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%
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