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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
November 3, 2006
Date of Report (Date of earliest event reported)
SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND
(State or Other Jurisdiction of Incorporation)
1-12616 38-2730780
(Commission File Number) (IRS Employer Identification No.)
27777 FRANKLIN ROAD
SUITE 200
SOUTHFIELD, MI 48034
(Address of Principal Executive Office) (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 14a12 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))
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ITEM 2.02 DESCRIPTION.
On November 3, 2006, 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 quarter ended September 30, 2006 and
certain other information.
The Company will hold an investor conference call and webcast at 11:00 A.M. EST
on November 3, 2006 to disclose and discuss the financial results for the
quarter ended September 30, 2006.
The information contained in this Current Report on Form 8-K, including the
exhibit attached hereto, 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.
EXHIBIT # DESCRIPTION
- --------- -------------------------------------------------------------------
99.1 Press Release issued November 3, 2006
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.
Company Name Sun Communities, Inc.
Date: November 3, 2006 By: /s/ Jeffrey P. Jorissen
-----------------------------------
Jeffrey P. Jorissen,
Executive Vice President,
Treasurer, Chief Financial Officer,
and Secretary
Exhibit 99.1
SUN COMMUNITIES, INC. REPORTS 13.5% FFO PER SHARE INCREASE IN THIRD QUARTER
2006 RESULTS
SOUTHFIELD, Mich., Nov. 3 /PRNewswire-FirstCall/ -- Sun Communities, Inc.
(NYSE: SUI), a real estate investment trust (REIT) that owns and operates
manufactured housing communities, today reported third quarter results.
For the third quarter ended September 30, 2006, total revenues increased
$1.7 million to $55.0 million, compared with $53.3 million in the third quarter
of 2005. Funds from operations (FFO)(1) for the three months ended September 30,
2006 increased $1.3 million to $11.8 million from $10.5 million in the third
quarter of 2005. On a diluted per share/OP Unit basis, FFO was $0.59 for the
third quarter of 2006 as compared with $0.52 for the same period in 2005. Net
loss for the third quarter of 2006 was $(3.9) million, or $(0.22) per diluted
common share, compared with $(3.7) million, or $(0.21) per diluted common share,
for the same period in 2005.
For the nine months ended September 30, 2006, total revenues increased $12.3
million to $169.8 million, compared with $157.5 million for the same period in
2005. Funds from operations (FFO)(1) increased $1.6 million to $39.5 million
from $37.9 million in 2005. On a diluted per share/OP Unit basis, FFO was $1.97
for the nine months ended September 30, 2006 as compared with $1.87 for the same
period in 2005. Net loss for the nine months of 2006 was $(6.5) million, or
$(0.37) per diluted common share, compared with $(3.8) million or $(0.21) per
diluted common share for the same period in 2005.
For the 133 communities owned throughout 2005 and 2006, total revenues
increased 3.3 percent for the three months ended September 30, 2006 and expenses
increased 4.9 percent, resulting in an increase in net operating income(2) of
2.6 percent. For the nine months ended September 30, 2006, revenues increased by
3.6% and expenses by 2.4%, while net operating income increased by 4.0%. Same
property occupancy in the manufactured housing sites decreased from 83.9 percent
at December 31, 2005 to 83.7 percent at September 30, 2006.
"We have completed our first full quarter of transitioning from growing the
rental program over the past five years to winding it down over the next five,"
said Gary Shiffman, Chairman and CEO. "This shift of emphasis required the
implementation of fully developed marketing and sales programs that made the
economic advantage of buying one of our homes more attractive than renting.
Sales results for the quarter and the month of October have been encouraging.
Nearly 150 rental and previously owned homes have been sold during the four
months," he added.
In the first three quarters of 2005, the Company increased occupancy by over
1,500 sites due to rentals. In 2006, the comparable number is 947, a decline of
562 which relates directly to the 600 fewer homes acquired for rentals to date
in 2006 as compared to last year. At the same time, the number of repossessions
in our portfolio has declined by 300 from the nine months of 2005. In summary,
rentals have contributed 562 fewer sites to occupancy while repossessions have
declined by 300, so the net effect of these two factors on occupancy is a
negative 262 which approximates the difference between occupancy in the first
nine months of 2006 and 2005. The Company sold 135 manufactured homes during the
third quarter bringing the nine month total to 366.
The Company's occupied rentals increased by 59 homes to a total of 4,659 at
the end of third quarter 2006, as reflected in the accompanying table. Rental
rates for the homes, including site rent, have increased approximately 6.9
percent in the past twelve months from an average of $634 per month at September
30, 2005 to an average of $678 per month at September 30, 2006.
"Monthly rates for the rental program have increased $44 over the past
twelve months. It is reasonable to expect that until demand for new homes
increases, we will experience some modest loss in occupancy as we convert rental
homes into sales to third parties. We expect to offset some of the economics of
these occupancy declines with increased rental rates and the economic benefit
resulting from increased sales of the rental homes," said Shiffman.
After absorbing 6 cents related to SEC and other nonrecurring items and 6
cents related to deferred compensation and the earlier than anticipated
improvement in repossessions, the Company has adjusted guidance to a FFO per
share range of $2.68 - $2.74 for the year.
During the quarter, the Company completed financings totaling $48 million.
The 10 year notes have interest only payments at a rate of 6.159 percent and are
secured by three communities. The proceeds from the financings were used to
repay approximately $12 million of mortgage notes and pay down $36 million of
the company's lines of credit.
A conference call to discuss third quarter operating results will be held on
November 3, 2006, at 11:00 A.M. Eastern Time. 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 November 17,
2006, and can be accessed by dialing 877-660-6853 from the U.S. or 201- 612-7415
outside the U.S. or Canada. The account number for the replay is 3055 and the ID
number is 215767. The conference call will be available live on Sun Communities
website http://www.suncommunities.com. Replay will also be available on the
website.
Sun Communities, Inc. is a real estate investment trust (REIT) that
currently owns and operates a portfolio of 136 communities comprising
approximately 47,600 developed sites and approximately 6,800 sites suitable for
development mainly in the Midwest and Southeast United States.
(1) Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income (computed in
accordance with generally accepted accounting principles), excluding
gains (or losses) from sales of depreciable operating property, plus
real estate-related depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. FFO is a non-GAAP
financial measure that management believes is a useful supplemental
measure of the Company's operating performance. Management generally
considers FFO to be a useful measure for reviewing comparative operating
and financial performance because, by excluding gains and losses related
to sales of previously depreciated operating real estate assets and
excluding real estate asset depreciation and amortization (which can
vary among owners of identical assets in similar condition based on
historical cost accounting and useful life estimates), FFO provides a
performance measure that, when compared year over year, reflects the
impact to operations from trends in occupancy rates, rental rates and
operating costs, providing perspective not readily apparent from net
income. Management believes that the use of FFO has been beneficial in
improving the understanding of operating results of REITs among the
investing public and making comparisons of REIT operating results more
meaningful.
Because FFO excludes significant economic components of net income
including depreciation and amortization, FFO should be used as an
adjunct to net income and not as an alternative to net income. The
principal limitation of FFO is that it does not represent cash flow from
operations as defined by GAAP and is a supplemental measure of
performance that does not replace net income as a measure of performance
or net cash provided by operating activities as a measure of liquidity.
In addition, FFO is not intended as a measure of a REIT's ability to
meet debt principal repayments and other cash requirements, nor as a
measure of working capital. FFO only provides investors with an
additional performance measure. Other REITs may use different methods
for calculating FFO and, accordingly, the Company's FFO may not be
comparable to other REITs.
(2) Investors in and analysts following the real estate industry utilize net
operating income ("NOI") as a supplemental performance measure. NOI is
derived from revenues (determined in accordance with GAAP) minus
property operating expenses and real estate taxes (determined in
accordance with GAAP). NOI does not represent cash generated from
operating activities in accordance with GAAP and should not be
considered to be an alternative to net income (determined in accordance
with GAAP) as an indication of the Company's financial performance or to
be an alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity; nor is it
indicative of funds available for the Company's cash needs, including
its ability to make cash distributions.
The Company believes that net income is the most directly comparable
GAAP measurement to net operating income. Net income includes interest
and depreciation and amortization which often have no effect on the
market value of a property and therefore limit its use as a performance
measure. In addition, such expenses are often incurred at a parent
company level and therefore are not necessarily linked to the
performance of a real estate asset. The Company believes that net
operating income is helpful to investors as a measure of operating
performance because it is an indicator of the return on property
investment, and provides a method of comparing property performance over
time. The Company uses NOI as a key management tool when evaluating
performance and growth of particular properties and/or groups of
properties. The principal limitation of NOI is that it excludes
depreciation, amortization and non-property specific expenses such as
general and administrative expenses, all of which are significant costs,
and therefore, NOI is a measure of the operating performance of the
properties of the Company rather than of the Company overall.
For more information about Sun Communities, Inc., visit our website at
http://www.suncommunities.com
-FINANCIAL TABLES FOLLOW-
This press release contains various "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements will be subject to
the safe harbors created thereby. The words "will," "may," "could," "expect,"
"anticipate," "believes," "intends," "should," "plans," "estimates,"
"approximate", "guidance" and similar expressions identify these forward-
looking statements. These forward-looking statements reflect the Company's
current views with respect to future events and financial performance, but
involve known and unknown risks and uncertainties, both general and specific to
the matters discussed in this press release. These risks and uncertainties 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 the ability of manufactured home buyers to
obtain financing, the level of repossessions by manufactured home lenders and
those referenced under the headings entitled "Factors That May Affect Future
Results" or "Risk Factors" contained in the Company's filings with the
Securities and Exchange Commission. The forward-looking statements contained in
this press release speak only as of the date hereof and the Company expressly
disclaims any obligation to provide public updates, revisions or amendments to
any forward- looking statements made herein to reflect changes in the Company's
expectations of future events.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(Amounts in thousands except for per share data)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
REVENUES
Income from rental property $ 45,680 $ 44,022 $ 139,340 $ 133,416
Revenue from home sales 4,783 6,008 15,330 14,136
Rental home revenue 3,965 2,549 11,107 6,181
Interest and other income 584 704 4,016 3,770
Total revenues 55,012 53,283 169,793 157,503
COSTS AND EXPENSES
Property operating and maintenance 12,349 11,722 35,448 34,166
Real estate taxes 4,031 3,801 11,828 11,373
Cost of home sales 3,749 4,784 11,952 10,772
Rental home operating and
maintenance 2,965 1,889 8,143 4,854
General and administrative - rental
property 3,426 3,630 12,825 10,735
General and administrative - home
sales and rentals 1,561 1,826 4,727 4,875
Depreciation and amortization 15,072 13,525 44,835 40,011
Interest 15,623 14,092 45,598 41,265
Interest on mandatorily redeemable
debt 935 1,087 3,010 3,234
Florida storm damage recovery - - - (555)
Total expenses 59,711 56,356 178,366 160,730
Equity income (loss) from affiliate 300 (1,147) 967 (1,042)
Loss from operations (4,399) (4,220) (7,606) (4,269)
Less income (loss) allocated to
minority interest:
Preferred OP Units - - - 961
Common OP Units (510) (495) (851) (618)
Loss from continuing operations (3,889) (3,725) (6,755) (4,612)
Income from discontinued operations - - - 824
Loss before cumulative effect of
change in accounting principle (3,889) (3,725) (6,755) (3,788)
Cumulative effect of change in
accounting principle - - 289 -
Net loss $ (3,889) $ (3,725) $ (6,466) $ (3,788)
Weighted average common shares outstanding:
Basic 17,655 17,746 17,601 17,775
Diluted 17,655 17,746 17,601 17,775
Basic and diluted earnings (loss) per share:
Continuing operations $ (0.22) $ (0.21) $ (0.39) $ (0.26)
Discontinued operations - - - 0.05
Loss before cumulative effect of
change in accounting principle (0.22) (0.21) (0.39) (0.21)
Cumulative effect of change in
accounting principle - - 0.02 -
Net loss $ (0.22) $ (0.21) $ (0.37) $ (0.21)
RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(Amounts in thousands except for per share data)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net loss $ (3,889) $ (3,725) $ (6,466) $ (3,788)
Adjustments:
Depreciation and amortization 15,570 14,166 46,160 41,930
Valuation adjustment(3) (187) 194 (166) 400
(Gain) loss on disposition
of assets, net 774 365 844 (101)
Loss allocated to minority
interest (510) (495) (851) (504)
Funds from operations (FFO) $ 11,758 $ 10,505 $ 39,521 $ 37,937
FFO - Continuing Operations $ 11,758 $ 10,505 $ 39,521 $ 37,765
FFO - Discontinued Operations $ - $ - $ - $ 172
Weighted average common shares/OP Units outstanding:
Basic 19,974 20,103 19,923 20,205
Diluted 20,150 20,242 20,102 20,357
Continuing Operations:
FFO per weighted average common
share/OP Unit - Basic $ 0.59 $ 0.52 $ 1.99 $ 1.87
FFO per weighted average common
share/OP Unit - Diluted $ 0.59 $ 0.52 $ 1.97 $ 1.86
Discontinued Operations:
FFO per weighted average common
share/OP Unit - Basic $ - $ - $ - $ 0.01
FFO per weighted average common
share/OP Unit - Diluted $ - $ - $ - $ 0.01
Total Operations:
FFO per weighted average common
share/OP Unit - Basic $ 0.59 $ 0.52 $ 1.99 $ 1.88
FFO per weighted average common
share/OP Unit - Diluted $ 0.59 $ 0.52 $ 1.97 $ 1.87
(3) The Company entered into three interest rate swaps and an interest rate
cap agreement. The valuation adjustment reflects the theoretical noncash
profit and loss were those hedging transactions terminated at the
balance sheet date. As the Company has no expectation of terminating the
transactions prior to maturity, the net of these noncash valuation
adjustments will be zero at the various maturities. As any imperfection
related to hedging correlation in these swaps is reflected currently in
cash as interest, the valuation adjustments reflect volatility that
would distort the comparative measurement of FFO and on a net basis
approximate zero. Accordingly, the valuation adjustments are excluded
from FFO. The valuation adjustment is included in interest expense.
SUN COMMUNITIES, INC.
SELECTED BALANCE SHEET DATA
(Amounts in thousands)
(Unaudited)
September 30, 2006 December 31, 2005
------------------ ------------------
Investment in rental property before
accumulated depreciation $ 1,507,409 $ 1,458,122
Total assets $ 1,316,491 $ 1,320,536
Total debt $ 1,163,191 $ 1,123,468
Total minority interests and
stockholders' equity $ 123,576 $ 164,801
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE PERIODS ENDED SEPTEMBER 30, 2006 AND 2005
(Amounts in thousands)
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Net loss $ (3,889) $ (3,725) $ (6,466) $ (3,788)
Unrealized income (loss) on interest
rate swaps (1,133) 1,150 289 1,074
Comprehensive loss $ (5,022) $ (2,575) $ (6,177) $ (2,714)
SUN COMMUNITIES, INC.
ADDITIONAL INFORMATION
SAME PROPERTY RESULTS
For 133 communities owned throughout both years (amounts in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
2006 2005 % change 2006 2005 % change
--------- --------- --------- --------- --------- ---------
Total revenue $ 43,328 $ 41,958 3.3% $ 131,809 $ 127,283 3.6%
Total expense 13,449 12,826 4.9% 38,741 37,830 2.4%
Net operating
income(2) $ 29,879 $ 29,132 2.6% $ 93,068 $ 89,453 4.0%
Same property occupancy and average monthly rent information at September
30, 2006 and 2005:
2006 2005
-------- --------
Total manufactured housing sites 41,835 41,728
Occupied manufactured housing sites 35,024 35,219
Manufactured housing occupancy % 83.7% 84.4%
Average monthly rent per site $ 366 $ 352
RENTAL PROGRAM SUMMARY
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
-------- -------- -------- --------
Rental home revenue $ 3,965 $ 2,549 $ 11,107 $ 6,181
Site rent included in Income from
rental property 4,957 3,383 13,839 8,482
Rental program revenue 8,922 5,932 24,946 14,663
Expenses
Payroll and commissions 503 388 1,525 1,214
Repairs and refurbishment 1,324 955 3,315 2,105
Taxes and insurance 642 176 1,860 724
Other 496 370 1,443 811
Rental program operating and
maintenance 2,965 1,889 8,143 4,854
Net operating income (2) $ 5,957 $ 4,043 $ 16,803 $ 9,809
Occupied rental homes information at September 30, 2006 and 2005 (in
thousands except for *):
2006 2005
---------- ----------
Number of occupied rentals, end of period* 4,659 3,438
Cost of occupied rental homes $ 138,053 $ 97,827
Weighted average monthly rental rate* $ 678 $ 634
SOURCE Sun Communities, Inc.
-0- 11/03/2006
/CONTACT: Jeffrey P. Jorissen, Chief Financial Officer of Sun
Communities, Inc., +1-248-208-2500/
/Web site: http://www.suncommunities.com /
(SUI)