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 2004 RESULTS
SOUTHFIELD, MI, OCTOBER 27, 2004 - 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, 2004, total revenues increased to
$48.9 million, compared with $47.7 million in the third quarter of 2003.
Funds from operations (FFO) (1) decreased from $17.3 million in the third
quarter 2003 to $11.6 million in the third quarter 2004. On a diluted per
share/OP unit basis, FFO was $0.56 for the third quarter of 2004 as
compared with $0.82 for the three months ended September 30, 2003. Net
income for the third quarter of 2004 was $0.6 million or $0.03 per diluted
common share, compared with net income of $6.4 million, or $0.34 per
diluted common share for the same period in 2003. The third quarter 2004
results reflect a charge of $0.6 million for Florida storm damage and $0.2
million for severance. The Company owns 20 communities in Florida
comprising 9,680 sites. Four hurricanes have ravaged Florida during the
current season. Damages relate primarily to cleanup of debris with minimal
structural damage to the Company's communities or the homes of our
residents. No injuries were sustained by employees or residents who have
performed heroically through this difficult period.
For 108 communities owned throughout both years, total revenues increased
3.5 percent for the nine months ended September 30, 2004 and expenses
increased 3.7 percent, resulting in an increase in net operating income(2)
of 3.4 percent. Same property occupancy in the manufactured housing sites
decreased from 89.1 percent at June 30, 2004 to 88.4 percent at September
30, 2004.
October 27, 2004
Page 2
As previously announced, the Company acquired four manufactured housing
communities comprising 1,542 developed sites with 89 percent occupancy. The
aggregate price was $54.6 million at a 7.5 percent capitalization rate and
included the assumption of approximately $16 million in debt. Three of the
communities are in northeast Atlanta and closed in October and the fourth
is in Ypsilanti, Michigan and closed in the third quarter. An additional
$100 million of acquisitions are scheduled to close in the fourth quarter.
Also, the Company's recently announced $90 million unsecured line of credit
was subsequently expanded by $25 million to $115 million. The line
borrowings will be at LIBOR + 1.75 percent.
"Year-to-date NOI growth of 3.4 percent for our core portfolio of 108
communities has remained solid. Third quarter expenses increased at a 6.3
percent rate driven primarily by real estate taxes and after two quarters
of solid occupancy performance, we experienced some reductions in occupancy
at eight communities representing 2/3 of the loss of 268 sites. We remain
optimistic that industry consensus and data continue to indicate general
trends of both improving conditions and reduced levels of repossessions,"
said Gary A. Shiffman, Chairman and Chief Executive Officer.
"As previously discussed, management has been focused on completing each of
the strategic steps related to the refinancing of the Company's debt
earlier this year. Our cash on hand averaged nearly $90 million during the
third quarter, which while dilutive to operating results, had been
anticipated as part of our longer term strategy. In October, we purchased
three communities for $43 million and anticipate the closing of several
more acquisitions in the fourth quarter, which will require approximately
$45 million in cash. Of the FNMA financing, $60 million remains to be drawn
by December, which we may use to retire our $50 million, 8-7/8 percent
preferred issue and/or acquire additional shares of our stock in the
market. When these actions are complete, we should have a minimal cash
balance and a fully available $115 million line of credit," he added.
The Company expects to provide earnings guidance in mid-November at which
time significant pending acquisitions are expected to be closed and the
2005 budgeting process will be complete.
A conference call to discuss third quarter operating results will be held
on October 27, 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
November 10, 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 119388. 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 136 communities
mainly in the Midwest and Southeast United States. The Company's properties
are comprised of over 46,800 developed sites and approximately 7,300
additional sites available for development.
October 27, 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 generally accepted accounting principles), excluding gains
(or losses) from sales of depreciable operating property, plus real
estate-related depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial
measure that management believes is a useful supplemental measure of the
Company's operating performance. Management generally considers FFO to be a
useful measure for reviewing comparative operating and financial
performance because, by excluding gains and losses related to sales of
previously depreciated operating real estate assets and excluding real
estate asset depreciation and amortization (which can vary among owners of
identical assets in similar condition based on historical cost accounting
and useful life estimates), FFO provides a performance measure that, when
compared year over year, reflects the impact to operations from trends in
occupancy rates, rental rates and operating costs, providing perspective
not readily apparent from net income. Management believes that the use of
FFO has been beneficial in improving the understanding of operating results
of REITs among the investing public and making comparisons of REIT
operating results more meaningful.
Because FFO excludes significant economic components of net income
including depreciation and amortization, FFO should be used as an adjunct
to net income and not as an alternative to net income. The principal
limitation of FFO is that it 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. FFO only
provides investors with an additional performance measure that, when
combined with measures computed in accordance with GAAP such as net income,
cash flow from operating activities, investing activities and financing
activities, provide investors with an indication of the Company's ability
to service debt and to fund acquisitions and other expenditures. Other
REITS may use different methods for calculating FFO and, accordingly, the
Company's FFO may not be comparable to other REITs.
(2) Investors in and analysts following the real estate industry utilize net
operating income ("NOI") as a supplemental performance measure. NOI is
derived from revenues (determined in accordance with GAAP) minus property
operating expenses and real estate taxes (determined in accordance with
GAAP). NOI does not represent cash generated from operating activities in
accordance with GAAP and should not be considered to be an alternative to
net income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to be an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity; nor is it indicative of funds available for the
Company's cash needs, including its ability to make cash distributions. The
Company believes that net income is the most directly comparable GAAP
measurement to net operating income. Because of the inclusion of items such
as interest, depreciation and amortization, the use of net income as a
performance measure is limited as these items may not accurately reflect
the actual change in market value of a property, in the case of
depreciation and in the case of interest, may not necessarily be linked to
the operating performance of a real estate asset, as it is often incurred
at a parent company level and not at a property level. The Company believes
that net operating income is helpful to investors as a measure of operating
performance because it is an indicator of the return on property
investment, and provides a method of comparing property performance over
time. The Company uses NOI as a key management tool when evaluating
performance and growth of particular properties and/or groups of
properties. The principal limitation of NOI is that it excludes
depreciation, amortization and non-property specific expenses such as
general and administrative expenses, all of which are significant costs,
and therefore, NOI is a measure of the operating performance of the
properties of the Company rather than of the Company overall.
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 SEPTEMBER 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ------------------------------
2004 2003 2004 2003
------------ --------- --------- ---------
REVENUES
Income from rental property $ 40,960 $ 39,090 $ 124,329 $ 119,465
Revenue from home sales 4,837 4,357 14,893 14,072
Ancillary revenues, net 394 341 1,510 1,217
Interest and other income 2,686 3,909 6,793 9,157
--------- --------- --------- ---------
Total revenues 48,877 47,697 147,525 143,911
--------- --------- --------- ---------
COSTS AND EXPENSES
Property operating and maintenance 10,738 10,091 31,034 29,640
Cost of home sales 3,812 3,282 12,074 9,468
Real estate taxes 3,520 2,937 10,039 8,805
General and administrative - rental property 3,173 2,581 8,619 7,458
General and administrative - home sales 1,413 1,353 4,474 4,364
Depreciation and amortization 10,987 11,036 33,076 32,486
Interest 11,812 7,377 31,177 26,684
Extinguishment of debt -- -- 51,643 --
Deferred financing costs related to extinquished debt -- -- 5,557 --
Florida storm damage 600 -- 600 --
--------- --------- --------- ---------
Total expenses 46,055 38,657 188,293 118,905
--------- --------- --------- ---------
Income (loss) from continuing operations before
minority interests 2,822 9,040 (40,768) 25,006
Less income (loss) allocated to minority interests:
Preferred OP Units 2,192 2,136 6,555 6,397
Common OP Units 76 816 (5,546) 2,284
--------- --------- --------- ---------
Income (loss) from continuing operations 554 6,088 (41,777) 16,325
Income from discontinued operations -- 333 -- 978
--------- --------- --------- ---------
Net income (loss) $ 554 $ 6,421 $ (41,777) $ 17,303
========= ========= ========= =========
Weighted average common shares outstanding:
Basic 18,100 18,504 18,480 18,065
========= ========= ========= =========
Diluted 18,246 18,683 18,480 18,220
========= ========= ========= =========
Basic earnings (loss) per share:
Continuing operations $ 0.03 $ 0.33 $ (2.26) $ 0.91
Discontinued operations -- 0.02 -- 0.05
--------- --------- --------- ---------
Net income (loss) $ 0.03 $ 0.35 $ (2.26) $ 0.96
========= ========= ========= =========
Diluted earnings (loss) per share:
Continuing operations $ 0.03 $ 0.32 $ (2.26) $ 0.90
Discontinued operations -- 0.02 -- 0.05
--------- --------- --------- ---------
Net income (loss) $ 0.03 $ 0.34 $ (2.26) $ 0.95
========= ========= ========= =========
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net income (loss) $ 554 $ 6,421 $ (41,777) $ 17,303
Adjustments:
Depreciation and amortization 11,195 10,708 33,109 31,817
Valuation adjustment(3) (180) (1,949) 302 (1,274)
Allocation of SunChamp losses(4) -- 1,221 300 3,158
Income (loss) allocated to minority interest 76 860 (5,546) 2,420
--------- --------- --------- ---------
Funds from operations $ 11,645 $ 17,261 $ (13,612) $ 53,424
========= ========= ========= =========
FFO - Continuing Operations $ 11,645 $ 16,775 ($ 13,612) $ 51,886
========= ========= ========= =========
FFO - Discontinued Operations $ -- $ 486 $ 0 $ 1,538
========= ========= ========= =========
Weighted average common shares/OP Units outstanding:
Basic 20,574 20,989 20,954 20,586
========= ========= ========= =========
Diluted 20,720 21,168 20,954 20,741
========= ========= ========= =========
Continuing Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.57 $ 0.80 $ (0.65) $ 2.52
========= ========= ========= =========
FFO per weighted average Common Share/OP Unit - Diluted $ 0.56 $ 0.79 $ (0.65) $ 2.50
========= ========= ========= =========
Discontinued Operations:
FFO per weighted average Common Share/OP Unit - Basic $ -- $ 0.02 $ -- $ 0.08
========= ========= ========= =========
FFO per weighted average Common Share/OP Unit - Diluted $ -- $ 0.03 $ -- $ 0.08
========= ========= ========= =========
Total Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.57 $ 0.82 $ (0.65) $ 2.60
========= ========= ========= =========
FFO per weighted average Common Share/OP Unit - Diluted $ 0.56 $ 0.82 $ (0.65) $ 2.58
========= ========= ========= =========
(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 imperfection related to hedging
correlation in these swaps is reflected currently in cash as interest, the
valuation adjustments reflect volatility that would distort the comparative
measurement of FFO and on a net basis approximate zero. Accordingly, 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. A situation such as
this is not contemplated in the NAREIT definition of FFO due to the unique
circumstances of the transaction. Although not comparable to the precise
NAREIT definition, the Company believes the inclusion of this item in its
calculation of FFO to be appropriate as noted above.
SUN COMMUNITIES, INC.
SELECTED BALANCE SHEET DATA
(AMOUNTS IN THOUSANDS) (UNAUDITED)
SEPTEMBER 30, 2004 DECEMBER 31, 2003
------------------ -----------------
Investment in rental property before accumulated depreciation $ 1,326,585 $ 1,220,405
Total assets $ 1,331,358 $ 1,221,574
Total debt $ 999,793 $ 773,328
Total minority interests and stockholders' equity $ 301,550 $ 423,413
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 2004 AND 2003
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income (loss) $ 554 $ 6,421 $(41,777) $ 17,303
Unrealized income (loss) on interest rate swaps (1,615) 2,033 (241) (347)
-------- -------- -------- --------
Comprehensive income (loss) $ (1,061) $ 8,454 $(42,018) $ 16,956
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