SOUTHFIELD, Mich., March 13 /PRNewswire-FirstCall/ -- Sun Communities, Inc. (NYSE: SUI) (the 'Company'), a real estate investment trust (REIT) that owns and operates manufactured housing communities, today reported fourth quarter and year ended December 31, 2008 results.
For the year ended December 31, 2008, total revenues increased 8.1 percent to $255.0 million, as compared to $236.0 million for the same period in 2007. Net loss for the year ended December 31, 2008 was $(34.5) million, or $(1.90) per diluted common share, compared with a net loss of $(16.6) million, or $(0.93) per diluted common share, for the year ended December 31, 2007. Funds from operations (FFO)(1) were $26.5 million, or $1.29 per diluted share/OP Unit, for the year ended December 31, 2008, compared to $45.4 million, or $2.24 per diluted share/OP Unit, for the year ended December 31, 2007.
During the quarter ended December 31, 2008, total revenues increased 6.6 percent to $63.2 million, as compared to $59.3 million in the fourth quarter of 2007. Net loss for the fourth quarter of 2008 was $(18.5) million, or $(1.01) per diluted common share, compared with a net loss of $(10.2) million, or $(0.57) per diluted common share, for the same period in 2007. FFO(1) was $(0.6) million, or $(0.03) per diluted share/OP Unit, in the fourth quarter of 2008 as compared to $4.5 million, or $0.22 per diluted share/OP Unit, in the fourth quarter of 2007.
Included in 2008 net loss is equity loss from Origen Financial, Inc. ('Origen') of $16.5 million, which includes an impairment charge of $9.6 million. Also included are impairment charges of $9.1 million to the book value of four communities, an impairment charge of $4.1 million to the Company's cable television and internet assets, and severance costs of $0.9 million. The Reconciliation of Net Loss to Funds from Operations, included with this press release, presents adjustments to FFO(1) for the quarter and year ended December 31, 2008 and 2007.
After adjustments, the Company earned FFO(1) of $2.78 and $2.72 per diluted share/OP unit for the year ended December 31, 2008, and 2007, and $0.73 and $0.70 for the three months ended December 31, 2008, and 2007, respectively.
'We are pleased with the overall performance in 2008, especially in light of the ever increasing economic uncertainty in the latter half of the year,' said Gary Shiffman, Chairman and CEO. 'Home sales remained strong, portfolio occupancy gains exceeded budget and nearly all key guidance metrics were achieved,' Shiffman added.
For 135 communities owned throughout 2008 and 2007, total revenues increased 2.5 percent for the quarter ended December 31, 2008, and total expenses increased 1.0 percent, resulting in an increase in net operating income(2) of 3.1 percent, as compared to an increase in net operating income(2) of 2.2 percent for the same period in 2007. For the year ended December 31, 2008, total revenues increased 2.3 percent and total expenses increased 1.0 percent, resulting in an increase in net operating income(2) of 2.8 percent, as compared to an increase in net operating income(2) of 2.1 percent for the same period in 2007. Same property occupancy in the manufactured housing sites was 82.1 percent and 82.4 percent at December 31, 2008, and 2007, respectively.
Manufactured housing revenue producing sites decreased by 138 for the fourth quarter of 2008, compared to a decrease of 67 sites during the fourth quarter of 2007. For the year ended December 31, 2008, manufactured housing revenue producing sites decreased by 88, compared to a decrease of 132 during the same period in 2007. This represents a quarter over quarter decline of 71 sites and a year over year improvement of 44 sites, for the three and twelve months ended December 31, 2008, respectively, compared to the same periods during 2007.
'Total portfolio occupancy including permanent recreational vehicles improved from a loss of 148 sites in 2007 to a loss of 47 sites in 2008, and is budgeted to be positive for 2009. At the same time, we have seen total applications to live in a Sun Community increase from 10,000 in 2006 to 15,000 in 2007 to 17,000 in 2008. With the current tenuous economy, there are fewer and fewer housing options available to an increasing segment of the population. The affordability factor should play strong to this growing segment of the population and continue to augment demand for our product.' said Shiffman.
The Company sold 965 new and pre-owned homes during 2008, compared to 712 in 2007, an increase of approximately 35.5 percent. The increase is due principally to increased sales of rental homes which increased 64.2 percent to 596 in 2008, up from 363 in 2007. During the fourth quarter of 2008, the Company sold 223 new and pre-owned homes, compared to 147 during the fourth quarter of 2007. Rental home sales, included in total new and pre-owned home sales, totaled 153 for the three months ended December 31, 2008, compared to 82 during the same period in 2007.
The Company's rental program has increased by a net 189 homes since December 31, 2007, bringing the total number of occupied rentals to 5,517 at December 31, 2008, as reflected in the accompanying table. Rental rates for the homes, including site rent, have increased approximately 2.5 percent over the past year from an average of $718 per month at December 31, 2007, to an average of $736 per month at December 31, 2008.
During 2008, the Company completed a secured borrowing of $27.0 million, of which $4.3 million was used to repay an existing mortgage and the remaining proceeds were used to pay down the Company's unsecured line of credit. Subsequent to year end, the Company's $40.0 million floor plan/line of credit facility matured and was replaced by a $10.0 million floor plan facility. Additional information regarding upcoming debt maturities is contained in the following 2009 Earnings Guidance section.
The Company completed various transactions involving its installment notes during 2008 which are recorded as a transfer of financial assets and resulted in cash proceeds of $27.5 million and net proceeds of $6.0 million were realized through the sale of three parcels of vacant land.
The Company's Board of Directors has approved a first quarter dividend of $0.63 to be declared and paid in April 2009.
2009 EARNINGS GUIDANCE
It is the Company's expectation that FFO(1) per diluted share/OP unit will be in the range of $2.84 to $2.92 per diluted share/OP unit for 2009. We believe this growth of 2.2 percent to 5.0 percent to be achievable in the current economic environment because affordable housing meets essential needs at a time of severe uncertainty regarding employment and wage growth. Monthly costs for our homes range from as little as $500 per month for smaller homes (including the home and land) to over $1,000 for larger homes. The monthly cost per square foot ranges from as low as $0.50 for the smaller homes to about $0.80 for the larger homes. As economic times become more challenging, our product experiences stronger demand which is why manufactured housing has often been characterized as recession-resistant. While it is too early to call it a trend, growth in revenue producing sites, as described in greater detail below, may be reflective of that historical experience. Sun Communities represents a high-quality low-cost alternative for housing.
Site Rent Increases
The weighted average site rental increase for 2009 is expected to be 3.0 percent.
Occupancy
Occupancy losses in the portfolio, including manufactured housing and permanent recreational vehicle sites, improved from a loss of 148 sites in 2007 to a loss of 47 sites in 2008. For 2009, revenue producing sites are expected to increase by approximately 190 sites, including over 50 permanently sited homes in our recreational vehicle communities. The improvement in occupancy results for 2009 compared to 2008 is concentrated in our portfolio in the Midwest while the East, Southeast, and West are expected to perform at a consistent level of occupancy growth. The increase in revenue producing sites is also benefiting from a continuing conversion of seasonal recreational vehicle sites into permanent occupancy.
Revenue producing sites have increased by 40 during the first two months of 2009, compared to a loss of 82 sites during the first two months of 2008. Driving that improvement were Michigan, Indiana, and Ohio, which improved by 126 sites for the first two months of 2009 compared to the comparable 2008 period.
JLT & Associates, an independent real estate market research company, recently issued a summary of its 2008 and 2007 manufactured housing home community surveys. The surveys covered 71 major markets in the United States and included 1,309 'all ages' communities with 368,653 home sites. The national average occupancy is 82.7 percent and the weighted average rent increase is 3 percent. Sun's portfolio occupancy as of December 31, 2008, was 81.9 percent and the weighted average rental increase for 2008 was 2.9 percent. Sun's portfolio, while weighted toward the Midwest, is performing consistently with the results of JLT & Associates national survey results. It seems clear that the Company's performance has been impacted more by the manufactured housing industry issues related to poor underwriting standards and repossessions (that have dramatically mitigated) than by regional economic issues in the Midwest.
Same Property Portfolio
The Company's same property portfolio of 135 communities is expected to generate growth in net operating income(2) of approximately 1.7 percent in 2009.
