Exhibit 99.1
SUN COMMUNITIES, INC. PROVIDES ADDITIONAL DETAIL REGARDING
2006 GUIDANCE AND UPDATE ON DAMAGE FROM HURRICANE WILMA
SOUTHFIELD, Mich., Nov. 1 /PRNewswire-FirstCall/ -- Sun Communities, Inc.
(NYSE: SUI), a real estate investment trust (REIT) that owns and operates
manufactured housing communities, has previously provided financial guidance for
2006. It is the Company's expectation that Funds From Operations (FFO)(1) per
share will be in the range of $2.87 to $2.95 per share. The Company expects net
income and earnings per share to be affected by increased depreciation and
interest expenses which will largely offset improved operating results. That
guidance is supported by the following assumptions.
Same Property Portfolio
The Company's same property portfolio of 121 communities is expected to
generate growth in net operating income (NOI)(2) of 3.9%, based on revenue
growth of 3.3% and expense growth of 2%. Expenses are impacted by a slowing in
the growth of real estate taxes and a comprehensive review and implementation of
cost savings related to all aspects of the business. These initiatives include,
but are not limited to, the deferral of the Company's annual community
management meeting, increased employee contributions for health care, and a more
rigorous bonus program based on the attainment of corporate FFO objectives.
Occupancy and Rental Increases
The weighted average rental increase for 2006 is expected to be 3.7% for
the manufactured homes and 4.7% for the seasonal recreational vehicle sites. The
Company expects to increase occupancy in its manufactured housing portfolio by
296 sites and by 49 sites in its permanent recreational vehicle communities.
Rental Home Program
The Company expects to continue to achieve average rental increases of 8%
in the home rental program in 2006. The exact extent of the program will depend
upon the availability of value priced preowned homes and the recovery of new
home shipments and dealer activity to sustain and grow community occupancy. The
Company expects to achieve 250 rental home sales in 2006.
Recurring Capital Improvements
The Company expects recurring capital expenditures to approximate
$6,000,000 in 2006 or $126 per site which is within the range of per site
improvements of $115 to $168 per site over the preceding five years. The
resulting funds available for distribution will approximate $2.61 per share
compared to the current annual dividend rate of $2.52.
General & Administrative Expenses
The Company expects general and administrative expenses related to rental
property to approximate $12 million in 2006. The Company has strengthened all
controls over expenses including instituting a more rigorous bonus program based
on the attainment of corporate FFO objectives, increased employee contributions
for health insurance, extending vesting terms for stock awards to officers and
staffing adjustments. These actions more carefully reflect the needs related to
the current industry environment and are not expected to have any effect on the
quality of performance. It is assumed that the SEC inquiry is resolved and the
effects, if any, are reflected in 2005 results.
Hurricane Wilma Update
The Company owns a portfolio of nineteen communities in Florida
compromising over 10,000 sites. Hurricane Wilma destroyed five owner-occupied
homes and one permanent recreational vehicle with the bulk of the damage caused
by uprooted trees. With minor exceptions, power has been restored to all of the
Company's Florida communities. Most of the damage relates to debris, largely
trees, and signs, fencing, awnings, and carports. The aggregate amount of
damages before any recovery from insurance is expected to approximate $600,000.
All of the Company's seasonal recreational vehicle communities are fully
operational for the upcoming season and the availability of gasoline is
returning to normal.
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.
For more information about Sun Communities, Inc. visit our website at
http://www.suncommunities.com
Statements contained in this press release that relate to the Company's
future performance, including, without limitation, statements with respect to
the Company's anticipated results of operations or level of business for 2006 or
any other future period, are forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements reflect the Company's current views with respect to
future events and financial performance, and are subject to known and unknown
risks, uncertainties and assumptions, both general and specific to the matters
discussed in this press release. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, actual results of the
Company may be materially different from any future results expressed or implied
by such forward-looking statements. Such risks and uncertainties include the
national and regional economic climates, real estate housing market conditions,
real estate rental market conditions, competition from other available
manufactured housing sites and alternative forms of housing, ability of
manufactured home buyers to obtain financing, the level of repossessions by
manufactured home lenders, increased operating costs (such as insurance
premiums, real estate taxes and utilities) and the ability of the Company to
pass such costs on to its tenants, the outcome of the ongoing SEC inquiry, and
those risks and uncertainties 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.
(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.
SOURCE Sun Communities, Inc.
-0- 11/01/2005
/CONTACT: Jeffrey P. Jorissen, Chief Financial Officer of Sun
Communities, Inc., +1-248-208-2500/
/Web site: http://www.suncommunities.com /
(SUI)
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