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sui-20210630

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, 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 July 20, 2021: 115,903,246

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	3
	Consolidated Statement of Equity for the Three Months Ended June 30, 2021 and 2020 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)	6
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 4.	Controls and Procedures	60

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 6.	Exhibits	63

	Signatures	65

SUN COMMUNITIES, INC.

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	(Unaudited)
	June 30, 2021		December 31, 2020
Assets
Land	$	2,412,629	$	2,119,364
Land improvements and buildings	8,995,041		8,480,597
Rental homes and improvements	622,397		637,603
Furniture, fixtures and equipment	529,549		447,039
Investment property	12,559,616		11,684,603
Accumulated depreciation	(2,165,564)		(1,968,812)
Investment property, net (including $508,055 and $438,918 for consolidated VIEs at June 30, 2021 and December 31, 2020; see Note 7)	10,394,052		9,715,791
Cash, cash equivalents and restricted cash	119,612		92,641
Marketable securities (see Note 14)	153,049		124,726
Inventory of manufactured homes	43,686		46,643
Notes and other receivables, net	262,333		221,650

Goodwill	448,317		428,833
Other intangible assets, net	295,663		305,611
Other assets, net (including $32,817 and $24,554 for consolidated VIEs at June 30, 2021 and December 31, 2020; see Note 7)	324,278		270,691
Total Assets	$	12,040,990	$	11,206,586
Liabilities
Secured debt (see Note 8) (including $74,571 and $47,706 for consolidated VIEs at June 30, 2021 and December 31, 2020; see Note 7)	$	3,457,734	$	3,489,983
Unsecured debt (see Note 8) (including $35,249 and $35,249 for consolidated VIE at June 30, 2021 and December 31, 2020; see Note 7)	853,441		1,267,093





Distributions payable	98,429		86,988
Advanced reservation deposits and rent	290,913		187,730
Accrued expenses and accounts payable	214,200		148,435
Other liabilities (including $44,944 and $21,957 for consolidated VIEs at June 30, 2021 and December 31, 2020; see Note 7)	184,846		134,650
Total Liabilities	5,099,563		5,314,879
Commitments and contingencies (see Note 15)
Temporary equity (see Note 9) (including $27,491 and $28,469 for consolidated VIEs at June 30, 2021 and December 31, 2020; see Note 7)	285,603		264,379









Stockholders' Equity

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 115,889 June 30, 2021 and 107,626 December 31, 2020	1,159		1,076
Additional paid-in capital	8,163,095		7,087,658
Accumulated other comprehensive income	5,197		3,178
Distributions in excess of accumulated earnings	(1,614,243)		(1,566,636)
Total Sun Communities, Inc. stockholders' equity	6,555,208		5,525,276
Noncontrolling interests
Common and preferred OP units	82,865		85,968
Consolidated VIEs (fully attributable to consolidated VIEs; see Note 7)	17,751		16,084
Total noncontrolling interests	100,616		102,052
Total Stockholders' Equity	6,655,824		5,627,328
Total Liabilities, Temporary Equity and Stockholders' Equity	$	12,040,990	$	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				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Revenues
Real property	$	405,905	$	251,127	$	736,518	$	509,476
Home sales	81,848		38,530		134,047		79,117
Service, retail, dining and entertainment	106,452		7,700		157,064		12,803
Interest	2,719		2,635		5,350		4,985
Brokerage commissions and other, net	6,939		3,274		12,899		7,187
Total Revenues	603,863		303,266		1,045,878		613,568
Expenses
Property operating and maintenance	129,961		70,804		233,514		140,638
Real estate tax	23,202		17,723		45,610		34,899
Home costs and selling	58,763		32,051		100,353		66,090
Service, retail, dining and entertainment	78,585		7,242		124,016		13,924
General and administrative	45,127		26,527		83,330		51,876
Catastrophic event-related charges, net	355		(566)		2,769		40
Business combination, net	(201)		—		1,031		—
Depreciation and amortization	126,423		87,265		249,727		170,954
Loss on extinguishment of debt (see Note 8)	8,108		1,930		8,108		5,209
Interest	37,681		31,428		77,198		63,844
Interest on mandatorily redeemable preferred OP units / equity	1,041		1,042		2,077		2,083
Total Expenses	509,045		275,446		927,733		549,557
Income Before Other Items	94,818		27,820		118,145		64,011
Gain / (loss) on remeasurement of marketable securities (see Note 14)	27,494		24,519		31,155		(4,128)
Gain / (loss) on foreign currency translation	(264)		10,374		(239)		(7,105)

Other expense, net	(660)		(821)		(1,759)		(1,793)
Gain / (loss) on remeasurement of notes receivable (see Note 4)	93		246		469		(1,866)
Income from nonconsolidated affiliates (see Note 6)	794		92		1,965		144
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6)	(115)		1,132		(11)		(1,059)
Current tax expense (see Note 12)	(1,245)		(119)		(1,016)		(569)
Deferred tax benefit / (expense) (see Note 12)	(66)		112		81		242
Net Income	120,849		63,355		148,790		47,877
Less: Preferred return to preferred OP units / equity	3,035		1,584		5,899		3,154
Less: Income attributable to noncontrolling interests	7,044		2,861		7,339		1,899


Net Income Attributable to Sun Communities, Inc. Common Stockholders	$	110,770	$	58,910	$	135,552	$	42,824

Weighted average common shares outstanding - basic	112,082		95,859		110,007		94,134
Weighted average common shares outstanding - diluted	112,082		95,860		112,593		94,525

Basic earnings per share (see Note 13)	$	0.98	$	0.61	$	1.22	$	0.45
Diluted earnings per share (see Note 13)	$	0.98	$	0.61	$	1.22	$	0.45

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, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net Income	$	120,849	$	63,355	$	148,790	$	47,877
Foreign currency translation gain / (loss) adjustment	1,220		3,872		2,115		(3,428)

Total Comprehensive Income	122,069		67,227		150,905		44,449
Less: Comprehensive income attributable to noncontrolling interests	(7,100)		(2,883)		(7,435)		(1,615)
Comprehensive Income attributable to Sun Communities, Inc.	$	114,969	$	64,344	$	143,470	$	42,834

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
Issuance of common stock and common OP units, net	—		40		537,557		—		—		—		537,597		537,597
Conversion of OP units	—		1		296		—		—		(297)		—		—


Other redeemable non-controlling interests	53		—		—		(53)		—		—		(53)		—

Share-based compensation - amortization and forfeitures	—		—		7,099		74		—		—		7,173		7,173



Issuance of Series J preferred OP units	24,000		—		—		—		—		—		—		24,000
Foreign currency translation	—		—		—		—		1,164		56		1,220		1,220
Net income	2,448		—		—		113,804		—		4,597		118,401		120,849
Distributions	(1,957)		—		—		(96,188)		—		(3,143)		(99,331)		(101,288)
Other	—		—		15		(836)		—		—		(821)		(821)
Balance at June 30, 2021	$	285,603	$	1,159	$	8,163,095	$	(1,614,243)	$	5,197	$	100,616	$	6,655,824	$	6,941,427

SUN COMMUNITIES, INC.


			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
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)		—		—

Other redeemable non-controlling interests	(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 / (loss)	(300)		—		—		60,492		—		3,163		63,655		63,355
Distributions	(492)		—		—		(77,635)		—		(2,971)		(80,606)		(81,098)
Balance at June 30, 2020