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sui-20220930

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, 2022.

☐ TRANSITION REPORT 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 October 18, 2022: 123,890,230

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	2
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	3
	Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	70
Item 4.	Controls and Procedures	71

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	72
Item 1A.	Risk Factors	72
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 6.	Exhibits	74

	Signatures	75

SUN COMMUNITIES, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In millions, except for per share amounts)


	(Unaudited)
	September 30, 2022		December 31, 2021
Assets
Land	$	4,173.1	$	2,556.3
Land improvements and buildings	10,632.6		9,958.3
Rental homes and improvements	604.4		591.7
Furniture, fixtures and equipment	813.8		656.4
Investment property	16,223.9		13,762.7
Accumulated depreciation	(2,611.8)		(2,337.2)
Investment property, net (see Note 7 at VIEs)	13,612.1		11,425.5
Cash, cash equivalents and restricted cash (see Note 7 at VIEs)	112.0		78.2
Marketable securities (see Note 15)	100.4		186.9
Inventory of manufactured homes	153.5		51.1
Notes and other receivables, net	511.0		469.6

Goodwill	981.5		495.4
Other intangible assets, net (see Note 7 at VIEs)	403.2		306.8
Other assets, net (see Note 7 at VIEs)	610.9		480.6
Total Assets	$	16,484.6	$	13,494.1
Liabilities
Secured debt (see Note 8; Note 7 at VIEs)	$	3,006.0	$	3,380.7
Unsecured debt (see Note 8; Note 7 at VIEs)	3,705.0		2,291.1






Distributions payable	111.2		98.4
Advanced reservation deposits and rent (see Note 7 at VIEs)	294.2		242.8
Accrued expenses and accounts payable (see Note 7 at VIEs)	392.8		237.5
Other liabilities (see Note 7 at VIEs)	845.4		224.1
Total Liabilities	8,354.6		6,474.6
Commitments and contingencies (see Note 16)
Temporary equity (see Note 9; Note 7 at VIEs)	206.8		288.9









Shareholders' Equity

Common stock, $0.01 par value. Authorized: 180.0 shares; Issued and outstanding: 123.9 at September 30, 2022 and 116.0 at December 31, 2021	1.2		1.2
Additional paid-in capital	9,536.4		8,175.6
Accumulated other comprehensive income / (loss)	(69.9)		3.1
Distributions in excess of accumulated earnings	(1,628.9)		(1,556.0)
Total SUI shareholders' equity	7,838.8		6,623.9
Noncontrolling interests
Common and preferred OP units	83.8		86.8
Consolidated entities (see Note 7 at VIEs)	0.6		19.9
Total noncontrolling interests	84.4		106.7
Total Shareholders' Equity	7,923.2		6,730.6
Total Liabilities, Temporary Equity and Shareholders' Equity	$	16,484.6	$	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				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenues
Real property	$	585.7	$	478.1	$	1,461.6	$	1,213.9
Home sales	150.7		81.1		358.1		215.1
Service, retail, dining and entertainment	174.2		113.7		423.0		271.5
Interest	11.2		2.6		25.3		8.0
Brokerage commissions and other, net	10.8		8.8		27.4		21.7
Total Revenues	932.6		684.3		2,295.4		1,730.2
Expenses
Property operating and maintenance	184.7		150.8		469.2		375.2
Real estate tax	29.4		24.8		83.2		70.4
Home costs and selling	96.4		56.5		235.2		156.9
Service, retail, dining and entertainment	144.9		94.5		363.3		227.6
General and administrative	69.1		43.2		187.0		126.7
Catastrophic event-related charges, net	12.2		0.3		12.3		3.1
Business combinations	8.4		—		23.9		1.0
Depreciation and amortization	151.3		127.1		450.0		378.1

Loss on extinguishment of debt (see Note 8)	4.0		—		4.4		8.1
Interest	61.7		39.0		162.2		116.2
Interest on mandatorily redeemable preferred OP units / equity	1.0		1.1		3.1		3.1
Total Expenses	763.1		537.3		1,993.8		1,466.4
Income Before Other Items	169.5		147.0		301.6		263.8
Gain / (loss) on remeasurement of marketable securities (see Note 15)	(7.2)		12.0		(74.0)		43.2
Gain / (loss) on foreign currency exchanges	14.9		(7.0)		21.7		(7.1)
Gain / (loss) on dispositions of properties	(0.8)		108.1		12.5		108.1
Other income / (expense), net	2.8		(9.3)		2.6		(10.0)
Gain / (loss) on remeasurement of notes receivable (see Note 4)	(0.1)		0.1		0.1		0.6
Income from nonconsolidated affiliates (see Note 6)	2.0		0.9		3.8		2.9
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6)	(0.4)		(0.1)		0.1		(0.1)
Current tax expense (see Note 12)	(7.3)		(0.4)		(12.5)		(1.4)
Deferred tax benefit / (expense) (see Note 12)	3.6		(1.2)		3.9		(1.1)
Net Income	177.0		250.1		259.8		398.9
Less: Preferred return to preferred OP units / equity interests	2.5		3.1		8.6		9.0
Less: Income attributable to noncontrolling interests	11.9		15.3		13.9		22.6


Net Income Attributable to SUI Common Shareholders	$	162.6	$	231.7	$	237.3	$	367.3

Weighted average common shares outstanding - basic	122.4		115.1		119.2		111.7
Weighted average common shares outstanding - diluted	122.8		118.1		121.9		114.3

Basic earnings per share (see Note 13)	$	1.32	$	2.00	$	1.98	$	3.27
Diluted earnings per share (see Note 13)	$	1.32	$	2.00	$	1.97	$	3.27

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions) (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net Income	$	177.0	$	250.1	$	259.8	$	398.9
Foreign currency translation loss adjustment	(84.2)		(3.5)		(151.2)		(1.5)

Cash Flow Hedges:
Change in unrealized gain on interest rate derivatives	40.7		—		75.7		—
Less: interest rate derivative (gain) / loss reclassified to earnings	0.2		—		(0.6)		—
Net unrealized gain on interest rate derivatives	40.9		—		75.1		—
Total Comprehensive Income	133.7		246.6		183.7		397.4
Less: Comprehensive income attributable to noncontrolling interests	(10.2)		(15.2)		(10.8)		(22.5)
Comprehensive Income attributable to SUI	$	123.5	$	231.4	$	172.9	$	374.9

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 / (loss)		Noncontrolling 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)
OP Units accretion	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
Issuance of common stock and common OP units, net	—		—		968.6		—		—		2.7		971.3		971.3
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		—		(1.2)		—		—		—		(1.2)		(1.2)


Third party equity interest in consolidated entities	9.7		—		—		—		—		—		—		9.7

Other redeemable noncontrolling interests	0.1		—		—		(0.1)		—		—		(0.1)		—
Acquisition of third parties equity interest in consolidated entities	—		—		13.2		—		—		(16.5)		(3.3)		(3.3)

Share-based compensation - amortization and forfeitures	—		—		9.1		0.1		—		—		9.2		9.2









Other comprehensive loss	—		—		—		—		(54.2)		(2.5)		(56.7)		(56.7)
Net income	1.5		—		—		77.1		—		2.7		79.8		81.3
Distributions	(2.0)		—		—		(107.0)		—		(3.2)		(110.2)		(112.2)
OP Units accretion	0.1		—		—		(0.2)		—		—		(0.2)		(0.1)
Balance at June 30, 2022	$	293.3	$	1.2	$	9,159.1	$	(1,684.7)	$	(28.3)	$	90.9	$	7,538.2	$	7,831.5
Issuance of common stock and common OP units, net	—		—		275.3		—		—		—		275.3		275.3
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		—		(0.8)		—		—		—		(0.8)		(0.8)
Conversion of OP units	(92.6)		—		95.0		—		—		(2.4)		92.6		—




Acquisition of third party equity interest in consolidated entities	—		—		(1.5)		—		—		(4.1)		(5.6)		(5.6)
Share-based compensation - amortization and forfeitures	—		—		9.3		—		—		—		9.3		9.3









Other comprehensive loss	—		—		—		—		(41.6)		(1.7)		(43.3)		(43.3)
Net income	7.1		—		—		165.1		—		4.8		169.9		177.0
Distributions	(1.2)		—		—		(109.0)		—		(