EXHIBIT 99.1
FOR FURTHER INFORMATION:
AT THE COMPANY:
Jeffrey P. Jorissen
Chief Financial Officer
(248) 208-2500
FOR IMMEDIATE RELEASE
SUN COMMUNITIES, INC. REPORTS THIRD QUARTER 2003 RESULTS
SOUTHFIELD, MI, OCTOBER 29, 2003 - SUN COMMUNITIES, INC. (NYSE: SUI),
a real estate investment trust (REIT) that owns and operates
manufactured housing communities, today reported third quarter
results.
For the third quarter ended September 30, 2003, total revenues
increased 6.7 percent to $43.0 million, compared with $40.3 million
in the third quarter of 2002. Funds from operations (FFO)(1) of $17.3
million increased 3.2 percent, from $16.7 million in the third
quarter 2002. On a diluted per share basis for the three months ended
September 30, 2003, FFO remained constant at $0.82 when compared to
the same period in the prior year. Net income for the third quarter
of 2003 was $6.4 million or $0.34 per diluted common share, compared
with $5.8 million, or $0.32 per diluted common share for the same
period in 2002.
Dilution attributed to the previously announced issuance of equity
reduced funds from operations by approximately $0.02 in the quarter
and nine month periods.
For 109 communities owned throughout both years, total revenues
increased 2.7 percent for the nine months ended September 30, 2003
and expenses increased 9.1 percent, which caused net operating income
(2) to increase by 0.5 percent. Same property occupancy in the
manufactured housing sites decreased from 91.0 percent at June 30,
2003 to 90.1 percent at September 30, 2003.
"Third quarter continues to reflect similar year-to-date results.
Absorption of new development sites, previously built, continues at a
slow steady pace of 31 residents per month, while the stabilized
portfolio continues to experience the run off of the last significant
wave of repossessions caused by previous lending practices," said
Gary A. Shiffman, Chairman and CEO.
October 29, 2003
Page 2
"One bright spot has been the high credit quality of new residents moving into
Sun communities. Average FICO scores for our Home Buying Made Easy program have
been 740 for new homes and 686 for used homes. Average down payments of 13
percent coupled with these high FICO scores and 15-year amortization represents
an entirely new resident credit profile which we believe will enhance
performance, " Shiffman added.
During the third quarter, the Company experienced a loss of 309 revenue
producing sites or 0.8 percent. In addition, the Company sold 148 homes and
brokered 134 sales.
The Company's line of credit to Origen Financial, LLC, was repaid shortly after
Origen closed on its $150 million equity financing on October 8, 2003. The
Company invested $50 million and agreed to sell Origen various interests in
manufactured home loans previously acquired. Origen expects to be profitable
immediately.
The Company's "Home Buying Made Easy" program announced in July, 2003, has
resulted in 80 approved applications with strong FICO scores and downpayments in
excess of 10 percent. These loans will be purchased by Origen at par with future
loans under this program being originated by Origen and the Company will be
responsible for quarterly payments to Origen of the interest differential
between the market and coupon rates. The Company will not be responsible for the
performance of the loans.
The Company expects to close on the sale of four properties in mid November
realizing proceeds of approximately $24 million. The properties are located in
Michigan and Illinois and comprise 731 sites of which 659 or 90 percent are
occupied.
The Company also affirmed its intent to maintain its investment grade rating
through prudent leverage and coverage ratios. The Company expects its Board of
Directors to continue its past policy of reviewing and increasing the annual
dividend with the April distribution, given the Company's conservative payout
ratio.
A conference call to discuss third quarter operating results will be held on
October 29, 2003 at 11:00 A.M. EST. To participate, call toll-free 877-407-8037.
Callers outside the United States or Canada can access the call at 201-689-8037.
A replay will be available following the call until November 14, 2003 and can be
accessed by dialing 877-660-6853 from the U.S. or 201-612-7415 outside the
United States or Canada. The account number for the replay is 3055 and the ID
number is 77223. The conference call will be available live on Sun Communities
website www.suncommunities.com. Replay will also be available on the website.
Sun Communities, Inc. is a real estate investment trust (REIT) that currently
owns and operates a portfolio of 130 communities comprising 44,542 developed
sites and approximately 6,950 sites suitable for development, mainly in the
Midwest and Southeast United States.
October 29, 2003
Page 3
(1) Funds From Operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as "net income (computed in accordance
with GAAP), 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 on 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 GAAP 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. A
reconciliation of net income to FFO is provided in the financial statement
section of this press release.
(2) Investors in and analysts following the real estate industry utilize net
operating income ("NOI") as a supplemental performance measure. NOI provides
a measure of rental operations and does not factor in
depreciation/amortization and non-property specific expenses such as general
and administrative expenses. NOI is defined as income from property of the
Company, minus property expenses such as real estate taxes, repairs and
maintenance, property management, utilities, insurance and other expenses.
NOI does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of cash available to
fund cash needs, including the repayment of principal on debt and payment of
dividends and distributions. NOI should not be considered as a substitute
for net income (calculated in accordance with GAAP) as a measure of results
of operations or cash flows (calculated in accordance with GAAP) as a
measure of liquidity.
FOR MORE INFORMATION ABOUT SUN COMMUNITIES, INC.,
VISIT OUR WEBSITE AT WWW.SUNCOMMUNITIES.COM
-FINANCIAL TABLES FOLLOW-
This press release 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 will be subject to
the safe harbors created thereby. For this purpose, any statements contained in
this press release that relate to prospective events or developments are deemed
to be forward-looking statements. Words such as "believes," "forecasts,"
"anticipates," "intends," "plans," "expects," "will" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to future events and
financial performance, but involve known and unknown risks and uncertainties,
both general and specific to the matters discussed in this press release. These
risks and uncertainties may cause the actual results of the Company to be
materially different from any future results expressed or implied by such
forward looking statements. Such risks and uncertainties include the national,
regional and local economic climates, the ability to maintain rental rates and
occupancy levels, competitive market forces, changes in market rates of
interest, the ability of manufactured home buyers to obtain financing, the level
of repossessions by manufactured home lenders and those referenced under the
headings entitled "Factors That May Affect Future Results" or "Risk Factors"
contained in the Company's filings with the Securities and Exchange Commission.
The forward-looking statements contained in this press release speak only as of
the date hereof and the Company expressly disclaims any obligation to provide
public updates, revisions or amendments to any forward-looking statements made
herein to reflect changes in the Company's expectations of future events.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Income from property $ 39,090 $ 37,732 $ 119,465 $ 112,974
Other income 3,920 2,595 9,897 7,194
--------- --------- --------- ---------
Total revenues 43,010 40,327 129,362 120,168
--------- --------- --------- ---------
Property operating and maintenance 10,091 8,691 29,640 24,772
Real estate taxes 2,937 2,496 8,805 7,458
Property management 683 541 2,140 1,856
General and administrative 1,898 1,130 5,318 3,600
Depreciation and amortization 11,036 9,505 32,486 27,661
Interest 7,352 8,266 26,559 23,834
--------- --------- --------- ---------
Total expenses 33,997 30,629 104,948 89,181
--------- --------- --------- ---------
Income before equity income (loss) from affiliates,
minority interests, and discontinued operations 9,013 9,698 24,414 30,987
Equity income (loss) from affiliates 27 (1,457) 592 (2,639)
--------- --------- --------- ---------
Income before minority interests and discontinued
operations 9,040 8,241 25,006 28,348
Less income allocated to minority interests:
Preferred OP Units 2,136 1,951 6,397 5,817
Common OP Units 816 801 2,284 2,902
--------- --------- --------- ---------
Income from continuing operations 6,088 5,489 16,325 19,629
Income from discontinued operations 333 313 978 1,289
--------- --------- --------- ---------
Net income $ 6,421 $ 5,802 $ 17,303 $ 20,918
========= ========= ========= =========
Weighted average common shares outstanding:
Basic 18,504 17,739 18,065 17,535
========= ========= ========= =========
Diluted 18,683 17,921 18,220 17,740
========= ========= ========= =========
Basic earnings per share:
Continuing operations $ 0.33 $ 0.31 $ 0.91 $ 1.12
Discontinued operations 0.02 0.02 0.05 0.07
--------- --------- --------- ---------
Net income $ 0.35 $ 0.33 $ 0.96 $ 1.19
========= ========= ========= =========
Diluted earnings per share:
Continuing operations $ 0.32 $ 0.30 $ 0.90 $ 1.11
Discontinued operations 0.02 0.02 0.05 0.07
--------- --------- --------- ---------
Net income $ 0.34 $ 0.32 $ 0.95 $ 1.18
========= ========= ========= =========
SUN COMMUNITIES, INC.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE/OP UNIT AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- --------
Net Income $ 6,421 $ 5,802 $ 17,303 $ 20,918
Adjustments:
Depreciation of rental property 10,708 9,589 31,817 27,913
Valuation adjustment(3) (1,949) 487 (1,274) 487
Allocation of SunChamp losses(4) 1,221 - 3,158 -
Income allocated to Minority Interest 860 846 2,420 3,055
(Gain) on sale of properties - - - (269)
---------- ---------- ---------- --------
FFO $ 17,261 $ 16,724 $ 53,424 $ 52,104
========== ========== ========== ========
FFO from Continuing Operations $ 16,775 $ 16,211 $ 51,886 $ 50,464
========== ========== ========== ========
FFO from Discontinued Operations $ 486 $ 513 $ 1,538 $ 1,640
========== ========== ========== ========
Weighted average common shares/OP Units outstanding:
Basic 20,989 20,323 20,586 20,126
========== ========== ========== ========
Diluted 21,168 20,505 20,741 20,331
========== ========== ========== ========
Continuing Operations:
FFO per weighted average Common Share/OP Unit
- Basic $ 0.80 $ 0.80 $ 2.52 $ 2.51
========== ========== ========== ========
FFO per weighted average Common Share/OP Unit
- Diluted $ 0.79 $ 0.79 $ 2.50 $ 2.48
========== ========== ========== ========
Discontinued Operations:
FFO per weighted average Common Share/OP Unit
- Basic $ 0.02 $ 0.02 $ 0.08 $ 0.08
========== ========== ========== ========
FFO per weighted average Common Share/OP Unit
- Diluted $ 0.03 $ 0.03 $ 0.08 $ 0.08
========== ========== ========== ========
Total Operations:
FFO per weighted average Common Share/OP Unit
- Basic $ 0.82 $ 0.82 $ 2.60 $ 2.59
========== ========== ========== ========
FFO per weighted average Common Share/OP Unit
- Diluted $ 0.82 $ 0.82 $ 2.58 $ 2.56
========== ========== ========== ========
(3) The Company entered into three interest rate swaps and an interest rate cap
agreement. The valuation adjustment reflects the theoretical noncash profit and
loss were those hedging transactions terminated at the balance sheet date. As
the Company has no expectation of terminating the transactions prior to
maturity, the net of these noncash valuation adjustments will be zero at the
various maturities. As any imperfections related to hedging correlation in these
swaps is reflected currently in cash as interest, the valuation adjustments are
excluded from Funds From Operations. The valuation adjustment is included in
interest expense.
(4) The Company acquired the equity interest of another investor in SunChamp in
December 2002. Consideration consisted of a long-term note payable at net book
value. Although the adjustment for the allocation of the SunChamp losses is not
reflected in the accompanying financial statements, management believes that it
is appropriate to provide for this adjustment because the Company's payment
obligations with respect to the note are subordinate in all respects to the
return of the members' equity (including the gross book value of the acquired
equity) plus a preferred return. As a result, the losses that are allocated to
the Company under generally accepted accounting principles are effectively
reallocated to the note for purposes of calculating Funds from Operations.
SUN COMMUNITIES, INC.
SELECTED BALANCE SHEET DATA
(AMOUNTS IN THOUSANDS) (UNAUDITED)
SEPTEMBER 30, 2003 DECEMBER 31, 2002
-------------------- -------------------
Investment in rental property before accumulated $1,177,938 $1,174,837
depreciation
Total assets $1,228,627 $1,163,976
Total debt $ 777,419 $ 721,351
Total minority interests and stockholders' equity $ 426,319 $ 418,044
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(AMOUNTS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net income $ 6,421 $ 5,802 $ 17,303 $ 20,918
Unrealized income (loss) on interest rate swaps 2,033 (1,344) (347) (1,344)
-------- -------- -------- --------
Comprehensive income $ 8,454 $ 4,458 $ 16,956 $ 19,574
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