Fitch Rates Sun Communities' $150MM Senior Unsecured Notes 'BBB-'

Business Wire, April 8, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--April 8, 2003

Fitch Ratings has assigned a 'BBB-' rating to the $150 million 5.75% seven-year senior unsecured notes issued today by Sun Communities Operating L.P., which is the operating partnership of Sun Communities, Inc. (NYSE: SUI). At the same time, Fitch has affirmed the 'BBB-' rating on the existing $285 million of senior unsecured notes due 2003 through 2008, and the 'BB ' rating of the approximately $50 million outstanding preferred stock. The Rating Outlook is Stable.

The ratings are supported by the relatively stable cash flow attributes of SUI's core portfolio of class A/B manufactured home communities, a high ratio of unencumbered assets, and the firm's ability to maintain 92% occupancy levels in a more difficult operating environment.

Nevertheless, these positive aspects are tempered by SUI's increased use of debt leverage over the last several fiscal years and reduced debt protection measures, as well as increased off-balance sheet exposure to its joint venture partners. The ratings also consider the weaker macro-industry conditions affecting all manufactured home community owners, including poor underwriting and oversupply, which has resulted in heightened problem assets, a reduction in financing available for home purchasers, increased supply from home repossessions, job losses, and lower unit absorption. The Rating Outlook is Stable to the extent that SUI is able to maintain sufficient cash flows from its core operations to maintain current debt protection levels.

The current ratings reflect the fact that SUI's debt leverage has materially increased since 2000 from 42% debt/adjusted book to 51% as of year-end 2002 while coverage levels have also deteriorated as EBITDA/Interest has fallen from 3.4 times (x) in 2000 to 2.9x as of year end 2002. In addition to rising consolidated leverage, Fitch has also identified additional off-balance sheet risk associated with SUI's investment (27% ownership) in Origen Financial L.L.C., which originates and securitizes consumer loans for manufactured home buyers.

SUI projects that it will generate approximately $70 million of internally generated cash flow in 2003, which when added to the offering proceeds, is adequate to meet the company's 2003 debt maturities and recurring capital expenditures. Debt maturities for 2003 total $142 million (out of total debt of $667 million before the offering), including an $85 million unsecured note due in May 2003 and a $48 million bridge note. The $85 million unsecured line of credit, which matures December 2006, had only $22 million available and was more than 74% utilized as of Dec. 31, 2002. The current offering is evidence of SUI's continued access to multiple forms of capital and appears to provide the company with sufficient liquidity in 2003. SUI's maturities over the next four calendar years are $34 million in 2004, $66 million in 2005, and $75 million in 2006 (including the $63 million line balance) and $42 million in 2007.

With a total adjusted book capitalization of approximately $1.3 billion, SUI owns and operates a portfolio of 129 manufactured housing communities comprising approximately 43,960 developed sites, and an additional land bank of 7,640 sites for future development. The core property portfolio is concentrated in the mid-west and the southeast, including Michigan (30% of total sites), Florida (22%), and Indiana (15%).

The noted ratings were initiated by Fitch as service to users of Fitch Ratings and are based primarily on public information.