American Land Lease (NYSE:ANL)
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American Land Lease, Inc. (NYSE: ANL) today released second quarter
results for 2008.
Summary Financial Results
Second Quarter
Diluted Earnings Per Share (“Diluted EPS”)
were $0.04 for the three-month period ended June 30, 2008, compared to
$0.13 for the same period one year ago, a decrease of 69.2% on a per
share basis.
Funds from Operations (“FFO”),
a non-GAAP financial measure defined on page 12 of this press release,
were $1,796,000 or $0.21 per diluted common share, for the quarter,
compared to $2,503,000 or $0.28 per diluted common share, for the same
period one year ago, a decrease of 28.2% on a per share basis.
Home sales volume was $3,525,000, a decline of 55.5% from the same
period one year ago, consisting of 29 new home closings. This result
compares with 65 new home closings in second quarter 2007.
“Same Store” (a
non-GAAP financial measure defined on page 12 of this release) results
provided a revenue increase of 4.8%, an expense increase of 1.0% and
an increase of 6.6% in Net Operating Income (“NOI”;
a non-GAAP financial measure defined on page 12 of this release).
“Same Site” (a
non-GAAP financial measure defined on page 12 of this release) results
provided a revenue increase of 3.1%, an expense increase of 0.6% and
an increase of 4.2% in NOI.
FFO, NOI, Same Store and Same Site are supplemental non-GAAP financial
measures that are defined in the glossary beginning on page 12. We use
FFO in measuring our operating performance because we believe that the
items that result in a difference between FFO and net income have a
different impact to the ongoing operating performance of a real estate
company as compared to other businesses. We use NOI to evaluate the
operating performance of our properties and we believe that it is
relevant and useful information as a measure of property performance on
an unleveraged basis. We use NOI on a Same Store and Same Site basis as
useful information to measure property performance without the impact of
newly acquired or newly disposed properties. Neither FFO nor NOI should
be considered an alternative to net income or net cash flows from
operating activities, as calculated in accordance with GAAP, as an
indication of our performance or as a measure of liquidity. A
reconciliation of FFO to the comparable GAAP financial measure is
included on page 17. A reconciliation of NOI, Same Store and Same Site
to the comparable GAAP financial measure is included on page 18.
The full text of this press release is available upon request or through
the Company’s web site at www.americanlandlease.com.
Management Comments
Bob Blatz, President of American Land Lease, commented, “The
results of the current quarter underscore the continued stability and
strength of our core residential land lease business as, to date, we
have not seen deterioration in credit quality that has negatively
impacted residential mortgages and other forms of consumer financing.
Our portfolio of land leases continue to produce strong same site and
same store results which have a positive impact on the Company’s
Net Asset Value or “NAV.”
We continue to see a protracted decline in the broader home sales
markets has continued to impact our ability to add new leases to the
portfolio at the same rate we have enjoyed in prior years. The reduction
in the rate at which new leases are added to the portfolio has reduced
current land values, which in turn impacts the Company’s
NAV. We believe that we are in good markets, with a product –
retirement communities – that has a growing
customer base and, once confidence returns to the market, our absorption
rates will be restored.”
“The continued expansion of operating margins
at the property level reflects the strength of our properties and
personnel who serve our customers well. Operating margins grew 1.1% over
2007 to 64.8%. This growth reflects both the quality of the core
portfolio and the positive impact on margins of newly leased sites even
at the lower rate of new home sales. We continue to view our core
business as owning and operating land leases –
and in that core business our performance was outstanding.”
“We view the new home sales business as an
activity that complements our residential land lease business by
creating new revenue generating home sites. Home sales have not yet
shown signs of recovery as our customers are taking longer to sell their
current homes and their confidence has been impacted by negative news in
the broader economy, including a heightened risk of inflation. We view
this as an industry issue and not one that can be solved or completely
mitigated by ANL. The unit volume of new homes sold was down by 36, or
55.4% compared to the second quarter of 2007. In this market, our
average home sale price was $120,000; a slight decrease of 1.6% from
Q207. We have taken numerous steps to lower our sales overhead and
marketing costs as we continue to look to decrease the drag that adding
new leases to the portfolio has on current earnings. These steps
included a number of actions whose costs, primarily severance costs, are
included in the second quarter results and are not expected to recur in
2008. As we look towards where the home sale market is today, we note
that for the first time in 11 quarters we had a slight increase in home
sales as compared to the previous quarter. While the number is small –
at one – we note that we may be seeing a
leveling out of the decline.”
“Our core business is solid. Land lease
returns grow with increased rents and expense control reflecting the
outstanding work of our operations team. Our second growth engine is new
home sales, which has been affected by the national decline in home
sales. We are focused on operating this business activity efficiently to
minimize the drag on current earnings and Net Asset Value. We are
fortunate to have solid locations, a growing base of potential
customers, attractive homes, and a hardworking sales team that is
selling excellent homes at good prices.”
The term “NAV” is
defined on page 12 of this press release.
Dividend Declaration
On July 29, 2008, the Board of Directors declared a second quarter
common stock dividend of $0.25 per share, payable on August 29, 2008, to
stockholders of record on August 15, 2008.
On July 29, 2008, the Board of Directors also declared a cash dividend
of $0.4844 per share of Series A Preferred Stock for the quarter ended
June 30, 2008, payable on August 29, 2008, to shareholders of record on
August 15, 2008.
The Board of Directors reviews the dividend policy quarterly. The
Company's dividends are set quarterly and are 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 common
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 is subject to numerous factors,
including the Company's profitability, capital expenditure plans and
competing uses of capital, 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.
Further, the Board has and will continue to consider the downturn in new
home sales and the state of the commercial real estate credit market in
the context of its quarterly review and dividend decision. In addition,
the Board of Directors may consider the Company’s
dividend policy as a part of its previously announced review of
strategic alternatives. The Company’s net
operating loss may be used to offset all or a portion of its real estate
investment (“REIT”)
taxable income, which may allow the Company to reduce or eliminate its
dividends and still maintain its REIT status.
Operational Results –
Second Quarter
Second Quarter Property Operations
Second quarter revenue from property operations was $9,733,000, as
compared to $9,334,000 in the same period one year ago, a 4.3% increase.
Second quarter property operating expenses totaled $3,156,000, as
compared to $3,111,000 in the same period one year ago, a 1.5% increase.
The Company realized increases in rental income as the result of annual
rental rate increases, rent yield management, and the leasing of new
home sites through its home sales efforts. Second quarter property
operating expense increases reflect the impact of higher utility and
property insurance costs as compared to the prior year’s
second quarter. In a majority of the communities we operate, the Company
has previously implemented contractual terms under its leases to pass on
increases in property taxes through billings to homeowners for their
proportional share of increased taxes. In 23 of the 30 communities we
operate, the individual homeowner’s water and
sewer is metered, and changes in consumption are billed to the homeowner.
Second quarter property-operating margins before depreciation expense
increased to 64.8% from 63.7% in the prior year’s
second quarter.
Second Quarter “Same
Store”
Results
Second quarter “same store”
results reflect the results of operations for properties and golf
courses owned during the second quarters of both 2008 and 2007. Same
store properties accounted for 99.5% of property operating revenues for
second quarter 2008. “Same store”
results are defined on page 12, and reconciled to GAAP on page 18, of
this press release. We believe that same store information provides an
opportunity to understand changes in profitability for properties owned
during both reporting periods that cannot be obtained from a review of
the consolidated income statement for periods in which properties are
acquired or sold. Our presentation of same store 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.
The same store % change results are as follows:
2Q08
Revenue
4.8
%
Expense
1.0
%
Net Operating Income
6.6
%
Our same store revenues reflect reimbursements from our tenants for
certain expense items, principally utilities and real estate taxes.
During the current period, the property taxes associated with certain
Florida properties were reduced when compared to the prior year,
resulting in a corresponding reduction in billings to tenants. When
adjusted for these items, the change in revenues and expenses for the
quarter are shown below.
2Q08
Revenues
4.8
%
Less: Increase in Net Reimbursements
(0.1
%)
Revenue growth; net of reimbursements
4.7
%
Expenses
1.0
%
Less: Increase in Net Reimbursements
(1.3
%)
Expense decrease; net of reimbursements
(0.3
%)
Same Store NOI Growth
6.6
%
In addition to focusing on controlling operating expenses, our leases
also provide some insulation from increased expenses.
We derive our increase in property revenue (i) from increases in rental
rates and other charges at our properties, (ii) re-establishing market
rents at times of home transfers, and (iii) 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. “Same
Site” results are defined on page 12, and
reconciled to GAAP on page 18, of this press release. We believe that “same
site” information provides the ability to
understand the changes in profitability without the changes 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 rental, absorption and golf operations contributions to
total same store results for second quarter are as follows based upon
increases from prior year results.
Second Quarter
Same Site
Absorption
Golf
Same Store
Revenue
3.1
%
1.7
%
--
4.8
%
Expense
0.6
%
0.6
%
(0.2
)%
1.0
%
NOI
4.2
%
2.3
%
0.1
%
6.6
%
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 June 30, 2008 and
2007 can be found on page 18 of this earnings release.
Second Quarter Home Sales Operations
Second quarter 2008 new home sales were $3,525,000, a 55.5% decrease
from the same period in the prior year. There were 29 closings, a 55.4%
decrease from the 65 closings during the same period in 2007. Average
selling price per home was $120,000, compared to $122,000 in the same
period in 2007, a decrease of 1.6%. Ten communities reported average
selling prices in excess of $100,000. Selling gross margins, excluding
brokerage activities, were 20.2% in the quarter, a decrease of 8.4% from
the same period in 2007. Selling costs as a percentage of sales revenue
increased from 30.0% in the second quarter of 2007 to 43.1% in the
second quarter of 2008, reflecting lower operating leverage against
fixed costs. Selling costs, including overhead, marketing and
advertising expenses, were down by 36.0% compared to the same period in
2007.
During the second quarter the Company’s
results include charges of $40,000 or $0.005 per share for severance
costs in conjunction with a reduction in force as a result of the
current sales environment. In addition, the Company recorded charges of
$255,000 or $0.03 per share to write down inventory values to reflect
the pricing expected to be achieved on certain aged homes.
The Company’s backlog of contracts to close
stood at 9, a decrease of 39, or 81.3%, from the same period in 2007.
The Company remains committed to generating revenue growth through new
lease originations in its existing portfolio. Even though new home sales
slowed from 2007 to 2008, our home sales business continues to provide
the Company with additional earning home sites.
Summary of home sales activity:
Three MonthsEndedJune 30, 2008
Three MonthsEndedJune 30, 2007
UnitChange
PercentChange
New home closings
29
65
(36
)
(55.4
%)
New home contracts
29
56
(27
)
(48.2
%)
Home resales
2
1
1
100.0
%
Brokered home sales
19
18
1
5.6
%
New home contract backlog (1)
9
48
(39
)
(81.3
%)
(1) Balance as of June 30, 2008 and 2007,
respectively.
Strategic Alternative Review
As previously announced, the Board of Directors is considering a broad
range of strategic alternatives to enhance shareholder value. In support
of its consideration, the Board of Directors has authorized management
to undertake a formal process to determine investor interest in the
purchase of some or all of the Company’s real
estate assets. This process is ongoing as of the date of this release.
There can be no assurance that this process will result in any strategic
or financial transaction.
Financing Activity
During the quarter, the Company closed a future advance of $2,175,000 on
one of our properties pursuant to the terms of the original financing at
an interest rate of 6.06% which is coterminous with the original
financing in 10 years. Proceeds were used to continue the development of
the Company’s inventory of home sites.
Development Activity
The Company ended the quarter with an inventory of 1,424 developed and
unleased home sites. We sell new homes to be located on these home sites
so that they will become revenue generating.
In addition, the Company has an inventory of 1,091 home sites that are
partially developed or undeveloped. All of these sites are fully
entitled and zoned for use as a land lease community. With the exception
of Sebastian Beach and Tennis Village and the Villages at Country Club,
all are contiguous to, and a part of, a current community where there
are ongoing property operations and a proven customer base.
Significant development activity during the quarter included:
At Sebastian Beach and Tennis Village, construction and site work
continued. As reported in prior quarters, a new municipality was
formed in July of 2006, which impacts this site. As previously
announced, we completed a key step in the platting process to annex
the entire project site into one governmental jurisdiction. Pre-sales
and marketing activities for the community have already begun at an
off-site sales office, and we expect to begin home and Village Centre
construction upon completion of the platting process.
At the Villages at Country Club project in Mesa, Arizona, our
homebuilding partner began home-building activity in September 2007,
and completed the first models during the quarter. We expect to begin
sales efforts this fall.
Outlook for 2008
The table below summarizes the Company’s
projected financial outlook for 2008 as of the date of this release and
is based on the estimates and assumptions disclosed in this and previous
press releases. Our core land lease operating business remains solid and
there have been no changes to our projections for this business element.
The rate of growth in our land lease operating business projected for
2008 as compared to 2007 actual results is lower due chiefly to three
key factors:
1.
The reduction in new home sales in 2007 and sales projections for
2008. The reduced rate of new home sales will result in a lower
contribution from absorption to same store revenue growth than in
prior years.
2.
Certain resident leases increase annually based upon the rate of
increase in the Consumer Price Index. The Consumer Price Index
applicable to certain leases was 2.0% for lease renewals in 2008
compared to 3.8% for lease renewals for 2007, a 1.8% decrease.
3.
In addition, the lower rate of turnover within our communities has
slowed the rate at which rents are increased to higher market rates
at the time of home transfers.
Our outlook for our core land lease operating business is as follows:
2007 Actual Results
Full Year 2008 Projected
Same Store
Revenue Growth
6.6%
4.5% to 6.5%
Expense Growth
3.4%
3.5% to 5.0%
NOI Growth
8.2%
4.5% to 6.0%
General and Administrative Expenses
$4.3M
$4.6M to $5.1M
Capital Replacements (per site)
$126
$130 to $160
Depreciation
$5.0M
$5.5M to $5.9M
The earnings from the Company’s new home
sales business are subject to greater volatility than are the earnings
from land leases. The Company’s new home
sales business has been impacted by the general decline in new home
sales nationwide. Certain local markets in which the Company operates
have been impacted to a greater extent than have the national averages.
In this home sales environment, the Company has limited visibility on
future new home sales volumes. The Company's earnings estimates would be
impacted positively or negatively by changes in the volume of new home
sales or in the gross margins from new home sales. New home sales volume
and gross margins are dependent upon a number of factors, including but
not limited to consumer confidence, the cost of homeowners’
insurance, consumer access to financing sources for home purchases and
the sale of their current owned homes. We currently do not see a near
term catalyst for increased levels of new home sales in Florida and
Arizona.
The table below reflects our forecast based upon our current information
and analysis:
2007 Actual Results
Full Year 2008 Projected
New Home Sales Volume
209
75 to 130
New Home Sales Gross Margin
28.4%
25% to 28%
Home Sales Operating Income(Loss)
($1.3M)
($3.5M) to ($1.6M)
Home Sales Net Contribution
($2.8M)
($4.9M) to ($2.9M)
In consideration of the above projections for our businesses, our total
company projections are as follows:
2007 Actual Results
Full Year 2008 Projected
Contribution to FFO from land lease operations
$1.31
$1.21 to $1.27
Contribution to FFO from Homes sales operations
($0.30)
($0.57) to ($0.33)
Contribution to FFO from prepayment penalties on debt refinancing
transactions
--
($0.23)
FFO
$1.01
$0.41 to $0.71
Contribution to AFFO from land lease operations
$1.17
$1.07 to $1.16
Contribution to AFFO from Homes sales operations
($0.30)
($0.57) to ($0.33)
Contribution to AFFO from prepayment penalties on debt refinancing
transactions
--
($0.23)
AFFO
$0.87
$0.27 to $0.60
Diluted EPS from continuing operations
$0.39
($0.22) to $0.09
Diluted EPS from discontinued operations
$1.18
--
Diluted EPS
$1.57
($0.22) to $0.09
The Company’s reported results are impacted
by the amount of interest capitalized on its development properties. The
amount of interest capitalized is dependent on the rate of completion of
home sites, the timing and amount of capital expenditures and continuing
development activities at each location. Changes in any of the preceding
factors, along with changes in applicable interest rates, will result in
either increases or decreases in the actual amount of interest
capitalized. Changes in the amount of interest capitalized will increase
or decrease the Company’s earnings as
compared to historical financial results.
Non-employee director compensation continues to be paid in stock and all
stock based compensation is expensed within the 2008 projections. The
Company's earnings estimates would be adversely impacted by any
increased cost of compliance with regulations and laws applicable to
public companies and financial reporting.
Additional factors that may impact our projected results include a
change in the mix of home sales across our communities, occupancy
changes, further changes in the residential housing markets, the impact
of hurricanes or other natural disasters, changes in interest rates, and
additional refinancing transactions.
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. However, no
assurance can be provided as to the achievement of these projections and
actual results will vary, perhaps materially.
American Land Lease, Inc. is a REIT that held interests in 30
manufactured home communities with 8,033 operational home sites, 1,424
developed expansion sites, 1,091 undeveloped expansion sites and 129
recreational vehicle sites as of June 30, 2008.
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 statements regarding the Company’s
cash flow, results of operations, dividends, anticipated returns on real
estate investments, stock repurchases and future absorption rates. 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, but are
not limited to: general economic and business conditions; interest rate
changes, financing and refinancing risks; risks inherent in owning real
estate; demand for new homes; 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. We assume no obligation to
update or revise any forward-looking statements or to update the reasons
why actual results could differ from those projected in any
forward-looking statements.
As previously announced, management will hold a teleconference call,
Wednesday, August 6, 2008 at 1:30 p.m. Eastern Daylight Time to discuss
second quarter 2008 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 second quarter 2008 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.
Eastern Daylight Time, August 6, 2008 until midnight on August 13, 2008.
To access the replay, dial toll free, (800) 642-1687 and request
information from conference ID 58452508.
GLOSSARY
GLOSSARY OF NON-GAAP FINANCIAL AND OPERATING MEASUREMENTS
Financial and operational measurements found in the Earnings Release and
Supplemental Information include certain non-GAAP financial measurements
used by American Land Lease management. Such measurements include Funds
from Operations (“FFO”),
which is an industry-accepted measurement based in part on the
definition of the National Association of Real Estate Investment Trusts
(NAREIT) and “same store”
and same site” results. These terms are
defined below and, where appropriate, reconciled to the most comparable
Generally Accepted Accounting Principles (GAAP) measurements on the
accompanying supplement schedules.
FUNDS FROM OPERATIONS (“FFO”):
is a commonly used term defined by NAREIT as net income (loss), computed
in accordance with GAAP, excluding gains and losses from extraordinary
items, dispositions of depreciable real estate property, dispositions of
discontinued operations, net of related income taxes, plus real estate
related depreciation and amortization (excluding amortization of
financing costs), including depreciation for unconsolidated real estate
partnerships, joint ventures and discontinued operations. American Land
Lease calculates FFO based on the NAREIT definition, as further adjusted
for the minority interest in the American Land Lease’s
operating partnership (Asset Investors Operating Partnership). This
supplemental measure captures real estate performance by recognizing
that real estate generally appreciates over time or maintains residual
value to a much greater extent than do other depreciable assets such as
machinery, computers or other personal property. There can be no
assurance that American Land Lease’s method
for computing FFO is comparable with that of other real estate
investments trusts.
ADJUSTED FUNDS FROM OPERATIONS (“AFFO”):
is FFO less Capital Replacement expenditures. Similar to FFO, AFFO
captures real estate performance by recognizing that real estate
generally appreciates over time or maintains residual value to a much
greater extent than do other depreciating assets such as machinery,
computers or other personal property while also reflecting that Capital
Replacements are necessary to maintain the associated real estate assets.
NET OPERATING INCOME (“NOI”):
is the property's gross rental income plus any other income, such as
late fees or parking income, less vacancies and rental expenses.
Essentially, NOI is the net cash generated before mortgage payments and
taxes.
NET ASSET VALUE: As defined by NAREIT, the net “market
value” of all of a company’s
assets, including but not limited to its properties, after subtracting
all its liabilities and other obligations.
CAPITALIZATION RATE: The capitalization rate (“cap
rate”) is the rate at which net operating
income is discounted to determine the value of a property. It is one
method that is utilized to estimate property value.
SAME STORE RESULTS: represent an operating measure that is used
to compare the results of properties that have been in the portfolio for
both accounting periods being compared.
SAME SITE RESULTS: represent an operating measure that is used to
compare the results of home sites that have been in the portfolio for
both accounting periods being compared. Home sites that are leased or “absorbed”
during the accounting periods are not included in this calculation.
OPERATIONAL HOME SITE: represents those sites within our
portfolio that are/or have been leased to a tenant. Operational Home
Sites and their relative occupancy provide a measure of stabilized
portfolio status.
DEVELOPED HOME SITE: represents those sites within our portfolio
that have not been occupied, but for which the greater part of their
infrastructure has been completed.
UNDEVELOPED HOME SITE: represents those sites within our
portfolio that have not been fully developed and that require
construction of substantial lateral improvements such as roads.
CAPITAL REPLACEMENT: represents capitalized spending which
maintains a property. American Land Lease generally capitalizes spending
for items that cost more than $250 and have a useful life of more than
one year. A common example is street repaving. This spending is better
considered a recurring cost of preserving an asset rather than as an
additional investment. It is a cash proxy for depreciation.
CAPITAL ENHANCEMENT: represents capitalized spending which adds a
revenue source or material feature that increases overall community
value. An example is the addition of a marina facility to an existing
community.
SELLING GROSS MARGIN: represents what remains from sales after
paying out the costs of goods sold. Gross Profit margin is expressed as
a percentage. To obtain a gross profit margin, divide gross profit by
sales.
USED HOME SALE: represents the sale of a home previously owned by
a third party and American Land Lease has acquired title through an
eviction proceeding or through purchase from the third party.
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
As of
June 30,2008
March 31,2008
December 31,2007
September 30,2007
June 30,2007
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
ASSETS
Real Estate
$
312,388
$
312,850
$
308,956
$
304,280
$
306,824
Less accumulated depreciation
(34,145
)
(32,989
)
(31,842
)
(30,735
)
(31,191
)
Real estate under development
128,277
123,542
122,403
121,056
119,602
Total Real Estate
$
406,520
403,403
399,517
394,601
395,235
Cash and cash equivalents
142
255
541
296
308
Inventory
15,841
18,539
20,084
20,012
21,031
Other assets
17,999
17,062
16,391
15,362
16,085
Total Assets
$
440,502
$
439,259
$
436,533
$
430,271
$
432,659
LIABILITIES AND EQUITY
Liabilities
Secured long-term notes payable
$
259,630
$
258,140
$
239,970
$
240,769
$
238,676
Secured short-term financing
21,219
20,210
30,932
18,963
30,013
Accounts payable and accrued liabilities
8,196
8,526
9,288
12,260
11,545
Total Liabilities
289,045
286,876
280,190
271,992
280,234
Minority Interest in Operating Partnership
16,824
16,964
17,339
17,522
16,421
STOCKHOLDERS’ EQUITY
Preferred Stock, par value $.01 per share; 3,000 shares
authorized, 1,000 shares issued and outstanding
25,000
25,000
25,000
25,000
25,000
Common Stock, par value $.01 per share; 12,000 shares authorized
96
95
95
95
95
Additional paid-in capital
295,266
294,295
293,821
293,510
293,113
Dividends in excess of accumulated earnings
(153,810
)
(152,164
)
(148,749
)
(147,013
)
(154,920
)
Treasury stock at cost
(31,919
)
(31,897
)
(31,163
)
(30,835
)
(27,284
)
Total Stockholders Equity
134,633
135,419
139,004
140,757
136,004
Total Liabilities and Stockholders’
Equity
$
440,502
$
439,259
$
436,533
$
430,271
$
432,659
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,2008
March 31,2008
December 31,2007
September 30,2007
RENTAL PROPERTY OPERATIONS
Rental and other property revenues
$
9,733
$
9,717
$
9,528
$
9,389
Golf course operating revenues
217
439
250
165
Total property operating revenues
9,950
10,156
9,778
9,554
Property operating expenses
(3,156
)
(3,163
)
(3,204
)
(3,092
)
Golf course operating expenses
(348
)
(332
)
(336
)
(341
)
Total property operating expenses
(3,504
)
(3,495
)
(3,540
)
(3,433
)
Depreciation
(1,351
)
(1,348
)
(1,286
)
(1,239
)
Income from rental property operations
5,095
5,313
4,952
4,882
SALES OPERATIONS
Home sales revenue
3,525
3,855
4,508
7,162
Cost of home sales
(2,814
)
(2,837
)
(3,205
)
(5,055
)
Gross profit on home sales
711
1,018
1,303
2,107
Commissions earned on brokered sales
39
45
69
60
Commissions paid on brokered sales
(23
)
(19
)
(27
)
(24
)
Gross profit on brokered sales
16
26
42
36
Selling and marketing expenses
(1,519
)
(2,038
)
(2,064
)
(2,345
)
Income (loss) from sales operations
(792
)
(994
)
(719
)
(202
)
General and administrative expenses
(1,233
)
(1,222
)
(1,230
)
(1,105
)
Interest and other income
58
44
22
7
Loss on early debt retirement
--
(1,987
)
--
--
Interest expense
(2,198
)
(2,248
)
(2,251
)
(2,197
)
Income before minority interest in Operating Partnership
930
(1,094
)
774
1,385
Minority interest in Operating Partnership
(108
)
127
(88
)
(164
)
Income from continuing operations
822
(967
)
686
1,221
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations, net of
Minority Interest
--
--
21
9,154
Net Income
822
(967
)
707
10,375
Cumulative preferred stock dividends
(485
)
(484
)
(485
)
(484
)
Net Income Attributable to common shareholders
$
337
($ 1,451
)
$
222
$
9,891
Basic earnings from continuing operations (net of cumulative unpaid
preferred dividends)
$
0.04
$
(0.19
)
$
0.03
$
0.09
Basic earnings (loss) from discontinued operations
--
--
--
1.20
Basic earnings per common share
$
0.04
$
( 0.19
)
$
0.03
$
1.29
Diluted earnings from continuing operations
$
0.04
$
(0.19
)
$
0.03
$
0.10
Diluted earnings (loss) from discontinued operations
--
--
--
1.16
Diluted earnings per common share
$
0.04
$
( 0.19
)
$
0.03
$
1.26
Weighted average common shares outstanding
7,611
7,552
7,560
7,659
Weighted average common shares and common share equivalents
outstanding
7,710
7,682
7,754
7,871
Common dividends paid per share
$
0.25
$
0.25
$
0.25
$
0.25
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
DEBT ANALYSIS
(in thousands)
(unaudited)
As of
June 30,2008
March 31,2008
December 31,2007
September 30,2007
June 30,2007
DEBT OUTSTANDING
Mortgage Loans Payable – Fixed
$
237,524
$
236,034
$
217,864
$
218,663
$
227,320
Mortgage Loans Payable – Floating
22,106
22,106
22,106
22,106
11,356
Floor Plan Facility
16,619
20,210
23,086
13,337
20,508
Line of Credit
4,600
--
7,846
5,626
9,505
Total Debts
$
280,849
$
278,350
$
270,902
$
259,732
$
268,689
% FIXED FLOATING
Fixed
84.6
%
84.8
%
80.4
%
84.2
%
84.6
%
Floating
15.4
%
15.2
%
19.6
%
15.8
%
15.4
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
AVERAGE INTEREST RATES
Mortgage Loans Payable – Fixed
6.3
%
6.2
%
6.3
%
6.3
%
6.3
%
Mortgage Loans Payable – Floating
4.2
%
6.2
%
6.7
%
6.9
%
7.1
%
Floor Plan Facility
5.5
%
6.1
%
7.5
%
8.5
%
8.5
%
Line of Credit
4.2
%
5.6
%
6.6
%
7.2
%
6.9
%
Total Weighted Average
6.1
%
6.2
%
6.4
%
6.5
%
6.5
%
DEBT RATIOS
Debt/Total Market Cap (1)
58.7
%
57.8
%
57.7
%
53.7
%
51.7
%
Debt/Gross Assets
62.1
%
63.4
%
62.0
%
60.4
%
62.1
%
MATURITIES
December 31,2008
December 31,2009
December 31,2010
December 31,2011
December 31,2012
Mortgage Loan Scheduled Principal Payments
1,413
3,234
3,730
4,035
4,399
Mortgage Loan Balloon Maturities
--
--
--
11,356
10,750
Total
$
1,413
3,234
$
3,730
$
15,391
$
15,149
(1) Computed based upon closing price as
reported on NYSE as of the last trading day of the period then ended and
computed using all shares outstanding at such date.
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO FFO/AFFO AND PAYOUT RATIOS
(Amounts in thousands, except per share/OP unit amounts)
(Unaudited)
Three Months EndedJune 30,
2008
2007
Net Income
$
337
$
1,054
Adjustments
Cumulative unpaid preferred stock dividends
485
485
Minority interest in operating partnership
108
188
Real estate depreciation
1,351
1,227
Discontinued Operations:
Real estate depreciation attributed to discontinued operations
--
24
Minority interest in operating partnership attributed to
discontinued operations
--
10
Funds From Operations (FFO)
$
2,281
$
2,988
Cumulative unpaid preferred stock dividends
(485
)
(485
)
Funds From Operations attributable to common
Stockholders
1,796
2,503
Capital Replacements
(185
)
(385
)
Adjusted Funds from Operations (AFFO)
$
1,611
$
2,118
Weighted Average Common Shares/OP Units Outstanding
8,703
9,022
Per Common Share and OP Unit:
FFO:
$
0.21
$
0.28
AFFO:
$
0.19
$
0.23
Payout Ratio Per Common Share and OP Unit:
Gross Distribution Payout
FFO:
119.0
%
89.3
%
AFFO:
131.6
%
108.7
%
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
RECONCILIATION OF SAME SITE AND SAME STORE OPERATING RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND JUNE 30, 2007
(in thousands)
(unaudited)
Three
MonthsEndedJune 30,2008
ThreeMonthsEndedJune 30,
2007
Change
% Change
Contributionto SameStore% Change (1)
Same site rental revenues
C
$
9,441
$
9,152
$
289
3.2
%
3.1
%
Absorption rental revenues
239
73
166
227.4
%
1.7
%
Same store golf revenues
217
219
(2
)
(0.9
%)
--
Same store revenues
A
9,897
9,444
453
4.8
%
4.8
%
Other ancillary revenues (2)
53
109
(56
)
(51.4
)%
Total property revenues
E
$
9,950
$
9,553
$
397
4.2
%
Same site rental expenses
D
$
2,713
$
2,694
$
19
0.7
%
0.6
%
Absorption rental expenses
19
-
19
100.0
%
0.6
%
Same store golf expenses
348
357
(9
)
(2.5
%)
(0.2
%)
Same store expenses
B
3,080
3,051
29
1.0
%
1.0
%
Expenses related to offsite management (3)
424
417
7
1.7
%
Total property operating expenses
F
$
3,504
$
3,468
$
36
1.0
%
Same store net operating income
A-B
$
6,817
$
6,393
$
424
6.6
%
Same site net operating income
C-D
$
6,728
$
6,458
$
270
4.2
%
Total net operating income
E-F
6,446
$
6,085
$
361
5.9
%
(1) Computed as the change in the individual
component of same store revenue or expense divided by the total
applicable same store base (revenue or expense) for the 2007 period. For
example, same store rental revenue increase of $289 as compared to the
total same site revenues in 2007 of $9,444 is a 3.1% increase ($289 /
$9,444 = 3.1%).
(2) Other ancillary revenues consist of
amortization of deferred income recognized related to acquired lease
obligations, intercompany revenues and other miscellaneous income not
attributable to land leases.
(3) Expenses related to offsite management
reflect portfolio property management costs not attributable to a
specific property.
AMERICAN LAND LEASE, INC. AND SUBSIDIARIES
NUMBER OF HOMESITES AND AVERAGE RENT BY COMMUNITY
AS OF JUNE 30, 2008
Community
Location
Operational HomeSites (1)
Occupancy
Average Monthly Rent
RV
Sites
UndevelopedHome Sites
Developed Home Sites
Owned Communities
Blue Heron Pines
Punta Gorda, FL
345
100
%
$
364
--
--
44
Brentwood Estates
Hudson, FL
144
98
%
296
--
--
47
Sebastian Beach & Tennis Club
Grant-Valkaria, FL
--
0
%
--
--
533
--
Serendipity
Ft. Myers, FL
338
95
%
378
--
--
--
Stonebrook
Homosassa, FL
198
100
%
314
--
--
3
Sunlake Estates
Grand Island, FL
367
100
%
376
--
--
35
Forest View
Homosassa, FL
274
100
%
339
--
--
30
Gulfstream Harbor
Orlando, FL
382
99
%
437
--
50
--
Gulfstream Harbor II
Orlando, FL
306
99
%
433
--
37
1
Gulfstream Harbor III
Orlando, FL
182
95
%
407
--
--
102
Lakeshore Villas
Tampa, FL
281
96
%
459
--
--
--
Park Place
Sebastian, FL
379
100
%
349
--
--
90
Park Royale
Pinellas Park, FL
299
92
%
461
--
--
10
Pleasant Living
Riverview, FL
245
95
%
387
--
--
--
Riverside GCC
Ruskin, FL
479
100
%
544
--
211
251
Royal Palm Village
Haines City, FL
290
96
%
367
--
--
97
Cypress Greens
Lakeland, FL
234
100
%
271
--
--
24
Savanna Club
Port St Lucie, FL
1,012
100
%
304
--
--
55
Woodlands
Groveland, FL
172
99
%
308
-
--
120
Subtotal—Florida
5,927
98
%
$
379
--
831
909
Blue Star
Apache Junction AZ
22
50
%
320
129
--
--
Brentwood West
Mesa, AZ
350
94
%
488
--
--
--
The Villages
Mesa, AZ
--
0
%
--
--
--
375
Desert Harbor
Apache Junction AZ
205
100
%
384
--
--
--
Fiesta Village
Mesa, AZ
172
86
%
405
--
--
--
La Casa Blanca
Apache Junction AZ
197
100
%
413
--
--
--
Lost Dutchman
Apache Junction AZ
219
74
%
325
--
--
23
Rancho Mirage
Apache Junction AZ
312
97
%
448
--
--
--
Reserve at Fox Creek
Bull Head City, AZ
257
100
%
336
--
--
56
Sun Valley
Apache Junction AZ
268
91
%
366
--
--
--
Subtotal—Arizona
2,002
93
%
$
403
129
--
454
Foley Grove
Foley, AL
104
100
%
296
--
260
61
Total Communities
30
8,033
97
%
$
381
129
1,091
1,424
(1) We define operational home sites as those sites within our portfolio
that have been leased to a tenant during our ownership of the community.
Since our portfolio contains a large inventory of developed home sites
that have not been occupied during our ownership, we have expressed
occupancy as the number of occupied sites as a percentage of operational
home sites. We believe this measure most accurately describes the
performance of an individual property relative to prior periods and
other properties without our portfolio. The occupancy of all developed
sites was 84.9% across the entire portfolio. Including sites not yet
developed, occupancy was at 76.2% at June 30, 2008.
Portfolio Summary
Operational
Home sites
Developed Home sites
Undeveloped Home sites
RV Sites
Total
As of December 31, 2007
7,984
1,370
1,191
129
10,674
New lots purchased
--
3
--
--
3
New leases originated
49
(49
)
--
--
--
Properties developed
--
100
(100
)
--
--
As of June 30, 2008
8,033 (1
)
1,424
1,091
129
10,677
(1) As of June 30, 2008, 7,784 of these
operational home sites were occupied.
Occupancy Roll Forward
Occupied
Home sites
Operational
Home sites
Occupancy
As of December 31, 2007
7,748
7,984
97.0
%
New home sales
57
49
Used home sales
4
--
Used homes acquired
(10
)
--
Homes constructed by others
1
--
Homes removed from previously leased sites
(16
)
--
As of June 30, 2008
7,784
8,033
96.9
%
AMERICAN LAND LEASE, INC. AND SUBSIDIARIES
RETURN ON INVESTMENT FROM HOME SALES
(unaudited)
Three Months EndedJune 30, 2008
Three Months EndedJune 30, 2007
Expansion sites leased during the period
29
60
Estimated stabilized first year profit on leases originated during
the period
A
$
106
$
191
Allocated costs, including development costs of sites leased
$
1,648
$
2,636
Home sales loss attributable to sites leased
814
110
Total costs incurred to originate ground leases
B
$
2,462
$
2,746
Estimated stabilized first year returns from the leases originated
on expansion home sites during the period
A/B
4.3
%
7.0
%
For the three months ended June 30, 2008 and 2007, we estimate our
profit or loss attributable to the sale of homes situated on expansion
home sites as follows (in thousands):
Three Months EndedJune 30, 2008
Three Months EndedJune 30, 2007
Reported loss from sales operations
$
(792
)
$
(79
)
Brokerage business income
(16
)
(25
)
Used home sales
(6
)
(6
)
Adjusted (loss) income for projection analysis
$
(814
)
$
(110
)
We have changed the method of estimating costs attributable to newly
leased sites. Beginning with the third quarter, we revised our estimate
of home site costs with respect to indirect general community
expenditures. Previously such indirect costs were allocated to remaining
unleased lots; now such costs are allocated to all sites within the
community. For example, the Company has constructed additional amenities
such as an additional clubhouse at our Sunlake Community, which will
benefit all sites in the community, whether leased or unleased. If
calculated using the previous methodology, the estimated return would
have been 3.2% instead of 4.3%.
The reconciliation of our estimated stabilized first year return on
investment in expansion home sites to our return on investment in
operational home sites for the year ended December 31, 2007 in
accordance with GAAP is shown below (in thousands):
Total Portfolio forYear EndedDecember 31, 2007
Property income before depreciation
A
$
24,686
Total investment in operating home sites
B
$
295,898
Return on investment from earning home sites (1)
A/B
8.3
%
(1) Our return on investment in operational
sites reflects our income from and investment in sites that were leased
for the first time during the year ended December 31, 2007. For these
leases, the income reported above includes less than a full twelve
months of operating results. Consequently, when compared to the
investment we have made in these home sites, the return on investment
during the year ended December 31, 2007 is less than the return when
measured using a full twelve months of operating results.
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
KEY HOME SALES STATISTICS
ThreeMonths
endedJune 30,2007
ThreeMonthsendedSeptember 30,2007
ThreeMonthsendedDecember 31,2007
ThreeMonthsendedMarch 31,2008
ThreeMonthsendedJune 30,2008
2Q08over1Q08Increase/Decrease
2Q08over1Q08% Change
2Q08over
2Q07Increase/Decrease
2Q08over2Q07% Change
New home contracts
56
44
37
23
29
6
26.1
%
(27
)
(48.2
%)
New home closings
65
51
38
28
29
1
3.6
%
(36
)
(55.4
%)
Home resales
1
4
2
2
2
--
--
1
100.0
%
Brokered home sales
18
22
26
22
19
(3
)
(13.6
%)
1
5.6
%
New home contract backlog
48
32
23
12
9
(3
)
(25.0
%)
(39
)
(81.3
%)
Average Selling Price
$
122,000
$
137,000
$
128,000
$
143,000
$
120,000
($23,000
)
(16.1
%)
($2,000
)
(1.6
%)
Average Gross Margin Percentage
28.6
%
29.4
%
29.8
%
26.4
%
20.2
%