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sui-20210331

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 March 31, 2021.

☐ 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 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. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘emerging growth company” in rule 12b-2 of the Exchange Act.

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 April 20, 2021: 111,828,638

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	1
	Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	3
	Consolidated Statement of Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	54

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 6.	Exhibits	57

	Signatures	58

SUN COMMUNITIES, INC.

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	(Unaudited)
	March 31, 2021		December 31, 2020
Assets
Land	$	2,190,762	$	2,119,364
Land improvements and buildings	8,664,199		8,480,597
Rental homes and improvements	652,559		637,603
Furniture, fixtures and equipment	491,735		447,039
Investment property	11,999,255		11,684,603
Accumulated depreciation	(2,088,105)		(1,968,812)
Investment property, net (including $479,196 and $438,918 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7)	9,911,150		9,715,791
Cash, cash equivalents and restricted cash	120,174		92,641
Marketable securities (see Note 14)	127,821		124,726
Inventory of manufactured homes	43,242		46,643
Notes and other receivables, net	249,009		221,650

Goodwill	438,842		428,833
Other intangible assets, net	300,554		305,611
Other assets, net (including $31,820 and $24,554 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7)	263,417		270,691
Total Assets	$	11,454,209	$	11,206,586
Liabilities
Mortgage loans payable (including $54,142 and $47,706 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7)	$	3,430,420	$	3,444,967

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	917,603		1,242,197
Distributions payable	95,076		86,988
Advanced reservation deposits and rent	280,301		187,730
Accrued expenses and accounts payable	160,072		148,435
Other liabilities (including $47,901 and $21,957 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7)	148,128		134,650
Total Liabilities	5,101,512		5,314,879
Commitments and contingencies (see Note 15)
Temporary equity (see Note 9) (including $26,604 and $28,469 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7)	261,059		264,379








Stockholders' Equity

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 111,835 March 31, 2021 and 107,626 December 31, 2020	1,118		1,076
Additional paid-in capital	7,618,128		7,087,658
Accumulated other comprehensive loss	4,033		3,178
Distributions in excess of accumulated earnings	(1,631,044)		(1,566,636)
Total Sun Communities, Inc. stockholders' equity	5,992,235		5,525,276
Noncontrolling interests
Common and preferred OP units	82,502		85,968
Consolidated VIEs (fully attributable to consolidated VIEs; see Note 7)	16,901		16,084
Total noncontrolling interests	99,403		102,052
Total Stockholders' Equity	6,091,638		5,627,328
Total Liabilities, Temporary Equity and Stockholders' Equity	$	11,454,209	$	11,206,586

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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


	Three Months Ended
	March 31, 2021		March 31, 2020
Revenues
Real property	$	330,613	$	258,349
Home sales	52,199		40,587
Service, retail, dining and entertainment	50,612		5,103
Interest	2,631		2,350
Brokerage commissions and other, net	5,960		3,913
Total Revenues	442,015		310,302
Expenses
Property operating and maintenance	103,553		69,834
Real estate tax	22,408		17,176
Home costs and selling	41,590		34,039
Service, retail, dining and entertainment	45,431		6,682
General and administrative	38,203		25,349
Catastrophic event-related charges, net	2,414		606
Business combination	1,232		—
Depreciation and amortization	123,304		83,689
Loss on extinguishment of debt (see Note 8)	—		3,279
Interest	39,517		32,416
Interest on mandatorily redeemable preferred OP units / equity	1,036		1,041
Total Expenses	418,688		274,111
Income Before Other Items	23,327		36,191
Gain / (loss) on remeasurement of marketable securities (see Note 14)	3,661		(28,647)
Gain / (loss) on foreign currency translation	25		(17,479)

Other expense, net	(1,099)		(972)
Income / (loss) on remeasurement of notes receivable (see Note 4)	376		(2,112)
Income from nonconsolidated affiliates (see Note 6)	1,171		52
Income / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6)	104		(2,191)
Current tax benefit / (expense) (see Note 12)	229		(450)
Deferred tax benefit (see Note 12)	147		130
Net Income / (Loss)	27,941		(15,478)
Less: Preferred return to preferred OP units / equity	2,864		1,570
Less: Income / (loss) attributable to noncontrolling interests	295		(962)


Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders	$	24,782	$	(16,086)

Weighted average common shares outstanding - basic	107,932		92,410
Weighted average common shares outstanding - diluted	108,161		92,411

Basic earnings / (loss) per share (see Note 13)	$	0.23	$	(0.17)
Diluted earnings / (loss) per share (see Note 13)	$	0.23	$	(0.17)

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)


	Three Months Ended
	March 31, 2021		March 31, 2020
Net Income / (Loss)	$	27,941	$	(15,478)
Foreign currency translation gain / (loss) adjustment	895		(7,300)

Total Comprehensive Income	28,836		(22,778)
Less: Comprehensive income / (loss) attributable to noncontrolling interests	(335)		1,268
Comprehensive Income / (Loss) attributable to Sun Communities, Inc.	$	28,501	$	(21,510)

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, 2020	$	264,379	$	1,076	$	7,087,658	$	(1,566,636)	$	3,178	$	102,052	$	5,627,328	$	5,891,707
Issuance of common stock and common OP units, net	—		42		522,222		—		—		—		522,264		522,264
Conversion of OP units	—		—		1,150		—		—		(1,150)		—		—

Other redeemable non-controlling interests	52		—		—		(52)		—		—		(52)		—
Share-based compensation - amortization and forfeitures	—		—		7,118		62		—		—		7,180		7,180




Foreign currency translation	—		—		—		—		855		40		895		895

Net income (loss)	(1,568)		—		—		27,647		—		1,862		29,509		27,941
Distributions	(1,804)		—		—		(92,823)		—		(3,260)		(96,083)		(97,887)
Other	—		—		(20)		758		—		(141)		597		597
Balance at March 31, 2021	$	261,059	$	1,118	$	7,618,128	$	(1,631,044)	$	4,033	$	99,403	$	6,091,638	$	6,352,697


			Stockholders' Equity
	Temporary 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)		—		—

Other redeemable non-controlling interests	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	—		—		—		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

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)


	Three Months Ended
	March 31, 2021		March 31, 2020
Operating Activities
Net Cash Provided By Operating Activities	$	220,490	$	118,513
Investing Activities
Investment in properties	(151,979)		(132,759)
Acquisitions of properties, net of cash acquired	(141,755)		(24,439)




Proceeds from dispositions of assets and depreciated homes, net	17,774		12,612


Issuance of notes and other receivables	(7,907)		(19,903)

Repayments of notes and other receivables	1,207		854
Investments in nonconsolidated affiliates	(4,510)		(6,970)
Distributions from nonconsolidated affiliates	1,192		1,275

Net Cash Used For Investing Activities	(285,978)		(169,330)
Financing Activities
Issuance of common stock, OP units, and preferred OP units, net	522,264		(7,140)



Borrowings on lines of credit	442,290		1,163,965
Payments on lines of credit	(766,260)		(763,076)
Proceeds from issuance of other debt	—		230,000
Payments on other debt	(14,799)		(134,203)
Prepayment penalty on collateralized term loans	—		(3,250)


Distributions to stockholders, OP unit holders, and preferred OP unit holders	(89,792)		(71,859)



Payments for deferred financing costs	(701)		(3,328)

Net Cash Provided By Financing Activities	93,002		411,109
Effect of exchange rate changes on cash, cash equivalents and restricted cash	19		(382)
Net change in cash, cash equivalents and restricted cash	27,533		359,910
Cash, cash equivalents and restricted cash, beginning of period	92,641		34,830
Cash, Cash Equivalents and Restricted Cash, End of Period	$	120,174	$	394,740


	Three Months Ended
	March 31, 2021		March 31, 2020
Supplemental Information
Cash paid for interest (net of capitalized interest of $1,154 and $2,258 respectively)	$	39,458	$	32,464
Cash paid for interest on mandatorily redeemable debt	$	1,036	$	1,041
Cash paid / (refunded) for income taxes	$	(484)	$	75
Noncash investing and financing activities


Change in distributions declared and outstanding	$	8,095	$	4,787
Conversion of common and preferred OP units	$	1,150	$	446














Acquisitions - Series E preferred interest	$	—	$	9,000







Acquisitions - Contingent consideration liability	$	3,201	$	—

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership (the "Operating Partnership"), Sun Home Services, Inc. ("SHS") and Safe Harbor Marinas, LLC ("Safe Harbor") are referred to herein as the "Company," "us," "we," and "our."

We follow accounting standards set by the Financial Accounting Standards Board ("FASB"). FASB establishes accounting principles generally accepted in the United States of America ("GAAP"), which we follow to ensure that we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification ("ASC"). These unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information and in accordance with GAAP. We present interim disclosures and certain information and footnote disclosures as required by SEC rules and regulations. Accordingly, the unaudited Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited Consolidated Financial Statements reflect, in the opinion of management, all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of the interim financial statements. All intercompany transactions have been eliminated in consolidation.

During the three months ended March 31, 2021, we changed our organizational structure from a two-segment to a three-segment structure as a result of the recent acquisition of Safe Harbor and its internal organization. The new structure reflects how the chief operating decision maker manages the business, makes operating decisions, allocates resources and evaluates operating performance. Therefore, beginning with results for the three months ended March 31, 2021, we are reporting our financial results consistent with our newly realigned operating segments and have recast prior period amounts to conform to the way we internally manage our business and monitor segment performance. Certain reclassifications have been made to the prior period financial statements and related notes in order to conform to the current period presentation. The most significant changes were the combining of rental home revenue with real property revenue, the combining of rental home operating and maintenance expenses with property operating expenses, and the combining of home selling expenses with cost of home sales. Vacation rental home rent has been reclassified from ancillary income into real property. In addition, ancillary revenues and expenses have been renamed service, retail, dining & entertainment. There was no impact to prior period net income, stockholders equity or cash flows for any of the reclassifications.

The results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 18, 2021 (our "2020 Annual Report"). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our 2020 Annual Report.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

2. Revenue

Disaggregation of Revenue

The following tables details our revenue by major source (in thousands):


	Three Months Ended
	March 31, 2021								March 31, 2020(1)
	MH		RV		Marinas		Consolidated		MH		RV		Marinas	Consolidated
Revenues
Real property	$	198,278	$	81,102	$	51,233	$	330,613	$	183,326	$	75,023	N/A	$	258,349
Home sales	45,332		6,867		—		52,199		35,782		4,805		N/A	40,587
Service, retail, dining and entertainment	1,864		4,394		44,354		50,612		2,053		3,050		N/A	5,103
Interest	2,086		537		8		2,631		1,999		351		N/A	2,350
Brokerage commissions and other, net	2,520		2,895		545		5,960		2,099		1,814		N/A	3,913
Total Revenues	$	250,080	$	95,795	$	96,140	$	442,015	$	225,259	$	85,043	N/A	$	310,302

(1) Recast to reflect segment changes

Our revenue consists primarily of Real property revenue at our MH, RV and marina properties, revenue from Home sales, Service, retail, dining and entertainment revenue, Interest income, and Brokerage commissions and other revenue.

The majority of our revenue is derived from site and home leases, and wet slips and dry storage spaces leases that are accounted for pursuant to ASC 842, "Leases." We account for all revenue from contracts with customers following ASC 606, "Revenue from Contracts with Customers" except for those that are within the scope of other topics in the FASB accounting standards codification. For additional information, refer to Note 1, "Significant Accounting Policies," in our 2020 Annual Report.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

3. Real Estate Acquisitions and Dispositions

2021 Acquisitions

During the three months ended March 31, 2021, we acquired the following communities, resorts and marinas:

Community Name

Type

Sites,
Wet Slips and
Dry Storage Spaces

State

Month Acquired

Association Island KOA

RV: asset acquisition

294

January

Blue Water Beach Resort

RV: asset acquisition

177

February

Tranquility MHC

MH: asset acquisition

February

Islamorada and Angler House(1)

Marina: asset acquisition

251

February

Prime Martha's Vineyard(1)

Marina: asset acquisition

390

March

Pleasant Beach Campground

RV: asset acquisition

102

March

Cherrystone Family Camping Resort

RV: asset acquisition

669

March

Beachwood Resort

RV: asset acquisition

672

March

Total

2,580

(1) Includes two marinas

The following table summarizes the amount of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the MH community, RV resort and marina acquisitions completed during the three months ended March 31, 2021 (in thousands):


	At Acquisition Date										Consideration
	Investment in property		Inventory of manufactured homes, boat parts and retail related items		In-place leases and other intangible assets		Other assets / (liabilities), net		Total identifiable assets acquired net of liabilities assumed		Cash and escrow		Total consideration
Association Island KOA	$	14,965	$	—	$	41	$	(248)	$	14,758	$	14,758	$	14,758
Blue Water Beach Resort	9,000		—		—		(151)		8,849		8,849		8,849
Tranquility MHC	1,250		—		—		(1)		1,249		1,249		1,249
Islamorada and Angler House	18,001		22		269		(317)		17,975		17,975		17,975
Prime Martha's Vineyard(1)	22,258		138		127		(573)		21,950		21,950		21,950
Pleasant Beach Campground	1,588		—		—		1		1,589		1,589		1,589
Cherrystone Family Camping Resort	59,900		—		—		(2,029)		57,871		57,871		57,871
Beachwood Resort	7,000		—		—		(401)		6,599		6,599		6,599



Total	$