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sui-20200930

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 September 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 October 15, 2020: 98,280,096

INDEX

PART I – FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements

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

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

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

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

Consolidated Statement of Equity for the Three and Nine Months Ended September 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)
	September 30, 2020		December 31, 2019
Assets
Land	$	1,441,372	$	1,414,279
Land improvements and buildings	7,119,163		6,595,272
Rental homes and improvements	649,004		627,175
Furniture, fixtures and equipment	338,236		282,874
Investment property	9,547,775		8,919,600
Accumulated depreciation	(1,900,306)		(1,686,980)
Investment property, net (including $385,296 and $344,300 for consolidated VIEs at September 30, 2020 and December 31, 2019; see Note 7)	7,647,469		7,232,620
Cash, cash equivalents and restricted cash	115,529		34,830
Marketable securities; (see Note 14)	107,083		94,727
Inventory of manufactured homes	48,130		62,061
Notes and other receivables, net	191,508		157,926


Other assets, net (including $24,651 and $23,894 for consolidated VIEs at September 30, 2020 and December 31, 2019; see Note 7)	225,998		219,896
Total Assets	$	8,335,717	$	7,802,060
Liabilities
Mortgage loans payable (including $46,197 and $46,993 for consolidated VIEs at September 30, 2020 and December 31, 2019; see Note 7)	$	3,191,380	$	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 and other debt	79,321		183,898
Distributions payable	79,600		71,704
Advanced reservation deposits and rent	146,909		133,420
Accrued expenses and accounts payable	140,848		127,289
Other liabilities (including $21,380 and $13,631 for consolidated VIEs at September 30, 2020 and December 31, 2019; see Note 7)	83,952		81,289
Total Liabilities	3,791,922		3,848,104
Commitments and contingencies (see Note 15)


Series D preferred OP units	50,034		50,913
Series F preferred OP units	8,930		—
Series G preferred OP units	26,072		—
Equity interests - NG Sun LLC and NG Sun Whitewater LLC (fully attributable to consolidated VIEs; see Note 7)	27,513		27,091
Stockholders' Equity

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 98,280 September 30, 2020 and 93,180 December 31, 2019	983		932
Additional paid-in capital	5,851,380		5,213,264
Accumulated other comprehensive loss	(2,226)		(1,331)
Distributions in excess of accumulated earnings	(1,491,338)		(1,393,141)
Total Sun Communities, Inc. stockholders' equity	4,358,799		3,819,724
Noncontrolling interests
Common and preferred OP units	61,350		47,686
Consolidated VIEs (fully attributable to consolidated VIEs; see Note 7)	11,097		8,542
Total noncontrolling interests	72,447		56,228
Total Stockholders' Equity	4,431,246		3,875,952
Total Liabilities, Temporary Equity and Stockholders' Equity	$	8,335,717	$	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						Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Revenues
Income from real property	$	284,373	$	251,163	$	753,642	$	689,890
Revenue from home sales	47,662		49,805		126,779		136,665
Rental home revenue	16,171		14,444		46,611		42,827
Ancillary revenue	43,803		37,259		66,373		67,157
Interest income	2,624		4,770		7,609		14,489
Brokerage commissions and other revenues, net	5,881		5,002		13,068		11,190
Total Revenues	400,514		362,443		1,014,082		962,218
Expenses
Property operating and maintenance	90,647		79,095		219,908		202,892
Real estate taxes	17,442		15,399		52,341		46,455
Cost of home sales	36,237		36,318		95,450		100,030
Rental home operating and maintenance	5,949		6,444		16,128		16,453
Ancillary expenses	20,023		18,752		35,731		38,333
Home selling expenses	3,652		3,972		10,508		10,922
General and administrative expenses	27,243		22,946		79,493		68,530
Catastrophic weather-related charges, net	14		341		54		1,302
Depreciation and amortization	88,499		76,532		259,453		229,241
Loss on extinguishment of debt (see Note 8)	—		12,755		5,209		13,478
Interest expense	30,214		32,219		94,058		99,894
Interest on mandatorily redeemable preferred OP units / equity	1,047		1,216		3,130		3,491
Total Expenses	320,967		305,989		871,463		831,021
Income Before Other Items	79,547		56,454		142,619		131,197
Gain / (loss) on remeasurement of marketable securities (see Note 14)	1,492		12,661		(2,636)		16,548
Gain / (loss) on foreign currency translation	4,664		(3,046)		(2,441)		35
Gain on disposition of property	5,595		—		5,595		—
Other expense, net	(2,524)		(1,362)		(3,378)		(1,524)
Loss on remeasurement of notes receivable (see Note 4)	(445)		—		(2,311)		—
Income from nonconsolidated affiliates (see Note 6)	1,204		513		1,348		1,380
Loss on remeasurement of investment in nonconsolidated affiliates (see Note 6)	(446)		—		(1,505)		—
Current tax benefit / (expense) (see Note 12)	107		(420)		(462)		(906)
Deferred tax benefit / (expense) (see Note 12)	562		(349)		804		(36)
Net Income	89,756		64,451		137,633		146,694
Less: Preferred return to preferred OP units / equity	1,645		1,599		4,799		4,640
Less: Income attributable to noncontrolling interests	6,907		5,422		8,806		9,048
Net Income Attributable to Sun Communities, Inc.	81,204		57,430		124,028		133,006
Less: Preferred stock distribution	—		428		—		1,288
Net Income Attributable to Sun Communities, Inc. Common Stockholders	$	81,204	$	57,002	$	124,028	$	131,718

Weighted average common shares outstanding - basic	97,542		89,847		95,270		87,499
Weighted average common shares outstanding - diluted	97,549		90,332		95,273		87,500

Basic earnings per share (see Note 13)	$	0.83	$	0.63	$	1.29	$	1.49
Diluted earnings per share (see Note 13)	$	0.83	$	0.63	$	1.29	$	1.49

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)


	Three Months Ended						Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net Income	$	89,756	$	64,451	$	137,633	$	146,694
Foreign currency translation gain / (loss) adjustment	2,146		(1,717)		(1,282)		1,771

Total Comprehensive Income	91,902		62,734		136,351		148,465
Less: Comprehensive Income attributable to noncontrolling interests	(6,804)		(5,346)		(8,419)		(9,140)
Comprehensive Income attributable to Sun Communities, Inc.	$	85,098	$	57,388	$	127,932	$	139,325

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Nine Months Ended
	September 30, 2020		September 30, 2019
Operating Activities
Net Cash Provided By Operating Activities	$	464,458	$	398,293
Investing Activities
Investment in properties	(401,976)		(412,092)
Acquisitions of properties, net of cash acquired	(256,359)		(403,889)




Proceeds from dispositions of assets and depreciated homes, net	37,389		43,157
Proceeds from disposition of properties	12,612		—

Issuance of notes and other receivables	(35,188)		(30,186)

Repayments of notes and other receivables	2,713		3,249
Investments in nonconsolidated affiliates	(33,390)		(42,896)
Distributions from nonconsolidated affiliates	8,491		43,406

Net Cash Used For Investing Activities	(665,708)		(799,251)
Financing Activities
Issuance of common stock, OP units, and preferred OP units, net	619,793		441,871
Redemption of Series B-3 preferred OP units	—		(2,675)

Borrowings on lines of credit	1,221,980		2,681,980
Payments on lines of credit	(1,328,440)		(2,669,348)
Proceeds from issuance of other debt	230,000		523,721
Payments on other debt	(220,288)		(372,219)
Prepayment penalty on collateralized term loans	(6,226)		(12,610)
Proceeds received from return of prepaid deferred financing costs	—		1,618

Distributions to stockholders, OP unit holders, and preferred OP unit holders	(231,500)		(205,639)



Payments for deferred financing costs	(3,322)		(6,568)

Net Cash Provided By Financing Activities	281,997		380,131
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(48)		291
Net change in cash, cash equivalents and restricted cash	80,699		(20,536)
Cash, cash equivalents and restricted cash, beginning of period	34,830		62,262
Cash, Cash Equivalents and Restricted Cash, End of Period	$	115,529	$	41,726


	Nine Months Ended
	September 30, 2020		September 30, 2019
Supplemental Information
Cash paid for interest (net of capitalized interest of $7,169 and $5,673 respectively)	$	100,047	$	99,925
Cash paid for interest on mandatorily redeemable debt	$	3,130	$	3,132
Cash paid for income taxes	$	1,069	$	818
Noncash investing and financing activities

Reduction in secured borrowing balance	$	—	$	14,062
Change in distributions declared and outstanding	$	7,861	$	6,442
Conversion of common and preferred OP units	$	793	$	1,411
Conversion of Series A-4 preferred stock	$	—	$	337






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




Acquisitions - Debt	$	—	$	3,900
Acquisitions - Series D preferred interest	$	—	$	51,930
Acquisitions - Series E preferred interest	$	9,000	$	—
Acquisitions - Series F preferred interest	$	9,000	$	—
Acquisitions - Series G preferred interest	$	26,071	$	—
Acquisitions - Escrow	$	—	$	1,395




Acquisitions - Deferred liability	$	—	$	12,597

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 & NG Sun Whitewater 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		22		3,872			3,872

Net income	(300)		—		—		60,492		—		3,163		63,655			63,355
Distributions	(492)		—		—		(77,635)		—		(2,971)		(80,606)			(81,098)
Balance at June 30, 2020	$	83,982	$	983	$	5,847,598	$	(1,496,542)	$	(4,475)	$	71,805	$	4,419,369		$	4,503,351
Issuance of common stock and common OP units, net	—		—		(1,622)		—		—		—		(1,622)			(