|
EXHIBIT 99.1
American Land Lease Announces Third Quarter 2007 Results
Property Operating Results Continue Predictable Course
Home Sales Results Reflect Market Challenges
CLEARWATER, Fla.--(BUSINESS WIRE)--Nov. 6, 2007--American
Land
Lease, Inc. (NYSE:ANL) today released third quarter 2007
results.
Summary Financial Results
Third Quarter
-- Diluted Earnings Per Share ("Diluted EPS") were $1.26 for
the
three-month period ended September 30, 2007 compared to
$0.27
for the same period one-year ago. 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 and reconciled to
net
income on page 16 of this press release) were $2.2 million,
or
$0.25 per diluted common share, for the quarter compared to
$3.6 million or $0.41 per diluted common share from the same
period one year ago, a decrease of 39.0% on a per share
basis.
-- Home sales volume was $7,162,000 down by 41.3% from the
same
period one year ago, with 51 new home closings, including 49
new homes sold on expansion home sites. This compares with
92
new home closings in third quarter 2006.
-- "Same Store" results (a non-GAAP financial measure defined
on
page 11 of this press release and reconciled on page 17 of
this press release) provided a revenue increase of 6.6%, an
expense increase of 2.0% and an increase of 8.8% in Net
Operating Income ("NOI").
-- "Same Site" results (a non-GAAP financial measure defined
on
page 11 of this press release and reconciled on page 17 of
this press release) provided a revenue increase of 3.4%, an
expense increase of 0.2% and an increase of 4.9% in NOI.
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,
"This
quarter, strong same site and same store results continued to
build
Net Asset Value or 'NAV'. These results reflect the
continued
stability and strength of our core residential land lease
business.
These results were a key to our performance as the declining
rate of
new home sales and resulting new land leases reduced our current
land
values. This reduction in land values offset the quarterly NAV
created
by property operations.
"The continued expansion of operating margins at the
property
level speaks to the strength of our properties and personnel who
serve
our customers well. Operating margins grew 1.3% over the same
quarter
in 2006. This is a testament to both the quality of the core
portfolio
and the impact of our 2006 acquisitions. We continue to view our
core
business as owning and operating land leases - and in that
core
business our performance was outstanding. The quality and
strength of
our communities was evidenced by the sale of a lower quality
property
during the third quarter. This property sale was executed at a
4.89%
cap rate based on the property's trailing twelve month net
operating
income. We believe that this valuation reflects an outstanding
NAV for
the rest of the ANL portfolio.
"We view the new home sales business as an activity that
complements our residential land lease business by creating
new
revenue generating home sites. New home sales activity continues
to be
challenging as our buyers take longer to sell their current
homes. We
continue to put our emphasis on the excellent lifestyle enjoyed
by our
residents and the quality of their communities and homes. The
unit
volume of New Home Sales was down by 41, or 45% compared to the
third
quarter of 2006. Still, we did see an increase in traffic
and
cancellation levels remained low as compared to past experience.
We
view the reduction in cancellations as a positive trend as many
other
homebuilders continue to see significant cancellation activity.
This
reflects both the strength of sales process and the credit
quality of
our customers. We are pleased we have been able to expand our
land
lease business, even if at a slower rate. New Home Sales cost
$0.02 in
third quarter and an additional $0.02 in "drag" or costs to
carry
completed and unleased homes. The Company accepts this short
term cost
in order to create long term NAV.
"Our core business, owning land lease communities, is solid.
Its
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 have focused on taking the necessary measures in
that
part of our business to reduce its current drag on earnings
while
maintaining our ability to grow NAV. That said, we have
solid
locations, attractive homes, a hardworking sales team, and we
are
still selling excellent homes at good prices. I remain upbeat
and
optimistic about the future of our company."
The terms "NAV" and "cap rate" are defined on page 11 of
this
press release.
Dividend Declaration
On October 30, 2007, the Board of Directors declared a third
quarter common stock dividend of $0.25 per share payable on
November
30, 2007, to stockholders of record on November 16, 2007.
On October 30, 2007, the Board of Directors also declared a
cash
dividend of $0.4844 per share of Class A Preferred Stock for
the
quarter ended September 30, 2007, payable on November 30, 2007
to
shareholders of record on November 16, 2007.
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
shareholders. 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
opportunity for share repurchases in the context of its
quarterly
review and dividend decision. The Company's net operating loss
may be
used to offset all or a portion of its real estate investment
trust
("REIT") taxable income, which may allow the Company to reduce
or
eliminate its dividends and still maintain its REIT status.
Operational Results - Third Quarter
Third Quarter Property Operations
Third quarter revenue from property operations was $9,389,000
as
compared to $8,751,000 in the same period one year ago, a
7.3%
increase. Third quarter property operating expenses totaled
$3,092,000
as compared to $3,014,000 in the same period one year ago, a
2.6%
increase. The Company realized increases in rental income as
the
result of an acquisition of a community in 2006, annual rental
rate
increases, rent yield management, and the absorption of new home
sites
through its home sales efforts.
Third quarter property operating expenses increased primarily
due
to increases in utility costs, tenant related legal costs,
insurance
premiums and the aforementioned acquisition of a community. 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 64.1% from 62.8% 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 2007 and 2006. Same store properties accounted
for
95.1% of property operating revenues for third quarter 2007.
"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 in periods
where
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:
3Q07
---------------------
Revenue 6.6%
Expense 2.0%
Net Operating Income 8.8%
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.
3Q07
--------------------
Revenues 6.6%
Less: Net Reimbursements (0.9%)
--------------------
Revenue growth net of reimbursements 7.5%
Expenses 2.0%
Less: Net Reimbursements (2.1%)
--------------------
Expense growth net of reimbursements 4.1%
Same Store NOI Growth 8.8%
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, absorption and golf operations contributions
to
total same store results for third quarter are as follows:
Same Site Rental Absorption Same Site Golf Same Store
---------------- ---------- -------------- ----------
Revenue 3.4% 3.1% 0.1% 6.6%
Expense 0.2% 0.2% 1.6% 2.0%
NOI 4.9% 4.5% (0.6)% 8.8%
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, 2007 and 2006 can be found on page 16 of this
earnings
release.
Third Quarter Home Sales Operations
Third quarter 2007 new home sales were $7,162,0000, a 41.3%
decrease from the same period in the prior year. We had 51
closings, a
44.6% decrease from the 92 closings in the same period in the
prior
year. Average selling price per home was $137,000 as compared
to
$129,000 in the same period in the prior year, a 6.2% increase.
Twelve
communities reported average selling prices in excess of
$100,000.
Selling gross margins, excluding brokerage activities, decreased
to
29.4% in the quarter as compared to 32.4% in the same period in
the
prior year, but increased from the 28.6% realized in second
quarter
2007. The year-to-year decrease was driven primarily by
decreased
manufacturer rebates associated with lower purchasing
volumes;
increases in costs of homes purchased; and lower relative
selling
prices. Selling costs as a percentage of sales revenue increased
from
21.2% in the prior year's period to 32.7% in the third quarter
of
2007. Selling costs, including overhead, marketing and
advertising
expenses, were down by 9.3%. However, when allocated against
still
lower sales volumes, such costs resulted in a higher per home
expense
than in the same period last year.
The backlog of contracts for closing stood at 32, a decrease
of
19, or 37.3% from the same period in the prior year.
The Company remains committed to generating revenue growth
through
new lease originations in its existing portfolio. The home
sales
business continues to provide the Company with additional
earning home
sites that have a greater return on investment than is
currently
available through the purchase of occupied communities, though
such
increase in home sites is at a slower rate than in 2006. We
anticipate
that the decline in New Home Sales will bring our results toward
the
lower end of our annual earnings guidance.
Summary of home sales activity:
Quarter ended Quarter ended
September 30, 2007 September 30, 2006
------------------ ------------------
New home closings - Same Store 50 89
New home closings - Acquisitions 1 3
------------------ ------------------
Total new home closings 51 92
New home contracts - Same Store 42 78
New home contracts -
Acquisitions 2 3
------------------ ------------------
Total new home contracts 44 81
Home resales 4 2
Brokered home sales 22 20
New home contract backlog - Same
Store 30 51
New home contract backlog -
Acquisitions 2 --
------------------ ------------------
Total new home contract backlog 32 51
Outlook for 2007
The table below summarizes the Company's projected financial
outlook for 2007 as of the date of this release and is based on
the
estimates and assumptions disclosed in this and previous
press
releases:
The Company's land lease business continues to perform
predictably
and consistently with the Company's prior guidance. A portion of
the
Company's earnings is from the sale of new homes on expansion
home
sites in its developing communities and from the new leases
originated
coincident with such new home sales. The earnings from new home
sales
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
the national averages. The traffic levels during the recent
months,
while increased, have not generated the sales activity that had
been
anticipated. In this home sales environment, the Company has
limited
visibility on future new home sales volumes. Current New Home
Sales
projections bring our results toward the lower end of
current
guidance.
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. Home sales volume and gross margins
are
dependent upon a number of factors, including consumer
confidence, the
cost of homeowners' insurance, and consumers' access to
financing
sources for home purchases and the sale of their current
homes.
Full Year 2007 Projected
----------------------------------------------------------------------
FFO $1.05 to $1.40
----------------------------------------------------------------------
AFFO $0.90 to $1.24
----------------------------------------------------------------------
Diluted EPS $0.47 to $0.85
----------------------------------------------------------------------
----------------------------------------------------------------------
Same Store
----------------------------------------------------------------------
Revenue Growth 6.5% to 8.5%
----------------------------------------------------------------------
Expense Growth 6.0% to 9.0%
----------------------------------------------------------------------
NOI Growth 7.0% to 9.0%
----------------------------------------------------------------------
Contribution from Acquired Properties and $2.4M to $2.8M
Redevelopment
----------------------------------------------------------------------
Growth in Income from Property Operations 9.5% to 12.5%
Before Depreciation Expense
----------------------------------------------------------------------
----------------------------------------------------------------------
Home Sales Operating Income(Loss) ($1.0M) to $1.5M
----------------------------------------------------------------------
Home Sales Net Contribution ($1.85M) to $0.7M
----------------------------------------------------------------------
----------------------------------------------------------------------
General and Administrative Expenses $4.2M to $4.7M
----------------------------------------------------------------------
----------------------------------------------------------------------
Capital Replacements (per site) $140 to $170
----------------------------------------------------------------------
Depreciation $4.8M to $5.5M
----------------------------------------------------------------------
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.
The Company's projected results for 2007 include a reduction
in
regulatory compliance costs. Non-employee director
compensation
continues to be paid in stock and all stock based compensation
is
expensed within the 2007 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.
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.
Share Repurchase
The Board of Directors has authorized the Company to repurchase
up
to 2,000,000 shares of our outstanding common stock. Pursuant to
this
authorization, the Company repurchased 163,000 shares of
outstanding
common stock at an average price of $21.80 for the three months
ended
September 30, 2007. The Company has repurchased approximately
767,000
shares as of September 30, 2007 pursuant to this
authorization,
including the 190,000 shares repurchased in 2007.
We believe that the current share price reflects a discount
from
the Company's Net Asset Value. Therefore, we have repurchased,
and
expect to continue repurchasing additional shares of our common
stock
in the fourth quarter 2007.
Dispositions
During the quarter, the Company closed the sale of a
property
located in Tarpon Springs, Florida which consisted of 261 home
sites.
The sales price was $17.6 million, or $67,400 per home site,
resulting
in a gain of $10.3 million.
Financing Activity
The Company closed a future advance associated with one
property
loan for proceeds of $3.7 million bearing interest at "LIBOR"
plus
1.15% adjusted quarterly, currently at 6.73% for a term of 5
years.
Proceeds were used to continue the development of the
Company's
inventory of home sites.
The Company closed a future advance associated with a second
property loan for proceeds of $7.1 million bearing interest at
"LIBOR"
plus 1.15% adjusted quarterly, currently at 6.73% for a term of
5
years. Proceeds were used to continue the development of the
Company's
inventory of home sites.
In conjunction with the decline in new home sales
profitability,
the Company failed to meet the cash flow coverage debt
covenant
provided by our secured floor plan lender for the quarter.
This
covenant violation was waived by the lender and the covenant
was
subsequently amended. The Company was in compliance with the
amended
covenant as of September 30, 2007. This $35 million facility
is
secured by inventories with a net book value of $17.9
million.
Development Activity
The Company ended the quarter with an inventory of 1,191
developed
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 1,405 home sites
that
are partially developed or undeveloped. All of these sites are
fully
entitled and zoned for 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 the
largest part of this site. We are working with the town and
county governments to accomplish the platting of the
community
under this unique set of circumstances. Pre-sales and
marketing activities for the community h
| 
