American Land Lease Announces Third Quarter 2004 Financial Results
21% Decrease in Funds From Operations Per Share Over 2003 as
Hurricanes Impact Home Closings in the Quarter CLEARWATER, Fla.,
Nov. 3 /PRNewswire-FirstCall/ -- American Land Lease, Inc.
(NYSE:ANL) today released results for third quarter 2004. Please
refer to the Supplemental Information which the Company also
released today for definitions of measures of performance not
determined in accordance with generally accepted accounting
principles ("non-GAAP") and reconciliation of non-GAAP measures to
measures determined in accordance with generally accepted
accounting principles ("GAAP"). Summary Financial Results Third
Quarter * Diluted Earnings Per Share ("Diluted EPS") were $0.23 for
the three- month period ended September 30, 2004 as compared to
$0.44 from the same period one year ago, a decrease of 47.0% on a
per share basis. * Funds from Operations ("FFO"; a non-GAAP
financial measure defined in the Supplemental Information) were
$2.6 million, or $0.32 per diluted common share, for the quarter
compared to $3.3 million, or $0.40 per diluted common share from
the same period one year ago, a decrease of 21.0% on a per share
basis. * Unit volume in home sales was 77 new home closings,
including 74 new homes sold on expansion home sites. This compares
with 125 new home closings in second quarter 2003, including 123
new homes sold on expansion sites. * "Same Store" results provided
a revenue increase of 10.6%, an expense increase of 9.2% and an
increase of 11.3% in Net Operating Income ("NOI"). * "Same Site"
results provided a revenue increase of 3.3%, an expense increase of
4.8% and an increase of 2.6% in NOI. Supplemental Information The
full text of this press release and Supplemental Information are
available upon request or through the Company's web site at
http://www.americanlandlease.com/ . Management Comments Bob Blatz,
President of American Land Lease, commented, "Our results for third
quarter 2004 reflect the significant impact of the three hurricanes
on our ability to close homes under contract. We expect to close
the majority of these homes in the fourth quarter of this year and
in first quarter 2005 -- as we address the damage and complete the
building process that was delayed by the storm. We continue to be
encouraged by the increase in the average price of each home sold
-- this quarter exceeding $108,000. Our backlog is up 74% over the
prior year to 175 homes, representing increased sales throughout
the year combined with the deferral of many closings from September
due to the hurricanes. In the period immediately following the
hurricanes we saw a drop- off in traffic and a corresponding drop
in contracts -- so we expect that the current backlog will enable
us to maintain our expected sales levels throughout fourth quarter
and into 2005. We have already seen increases in traffic through
October and we expect the effects of the hurricanes on our sales
activity to be temporary -- and are projecting a return to
normalized sales levels by first quarter next year. "Our property
operations before depreciation performed well in light of the
challenges for the quarter as operating margins increased 1.9% over
the third quarter of 2003. "As we have reported in previous press
releases, the qualitative improvements in the homes that are
constructed in our communities minimized the damage suffered
through three hurricanes. The continued growing demand has
increased lead times for our product and we continue to monitor
that part of our business. The combination of a shortage of
building supplies and contractors for home building has increased
the overall cycle time for our home completion process. This will
have an impact on our inventory levels and home delivery timeline
in 2005. We have had a number of homes that have been identified
for removal in our communities mainly as a result of water damage
from the storms. We view this as an opportunity to bring new,
high-quality homes into our communities. The better quality homes
are a welcome addition to our communities as they increase the
overall community value." Dividend Declaration On October 27, 2004,
the Board of Directors declared a regular third quarter dividend of
$0.25 per share, payable on November 24, 2004, to stockholders of
record on November 10, 2004. The Company continues to suspend its
dividend reinvestment plan until further notice. The Board of
Directors reviews the dividend policy quarterly. The Company's
dividend is set quarterly and is subject to change or elimination
at any time. The Company's primary financial objective is to
maximize long-term, risk-adjusted returns on investment for
stockholders. While the dividend policy is considered within the
context of this objective, maintenance of past dividend levels is
not a primary investment objective of the Company and the dividend
policy is subject to numerous factors, including the Company's
profitability, capital expenditure plans, obligations related to
principal payments and capitalized interest, and the availability
of debt and equity capital at terms deemed attractive by the
Company to finance these expenditures. The Company's net operating
loss carryforward may be used to offset all or a portion of its
real estate investment trust ("REIT") taxable income, which may
allow the Company to reduce or eliminate its dividends and still
maintain its REIT status. Operational Results Third Quarter
Property Operations Third quarter revenue from property operations
was $7,260,000 as compared to $6,480,000 in the same period one
year ago, a 12.0% increase. Third quarter property operating
expenses totaled $2,746,000 as compared to $2,571,000 in the same
period one year ago, a 6.8% increase. The Company realized
significant increases in rental income driven by annual rental rate
increases, the absorption of new home sites as a result of its home
sales efforts and the acquisition of one community during fourth
quarter 2003. Property operating expenses increased in the third
quarter 2004 as compared to the same period in the prior year,
driven primarily by increases in utility costs, property taxes,
casualty losses and the acquisition of one community during the
fourth quarter 2003, offset by decreases in offsite management
costs. The combination of increased revenue and expenses resulted
in an overall improvement in property operating margins before
depreciation expense from 60.3% in the prior year's third quarter
to 62.2% in the third quarter 2004. Third Quarter "Same Store"
Results Third quarter "same store" results reflect the results of
operations for properties and golf courses owned for both the third
quarter of 2004 and the same period in the prior year. The same
store properties account for 94% of the property operating revenues
for the third quarter of 2004. We believe that same store
information provides insight as to the changes in profitability for
properties owned during both reporting periods that could not be
obtained from a review of the consolidated income statement in
periods where properties are acquired. A reconciliation of "same
store" operating results reported below to total property revenues
and property expenses, as determined under GAAP, can be found in
the Supplemental Information, page 28. The same store increases are
as follows: 3Q04 Revenue 10.6% Expense 9.2% Net Operating Income
11.3% We derive our increase in property revenue (i) from increases
in rental rates and other charges at our properties and (ii)
through the origination of leases on expansion home sites
("absorption"). "Same site" results reflect the results of
operations excluding those sites leased subsequent to the beginning
of the prior year period. We believe that "same site" information
provides the ability to understand the changes in profitability
without the growth related to the newly leased sites. Our
presentation of same site results is a non-GAAP measure and should
not be considered in isolation from, and is not intended to
represent an alternative measure to, operating income or cash flow
or any other measure of performance as determined in accordance
with GAAP. We calculate absorption revenues as the rental revenue
recognized on sites leased subsequent to the beginning of the prior
year period. We estimate that 50% of the increase in expenses over
the prior year period is attributable to newly leased sites in our
calculation of same site results. We believe that the allocation of
expenses between same site and absorption is an appropriate
allocation between fixed and variable costs of operating our
properties. Our same site, absorption, same site golf operations
and total same store results for third quarter 2004 are as follows:
Same Site Absorption Same Site Same Store Rental Golf Revenue 3.3%
7.4% (0.1%) 10.6% Expense 4.8% 4.8% (0.4%) 9.2% NOI 2.6% 8.6% 0.1%
11.3% A reconciliation of same site and same store operating
results used in the above calculations to total property revenues
and property expenses, as determined under GAAP, for the three
months ended September 30, 2004 and 2003 can be found in the
Supplemental Information, page 28. Third Quarter Home Sales
Operations Third quarter 2004 new home sales unit volume was 77
closings, a 38.4% decrease from the 125 closings in the same period
in the prior year. Average selling price per home was $108,000 as
compared to $96,000 in the same period in the prior year, a 12.5%
increase. The decrease in closings compared to the same period in
the prior year was balanced across the Company's expansion
communities, with increases in seven communities and decreases in
nine communities. Brokerage profits were down 33.6% as compared
with the same period in the prior year driven by a 9.4% decrease in
the number of transactions. Selling gross margins, excluding
brokerage activities, improved to 31.2% in the quarter as compared
to 27.8% in the same period in the prior year. This increase was
driven by increased selling prices, increased manufacturer rebates
associated with higher purchasing volumes, and sales of upgrades to
base home models. The increases in revenue and cost savings were
offset by increases in the cost of homes purchased. Selling costs
as a percentage of sales revenue increased from 16.8% in the prior
year's period to 26.3% in the third quarter of 2004, reflecting
additional investments in personnel and advertising/marketing in
support of a higher operating level for the business and a lower
volume of home closings. The backlog of contracts for closing stood
at 175 home sales, an increase of 74 contracts from the same period
in the prior year. The Company remains committed to its program of
generating revenue growth through new lease originations in its
existing portfolio. The home sales business continues to provide
the Company with additional earning home sites that have a greater
return on investment than is currently available through the
purchase of occupied communities. Summary of home sales activity:
Quarter ended Quarter ended September 30, September 30, 2004 2003
New home closings 77 125 New home contracts 69 86 Home resales 3 9
Brokered home sales 48 53 New home contract backlog 175 101
Dispositions On July 30, 2004, the Company closed the sale of its
ministorage property in Arizona for a sales price of $2,050,000 and
recorded a gain on the sale of $23,000. The Company no longer has
an interest in ministorage properties. Outlook for 2004 The table
below summarizes the Company's projected financial outlook for 2004
as of the date of this release and is based on the estimates and
assumptions disclosed in this and previous press releases: Full
Year 2004 Projected FFO $1.45 to $1.55 AFFO $1.32 to $1.40 Diluted
EPS $1.03 to $1.24 Same Store Sales Revenue Growth 5.0% to 9.0%
Expense Growth 4.5% to 7.5% NOI Growth 6.0% to 9.5% Home Sales
Operating Income $2,000,000 to $3,250,000 General and
Administrative Expenses $3,200,000 to $3,700,000 Other Income
$210,000 to $280,000 Capital Replacements (per site) $115 to $135
Depreciation $2,900,000 to $3,200,000 A portion of the Company's
earnings is from the sale of new homes on expansion home sites in
its developing communities. The earnings from the new home sales
are subject to greater volatility than the earnings from rental
property activities. The Company's earnings estimates would be
impacted positively by increases in the unit volume of new home
sales or increases in the gross margins from new home sales.
Conversely, decreases in the unit volume of new home sales or
decreases in the gross margins from new home sales would negatively
impact the Company's earnings estimates. Home sales volume is
dependent upon a number of factors, including consumer confidence
and consumer access to financing sources for home purchases and the
sale of their current home. The Company's projected results for
2004 include increased corporate governance costs based upon
current estimates of the cost of compliance. These costs have
exceeded our original forecasts, as implementation of Section 404
of Sarbanes-Oxley has required the engagement of additional
consultants to enable the company to meet the initial
implementation requirements. These costs totaled approximately
$0.015 per share in the third quarter. Non- employee director
compensation continues to be paid in stock and all stock- based
compensation is expensed within the 2004 projections. The Company's
earnings estimates would be adversely impacted by the increased
cost of compliance with regulations and laws applicable to public
companies and financial reporting. The financial and operating
projections provided in this release are the result of management's
consideration of past operating performance, current and
anticipated market conditions and other factors that management
considers relevant from its past experience. Development Activity
The Company neared completion of its development activity at
Savanna Club and began selling into its "Eagles Retreat"
subdivision throughout the third quarter. This subdivision
represents Phase VII of VIII. While development activities were
delayed by hurricane activities, sales into the last phase are
projected to begin in mid-2005 with final close out of the phase to
happen in 2006. At Riverside Club, "The Bluffs" closed out home
sales, with one home site not under contract at the end of the
quarter. The next Phase - "The Fairways" -- began pre-selling into
that phase as of August 1. In its current pre-sale phase, only 48
of the 148 home sites are available to be placed under contract for
a home and future lease. As that phase sells out, the company will
open another section of the subdivision, which originally was
expected in Q105 and is now projected for late Q205 as a result of
a temporary drop in traffic resulting from the hurricane activity.
The company has already seen a pick-up in traffic in late October,
and expects by first quarter 2005 that traffic will return to
projected levels and sales activity will return to projected
levels. Construction was completed for the subdivisions at the
Royal Palm and Brentwood communities that provide an additional 162
home sites for new homeowners. Delays from hurricanes have delayed
home completion and no occupancy is expected in these subdivisions
until first quarter 2005. Planning and permitting a subdivision at
an additional community continued during the quarter. Financing
Activity During the third quarter of 2004, the Company closed a
$9.9 million mortgage on a property in Florida at an interest rate
of 5.96% for a term of 10 years. American Land Lease, Inc. is a
REIT that holds interests in 29 manufactured home communities with
6,815 operational home sites, 950 developed expansion sites, 1,219
undeveloped expansion sites and 129 recreational vehicle sites.
Some of the statements in this press release, as well as oral
statements made by the Company's officials to analysts and
stockholders in the course of presentations about the Company and
conference calls following quarterly earnings releases, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements may
include projections of the Company's cash flow, dividends and
anticipated returns on real estate investments. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
factors include: general economic and business conditions; interest
rate changes, financing and refinancing risks; risks inherent in
owning real estate; future development rate of home sites;
competition; the availability of real estate assets at prices which
meet the Company's investment criteria; the Company's ability to
reduce expense levels, implement rent increases, use leverage and
other risks set forth in the Company's Securities and Exchange
Commission filings. Management will hold a teleconference call,
Wednesday, November 3, 2004 at 4:00 p.m. Eastern Standard Time to
discuss third quarter 2004 results. You can participate in the
conference call by dialing, toll-free, (800) 374-5458 approximately
five minutes before the conference call is scheduled to begin and
indicating that you wish to join the American Land Lease third
quarter 2004 results conference call. If you are unable to
participate at the scheduled time, this information will be
available for recorded playback from 5:30 p.m. EST, November 3,
2004 until midnight on November 10, 2004. To access the replay,
dial toll free, (800) 642-1687 and request information from
conference ID 1921174. DATASOURCE: American Land Lease, Inc.
CONTACT: Robert G. Blatz, President, or Shannon E. Smith, Chief
Financial Officer, both of American Land Lease, Inc.,
+1-727-726-8868 Web site: http://www.americanlandlease.com/
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