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NEWS RELEASEJuly 26, 2017
Southfield, Michigan, July 26, 2017 - 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.
Financial Results for the Quarter and Six Months Ended June 30, 2017
For the quarter ended June 30, 2017, total revenues increased $47.1 million, or 24.7 percent, to $237.9 million compared to $190.8 million for the same period in 2016. Net income attributable to common stockholders was $12.4 million, or $0.16 per diluted common share, as compared to net loss attributable to common stockholders of $7.8 million, or $0.12 net loss per diluted common share, for the same period in 2016.
For the six months ended June 30, 2017, total revenues increased $106.9 million, or 29.2 percent, to $472.3 million compared to $365.4 million for the same period in 2016. Net income attributable to common stockholders was $33.5 million, or $0.45 per diluted common share, as compared to net income attributable to common stockholders of $0.1 million, or $0.00 per diluted common share, for the same period in 2016.
Non-GAAP Financial Measures and Portfolio Performance
Funds from Operations ("FFO")(1) excluding certain items was $0.96 per diluted share and OP unit ("Share") for the quarter ended June 30, 2017 as compared to $0.85 for the same period in 2016, an increase of 12.9 percent. Revenue producing sites increased by 752 sites for the quarter ended June 30, 2017, as compared to an increase of 501 sites in the same period in 2016. Home sales volumes increased by 6.8 percent for the quarter ended June 30, 2017 as compared to the same period in 2016. Same Community Net Operating Income ("NOI")(1) increased by 6.1 percent for the quarter ended June 30, 2017 as compared to the same period in 2016. Same Community occupancy increased 160 basis points to 97.2 percent, as compared to 95.6 percent(10) at June 30, 2016. "Our second quarter performance demonstrates our ongoing commitment to deliver consistent operational results, while positioning ourselves for continued growth. Solid occupancy gains, stable rate increases and robust home sales all contributed to the quarter's performance," said Gary A. Shiffman, Chairman and Chief Executive Officer. "On the capital side, we further strengthened our balance sheet from both a debt and equity perspective. With a sizable expansion platform and an active acquisition pipeline, we expect to continue to drive attractive growth."
OPERATING HIGHLIGHTS
Community Occupancy
Total portfolio occupancy was 96.1 percent at both June 30, 2017 and June 30, 2016, including the impact of recently completed but vacant expansion sites. During the quarter ended June 30, 2017, revenue producing sites increased by 752 sites, as compared to 501 revenue producing sites gained during the second quarter of 2016.
Revenue producing sites increased by 1,439 for the six months ended June 30, 2017 as compared to 1,093 revenue producing sites gained during the six months ended June 30, 2016.
Same Community Results
For the 231 communities owned since January 1, 2016, NOI(1) for the quarter ended June 30, 2017 increased 6.1 percent over the same period in 2016, driven by a 6.2 percent increase in revenues and a 6.3 percent increase in operating expenses. Same community occupancy increased to 97.2 percent at June 30, 2017 from 95.6 percent(10) at June 30, 2016.
For the six months ended June 30, 2017, total revenues increased by 5.7 percent while total expenses increased by 3.8 percent, resulting in an increase to NOI(1) of 6.4 percent over the six months ended June 30, 2016.
Home Sales
Total home sales were 801 for the quarter ended June 30, 2017 as compared to 750 homes sold during the same period in 2016, a 6.8 percent increase.
Rental homes sales, which are included in total home sales, were 302 and 278 for the quarters ended June 30, 2017 and 2016, respectively.
During the six months ended June 30, 2017, 1,627 homes were sold compared to 1,515 for the same period ending 2016. Rental home sales, which are included in total home sales, were 542 and 572 for the six months ended June 30, 2017 and 2016, respectively.
BALANCE SHEET AND CAPITAL MARKETS ACTIVITY
Debt Transactions
During the quarter ended June 30, 2017, as previously announced, the Company amended and restated its credit agreement with Citibank, N.A. and certain other lenders. Pursuant to the amendments, the Company can borrow up to $550.0 million under a revolving loan and $100.0 million under a term loan (the "Facility"). The Facility has a four-year term, and replaced the Company's $450.0 million credit facility that was scheduled to mature in August 2019. The Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that can range from 1.35 percent to 2.20 percent for the revolving loan and 1.30 percent to 2.15 percent for the term loan. The Company may borrow up to $100.0 million on the term loan on or before September 30, 2017.
Additionally, during the quarter, the Company completed a $77.0 million secured borrowing that bears interest at a fixed rate of 4.16 percent and has a 25-year term. The Company also repaid a $3.9 million mortgage loan that had an interest rate of 6.54 percent that was due to mature in August 2017.
As of June 30, 2017, the Company had approximately $3.0 billion of debt outstanding. The weighted average interest rate was 4.56 percent and the weighted average maturity was 8.7 years. The Company had $241.6 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.
Equity Transactions
During the quarter ended June 30, 2017, the Company closed an underwritten registered public offering of 4,830,000 shares of common stock at a gross price of $86.00 per share. Proceeds from the offering were $408.9 million after deducting expenses related to the offering. The Company utilized proceeds from the offering to fully repay borrowings outstanding on its senior revolving credit facility, redeem certain preferred securities, and fund an acquisition.
The Company also sold 400,000 shares of common stock through its At-the-Market equity sales program ("ATM") at a weighted average price of $85.01 during the quarter ended June 30, 2017. Net proceeds from the sales were $33.6 million.
During the quarter ended June 30, 2017, the Company redeemed 438,448 shares of 6.50% Series A-4 Cumulative Convertible Preferred Stock and 200,000 Series A-4 preferred OP units from certain entities affiliated with the sellers under the Company's previous acquisition of the American Land Lease portfolio for total consideration of $24.7 million.
PORTFOLIO ACTIVITY
Acquisitions(2)
During the quarter ended June 30, 2017, as previously announced, the Company acquired an undeveloped parcel of land near the ocean in Myrtle Beach, South Carolina, for total consideration of $5.9 million. This land parcel has been successfully entitled and zoned to build a 775 site RV resort.
During the quarter, the Company acquired a 489 site RV resort located in Hillsdale, Illinois and a 458 site MH community in Superior Township, Michigan, for total consideration of approximately $25.0 million.
GUIDANCE 2017
The Company is updating its 2017 full year guidance of FFO(1) per Share to be in the range of $4.12 to $4.18. The revised guidance reflects the impacts of the May equity offering and ATM issuances of $(0.12) per Share, and year to date outperformance of the portfolio and contribution from completed acquisitions of $0.06 per Share. The Company anticipates FFO(1) per Share of $1.11 to $1.14 for the third quarter and $0.95 to $0.98 for the fourth quarter.
The Company affirms 2017 full year guidance of Same Community NOI(1) growth of 6.4 percent to 6.8 percent. Guidance does not include prospective acquisitions or capital markets activity.
FFO(1) per Share estimates assume certain non-core items are 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 second quarter operating results will be held on Thursday, July 27, 2017 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 10, 2017 and can be accessed toll-free by calling 844-512-2921 or by calling 412-317-6671. The Conference ID number for the call and the replay is 13661890. The conference call will be available live on Sun Communities' website www.suncommunities.com. Replay will also be available on the website.
Sun Communities, Inc. is a REIT that, as of June 30, 2017, owned or had an interest in a portfolio of 344 communities comprising approximately 120,000 developed sites in 29 states and Ontario, Canada.
For more information about Sun Communities, Inc., please visit the website at www.suncommunities.com.
CONTACT
Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone (248) 208-2500, by email or by mail 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 our 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, 2016.
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 BMO Capital Markets John Kim (212) 885-4115 Citi Research Michael Bilerman (212) 816-1383 Nicholas Joseph (212) 816-1909 Evercore ISI Steve Sakwa (212) 446-9462 Gwen Clark (212) 446-5611 Green Street Advisors Ryan Burke (949) 640-8780 RBC Capital Markets Neil Malkin (440) 715-2651 Robert W. Baird & Co. Drew Babin (610) 238-6634 Wells Fargo Todd Stender (562) 637-1371 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 By Phone (248) 208-2500 Portfolio Overview (As of June 30, 2017)
Balance Sheets (amounts in thousands)
6/30/2017 12/31/2016 ASSETS: Land $ 1,066,792 $ 1,051,536 Land improvements and buildings 4,934,110 4,825,043 Rental homes and improvements 507,362 489,633 Furniture, fixtures and equipment 137,546 130,127 Investment property 6,645,810 6,496,339 Accumulated depreciation (1,128,671 ) (1,026,858 ) Investment property, net 5,517,139 5,469,481 Cash and cash equivalents 241,646 8,164 Inventory of manufactured homes 25,582 21,632 Notes and other receivables, net 110,499 81,179 Collateralized receivables, net (3) 138,696 143,870 Other assets, net 145,151 146,450 Total assets $ 6,178,713 $ 5,870,776 LIABILITIES: Mortgage loans payable $ 2,832,819 $ 2,819,567 Secured borrowings (3) 139,496 144,477 Preferred OP units - mandatorily redeemable 45,903 45,903 Lines of credit 435 100,095 Distributions payable 56,283 51,896 Other liabilities 298,759 279,667 Total liabilities 3,373,695 3,441,605 Series A-4 preferred stock 32,414 50,227 Series A-4 preferred OP units 11,051 16,717 STOCKHOLDERS' EQUITY: Series A preferred stock 34 34 Common stock 790 732 Additional paid-in capital 3,780,599 3,321,441 Accumulated other comprehensive loss (981 ) (3,181 ) Distributions in excess of accumulated earnings (1,089,428 ) (1,023,415 ) Total SUI stockholders' equity 2,691,014 2,295,611 Noncontrolling interests: Common and preferred OP units 67,135 69,598 Consolidated variable interest entities 3,404 (2,982 ) Total noncontrolling interest 70,539 66,616 Total stockholders' equity 2,761,553 2,362,227 Total liabilities & stockholders' equity $ 6,178,713 $ 5,870,776 Statements of Operations - Quarter to Date Comparison (amounts in thousands, except per share amounts)
Three Months Ended June 30, 2017 2016 Change % Change REVENUES Income from real property (excluding transient revenue) $ 163,770 $ 129,117 $ 34,653 26.8 % Transient revenue 15,691 10,884 4,807 44.2 % Revenue from home sales 30,859 26,039 4,820 18.5 % Rental home revenue 12,678 11,957 721 6.0 % Ancillary revenues 8,850 7,383 1,467 19.9 % Interest 5,043 4,672 371 7.9 % Brokerage commissions and other revenues, net 1,008 747 261 34.9 % Total revenues 237,899 190,799 47,100 24.7 % EXPENSES Property operating and maintenance 53,446 37,067 16,379 44.2 % Real estate taxes 13,126 10,153 2,973 29.3 % Cost of home sales 22,022 18,684 3,338 17.9 % Rental home operating and maintenance 4,944 5,411 (467 ) (8.6 )% Ancillary expenses 7,058 5,599 1,459 26.1 % Home selling expenses 2,990 2,460 530 21.5 % General and administrative 19,989 16,543 3,446 20.8 % Transaction costs 2,437 20,979 (18,542 ) (88.4 )% Depreciation and amortization 62,721 49,670 13,051 26.3 % Extinguishment of debt 293 - 293 N/A Interest 32,358 28,428 3,930 13.8 % Interest on mandatorily redeemable preferred OP units 787 787 - - % Total expenses 222,171 195,781 26,390 13.5 % Income / (loss) before other items 15,728 (4,982 ) 20,710 415.7 % Other income, net (4) 875 - 875 N/A Current tax benefit / (expense) 7 (56 ) 63 112.5 % Deferred tax benefit 364 - 364 N/A Net income / (loss) 16,974 (5,038 ) 22,012 436.9 % Less: Preferred return to preferred OP units (1,196 ) (1,263 ) 67 (5.3 )% Less: Amounts attributable to noncontrolling interests (1,315 ) 695 (2,010 ) (289.2 )% Less: Preferred stock distribution (2,099 ) (2,197 ) 98 (4.5 )% NET INCOME / (LOSS) ATTRIBUTABLE TO SUI $ 12,364 $ (7,803 ) $ 20,167 258.5 % Weighted average common shares outstanding: Basic 74,678 64,757 9,921 15.3 % Diluted 75,154 64,757 10,397 16.1 % Earnings / (loss) per share: Basic $ 0.16 $ (0.12 ) $ 0.28 233.3 % Diluted $ 0.16 $ (0.12 ) $ 0.28 233.3 % Statements of Operations - Year to Date Comparison (amounts in thousands, except per share amounts)
Six Months Ended June 30, 2017 2016 Change % Change REVENUES: Income from real property (excluding transient revenue) $ 325,646 $ 248,201 $ 77,445 31.2 % Transient revenue 36,869 21,035 15,834 75.3 % Revenue from home sales 58,122 50,776 7,346 14.5 % Rental home revenue 25,017 23,665 1,352 5.7 % Ancillary revenues 15,069 11,996 3,073 25.6 % Interest 9,689 8,617 1,072 12.4 % Brokerage commissions and other revenues, net 1,887 1,153 734 63.7 % Total revenues 472,299 365,443 106,856 29.2 % EXPENSES: Property operating and maintenance 100,612 68,268 32,344 47.4 % Real estate taxes 26,269 19,738 6,531 33.1 % Cost of home sales 42,905 36,868 6,037 16.4 % Rental home operating and maintenance 10,046 11,287 (1,241 ) (11.0 )% Ancillary expenses 11,726 9,248 2,478 26.8 % Home selling expenses 6,101 4,597 1,504 32.7 % General and administrative 37,921 30,335 7,586 25.0 % Transaction costs 4,823 23,700 (18,877 ) (79.7 )% Depreciation and amortization 125,487 98,082 27,405 27.9 % Extinguishment of debt 759 - 759 N/A Interest 63,680 54,722 8,958 16.4 % Interest on mandatorily redeemable preferred OP units 1,571 1,574 (3 ) (0.2 )% Total expenses 431,900 358,419 73,481 20.5 % Income before other items 40,399 7,024 33,375 475.2 % Other income, net (4) 1,627 - 1,627 N/A Current tax expense (171 ) (284 ) 113 39.8 % Deferred tax benefit 664 - 664 N/A Net income 42,519 6,740 35,779 530.9 % Less: Preferred return to preferred OP units (2,370 ) (2,536 ) 166 (6.6 )% Less: Amounts attributable to noncontrolling interests (2,403 ) 419 (2,822 ) (673.5 )% Less: Preferred stock distribution (4,278 ) (4,551 ) 273 (6.0 )% NET INCOME ATTRIBUTABLE TO SUI $ 33,468 $ 72 33,396 46,383.3 % Weighted average common shares outstanding: Basic 73,677 61,247 12,430 20.3 % Diluted 74,272 61,673 12,599 20.4 % Earnings per share: Basic $ 0.45 $ 0.00 $ 0.45 N/A Diluted $ 0.45 $ 0.00 $ 0.45 N/A Outstanding Securities and Capitalization (in thousands except for *)
Outstanding Securities - As of June 30, 2017 Number of Units/Shares Outstanding Conversion Rate* If Converted Issuance Price per unit* Annual Distribution Rate* Convertible Securities Series A-1 preferred OP units 361 2.4390 880 $100 6.0% Series A-3 preferred OP units 40 1.8605 74 $100 4.5% Series A-4 preferred OP units 429 0.4444 191 $25 6.5% Series C preferred OP units 328 1.1100 364 $100 4.5% Common OP units 2,770 1.0000 2,770 N/A Mirrors common shares distributions Series A-4 cumulative convertible preferred stock 1,085 0.4444 482 $25 6.5% Non-Convertible Securities Preferred stock (SUI-PrA) 3,400 N/A N/A $25 7.125% Common shares 78,987 N/A N/A N/A $2.68^ ^ Annual distribution is based on the last quarterly distribution annualized. Capitalization - As of June 30, 2017 Equity Shares Share Price* Total Common shares 78,987 $ 87.69 $ 6,926,370 Common OP units 2,770 $ 87.69 242,901 Subtotal 81,757 $ 7,169,271 Series A-1 preferred OP units 880 $ 87.69 77,167 Series A-3 preferred OP units 74 $ 87.69 6,489 Series A-4 preferred OP units 191 $ 87.69 16,749 Series C preferred OP units 364 $ 87.69 31,919 Total diluted shares outstanding 83,266 $ 7,301,595 Debt Mortgage loans payable $ 2,832,819 Secured borrowings (3) 139,496 Preferred OP units - mandatorily redeemable 45,903 Lines of credit 435 Total Debt $ 3,018,653 Preferred Perpetual preferred 3,400 $ 25.00 $ 85,000 A-4 preferred stock 1,085 $ 25.00 $ 27,125 Total Capitalization $ 10,432,373 Reconciliations to Non-GAAP Financial Measures
Reconciliation of Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders to Funds from Operations (amounts in thousands except for per share data)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net income / (loss) attributable to Sun Communities, Inc. common stockholders $ 12,364 (7,803 ) $ 33,468 $ 72 Adjustments: Depreciation and amortization 62,842 49,340 125,659 97,416 Amounts attributable to noncontrolling interests 1,202 (779 ) 2,102 (430 ) Preferred return to preferred OP units 586 618 1,172 1,243 Preferred distribution to Series A-4 preferred stock 560 - 1,225 - Gain on disposition of assets, net (4,352 ) (3,903 ) (7,033 ) (7,558 ) FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (6) 73,202 37,473 156,593 90,743 Adjustments: Transaction costs 2,437 20,979 4,823 23,700 Other acquisition related costs (5) 1,525 - 2,369 - Extinguishment of debt 293 - 759 - Other income, net (4) (875 ) - (1,627 ) - Debt premium write-off (24 ) - (438 ) - Deferred tax benefit (364 ) - (664 ) - FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items (1) (6) $ 76,194 $ 58,452 $ 161,815 $ 114,443 Weighted average common shares outstanding - basic: 74,678 64,757 73,677 61,247 Add: Common stock issuable upon conversion of stock options 2 9 2 9 Restricted stock 474 444 593 417 Common OP units 2,757 2,863 2,756 2,863 Common stock issuable upon conversion of Series A-1 preferred OP units 882 933 887 939 Common stock issuable upon conversion of Series A-3 preferred OP units 75 75 75 75 Common stock issuable upon conversion of Series A-4 preferred stock 645 - 690 - Weighted average common shares outstanding - fully diluted 79,513 69,081 78,680 65,550 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (6) per share - fully diluted $ 0.92 $ 0.54 $ 1.99 $ 1.38 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (6) per share excluding certain items - fully diluted $ 0.96 $ 0.85 $ 2.06 $ 1.75 Reconciliation of Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA(amounts in thousands)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net income / (loss) attributable to Sun Communities, Inc., common stockholders $ 12,364 $ (7,803 ) $ 33,468 $ 72 Interest 32,358 28,428 63,680 54,722 Interest on mandatorily redeemable preferred OP units 787 787 1,571 1,574 Depreciation and amortization 62,721 49,670 125,487 98,082 Extinguishment of debt 293 - 759 - Transaction costs 2,437 20,979 4,823 23,700 Other income, net (4) (875 ) - (1,627 ) - Current tax (benefit) / expense (7 ) 56 171 284 Deferred tax benefit (364 ) - (664 ) - Preferred return to preferred OP units 1,196 1,263 2,370 2,536 Amounts attributable to noncontrolling interests 1,315 (695 ) 2,403 (419 ) Preferred stock distributions 2,099 2,197 4,278 4,551 RECURRING EBITDA (1) $ 114,324 $ 94,882 $ 236,719 $ 185,102 Reconciliation of Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders to Net Operating Income(amounts in thousands)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net income / (loss) attributable to Sun Communities, Inc., common stockholders: $ 12,364 $ (7,803 ) $ 33,468 $ 72 Other revenues (6,051 ) (5,419 ) (11,576 ) (9,770 ) Home selling expenses 2,990 2,460 6,101 4,597 General and administrative 19,989 16,543 37,921 30,335 Transaction costs 2,437 20,979 4,823 23,700 Depreciation and amortization 62,721 49,670 125,487 98,082 Extinguishment of debt 293 - 759 - Interest expense 33,145 29,215 65,251 56,296 Other income, net (4) (875 ) - (1,627 ) - Current tax (benefit) / expense (7 ) 56 171 284 Deferred tax benefit (364 ) - (664 ) - Preferred return to preferred OP units 1,196 1,263 2,370 2,536 Amounts attributable to noncontrolling interests 1,315 (695 ) 2,403 (419 ) Preferred stock distributions 2,099 2,197 4,278 4,551 NOI(1) / Gross Profit $ 131,252 $ 108,466 $ 269,165 $ 210,264 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Real Property NOI (1) $ 112,889 $ 92,781 $ 235,634 $ 181,230 Rental Program NOI (1) 23,743 21,959 46,699 43,009 Home Sales NOI(1) / Gross Profit 8,837 7,355 15,217 13,908 Ancillary NOI(1) / Gross Profit 1,792 1,784 3,343 2,748 Site rent from Rental Program (included in Real Property NOI) (1)(7) (16,009 ) (15,413 ) (31,728 ) (30,631 ) NOI(1) / Gross profit $ 131,252 $ 108,466 $ 269,165 $ 210,264 Non-GAAP and Other Financial Measures
Financial Highlights (amounts in thousands, except per share data)
Quarter Ended 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 OPERATING INFORMATION Total revenues $ 237,899 $ 234,400 $ 218,634 $ 249,701 $ 190,799 Net income / (loss) $ 16,974 $ 25,545 $ 1,501 $ 23,230 $ (5,038 ) Net income / (loss) attributable to common stockholders $ 12,364 $ 21,104 $ (1,600 ) $ 18,897 $ (7,803 ) Earnings / (loss) per share basic $ 0.16 $ 0.29 $ (0.02 ) $ 0.27 $ (0.12 ) Earnings / (loss) per share diluted $ 0.16 $ 0.29 $ (0.02 ) $ 0.27 $ (0.12 ) Recurring EBITDA (1) $ 114,324 $ 122,395 $ 105,850 $ 123,276 $ 94,882 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities(1) (6) $ 73,202 $ 83,391 $ 57,572 $ 78,023 $ 37,473 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items(1) (6) $ 76,194 $ 85,621 $ 69,192 $ 83,181 $ 58,452 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (6) per share - fully diluted $ 0.92 $ 1.07 $ 0.75 $ 1.06 $ 0.54 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (6) per share excluding certain items - fully diluted $ 0.96 $ 1.10 $ 0.91 $ 1.13 $ 0.85 BALANCE SHEETS Total assets $ 6,178,713 $ 5,902,447 $ 5,870,776 $ 5,904,706 $ 5,823,191 Total debt $ 3,018,653 $ 3,140,547 $ 3,110,042 $ 3,102,993 $ 3,340,329 Total liabilities $ 3,373,695 $ 3,478,132 $ 3,441,605 $ 3,429,743 $ 3,645,744 Debt Analysis (amounts in thousands)
Quarter Ended 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 DEBT OUTSTANDING Mortgage loans payable $ 2,832,819 $ 2,774,645 $ 2,819,567 $ 2,854,831 $ 2,792,021 Secured borrowings (3) 139,496 141,671 144,477 144,522 144,684 Preferred OP units - mandatorily redeemable 45,903 45,903 45,903 45,903 45,903 Lines of credit (8) 435 178,328 100,095 57,737 357,721 Total debt $ 3,018,653 $ 3,140,547 $ 3,110,042 $ 3,102,993 $ 3,340,329 % FIXED/FLOATING Fixed 94.9% 89.4% 91.8% 93.1% 84.5% Floating 5.1% 10.6% 8.2% 6.9% 15.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% WEIGHTED AVERAGE INTEREST RATES Mortgage loans payable 4.26% 4.26% 4.24% 4.30% 4.38% Preferred OP units - mandatorily redeemable 6.87% 6.87% 6.87% 6.87% 6.87% Lines of credit -% 2.52% 2.14% 1.93% 1.89% Average before Secured borrowings 4.30% 4.19% 4.21% 4.29% 4.13% Secured borrowings (3) 9.99% 10.01% 10.03% 10.06% 10.09% Total average 4.56% 4.45% 4.48% 4.56% 4.39% DEBT RATIOS Net Debt / Recurring EBITDA(1) (TTM) 6.0 7.0 7.5 7.7 9.1 Net Debt / Enterprise Value 27.2% 32.8% 33.8% 32.8% 36.6% Net Debt + Preferred Stock / Enterprise Value 28.4% 34.2% 35.2% 34.2% 38.0% Net Debt / Gross Assets 38.0% 44.8% 45.0% 44.1% 49.0% COVERAGE RATIOS Recurring EBITDA(1) (TTM) / Interest 3.4 3.3 3.2 3.1 3.1 Recurring EBITDA(1) (TTM) / Interest + Pref.Distributions + Pref. Stock Distribution 3.1 3.0 2.9 2.9 2.8 MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS 2017 2018 2019 2020 2021 Mortgage loans payable: Maturities $ - $ 26,186 $ 64,314 $ 58,078 $ 270,680 Weighted average rate of maturities - % 6.13 % 6.24 % 5.92 % 5.53 % Principal amortization 26,533 55,143 55,937 56,558 55,503 Secured borrowings (3) 2,763 5,923 6,440 7,028 7,550 Preferred OP units - mandatorily redeemable 3,670 7,570 - - - Lines of credit - 435 - - - Total $ 32,966 $ 95,257 $ 126,691 $ 121,664 $ 333,733 Statements of Operations - Same Community (amounts in thousands except for Other Information)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 Change % Change 2017 2016 Change % Change REVENUES: Income from real property $ 131,008 $ 123,399 $ 7,609 6.2 % $ 259,764 $ 245,842 $ 13,922 5.7 % PROPERTY OPERATING EXPENSES: Payroll and benefits 11,615 11,143 472 4.2 % 21,710 20,811 899 4.3 % Legal, taxes & insurance 1,564 1,418 146 10.3 % 2,748 2,717 31 1.1 % Utilities 7,192 6,577 615 9.4 % 13,944 13,261 683 5.2 % Supplies and repair 5,560 5,130 430 8.4 % 9,010 8,612 398 4.6 % Other 3,296 3,180 116 3.7 % 6,472 6,457 15 0.2 % Real estate taxes 9,767 9,224 543 5.9 % 19,473 18,795 678 3.6 % Property operating expenses 38,994 36,672 2,322 6.3 % 73,357 70,653 2,704 3.8 % NET OPERATING INCOME (NOI)(1) $ 92,014 $ 86,727 $ 5,287 6.1 % $ 186,407 $ 175,189 $ 11,218 6.4 % As of June 30, 2017 2016 Change % Change OTHER INFORMATION Number of properties 231 231 - Overall occupancy (9) 97.2 % 95.6 % (10) 1.6 % Sites available for development 6,193 6,919 (726 ) (10.6 )% Monthly base rent per site - MH $ 510 $ 493 $ 17 3.4 % (12) Monthly base rent per site - RV (11) $ 448 $ 432 $ 16 3.6 % (12) Monthly base rent per site - Total $ 502 $ 486 $ 16 3.4 % (12) Rental Program Summary (amounts in thousands except for *)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 Change % Change 2017 2016 Change % Change REVENUES: Rental home revenue $ 12,678 $ 11,957 $ 721 6.0 % $ 25,017 $ 23,665 $ 1,352 5.7 % Site rent included in Income from real property 16,009 15,413 596 3.9 % 31,728 30,631 1,097 3.6 % Rental program revenue 28,687 27,370 1,317 4.8 % 56,745 54,296 2,449 4.5 % EXPENSES: Commissions 401 384 17 4.4 % 1,011 1,159 (148 ) (12.8 )% Repairs and refurbishment 2,363 3,273 (910 ) (27.8 )% 4,644 5,939 (1,295 ) (21.8 )% Taxes and insurance 1,506 1,167 339 29.1 % 2,943 2,732 211 7.7 % Marketing and other 674 587 87 14.8 % 1,448 1,457 (9 ) (0.6 )% Rental program operating and maintenance 4,944 5,411 (467 ) (8.6 )% 10,046 11,287 (1,241 ) (11.0 )% NET OPERATING INCOME (NOI) (1) $ 23,743 $ 21,959 $ 1,784 8.1 % $ 46,699 $ 43,009 $ 3,690 8.6 % Occupied rental home information as of June 30, 2017 and 2016: Number of occupied rentals, end of period* 11,083 10,997 86 0.8 % Investment in occupied rental homes, end of period $ 479,503 $ 453,869 $ 25,634 5.7 % Number of sold rental homes (YTD)* 542 572 (30 ) (5.2 )% Weighted average monthly rental rate, end of period* $ 897 $ 868 $ 29 3.3 % Home Sales Summary (amounts in thousands except for *)
Three Months Ended June 30, Six Months Ended June 30, 2017 2016 Change % Change 2017 2016 Change % Change New home sales $ 7,546 $ 5,612 $ 1,934 34.5 % $ 14,429 $ 11,081 $ 3,348 30.2 % Pre-owned home sales 23,313 20,427 2,886 14.1 % 43,693 39,695 3,998 10.1 % Revenue from home sales 30,859 26,039 4,820 18.5 % 58,122 50,776 7,346 14.5 % New home cost of sales 6,497 4,773 1,724 36.1 % 12,345 9,617 2,728 28.4 % Pre-owned home cost of sales 15,525 13,911 1,614 11.6 % 30,560 27,251 3,309 12.1 % Cost of home sales 22,022 18,684 3,338 17.9 % 42,905 36,868 6,037 16.4 % NOI / Gross Profit (1) $ 8,837 $ 7,355 $ 1,482 20.2 % $ 15,217 $ 13,908 $ 1,309 9.4 % Gross profit - new homes $ 1,049 $ 839 $ 210 25.0 % $ 2,084 $ 1,464 $ 620 42.4 % Gross margin % - new homes 13.9 % 15.0 % (1.1 )% 14.4 % 13.2 % 1.2 % Average selling price - new homes* $ 93,161 $ 95,119 $ (1,958 ) (2.1 )% $ 91,905 $ 88,648 $ 3,257 3.7 % Gross profit - pre-owned homes $ 7,788 $ 6,516 $ 1,272 19.5 % $ 13,133 $ 12,444 $ 689 5.5 % Gross margin % - pre-owned homes 33.4 % 31.9 % 1.5 % 30.1 % 31.3 % (1.2 )% Average selling price - pre-owned homes* $ 32,379 $ 29,562 $ 2,817 9.5 % $ 29,723 $ 28,558 $ 1,165 4.1 % Home sales volume: New home sales* 81 59 22 37.3 % 157 125 32 25.6 % Pre-owned home sales* 720 691 29 4.2 % 1,470 1,390 80 5.8 % Total homes sold* 801 750 51 6.8 % 1,627 1,515 112 7.4 %
Acquisitions Summary - Properties Acquired in 2017 and 2016(amounts in thousands except for statistical data)
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 REVENUES: Income from real property $ 42,455 $ 89,956 PROPERTY AND OPERATING EXPENSES: Payroll and benefits 6,640 11,466 Legal, taxes & insurance 326 670 Utilities 6,649 13,137 Supplies and repair 1,752 3,001 Other 2,854 5,659 Real estate taxes 3,359 6,796 Property operating expenses 21,580 40,729 NET OPERATING INCOME (NOI) (1) $ 20,875 $ 49,227 As of June 30, 2017 Other information: Number of properties 113 Occupied sites (13) 21,728 Developed sites (13) 22,395 Occupancy % (13) 97.0 % Transient sites 7,358 Monthly base rent per site - MH $ 620 Monthly base rent per site - RV (11) $ 404 Monthly base rent per site - Total (11) $ 507 Ancillary revenues, net (in thousands) $ 1,217 Home sales: Gross profit from home sales (in thousands) $ 1,958 New homes sales 44 Pre-owned homes sales 172 Occupied rental home information: Rental program NOI (1) (in thousands) $ 297 Number of occupied rentals, end of period 352 Investment in occupied rental homes (in thousands) $ 8,163 Weighted average monthly rental rate $ 991 Property Summary (includes MH and Annual/Seasonal RV's) COMMUNITIES 6/30/2017 3/31/2017 12/31/2016 9/30/2016 6/30/2016 FLORIDA Communities 121 121 121 121 121 Developed sites (13) 36,661 36,533 36,326 36,050 36,119 Occupied (13) 35,479 35,257 35,021 34,745 34,720 Occupancy % (13) 96.8 % 96.5 % 96.4 % 96.4 % 96.1 % Sites for development 1,368 1,359 1,465 1,259 1,259 MICHIGAN Communities 68 67 67 67 66 Developed sites (13) 25,496 25,024 24,512 24,388 24,387 Occupied (13) 23,924 23,443 23,248 23,218 23,198 Occupancy % (13) 93.8 % 93.7 % 94.8 % 95.2 % 95.1 % Sites for development 1,752 1,798 2,589 2,628 2,248 TEXAS Communities 21 21 21 21 21 Developed sites (13) 6,312 6,292 6,186 6,088 6,071 Occupied (13) 6,021 5,943 5,862 5,774 5,771 Occupancy % (13) 95.4 % 94.5 % 94.8 % 94.8 % 95.1 % Sites for development 1,345 1,387 1,474 1,455 1,347 CALIFORNIA Communities 23 23 22 22 22 Developed sites (13) 4,894 4,865 4,862 4,863 4,864 Occupied (13) 4,834 4,804 4,793 4,792 4,796 Occupancy % (13) 98.8 % 98.7 % 98.6 % 98.5 % 98.6 % Sites for development 367 411 332 332 332 ARIZONA Communities 11 11 11 11 11 Developed sites (13) 3,589 3,582 3,565 3,567 3,532 Occupied (13) 3,383 3,370 3,338 3,305 3,281 Occupancy % (13) 94.3 % 94.1 % 93.6 % 92.7 % 92.9 % Sites for development 269 269 358 358 358 ONTARIO, CANADA Communities 15 15 15 15 15 Developed sites (13) 3,564 3,451 3,368 3,453 3,375 Occupied (13) 3,564 3,451 3,368 3,453 3,375 Occupancy % (13) 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sites for development 1,628 1,628 1,599 2,029 2,029 INDIANA Communities 11 11 11 11 11 Developed sites (13) 2,900 2,900 2,900 2,900 2,900 Occupied (13) 2,758 2,741 2,724 2,712 2,700 Occupancy % (13) 95.1 % 94.5 % 93.9 % 93.5 % 93.1 % Sites for development 330 330 316 316 316 OHIO Communities 9 9 9 9 9 Developed sites (13) 2,735 2,719 2,715 2,719 2,718 Occupied (13) 2,643 2,623 2,595 2,602 2,616 Occupancy % (13) 96.6 % 96.5 % 95.6 % 95.7 % 96.2 % Sites for development 75 75 - - - COLORADO Communities 8 8 8 7 7 Developed sites (13) 2,335 2,335 2,335 2,335 2,335 Occupied (13) 2,326 2,329 2,325 2,323 2,320 Occupancy % (13) 99.6 % 99.7 % 99.6 % 99.5 % 99.4 % Sites for development 656 656 656 304 304 OTHER STATES Communities 57 56 56 55 54 Developed sites (13) 14,891 14,567 14,313 14,415 14,337 Occupied (13) 14,439 14,130 13,919 13,991 13,912 Occupancy % (13) 97.0 % 97.0 % 97.3 % 97.1 % 97.0 % Sites for development 2,582 1,977 1,827 1,823 1,728 TOTAL - PORTFOLIO Communities 344 342 341 339 337 Developed sites (13) 103,377 102,268 101,082 100,778 100,638 Occupied (13) 99,371 98,091 97,193 96,915 96,689 Occupancy % (13) 96.1 % 95.9 % 96.2 % 96.2 % 96.1 % Sites for development 10,372 9,890 10,616 10,504 9,921 % Communities age restricted 32.8 % 33.0 % 33.1 % 33.3 % 33.5 % TRANSIENT RV PORTFOLIO SUMMARY Location Florida 6,244 6,467 6,497 7,232 6,990 Ontario, Canada 1,314 1,451 1,500 1,485 1,657 Texas 1,403 1,412 1,407 1,446 1,455 Arizona 1,025 1,032 1,049 1,047 1,055 New Jersey 1,028 1,059 1,042 1,047 1,084 New York 630 588 830 484 483 Maine 533 543 555 556 571 California 808 840 513 478 518 Indiana 520 520 502 501 501 Michigan 260 210 204 203 126 Ohio 169 194 198 194 195 Other locations 2,253 1,966 1,997 1,801 1,864 Total transient RV sites 16,187 16,282 16,294 16,474 16,499 Capital Improvements, Development, and Acquisitions (amounts in thousands except for *)
Recurring Capital Recurring Expenditures Capital Lot Expansion & Revenue Average/Site* Expenditures (14) Modifications (15) Acquisitions (16) Development (17) Producing (18) YTD 2017 $ 94 $ 8,410 $ 10,703 $ 69,402 $ 32,541 $ 784 2016 $ 211 $ 17,613 $ 19,040 $ 1,822,564 $ 47,958 $ 2,631 2015 $ 230 $ 20,344 $ 13,961 $ 1,214,482 $ 28,660 $ 4,497 Operating Statistics for Manufactured Homes and Annual/Seasonal RV's
Resident Net Leased New Home Pre-owned Brokered LOCATIONS Move-outs Sites (19) Sales Home Sales Re-sales Florida 540 458 79 227 681 Michigan 265 386 16 651 60 Texas 123 159 15 183 17 California 12 11 2 10 8 Arizona 32 45 16 14 100 Ontario, Canada 88 196 8 20 79 Indiana 22 34 1 114 12 Ohio 55 48 - 57 3 Colorado 4 1 3 65 27 Other locations 373 101 17 129 79 Six Months Ended June 30, 2017 1,514 1,439 157 1,470 1,066 Resident Net Leased New Home Pre-owned Brokered TOTAL FOR YEAR ENDED Move-outs Sites (19) Sales Home Sales Re-sales 2016 1,722 1,686 329 2,843 1,655 2015 1,344 1,905 273 2,210 1,244 Resident Resident PERCENTAGE TRENDS Move-outs Re-sales 2017 (TTM) 2.1 % 6.3 % 2016 2.0 % 6.1 % 2015 2.0 % 5.9 % Footnotes and Definitions
(1) Investors in and analysts following the real estate industry utilize funds from operations (FFO), net operating income (NOI), and recurring earnings before interest, tax, depreciation and amortization (Recurring EBITDA) as supplemental performance measures. We believe FFO, NOI, and Recurring EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation/amortization of real estate assets. NOI provides a measure of rental operations and does not factor in depreciation/amortization and non-property specific expenses such as general and administrative expenses. Recurring EBITDA, a metric calculated as EBITDA exclusive of certain nonrecurring items, provides a further tool to evaluate ability to incur and service debt and to fund dividends and other cash needs. Additionally, FFO, NOI, and Recurring EBITDA are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance and value.
FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income (loss) computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company's operating performance. Management generally considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period over period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from net income (loss). Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. FFO is computed in accordance with the Company's interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. The Company also uses FFO excluding certain items, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results.
Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, FFO is not intended as a measure of a REIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO only provides investors with an additional performance measure that, when combined with measures computed in accordance with GAAP such as net income (loss), cash flow from operating activities, investing activities and financing activities, provide investors with an indication of our ability to service debt and to fund acquisitions and other expenditures. Other REITs may use different methods for calculating FFO, accordingly, our FFO may not be comparable to other REITs.
NOI is derived from revenues minus property operating expenses and real estate taxes. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company's financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity; nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions. The Company believes that net income (loss) is the most directly comparable GAAP measurement to NOI. Because of the inclusion of items such as interest, depreciation, and amortization, the use of 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. The Company believes that NOI is helpful to investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs, therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.
EBITDA is defined as NOI plus other income, plus (minus) equity earnings (loss) from affiliates, minus general and administrative expenses. EBITDA includes EBITDA from discontinued operations. The Company believes that net income (loss) is the most directly comparable GAAP measurement to EBITDA.
(2) The consideration amounts presented with respect to acquired communities represent the economic transaction and do not contemplate the fair value purchase accounting required by GAAP.
(3) 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/amount.
(4) Other income, net for the three months ended June 30, 2017, is comprised of a foreign currency translation gain of $2.2 million partially offset by contingent liability re-measurement of $0.8 million, hurricane related expenses of $0.3 million and other expenses of $0.2 million. For the six months ended June 30, 2017, Other income, net is comprised primarily of a foreign currency translation gain of $3.0 million, partially offset by contingent liability re-measurement of $1.0 million and hurricane related expenses of $0.4 million.
(5) These costs represent the first year expenses incurred to bring 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.
(6) The effect of certain anti-dilutive convertible securities is excluded from these items.
(7) The renter's monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in Real Property NOI. For purposes of management analysis, the site rent is included in the 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 our operations.
(8) Lines of credit balance of $0.4 million at June 30, 2017 represents the Company's MH floor plan facility. There were no borrowings outstanding on the revolving loan or term loan as of June 30, 2017. As of June 30, 2017, the effective interest rate on the MH floor plan facility was 7.0 percent, however, the Company pays no interest if the floor plan balance is repaid within 60 days.
(9) Includes manufactured housing (MH) and annual/seasonal recreational vehicle (RV) sites, and excludes transient RV sites and recently completed but vacant expansion sites.
(10) Occupancy reflects current year gains from expansion sites and the conversion of transient RV guests to annual/seasonal RV contracts as vacant in 2016.
(11) Monthly base rent per site pertains to annual/seasonal RV sites and excludes transient RV sites.
(12) Calculated using actual results without rounding.
(13) Includes MH and annual/seasonal RV sites, and excludes transient RV sites.
(14) Includes capital expenditures 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, and 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.
(15) Includes capital expenditures which 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.
(16) Acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. Acquisitions for the six months ended June 30, 2017 also include $29.5 million of capital improvements identified during due diligence that are necessary to bring the community up to the Company's standards. 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, they sometimes require 24 to 36 months after closing to complete.
(17) Expansion and development costs consist primarily of construction costs and costs necessary to complete home site improvements.
(18) Capital costs related to revenue generating activities, consist primarily of garages, sheds, and 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.
(19) Net leased sites do not include occupied sites acquired in that year.
Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.
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