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 2005 RESULTS
SOUTHFIELD, MI, JULY 21, 2005 - 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, 2005, total revenues increased 4.9 percent
to $51.3 million, compared with $48.9 million in the second quarter of 2004.
Funds from operations (FFO) (1) increased from $(42.3) million in the second
quarter 2004 to $12.6 million in the second quarter 2005. On a per share/OP Unit
basis, FFO was $0.62 for the second quarter of 2005 as compared with $(2.00) for
the same period in 2004. Net loss for the second quarter of 2005 was $(0.8)
million or $(0.04) per common share, compared with $(47.9) million, or $(2.57)
per common share for the same period in 2004. 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 per share.
During the second quarter, the Company achieved an increase of 105 revenue
producing manufactured housing sites bringing the year-to-date total increase to
394. In addition, the Company sold 99 homes and brokered 172 sales with
respective year-to-date totals of 210 and 326.
July 21, 2005
Page 2
For 121 communities owned throughout both years, total revenues increased 4.0
percent for the three months ended June 30, 2005 and expenses increased 7.7
percent, resulting in an increase in net operating income(2) of 2.6 percent.
Same property occupancy in manufactured housing sites increased from 85.0% at
December 31, 2004 to 85.6% at June 30, 2005.
"We have leased 394 net sites in our portfolio during the first six months of
this year as compared to a loss of 21 sites during the same period last year.
This represents about 88% of the budgeted net site increase for the entire
year," said Gary A. Shiffman, Chairman and Chief Executive Officer.
"Through June 30, 2005, 512 homes have been sold in our communities. Included
are 38 rental homes which have been sold to lessees, 27 of which occurred as a
result of our new telemarketing effort which began operations in the second
quarter of 2005. We are encouraged by the steady progress in the rental program,
which has had a weighted average rental increase of 7% from the level at the
beginning of the year, as well as initial success in converting the first of
these rentals into sales to the lessees," Shiffman added.
Also during the second quarter, the Company sold two properties located in
Florida comprised of 96 manufactured housing sites and 165 recreational vehicle
sites for a combined sales price of $5.7 million. These transactions resulted in
a $0.8 million gain which is included in interest and other income.
A conference call to discuss second quarter operating results will be held on
July 21, 2005, at 11:00 A.M. Eastern Time. 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 4,
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 158910. The conference call will be available live on Sun Communities
website www.suncommunities.com. Replay will also be available on the website.
Sun Communities, Inc. is a real estate investment trust (REIT) that currently
owns and operates a portfolio of 135 communities comprising approximately 47,300
developed sites and over 7,100 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.
July 21, 2005
Page 3
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. Net income includes interest and depreciation and
amortization which often have no effect on the market value of a
property and therefore limit its use as a performance measure. In
addition, such expenses are often incurred at a parent company level
and therefore are not necessarily linked to the performance of a real
estate asset. 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. 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 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 JUNE 30, 2005 AND 2004
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2005 2004 2005 2004
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REVENUES
Income from rental property $ 44,020 $ 40,501 $ 89,801 $ 83,369
Revenue from home sales 4,474 6,082 8,224 10,056
Ancillary revenues, net 739 519 1,242 1,116
Interest and other income 2,115 1,792 3,427 4,102
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Total revenues 51,348 48,894 102,694 98,643
COSTS AND EXPENSES
Property operating and maintenance 11,547 10,068 22,614 20,296
Cost of home sales 3,670 5,137 6,077 8,262
Real estate taxes 3,808 3,353 7,596 6,519
General and administrative - rental property 3,600 2,647 7,105 5,441
General and administrative - home sales 1,512 1,568 3,055 3,061
Depreciation and amortization 13,480 10,869 26,548 22,089
Extinguishment of debt - 51,643 - 51,643
Deferred financing costs related to extinguished debt - 5,557 - 5,557
Interest 14,640 11,175 29,365 21,509
Florida storm damage recovery (55) - (555) -
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Total expenses 52,202 102,017 101,805 144,377
Income (loss) from operations (854) (53,123) 889 (45,734)
Less income (loss) allocated to minority interest:
Preferred OP Units - 1,109 961 2,219
Common OP Units (104) (6,331) (9) (5,622)
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Net loss $ (750) $(47,901) $ (63) $(42,331)
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Weighted average common shares outstanding:
Basic 17,731 18,639 17,789 18,670
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Diluted 17,731 18,639 17,789 18,670
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Basic earnings (loss) per share: $ (0.04) $ (2.57) $ (0.00) $ (2.27)
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Diluted earnings (loss) per share: $ (0.04) $ (2.57) $ (0.00) $ (2.27)
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RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 2005 AND 2004
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- -------------- -------------
Net loss $ (750) $(47,901) $ (63) $(42,331)
Adjustments:
Depreciation and amortization 14,100 11,073 27,764 21,914
Valuation adjustment(3) (153) 889 206 482
Allocation of SunChamp losses(4) - - - 300
Gain on disposition of assets, net (513) - (466)
Income allocated to minority interest (104) (6,331) (9) (5,622)
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Funds from operations $ 12,580 $(42,270) $ 27,432 $(25,257)
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Weighted average common shares/OP Units outstanding:
Basic 20,193 21,112 20,256 21,144
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Diluted 20,280 21,112 20,351 21,144
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FFO per weighted average Common Share/OP $ 0.62 $ (2.00) $ 1.35 $ (1.19)
Unit - Basic
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FFO per weighted average Common Share/OP $ 0.62 $ (2.00) $ 1.35 $ (1.19)
Unit - Diluted
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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 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 FFO. 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 FFO. 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)
JUNE 30, 2005 DECEMBER 31, 2004
-------------------------- ---------------------------
Investment in rental property before accumulated depreciation $ 1,430,153 $ 1,380,553
Total assets $ 1,326,809 $ 1,403,167
Total debt $ 1,086,688 $ 1,078,442
Total minority interests and stockholders' equity $ 209,617 $ 292,789
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE PERIODS ENDED JUNE 30, 2005 AND 2004
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
2005 2004 2005 2004
------------- ------------- -------------- -------------
Net loss $ (750) $(47,901) $ (63) $(42,331)
Unrealized income (loss) on interest rate swaps (1,250) 2,857 (76) 1,374
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Comprehensive loss $ (2,000) $(45,044) $ (139) $(40,957)
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