|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
"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."
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.
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.
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.
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
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.
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.
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 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.
Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone (248) 208-2500, by email email@example.com or by mail Sun Communities, Inc. Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.
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
Consolidated Statements of Operations
Reconciliation of Net Income to FFO(1)
(5) The effect of certain anti-dilutive convertible securities is excluded from these items.
Statement of Operations - Same Community
(6) Includes manufactured housing and annual/seasonal recreational vehicle sites and
Rental Program Summary
Homes Sales Summary
Acquisition Summary - Properties Acquired in 2015 and 2016
(11) Monthly base rent per site pertains to annual/seasonal recreational vehicle sites and