Sun Communities, Inc. Reports 2012 Third Quarter Results

Funds from Operations ("FFO")⁽¹⁾

FFO⁽¹⁾ was $20.7 million, or $0.68 per Share, in the third quarter of 2012 as compared to $18.5 million, or $0.74 per Share, in the third quarter of 2011. Excluding approximately $0.8 million and $0.1 million in transaction costs incurred in connection with acquisition activity during the three months ended September 30, 2012 and 2011, respectively, FFO⁽¹⁾ was $21.5 million and $18.6 million, or $0.71 and $0.75 per Share for the three months ended September 30, 2012 and 2011, respectively.

FFO⁽¹⁾ increased to  $69.1 million, or $2.34 per Share, for the nine months ended September 30, 2012 as compared to $53.6 million, or $2.27 per Share, in the nine months ended September 30, 2011. Excluding approximately $1.4 million and $1.5 million in transaction costs incurred in connection with acquisition activity during the nine months ended September 30, 2012 and 2011, respectively, FFO⁽¹⁾ was $70.5 million and $55.1 million, or $2.39 and $2.32 per Share for the nine months ended September 30, 2012 and 2011, respectively.
  

Net Income (Loss) Attributable to Common Stockholders

Net loss attributable to common stockholders for the third quarter of 2012 was $(0.7) million, or $(0.02) per diluted common share, compared with net loss of $(0.4) million, or $(0.02) per diluted common share, for the third quarter of 2011.  Net income attributable to common stockholders for the nine months ended September 30, 2012 was $6.4 million, or $0.24 per diluted common share, compared with net income of $1.1 million, or $0.05 per diluted common share, for the nine months ended September 30, 2011.

Community Occupancy

During the third quarter of 2012, revenue producing sites increased by 271 sites, comprised of 99 sites from properties acquired in 2011 and 2012 and 172 sites from same site communities. This compares to 302 revenue producing sites gained in the third quarter of 2011, comprised of 103 sites from properties acquired in 2011 and 199 sites from same site communities.

During the nine months ended September 30, 2012,  revenue producing sites increased by 975 sites, comprised of 370 sites from properties acquired in 2011 and 2012 and 605 sites from same site communities. This compares to an increase of 732 sites during the nine months ended September 30, 2011, comprised of 103 sites from properties acquired in 2011 and 629 sites from same site communities. Total portfolio occupancy was 86.8 percent at September 30, 2012 as compared to 85.4 percent at September 30, 2011.

"As our occupancy is well over 90 percent in many of our markets, we are focusing on acquisitions and expansions to provide the supply of sites to meet ongoing demand.  Acquisitions and investments which have been closed or announced from June of 2011 approach $400 million.  These acquisitions included nearly 1,500 vacant sites providing opportunities for growth and occupancy enhancements.  The improvement in our debt metrics and liquidity, position us to continue actively identifying and acquiring communities in this favorable environment. We believe it is reasonable to expect an additional $400 million of acquisitions over the next twelve months", said Shiffman. "Further, we have recently completed, or have in process, plans to construct over 1,500 expansion sites, primarily in Texas and Colorado, by the end of 2013.  The expansions represent an investment of about $40 million", Shiffman added.

Same Site Results

For 136 communities owned throughout 2012 and 2011, third quarter 2012 total revenues increased 4.0 percent and total expenses increased 3.2 percent, resulting in an increase in NOI⁽²⁾ of 4.4 percent over the third quarter of 2011.  For  the nine months ended September 30, 2012 total revenues increased 4.7 percent and total expenses increased 1.8 percent, resulting in an increase in NOI⁽²⁾ of 5.9 percent over the nine months ended September 30, 2011. Same site occupancy increased to 86.8 percent at September 30, 2012 from 85.7 percent at September 30, 2011.

Home Sales

During the third quarter of 2012, 395 homes were sold, an increase of 28 sales, or 7.6 percent, from the 367 homes sold during the third quarter of 2011. Rental home sales included in total home sales above totaled 209 and 180 for the third quarters of 2012 and 2011, respectively.

During the nine months ended September 30, 2012, 1,253 homes were sold, an increase of 167 sales, or 15.4 percent, from the 1,086 homes sold during the nine months ended September 30, 2011. Rental home sales included in total home sales above totaled 678 and 596 for the nine months ended September 30, 2012 and 2011, respectively.

• increased RV community offerings to meet a larger and broader base of RV customer needs and wants, 

• greater opportunity to create better branding, loyalty and increased market share, 

• a larger and broader base of potential and existing customers for targeted marketing ,

• additional incremental revenues through cross selling, membership and other attractive programs, and 

• greater leverage of existing staff, systems and resources currently utilized in our Southern communities during the peak period of December - April which are available for the complementary season of May - September in the North. 

Earnings Conference Call

The Company will release its results on Thursday, October 25, 2012, prior to the opening of the market.  A conference call to discuss second quarter operating results will be held on Thursday, October 25, 2012 at 11:00 A.M. (EST).  To participate, call toll-free 877-941-9205.  Callers outside the U.S. or Canada can access the call at 480-629-9771.  A replay will be available following the call through November 8, 2012, and can be accessed toll-free by calling 800-406-7325 or by calling 303-590-3030.  The Conference ID number for the call and the replay is 4567463. 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 REIT that currently owns and operates a portfolio of 165 communities comprising approximately 57,700 developed sites.

For more information about Sun Communities, Inc., please visit our website at www.suncommunities.com.

Contact

Please address all inquiries to our investor relations department, at our website www.suncommunities.com, by phone (248) 208-2500, by facsimile (248) 208-2645 or by mail Sun Communities, Inc. Investor Relations, 27777 Franklin Road,   Southfield, MI 48034.

  

1. Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss) (computed in accordance with generally accepted accounting principles "GAAP"), 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, impairment 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 loss. 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. FFO is computed in accordance with the Company's interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. 

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). 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 (loss) 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.

2. Investors in and analysts following the real estate industry utilize NOI as a supplemental performance measure. NOI is derived from revenues minus property operating expenses and real estate taxes. 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 (loss) (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 (loss) is the most directly comparable GAAP measurement to NOI. Net income (loss) 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 NOI 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, interest expense, 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. 

Forward Looking Statements
This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as "will," "may," "could," "expect," "anticipate," "believes," "intends," "should," "plans," "estimates," "approximate", "guidance" and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.  

These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors 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 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 risks and uncertainties referenced under the headings entitled "Risk Factors" contained in our 2011 Annual Report, and the Company's other periodic 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 assumptions, expectations of future events, or trends.

 

		(Unaudited)       September 30, 2012		December 31, 2011
ASSETS
Investment property, net	$	1,278,127		$	1,196,606
Cash and cash equivalents		38,724		5,857
Inventory of manufactured homes		5,672		5,832
Notes and other receivables		128,178		114,884
Other assets		50,525		44,795
TOTAL ASSETS	$	1,501,226		$	1,367,974
LIABILITIES
Debt	$	1,268,672		$	1,268,191
Lines of credit		2,988		129,034
Other liabilities		76,749		71,404
TOTAL LIABILITIES	$	1,348,409		$	1,468,629
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.01 par value, 10,000 shares authorized, none issued	$	-		$	-
Common stock, $0.01 par value, 90,000 shares authorized   (September 30, 2012 and December 31, 2011, 31,536 and 23,612 shares issued, respectively)		315		236
Additional paid-in capital		857,809		555,981
Accumulated other comprehensive loss		(696)		(1,273)
Distributions in excess of accumulated earnings		(663,579)		(617,953)
Treasury stock, at cost  (September 30, 2012 and December 31, 2011, 1,802 shares)		(63,600)		(63,600)
Total Sun Communities, Inc. stockholders' equity (deficit)		130,249		(126,609)
Noncontrolling interests:
A-1 preferred OP units		45,548		45,548
Common OP units		(22,980)		(19,594)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		152,817		(100,655)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	1,501,226		$	1,367,974

 

		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
REVENUES
Income from real property	$	63,015		$	58,251		$	188,818		$	164,351
Revenue from home sales		10,461			8,115			31,513			24,496
Rental home revenue		6,712			5,650			19,514			16,407
Ancillary revenues, net		(6)			31			349			434
Interest		2,847			2,430			7,907			6,789
Other income, net		95			246			530			222
Total revenues		83,124			74,723			248,631			212,699
COSTS AND EXPENSES
Property operating and maintenance		18,067			16,354			51,261			43,806
Real estate taxes		4,933			4,504			14,741			12,717
Cost of home sales		7,791			6,357			24,535			19,249
Rental home operating and maintenance		5,118			4,253			13,090			11,680
General and administrative - real property		5,165			5,138			15,405			14,449
General and administrative - home sales and rentals		2,011			2,109			6,458			6,034
Acquisition related costs		847			121			1,434			1,521
Depreciation and amortization		22,092			18,748			63,027			53,548
Interest		17,066			16,626			50,644			47,257
Interest on mandatorily redeemable debt		825			834			2,499			2,489
Total expenses		83,915			75,044			243,094			212,750
Income (loss) before income taxes and distributions from affiliates		(791)			(321)			5,537			(51)
Provision for state income taxes		(84)			(150)			(190)			(22)
Distributions from affiliate		600			450			3,250			1,650
Net income (loss)		(275)			(21)			8,597			1,577
Less:  Preferred return to A-1 preferred OP units		586			585			1,744			636
Less:  Amounts attributable to noncontrolling interests		(211)			(233)			463			(196)
Net income (loss) attributable to Sun Communities, Inc. common stockholders	$	(650)		$	(373)		$	6,390		$	1,137
Weighted average common shares outstanding:
Basic		26,938			21,366			26,427			21,260
Diluted		26,938			21,366			26,444			23,343
Earnings (loss) per share:
Basic	$	(0.02)		$	(0.02)		$	0.24		$	0.05
Diluted	$	(0.02)		$	(0.02)		$	0.24		$	0.05
Dividends per common share:	$	0.63		$	0.63		$	1.89		$	1.89

 

		Three Months Ended September 30,							Nine Months Ended September 30,
		2012		2011					2012		2011
Net income (loss) attributable to Sun Communities, Inc. common stockholders	$	(650)		$	(373)			$	6,390		$	1,137
Adjustments:
Preferred return to A-1 preferred OP units		586				585			1,744				636
Amounts attributable to noncontrolling interests		(211)		(233)					463		(196)
Depreciation and amortization		22,365		19,109					63,798		54,576
Benefit for state income taxes (3)		-		-					-		(407)
Gain on disposition of assets, net		(1,427)		(629)					(3,324)		(2,147)
Funds from operations ("FFO") (1)		20,663		18,459					69,071		53,599
Adjustments:
Acquisition related costs		847		121					1,434		1,521
Funds from operations excluding acquisition costs	$	21,510		$	18,580			$	70,505		$	55,120
Weighted average common shares outstanding:		26,938		21,366					26,145		21,039
Add:
OP Units		2,070		2,072					2,071		2,076
Restricted stock		289		278					282		221
Common stock issuable upon conversion of A-1 preferred OP units		1,111		1,111					1,111		403
Common stock issuable upon conversion of stock options		18		14					17		7
Weighted average common shares outstanding - fully diluted		30,426		24,841					29,626		23,746
Funds from operations per Share - fully diluted	$	0.68		$	0.74			$	2.34		$	2.27
Funds from operations per Share excluding acquisition costs - fully diluted	$	0.71		$	0.75			$	2.39		$	2.32

 

		Three Months Ended September 30,											Nine Months Ended September 30
		2012			2011			Change		% Change				2012			2011			Change		% Change
REVENUES:
Income from real property	$	51,060		$	49,094		$	1,966		4.0	%		$	155,475		$	148,557		$	6,918		4.7	%
PROPERTY OPERATING EXPENSES:
Payroll and benefits		4,082			4,074			8		0.2	%			11,831			11,767			64		0.5	%
Legal, taxes, & insurance		750			685			65		9.5	%			1,935			2,227			(292)		(13.1	)%
Utilities		2,775			2,488			287		11.5	%			8,545			8,403			142		1.7	%
Supplies and repair		2,471			2,532			(61)		(2.4	)%			6,642			6,258			384		6.1	%
Other		1,553			1,461			92		6.3	%			4,253			3,802			451		11.9	%
Real estate taxes		3,999			3,902			97		2.5	%			12,123			12,056			67		0.6	%
Property operating expenses		15,630			15,142			488		3.2	%			45,329			44,513			816		1.8	%
NET OPERATING INCOME ("NOI")(2)	$	35,430		$	33,952		$	1,478		4.4	%		$	110,146		$	104,044		$	6,102		5.9	%

		As of September 30,
		2012			2011			Change
OTHER INFORMATION
Number of properties		136			136			-
Developed sites		48,096			47,751			345
Occupied sites (4)		39,835			39,127			708
Occupancy % (4)(5)		86.8%			85.7%			1.1%
Weighted average monthly rent per site (6)	$	435		$	423		$	12
Sites available for development		5,021			5,439			(418)

 

		Three Months Ended September 30,											Nine Months Ended September 30,
		2012			2011			Change		% Change			2012					2011			Change		% Change
REVENUES:
Rental home revenue	$	6,712		$	5,650		$	1,062		18.8	%		$	19,514			$	16,407		$	3,107		18.9	%
Site rent included in income from real property		9,837			8,090			1,747		21.6	%		28,364					23,407			4,957		21.2	%
Rental program revenue		16,549			13,740			2,809		20.4	%		47,878					39,814			8,064		20.3	%
EXPENSES:
Commissions		569			485			84		17.3	%		1,647					1,429			218		15.3	%
Repairs and refurbishment		2,689			2,154			535		24.8	%		6,568					5,745			823		14.3	%
Taxes and insurance		876			755			121		16.0	%		2,509					2,306			203		8.8	%
Marketing and other		984			859			125		14.6	%		2,366					2,200			166		7.5	%
Rental program operating and maintenance		5,118			4,253			865		20.3	%		13,090					11,680			1,410		12.1	%
NET OPERATING INCOME ("NOI") (2)	$	11,431		$	9,487		$	1,944		20.5	%		$	34,788			$	28,134		$	6,654		23.7	%
Occupied rental home formation as of September 30, 2012 and 2011:
Number of occupied rentals, end of period*													7,930					6,737			1,193		17.7	%
Investment in occupied rental homes													$	276,300			$	224,794		$	51,506		22.9	%
Number of sold rental homes*													678					596			82		13.8	%
Weighted average monthly rental rate*													$	773			$	752		$	21		2.8	%

 

	Three Months Ended September 30, 2012				Nine Months Ended September 30, 2012
REVENUES:
Income from real property	$	8,373			$	23,105
Revenue from home sales	661				1,524
Rental home revenue	473				1,025
Total revenues	9,507				25,654
COSTS AND EXPENSES:
Property operating and maintenance	2,855				7,817
Real estate taxes	935				2,618
Cost of home sales	483				1,181
Rental home operating and maintenance	183				407
Total expenses	4,456				12,023
NET OPERATING INCOME ("NOI") (2)	$	5,051			$	13,631
Home sales volume :
Pre-Owned Homes	19				61
					As of September 30, 2012
Other information:
Number of properties					28
Developed sites					9,095
Occupied sites (4)					6,123
Occupancy % (4)(5)					89.0		%
Weighted average monthly rent per site (6)					$	404
Occupied rental home information :
Number of occupied rentals, end of period					539
Investment in occupied rental homes (in thousands)					$	19,853
Number of sold rental homes					15
Weighted average monthly rental rate					$	817