Sun Communities Reports 2025 First Quarter Results; Announces Completion of Safe Harbor Sale

Published: 2025-05-05 17:01:04 ET SUI

Published on 05/05/2025 at 17:01

Net Loss per Diluted Share of $0.34 for the Quarter

Core FFO per Share of $1.26 for the Quarter

North America Same Property NOI for MH and RV Increased by 4.6% for the Quarter on a Year-over-Year Basis

North America Same Property Adjusted Blended Occupancy for MH and RV of 99.0% Represents a 150 Basis Point Year-over-Year Increase

Establishing Post-Safe Harbor Sale Guidance for 2025

Expecting Core FFO per Share of $6.43 to $6.63

Expecting North American Same Property NOI Growth of 3.5% - 5.2%

Expecting UK Same Property NOI Growth of 0.9% - 2.9%

Completed Initial Closing of Safe Harbor Marinas Sale in April for Net Pre-tax Cash Proceeds of $5.25 Billion

Announced a Special Cash Distribution of $4.00 per Share

Increasing Quarterly Distribution by 10.6% in 2025, to $1.04 per Share

Announced the Authorization of a Stock Repurchase Program of Up to $1.0 Billion

Southfield, Michigan, May 05, 2025 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the "Company" or "SUI"), a real estate investment trust ("REIT") that owns and operates, or has an interest in, manufactured housing ("MH") and recreational vehicle ("RV") communities and marinas (collectively, the "properties"), today reported its first quarter results for 2025. In February 2025, the Company entered into an agreement to sell 100% of the Company's interest in its Safe Harbor Marinas business. Accordingly, the results of the Safe Harbor Marinas business, along with the related assets and liabilities included in the disposition, are presented as held for sale and as discontinued operations for all periods presented herein. The sale was substantially completed subsequent to the quarter ended March 31, 2025.

Financial Results for the Quarter Ended March 31, 2025

Non-GAAP Financial Measures

"We recently marked a milestone for Sun, as we completed the sale of Safe Harbor as part of our long-term strategy to reduce leverage, increase financial and strategic flexibility and further simplify the business," said Gary A. Shiffman, Chairman and CEO. "With this transaction, we have repositioned the Company’s balance sheet and are laser focused on our core business and delivering reliable earnings growth. We are encouraged by our operational focus as we implement efficiencies and enhanced revenue-driving strategies. These have already started to deliver results, as seen in our solid first quarter, with particularly strong performance in Manufactured Housing and ongoing progress in expense management."

Shiffman continued, "While the broader macro environment is seeing uncertainty, we are confident in our positioning and the resilience of our communities. The fundamentals driving demand remains intact, particularly around affordable housing and vacationing, and our markets remain supply constrained. Furthermore, with our financial flexibility and enhanced capital position, which allow us to invest in our growth, we are optimistic in our ability to create long-term value."

OPERATING HIGHLIGHTS

North America Portfolio Occupancy

Same Property Results

For the properties owned and operated by the Company since at least January 1, 2024, excluding properties classified as discontinued operations, the following table reflects the percentage changes for the quarter ended March 31, 2025, as compared to the same period in 2024:

North America Same Property adjusted blended occupancy for MH and RV increased by 150 basis points to 99.0% at March 31, 2025, from 97.5% at March 31, 2024.

INVESTMENT ACTIVITY

During the quarter ended March 31, 2025, the Company completed the following dispositions:

Subsequent to the quarter ended March 31, 2025, the Company completed the following dispositions:

Refer to page 14 for additional details related to the Company's acquisition and disposition activity.

BALANCE SHEET, CAPITAL MARKETS ACTIVITY, AND OTHER ITEMS

As of March 31, 2025, the Company had $7.4 billion in debt outstanding with a weighted average interest rate of 4.1% and a weighted average maturity of 5.9 years. At March 31, 2025, the Company's Net Debt to trailing twelve-month Recurring EBITDA ratio was 5.9 times.

Safe Harbor Sale

Subsequent to the quarter ended March 31, 2025, the Company completed the initial closing of its sale of the Safe Harbor Marinas business (the "Safe Harbor Sale"). The initial closing of the Safe Harbor Sale generated approximately $5.25 billion of pre-tax cash proceeds, net of transaction costs, with an estimated book gain on sale of approximately $1.4 billion. Pursuant to the terms of the transaction agreement, subsidiaries owning 15 marina properties representing approximately $250.0 million of value (the "Delayed Consent Subsidiaries") were not part of the initial closing. The sales of those properties remain subject to the receipt of certain third-party consents, which may delay the timing of any such sale or may prevent any such property from being sold at all. The Company anticipates that the acquisitions of most or all of the Delayed Consent Subsidiaries will occur in the second quarter of 2025. The Company has begun to use the net cash proceeds to support a combination of debt reduction, distributions to shareholders, and reinvestment in the Company's core portfolio.

Accordingly, subsequent to the quarter ended March 31, 2025, the Company settled outstanding debt balances of $1.6 billion under the Company's senior credit facility and $740.0 million of secured mortgage debt, inclusive of prepayments costs. The Company also announced the planned redemption of $950.0 million, inclusive of prepayment costs, in outstanding unsecured senior notes that is expected to occur on May 10, 2025. Furthermore, the Company allocated approximately $1.0 billion into 1031 exchange escrow accounts to fund potential future MH and RV acquisitions.

Reporting Changes

As a result of the Safe Harbor Sale, we have revised the Company's reporting structure to three segments, which consist of (i) MH communities, (ii) RV communities, and (iii) communities in the United Kingdom ("UK"). The new structure removes the Marina business from the Company's operating segments as a result of its classification as a discontinued operation and reflects how the chief operating decision maker manages the business, makes operating decisions, allocates resources, and evaluates operating performance.

Service, retail, dining and entertainment revenues and expenses have been renamed as ancillary revenues and expenses to more appropriately reflect the nature of these activities for the Company's continuing operations, after reclassifying the Marina results to discontinued operations. There was no impact to prior period net income, stockholders equity', or cash flows due to the change in naming convention.

2025 Distributions

The Company's Board of Directors has authorized a one-time special cash distribution of $4.00 per common share and unit, equating to approximately $520.0 million. The distribution will be payable on May 22, 2025 to shareholders of record on May 14, 2025. The Company's Board of Directors also approved a quarterly distribution increase of 10.6%, to $1.04 per common share and unit. The increase is expected to begin with the second quarter distribution that is anticipated to be paid in July 2025. While the Board of Directors has approved the new quarterly distribution policy, the amount of each quarterly distribution on the Company's common stock will be subject to approval by the Board of Directors.

Stock Repurchase Program

The Company's Board of Directors has authorized a stock repurchase program of up to $1.0 billion of the Company's outstanding common stock. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company's discretion, through the expiration date of April 30, 2026.

2025 GUIDANCEFollowing the substantial completion of the Safe Harbor Sale, the Company is establishing second quarter and full-year 2025 guidance for diluted EPS and Core FFO per Share as follows:

(a) The diluted share counts for the quarter ending June 30, 2025 and the year ending December 31, 2025 are estimated to be 132.4 million for each respective period.

(b) No reconciliation of the forecasted range for Core FFO per share attributable to the Consolidated Portfolio is included in this release because we are unable to quantify certain amounts that would be required to be included in the reconciliation to the comparable GAAP financial measure without unreasonable efforts, particularly with respect to the allocations of itemized adjustments to the Consolidated Portfolio as the Safe Harbor Sale has closed on April 30, 2025, and we believe such reconciliation would imply a degree of precision that could be confusing or misleading to investors.

(c) The Company's guidance translates forecasted results from operations in the UK using the relevant exchange rate provided in the table presented below. The impact of fluctuations in Canadian and Australian foreign currency rates on guidance are not material.

Supplemental Guidance Tables:

For the second quarter ending June 30, 2025, the Company's guidance range assumes North America Same Property NOI growth of 1.7% - 4.0% and UK Same Property NOI growth of 3.9% - 5.9%.

The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results. These estimates include contributions from all acquisitions, dispositions and capital markets activity completed through May 5, 2025, and the effect of the completion of the sale of the Delayed Consent Subsidiaries from the Safe Harbor Sale. These estimates exclude all other prospective acquisitions, dispositions and capital markets activity. The estimates and assumptions are forward-looking based on the Company's current assessment of economic and market conditions and are subject to the other risks outlined below under the caption Cautionary Statement Regarding Forward-Looking Statements.

EARNINGS CONFERENCE CALL

A conference call to discuss first quarter results will be held on Tuesday, May 6, 2025 at 11:00 A.M. (ET). To participate, call toll-free at (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 20, 2025 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 13752708. The conference call will be available live on the Company's website located at www.suninc.com. The replay will also be available on the website.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this document that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments, and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as "forecasts," "intend," "goal," "estimate," "expect," "project," "projections," "plans," "predicts," "potential," "seeks," "anticipates," "should," "could," "may," "will," "designed to," "foreseeable future," "believe," "scheduled," "guidance," "target," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. 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, both general and specific to the matters discussed in this document, some of which are beyond the Company's control. These risks, uncertainties, and other factors may cause the Company's actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks described under "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and in the Company's other filings with the Securities and Exchange Commission, from time to time, such risks, uncertainties and other factors include, but are not limited to:

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements included or incorporated by reference into this document, whether as a result of new information, future events, changes in the Company's expectations or otherwise, except as required by law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to the Company or persons acting on the Company's behalf are qualified in their entirety by these cautionary statements.

Company Overview and Investor Information

The Company

Established in 1975, Sun Communities, Inc. became a publicly owned corporation in December 1993. The Company is a fully integrated REIT listed on the New York Stock Exchange under the symbol: SUI. As of March 31, 2025, the Company owned, operated, or had an interest in a portfolio of 502 developed MH, RV, and UK properties comprising approximately 174,850 developed sites in the U.S., Canada, and the U.K. The Company also owned, operated, or held an interest in a portfolio of 138 marina properties comprising approximately 48,790 wet slips and dry storage spaces in the U.S. and Puerto Rico, which were classified within discontinued operations as of March 31, 2025.

For more information about the Company, please visit www.suninc.com.

(a) Updated based on credit rating upgrade received as of May 1st, 2025.

Financial and Operating Highlights($ in millions, except Per Share amounts, Unaudited)

(a) Refer to Definition and Notes for additional information.

(b) Excludes the effect of certain anti-dilutive convertible securities.

Portfolio Overview as of March 31, 2025(a)

(a) The Company also owned 138 marina properties with 48,790 total wet slips and dry storage spaces, which were classified within discontinued operations as of March 31, 2025.

Consolidated Balance Sheets(amounts in millions)

(a) Refer to "Secured borrowings on collateralized receivables" within Definitions and Notes for additional information.

(b) Refer to "Discontinued Operations" within Definitions and Notes for additional information.

Consolidated Statements of Operations(amounts in millions, except for per share amounts)

(a) Refer to "Utility Revenues" within Definitions and Notes for additional information.

(b) Refer to Definitions and Notes for additional information.

N/M = Not meaningful. N/A = Not applicable.

Reconciliation of Net Loss Attributable to SUI Common Shareholders to Core FFO(amounts in millions, except for per share data)

(a) Refer to Definitions and Notes for additional information.

(b) Loss of earnings - catastrophic event-related charges, net include the following:

(d) FFO and Core FFO include discontinued operations activity of $20.0 million or $0.15 per Share, and $49.2 million or $0.37 per Share, respectively, during the quarter ended March 31, 2025, and $56.4 million or $0.44 per Share, and $46.0 million or $0.36 per Share, respectively, during the quarter ended March 31, 2024.

Reconciliation of Net Loss Attributable to SUI Common Shareholders to NOI(amounts in millions)

(a) Refer to Definitions and Notes for additional information.

(b) Excludes properties classified as discontinued operations. During the quarters ended March 31, 2025 and 2024, the Company's marina properties generated total NOI of $64.3 million and $61.8 million, which was recorded within Income / (loss) from discontinued operations, net on the Consolidated Statements of Operations. Refer to the section "Discontinued Operations" within the Definitions and Notes for additional information.

Reconciliation of Net Loss Attributable to SUI Common Shareholders to Recurring EBITDA(amounts in millions)

(a) Refer to Definitions and Notes for additional information.

Real Property Operations - Total Portfolio(amounts in millions, except statistical information)

N/A = Not applicable.

(a) Refer to Definitions and Notes for additional information.

(b) MH annual sites included 11,495 and 10,300 rental homes in the Company's rental program at March 31, 2025 and 2024, respectively. The Company's investment in occupied rental homes at March 31, 2025 was $812.1 million, an increase of 16.6% from $696.3 million at March 31, 2024.

Real Property Operations - North America Same Property Portfolio(a)(amounts in millions, except for statistical information)

(a) Refer to Definitions and Notes for additional information.

(b) Same Property results for the Company's MH and RV properties reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at the average exchange rate of $0.6966 USD per Canadian dollar, respectively, during the quarter ended March 31, 2025.

(c) Financial results from properties impacted by dispositions and catastrophic weather events during 2024 have been removed from Same Property reporting.

(d) Percentages are calculated based on unrounded numbers.

(e) Refer to "Utility Revenues" within Definitions and Notes for additional information.

(f) Total Same Property operating expenses consist of the following components for the periods shown (in millions) and exclude amounts invested into recently acquired properties to bring them up to the Company's standards:

Real Property Operations - North America Same Property Portfolio(a) (Continued)(amounts in millions, except for statistical information)

N/A = Not applicable.

(a) Refer to Definitions and Notes for additional information.

(b) Financial results from properties impacted by dispositions and catastrophic weather events during 2024 have been removed from Same Property reporting.

(c) Same Property blended occupancy for MH and RV was 98.1% at March 31, 2025, up 40 basis points from 97.7% at March 31, 2024. Adjusting for recently delivered and vacant expansion sites, Same Property adjusted blended occupancy for MH and RV increased by 150 basis points year over year, to 99.0% at March 31, 2025, from 97.5% at March 31, 2024.

(d) Calculated using actual results without rounding.

(e) Occupied rental program sites in Same Property are included in total sites.

Real Property Operations - UK Same Property Portfolio(a)(amounts in millions, except for statistical information)

(a) Refer to Definitions and Notes for additional information.

(b) Same Property results for the Company's UK properties reflect constant currency for comparative purposes. British pound sterling figures in the prior comparative period have been translated at the average exchange rate of $1.2588 USD per pound sterling, respectively, during the quarter ended March 31, 2025.

(d) Refer to "Utility Revenues" within Definitions and Notes for additional information.

(e) Adjusting for recently delivered and vacant expansion sites, Same Property adjusted occupancy decreased by 60 basis points year over year, to 90.1% at March 31, 2025, from 90.7% at March 31, 2024.

Home Sales Summary($ in millions, except for average selling price)

(a) Refer to Definitions and Notes for additional information.

Operating Statistics for MH and Annual RVs

(a) Percentage calculated on a trailing 12-month basis.

(b) Increase in revenue producing sites, net of new vacancies.

Acquisitions and Dispositions(amounts in millions, except for *)

(a) Total sales proceeds include the disposition of two operating properties and two development properties that were owned by the Company along with the settlement of a developer note receivable of $36.5 million pertaining to three additional properties in which the Company had provided financing to the developer.

Capital Expenditures and Investments(amounts in millions)

(a) Refer to Definitions and Notes for additional information.

(b) Excludes total capital expenditures and investments of $48.7 million, $279.1 million, and $330.7 million for the quarter ended March 31, 2025, and years ended December 31, 2024 and 2023, respectively, which pertain to Marina properties classified as discontinued operations.

(c) Average based on actual number of MH and RV sites and UK sites associated with the recurring capital expenditures in each period.

Capitalization Overview(Shares and units in thousands, dollar amounts in millions, except for *)

(a) Refer to "Securities" within Definitions and Notes for additional information related to the Company's securities outstanding.

(b) Refer to "Enterprise Value" within Definitions and Notes for additional information.

Summary of Outstanding Debt

(amounts in millions, except for *)

(a) Includes the effect of amortizing deferred financing costs, loan premiums / discounts, and derivatives, as well as fair value adjustments on the Secured borrowings on collateralized receivables.

(b) Refer to "Secured borrowings on collateralized receivables" within Definitions and Notes for additional information.

(d) Represents the initial maturity for the revolving loan facility. The Company holds the unilateral option to extend the maturity date for two additional six-month periods to April 7, 2027.(e) Debt Maturities(a)

(amounts in millions, except for *)

(a) Debt maturities include the unamortized deferred financing costs, discount / premiums, and fair value adjustments associated with outstanding debt.

(b) For the Mortgage loans payable maturing between 2025 - 2029:

(d) Refer to "Secured borrowings on collateralized receivables" within Definitions and Notes for additional information.

(e) Represents the initial maturity for the revolving loan facility. The Company holds the unilateral option to extend the maturity date for two additional six-month periods to April 7, 2027.

^ Excludes the Company's borrowings under its senior credit facility.

Debt Analysis

(a) Refer to Definitions and Notes for additional information.

(b) Percentage includes the impact of hedge activities.

Definitions and Notes

Acquisition and Other Transaction Costs - In the Company's Reconciliation of Net Loss Attributable to SUI Common Shareholders to Core FFO on page 6, 'Acquisition and other transaction costs - continuing operations' represent (a) nonrecurring integration expenses associated with acquisitions during the quarters ended March 31, 2025 and 2024, (b) costs associated with potential acquisitions that will not close, (c) 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, and (d) other non-recurring transaction costs. Within this same reconciliation on page 6, 'Transaction costs - discontinued operations' represent other non-recurring transaction costs that are directly attributable to the Safe Harbor Sale.

Asset Impairments - In the Company's Consolidated Statements of Operations on page 5, the Company recorded asset impairment charges during the quarter ended March 31, 2025, which primarily consisted of aggregate charges of $20.5 million related to pre-construction development costs at seven MH and RV properties for which the related development projects are no longer probable of being realized.

Capital Expenditures and Investment Activity - The Company classifies its investments in properties into the following categories:

Capital improvements subsequent to acquisition often require 24 to 36 months to complete after closing. At MH, RV, and UK properties, capital improvements include upgrading clubhouses; landscaping; new street lighting systems; new mail delivery systems; pool renovations including larger decks, heaters and furniture; new maintenance facilities; lot modifications; and new signage including main signs and internal road signs.

For the quarter ended March 31, 2025, the components of total acquisition investment are as follows, excluding discontinued operations (in millions):

Assets Held for Sale and Discontinued Operations - In February 2025, we entered into the Safe Harbor Sale, which represents a strategic shift in operations that is expected to have a major effect on the Company's operations and financial results. Accordingly, the results of the Marina business and assets and liabilities included in the disposition are presented as held for sale and as discontinued operations for all periods presented herein.

Subsequent to the quarter ended March 31, 2025, the Company closed the Safe Harbor Sale, which generated pre-tax proceeds of approximately $5.25 billion, net of transaction and employee separation costs. The transfer of subsidiaries owning approximately 15 of Safe Harbor's properties ("the Delayed Consent Subsidiaries") with an aggregate agreed value of approximately $250.0 million is further subject to certain third-party consents and the Delayed Consent Subsidiaries therefore may be transferred in one or more subsequent closings. The assets and liabilities of Safe Harbor Marinas are presented as "Held for sale" and its operations and cash flows are presented as discontinued operations.

The following table sets forth a summary of assets and liabilities attributable to discontinued operations related to Safe Harbor Marinas (in millions):

The following table sets forth a summary of the operating results included within Income / (loss) from discontinued operations, net related to Safe Harbor Marinas (in millions):

(1) Represents legal and advisory fees and other transaction costs associated with the Safe Harbor Sale.

(2) During the quarter ended March 31, 2025, we recorded a contingent consideration expense of $14.6 million related to a tax protection agreement that we entered into with former owners of certain Marina properties at the time of acquisition. The tax protection agreement stipulates that we indemnify those owners for certain tax obligations incurred related to the sale of certain Marina properties. As a result of the Safe Harbor Sale, we concluded that our tax liability to the former owners was probable of being realized and estimable.

Other Assets Held for Sale - In March 2025, we reached an agreement to sell one MH development property for a sale price of $40.0 million. As a result, the carrying value of total non-financial assets of $35.9 million was reclassified from Investment property, net to Assets held for sale and discontinued operations, net as of March 31, 2025.

Enterprise Value - Equals total equity market capitalization, plus total indebtedness reported on the Company's balance sheet and less unrestricted cash and cash equivalents.

GAAP - U.S. Generally Accepted Accounting Principles.

Home Sales Contribution to FFO - The reconciliation of NOI from home sales to FFO from home sales for the quarter ended March 31, 2025 is as follows (in millions):

Interest expense - The following is a summary of the components of the Company's interest expense (in millions):

NAREIT - The National Association of Real Estate Investment Trusts is the worldwide representative voice for REITs and real estate companies with an interest in U.S. real estate and capital markets. More information is available at www.reit.com.

Net Debt - The carrying value of debt, plus, unamortized premiums, discounts, and deferred financing costs, less unrestricted cash and cash equivalents.

Other adjustments, net - In the Company's Reconciliation of Net Loss Attributable to SUI Common Shareholders to Core FFO on page 6, Other adjustments, net - continuing operations consists of the following (in millions):

In the Company's Reconciliation of Net Loss Attributable to SUI Common Shareholders to Core FFO on page 6, Other adjustments, net - discontinued operations consists of an expense of $14.6 million related to a contingent consideration liability associated with the Safe Harbor Sale, and income of $10.4 million related to a litigation settlement gain during the quarters ended March 31, 2025 and 2024, respectively, at the Company's Marina business.

Other income / (expense), net - In the Company's Consolidated Statements of Operations on page 5, Other income / (expense), net consists of the following (in millions):

Same Property - The Company defines Same Properties as those the Company has owned and operated continuously since at least January 1, 2024. Same properties exclude ground-up development properties, acquired properties, properties classified as discontinued operations, and properties sold after December 31, 2023. The Same Property data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions or unique situations.

Secured borrowings on collateralized receivables - This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as secured borrowings. The interest income and interest expense accrue in equal amounts. The Company has elected to record the collateralized receivables and secured borrowings at fair value under ASC 820, "Fair Value Measurements and Disclosures." As a result, the balance of collateralized receivables and related secured borrowings are net of fair value adjustments.

Securities - The Company had the following securities outstanding as of March 31, 2025:

(a) Exchange rates are subject to adjustment upon stock splits, recapitalizations and similar events. The exchange rates of certain series of OP units are approximated to four decimal places.

(b) Calculation may yield minor differences due to fractional shares paid in cash to the shareholder at conversion.

Share - In addition to reporting net income on a diluted basis ("EPS"), the Company reports FFO and Core FFO on a per common share and dilutive convertible securities basis (per "Share"). For the periods presented below, the Company's diluted weighted average common shares outstanding for EPS and FFO are as follows:

Utility Revenues - In its Consolidated Statements of Operations and its total portfolio presentation of real property operating results, the Company includes the following utility reimbursement revenues in real property revenues (excluding transient):

For its presentation of Same Property results on page 10 and page 12, the Company nets the following utility revenues (which include utility reimbursement revenues from residents) against related utility expenses in Same Property operating expenses:

Non-GAAP Supplemental Measures

Investors and analysts following the real estate industry use non-GAAP supplemental performance measures, including net operating income ("NOI"), earnings before interest, tax, depreciation, and amortization ("EBITDA") and funds from operations ("FFO") to assess REITs. The Company believes that NOI, EBITDA, and FFO are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, NOI, EBITDA, and FFO are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance, and value.

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 the Company's ability to incur and service debt; EBITDA also provides further measures to evaluate the Company's ability to fund dividends and other cash needs.

FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets.

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 net cash provided by 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.

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