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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
APRIL 30, 2004
(Date of Report)
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its Charter)
1-11718
(Commission File No.)
MARYLAND 36-3857664
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 279-1400
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OF ASSETS
Manufactured Home Communities, Inc. and its subsidiaries (the "Company") have
acquired or invested in 58 manufactured home communities ("Communities") and
park model communities ("Resorts") during the period from January 1, 2004
through April 30, 2004. Of these communities, 30 were reported on Form 8-K dated
March 2, 2004, and 28 were reported on Form 8-K dated March 3, 2004. The
combined investment in these 58 properties was approximately $377.4 million.
MANUFACTURED HOME COMMUNITIES, INC.
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
REQUIRED UNDER ITEM 7(b) OF FORM 8-K
MANUFACTURED HOME COMMUNITIES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
The following unaudited Pro Forma Condensed Consolidated Balance Sheet presents
the effect of the acquisition of ten properties from Diversified Investments,
Inc. ("Diversified"), the NHC Portfolio ("NHC Portfolio"), and O'Connell's,
Spring Gulch, Paradise, Twin Lakes, and Lakeside ("Other 2004 Acquisitions").
The Pro Forma also includes the investment of $29.7 million in preferred equity
interest in six entities controlled by Diversified Investments, Inc. and the
$1.4 million investment in the Diversified entities managing these properties
(the "Mezzanine Investments"), the $1.4 million investment in the Lake Myers,
Pine Haven, Twin Mills and Plymouth Rock joint ventures ("Joint Ventures"), the
payment of a one-time special distribution of $8.00 per share, and an additional
borrowing of $35 million under the Company's line of credit.
Related to the acquisition of the NHC portfolio, beginning in 1996, a series of
partnerships were formed between "NHC" entities and "PAMI" (the former General
Partner of NHC) entities. A trial on all claims between NHC and PAMI, including
whether NHC had the authority to consummate the transaction with the Company was
held on April 15 and 16, 2004. The Company continues to believe in the merit of
NHC's claims and defenses. Under the terms and conditions of the partnership
agreements, $69 million was paid to acquire the PAMI entities' interests.
Principals of the NHC entities will continue to operate the properties under a
management agreement with the Company and maintain a minority equity position in
the new entity. The existing dispute is related to the PAMI entities' desire to
liquidate their investments. While the possibility of additional litigation and
its attendant risks remain, we believe that providing liquidity to the NHC
entities to acquire the PAMI interests may assist in resolving the dispute.
The Company, after advice from its legal counsel, believes that there is
substantial merit to its' position that the NHC Portfolio transaction is valid.
Accordingly, the Company has treated the NHC Portfolio transaction as an
acquisition in the financial statements.
The following unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 2003 presents the effect of the following
acquisitions as if they had occurred on January 1, 2003: Diversified, NHC, and
the Other 2004 Acquisitions; and the income from the Mezzanine Investments and
Joint Ventures.
The following unaudited Pro Forma Condensed Consolidated Financial Statements
are not necessarily indicative of the results of future operations, nor the
results of historical operations, had all the transactions occurred as described
above on January 1, 2003.
The unaudited Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the accompanying Notes to Pro Forma Condensed
Consolidated Financial Statements and Combined Statements of Revenue and Certain
Expenses (included elsewhere herein).
MANUFACTURED HOME COMMUNITIES, INC
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
(unaudited)
(amounts in thousands)
Other 2004
Diversified NHC Acquisitions Adjustments
Historical (A) (B) (C) (D) Pro Forma
------------ ----------- ---------- ----------- ----------- -----------
ASSETS Investment in real estate:
Land $ 282,803 $ 14,559 $ 58,798 $ 11,837 $ - $ 367,997
Land improvements 911,176 43,673 176,545 33,711 - 1,165,105
Buildings and other depreciable property 121,117 0 0 0 0 121,117
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1,315,096 58,232 235,343 45,548 - 1,654,219
Accumulated depreciation (272,497) 0 0 0 0 (272,497)
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Net investment in real estate 1,042,599 58,232 235,343 45,548 - 1,381,722
Cash and cash equivalents 325,740 (15,144) (65,326) (9,513) (228,008) 7,749
Notes receivable 11,551 - 31 - 11,582
Investment in and advances to joint ventures 18,828 - - - 31,079 49,907
Rents receivable, net 2,385 - 547 - 2,932
Deferred financing costs, net 14,164 - - - 14,164
Inventory 31,604 - 718 419 32,741
Prepaid expenses and other assets 27,044 - 4,343 - 7,233 38,620
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Total assets $ 1,473,915 $ 43,088 $ 175,656 $ 36,454 $ (189,696) 1,539,417
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 1,076,183 $ 41,550 $ 159,003 $ 33,626 $ - $ 1,310,362
Unsecured term loan - - - - - -
Unsecured line of credit - - - - 35,000 35,000
Other notes payable 113 - - - - 113
Accounts payable and accrued expenses 27,815 421 4,388 432 - 33,056
Accrued interest payable 5,978 - 614 - - 6,592
Rents received in advance and security
deposits 6,616 1,117 6,051 2,396 - 16,180
Distributions payable 224,696 - - - (224,696) -
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Total liabilities 1,341,401 43,088 170,056 36,454 (189,696) 1,401,303
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Commitments and contingencies
Minority interest - Common OP Units and other 1,716 - 5,600 - - 7,316
Minority interest - Perpetual Preferred OP Units 125,000 - - - - 125,000
-
-
Stockholders' equity: -
Common stock, $.01 par value 222 - - - - 222
Paid-in capital 263,066 - - - - 263,066
Deferred compensation (494) - - - - (494)
Distributions in excess of accumulated
earnings (256,996) - - - - (256,996)
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Total stockholders' equity 5,798 - - - - 5,798
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Total liabilities and stockholders' equity $ 1,473,915 $ 43,088 $ 175,656 $ 36,454 $ (189,696) $ 1,539,417
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(A) Reflects the acquisition of ten properties from Diversified Investments,
Inc. on February 5, 2004 for a total purchase price of $64 million. The
amounts presented include the initial purchase price and subsequent closing
costs and were allocated based on the fair value of the assets acquired and
liabilities assumed.
(B) Reflects the acquisition of the NHC Portfolio on February 17, 2004 for a
total purchase price of $235 million. The amounts presented include the
initial purchase price and subsequent closing costs and were allocated
based on the fair value of the assets acquired and liabilities assumed.
(C) Reflects the acquisitions of O'Connell's on January 15, 2004, Spring Gulch
on January 30, 2004, Paradise on February 3, 2004, Twin Lakes on February
18, 2004, and Lakeside on February 19, 2004. The amounts presented include
the initial purchase price and subsequent closing costs and were allocated
based on the fair value of the assets acquired and liabilities assumed.
(D) Reflects the Mezzanine Investment, the investment in the Joint Ventures, an
additional borrowing of $35.0 million under the Company's line of credit,
payment of the one-time special distribution of approximately $225 million,
and approximately $5.8 million related to the Diversified acquisition which
is being held in escrow contingent upon future revenues.
MANUFACTURED HOME COMMUNITIES, INC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(unaudited)
(amounts in thousands, except per share data)
Other 2004
Diversified NHC Acquisitions Adjustments
Historical (A) (B) (C) (D) Pro Forma
----------- ----------- --------- ------------ ----------- -----------
PROPERTY OPERATIONS:
Community base rental income $ 196,919 661 $ 197,580
Resort base rental income 11,780 5,565 32,083 5,368 54,796
Utility and other income 20,150 462 4,927 697 26,236
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Property operating revenues 228,849 6,027 37,010 6,726 - 278,612
Property operating & maintenance 64,996 2,577 17,659 4,239 89,471
Real estate taxes 18,917 392 2,533 181 22,023
Property management 9,373 9 9,382
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Property operating expenses 93,286 2,969 20,192 4,429 - 120,876
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Income from property operations 135,563 3,058 16,818 2,297 0 157,736
HOME SALES OPERATIONS:
Gross revenues from inventory home sales 36,606 1,093 37,699
Cost of inventory home sales (31,767) (960) (32,727)
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Gross profit from inventory home sales 4,839 0 0 133 0 4,972
Brokered resale revenues, net 1,724 1,724
Home selling expenses (7,360) (108) (7,468)
Ancillary services revenues, net 216 823 1,039
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Income (loss) from home sales operations (581) - - 848 - 267
OTHER INCOME AND EXPENSES:
Interest income 1,695 1,695
Equity in income of unconsolidated joint ventures 2,065 3,706 5,771
General and administrative (8,060) (8,060)
Interest and related amortization (58,402) (13,502) (71,904)
Depreciation on corporate assets (1,240) (1,240)
Depreciation on real estate assets and other costs (38,034) (8,717) (46,751)
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Total other income and expenses (101,976) - - - (18,513) (120,489)
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MINORITY INTERESTS:
(Income) allocated to Common OP Units (4,330) (852) (5,182)
(Income) allocated to Perpetual Preferred OP Units (11,252) (11,252)
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Income from continuing operations 17,424 3,058 16,818 3,145 (19,365) 21,080
DISCONTINUED OPERATIONS:
Discontinued operations 1,043 1,043
Depreciation on discontinued operations (135) (135)
Gain on sale of properties and other 10,826 10,826
Minority interests on discontinued operations (2,144) (2,144)
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Income from discontinued operations 9,590 - - - - 9,590
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NET INCOME AVAILABLE TO COMMON SHARES 27,014 3,058 16,818 3,145 (19,365) 30,670
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EARNINGS PER COMMON SHARE - BASIC
Income from continuing operations $ 0.79 $ 0.95
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Income from discontinued operations $ 0.43 $ 0.43
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Income available for Common Shares $ 1.22 $ 1.39
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EARNINGS PER COMMON SHARE - FULLY DILUTED
Income from continuing operations $ 0.78 $ 0.94
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Income from discontinued operations $ 0.42 $ 0.42
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Income available for Common Shares $ 1.20 $ 1.36
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Weighted average common shares
outstanding - basic 22,077 22,077
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Weighted average common shares
outstanding - fully diluted 28,002 28,002
========= ==========
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(A) Reflects the audited results of operations of the Diversified portfolio.
The amounts presented represent the historical amounts for certain revenues
and expenses for the periods from January 1, 2003 through December 31,
2003.
(B) Reflects the audited results of operations of the NHC Portfolio. The
amounts presented represent the historical amounts for certain revenues and
expenses for the periods from January 1, 2003 through December 31, 2003.
(C) Reflects the results of operations of the Other 2004 Acquisitions. The
amounts presented represent the historical amounts for certain revenues and
expenses for the periods from January 1, 2003 through December 31, 2003 for
each of the properties
(D) Reflects the following adjustments:
Equity in income of unconsolidated joint ventures:
Income on $29.7 million Mezzanine Investments $ 3,155
Income on $1.4 million Joint Venture investments 551
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$ 3,706
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Interest and related amortization:
Interest associated with debt assumed in Diversified transaction bearing interest at
an average rate of 5.81% which reflects effective rates (2,454)
Interest associated with debt assumed in NHC Portfolio transaction bearing interest at an average
rate of 5.14%, which reflects effective rates (8,173)
Interest associated with debt assumed in Other 2004 Acquisitions bearing interest at an
average rate of 5.6%, which reflects effective rates (1,870)
Interest associated with borrowings under the Company's line of credit bearing
interest at LIBOR plus 1.65%, which based on the 30-day LIBOR rate at the time
of borrowings was 2.87% (1,005)
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$(13,502)
========
Depreciation:
Depreciation based on real property acquired in the amount $339 million
less approximately 25% allocated to land, in the amount of $254 million,
and depreciated over a 30-year life for real property $ (8,500)
Reflects the Company's 25% interest in the depreciation on the Joint Ventures (8)
Reflects 7.59% minority interest in net income of NHC of $2.8 million (209)
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$ (8,717)
========
Income allocated to minority interests:
Reflects allocation of proforma net income to Common OP Units $ (852)
========
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANUFACTURED HOME COMMUNITIES, INC.
BY: \s\ Thomas P. Heneghan
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Thomas P. Heneghan
President and Chief Executive Officer
BY: \s\ Michael B. Berman
------------------------------------
Michael B. Berman
Vice President, Treasurer and
Chief Financial Officer
DATE: April 30, 2004
Manufactured Home Communities, Inc.
Diversified Investments Companies Portfolio
- Sacramento, California
Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
Report of Independent Auditors
The Board of Directors of
Manufactured Home Communities, Inc.
We have audited the accompanying combined statement of revenue and certain
expenses of the Diversified Investments Companies Portfolio (the Properties) as
described in Note 2 for the year ended December 31, 2003. The combined statement
of revenue and certain expenses is the responsibility of the Properties'
management. Our responsibility is to express an opinion on the combined
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined statement of revenue
and certain expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures made
in the combined statement of revenue and certain expenses. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the combined
statement of revenue and certain expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying combined statement of revenue and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, for inclusion in the Current Report on Form 8-K of
Manufactured Home Communities, Inc. as described in Note 1, and is not intended
to be a complete presentation of the Properties' combined revenue and expenses.
In our opinion, the combined statement of revenue and certain expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses as described in Note 1 of the Properties for the year ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States.
ERNST & YOUNG LLP
Chicago, Illinois
April 1, 2004
1
Diversified Investments Companies Portfolio
- Sacramento, California
Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
REVENUE
Rental income $5,564,827
Other income 462,483
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6,027,310
CERTAIN EXPENSES
General and administrative 381,502
Utilities 808,744
Repairs and maintenance 227,284
Real estate taxes 392,374
Insurance 261,120
Payroll and benefits 823,082
Marketing 75,690
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2,969,796
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Revenue in excess of certain expenses $ 3,057,514
===========
See accompanying notes.
2
Diversified Investments Companies Portfolio
- Sacramento, California
Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying combined statement of revenue and certain expenses for the year
ended December 31, 2003 was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission for inclusion in the
Current Report on Form 8-K of Manufactured Home Communities, Inc. The
accompanying financial statements are not representative of the actual
operations of the acquired Properties for the period presented as certain
expenses, which may not be comparable to the expenses to be incurred by
Manufactured Home Communities, Inc. in the proposed future operations of the
Properties, have been excluded. Expenses excluded consist of interest expense
depreciation and amortization, professional fees and other costs not directly
related to the future operations of the Properties.
Revenue and Expense Recognition
Rental income attributable to leases is recorded when earned from tenants.
Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined statement of revenue and certain expenses in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of the combined revenue and expenses during the reporting period. Actual
results could differ from these estimates.
2. DESCRIPTION OF PROPERTIES
The accompanying combined statements of revenue and certain expenses relate to
the combined operations of the Diversified Investments Companies Portfolio (the
"Properties"), which are located in Arizona, Florida and North Carolina. The
Properties have been presented on a combined basis because the Properties were
under common ownership and management prior to acquisition. The Properties
listed below were acquired on February 5, 2004 for $64 million by Manufactured
Home Communities, Inc. from an unrelated party.
Property Name Location Number of Sites
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(unaudited)
Shangri-La MHP Largo, FL 160
Coachwood Colony MHP Leesburg, FL 200
Southernaire MHP Mount Dora, FL 134
Sixth Avenue MHP Zephyrhills, FL 140
Topics RV Community Spring Hill, FL 230
Waterway RV Park Cedar Point, NC 336
Goose Creek Resort Newport, NC 598
Desert Paradise RV Yuma, AZ 260
Suni Sands RV Resort Yuma, AZ 336
Terra Ceia Village Palmetto, FL 203
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2,597
3
Manufactured Home Communities, Inc.
NHC Corporation Portfolio
- Scottsdale, Arizona
Combined Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
Report of Independent Auditors
The Board of Directors of
Manufactured Home Communities, Inc.
We have audited the accompanying combined statement of revenue and certain
expenses of the NHC Corporation Portfolio (the Properties) as described in Note
2 for the year ended December 31, 2003. The combined statement of revenue and
certain expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined statement of revenue and
certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statement of revenue and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures made in the
statement of revenue and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined statement of revenue and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenue and certain expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, for inclusion in the Current Report on Form 8-K of
Manufactured Home Communities, Inc. as described in Note 1, and is not intended
to be a complete presentation of the Properties' combined revenue and expenses.
In our opinion, the combined statement of revenue and certain expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses as described in Note 1 of the Properties for the year ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United States.
ERNST & YOUNG LLP
Chicago, Illinois
April 15, 2004
1
NHC Corporation Portfolio
- Scottsdale, Arizona
Combined Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
REVENUE
Rental income $32,083,332
Other income 4,927,261
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37,010,593
CERTAIN EXPENSES
General and administrative 2,849,777
Utilities 5,444,927
Repairs and maintenance 1,568,194
Real estate taxes 2,533,121
Insurance 1,355,148
Payroll and Benefits 6,441,433
-----------
20,192,600
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Revenue in excess of certain expenses $16,817,993
===========
See accompanying notes.
2
NHC Corporation Portfolio
- Scottsdale, Arizona
Combined Statement of Revenue and Certain Expenses
For The Year Ended December 31, 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying combined statement of revenue and certain expenses for the year
ended December 31, 2003 was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission for inclusion in the
Current Report on Form 8-K of Manufactured Home Communities, Inc. The
accompanying financial statements are not representative of the actual
operations of the acquired Properties for the period presented as certain
expenses, which may not be comparable to the expenses to be incurred by
Manufactured Home Communities, Inc. in the proposed future operations of the
Properties, have been excluded. Expenses excluded consist of interest expense
depreciation and amortization, professional fees and other costs not directly
related to the future operations of the Properties.
Revenue and Expense Recognition
Rental income attributable to leases is recorded when earned from tenants.
Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined statement of revenue and certain expenses in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of the combined revenue and expenses during the reporting period. Actual
results could differ from these estimates.
2. DESCRIPTION OF PROPERTIES
The accompanying combined statements of revenue and certain expenses relate to
the combined operations of the NHC Corporation Portfolio (the "Properties"),
which are located in Texas, Florida and California. The Properties have been
presented on a combined basis because the Properties were under common ownership
and management prior to acquisition. The Properties listed below were acquired
on February 17, 2004 for approximately $235 million by Manufactured Home
Communities, Inc. from an unrelated party.
Property Name Location Sites Property Name Location Sites
(unaudited) (unaudited)
--------------------------------------------------------- -----------------------------------------------------------------
Encore Harlingen Harlingen, TX 1,027 Encore Orlando Orlando, FL 471
Sunburst Harlingen Harlingen, TX 301 Fort Myers Beach Fort Myers, FL 306
Paradise Park Harlingen, TX 563 Encore Daytona Beach North Ormond Beach, FL 349
Southern Comfort Weslaco, TX 403 Silver Dollar Odessa, FL 385
Sunburst Weslaco Weslaco, TX 390 Sunburst Lake Placid Lake Placid, FL 408
Encore Mercedes Mercedes, TX 493 Encore Sarasota North Bradenton, FL 415
Encore Tampa North Lutz, FL 255
Sunburst Port Richey Hudson, FL 392 Sunshine Key Fun Ohio Key, FL 409
Sunburst St Petersburg Largo, FL 293 Sunburst Fort Myers Fort Myers Beach, FL 246
Encore Sarasota South Nokomis, FL 548 Sunburst Florida Keys Sugarloaf Key, FL 100
Encore Port Charlotte Port Charlotte, FL 528 Sunburst North Fort Myers Fort Myers, FL 733
Park City West Fort Lauderdale, FL 363 Tropical Palms Fun Kissimmee, FL 585
Encore Punta Gorda Punta Gorda, FL 206
Encore Vero Beach Sebastian, FL 300 Pacific Dunes Ranch Oceana, CA 215
Encore Crystal River Crystal River, FL 260 Tahoe Valley South Lake Tahoe, CA 413
3