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sui-20200630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020.

☐ TRANSITION PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

SUN COMMUNITIES INC.

(Exact Name of Registrant as Specified in its Charter)


Maryland	1-12616	38-2730780
(State of Incorporation)	Commission file number	(I.R.S. Employer Identification No.)

27777 Franklin Rd,

Suite 200,

Southfield,

Michigan

48034

(Address of Principal Executive Offices)

(Zip Code)

(248) 208-2500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

SUI

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock, $0.01 par value per share, outstanding as of July 16, 2020: 98,272,394

INDEX

PART I – FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Consolidated Statement of Equity for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

Notes to Consolidated Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

Exhibits

Signatures

SUN COMMUNITIES, INC.

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	(Unaudited)
	June 30, 2020		December 31, 2019
Assets
Land	$	1,433,272	$	1,414,279
Land improvements and buildings	6,826,741		6,595,272
Rental homes and improvements	652,177		627,175
Furniture, fixtures and equipment	312,139		282,874
Investment property	9,224,329		8,919,600
Accumulated depreciation	(1,826,810)		(1,686,980)
Investment property, net (including $357,778 and $344,300 for consolidated VIEs at June 30, 2020 and December 31, 2019; see Note 7)	7,397,519		7,232,620
Cash, cash equivalents and restricted cash	389,214		34,830
Marketable securities; (see Note 14)	100,564		94,727
Inventory of manufactured homes	58,744		62,061
Notes and other receivables, net	180,391		157,926


Other assets, net (including $27,814 and $23,894 for consolidated VIEs at June 30, 2020 and December 31, 2019; see Note 7)	222,227		219,896
Total Assets	$	8,348,659	$	7,802,060
Liabilities
Mortgage loans payable (including $46,464 and $46,993 for consolidated VIEs at June 30, 2020 and December 31, 2019; see Note 7)	$	3,205,507	$	3,180,592

Preferred Equity - Sun NG RV Resorts LLC - mandatorily redeemable (fully attributable to consolidated VIEs; see Note 7)	35,249		35,249
Preferred OP units - mandatorily redeemable	34,663		34,663
Lines of credit	115,352		183,898
Distributions payable	79,549		71,704
Advanced reservation deposits and rent	169,931		133,420
Accrued expenses and accounts payable	124,324		127,289
Other liabilities (including $26,524 and $13,631 for consolidated VIEs at June 30, 2020 and December 31, 2019; see Note 7)	80,733		81,289
Total Liabilities	3,845,308		3,848,104
Commitments and contingencies (see Note 15)


Series D preferred OP units	50,171		50,913
Series F preferred OP units	8,948		—
Equity interests - NG Sun LLC and NG Sun Whitewater LLC (fully attributable to consolidated VIEs; see Note 7)	24,863		27,091
Stockholders' Equity

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 98,274 June 30, 2020 and 93,180 December 31, 2019	983		932
Additional paid-in capital	5,847,598		5,213,264
Accumulated other comprehensive loss	(4,475)		(1,331)
Distributions in excess of accumulated earnings	(1,496,542)		(1,393,141)
Total Sun Communities, Inc. stockholders' equity	4,347,564		3,819,724
Noncontrolling interests
Common and preferred OP units	61,555		47,686
Consolidated VIEs	10,250		8,542
Total noncontrolling interests	71,805		56,228
Total Stockholders' Equity	4,419,369		3,875,952
Total Liabilities, Temporary Equity and Stockholders' Equity	$	8,348,659	$	7,802,060

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) (Unaudited)


	Three Months Ended						Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenues
Income from real property	$	231,484	$	223,644	$	469,269	$	438,727
Revenue from home sales	38,530		47,242		79,117		86,860
Rental home revenue	14,968		14,412		30,440		28,383
Ancillary revenue	12,375		19,720		22,570		29,898
Interest income	2,635		4,919		4,985		9,719
Brokerage commissions and other revenues, net	3,274		2,508		7,187		6,188
Total Revenues	303,266		312,445		613,568		599,775
Expenses
Property operating and maintenance	65,204		65,888		129,261		123,797
Real estate taxes	17,723		15,726		34,899		31,056
Cost of home sales	29,181		34,435		59,213		63,712
Rental home operating and maintenance	4,685		5,177		10,179		10,009
Ancillary expenses	8,226		12,480		15,708		19,581
Home selling expenses	2,864		3,626		6,856		6,950
General and administrative expenses	26,733		23,697		52,250		45,584
Catastrophic weather-related charges, net	(566)		179		40		961
Depreciation and amortization	87,265		76,153		170,954		152,709
Loss on extinguishment of debt (see Note 8)	1,930		70		5,209		723
Interest expense	31,428		33,661		63,844		67,675
Interest on mandatorily redeemable preferred OP units / equity	1,042		1,181		2,083		2,275
Total Expenses	275,715		272,273		550,496		525,032
Income Before Other Items	27,551		40,172		63,072		74,743
Gain / (loss) on remeasurement of marketable securities (see Note 14)	24,519		3,620		(4,128)		3,887
Gain / (loss) on foreign currency translation	10,374		1,116		(7,105)		3,081
Other expense, net	(552)		(95)		(854)		(162)
Gain / (loss) on remeasurement of notes receivable (see Note 4)	246		—		(1,866)		—
Income from nonconsolidated affiliates (see Note 6)	92		479		144		867
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6)	1,132		—		(1,059)		—
Current tax expense (see Note 12)	(119)		(272)		(569)		(486)
Deferred tax benefit (see Note 12)	112		96		242		313
Net Income	63,355		45,116		47,877		82,243
Less: Preferred return to preferred OP units / equity	1,584		1,718		3,154		3,041
Less: Income attributable to noncontrolling interests	2,861		2,585		1,899		3,626
Net Income Attributable to Sun Communities, Inc.	58,910		40,813		42,824		75,576
Less: Preferred stock distribution	—		428		—		860
Net Income Attributable to Sun Communities, Inc. Common Stockholders	$	58,910	$	40,385	$	42,824	$	74,716

Weighted average common shares outstanding - basic	95,859		87,130		94,134		86,325
Weighted average common shares outstanding - diluted	96,165		87,564		94,525		86,770

Basic earnings per share (see Note 13)	$	0.61	$	0.46	$	0.45	$	0.86
Diluted earnings per share (see Note 13)	$	0.61	$	0.46	$	0.45	$	0.86

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)


	Three Months Ended						Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net Income	$	63,355	$	45,116	$	47,877	$	82,243
Foreign currency translation gain / (loss) adjustment	3,872		(1,913)		(3,428)		(3,488)

Total Comprehensive Income	67,227		43,203		44,449		78,755
Less: Comprehensive Income attributable to noncontrolling interests	(2,883)		(2,494)		(1,615)		(3,458)
Comprehensive Income attributable to Sun Communities, Inc.	$	64,344	$	40,709	$	42,834	$	75,297

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Six Months Ended
	June 30, 2020		June 30, 2019
Operating Activities
Net Cash Provided By Operating Activities	$	302,027	$	259,844
Investing Activities
Investment in properties	(268,708)		(262,944)
Acquisitions of properties, net of cash acquired	(78,869)		(308,165)




Proceeds from dispositions of assets and depreciated homes, net	24,459		28,774


Issuance of notes and other receivables	(25,044)		—

Repayments of notes and other receivables	1,719		2,307
Investments in nonconsolidated affiliates	(23,743)		(31,869)
Distributions from nonconsolidated affiliates	2,070		1,367

Net Cash Used For Investing Activities	(368,116)		(570,530)
Financing Activities
Issuance of common stock, OP units, and preferred OP units, net	621,415		443,420
Redemption of Series B-3 preferred OP units	—		(2,675)

Borrowings on lines of credit	1,217,289		2,345,659
Payments on lines of credit	(1,286,462)		(2,397,580)
Proceeds from issuance of other debt	230,000		265,000
Payments on other debt	(201,598)		(223,559)
Prepayment penalty on collateralized term loans	(6,226)		—
Proceeds received from return of prepaid deferred financing costs	—		1,618

Distributions to stockholders, OP unit holders, and preferred OP unit holders	(150,422)		(133,989)



Payments for deferred financing costs	(3,331)		(3,875)

Net Cash Provided By Financing Activities	420,665		294,019
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(192)		443
Net change in cash, cash equivalents and restricted cash	354,384		(16,224)
Cash, cash equivalents and restricted cash, beginning of period	34,830		62,262
Cash, Cash Equivalents and Restricted Cash, End of Period	$	389,214	$	46,038


	Six Months Ended
	June 30, 2020		June 30, 2019
Supplemental Information
Cash paid for interest (net of capitalized interest of $4,561, $3,283 respectively)	$	65,822	$	66,947
Cash paid for interest on mandatorily redeemable debt	$	2,083	$	2,275
Cash paid for income taxes	$	441	$	703
Noncash investing and financing activities

Reduction in secured borrowing balance	$	—	$	9,432
Change in distributions declared and outstanding	$	7,781	$	6,401
Conversion of common and preferred OP units	$	577	$	527
Conversion of Series A-4 preferred stock	$	—	$	337
Asset held for sale	$	5,770	$	—

Noncash investing and financing activities at the date of acquisition



Acquisitions - Common stock and OP units issued	$	10,114	$	—




Acquisitions - Series D preferred interest	$	—	$	51,930
Acquisitions - Series E preferred interest	$	9,000	$	—
Acquisitions - Series F preferred interest	$	9,000	$	—
Acquisitions - Escrow	$	—	$	1,395

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENT OF EQUITY

(In thousands) (Unaudited)


	Temporary Equity		Stockholders’ Equity
					Common Stock		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total Stockholders’ Equity			Total Equity
Balance at December 31, 2019	$	78,004	$	932	$	5,213,264	$	(1,393,141)	$	(1,331)	$	56,228	$	3,875,952		$	3,953,956
Issuance of common stock and common OP units, net	—		1		(7,141)		—		—		—		(7,140)			(7,140)
Conversion of OP units	—		—		446		—		—		(446)		—			—

Equity Interests - NG Sun LLC & NG Sun Whitewater LLC	98		—		—		(85)		—		—		(85)			13
Share-based compensation - amortization and forfeitures	—		—		4,928		93		—		—		5,021			5,021


Issuance of Series E preferred OP units	—		—		181		—		—		8,819		9,000			9,000
Foreign currency translation	—		—		—		—		(6,994)		(306)		(7,300)			(7,300)
Remeasurement of notes receivable and equity method investment (see Note 17)	—		—		—		1,953		—		—		1,953			1,953
Net income (loss)	(1,195)		—		—		(14,514)		—		231		(14,283)			(15,478)
Distributions	(457)		—		—		(73,730)		—		(2,918)		(76,648)			(77,105)
Balance at March 31, 2020	$	76,450	$	933	$	5,211,678	$	(1,479,424)	$	(8,325)	$	61,608	$	3,786,470		$	3,862,920
Issuance of common stock and common OP units, net	—		49		628,506		—		—		10,114		638,669			638,669
Conversion of OP units	—		1		130		—		—		(131)		—			—

Equity Interests - NG Sun LLC	(641)		—		—		(67)		—		—		(67)			(708)
Issuance of Series F preferred OP units	8,965		—		—		—		—		—		—			8,965
Share-based compensation - amortization and forfeitures	—		—		7,284		92		—		—		7,376			7,376



Foreign currency translation	—		—		—		—		3,850