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Sun Communities Inc.$133.48($.27)(.20%)

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 Sun Communities, Inc. Reports 2019 First Quarter Results
   Wednesday, April 24, 2019 4:49:00 PM ET

Southfield, MI, April 24, 2019 (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 first quarter results for 2019.

Financial Results for the Three Months Ended March 31, 2019

For the three months ended March 31, 2019, total revenues increased $29.4 million, or 11.4 percent, to $287.3 million compared to $258.0 million for the same period in 2018. Net income attributable to common stockholders was $34.3 million, or $0.40 per diluted common share, for the three months ended March 31, 2019, as compared to net income attributable to common stockholders of $30.0 million, or $0.38 per diluted common share, for the same period in 2018.



Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations (“Core FFO”)(1) for the three months ended March 31, 2019, was $1.18 per diluted share and OP unit (“Share”) as compared to $1.14 in the prior year, an increase of 3.5 percent.
     
  • Same Community(2) Net Operating Income (“NOI”)(1) increased by 7.2 percent for the three months ended March 31, 2019, as compared to the same period in 2018.
     
  • New home sales volume increased 17.9 percent for the three months ended March 31, 2019, as compared to the same period in 2018.

Gary Shiffman, Chief Executive Officer of Sun Communities, stated, “Our solid momentum has continued as we started the year with strong operating results and numerous investments. We delivered another quarter of robust same community NOI growth, which along with our recent investments and expansions, contributed to our outperformance. Our extensive history of providing first-rate amenities and a focus on customer service continues to draw sustained demand. We remain confident in our outlook, maintain an attractive growth pipeline and anticipate the continued realization of the benefits of our developments and expansion opportunities as we bring them online over time.”

 

OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.4 percent at March 31, 2019, compared to 95.8 percent at March 31, 2018.

During the three months ended March 31, 2019, revenue producing sites increased by 571 sites, as compared to 616 revenue producing sites gained during the first quarter of 2018.
Same Community(2) Results

For the 345 communities owned and operated by the Company since January 1, 2018, NOI(1) for the three months ended March 31, 2019, increased 7.2 percent over the same period in 2018, as a result of a 6.0 percent increase in revenues and a 3.1 percent increase in operating expenses. Same Community occupancy(3) increased to 98.2 percent at March 31, 2019 from 96.1 percent at March 31, 2018.

 

Home Sales

During the three months ended March 31, 2019, the Company sold 798 homes as compared to 837 homes sold during the same period in 2018, a 4.7 percent decrease. Rental home sales, which are included in total home sales, were 210 and 234 for the three months ended March 31, 2019 and 2018, respectively.

 

PORTFOLIO ACTIVITY

Acquisitions

During the quarter ended March 31, 2019, the Company acquired the following communities:

First Quarter 2019:   
Date of AcquisitionTypeLocationUsable SitesConsideration  (in Millions)
1/2019MH (Age Restricted)Edgewater, Florida (1)730 $115.3 
1/2019RVOld Orchard Beach, Maine321  10.8 
1/2019MHOregon City, Oregon(2)518  61.8 
2/2019MHBuckeye, Arizona400  22.3 
2/2019MH (3)Shelby Township, Michigan1,308  94.5 
2/2019RVMillsboro, Delaware291  20.0 
  Total3,568 $324.7 
     

(1) Acquisition includes expansion potential of 70 sites.
(2) In conjunction with the acquisition, the Company issued a new class of Operating Partnership (“OP”) units named Series D Preferred Units. As of March 31, 2019, 488,958 Series D Preferred OP Units were outstanding.
 (3) Contains two MH communities.

 

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

During the quarter ended March 31, 2019, the Company completed a $265.0 million twenty-five year term loan transaction which carries an interest rate of 4.17 percent and concurrently repaid a $186.8 million term loan. The transaction provided $78.2 million of additional proceeds and extended the maturity date from 2030 to 2044 using the same assets as collateral for the new loan.

As of March 31, 2019, the Company had $3.4 billion of debt outstanding. The weighted average interest rate was 4.39 percent and the weighted average maturity was 9.3 years. The Company had $21.9 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 6.0 times.

2019 Distributions

As previously announced, the Company increased its annual distribution by 5.6 percent to $3.00 per common share from $2.84 per common share. The increase began with the distribution declared in March 2019 that was paid after quarter end.

 

GUIDANCE 2019

The Company revises full year 2019 net income per diluted share to be in the range of $1.61 to $1.71 and Core FFO(1) per Share to be in the range of $4.80 to $4.88. The Company anticipates second quarter 2019 net income per diluted share to be in the range of $0.31 to $0.35 and Core FFO(1) per Share to be in the range of $1.11 to $1.14. The Company is revising its Same Community NOI(1) growth guidance to be in the range of 6.4 percent to 7.0 percent for full year 2019.

Guidance estimates include acquisitions completed through the date of this release and exclude any perspective acquisitions or capital markets activity.

Core FFO(1) per Share estimates assume certain gain and loss items that management considers unrelated to the operational and financial performance of our core business will be adjusted from FFO(1). 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 Thursday, April 25, 2019 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 May 9, 2019 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 13688595. The conference call will be available live on Sun Communities’ website www.suncommunities.com . The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of March 31, 2019, owned, operated, or had an interest in a portfolio of 379 communities comprising over 132,000 developed sites in 31 states and Ontario, Canada.

For more information about Sun Communities, Inc., please visit www.suncommunities.com .

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com , by phone to (248) 208-2500, by email to investorrelations@suncommunities.com or by mail to Sun Communities, Inc. Attn: 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, 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                                                            

 

RESEARCH COVERAGE      
       
Firm Analyst Phone Email
Bank of America Merrill Lynch Joshua Dennerlein (646) 855-1681 joshua.dennerlein@baml.com
BMO Capital Markets John Kim (212) 885-4115 johnp.kim@bmo.com
Citi Research Michael Bilerman (212) 816-1383 michael.bilerman@citi.com
  Nicholas Joseph (212) 816-1909 nicholas.joseph@citi.com
Evercore ISI Steve Sakwa (212) 446-9462 steve.sakwa@evercoreisi.com
  Samir Khanal (212) 888-3796 samir.khanal@evercoreisi.com
Green Street Advisors John Pawlowski (949) 640-8780 jpawlowski@greenstreetadvisors.com
RBC Capital Markets Wes Golladay (440) 715-2650 wes.golladay@rbccm.com
Robert W. Baird & Co. Drew Babin (610) 238-6634 dbabin@rwbaird.com
Wells Fargo Todd Stender (562) 637-1371 todd.stender@wellsfargo.com
       
       
INQUIRIES      
       
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department.
       
At Our Website www.suncommunities.com     
       
By Email investorrelations@suncommunities.com   
       
By Phone (248) 208-2500    
       
       
       
       
       
       
       
       

 

Portfolio Overview                                                                           
(As of March 31, 2019)


Balance Sheets                                                                                                                                              
(amounts in thousands)

 

  3/31/2019 12/31/2018
ASSETS:    
Land $1,279,306  $1,201,945 
Land improvements and buildings 5,899,149  5,586,250 
Rental homes and improvements 585,994  571,661 
Furniture, fixtures and equipment 208,177  201,090 
Investment property 7,972,626  7,560,946 
Accumulated depreciation (1,501,370) (1,442,630)
Investment property, net 6,471,256  6,118,316 
Cash and cash equivalents 21,946  50,311 
Marketable securities 50,501  49,037 
Inventory of manufactured homes 52,993  49,199 
Notes and other receivables, net 179,814  160,077 
Collateralized receivables, net (4) 101,938  106,924 
Other assets, net 220,214  176,162 
TOTAL ASSETS $7,098,662  $6,710,026 
LIABILITIES AND TEMPORARY EQUITY:    
Mortgage loans payable $2,879,017  $2,815,957 
Secured borrowings (4) 102,676  107,731 
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,249  35,277 
Preferred OP units - mandatorily redeemable 34,663  37,338 
Lines of credit (5) 396,512  128,000 
Distributions payable 66,887  63,249 
Advanced reservation deposits and rent 151,860  133,698 
Other liabilities 179,461  157,862 
TOTAL LIABILITIES 3,846,325  3,479,112 
Commitments and contingencies    
Series A-4 preferred stock 31,739  31,739 
Series A-4 preferred OP units 9,784  9,877 
Series D preferred OP units 51,738   
Equity Interests - NG Sun LLC 22,167  21,976 
STOCKHOLDERS' EQUITY:    
Common stock 865  864 
Additional paid-in capital 4,398,641  4,398,949 
Accumulated other comprehensive loss (3,006) (4,504)
Distributions in excess of accumulated earnings (1,317,605) (1,288,486)
Total Sun Communities, Inc. stockholders' equity 3,078,895  3,106,823 
Noncontrolling interests:    
Common and preferred OP units 51,816  53,354 
Consolidated variable interest entities 6,198  7,145 
Total noncontrolling interests 58,014  60,499 
TOTAL STOCKHOLDERS' EQUITY 3,136,909  3,167,322 
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY $7,098,662  $6,710,026 


Statements of Operations - Quarter to Date Comparison                                                            
(amounts in thousands, except per share amounts)

 

 Three Months Ended March 31,
 2019 2018 Change % Change
REVENUES:       
Income from real property (excluding transient revenue)$190,564  $175,210  $15,354  8.8%
Transient revenue26,215  22,001  4,214  19.2%
Revenue from home sales39,618  34,900  4,718  13.5%
Rental home revenue13,971  13,020  951  7.3%
Ancillary revenue8,482  6,568  1,914  29.1%
Interest4,800  5,316  (516) (9.7)%
Brokerage commissions and other revenues, net3,680  960  2,720  283.3%
Total Revenues287,330  257,975  29,355  11.4%
EXPENSES:       
Property operating and maintenance57,909  51,630  6,279  12.2%
Real estate taxes15,330  13,836  1,494  10.8%
Cost of home sales29,277  26,571  2,706  10.2%
Rental home operating and maintenance4,788  5,227  (439) (8.4)%
Ancillary expenses7,101  5,383  1,718  31.9%
Home selling expenses3,324  3,290  34  1.0%
General and administrative21,887  19,757  2,130  10.8%
Catastrophic weather related charges, net782  (2,213) 2,995  (135.3)%
Depreciation and amortization76,556  66,437  10,119  15.2%
Loss on extinguishment of debt653  196  457  233.2%
Interest34,014  31,138  2,876  9.2%
Interest on mandatorily redeemable preferred OP units / equity1,094  619  475  76.7%
Total Expenses252,715  221,871  30,844  13.9%
Income Before Other Items34,615  36,104  (1,489) (4.1)%
Remeasurement of marketable securities267    267  N/A
Other income / (expense), net (6)1,898  (2,617) 4,515  172.5%
Income / (loss) from nonconsolidated affiliates344  (59) 403  683.1%
Current tax expense(214) (174) (40) (23.0)%
Deferred tax benefit217  347  (130) (37.5)%
Net Income37,127  33,601  3,526  10.5%
Less: Preferred return to preferred OP units / equity(1,323) (1,080) (243) 22.5%
Less: Amounts attributable to noncontrolling interests(1,041) (2,094) 1,053  (50.3)%
Net Income Attributable to Sun Communities, Inc.34,763  30,427  4,336  14.3%
Less: Preferred stock distribution(432) (441) 9  (2.0)%
Net Income Attributable to Sun Communities, Inc. Common Stockholders$34,331  $29,986  $4,345  14.5%
        
Weighted average common shares outstanding:       
Basic85,520  78,855  6,665  8.5%
Diluted86,033  79,464  6,569  8.3%
Earnings per share:       
Basic$0.40  $0.38  $0.02  5.3%
Diluted$0.40  $0.38  $0.02  5.3%

 

Outstanding Securities and Capitalization 
(amounts in thousands except for *)

Outstanding Securities - As of March 31, 2019
          
 Number of Units/Shares Outstanding Conversion Rate* If Converted Issuance Price per unit* Annual Distribution Rate*
Convertible Securities         
Series A-1 preferred OP units328 2.4390 800 $100 6.0%
Series A-3 preferred OP units40 1.8605 74 $100 4.5%
Series A-4 preferred OP units410 0.4444 182 $25 6.5%
Series C preferred OP units314 1.1100 349 $100 4.5%
Series D preferred OP units489 0.8000 391 $100 3.8%
Common OP units2,719 1.0000 2,719 N/A Mirrors common shares distributions
Series A-4 preferred stock1,063 0.4444 472 $25 6.5%
Non-Convertible Securities         
Common shares86,463 N/A N/A N/A $3.00^
^ Annual distribution is based on the last quarterly distribution annualized.

 

Capitalization - As of March 31, 2019      
       
Equity Shares Share Price* Total
Common shares 86,463  $118.52  $10,247,595 
Common OP units 2,719  $118.52  322,256 
Subtotal 89,182    $10,569,851 
       
Series A-1 preferred OP units 800  $118.52  94,816 
Series A-3 preferred OP units 74  $118.52  8,770 
Series A-4 preferred OP units 182  $118.52  21,571 
Series C preferred OP units 349  $118.52  41,363 
Series D preferred OP units 391  $118.52  46,341 
Total diluted shares outstanding 90,978    $10,782,712 
 
Debt
Mortgage loans payable     $2,879,017 
Secured borrowings (4)     102,676 
Preferred Equity - Sun NG Resorts - mandatorily redeemable     35,249 
Preferred OP units - mandatorily redeemable     34,663 
Lines of credit (5)     396,512 
Total debt     $3,448,117 
 
Preferred
Series A-4 preferred stock 1,063  $25.00  $26,575 
Total Capitalization     $14,257,404 

 

Reconciliations to Non-GAAP Financial Measures

 

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO
(amounts in thousands except for per share data)

 

 Three Months Ended
 March 31,
 2019 2018
Net income attributable to Sun Communities, Inc. common stockholders:$34,331  $29,986 
Adjustments:   
Depreciation and amortization76,712  66,646 
Remeasurement of marketable securities(267)  
Amounts attributable to noncontrolling interests723  1,889 
Preferred return to preferred OP units527  553 
Preferred distribution to Series A-4 preferred stock432  441 
Gain on disposition of assets, net(5,679) (4,539)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$106,779  $94,976 
Adjustments:   
Other acquisition related costs (8)160  135 
Loss on extinguishment of debt653  196 
Catastrophic weather related charges, net782  (2,213)
Loss of earnings - catastrophic weather related (9)  325 
Other (income) / expense (6)(1,898) 2,617 
Debt premium write-off  (782)
Deferred tax benefit(217) (347)
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$106,259  $94,907 
    
Weighted average common shares outstanding - basic:85,520  78,855 
Add:   
Common stock issuable upon conversion of stock options1  2 
Restricted stock512  607 
Common OP units2,722  2,741 
Common stock issuable upon conversion of Series A-4 preferred stock472  482 
Common stock issuable upon conversion of Series A-3 preferred OP units75  75 
Common stock issuable upon conversion of Series A-1 preferred OP units803  836 
Weighted average common shares outstanding - fully diluted90,105  83,598 
    
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted
$1.19  $1.14 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted
$1.18  $1.14 

 

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA
(amounts in thousands)

 

 Three Months Ended
 March 31,
 2019 2018
Net income attributable to Sun Communities, Inc., common stockholders:$34,331  $29,986 
Adjustments:   
Interest expense35,108  31,757 
Loss on extinguishment of debt653  196 
Current tax expense214  174 
Deferred tax benefit(217) (347)
(Income) / loss from nonconsolidated affiliates(344) 59 
Depreciation and amortization76,556  66,437 
Gain on disposition of assets, net(5,679) (4,539)
EBITDAre (1)$140,622  $123,723 
Adjustments:   
Remeasurement of marketable securities(267)  
Other (income) / expense, net (6)(1,898) 2,617 
Catastrophic weather related charges, net782  (2,213)
Preferred return to preferred OP units / equity1,323  1,080 
Amounts attributable to noncontrolling interests1,041  2,094 
Preferred stock distribution432  441 
Plus: Gain on dispositions of assets, net5,679  4,539 
Recurring EBITDA (1)$147,714  $132,281 


Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to NOI
(amounts in thousands)

 

 Three Months Ended
 March 31,
 2019 2018
Net income attributable to Sun Communities, Inc., common stockholders:$34,331  $29,986 
Other revenues(8,480) (6,276)
Home selling expenses3,324  3,290 
General and administrative21,887  19,757 
Catastrophic weather related charges, net782  (2,213)
Depreciation and amortization76,556  66,437 
Loss on extinguishment of debt653  196 
Interest expense35,108  31,757 
Remeasurement of marketable securities(267)  
Other (income) / expense, net (6)(1,898) 2,617 
(Income) / loss from nonconsolidated affiliates(344) 59 
Current tax expense214  174 
Deferred tax benefit(217) (347)
Preferred return to preferred OP units / equity1,323  1,080 
Amounts attributable to noncontrolling interests1,041  2,094 
Preferred stock distribution432  441 
NOI(1) / Gross Profit$164,445  $149,052 

 

 Three Months Ended
 March 31,
 2019 2018
Real Property NOI (1)$143,540  $131,745 
Rental Program NOI (1)26,061  24,102 
Home Sales NOI (1) / Gross Profit10,341  8,329 
Ancillary NOI (1) / Gross Profit1,381  1,185 
Site rent from Rental Program (included in Real Property NOI) (1)(10)(16,878) (16,309)
NOI (1) / Gross profit$164,445  $149,052 


Non-GAAP and Other Financial Measures

 

Financial and Operating Highlights                                                                                                           
(amounts in thousands, except for *)

 

 Quarter Ended
 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
FINANCIAL INFORMATION         
Total revenues$287,330  $274,004  $323,538  $271,426  $257,975 
Net income37,127  10,672  51,715  24,170  33,601 
Net income attributable to Sun Communities Inc.34,331  9,039  46,060  20,408  29,986 
Earnings per share basic*$0.40  $0.11  $0.56  $0.25  $0.38 
Earnings per share diluted*0.40  0.11  0.56  0.25  0.38 
          
Cash distributions declared per common share*$0.75  $0.71  $0.71  $0.71  $0.71 
          
Recurring EBITDA (1)$147,714  $133,669  $158,153  $128,798  $132,281 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

106,779  88,562  117,018  85,623  94,976 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

106,259  92,695  116,959  90,372  94,907 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*$1.19  $0.98  $1.35  $1.02  $1.14 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*1.18  1.03  1.35  1.07  1.14 
          
BALANCE SHEETS         
Total assets$7,098,662  $6,710,026  $6,653,726  $6,492,348  $6,149,653 
Total debt3,448,117  3,124,303  3,004,929  3,364,081  3,129,440 
Total liabilities3,846,325  3,479,112  3,367,285  3,736,621  3,471,096 

 

 Quarter Ended
 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
OPERATING INFORMATION*         
New home sales125  140  146  134  106 
Pre-owned home sales673  738  825  809  731 
Total homes sold798  878  971  943  837 
          
Communities379  371  370  367  350 
          
Developed sites112,175  108,963  108,142  107,192  106,617 
Transient RV sites20,173  19,491  19,432  19,007  15,693 
Total sites132,348  128,454  127,574  126,199  122,310 
          
MH occupancy95.4% 95.0% 94.9% 95.0% 94.7%
RV occupancy100.0% 100.0% 100.0% 100.0% 100.0%
Total blended MH and RV occupancy96.4% 96.1% 96.1% 96.1% 95.8%


Debt Analysis
(amounts in thousands)

 

 Quarter Ended
 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
DEBT OUTSTANDING         
Mortgage loans payable$2,879,017  $2,815,957  $2,819,225  $2,636,847  $2,826,225 
Secured borrowings (4)102,676  107,731  113,089  118,242  124,077 
Preferred Equity - Sun NG Resorts - mandatorily redeemable35,249  35,277  35,277  35,277   
Preferred OP units - mandatorily redeemable34,663  37,338  37,338  37,338  37,338 
Lines of credit (5)396,512  128,000    536,377  141,800 
Total debt$3,448,117  $3,124,303  $3,004,929  $3,364,081  $3,129,440 
          
% FIXED/FLOATING         
Fixed88.5% 95.9% 100.0% 84.0% 90.6%
Floating11.5% 4.1% % 16.0% 9.4%
Total100.0% 100.0% 100.0% 100.0% 100.0%
          
WEIGHTED AVERAGE INTEREST RATES         
Mortgage loans payable4.24% 4.22% 4.23% 4.27% 4.25%
Preferred Equity - Sun NG Resorts - mandatorily redeemable6.00% 6.00% 6.00% 6.00% %
Preferred OP units - mandatorily redeemable6.50% 6.61% 6.61% 6.61% 6.61%
Lines of credit (5)3.73% 3.77% % 3.31% 3.01%
Average before Secured borrowings (4)4.22% 4.25% 4.28% 4.15% 4.22%
Secured borrowings (4)9.94% 9.94% 9.95% 9.96% 9.97%
Total average4.39% 4.45% 4.40% 4.36% 4.45%
          
DEBT RATIOS         
Net Debt / Recurring EBITDA (1) (TTM)6.0  5.6  5.4  6.5  6.2 
Net Debt / Enterprise Value24.1% 25.2% 24.1% 28.6% 28.8%
Net Debt / Gross Assets39.8% 37.7% 35.9% 42.7% 41.9%
          
COVERAGE RATIOS         
Recurring EBITDA (1) (TTM) / Interest4.1 4.0 3.9 3.7 3.6
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution3.9 3.9 3.8 3.6 3.4

 

MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARSRemaining 2019 2020 2021 2022 2023
Mortgage loans payable:         
Maturities$  $58,078  $270,680  $82,155  $307,465 
Weighted average rate of maturities% 5.92% 5.53% 4.46% 4.17%
Principal amortization44,099  59,931  59,173  57,182  53,829 
Secured borrowings (4)3,846  5,547  5,956  6,154  6,154 
Preferred Equity - Sun NG Resorts - mandatorily redeemable      35,249   
Lines of credit (5)  3,512  393,000     
Total$47,945  $127,068  $728,809  $180,740  $367,448 

 

Real Property Operations – Same Community(2)                                                     
(amounts in thousands except for Other Information)

 

 Three Months Ended March 31, 
 2019 2018 Change % Change 
Financial Information        
Income from real property (11)$199,084  $187,826  $11,258  6.0% 
         
Property Operating Expenses:     
Payroll and benefits16,421  15,534  887  5.7% 
Legal, taxes & insurance2,191  2,471  (280) (11.3)% 
Utilities (11)14,434  14,463  (29) (0.2)% 
Supplies and repair (12)5,719  5,159  560  10.9% 
Other4,455  4,688  (233) (5.0)% 
Real estate taxes14,590  13,766  824  6.0% 
Total property operating expenses57,810  56,081  1,729  3.1% 
Real Property NOI(1)$141,274  $131,745  $9,529  7.2% 

 

 As of March 31, 
 2019 2018 Change % Change 
Other Information        
Number of properties345  345      
         
MH occupancy (3)97.6%       
RV occupancy (3)100.0%       
MH & RV blended occupancy % (3)98.2% 96.1% 2.1%   
         
Sites available for development7,296  7,602  (306) (4.0)% 
         
Monthly base rent per site - MH$565  $543  $22  4.1%(14)
Monthly base rent per site - RV (13)$457  $434  $23  5.3%(14)
Monthly base rent per site - Total (13)$541  $519  $22  4.2%(14)


Home Sales Summary           
(amounts in thousands except for *)

 

 Three Months Ended March 31,
Financial Information2019 2018 Change % Change
Revenue:       
New home sales$15,381  $11,893  $3,488  29.3%
Pre-owned home sales24,237  23,007  1,230  5.3%
Revenue from home sales39,618  34,900  4,718  13.5%
Expenses:       
New home cost of sales13,146  10,197  2,949  28.9%
Pre-owned home cost of sales16,131  16,374  (243) (1.5)%
Cost of home sales29,277  26,571  2,706  10.2%
NOI / Gross Profit (1)$10,341  $8,329  $2,012  24.2%
        
Gross profit – new homes$2,235  $1,696  $539  31.8%
Gross margin % – new homes14.5% 14.3% 0.2%  
Average selling price – new homes*$123,048  $112,198  $10,850  9.7%
        
Gross profit – pre-owned homes$8,106  $6,633  $1,473  22.2%
Gross margin % – pre-owned homes33.4% 28.8% 4.6%  
Average selling price – pre-owned homes*$36,013  $31,473  $4,540  14.4%
        
Statistical Information
New home sales volume*125  106  19  17.9%
Pre-owned home sales volume*673  731  (58) (7.9)%
Total homes sold*798  837  (39) (4.7)%

               

 

Rental Program Summary    
(amounts in thousands except for *)

 

  Three Months Ended March 31,
Financial Information 2019 2018 Change % Change
Revenues:        
Rental home revenue $13,971  $13,020  $951  7.3%
Site rent included in Income from real property 16,878  16,309  569  3.5%
Rental program revenue 30,849  29,329  1,520  5.2%
         
Expenses:        
Repairs and refurbishment 2,304  2,314  (10) (0.4)%
Taxes and insurance 1,864  1,546  318  20.6%
Other 620  1,367  (747) (54.6)%
Rental program operating and maintenance 4,788  5,227  (439) (8.4)%
Rental Program NOI(1) $26,061  $24,102  $1,959  8.1%

 

  As of March 31,
Other Information 2019 2018 Change % Change
Number of occupied rental homes, end of period* 11,170  11,074  96  0.9%
Investment in occupied rental homes, end of period $547,844  $504,402  $43,442  8.6%
Number of sold rental homes (YTD)* 210  234  (24) (10.3)%
Weighted average monthly rental rate, end of period* $963  $913  $50  5.5%


Acquisitions and Other Summary (15)
(amounts in thousands except for statistical data)

 

   Three Months Ended
 March 31, 2019
REVENUES:   
Income from real property  $9,251 
    
PROPERTY AND OPERATING EXPENSES:   
Payroll and benefits  2,450 
Legal, taxes & insurance  193 
Utilities(11)  1,550 
Supplies and repair  635 
Other  1,417 
Real estate taxes  740 
Property operating expenses  6,985 
NET OPERATING INCOME (NOI) (1)  $2,266 
    
   As of March 31, 2019
Other information:   
Number of properties  34 
Occupied sites  3,699 
Developed sites  3,893 
Occupancy %  95.0%
Transient sites  5,189 


Property Summary          
(includes MH and Annual RVs)
           
COMMUNITIES 3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
FLORIDA          
Communities 125  124  124  124  123 
Developed sites (16) 38,878  37,874  37,879  37,723  37,726 
Occupied (16) 37,932  36,868  36,822  36,602  36,546 
Occupancy % (16) 97.6% 97.3% 97.2% 97.0% 96.9%
Sites for development 1,754  1,684  1,494  1,335  1,397 
MICHIGAN          
Communities 72  70  70  69  68 
Developed sites (16) 27,777  26,504  26,116  26,039  25,881 
Occupied (16) 26,430  25,075  24,830  24,709  24,319 
Occupancy % (16) 95.2% 94.6% 95.1% 94.9% 94.0%
Sites for development 1,202  1,202  1,533  1,668  1,371 
TEXAS          
Communities 23  23  23  23  21 
Developed sites (16) 6,953  6,922  6,905  6,622  6,614 
Occupied (16) 6,529  6,428  6,301  6,251  6,191 
Occupancy % (16) 93.9% 92.9% 91.3% 94.4% 93.6%
Sites for development 1,107  1,121  907  1,168  1,100 
CALIFORNIA          
Communities 31  30  30  29  27 
Developed sites (16) 5,949  5,941  5,932  5,694  5,692 
Occupied (16) 5,902  5,897  5,881  5,647  5,646 
Occupancy % (16) 99.2% 99.3% 99.1% 99.2% 99.2%
Sites for development 56  56  59  177  389 
ARIZONA          
Communities 13  12  11  11  11 
Developed sites (16) 4,238  3,836  3,826  3,804  3,797 
Occupied (16) 3,830  3,545  3,515  3,485  3,468 
Occupancy % (16) 90.4% 92.4% 91.9% 91.6% 91.3%
Sites for development          
ONTARIO, CANADA          
Communities 15  15  15  15  15 
Developed sites (16) 3,832  3,845  3,832  3,752  3,650 
Occupied (16) 3,832  3,845  3,832  3,752  3,650 
Occupancy % (16) 100.0% 100.0% 100.0% 100.0% 100.0%
Sites for development 1,675  1,682  1,662  1,662  1,664 
INDIANA          
Communities 11  11  11  11  11 
Developed sites (16) 3,089  3,089  3,089  3,089  3,048 
Occupied (16) 2,823  2,772  2,778  2,791  2,785 
Occupancy % (16) 91.4% 89.7% 89.9% 90.4% 91.4%
Sites for development 277  277  277  277  318 
OHIO          
Communities 9  9  9  9  9 
Developed sites (16) 2,770  2,770  2,770  2,767  2,756 
Occupied (16) 2,704  2,693  2,694  2,698  2,672 
Occupancy % (16) 97.6% 97.2% 97.3% 97.5% 97.0%
Sites for development 59  59  59  59  75 
COLORADO          
Communities 8  8  8  8  8 
Developed sites (16) 2,335  2,335  2,335  2,335  2,335 
Occupied (16) 2,323  2,320  2,313  2,319  2,327 
Occupancy % (16) 99.5% 99.4% 99.1% 99.3% 99.7%
Sites for development 2,129  2,129  2,129  1,819  650 
OTHER STATES          
Communities 72  69  69  68  57 
Developed sites (16) 16,354  15,847  15,458  15,367  15,118 
Occupied (16) 15,826  15,323  14,932  14,786  14,544 
Occupancy % (16) 96.8% 96.7% 96.6% 96.2% 96.2%
Sites for development 2,987  3,048  3,195  3,233  2,381 
TOTAL - PORTFOLIO          
Communities 379  371  370  367  350 
Developed sites (16) 112,175  108,963  108,142  107,192  106,617 
Occupied (16) 108,131  104,766  103,898  103,040  102,148 
Occupancy % (16) 96.4%(17)96.1% 96.1% 96.1% 95.8%
Sites for development (18) 11,246  11,258  11,315  11,398  9,345 
% Communities age restricted 31.7% 32.1% 32.2% 32.2% 33.7%
           
TRANSIENT RV PORTFOLIO SUMMARY          
 Location          
Florida 5,650  5,917  5,786  5,942  5,870 
California 1,975  1,765  1,774  1,377  806 
Texas 1,717  1,752  1,758  1,776  1,360 
Arizona 1,421  1,423  1,057  1,079  1,085 
Maryland 1,375  1,381  1,386  1,386  1,155 
Ontario, Canada 1,131  1,046  1,056  1,133  1,234 
New York 929  925  910  928  610 
New Jersey 906  884  893  906  931 
Maine 857  572  578  591  591 
Michigan 611  576  629  350  256 
Indiana 519  519  519  519  519 
Other locations 3,082  2,731  3,086  3,020  1,276 
Total transient RV sites 20,173  19,491  19,432  19,007  15,693 


Capital Improvements, Development, and Acquisitions   
(amounts in thousands except for *)

 

  Recurring Capital Expenditures
Average/Site*
Recurring
Capital Expenditures (19)
 Lot Modifications (20)Acquisitions (21) Expansion &
Development (22)
Revenue Producing (23)
YTD 2019$53 $5,296 $5,587 $328,700 $51,157 $2,803 
2018$263 $24,265 $22,867 $414,840 $152,672 $3,864 
2017$214 $14,166 $18,049 $204,375 $88,331 $1,990 


Operating Statistics for MH and Annual RVs

 

LOCATIONS Resident Move-outs Net Leased Sites (24) New Home Sales Pre-owned Home Sales Brokered  Re-sales
Florida 281  348  59  56  342 
Michigan 197  111  15  324  30 
Ontario, Canada 301  (13) 3  2  13 
Texas 61  101  11  77  14 
Arizona 11  16  11  1  54 
Indiana 13  51  2  82  4 
Ohio 48  11    38   
California 12  5  5    14 
Colorado   3  6  19  8 
Other locations 426  (62) 13  74  21 
Three Months Ended March 31, 2019 1,350  571  125  673  500 

 

TOTAL FOR YEAR ENDED Resident Move-outs New Leased Sites (24) New Home Sales Pre-owned Home Sales Brokered  Re-sales
2018 3,435  2,600  526  3,103  2,147 
2017 2,739  2,406  362  2,920  2,006 

 

PERCENTAGE TRENDS Resident Move-outs Resident  Re-sales
2019 (TTM) 2.5% 7.2%
2018 2.4% 7.2%
2017 1.9% 6.6%

 

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 106,386 developed sites, of which 104,432 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 95.4 percent for MH, 100.0 percent for RV, and 96.4 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 108,282 developed sites, of which 104,432 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.

(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):

 Three Months Ended
March 31,
 2019 2018
Foreign currency translation gain / (loss)$1,969  $(2,524)
Contingent liability remeasurement (loss) / gain(71) (93)
Other income / (expense), net$1,898  $(2,617)

(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)   We recorded a total estimated income of $0.3 million in the Core FFO(1) during the first quarter ending March 31, 2018 for the income related to the loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities. The estimated income was not recorded within our consolidated financial statements during that period in accordance with GAAP. The income was recognized in the fourth quarter of 2018. During the three months ended March 31, 2019, we recorded GAAP income of $0.4 million from business interruption coverage upon notification of payment by the insurance company.

(10) The renter’s monthly payment includes the site rent and an amount attributable to the home lease. Site rent is reflected in Real Property NOI. For purposes of management analysis, site rent is included in Rental Program revenue to evaluate the incremental revenue gains associated with implementation of 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 $8.4 million and $8.1 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended March 31, 2019 and 2018, respectively. The Company adopted ASC 842, the new leasing 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 $0.1 million for the three months ended March 31, 2018 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 seven properties acquired and one property being operated under a temporary use permit 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, one recently opened ground-up development, one property undergoing redevelopment, one property that we have an interest in, but do not operate, and other miscellaneous transactions and activity.

(16) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.

(17) As of March 31, 2019, total portfolio MH occupancy was 95.4 percent (including the impact of approximately 1,900 recently constructed but vacant MH expansion sites) and annual RV occupancy was 100.0 percent.

(18) Total sites for development were comprised of approximately 71.7 percent for expansion, 23.3 percent for greenfield development and 5.0 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 three months ended March 31, 2019 include $12.4 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.

 

Attachment

Source: Sun Communities, Inc.


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