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Sun Communities, Inc. Reports 2016 Second Quarter Results

                                                                                                                       
NEWS RELEASE
August 2, 2016

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."


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.


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

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.


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.


(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.


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  


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  


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.


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.


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 %


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 %


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.



HUG#2032454
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