UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report: October 27, 2015
(Date of earliest event reported)
SUN COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Maryland | 1-12616 | 38-2730780 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
27777 Franklin Rd. | ||
Suite 200 | ||
Southfield, Michigan | 48034 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(248) 208-2500 |
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 | Results of Operations and Financial Condition |
On October 27, 2015, Sun Communities, Inc. (the "Company") issued a press release, furnished as Exhibit 99.1 and incorporated herein by reference, announcing its financial results for the period ended September 30, 2015, and certain other information.
The Company will hold an investor conference call and webcast at 1:00 p.m. ET on October 27, 2015 to disclose and discuss the financial results for the period ended September 30, 2015.
The information contained in this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended.
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits. |
99.1 | Press release issued October 27, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
SUN COMMUNITIES, INC. | |||
Dated: October 27, 2015 | By: | /s/ Karen J. Dearing | |
Karen J. Dearing, Executive Vice President, Chief Financial Officer, Secretary and Treasurer | |||
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release issued October 27, 2015 | |
Exhibit 99.1
NEWS RELEASE
October 27, 2015
Sun Communities, Inc. Reports 2015 Third Quarter Results
Southfield, Michigan, October 27, 2015 - Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates manufactured housing ("MH") and recreational vehicle ("RV") communities, today reported its third quarter results.
Highlights: Three Months Ended September 30, 2015
• | Funds from operations ("FFO")(1) excluding certain items was $1.05 per diluted share and OP unit ("Share") for the three months ended September 30, 2015, representing an 8.2 percent increase over the same period last year. |
• | Same site Net Operating Income ("NOI")(2) increased by 9.1 percent as compared to the three months ended September 30, 2014. |
• | Revenue producing sites increased by 358 sites during the three months ended September 30, 2015, bringing total portfolio occupancy to 93.7 percent. |
• | New home sales more than doubled and pre-owned home sales grew by 13.7 percent as compared to the three months ended September 30, 2014, resulting in total homes sales increasing by 19.5 percent. |
• | Acquired three RV communities for $76.1 million; two in Maryland and one in Florida adding 1,185 developed sites and approximately 290 sites available for expansion. |
• | Sale of three MH communities; two in Ohio and one in Michigan for approximately $32.5 million. Subsequent to the quarter, completed the sale of three MH communities in Indiana for $36.1 million. |
• | Refinanced the Company's senior line of credit; increasing its capacity to $450.0 million, extending its maturity and reducing interest rate spreads. |
• | Obtained $51.2 million in financing for four communities for 25 years at 4.06 percent interest. |
• | Repurchased 4.1 million shares of Series A-4 Cumulative Convertible Preferred Stock for $126.4 million. |
“We continue to successfully execute on our external growth strategy of selecting properties for acquisition with both prime destination locations and strong potential NOI growth, while divesting of communities that no longer meet our long-term objectives," said Gary A. Shiffman, Chairman and CEO. “As a result of our strong operating performance, the benefits of our high-quality acquisitions and the ongoing strengthening of our balance sheet, the Company is building a strong foundation for long-term growth for our shareholders,” Shiffman added.
Sun Communities, Inc. 3rd Quarter 2015 Page 2
Funds from Operations ("FFO")(1)
FFO(1) excluding certain items was $61.5 million and $42.1 million, or $1.05 and $0.97 per Share, for the three months ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, FFO(1) excluding certain items was $158.5 million and $113.2 million, or $2.83 and $2.72 per Share, respectively.
Net Income Attributable to Common Stockholders
Net income attributable to common stockholders for the third quarter of 2015 was $28.8 million, or $0.54 per diluted common share, as compared to net income of $22.7 million, or $0.55 per diluted common share, for the third quarter of 2014.
Net income attributable to common stockholders for the nine months ended September 30, 2015 was $47.9 million, or $0.90 per diluted common share, as compared to net income of $35.4 million , or $0.85 per diluted common share, for the nine months ended September 30, 2014.
Community Occupancy
Total portfolio occupancy increased to 93.7 percent at September 30, 2015 from 92.5 percent at September 30, 2014. During the third quarter of 2015, revenue producing sites increased by 358 sites, as compared to 428 revenue producing sites gained in the third quarter of 2014.
Revenue producing sites increased by 1,357 sites for the nine months ended September 30, 2015 as compared to 1,415 revenue producing sites gained during the nine months ended September 30, 2014.
Same Site Results
For the 174 communities owned throughout 2015 and 2014, third quarter 2015 total revenues increased 7.4 percent and total expenses increased 3.7 percent, resulting in an increase in NOI(2) of 9.1 percent over the third quarter of 2014. Same site occupancy increased to 95.0 percent at September 30, 2015 from 93.5 percent at September 30, 2014.
For the nine months ended September 30, 2015, total revenues increased 7.5 percent and total expenses increased 3.6 percent, resulting in an increase in NOI(2) of 9.2 percent over the nine months ended September 30, 2014.
Home Sales
The Company sold 60 new homes during the third quarter of 2015, representing an increase of 130.8 percent as compared to the same three month period in 2014. Total home sales were 626 for the third quarter as compared to 524 homes sold during the third quarter of 2014, a 19.5 percent increase. Total home sales gross profit margins were 29.5 percent, an increase of 520 basis points when compared to the same period in 2014.
During the nine months ended September 30, 2015, 1,745 homes were sold compared to the 1,414 homes sold during the same period ending 2014, resulting in an additional 331 homes sold during 2015, or a 23.4
Sun Communities, Inc. 3rd Quarter 2015 Page 3
percent increase. Total home sales gross profit margins were 27.3 percent, an increase of 320 basis points when compared to the same period in 2014.
Rental homes sales, which are included in total home sales, were 611 and 562 for the nine months ended September 30, 2015 and 2014.
Acquisitions (3)
As previously announced, the Company acquired three recreational vehicle communities for $76.1 million in cash; two in Maryland and one in Florida. The properties contain 1,185 developed sites and approximately 290 sites available for expansion. These high quality resorts compliment the Company's geographic mix in the highly desirable areas of Ocean City, Maryland and Central Florida.
Since March of this year the Company has acquired 12 communities (8 manufactured home communities and 4 recreational vehicle resorts) for approximately $400.0 million resulting in the addition of over 5,300 developed sites to the portfolio.
Dispositions
The Company completed the sale of the six manufactured home communities that was announced in its second quarter earnings press release in two separate closings. On August 19, 2015, three of the manufactured home communities, associated homes and notes, (two in Ohio and one in Michigan) comprised of approximately 900 developed sites were sold for $32.5 million. On October 16, 2015, the Company sold the three remaining manufactured home communities, associated homes and notes for $36.1 million. The properties were located in Indiana and contained approximately 1,250 developed sites. Proceeds from the dispositions were used to pay down the Company's line of credit.
“We continue to evaluate a steady flow of both manufactured home communities and recreational vehicle resort acquisition opportunities and seek to capitalize on our opportunity to re-cycle funds from our dispositions into purchased communities which provide higher long term value for our shareholders,” said Shiffman.
Debt Transactions
As previously disclosed, the Company entered into a senior line of credit facility in the amount of $450.0 million (the "Facility"). The Facility is comprised of a $392.0 million revolving loan and a $58.0 million term loan and has an accordion feature allowing up to $300.0 million in additional borrowing upon the satisfaction of certain conditions. The four-year facility also contains two six-month extension options and bears interest at a floating rate based on Eurodollar plus a margin that is determined based on the Company's leverage ratio, which can range from 1.40% to 2.25% for the revolving loan and 1.35% to 2.20% for the term loan. The Facility replaced the Company's $350.0 million senior secured revolving line of credit which was scheduled to mature on May 14, 2017.
The Company entered into an agreement in August 2015 to borrow $87.0 million in mortgage debt that will be secured by five communities at an interest rate of 4.06% for a term of 25 years and will be completed in two separate closings. On September 24, 2015, the Company completed the first closing for $51.2 million secured by four communities. The second closing, for $35.8 million, is scheduled to close in December 2015.
Sun Communities, Inc. 3rd Quarter 2015 Page 4
Equity Transactions
As previously announced, the Company repurchased 4,066,586 shares of the Company’s 6.50% Series A-4 Cumulative Convertible Preferred Stock pursuant to a repurchase agreement with certain holders. Each Series A-4 preferred share was purchased at a price equal to $30.90 plus $0.18 for accrued and unpaid distributions through August 9, 2015. In aggregate the Company repurchase totaled $126.4 million, which was funded using the Company's line of credit. After the repurchase there are 2,298,184 Series A-4 preferred shares outstanding.
The Company sold 608,100 common shares using its at-the-market program at an average sales price of $68.00 for net proceeds of $40.8 million during the three months ended September 30, 2015, which were used to pay down the Company's line of credit.
Guidance
The Company is narrowing the range of its previously provided guidance for full year 2015 FFO(1) excluding certain items to $3.65 - $3.69 per Share. The guidance provided is subject to the estimates and assumptions previously disclosed and the following: (a) includes all acquisitions and dispositions completed through October 27, 2015, but no prospective acquisitions or dispositions and (b) the assumption that certain non-core items are adjusted from FFO(1) as noted in the table contained in this press release.
The estimates and assumptions presented above 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.”
Sun Communities, Inc. 3rd Quarter 2015 Page 5
Earnings Conference Call
A conference call to discuss third quarter operating results will be held on Tuesday October 27, 2015 at 1:00 P.M. (ET). To participate, call toll-free 888-427-9411. Callers outside the U.S. or Canada can access the call at 719-457-2689. A replay will be available following the call through November 10, 2015, and can be accessed toll-free by calling 888-203-1112 or by calling 719-457-0820. The Conference ID number for the call and the replay is 669598. The conference call will be available live on Sun Communitie's 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 248 communities comprising approximately 92,500 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 email investorrelations@suncommunities.com or by mail Sun Communities, Inc. Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.
Sun Communities, Inc. 3rd Quarter 2015 Page 6
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, 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 the Company's 2014 Annual Report on Form 10-K, 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.
Sun Communities, Inc. 3rd Quarter 2015 Page 7
(1) | Funds from operations attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities ("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. |
(3) | The consideration amounts presented with respect to acquired communities represent the economic transaction and do not contemplate the fair value purchase accounting required by GAAP. |
Sun Communities, Inc. 3rd Quarter 2015 Page 8
Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited) September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Land | $ | 457,279 | $ | 309,386 | |||
Land improvements and buildings | 3,604,444 | 2,509,827 | |||||
Rental homes and improvements | 478,764 | 439,163 | |||||
Furniture, fixtures, and equipment | 98,567 | 81,586 | |||||
Land held for future development | 23,659 | 23,955 | |||||
Investment property | 4,662,713 | 3,363,917 | |||||
Accumulated depreciation | (879,184 | ) | (795,753 | ) | |||
Investment property, net (including $92,593 and $94,230 for consolidated variable interest entities at September 30, 2015 and December 31, 2014) | $ | 3,783,529 | $ | 2,568,164 | |||
Cash and cash equivalents | 23,917 | 83,459 | |||||
Inventory of manufactured homes | 15,263 | 8,860 | |||||
Notes and other receivables, net | 49,201 | 51,895 | |||||
Collateralized receivables, net | 138,241 | 122,962 | |||||
Other assets, net | 104,452 | 102,352 | |||||
TOTAL ASSETS | $ | 4,114,603 | $ | 2,937,692 | |||
LIABILITIES | |||||||
Mortgage loans payable (including $64,531 and $65,849 for consolidated variable interest entities at September 30, 2015 and December 31, 2014) | $ | 2,205,760 | $ | 1,656,740 | |||
Secured borrowings on collateralized receivables | 138,887 | 123,650 | |||||
Preferred OP units - mandatorily redeemable | 45,903 | 45,903 | |||||
Lines of credit | 167,000 | 5,794 | |||||
Distributions payable | 38,819 | 35,084 | |||||
Other liabilities (including $19,474 and $10,442 for consolidated variable interest entities at September 30, 2015 and December 31, 2014) | 190,284 | 130,369 | |||||
TOTAL LIABILITIES | $ | 2,786,653 | $ | 1,997,540 | |||
Commitments and contingencies | |||||||
Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 2,298 shares at September 30, 2015 and 483 shares at December 31, 2014 | $ | 68,633 | $ | 13,610 | |||
Series A-4 preferred OP units | $ | 20,982 | $ | 18,722 | |||
STOCKHOLDERS’ EQUITY | |||||||
Series A preferred stock, $0.01 par value. Issued and outstanding: 3,400 shares at September 30, 2015 and December 31, 2014 | $ | 34 | $ | 34 | |||
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 54,546 shares at September 30, 2015 and 48,573 shares at December 31, 2014 | 545 | 486 | |||||
Additional paid-in capital | 2,079,139 | 1,741,154 | |||||
Distributions in excess of accumulated earnings | (916,961 | ) | (863,545 | ) | |||
Total Sun Communities, Inc. stockholders' equity | 1,162,757 | 878,129 | |||||
Noncontrolling interests: | |||||||
Common and preferred OP units | 76,914 | 30,107 | |||||
Consolidated variable interest entities | (1,336 | ) | (416 | ) | |||
Total noncontrolling interest | 75,578 | 29,691 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 1,238,335 | 907,820 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,114,603 | $ | 2,937,692 | |||
Sun Communities, Inc. 3rd Quarter 2015 Page 9
Consolidated Statements of Operations
Unaudited - dollars in thousands, except per share amounts
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
REVENUES | |||||||||||||||
Income from real property | $ | 137,548 | $ | 94,245 | $ | 382,906 | $ | 267,847 | |||||||
Revenue from home sales | 18,991 | 13,913 | 54,559 | 38,849 | |||||||||||
Rental home revenue | 11,856 | 9,829 | 34,480 | 28,964 | |||||||||||
Ancillary revenues | 12,511 | 8,762 | 20,956 | 15,452 | |||||||||||
Interest | 3,987 | 3,545 | 11,864 | 10,425 | |||||||||||
Brokerage commissions and other income, net | 462 | 338 | 1,728 | 720 | |||||||||||
Total revenues | 185,355 | 130,632 | 506,493 | 362,257 | |||||||||||
COSTS AND EXPENSES | |||||||||||||||
Property operating and maintenance | 38,716 | 28,031 | 102,437 | 76,413 | |||||||||||
Real estate taxes | 8,520 | 6,004 | 26,031 | 18,092 | |||||||||||
Cost of home sales | 13,386 | 10,524 | 39,645 | 29,472 | |||||||||||
Rental home operating and maintenance | 7,031 | 6,232 | 18,115 | 16,696 | |||||||||||
Ancillary expenses | 6,936 | 5,197 | 13,631 | 10,254 | |||||||||||
General and administrative - real property | 10,735 | 6,971 | 31,051 | 23,177 | |||||||||||
General and administrative - home sales and rentals | 3,845 | 2,313 | 11,290 | 7,932 | |||||||||||
Transaction costs | 1,664 | 2,399 | 13,150 | 4,263 | |||||||||||
Depreciation and amortization | 44,695 | 29,917 | 130,107 | 88,851 | |||||||||||
Asset impairment charge | — | 837 | — | 837 | |||||||||||
Extinguishment of debt | — | — | 2,800 | — | |||||||||||
Interest | 27,453 | 18,619 | 79,593 | 54,149 | |||||||||||
Interest on mandatorily redeemable preferred OP units | 790 | 808 | 2,429 | 2,417 | |||||||||||
Total expenses | 163,771 | 117,852 | 470,279 | 332,553 | |||||||||||
Income before other gains (losses) | 21,584 | 12,780 | 36,214 | 29,704 | |||||||||||
Gain on disposition of properties, net | 18,190 | 13,631 | 26,946 | 14,516 | |||||||||||
Provision for state income taxes | (77 | ) | (69 | ) | (229 | ) | (207 | ) | |||||||
Distributions from affiliate | — | 400 | 7,500 | 1,200 | |||||||||||
Net income | 39,697 | 26,742 | 70,431 | 45,213 | |||||||||||
Less: Preferred return to Series A-1 preferred OP units | 591 | 661 | 1,844 | 1,997 | |||||||||||
Less: Preferred return to Series A-3 preferred OP units | 45 | 45 | 136 | 136 | |||||||||||
Less: Preferred return to Series A-4 preferred OP units | 326 | — | 1,032 | — | |||||||||||
Less: Preferred return to Series C preferred OP units | 340 | — | 680 | — | |||||||||||
Less: Amounts attributable to noncontrolling interests | 2,125 | 1,851 | 3,132 | 3,093 | |||||||||||
Net income attributable to Sun Communities, Inc. | 36,270 | 24,185 | 63,607 | 39,987 | |||||||||||
Less: Preferred stock distributions | 3,179 | 1,514 | 11,353 | 4,542 | |||||||||||
Less: Preferred stock redemption costs | 4,328 | — | 4,328 | — | |||||||||||
Net income attributable to Sun Communities, Inc. common stockholders | $ | 28,763 | $ | 22,671 | $ | 47,926 | $ | 35,445 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 53,220 | 41,023 | 52,855 | 39,283 | |||||||||||
Diluted | 53,665 | 41,267 | 53,271 | 41,575 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.53 | $ | 0.55 | $ | 0.90 | $ | 0.89 | |||||||
Diluted | $ | 0.54 | $ | 0.55 | $ | 0.90 | $ | 0.85 | |||||||
Sun Communities, Inc. 3rd Quarter 2015 Page 10
Reconciliation of Net Income to FFO(1)
(in thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income attributable to Sun Communities, Inc. common stockholders | $ | 28,763 | $ | 22,671 | $ | 47,926 | $ | 35,445 | |||||||
Adjustments: | |||||||||||||||
Amounts attributable to noncontrolling interests | 1,174 | 1,220 | 1,554 | 2,067 | |||||||||||
Preferred distribution to Series A-4 preferred stock | 1,666 | — | — | — | |||||||||||
Depreciation and amortization | 45,014 | 30,229 | 130,247 | 89,772 | |||||||||||
Asset impairment charge | — | 837 | — | 837 | |||||||||||
Gain on disposition of properties, net | (18,190 | ) | (13,631 | ) | (26,946 | ) | (14,516 | ) | |||||||
Gain on disposition of assets, net | (2,937 | ) | (1,634 | ) | (7,065 | ) | (4,663 | ) | |||||||
Funds from operations ("FFO") attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1)(4) | 55,490 | 39,692 | 145,716 | 108,942 | |||||||||||
Adjustments: | |||||||||||||||
Distribution from affiliate | — | — | (7,500 | ) | — | ||||||||||
Transaction costs | 1,664 | 2,399 | 13,150 | 4,263 | |||||||||||
Preferred stock redemption costs | 4,328 | — | 4,328 | — | |||||||||||
Extinguishment of debt | — | — | 2,800 | — | |||||||||||
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items (1)(4) | $ | 61,482 | $ | 42,091 | $ | 158,494 | $ | 113,205 | |||||||
Weighted average common shares outstanding - basic: | 53,220 | 41,023 | 52,855 | 39,283 | |||||||||||
Add: | |||||||||||||||
Common stock issuable upon conversion of stock options | 14 | 15 | 16 | 16 | |||||||||||
Restricted stock | 431 | 229 | 400 | 207 | |||||||||||
Common OP units | 2,874 | 2,069 | 2,783 | 2,069 | |||||||||||
Common stock issuable upon conversion of Series A-4 preferred stock | 1,826 | — | — | — | |||||||||||
Weighted average common shares outstanding - fully diluted | 58,365 | 43,336 | 56,054 | 41,575 | |||||||||||
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) per Share - fully diluted | $ | 0.95 | $ | 0.92 | $ | 2.60 | $ | 2.62 | |||||||
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items(1) per Share - fully diluted | $ | 1.05 | $ | 0.97 | $ | 2.83 | $ | 2.72 | |||||||
(4) The effect of certain anti-dilutive convertible securities is excluded from these items.
Sun Communities, Inc. 3rd Quarter 2015 Page 11
Statement of Operations – Same Site
(in thousands except for Other Information)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2015 | 2014 | Change | % Change | 2015 | 2014 | Change | % Change | ||||||||||||||||||||||
REVENUES: | |||||||||||||||||||||||||||||
Income from real property | $ | 84,972 | $ | 79,107 | $ | 5,865 | 7.4 | % | $ | 248,082 | $ | 230,860 | $ | 17,222 | 7.5 | % | |||||||||||||
PROPERTY OPERATING EXPENSES: | |||||||||||||||||||||||||||||
Payroll and benefits | 6,996 | 7,217 | (221 | ) | (3.1 | )% | 20,793 | 19,783 | 1,010 | 5.1 | % | ||||||||||||||||||
Legal, taxes, & insurance | 1,436 | 1,285 | 151 | 11.8 | % | 4,203 | 3,602 | 601 | 16.7 | % | |||||||||||||||||||
Utilities | 5,440 | 4,747 | 693 | 14.6 | % | 14,961 | 14,555 | 406 | 2.8 | % | |||||||||||||||||||
Supplies and repair | 4,119 | 3,654 | 465 | 12.7 | % | 9,538 | 9,221 | 317 | 3.4 | % | |||||||||||||||||||
Other | 2,706 | 2,559 | 147 | 5.7 | % | 7,386 | 7,084 | 302 | 4.3 | % | |||||||||||||||||||
Real estate taxes | 5,336 | 5,639 | (303 | ) | (5.4 | )% | 16,689 | 16,768 | (79 | ) | (0.5 | )% | |||||||||||||||||
Property operating expenses | 26,033 | 25,101 | 932 | 3.7 | % | 73,570 | 71,013 | 2,557 | 3.6 | % | |||||||||||||||||||
NET OPERATING INCOME ("NOI")(3) | $ | 58,939 | $ | 54,006 | $ | 4,933 | 9.1 | % | $ | 174,512 | $ | 159,847 | $ | 14,665 | 9.2 | % | |||||||||||||
As of September 30, | ||||||||||||
OTHER INFORMATION | 2015 | 2014 | Change | |||||||||
Number of properties | 174 | 174 | — | |||||||||
Developed sites | 66,020 | 65,340 | 680 | |||||||||
Occupied sites (5) | 55,699 | 53,750 | 1,949 | |||||||||
Occupancy % (5) (6) | 95.0 | % | 93.5 | % | 1.5 | % | ||||||
Weighted average monthly rent per site - MH | $ | 472 | $ | 457 | $ | 15 | ||||||
Weighted average monthly rent per site - RV (7) | $ | 407 | $ | 394 | $ | 13 | ||||||
Weighted average monthly rent per site - Total | $ | 463 | $ | 449 | $ | 14 | ||||||
Sites available for development | 5,797 | 6,118 | (321 | ) | ||||||||
(5) Includes manufactured housing and annual/seasonal recreational vehicle sites, and excludes transient recreational vehicle sites, which are included in total developed sites.
(6) Occupancy % excludes recently completed but vacant expansion sites.
(7) Weighted average rent pertains to annual/seasonal RV sites and excludes transient RV sites.
Sun Communities, Inc. 3rd Quarter 2015 Page 12
Rental Program Summary
(amounts in thousands except for *)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2015 | 2014 | Change | % Change | 2015 | 2014 | Change | % Change | ||||||||||||||||||||||
REVENUES: | |||||||||||||||||||||||||||||
Rental home revenue | $ | 11,856 | $ | 9,829 | $ | 2,027 | 20.6 | % | $ | 34,480 | $ | 28,964 | $ | 5,516 | 19.0 | % | |||||||||||||
Site rent included in Income from real property | 15,762 | 13,543 | 2,219 | 16.4 | % | 46,440 | 40,159 | 6,281 | 15.6 | % | |||||||||||||||||||
Rental Program revenue | 27,618 | 23,372 | 4,246 | 18.2 | % | 80,920 | 69,123 | 11,797 | 17.1 | % | |||||||||||||||||||
EXPENSES: | |||||||||||||||||||||||||||||
Commissions | 855 | 677 | 178 | 26.3 | % | 2,441 | 1,899 | 542 | 28.5 | % | |||||||||||||||||||
Repairs and refurbishment | 3,389 | 3,049 | 340 | 11.2 | % | 8,127 | 7,859 | 268 | 3.4 | % | |||||||||||||||||||
Taxes and insurance | 1,645 | 1,313 | 332 | 25.3 | % | 4,665 | 3,935 | 730 | 18.6 | % | |||||||||||||||||||
Marketing and other | 1,142 | 1,193 | (51 | ) | (4.3 | )% | 2,882 | 3,003 | (121 | ) | (4.0 | )% | |||||||||||||||||
Rental Program operating and maintenance | 7,031 | 6,232 | 799 | 12.8 | % | 18,115 | 16,696 | 1,419 | 8.5 | % | |||||||||||||||||||
NET OPERATING INCOME ("NOI") (3) | $ | 20,587 | $ | 17,140 | $ | 3,447 | 20.1 | % | $ | 62,805 | $ | 52,427 | $ | 10,378 | 19.8 | % | |||||||||||||
Occupied rental home information as of September 30, 2015 and 2014: | |||||||||||||||||||||||||||||
Number of occupied rentals, end of period* | 11,443 | 10,116 | 1,327 | 13.1 | % | ||||||||||||||||||||||||
Investment in occupied rental homes | $ | 456,027 | $ | 389,634 | $ | 66,393 | 17.0 | % | |||||||||||||||||||||
Number of sold rental homes* | 611 | 562 | 49 | 8.7 | % | ||||||||||||||||||||||||
Weighted average monthly rental rate, end of period* | $ | 843 | $ | 816 | $ | 27 | 3.3 | % | |||||||||||||||||||||
Sun Communities, Inc. 3rd Quarter 2015 Page 13
Homes Sales Summary
(amounts in thousands except for *)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2015 | 2014 | Change | % Change | 2015 | 2014 | Change | % Change | ||||||||||||||||||||||
New home sales | $ | 4,469 | $ | 2,250 | $ | 2,219 | 98.6 | % | $ | 14,890 | $ | 6,825 | $ | 8,065 | 118.2 | % | |||||||||||||
Pre-owned home sales | 14,522 | 11,663 | 2,859 | 24.5 | % | 39,669 | 32,024 | 7,645 | 23.9 | % | |||||||||||||||||||
Revenue from home sales | 18,991 | 13,913 | 5,078 | 36.5 | % | 54,559 | 38,849 | 15,710 | 40.4 | % | |||||||||||||||||||
New home cost of sales | 3,739 | 1,910 | 1,829 | 95.8 | % | 12,348 | 5,785 | 6,563 | 113.4 | % | |||||||||||||||||||
Pre-owned home cost of sales | 9,647 | 8,614 | 1,033 | 12.0 | % | 27,297 | 23,687 | 3,610 | 15.2 | % | |||||||||||||||||||
Cost of home sales | 13,386 | 10,524 | 2,862 | 27.2 | % | 39,645 | 29,472 | 10,173 | 34.5 | % | |||||||||||||||||||
NOI / Gross Profit (2) | $ | 5,605 | $ | 3,389 | $ | 2,216 | 65.4 | % | $ | 14,914 | $ | 9,377 | $ | 5,537 | 59.0 | % | |||||||||||||
Gross profit – new homes | $ | 730 | $ | 340 | $ | 390 | 114.7 | % | $ | 2,542 | $ | 1,040 | $ | 1,502 | 144.4 | % | |||||||||||||
Gross margin % – new homes | 16.3 | % | 15.1 | % | 1.2 | % | 17.1 | % | 15.2 | % | 1.9 | % | |||||||||||||||||
Average selling price - new homes* | $ | 74,485 | $ | 86,482 | $ | (11,997 | ) | (13.9 | )% | $ | 77,956 | $ | 85,306 | $ | (7,350 | ) | (8.6 | )% | |||||||||||
Gross profit – pre-owned homes | $ | 4,875 | $ | 3,049 | $ | 1,826 | 59.9 | % | $ | 12,372 | $ | 8,337 | $ | 4,035 | 48.4 | % | |||||||||||||
Gross margin % – pre-owned homes | 33.6 | % | 26.1 | % | 7.5 | % | 31.2 | % | 26.0 | % | 5.2 | % | |||||||||||||||||
Average selling price - pre-owned homes* | $ | 25,658 | $ | 23,435 | $ | 2,223 | 9.5 | % | $ | 25,527 | $ | 24,011 | $ | 1,516 | 6.3 | % | |||||||||||||
Home sales volume: | |||||||||||||||||||||||||||||
New home sales* | 60 | 26 | 34 | 130.8 | % | 191 | 80 | 111 | 138.8 | % | |||||||||||||||||||
Pre-owned home sales* | 566 | 498 | 68 | 13.7 | % | 1,554 | 1,334 | 220 | 16.5 | % | |||||||||||||||||||
Total homes sold* | 626 | 524 | 102 | 19.5 | % | 1,745 | 1,414 | 331 | 23.4 | % | |||||||||||||||||||
Sun Communities, Inc. 3rd Quarter 2015 Page 14
Acquisition Summary - Properties Acquired in 2014 and 2015
(amounts in thousands except for statistical data)
Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | ||||||
REVENUES: | |||||||
Income from real property (excluding transient revenue) | $ | 37,148 | $ | 103,286 | |||
Transient revenue | 9,808 | 13,500 | |||||
Revenue from home sales | 5,366 | 14,880 | |||||
Rental home revenue | 683 | 2,121 | |||||
Ancillary revenues | 7,143 | 9,909 | |||||
Total revenues | 60,148 | 143,696 | |||||
COSTS AND EXPENSES: | |||||||
Property operating and maintenance | 11,936 | 28,575 | |||||
Real estate taxes | 3,130 | 8,794 | |||||
Cost of home sales | 4,001 | 11,515 | |||||
Rental home operating and maintenance | 294 | 527 | |||||
Ancillary expense | 3,630 | 5,322 | |||||
Total expenses | 22,991 | 54,733 | |||||
NET OPERATING INCOME ("NOI") (2) | $ | 37,157 | $ | 88,963 | |||
As of September 30, 2015 | |||||||
Other information: | |||||||
Number of properties | 77 | ||||||
Developed sites | 27,698 | ||||||
Occupied sites (5) | 22,832 | ||||||
Occupancy % (5) | 92.4 | % | |||||
Weighted average monthly rent per site - MH | $ | 486 | |||||
Weighted average monthly rent per site - RV (7) | $ | 425 | |||||
Weighted average monthly rent per site - MH/RV | $ | 483 | |||||
Home sales volume: | |||||||
New homes | 118 | ||||||
Pre-owned homes | 310 | ||||||
Occupied rental home information: | |||||||
Number of occupied rentals, end of period | 491 | ||||||
Investment in occupied rental homes (in thousands) | $ | 14,085 | |||||
Weighted average monthly rental rate | $ | 994 | |||||
(5) Includes manufactured housing and annual/seasonal recreational vehicle sites, and excludes transient recreational vehicle sites, which are included in total developed sites.
(7) Weighted average rent pertains to annual/seasonal RV sites and excludes transient RV sites.
Sun Communities, Inc. 3rd Quarter 2015 Page 15