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sui-20220331

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, 2022.

☐ 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 the 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 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 19, 2022: 121,612,597

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021	1
	Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	3
	Consolidated Statements of Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	57

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 6.	Exhibits	60

	Signatures	61

SUN COMMUNITIES, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In millions, except for per share amounts)


	(Unaudited)
	March 31, 2022		December 31, 2021
Assets
Land	$	2,708.0	$	2,556.3
Land improvements and buildings	10,169.4		9,958.3
Rental homes and improvements	583.1		591.7
Furniture, fixtures and equipment	684.8		656.4
Investment property	14,145.3		13,762.7
Accumulated depreciation	(2,441.5)		(2,337.2)
Investment property, net (including $699.4 and $623.5 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	11,703.8		11,425.5
Cash, cash equivalents and restricted cash (including $15.5 and $13.6 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	102.6		78.2
Marketable securities (see Note 15)	158.3		186.9
Inventory of manufactured homes	63.3		51.1
Notes and other receivables, net	513.6		469.6

Goodwill	512.7		495.4
Other intangible assets, net (including $13.8 and $13.4 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	334.2		306.8
Other assets, net (including $6.7 and $5.3 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	525.7		480.6
Total Assets	$	13,914.2	$	13,494.1
Liabilities
Secured debt (see Note 8) (including $53.1 and $52.6 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	$	3,366.6	$	3,380.7
Unsecured debt (see Note 8) (including $35.2 for consolidated VIEs at March 31, 2022 and December 31, 2021, respectively; see Note 7)	2,709.9		2,291.1






Distributions payable	104.5		98.4
Advanced reservation deposits and rent	335.1		242.8
Accrued expenses and accounts payable	228.0		237.5
Other liabilities (including $123.2 and $94.0 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	236.6		224.1
Total Liabilities	6,980.7		6,474.6
Commitments and contingencies (see Note 16)
Temporary equity (see Note 9) (including $32.3 and $35.4 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	283.9		288.9









Shareholders' Equity

Common stock, $0.01 par value. Authorized: 180.0 shares; Issued and outstanding: 116.2 at March 31, 2022 and 116.0 at December 31, 2021	1.2		1.2
Additional paid-in capital	8,169.4		8,175.6
Accumulated other comprehensive income	25.9		3.1
Distributions in excess of accumulated earnings	(1,654.6)		(1,556.0)
Total Sun Communities, Inc. shareholders' equity	6,541.9		6,623.9
Noncontrolling interests
Common and preferred OP units	86.8		86.8
Consolidated entities (including $20.3 and $19.4 for consolidated VIEs at March 31, 2022 and December 31, 2021; see Note 7)	20.9		19.9
Total noncontrolling interests	107.7		106.7
Total Shareholders' Equity	6,649.6		6,730.6
Total Liabilities, Temporary Equity and Shareholders' Equity	$	13,914.2	$	13,494.1

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except for per share amounts) (Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
Revenues
Real property	$	388.2	$	330.6
Home sales	64.7		52.2
Service, retail, dining and entertainment	80.8		50.6
Interest	6.8		2.6
Brokerage commissions and other, net	8.0		6.0
Total Revenues	548.5		442.0
Expenses
Property operating and maintenance	129.3		103.6
Real estate tax	26.1		22.4
Home costs and selling	45.9		41.6
Service, retail, dining and entertainment	70.5		45.4
General and administrative	55.7		38.2
Catastrophic event-related charges, net	—		2.4
Business combinations	0.5		1.2
Depreciation and amortization	148.5		123.9

Loss on extinguishment of debt (see Note 8)	0.3		—
Interest	45.2		39.5
Interest on mandatorily redeemable preferred OP units / equity	1.0		1.0
Total Expenses	523.0		419.2
Income Before Other Items	25.5		22.8
Gain / (loss) on remeasurement of marketable securities (see Note 15)	(34.5)		3.7
Loss on foreign currency translation	(2.2)		—
Gain on dispositions of properties	13.4		—
Other expense, net	(0.6)		(0.5)
Gain on remeasurement of notes receivable (see Note 4)	0.2		0.4
Income from nonconsolidated affiliates (see Note 6)	0.9		1.2
Gain on remeasurement of investment in nonconsolidated affiliates (see Note 6)	0.1		0.1
Current tax benefit / (expense) (see Note 12)	(1.3)		0.2
Deferred tax benefit (see Note 12)	—		0.1
Net Income	1.5		28.0
Less: Preferred return to preferred OP units / equity interests	3.0		2.9
Less: Income / (loss) attributable to noncontrolling interests	(2.2)		0.3


Net Income Attributable to Sun Communities, Inc. Common Shareholders	$	0.7	$	24.8

Weighted average common shares outstanding - basic	115.3		107.9
Weighted average common shares outstanding - diluted	115.9		108.2

Basic earnings per share (see Note 13)	$	0.01	$	0.23
Diluted earnings per share (see Note 13)	$	0.01	$	0.23

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions) (Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
Net Income	$	1.5	$	28.0
Foreign currency translation gain / (loss) adjustment	(1.3)		0.8

Cash flow hedge - Unrealized gain on interest rate swaps	25.2		—
Total Comprehensive Income	25.4		28.8
Less: Comprehensive (income) / loss attributable to noncontrolling interests	1.1		(0.3)
Comprehensive Income attributable to Sun Communities, Inc.	$	26.5	$	28.5

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In millions) (Unaudited)


			Shareholders' Equity
	Temporary Equity		Common Stock		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income		Non-controlling Interests		Total Shareholders' Equity		Total Equity
Balance at December 31, 2021	$	288.9	$	1.2	$	8,175.6	$	(1,556.0)	$	3.1	$	106.7	$	6,730.6	$	7,019.5
Issuance of common stock and common OP units, net	—		—		(0.2)		—		—		2.8		2.6		2.6
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		—		(16.4)		—		—		—		(16.4)		(16.4)
Conversion of OP units	—		—		0.7		—		—		(0.7)		—		—



Share-based compensation - amortization and forfeitures	—		—		9.7		0.1		—		—		9.8		9.8







Other comprehensive income	—		—		—		—		22.8		1.1		23.9		23.9
Net income / (loss)	(3.1)		—		—		3.7		—		0.9		4.6		1.5
Distributions	(2.1)		—		—		(102.3)		—		(3.1)		(105.4)		(107.5)
Other	0.2		—		—		(0.1)		—		—		(0.1)		0.1
Balance at March 31, 2022	$	283.9	$	1.2	$	8,169.4	$	(1,654.6)	$	25.9	$	107.7	$	6,649.6	$	6,933.5


			Shareholders' Equity
	Temporary Equity		Common Stock		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income		Non-controlling Interests		Total Shareholders' Equity		Total Equity
Balance at December 31, 2020	$	264.4	$	1.1	$	7,087.6	$	(1,566.6)	$	3.2	$	102.0	$	5,627.3	$	5,891.7
Issuance of common stock and common OP units, net	—		—		537.1		—		—		—		537.1		537.1
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		—		(14.8)		—		—		—		(14.8)		(14.8)
Conversion of OP units	—		—		1.2		—		—		(1.2)		—		—

Equity interest in consolidated entities	—		—		—		—		—		(0.1)		(0.1)		(0.1)
Other redeemable non-controlling interests	0.1		—		—		(0.1)		—		—		(0.1)		—
Share-based compensation - amortization and forfeitures	—		—		7.0		—		—		—		7.0		7.0







Other comprehensive income	—		—		—		—		0.8		—		0.8		0.8
Net income / (loss)	(1.6)		—		—		27.7		—		1.9		29.6		28.0
Distributions	(1.8)		—		—		(92.8)		—		(3.2)		(96.0)		(97.8)
Other	—		—		—		0.8		—		—		0.8		0.8
Balance at March 31, 2021	$	261.1	$	1.1	$	7,618.1	$	(1,631.0)	$	4.0	$	99.4	$	6,091.6	$	6,352.7

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (Unaudited)


	Three Months Ended
	March 31, 2022		March 31, 2021
Operating Activities
Net Cash Provided By Operating Activities	$	225.7	$	220.5
Investing Activities
Investment in properties	(182.7)		(152.0)
Acquisitions of properties, net of cash acquired	(299.0)		(141.7)




Proceeds from disposition of assets and depreciated homes, net	24.7		17.8
Proceeds related to disposition of properties	0.1		—

Issuance of notes and other receivables	(25.8)		(7.9)

Repayments of notes and other receivables	1.3		1.2
Investments in nonconsolidated affiliates	(6.4)		(4.5)
Distributions of capital from nonconsolidated affiliates	3.6		1.2

Net Cash Used For Investing Activities	(484.2)		(285.9)
Financing Activities
Issuance and costs of common stock, OP units and preferred OP units, net	(0.2)		537.1
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	(16.4)		(14.8)



Borrowings on lines of credit	474.7		442.3
Payments on lines of credit	(58.2)		(766.3)
Proceeds from issuance of other debt	0.9		—

Payments on other debt	(15.4)		(14.8)

Fees paid in connection with extinguishment of debt	(0.3)		—


Distributions	(101.4)		(89.8)



Payments for deferred financing costs	(0.8)		(0.7)

Net Cash Provided By Financing Activities	282.9		93.0

Net change in cash, cash equivalents and restricted cash	24.4		27.6
Cash, cash equivalents and restricted cash, beginning of period	78.2		92.6
Cash, Cash Equivalents and Restricted Cash, End of Period	$	102.6	$	120.2


	Three Months Ended
	March 31, 2022		March 31, 2021
Supplemental Information
Cash paid for interest (net of capitalized interest of $1.0 and $1.2, respectively)	$	46.2	$	39.5
Cash paid for interest on mandatorily redeemable debt	$	1.0	$	1.0
Cash (refunds) / paid for income taxes	$	0.1	$	(0.5)
Noncash investing and financing activities


Change in distributions declared and outstanding	$	6.0	$	8.1
Conversion of common and preferred OP units	$	0.7	$	1.2


Proceeds related to disposition of properties through 1031 exchange	$	28.7	$	—
Contingent consideration liability related to prior acquisitions	$	—	$	3.2







Noncash investing and financing activities at the date of acquisition
Acquisitions - Common stock and OP units issued	$	2.8	$	—

See accompanying Notes to Consolidated Financial Statements.

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.

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, 2021 as filed with the SEC on February 22, 2022 (our "2021 Annual Report"). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our 2021 Annual Report.

Our three reportable segments are: (i) Manufactured home ("MH") communities, (ii) Recreational vehicle ("RV") resorts and (iii) Marina.

2. Revenue

The following table disaggregates our revenue by major source (in millions):


	Three Months Ended
	March 31, 2022								March 31, 2021
	MH		RV		Marina		Consolidated		MH		RV		Marina		Consolidated
Revenues
Real property	$	208.8	$	102.7	$	76.7	$	388.2	$	198.3	$	81.1	$	51.2	$	330.6
Home sales	58.0		6.7		—		64.7		45.3		6.9		—		52.2
Service, retail, dining and entertainment	2.3		7.3		71.2		80.8		1.9		4.3		44.4		50.6
Interest	6.2		0.6		—		6.8		2.1		0.5		—		2.6
Brokerage commissions and other, net	4.2		3.5		0.3		8.0		2.5		3.0		0.5		6.0
Total Revenues	$	279.5	$	120.8	$	148.2	$	548.5	$	250.1	$	95.8	$	96.1	$	442.0

Our revenue consists 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 slip and dry storage space 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 ASC. For additional information, refer to Note 1, "Significant Accounting Policies," in our 2021 Annual Report.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(Unaudited)

3. Real Estate Acquisitions and Dispositions

2022 Acquisitions and Dispositions

During the three months ended March 31, 2022, we acquired the following MH communities and marinas:

Community Name

Type

Sites, Wet Slips and
Dry Storage Spaces

Development Sites

State / Province or Country

Month Acquired

Harrison Yacht Yard(1)

Marina: asset acquisition

—

January

Outer Banks

Marina: asset acquisition

196

—

January

Jarrett Bay Boatworks

Marina: business combination

—

February

Tower Marine

Marina: asset acquisition

446

—

March

Sandy Bay

MH: asset acquisition

616

570

March

Total

1,291

570

(1) Combined with Safe Harbor Narrows Point, an existing adjacent marina.

The following table summarizes the amount of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed during the three months ended March 31, 2022 (in millions):


	At Acquisition Date										Consideration
	Investment in property		Inventory of manufactured homes, boat parts and retail related items		In-place leases, goodwill and other intangible assets		Other assets / (liabilities), net		Total identifiable assets acquired net of liabilities assumed		Cash and escrow		Temporary and permanent equity		Total consideration
Asset Acquisition
Harrison Yacht Yard(1)	$	5.8	$	—	$	—	$	—	$	5.8	$	5.8	$	—	$	5.8
Outer Banks	5.2		—		—		(0.4)		4.8		4.8		—		4.8

Tower Marine(2)	20.0		0.1		—		(1.7)		18.4		18.4		—		18.4
Sandy Bay(2)	187.0		6.2		—		—		193.2		193.2		—		193.2

























Business Combination