Manufactured Home Communities, Inc., which in August announced an agreement to purchase the real estate holdings of Thousand Trails Inc., today (Oct. 19) reported a net quarterly loss for its third quarter, in large part because of Florida’s hurricanes.
“We are extremely pleased with the company’s resilience in light of the storms that deluged Florida during the third quarter,” remarked Thomas P. Heneghan, president and CEO of MHC, a self-managed, real estate investment trust (REIT) headquartered in Chicago that owns or has an interest in 212 manufactured housing communities and RV parks in 23 states, all of which have a combined total of 80,654 sites. “We continue to integrate our acquisitions and are looking forward to completing the Thousand Trails transaction.”
Funds from operations were $12.3 million, or 41 cents a share on a fully diluted basis, versus $15.9 million, or 56 cents per share for the same quarter in 2003. Third-quarter property operating revenues were $74 million compared to $56.3 million in the third quarter of 2003. For the most recent quarter, average occupancy was 89.7 percent and average monthly base rent per site for the company’s “Core Portfolio” was $437.62, up 4.6 percent from $418.25 in the same period last year.
FFO for the nine months ended Sept. 30 were $41.6 million, or $1.43 per share, down from $51.2 million, or $1.83 per share in 2003. Property operating revenues for the nine months totalled $215.9 million versus $171.1 million for the same period of 2003.
This translated into a net quarterly loss of $600,000, or 3 cents per fully diluted share, relative to a net income of $5.2 million, or 23 cents per share, in the third quarter of 2003. Net income for the nine months totaled $5 million, or 21 cents per share, compared to $27.3 million, $1.21 per share.
Third-quarter and year-to-date comparisons, according to MHC’s release, were impacted by, among other factors, the company’s “$1 million reserve for nonrecoverable losses and deductibles associated with the Florida storms; a previously announced acquisition program; a recapitalization in the fourth quarter of 2003; the sale of three properties in the second quarter of 2003 and the sale of one property in the second quarter of 2004; and “OP Units issued in connection with the acquisitions.”
“MHC’s management projects continued growth in 2004 Core Portfolio performance,” MHC’s management stated in its release. “Assuming current economic conditions continue to impact occupancies, overall revenue growth is anticipated to be approximately 3% for the fourth quarter of 2004. Core Portfolio operating expenses are expected to grow in excess of CPI due to continued increases in real estate taxes and utility expenses. These projections would result in Core NOI growth of approximately 2.0 to 2.5%.”
However, the release added, 2004 results will continue to be impacted by the company’s recapitalization and acquisition program, continued competitive housing options impacting occupancy levels at certain communities, variability in income from home sales operations and ongoing effects from the Florida storms.
“Based upon these factors and excluding potential acquisitions,” the release notes, “MHC reaffirms that fully diluted FFO per share should be between $1.85 and $1.90 for the full year of 2004.”
With respect to the pending Thousand Trails transaction, the release continued, MHC expects the deal to close by year-end with an anticipated investment of $160 million “under a sale-leaseback structure” with an initial yield of 10%. “Management is in discussions with its banks regarding the funding of this transaction,” MHC advised. “Management currently anticipates new unsecured financing in addition to its availability under its lines of credit. To the extent the transaction is completed, management expects to revise guidance for 2005 taking into account decisions with respect to financing the transaction.”