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 Sun Communities, Inc. Reports 2018 Second Quarter Results
   Wednesday, July 25, 2018 5:02:00 PM ET

Expands Portfolio and Raises 2018 Guidance 

 

NEWS RELEASE
July 25, 2018

Southfield, Michigan, July 25, 2018 - Sun Communities, Inc. (NYSE: SUI) (the "Company"), a real estate investment trust ("REIT") that owns and operates, or has an interest in, manufactured housing ("MH") and recreational vehicle ("RV") communities, today reported its second quarter results for 2018.

Financial Results for the Quarter and Six Months Ended June 30, 2018

For the quarter ended June 30, 2018, total revenues increased $33.5 million, or 14.1 percent, to $271.4 million compared to $237.9 million for the same period in 2017. Net income attributable to common stockholders was $20.4 million, or $0.25 per diluted common share, for the quarter ended June 30, 2018, as compared to net income attributable to common stockholders of $12.4 million, or $0.16 net income per diluted common share, for the same period in 2017.

For the six months ended June 30, 2018, total revenues increased $57.0 million, or 12.1 percent, to $529.3 million compared to $472.3 million for the same period in 2017. Net income attributable to common stockholders was $50.4 million, or $0.63 per diluted common share, as compared to net income attributable to common stockholders of $33.5 million, or $0.45 net income per diluted common share, for the same period in 2017.

Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations ("Core FFO")(1) for the quarter ended June 30, 2018, was $1.07 per diluted share and OP unit ("Share") as compared to $0.96 in the prior year, an increase of 11.5 percent.
     
  • Same Community(3) Net Operating Income ("NOI")(1) increased by 7.2 percent for the quarter ended June 30, 2018, as compared to the same period in 2017.
     
  • Same Community occupancy(4) increased by 200 basis points to 97.8 percent, as compared to 95.8 percent at June 30, 2017.
     
  • Home sales volumes increased 17.7 percent for the quarter ended June 30, 2018, as compared to the same period in 2017.  New home sales volumes increased 65.4 percent to 134 for the quarter ended June 30, 2018, as compared to 81 in the same period in 2017.

Gary Shiffman, Chief Executive Officer of Sun Communities commented, "Sun continued to produce solid investor returns in the second quarter and deliver value creation across our MH communities and RV resorts. Core FFO rose 11.5 percent driven by significant contributions from our same community pool as well as our acquisition activity. We invested in properties valued at over $334 million including 17 operating resorts, one resort under development and one land parcel entitled for future development. As a consequence of our strong performance and the accretion from our recent acquisition activity, we are raising our 2018 Core FFO guidance."



OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.1 percent at June 30, 2018 and June 30, 2017. During the quarter ended June 30, 2018, revenue producing sites increased by 634 sites, as compared to 752 revenue producing sites gained during the second quarter of 2017.

During the six months ended June 30, 2018, revenue producing sites increased by 1,250 sites, as compared to an increase of 1,439 revenue producing sites during the six months ended June 30, 2017.



Same Community(3) Results

For the 336 stabilized communities owned and operated by the Company since January 1, 2017, NOI(1) for the quarter ended June 30, 2018 increased 7.2 percent over the same period in 2017, as a result of a 6.3 percent increase in revenues and a 4.6 percent increase in operating expenses. Same Community occupancy(4) increased to 97.8 percent at June 30, 2018 from 95.8 percent at June 30, 2017.

For the six months ended June 30, 2018, total revenues increased by 6.0 percent  while total expenses increased by 5.6 percent, resulting in an increase to NOI(1) of 6.2 percent over the six months ended June 30, 2017.



Home Sales

During the quarter ended June 30, 2018, the Company sold 943 homes as compared to 801 homes sold during the same period in 2017, a 17.7 percent increase. Rental home sales, which are included in total home sales, were 275 and 302 for the quarters ended June 30, 2018 and 2017, respectively.

During the six months ended June 30, 2018, 1,780 homes were sold compared to 1,627 for the same period in 2017. Rental sales, which are included in total home sales, were 509 and 542 for the six months ended June 30, 2018 and 2017, respectively.



PORTFOLIO ACTIVITY

Acquisitions(2)

During and subsequent to the quarter ended June 30, 2018, the Company invested in 17 RV resorts, an RV development currently under construction and one entitled development land parcel with a total value of $334 million. The investments include:

  • An 80 percent equity interest in Sun NG RV Resorts LLC ("Sun NG Resorts"), consisting of ten operating RV resorts and one ground-up RV development currently under construction. The portfolio consists of 2,700 developed sites and 940 sites available for development. Sun Communities purchased the 80 percent interest in Sun NG Resorts for $61.6 million through Sun NG LLC. Sun paid additional consideration of $123.3 million consisting of a $1.8 million preferred equity investment and a $121.5 million temporary loan to Sun NG Resorts. The Company is in active negotiations to replace the temporary loan with permanent entity level financing. The remaining 20 percent ownership interest in Sun NG Resorts of $15.4 million is held by NG Sun LLC, which is controlled by Northgate Resorts. Other components of the capital structure for the transaction include:

-                   $35.3 million Series A preferred equity - mandatorily redeemable
-                   $6.5 million Series B preferred equity
-                   $15.0 million Assumed debt and other liabilities

  • $72.1 million investment in seven RV resorts located in five states, comprised of approximately 1,500 sites and 175 sites available for expansions.
     
  • $5.3 million investment in a 369 acre land parcel in Granby, Colorado for development of a resort containing over 1,100 MH and RV sites.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

During the quarter ended June 30, 2018, the Company repaid three collateralized term loans totaling $177.7 million with a weighted average interest rate of 4.53 percent. One loan was due to mature in August 2018 and two loans were due to mature in May 2023.

As of June 30, 2018, the Company had $3.4 billion of debt outstanding. The weighted average interest rate was 4.36 percent and the weighted average maturity was 7.8 years. The Company had $20.0 million of unrestricted cash on hand. At period-end the Company's net debt to trailing twelve month Recurring EBITDA(1) ratio was 6.5 times.

Subsequent to quarter end, the Company entered into a $228.0 million mortgage with a 4.10 percent fixed rate and a 20 year term.

Equity Transactions

During and subsequent to the quarter ended June 30, 2018, the Company issued 1,201,700 shares of common stock through its At-the-Market ("ATM") equity sales program at a weighted average price of $93.78 per share. Net proceeds from the sales were $111.3 million.  This issuance includes 200,000 shares which were previously announced in conjunction with first quarter 2018 earnings.



GUIDANCE 2018

The Company is increasing its 2018 total portfolio guidance to take into account the contribution impact of the closed acquisitions, completed ATM share issuances and financings and anticipated additional financing related to the acquisitions.  The updated guidance is as follows:

Total Portfolio
Number of communities: 367

The Company's announced acquisitions have significant seasonality and contribute the vast majority of their annual NOI(1) contribution in the second and third quarters of the year.  Due to this seasonality, Core FFO(1) guidance has been increased in the third quarter 2018 and decreased in the fourth quarter 2018. Core FFO(1) contribution from these acquisitions in the first and second quarters of 2019 is expected to be neutral.

The Company affirms 2018 Same Community NOI(1) growth guidance for the year of 6.75 percent to 7.25 percent and raises the estimated range of general and administrative expenses to $79.8 million to $81.0 million. The increase in general and administrative costs is primarily due to changes to the Company's  executive long term incentive plan which increased amortization in the current year, the staffing of a re-engineering and productivity team, and certain one-time non-recurring expenses incurred through the first half of 2018. Guidance does not include prospective acquisitions but contains certain additional financing assumptions related to its announced acquisition activity.

Core FFO(1) per Share estimates assume certain gain and loss items that management considers unrelated to the operational and financial performance of our core business will be adjusted from FFO(1). The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results. The estimates and assumptions are forward looking based on the Company's current assessment of economic and market conditions, as well as other risks outlined below under the caption "Forward-Looking Statements."



EARNINGS CONFERENCE CALL

A conference call to discuss second quarter operating results will be held on Thursday, July 26, 2018 at 11:00 A.M. (ET). To participate, call toll-free 877-407-9039. Callers outside the U.S. or Canada can access the call at 201-689-8470. A replay will be available following the call through August 9, 2018 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13680133. The conference call will be available live on Sun Communities' website www.suncommunities.com . Replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of June 30, 2018, owned, operated, or had an interest in a portfolio of 367 communities comprising approximately 126,000 developed sites in 31 states and Ontario, Canada.

For more information about Sun Communities, Inc., please visit www.suncommunities.com .

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com , by phone to (248) 208-2500, by email to investorrelations@suncommunities.com or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.



Forward-Looking Statements

This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as "will," "may," "could," "expect," "anticipate," "believes," "intends," "should," "plans," "estimates," "approximate," "guidance," and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, the performance of recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, changes in market rates of interest, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders.  Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the "Risk Factors" section of the Company's Annual Report on Form 10-K.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company's assumptions, expectations of future events, or trends.



Investor Information                                                           



    Q3 2018E   Q4 2018E   FY 2018E
Net Income per fully diluted share   $0.52 - $0.56   $0.18 - $0.22   $1.33 - $1.41
Core FFO(1) per fully diluted share   $1.34 - $1.37   $1.02 - $1.05   $4.57 - $4.63


Portfolio Overview                                                                           
(As of June 30, 2018)


 



Balance Sheets                                                                                                                                              
(amounts in thousands)


RESEARCH COVERAGE            
             
Firm   Analyst   Phone   Email
Bank of America Merrill Lynch   Joshua Dennerlein   (646) 855-1681   joshua.dennerlein@baml.com
BMO Capital Markets   John Kim   (212) 885-4115   johnp.kim@bmo.com
Citi Research   Michael Bilerman   (212) 816-1383   michael.bilerman@citi.com
    Nicholas Joseph   (212) 816-1909   nicholas.joseph@citi.com
Evercore ISI   Steve Sakwa   (212) 446-9462   steve.sakwa@evercoreisi.com
    Samir Khanal   (212) 888-3796   samir.khanal@evercoreisi.com
Green Street Advisors   John Pawlowski   (949) 640-8780   jpawlowski@greenstreetadvisors.com
    Ryan Lumb   (949) 640-8780   rlumb@greenstreetadvisors.com
RBC Capital Markets   Wes Golladay   (440) 715-2650   wes.golladay@rbccm.com
Robert W. Baird & Co.   Drew Babin   (610) 238-6634   dbabin@rwbaird.com
Wells Fargo   Todd Stender   (562) 637-1371   todd.stender@wellsfargo.com
             
             
INQUIRIES            
             
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department.
             
At Our Website   www.suncommunities.com        
             
By Email   investorrelations@suncommunities.com    
             
By Phone   (248) 208-2500        
             
             
             
             
             
             
             
             



Statements of Operations - Quarter to Date Comparison                                                           
(amounts in thousands, except per share amounts)


    6/30/2018   12/31/2017
ASSETS:        
Land   $ 1,131,956     $ 1,107,838  
Land improvements and buildings   5,484,388     5,102,014  
Rental homes and improvements   551,840     528,074  
Furniture, fixtures and equipment   162,961     144,953  
Investment property   7,331,145     6,882,879  
Accumulated depreciation   (1,337,567 )   (1,237,525 )
Investment property, net   5,993,578     5,645,354  
Cash and cash equivalents   20,046     10,127  
Inventory of manufactured homes   38,298     30,430  
Notes and other receivables, net   176,755     163,496  
Collateralized receivables, net (5)   117,314     128,246  
Other assets, net   146,357     134,304  
Total assets   $ 6,492,348     $ 6,111,957  
LIABILITIES:        
Mortgage loans payable   $ 2,636,847     $ 2,867,356  
Secured borrowings (5)   118,242     129,182  
Preferred Equity - Sun NG Resorts - mandatorily redeemable   35,277     -  
Preferred OP units - mandatorily redeemable   37,338     41,443  
Lines of credit (6)   536,377     41,257  
Distributions payable   59,364     55,225  
Advanced reservation deposits and rent   161,192     132,205  
Other liabilities   151,984     138,536  
Total liabilities   3,736,621     3,405,204  
Commitments and contingencies   -     -  
Series A-4 preferred stock   31,739     32,414  
Series A-4 preferred OP units   10,137     10,652  
Equity Interests - NG Sun LLC   21,869     -  
STOCKHOLDERS' EQUITY:        
Common stock   809     797  
Additional paid-in capital   3,854,057     3,758,533  
Accumulated other comprehensive (loss) / income   (2,184 )   1,102  
Distributions in excess of accumulated earnings   (1,223,394 )   (1,162,001 )
Total SUI stockholders' equity   2,629,288     2,598,431  
Noncontrolling interests:        
Common and preferred OP units   56,820     60,971  
Consolidated variable interest entities   5,874     4,285  
Total noncontrolling interests   62,694     65,256  
Total stockholders' equity   2,691,982     2,663,687  
Total liabilities & stockholders' equity   $ 6,492,348     $ 6,111,957  

* Not Meaningful



Statements of Operations - Year to Date Comparison                                                                              
(amounts in thousands, except per share amounts)


  Three Months Ended June 30,
  2018   2017   Change   % Change
REVENUES:              
Income from real property (excluding transient revenue) $ 177,080     $ 163,770     $ 13,310     8.1 %
Transient revenue 21,590     15,691     5,899     37.6 %
Revenue from home sales 41,217     30,859     10,358     33.6 %
Rental home revenue 13,348     12,678     670     5.3 %
Ancillary revenues 12,031     8,850     3,181     35.9 %
Interest 5,277     5,043     234     4.6 %
Brokerage commissions and other revenues, net 883     1,008     (125 )   (12.4 )%
Total revenues 271,426     237,899     33,527     14.1 %
               
EXPENSES:              
Property operating and maintenance 58,691     53,446     5,245     9.8 %
Real estate taxes 14,076     13,126     950     7.2 %
Cost of home sales 30,932     22,022     8,910     40.5 %
Rental home operating and maintenance 5,268     4,944     324     6.6 %
Ancillary expenses 8,241     7,148     1,093     15.3 %
Home selling expenses 3,986     2,990     996     33.3 %
General and administrative 21,442     19,899     1,543     7.8 %
Transaction costs (7) 57     2,437     (2,380 )   (97.7 )%
Catastrophic weather related charges, net 53     281     (228 )   (81.1 )%
Depreciation and amortization 67,773     62,721     5,052     8.1 %
Loss on extinguishment of debt 1,522     293     1,229     419.5 %
Interest 32,260     32,358     (98 )   (0.3 )%
Interest on mandatorily redeemable preferred OP units / equity 790     787     3     0.4 %
Total expenses 245,091     222,452     22,639     10.2 %
Income before other items 26,335     15,447     10,888     70.5 %
Other (expense) / income, net (8) (1,828 )   1,156     (2,984 )   (258.1 )%
Current tax (expense) / benefit (225 )   7     (232 )   NM*
Deferred tax (expense) / benefit (112 )   364     (476 )   (130.8 )%
Net income 24,170     16,974     7,196     42.4 %
Less: Preferred return to preferred OP units / equity (1,103 )   (1,196 )   93     (7.8 )%
Less: Amounts attributable to noncontrolling interests (2,227 )   (1,315 )   (912 )   69.4 %
Less: Preferred stock distribution (432 )   (2,099 )   1,667     (79.4 )%
NET INCOME ATTRIBUTABLE TO SUI $ 20,408     $ 12,364     $ 8,044     65.1 %
               
Weighted average common shares outstanding:              
Basic 79,612     74,678     4,934     6.6 %
Diluted 80,116     75,154     4,962     6.6 %
Earnings per share:              
Basic $ 0.25     $ 0.16     $ 0.09     56.3 %
Diluted $ 0.25     $ 0.16     $ 0.09     56.3 %

Outstanding Securities and Capitalization 
(in thousands except for *)

    Six Months Ended June 30,
    2018   2017   Change   % Change
REVENUES:                
Income from real property (excluding transient revenue)   $ 352,290     $ 325,646     $ 26,644     8.2 %
Transient revenue   43,591     36,869     6,722     18.2 %
Revenue from home sales   76,117     58,122     17,995     31.0 %
Rental home revenue   26,368     25,017     1,351     5.4 %
Ancillary revenues   18,599     15,069     3,530     23.4 %
Interest   10,593     9,689     904     9.3 %
Brokerage commissions and other revenues, net   1,784     1,887     (103 )   (5.5 )%
Total revenues   529,342     472,299     57,043     12.1 %
                 
EXPENSES:                
Property operating and maintenance   110,321     100,612     9,709     9.6 %
Real estate taxes   27,912     26,269     1,643     6.3 %
Cost of home sales   57,503     42,905     14,598     34.0 %
Rental home operating and maintenance   10,438     10,046     392     3.9 %
Ancillary expenses   13,624     11,909     1,715     14.4 %
Home selling expenses   7,276     6,101     1,175     19.3 %
General and administrative   41,199     37,738     3,461     9.2 %
Transaction costs (7)   114     4,823     (4,709 )   (97.6 )%
Catastrophic weather related charges, net   (2,160 )   368     (2,528 )   (687.0 )%
Depreciation and amortization   134,210     125,487     8,723     7.0 %
Loss on extinguishment of debt   1,718     759     959     126.4 %
Interest   63,398     63,680     (282 )   (0.4 )%
Interest on mandatorily redeemable preferred OP units / equity   1,409     1,571     (162 )   (10.3 )%
Total expenses   466,962     432,268     34,694     8.0 %
Income before other items   62,380     40,031     22,349     55.8 %
Other (expense) / income, net (8)   (4,445 )   1,995     (6,440 )   (322.8 )%
Current tax expense   (399 )   (171 )   (228 )   (133.3 )%
Deferred tax benefit   235     664     (429 )   (64.6 )%
Net income   57,771     42,519     15,252     35.9 %
Less: Preferred return to preferred OP units / equity   (2,183 )   (2,370 )   187     (7.9 )%
Less: Amounts attributable to noncontrolling interests   (4,321 )   (2,403 )   (1,918 )   79.8 %
Less: Preferred stock distribution   (873 )   (4,278 )   3,405     (79.6 )%
NET INCOME ATTRIBUTABLE TO SUI   $ 50,394     $ 33,468     $ 16,926     50.6 %
                 
Weighted average common shares outstanding:                
Basic   79,233     73,677     5,556     7.5 %
Diluted   79,905     74,272     5,633     7.6 %
Earnings per share:                
Basic   $ 0.63     $ 0.45     $ 0.18     40.0 %
Diluted   $ 0.63     $ 0.45     $ 0.18     40.0 %

Outstanding Securities - As of June 30, 2018
                   
  Number of Units/Shares Outstanding   Conversion Rate*   If Converted   Issuance Price per unit*   Annual Distribution Rate*
Convertible Securities                  
Series A-1 preferred OP units 337   2.4390   822   $100   6.0%
Series A-3 preferred OP units 40   1.8605   74   $100   4.5%
Series A-4 preferred OP units 412   0.4444   183   $25   6.5%
Series C preferred OP units 314   1.1100   349   $100   4.5%
Common OP units 2,731   1.0000   2,731   N/A   Mirrors common shares distributions
Series A-4 cumulative convertible preferred stock 1,063   0.4444   472   $25   6.5%
                   
Non-Convertible Securities                  
Common shares 80,891   N/A   N/A   N/A   $2.84^
^ Annual distribution is based on the last quarterly distribution annualized.


Reconciliations to Non-GAAP Financial Measures



Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Funds from Operations                                                                               
(amounts in thousands except for per share data)


Capitalization - As of June 30, 2018            
             
Equity   Shares   Share Price*   Total
Common shares   80,891     $ 97.88     $ 7,917,611  
Common OP units   2,731     $ 97.88     267,310  
Subtotal   83,622         $ 8,184,921  
             
Series A-1 preferred OP units   822     $ 97.88     80,457  
Series A-3 preferred OP units   74     $ 97.88     7,243  
Series A-4 preferred OP units   183     $ 97.88     17,912  
Series C preferred OP units   349     $ 97.88     34,160  
Total diluted shares outstanding   85,050         $ 8,324,693  
 
Debt
Mortgage loans payable           $ 2,636,847  
Secured borrowings (5)           118,242  
Preferred Equity - Sun NG Resorts - mandatorily redeemable           35,277  
Preferred OP units - mandatorily redeemable           37,338  
Lines of credit           536,377  
Total Debt           $ 3,364,081  
 
Preferred
A-4 preferred stock   1,063     $ 25.00     $ 26,575  
Total Capitalization           $ 11,715,349  


Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA
(amounts in thousands)



  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc. common stockholders: $ 20,408     $ 12,364     $ 50,394     $ 33,468  
Adjustments:              
Depreciation and amortization 67,977     62,842     134,623     125,659  
Amounts attributable to noncontrolling interests 2,089     1,202     3,978     2,102  
Preferred return to preferred OP units 552     586     1,105     1,172  
Preferred distribution to Series A-4 preferred stock 432     560     873     1,225  
Gain on disposition of assets, net (5,835 )   (4,352 )   (10,374 )   (7,033 )
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9)

$ 85,623     $ 73,202     $ 180,599     $ 156,593  
Adjustments:              
Transaction costs (7) -     2,437     -     4,823  
Other acquisition related costs (10) 301     1,525     436     2,369  
Loss on extinguishment of debt 1,522     293     1,718     759  
Catastrophic weather related charges, net 53     281     (2,160 )   368  
Loss of earnings - catastrophic weather related (11) 325     -     650     -  
Other expense / (income), net (8) 1,828     (1,156 )   4,445     (1,995 )
Debt premium write-off (209 )   (24 )   (991 )   (438 )
Ground lease intangible write-off 817     -     817     -  
Deferred tax expense / (benefit) 112     (364 )   (235 )   (664 )
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9)

$ 90,372     $ 76,194     $ 185,279     $ 161,815  
               
Weighted average common shares outstanding - basic: 79,612     74,678     79,233     73,677  
Add:              
Common stock issuable upon conversion of stock options 2     2     2     2  
Restricted stock 502     474     670     593  
Common OP units 2,735     2,757     2,738     2,756  
Common stock issuable upon conversion of Series A-1 preferred OP units 825     882     831     887  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75     75     75  
Common stock issuable upon conversion of Series A-4 preferred stock 472     645     472     690  
Weighted average common shares outstanding - fully diluted 84,223     79,513     84,021     78,680  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) per share - fully diluted $ 1.02     $ 0.92     $ 2.15     $ 1.99  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) per share - fully diluted $ 1.07     $ 0.96     $ 2.21     $ 2.06  



Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Net Operating Income
(amounts in thousands)



  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 20,408     $ 12,364     $ 50,394     $ 33,468  
Adjustments:              
Interest expense 33,050     33,145     64,807     65,251  
Loss on extinguishment of debt 1,522     293     1,718     759  
Current tax expense / (benefit) 225     (7 )   399     171  
Deferred tax expense / (benefit) 112     (364 )   (235 )   (664 )
Depreciation and amortization 67,773     62,721     134,210     125,487  
Gain on disposition of assets, net (5,835 )   (4,352 )   (10,374 )   (7,033 )
EBITDAre (1) $ 117,255     $ 103,800     $ 240,919     $ 217,439  
Adjustments:              
Transaction costs (7) 57     2,437     114     4,823  
Other expense / (income), net (8) 1,828     (1,156 )   4,445     (1,995 )
Catastrophic weather related charges, net 53     281     (2,160 )   368  
Preferred return to preferred OP units / equity 1,103     1,196     2,183     2,370  
Amounts attributable to noncontrolling interests 2,227     1,315     4,321     2,403  
Preferred stock distribution 432     2,099     873     4,278  
Plus: Gain on dispositions of assets, net 5,835     4,352     10,374     7,033  
Recurring EBITDA (1) $ 128,790     $ 114,324     $ 261,069     $ 236,719  

  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 20,408     $ 12,364     $ 50,394     $ 33,468  
Other revenues (6,160 )   (6,051 )   (12,377 )   (11,576 )
Home selling expenses 3,986     2,990     7,276     6,101  
General and administrative 21,442     19,899     41,199     37,738  
Transaction costs (7) 57     2,437     114     4,823  
Depreciation and amortization 67,773     62,721     134,210     125,487  
Loss on extinguishment of debt 1,522     293     1,718     759  
Interest expense 33,050     33,145     64,807     65,251  
Catastrophic weather related charges, net 53     281     (2,160 )   368  
Other expense / (income), net (8) 1,828     (1,156 )   4,445     (1,995 )
Current tax expense / (benefit) 225     (7 )   399     171  
Deferred tax expense / (benefit) 112     (364 )   (235 )   (664 )
Preferred return to preferred OP units / equity 1,103     1,196     2,183     2,370  
Amounts attributable to noncontrolling interests 2,227     1,315     4,321     2,403  
Preferred stock distribution 432     2,099     873     4,278  
NOI(1) / Gross Profit $ 148,058     $ 131,162     $ 297,167     $ 268,982  



Non-GAAP and Other Financial Measures



Financial and Operating Highlights                                                                                                           
(amounts in thousands, except for *)


  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2018   2017   2018   2017
Real Property NOI (1) $ 125,903     $ 112,889     $ 257,648     $ 235,634  
Rental Program NOI (1) 24,619     23,743     48,778     46,699  
Home Sales NOI (1) / Gross Profit 10,285     8,837     18,614     15,217  
Ancillary NOI (1) / Gross Profit 3,790     1,702     4,975     3,160  
Site rent from Rental Program (included in Real Property NOI) (1)(12) (16,539 )   (16,009 )   (32,848 )   (31,728 )
NOI (1) / Gross profit $ 148,058     $ 131,162     $ 297,167     $ 268,982  

  Quarter Ended
  6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
FINANCIAL INFORMATION                  
Total revenues $ 271,426     $ 257,916     $ 242,026     $ 268,245     $ 237,899  
Net income 24,170     33,601     10,342     28,958     16,974  
Net income attributable to common stockholders 20,408     29,986     7,438     24,115     12,364  
Earnings per share basic* $ 0.25     $ 0.38     $ 0.09     $ 0.31     $ 0.16  
Earnings per share diluted* 0.25     0.38     0.09     0.31     0.16  
                   
Recurring EBITDA (1) $ 128,790     $ 132,222     $ 119,408     $ 132,524     $ 114,324  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) 85,623     94,976     76,609     86,917     73,202  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) 90,372     94,907     81,812     93,757     76,194  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) per share - fully diluted* $ 1.02     $ 1.14     $ 0.92     $ 1.05     $ 0.92  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (9) per share - fully diluted* 1.07     1.14     0.98     1.13     0.96  
                   
BALANCE SHEETS                  
Total assets $ 6,492,348     $ 6,149,653     $ 6,111,957     $ 6,157,836     $ 6,178,713  
Total debt 3,364,081     3,129,440     3,079,238     3,003,427     3,018,653  
Total liabilities 3,736,621     3,471,096     3,405,204     3,351,021     3,373,695  



Debt Analysis
(amounts in thousands)


  Quarter Ended
  6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
OPERATING INFORMATION*                  
New home sales 134     106     103     102     81  
Pre-owned home sales 809     731     747     703     720  
Total homes sold 943     837     850     805     801  
                   
Communities 367     350     350     348     344  
Developed sites 107,192     106,617     106,036     104,359     103,377  
Transient RV sites 19,007     15,693     15,856     15,915     16,187  
Total sites 126,199     122,310     121,892     120,274     119,564  
                   
MH occupancy 95.0 %   94.7 %   94.6 %   95.2 %   95.1 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.1 %   95.8 %   95.8 %   96.2 %   96.1 %

  Quarter Ended
  6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
DEBT OUTSTANDING                  
Mortgage loans payable $ 2,636,847     $ 2,826,225     $ 2,867,356     $ 2,822,640     $ 2,832,819  
  Secured borrowings (5) 118,242     124,077     129,182     134,884     139,496  
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,277     -     -     -     -  
Preferred OP units - mandatorily redeemable 37,338     37,338     41,443     45,903     45,903  
Lines of credit (6) 536,377     141,800     41,257     -     435  
Total debt $ 3,364,081     $ 3,129,440     $ 3,079,238     $ 3,003,427     $ 3,018,653  
                   
% FIXED/FLOATING                  
Fixed 84.0 %   90.6 %   93.7 %   94.9 %   94.9 %
Floating 16.0 %   9.4 %   6.3 %   5.1 %   5.1 %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
WEIGHTED AVERAGE INTEREST RATES                  
Mortgage loans payable 4.27 %   4.25 %   4.25 %   4.26 %   4.26 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   - %   - %   - %   - %
Preferred OP units - mandatorily redeemable 6.61 %   6.61 %   6.75 %   6.87 %   6.87 %
Lines of credit (6) 3.31 %   3.01 %   2.79 %   - %   - %
Average before Secured borrowings (5) 4.15 %   4.22 %   4.26 %   4.30 %   4.30 %
Secured borrowings (5) 9.96 %   9.97 %   9.97 %   9.98 %   9.99 %
Total average 4.36 %   4.45 %   4.50 %   4.56 %   4.56 %
                   
DEBT RATIOS                  
Net Debt / Recurring EBITDA (1) (TTM) 6.5     6.2     6.3     6.0     6.0  
Net Debt / Enterprise Value 28.6 %   28.8 %   28.2 %   28.3 %   27.2 %
Net Debt / Gross Assets 42.7 %   41.9 %   41.8 %   39.0 %   38.0 %
                   
COVERAGE RATIOS                  
Recurring EBITDA (1) (TTM) / Interest 3.7   3.6   3.6   3.5   3.4
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 3.6   3.4   3.3   3.2   3.1


Statements of Operations - Same Community(3)                                                       
(amounts in thousands except for Other Information)


MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS Remaining 2018   2019   2020   2021   2022
Mortgage loans payable:                  
Maturities $ -     $ 40,407     $ 58,078     $ 270,680     $ 82,544  
Weighted average rate of maturities - %   6.17 %   5.92 %   5.53 %   4.46 %
Principal amortization 26,473     54,359     55,137     54,163     51,558  
Secured borrowings (5) 2,635     5,624     6,137     6,595     6,804  
Preferred Equity - Sun NG Resorts - mandatorily redeemable -     -     -     -     35,277  
Preferred OP units - mandatorily redeemable 1,500     1,175     -     -     -  
Lines of credit (6) -     2,845     -     534,000     -  
Total $ 30,608     $ 104,410     $ 119,352     $ 865,438     $ 176,183  

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   Change   % Change   2018   2017   Change   % Change
REVENUES:                              
Income from real property (13) $ 181,211     $ 170,445     $ 10,766     6.3 %   $ 366,330     $ 345,651     $ 20,679     6.0 %
                               
PROPERTY OPERATING EXPENSES:                        
Payroll and benefits 17,092     16,753     339     2.0 %   32,133     31,598     535     1.7 %
Legal, taxes & insurance 2,003     1,872     131     7.0 %   4,427     3,385     1,042     30.8 %
Utilities (13) 12,794     12,111     683     5.6 %   26,675     24,488     2,187     8.9 %
Supplies and repair (14) 7,547     7,263     284     3.9 %   12,575     11,933     642     5.4 %
Other 6,130     5,418     712     13.1 %   11,560     10,654     906     8.5 %
Real estate taxes 13,506     13,058     448     3.4 %   26,866     26,165     701     2.7 %
Total property operating expenses 59,072     56,475     2,597     4.6 %   114,236     108,223     6,013     5.6 %
NET OPERATING INCOME (NOI)(1) $ 122,139     $ 113,970     $ 8,169     7.2 %   $ 252,094     $ 237,428     $ 14,666     6.2 %



Rental Program Summary    
(amounts in thousands except for *)


  As of June 30,  
  2018   2017   Change   % Change  
OTHER INFORMATION                
Communities 336     336     -        
                 
MH occupancy (4) 97.1 %              
RV occupancy (4) 100.0 %              
MH & RV blended occupancy % (4) 97.8 %   95.8 %   2.0 %      
                 
Sites available for development 7,463     6,193     1,270     20.5 %  
                 
Monthly base rent per site - MH $ 545     $ 525     $ 20     3.8 % (16)
Monthly base rent per site - RV (15) $ 448     $ 426     $ 22     5.2 % (16)
Monthly base rent per site - Total (15) $ 523     $ 503     $ 20     4.0 % (16)

  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   Change   % Change   2018   2017   Change   % Change
REVENUES:                              
Rental home revenue $ 13,348     $ 12,678     $ 670     5.3 %   $ 26,368     $ 25,017     $ 1,351     5.4 %
Site rent included in Income from real property 16,539     16,009     530     3.3 %   32,848     31,728     1,120     3.5 %
Rental program revenue 29,887     28,687     1,200     4.2 %   59,216     56,745     2,471     4.4 %
                               
EXPENSES:                              
Commissions 689     401     288     71.8 %   1,019     1,011     8     0.8 %
Repairs and refurbishment 2,207     2,363     (156 )   (6.6 )%   4,521     4,644     (123 )   (2.6 )%
Taxes and insurance 1,558     1,506     52     3.5 %   3,093     2,943     150     5.1 %
Marketing and other 814     674     140     20.8 %   1,805     1,448     357     24.7 %
Rental program operating and maintenance 5,268     4,944     324     6.6 %   10,438     10,046     392     3.9 %
NET OPERATING INCOME (NOI) (1) $ 24,619     $ 23,743     $ 876     3.7 %   $ 48,778     $ 46,699     $ 2,079     4.5 %
                               



Home Sales Summary           
(amounts in thousands except for *)


Occupied rental home information as of June 30, 2018 and 2017:                
Number of occupied rentals, end of period*   11,072     11,083     (11 )   (0.1 )%
Investment in occupied rental homes, end of period   $ 514,756     $ 479,503     $ 35,253     7.4 %
Number of sold rental homes (YTD)*   509     542     (33 )   (6.1 )%
Weighted average monthly rental rate, end of period*   $ 927     $ 889     $ 38     4.3 %

               



Acquisitions and Other Summary (17)
(amounts in thousands except for statistical data)



  Three Months Ended June 30,   Six Months Ended June 30,  
  2018   2017   Change   % Change   2018   2017   Change   % Change  
REVENUES AND EXPENSES:                                
New home sales $ 14,652     $ 7,546     $ 7,106     94.2 %   $ 26,545     $ 14,429     $ 12,116     84.0 %  
Pre-owned home sales 26,565     23,313     3,252     13.9 %   49,572     43,693     5,879     13.5 %  
Revenue from home sales 41,217     30,859     10,358     33.6 %   76,117     58,122     17,995     31.0 %  
                                 
New home cost of sales 12,712     6,497     6,215     95.7 %   22,909     12,345     10,564     85.6 %  
Pre-owned home cost of sales 18,220     15,525     2,695     17.4 %   34,594     30,560     4,034     13.2 %  
Cost of home sales 30,932     22,022     8,910     40.5 %   57,503     42,905     14,598     34.0 %  
NOI / Gross Profit (1) $ 10,285     $ 8,837     $ 1,448     16.4 %   $ 18,614     $ 15,217     $ 3,397     22.3 %  
                                 
Gross profit - new homes $ 1,940     $ 1,049     $ 891     84.9 %   $ 3,636     $ 2,084     $ 1,552     74.5 %  
Gross margin % - new homes 13.2 %   13.9 %   (0.7 )%       13.7 %   14.4 %   (0.7 )%      
Average selling price - new homes* $ 109,343     $ 93,161     $ 16,182     17.4 %   $ 110,604     $ 91,905     $ 18,699     20.3 %  
                                 
Gross profit - pre-owned homes $ 8,345     $ 7,788     $ 557     7.2 %   $ 14,978     $ 13,133     $ 1,845     14.0 %  
Gross margin % - pre-owned homes 31.4 %   33.4 %   (2.0 )%       30.2 %   30.1 %   0.1 %      
Average selling price - pre-owned homes* $ 32,837     $ 32,379     $ 458     1.4 %   $ 32,190     $ 29,723     $ 2,467     8.3 %  
                                 
Home sales volume:                
New home sales* 134     81     53     65.4 %   240     157     83     52.9 %  
Pre-owned home sales* 809     720     89     12.4 %   1,540     1,470     70     4.8 %  
Total homes sold* 943     801     142     17.7 %   1,780     1,627     153     9.4 %  



    Three Months Ended
 June 30, 2018
  Six Months Ended
 June 30, 2018
REVENUES:        
Income from real property   $ 9,729     $ 13,781  
         
PROPERTY AND OPERATING EXPENSES:        
Payroll and benefits   1,578     2,196  
Legal, taxes & insurance   83     141  
Utilities(13)   1,082     1,714  
Supplies and repair   366     513  
Other   2,286     2,617  
Real estate taxes   570     1,046  
Property operating expenses   5,965     8,227  
NET OPERATING INCOME (NOI) (1)   $ 3,764     $ 5,554  
         
        As of June 30, 2018
Other information:        
Number of properties       31  
Occupied sites       2,255  
Developed sites       2,319  
Occupancy %       97.2 %
Transient sites       4,365  



Capital Improvements, Development, and Acquisitions   
(amounts in thousands except for *)


Property Summary                    
(includes MH and Annual RV's)
                     
COMMUNITIES   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
FLORIDA                    
Communities   124     123     123     121     121  
Developed sites (18)   37,723     37,726     37,254     36,587     36,661  
Occupied (18)   36,602     36,546     36,170     35,414     35,479  
Occupancy % (18)   97.0 %   96.9 %   97.1 %   96.8 %   96.8 %
Sites for development   1,335     1,397     1,485     1,469     1,368  
MICHIGAN                    
Communities   69     68     68     68     68  
Developed sites (18)   26,039     25,881     25,881     25,498     25,496  
Occupied (18)   24,709     24,319     24,147     23,996     23,924  
Occupancy % (18)   94.9 %   94.0 %   93.3 %   94.1 %   93.8 %
Sites for development   1,668     1,371     1,371     1,752     1,752  
TEXAS                    
Communities   23     21     21     21     21  
Developed sites (18)   6,622     6,614     6,601     6,410     6,312  
Occupied (18)   6,251     6,191     6,152     6,041     6,021  
Occupancy % (18)   94.4 %   93.6 %   93.2 %   94.2 %   95.4 %
Sites for development   1,168     1,100     1,100     1,277     1,345  
CALIFORNIA                    
Communities   29     27     27     27     23  
Developed sites (18)   5,694     5,692     5,692     5,693     4,894  
Occupied (18)   5,647     5,646     5,639     5,630     4,834  
Occupancy % (18)   99.2 %   99.2 %   99.1 %   98.9 %   98.8 %
Sites for development   177     389     389     379     367  
ARIZONA                    
Communities   11     11     11     11     11  
Developed sites (18)   3,804     3,797     3,786     3,602     3,589  
Occupied (18)   3,485     3,468     3,446     3,410     3,383  
Occupancy % (18)   91.6 %   91.3 %   91.0 %   94.7 %   94.3 %
Sites for development   -     -     -     269     269  
ONTARIO, CANADA                    
Communities   15     15     15     15     15  
Developed sites (18)   3,752     3,650     3,634     3,620     3,564  
Occupied (18)   3,752     3,650     3,634     3,620     3,564  
Occupancy % (18)   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Sites for development   1,662     1,664     1,696     1,628     1,628  
INDIANA                    
Communities   11     11     11     11     11  
Developed sites (18)   3,089     3,048     2,900     2,900     2,900  
Occupied (18)   2,791     2,785     2,756     2,759     2,758  
Occupancy % (18)   90.4 %   91.4 %   95.0 %   95.1 %   95.1 %
Sites for development   277     318     466     330     330  
OHIO                    
Communities   9     9     9     9     9  
Developed sites (18)   2,767     2,756     2,759     2,757     2,735  
Occupied (18)   2,698     2,672     2,676     2,676     2,643  
Occupancy % (18)   97.5 %   97.0 %   97.0 %   97.1 %   96.6 %
Sites for development   59     75     75     75     75  
COLORADO                    
Communities   8     8     8     8     8  
Developed sites (18)   2,335     2,335     2,335     2,335     2,335  
Occupied (18)   2,319     2,327     2,325     2,318     2,326  
Occupancy % (18)   99.3 %   99.7 %   99.6 %   99.3 %   99.6 %
Sites for development   1,819     650     650     670     656  
OTHER STATES                    
Communities   68     57     57     57     57  
Developed sites (18)   15,367     15,118     15,194     14,957     14,891  
Occupied (18)   14,786     14,544     14,587     14,532     14,439  
Occupancy % (18)   96.2 %   96.2 %   96.0 %   97.2 %   97.0 %
Sites for development   3,233     2,381     2,385     2,540     2,582  
TOTAL - PORTFOLIO                    
Communities   367     350     350     348     344  
Developed sites (18)   107,192     106,617     106,036     104,359     103,377  
Occupied (18)   103,040     102,148     101,532     100,396     99,371  
Occupancy % (18)(19)   96.1 %   95.8 %   95.8 %   96.2 %   96.1 %
Sites for development   11,398     9,345     9,617     10,389     10,372  
% Communities age restricted   32.2 %   33.7 %   33.7 %   33.6 %   32.8 %
                     
TRANSIENT RV PORTFOLIO SUMMARY                    
 Location                    
Florida   5,942     5,870     6,074     6,133     6,244  
Texas   1,776     1,360     1,373     1,392     1,403  
California   1,377     806     806     808     808  
Ontario, Canada   1,133     1,234     1,248     1,262     1,314  
Arizona   1,079     1,085     1,096     1,012     1,025  
New York   928     610     614     623     630  
New Jersey   906     931     917     1,016     1,028  
Maine   591     591     596     529     533  
Indiana   519     519     520     520     520  
Michigan   350     256     256     258     260  
Ohio   153     148     145     147     169  
Other locations   4,253     2,283     2,211     2,215     2,253  
Total transient RV sites   19,007     15,693     15,856     15,915     16,187  



Operating Statistics for Manufactured Homes and Annual RV's



   Recurring Capital Expenditures
Average/Site*
Recurring
Capital Expenditures (20)
 Lot Modifications (21) Acquisitions (22)  Expansion &
Development (23)
Revenue Producing (24)
YTD 2018 $ 77   $ 7,066   $ 9,471   $ 336,205   $ 61,258   $ 1,237  
2017 $ 214   $ 14,166   $ 18,049   $ 204,375   $ 88,331   $ 1,990  
2016 $ 211   $ 17,613   $ 19,040   $ 1,822,564   $ 47,958   $ 2,631  

LOCATIONS   Resident Move-outs   Net Leased Sites (25)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
Florida   695     432     121     158     705  
Michigan   224     404     34     773     69  
Ontario, Canada   387     118     10     15     78  
Texas   118     99     16     197     16  
Arizona   47     39     15     5     89  
Indiana   24     35     3     112     4  
Ohio   57     22     1     78     6  
California   15     8     10     4     44  
Colorado   1     (6 )   1     37     29  
Other locations   560     99     29     161     60  
Six Months Ended June 30, 2018   2,128     1,250     240     1,540     1,100  

TOTAL FOR YEAR ENDED   Resident Move-outs   New Leased Sites (25)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
2017   2,739     2,406     362     2,920     2,006  
2016   1,722     1,686     329     2,843     1,655  


Footnotes and Definitions                                                                


(1)Investors in and analysts following the real estate industry utilize funds from operations ("FFO"), net operating income ("NOI"), and earnings before interest, tax, depreciation and amortization ("EBITDA") as supplemental performance measures.  The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts.  Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.

·   FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles ("GAAP") depreciation and amortization of real estate assets. 

·   NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses. 

·   EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.

FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company's operating performance.  By excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss).  Management believes the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful.  The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business ("Core FFO").  The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO.  The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure.  Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it.  Further, FFO is not intended as a measure of a REIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital.  FFO is calculated in accordance with the Company's interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.

NOI is derived from revenues minus property operating expenses and real estate taxes.  NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time.  The Company uses NOI as a key measure when evaluating performance and growth of particular properties and/or groups of properties.  The principal limitation of NOI is that it excludes depreciation, amortization, interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs.  Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI.  NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company's financial performance or GAAP cash flow from operating activities as a measure of the Company's liquidity; nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions.  Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.

EBITDA as defined by NAREIT (referred to as "EBITDAre") is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.  EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs.  Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs.  The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company's performance on a basis that is independent of capital structure ("Recurring EBITDA").

The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre.  EBITDAre is not intended to be used as a measure of the Company's cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company's financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.

(2)  The total value of $314.6 million for acquisitions of operating properties during the three months ended June 30, 2018 was comprised of $242.4 million of cash, $15.4 million of equity, $3.0 million of debt assumed, $12.0 million of other liabilities, net, $35.3 million of  Preferred Interest Series A, and $6.5 million of Preferred Interest Series B.

(3)  Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2018 actual exchange rates.

(4)  The Same Community occupancy percentage for 2018 is derived from 103,086 developed sites, of which 100,785 were occupied. The number of developed sites excludes RV transient sites and approximately 1,800 recently completed but vacant MH expansion sites.  The Same Community occupancy percentage for 2017 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites.

(5)  This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount.

(6)  Lines of credit includes the Company's MH floor plan facility. The effective interest rate on the MH floor plan facility was 7.0 percent for all periods presented. However, the Company pays no interest if the floor plan balance is repaid within 60 days.

(7)   In January 2018, new accounting guidance became effective, which clarified the definition of a business with the objective of assisting entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. Under previous guidance, substantially all of the Company's property acquisitions were accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred and reported as Transaction costs. Under the new guidance, the Company expects that substantially all of its future property acquisitions will be accounted for as asset acquisitions. The purchase price of these properties are allocated on a relative fair value basis and direct acquisition related costs are capitalized as part of the purchase price.  Acquisitions costs that do not meet the criteria for capitalization are expensed as incurred and reported as General and administrative costs.

(8)   Other (expense) / income, net for the three and six months ended June 30, 2018 primarily includes a $1.7 million foreign currency translation loss in addition to a $0.1 million contingent liability remeasurement loss and a $4.2 million foreign currency translation loss in addition to a $0.2 million contingent liability remeasurement loss, respectively. Other (expense) / income, net for the three and six months ended June 30, 2017 primarily includes a $2.2 million foreign currency translation gain offset by a $0.8 million contingent liability remeasurement loss and a $3.0 million foreign currency translation gain offset by a $1.0 million contingent liability remeasurement loss, respectively.

   (9) The effect of certain anti-dilutive convertible securities is excluded from these items.

(10)   These costs represent the expenses incurred to bring recently acquired properties up to the Company's operating standards, including items such as tree trimming and painting costs that do not meet the Company's capitalization policy.

(11) Core FFO(1) includes an adjustment of $0.3 million and $0.7 million for the three and six months ended June 30, 2018 for estimated loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities that require redevelopment due to damages sustained from Hurricane Irma in September 2017, as previously announced.

(12) The renter's monthly payment includes the site rent and an amount attributable to the home lease. Site rent is reflected in Real Property NOI. For purposes of management analysis, site rent is included in Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of the Rental Program and financial impact on the Company's operations.

(13) Same Community results net $7.8 million and $7.5 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended June 30, 2018 and 2017, respectively and net $15.7 million and $15.1 million for the six months ended June 30, 2018 and 2017, respectively.

(14) Same Community supplies and repair expense excludes $0.6 million and $1.5 million for the three and six months ended June 30, 2017, respectively, of expenses incurred for recently acquired properties to bring the properties up to the Company's operating standards, including items such as tree trimming and painting costs that do not meet the Company's capitalization policy.

(15) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.

(16) Calculated using actual results without rounding.

(17) Acquisitions and other is comprised of sixteen properties acquired in 2018, nine properties acquired in 2017, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, one property undergoing redevelopment, a recently opened ground-up development, one property that we have an interest in but do not operate, and other miscellaneous transactions and activity.

(18) Includes MH and annual RV sites, and excludes transient RV sites, as applicable. Total sites for development were comprised of approximately 74.0 percent for expansion, 21.0 percent for greenfield development and 5.0 percent for redevelopment.

(19) At June 30, 2018, total portfolio MH occupancy was 95.0 percent (including the impact of approximately 1,800 recently completed but vacant expansion sites) and annual RV occupancy was 100.0 percent.

(20) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.

(21) Lot modification capital expenditures improve the asset quality of the community.  These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home.  These activities, which are mandated by strict manufacturer's installation requirements and state building code, include items such as new foundations, driveways, and utility upgrades.

(22) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the six months ended June 30, 2018 include $75.8 million of capital improvements identified during due diligence that are necessary to bring a community to the Company's standards. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.

(23) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements.

(24) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.

(25) Net leased sites do not include occupied sites acquired during that year.

        Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.





This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Sun Communities via Globenewswire

PERCENTAGE TRENDS   Resident Move-outs   Resident  Re-sales
2018 (TTM)   2.4 %   7.1 %
2017   1.9 %   6.6 %
2016   2.0 %   6.1 %


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