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Sun Communities, Inc. Reports 2019 Second Quarter Results

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Southfield, MI, July 24, 2019 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its second quarter results for 2019.

Financial Results for the Quarter and Six Months Ended June 30, 2019

For the quarter ended June 30, 2019, total revenues increased $41.0 million, or 15.1 percent, to $312.4 million compared to $271.4 million for the same period in 2018. Net income attributable to common stockholders was $40.4 million, or $0.46 per diluted common share, for the quarter ended June 30, 2019, as compared to net income attributable to common stockholders of $20.4 million, or $0.25 per diluted common share, for the same period in 2018.

For the six months ended June 30, 2019, total revenues increased $70.4 million or 13.3 percent, to $599.8 million compared to $529.4 million for the same period in 2018. Net income attributable to common stockholders was $74.7 million, or $0.86 per diluted common share, for the six months ended June 30, 2019, as compared to net income attributable to common stockholders of $50.4 million, or $0.63 per diluted common share, for the same period in 2018.

Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations (“Core FFO”)(1) for the quarter ended June 30, 2019, was $1.18 per diluted share and OP unit (“Share”) as compared to $1.07 in the prior year, an increase of 10.3 percent.

  • Same Community(2) Net Operating Income (“NOI”)(1) increased by 7.2 percent for the quarter ended June 30, 2019, as compared to the same period in 2018.

  • Revenue Producing Sites increased to 668 sites for the quarter ended June 30, 2019 bringing total portfolio occupancy to 96.6 percent.

Gary Shiffman, Chief Executive Officer of Sun Communities stated, “During the second quarter, robust demand across our Manufactured Housing communities and RV resorts, combined with a best in class operating platform allowed us to deliver another quarter of strong performance. With better than expected same community NOI growth of 7.2 percent as well as Core FFO per share growth of 10.3 percent, we are pleased to announce guidance increases for full year 2019 in these two metrics. Our balance sheet is well-positioned and we have the necessary liquidity to continue to fund Sun’s growth. We continue to execute on our core growth initiatives and remain optimistic about our outlook in both the near and long term.”


OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.6 percent at June 30, 2019, compared to 96.1 percent at June 30, 2018. During the quarter ended June 30, 2019, revenue producing sites increased to 668 sites, as compared to 634 revenue producing sites gained during the second quarter of 2018, a 5.4 percent increase.

During the six months ended June 30, 2019, revenue producing sites increased by 1,239 sites, as compared to an increase of 1,250 revenue producing sites during the six months ended June 30, 2018.


Same Community(2) Results

For the 345 communities owned and operated by the Company since January 1, 2018, NOI(1) for the quarter ended June 30, 2019, increased 7.2 percent over the same period in 2018, as a result of a 6.4 percent increase in revenues and a 4.7 percent increase in operating expenses. Same Community occupancy(3) increased to 98.2 percent at June 30, 2019 from 96.2 percent at June 30, 2018.

For the six months ended June 30, 2019, total revenues increased by 6.2 percent while total expenses increased by 3.9 percent, resulting in an increase to NOI(1) of 7.2 percent over the six months ended June 30, 2018.


Home Sales

During the quarter ended June 30, 2019, the Company sold 927 homes as compared to 943 homes sold during the same period in 2018. Rental home sales, which are included in total home sales, were 332 in 2019, an increase of 20.7 percent over the 275 sold during 2018.

During the six months ended June 30, 2019, 1,725 homes were sold compared to 1,780 for the same period in 2018. Rental home sales, which are included in total home sales, were 542 in 2019, an increase of 6.5 percent over the 509 sold during 2018.


PORTFOLIO ACTIVITY

Acquisitions

During the quarter ended June 30, 2019, the Company acquired a 309 site RV resort in Sevierville, Tennessee for a purchase price of $23.0 million and an RV resort located in Strafford, New Hampshire for a purchase price of $2.7 million.

Subsequent to the quarter ended June 30, 2019, the Company acquired a RV resort located in Ponchatoula, Louisiana with 202 developed sites and 69 expansion sites for a purchase price of $23.5 million.

Ground-up Development

During the quarter ended June 30, 2019, the Company opened 281 sites of the ground-up development, Carolina Pines RV Resort in Myrtle Beach, South Carolina. The remaining phases of 565 sites for 846 total developed sites are expected to be completed in 2019 and 2020.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

As of June 30, 2019, the Company had $3.1 billion of debt outstanding. The weighted average interest rate was 4.4 percent and the weighted average maturity was 9.9 years. The Company had $28.7 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.2 times.

During the quarter, the Company amended and restated its credit agreement with Citibank, N.A. and certain other lenders. Pursuant to the agreement, the Company can borrow up to $750.0 million under the senior credit facility comprised of a $650.0 million revolving loan, with the ability to use up to $100.0 million for advances in Australian dollars, and a $100.0 million term loan. As of June 30, 2019 the Company has not drawn any funds on the term loan.

Equity Transactions

During the quarter ended June 30, 2019, the Company closed an underwritten registered public offering of 3,737,500 shares of common stock. Proceeds from the offering were $452.1 million after deducting expenses related to the offering. The Company used the net proceeds of this offering to repay borrowings under the revolving loan under its senior credit facility.


GUIDANCE 2019

The Company is revising its 2019 guidance for the following metrics:

Previous Range
FY 2019E

Revised Range
FY 2019E

3Q 2019E

Net Income per fully diluted share

$1.61 - $1.71

$1.81 - $1.87

$0.66 - $0.69

Core FFO (1) per fully diluted share

$4.80 - $4.88

$4.84 - $4.90

$1.43 - $1.46

Same Community(2) Portfolio
Number of communities: 345

2019E Change %

Income from real property

6.0% - 6.2%

Total property operating expenses

4.1% - 4.7%

Net operating income (1)

6.6% - 7.2%

Guidance estimates include acquisitions completed through the date of this release and exclude any prospective acquisitions and capital markets activity.

Core FFO(1) per Share estimates assume certain gain and loss items that management considers unrelated to the operational and financial performance of our core business will be 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 second quarter operating results will be held on Thursday, July 25, 2019 at 11:00 A.M. (ET). To participate, call toll-free 877-407-9039. Callers outside the U.S. or Canada can access the call at 201-689-8470. A replay will be available following the call through August 8, 2019 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13691366. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of June 30, 2019, owned, operated, or had an interest in a portfolio of 382 communities comprising over 133,000 developed sites in 31 states and Ontario, Canada.

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

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to (248) 208-2500, by email to investorrelations@suncommunities.com or by mail to Sun Communities, Inc. Attn: 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, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders. Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company’s Annual Report on Form 10-K.

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

Firm

Analyst

Phone

Email

Bank of America Merrill Lynch

Joshua Dennerlein

(646) 855-1681

joshua.dennerlein@baml.com

BMO Capital Markets

John Kim

(212) 885-4115

johnp.kim@bmo.com

Citi Research

Michael Bilerman

(212) 816-1383

michael.bilerman@citi.com

Nicholas Joseph

(212) 816-1909

nicholas.joseph@citi.com

Evercore ISI

Steve Sakwa

(212) 446-9462

steve.sakwa@evercoreisi.com

Samir Khanal

(212) 888-3796

samir.khanal@evercoreisi.com

Green Street Advisors

John Pawlowski

(949) 640-8780

jpawlowski@greenstreetadvisors.com

RBC Capital Markets

Wes Golladay

(440) 715-2650

wes.golladay@rbccm.com

Robert W. Baird & Co.

Drew Babin

(610) 238-6634

dbabin@rwbaird.com

Wells Fargo

Todd Stender

(562) 637-1371

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 June 30, 2019)


Balance Sheets
(amounts in thousands)


6/30/2019

12/31/2018

ASSETS

Land

$

1,286,952

$

1,201,945

Land improvements and buildings

6,026,193

5,586,250

Rental homes and improvements

599,150

571,661

Furniture, fixtures and equipment

215,610

201,090

Investment property

8,127,905

7,560,946

Accumulated depreciation

(1,560,061

)

(1,442,630

)

Investment property, net

6,567,844

6,118,316

Cash and cash equivalents

28,704

50,311

Marketable securities

53,553

49,037

Inventory of manufactured homes

55,869

49,199

Notes and other receivables, net

164,303

160,077

Collateralized receivables, net (4)

97,658

106,924

Other assets, net

254,153

176,162

TOTAL ASSETS

$

7,222,084

$

6,710,026

LIABILITIES

Mortgage loans payable

$

2,863,485

$

2,815,957

Secured borrowings on collateralized receivables (4)

98,299

107,731

Preferred Equity - Sun NG Resorts - mandatorily redeemable

35,249

35,277

Preferred OP units - mandatorily redeemable

34,663

37,338

Lines of credit (5)

76,079

128,000

Distributions payable

69,719

63,249

Advanced reservation deposits and rent

160,527

133,698

Other liabilities

204,167

157,862

TOTAL LIABILITIES

3,542,188

3,479,112

Commitments and contingencies

Series A-4 preferred stock

31,402

31,739

Series A-4 preferred OP units

9,590

9,877

Series D preferred OP units

51,462

Equity Interests - NG Sun LLC

22,099

21,976

STOCKHOLDERS' EQUITY

Common stock

907

864

Additional paid-in capital

4,851,323

4,398,949

Accumulated other comprehensive loss

(1,184

)

(4,504

)

Distributions in excess of accumulated earnings

(1,343,792

)

(1,288,486

)

Total Sun Communities, Inc. stockholders' equity

3,507,254

3,106,823

Noncontrolling interests

Common and preferred OP units

50,880

53,354

Consolidated variable interest entities

7,209

7,145

Total noncontrolling interests

58,089

60,499

TOTAL STOCKHOLDERS' EQUITY

3,565,343

3,167,322

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY

$

7,222,084

$

6,710,026



Statements of Operations - Quarter to Date and Year to Date Comparison
(amounts in thousands, except per share amounts)


Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

Change

% Change

June 30, 2019

June 30, 2018

Change

% Change

REVENUES

Income from real property (excluding transient revenue)

$

195,503

$

177,080

$

18,423

10.4

%

$

386,067

$

352,290

$

33,777

9.6

%

Transient revenue

30,596

21,590

9,006

41.7

%

56,811

43,591

13,220

30.3

%

Revenue from home sales

47,242

41,217

6,025

14.6

%

86,860

76,117

10,743

14.1

%

Rental home revenue

14,412

13,348

1,064

8.0

%

28,383

26,368

2,015

7.6

%

Ancillary revenue

17,265

12,031

5,234

43.5

%

25,747

18,599

7,148

38.4

%

Interest income

4,919

5,277

(358

)

(6.8

)%

9,719

10,593

(874

)

(8.3

)%

Brokerage commissions and other revenues, net

2,508

891

1,617

181.5

%

6,188

1,851

4,337

234.3

%

Total Revenues

312,445

271,434

41,011

15.1

%

599,775

529,409

70,366

13.3

%

EXPENSES

Property operating and maintenance

65,888

58,691

7,197

12.3

%

123,797

110,321

13,476

12.2

%

Real estate taxes

15,726

14,076

1,650

11.7

%

31,056

27,912

3,144

11.3

%

Cost of home sales

34,435

30,932

3,503

11.3

%

63,712

57,503

6,209

10.8

%

Rental home operating and maintenance

5,091

5,315

(224

)

(4.2

)%

9,879

10,542

(663

)

(6.3

)%

Ancillary expenses

12,480

8,241

4,239

51.4

%

19,581

13,624

5,957

43.7

%

Home selling expenses

3,626

3,986

(360

)

(9.0

)%

6,950

7,276

(326

)

(4.5

)%

General and administrative

23,697

21,452

2,245

10.5

%

45,584

41,209

4,375

10.6

%

Catastrophic weather related charges, net

179

53

126

237.7

%

961

(2,160

)

3,121

(144.5

)%

Depreciation and amortization

76,153

67,773

8,380

12.4

%

152,709

134,210

18,499

13.8

%

Loss on extinguishment of debt

70

1,522

(1,452

)

(95.4

)%

723

1,718

(995

)

(57.9

)%

Interest expense

33,661

32,260

1,401

4.3

%

67,675

63,398

4,277

6.7

%

Interest on mandatorily redeemable preferred OP units / equity

1,181

790

391

49.5

%

2,275

1,409

866

61.5

%

Total Expenses

272,187

245,091

27,096

11.1

%

524,902

466,962

57,940

12.4

%

Income Before Other Items

40,258

26,343

13,915

52.8

%

74,873

62,447

12,426

19.9

%

Remeasurement of marketable securities

3,620

3,620

N/A

3,887

3,887

N/A

Other income / (expense), net (6)

1,021

(1,828

)

2,849

155.9

%

2,919

(4,445

)

7,364

(165.7

)%

Income / (loss) from nonconsolidated affiliates

393

(8

)

401

5,012.5

%

737

(67

)

804

(1,200.0

)%

Current tax expense

(272

)

(225

)

(47

)

(20.9

)%

(486

)

(399

)

(87

)

21.8

%

Deferred tax benefit / (expense)

96

(112

)

208

(185.7

)%

313

235

78

33.2

%

Net Income

45,116

24,170

20,946

86.7

%

82,243

57,771

24,472

42.4

%

Less: Preferred return to preferred OP units / equity

(1,718

)

(1,103

)

(615

)

55.8

%

(3,041

)

(2,183

)

(858

)

39.3

%

Less: Amounts attributable to noncontrolling interests

(2,585

)

(2,227

)

(358

)

16.1

%

(3,626

)

(4,321

)

695

(16.1

)%

Net Income Attributable to Sun Communities, Inc.

40,813

20,840

19,973

95.8

%

75,576

51,267

24,309

47.4

%

Less: Preferred stock distribution

(428

)

(432

)

4

(0.9

)%

(860

)

(873

)

13

(1.5

)%

Net Income Attributable to Sun Communities, Inc. Common Stockholders

$

40,385

$

20,408

$

19,977

97.9

%

$

74,716

$

50,394

$

24,322

48.3

%

Weighted average common shares outstanding

Basic

87,130

79,612

7,518

9.4

%

86,325

79,233

7,092

9.0

%

Diluted

87,564

80,116

7,448

9.3

%

86,770

79,905

6,865

8.6

%

Earnings per share:

Basic

$

0.46

$

0.25

$

0.21

84.0

%

$

0.86

$

0.63

$

0.23

36.5

%

Diluted

$

0.46

$

0.25

$

0.21

84.0

%

$

0.86

$

0.63

$

0.23

36.5

%


Outstanding Securities and Capitalization
(amounts in thousands except for *)

Outstanding Securities - As of June 30, 2019

Number of Units/Shares Outstanding

Conversion Rate*

If Converted

Issuance Price per unit*

Annual Distribution Rate*

Non-convertible securities

Common shares

90,667

N/A

N/A

N/A

$3.00^

Convertible securities

Series A-1 preferred OP units

324

2.4390

790

$

100

6.0

%

Series A-3 preferred OP units

40

1.8605

74

$

100

4.5

%

Series A-4 preferred OP units

406

0.4444

180

$

25

6.5

%

Series C preferred OP units

314

1.1100

349

$

100

4.5

%

Series D preferred OP units

489

0.8000

391

$

100

3.8

%

Common OP units

2,289

1.0000

2,289

N/A

Mirrors common shares distributions

Series A-4 preferred stock

1,052

0.4444

468

$

25

6.5

%

^ Annual distribution is based on the last quarterly distribution annualized.


Capitalization - As of June 30, 2019

Equity

Shares

Share Price*

Total

Common shares

90,667

$

128.19

$

11,622,603

Common OP units

2,289

$

128.19

293,427

Subtotal

92,956

$

11,916,030

Series A-1 preferred OP units

790

$

128.19

101,270

Series A-3 preferred OP units

74

$

128.19

9,486

Series A-4 preferred OP units

180

$

128.19

23,074

Series C preferred OP units

349

$

128.19

44,738

Series D preferred OP units

391

$

128.19

50,122

Total diluted shares outstanding

94,740

$

12,144,720

Debt

Mortgage loans payable

$

2,863,485

Secured borrowings (4)

98,299

Preferred Equity - Sun NG Resorts - mandatorily redeemable

35,249

Preferred OP units - mandatorily redeemable

34,663

Lines of credit (5)

76,079

Total debt

$

3,107,775

Preferred

Series A-4 preferred stock

1,052

$

25.00

$

26,300

Total Capitalization

$

15,278,795


Reconciliations to Non-GAAP Financial Measures


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


Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Net income attributable to Sun Communities, Inc. common stockholders

$

40,385

$

20,408

$

74,716

$

50,394

Adjustments

Depreciation and amortization

76,294

67,977

153,006

134,623

Remeasurement of marketable securities

(3,620

)

(3,887

)

Amounts attributable to noncontrolling interests

2,158

2,089

2,881

3,978

Preferred return to preferred OP units

537

552

1,064

1,105

Preferred distribution to Series A-4 preferred stock

428

432

860

873

Gain on disposition of assets, net

(8,070

)

(5,835

)

(13,749

)

(10,374

)

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$

108,112

$

85,623

$

214,891

$

180,599

Adjustments

Other acquisition related costs (8)

366

301

526

436

Loss on extinguishment of debt

70

1,522

723

1,718

Catastrophic weather related charges, net

194

53

976

(2,160

)

Loss of earnings - catastrophic weather related (9)

377

325

377

650

Other (income) / expense (6)

(1,021

)

1,828

(2,919

)

4,445

Debt premium write-off

(209

)

(991

)

Ground lease intangible write-off

817

817

Deferred tax (benefit) / expense

(96

)

112

(313

)

(235

)

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$

108,002

$

90,372

$

214,261

$

185,279

Weighted average common shares outstanding - basic

87,130

79,612

86,325

79,233

Add

Common stock issuable upon conversion of stock options

1

2

1

2

Restricted stock

433

502

444

670

Common OP units

2,487

2,735

2,605

2,738

Common stock issuable upon conversion of Series A-4 preferred stock

467

472

467

472

Common stock issuable upon conversion of Series A-3 preferred OP units

75

75

75

75

Common stock issuable upon conversion of Series A-1 preferred OP units

793

825

798

831

Weighted average common shares outstanding - fully diluted

91,386

84,223

90,715

84,021

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

$

1.18

$

1.02

$

2.37

$

2.15

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

$

1.18

$

1.07

$

2.36

$

2.21


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


Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Net income attributable to Sun Communities, Inc., common stockholders

$

40,385

$

20,408

$

74,716

$

50,394

Adjustments

Interest expense

34,842

33,050

69,950

64,807

Loss on extinguishment of debt

70

1,522

723

1,718

Current tax expense

272

225

486

399

Deferred tax (benefit) / expense

(96

)

112

(313

)

(235

)

(Income) / loss from nonconsolidated affiliates

(393

)

8

(737

)

67

Depreciation and amortization

76,153

67,773

152,709

134,210

Gain on disposition of assets, net

(8,070

)

(5,835

)

(13,749

)

(10,374

)

EBITDAre (1)

$

143,163

$

117,263

$

283,785

$

240,986

Adjustments

Remeasurement of marketable securities

(3,620

)

(3,887

)

Other (income) / expense, net (6)

(1,021

)

1,828

(2,919

)

4,445

Catastrophic weather related charges, net

179

53

961

(2,160

)

Preferred return to preferred OP units / equity

1,718

1,103

3,041

2,183

Amounts attributable to noncontrolling interests

2,585

2,227

3,626

4,321

Preferred stock distribution

428

432

860

873

Plus: Gain on dispositions of assets, net

8,070

5,835

13,749

10,374

Recurring EBITDA (1)

$

151,502

$

128,741

$

299,216

$

261,022



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


Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Net income attributable to Sun Communities, Inc., common stockholders

$

40,385

$

20,408

$

74,716

$

50,394

Other revenues

(7,427

)

(6,168

)

(15,907

)

(12,444

)

Home selling expenses

3,626

3,986

6,950

7,276

General and administrative

23,697

21,452

45,584

41,209

Catastrophic weather related charges, net

179

53

961

(2,160

)

Depreciation and amortization

76,153

67,773

152,709

134,210

Loss on extinguishment of debt

70

1,522

723

1,718

Interest expense

34,842

33,050

69,950

64,807

Remeasurement of marketable securities

(3,620

)

(3,887

)

Other (income) / expense, net (6)

(1,021

)

1,828

(2,919

)

4,445

(Income) / loss from nonconsolidated affiliates

(393

)

8

(737

)

67

Current tax expense

272

225

486

399

Deferred tax (benefit) / expense

(96

)

112

(313

)

(235

)

Preferred return to preferred OP units / equity

1,718

1,103

3,041

2,183

Amounts attributable to noncontrolling interests

2,585

2,227

3,626

4,321

Preferred stock distribution

428

432

860

873

NOI(1) / Gross Profit

$

171,398

$

148,011

$

335,843

$

297,063


Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Real Property NOI (1)

$

144,485

$

125,903

$

288,025

$

257,648

Rental Program NOI (1)

26,499

24,572

52,560

48,674

Home Sales NOI (1) / Gross Profit

12,807

10,285

23,148

18,614

Ancillary NOI (1) / Gross Profit

4,785

3,790

6,166

4,975

Site rent from Rental Program (included in Real Property NOI) (1)(10)

(17,178

)

(16,539

)

(34,056

)

(32,848

)

NOI (1) / Gross profit

$

171,398

$

148,011

$

335,843

$

297,063



Non-GAAP and Other Financial Measures


Financial and Operating Highlights
(amounts in thousands, except for *)


Quarter Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

Financial Information

Total revenues

$

312,445

$

287,330

$

274,004

$

323,538

$

271,426

Net income

$

45,116

$

37,127

$

10,672

$

51,715

$

24,170

Net income attributable to Sun Communities Inc.

$

40,385

$

34,331

$

9,039

$

46,060

$

20,408

Earnings per share basic*

$

0.46

$

0.40

$

0.11

$

0.56

$

0.25

Earnings per share diluted*

$

0.46

$

0.40

$

0.11

$

0.56

$

0.25

Cash distributions declared per common share*

$

0.75

$

0.75

$

0.71

$

0.71

$

0.71

Recurring EBITDA (1)

$

151,502

$

147,714

$

133,335

$

158,129

$

128,741

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$

108,112

$

106,779

$

88,562

$

117,018

$

85,623

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$

108,002

$

106,259

$

92,695

$

116,959

$

90,372

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*

$

1.18

$

1.19

$

0.98

$

1.35

$

1.02

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*

$

1.18

$

1.18

$

1.03

$

1.35

$

1.07

Balance Sheet

Total assets

$

7,222,084

$

7,098,662

$

6,710,026

$

6,653,726

$

6,492,348

Total debt

$

3,107,775

$

3,448,117

$

3,124,303

$

3,004,929

$

3,364,081

Total liabilities

$

3,542,188

$

3,846,325

$

3,479,112

$

3,367,285

$

3,736,621


Quarter Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

Operating Information*

New home sales

139

125

140

146

134

Pre-owned home sales

788

673

738

825

809

Total homes sold

927

798

878

971

943

Communities

382

379

371

370

367

Developed sites

112,564

112,175

108,963

108,142

107,192

Transient RV sites

20,585

20,173

19,491

19,432

19,007

Total sites

133,149

132,348

128,454

127,574

126,199

MH occupancy

95.7

%

95.4

%

95.0

%

94.9

%

95.0

%

RV occupancy

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Total blended MH and RV occupancy

96.6

%

96.4

%

96.1

%

96.1

%

96.1

%



Debt Analysis
(amounts in thousands)


Quarter Ended

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

DEBT OUTSTANDING

Mortgage loans payable

$

2,863,485

$

2,879,017

$

2,815,957

$

2,819,225

$

2,636,847

Secured borrowings on collateralized receivables (4)

98,299

102,676

107,731

113,089

118,242

Preferred Equity - Sun NG Resorts - mandatorily redeemable

35,249

35,249

35,277

35,277

35,277

Preferred OP units - mandatorily redeemable

34,663

34,663

37,338

37,338

37,338

Lines of credit (5)

76,079

396,512

128,000

536,377

Total debt

$

3,107,775

$

3,448,117

$

3,124,303

$

3,004,929

$

3,364,081

% FIXED/FLOATING

Fixed

97.6

%

88.5

%

95.9

%

100.0

%

84.0

%

Floating

2.4

%

11.5

%

4.1

%

%

16.0

%

Total

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

WEIGHTED AVERAGE INTEREST RATES

Mortgage loans payable

4.24

%

4.24

%

4.22

%

4.23

%

4.27

%

Preferred Equity - Sun NG Resorts - mandatorily redeemable

6.00

%

6.00

%

6.00

%

6.00

%

6.00

%

Preferred OP units - mandatorily redeemable

6.50

%

6.50

%

6.61

%

6.61

%

6.61

%

Lines of credit (5)

3.34

%

3.73

%

3.77

%

%

3.31

%

Average before Secured borrowings (4)

4.27

%

4.22

%

4.25

%

4.28

%

4.15

%

Secured borrowings on collateralized receivables (4)

9.93

%

9.94

%

9.94

%

9.95

%

9.96

%

Total average

4.44

%

4.39

%

4.45

%

4.40

%

4.36

%

DEBT RATIOS

Net Debt / Recurring EBITDA (1) (TTM)

5.2

6.0

5.6

5.4

6.5

Net Debt / Enterprise Value

20.2

%

24.1

%

25.2

%

24.1

%

28.6

%

Net Debt / Gross Assets

35.1

%

39.8

%

37.7

%

35.9

%

42.7

%

COVERAGE RATIOS

Recurring EBITDA (1) (TTM) / Interest

4.2

4.1

4.0

3.9

3.7

Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution

4.0

3.9

3.9

3.8

3.6


MATURITIES / PRINCIPAL AMORTIZATION NEXT FIVE YEARS

Remaining 2019

2020

2021

2022

2023

Mortgage loans payable:

Maturities

$

$

58,078

$

270,680

$

82,155

$

307,465

Weighted average rate of maturities

%

5.92

%

5.53

%

4.46

%

4.17

%

Principal amortization

29,618

59,931

59,173

57,182

53,829

Secured borrowings on collateralized receivables (4)

2,514

5,383

5,778

5,972

5,979

Preferred Equity - Sun NG Resorts - mandatorily redeemable

35,249

Lines of credit (5)

5,079

71,000

Total

$

32,132

$

128,471

$

335,631

$

180,558

$

438,273


Real Property Operations – Same Community(2)
(amounts in thousands except for Other Information)

Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

Change

% Change

June 30, 2019

June 30, 2018

Change

% Change

Financial Information

Income from real property(11)

$

196,305

$

184,532

$

11,773

6.4

%

$

395,389

$

372,358

$

23,031

6.2

%

Property operating expenses

Payroll and benefits

18,673

17,609

1,064

6.0

%

35,094

33,143

1,951

5.9

%

Legal, taxes & insurance

2,131

2,047

84

4.1

%

4,322

4,518

(196

)

(4.3

)%

Utilities (11)

13,244

13,325

(81

)

(0.6

)%

27,678

27,788

(110

)

(0.4

)%

Supplies and repair (12)

8,472

7,739

733

9.5

%

14,191

12,898

1,293

10.0

%

Other

5,411

5,402

9

0.2

%

9,866

10,090

(224

)

(2.2

)%

Real estate taxes

14,896

13,896

1,000

7.2

%

29,486

27,662

1,824

6.6

%

Total property operating expenses

62,827

60,018

2,809

4.7

%

120,637

116,099

4,538

3.9

%

Real Property NOI(1)

$

133,478

$

124,514

$

8,964

7.2

%

$

274,752

$

256,259

$

18,493

7.2

%


As of

June 30, 2019

June 30, 2018

Change

% Change

Other Information

Number of properties

345

MH occupancy (3)

97.7

%

RV occupancy (3)

100.0

%

MH & RV blended occupancy % (3)

98.2

%

96.2

%

2.0

%

Sites available for development

7,237

7,463

(226

)

(3.0

)%

Monthly base rent per site - MH

$

568

$

545

$

23

4.2

%

(14)

Monthly base rent per site - RV (13)

$

473

$

445

$

28

6.3

%

(14)

Monthly base rent per site - Total (13)

$

547

$

523

$

24

4.5

%

(14)



Home Sales Summary
(amounts in thousands except for *)


Three Months Ended

Six Months Ended

Financial Information

June 30, 2019

June 30, 2018

Change

% Change

June 30, 2019

June 30, 2018

Change

% Change

New homes

New home sales

$

16,704

$

14,652

$

2,052

14.0

%

$

32,085

$

26,545

$

5,540

20.9

%

New home cost of sales

14,833

12,712

2,121

16.7

%

27,979

22,909

5,070

22.1

%

NOI / Gross Profit (1) - new homes

1,871

1,940

(69

)

(3.6

)%

4,106

3,636

470

12.9

%

Gross margin % – new homes

11.2

%

13.2

%

(2.0

)%

12.8

%

13.7

%

(0.9

)%

Average selling price – new homes*

$

120,173

$

109,343

$

10,830

9.9

%

$

121,534

$

110,604

$

10,930

9.9

%

Pre-owned homes

Pre-owned home sales

30,538

26,565

3,973

15.0

%

54,775

49,572

5,203

10.5

%

Pre-owned home cost of sales

19,602

18,220

1,382

7.6

%

35,733

34,594

1,139

3.3

%

NOI / Gross Profit (1) - pre-owned homes

10,936

8,345

2,591

31.0

%

19,042

14,978

4,064

27.1

%

Gross margin % – pre-owned homes

35.8

%

31.4

%

4.4

%

34.8

%

30.2

%

4.6

%

Average selling price – pre-owned homes*

$

38,754

$

32,837

$

5,917

18.0

%

$

37,491

$

32,190

$

5,301

16.5

%

Revenue from home sales

47,242

41,217

6,025

14.6

%

86,860

76,117

10,743

14.1

%

Cost of home sales

34,435

30,932

3,503

11.3

%

63,712

57,503

6,209

10.8

%

NOI / Gross Profit (1) - home sales

$

12,807

$

10,285

$

2,522

24.5

%

$

23,148

$

18,614

$

4,534

24.4

%

Statistical Information

New home sales volume*

139

134

5

3.7

%

264

240

24

10.0

%

Pre-owned home sales volume*

788

809

(21

)

(2.6

)%

1,461

1,540

(79

)

(5.1

)%

Total homes sold*

927

943

(16

)

(1.7

)%

1,725

1,780

(55

)

(3.1

)%


Rental Program Summary
(amounts in thousands except for *)


Three Months Ended

Six Months Ended

Financial Information

June 30, 2019

June 30, 2018

Change

% Change

June 30, 2019

June 30, 2018

Change

% Change

Revenues

Rental home revenue

$

14,412

$

13,348

$

1,064

8.0

%

$

28,383

$

26,368

$

2,015

7.6

%

Site rent from rental program

17,178

16,539

639

3.9

%

34,056

32,848

1,208

3.7

%

Rental program revenue

31,590

29,887

1,703

5.7

%

62,439

59,216

3,223

5.4

%

Expenses

Repairs and refurbishment

2,803

2,207

596

27.0

%

5,107

4,521

586

13.0

%

Taxes and insurance

1,827

1,569

258

16.4

%

3,691

3,115

576

18.5

%

Other

461

1,539

(1,078

)

(70.0

)%

1,081

2,906

(1,825

)

(62.8

)%

Rental program operating and maintenance

5,091

5,315

(224

)

(4.2

)%

9,879

10,542

(663

)

(6.3

)%

Rental Program NOI(1)

$

26,499

$

24,572

$

1,927

7.8

%

$

52,560

$

48,674

$

3,886

8.0

%


As of

Other Information

June 30, 2019

June 30, 2018

Change

% Change

Number of occupied rental homes, end of period*

11,230

11,072

158

1.4

%

Investment in occupied rental homes, end of period

$

561,219

$

514,756

$

46,463

9.0

%

Number of sold rental homes (YTD)*

542

509

33

6.5

%

Weighted average monthly rental rate, end of period*

$

975

$

927

$

48

5.2

%



Acquisitions and Other Summary (15)
(amounts in thousands except for statistical data)


Three Months Ended

Six Months Ended

Financial Information

June 30, 2019

June 30, 2019

Revenues

Income from real property

$

21,262

$

30,513

Property and operating expenses

Payroll and benefits

3,424

5,874

Legal, taxes & insurance

233

426

Utilities(11)

1,874

3,424

Supplies and repair

1,257

1,892

Other

2,637

4,054

Real estate taxes

830

1,570

Property operating expenses

10,255

17,240

Net operating income (NOI) (1)

$

11,007

$

13,273

As of June 30, 2019

Other information

Number of properties

37

Occupied sites

3,786

Developed sites

3,991

Occupancy %

94.9

%

Transient sites

5,805



Property Summary

(includes MH and Annual RVs)

COMMUNITIES

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

FLORIDA

Communities

125

125

124

124

124

Developed sites (16)

38,879

38,878

37,874

37,879

37,723

Occupied (16)

37,944

37,932

36,868

36,822

36,602

Occupancy % (16)

97.6

%

97.6

%

97.3

%

97.2

%

97.0

%

Sites for development

1,707

1,754

1,684

1,494

1,335

MICHIGAN

Communities

72

72

70

70

69

Developed sites (16)

27,891

27,777

26,504

26,116

26,039

Occupied (16)

26,591

26,430

25,075

24,830

24,709

Occupancy % (16)

95.3

%

95.2

%

94.6

%

95.1

%

94.9

%

Sites for development

1,115

1,202

1,202

1,533

1,668

TEXAS

Communities

23

23

23

23

23

Developed sites (16)

6,997

6,953

6,922

6,905

6,622

Occupied (16)

6,683

6,529

6,428

6,301

6,251

Occupancy % (16)

95.5

%

93.9

%

92.9

%

91.3

%

94.4

%

Sites for development

1,100

1,107

1,121

907

1,168

CALIFORNIA

Communities

31

31

30

30

29

Developed sites (16)

5,946

5,949

5,941

5,932

5,694

Occupied (16)

5,896

5,902

5,897

5,881

5,647

Occupancy % (16)

99.2

%

99.2

%

99.3

%

99.1

%

99.2

%

Sites for development

56

56

56

59

177

ARIZONA

Communities

13

13

12

11

11

Developed sites (16)

4,235

4,238

3,836

3,826

3,804

Occupied (16)

3,842

3,830

3,545

3,515

3,485

Occupancy % (16)

90.7

%

90.4

%

92.4

%

91.9

%

91.6

%

Sites for development

ONTARIO, CANADA

Communities

15

15

15

15

15

Developed sites (16)

3,929

3,832

3,845

3,832

3,752

Occupied (16)

3,929

3,832

3,845

3,832

3,752

Occupancy % (16)

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

Sites for development

1,675

1,675

1,682

1,662

1,662

INDIANA

Communities

11

11

11

11

11

Developed sites (16)

3,089

3,089

3,089

3,089

3,089

Occupied (16)

2,849

2,823

2,772

2,778

2,791

Occupancy % (16)

92.2

%

91.4

%

89.7

%

89.9

%

90.4

%

Sites for development

277

277

277

277

277

OHIO

Communities

9

9

9

9

9

Developed sites (16)

2,770

2,770

2,770

2,770

2,767

Occupied (16)

2,705

2,704

2,693

2,694

2,698

Occupancy % (16)

97.7

%

97.6

%

97.2

%

97.3

%

97.5

%

Sites for development

59

59

59

59

59





COLORADO

Communities

8

8

8

8

8

Developed sites (16)

2,335

2,335

2,335

2,335

2,335

Occupied (16)

2,323

2,323

2,320

2,313

2,319

Occupancy % (16)

99.5

%

99.5

%

99.4

%

99.1

%

99.3

%

Sites for development

2,129

2,129

2,129

2,129

1,819

OTHER STATES

Communities

75

72

69

69

68

Developed sites (16)

16,493

16,354

15,847

15,458

15,367

Occupied (16)

16,026

15,826

15,323

14,932

14,786

Occupancy % (16)

97.2

%

96.8

%

96.7

%

96.6

%

96.2

%

Sites for development

2,705

2,987

3,048

3,195

3,233

TOTAL - PORTFOLIO

Communities

382

379

371

370

367

Developed sites (16)

112,564

112,175

108,963

108,142

107,192

Occupied (16)

108,788

108,131

104,766

103,898

103,040

Occupancy % (16)

96.6

%

(17)

96.4

%

96.1

%

96.1

%

96.1

%

Sites for development (18)

10,823

11,246

11,258

11,315

11,398

% Communities age restricted

31.4

%

31.7

%

32.1

%

32.2

%

32.2

%

TRANSIENT RV PORTFOLIO SUMMARY

Location

Florida

5,693

5,650

5,917

5,786

5,942

California

1,985

1,975

1,765

1,774

1,377

Texas

1,693

1,717

1,752

1,758

1,776

Arizona

1,424

1,421

1,423

1,057

1,079

Maryland

1,380

1,375

1,381

1,386

1,386

Ontario, Canada

1,043

1,131

1,046

1,056

1,133

New York

935

929

925

910

928

New Jersey

875

906

884

893

906

Maine

848

857

572

578

591

Michigan

584

611

576

629

350

Indiana

519

519

519

519

519

Other locations

3,606

3,082

2,731

3,086

3,020

Total transient RV sites

20,585

20,173

19,491

19,432

19,007



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


Recurring Capital Expenditures
Average/Site*

Recurring
Capital Expenditures (19)

Lot Modifications (20)

Acquisitions (21)

Expansion &
Development (22)

Revenue Producing (23)

YTD 2019

$

111

$

11,061

$

11,825

$

371,096

$

123,393

$

5,647

2018

$

263

$

24,265

$

22,867

$

414,840

$

152,672

$

3,864

2017

$

214

$

14,166

$

18,049

$

204,375

$

88,331

$

1,990



Operating Statistics for MH and Annual RVs


LOCATIONS

Resident Move-outs

Net Leased Sites (24)

New Home Sales

Pre-owned Home Sales

Brokered Re-sales

Florida

873

360

127

161

697

Michigan

295

279

28

690

84

Ontario, Canada

414

84

11

10

89

Texas

141

255

22

179

38

Arizona

45

33

21

5

98

Indiana

24

77

2

144

10

Ohio

61

12

73

5

California

38

(1

)

12

2

29

Colorado

1

3

7

35

24

Other locations

597

137

34

162

56

Six Months Ended June 30, 2019

2,489

1,239

264

1,461

1,130


TOTAL FOR YEAR ENDED

Resident Move-outs

Net Leased Sites (24)

New Home Sales

Pre-owned Home Sales

Brokered Re-sales

2018

3,435

2,600

526

3,103

2,147

2017

2,739

2,406

362

2,920

2,006


PERCENTAGE TRENDS

Resident Move-outs

Resident Re-sales

2019 (TTM)

2.6

%

7.2

%

2018

2.4

%

7.2

%

2017

1.9

%

6.6

%


Footnotes and Definitions

(1)Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), and earnings before interest, tax, depreciation and amortization (“EBITDA”) as supplemental performance measures. The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.

• FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles (“GAAP”) depreciation and amortization of real estate assets.

• NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses.

• EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), 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. 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 GAAP net income (loss). Management believes 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. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, 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 is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.

NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental 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 measure 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.

The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities 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. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP 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.

EBITDA as defined by NAREIT (referred to as “EBITDAre”) is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs. Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs. The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company’s performance on a basis that is independent of capital structure (“Recurring EBITDA”).

The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre. EBITDAre is not intended to be used as a measure of the Company’s cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.

(2) Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2019 actual exchange rates.

(3) The Same Community occupancy percentage for 2019 is derived from 106,929 developed sites, of which 105,002 were occupied. The number of developed sites excludes RV transient sites and approximately 1,600 recently completed but vacant MH expansion sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.8 percent for MH, 100.0 percent for RV, and 96.7 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 108,573 developed sites, of which 105,002 were occupied. The Same Community occupancy percentage for 2018 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites.

(4) 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 and amount.

(5) Lines of credit includes the Company’s MH floor plan facility. The effective interest rate on the MH floor plan facility was 7.0 percent for all periods presented. However, the Company pays no interest if the floor plan balance is repaid within 60 days.

(6) Other income / (expense), net was as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Foreign currency translation gain / (loss)

$

1,126

$

(1,663

)

$

3,095

$

(4,187

)

Contingent liability remeasurement loss

(63

)

(95

)

(134

)

(188

)

Long term lease termination expense

(42

)

(70

)

(42

)

(70

)

Other income / (expense), net

$

1,021

$

(1,828

)

$

2,919

$

(4,445

)

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

(8) These costs represent the expenses incurred to bring recently 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.

(9) Core FFO(1) includes an adjustment of $0.4 million for the three and six months ended June 30, 2019 and $0.3 million and $0.7 million for the three and six months ended June 30, 2018 for estimated loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities that require redevelopment due to damages sustained from Hurricane Irma in September 2017, as previously announced. Amounts recognized in 2018 were received in 2019.

(10) The renter’s monthly payment includes the site rent and an amount attributable to the home lease. Site rent is reflected in Real Property NOI. For purposes of management analysis, site rent is included in 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 the Company’s operations.

(11) Same Community results net $8.5 million and $7.8 million of utility revenue against the related utility expense in property operating and maintenance expense for the quarter ended June 30, 2019 and 2018, respectively. Same Community results net $16.9 million and $15.7 million of utility revenue against the related utility expense in property operating and maintenance expense for the six months ended June 30, 2019 and 2018, respectively. The Company adopted ASC 842, the new leasing standard, as of January 1, 2019 which required the reclassification of bad debt expense from Property operating expense to Income from real property. To assist with comparability within Same Community results, bad debt expense has been reclassified to be shown as a reduction of Income from real property for all periods presented.

(12) Same Community supplies and repair expense excludes $0.6 million and $1.5 million for the three and six months ended June 30, 2018, respectively, of expenses incurred for recently acquired properties to bring the 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.

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

(14) Calculated using actual results without rounding.

(15) Acquisitions and other is comprised of eight properties acquired and one property being operated under a temporary use permit in 2019, twenty properties acquired in 2018, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, two recently opened ground-up development, one property undergoing redevelopment, two properties that we have an interest in, but do not operate, and other miscellaneous transactions and activity.

(16) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.

(17) As of June 30, 2019, total portfolio MH occupancy was 95.7 percent inclusive of the impact of approximately 1,600 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.

(18) Total sites for development were comprised of approximately 73.6 percent for expansion, 21.6 percent for greenfield development and 4.8 percent for redevelopment.

(19) Recurring capital expenditures are 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, 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.

(20) Lot modification capital expenditures 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.

(21) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the six months ended June 30, 2019 include $15.7 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards. For the years ended December 31, 2018 and 2017, these costs were $94.6 million and $84.0 million, respectively. 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, often require 24 to 36 months after closing to complete.

(22) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.

(23) Capital costs related to revenue generating activities consist primarily of garages, sheds, 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.

(24) Net leased sites do not include occupied sites acquired during that year.

Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.

Attachment