News Release Details

Sun Communities, Inc. Reports 2019 Second Quarter Results

Jul 24, 2019
PDF Version


Southfield, MI, July 24, 2019 (GLOBE NEWSWIRE) --  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 2019.

Financial Results for the Quarter and Six Months Ended June 30, 2019

For the quarter ended June 30, 2019, total revenues increased $41.0 million, or 15.1 percent, to $312.4 million compared to $271.4 million for the same period in 2018. Net income attributable to common stockholders was $40.4 million, or $0.46 per diluted common share, for the quarter ended June 30, 2019, as compared to net income attributable to common stockholders of $20.4 million, or $0.25 per diluted common share, for the same period in 2018.

For the six months ended June 30, 2019, total revenues increased $70.4 million or 13.3 percent, to $599.8 million compared to $529.4 million for the same period in 2018. Net income attributable to common stockholders was $74.7 million, or $0.86 per diluted common share, for the six months ended June 30, 2019, as compared to net income attributable to common stockholders of $50.4 million, or $0.63 per diluted common share, for the same period in 2018.

Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations (“Core FFO”)(1) for the quarter ended June 30, 2019, was $1.18 per diluted share and OP unit (“Share”) as compared to $1.07 in the prior year, an increase of 10.3 percent.
     
  • Same Community(2) Net Operating Income (“NOI”)(1) increased by 7.2 percent for the quarter ended June 30, 2019, as compared to the same period in 2018.
     
  • Revenue Producing Sites increased to 668 sites for the quarter ended June 30, 2019 bringing total portfolio occupancy to 96.6 percent.

Gary Shiffman, Chief Executive Officer of Sun Communities stated, “During the second quarter, robust demand across our Manufactured Housing communities and RV resorts, combined with a best in class operating platform allowed us to deliver another quarter of strong performance.  With better than expected same community NOI growth of 7.2 percent as well as Core FFO per share growth of 10.3 percent, we are pleased to announce guidance increases for full year 2019 in these two metrics. Our balance sheet is well-positioned and we have the necessary liquidity to continue to fund Sun’s growth. We continue to execute on our core growth initiatives and remain optimistic about our outlook in both the near and long term.”


OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.6 percent at June 30, 2019, compared to 96.1 percent at June 30, 2018. During the quarter ended June 30, 2019, revenue producing sites increased to 668 sites, as compared to 634 revenue producing sites gained during the second quarter of 2018, a 5.4 percent increase.

During the six months ended June 30, 2019, revenue producing sites increased by 1,239 sites, as compared to an increase of 1,250 revenue producing sites during the six months ended June 30, 2018.


Same Community(2) Results

For the 345 communities owned and operated by the Company since January 1, 2018, NOI(1) for the quarter ended June 30, 2019, increased 7.2 percent over the same period in 2018, as a result of a 6.4 percent increase in revenues and a 4.7 percent increase in operating expenses. Same Community occupancy(3) increased to 98.2 percent at June 30, 2019 from 96.2 percent at June 30, 2018.

For the six months ended June 30, 2019, total revenues increased by 6.2 percent while total expenses increased by 3.9 percent, resulting in an increase to NOI(1) of 7.2 percent over the six months ended June 30, 2018.


Home Sales

During the quarter ended June 30, 2019, the Company sold 927 homes as compared to 943 homes sold during the same period in 2018. Rental home sales, which are included in total home sales, were 332 in 2019, an increase of 20.7 percent over the 275 sold during 2018.

During the six months ended June 30, 2019, 1,725 homes were sold compared to 1,780 for the same period in 2018. Rental home sales, which are included in total home sales, were 542 in 2019, an increase of 6.5 percent over the 509 sold during 2018.


PORTFOLIO ACTIVITY

Acquisitions

During the quarter ended June 30, 2019, the Company acquired a 309 site RV resort in Sevierville, Tennessee for a purchase price of $23.0 million and an RV resort located in Strafford, New Hampshire for a purchase price of $2.7 million.

Subsequent to the quarter ended June 30, 2019, the Company acquired a RV resort located in Ponchatoula, Louisiana with 202 developed sites and 69 expansion sites for a purchase price of $23.5 million.

Ground-up Development

During the quarter ended June 30, 2019, the Company opened 281 sites of the ground-up development, Carolina Pines RV Resort in Myrtle Beach, South Carolina. The remaining phases of 565 sites for 846 total developed sites are expected to be completed in 2019 and 2020.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

As of June 30, 2019, the Company had $3.1 billion of debt outstanding. The weighted average interest rate was 4.4 percent and the weighted average maturity was 9.9 years. The Company had $28.7 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.2 times.

During the quarter, the Company amended and restated its credit agreement with Citibank, N.A. and certain other lenders. Pursuant to the agreement, the Company can borrow up to $750.0 million under the senior credit facility comprised of a $650.0 million revolving loan, with the ability to use up to $100.0 million for advances in Australian dollars, and a $100.0 million term loan. As of June 30, 2019 the Company has not drawn any funds on the term loan.

Equity Transactions

During the quarter ended June 30, 2019, the Company closed an underwritten registered public offering of 3,737,500 shares of common stock. Proceeds from the offering were $452.1 million after deducting expenses related to the offering. The Company used the net proceeds of this offering to repay borrowings under the revolving loan under its senior credit facility.


GUIDANCE 2019

The Company is revising its 2019 guidance for the following metrics:

    Previous Range
 FY 2019E		   Revised Range
FY 2019E		   3Q 2019E
Net Income per fully diluted share   $1.61 - $1.71   $1.81 - $1.87   $0.66 - $0.69
Core FFO (1) per fully diluted share   $4.80 - $4.88   $4.84 - $4.90   $1.43 - $1.46

Same Community(2) Portfolio
Number of communities: 345

  2019E Change %
Income from real property 6.0% - 6.2%
Total property operating expenses 4.1% - 4.7%
Net operating income (1) 6.6% - 7.2%

Guidance estimates include acquisitions completed through the date of this release and exclude any prospective acquisitions and capital markets 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 25, 2019 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 8, 2019 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 13691366. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of June 30, 2019, owned, operated, or had an interest in a portfolio of 382 communities comprising over 133,000 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                                                            


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
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        
             
             
             
             
             
             
             
             

Portfolio Overview                                                                           
(As of June 30, 2019)

 

Balance Sheets                                                                                                                                              
(amounts in thousands)


    6/30/2019   12/31/2018
ASSETS        
Land   $ 1,286,952     $ 1,201,945  
Land improvements and buildings   6,026,193     5,586,250  
Rental homes and improvements   599,150     571,661  
Furniture, fixtures and equipment   215,610     201,090  
Investment property   8,127,905     7,560,946  
Accumulated depreciation   (1,560,061 )   (1,442,630 )
Investment property, net   6,567,844     6,118,316  
Cash and cash equivalents   28,704     50,311  
Marketable securities   53,553     49,037  
Inventory of manufactured homes   55,869     49,199  
Notes and other receivables, net   164,303     160,077  
Collateralized receivables, net (4)   97,658     106,924  
Other assets, net   254,153     176,162  
TOTAL ASSETS   $ 7,222,084     $ 6,710,026  
LIABILITIES        
Mortgage loans payable   $ 2,863,485     $ 2,815,957  
Secured borrowings on collateralized receivables (4)   98,299     107,731  
Preferred Equity - Sun NG Resorts - mandatorily redeemable   35,249     35,277  
Preferred OP units - mandatorily redeemable   34,663     37,338  
Lines of credit (5)   76,079     128,000  
Distributions payable   69,719     63,249  
Advanced reservation deposits and rent   160,527     133,698  
Other liabilities   204,167     157,862  
TOTAL LIABILITIES   3,542,188     3,479,112  
Commitments and contingencies        
Series A-4 preferred stock   31,402     31,739  
Series A-4 preferred OP units   9,590     9,877  
Series D preferred OP units   51,462     —  
Equity Interests - NG Sun LLC   22,099     21,976  
STOCKHOLDERS' EQUITY        
Common stock   907     864  
Additional paid-in capital   4,851,323     4,398,949  
Accumulated other comprehensive loss   (1,184 )   (4,504 )
Distributions in excess of accumulated earnings   (1,343,792 )   (1,288,486 )
Total Sun Communities, Inc. stockholders' equity   3,507,254     3,106,823  
Noncontrolling interests        
Common and preferred OP units   50,880     53,354  
Consolidated variable interest entities   7,209     7,145  
Total noncontrolling interests   58,089     60,499  
TOTAL STOCKHOLDERS' EQUITY   3,565,343     3,167,322  
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY   $ 7,222,084     $ 6,710,026  



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


  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   Change   % Change   June 30, 2019   June 30, 2018   Change   % Change
REVENUES                              
Income from real property (excluding transient revenue) $ 195,503     $ 177,080     $ 18,423     10.4 %   $ 386,067     $ 352,290     $ 33,777     9.6 %
Transient revenue 30,596     21,590     9,006     41.7 %   56,811     43,591     13,220     30.3 %
Revenue from home sales 47,242     41,217     6,025     14.6 %   86,860     76,117     10,743     14.1 %
Rental home revenue 14,412     13,348     1,064     8.0 %   28,383     26,368     2,015     7.6 %
Ancillary revenue 17,265     12,031     5,234     43.5 %   25,747     18,599     7,148     38.4 %
Interest income 4,919     5,277     (358 )   (6.8 )%   9,719     10,593     (874 )   (8.3 )%
Brokerage commissions and other revenues, net 2,508     891     1,617     181.5 %   6,188     1,851     4,337     234.3 %
Total Revenues 312,445     271,434     41,011     15.1 %   599,775     529,409     70,366     13.3 %
EXPENSES                              
Property operating and maintenance 65,888     58,691     7,197     12.3 %   123,797     110,321     13,476     12.2 %
Real estate taxes 15,726     14,076     1,650     11.7 %   31,056     27,912     3,144     11.3 %
Cost of home sales 34,435     30,932     3,503     11.3 %   63,712     57,503     6,209     10.8 %
Rental home operating and maintenance 5,091     5,315     (224 )   (4.2 )%   9,879     10,542     (663 )   (6.3 )%
Ancillary expenses 12,480     8,241     4,239     51.4 %   19,581     13,624     5,957     43.7 %
Home selling expenses 3,626     3,986     (360 )   (9.0 )%   6,950     7,276     (326 )   (4.5 )%
General and administrative 23,697     21,452     2,245     10.5 %   45,584     41,209     4,375     10.6 %
Catastrophic weather related charges, net 179     53     126     237.7 %   961     (2,160 )   3,121     (144.5 )%
Depreciation and amortization 76,153     67,773     8,380     12.4 %   152,709     134,210     18,499     13.8 %
Loss on extinguishment of debt 70     1,522     (1,452 )   (95.4 )%   723     1,718     (995 )   (57.9 )%
Interest expense 33,661     32,260     1,401     4.3 %   67,675     63,398     4,277     6.7 %
Interest on mandatorily redeemable preferred OP units / equity 1,181     790     391     49.5 %   2,275     1,409     866     61.5 %
Total Expenses 272,187     245,091     27,096     11.1 %   524,902     466,962     57,940     12.4 %
Income Before Other Items 40,258     26,343     13,915     52.8 %   74,873     62,447     12,426     19.9 %
Remeasurement of marketable securities 3,620     —     3,620     N/A   3,887     —     3,887     N/A
Other income / (expense), net (6) 1,021     (1,828 )   2,849     155.9 %   2,919     (4,445 )   7,364     (165.7 )%
Income / (loss) from nonconsolidated affiliates 393     (8 )   401     5,012.5 %   737     (67 )   804     (1,200.0 )%
Current tax expense (272 )   (225 )   (47 )   (20.9 )%   (486 )   (399 )   (87 )   21.8 %
Deferred tax benefit / (expense) 96     (112 )   208     (185.7 )%   313     235     78     33.2 %
Net Income 45,116     24,170     20,946     86.7 %   82,243     57,771     24,472     42.4 %
Less: Preferred return to preferred OP units / equity (1,718 )   (1,103 )   (615 )   55.8 %   (3,041 )   (2,183 )   (858 )   39.3 %
Less: Amounts attributable to noncontrolling interests (2,585 )   (2,227 )   (358 )   16.1 %   (3,626 )   (4,321 )   695     (16.1 )%
Net Income Attributable to Sun Communities, Inc. 40,813     20,840     19,973     95.8 %   75,576     51,267     24,309     47.4 %
Less: Preferred stock distribution (428 )   (432 )   4     (0.9 )%   (860 )   (873 )   13     (1.5 )%
Net Income Attributable to Sun Communities, Inc. Common Stockholders $ 40,385     $ 20,408     $ 19,977     97.9 %   $ 74,716     $ 50,394     $ 24,322     48.3 %
                               
Weighted average common shares outstanding                              
Basic 87,130     79,612     7,518     9.4 %   86,325     79,233     7,092     9.0 %
Diluted 87,564     80,116     7,448     9.3 %   86,770     79,905     6,865     8.6 %
Earnings per share:                              
Basic $ 0.46     $ 0.25     $ 0.21     84.0 %   $ 0.86     $ 0.63     $ 0.23     36.5 %
Diluted $ 0.46     $ 0.25     $ 0.21     84.0 %   $ 0.86     $ 0.63     $ 0.23     36.5 %


Outstanding Securities and Capitalization 
(amounts in thousands except for *)

Outstanding Securities - As of June 30, 2019
                   
  Number of Units/Shares Outstanding   Conversion Rate*   If Converted   Issuance Price per unit*   Annual Distribution Rate*
Non-convertible securities                  
Common shares 90,667   N/A   N/A   N/A   $3.00^
                   
Convertible securities                  
Series A-1 preferred OP units 324   2.4390   790   $ 100   6.0 %
Series A-3 preferred OP units 40   1.8605   74   $ 100   4.5 %
Series A-4 preferred OP units 406   0.4444   180   $ 25   6.5 %
Series C preferred OP units 314   1.1100   349   $ 100   4.5 %
Series D preferred OP units 489   0.8000   391   $ 100   3.8 %
Common OP units 2,289   1.0000   2,289   N/A   Mirrors common shares distributions
Series A-4 preferred stock 1,052   0.4444   468   $ 25   6.5 %
^ Annual distribution is based on the last quarterly distribution annualized.


Capitalization - As of June 30, 2019            
             
Equity   Shares   Share Price*   Total
Common shares   90,667     $ 128.19     $ 11,622,603  
Common OP units   2,289     $ 128.19     293,427  
Subtotal   92,956         $ 11,916,030  
             
Series A-1 preferred OP units   790     $ 128.19     101,270  
Series A-3 preferred OP units   74     $ 128.19     9,486  
Series A-4 preferred OP units   180     $ 128.19     23,074  
Series C preferred OP units   349     $ 128.19     44,738  
Series D preferred OP units   391     $ 128.19     50,122  
Total diluted shares outstanding   94,740         $ 12,144,720  
 
Debt
Mortgage loans payable           $ 2,863,485  
Secured borrowings (4)           98,299  
Preferred Equity - Sun NG Resorts - mandatorily redeemable           35,249  
Preferred OP units - mandatorily redeemable           34,663  
Lines of credit (5)           76,079  
Total debt           $ 3,107,775  
 
Preferred
Series A-4 preferred stock   1,052     $ 25.00     $ 26,300  
Total Capitalization           $ 15,278,795  


Reconciliations to Non-GAAP Financial Measures


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


  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Net income attributable to Sun Communities, Inc. common stockholders $ 40,385     $ 20,408     $ 74,716     $ 50,394  
Adjustments              
Depreciation and amortization 76,294     67,977     153,006     134,623  
Remeasurement of marketable securities (3,620 )   —     (3,887 )   —  
Amounts attributable to noncontrolling interests 2,158     2,089     2,881     3,978  
Preferred return to preferred OP units 537     552     1,064     1,105  
Preferred distribution to Series A-4 preferred stock 428     432     860     873  
Gain on disposition of assets, net (8,070 )   (5,835 )   (13,749 )   (10,374 )
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

 $ 108,112     $ 85,623     $ 214,891     $ 180,599  
Adjustments              
Other acquisition related costs (8) 366     301     526     436  
Loss on extinguishment of debt 70     1,522     723     1,718  
Catastrophic weather related charges, net 194     53     976     (2,160 )
Loss of earnings - catastrophic weather related (9) 377     325     377     650  
Other (income) / expense (6) (1,021 )   1,828     (2,919 )   4,445  
Debt premium write-off —     (209 )   —     (991 )
Ground lease intangible write-off —     817     —     817  
Deferred tax (benefit) / expense (96 )   112     (313 )   (235 )
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

 $ 108,002     $ 90,372     $ 214,261     $ 185,279  
               
Weighted average common shares outstanding - basic 87,130     79,612     86,325     79,233  
Add              
Common stock issuable upon conversion of stock options 1     2     1     2  
Restricted stock 433     502     444     670  
Common OP units 2,487     2,735     2,605     2,738  
Common stock issuable upon conversion of Series A-4 preferred stock 467     472     467     472  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75     75     75  
Common stock issuable upon conversion of Series A-1 preferred OP units 793     825     798     831  
Weighted average common shares outstanding - fully diluted 91,386     84,223     90,715     84,021  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

 $ 1.18     $ 1.02     $ 2.37     $ 2.15  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

 $ 1.18     $ 1.07     $ 2.36     $ 2.21  


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


  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Net income attributable to Sun Communities, Inc., common stockholders $ 40,385     $ 20,408     $ 74,716     $ 50,394  
Adjustments              
Interest expense 34,842     33,050     69,950     64,807  
Loss on extinguishment of debt 70     1,522     723     1,718  
Current tax expense 272     225     486     399  
Deferred tax  (benefit) / expense (96 )   112     (313 )   (235 )
(Income) / loss from nonconsolidated affiliates (393 )   8     (737 )   67  
Depreciation and amortization 76,153     67,773     152,709     134,210  
Gain on disposition of assets, net (8,070 )   (5,835 )   (13,749 )   (10,374 )
EBITDAre (1) $ 143,163     $ 117,263     $ 283,785     $ 240,986  
Adjustments              
Remeasurement of marketable securities (3,620 )   —     (3,887 )   —  
Other (income) / expense, net (6) (1,021 )   1,828     (2,919 )   4,445  
Catastrophic weather related charges, net 179     53     961     (2,160 )
Preferred return to preferred OP units / equity 1,718     1,103     3,041     2,183  
Amounts attributable to noncontrolling interests 2,585     2,227     3,626     4,321  
Preferred stock distribution 428     432     860     873  
Plus: Gain on dispositions of assets, net 8,070     5,835     13,749     10,374  
Recurring EBITDA (1) $ 151,502     $ 128,741     $ 299,216     $ 261,022  



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


  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Net income attributable to Sun Communities, Inc., common stockholders $ 40,385     $ 20,408     $ 74,716     $ 50,394  
Other revenues (7,427 )   (6,168 )   (15,907 )   (12,444 )
Home selling expenses 3,626     3,986     6,950     7,276  
General and administrative 23,697     21,452     45,584     41,209  
Catastrophic weather related charges, net 179     53     961     (2,160 )
Depreciation and amortization 76,153     67,773     152,709     134,210  
Loss on extinguishment of debt 70     1,522     723     1,718  
Interest expense 34,842     33,050     69,950     64,807  
Remeasurement of marketable securities (3,620 )   —     (3,887 )   —  
Other (income) / expense, net (6) (1,021 )   1,828     (2,919 )   4,445  
(Income) / loss from nonconsolidated affiliates (393 )   8     (737 )   67  
Current tax expense 272     225     486     399  
Deferred tax  (benefit) / expense (96 )   112     (313 )   (235 )
Preferred return to preferred OP units / equity 1,718     1,103     3,041     2,183  
Amounts attributable to noncontrolling interests 2,585     2,227     3,626     4,321  
Preferred stock distribution 428     432     860     873  
NOI(1) / Gross Profit $ 171,398     $ 148,011     $ 335,843     $ 297,063  


  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Real Property NOI (1) $ 144,485     $ 125,903     $ 288,025     $ 257,648  
Rental Program NOI (1) 26,499     24,572     52,560     48,674  
Home Sales NOI (1) / Gross Profit 12,807     10,285     23,148     18,614  
Ancillary NOI (1) / Gross Profit 4,785     3,790     6,166     4,975  
Site rent from Rental Program (included in Real Property NOI) (1)(10) (17,178 )   (16,539 )   (34,056 )   (32,848 )
NOI (1) / Gross profit $ 171,398     $ 148,011     $ 335,843     $ 297,063  



Non-GAAP and Other Financial Measures


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


  Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Financial Information                  
Total revenues $ 312,445     $ 287,330     $ 274,004     $ 323,538     $ 271,426  
Net income $ 45,116     $ 37,127     $ 10,672     $ 51,715     $ 24,170  
Net income attributable to Sun Communities Inc. $ 40,385     $ 34,331     $ 9,039     $ 46,060     $ 20,408  
Earnings per share basic* $ 0.46     $ 0.40     $ 0.11     $ 0.56     $ 0.25  
Earnings per share diluted* $ 0.46     $ 0.40     $ 0.11     $ 0.56     $ 0.25  
                   
Cash distributions declared per common share* $ 0.75     $ 0.75     $ 0.71     $ 0.71     $ 0.71  
                   
Recurring EBITDA (1) $ 151,502     $ 147,714     $ 133,335     $ 158,129     $ 128,741  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

 $ 108,112     $ 106,779     $ 88,562     $ 117,018     $ 85,623  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

 $ 108,002     $ 106,259     $ 92,695     $ 116,959     $ 90,372  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted* $ 1.18     $ 1.19     $ 0.98     $ 1.35     $ 1.02  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted* $ 1.18     $ 1.18     $ 1.03     $ 1.35     $ 1.07  
                   
Balance Sheet
                  
Total assets $ 7,222,084     $ 7,098,662     $ 6,710,026     $ 6,653,726     $ 6,492,348  
Total debt $ 3,107,775     $ 3,448,117     $ 3,124,303     $ 3,004,929     $ 3,364,081  
Total liabilities $ 3,542,188     $ 3,846,325     $ 3,479,112     $ 3,367,285     $ 3,736,621  


  Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Operating Information*                  
New home sales 139     125     140     146     134  
Pre-owned home sales 788     673     738     825     809  
Total homes sold 927     798     878     971     943  
                   
Communities 382     379     371     370     367  
                   
Developed sites 112,564     112,175     108,963     108,142     107,192  
Transient RV sites 20,585     20,173     19,491     19,432     19,007  
Total sites 133,149     132,348     128,454     127,574     126,199  
                   
MH occupancy 95.7 %   95.4 %   95.0 %   94.9 %   95.0 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.6 %   96.4 %   96.1 %   96.1 %   96.1 %



Debt Analysis
(amounts in thousands)


  Quarter Ended
  6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
DEBT OUTSTANDING                  
Mortgage loans payable $ 2,863,485     $ 2,879,017     $ 2,815,957     $ 2,819,225     $ 2,636,847  
Secured borrowings on collateralized receivables (4) 98,299     102,676     107,731     113,089     118,242  
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,249     35,249     35,277     35,277     35,277  
Preferred OP units - mandatorily redeemable 34,663     34,663     37,338     37,338     37,338  
Lines of credit (5) 76,079     396,512     128,000     —     536,377  
Total debt $ 3,107,775     $ 3,448,117     $ 3,124,303     $ 3,004,929     $ 3,364,081  
                   
% FIXED/FLOATING                  
Fixed 97.6 %   88.5 %   95.9 %   100.0 %   84.0 %
Floating 2.4 %   11.5 %   4.1 %   — %   16.0 %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
WEIGHTED AVERAGE INTEREST RATES                  
Mortgage loans payable 4.24 %   4.24 %   4.22 %   4.23 %   4.27 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   6.00 %   6.00 %   6.00 %   6.00 %
Preferred OP units - mandatorily redeemable 6.50 %   6.50 %   6.61 %   6.61 %   6.61 %
Lines of credit (5) 3.34 %   3.73 %   3.77 %   — %   3.31 %
Average before Secured borrowings (4) 4.27 %   4.22 %   4.25 %   4.28 %   4.15 %
Secured borrowings on collateralized receivables (4) 9.93 %   9.94 %   9.94 %   9.95 %   9.96 %
Total average 4.44 %   4.39 %   4.45 %   4.40 %   4.36 %
                   
DEBT RATIOS                  
Net Debt / Recurring EBITDA (1) (TTM) 5.2     6.0     5.6     5.4     6.5  
Net Debt / Enterprise Value 20.2 %   24.1 %   25.2 %   24.1 %   28.6 %
Net Debt / Gross Assets 35.1 %   39.8 %   37.7 %   35.9 %   42.7 %
                   
COVERAGE RATIOS                  
Recurring EBITDA (1) (TTM) / Interest 4.2   4.1   4.0   3.9   3.7
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 4.0   3.9   3.9   3.8   3.6


MATURITIES / PRINCIPAL AMORTIZATION NEXT FIVE YEARS Remaining 2019   2020   2021   2022   2023
Mortgage loans payable:                  
Maturities $ —     $ 58,078     $ 270,680     $ 82,155     $ 307,465  
Weighted average rate of maturities — %   5.92 %   5.53 %   4.46 %   4.17 %
Principal amortization 29,618     59,931     59,173     57,182     53,829  
Secured borrowings on collateralized receivables (4) 2,514     5,383     5,778     5,972     5,979  
Preferred Equity - Sun NG Resorts - mandatorily redeemable —     —     —     35,249     —  
Lines of credit (5) —     5,079     —     —     71,000  
Total $ 32,132     $ 128,471     $ 335,631     $ 180,558     $ 438,273  


Real Property Operations – Same Community(2)                                                     
(amounts in thousands except for Other Information)

  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   Change   % Change   June 30, 2019   June 30, 2018   Change   % Change
Financial Information                              
Income from real property(11) $ 196,305     $ 184,532     $ 11,773     6.4 %   $ 395,389     $ 372,358     $ 23,031     6.2 %
                               
  Property operating expenses                        
Payroll and benefits 18,673     17,609     1,064     6.0 %   35,094     33,143     1,951     5.9 %
Legal, taxes & insurance 2,131     2,047     84     4.1 %   4,322     4,518     (196 )   (4.3 )%
Utilities (11) 13,244     13,325     (81 )   (0.6 )%   27,678     27,788     (110 )   (0.4 )%
Supplies and repair (12) 8,472     7,739     733     9.5 %   14,191     12,898     1,293     10.0 %
Other 5,411     5,402     9     0.2 %   9,866     10,090     (224 )   (2.2 )%
Real estate taxes 14,896     13,896     1,000     7.2 %   29,486     27,662     1,824     6.6 %
Total property operating expenses 62,827     60,018     2,809     4.7 %   120,637     116,099     4,538     3.9 %
Real Property NOI(1) $ 133,478     $ 124,514     $ 8,964     7.2 %   $ 274,752     $ 256,259     $ 18,493     7.2 %


  As of  
  June 30, 2019   June 30, 2018   Change   % Change  
Other Information                
Number of properties 345          
                 
MH occupancy (3) 97.7 %              
RV occupancy (3) 100.0 %              
MH & RV blended occupancy % (3) 98.2 %   96.2 %   2.0 %      
                 
Sites available for development 7,237     7,463     (226 )   (3.0 )%  
                 
Monthly base rent per site - MH $ 568     $ 545     $ 23     4.2 % (14)
Monthly base rent per site - RV (13) $ 473     $ 445     $ 28     6.3 % (14)
Monthly base rent per site - Total (13) $ 547     $ 523     $ 24     4.5 % (14)



Home Sales Summary           
(amounts in thousands except for *)


  Three Months Ended   Six Months Ended
Financial Information June 30, 2019   June 30, 2018   Change   % Change   June 30, 2019   June 30, 2018   Change   % Change
New homes                              
New home sales $ 16,704     $ 14,652     $ 2,052     14.0 %   $ 32,085     $ 26,545     $ 5,540     20.9 %
New home cost of sales 14,833     12,712     2,121     16.7 %   27,979     22,909     5,070     22.1 %
NOI / Gross Profit (1) - new homes 1,871     1,940     (69 )   (3.6 )%   4,106     3,636     470     12.9 %
Gross margin % – new homes 11.2 %   13.2 %   (2.0 )%       12.8 %   13.7 %   (0.9 )%    
Average selling price – new homes* $ 120,173     $ 109,343     $ 10,830     9.9 %   $ 121,534     $ 110,604     $ 10,930     9.9 %
                               
Pre-owned homes                              
Pre-owned home sales 30,538     26,565     3,973     15.0 %   54,775     49,572     5,203     10.5 %
Pre-owned home cost of sales 19,602     18,220     1,382     7.6 %   35,733     34,594     1,139     3.3 %
NOI / Gross Profit (1) - pre-owned homes 10,936     8,345     2,591     31.0 %   19,042     14,978     4,064     27.1 %
Gross margin % – pre-owned homes 35.8 %   31.4 %   4.4 %       34.8 %   30.2 %   4.6 %    
Average selling price – pre-owned homes* $ 38,754     $ 32,837     $ 5,917     18.0 %   $ 37,491     $ 32,190     $ 5,301     16.5 %
                               
Revenue from home sales 47,242     41,217     6,025     14.6 %   86,860     76,117     10,743     14.1 %
Cost of home sales 34,435     30,932     3,503     11.3 %   63,712     57,503     6,209     10.8 %
NOI / Gross Profit (1) - home sales $ 12,807     $ 10,285     $ 2,522     24.5 %   $ 23,148     $ 18,614     $ 4,534     24.4 %
                               
Statistical Information                
New home sales volume* 139     134     5     3.7 %   264     240     24     10.0 %
Pre-owned home sales volume* 788     809     (21 )   (2.6 )%   1,461     1,540     (79 )   (5.1 )%
Total homes sold* 927     943     (16 )   (1.7 )%   1,725     1,780     (55 )   (3.1 )%

               


Rental Program Summary    
(amounts in thousands except for *)


    Three Months Ended   Six Months Ended
Financial Information   June 30, 2019   June 30, 2018   Change   % Change   June 30, 2019   June 30, 2018   Change   % Change
Revenues                                
Rental home revenue   $ 14,412     $ 13,348     $ 1,064     8.0 %   $ 28,383     $ 26,368     $ 2,015     7.6 %
Site rent from rental program   17,178     16,539     639     3.9 %   34,056     32,848     1,208     3.7 %
Rental program revenue   31,590     29,887     1,703     5.7 %   62,439     59,216     3,223     5.4 %
                                 
Expenses                                
Repairs and refurbishment   2,803     2,207     596     27.0 %   5,107     4,521     586     13.0 %
Taxes and insurance   1,827     1,569     258     16.4 %   3,691     3,115     576     18.5 %
Other   461     1,539     (1,078 )   (70.0 )%   1,081     2,906     (1,825 )   (62.8 )%
Rental program operating and maintenance   5,091     5,315     (224 )   (4.2 )%   9,879     10,542     (663 )   (6.3 )%
Rental Program NOI(1)   $ 26,499     $ 24,572     $ 1,927     7.8 %   $ 52,560     $ 48,674     $ 3,886     8.0 %


    As of
Other Information   June 30, 2019   June 30, 2018   Change   % Change
Number of occupied rental homes, end of period*   11,230     11,072     158     1.4 %
Investment in occupied rental homes, end of period   $ 561,219     $ 514,756     $ 46,463     9.0 %
Number of sold rental homes (YTD)*   542     509     33     6.5 %
Weighted average monthly rental rate, end of period*   $ 975     $ 927     $ 48     5.2 %



Acquisitions and Other Summary (15)
(amounts in thousands except for statistical data)


    Three Months Ended   Six Months Ended
Financial Information   June 30, 2019   June 30, 2019
Revenues
        
Income from real property   $ 21,262     $ 30,513  
         
Property and operating expenses
        
Payroll and benefits   3,424     5,874  
Legal, taxes & insurance   233     426  
Utilities(11)   1,874     3,424  
Supplies and repair   1,257     1,892  
Other   2,637     4,054  
Real estate taxes   830     1,570  
Property operating expenses   10,255     17,240  
Net operating income (NOI) (1)   $ 11,007     $ 13,273  
         
        As of June 30, 2019
Other information        
Number of properties       37  
Occupied sites       3,786  
Developed sites       3,991  
Occupancy %       94.9 %
Transient sites       5,805  



Property Summary                    
(includes MH and Annual RVs)
                     
COMMUNITIES   6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
FLORIDA                    
Communities   125     125     124     124     124  
Developed sites (16)   38,879     38,878     37,874     37,879     37,723  
Occupied (16)   37,944     37,932     36,868     36,822     36,602  
Occupancy % (16)   97.6 %   97.6 %   97.3 %   97.2 %   97.0 %
Sites for development   1,707     1,754     1,684     1,494     1,335  
MICHIGAN                    
Communities   72     72     70     70     69  
Developed sites (16)   27,891     27,777     26,504     26,116     26,039  
Occupied (16)   26,591     26,430     25,075     24,830     24,709  
Occupancy % (16)   95.3 %   95.2 %   94.6 %   95.1 %   94.9 %
Sites for development   1,115     1,202     1,202     1,533     1,668  
TEXAS                    
Communities   23     23     23     23     23  
Developed sites (16)   6,997     6,953     6,922     6,905     6,622  
Occupied (16)   6,683     6,529     6,428     6,301     6,251  
Occupancy % (16)   95.5 %   93.9 %   92.9 %   91.3 %   94.4 %
Sites for development   1,100     1,107     1,121     907     1,168  
CALIFORNIA                    
Communities   31     31     30     30     29  
Developed sites (16)   5,946     5,949     5,941     5,932     5,694  
Occupied (16)   5,896     5,902     5,897     5,881     5,647  
Occupancy % (16)   99.2 %   99.2 %   99.3 %   99.1 %   99.2 %
Sites for development   56     56     56     59     177  
ARIZONA                    
Communities   13     13     12     11     11  
Developed sites (16)   4,235     4,238     3,836     3,826     3,804  
Occupied (16)   3,842     3,830     3,545     3,515     3,485  
Occupancy % (16)   90.7 %   90.4 %   92.4 %   91.9 %   91.6 %
Sites for development   —     —     —     —     —  
ONTARIO, CANADA                    
Communities   15     15     15     15     15  
Developed sites (16)   3,929     3,832     3,845     3,832     3,752  
Occupied (16)   3,929     3,832     3,845     3,832     3,752  
Occupancy % (16)   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Sites for development   1,675     1,675     1,682     1,662     1,662  
INDIANA                    
Communities   11     11     11     11     11  
Developed sites (16)   3,089     3,089     3,089     3,089     3,089  
Occupied (16)   2,849     2,823     2,772     2,778     2,791  
Occupancy % (16)   92.2 %   91.4 %   89.7 %   89.9 %   90.4 %
Sites for development   277     277     277     277     277  
OHIO                    
Communities   9     9     9     9     9  
Developed sites (16)   2,770     2,770     2,770     2,770     2,767  
Occupied (16)   2,705     2,704     2,693     2,694     2,698  
Occupancy % (16)   97.7 %   97.6 %   97.2 %   97.3 %   97.5 %
Sites for development   59     59     59     59     59  
             

 

 		        
COLORADO                    
Communities   8     8     8     8     8  
Developed sites (16)   2,335     2,335     2,335     2,335     2,335  
Occupied (16)   2,323     2,323     2,320     2,313     2,319  
Occupancy % (16)   99.5 %   99.5 %   99.4 %   99.1 %   99.3 %
Sites for development   2,129     2,129     2,129     2,129     1,819  
OTHER STATES                    
Communities   75     72     69     69     68  
Developed sites (16)   16,493     16,354     15,847     15,458     15,367  
Occupied (16)   16,026     15,826     15,323     14,932     14,786  
Occupancy % (16)   97.2 %   96.8 %   96.7 %   96.6 %   96.2 %
Sites for development   2,705     2,987     3,048     3,195     3,233  
TOTAL - PORTFOLIO                    
Communities   382     379     371     370     367  
Developed sites (16)   112,564     112,175     108,963     108,142     107,192  
Occupied (16)   108,788     108,131     104,766     103,898     103,040  
Occupancy % (16)   96.6 % (17) 96.4 %   96.1 %   96.1 %   96.1 %
Sites for development (18)   10,823     11,246     11,258     11,315     11,398  
% Communities age restricted   31.4 %   31.7 %   32.1 %   32.2 %   32.2 %
                     
TRANSIENT RV PORTFOLIO SUMMARY                    
 Location                    
Florida   5,693     5,650     5,917     5,786     5,942  
California   1,985     1,975     1,765     1,774     1,377  
Texas   1,693     1,717     1,752     1,758     1,776  
Arizona   1,424     1,421     1,423     1,057     1,079  
Maryland   1,380     1,375     1,381     1,386     1,386  
Ontario, Canada   1,043     1,131     1,046     1,056     1,133  
New York   935     929     925     910     928  
New Jersey   875     906     884     893     906  
Maine   848     857     572     578     591  
Michigan   584     611     576     629     350  
Indiana   519     519     519     519     519  
Other locations   3,606     3,082     2,731     3,086     3,020  
Total transient RV sites   20,585     20,173     19,491     19,432     19,007  



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


   Recurring Capital Expenditures
Average/Site*		 Recurring
Capital Expenditures (19)		  Lot Modifications (20) Acquisitions (21)  Expansion &
Development (22)		 Revenue Producing (23)
YTD 2019 $ 111   $ 11,061   $ 11,825   $ 371,096   $ 123,393   $ 5,647  
2018 $ 263   $ 24,265   $ 22,867   $ 414,840   $ 152,672   $ 3,864  
2017 $ 214   $ 14,166   $ 18,049   $ 204,375   $ 88,331   $ 1,990  



Operating Statistics for MH and Annual RVs


LOCATIONS   Resident Move-outs   Net Leased Sites (24)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
Florida   873     360     127     161     697  
Michigan   295     279     28     690     84  
Ontario, Canada   414     84     11     10     89  
Texas   141     255     22     179     38  
Arizona   45     33     21     5     98  
Indiana   24     77     2     144     10  
Ohio   61     12     —     73     5  
California   38     (1 )   12     2     29  
Colorado   1     3     7     35     24  
Other locations   597     137     34     162     56  
Six Months Ended June 30, 2019   2,489     1,239     264     1,461     1,130  


TOTAL FOR YEAR ENDED   Resident Move-outs   Net Leased Sites (24)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
2018   3,435     2,600     526     3,103     2,147  
2017   2,739     2,406     362     2,920     2,006  


PERCENTAGE TRENDS   Resident Move-outs   Resident  Re-sales
2019 (TTM)   2.6 %   7.2 %
2018   2.4 %   7.2 %
2017   1.9 %   6.6 %


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)  Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2019 actual exchange rates.

(3)  The Same Community occupancy percentage for 2019 is derived from 106,929 developed sites, of which 105,002 were occupied. The number of developed sites excludes RV transient sites and approximately 1,600 recently completed but vacant MH expansion sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.8 percent for MH, 100.0 percent for RV, and 96.7 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 108,573 developed sites, of which 105,002 were occupied. The Same Community occupancy percentage for 2018 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.

(4)  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.

(5)  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.

(6)   Other income / (expense), net was as follows (in thousands):

  Three Months Ended   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
Foreign currency translation gain / (loss) $ 1,126     $ (1,663 )   $ 3,095     $ (4,187 )
Contingent liability remeasurement loss (63 )   (95 )   (134 )   (188 )
Long term lease termination expense (42 )   (70 )   (42 )   (70 )
Other income / (expense), net $ 1,021     $ (1,828 )   $ 2,919     $ (4,445 )

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

(8)   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.

(9)   Core FFO(1) includes an adjustment of $0.4 million for the three and six months ended June 30, 2019 and $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. Amounts recognized in 2018 were received in 2019.

(10) 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.

(11) Same Community results net $8.5 million and $7.8 million of utility revenue against the related utility expense in property operating and maintenance expense for the quarter ended June 30, 2019 and 2018, respectively. Same Community results net $16.9 million and $15.7 million of utility revenue against the related utility expense in property operating and maintenance expense for the six months ended June 30, 2019 and 2018, respectively. The Company adopted ASC 842, the new leasing standard, as of January 1, 2019 which required the reclassification of bad debt expense from Property operating expense to Income from real property. To assist with comparability within Same Community results, bad debt expense has been reclassified to be shown as a reduction of Income from real property for all periods presented.

(12) Same Community supplies and repair expense excludes $0.6 million and $1.5 million for the three and six months ended June 30,  2018, 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.

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

(14) Calculated using actual results without rounding.

(15) Acquisitions and other is comprised of eight properties acquired and one property being operated under a temporary use permit in 2019, twenty properties acquired in 2018, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, two recently opened ground-up development, one property undergoing redevelopment, two properties that we have an interest in, but do not operate, and other miscellaneous transactions and activity.

(16) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.

(17) As of June 30, 2019, total portfolio MH occupancy was 95.7 percent inclusive of the impact of approximately 1,600 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.

(18) Total sites for development were comprised of approximately 73.6 percent for expansion, 21.6 percent for greenfield development and 4.8 percent for redevelopment.

(19) 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.

(20) 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.

(21) 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, 2019 include $15.7 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards.  For the years ended December 31, 2018 and 2017, these costs were $94.6 million and $84.0 million, respectively. 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.

(22) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.

(23) 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.

(24) 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.

Attachment

Sun Communities, Inc.