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 THIRD QUARTER 2005 RESULTS AND 2006 GUIDANCE
Southfield, MI, October 27, 2005 - Sun Communities, Inc. (NYSE: SUI), a real
estate investment trust (REIT) that owns and operates manufactured housing
communities, today reported third quarter results.
For the third quarter ended September 30, 2005, total revenues increased 3.3
percent to $50.2 million, compared with $48.6 million in the third quarter of
2004. Funds from operations (FFO) (1) was $10.5 million, $0.52 per diluted
share/OP Unit, in the third quarter 2005 as compared to $11.6 million, $0.56 per
diluted share/OP Unit, in the third quarter 2004. Net loss for the third quarter
of 2005 was $(3.7) million or $(0.21) per common share, compared with net income
of $0.6 million, or $0.03 per common share for the same period in 2004.
Per share results were adversely affected by loan losses at Origen Financial,
Inc. (Origen) caused by Hurricanes Katrina and Rita which reduced Origen's
contribution to the Company's earnings by $0.08 compared to the Company's
forecast. Also impacting the quarter to the extent of $0.03 were expenses,
principally legal, related to the previously disclosed SEC inquiry which relates
primarily to the accounting for the Company's investment in SunChamp, LLC, from
2000 to 2002.
The Company has increased net revenue producing sites by 226 through September
30, 2005, compared to a loss of 298 sites during the comparable period in 2004.
During the third quarter of 2005, the Company lost 168 revenue producing sites
compared to 277 sites lost in the comparable prior year period.
For 121 communities owned throughout both years, total revenues increased 3.6
percent for the three months ended September 30, 2005 and expenses increased 1.3
percent, resulting in an increase in net operating income (NOI) (2) of 4.6
percent. Same property occupancy in manufactured housing sites increased from
85.0% at December 31, 2004 to 85.2% at September 30, 2005 (see Same Property
Results table).
October 27, 2005
Page 2
The Company has continued growth of its rental program due to the supply of
value-priced homes and the demand for rentals in its communities. During the
third quarter, the Company rented 381 homes bringing the total number of rentals
to 3,438 at September 30, 2005, as reflected in the accompanying table. Rental
rates for the homes, including site rent, have increased by nearly 11% over the
past twelve months and 68 homes that were formerly rentals have been sold in
2005 at an aggregate price in excess of their original aggregate cost.
Currently, the Company is conducting a detailed analysis of its properties and
markets as a basis for the development of a strategic plan of community
acquisitions and dispositions based on historic performance and the near-term
outlook. The Company will then focus on the performance and operations of its
remaining well-positioned portfolio.
"The quarter is one of mixed results. Fundamentals relating to rental increases
and NOI were on budget or slightly strengthening. Net leased sites for the
quarter and year to date while dramatically improved over the same period in
2004, reflect a loss for the quarter reducing the positive trends experienced
during the first half," said Gary A. Shiffman, Chairman and Chief Executive
Officer.
"While repossessions and industry fundamentals have neither worsened nor
improved, management continues to focus on operational improvements, strategies,
implementation of the rental and sales programs, and asset management," Shiffman
added.
In 2004, the Company issued earnings guidance for five years through 2009
forecasting 8% to 10% compounded annual growth in FFO per share to the end of
that period. This guidance was projected from a 2004 FFO per share of $2.57,
before costs related to the Company's recapitalization, and was not expected to
equal or exceed the 8% to 10% range initially. While 2005 results have been
impacted by one-time items, the Company reaffirms its previous five-year
guidance. The Company expects FFO 2006 results to be within the range of $2.87
to $2.95 per share. The Company expects net income per share to be affected by
increased depreciation and interest that will largely offset improved operating
results over the term of the guidance.
In addition the Company expects that the current annual dividend will
approximate 96% of 2006 FFO reduced by recurring capital expenditures.
A conference call to discuss third quarter operating results will be held on
October 27, 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
201-689-8470. A replay will be available following the call through November 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 171406. The conference call will be available live on Sun Communities
website www.suncommunities.com. Replay will also be available on the website.
October 27, 2005
Page 3
Sun Communities, Inc. is a real estate investment trust (REIT) that currently
owns and operates a portfolio of 135 communities comprising approximately 47,320
developed sites and over 7,000 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.
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.
October 27, 2005
Page 4
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 SEPTEMBER 30, 2005 AND 2004
(Amounts in thousands except for per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
REVENUES
Income from rental property $ 44,022 $ 40,852 $ 133,416 $ 123,805
Revenue from home sales 6,008 4,786 14,136 14,723
Rental revenues, net 660 351 1,327 1,138
Ancillary revenues, net 36 38 606 364
Interest and other income (loss) (479) 2,611 2,122 6,713
------------- ------------- ------------- -------------
Total revenues 50,247 48,638 151,607 146,743
COSTS AND EXPENSES
Property operating and maintenance 11,722 10,687 34,166 30,829
Cost of home sales 4,784 3,771 10,772 11,928
Real estate taxes 3,801 3,504 11,373 9,991
General and administrative - rental property 3,630 3,098 10,735 8,539
General and administrative - home sales and rentals 1,826 1,410 4,875 4,465
Depreciation and amortization 13,525 10,944 40,011 32,946
Extinguishment of debt - - - 51,643
Deferred financing costs related to extinguished debt - - - 5,557
Interest 15,179 12,873 44,499 34,376
Florida storm damage (recovery) - 600 (555) 600
------------- ------------- ------------- -------------
Total expenses 54,467 46,887 155,876 190,874
------------- ------------- ------------- -------------
Income (loss) from operations (4,220) 1,751 (4,269) (44,131)
Less income (loss) allocated to minority interest:
Preferred OP Units - 1,109 961 3,328
Common OP Units (495) 77 (618) (5,562)
------------- ------------- ------------- -------------
Income (loss) from continuing operations (3,725) 565 (4,612) (41,897)
Income (loss) from discontinued operations - (11) 824 120
------------- ------------- ------------- -------------
Net income (loss) $ (3,725) $ 554 $ (3,788) $ (41,777)
============= ============= ============= =============
Weighted average common shares outstanding:
Basic 17,746 18,100 17,775 18,480
============= ============= ============= =============
Diluted 17,746 18,246 17,775 18,480
============= ============= ============= =============
Basic earnings (loss) per share:
Continuing operations $ (0.21) $ 0.03 $ (0.26) $ (2.27)
Discontinued operations - 0.00 0.05 0.01
------------- ------------- ------------- -------------
Net income (loss) $ (0.21) $ 0.03 $ (0.21) $ (2.26)
============= ============= ============= =============
Diluted earnings (loss) per share:
Continuing operations $ (0.21) $ 0.03 $ (0.26) $ (2.27)
Discontinued operations - 0.00 0.05 0.01
------------- ------------- ------------- -------------
Net income (loss) $ (0.21) $ 0.03 $ (0.21) $ (2.26)
============= ============= ============= =============
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
(Amounts in thousands except for per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Net income (loss) $ (3,725) $ 554 $ (3,788) $ (41,777)
Adjustments:
Depreciation and amortization 14,166 11,195 41,930 33,109
Valuation adjustment(3) 194 (180) 400 302
Allocation of SunChamp losses(4) - - - 300
(Gain) loss on disposition of assets, net 365 (101)
Income (loss) allocated to minority interest (495) 76 (504) (5,546)
------------- ------------- ------------- -------------
Funds from operations (FFO) $ 10,505 $ 11,645 $ 37,937 $ (13,612)
============= ============= ============= =============
FFO - Continuing Operations $ 10,505 $ 11,614 $ 37,765 $ (13,878)
============= ============= ============= =============
FFO - Discontinued Operations $ - $ 31 $ 172 $ 266
============= ============= ============= =============
Weighted average common shares/OP Units outstanding:
Basic 20,103 20,574 20,205 20,954
============= ============= ============= =============
Diluted 20,242 20,720 20,357 20,954
============= ============= ============= =============
Continuing Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.52 $ 0.56 $ 1.87 $ (0.66)
============= ============= ============= =============
FFO per weighted average Common Share/OP Unit - Diluted $ 0.52 $ 0.56 $ 1.86 $ (0.66)
============= ============= ============= =============
Discontinued Operations:
FFO per weighted average Common Share/OP Unit - Basic $ - $ 0.01 $ 0.01 $ 0.01
============= ============= ============= =============
FFO per weighted average Common Share/OP Unit - Diluted $ - $ 0.00 $ 0.01 $ 0.01
============= ============= ============= =============
Total Operations:
FFO per weighted average Common Share/OP Unit - Basic $ 0.52 $ 0.57 $ 1.88 $ (0.65)
============= ============= ============= =============
FFO per weighted average Common Share/OP Unit - Diluted $ 0.52 $ 0.56 $ 1.87 $ (0.65)
============= ============= ============= =============
(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)
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------- -------------
Investment in rental property before accumulated depreciation $ 1,443,614 $ 1,380,553
Total assets $ 1,319,745 $ 1,403,167
Total debt $ 1,104,328 $ 1,078,442
Total minority interests and stockholders' equity $ 184,892 $ 292,789
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
(Amounts in thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Net income (loss) $ (3,725) $ 554 $ (3,788) $ (41,777)
Unrealized income (loss) on interest rate swaps 1,150 (1,616) 1,074 (242)
------------- ------------- ------------- -------------
Comprehensive loss $ (2,575) $ (1,062) $ (2,714) $ (42,019)
============= ============= ============= =============
SUN COMMUNITIES, INC.
ADDITIONAL INFORMATION
SAME PROPERTY RESULTS
---------------------
(thousands)
September YTD 2005 vs. September YTD 2004
PERIOD REVENUES EXPENSES NOI
- ------------------------- ------------ ------------ ------------
YTD 2005 $ 118,443 $ 34,164 $ 84,279
YTD 2004 $ 115,061 $ 33,090 $ 81,971
------------ ------------ ------------
Change $ 3,382 $ 1,074 $ 2,308
============ ============ ============
Change 2.9% 3.2% 2.8%
Third Quarter 2005 vs. Third Quarter 2004
PERIOD REVENUES EXPENSES NOI
- ------------------------- ------------ ------------ ------------
Q3 2005 $ 38,960 $ 11,506 $ 27,454
Q3 2004 $ 37,609 $ 11,354 $ 26,255
------------ ------------ ------------
Change $ 1,351 $ 152 $ 1,199
============ ============ ============
Change 3.6% 1.3% 4.6%
SAME PROPERTY OCCUPANCY STATISTICS
----------------------------------
September 30, December 31, September 30,
2005 2004 2004
------------- ------------ -------------
85.2% 85.0% 85.9%
RENTAL PROGRAM SUMMARY
----------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------
2005 2004
------------ ------------
(thousands)
Revenue $ 14,674 $ 7,717
------------ ------------
Expenses
Payroll and commissions 1,215 733
Repairs and refurbishment 2,105 806
Taxes and insurance 724 303
Other 812 302
------------ ------------
Total expenses 4,856 2,144
------------ ------------
NOI $ 9,818(5) $ 5,573(5)
============ ============
Number of rentals, end of period 3,438 1,811
Cost of rental homes $ 97,860 $ 47,962
Weighted average monthly rental rate $ 636 $ 575
(5) Includes site rent included in Income from Rental Property.