ANL Amer Land Lease

American Land Lease Announces Second Quarter 2004 Financial Results; 8.7% Increase in Funds From Operations per Share Over 2003 CLEARWATER, Fla., Aug. 5 /PRNewswire-FirstCall/ -- American Land Lease, Inc. (NYSE:ANL) today released results for second quarter 2004. Please refer to the Supplemental Information which the Company also released today for definitions of measures of performance not determined in accordance with generally accepted accounting principles ("non-GAAP") and reconciliation of non-GAAP measures to measures determined in accordance with generally accepted accounting principles ("GAAP"). Summary Financial Results Second Quarter * Diluted Earnings Per Share ("Diluted EPS") were $0.29 for the three- month period ended June 30, 2004 as compared to $0.26 from the same period one year ago, an increase of 9.2% on a per share basis. * Funds from Operations ("FFO"; a non-GAAP financial measure defined in the Supplemental Information) were $3.1 million, or $0.38 per diluted common share, for the quarter compared to $2.8 million, or $0.35 per diluted common share from the same period one year ago, an increase of 8.7% on a per share basis. * Unit volume in home sales was 103 new home closings, including 94 new homes sold on expansion home sites. This compares with 88 new home closings in second quarter 2003, including 87 new homes sold on expansion sites. * "Same Store" results provided a revenue increase of 9.0%, an expense increase of 3.4% and an increase of 11.8% in Net Operating Income ("NOI"). * "Same Site" results provided a revenue increase of 3.1%, an expense increase of 2.1% and an increase of 3.7% in NOI. Supplemental Information The full text of this press release and Supplemental Information are available upon request or through the Company's web site at http://www.americanlandlease.com/. Management Comments Bob Blatz, President of American Land Lease, commented, "We are pleased to report results for the second quarter 2004. The impact of newly leased sites continues to drive the outperformance of our same store growth rate while our focus on senior communities continues to provide stable growth in our core business." "Our home sales unit volume increased as compared to second quarter 2003 and revenue growth in home sales was 25% primarily driven by an increase from $85,000 to $92,000 in average selling price. Our backlog is up 15% over the prior year to 189 homes, so we continue to see growth in the volume and quality of our home sales as a driver for improved results. Our partnership with home manufacturers continues to yield product improvements, including longer lead times, and a better quality home product that commands a higher sales price The better quality homes are a welcome addition to our communities as they increase the overall community value." Dividend Declaration On July 28, 2004, the Board of Directors declared a regular second quarter dividend of $0.25 per share, payable on August 26, 2004, to stockholders of record on August 9, 2004. The Company continues to suspend its dividend reinvestment plan until further notice. The Board of Directors reviews the dividend policy quarterly. The Company's dividend is set quarterly and is 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 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 the dividend policy is subject to numerous factors including, the Company's 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 the Company to finance these expenditures. The Company's net operating loss carryforward 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 Second Quarter Property Operations Second quarter revenue from property operations was $7,247,000 as compared to $6,540,000 in the same period one year ago, a 10.8% increase. Second quarter property operating expenses totaled $2,764,000 as compared to $2,616,000 in the same period one year ago, a 5.7% increase. The Company realized significant increases in rental income driven by annual rental rate increases, the absorption of new home sites as a result of its home sales efforts and the acquisition of one community during fourth quarter 2003. Property operating expenses increased in the second quarter 2004 as compared to the same period in the prior year driven primarily by increases in labor and benefit costs, the acquisition of one community during the fourth quarter 2003, and utility costs, offset by decreases in offsite management and tenant related legal costs. The combination of increased revenue and expenses resulted in an overall improvement in property operating margins before depreciation expense from 60.0% in the prior year's second quarter to 61.9% in the second quarter 2004. Second Quarter "Same Store" Results Second quarter "same store" results reflect the results of operations for properties and golf courses owned for both the second quarter of 2004 and the same period in the prior year. The same store properties account for 98% of the property operating revenues for the second quarter of 2004. We believe that same store information provides insight as to the changes in profitability for properties owned during both reporting periods that could not be obtained from a review of the consolidated income statement in periods where properties are acquired. A reconciliation of "same store" operating results reported below to total property revenues and property expenses, as determined under GAAP, can be found in the Supplemental Information, page 27. The same store increases are as follows: 2Q04 Revenue 9.0 % Expense 3.4 % Net Operating Income 11.8 % We derive our increase in property revenue (i) from increases in rental rates and other charges at our properties and (ii) 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. We believe that "same site" information provides the ability to understand the changes in profitability without the growth 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, same site golf operations and total same store results for second quarter 2004 are as follows: Same Site Rental Absorption Same Site Golf Same Store Revenue 3.1 % 5.8 % 0.1 % 9.0 % Expense 2.1 % 2.0 % (0.7%) 3.4 % NOI 3.7 % 7.7 % 0.4 % 11.8 % 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 June 30, 2004 and 2003 can be found in the Supplemental Information, page 27. Second Quarter Home Sales Operations Second quarter 2004 new home sales unit volume was 103 closings, a 17% increase from the 88 closings in the same period in the prior year. Average selling price per home was $92,000 as compared to $85,000 in the same period in the prior year, an 8.2% increase. The increase in closings compared to the same period in the prior year was balanced across the Company's expansion communities, with increases in nine communities and decreases in seven communities. Brokerage profits were up 85% as compared with the same period in the prior year driven by an 89% increase in the number of transactions. Selling gross margins, excluding brokerage activities, improved to 33% in the quarter as compared to 29% in the same period in the prior year. This increase was driven by increased selling prices, increased manufacturer rebates associated with higher purchasing volumes, and sales of upgrades to base home models. The increases in revenue and cost savings were offset by increases in the cost of homes purchased. Selling costs as a percentage of sales revenue increased from 20.6% in the prior year's period to 25.3% in the second quarter of 2004, reflecting additional investments in personnel and advertising/marketing in support of a higher operating level for the business. The backlog of contracts for closing stood at 189 home sales, an increase of 24 contracts from the same period in the prior year. The Company remains committed to its program of 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. Summary of home sales activity: Quarter ended Quarter ended June 30, 2004 June 30, 2003 New home closings 103 88 New home contracts 144 105 Home resales 5 11 Brokered home sales 83 44 New home contract backlog 189 165 Outlook for 2004 The table below summarizes the Company's projected financial outlook for 2004 as of the date of this release and is based on the estimates and assumptions disclosed in this and previous press releases: Full Year 2004 Projected FFO $1.40 to $1.60 AFFO $1.28 to $1.44 Diluted EPS $1.03 to $1.24 Same Store Sales Revenue Growth 5.0% to 9.0% Expense Growth 4.5% to 7.5% NOI Growth 6.0% to 9.5% Home Sales Operating Income $2,000,000 to $3,250,000 General and Administrative Expenses $3,200,000 to $3,700,000 Other Income $210,000 to $280,000 Capital Replacements (per site) $115 to $135 Depreciation $2,900,000 to $3,200,000 A portion of the Company's earnings is from the sale of new homes on expansion home sites in its developing communities. The earnings from the new home sales are subject to greater volatility than the earnings from rental property activities. The Company's earnings estimates would be impacted positively by increases in the unit volume of new home sales or increases in the gross margins from new home sales. Conversely, decreases in the unit volume of new home sales or decreases in the gross margins from new home sales would negatively impact the Company's earnings estimates. Home sales volume is dependent upon a number of factors, including consumer confidence and consumer access to financing sources for home purchases and the sale of their current home. The Company's projected results for 2004 include increased corporate governance costs based upon current estimates of the cost of compliance. Non- employee director compensation continues to be paid in stock and all stock based compensation is expensed within the 2004 projections. The Company's earnings estimates would be adversely impacted by the 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. Development Activity The Company continued its development activity at Savanna Club and will be selling into its "Eagles Retreat" subdivision throughout the third quarter. This subdivision represents Phase VII of VIII. At Riverside Club, "The Bluffs" is in its closeout phase -- with less than 10 homesites not under contract. While the next Phase -- "The Fairways" -- is not scheduled for completion until the end of third quarter, the Company has begun pre-selling into that phase as of August 1st. In its current pre-sale phase, only 48 of the 148 home sites are available to be placed under contract for a home and future lease. As that phase sells out the company will open another section of the subdivision, which is expected in Q105first quarter 2005. Construction neared completion for the subdivisions at the Royal Palm and Brentwood communities that will provide an additional 162 home sites for immediate occupancy in third quarter 2004. Planning and permitting a subdivision at an additional community continued during the quarter. Financing Activity During the quarter, the Company negotiated a 1% reduction in floor interest rate on three variable rate loans with an outstanding balance of $10.6 million as of June 30, 2004. This reduction in floor rate became effective July 1, 2004. With respect to these three loans, the Company achieved occupancy targets at three properties that provided additional advances under committed non-recourse credit facilities totaling $2.13 million. During the quarter, the Company increased the size of its floor plan credit facility used to finance its inventory of homes to $20 million. American Land Lease, Inc. is a REIT that holds interests in 29 manufactured home communities with 6,754 operational home sites, 976 developed expansion sites, 1,268 undeveloped expansion sites and 129 recreational vehicle sites. 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 projections of the Company's cash flow, dividends and anticipated returns on real estate investments. 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: general economic and business conditions; interest rate changes, financing and refinancing risks; risks inherent in owning real estate; 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. Management will hold a teleconference call, Thursday, August 5, 2004 at 4:00 p.m. Eastern Daylight Time to discuss second quarter 2004 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 first quarter 2004 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. EDT, August 5, 2004 until midnight on August 12, 2004. To access the replay, dial toll free, (800) 642-1687 and request information from conference ID 9106803. DATASOURCE: American Land Lease CONTACT: Robert G. Blatz, President, or Shannon E. Smith, Chief Financial Officer, both of American Land Lease, +1-727-726-8868 Web site: http://www.americanlandlease.com/

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