FOR FURTHER INFORMATION:
AT THE COMPANY:
Jeffrey P. Jorissen
Chief Financial Officer
(248) 208-2500
FOR IMMEDIATE RELEASE
SUN COMMUNITIES, INC. REPORTS 2004 RESULTS
SOUTHFIELD, MI, FEBRUARY 24, 2005 - SUN COMMUNITIES, INC. (NYSE: SUI), a real
estate investment trust (REIT) that owns and operates manufactured housing
communities, today reported fourth quarter and year ended December 31, 2004
results.
Income from rental property increased 5.5 percent to $167.8 million for the year
ended December 31, 2004 from $159.1 million for the year ended December 31,
2003. Net loss for the year ended December 31, 2004 was $(40.5) million or
$(2.21) per common share compared to net income of $23.7 million or $1.29 per
diluted common share during 2003. Funds from operations (FFO)(1) was $(3.3)
million, or $(0.16) per share/OP Unit for the year ended December 31, 2004; a
decrease from FFO of $65.5 million, or $3.14 per diluted share/OP Unit for the
year ended December 31, 2003. The decreases in net income and FFO are due
largely to charges 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 in the second quarter of 2004 and
the associated recapitalization of the Company. Excluding these costs, FFO for
2004 would have been $53.9 million or $2.57 per diluted share/OP unit and net
income would have been $16.7 million or $0.91 cents per diluted common share.
During the fourth quarter ended December 31, 2004, income from rental property
increased 9.6 percent to $43.5 million, compared with $39.7 million in the
fourth quarter of 2003. Income from continuing operations for the fourth quarter
of 2004 was $1.3 million or $0.07 per diluted common share, compared with loss
of $(2.6) million, or $(0.14) per diluted common share for the same period in
2003. Funds from continuing operations decreased from $11.7 million, or $0.55
per diluted share/OP Unit in the fourth quarter 2003 to $10.3 million, or $0.50
per diluted share/OP Unit in the fourth quarter 2004.
February 24, 2005
Page 2
For 108 communities owned throughout both years, total revenues increased 4.0
percent for the year ended December 31, 2004 and expenses increased 3.4 percent,
resulting in an increase in net operating income(2) of 4.25 percent. Same
property occupancy in the manufactured housing sites decreased from 88.4 percent
at September 30, 2004 to 87.4 percent at December 31, 2004.
As previously noted the Company completed a significant restructuring of its
capital and operating debt during 2004. Secured debt financings of $734 million
with average terms approximating 10 years and weighted average interest rates of
approximately 5.0% were concluded, as well as the successful negotiation of a
new $115 million revolving line of credit at LIBOR + 1.75%. Proceeds from the
secured financings were used to retire existing debt, acquire communities, and
repurchase the Company's stock. The Company has also provided the required
notice to retire $50 million of 8.875% perpetual preferred partnership units
during the first quarter of 2005 and is authorized to repurchase up to 1 million
additional shares of its stock.
During 2004 the Company acquired nine manufactured housing communities
comprising approximately 2950 developed and 570 undeveloped sites. The aggregate
purchase price was $120.4 million and included the assumption of approximately
$34.3 million in debt. Three of the communities are in northeast Atlanta, four
are located in Michigan and the remaining properties are located in Colorado and
Texas.
"While we looked for a year of industry transition, manufactured housing
conditions never reversed, but did seem to stabilize during 2004. Home
shipments, repossessions, finance company recoveries and delinquencies ended the
year at similar or slightly improved levels over 2003. The first half of the
year reflected strongly improving occupancy statistics in the Company's
portfolio, the second half suffered from another surge of repossessed homes,
depressing overall occupancy. Performance of the same site portfolio was one
bright spot in an otherwise difficult manufactured home environment." said Gary
A. Shiffman, Chief Executive Officer.
"This past year marks many significant accomplishments that position the Company
to regain positive year over year FFO growth. Putting both the refinancing and
implementation of an entirely new software system in both accounting and
operations behind us, management is focused on its leasing and sales efforts, as
well as acquisition opportunities. While it remains early, the overall portfolio
has had a net gain of 61 sites so far this year." Shiffman added.
Through February 19, 2005, the Company has added 61 net leased sites which
represents five weeks of positive performance after losses of 42 net sites in
the first two weeks of the year. This leasing rate, if maintained, will result
in 445 net leased sites which is the plan for 2005. For the first fifty days of
the year, the Company has averaged leasing gains and losses of 7.8 and 6.6 per
day, respectively.
The Company stands by its previously issued earnings guidance.
February 24, 2005
Page 3
A conference call to discuss fourth quarter and year-end operating results will
be held on February 24, 2005, 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 March 10,
2005, 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 135176. 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.
(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. 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
February 24, 2005
Page 4
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 OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2004 AND 2003
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
REVENUES
Income from rental property $ 43,506 $ 39,650 $ 167,835 $ 159,115
Revenue from home sales 2,944 5,444 17,837 19,516
Ancillary revenues, net 225 574 1,735 1,791
Gain on sale of land, net 3,880 -- 3,880 --
Interest and other income 1,823 2,699 7,567 12,030
---------- ---------- ---------- ----------
Total revenues 52,378 48,367 198,854 192,452
---------- ---------- ---------- ----------
COSTS AND EXPENSES
Property operating and maintenance 10,785 10,197 41,819 39,837
Cost of home sales 2,309 4,411 14,383 13,879
Real estate taxes 3,778 2,941 13,817 11,746
General and administrative - rental property 3,940 3,078 12,559 10,536
General and administrative - home sales 1,607 1,663 6,081 6,027
Depreciation and amortization 12,319 11,634 45,395 44,120
Interest 12,772 9,996 43,949 36,680
Extinguishment of debt -- -- 51,643 --
Deferred financing costs related to extinguished debt -- -- 5,557 --
Impairment charge -- 4,932 -- 4,932
Florida storm damage -- -- 600 --
---------- ---------- ---------- ----------
Total expenses 47,510 48,852 235,803 167,757
---------- ---------- ---------- ----------
Income (loss) before equity income (loss) from affiliate,
discontinued operations, and minority interests 4,868 (485) (36,949) 24,695
Equity income (loss) from affiliate (1,200) 841 (151) 667
---------- ---------- ---------- ----------
Income (loss) from continuing operations before
minority interests 3,668 356 (37,100) 25,362
Less income (loss) allocated to minority interests:
Preferred OP Units 2,177 2,140 8,732 8,537
Common OP Units 182 799 (5,364) 3,083
---------- ---------- ---------- ----------
Income (loss) from continuing operations 1,309 (2,583) (40,468) 13,742
Income from discontinued operations -- 8,994 -- 9,972
---------- ---------- ---------- ----------
Net income (loss) $ 1,309 $ 6,411 $ (40,468) $ 23,714
========== ========== ========== ==========
Weighted average common shares outstanding:
Basic 17,832 18,628 18,318 18,206
========== ========== ========== ==========
Diluted 17,990 18,771 18,318 18,345
========== ========== ========== ==========
Basic earnings (loss) per share:
Continuing operations $ 0.07 $ (0.14) $ (2.21) $ 0.75
Discontinued operations -- 0.48 -- 0.55
---------- ---------- ---------- ----------
Net income (loss) $ 0.07 $ 0.34 $ (2.21) $ 1.30
========== ========== ========== ==========
Diluted earnings (loss) per share:
Continuing operations $ 0.07 $ (0.14) $ (2.21) $ 0.75
Discontinued operations -- 0.48 -- 0.54
---------- ---------- ---------- ----------
Net income (loss) $ 0.07 $ 0.34 $ (2.21) $ 1.29
========== ========== ========== ==========
</Table>
SUN COMMUNITIES, INC.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(AMOUNTS IN THOUSANDS, EXEPT PER SHARE/OP UNIT AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- --------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net income (loss) $ 1,309 $ 6,411 $ (40,468) $ 23,714
Adjustments:
Depreciation and amortization 12,480 11,641 45,589 43,458
Valuation adjustment(3) 226 395 528 (879)
Allocation of SunChamp losses(4) -- 1,390 300 4,548
Gain on disposition of properties and land, net (3,880) (8,590) (3,880) (8,590)
Income (loss) allocated to minority interest 182 854 (5,364) 3,274
---------- ---------- ---------- ----------
Funds from operations (FFO) $ 10,317 $ 12,101 $ (3,295) $ 65,525
========== ========== ========== ==========
FFO - Continuing Operations $ 10,317 $ 11,719 $ (3,295) $ 63,605
========== ========== ========== ==========
FFO - Discontinued Operations $ -- $ 382 $ -- $ 1,920
========== ========== ========== ==========
Weighted average common shares/OP Units outstanding:
Basic 20,306 21,111 20,792 20,717
========== ========== ========== ==========
Diluted 20,464 21,254 20,792 20,856
========== ========== ========== ==========
Continuing Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.51 $ 0.55 $ (0.16) $ 3.07
========== ========== ========== ==========
FFO per weighted average Common Share/OP Unit - Diluted $ 0.50 $ 0.55 $ (0.16) $ 3.05
========== ========== ========== ==========
Discontinued Operations:
FFO per weighted average Common Share/OP Unit - Basic $ -- $ 0.02 $ -- $ 0.09
========== ========== ========== ==========
FFO per weighted average Common Share/OP Unit - Diluted $ -- $ 0.02 $ -- $ 0.09
========== ========== ========== ==========
Total Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.51 $ 0.57 $ (0.16) $ 3.16
========== ========== ========== ==========
FFO per weighted average Common Share/OP Unit - Diluted $ 0.50 $ 0.57 $ (0.16) $ 3.14
========== ========== ========== ==========
</Table>
(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)
<Table>
<Caption>
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------- --------------------
Investment in rental property before accumulated depreciation $ 1,382,541 $ 1,220,405
Total assets $ 1,403,167 $ 1,221,574
Total debt $ 1,078,442 $ 773,328
Total minority interests and stockholders' equity $ 292,789 $ 423,413
</Table>
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODS ENDED DECEMBER 31, 2004 AND 2003
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------- ----------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Net income (loss) $ 1,309 $ 6,411 $ (40,468) $ 23,714
Unrealized income on interest rate swaps 577 904 335 557
-------------- -------------- -------------- --------------
Comprehensive income (loss) $ 1,886 $ 7,315 $ (40,133) $ 24,271
============== ============== ============== ==============
</Table>