PART I
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements in certain circumstances. Certain information included in this Annual Report on Form 10-K (Annual Report) and our filings with the Securities and Exchange Commission (the SEC) under the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as well as information communicated orally or in writing between the dates of these SEC filings, constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements may include projections relating to our results of operations, cash flow, dividends, anticipated returns on real estate investments and opportunities to acquire additional
communities. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such factors include: general economic and business conditions; interest rate changes; financing and refinancing risks; risks inherent in owning real estate or debt secured by real
estate; future development rate of home sites; competition; the availability of real estate assets at prices which meet our investment criteria; our ability to reduce expense levels, implement rent increases, use leverage and other risks set forth
in this Annual Report and our other SEC filings. In addition, American Land Lease, Inc.s current and continuing qualification as a real estate investment trust (REIT) involves the application of highly technical and complex
provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully
review our financial statements and the notes thereto, as well as the risk factors described in this Annual Report and the other the documents that we file from time to time with the SEC. American Land Lease, Inc. assumes no obligation and does not
intend to update these forward-looking statements.
The Company
American Land Lease, Inc. (ANL), a Delaware corporation, is a self-administered and
self-managed REIT engaged in the ownership, development, expansion, management, financing and refinancing, acquisition and disposition of residential land lease communities. Residential land lease communities own home sites that are leased to owners
of homes situated on the leased land and own various amenities provided for common use by the homeowners. The amenities may include features that support the lifestyle of the community such as a clubhouse, pool, tennis courts, golf course, or
marina. The communities consist of one or more subdivisions with features comparable to any typical residential subdivision, including central entrances, paved streets, signage and monumentation, and in some instances, sidewalks and street lights.
We collect various amounts from the homeowners in our communities related to the lease of the home site, use of common facilities and areas, maintenance of lawns and common areas, collection of trash, providing water and wastewater services, payment
of ad valorem taxes, operation of security services and maintenance of common infrastructure. The extent of the services provided varies by community.
In May 1997, American Land Lease, Inc. contributed its net assets to Asset Investors Operating Partnership, L.P. (the Operating Partnership) in exchange for the sole general partner interest in the
Operating Partnership and substantially all of the Operating Partnerships initial capital. We conduct our business through the Operating Partnership. We do not own all of the interests in the Operating Partnership. Interests in the Operating
Partnership held by limited partners other than ANL are referred to as OP Units. The holders of OP Units receive distributions, prorated from the date of issuance, in an amount equivalent to the dividends, if any, paid to holders of our
common stock. After holding OP Units for one year, limited partners generally have the right to redeem their OP Units for cash. Notwithstanding that right, the Operating Partnership may elect to acquire some or all of the OP Units tendered for
redemption by exchanging shares of our common stock in lieu of cash. At
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December 31, 2007, the Operating Partnership had a total of 8,546,000 partnership units outstanding and we owned 7,553,000 partnership units comprising
89% of the Operating Partnership. As of December 31, 2007, 100%, or approximately 993,000, of the OP Units held by limited partners had been held for at least one year and were eligible for redemption by the holders thereof.
Except as the context otherwise requires, we, our, us, ANL and the Company refer to American
Land Lease, Inc., the Operating Partnership and all majority-owned subsidiaries.
As of December 31, 2007, we held interests as owner
in 30 residential land lease communities, one of which includes a recreational vehicle park, with an approximate total of 7,984 operational home sites, 1,370 developed home sites, 1,191 undeveloped home sites and 129 recreational vehicle sites.
Based on total home sites, 72% of the Companys portfolio of residential land lease communities is located in Florida, 24% in Arizona and 4% in Alabama. An operational home site is defined as a home site that is or has been occupied by a home
owned by a resident. A developed home site is defined as a home site for which infrastructure is complete, but either a home has not yet been constructed or the home constructed has not been occupied by a resident. An undeveloped home site is
defined as a planned home site under active development for which the infrastructure is not complete. A recreational vehicle site is defined as a site that is equipped to allow a recreational vehicle to connect to water and electricity.
In support of the development, redevelopment, and expansion of our residential land lease communities, we are engaged, through a taxable subsidiary
corporation, in the sale of homes to future residents. The home sales business is operated like other homebuilders with sales presentation centers, model homes designated for presentation, an inventory of completed homes and the ability to supply
custom designed homes based upon the requirements of the new homeowners.
Our principal executive offices are located at 29399 U.S. Hwy 19
North, Suite 320, Clearwater, Florida 33761, and our telephone number is (727) 726-8868. Our common stock, par value $.01 per share and our preferred stock, par value $.01, are listed on the New York Stock Exchange (NYSE) under the
symbol ANL and ANLPRA, respectively. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to such reports and other documents we file or furnish pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available as soon as reasonably practicable after we electronically file such material and free of charge through our internet Web site at www.americanlandlease.com.
Additionally, we intend to provide any information otherwise required by Item 5.05 of Form 8-K by the alternative of disclosure on our aforementioned internet website. The information contained on our Web site is not incorporated into this
Annual Report.
Recent Developments
2007 Events
Change in General Business Conditions
During 2007, our new home sales business was significantly impacted by the slowdown
in the U.S. housing market while our portfolio of land leases produced solid results and demonstrated the strength of our business model. The decline in our new homes sales business has negatively impacted our profitability, cash flows and growth
rate. See also Item 1A. Risk Factors.
We believe this slowdown is attributable to a decline in consumer confidence, an overall
softening of demand for new homes, an oversupply of homes available for sale, the inability of some of our home buyers to sell their current homes and the direct and indirect impact of the turmoil in the mortgage loan market. In our markets,
industry conditions deteriorated during the year. We attribute the reduction in new home sales demand to concerns on the part of prospective home buyers about the direction of home prices and concerns by prospective home buyers about being able to
sell their existing homes. The potential of mortgage foreclosures, price reductions and increased sales incentives advertised by homebuilders have contributed to home buyers concerns and provide impediments to our new home sales process.
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We continue to operate our business with the expectation that difficult market conditions will continue
to impact us for at least the near term. We expect these trends in our new home sales activities to continue and the majority of the markets we serve to remain challenging throughout 2008. We have adjusted our approach to inventory construction,
limited land development expenditures, and balanced home price and profitability with sales pace. While these difficult market conditions persist, improving the efficiency of our selling, general and administrative expenses will continue to be a
significant area of increasing focus.
Continuing Conversion of Undeveloped Home Sites and Developed Home Site Inventory to Leased Sites
We own an inventory of developed vacant sites within our portfolio of residential land lease communities. In addition, we own undeveloped land that is
contiguous to existing occupied communities, and we own two communities that we are developing from raw land. Our development activities convert the undeveloped land into developed home sites. As of December 31, 2007, 533 of our total 1,191
undeveloped lots were being improved pursuant to construction contracts with the remaining 658 lots in various stages of permitting and design. Our home sales business facilitates the conversion of these developed home sites into leased sites with
long-term cash flows through the sale of homes to future residents. In 2007, we entered into 198 new land leases in connection with the purchase of new homes, a 34.0% decrease in this activity compared to the prior year. The changes in our leased
sites for the year ended December 31, 2007 are shown in the following table:
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Changes in Leased
Sites for Year Ended
December, 31, 2007
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New leases facilitated by home sales
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198
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Leases terminated through:
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removal of home by tenant
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(18
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removal of home to facilitate redevelopment
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(11
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acquisition of home by tenant transferring title to ANL
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(25
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Sales of homes previously repossessed
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21
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Leased sites sold
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(255
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New leases originated as a result of homes sold by others
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5
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Net decrease in leased sites
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(85
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Debt Financings
During 2007, we closed one fixed rate loan for $4.6 million with an interest rate of 5.89% and we closed variable rate loans totaling $10.8 million with a variable rate at the three-month London Interbank Offered Rate
(LIBOR) plus 115 basis points, which was 6.35% at December 31, 2007.
Consideration of Acquisitions, Dispositions, and Financing
Transactions
In the ordinary course of business, we engage in discussions and negotiations regarding the acquisition of residential
land lease properties, including interests in entities that own residential land lease properties. We frequently enter into contracts and non-binding letters of intent with respect to the purchase of properties. These contracts are typically subject
to certain conditions and permit us to terminate the contract in our sole and absolute discretion if we are not satisfied with the results of our due diligence investigation of the properties. We believe that such contracts essentially result in the
creation of an option to acquire the subject properties and give us greater flexibility in seeking to acquire properties.
From time to
time we offer for sale certain real estate properties that are inconsistent with our long-term investment strategies.
Additionally, we
actively consider a broad range of debt and equity financing and refinancing transactions with respect to our real estate portfolio. These transactions are considered and may be pursued to modify our capital structure, generate additional capital
for future operations, fund acquisitions or for other uses.
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Industry and Business Background
A residential land lease community is a residential subdivision designed and
improved with sites for the placement of homes together with related improvements and amenities. At this time, the homes constructed in residential land lease communities are generally, but not always, manufactured homes. Manufactured homes are
detached, single-family homes which are produced off-site by manufacturers and installed on sites within the community. These homes are often improved with the addition of features constructed on site, including garages, screened rooms and carports.
Manufactured homes are available in a variety of designs and floor plans, offering many amenities and custom options.
Modern residential
land lease communities are similar to typical residential subdivisions containing central entrances, paved streets, curbs and gutters, and parkways. The communities frequently provide a clubhouse for social activities and recreation and other
amenities, which may include golf courses, marinas, swimming pools, shuffleboard courts and laundry facilities. Utilities are provided, or arranged for, by the owner of the community. Community lifestyles, promoted by community managers, include a
wide variety of social activities that promote a sense of neighborhood. The communities provide attractive and affordable housing for retirees, empty nesters and start-up or single parent families.
Residential land lease communities are primarily characterized as all age communities or age-restricted communities. In
age-restricted communities, one of the residents must be at least 55 years old in a minimum of 80% of the homes, and in all age communities, there are no age restrictions on residents. We generally invest in age-restricted communities. At
December 31, 2007, 95% of our total home sites were in age-restricted communities.
The owner of a home in our communities leases from
us the site on which the home is located and acquires the right to utilize the community common areas and amenities. Typically, the leases are on a month-to-month or year-to-year basis, renewable upon the consent of both parties or, in some
instances, as provided by statute for a term of four years. In some circumstances, we offer a 99-year non-transferable lease to residents in order to enable the resident to have some of the benefits of an owner of real property, including creditor
protection laws in some states. In one instance, we acquired leases that contained 35 year original terms and were transferable to successor residents. These leases can be cancelled, depending on state law, for non-payment of rent, violation of
community rules and regulations, or other specified defaults. Generally, rental rate increases are made on an annual basis. The size of these rental rate increases depends upon the policies that are in place at each community. We may, as an
inducement to new homebuyers, make rent concessions, including fixed rental rates. Rental increases may be based on fixed dollar amounts, percentage amounts, inflation indices, or they may depend entirely on local market conditions. We own interests
in the underlying land, utility connections, streets, lighting, driveways, common area amenities and other capital improvements and are responsible for enforcement of community guidelines and maintenance. Each homeowner within the residential land
lease communities is responsible for the maintenance of his or her home and leased site, including lawn care in some communities.
Residential land lease communities, once fully occupied, tend to be a stable, predictable asset class. The investment by the individual in the ownership of a home on our land, combined with the cost and effort involved in relocating the
home to another location, promote a high level of home maintenance and encourage the owner to resell the home as located within the community. Additionally, the number of individual homeowners within a community provides a diversification of risk.
Financial Information about Industry Segments
We operate in two reportable segments: real estate (ownership of
land leases, land development, investment acquisition and disposition) and home sales (sale of homes, both new and used, to be sited on land owned by the Company). See the consolidated financial statements and related notes, in Item 8 of this
Annual Report.
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Growth and Operating Strategies
Our primary objective is to maximize total risk-adjusted stockholder returns
over the long term by increasing our operating cash flow and increasing our net asset value (as defined by NAREIT, the net market value of all of a companys assets, including but not limited to its properties, after subtracting all
its liabilities and other obligations). Increasing our operating cash flow increases our net asset value and increases the amount and predictability of Funds From Operations (FFO) (as defined by the National Association of Real Estate
Investment Trusts). For a description of the meaning of FFO, see the discussion entitled, Funds From Operations, in Item 7 of this Annual Report.
We implement operating and financing strategies to achieve our objectives, which include but are not limited to the following:
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improving net operating income from our existing portfolio of residential land lease communities;
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redeveloping residential land lease communities;
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leasing unoccupied sites in our development portfolio, through the sale of homes by our home sales subsidiary;
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acquiring additional communities at values that are accretive on a per share basis; and
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acquiring additional development property that is suitable for development as a residential land lease community.
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We seek to increase our net asset value through a number of financing strategies, which include but are not limited to the following:
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use of leverage with attractively priced debt capital;
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consideration of asset disposals where the use of sales proceeds provides for an accretion to net asset value; and
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continuing evaluation of our equity capital sources including common stock issuances, preferred stock issuances, joint ventures and property sales.
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Company Policies
Management has adopted specific policies to accomplish our primary objective of increasing net asset value and increasing the amount and predictability of our FFO on a per share basis, less capital replacements. These policies include:
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acquiring residential land lease communities that have potential for long-term appreciation of value through, among other things, rent increases, expense
efficiencies and in-community home site development;
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improving the profitability of our communities through management of occupancy, rent collection, rent increases based upon community enhancements and operating
expense controls;
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making capital replacement expenditures to maintain the physical condition of our communities (expenditures per developed home site were approximately $126, $184
and $149 for 2007, 2006 and 2005, respectively);
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developing and maintaining resident satisfaction and a reputation for quality communities through maintenance of the physical condition of our communities and by
providing activities that improve the community lifestyle;
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using our home sales subsidiary to increase the occupancy rate at our communities by selling homes to be situated on presently unoccupied sites at our development
communities and selling previously owned homes in all communities;
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using our home sales subsidiary to upgrade the quality of homes placed on home sites within the community;
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developing additional home sites on land we own that may or may not be contiguous to existing communities;
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seeking to limit our exposure to downturns in regional real estate markets by diversifying the location of our portfolio of communities (at the end of year 2007,
based on total home sites, 72% of our properties were in Florida, 24% were in Arizona and 4% were in Alabama);
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increasing our financial returns through the use of leverage, including long-term, non-recourse debt, joint venture equity, and preferred stock;
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managing our exposure to interest rate fluctuations by utilizing primarily long-term, fixed-rate debt (80% of our total debt was fixed rate at the end of year
2007); and
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recruiting and retaining capable management and professional staff at the community management level and above.
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Future Acquisitions
Our acquisition of interests in
residential land lease communities may take many forms. In many cases, we acquire title in fee simple to the community or acquire ownership of entities that have fee simple title to the community. Alternatively, we may accomplish this goal by making
participating loans to others that are non-recourse to the borrowers and secured by the properties. In general, these participating mortgages earn interest at fixed rates and, in addition, participate in profits or revenues from the community. We
may undertake these activities directly or through joint venture arrangements.
We believe that acquisition opportunities for residential
land lease communities are attractive at this time because of:
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the increasing quality of manufactured homes, as shown by the number of individuals living in manufactured homes;
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the substantial price paid for, and further investment by the owner in, manufactured homes; and
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the continued constraints on development of new residential land lease communities.
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We are actively seeking to acquire additional communities and we are currently engaged in various stages of negotiations relating to the possible
acquisitions of a number of communities. The acquisitions of interests in additional communities or other business activities could result in changes in our capital structure through the issuance, or assumption, of additional debt and the issuance
of equity.
When evaluating and structuring potential acquisitions, we consider several factors including, but not limited to, the cost,
location, amenities, current and projected cash flow, regulatory environment and the effects the acquisitions would have on our REIT status.
Expansion
of Existing Communities
We expect to increase the number of leased home sites and the amount of earnings generated from our existing
portfolio of residential land lease communities through marketing campaigns aimed at increasing new home sales that result in the origination of new leases and increased occupancy. We also expect to seek expansion through future acquisitions and
expansion of the number of sites available to be leased to residents at our existing communities, if justified by local market conditions and permitted by zoning and other applicable laws. As of December 31, 2007, we held interests in 30
communities with approximately 7,984 operational home sites, 1,370 developed home sites, 1,191 undeveloped home sites and 129 recreational vehicle sites.
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Dispositions
We regularly monitor and adjust our assets to increase the quality and performance of our portfolio. At certain points in time, we may sell properties in an effort to increase the quality and performance of our portfolio and in pursuit of
increasing our net asset value.
There can be no assurance that the growth and operating strategies can be achieved, in whole or in part.
For additional risk factors related to our business, see Item 1A on page 13 of this Annual Report.
Competition
There are numerous housing alternatives that compete with our residential land lease communities
in attracting residents. Our properties compete for residents with other residential land lease communities, multifamily rental apartments, single-family homes and condominiums. The number of competitors and relative price of competing alternatives
in a particular area have a material effect on our ability to attract and retain residents, and on the rents we are able to charge for home sites. The relative price of competing products are measured based upon the total cost of occupancy to the
resident. Historically, mortgage finance rates for homes situated in land lease communities have been higher for borrowers of equivalent credit when compared to mortgage finance rates available for single-family, site-built housing on land owned in
fee simple. In addition, the cost of insurance for manufactured homes has increased and, in certain instances, insurance has not been available for a period of time in prior years.
In acquiring assets, we compete with other REITs, pension funds, insurance companies, and other investors, many of which have greater financial resources
than we do and the ability to procure more attractively priced capital.
Acquisition of Our Inventory of Homes
We do not manufacture the homes we sell. Generally, we purchase them directly from various companies engaged in manufacturing homes. We do not believe we
have undue concentration risk with respect to the suppliers of our inventory of homes. However, in some instances, our purchasing volume is significant to a manufacturer and we are able to negotiate favorable pricing, delivery schedules and other
terms. As a result of the deterioration in the overall U.S. housing market, we have seen reduction in production capacity by a number of our suppliers. These reductions have not, to date, limited our ability to acquire the homes we sell or the price
we pay to our suppliers. From time to time, we have also acquired homes for resale through acquisitions of other residential land lease communities and foreclosures.
Taxation of the Company
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986,
commencing with our taxable year ended December 31, 1986, and we intend to continue to operate in such a manner. Our current and continuing qualification as a REIT depends on our ability to meet the various requirements imposed by the Internal
Revenue Code of 1986 through actual operating results, including income and asset requirements, distribution levels and diversity of stock ownership.
If we qualify for taxation as a REIT, we will generally not be subject to federal corporate income tax on our net income that is currently distributed to stockholders. This treatment substantially eliminates the
double taxation of income (at the corporate and stockholder levels) that results from investment in a corporation under current law. However, our stockholders are generally subject to tax on dividends received from us at regular ordinary
income rates. They are generally not eligible for tax at the lower capital gain rates that apply, in the case of stockholders who are individuals, to dividends received from taxable domestic corporations under current law. The extent to which the
dividends that we pay are treated as ordinary income varies, and portions of our dividends may be subject to more favorable tax treatment for our stockholders than ordinary income, such as the portion, if any, of the dividends that represent return
of capital, capital gains, or unrecaptured Section 1250 gains.
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If we fail to qualify as a REIT in any taxable year, our taxable income will be subject to federal income
tax at regular corporate rates (including any applicable alternative minimum tax). Even if we qualify as a REIT, we may be subject to certain state and local income taxes, and to federal income and excise taxes and penalties, including taxes on our
undistributed income.
If in any taxable year we fail to qualify as a REIT and incur additional tax liability, we may need to borrow funds
or liquidate investments in order to pay the applicable tax, but we would not be compelled to make distributions under the Internal Revenue Code of 1986. Unless entitled to relief under certain statutory provisions, we would also be disqualified
from treatment as a REIT for the four taxable years following the year during which qualification is lost. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or
other considerations may cause us to fail to qualify as a REIT, or may cause our Board of Directors to revoke our REIT election.
Certain
of our operations, including our home sales business and golf course activities, are conducted through taxable REIT subsidiaries, which we refer to as taxable subsidiaries. A taxable subsidiary is a corporation that has not elected REIT
status and, as such, is subject to federal corporate income tax. We use taxable subsidiaries to offer certain services to our residents and engage in activities that would not otherwise be permitted under the REIT rules if provided directly by us or
by the Operating Partnership.
At December 31, 2007, our net operating loss (NOL) carryover was approximately $64.2
million for the parent REIT entity, and $9.0 million for our taxable subsidiaries that are consolidated for financial reporting, but not for federal income tax purposes. Subject to certain limitations, the REITs NOL carryover may be used to
offset all or a portion of our REIT taxable income and to reduce the amount that we are required to distribute to stockholders to maintain our status as a REIT. It does not, however, affect the tax treatment to stockholders of any distributions that
we make. The REITs and the taxable subsidiaries NOL carryovers are scheduled to expire between 2008 and 2009, and 2020 and 2026, respectively.
ANL and its stockholders may be subject to state or local taxation in various jurisdictions, including those in which ANL or they transact business or reside. The state and local tax treatment that ANL and its
stockholders receive may not conform to the federal income tax treatment.
Regulation
General
Residential land lease communities, like other housing alternatives, are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses and other common
areas. We believe that we have obtained the necessary permits and approvals to operate each of our properties in conformity with these laws. Changes in laws increasing the potential liability for environmental conditions existing on properties or
increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which would adversely affect our cash flows
from operating activities. In addition, future enactment of rent control or rent stabilization laws, or other laws regulating housing, may reduce rental revenue or increase operating costs in particular markets.
Americans with Disabilities Act and Fair Housing Act
Our current properties and any newly acquired communities may be required to comply with the Americans with Disabilities Act (the ADA) and the Fair Housing Act (the FHA). The ADA generally requires that public
facilities, such as clubhouses, swimming pools and recreation areas, be made accessible to people with disabilities. Many of our communities have public facilities. In order to comply with the ADAs requirements, we have made improvements at
our communities to remove barriers to access. If we fail to comply with ADA
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regulations, we could be fined or forced to pay damages to private litigants. We have made those changes which we believe are appropriate and required by the
ADA, and we believe that our properties are in compliance with the requirements of the ADA. In the event that we incur any further costs related to ADA compliance, we believe these costs can be recovered from cash flows from the individual
properties without causing any material adverse effect. We may also seek to recover these costs immediately as a governmental pass-through charge that is included in selected leases. If required changes involve a greater expenditure than we
currently anticipate, or if the changes must be made on a more accelerated basis than we anticipate, our ability to make distributions could be adversely affected. The FHA requires that we allow residents, at their own expense and subject to our
review, to make private facilities within our communities accessible to people with disabilities. When requested by residents, we believe we have made the appropriate and required accommodations to enable them to make the improvements.
Rent Control Legislation
State and local laws
might limit our ability to increase rents on some of our properties, and thereby limit our ability to recover increases in operating expenses and costs of capital improvements. Enactment of rent control laws has been considered from time to time in
jurisdictions in which we operate. We expect to maintain residential land lease communities, and may purchase additional properties, in markets that are either subject to rent control laws, or in which such legislation may be enacted in the future.
Environmental
Various federal, state
and local laws subject property owners or operators to liability for the costs of removal or remediation of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the presence or release of the hazardous substances. The presence of, or the failure to remediate properly, hazardous substances may adversely affect occupancy at affected communities and our ability to sell or finance
affected properties. In addition to the costs associated with investigation and remediation actions brought by governmental agencies, the presence of hazardous wastes on a property could result in claims by private plaintiffs for personal injury,
disease, disability or other infirmities. Various laws also impose liability for the cost of removal or remediation of hazardous substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or
toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management
of our properties, we could potentially be liable for environmental liabilities or costs associated with our properties or properties we acquire or manage in the future.
Building Codes
The manufactured homes we purchase from our suppliers are subject to certain building
codes and regulations, which vary from state to state. If building codes or regulations change such that new building codes increase our suppliers costs, the cost of the homes we purchase from our suppliers may increase. Increases in the cost
of the homes we sell could reduce our margins and or sales volume, which could materially affect our future cash flows.
Land Use Regulations
The communities we own and the land that surrounds them are subject to land use regulations promulgated by local governmental bodies,
including counties, towns and cities. These regulations may change, resulting in increases in our costs. There is also the potential for uses inconsistent with our residential communities being constructed on land adjoining our communities. These
changes could reduce the value of our communities.
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Insurance
We believe that our properties are covered by adequate fire, flood, property, terrorism, and
business interruption insurance policies. It is our policy to purchase insurance policies that contain commercially reasonable deductibles and limits from reputable insurers. In the event of changes in the insurance markets, we may be unable to
purchase policies with deductibles and limits equal to the coverage currently in place or the costs to procure such coverage may increase at a rate in excess of our ability to recover these costs through increased rental rates. We also believe that
we have obtained adequate title insurance policies insuring fee title to properties we have acquired. We do not insure our residents homes. In the event that a community is subject to a casualty that results in our residents homes being
destroyed, insurance proceeds to our residents (if any) may not be sufficient to replace or repair their homes. Additionally, in such event, our business interruption insurance may not be sufficient to replace the rental income lost from the
termination of, or default under, residents leases until such time as we are able to originate new ground leases through our home sales division.
Capital Resources
We have used our available cash balances, our cash flow and our long-term and short-term
financing arrangements to provide working capital to support our operations, fund development in our existing communities, pay dividends and acquire assets. Future acquisitions and continued development of our communities will be financed by the
most appropriate sources of capital, which may include our available cash balances; undistributed FFO; long-term secured debt; short-term secured debt; the issuance of additional equity securities, including interests in the Operating Partnership or
other partnership interests or joint venture transactions; or additional sources as determined by management. Our ability to offer interests in the Operating Partnership provides an additional acquisition currency to potential sellers of
residential land lease communities, which may enable the seller to defer some or all of the tax consequences of a sale. We believe that this flexibility may offer sellers an incentive to enter into transactions with us on favorable terms.
Without further stockholder approval, we are authorized to issue up to an aggregate of 12,000,000 shares of common stock and 3,000,000
shares of preferred stock. As of February 27, 2008, approximately 7,866,000 shares of common stock were outstanding, and 1,000,000 shares of Class A Cumulative Redeemable Preferred Stock were outstanding. Additionally, as of
February 27, 2008, we held approximately 1,961,000 shares of common stock in treasury, which are available for re-issuance. Under our Certificate of Incorporation, the Board of Directors has the authority to classify, reclassify and issue
shares of preferred stock, including the determination of the preferences, rights, powers and restrictions of the preferred stock. Depending upon the terms set by our Board of Directors, the authorization and issuance of preferred stock or other new
classes of stock could adversely affect existing stockholders. Future offerings of common or preferred stock may result in the reduction of the net tangible book value per outstanding share and a reduction in the market price of the stock. We are
unable to estimate the amount, timing or nature of such future offerings, as any such offerings will depend on general market conditions or other factors.
Restrictions on Transfer and Ownership of Common Stock
To qualify to be taxed as a REIT, we must comply with
certain ownership limitations with respect to shares of our common stock. Our Third Amended and Restated Certificate of Incorporation (the Certification of Incorporation) provides generally that no person is permitted to acquire or own,
directly or indirectly, more than 5% of the aggregate value of the outstanding shares of any class of our stock unless our Board of Directors waives this restriction. Our Board of Directors has waived this ownership limitation for Mr. Terry
Considine, our Chief Executive Officer, and for certain other stockholders, subject to such terms and conditions as determined by the Board of Directors.
If any transfer of shares of our stock that is not authorized by our Board of Directors would result in a person owning greater than 5% of the aggregate value of the outstanding shares of any class of our stock, all
shares owned by that person that are in excess of the 5% limit will be transferred in trust for the benefit of a
10
charitable beneficiary. Within 90 days of receiving notice from us that shares of stock have been transferred to the trust, the trustee of the trust shall
sell the shares held in trust and distribute the proceeds from the sale of the shares in the following manner:
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the prohibited owner whose shares were transferred to the trust will receive the lesser of the amount that the prohibited owner paid for the shares or the amount
the trustee receives for the shares; and
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any further amounts remaining from the sale will be transferred to a charitable beneficiary.
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At the end of each year, every owner of more than a prescribed percentage (5% if there are more than 2,000 record stockholders, and 1% if there are more
than 200 but less than 2,000 record stockholders) of the outstanding shares of our stock will be required to provide us with written notice stating the name and address of the owner, the number of shares held, and a description of the manner of
ownership.
Employees
As of December 31, 2007, we employed 195 persons that devoted their full-time attention to our
communities and certain part-time employees as seasonal or other circumstances dictate. Our employees are not represented by a union, and we have never experienced a work stoppage. We believe that we maintain satisfactory relations with our
employees.
Company Web Site and Access to Filed Reports
The Company maintains an Internet Web site at
www.americanlandlease.com.
The Company provides access to its reports filed with the SEC, its Code of Business Conduct and Ethics, the Code of Ethics for Chief
Executive and Senior Financial Officers, the charters of the Audit, Compensation and Nominating/Corporate Governance Committees of our Board of Directors and the Companys Governance Guidelines through this Web site. The Companys SEC
reports are available as soon as reasonably practicable after they are filed or furnished electronically with the SEC. In addition, paper copies of annual and periodic reports filed with the SEC, the Code of Business Conduct and Ethics, the Code of
Ethics for Chief Executive and Senior Financial Officers, committee charters and Corporate Governance Guidelines may be obtained free of charge by contacting the Companys headquarters at the address located within our SEC filings or under
Investor Relations, Financials, on the aforementioned Web site.
Our debt service obligations could leave us with
insufficient cash resources to meet our other working capital and dividend needs, limit our operational flexibility, or otherwise adversely affect our financial condition.
Our organizational documents do not limit the amount of debt that we may incur, and our strategy is generally to incur debt to increase the return on our
equity. As part of our strategy, we most often utilize long-term, non-recourse fixed-rate debt, which comprises 80% of our total debt. As of December 31, 2007, we had approximately $270.9 million of total outstanding debt, consisting of
approximately $247.8 million of secured debt that is secured by mortgage liens on 28 of our properties, and $23.1 million of secured debt that is secured by the Companys inventory. In addition, our credit facilities contain customary negative
covenants and other financial and operating covenants that, among other things, require us to maintain certain financial coverage ratios and restrict our ability to incur additional indebtedness or make distributions to stockholders. In the event
that new home sales activities continue at the same pace or decline further in 2008, we may not achieve certain covenants. If we do not achieve our financial covenants and the lender does not grant us a waiver, the lender could place restrictions
upon us that could adversely affect our operations and our ability to make distributions to
11
our stockholders. Our substantial indebtedness and the cash flow associated with servicing our indebtedness could have important consequences, including the
risks that:
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payments of principal and interest may leave us with insufficient cash resources to operate our properties or pay distributions required to be paid in order to
maintain our qualification as a REIT;
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our cash flow from operations may be insufficient to make required payments of principal and interest or to continue payment of dividends on common and preferred
stock;
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our existing indebtedness may limit our operational flexibility due to financial and other restrictive covenants, including restrictions on incurring other debt;
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if we fail to meet our covenants under our credit facilities, our lenders could foreclose on the collateral securing the facilities or place restrictions that could
adversely affect our operations.
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our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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if changes occur in the market such that our communities decline in value, we may not be able to refinance existing indebtedness which could lead to foreclosure, or
the terms of any refinancing may not be as favorable as the terms of existing indebtedness;
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if we fail to make required payments of principal and interest on any debt, our lenders could foreclose on the properties securing the debt with a resulting loss of
income and asset value to us; and
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if balloon maturities cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity capital, our cash flow may not be
sufficient to repay maturing debt.
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The recent significant decline in demand for new homes has adversely affected our new home sales
business.
Beginning in 2006 and continuing in 2007, the homebuilding industry, including manufactured housing, experienced a
significant decline in demand for newly built homes in our markets. The decline followed an unusually long period of strong demand for new homes. Inventories of new homes have also increased as a result of increased cancellation rates on pending
contracts as new homebuyers sometimes find it more advantageous to forfeit a deposit than to complete the purchase of the home. This industry downturn has negatively impacted our profitability, cash flow, liquidity and returns on newly leased sites.
We believe these conditions will continue in 2008. We are unable to predict with confidence how long demand and supply will remain out of balance in markets where we operate. Additionally, there can be no assurances that if demand and supply come
back in balance, sales volumes or pricing will return to prior levels. Further, an extended period of decline may reduce the number of manufactured housing suppliers. In turn, this reduction may increase the price we pay or reduce the supply of new
homes.
There are numerous risks associated with our development activities.
The development and expansion of residential land lease communities is another principal component of our growth strategy. When we develop or expand
properties, we are subject to the risks that:
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costs may exceed original estimates resulting in lower than expected returns; which may adversely affect our cash flow, net income, funds from operations and net
asset value;
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we may be unable to obtain construction financing on satisfactory terms or at all, in which case we may be unable to fund development or expansion of our properties
to achieve our growth objectives;
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governmental jurisdiction impacting our properties may change, which may result in additional costs and delays not contemplated in our original estimates;
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we may experience delays in obtaining, or may not be able to obtain, anticipated zoning and other regulatory approvals; which may adversely affect our cash flow,
net income, fund from operations and net asset value.
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construction and lease-up may not be completed on schedule, which may adversely affect our cash flow, net income, funds from operations and net asset value; and
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we may be unable to obtain long-term financing upon completion of the development process which may adversely affect our return on equity.
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We are subject to substantial legal and regulatory requirements regarding the development of land, the homebuilding process and
protection of the environment, which can cause us to suffer delays and incur costs associated with compliance and which can prohibit or restrict homebuilding activity in some regions or areas.
Our homebuilding business is heavily regulated and subject to an increasing degree of local, state and federal regulations concerning zoning, resource
protection and other environmental impacts, building design, construction and similar matters. These regulations often provide broad discretion to governmental authorities that regulate these matters, which can result in unanticipated delays or
increases in the cost of a specified project or a number of projects in particular markets. We may also experience periodic delays in homebuilding projects due to building moratoria in any of the areas in which we operate.
We are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the environment. These laws and
regulations may cause delays in construction and delivery of new homes, may cause us to incur substantial compliance and other costs, and can prohibit or severely restrict homebuilding activity in certain environmentally sensitive regions or areas.
In addition, environmental laws may impose liability for the costs of removal or remediation of hazardous or toxic substances whether or not the developer or owner of the property knew of, or was responsible for, the presence of those substances.
The presence of those substances on our properties may prevent us from selling our homes and we may also be liable, under applicable laws and regulations or lawsuits brought by private parties, for hazardous or toxic substances on properties that we
own or have owned.
Our Certificate of Incorporation limits the amount of outstanding shares of common stock that our stockholders may purchase or own.
Our Certificate of Incorporation limits the amount of outstanding shares of common stock that our stockholders may purchase or own in
various ways. First, it limits direct or indirect ownership of our common stock by any person to 5% of the outstanding shares unless our Board of Directors grants an exemption to a stockholder. Second, our Certificate of Incorporation also prohibits
anyone from buying shares if the purchase could adversely affect our REIT status. This could happen if a share transaction results in fewer than 100 persons owning all of our shares, or if five or fewer individuals, applying broad attribution rules
of the Internal Revenue Code of 1986, collectively own 50% or more of our shares. Third, our Certificate of Incorporation limits purchases of our common stock if such purchases would cause us to undergo an ownership change that would limit the
availability of our net operating losses. Our Certificate of Incorporation also prohibits ownership of our common stock by any person or persons that would cause us to receive income of a nature that would prevent us from satisfying the gross income
requirements that apply to REITs. If any person is in violation of the ownership provisions described above, the shares of our stock, which caused the affected person to violate the ownership requirements, would be automatically transferred to a
trust for the benefit of a charitable beneficiary and such person will be deemed to never have had an interest in those shares of stock. The trust will sell those shares, within a designated period, at which time the affected person will receive the
lesser of the price paid for the shares or the price received by the trustee upon the sale. If the transfer to the trust should not be effective for any reason, the transaction, such as a purchase of shares, would be treated as void and the affected
person, the intended owner, would acquire no rights to those shares.
13
Our Certificate of Incorporation may limit the ability of a third party to acquire control of us.
The ownership limits in our Certificate of Incorporation discussed above may have the effect of precluding the acquisition of control of us by a third
party without the consent of our Board of Directors. In addition, our Certificate of Incorporation authorizes the Board of Directors to issue up to 3,000,000 shares of preferred stock. Under our Certificate of Incorporation, the Board of Directors
has the authority to classify, reclassify and issue shares of preferred stock, including the determination of the preferences, rights, powers and restrictions of the preferred stock. The authorization and issuance of preferred stock could have the
effect of delaying or preventing someone from taking control of us, even if a change of control were in our stockholders best interests.
There
are numerous risks associated with our acquisition activities.
The selective acquisition of residential land lease communities is a
principal component of our growth strategy. We intend to continue to acquire properties. We compete with other real estate investors, many with greater capital resources, for attractive properties that meet our long-term investment goals. Such
competition increases prices of properties; therefore, we may be unable to identify suitable acquisition opportunities, either as stand-alone assets or as components of operating businesses, or complete transactions in the future, which may
negatively impact our growth objectives. In addition, the acquisition of residential land lease communities is subject to the risks that:
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we may be unable to obtain acquisition financing on satisfactory terms or at all, in which case we may be unable to sufficiently leverage our capital to achieve our
desired return on investment;
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once acquired, our residential land lease communities may not perform as projected, and we may be unable to realize projected occupancy and rental rates, in which
case these acquisitions may adversely affect our cash flow, net income, funds from operations and net asset value;
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we may assume or be subject to liabilities in connection with these residential land lease communities for which adequate indemnification from the seller or our
insurance carriers may not be available;
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we may be unable to successfully integrate the personnel and operations of the business we acquire, in which case we may be unable to effectively operate
residential land lease communities owned by these businesses, which may, in turn, adversely affect our returns; and
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we may encounter zoning or governmental regulations that may prohibit or delay the development or home building process, thereby slowing or eliminating our ability
to originate residential land leases on home sites we acquire.
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We depend on distributions and other payments from our subsidiaries.
All of our properties are owned, and all of our operations are conducted, by the Operating Partnership and its subsidiaries. As a
result, we depend on distributions and other payments from our subsidiaries in order to satisfy our financial obligations and make payments to our investors. The ability of our subsidiaries to make such distributions and other payments depends on
their earnings and may be subject to statutory or contractual limitations. Our ability to pay dividends to holders of common stock depends on the Operating Partnerships ability first to satisfy its obligations to its creditors and make
distributions payable to third party holders of its preferred Units and then to make distributions to us. In addition, as an equity investor in our subsidiaries, our right to receive assets upon their liquidation or reorganization will be
effectively subordinated to the claims of their creditors.
Increases in interest rates may increase our interest expense.
From time to time, we may incur debt that is subject to variable interest rates. An increase in interest rates could increase our interest expense and
adversely affect our cash flow and our ability to service our indebtedness and make distributions. At December 31, 2007, 20% of our aggregate debt was subject to variable rates. The base rates for our variable rate debt instruments are based
upon either the lenders prime rate or the one-month or three-month LIBOR, plus a spread.
14
Our real estate investments are subject to numerous risks that are beyond our control.
Our ability to make payments to our investors depends on our ability to generate cash from operations in excess of required debt payments and capital
expenditures. Our cash from operations and the value of our properties may be adversely affected by events or conditions, which are beyond our control, including the following material risks:
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the general economic climate;
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competition from other housing alternatives;
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local conditions, such as increases in unemployment, oversupply of housing or a reduction in demand, that might adversely affect occupancy or rental rates;
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increases in operating costs, including real estate taxes, due to inflation and other factors, which may not necessarily be offset by increased rents;
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changes in governmental regulations and the related costs of compliance;
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changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating housing;
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changes in the interest rate levels and the availability of financing used by our tenants to acquire the homes situated on land we lease;
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changes in interest rate levels and the availability of financing;
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availability of property insurance for our tenants;
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the relative illiquidity of real estate investments as these investments generally can not be sold quickly, which limits our ability to respond promptly to changes
in economic or market conditions and could cause us to accept lower than market value for our properties; and
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the liquidity of the for sale residential real estate market which often provides the source of funds for our tenants purchase of a home situated in our
communities.
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We are subject to risks relating to the manufacturers that supply our inventory of homes.
We rely on our home sales business to facilitate the conversion of developed home sites into leased sites through the sale of homes to future residents.
An interruption or reduction in our supply of homes, or an increase in our acquisition costs for our inventory of homes, could negatively impact our sales efforts and have and adverse effect on our business.
We have a significant concentration of properties in Florida and Arizona, and natural disasters or other catastrophic events in these states could adversely affect
the value of our properties and our cash flow.
As of December 31, 2007, we owned 30 properties located in three states, including
19 properties located in Florida, 10 properties located in Arizona and 1 property in Alabama. The occurrence of a natural disaster or other catastrophic event in Florida, Arizona, or Alabama may cause a sudden decrease in the value of our
properties. While we may obtain insurance policies providing certain coverage against damage from fire, flood, property damage, earthquake, wind storm and business interruption, these insurance policies contain coverage limits, limits on covered
property and various deductible amounts that the Company must pay before insurance proceeds are available. Such insurance may therefore be insufficient to restore our economic position with respect to damage or destruction to our properties caused
by such occurrences. Moreover, each of these coverages must be renewed every year and there is the possibility that all or some of the coverages may not be available at a reasonable cost. In addition, in the event of such natural disaster or other
catastrophic event, the process of obtaining reimbursement for covered losses, including the lag between expenditures incurred by us and reimbursements received from the insurance providers, could adversely affect our economic performance. Further,
the occurrence of a natural disaster may reduce demand for housing thereby limiting our ability to originate new leases.
15
Our properties may be subject to environmental liabilities.
Various federal, state and local laws subject property owners or operators to liability for the costs of removal or rededication of hazardous substances
released on a property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous substances. The presence of, or the failure to properly remediate, hazardous
substances may adversely affect occupancy at contaminated residential land lease communities and our ability to sell, rent or borrow against contaminated properties. In addition to the costs associated with investigation and rededication actions
brought by governmental agencies, the presence of hazardous wastes on a property could result in personal injury or similar claims by private plaintiffs.
Various laws also impose, on persons who arrange for the disposal or treatment of hazardous or toxic substances, liability for the cost of removal or rededication of hazardous substances at the disposal or treatment
facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility.
Laws
benefiting disabled persons may result in unanticipated expenses.
A number of federal, state and local laws exist to ensure that
disabled persons have reasonable access to public buildings. For example, the Americans with Disabilities Act of 1990 requires that all places of public accommodation meet federal requirements related to access and use by disabled persons. Common
areas on our properties that are used by our tenants on the property, such as clubhouses, may be subject to the Americans with Disabilities Act. These laws may require modifications to our properties or restrict renovations of our properties.
Failure to comply with these laws could result in the imposition of fines, an award of damages to private litigants and/or an order to correct any non-complying feature, which could result in substantial capital expenditures. Although we believe
that our properties are substantially in compliance with present requirements, incurrence of unanticipated expenses to comply with laws requiring equal access to the disabled may adversely affect our financial condition.
Our properties may become subject to rent control and other legislation affecting rents, which could decrease our revenues.
We may purchase residential land lease communities in markets that are either subject to rent control laws or in which such legislation may be enacted.
Enactment of rent control laws has been considered from time to time in jurisdictions in which we operate. State and local laws might limit our ability to increase rents on some of our properties, and thereby, limit our ability to recover increases
in operating expenses and the costs of capital improvements. Currently, no community in our portfolio is subject to legislated or regulatory rent control.
Our directors and executive officers have significant influence on us and may exert this influence to affect decisions made by the Company and its stockholders.
As of February 27, 2008, our executive officers and directors held in the aggregate approximately 19.1% of our common stock, excluding shares of
common stock that are issuable upon exercise of stock options and upon redemption of units of the Operating Partnership. In addition, as of February 27, 2008, they could acquire an additional 5.4% of our common stock assuming that the
outstanding OP Units held by our executive officers and directors, were not redeemed by the Operating Partnership, and the Company issued common stock in lieu of the cash redemption. Furthermore, as of February 27, 2008, they could acquire an
additional 10.9% of our common stock, assuming all stock options they have been granted are exercised. Although there is no current agreement, understanding or arrangement for these stockholders to act together on any matter, if they were to act
together in the future these stockholders could be in a position to exercise significant influence and control over any decisions made by the Company and stockholders, including the election of directors or potential changes of control or ownership
contests.
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Our Board of Directors may unilaterally implement changes in our investment and financing policies that may affect the
interests of our stockholders.
Our investment and financing policies, and our policies with respect to other activities, including
growth, debt, capitalization, REIT status and operating policies, are determined by the Board of Directors. Although the Board of Directors has no present intention to do so, these policies may be amended or revised from time to time at the
discretion of the Board of Directors without notice to stockholders or a vote of our stockholders. Accordingly, stockholders have no direct control over changes in our policies and changes in our policies may affect them.
The loss of key executive officers could have an adverse effect on us.
We are dependent on the efforts of our Chairman and Chief Executive Officer, Terry Considine, our President and Chief Operating Officer, Robert G. Blatz, and our Chief Financial Officer and Treasurer, Shannon E.
Smith. The loss of their services could have an adverse effect on our operations. We do not currently have employment agreements with, or maintain or contemplate obtaining any key man life insurance on, our executive officers.
Mr. Considine does not devote his full time to our business. He is the Chief Executive Officer of another public company, which is
significantly larger than ours and has other business interests. Each of Mr. Blatz and Mr. Smith devotes substantially all of his time to our business.
If we fail to qualify as a REIT, we would be subject to tax at corporate rates and we would not be able to deduct distributions to our stockholders for tax purposes.
Adverse consequences of failure to qualify as a REIT.
Although we believe that we operate in a manner that enables us to meet the requirements for
qualification as a REIT for federal income tax purposes, the rules regarding REIT qualification are highly technical and complex, and no assurance can be given that the Internal Revenue Service, or the IRS, will not challenge our
qualification, or that we will be able to operate in accordance with the REIT requirements in the future.
If we fail to qualify as a REIT,
we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax at regular corporate rates. Unless we were entitled to relief under the tax law, we could not elect
to be taxed as a REIT for four years following the year during which we were disqualified. However, if we lose our REIT qualification, our net operating loss, the majority of which expires between 2008 and 2009, may be available to reduce the amount
of income that would otherwise be taxable.
Possible legislative or other acts affecting REITs could have an adverse effect on us.
The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to the tax law could adversely affect our investors. We cannot predict
with certainty whether, when, in what forms, or with what effective dates, the tax laws applicable to us or our investors will be changed.
Even if we qualify as a REIT, other tax liabilities could negatively affect us, and we and our subsidiaries may be subject to federal, state and local income, property, payroll, excise and other taxes that could reduce operating cash flow.
If we experience an ownership change, our use of net operating losses would be limited.
We have a net operating loss carryover at
our parent REIT entity of approximately $64.6 million, which is scheduled to expire between 2008 and 2009. Under the Internal Revenue Code of 1986, if a corporation experiences an ownership change, the aggregate amount of net operating
losses available to offset otherwise taxable income is generally limited each year to an amount equal to the value of the corporations stock at the time of the ownership change
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multiplied by the long-term tax-exempt rate. In general, an ownership change occurs if one or more large stockholders, including groups of stockholders in
some cases, increase their aggregate percentage interest in us by more than 50 percentage points over a three-year period. It is possible that transactions over which we do not have control could cause an ownership change, and result in a limitation
on our ability to utilize our net operating losses.
We are dependent on external sources of capital.
To qualify as a REIT, we must distribute to our stockholders each year at least 90% of our REIT taxable income (excluding any net capital gains). In
addition, we may distribute all or substantially all of our taxable income so that we will generally not be subject to U.S. federal income tax on our earnings. Because of these distribution requirements, it is not likely that we will be able to fund
all future capital needs, including capital for property development and acquisitions, from income from operations. We therefore will have to relay on third-party sources of debt and equity capital financing, which may or may not be available on
favorable terms or at all. Our access to third party sources of capital depends on a number of things, including conditions in the capital markets generally and the markets perception of our growth potential and our current and potential
future earnings. Moreover, additional equity offerings may result in substantial dilution of stockholders interests, and additional debt financings may substantially increase our leverage.
Potential losses may be uninsured.
We maintain
comprehensive liability, fire, terrorism, flood (where appropriate), extended coverage, and rental loss insurance with respect to the properties that we own with policy specifications, limits, and deductibles customarily carried for similar
properties. Some types of losses, however, may be either uninsurable or not economically insurable, such as losses due to earthquakes, hurricanes, floods (in some circumstances), riots, acts of war or terrorism. In particular, because many of our
properties are located in Florida, we and our tenants may be more susceptible to losses due to hurricanes and floods. We do not insure our residents homes. In the event that a community is subject to a casualty that results in our
residents homes being destroyed, insurance proceeds to our residents (if any) may not be sufficient to replace or repair their homes. Additionally, in such event, our business interruption insurance may not be sufficient to replace the rental
income lost from the termination of, or default under, residents leases until such time as we are able to originate new ground leases through our home sales operation.
An increase in prevailing interest rates, a decrease in our annual distributions, or an increase in dividends on comparable REIT securities could adversely affect the market price of our common and preferred stock.
An increase in prevailing interest rates, a modification or elimination of our distributions or an increase in distributions on
comparable REIT securities could adversely affect the market price of our common and preferred stock.
The price of our common and preferred stock may
be volatile.
The trading price of our common and preferred stock may fluctuate widely as a result of a number of factors, many of which
are outside our control. In addition, the stock market has experienced, from time to time, price and volume fluctuations that have affected the market prices of many companies. Such broad market fluctuations could adversely affect the market price
of our common and preferred stock. A significant decline in our common and preferred stock prices could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation.
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Changes in Accounting Standards Could Adversely Affect Our Reported Financial Results.
The bodies that set accounting standards for public companies, including the Financial Accounting Standards Board, the Securities and Exchange Commission
and others, periodically change or revise existing interpretations of the accounting and reporting standards that govern the way that we report our financial condition and results of operations. These changes can be difficult to predict and can
materially impact our reported financial results. In some cases, we could be required to apply a new or a revised accounting standard, or a revised interpretation of an accounting standard, retroactively, which could have a negative impact on
reported results or result in the restatement of our financial statements for prior periods.
Item 1B.
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Unresolved Staff Comments.
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None.
The residential land lease communities
in which we have interests are primarily located in Florida and Arizona and are concentrated in or around five metropolitan areas: Tampa, West Palm Beach, Fort Myers and Orlando, Florida and Phoenix, Arizona. We hold interests in each of these
communities as owner in fee simple. The following table sets forth the states in which the communities we held an interest on December 31, 2007 are located:
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Number of
Communities
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Number of Sites
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Operational
Home Sites
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Developed
Home Sites
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Undeveloped
Home Sites
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Recreational
Vehicle Sites
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Florida
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19
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5,885
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848
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931
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Arizona
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10
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1,997
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459
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129
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Alabama
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1
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102
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63
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260
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Total
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30
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7,984
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1,370
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1,191
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129
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The following table sets forth information as of December 31, 2007 regarding each residential land
lease community in which we held an interest.
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Community
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Location
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Operational
Home Sites(1)
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Occupancy
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Average
Monthly
Rent
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Developed
Home
Sites
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Undeveloped
Home Sites
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RV
Sites
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Year(s) First
Developed
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Owned Communities
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|
|
|
|
|
|
|
|
|
|
|
|
Blue Heron Pines
|
|
Punta Gorda, FL
|
|
345
|
|
100
|
%
|
|
$
|
351
|
|
44
|
|
|
|
|
|
1983/1999
|
Brentwood Estates
|
|
Hudson, FL
|
|
143
|
|
98
|
%
|
|
|
280
|
|
48
|
|
|
|
|
|
1984
|
Cypress Greens
|
|
Lakeland, FL
|
|
230
|
|
100
|
%
|
|
|
267
|
|
28
|
|
|
|
|
|
1986
|
Forest View
|
|
Homosassa, FL
|
|
273
|
|
100
|
%
|
|
|
328
|
|
31
|
|
|
|
|
|
1987/1997
|
Gulfstream Harbor
|
|
Orlando, FL
|
|
382
|
|
98
|
%
|
|
|
427
|
|
|
|
50
|
|
|
|
1980
|
Gulfstream Harbor II
|
|
Orlando, FL
|
|
306
|
|
100
|
%
|
|
|
429
|
|
1
|
|
37
|
|
|
|
1988
|
Gulfstream Harbor III.
|
|
Orlando, FL
|
|
176
|
|
97
|
%
|
|
|
398
|
|
108
|
|
|
|
|
|
1984
|
Lakeshore Villas
|
|
Tampa, FL
|
|
281
|
|
96
|
%
|
|
|
437
|
|
|
|
|
|
|
|
1972
|
Park Place
|
|
Sebastian, FL
|
|
374
|
|
100
|
%
|
|
|
336
|
|
93
|
|
|
|
|
|
1994/2003/2005
|
Park Royale
|
|
Pinellas Park, FL
|
|
297
|
|
93
|
%
|
|
|
441
|
|
12
|
|
|
|
|
|
1971
|
Pleasant Living
|
|
Riverview, FL
|
|
245
|
|
95
|
%
|
|
|
387
|
|
|
|
|
|
|
|
1979
|
Riverside GCC
|
|
Ruskin, FL
|
|
472
|
|
100
|
%
|
|
|
535
|
|
158
|
|
311
|
|
|
|
1981/2002
|
Royal Palm Village
|
|
Haines City, FL
|
|
288
|
|
96
|
%
|
|
|
359
|
|
99
|
|
|
|
|
|
1971
|
Savanna Club
|
|
Port St Lucie, FL
|
|
1,003
|
|
100
|
%
|
|
|
301
|
|
64
|
|
|
|
|
|
1999/2001
|
Sebastian Beach
|
|
Grant-Valkaria, FL
|
|
|
|
0
|
%
|
|
|
|
|
|
|
533
|
|
|
|
NA(2)
|
Serendipity
|
|
Ft. Myers, FL
|
|
338
|
|
96
|
%
|
|
|
365
|
|
|
|
|
|
|
|
1971/1974
|
Stonebrook
|
|
Homosassa, FL
|
|
198
|
|
100
|
%
|
|
|
314
|
|
3
|
|
|
|
|
|
1987/1997
|
Sunlake Estates
|
|
Grand Island, FL
|
|
366
|
|
100
|
%
|
|
|
370
|
|
35
|
|
|
|
|
|
1980
|
Woodlands
|
|
Groveland, FL
|
|
168
|
|
99
|
%
|
|
|
289
|
|
124
|
|
|
|
|
|
1979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total Florida
|
|
5,885
|
|
99
|
%
|
|
|
370
|
|
848
|
|
931
|
|
|
|
|
Blue Star
|
|
Apache Junction, AZ
|
|
22
|
|
50
|
%
|
|
|
320
|
|
|
|
|
|
129
|
|
1955
|
Brentwood West
|
|
Mesa, AZ
|
|
350
|
|
94
|
%
|
|
|
471
|
|
|
|
|
|
|
|
1972/1987
|
The Villages
|
|
Mesa, AZ
|
|
|
|
0
|
%
|
|
|
|
|
375
|
|
|
|
|
|
NA(3)
|
Desert Harbor
|
|
Apache Junction, AZ
|
|
205
|
|
100
|
%
|
|
|
376
|
|
|
|
|
|
|
|
1997
|
Fiesta Village
|
|
Mesa, AZ
|
|
172
|
|
86
|
%
|
|
|
402
|
|
|
|
|
|
|
|
1962
|
La Casa Blanca
|
|
Apache Junction, AZ
|
|
197
|
|
100
|
%
|
|
|
400
|
|
|
|
|
|
|
|
1993
|
Lost Dutchman
|
|
Apache Junction, AZ
|
|
215
|
|
77
|
%
|
|
|
320
|
|
27
|
|
|
|
|
|
1971/1979/1999
|
Rancho Mirage
|
|
Apache Junction, AZ
|
|
312
|
|
96
|
%
|
|
|
435
|
|
|
|
|
|
|
|
1994
|
The Reserve at Fox Creek
|
|
Bullhead City, AZ
|
|
256
|
|
100
|
%
|
|
|
331
|
|
57
|
|
|
|
|
|
2000/2004
|
Sun Valley
|
|
Apache Junction, AZ
|
|
268
|
|
91
|
%
|
|
|
364
|
|
|
|
|
|
|
|
1984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total Arizona
|
|
1,997
|
|
93
|
%
|
|
|
394
|
|
459
|
|
|
|
129
|
|
|
The Grove
|
|
Foley, AL
|
|
102
|
|
100
|
%
|
|
|
291
|
|
63
|
|
260
|
|
|
|
1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Communities
|
|
30
|
|
7,984
|
|
97
|
%
|
|
$
|
374
|
|
1,370
|
|
1,191
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
We define operational home sites as those sites within our portfolio that have been leased to a resident during our ownership of the community. Since our portfolio contains a large
inventory of developed home sites that have not been occupied during our ownership, we have expressed occupancy as the number of occupied sites as a percentage of operational home sites. We believe this measure most accurately describes the
performance of an individual property relative to prior periods and other properties within our portfolio. Occupancy figures in the above table are based on operational home sites. The occupancy of all developed sites was 82.8% across the entire
portfolio at December 31, 2007. Including sites not yet developed, occupancy was 73.5% at December 31, 2007
|
(2)
|
Development of property began in 2005. At December 31, 2007 the property is still under development.
|
(3)
|
This property was first developed in 1970. At December 31, 2007 it is under redevelopment.
|
At December 31, 2007, these properties contain, on average, 356 sites, with the largest property containing 1,067 home sites. These properties offer
residents a range of amenities, including swimming pools, clubhouses, marinas, golf courses and tennis courts.
At December 31, 2007,
24 of these properties were encumbered by long-term fixed rate mortgage indebtedness totaling $240.0 million. These mortgaged properties represent approximately 83.5% of our total home sites. The 24 properties securing our mortgage indebtedness have
a combined net book value of approximately $333.4 million, and the indebtedness has a weighted average effective interest rate of 6.4% and a weighted average maturity of 8.82 years. In addition, one of these properties secures a construction loan
totaling $11.4 million. This property represents 5.1% of our total home sites. The property securing this variable rate mortgage indebtedness has a net book value of $36.0 million, and the indebtedness bears interest at a variable rate of 175 basis
points over the three-month LIBOR (7.0% at December 31, 2007). As of December 31, 2007,
20
97.6% of our outstanding debt secured by properties was long-term (maturities over one year) and 2.4% was short-term (maturities less than one year).
At December 31, 2007, five of these properties were encumbered by our line of credit. These properties represent approximately 8.9%
of our total home sites and have a combined net book value of approximately $43.3 million, and the indebtedness bears interest at a variable rate ranging from 150 to 175 points over the one-month LIBOR (6.6% at December 31, 2007).
See the consolidated financial statements, including their notes, in Item 8 of this Annual Report for additional information about our
indebtedness.
Item 3.
|
Legal Proceedings.
|
We are party to various legal
actions resulting from our operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have
a material adverse effect on our consolidated financial condition or results of operations taken as a whole.
Item 4.
|
Submission of Matters to a Vote of Security Holders.
|
None.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
American Land Lease, Inc.
(ANL) is a Delaware corporation that owns home sites leased to owners of homes situated on the leased land and operates the communities composed of these homes. ANL has elected to be taxed as a real estate investment trust
(REIT). ANLs preferred stock, par value $0.01 per share, is listed on the New York Stock Exchange under the symbol ANLPRA. ANLs common stock, par value $0.01 per share, is listed on the New York Stock Exchange
under the symbol ANL. In May 1997, ANL contributed its net assets to Asset Investors Operating Partnership, L.P. (the Operating Partnership) in exchange for the sole general partner interest in the Operating Partnership and
substantially all of the Operating Partnerships initial capital. Except as the context requires, we, our, us and the Company refer to ANL, the Operating Partnership and all majority-owned
subsidiaries.
Interests in the Operating Partnership held by limited partners other than ANL are referred to as OP Units. The
Operating Partnerships income is allocated to holders of OP Units based on the weighted average number of OP Units outstanding during the period. The holders of the OP Units receive distributions, prorated from the date of issuance, in an
amount equivalent to the dividends paid, if any, to holders of ANLs common stock. After holding the OP Units for one year, limited partners generally have the right to redeem their OP Units for cash. Notwithstanding that right, the Operating
Partnership may elect to acquire some or all of the OP Units tendered for redemption in exchange for shares of ANLs common stock in lieu of cash. At December 31, 2007, the Operating Partnership had approximately 993,000 OP units
outstanding, excluding those owned by ANL, and ANL owned 89% of the Operating Partnership.
As of December 31, 2007, based on total
home sites, 72% of the Companys portfolio of residential land lease communities is located in Florida, 24% in Arizona and 4% in Alabama.
B.
|
Summary of Significant Accounting Policies
|
Principles of
Consolidation
The consolidated financial statements include the accounts of ANL, the Operating Partnership and all majority-owned
subsidiaries. The minority interest in the Operating Partnership represents the OP Units that are redeemable at the option of the holder. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company applies Financial Accounting Standards Board (FASB) Interpretation No. 46,
Consolidation of Variable Interest Entities
(revised December 2003), an interpretation of ARB No. 51,
(FIN 46R). The objective of FIN 46R is to provide guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities,
non-controlling interests, and results of operations of a VIE need to be included in a companys consolidated financial statements. A company that holds variable interests in an entity will need to consolidate such entity if the company absorbs
a majority of the entitys expected losses or receives a majority of the entitys expected residual returns if they occur, or both (i.e., the primary beneficiary). The Company has applied FIN 46R guidance as required.
Real Estate and Depreciation
The Company capitalizes
direct costs associated with the acquisition of consolidated properties as a cost of the assets acquired, and such direct costs are depreciated over the estimated useful lives of the related assets. In accordance with FASB Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations
,
F-8
(SFAS 141), the Company allocates the purchase price of real estate to land, land improvements, buildings, furniture, fixtures, equipment and
intangibles, such as the value of above and below market leases and origination costs associated with the in-place leases. In order to allocate purchase price on these various components, the Company performs the following procedures for properties
acquired:
|
1.
|
Determine the as-if vacant fair value of the physical property acquired;
|
|
2.
|
Allocate the as-if vacant fair value among land, land improvements, buildings, (based on real estate valuation techniques), furniture, fixtures and equipment; and
|
|
3.
|
Compute the difference between the purchase price of the property and the as-if vacant fair value and allocate such difference to leases in-place (based on the nature of
our business, customer relationship value is assumed to be zero), which will represent the total intangible assets or liabilities. The fair value of the leases in-place are comprised of:
|
|
a.
|
The value of the above and/or below market leases in-place. Above-market and below-market in-place lease values are computed based on the difference between (i) the contractual
amounts to be paid pursuant to the in-place leases and (ii) managements estimate of fair market lease rates and effective lease terms for the corresponding in-place leases, measured over a period equal to the estimated remaining effective
terms of the leases.
|
|
b.
|
Avoided leasing commissions and other costs that were incurred to execute leases.
|
|
c.
|
The value associated with lost rents during the absorption period (estimates of lost rental revenue during the expected lease-up periods based on current market demand).
|
The values of the above and below market leases are amortized and recorded as either an increase (in the case of below
market leases) or a decrease (in the case of above market leases) to rental income over the estimated remaining expected terms of the associated leases (including fixed rate renewal periods for below market leases). The value of below market leases
is reported in accounts payable and accrued liabilities in the consolidated balance sheets. At December 31, 2007, the unamortized below market lease intangible was $2,104,000.
The remaining unamortized balance of the below market lease intangible will be amortized, as an increase to rental revenues, as follows:
|
|
|
|
Year
|
|
Amortization
|
2008
|
|
$
|
433,000
|
2009
|
|
|
395,000
|
2010
|
|
|
355,000
|
2011
|
|
|
274,000
|
2012
|
|
|
60,000
|
Thereafter
|
|
|
587,000
|
|
|
|
|
|
|
$
|
2,104,000
|
|
|
|
|
|
|
Weighted Average Amortization period
|
|
|
5.9 Years
|
If residents vacate their home site prior to the effective term of the lease and no rental
payments are being made on the lease, any unamortized balance of the related intangible will be written off. Amortization expense is recorded over the expected remaining terms of the associated leases for the values associated with avoided leasing
commissions, other costs that were incurred to execute leases and the value associated with lost rents during the absorption period.
F-9
Rental properties are recorded at cost less accumulated depreciation, unless considered impaired.
Significant renovations and improvements, which improve or extend the useful life of an asset, are capitalized and depreciated using the straight-line method over the remaining estimated life. In addition, the Company capitalizes direct and indirect
costs (including interest, taxes and other costs) in connection with the development of additional home sites within its residential land lease communities. Maintenance, repairs and minor improvements are expensed as incurred.
Interest incurred relating to the development of communities is capitalized during the development period. The Companys strategy is to master plan,
develop and build substantially all of the home sites in its communities. Accordingly, substantially all projects excluding finished lots where the home is available for occupancy are undergoing development. The Company capitalized interest of
approximately $8,992,000, $7,620,000 and $5,554,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
If events or
circumstances indicate that the carrying amount of a property may be impaired, the Company will make an assessment of its recoverability by estimating the future undiscounted cash flows, excluding interest charges, of the property. If the carrying
amount exceeds the aggregate future cash flows, the Company would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. There were no impairment losses recognized for the years ended December 31,
2007, 2006 and 2005.
Depreciation is computed using the straight-line method over an estimated useful life of 5 to 75 years for land
improvements, 5 to 50 years for buildings and 5 to 15 years for furniture and other equipment, all of which are judgmental determinations. These determinations may prove to be different than the actual life of any individual asset.
Cash Equivalents
The Company considers cash
maintained in bank accounts, money market funds and highly liquid investments with an initial maturity of three months or less to be cash and cash equivalents.
Inventory
The Company, through a taxable subsidiary corporation, maintains an inventory of manufactured homes situated
within its residential land lease communities. Carrying amounts for inventory are determined on a specific identification basis and are stated at the lower of cost or market. If actual market conditions are less favorable than those projected by
management, inventory write-downs may be required that could have a significant impact on the Companys results of operations and cash flows. As of December 31, 2007, approximately $9,453,000 of the Companys total inventory
investment of $20,084,000 was older than one year. The Company recorded charges of approximately $414,000, $407,000 and $396,000 for the years ended December 31, 2007, 2006 and 2005, respectively, to adjust inventory carrying amounts to market
value.
Revenue Recognition
The
Company generates income from the rental of home sites. The leases entered into by residents for the rental of home sites are generally for terms of one year, and the rental revenues associated with the leases are recognized when earned and due from
residents.
The Company, through a taxable subsidiary, generates income from the sale of homes situated on home sites owned by the Company.
Sales of homes by the Company are recorded upon the closing of the home sale transaction and title passing to the purchaser.
The Company,
through a taxable subsidiary, generates income from memberships, daily green fees, cart rentals and merchandise sales at golf courses located within its communities. Revenues associated with the activities of the golf courses are recognized when
earned and received by the Company.
F-10
Deferred Financing Costs
Fees and costs incurred in obtaining financing are capitalized. Such costs are amortized over the terms of the related loan agreements using the effective interest method and are charged to interest expense.
Advertising Costs
Costs of
advertising are expensed the first time the advertising takes place. Direct response advertising conducted by the Company during the periods was expensed as incurred, as the Company could not define the expected period of future benefits.
Advertising expenses were $1,916,000, $2,287,000, and $2,535,000 for the years ended December 31, 2007, 2006 and 2005, respectively, and are included within golf course operating expenses and selling and marketing expenses in the consolidated
statements of income.
Income Taxes
ANL has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, ANL must meet a number of organizational and operational requirements, including income, asset, and stockholder requirements,
and a requirement that, in general, it must distribute currently at least 90% of its adjusted taxable income to its stockholders. It is managements current intention to adhere to these requirements and maintain ANLs REIT status. As a
REIT, ANL generally will not be subject to corporate level federal income tax on taxable income that it distributes currently to its stockholders by virtue of a deduction for dividends paid. If ANL fails to qualify as a REIT in any taxable year, it
will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and, unless entitled to relief under certain statutory provisions, may not be able to qualify as a REIT for four subsequent taxable
years. Even if ANL qualifies for taxation as a REIT, ANL may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes and penalties, including taxes on ANLs undistributed taxable income. In
addition, taxable income from non-REIT activities conducted through ANLs taxable subsidiaries is subject to federal, state, and local income taxes.
Earnings Per Share
Basic earnings per share are based upon the weighted-average number of shares of common stock
outstanding during each year. Diluted earnings per share reflect the effect of dilutive, unexercised stock options, both vested and unvested, and unvested restricted stock of 262,000, 396,000 and 385,000 shares for the years ended December 31,
2007, 2006 and 2005, respectively. Vested and unvested stock options totaling 409,000, 0 and 0 shares for the years ended December 31, 2007, 2006, and 2005, respectively, have been excluded from diluted earnings per share as their effect would
be anti-dilutive.
Stock-based Compensation
The Company used the Black-Scholes-Merton formula to estimate the fair value of stock options and used the closing stock price at date of grant for time-based restricted stock for the years ended December 31, 2007, 2006 and 2005. In
2007, the Company changed its valuation model for its market-based restricted stock from a barrier option model to a Monte Carlo model. The Company reviewed various models in 2007 and determined that the output derived from the Monte Carlo model is
more reflective of the economic substance of the Companys market-based restricted award. The change in valuation model to estimate the fair value of the market-based awards did not have a material effect on the consolidated financial
statements for the year ended December 31, 2007. Stock-based compensation is reported in selling and marketing expenses and general and administrative expenses in the accompanying consolidated statements of income.
F-11
Treasury Stock
On October 17, 2000, the Board of Directors authorized the Company to repurchase up to 2,000,000 shares of the outstanding common stock. The timing of stock purchases is at the discretion of management. The
Company repurchased 206,000, 0 and 0 shares for the years ended December 31, 2007, 2006 and 2005, respectively. The Company has repurchased approximately 783,000 shares as of December 31, 2007, pursuant to this authorization.
Comprehensive Income
SFAS No. 130,
Reporting Comprehensive Income
, requires all components of comprehensive income be reported in the consolidated financial statements in the period in which they are recognized. For all periods reported, the Companys comprehensive income
is equal to its net income reported in the accompanying consolidated statements of income.
Depreciation of Personal Property
Depreciation of personal property is reported in property operating expenses, golf operating expenses, selling and marketing expenses, or general and
administrative expenses, based upon the use of the associated asset. The Company recorded depreciation expense relating to personal property of $462,000, $481,000 and $452,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
Depreciation is computed using the straight-line method over an estimated useful life of 5 to 15 years for furniture and other equipment, all of which are judgmental determinations. These determinations may prove to be different than the actual life
of any individual asset.
Statements of Cash Flows
The Company considers cash maintained in bank accounts, money market funds and highly liquid investments with an initial maturity of three months or less to be cash and cash equivalents. The Company made interest
payments of $17,216,000, $14,415,000 and $10,768,000 for 2007, 2006 and 2005, respectively, of which $8,992,000, $7,620,000 and $5,554,000 for 2007, 2006 and 2005 was capitalized, respectively.
Non-cash investing and financing activities for 2007, 2006 and 2005 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Issuance of Common Stock for:
|
|
|
|
|
|
|
|
|
|
Acquisition of an age-restricted residential land lease community
|
|
$
|
|
|
$
|
1,000
|
|
$
|
|
Services by employees and directors
|
|
$
|
194
|
|
$
|
122
|
|
$
|
462
|
Real estate acquired:
|
|
|
|
|
|
|
|
|
|
By assumption of below market leases
|
|
$
|
|
|
$
|
2,774
|
|
$
|
|
By issuance of OP Units
|
|
$
|
|
|
$
|
|
|
$
|
563
|
Legal Contingencies
The Company is currently involved in certain legal proceedings. The Company does not believe these proceedings will have a material adverse effect on its consolidated financial position. It is possible, however, that
future results of operations for any particular quarterly or annual period could be materially affected by changes in assumptions and the effectiveness of strategies, related to these proceedings.
F-12
Fair Value of Financial Instruments
The aggregate fair value of cash and cash equivalents, receivables, accounts payable and accrued liabilities and secured credit facilities as of December 31, 2007 approximates their carrying value due to their
relatively short-term nature. Management further believes that the fair value of variable rate secured notes payable approximates their carrying value. For the Companys fixed rate secured notes payable, fair values have been based on estimates
using present value techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the calculated estimates of fair value cannot be substantiated by
comparison to independent market quotes and, in many cases, may not be realized in immediate settlement of the instruments. The estimated fair value of the Companys secured notes payable was $243,747,000 and $243,114,000 at December 31,
2007 and 2006, respectively, as compared to the carrying value of $239,970,000 and $235,567,000 at December 31, 2007 and 2006, respectively.
Use
of Estimates
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Reclassifications
In accordance with SFAS 144,
Accounting for the Impairment or Disposal of
Long-lived Assets
(SFAS 144), certain reclassifications have been made in the 2006 and 2005 consolidated financial statements to present the operations of discontinued operations for all periods presented. Such reclassifications have
no material effect on the amounts as originally presented.
Real estate at December 31, 2007
and 2006 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
Land
|
|
$
|
92,664
|
|
|
$
|
89,124
|
|
Land improvements and buildings
|
|
|
338,695
|
|
|
|
322,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
431,359
|
|
|
|
412,074
|
|
Less accumulated depreciation
|
|
|
(31,842
|
)
|
|
|
(29,068
|
)
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
$
|
399,517
|
|
|
$
|
383,006
|
|
|
|
|
|
|
|
|
|
|
The Companys real estate investment consists of land, land improvements, and buildings.
Buildings consist primarily of clubhouses at its residential land lease communities maintained as amenities for resident use. A majority of the Companys investment in land improvements consists of long-lived assets such as lateral
infrastructure at its residential land lease communities including sanitary sewer and storm water collection systems, potable water supply systems, roads and walkways. The balance of land improvements consists of assets with shorter lives such as
marinas, fencing, swimming pools, spas, shuffleboard courts, tennis courts and other resident amenities. Depreciation is computed using the straight-line method over an estimated useful life of 5 to 75 years for land improvements and 5 to 50 years
for buildings.
F-13
The following table
summarizes the Companys secured notes payable (in thousands):
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
Fixed rate, ranging from 7.86% to 8.20%, fully amortizing, non-recourse notes maturing at various dates from 2015 through 2020
|
|
$
|
9,882
|
|
$
|
10,467
|
Fixed rate, ranging from 5.48% to 7.75%, partially amortizing, non-recourse notes maturing at various dates from 2008 through
2021
|
|
|
207,982
|
|
|
213,744
|
Variable rate, at the three-month LIBOR plus 115 to 175 basis points, interest only non-recourse notes maturing at various dates from 2011
through 2012
|
|
|
22,106
|
|
|
11,356
|
|
|
|
|
|
|
|
|
|
$
|
239,970
|
|
$
|
235,567
|
|
|
|
|
|
|
|
On May 3, 2007, the Company issued a $4,580,000 partially amortizing non-recourse mortgage
note payable with a fixed rate of 5.89% and blended the new note with an existing $15,770,000 note, resulting in a blended and restated $20,350,000 note payable with a blended fixed rate of 5.99% maturing on February 1, 2016.
On August 15, 2007, the Company issued a $3,700,000 interest only non-recourse mortgage note payable with a variable rate of three-month LIBOR plus
115 basis points adjusted quarterly, currently at 6.35%, maturing on September 1, 2012.
On August 15, 2007, the Company issued a
$7,050,000 interest only non-recourse mortgage note payable with a variable rate of three-month LIBOR plus 115 basis points adjusted quarterly, currently at 6.35%, maturing on September 1, 2012.
The scheduled principal amortization and maturity payments for the Companys notes payable at December 31, 2007 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Year
|
|
Amortization
|
|
Maturities
|
|
Total
|
2008
|
|
$
|
3,145
|
|
$
|
2,661
|
|
$
|
5,806
|
2009
|
|
|
3,625
|
|
|
|
|
|
3,625
|
2010
|
|
|
3,869
|
|
|
|
|
|
3,869
|
2011
|
|
|
4,018
|
|
|
21,740
|
|
|
25,758
|
2012
|
|
|
4,202
|
|
|
10,750
|
|
|
14,952
|
Thereafter
|
|
|
26,105
|
|
|
159,855
|
|
|
185,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
239,970
|
|
|
|
|
|
|
|
|
|
|
E.
|
Secured Credit Facilities
|
The Company has a
revolving line of credit with a bank with a total commitment of $16,000,000 that bears interest at a variable rate ranging from 150 to 175 points over the one-month LIBOR rate (6.6% at December 31, 2007 and 7.0% at December 31, 2006). The
line of credit is secured by real property and improvements located in St. Lucie, Lake, and Pasco County, Florida and Maricopa County, Arizona with a net book value of $43,264,000. The revolving line of credit matures in May 2009. At
December 31, 2007, $7,846,000 was outstanding and $8,154,000 was not drawn under the revolving line of credit. The availability of funds to the Company under the line of credit is subject to certain borrowing base and other customary
restrictions, including compliance with financial and other covenants thereunder. Based on the application of the borrowing base calculation, as of December 31, 2007, $8,154,000 was available to the Company. The line of credit also includes
certain financial covenants that require the Company to maintain a ratio of cash flow (as defined by the lender) to fixed charge obligations (as defined by the lender) of not less than .85 to 1.0 during fiscal year 2007, and 1.0 to 1.0 during fiscal
year 2008; to maintain an adjusted tangible net worth (as defined by the lender) of $150,000,000
F-14
and to maintain a debt to adjusted tangible net worth ratio of not more than 1.75 to 1.0, among others. The Company believes it was in compliance with all
financial covenant requirements under this revolving line of credit at December 31, 2007.
The Company has a floor plan line of credit
with a floor plan lender providing a committed credit facility of $35,000,000 with a variable interest rate linked to the lenders prime rate plus 25 basis points (7.8% at December 31, 2007 and 8.5% at December 31, 2006). Individual
advances mature between 360 days and 720 days based on the aging of the Companys inventory. This floor plan line of credit is secured by inventory located in the Companys residential land lease communities with a carrying value of
approximately $18,698,000. At December 31, 2007, approximately $23,086,000 was outstanding, of which $3,013,000 was recourse to the Company, and approximately $11,914,000 was available under the floor plan credit facility. The financial
covenants of the floor plan line of credit require the Company to maintain a tangible net worth of $90,000,000, to maintain a cash flow ratio of 1.1 to 1.0 and to maintain a debt to net worth ratio of not more than 2.0 to 1.0, among others. The
floor plan lenders commitment to fund future inventory purchases expires in September 2009. The Company believes it was in compliance with all financial covenant requirements under this floor plan facility at December 31, 2007.
F.
|
Commitments and Contingencies
|
Legal Contingencies
The Company is party to various legal actions resulting from its operating activities. These actions are routine litigation and
administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of
operations of the Company and its subsidiaries taken as a whole. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in assumptions and the effectiveness of
strategies, related to these proceedings.
Commitments
In the ordinary course of business, the Company has entered into various construction contracts with third parties to develop subdivisions within the Companys existing portfolio of residential land lease
communities. The unpaid balance of these contracts remaining at December 31, 2007 is approximately $1,449,000.
As of
December 31, 2007, the Companys outstanding purchase obligations with manufacturers of homes to be constructed in the Companys communities totaled $303,000.
During 2007, the Company issued a construction loan to a development company in Arizona. The maximum aggregate amount of advances available under the
construction loan is $8,080,000, subject to certain inventory level restrictions provided for in the loan documents that limit the aggregate amount of advances outstanding at any given time. The proceeds of the loan are to be used exclusively to
develop a community for the Company in Mesa, Arizona. At December 31, 2007, the application of the inventory restriction limits the additional funds available to the development company to approximately $3,580,000. At December 31, 2007,
approximately $661,000 was outstanding under the construction loan.
The Company has two reportable
segments: real estate (ownership of land leases, land development, investment acquisition and disposition) and home sales (sale of homes, both new and used, to be sited on land owned by the Company). The real estate segment consists of residential
land lease communities that generate rental and other property related income through the leasing of land to residents that are unaffiliated with the Company. The home sales segment sells manufactured homes to customers that are unrelated to the
Company.
F-15
The homes sold by the home sales segment are situated on land within the Companys portfolio of rental property. The customers of the home sales
business become residents of the Companys real estate segment coincident with the sale of a home, at which time the customer enters into a lease with the real estate segment. The chief operating decision maker assesses the performance of the
real estate segment using, among other measures, net operating income excluding depreciation as a key measurement of segment profit or loss. The chief operating decision maker assesses the performance of the home sales segment using, among other
measures, contribution margin, excluding allocated corporate expenses as the best measure of the segments performance. Segment operating income is generally defined as segment revenues less direct segment operating expenses.
Non-segment revenue used to reconcile total revenue consists primarily of interest income and other income. Non-segment assets used to reconcile to total
assets include cash and cash equivalents, cash in escrows, accounts receivable, prepaid expenses, investments, deferred charges and other assets. Overhead expenses, such as administrative expenses, are allocated to each segment based upon
managements best estimate of the resources utilized in the management and operations of each segment. The accounting policies of the segments are the same as those described in Note B.
The revenues, net income (loss), and assets for each of the reportable segments are summarized in the following tables for 2007, 2006 and 2005 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
Real
Estate
|
|
|
Home
Sales
|
|
|
Corporate,
(not allocated
to segments)
|
|
|
Consolidated
|
|
Rental and other property revenues, net
|
|
$
|
38,651
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
38,651
|
|
Home sales revenues
|
|
|
|
|
|
|
27,512
|
|
|
|
|
|
|
|
27,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
38,651
|
|
|
|
27,512
|
|
|
|
|
|
|
|
66,163
|
|
Operating expenses of real estate segment
|
|
|
(13,965
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income gross profit for real estate segment
|
|
|
24,686
|
|
|
|
|
|
|
|
|
|
|
|
24,686
|
|
Home sales contribution margin
|
|
|
|
|
|
|
(1,265
|
)
|
|
|
|
|
|
|
(1,265
|
)
|
Adjustments to arrive at net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(4,957
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,957
|
)
|
General and administrative expenses
|
|
|
(2,481
|
)
|
|
|
(1,798
|
)
|
|
|
(13
|
)
|
|
|
(4,292
|
)
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(8,699
|
)
|
|
|
(8,699
|
)
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
207
|
|
|
|
207
|
|
Income from discontinued operations
|
|
|
9,327
|
|
|
|
|
|
|
|
|
|
|
|
9,327
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
(651
|
)
|
|
|
(651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
26,575
|
|
|
$
|
(3,063
|
)
|
|
$
|
(9,156
|
)
|
|
$
|
14,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
410,215
|
|
|
$
|
24,403
|
|
|
$
|
1,915
|
|
|
$
|
436,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
25,832
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25,832
|
|
Capital replacementsreal estate
|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
812
|
|
Capital replacementsother assets
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
362
|
|
Other assets
|
|
|
228
|
|
|
|
289
|
|
|
|
15
|
|
|
|
532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,234
|
|
|
$
|
289
|
|
|
$
|
15
|
|
|
$
|
27,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
Real
Estate
|
|
|
Home
Sales
|
|
|
Corporate,
(not allocated
to segments)
|
|
|
Consolidated
|
|
Rental and other property revenues, net
|
|
$
|
34,842
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
34,842
|
|
Home sales revenues
|
|
|
|
|
|
|
47,692
|
|
|
|
|
|
|
|
47,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
34,842
|
|
|
|
47,692
|
|
|
|
|
|
|
|
82,534
|
|
Operating expenses of real estate segment
|
|
|
(13,116
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income gross profit for real estate segment
|
|
|
21,726
|
|
|
|
|
|
|
|
|
|
|
|
21,726
|
|
Home sales contribution margin
|
|
|
|
|
|
|
5,387
|
|
|
|
|
|
|
|
5,387
|
|
Adjustments to arrive at net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(4,248
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,248
|
)
|
General and administrative expenses
|
|
|
(1,733
|
)
|
|
|
(2,248
|
)
|
|
|
(14
|
)
|
|
|
(3,995
|
)
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(7,378
|
)
|
|
|
(7,378
|
)
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
293
|
|
|
|
293
|
|
Income from discontinued operations
|
|
|
1,286
|
|
|
|
|
|
|
|
|
|
|
|
1,286
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
(1,380
|
)
|
|
|
(1,380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,031
|
|
|
$
|
3,139
|
|
|
$
|
(8,479
|
)
|
|
$
|
11,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
388,385
|
|
|
$
|
32,885
|
|
|
$
|
784
|
|
|
$
|
422,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
93,802
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
93,802
|
|
Capital replacementsreal estate
|
|
|
1,389
|
|
|
|
|
|
|
|
|
|
|
|
1,389
|
|
Capital replacementsother assets
|
|
|
314
|
|
|
|
|
|
|
|
|
|
|
|
314
|
|
Other assets
|
|
|
1,251
|
|
|
|
503
|
|
|
|
52
|
|
|
|
1,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
96,756
|
|
|
$
|
503
|
|
|
$
|
52
|
|
|
$
|
97,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
Real
Estate
|
|
|
Home
Sales
|
|
|
Corporate,
(not allocated
to segments)
|
|
|
Consolidated
|
|
Rental and other property revenues, net
|
|
$
|
30,069
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
30,069
|
|
Home sales revenues
|
|
|
|
|
|
|
52,103
|
|
|
|
|
|
|
|
52,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
30,069
|
|
|
|
52,103
|
|
|
|
|
|
|
|
82,172
|
|
Operating expenses of real estate segment
|
|
|
(11,447
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income gross profit for real estate segment
|
|
|
18,622
|
|
|
|
|
|
|
|
|
|
|
|
18,622
|
|
Home sales contribution margin
|
|
|
|
|
|
|
5,640
|
|
|
|
|
|
|
|
5,640
|
|
Adjustments to arrive at net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(3,395
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,395
|
)
|
General and administrative expenses
|
|
|
(1,273
|
)
|
|
|
(2,079
|
)
|
|
|
(1
|
)
|
|
|
(3,353
|
)
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(5,258
|
)
|
|
|
(5,258
|
)
|
Casualty gain
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
23
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
600
|
|
|
|
600
|
|
Income from discontinued operations
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
396
|
|
Minority interest in earnings
|
|
|
|
|
|
|
|
|
|
|
(1,562
|
)
|
|
|
(1,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,587
|
|
|
$
|
3,561
|
|
|
$
|
(6,198
|
)
|
|
$
|
11,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
301,108
|
|
|
$
|
25,064
|
|
|
$
|
3,517
|
|
|
$
|
329,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
$
|
51,529
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
51,529
|
|
Capital replacementsreal estate
|
|
|
790
|
|
|
|
|
|
|
|
|
|
|
|
790
|
|
Capital replacementsother assets
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
444
|
|
Other assets
|
|
|
596
|
|
|
|
740
|
|
|
|
34
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
53,359
|
|
|
$
|
740
|
|
|
$
|
34
|
|
|
$
|
54,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
Dividends
ANLs common stock dividend and preferred stock dividend is set quarterly by ANLs Board of Directors and is subject to change or elimination at
any time. ANL paid yearly dividends on common stock of $1.00 per share for the years ended December 31, 2007, 2006 and 2005, respectively. ANL paid yearly dividends on preferred stock of $1.94 per share for the year ended December 31,
2007, $1.94 for the year ended December 31, 2006 and partial year dividends of $1.48 for the year ended December 31, 2005.
The
Company deducts cumulative paid and unpaid preferred stock dividends from net income to arrive at income available to common stockholders. The Company deducted $1,938,000, $1,938,000 and $1,647,000 for the years ended December 31, 2007, 2006,
and 2005, respectively, related to cumulative paid and unpaid preferred stock dividends.
The Company paid dividends to preferred and
common stockholders and distributions to holders of OP Units, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
Dividends-common stockholders
|
|
$
|
7,936
|
|
$
|
7,839
|
|
$
|
7,542
|
Dividends-preferred stockholders
|
|
|
1,938
|
|
|
1,938
|
|
|
1,485
|
DistributionsOP Units
|
|
|
995
|
|
|
993
|
|
|
980
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,869
|
|
$
|
10,770
|
|
$
|
10,007
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
Holders of the Class A Preferred Stock are entitled to receive quarterly dividend payments of $0.48 per share, equivalent to $1.94 per share on an annual basis, or 7.75% of the $25 per share liquidation
preference. Class A Preferred Stock is senior to Common Stock as to dividends and liquidation. Upon the Companys liquidation, dissolution or winding up, before payments of distributions are made to any holders of the Companys Common
Stock, the holders of the Class A Preferred Stock are entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. Each share of Class A Preferred Stock is redeemable at the Companys
option beginning February 23, 2010 for cash in the amount of $25 per share, plus all accrued and unpaid dividends, if any, to the date fixed for redemption.
I.
|
Stock-Based Compensation
|
The Companys Plan
provides for the issuance of up to 3,000,000 shares of common stock in the form of qualified and non-qualified stock options, stock appreciation rights, limited stock appreciation rights, restricted stock and deferred stock to its directors,
officers, employees and consultants. As of December 31, 2007, the Company has granted awards of stock options and restricted stock under the Plan. The exercise price for stock options may not be less than 100% of the fair value of the shares of
common stock at the date of grant. Stock options generally vest ratably over 4 to 5 years and have 10-year contractual terms. All outstanding stock options are non-qualified stock options. Restricted stock awards generally vest ratably over four
years. The Company uses the straight-line method to recognize expense for plans with graded vesting. Restricted stock awards are entitled to receive dividends during the vesting period. In addition to the ratable amortization of fair value over the
vesting period, dividends paid on unvested shares of restricted stock which are not expected to vest are charged to compensation expense in the period paid. As of December 31, 2007, there was approximately $2,080,000 of total unrecognized
compensation costs related to nonvested stock-based compensation arrangements granted under the Plan. The cost is expected to be recognized over a weighted average period of 2.9 years. This expected cost does not include the impact of any future
stock-based compensation awards. The Company recognized $1,255,000, $1,309,000 and $918,000 for the years ended December 31, 2007, 2006 and 2005, respectively, in stock-based compensation expense.
F-18
Stock Options
The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton formula that uses the assumptions noted in the following table:
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Risk free interest rates
|
|
4.13% - 4.71%
|
|
4.54%
|
|
4.07%
|
Expected dividend yield
|
|
3.62% - 4.00%
|
|
4.03%
|
|
4.33%
|
Volatility factor of the expected market price of ANLs common stock
|
|
0.139 - 0.161
|
|
0.136
|
|
0.142
|
Expected life of options
|
|
5.0 - 7.0 years
|
|
7.0 years
|
|
8.5 years
|
The Company assumed lives of five to eight and a half years based on historical data and risk-free
interest rates equal to the five or eight and a half year U.S. Treasury rates on the date the options were granted. In addition, the expected stock price volatility and dividends rates were estimated based upon historical experience.
Presented in the following table is a summary stock options activity for the year ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
(in thousands)
|
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2006
|
|
1,260
|
|
|
$
|
18.87
|
|
4.05 Years
|
|
|
|
|
Granted
|
|
173
|
|
|
$
|
27.02
|
|
|
|
|
|
|
Exercised
|
|
(61
|
)
|
|
$
|
14.73
|
|
|
|
|
|
|
Forfeited
|
|
(5
|
)
|
|
$
|
20.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
1,367
|
|
|
$
|
20.08
|
|
3.83 Years
|
|
$
|
(342,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2007
|
|
976
|
|
|
$
|
17.91
|
|
1.98 Years
|
|
$
|
1,873,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2007, 2006 and 2005, the weighted-average grant-date fair
value of options granted was $3.29 per option, $2.84 per option and $2.36 per option, respectively. The total intrinsic value of the options exercised during the years ended December 31, 2007, 2006 and 2005 was $638,000, $1,653,000 and
$1,373,000, respectively.
Restricted Stock
Pursuant to the Plan, the Company has awarded two general types of stock-based awards of restricted stock. The first type of award is a time-based award that vests based upon continued employment during the service period required for
vesting, which is generally over a period of four years with graded vesting of 25% per year. The second type of award is a market-based award, also known as high performance shares (HPS Shares), that vests based upon attaining
specific stock prices and total stockholder returns over the requisite service period. Restricted stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of and is subject to forfeiture within the vesting period.
The Company issued 19,000 and 18,500 shares as time-based awards of restricted stock to members of management for the years ended
December 31, 2007, and 2006, respectively, with weighted average fair values per share of $24.58 and $24.80, respectively. The time-based awards of restricted stock were issued at the fair value of ANLs common stock on the date of
issuance. The fair value of such restricted stock is amortized to compensation expense over the vesting period.
F-19
A summary of the status of the Companys nonvested time-based restricted stock as of
December 31, 2006, and changes during 2007 is presented in the following table (share amounts in thousands):
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant-Date
Fair Value
|
Nonvested at December 31, 2006
|
|
54
|
|
|
$
|
20.49
|
Granted
|
|
19
|
|
|
$
|
24.58
|
Vested
|
|
(27
|
)
|
|
$
|
18.51
|
Forfeited
|
|
(5
|
)
|
|
$
|
19.75
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
41
|
|
|
$
|
23.66
|
|
|
|
|
|
|
|
The total fair value of time-based restricted shares vested during the years ended
December 31, 2007, 2006 and 2005 was $742,000, $821,000 and $751,000, respectively.
The Company issued 65,000 and 91,500 shares as
market-based awards of restricted stock to members of management for the years ended December 31, 2007 and 2006, respectively. In 2007, the Company changed its valuation model for its market-based restricted stock from a barrier option model to
a Monte Carlo model. The Company reviewed various models in 2007 and determined that the output derived from the Monte Carlo model is more reflective of the economic substance of the Companys market-based restricted award. The Company applied
risk free rates of 4.7% and 4.3% for the years ended December 31, 2007 and 2006, respectively, which were equal to the U.S. Treasury rates on the dates the market-based awards were granted with a maturity equal to the term of the award.
Expected stock price volatility was estimated based upon historical experience. For the years ended December 31, 2007 and 2006, the Company used a volatility factor of 13.6% and 12.9%, respectively. The weighted average per share fair values of
the market-based restricted stock was $7.38 and $8.09, for the years ended December 31, 2007 and 2006, respectively.
The fair value
of the market-based awards of restricted stock is amortized to compensation expense over the requisite service period. The requisite service period for market-based restricted stock awards granted during the years ended December 31, 2007 and
2006 was three years for both grants. The principal terms of the market-based awards of restricted stock is more fully described below.
The HPS Shares vest to the extent, if any, that the total return realized by stockholders during the measurement period exceeds the ten-year return for the Equity REIT Index prior to the date of grant, as reported by the National
Association of Real Estate Investment Trusts. Total return is defined as the total of the closing price at year-end plus any dividends paid, less the closing price for the prior year-end. The total return for the Company is measured over a
three-year period that ends on the final valuation date specified in connection with each grant of HPS Shares. To the extent that HPS Shares are not vested as of the final valuation date, such shares are forfeited and are returned to the Company.
Vesting is achieved ratably on the final valuation date to the extent that excess value has been realized. In order for managements HPS Shares to vest in full at a given final valuation date, the actual total return to stockholders over the
applicable three-year period is required to exceed the Equity REIT Index total return by 5% per year on a compounded basis.
The
65,000 shares granted in 2007 have a final measurement date of December 31, 2009. The Equity REIT Index annual compounded total return over the trailing ten years as of December 31, 2006 was 14.5%. For the 2007 HPS Shares to fully vest,
the actual total return over the three-year period is required to be 19.5%. If the actual total return is between 14.5% and 19.5%, then a ratable portion of the HPS shares would vest (for example, one half of the HPS Shares would vest if the actual
total return is 17.0%). If the actual total return does not exceed 14.5%, all of the 2007 HPS Shares would be forfeited, but none of the dividends paid during the three-year period would be forfeited.
F-20
A summary of the status of the Companys market-based restricted stock as of December 31, 2006,
and changes during 2007 is presented in the following table (share amounts in thousands):
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant-Date
Fair Value
|
Nonvested at December 31, 2006
|
|
165
|
|
|
$
|
8.51
|
Granted
|
|
65
|
|
|
$
|
7.38
|
Forfeited
|
|
(75
|
)
|
|
$
|
8.99
|
|
|
|
|
|
|
|
Nonvested at December 31, 2007
|
|
155
|
|
|
$
|
7.80
|
|
|
|
|
|
|
|
The total fair value of market-based restricted shares vested during the years ended
December 31, 2007, 2006 and 2005 was $0, $853,000 and $1,185,000, respectively.
Effective January 1, 2006 upon the adoption of
SFAS No. 123(revised December 2004),
Share-Based Payment
, the Company does not record the unamortized value of restricted stock as a debit within equity. In accordance with the EITF Topic D-90,
Grantor Balance Sheet Presentation
of Unvested, Forfeitable Equity Instruments Granted to a Nonemployee
, the equity instrument is recognized when vested and related compensation cost has been recognized.
Stock-Based Compensation Correction
In the first quarter of 2005, the Company reviewed its
application of SFAS No. 123,
Accounting for Stock-Based Compensation
. (SFAS 123), and management determined that the accounting for certain aspects of its accounting for stock-based compensation was in error. The Company had
previously valued certain awards of market-based restricted stock at the market value of the Companys common stock at the date of issuance. These awards were determined to be target stock price awards that should have been recorded at fair
value on the date of issuance. In addition, the Company had previously treated dividends paid on unvested shares of restricted stock as additional compensation expense until the vesting condition was satisfied. Under SFAS 123, only the dividends
paid on non-vested awards that are not expected to vest are accounted for as additional compensation expense. The Company corrected these errors in first quarter 2005 to conform to the provisions of SFAS 123 for valuing target stock price awards and
dividends paid on unvested awards that are expected to vest. The correction related solely to accounting treatment and did not affect the Companys historical or future cash flows. The impact on the Companys prior years earnings per
share, cash from operations and stockholders equity was immaterial.
Parent REIT Entity
Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to
differences for U.S. Federal tax purposes in the estimated useful lives and methods used to compute depreciation and the carrying value of the investments in properties, among other things.
F-21
The following table reconciles the Companys net income to REIT taxable income (loss) for each of
the three years ended December 31, 2007, 2006, and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Net income
|
|
$
|
14,356
|
|
|
$
|
11,691
|
|
|
$
|
11,950
|
|
Elimination of losses from the taxable consolidated subsidiaries included above
|
|
|
5,994
|
|
|
|
1,219
|
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from REIT operations
|
|
|
20,350
|
|
|
|
12,910
|
|
|
|
12,675
|
|
Depreciation timing differences
|
|
|
(9,619
|
)
|
|
|
(8,289
|
)
|
|
|
(7,623
|
)
|
Depreciation attributable to the election made under The Taxpayer Relief Act of 1997
|
|
|
(1,111
|
)
|
|
|
(1,255
|
)
|
|
|
(1,244
|
)
|
Inclusion of unconsolidated grantor trusts
|
|
|
38
|
|
|
|
88
|
|
|
|
521
|
|
Deferred compensation
|
|
|
(139
|
)
|
|
|
(1,969
|
)
|
|
|
(1,060
|
)
|
Tax benefit
|
|
|
|
|
|
|
|
|
|
|
(600
|
)
|
Other book/tax differences
|
|
|
472
|
|
|
|
626
|
|
|
|
617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income before adjustments
|
|
|
9,991
|
|
|
|
2,111
|
|
|
|
3,286
|
|
Difference on gain on sale of real estate
|
|
|
1,140
|
|
|
|
258
|
|
|
|
(237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REIT taxable income before net operating loss and dividends paid deduction
|
|
|
11,131
|
|
|
|
2,369
|
|
|
|
3,049
|
|
REIT taxable income allocated to preferred stockholders
|
|
|
(1,938
|
)
|
|
|
(1,938
|
)
|
|
|
(1,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REIT taxable income allocated to common stockholders
|
|
$
|
9,193
|
|
|
$
|
431
|
|
|
$
|
1,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For income tax purposes, dividends paid to common stockholders consist of ordinary income, capital
gains (including unrecaptured gain under Section 1250 of the Internal Revenue Code of 1986), return of capital or a combination thereof. For the years ended December 31, 2007, 2006 and 2005, dividends paid per share were taxable as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Amount
|
|
Percentage
|
|
|
Amount
|
|
Percentage
|
|
|
Amount
|
|
Percentage
|
|
Return of capital
|
|
|
|
|
|
|
|
$
|
0.95
|
|
95.0
|
%
|
|
$
|
0.815
|
|
81.5
|
%
|
Ordinary income
|
|
$
|
0.411
|
|
41.1
|
%
|
|
|
|
|
|
|
|
|
0.185
|
|
18.5
|
%
|
Capital gain
|
|
|
0.587
|
|
58.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecaptured Section 1250 gain
|
|
|
0.002
|
|
0.2
|
%
|
|
|
0.05
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.00
|
|
100.0
|
%
|
|
$
|
1.00
|
|
100.0
|
%
|
|
$
|
1.00
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, the Companys net operating loss (NOL) carryover was
approximately $64,248,000 for the parent REIT entity. Subject to certain limitations, the parent REITs NOL carryover may be used to offset all or a portion of the Companys REIT taxable income, and as a result, to reduce or eliminate the
amount that the Company is required to distribute to stockholders to maintain its status as a REIT. It does not, however, affect the tax treatment to stockholders of any distributions that the Company does make. Distributions with respect to
ANLs 2006, and 2005 tax years exceeded, in each case, REIT taxable income as determined prior to taking into account the deduction for dividends paid, and, consequently, the Company did not utilize any of its NOL carryovers in those years. In
2007, taxable income was in excess of distributions; therefore, the Company utilized $316,000 of its NOL carryovers in 2007. The parent REIT entitys NOL carryovers are scheduled to expire in 2008 and 2009.
In 2001, the Company utilized a provision of the Taxpayer Relief Act of 1997 that allowed a one-time election to treat assets as having been sold for tax
purposes in a deemed sale as of January 1, 2001 for fair value of those assets. The Company recorded a contingent tax liability of $600,000 related to this election in 2001. During 2005, certain subsequent events occurred, and the $600,000
contingent tax liability was reversed in 2005, resulting in a tax benefit of $600,000 for the year ended December 31, 2005.
F-22
Taxable Consolidated Entities
Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities of taxable entities that are consolidated for financial reporting purposes (but not for tax
purposes) and the amounts used for income tax purposes. During 2007, 2006 and 2005, the taxable consolidated entities were comprised of the taxable REIT subsidiaries of the Company that are wholly owned by the Operating Partnership.
Significant components of the Companys deferred tax liabilities and assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
2007
|
|
|
December 31,
2006
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
149
|
|
|
$
|
165
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
149
|
|
|
|
165
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
|
3,386
|
|
|
|
1,134
|
|
Deferred income
|
|
|
30
|
|
|
|
30
|
|
Inventory reserves
|
|
|
72
|
|
|
|
105
|
|
Other
|
|
|
12
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
3,500
|
|
|
|
1,288
|
|
Valuation allowance for deferred tax assets
|
|
|
(3,351
|
)
|
|
|
(1,123
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
|
149
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
SFAS No. 109
, Accounting for Income Taxes,
requires a valuation allowance to reduce
the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Companys taxable REIT subsidiaries have reported cumulative
losses since inception. After consideration, a $3,351,000 valuation allowance at December 31, 2007 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The increase in the valuation allowance
for 2007 is $2,228,000. At December 31, 2007, the Company has available NOL carryforwards of approximately $8,999,000 arising from the operations of the consolidated taxable REIT subsidiaries, which expire between 2020 and 2027.
Significant components of the provision for income taxes are as follows and classified with selling and marketing expense in the Companys
consolidated statements of income for 2007, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2007
|
|
Year Ended
December 31,
2006
|
|
Year Ended
December 31,
2005
|
Current
|
|
$
|
|
|
$
|
|
|
$
|
6
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
F-23
Consolidated loss subject to tax is $(5,994,000), $(1,219,000) and $(718,000) for 2007, 2006 and 2005,
respectively. The reconciliation of income tax attributable to consolidated loss subject to tax from continuing operations computed at the U.S. statutory rate to income tax expense (benefit) is shown below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2007
|
|
|
Year Ended
December 31, 2006
|
|
|
Year Ended
December 31, 2005
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Tax at U.S. statutory rates on consolidated (loss) income subject to tax
|
|
$
|
(2,038
|
)
|
|
(34.0
|
%)
|
|
$
|
(414
|
)
|
|
(34.0
|
%)
|
|
$
|
(244
|
)
|
|
(34.0
|
%)
|
State income tax, net of federal tax benefit
|
|
|
(217
|
)
|
|
(3.6
|
)
|
|
|
(44
|
)
|
|
(3.6
|
)
|
|
|
(25
|
)
|
|
(3.6
|
)
|
Other
|
|
|
27
|
|
|
0.5
|
|
|
|
105
|
|
|
8.6
|
|
|
|
48
|
|
|
6.9
|
|
Increase (decrease) in valuation allowance
|
|
|
2,228
|
|
|
37.1
|
|
|
|
353
|
|
|
29.0
|
|
|
|
227
|
|
|
31.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
0.0
|
%
|
|
$
|
|
|
|
0.0
|
%
|
|
$
|
6
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid totaled $0, $0 and $6,000 in the years ended December 31, 2007, 2006 and
2005, respectively.
The Company has a 401(k)
defined-contribution employee savings plan, which provides substantially all employees the opportunity to accumulate funds for retirement. The Company may, at its discretion, match a portion of the contributions from participating employees. During
2007, 2006, and 2005, the Company matched $58,000, $52,000, and $46,000, respectively, of employee contributions. The Companys match vests as follows:
|
|
|
Years of Service
|
|
Vested Interest
|
1
|
|
0%
|
2
|
|
30%
|
3
|
|
60%
|
4
|
|
100%
|
L.
|
Discontinued Operations
|
In accordance with SFAS
No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets
, the Company reports as discontinued operations real estate assets held for sale and real estate assets sold in the current period. All results of these discontinued
operations are included in a separate component of income on the consolidated statements of income under the heading DISCONTINUED OPERATIONS. The results of operations and gain or loss recognized on long-lived assets classified as
discontinued operations are included in the Rental Property segment in Note G.
During the year ended December 31, 2007, the Company
sold an age-restricted community located in Florida with 261 home sites. The results of operations of this community before the sale and the related $10,302,000 gain on sale are included in discontinued operations for the years ended
December 31, 2007, 2006 and 2005, respectively.
During the year ended December 31, 2006, the Company sold an age-restricted
community located in New Jersey with 90 home sites. The results of operations of this community before the sale and the related $1,006,000 gain on sale were included in discontinued operations for the years ended December 2006 and 2005.
F-24
The following is a summary of the components of income from discontinued operations for the years ended
December 31, 2007, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Discontinued Property Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues
|
|
$
|
978
|
|
|
$
|
1,931
|
|
|
$
|
1,845
|
|
Property operating expenses
|
|
|
(348
|
)
|
|
|
(640
|
)
|
|
|
(648
|
)
|
Interest expense
|
|
|
(360
|
)
|
|
|
(676
|
)
|
|
|
(586
|
)
|
Depreciation
|
|
|
(64
|
)
|
|
|
(165
|
)
|
|
|
(161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before gain on disposition of discontinued operations
|
|
|
206
|
|
|
|
450
|
|
|
|
450
|
|
Gain on disposition of discontinued real estate
|
|
|
10,302
|
|
|
|
1,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before minority interest in Operating Partnership
|
|
|
10,508
|
|
|
|
1,456
|
|
|
|
450
|
|
Minority interest in Operating Partnership attributable to discontinued operations
|
|
|
(1,181
|
)
|
|
|
(170
|
)
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
9,327
|
|
|
$
|
1,286
|
|
|
$
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, the Company did not have any assets classified as held for sale.
M.
|
Accounting for Uncertainty in Income Taxes
|
On
January 1, 2007, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan Interpretation of SFAS 109
(FIN 48). FIN 48 provides interpretative guidance for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return.
In accordance with our accounting policy, the
Company recognizes accrued interest related to unrecognized tax benefits as a component of interest expense and penalties related to unrecognized tax benefits as a component of general and administrative expenses. This policy did not change as a
result of the adoption of FIN 48.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it
operates. The Companys federal and state income tax returns for the year ended December 31, 2004, and subsequent years are currently subject to examination by the Internal Revenue Service or other taxing authorities. In March 2008, the
Company was notified by the Internal Revenue Service that it intends to examine the 2005 federal tax return for Asset Investors Operating Partnership. The Company does not anticipate that this examination will have a material impact on the
Companys unrecognized tax benefits or the financial condition of the Company. As a result of the implementation of FIN 48, the Company did not recognize a liability for unrecognized tax benefits.
N.
|
Recent Accounting Developments
|
In February 2007,
the FASB issued SFAS 159,
The Fair Value Option for Financial Assets and Financial Liabilities
(SFAS 159). SFAS 159 permits entities to choose to measure financial assets and liabilities (except for those that are specifically
scoped out of the statement) at fair value. The election to measure a financial asset or liability at fair value can be made on an instrument-by-instrument basis and is irrevocable. The difference between carrying value and fair value at the
election date is recorded as a transition adjustment to opening retained earnings. Subsequent changes in fair value are recognized in earnings. The effective date for SFAS 159 is as of the beginning of an entitys first fiscal year that begins
after November 15, 2007. The Company is evaluating SFAS 159 and has not yet determined the impact the adoption will have on the consolidated financial statements, but it is not expected to be material.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurement
(SFAS 157). SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
F-25
and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. The Company is evaluating SFAS 157 and has not yet determined the impact the adoption will have on the consolidated financial statements, but it is not expected to be material.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets
, which was effective for the fiscal
year ended December 31, 2007. This statement amends SFAS 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement 125
(SFAS 140), regarding
(1) the circumstances under which a servicing asset or servicing liability must be recognized, (2) the initial and subsequent measurement of recognized servicing assets and liabilities, and (3) information required to be disclosed
relating to servicing assets and liabilities. The adoption of this standard did not have a material impact on the Companys consolidated financial statements.
In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments
(SFAS 155), which was effective for the fiscal year ended December 31, 2007. This
statement amends SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
, to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to
receive a specified portion of the contractual interest or principal cash flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that
itself is a derivative financial instrument. The adoption of this standard did not have a material impact on the Companys consolidated financial statements.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Non-controlling Interests in Consolidated Financial Statements
(SFAS 160) an amendment of
Accounting Research Bulletin No. 51. The Statement seeks to improve uniformity and transparency in reporting of the net income attributable to non-controlling interests in the consolidated financial statements of the reporting entity. The
statement requires, among other provisions, the disclosure, clear labeling and presentation of non-controlling interests in the Consolidated Balance Sheet and Consolidated Income Statement. SFAS 160 is effective for fiscal years beginning after
December 15, 2008, early adoption is prohibited. The Company is evaluating SFAS 160 and has not yet determined the impact the adoption will have on the consolidated financial statements.
In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141R,
Business Combinations
(SFAS 141(R)).
SFAS 141(R) replaces SFAS 141 but retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (also known as the purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141(R) also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired entity; (b) improves the completeness of the information reported about a business combination by changing the requirements for recognizing assets acquired and liabilities assumed arising from
contingencies; (c) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (d) determines what information to disclose to enable users of the financial statements to evaluate the
nature and financial effects of the business combination. SFAS 141(R) replaces, with limited exceptions as specified in the Statement, the cost allocation process in SFAS 141(R) with a fair value based allocation process. SFAS 141(R) is required to
be adopted concurrently with SFAS 160 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early
adoption is prohibited. The Company is evaluating SFAS 141(R) and has not yet determined the impact the adoption will have on the consolidated financial statements.
O.
|
Transactions with Related Parties
|
In previous
years, the Company had provided loans to its executive officers in an amount equal to the total cash required to purchase common stock in the Company at the then prevailing market prices. These loans had a 10-year maturity, were 25% recourse to the
executive officers, bore interest at 7.5% and were secured by the
F-26
stock acquired with the proceeds from the loan. One such loan was fully repaid in 2002. During the year ended December 31, 2005, the two remaining loans
made to officers secured by common stock were repaid in full, and principal and interest payments made on these obligations during the year ended December 31, 2007, 2006 and 2005 were $0, $0 and $767,000, respectively. No amounts were
outstanding at December 31, 2005. In compliance with current regulations, the Company has not provided or modified loans to executive officers since January 2, 2001.
P.
|
Selected Quarterly Financial Data (Unaudited)
|
Presented in the following table is selected quarterly financial data for 2007 and 2006 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Quarters
|
|
|
|
Fourth
|
|
|
Third
|
|
|
Second
|
|
|
First
|
|
Rental and other property revenues
|
|
$
|
9,778
|
|
|
$
|
9,554
|
|
|
$
|
9,553
|
*
|
|
$
|
9,766
|
*
|
Income from rental property operations
|
|
|
4,952
|
|
|
|
4,882
|
|
|
|
4,858
|
*
|
|
|
5,037
|
*
|
Home sales revenue
|
|
|
4,577
|
|
|
|
7,222
|
|
|
|
7,973
|
|
|
|
7,740
|
|
Loss from home sales operations
|
|
|
(719
|
)
|
|
|
(202
|
)
|
|
|
(79
|
)
|
|
|
(265
|
)
|
Income from continuing operations
|
|
|
686
|
|
|
|
1,221
|
|
|
|
1,464
|
*
|
|
|
1,658
|
*
|
Income from discontinued operations
|
|
|
21
|
|
|
|
9,154
|
|
|
|
75
|
*
|
|
|
77
|
*
|
Net income
|
|
|
707
|
|
|
|
10,375
|
|
|
|
1,539
|
|
|
|
1,735
|
|
Preferred stock dividends
|
|
|
485
|
|
|
|
484
|
|
|
|
485
|
|
|
|
484
|
|
Net income attributable to common stockholders
|
|
|
222
|
|
|
|
9,891
|
|
|
|
1,054
|
|
|
|
1,251
|
|
Basic earnings per share
|
|
$
|
0.03
|
|
|
$
|
1.29
|
|
|
$
|
0.14
|
|
|
$
|
0.16
|
|
Diluted earnings per share
|
|
$
|
0.03
|
|
|
$
|
1.26
|
|
|
$
|
0.13
|
|
|
$
|
0.16
|
|
Weighted average common shares outstanding
|
|
|
7,560
|
|
|
|
7,659
|
|
|
|
7,745
|
|
|
|
7,688
|
|
Weighted average common shares and common shares equivalents outstanding
|
|
|
7,755
|
|
|
|
7,871
|
|
|
|
8,029
|
|
|
|
8,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 Quarters
|
|
|
|
Fourth
|
|
Third
|
|
Second
|
|
|
First
|
|
Rental and other property revenues
|
|
$
|
9,251
|
|
$
|
8,905
|
|
$
|
8,379
|
*
|
|
$
|
8,307
|
*
|
Income from rental property operations
|
|
|
4,712
|
|
|
4,485
|
|
|
4,082
|
*
|
|
|
4,199
|
*
|
Home sales revenue
|
|
|
9,579
|
|
|
12,242
|
|
|
12,216
|
|
|
|
13,655
|
|
Income from home sales operations
|
|
|
797
|
|
|
1,389
|
|
|
1,472
|
|
|
|
1,729
|
|
Income from continuing operations
|
|
|
2,164
|
|
|
2,451
|
|
|
2,604
|
*
|
|
|
3,186
|
*
|
Income from discontinued operations
|
|
|
962
|
|
|
116
|
|
|
92
|
*
|
|
|
116
|
*
|
Net income
|
|
|
3,126
|
|
|
2,567
|
|
|
2,696
|
|
|
|
3,302
|
|
Preferred stock dividends
|
|
|
485
|
|
|
485
|
|
|
484
|
|
|
|
484
|
|
Net income attributable to common stockholders
|
|
|
2,641
|
|
|
2,082
|
|
|
2,212
|
|
|
|
2,818
|
|
Basic earnings per share
|
|
$
|
0.35
|
|
$
|
0.28
|
|
$
|
0.30
|
|
|
$
|
0.38
|
|
Diluted earnings per share
|
|
$
|
0.33
|
|
$
|
0.27
|
|
$
|
0.28
|
|
|
$
|
0.36
|
|
Weighted average common shares outstanding
|
|
|
7,553
|
|
|
7,507
|
|
|
7,465
|
|
|
|
7,423
|
|
Weighted average common shares and common shares equivalents outstanding
|
|
|
7,953
|
|
|
7,808
|
|
|
7,836
|
|
|
|
7,880
|
|
F-27
*
|
The quarterly data supplied varies from the amounts previously reported due to sale of one property in 2007 and the effect of discontinued operations on these amounts. The following
table reconciles the amounts previously presented with the above:
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
Second
|
|
|
First
|
|
Rental and other property revenues as reported on Form 10-Q
|
|
$
|
9,934
|
|
|
$
|
10,151
|
|
Rental and other property revenues related to discontinued operations
|
|
|
(381
|
)
|
|
|
(385
|
)
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues
|
|
$
|
9,553
|
|
|
$
|
9,766
|
|
|
|
|
|
|
|
|
|
|
Income from rental property operations as reported on Form 10-Q
|
|
$
|
5,079
|
|
|
$
|
5,258
|
|
Property operating expenses related to discontinued operations
|
|
|
136
|
|
|
|
140
|
|
Depreciation related to discontinued operations
|
|
|
24
|
|
|
|
24
|
|
Rental and other property revenues related to discontinued operations
|
|
|
(381
|
)
|
|
|
(385
|
)
|
|
|
|
|
|
|
|
|
|
Income from rental property operations
|
|
$
|
4,858
|
|
|
$
|
5,037
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations as reported on Form 10-Q
|
|
$
|
1,539
|
|
|
$
|
1,735
|
|
Income from discontinued operations
|
|
|
(75
|
)
|
|
|
(77
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1,464
|
|
|
$
|
1,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
Rental and other property revenues as reported on Form 10-Q
|
|
$
|
8,721
|
|
|
$
|
8,643
|
|
Rental and other property revenues related to discontinued operation
|
|
|
(342
|
)
|
|
|
(336
|
)
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues
|
|
$
|
8,379
|
|
|
$
|
8,307
|
|
|
|
|
|
|
|
|
|
|
Income from rental property operations as reported on Form 10-Q
|
|
$
|
4,260
|
|
|
$
|
4,383
|
|
Property operating expenses related to discontinued operations
|
|
|
140
|
|
|
|
128
|
|
Depreciation related to discontinued operations
|
|
|
24
|
|
|
|
24
|
|
Rental and other property revenues related to discontinued operations
|
|
|
(342
|
)
|
|
|
(336
|
)
|
|
|
|
|
|
|
|
|
|
Income from rental property operations
|
|
$
|
4,082
|
|
|
$
|
4,199
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations as reported on Form 10-Q
|
|
$
|
2,646
|
|
|
$
|
3,260
|
|
Income from discontinued operations as reported on Form 10-Q
|
|
|
50
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
Net income as reported on Form 10-Q
|
|
|
2,696
|
|
|
|
3,302
|
|
Income from discontinued operations
|
|
|
(92
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2,604
|
|
|
$
|
3,186
|
|
|
|
|
|
|
|
|
|
|
On January 15, 2008, the
Company refinanced a $5,775,000 note payable with a fixed rate of 7.8% and a weighted average maturity of 3.0 years and issued an $11,293,000 non-recourse mortgage note payable with a fixed rate of 5.91% maturing on February 1, 2018. The net
proceeds were used to continue development of our residential land lease communities and for general corporate purposes.
On
January 15, 2008, the Company refinanced a $2,011,000 note payable with a fixed rate of 8.2% and a weighted average maturity of 7.8 years and issued a $7,010,000 non-recourse mortgage note payable with a fixed rate of 5.91% maturing on
February 1, 2018. The net proceeds were used to continue development of our residential land lease communities and for general corporate purposes.
F-28
On January 15, 2008, the Company refinanced a $5,465,000 note payable with a fixed rate of 6.6% and
a weighted average maturity of 4.0 years and issued a $10,373,000 non-recourse mortgage note payable with a fixed rate of 5.91% maturing on February 1, 2018. The net proceeds were used to continue development of our residential land lease
communities and for general corporate purposes.
The Companys common stock dividend is set quarterly and is subject to change or
elimination at any time. On January 30, 2008, the Board of Directors declared a quarterly cash dividend of $0.25 per common share for the quarter ended December 31, 2007, payable on February 29, 2008, to stockholders of record on
February 15, 2008.
The Companys preferred stock dividend is set quarterly and is subject to change or elimination at any time.
On January 30, 2008, the Board of Directors declared a quarterly cash dividend of $0.4844 per share of Class A Preferred Stock for the quarter ended December 31, 2007, payable on February 29, 2008, to stockholders of record on
February 15, 2008.
On January 30, 2008, each board member was issued 1,750 shares of stock as compensation for their board
member duties. In total, 8,750 shares were issued at the fair value of the common stock on the date of issuance.
On January 30, 2008,
the Board of Directors awarded approximately 5,000 shares of time-based restricted stock to a member of management. The restricted stock was issued at the fair value of the common stock on the date of issuance. The restricted stock may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of and is subject to a risk of forfeiture within the vesting period. The restricted stock issued has a five-year vesting period and vests 33 1/3% on the third, fourth, and fifth
anniversary of the date of employment.
On January 30, 2008, The Board of Directors awarded approximately 5,000 stock options to a
member of management. The stock options were issued at fair value on the date of issuance and have a five-year vesting period which vests 33 1/3% on the third, fourth, and fifth anniversary of the date of employment.
On February 14, 2008, the Board of Directors awarded approximately 292,515 stock options to members of management. The stock options were issued at
fair value on the date of issuance and vest equally over periods between 4 and 5 years from the date of grant.
On February 14, 2008,
the Board of Directors made a grant of market-based restricted stock totaling 65,000 shares to members of senior management whereby the Company issued restricted common stock (the HPS shares) under the terms of the 1998 Stock Incentive
Plan. The HPS shares vest based upon the extent, if any, that the total return realized by stockholders exceeds the ten-year average total return of the Equity REIT Index, as reported by the National Association of Real Estate Investment Trusts.
Vesting is achieved ratably on the final valuation date to the extent that excess value has been realized. In order for management to earn vesting in all of the HPS shares for a given final valuation date, the actual total return to stockholders for
the three-year period is required to exceed the Equity REIT Index total return by 5 percentage points. The 65,000 HPS shares granted have a final measurement date of December 31, 2010.
On February 14, 2008, the Board of Directors awarded approximately x,xxx shares of time-based restricted stock to members of management. The
restricted stock was issued at the fair value of the common stock on the date of issuance. The restricted stock may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of and is subject to risk of forfeiture within the
vesting period. The restricted stock issued vests equally over four years.
On February 14, 2008, the Board of Directors awarded
approximately 55,000 shares of time-based restricted stock to members of management. The restricted stock was issued at the fair value of the common stock on the date of issuance. The restricted stock may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of and is subject to risk of forfeiture within the vesting period. The restricted stock has a six-year vesting period which vests 33 1/3 % on fourth, fifth and sixth years.
On March 7, 2008, we amended our revolving line of credit. The amendment eliminates the covenant to maintain a ratio of cash flow to fixed charge
obligations, changes the variable interest rate from a range of 150 to 175 basis points to 175 basis points over the one-month LIBOR and changes the maturity from May 31, 2009 to December 31, 2008.
F-29
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
SCHEDULE III
Real Estate and Accumulated Depreciation
December 31, 2007
(In Thousands Except Site Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
Initial Cost
|
|
|
|
Total Cost
|
|
|
|
|
|
|
|
Property Name
|
|
Date
Acquired
|
|
Location
|
|
Year Developed
|
|
Number
Of Sites
|
|
Land
|
|
Buildings and
Improvements
|
|
Cost
Capitalized
Subsequent
Acquisition
|
|
Land
|
|
Buildings and
Improvements
|
|
Total
|
|
Accumulated
Depreciation
|
|
|
Total Cost
Net of
Accumulated
Depreciation
|
|
Encumbrances
|
Blue Heron Pines
|
|
2000
|
|
Punta Gorda, FL
|
|
1983/1999
|
|
389
|
|
$
|
3,026
|
|
$
|
2,356
|
|
$
|
14,112
|
|
$
|
3,169
|
|
$
|
16,325
|
|
$
|
19,494
|
|
$
|
(1,034
|
)
|
|
$
|
18,460
|
|
$
|
10,464
|
Blue Star(1)
|
|
1999
|
|
Apache Junction, AZ
|
|
1955
|
|
151
|
|
|
453
|
|
|
1,029
|
|
|
84
|
|
|
453
|
|
|
1,113
|
|
|
1,566
|
|
|
(206
|
)
|
|
|
1,360
|
|
|
|
Brentwood(1)
|
|
2000
|
|
Hudson, FL
|
|
1984
|
|
191
|
|
|
446
|
|
|
1,037
|
|
|
3,600
|
|
|
446
|
|
|
4,637
|
|
|
5,083
|
|
|
(369
|
)
|
|
|
4,714
|
|
|
|
Brentwood West
|
|
1998
|
|
Mesa, AZ
|
|
1972/1987
|
|
350
|
|
|
1,050
|
|
|
12,768
|
|
|
1,340
|
|
|
1,050
|
|
|
14,108
|
|
|
15,158
|
|
|
(2,986
|
)
|
|
|
12,172
|
|
|
15,691
|
Casa Commercial
|
|
2000
|
|
Mesa, AZ
|
|
|
|
|
|
|
304
|
|
|
6
|
|
|
8
|
|
|
304
|
|
|
14
|
|
|
318
|
|
|
(2
|
)
|
|
|
316
|
|
|
|
The Villages
|
|
2000
|
|
Mesa, AZ
|
|
1970
|
|
375
|
|
|
283
|
|
|
1,050
|
|
|
15,583
|
|
|
283
|
|
|
16,633
|
|
|
16,916
|
|
|
|
|
|
|
16,916
|
|
|
|
Cypress Greens
|
|
2000
|
|
Lakeland, FL
|
|
1986
|
|
258
|
|
|
216
|
|
|
1,649
|
|
|
5,720
|
|
|
2,031
|
|
|
5,554
|
|
|
7,585
|
|
|
(401
|
)
|
|
|
7,184
|
|
|
5,110
|
Desert Harbor
|
|
2000
|
|
Apache Junction, AZ
|
|
1997
|
|
205
|
|
|
952
|
|
|
3,980
|
|
|
2,248
|
|
|
957
|
|
|
6,223
|
|
|
7,180
|
|
|
(645
|
)
|
|
|
6,535
|
|
|
8,859
|
Fiesta Village
|
|
2000
|
|
Mesa, AZ
|
|
1962
|
|
172
|
|
|
2,698
|
|
|
4,034
|
|
|
2,638
|
|
|
2,697
|
|
|
6,673
|
|
|
9,370
|
|
|
(529
|
)
|
|
|
8,841
|
|
|
2,661
|
Forest View
|
|
2000
|
|
Homosassa, FL
|
|
1987/1997
|
|
304
|
|
|
927
|
|
|
1,950
|
|
|
4,284
|
|
|
1,320
|
|
|
5,841
|
|
|
7,161
|
|
|
(867
|
)
|
|
|
6,294
|
|
|
6,567
|
Gulfstream Harbor I
|
|
1998
|
|
Orlando, FL
|
|
1980
|
|
432
|
|
|
1,740
|
|
|
11,793
|
|
|
2,863
|
|
|
1,982
|
|
|
14,414
|
|
|
16,396
|
|
|
(2,639
|
)
|
|
|
13,757
|
|
|
11,952
|
Gulfstream Harbor II
|
|
1998
|
|
Orlando, FL
|
|
1988
|
|
344
|
|
|
924
|
|
|
9,183
|
|
|
729
|
|
|
924
|
|
|
9,912
|
|
|
10,836
|
|
|
(2,073
|
)
|
|
|
8,763
|
|
|
7,611
|
Gulfstream Harbor III
|
|
1998
|
|
Orlando, FL
|
|
1984
|
|
284
|
|
|
858
|
|
|
7,952
|
|
|
4,505
|
|
|
858
|
|
|
12,457
|
|
|
13,315
|
|
|
(1,915
|
)
|
|
|
11,400
|
|
|
9,904
|
La Casa Blanca
|
|
2000
|
|
Apache Junction, AZ
|
|
1993
|
|
197
|
|
|
534
|
|
|
6,080
|
|
|
478
|
|
|
534
|
|
|
6,558
|
|
|
7,092
|
|
|
(905
|
)
|
|
|
6,187
|
|
|
6,686
|
Lakeshore Villas
|
|
2000
|
|
Tampa, FL
|
|
1972
|
|
281
|
|
|
762
|
|
|
6,081
|
|
|
1,724
|
|
|
2,078
|
|
|
6,489
|
|
|
8,567
|
|
|
(888
|
)
|
|
|
7,679
|
|
|
9,093
|
Lost Dutchman(1)
|
|
1999
|
|
Apache Junction, AZ
|
|
1971/1979/1999
|
|
242
|
|
|
777
|
|
|
4,885
|
|
|
2,110
|
|
|
777
|
|
|
6,995
|
|
|
7,772
|
|
|
(951
|
)
|
|
|
6,821
|
|
|
|
Park Place
|
|
2006
|
|
Sebastian, FL
|
|
1994/2003/2006
|
|
467
|
|
|
15,483
|
|
|
14,839
|
|
|
1,388
|
|
|
15,683
|
|
|
16,027
|
|
|
31,710
|
|
|
(268
|
)
|
|
|
31,442
|
|
|
22,400
|
Park Royale
|
|
2000
|
|
Pinellas Park, FL
|
|
1971
|
|
309
|
|
|
927
|
|
|
5,221
|
|
|
1,852
|
|
|
1,029
|
|
|
6,971
|
|
|
8,000
|
|
|
(1,475
|
)
|
|
|
6,525
|
|
|
5,781
|
Pleasant Living
|
|
1997
|
|
Riverview, FL
|
|
1979
|
|
245
|
|
|
726
|
|
|
5,079
|
|
|
502
|
|
|
697
|
|
|
5,610
|
|
|
6,307
|
|
|
(1,313
|
)
|
|
|
4,994
|
|
|
2,027
|
Rancho Mirage
|
|
2000
|
|
Apache Junction, AZ
|
|
1994
|
|
312
|
|
|
837
|
|
|
9,924
|
|
|
1,438
|
|
|
837
|
|
|
11,362
|
|
|
12,199
|
|
|
(1,484
|
)
|
|
|
10,715
|
|
|
11,919
|
The Reserve at Fox Creek
|
|
2006
|
|
Bullhead City, AZ
|
|
2000/2004
|
|
313
|
|
|
4,607
|
|
|
5,837
|
|
|
3,359
|
|
|
4,607
|
|
|
9,196
|
|
|
13,803
|
|
|
(203
|
)
|
|
|
13,600
|
|
|
7,250
|
Riverside
|
|
2000
|
|
Ruskin, FL
|
|
1984
|
|
941
|
|
|
3,202
|
|
|
8,167
|
|
|
37,134
|
|
|
5,738
|
|
|
42,765
|
|
|
48,503
|
|
|
(2,227
|
)
|
|
|
46,276
|
|
|
20,199
|
Royal Palm
|
|
2000
|
|
Haines City, FL
|
|
1971
|
|
387
|
|
|
1,244
|
|
|
2,874
|
|
|
5,871
|
|
|
1,393
|
|
|
8,596
|
|
|
9,989
|
|
|
(668
|
)
|
|
|
9,321
|
|
|
6,118
|
Savanna Club(2)
|
|
2000
|
|
Port St. Lucie, FL
|
|
1999
|
|
1,067
|
|
|
6,945
|
|
|
4,643
|
|
|
44,137
|
|
|
16,560
|
|
|
39,088
|
|
|
55,648
|
|
|
(2,437
|
)
|
|
|
53,211
|
|
|
31,116
|
Sebastian Beach
|
|
2005
|
|
Grant-Valkaria, FL
|
|
2005
|
|
533
|
|
|
15,591
|
|
|
|
|
|
20,434
|
|
|
15,609
|
|
|
20,416
|
|
|
36,025
|
|
|
|
|
|
|
36,025
|
|
|
11,356
|
Serendipity
|
|
1998
|
|
Ft. Myers, FL
|
|
1971/1974
|
|
338
|
|
|
1,014
|
|
|
7,635
|
|
|
978
|
|
|
1,014
|
|
|
8,613
|
|
|
9,627
|
|
|
(1,780
|
)
|
|
|
7,847
|
|
|
10,033
|
Stonebrook
|
|
2000
|
|
Homosassa, FL
|
|
1987/1997
|
|
201
|
|
|
654
|
|
|
1,483
|
|
|
3,281
|
|
|
854
|
|
|
4,564
|
|
|
5,418
|
|
|
(661
|
)
|
|
|
4,757
|
|
|
3,349
|
Sun Valley
|
|
1999
|
|
Apache Junction, AZ
|
|
1984
|
|
268
|
|
|
804
|
|
|
5,644
|
|
|
231
|
|
|
804
|
|
|
5,875
|
|
|
6,679
|
|
|
(1,058
|
)
|
|
|
5,621
|
|
|
5,476
|
Sunlake
|
|
2000
|
|
Grand Island, FL
|
|
1980
|
|
401
|
|
|
1,712
|
|
|
6,522
|
|
|
8,472
|
|
|
2,272
|
|
|
14,434
|
|
|
16,706
|
|
|
(1,412
|
)
|
|
|
15,294
|
|
|
8,348
|
The Grove
|
|
2006
|
|
Foley, AL
|
|
1998
|
|
425
|
|
|
2,337
|
|
|
1,703
|
|
|
1,645
|
|
|
2,337
|
|
|
3,348
|
|
|
5,685
|
|
|
(56
|
)
|
|
|
5,629
|
|
|
|
Woodlands(1)
|
|
2003
|
|
Groveland, FL
|
|
1979
|
|
292
|
|
|
2,231
|
|
|
2,721
|
|
|
6,299
|
|
|
3,367
|
|
|
7,884
|
|
|
11,251
|
|
|
(390
|
)
|
|
|
10,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,674
|
|
$
|
74,264
|
|
$
|
158,125
|
|
$
|
199,047
|
|
$
|
92,664
|
|
$
|
338,695
|
|
$
|
431,359
|
|
$
|
(31,842
|
)
|
|
$
|
399,517
|
|
$
|
239,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These properties secure the Companys line of credit.
|
(2)
|
Phase VIII of this property secures the Companys line of credit. The assets of this phase have a net book value of approximately $19,508,000 as of December 31, 2007 and
contains 195 home sites. The remaining phases of this property secure a fixed rate mortgage and the phases have a net book value of approximately $33,780,000 as of December 31, 2007.
|
F-30
AMERICAN LAND LEASE, INC. AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
For the Years Ended December 31, 2007, 2006 and 2005
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
412,074
|
|
|
$
|
323,814
|
|
|
$
|
271,671
|
|
Additions during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquisitions
|
|
|
|
|
|
|
43,611
|
|
|
|
15,822
|
|
Capital replacements(1)
|
|
|
812
|
|
|
|
1,389
|
|
|
|
790
|
|
Hurricane capital replacements
|
|
|
|
|
|
|
|
|
|
|
765
|
|
Development
|
|
|
25,832
|
|
|
|
45,226
|
|
|
|
34,825
|
|
Dispositions
|
|
|
(7,359
|
)
|
|
|
(1,966
|
)
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
431,359
|
|
|
$
|
412,074
|
|
|
$
|
323,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
(29,068
|
)
|
|
$
|
(25,277
|
)
|
|
$
|
(22,803
|
)
|
Additions during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation(2)
|
|
|
(4,349
|
)
|
|
|
(3,802
|
)
|
|
|
(3,270
|
)
|
Dispositions
|
|
|
1,575
|
|
|
|
11
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
(31,842
|
)
|
|
$
|
(29,068
|
)
|
|
$
|
(26,014
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Capital replacements in the above schedule are specifically related to assets such as buildings, building improvements and land improvements that are classified as Real Estate
assets on the consolidated balance sheet. In addition to the capital replacements of real estate assets, the Company also replaces personal property (such as furniture & fixtures, machinery & equipment, and computers) used in the
operations of the Companys real estate assets. In 2007, 2006, and 2005, the Company incurred $362,000, $314,000 and $444,000, respectively, to replace personal property in the operations of its real estate assets.
|
(2)
|
Depreciation in the above schedule is specifically related to assets such as buildings, building improvements and land improvements that are classified as Real Estate assets on the
consolidated balance sheet. In addition to the depreciation of real estate assets, the Company also depreciates personal property (such as furniture & fixtures, machinery & equipment, and computers) used in the operations of the
Companys real estate assets. In 2007, 2006, and 2005, the Company recorded depreciation expense of $608,000, $446,000, and $125,000, respectively, related to the personal property in the operations of its real estate assets.
|
F-31