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sui-20230630

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, 2023.

☐ 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 300,

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 July 20, 2023: 124,418,869

INDEX



PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	2
	Consolidated Statements of Comprehensive Income / (Loss) for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	65
Item 4.	Controls and Procedures	66

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6.	Exhibits	69

	Signatures	70

SUN COMMUNITIES, INC.

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In millions, except for per share amounts)


	(Unaudited)
	June 30, 2023		December 31, 2022
Assets
Land	$	4,039.5	$	4,322.3
Land improvements and buildings	11,323.5		10,903.4
Rental homes and improvements	694.1		645.2
Furniture, fixtures and equipment	941.8		839.0
Investment property	16,998.9		16,709.9
Accumulated depreciation	(3,011.4)		(2,738.9)
Investment property, net (see Note 7 at VIEs)	13,987.5		13,971.0
Cash, cash equivalents and restricted cash (see Note 7 at VIEs)	68.7		90.4
Marketable securities (see Note 15)	110.4		127.3
Inventory of manufactured homes	236.6		202.7
Notes and other receivables, net	733.3		617.3

Goodwill	1,104.2		1,018.4
Other intangible assets, net (see Note 7 at VIEs)	385.4		402.0
Other assets, net (see Note 7 at VIEs)	935.3		655.1
Total Assets	$	17,561.4	$	17,084.2
Liabilities
Secured debt (see Note 8; Note 7 at VIEs)	$	3,373.0	$	3,217.8
Unsecured debt (see Note 8; Note 7 at VIEs)	4,241.0		3,979.4






Distributions payable	118.0		111.3
Advanced reservation deposits and rent (see Note 7 at VIEs)	430.9		352.1
Accrued expenses and accounts payable (see Note 7 at VIEs)	353.6		396.3
Other liabilities (see Note 7 at VIEs)	958.3		935.9
Total Liabilities	9,474.8		8,992.8
Commitments and contingencies (see Note 16)
Temporary equity (see Note 9; Note 7 at VIEs)	298.1		202.9









Shareholders' Equity

Common stock, $0.01 par value. Authorized: 360.0 shares; Issued and outstanding: 124.4 at June 30, 2023 and 124.0 at December 31, 2022	1.2		1.2
Additional paid-in capital	9,567.5		9,549.7
Accumulated other comprehensive income / (loss)	37.6		(9.9)
Distributions in excess of accumulated earnings	(1,898.2)		(1,731.2)
Total SUI shareholders' equity	7,708.1		7,809.8
Noncontrolling interests
Common and preferred OP units	80.4		78.7

Total noncontrolling interests	80.4		78.7
Total Shareholders' Equity	7,788.5		7,888.5
Total Liabilities, Temporary Equity and Shareholders' Equity	$	17,561.4	$	17,084.2

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				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenues
Real property	$	526.2	$	488.1	$	967.6	$	875.9
Home sales	122.6		142.7		208.9		207.4
Service, retail, dining and entertainment	190.9		167.6		293.5		248.8
Interest	14.0		7.3		25.4		14.1
Brokerage commissions and other, net	9.8		8.6		19.3		16.6
Total Revenues	863.5		814.3		1,514.7		1,362.8
Expenses
Property operating and maintenance	178.6		160.4		335.2		284.5
Real estate tax	30.0		27.7		60.1		53.8
Home costs and selling	81.2		92.9		144.4		138.8
Service, retail, dining and entertainment	171.7		142.7		271.7		218.4
General and administrative	62.3		62.2		126.2		117.9
Catastrophic event-related charges, net	(0.1)		0.1		0.9		0.1
Business combinations	0.2		15.0		3.0		15.5
Depreciation and amortization	164.1		150.1		319.7		298.0
Asset impairments	6.5		0.1		8.9		0.7
Loss on extinguishment of debt (see Note 8)	—		0.1		—		0.4
Interest	79.2		55.3		155.8		100.5
Interest on mandatorily redeemable preferred OP units / equity	0.9		1.1		1.9		2.1
Total Expenses	774.6		707.7		1,427.8		1,230.7
Income Before Other Items	88.9		106.6		86.9		132.1
Gain / (loss) on remeasurement of marketable securities (see Note 15)	5.8		(32.3)		(14.1)		(66.8)
Gain on foreign currency exchanges	2.7		9.0		—		6.8
Gain / (loss) on dispositions of properties	(0.6)		(0.1)		(2.2)		13.3
Other income / (expense), net	(0.8)		0.4		(1.8)		(0.2)
Gain / (loss) on remeasurement of notes receivable (see Note 4)	(0.1)		—		(1.8)		0.2
Income / (loss) from nonconsolidated affiliates (see Note 6)	(0.7)		0.9		(0.9)		1.8
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6)	—		0.4		(4.5)		0.5
Current tax expense (see Note 12)	(5.4)		(3.9)		(9.3)		(5.2)
Deferred tax benefit (see Note 12)	7.7		0.3		12.3		0.3
Net Income	97.5		81.3		64.6		82.8
Less: Preferred return to preferred OP units / equity interests	3.3		3.1		5.7		6.1
Less: Income / (loss) attributable to noncontrolling interests	4.4		4.2		(0.8)		2.0


Net Income Attributable to SUI Common Shareholders	$	89.8	$	74.0	$	59.7	$	74.7

Weighted average common shares outstanding - basic	123.4		120.0		123.4		117.6
Weighted average common shares outstanding - diluted	123.4		120.0		123.4		120.4

Basic earnings per share (see Note 13)	$	0.72	$	0.61	$	0.48	$	0.63
Diluted earnings per share (see Note 13)	$	0.72	$	0.61	$	0.48	$	0.63

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions) (Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net Income	$	97.5	$	81.3	$	64.6	$	82.8
Foreign Currency Translation
Foreign currency translation gain / (loss) arising during period	15.4		(65.7)		32.6		(67.0)
Adjustment for accumulated foreign currency translation loss reclassified into earnings	—		—		11.9		—
Net foreign currency translation gain / (loss)	15.4		(65.7)		44.5		(67.0)
Cash Flow Hedges
Change in unrealized gain on interest rate derivatives	19.0		9.8		10.4		35.0
Less: Interest rate derivative gains reclassified to earnings	(3.2)		(0.8)		(5.5)		(0.8)
Net unrealized gain on interest rate derivatives	15.8		9.0		4.9		34.2
Total Comprehensive Income	128.7		24.6		114.0		50.0
Less: Comprehensive income attributable to noncontrolling interests	(5.7)		(1.7)		(1.1)		(0.6)
Comprehensive Income attributable to SUI	$	123.0	$	22.9	$	112.9	$	49.4

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In millions) (Unaudited)


				Stockholders' Equity
	Temporary Equity		Common Stock (Shares)	Common Stock ($Value)		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income / (Loss)		Non-controlling Interests		Total Stockholders' Equity		Total Equity
Balance at December 31, 2022	$	202.9	124.0	$	1.2	$	9,549.7	$	(1,731.2)	$	(9.9)	$	78.7	$	7,888.5	$	8,091.4
Issuance of common stock and common OP units, net	—		0.4	—		—		—		—		4.4		4.4		4.4
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		(0.1)	—		(11.0)		—		—		—		(11.0)		(11.0)
Conversion of OP units	—		0.1	—		7.3		—		—		—		7.3		7.3

Issuance of third party equity interests in consolidated entities	1.7		—	—		—		—		—		—		—		1.7



Share-based compensation - amortization and forfeitures	—		—	—		10.4		—		—		—		10.4		10.4










Issuance of Series K preferred OP units	100.0		—	—		—		—		—		—		—		100.0



Other comprehensive income	—		—	—		—		—		17.6		0.6		18.2		18.2
Net loss	(4.4)		—	—		—		(27.7)		—		(0.8)		(28.5)		(32.9)
Distributions	(1.6)		—	—		—		(115.8)		—		(3.1)		(118.9)		(120.5)
OP Units accretion	0.3		—	—		—		(0.3)		—		—		(0.3)		—
Balance at March 31, 2023	$	298.9	124.4	$	1.2	$	9,556.4	$	(1,875.0)	$	7.7	$	79.8	$	7,770.1	$	8,069.0
Issuance of common stock and common OP units, net	—		—	—		(0.2)		—		—		—		(0.2)		(0.2)
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		—	—		(1.1)		—		—		—		(1.1)		(1.1)
Conversion of OP units	(2.0)		—	—		2.1		—		—		(0.1)		2.0		—

Issuance of third party equity interests in consolidated entities	0.2		—	—		—		—		—		—		—		0.2
Other redeemable noncontrolling interests	0.1		—	—		—		(0.1)		—		—		(0.1)		—


Share-based compensation - amortization and forfeitures	—		—	—		10.3		0.2		—		—		10.5		10.5










Issuance of Series K preferred OP units	0.6		—	—		—		—		—		—		—		0.6



Other comprehensive income	—		—	—		—		—		29.9		1.3		31.2		31.2
Net income	1.9		—	—		—		93.1		—		2.5		95.6		97.5
Distributions	(2.3)		—	—		—		(115.7)		—		(3.1)		(118.8)		(121.1)
OP Units accretion	0.7		—	—		—		(0.7)		—		—		(0.7)		—
Balance at June 30, 2023	$	298.1	124.4	$	1.2	$	9,567.5	$	(1,898.2)	$	37.6	$	80.4	$	7,788.5	$	8,086.6

SUN COMMUNITIES, INC.


				Stockholders' Equity
	Temporary Equity		Common Stock (Shares)	Common Stock ($Value)		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income / (loss)		Non-controlling Interests		Total Stockholders' Equity		Total Equity
Balance at December 31, 2021	$	288.9	116.0	$	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	—		0.3	—		(0.2)		—		—		2.8		2.6		2.6
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		(0.1)	—		(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	116.2	$	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	—		5.5	—		968.6		—		—		2.7		971.3		971.3
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	—		(0.1)	—		(1.2)		—		—		—		(1.2)		(1.2)


Issuance of third party equity interests in consolidated entities	9.7		—	—		—		—		—		—		—		9.7
Other redeemable noncontrolling interests	0.1		—	—		—		(0.1)		—		—		(0.1)		—

Acquisition of third party 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	121.6	$	1.2	$	9,159.1	$	(1,684.7)	$	(28.3)	$	90.9	$	7,538.2	$	7,831.5

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (Unaudited)


	Six Months Ended
	June 30, 2023		June 30, 2022
Operating Activities
Net Cash Provided By Operating Activities	$	449.9	$	532.0
Investing Activities
Investment in properties	(564.7)		(406.4)
Acquisitions, net of cash acquired	(48.7)		(1,903.7)
Proceeds / (payment) for deposit on acquisition	1.2		(195.3)
Proceeds from insurance	5.0		—

Proceeds from disposition of assets and depreciated homes, net	34.2		53.7
Proceeds related to disposition of properties	0.2		28.8
Issuance of notes and other receivables	(14.5)		(37.8)

Repayments of notes and other receivables	4.8		2.5

Investments in nonconsolidated affiliates	(12.1)		(25.4)
Distributions of capital from nonconsolidated affiliates	12.8		7.8

Net Cash Used For Investing Activities	(581.8)		(2,475.8)
Financing Activities
Issuance and costs of common stock, OP units and preferred OP units, net	(0.2)		934.5
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards	(12.1)		(17.6)


Borrowings on lines of credit	990.1		2,384.4
Payments on lines of credit	(1,186.5)		(1,572.0)
Proceeds from issuance of other debt	583.0		597.5
Contributions from noncontrolling interest	1.9		9.8
Payments on other debt	(28.3)		(46.9)
Payments on financial liability	—		(2.3)

Fees paid in connection with extinguishment of debt	—		(0.3)
Proceeds received from return of prepaid deferred financing costs	2.0		—
Distributions	(234.8)		(209.0)
Payments for deferred financing costs	(5.7)		(19.6)


Distributions for redemption of noncontrolling interests	—		(1.6)

Net Cash Provided By Financing Activities	109.4		2,056.9
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0.8		(6.6)
Net change in cash, cash equivalents and restricted cash	(21.7)		106.5
Cash, cash equivalents and restricted cash, beginning of period	90.4		78.2
Cash, Cash Equivalents and Restricted Cash, End of Period	$	68.7	$	184.7

SUN COMMUNITIES, INC.


	Six Months Ended
	June 30, 2023		June 30, 2022
Supplemental Information
Cash paid for interest (net of capitalized interest of $5.1 and $2.8, respectively)	$	151.6	$	94.7
Cash paid for interest on mandatorily redeemable debt	$	1.9	$	2.1
Cash paid for income taxes	$	15.0	$	1.7
Noncash investing and financing activities


Change in distributions declared and outstanding	$	6.8	$	10.8
Conversion of common and preferred OP units	$	9.4	$	0.7

Assets held for sale, net (included within Other Assets, net and Other Liabilities)	$	210.4	$	—

Common OP units issued for redemption of noncontrolling interests	$	—	$	1.8
ROU asset obtained from new operating lease liabilities	$	0.2	$	—

Issuance of notes and other receivables in relation to disposition of properties	$	111.2	$	—






Noncash investing and financing activities at the date of acquisition
Acquisitions - Common stock and OP units issued	$	4.4	$	37.7








Acquisitions - Series K preferred interest	$	100.6	$	—