Southfield, MI, Feb. 19, 2020 (GLOBE NEWSWIRE) — Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its fourth quarter results for 2019.Financial Results for the Quarter and Year Ended December 31, 2019For the quarter ended December 31, 2019, total revenues increased $27.8 million, or 10.2 percent, to $301.8 million compared to $274.0 million for the same period in 2018. Net income attributable to common stockholders was $28.5 million, or $0.31 per diluted common share, for the quarter ended December 31, 2019, as compared to net income attributable to common stockholders of $9.0 million, or $0.11 per diluted common share, for the same period in 2018.For the year ended December 31, 2019, total revenues increased $137.2 million, or 12.2 percent, to $1.3 billion compared to $1.1 billion for the same period in 2018. Net income attributable to common stockholders was $160.3 million, or $1.80 per diluted common share, for the year ended December 31, 2019, as compared to net income attributable to common stockholders of $105.5 million, or $1.29 per diluted common share, for the same period in 2018.Non-GAAP Financial Measures and Portfolio PerformanceCore Funds from Operations (“Core FFO”)(1) for the quarter ended December 31, 2019, was $1.10 per diluted share and OP unit (“Share”) as compared to $1.03 in the prior year, an increase of 6.8 percent. Core FFO(1) for the year ended December 31, 2019, was $4.92 per Share as compared to $4.58 in the prior year, an increase of 7.4 percent.
Same Community(2) Net Operating Income (“NOI”)(1) increased by 7.6 percent and 7.3 percent for the quarter and year ended December 31, 2019, respectively, as compared to the corresponding periods in 2018.
Same Community Occupancy (3) increased by 220 basis points to 98.4 percent at December 31, 2019, as compared to 96.2 percent at December 31, 2018.
Revenue Producing Sites increased by 669 sites for the quarter and 2,674 sites for the year ended December 31, 2019, respectively, bringing total portfolio occupancy to 96.4 percent.Gary Shiffman, Chief Executive Officer of Sun Communities stated, “Sun Communities again delivered industry leading growth as we successfully executed on our strategic initiatives and saw strong results across the business. Our organic growth has been a consistent earnings driver as we benefit from sustained consumer demand for our high-quality, affordable homes and RV vacation destinations. Capital deployment during 2019 of over $1.2 billion in accretive acquisitions, expansions, and ground up development provide incremental growth opportunities for the years ahead. In recognition of an outstanding year and a solid future, the Board of Directors for the fourth consecutive year approved an increase in our quarterly dividend. We are proud of our accomplishments and our team and remain committed to delivering superior value to our shareholders.”
OPERATING HIGHLIGHTSPortfolio OccupancyTotal portfolio occupancy was 96.4 percent at December 31, 2019, compared to 96.1 percent at December 31, 2018.During the quarter ended December 31, 2019, revenue producing sites increased by 669 sites, as compared to 722 revenue producing sites gained during the fourth quarter of 2018.During the year ended December 31, 2019, revenue producing sites increased by 2,674 sites, as compared to an increase of 2,600 revenue producing sites during the year ended December 31, 2018, a 2.8 percent increase.
Same Community(2) ResultsFor the 345 communities owned and operated by the Company since January 1, 2018, NOI(1) for the quarter ended December 31, 2019 increased 7.6 percent over the same period in 2018, as a result of a 6.4 percent increase in revenues and a 3.6 percent increase in operating expenses. Same Community occupancy(3) increased to 98.4 percent at December 31, 2019 from 96.2 percent at December 31, 2018.For the year ended December 31, 2019, NOI(1) increased 7.3 percent over 2018, as a result of a 6.2 percent increase in revenues and a 3.8 percent increase in operating expenses.
Home SalesDuring the quarter ended December 31, 2019, the Company sold 808 homes as compared to 878 homes sold during the same period in 2018. New home sales volume was 140 for both the quarters ended December 31, 2019 and 2018. Rental home sales, which are included in total home sales, were 281 in 2019, as compared to 297 sold during 2018.During the year ended December 31, 2019, 3,439 homes were sold compared to 3,629 for the same period in 2018. New home sales volume increased 8.6 percent to 571 new home sales for the year ended December 31, 2019, as compared to 526 homes during the same period in 2018. Rental home sales, which are included in total home sales, were 1,140 in 2019, an increase of 1.6 percent over the 1,122 sold during 2018.
PORTFOLIO ACTIVITYAcquisitionsDuring the quarter ended December 31, 2019, the Company acquired the following communities:(1)
Contains
31
communities located in CT, GA, MD, NH, NJ, NY, NC and SC.For the year ended December 31, 2019, the Company acquired 47 communities, totaling over 10,000 developed sites and over 900 sites available for expansion, for a total purchase price of approximately $815.2 million.Subsequent to the year ended December 31, 2019, the Company acquired Cape Cod RV Resort located in East Falmouth, Massachusetts with 230 developed sites for a purchase price of $13.5 million. In conjunction with the acquisition, the Company’s operating partnership issued 90,000 Series E Preferred Units, at an issuance price of $100 per unit.Construction ActivityDuring the quarter ended December 31, 2019, the Company completed the construction of 284 sites at the following ground-up developments:(1) Remaining sites are approximate and may be adjusted as final construction is completed.For the year ended December 31, 2019, the Company completed the construction of approximately 1,100 sites at four ground-up developments and one redevelopment community.During the quarter ended December 31, 2019, the Company completed the construction of 864 expansion sites in nine communities. For the year ended December 31, 2019, the Company completed the construction of approximately 1,230 expansion sites in 16 communities.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITYSeries A-4 Preferred Stock and OP UnitsOn December 13, 2019, as previously announced and disclosed, all outstanding shares of the Company’s 6.50% Series A-4 Cumulative Convertible Preferred Stock, and all of its operating partnership’s Series A-4 Preferred OP Units, were converted into common stock and common OP units, respectively. All 1,031,747 shares of Series A-4 Preferred Stock were converted into 458,541 shares of common stock (net of fractional shares paid in cash). All 405,656 Series A-4 preferred OP units were converted into 180,277 common OP units (net of fractional units paid in cash).Debt TransactionsDuring the quarter ended December 31, 2019, the Company completed a 21-year, $400.0 million term loan transaction that carries an interest rate of 4.0 percent. Concurrently, the Company repaid a $17.0 million term loan due to mature in 2020 and $127.3 million in term loans due to mature in 2021. The Company also repaid four term loans secured by three properties totaling $21.5 million which were set to mature in 2020.As of December 31, 2019, the Company had $3.4 billion of debt outstanding. The weighted average interest rate was 4.0 percent and the weighted average maturity was 11.1 years. The Company had $22.1 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.5 times.2020 DistributionsAfter quarter end, the Company announced a 5.3 percent annual distribution increase to $3.16 per common share from $3.00 per common share. This increase will begin with the first quarter distribution to be paid in April 2020. While the Company has adopted the new annual distribution policy, the amount of each quarterly distribution on the Company’s common stock will be subject to approval by its Board of Directors.
GUIDANCE 2020The estimates and assumptions presented below represent a range of possible outcomes and may differ materially from actual results. Guidance estimates include acquisitions completed through the date of this release, and exclude any prospective acquisitions or capital markets activity. 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.”
Total Portfolio
Number of communities: 422Same Community(2) Portfolio(ii)
Number of communities: 367
Total Company Supplementary Information:
(i) Certain securities that are dilutive to the computation of Core FFO per fully diluted share in the table above have been excluded from the computation of net income per fully diluted share, as inclusion of these securities would have been anti-dilutive to net income per fully diluted share.
(ii) The amounts in the table reflect constant currency, as Canadian currency figures included within the 2019 actual amounts have been translated at the assumed exchange rate used for 2020 guidance.
(iii) Water and sewer utility revenue of $34.7 million and $36.2 million has been reclassified from Income from real property to net against the related expense in Property operating maintenance for 2019 and 2020 guidance, respectively.
(iv) For 2019, property operating and maintenance expense excludes $0.7 million of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards that do not meet the Company’s capitalization policy.
(v) Includes gross profit from new and certain pre-owned home sales. Gross profit from pre-owned home sales of depreciated rental homes is excluded.
EARNINGS CONFERENCE CALLA conference call to discuss fourth quarter operating results will be held on Thursday, February 20, 2020 at 11:00 A.M. (ET). 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 March 5, 2020 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13697139. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.Sun Communities, Inc. is a REIT that, as of December 31, 2019, owned, operated, or had an interest in a portfolio of 422 communities comprising over 141,000 developed sites in 33 states and Ontario, Canada.For more information about Sun Communities, Inc., please visit www.suncommunities.com.CONTACTPlease address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to (248) 208-2500, by email to [email protected] or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.
Forward-Looking StatementsThis 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, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders. Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company’s Annual Report on Form 10-K.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.
Investor Information
Portfolio Overview
(As of December 31, 2019)
Financial and Operating Highlights
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Balance Sheets
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Statements of Operations – Quarter to Date and Year to Date Comparison
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Outstanding Securities and Capitalization
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Reconciliations to Non-GAAP Financial Measures
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO(1)
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(a) Other adjustments include early retirement compensation expense, ground lease intangible write-off, and deferred tax benefits.
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA (1)
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Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to NOI (1)
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Non-GAAP and Other Financial Measures
Debt Analysis
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Real Property Operations – Same Community(2)
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Home Sales Summary
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Rental Program Summary
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Acquisitions and Other Summary (15)
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Capital Improvements, Development, and Acquisitions
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Operating Statistics for MH and Annual RVs
Footnotes and Definitions (1)Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), and earnings before interest, tax, depreciation and amortization (“EBITDA”) as supplemental performance measures. The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.• FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles (“GAAP”) depreciation and amortization of real estate assets. • NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses. • EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), 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. 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 period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes 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. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, 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 is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental 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 measure 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. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities 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. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.EBITDA as defined by NAREIT (referred to as “EBITDAre”) is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs. Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs. The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company’s performance on a basis that is independent of capital structure (“Recurring EBITDA”).The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre. EBITDAre is not intended to be used as a measure of the Company’s cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.(2) Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2019 actual exchange rates.(3) The Same Community occupancy percentage for 2019 is derived from 108,024 developed sites, of which 106,310 were occupied. The number of developed sites excludes RV transient sites and approximately 1,900 recently completed but vacant MH expansion sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.8 percent for MH, 100.0 percent for RV, and 96.7 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 109,927 developed sites, of which 106,310 were occupied. The Same Community occupancy percentage for 2018 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites.(4) This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount. In November 2019, the Company derecognized the transferred financial assets and secured borrowing as legal isolation criteria to be accounted for as a true sale were satisfied pursuant to the terms of the purchase agreement.(5) Lines of credit includes the Company’s MH floor plan facility. The effective interest rate on the MH floor plan facility was 7.0 percent for all periods presented. However, the Company pays no interest if the floor plan balance is repaid within 60 days.(6) Other income / (expense), net was as follows (in thousands):(7) The effect of certain anti-dilutive convertible securities is excluded from these items.(8) These costs represent the expenses incurred to bring recently acquired properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.(9) Core FFO(1) includes an adjustment of $(1.3) million and $(0.3) million for the quarter and year ended December 31, 2018, for estimated loss of earnings in excess of the applicable business interruption deductible in relation to the Company’s Florida Keys communities that required redevelopment due to damages sustained from Hurricane Irma in September 2017. Amounts recognized in 2018 were received in 2019.(10) The renter’s monthly payment includes the site rent and an amount attributable to the home lease. The site rent is reflected in Real Property Operations’ segment revenue. For purposes of management analysis, site rent is included in Rental Program revenue to evaluate the incremental revenue gains associated with the Rental Program, and to assess the overall growth and performance of the Rental Program and financial impact on the Company’s operations.(11) Same Community results net $8.7 million and $8.2 million of certain utility revenue against the related utility expense in property operating expense for the quarter ended December 31, 2019 and 2018, respectively. Same Community results net $34.7 million and $32.7 million of certain utility revenue against the related utility expense in property operating expense for the year ended December 31, 2019 and 2018, respectively. Additionally, the Company adopted ASC 842, the new lease accounting standard, as of January 1, 2019, which required the reclassification of bad debt expense from Property operating expense to Income from real property. To assist with comparability within Same Community results, bad debt expense has been reclassified to be shown as a reduction of Income from real property for all periods presented.(12) Same Community supplies and repair expense excludes $26.1 thousand and $0.7 million for the three months and year ended December 31, 2018, respectively, of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.(13) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.(14) Calculated using actual results without rounding.(15) Acquisitions and other is comprised of forty-four properties acquired, one property being operated under a temporary use permit, and three properties that we have an interest in, but do not operate in 2019, twenty properties acquired in 2018, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, five recently opened ground-up development properties, one property undergoing redevelopment, and other miscellaneous transactions and activity.(16) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.(17) As of December 31, 2019, total portfolio MH occupancy was 95.5 percent inclusive of the impact of approximately 2,200 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.(18) Total sites for development were comprised of approximately 76.3 percent for expansion, 17.6 percent for greenfield development and 6.1 percent for redevelopment.(19) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.(20) Lot modification capital expenditures improve the asset quality of the community. These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home. These activities, which are mandated by strict manufacturer’s installation requirements and state building code, include items such as new foundations, driveways, and utility upgrades.(21) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the year ended December 31, 2019 include $50.7 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards. For the years ended December 31, 2018 and 2017, these costs were $94.6 million and $84.0 million, respectively. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.(22) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.(23) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.(24) Net leased sites do not include occupied sites acquired during that year. Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.
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