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sui-20210930

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, 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 October 19, 2021: 115,970,843

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	3
	Consolidated Statement of Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	63

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 6.	Exhibits	66

	Signatures	67

SUN COMMUNITIES, INC.

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	(Unaudited)
	September 30, 2021		December 31, 2020
Assets
Land	$	2,457,236	$	2,119,364
Land improvements and buildings	9,469,247		8,480,597
Rental homes and improvements	591,367		637,603
Furniture, fixtures and equipment	590,829		447,039
Investment property	13,108,679		11,684,603
Accumulated depreciation	(2,232,243)		(1,968,812)
Investment property, net (including $567,026 and $453,236 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	10,876,436		9,715,791
Cash, cash equivalents and restricted cash	85,619		92,641
Marketable securities (see Note 14)	160,321		124,726
Inventory of manufactured homes	43,708		46,643
Notes and other receivables, net	256,924		221,650

Goodwill	461,609		428,833
Other intangible assets, net	297,625		305,611
Other assets, net (including $28,670 and $25,072 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	401,054		270,691
Total Assets	$	12,583,296	$	11,206,586
Liabilities
Secured debt (see Note 8) (including $49,054 and $47,706 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	$	3,403,436	$	3,489,983
Unsecured debt (see Note 8) (including $35,249 and $35,249 for consolidated VIE at September 30, 2021 and December 31, 2020; see Note 7)	1,286,001		1,267,093






Distributions payable	98,453		86,988
Advanced reservation deposits and rent	223,471		187,730
Accrued expenses and accounts payable	232,590		148,435
Other liabilities (including $22,908 and $22,221 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	244,518		134,650
Total Liabilities	5,488,469		5,314,879
Commitments and contingencies (see Note 15)
Temporary equity (see Note 9) (including $37,064 and $32,719 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	292,394		264,379









Stockholders' Equity

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 115,959 September 30, 2021 and 107,626 December 31, 2020	1,160		1,076
Additional paid-in capital	8,170,322		7,087,658
Accumulated other comprehensive income	1,752		3,178
Distributions in excess of accumulated earnings	(1,475,634)		(1,566,636)
Total Sun Communities, Inc. stockholders' equity	6,697,600		5,525,276
Noncontrolling interests
Common and preferred OP units	85,756		85,968
Consolidated entities (including $18,527 and $16,084 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)	19,077		16,084
Total noncontrolling interests	104,833		102,052
Total Stockholders' Equity	6,802,433		5,627,328
Total Liabilities, Temporary Equity and Stockholders' Equity	$	12,583,296	$	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				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Revenues
Real property	$	478,625	$	320,488	$	1,215,143	$	829,964
Home sales	81,099		47,662		215,146		126,779
Service, retail, dining and entertainment	113,039		23,859		270,103		36,662
Interest	2,690		2,624		8,040		7,609
Brokerage commissions and other, net	8,841		5,881		21,740		13,068
Total Revenues	684,294		400,514		1,730,172		1,014,082
Expenses
Property operating and maintenance	158,095		98,775		391,609		239,413
Real estate tax	24,751		17,442		70,361		52,341
Home costs and selling	56,567		39,899		156,920		105,989
Service, retail, dining and entertainment	87,106		17,615		211,122		31,539
General and administrative	43,276		26,834		126,606		78,710
Catastrophic event-related charges, net	328		14		3,097		54
Business combination	—		—		1,031		—
Depreciation and amortization	127,091		88,499		378,068		259,453
Loss on extinguishment of debt (see Note 8)	—		—		8,108		5,209
Interest	39,026		30,214		116,224		94,058
Interest on mandatorily redeemable preferred OP units / equity	1,047		1,047		3,124		3,130
Total Expenses	537,287		320,339		1,466,270		869,896
Income Before Other Items	147,007		80,175		263,902		144,186
Gain / (loss) on remeasurement of marketable securities (see Note 14)	12,072		1,492		43,227		(2,636)
Gain / (loss) on foreign currency translation	(7,028)		5,023		(7,107)		(2,496)
Gain on dispositions of properties	108,104		5,595		108,104		5,595
Other expense, net	(9,372)		(3,511)		(10,041)		(4,890)
Gain / (loss) on remeasurement of notes receivable (see Note 4)	92		(445)		561		(2,311)
Income from nonconsolidated affiliates (see Note 6)	962		1,204		2,927		1,348
Loss on remeasurement of investment in nonconsolidated affiliates	(119)		(446)		(130)		(1,505)
Current tax benefit / (expense) (see Note 12)	(402)		107		(1,418)		(462)
Deferred tax benefit / (expense) (see Note 12)	(1,155)		562		(1,074)		804
Net Income	250,161		89,756		398,951		137,633
Less: Preferred return to preferred OP units / equity interests	3,101		1,645		9,000		4,799
Less: Income attributable to noncontrolling interests	15,290		6,907		22,629		8,806


Net Income Attributable to Sun Communities, Inc. Common Stockholders	$	231,770	$	81,204	$	367,322	$	124,028

Weighted average common shares outstanding - basic	115,136		97,542		111,717		95,270
Weighted average common shares outstanding - diluted	118,072		97,549		114,291		95,273

Basic earnings per share (see Note 13)	$	2.00	$	0.83	$	3.27	$	1.29
Diluted earnings per share (see Note 13)	$	2.00	$	0.83	$	3.27	$	1.29

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, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net Income	$	250,161	$	89,756	$	398,951	$	137,633
Foreign currency translation gain / (loss) adjustment	(3,606)		2,146		(1,491)		(1,282)

Total Comprehensive Income	246,555		91,902		397,460		136,351
Less: Comprehensive income attributable to noncontrolling interests	(15,129)		(6,804)		(22,564)		(8,419)
Comprehensive Income attributable to Sun Communities, Inc.	$	231,426	$	85,098	$	374,896	$	127,932

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 Income		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
Issuance of common stock and common OP units, net	—		—		(813)		—		—		—		(813)		(813)
Conversion of OP units	—		1		1,336		—		—		(1,337)		—		—



Equity interest in consolidated entities	1,750		—		—		—		—		550		550		2,300

Other redeemable non-controlling interests	56		—		—		(55)		—		—		(55)		1


Share-based compensation - amortization and forfeitures	—		—		6,704		77		—		—		6,781		6,781




Foreign currency translation	—		—		—		—		(3,445)		(161)		(3,606)		(3,606)
Net income	7,023		—		—		234,871		—		8,267		243,138		250,161
Distributions	(2,038)		—		—		(96,246)		—		(3,101)		(99,347)		(101,385)
Other	—		—		—		(38)		—		(1)		(39)		(39)
Balance at September 30, 2021	$	292,394	$	1,160	$	8,170,322	$	(1,475,634)	$	1,752	$	104,833	$	6,802,433	$	7,094,827

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