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CST: 19/10/2019 16:01:08   

Sun Communities, Inc. Reports 2019 First Quarter Results

178 Days ago

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 Acquisition Type Location Usable Sites Consideration  (in Millions)
1/2019 MH (Age Restricted) Edgewater, Florida (1) 730   $ 115.3  
1/2019 RV Old Orchard Beach, Maine 321     10.8  
1/2019 MH Oregon City, Oregon(2) 518     61.8  
2/2019 MH Buckeye, Arizona 400     22.3  
2/2019 MH (3) Shelby Township, Michigan 1,308     94.5  
2/2019 RV Millsboro, Delaware 291     20.0  
    Total 3,568   $ 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 revenue 26,215     22,001     4,214     19.2 %
Revenue from home sales 39,618     34,900     4,718     13.5 %
Rental home revenue 13,971     13,020     951     7.3 %
Ancillary revenue 8,482     6,568     1,914     29.1 %
Interest 4,800     5,316     (516 )   (9.7 )%
Brokerage commissions and other revenues, net 3,680     960     2,720     283.3 %
Total Revenues 287,330     257,975     29,355     11.4 %
EXPENSES:              
Property operating and maintenance 57,909     51,630     6,279     12.2 %
Real estate taxes 15,330     13,836     1,494     10.8 %
Cost of home sales 29,277     26,571     2,706     10.2 %
Rental home operating and maintenance 4,788     5,227     (439 )   (8.4 )%
Ancillary expenses 7,101     5,383     1,718     31.9 %
Home selling expenses 3,324     3,290     34     1.0 %
General and administrative 21,887     19,757     2,130     10.8 %
Catastrophic weather related charges, net 782     (2,213 )   2,995     (135.3 )%
Depreciation and amortization 76,556     66,437     10,119     15.2 %
Loss on extinguishment of debt 653     196     457     233.2 %
Interest 34,014     31,138     2,876     9.2 %
Interest on mandatorily redeemable preferred OP units / equity 1,094     619     475     76.7 %
Total Expenses 252,715     221,871     30,844     13.9 %
Income Before Other Items 34,615     36,104     (1,489 )   (4.1 )%
Remeasurement of marketable securities 267         267     N/A
Other income / (expense), net (6) 1,898     (2,617 )   4,515     172.5 %
Income / (loss) from nonconsolidated affiliates 344     (59 )   403     683.1 %
Current tax expense (214 )   (174 )   (40 )   (23.0 )%
Deferred tax benefit 217     347     (130 )   (37.5 )%
Net Income 37,127     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:              
Basic 85,520     78,855     6,665     8.5 %
Diluted 86,033     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 units 328   2.4390   800   $ 100   6.0 %
Series A-3 preferred OP units 40   1.8605   74   $ 100   4.5 %
Series A-4 preferred OP units 410   0.4444   182   $ 25   6.5 %
Series C preferred OP units 314   1.1100   349   $ 100   4.5 %
Series D preferred OP units 489   0.8000   391   $ 100   3.8 %
Common OP units 2,719   1.0000   2,719   N/A   Mirrors common shares distributions
Series A-4 preferred stock 1,063   0.4444   472   $ 25   6.5 %
Non-Convertible Securities                  
Common shares 86,463   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 amortization 76,712     66,646  
Remeasurement of marketable securities (267 )    
Amounts attributable to noncontrolling interests 723     1,889  
Preferred return to preferred OP units 527     553  
Preferred distribution to Series A-4 preferred stock 432     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 debt 653     196  
Catastrophic weather related charges, net 782     (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 options 1     2  
Restricted stock 512     607  
Common OP units 2,722     2,741  
Common stock issuable upon conversion of Series A-4 preferred stock 472     482  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75  
Common stock issuable upon conversion of Series A-1 preferred OP units 803     836  
Weighted average common shares outstanding - fully diluted 90,105     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 expense 35,108     31,757  
Loss on extinguishment of debt 653     196  
Current tax expense 214     174  
Deferred tax benefit (217 )   (347 )
(Income) / loss from nonconsolidated affiliates (344 )   59  
Depreciation and amortization 76,556     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, net 782     (2,213 )
Preferred return to preferred OP units / equity 1,323     1,080  
Amounts attributable to noncontrolling interests 1,041     2,094  
Preferred stock distribution 432     441  
Plus: Gain on dispositions of assets, net 5,679     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 expenses 3,324     3,290  
General and administrative 21,887     19,757  
Catastrophic weather related charges, net 782     (2,213 )
Depreciation and amortization 76,556     66,437  
Loss on extinguishment of debt 653     196  
Interest expense 35,108     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 expense 214     174  
Deferred tax benefit (217 )   (347 )
Preferred return to preferred OP units / equity 1,323     1,080  
Amounts attributable to noncontrolling interests 1,041     2,094  
Preferred stock distribution 432     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 Profit 10,341     8,329  
Ancillary NOI (1) / Gross Profit 1,381     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 income 37,127     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 debt 3,448,117     3,124,303     3,004,929     3,364,081     3,129,440  
Total liabilities 3,846,325     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 sales 125     140     146     134     106  
Pre-owned home sales 673     738     825     809     731  
Total homes sold 798     878     971     943     837  
                   
Communities 379     371     370     367     350  
                   
Developed sites 112,175     108,963     108,142     107,192     106,617  
Transient RV sites 20,173     19,491     19,432     19,007     15,693  
Total sites 132,348     128,454     127,574     126,199     122,310  
                   
MH occupancy 95.4 %   95.0 %   94.9 %   95.0 %   94.7 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.4 %   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 redeemable 35,249     35,277     35,277     35,277      
Preferred OP units - mandatorily redeemable 34,663     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                  
Fixed 88.5 %   95.9 %   100.0 %   84.0 %   90.6 %
Floating 11.5 %   4.1 %   %   16.0 %   9.4 %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
WEIGHTED AVERAGE INTEREST RATES                  
Mortgage loans payable 4.24 %   4.22 %   4.23 %   4.27 %   4.25 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   6.00 %   6.00 %   6.00 %   %
Preferred OP units - mandatorily redeemable 6.50 %   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 average 4.39 %   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 Value 24.1 %   25.2 %   24.1 %   28.6 %   28.8 %
Net Debt / Gross Assets 39.8 %   37.7 %   35.9 %   42.7 %   41.9 %
                   
COVERAGE RATIOS                  
Recurring EBITDA (1) (TTM) / Interest 4.1   4.0   3.9   3.7   3.6
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 3.9   3.9   3.8   3.6   3.4

 

MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS Remaining 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 amortization 44,099     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 benefits 16,421     15,534     887     5.7 %  
Legal, taxes & insurance 2,191     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 %  
Other 4,455     4,688     (233 )   (5.0 )%  
Real estate taxes 14,590     13,766     824     6.0 %  
Total property operating expenses 57,810     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 properties 345     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 development 7,296     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 Information 2019   2018   Change   % Change
Revenue:              
New home sales $ 15,381     $ 11,893     $ 3,488     29.3 %
Pre-owned home sales 24,237     23,007     1,230     5.3 %
Revenue from home sales 39,618     34,900     4,718     13.5 %
Expenses:              
New home cost of sales 13,146     10,197     2,949     28.9 %
Pre-owned home cost of sales 16,131     16,374     (243 )   (1.5 )%
Cost of home sales 29,277     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 homes 14.5 %   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 homes 33.4 %   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.

 

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