10-K 1 k68294e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 333-2522-01 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) STATE OF MICHIGAN 38-3144240 State of Organization I.R.S. Employer I.D. No. 31700 MIDDLEBELT ROAD SUITE 145 FARMINGTON HILLS, MICHIGAN 48334 (248) 932-3100 (Address of principal executive offices and telephone number) Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act: NONE Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of March 4, 2002, the aggregate market value of the Registrant's partnership Units held by non-affiliates of the Registrant was approximately $68,669,413 based on the closing sales price of one share of Sun Communities, Inc. common stock (into which the partnership units are convertible on a one-for-one basis) on such date. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive Proxy Statement to be filed by Sun Communities, Inc. for its 2002 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report. As used in this report, "Company", "Us", "We", "Our" and similar terms means Sun Communities Operating Limited Partnership, a Michigan limited partnership, and one or more of its Subsidiaries, (as defined below). PART I ITEM 1. BUSINESS GENERAL We own, operate and finance manufactured housing communities concentrated in the midwestern and southeastern United States. Sun Communities, Inc., a Maryland corporation and our sole general partner ("General Partner"), is a fully integrated real estate company which, together with its affiliates and predecessors, has been in the business of acquiring, operating and expanding manufactured housing communities since 1975. As of December 31, 2001, we owned and operated or financed a portfolio of 116 developed properties located in fifteen states (the "Properties"), including 105 manufactured housing communities, 5 recreational vehicle communities, and 6 properties containing both manufactured housing and recreational vehicle sites. As of December 31, 2001, the Properties contained an aggregate of 40,544 developed sites comprised of 35,390 developed manufactured home sites and 5,154 recreational vehicle sites and an additional 4,385 manufactured home sites suitable for development. In order to enhance Property performance and cash flow, the Company, through Sun Home Services, Inc., a Michigan corporation ("SHS"), actively markets and sells new and used manufactured homes for placement in the Properties. Our executive and principal property management office is located at 31700 Middlebelt Road, Suite 145, Farmington Hills, Michigan 48334 and our telephone number is (248) 932-3100. We have regional property management offices located in Austin, Texas, Dayton, Ohio, Elkhart, Indiana, Grand Rapids, Michigan, and Orlando, Florida, and we employed an aggregate of 546 people as of December 31, 2001. STRUCTURE OF THE COMPANY Our General Partner is a self-administered and self-managed real estate investment trust, or REIT. The Company is structured as an umbrella partnership REIT, or UPREIT, and is the entity through which our General Partner conducts substantially all of its operations, and which owns, either directly or indirectly, through subsidiaries (the "Subsidiaries"), all of the General Partner's assets. This UPREIT structure enables the General Partner to comply with certain complex requirements under the Federal tax rules and regulations applicable to REITs, and to acquire manufactured housing communities in transactions that defer some or all of the sellers' tax consequences. Our Subsidiaries include SHS, which provides manufactured home sales and other services to current and prospective tenants of the Properties. Along with several other subsidiaries, SHS wholly owns Sun Water Oak Golf, Inc., which was organized to own and operate the golf course, restaurant and related facilities located on the Water Oak Property that was acquired in November 1994, and SUI TRS, Inc., which was organized to hold our investment in Origen Financial, L.L.C. See "Factors that May Affect Future Results -- Relationship with Origen" in our General Partner's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. 2 THE MANUFACTURED HOUSING COMMUNITY INDUSTRY A manufactured housing community is a residential subdivision designed and improved with sites for the placement of manufactured homes and related improvements and amenities. Manufactured homes are detached, single-family homes which are produced off-site by manufacturers and installed on sites within the community. Manufactured homes are available in a wide array of designs, providing owners with a level of customization generally unavailable In other forms of multifamily housing. Modern manufactured housing communities, such as the Properties, contain improvements similar to other garden-style residential developments, including centralized entrances, paved streets, curbs and gutters, and parkways. In addition, these communities also often provide a number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts, tennis courts, laundry facilities and cable television service. The owner of each home on our Properties leases the site on which the home is located. We own 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. Some of the Properties provide water and sewer service through public or private utilities, while others provide these services to residents from on-site facilities. Each owner within our Properties is responsible for the maintenance of his or her home and leased site. As a result, capital expenditure needs tend to be less significant, relative to multi-family rental apartment complexes. PROPERTY MANAGEMENT Our property management strategy emphasizes intensive, hands-on management by dedicated, on-site district and community managers. We believe that this on-site focus enables us to continually monitor and address tenant concerns, the performance of competitive properties and local market conditions. Of the 546 Company employees, 487 are located on-site as property managers, support staff, or maintenance personnel. Our community managers are overseen by Brian W. Fannon, our General Partner's Chief Operating Officer, who has 32 years of property management experience, a Senior-Vice President-Operations, three Vice Presidents of Operations and ten Regional Property Managers. In addition, the Regional Property Managers are responsible for semi-annual market surveys of competitive communities, interaction with local manufactured home dealers and regular property inspections. Each district or community manager performs regular inspections in order to continually monitor the Property's physical condition and provides managers with the opportunity to understand and effectively address tenant concerns. In addition to a district or community manager, each district or property has an on-site maintenance personnel and management support staff. We hold periodic training sessions for all property management personnel to ensure that management policies are implemented effectively and professionally. 3 HOME SALES SHS offers manufactured home sales services to tenants and prospective tenants of our Properties. Since tenants often purchase a home already on-site within a community, such services enhance occupancy and property performance. Additionally, because many of the homes in the Properties are sold through SHS, better control of home quality in our communities can be maintained than if sales services were conducted solely through third-party brokers. REGULATIONS AND INSURANCE General. Manufactured housing community properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses and other common areas. We believe that each Property has the necessary operating permits and approvals. Americans with Disabilities Act ("ADA"). The Properties and any newly acquired manufactured housing communities must comply with the ADA. The ADA has separate compliance requirements for "public accommodations" and "commercial facilities," but generally requires that public facilities such as clubhouses, pools and recreation areas be made accessible to people with disabilities. Compliance with ADA requirements could require removal of access barriers and other capital improvements at our Properties. Noncompliance could result in imposition of fines or an award of damages to private litigants. We do not believe the ADA will have a material adverse impact on our results of operations. If required property improvements involve a greater expenditure than we currently anticipate, or if the improvements must be made on a more accelerated basis than we anticipate, our ability to make expected distributions could be adversely affected. We believe that our competitors face similar costs to comply with the requirements of the ADA. Insurance. Our management believes that the Properties are covered by adequate fire, flood, property and business interruption insurance provided by reputable companies with commercially reasonable deductibles and limits. We maintain a blanket policy that covers all of our Properties. We have obtained title insurance insuring fee title to the Properties in an aggregate amount which we believe to be adequate. FACTORS THAT MAY AFFECT FUTURE RESULTS Our prospects are subject to certain uncertainties and risks. Our future results could differ materially from our current results, and our actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. These risk factors include, but are not limited to, the risk factors set forth in the General Partner's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, other one-time events and other important factors disclosed previously and from time to time in the Company's other filings with the Securities and Exchange Commission. This report contains certain forward-looking statements. ITEM 2. PROPERTIES General. As of December 31, 2001, the Properties consisted of 104 manufactured housing communities, 5 recreational vehicle communities, and 7 properties containing both manufactured housing and recreational vehicle sites located in fifteen states concentrated in the midwestern and 4 southeastern United States. As of December 31, 2001, the Properties contained 40,544 developed sites comprised of 35,340 developed manufactured home sites and 5,154 recreational vehicle sites and an additional 4,385 manufactured home sites suitable for development. Most of the Properties include amenities oriented towards family and retirement living. Of the 116 Properties, 61 have more than 300 developed manufactured home sites, with the largest having 1,554 developed manufactured home sites. The Properties had an aggregate occupancy rate of 93% as of December 31, 2001, excluding recreational vehicle sites. Since January 1, 2001, the Properties have averaged an aggregate annual turnover of homes (where the home is moved out of the community) of approximately 3.2% and an average annual turnover of residents (where the home is sold and remains within the community, typically without interruption of rental income) of approximately 7.4%. We believe that our Properties' high amenity levels contribute to low turnover and generally high occupancy rates. All of the Properties provide residents with attractive amenities with most offering a clubhouse, a swimming pool, laundry facilities and cable television service. Many Properties offer additional amenities such as sauna/whirlpool spas, tennis, shuffleboard and basketball courts and/or exercise rooms. We have tried to concentrate our communities within certain geographic areas in order to achieve economies of scale in management and operation. The Properties are principally concentrated in the midwestern and southeastern United States. We believe that geographic diversification will help insulate the portfolio from regional economic influences and we are also interested in expanding our operations in the western United States. The following table sets forth certain information relating to the Properties owned or financed as of December 31, 2001:

(1) Occupancy percentage relates to manufactured housing sites, excluding recreational vehicle sites. (2) Acquired in 2000. (3) Acquired in 2001. 9 (4) Occupancy in these Properties reflects the fact that these communities are in their initial lease-up phase following an expansion or ground up development. (5) This Property contains only recreational vehicle sites. (6) The Company leases this Property. The Company has the option and intends to purchase the Property upon the expiration of the lease. If the Company does not exercise its option to purchase, the lessor has the right to cause the Company to purchase the Property at the expiration of the lease at the then outstanding lease obligation. (7) This Property contains recreational vehicle sites. (8) This Property is financed and managed by the Company. (9) This Property was sold in February 2002. Leases. The typical lease we enter into with a tenant for the rental of a site is month-to-month or year-to-year, renewable upon the consent of both parties, or, in some instances, as provided by statute. In some cases, leases are for one-year terms, with up to ten renewal options exercisable by the tenant, with rent adjusted for increases in the consumer price index. These leases are cancelable for non-payment of rent, violation of community rules and regulations or other specified defaults. See "Regulations and Insurance." ITEM 3. LEGAL PROCEEDINGS We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year covered by this report. 10 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION There is no established public market for any class of the Company's equity securities. On March 5, 2002, partnership units of the Company were held by approximately 123 holders of record. The General Partners' Common Stock has been listed on the New York Stock Exchange ("NYSE") since December 8, 1993 under the symbol "SUI." On March 4, 2002, the closing sales price of the Common Stock was $38.73 and the Common Stock was held by approximately 675 holders of record. The following table sets forth the high and low closing sales prices per share for the Common Stock for the periods indicated as reported by the NYSE and the distributions paid by the General Partner with respect to each such period (we paid equivalent distributions per common partnership unit to our partners during such periods).

RECENT SALES OF UNREGISTERED SECURITIES On April 16, 2001, we issued 46,117 Series B-1 Preferred Units to River Haven Village, Inc. in exchange for property with an agreed upon value of $4,611,692.48 (the "Series B-1 Units"). Holders of the Series B-1 Units may require the Company to redeem all of the outstanding Series B-1 Units within the ninety (90) day period following any anniversary of the Series B-1 Unit issuance date beginning on April 16, 2006, or the death of River Haven's current president. On or after July 16, 2012, we may redeem all of the outstanding Series B-1 Units on written notice to the Series B-1 Unit holders. We will pay a redemption price of $100.00 per Series B-1 Unit redeemed. On January 2, 2002, we issued 100,000 Series B-2 Preferred Units to Bay Area Limited Partnership and assumed approximately $10,500,000 of debt, in exchange for property with a net agreed upon value of $15,000,000 (the "Series B-2 Units"). Holders of the Series B-2 Units may require the Company to redeem all of the outstanding Series B-2 Units within the ninety (90) day period following the fifth anniversary of the Series B-2 Unit issuance date, the death of Bay Area's president, or the occurrence of a change of control as defined in our limited partnership agreement, but in no event may the Series B-2 Unit holders require the redemption of the Series B-2 Units prior to the January 31, 2007. We will pay a redemption price of $45.00 per Series B-2 Unit redeemed. In 11 addition, holders of the Series B-2 Units may convert such units into Common OP Units at a conversion price of $45 per unit within the ninety (90) day period following the third anniversary of the Series B-2 Unit issuance date. In 2001, our General Partner issued an aggregate of 98,036 shares of its Common Stock upon conversion of an aggregate of 98,036 Common OP Units. All of the above OP Units and shares of Common Stock were issued in private placements in reliance on Section 4(2) of the Securities Act of 1933, as amended, including Regulation D promulgated thereunder. No underwriters were used in connection with any of such issuances. 12 ITEM 6 SELECTED FINANCIAL DATA SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP

(A) Includes an $875 expense related to an unsuccessful portfolio acquisition 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto elsewhere herein. The Company owns, operates and finances manufactured housing communities concentrated in the midwestern and southeastern United States. Sun Communities, Inc. ("Sun"), a self-administered and self-managed Real Estate Investment Trust is the sole general partner of the Company. As of December 31, 2001, the Company owned and operated or financed a portfolio of 116 developed properties located in 15 states, including 104 manufactured housing communities, 5 recreational vehicle communities, and 7 properties containing both manufactured housing and recreational vehicle sites. During 2001, the Company acquired five manufactured housing communities, comprising 2,332 developed sites, for $55.8 million and two development communities, comprising 1,273 sites, for $4.3 million and the Company sold two manufactured housing communities for $16.2 million. SIGNIFICANT ACCOUNTING POLICIES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing these financial statements, management has made its best estimates and judgment of certain amounts included in the financial statements. Nevertheless, actual results may differ from these estimates under different assumptions or conditions. Management believes the following significant accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: Principles of Consolidation. The financial statements include the accounts of the Company and all its wholly and 99 percent owned subsidiary partnerships and limited liability companies. Notes Receivable. The Company evaluates the recoverability of its notes receivable whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. The loan is then measured based on the present value of the expected future cash flow discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. 14 Rental Property. Rental property is recorded at cost, less accumulated depreciation. Management evaluates the recoverability of its investment in rental property whenever events or changes in circumstances, such as recent operating results, expected net operating cash flow and plans for future operations, indicate that full asset recoverability is questionable. Recoverability of these assets is measured by a comparison of the carrying amount of such assets to the future undiscounted net cash flows expected to be generated by the assets. If such assets were deemed to be impaired as a result of this measurement, the impairment that would be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset as determined on a discounted net cash flow basis. Revenue Recognition. Rental income attributable to leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants generally range from month-to-month to one year and are renewable by mutual agreement of the Company and the resident. Income Taxes. As a partnership, the Company does not pay federal or state income taxes. RESULTS OF OPERATIONS Comparison of year ended December 31, 2001 to year ended December 31, 2000 For the year ended December 31, 2001, income before gain from property dispositions, net and distribution to Preferred OP Units increased by $1.5 million from $41.5 million to $43.0 million, when compared to the year ended December 31, 2000. The increase was due to increased revenues of $7.0 million while expenses increased by $5.5 million. Income from property increased by $6.6 million from $132.4 million to $139.0 million, or 5.0 percent, due to rent increases and other community revenues ($6.5 million) and acquisitions ($4.4 million), offset by a revenue reduction of $4.3 million due to property dispositions. Other income increased by $0.4 million from $14.1 million to $14.5 million due primarily to an increase in interest income ($1.3 million) offset by reductions in income from affiliate ($0.5 million) and other income ($0.4 million). Property operating and maintenance expenses increased by $0.6 million from $28.6 million to $29.2 million, or 2.0 percent, representing general cost increases ($1.0 million) and acquisitions ($0.7 million), offset by an expense reduction of $1.1 million due to property dispositions. Real estate taxes increased by $0.4 million from $9.1 million to $9.5 million, or 4.5 percent, due to the acquired communities ($0.2 million) and changes in certain assessments. Property management expenses decreased by $0.2 million from $2.9 million to $2.7 million, representing 2.0 percent and 2.2 percent of income from property in 2001 and 2000, respectively. 15 General and administrative expenses increased by $0.5 million from $4.1 million to $4.6 million, representing 3.0 percent and 2.8 percent of total revenues in 2001 and 2000, respectively. Interest expense increased by $1.4 million from $29.6 million to $31.0 million due primarily to financing additional investments in rental property offset by decreasing rates on variable rate debt. Earnings before interest, taxes, depreciation and amortization ("EBITDA" an alternative financial performance measure that may not be comparable to similarly titled measures reported by other companies, defined as total revenues less property operating and maintenance, real estate taxes, property management and general and administrative expenses) increased by $5.7 million from $101.8 million to $107.5 million. EBITDA as a percent of revenues increased to 70.0 percent in 2001 compared to 69.5 percent in 2000. Depreciation and amortization expense increased by $2.8 million from $30.7 million to $33.5 million due primarily to the net additional investments in rental properties. Comparison of year ended December 31, 2000 to year ended December 31, 1999 For the year ended December 31, 2000, income before gain from property dispositions, net and distribution to Preferred OP Units increased by $4.9 million from $36.6 million to $41.5 million, when compared to the year ended December 31, 1999. The increase was due to increased revenues of $11.6 million while expenses increased by $6.7 million. Income from property increased by $7.0 million from $125.4 million to $132.4 million, or 5.6 percent, due to rent increases and other community revenues ($5.3 million), acquisitions ($3.1 million), lease up of manufactured home sites ($2.2 million), offset by a revenue reduction of $3.6 million due to the sale of communities during 1999. Other income increased by $4.6 million from $9.5 million to $14.1 million due primarily to an increase in interest income ($3.0 million) and other income ($2.7 million), offset by a $1.1 million reduction in income from affiliate. Property operating and maintenance expenses increased by $1.3 million from $27.3 million to $28.6 million, or 4.7 percent, due primarily to acquisitions ($0.8 million). Real estate taxes increased by $0.2 million from $8.9 million to $9.1 million, or 2.5 percent, due primarily to the acquired communities. Property management expenses increased by $0.3 million from $2.6 million to $2.9 million, or 11.2 percent, representing 2.2 percent and 2.1 percent of income from property in 2000 and 1999, respectively. General and administrative expenses increased by $0.4 million from $3.7 million to $4.1 million, or 10.8 percent, representing 2.8 percent and 2.7 percent of total revenues in 2000 and 1999, respectively. 16 Interest expense increased by $2.4 million from $27.3 million to $29.7 million due primarily to investments in rental property and notes receivable. EBITDA increased by $9.4 million from $92.4 million to $101.8 million. EBITDA as a percent of revenues increased to 69.5 percent in 2000 compared to 68.5 percent in 1999. Depreciation and amortization expense increased by $2.1 million from $28.6 million to $30.7 million due primarily to the acquisition and development/expansion of communities in 2000 and 1999. SAME PROPERTY INFORMATION The following table reflects property-level financial information as of and for the years ended December 31, 2001 and 2000. The "Same Property" data represents information regarding the operation of communities owned as of January 1, 2000 and December 31, 2001. Site, occupancy, and rent data for those communities is presented as of the last day of each period presented. The "Total Portfolio" column differentiates from the "Same Property" column by including financial information for managed but not owned communities, recreational vehicle communities, new development and acquisition communities.

(1) Occupancy % and weighted average rent relates to manufactured housing sites, excluding recreational vehicle sites. (2) Includes 3 properties sold in December 2000. On a same property basis, property revenues increased by $5.4 million from $99.9 million to $105.3 million, or 5.4 percent, due primarily to increases in rents and related charges including water and property tax pass through. Property operating expenses increased by $0.8 million from $25.6 million to $26.4 million, or 3.2 percent, due to increased costs. Property EBITDA increased by $4.5 million from $74.4 million to $78.9 million, or 6.1 percent. 17 LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity demands have historically been, and are expected to continue to be, distributions to Sun's stockholders and the Company's unitholders, property acquisitions, development and expansion of properties, capital improvements of properties and debt repayment. The Company expects to meet its short-term liquidity requirements through its working capital provided by operating activities and its line of credit, as described below. The Company considers its ability to generate cash from operations (anticipated to be approximately $70 million) to be adequate to meet all operating requirements, including recurring capital improvements, routinely amortizing debt and other normally recurring expenditures of a capital nature, pay distributions to Sun's stockholders to maintain Sun's qualification as a REIT in accordance with the Internal Revenue Code and make distributions to the Company's unitholders. The Company plans to invest approximately $25 to $30 million in developments consisting of expansions to existing communities and the new or continuing development of new communities. The Company expects to finance these investments by using net cash flows provided by operating activities and by drawing upon its line of credit. Furthermore, the Company expects to invest in the range of $40 to $60 million in the acquisition of properties in 2002, depending upon market conditions. The Company plans to finance these investments by using net cash flows provided by operating activities and by drawing upon its line of credit. Cash and cash equivalents decreased by $13.9 million to $4.6 million at December 31, 2001 compared to $18.5 million at December 31, 2000 because cash used in investing and financing activities exceeded cash provided by operating activities. Net cash provided by operating activities increased by $9.2 million to $65.9 million for the year ended December 31, 2001 compared to $56.7 million for the year ended December 31, 2000. This increase was primarily due to earnings attributable to OP Units before depreciation and amortization and gain from property dispositions, net increasing by $4.0 million and other assets decreasing by $2.6 million, offset by accounts payable and other liabilities increasing by $2.5 million. The Company's net cash flows provided by operating activities may be adversely impacted by, among other things: (a) the market and economic conditions in the Company's current markets generally, and specifically in metropolitan areas of the Company's current markets; (b) lower occupancy and rental rates of the Properties; (c) increased operating costs, including insurance premiums, real estate taxes and utilities, that cannot be passed on to the Company's tenants; and (d) decreased sales of manufactured homes. See "Factors that May Affect Future Results." The Company's $150 million unsecured line of credit, which expires in January 2003, bears interest at the annual rate of LIBOR plus 1.0%. At December 31, 2001, the average interest rate of outstanding borrowings under the line of credit was 3.22%, $93 million was outstanding and $57 million was available to be drawn. The line of credit facility contains 18 various leverage, debt service coverage, net worth maintenance and other customary covenants all of which the Company was in compliance with at December 21, 2001. The Company's primary long-term liquidity needs are principal payments on outstanding indebtedness. At December 31, 2001, the Company's outstanding contractual obligations were as follows:

(1) The Company is the guarantor of $23.2 million in personal bank loans which is not reflected in the balance sheet, maturing in 2004, made to Sun's and the Company's directors, employees and consultants for the purpose of purchasing shares of Sun's common stock or the Company's OP Units pursuant to Sun's Stock Purchase Plan. The Company is obligated under the Guaranty only in the event that one or more of the borrowers cannot repay their loan when due. The Company anticipates meeting its long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions and Operating Partnership unit redemptions, through the issuance of debt or equity securities, including equity units in the Operating Partnership, or from selective asset sales. Along with OrigenLLC's other investors, the Company may be requested to make additional capital contributions to maintain its respective ownership interest. The Company has maintained investment grade ratings with Fitch ICBA, Moody's Investor Service and Standard & Poor's, which facilitates access to the senior unsecured debt market. Since 1993, the Company has raised, in the aggregate, $263.4 million from the sale of Sun's shares of common stock, $84.2 million from the issuance of OP units in the Company and $430 million from secured and unsecured debt securities. In addition, at December 31, 2001, ninety-six of the Properties were unencumbered by debt, therefore, providing substantial financial flexibility. The ability of the Company to finance its long-term liquidity requirements in such manner will be affected by numerous economic factors affecting the manufactured housing community industry at the time, including the availability and cost of mortgage debt, the financial condition of the Company, the operating history of the Properties, the state of the debt and equity markets, and the general national, regional and local economic conditions. See "Factors that May Affect Future Results". If the Company is unable to obtain additional equity or debt financing on acceptable terms, the Company's business, results of operations and financial condition will be harmed. The terms of the $35.8 million Preferred OP units were renegotiated effective December 31, 2001. The conversion price increased from $27 per unit to at least $68 per unit and the coupon rate was decreased from nine percent (9%) to seven percent (7%) for the first two years followed by a variable rate ranging from 6.5% to 8.5% with mandatory redemption on January 2, 2014. 19 At December 31, 2001, the Company's debt to total market capitalization approximated 36.7 percent (assuming conversion of all Common OP Units to shares of common stock). The debt has a weighted average maturity of approximately 5.3 years and a weighted average interest rate of 6.6 percent. Capital expenditures for the years ended December 31, 2001 and 2000 included recurring capital expenditures of $4.8 million and $4.6 million, respectively. Net cash used in investing activities decreased by $34.2 million to $35.1 million from $69.3 million due to a $84.5 million increase in repayments from financing notes receivable, net offset by a $20.7 million increase in investment in and advances to affiliates, a $17.1 million decrease in proceeds related to property dispositions and a $12.5 million increase in rental property acquisition activities. Net cash used in financing activities increased by $64.4 million to $44.7 million for the year ended December 31, 2001. This increase was primarily because of a $74.5 million increase in repayments on notes payable, $100 million reduced proceeds from notes payable and $7.1 million in capital withdrawals and distributions offset by a $116.0 million increase in borrowings on the line of credit. RATIO OF EARNINGS TO FIXED CHARGES The Company's ratio of earnings to fixed charges for the years ended December 31, 2001, 2000, and 1999 was 1.83:1, 1.87:1, and 1.95:1 respectively. INDUSTRY CONDITIONS According to the Manufactured Housing Institute, the shipments of new manufactured homes has declined from 373,000 in 1998 to 193,000 in 2001. This decline was caused primarily by the tightening of credit standards in response to an increasing number of repossessions. Beginning in 1999, repossessions increased as unqualified borrowers defaulted on their manufactured home loans. Financing standards tightened significantly reducing demand at a time of excessive inventories. Exacerbating this excess supply was the competition of aggressively priced repossessed homes which further slowed new home sales. The Company expects these conditions to work themselves back into equilibrium. New home shipments increased in October 2001 as compared to October 2000, representing the first such year to year monthly increase since March 1999. Fourth quarter 2001 shipments exceeded fourth quarter 2000 shipments and the trend has continued through January 2002 with no sign of inventory accumulation. Repossessions are expected to remain at high levels throughout most, if not all, of 2002. These conditions adversely impact the sale of new homes by SHS, which harms the Company's profitability. Furthermore, these conditions cause a slow-down in the leasing of the Company's communities, especially newly developed expansions and new communities, which in turn slows the development of new sites causing the Company to hold non-income producing land inventory longer. 20 INFLATION Most of the leases allow for periodic rent increases which provide the Company with the opportunity to achieve increases in rental income as each lease expires. Such types of leases generally minimize the risk of inflation to the Company. SAFE HARBOR STATEMENT This Form 10-K contains various "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "may", "will", "expect", "believe", "anticipate", "should", "estimate", and similar expressions identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors relating to the Company's operations and business environment which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Please see "Factors That May Affect Future Results" for a representative example of such uncertainties and factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. RECENT ACCOUNTING PRONOUNCEMENTS In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business (as previously defined in that Opinion). The provisions of this SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of this standard are generally to be applied prospectively. The Company does not expect a material impact from the adoption of this standard. In June 2001, the FASB approved SFAS No. 141, "Business Combinations and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires, among other things, that the purchase method of accounting for business combinations be used for all business combinations initiated after September 30, 2001. SFAS 142 addresses the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS 142 requires, among other things, that goodwill and other indefinite-lived intangible assets no longer be amortized and that such assets be tested for impairment at least annually. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company does not expect these pronouncements to have a material impact on its financial statements. 21 OTHER Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as "net income (computed in accordance with generally accepted accounting principles) excluding gains (or losses) from sales of property, plus rental property depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures." Industry analysts consider FFO to be an appropriate supplemental measure of the operating performance of an equity REIT primarily because the computation of FFO excludes historical cost depreciation as an expense and thereby facilitates the comparison of REITs which have different cost bases in their assets. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time, whereas real estate values have instead historically risen or fallen based upon market conditions. FFO does not represent cash flow from operations as defined by generally accepted accounting principles and is a supplemental measure of performance that does not replace net income as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, FFO is not intended as a measure of a REIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. The following table calculates FFO data for both basic and diluted purposes for the years ended December 31, 2001, 2000 and 1999 (in thousands):

22 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's principal market risk exposure is interest rate risk. The Company does not hedge interest rate risk using financial instruments nor is the Company subject to foreign currency risk on its long-term debt, mortgage notes and other notes receivable. The Company's exposure to market risk for changes in interest rates relates primarily to refinancing long-term fixed rate obligations, the opportunity cost of fixed rate obligations in a falling interest rate environment and its variable rate line of credit. The Company primarily enters into debt obligations to support general corporate purposes including acquisitions, capital improvements and working capital needs. The Company manages its exposure to interest rate risk on its variable rate indebtedness by borrowing on a short term basis under its line of credit until such time as it is able to retire the short term variable rate debt with a long term fixed rate debt offering on terms that are advantageous. The Company's variable rate debt is limited to its $150 million line of credit ($93.0 million outstanding as of December 31, 2001) which bears interest at LIBOR plus 1.0 percent. If LIBOR increased or decreased by 1.0 percent during 2001 and 2000, the Company believes its interest expense would have increased or decreased by approximately $0.7 million and $0.5 million based on the $69.2 million and $49.9 million average balance outstanding under the Company's line of credit for the year ended December 31, 2001 and 2000, respectively. Additionally, the Company has $49.0 million LIBOR based variable rate mortgage and other notes receivables at December 31, 2001. If LIBOR increased or decreased by 1.0 percent during 2001 and 2000, the Company believes interest income would have increased or decreased by approximately $0.8 million and $0.7 million based on the $79.5 million and $68.0 million average balance outstanding on all variable rate notes receivables for the year ended December 31, 2001 and 2000, respectively. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial statements and supplementary data are filed herewith under Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 23 PART III The General Partner is the sole general partner of the Company and, therefore, the information required by ITEMS 10, 11, 12 AND 13 will be included in the General Partner's proxy statement for its 2002 Annual Meeting of Shareholders, and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed herewith as part of this Form 10-K: (1) A list of the financial statements required to be filed as a part of this Form 10-K is shown in the "Index to the Consolidated Financial Statements and Financial Statement Schedule" filed herewith. (2) A list of the financial statement schedules required to be filed as it part of this Form 10-K is shown in the "Index to the Consolidated Financial Statements and Financial Statement Schedule" filed herewith. (3) A list of the exhibits required by Item 601 of Regulation S-K to be tiled as a part of this Form 10-K is shown on the "Exhibit Index" filed herewith. (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed during the last fiscal quarter for the year ended December 31, 2001. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 27, 2002 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP By: Sun Communities, Inc., General Partner By: __________________________________ Gary A. Shiffman, President Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

25 EXHIBIT INDEX

-------------------------------- (1) Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33-69340. (2) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated March 20, 1996. (3) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1995. (4) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated April 24, 1996. (5) Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33-80972. (6) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1994. (7) Incorporated by reference to Sun Communities, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. (8) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1996. 30 (9) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997. (10) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated April 24, 1998. (11) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. (12) Incorporated by reference to Sun Communities, Inc.'s Proxy Statement, dated April 20, 1999 (13) Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated October 14, 1999. (14) Incorporated by reference to Sun Communities, Inc.'s Registration Statement on Form S-3, Amendment No. 1, No. 333-54718. (15) Incorporated by reference to Sun Communities Operating Limited Partnership's Annual Report on Form 10-K for the year ended December 31, 2000, No. 333-2522-01. (16) Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001, No. 1-12616. (17) Filed herewith. # Management contract or compensatory plan or arrangement required to be identified by Form 10-K Item 14. 31 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGES Report of Independent Accountants............................................F-2 Financial Statements: Consolidated Balance Sheets as of December 31, 2001 and 2000..............F-3 Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999.................F-4 Consolidated Statements of Partners' Capital for the Years Ended December 31, 2001, 2000 and 1999...............................F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999.........................F-6 Notes to Consolidated Financial Statements.........................F-7 - F-16 Schedule III - Real Estate and Accumulated Depreciation..............F-17 - F-21 F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Sun Communities Operating Limited Partnership: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, partners' capital and of cash flows present fairly, in all material respects, the financial position of Sun Communities Operating Limited Partnership and subsidiaries (the "Company") at December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule referred to in the index appearing under Item 14(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Detroit, Michigan February 19, 2002 F-2 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 AND 2000 (AMOUNTS IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial statements. F-3 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)

The accompanying notes are an integral part of the consolidated financial statements. F-4 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP STATEMENT OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS EXCEPT FOR PER UNIT DATA)

The accompanying notes are an integral part of the consolidated financial statements. F-5 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (AMOUNTS IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial statements. F-6 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 AND 1999 1. BASIS OF PRESENTATION: Sun Communities Operating Limited Partnership (the "Company") owns and operates or finances manufactured housing community properties. Sun Communities, Inc. ("Sun"), a self-administered and self-managed Real Estate Investment Trust with no independent operations of its own, is the sole general partner of the Company. As general partner, Sun has unilateral control and complete responsibility for management of the Company. Pursuant to the terms of the Company's partnership agreement, the Company is required to reimburse Sun for the net expenses incurred by Sun. The amounts reimbursed by the Company are reflected in the statement of income as general and administrative expenses. The balance sheet of Sun as of December 31, 2001 is identical to the accompanying Company balance sheet, except as follows:

F-7 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. BUSINESS: The Company owns and operates or finances 116 manufactured housing communities located in 15 states concentrated principally in the Midwest and Southeast comprising approximately 40,544 developed sites and approximately 4,385 sites suitable for development. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. b. PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include the accounts of the Company and all its wholly and 99 percent owned subsidiary partnerships and limited liability companies. All significant inter-entity balances and transactions have been eliminated in consolidation. The limited partnership interests are adjusted to their relative ownership interest by reclassification to/from general partnership interests. Minority interests represented by Sun's one percent indirect interest in the aforementioned subsidiaries are not separately recognized in the Company's financial statements, but rather are included in general and administrative expenses since the amounts involved are immaterial. c. RENTAL PROPERTY: Rental property is recorded at cost, less accumulated depreciation. Management evaluates the recoverability of its investment in rental property whenever events or changes in circumstances such as recent operating results, expected net operating cash flow and plans for future operations indicate that full asset recoverability is questionable. Recoverability of these assets is measured by a comparison of the carrying amount of such assets to the future undiscounted net cash flows expected to be generated by the assets. If such assets were deemed to be impaired as a result of this measurement, the impairment that would be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset as determined on a discounted cash flow basis. In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The provisions of this SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company does not expect a material impact from the adoption of this standard. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are 30 years for land improvements and buildings and 7 to 15 years for furniture, fixtures and equipment. Expenditures for ordinary maintenance and repairs are charged to operations as incurred and significant renovations and improvements, which improve and/or extend the useful life of the asset, are capitalized and depreciated over their estimated useful lives. Construction costs related to new community or expansion sites development including interest are capitalized until the property is substantially complete. F-8 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): d. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments with an initial maturity of three months or less to be cash and cash equivalents. e. NOTES RECEIVABLE: The Company evaluates the recoverability of its notes receivable whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. The loan is then measured based on the present value of the expected future cash flow discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent. f. INVESTMENTS IN AND ADVANCES TO AFFILIATES: Sun Home Services ("SHS") provides home sales and other services to current and prospective tenants. Through the Operating Partnership, the Company owns 100 percent of the outstanding preferred stock of SHS, is entitled to ninety-five percent (95%) of the operating cash flow, and accounts for its investment utilizing the equity method of accounting. The common stock is owned by one officer of the Company and the estate of a former officer of the Company who collectively are entitled to receive five percent (5%) of the operating cash flow. Bingham Financial Services Corporation ("BFSC") was formed by Sun in 1997 in response to demand for financing from purchasers and residents in the Company's communities. As BFSC's business developed, its objectives and opportunities expanded and the Company concluded that its business could be operated and grown more effectively as a separate public entity. BFSC's initial public offering occurred in November 1997. The Company has continued to provide financial support to BFSC. In December 2001, the Company, through SHS, made a $15 million equity investment in a newly formed company Origen Financial, L.L.C., that will merge with Origen Financial, Inc., subsidiary of BFSC, as part of the recapitalization of BFSC. As a result of this equity investment, the Company will own approximately a thirty percent (30%) interest in the surviving company ("Origen"), which company will hold all of the operating assets of BFSC and its subsidiaries. BFSC owns approximately a twenty percent (20%) interest in Origen and the Company (together with the other investors in Origen) has the right to purchase its pro-rata share of BFSC's interest in Origen at fair value as determined by an independent nationally recognized investment banking firm's application of generally accepted valuation methodologies at any time between the third and fifth anniversaries of the closing date of the Company's investment in Origen. Coincident with the recapitalization of BFSC, Gary A. Shiffman, Sun's Chairman, Chief Executive Officer and President, invested on behalf of himself and his family $5 million in Origen and holds approximately a ten percent (10%) interest in Origen. An unrelated third party also invested $20 million all on the same terms as the Company and Mr. Shiffman. Mr. Shiffman and Arthur A. Weiss, the Company's legal counsel, are directors of BFSC and Sun and Mr. Shiffman currently serves as Chairman of both companies. F-9 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): f. INVESTMENTS IN AND ADVANCES TO AFFILIATES (CONTINUED): Additionally, the Company (together with the unrelated third party) provides financing to Origen and is subject to the risks of being a lender. These risks include the risks relating to borrower delinquency and default and the adequacy of the collateral for such loans. This financing consists of a $21.25 million standby line of credit of which the Company's commitment is $12.5 million ($11.2 million was outstanding as of December 31, 2001), bearing interest at a per annum rate equal to 700 basis points over LIBOR, with a minimum interest rate of 11 percent and a maximum interest rate of 15 percent. This line of credit is collateralized by a security interest in Origen's assets, which is subordinate in all respects to all institutional indebtedness of Origen, and a guaranty and pledge of assets by Bingham. Under the participation agreement, each lender participates pari passu in all proceeds from the line of credit, provided that, if additional funds in excess of $17.5 million are loaned to Origen and both lenders do not participate therein, such additional amounts funded will be subordinate in all respects to all indebtedness of Origen in which both lenders have participated. Summarized financial information of the Company's equity investments presented before elimination of intercompany transactions follows:

(1) Includes Origen's financial data for the period from December 19, 2001 to December 31, 2001. g. REVENUE RECOGNITION: Rental income attributable to leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants generally range from month-to-month to one year and are renewable by mutual agreement of the Company and resident or, in some cases, as provided by state statute. F-10 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): h. FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of financial instruments which includes cash and cash investments, mortgages and notes receivable and debt approximates fair value. Fair values have been determined through information obtained from market sources and management estimates. i. TAXES: As a partnership, the Company does not pay federal or state income taxes. j. RECLASSIFICATIONS: Certain 2000 and 1999 amounts have been reclassified to conform with the 2000 financial statement presentation. Such reclassifications had no effect on operations as originally presented. RENTAL PROPERTY (AMOUNTS IN THOUSANDS):

Land improvements and buildings consist primarily of infrastructure, roads, landscaping, and clubhouses, maintenance buildings and amenities. Included in rental property at December 31, 2001 and 2000 are net carrying amounts related to capitalized leases of $28.6 million and $39.7 million, respectively. During 2001, the Company acquired five communities comprising 2,332 developed sites for $55.8 million and two development communities comprising 1,273 sites for $4.3 million. During 2000, the Company acquired three manufactured housing communities comprising 659 developed sites for $21.1 million. These transactions have been accounted for as purchases, and the statements of income include the operations of the acquired communities from the dates of their respective acquisitions. As of December 31, 2001, in conjunction with a 1993 acquisition, the Company is obligated to issue $8.2 million of OP Units through 2009 based on the per unit price of the OP Units on the issuance date. This obligation was accounted for as part of the purchase price of the original acquisition. F-11 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 4. NOTES AND OTHER RECEIVABLES (AMOUNTS IN THOUSANDS):

At December 31, 2001, the maturities of mortgage and other notes receivables are approximately as follows: 2002 - $40.7 million; 2003 - $13.1 million; 2004 - $3.5 million; 2005 and after - $20.1 million. 5. DEBT (AMOUNTS IN THOUSANDS):

F-12 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 5. DEBT (AMOUNTS IN THOUSANDS) (CONTINUED): The Company has a $150 million unsecured line of credit at LIBOR plus 1.0 percent maturing in January, 2003, of which $57 million was available at December 31, 2001. The average interest rate of outstanding borrowings at December 31, 2001 was 3.22 percent. The term loan is collateralized by seven communities comprising approximately 3,400 sites. The capitalized lease obligations and mortgage notes are collateralized by eleven communities comprising approximately 4,440 sites. At the lease expiration date of the capitalized leases, the Company has the right and intends to purchase the properties for the amount of the then outstanding lease obligation. Annual payments under capitalized lease obligations are $2.1 million in 2002 and $0.8 million in 2003. At December 31, 2001, the maturities of debt, excluding the line of credit, during the next five years are approximately as follows: 2002 - $17.6 million; 2003 - $86.7 million; 2004 - $12.2 million; 2005 - $1.6 million; and 2006 - $7.9 million. The Company is the guarantor of $23.2 million in personal bank loans maturing in 2004, made to Sun's directors, employees and consultants to purchase common stock of the general partner and OP Units pursuant to Sun's Stock Purchase Plan. No compensation expense was recognized in respect to the guarantees as the fair value therefore was not material nor have there been any defaults. 6. SUN'S STOCK OPTIONS: Data pertaining to Sun's stock option plans are as follows:

(a) There are 365,675 and 279,409 options outstanding and exercisable, respectively, which range from $20.00 - $27.99 with a weighted average life of 5.1 years related to the outstanding options. The weighted average exercise price for these outstanding and exercisable options is $24.33 and $23.50, respectively. There are 725,119 and 543,868 options outstanding and exercisable, respectively, which range from $28.00 - $35.39 with a weighted average life of 4.3 years related to the outstanding options. The weighted average exercise price for these outstanding and exercisable options is $30.89 and $30.24, respectively. F-13 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 6. SUN'S STOCK OPTIONS (CONTINUED): Sun's stock option plans provide for up to 2.2 million shares of common stock that may be granted to directors, executive officers and other key employees of Sun or the Company. At December 31, 2001, 369,764 shares of common stock were available for the granting of options. Options are granted at fair market value and generally vest over a two-year period and may be exercised for 10 years after date of grant. In addition, the Company established a Long-Term Incentive Plan in 1997 for certain employees granting 168,000 options which become exercisable in equal installments in 2002-2004. The Company has opted to measure compensation cost utilizing the intrinsic value method. The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions for options granted in:

If compensation cost for stock option grants had been recognized based on the fair value at the grant date, this would have resulted in net income of $38.7 million, $38.2 million and $33.4 million and net income per OP Unit of $1.95, $1.91 and $1.68 in 2001, 2000 and 1999, respectively. 7. PARTNERS' CAPITAL: There are approximately $8.2 million of $100 mandatory redemption price Series B Units outstanding at December 31, 2001 with mandatory dividends at rates ranging from 6.85 percent to 9.19 percent and maturing between 2003 and 2012. The Company issued 2 million Series A Units at $25 per unit in September 1999 bearing an annual coupon rate of 8.875 percent. The Series A Units may be called by the Company at par on or after September 29, 2004, have no stated maturity or mandatory redemption and are convertible into Sun's preferred stock under certain circumstances. The terms of the POP Units issued at $27 per unit were renegotiated effective December 31, 2001. The conversion price increased to at least $68 per unit and the annual coupon rate was decreased from 9.0 percent to 7.0 percent for the first two years followed by a variable rate ranging from 6.5 percent to 8.5 percent with mandatory redemption on January 2, 2014. F-14 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 7. PARTNERS' CAPITAL (CONTINUED): In March 2001 and December 1999, the Company's general partner issued additional restricted stock awards of 99,422 at $33.00 per unit and 24,750 at $30.00 per unit, respectively, to officers and certain employees which are being amortized over their five to ten year vesting period. Compensation cost recognized in income for all restricted stock awards was $0.9 million, $0.7 million and $0.6 million in 2001, 2000 and 1999, respectively. 8. OTHER INCOME (AMOUNTS IN THOUSANDS): The components of other income are as follows for the years ended December 31, 2000, 1999 and 1998:

9. EARNINGS PER OP UNIT (AMOUNTS IN THOUSANDS):

Diluted earnings per OP Unit reflect the potential dilution that would occur if securities were exercised or converted into OP Units. F-15 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED DECEMBER 31, 2001, 2000 AND 1999 10. QUARTERLY FINANCIAL DATA (UNAUDITED): The following unaudited quarterly amounts are in thousands, except for per unit amounts:

(a) Operating income is defined as total revenues less property operating and maintenance expense, real estate tax expense, property management, and general and administrative expenses. Operating income is a measure of the performance of the operations of the properties before the effects of depreciation, amortization and interest expense. Operating income is not necessarily an indication of the performance of the Company or a measure of liquidity. (b) Earnings attributable to OP Units includes net gains on the disposition of properties of $3,517 in the first quarter of 2001, $758 in the second quarter of 2001, $4,619 in the third quarter of 2000 and $182 in the fourth quarter of 2000. F-16 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III DECEMBER 31, 2001 (AMOUNT IN THOUSANDS)

F-17 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III DECEMBER 31, 2001 (AMOUNT IN THOUSANDS)

F-18 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III DECEMBER 31, 2001 (AMOUNT IN THOUSANDS)

F-19 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED SCHEDULE III DECEMBER 31, 2001 (AMOUNT IN THOUSANDS)

(1) These communities collaterize $42.8 million of secured debt. (2) These communities are financed by $26 million of collaterized lease obligations. (3) These communities collaterize $4.7 million of secured debt. (4) These communities collaterize $12.4 million of secured debt. (5) Includes $3.6 million of land in property under development in Footnote 2 "Rental Property" to the Company's Consolidated Financial Statements included elsewhere herein. (6) Includes $12.2 million of property under development in Footnote 2 "Rental Property" to the Company's Consolidated Financial Statements included elsewhere herein. (7) The initial cost for this property is included in the initial cost reported for Continental Estates. (8) Mortgage paid in full in March 2002. F-20 SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION, CONTINUED DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS) The change in investment in real estate for the years ended December 31, 2001, 2000 and 1999 is as follows:

The change in accumulated depreciation for the years ended December 31, 2001, 2000 and 1999 is as follows:

F-21

SUN COMMUNITIES OPERATING LIMITED PARTNERSHIP 10-K