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 SECOND QUARTER 2004 RESULTS
SOUTHFIELD, MI, JULY 28, 2004 - SUN COMMUNITIES, INC. (NYSE: SUI), a real estate
investment trust (REIT) that owns and operates manufactured housing communities,
today reported second quarter results.
For the second quarter ended June 30, 2004, total revenues increased 1.2 percent
to $48.9 million, compared with $48.3 million in the second quarter of 2003.
Funds from operations (FFO) (1) decreased from $17.3 million in the second
quarter 2003 to $(42.3) million in the second quarter 2004. On a diluted per
share/OP unit basis, FFO was $(2.00) for the second quarter of 2004 as compared
with $0.84 for the three months ended June 30, 2003. Net loss for the second
quarter of 2004 was $47.9 million or $(2.57) per diluted common share, compared
with net income of $4.5 million, or $0.25 per diluted common share for the same
period in 2003. These second quarter 2004 results reflect a charge of $51.6
million for prepayment costs, fees and related expenses and $5.6 million of
deferred financing costs associated with the repurchase of $345 million of
unsecured debt. Second quarter 2004 earnings, excluding these one-time costs,
were FFO of $14.9 million or $0.70 per share/OP unit and net income of $9.3
million or $0.50 cents per share.
For 108 communities owned throughout both years, total revenues increased 3.5
percent for the six months ended June 30, 2004 and expenses increased 2.4
percent, resulting in an increase in net operating income(2) of 4.0 percent.
Same property occupancy in the manufactured housing sites decreased from 89.3
percent at March 31, 2004 to 89.1 percent at June 30, 2004.
The Company had 21 fewer occupied sites in its manufactured housing portfolio
through June 30, 2004. This compares with losses of 172 and 849 sites
respectively in the years 2002 and 2003. The leasing cycle appears to have
reached bottom which is further supported by the presence of 528 repossessed
homes in our portfolio at June 30, 2004, the lowest number since September,
2001.
July 28, 2004
Page 2
The Company recently completed two financings for total proceeds of $733
million, consisting of $237 million of additional secured financing from Fannie
Mae of which $60 million remains available to draw until December, 2004 and $496
million of collateralized mortgage backed securities with Bank of America CMBS
Capital markets. Of these proceeds, $674 million has a weighted average interest
rate of 4.99 percent and a weighted average duration slightly in excess of ten
years. The completion of these financings leaves the Company well-positioned
with long term debt at historically low interest rates.
"The financings not only coincided with cyclical lows in interest rates but also
with signs of improving industry conditions," said Gary Shiffman, Chairman and
Chief Executive Officer. "The performance of the same site portfolio is near
stabilization and both Champion and Fleetwood, the two largest manufactured home
builders, reported profitable results in their MH divisions this quarter."
"Lower levels of repossessed homes, efficient manufacturers focused on producing
high quality affordable housing and the entry of additional retail financing
sources into the market are further positive indications for the industry.
Management remains focused on daily operations while seeking opportunistic
acquisitions to lever the Company's existing expertise," Shiffman added.
At June 30, 2004, the Company has cash of $106 million which will increase to
nearly $170 million when the final draw is funded under the recently completed
financing. The Company has a number of uses under consideration including:
- The Company has acquired approximately 430,000 shares under the
Company's stock buy back program.
- Property acquisitions of $164 million are in advanced stages of
negotiation at a weighted average capitalization rate of approximately
7.5 percent.
- A $50 million 8.875 percent Preferred Operating Partnership unit issue
becomes callable in the fourth quarter.
A conference call to discuss second quarter operating results will be held on
July 28, 2004, at 11:00 A.M. EST. To participate, call toll-free 877-407-9039.
Callers outside the U.S. or Canada can access the call at 201-689-8359. A replay
will be available following the call through August 11, 2004, and can be
accessed by dialing 877-660-6853 from the U.S. or 201-612-7415 outside the U.S.
or Canada. The account number for the replay is 3055 and the ID number is
108843. The conference call will be available live on Sun Communities website
www.suncommunities.com. Replay will also be available on the website.
Sun Communities currently owns and operates a portfolio of 132 communities
mainly in the Midwest and Southeast United States. The Company's properties are
comprised of over 45,300 developed sites and approximately 7,400 additional
sites available for development.
July 28, 2004
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 STATEMENTS OF INCOME
FOR THE PERIODS ENDED JUNE 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
-------------- ------------- ------------- -------------
REVENUES
Income from rental property $40,501 $39,361 $83,369 $80,374
Revenue from home sales 6,082 5,601 10,056 9,715
Ancillary revenues, net 519 435 1,116 876
Interest and other income 1,785 2,913 4,107 5,248
-------------- ------------- ------------- -------------
Total revenues 48,887 48,310 98,648 96,213
-------------- ------------- ------------- -------------
COSTS AND EXPENSES
Property operating and maintenance 10,068 9,447 20,296 19,549
Cost of home sales 5,137 3,543 8,262 6,186
Real estate taxes 3,353 2,932 6,519 5,869
General and administrative - rental property 2,640 2,504 5,446 4,877
General and administrative - home sales 1,631 1,598 3,061 3,011
Depreciation and amortization 10,806 10,838 22,089 21,450
Recapitalization costs 51,643 - 51,643 -
Deferred financing costs related to retired debt 5,557 - 5,557 -
Interest 10,100 10,484 19,365 19,307
-------------- ------------- ------------- -------------
Total expenses 100,935 41,346 142,238 80,249
-------------- ------------- ------------- -------------
Income from continuing operations before
minority interests (52,048) 6,964 (43,590) 15,964
Less income (loss) allocated to minority interests:
Preferred OP Units 2,184 2,133 4,363 4,261
Common OP Units (6,331) 605 (5,622) 1,468
-------------- ------------- ------------- -------------
Income from continuing operations (47,901) 4,226 (42,331) 10,235
Income from discontinued operations - 313 - 647
-------------- ------------- ------------- -------------
Net income $(47,901) $ 4,539 $(42,331) $10,882
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Weighted average common shares outstanding:
Basic 18,639 17,902 18,670 17,846
============== ============= ============= =============
Diluted 18,755 18,091 18,829 18,000
============== ============= ============= =============
Basic earnings per share:
Continuing operations $ (2.57) $ 0.23 $ (2.27) $ 0.57
Discontinued operations - 0.02 - 0.04
-------------- ------------- ------------- -------------
Net income $ (2.57) $ 0.25 $ (2.27) $ 0.61
============== ============= ============= =============
Diluted earnings per share:
Continuing operations $ (2.57) $ 0.23 $ (2.27) $ 0.56
Discontinued operations - 0.02 - 0.04
-------------- ------------- ------------- -------------
Net income $ (2.57) $ 0.25 $ (2.27) $ 0.60
============== ============= ============= =============
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-----------------------------------------------------------
2004 2003 2004 2003
---------- --------- ---------- -------
Net income ....................................................... $ (47,901) $ 4,539 $ (42,331) $10,882
Adjustments:
Depreciation of rental property ........................ 11,073 10,600 21,914 21,109
Valuation adjustment (3) ............................... 889 461 482 675
Allocation of SunChamp losses (4) ...................... -- 1,087 300 1,937
Income allocated to Minority Interest .................. (6,331) 650 (5,622) 1,560
---------- --------- ---------- -------
Funds from operations ............................................ $ (42,270) $ 17,337 $ (25,257) $36,163
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Weighted average common shares/OP Units outstanding:
Basic .................................................. 21,112 20,427 21,144 20,384
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Diluted ................................................ 21,228 20,616 21,303 20,538
========== ========= ========== =======
FFO per weighted average Common Share/OP Unit - Basic ............ $ (2.00) $ 0.85 $ (1.19) $ 1.77
========== ========= ========== =======
FFO per weighted average Common Share/OP Unit - Diluted .......... $ (2.00) $ 0.84 $ (1.19) $ 1.76
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(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 (based on SunChamp as a stand-alone entity) 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 from SunChamp as a stand-alone entity 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)
JUNE 30, 2004 DECEMBER 31, 2003
----------------- -----------------
Investment in rental property before accumulated depreciation... $ 1,304,822 $ 1,220,405
Total assets ................................................... $ 1,345,183 $ 1,221,574
Total debt ..................................................... $ 976,816 $ 773,328
Total minority interests and stockholders' equity .............. $ 342,160 $ 423,413
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED JUNE 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income (loss) .............................................. $(47,901) $ 4,539 $(42,331) $ 10,882
Unrealized income (loss) on interest rate swaps ................ 2,857 (1,942) 1,374 (2,381)
-------- -------- -------- --------
Comprehensive income (loss) .................................... $(45,044) $ 2,597 $(40,957) $ 8,501
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