EXHIBIT 99.1
(BW)(MI-SUN-COMMUNITIES)(SUI) SUN COMMUNITIES, INC. REPORTS SECOND QUARTER 2003
RESULTS AND ANNOUNCES "HOME BUYING MADE EASY" PROGRAM
Business Editors
SOUTHFIELD, Mich.--(BUSINESS WIRE)--July 31, 2003--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, 2003, total revenues increased 7.5
percent to $43.2 million, compared with $40.2 million in the second quarter of
2002. Funds from operations (FFO)(1) was $17.3 million in both periods. On a
diluted per share basis, FFO was $0.84 compared to $0.85 for the same period in
the prior year. Net income for the second quarter of 2003 was $4.5 million or
$0.25 per diluted common share, compared with $7.0 million, or $0.39 per diluted
common share for the same period in the prior year.
For 109 communities owned throughout both years, total revenues increased
3.0 percent for the six months ended June 30, 2003 and expenses increased 10.2
percent, which caused net operating income (2) to increase by 0.6 percent. Same
property occupancy in the manufactured housing sites decreased from 91.4 percent
at March 31, 2003 to 91.0 percent at June 30, 2003.
"Same site NOI growth has remained somewhat flat and below our expectations
for the quarter," said Gary A. Shiffman, Chairman and CEO. "Year over year
revenue for the first six months was up only 2.5 percent as a result, in large
part, of the Conseco and other repossessions becoming nonrevenue producing. On
the expense side, increases of $100,000 a quarter on real estate taxes remain
constant while repair and maintenance expenses were somewhat above budget and
accelerated to prepare for the rollout of our "Home Buying Made Easy program,"
Shiffman added.
During the second quarter, the Company leased 58 sites in its new community
development portfolio while losing 164 sites in its stabilized portfolio for a
net loss of 106 revenue producing sites or a loss of 0.3 percent. In addition,
the Company sold 144 homes and brokered 166 sales.
The Company has raised $24.3 million of equity through the issuance of
common stock at an average price of $39.64 per share The dilutive effect of the
issuance requires an adjustment of earnings guidance for 2003 FFO per share
growth to a range of 1.0 percent to 3.0 percent.
Sun Communities also announced its "Home Buying Made Easy" program,
designed to attract traditional and upscale buyers of homes to its properties.
This new financing program addresses several of the problems of the current
credit markets for manufactured housing. The key features of this new program
are:
- -- Loans require a minimum down payment of ten percent. New homes may be
financed for no more than twenty years, previously owned homes for no more
than fifteen years. These features result in the buyer's equity increasing
to twenty to thirty percent of cost in the fifth year. This equity factor
should reduce the delinquency and default rates that have been caused, at
least in part, by a lack of initial equity and slow equity buildup.
- -- Interest rates range from 4.99 percent to 5.99 percent. These rates should
put manufactured housing financing in better competitive position, relative
to other housing financing options. Lower rates will attract more
sophisticated buyers who are attuned to financing alternatives, and will be
more economical, which in turn, should result in fewer delinquencies and
fewer defaults.
- -- Home sales will be made by the Company's affiliate, Sun Home Services, and
all homes financed under the program will remain in a Sun community. Sale by
Sun Home Services allows the Company to control the soft costs of the
transaction to ensure that the new owner is acquiring a value-priced home.
- -- Origen Financial, LLC will underwrite and service the loans.
"We are very optimistic about the program," said Shiffman. "We have eleven
applicants for the sale of homes in communities where we have tested the program
with no advertising or promotion whatsoever. The average
downpayment is fifteen percent and the terms are fifteen years exceeding or
achieving all of the program goals. But the most amazing thing is that eight of
the FICO scores range from 732 to 789, dramatically above current industry
experience and suggesting that this program is reaching a new customer. We
anticipate that this program will benefit the manufactured housing industry in
two ways. First, the more rapid loan amortization will increase the likelihood
that the owner will generate proceeds upon the future home sale in excess of the
loan balance thus creating value. Secondly, repossessed homes acquired by Sun at
deep discounts which are passed on to the resident, will create the best value
for homeowners while logically improving future recoveries on any bad loans,
further stabilizing the value of the home."
The Company intends to roll the program out throughout its portfolio
beginning with the Grand Rapids, Michigan and South Bend, Indiana markets. The
promotion will include print and radio advertising which will direct interest to
an 800 number for more information.
Sun currently has approximately 4,800 sites available for occupancy in its
communities. An additional 6,000 undeveloped sites are located primarily in new
communities which could be developed to meet demand. Weighted average monthly
site rent approximates $325. Sun expects the economics of the "Home Buying Made
Easy" program to result in a return on equity of approximately seventeen
percent. This is based on income from rent and interest and after a reserve for
loan losses and does not include any profit from home sales. It is also assumed
that the program is financed equally with six percent term debt and equity.
A conference call to discuss second quarter operating results will be held
on July 31, 2003 at 11:00 A.M. EST. To participate, call toll-free 877-679-9049.
Callers outside the United States or Canada can access the call at 952-556-2803.
A replay will be available following the call until August 14, 2003 and can be
accessed by dialing 888-211-2648 from the U.S. or 703-925-2474 outside the
United States or Canada. The ID number for the replay is 189687. 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 130 communities comprising 44,520
developed sites and approximately 7,050 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 GAAP), excluding gains (or losses) from sales of property,
plus rental property depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures." Industry analysts
consider FFO to be an appropriate supplemental measure of the operating
performance of an equity REIT primarily because the computation of FFO
excludes historical cost depreciation as an expense and thereby facilitates
the comparison of REITs, which have different cost bases on their assets.
Historical cost accounting for real estate assets implicitly assumes that
the value of real estate assets diminishes predictably over time, whereas
real estate values have instead historically risen or fallen based upon
market conditions. FFO 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. A
reconciliation of net income to FFO is provided in the financial statement
section of this press release.
(2) Investors in and analysts following the real estate industry utilize
net operating income ("NOI") as a supplemental performance measure. NOI
provides a measure of rental
operations and does not factor in depreciation/amortization and
non-property specific expenses such as general and administrative expenses.
NOI is defined as income from property of the Company, minus property
expenses such as real estate taxes, repairs and maintenance, property
management, utilities, insurance and other expenses. NOI does not represent
cash generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs, including the
repayment of principal on debt and payment of dividends and distributions.
NOI should not be considered as a substitute for net income (calculated in
accordance with GAAP) as a measure of results of operations or cash flows
(calculated in accordance with GAAP) as a measure of liquidity.
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 (including
our 2003 guidance) are deemed to be forward-looking statements. Words such as
"believes," "forecasts," anticipates," "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.
FINANCIAL RESULTS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(Amounts in thousands, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Income from property $40,121 $38,060 $81,876 $76,740
Other income 3,035 2,189 5,977 4,599
-------- -------- -------- --------
Total revenues 43,156 40,249 87,853 81,339
-------- -------- -------- --------
Property operating and maintenance 9,603 7,940 19,820 16,291
Real estate taxes 3,020 2,582 6,046 5,134
Property management 703 557 1,457 1,315
General and administrative 1,801 1,151 3,420 2,470
Depreciation and amortization 10,996 9,355 21,765 18,468
Interest 10,447 7,722 19,207 15,568
-------- -------- -------- --------
Total expenses 36,570 29,307 71,715 59,246
-------- -------- -------- --------
Income before equity income (loss)
from affiliates, minority
interests and discontinued
operations 6,586 10,942 16,138 22,093
Equity income (loss) from
affiliates 736 (960) 565 (1,182)
-------- -------- -------- --------
Income before minority interests
and discontinued operations 7,322 9,982 16,703 20,911
Less income allocated to minority
interests:
Preferred OP Units 2,133 1,947 4,261 3,866
Common OP Units and others 650 1,033 1,560 2,209
-------- -------- -------- --------
Income from continuing operations 4,539 7,002 10,882 14,836
Income (loss) from discontinued
operations - - - 280
-------- -------- -------- --------
Net income $4,539 $7,002 $10,882 $15,116
======== ======== ======== ========
Weighted average common shares
outstanding:
Basic 17,897 17,544 17,843 17,433
======== ======== ======== ========
Diluted 18,118 17,788 17,997 17,661
======== ======== ======== ========
Basic earnings per share:
Continuing operations $0.25 $0.40 $0.61 $0.85
Discontinued operations - - - 0.02
-------- -------- -------- --------
Net income $0.25 $0.40 $0.61 $0.87
======== ======== ======== ========
Diluted earnings per share:
Continuing operations $0.25 $0.39 $0.60 $0.84
Discontinued operations - - - 0.02
-------- -------- -------- --------
Net income $0.25 $0.39 $0.60 $0.86
======== ======== ======== ========
SUN COMMUNITIES, INC.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
(Amounts in thousands, exept per share/OP unit amounts)(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2003 2002 2003 2002
-------- -------- -------- --------
Net Income $4,539 $7,002 $10,882 $15,116
Adjustments:
Depreciation of rental property 10,600 9,283 21,109 18,324
Valuation adjustment(1) 461 675
Allocation of SunChamp losses(2) 1,087 1,937
Income allocated to
Minority Interest 650 1,033 1,560 2,209
(Gain) on sale of properties - - (269)
-------- -------- -------- --------
FFO $17,337 $17,318 $36,163 $35,380
======== ======== ======== ========
Weighted average common shares/OP
Units outstanding:
Basic 20,427 20,133 20,384 20,027
Diluted 20,648 20,377 20,538 20,255
FFO per weighted average Common
Share/OP Unit - Basic $0.85 $0.86 $1.77 $1.77
FFO per weighted average Common
Share/OP Unit - Diluted $0.84 $0.85 $1.76 $1.75
(1) 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 imperfections related to hedging
correlation in these swaps is reflected currently in cash as interest, the
valuation adjustments are excluded from Funds From Operations. The valuation
adjustment is included in interest expense.
(2) 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 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 under generally accepted accounting
principles are effectively reallocated to the note for purposes of
calculating Funds from Operations.
SUN COMMUNITIES, INC.
SELECTED BALANCE SHEET DATA
(Amounts in thousands) (Unaudited)
June 30, December 31,
2003 2002
----------- -----------
Investment in rental property before
accumulated depreciation $1,188,895 $1,174,837
Total assets $1,181,076 $1,163,976
Total debt $687,272 $667,373
Total minority interests and stockholders'
equity $468,207 $472,022
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands) (Unaudited)
First Quarter Ended Six Months Ended
June 30, June 30,
--------------- -----------------
2003 2002 2003 2002
------- ------- -------- --------
Net Income $4,539 $7,002 $10,882 $15,116
Unrealized losses on
interest rate swaps (1,942) - (2,381) -
------- ------- -------- --------
Comprehensive Income $2,597 $7,002 $8,501 $15,116
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--30--SLB/cl*
CONTACT: Sun Communities, Inc.
Jeffrey P. Jorissen, 248-208-2500
KEYWORD: MICHIGAN
INDUSTRY KEYWORD: REAL ESTATE EARNINGS
SOURCE: Sun Communities, Inc.