EXHIBIT 99.1
FOR FURTHER INFORMATION:
AT THE COMPANY:
Jeffrey P. Jorissen
Chief Financial Officer
(248) 208-2500
FOR IMMEDIATE RELEASE
SUN COMMUNITIES PROVIDES GUIDANCE THROUGH 2009
SOUTHFIELD, MI, NOVEMBER 30, 2004 -- SUN COMMUNITIES, INC. (NYSE:
SUI), a real estate investment trust (REIT) that owns and operates
manufactured housing communities, is today providing financial
guidance through 2009. The Company expects that Funds From Operations
(FFO)(1) per share will grow at a compounded annual growth rate in
the range of 8% to 10% from the 2004 anticipated baseline results of
$2.60 to $2.70 per share of FFO, before extraordinary
recapitalization costs discussed below.
The Company expects Net Asset Value per share will grow at a
compounded annual growth rate of 9% to 11%. This is based on a
capitalization rate of 7.5% applied to the net operating income of
the Company's portfolio.
The Company expects Earnings Per Share to be affected by increased
depreciation in an amount that will largely offset improved operating
results over the term of the guidance.
2004 HIGHLIGHTS:
The most significant financial event of 2004 was the restructuring of
the Company's capital and operating debt. The Company completed $734
million of secured debt financings with an average term approximating
10 years and a weighted average interest rate of approximately 5%.
The Company also signed a new $115 million revolving line of credit
at LIBOR + 1.75%. The Company used approximately $440 million of
proceeds from the secured debt financings to retire existing debt.
The Company also incurred extraordinary recapitalization costs of
approximately $57 million in these transactions. Of the remaining
$237 million, the Company used $100 million to acquire communities
and $37 million for repurchases of the Company's stock. As previously
announced, the Company expects to use the remaining proceeds to
finance some combination of additional property purchases, additional
stock repurchases, and the retirement of perpetual preferred
operating partnership units. The Company has not determined the
timing and specific allocation of the remaining proceeds which could
affect the short-term performance of the Company.
November 30, 2004
Page 2
Other significant factors affecting operating results in 2004 have been the
negative arbitrage on the proceeds of the debt restructuring pending investment,
reduced levels of capitalized interest related to development, and lower than
anticipated results from equity in income of affiliate and leasing performance.
FFO has also been adversely impacted by reduced benefits relating to the
allocation of SunChamp losses.
ASSUMPTIONS:
The Company's guidance of future financial performance is the result of
management's detailed analysis of its properties and business, from the property
level to the corporate level, and is based on several assumptions of future
conditions, all of which management believes are reasonable and prudent under
current circumstances. Some of the material assumptions used by management in
this effort are set forth below:
o INDUSTRY CONDITIONS:
The Company's guidance is based on its expectation of a gradual
recovery in new home sales beginning in 2005, from the depressed
industry sales rates over the last few years. The sale of manufactured
homes is in its sixth year of decline, with an aggregate loss of annual
new home shipments from peak to trough of approximately 250,000 units,
almost a 70% decline from the peak. The result of this condition is a
substantial reduction of the number of new homes sold into our
communities, slowing the Company's leasing activities. One of the major
contributors to the decline in new home sales has been the all-time
high of annual repossessions of homes by lenders over the past several
years, which the Company expects to return to more normal levels in
2005.
o PORTFOLIO OPERATIONS:
The Company's guidance is based on its expectation that occupancy in
the current portfolio of manufactured housing communities will increase
from approximately 84% at the end of 2004 to 91% at the end of 2009.
This reflects the construction of approximately 630 sites during the
period but no new community development. The occupancy improvement is
based on leasing 450 net sites in 2005, with approximate ratable annual
increases to 800 in 2009.
o CORPORATE INFRASTRUCTURE:
During 2004, the Company invested significant resources on completing
the implementation of a new management information and accounting
system. The Company expects to see increased staff efficiency resulting
from these investments, and does not foresee any significant increase
in staff levels or the need for any significant additional investment
in corporate infrastructure over the guidance period.
o SARBANES-OXLEY ACT:
The Company expects to expend approximately $500,000 per year on
compliance with the Sarbanes-Oxley Act during the period 2005 to 2009.
November 30, 2004
Page 3
o HOME ACQUISITIONS:
The Company's guidance is also based on its expectation that it will
acquire value-priced homes for rental and resale over the guidance
period. The Company intends to continue to acquire pre-owned homes in
its communities from finance companies as appropriate opportunities
arise. The Company expects to be able to purchase these homes, which
are usually only a few years old, for approximately 50% of their new
cost. The guidance is based upon depreciable lives of ten years for the
homes with the expensing of all refurbishments during the rental period
and the inclusion of the depreciation in FFO. Profit on the sale of
homes will be excluded from FFO.
o RENT INCREASES AND RECURRING CAPITAL IMPROVEMENTS:
The Company's guidance is based on its expectation that annual rental
increases will exceed increases in operating expenses by approximately
1% per year. The Company's guidance is based on its expectation that
recurring capital improvements for 2005 will be $150 per site and
increase by $5 per site per year thereafter.
o COMMUNITY ACQUISITION ACTIVITIES:
The Company's guidance is based on the expectation of completing the
acquisition of $100 million of properties in the near future. The
Company's guidance has not factored in any enhancements from additional
acquisitions over the guidance period.
OTHER FACTORS:
The Board of Directors of the Company has authorized an additional stock
repurchase of up to one million shares of the Company's common stock. Theses
shares may be acquired in the open market or in negotiated transactions. The
effect of such stock repurchases has not been considered in this guidance.
While no dividend increases have been declared at this time, the guidance
includes annual dividend increases of approximately 3% per share commencing in
2005.
GENERAL:
Sun Communities, Inc. is a real estate investment trust (REIT) that currently
owns and operates a portfolio of 136 communities comprising 46,800 developed
sites and approximately 7,300 sites suitable for development mainly in the
Midwest and Southeast United States.
(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.
November 30, 2004
Page 4
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.
FORWARD LOOKING STATEMENTS
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. The words "will," "may," "could," "expect,"
"anticipate," "believes," "intends," "should," "plans," "estimates,"
"approximate" and similar expressions identify these 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 foregoing assumptions, 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.
FOR MORE INFORMATION ABOUT SUN COMMUNITIES, INC.
VISIT OUR WEBSITE AT WWW.SUNCOMMUNITIES.COM