NEWS RELEASE
February 20, 2019
Southfield, MI, Feb. 20, 2019 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its fourth quarter results for 2018 and initial 2019 guidance.
Financial Results for the Quarter and Year Ended December 31, 2018
For the quarter ended December 31, 2018, total revenues increased $32.0 million, or 13.2 percent, to $274.0 million compared to $242.0 million for the same period in 2017. Net income attributable to common stockholders was $9.0 million, or $0.11 per diluted common share, for the quarter ended December 31, 2018, as compared to net income attributable to common stockholders of $7.4 million, or $0.09 per diluted common share, for the same period in 2017.
For the year ended December 31, 2018, total revenues increased $144.3 million, or 14.7 percent, to $1.1 billion compared to $982.6 million for the same period in 2017. Net income attributable to common stockholders was $105.5 million, or $1.29 per diluted common share, for the year ended December 31, 2018, as compared to net income attributable to common stockholders of $65.0 million, or $0.85 per diluted common share, for the same period in 2017.
Non-GAAP Financial Measures and Portfolio Performance
- Core Funds from Operations (“Core FFO”)(1) for the quarter ended December 31, 2018, was $1.03 per diluted share and OP unit (“Share”) as compared to $0.98 in the prior year, an increase of 5.1 percent.
- Core FFO(1) for the year ended December 31, 2018, was $4.58 per Share as compared to $4.17 in the prior year, an increase of 9.8 percent.
- Same Community(2) Net Operating Income (“NOI”)(1) increased by 8.4 percent and 6.7 percent for the quarter and year ended December 31, 2018, respectively, as compared to the same periods in 2017.
- Home sales volume increased 3.3 percent and 10.6 percent for the quarter and year ended December 31, 2018, respectively, as compared to the same periods in 2017.
- Revenue producing sites increased by 722 sites and 2,600 sites for the quarter and year ended December 31, 2018, respectively, as compared to a 573 site and a 2,406 site increase in the same periods in 2017.
Gary Shiffman, Chief Executive Officer of Sun Communities, stated, “With same community NOI growth of 8.4 percent in the quarter, Sun completed another successful year which demonstrated the sustained demand for our housing and vacation solutions. We also continue to source attractive growth opportunities across the manufactured housing and RV segments, deploying more than $585 million during 2018. These investments included ongoing expansions at our highly occupied communities, acquisitions of income producing assets, and select greenfield developments, along with a strategic stake in a leading owner, operator and developer of senior manufactured housing communities and RV resorts based in Australia. The tailwinds for our sector remain strong, we have an excellent product, and we are well positioned to continue our track record of industry leading growth.”
OPERATING HIGHLIGHTS
Community Occupancy
Total portfolio occupancy was 96.1 percent as of the year ended December 31, 2018, and 95.8 percent as of the year ended December 31, 2017.
During the quarter ended December 31, 2018, revenue producing sites increased by 722 sites, as compared to 573 revenue producing sites gained during the fourth quarter of 2017. During the year ended December 31, 2018, revenue producing sites increased by 2,600 sites, as compared to an increase of 2,406 revenue producing sites during the year ended December 31, 2017.
Same Community(2) Results
For the 336 communities owned and operated by the Company since January 1, 2017, NOI(1) for the quarter ended December 31, 2018, increased 8.4 percent over the same period in 2017, as a result of a 6.2 percent increase in revenues and a 1.4 percent increase in operating expenses. Same Community occupancy(3) increased to 98.0 percent as of the year ended December 31, 2018 from 95.8 percent as of the year ended December 31, 2017.
For the year ended December 31, 2018, total revenues increased by 6.1 percent while total expenses increased by 4.9 percent, resulting in an increase in NOI(1) of 6.7 percent over the year ended December 31, 2017.
Home Sales
During the quarter ended December 31, 2018, the Company sold 878 homes as compared to 850 homes sold during the same period in 2017, a 3.3 percent increase. Rental home sales, which are included in total home sales, were 297 and 340 for the quarters ended December 31, 2018 and 2017, respectively.
During the year ended December 31, 2018, 3,629 homes were sold compared to 3,282 homes sold during the same period in 2017, a 10.6 percent increase. Rental home sales, which are included in total home sales, were 1,122 and 1,168 for the year ended December 31, 2018 and 2017, respectively.
PORTFOLIO ACTIVITY
Acquisitions
During, and subsequent, to the quarter ended December 31, 2018, the Company acquired the following communities:
| Fourth Quarter 2018: | ||||||
| Date of Acquisition | Type | Location | Usable Sites | Consideration (in Millions) | ||
| 10/2018 | RV | Buckeye, Arizona | 376 | $11.6 | ||
| Total | 376 | $11.6 | ||||
| Subsequent to December 31, 2018: | ||||||
| Date of Acquisition | Type | Location | Usable Sites | Consideration (in Millions) | ||
| 1/2019 | MH (Age Restricted) | Edgewater, Florida (1) | 730 | $115.3 | ||
| 1/2019 | RV | Old Orchard Beach, Maine | 321 | 10.8 | ||
| 1/2019 | MH | Oregon City, Oregon(2) | 518 | 61.8 | ||
| 2/2019 | MH | Buckeye, Arizona | 400 | 22.3 | ||
| 2/2019 | MH (3) | Shelby Township, Michigan | 1,308 | 94.5 | ||
| 2/2019 | RV | Millsboro, Delaware | 291 | 20.0 | ||
| Total | 3,568 | $324.7 | ||||
(1) Acquisition includes expansion potential of 70 sites.
(2) In conjunction with the acquisition, the Company created a new class of OP units named Series D Preferred Units. As of February 14, 2019, 488,958 Series D Preferred OP Units were outstanding.
(3) Contains two MH communities.
During the quarter ended December 31, 2018, the Company acquired three land parcels which are located in Texas, Florida, and California for total consideration of $6.3 million. These land parcels are adjacent to existing communities and have potential to add approximately 500 usable sites once constructed.
In November, the Company completed a $54 million strategic investment in Ingenia Communities Group (“Ingenia”), a leading owner, operator, and developer of senior manufactured housing communities and holiday resorts in Australia. The $54 million investment represents a 9.9 percent ownership stake in Ingenia. In addition, the Company and Ingenia have also formed a 50/50 joint venture to establish and grow a manufactured housing community development program in Australia.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
Debt Transactions
During the quarter ended December 31, 2018, the Company repaid one collateralized term loan of $10.2 million with an interest rate of 5.66 percent. The loan was due to mature on February 28, 2019.
Subsequent to the quarter, the Company completed a $265.0 million twenty-five year term loan transaction which carries an interest rate of 4.17 percent. Concurrently, the Company repaid a $187.9 million term loan which was due to mature in January 2030.
As of December 31, 2018, the Company had $3.1 billion of debt outstanding. The weighted average interest rate was 4.45 percent and the weighted average maturity was 9.0 years. The Company had $50.3 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.6 times.
2019 Distributions
After quarter end, the Company announced a 5.6 percent annual distribution increase to $3.00 per common share from $2.84 per common share. This increase will begin with the first quarter distribution to be paid in April 2019.
GUIDANCE 2019
The estimates and assumptions presented below represent a range of possible outcomes and may differ materially from actual results. Guidance estimates include acquisitions completed through the date of this release, and exclude any prospective acquisitions or capital markets activity. The estimates and assumptions are forward looking based on the Company's current assessment of economic and market conditions, as well as other risks outlined below under the caption “Forward Looking Statements.”
| Net Income | Core FFO(1) | |||
| Weighted average common shares outstanding, fully diluted (in mm)(i) | 85.6 | 90.3 | ||
| First quarter 2019, per fully diluted share | $0.31 - $0.34 | $1.10 - $1.13 | ||
| Full year 2019, per fully diluted share | $1.59 - $1.71 | $4.76 - $4.86 |
| 1Q19 | 2Q19 | 3Q19 | 4Q19 | |||||
| Seasonality of Core FFO(1) | 23.2% | 23.7% | 30.5% | 22.6% |
Total Portfolio
Number of communities: 378
| 2018 Actual | 2019E | |||||
| (in Millions) | Change % | |||||
| Income from real property (excluding transient revenue) | $ | 719.8 | 10.6% - 11.0% | |||
| Transient revenue | 106.2 | 14.2% - 15.4% | ||||
| Income from real property | $ | 826.0 | 11.1% - 11.6% | |||
| Property operating and maintenance | 236.1 | 14.4% - 15.0% | ||||
| Real estate taxes | 56.6 | 11.5% - 12.4% | ||||
| Total property operating expenses | $ | 292.7 | 13.9% - 14.5% | |||
| NOI(1) | $ | 533.3 | 9.2% - 10.4% | |||
Same Community Portfolio(ii)
Number of communities: 345
| 2018 Actual | 2019E | |||||
| (in Millions) | Change % | |||||
| Income from real property (excluding transient revenue) | $ | 682.2 | 6.3% - 6.5% | |||
| Transient revenue | 81.3 | 2.7% - 3.3% | ||||
| Income from real property(iii) | $ | 763.5 | 5.9% - 6.2% | |||
| Property operating and maintenance(iii)(iv) | 186.0 | 3.8% - 4.9% | ||||
| Real estate taxes | 55.7 | 6.5% - 6.8% | ||||
| Total property operating expenses | $ | 241.7 | 4.4% - 5.4% | |||
| NOI(1) | $ | 521.8 | 6.2% - 7.0% | |||
Same community property operating and maintenance expense includes $1.9 million of previously capitalized internal leasing costs related to the implementation of the new lease accounting standard. Without this change, 2019 Same community NOI(1) growth would be in the range of 6.6 percent to 7.4 percent.
| Weighted average monthly rental rate increase | 4.0% | |||||||
| 1Q19 | 2Q19 | 3Q19 | 4Q19 | |||||
| Same Community NOI(1) Seasonality | 25.2% | 23.8% | 26.1% | 24.9% |
Total Company Supplementary Information:
| 2018 Actual | 2019E | |||||
| (in Millions) | Change % | |||||
| Rental program, net | $ | 30.6 | 10.1% - 12.4% | |||
| Ancillary revenues, net | 16.5 | 9.1% - 10.9% | ||||
| Home sales contribution to Core FFO(v), net of home selling expenses | 3.6 | 19.4% - 25.0% | ||||
| Interest income | 20.9 | (5.7%) - (4.3%) | ||||
| Brokerage commissions, other revenues, net, and income from nonconsolidated affiliates | 6.9 | 75.4% - 76.8% | ||||
| General and administrative | 81.4 | 8.8% - 10.6% | ||||
| Loss of earnings in 2019 from Florida Keys included in Core FFO(1) | 1.5 | – | ||||
General and administrative expense includes approximately $3.5 million of previously capitalized internal leasing costs related to the implementation of the new lease accounting standard. Without this change, 2019 General and administrative expense growth would be in the range of 4.6 percent to 6.3 percent.
Other line items impacted by the lease accounting standard include Rental program, net and Home sales contribution to FFO(1), net of home selling expenses. The capitalization of allowable costs within these line items substantially offsets the additional expense recognized in property operating and maintenance and general and administrative expense making the overall impact to the Company’s 2019 FFO(1) minimal.
| 2019E | ||
| Increase in revenue producing sites | 2,500 - 2,700 | |
| Expansion sites constructed | 1,200 - 1,400 | |
| Ground-up development sites constructed | 800 - 1,000 | |
| New home sales volume | 550 - 600 | |
| Pre-owned home sales volume | 2,700 - 3,000 |
(i) Certain securities that are dilutive to the computation of Core FFO per fully diluted share in the table above have been excluded from the computation of net income per fully diluted share, as inclusion of these securities would have been anti-dilutive to net income per fully diluted share.
(ii) The amounts in the table reflect constant currency, as Canadian currency figures included within the 2018 actual amounts have been translated at the assumed exchange rate used for 2019 guidance.
(iii) Water and sewer utility revenue of $34.5 million has been reclassified from Income from real property to net against the related expense in Property operating maintenance.
(iv) 2018 actual property operating and maintenance expense excludes $0.7 million of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards that do not meet the Company’s capitalization policy.
(v) Includes gross profit from new and certain pre-owned home sales. Gross profit from pre-owned home sales of depreciated rental homes is excluded.
EARNINGS CONFERENCE CALL
A conference call to discuss fourth quarter operating results will be held on Thursday, February 21, 2019 at 11:00 A.M. (ET). 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 March 7, 2019 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13685225. The conference call will be available live on Sun Communities’ website www.suncommunities.com. The replay will also be available on the website.
Sun Communities, Inc. is a REIT that, as of December 31, 2018, owned, operated, or had an interest in a portfolio of 371 communities comprising over 128,000 developed sites in 31 states and Ontario, Canada.
For more information about Sun Communities, Inc., please visit www.suncommunities.com.
CONTACT
Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to (248) 208-2500, by email to investorrelations@suncommunities.com or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.
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 the Company’s 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, the performance of recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, changes in market rates of interest, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders. Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company’s Annual Report on Form 10-K.
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.
Investor Information
| RESEARCH COVERAGE | ||||||
| Firm | Analyst | Phone | ||||
| Bank of America Merrill Lynch | Joshua Dennerlein | (646) 855-1681 | joshua.dennerlein@baml.com | |||
| BMO Capital Markets | John Kim | (212) 885-4115 | johnp.kim@bmo.com | |||
| Citi Research | Michael Bilerman | (212) 816-1383 | michael.bilerman@citi.com | |||
| Nicholas Joseph | (212) 816-1909 | nicholas.joseph@citi.com | ||||
| Evercore ISI | Steve Sakwa | (212) 446-9462 | steve.sakwa@evercoreisi.com | |||
| Samir Khanal | (212) 888-3796 | samir.khanal@evercoreisi.com | ||||
| Green Street Advisors | John Pawlowski | (949) 640-8780 | jpawlowski@greenstreetadvisors.com | |||
| RBC Capital Markets | Wes Golladay | (440) 715-2650 | wes.golladay@rbccm.com | |||
| Robert W. Baird & Co. | Drew Babin | (610) 238-6634 | dbabin@rwbaird.com | |||
| Wells Fargo | Todd Stender | (562) 637-1371 | todd.stender@wellsfargo.com | |||
| INQUIRIES | ||||||
| Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department. | ||||||
| At Our Website | www.suncommunities.com | |||||
| By Email | investorrelations@suncommunities.com | |||||
| By Phone | (248) 208-2500 | |||||
Portfolio Overview
(As of December 31, 2018)
Balance Sheets
(amounts in thousands)
| 12/31/2018 | 12/31/2017 | |||||||
| ASSETS: | ||||||||
| Land | $ | 1,201,945 | $ | 1,107,838 | ||||
| Land improvements and buildings | 5,586,250 | 5,102,014 | ||||||
| Rental homes and improvements | 571,661 | 528,074 | ||||||
| Furniture, fixtures and equipment | 201,090 | 144,953 | ||||||
| Investment property | 7,560,946 | 6,882,879 | ||||||
| Accumulated depreciation | (1,442,630 | ) | (1,237,525 | ) | ||||
| Investment property, net | 6,118,316 | 5,645,354 | ||||||
| Cash and cash equivalents | 50,311 | 10,127 | ||||||
| Inventory of manufactured homes | 49,199 | 30,430 | ||||||
| Notes and other receivables, net | 160,077 | 163,496 | ||||||
| Collateralized receivables, net (4) | 106,924 | 128,246 | ||||||
| Other assets, net | 225,199 | 134,304 | ||||||
| TOTAL ASSETS | $ | 6,710,026 | $ | 6,111,957 | ||||
| LIABILITIES: | ||||||||
| Mortgage loans payable | $ | 2,815,957 | $ | 2,867,356 | ||||
| Secured borrowings (4) | 107,731 | 129,182 | ||||||
| Preferred Equity - Sun NG Resorts - mandatorily redeemable | 35,277 | — | ||||||
| Preferred OP units - mandatorily redeemable | 37,338 | 41,443 | ||||||
| Lines of credit (5) | 128,000 | 41,257 | ||||||
| Distributions payable | 63,249 | 55,225 | ||||||
| Advanced reservation deposits and rent | 133,698 | 132,205 | ||||||
| Other liabilities | 157,862 | 138,536 | ||||||
| TOTAL LIABILITIES | 3,479,112 | 3,405,204 | ||||||
| Commitments and contingencies | — | — | ||||||
| Series A-4 preferred stock | 31,739 | 32,414 | ||||||
| Series A-4 preferred OP units | 9,877 | 10,652 | ||||||
| Equity Interests - NG Sun LLC | 21,976 | — | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock | 864 | 797 | ||||||
| Additional paid-in capital | 4,398,949 | 3,758,533 | ||||||
| Accumulated other comprehensive (loss) / income | (4,504 | ) | 1,102 | |||||
| Distributions in excess of accumulated earnings | (1,288,486 | ) | (1,162,001 | ) | ||||
| Total Sun Communities, Inc. stockholders' equity | 3,106,823 | 2,598,431 | ||||||
| Noncontrolling interests: | ||||||||
| Common and preferred OP units | 53,354 | 60,971 | ||||||
| Consolidated variable interest entities | 7,145 | 4,285 | ||||||
| Total noncontrolling interests | 60,499 | 65,256 | ||||||
| TOTAL STOCKHOLDERS' EQUITY | 3,167,322 | 2,663,687 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 6,710,026 | $ | 6,111,957 | ||||
Statements of Operations - Quarter to Date Comparison
(amounts in thousands, except per share amounts)
| Three Months Ended December 31, | ||||||||||||||
| 2018 | 2017 | Change | % Change | |||||||||||
| REVENUES: | ||||||||||||||
| Income from real property (excluding transient revenue) | $ | 183,059 | $ | 169,102 | $ | 13,957 | 8.3 | % | ||||||
| Transient revenue | 17,426 | 12,348 | 5,078 | 41.1 | % | |||||||||
| Revenue from home sales | 43,783 | 36,089 | 7,694 | 21.3 | % | |||||||||
| Rental home revenue | 13,700 | 12,775 | 925 | 7.2 | % | |||||||||
| Ancillary revenue | 7,900 | 5,425 | 2,475 | 45.6 | % | |||||||||
| Interest | 5,004 | 5,571 | (567 | ) | (10.2 | )% | ||||||||
| Brokerage commissions and other revenues, net | 3,132 | 716 | 2,416 | 337.4 | % | |||||||||
| Total Revenues | 274,004 | 242,026 | 31,978 | 13.2 | % | |||||||||
| EXPENSES: | ||||||||||||||
| Property operating and maintenance | 54,120 | 50,417 | 3,703 | 7.3 | % | |||||||||
| Real estate taxes | 14,110 | 12,966 | 1,144 | 8.8 | % | |||||||||
| Cost of home sales | 32,138 | 27,115 | 5,023 | 18.5 | % | |||||||||
| Rental home operating and maintenance | 6,356 | 5,204 | 1,152 | 22.1 | % | |||||||||
| Ancillary expenses | 8,638 | 5,441 | 3,197 | 58.8 | % | |||||||||
| Home selling expenses | 4,403 | 3,066 | 1,337 | 43.6 | % | |||||||||
| General and administrative | 20,570 | 18,409 | 2,161 | 11.7 | % | |||||||||
| Transaction costs (6) | 334 | 2,811 | (2,477 | ) | (88.1 | )% | ||||||||
| Catastrophic weather related charges, net | 2,079 | 228 | 1,851 | 811.8 | % | |||||||||
| Depreciation and amortization | 81,070 | 71,817 | 9,253 | 12.9 | % | |||||||||
| Loss on extinguishment of debt | — | 5,260 | (5,260 | ) | (100.0 | )% | ||||||||
| Interest | 32,170 | 31,363 | 807 | 2.6 | % | |||||||||
| Interest on mandatorily redeemable preferred OP units / equity | 1,143 | 753 | 390 | 51.8 | % | |||||||||
| Total Expenses | 257,131 | 234,850 | 22,281 | 9.5 | % | |||||||||
| Income Before Other Items | 16,873 | 7,176 | 9,697 | 135.1 | % | |||||||||
| Remeasurement of marketable securities | (3,639 | ) | — | (3,639 | ) | N/A | ||||||||
| Other (expense) / income, net (7) | (3,239 | ) | 3,642 | (6,881 | ) | (188.9 | )% | |||||||
| Income from nonconsolidated affiliates | 587 | — | 587 | N/A | ||||||||||
| Current tax benefit / (expense) | 17 | (313 | ) | 330 | 105.4 | % | ||||||||
| Deferred tax benefit / (expense) | 73 | (163 | ) | 236 | 144.8 | % | ||||||||
| Net Income | 10,672 | 10,342 | 330 | 3.2 | % | |||||||||
| Less: Preferred return to preferred OP units / equity | (1,151 | ) | (1,099 | ) | (52 | ) | 4.7 | % | ||||||
| Less: Amounts attributable to noncontrolling interests | (51 | ) | (876 | ) | 825 | (94.2 | )% | |||||||
| Net Income Attributable to Sun Communities, Inc. | 9,470 | 8,367 | 1,103 | 13.2 | % | |||||||||
| Less: Preferred stock distribution | (431 | ) | (929 | ) | 498 | (53.6 | )% | |||||||
| Net Income Attributable to Sun Communities, Inc. Common Stockholders | $ | 9,039 | $ | 7,438 | $ | 1,601 | 21.5 | % | ||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 85,481 | 78,633 | 6,848 | 8.7 | % | |||||||||
| Diluted | 85,982 | 79,107 | 6,875 | 8.7 | % | |||||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | 0.11 | $ | 0.09 | $ | 0.02 | 22.2 | % | ||||||
| Diluted | $ | 0.11 | $ | 0.09 | $ | 0.02 | 22.2 | % | ||||||
Statements of Operations - Year to Date Comparison
(amounts in thousands, except per share amounts)
| Year Ended December 31, | |||||||||||||||
| 2018 | 2017 | Change | % Change | ||||||||||||
| REVENUES: | |||||||||||||||
| Income from real property (excluding transient revenue) | $ | 719,763 | $ | 664,281 | $ | 55,482 | 8.4 | % | |||||||
| Transient revenue | 106,210 | 77,947 | 28,263 | 36.3 | % | ||||||||||
| Revenue from home sales | 166,031 | 127,408 | 38,623 | 30.3 | % | ||||||||||
| Rental home revenue | 53,657 | 50,549 | 3,108 | 6.1 | % | ||||||||||
| Ancillary revenue | 54,107 | 37,511 | 16,596 | 44.2 | % | ||||||||||
| Interest | 20,853 | 21,180 | (327 | ) | (1.5 | )% | |||||||||
| Brokerage commissions and other revenues, net | 6,204 | 3,694 | 2,510 | 67.9 | % | ||||||||||
| Total Revenues | 1,126,825 | 982,570 | 144,255 | 14.7 | % | ||||||||||
| EXPENSES: | |||||||||||||||
| Property operating and maintenance | 236,097 | 210,278 | 25,819 | 12.3 | % | ||||||||||
| Real estate taxes | 56,555 | 52,288 | 4,267 | 8.2 | % | ||||||||||
| Cost of home sales | 123,333 | 95,114 | 28,219 | 29.7 | % | ||||||||||
| Rental home operating and maintenance | 23,099 | 22,114 | 985 | 4.5 | % | ||||||||||
| Ancillary expenses | 37,623 | 27,436 | 10,187 | 37.1 | % | ||||||||||
| Home selling expenses | 15,722 | 12,457 | 3,265 | 26.2 | % | ||||||||||
| General and administrative | 81,438 | 74,232 | 7,206 | 9.7 | % | ||||||||||
| Transaction costs (6) | 472 | 9,801 | (9,329 | ) | (95.2 | )% | |||||||||
| Catastrophic weather related charges, net | 92 | 8,352 | (8,260 | ) | (98.9 | )% | |||||||||
| Depreciation and amortization | 287,262 | 261,536 | 25,726 | 9.8 | % | ||||||||||
| Loss on extinguishment of debt | 2,657 | 6,019 | (3,362 | ) | (55.9 | )% | |||||||||
| Interest | 129,089 | 127,128 | 1,961 | 1.5 | % | ||||||||||
| Interest on mandatorily redeemable preferred OP units / equity | 3,694 | 3,114 | 580 | 18.6 | % | ||||||||||
| Total Expenses | 997,133 | 909,869 | 87,264 | 9.6 | % | ||||||||||
| Income Before Other Items | 129,692 | 72,701 | 56,991 | 78.4 | % | ||||||||||
| Remeasurement of marketable securities | (3,639 | ) | — | (3,639 | ) | N/A | |||||||||
| Other (expense) / income, net (7) | (6,453 | ) | 8,982 | (15,435 | ) | (171.8 | )% | ||||||||
| Income from nonconsolidated affiliates | 646 | — | 646 | N/A | |||||||||||
| Current tax expense | (595 | ) | (446 | ) | (149 | ) | 33.4 | % | |||||||
| Deferred tax benefit | 507 | 582 | (75 | ) | (12.9 | )% | |||||||||
| Net Income | 120,158 | 81,819 | 38,339 | 46.9 | % | ||||||||||
| Less: Preferred return to preferred OP units / equity | (4,486 | ) | (4,581 | ) | 95 | (2.1 | )% | ||||||||
| Less: Amounts attributable to noncontrolling interests | (8,443 | ) | (5,055 | ) | (3,388 | ) | 67.0 | % | |||||||
| Net Income Attributable to Sun Communities, Inc. | 107,229 | 72,183 | 35,046 | 48.6 | % | ||||||||||
| Less: Preferred stock distribution | (1,736 | ) | (7,162 | ) | 5,426 | (75.8 | )% | ||||||||
| Net Income Attributable to Sun Communities, Inc. Common Stockholders | $ | 105,493 | $ | 65,021 | $ | 40,472 | 62.2 | % | |||||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 81,387 | 76,084 | 5,303 | 7.0 | % | ||||||||||
| Diluted | 82,040 | 76,711 | 5,329 | 6.9 | % | ||||||||||
| Earnings per share: | |||||||||||||||
| Basic | $ | 1.29 | $ | 0.85 | $ | 0.44 | 51.8 | % | |||||||
| Diluted | $ | 1.29 | $ | 0.85 | $ | 0.44 | 51.8 | % | |||||||
Outstanding Securities and Capitalization
(amounts in thousands except for *)
| Outstanding Securities - As of December 31, 2018 | |||||||||
| Number of Units/Shares Outstanding | Conversion Rate* | If Converted | Issuance Price per unit* | Annual Distribution Rate* | |||||
| Convertible Securities | |||||||||
| Series A-1 preferred OP units | 332 | 2.4390 | 810 | $100 | 6.0% | ||||
| Series A-3 preferred OP units | 40 | 1.8605 | 74 | $100 | 4.5% | ||||
| Series A-4 preferred OP units | 410 | 0.4444 | 182 | $25 | 6.5% | ||||
| Series C preferred OP units | 314 | 1.1100 | 349 | $100 | 4.5% | ||||
| Common OP units | 2,726 | 1.0000 | 2,726 | N/A | Mirrors common shares distributions | ||||
| Series A-4 preferred stock | 1,063 | 0.4444 | 472 | $25 | 6.5% | ||||
| Non-Convertible Securities | |||||||||
| Common shares | 86,357 | N/A | N/A | N/A | $2.84^ | ||||
| ^ Annual distribution is based on the last quarterly distribution annualized. | |||||||||
| Capitalization - As of December 31, 2018 | |||||||||||
| Equity | Shares | Share Price* | Total | ||||||||
| Common shares | 86,357 | $ | 101.71 | $ | 8,783,370 | ||||||
| Common OP units | 2,726 | $ | 101.71 | 277,261 | |||||||
| Subtotal | 89,083 | $ | 9,060,631 | ||||||||
| Series A-1 preferred OP units | 810 | $ | 101.71 | 82,385 | |||||||
| Series A-3 preferred OP units | 74 | $ | 101.71 | 7,527 | |||||||
| Series A-4 preferred OP units | 182 | $ | 101.71 | 18,511 | |||||||
| Series C preferred OP units | 349 | $ | 101.71 | 35,497 | |||||||
| Total diluted shares outstanding | 90,498 | $ | 9,204,551 | ||||||||
| Debt | |||||||||||
| Mortgage loans payable | $ | 2,815,957 | |||||||||
| Secured borrowings (4) | 107,731 | ||||||||||
| Preferred Equity - Sun NG Resorts - mandatorily redeemable | 35,277 | ||||||||||
| Preferred OP units - mandatorily redeemable | 37,338 | ||||||||||
| Lines of credit (5) | 128,000 | ||||||||||
| Total debt | $ | 3,124,303 | |||||||||
| Preferred | |||||||||||
| Series A-4 preferred stock | 1,063 | $ | 25.00 | $ | 26,575 | ||||||
| Total Capitalization | $ | 12,355,429 | |||||||||
Reconciliations to Non-GAAP Financial Measures
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO
(amounts in thousands except for per share data)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net income attributable to Sun Communities, Inc. common stockholders: | $ | 9,039 | $ | 7,438 | $ | 105,493 | $ | 65,021 | |||||||
| Adjustments: | |||||||||||||||
| Depreciation and amortization | 81,314 | 72,068 | 288,206 | 262,211 | |||||||||||
| Remeasurement of marketable securities | 3,639 | — | 3,639 | — | |||||||||||
| Amounts attributable to noncontrolling interests | 15 | 825 | 7,740 | 4,535 | |||||||||||
| Preferred return to preferred OP units | 552 | 570 | 2,206 | 2,320 | |||||||||||
| Preferred distribution to Series A-4 preferred stock | 432 | 441 | 1,737 | 2,107 | |||||||||||
| Gain on disposition of assets, net | (6,429 | ) | (4,733 | ) | (23,406 | ) | (16,075 | ) | |||||||
| FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) | $ | 88,562 | $ | 76,609 | $ | 385,615 | $ | 320,119 | |||||||
| Adjustments: | |||||||||||||||
| Transaction costs (6) | — | 2,811 | — | 9,801 | |||||||||||
| Other acquisition related costs (9) | 220 | 98 | 1,001 | 2,810 | |||||||||||
| Loss on extinguishment of debt | — | 5,260 | 2,657 | 6,019 | |||||||||||
| Catastrophic weather related charges, net | 2,079 | 228 | 92 | 8,352 | |||||||||||
| Loss of earnings - catastrophic weather related (10) | (1,267 | ) | 292 | (292 | ) | 292 | |||||||||
| Other expense / (income), net (7) | 3,239 | (3,642 | ) | 6,453 | (8,982 | ) | |||||||||
| Debt premium write-off | (65 | ) | (905 | ) | (1,467 | ) | (1,343 | ) | |||||||
| Ground lease intangible write-off | — | 898 | 817 | 898 | |||||||||||
| Deferred tax (benefit) / expense | (73 | ) | 163 | (507 | ) | (582 | ) | ||||||||
| Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) | $ | 92,695 | $ | 81,812 | $ | 394,369 | $ | 337,384 | |||||||
| Weighted average common shares outstanding - basic: | 85,481 | 78,633 | 81,387 | 76,084 | |||||||||||
| Add: | |||||||||||||||
| Common stock issuable upon conversion of stock options | 2 | 2 | 2 | 2 | |||||||||||
| Restricted stock | 499 | 472 | 651 | 625 | |||||||||||
| Common OP units | 2,727 | 2,751 | 2,733 | 2,756 | |||||||||||
| Common stock issuable upon conversion of Series A-1 preferred OP units | 810 | 847 | 821 | 869 | |||||||||||
| Common stock issuable upon conversion of Series A-4 preferred stock | 472 | 482 | 472 | 585 | |||||||||||
| Common stock issuable upon conversion of Series A-3 preferred OP units | 75 | 75 | 75 | 75 | |||||||||||
| Weighted average common shares outstanding - fully diluted | 90,066 | 83,262 | 86,141 | 80,996 | |||||||||||
| FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted | $ | 0.98 | $ | 0.92 | $ | 4.48 | $ | 3.95 | |||||||
| Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted | $ | 1.03 | $ | 0.98 | $ | 4.58 | $ | 4.17 | |||||||
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA
(amounts in thousands)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net income attributable to Sun Communities, Inc., common stockholders: | $ | 9,039 | $ | 7,438 | $ | 105,493 | $ | 65,021 | |||||||
| Adjustments: | |||||||||||||||
| Interest expense | 33,313 | 32,116 | 132,783 | 130,242 | |||||||||||
| Loss on extinguishment of debt | — | 5,260 | 2,657 | 6,019 | |||||||||||
| Current tax (benefit) / expense | (17 | ) | 313 | 595 | 446 | ||||||||||
| Deferred tax (benefit) / expense | (73 | ) | 163 | (507 | ) | (582 | ) | ||||||||
| Income from nonconsolidated affiliates | (587 | ) | — | (646 | ) | — | |||||||||
| Depreciation and amortization | 81,070 | 71,817 | 287,262 | 261,536 | |||||||||||
| Gain on disposition of assets, net | (6,429 | ) | (4,733 | ) | (23,406 | ) | (16,075 | ) | |||||||
| EBITDAre (1) | $ | 116,316 | $ | 112,374 | $ | 504,231 | $ | 446,607 | |||||||
| Adjustments: | |||||||||||||||
| Transaction costs (6) | 334 | 2,811 | 472 | 9,801 | |||||||||||
| Remeasurement of marketable securities | 3,639 | — | 3,639 | — | |||||||||||
| Other expense / (income), net (7) | 3,239 | (3,642 | ) | 6,453 | (8,982 | ) | |||||||||
| Catastrophic weather related charges, net | 2,079 | 228 | 92 | 8,352 | |||||||||||
| Preferred return to preferred OP units / equity | 1,151 | 1,099 | 4,486 | 4,581 | |||||||||||
| Amounts attributable to noncontrolling interests | 51 | 876 | 8,443 | 5,055 | |||||||||||
| Preferred stock distribution | 431 | 929 | 1,736 | 7,162 | |||||||||||
| Plus: Gain on dispositions of assets, net | 6,429 | 4,733 | 23,406 | 16,075 | |||||||||||
| Recurring EBITDA (1) | $ | 133,669 | $ | 119,408 | $ | 552,958 | $ | 488,651 | |||||||
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to NOI
(amounts in thousands)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Net income attributable to Sun Communities, Inc., common stockholders: | $ | 9,039 | $ | 7,438 | $ | 105,493 | $ | 65,021 | |||||||
| Other revenues | (8,136 | ) | (6,287 | ) | (27,057 | ) | (24,874 | ) | |||||||
| Home selling expenses | 4,403 | 3,066 | 15,722 | 12,457 | |||||||||||
| General and administrative | 20,570 | 18,409 | 81,438 | 74,232 | |||||||||||
| Transaction costs (6) | 334 | 2,811 | 472 | 9,801 | |||||||||||
| Catastrophic weather related charges, net | 2,079 | 228 | 92 | 8,352 | |||||||||||
| Depreciation and amortization | 81,070 | 71,817 | 287,262 | 261,536 | |||||||||||
| Loss on extinguishment of debt | — | 5,260 | 2,657 | 6,019 | |||||||||||
| Interest expense | 33,313 | 32,116 | 132,783 | 130,242 | |||||||||||
| Remeasurement of marketable securities | 3,639 | — | 3,639 | — | |||||||||||
| Other expense / (income), net (7) | 3,239 | (3,642 | ) | 6,453 | (8,982 | ) | |||||||||
| Income from nonconsolidated affiliates | (587 | ) | — | (646 | ) | — | |||||||||
| Current tax (benefit) / expense | (17 | ) | 313 | 595 | 446 | ||||||||||
| Deferred tax (benefit) / expense | (73 | ) | 163 | (507 | ) | (582 | ) | ||||||||
| Preferred return to preferred OP units / equity | 1,151 | 1,099 | 4,486 | 4,581 | |||||||||||
| Amounts attributable to noncontrolling interests | 51 | 876 | 8,443 | 5,055 | |||||||||||
| Preferred stock distribution | 431 | 929 | 1,736 | 7,162 | |||||||||||
| NOI(1) / Gross Profit | $ | 150,506 | $ | 134,596 | $ | 623,061 | $ | 550,466 | |||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Real Property NOI (1) | $ | 132,255 | $ | 118,067 | $ | 533,321 | $ | 479,662 | |||||||
| Rental Program NOI (1) | 23,714 | 23,598 | 96,173 | 92,268 | |||||||||||
| Home Sales NOI (1) / Gross Profit | 11,645 | 8,974 | 42,698 | 32,294 | |||||||||||
| Ancillary NOI (1) / Gross Profit | (738 | ) | (16 | ) | 16,484 | 10,075 | |||||||||
| Site rent from Rental Program (included in Real Property NOI) (1)(11) | (16,370 | ) | (16,027 | ) | (65,615 | ) | (63,833 | ) | |||||||
| NOI (1) / Gross profit | $ | 150,506 | $ | 134,596 | $ | 623,061 | $ | 550,466 | |||||||
Non-GAAP and Other Financial Measures
Financial and Operating Highlights
(amounts in thousands, except for *)
| Quarter Ended | |||||||||||||||||||
| 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | |||||||||||||||
| FINANCIAL INFORMATION | |||||||||||||||||||
| Total revenues | $ | 274,004 | $ | 323,538 | $ | 271,426 | $ | 257,916 | $ | 242,026 | |||||||||
| Net income | 10,672 | 51,715 | 24,170 | 33,601 | 10,342 | ||||||||||||||
| Net income attributable to Sun Communities Inc. | 9,039 | 46,060 | 20,408 | 29,986 | 7,438 | ||||||||||||||
| Earnings per share basic* | $ | 0.11 | $ | 0.56 | $ | 0.25 | $ | 0.38 | $ | 0.09 | |||||||||
| Earnings per share diluted* | 0.11 | 0.56 | 0.25 | 0.38 | 0.09 | ||||||||||||||
| Cash distributions declared per common share* | $ | 0.71 | $ | 0.71 | $ | 0.71 | $ | 0.71 | $ | 0.67 | |||||||||
| Recurring EBITDA (1) | $ | 133,669 | $ | 158,153 | $ | 128,798 | $ | 132,281 | $ | 119,408 | |||||||||
| FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) | 88,562 | 117,018 | 85,623 | 94,976 | 76,609 | ||||||||||||||
| Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) | 92,695 | 116,959 | 90,372 | 94,907 | 81,812 | ||||||||||||||
| FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted* | $ | 0.98 | $ | 1.35 | $ | 1.02 | $ | 1.14 | $ | 0.92 | |||||||||
| Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted* | 1.03 | 1.35 | 1.07 | 1.14 | 0.98 | ||||||||||||||
| BALANCE SHEETS | |||||||||||||||||||
| Total assets | $ | 6,710,026 | $ | 6,653,726 | $ | 6,492,348 | $ | 6,149,653 | $ | 6,111,957 | |||||||||
| Total debt | 3,124,303 | 3,004,929 | 3,364,081 | 3,129,440 | 3,079,238 | ||||||||||||||
| Total liabilities | 3,479,112 | 3,367,285 | 3,736,621 | 3,471,096 | 3,405,204 | ||||||||||||||
| Quarter Ended | ||||||||||||||
| 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | ||||||||||
| OPERATING INFORMATION* | ||||||||||||||
| New home sales | 140 | 146 | 134 | 106 | 103 | |||||||||
| Pre-owned home sales | 738 | 825 | 809 | 731 | 747 | |||||||||
| Total homes sold | 878 | 971 | 943 | 837 | 850 | |||||||||
| Communities | 371 | 370 | 367 | 350 | 350 | |||||||||
| Developed sites | 108,963 | 108,142 | 107,192 | 106,617 | 106,036 | |||||||||
| Transient RV sites | 19,491 | 19,432 | 19,007 | 15,693 | 15,856 | |||||||||
| Total sites | 128,454 | 127,574 | 126,199 | 122,310 | 121,892 | |||||||||
| MH occupancy | 95.0 | % | 94.9 | % | 95.0 | % | 94.7 | % | 94.6 | % | ||||
| RV occupancy | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
| Total blended MH and RV occupancy | 96.1 | % | 96.1 | % | 96.1 | % | 95.8 | % | 95.8 | % | ||||
Debt Analysis
(amounts in thousands)
| Quarter Ended | |||||||||||||||||||
| 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | |||||||||||||||
| DEBT OUTSTANDING | |||||||||||||||||||
| Mortgage loans payable | $ | 2,815,957 | $ | 2,819,225 | $ | 2,636,847 | $ | 2,826,225 | $ | 2,867,356 | |||||||||
| Secured borrowings (4) | 107,731 | 113,089 | 118,242 | 124,077 | 129,182 | ||||||||||||||
| Preferred Equity - Sun NG Resorts - mandatorily redeemable | 35,277 | 35,277 | 35,277 | — | — | ||||||||||||||
| Preferred OP units - mandatorily redeemable | 37,338 | 37,338 | 37,338 | 37,338 | 41,443 | ||||||||||||||
| Lines of credit (5) | 128,000 | — | 536,377 | 141,800 | 41,257 | ||||||||||||||
| Total debt | $ | 3,124,303 | $ | 3,004,929 | $ | 3,364,081 | $ | 3,129,440 | $ | 3,079,238 | |||||||||
| % FIXED/FLOATING | |||||||||||||||||||
| Fixed | 95.9 | % | 100.0 | % | 84.0 | % | 90.6 | % | 93.7 | % | |||||||||
| Floating | 4.1 | % | — | % | 16.0 | % | 9.4 | % | 6.3 | % | |||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
| WEIGHTED AVERAGE INTEREST RATES | |||||||||||||||||||
| Mortgage loans payable | 4.22 | % | 4.23 | % | 4.27 | % | 4.25 | % | 4.25 | % | |||||||||
| Preferred Equity - Sun NG Resorts - mandatorily redeemable | 6.00 | % | 6.00 | % | 6.00 | % | — | % | — | % | |||||||||
| Preferred OP units - mandatorily redeemable | 6.61 | % | 6.61 | % | 6.61 | % | 6.61 | % | 6.75 | % | |||||||||
| Lines of credit (5) | 3.77 | % | — | % | 3.31 | % | 3.01 | % | 2.79 | % | |||||||||
| Average before Secured borrowings (4) | 4.25 | % | 4.28 | % | 4.15 | % | 4.22 | % | 4.26 | % | |||||||||
| Secured borrowings (4) | 9.94 | % | 9.95 | % | 9.96 | % | 9.97 | % | 9.97 | % | |||||||||
| Total average | 4.45 | % | 4.50 | % | 4.36 | % | 4.45 | % | 4.50 | % | |||||||||
| DEBT RATIOS | |||||||||||||||||||
| Net Debt / Recurring EBITDA (1) (TTM) | 5.6 | 5.4 | 6.5 | 6.2 | 6.3 | ||||||||||||||
| Net Debt / Enterprise Value | 25.2 | % | 23.9 | % | 28.6 | % | 28.8 | % | 28.2 | % | |||||||||
| Net Debt / Gross Assets | 37.7 | % | 35.9 | % | 42.7 | % | 41.9 | % | 41.8 | % | |||||||||
| COVERAGE RATIOS | |||||||||||||||||||
| Recurring EBITDA (1) (TTM) / Interest | 4.0 | 3.9 | 3.7 | 3.6 | 3.6 | ||||||||||||||
| Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution | 3.9 | 3.8 | 3.6 | 3.4 | 3.3 | ||||||||||||||
| MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||
| Mortgage loans payable: | |||||||||||||||||||
| Maturities | $ | — | $ | 58,078 | $ | 270,680 | $ | 82,155 | $ | 307,465 | |||||||||
| Weighted average rate of maturities | — | % | 5.92 | % | 5.53 | % | 4.46 | % | 4.17 | % | |||||||||
| Principal amortization | 58,164 | 59,630 | 58,843 | 56,822 | 53,437 | ||||||||||||||
| Secured borrowings (4) | 5,265 | 5,746 | 6,171 | 6,379 | 6,374 | ||||||||||||||
| Preferred Equity - Sun NG Resorts - mandatorily redeemable | — | — | — | 35,277 | — | ||||||||||||||
| Preferred OP units - mandatorily redeemable | 2,675 | — | — | — | — | ||||||||||||||
| Lines of credit (5) | — | — | 128,000 | — | — | ||||||||||||||
| Total | $ | 66,104 | $ | 123,454 | $ | 463,694 | $ | 180,633 | $ | 367,276 | |||||||||
Real Property Operations – Same Community(2)
(amounts in thousands except for Other Information)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
| 2018 | 2017 | Change | % Change | 2018 | 2017 | Change | % Change | ||||||||||||||||||||||
| Financial Information | |||||||||||||||||||||||||||||
| Income from real property (12) | $ | 181,147 | $ | 170,565 | $ | 10,582 | 6.2 | % | $ | 746,360 | $ | 703,272 | $ | 43,088 | 6.1 | % | |||||||||||||
| Property Operating Expenses: | |||||||||||||||||||||||||||||
| Payroll and benefits | 15,707 | 15,331 | 376 | 2.5 | % | 66,502 | 65,524 | 978 | 1.5 | % | |||||||||||||||||||
| Legal, taxes & insurance | 2,053 | 1,885 | 168 | 8.9 | % | 9,026 | 7,152 | 1,874 | 26.2 | % | |||||||||||||||||||
| Utilities (12) | 12,000 | 11,596 | 404 | 3.5 | % | 54,949 | 51,480 | 3,469 | 6.7 | % | |||||||||||||||||||
| Supplies and repair (13) | 5,531 | 6,006 | (475 | ) | (7.9 | )% | 26,476 | 25,347 | 1,129 | 4.5 | % | ||||||||||||||||||
| Other | 4,523 | 5,089 | (566 | ) | (11.1 | )% | 22,952 | 21,960 | 992 | 4.5 | % | ||||||||||||||||||
| Real estate taxes | 13,471 | 12,668 | 803 | 6.3 | % | 54,098 | 51,695 | 2,403 | 4.6 | % | |||||||||||||||||||
| Total property operating expenses | 53,285 | 52,575 | 710 | 1.4 | % | 234,003 | 223,158 | 10,845 | 4.9 | % | |||||||||||||||||||
| Real Property NOI(1) | $ | 127,862 | $ | 117,990 | $ | 9,872 | 8.4 | % | $ | 512,357 | $ | 480,114 | $ | 32,243 | 6.7 | % | |||||||||||||
| As of December 31, | |||||||||||||||
| 2018 | 2017 | Change | % Change | ||||||||||||
| Other Information | |||||||||||||||
| Number of properties | 336 | 336 | — | ||||||||||||
| MH occupancy (3) | 97.4 | % | |||||||||||||
| RV occupancy (3) | 100.0 | % | |||||||||||||
| MH & RV blended occupancy % (3) | 98.0 | % | 95.8 | % | 2.2 | % | |||||||||
| Sites available for development | 7,348 | 5,087 | 2,261 | 44.4 | % | ||||||||||
| Monthly base rent per site - MH | $ | 554 | $ | 533 | $ | 21 | 4.0 | % | (15) | ||||||
| Monthly base rent per site - RV (14) | $ | 455 | $ | 431 | $ | 24 | 5.4 | % | (15) | ||||||
| Monthly base rent per site - Total (14) | $ | 532 | $ | 511 | $ | 21 | 4.1 | % | (15) | ||||||
Home Sales Summary
(amounts in thousands except for *)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
| Financial Information | 2018 | 2017 | Change | % Change | 2018 | 2017 | Change | % Change | |||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| New home sales | $ | 16,600 | $ | 12,155 | $ | 4,445 | 36.6 | % | $ | 59,578 | $ | 36,915 | $ | 22,663 | 61.4 | % | |||||||||||||
| Pre-owned home sales | 27,183 | 23,934 | 3,249 | 13.6 | % | 106,453 | 90,493 | 15,960 | 17.6 | % | |||||||||||||||||||
| Revenue from home sales | 43,783 | 36,089 | 7,694 | 21.3 | % | 166,031 | 127,408 | 38,623 | 30.3 | % | |||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||||||
| New home cost of sales | 14,726 | 10,534 | 4,192 | 39.8 | % | 51,913 | 31,578 | 20,335 | 64.4 | % | |||||||||||||||||||
| Pre-owned home cost of sales | 17,412 | 16,581 | 831 | 5.0 | % | 71,420 | 63,536 | 7,884 | 12.4 | % | |||||||||||||||||||
| Cost of home sales | 32,138 | 27,115 | 5,023 | 18.5 | % | 123,333 | 95,114 | 28,219 | 29.7 | % | |||||||||||||||||||
| NOI / Gross Profit (1) | $ | 11,645 | $ | 8,974 | $ | 2,671 | 29.8 | % | $ | 42,698 | $ | 32,294 | $ | 10,404 | 32.2 | % | |||||||||||||
| Gross profit – new homes | $ | 1,874 | $ | 1,621 | $ | 253 | 15.6 | % | $ | 7,665 | $ | 5,337 | $ | 2,328 | 43.6 | % | |||||||||||||
| Gross margin % – new homes | 11.3 | % | 13.3 | % | (2.0 | )% | 12.9 | % | 14.5 | % | (1.6 | )% | |||||||||||||||||
| Average selling price – new homes* | $ | 118,571 | $ | 118,010 | $ | 561 | 0.5 | % | $ | 113,266 | $ | 101,975 | $ | 11,291 | 11.1 | % | |||||||||||||
| Gross profit – pre-owned homes | $ | 9,771 | $ | 7,353 | $ | 2,418 | 32.9 | % | $ | 35,033 | $ | 26,957 | $ | 8,076 | 30.0 | % | |||||||||||||
| Gross margin % – pre-owned homes | 35.9 | % | 30.7 | % | 5.2 | % | 32.9 | % | 29.8 | % | 3.1 | % | |||||||||||||||||
| Average selling price – pre-owned homes* | $ | 36,833 | $ | 32,040 | $ | 4,793 | 15.0 | % | $ | 34,306 | $ | 30,991 | $ | 3,315 | 10.7 | % | |||||||||||||
| Statistical Information | |||||||||||||||||||||||||||||
| New home sales volume* | 140 | 103 | 37 | 35.9 | % | 526 | 362 | 164 | 45.3 | % | |||||||||||||||||||
| Pre-owned home sales volume* | 738 | 747 | (9 | ) | (1.2 | )% | 3,103 | 2,920 | 183 | 6.3 | % | ||||||||||||||||||
| Total homes sold* | 878 | 850 | 28 | 3.3 | % | 3,629 | 3,282 | 347 | 10.6 | % | |||||||||||||||||||
Rental Program Summary
(amounts in thousands except for *)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
| Financial Information | 2018 | 2017 | Change | % Change | 2018 | 2017 | Change | % Change | |||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Rental home revenue | $ | 13,700 | $ | 12,775 | $ | 925 | 7.2 | % | $ | 53,657 | $ | 50,549 | $ | 3,108 | 6.1 | % | |||||||||||||
| Site rent included in Income from real property | 16,370 | 16,027 | 343 | 2.1 | % | 65,615 | 63,833 | 1,782 | 2.8 | % | |||||||||||||||||||
| Rental program revenue | 30,070 | 28,802 | 1,268 | 4.4 | % | 119,272 | 114,382 | 4,890 | 4.3 | % | |||||||||||||||||||
| Expenses: | |||||||||||||||||||||||||||||
| Commissions | 625 | 743 | (118 | ) | (15.9 | )% | 2,291 | 2,734 | (443 | ) | (16.2 | )% | |||||||||||||||||
| Repairs and refurbishment | 2,973 | 1,914 | 1,059 | 55.3 | % | 10,312 | 9,864 | 448 | 4.5 | % | |||||||||||||||||||
| Taxes and insurance | 1,691 | 1,613 | 78 | 4.8 | % | 6,364 | 6,102 | 262 | 4.3 | % | |||||||||||||||||||
| Marketing and other | 1,067 | 934 | 133 | 14.2 | % | 4,132 | 3,414 | 718 | 21.0 | % | |||||||||||||||||||
| Rental program operating and maintenance | 6,356 | 5,204 | 1,152 | 22.1 | % | 23,099 | 22,114 | 985 | 4.5 | % | |||||||||||||||||||
| Rental Program NOI(1) | $ | 23,714 | $ | 23,598 | $ | 116 | 0.5 | % | $ | 96,173 | $ | 92,268 | $ | 3,905 | 4.2 | % | |||||||||||||
| As of December 31, | |||||||||||||||
| Other Information | 2018 | 2017 | Change | % Change | |||||||||||
| Number of occupied rental homes, end of period* | 10,994 | 11,074 | (80 | ) | (0.7 | )% | |||||||||
| Investment in occupied rental homes, end of period | $ | 530,006 | $ | 494,945 | $ | 35,061 | 7.1 | % | |||||||
| Number of sold rental homes (YTD)* | 1,122 | 1,168 | (46 | ) | (3.9 | )% | |||||||||
| Weighted average monthly rental rate, end of period* | $ | 949 | $ | 901 | $ | 48 | 5.3 | % | |||||||
Acquisitions and Other Summary (16)
(amounts in thousands except for statistical data)
| Three Months Ended December 31, 2018 | Year Ended December 31, 2018 | |||||||
| REVENUES: | ||||||||
| Income from real property | $ | 11,270 | $ | 47,406 | ||||
| PROPERTY AND OPERATING EXPENSES: | ||||||||
| Payroll and benefits | 2,534 | 8,151 | ||||||
| Legal, taxes & insurance | 160 | 498 | ||||||
| Utilities(12) | 1,774 | 6,049 | ||||||
| Supplies and repair | 692 | 2,118 | ||||||
| Other | 1,476 | 7,169 | ||||||
| Real estate taxes | 639 | 2,457 | ||||||
| Property operating expenses | 7,275 | 26,442 | ||||||
| NET OPERATING INCOME (NOI) (1) | $ | 3,995 | $ | 20,964 | ||||
| As of December 31, 2018 | ||||||||
| Other information: | ||||||||
| Number of properties | 35 | |||||||
| Occupied sites | 2,778 | |||||||
| Developed sites | 2,816 | |||||||
| Occupancy % | 98.7 | % | ||||||
| Transient sites | 5,179 | |||||||
| Property Summary | |||||||||||||||
| (includes MH and Annual RVs) | |||||||||||||||
| COMMUNITIES | 12/31/2018 | 9/30/2018 | 6/30/2018 | 3/31/2018 | 12/31/2017 | ||||||||||
| FLORIDA | |||||||||||||||
| Communities | 124 | 124 | 124 | 123 | 123 | ||||||||||
| Developed sites (17) | 37,874 | 37,879 | 37,723 | 37,726 | 37,254 | ||||||||||
| Occupied (17) | 36,868 | 36,822 | 36,602 | 36,546 | 36,170 | ||||||||||
| Occupancy % (17) | 97.3 | % | 97.2 | % | 97.0 | % | 96.9 | % | 97.1 | % | |||||
| Sites for development | 1,684 | 1,494 | 1,335 | 1,397 | 1,485 | ||||||||||
| MICHIGAN | |||||||||||||||
| Communities | 70 | 70 | 69 | 68 | 68 | ||||||||||
| Developed sites (17) | 26,504 | 26,116 | 26,039 | 25,881 | 25,881 | ||||||||||
| Occupied (17) | 25,075 | 24,830 | 24,709 | 24,319 | 24,147 | ||||||||||
| Occupancy % (17) | 94.6 | % | 95.1 | % | 94.9 | % | 94.0 | % | 93.3 | % | |||||
| Sites for development | 1,202 | 1,533 | 1,668 | 1,371 | 1,371 | ||||||||||
| TEXAS | |||||||||||||||
| Communities | 23 | 23 | 23 | 21 | 21 | ||||||||||
| Developed sites (17) | 6,922 | 6,905 | 6,622 | 6,614 | 6,601 | ||||||||||
| Occupied (17) | 6,428 | 6,301 | 6,251 | 6,191 | 6,152 | ||||||||||
| Occupancy % (17) | 92.9 | % | 91.3 | % | 94.4 | % | 93.6 | % | 93.2 | % | |||||
| Sites for development | 1,121 | 907 | 1,168 | 1,100 | 1,100 | ||||||||||
| CALIFORNIA | |||||||||||||||
| Communities | 30 | 30 | 29 | 27 | 27 | ||||||||||
| Developed sites (17) | 5,941 | 5,932 | 5,694 | 5,692 | 5,692 | ||||||||||
| Occupied (17) | 5,897 | 5,881 | 5,647 | 5,646 | 5,639 | ||||||||||
| Occupancy % (17) | 99.3 | % | 99.1 | % | 99.2 | % | 99.2 | % | 99.1 | % | |||||
| Sites for development | 56 | 59 | 177 | 389 | 389 | ||||||||||
| ONTARIO, CANADA | |||||||||||||||
| Communities | 15 | 15 | 15 | 15 | 15 | ||||||||||
| Developed sites (17) | 3,845 | 3,832 | 3,752 | 3,650 | 3,634 | ||||||||||
| Occupied (17) | 3,845 | 3,832 | 3,752 | 3,650 | 3,634 | ||||||||||
| Occupancy % (17) | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
| Sites for development | 1,682 | 1,662 | 1,662 | 1,664 | 1,696 | ||||||||||
| ARIZONA | |||||||||||||||
| Communities | 12 | 11 | 11 | 11 | 11 | ||||||||||
| Developed sites (17) | 3,836 | 3,826 | 3,804 | 3,797 | 3,786 | ||||||||||
| Occupied (17) | 3,545 | 3,515 | 3,485 | 3,468 | 3,446 | ||||||||||
| Occupancy % (17) | 92.4 | % | 91.9 | % | 91.6 | % | 91.3 | % | 91.0 | % | |||||
| Sites for development | — | — | — | — | — | ||||||||||
| INDIANA | |||||||||||||||
| Communities | 11 | 11 | 11 | 11 | 11 | ||||||||||
| Developed sites (17) | 3,089 | 3,089 | 3,089 | 3,048 | 2,900 | ||||||||||
| Occupied (17) | 2,772 | 2,778 | 2,791 | 2,785 | 2,756 | ||||||||||
| Occupancy % (17) | 89.7 | % | 89.9 | % | 90.4 | % | 91.4 | % | 95.0 | % | |||||
| Sites for development | 277 | 277 | 277 | 318 | 466 | ||||||||||
| OHIO | |||||||||||||||
| Communities | 9 | 9 | 9 | 9 | 9 | ||||||||||
| Developed sites (17) | 2,770 | 2,770 | 2,767 | 2,756 | 2,759 | ||||||||||
| Occupied (17) | 2,693 | 2,694 | 2,698 | 2,672 | 2,676 | ||||||||||
| Occupancy % (17) | 97.2 | % | 97.3 | % | 97.5 | % | 97.0 | % | 97.0 | % | |||||
| Sites for development | 59 | 59 | 59 | 75 | 75 | ||||||||||
| COLORADO | |||||||||||||||
| Communities | 8 | 8 | 8 | 8 | 8 | ||||||||||
| Developed sites (17) | 2,335 | 2,335 | 2,335 | 2,335 | 2,335 | ||||||||||
| Occupied (17) | 2,320 | 2,313 | 2,319 | 2,327 | 2,325 | ||||||||||
| Occupancy % (17) | 99.4 | % | 99.1 | % | 99.3 | % | 99.7 | % | 99.6 | % | |||||
| Sites for development | 2,129 | 2,129 | 1,819 | 650 | 650 | ||||||||||
| OTHER STATES | |||||||||||||||
| Communities | 69 | 69 | 68 | 57 | 57 | ||||||||||
| Developed sites (17) | 15,847 | 15,458 | 15,367 | 15,118 | 15,194 | ||||||||||
| Occupied (17) | 15,323 | 14,932 | 14,786 | 14,544 | 14,587 | ||||||||||
| Occupancy % (17) | 96.7 | % | 96.6 | % | 96.2 | % | 96.2 | % | 96.0 | % | |||||
| Sites for development | 3,048 | 3,195 | 3,233 | 2,381 | 2,385 | ||||||||||
| TOTAL - PORTFOLIO | |||||||||||||||
| Communities | 371 | 370 | 367 | 350 | 350 | ||||||||||
| Developed sites (17) | 108,963 | 108,142 | 107,192 | 106,617 | 106,036 | ||||||||||
| Occupied (17) | 104,766 | 103,898 | 103,040 | 102,148 | 101,532 | ||||||||||
| Occupancy % (17)(18) | 96.1 | % | 96.1 | % | 96.1 | % | 95.8 | % | 95.8 | % | |||||
| Sites for development (19) | 11,258 | 11,315 | 11,398 | 9,345 | 9,617 | ||||||||||
| % Communities age restricted | 32.1 | % | 32.2 | % | 32.2 | % | 33.7 | % | 33.7 | % | |||||
| TRANSIENT RV PORTFOLIO SUMMARY | |||||||||||||||
| Location | |||||||||||||||
| Florida | 5,917 | 5,786 | 5,942 | 5,870 | 6,074 | ||||||||||
| California | 1,765 | 1,774 | 1,377 | 806 | 806 | ||||||||||
| Texas | 1,752 | 1,758 | 1,776 | 1,360 | 1,373 | ||||||||||
| Arizona | 1,423 | 1,057 | 1,079 | 1,085 | 1,096 | ||||||||||
| Ontario, Canada | 1,046 | 1,056 | 1,133 | 1,234 | 1,248 | ||||||||||
| New York | 925 | 910 | 928 | 610 | 614 | ||||||||||
| New Jersey | 884 | 893 | 906 | 931 | 917 | ||||||||||
| Michigan | 576 | 629 | 350 | 256 | 256 | ||||||||||
| Maine | 572 | 578 | 591 | 591 | 596 | ||||||||||
| Indiana | 519 | 519 | 519 | 519 | 520 | ||||||||||
| Ohio | 150 | 150 | 153 | 148 | 145 | ||||||||||
| Other locations | 3,962 | 4,322 | 4,253 | 2,283 | 2,211 | ||||||||||
| Total transient RV sites | 19,491 | 19,432 | 19,007 | 15,693 | 15,856 | ||||||||||
Capital Improvements, Development, and Acquisitions
(amounts in thousands except for *)
| Recurring Capital Expenditures Average/Site* | Recurring Capital Expenditures (20) | Lot Modifications (21) | Acquisitions (22) | Expansion & Development (23) | Revenue Producing (24) | |||||||||||||
| 2018 | $ | 263 | $ | 24,265 | $ | 22,867 | $ | 414,840 | $ | 152,672 | $ | 3,864 | ||||||
| 2017 | $ | 214 | $ | 14,166 | $ | 18,049 | $ | 204,375 | $ | 88,331 | $ | 1,990 | ||||||
| 2016 | $ | 211 | $ | 17,613 | $ | 19,040 | $ | 1,822,564 | $ | 47,958 | $ | 2,631 | ||||||
Operating Statistics for MH and Annual RVs
| LOCATIONS | Resident Move-outs | Net Leased Sites (25) | New Home Sales | Pre-owned Home Sales | Brokered Re-sales | ||||||||||
| Florida | 1,320 | 862 | 248 | 269 | 1,263 | ||||||||||
| Michigan | 414 | 720 | 75 | 1,539 | 137 | ||||||||||
| Ontario, Canada | 470 | 211 | 39 | 31 | 236 | ||||||||||
| Texas | 235 | 276 | 27 | 375 | 43 | ||||||||||
| Arizona | 78 | 99 | 38 | 16 | 180 | ||||||||||
| Indiana | 53 | 16 | 4 | 240 | 15 | ||||||||||
| Ohio | 77 | 17 | 1 | 148 | 10 | ||||||||||
| California | 48 | 29 | 21 | 7 | 74 | ||||||||||
| Colorado | 5 | (5 | ) | 5 | 98 | 64 | |||||||||
| Other locations | 735 | 375 | 68 | 380 | 125 | ||||||||||
| Year Ended December 31, 2018 | 3,435 | 2,600 | 526 | 3,103 | 2,147 | ||||||||||
| TOTAL FOR YEAR ENDED | Resident Move-outs | New Leased Sites (25) | New Home Sales | Pre-owned Home Sales | Brokered Re-sales | ||||||||||
| 2017 | 2,739 | 2,406 | 362 | 2,920 | 2,006 | ||||||||||
| 2016 | 1,722 | 1,686 | 329 | 2,843 | 1,655 | ||||||||||
| PERCENTAGE TRENDS | Resident Move-outs | Resident Re-sales | ||||
| 2018 | 2.4 | % | 7.2 | % | ||
| 2017 | 1.9 | % | 6.6 | % | ||
| 2016 | 2.0 | % | 6.1 | % | ||
Footnotes and Definitions
(1)Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), and earnings before interest, tax, depreciation and amortization (“EBITDA”) as supplemental performance measures. The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.
• FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles (“GAAP”) depreciation and amortization of real estate assets.
• NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses.
• EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), 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. 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 period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes 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. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.
The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, 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 is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.
NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental 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 measure 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. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.
The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities 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. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.
EBITDA as defined by NAREIT (referred to as “EBITDAre”) is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs. Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs. The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company’s performance on a basis that is independent of capital structure (“Recurring EBITDA”).
The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre. EBITDAre is not intended to be used as a measure of the Company’s cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.
(2) Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2018 actual exchange rates.
(3) The Same Community occupancy percentage for 2018 is derived from 104,059 developed sites, of which 101,988 were occupied. The number of developed sites excludes RV transient sites and approximately 2,100 recently completed but vacant MH expansion sites. The Same Community occupancy percentage for 2017 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.0 percent for MH, 100 percent for RV, and 96.1 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 106,147 developed sites, of which 101,988 were occupied.
(4) This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount.
(5) Lines of credit includes the Company’s MH floor plan facility. The effective interest rate on the MH floor plan facility was 7.0 percent for all periods presented. However, the Company pays no interest if the floor plan balance is repaid within 60 days.
(6) In January 2018, new accounting guidance became effective, which clarified the definition of a business with the objective of assisting entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. Under previous guidance, substantially all of the Company’s property acquisitions were accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred and reported as Transaction costs. Under the new guidance, substantially all of the Company’s property acquisitions are accounted for as asset acquisitions. The purchase price of these properties are allocated on a relative fair value basis and direct acquisition related costs are capitalized as part of the purchase price. Acquisitions costs that do not meet the criteria for capitalization are expensed as incurred.
(7) Other (expense) / income, net was as follows (in thousands):
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Foreign currency translation (loss) / gain | $ | (5,795 | ) | $ | (497 | ) | $ | (8,435 | ) | $ | 5,947 | ||||
| Contingent liability remeasurement gain | 2,621 | 4,139 | 2,336 | 3,035 | |||||||||||
| Long term lease termination expense | (65 | ) | — | (354 | ) | — | |||||||||
| Other (expense) / income, net | $ | (3,239 | ) | $ | 3,642 | $ | (6,453 | ) | $ | 8,982 | |||||
(8) The effect of certain anti-dilutive convertible securities is excluded from these items.
(9) These costs represent the expenses incurred to bring recently acquired properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.
(10) We recorded a total estimated income of $0.3 million and $1.0 million in the Core FFO(1) during the fourth quarter ending December 31, 2017 and the first three quarters of 2018 respectively, for the income related to the loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities. The estimated income was not recorded within our consolidated financial statements during those respective periods in accordance with GAAP. During the three months ended December 31, 2018, we recorded GAAP income of $1.8 million upon notification of payment by the insurance company and adjusted the Core FFO(1) for the previously estimated income of $1.3 million and $0.3 million for the three months and year ended December 31, 2018, respectively.
(11) The renter’s monthly payment includes the site rent and an amount attributable to the home lease. Site rent is reflected in Real Property NOI. For purposes of management analysis, site rent is included in Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of the Rental Program and financial impact on the Company’s operations.
(12) Same Community results net $8.1 million and $7.7 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended December 31, 2018 and 2017, respectively and net $32.2 million and $30.6 million for the year ended December 31, 2018 and 2017, respectively.
(13) Same Community supplies and repair expense excludes $0.1 million and $2.6 million for the three months and year ended December 31, 2017, respectively, of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.
(14) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.
(15) Calculated using actual results without rounding.
(16) Acquisitions and other is comprised of twenty properties acquired in 2018, nine properties acquired in 2017, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, one recently opened ground-up development, one property undergoing redevelopment, one property that we have an interest in, but do not operate, and other miscellaneous transactions and activity.
(17) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.
(18) As of December 31, 2018, total portfolio MH occupancy was 96.1 percent (including the impact of approximately 2,088 recently constructed but vacant MH expansion sites) and annual RV occupancy was 100.0 percent.
(19) Total sites for development were comprised of approximately 71.8 percent for expansion, 23.2 percent for greenfield development and 5.0 percent for redevelopment.
(20) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.
(21) Lot modification capital expenditures improve the asset quality of the community. These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home. These activities, which are mandated by strict manufacturer’s installation requirements and state building code, include items such as new foundations, driveways, and utility upgrades.
(22) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the year ended December 31, 2018 include $94.6 million of capital improvements identified during due diligence that are necessary to bring a community to the Company’s operating standards. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.
(23) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.
(24) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.
(25) Net leased sites do not include occupied sites acquired during that year.
Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.
Attachment
