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: August 2, 2016
(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 August 2, 2016, 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 June 30, 2016, and certain other information.
The Company will hold an investor conference call and webcast at 11:00 a.m. ET on August 2, 2016 to disclose and discuss the financial results for the period ended June 30, 2016.
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 8.01 | Other Events |
Supplemental Material U.S. Federal Income Tax Considerations
The following information included in this Item 8.01 of this Current Report on Form 8-K is a summary of certain additional material U.S. federal income tax considerations with respect to the ownership of the Company’s capital stock and other securities. This summary supplements and, where applicable, supersedes the discussion under the heading “Material U.S. Federal Income Tax Considerations” in each of (a) the prospectus dated April 17, 2015, which is part of the Company’s Registration Statement on Form S-3 (File No. 333-203498), (b) the prospectus dated April 17, 2015, which is part of the Company’s Registration Statement on Form S-3 (File No. 333-203502), and (c) the prospectus dated June 12, 2015, which is part of the Company’s Registration Statement on Form S-3 (File No. 333-204911) (collectively, the “Prospectuses”). The following information should be read together with such discussion for a more detailed summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of the Company’s capital stock and other securities and its election to be taxed as a REIT under the Internal Revenue Code of 1986, as amended.
Tax on Built-In Gains
On June 7, 2016, the IRS and Treasury Department issued temporary regulations changing the recognition period for the corporate tax on built-in gains described in the discussion under the tenth bullet point under “U.S. Federal Income Tax Considerations-Taxation of Sun as a REIT” in each of the Prospectuses, as supplemented by Item 8.01 of the Company’s Current Report on Form 8-K filed March 15, 2016. Prior to August 8, 2016, the recognition period applicable to us with respect to an asset with built-in gain is the five-year period beginning on the day the asset was acquired. Effective for assets with built-in gain acquired on or after August 2, 2016, the recognition period will be the ten-year period beginning on the day the asset was acquired. This change is temporary and is set to expire on June 7, 2019.
Item 9.01 | Financial Statements and Exhibits |
Exhibit No. | Description |
99.1 | Press release dated August 2, 2016 |
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: August 2, 2016 | 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 August 2, 2016 | |
NEWS RELEASE
August 2, 2016
Sun Communities, Inc. Reports 2016 Second Quarter Results
Southfield, Michigan, August 2, 2016 - 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 second quarter results.
Highlights: Three Months Ended June 30, 2016
• | Funds from operations ("FFO")(1) excluding certain items was $0.85 per diluted share and OP unit ("Share") for the three months ended June 30, 2016. |
• | Home sales increased by 30.2 percent as compared to the second quarter of 2015. |
• | Revenue producing sites increased by 501 sites for the quarter bringing total portfolio occupancy to 96.1 percent. |
• | Same community Net Operating Income ("NOI")(2) increased by 6.9 percent as compared to the three months ended June 30, 2015. |
• | Closed on the Carefree acquisition, a 103 community portfolio of MH and RV communities concentrated in Florida, California and Ontario, Canada. |
"We delivered impressive second quarter results while working to close and begin the integration of the Carefree portfolio a month ahead of schedule,” said Gary A. Shiffman, Chairman and CEO. “We achieved same community NOI growth of 6.9 percent spurred by weighted average rent increases of 3.2% and occupancy gains of 250 basis points since June of 2015. In addition, we successfully added 501 rent producing sites to the portfolio and converted 278 rental sites to owners. Home sales remain strong as well with a unit increase of 30 percent in the quarter. With the closing of Carefree behind us, we are focusing our efforts on its successful integration as we implement our practices to make Carefree as productive as the balance of our platform.”
Sun Communities, Inc. 2nd Quarter 2016 Page 2
FINANCIAL HIGHLIGHTS
(amounts in thousands)
Three Months Ended June 30, 2016 | ||||||||||||||
2016 | 2015 | Change | % Change | |||||||||||
FFO per Share excluding certain items - fully diluted(1) | $ | 0.85 | $ | 0.87 | $ | (0.02 | ) | (2.3 | )% | |||||
EBITDA (3) | $ | 94,882 | $ | 84,862 | $ | 10,020 | 11.8 | % | ||||||
Diluted Earnings per Share | $ | (0.12 | ) | $ | 0.23 | $ | (0.35 | ) | (152.2 | )% | ||||
Previously communicated second quarter 2016 FFO(1) guidance was $0.79 to $0.81 per Share. The early close of the Carefree acquisition on June 9, 2016 reduced dilution from the issuance of equity prior to the closing of the transaction from $0.08 per Share to $0.06 per Share. The partial month contribution from Carefree was $0.01 per Share and strong performance from Sun’s portfolio contributed an additional $0.02 FFO(1) per Share for the quarter.
OPERATING HIGHLIGHTS
Community Occupancy
Total portfolio occupancy increased to 96.1 percent at June 30, 2016 from 93.5 percent at June 30, 2015 from a combination of occupancy gains, the acquisition of properties with higher occupancy and the disposition of properties with lower occupancy. During the second quarter of 2016, revenue producing sites increased by 501, as compared to 500 revenue producing sites gained in the second quarter of 2015.
Revenue producing sites increased by 1,093 for the six months ended June 30, 2016 as compared to 999 revenue producing sites gained during the six months ended June 30, 2015.
Same Community Results
For the 219 communities owned throughout 2016 and 2015, second quarter 2016 total revenues increased 5.6 percent and total expenses increased 2.7 percent, resulting in an increase in NOI(2) of 6.9 percent over the second quarter of 2015. The results were primarily driven by 250 basis points of occupancy gain to 96.4 percent and a weighted average rent increase of 3.2 percent compared to the same period last year.
For the six months ended June 30, 2016, total revenues increased by 6.1 percent and total expenses increased by 4.8 percent, resulting in an increase in NOI(2) of 6.6 percent over the six months ended June 30, 2015.
Home Sales
Total home sales were 750 for the second quarter as compared to 576 homes sold during the second quarter of 2015, a 30.2 percent increase, driven by the sale of an additional 180 pre-owned homes.
Rental homes sales, which are included in total home sales, were 278 and 207 for the quarter ended June 30, 2016 and 2015, respectively, a 34.3 percent increase.
During the six months ended June 30, 2016, 1,515 homes were sold compared to 1,119 for the same period ending 2015. Rental home sales, which are included in total home sales, were 572 and 388 for the six months ended June 30, 2016 and 2015, respectively.
Sun Communities, Inc. 2nd Quarter 2016 Page 3
Acquisitions (4)
In June, the Company completed the acquisition of the Carefree portfolio for $1.68 billion which is comprised of 103 manufactured housing and recreational vehicle communities located in prime coastal markets with over 27,000 total sites. The Company continues to expect the Carefree acquisition to be accretive over the first 12 months but due to the geographic concentration in Florida and related seasonality of RV communities, revenue recognition for this portfolio is weighted toward the first and second quarters of the year.
The Company also acquired one RV community in Florida during the quarter comprised of 183 sites, for total consideration of $7.0 million.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
Debt Transactions
To fund a portion of the acquisition price of the Carefree portfolio the Company completed two financings that totaled approximately $743.0 million. The first financing, which closed on June 3, 2016, consists of two ten-year loans for an aggregate amount of $338.0 million at a weighted average interest rate of 3.69 percent. The second financing, which closed on June 9, 2016, consists of three loans with maturities between ten and twelve years for an aggregate amount of $405.0 million at a weighted average interest rate of 3.64 percent.
As of June 30, 2016, the Company had approximately $3.3 billion of debt outstanding. The weighted average interest rate was 4.39 percent and the weighted average maturity was 8.8 years. The Company had $31.4 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month EBITDA(3) ratio was 9.1 times. This ratio was elevated at the period end as it is calculated on trailing EBITDA which does not give credit for the income produced by the Carefree acquisition. The Company anticipates that this ratio will improve to near its stated goal of at or below 7.0 times by mid- 2017.
Equity Transaction
During the quarter the Company sold 485,000 shares of common stock through its At the Market equity sales program at a weighted average price of $71.86 per share. Net proceeds from the sales were $34.4 million.
GUIDANCE 2016
The Company is updating its 2016 guidance for the impact of the Carefree acquisition, its other acquisitions, and other affiliated capital transactions.
The Company anticipates FFO(1) per Share for full year 2016 to be in the range of $3.75 to $3.80.
The following items are reflected in the revised guidance:
• | Impact of March equity (date of offering until Carefree closing) |
and June ATM issuance $(0.09) per Share
• | Estimated contribution from Carefree and other acquired properties $0.07 per Share |
• | Year to date outperformance of portfolio $0.04 per Share |
Sun Communities, Inc. 2nd Quarter 2016 Page 4
The Company anticipates FFO(1) per Share of $1.10 to $1.12 for the third quarter and $0.90 to $0.93 for the fourth quarter.
FFO(1) per Share estimates assume 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 represent a range of possible outcomes and may differ materially from actual results. 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."
EARNINGS CONFERENCE CALL
A conference call to discuss first quarter operating results will be held on Tuesday, August 2, 2016 at 11:00 A.M. (ET). To participate, call toll-free 877-407-4018. Callers outside the U.S. or Canada can access the call at 201-689-8471. A replay will be available following the call through August 16, 2016 and can be accessed toll-free by calling 877-870-5176 or by calling 858-384-5517. The Conference ID number for the call and the replay is 13640455. The conference call will be available live on Sun Communities' website www.suncommunities.com. Replay will also be available on the website.
Sun Communities, Inc. is a REIT that currently owns and operates a portfolio of 337 communities comprising approximately117,000 developed sites.
For more information about Sun Communities, Inc., please visit the 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. 2nd Quarter 2016 Page 5
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 2015 Annual Report on Form 10-K, the Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 2016, 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. 2nd Quarter 2016 Page 6
(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) | EBITDA is defined as NOI plus other income, plus (minus) equity earnings (loss) from affiliates, minus general and administrative expenses. EBITDA includes EBITDA from discontinued operations. |
(4) | 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. 2nd Quarter 2016 Page 7
Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited) June 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Land | $ | 458,349 | $ | 451,340 | |||
Land improvements and buildings | 5,294,663 | 3,535,909 | |||||
Rental homes and improvements | 477,875 | 460,480 | |||||
Furniture, fixtures and equipment | 107,123 | 102,746 | |||||
Land held for future development | 23,497 | 23,047 | |||||
Investment property | 6,361,507 | 4,573,522 | |||||
Accumulated depreciation | (928,882 | ) | (852,407 | ) | |||
Investment property, net (including $90,502 and $92,009 for consolidated variable interest entities at June 30, 2016 and December 31, 2015) | 5,432,625 | 3,721,115 | |||||
Cash and cash equivalents | 31,441 | 45,086 | |||||
Inventory of manufactured homes | 29,044 | 14,828 | |||||
Notes and other receivables, net | 76,466 | 47,972 | |||||
Collateralized receivables, net | 144,017 | 139,768 | |||||
Other assets, net | 109,598 | 213,030 | |||||
TOTAL ASSETS | $ | 5,823,191 | $ | 4,181,799 | |||
LIABILITIES | |||||||
Mortgage loans payable (including $63,010 and $64,082 for consolidated variable interest entities at June 30, 2016 and December 31, 2015) | $ | 2,792,021 | $ | 2,125,267 | |||
Secured borrowings on collateralized receivables | 144,684 | 140,440 | |||||
Preferred OP units - mandatorily redeemable | 45,903 | 45,903 | |||||
Lines of credit | 357,721 | 24,687 | |||||
Distributions payable | 47,992 | 41,265 | |||||
Other liabilities (including $4,381 and $4,091 for consolidated variable interest entities at June 30, 2016 and December 31, 2015) | 257,423 | 184,859 | |||||
TOTAL LIABILITIES | $ | 3,645,744 | $ | 2,562,421 | |||
Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 1,682 shares at June 30, 2016 and 2,067 shares at December 31, 2015 | $ | 50,227 | $ | 61,732 | |||
Series A-4 preferred OP units | $ | 20,266 | $ | 21,065 | |||
STOCKHOLDERS’ EQUITY | |||||||
Series A preferred stock, $0.01 par value. Issued and outstanding: 3,400 shares at June 30, 2016 and December 31, 2015 | $ | 34 | $ | 34 | |||
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 68,643 shares at June 30, 2016 and 58,395 shares at December 31, 2015 | 686 | 584 | |||||
Additional paid-in capital | 2,980,382 | 2,319,314 | |||||
Accumulated other comprehensive income | 1 | — | |||||
Distributions in excess of accumulated earnings | (947,988 | ) | (864,122 | ) | |||
Total Sun Communities, Inc. stockholders' equity | 2,033,115 | 1,455,810 | |||||
Noncontrolling interests: | |||||||
Common and preferred OP units | 76,166 | 82,538 | |||||
Consolidated variable interest entities | (2,327 | ) | (1,767 | ) | |||
Total noncontrolling interest | 73,839 | 80,771 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 2,106,954 | 1,536,581 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 5,823,191 | $ | 4,181,799 | |||
Sun Communities, Inc. 2nd Quarter 2016 Page 8
Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
REVENUES | |||||||||||||||
Income from real property | $ | 140,001 | $ | 125,833 | $ | 269,236 | $ | 245,358 | |||||||
Revenue from home sales | 26,039 | 18,734 | 50,776 | 35,568 | |||||||||||
Rental home revenue | 11,957 | 11,495 | 23,665 | 22,624 | |||||||||||
Ancillary revenues | 7,383 | 5,254 | 11,996 | 8,445 | |||||||||||
Interest | 4,672 | 3,893 | 8,617 | 7,877 | |||||||||||
Brokerage commissions and other income, net | 747 | 729 | 1,153 | 1,266 | |||||||||||
Total revenues | 190,799 | 165,938 | 365,443 | 321,138 | |||||||||||
COSTS AND EXPENSES | |||||||||||||||
Property operating and maintenance | 37,067 | 34,507 | 68,268 | 63,721 | |||||||||||
Real estate taxes | 10,153 | 8,796 | 19,738 | 17,511 | |||||||||||
Cost of home sales | 18,684 | 13,702 | 36,868 | 26,259 | |||||||||||
Rental home operating and maintenance | 5,411 | 5,479 | 11,287 | 11,084 | |||||||||||
Ancillary expenses | 5,201 | 4,149 | 8,709 | 6,695 | |||||||||||
Home selling expenses | 2,858 | 1,797 | 5,136 | 3,487 | |||||||||||
General and administrative | 16,543 | 12,646 | 30,335 | 24,274 | |||||||||||
Transaction costs | 20,979 | 2,037 | 23,700 | 11,486 | |||||||||||
Depreciation and amortization | 49,670 | 41,411 | 98,082 | 85,412 | |||||||||||
Extinguishment of debt | — | 2,800 | — | 2,800 | |||||||||||
Interest | 28,428 | 26,751 | 54,722 | 52,140 | |||||||||||
Interest on mandatorily redeemable preferred OP units | 787 | 787 | 1,574 | 1,639 | |||||||||||
Total expenses | 195,781 | 154,862 | 358,419 | 306,508 | |||||||||||
Income / (loss) before other items | (4,982 | ) | 11,076 | 7,024 | 14,630 | ||||||||||
Gains / (losses) on disposition of properties, net | — | (13 | ) | — | 8,756 | ||||||||||
Provision for income taxes | (56 | ) | (77 | ) | (284 | ) | (152 | ) | |||||||
Distributions from affiliate | — | 7,500 | — | 7,500 | |||||||||||
Net income / (loss) | (5,038 | ) | 18,486 | 6,740 | 30,734 | ||||||||||
Less: Preferred return to preferred OP units | 1,263 | 1,361 | 2,536 | 2,390 | |||||||||||
Less: Amounts attributable to noncontrolling interests | (695 | ) | 743 | (419 | ) | 1,007 | |||||||||
Net income / (loss) attributable to Sun Communities, Inc. | (5,606 | ) | 16,382 | 4,623 | 27,337 | ||||||||||
Less: Preferred stock distributions | 2,197 | 4,088 | 4,551 | 8,174 | |||||||||||
Net income / (loss) attributable to Sun Communities, Inc. common stockholders | $ | (7,803 | ) | $ | 12,294 | $ | 72 | $ | 19,163 | ||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 64,757 | 52,846 | 61,247 | 52,672 | |||||||||||
Diluted | 64,757 | 53,237 | 61,673 | 53,060 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | (0.12 | ) | $ | 0.23 | $ | — | $ | 0.36 | ||||||
Diluted | $ | (0.12 | ) | $ | 0.23 | $ | — | $ | 0.36 | ||||||
Sun Communities, Inc. 2nd Quarter 2016 Page 9
Reconciliation of Net Income to FFO(1)
(in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income (loss) attributable to Sun Communities, Inc. common stockholders | $ | (7,803 | ) | $ | 12,294 | $ | 72 | $ | 19,163 | ||||||
Adjustments: | |||||||||||||||
Preferred return to preferred OP units | 618 | 668 | 1,243 | 1,344 | |||||||||||
Amounts attributable to noncontrolling interests | (779 | ) | 566 | (430 | ) | 779 | |||||||||
Preferred distribution to Series A-4 preferred stock | — | 2,574 | — | — | |||||||||||
Depreciation and amortization | 49,340 | 40,969 | 97,416 | 85,234 | |||||||||||
(Gain)/loss on disposition of properties, net | — | 13 | — | (8,756 | ) | ||||||||||
Gain on disposition of assets, net | (3,903 | ) | (2,426 | ) | (7,558 | ) | (4,128 | ) | |||||||
Funds from operations (FFO) attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1)(5) | 37,473 | 54,658 | 90,743 | 93,636 | |||||||||||
Adjustments: | |||||||||||||||
Transaction costs | 20,979 | 2,037 | 23,700 | 11,486 | |||||||||||
Distribution from affiliate | — | (7,500 | ) | — | (7,500 | ) | |||||||||
Extinguishment of debt | — | 2,800 | — | 2,800 | |||||||||||
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items (1)(5) | $ | 58,452 | $ | 51,995 | $ | 114,443 | $ | 100,422 | |||||||
Weighted average common shares outstanding - basic: | 64,757 | 52,846 | 61,247 | 52,672 | |||||||||||
Add: | |||||||||||||||
Common stock issuable upon conversion of stock options | 9 | 12 | 9 | 14 | |||||||||||
Restricted stock | 444 | 379 | 417 | 374 | |||||||||||
Common OP units | 2,863 | 2,916 | 2,863 | 2,738 | |||||||||||
Common stock issuable upon conversion of Series A-1 preferred OP units | 933 | 1,012 | 939 | 1,026 | |||||||||||
Common stock issuable upon conversion of Series A-3 preferred OP units | 75 | 75 | 75 | 75 | |||||||||||
Common stock issuable upon conversion of Series A-4 preferred stock | — | 2,829 | — | — | |||||||||||
Weighted average common shares outstanding - fully diluted | 69,081 | 60,069 | 65,550 | 56,899 | |||||||||||
FFO(1) attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per Share - fully diluted | $ | 0.54 | $ | 0.91 | $ | 1.38 | $ | 1.65 | |||||||
FFO (1) attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per Share excluding certain items - fully diluted | $ | 0.85 | $ | 0.87 | $ | 1.75 | $ | 1.76 | |||||||
(5) The effect of certain anti-dilutive convertible securities is excluded from these items.
Sun Communities, Inc. 2nd Quarter 2016 Page 10
Statement of Operations – Same Community
(in thousands except for Other Information)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
2016 | 2015 | Change | % Change | 2016 | 2015 | Change | % Change | ||||||||||||||||||||||
REVENUES: | |||||||||||||||||||||||||||||
Income from real property | $ | 114,262 | $ | 108,193 | $ | 6,069 | 5.6 | % | $ | 228,807 | $ | 215,641 | $ | 13,166 | 6.1 | % | |||||||||||||
PROPERTY OPERATING EXPENSES: | |||||||||||||||||||||||||||||
Payroll and benefits | 9,974 | 9,647 | 327 | 3.4 | % | 18,851 | 17,804 | 1,047 | 5.9 | % | |||||||||||||||||||
Legal, taxes & insurance | 1,373 | 1,704 | (331 | ) | (19.4 | )% | 3,058 | 3,329 | (271 | ) | (8.1 | )% | |||||||||||||||||
Utilities | 6,050 | 5,914 | 136 | 2.3 | % | 12,446 | 12,153 | 293 | 2.4 | % | |||||||||||||||||||
Supplies and repair | 4,651 | 4,673 | (10) | (22 | ) | (0.5 | )% | 7,382 | 7,233 | (10) | 149 | 2.1 | % | ||||||||||||||||
Other | 3,169 | 3,249 | (80 | ) | (2.5 | )% | 6,059 | 5,870 | 189 | 3.2 | % | ||||||||||||||||||
Real estate taxes | 8,735 | 7,862 | 873 | 11.1 | % | 17,728 | 16,125 | 1,603 | 9.9 | % | |||||||||||||||||||
Property operating expenses | 33,952 | 33,049 | 903 | 2.7 | % | 65,524 | 62,514 | 3,010 | 4.8 | % | |||||||||||||||||||
NET OPERATING INCOME ("NOI")(2) | $ | 80,310 | $ | 75,144 | $ | 5,166 | 6.9 | % | $ | 163,283 | $ | 153,127 | $ | 10,156 | 6.6 | % | |||||||||||||
As of June 30, | |||||||||||||||
OTHER INFORMATION | 2016 | 2015 | Change | % Change | |||||||||||
Number of properties | 219 | 219 | |||||||||||||
Overall occupancy (6) (7) | 96.4 | % | 93.9 | % | (9) | 2.5 | % | ||||||||
Sites available for development | 6,071 | 6,574 | (503 | ) | (7.7 | )% | |||||||||
Monthly base rent per site - MH | $ | 491 | $ | 475 | $ | 16 | 3.4 | % | |||||||
Monthly base rent per site - RV (8) | $ | 432 | $ | 417 | $ | 15 | 3.6 | % | |||||||
Monthly base rent per site - Total | $ | 483 | $ | 468 | $ | 15 | 3.2 | % | |||||||
(6) Includes manufactured housing and annual/seasonal recreational vehicle sites and excludes transient recreational vehicle sites.
(7) Occupancy % excludes recently completed but vacant expansion sites.
(8) Monthly base rent per site pertains to annual/seasonal RV sites and excludes transient RV sites.
(9) Occupancy reflects current year gains from expansion sites and the conversion of transient RV guests to annual/seasonal RV contracts as vacant in 2015.
(10) Three and six months ending June 30, 2015 excludes $1.1 million of first year expenses for properties acquired in late 2014 and 2015 incurred to bring the properties up to Sun's operating standards. These costs did not meet the Company's capitalization policy.
Sun Communities, Inc. 2nd Quarter 2016 Page 11
Rental Program Summary
(amounts in thousands except for *)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
2016 | 2015 | Change | % Change | 2016 | 2015 | Change | % Change | ||||||||||||||||||||||
REVENUES: | |||||||||||||||||||||||||||||
Rental home revenue | $ | 11,957 | $ | 11,495 | $ | 462 | 4.0 | % | $ | 23,665 | $ | 22,624 | $ | 1,041 | 4.6 | % | |||||||||||||
Site rent included in Income from real property | 15,413 | 15,551 | (138 | ) | (0.9 | )% | 30,631 | 30,678 | (47 | ) | (0.2 | )% | |||||||||||||||||
Rental Program revenue | 27,370 | 27,046 | 324 | 1.2 | % | 54,296 | 53,302 | 994 | 1.9 | % | |||||||||||||||||||
EXPENSES: | |||||||||||||||||||||||||||||
Commissions | 384 | 752 | (368 | ) | (48.9 | )% | 1,159 | 1,586 | (427 | ) | (26.9 | )% | |||||||||||||||||
Repairs and refurbishment | 3,273 | 2,322 | 951 | 41.0 | % | 5,939 | 4,738 | 1,201 | 25.3 | % | |||||||||||||||||||
Taxes and insurance | 1,167 | 1,544 | (377 | ) | (24.4 | )% | 2,732 | 3,020 | (288 | ) | (9.5 | )% | |||||||||||||||||
Marketing and other | 587 | 861 | (274 | ) | (31.8 | )% | 1,457 | 1,740 | (283 | ) | (16.3 | )% | |||||||||||||||||
Rental Program operating and maintenance | 5,411 | 5,479 | (68 | ) | (1.2 | )% | 11,287 | 11,084 | 203 | 1.8 | % | ||||||||||||||||||
NET OPERATING INCOME ("NOI") (2) | $ | 21,959 | $ | 21,567 | $ | 392 | 1.8 | % | $ | 43,009 | $ | 42,218 | $ | 791 | 1.9 | % | |||||||||||||
Occupied rental home information as of June 30, 2016 and 2015: | |||||||||||||||||||||||||||||
Number of occupied rentals, end of period* | 10,997 | 11,395 | (398 | ) | (3.5 | )% | |||||||||||||||||||||||
Investment in occupied rental homes, end of period | $ | 453,869 | $ | 445,446 | $ | 8,423 | 1.9 | % | |||||||||||||||||||||
Number of sold rental homes* | 572 | 388 | 184 | 47.4 | % | ||||||||||||||||||||||||
Weighted average monthly rental rate, end of period* | $ | 868 | $ | 835 | $ | 33 | 4.0 | % | |||||||||||||||||||||
Sun Communities, Inc. 2nd Quarter 2016 Page 12
Homes Sales Summary
(amounts in thousands except for *)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
2016 | 2015 | Change | % Change | 2016 | 2015 | Change | % Change | ||||||||||||||||||||||
New home sales | $ | 5,612 | $ | 5,175 | $ | 437 | 8.4 | % | $ | 11,081 | $ | 10,421 | $ | 660 | 6.3 | % | |||||||||||||
Pre-owned home sales | 20,427 | 13,559 | 6,868 | 50.7 | % | 39,695 | 25,147 | 14,548 | 57.9 | % | |||||||||||||||||||
Revenue from home sales | 26,039 | 18,734 | 7,305 | 39.0 | % | 50,776 | 35,568 | 15,208 | 42.8 | % | |||||||||||||||||||
New home cost of sales | 4,773 | 4,418 | 355 | 8.0 | % | 9,617 | 8,609 | 1,008 | 11.7 | % | |||||||||||||||||||
Pre-owned home cost of sales | 13,911 | 9,284 | 4,627 | 49.8 | % | 27,251 | 17,650 | 9,601 | 54.4 | % | |||||||||||||||||||
Cost of home sales | 18,684 | 13,702 | 4,982 | 36.4 | % | 36,868 | 26,259 | 10,609 | 40.4 | % | |||||||||||||||||||
NOI / Gross Profit (2) | $ | 7,355 | $ | 5,032 | $ | 2,323 | 46.2 | % | $ | 13,908 | $ | 9,309 | $ | 4,599 | 49.4 | % | |||||||||||||
Gross profit – new homes | $ | 839 | $ | 757 | $ | 82 | 10.8 | % | $ | 1,464 | $ | 1,812 | $ | (348 | ) | (19.2 | )% | ||||||||||||
Gross margin % – new homes | 15.0 | % | 14.6 | % | 0.4 | % | 13.2 | % | 17.4 | % | (4.2 | )% | |||||||||||||||||
Average selling price - new homes* | $ | 95,119 | $ | 79,615 | $ | 15,504 | 19.5 | % | $ | 88,648 | $ | 79,550 | $ | 9,098 | 11.4 | % | |||||||||||||
Gross profit – pre-owned homes | $ | 6,516 | $ | 4,275 | $ | 2,241 | 52.4 | % | $ | 12,444 | $ | 7,497 | $ | 4,947 | 66.0 | % | |||||||||||||
Gross margin % – pre-owned homes | 31.9 | % | 31.5 | % | 0.4 | % | 31.3 | % | 29.8 | % | 1.5 | % | |||||||||||||||||
Average selling price - pre-owned homes* | $ | 29,562 | $ | 26,534 | $ | 3,028 | 11.4 | % | $ | 28,558 | $ | 25,452 | $ | 3,106 | 12.2 | % | |||||||||||||
Home sales volume: | |||||||||||||||||||||||||||||
New home sales* | 59 | 65 | (6 | ) | (9.2 | )% | 125 | 131 | (6 | ) | (4.6 | )% | |||||||||||||||||
Pre-owned home sales* | 691 | 511 | 180 | 35.2 | % | 1,390 | 988 | 402 | 40.7 | % | |||||||||||||||||||
Total homes sold* | 750 | 576 | 174 | 30.2 | % | 1,515 | 1,119 | 396 | 35.4 | % | |||||||||||||||||||
Sun Communities, Inc. 2nd Quarter 2016 Page 13
Acquisition Summary - Properties Acquired in 2015 and 2016
(amounts in thousands except for statistical data)
Three Months Ended June 30, 2016 | Six Months Ended June 30, 2016 | ||||||
REVENUES: | |||||||
Income from real property (excluding transient revenue) | $ | 16,724 | $ | 23,674 | |||
Transient revenue | 3,976 | 5,340 | |||||
Revenue from home sales | 2,532 | 4,374 | |||||
Rental home revenue | 150 | 199 | |||||
Ancillary revenues | 2,068 | 2,593 | |||||
Total revenues | 25,450 | 36,180 | |||||
COSTS AND EXPENSES: | |||||||
Property operating and maintenance | 6,192 | 8,410 | |||||
Real estate taxes | 1,485 | 2,074 | |||||
Cost of home sales | 1,714 | 3,153 | |||||
Rental home operating and maintenance | 23 | 45 | |||||
Ancillary expense | 1,217 | 1,690 | |||||
Total expenses | 10,631 | 15,372 | |||||
NET OPERATING INCOME ("NOI") (2) | $ | 14,819 | $ | 20,808 | |||
As of June 30, 2016 | |||||||
Other information: | |||||||
Number of properties | 118 | ||||||
Transient sites | 8,860 | ||||||
Occupied sites (12) | 24,969 | ||||||
Developed sites (12) | 33,829 | ||||||
Occupancy % (12) | 73.8 | % | |||||
Monthly base rent per site - MH | $ | 597 | |||||
Monthly base rent per site - RV (11) | $ | 386 | |||||
Monthly base rent per site - Total (11) | $ | 506 | |||||
Home sales volume: | |||||||
New homes | 19 | ||||||
Pre-owned homes | 68 | ||||||
Occupied rental home information: | |||||||
Number of occupied rentals, end of period | 284 | ||||||
Investment in occupied rental homes (in thousands) | $ | 4,027 | |||||
Weighted average monthly rental rate | $ | 913 | |||||
(11) Monthly base rent per site pertains to annual/seasonal recreational vehicle sites and excludes transient recreational vehicle sites.
(12) Includes manufactured housing and annual/seasonal recreational vehicle sites and excludes transient recreational vehicle sites.
Sun Communities, Inc. 2nd Quarter 2016 Page 14