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Sun Communities, Inc. Reports 2016 Third Quarter Results

NEWS RELEASE
November 1, 2016

Southfield, Michigan, November 1, 2016 -  Sun Communities, Inc. (NYSE: SUI) (the "Company"), a real estate investment trust ("REIT") that owns and operates manufactured housing ("MH") and recreational vehicle ("RV") communities, today reported its third quarter results.

Financial Results for the Quarter and Nine Months Ended September 30, 2016

For the quarter ended September 30, 2016, total revenues increased $64.3 million, or 34.7 percent, to $249.7 million compared to $185.4 million for the same period in 2015. Net income available for Common Stockholders was $18.9 million, or $0.27 per diluted common share, as compared to $28.8 million, or $0.53 per diluted common share, for the same period in 2015.

For the nine months ended September 30, 2016, total revenues increased $108.6 million, or 21.4 percent, to $615.1 million compared to $506.5 million for the same period in 2015. Net income available for Common Stockholders for the nine months ended September 30, 2016 was $19.0 million, or $0.30 per diluted common share, as compared to $47.9 million, or $0.90 per diluted common share, for the same period in 2015.

"Our strong third quarter results demonstrate the consistent growth profile of our portfolio. With home sales solidly ahead of last year in both the third quarter and year to date, the ongoing demand for manufactured housing in our high quality communities is clearly evident," said Gary A. Shiffman, Chairman and CEO. "I am pleased with the integration of the Carefree assets, which are performing ahead of expectations, as we employ our experience and expertise as a consolidator in this space. With both site expansion opportunities, and selective acquisitions such as the four communities purchased during and subsequent to the quarter, we continue to be well-positioned to drive ongoing growth across our platform."

Non-GAAP Financial Measures and Portfolio Performance

  • For the quarter ended September 30, 2016, Funds from Operations ("FFO")(1) excluding certain items was $1.13 per diluted share and OP unit ("Share") for the three months ended September 30, 2016, as compared to $1.05 in the prior year, an increase of 7.6 percent.
     
  • Home sales increased by 43.0 percent as compared to the third quarter of 2015.
     
  • Revenue producing sites increased by 292 sites for the quarter bringing total portfolio occupancy to 96.2 percent, up 250 basis points from the third quarter of 2015.  
     
  • For the quarter, same community Net Operating Income ("NOI")(1) increased by 6.0 percent as compared to the three months ended September 30, 2015.

OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy increased to 96.2 percent at September 30, 2016 from 93.7 percent at September 30, 2015. During the third quarter of 2016, revenue producing sites increased by 292 sites, as compared to 358 revenue producing sites gained in the third quarter of 2015.

Revenue producing sites gained during the nine months ended September 30, 2016 were 1,385 as compared to 1,357 revenue producing sites gained during the nine months ended September 30, 2015.


Same Community Results

For the 219 communities owned throughout 2016 and 2015, third quarter 2016 total revenues increased 5.9 percent and total expenses increased 5.6 percent, resulting in an increase in NOI(1) of 6.0 percent over the third quarter of 2015.  Same community occupancy increased to 96.4 percent at September 30, 2016 from 94.2 percent at September 30, 2015.

For the nine months ended September 30, 2016, total revenues increased 6.0 percent and total expenses increased 5.1 percent, resulting in an increase in NOI(1) of 6.4 percent over the nine months ended September 30, 2015.


Home Sales

Total home sales were 895 for the third quarter as compared to 626 homes sold during the third quarter of 2015, a 43.0 percent increase.

During the nine months ended September 30, 2016, the Company sold 2,410 homes as compared to the 1,745 homes sold during the same period ending 2015, resulting in an additional 665 homes sold during 2016, or a 38.1 percent increase.

Rental homes sales, which are included in total home sales, were 286 and 223 for the three months ended and 858 and 611 for the nine months ended September 30, 2016 and 2015, respectively.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

For the quarter ended September 30, 2016, the Company closed on $139.0 million of debt with a weighted average interest rate of 3.84 percent and maturities ranging between seven and ten years.  Subsequent to quarter end, the Company completed a $58.5 million secured borrowing that bears interest at a fixed rate of 3.33 percent and has a seven-year term.  During the quarter, the Company also repaid three mortgage loans totaling $62.1 million.

As of September 30, 2016, the Company had approximately $3.1 billion of debt outstanding. The weighted average interest rate was 4.56 percent and the weighted average maturity was 8.6 years. The Company had $69.8 million of unrestricted cash on hand.  At period-end the Company's net debt to trailing twelve month EBITDA(1)(7) ratio was 7.7 times.

Equity Transactions

In September 2016, the Company completed an underwritten registered public equity offering of 3,737,500 shares at a net price of $75.89 per share for proceeds of $283.6 million. The Company used the proceeds of the offering to repay borrowings outstanding under the Company's revolving line of credit.

During the quarter the Company sold 620,828 shares of common stock through its At the Market equity sales program at a weighted average price of $76.81 per share. Net proceeds from the sales were $47.1 million.


PORTFOLIO ACTIVITY

Acquisitions (2)

During the quarter and also subsequent to September 30, 2016, the Company acquired four communities for total consideration of $41.0 million. The communities, located in Colorado, Michigan, New York, and Virginia, contain 964 RV sites and have expansion potential of approximately 400 sites.

These resorts are located in high demand destination locations and will undergo repositioning or expansion activities to fully realize the inherent value in the zoned and entitled land that was previously under-managed or under-utilized.


GUIDANCE 2016

The Company expects FFO(1) per Share excluding certain items for fourth quarter 2016 to be in the range of $0.89 to $0.91 per Share.  This revised range includes a $0.03 to $0.04 per Share impact from the third quarter equity offerings, partially offset by a higher expected contribution from the Carefree portfolio. Guidance also includes expenses related to Hurricane Matthew as an adjustment to FFO(1) excluding certain items.

The Company anticipates full year same community NOI(1) growth of 6.7 percent to 6.9 percent. This revised outlook reflects transient RV revenues which were impacted by weather in a few communities in the third quarter, along with higher real estate tax assessments on a year to date basis.

Estimates of FFO(1) per Share excluding certain items assume certain non-core items are adjusted from
FFO(1).  The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results.  The estimates and assumptions are forward looking based on the Company's current assessment of economic and market conditions, as well as other risks outlined below under the caption "Forward-Looking Statements."


EARNINGS CONFERENCE CALL

A conference call to discuss third quarter operating results will be held on Tuesday, November 1, 2016 at 11:00 A.M. (ET). To participate, call toll-free 877-407-4018. Callers outside the U.S. or Canada can access the call at 201-689-8471. A replay will be available following the call through November 15, 2016 and can be accessed toll-free by calling 877-870-5176 or by calling 858-384-5517. The Conference ID number for the call and the replay is 13646698. The conference call will be available live on Sun Communities' website www.suncommunities.com. Replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of September 30, 2016, owned or had an interest in a portfolio of 339 communities comprising approximately 117,000 developed sites in 29 states and Ontario.

For more information about Sun Communities, Inc., please visit the website at www.suncommunities.com.

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone (248) 208-2500, by email investorrelations@suncommunities.com or by mail Sun Communities, Inc. Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.


Forward-Looking Statements

This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as "will," "may," "could," "expect," "anticipate," "believes," "intends," "should," "plans," "estimates," "approximate," "guidance," and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, the performance of recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, changes in market rates of interest, the ability of manufactured home buyers to obtain financing, the level of repossessions by manufactured home lenders and those risks and uncertainties referenced under the headings entitled "Risk Factors" contained in the Company's 2015 Annual Report on Form 10-K, the Company's Quarterly Report on Form 10-Q for the Quarter ended September 30, 2016, and the Company's other periodic filings with the Securities and Exchange Commission.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company's assumptions, expectations of future events, or trends.


Investor Information                                                           



RESEARCH COVERAGE    
       
  BMO Capital Markets   Paul Adornato
      (212) 885-4170
      paul.adornato@bmo.com
       
  Citi Research   Michael Bilerman/Nicholas Joseph
      (212) 816-1383
      michael.bilerman@citi.com
      nicholas.joseph@citi.com
       
  Evercore ISI   Steve Sakwa
      (212) 446-9462
      ssakwa@isigrp.com
       
  Green Street Advisors   Dave Bragg
      (949) 640-9780
      dbragg@greenst.com
       
  Robert W. Baird & Co.   Drew Babin
      (215) 553-7816
      dbabin@rwbaird.com
       
  Wells Fargo   Todd Stender
      (212) 214-8067
      todd.stender@wellsfargo.com
       
       
       
INQUIRIES      
       
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or
any prospective investor. Please address all inquiries to our investor relations department.
       
  At Our Website   www.suncommunities.com
       
  By Email   investorrelations@suncommunities.com
       
  By Phone   (248) 208-2500


Portfolio Overview                                                                                       
(As of September 30, 2016)


 


Balance Sheets                                                                                                                                              
(amounts in thousands)


    Quarter Ended
    9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015
ASSETS:                    
Land   $ 1,072,964     $ 458,349     $ 456,380     $ 451,340     $ 457,279  
Land improvements and buildings   4,682,920     5,294,663     3,586,969     3,535,909     3,604,444  
Rental homes and improvements   485,340     477,875     469,217     460,480     478,764  
Furniture, fixtures and equipment   125,603     107,123     104,855     102,746     98,567  
Land held for future development   23,497     23,497     23,047     23,047     23,659  
Investment property   6,390,324     6,361,507     4,640,468     4,573,522     4,662,713  
Accumulated depreciation   (977,486 )   (928,882 )   (889,941 )   (852,407 )   (879,184 )
Investment property, net   5,412,838     5,432,625     3,750,527     3,721,115     3,783,529  
Cash and cash equivalents   69,829     31,441     410,408     45,086     23,917  
Inventory of manufactured homes   24,147     29,044     16,636     14,828     15,263  
Notes and other receivables, net   87,856     76,466     54,124     47,972     49,201  
Collateralized receivables, net (3)   143,888     144,017     142,944     139,768     138,241  
Other assets, net   166,148     109,598     188,247     213,030     95,728  
Total assets, net   $ 5,904,706     $ 5,823,191     $ 4,562,886     $ 4,181,799     $ 4,105,879  
LIABILITIES:                    
Mortgage loans payable   $ 2,854,831     $ 2,792,021     $ 2,114,818     $ 2,125,267     $ 2,197,359  
Secured borrowings (3)   144,522     144,684     143,664     140,440     138,887  
Preferred OP units - mandatorily redeemable   45,903     45,903     45,903     45,903     45,903  
Lines of credit   57,737     357,721     58,065     24,687     166,677  
Distributions payable   51,100     47,992     45,351     41,265     38,819  
Other liabilities   275,650     257,423     184,102     184,859     190,284  
Total liabilities   3,429,743     3,645,744     2,591,903     2,562,421     2,777,929  
Series A-4 Preferred Stock   50,227     50,227     61,732     61,732     68,633  
Series A-4 preferred OP units   19,906     20,266     20,762     21,065     20,982  
STOCKHOLDERS' EQUITY:                    
Series A Preferred Stock   34     34     34     34     34  
Common stock   730     686     646     584     545  
Additional paid-in capital   3,313,905     2,980,382     2,706,657     2,319,314     2,079,139  
Accumulated other comprehensive (loss) income   (4,876 )   1     -     -     -  
Distributions in excess of accumulated earnings   (975,511 )   (947,988 )   (896,896 )   (864,122 )   (916,961 )
  Total SUI stockholders' equity   2,334,282     2,033,115     1,810,441     1,455,810     1,162,757  
Noncontrolling interests:                    
Common and preferred OP units   73,284     76,166     80,018     82,538     76,914  
Consolidated variable interest entities   (2,736 )   (2,327 )   (1,970 )   (1,767 )   (1,336 )
Total noncontrolling interest   70,548     73,839     78,048     80,771     75,578  
Total stockholders' equity   2,404,830     2,106,954     1,888,489     1,536,581     1,238,335  
Total liabilities & stockholders' equity   $ 5,904,706     $ 5,823,191     $ 4,562,886     $ 4,181,799     $ 4,105,879  


Statements of Operations                                                                             
(amounts in thousands, except per share amounts)


  Three Months Ended
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015
REVENUES:                  
Income from real property (excluding transient revenue) $ 158,020     $ 129,117     $ 119,084     $ 117,604     $ 119,784  
Transient revenue 26,304     10,884     10,151     5,568     17,764  
Revenue from home sales 31,211     26,039     24,737     25,169     18,991  
Rental home revenue 12,031     11,957     11,708     11,756     11,856  
Ancillary revenues 16,446     7,383     4,613     3,576     12,511  
Interest 4,705     4,672     3,945     4,074     3,987  
Brokerage commissions and other income, net 984     747     406     491     462  
Total revenues 249,701     190,799     174,644     168,238     185,355  
                   
EXPENSES:                  
Property operating and maintenance 57,089     37,067     31,201     33,360     38,716  
Real estate taxes 12,384     10,153     9,585     8,683     8,520  
Cost of home sales 21,935     18,684     18,184     19,296     13,386  
Rental home operating and maintenance 6,350     5,411     5,876     6,841     7,031  
Ancillary expenses 8,539     5,201     3,508     3,888     6,936  
Home selling expenses 3,553     2,858     2,278     2,079     1,910  
General and administrative 16,575     16,543     13,792     10,511     12,670  
Transaction costs 4,191     20,979     2,721     4,653     1,664  
Depreciation and amortization 61,483     49,670     48,412     47,530     44,695  
Interest 33,800     28,428     26,294     28,066     27,453  
Interest on mandatorily redeemable preferred OP units 789     787     787     790     790  
Total expenses 226,688     195,781     162,638     165,697     163,771  
Income / (loss) before other items 23,013     (4,982 )   12,006     2,541     21,584  
Gains on disposition of properties, net -     -     -     98,430     18,190  
Provision for income taxes (283 )   (56 )   (228 )   71     (77 )
Income tax expense - reduction of deferred tax asset -     -     -     (1,000 )   -  
Income from affiliate transactions 500     -     -     -     -  
Net income / loss 23,230     (5,038 )   11,778     100,042     39,697  
Less: Preferred return to preferred OP units (1,257 )   (1,263 )   (1,273 )   (1,281 )   (1,302 )
Less: Amounts attributable to noncontrolling interests (879 )   695     (276 )   (6,922 )   (2,125 )
Less: Preferred stock distribution (2,197 )   (2,197 )   (2,354 )   (2,440 )   (3,179 )
Less: Preferred stock redemption costs -     -     -     -     (4,328 )
NET INCOME / (LOSS) ATTRIBUTABLE TO SUI $ 18,897     $ (7,803 )   $ 7,875     $ 89,399     $ 28,763  
Weighted average common shares outstanding:                  
Basic 68,655     64,757     57,736     56,181     53,220  
Diluted 69,069     64,757     58,126     57,639     53,665  
Earnings (loss) per share:                  
Basic $ 0.27     $ (0.12 )   $ 0.14     $ 1.57     $ 0.53  
Diluted $ 0.27     $ (0.12 )   $ 0.14     $ 1.56     $ 0.53  
                   


Summary of Securities Outstanding as of September 30, 2016               
(units/stock/shares in thousands)

  Number of Units/Stock/Shares Outstanding   Conversion Rate   If Converted   Issuance Price per unit   Annual Distribution Rate
Convertible Securities                  
Series A-1 preferred OP Units 376   2.43902   917   $100   6.0%
Series A-3 preferred OP Units 40   1.8605   74   $100   4.5%
Series A-4 preferred OP Units 743   0.444444   330   $25   6.5%
Series C preferred OP Units 333   1.11   370   $100   4.0%
Common OP Units 2,838   1.0   2,838   N/A   Mirrors the Common Share distributions
Series A-4 cumulative convertible Preferred  Stock 1,682   0.444444   748   $25   6.5%
                   
Non-Convertible Securities                  
Preferred Stock ( SUI-PrA) 3,400   N/A   N/A   $25   7.125%
                   
Common Shares 73,027   N/A   N/A   N/A   $2.60*
* Annual distribution is based on the last quarter distribution annualized.


Reconciliations to Non-GAAP Financial Measures


Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Funds from Operations                                                                               
(amounts in thousands except for per share data)


  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2016   2015   2016   2015
Net income attributable to Sun Communities, Inc. common stockholders $ 18,897     $ 28,763     $ 18,969     $ 47,926  
Adjustments:              
Preferred return to preferred OP units 616     -     1,858     -  
Amounts attributable to noncontrolling interests 685     1,174     255     1,554  
Preferred distribution to Series A-4 preferred stock 683     1,666     -     -  
Depreciation and amortization 61,809     45,014     159,225     130,247  
Gain on disposition of properties, net -     (18,190 )   -     (26,946 )
Gain on disposition of assets, net (4,667 )   (2,937 )   (12,226 )   (7,065 )
Funds from operations ("FFO") attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (5)

 
78,023     55,490     168,081     145,716  
Adjustments:              
Transaction costs 4,191     1,664     27,891     13,150  
Other acquisition related costs (4) 1,467     -     1,467     -  
Income from affiliate transactions (500 )   -     (500 )   (7,500 )
Preferred stock redemption costs -     4,328     -     4,328  
Extinguishment of debt -     -     -     2,800  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items (1) (5)

 
$ 83,181     $ 61,482     $ 196,939     $ 158,494  
               
Weighted average common shares outstanding - basic: 68,655     53,220     63,716     52,855  
Add:              
Common stock issuable upon conversion of stock options 8     14     10     16  
Restricted stock 406     431     437     400  
Common stock issuable upon conversion of Series A-4 preferred stock 747     1,826     -     -  
Common OP units 2,856     2,874     2,861     2,783  
Common stock issuable upon conversion of Series A-1 preferred OP units 920     -     932     -  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     -     75     -  
Weighted average common shares outstanding - fully diluted 73,667     58,365     68,031     56,054  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (5) per Share - fully diluted

 
$ 1.06     $ 0.95     $ 2.47     $ 2.60  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (5) per Share excluding certain items - fully diluted

 
$ 1.13     $ 1.05     $ 2.89     $ 2.83  


Reconciliation of Recurring EBITDA to Net Income Attributable to Sun Communities, Inc. Common Stockholders
(amounts in thousands)


The following table reconciles Recurring EBITDA to consolidated net income:

  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
RECURRING EBITDA (1) $ 123,276     $ 96,186     $ 308,378     $ 264,293  
Interest 33,800     27,453     88,522     79,593  
Interest on mandatorily redeemable preferred OP units 789     790     2,363     2,429  
Depreciation and amortization 61,483     44,695     159,565     130,107  
Extinguishment of debt -     -     -     2,800  
Transaction costs 4,191     1,664     27,891     13,150  
Gains on disposition of properties, net -     (18,190 )   -     (26,946 )
Provision for income tax 283     77     567     229  
Income from affiliate transactions (500 )   -     (500 )   (7,500 )
Net income 23,230     39,697     29,970     70,431  
Less: Preferred return to preferred OP units 1,257     1,302     3,793     3,692  
Less: Amounts attributable to noncontrolling interests 879     2,125     460     3,132  
Net income attributable to Sun Communities, Inc. 21,094     36,270     25,717     63,607  
Less: Preferred stock distributions 2,197     3,179     6,748     11,353  
Less: Preferred stock redemption costs -     4,328     -     4,328  
Net income attributable to Sun Communities, Inc., common stockholders $ 18,897     $ 28,763     $ 18,969     $ 47,926  


Reconciliation of Net Operating Income to Net Income Attributable to Sun Communities, Inc. Common Stockholders
(amounts in thousands)


The following table reconciles net operating income to consolidated net income:

  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   2016   2015
Real Property NOI $ 114,851     $ 90,312     $ 296,081     $ 254,438  
Rental Program NOI 21,213     20,587     64,223     62,805  
Home Sales NOI/Gross profit 9,276     5,605     23,184     14,914  
Ancillary NOI/Gross profit 7,907     5,575     11,194     7,325  
Site rent from Rental Program (included in Real Property NOI) (6) (15,532 )   (15,762 )   (46,164 )   (46,440 )
NOI/Gross profit 137,715     106,317     348,518     293,042  
Adjustments to arrive at net income:              
Other revenues 5,689     4,449     15,459     13,592  
Home selling expenses (3,553 )   (1,910 )   (8,689 )   (5,397 )
General and administrative (16,575 )   (12,670 )   (46,910 )   (36,944 )
Transaction costs (4,191 )   (1,664 )   (27,891 )   (13,150 )
Depreciation and amortization (61,483 )   (44,695 )   (159,565 )   (130,107 )
Extinguishment of debt -     -     -     (2,800 )
Interest expense (34,589 )   (28,243 )   (90,885 )   (82,022 )
Gain on disposition of properties, net -     18,190     -     26,946  
Provision for state income taxes (283 )   (77 )   (567 )   (229 )
Income from affiliate transactions 500     -     500     7,500  
Net income 23,230     39,697     29,970     70,431  
Less: Preferred return to preferred OP units 1,257     1,302     3,793     3,692  
Less: Amounts attributable to noncontrolling interests 879     2,125     460     3,132  
Net income attributable to Sun Communities, Inc. 21,094     36,270     25,717     63,607  
Less: Preferred stock distributions 2,197     3,179     6,748     11,353  
Less: Preferred stock redemption costs -     4,328     -     4,328  
Net income attributable to Sun Communities, Inc., common stockholders $ 18,897     $ 28,763     $ 18,969     $ 47,926  
               


Non-GAAP and Other Financial Measures


Financial Highlights                                                                                                                                     
(amounts in thousands, except per share data)


  Quarter Ended
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015
OPERATING INFORMATION                  
Total revenues $ 249,701     $ 190,799     $ 174,644     $ 168,238     $ 185,355  
Net income (loss) $ 23,230     $ (5,038 )   $ 11,778     $ 100,042     $ 39,697  
Net income (loss) available for Common Stockholders $ 18,897     $ (7,803 )   $ 7,875     $ 89,399     $ 28,763  
Earnings (loss) per share basic $ 0.27     $ (0.12 )   $ 0.14     $ 1.57     $ 0.53  
Earnings (loss) per share diluted $ 0.27     $ (0.12 )   $ 0.14     $ 1.56     $ 0.53  
                   
Recurring EBITDA (1) $ 123,276     $ 94,882     $ 90,220     $ 83,580     $ 96,186  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities(1) (5) $ 78,023     $ 37,473     $ 53,270     $ 43,282     $ 55,490  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items(1) (5) $ 83,181     $ 58,452     $ 55,991     $ 48,935     $ 61,482  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (5) per Share - fully diluted $ 1.06     $ 0.54     $ 0.86     $ 0.72     $ 0.95  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (5) per Share excluding certain items - fully diluted $ 1.13     $ 0.85     $ 0.90     $ 0.81     $ 1.05  
                   
                   
BALANCE SHEET                  
Total assets $ 5,904,706     $ 5,823,191     $ 4,562,886     $ 4,181,799     $ 4,105,879  
Total debt $ 3,102,993     $ 3,340,329     $ 2,362,450     $ 2,336,297     $ 2,548,826  
Total liabilities $ 3,429,743     $ 3,645,744     $ 2,591,903     $ 2,562,421     $ 2,777,929  


Debt Analysis                                                                                                                                                
(amounts in thousands)


  Quarter Ended
  9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015
DEBT OUTSTANDING                  
Lines of credit $ 57,737     $ 357,721     $ 58,065     $ 24,687     $ 166,677  
Mortgage loans payable 2,854,831     2,792,021     2,114,818     2,125,267     2,197,359  
Preferred OP units - mandatorily redeemable 45,903     45,903     45,903     45,903     45,903  
Secured borrowing (3) 144,522     144,684     143,664     140,440     138,887  
Total debt $ 3,102,993     $ 3,340,329     $ 2,362,450     $ 2,336,297     $ 2,548,826  
                   
% FIXED/FLOATING                  
Fixed 93.1%   84.5%   90.7%   92.0%   87.0%
Floating 6.9%   15.5%   9.3%   8.0%   13.0%
Total 100.0%   100.0%   100.0%   100.0%   100.0%
                   
WEIGHTED AVERAGE INTEREST RATES                  
Lines of credit 1.93%   1.89%   1.87%   1.62%   1.66%
Mortgage loans payable 4.30%   4.38%   4.67%   4.65%   4.69%
Preferred OP units - mandatorily redeemable 6.87%   6.87%   6.87%   6.87%   6.87%
Average before Secured borrowing 4.29%   4.13%   4.64%   4.66%   4.52%
Secured borrowing (3) 10.06%   10.09%   10.12%   10.17%   10.23%
Total average 4.56%   4.39%   4.98%   4.99%   4.83%
                   
DEBT RATIOS                  
Net Debt/Recurring EBITDA (1) (7) 7.7   9.1   5.5   6.6   7.8
                   
Net Debt/Enterprise Value 32.8%   36.6%   27.7%   34.0%   37.9%
                   
Net Debt + Preferred Stock/Enterprise Value 34.2%   38.0%   29.7%   36.1%   40.1%
                   
Net Debt/Gross Assets 44.1%   49.0%   35.8%   45.6%   50.7%
                   
COVERAGE RATIOS                  
Recurring EBITDA/ Interest (1) (7) 3.1   3.1   3.0   3.1   3.1
                   
Recurring EBITDA/ Interest + Pref.
Distributions + Pref. Stock Distribution (1) (7)
2.9   2.8   2.7   2.6   2.7

MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS 2016   2017   2018   2019   2020
Lines of credit $ -     $ -     $ -     $ -     $ 58,000  
Mortgage loans payable:                  
Maturities -     87,489     49,109     64,314     49,003  
Weighted average rate of maturities - %   5.96 %   6.02 %   6.24 %   5.82 %
Principal amortization 11,399     53,144     53,353     54,035     63,650  
Preferred OP units - mandatorily redeemable 3,670     7,570     -     -     -  
Secured borrowing (3) 1,357     5,752     6,291     6,838     7,459  
Total $ 16,426     $ 153,955     $ 108,753     $ 125,187     $ 178,112  

Statements of Operations - Same Community                                                                     
(amounts in thousands except for percentages and other information)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   Change   % Change   2016   2015   Change   % Change
REVENUES:                              
Income from real property $ 124,274     $ 117,337     $ 6,937     5.9 %   $ 353,083     $ 332,978     $ 20,105     6.0 %
                               
PROPERTY OPERATING EXPENSES:                        
Payroll and benefits 11,029     9,716     1,313     13.5 %   29,879     27,521     2,358     8.6 %
Legal, taxes & insurance 1,116     1,892     (776 )   (41.0 )%   4,174     5,221     (1,047 )   (20.1 )%
Utilities 7,954     7,564     390     5.2 %   20,400     19,716     684     3.5 %
Supplies and repair 5,352     5,270   (8) 82     1.6 %   12,733     12,503   (8) 230     1.8 %
Other 3,603     3,619     (16 )   (0.5 )%   9,662     9,490     172     1.8 %
Real estate taxes 8,575     7,557     1,018     13.5 %   26,303     23,683     2,620     11.1 %
Property operating expenses 37,629     35,618     2,011     5.6 %   103,151     98,134     5,017     5.1 %
NET OPERATING INCOME (NOI)(1) $ 86,645     $ 81,719     $ 4,926     6.0 %   $ 249,932     $ 234,844     $ 15,088     6.4 %

  As of September 30,
  2016   2015   Change   % Change
OTHER INFORMATION              
Number of properties 219     219     -      
               
Overall occupancy (9) 96.4 %   94.2 % (10) 2.2 %    
               
Sites available for development 6,608     6,174     434     7.0 %
               
Monthly base rent per site - MH $ 495     $ 478     $ 17     3.5 %
Monthly base rent per site - RV (11) $ 432     $ 417     $ 15     3.6 %
Monthly base rent per site - Total $ 487     $ 470     $ 17     3.6 %

Rental Program Summary    
(amounts in thousands except for *)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   Change   % Change   2016   2015   Change   % Change
REVENUES:                              
Rental home revenue $ 12,031     $ 11,856     $ 175     1.5 %   $ 35,696     $ 34,480     $ 1,216     3.5 %
Site rent included in Income from real property 15,532     15,762     (230 )   (1.5 )%   46,164     46,440     (276 )   (0.6 )%
Rental Program revenue 27,563     27,618     (55 )   (0.2 )%   81,860     80,920     940     1.2 %
                               
EXPENSES:                              
Commissions 551     855     (304 )   (35.6 )%   1,710     2,441     (731 )   (30.0 )%
Repairs and refurbishment 3,349     3,389     (40 )   (1.2 )%   9,288     8,127     1,161     14.3 %
Taxes and insurance 1,446     1,645     (199 )   (12.1 )%   4,178     4,665     (487 )   (10.4 )%
Marketing and other 1,004     1,142     (138 )   (12.1 )%   2,461     2,882     (421 )   (14.6 )%
Rental Program operating and maintenance 6,350     7,031     (681 )   (9.7 )%   17,637     18,115     (478 )   (2.6 )%
NET OPERATING INCOME (NOI) (1) $ 21,213     $ 20,587     $ 626     3.0 %   $ 64,223     $ 62,805     $ 1,418     2.3 %
                               
Occupied rental home information as of September 30, 2016 and 2015:            
Number of occupied rentals, end of period*                 10,797     11,443     (646 )   (5.6 )%
Investment in occupied rental homes, end of period                 $ 453,521     $ 456,027     $ (2,506 )   (0.6 )%
Number of sold rental homes*                 858     611     247     40.4 %
Weighted average monthly rental rate, end of period*                 $ 879     $ 843     $ 36     4.3 %


Homes Sales Summary          
(amounts in thousands except for *)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2016   2015   Change   % Change   2016   2015   Change   % Change
New home sales $ 9,391     $ 4,469     $ 4,922     110.1 %   $ 20,472     $ 14,890     $ 5,582     37.5 %
Pre-owned home sales 21,820     14,522     7,298     50.3 %   61,515     39,669     21,846     55.1 %
Revenue from home sales 31,211     18,991     12,220     64.3 %   81,987     54,559     27,428     50.3 %
                               
New home cost of sales 7,896     3,739     4,157     111.2 %   17,513     12,348     5,165     41.8 %
Pre-owned home cost of sales 14,039     9,647     4,392     45.5 %   41,290     27,297     13,993     51.3 %
Cost of home sales 21,935     13,386     8,549     63.9 %   58,803     39,645     19,158     48.3 %
                               
NOI / Gross Profit (1) $ 9,276     $ 5,605     $ 3,671     65.5 %   $ 23,184     $ 14,914     $ 8,270     55.5 %
                               
Gross profit - new homes $ 1,495     $ 730     $ 765     104.8 %   $ 2,959     $ 2,542     $ 417     16.4 %
Gross margin % - new homes 15.9 %   16.3 %   (0.4 )%       14.5 %   17.1 %   (2.6 )%    
Average selling price - new homes* $ 90,298     $ 74,483     $ 15,815     21.2 %   $ 89,397     $ 77,958     $ 11,439     14.7 %
                               
Gross profit - pre-owned homes $ 7,781     $ 4,875     $ 2,906     59.6 %   $ 20,225     $ 12,372     $ 7,853     63.5 %
Gross margin % - pre-owned homes 35.7 %   33.6 %   2.1 %       32.9 %   31.2 %   1.7 %    
Average selling price - pre-owned homes* $ 27,585     $ 25,657     $ 1,928     7.5 %   $ 28,205     $ 25,527     $ 2,678     10.5 %
                               
Home sales volume:                
New home sales* 104     60     44     73.3 %   229     191     38     19.9 %
Pre-owned home sales* 791     566     225     39.8 %   2,181     1,554     627     40.3 %
Total homes sold* 895     626     269     43.0 %   2,410     1,745     665     38.1 %

               


Acquisitions Summary - Properties Acquired in 2015 and 2016      
(amounts in thousands except for statistical data)


  Three Months Ended September 30, 2016   Nine Months Ended September 30, 2016
REVENUES:      
Income from real property (excluding transient revenue) $ 58,609     $ 82,283  
Transient revenue 10,653     15,993  
Revenue from home sales 9,644     14,018  
Rental home revenue 276     475  
Ancillary revenues 7,508     10,101  
Total revenues 86,690     122,870  
COSTS AND EXPENSES:      
Property operating and maintenance 37,898     46,308  
Real estate taxes 3,745     5,819  
Cost of home sales 6,671     9,824  
Rental home operating and maintenance 80     125  
Ancillary expense 3,034     4,724  
  Total expenses 51,428     66,800  
       
NET OPERATING INCOME (NOI) (1) $ 35,262     $ 56,070  
       
      As of September 30, 2016
Other information:      
Number of properties     120  
Occupied sites (12)     24,191  
Developed sites (12)     24,982  
Occupancy % (12)     96.8 %
Transient sites     8,907  
Monthly base rent per site - MH     $ 590  
Monthly base rent per site - RV (11)     $ 398  
Monthly base rent per site - Total (11)     $ 506  
       
Home sales volume:      
New homes sales     63
Pre-owned homes sales     190
       
Occupied rental home information:      
Number of occupied rentals, end of period     291  
Investment in occupied rental homes (in thousands)     $ 7,582  
Weighted average monthly rental rate     $ 863  


Property Summary                      
(includes MH and Annual/Seasonal RV's)          
                       
COMMUNITIES   9/30/2016   6/30/2016   3/31/2016   12/31/2015   9/30/2015  
FLORIDA                      
Communities   121     121     61     61     62    
Sites for development   1,259     1,259     823     823     823    
Developed sites (12)   36,116     36,119     24,312     24,216     24,528    
Occupied (12)   34,817     34,720     23,359     23,201     23,427    
Occupancy % (12)   96.4 %   96.1 %   96.1 %   95.8 %   95.5 %  
MICHIGAN                      
Communities   67     66     66     65     70    
Sites for development   2,628     2,248     2,105     2,105     2,262    
Developed sites (12)   24,388     24,387     24,363     23,966     24,657    
Occupied (12)   23,218     23,198     23,079     22,677     23,179    
Occupancy % (12)   95.2 %   95.1 %   94.7 %   94.6 %   94.0 %  
TEXAS                      
Communities   21     21     17     16     19    
Sites for development   1,455     1,347     1,347     1,347     1,599    
Developed sites (12)   6,088     6,071     5,970     5,965     6,507    
Occupied (12)   5,774     5,771     5,602     5,517     6,034    
Occupancy % (12)   94.8 %   95.1 %   93.8 %   92.5 %   92.7 %  
CALIFORNIA                      
Communities   22     22     3     3     3    
Sites for development   332     332     332     332     332    
Developed sites (12)   4,797     4,864     198     198     198    
Occupied (12)   4,720     4,796     192     192     191    
Occupancy % (12)   98.4 %   98.6 %   97.0 %   97.0 %   96.5 %  
ARIZONA                      
Communities   11     11     10     10     11    
Sites for development   358     358     393     393     393    
Developed sites (12)   3,567     3,532     3,302     3,301     3,279    
Occupied (12)   3,305     3,281     3,102     3,078     3,043    
Occupancy % (12)   92.7 %   92.9 %   93.9 %   93.2 %   92.8 %  
ONTARIO                      
Communities   15     15     -     -     -    
Sites for development   2,029     2,029     -     -     -    
Developed sites (12)   3,453     3,375     -     -     -    
Occupied (12)   3,453     3,375     -     -     -    
Occupancy % (12)   100.0 %   100.0 %   - %   - %   - %  
INDIANA                      
Communities   11     11     11     11     16    
Sites for development   316     316     363     363     522    
Developed sites (12)   2,900     2,900     2,900     2,900     4,913    
Occupied (12)   2,712     2,700     2,674     2,628     3,865    
Occupancy % (12)   93.5 %   93.1 %   92.2 %   90.6 %   78.7 %  
                       
                       
OHIO                      
Communities   9     9     9     9     9    
Sites for development   -     -     -     -     -    
Developed sites (12)   2,719     2,718     2,700     2,703     2,703    
Occupied (12)   2,602     2,616     2,585     2,560     2,565    
Occupancy % (12)   95.7 %   96.2 %   95.7 %   94.7 %   94.9 %  
COLORADO                      
Communities   7     7     7     7     7    
Sites for development   304     304     304     304     304    
Developed sites (12)   2,335     2,335     2,335     2,335     2,335    
Occupied (12)   2,323     2,320     2,319     2,315     2,289    
Occupancy % (12)   99.5 %   99.4 %   99.3 %   99.1 %   98.0 %  
OTHER STATES                      
Communities   55     54     49     49     54    
Sites for development   1,823     1,728     1,514     1,514     1,514    
Developed sites (12)   14,415     14,337     13,683     13,657     14,705    
Occupied (12)   13,991     13,912     13,237     13,142     13,938    
Occupancy % (12)   97.1 %   97.0 %   96.7 %   96.2 %   94.8 %  
TOTAL - PORTFOLIO                      
Communities   339     337     233     231     251    
% Community age restricted   33.3 %   33.5 %   26.2 %   26.4 %   25.9 %  
Sites for development   10,504     9,921     7,181     7,181     7,749    
Developed sites (12)   100,778     100,638     79,763     79,241     83,825    
Occupied (12)   96,915     96,689     76,149     75,310     78,531    
Occupancy % (12)   96.2 %   96.1 %   95.5 %   95.0 %   93.7 %  
                       
TRANSIENT RV PORTFOLIO SUMMARY                      
 Location                      
Florida   7,232     6,990     2,664     2,823     2,915    
Michigan   203     126     150     160     165    
Texas   1,446     1,455     799     414     864    
California   478     518     296     296     296    
Arizona   1,047     1,055     1,096     1,087     1,053    
Ontario   1,485     1,657     -     -     -    
Indiana   501     501     501     501     501    
Ohio   194     195     213     210     237    
Maine   556     571     575     604     605    
New York   484     483     489     499     511    
New Jersey   1,047     1,084     995     981     987    
Other States   1,801     1,864     2,099     2,092     2,055    
Total transient RV sites   16,474     16,499     9,877     9,667     10,189    


Capital Improvements, Development, and Acquisitions   
(amounts in thousands except for *)


  Recurring                    
  Capital Recurring                
  Expenditures Capital Lot     Expansion & Revenue
    Average/Site*   Expenditures (13)   Modifications (14)   Acquisitions (15)   Development (16)   Producing (17)
2014   $ 227     $ 18,077     $ 9,414     $ 785,624     $ 22,196     $ 1,454  
2015   $ 230     $ 20,344     $ 13,961     $ 1,214,482     $ 28,660     $ 4,497  
YTD 2016   $ 149     $ 13,252     $ 13,799     $ 1,757,151     $ 34,346     $ 1,853  


Operating Statistics for Manufactured Homes and Annual/Seasonal RV's        



  Resident Net Leased New Home Pre-owned Brokered
MARKETS Move-outs Sites (18) Sales Home Sales Re-sales
Michigan   326     251     6     986     112  
Florida   232     494     119     229     653  
Texas   106     162     9     290     39  
Indiana   44     84     -     160     5  
Ohio   80     42     1     85     4  
Arizona   37     94     26     17     93  
Colorado   8     8     15     158     32  
Other states   346     250     53     256     350  
YTD ended September 30, 2016   1,179     1,385     229     2,181     1,288  

  Resident Net Leased New Home Pre-owned Brokered
TOTAL FOR YEAR ENDED Move-outs Sites (18) Sales Home Sales Re-sales
2015   1,344     1,905     273     2,210     1,244  
2014   1,504     1,890     113     1,853     618  

  Resident Resident
PERCENTAGE TRENDS Move-outs Re-sales
YTD 2016   1.9 %   6.5 %
2015   2.0 %   5.9 %
2014   2.6 %   5.0 %

Footnotes and Definitions                                                                


  1. Investors in and analysts following the real estate industry utilize funds from operations (FFO), net operating income (NOI), and recurring earnings before interest, tax, depreciation and amortization (Recurring EBITDA) as supplemental performance measures.  We believe FFO, NOI, and Recurring EBITDA are appropriate measures given their wide use by and relevance to investors and analysts.  FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation/amortization of real estate assets.  NOI provides a measure of rental operations and does not factor in depreciation/amortization and non-property specific expenses such as general and administrative expenses.  Recurring EBITDA, a metric calculated as EBITDA exclusive of certain nonrecurring items, provides a further tool to evaluate ability to incur and service debt and to fund dividends and other cash needs. In addition, FFO, NOI, and Recurring EBITDA are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance and value.

FFO is defined by the National Association of Real Estate Investment Trusts (NAREIT) as net income (loss) computed in accordance with generally accepted accounting principles (GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company's operating performance.  Management generally considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period over period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from net income (loss).  Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. FFO is computed in accordance with the Company's interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.  The Company also uses FFO excluding certain items, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business.  We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results.

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss).  The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity.  In addition, FFO is not intended as a measure of a REIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital.  FFO only provides investors with an additional performance measure that, when combined with measures computed in accordance with GAAP such as net income (loss), cash flow from operating activities, investing activities and financing activities, provide investors with an indication of our ability to service debt and to fund acquisitions and other expenditures.  Other REITs may use different methods for calculating FFO, accordingly, our FFO may not be comparable to other REITs.

NOI is derived from revenues minus property operating expenses and real estate taxes. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company's financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity; nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions. The Company believes that net income (loss) is the most directly comparable GAAP measurement to NOI. Because of the inclusion of items such as interest, depreciation, and amortization, the use of net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level. The Company believes that NOI is helpful to investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs, therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

EBITDA is defined as NOI plus other income, plus (minus) equity earnings (loss) from affiliates, minus general and administrative expenses.  EBITDA includes EBITDA from discontinued operations. The Company believes that net income (loss) is the most directly comparable GAAP measurement to EBITDA.

FFO, NOI, and EBITDA do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs, including the repayment of principal on debt and payment of dividends and distributions.  FFO, NOI, and EBITDA should not be considered as alternatives to net income (loss) (calculated in accordance with GAAP) for purposes of evaluating our operating performance, or cash flows (calculated in accordance with GAAP) as a measure of liquidity.  FFO, NOI, and EBITDA as calculated by us may not be comparable to similarly titled, but differently calculated, measures of other REITs or to the definition of FFO published by NAREIT.

(2) The consideration amounts presented with respect to acquired communities represent the economic transaction and do not contemplate the fair value purchase accounting required by GAAP.

(3) This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate/amount.

(4)  These costs represent the first year expenses incurred to bring acquired properties up to the Company's operating standards, including items such as tree trimming and painting costs that do not meet the Company's capitalization policy. These costs are expected to become more significant in connection with the size of our acquisitions, and are therefore included as an adjustment to FFO in the three and nine months ended September 30, 2016. The Company incurred $0.5 million and $1.7 million of these first year expenses in the three and nine month periods ended September 30, 2015, respectively, and had a similar adjustment been made, FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share excluding certain items would have been $1.06 and $2.86 for the three and nine months ended September 30, 2015, respectively.

(5) The effect of certain anti-dilutive convertible securities is excluded from these items.

(6) The renter's monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in Real Property NOI. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of the Rental Program and financial impact on our operations.

(7) The coverage ratios are calculated using the trailing 12 months for the period ended and have been adjusted to exclude: depreciation and amortization; income taxes; interest expense; transaction costs; extinguishment of debt; income from affiliate transactions; gain on dispositions; and gain on settlement.  See Statement of Operations on page 4 for detailed amounts.

(8) Three and nine months ended September 30, 2015 excludes $0.5 million and $1.7 million of first year expenses for properties acquired in late 2014 and 2015 incurred to bring the properties up to Sun's operating standards.  These costs did not meet the Company's capitalization policy.

(9) Includes manufactured housing (MH) and annual/seasonal recreational vehicle (RV) sites, and excludes transient RV sites and recently completed but vacant expansion sites.

(10) Occupancy reflects current year gains from expansion sites and the conversion of transient RV guests to annual/seasonal RV contracts as vacant in 2015.

(11) Monthly base rent per site pertains to annual/seasonal RV sites and excludes transient RV sites.

(12) Includes MH and annual/seasonal RV sites, and excludes transient RV sites.

(13) Includes capital expenditures necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, and pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.

(14) Includes capital expenditures which improve the asset quality of the community.  These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home.  These activities which are mandated by strict manufacturer's installation requirements and state building code include items such as new foundations, driveways, and utility upgrades.

(15) Acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. Acquisitions also include deferred maintenance identified during due diligence and those capital improvements necessary to bring the community up to Sun's standards.  These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs.  These are considered acquisition costs and although identified during due diligence, they sometimes require up to twelve months after closing to complete.

(16) Expansion and development costs consist primarily of construction costs and costs necessary to complete home site    improvements.

(17) Capital costs related to revenue generating activities, consisting primarily of garages, sheds, and sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.

(18) Net leased sites do not include occupied sites acquired in that year.


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