American Land Lease (NYSE:ANL)
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American Land Lease, Inc. (NYSE: ANL) today released third quarter
results for 2008.
Ongoing Strategic Review
As previously reported, the Company’s Board of
Directors has undertaken a year-long strategic review of how best to
maximize shareholder value. This strategic review remains ongoing.
In support of its strategic review, 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. In connection with this process, the Company has received
expressions of interest to purchase one or more of its properties from a
number of interested parties. The Company is considering several such
offers. If any such transactions are agreed to and concluded, the Board
of Directors may consider a special distribution of any sales proceeds,
among other possible uses. There is no assurance that any such
transaction will be concluded or that the Company’s
Board of Directors will distribute any proceeds as a special
distribution.
Additionally, as part of this strategic review, the Board of Directors
has been analyzing the Company’s business and
operating strategy and outside factors on an ongoing basis. In
particular, the Board of Directors has considered adverse factors such
as the poor market for new home sales and uncertain prospects for its
recovery; the costs of developing sites for new homes in advance of
their use; volatility in the market for property debt and its increased
price; the increased risk of non-performance by counterparties; the
price of the Company’s common stock and the
limited volume of its trading. The Company’s
Board of Directors also has considered the continued investor interest
in the Company’s land lease communities and
its sources and uses of liquidity.
As a result of this ongoing review, the Board of Directors has
determined to reduce the Company’s efforts and
costs to make new home sales and to reduce the cost and the rate of
development of additional home sites.
Further, in order to conserve liquidity, our Board of Directors has
determined against payment of a quarterly dividend on our shares of
common stock during the current quarter. The Board of Directors
determined to pay a dividend on our shares of preferred stock during the
current quarter. These dividend determinations are discussed in more
detail below under “Dividends.”
Summary Financial Results
Third Quarter
Diluted Earnings Per Share (“Diluted EPS”)
were $0.07 for the three-month period ended September 30, 2008,
compared to $1.26 for the same period one year ago, a decrease of
94.4% on a per share basis. Net income was impacted by a $1.16 gain
recognized on the sale of a community in the period ending September
30, 2007.
Funds from Operations (“FFO”),
a non-GAAP financial measure defined on page 11 of this press release,
were $1,975,000 or $0.23 per diluted common share, for the quarter,
compared to $2,190,000 or $0.25 per diluted common share, for the same
period one year ago, a decrease of 8.0% on a per share basis.
Home sales volume was $3,403,000, a decline of 52.5% from the same
period one year ago, consisting of 29 new home closings. This result
compares with 51 new home closings in third quarter 2007.
“Same Store” (a
non-GAAP financial measure defined on page 11 of this release) results
provided a revenue increase of 4.7%, an expense increase of 3.4% and
an increase of 5.3% in Net Operating Income (“NOI”;
a non-GAAP financial measure defined on page 11 of this release).
“Same Site” (a
non-GAAP financial measure defined on page 11 of this release) results
provided a revenue increase of 3.5%, an expense increase of 2.2% and
an increase of 4.1% in NOI.
FFO, NOI, Same Store and Same Site are supplemental non-GAAP financial
measures that are defined in the glossary beginning on page 11. 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 16. A reconciliation of NOI, Same Store and Same Site
to the comparable GAAP financial measure is included on page 17.
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. 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 that has continued to impact our ability to add new leases to
the portfolio at the same rate we have enjoyed in prior years. While
this past quarter saw a stabilization in our home sales business, 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 this quarter’s stabilization
could be short-lived and followed by additional declines in demand and
reductions in home sales.”
“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 0.7% over
2007 to 64.7%. 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.”
“As previously announced, our Board of
Directors is engaged in an ongoing strategic review of how best to
maximize shareholder value. As one part of this review, the Board has
been analyzing our business and operating strategy, numerous positive
and negative outside factors and our sources and uses of liquidity. As a
result of this ongoing review, our Board has determined to reduce the
company’s efforts and costs to make new home
sales and to reduce the cost and rate of development of additional home
sites. We may further change our levels of home sales activity and
development based on, among other things, changes in new home sales
demand, our liquidity position and our ongoing strategic review. Any
reduced home sales or development efforts may be reversed if market
conditions improve.”
“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 11 of this press release.
Dividends
On November 4, 2008, in connection with the Company’s
ongoing strategic review, the Board of Directors determined not to
declare or pay a quarterly cash dividend on the Company’s
common stock during the current quarter.
On November 4, 2008, the Board of Directors declared a cash dividend of
$0.4844 per share of Series A Preferred Stock, payable on November 28,
2008, to stockholders of record on November 14, 2008.
The Company’s dividends on common and
preferred stock are set quarterly by the Board of Directors and are
subject to change, suspension 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 our ongoing strategic review,
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 us to finance
these expenditures. The Board of Directors has and will continue to
consider the downturn in new home sales 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. Our
net operating loss may be used to offset all or a portion of our real
estate investment (“REIT”)
taxable income, which may allow us to reduce, suspend or eliminate our
dividends paid and still maintain our REIT status.
Operational Results –
Third Quarter
Third Quarter Property Operations
Third quarter revenue from property operations was $9,831,000, as
compared to $9,380,000 in the same period one year ago, a 4.8% increase.
Third quarter property operating expenses totaled $3,215,000, as
compared to $3,090,000 in the same period one year ago, a 4.0% 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. Third quarter property
operating expense increases reflect the impact of higher property taxes,
repairs and maintenance, and employee costs as compared to the prior year’s
third 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.
Third quarter property-operating margins before depreciation expense
increased to 64.7% from 64.0% in the prior year’s
third quarter.
Third Quarter “Same
Store”
Results
Third quarter “same store”
results reflect the results of operations for properties and golf
courses owned during the third quarters of both 2008 and 2007. Same
store properties accounted for 98.7% of property operating revenues for
third quarter 2008. “Same store”
results are defined on page 11, and reconciled to GAAP on page 17, 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:
3Q08
Revenue
4.7
%
Expense
3.4
%
Net Operating Income
5.3
%
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.
3Q08
Revenues
4.7
%
Less: Increase in Net Reimbursements
(0.6
%)
Revenue growth; net of reimbursements
4.1
%
Expenses
3.4
%
Less: Increase in Net Reimbursements
(2.6
%)
Expense increase; net of reimbursements
0.8
%
Same Store NOI Growth
5.3
%
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 11, and
reconciled to GAAP on page 17, 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.
Third Quarter
Same Site
Absorption
Golf
Same Store
Revenue
3.5
%
1.2
%
--
4.7
%
Expense
2.2
%
2.2
%
(1.0
)%
3.4
%
NOI
4.1
%
0.8
%
0.4
%
5.3
%
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, 2008
and 2007 can be found on page 17 of this earnings release.
Third Quarter Home Sales Operations
Third quarter 2008 new home sales were $3,403,000, a 52.5% decrease from
the same period in the prior year. There were 29 closings, a 43.1%
decrease from the 51 closings during the same period in 2007. Average
selling price per home was $116,000, compared to $137,000 in the same
period in 2007, a decrease of 15.3%. Nine communities reported average
selling prices in excess of $100,000. Selling gross margins, excluding
brokerage activities, were 26.0% in the quarter, a decrease of 3.4% from
the same period in 2007. Selling costs as a percentage of sales revenue
increased from 32.7% in the third quarter of 2007 to 41.9% in the third
quarter of 2008, reflecting lower operating leverage against fixed
costs. Selling costs, including overhead, marketing and advertising
expenses, were down by 39.1% compared to the same period in 2007.
The Company’s backlog of contracts to close
stood at 6, a decrease of 26, or 81.3%, from the same period in 2007.
In connection with our ongoing strategic review, we are reducing new
home sales operations and related expenditures. These actions have the
potential to reduce the number of expansion home site leases facilitated
by our home sales business. We may further change our levels of home
sales activity based on, among other things, changes in new home sales
demand, our liquidity position and our ongoing strategic review, and any
reduced home sales efforts may be reversed if market conditions improve.
Summary of home sales activity:
Three MonthsEndedSeptember 30,2008
Three MonthsEndedSeptember 30,2007
UnitChange
Percent Change
New home closings
29
51
(22
)
(43.1
%)
New home contracts
30
44
(14
)
(31.8
%)
Home resales
3
4
(1
)
(25.0
%)
Brokered home sales
23
22
1
4.5
%
New home contract backlog (1)
6
32
(26
)
(81.3
%)
(1) Balance as of September 30, 2008 and
2007, respectively.
Financing
We have a revolving line of credit with a bank with a total commitment
of $16,000,000 that bears interest at 175 basis points over the
one-month LIBOR rate (4.2% at September 30, 2008). The line of credit is
secured by real property and improvements located in St. Lucie, Lake,
and Pasco Counties, Florida and Maricopa County, Arizona with a net book
value of $44,275,000. The revolving line of credit matures on December
31, 2008. We are currently in negotiations with our lender and expect
this line of credit will be renewed. However, loan renewals are
unusually uncertain in the current financial environment and there is no
assurance that we will obtain the renewal. In the event we are unable to
obtain a renewal of this line of credit, we would be required to repay
the amounts outstanding. At September 30, 2008, $9,719,000 was
outstanding and $6,281,000 was not drawn. The availability of funds to
the Company under the line of credit is subject to certain borrowing
base and other customary restrictions, including compliance with
financial and other covenants thereunder. Based on the application of
the borrowing base calculation, as of September 30, 2008, $3,368,000 was
available to the Company.
On October 21, 2008, the Company received a loan commitment of
$7,670,000, which expires on November 21, 2008. The annual interest rate
of this committed loan is locked at 7.5%. The security for the loan is
real property that currently secures as portion of the Company’s
corporate line of credit that matures on December 31, 2008. If and when
the loan closes, the entire proceeds of this loan will be used to pay
down our corporate revolving line of credit, the borrowing base under
the line of credit will decrease by approximately $4,400,000, and the
Company will achieve a net increase in availability of approximately
$3,270,000. There is no assurance that the lender will fund under its
loan commitment.
Property Disposal
During the quarter, we sold a parcel of commercial property located in
Arizona to a third party for $425,000. The sale resulted in a gain on
the transaction of approximately $100,000.
Development Activity
The Company ended the quarter with an inventory of 1,391 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 1,089 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.
In connection with our ongoing strategic review, we are reducing
development costs. We may further change our levels of development based
on, among other things, changes in new home sales demand, our liquidity
position and our ongoing strategic review, and any reduced development
efforts may be reversed if market conditions improve.
Outlook for 2008
In light of the current unpredictable economic climate, our decision to
reduce our efforts and costs to make new home sales and to reduce our
cost and rate of development of additional home sites, and our ongoing
strategic review, we believe it is prudent to withdraw all of our
previously disclosed financial projections for 2008, except as set forth
below.
The table below summarizes the Company’s
projected financial outlook for our core land lease operational business
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 (CPI). The CPI applicable for
increases in calendar year 2008 was the August 2007 CPI. The August 2007
CPI was 2.0%, compared to an applicable CPI of 3.8% for increases in
calendar year 2007, representing a 1.8% decline in the rate of CPI
increases from 2007 to 2008. We note that the CPI applicable for
increases in calendar year 2009 was the August 2008 CPI. The August 2008
CPI was 5.9%.
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:
2007ActualResults
Full Year 2008Projected
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%
Capital Replacements (per site)
$126
$130 to $160
Depreciation
$5.0M
$5.5M to $5.9M
As described above, we are reducing our new home sales operations and
our cost and rate of development of additional home sites relative to
historical levels, which may reduce the number of expansion home sites
and leases facilitated by our home sales business. Accordingly, we
believe it is prudent to withdraw financial guidance as it relates to
our home sales business and anticipated EPS, Diluted EPS, FFO and AFFO
because we cannot predict with reasonable assurance what impact if any
the above decision will have on our results.
Additional factors that may impact our projected results include
occupancy changes, further changes in the residential housing markets
and the impact of hurricanes or other natural disasters.
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 8,049 operational home sites, 1,391
developed expansion sites, 1,089 undeveloped expansion sites and 129
recreational vehicle sites as of September 30, 2008.
Under current economic conditions and due to other risks and
uncertainties disclosed in this release and our filings with the SEC,
there can be no assurance that any of the matters discussed above or
elsewhere in this release will proceed as anticipated by management and
our Board of Directors. Additionally, if the strategic review underway
by our Board of Directors results in the consummation of a strategic
transaction, it may impact our future financial condition or results of
operations.
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, future absorption rates and our
strategic process. 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.
Management will hold a teleconference call, Wednesday, November 12, 2008
at 1:00 p.m. Eastern Standard Time to discuss third 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 third quarter 2008 results conference call.
If you are unable to participate at the scheduled time, this information
will be available for recorded playback from 5:00 p.m. Eastern Standard
Time, November 12, 2008 until midnight on November 18, 2008. To access
the replay, dial toll free, (800) 642-1687 and request information from
conference ID 72924528.
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
September 30,2008
June 30,2008
March 31,2008
December 31,2007
September 30,2007
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
ASSETS
Real Estate
$
313,175
$
312,388
$
312,850
$
308,956
$
304,280
Less accumulated depreciation
(35,303
)
(34,145
)
(32,989
)
(31,842
)
(30,735
)
Real estate under development
132,594
128,277
123,542
122,403
121,056
Total Real Estate
$
410,466
$
406,520
403,403
399,517
394,601
Cash and cash equivalents
30
142
255
541
296
Inventory
13,774
15,841
18,539
20,084
20,012
Other assets
18,110
17,999
17,062
16,391
15,362
Total Assets
$
442,380
$
440,502
$
439,259
$
436,533
$
430,271
LIABILITIES AND EQUITY
Liabilities
Secured long-term notes payable
$
258,928
$
259,630
$
258,140
$
239,970
$
240,769
Secured short-term financing
24,063
21,219
20,210
30,932
18,963
Accounts payable and accrued liabilities
9,076
8,196
8,526
9,288
12,260
Total Liabilities
292,067
289,045
286,876
280,190
271,992
Minority Interest in Operating Partnership
16,715
16,824
16,964
17,339
17,522
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
96
95
95
95
Additional paid-in capital
295,627
295,266
294,295
293,821
293,510
Dividends in excess of accumulated earnings
(155,206
)
(153,810
)
(152,164
)
(148,749
)
(147,013
)
Treasury stock at cost
(31,919
)
(31,919
)
(31,807
)
(31,163
)
(30,835
)
Total Stockholders Equity
133,598
134,633
135,419
139,004
140,757
Total Liabilities and Stockholders’
Equity
$
442,380
$
440,502
$
439,259
$
436,533
$
430,271
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,2008
June 30,2008
March 31,2008
December 31,2007
RENTAL PROPERTY OPERATIONS
Rental and other property revenues
$
9,831
$
9,724
$
9,708
$
9,519
Golf course operating revenues
158
217
439
250
Total property operating revenues
9,989
9,941
10,147
9,769
Property operating expenses
(3,215
)
(3,153
)
(3,161
)
(3,202
)
Golf course operating expenses
(311
)
(348
)
(332
)
(336
)
Total property operating expenses
(3,526
)
(3,501
)
(3,493
)
(3,538
)
Depreciation
(1,348
)
(1,351
)
(1,347
)
(1,285
)
Income from rental property operations
5,115
5,089
5,307
4,946
SALES OPERATIONS
Home sales revenue
3,403
3,525
3,855
4,508
Cost of home sales
(2,518
)
(2,814
)
(2,837
)
(3,205
)
Gross profit on home sales
885
711
1,018
1,303
Commissions earned on brokered sales
52
39
45
69
Commissions paid on brokered sales
(24
)
(23
)
(19
)
(27
)
Gross profit on brokered sales
28
16
26
42
Selling and marketing expenses
(1,427
)
(1,519
)
(2,038
)
(2,064
)
Income (loss) from sales operations
(514
)
(792
)
(994
)
(719
)
General and administrative expenses
(1,356
)
(1,233
)
(1,222
)
(1,230
)
Interest and other income
59
58
44
22
Loss on early debt retirement
--
--
(1,987
)
--
Interest expense
(2,202
)
(2,198
)
(2,248
)
(2,251
)
Income before minority interest in Operating Partnership
1,102
924
(1,100
)
768
Minority interest in Operating Partnership
(127
)
(108
)
128
(112
)
Income from continuing operations
975
816
(972
)
656
DISCONTINUED OPERATIONS
Income (loss) from discontinued operations, net of
Minority Interest
96
6
5
51
Net Income
1,071
822
(967
)
707
Cumulative preferred stock dividends
(484
)
(485
)
(484
)
(485
)
Net Income Attributable to common shareholders
$
587
$
337
($ 1,451
)
$
222
Basic earnings from continuing operations (net of cumulative unpaid
preferred dividends)
$
0.07
$
0.04
$
(0.19
)
$
0.03
Basic earnings (loss) from discontinued operations
0.01
--
--
--
Basic earnings per common share
$
0.08
$
0.04
$
( 0.19
)
$
0.03
Diluted earnings from continuing operations
$
0.06
$
0.04
$
(0.19
)
$
0.03
Diluted earnings (loss) from discontinued operations
0.01
--
--
--
Diluted earnings per common share
$
0.07
$
0.04
$
( 0.19
)
$
0.03
Weighted average common shares outstanding
7,625
7,611
7,552
7,560
Weighted average common shares and common share equivalents
outstanding
7,735
7,710
7,682
7,754
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
September 30,2008
June 30,2008
March 31,2008
December 31,2007
September 30,2007
DEBT OUTSTANDING
Mortgage Loans Payable – Fixed
$ 236,822
$ 237,524
$ 236,034
$ 217,864
$ 218,663
Mortgage Loans Payable – Floating
22,106
22,106
22,106
22,106
22,106
Floor Plan Facility
14,344
16,619
20,210
23,086
13,337
Line of Credit
9,719
4,600
--
7,846
5,626
Total Debts
$ 282,991
$ 280,849
$ 278,350
$ 270,902
$ 259,732
% FIXED FLOATING
Fixed
83.7%
84.6%
84.8%
80.4%
84.2%
Floating
16.3%
15.4%
15.2%
19.6%
15.8%
Total
100.0%
100.0%
100.0%
100.0%
100.0%
AVERAGE INTEREST RATES
Mortgage Loans Payable – Fixed
6.3%
6.3%
6.2%
6.3%
6.3%
Mortgage Loans Payable – Floating
4.3%
4.2%
6.2%
6.7%
6.9%
Floor Plan Facility
5.5%
5.5%
6.1%
7.5%
8.5%
Line of Credit
4.2%
4.2%
5.6%
6.6%
7.2%
Total Weighted Average
6.0%
6.1%
6.2%
6.4%
6.5%
DEBT RATIOS
Debt/Total Market Cap(1)
59.3%
58.7%
57.8%
57.7%
53.7%
Debt/Gross Assets
64.0%
62.1%
63.4%
62.0%
60.4%
MATURITIES
December 31,2008
December 31,2009
December 31,2010
December 31,2011
December 31,2012
Mortgage Loan Scheduled Principal Payments
712
3,234
3,730
4,035
4,399
Mortgage Loan Balloon Maturities
--
--
--
11,356
10,750
Total
$ 712
$ 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 Ended
September 30,
2008
2007
Net Income
$
587
$
9,891
Adjustments
Cumulative unpaid preferred stock dividends
484
484
Minority interest in operating partnership
127
162
Gain on sale of assets
(100
)
(10,305
)
Real estate depreciation
1,348
1,239
Discontinued Operations:
Real estate depreciation attributed to discontinued operations
--
16
Minority interest in operating partnership attributed to
discontinued operations
13
1,187
Funds From Operations (FFO)
$
2,459
$
2,674
Cumulative unpaid preferred stock dividends
(484
)
(484
)
Funds From Operations attributable to common Stockholders
1,975
2,190
Capital Replacements
(197
)
(260
)
Adjusted Funds from Operations (AFFO)
$
1,778
$
1,930
Weighted Average Common Shares/OP Units Outstanding
8,728
8,864
Per Common Share and OP Unit:
FFO:
$
0.23
$
0.25
AFFO:
$
0.20
$
0.22
Payout Ratio Per Common Share and OP Unit:
Gross Distribution Payout
FFO:
108.7
%
100.0
%
AFFO:
125.0
%
113.6
%
AMERICAN LAND LEASE INC. AND SUBSIDIARIES
RECONCILIATION OF SAME SITE AND SAME STORE OPERATING RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND SEPTEMBER 30,
2007
(in thousands)
(unaudited)
Three Months Ended September 30, 2008
Three Months Ended September 30, 2007
Change
% Change
Contribution to Same Store
% Change(1)
Same site rental revenues
C
$
9,493
$
9,158
$
335
3.7
%
3.5
%
Absorption rental revenues
244
128
116
90.6
%
1.2
%
Same store golf revenues
158
165
(7
)
(4.2
%)
--
Same store revenues
A
9,895
9,451
444
4.7
%
4.7
%
Other ancillary revenues(2)
94
94
--
--
Total property revenues
E
$
9,989
$
9,545
$
444
4.7
%
Same site rental expenses
D
$
2,696
$
2,630
$
66
2.5
%
2.2
%
Absorption rental expenses
66
--
66
100.0
%
2.2
%
Same store golf expenses
311
341
(30
)
(8.8
%)
(1.0
%)
Same store expenses
B
3,073
2,971
102
3.4
%
3.4
%
Expenses related to offsite management (3)
453
460
(7
)
(1.5
%)
Total property operating expenses
F F
$
3,526
$
3,431
$
95
2.8
%
Same store net operating income
A-B
$
6,822
$
6,480
$
342
5.3
%
Same site net operating income
C-D
$
6,797
$
6,528
$
269
4.1
%
Total net operating income
E-F
6,463
$
6,114
$
349
5.7
%
(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 site rental revenue increase of $335 as compared to the
total same store revenues in 2007 of $9,451 is a 3.5% increase ($335 /
$9,451 = 3.5%).
(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 SEPTEMBER 30, 2008
Community
Location
OperationalHome Sites
(1)
Occupancy
AverageMonthlyRent
RV
Sites
UndevelopedHome Sites
DevelopedHome Sites
Owned Communities
Blue Heron Pines
Punta Gorda, FL
346
100%
$364
--
--
43
Brentwood Estates
Hudson, FL
145
98%
296
--
--
46
Sebastian Beach & Tennis Club
Grant-Valkaria, FL
--
0%
--
--
533
--
Serendipity
Ft. Myers, FL
338
95%
379
--
--
--
Stonebrook
Homosassa, FL
199
100%
325
--
--
--
Sunlake Estates
Grand Island, FL
369
100%
377
--
--
34
Forest View
Homosassa, FL
274
100%
340
--
--
30
Gulfstream Harbor
Orlando, FL
382
99%
440
--
50
--
Gulfstream Harbor II
Orlando, FL
306
99%
440
--
37
1
Gulfstream Harbor III
Orlando, FL
182
95%
411
--
--
102
Lakeshore Villas
Tampa, FL
281
96%
459
--
--
--
Park Place
Sebastian, FL
379
100%
352
--
--
90
Park Royale
Pinellas Park, FL
300
92%
463
--
--
9
Pleasant Living
Riverview, FL
245
95%
414
--
--
--
Riverside GCC
Ruskin, FL
480
100%
545
--
209
252
Royal Palm Village
Haines City, FL
291
96%
371
--
--
96
Cypress Greens
Lakeland, FL
236
100%
272
--
--
22
Savanna Club
Port St Lucie, FL
1,021
100%
305
--
--
46
Woodlands
Groveland, FL
172
99%
312
-
--
120
Subtotal—Florida
5,946
98%
$382
--
829
891
Blue Star
Apache Junction AZ
22
50%
333
129
--
--
Brentwood West
Mesa, AZ
350
94%
488
--
--
--
The Villages
Mesa, AZ
--
0%
--
--
--
369
Desert Harbor
Apache Junction AZ
205
100%
386
--
--
--
Fiesta Village
Mesa, AZ
172
86%
422
--
--
--
La Casa Blanca
Apache Junction AZ
197
100%
413
--
--
--
Lost Dutchman
Apache Junction AZ
207
74%
333
--
--
23
Rancho Mirage
Apache Junction AZ
312
97%
445
--
--
--
Reserve at Fox Creek
Bull Head City, AZ
264
100%
334
--
--
49
Sun Valley
Apache Junction AZ
268
91%
379
--
--
--
Subtotal—Arizona
1,997
93%
$406
129
--
441
Foley Grove
Foley, AL
106
100%
296
--
260
59
Total Communities
30
8,049
97%
$386
129
1,089
1,391
(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 83.5% across the entire portfolio. Including sites not yet
developed, occupancy was at 74.1% at September 30, 2008.
Portfolio Summary
Operational
Home sites
DevelopedHome sites
UndevelopedHome sites
RV Sites
Total
As of December 31, 2007
7,984
1,370
1,191
129
10,674
New lots purchased
--
4
--
--
4
New leases originated
77
(77
)
--
--
--
Properties developed
--
102
(102
)
--
--
Site Plan Changes
(12
)
(8
)
--
--
(20
)
As of September 30, 2008
8,049
(1)
1,391
1,089
129
10,658
(1) As of September 30, 2008, 7,802 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
86
77
Used home sales
7
--
Used homes acquired
(22
)
--
Site Plan Changes
--
(12
)
Homes constructed by others
1
--
Homes removed from previously leased sites
(18
)
--
As of September 30, 2008
7,802
8,049
96.9
%
AMERICAN LAND LEASE, INC. AND SUBSIDIARIES
RETURN ON INVESTMENT FROM HOME SALES
(unaudited)
Three Months Ended
September 30, 2008
Three Months Ended
September 30, 2007
Expansion sites leased during the period
28
49
Estimated stabilized first year profit on leases originated during
the period
A
$
85
$
179
Allocated costs, including development costs of sites leased
$
1,262
$
2,213
Home sales loss attributable to sites leased
543
284
Total costs incurred to originate ground leases
B
$
1,805
$
2,497
Estimated stabilized first year returns from the leases originated
on expansion home sites during the period
A/B
4.7
%
7.2
%
For the three months ended September 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 EndedSeptember 30, 2008
Three Months EndedSeptember 30, 2007
Reported loss from sales operations
$
(514
)
$
(202
)
Brokerage business income
(28
)
(36
)
Used home sales
(1
)
(46
)
Adjusted (loss) income for projection analysis
$
(543
)
$
(284
)
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 2.7% instead of 4.7%.
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
Three Months ended
September 30, 2007
Three Months ended
December 31, 2007
Three Months ended
March 31, 2008
Three Months ended
June 30, 2008
Three Months ended
September 30, 2008
3Q08 over 2Q08 Increase/ Decrease
3Q08 over 2Q08 % Change
3Q08 over 3Q07 Increase/ Decrease
3Q08 over 3Q07 % Change
New home contracts
44
37
23
29
30
1
3.4%
(14)
(31.8%)
New home closings
51
38
28
29
29
--
--
(22)
(43.1%)
Home resales
4
2
2
2
3
1
50.0%
(1)
(25.0%)
Brokered home sales
22
26
22
19
23
4
21.1%
1
4.5%
New home contract backlog
32
23
12
9
6
(3)
(33.3%)
(26)
(81.3%)
Average Selling Price
$137,000
$128,000
$143,000
$120,000
$116,000
($4,000)
(3.3%)
($21,000)
(15.3%)
Average Gross Margin Percentage
29.4%
29.8%
26.4%
20.2%
26.0%