NEWS RELEASE

February 20, 2019

Southfield, MI, Feb. 20, 2019 (GLOBE NEWSWIRE) --  Sun Communities, Inc. (NYSE: 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 fourth quarter results for 2018 and initial 2019 guidance.

Financial Results for the Quarter and Year Ended December 31, 2018

For the quarter ended December 31, 2018, total revenues increased $32.0 million, or 13.2 percent, to $274.0 million compared to $242.0 million for the same period in 2017. Net income attributable to common stockholders was $9.0 million, or $0.11 per diluted common share, for the quarter ended December 31, 2018, as compared to net income attributable to common stockholders of $7.4 million, or $0.09 per diluted common share, for the same period in 2017.

For the year ended December 31, 2018, total revenues increased $144.3 million, or 14.7 percent, to $1.1 billion compared to $982.6 million for the same period in 2017. Net income attributable to common stockholders was $105.5 million, or $1.29 per diluted common share, for the year ended December 31, 2018, as compared to net income attributable to common stockholders of $65.0 million, or $0.85 per diluted common share, for the same period in 2017.

Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations (“Core FFO”)(1) for the quarter ended December 31, 2018, was $1.03 per diluted share and OP unit (“Share”) as compared to $0.98 in the prior year, an increase of 5.1 percent.
     
  • Core FFO(1) for the year ended December 31, 2018, was $4.58 per Share as compared to $4.17 in the prior year, an increase of 9.8 percent.
     
  • Same Community(2) Net Operating Income (“NOI”)(1) increased by 8.4 percent and 6.7 percent for the quarter and year ended December 31, 2018, respectively, as compared to the same periods in 2017.
     
  • Home sales volume increased 3.3 percent and 10.6 percent for the quarter and year ended December 31, 2018, respectively, as compared to the same periods in 2017.
     
  • Revenue producing sites increased by 722 sites and 2,600 sites for the quarter and year ended December 31, 2018, respectively, as compared to a 573 site and a 2,406 site increase in the same periods in 2017.

Gary Shiffman, Chief Executive Officer of Sun Communities, stated, “With same community NOI growth of 8.4 percent in the quarter, Sun completed another successful year which demonstrated the sustained demand for our housing and vacation solutions. We also continue to source attractive growth opportunities across the manufactured housing and RV segments, deploying more than $585 million during 2018. These investments included ongoing expansions at our highly occupied communities, acquisitions of income producing assets, and select greenfield developments, along with a strategic stake in a leading owner, operator and developer of senior manufactured housing communities and RV resorts based in Australia. The tailwinds for our sector remain strong, we have an excellent product, and we are well positioned to continue our track record of industry leading growth.”


OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.1 percent as of the year ended December 31, 2018, and 95.8 percent as of the year ended December 31, 2017.

During the quarter ended December 31, 2018, revenue producing sites increased by 722 sites, as compared to 573 revenue producing sites gained during the fourth quarter of 2017. During the year ended December 31, 2018, revenue producing sites increased by 2,600 sites, as compared to an increase of 2,406 revenue producing sites during the year ended December 31, 2017.


Same Community(2) Results

For the 336 communities owned and operated by the Company since January 1, 2017, NOI(1) for the quarter ended December 31, 2018, increased 8.4 percent over the same period in 2017, as a result of a 6.2 percent increase in revenues and a 1.4 percent increase in operating expenses. Same Community occupancy(3) increased to 98.0 percent as of the year ended December 31, 2018 from 95.8 percent as of the year ended December 31, 2017.

For the year ended December 31, 2018, total revenues increased by 6.1 percent while total expenses increased by 4.9 percent, resulting in an increase in NOI(1) of 6.7 percent over the year ended December 31, 2017.


Home Sales

During the quarter ended December 31, 2018, the Company sold 878 homes as compared to 850 homes sold during the same period in 2017, a 3.3 percent increase. Rental home sales, which are included in total home sales, were 297 and 340 for the quarters ended December 31, 2018 and 2017, respectively.

During the year ended December 31, 2018, 3,629 homes were sold compared to 3,282 homes sold during the same period in 2017, a 10.6 percent increase. Rental home sales, which are included in total home sales, were 1,122 and 1,168 for the year ended December 31, 2018 and 2017, respectively.

PORTFOLIO ACTIVITY

Acquisitions

During, and subsequent, to the quarter ended December 31, 2018, the Company acquired the following communities:

Fourth Quarter 2018:   
Date of AcquisitionTypeLocationUsable SitesConsideration (in Millions)
10/2018RVBuckeye, Arizona376 $11.6 
  Total376 $11.6 
     
Subsequent to December 31, 2018:   
Date of AcquisitionTypeLocationUsable SitesConsideration (in Millions)
1/2019MH (Age Restricted)Edgewater, Florida (1)730 $115.3 
1/2019RVOld Orchard Beach, Maine321 10.8 
1/2019MHOregon City, Oregon(2)518 61.8 
2/2019MHBuckeye, Arizona400 22.3 
2/2019MH (3)Shelby Township, Michigan1,308 94.5 
2/2019RVMillsboro, Delaware291 20.0 
  Total3,568 $324.7 

(1) Acquisition includes expansion potential of 70 sites.
(2) In conjunction with the acquisition, the Company created a new class of OP units named Series D Preferred Units. As of February 14, 2019, 488,958 Series D Preferred OP Units were outstanding.
(3) Contains two MH communities.

During the quarter ended December 31, 2018, the Company acquired three land parcels which are located in Texas, Florida, and California for total consideration of $6.3 million. These land parcels are adjacent to existing communities and have potential to add approximately 500 usable sites once constructed.

In November, the Company completed a $54 million strategic investment in Ingenia Communities Group (“Ingenia”), a leading owner, operator, and developer of senior manufactured housing communities and holiday resorts in Australia. The $54 million investment represents a 9.9 percent ownership stake in Ingenia. In addition, the Company and Ingenia have also formed a 50/50 joint venture to establish and grow a manufactured housing community development program in Australia.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

During the quarter ended December 31, 2018, the Company repaid one collateralized term loan of $10.2 million with an interest rate of 5.66 percent. The loan was due to mature on February 28, 2019.

Subsequent to the quarter, the Company completed a $265.0 million twenty-five year term loan transaction which carries an interest rate of 4.17 percent. Concurrently, the Company repaid a $187.9 million term loan which was due to mature in January 2030.

As of December 31, 2018, the Company had $3.1 billion of debt outstanding. The weighted average interest rate was 4.45 percent and the weighted average maturity was 9.0 years. The Company had $50.3 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.6 times.

2019 Distributions

After quarter end, the Company announced a 5.6 percent annual distribution increase to $3.00 per common share from $2.84 per common share. This increase will begin with the first quarter distribution to be paid in April 2019.


GUIDANCE 2019

The estimates and assumptions presented below represent a range of possible outcomes and may differ materially from actual results. Guidance estimates include acquisitions completed through the date of this release, and exclude any prospective acquisitions or capital markets activity. 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.”

  Net Income Core FFO(1)
Weighted average common shares outstanding, fully diluted (in mm)(i) 85.6  90.3
First quarter 2019, per fully diluted share $0.31 - $0.34 $1.10 - $1.13
Full year 2019, per fully diluted share $1.59 - $1.71 $4.76 - $4.86


  1Q19 2Q19 3Q19 4Q19
Seasonality of Core FFO(1) 23.2% 23.7% 30.5% 22.6%

Total Portfolio
Number of communities: 378

  2018 Actual 2019E
  (in Millions) Change %
Income from real property (excluding transient revenue) $719.8  10.6% - 11.0%
Transient revenue 106.2  14.2% - 15.4%
Income from real property $826.0  11.1% - 11.6%
Property operating and maintenance 236.1  14.4% - 15.0%
Real estate taxes 56.6  11.5% - 12.4%
Total property operating expenses $292.7  13.9% - 14.5%
NOI(1) $533.3  9.2% - 10.4%

Same Community Portfolio(ii)

Number of communities: 345

  2018 Actual 2019E
  (in Millions) Change %
Income from real property (excluding transient revenue) $682.2  6.3% - 6.5%
Transient revenue 81.3  2.7% - 3.3%
Income from real property(iii) $763.5  5.9% - 6.2%
Property operating and maintenance(iii)(iv) 186.0  3.8% - 4.9%
Real estate taxes 55.7  6.5% - 6.8%
Total property operating expenses $241.7  4.4% - 5.4%
NOI(1) $521.8  6.2% - 7.0%

Same community property operating and maintenance expense includes $1.9 million of previously capitalized internal leasing costs related to the implementation of the new lease accounting standard. Without this change, 2019 Same community NOI(1) growth would be in the range of 6.6 percent to 7.4 percent.

Weighted average monthly rental rate increase       4.0%
         
  1Q19 2Q19 3Q19 4Q19
Same Community NOI(1) Seasonality 25.2% 23.8% 26.1% 24.9%

Total Company Supplementary Information:

  2018 Actual 2019E
  (in Millions) Change %
Rental program, net $30.6  10.1% - 12.4%
Ancillary revenues, net 16.5  9.1% - 10.9%
Home sales contribution to Core FFO(v), net of home selling expenses 3.6  19.4% - 25.0%
Interest income 20.9  (5.7%) - (4.3%)
Brokerage commissions, other revenues, net, and income from nonconsolidated affiliates 6.9  75.4% - 76.8%
General and administrative 81.4  8.8% - 10.6%
Loss of earnings in 2019 from Florida Keys included in Core FFO(1) 1.5   –

General and administrative expense includes approximately $3.5 million of previously capitalized internal leasing costs related to the implementation of the new lease accounting standard. Without this change, 2019 General and administrative expense growth would be in the range of 4.6 percent to 6.3 percent.

Other line items impacted by the lease accounting standard include Rental program, net and Home sales contribution to FFO(1), net of home selling expenses. The capitalization of allowable costs within these line items substantially offsets the additional expense recognized in property operating and maintenance and general and administrative expense making the overall impact to the Company’s 2019 FFO(1) minimal.

  2019E
Increase in revenue producing sites 2,500 - 2,700
Expansion sites constructed 1,200 - 1,400
Ground-up development sites constructed 800 - 1,000
   
New home sales volume 550 - 600
Pre-owned home sales volume 2,700 - 3,000

(i) Certain securities that are dilutive to the computation of Core FFO per fully diluted share in the table above have been excluded from the computation of net  income per fully diluted share, as inclusion of these securities would have been anti-dilutive to net income per fully diluted share.
(ii) The amounts in the table reflect constant currency, as Canadian currency figures included within the 2018 actual amounts have been translated at the assumed exchange rate used for 2019 guidance.
(iii) Water and sewer utility revenue of $34.5 million has been reclassified from Income from real property to net against the related expense in Property operating maintenance.
(iv) 2018 actual property operating and maintenance expense excludes $0.7 million of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards that do not meet the Company’s capitalization policy.
(v) Includes gross profit from new and certain pre-owned home sales. Gross profit from pre-owned home sales of depreciated rental homes is excluded.


EARNINGS CONFERENCE CALL

A conference call to discuss fourth quarter operating results will be held on Thursday, February 21, 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 March 7, 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 13685225. The conference call will be available live on Sun Communities’ website www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of December 31, 2018, owned, operated, or had an interest in a portfolio of 371 communities comprising over 128,000 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 December 31, 2018)




Balance Sheets                                                                                                                                              
(amounts in thousands)



  12/31/2018 12/31/2017
ASSETS:    
Land $1,201,945  $1,107,838 
Land improvements and buildings 5,586,250  5,102,014 
Rental homes and improvements 571,661  528,074 
Furniture, fixtures and equipment 201,090  144,953 
Investment property 7,560,946  6,882,879 
Accumulated depreciation (1,442,630) (1,237,525)
Investment property, net 6,118,316  5,645,354 
Cash and cash equivalents 50,311  10,127 
Inventory of manufactured homes 49,199  30,430 
Notes and other receivables, net 160,077  163,496 
Collateralized receivables, net (4) 106,924  128,246 
Other assets, net 225,199  134,304 
TOTAL ASSETS $6,710,026  $6,111,957 
LIABILITIES:    
Mortgage loans payable $2,815,957  $2,867,356 
Secured borrowings (4) 107,731  129,182 
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,277   
Preferred OP units - mandatorily redeemable 37,338  41,443 
Lines of credit (5) 128,000  41,257 
Distributions payable 63,249  55,225 
Advanced reservation deposits and rent 133,698  132,205 
Other liabilities 157,862  138,536 
TOTAL LIABILITIES 3,479,112  3,405,204 
Commitments and contingencies    
Series A-4 preferred stock 31,739  32,414 
Series A-4 preferred OP units 9,877  10,652 
Equity Interests - NG Sun LLC 21,976   
STOCKHOLDERS' EQUITY:    
Common stock 864  797 
Additional paid-in capital 4,398,949  3,758,533 
Accumulated other comprehensive (loss) / income (4,504) 1,102 
Distributions in excess of accumulated earnings (1,288,486) (1,162,001)
Total Sun Communities, Inc. stockholders' equity 3,106,823  2,598,431 
Noncontrolling interests:    
Common and preferred OP units 53,354  60,971 
Consolidated variable interest entities 7,145  4,285 
Total noncontrolling interests 60,499  65,256 
TOTAL STOCKHOLDERS' EQUITY 3,167,322  2,663,687 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,710,026  $6,111,957 



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



 Three Months Ended December 31,
 2018 2017 Change % Change
REVENUES:       
Income from real property (excluding transient revenue)$183,059  $169,102  $13,957  8.3%
Transient revenue17,426  12,348  5,078  41.1%
Revenue from home sales43,783  36,089  7,694  21.3%
Rental home revenue13,700  12,775  925  7.2%
Ancillary revenue7,900  5,425  2,475  45.6%
Interest5,004  5,571  (567) (10.2)%
Brokerage commissions and other revenues, net3,132  716  2,416  337.4%
Total Revenues274,004  242,026  31,978  13.2%
EXPENSES:       
Property operating and maintenance54,120  50,417  3,703  7.3%
Real estate taxes14,110  12,966  1,144  8.8%
Cost of home sales32,138  27,115  5,023  18.5%
Rental home operating and maintenance6,356  5,204  1,152  22.1%
Ancillary expenses8,638  5,441  3,197  58.8%
Home selling expenses4,403  3,066  1,337  43.6%
General and administrative20,570  18,409  2,161  11.7%
Transaction costs (6)334  2,811  (2,477) (88.1)%
Catastrophic weather related charges, net2,079  228  1,851  811.8%
Depreciation and amortization81,070  71,817  9,253  12.9%
Loss on extinguishment of debt  5,260  (5,260) (100.0)%
Interest32,170  31,363  807  2.6%
Interest on mandatorily redeemable preferred OP units / equity1,143  753  390  51.8%
Total Expenses257,131  234,850  22,281  9.5%
Income Before Other Items16,873  7,176  9,697  135.1%
Remeasurement of marketable securities(3,639)   (3,639) N/A
Other (expense) / income, net (7)(3,239) 3,642  (6,881) (188.9)%
Income from nonconsolidated affiliates587    587  N/A
Current tax benefit / (expense)17  (313) 330  105.4%
Deferred tax benefit / (expense)73  (163) 236  144.8%
Net Income10,672  10,342  330  3.2%
Less: Preferred return to preferred OP units / equity(1,151) (1,099) (52) 4.7%
Less: Amounts attributable to noncontrolling interests(51) (876) 825  (94.2)%
Net Income Attributable to Sun Communities, Inc.9,470  8,367  1,103  13.2%
Less: Preferred stock distribution(431) (929) 498  (53.6)%
Net Income Attributable to Sun Communities, Inc. Common Stockholders$9,039  $7,438  $1,601  21.5%
        
Weighted average common shares outstanding:       
Basic85,481  78,633  6,848  8.7%
Diluted85,982  79,107  6,875  8.7%
Earnings per share:       
Basic$0.11  $0.09  $0.02  22.2%
Diluted$0.11  $0.09  $0.02  22.2%


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



  Year Ended December 31,
  2018 2017 Change % Change
REVENUES:        
Income from real property (excluding transient revenue) $719,763  $664,281  $55,482  8.4%
Transient revenue 106,210  77,947  28,263  36.3%
Revenue from home sales 166,031  127,408  38,623  30.3%
Rental home revenue 53,657  50,549  3,108  6.1%
Ancillary revenue 54,107  37,511  16,596  44.2%
Interest 20,853  21,180  (327) (1.5)%
Brokerage commissions and other revenues, net 6,204  3,694  2,510  67.9%
Total Revenues 1,126,825  982,570  144,255  14.7%
EXPENSES:        
Property operating and maintenance 236,097  210,278  25,819  12.3%
Real estate taxes 56,555  52,288  4,267  8.2%
Cost of home sales 123,333  95,114  28,219  29.7%
Rental home operating and maintenance 23,099  22,114  985  4.5%
Ancillary expenses 37,623  27,436  10,187  37.1%
Home selling expenses 15,722  12,457  3,265  26.2%
General and administrative 81,438  74,232  7,206  9.7%
Transaction costs (6) 472  9,801  (9,329) (95.2)%
Catastrophic weather related charges, net 92  8,352  (8,260) (98.9)%
Depreciation and amortization 287,262  261,536  25,726  9.8%
Loss on extinguishment of debt 2,657  6,019  (3,362) (55.9)%
Interest 129,089  127,128  1,961  1.5%
Interest on mandatorily redeemable preferred OP units / equity 3,694  3,114  580  18.6%
Total Expenses 997,133  909,869  87,264  9.6%
Income Before Other Items 129,692  72,701  56,991  78.4%
Remeasurement of marketable securities (3,639)   (3,639) N/A
Other (expense) / income, net (7) (6,453) 8,982  (15,435) (171.8)%
Income from nonconsolidated affiliates 646    646  N/A
Current tax expense (595) (446) (149) 33.4%
Deferred tax benefit 507  582  (75) (12.9)%
Net Income 120,158  81,819  38,339  46.9%
Less: Preferred return to preferred OP units / equity (4,486) (4,581) 95  (2.1)%
Less: Amounts attributable to noncontrolling interests (8,443) (5,055) (3,388) 67.0%
Net Income Attributable to Sun Communities, Inc. 107,229  72,183  35,046  48.6%
Less: Preferred stock distribution (1,736) (7,162) 5,426  (75.8)%
Net Income Attributable to Sun Communities, Inc. Common Stockholders $105,493  $65,021  $40,472  62.2%
Weighted average common shares outstanding:        
Basic 81,387  76,084  5,303  7.0%
Diluted 82,040  76,711  5,329  6.9%
Earnings per share:        
Basic $1.29  $0.85  $0.44  51.8%
Diluted $1.29  $0.85  $0.44  51.8%


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



Outstanding Securities - As of December 31, 2018
          
 Number of Units/Shares Outstanding Conversion Rate* If Converted Issuance Price per unit* Annual Distribution Rate*
Convertible Securities         
Series A-1 preferred OP units332 2.4390 810 $100 6.0%
Series A-3 preferred OP units40 1.8605 74 $100 4.5%
Series A-4 preferred OP units410 0.4444 182 $25 6.5%
Series C preferred OP units314 1.1100 349 $100 4.5%
Common OP units2,726 1.0000 2,726 N/A Mirrors common shares distributions
Series A-4 preferred stock1,063 0.4444 472 $25 6.5%
          
Non-Convertible Securities         
Common shares86,357 N/A N/A N/A $2.84^
^ Annual distribution is based on the last quarterly distribution annualized.


Capitalization - As of December 31, 2018      
       
Equity Shares Share Price* Total
Common shares 86,357  $101.71  $8,783,370 
Common OP units 2,726  $101.71  277,261 
Subtotal 89,083    $9,060,631 
       
Series A-1 preferred OP units 810  $101.71  82,385 
Series A-3 preferred OP units 74  $101.71  7,527 
Series A-4 preferred OP units 182  $101.71  18,511 
Series C preferred OP units 349  $101.71  35,497 
Total diluted shares outstanding 90,498    $9,204,551 
 
Debt
Mortgage loans payable     $2,815,957 
Secured borrowings (4)     107,731 
Preferred Equity - Sun NG Resorts - mandatorily redeemable     35,277 
Preferred OP units - mandatorily redeemable     37,338 
Lines of credit (5)     128,000 
Total debt     $3,124,303 
 
Preferred
Series A-4 preferred stock 1,063  $25.00  $26,575 
Total Capitalization     $12,355,429 


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
 December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Net income attributable to Sun Communities, Inc. common stockholders:$9,039  $7,438  $105,493  $65,021 
Adjustments:       
Depreciation and amortization81,314  72,068  288,206  262,211 
Remeasurement of marketable securities3,639    3,639   
Amounts attributable to noncontrolling interests15  825  7,740  4,535 
Preferred return to preferred OP units552  570  2,206  2,320 
Preferred distribution to Series A-4 preferred stock432  441  1,737  2,107 
Gain on disposition of assets, net(6,429) (4,733) (23,406) (16,075)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

$88,562  $76,609  $385,615  $320,119 
Adjustments:       
Transaction costs (6)  2,811    9,801 
Other acquisition related costs (9)220  98  1,001  2,810 
Loss on extinguishment of debt  5,260  2,657  6,019 
Catastrophic weather related charges, net2,079  228  92  8,352 
Loss of earnings - catastrophic weather related (10)(1,267) 292  (292) 292 
Other expense / (income), net (7)3,239  (3,642) 6,453  (8,982)
Debt premium write-off(65) (905) (1,467) (1,343)
Ground lease intangible write-off  898  817  898 
Deferred tax (benefit) / expense(73) 163  (507) (582)
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

$92,695  $81,812  $394,369  $337,384 
        
Weighted average common shares outstanding - basic:85,481  78,633  81,387  76,084 
Add:       
Common stock issuable upon conversion of stock options2  2  2  2 
Restricted stock499  472  651  625 
Common OP units2,727  2,751  2,733  2,756 
Common stock issuable upon conversion of Series A-1 preferred OP units810  847  821  869 
Common stock issuable upon conversion of Series A-4 preferred stock472  482  472  585 
Common stock issuable upon conversion of Series A-3 preferred OP units75  75  75  75 
Weighted average common shares outstanding - fully diluted90,066  83,262  86,141  80,996 
        
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted

$0.98  $0.92  $4.48  $3.95 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted

$1.03  $0.98  $4.58  $4.17 


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



 Three Months Ended
 December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Net income attributable to Sun Communities, Inc., common stockholders:$9,039  $7,438  $105,493  $65,021 
Adjustments:       
Interest expense33,313  32,116  132,783  130,242 
Loss on extinguishment of debt  5,260  2,657  6,019 
Current tax (benefit) / expense(17) 313  595  446 
Deferred tax (benefit) / expense(73) 163  (507) (582)
Income from nonconsolidated affiliates(587)   (646)  
Depreciation and amortization81,070  71,817  287,262  261,536 
Gain on disposition of assets, net(6,429) (4,733) (23,406) (16,075)
EBITDAre (1)$116,316  $112,374  $504,231  $446,607 
Adjustments:       
Transaction costs (6)334  2,811  472  9,801 
Remeasurement of marketable securities3,639    3,639   
Other expense / (income), net (7)3,239  (3,642) 6,453  (8,982)
Catastrophic weather related charges, net2,079  228  92  8,352 
Preferred return to preferred OP units / equity1,151  1,099  4,486  4,581 
Amounts attributable to noncontrolling interests51  876  8,443  5,055 
Preferred stock distribution431  929  1,736  7,162 
Plus: Gain on dispositions of assets, net6,429  4,733  23,406  16,075 
Recurring EBITDA (1)$133,669  $119,408  $552,958  $488,651 



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



 Three Months Ended
 December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Net income attributable to Sun Communities, Inc., common stockholders:$9,039  $7,438  $105,493  $65,021 
Other revenues(8,136) (6,287) (27,057) (24,874)
Home selling expenses4,403  3,066  15,722  12,457 
General and administrative20,570  18,409  81,438  74,232 
Transaction costs (6)334  2,811  472  9,801 
Catastrophic weather related charges, net2,079  228  92  8,352 
Depreciation and amortization81,070  71,817  287,262  261,536 
Loss on extinguishment of debt  5,260  2,657  6,019 
Interest expense33,313  32,116  132,783  130,242 
Remeasurement of marketable securities3,639    3,639   
Other expense / (income), net (7)3,239  (3,642) 6,453  (8,982)
Income from nonconsolidated affiliates(587)   (646)  
Current tax (benefit) / expense(17) 313  595  446 
Deferred tax (benefit) / expense(73) 163  (507) (582)
Preferred return to preferred OP units / equity1,151  1,099  4,486  4,581 
Amounts attributable to noncontrolling interests51  876  8,443  5,055 
Preferred stock distribution431  929  1,736  7,162 
NOI(1) / Gross Profit$150,506  $134,596  $623,061  $550,466 


 Three Months Ended
 December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Real Property NOI (1)$132,255  $118,067  $533,321  $479,662 
Rental Program NOI (1)23,714  23,598  96,173  92,268 
Home Sales NOI (1) / Gross Profit11,645  8,974  42,698  32,294 
Ancillary NOI (1) / Gross Profit(738) (16) 16,484  10,075 
Site rent from Rental Program (included in Real Property NOI) (1)(11)(16,370) (16,027) (65,615) (63,833)
NOI (1) / Gross profit$150,506  $134,596  $623,061  $550,466 



Non-GAAP and Other Financial Measures


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



 Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
FINANCIAL INFORMATION         
Total revenues$274,004  $323,538  $271,426  $257,916  $242,026 
Net income10,672  51,715  24,170  33,601  10,342 
Net income attributable to Sun Communities Inc.9,039  46,060  20,408  29,986  7,438 
Earnings per share basic*$0.11  $0.56  $0.25  $0.38  $0.09 
Earnings per share diluted*0.11  0.56  0.25  0.38  0.09 
          
Cash distributions declared per common share*$0.71  $0.71  $0.71  $0.71  $0.67 
          
Recurring EBITDA (1)$133,669  $158,153  $128,798  $132,281  $119,408 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

88,562  117,018  85,623  94,976  76,609 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

92,695  116,959  90,372  94,907  81,812 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted*$0.98  $1.35  $1.02  $1.14  $0.92 
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted*1.03  1.35  1.07  1.14  0.98 
          
BALANCE SHEETS         
Total assets$6,710,026  $6,653,726  $6,492,348  $6,149,653  $6,111,957 
Total debt3,124,303  3,004,929  3,364,081  3,129,440  3,079,238 
Total liabilities3,479,112  3,367,285  3,736,621  3,471,096  3,405,204 


 Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
OPERATING INFORMATION*         
New home sales140  146  134  106  103 
Pre-owned home sales738  825  809  731  747 
Total homes sold878  971  943  837  850 
          
Communities371  370  367  350  350 
          
Developed sites108,963  108,142  107,192  106,617  106,036 
Transient RV sites19,491  19,432  19,007  15,693  15,856 
Total sites128,454  127,574  126,199  122,310  121,892 
          
MH occupancy95.0% 94.9% 95.0% 94.7% 94.6%
RV occupancy100.0% 100.0% 100.0% 100.0% 100.0%
Total blended MH and RV occupancy96.1% 96.1% 96.1% 95.8% 95.8%



Debt Analysis
(amounts in thousands)



 Quarter Ended
 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
DEBT OUTSTANDING         
Mortgage loans payable$2,815,957  $2,819,225  $2,636,847  $2,826,225  $2,867,356 
Secured borrowings (4)107,731  113,089  118,242  124,077  129,182 
Preferred Equity - Sun NG Resorts - mandatorily redeemable35,277  35,277  35,277     
Preferred OP units - mandatorily redeemable37,338  37,338  37,338  37,338  41,443 
Lines of credit (5)128,000    536,377  141,800  41,257 
Total debt$3,124,303  $3,004,929  $3,364,081  $3,129,440  $3,079,238 
          
% FIXED/FLOATING         
Fixed95.9% 100.0% 84.0% 90.6% 93.7%
Floating4.1% % 16.0% 9.4% 6.3%
Total100.0% 100.0% 100.0% 100.0% 100.0%
          
WEIGHTED AVERAGE INTEREST RATES         
Mortgage loans payable4.22% 4.23% 4.27% 4.25% 4.25%
Preferred Equity - Sun NG Resorts - mandatorily redeemable6.00% 6.00% 6.00% % %
Preferred OP units - mandatorily redeemable6.61% 6.61% 6.61% 6.61% 6.75%
Lines of credit (5)3.77% % 3.31% 3.01% 2.79%
Average before Secured borrowings (4)4.25% 4.28% 4.15% 4.22% 4.26%
Secured borrowings (4)9.94% 9.95% 9.96% 9.97% 9.97%
Total average4.45% 4.50% 4.36% 4.45% 4.50%
          
DEBT RATIOS         
Net Debt / Recurring EBITDA (1) (TTM)5.6  5.4  6.5  6.2  6.3 
Net Debt / Enterprise Value25.2% 23.9% 28.6% 28.8% 28.2%
Net Debt / Gross Assets37.7% 35.9% 42.7% 41.9% 41.8%
          
COVERAGE RATIOS         
Recurring EBITDA (1) (TTM) / Interest4.0 3.9 3.7 3.6 3.6
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution3.9 3.8 3.6 3.4 3.3


MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS2019 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 amortization58,164  59,630  58,843  56,822  53,437 
Secured borrowings (4)5,265  5,746  6,171  6,379  6,374 
Preferred Equity - Sun NG Resorts - mandatorily redeemable      35,277   
Preferred OP units - mandatorily redeemable2,675         
Lines of credit (5)    128,000     
Total$66,104  $123,454  $463,694  $180,633  $367,276 


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



 Three Months Ended December 31, Year Ended December 31,
 2018 2017 Change % Change 2018 2017 Change % Change
Financial Information               
Income from real property (12)$181,147  $170,565  $10,582  6.2% $746,360  $703,272  $43,088  6.1%
                
Property Operating Expenses:            
Payroll and benefits15,707  15,331  376  2.5% 66,502  65,524  978  1.5%
Legal, taxes & insurance2,053  1,885  168  8.9% 9,026  7,152  1,874  26.2%
Utilities (12)12,000  11,596  404  3.5% 54,949  51,480  3,469  6.7%
Supplies and repair (13)5,531  6,006  (475) (7.9)% 26,476  25,347  1,129  4.5%
Other4,523  5,089  (566) (11.1)% 22,952  21,960  992  4.5%
Real estate taxes13,471  12,668  803  6.3% 54,098  51,695  2,403  4.6%
Total property operating expenses53,285  52,575  710  1.4% 234,003  223,158  10,845  4.9%
Real Property NOI(1)$127,862  $117,990  $9,872  8.4% $512,357  $480,114  $32,243  6.7%


 As of December 31, 
 2018 2017 Change % Change 
Other Information        
Number of properties336  336      
         
MH occupancy (3)97.4%       
RV occupancy (3)100.0%       
MH & RV blended occupancy % (3)98.0% 95.8% 2.2%   
         
Sites available for development7,348  5,087  2,261  44.4% 
         
Monthly base rent per site - MH$554  $533  $21  4.0%(15)
Monthly base rent per site - RV (14)$455  $431  $24  5.4%(15)
Monthly base rent per site - Total (14)$532  $511  $21  4.1%(15)



Home Sales Summary           
(amounts in thousands except for *)



 Three Months Ended December 31, Year Ended December 31,
Financial Information2018 2017 Change % Change 2018 2017 Change % Change
Revenue:               
New home sales$16,600  $12,155  $4,445  36.6% $59,578  $36,915  $22,663  61.4%
Pre-owned home sales27,183  23,934  3,249  13.6% 106,453  90,493  15,960  17.6%
Revenue from home sales43,783  36,089  7,694  21.3% 166,031  127,408  38,623  30.3%
Expenses:               
New home cost of sales14,726  10,534  4,192  39.8% 51,913  31,578  20,335  64.4%
Pre-owned home cost of sales17,412  16,581  831  5.0% 71,420  63,536  7,884  12.4%
Cost of home sales32,138  27,115  5,023  18.5% 123,333  95,114  28,219  29.7%
NOI / Gross Profit (1)$11,645  $8,974  $2,671  29.8% $42,698  $32,294  $10,404  32.2%
                
Gross profit – new homes$1,874  $1,621  $253  15.6% $7,665  $5,337  $2,328  43.6%
Gross margin % – new homes11.3% 13.3% (2.0)%   12.9% 14.5% (1.6)%  
Average selling price – new homes*$118,571  $118,010  $561  0.5% $113,266  $101,975  $11,291  11.1%
                
Gross profit – pre-owned homes$9,771  $7,353  $2,418  32.9% $35,033  $26,957  $8,076  30.0%
Gross margin % – pre-owned homes35.9% 30.7% 5.2%   32.9% 29.8% 3.1%  
Average selling price – pre-owned homes*$36,833  $32,040  $4,793  15.0% $34,306  $30,991  $3,315  10.7%
                
Statistical Information        
New home sales volume*140  103  37  35.9% 526  362  164  45.3%
Pre-owned home sales volume*738  747  (9) (1.2)% 3,103  2,920  183  6.3%
Total homes sold*878  850  28  3.3% 3,629  3,282  347  10.6%

               


Rental Program Summary    
(amounts in thousands except for *)



 Three Months Ended December 31, Year Ended December 31,
Financial Information2018 2017 Change % Change 2018 2017 Change % Change
Revenues:               
Rental home revenue$13,700  $12,775  $925  7.2% $53,657  $50,549  $3,108  6.1%
Site rent included in Income from real property16,370  16,027  343  2.1% 65,615  63,833  1,782  2.8%
Rental program revenue30,070  28,802  1,268  4.4% 119,272  114,382  4,890  4.3%
                
Expenses:               
Commissions625  743  (118) (15.9)% 2,291  2,734  (443) (16.2)%
Repairs and refurbishment2,973  1,914  1,059  55.3% 10,312  9,864  448  4.5%
Taxes and insurance1,691  1,613  78  4.8% 6,364  6,102  262  4.3%
Marketing and other1,067  934  133  14.2% 4,132  3,414  718  21.0%
Rental program operating and maintenance6,356  5,204  1,152  22.1% 23,099  22,114  985  4.5%
Rental Program NOI(1)$23,714  $23,598  $116  0.5% $96,173  $92,268  $3,905  4.2%
                


  As of December 31,
Other Information 2018 2017 Change % Change
Number of occupied rental homes, end of period* 10,994  11,074  (80) (0.7)%
Investment in occupied rental homes, end of period $530,006  $494,945  $35,061  7.1%
Number of sold rental homes (YTD)* 1,122  1,168  (46) (3.9)%
Weighted average monthly rental rate, end of period* $949  $901  $48  5.3%



Acquisitions and Other Summary (16)
(amounts in thousands except for statistical data)



  Three Months Ended
 December 31, 2018
 Year Ended
 December 31, 2018
REVENUES:    
Income from real property $11,270  $47,406 
     
PROPERTY AND OPERATING EXPENSES:    
Payroll and benefits 2,534  8,151 
Legal, taxes & insurance 160  498 
Utilities(12) 1,774  6,049 
Supplies and repair 692  2,118 
Other 1,476  7,169 
Real estate taxes 639  2,457 
Property operating expenses 7,275  26,442 
NET OPERATING INCOME (NOI) (1) $3,995  $20,964 
     
    As of December 31, 2018
Other information:    
Number of properties   35 
Occupied sites   2,778 
Developed sites   2,816 
Occupancy %   98.7%
Transient sites   5,179 



Property Summary          
(includes MH and Annual RVs)
           
COMMUNITIES 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
FLORIDA          
Communities 124  124  124  123  123 
Developed sites (17) 37,874  37,879  37,723  37,726  37,254 
Occupied (17) 36,868  36,822  36,602  36,546  36,170 
Occupancy % (17) 97.3% 97.2% 97.0% 96.9% 97.1%
Sites for development 1,684  1,494  1,335  1,397  1,485 
MICHIGAN          
Communities 70  70  69  68  68 
Developed sites (17) 26,504  26,116  26,039  25,881  25,881 
Occupied (17) 25,075  24,830  24,709  24,319  24,147 
Occupancy % (17) 94.6% 95.1% 94.9% 94.0% 93.3%
Sites for development 1,202  1,533  1,668  1,371  1,371 
TEXAS          
Communities 23  23  23  21  21 
Developed sites (17) 6,922  6,905  6,622  6,614  6,601 
Occupied (17) 6,428  6,301  6,251  6,191  6,152 
Occupancy % (17) 92.9% 91.3% 94.4% 93.6% 93.2%
Sites for development 1,121  907  1,168  1,100  1,100 
CALIFORNIA          
Communities 30  30  29  27  27 
Developed sites (17) 5,941  5,932  5,694  5,692  5,692 
Occupied (17) 5,897  5,881  5,647  5,646  5,639 
Occupancy % (17) 99.3% 99.1% 99.2% 99.2% 99.1%
Sites for development 56  59  177  389  389 
ONTARIO, CANADA          
Communities 15  15  15  15  15 
Developed sites (17) 3,845  3,832  3,752  3,650  3,634 
Occupied (17) 3,845  3,832  3,752  3,650  3,634 
Occupancy % (17) 100.0% 100.0% 100.0% 100.0% 100.0%
Sites for development 1,682  1,662  1,662  1,664  1,696 
ARIZONA          
Communities 12  11  11  11  11 
Developed sites (17) 3,836  3,826  3,804  3,797  3,786 
Occupied (17) 3,545  3,515  3,485  3,468  3,446 
Occupancy % (17) 92.4% 91.9% 91.6% 91.3% 91.0%
Sites for development          
INDIANA          
Communities 11  11  11  11  11 
Developed sites (17) 3,089  3,089  3,089  3,048  2,900 
Occupied (17) 2,772  2,778  2,791  2,785  2,756 
Occupancy % (17) 89.7% 89.9% 90.4% 91.4% 95.0%
Sites for development 277  277  277  318  466 
OHIO          
Communities 9  9  9  9  9 
Developed sites (17) 2,770  2,770  2,767  2,756  2,759 
Occupied (17) 2,693  2,694  2,698  2,672  2,676 
Occupancy % (17) 97.2% 97.3% 97.5% 97.0% 97.0%
Sites for development 59  59  59  75  75 
COLORADO          
Communities 8  8  8  8  8 
Developed sites (17) 2,335  2,335  2,335  2,335  2,335 
Occupied (17) 2,320  2,313  2,319  2,327  2,325 
Occupancy % (17) 99.4% 99.1% 99.3% 99.7% 99.6%
Sites for development 2,129  2,129  1,819  650  650 
OTHER STATES          
Communities 69  69  68  57  57 
Developed sites (17) 15,847  15,458  15,367  15,118  15,194 
Occupied (17) 15,323  14,932  14,786  14,544  14,587 
Occupancy % (17) 96.7% 96.6% 96.2% 96.2% 96.0%
Sites for development 3,048  3,195  3,233  2,381  2,385 
TOTAL - PORTFOLIO          
Communities 371  370  367  350  350 
Developed sites (17) 108,963  108,142  107,192  106,617  106,036 
Occupied (17) 104,766  103,898  103,040  102,148  101,532 
Occupancy % (17)(18) 96.1% 96.1% 96.1% 95.8% 95.8%
Sites for development (19) 11,258  11,315  11,398  9,345  9,617 
% Communities age restricted 32.1% 32.2% 32.2% 33.7% 33.7%
           
TRANSIENT RV PORTFOLIO SUMMARY          
 Location          
Florida 5,917  5,786  5,942  5,870  6,074 
California 1,765  1,774  1,377  806  806 
Texas 1,752  1,758  1,776  1,360  1,373 
Arizona 1,423  1,057  1,079  1,085  1,096 
Ontario, Canada 1,046  1,056  1,133  1,234  1,248 
New York 925  910  928  610  614 
New Jersey 884  893  906  931  917 
Michigan 576  629  350  256  256 
Maine 572  578  591  591  596 
Indiana 519  519  519  519  520 
Ohio 150  150  153  148  145 
Other locations 3,962  4,322  4,253  2,283  2,211 
Total transient RV sites 19,491  19,432  19,007  15,693  15,856 



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



  Recurring Capital Expenditures
Average/Site*
Recurring
Capital Expenditures (20)
 Lot Modifications (21)Acquisitions (22) Expansion &
Development (23)
Revenue Producing (24)
2018$263 $24,265 $22,867 $414,840 $152,672 $3,864 
2017$214 $14,166 $18,049 $204,375 $88,331 $1,990 
2016$211 $17,613 $19,040 $1,822,564 $47,958 $2,631 



Operating Statistics for MH and Annual RVs       



LOCATIONS Resident Move-outs Net Leased Sites (25) New Home Sales Pre-owned Home Sales Brokered  Re-sales
Florida 1,320  862  248  269  1,263 
Michigan 414  720  75  1,539  137 
Ontario, Canada 470  211  39  31  236 
Texas 235  276  27  375  43 
Arizona 78  99  38  16  180 
Indiana 53  16  4  240  15 
Ohio 77  17  1  148  10 
California 48  29  21  7  74 
Colorado 5  (5) 5  98  64 
Other locations 735  375  68  380  125 
Year Ended December 31, 2018 3,435  2,600  526  3,103  2,147 


TOTAL FOR YEAR ENDED Resident Move-outs New Leased Sites (25) New Home Sales Pre-owned Home Sales Brokered  Re-sales
2017 2,739  2,406  362  2,920  2,006 
2016 1,722  1,686  329  2,843  1,655 


PERCENTAGE TRENDS Resident Move-outs Resident  Re-sales
2018 2.4% 7.2%
2017 1.9% 6.6%
2016 2.0% 6.1%


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 2018 actual exchange rates.

(3)  The Same Community occupancy percentage for 2018 is derived from 104,059 developed sites, of which 101,988 were occupied. The number of developed sites excludes RV transient sites and approximately 2,100 recently completed but vacant MH expansion sites. The Same Community occupancy percentage for 2017 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. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.0 percent for MH, 100 percent for RV, and 96.1 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 106,147 developed sites, of which 101,988 were occupied.

(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)   In January 2018, new accounting guidance became effective, which clarified the definition of a business with the objective of assisting entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. Under previous guidance, substantially all of the Company’s property acquisitions were accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred and reported as Transaction costs. Under the new guidance, substantially all of the Company’s property acquisitions are accounted for as asset acquisitions. The purchase price of these properties are allocated on a relative fair value basis and direct acquisition related costs are capitalized as part of the purchase price. Acquisitions costs that do not meet the criteria for capitalization are expensed as incurred.

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

 Three Months Ended
 December 31,
 Year Ended
 December 31,
 2018 2017 2018 2017
Foreign currency translation (loss) / gain$(5,795) $(497) $(8,435) $5,947 
Contingent liability remeasurement gain2,621  4,139  2,336  3,035 
Long term lease termination expense(65)   (354)  
Other (expense) / income, net$(3,239) $3,642  $(6,453) $8,982 

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

(9)   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.

(10) We recorded a total estimated income of $0.3 million and $1.0 million in the Core FFO(1) during the fourth quarter ending December 31, 2017 and the first three quarters of 2018 respectively, for the income related to the loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities. The estimated income was not recorded within our consolidated financial statements during those respective periods in accordance with GAAP. During the three months ended December 31, 2018, we recorded GAAP income of $1.8 million upon notification of payment by the insurance company and adjusted the Core FFO(1) for the previously estimated income of $1.3 million and $0.3 million for the three months and year ended December 31, 2018, respectively.

(11) 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.

(12) Same Community results net $8.1 million and $7.7 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended December 31, 2018 and 2017, respectively and net $32.2 million and $30.6 million for the year ended December 31, 2018 and 2017, respectively.

(13) Same Community supplies and repair expense excludes $0.1 million and $2.6 million for the three months and year ended December 31, 2017, 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.

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

(15) Calculated using actual results without rounding.

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

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

(18) As of December 31, 2018, total portfolio MH occupancy was 96.1 percent (including the impact of approximately 2,088 recently constructed but vacant MH expansion sites) and annual RV occupancy was 100.0 percent.

(19) Total sites for development were comprised of approximately 71.8 percent for expansion, 23.2 percent for greenfield development and 5.0 percent for redevelopment.

(20) 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.

(21) 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.

(22) 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 year ended December 31, 2018 include $94.6 million of capital improvements identified during due diligence that are necessary to bring a community to the Company’s operating 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, often require 24 to 36 months after closing to complete.

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

(24) 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.

(25) 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