Exhibit 99.1
FOR FURTHER INFORMATION:
AT THE COMPANY:
Carol Petersen
(248) 208-2500
FOR IMMEDIATE RELEASE
SUN COMMUNITIES, INC. RECEIVES "WELLS NOTICE" FROM SEC
SOUTHFIELD, MI, JULY 19, 2005 - SUN COMMUNITIES, INC. (NYSE: SUI), announced
today that it has received a "Wells Notice" from the staff of the U.S.
Securities and Exchange Commission (SEC) in connection with a non-public inquiry
regarding the Company. The inquiry by the SEC was commenced in January 2004 with
a request for information and legal, accounting and other documentation
generally regarding the Company's investment in SunChamp LLC, the operation of
SunChamp, the Company's accounting for SunChamp and other transactions related
to SunChamp. Under the direction of the Company's Audit Committee and Board of
Directors, the Company has fully and voluntarily cooperated, and continues to
cooperate, with the SEC in its requests for information and has consented to the
cooperation by its employees and by its former and current auditors. Under the
SEC's procedures, the Wells Notice indicates that the staff has made a
preliminary decision to recommend that the Commission bring a civil action
against the Company. The Wells Notice also covers the Company's chief financial
officer and a former controller who transferred to another position within the
Company prior to the pending inquiry. Recipients of Wells Notices have the
opportunity to respond to the SEC staff before the staff makes a decision on
whether to proceed with its recommendation.
As described in its filings with the SEC, SunChamp LLC was formed in late 1999
by the Company and Champion Enterprises, Inc. (NYSE:CHB) for the acquisition and
development of 11 manufactured home communities. During the fourth quarter of
2002, the Company acquired all of Champion's interest in SunChamp and,
thereafter, the SunChamp properties were consolidated into the Company's
financial statements. The SEC Staff has informed the Company that the major
focus of the Staff's inquiry, and the primary bases for its preliminary
conclusion to recommend action, relate to the Company's accounting for the
SunChamp investment during 2000, 2001 and 2002. In particular, the SEC Staff has
indicated that it: (1) differs with the Company's decision to account for its
interest in SunChamp on the cost method, rather than the equity method, during
most of 2000 and 2001; (2) differs with the Company's application of the equity
method in 2002; and (3) believes that the Company should have applied Statement
of Financial Accounting Standards No. 66 - "Accounting for Sales of Real Estate"
("FAS 66"), to sales by the Company of a portion of its interest in SunChamp to
outside investors. The Staff further has expressed its view that the application
of FAS 66 would require the Company to disregard entirely the sales of its
interests to outside investors for purposes of accounting for losses from
SunChamp. These investors paid the Company a total of $13.2 million ($7.2
million in cash and $6 million in long-term, non-recourse notes) for the
Company's SunChamp interests they acquired.
The Company believes the sales to investors were bona fide, arms-length
transactions and disagrees with the Staff's stated position that FAS 66 applies
to these transactions in a manner that would disregard entirely these sales for
purposes of allocating SunChamp losses to the Company. If the Company were
required to disregard the sales to investors for accounting purposes, it would
have to report its proportionate share of SunChamp's losses during the periods
in question and that share would be a significantly larger percentage of those
losses than that recorded by the Company. The Company believes that the
increased losses from application of FAS 66 as suggested by the Staff would not
affect calculations of cash flow or net asset value. Also, if application of FAS
66 required a greater allocation of losses to the Company as the result of
disregarding the effect of sales to investors, the Company also would be
required to recognize a greater portion of any profits in the event that
SunChamp becomes profitable in later periods. The Company believes that the
consolidation of the SunChamp properties into the Company's financial statements
at the end of 2002 and for subsequent periods provides all material information
to users of its financial statements regarding this venture's financial
condition, financial results and the Company's participation from 2003 forward.
The Company believes that the Staff's other suggested bases for alleged improper
accounting would not result in quantitatively material differences from the
actual reported results in the Company's earnings and FFO.
All financial reports from periods covered by the inquiry were reviewed and, for
year-end statements, audited, by the Company's independent auditor at those
times. At the direction and with supervision of the Audit Committee, the Company
currently is engaged in discussions with the SEC staff regarding the Wells
Notice and its planned response to this matter, and continues to cooperate fully
with the SEC in respect of its investigation.
Sun Communities currently owns and operates a portfolio of 135 communities
mainly in the Midwest and Southeast United States. The Company's properties are
comprised of over 47,300 developed sites and approximately 7,100 additional
sites available for development.
FOR MORE INFORMATION ABOUT SUN COMMUNITIES, INC.,
VISIT OUR WEBSITE AT WWW.SUNCOMMUNITIES.COM
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.