Sun Communities Inc (SUI)
Q4 2008 Earnings Call
March 13, 2009; 11:00 am ET
Gary Shiffman - Chairman & Chief Executive Officer
Karen Dearing - Chief Financial Officer
Jeff Jorissen - Director of Corporate Development
David Toti - Citi
Andy McCullough - Green Street Advisors
Bill Carrier - KBW
Bill Carrier - Keefe, Bruyette & Woods
David Minkoff. - Maxim Group
Paul Adornato - BMO Capital Markets
Daniel Fisher - Wachovia Securities
Previous Statements by SUI
» Sun Communities Inc. Q3 2008 Earnings Call Transcript
» Sun Communities, Inc. Q2 2008 Earnings Call Transcript
» Sun Communities, Inc. Q1 2008 Earnings Call Transcript
At this time, management would like me to inform you that certain statements made during this conference call which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Although the company believes that the expectations reflected in any forward-looking statements are based on a reasonable assumption, the company can provide no assurance that its expectations will be achieved.
Factors and risks that could cause actual results to differ materially from expectations are detailed in this morning’s press release, and from time to time in the company’s periodic filings with the SEC. The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Having said that, I’d like to introduce management with us today; Gary Shiffman, Chairman and Chief Executive Officer; and Karen Dearing, Chief Financial Officer, Jeff Jorissen, Director of Corporate Development.
It is now my pleasure to introduce your host, Mr. Gary Shiffman. Thank you, Mr. Shiffman. You may begin.
Thank you, operator and good morning to everybody. This morning we reported funds from operations of $15 million for the fourth quarter of 2008 compared to $14.3 million for the fourth quarter of ’07, both before impairment and other charges of $15.6 million and $9.8 million respectively.
FFO per share for the year ended December 31, 2008 was $2.78, compared to $2.72 for 2007 both before impairment and other charges. Total revenue for 2008 was $225 million, compared to $236 million in 2007. For 2008 the affiliate loss including impairment charges for the quarter and year relate to Sun’s investment in Origen, in the amounts of $2.5 million and $16.5 million.
Also included in the fourth quarter and 2008 year results our asset impairment charges related to the carrying value of three properties which we no longer intend to fully develop about $6.9 million, and one property which has experienced severe local market conditions for $2.2 million and the company’s decision to cease offering, cable television and internet services in 12 communities which is due to the increase in competition and advances in technology related to DVR, pay-per-view and high definition type services.
The 2008 results also exclude severance costs of about $900,000, as discussed during the second quarter. Before we get into the details of 2008 and discuss 2009 guidance, I wanted to briefly comment on Sun’s position during the current difficulties in the overall marketplace. We are in fact in a pretty good place.
First; we are under no significant pressure from debt maturities. The 2009 mortgage maturities of $11.2 million are awaiting final term sheets which we expect sometime next week. We have only about $800,000 of debt coming due in 2010. In July 2011, approximately $104 million of secured debt is due and that’s on properties whose NOIs have grown consistently since the 2004 original financing, but we have two years for continued NOI growth in those properties and for the capital marketplaces to become a little bit more functional.
Second; our portfolio is performing well in this environment, where demand for affordable housing is strong and likely to strengthen further. In 2008, there were only two states, comprising 19 communities which did not generate positive net operating income compared to 2007. Indiana, where 18 of those communities are located experienced a decline of about 2.5% in net operating income.
Additionally, while we have lost 82 sites through February 2008, we have actually gained 40 sites through February 2009, a positive swing of 122 sites, which in fact are totally attributable to improvement in Michigan, Ohio and our Indiana markets. The credit quality of our portfolio is holding up quite well. Our delinquencies at February 28, 2009 total $806,000 which is about 36% lower than at the same time December 31, 2008 and slightly lower than the same period February 28, 2008.
Third; I just wanted to comment that the company feels it’s ready for this market. We’ve always invested in our communities to maintain their premier position within our markets. This is attested to by the continuing growth and applications to live in our communities, and our multi-year emphasis on customer satisfaction.
We also have an environment of accountability which really has resulted in a substantial qualitative and quantitative increase in the performance of our management team. So one had to be prepared for the turbulent times that exist now, as I’ve stated earlier I do think we are in a pretty good place and at this time I would like to review the portfolio.
The weighted average rental increase for 2008 was 2.9%. For 2009, we expect the increase to be 3%. We lost 47 occupied sites in 2008 compared to a budgeted loss of 100 sites and a loss of 132 sites in 2007.