 6,431 - 188 Kensington Meadows Lansing, MI - 250 2,699 - 3,354 Kenwood La Feria, TX - 145 1,857 - - King's Court Traverse City, MI - 1,473 13,782 - 1,100 King's Lake Debary, FL - 280 2,542 - 1,690 King's Pointe Winter Haven, FL - 262 2,359 - 318 Kissimmee Gardens Kissimmee, FL - 594 5,522 - 236 Lafayette Place Warren, MI - 669 5,979 - 561 Lake Juliana Auburndale, FL - 335 2,848 - 519 Lake San Marino Naples, FL - 650 5,760 - 259 Leesburg Landing Leesburg, FL - 50 429 921 365 GROSS AMOUNT CARRIED AT DECEMBER 31, 1999 --------------------- BUILDING DATE OF AND ACCUMULATED CONSTRUCTION (C) PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A) - ------------- ---- -------- ----------- ------------ ---------------- Countryside Village 460 5,701 6,161 1,036 1987(A) Creekside 369 1,403 1,772 - 1999(A) Creekwood Meadows 1,212 6,478 7,690 387 1997(C) Cutler Estates 822 7,769 8,591 931 1996(A) Davison - 2 2 - 1996(A) Deerfield Run 990 1,723 2,713 30 1999(A) Desert View Village 1,603 940 2,543 - 1998(A) Eagle Crest 4,118 4,829 8,947 - 1998(A) Edwardsville 966 10,886 11,852 2,074 1987(A) Elmwood 230 2,121 2,351 176 1997(A) Fisherman's Cove 380 3,835 4,215 772 1993(A) Goldcoaster 520 5,149 5,669 424 1997(A) Golden Lakes 1,092 8,052 9,144 1,605 1993(A) Grand 578 5,495 6,073 672 1996(A) Groves 249 2,826 3,075 231 1997(A) Hamlin 405 2,562 2,967 475 1984(A) Holiday Village 243 4,303 4,546 866 1986(A) Holly Forest 920 8,553 9,473 719 1997(A) Hunter's Glen 1,102 1,573 2,675 - 1998(A) Indian Creek 3,832 35,204 39,036 4,263 1996(A) Island Lake 700 6,619 7,319 1,003 1995(A) Kensington Meadows 250 6,053 6,303 624 1995(A) Kenwood 145 1,857 2,002 29 1999(A) King's Court 1,473 14,882 16,355 1,727 1996(A) King's Lake 280 4,232 4,512 633 1994(A) King's Pointe 262 2,677 2,939 490 1994(A) Kissimmee Gardens 594 5,758 6,352 1,243 1993(A) Lafayette Place 669 6,540 7,209 338 1998(A) Lake Juliana 335 3,367 3,702 610 1994(A) Lake San Marino 650 6,019 6,669 723 1996(A) Leesburg Landing 971 794 1,765 86 1996(A)
F-15 36 SUN COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
COST CAPITALIZED SUBSEQUENT TO INITIAL COST ACQUISITION TO COMPANY IMPROVEMENTS -------------------- ---------------------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES - ------------- -------- ----------- ---- -------- ---- -------- Liberty Farms Valparaiso, IN - 66 1,201 116 1,711 Lincoln Estates Holland, MI - 455 4,201 - 232 Maple Grove Estates Dorr, MI - 15 210 19 256 Maplewood Lawrence, IN - 280 2,122 - 611 Meadow Lake Estates White Lake, MI - 1,188 11,498 126 1,363 Meadowbrook Estates Monroe, MI - 431 3,320 379 5,580 Meadowbrook Village Tampa, FL - 519 4,728 - 214 Meadows Nappanee, IN - 300 2,300 -13 2,098 Meadowstream Village Sodus, MI - 100 1,175 109 1,216 Oakwood Village Miamisburg, OH 704 1,964 6,401 - 3,073 Orange Tree Orange City, FL - 283 2,530 15 520 Orchard Lake Milford, OH (3) 395 4,064 - - Paradise Chicago Heights, IL - 723 6,638 - 408 Parkwood Grand Blanc, MI - 477 4,279 - 535 Pecan Branch Georgetown, TX - 1,379 - - 65 Chateau Philomath Philomath, OR - 1,031 2,064 - 15 Pin Oak Parc St. Louis, MO - 1,038 3,250 467 4,088 Pine Hills Middlebury, IN - 72 544 56 1,532 Pine Ridge Petersburg, VA - 405 2,397 - 1,088 Pine Trace Houston, TX - 2,907 4,272 - 1,812 Presidential Hudsonville, MI - 680 6,314 - 1,000 Richmond Richmond, MI (2) 501 2,040 - 264 Royal Country Miami, FL (1) 2,290 20,758 - 455 Saddle Oak Club Ocala, FL - 730 6,743 - 409 Scio Farms Ann Arbor, MI - 2,300 22,659 - 3,306 Sherman Oaks Jackson, MI (1) 200 2,400 240 3,280 Siesta Bay Ft. Myers Beach, FL - 2,051 18,549 - 304 Silver Star Orlando, FL - 1,067 9,685 - 191 Snow to Sun Weslaco, TX 97 190 2,143 15 629 Southfork Belton, MO - 1,000 9,011 - 847 St. Clair Place St. Clair, MI (2) 501 2,029 1 283 GROSS AMOUNT CARRIED AT DECEMBER 31, 1999 ---------------------- BUILDING DATE OF AND ACCUMULATED CONSTRUCTION (C) PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A) - ------------- ---- -------- ----------- ------------ ---------------- Liberty Farms 182 2,912 3,094 553 1985(A) Lincoln Estates 455 4,433 4,888 527 1996(A) Maple Grove Estates 34 466 500 92 1979(A) Maplewood 280 2,733 3,013 544 1989(A) Meadow Lake Estates 1,314 12,861 14,175 2,448 1994(A) Meadowbrook Estates 810 8,900 9,710 1,783 1986(A) Meadowbrook Village 519 4,942 5,461 989 1994(A) Meadows 287 4,398 4,685 804 1987(A) Meadowstream Village 209 2,391 2,600 481 1984(A) Oakwood Village 1,964 9,474 11,438 399 1998(A) Orange Tree 298 3,050 3,348 520 1994(A) Orchard Lake 395 4,064 4,459 68 1999(A) Paradise 723 7,046 7,769 825 1996(A) Parkwood 477 4,814 5,291 951 1993(A) Pecan Branch 1,379 65 1,444 - 1999(C) Chateau Philomath 1,031 2,079 3,110 32 1999(A) Pin Oak Parc 1,505 7,338 8,843 845 1994(A) Pine Hills 128 2,076 2,204 397 1980(A) Pine Ridge 405 3,485 3,890 672 1986(A) Pine Trace 2,907 6,084 8,991 103 1999(C) Presidential 680 7,314 7,994 843 1996(A) Richmond 501 2,304 2,805 123 1998(A) Royal Country 2,290 21,213 23,503 4,298 1994(A) Saddle Oak Club 730 7,152 7,882 1,235 1995(A) Scio Farms 2,300 25,965 28,265 3,714 1995(A) Sherman Oaks 440 5,680 6,120 1,119 1986(A) Siesta Bay 2,051 18,853 20,904 2,281 1996(A) Silver Star 1,067 9,876 10,943 1,193 1996(A) Snow to Sun 205 2,772 2,977 226 1997(A) Southfork 1,000 9,858 10,858 498 1997(A) St. Clair Place 502 2,312 2,814 145 1998(A)
F-16 37 SUN COMMUNITIES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS)
COST CAPITALIZED SUBSEQUENT TO INITIAL COST ACQUISITION TO COMPANY IMPROVEMENTS -------------------- ---------------------- BUILDING BUILDING AND AND PROPERTY NAME LOCATION ENCUMBRANCE LAND FIXTURES LAND FIXTURES - ------------- -------- ----------- ---- -------- ---- -------- Stonebridge Richfield Twp., MI 1,119 2,044 - 17 380 Sun Villa Reno, NV 6,916 2,385 11,773 - 294 Sunset Ridge Portland, MI - 2,044 - - 54 Superstition Falls Apache Junction, AZ - 5,368 - 51 6,114 Tallowwood Coconut Creek, FL - 510 5,099 140 817 Timber Ridge Ft. Collins, CO - 990 9,231 - 438 Timberbrook Bristol, IN (1) 490 3,400 101 4,539 Timberline Estates Grand Rapids, MI - 536 4,867 - 444 Town and Country Traverse City, MI - 406 3,736 - 174 Valley Brook Indianapolis, IN - 150 3,500 1,277 8,371 Village Trails Howard City, MI 648 988 1,472 - 451 Water Oak Country Club Est. Lady Lake, FL - 2,503 17,478 - 2,419 Westbrook Toledo, OH (2) 1,110 10,462 - 2 West Glen Village Indianapolis, IN - 1,100 10,028 - 611 White Lake White Lake, MI - 673 6,179 - 2,302 White Oak Mt. Morris, MI - 782 7,245 112 2,406 Willowbrook Toledo, OH (2) 781 7,054 - 293 Windham Hills Jackson, MI - 2,673 2,364 - 3,591 Woodhaven Place Wood Haven, MI (2) 501 4,541 - 632 Woodlake Estates Yoder, IN - 632 3,674 - 998 Woodlake Trails San Antonio, TX (4) 1,206 668 - - Woodland Park Estates Eugene, OR 8,005 1,593 14,398 - 108 Woods Edge West Lafayette, IN - 100 2,600 3 5,758 Woodside Terrace Holland, OH (2) 1,064 9,625 - 1,113 Worthington Arms Delaware, OH - 376 2,624 - 1,039 Corporate Headquarters Farmington Hills, MI - - - - 3,419 -------- -------- ------- -------- $ 99,882 $589,956 $ 8,070 $168,283 ======== ======== ======= ======== GROSS AMOUNT CARRIED AT DECEMBER 31, 1999 --------------------- BUILDING DATE OF AND ACCUMULATED CONSTRUCTION (C) PROPERTY NAME LAND FIXTURES TOTAL DEPRECIATION ACQUISITION (A) - ------------- ---- -------- ----------- ------------ ---------------- Stonebridge 2,061 380 2,441 - 1998(A) Sun Villa 2,385 12,067 14,452 608 1998(A) Sunset Ridge 2,044 54 2,098 - 1998(A) Superstition Falls 5,419 6,114 11,533 - 1998(A) Tallowwood 650 5,916 6,566 1,060 1994(A) Timber Ridge 990 9,669 10,659 1,163 1996(A) Timberbrook 591 7,939 8,530 1,443 1987(A) Timberline Estates 536 5,311 5,847 989 1994(A) Town and Country 406 3,910 4,316 471 1996(A) Valley Brook 1,427 11,871 13,298 2,018 1989(A) Village Trails 988 1,923 2,911 92 1998(A) Water Oak Country Club Est. 2,503 19,897 22,400 3,934 1993(A) Westbrook 1,110 10,464 11,574 180 1999(A) West Glen Village 1,100 10,639 11,739 1,932 1994(A) White Lake 673 8,481 9,154 627 1997(A) White Oak 894 9,651 10,545 712 1997(A) Willowbrook 781 7,347 8,128 372 1997(A) Windham Hills 2,673 5,955 8,628 235 1998(A) Woodhaven Place 501 5,173 5,674 269 1998(A) Woodlake Estates 632 4,672 5,304 206 1998(A) Woodlake Trails 1,206 668 1,874 - 1999(A) Woodland Park Estates 1,593 14,506 16,099 741 1998(A) Woods Edge 103 8,358 8,461 947 1985(A) Woodside Terrace 1,064 10,738 11,802 864 1997(A) Worthington Arms 376 3,663 4,039 720 1990(A) Corporate Headquarters - 3,419 3,419 885 Various -------- -------- -------- -------- $107,952(5) $758,239(6) $866,191 $ 92,558 ======== ======== ======== ========
(1) These communities collateralize $43.9 million of term debt. (2) These communities are financed by $36.6 million of collateralized lease obligations. (3) These communities collateralize $4.8 million of mortgage debt. (4) These communities collateralize $3.9 million of mortgage debt. (5) Includes $8.3 million of land in property under development in Footnote 2 "Rental Property" to the Company's Consolidated Financial Statements included elsewhere herein. (6) Includes $16.7 million of property under development in Footnote 2 "Rental Property" to the Company's Consolidated Financial Statements included elsewhere herein. F-17 38 SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS) The change in investment in real estate for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ---------- ---------- ---------- Balance, beginning of year $ 803,152 $ 684,821 $ 588,813 Community and land acquisitions, including immediate improvements 59,578 102,248 73,065 Community expansion and development 42,480 26,874 17,300 Improvements, other 7,022 6,193 5,643 Dispositions and other (46,041) (16,984) -- --------- --------- --------- Balance, end of year $ 866,191 $ 803,152 $ 684,821 ========= ========= =========
The change in accumulated depreciation for the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ---------- ---------- ---------- Balance, beginning of year $ 70,940 $ 50,084 $ 30,535 Depreciation for the period 25,112 22,765 19,549 Dispositions and other (3,494) (1,909) -- --------- --------- --------- Balance, end of year $ 92,558 $ 70,940 $ 50,084 ========= ========= =========
F-18 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 20, 2000 SUN COMMUNITIES, INC. By /s/ Gary A. Shiffman ----------------------------------- Gary A. Shiffman, President Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE ---- ----- ---- /s/ Gary A. Shiffman Chief Executive Officer, President and March 20, 2000 -------------------------------------------- Director Gary A. Shiffman /s/ Jeffrey P. Jorissen -------------------------------------------- Senior Vice President, March 20, 2000 Jeffrey P. Jorissen Chief Financial Officer, Treasurer, Secretary and Principal Accounting Officer /s/ Paul D. Lapides -------------------------------------------- Director March 20, 2000 Paul D. Lapides /s/ Ted J. Simon -------------------------------------------- Director March 20, 2000 Ted J. Simon /s/ Clunet R. Lewis -------------------------------------------- Director March 20, 2000 Clunet R. Lewis
40
NAME TITLE DATE ---- ----- ---- /s/ Ronald L. Piasecki -------------------------------------------- Director March 20, 2000 Ronald L. Piasecki /s/ Arthur A. Weiss -------------------------------------------- Director March 20, 2000 Arthur A. Weiss
41 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------ ----------- -------- 2.1 Form of Sun Communities, Inc.'s Common Stock Certificate (1) 3.1 Amended and Restated Articles of Incorporation of Sun Communities, Inc. (1) 3.2 Bylaws of Sun Communities, Inc. (3) 4.1 Indenture, dated as of April 24, 1996, among Sun Communities, Inc., Sun Communities (4) Operating Limited Partnership and Bankers Trust Company, as Trustee 4.2 Form of Note for the 2001 Notes (4) 4.3 Form of Note for the 2003 Notes (4) 4.4 First Supplemental Indenture, dated as of August 20, 1997, by and between Sun Communities (9) Operating Limited Partnership and Bankers Trust Company, as Trustee 4.5 Form of Medium-Term Note (Floating Rate) (9) 4.6 Form of Medium-Term Note (Fixed Rate) (9) 4.7 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series (11) of Preferred Stock and Fixing Distribution and other Rights in such Series 4.8 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series (13) of Preferred Stock 10.1 Second Amended and Restated Agreement of Limited Partnership of Sun Communities Operating (8) Limited Partnership 10.2 Second Amended and Restated 1993 Stock Option Plan (12) 10.3 Amended and Restated 1993 Non-Employee Director Stock Option Plan (8) 10.4 Form of Stock Option Agreement between Sun Communities, Inc. and certain directors, officers (1) and other individuals 10.5 Form of Non-Employee Director Stock Option Agreement between Sun Communities, Inc. and (5) certain directors 10.6 Employment Agreement between Sun Communities, Inc. and Gary A. Shiffman (8) 10.7 Senior Unsecured Line of Credit Agreement with Lehman Brothers Holdings Inc. (9) 10.8 Amended and Restated Loan Agreement between Sun Communities Funding Limited Partnership and (9) Lehman Brothers Holdings Inc. 10.9 Amended and Restated Loan Agreement among Miami Lakes Venture Associates, Sun Communities (9) Funding Limited Partnership and Lehman Brothers Holdings Inc.
42
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------ ----------- -------- 10.10 Form of Indemnification Agreement between each officer and director of Sun Communities, Inc. (9) and Sun Communities, Inc. 10.11 Loan Agreement among Sun Communities Operating Limited Partnership, Sea Breeze Limited (9) Partnership and High Point Associates, LP. 10.12 Option Agreement by and between Sun Communities Operating Limited Partnership and Sea Breeze (9) Limited Partnership 10.13 Option Agreement by and between Sun Communities Operating Limited Partnership and High Point (9) Associates, LP 10.14 $1,022,538.12 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7) Partnership 10.15 $1,022,538.13 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7) Partnership 10.16 $6,604,923.75 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (7) Partnership 10.17 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (7) Partnership for 94,570 shares of Common Stock 10.18 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (7) Partnership for 305,430 shares of Common Stock 10.19 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (9) Partnership 10.20 $ 1,300,195.40 Promissory Note from Gary A. Shiffman to Sun Communities Operating Limited (9) Partnership 10.21 Stock Pledge Agreement between Gary A. Shiffman and Sun Communities Operating Limited (9) Partnership with respect to 80,000 shares of Common Stock 10.22 Employment Agreement between Sun Communities, Inc. and Jeffrey P. Jorissen# (11) 10.23 Long Term Incentive Plan (9) 10.24 Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. Shiffman, dated (11) June 5, 1998# 10.25 Restricted Stock Award Agreement between Sun Communities, Inc. and Jeffrey P. Jorissen, (11) dated June 5, 1998# 10.26 Restricted Stock Award Agreement between Sun Communities, Inc. and Jonathan M. Colman, dated (11) June 5, 1998# 10.27 Restricted Stock Award Agreement between Sun Communities, Inc. and Brian W. Fannon, dated (11) June 5, 1998# 10.28 Sun Communities, Inc. 1998 Stock Purchase Plan# (11) 10.29 Employment Agreement between Sun Home Services, Inc. and Brian Fannon# (11)
43
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------ ----------- -------- 10.30 Facility and Guaranty Agreement among Sun Communities, Inc., Sun Communities Operating (11) Limited Partnership, Certain Subsidiary Guarantors and First National Bank of Chicago, dated December 10, 1998 10.31 Rights Agreement between Sun Communities, Inc. and State Street Bank and Trust Company, (10) dated April 24, 1998 10.32 Employment Agreement between Sun Communities, Inc. and Brian W. Fannon (11) 10.33 Contribution Agreement, dated as of September 29, 1999, by and among the Company, the (13) Operating Partnership, Belcrest Realty Corporation and Belair Real Estate Corporation 10.34 One Hundred Third Amendment to Second Amended and Restated Limited Partnership Agreement of (13) the Operating Partnership 12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio Earnings to Combined Fixed (14) Charges and Preferred Dividends 21 List of Subsidiaries of Sun Communities, Inc. (14) 23 Consent of PricewaterhouseCoopers LLP, independent accountants (14) 27 Financial Data Schedule (14)
- ----------------------- (1) Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33-69340. (2) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated March 20, 1996. (3) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995. (4) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated April 24, 1996. (5) Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33-80972. (6) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994. (7) Incorporated by reference to Sun Communities, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. (8) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996. (9) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997. 44 (10) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated April 24, 1998. (11) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. (12) Incorporated by reference to Sun Communities, Inc.'s Proxy Statement, dated April 20, 1999 (13) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated October 14, 1999. (14) Filed herewith. # Management contract or compensatory plan or arrangement required to be identified by Form 10-K Item 14. EX-12.1 2 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS The ratio of earnings to fixed charges for the Company (including its subsidiaries and majority-owned partnerships) presents the relationship of the Company's earnings to its fixed charges. "Earnings" as used in the computation, is based on the Company's net income (loss) from continuing operations (which includes a charge to income for depreciation and amortization expense) before income taxes, plus fixed charges. "Fixed charges" is comprised of (i) interest charges, whether expensed or capitalized, and (ii) amortization of loan costs and discounts or premiums relating to indebtedness of the Company and its subsidiaries and majority-owned partnerships, excluding in all cases items which would be or are eliminated in consolidation. The Company's ratio of earnings to combined fixed charges presents the relationship of the Company's earnings (as defined above) to fixed charges (as defined above).
Year Ended December 31 ---------------------- 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- (unaudited, in thousands) Earnings: Net income (before minority interest) $37,435 $32,054 $27,927 $21,953(1) $13,591 Add fixed charges other than capitalized interest 26,751 24,245 14,534 1,277 6,420 ------- ------- ------- ------- ------- $64,186 $56,299 $42,461 $23,230 $20,011 ======= ======= ======= ======= ======= Fixed Charges: Interest expense $26,751 $23,699 $14,423 $11,277 $ 6,420 Preferred OP Unit distribution 3,663 2,505 2,505 1,670 - Capitalized interest 2,322 1,333 756 380 192 ------- ------- ------- ------- ------- Total fixed charges $32,736 $27,537 $17,684 $13,327 $ 6,612 ======= ======= ======= ======= ======= - ------------------------
(1) Before Extraordinary Item EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 SUN COMMUNITIES, INC. Exhibit 21 - List of Subsidiaries Main operating subsidiary: Sun Communities Operating Limited Partnership, a Michigan limited partnership Other subsidiaries (wholly-owned): SCF Manager, Inc., a Michigan corporation SCN Manager, Inc., a Michigan corporation Sun Acquiring, Inc., a Kansas corporation Sun Florida QRS, Inc., a Michigan corporation Sun Houston QRS, Inc., a Michigan corporation Sun QRS, Inc., a Michigan corporation Sun Texas QRS, Inc., a Michigan corporation Subsidiaries of Sun Communities Operating Limited Partnership 8920 Associates, a Florida general partnership Apache Junction MHC, LLC, a Michigan limited liability company Apple Orchard, LLC, a Michigan limited liability company Arizona Finance L.L.C., a Michigan limited liability company Aspen-Allendale Project, L.L.C., a Michigan limited liability company Aspen-Alpine Project, L.L.C., a Michigan limited liability company Aspen-Arbor Terrace, L.P., a Delaware limited partnership Aspen-Bonita Lake Resort Limited Partnership, a Michigan limited partnership Aspen-Breezy Project Limited Partnership, a Michigan limited partnership Aspen-Brentwood Project, L.L.C., a Michigan limited liability company Aspen-Byron Project, L.L.C., a Michigan limited liability company Aspen-Country Project, L.L.C., a Michigan limited liability company Aspen-Cutler Associates, L.L.C., a Michigan limited liability company Aspen-Ft. Collins Limited Partnership, a Michigan limited partnership Aspen-Grand Project, L.L.C., a Michigan limited liability company Aspen-Holland Estates, L.L.C., a Michigan limited liability company Aspen-Indian Project Limited Partnership, a Michigan limited partnership Aspen-Kings Court, L.L.C., a Michigan limited liability company Aspen-Paradise Park II Limited Partnership, a Michigan limited partnership Aspen-Presidential Project, L.L.C., a Michigan limited liability company Aspen-Siesta Bay Limited Partnership, a Michigan limited partnership Aspen-Silver Star II Limited Partnership, a Michigan limited partnership Aspen-Town & Country Associates II, L.L.C., a Michigan limited liability company Bedford Hills Mobile Village, L.L.C., a Michigan limited liability company CM-GL Services, Inc., a Florida corporation Family Retreat, Inc., a Michigan corporation K.S. Park Property, Owners Association, Inc., a Florida non-profit corporation Miami Lakes Venture Associates, a Florida general partnership Mt. Morris MHC, L.L.C., a Michigan limited liability company Snowbird Concessions, Inc., a Texas corporation SunChamp, LLC, a Michigan limited liability company Sun Communities Acquisitions, LLC, a Michigan limited liability company Sun Communities Financing, LLC, a Michigan limited liability company Sun Communities Funding Limited Partnership, a Michigan limited partnership Sun Communities Houston Limited Partnership, a Michigan limited partnership Sun Communities Nevada GP L.L.C., a Michigan limited liability company Sun Communities Nevada Limited Partnership, a Michigan limited partnership Sun Communities Texas Limited Partnership, a Michigan limited partnership Sun Communities Funding GP L.L.C., a Michigan limited liability company Sun/Forest, LLC, a Michigan limited liability company Sun GP L.L.C., a Michigan limited liability company Sun Home Services, Inc., a Michigan corporation Sun Texas Financial, LLC, a Michigan limited liability company Sun Water Oak Golf, Inc., a Michigan corporation Sun/York L.L.C., a Michigan limited liability company Tallowwood Property Owners Association, Inc., a Florida non-profit corporation White Oak Estates, L.L.C., a Michigan limited liability company White Oak Estates Holding, LLC, a Michigan limited liability company EX-23 4 CONSENT OF PRICEWATERHOUSECOOPERS, LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Sun Communities, Inc. on Form S-3 (File No. 33-95694; File No. 333-1822; File No. 333-2522; File No. 333-14595; File No. 333-36451; File No. 333-45273; File No. 333-64271; File No. 333-72461; File No. 333-86237; and File No. 333-30462) and on Form S-8 (File No. 333-11923) of our report dated February 11, 2000 on our audits of the consolidated financial statements and financial statement schedule of Sun Communities, Inc. as of December 31, 1999 and 1998, and for the years ended December 31, 1999, 1998 and 1997, which report is included in this Annual Report on Form 10-K. PRICEWATERHOUSECOOPERS LLP Detroit, Michigan March 16, 2000 EX-27 5 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 11,355 0 0 0 0 0 866,191 92,558 911,083 47,000 358,473 0 0 174 338,184 911,083 0 134,416 0 38,826 0 0 26,751 37,435 0 37,435 0 0 0 29,089 1.69 1.68
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