NEWS RELEASEJuly 22, 2020Sun Communities, Inc. Reports 2020 Second Quarter ResultsSouthfield, Michigan, July 22, 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 second quarter results for 2020.Financial Results for the Quarter and Six Months Ended June 30, 2020For the quarter ended June 30, 2020, total revenues decreased $9.2 million, or 2.9 percent, to $303.3 million compared to $312.4 million for the same period in 2019. Net income attributable to common stockholders was $58.9 million, or $0.61 per diluted common share, for the quarter ended June 30, 2020, as compared to net income attributable to common stockholders of $40.4 million, or $0.46 per diluted common share, for the same period in 2019.For the six months ended June 30, 2020, total revenues increased $13.8 million, or 2.3 percent, to $613.6 million compared to $599.8 million for the same period in 2019. Net income attributable to common stockholders was $42.8 million, or $0.45 per diluted common share, for the six months ended June 30, 2020, as compared to net income attributable to common stockholders of $74.7 million, or $0.86 per diluted common share, for the same period in 2019.Non-GAAP Financial Measures and Portfolio PerformanceCore Funds from Operations (“Core FFO”)(1) for the quarter ended June 30, 2020, was $1.12 per diluted share and OP unit (“Share”) as compared to $1.18 in the corresponding period in 2019.
Same Community(2) Net Operating Income (“NOI”)(1) increased by 1.4 percent for the quarter ended June 30, 2020, as compared to the corresponding period in 2019, including the impact of $0.9 million of direct COVID-19 related expense.
Revenue Producing Sites increased by 851 sites for the quarter ended June 30, 2020, bringing total portfolio occupancy to 97.3 percent.
MH rent collections for the second quarter were approximately 97.0 percent, in line with the corresponding period in 2019. MH rent collections as of July 21st are approximately 96.0 percent.
Annual RV rent collections for the second quarter were approximately 98.0 percent, in line with the corresponding period in 2019.Gary Shiffman, Chief Executive Officer of Sun Communities stated, “We are pleased to report, despite the ongoing uncertainty, all of our communities and resorts are open. In the second quarter, our portfolio performed better than our expectations as expense containment efforts helped to mitigate the impact of the pandemic. Furthermore, we achieved total portfolio occupancy of 97.3 percent, adding 851 revenue producing sites during the second quarter, a 27.4 percent increase year over year. Portions of our portfolio were restricted from opening early in the second quarter, but we are now seeing significant gains in demand for our RV resorts with forward reservations trending near or ahead of initial budget.”Mr. Shiffman continued, “We remain focused on the health and safety of our residents, guests and team members as we navigate the COVID-19 virus. We are well positioned in the current environment and over the long term given our high-quality locations, affordable home price point and our alignment with the growing demand for the RV lifestyle.”
OPERATING HIGHLIGHTSPortfolio OccupancyTotal portfolio occupancy was 97.3 percent at June 30, 2020, compared to 96.6 percent at June 30, 2019. During the quarter ended June 30, 2020, revenue producing sites increased by 851 sites, as compared to 668 revenue producing sites gained during the second quarter of 2019, a 27.4 percent increase.During the six months ended June 30, 2020, revenue producing sites increased by 1,151 sites, as compared to an increase of 1,239 revenue producing sites during the six months ended June 30, 2019.
Same Community(2) ResultsFor the 367 communities owned and operated by the Company since January 1, 2019, NOI(1) for the quarter ended June 30, 2020 increased 1.4 percent over the same period in 2019, resulting from a 1.8 percent decrease in revenues and an 8.0 percent decrease in operating expenses. Adjusted to remove the impact of $0.9 million of direct COVID-19 related expense, Same Community NOI(1) growth was 2.0 percent. Same Community occupancy(3) increased to 98.7 percent at June 30, 2020 from 96.8 percent at June 30, 2019.For the six months ended June 30, 2020, NOI(1) increased 4.0 percent over the same period in 2019, as a result of a 1.6 percent increase in revenues and a 3.4 percent decrease in operating expenses. Adjusted to remove the impact of $0.9 million of direct COVID-19 related expense, Same Community NOI(1) growth was 4.4 percent.
Home SalesDuring the quarter ended June 30, 2020, the Company sold 611 homes as compared to 927 homes sold during the same period in 2019. The Company sold 140 and 139 new homes for the quarters ended June 30, 2020 and 2019, respectively. Rental home sales, which are included in total home sales, were 122 and 332 for the quarters ended June 30, 2020 and 2019, respectively.During the six months ended June 30, 2020, 1,374 homes were sold as compared to 1,725 for the same period in
2019. Rental home sales, which are included in total home sales, were 356 and 542 for the six months ended June 30, 2020 and 2019, respectively.Rent CollectionsFor the second quarter of 2020, MH and annual RV rent collections approximated 97.0 percent and 98.0 percent, respectively, after adjusting for the impact of hardship deferrals and prepaid rent balances. These collection percentages are in line with the second quarter of 2019.
PORTFOLIO ACTIVITYAcquisitions and DispositionsDuring and subsequent to the quarter ended June 30, 2020, the Company acquired the following communities:(a) In conjunction with the acquisition, the Company issued Series F preferred Operating Partnership (“OP”) units and Common OP units. As of June 30, 2020, 90,000 Series F preferred OP units and 82,420 common OP units, specific to this acquisition, were outstanding.Year to date, the Company has acquired five communities totaling 1,445 sites for a total purchase price of $132.3 million.Subsequent to the quarter ended June 30, 2020, the Company sold a MH community located in Great Falls, Montana, containing 226 sites, for $13.0 million. The assets and liabilities associated with the transaction were classified as held for sale on the Consolidated Balance Sheets as of June 30, 2020.Construction ActivityDuring the quarter ended June 30, 2020, the Company completed the construction of nearly 180 expansion sites in five communities and nearly 320 sites in three ground-up developments and one redevelopment community.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITYDebt TransactionsDuring the quarter, the Company repaid four term loans totaling $52.7 million collateralized by six properties. These loans had a weighted average interest rate of 5.98 percent and were set to mature in 2021.As of June 30, 2020, the Company had $3.4 billion of debt outstanding. The weighted average interest rate was 3.86 percent and the weighted average maturity was 11.6 years. The Company had $373.5 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve-month Recurring EBITDA(1) ratio was 4.8 times.Equity TransactionsDuring the quarter ended June 30, 2020, the Company closed an underwritten registered public offering of 4,968,000 shares of common stock. Proceeds from the offering were $633.1 million after deducting expenses related to the offering. The Company used a portion of the net proceeds of the offering to repay borrowings outstanding under its senior credit facility. The Company intends to use the proceeds of this offering to fund acquisitions, working capital needs and for general corporate purposes.
COVID-19 FINANCIAL IMPACTGiven the uncertainty surrounding the impact from the COVID-19 pandemic on its operations, the Company has withdrawn full year 2020 operational and financial guidance previously provided on February 19, 2020.For the second quarter of 2020, the Company had a net reduction of $10.8 million from its original budget as compared to its estimated net reduction of $15.0 million to $18.0 million.The Company’s third quarter is typically the largest contributor to earnings due to seasonality. The Company’s original budget for the third quarter of 2020 was approximately 31.0 percent of FFO(1) for the year. The Company has estimated a net reduction of $12.0 million to $15.0 million from its original budget for the third quarter of 2020. This range includes an expected $9.5 million of impact to income from real property across manufactured housing, annual RV and transient RV, and a reduction of $2.5 million and $2.0 million in net contribution from ancillary services and home sales, respectively.
EARNINGS CONFERENCE CALLA conference call to discuss second quarter operating results will be held on Thursday, July 23, 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 August 6, 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 13704750. 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 June 30, 2020, owned, operated, or had an interest in a portfolio of 426 communities comprising nearly 143,000 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 the effects of the COVID-19 pandemic and related stay-at-home orders, quarantine policies and restrictions on travel, trade and business operations; 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 for the year ended December 31, 2019 and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.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 June 30, 2020)
Financial and Operating Highlights(amounts in thousands, except for *)Consolidated Balance Sheets
(amounts in thousands)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)
(amounts in thousands except for per share data)(a) Adjustments include deferred compensation amortization upon retirement and deferred tax benefits.
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA (1)
(amounts in thousands)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)
(amounts in thousands except for Other Information)(a) Includes COVID-19 personal protective equipment expense of $910.Home Sales Summary
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Rental Program Summary
(amounts in thousands except for *)Acquisitions and Other Summary (16)
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Capital Improvements, Development, and Acquisitions
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Operating Statistics for MH and Annual RVs
Footnotes and Definitions 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 nonconsolidated 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 nonconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of nonconsolidated 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 2020 actual exchange rates.(3) The Same Community occupancy percentage is 96.9 percent for MH, 100.0 percent for RV, and 97.6 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 111,652 developed sites, of which 108,967 were occupied. The Same Community occupancy percentage for 2019 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. The adjusted Same Community occupancy percentage for 2020 is derived from 110,362 developed sites, of which 108,967 were occupied. The number of developed sites excludes RV transient sites and approximately 1,300 recently completed but vacant MH expansion sites.(4) The effect of certain anti-dilutive convertible securities is excluded from these items.(5) Net leased sites do not include occupied sites acquired during that year.(6) 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.(7) Other expense, net was as follows (in thousands):(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 $0.3 million for the six months ended June 30, 2020 and $0.4 million for the three and six months ended June 30, 2019, respectively, 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. For the three months ended June 30, 2020, the adjustment of $0.3 million was offset by the reversal of the first quarter 2020 adjustment of $0.3 million for which payment was received and income recognized during the current quarter in accordance with GAAP.(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) 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.(12) Same Community results net $9.4 million and $8.5 million of certain utility revenue against the related utility expense in property operating and maintenance expense for the three months ended June 30, 2020 and 2019, respectively. Same Community results net $18.3 million and $16.9 million of utility revenue against the related utility expense in property operating and maintenance expense for the six months ended June 30, 2020 and 2019, respectively.(13) Same Community supplies and repair expense excludes $0.3 million and $0.4 million for the three and six months ended June 30, 2019, 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.(14) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.(15) Calculated using actual results without rounding.(16) Acquisitions and other is comprised of 4 properties acquired and 3 properties that the Company has an interest in, but does not operate in 2020, forty-two properties acquired in 2019, one property being operated under a temporary use permit, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, five recently opened ground-up developments, one property undergoing redevelopment, and other miscellaneous transactions and activity.(17) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.(18) As of June 30, 2020, total portfolio MH occupancy was 96.5 percent inclusive of the impact of approximately 1,600 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.(19) Total sites for development were comprised of approximately 78.2 percent for expansion, 18.0 percent for greenfield development and 3.8 percent for redevelopment.(20) 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.(21) 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.(22) 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 six months ended June 30, 2020 include $19.8 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, 2019 and 2018, these costs were $50.7 million and $94.6 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.(23) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.(24) 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.Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.AttachmentExhibit 99.1 Press Release and Supplemental Package 2020.06.30
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