UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012.2014
Commission file number 1-12616

SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)

Maryland 38-2730780
(State of Incorporation) (I.R.S. Employer Identification No.)
27777 Franklin Rd.  
Suite 200  
Southfield, Michigan 48034
(Address of Principal Executive Offices) (Zip Code)
(248) 208-2500
(Registrant’s telephone number, including area code)
Common Stock, Par Value $0.01 per Share New York Stock Exchange
Securities Registered Pursuant to Section 12(b) of the Act Name of each exchange on which registered
7.125% Series A Cumulative Redeemable Preferred Stock, Par Value $0.01 per Share New York Stock Exchange
Securities Registered Pursuant to Section 12(b) of the Act Name of each exchange on which registered
Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]  No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ]  No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]  No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):
Large accelerated filer [ X ]Accelerated filer [ ]Non-accelerated filer [   ]Smaller reporting company [   ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes[ ]  No [X]









As of June 30, 2012,2014, the aggregate market value of the Registrant’s stock held by non-affiliates was approximately $1,100,729,025$1,948,452,037.28 (computed by reference to the closing sales price of the Registrant’s common stock as of June 30, 2012)2014). For this computation, the Registrant has excluded the market value of all shares of common stock reported as beneficially owned by executive officers and directors of the Registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant.

Number of shares of Common Stock,common stock, $0.01 par value per share, outstanding as of February 15, 201318, 2015:  53,465,428:  31,642,521

Documents Incorporated By Reference

Unless provided in an amendment to this Annual Report on Form 10−K, the information required by Part III is incorporated by reference to the registrant’s proxy statement to be filed pursuant to Regulation 14A, with respect to the registrant’s 2015 annual meeting of stockholders.




SUN COMMUNITIES, INC.

Table of Contents

ItemDescriptionPage
   
Part I.  
Item 1.Business
Item 1A.Risk Factors
Item 1B.Unresolved Staff Comments
Item 2.Properties
Item 3.Legal Proceedings
Item 4.Mine Safety Disclosures
Executive Officers of the Registrant
   
Part II.  
Item 5.Market for the RegistrantsRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.Selected Financial Data
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
Item 8.Financial Statements and Supplementary Data
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Item 9B.Other Information
   
Part III.  
Item 10.Directors, Executive Officers and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions, and Director Independence
Item 14.Principal Accountant Fees and Services
   
Part IV.  
Item 15.Exhibits and Financial Statement Schedules



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PART I

ITEM 1. BUSINESS

GENERAL

Sun Communities, Inc., a Maryland corporation, together with the Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”) and other consolidated subsidiaries are referred to herein as the “Company”, “us”, “we”, and “our”. We are a self-administered and self-managed real estate investment trust (“REIT”).

We are a fully integrated real estate company which, together with our affiliates and predecessors, has been in the business of acquiring, operating, developing and expanding manufactured housing ("MH") and recreational vehicle ("RV") communities since 1975. We lease individual parcels of land (“sites”) with utility access for placement of manufactured homes and RVs to our customers. We are also engaged through a taxable subsidiary, Sun Home Services, Inc., a Michigan corporation (“SHS”), in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance, and cash flows.

We own, operate, and develop manufactured housingMH and RV communities concentrated inthroughout the midwestern, southern, and southeastern United States. As of December 31,2012 2014, we owned and operated a portfolio of 173217 properties located in 1929 states (the(collectively, the “Properties”, or “Property”), including 149183 manufactured housingMH communities, 1325 RV communities, and 11nine Properties containing both manufactured housingMH and RV sites. As of December 31,2012 2014, the Properties contained an aggregate of 63,69779,554 developed sites comprised of 52,83361,231 developed manufactured home sites, 4,904 permanent9,297 annual RV sites 5,960(inclusive of both annual and seasonal usage rights), 9,026 transient RV sites, and approximately 6,9007,000 additional manufactured home sites suitable for development.

Our executive and principal property management office is located at 27777 Franklin Road, Suite 200, Southfield, Michigan 48034 and our telephone number is (248) 208-2500. We have regional property management offices located in Austin, Texas; San Antonio, Texas; Dayton, Ohio; Grand Rapids, Michigan; Elkhart, Indiana; Indianapolis, Indiana; Traverse City, Michigan; Charlotte, North Carolina; Denver, Colorado; Ft. Myers, Florida and Orlando, Florida; and we employed an aggregate of 9151,525 full and part time employees as of December 31,2012 2014.

Our website address is www.suncommunities.com and we make available, free of charge, on or through our website all of our periodic reports, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as soon as reasonably practicable after we file such reports with the Securities and Exchange Commission.Commission (the "SEC").

STRUCTURE OF THE COMPANY

The Operating Partnership is structured as an umbrella partnership REIT, or UPREIT. In 1993, we contributed our net assets to the Operating Partnership in exchange for the sole general partner interest in the Operating Partnership and the majority of all the Operating Partnership’s initial capital. We substantially conduct our operations through the Operating Partnership. The Operating Partnership owns, either directly or indirectly through subsidiaries, all of our assets. This UPREIT structure enables us to comply with certain complex requirements under the federal tax rules and regulations applicable to REITs, and to acquire manufactured housingMH and RV communities in transactions that defer some or all of the sellers’ tax consequences. The financial results of the Operating Partnership and our other subsidiaries are consolidated in our consolidated financial statements. The financial results include certain activities that do not necessarily qualify as REIT activities under the Internal Revenue Code of 1986, as amended (the “Code”). We have formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities. We use taxable REIT subsidiaries to offer certain services to our residents and engage in activities that would not otherwise be permitted under the REIT rules if provided directly by us or by the Operating Partnership. The taxable REIT subsidiaries include our home sales business, SHS, which provides manufactured home sales, leasing and other services to current and prospective tenants of the Properties.


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We do not own all of the Operating Partnership units ("OP Units.units"). As of December 31,2012 2014, the Operating Partnership had issued and outstanding 31,824,586outstanding:

51,134,405 common OP Units, units,
1,283,819 preferred OP units ("Aspen preferred OP units"),
429,097 Series A-1 preferred OP units,
40,268 Series A-3 preferred OP units,
1,152,766 Series A-4 preferred OP units,
3,400,000 7.125% Series A Cumulative Redeemable Preferred OP Units (the "7.125%(“7.125% Series A OP Units"units”), 1,325,275 preferred OP Units ("Aspen preferred OP Units"), 455,476 Series A-1 preferred OP Units, and
112,400 Series B-3 preferred OP Units. units.

As of December 31,2012 2014, we held 29,755,264held:

48,573,063 common OP Units,units, or approximately 93.5%95% of the issued and outstanding common OP Units, allunits,
483,317 Series A-4 preferred OP units, or approximately 42% of the issued and outstanding Series A-4 preferred OP units,
all of the 7.125% Series A OP Units,units, and
no Aspen preferred OP Units,units, Series A-1 preferred OP Unitsunits, Series A-3 preferred OP units or Series B-3 preferred OP Units. units.

In addition, on February 8, 2013,January 2015, the Operating Partnership created a new classissued an additional 6,047,234 Series A-4 preferred OP units, of which 5,847,234 are held by us.

Ranking and Priority

The various classes and series of OP Units designatedunits issued by the Operating Partnership rank as follows with respect to rights to the payment of distributions and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Operating Partnership:

first, the 7.125% Series A-3 Preferred Units (the "Series A-3A OP units;
next, the Series A-4 preferred OP Units")units, Aspen preferred OP units and issued all ofSeries A-1 preferred OP units, on parity with each other;
next, the authorized 40,267.50Series B-3 preferred OP units;
next, the Series A-3 preferred OP Units to a third party.units; and
finally, the common OP units.

Common OP Units

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Subject to certain limitations, the holder of each common OP Unitunit at its option may convert such common OP Unitunit at any time into one share of our common stock. Holders of common OP units are entitled to receive distributions from the Operating Partnership as and when declared by the general partner, provided that all accrued distributions payable on OP units ranking senior to the common OP units have been paid. The holders of common OP Unitsunits generally receive distributions on the same dates and in amounts equal to the dividendsdistributions paid to holders of our common stock.

Aspen Preferred OP Units

Subject to certain limitations, at any time prior to January 1, 2024, the holder of each Aspen preferred OP Unitunit at its option may convert such Aspen preferred OP Unitunit into: (a) if the market price of our common stock is $68.00 per share or less, 0.397 common OP Units,units, or (b) if the market price of our common stock is greater than $68.00 per share, that number of common OP Unitsunits determined by dividing (i) the sum of (A) $27.00 plus (B) 25% of the amount by which the market price of our common stock exceeds $68.00 per share, by (ii) the per-share market price of our common stock. The holders of Aspen preferred OP Unitsunits are entitled to receive distributions not less than quarterly. Distributions on Aspen preferred OP units are generally receive distributionspaid on the same dates as distributions are paid to holders of common OP Units.units. Each Aspen preferred OP Unitunit is entitled to receive distributions in an amount equal to the product of (x) $27.00, multiplied by (y) an annual rate equal to the 10-year United States Treasury bond yield plus 239 basis points; provided, however, that the aggregate distribution rate shall not be less than 6.5% nor more than 9%. On January 2, 2024, we are required to redeem all Aspen preferred OP Unitsunits that have not been converted to common OP Units.units. In addition, we are required to redeem the Aspen preferred OP Unitsunits of any holder thereof within five days after receipt of a written demand during the existence of certain uncured Aspen preferred OP Unitunit defaults, including our failure to pay distributions on the

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Aspen preferred OP Unitsunits when due and our failure to provide certain security for the payment of distributions on the Aspen preferred OP Units.units. We may also redeem Aspen preferred OP Unitsunits from time to time if we and the holder thereof agree to do so.

Series A-1 Preferred OP Units

Subject to certain limitations, the holder of each Series A-1 preferred OP Unitunit at its option may exchange such Series A-1 preferred OP Unitunit at any time on or after December 31, 2013, into 2.439 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations and similar events). The holders of Series A-1 preferred OP Unitsunits are entitled to receive distributions not less than quarterly. Distributions on Series A-1 preferred OP units are generally receive distributionspaid on the same dates as distributions are paid to holders of common OP Units.units. Each Series A-1 preferred OP Unitunit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 5.1% until June 23, 2013,6.0%. Series A-1 preferred OP units do not have any voting or consent rights requiring the consent or approval of the Operating Partnership's limited partners.

Series A-3 Preferred OP Units

Subject to certain limitations, the holder of each Series A-3 preferred OP unit at its option may exchange such Series A-3 preferred OP unit at any time into 1.8605 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations and similar events). The holders of Series A-3 preferred OP units are entitled to receive distributions not less than quarterly. Each Series A-3 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 6.0% thereafter.4.5%. Series A-3 preferred OP units do not have any voting or consent rights requiring the consent or approval of the Operating Partnership's limited partners.

Series A-4 Preferred OP Units

In connection with the issuance of our 6.50% Series A-4 Cumulative Convertible Preferred Stock (the "Series A-4 Preferred Stock”) in November 2014, the Operating Partnership created the Series A-4 preferred OP units as a new class of OP units. Series A-4 preferred OP units have economic and other rights and preferences substantially similar to those of the Series A-4 Preferred Stock, including rights to receive distributions at the same time and in the same amounts as distributions paid on Series A-4 Preferred Stock. Each Series A-4 preferred OP unit is exchangeable into approximately 0.4444 shares of common stock or common OP units (which exchange rate is subject to adjustment upon stock splits, recapitalizations and similar events). We hold 6,330,551 Series A-4 preferred OP units that the Operating Partnership issued to us in connection with the acquisition of certain MH communities from Green Courte Real Estate Partners, LLC, Green Courte Real Estate Partners II, LLC, Green Courte Real Estate Partners III, LLC and certain of their affiliated entities. In 2014, we also issued 669,449 Series A-4 preferred OP units to the sellersas consideration for the Green Courte acquisition. In January 2015, we issued 200,000 Series A-4 Preferred OP units in a private placement in connection with the Green Courte acquisition. The rights of the 6,330,551 Series A-4 preferred OP units held by us mirror the economic rights of the Series A-4 preferred OP units issued to the Green Courte entities, but certain voting, consent and other rights do not apply to the Series A-4 preferred OP units held by us.

7.125% Series A OP Units

In connection with the issuance of our 7.125% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") in November 2012, the Operating Partnership created the 7.125% Series A OP units as a new class of OP units.  All of the outstanding 7.125% Series A OP units are held by us and they have rights, preferences and other terms substantially similar to the Series A Preferred Stock, including rights to receive distributions at the same time and in the same amounts as distributions paid on Series A Preferred Stock. The Operating Partnership issued the 7.125% Series A OP units to us in consideration of our contributing to the Operating Partnership the net proceeds of our November 2012 offering of shares of Series A Preferred Stock.

Series B-3 Preferred OP Units

Series B-3 preferred OP Unitsunits are not convertible. The holders of Series B-3 preferred OP Unitsunits generally receive distributions on the same dates as distributions are paid to holders of common OP Units.units. Each Series B-3 preferred OP Unitunit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 8.0%. As of November 5, 2012,December 31, 2014, there were outstanding 36,700 Series B-3 preferred OP Unitsunits which were issued on December 1, 2002, 33,450 Series B-3 preferred OP Unitsunits which were issued on January 1, 2003, and 42,250 Series B-3 preferred OP Unitsunits which were issued on January 5, 2004. Subject to certain limitations, (x) during the 90-day period beginning on each of the tenth through fifteenth anniversaries of the issue date of the applicable Series B-3 preferred OP Units,units, (y) at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP Units,units, or (z) after our receipt of notice of the death of the electing holder of a Series B-3 preferred OP Unit,unit, each holder of Series B-3 preferred OP Unitsunits may require us to redeem such holder's Series B-3 preferred OP Unitsunits at the

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redemption price of $100.00 per unit. In addition, at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP Unitsunits we may redeem, at our option, all of the Series B-3 preferred OP Unitsunits of any holder thereof at the redemption price of $100.00 per unit.
In connection with the issuance of the 7.125% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), the Operating Partnership created the 7.125% Series A OP Units as a new class of OP Units. All of the outstanding 7.125% Series A OP Units are held by us and they have rights, preferences and other terms substantially similar to the Series A Preferred Stock, including rights to receive distributions at the same time and in the same amounts as dividends paid on Series A Preferred Stock. The Operating Partnership issued the 7.125% Series A OP Units to us in consideration of our contributing to the Operating Partnership the net proceeds of our November 2012 offering of shares of Series A Preferred Stock. The 7.125% Series A OP Units rank senior in all respects to the Aspen preferred OP Units, the Series A-1 preferred OP Units, the Series A-3 preferred OP Units, the Series B-3 preferred OP Units andunits do not have any voting or consent rights requiring the common OP Units. So long as any Aspen preferred OP Units remain issued and outstanding,consent or approval of the Operating Partnership may not issue any OP Units that are not junior to the Aspen preferred OP Units, without the written consent of holders of a majority of the Aspen preferred OP Units. Holders of a majority of the Aspen preferred OP Units have consented to the issuance of up to $150.0 million in OP Units senior to the Aspen preferred OP Units, including the 7.125% Series A OP Units issued to us. Holders of a majority of the Aspen preferred OP Units have previously consented to the issuance of up to approximately an additional $54.5 million of OP Units that are pari passu with the Aspen preferred OP Units.Partnership's limited partners.


REAL PROPERTY OPERATIONS



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Subject to certain limitations, including certain contractual restrictions contained in the related acquisition agreemnts, the holderProperties are designed and improved for several home options of each Series A-3 preferred OP Unit at its option may exchange such Series A-3 preferred OP Unit at any time into 1.8605 sharesvarious sizes and designs and consist of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizationsMH communities and similar events). The holders of Series A-3 preferred OP Units generally receive distributions on the same dates as distributions are paid to holders of common OP Units. Each Series A-3 preferred OP Unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 4.5%.RV communities.

THE MANUFACTURED HOUSING COMMUNITY

A manufactured housingAn MH community is a residential subdivision designed and improved with sites for the placement of manufactured homes and related improvements and amenities. Manufactured homes are detached, single‑family homes which are produced off‑site by manufacturers and installed on sites within the community. Manufactured homes are available in a wide array of designs, providing owners with a level of customization generally unavailable in other forms of multi-family housing developments.

Modern manufactured housing communities, such as the Properties, contain improvements similar to other garden‑style residential developments, including centralized entrances, paved streets, curbs and gutters, and parkways. In addition, these communities also often provide a number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts, tennis courts, and laundry facilities.

An RV community is a resort or park designed and improved with sites for the placement of RVs for varied lengths of time. Properties may also provide vacation rental homes. RV communities, such as the Properties, include a number of amenities, such as restaurants, golf courses, swimming pools, tennis courts, fitness centers, planned activities and spacious social facilities.

The owner of each home on our Properties leases the site on which the home is located. We own the underlying land, utility connections, streets, lighting, driveways, common area amenities and other capital improvements and are responsible for enforcement of community guidelines and maintenance. Some of the Properties provide water and sewer service through public or private utilities, while others provide these services to residents from on‑site facilities. Each owner of a home within our Properties is responsible for the maintenance of the home and leased site. As a result, capital expenditure needs tend to be less significant relative to multi‑family rental apartment complexes.

PROPERTY MANAGEMENT

Our property management strategy emphasizes intensive, hands‑on management by dedicated, on‑site district and community managers. We believe that this on‑site focus enables us to continually monitor and address resident concerns, the performance of competitive properties and local market conditions. As of December 31,2012 2014, we employed 9151,525 full and part time employees, of which 7481,374 were located on‑site as property managers, support staff, or maintenance personnel.

Our community managers are overseen by John B. McLaren, our President and Chief Operating Officer, who has been in the manufactured housing industry since 1995, fourtwo Senior Vice Presidents of Operations and Sales, twosix Division Vice Presidents and 1823 Regional Vice Presidents. The Regional Vice Presidents are responsible for semi-annual market surveys of competitive communities, interaction with local manufactured home dealers, and regular property inspections.inspections and oversight of property operations and sales functions for eight to twelve properties.

Each district or community manager performs regular inspections in order to continually monitor the Property’s physical condition and to effectively address tenant concerns. In addition to a district or community manager, each district or property has on-site maintenance personnel and management support staff. We hold mandatory training sessions for all new property management personnel to ensure that management policies and procedures are executed effectively and professionally. All of our property management personnel participate in on-going training to ensure that changes to management policies and procedures are implemented consistently. We offer nearly 300400 courses for our team members through our Sun University, which has led to increased knowledge and accountability for daily operations and policies and procedures.

HOME SALES AND LEASINGRENTALS

SHS is engaged in the marketing, selling and leasing of new and pre-owned homes to current and future residents in our communities. Since tenants often purchase a home already on-site within a community, such services enhance occupancy and property performance. Additionally, because many of the homes on the Properties are sold through SHS, better control of home quality in our communities can be maintained than if sales services were conducted solely through third-party brokers. SHS also leases

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homes to prospective tenants. At December 31,2012 2014, SHS had 8,11010,973 occupied leased homes in its portfolio. Homes for this rental program (the "Rental Program") are purchased at discounted rates from finance companies that hold pre-owned and repossessed homes within our communities. New homes are also purchased as necessary to supplement these repossessed home purchases.for the Rental Program. Leases associated with the Rental Program generally have a term of one year. This programThe Rental Program requires intensive management of costs associated with repair and refurbishment of these homes as the tenants vacate and the homes are re-leased, similar to apartment rentals. We have added repair and service supervisors in areas with high concentrations of rental homes to aggressively pursue cost containment

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programs. The program is a strategic response to capture the value inherent in the purchase of substantially discounted repossessed homes in our communities. We receivereceived approximately 27,00034,000 applications each yearduring 2014 to live in our Properties, providing a significant "resident boarding" system allowing us to market purchasing a home to the best applicants and to rent to the remainder of approved applicants. Through the Rental Program we are able to demonstrate our product and lifestyle to the renters, while monitoring their payment history and converting qualified renters to owners.

REGULATIONS AND INSURANCE

General

Manufactured housingMH and RV community properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses and other common areas. We believe that each Property has the necessary operating permits and approvals.

Insurance

Our management believes that the Properties are covered by adequate fire, flood (where appropriate), property and business interruption insurance provided by reputable companies with commercially reasonable deductibles and limits. We maintain a blanket policy that covers all of our Properties. We have obtained title insurance insuring fee title to the Properties in an aggregate amount which we believe to be adequate. Claims made to our insurance carriers that are determined to be recoverable are classified in other receivables as incurred.

SITE LEASES OR USAGE RIGHTS

The typical lease we enter into with a tenant for the rental of a manufactured home site is month‑to‑month or year‑to‑year, renewable upon the consent of both parties, or, in some instances, as provided by statute. A small numberCertain of our leases, mainly Florida properties, are tied to consumer price index or other indices as it relates to rent increase. Generally, market rate adjustments are made on an annual basis. These leases are cancelable for non‑payment of rent, violation of community rules and regulations or other specified defaults. During the five calendar years ended December 31, 2012,2014, on average 2.5 percent2.5% of the homes in our communities have been removed by their owners and 5.1 percent4.9% of the homes have been sold by their owners to a new owner who then assumes rental obligations as a community resident. The cost to move a home is approximately $4,000 to $10,000. The average resident remains in our communities for approximately 2013 years, while the average home, which gives rise to the rental stream, remains in our communities for approximately 40 years.

At Properties zonedPlease see the risk factors at Item 1A, and financial statements and related notes beginning on page F-1 of this Form 10-K for RV use, our customers have short-term (“transient”) usage rights or long-term (“permanent”) usage rights. The transient RV customers typically prepay for their stay or leave deposits to reserve a site for the following year, whereas the permanent RV customers prepay or pay on a monthly basis. Many of these RV customers do not live full time on the Property.more detailed information.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the United States Securities Act of 1933, as amended (the "Securities Act"), and the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we intend that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this filing that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as “forecasts,” “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “predicts,” “potential,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes,” “scheduled”“scheduled,” "guidance" and similar expressions are intended to identify forward-looking statements, although not all forward looking statements contain these words. These forward-looking statements reflect our current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this filing. These risks and uncertainties may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks disclosed under “Risk Factors” contained in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission,SEC, such risks and uncertainties include:

changes in general economic conditions, the real estate industry and the markets in which we operate;

difficulties in our ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully;

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our liquidity and refinancing demands;

our ability to obtain or refinance maturing debt;

our ability to maintain compliance with covenants contained in our debt facilities;

availability of capital;

difficulties in completing acquisitions;

our ability to maintain rental rates and occupancy levels;
our failure to maintain effective internal control over financial reporting and disclosure controls and procedures;

increases in interest rates and operating costs, including insurance premiums and real property taxes;

risks related to natural disasters;

general volatility of the capital markets and the market price of shares of our capital stock;

our failure to maintain our status as a REIT;

changes in real estate and zoning laws and regulations;

legislative or regulatory changes, including changes to laws governing the taxation of REITs;

litigation, judgments or settlements;

our ability to maintain rental rates and occupancy levels;

competitive market forces; and

the ability of manufactured home buyers to obtain financingfinancing; and
the level of repossessions by manufactured home lenderslenders.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference into this filing, whether as a result of new information, future events, changes in our expectations or otherwise.otherwise, except as required by law.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements.

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ITEM 1A. RISK FACTORS
Our prospects are subject to certain uncertainties and risks. Our future results could differ materially from current results, and our actual results could differ materially from those projected in forward‑looking statements as a result of certain risk factors. These risk factors include, but are not limited to, those set forth below, other one‑time events, and important factors disclosed previously and from time to time in our other filings with the Securities and Exchange Commission.SEC.
REAL ESTATE RISKS

General economic conditions and the concentration of our properties in Michigan, Florida, Indiana, and Texas may affect our ability to generate sufficient revenue.

The market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets, may significantly affect manufactured home occupancy or rental rates. Occupancy and rental rates, in turn, may significantly affect our revenues, and if our communities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay or refinance our debt obligations could be adversely affected. We derive significant amounts of our rental income from properties located in Michigan, Florida, Indiana, and Texas. As of December 31, 20122014, 7370 of our 173217 Properties, representing approximately 38%31% of developed sites, are located in Michigan; 2729 Properties, representing approximately 20%17% of developed sites, are located in Florida; 1817 Properties, representing approximately 10%8% of developed sites, are located in Indiana; and 18 Properties, representing approximately 9%8% of developed sites, are located in Texas. As a result of the geographic concentration of our Properties in Michigan, Florida, Indiana, and Texas, we are exposed to the risks of downturns in the local economy or other local real estate market conditions which could adversely affect occupancy rates, rental rates, and property values of properties in these markets.

Our income would also be adversely affected if tenants were unable to pay rent or if sites were unable to be rented on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of the sites, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our business and results of operations could be adversely affected. In addition, certain expenditures associated with each Property (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the Property. Furthermore, real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.

The following factors, among others, may adversely affect the revenues generated by our communities:

the national and local economic climate which may be adversely impacted by, among other factors, plant closings, and industry slowdowns;

local real estate market conditions such as the oversupply of manufactured housingMH and RV sites or a reduction in demand for manufactured housingMH and RV sites in an area;

the number of repossessed homes in a particular market;

the lack of an established dealer network;

the rental market which may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates;

the perceptions by prospective tenants of the safety, convenience and attractiveness of our Properties and the neighborhoods where they are located;

zoning or other regulatory restrictions;

competition from other available manufactured housingMH and RV communities and alternative forms of housing (such as apartment buildings and site‑built single‑family homes);

our ability to provide adequate management, maintenance and insurance;


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increased operating costs, including insurance premiums, real estate taxes, and utilities; and

the enactment of rent control laws or laws taxing the owners of manufactured homes.

Competition affects occupancy levels and rents which could adversely affect our revenues.

All of our Properties are located in developed areas that include other manufactured housingMH and RV community properties. The number of competitive manufactured housingMH and RV community properties in a particular area could have a material adverse effect on our ability to lease sites and increase rents charged at our Properties or at any newly acquired properties. We may be competing with others with greater resources and whose officers and directors have more experience than our officers and directors. In addition, other forms of multi‑family residential properties, such as private and federally funded or assisted multi‑family housing projects and single‑family housing, provide housing alternatives to potential tenants of manufactured housingMH and RV communities.

Our ability to sell or lease manufactured homes may be affected by various factors, which may in turn adversely affect our profitability.

SHS operates in the manufactured home market offering manufactured home sales and leasing services to tenants and prospective tenants of our communities. The market for the sale and lease of manufactured homes may be adversely affected by the following factors:

downturns in economic conditions which adversely impact the housing market;

an oversupply of, or a reduced demand for, manufactured homes;

the difficulty facing potential purchasers in obtaining affordable financing as a result of heightened lending criteria; and

an increase or decrease in the rate of manufactured home repossessions which provide aggressively priced competition to new manufactured home sales.

Any of the above listed factors could adversely impact our rate of manufactured home sales and leases, which would result in a decrease in profitability.

Increases in taxes and regulatory compliance costs may reduce our revenue.

Costs resulting from changes in real estate laws, income taxes, service or other taxes, generally are not passed through to tenants under leases and may adversely affect our funds from operations and our ability to pay or refinance our debt. Similarly, changes in laws increasingThe intended benefits of the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our business and results of operations.

WeGreen Courte acquisition may not be ablerealized.
Our recent acquisition of 59 Properties from Green Courte poses risks for our ongoing operations, including, among others:
that senior management’s attention may be diverted from the management of daily operations to integratethe integration of the acquired Properties;
costs and expenses associated with any undisclosed or financepotential liabilities;
that the acquired Properties may not perform as well as anticipated; and
that unforeseen difficulties may arise in integrating the acquired Properties into our expansion and development activities.portfolio.

From timeAs a result of the foregoing, we cannot assure you that the Green Courte acquisition will be accretive to time, we engageus in the constructionnear term or at all. Furthermore, if we fail to realize the intended benefits of the acquired Properties, the market prices of our common stock and development of new communities or expansion of existing communities, and may continue to engage in the development and construction business in the future. Our development and construction business may be exposedpreferred stock could decline to the following risks which are in addition toextent that the market price reflects those risks associated with the ownership and operation of established manufactured housing communities:

we may not be able to obtain financing with favorable terms for community development which may make us unable to proceed with the development;

we may be unable to obtain, or face delays in obtaining, necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays, and even require us to abandon development of the community entirely if we are unable to obtain such permits or authorizations;

we may abandon development opportunities that we have already begun to explore and as a result we may not recover expenses already incurred in connection with exploring such development opportunities;

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we may be unable to complete construction and lease‑up of a community on schedule resulting in increased debt service expense and construction costs;

we may incur construction and development costs for a community which exceed our original estimates due to increased materials, labor or other costs, which could make completion of the community uneconomical and we may not be able to increase rents to compensate for the increase in development costs which may impact our profitability;

we may be unable to secure long‑term financing on completion of development resulting in increased debt service and lower profitability; and

occupancy rates and rents at a newly developed community may fluctuate depending on several factors, including market and economic conditions, which may result in the community not being profitable.

If any of the above occurred, our business and results of operations could be adversely affected.benefits.

We may not be able to integrate or finance our acquisitions and our acquisitions may not perform as expected.

We have acquired and intend to continue to acquire manufactured housingMH and RV communities on a select basis. Our acquisition activities and their success are subject to the following risks:

we may be unable to acquire a desired property because of competition from other well capitalized real estate investors, including both publicly traded real estate investment trusts and institutional investment funds;

even if we enter into an acquisition agreement for a property, it is usually subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction, which may not be satisfied;

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even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price;

we may be unable to finance acquisitions on favorable terms;

acquired properties may fail to perform as expected;

acquired properties may be located in new markets where we face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures; and

we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations.

If any of the above occurred, our business and results of operations could be adversely affected.

In addition, we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were to be asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.

Increases in taxes and regulatory compliance costs may reduce our revenue.

Costs resulting from changes in real estate laws, income taxes, service or other taxes, generally are not passed through to tenants under leases and may adversely affect our funds from operations and our ability to pay or refinance our debt. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our business and results of operations.

We may not be able to integrate or finance our expansion and development activities.

From time to time, we engage in the construction and development of new communities or expansion of existing communities, and may continue to engage in the development and construction business in the future. Our development and construction business may be exposed to the following risks which are in addition to those risks associated with the ownership and operation of established MH and RV communities:

we may not be able to obtain financing with favorable terms for community development which may make us unable to proceed with the development;

we may be unable to obtain, or face delays in obtaining, necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays, and even require us to abandon development of the community entirely if we are unable to obtain such permits or authorizations;

we may abandon development opportunities that we have already begun to explore and as a result we may not recover expenses already incurred in connection with exploring such development opportunities;

we may be unable to complete construction and lease‑up of a community on schedule resulting in increased debt service expense and construction costs;

we may incur construction and development costs for a community which exceed our original estimates due to increased materials, labor or other costs, which could make completion of the community uneconomical and we may not be able to increase rents to compensate for the increase in development costs which may impact our profitability;

we may be unable to secure long‑term financing on completion of development resulting in increased debt service and lower profitability; and



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occupancy rates and rents at a newly developed community may fluctuate depending on several factors, including market and economic conditions, which may result in the community not being profitable.

If any of the above occurred, our business and results of operations could be adversely affected.

Rent control legislation may harm our ability to increase rents.

State and local rent control laws in certain jurisdictions may limit our ability to increase rents and to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. Certain Properties are located, and we may purchase additional properties, in markets that are either subject to rent control or in which rent‑limitingrent-limiting legislation exists or may be enacted.





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We may be subject to environmental liability.

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous substances at, on, under or in such property. Such laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such property, to borrow using such property as collateral or to develop such property. Persons who arrange for the disposal or treatment of hazardous substances also may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility owned or operated by another person. In addition, certain environmental laws impose liability for the management and disposal of asbestos‑containing materials and for the release of such materials into the air. These laws may provide for third parties to seek recovery from owners or operators of real properties for personal injury associated with asbestos‑containing materials. In connection with the ownership, operation, management, and development of real properties, we may be considered an owner or operator of such properties and, therefore, are potentially liable for removal or remediation costs, and also may be liable for governmental fines and injuries to persons and property. When we arrange for the treatment or disposal of hazardous substances at landfills or other facilities owned by other persons, we may be liable for the removal or remediation costs at such facilities.

All of the Properties have been subject to a Phase I or similar environmental audit (which involves general inspections without soil sampling or ground water analysis) completed by independent environmental consultants. These environmental audits have not revealed any significant environmental liability that would have a material adverse effect on our business. These audits cannot reflect conditions arising after the studies were completed, and no assurances can be given that existing environmental studies reveal all environmental liabilities, that any prior owner or operator of a property or neighboring owner or operator did not create any material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any one or more Properties.

Losses in excess of our insurance coverage or uninsured losses could adversely affect our cash flow.

We maintain comprehensive liability, fire, flood (where appropriate), extended coverage, and rental loss insurance on the Properties with policy specifications, limits, and deductibles which are customarily carried for similar properties. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots, or acts of war. In the event an uninsured loss occurs, we could lose both our investment in and anticipated profits and cash flow from the affected property. Any loss could adversely affect our ability to repay our debt.

FINANCING AND INVESTMENT RISKS

Our significant amount of debt could limit our operational flexibility or otherwise adversely affect our financial condition.

We have a significant amount of debt. As of December 31, 20122014, we had approximately $1.5$1.8 billion of total debt outstanding, consisting of approximately $1.3$1.7 billion in debt that is collateralized by mortgage liens on 126147 of the Properties, $94.4$123.7 million that is secured by collateralized receivables, $29.8 million that is collateralized by liens on manufactured homes and $47.3$45.9 million that is unsecured debt. If we fail to meet our obligations under our secured debt, the lenders would be entitled to foreclose on all or some of the collateral securing such debt which could have a material adverse effect on us and our ability to make expected distributions, and could threaten our continued viability.

We are subject to the risks normally associated with debt financing, including the following risks:


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our cash flow may be insufficient to meet required payments of principal and interest, or require us to dedicate a substantial portion of our cash flow to pay our debt and the interest associated with our debt rather than to other areas of our business;

our existing indebtedness may limit our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt;

it may be more difficult for us to obtain additional financing in the future for our operations, working capital requirements, capital expenditures, debt service or other general requirements;

we may be more vulnerable in the event of adverse economic and industry conditions or a downturn in our business;


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we may be placed at a competitive disadvantage compared to our competitors that have less debt; and

we may not be able to refinance at all or on favorable terms, as our debt matures.

If any of the above risks occurred, our financial condition and results of operations could be materially adversely affected.

We may incur substantially more debt, which would increase the risks associated with our substantial leverage.

Despite our current indebtedness levels, we may incur substantially more debt in the future. If new debt is added to our current debt levels, an even greater portion of our cash flow will be needed to satisfy our debt service obligations. As a result, the related risks that we now face could intensify and increase the risk of a default on our indebtedness.

The financial condition and solvency of our borrowers may adversely affect our installment notes.

As of December 31, 2012, we had approximately $115.7 million of installment notes, net of reserves, to owners of manufactured homes. These installment loans are collateralized by the manufactured homes. We may invest in additional mortgages and installment loans in the future. By virtue of our investment in the mortgages and the loans, we are subject to the following risks of such investment:

the borrowers may not be able to make debt service payments or pay principal when due;

the value of property securing the installment notes receivable may be less than the amounts owed; and

interest rates payable on the installment notes receivable may be lower than our cost of funds.

If any of the above occurred, our business and results of operations could be adversely affected.

TAX RISKS

We may suffer adverse tax consequences and be unable to attract capital if we fail to qualify as a REIT.

We believe that since our taxable year ended December 31, 1994, we have been organized and operated, and intend to continue to operate, so as to qualify for taxation as a REIT under the Code. Although we believe that we have been and will continue to be organized and have operated and will continue to operate so as to qualify for taxation as a REIT, we cannot be assured that we have been or will continue to be organized or operated in a manner to so qualify or remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which require us to continually to monitor our tax status.

If we fail to qualify as a REIT in any taxable year, we could be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Moreover, unless entitled to relief under certain statutory provisions,
we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability to us for the years involved. In addition, distributions to stockholders would no longer be required to be made. Even if we qualify for and maintain our REIT status, we will be subject to certain federal, state and local taxes on our property and certain of our operations.

We intend for the Operating Partnership to be taxed as a partnership, but we cannot guarantee that it will qualify.

We believe that the Operating Partnership has been organized as a partnership and will qualify for treatment as such under the Code. However, if the Operating Partnership is deemed to be a “publicly traded partnership,” it will be treated as a corporation instead of a partnership for federal income tax purposes unless at least 90% of its income is qualifying income as defined in the Code. The income requirements applicable to REITs and the definition of “qualifying income” for purposes of this 90% test are similar in most respects. Qualifying income for the 90% test generally includes passive income, such as specified types of real property rents, dividends and interest. We believe that the Operating Partnership wouldhas and will continue to meet this 90% test, but we cannot guarantee

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that it would.has or will. If the Operating Partnership were to be taxed as a regular corporation, it would incur substantial tax liabilities, we would fail to qualify as a REIT for federal income tax purposes, and our ability to raise additional capital could be significantly impaired.


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Our ability to accumulate cash may be restricted due to certain REIT distribution requirements.

In order to qualify as a REIT, we must distribute to our stockholders at least 90% of our REIT taxable income (calculated without any deduction for dividends paid and excluding net capital gain) and to avoid federal income taxation, our distributions must not be less than 100% of our REIT taxable income, including capital gains. As a result of the distribution requirements, we do not expect to accumulate significant amounts of cash. Accordingly, these distributions could significantly reduce the cash available to us in subsequent periods to fund our operations and future growth.

Our taxable REIT subsidiaries, or TRSs, are subject to special rules that may result in increased taxes.

As a REIT, we must pay a 100% penalty tax on certain payments that we receive if the economic arrangements between us and any of our TRSs are not comparable to similar arrangements between unrelated parties. The Internal Revenue Service may successfully assert that the economic arrangements of any of our inter-company transactions are not comparable to similar arrangements between unrelated parties.

Dividends payable by REITs do not qualify for the reduced tax rates applicable to certain dividends.

The maximum federal tax rate for certain qualified dividends payable to domestic stockholders that are individuals, trusts and estates is 20%. Dividends payable by REITs, however, are generally not eligible for this reduced rate. Although this legislationrule does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular qualified corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less competitive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the comparative value of the stock of REITs, including our common stock and Series A Preferred Stock.preferred stock.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

To remain qualified as a REIT for federal income tax purposes, we must continually satisfy requirements and tests under the tax law concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. In order to meet these tests, we may be required to forego or limit attractive business or investment opportunities and distribute all of our net earnings rather than invest in attractive opportunities or hold larger liquid reserves. Therefore, compliance with the REIT requirements may hinder our ability to operate solely to maximize profits.

Our ability to use net operating loss carryforwards to reduce future tax payments may be limited if we experience a change in ownership, or if taxable income does not reach sufficient levels.

Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a rolling three-year period), the corporation’s ability to use its pre-changepre-ownership-change net operating loss carryforwards to offset its post-changepost-ownership-change income may be limited. We may experience ownership changes in the future as a result of
this offering and subsequent shifts in our stock ownership. If an ownership change were to occur, we would be limited in the portion of net operating loss carryforwards that we could use in the future to offset taxable income for U.S. Federal income tax purposes.

BUSINESS RISKS

We are a partyin the future. If an ownership change were to a lawsuit regarding title to certain communitiesoccur, we recently purchased and if this lawsuit is decided unfavorably against us, our financial position and resultswould be limited in the portion of operations could be materially adversely affected.

On February 8, 2013, we acquired ten RV communities and associated assets from certain sellers for a purchase price of $112.8 million, subject to certain adjustments and pro-rations. See Note 2 of our financial statements. MHC Operating Limited Partnership (“MHC”), an affiliate of Equity Lifestyle Properties, Inc., recorded a “Memorandum of Agreement for an Option to Acquire the Properties” against some or all of the communities and we closed this transaction with knowledge of those memoranda. MHC had also assertednet operating loss carryforwards that we improperly interfered with their purported contract rights with respect to the communities. The sellers and

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certain of their affiliates, jointly and severally, have agreed to indemnify us against any and all liabilities and expenses relating to any claims by MHC with respect to the communities and the transaction, provided that we are not entitled to indemnification for loss of our future revenue or income or loss of business reputation or opportunity. The indemnity obligations are secured by certain assets of the indemnitors and their affiliates. On December 26, 2012, we filed a complaintcould use in the Oakland County (Michigan) Circuit Court against MHC, the sellers of the communities and certain of their affiliates seeking declaratory relief concerning MHC's assertion of rights with respectfuture to the communities and MHC's claims against us. On January 23, 2013, MHC filed an answer and counterclaim (and cross claim against the sellers of the communities and certain of their affiliates) seeking to enforce its claimed rights and seeking specific performance against the sellers of the communities (and us to the extent our rights would be affected) of those rights to acquire the communities. MHC's answer and counterclaim did not assert any othersubstantive claims against us. On February 14, 2013, we filed an amended complaint seeking a declaratory judgment that we have not violated, and our purchase of the communities did not violate, any rights of MHC and further seeking a judgment requiring MHC to cancel the memoranda it recorded. As of February 22, 2013, MHC had not filed an answer to our amended complaint.

We believe that MHC's claims to the communities and any other claims it may bring against us are without merit and we intend to prosecute our claims and defend any counterclaims vigorously, but there can be no assurances that the litigation will be decided favorablyoffset taxable income for us. We have indemnification rights against the sellers of the communities and their affiliates. However, there can be no assurance that the collateral securing those indemnification obligations would be sufficient to cover our losses, and the indemnity does not cover loss of our future revenue orU.S. federal income or loss of business reputation or opportunity. We have included the expected performance of these properties in our earnings guidance. If MHC's claim for specific performance or any other claims it may bring against us or related to the communities are successful, our financial position and results of operations could be materially adversely affected. In addition, this litigation may be costly and may also impose a significant burden on our management and employees.tax purposes.

Some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests.

Ownership of Origen. We own 5,000,000 shares of Origen Financial, Inc. (“Origen”) common stock and Shiffman Origen LLC (which is owned by the Milton M. Shiffman Spouse’s Marital Trust, Gary A. Shiffman (our Chief Executive Officer), and members of Mr. Shiffman’s family) owns 1,025,000 shares of Origen common stock. Gary A. Shiffman is a member of the Board of Directors of Origen, and one of our directors, Arthur A. Weiss, is a trustee of the Milton M. Shiffman Spouse’s Marital Trust. Accordingly,Ronald A. Klein, one of our directors, is the Chief Executive Officer and a director of Origen. Mr. Klein, Mr. Weiss and Brian M. Hermelin, another of our directors, beneficially own approximately 570,000, 10,000, and 200,000 shares of Origen common stock,


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respectively. Accordingly, in all transactions involving Origen, Mr. Shiffman, and/Mr. Weiss, Mr. Hermelin or Mr. WeissKlein may have a conflict of interest with respect to their respective obligations as our officer and/or director.

Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns a 21 percent21% equity interest in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Arthur A. Weiss one of our directors,and Ronald A. Klein owns a 0.75less than one percent indirect interest in American Center LLC. WeUnder this lease agreement, we lease approximately 48,20062,900 rentable square feet. The term of the lease is until October 31, 2016, with an option to renew for an additional five years. The annual2026, and the base rent under the current leasethrough October 31, 2015 is $18.61$16.45 per square foot (gross) and will remain this amount through October 31, 2014.. From November 1, 2014 to August 31, 2015, the annual base rent will be $18.72 per square foot (gross) and then from September 1, 2015 to October 31, 2016, the annual base rent will be $17.92$16.95 per square foot (gross) and from November 1, 2016 to October 31, 2017, the base rent will be $17.45 per square foot (gross). We also have a temporary lease for $8.48approximately 10,500 rentable square feet with base rent equal to $12.71 per square foot (gross)
until April 2013 for 10,500 rentable square feet. Mr. Shiffman and Mr. Weiss may have. This temporary lease is currently operating on a conflict of interest with respectmonth to their obligations as our officer and/or director and their ownership interest in American Center LLC.

Loan Funding Agreement with Talmer Bank. Each of Robert H. Naftaly and Arthur A. Weiss, who serve on our board of directors, is also a director of each of Talmer Bancorp, Inc. and its primary operating subsidiary, Talmer Bank. Each of Mr. Naftaly, Mr. Weiss and Mr. Shiffman also owns less than one percent of Talmer Bancorp, Inc.'s common stock. In January 2013, we entered into an agreement with Talmer Bank under which we may refer purchasers of homes in our communities to Talmer Bank to obtain loans to finance their home purchases. We do not receive referral fees or other cash compensation under the agreement. If Talmer Bank makes loans to purchasers referred by us under the agreement, those purchasers default on their loans and Talmer Bank repossesses the homes securing such loans, we have agreed to purchase from Talmer Bank each such repossessed home for a price equal to 100% of the amount under each such loan, subject to certain adjustments; provided that the maximum outstanding principal amount of the loans subject to the agreement may not exceed $10 million. In addition, we have agreed to waive all site rent that would otherwise be due from Talmer Bank so long as it owns any homes on which loans were made pursuant to the agreement. The agreement expires November 1, 2013, but may be extended by mutual agreement of Talmer Bank and us.month basis. Each of Mr. Shiffman, Mr. NaftalyWeiss and Mr. WeissKlein may have a conflict of interest with respect to his obligations as our officer and/or director and his capacity as a shareholder and/or director of Talmer Bancorp, Inc. and Talmer Bank.ownership interest in American Center LLC.


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Legal Counsel. During 2012,2014, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss, one of our directors, is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $3.4$7.5 million, $2.5$3.2 million and $0.8$3.4 million in the years ended December 31, 2012, 20112014, 2013 and 2010,2012, respectively.

Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of 24 properties (four of which have been sold) from partnerships previously affiliated with him (the “Sun Partnerships”).him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those ofon us and our public stockholders onupon the sale of any of the Sun Partnerships.these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties.

We rely on key management.

We are dependent on the efforts of our executive officers, Gary A. Shiffman, John B. McLaren, Karen J. Dearing and Jonathan M. Colman (together, the “Executive Officers”).Colman. The loss of services of one or more of our Executive Officersthese executive officers could have a temporary adverse effect on our operations. We do not currently maintain or contemplate obtaining any “key-man” life insurance on the Executive Officers.

Certain provisions in our governing documents may make it difficult for a third-party to acquire us.

9.8% Ownership LimitLimit.. In order to qualify and maintain our qualification as a REIT, not more than 50% of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals. Thus, ownership of more than 9.8%, in number of shares or value, of the issued and outstanding shares of our capital stock by any single stockholder has been restricted, with certain exceptions, for the purpose of maintaining our qualification as a REIT under the Code. Such restrictions in our charter do not apply to Milton M. Shiffman, Gary A. Shiffman, the Milton M. Shiffman Spouse’s Marital Trust and the Estate of Robert B. Bayer, Gary Shiffman, Milton M. Shiffman, Robert B. Bayer, orBayer; trustees, personal representatives and agents to the extent acting onfor them or their respective behalfs,estates; or certain of their respective relatives.

The 9.8% ownership limit, as well as our ability to issue additional shares of common stock or shares of other stock (which may have rights and preferences over the common stock), may discourage a change of control of the Company and may also: (1) deter tender offers for the common stock, which offers may be advantageous to stockholders; and (2) limit the opportunity for stockholders to receive a premium for their common stock that might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8% of our outstanding shares or otherwise effect a change of control of the Company.

Staggered Board. Our Board of Directors has been divided into three classes of directors. The term of one class will expire each year. Directors for each class will be chosen for a three-year term upon the expiration of such class’s term, and the directors in the other two classes will continue in office. The staggered terms for directors may affect the stockholders’ ability to change control of the Company even if a change in control were in the stockholders’ interest.

Preferred StockStock.. Our charter authorizes the Board of Directors to issue up to 10,000,000 shares of preferred stock and to establish the preferences and rights (including the right to vote and the right to convert into shares of common stock) of any shares issued.
In November 2012, we amended our charter to designate 3,450,000 shares of preferred stock as 7.125% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share, and issued 3,400,000 of such shares of stock. In November 2014, we amended our charter to designate 6,330,551 shares of preferred stock as 6.50% Series A-4 Cumulative Convertible Preferred Stock, $0.01 par value per share, and in November 2014 and January 2015 we issued in the aggregate 6,330,551 of such shares of stock. The power to issue preferred stock could have the effect of delaying or preventing a change in control of the Company even if a change in control were in the stockholders’stockholders' interest.



16

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED
Upon the occurrence of certain change of control events, the result of which is that shares of our common stock and the common securities of the acquiring or surviving entity (or ADRs representing such securities) are not listed on the NYSE,New York Stock Exchange (“NYSE”), the NYSE MKT or NASDAQ or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or NASDAQ, holders of shares of Series A Preferred Stock will have the right, subject to certain limitations, to convert some or all of their shares of Series A Preferred Stock into shares of our common stock (or equivalent value of alternative consideration) and under these circumstances we will also have a special optional redemption right to redeem the shares of Series A Preferred Stock. Upon such a conversion, the holders of shares of Series A Preferred Stock will be limited to a maximum number of shares of our common



16

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED

stock. If our common stock price, as determined in accordance with our charter for these purposes, is less than $20.97, subject to adjustment, the holders will receive a maximum of 1.1925 shares of our common stock per shares of Series A Preferred Stock,
which may result in a holder receiving value that is less than the liquidation preference of the Series A Preferred Stock. Subject to certain limitations, upon written notice to us, each holder of shares of Series A-4 Preferred Stock at its option may convert each share of Series A-4 Preferred Stock held by it for that number of shares of our common stock equal to the quotient obtained by dividing $25.00 by the then-applicable conversion price. The initial conversion price is $56.25, so initially each share of Series A-4 Preferred Stock is convertible into approximately 0.4444 shares of common stock. At our option, instead of issuing the shares of common stock to the converting holder of Series A-4 Preferred Stock as described above, we may make a cash payment to the converting holder with respect to each share of Series A-4 Preferred Stock the holder desires to convert equal to the fair market value of one share of our common stock. If, at any time after November 26, 2019, the volume weighted average of the daily volume weighted average price of a share of our common stock on the NYSE equals or exceeds 115.5% of the then prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, then, within 10 days thereafter, upon written notice to the holders thereof, we may convert each outstanding share of Series A-4 Preferred Stock into that number of shares of common stock equal to the quotient obtained by dividing $25.00 by the then prevailing conversion price.
These features of the Series A Preferred Stock and Series A-4 Preferred Stock may have the effect of inhibiting a third party from making an acquisition proposal for Sun or of delaying, deferring or preventing a change of control of Sun under circumstances that otherwise could provide the holders of our common stock and Series A Preferred Stockpreferred stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

Rights Plan.We adopted a stockholders’stockholders' rights plan in 2008 that provides our stockholders (other than a stockholder attempting to acquire a 15% or greater interest in us) with the right to purchase our stock at a discount in the event any person attempts to acquire a 15% or greater interest in us. Because this plan could make it more expensive for a person to acquire a controlling interest in us, it could have the effect of delaying or preventing a change in control even if a change in control were in the stockholders’stockholders' interest.
Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.
Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our commoncapital stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
 
“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements on these combinations; and

“control share” provisions that provide that “control shares” of our company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.


17

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED

The provisions of the MGCL relating to business combinations do not apply, however, to business combinations that are approved or exempted by our boardBoard of directorsDirectors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the statute, our boardBoard of directorsDirectors has by resolution exempted Milton M. Shiffman, Robert B. Bayer, and Gary A. Shiffman, their affiliates and all persons acting in concert or as a group with the foregoing, from the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and these persons. As a result, these persons may be able to enter into business combinations with us that may not be in the best interests of our stockholders without compliance by our company with the supermajority vote requirements and the other provisions of the statute.
Also, pursuant to a provision in our bylaws, we have exempted any acquisition of our stock from the control share provisions of the MGCL. However, our boardBoard of directorsDirectors may by amendment to our bylaws opt in to the control share provisions of the MGCL at any time in the future.
Additionally, Subtitle 8 of Title 3 of the MGCL permits our boardBoard of directors,Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium to the market price of our common stock or otherwise be in our stockholders' best interests. WeThese provisions include a classified board; two-thirds vote to remove a director; that the number of directors may only be fixed by the Board of Directors; that vacancies on the board as a result of an increase in the size of the board or due to death, resignation or removal can only be filled by the board, and the director appointed to fill the vacancy serves for the remainder of the full term of the class of director in which the vacancy occurred; and a majority requirement for the calling by stockholders of special meetings. Other than a classified board, the filling of vacancies as a result of the removal of a director and a majority requirement for the calling by stockholders of special meetings, we are already subject to certain of these provisions, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election to be subject to certain provisions of Subtitle 8.

17

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED In the future, our Board of Directors may elect, without stockholder approval, to make us subject to the provisions of Subtitle 8 to which we are not currently subject.

Changes in our investment and financing policies may be made without stockholder approval.

Our investment and financing policies, and our policies with respect to certain other activities, including our growth, debt, capitalization, distributions, REIT status, and operating policies, are determined by our Board of Directors. Although the Board of Directors has no present intention to do so, these policies may be amended or revised from time to time at the discretion of the Board of Directors without notice to or a vote of our stockholders. Accordingly, stockholders may not have control over changes in our policies and changes in our policies may not fully serve the interests of all stockholders.

Substantial sales of our common stock could cause our stock price to fall.

The sale or issuance of substantial amounts of our common stock or preferred stock, whether directly by us or in the secondary market, the perception that such sales could occur or the availability of future issuances of shares of our common stock, preferred stock, OP Units or other securities convertible into or exchangeable or exercisable for our common stock or preferred stock, could materially and adversely affect the market price of our common stock or preferred stock and our ability to raise capital through future offerings of equity or equity-related securities. In addition, we may issue capital stock that is senior to our common stock in the future for a number of reasons, including to finance our operations and business strategy, to adjust our ratio of debt to equity or for other reasons.

Based on the applicable conversion ratios then in effect, as of February 15, 2013,18, 2015, in the future we may issue to the limited partners of the Operating Partnership, up to approximately 2.14.6 million shares of our common stock in exchange for their common OP Units, up to approximately 0.5 million shares of our common stock in exchange for their Aspen preferred OP Units, up to approximately 0.1 million shares of our common stock in exchange for their Series A-3 preferred OP Units and up to approximately 1.1 million shares of our common stock in exchange for their Series A-1 preferred OP Units, although the Series A-1 preferred OP Units may not be converted into shares of common stock until December 31, 2013.Units. The limited partners may sell such shares pursuant to registration rights, if available, or an available exemption from registration. As of February 15, 2013,18, 2015, options to purchase 51,45029,500 shares of our common stock were outstanding under our 1993 Employee Stock Option Plan, our 1993 Non-Employee Director Stock Option Plan, our 2004 Non-Employee Director Option Plan and our Long-Term Incentive Plan.equity incentive plans. We currently have the authority to issue restricted stock awards or options to purchase up to an additional 600,000299,398 shares of our common stock pursuant to our 2009 Equity Incentive Plan.equity incentive plans. In addition, we entered into an “at-the-market” Sales Agreement in May 2012 to issue and sell shares of common stock. As of February 15, 2013,18, 2015, our boardBoard of directorsDirectors had authorized us to sell approximately an additional $88.5$43.7 million of
common stock under this agreement. No prediction can be made regarding the effect that future sales of shares of our common stock or our other securities will have on the market price of shares.




18

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED
The issuance of the securities issued on January 6, 2015 in connection with the Green Courte acquisition is expected to be dilutive, which may adversely affect the market price of our common stock or preferred stock.
We expect that the issuance on January 6, 2015 of 4,527,073 shares of common stock, 5,847,234 shares of Series A-4 Preferred Stock and 200,000 Series A-4 preferred OP units in connection with the Green Courte acquisition and a related private placement will have a dilutive effect on our earnings per share and funds from operations per share for the year ending December 31, 2015. The actual amount of dilution cannot be determined at this time and will be based on numerous factors.

An increase in interest rates may have an adverse effect on the price of our common stock.

One of the factors that may influence the price of our common stock in the public market will be the annual distributions to stockholders relative to the prevailing market price of the common stock. An increase in market interest rates may tend to make the common stock less attractive relative to other investments, which could adversely affect the market price of our common stock.

The volatility in economic conditions and the financial markets may adversely affect our industry, business and financial performance.

Although demand in the U.S. improved in 2012,recently, the U.S. macroeconomic environment remains uncertain and was the primary factor in a slowdown starting in 2008. The global economy remains unstable, and we expect the economic environment tomay continue to be challenging as continued economic uncertainty has generally given the marketplace less confidence.  In particular, the financial crisis that affected the banking system and financial markets and the currentrelated uncertainty in global economic conditions have resulted
in a tightening in the credit markets, a low level of liquidity in many financial markets and volatility in credit, equity and fixed income markets. If such conditions are experienced in future periods, our industry, business and results of operations may be severely impacted.  The slow recovery and possible impact of automatic sequesters or a failure to raise the “debt ceiling” in the U.S., as well as the impact of the sovereign debt crisis and resulting austerity measures in Europe, may continue to adversely impact us. The other risk factors presented in this Form 10-K discuss some of the principal risks inherent in our business, including liquidity risks, operational risks, and credit risks, among others. The turbulenceTurbulence in financial markets has accentuatedaccentuates each of these risks and magnifiedmagnifies their potential effect on us. If these economic developments continue to rebound slowly or worsen, there could be an adverse impact on our access to capital, stock price and our operating results.




18

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED

Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness, and we may adjust our common stock dividenddistribution policy.

Our ability to make distributions on our common stock and Series A Preferred Stockpreferred stock, and payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock or Series A Preferred Stock,preferred stock, to pay our indebtedness or to fund our other liquidity needs.

The decision to declare and pay dividendsdistributions on shares of our common stock in the future, as well as the timing, amount and composition of any such future dividends,distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. Any change in our dividenddistribution policy could have a material adverse effect on the market price of our common stock.
Our ability to pay dividendsdistributions is limited by the requirements of Maryland law.
Our ability to pay dividendsdistributions on our common stock and Series A Preferred Stockpreferred stock is limited by the laws of Maryland. Under Maryland law, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation's total assets would be less than the sum of its total liabilities plus, unless the corporation's charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution, provided, however, that a Maryland corporation may make a distribution from: (i) its net earnings for the fiscal year in which the distribution is made; (ii) its net earnings for the preceding fiscal year; or (iii) the sum of its net earnings for its preceding eight fiscal quarters even if, after such distribution, the corporation's total assets would be less than its total liabilities. Accordingly, we generally may not make a distribution on our common stock or Series A Preferred Stockpreferred stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual


19

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED
course of business or, unless paid from one of the permitted sources of net earnings as described above, our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series of stock provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of stock then outstanding, if any, with preferential rights upon dissolution senior to those of our common stock or Series A Preferred Stock.currently outstanding preferred stock.
We may not be able to pay distributions upon events of default under our financing documents.

Some of our financing documents contain restrictions on distributions upon the occurrence of events of default thereunder. If such an event of default occurs, such as our failure to pay principal at maturity or interest when due for a specified period of time, we would be prohibited from making payments on our common stock and Series A Preferred Stock.preferred stock.

Our share price could be volatile and could decline, resulting in a substantial or complete loss on our stockholders' investment.

The stock markets, including the New York Stock Exchange (“NYSE”),NYSE on which we list our common stock and Series A Preferred Stock, have experienced significant price and volume fluctuations. As a result, the market price of our common stock and Series A Preferred Stockpreferred stock could be similarly volatile, and investors in our common stock and Series A Preferred Stockpreferred stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our common stock and Series A Preferred Stockpreferred stock could be subject to wide fluctuations in response to a number of factors, including:

any increases in prevailing interest rates, which may negatively affect the market for shares of our common stock or Series A Preferred Stock;

the market for similar securities;

issuances of other equity securities in the future, including new series or classes of preferred stock or other equity securities;stock;

our operating performance and the performance of other similar companies;


19

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED

our ability to maintain compliance with covenants contained in our debt facilities;

actual or anticipated variations in our operating results, funds from operations, cash flows or liquidity;

changes in expectations of future financial performance or changes in our earnings estimates or those of analysts;

changes in our dividenddistribution policy;

publication of research reports about us or the real estate industry generally;

increases in market interest rates that lead purchasers of our common stock to demand a higher dividend yield;

changes in market valuations of similar companies;

increases in market interest rates that lend purchases of our common stock and preferred stock to demand a higher dividend yield;

adverse market reaction to the amount of our debt outstanding at any time, the amount of our debt maturing in the near- and medium-term and our ability to refinance our debt, or our plans to incur additional debt in the future;

additions or departures of key management personnel;

speculation in the press or investment community;

equity issuances by us, or share resales by our stockholders or the perception that such issuances or resales may occur;

actions by institutional stockholders; and

general market and economic conditions.



20

SUN COMMUNITIES, INC.

BUSINESS RISKS, CONTINUED

Many of the factors listed above are beyond our control. Those factors may cause the market price of our common stock or preferred stock to decline significantly, regardless of our financial condition, results of operations and prospects. It is impossible to provide any assurance that the market price of our common stock or preferred stock will not fall in the future, and it may be difficult for holders to resell shares of our common stock or preferred stock at prices they find attractive, or at all. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management's attention and resources.
Our Series A Preferred Stock and Series A-4 Preferred Stock has not been rated.
We have not sought to obtain a rating for our Series A Preferred Stock or Series A-4 Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A Preferred Stock or Series A-4 Preferred Stock. In addition, we may elect in the future to obtain a rating of the Series A Preferred Stock or Series A-4 Preferred Stock, which could adversely affect the market price of the Series A Preferred Stock.such preferred stock. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on a watch list or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision, placing on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Series A Preferred Stock or Series A-4 Preferred Stock.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants and clients and personally identifiable information of our employees, in our facility and on our network. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence, which could adversely affect our business.





2021

SUN COMMUNITIES, INC.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.



22

SUN COMMUNITIES, INC.

ITEM 2. PROPERTIES

As of December 31,2012 2014, the Properties consisted of 149183 manufactured housingMH communities, 1325 RV communities, and 119 properties containing both manufactured housingMH and RV sites located in 1929 states. As of December 31,2012 2014, the Properties contained an aggregate of 63,69779,554 developed sites comprised of 52,83361,231 developed manufactured home sites, 4,904 permanent9,297 annual RV sites 5,960(inclusive of both annual and seasonal usage rights), 9,026 transient RV sites, and approximately 6,9007,000 additional manufactured home sites suitable for development. Most of the Properties include amenities oriented toward family and retirement living. Of the 173217 Properties, 8093 have more than 300 developed manufactured home sites; with the largest having 1,0391,080 developed manufactured home sites. See "Real Estate and Accumulated Depreciation, Schedule III" for detail on Properties that are encumbered.

As of December 31, 20122014, the Properties had an occupancy rate of 87.3 percent92.6% excluding transient RV sites. Since January 1, 2012,2014, the Properties have averaged an aggregate annual turnover of homes (where the home is moved out of the community) of approximately 2.5 percent2.6% and an average annual turnover of residents (where the resident-owned home is sold and remains within the community, typically without interruption of rental income) of approximately 4.9 percent5.0%. The average renewal rate for residents in our Rental Program was 60.6 percent59.4% for the year ended December 31, 20122014.

We believe that our Properties’ high amenity levels contribute to low turnover and generally high occupancy rates. All of the Properties provide residents with attractive amenities with most offering a clubhouse, a swimming pool, and laundry facilities. Many of the Properties offer additional amenities such as sauna/whirlpool spas, tennis, shuffleboard and basketball courts and/or exercise rooms.

We have concentrated our communities within certain geographic areas in order to achieve economies of scale in management and operation. The Properties are principally concentrated in the midwestern, southern, northeastern and southeastern United States. We believe that geographic diversification helps to insulate the portfolio from regional economic influences.

The following tables set forth certain information relating to the properties owned as of December 31, 20122014. The occupancy percentage includes manufactured homeMH sites (“MH Sites”) and permanentannual RV sites, and excludes transient RV sites.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
MIDWEST           
Michigan           
Academy/West Pointe (1)
MHCantonMI441

93% 88% 88% 
Allendale Meadows Mobile VillageMHAllendaleMI352

80% 78% 74% 
Alpine Meadows Mobile VillageMHGrand RapidsMI403

91% 87% 83% 
Apple Carr VillageMHMuskegonMI529

76% 72% N/A
 
Bedford Hills Mobile VillageMHBattle CreekMI339

72% 71% 73% 
Brentwood Mobile VillageMHKentwoodMI195

97% 99% 98% 
Brookside VillageMHKentwoodMI196

97% 95% N/A
 
Byron Center Mobile VillageMHByron CenterMI143

89% 93% 92% 
Candlewick CourtMHOwossoMI211

70% 73% 74% 
Cider Mill CrossingsMHFentonMI262

51% 19% N/A
 
Cider Mill VillageMHMiddlevilleMI258

77% 67% N/A
 
College Park EstatesMHCantonMI230

77% 73% 70% 
Continental EstatesMHDavisonMI385

39% 40% 38% 
Continental NorthMHDavisonMI474

51% 53% 54% 
Country Acres Mobile VillageMHCadillacMI182

90% 86% 84% 
Country Hills VillageMHHudsonvilleMI239

93% 74% N/A
 
Country Meadows Mobile VillageMHFlat RockMI577

95% 94% 91% 

21

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
Country Meadows VillageMHCaledoniaMI307

88% 77% N/A
 
Countryside VillageMHPerryMI359

61% 58% 67% 
Creekwood MeadowsMHBurtonMI336

73% 65% 63% 
Cutler Estates Mobile VillageMHGrand RapidsMI259

96% 98% 93% 
Davison EastMHDavisonMI190

43% 44% 45% 
Dutton Mill VillageMHCaledoniaMI307

98% 91% N/A
 
East Village EstatesMHWashington Twp.MI708

93% N/A
 N/A
 
Falcon PointeMHEast LansingMI142

13%
(2) 
13%
(2) 
15%
(2) 
Fisherman’s CoveMHFlintMI162

91% 87% 87% 
Grand Mobile EstatesMHGrand RapidsMI230

72% 75% 73% 
HamlinMHWebbervilleMI209

83%
(3) 
75%
(3) 
73%
(3) 
Hickory Hills VillageMHBattle CreekMI283

94% 84% N/A
 
Hidden Ridge RV ResortRVHopkinsMI
276
N/A
 N/A
 N/A
 
Holiday West VillageMHHollandMI341

99% 93% N/A
 
Holly Village/Hawaiian Gardens (1)
MHHollyMI425

96% 98% 98% 
Hunters CrossingMHCapacMI114

89% N/A
 N/A
 
Hunters GlenMHWaylandMI280

69%
(2) 
63%
(2) 
59%
(2) 
Kensington MeadowsMHLansingMI290

96% 90% 85% 
Kings Court Mobile VillageMHTraverse CityMI639

100% 100% 98% 
Knollwood EstatesMHAllendaleMI161

89% 82% 81% 
Lafayette PlaceMHMetro DetroitMI254

68% 66% 65% 
LakeviewMHYpsilantiMI392

98% 97% 93% 
Leisure VillageMHBelmontMI237

100% 97% N/A
 
Lincoln EstatesMHHollandMI191

93% 92% 85% 
Meadow Lake EstatesMHWhite LakeMI425

92% 88% 84% 
Meadowbrook EstatesMHMonroeMI453

92% 92% 92% 
Northville CrossingsMHNorthvilleMI756

82% N/A
 N/A
 
Oak Island VillageMHEast LansingMI250

95% 84% N/A
 
Pinebrook VillageMHGrand RapidsMI185

93% 91% N/A
 
Presidential Estates Mobile VillageMHHudsonvilleMI364

95% 90% 88% 
Richmond PlaceMHMetro DetroitMI117

83% 84% 83% 
River Haven VillageMHGrand HavenMI721

60% 60% 57% 
Rudgate ClintonMHClinton TownshipMI667

90% N/A
 N/A
 
Rudgate ManorMHSterling HeightsMI931

89% N/A
 N/A
 
Scio Farms EstatesMHAnn ArborMI913

95% 94% 93% 
Sheffield EstatesMHAuburn HillsMI228

96% 98% 98% 
Sherman OaksMHJacksonMI366

72% 74% 72% 
Silver SpringsMHClinton TownshipMI546

89% N/A
 N/A
 
Southwood VillageMHGrand RapidsMI394

97% 94% N/A
 
St. Clair PlaceMHMetro DetroitMI100

75% 75% 74% 
Sunset RidgeMHPortland TownshipMI190

95% 96%
95% 

22

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
Sycamore VillageMHMasonMI396

91% 85% N/A
 
Tamarac VillageMHLudingtonMI293

98% 95% N/A
 
Tamarac VillageRVLudingtonMI108
9
100%
(5) 
100%
(5) 
N/A
 
Timberline EstatesMHGrand RapidsMI296

87% 83% 80% 
Town & Country Mobile VillageMHTraverse CityMI192

99% 98% 98% 
Village TrailsMHHoward CityMI100

97% 97% 92% 
Warren Dunes VillageMHBridgmanMI188

91% 77% N/A
 
Waverly Shores VillageMHHollandMI326

100% 97% N/A
 
West Village EstatesMHRomulusMI628

93% N/A
 N/A
 
White Lake Mobile Home VillageMHWhite LakeMI315

98% 96% 98% 
White Oak EstatesMHMt. MorrisMI480

65% 66% 68% 
Windham Hills EstatesMHJacksonMI402

78%
(3) 
77%
(3) 
70%
(3) 
Windsor Woods VillageMHWaylandMI314

83% 78% N/A
 
Woodhaven PlaceMHMetro DetroitMI220

97% 98% 95% 
Michigan Total   24,096
285
85% 81% 79% 
            
Indiana           
Brookside Mobile Home VillageMHGoshenIN570

65% 66% 64% 
Carrington PointeMHFt. WayneIN320

80%
(3) 
80%
(3) 
79%
(3) 
Clear Water Mobile VillageMHSouth BendIN227

82% 77% 73% 
Cobus Green Mobile Home ParkMHElkhartIN386

66% 66% 64% 
Deerfield RunMHAndersonIN175

62%
(3) 
61%
(3) 
64%
(3) 
Four SeasonsMHElkhartIN218

86% 82% 80% 
Holiday Mobile Home VillageMHElkhartIN326

71% 75% 75% 
Liberty FarmsMHValparaisoIN220

99% 98% 98% 
MaplewoodMHLawrenceIN207

67% 69% 70% 
MeadowsMHNappaneeIN330

51% 50% 51% 
Pebble Creek (4)
MHGreenwoodIN257

98% 93% 89% 
Pine HillsMHMiddleburyIN129

87% 91% 88% 
Roxbury ParkMHGoshenIN398

88% 84% 85% 
TimberbrookMHBristolIN567

52% 55% 56% 
Valley BrookMHIndianapolisIN798

53% 54% 53% 
West Glen VillageMHIndianapolisIN552

76% 72% 71% 
Woodlake EstatesMHFt. WayneIN338

57% 53% 50% 
Woods Edge Mobile VillageMHWest LafayetteIN598

52%
(3) 
52%
(3) 
53%
(3) 
Indiana Total   6,616

68% 67% 66% 
            
Ohio           
Apple Creek Manufactured Home Community and Self StorageMHAmeliaOH176

95% 95% 100% 
Byrne Hill VillageMHToledoOH236

88% 91% 86% 
CatalinaMHMiddletownOH462

59% 59% 56% 
East Fork  (4)
MHBataviaOH215

99%
97%
94%
PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
MIDWEST           
Michigan           
Academy/West Pointe (1)
MHCantonMI441

96% 92% 93% 
Allendale Meadows Mobile VillageMHAllendaleMI352

96% 89% 80% 
Alpine Meadows Mobile VillageMHGrand RapidsMI403

99% 98% 91% 
Apple Carr VillageMHMuskegonMI529

87% 83% 76% 
Brentwood Mobile VillageMHKentwoodMI195

99% 97% 97% 
Brookside VillageMHKentwoodMI196

99% 100% 97% 
Byron Center Mobile VillageMHByron CenterMI143

99% 94% 89% 
Camelot VillaMHMacombMI712

86% 79% N/A
 
Candlewick CourtMHOwossoMI211

64% 66% 70% 
Cider Mill CrossingsMHFentonMI262

91% 72% 51% 
Cider Mill VillageMHMiddlevilleMI258

89% 83% 77% 
College Park EstatesMHCantonMI230

85% 84% 77% 
Continental NorthMHDavisonMI474

56% 54% 51% 
Country Acres Mobile VillageMHCadillacMI182

98% 95% 90% 
Country Hills VillageMHHudsonvilleMI239

100% 98% 93% 
Country Meadows Mobile VillageMHFlat RockMI577

97% 97% 95% 
Country Meadows VillageMHCaledoniaMI307

100% 95% 88% 
Creekwood MeadowsMHBurtonMI336

79% 76% 73% 

23

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
Oakwood VillageMHMiamisburgOH511

96% 92% 89% 
Orchard LakeMHMilfordOH147

98% 97% 96% 
Westbrook Senior VillageMHToledoOH112

99% 96% 98% 
Westbrook VillageMHToledoOH344

96% 96% 95% 
Willowbrook PlaceMHToledoOH266

87% 91% 95% 
Woodside TerraceMHHollandOH439

83% 79% 82% 
Worthington ArmsMHLewis CenterOH224

96% 98% 96% 
Ohio Total   3,132

88% 87% 86% 
            
SOUTH           
Texas           
Blazing StarRVSan AntonioTX
260
N/A
 N/A
 N/A
 
Boulder RidgeMHPflugervilleTX526

98% 95% 79% 
Branch Creek EstatesMHAustinTX392

100% 99% 100% 
Casa del ValleMHAlamoTX120

100% 100% 100% 
Casa del ValleRVAlamoTX98
178
100%
(5) 
100%
(5) 
100%
(5) 
Chisholm Point EstatesMHPflugervilleTX417

99% 99% 100% 
Comal Farms (4)
MHNew BraunfelsTX350

97% 99% 91% 
Kenwood RV and Mobile Home PlazaMHLaFeriaTX41

100% 100% 100% 
Kenwood RV and Mobile Home PlazaRVLaFeriaTX43
196
100%
(5) 
100%
(5) 
100%
(5) 
Oak CrestMHAustinTX335

99% 98% 88% 
Pecan BranchMHGeorgetownTX69

93% 91% 99% 
Pine TraceMHHoustonTX403

99% 98% 98% 
River Ranch (4)
MHAustinTX266

79%
(3) 
98% 99% 
River RidgeMHAustinTX515

97% 74%
(3) 
99% 
Saddle BrookMHAustinTX260

97% 98% 87% 
Snow to SunMHWeslacoTX184

99% 100% 100% 
Snow to SunRVWeslacoTX132
159
100%
(5) 
100%
(5) 
100%
(5) 
Stonebridge (4)
MHSan AntonioTX335

99% 99% 98% 
Summit Ridge (4)
MHConverseTX369

67% 98% 98% 
Sunset Ridge (4)
MHKyleTX170

99% 98% 100% 
Woodlake Trails (4)
MHSan AntonioTX227

70%
(3) 
98% 97% 
Texas Total   5,252
793
94% 96% 95% 
            
SOUTHEAST           
Florida           
Arbor Terrace RV ParkRVBradentonFL153
242
100%
(5) 
98%
(5) 
99%
(5) 
Ariana Village Mobile Home ParkMHLakelandFL208

92% 92% 92% 
Blueberry HillRVBushnellFL24
381
100%
(5) 
N/A
 N/A
 
Buttonwood BayMHSebringFL407

100% 100% 100% 
Buttonwood BayRVSebringFL376
157
100%
(5) 
98%
(5) 
99%
(5) 
PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Cutler Estates Mobile VillageMHGrand RapidsMI259

95% 95% 96% 
Dutton Mill VillageMHCaledoniaMI307

99% 98% 98% 
East Village EstatesMHWashington Twp.MI708

99% 99% 93% 
EgelcraftMHMuskegonMI458

95% N/A
 N/A
 
Fisherman’s CoveMHFlintMI162

96% 94% 91% 
Frenchtown Villa/Elizabeth Woods(1)
MHNewportMI1,061

73% N/A
 N/A
 
Grand Mobile EstatesMHGrand RapidsMI230

84% 76% 72% 
Hamlin 
MHWebbervilleMI209

91%
(3) 
87%
(3) 
83%
(3) 
Hickory Hills VillageMHBattle CreekMI283

98% 98% 94% 
Hidden Ridge RV ResortRVHopkinsMI116
160
100%
(5) 
100%
(5) 
N/A
 
Holiday West VillageMHHollandMI341

99% 99% 99% 
Holly Village/Hawaiian Gardens (1)
MHHollyMI425

93% 96% 96% 
Hunters CrossingMHCapacMI114

97% 90% 89% 
Hunters GlenMHWaylandMI280

87%
(2) 
79%
(2) 
69%
(2) 
Kensington MeadowsMHLansingMI290

97% 98% 96% 
Kings Court Mobile VillageMHTraverse CityMI639

100% 99% 100% 
Knollwood EstatesMHAllendaleMI161

96% 94% 89% 
Lafayette PlaceMHWarrenMI254

74% 71% 68% 
LakeviewMHYpsilantiMI392

97% 97% 98% 
Leisure VillageMHBelmontMI238

100% 100% 100% 
Lincoln EstatesMHHollandMI191

97% 98% 93% 
Meadow Lake EstatesMHWhite LakeMI425

98% 95% 92% 
Meadowbrook EstatesMHMonroeMI453

93% 94% 92% 
Northville CrossingsMHNorthvilleMI756

100% 91% 82% 
Oak Island VillageMHEast LansingMI250

99% 97% 95% 
Pinebrook VillageMHGrand RapidsMI185

99% 92% 93% 
Presidential Estates Mobile VillageMHHudsonvilleMI364

98% 97% 95% 
Richmond PlaceMHRichmondMI117

80% 86% 83% 
River Haven VillageMHGrand HavenMI721

67% 64% 60% 
Rudgate ClintonMHClinton TownshipMI667

97% 96% 90% 
Rudgate ManorMHSterling HeightsMI931

99% 96% 89% 
Scio Farms EstatesMHAnn ArborMI913

99% 98% 95% 
Sheffield EstatesMHAuburn HillsMI228

96% 92% 96% 
Sherman OaksMHJacksonMI366

73% 73% 72% 
Silver SpringsMHClinton TownshipMI546

99% 96% 89% 
Southwood VillageMHGrand RapidsMI394

99% 99% 97% 
St. Clair PlaceMHSt. ClairMI100

75% 74% 75% 
Sunset RidgeMHPortland TownshipMI190

98% 95% 95% 
Sycamore VillageMHMasonMI396

99% 99% 91% 
Tamarac VillageMHLudingtonMI298

99% 99% 98% 
Tamarac VillageRVLudingtonMI103
14
100%
(5) 
100%
(5) 
100%
(5) 
Timberline EstatesMHGrand RapidsMI296

98% 94% 87% 

24

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
Club NaplesRVNaplesFL114
191
100%
(5) 
99%
(5) 
N/A
 
Gold CoasterMHHomesteadFL453
92
99%
(5) 
100%
(5) 
100%
(5) 
Grand LakesRVCitraFL37
364
100%
(5) 
N/A
 N/A
 
Groves RV ResortRVFt. MyersFL153
124
100%
(5) 
99%
(5) 
99%
(5) 
Holly Forest EstatesMHHolly HillFL402

99% 99% 100% 
Indian Creek ParkMHFt. Myers BeachFL353

100% 99% 100% 
Indian Creek ParkRVFt. Myers BeachFL961
125
100%
(5) 
99%
(5) 
99%
(5) 
Island LakesMHMerritt IslandFL301

100% 99% 100% 
Kings LakeMHDebaryFL245

99% 96% 97% 
Lake Juliana LandingsMHAuburndaleFL274

98% 97% 98% 
Lake San Marino RV ParkRVNaplesFL185
224
100%
(5) 
96%
(5) 
98%
(5) 
Meadowbrook VillageMHTampaFL257

100% 100% 100% 
Naples RV ResortRVNaplesFL32
134
100%
(5) 
94%
(5) 
N/A
 
North LakeRVMoore HavenFL173
98
100%
(5) 
100%
(5) 
N/A
 
Orange City RV ResortMHOrange CityFL4

100% 100% N/A
 
Orange City RV ResortRVOrange CityFL181
340
100%
(5) 
100%
(5) 
N/A
 
Orange Tree VillageMHOrange CityFL246

99% 100% 99% 
Rainbow RV ResortMHFrostproofFL37

100% N/A
 N/A
 
Rainbow RV ResortRVFrostproofFL128
333
100%
(5) 
N/A
 N/A
 
Royal CountryMHMiamiFL864

100% 100% 100% 
Saddle Oak ClubMHOcalaFL376

99% 99% 99% 
Siesta Bay RV ParkRVFt. Myers BeachFL715
82
100%
(5) 
98%
(5) 
99%
(5) 
Silver Star Mobile VillageMHOrlandoFL406

98% 98% 99% 
Tampa EastMHDoverFL31

100% 100% 100% 
Tampa EastRVDoverFL193
476
100%
(5) 
96%
(5) 
99%
(5) 
Three LakesRVHudsonFL124
184
100%
(5) 
N/A
 N/A
 
Water Oak Country Club EstatesMHLady LakeFL1,039

99% 100% 99% 
Florida Total   9,452
3,547
99% 99% 99% 
            
OTHER           
Autumn RidgeMHAnkenyIA413

99% 100% 100% 
Bell CrossingMHClarksvilleTN239

79%
(3) 
72%
(3) 
64%
(3) 
Candlelight VillageMHChicago HeightsIL309

97% 99% 95% 
Cave CreekMHEvansCO289

99% 91% 76%
(2) 
Countryside AtlantaMHLawrencevilleGA271

100%
(6) 
100%
(6) 
99%
(6) 
Countryside GwinnettMHBufordGA331

98% 96% 94% 
Countryside Lake LanierMHBufordGA548

86% 84% 83% 
Creekside (4)
MHReidsvilleNC45

62%
(2) 
64%
(2) 
67%
(2) 
Desert View VillageMHWest WendoverNV93

44%
(2) 
47%
(2) 
48%
(2) 
Eagle CrestMHFirestoneCO441

99% 94% 76%
(2) 
EdwardsvilleMHEdwardsvilleKS634

70% 69% 67% 
Forest MeadowsMHPhilomathOR75

100% 99% 100% 
Glen Laurel (4)
MHConcordNC260

77%
(2) 
67%
(2) 
61%
(2) 
PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Town & Country Mobile VillageMHTraverse CityMI192

99% 100% 99% 
Village TrailsMHHoward CityMI100

97% 94% 97% 
Warren Dunes VillageMHBridgmanMI188

99% 95% 91% 
Waverly Shores VillageMHHollandMI326

100% 100% 100% 
West Village EstatesMHRomulusMI628

99% 100% 93% 
White Lake Mobile Home VillageMHWhite LakeMI315

96% 96% 98% 
Windham Hills EstatesMHJacksonMI402

93% 85%
(3) 
78%
(3) 
Windsor Woods VillageMHWaylandMI314

96% 90% 83% 
Woodhaven PlaceMHWoodhavenMI220

91% 96% 97% 
Michigan Total   24,549
174
92% 88% 85% 
            
Indiana           
Brookside Mobile Home VillageMHGoshenIN570

74% 71% 65% 
Carrington PointeMHFt. WayneIN320

87%
(3) 
82%
(3) 
80%
(3) 
Clear Water Mobile VillageMHSouth BendIN227

92% 92% 82% 
Cobus Green Mobile Home ParkMHElkhartIN386

90% 78% 66% 
Deerfield RunMHAndersonIN175

78%
(3) 
73%
(3) 
62%
(3) 
Four SeasonsMHElkhartIN218

95% 92% 86% 
Holiday Mobile Home VillageMHElkhartIN326

75% 74% 71% 
Lake Rudolph RV Campground & RV ResortRVSanta ClausIN
501
N/A
(5) 
N/A
 N/A
 
Liberty FarmsMHValparaisoIN220

98% 98% 99% 
MaplewoodMHLawrenceIN207

62% 66% 67% 
MeadowsMHNappaneeIN330

46% 47% 51% 
Pebble Creek (4)
MHGreenwoodIN257

98% 93% 98% 
Pine HillsMHMiddleburyIN129

91% 90% 87% 
Roxbury ParkMHGoshenIN398

98% 99% 88% 
Valley Brook (7)
MHIndianapolisIN798

50% 52% 53% 
West Glen VillageMHIndianapolisIN552

82% 80% 76% 
Woods Edge Mobile VillageMHWest LafayetteIN598

53%
(3) 
53%
(3) 
52%
(3) 
Indiana Total   5,711
501
75% 71% 68% 
            
Ohio           
Apple Creek Manufactured Home Community and Self StorageMHAmeliaOH176

93% 93% 95% 
CatalinaMHMiddletownOH462

60% 59% 59% 
East Fork (4)
MHBataviaOH350

74%
(3) 
90% 99% 
Indian Creek RV & Camping ResortRVGeneva on the LakeOH332
301
100%
(5) 
100%
(5) 
N/A
 
Oakwood VillageMHMiamisburgOH511

97% 98% 96% 
Orchard LakeMHMilfordOH147

96% 99% 98% 
Westbrook Senior VillageMHToledoOH112

96% 96% 99% 
Westbrook VillageMHToledoOH344

94% 94% 96% 
Willowbrook PlaceMHToledoOH266

95% 94% 87% 

25

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Permanent RV Sites as of 12/31/12Transient RV Sites as of 12/31/12Occupancy as of 12/31/12Occupancy as of 12/31/11Occupancy as of 12/31/10
High PointeMHFredericaDE411

96% 93% 92% 
Lake In WoodRVNarvonPA
425
N/A
 N/A
 N/A
 
Meadowbrook (4)
MHCharlotteNC177

99% 99% 98% 
North Point EstatesMHPuebloCO108

84%
(2) 
76%
(2) 
63%
(2) 
Palm CreekMHCasa GrandeAZ118

97% N/A
 N/A
 
Palm CreekRVCasa GrandeAZ838
907
100% N/A
 N/A
 
Pheasant RidgeMHLancasterPA553

100% 100% 100% 
Pin Oak ParcMHO’FallonMO502

83% 82% 82% 
Pine RidgeMHPetersburgVA245

97% 98% 98% 
Sea AirMHRehoboth BeachDE372

100% 100% 99% 
Sea AirRVRehoboth BeachDE136
3
100%
(5) 
100%
(5) 
100%
(5) 
SouthforkMHBeltonMO474

61% 62% 65% 
Sun Villa EstatesMHRenoNV324

98% 100% 99% 
Timber RidgeMHFt. CollinsCO585

100% 98% 95% 
Woodland Park EstatesMHEugeneOR398

100% 100% 98% 
Other Total   9,189
1,335
91% 89% 86% 
            
TOTAL / AVERAGE   57,737
5,960
87% 85% 84% 
PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Woodside TerraceMHHollandOH439

91% 87% 83% 
Worthington ArmsMHLewis CenterOH224

98% 95% 96% 
Ohio Total   3,363
301
88% 89% 88% 
            
SOUTH           
Texas           
Blazing StarRVSan AntonioTX86
176
100%
(5) 
100%
(5) 
N/A
 
Boulder RidgeMHPflugervilleTX526

99% 99% 98% 
Branch Creek EstatesMHAustinTX392

100% 100% 100% 
Casa del ValleMHAlamoTX130

97% 98% 100% 
Casa del ValleRVAlamoTX145
106
100%
(5) 
100%
(5) 
100%
(5) 
Chisholm Point EstatesMHPflugervilleTX417

98% 99% 99% 
Comal Farms (4)
MHNew BraunfelsTX355

98% 99% 97% 
Kenwood RV and Mobile Home PlazaMHLaFeriaTX41

95% 95% 100% 
Kenwood RV and Mobile Home PlazaRVLaFeriaTX44
195
100%
(5) 
100%
(5) 
100%
(5) 
Oak CrestMHAustinTX433

98% 100% 99% 
Pecan BranchMHGeorgetownTX69

96% 94% 93% 
Pine Trace 
MHHoustonTX619

83%
(3) 
99% 99% 
River Ranch (4)
MHAustinTX541

99% 73%
(2) 
79%
(2) 
River RidgeMHAustinTX515

99% 100% 97% 
SaddlebrookMHAustinTX260

98% 99% 97% 
Snow to SunMHWeslacoTX184

96% 98% 99% 
Snow to SunRVWeslacoTX128
163
100%
(5) 
100%
(5) 
100%
(5) 
Stonebridge (4)
MHSan AntonioTX335

99% 98% 99% 
Summit Ridge (4)
MHConverseTX370

98% 91% 67% 
Sunset Ridge (4)
MHKyleTX171

100% 100% 99% 
Woodlake Trails (4)
MHSan AntonioTX227

98% 98% 70%
(3) 
Texas Total   5,988
640
97% 96% 94% 
            
SOUTHEAST           
Florida           
Arbor Terrace RV ParkRVBradentonFL141
220
100%
(5) 
100%
(5) 
100%
(5) 
Ariana Village Mobile Home ParkMHLakelandFL207

95% 94% 92% 
Blueberry HillRVBushnellFL152
253
100%
(5) 
100%
(5) 
100%
(5) 
Buttonwood BayMHSebringFL407

100% 100% 100% 
Buttonwood BayRVSebringFL364
168
100%
(5) 
100%
(5) 
100%
(5) 
Carriage CoveMHSanfordFL464

95% N/A
 N/A
 
Club NaplesRVNaplesFL158
147
100%
(5) 
100%
(5) 
100%
(5) 
Gold CoasterMHHomesteadFL471
74
100%
(5) 
98%
(5) 
99%
(5) 
Grand LakesRVCitraFL154
249
100%
(5) 
100%
(5) 
100%
(5) 
Groves RV ResortRVFt. MyersFL177
96
100%
(5) 
100%
(5) 
100%
(5) 

26

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Holly Forest EstatesMHHolly HillFL402

99% 99% 99% 
Indian Creek ParkMHFt. Myers BeachFL353

100% 100% 100% 
Indian Creek ParkRVFt. Myers BeachFL957
121
100%
(5) 
100%
(5) 
100%
(5) 
Island LakesMHMerritt IslandFL301

100% 100% 100% 
Kings LakeMHDebaryFL245

100% 100% 99% 
Lake Juliana LandingsMHAuburndaleFL274

97% 97% 98% 
Lake San Marino RV ParkRVNaplesFL206
201
100%
(5) 
100%
(5) 
100%
(5) 
Lakeshore LandingsMHOrlandoFL306

95% N/A
 N/A
 
Meadowbrook VillageMHTampaFL257

100% 100% 100% 
Naples RV ResortRVNaplesFL71
94
100%
(5) 
100%
(5) 
100%
(5) 
North LakeRVMoore HavenFL190
82
100%
(5) 
100%
(5) 
100%
(5) 
Orange City RV ResortMHOrange CityFL4

100% 100% 100% 
Orange City RV ResortRVOrange CityFL242
279
100%
(5) 
100%
(5) 
100%
(5) 
Orange Tree VillageMHOrange CityFL246

100% 100% 99% 
Rainbow RV ResortMHFrostproofFL37

100% 100% 100% 
Rainbow RV ResortRVFrostproofFL296
166
100%
(5) 
100%
(5) 
100%
(5) 
Royal CountryMHMiamiFL864

100% 100% 100% 
Saddle Oak ClubMHOcalaFL376

100% 99% 99% 
Siesta Bay RV ParkRVFt. Myers BeachFL714
83
100%
(5) 
100%
(5) 
100%
(5) 
Silver Star Mobile VillageMHOrlandoFL406

99% 99% 98% 
Tampa EastMHDoverFL31

100% 100% 100% 
Tampa EastRVDoverFL217
452
100%
(5) 
100%
(5) 
100%
(5) 
Three LakesRVHudsonFL178
130
100%
(5) 
100%
(5) 
100%
(5) 
Water Oak Country Club EstatesMHLady LakeFL1,080

100% 99% 99% 
Florida Total   10,948
2,815
99% 99% 99% 
            
SOUTHWEST           
Arizona           
Blue StarMHApache JunctionAZ8

100% N/A
 N/A
 
Blue StarRVApache JunctionAZ
143
N/A
(5) 
N/A
 N/A
 
Brentwood WestMHMesaAZ350

95% N/A
 N/A
 
Desert HarborMHApache JunctionAZ205

100% N/A
 N/A
 
Fiesta VillageMHMesaAZ172

74% N/A
 N/A
 
La Casa BlancaMHApache JunctionAZ198

99% N/A
 N/A
 
Lost DutchmanMHApache JunctionAZ179

82% N/A
 N/A
 
Lost DutchmanRVApache JunctionAZ
45
N/A
(5) 
N/A
 N/A
 
Mountain ViewMHMesaAZ170

99% N/A
 N/A
 
Palm Creek Golf & RV ResortMHCasa GrandeAZ281

58% 94% 97% 
Palm Creek Golf & RV ResortRVCasa GrandeAZ848
892
100%
(5) 
100%
(5) 
100%
(5) 
Rancho MirageMHApache JunctionAZ312

98% N/A
 N/A
 
Reserve at Fox CreekMHBullhead CityAZ313

89% N/A
 N/A
 
Sun ValleyMHApache JunctionAZ268

88% N/A
 N/A
 
Arizona Total   3,304
1,080
91% 99% 99% 
            

27

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Colorado           
Cave CreekMHEvansCO447

77%
(3) 
98% 99% 
Eagle CrestMHFirestoneCO441

100% 99% 99% 
The Grove at Alta RidgeMHDenverCO409

99% N/A
 N/A
 
North Point EstatesMHPuebloCO108

100% 95% 84%
(2) 
SkylineMHFort CollinsCO172

98% N/A
 N/A
 
Swan Meadow VillageMHDillonCO175

99% N/A
 N/A
 
Timber RidgeMHFt. CollinsCO585

100% 100% 100% 
Colorado Total   2,337

95% 99% 84% 
            
OTHER           
Autumn RidgeMHAnkenyIA413

99% 99% 99% 
Bell CrossingMHClarksvilleTN237

99% 90%
(3) 
79%
(3) 
Big Timber Lake RV ResortRVCape MayNJ269
259
100%
(5) 
100%
(5) 
N/A
 
Candlelight VillageMHChicago HeightsIL309

97% 97% 97% 
Castaways RV Resort & CampgroundRVBerlinMD9
384
100%
(5) 
N/A
 N/A
 
Colonial VillageMHAlleganyNY153

88% N/A
 N/A
 
Countryside AtlantaMHLawrencevilleGA271

100%
(6) 
100%
(6) 
100%
(6) 
Countryside EstatesMHMckeanPA304

94% N/A
 N/A
 
Countryside GwinnettMHBufordGA331

99% 99% 98% 
Countryside Lake LanierMHBufordGA548

99% 92% 86% 
Countryside VillageMHGreat FallsMT226

98% N/A
 N/A
 
Creekside (4)
MHReidsvilleNC45

62%
(2) 
64%
(2) 
62%
(2) 
Driftwood Camping ResortRVClermontNJ596
106
100%
(5) 
N/A
 N/A
 
EdwardsvilleMHEdwardsvilleKS634

77% 74% 70% 
Forest MeadowsMHPhilomathOR75

100% 100% 100% 
Glen Laurel (4)
MHConcordNC260

99% 88%
(2) 
77%
(2) 
Gwynn's Island RV Resort & CampgroundRVGwynnVA96
20
100%
(5) 
100%
(5) 
N/A
 
High PointeMHFredericaDE409

98% 96% 96% 
Jellystone Park(TM) of Western New YorkRVNorth JavaNY59
216
100%
(5) 
N/A
 N/A
 
Jellystone Park(TM) at Birchwood AcresRVWoodridgeNY5
297
100%
(5) 
100%
(5) 
N/A
 
Lake In WoodRVNarvonPA265
156
100%
(5) 
100%
(5) 
N/A
 
Lake Laurie RV & Camping ResortRVCape MayNJ311
408
100%
(5) 
100%
(5) 
N/A
 
Maple BrookMHMattesonIL441

100% N/A
 N/A
 
Maplewood ManorMHBrunswickME296

93% N/A
 N/A
 
Meadowbrook (4)
MHCharlotteNC321

82%
(3) 
59%
(3) 
99% 
MerrymeetingMHBrunswickME43

72% N/A
 N/A
 
New Point RV ResortRVNew PointVA173
150
100%
(5) 
100%
(5) 
N/A
 
Oak CreekMHCoarsegoldCA198

97% N/A
 N/A
 
Oak RidgeMHMantenoIL426

86% N/A
 N/A
 
Parkside VillageMHCheektowagaNY156

100% N/A
 N/A
 

28

SUN COMMUNITIES, INC.

PropertyMH/RVCityStateMH and Annual RV Sites as of 12/31/14Transient RV Sites as of 12/31/14Occupancy as of 12/31/14Occupancy as of 12/31/13Occupancy as of 12/31/12
Peter's Pond RV ResortRVSandwichMA297
106
100%
(5) 
100%
(5) 
N/A
 
Pheasant RidgeMHLancasterPA553

100% 100% 100% 
Pin Oak ParcMHO’FallonMO502

90% 86% 83% 
Pine RidgeMHPetersburgVA245

97% 98% 97% 
Saco/Old Orchard Beach KOARVSacoME
127
N/A
(5) 
N/A
 N/A
 
Sea Air VillageMHRehoboth BeachDE372

99% 99% 100% 
Sea Air VillageRVRehoboth BeachDE123
12
100%
(5) 
100%
(5) 
100%
(5) 
Seaport RV ResortRVMysticCT25
116
100%
(5) 
100%
(5) 
N/A
 
Seashore Campsites RV Park and CampgroundRVCape MayNJ432
246
100%
(5) 
N/A
 N/A
 
Sky HarborMHCheektowagaNY522

90% N/A
 N/A
 
SouthforkMHBeltonMO474

64% 62% 61% 
Southern Hills/Northridge PlaceMHStewartvilleMN405

85% N/A
 N/A
 
Sun Villa EstatesMHRenoNV324

99% 97% 98% 
Thunderhill EstatesMHSturgeon BayWI226

87% N/A
 N/A
 
Town & Country VillageMHLisbonME144

81% N/A
 N/A
 
Valley View EstatesMHAlleganyNY197

86% N/A
 N/A
 
The Villas at Calla PointeMHCheektowagaNY116

100% N/A
 N/A
 
Vines RV ResortRVPaso RoblesCA
130
N/A
 N/A
 N/A
 
Wagon Wheel RV Resort & CampgroundRVOld Orchard BeachME181
100
100%
(5) 
100%
(5) 
N/A
 
Westward Ho RV Resort & CampgroundRVGlenbeulahWI205
118
100%
(5) 
100%
(5) 
N/A
 
Wild Acres RV Resort & CampgroundRVOrchard BeachME232
398
100%
(5) 
100%
(5) 
N/A
 
Wildwood CommunityMHSandwichIL476

98% N/A
 N/A
 
Wine Country RV ResortRVPaso RoblesCA
166
N/A
 N/A
 N/A
 
Woodland Park EstatesMHEugeneOR398

100% 100% 100% 
Other Total   14,328
3,515
94% 91% 91% 
            
TOTAL / AVERAGE   70,528
9,026
93% 90% 87% 
(1) Properties have two licenses but operate as one community.

(2) Occupancy in these Properties reflects the fact that these communities are ground-up developments and have not reached full occupancy.

(3) Occupancy in these Properties reflects the fact that these communities are in a lease-up phase following an expansion.

(4) This Property is owned by an affiliate of SunChamp LLC, a joint venture that owns 11 of our consolidated manufactured home communities, in which we own approximately aan 79.5 percent82.6% equity interest as of December 31,2012 2014.

(5) Occupancy percentage excludes transient RV sites. Percentage calculated by dividing revenue producing sites by developed sites. A revenue producing site is defined as a site that is occupied by a paying resident.resident or reserved by a customer with annual or seasonal usage rights. A developed site is defined as an adequate sized parcel of land that has road and utility access which is zoned and licensed (if required) for use as a home site.

(6) The number of developed sites and occupancy percentage at this Property includes sites that have been covered under our comprehensive insurance coverage (subject to deductibles and certain limitations) for both property damage and business interruption from a flood that caused substantial damage to this Property.

(7) Property was sold on January 14, 2015.


2629

SUN COMMUNITIES, INC.

ITEM 3. LEGAL PROCEEDINGS

On February 8, 2013, we acquired ten RV communities and associated assets from Gwynns Island RV Resort LLC, Indian Creek RV Resort LLC, Lake Laurie RV Resort LLC, Newpoint RV Resort LLC, Peters Pond RV Resort Inc., Seaport LLC, Virginia Tent LLC, Wagon Wheel Maine LLC, Westward Ho RV Resort LLC and Wild Acres LLC (collectively, the "Contributors") for a purchase price of $112.8 million, subject to certain adjustments and pro-rations. See Note 2 of our financial statements. MHC recorded a “Memorandum of Agreement for an Option to Acquire the Properties” against some or all of the communities and we closed this transaction with knowledge of those memoranda. MHC had also asserted that we improperly interfered with their purported contract rights with respect to the communities. The Contributors and their affiliates Ideal Private Resorts LLC, Robert C. Morgan, Robert Moser, Robyn Morgan and Herbert Morgan, jointly and severally, have agreed to indemnify us against any and all liabilities and expenses relating to any claims by MHC with respect to the communities or the transaction, subject to certain limitations. The indemnity obligations are secured by certain assets of the indemnitors and their affiliates. On December 26, 2012, we filed a complaint in the Oakland County (Michigan) Circuit Court against MHC, the Contributors and certain of their affiliates seeking declaratory relief concerning MHC's assertion of rights with respect to the communities and MHC's claim against us. On January 23, 2013, MHC filed an answer and counterclaim (and cross claim against the Contributors and certain of their affiliates) seeking to enforce its claimed rights and seeking specific performance against the Contributors (and us to the extent our rights would be affected) of those rights to acquire the communities. MHC's answer and counterclaim did not assert any othersubstantive claims against us. On February 14, 2013, we filed an amended complaint seeking a declaratory judgment that we have not violated, and our purchase of the communities did not violate, any rights of MHC and further seeking a judgment requiring MHC to cancel the memoranda it recorded. As of February 22, 2013, MHC had not filed an answer to our amended complaint.


We are involved in various other legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

None.




30

SUN COMMUNITIES, INC.

EXECUTIVE OFFICERS OF THE REGISTRANT

The persons listed below are our executive officers.
Name Age Office
Gary A. Shiffman60Chairman and Chief Executive Officer
John B. McLaren44President and Chief Operating Officer
Karen J. Dearing50Executive Vice President, Treasurer, Chief Financial Officer and Secretary
Jonathan M. Colman59Executive Vice President

Gary A. Shiffman is our Chairman and Chief Executive Officer and has been an executive officer since our inception. He is a member of the Executive Committee of our Board of Directors. He has been actively involved in the management, acquisition, construction and development of MH communities and has developed an extensive network of industry relationships over the past thirty years. He has overseen the acquisition, rezoning, development and marketing of numerous manufactured home expansion projects, as well as other types of income producing real estate. Additionally, Mr. Shiffman has significant direct holdings in various real estate asset classes, which include office, multi-family, industrial, residential and retail. Mr. Shiffman is an executive officer and a director of SHS and all of our other corporate subsidiaries. Mr. Shiffman is also a director of Origen.

John B. McLaren has been in the manufactured housing industry since 1995. He has served as our President since February 2014 and as our Chief Operating Officer since February 2008. From February 2008 to February 2014, he served as an Executive Vice President of the Company. From August 2005 to February 2008, he was Senior Vice President of SHS with overall responsibility for home sales and leasing. Prior to that, Mr. McLaren was a Regional Vice President for Apartment Investment & Management Company (“AIMCO”), a Real Estate Investment Trust engaged in leasing apartments. Prior to AIMCO, Mr. McLaren spent approximately three years as Vice President of Leasing & Service for SHS with responsibility for developing and leading our Rental Program.

Karen J. Dearing joined us in October 1998 as the Director of Finance where she worked extensively with accounting and finance matters related to our ground up developments and expansions. Ms. Dearing became our Corporate Controller in 2002, a Senior Vice President in 2006, and Executive Vice President and Chief Financial Officer in February 2008. She is responsible for the overall management of our information technology, accounting and finance departments, and all internal and external financial reporting. Prior to working for us, Ms. Dearing had eight years of experience as the Financial Controller of a privately-owned automotive supplier and five years’ experience as a certified public accountant with Deloitte.

Jonathan M. Colman joined us in 1994 as Vice President-Acquisitions and became a Senior Vice President in 1995 and an Executive Vice President in March 2003. A certified public accountant, Mr. Colman has over thirty years of experience in the manufactured housing community industry. He has been involved in the acquisition, financing and management of over 75 manufactured housing communities for two of the 10 largest manufactured housing community owners, including Uniprop, Inc. during its syndication of over $90.0 million in public limited partnerships in the late 1980s. Mr. Colman is also a Vice President of all of our corporate subsidiaries.





31

SUN COMMUNITIES, INC.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the NYSE since December 8, 1993, and traded under the symbol “SUI”. The following table sets forth the high and low sales prices per share for the common stock for the periods indicated as reported by the NYSE and the distributions per share paid by us with respect to each period:
Year Ended December 31, 2012 High Low Distributions 
Year Ended December 31, 2014 High Low Distributions
1st Quarter
 $43.90
 $35.06
 $0.63
  $48.70
 $41.65
 $0.65
 
2nd Quarter
 44.68
 39.15
 0.63
  $50.84
 $42.97
 $0.65
 
3rd Quarter
 47.84
 43.37
 0.63
  $55.00
 $49.36
 $0.65
 
4th Quarter
 44.64
 36.15
 0.63
(a) 
 $64.22
 $50.25
 $0.65
(1) 

Year Ended December 31, 2011 High Low Distributions 
Year Ended December 31, 2013 High Low Distributions
1st Quarter
 $35.73
 $31.85
 $0.63
  $49.38
 $40.28
 $0.63
 
2nd Quarter
 40.21
 35.01
 0.63
  $57.78
 $46.40
 $0.63
 
3rd Quarter
 40.00
 30.49
 0.63
  $53.35
 $41.93
 $0.63
 
4th Quarter
 39.45
 33.00
 0.63
(b) 
 $45.96
 $39.53
 $0.63
(2) 
 (a)(1) Paid on January 18, 2013,16, 2015, to stockholders of record on December 31, 20122014

(b)(2) Paid on January 20, 2012,17, 2014, to stockholders of record on December 31, 20112013


27

SUN COMMUNITIES, INC.

On February 15, 2013,18, 2015, the closing share price of our common stock was $45.69$67.32 per share on the NYSE, and there were 245237 holders of record for the 31,642,52153,465,428 million outstanding shares of common stock. On February 15, 2013,18, 2015, the Operating Partnership had (i) 2,069,3222,561,342 common OP Unitsunits issued and outstanding, not held by us, which were convertible into an equal number of shares of our common stock, (ii) 1,325,2751,283,819 Aspen preferred OP Unitsunits issued and outstanding which were exchangeable for 526,212509,676 shares of our common stock, (iii) 455,476427,120 Series A-1 preferred OP Units issued and outstanding which on or after December 31, 2013 will be exchangeable for 1,111,361 shares of our common stock and (iv) 40,267.50 Series A-3 preferred OP Unitsunits issued and outstanding which were exchangeable for 74,9181,041,754 shares of our common stock, (iv) 40,268 Series A-3 preferred OP units issued and outstanding which were exchangeable for 74,919 shares of our common stock, and (v) 869,449 Series A-4 preferred OP units issued and outstanding, not held by us, which were exchangeable for 386,383 shares of our common stock.

We have historically paid regular quarterly distributions to holders of our common stock and common OP Units. In addition, we are obligated to make distributions to holders of shares of Series A Preferred Stock, Series A-4 Preferred Stock, Aspen preferred OP Units,units, Series A-1 preferred OP Units,units, Series A-3 preferred OP Unitsunits, Series A-4 preferred OP units and Series B-3 preferred OP Units.units. See “Structure of the Company” under Part I, Item 1 above.of this Form 10-K. Our ability to make distributions on our common and preferred stock and OP units and payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. The decision to declare and pay dividendsdistributions on shares of our common stock and common OP units in the future, as well as the timing, amount and composition of any such future dividends,distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors.

32

SUN COMMUNITIES, INC.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table reflects information about the securities authorized for issuance under our equity compensation plans as of December 31, 20122014.
 Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
Plan Category (a) (b) (c) (a) (b) (c)
Equity compensation plans approved by shareholders 55,950
 29.19
 763,400
 32,500
 $29.56
 316,494
Equity compensation plans not approved by shareholders 
 
 
 
 
 
Total 55,950
 29.19
 763,400
 32,500
 $29.56
 316,494

Issuer Purchases of Equity Securities

In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock.  We have 400,000 common shares remaining in the repurchase program.  No common shares were repurchased under this program during 2012.2014. There is no expiration date specified for the buybackrepurchase program.

Recent Sales of Unregistered Securities

From time to time, we may issue shares of common stock in exchange for OP Unitsunits that may be tendered to the Operating Partnership for redemption in accordance with the terms and provisions of the limited partnership agreement of the Operating Partnership. Such shares are issued based on the exchange ratios and formulas described in “Structure of the Company” under Item 1 above.

Holders of common OP Units have converted 2,4009,110 units, 10,249zero units and 57,8812,400 units to common stock for the years ended December 31, 2014, 2013 and 2012, 2011 and 2010, respectively.

In February Holders of Series A-1 preferred OP units converted 26,379 units into 64,335 shares of common stock during the year ended December 31, 2014. No Series A-1 preferred OP units were converted into common stock during 2013 or 2012.

On November 26, 2014, as consideration for the Green Courte acquisition, we issued to the Green Courte sellers 361,797 shares of common stock and 483,717 shares of Class A-4 Preferred Stock, and our Operating Partnership issued 40,267.50to the Green Courte sellers 455,296 common OP units and 608,220 Series A-3A-4 preferred OP Units in connection withunits. On December 17, 2014, as additional consideration for the Green Courte acquisition, our acquisitionOperating Partnership issued to the Green Courte sellers 45,834 common OP units and 61,229 Series A-4 preferred OP units. All of ten RV communities.the shares of common stock and common OP units were issued at an issuance price of $50.00 per share or unit. All of the shares of Series A-4 Preferred Stock and Series A-4 preferred OP units were issued at an issuance price of $25.00 per share or unit. See Note 2 to our financial statements for other consideration paidtransferred in the transaction. The

Subject to certain limitations, upon written notice to us, each holder of shares of Series A-3 preferred OP Units are convertible, but not redeemable. The holdersA-4 Preferred Stock at its option may convert any or all of the shares of Series A-3 preferred OP Units can convert each Series A-3 preferred OP Unit at any time, subject to certain contractual restrictions contained in the acquisition agreements, into 1.8605A-4 Preferred Stock held by it for that number of shares of our common stock (which exchange rateequal to the quotient obtained by dividing $25.00 by the then-applicable conversion price. The initial conversion price is $56.25, so initially each share of Series A-4 Preferred Stock is convertible into approximately 0.4444 shares of common stock. The conversion price is subject to adjustment upon various events. At our option, instead of issuing the shares of common stock splits, recapitalizations and similar events). Theto the converting holder of Series A-3A-4 Preferred Stock as described above, we may make a cash payment to the converting holder with respect to each share of Series A-4 Preferred Stock the holder desires to convert equal to the fair market value of one share of our common stock. If, at any time after November 26, 2019, the volume weighted average of the daily volume weighted average price of a share of our common stock on the NYSE equals or exceeds 115.5% of the then prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, then, within 10 days thereafter, upon written notice to the holders thereof, we may convert each outstanding share of Series A-4 Preferred Stock into that number of shares of common stock equal to the quotient obtained by dividing $25.00 by the then prevailing conversion price.

Each Series A-4 preferred OP Unit holders receive an annual preferred returnunit is initially exchangeable for that number of 4.5%.

In June, 2011, our Operating Partnership issued 455,476shares of common stock or common OP units obtained by dividing $25.00 by $56.25. The number of shares of common stock or common OP units into which each Series A-1 preferred OP Units in connection with our acquisition of the Kentland Communities ("Kentland"). See Note 2 to our financial statements for other consideration paid in the transaction. TheA-4

2833

SUN COMMUNITIES, INC.

Series A-1 preferred OP Unitsunit is exchangeable are convertible, but not redeemable. The holders ofsubject to adjustment under certain circumstances on the same basis applicable to adjustments in the conversion price for Series A-1 preferredA-4 Preferred Stock described above.

Each common OP Units can convert each Series A-1 preferred OP Unitsunit issued by the Operating Partnership is exchangeable at any time after December 31, 2013 into 2.439 shares(subject to certain limited exceptions) at the holder’s option for one share of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations and similar events). The Series A-1 preferred OP Unit holders receive an annual preferred return of 5.1% until June 23, 2013 and 6.0% thereafter.stock.

All of the securities described above were issued in private placements in reliance on Section 4a(2)4(a)(2) of the Securities Act, of 1933, as amended, including Regulation D promulgated there under.thereunder, based on certain investment representations made by the parties to whom the securities were issued. No underwriters were used in connection with any of such issuances.


34

SUN COMMUNITIES, INC.

Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on our common stock against the cumulative total return of a broad market index composed of all issuers listed on the NYSE and an industry index comprised of fifteen publicly traded residential real estate investment trusts, for the five year period ending on December 31,2012 2014. This line graph assumes a $100 investment on December 31, 2007,2009, a reinvestment of dividendsdistributions and actual increase of the market value of our common stock relative to an initial investment of $100. The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.

 As of December 31, As of December 31,
Index 2007 2008 2009 2010 2011 2012 2009 2010 2011 2012 2013 2014
Sun Communities, Inc. 100.00 77.22 129.38 240.63 287.93 333.62 $100.00
 $185.98
 $222.54
 $257.86
 $291.24
 $434.43
SNL US REIT Residential 100.00 74.56 100.03 146.93 168.3 179.07 $100.00
 $146.88
 $168.25
 $179.02
 $173.98
 $238.09
NYSE Market Index 100.00 60.85 78.24 88.88 85.62 99.45 $100.00
 $113.60
 $109.43
 $127.11
 $160.65
 $171.67
SUI Peer Group Index 100.00 77.39 101.56 144.45 166.76 180.26
SUI Peer Group 2013 Index(1)
 $100.00
 $141.85
 $163.64
 $176.97
 $164.77
 $227.55
SUI Peer Group 2014 Index(2)
 $100.00
 $142.14
 $163.63
 $177.38
 $163.82
 $226.40
(1) Includes American Campus Communities, Inc., American Capital Agency Corp., Apartment Investment and Management Company, Associated Estates Realty Corporation, AvalonBay Communities, Inc., BRE Properties, Inc., Camden Property Trust, Education Realty Trust, Inc., Equity Lifestyles Properties, Inc., Equity Residential, Essex Property Trust, Inc., Home Properties, Inc., Mid-America Apartment Communities, Inc., Senior Housing Properties Trust and UDR, Inc.

(2) Includes the same companies as SUI Peer Group 2013 Index, with the exception of BRE Properties Trust, which merged with Essex Properties Trust, Inc. in 2014.


29

SUN COMMUNITIES, INC.

The information included under the heading “Performance Graph” is not to be treated as “soliciting material” or as “filed” with the SEC, and is not incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that is made on, before or after the date of filing of this Form 10-K.

3035

SUN COMMUNITIES, INC.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial and operating information on a historical basis. The historical financial data has been derived from our historical financial statements. The following information should be read in conjunction with the information included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the financial statements and accompanying notes included herein.

Years Ended December 31,Year Ended December 31,
2012 2011 
2010 (a)
 
2009 (a)
 
2008 (a)
2014 
2013 (1)
 
2012 (1)
 
2011 (1)
 
2010 (1)
(In thousands, except for share related data)(In thousands, except for share related data)
OPERATING DATA:                  
Revenues$339,616
 $289,185
 $265,970
 $259,021
 $255,404
$471,675
 $415,222
 $338,952
 $288,600
 $265,407
Net income (loss) attributable to Sun Communities, Inc. common stockholders:                  
Income (loss) from continuing operations4,958
 (1,086) (2,883) (6,099) (29,209)$22,376
 $10,610
 $4,958
 $(1,086) $(2,883)
Net income (loss)4,958
 (1,086) (2,883) (6,302) (34,448)$22,376
 $10,610
 $4,958
 $(1,086) $(2,883)
Income (loss) from continuing operations per share - basic and diluted$0.18
 $(0.05) $(0.15) $(0.33) $(1.61)
Income (loss) from continuing operations per share - basic$0.54
 $0.31
 $0.19
 $(0.05) $(0.15)
Income (loss) from continuing operations per share - diluted$0.54
 $0.31
 $0.18
 $(0.05) $(0.15)
                  
Cash dividends declared per common share (b)
$2.52
 $3.15
 $2.52
 $2.52
 $2.52
Cash distributions declared per common share (2)
$2.60
 $2.52
 $2.52
 $3.15
 $2.52
                  
BALANCE SHEET DATA:                  
Investment property before accumulated depreciation$2,177,305
 $1,794,605
 $1,580,544
 $1,565,700
 $1,549,339
$3,363,917
 $2,489,119
 $2,177,305
 $1,794,605
 $1,580,544
Total assets1,754,117
 1,367,974
 1,165,342
 1,184,234
 1,209,683
$2,937,692
 $1,994,904
 $1,754,628
 $1,367,974
 $1,165,342
Total debt and lines of credit1,453,501
 1,397,225
 1,258,139
 1,253,907
 1,229,571
$1,832,087
 $1,492,820
 $1,453,501
 $1,397,225
 $1,258,139
Total stockholders’ equity (deficit)212,990
 (100,655) (132,384) (111,308) (59,882)$940,152
 $383,541
 $199,457
 $(114,188) $(145,047)
                  
OTHER FINANCIAL DATA:                  
Net operating income (NOI) (c) from:
         
Net operating income (NOI) (3) from:
         
Real property operations$167,715
 $146,876
 $135,222
 $131,131
 $130,222
$232,478
 $203,176
 $167,715
 $146,876
 $135,222
Home sales and home rentals18,677
 12,954
 12,981
 13,410
 12,051
$29,341
 $26,620
 $18,677
 $12,954
 $12,981
                  
Funds from operations (FFO) (c)
$92,409
 $73,691
 $62,765
 $56,073
 $26,903
Funds from operations (FFO) (3)
$134,549
 $117,583
 $92,409
 $73,691
 $62,765
Adjustment to FFO4,296
 1,564
 874
 3,419
 30,127
13,807
 3,928
 4,296
 1,564
 874
FFO excluding certain items$96,705
 $75,255
 $63,639
 $59,492
 $57,030
$148,356
 $121,511
 $96,705
 $75,255
 $63,639
                  
FFO per share excluding certain items - fully diluted$3.19
 $3.13
 $2.97
 $2.86
 $2.78
$3.37
 $3.22
 $3.19
 $3.13
 $2.97
(1) Financial information has been revised to reflect certain reclassifications in prior periods to conform to current period presentation.

(a)Financial information has been restated to reflect the reclassification of our cable television service business as a discontinued operation. Additionally, financial information has been restated to reflect certain reclassifications in prior periods to conform to current period presentation.
(b)In 2011, we paid $2.52 in cash dividends per common share and declared $3.15 in dividends per common share.
(c)Refer to Item 7, Supplemental Measures, for information regarding the presentation of the net operating income (“NOI”) financial measure and funds from operations (“FFO”) financial measure.
(2) In 2011, we paid $2.52 in cash distributions per common share and declared $3.15 in distributions per common share.

(3) Refer to Item 7, Supplemental Measures, for information regarding the presentation of the NOI financial measure and FFO financial measure.



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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statementsconsolidated financial statements and Notesnotes thereto included in this Form 10-K.

EXECUTIVE SUMMARY

We are a fully integrated, self-administered and self-managed REIT. We own, operate, and develop manufactured housing and2014 Accomplishments

Completed largest acquisition to date with the first closing of the Green Courte acquisition representing 31 MH communities.
Completed acquisitions of six RV communities concentrated infor an aggregate purchase price of approximately $137.4 million.
Closed on the midwestern, southern, and southeastern United States. Asdisposition of December 31, 2012, we owned and operated a portfolio of 173 developed properties located in 19 states, including 149 manufactured housing communities, 13 RV10 MH communities and recognized a gain on disposition of assets, net of approximately 11$17.7 million.
Increased our Same Site occupancy to 93.2% properties containing both manufactured housing and RV sites.in 2014 from 91.5% in 2013.

We are have beenClosed two underwritten registered public offerings totaling 11.7 million shares of common stock with net proceeds of approximately $562.9 million after deducting offering related expenses.
Increased our annual distribution rate to $2.60 per share in the business2014, an increase of acquiring, operating, developing and expanding manufactured housing and RV communities since 1975. We lease individual sites with utility access for placement of manufactured homes and RVs$0.08 compared to our customers. We are also engaged through SHS$2.52 per share in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance, and cash flows.2013.

Property Operations:

Portfolio Information: Years Ended December 31,
  2012 2011 2010
Occupancy % - Total Portfolio - MH and Perm RV 87.3% 85.3% 84.3%
Occupancy % - Same Site - MH and Perm RV 86.3% 85.5% 84.3%
Funds from operations excluding certain items(1)
 $3.19
 $3.13
 $2.97
NOI(1) - Total Portfolio
 $167,715
 $146,876
 $135,222
NOI(1) - Same Site
 $147,821
 $140,058
 $135,222
Homes Sold 1,742
 1,439
 1,375
Number of Occupied Rental Homes 8,110
 7,047
 6,141
(1)
Refer to Item 7, Supplemental Measures, for information regarding the presentation of the NOI financial measure and funds from operations excluding certain items financial measure.

Occupancy in our Properties as well as our ability to increase rental rates directly affects revenues. Our same siterevenue streams are predominantly derived from customers renting our sites on a long-term basis. Our Same Site properties continue to achieve revenue and occupancy increases which drive continued NOINet Operating Income (“NOI”) growth. Home sales are at their historical high, and we expect to continue to increase the number of homes sold in our portfolio.

Portfolio Information: Year Ended December 31,
  2014 2013 2012
Occupancy % - Total Portfolio - MH and annual RV(1)
 92.6% 89.7% 87.3%
Occupancy % - Same Site - MH and annual RV(1)(2)
 93.2% 91.5% 87.1%
Funds from operations excluding certain items(3)
 $3.37
 $3.22
 $3.19
NOI(3) - Total Portfolio
 $232,478
 $203,176
 $167,715
NOI(3) - Same Site
 $206,744
 $191,938
 $164,041
Homes Sold 1,966
 1,929
 1,742
Number of Occupied Rental Homes 10,973
 9,726
 8,110
(1)  
Occupancy % includes MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.
(2)
Occupancy % excludes recently completed but vacant expansion sites.
(3) Refer to Item 7, Supplemental Measures, for information regarding the presentation of the NOI financial measure and funds from operations excluding
certain items financial measure.















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SUN COMMUNITIES, INC.

Acquisition and Disposition Activity:

We acquired seven manufactured housingDuring the past three years, we have completed acquisitions of 68 properties with over 26,000 sites located in high growth areas and retirement and vacation destinations such as Florida, California and Eastern coastal areas such as Old Orchard Beach, Maine; Cape May, New Jersey; Chesapeake Bay, Virginia and Cape Cod, Massachusetts.

During 2014, we completed eight acquisitions consisting of six RV communities and 33 MH communities:
Property/Portfolio Location Type Total Consideration Number of sites - MH/Annual Number of sites - Transient
Wine Country RV Resort Paso Robles, CA RV $13,199
 
 166
Castaways RV Resort & Campground Worcester County, MD RV $36,102
 7
 362
Seashore Campsites RV & Campground Cape May, NJ RV $23,582
 430
 253
Driftwood Camping Resort Clermont, NJ RV $31,259
 570
 128
Saco/Old Orchard Beach RV Resort Saco, Maine RV $4,133
 
 127
Lake Rudolph Campground & RV Resort Santa Claus, IN RV $29,101
 
 501
Green Courte properties AZ, FL, NY, PA, MT, MI, CO, ME, MN, WI, IL, CA MH $460,683
 9,351
 188
Oak Creek Coarsegold, CA MH $6,015
 198
 

During 2014, we announced our acquisition of the Green Courte properties for a purchase price of $1.3 billion, which is our largest acquisition to date. The Green Courte portfolio includes 59 MH communities comprised of 4,350 developed sites, five RV communities comprisedover 19,000 sites. This acquisition provides us with a portfolio of 1,799 developed sites, and twolarge, well-located high-quality communities with both manufactured housingattractive amenities and RV sites comprisedpotential for occupancy and rent growth. It increases our overall geographic diversification and size of 2,361 developed sites for an aggregate purchase price of approximately $249.3 million, net of approximately $62.8 million of assumed debt encumbering sixour age-restricted portfolio with additional exposure to the sought after Florida and Arizona markets. Approximately, 56% of the acquired properties.communities are located in Florida and 73% are considered age-restricted, adding significant growth to our existing highly-stable age-restricted portfolio.

BesidesThe acquisition was completed in two phases. We acquired 33 properties, which we will operate as 31 communities, on November 26, 2014, and the noted activity in 2012, we acquired 23 communities, or $121.9 million of Properties, net of assumed debt in 2011. remaining 26 properties on January 6, 2015.

We continue to experience an active pipeline of acquisition opportunities and will seek to enhance the growth of the companyCompany through continued selective acquisitions. In December 2014, we announced that we entered into an agreement to purchase six MH communities which is expected to close during the second quarter of 2015, comprised of approximately 3,150 sites located in the Orlando, Florida area and with expansion potential of approximately 380 sites. The transaction is subject to the Company's satisfaction with its due diligence investigation and customary closing conditions, including consent of the existing lenders.

We continually review the properties in our portfolio to ensure that they fit our business objectives. During 2014, we sold 10 MH Properties, and redeployed capital to properties in markets we believe have greater long-term potential. A gain of $17.7 million is recorded in "Gain on disposition of properties, net" in our consolidated statements of operations.

Development Activity:

We have been focused on development and expansion opportunities adjacent to our existing communities, and we have developed nearly 1,400 sites over the past three years. We expanded 354374 sites at three properties in 2012.

2014. The total cost to construct the sites was approximately $11.0 million. We continue to expand our properties utilizing our inventory of owned and entitled land (approximately 7,000 developed sites) and expect to construct approximately 1,300 to 1,400over 800 additional sites in 2013, located primarily in Texas and Colorado which have current occupancies in excess of 95 percent.2015.







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SUN COMMUNITIES, INC.


Capital Activity:

We closed two underwritten registered public offerings during 2014 totaling 7.611.7 million shares of common stock with net proceeds of approximately $289.7 million after deducting offering related expenses.

We closed an underwritten registered public offering of 3.4 million shares of Series A Preferred Stock with net proceeds of approximately $82.2$562.9 million after deducting offering related expenses.

Proceeds from these capital raises allowed for not only the acquisition of properties but also, strengtheninghelp us to maintain our balance sheet by taking measured stepstargeted leverage levels while continuing to de-leverexpand our assets. We have improved our leverage and coverage ratios and may opportunistically access capital markets to improve liquidity and further improve credit metrics in the future.

portfolio.
 
Markets

The following table identifies the Company's largest markets by number of sites:
Major Market Number of Properties Total Sites Percentage of Total Sites
Michigan 70
 24,723
 31.1%
Florida 29
 13,763
 17.3%
Northeast 26
 9,000
 11.3%
Southwest 18
 6,721
 8.4%
Texas 18
 6,628
 8.3%
Indiana 17
 6,212
 7.8%
Ohio 11
 3,664
 4.6%
Other 28
 8,843
 11.1%
TOTAL 217
 79,554
  

A large geographic concentration of our properties continues to be in Michigan, Florida and Texas. Occupancy at our Michigan communities has grown from 85% in 2012 to 93% in 2014, occupancy at our Texas communities has grown from 94% in 2012 to 97% in 2014, while occupancy at our Florida communities has remained consistent at 99%. As a result of our recent acquisitions, we have increased the concentration of our properties located in other areas of the United States, predominantly in high growth areas and retirement and vacation destinations, such as Arizona, California and the Northeastern coastal areas. Several of our acquisitions in these areas have been RV communities. Through our expansion into RV communities, we have experienced strong revenue growth. The age demographic of RV communities is attractive, as the population of retirement age baby boomers in the U.S. is growing. RV communities have become a trending vacation opportunity not only for the retiree population, but as an affordable vacation alternative for families.














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SUN COMMUNITIES, INC.

SUPPLEMENTAL MEASURES

In addition to the results reported in accordance with generally accepted accounting principles in the United States (“GAAP”), we have provided information regarding NOI in the following tables. NOI is derived from revenues minus property operating and maintenance expenses and real estate taxes. We use NOI as the primary basis to evaluate the performance of our operations. A reconciliation of NOI to net income (loss) attributable to Sun Communities, Inc. is included in “Results of Operations” below.

We believe that NOI is helpful to investors and analysts as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We use NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense, and non-property specific expenses such as general and administrative expenses, all of which are significant costs, and therefore, NOI is a measure of the operating performance of our properties rather than of the Company overall.  We believe that these costs included in net income (loss) often have no effect on the market value of our property and therefore limit its use as a performance measure. In addition, such expenses are often incurred at a parent company level and therefore are not necessarily linked to the performance of a real estate asset.

NOI should not be considered a substitute for the reported results prepared in accordance with GAAP. NOI should not be considered as an alternative to net income (loss) as an indicator of our financial performance, or to cash flows as a measure of liquidity; nor is it indicative of funds available for our cash needs, including our ability to make cash distributions.  NOI, as determined and presented by us, may not be comparable to related or similarly titled measures reported by other companies.

We also provide information regarding Funds From Operations (“FFO”).  We consider FFO an appropriate supplemental measure of the financial performance of an equity REIT. Under the National Association of Real Estate Investment Trusts (“NAREIT”) definition, FFO represents net income, excluding extraordinary items (as defined under GAAP), and gain (loss) on sales of depreciable property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Management also uses FFO excluding certain items, a non-GAAP financial measure, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results. A discussion of FFO, FFO excluding certain items, a reconciliation of FFO to net income (loss), and FFO to FFO excluding certain items are included in the presentation of FFO following our “Results of Operations."

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SUN COMMUNITIES, INC.

The following table is a summary of our consolidated financial results which are discussed in more detail in the following paragraphs (in thousands):
  Year Ended December 31,
  2014 2013 2012
Real Property NOI $232,478
 $203,176
 $167,715
Rental Program NOI 70,232
 58,481
 47,084
Home Sales NOI/Gross Profit 13,398
 14,555
 10,229
Site rent from Rental Program (included in Real Property NOI) (54,289) (46,416) (38,636)
NOI/Gross profit 261,819
 229,796
 186,392
Adjustments to arrive at net income:      
Other revenues 20,715
 14,773
 11,455
General and administrative (42,622) (35,854) (28,353)
Transaction costs (18,259) (3,928) (4,296)
Depreciation and amortization (133,726) (110,078) (89,674)
Asset impairment charge (837) 
 
Interest expense (76,981) (76,577) (71,180)
Gain on disposition of properties, net 17,654
 
 
Gain on settlement 4,452
 
 
Provision for state income taxes (219) (234) (249)
Distributions from affiliate 1,200
 2,250
 3,900
Net income 33,196
 20,148
 7,995
Less:  Preferred return to A-1 preferred OP units 2,654
 2,598
 2,329
Less: Preferred return to A-3 preferred OP units 181
 166
 
Less: Preferred return to A-4 preferred OP units 100
 
 
Less:  Amounts attributable to noncontrolling interests 1,752
 718
 (318)
Net income attributable to Sun Communities, Inc. 28,509
 16,666
 5,984
Less: Preferred Stock Distributions 6,133
 6,056
 1,026
Net income attributable to Sun Communities, Inc. common stockholders $22,376
 $10,610

$4,958


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SUN COMMUNITIES, INC.

RESULTS OF OPERATIONS

We report operating results under two segments: Real Property Operations and Home Sales and Rentals.  The Real Property Operations segment owns, operates, and develops MH communities and RV communities throughout the United States and is in the business of acquiring, operating, and expanding MH and RV communities.  The Home Sales and Rentals segment offers manufactured home sales and leasing services to tenants and prospective tenants of our communities.  We evaluate segment operating performance based on NOI and gross profit.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2014 AND 2013

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio for the years ended December 31, 2014 and 2013:
  Year Ended December 31,
Financial Information (in thousands) 2014 2013 Change % Change
Income from Real Property $357,793
 $313,097
 $44,696
 14.3%
Property operating expenses:        
Payroll and benefits 30,107
 26,750
 3,357
 12.5%
Legal, taxes, & insurance 5,089
 4,769
 320
 6.7%
Utilities 41,275
 36,071
 5,204
 14.4%
Supplies and repair 13,535
 11,213
 2,322
 20.7%
Other 11,128
 8,834
 2,294
 26.0%
Real estate taxes 24,181
 22,284
 1,897
 8.5%
Property operating expenses 125,315
 109,921
 15,394
 14.0%
Real Property NOI $232,478
 $203,176
 $29,302
 14.4%

  As of December 31,
Other Information 2014 2013 Change
Number of properties 217
 188
 29
Developed sites 79,554
 69,789
 9,765
Occupied sites (1) (2)
 65,340
 55,459
 9,881
Occupancy % (1)
 92.6% 89.7% 2.9%
Weighted average monthly site rent - MH $458
 $445
 $13
Weighted average monthly site rent - RV (3)
 $391
 $376
 $15
Weighted average monthly site rent - Total $450
 $436
 $14
Sites available for development 6,987
 6,339
 648
(1)   Occupied sites and occupancy % include MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.

(2)  Occupied sites include 9,779 sites acquired during 2014 and 2,480 sites acquired in 2013.

(3) Weighted average rent pertains to annual RV sites and excludes transient RV sites.

The 14.4% growth in Real Property NOI consists of $14.5 million from newly acquired properties and $14.8 million from our Same Site properties as detailed below.


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SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME SITE

A key management tool used when evaluating performance and growth of our properties is a comparison of "Same Site" communities. Same Site communities consist of properties owned and operated throughout 2014 and 2013.  The Same Site data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations. The Same Site data in this Form 10-K includes all properties acquired prior to December 31, 2012 and which we have owned and operated continuously since January 1, 2013.

In order to evaluate the growth of the Same Site communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Site portfolio is the reclassification of water and sewer revenues from income from real property to utilities.  A significant portion of our utility charges are re-billed to our residents. We reclassify these amounts to reflect the utility expenses associated with our Same Site portfolio net of recovery.

The following tables reflect certain financial and other information for our Same Site communities for the years ended December 31, 2014 and 2013:
  Year Ended December 31,
Financial Information (in thousands) (1)
 2014 2013 Change % Change
Income from Real Property $291,720
 $273,574
 $18,146
 6.6 %
Property operating expenses:        
Payroll and benefits 22,585
 22,918
 (333) (1.5)%
Legal, taxes, & insurance 4,630
 4,390
 240
 5.5 %
Utilities 16,593
 15,620
 973
 6.2 %
Supplies and repair 11,396
 10,222
 1,174
 11.5 %
Other 8,354
 7,610
 744
 9.8 %
Real estate taxes 21,418
 20,876
 542
 2.6 %
Property operating expenses 84,976
 81,636
 3,340
 4.1 %
Real Property NOI $206,744
 $191,938
 $14,806
 7.7 %

(1)    Excludes 10 properties that were disposed during 2014 (refer to Note 2 to our consolidated financial statements).

  As of December 31,
Other Information (1)
 2014 2013 Change
Number of properties 163
 163
 
Developed sites 61,734
 61,141
 593
Occupied sites (2)
 52,831
 51,119
 1,712
Occupancy % (2) (3)
 93.2% 91.5% 1.7%
Weighted average monthly site rent - MH $461
 $446
 $15
Weighted average monthly site rent - RV (4)
 $413
 $405
 $8
Weighted average monthly site rent - Total $456
 $442
 $14
Sites available for development 5,823
 6,339
 (516)
(1)
Excludes 10 properties that were disposed during 2014 (refer to Note 2 to our consolidated financial statements).
(2)  
Occupied sites and occupancy % include MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.
(3)
Occupancy % excludes recently completed but vacant expansion sites.
(4)
Weighted average rent pertains to annual RV sites and excludes transient RV sites.


The 7.7% growth in NOI is primarily due to increased revenues of $18.1 million partially offset by a $3.3 million increase in expenses.

Income from real property revenue consists of MH and RV site rent, and miscellaneous other property revenues. The 6.6% growth in income from real property was due to a combination of factors. Revenue from our MH and RV portfolio increased $17.1 million due to weighted average rental rate increases of 3.2%and the increased number of occupied home sites. This growth in revenue was partially offset by rent concessions offered to new residents and current residents converting from home renters to home owners.  Additionally, other revenues increased $1.1 million primarily due to increases in late fees and insufficient fund charges, month to month fees, application fees, trash income and cable television royalties.

Property operating expenses increased approximately $3.3 million, or 4.1%, compared to 2013. Of that increase, supplies and repair increased $1.2 million, of which approximately $0.5 million was primarily related to weather related maintenance and repair

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SUN COMMUNITIES, INC.

costs resulting from extreme temperatures experienced in certain areas of the country during the first part of 2014, $0.4 million was related to lawn services and tree trimming and removal and $0.2 million was related to general community maintenance and vehicle maintenance. Utilities increased $1.0 million primarily as a result of increased gas, electric and trash removal costs. Real estate taxes increased by $0.5 million, and other expenses increased by $0.7 million primarily due to increases in bad debt expense and miscellaneous expenses such as software maintenance expense and bank service and credit card processing charges.


HOME SALES AND RENTALS

We acquire pre-owned and repossessed manufactured homes generally located within our communities from lenders and dealers at substantial discounts.  We lease or sell these value priced homes to current and prospective residents.  We also purchase new homes to lease and sell to current and prospective residents.  

The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2014 and 2013 (in thousands, except for statistical information):
  Year Ended December 31,
Financial Information 2014 2013 Change % Change
New home sales $9,464
 $6,645
 $2,819
 42.4 %
Pre-owned home sales 44,490
 48,207
 (3,717) (7.7)%
Revenue from homes sales 53,954
 54,852
 (898) (1.6)%
New home cost of sales 7,977
 5,557
 2,420
 43.5 %
Pre-owned home cost of sales 32,579
 34,740
 (2,161) (6.2)%
Cost of home sales 40,556
 40,297
 259
 0.6 %
NOI / Gross profit $13,398
 $14,555
 $(1,157) (7.9)%
         
Gross profit – new homes $1,487
 $1,088
 $399
 36.7 %
Gross margin % – new homes 15.7% 16.4% (0.7)% 

Gross profit – pre-owned homes $11,911
 $13,467
 $(1,569) (11.7)%
Gross margin % – pre-owned homes 26.8% 27.9% (1.1)% 

         
Statistical Information        
Home sales volume:        
New home sales 113
 85
 28
 32.9 %
Pre-owned home sales 1,853
 1,844
 9
 0.5 %
Total homes sold 1,966
 1,929
 37
 1.9 %

Home Sales NOI/Gross profit increased $0.4 million on new home sales and decreased $1.6 million on pre-owned home sales. The increased profit on new home sales is primarily due to an increase in volume of home sales. The decreased profit on pre-owned home sales is primarily a result of decreased per unit selling prices in 2014.




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SUN COMMUNITIES, INC.


The following table reflects certain financial and other information for our Rental Program for the years ended December 31, 2014 and 2013 (in thousands, except for statistical information):

  Year Ended December 31,
Financial Information 2014 2013 Change % Change
Rental home revenue $39,213
 $32,500
 $6,713
 20.7 %
Site rent from Rental Program (1)
 54,289
 46,416
 7,873
 17.0 %
Rental Program revenue 93,502
 78,916
 14,586
 18.5 %
Expenses        
Commissions 2,607
 2,507
 100
 4.0 %
Repairs and refurbishment 11,068
 9,411
 1,657
 17.6 %
Taxes and insurance 5,286
 4,446
 840
 18.9 %
Marketing and other 4,309
 4,071
 238
 5.8 %
Rental Program operating and maintenance 23,270
 20,435
 2,893
 14.2 %
Rental Program NOI $70,232
 $58,481
 $11,751
 20.0 %
         
Other Information        
Number of occupied rentals, end of period 10,973
 9,726
 1,247
 12.8 %
Investment in occupied rental homes $429,605
 $355,789
 $73,816
 20.7 %
Number of sold rental homes 799
 924
 (125) (13.5)%
Weighted average monthly rental rate $822
 $796
 $26
 3.3 %
(1)   The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

The 20.0% growth in NOI is primarily as a result of the increased number of residents participating in the Rental Program and from increased monthly rental rates as indicated in the table above. We renew approximately 60% of our rental home leases primarily at current market rates or above existing rates.

The increase in operating and maintenance expense of $2.9 million was primarily a result of increased repair and refurbishment expenses of $1.7 million, of which $0.9 million was due to increased refurbishment costs related to occupant turnover and $0.8 million was due to increased repair costs on occupied home rentals. In addition, insurance and personal property and use taxes increased $0.8 million due to the additional number of homes in the Rental Program and bad debt expense increased $0.6 million, partially offset by a decrease in advertising expense of $0.4 million.


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SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

The following table summarizes other income and expenses for the years ended December 31, 2014 and 2013 (amounts in thousands):
  Year Ended December 31,
  2014 2013 Change % Change
Ancillary revenues, net $5,217
 $1,151
 $4,066
 353.3 %
Interest income $14,462
 $13,073
 $1,389
 10.6 %
Brokerage commissions and other revenues $1,036
 $549
 $487
 88.7 %
Real property general and administrative $31,769
 $25,941
 $5,828
 22.5 %
Home sales and rentals general and administrative $10,853
 $9,913
 $940
 9.5 %
Transaction costs $18,259
 $3,928
 $14,331
 364.8 %
Depreciation and amortization $133,726
 $110,078
 $23,648
 21.5 %
Asset impairment charge $837
 $
 $837
 N/A
Interest expense $76,981
 $76,577
 $404
 0.5 %
Gain on disposition of properties, net $17,654
 $
 $17,654
 N/A
Gain on settlement $4,452
 $
 $4,452
 N/A
Distributions from affiliates $1,200
 $2,250
 $(1,050) (46.7)%

Ancillary revenues, net increased $4.1 million primarily related to increased vacation rental income of $3.2 million and increased merchandise income. The increased merchandise income was primarily a result of our acquisition of six RV communities during 2014 and a full year of activity for the 14 RV communities acquired in 2013.

Interest income increased $1.4 million primarily due to an increase in interest income from collateralized receivables of $1.2 million.

Real property general and administrative expenses increased $5.8 million primarily due to increased salaries, wages and bonus expense of $2.3 million as a result of our acquisitions and increased headcount year over year, increased deferred compensation of $1.7 million due to awards of restricted stock to our executives and key employees, increased legal expense of $0.7 million and increased other expenses of $1.2 million primarily related to increased consulting fees, director fees, corporate office rent and software support and maintenance fees.

Transaction costs increased primarily due to due diligence and other transaction costs related to the Green Courte acquisition (see Note 2).

Depreciation and amortization expenses increased as a result of additional depreciation and amortization of $16.2 million primarily related to our newly acquired properties (See Note 2 to our financial statements), $5.7 million related to depreciation on investment property for use in our rental program, $2.3 million related to depreciation on investment property for our vacation rental property, and $1.7 million related to the amortization of in place leases and promotions, partially offset by $2.6 million related to the write off of the remaining net book value for assets replaced during the year.

Asset impairment charge of $0.8 million is a result of an impairment loss recorded on a long-lived asset for our MH and RV community in La Feria, Texas during 2014. We did not recognize any impairment losses in 2013.

Gain on disposition of properties, net of$17.7 million is a result of the sale of 10 MH properties during the year ended December 31, 2014 (see Note 2). We did not dispose of any properties in 2013.

Gain on settlement of $4.5 million is the result of a settlement reached with the selling entities of 10 RV communities that we acquired in February 2013. The settlement was related to various warranties, representations and indemnities included in the agreements under which we acquired the RV communities, including a covenant made by the sellers related to the 2012 revenue of the acquired properties. No such gain was recorded in 2013.


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SUN COMMUNITIES, INC.

Distributions from affiliate decreased $1.1 million. We suspended equity accounting in 2010 on our affiliate, Origen, as our investment balance is zero.  The income recorded in 2014 is distribution income. The amount of the distribution is determined by Origen on a quarterly basis. See Note 7 to our financial statements.

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SUN COMMUNITIES, INC.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2013 AND 2012

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio for the year endedDecember 31, 2013 and 2012:
  Year Ended December 31,
Financial Information (in thousands) 2013 2012 Change % Change
Income from Real Property $313,097
 $255,761
 $57,336
 22.4%
Property operating expenses:        
Payroll and benefits 26,750
 19,410
 7,340
 37.8%
Legal, taxes, & insurance 4,769
 3,216
 1,553
 48.3%
Utilities 36,071
 29,445
 6,626
 22.5%
Supplies and repair 11,213
 10,085
 1,128
 11.2%
Other 8,834
 6,683
 2,151
 32.2%
Real estate taxes 22,284
 19,207
 3,077
 16.0%
Property operating expenses 109,921
 88,046
 21,875
 24.8%
Real Property NOI $203,176
 $167,715
 $35,461
 21.1%

  As of December 31,
Other Information 2013 2012 Change
Number of properties 188
 173
 15
Developed sites 69,789
 63,697
 6,092
Occupied sites (1) (2)
 55,459
 50,412
 5,047
Occupancy % (1)
 89.7% 87.3% 2.4%
Weighted average monthly site rent - MH (3)
 $445
 $433
 $12
Weighted average monthly site rent - RV (3)
 $376
 $392
 $(16)
Weighted average monthly site rent - Total $436
 $430
 $6
Sites available for development 6,339
 6,969
 (630)
(1)      Occupied sites and occupancy % include MH and annual RV sites and excludes transient RV sites.

(2)
Occupied sites include 2,480 sites acquired in 2013 and 4,989 sites acquired during 2012.
(3)
Weighted average rent pertains to annual RV sites and excludes transient RV sites.

The 21.1% growth in NOI was primarily due to $25.9 million from newly acquired properties and $9.6 million from Same Site properties as detailed below.

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SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME SITE

The Same Site information in this comparison of the years ended December 31, 2013 and 2012 includes all properties acquired on or prior to December 31, 2011 and which were owned and operated by the Company during the years ended December 31, 2013 and 2012.

  Year Ended December 31,
Financial Information (in thousands) 2013 2012 Change % Change
Income from Real Property $245,703
 $233,858
 $11,845
 5.1 %
Property operating expenses:        
Payroll and benefits 19,349
 18,522
 827
 4.5 %
Legal, taxes, & insurance 4,101
 3,125
 976
 31.2 %
Utilities 13,624
 13,279
 345
 2.6 %
Supplies and repair 9,279
 9,687
 (408) (4.2)%
Other 6,706
 6,421
 285
 4.4 %
Real estate taxes 18,970
 18,783
 187
 1.0 %
Property operating expenses 72,029
 69,817
 2,212
 3.2 %
Real Property NOI $173,674
 $164,041
 $9,633
 5.9 %

  As of December 31,
Other Information 2013 2012 Change
Number of properties 159
 159
 
Developed sites 55,590
 55,006
 584
Occupied sites (1)
 46,908
 45,224
 1,684
Occupancy % (1) (2)
 88.9% 87.1% 1.8%
Weighted average monthly rent per site - MH (3)
 $445
 $433
 $12
Weighted average monthly rent per site - RV (3)
 $405
 $392
 $13
Weighted average month rent per site - Total $442
 $430
 $12
Sites available for development 5,631
 6,104
 (473)
(1)      Occupied sites and occupancy % include MH and annual RV sites, and excludes transient RV sites.

(2)
Occupancy % excludes recently completed but vacant expansion sites.

(3)
Weighted average rent pertains to annual RV sites and excludes transient RV sites.

The 5.9% growth in NOI is primarily due to increased revenues of $11.8 million partially offset by a $2.2 million increase in expenses.

Income from real property revenue consists of MH and RV site rent, and miscellaneous other property revenues. The 5.1% growth in income from real property was due to a combination of factors. Revenue from our MH and RV portfolio increased $10.7 million due to weighted average rental rate increases of 3.1% and due to the increased number of occupied home sites. This growth in revenue was partially offset by rent concessions offered to new residents and current residents converting from home renters to home owners.  Additionally, other revenues increased $1.1 million primarily due to increases in late fees and insufficient fund charges, cable television royalties, property tax revenues and utility income.

Property operating expenses increased approximately $2.2 million, or 3.2%, compared to 2012. Of that increase, payroll and benefits increased by $0.8 million primarily as a result of increased health insurance, workers compensation costs and salary increases. Legal, taxes and insurance increased $1.0 million primarily due to $0.6 million of increased property and casualty insurance and $0.4 million of increased legal fees. Utility expense increased $0.3 million primarily as a result of the increased gas and electric costs. These increases were partially offset by a decrease in supplies and repairs of $0.4 million, which was primarily due to decreased lawn services and tree trimming/removal expense, decreased maintenance and repair expenses for water, irrigation and electric systems and decreased maintenance expenses for our clubhouses, garages, sheds and carports.


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SUN COMMUNITIES, INC.

HOME SALES AND RENTALS

We acquire pre-owned and repossessed manufactured homes generally located within our communities from lenders and dealers at substantial discounts.  We lease or sell these value priced homes to current and prospective residents.  We also purchase new homes to lease and sell to current and prospective residents.  

The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2013 and 2012 (in thousands, except for statistical information):
  Year Ended December 31,
Financial Information 2013 2012 Change % Change
New home sales $6,645
 $5,380
 $1,265
 23.5%
Pre-owned home sales 48,207
 39,767
 8,440
 21.2%
Revenue from homes sales 54,852
 45,147
 9,705
 21.5%
New home cost of sales 5,557
 4,553
 1,004
 22.1%
Pre-owned home cost of sales 34,740
 30,365
 4,375
 14.4%
Cost of home sales 40,297
 34,918
 5,379
 15.4%
NOI / Gross profit $14,555
 $10,229
 $4,326
 42.3%
         
Gross profit – new homes $1,088
 $827
 $261
 31.6%
Gross margin % – new homes 16.4% 15.4% 1.0% 
Gross profit – pre-owned homes $13,467
 $9,402
 $4,065
 43.2%
Gross margin % – pre-owned homes 27.9% 23.6% 4.3% 
         
Statistical Information        
Home sales volume:        
New home sales 85
 76
 9
 11.8%
Pre-owned home sales 1,844
 1,666
 178
 10.7%
Total homes sold 1,929
 1,742
 187
 10.7%

Home Sales NOI/Gross profit increased $0.3 million on new home sales and $4.1 million on preowned home sales. The increased profits are due to both an increase in volume of home sales and an increase in average selling price.








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SUN COMMUNITIES, INC.

The following table reflects certain financial and other information for our Rental Program for the years ended December 31, 2013 and 2012 (in thousands, except for statistical information):

  Year Ended December 31,
Financial Information 2013 2012 Change % Change
Rental home revenue $32,500
 $26,589
 $5,911
 22.2 %
Site rent from Rental Program (1)
 46,416
 38,636
 7,780
 20.1 %
Rental Program revenue 78,916
 65,225
 13,691
 21.0 %
Expenses        
Commissions 2,507
 2,207
 300
 13.6 %
Repairs and refurbishment 9,411
 9,002
 409
 4.5 %
Taxes and insurance 4,446
 3,467
 979
 28.2 %
Marketing and other 4,071
 3,465
 606
 17.5 %
Rental Program operating and maintenance 20,435
 18,141
 2,294
 12.6 %
Rental Program NOI $58,481
 $47,084
 $11,397
 24.2 %
         
Other Information        
Number of occupied rentals, end of period 9,726
 8,110
 1,616
 19.9 %
Investment in occupied rental homes $355,789
 $287,261
 $68,528
 23.9 %
Number of sold rental homes 924
 953
 (29) (3.0)%
Weighted average monthly rental rate $796
 $782
 $14
 1.8 %
(1)  The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

The 24.2% growth in NOI is primarily as a result of the increased number of residents participating in the Rental Program and from increased monthly rental rates as indicated in the table above.

The increase in operating and maintenance expense of $2.3 million was a result of several factors.  Personal property and use taxes increased $0.6 million and property and casualty insurance increased $0.4 million, both due to the additional homes in the Rental Program, and bad debt expense increased $0.5 million. Commissions increased $0.3 million, primarily due to the increased number of new leases.







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SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

The following table summarizes other income and expenses for the years ended December 31, 2013 and 2012 (amounts in thousands):
  Year Ended December 31,
  2013 2012 Change % Change
Ancillary revenues, net $1,151
 $(180) $1,331
 (739.4)%
Interest income $13,073
 $11,018
 $2,055
 18.7 %
Brokerage commissions and other revenues $549
 $617
 $(68) (11.0)%
Real property general and administrative $25,941
 $20,037
 $5,904
 29.5 %
Home sales and rentals general and administrative $9,913
 $8,316
 $1,597
 19.2 %
Transaction costs $3,928
 $4,296
 $(368) (8.6)%
Depreciation and amortization $110,078
 $89,674
 $20,404
 22.8 %
Interest expense $76,577
 $71,180
 $5,397
 7.6 %
Distributions from affiliates $2,250
 $3,900
 $(1,650) (42.3)%

Ancillary revenues, net increased $1.3 million primarily related to increases in our vacation rental income and golf course, restaurant and pro shop income, as a result of our acquisition of 14 RV communities during 2013.

Interest income increased primarily due to increases in interest income of $1.3 million from collateralized receivables and $0.7 million from installment note receivables.

Real property general and administrative costs increased primarily due to increased salaries, wages and bonus expense of $2.1 million as a result of our acquisitions and increased headcount year over year, increased health insurance and workers compensation costs of $0.5 million, increased deferred compensation of $1.7 million due to awards of restricted stock to our executives and key employees, increased other expenses of $0.9 million related to training and development, travel, consulting fees, software support and maintenance expenses, office expenses and rent, increased human resources expense of $0.3 million primarily related to pre-employment costs and an update to our payroll processing software and increased legal expense of $0.3 million.

Home sales and rentals general and administrative costs increased primarily due to increased salary expense of $0.5 million, increased health insurance costs of $0.2 million, increased commissions on home sales of $0.3 million, increased advertising expense of $0.3 million and increased utility expense of $0.2 million.

Depreciation and amortization costs increased as a result of additional depreciation and amortization of $9.5 million primarily related to our newly acquired properties (See Note 2 to our financial statements), $6.9 million related to depreciation on investment property for use in our rental program, $2.3 million related to the amortization of in place leases and promotions, and $1.7 million related to the write off of the remaining net book value for assets replaced during the year.

Interest expense on debt, including interest on mandatorily redeemable debt, increased primarily due to an increase of $1.8 million in our mortgage interest due to debt associated with the acquired properties (See Note 2 to our financial statements), an increase of $1.5 million in amortized financing costs, an increase of $1.3 million in interest expense on our secured borrowing arrangements, and an increase of $0.9 million in interest on our lines of credit, partially offset by a decrease in preferred OP unit interest expense.

Distributions from affiliate decreased approximately $1.7 million. We suspended equity accounting in 2010 on our affiliate, Origen, as our investment balance is zero.  The income recorded in 2013 and 2012 is distribution income. The amount of the distribution is determined by Origen on a quarterly basis. See Note 7 to our financial statements.



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SUN COMMUNITIES, INC.

FUNDS FROM OPERATIONS

We provide information regarding FFO as a supplemental measure of operating performance.  FFO is defined by NAREIT as net income (loss) (computed in accordance GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Due to the variety among owners of identical assets in similar condition (based on historical cost accounting and useful life estimates), we believe excluding gains and losses related to sales of previously depreciated operating real estate assets, excluding impairment and excluding real estate asset depreciation and amortization provides a better indicator of our operating performance.  FFO is a useful supplemental measure of our operating performance because it reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from net income (loss).  Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management, the investment community, and banking institutions routinely use FFO, together with other measures, to measure operating performance in our industry. Further, management uses FFO for planning and forecasting future periods.

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, FFO is not intended as a measure of a REIT’s ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO only provides investors with an additional performance measure. FFO is compiled in accordance with its interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.


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SUN COMMUNITIES, INC.

The following table reconciles net income to FFO data for diluted purposes for the years ended December 31, 2014, 2013 and 2012 (in thousands):
  Year Ended December 31,
  2014 2013 2012
Net income attributable to Sun Communities, Inc. common stockholders $22,376
 $10,610
 $4,958
Adjustments:      
Preferred return to Series A-1 preferred OP units 
 2,598
 2,329
Preferred return to Series A-3 preferred OP units 
 166
  
Amounts attributable to noncontrolling interests 1,086
 718
 (318)
Preferred distribution to Series A-4 Preferred Stock 76
 
 
Preferred return to Series A-3 preferred OP units 181
 
 
Preferred return to Series A-4 preferred OP units 100
 
 
Depreciation and amortization 134,252
 111,083
 90,577
Asset impairment charge 837
 
 
Gain on disposition of properties, net (17,654) 
  
Gain on disposition of assets (6,705) (7,592) (5,137)
Funds from operations ("FFO") $134,549
 $117,583
 $92,409
Adjustments:      
Transaction costs 18,259
 3,928
 4,296
Gain on settlement (4,452) 
 
FFO excluding certain items $148,356
 $121,511
 $96,705
       
Weighted average common shares outstanding: 41,337
 34,228
 26,970
Add:      
Common stock issuable upon conversion of stock options 16
 15
 17
Restricted stock 237
 167
 138
Series A-4 Preferred Stock 215
 
 
Common OP units 2,114
 2,069
 2,071
Common stock issuable upon conversion of Series A-4 preferred OP units 28
 
 
Common stock issuable upon conversion of Series A-3 preferred OP units 75
 67
 
Common stock issuable upon conversion of Series A-1 preferred OP units 
 1,111
 1,111
Weighted average common shares outstanding - fully diluted 44,022
 37,657
 30,307
       
FFO per share - fully diluted $3.06
 $3.11
 $3.05
FFO per share excluding certain items - fully diluted $3.37
 $3.22
 $3.19


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SUN COMMUNITIES, INC.

LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unitholders of the Operating Partnership, capital improvements to properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment.

Subject to market conditions, we intend to continue to look for opportunities to expand our development pipeline and acquire existing communities. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our secured credit facility, secured debt financing transactions, and the use of debt and equity offerings under our automatic shelf registration statement.

We completed eight acquisitions in 2014 in which we acquired 39 properties in total, 33 MH communities and six RV communities. See our Executive Summary above and Note 2 to our financial statements for details on the acquisitions, and Note 9 to our financial statements for related debt transactions.  We will continue to evaluate acquisition opportunities that meet our criteria for acquisition. Should additional investment opportunities arise in 2015, we may finance the acquisitions through secured financing, draws on our credit facilities, the assumption of existing debt on the properties and/or the issuance of certain equity securities.

During the year ended December 31, 2014, we invested $52.9 million in the acquisition of homes intended for the Rental Program net of proceeds from third party financing from homes sales.  Expenditures for 2015 will be dependent upon the condition of the markets for repossessions and new home sales, as well as rental homes. We finance a portion of our new home purchases with a $12.0 million floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third party financing of our home sales, available floor plan financing, operating cash flows and working capital available on our secured lines of credit.

Our cash flow activities are summarized as follows (in thousands):

  Year Ended December 31,
  2014 2013 2012
Net Cash Provided by Operating Activities $133,320
 $114,683
 $87,251
Net Cash Used in Investing Activities $(550,705) $(352,412) $(375,219)
Net Cash Provided by Financing Activities $496,091
 $212,974
 $311,619

Operating Activities

Cash and cash equivalents increased by $78.7 million from $4.8 million as of December 31, 2013, to $83.5 million as of December 31, 2014. Net cash provided by operating activities increased by $18.6 million from $114.7 million for the year ended December 31, 2013 to $133.3 million for the year ended December 31, 2014.

Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes and (e) current volatility in economic conditions and the financial markets.  See Part I, Item 1A, “Risk Factors” in this 10-K.

Investing Activities

Net cash used in investing activities was $550.7 million for the year ended December 31, 2014, compared to $352.4 million for the year ended December 31, 2013. The increase is primarily due to increased cash invested into acquisitions during 2014, of which approximately $283.2 million is related to the first closing of our acquisition of the Green Courte properties during the fourth quarter. Additionally, we made payments for deposits on pending acquisitions scheduled for 2015 (see Note 21 to our financial statements). These items are partially offset by proceeds related to the disposition of 10 of our MH properties during 2014. We did not dispose of any properties during 2013. Net cash used in investing activities during 2013 includes an investment

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SUN COMMUNITIES, INC.

in a note receivable, which was extinguished in a net cash settlement during the acquisition of the properties the note was attributable to. No such investment was made during 2014.

Financing Activities

Net cash provided by financing activities was $496.1 million for the year ended December 31, 2014, compared to $213.0 million for the year ended December 31, 2013. The increase is primarily related to increased net proceeds received from the issuance of additional shares of common stock. We completed two underwritten registered public offerings during 2014 for net proceeds of $562.9 million and completed one underwritten registered public offering during 2013 for net proceeds of $249.5 million. Additionally, due to the recent refinancing activity of our mortgage debt (see Note 9 to our financial statements), we increased proceeds from and decreased payments on other debt as compared to 2013. These items are partially offset by increased net payments on our lines of credit and increased distributions to our stockholders and OP unit holders, as a result of our increase in distribution per share and number of shares outstanding in 2014.

We continually evaluate our debt maturities, and, based on management's current assessment, believe we have viable financing and refinancing alternatives that will not materially adversely impact our expected financial results. We continue to pursue borrowing opportunities with a variety of different lending institutions and have noticed that, although pricing and loan-to-value ratios remain dependent on specific deal terms, spreads for non-recourse mortgage financing are compressing and loan-to-value ratios are gradually increasing from levels a year ago. The unsecured debt markets are functioning well and credit spreads are at manageable levels. We continue to assess our debt maturities and financing needs in 2014 and beyond to try to best position the Company if current credit market conditions change.

Financial Flexibility

We have a senior secured revolving credit facility (the "Facility") with a maximum borrowing capacity of $350.0 million, subject to certain borrowing base calculations, and a built in accordion allowing for up to $250.0 million in additional borrowings. As of December 31, 2014, we did not have a balance outstanding under the Facility. As of December 31, 2013, we had $178.1 million outstanding under the Facility. Borrowings under the Facility bear interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the Facility, which can range from 1.65% to 2.90%.  During 2014, the highest balance on the Facility was $247.3 million.  The borrowings under the Facility mature May 15, 2017, which date can be extended for one additional year at our option, subject to the satisfaction of certain conditions as defined in the credit agreement. Although the Facility is a committed facility, the financial failure of one or more of the participating financial institutions may reduce the amount of credit available to us.

Our Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but it does reduce the borrowing amount available. At December 31, 2014, we had outstanding letters of credit to back standby letters of credit totaling approximately $3.2 million, leaving approximately $346.8 million available under the Facility.

Pursuant to the terms of the Facility, we are subject to various financial and other covenants. We are currently in compliance with these covenants. The most restrictive financial covenants for the Facility are as follows:
CovenantMust BeAs of 12/31/14
Maximum Leverage Ratio< 68.5%44.3%
Minimum Fixed Charge Coverage Ratio> 1.402.51
Minimum Tangible Net Worth> $1,270,104$1,714,403
Maximum Dividend Payout Ratio< 95.0%72.5%

Market and Economic Conditions
The U.S. rate environment, changes in the Euro area, falling oil prices and turmoil in emerging markets are factors that are influencing financial markets as we move into 2015.  Questions on whether the U.S. economy will sustain the growth indicators it has reported and whether or when the U.S. Federal Reserve will hike its benchmark rate for the first time in 10 years, as well as how much of the Eurozone will remain or fall into recession and what the effect of additional global turmoil will have on the world economy keep economic outlooks tempered. While the U.S. economy looks poised for self-sustaining growth, the global economy is expected to slow. Continued economic uncertainty, both nationally and internationally, causes increased volatility in investor

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confidence thereby creating similar volatility in the availability of both debt and equity capital. If such volatility is experienced in future periods, our industry, business and results of operations may be adversely impacted.

We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our properties. At December 31, 2014, we had 70 unencumbered properties with an estimated market value of $783.0 million, 56 of these properties support the borrowing base for our $350.0 million secured line of credit.  From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain debt financing, or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the manufactured housing community industry at the time, including the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional, and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those  markets could make borrowing more difficult to secure, more expensive, or effectively unavailable.  See “Risk Factors” in Part I, Item 1A.  If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.
Contractual Cash Obligations

Our primary long-term liquidity needs are principal payments on outstanding indebtedness. As of December 31, 2014, our outstanding contractual obligations, including interest expense, were as follows:
    Payments Due By Period
    (In thousands)
Contractual Cash Obligations (1)
 Total Due <1 year 1-3 years 3-5 years After 5 years
Collateralized term loans - FNMA $482,639
 $8,389
 $47,832
 $70,856
 $355,562
Collateralized term loans - FMCC 152,462
 2,376
 5,461
 5,944
 138,681
Collateralized term loans - Life Company 203,615
 25,542
 17,679
 8,237
 152,157
Collateralized term loans - CMBS 799,823
 12,595
 336,310
 16,718
 434,200
Preferred OP Units 45,903
 3,670
 7,570
 
 34,663
Lines of credit 5,794
 5,794
 
 
 
Secured borrowing 123,650
 5,167
 11,974
 14,164
 92,345
 Total principal payments 1,813,886
 63,533
 426,826
 115,919
 1,207,608
           
Interest expense (2)
 604,694
 91,685
 151,133
 123,101
 238,775
Operating leases 14,325
 1,040
 2,175
 2,301
 8,809
 Total contractual obligations $2,432,905
 $156,258
 $580,134
 $241,321
 $1,455,192
(1)Our contractual cash obligations exclude debt premiums/discounts.

(2) Our contractual cash obligation related to interest expense is calculated based on the current debt levels, rates and maturities as of December 31, 2014 (excluding secured borrowings), and actual payments required in future periods may be different than the amounts included above.

As of December 31, 2014, our net debt to enterprise value approximated 34.8% (assuming conversion of all common OP units, A-1 preferred OP units, A-3 preferred OP units, and A-4 preferred OP units to shares of common stock). Our debt has a weighted average maturity of approximately 7.5 years and a weighted average interest rate of 5.2%.

Capital expenditures for the year ended December 31, 2014 and 2013 included recurring capital expenditures of $10.2 million and $14.0 million, respectively. We are committed to the continued upkeep of our properties and therefore do not expect a significant decline in our recurring capital expenditures during 2015.



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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our Consolidated Financial Statements,consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing these financial statements, management has made its best estimate and judgment of certain amounts included in the financial statements. Nevertheless, actual results may differ from these estimates under different assumptions or conditions. Management believes the following significantcritical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements:consolidated financial statements:
    
Investment Property

Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may also include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long-lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long livedlong-lived assets based on future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy, development and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements.

Capitalized Costs

We capitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and construction costs related to the development of new community or expansion sites are capitalized until the property is substantially complete. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized over a seven year period based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method).




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SUN COMMUNITIES, INC.

Notes and Other Receivables

We providemake financing available to purchasers of manufactured homes generally located in our communities. The notes are collateralized by the underlying manufactured home sold. Notes receivable include both installment loans retainedpurchased by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables (See Note 5 to our financial statements for additional information). For purposes of accounting policy, all notes receivable are considered one homogeneous segment, as the notes are typically underwritten using the same requirements and terms. Notes receivable are reported at their outstanding unpaid principal balance adjusted for an allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of the loans.

Past due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash basis until qualifying for return to accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans on a nonaccrual status were immaterial at December 31, 20122014 and 2011.2013. The ability to collect our notes receivable is measured based on current and historical information and events.

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We consider numerous factors including: length of delinquency, estimated costs to lease or sell, and repossession history. Our experience supports a high recovery rate for notes receivable; however there is some degree of uncertainty about the recoverability of our investment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the homes on the notes retained by us and repurchasing the homes on the collateralized receivables, and subsequently selling or leasing these homes to potential residents in our communities. We have established a loan loss reserve based on our estimated unrecoverable costs associated with repossessed/repurchased homes. We estimate our unrecoverable costs to be the repurchase price of the home collateralizing the note receivable plus repair and remarketing costs in excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and is applied to our estimated annual future repossessions to create the allowance for both installment and collateralized notes receivable. See Note 65 to our financial statements for additional information.

We evaluate the collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent more than five to seven days, dependent on state law, we begin the repossession and eviction process simultaneously. This process generally takes 30 to 45 days; due to the short time frame from delinquent loan to repossession we do not evaluate the notesnote receivables for impairments. No loans were considered impaired as of December 31, 20122014 and 2011.2013.

We evaluate the credit quality of our notes receivable at the inception of the receivable. We consider the following factors in order to determine the credit quality of the applicant - rental payment history; home debt to income ratio; loan value to the collateralized asset; total debt to income ratio; length of employment; previous landlord references; and FICO scores.

Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due.

Investment in Affiliates

Investments in affiliates in which we do not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to its operations and major decisions, are accounted for using the equity method of accounting. The carrying value of our investment is adjusted for our proportionate share of the affiliate’s net income or loss and reduced by distributions received. We review the carrying value of our investment in affiliates for other than temporary impairment whenever events or changes in circumstances indicate a possible impairment. Financial condition, operational performance, and other economic trends are some of the factors we consider when we evaluate the existence of impairment indicators. When we have a carrying value of zero for our investment, we suspend the equity method of accounting until such time that the affiliate’s net income equals or exceeds the share of net losses not recognized during the time in which the equity method of accounting was suspended.




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SUN COMMUNITIES, INC.

Revenue Recognition

Rental income attributable to site and home leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants are generally for one year terms but may range from month-to-month to two years and are renewable by mutual agreement from us and the resident, or in some cases, as provided by state statute. Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sales transaction. Interest income on notes receivable is recorded on a level yield basis over the life of the notes. We report certain taxes collected from the resident and remitted to taxing authorities in revenue. These taxes include certain Florida property and fire taxes.

Depreciation and Amortization

Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are 30 years for land improvements and buildings, 10 years for rental homes, seven to 15 years for furniture, fixtures and equipment, and seven years for intangible assets.

Derivative Instruments and HedgingInvesting Activities

We have three derivative contracts consisting of one interest rate swap agreement with a total notional amount of $20.0Net cash used in investing activities was $550.7 million and two interest rate cap agreements with an aggregate notional amount of $162.4 million as offor the year ended December 31, 2012. We do not enter2014, compared to $352.4 million for the year ended December 31, 2013. The increase is primarily due to increased cash invested into derivative instruments for speculative purposes. For those hedges that qualify for cash flow hedge accounting, we adjust our balance sheet on a quarterly basisacquisitions during 2014, of which approximately $283.2 million is related to reflect current fair market valuethe first closing of our derivatives. Changes inacquisition of the fair value of derivativesGreen Courte properties during the fourth quarter. Additionally, we made payments for deposits on pending acquisitions scheduled for 2015 (see Note 21 to our financial statements). These items are recorded in earnings or comprehensive income (loss), as appropriate. The ineffective portion of these hedges are immediately recognized in earningspartially offset by proceeds related to the extent that the change in valuedisposition of a derivative does not perfectly offset the change in value of the instrument being hedged. The effective portion of these hedges are recorded in accumulated other comprehensive income (loss). We use standard market conventions to determine the fair values of derivative instruments, including the quoted market prices or quotes from brokers or dealers for the same or similar instruments. All methods of assessing fair value result in a general approximation of value and such value may never actually be realized.

Income Taxes

We have elected to be taxed as a REIT as defined under Section 856(c) of the Code. In order for us to qualify as a REIT, at least ninety-five percent (95%)10 of our gross income in any year must be derived from qualifying sources. As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level if we distribute at least ninety percent (90%) of our REIT ordinary taxable income to our stockholders. From the time we started paying dividends, we have distributed greater than 100% of our taxable income to our shareholders and intend to continue to do so for the foreseeable future. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.MH properties during 2014. We remain subject to certain state and local taxes on our income and property as well as Federal income and excise taxes on our undistributed income.

We are subject to certain state taxes that are considered income taxes and have certain subsidiaries that are taxed as regular corporations. Deferred tax assets or liabilities are recognized for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and net operating loss carry forwards. Deferred tax assets and liabilities are measured using currently enacted tax rates. A valuation allowance is established if based on available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Recent Accounting Pronouncements

In April 2011, the FASB issued ASU 2011-03, “Reconsideration of Effective Control for Repurchase Agreements” (ASU 2011-03) which amends ASC Topic 860, Transfers and Servicing.  The updated guidance in ASC Topic 860 removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The updated guidance in ASC Topic 860 is effective for the first interim or annual period beginning on or after December 15, 2011.  Early adoption was not permitted.  The adoption of this guidance did not havedispose of any impact on our results of operations or financial condition.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirementsproperties during 2013. Net cash used in U.S. GAAP and IFRSs” (ASU 2011-04) which amends ASC Topic 820, Fair Value Measurement.  The updated guidance in ASC Topic 820 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value andinvesting activities during 2013 includes an investment

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SUN COMMUNITIES, INC.

for disclosing information about fair value measurements.   The updated guidance in ASC Topic 820 is effective during interim and annual periods beginning after December 15, 2011.  Early adoption was not permitted.  The adoption of this guidance did not have any impact on our results of operations or financial condition.

SUPPLEMENTAL MEASURES

In addition to the results reported in accordance with GAAP, we have provided information regarding Net Operating Income (“NOI”) in the following tables. NOI is derived from revenues minus property operating and maintenance expenses and real estate taxes. We use NOI as the primary basis to evaluate the performance of our operations. A reconciliation of NOI to net income (loss) attributable to Sun Communities, Inc. is included in “Results of Operations” below.

We believe that NOI is helpful to investors and analysts as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We use NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense, and non-property specific expenses such as general and administrative expenses, all of which are significant costs, and therefore, NOI is a measure of the operating performance of our properties rather than of the Company overall.  We believe that these costs included in net income (loss) often have no effect on the market value of our property and therefore limit its use as a performance measure. In addition, such expenses are often incurred at a parent company level and therefore are not necessarily linked to the performance of a real estate asset.

NOI should not be considered a substitute for the reported results prepared in accordance with GAAP. NOI should not be considered as an alternative to net income (loss) as an indicator of our financial performance, or to cash flows as a measure of liquidity; nor is it indicative of funds available for our cash needs, including our ability to make cash distributions.  NOI, as determined and presented by us, may not be comparable to related or similarly titled measures reported by other companies.

We also provide information regarding Funds From Operations (“FFO”).  We consider FFO an appropriate supplemental measure of the financial performance of an equity REIT. Under the National Association of Real Estate Investment Trusts (“NAREIT”) definition, FFO represents net income, excluding extraordinary items (as defined under GAAP), and gain (loss) on sales of depreciable property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Management also uses FFO excluding certain items, a non-GAAP financial measure, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results. A discussion of FFO, FFO excluding certain items, a reconciliation of FFO to net income (loss), and FFO to FFO excluding certain items are included in the presentation of FFO in “Results of Operations” following the “Comparison of the Years Ended December 31, 2012 and 2011”.



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RESULTS OF OPERATIONSin a note receivable, which was extinguished in a net cash settlement during the acquisition of the properties the note was attributable to. No such investment was made during 2014.

Financing Activities

Net cash provided by financing activities was $496.1 million for the year ended December 31, 2014, compared to $213.0 million for the year ended December 31, 2013. The increase is primarily related to increased net proceeds received from the issuance of additional shares of common stock. We completed two underwritten registered public offerings during 2014 for net proceeds of $562.9 million and completed one underwritten registered public offering during 2013 for net proceeds of $249.5 million. Additionally, due to the recent refinancing activity of our mortgage debt (see Note 9 to our financial statements), we increased proceeds from and decreased payments on other debt as compared to 2013. These items are partially offset by increased net payments on our lines of credit and increased distributions to our stockholders and OP unit holders, as a result of our increase in distribution per share and number of shares outstanding in 2014.

We report operating results under two segments: Real Property Operationscontinually evaluate our debt maturities, and, Home Sales and Rentals.  The Real Property Operations segment owns, operates, and develops manufactured housing communities and RV communities concentrated in the midwestern, southern, and southeastern United States and is in the business of acquiring, operating, and expanding manufactured housing and RV communities.  The Home Sales and Rentals segment offers manufactured home sales and leasing services to tenants and prospective tenants of our communities.  We evaluate segment operating performance based on NOImanagement's current assessment, believe we have viable financing and Gross Profit.refinancing alternatives that will not materially adversely impact our expected financial results. We continue to pursue borrowing opportunities with a variety of different lending institutions and have noticed that, although pricing and loan-to-value ratios remain dependent on specific deal terms, spreads for non-recourse mortgage financing are compressing and loan-to-value ratios are gradually increasing from levels a year ago. The unsecured debt markets are functioning well and credit spreads are at manageable levels. We continue to assess our debt maturities and financing needs in 2014 and beyond to try to best position the Company if current credit market conditions change.

The accounting policiesFinancial Flexibility

We have a senior secured revolving credit facility (the "Facility") with a maximum borrowing capacity of $350.0 million, subject to certain borrowing base calculations, and a built in accordion allowing for up to $250.0 million in additional borrowings. As of December 31, 2014, we did not have a balance outstanding under the segments areFacility. As of December 31, 2013, we had $178.1 million outstanding under the same as those applied inFacility. Borrowings under the Consolidated Financial Statements, except forFacility bear interest at a floating rate based on the use of NOI. We may allocate certain common costs, primarily corporate functions, between the segments differently than we would for stand alone financial information preparedEurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with GAAP. These allocated costs include expensesthe Facility, which can range from 1.65% to 2.90%.  During 2014, the highest balance on the Facility was $247.3 million.  The borrowings under the Facility mature May 15, 2017, which date can be extended for shared services suchone additional year at our option, subject to the satisfaction of certain conditions as information technology, finance, communications, legal, and human resources. We do not allocate interest expense and certain other corporate costs not directly associated withdefined in the segments’ NOI and Gross Profit.credit agreement. Although the Facility is a committed facility, the financial failure of one or more of the participating financial institutions may reduce the amount of credit available to us.

COMPARISON OF THEOur Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but it does reduce the borrowing amount available. At YEARS ENDEDDECEMBERDecember 31, 20122014 AND 2011, we had outstanding letters of credit to back standby letters of credit totaling approximately $3.2 million, leaving approximately $346.8 million available under the Facility.

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certainPursuant to the terms of the Facility, we are subject to various financial and other information for our Total Portfolio as of andcovenants. We are currently in compliance with these covenants. The most restrictive financial covenants for the years ended December 31,2012 and 2011:Facility are as follows:
 Years Ended December 31,
Financial Information (in thousands)2012 2011 Change % Change
Income from Real Property$255,761
 $223,613
 $32,148
 14.4%
Property operating expenses:       
Payroll and benefits19,410
 16,503
 2,907
 17.6%
Legal, taxes, & insurance3,216
 3,200
 16
 0.5%
Utilities29,445
 25,146
 4,299
 17.1%
Supplies and repair10,085
 8,852
 1,233
 13.9%
Other6,683
 5,489
 1,194
 21.8%
Real estate taxes19,207
 17,547
 1,660
 9.5%
Property operating expenses88,046
 76,737
 11,309
 14.7%
Real Property NOI$167,715
 $146,876
 $20,839
 14.2%

 As of December 31,
Other Information2012 2011 Change
Number of properties173
 159
 14
Developed sites63,697
 54,811
 8,886
Occupied sites (1) (2)
50,412
 44,204
 6,208
Occupancy % (1)
87.3% 85.3% 2.0%
Weighted average monthly site rent - MH (3)
$434
 $420
 $14
Weighted average monthly site rent - Permanent RV (3)
$406
 $418
 (12)
Sites available for development6,969
 6,443
 526

(1)  
Covenant
Occupied sites and occupancy % include manufactured housing and permanent RV sites, and exclude transient RV sites.
Must BeAs of 12/31/14
(2)
Maximum Leverage Ratio
Occupied sites include 4,814 sites acquired during 2011 and 5,139 sites acquired in 2012.
< 68.5%44.3%
(3)
Minimum Fixed Charge Coverage Ratio
Weighted average rent pertains to manufactured housing and permanent RV sites and excludes transient RV sites.> 1.402.51
Minimum Tangible Net Worth> $1,270,104$1,714,403
Maximum Dividend Payout Ratio< 95.0%72.5%

Real Property NOIMarket and Economic Conditions
The U.S. rate environment, changes in the Euro area, falling oil prices and turmoil in emerging markets are factors that are influencing financial markets as we move into 2015.  Questions on whether the U.S. economy will sustain the growth indicators it has reported and whether or when the U.S. Federal Reserve will hike its benchmark rate for the first time in 10 years, as well as how much of the Eurozone will remain or fall into recession and what the effect of additional global turmoil will have on the world economy keep economic outlooks tempered. While the U.S. economy looks poised for self-sustaining growth, the global economy is expected to slow. Continued economic uncertainty, both nationally and internationally, causes increased $20.8 million, from $146.9 million to $167.7 million or 14.2 percent. The growthvolatility in NOI is primarily due to $13.0 million from newly acquired properties and $7.8 million from same site properties as detailed below.

investor

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SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME SITEconfidence thereby creating similar volatility in the availability of both debt and equity capital. If such volatility is experienced in future periods, our industry, business and results of operations may be adversely impacted.

A key management tool used when evaluating performanceWe anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, and growthOperating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our properties. At December 31, 2014, we had 70 unencumbered properties with an estimated market value of $783.0 million, 56 of these properties support the borrowing base for our $350.0 million secured line of credit.  From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain debt financing, or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the manufactured housing community industry at the time, including the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional, and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those  markets could make borrowing more difficult to secure, more expensive, or effectively unavailable.  See “Risk Factors” in Part I, Item 1A.  If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.
Contractual Cash Obligations

Our primary long-term liquidity needs are principal payments on outstanding indebtedness. As of December 31, 2014, our outstanding contractual obligations, including interest expense, were as follows:
    Payments Due By Period
    (In thousands)
Contractual Cash Obligations (1)
 Total Due <1 year 1-3 years 3-5 years After 5 years
Collateralized term loans - FNMA $482,639
 $8,389
 $47,832
 $70,856
 $355,562
Collateralized term loans - FMCC 152,462
 2,376
 5,461
 5,944
 138,681
Collateralized term loans - Life Company 203,615
 25,542
 17,679
 8,237
 152,157
Collateralized term loans - CMBS 799,823
 12,595
 336,310
 16,718
 434,200
Preferred OP Units 45,903
 3,670
 7,570
 
 34,663
Lines of credit 5,794
 5,794
 
 
 
Secured borrowing 123,650
 5,167
 11,974
 14,164
 92,345
 Total principal payments 1,813,886
 63,533
 426,826
 115,919
 1,207,608
           
Interest expense (2)
 604,694
 91,685
 151,133
 123,101
 238,775
Operating leases 14,325
 1,040
 2,175
 2,301
 8,809
 Total contractual obligations $2,432,905
 $156,258
 $580,134
 $241,321
 $1,455,192
(1)Our contractual cash obligations exclude debt premiums/discounts.

(2) Our contractual cash obligation related to interest expense is calculated based on the current debt levels, rates and maturities as of December 31, 2014 (excluding secured borrowings), and actual payments required in future periods may be different than the amounts included above.

As of December 31, 2014, our net debt to enterprise value approximated 34.8% (assuming conversion of all common OP units, A-1 preferred OP units, A-3 preferred OP units, and A-4 preferred OP units to shares of common stock). Our debt has a comparisonweighted average maturity of Same Site communities. Same Site communities consistapproximately 7.5 years and a weighted average interest rate of properties owned and operated for the same period in both years5.2%.

Capital expenditures for the yearsyear ended December 31,2012 2014 and 20112013.  The Same Site data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations.

In order to evaluate the growth included recurring capital expenditures of the Same Site communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Site portfolio is the reclassification of water and sewer revenues from income from real property to utilities.  A significant portion of our utility charges are re-billed to our residents. We reclassify these amounts to reflect the utility expenses associated with our Same Site portfolio net of recovery.

The following tables reflect certain financial and other information for our Same Site communities as of and for the years ended December 31,2012$10.2 million and 2011$14.0 million:
 Years Ended December 31,
Financial Information (in thousands)2012 2011 Change % Change
Income from Real Property$207,849
 $198,806
 $9,043
 4.5 %
Property operating expenses:       
Payroll and benefits15,766
 15,414
 352
 2.3 %
Legal, taxes, & insurance2,652
 2,993
 (341) (11.4)%
Utilities11,288
 11,004
 284
 2.6 %
Supplies and repair8,428
 8,163
 265
 3.2 %
Other5,737
 5,119
 618
 12.1 %
Real estate taxes16,157
 16,055
 102
 0.6 %
Property operating expenses60,028
 58,748
 1,280
 2.2 %
Real Property NOI$147,821
 $140,058
 $7,763
 5.5 %
 As of December 31,
Other Information2012 2011 Change
Number of properties136
 136
 
Developed sites48,222
 47,850
 372
Occupied sites (1)
39,860
 39,230
 630
Occupancy % (1) (2)
86.7% 85.8% 0.9%
Weighted average monthly rent per site - MH (3)
$437
 $425
 $12
Weighted average monthly rent per site - Permanent RV (3)
$453
 $431
 22
Sites available for development4,908
 5,247
 (339)
(1)  
Occupied sites and occupancy % include manufactured housing and permanent RV sites, and exclude transient RV sites.
(2)
Occupancy % excludes recently completed but vacant expansion sites.
(3)
Weighted average rent pertains to manufactured housing and permanent RV sites and excludes transient RV sites.

Real Property NOI increased $7.8 million, from $140.1 million, respectively. We are committed to $147.8 million, or 5.5 percent. The growththe continued upkeep of our properties and therefore do not expect a significant decline in NOI is primarily due to increased revenues of $9.0 million partially offset by an $1.2 million increase in expenses.our recurring capital expenditures during 2015.

Income from real property revenue consists of manufactured home and RV site rent, and miscellaneous other property revenues.  Income from real property revenues increased $9.0 million, from $198.8 million to $207.8 million, or 4.5 percent.  The growth in income from real property was due to a combination of factors.  Revenue from our manufactured home and RV portfolio increased $9.5 million due to average rental rate increases of 2.8 percent and the increased number of occupied home sites and was partially offset by rent concessions offered to new residents and current residents who convert from home renters to home owners.  Additionally, other revenues decreased $0.5 million due to a decrease in cable television royalties and utility income partially offset by an increase in other charges and fees.

Property operating expenses increased $1.2 million, from $58.8 million to $60.0 million, or 2.2 percent. Other expenses increased $0.6 million primarily due to increased operational meeting expenses, general office expenses, security service expenses, regional manager travel expenses and resident relations expenses. Payroll and benefits increased by $0.4 million due to increased salaries partially offset by decreased health and life insurance costs. Supplies and repairs increased $0.2 million primarily due to increased lawn services and community maintenance expenses. Utilities expenses increased $0.2 million primarily due to increased cable, telephone and internet expenses. Real estate taxes increased $0.1 million. These increases were offset by a $0.3 million decrease in property insurance expenses.

3857

SUN COMMUNITIES, INC.

HOME SALESCRITICAL ACCOUNTING POLICIES AND RENTALSESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing these financial statements, management has made its best estimate and judgment of certain amounts included in the financial statements. Nevertheless, actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of our consolidated financial statements:
Investment Property

Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may also include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long-lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long-lived assets based on future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy, development and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements.

Capitalized Costs

We acquirecapitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and construction costs related to the development of new community or expansion sites are capitalized until the property is substantially complete. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized over a seven year period based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method).

Notes and Other Receivables

We make financing available to purchasers of manufactured homes generally located withinin our communities from lenderscommunities. The notes are collateralized by the underlying manufactured home sold. Notes receivable include both installment loans purchased by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables (See Note 5 to our financial statements for additional information). For purposes of accounting policy, all notes receivable are considered one homogeneous segment, as the notes are typically underwritten using the same requirements and dealersterms. Notes receivable are reported at substantial discounts.  We lease or sell these value priced homes to current and prospective residents.  We also purchase new homes to lease and sell to current and prospective residents.  

The following table reflects certain financial and other informationtheir outstanding unpaid principal balance adjusted for our Rental Program asan allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of and for the years ended December 31,2012 and 2011 (in thousands, except for certain items marked with *):loans.

 Years Ended December 31,
Financial Information2012 2011 Change % Change
Rental home revenue$26,589
 $22,290
 $4,299
 19.3%
Site rent from Rental Program (1)
38,636
 31,897
 6,739
 21.1%
Rental Program revenue65,225
 54,187
 11,038
 20.4%
Expenses       
Commissions2,207
 1,908
 299
 15.7%
Repairs and refurbishment9,002
 8,080
 922
 11.4%
Taxes and insurance3,467
 3,100
 367
 11.8%
Marketing and other3,465
 3,108
 357
 11.5%
Rental Program operating and maintenance18,141
 16,196
 1,945
 12.0%
Rental Program NOI$47,084
 $37,991
 $9,093
 23.9%
Other Information       
Number of occupied rentals, end of period*8,110
 7,047
 1,063
 15.1%
Investment in occupied rental homes$287,261
 $237,383
 $49,878
 21.0%
Number of sold rental homes*953
 789
 164
 20.8%
Weighted average monthly rental rate*$782
 $756
 $26
 3.4%

(1)
The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

Rental Program NOI increased $9.1 million from $38.0 millionPast due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash basis until qualifying for return to $47.1 million, or 23.9 percent,accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans on a nonaccrual status were immaterial at December 31, 2014 and 2013. The ability to increased revenues of $11.0 million, offset by increased expenses of $1.9 million. Revenues increased $11.0 million primarily due to the increased number of residents participating in the Rental Programcollect our notes receivable is measured based on current and from increased monthly rental rates as indicated in the table above.

The increase in operatinghistorical information and maintenance expenses of $1.9 million was due to several factors.  Refurbishment costs for occupant turnover increased $0.5 million, personal property and use taxes increased $0.4 million due to the additional homes and occupants in the program, bad debt expenses increased $0.4 million, and repair costs on occupied home rentals increased $0.4 million. Commissions increased $0.3 million due to the increased number of new leases. These increases are partially offset by a $0.1 million decrease in advertising costs.


events.

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SUN COMMUNITIES, INC.

The following table reflects certain financialWe consider numerous factors including: length of delinquency, estimated costs to lease or sell, and statistical informationrepossession history. Our experience supports a high recovery rate for notes receivable; however there is some degree of uncertainty about the recoverability of our Home Sales Program forinvestment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the years ended December 31,2012homes on the notes retained by us and 2011 (in thousands, except for statistical information):
 Years Ended December 31,
Financial Information2012 2011 Change % Change
New home sales$5,380
 $2,062
 $3,318
 > 100%
Pre-owned home sales39,767
 30,190
 9,577
 31.7 %
Revenue from homes sales45,147
 32,252
 12,895
 40.0 %
New home cost of sales4,553
 1,700
 2,853
 > 100%
Pre-owned home cost of sales30,365
 23,692
 6,673
 28.2 %
Cost of home sales34,918
 25,392
 9,526
 37.5 %
NOI / Gross profit$10,229
 $6,860
 $3,369
 49.1 %
        
Gross profit – new homes827
 362
 465
 >100%
Gross margin % – new homes15.4% 17.6% (2.2)% (12.5)%
Gross profit – pre-owned homes9,402
 6,498
 2,904
 44.7 %
Gross margin % – pre-owned homes23.6% 21.5% 2.1 % 9.8 %
        
Statistical Information       
Home sales volume:       
New home sales76
 28
 48
 > 100%
Pre-owned home sales1,666
 1,411
 255
 18.1 %
Total homes sold1,742
 1,439
 303
 21.1 %

Home Sales NOI increased $3.3 million, from $6.9 million to $10.2 million, or 49.1 percent. Gross profitrepurchasing the homes on new home sales increased from $0.4 million to $0.8 million and gross profit on pre-owned home sales increased from $6.5 million to $9.4 million primarily due to increased sales volume.



40

SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

Other revenues include other income, interest income, and ancillary revenues, net.  Other revenues increased $1.1 million, from $11.0 million to $12.1 million, or 10.0 percent.  This was primarily due to an increase in interest income of $0.9 million fromthe collateralized receivables, a $0.5 million increaseand subsequently selling or leasing these homes to potential residents in interest income from installment note receivables,our communities. We have established a $0.1 million increase from gain on sale of land, a $0.1 million decrease in the adjustment to our loan loss reserve and a $0.5 million decrease in management fees and other miscellaneous income.

Real Property general and administrativebased on our estimated unrecoverable costs increased $0.3 million, from $19.7 millionassociated with repossessed/repurchased homes. We estimate our unrecoverable costs to $20.0 million, or 1.5 percent, due to an increase in training and recruiting expenses of $0.5 million, an increase in rent of $0.2 million, and an increase of $0.1 million in eachbe the repurchase price of the following categories: travel, software supporthome collateralizing the note receivable plus repair and maintenanceremarketing costs hardware maintenance costs, licensesin excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and dues, contributions, entertainment and various miscellaneous expenses. These increases were partially offset by a decrease in corporate insurance and legal expenses of $0.4 million and payroll costs of $0.7 million.

Home Sales and Rentals general and administrative costs increased $0.9 million, from $8.1 millionis applied to $9.0 million, or 9.8 percent, dueour estimated annual future repossessions to increased salary, commission and bonus costs.

Acquisition related costs increased $2.3 million. These costs have been incurredcreate the allowance for both completedinstallment and potential acquisitions (See Note 2 of our financial statements).

Depreciation and amortization costs increased $15.5 million, from $74.2 million to $89.7 million, or 20.9 percent, due to increased depreciation on investment property for use in our Rental Program of $4.9 million and increased other depreciation and amortization of $10.6 million primarily due to the newly acquired properties (See Note 2 of our financial statements).

Interest expense on debt, including interest on mandatorily redeemable debt, increased $3.2 million, from $67.9 million to $71.2 million, or 4.7 percent, due to an increase in expense associated with our secured borrowing arrangements of $0.9 million, an increase of $4.2 million in our mortgage interest due to debt associated with the acquired properties (see Note 2 of our financial statements) and a higher rate on our FNMA debt and an increase of $0.1 million in amortized financing costs, offset by a decrease of $2.0 million in interest on our lines of credit. 

Distributions from affiliate increased $1.8 million, from $2.1 million to $3.9 million. We suspended equity accounting in 2010 on our affiliate, Origen, as our investment balance is zero.  The income recorded in 2012 and 2011 is dividend income.collateralized notes receivable. See Note 7 of our financial statements.


41

SUN COMMUNITIES, INC.

COMPARISON OF THE YEARS ENDEDDECEMBER 31, 20115 AND 2010

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio as of and for the years endedDecember 31, 2011 and 2010:
 Years Ended December 31,
Financial Information (in thousands)2011 2010 Change % Change
Income from Real Property$223,613
 $204,498
 $19,115
 9.3%
Property operating expenses:       
Payroll and benefits16,503
 15,249
 1,254
 8.2%
Legal, taxes, & insurance3,200
 2,934
 266
 9.1%
Utilities25,146
 22,879
 2,267
 9.9%
Supplies and repair8,852
 7,597
 1,255
 16.5%
Other5,489
 4,335
 1,154
 26.6%
Real estate taxes17,547
 16,282
 1,265
 7.8%
Property operating expenses76,737
 69,276
 7,461
 10.8%
Real Property NOI$146,876
 $135,222
 $11,654
 8.6%

 As of December 31,
Other Information2011 2010 Change
Number of properties159
 136
 23
Developed sites54,811
 47,683
 7,128
Occupied sites (1) (2)
44,204
 38,498
 5,706
Occupancy % (1)
85.3% 84.3% 1.0%
Weighted average monthly site rent - MH (3)
$420
 $413
 $7
Weighted average monthly site rent - Permanent RV (3)
$418
 $422
 $(4)
Sites available for development6,443
 5,939
 504

(1)  
Occupied sites and occupancy % include manufactured housing and permanent RV sites and exclude transient RV sites.
(2)
Occupied sites include 4,814 sites acquired during 2011.
(3)
Weighted average rent pertains to manufactured housing and permanent recreational vehicle sites and excludes transient recreational vehicle sites.

Real Property NOI increased $11.7 million, from $135.2 million to $146.9 million or 8.6 percent. The growth in NOI is primarily due to $6.9 million from newly acquired properties and $4.8 million from same site properties as detailed below.

42

SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME SITE

A key management tool used when evaluating performance and growth of our properties is a comparison of Same Site communities. Same Site communities consist of properties owned and operated for the same period in both years for the years ended December 31,2011 and 2010.  The Same Site data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations.

In order to evaluate the growth of the Same Site communities, management has classified certain items differently than our GAAP statements.  The reclassification difference between our GAAP statements and our Same Site portfolio is the reclassification of water and sewer revenues from income from real property to utilities.  A significant portion of our utility charges are re-billed to our residents.   We reclassify these amounts to reflect the utility expenses associated with our Same Site portfolio net of recovery.

The following tables reflect certain financial and other information for our Same Site communities as of and for the years ended December 31,2011 and 2010:
 Years Ended December 31,
Financial Information (in thousands)2011 2010 Change % Change
Income from Real Property$198,806
 $193,070
 $5,736
 3.0 %
Property operating expenses:       
Payroll and benefits15,414
 15,250
 164
 1.1 %
Legal, taxes, & insurance2,993
 2,934
 59
 2.0 %
Utilities11,004
 11,451
 (447) (3.9)%
Supplies and repair8,163
 7,597
 566
 7.5 %
Other5,119
 4,334
 785
 18.1 %
Real estate taxes16,055
 16,282
 (227) (1.4)%
Property operating expenses58,748
 57,848
 900
 1.6 %
Real Property NOI$140,058
 $135,222
 $4,836
 3.6 %
 As of December 31,
Other Information2011 2010 Change
Number of properties136
 136
 
Developed sites47,850
 47,683
 167
Occupied sites (1)
39,230
 38,498
 732
Occupancy % (1) (2)
85.8% 84.5% 1.3%
Weighted average monthly rent per site - MH (3)
$425
 $413
 $12
Weighted average monthly rent per site - Permanent RV (3)
$431
 $422
 9
Sites available for development5,247
 5,441
 (194)
(1)  
Occupied sites and occupancy % include manufactured housing and permanent RV sites, and exclude transient RV sites.
(2)
Occupancy % excludes recently completed but vacant expansion sites.
(3)
Weighted average rent pertains to manufactured housing and permanent recreational vehicle sites and excludes transient recreational vehicle sites.

Real Property NOI increased $4.8 million, from $135.2 million to $140.0 million, or 3.6 percent. The growth in NOI is primarily due to increased revenues. Income from real property revenue consists of manufactured home and RV site rent, and miscellaneous other property revenues.  Income from real property revenues increased $5.7 million, from $193.1 million to $198.8 million, or 3.0 percent.  The growth in income from real property was due to a combination of factors.  Revenue from our manufactured home and RV portfolio increased $5.3 million due to average rental rate increases of 2.7 percent and due to the increased number of occupied home sites. This growth in revenue was partially offset by rent concessions offered to new residents and current residents converting from home renters to home owners.  Additionally, we experienced increased miscellaneous other property revenues of $0.4 million primarily due to revenue realized on cable television royalties and revenue from late fee and non-sufficient funds charges.

Property operating expenses increased $0.9 million, from $57.8 million to $58.7 million, or 1.6 percent. The growth in property operating expenses was due to several factors. Payroll and benefits increased by $0.3 million due to increased wages from annual merit increases. Supplies and repairs increased by $0.6 million primarily due to increased cost of lawn services and community maintenance. Utility costs reported net of rebilled water/sewer revenue, primarily related to water, electricity charges, and rubbish removal, decreased $0.4 million due to increased water and sewer income. Real estate taxes decreased by $0.2 million primarily due to reduced real estate taxes in Indiana and Illinois. Legal, taxes and insurance remained nearly constant. Other operating expenses increased by $0.6 million due to increased bank charges, resident relation expenses, and bad debt expense.

43

SUN COMMUNITIES, INC.

HOME SALES AND RENTALS

We acquire pre-owned and repossessed manufactured homes generally located within our communities from lenders and dealers at substantial discounts.  We lease or sell these value priced homes to current and prospective residents.  We also purchase new homes to lease and sell to current and prospective residents.  

The following table reflects certain financial and other information for our Rental Program as of and for the years ended December 31,2011 and 2010 (in thousands, except for certain items marked with *):

 Years Ended December 31,
Financial Information2011 2010 Change % Change
Rental home revenue$22,290
 $20,480
 $1,810
 8.8 %
Site rent from Rental Program (1)
31,897
 28,585
 3,312
 11.6 %
Rental Program revenue54,187
 49,065
 5,122
 10.4 %
Expenses       
Commissions1,908
 1,655
 253
 15.3 %
Repairs and refurbishment8,080
 7,671
 409
 5.3 %
Taxes and insurance3,100
 3,127
 (27) (0.9)%
Marketing and other3,108
 2,961
 147
 5.0 %
Rental Program operating and maintenance16,196
 15,414
 782
 5.1 %
Rental Program NOI$37,991
 $33,651
 $4,340
 12.9 %
Other Information       
Number of occupied rentals, end of period*7,047
 6,141
 906
 14.8 %
Investment in occupied rental homes$237,383
 $199,110
 $38,273
 19.2 %
Number of sold rental homes*789
 762
 27
 3.5 %
Weighted average monthly rental rate*$756
 $735
 $21
 2.9 %

(1)
The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

Rental Program NOI increased $4.3 million from $33.7 million to $38.0 million, or 12.9 percent due to increased revenues of $5.1 million, offset by increased expenses of $0.8 million. Revenues increased $5.1 million primarily due to the increased number of residents participating in the Rental Program as indicated in the table above and from increased market rates from the site rent.

The increase in operating and maintenance expenses of $0.8 million was due to several factors.  Commissions increased by $0.3 million due to increased number of new leases and increased lease renewal rate. Repairs costs on occupied home rentals increased by $0.3 million due to the increased number of homes in the Rental Program. Refurbishment costs increased by $0.1 million. Marketing and other costs increased by $0.1 million due an increase in bad debt expense partially offset by a decrease in utility expense.




44

SUN COMMUNITIES, INC.

The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31,2011 and 2010 (in thousands, except for statistical information):
 Years Ended December 31,
Financial Information2011 2010 Change % Change
New home sales$2,062
 $2,396
 $(334) (13.9)%
Pre-owned home sales30,190
 29,549
 641
 2.2 %
Revenue from homes sales32,252
 31,945
 307
 1.0 %
New home cost of sales1,700
 2,044
 (344) (16.8)%
Pre-owned home cost of sales23,692
 21,986
 1,706
 7.8 %
Cost of home sales25,392
 24,030
 1,362
 5.7 %
NOI / Gross profit$6,860
 $7,915
 $(1,055) (13.3)%
        
Gross profit – new homes362
 352
 10
 2.8 %
Gross margin % – new homes17.6% 14.7% 2.9 % 19.7 %
Gross profit – pre-owned homes6,498
 7,563
 (1,065) (14.1)%
Gross margin % – pre-owned homes21.5% 25.6% (4.1)% (16.0)%
        
Statistical Information       
Home sales volume:       
New home sales28
 36
 (8) (22.2)%
Pre-owned home sales1,411
 1,339
 72
 5.4 %
Total homes sold1,439
 1,375
 64
 4.7 %

Home Sales NOI decreased by $1.0 million, from $7.9 million to $6.9 million, or 13.3 percent primarily due to reduced profit margins on pre-owned homes.

The gross profit margin on new home sales slightly increased due to the increased average selling price per new home sold. The gross profit margin on pre-owned home sales decreased 4.1 percent from 25.6 percent to 21.5 percent.  We decreased the average margin of our pre-owned homes to stimulate sales thereby accelerating the recycling of the capital invested in inventory and the Rental Program. Approximately 90 percent of these home sales are financed by third party lenders or are paid for in cash.




45

SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

Other revenues include other income (loss), interest income, and ancillary revenues, net.  Other revenues increased by $2.0 million, from $9.0 million to $11.0 million, or 22.2 percent.  This was due to an increase in interest income of $1.5 million from collateralized receivables, a $0.4 million increase in other income, primarily due to the sale of certain raw water rights, and a $0.1 million increase in ancillary revenues, net.

Real Property general and administrative costs increased by $2.5 million, from $17.2 million to $19.7 million, or 14.5 percent due to increased wages, bonus, payroll taxes and health benefits of $1.5 million mainly from additional resources from acquisition and growth, employee relation expenses of $0.1 million, training and travel expense of $0.1 million, office expenses of $0.1 million and increased tax expense of $0.7 million. Tax expense for the year ended December 31, 2010 included a $0.7 million reversal of a state tax provision recorded in December of 2009 and the year ended December 31, 2011 does not contain such a reversal.  

Home Sales and Rentals general and administrative costs increased by $0.5 million, from $7.6 million to $8.1 million, or 6.6 percent due to increased salary, commission costs and payroll tax of $0.4 million and increased inventory utility costs of $0.1 million.

Acquisition related costs increased to $2.0 million (See Note 2 to our financial statements).

Depreciation and amortization costs increased by $5.3 million, from $68.9 million to $74.2 million, or 7.7 percent due to increased depreciation on investment property for use in our Rental Program of $1.9 million and increased other depreciation and amortization of $3.4 million primarily due to the newly acquired properties (See Note 2 to our financial statements).

Interest expense on debt, including interest on mandatorily redeemable debt, increased by $2.5 million, from $65.4 million to $67.9 million, or 3.8 percent due to increased expense associated with our secured borrowing arrangements of $1.5 million, an increase in our mortgage interest of $0.8 million, an increase in interest on our lines of credit of $0.3 million and a $2.0 million increase due to acquisition related debt (See Note 2 to our financial statements). This was offset by a $0.1 million reduction in bank service charges and a $2.0 million reduction in interest expense primarily due to the settlement with FNMA (See Note 9 to our financial statements).

Equity income (loss) and distributions from affiliates increased by $3.2 million, from a loss of $1.1 million to income of $2.1 million due to the suspension of equity accounting in 2010 as our investment below is zero. The income recorded in 2011 is dividend income.


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SUN COMMUNITIES, INC.

The following table is a summary of our consolidated financial results which were discussed in more detail in the preceding paragraphs (in thousands):
  Years Ended December 31,
  2012 2011 2010
Real Property NOI $167,715
 $146,876
 $135,222
Rental Program NOI 47,084
 37,991
 33,651
Home Sales NOI/Gross Profit 10,229
 6,860
 7,915
Site rent from Rental Program (included in Real Property NOI) (38,636) (31,897) (28,585)
NOI/Gross profit 186,392
 159,830
 148,203
Adjustments to arrive at net income (loss):      
Other revenues 12,119
 11,030
 9,047
General and administrative (29,017) (27,860) (24,810)
Acquisition related costs (4,296) (1,971) 
Depreciation and amortization (89,674) (74,193) (68,868)
Asset impairment charge 
 (1,382) 
Interest expense (71,180) (67,939) (65,427)
Provision for state income taxes (249) (150) (512)
Distributions from affiliate 3,900
 2,100
 500
Loss from affiliate 
 
 (1,646)
Net income 7,995
 (535) (3,513)
Less:  preferred return to A-1 preferred OP units 2,329
 1,222
 
Less:  amounts attributable to noncontrolling interests (318) (671) (630)
Less: Series A Preferred Stock Distributions $1,026
 $
 $
Net income (loss) attributable to Sun Communities, Inc. common stockholders $4,958
 $(1,086)
$(2,883)


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SUN COMMUNITIES, INC.

FUNDS FROM OPERATIONS

We provide information regarding FFO as a supplemental measure of operating performance.  FFO is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss) (computed in accordance GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Due to the variety among owners of identical assets in similar condition (based on historical cost accounting and useful life estimates), we believe excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization, provides a better indicator of our operating performance.  FFO is a useful supplemental measure of our operating performance because it reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from net income (loss).  Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management, the investment community, and banking institutions routinely use FFO, together with other measures, to measure operating performance in our industry. Further, management uses FFO for planning and forecasting future periods.

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, FFO is not intended as a measure of a REIT’s ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO only provides investors with an additional performance measure. FFO is compiled in accordance with its interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.

The following table reconciles net income (loss) to FFO data for diluted purposes for the periods ended December 31, 2012, 2011 and 2010 (in thousands):
 Years Ended December 31,
 2012 2011 2010
Net income (loss) attributable to Sun Communities, Inc. common stockholders$4,958
 $(1,086) $(2,883)
Adjustments:     
Preferred return to Series A-1 preferred OP units2,329
 1,222
 
Amounts attributable to noncontrolling interests(318) (671) (630)
Depreciation and amortization90,577
 75,479
 70,578
Asset impairment charge
 1,382
 
Gain on disposition of assets, net(5,137) (2,635) (4,300)
Funds from operations ("FFO")$92,409
 $73,691
 $62,765
Adjustments:     
State income tax adjustment(1)

 (407) (772)
Equity affiliate adjustment
 
 1,646
Acquisition related costs4,296
 1,971
 
FFO excluding certain items$96,705
 $75,255
 $63,639
      
Weighted average common shares outstanding:26,970
 21,147
 19,168
Add:     
Common OP Units2,071
 2,075
 2,114
Restricted stock285
 235
 153
Common stock issuable upon conversion of Series A-1 preferred OP units1,111
 580
 
Common stock issuable upon conversion of stock options17
 16
 9
Weighted average common shares outstanding - fully diluted30,454
 24,053
 21,444
      
FFO per share - fully diluted$3.05
 $3.06
 $2.93
FFO per share excluding certain items - fully diluted$3.19
 $3.13
 $2.97
(1)
The state income tax adjustment for the period ended December 31, 2011 and 2010 represents the reversal of the corporate and business tax expense previously excluded from FFO in a prior period.

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SUN COMMUNITIES, INC.

LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unitholders of the Operating Partnership, capital improvements of properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment.

Subject to market conditions, we intend to continue to look for opportunities to expand our development pipeline and acquire existing communities. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our secured credit facility, and the use of debt and equity offerings under our automatic shelf registration statement.

We completed seven acquisitions in 2012 in which we acquired 14 properties in total, seven manufactured housing communities, five RV communities and two communities containing both manufactured housing and RV communities. See Note 2 to our financial statements for details on the acquisitions and Note 9 to our financial statements for related debt transactions.  We will continue to evaluate acquisition opportunities that meet our criteria for acquisition. Should additional investment opportunities arise in 2013, we intend to finance the acquisitions through secured financing, draws on our credit facilities, the assumption of existing debt on the properties and the issuance of certain equity securities.information.

DuringWe evaluate the year ended collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent more than five to seven days, dependent on state law, we begin the repossession and eviction process simultaneously. This process generally takes 30 to 45 days; due to the short time frame from delinquent loan to repossession we do not evaluate the note receivables for impairments. No loans were considered impaired as of December 31, 2012, we have invested $57.5 million in the acquisition of homes intended for the Rental Program net of proceeds from third party financing from homes sales.  Expenditures for 2013 will be dependent upon the condition of the markets for repossessions2014 and new home sales, as well as rental homes. We finance new home purchases with a $12.0 million floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third party financing of our home sales, available floor plan financing and working capital available on our secured lines of credit.2013.

Our cash flow activities are summarized as follows (in thousands):We evaluate the credit quality of our notes receivable at the inception of the receivable. We consider the following factors in order to determine the credit quality of the applicant - rental payment history; home debt to income ratio; loan value to the collateralized asset; total debt to income ratio; length of employment; previous landlord references; and FICO scores.

  Years Ended December 31,
  2012 2011 2010
Net Cash Provided by Operating Activities 87,251
 63,311
 58,349
Net Cash Used in Investing Activities (375,219) (159,328) (42,612)
Net Cash Provided by (Used in) Financing Activities 311,619
 93,454
 (11,813)
Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due.

Operating Activities

Cash and cash equivalents increased by $23.7 million from $5.9 million as of December 31, 2011, to $29.5 million as of December 31, 2012. Net cash provided by operating activities increased by $24.0 million from $63.3 million for the year ended December 31, 2011 to $87.3 million for the year ended December 31, 2012.

Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes and (e) current volatility in economic conditions and the financial markets.  See “Risk Factors” in our 2012 Annual Report.

Investing Activities

Net cash used in investing activities was $375.2$550.7 million for the year ended December 31, 2012,2014, compared to $159.3$352.4 million for the year ended December 31, 2011.2013. The differenceincrease is primarily due to increased cash invested into acquisitions during 2014, of $172.1which approximately $283.2 million is related to the first closing of our acquisition of the Green Courte properties during the fourth quarter. Additionally, we made payments for deposits on pending acquisitions scheduled for 2015 (see Note 221 to our financial statements), a decrease in. These items are partially offset by proceeds fromrelated to the disposition of homes, assets and land10 of $2.8 million,our MH properties during 2014. We did not dispose of any properties during 2013. Net cash used in investing activities during 2013 includes an increase in notes receivable of $5.4 million, and increased investment in property of $37.4 million, largely due to homes purchased for the Rental Program primarily in the acquired communities and expansion projects, offset by an increase in proceeds from affiliate dividend distribution of $1.8 million.


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in a note receivable, which was extinguished in a net cash settlement during the acquisition of the properties the note was attributable to. No such investment was made during 2014.

Financing Activities

Net cash provided by financing activities was $311.6$496.1 million for the year ended December 31, 2012,2014, compared to of $93.5$213.0 million for the year ended December 31, 2011.2013. The differenceincrease is dueprimarily related to increased net proceeds received from the issuance of additional shares of $324.5common stock. We completed two underwritten registered public offerings during 2014 for net proceeds of $562.9 million and completed one underwritten registered public offering during 2013 for net proceeds of $249.5 million. Additionally, due to the recent refinancing activity of our mortgage debt (see Note 9 to our financial statements), we increased proceeds from issuance of other debt net of repaymentsand decreased payments on other debt of $40.0 million and decreased payments of deferred financing costs of $1.5 million,as compared to 2013. These items are partially offset by decreasedincreased net borrowingspayments on the lineour lines of credit of $133.8 million,and increased distributions to our stockholders and OP unitholdersunit holders, as a result of $13.3 millionour increase in distribution per share and decreased net proceeds from stock option exercisesnumber of $0.7 million.shares outstanding in 2014.

We continually evaluate our debt maturities, and, based on management's current assessment, believe we have viable financing and refinancing alternatives that will not materially adversely impact our expected financial results. The credit environment has slowly improved and weWe continue to pursue borrowing opportunities with a variety of different banks. Welending institutions and have noticed a continuing trend that, although pricing and loan-to-value ratios remain dependent on specific deal terms, generally spreads for non-recourse mortgage financing are compressing and loan-to-value ratios are gradually increasing from levels a year ago. The unsecured debt markets are functioning well and credit spreads are at manageable levels. We continue to assess 2013our debt maturities and financing needs in 2014 and beyond to ensure we are preparedtry to best position the Company if current credit market conditions deteriorate.change.

Financial Flexibility

We have a senior secured revolving line of credit facility (the "Facility") with a maximum borrowing capacity of $150.0$350.0 million, subject to certain borrowing base calculations.calculations, and a built in accordion allowing for up to $250.0 million in additional borrowings. As of December 31, 20122014, we did not have ana balance outstanding balance onunder the line of credit. The outstanding balance on the line of credit asFacility. As of December 31, 20112013, we had $178.1 million was $107.5 million.outstanding under the Facility. Borrowings under the line of creditFacility bear interest at a floating interest rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the line of credit agreement,Facility, which can range from 2.25%1.65% to 2.95%2.90%.  During 20122014, the highest balance on the line of creditFacility was $107.5 million.$247.3 million.  The borrowings under the line of creditFacility mature October 1, 2015May 15, 2017, assuming the election of awhich date can be extended for one additional year extension that is available at our discretion,option, subject to the satisfaction of certain conditions.conditions as defined in the credit agreement. Although the secured revolving line of creditFacility is a committed facility, the financial failure of one or more of the participating financial institutions may reduce the amount of credit available credit for use byto us.

Our line of creditFacility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but it does reduce the borrowing amount available. At December 31, 20122014, we had outstanding letters of credit to back standby letters of credit totaling approximately $4.0$3.2 million,, leaving approximately $146.0$346.8 million available under our secured line of credit.the Facility.

Pursuant to the terms of the line of credit facility,Facility, we are subject to various financial and other covenants. We are currently in compliance with these covenants. The most restrictive financial covenants for the line of credit facilityFacility are as follows:

Covenant Must Be As of 12/31/1214
Maximum Leverage Ratio <70.0% 68.5% 55.3%44.3%
Minimum Fixed Charge Coverage Ratio >1.45 1.40 1.682.51
Minimum Tangible Net Worth >$705,742 $1,270,104 $866,5221,714,403
Maximum Dividend Payout Ratio <95.0% 71.2%
Secured Recourse Indebtedness - Total Debt<$300,000$192,83572.5%

Market and Economic Conditions
Although demandThe U.S. rate environment, changes in the U.S. improvedEuro area, falling oil prices and turmoil in 2012,emerging markets are factors that are influencing financial markets as we move into 2015.  Questions on whether the U.S. macroeconomic environment remains uncertaineconomy will sustain the growth indicators it has reported and waswhether or when the primary factorU.S. Federal Reserve will hike its benchmark rate for the first time in a slowdown starting in 2008. The10 years, as well as how much of the Eurozone will remain or fall into recession and what the effect of additional global turmoil will have on the world economy keep economic outlooks tempered. While the U.S. economy looks poised for self-sustaining growth, the global economy remains unstable, and we expect the economic environmentis expected to continue to be challenging as continuedslow. Continued economic uncertainty, has generally given the marketplace less confidence.  In particular, the financial crisis that affected the banking systemboth nationally and financial markets and the current uncertaintyinternationally, causes increased volatility in global economic conditions have resulted in a tighteninginvestor

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confidence thereby creating similar volatility in the credit markets, a low levelavailability of liquidity in many financial marketsboth debt and volatility in credit, equity and fixed income markets.capital. If such conditions arevolatility is experienced in future periods, our industry, business and results of operations may be severelyadversely impacted.  The slow recovery and possible impact of automatic sequesters or a failure to raise the “debt ceiling” in the U.S., as well as the impact of the sovereign debt crisis and resulting austerity measures in Europe may continue to adversely impact us. We believe this risk is somewhat mitigated because we are able to utilize various forms of capital to fund our operations making availability to one specific form of capital less vital and have adequate working capital provided by operating activities as noted

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SUN COMMUNITIES, INC.

above. We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our properties. We currently haveAt December 31, 2014, we had 4770 unencumbered Propertiesproperties with an estimated market value of $340.0783.0 million, 3156 of these Propertiesproperties support the borrowing base for our $150.0$350.0 million secured line of credit.  From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain debt financing, or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the manufactured housing community industry at the time, including the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional, and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those  markets could make borrowing more difficult to secure, more expensive, or effectively unavailable.  See “Risk Factors” in Part I, Item 1A.  If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.

Contractual Cash Obligations

Our primary long-term liquidity needs are principal payments on outstanding indebtedness. As of December 31, 2012,2014, our outstanding contractual obligations, including interest expense, were as follows:
  Payments Due By Period   Payments Due By Period
  (In thousands)   (In thousands)
Contractual Cash Obligations(1)Total Due <1 year 1-3 years 3-5 years After 5 years Total Due <1 year 1-3 years 3-5 years After 5 years
         
         
Collateralized term loans - FNMA $482,639
 $8,389
 $47,832
 $70,856
 $355,562
Collateralized term loans - FMCC 152,462
 2,376
 5,461
 5,944
 138,681
Collateralized term loans - Life Company 203,615
 25,542
 17,679
 8,237
 152,157
Collateralized term loans - CMBS724,059
 46,020
 193,792
 301,463
 182,784
 799,823
 12,595
 336,310
 16,718
 434,200
Collateralized term loans - FNMA369,810
 5,024
 14,891
 17,034
 332,860
Aspen preferred OP Units and Series B-3 preferred OP Units47,322
 7,315
 4,225
 
 35,782
Preferred OP Units 45,903
 3,670
 7,570
 
 34,663
Lines of credit29,781
 29,781
 
 
 
 5,794
 5,794
 
 
 
Secured borrowing94,409
 4,123
 9,544
 11,619
 69,123
 123,650
 5,167
 11,974
 14,164
 92,345
Mortgage notes, other186,565
 14,376
 20,678
 76,068
 75,444
Total principal payments1,451,946
 106,639
 243,130
 406,184
 695,993
 1,813,886
 63,533
 426,826
 115,919
 1,207,608
                   
Interest expense (1)
461,495
 74,542
 127,596
 93,846
 165,511
Interest expense (2)
 604,694
 91,685
 151,133
 123,101
 238,775
Operating leases3,384
 917
 1,748
 720
 
 14,325
 1,040
 2,175
 2,301
 8,809
Total contractual obligations1,916,825
 182,098
 372,474
 500,750
 861,504
 $2,432,905
 $156,258
 $580,134
 $241,321
 $1,455,192
(1) Our contractual cash obligations exclude debt premiums/discounts.

(2)Our contractual cash obligation related to interest expense is calculated based on the current debt levels, rates and maturities as of December 31, 2012 excluding2014 (excluding secured borrowings,borrowings), and actual payments required in future periods may be different than the amounts included above.

As of December 31, 20122014, our net debt to total market capitalizationenterprise value approximated 53.4 percent34.8% (assuming conversion of all Common Operating Partnership Unitscommon OP units, A-1 preferred OP units, A-3 preferred OP units, and A-4 preferred OP units to shares of common stock). Our debt has a weighted average maturity of approximately 6.87.5 years and a weighted average interest rate of 5.2 percent5.2%.

Capital expenditures for the yearsyear ended December 31,2012 2014 and 20112013 included recurring capital expenditures of $9.110.2 million and $8.214.0 million, respectively. We are committed to the continued upkeep of our Propertiesproperties and therefore do not expect a significant decline in our recurring capital expenditures during 20132015.



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SUN COMMUNITIES, INC.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing these financial statements, management has made its best estimate and judgment of certain amounts included in the financial statements. Nevertheless, actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of our consolidated financial statements:
Investment Property

Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may also include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long-lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long-lived assets based on future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy, development and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements.

Capitalized Costs

We capitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and construction costs related to the development of new community or expansion sites are capitalized until the property is substantially complete. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized over a seven year period based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method).

Notes and Other Receivables

We make financing available to purchasers of manufactured homes generally located in our communities. The notes are collateralized by the underlying manufactured home sold. Notes receivable include both installment loans purchased by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables (See Note 5 to our financial statements for additional information). For purposes of accounting policy, all notes receivable are considered one homogeneous segment, as the notes are typically underwritten using the same requirements and terms. Notes receivable are reported at their outstanding unpaid principal balance adjusted for an allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of the loans.

Past due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash basis until qualifying for return to accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans on a nonaccrual status were immaterial at December 31, 2014 and 2013. The ability to collect our notes receivable is measured based on current and historical information and events.

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SUN COMMUNITIES, INC.

We consider numerous factors including: length of delinquency, estimated costs to lease or sell, and repossession history. Our experience supports a high recovery rate for notes receivable; however there is some degree of uncertainty about the recoverability of our investment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the homes on the notes retained by us and repurchasing the homes on the collateralized receivables, and subsequently selling or leasing these homes to potential residents in our communities. We have established a loan loss reserve based on our estimated unrecoverable costs associated with repossessed/repurchased homes. We estimate our unrecoverable costs to be the repurchase price of the home collateralizing the note receivable plus repair and remarketing costs in excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and is applied to our estimated annual future repossessions to create the allowance for both installment and collateralized notes receivable. See Note 5 to our financial statements for additional information.

We evaluate the collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent more than five to seven days, dependent on state law, we begin the repossession and eviction process simultaneously. This process generally takes 30 to 45 days; due to the short time frame from delinquent loan to repossession we do not evaluate the note receivables for impairments. No loans were considered impaired as of December 31, 2014 and 2013.

We evaluate the credit quality of our notes receivable at the inception of the receivable. We consider the following factors in order to determine the credit quality of the applicant - rental payment history; home debt to income ratio; loan value to the collateralized asset; total debt to income ratio; length of employment; previous landlord references; and FICO scores.

Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due.

Revenue Recognition

Rental income attributable to site and home leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants are generally for one year terms but may range from month-to-month to two years and are renewable by mutual agreement from us and the resident, or in some cases, as provided by state statute. Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sales transaction. Interest income on notes receivable is recorded on a level yield basis over the life of the notes. We report certain taxes collected from the resident and remitted to taxing authorities in revenue. These taxes include certain Florida property and fire taxes.

Refer to Note 1 to our consolidated financial statements for additional information on certain critical accounting policies and estimate.

Impact of New Accounting Standards

See Note 18 to our financial statements, "Recent Accounting Pronouncements", within this Form 10-K.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements with any unconsolidated entities that it believes have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity or capital resources.


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risk exposure is interest rate risk. We mitigate this risk by maintaining prudent amounts of leverage, minimizing capital costs and interest expense while continuously evaluating all available debt and equity resources and following established risk management policies and procedures, which include the periodic use of derivatives. Our primary strategy in entering into derivative contracts is to minimize the variability interest rate changes could have on our future cash flows. We generally employ derivative instruments that effectively convert a portion of our variable rate debt to fixed rate debt. We do not enter into derivative instruments for speculative purposes.

We have threetwo derivative contracts consisting ofone interest rate swap agreement with a notional amount of $20.0 million, and two interest rate cap agreements with a total notional amount of $162.4 million as of December 31, 2012. The swap agreement fixes $20.0 million of variable rate borrowings at 4.02 percent through January 2014. The first interest rate cap agreement has a cap rate of 11.27 percent11.27%, a notional amount of $152.4 million, and a termination date of April 2015.  The second interest rate cap agreement has a cap rate of 11.02 percent,11.02%, a notional amount of $10.0 million throughand a termination date of October 2016.

Our remaining variable rate debt totals $222.4166.4 million and $322.8344.0 million as of December 31, 20122014 and 20112013, respectively, which bear interest at Primeprime or various LIBOR rates. If Primeprime or LIBOR increased or decreased by 1.0 percent1.0% during the yearsyear ended December 31,2012 2014 and 20112013, we believe our interest expense would have increased or decreased by approximately $2.42.8 million and $2.62.4 million based on the $237.8279.1 million and $257.7235.9 million average balances outstanding under our variable rate debt facilities for the years ended December 31,2012 2014 and 20112013, respectively.


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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data are filed herewith under Item 15.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


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ITEM 9A.     CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. Under the supervision and with the participation of our management, including our Chief Executive Officer, Gary A. Shiffman, and Chief Financial Officer, Karen J. Dearing, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012.2014. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2012,2014, to ensure that information we are required to disclose in filings with the Securities and Exchange CommissionSEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Design and Evaluation of Internal Control Over Financial Reporting

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have included a report of management’s assessment of the design and effectiveness of our internal controls as part of this Form 10-K for the fiscal year ended December 31, 2012.2014. Our independent registered public accounting firm also attested to, and reported on, the effectiveness of internal control over financial reporting. Management’s report and the independent registered public accounting firm’s attestation report are included in our 20122014 financial statements under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm”.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarterly period ended December 31, 20122014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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ITEM 9B.    OTHER INFORMATION

None.


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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors and Committees

Pursuant to the termsinstruction 3 to paragraph (b) of our charter, the BoardItem 401 of Directors (the “Board”) is divided into three classes. The class up for election at the annual meeting of shareholders to be held in 2013 will hold office for a term expiring at the annual meeting of shareholders to be held in 2016. A second class will hold office for a term expiring at the annual meeting of shareholders to be held in 2014 and a third class will hold office for a term expiring at the annual meeting of shareholders to be held in 2015. Each director will hold office for the term to which such director is elected and until such director’s successor is duly elected and qualified. At each ofRegulation S−K, certain information regarding our annual meeting of the shareholders, the successors to the class of directors whose terms expire at such meeting will be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election.

The Board meets quarterly, or more often as necessary. The Board met eight times during 2012 and took various actions pursuant to resolutions adopted by unanimous written consent. All directors attended at least 75% of the meetings of the Board and each committee on which they served. All of our board members attended the annual meeting of shareholders held on July 19, 2012.

Several important functions of the Board may be performed by committees that are comprised of members of the Board. Our Bylaws authorize the formation of these committees and grant the Board the authority to prescribe the functions of each committee and the standards for membership of each committee. In addition, the Board appoints the members of each committee. The Board has four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and an Executive Committee. You may find copies of the charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee under the “Investors-Officers and Directors” section of our website at www.suncommunities.com. You may also find a copy of our corporate governance guidelines and its code of business ethics under the “Investors-Officers and Directors” section of our website at www.suncommunities.com. All of the committee charters, our corporate governance guidelines and our code of business ethics are available in print to any shareholder who requests them.

The Audit Committee operates pursuant to a third amended and restated charter that was approved by the Board in December 2007, and is reviewed annually. It is available under the “Investors-Officers and Directors” section of our website at www.suncommunities.com. The Audit Committee, among other functions, (i) has the sole authority to appoint, retain, terminate and determine the compensation of our independent accountants, (ii) reviews with our independent accountants the scope and results of the audit engagement, (iii) approves professional services provided by our independent accountants, (iv) reviews the independence of our independent accountants, and (v) directs and controls our internal audit functions. The current members of the Audit Committee are Messrs. Robert H. Naftaly, Clunet R. Lewis (Chairman) and Ms. Stephanie W. Bergeron, all of whom are “independent” as that term is defined in the rules of the SEC and applicable rules of the NYSE. The Audit Committee held fourformal meetings during the fiscal year ended December 31, 2012. The Board has determined that each member of the Audit Committee is an “audit committee financial expert,” as defined by SEC rules.

The Compensation Committee operates pursuant to a charter that was approved by the Board in March 2004. A copy of the Compensation Committee Charter is available under the “Investors-Officers and Directors” section of our website at www.suncommunities.com. The Compensation Committee, among other functions, (i) reviews and approves corporate goals and objectives relevant to the compensation of the Chief Executive Officer and such other executive officers as may be designated by the Chief Executive Officer, evaluates the performanceis contained in Part I of such officersthis Form 10−K. Unless provided in light of such goals and objectives, and determines and approves the compensation of such officers based on these evaluations, (ii) approves the compensation of our other executive officers, (iii) recommends to the Board for approval the compensation of the non-employee directors and (iv) oversees our incentive-compensation plans and equity-based plans. The current members of the Compensation Committee are Messrs. Robert H. Naftaly (Chairman), Clunet R. Lewis and Paul D. Lapides, all of whom are independent directors under the NYSE rules. During the fiscal year ended December 31, 2012, the Compensation Committee held two formal meetings and took various actions by unanimous written consent. See “Report of the Compensation Committee on Executive Compensation.”

The Nominating and Corporate Governance Committee (the “NCG Committee”) operates pursuant to a charter that was approved by the Board in March 2004. A copy of the NCG Committee Charter is available under the “Investors-Officers and Directors” section of our website at www.suncommunities.com. The NCG Committee, among other functions, is responsible for (i) identifying individuals qualified to become Board members, consistent with criteria approved by the Board, (ii) recommending that the Board select the committee-recommended nominees for election at each annual meeting of shareholders, (iii) developing and recommending to the Board a set of corporate governance guidelines applicable to us, and (iv) periodically reviewing such guidelines and recommending any changes, and overseeing the evaluation of the Board. The current members of the NCG Committee are

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Messrs. Paul D. Lapides (Chairman), Clunet R. Lewis and Ronald L. Piasecki, all of whom are independent under the NYSE rules. The NCG Committee held one formal meeting during the fiscal year ended December 31, 2012. The NCG Committee considers diversity and skills in identifying nominees for service on our Board. Regarding diversity, the NCG Committee considers the entirety of the board and a wide range of economic, social and ethnic backgrounds and does not nominate representational directors from any specific group.

The Executive Committee was established to generally manage our day-to-day business and affairs between regular Board meetings. In no event may the Executive Committee, without the prior approval of the Board acting as a whole: (i) recommend to the shareholders an amendment to our charter; (ii) amend our Bylaws; (iii) adopt an agreement of merger or consolidation; (iv) recommendthis Annual Report on Form 10−K, the other information required by this Item is incorporated herein by reference to the shareholders the sale, lease or exchange of all or substantially all of our property and assets; (v) recommend to the shareholders our dissolution or a revocation of a dissolution; (vi) fill vacancies on the Board; (vii) fix compensation of the directors for serving on the Board or on a committee of the Board; (viii) declare dividends or authorize the issuance of our stock; (ix) approve or take any action with respect to any related party transaction involving us; or (x) take any other action which is forbidden by our Bylaws. All actions taken by the Executive Committee must be promptly reported to the Board as a whole and are subject to ratification, revision and alteration by the Board, except that no rights of third persons created in reliance on authorized acts of the Executive Committee can be affected by any such revision or alteration. The current members of the Executive Committee are Messrs. Gary A. Shiffman and Arthur A. Weiss. The Executive Committee did not hold any formal meetings during the fiscal year ended December 31, 2012.

The Board oversees and implements its risk management function several different ways. Specifically, the Audit Committee discusses our risk assessment and risk management policies with the Chief Financial Officer and other accounting staff, our internal auditor and our independent accountants in conjunction with its review of our financial statements as they deem necessary. In addition, the Board discusses the general risks facing us, the risk factors disclosed in our annual and period reports and our risk management policies with our executive management team from time to time throughout the year. In the event that a specific risk is identified, the Board or the Audit Committee directs management to assess, evaluate and provide remedial recommendations to the Board, or the Audit Committee, with respect to such risk which may include suggested public disclosure.

Independence of Non-Employee Directors

The NYSE rules require that a majority of the Board consist of members who are independent. There are different measures of director independence—independence under NYSE rules, under Section 16 of the Exchange Act and under Section 162(m) of the Code. The Board has reviewedapplicable information about each of our non-employee directors and determined that Ms. Stephanie W. Bergeron and Messrs. Paul D. Lapides, Clunet R. Lewis, Robert H. Naftaly, and Ronald L. Piasecki are independent directors. The independent directors meet on a regular basis in executive sessions without management participation. In 2012, the executive sessions occurred after some of the regularly scheduled meetings of the entire Board and may occur at such other times as the independent directors deem appropriate or necessary. The Board appoints a lead director on an annual basis to serve for a term of one year. Clunet R. Lewis is currently serving as lead director. The lead director calls and presides at the executive sessions of our independent directors, acts as a liaison between our management team and the Board and is responsible for identifying, analyzing and making recommendations to the Board with respect to certain strategic and extraordinary matters.

Consideration of Director Nominees

Board Membership Criteria

The Board of Directors has established criteria for Board membership. These criteria include the following specific, minimum qualifications that the NCG Committee believes must be met by an NCG Committee-recommended nominee for a position on the Board:

The candidate must have experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing;

The candidate must be highly accomplished in his or her field, with superior credentials and recognition;

The candidate must be well regarded in the community and must have a long-term reputation for high ethical and moral standards;

The candidate must have sufficient time and availability to devote to our affairs, particularly in light of the number of boards on which the nominee may serve; and

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The candidate’s principal business or occupation must not be such as to place the candidate in competition with us or conflict with the discharge of a director’s responsibilities to us or to our shareholders.

In addition to the minimum qualifications for each nominee set forth above, the NCG Committee will recommend director candidates to the full Board for nomination, or present director candidates to the full Board for consideration, to help ensure that:

A majority of the Board of Directors shall be “independent” as defined by the NYSE rules;

Each of its Audit, Compensation and NCG Committees shall be comprised entirely of independent directors; and

At least one member of the Audit Committee shall have such experience, education and qualifications necessary to qualify as an “audit committee financial expert” as defined by the rules of the SEC.

Consideration of Shareholder Nominated Directors

The NCG Committee’s current policy is to review and consider any director candidates who have been recommended by shareholders in compliance with the procedures established from time to time by the NCG Committee. All shareholder recommendations for director candidates must be submitted in writing to our Secretary at Sun Communities, Inc., 27777 Franklin Road, Suite 200, Southfield, MI 48034, who will forward all recommendations to the NCG Committee. All shareholder recommendations for director candidates for election at the 2014 annual meeting of shareholders must be submitted to our Secretary not earlier than the 120th day and not later than the 90th day prior to the first anniversary of the 2013 annual meetingprovided, however, that if the 2014 annual meeting is more than 30 days earlier or later than the first anniversary of the 2013 annual meeting, notice by the shareholder must be delivered not earlier than the 120th day and not later than the 90th day prior to the date of the 2014 annual meeting or, if the first public announcement of the date of the 2014 annual meeting is less than 100 days prior to the date of the 2013 annual meeting, the tenth day following the day on which public announcement of the date of the 2014 annual meeting is first made by us. All shareholder recommendations for director candidates must include the following information:

The shareholder’s name, address, number of shares owned, length of period held and proof of ownership;

The name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the proposed director candidate;

A description of the qualifications and background of the proposed director candidate which addresses the minimum qualifications and other criteria for Board membership as approved by the Board from time to time;

A description of all arrangements or understandings between the shareholder and the proposed director candidate;

The consent of the proposed director candidate (1) to be named in the proxy statement relating tofor our 2015 annual meeting, of stockholders and (2) to serve as a director if elected at such annual meeting; and

Any otherincluding the information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to the rules of the SEC.

Identifying and Evaluating Nominees

The NCG Committee may solicit recommendations for director nominees from any or all of the following sources: non-management directors, executive officers, third-party search firms or any other source it deems appropriate. The NCG Committee will review and evaluate the qualifications of any proposed director candidate that it is considering or has been recommended to it by a shareholder in compliance with the NCG Committee’s procedures for that purpose, and conduct inquiries it deems appropriate into the background of these proposed director candidates. When nominating a sitting director for re-election, the NCG Committee will consider the director’s performance on the Board and the director’s qualifications in respect to the criteria set forth above. Other than circumstances in which we are legally required by contract or otherwise to provide third parties withunder the ability to nominate directors, the NCG Committee will evaluate all proposed director candidates based on the same criteria and in substantially the same manner, with no regard to the source of the initial recommendation of the proposed director candidate.




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Boardcaptions “Board of Directors

The following list identifies each incumbent director and describes each person’s principal occupation for at least the past five years. Each of the directors has served continuously from the date of his or her election to the present time.

Name Age Office
Gary A. Shiffman58Chairman, Chief Executive Officer, President and Director
Stephanie W. Bergeron59Director
Paul D. Lapides58Director
Clunet R. Lewis66Director
Robert H. Naftaly75Director
Ronald L. Piasecki73Director
Arthur A. Weiss64Director
Gary A. Shiffman is our Chairman, Chief Executive Officer, and President, and has been an executive officer since our inception. He has been actively involved in the management, acquisition, construction and development of manufactured housing communities and has developed an extensive network of industry relationships over the past twenty years. He has overseen the acquisition, rezoning, development and marketing of numerous manufactured home expansion projects, as well as other types of income producing real estate. Additionally, Mr. Shiffman has significant direct holdings in various real estate asset classes, which include office, multi-family, industrial, residential and retail. Mr. Shiffman is an executive officer and a director of SHS and all of our other corporate subsidiaries. Mr. Shiffman is also a director of Origen Financial, Inc. (OTCBB: ORGN.BB).

Stephanie W. Bergeron has been a director since May 2007. She is currently a member of our Audit Committee. Ms. Bergeron, a registered certified public accountant, also serves as the President and Chief Executive Officer of Walsh College. Additionally, Ms. Bergeron serves as President and Chief Executive Officer of Bluepoint Partners, LLC, a firm providing financial consulting services. From December 1998 to December 2003, Ms. Bergeron served as Vice President and Treasurer and then Senior Vice President-Corporate Financial Operations of The Goodyear Tire & Rubber Company (“Goodyear”). Prior to joining Goodyear, Ms. Bergeron was a Vice President and Assistant Treasurer of DaimlerChrysler Corporation. She has also served on Audit Committees of several publicly traded companies (including as chairman) and a number of not for profit organizations. During her business career, Ms. Bergeron directed staff responsible for accounting, treasury, investor relations and tax matters. Crain’s Detroit Business named Bergeron one of its “Most Influential Women” in 1997 and in 2007.

Paul D. Lapides has been a director since December 1993. He is currently the chairman of our NCG Committee and a member of our Compensation Committee. Mr. Lapides is Director of the Corporate Governance Center in the Michael J. Coles College of Business at Kennesaw State University, where he is a professor of management- Incumbent Directors and entrepreneurship. Mr. Lapides is a director of OnBoard, Inc., and a member of the advisory boards of the Newman Real Estate Institute at Baruch College and the National Association of Corporate Directors. Mr. Lapides has extensive knowledge and experience in the areas of real estate and corporate governance. Mr. Lapides, a certified public accountant, has been involved in real-estate related activities including the management of a $3.0 billion national portfolio of income-producing real estate. As a published author or co-author of more than 100 articles and twelve books, Mr. Lapides is considered a well-respected authority in management and corporate governance related issues.

Clunet R. Lewis has been a director since December 1993. He is currently the chairman of our Audit Committee, a member of our Compensation Committee and our NCG Committee, and he serves as the Lead Independent Director. Mr. Lewis has also chaired Special Committees of our Independent Directors formed to review and evaluate strategic alternatives. Mr. Lewis is a retired commercial lawyer. While in private practice, Mr. Lewis specialized in mergers and acquisitions, debt financings, issuances of equity and debt securities, and corporate governance and control issues. Mr. Lewis has also served as Board Member, General Counsel, Chief Financial Officer, President, and Managing Director of other public and private companies.

Robert H. Naftaly has been a director since October 2006. He is currently the chairman of our Compensation Committee and a member of our Audit Committee. Mr. Naftaly is retired as President and Chief Executive Officer of PPOM, an independent operating subsidiary of Blue Cross Blue Shield of Michigan (“BCBSM”) and as Executive Vice President and Chief Operating Officer of BCBSM. Previously, Mr. Naftaly served as Vice President and General Auditor of Detroit Edison Company and was the Director of the Department of Management and Budget for the State of Michigan. He was a managing partner and founder of Geller, Naftaly, Herbach & Shapiro, a certified public accounting firm. In addition, Mr. Naftaly has served as a director of Meadowbrook Insurance Group, Inc. (NYSE:MIG) since 2002 where he is currently the Chairman of the Compensation Committee

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and a member of the Audit Committee and Finance Committee. Mr. Naftaly is a director of Walsh College, a non-profit institution that offers business and technology degrees and programs. Mr. Naftaly also serves as a director and the chair of the Audit Committee at Talmer Bancorp, Inc. and Talmer Bank. Mr. Naftaly, a certified public accountant, draws upon a wide experience of board membership and leadership experiences. Mr. Naftaly was appointed by Governor Jennifer Granholm, as Chairperson, State Tax Commission of the State of Michigan in 2002. Mr. Naftaly is a member of the American Institute of Certified Public Accountants and the Michigan Association of Certified Public Accountants. In 2002, he received the Distinguished Achievement Award from the Michigan Association of Certified Public Accountants.

Ronald L. Piasecki has been a director since May 1996, upon completion of our acquisition of twenty-five manufactured housing communities (the “Aspen Properties”) owned by affiliates of Aspen Enterprises, Ltd. (“Aspen”). He is currently a member of our NCG Committee. Mr. Piasecki was a director of Aspen Properties, which he co-founded in 1974. From 1974 until its sale to us in 1996, Mr. Piasecki was the managing partner in charge of property financing, legal and accounting relationships, resident relations, lobbying and syndication and sale of registered private equity limited partnership and participating mortgage interests. Prior to our acquisition, Aspen was one of the largest privately-held developers and owners of manufactured housing communities in the U.S. Mr. Piasecki has been involved in real estate development and management since 1968 when he began working in the tax department of the then accounting firm of Lybrand, Ross Brothers and Montgomery in Detroit. Mr. Piasecki then practiced law, specializing in real estate development, syndication and management, until 1980 when he became a full time partner in Aspen. Mr. Piasecki is currently engaged in the financing, development and management of real estate properties.

Arthur A. Weiss has been a director since October 1996. Since 1976, Mr. Weiss has practiced law with the law firm of Jaffe, Raitt, Heuer & Weiss, Professional Corporation, which represents us in various matters. Mr. Weiss is currently Chairman of the firm and a shareholder of Jaffe, Raitt, Heuer & Weiss, Professional Corporation. Mr. Weiss practices law in the area of business planning, taxation, estate planning and real estate law. Mr. Weiss is a director of several closely-held companies in the real estate industry, steel industry and technology industry and currently serves as a director of Talmer Bancorp, Inc. and Talmer Bank. Mr. Weiss is also a director and officer of a number of closely held public and private nonprofit corporations, which include the Jewish Federation of Metropolitan Detroit and the Detroit Symphony Orchestra, where he is on the executive committee, and serves as a treasurer and board member. Mr. Weiss received a MBA in finance and a post graduate LLM degree from New York University in taxation. In addition to being an author and frequent lecturer in the Detroit area, Mr. Weiss previously was an Adjunct Professor of Law at Wayne State University. Mr. Weiss was recognized in 2008 as one of the nation’s Top 100 Attorneys by Worth magazine and has been chosen over the last 10 years as one of the Super Lawyers.

In addition to each director’s qualifications, experience and skills outlined in their biographical data above and the minimum Board qualifications set forth above, our NCG Committee looked for certain attributes in each director nominee and based on these attributes, and the mix of attributes of the other incumbent directors, determined that each director nominee should serve on our Board. The NCG Committee does not require that each director nominee possess all of these attributes but rather that the Board is comprised of directors that, taken together, provide us with a variety and depth of knowledge, judgment and experience necessary to provide effective oversight and vision. These attributes include: (a) significant leadership skills as a chief executive officer and/or relevant board member experience, (b) real estate industry experience, (c) transactional experience, especially within the real estate industry, (d) relevant experience in property operations, (e) financial expertise, and (f) legal or regulatory experience. The following table lists the attributes of each director, as determined by the NCG Committee:
DirectorCEO/Board ExperienceReal Estate IndustryTransactional ExperienceProperty OperationsFinancial ExpertiseLegal / Regulatory
Gary A. ShiffmanXXXXX
Stephanie W. BergeronXXX
Paul D. LapidesXXXXXX
Clunet R. LewisXXXXX
Robert H. NaftalyXXX
Ronald L. PiaseckiXXXXXX
Arthur A. WeissXXXXX

To the best of our knowledge, as of the date of this Form 10-K, there are no material proceedings to which any director or nominee is currently a party, or has a material interest, adverse to the Company. Except as described below, to the best of our knowledge, during the past tenyears: (i) there have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions that are material to the evaluation of the ability or integrity of any director or nominee, (ii) no director or nominee has been the subject of a or a party to any judicial or administrative proceedings relating to an alleged violation of (a) mail or wire fraud; (b) fraud in connection with any business entity; (c) violations of federal or state securities, commodities, banking or

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insurance laws and regulations, and (iii) no director or nominee has been the subject of a or a party to any sanction or order of any self-regulatory organization, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

As announced on February 27, 2006, the U.S. Securities and Exchange Commission (the “SEC”) completed its inquiry regarding the accounting for our SunChamp investment during 2000, 2001 and 2002, and the entry of an agreed-upon Administrative Order (the “Order”). The Order required us to cease and desist from violations of certain non-intent based provisions of the federal securities laws, without admitting or denying any such violations. On February 27, 2006, the SEC filed a civil action against Mr. Shiffman, in his capacity as our Chief Executive Officer, Jeffrey P. Jorissen, our then (and now former as of February 2008) Chief Financial Officer and a former Controller in the United States District Court for the Eastern District of Michigan alleging various claims generally consistent with the SEC’s findings set forth in the Order. On July 21, 2008, the U.S. District Court for the Eastern District of Michigan approved a settlement whereby the SEC dismissed its civil lawsuit against Mr. Shiffman and our former Controller. The SEC concurrently reached a settlement with Mr. Jorissen.

Executive Officers

The persons listed below are our executive officers who served during the last completed fiscal year. Each is appointed by, and serves at the pleasure of, the Board.
Name Age Office
Gary A. Shiffman58Chairman, Chief Executive Officer, and President
Karen J. Dearing48Executive Vice President, Treasurer, Chief Financial Officer and Secretary
John B. McLaren42Executive Vice President and Chief Operating Officer
Jonathan M. Colman57Executive Vice President

Background information for Gary A. Shiffman is provided above. Background information for the other three current executive officers is set forth below.

Karen J. Dearing joined us in October 1998 as the Director of Finance where she worked extensively with accounting and finance matters related to our ground up developments and expansions. Ms. Dearing became our Corporate Controller in 2002, a Senior Vice President in 2006,Nominees,” “Management and Executive Vice President and Chief Financial Officer in February 2008. She was responsible for the overall management of our information technology, accounting and finance departments, and all internal and external financial reporting. Prior to working for us, Ms. Dearing had eight years of experience as the Financial Controller of a privately-owned automotive supplier specializing in critical automotive fasteners and five years’ experience as a certified public accountant with Deloitte & Touche.

John B. McLaren has been in the manufactured housing industry since 1995. Prior to his appointment as Executive Vice President and Chief Operating Officer in February 2008, Mr. McLaren served, since August 2005, as Senior Vice President of SHS with overall responsibility for homes sales and leasing. Prior to that, Mr. McLaren was a Regional Vice President for Apartment Investment & Management Company (“AIMCO”), a Real Estate Investment Trust engaged in leasing apartments. Prior to AIMCO, Mr. McLaren spent approximately three years as Vice President of Leasing & Service for SHS with responsibility for developing and leading our rental home program.

Jonathan M. Colman joined us in 1994 as Vice President-Acquisitions and became a Senior Vice President in 1995 and an Executive Vice President in March 2003. A certified public accountant, Mr. Colman has over twenty years of experience in the manufactured housing community industry. He has been involved in the acquisition, financing and management of over 75 manufactured housing communities for two of the 10 largest manufactured housing community owners, including Uniprop, Inc. during its syndication of over $90.0 million in public limited partnerships in the late 1980s. Mr. Colman is also a Vice President of all of our corporate subsidiaries.

To the best of our knowledge, as of the date of this Form 10-K, there are no material proceedings to which any executive officer is currently a party, or has a material interest, adverse to us. To the best of our knowledge, except with respect to Mr. Shiffman (as described above), during the past tenyears: (i) there have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions that are material to the evaluation of the ability or integrity of any executive officer, (ii) no executive officer has been the subject of a or a party to any judicial or administrative proceedings relating to an alleged violation of (a) mail or wire fraud; (b) fraud in connection with any business entity; (c) violations of federal or state securities, commodities, banking

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or insurance laws and regulations, and (iii) no any executive officer has been the subject of a or a party to any sanction or order of any self-regulatory organization, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

SectionCompensation -Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,

Section 16(a)” “Board of the Exchange Act, requires our directors, executive officersDirectors and beneficial ownersCorporate Governance - Board of more than 10%Directors and Committees” and “Board of our capital stock to file reportsDirectors and Corporate Governance - Consideration of ownership and changes of ownership with the SEC and the NYSE. Based solely on our review of the copies of such reports received by us, and written representations from certain reporting persons, we believe, that, during the year ended December 31, 2012, our directors, executive officers and beneficial owners of more than 10% of our Common Stock have complied with all filing requirements applicable to them.Director Nominees”

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Committee Composition and Charter

The Compensation Committee assistsUnless provided in an amendment to this Annual Report on Form 10−K, the Board in fulfilling its responsibilities for determining the compensation offered to our executive officers. The Compensation Committee, among other functions:

consults with executive management in developing a compensation philosophy;

reviews and approves the goals and objectives relevantinformation required by this Item is incorporated by reference to the compensation ofapplicable information in the Chief Executive Officer and other executive officers ensuring those goals are aligned withproxy statement for our short and long-term objectives;

reviews and approves salary,2015 annual and long-term incentive compensation performance objectives and payments formeeting, including the executive officers;

evaluates the performance of the executives in light of the goals and objectives of our executive compensation plans and establishes future compensation levels based upon this evaluation;

reviews and approves grants and awards to the executive officers and other participants under our equity based compensation plans; and

reviews and approves any employment agreements and severance agreements to be made with any existing or prospective executive officer.

The Compensation Committee has the authority to retain and terminate independent, third-party compensation consultants and to obtain independent advice and assistance from internal and external legal, accounting and other advisors. The Compensation Committee utilized the services of a compensation consultant in crafting its compensation policies for the 2011 compensation year and did not engage a compensation consultant firm for 2012. Each member of the Compensation Committee is independent under NYSE rules. A copy of the Compensation Committee Charter is availableinformation set forth under the “Investors-Officerscaptions “Management and Directors” section of our website at www.suncommunities.com.

In late 2010, theExecutive Compensation, Committee engaged FPL Associates (“FPL”), a nationally recognized consulting firm specializing in the real estate industry, to: (1) assist the Compensation Committee with identifying a peer group; (2) assess the overall framework of our executive compensation program; (3) assess the compensation levels compared to the selected peer group; and (4) provide guidance and recommendations in establishing the overall compensation structure and individual compensation opportunities that were in place during 2010 and those established for 2011. The compensation of our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer were reviewed and compared to a Public REIT Peer Group (the “Peer Group”) generally comparable to Sun in terms of asset class, size and/or geography. The Peer Group contained the following companies:

Associated Realty Corporation
Colonial Properties Trust
EastGroup Properties, Inc.
Equity LifeStyle Properties, Inc.

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Glimcher Realty Trust
Home Properties, Inc.
Mid-America Apartment Communities, Inc.
Post Properties, Inc.
Ramco-Gershenson Properties Trust
UMH Properties, Inc.

The compensation data for each company was reviewed over a three-year period and compared to our compensation data for the same period. Each compensation component and total compensation of our three officers generally ranked between the 25th percentile to median of the total compensation levels of the Peer Group. The Compensation Committee believed this to be an appropriate level of compensation, although the Compensation Committee does not set a specific target level of compensation for our officers in relation to peers. As part of the review, FPL and the Compensation Committee discussed long-term equity plans with multi-year performance components including the types of programs being utilized in the marketplace, an analysis of all the peer long-term incentive plans, and key considerations with regards to such a plan for us. The Compensation Committee evaluated the possibility of adding a long-term equity plan with multi-year performance metrics as a component of our compensation program in future years. FPL has not provided any other services to us.

Compensation Philosophy and Objectives

The goals and objectives of our executive compensation program are to attract and retain a skilled executive team to manage, lead and direct our personnel and capital to obtain the best possible economic results.

The executive compensation program supports our commitment to providing superior shareholder value. This program is designed to:

attract, retain and reward executives who have the motivation, experience and skills necessary to lead us effectively and encourage them to make career commitments to us;

base executive compensation levels on our overall financial and operational performance and the individual contribution of an executive officer to our success;

create a link between the performance of our stock and executive compensation; and

position executive compensation levels to be competitive with other similarly situated public companies including the real estate industry in general and manufactured housing REITs in particular.
Annual salary and incentive awards are intended to be competitive in the marketplace to attract and retain executives. Stock options and restricted stock awards are intended to provide longer-term motivation which has the effect of linking stock price performance to executive compensation. Restricted stock is also intended to provide post-retirement financial security in lieu of other forms of more costly supplemental retirement programs. We have not implemented any policies related to stock ownership guidelines for our executive management or for members of the Board.

Role of Executive Officers in Compensation Decisions

The Compensation Committee makes all decisions regarding the compensation of executive officers, including cash-based and equity-based incentive compensation programs. The Compensation Committee reviews the performance, and determines the annual incentive compensation, of the Chief Executive Officer. The Compensation Committee and the Chief Executive Officer annually review the performance metrics of the short and long-term performance plans and the performance of the other executive officers. The conclusions reached and recommendations based on the reviews of the other executive officers, including with respect to annual incentive and equity award amounts, are presented by the Chief Executive Officer to the Compensation Committee, which can exercise its discretion in modifying any recommended incentive or equity awards. From time to time, the Compensation Committee may request our Senior Vice President of Human Resources or Chief Financial Officer to collect publicly available information on compensation levels and programs for executives. In addition, our Chief Financial Officer analyzes implications of various executive compensation awards or plan designs.





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Compensation Components and Processes

In order to implement our executive compensation philosophy, the Compensation Committee exercises its independent discretion in reviewing and approving the executive compensation program as a whole, as well as specific compensation levels for each executive officer. Final aggregate compensation determinations for each fiscal year are generally made after the end of the fiscal year, after financial statements for such year become available. At that time, the Compensation Committee determines the annual incentive award, if any, for the past year’s performance, sets base salaries for those executive officers whose base salaries are not bound by employment agreements for the following fiscal year and makes awards of equity-based compensation, if any. Prior to the engagement of FPL in late 2010, the Compensation Committee did not formally benchmark executive compensation but did, on occasion, review salary and compensation information for companies with comparable market capitalization, number of employees and business sectors as published in the National Association of Real Estate Investment Trusts Compensation Survey (the “NAREIT Survey”) and various other compensation studies and surveys. The Compensation Committee used this information to gain a general understanding of current compensation practices and guidelines and did not tie its compensation decisions to any particular target or level of compensation noted in the NAREIT Survey or other surveys. The Compensation Committee considers (a) internal equity among executive officers, (b) market data for the positions held by these executives, (c) each executive’s duties, responsibilities, and experience level, (d) each executive’s performance and contribution to our success, and (e) cost to us when determining levels of compensation.

The Compensation Committee also considered the results of the advisory vote by shareholders on executive compensation, or the "say-on-pay" proposal, presented to shareholders at our July 19, 2012 Annual Meeting. As reported in our Form 8-K, filed with the SEC on July 25, 2012, approximately 98% of the shares that voted on the say-on-pay proposal approved our 2011 executive compensation. Based on the votes from our 2012 Annual Meeting, we will continue to offer an annual non-binding advisory vote on the executive compensation. Accordingly, the Compensation Committee made no direct changes to the Company's executive compensation program as a result of the say-on-pay vote and our executive compensation program for the year ended December 31, 2012 continued to focus on the factors and objectives described above.

The key components of executive officer compensation are base salary, annual incentive awards, and long-term equity incentive awards. Base salary is generally based on factors such as an individual officer’s level of responsibility, prior years’ compensation, comparison to compensation of other officers, and compensation provided at competitive companies and companies of similar size.

Annual incentive awards are cash bonuses that motivate the executive officers to maximize our annual operating and financial performance and reward participants based on annual performance. The Compensation Committee annually reviews the performance measures for determining award levels which include individual performance, our performance against budget and growth in FFO and CNOI, in each case as measured against targets established by the Compensation Committee. A definition of FFO and NOI is included under the heading “Supplemental Measures” in Item 7, and CNOI is described further below. The Compensation Committee, in its sole discretion, may make adjustments to the NAREIT definition of FFO in determining FFO performance targets and achievement. The specific performance measures of the 2012 annual incentive award plan are further enumerated below.

Long-term equity incentive awards are provided to the executive officers in order to increase their personal stake in our success and motivate them to enhance our long-term value while better aligning their interests with those of other shareholders. Equity awards are generally awarded in the form of restricted stock although stock options are utilized from time to time. The value of the restricted shares awarded is the price of a share of our stock as of the close of business on the grant date. On an annual basis the Compensation Committee reviews and approves the equity incentives to be issued to each of the executive officers for the prior year’s performance. There is no established target for long-term equity incentive awards for any of the executive officers either as a dollar value or percentage of their total compensation. Rather, the Compensation Committee reviews this component of each executive officer’s total compensation on an annual basis. As such, in December 2012, the Compensation Committee awarded 20,000 shares of restricted stock to Mr. Shiffman.

Equity incentive awards were awarded in relation to Company and individual performance in February 2013. Grants of restricted shares of 40,000, 15,000, 3,000, and 15,000 were awarded to Messrs. Shiffman, McLaren, Colman and Ms. Dearing, respectively. Restricted stock awards generally begin to vest after three to four years from the date of grant and then vest over the following four to five years. Our executive officers (as well as our employees that receive restricted stock awards) receive dividends on the restricted stock awards that have been granted to date, including restricted stock awards that have not vested.




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Employment Agreements

Gary A. Shiffman

In 2005, we entered into an employment agreement with Gary A. Shiffman pursuant to which Mr. Shiffman serves as our Chairman, Chief Executive Officer, and President. Mr. Shiffman’s employment agreement is for an initial term ending December 31, 2011 and is automatically renewable for successive one year terms thereafter unless either party timely terminates the agreement. Pursuant to this employment agreement, Mr. Shiffman is paid an annual base salary of $545,000, which will be increased by an annual cost of living adjustment beginning with calendar year 2006. In addition to his base salary and in accordance with the terms of his employment agreement, and in the sole discretion of the Compensation Committee, Mr. Shiffman is entitled to annual incentive compensation of up to 75% of his then current base salary if he satisfies certain individual and Company performance criteria established from time to time by the Compensation Committee. Mr. Shiffman also is entitled to annual incentive compensation of up to 25% of his then current base salary in the sole discretion of the Compensation Committee. The non-competition clauses of Mr. Shiffman’s employment agreement preclude him from engaging, directly or indirectly: (a) in the real estate business or any ancillary business during the period he is employed by us; and (b) in the manufactured housing community business or any ancillary business for a period of eighteen months following the period he is employed by us. However, Mr. Shiffman’s employment agreement does allow him to make passive investments relating to real estate in general or the housing industry in particular (other than in manufactured housing communities) during the period he is employed by us.

The initial term of the employment agreement of Mr. Shiffman expired on December 31, 2011 and the agreement was automatically renewed for a one-year term in both 2012 and 2013. The Compensation Committee has been negotiating the terms of a new employment agreement with Mr. Shiffman and expects that a new agreement will be finalized in the near term.

A copy of Mr.Shiffman’s employment agreement is attached as an exhibit to our periodic filings under the Exchange Act.

Karen J. Dearing

On March 7, 2011 with an effective date of January 1, 2011 (the “Effective Date”), we entered into an employment agreement with Karen J. Dearing pursuant to which Ms. Dearing serves as our Executive Vice President, Chief Financial Officer, Secretary, and Treasurer. Ms. Dearing’s employment agreement is for an initial term commencing on the Effective Date and ending on December 31, 2015. The employment agreement is automatically renewable for successive one year terms thereafter unless either party timely terminates the agreement. Pursuant to the employment agreement, Ms. Dearing is paid an annual base salary of $335,000 thereafter, subject to adjustments in accordance with the annual cost of living provided that if the base salary for the calendar year 2014 is less than 115% of the base salary for calendar year 2011, for 2014 and 2015 only, the annual increase in the base salary shall be the greater of five percent or the otherwise applicable cost of living adjustment. Upon signing the employment agreement, Ms. Dearing was paid a one-time signing bonus of $150,000. In addition to her base salary and in accordance with the terms of her employment agreement and in sole discretion of the Compensation Committee, Ms. Dearing is eligible for annual incentive compensation of up to 50% of her base salary if certain annual individual and/or Company performance criteria, as established by the Compensation Committee in its sole discretion, are met and up to 50% of her base salary at the sole discretion of the Compensation Committee. The clawback clause of Ms. Dearing’s employment agreement deems that the bonus payment or any other incentive compensation is not deemed fully earned and vested, and Ms. Dearing shall reimburse us if previously paid, to the extent such incentive compensation becomes subject to clawback pursuant to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or NYSE rules. The non-competition clauses of Ms. Dearing’s employment agreement preclude her from engaging, directly or indirectly, in the development, ownership, leasing, management, financing, or sales of manufactured housing communities or manufactured homes anywhere in the continental United States or Canada during the period she is employed by us and for a period of up to twenty four months following the period she is employed by us; provided, however, that if Ms. Dearing is terminated without “cause” the period of non-competition shall be reduced to twelve months following the period she is employed by us. Notwithstanding, Ms. Dearing’s employment agreement does allow her to make passive investments in publicly-traded entities engaged in our business during the period she is employed by us. See “Change in Control and Severance Payments” for a description of the terms of the employment agreement relating to change of control and severance payments.

A copy of Ms.Dearing’s employment agreement is attached as an exhibit to our periodic filings under the Exchange Act.







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John B. McLaren

On March 7, 2011 but effective as of the Effective Date, we entered into an employment agreement with John B. McLaren pursuant to which Mr. McLaren serves as our Executive Vice President and Chief Operating Officer. Mr. McLaren’s employment agreement is for an initial term commencing on the Effective Date and ending on December 31, 2015. The employment agreement is automatically renewable for successive one year terms thereafter unless either party timely terminates the agreement. Pursuant to the employment agreement, Mr. McLaren is paid an annual base salary of $345,000 in the first year, $375,000 in the second year, $400,000 in the third year, and $425,000 thereafter, subject to adjustments in accordance with the annual cost of living. Upon signing the employment agreement, Mr. McLaren was paid a one-time signing bonus of $150,000. In addition to his base salary and in accordance with the terms of his employment agreement and sole discretion of the Compensation Committee, Mr. McLaren is eligible for annual incentive compensation of up to 50% of his base salary if certain annual individual and/or Company performance criteria, as established by the Compensation Committee in its sole discretion, are met and up to 50% of his base salary at the sole discretion of the Compensation Committee. The clawback clause of Mr. McLaren’s employment agreement deems that the bonus payment or any other incentive compensation is not deemed fully earned and vested, and Mr. McLaren shall reimburse us if previously paid, to the extent such incentive compensation becomes subject to clawback pursuant to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or NYSE rules. The non-competition clauses of Mr. McLaren’s employment agreement preclude him from engaging, directly or indirectly, in the development, ownership, leasing, management, financing, or sales of manufactured housing communities or manufactured homes anywhere in the continental United States or Canada during the period he is employed by us and for a period of up to twenty four months following the period he is employed by us; provided, however, that if Mr. McLaren is terminated without “cause” the period of non-competition shall be reduced to twelve months following the period he is employed by us. Notwithstanding, Mr. McLaren’s employment agreement does allow him to make passive investments in publicly-traded entities engaged in our business during the period he is employed by us. See “Change in Control and Severance Payments” for a description of the terms of the employment agreement relating to change of control and severance payments.

A copy of Mr.McLaren’s employment agreement is attached as an exhibit to our periodic filings under the Exchange Act.

2012 Compensation
The base salaries for the named executive officers for the year ended December 31, 2012, were paid in accordance with existing employment agreements or arrangements.
For 2012, the Compensation Committee established the following targets for the executive officers in relation to annual incentive awards. The achievement of such targets was used to determine a portion of the executive’s annual incentive award. As indicated in each executive’s employment agreement, the payment of any or all of the incentive compensation, whether or not set targets are achieved, is in the sole discretion of the Compensation Committee. The structure of the bonus plans for Mr. Shiffman and Ms. Dearing are set forth in the tables below:

CEO Bonus Plan  % of Salary    
   30% 60% 100%    
ItemAllocation of Base Salary Met Exceed Excel 
Maximum Discretionary Award (2)
 Total Bonus Awarded
            
Achievement of individual goals$164,375
 $49,313
 $98,625
 $164,375
 
 $164,375
Company achievement of FFO (1)
328,750
 98,625
 197,250
 328,750
 
 
Compensation Committee Discretion (2)
164,375
 
 
 
 164,375
 150,625
Total$657,500
         $315,000



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CFO Bonus Plan  % of Salary    
   30% 60% 100%    
ItemAllocation of Base Salary Met Exceed Excel 
Maximum Discretionary Award (2)
 Total Bonus Awarded
            
Achievement of individual goals$86,430
 $25,929
 $51,858
 $86,430
 
 $86,430
Company achievement of FFO (1)
172,860
 51,858
 103,716
 172,860
 
 
Compensation Committee Discretion (2)
86,430
 
 
 
 86,430
 48,570
Total$345,720
         $135,000

(1)See Target Level Table below for achievement ranges.
(2)The Compensation Committee has the discretion to award the CEO and CFO a cash bonus in any amount up to a maximum of 25% of their base salary.

Based on the results achieved in 2012, including significant community acquisitions, capital transactions and improvements to the Company's balance sheet, the Compensation Committee, elected to exercise its sole discretion to award Mr. Shiffman and Ms. Dearing additional discretionary amounts of $150,625 and $48,750, respectively, bringing their total annual incentive bonuses to $315,000 and $135,000, respectively.

The individual goals for Mr. Shiffman were focused on strategic leadership of the organization and communication of our mission and values, implementation of systems and processes that assure physical, financial and human resources of our organization, providing strategic planning and guidance for growth through acquisitions and expansions and opportunistically accessing capital markets to fund growth and strengthen the balance sheet. The individual goals for Ms. Dearing were focused on evaluation and implementation of strategies associated with our capital requirements and structure including debt and equity transactions, effectively leading our accounting, tax and information technology departments, and creating and communicating along with the other executive officers, our strategic vision. The Compensation Committee determined that for fiscal year 2012 both Mr. Shiffman and Ms. Dearing “excelled” in the achievement of their individual goals and as such, achieved annual incentive awards of $164,375 and $86,430, respectively, for the achievement of this target.

The following tables provide a summary of the various target levels that we established compared to the actual results to evaluate the achievement of certain executive goals:
Target Ranges
Achievement LevelFFO
CNOI(2)
Revenue Producing Sites (“RPS”)
Met$3.19 - $3.21$178,899,120> 1,174
Exceed$3.22 - $3.25$179,793,616> 1,224
Excel$3.26 or greater$180,688,111> 1,274

 Company Results
 
Revised FFO(1)
 
CNOI(2)
 Revenue Producing Sites (“RPS”)
Result$3.14 $177,659,435 1,069
Achievement LevelNot achieved Not achieved Not achieved

(1)The reconciliation for Revised FFO as deemed by the Compensation Committee is below.
(2)CNOI is comprised of NOI/Gross Profit excluding any Gross Profit (Loss) on fixed asset home sales.











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The following table provides information regarding the charge that was excluded from the Compensation Committee’s calculation of Revised FFO (shown as diluted per share):

 Year Ended December 31, 2012
 Funds from operations (FFO)3.05
     Acquisition related costs0.14
     Benefit for state income taxes 
     Adjustments to reflect unbudgeted acquisitions and capital events(0.05)
 Revised FFO as deemed by the Compensation Committee$3.14

Targets for FFO achievement were developed from the Company's budget prior to any additional community acquisitions or the issuance of common and preferred stock. Adjustments were made to remove results from acquired properties, increase interest expense, reduce preferred distributions and reduce outstanding shares to calculate revised FFO using similar assumptions as used to create the original targets.

We achieved Revised FFO/share of $3.14 as adjusted by the Compensation Committee and as such Messrs. Shiffman and McLaren and Ms. Dearing did not receive an incentive payout with respect to this target.

The structure of the annual incentive plan for Mr. McLaren is set forth in the table below:

COO Bonus Plan  % of Salary    
   30% 60% 100%    
ItemAllocation of Base Salary Minimum Target Maximum 
Maximum Discretionary Award (2)
 Total Bonus Awarded
            
CNOI(1)
$93,750
 $28,125
 $56,250
 $93,750
 
  
Company achievement of FFO75,000
 22,500
 45,000
 75,000
 
 
Achievement of Revenue Producing Sites (“RPS”)18,750
 5,625
 11,250
 18,750
 
 
Compensation Committee Discretion (2)
187,500
       187,500
 150,000
Total$375,000
         $150,000

(1)See Target Ranges Table above for achievement ranges and definition of CNOI.
(2) The Compensation Committee has the discretion to award the COO a cash bonus in any amount up to a maximum of 25% of his base salary.

Combined net operating income for this purpose may not be the same as net operating income as disclosed in the accompanying financial statements as certain items that are not under Mr. McLaren’s control or that are recorded solely for GAAP financial purposes are excluded from the computation of combined net operating income. Mr. McLaren did not achieve an annual incentive award for CNOI, FFO, or Revenue Producing Sites. The Compensation Committee, in its sole discretion, elected to award Mr. McLaren a discretionary bonus of $150,000 due to his significant efforts with respect to our core portfolio, acquired communities and leadership of the operations, sales and human resource departments.

For Jonathan M. Colman:

Mr. Colman’s annual incentive award is determined in the sole discretion of the CEO and recommended to the Compensation Committee after review of his overall responsibilities, his individual performance during the year, the annual incentives of the other executive officers and his overall compensation. For the fiscal year 2012, the CEO recommended and the Compensation Committee approved an annual incentive award of $175,000 related to his work on the acquisition of the 14 communities completed in 2012.




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Tax and Accounting Implications

Deductibility of Executive Compensation.

Section 162(m) of the Code limits the deductibility on our tax return of compensation over $1.0 million to any of our named executive officers. In 2012, we paid compensation of approximately $0.3 million to Mr. Shiffman that was subject to section 162(m). We believe that, because we qualify as a REIT under the Code and therefore are not subject to federal income taxes on our income to the extent distributed, the payment of compensation that does not satisfy the requirements of section 162(m) has not and will not generally affect our net income. However, to the extent that compensation does not qualify for deduction of section 162(m), a larger portion of shareholder distributions may be subject to federal income taxation as dividend income rather than return of capital. We do not believe that section 162(m) has materially affected or will materially affect the taxability of shareholder distributions, although no assurance can be given in this regard due to the variety of factors that affect the tax position of each shareholder. For these reasons, section 162(m) is not a significant factor in the Compensation Committee’s compensation policy and practices.

409A Considerations.

We have also taken into consideration Code Section 409A in the design and implementation of our compensation programs. If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409A, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the executive is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit includible in income.

Risks Arising from Compensation Policies and Practices

Our senior management has assessed the enterprise-wide risks facing us and processes and procedures to mitigate such risks. In connection with such enterprise risk management process, our compensation programs were assessed, including program features that could potentially encourage excessive or imprudent risk taking and the specific aspects of our compensation policies and procedures which mitigate some of the material risks that might otherwise arise from such policies and procedures. Following this review, our management, Compensation Committee and full Board” “Board of Directors affirmatively determined that there were no risks arising from the compensation policies and practices that are reasonably likely to have a material adverse effect on us.

Corporate Governance - Director Compensation Tables
Directors who are also employees receive no additional compensation for their services as directors. During 2012, we paid directors that are not our employees the following annual fees: 

 Chairman Member
Annual Retainer$
 $60,000
Audit Committee$32,500
 $30,000
Compensation Committee$10,000
 $5,000
NCG Committee$10,000
 $5,000
Executive Committee$5,000
 $















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The following tables provide compensation information for each member of the Board for the year ended on December 31, 2012.

Name Fees Earned or Paid in Cash 
July 2012 Restricted Stock Award (1)
 Total
Stephanie W. Bergeron $90,000
 $74,080
 $164,080
Paul D. Lapides $69,521
 $74,080
 $143,601
Clunet R. Lewis $102,500
 $74,080
 $176,580
Robert H. Naftaly $100,000
 $74,080
 $174,080
Ronald L. Piasecki $65,000
 $74,080
 $139,080
Ted J. Simon(2)
 $56,250
 $
 $56,250
Arthur A. Weiss $62,260
 $74,080
 $136,340
(1)
This column represents the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation - Stock Compensation (“FASB ASC Topic 718”). For additional information on the valuation assumptions with respect to these grants, refer to Note 11 to our financial statements.
(2)
Ted J. Simon served as a director until July 19, 2012.
Name 
July 2012
Restricted Stock Award (1)
 Aggregate number of options outstanding at December 31, 2012
Stephanie W. Bergeron $74,080
 7,500
Paul D. Lapides $74,080
 11,000
Clunet R. Lewis $74,080
 12,000
Robert H. Naftaly $74,080
 7,500
Ronald L Piasecki $74,080
 4,500
Arthur A. Weiss $74,080
 3,000

(1)
This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For additional information on the valuation assumptions with respect to these grants, refer to Note 11 of our financial statements.

In February 2013, each of our non-employee directors was granted 1,800 shares of restricted stock as provided for in the First Amended and Restated 2004 Non-Employee Director Plan. All of the shares will vest on February 15, 2016.











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Summary Compensation Table,
The following table includes information concerning compensation for our named executive officers for the fiscal year ended December 31, 2012.
Name and Principal Position Year Salary 
Bonus (1)
 
Stock Awards (2)
 
All Other Compensation (3)
 Total
Gary A. Shiffman, Chairman,2012 $657,500
 $315,000
 $769,200
 $59,666
 $1,801,366
Chief Executive Officer, and2011 $637,385
 $637,385
 $1,882,000
 $47,571
 $3,204,341
President2010 $615,012
 $135,000
 $
 $47,370
 $797,382
            
Karen J. Dearing, Executive Vice2012 $345,720
 $135,000
 $204,000
 $5,502
 $690,222
President, Treasurer, Chief2011 $335,000
 $402,925
 $834,575
 $5,145
 $1,577,645
Financial Officer and Secretary2010 $290,096
 $
 $
 $5,594
 $295,690
            
John B. McLaren, Executive Vice2012 $375,000
 $150,000
 $408,000
 $5,279
 $938,279
President and Chief Operating2011 $345,000
 $381,150
 $1,113,925
 $5,194
 $1,845,269
Officer2010 $277,628
 $
 $
 $4,397
 $282,025
            
Jonathan M. Colman, Executive2012 $195,388
 $175,000
 $
 $2,982
 $373,370
Vice President2011 $191,521
 $75,000
 $
 $2,210
 $268,731
 2010 $186,864
 $15,000
 $
 $2,777
 $204,641

(1)
See “2012 Compensation” above for additional information regarding annual incentive payments awarded in 2012. Although the annual incentive payments were earned for 2012, 2011 and 2010 such payments were made in 2013, 2012 and 2011, respectively. The bonus in 2011 for Ms. Dearing and Mr. McLaren includes the $150,000 signing bonus as provided for in their respective employment agreements.

(2)
This column represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For additional information on the valuation assumptions with respect to these grants, refer to Note 11 of our financial statements for the year ended December 31, 2012.

(3)
Includes matching contributions to our 401(k) Plan of $5,000, $5,000, $2,703and $5,000 for each of Messrs. Shiffman, McLaren, Colman and Ms. Dearing, respectively; for the fiscal year ended December 31, 2012. Includes matching contributions to our 401(k) Plan of $3,862, $4,900, $1,916and $4,851 for each of Messrs. Shiffman, McLaren, Colman and Ms. Dearing, respectively; for the fiscal year ended December 31, 2011. Includes matching contributions to our 401(k) Plan of $4,775, $3,805, $2,489and $4,900 for each of Messrs. Shiffman, McLaren, Colman and Ms. Dearing, respectively, for the fiscal year ended December 31, 2010. Also includes premiums for life insurance and accidental death and disability insurance in the amount of $279 for each of Messrs. Shiffman, McLaren, Colman and Ms. Dearing for the fiscal year ended December 31, 2012; $294 for each of Messrs. Shiffman, McLaren, Colman and Ms. Dearing for the fiscal year ended December 31, 2011; and $288 for each of Messrs. Shiffman, McLaren and Colman and Ms. Dearing for the fiscal year ended December 31, 2010. Includes perquisites for sporting events valued in the amounts of $8,637 and $223 for Mr. Shiffman and Ms. Dearing respectively; for the fiscal year ended December 31, 2012. Includes perquisites for sporting events valued in the amounts of $3,415 for Mr. Shiffman for the fiscal year ended December 31, 2011. Includes perquisites for sporting events valued in the amounts of $3,307, $304, and $406 for Messrs. Shiffman and McLaren and Ms. Dearing for the fiscal year ended December 31, 2010. Includes $45,750, $40,000, and $39,000 paid to Mr. Shiffman by Origen Financial, Inc. for service on its Board of Directors for the fiscal years ended December 31, 2012, 2011 and 2010, respectively.

Grants of Plan Based Awards

We made the following grants of restricted shares of our common stock to certain named executive officers in 2012. The shares granted on February 20, 2012 vest 20 percent on February 20, 2016, 30 percent on February 20, 2017, 35 percent on February 20, 2018, 10 percent on February 20, 2019 and five percent on February 20, 2020. One-third of the shares granted on December 14, 2012 vest on each of December 14, 2016, 2017 and 2018.


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Name  Grant Date All Other Stock Awards: Number of Shares of Stocks or Units (#) 
Grant Date Fair Value of Stock Option Awards (1)
Gary A. Shiffman 12/14/2012 20,000
 $769,200
       
Karen J. Dearing 2/20/2012 5,000
 $204,000
       
John B. McLaren 2/20/2012 10,000
 $408,000
(1) Pursuant to SEC rules, this column represents the total fair market value of restricted stock awards, in accordance with FASB ASC Topic 718.

Outstanding Equity Awards at Fiscal Year-End

The following table provides certain information with respect to the value of all restricted share awards previously granted our named executive officers. None of the named executive officers hold any unexercised options.


Outstanding Equity Awards at Fiscal Year-End as of December31, 2012

  
Share Awards (1)
 
 Name Number of Shares or Units of Stock that Have Not Vested 
Market Value of Shares or Units of Stock that Have Not Vested (2)
 
Gary A. Shiffman 3,502
 $139,695
(3) 
  1,000
 $39,890
(4) 
  60,000
 $2,393,400
(6) 
  50,000
 $1,994,500
(8) 
  20,000
 $797,800
(10) 
      
Karen J. Dearing 350
 $13,962
(4) 
  6,500
 $259,285
(5) 
  10,000
 $398,900
(6) 
  7,500
 $299,175
(7) 
  10,000
 $398,900
(8) 
  5,000
 $199,450
(9) 
      
John B. McLaren 6,500
 $259,285
(5) 
  10,000
 $398,900
(6) 
  12,500
 $498,625
(7) 
  7,500
 $299,175
(8) 
  10,000
 $398,900
(9) 
      
Jonathan M. Colman 500
 $19,945
(4) 

(1)
All share awards begin to vest after either the third or fourth anniversary of the date of grant.

(2)
Value based on $39.89, the closing price of our common stock on NYSE on December 31, 2012.

(3)
Shares will vest on July 15, 2014.

(4)
Shares will vest on May 10, 2014.

(5)
3,500 shares vest on February 5, 2013, 2,000 shares vest on February 5, 2014 and the remaining 1,000 shares will vest in two equal installments on February 5, 2015 and February 5, 2018.

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SUN COMMUNITIES, INC.


(6)
One-third of the shares vest on each of July 29, 2013, July 30, 2014 and July 31, 2015.

(7)
One-third of the shares vest on each of January 1, 2015, January 1, 2016 and January 1, 2017.

(8)
One-third of the shares vest on each of May 6, 2015, May 6, 2016 and May 6, 2017.

(9) Twenty percent of the shares vest on February 20, 2016, thirty percent of the shares vest on February 20, 2017, thirty-five percent of the shares vest on February 20, 2018, ten percent of the shares vest on February 20, 2019 and five percent of the shares vest on February 20, 2020.

(10)
One-third of the shares vest on each of December 14, 2016, December 14, 2017 and December 14, 2018.

Option Exercises and Stock Vested During Last Fiscal Year

The following table sets forth certain information concerning shares held by our named executive officers that vested during the fiscal year ended on December 31, 2012:
  Stock Awards 
 Name Number of Shares Acquired on Vesting Value Realized on Vesting 
Karen J. Dearing 3,500
 $144,393
(1) 
  2,500
 $109,538
(2) 
      
John B. McLaren 3,500
 $144,393
(1) 
      
(1)
Value based on the average of the high and low of the share price on the vesting date, or the next business day if the vesting date was on a weekend.
(2)
Represents an award of phantom stock where a cash bonus is paid on the vesting date in lieu of shares. The cash bonus value is based on a 10 day average of our closing stock price prior to the vesting date.

Change in Control and Severance Payments
Messrs. Shiffman and McLaren and Ms. Dearing have contractual arrangements with us providing for severance and change in control payments. If any such executive is terminated without “cause,he or she is entitled to any accrued but unpaid salary, incentive compensation and benefits through the date of termination and a continuation of salary for up to eighteen months after termination in the case of Mr. Shiffman and up to twelve months in the case of Ms. Dearing and Mr. McLaren, subject to the execution of a general release and continued compliance with his or her non-competition and confidentiality covenants. If Messrs. Shiffman’s or McLaren’s or Ms. Dearing’s employment is terminated due to death or disability, he or she or his or her heirs, is entitled to any accrued but unpaid salary, incentive compensation and benefits through the date of termination or death and a continuation of salary for up to twenty four months, in the case of Mr. Shiffman and Ms. Dearing and in the case of Mr. McLaren eighteen months if the permanent disability or death is on or before the third anniversary of the Effective Date of his employment agreement, and up to twenty four months if such permanent disability or death occurs after the third anniversary of the Effective Date of his employment agreement. Upon a change of control and if Messrs. Shiffman or McLaren or Ms. Dearing is terminated within two years after the date of such change of control or in the case of Mr. Shiffman, less than two years remain under the term of his employment agreement and in the case of Ms. Dearing and Mr. McLaren, less than 18 months remain under the term of his or her employment agreement, then he or she would receive 2.99 times his or her annual salary and a continuation of health and insurance benefits for one year. Under any of the foregoing events of termination or change of control, all stock options and other stock based compensation awarded to the executive shall become fully vested and immediately exercisable.

The following tables describe the potential payments upon termination without cause, a termination due to death or disability or after a change of control (and associated termination of the executives) for the following named executive officers:




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Termination Without Cause
Name 
Cash Payment (1)
 
Acceleration of Vesting of Stock Awards (2)
 
Benefits (3)
 Total
Gary A. Shiffman $986,257
 $5,365,285
 $
 $6,351,542
Karen J. Dearing $345,720
 $1,569,672
 $
 $1,915,392
John B. McLaren $375,000
 $1,854,885
 $
 $2,229,885
Jonathan M. Colman $
 $
 $
 $

Termination Due to Death or Disability
Name 
Cash Payment (1)
 
Acceleration of Vesting of Stock Awards (2)
 
Benefits (3)
 Total
Gary A. Shiffman $1,315,010
 $5,365,285
 $
 $6,680,295
Karen J. Dearing $691,440
 $1,569,672
 $
 $2,261,112
John B. McLaren $562,500
 $1,854,885
 $
 $2,417,385
Jonathan M. Colman $
 $19,945
 $
 $19,945

Change of Control
Name 
Cash Payment (1)
 
Acceleration of Vesting of Stock Awards (2)
 
Benefits (3)
 Total
Gary A. Shiffman $1,965,940
 $5,365,285
 $10,899
 $7,342,124
Karen J. Dearing $1,033,703
 $1,569,672
 $279
 $2,603,654
John B. McLaren $1,121,249
 $1,854,885
 $10,899
 $2,987,033
Jonathan M. Colman $
 $19,945
 $
 $19,945
(1)
Assumes a termination on December 31, 2012 and payments based on base salary (without taking into account any accrued incentive based compensation) as of December 31, 2012 for each executive for the periods specified above.

(2)
Calculated based on a termination as of December 31, 2012 and the fair market value of our common stock on NYSE as of December 31, 2012.

(3)
Reflects continuation of health benefits, life insurance and accidental death and disability insurance for the periods specified above.

Compensation“Compensation Committee Interlocks and Insider ParticipationParticipation” and “Compensation Committee Report.” The information in the section of an amendment to this Annual Report on Form 10−K or the proxy statement for our 2015 annual meeting captioned “Compensation Committee Report” is incorporated by reference herein but shall be deemed furnished, not filed, and shall not be deemed to be incorporated by reference into any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934.

None of the members of the Compensation Committee has been or will be one of our officers or employees. We do not have any interlocking relationships between our executive officers and the Compensation Committee and the executive officers and compensation committees of any other entities, nor has any such interlocking relationship existed in the past.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Form 10-K.

Respectfully submitted,
Members of the Compensation Committee:
Robert H. Naftaly
Clunet R. Lewis
Paul D. Lapides

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SUN COMMUNITIES, INC.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SecurityUnless provided in an amendment to this Annual Report on Form 10−K, the information required by this Item is incorporated by reference to the applicable information in the proxy statement for our 2015 annual meeting, including the information set forth under the captions “Security Ownership of Certain Beneficial Owners and ManagementManagement” and “Securities Authorized for Issuance under Equity Compensation Plans.”

The following table sets forth, based upon information available to us, asof February 15, 2013, the shareholdings of: (a) each person known to us to be the beneficial owner of more than five percent (5%) of our common stock; (b) each of our directors; (c) each named executive officer listed in the Summary Compensation Table; and (d) all of our named executive officers and directors as a group:
 
Name and Address of Beneficial Owner
 
Amount and Nature of
Beneficial Ownership
 
Percent of
Outstanding Shares(1)
Gary A. Shiffman
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 1,909,898
(2)5.94%
Karen J. Dearing
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 60,149
 *
Jonathan M. Colman
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 32,206
 *
John B. McLaren
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 62,165
 *
Paul D. Lapides
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 15,874
(3)*
Clunet R. Lewis
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 65,476
(4)*
Ronald L. Piasecki
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 79,312
(5)*
Arthur A. Weiss
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 753,645
(6)2.37%
Robert H. Naftaly
27777 Franklin Road
Suite 2500
Southfield, Michigan 48034
 17,400
(7)*
Stephanie W. Bergeron
27777 Franklin Road
Suite 200
Southfield, Michigan 48034
 15,400
(8)*
FMR LLC and Edward C. Johnson 3d (9)
        82 Devonshire Street
        Boston, MA 02109
 4,457,106
 14.09%
The Vanguard Group, Inc. (10)
100 Vanguard Blvd.
Malvern, PA 19355
 3,471,436
 10.97%
Vanguard Specialized Funds - Vanguard REIT Index Fund (11)
100 Vanguard Blvd.
Malvern, PA 19355
 1,869,953
 5.91%
BlackRock, Inc. (12)
        40 East 52nd Street
        New York, NY 10022
 2,042,206
 6.45%
Anchor Capital Advisors LLC (13)
        One Post Office Square, Suite 3850
        Boston, MA 02109
 2,099,860
 6.64%
All executive officers and directors as a group (10 persons)(14)
 2,415,890
 7.50%

* Less than one percent (1%) of the outstanding shares.



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SUN COMMUNITIES, INC.

(1)In accordance with SEC regulations, the percentage calculations are based on 31,642,521 shares of common stock issued and outstanding as of February 15, 2013 plus shares of common stock which may be acquired pursuant to options exercisable, common OP Units and Aspen preferred OP Units of Sun Communities Operating Limited Partnership that are indirectly convertible into common stock, within 60 days of February 15, 2013, by each individual or group listed. As of February 15, 2013, each Aspen preferred OP Unit was indirectly convertible into 0.397 shares of common stock.
(2)Includes: (a) 394,141 Common OP Units convertible into 394,141 shares of common stock; (b) 453,841 shares of common stock owned by certain limited liability companies of which Mr. Shiffman is a member and a manager, and (c) 141,794 Common OP Units convertible into 141,794 shares of common stock owned by certain limited liability companies of which Mr. Shiffman is a member and a manager.
(3)Includes 9,500 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.
(4)Includes (a) 20,000 Common OP Units convertible into 20,000 shares of common stock, and (b) 6,000 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.
(5)Includes: (a) 17,437 Common OP Units convertible into 17,437 shares of common stock, (b) 139,735 Series A-1 preferred OP Units convertible into 139,735 Common OP Units, which in turn were convertible into 55,475 shares of common stock as of February 15, 2013, and (c) 3,000 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.
(6)Includes (a) 6,938 Common OP Units convertible into 6,938 shares of common stock, (b) 2,000 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013, (c) 453,841 shares of common stock owned by certain limited liability companies of which Mr. Weiss is a manager, (d) 141,794 Common OP Units convertible into 141,794 shares of common stock owned by a limited liability company of which Mr. Weiss is a manager, (e) 3,327 shares of common stock held by the 1997 Shiffman Charitable Remainder Unitrust for which Mr. Weiss is a Co-Trustee, (f) a beneficial interest only in 10,000 Common OP Units convertible into 10,000 shares of common stock, and (g) 86,810 shares of common stock and 40,287 common OP Units convertible into 40,287 shares of common stock held by the Gary A. Shiffman 2012 Irrevocable Family Trust, of which Mr. Weiss is the Trustee.  Mr. Weiss does not have a pecuniary interest in any of the 1997 Shiffman Charitable Remainder Unitrust, the Gary A. Shiffman 2012 Irrevocable Family Trust or the limited liability companies described above and, accordingly, Mr. Weiss disclaims beneficial ownership of the 543,978 shares of common stock and the 182,081 common OP Units held by such entities.
(7)Includes 6,000 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.
(8)Includes 6,000 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.
(9)According to the Schedule 13G/A for the year ended December 31, 2012 and filed with the SEC on February 14, 2013, both FMR LLC, in its capacity as a parent holding company or control person, and Edward C. Johnson 3d, the Chairman of FMR LLC, beneficially own 4,457,106 shares of our common stock. According to the same filing, Fidelity Management & Research Company, a subsidiary of FMR LLC, in its capacity as an investment advisor, beneficially owns 2,801,420 shares of our common stock.
(10)According to the Schedule 13G/A for the year ended December 31, 2012 and filed with the SEC on February 11, 2013, The Vanguard Group, Inc., in its capacity as an investment advisor, beneficially owns 3,471,436 shares of our common stock.
(11)According to the Schedule 13G/A for the year ended December 31, 2012 and filed with the SEC on February 14, 2013, Vanguard Specialized Funds- Vanguard REIT Index Fund, in its capacity as an investment advisor, beneficially owns 1,869,953 shares of our common stock.
(12)According to the Schedule 13G/A for the year ended December 31, 2012 and filed with the SEC on February 5, 2013, BlackRock, Inc., in its capacity as a parent holding company or control person, beneficially owns 2,042,206 shares of our common stock.
(13)According to the Schedule 13G/A for the year ended December 31, 2012 and filed with the SEC on February 13, 2013, Anchor Capital Advisors LLC, in its capacity as an investment advisor, beneficially owns 2,099,860 shares of our common stock.
(14)Includes (a) 630,597 common OP Units convertible into 630,597 shares of common stock, (b) 139,735 Series A-1 preferred OP Units convertible into 139,735 common OP Units, which in turn were convertible into 55,475 shares of common stock as of February 15, 2013, and (c) 32,500 shares of common stock which may be acquired pursuant to options exercisable within 60 days of February 15, 2013.

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SUN COMMUNITIES, INC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Relationship with Equity Affiliates

We have entered intoUnless provided in an amendment to this Annual Report on Form 10−K, the following transactions with Origen Financial Services, LLC (“OFS LLC”):

Investment in OFS LLC. We entered into an agreement with four unrelated companies and contributed cash of approximately $0.6 million towardsinformation required by this Item is incorporated by reference to the formation of a limited liability company. OFS LLC purchased the origination platform of Origen. The purpose of the venture is to originate manufactured housing installment contracts for its members. We accountedproxy statement for our investment in OFS LLC using2015 annual meeting, including the equity method of accounting which we have since suspended. As of December 31, 2012, we had an ownership interest in OFS LLC of 22.9 percent, and the carrying value of our investment was zero.

Loan Origination, Sale and Purchase Agreement. OFS LLC agreed to fund loans that meet our underwriting guidelines and then transfer those loans to us pursuant to a Loan Origination, Sale and Purchase Agreement. We paid OFS LLC a fee of approximately $650 per loan pursuant to a Loan Origination, Sale and Purchase Agreement which totaled approximately $0.1 million during the year ended December 31, 2012. We purchased, at par, $6.4 million of these loans during the year ended December 31, 2012.

We have entered into the following transactions with Origen:

Investment in Origen: We own 5,000,000 shares of Origen common stock and Shiffman Origen LLC (which is owned by the Milton M. Shiffman Spouse’s Marital Trust, Gary A. Shiffman (our Chairman and Chief Executive Officer), and members of Mr. Shiffman’s family) owns 1,025,000 shares of Origen common stock. We accounted for our investment in Origen using the equity method of accounting which we have since suspended. As of December 31, 2012 we had an ownership interest in Origen of approximately 19 percent, and the carrying value of our investment was zero.

Board Membership. Gary A. Shiffman, our Chairman and Chief Executive Officer is a board member of Origen.
Lease of Principal Executive Offices

Gary A. Shiffman, together with certain of his family members, indirectly owns a 21 percent equity interest in American Center LLC, the entity from which we lease office space for our principal executive offices. Arthur A. Weiss, one of our directors, owns less than one percent indirect interest in American Center LLC. As of October 2011, we lease approximately 48,200 rentable square feet. The term of the lease is until October 31, 2016, with an option to renew for an additional five years. The annual base rentinformation set forth under the current lease is $18.61 per square foot (gross)captions “Certain Relationships and will remain this amount through October 31, 2014. From November 1, 2014 to August 31, 2015, the annual base rent will be $18.72 per square foot (gross)Related Transactions and then from September 1, 2015 to October 31, 2016, the annual base rent will be $17.92 per square foot (gross). We also have a temporary lease for $9.58 per square foot (gross) until April 2013 on 10,500 rentable square feet. Mr. ShiffmanDirector Independence,” “Board of Directors and Mr. Weiss may have a conflict of interest with respect to their obligations as one of our officers and/or directors and their ownership interest in American Center LLC.

Loan Funding Agreement with Talmer Bank

Each of Robert H. Naftaly and Arthur A. Weiss, who serve on our board of directors, is also a director of each of Talmer Bancorp, Inc. and its primary operating subsidiary, Talmer Bank. Each of Mr. Naftaly, Mr. Weiss and Mr. Shiffman also owns less than one percent of Talmer Bancorp, Inc.'s common stock. In January 2013, we entered into an agreement with Talmer Bank under which we may refer purchasers of homes in our communities to Talmer Bank to obtain loans to finance their home purchases. We do not receive referral fees or other cash compensation under the agreement. If Talmer Bank makes loans to purchasers referred by us under the agreement, those purchasers default on their loans and Talmer Bank repossesses the homes securing such loans, we have agreed to purchase from Talmer Bank each such repossessed home for a price equal to 100% of the amount under each such loan, subject to certain adjustments; provided that the maximum outstanding principal amount of the loans subject to the agreement may not exceed $10 million. In addition, we have agreed to waive all site rent that would otherwise be due from Talmer Bank so long as it owns any homes on which loans were made pursuant to the agreement. The agreement expires November 1, 2013, but may be extended by mutual agreement of Talmer Bank and us.





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SUN COMMUNITIES, INC.

Legal Counsel

During 2012, Jaffe, Raitt, Heuer &Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss, one of our directors, is the Chairman of theCorporate Governance - Board of Directors and a shareholderCommittees” and “Board of such firm. We incurred legal feesDirectors and expensesCorporate Governance - Board Leadership Structure and Independence of approximately $3.4 million in 2012 in connection with services rendered by Jaffe, Raitt, Heuer &Weiss, Professional Corporation. Non-Employee Directors.”

Tax Consequences Upon Sale of Properties

Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of 24 properties (four of which have been sold) from partnerships previously affiliated with him (the “Sun Partnerships”). Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those of us and our public stockholders on the sale of any of the Sun Partnerships. Therefore, we have different objectives than Mr. Shiffman regarding the appropriate pricing and timing of any sale of those properties.

Policies and Procedures for Approval of Related Party Transactions

None of our executive officers or directors (or any family member or affiliate of such executive officer or director) may enter into any transaction or arrangement with us that reasonably could be expected to give rise to a conflict of interest without the prior approval of the NCG Committee. Any such transaction or arrangement must be promptly reported to the NCG Committee or the full Board. Any such disclosure provided by an executive officer or director is reviewed by the NCG Committee and approved or disapproved. In determining whether to approve such a transaction or arrangement, the NCG Committee takes into account, among other factors, whether the transaction was on terms no less favorable to us than terms generally available to third parties and the extent of the executive officer’s or director’s involvement in such transaction or arrangement.

The current policy was adopted and approved in 2004. All related party transactions disclosed above were approved by either the NCG Committee or the full Board.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees

Aggregate feesUnless provided in an amendment to this Annual Report on Form 10−K, the information required by this Item is incorporated by reference to the proxy statement for professional services rendered byour 2015 annual meeting, including the information set forth under the caption “Ratification of Selection of Grant Thornton LLP, our independent auditors, for the fiscal years ended December 31, 2012 and 2011 were as follows:LLP.”

Category FYE 12/31/12 FYE 12/31/11
Audit Fees: For professional services rendered for the audit of the Company’s financial statements, the audit of internal controls relating to Section 404 of the Sarbanes-Oxley Act, the reviews of the quarterly financial statements and consents $734,170
 $601,908
Audit-Related Fees: For professional services rendered for accounting assistance with new accounting standards and potential transactions and other SEC related matters $7,019
 $32,020
Tax Fees $
 $
All Other Fees $
 $

The Audit Committee has a policy concerning the pre-approval of audit and non-audit services to be provided by our independent auditors. The policy requires that all services provided by the independent auditors to us, including audit services, audit-related services, tax services and other services, must be pre-approved by the Audit Committee. In some cases, pre-approval is provided by the full Audit Committee for up to a year, and relates to a particular category or group of services and is subject to a particular budget. In other cases, specific pre-approval is required. The Audit Committee approved all audit and non-audit related services provided to us by Grant Thornton during the 2011 and 2012 fiscal years.


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SUN COMMUNITIES, INC.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed herewith as part of this Form 10-K:

1.    Financial Statements.
A list of the financial statements required to be filed as a part of this Form 10‑K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith.

2.    Financial Schedules
A list of the financial statement schedules required to be filed as a part of this Form 10‑K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith.

3.    Exhibits.
A list of the exhibits required by Item 601 of Regulation S‑K to be filed as a part of this Form 10-K is shown on the “Exhibit Index” filed herewith.


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SUN COMMUNITIES, INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
SUN COMMUNITIES, INC.
(Registrant)
Date: February 25, 2013March 2, 2015By/s/Gary A. Shiffman
   
Gary A. Shiffman
Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 Name Capacity Date
/s/Gary A. Shiffman Chief Executive Officer President and Chairman of the Board of Directors (Principal Executive Officer) February 25, 2013March 2, 2015
 Gary A. Shiffman    
/s/Karen J. Dearing Executive Vice President, Chief Financial Officer, Treasurer, Secretary (Principal Financial Officer and Principal Accounting OfficerOfficer) February 25, 2013March 2, 2015
 Karen J. Dearing    
/s/Stephanie W. Bergeron Director February 25, 2013March 2, 2015
 Stephanie W. Bergeron
/s/James R. GoldmanDirectorMarch 2, 2015
James R. Goldman
/s/Brian M. HermelinDirectorMarch 2, 2015
Brian M. Hermelin
/s/Ronald A. KleinDirectorMarch 2, 2015
Ronald A. Klein    
/s/Paul D. Lapides Director February 25, 2013March 2, 2015
 Paul D. Lapides    
/s/Clunet R. Lewis Director February 25, 2013March 2, 2015
 Clunet R. Lewis
/s/Robert H. NaftalyDirectorFebruary 25, 2013
Robert H. Naftaly    
/s/Ronald L. Piasecki Director February 25, 2013March 2, 2015
 Ronald L. Piasecki
/s/Randall K. RoweDirectorMarch 2, 2015
Randall K. Rowe    
/s/Arthur A. Weiss Director February 25, 2013March 2, 2015
 Arthur A. Weiss    




7866

SUN COMMUNITIES, INC.

EXHIBIT INDEX

Exhibit Number Description Method of Filing
2.1 Master Contribution Agreement dated April 1, 2011 by and among Sun Communities, Inc., Sun Communities Operating Limited Partnership, and Kentland Corporation, Wilbur A. Lettinga, William B. Lettinga and Michael Lettinga (23)
2.2 Contribution Agreement (Tamarac Village) dated as of May 5, 2011 by and among Tamarac Village Holding Company MHP Holding Company #2, LLC, Tamarac Village Holding Company MHP Holding Company #1, LLC, Tamarac Village Mobile Home Park Limited Partnership, and  Sun Communities Operating Limited Partnership (form of Contribution Agreement for the following properties: Apple Carr Village, Brookside Village, Dutton Mill Village, Hickory Hills Village, Holiday West Village, Leisure Village, Oak Island Village, Southwood Village, Sycamore Village, Warren Dunes Village and Waverly Shores Village) (23)
2.3 Contribution Agreement (Country Meadows Village) dated as of May 5, 2011 by and among Country Meadows Village Holding Company MHP Holding Company #2, LLC, Country Meadows Village Holding Company MHP Holding Company #1, LLC, Country Meadows Village Mobile Home Park Limited Partnership, and  Sun Communities Operating Limited Partnership (form of Contribution Agreement for the following properties: Cider Mill Village, Country Hills Village, Hidden Ridge RV Park, Pinebrook Village and Windsor Woods Village) (23)
2.4 Agreement of Sale dated July 27, 2012 between Northville Crossing Venture L.L.C. and Sun Northville Crossing LLC (29)
2.5 Contribution Agreement dated October 3, 2012, among Sun Communities Operating Limited Partnership, Rudgate Silver Springs Company, L.L.C., Rudgate West Company Limited Partnership, Rudgate East Company Limited Partnership, Rudgate East Company II Limited Partnership and Rudgate Hunters Crossing, LLC (30)
2.6 Limited Liability Company Interests Assignment Agreement dated October 22, 2012, among Sun Communities Operating Limited Partnership, PCGRV, LLC and Keith Amigos, Inc. (31)
2.7 Omnibus Agreement, dated December 9, 2012, by and among Sun Communities Operating Limited Partnership, certain wholly owned subsidiaries of Sun Communities Operating Limited Partnership, Robert C. Morgan, Robert Moser, Ideal Private Resorts LLC and Morgan Fiesta Key LLC, Gwynns Island RV Resort LLC, Indian Creek RV Resort LLC, Lake Laurie RV Resort LLC, Newpoint RV Resort LLC, Peters Pond RV Resort Inc., Seaport LLC, Virginia Tent LLC, Wagon Wheel Maine LLC, Westward Ho RV Resort LLC and Wild Acres LLC, as amended by a First Amendment dated December 13, 2012 and a Second Amendment dated February 8, 2013 (22)
2.8 Contribution Agreement, dated December 9, 2012, by and among Sun Communities Operating Limited Partnership, certain wholly owned subsidiaries of Sun Communities Operating Limited Partnership, Indian Creek RV Resort LLC, Lake Laurie RV Resort LLC, Wagon Wheel Maine LLC and Wild Acres LLC, as amended by a First Amendment dated December 13, 2012, a Second Amendment dated December 20, 2012 and a Third Amendment dated February 8, 2013 (22)
2.9 Contribution Agreement, dated December 9, 2012, by and among Sun Communities Operating Limited Partnership, certain wholly owned subsidiaries of Sun Communities Operating Limited Partnership, Gwynns Island RV Resort LLC, Newpoint RV Resort LLC, Peters Pond RV Resort Inc., Seaport LLC, Virginia Tent LLC and Westward Ho RV Resort LLC, as amended by a First Amendment dated December 13, 2012, a Second Amendment dated December 31, 2012, a Third Amendment dated January 28, 2013 and a Fourth Amendment dated February 8, 2013 (22)
2.10 Amended and Restated Indemnity Agreement, dated February 8, 2013 (22)
3.1 Amended and Restated Articles of Incorporation of Sun Communities, Inc (1)
3.2 Articles Supplementary, dated October 16, 2006 (12)
3.3 First Amended and Restated Bylaws (16)
3.4 Articles of Amendment dated June 13, 1997 (32)
3.5 Articles Supplementary designating 7.125% Series A Cumulative Redeemable Preferred Stock dated November 9, 2012 (32)
4.1 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series of Preferred Stock (6)
4.2 Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series of Preferred Stock and Fixing Distribution and other Rights in such Series (15)
4.3 Rights Agreement, dated as of June 2, 2008, between Sun Communities, Inc. and Computershare Trust Company, N.A. as Rights Agent (15)
4.4 Sun Communities, Inc. Equity Incentive Plan# (17)
4.5 Form of Senior Indenture (19)
4.6 Form of Subordinated Indenture (19)
4.7 Registration Rights Agreement dated June 23, 2011 among Sun Communities, Inc., and the holders of Series A-1 Preferred Units that are parties thereto (23)
4.8 Form of certificate evidencing common stock (32)
4.9 Form of certificate evidencing 7.125% Series A Cumulative Redeemable Preferred Stock (32)
4.10 Articles Supplementary canceling and reclassifying 9.125% Series A Cumulative Redeemable Perpetual Preferred Stock dated November 9, 2012 (33)
4.11 Registration Rights Agreement dated February 8, 2013 among Sun Communities, Inc., and the holders of Series A-3 Preferred Units that are parties thereto (22)
10.1 Form of Stock Option Agreement between Sun Communities, Inc. and certain directors, officers and other individuals# (1)
10.2 Amended and Restated 1993 Non-Employee Director Stock Option Plan# (2)
10.3 Form of Non-Employee Director Stock Option Agreement between Sun Communities, Inc. and certain directors# (2)
10.4 Second Amended and Restated Agreement of Limited Partnership of Sun Communities Operating Limited Partnership (3)
10.5 Long Term Incentive Plan# (4)
Exhibit NumberDescriptionMethod of Filing
2.1Omnibus Agreement, dated July 30, 2014, by and among Green Courte Real Estate Partners, LLC,
GCP REIT II, GCP REIT III, American Land Lease, Inc., Asset Investors Operating Partnership, L.P., Sun Communities, Inc., Sun Communities Operating Limited Partnership and Sun Home Services, Inc.*
Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.2Contribution Agreement, dated July 30, 2014, by and between Green Courte Real Estate Partners, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.3Contribution Agreement, dated July 30, 2014, by and between Green Courte Real Estate Partners, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.4Contribution Agreement, dated July 30, 2014, by and between Green Courte Real Estate Partners, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.5Contribution Agreement, dated July 30, 2014, by and between Green Courte Real Estate Partners, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.6Membership Interest Purchase Agreement, dated July 30, 2014, between Asset Investors Operating Partnership, L.P. and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.7Membership Interest Purchase Agreement, dated July 30, 2014, between GCP REIT III and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.8Merger Agreement, dated July 30, 2014, by and between Sun Communities, Inc., Sun Maryland, Inc. and GCP REIT II*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.9Merger Agreement, dated July 30, 2014, by and between Sun Communities, Inc., Sun Maryland, Inc. and GCP REIT III*Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.10Subscription Agreement, dated July 30, 2014, by and among Green Courte Real Estate Partners III, LLC, Sun Communities, Inc. and Sun Communities Operating Limited PartnershipIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
2.11Contribution Agreement (Deerwood I) dated December 4, 2014, by and among Deerwood I Sponsor, LLC, Deerwood I Holding, LLC, Deerwood I Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.12Contribution Agreement (Deerwood II) dated December 4, 2014, by and among Deerwood II Sponsor, LLC, Deerwood II Holding, LLC, Deerwood II Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.13Contribution Agreement (Hamptons) dated December 4, 2014, by and among Hamptons Sponsor, LLC, Hamptons Holding, LLC, Hamptons Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.14Contribution Agreement (Palm Key Village) dated December 4, 2014, by and among Palm Key Village Sponsor, LLC, Palm Key Village Holding, LLC, Palm Key Village Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.15Contribution Agreement dated December 4, 2014, by and among 481 Associates, Route 27 Associates, Ltd. and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.16Contribution Agreement (Southport Springs) dated December 4, 2014, by and among Southport Springs Sponsor, LLC, Southport Springs Holding, LLC, Southport Springs Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
2.17Contribution Agreement (Windmill Village) dated December 4, 2014, by and among Windmill Village Sponsor, LLC, Windmill Village Holding, LLC, Windmill Village Park, LLC and Sun Communities Operating Limited Partnership*Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 10, 2014
3.1Amended and Restated Articles of Incorporation of Sun Communities, Inc.Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33 69340
3.2Articles Supplementary of Board of Directors of Sun Communities, Inc. Designating a Series of Preferred StockIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated September 29, 1999
3.3Articles Supplementary, dated October 16, 2006Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated October 16, 2006
3.4Articles Supplementary of Board of Directors Classifying and Designating a Series of Preferred Stock as Junior Participating Preferred Stock and Fixing Distribution and Other Preferences and Rights of Such SeriesIncorporated by reference to Sun Communities, Inc.'s Registration Statement on Form 8-A dated June 3, 2008

7967

SUN COMMUNITIES, INC.

Exhibit Number Description Method of Filing
10.6 Second Amended and Restated 1993 Stock Option Plan# (5)
10.7 One Hundred Third Amendment to Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (6)
10.8 One Hundred Eleventh Amendment to Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (7)
10.9 One Hundred Thirty-Sixth Amendment to Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (7)
10.10 One Hundred Forty-Fifth Amendment to Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (7)
10.11 Lease, dated November 1, 2002, by and between the Operating Partnership as Tenant and American Center LLC as Landlord (8)
10.12 Form of Loan Agreement dated June 9, 2004 by and between Sun Pool 8 LLC, as Borrower, and BANK OF AMERICA, N.A., as Lender (9)
10.13 Schedule identifying substantially identical agreements to Exhibit 10.12 (9)
10.14 Form of Loan Agreement dated June 9, 2004 by and between Sun Continental Estates LLC as Borrower, and BANK OF AMERICA, N.A., as Lender (9)
10.15 Schedule identifying substantially identical agreements to Exhibit 10.14 (9)
10.16 Form of Loan Agreement dated June 9, 2004 by and between Sun Indian Creek LLC, as Borrower, and BANK OF AMERICA, N.A., as Lender (9)
10.17 Schedule identifying substantially identical agreements to Exhibit 10.16 (9)
10.18 Fixed Facility Note dated April 5, 2004 made by Sun Secured Financing LLC, Aspen – Ft. Collins Limited Partnership and Sun Secured Financing Houston Limited Partnership, in favor of ARCS Commercial Mortgage Co., L.P., in the original principal amount of $77,362,500 (9)
10.19 Fixed Facility Note dated April 28, 2004 made by Sun Secured Financing LLC, Sun Secured Financing Houston Limited Partnership, Aspen – Ft. Collins Limited Partnership, Sun Communities Finance LLC, Sun Holly Forest LLC and Sun Saddle Oak LLC, in favor of ARCS Commercial Mortgage Co., L.P., in the original principal amount of $100,000,000 (9)
10.20 Variable Facility Note dated April 28, 2004 made by Sun Secured Financing LLC, Sun Secured Financing Houston Limited Partnership, Aspen – Ft. Collins Limited Partnership, Sun Communities Finance LLC, Sun Holly Forest LLC and Sun Saddle Oak LLC, in favor of ARCS Commercial Mortgage Co., L.P., in the original principal amount of $60,275,000 (9)
10.21 One Hundred Seventy-Second Amendment to Second Amended and Restated Limited Partnership Agreement of the Operating Partnership (10)
10.22 Form of Restricted Stock Award Agreement# (10)
10.23 Employment Agreement between Sun Communities, Inc. and Gary A. Shiffman, dated as of January 1, 2005# (11)
10.24 Future Advance, Renewal and Consolidation Promissory Note dated November 15, 2006 made by Miami Lakes Venture Associates in favor of Lehman Brothers Bank, FSB in the original principal amount of $54,000,000 (13)
10.25 Notice of Future Advance, Mortgage Modification, Extension and Spreader Agreement and Security Agreement dated November 15, 2006 made by Miami Lakes Venture Associates in favor of Lehman Brothers Bank, FSB (13)
10.26 Promissory Note dated January 4, 2007 made by High Point Associates, L.P., in favor of Lehman Brothers Bank, FSB in the original principal amount of $17,500,000 (13)
10.27 Mortgage and Security Agreement dated January 4, 2007 made by High Point Associates, L.P., in favor of Lehman Brothers Bank, FSB (13)
10.28 Promissory Note dated January 5, 2007 made by Sea Breeze Limited Partnership in favor of Lehman Brothers Bank, FSB in the original principal amount of $20,000,000 (13)
10.29 Mortgage and Security Agreement dated January 5, 2007 made by Sea Breeze Limited Partnership in favor of Lehman Brothers Bank, FSB (13)
10.30 Restricted Stock  Award Agreement between Sun Communities, Inc. and John B. McLaren, dated February 5, 2008# (14)
10.31 Restricted Stock  Award Agreement between Sun Communities, Inc. and Karen J. Dearing, dated February 5, 2008# (14)
10.32 Loan Agreement dated March 1, 2011 among Sun Siesta Bay LLC, Sun Pheasant Ridge Limited Partnership, Sun/York L.L.C., Sun Richmond LLC, Sun Groves LLC, Sun Lake Juliana LLC, Sun Lake San Marino LLC, Sun Candlelight Village LLC, Sun Southfork LLC, Sun  Four Seasons LLC and Sun Lafayette Place LLC, as Borrowers, and JPMorgan Chase Bank, National Association, as Lender (20)
10.33 Promissory Note dated March 1, 2011 in the principal amount of $115,000,000 by Sun Siesta Bay LLC, Sun Pheasant Ridge Limited Partnership, Sun/York L.L.C., Sun Richmond LLC, Sun Groves LLC, Sun Lake Juliana LLC, Sun Lake San Marino LLC, Sun Candlelight Village LLC, Sun Southfork LLC, Sun Four Seasons LLC and Sun Lafayette Place LLC, as Borrowers, in favor of JPMorgan Chase Bank, National Association, as Lender (20)
10.34 Employment Agreement dated March 7, 2011 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and John B. McLaren# (21)
10.35 Employment Agreement dated March 7, 2011 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Karen J. Dearing# (21)
10.36 Two Hundred Seventy Fifth Amendment to the Second Amended and Restated Limited Partnership Agreement of Sun Communities Operating Limited Partnership dated as of June 23, 2011 (23)
10.37 Second Amended and Restated Master Credit Facility Agreement dated July 27, 2011, among Sun Secured Financing LLC, Aspen-Ft. Collins Limited Partnership, Sun Secured Financing Houston Limited Partnership, Sun Communities Finance, LLC, Sun Holly Forest LLC, Sun Saddle Oak LLC, PNC Bank, National Association and Fannie Mae (24)
3.5Articles of Amendment dated June 13, 1997Incorporated by reference to Sun Communities, Inc.’s Registration Statement on Form 8-A dated November 9, 2012
3.6Articles Supplementary designating 7.125% Series A Cumulative Redeemable Preferred Stock dated November 9, 2012Incorporated by reference to Sun Communities, Inc.'s Registration Statement on Form 8-A dated November 9, 2012
3.7Articles Supplementary canceling and reclassifying 9.125% Series A Cumulative Redeemable Perpetual Preferred Stock dated November 9, 2012Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated November 9, 2012
3.8Articles of Amendment dated July 24, 2013Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 23, 2013
3.9Articles Supplementary designating 6.50% Series A-4 Cumulative Convertible Preferred Stock dated November 25, 2014Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 2, 2014
3.10Second Amended and Restated Bylaws†Filed herewith
4.1Rights Agreement, dated as of June 2, 2008, between Sun Communities, Inc. and Computershare Trust Company, N.A., as Rights AgentIncorporated by reference to Sun Communities, Inc.'s Registration Statement on Form 8-A dated June 3, 2008
4.2Sun Communities, Inc. Equity Incentive Plan#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 22, 2009
4.3Registration Rights Agreement dated June 23, 2011 among Sun Communities, Inc., and the holders of Series A-1 Preferred Units that are parties theretoIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated June 23, 2011
4.4First Amendment to Registration Rights Agreement dated as of February 3, 2014 among Sun Communities, Inc., and the holders of Series A-1 Preferred Units that are parties thereto
Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013


4.5Form of certificate evidencing common stockIncorporated by reference to Sun Communities, Inc.'s Registration Statement on Form 8-A dated November 9, 2012
4.6Form of certificate evidencing 7.125% Series A Cumulative Redeemable Preferred StockIncorporated by reference to Sun Communities, Inc.'s Registration Statement on Form 8-A dated November 9, 2012
4.7Registration Rights Agreement dated February 8, 2013 among Sun Communities, Inc., and the holders of Series A-3 Preferred Units that are parties theretoIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated February 6, 2013
4.8First Amendment to Rights Agreement, dated July 30, 2014, by and between Sun Communities, Inc. and Computershare Trust Company, N.A.Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 30, 2014
4.9Registration Rights Agreement dated November 26, 2014, among Sun Communities, Inc. and the holders of Registrable SharesIncorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 2, 2014
4.10Form of certificate evidencing 6.50% Series A-4 Cumulative Convertible Preferred StockIncorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 2, 2014
10.1Form of Stock Option Agreement between Sun Communities, Inc. and certain directors, officers and other individuals#Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33 69340
10.2Amended and Restated 1993 Non-Employee Director Stock Option Plan#Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33 80972
10.3Form of Non-Employee Director Stock Option Agreement between Sun Communities, Inc. and certain directors#Incorporated by reference to Sun Communities, Inc.'s Registration Statement No. 33 80972

8068

SUN COMMUNITIES, INC.

Exhibit Number Description Method of Filing
10.38 
Credit Agreement dated September 28, 2011, among Sun Communities Operating Limited Partnership, as Borrower, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Merrill, Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Sole Book Manager and Fifth Third Bank, as Syndication Agent
 
 (25)
10.39 First Amendment to Second Amended and Restated Master Credit Facility Agreement dated October 3, 2011, among Sun Secured Financing LLC, Aspen-Ft. Collins Limited Partnership, Sun Secured Financing Houston Limited Partnership, Sun Communities Finance, LLC, Sun Holly Forest LLC, Sun Saddle Oak LLC, PNC Bank, National Association and Fannie Mae (26)
10.40 Variable Facility Note dated January 3, 2012 made by Sun Secured Financing LLC, Aspen-Ft. Collins Limited Partnership, Sun Secured Financing Houston Limited Partnership, Sun Communities Finance, LLC, Sun Holly Forest LLC, and Sun Saddle Oak LLC in favor of PNC Bank, National Association, in the original principal amount of $152,362,500 (27)
10.41 Variable Facility Note dated January 3, 2012 made by Sun Secured Financing LLC, Aspen-Ft. Collins Limited Partnership, Sun Secured Financing Houston Limited Partnership, Sun Communities Finance, LLC, Sun Holly Forest LLC, and Sun Saddle Oak LLC in favor of PNC Bank, National Association, in the original principal amount of $10,000,000 (27)
10.42 Third Lease Modification dated October 31, 2011 by and between the Operating Partnership as Tenant and American Center LLC as Landlord (35)
10.43 First Amended and Restated 2004 Non-Employee Director Option Plan# (28)
10.44 Loan commitment letter dated October 3, 2012, among Sun Rudgate Lender LLC, Rudgate Village Company Limited Partnership, Rudgate Clinton Company Limited Partnership and Rudgate Clinton Estates L.L.C and certain guarantors named therein (30)
10.45 Two Hundred Eighty Third Amendment to the Second Amended and Restated Limited Partnership Agreement of Sun Communities Operating Limited Partnership dated November 14, 2012 (33)
10.46 Loan Agreement dated November 15, 2012 among Ladder Capital Finance LLC, Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC and Rudgate Clinton Estates SPE, LLC (34)
10.47 Promissory Note dated November 15, 2012 made by Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC and Rudgate Clinton Estates SPE, LLC, in favor of Ladder Capital Finance LLC, in the original principal amount of $45,900,000 (34)
10.48 Guaranty of Recourse Obligations dated November 15, 2012 made by Sun Communities Operating Limited Partnership in favor of Ladder Capital Finance LLC (34)
10.49 Mezzanine Loan Agreement dated November 14, 2012 among Sun Rudgate Lender LLC, Rudgate Village Holdings, LLC, Rudgate Clinton Holdings, LLC and Rudgate Clinton Estates Holdings, LLC (34)
10.50 Promissory Note (Mezzanine) dated November 14, 2012 made by Rudgate Village Holdings, LLC, Rudgate Clinton Holdings, LLC and Rudgate Clinton Estates Holdings, LLC, in favor of Sun Rudgate Lender LLC, in the maximum principal amount of up to $25,000,000 (34)
10.51 Future Advance Promissory Note (Mezzanine) dated November 14, 2012 made by Rudgate Village Holdings, LLC, Rudgate Clinton Holdings, LLC and Rudgate Clinton Estates Holdings, LLC, in favor of Sun Rudgate Lender LLC, in the maximum principal amount of up to $15,000,000 (34)
10.52 Property Management Agreement dated November 14, 2012 between Rudgate Village SPE, LLC and Sun Home Services, Inc. (34)
10.53 Property Management Agreement dated November 14, 2012 among Rudgate Clinton SPE, LLC, Rudgate Clinton Estates SPE, LLC and Sun Home Services, Inc. (34)
10.54 Credit Agreement, dated February 6, 2013, by and among Sun Communities Operating Limited Partnership, Sun Communities, Inc., certain of its wholly owned subsidiaries, Bank of Montreal, as administrative agent and lender, and BMO Capital Markets, as sole lead arranger and sole book manager (22)
10.55 At the Market Offering Sales Agreement, dated May 10, 2012, among Sun Communities, Inc., Sun Communities Operating Limited Partnership, BMO Capital Markets Corp. and Liquidnet, Inc. (18)
10.56 Two Hundred Eighty Seventh Amendment to the Second Amended and Restated Limited Partnership Agreement of Sun Communities Operating Limited Partnership dated as of February 8, 2013 (22)
21.1 List of Subsidiaries of Sun Communities, Inc. (36)
23.1 Consent of Grant Thornton LLP (36)
23.2 Consent of Baker Tilly Virchow Krause, LLP (36)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (36)
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (36)
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (36)
99.1 Financial Statements of Origen Financial, Inc. for the year ended December 31, 2012 (36)
101.1* The following Sun Communities, Inc. financial information, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011, and 2010, (iii) Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss for the Years Ended December 31, 2012, 2011, and 2010, (v) Consolidated Statements of Cash Flows, for the Years Ended December 31, 2012, 2011, and 2010; (v) Notes to Consolidated Financial Statements, and (vi) Schedule III – Real Estate and Accumulated Depreciation. (36)
10.4Long Term Incentive Plan#Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997
10.5Second Amended and Restated 1993 Stock Option Plan#Incorporated by reference to Sun Communities, Inc.'s Proxy Statement, dated April 20, 1999
10.6Lease, dated November 1, 2002, by and between the Operating Partnership as Tenant and American Center LLC as LandlordIncorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, December 31, 2002, as amended
10.7Form of Restricted Stock Award Agreement#Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2004
10.8Restricted Stock Award Agreement between Sun Communities, Inc. and Karen J. Dearing, dated February 5, 2008#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated February 4, 2008
10.9Employment Agreement dated March 7, 2011 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and John B. McLaren#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated March 7, 2011
10.10Employment Agreement dated March 7, 2011 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Karen J. Dearing#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated March 7, 2011
10.11Third Lease Modification dated October 31, 2011 by and between the Operating Partnership as Tenant and American Center LLC as LandlordIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 10-K for the year ended December 31, 2011
10.12First Amended and Restated 2004 Non-Employee Director Option Plan#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 19, 2012
10.13Credit Agreement, dated February 6, 2013, by and among Sun Communities Operating Limited Partnership, Sun Communities, Inc., certain of its wholly owned subsidiaries, Bank of Montreal, as administrative agent and lender, and BMO Capital Markets, as sole lead arranger and sole book managerIncorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated February 6, 2013
10.14At the Market Offering Sales Agreement, dated May 10, 2012, among Sun Communities, Inc., Sun Communities Operating Limited Partnership, BMO Capital Markets Corp. and Liquidnet, Inc.Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated May 10, 2012
10.15Employment Agreement dated June 20, 2013 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Gary A. Shiffman#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated June 20, 2013
10.16Third Amended and Restated Agreement of Limited Partnership of Sun Communities Operating Limited Partnership, dated June 19, 2014.Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated June 19, 2014
10.17First Amendment to Employment Agreement among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Gary A. Shiffman dated July 15, 2014#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 14, 2014
10.18First Amendment to Employment Agreement among Sun Communities, Inc., Sun Communities Operating Limited Partnership and John B. McLaren dated July 15, 2014#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 14, 2014
10.19First Amendment to Employment Agreement among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Karen J. Dearing dated July 15, 2014#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 14, 2014
10.20First Amendment to Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. Shiffman dated July 15, 2014#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 14, 2014
10.21Amendment No. 2 dated November 26, 2014, to the Third Amended and Restated Agreement of Limited Partnership of Sun Communities Operating Limited PartnershipIncorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated December 2, 2014
10.22Sun Communities, Inc. Executive Compensation "Clawback" Policy#Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K dated July 14, 2014
21.1List of Subsidiaries of Sun Communities, Inc.Filed herewith
23.1Consent of Grant Thornton LLPFiled herewith

69

SUN COMMUNITIES, INC.

31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Filed herewith
32.1Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Furnished herewith
101.1The following Sun Communities, Inc. financial information, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2014 and 2013, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013 and 2012, (iii) Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss for the Years Ended December 31, 2014, 2013 and 2012, (v) Consolidated Statements of Cash Flows, for the Years Ended December 31, 2014, 2013 and 2012; (v) Notes to Consolidated Financial Statements, and (vi) Schedule III - Real Estate and Accumulated DepreciationFiled herewith
*Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K because such schedules and exhibits do not contain information which is material to an investment decision or which is not otherwise disclosed in the filed agreements. The Company will furnish the omitted schedules and exhibits to the Securities and Exchange Commission upon request by the Commission.

The Second Amended and Restated Bylaws are being re-filed to correct an error in the form filed as an exhibit to Sun Communities, Inc.’s Current Report on Form 8-K dated July 23, 2013. The form previously filed erroneously included language applying the provisions of Article III, Section 14 of the bylaws to vacancies in the Board of Directors arising as a result of a removal of a director. As set forth in the form filed herewith and consistent with Sun Communities, Inc.’s charter and the election made by its Board of Directors, such Section 14 in fact applies only to vacancies arising from the death or resignation of a director or an increase in the size of the Board of Directors.
#Management contract or compensatory plan or arrangement.

*Users of this data are advised that pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.









81

SUN COMMUNITIES, INC.

(1)    Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33‑69340
(2)Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33‑80972

(3)Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10‑K for the year ended December 31, 1996

(4)Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10‑K for the year ended December 31, 1997

(5)Incorporated by reference to Sun Communities, Inc.’s Proxy Statement, dated April 20, 1999

(6)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8‑K dated September 29, 1999

(7)Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10‑K for the year ended December 31, 2001

(8)Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10‑K for the year ended December 31, 2002, as amended

(9)Incorporated by reference to Sun Communities, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004

(10)Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004

(11)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated February 23, 2005

(12)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated October 16, 2006

(13)Incorporated by reference to Sun Communities, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007

(14)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated February 4, 2008

(15)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-A dated June 3, 2008

(16)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8‑K dated April 30, 2009

(17)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8‑K dated July 22, 2009

(18)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8‑K dated May 10, 2012

(19)Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 333-181315

(20)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated March 1, 2011

(21)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated March 7, 2011

(22)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated February 6, 2013

(23)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated June 23, 2011

(24)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated July 27, 2011

(25)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated September 28, 2011

(26)Incorporated by reference to Sun Communities, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011

(27)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated January 3, 2012

(28)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated July 19, 2012

(29)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated July 27, 2012

(30)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated October 3, 2012

(31)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 10-Q for the quarter ended September 30, 2012

(32)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-A dated November 9, 2012

(33)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated November 9, 2012

82

SUN COMMUNITIES, INC.


(34)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K dated November 14, 2012

(35)Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 10-K for the year ended December 31, 2011

(36)Filed herewith


8370

SUN COMMUNITIES, INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE



 Page
Management’s Report on Internal Control Over Financial Reporting
F-2
Reports of Independent Registered Public Accounting Firm
F-3
Financial Statements: 
Consolidated Balance Sheets as of December 31, 20122014 and 20112013
F-5
Consolidated Statements of Operations for the Years Ended December 31, 2012, 20112014, 2013 and 20102012
F-6
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2012, 20112014, 2013 and 20102012
F-7
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2012, 20112014, 2013 and 20102012
F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 20112014, 2013 and 20102012
F-9
Notes to Consolidated Financial Statements
Schedule III - Real Estate and Accumulated Depreciation, Schedule III



F - 1

SUN COMMUNITIES, INC.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles;

provide reasonable assurance that receipts and expenditures are being made only in accordance with authorization of our management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material adverse effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012.2014. In making this assessment, management used the criteria for effective internal control over financial reporting set forth in “Internal Control – Integrated Framework”Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2012,2014, our internal control over financial reporting was effective.

Grant Thornton LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as of December 31, 2012,2014, and their report is included herein.


F - 2

SUN COMMUNITIES, INC.



Report of Independent Registered Public Accounting Firm



Board of Directors and Stockholders
Sun Communities, Inc.

We have audited the accompanying consolidated balance sheets of Sun Communities, Inc. (a Maryland Corporation)corporation) and subsidiaries’subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2014. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sun Communities, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012,2014, based on criteria established in the 2013 Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 2, 2015 expressed an unqualified opinion.



/s/ GRANT THORNTON LLP
GRANT THORNTON LLP

Southfield, Michigan
March 2, 2015


F - 3

SUN COMMUNITIES, INC.



Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Sun Communities, Inc.

We have audited the internal control over financial reporting of Sun Communities, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Sun Communities, Inc. and subsidiaries’The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on Sun Communities, Inc. and subsidiaries’the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Sun Communities, Inc. and subsidiariesthe Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012,2014, based on criteria established in the 2013 Internal Control—IntegratedControl-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsfinancial statements of Sun Communities, Inc. and subsidiariesthe Company as of December 31, 2012 and 2011, andfor the related consolidated statements of operations, comprehensive income (loss), stockholders’ (deficit) equity, and cash flows for each of the three years in the periodyear ended December 31, 2012, and the related financial statement schedule,2014, and our report dated February 25, 2013March 2, 2015 expressed an unqualified opinion.

opinion on those financial statements.


/s/ GRANT THORNTON LLP
GRANT THORNTON LLP

Southfield, Michigan
February 25, 2013

March 2, 2015


F - 3

SUN COMMUNITIES, INC.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Sun Communities, Inc.

We have audited the accompanying consolidated balance sheets of Sun Communities, Inc. (a Maryland Corporation) and subsidiaries (the "Company") as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits of the basic financial statements included the financial statement schedule listed in the accompanying index. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sun Communities, Inc. and subsidiaries as of December 31, 2012 and 2011 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 25, 2013, expressed an unqualified opinion.


/s/ GRANT THORNTON LLP
GRANT THORNTON LLP

Southfield, Michigan
February 25, 2013


F - 4



SUN COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

As of December 31,
As of December 31,2014 2013
2012 2011  (revised)
ASSETS      
Investment property, net (including $56,326 and $0 for consolidated variable interest entities, respectively)$1,518,136
 $1,196,606
Investment property, net (including $94,230 and $56,805 for consolidated variable interest entities at December 31, 2014 and 2013; see Note 8)$2,568,164
 $1,755,052
Cash and cash equivalents29,508
 5,857
83,459
 4,753
Inventory of manufactured homes7,527
 5,832
8,860
 5,810
Notes and other receivables139,067
 114,884
Other assets59,879
 44,795
Notes and other receivables, net174,857
 162,141
Other assets, net102,352
 67,148
TOTAL ASSETS$1,754,117
 $1,367,974
$2,937,692
 $1,994,904
LIABILITIES      
Debt (including $45,900 and $0 for consolidated variable interest entities, respectively)$1,423,720
 $1,268,191
Debt (including $65,849 and $45,209 for consolidated variable interest entities at December 31, 2014 and 2013; see Note 8)$1,826,293
 $1,311,437
Lines of credit29,781
 129,034
5,794
 181,383
Other liabilities87,626
 71,404
165,453
 118,543
TOTAL LIABILITIES$1,541,127
 $1,468,629
1,997,540
 1,611,363
Commitments and contingencies
 

 
STOCKHOLDERS’ EQUITY (DEFICIT)   
Preferred stock, $0.01 par value, 10,000 shares authorized (December 31, 2012 and 2011, 3,400 and 0 shares issued, respectively)$34
 $
Common stock, $0.01 par value, 90,000 shares authorized (December 31, 2012 and 2011, 31,557 and 23,612 shares issued, respectively)316
 236
STOCKHOLDERS’ EQUITY   
Series A Preferred Stock, $0.01 par value. Authorized: 10,000 shares;
Issued and outstanding: 3,400 shares at December 31, 2014 and 2013
34
 34
Series A-4 Preferred Stock, $0.01 par value. Authorized: 6,331 shares;
Issued and outstanding: 483 shares at December 31, 2014 and none at December 31, 2013
5
 
Common stock, $0.01 par value. Authorized: 90,000 shares;
Issued and outstanding: 48,573 shares at December 31, 2014 and 36,140 shares at December 31, 2013
486
 361
Additional paid-in capital940,202
 555,981
1,754,759
 1,141,590
Accumulated other comprehensive loss(696) (1,273)
 (366)
Distributions in excess of accumulated earnings(683,734) (617,953)(863,545) (773,301)
Treasury stock, at cost (December 31, 2012 and 2011, 1,802 shares)(63,600) (63,600)
Total Sun Communities, Inc. stockholders' equity (deficit)192,522
 (126,609)
Total Sun Communities, Inc. stockholders' equity891,739
 368,318
Noncontrolling interests:      
Series A-1 preferred OP units45,548
 45,548
Common OP units(24,572) (19,594)
Common and preferred OP units48,829
 15,760
Consolidated variable interest entities(508) 
(416) (537)
Total Noncontrolling Interests20,468
 25,954
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)212,990
 (100,655)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)$1,754,117
 $1,367,974
Total noncontrolling interests48,413
 15,223
TOTAL STOCKHOLDERS’ EQUITY940,152
 383,541
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,937,692
 $1,994,904



See accompanying Notes to Consolidated Financial Statements.


F - 5


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)


Years Ended December 31,Year Ended December 31,
2012 2011 20102014 2013 2012
REVENUES          
Income from real property$255,761
 $223,613
 $204,498
$357,793
 $313,097
 $255,761
Revenue from home sales45,147
 32,252
 31,945
53,954
 54,852
 45,147
Rental home revenue26,589
 22,290
 20,480
39,213
 32,500
 26,589
Ancillary revenues, net484
 592
 505
5,217
 1,151
 (180)
Interest11,018
 9,509
 8,053
14,462
 13,073
 11,018
Other income, net617
 929
 489
Brokerage commissions and other income, net1,036
 549
 617
Total revenues339,616
 289,185
 265,970
471,675
 415,222
 338,952
COSTS AND EXPENSES          
Property operating and maintenance68,839
 59,190
 52,994
101,134
 87,637
 68,839
Real estate taxes19,207
 17,547
 16,282
24,181
 22,284
 19,207
Cost of home sales34,918
 25,392
 24,030
40,556
 40,297
 34,918
Rental home operating and maintenance18,141
 16,196
 15,414
23,270
 20,435
 18,141
General and administrative - real property20,037
 19,704
 17,182
31,769
 25,941
 20,037
General and administrative - home sales and rentals8,980
 8,156
 7,628
10,853
 9,913
 8,316
Acquisition related costs4,296
 1,971
 
Transaction costs18,259
 3,928
 4,296
Depreciation and amortization89,674
 74,193
 68,868
133,726
 110,078
 89,674
Asset impairment charge
 1,382
 
837
 
 
Interest67,859
 64,606
 62,136
73,771
 73,339
 67,859
Interest on mandatorily redeemable debt3,321
 3,333
 3,291
3,210
 3,238
 3,321
Total expenses335,272
 291,670
 267,825
461,566
 397,090
 334,608
Income (loss) before income taxes and distributions from affiliate4,344
 (2,485) (1,855)
Income before other gains (losses)10,109
 18,132
 4,344
Gain on disposition of properties, net17,654
 
 
Gain on settlement4,452
 
 
Provision for state income taxes(249) (150) (512)(219) (234) (249)
Distributions from affiliate3,900
 2,100
 500
1,200
 2,250
 3,900
Loss from affiliate
 
 (1,646)
Net income (loss)7,995
 (535) (3,513)
Net income33,196
 20,148
 7,995
Less: Preferred return to Series A-1 preferred OP units2,329
 1,222
 
2,654
 2,598
 2,329
Less: Preferred return to Series A-3 preferred OP units181
 166
 
Less: Preferred return to Series A-4 preferred OP units100
 
 
Less: Amounts attributable to noncontrolling interests(318) (671) (630)1,752
 718
 (318)
Less: Series A Preferred Stock Distributions1,026
 
 
Net income (loss) attributable to Sun Communities, Inc. common stockholders$4,958
 $(1,086) $(2,883)
Net income attributable to Sun Communities, Inc.28,509
 16,666
 5,984
Less: Preferred stock distributions6,133
 6,056
 1,026
Net income attributable to Sun Communities, Inc. common stockholders$22,376
 $10,610
 $4,958
Weighted average common shares outstanding:          
Basic27,255
 21,147
 19,168
41,337
 34,228
 26,970
Diluted27,272
 21,147
 19,168
41,805
 34,410
 27,125
Earnings (loss) per share:     
Earnings per share:     
Basic$0.18
 $(0.05) $(0.15)$0.54
 $0.31
 $0.19
Diluted$0.18
 $(0.05) $(0.15)$0.54
 $0.31
 $0.18
          
Dividends per common share:$2.52
 $3.15
 $2.52
     


See accompanying Notes to Consolidated Financial Statements.


F - 6


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)


 Years Ended December 31,
 2012 2011 2010
Net income (loss)$7,995
 $(535) $(3,513)
Unrealized gain (loss) on interest rate swaps643
 1,048
 (411)
Total comprehensive income (loss)8,638
 513
 (3,924)
Less: Comprehensive income (loss) attributable to the noncontrolling interests(252) (576) (673)
Comprehensive income (loss) attributable to Sun Communities, Inc.$8,890
 $1,089
 $(3,251)
  Year Ended December 31,
  2014 2013 2012
Net income $33,196
 $20,148
 $7,995
Unrealized gain on interest rate swaps 97
 362
 643
Total comprehensive income 33,293
 20,510
 8,638
Less: Comprehensive income (loss) attributable to the noncontrolling interests 1,483
 750
 (252)
Comprehensive income attributable to Sun Communities, Inc. $31,810
 $19,760
 $8,890

See accompanying Notes to Consolidated Financial Statements.


F - 7


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)

7.125% Series A Cumulative Redeemable Preferred Stock Common Stock Additional Paid-in Capital Officer's Notes Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Accumulated Earnings Treasury Stock Non-controlling Interests Total Stockholders' Equity (Deficit)7.125% Series A Cumulative Redeemable Preferred Stock 
6.50%
Series A-4 Cumulative Convertible Preferred Stock
 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Distributions in Excess of Accumulated Earnings Non-Controlling Interests Total Stockholders' Equity (Deficit)
Balance as of December 31, 2009$
 $206
 $463,811
 $(5,028) $(1,858) $(498,370) $(63,600) $(6,469) $(111,308)
Issuance of common stock from exercise of options, net
 
 211
 
 
 
 
 
 211
Issuance and associated costs of common stock, net
 11
 29,907
 
 
 
 
 (1) 29,917
Share-based compensation - amortization and forfeitures
 
 1,402
 
 
 69
 
 
 1,471
Net income (loss)
 
 
 
 
 (2,883) 
 (630) (3,513)
Unrealized loss on interest rate swaps
 
 
 
 (368) 
 
 (43) (411)
Repayment of officer's notes
 
 
 5,028
 
 
 
 
 5,028
Cash distributions
 
 
 
 
 (48,441) 
 (5,338) (53,779)
Balance as of December 31, 2010$
 $217
 $495,331
 $
 $(2,226) $(549,625) $(63,600) $(12,481) $(132,384)
Issuance of common stock from exercise of options, net
 
 841
 
 
 
 
 
 841
Issuance and associated costs of common stock, net
 19
 58,347
 
 
 
 
 
 58,366
Issuance of preferred OP units
 
 
 
 
 
 
 45,548
 45,548
Share-based compensation - amortization and forfeitures
 
 1,462
 
 
 79
 
 
 1,541
Net income (loss)
 
 
 
 
 136
 
 (671) (535)
Unrealized gain on interest rate swaps
 
 
 
 953
 
 
 95
 1,048
Distributions declared
 
 
 
 
 (68,543) 
 (6,537) (75,080)
Balance as of December 31, 2011$
 $236
 $555,981
 $
 $(1,273) $(617,953) $(63,600) $25,954
 $(100,655)
Balance as of December 31, 2011, as reported$
 $
 $218
 $492,399
 $(1,273) $(617,953) $25,954
 $(100,655)
Prior period revision
 
 
 
 
 (12,189) (1,344) (13,533)
Balance as of December 31, 2011, revised
 
 218
 492,399
 (1,273) (630,142) 24,610
 $(114,188)
Issuance of common stock from exercise of options, net
 
 166
 
 
 
 
 
 166

 
 
 166
 
 
 
 166
Issuance and associated costs of common stock, net
 80
 300,554
 
 
 
 
 
 300,634

 
 80
 300,554
 
 
 
 300,634
Issuance and associated costs of Series A preferred stock34
 
 82,166
 
 
 
 
 
 82,200
34
 
 
 82,166
 
 
 
 82,200
Share-based compensation - amortization and forfeitures
 
 1,335
 
 
 90
 
 
 1,425

 
 
 1,335
 
 90
 
 1,425
Net income (loss)
 
 
 
 
 8,313
 
 (318) 7,995

 
 
 
 
 8,313
 (318) 7,995
Unrealized gain on interest rate swaps
 
 
 
 577
 
 
 66
 643

 
 
 
 577
 
 66
 643
Distributions declared
 
 
 
 
 (74,184) 
 (5,234) (79,418)
Balance as of December 31, 2012$34
 $316
 $940,202
 $
 $(696) $(683,734) $(63,600) $20,468
 $212,990
Distributions
 
 
 
 
 (74,184) (5,234) (79,418)
Balance as of December 31, 2012, revised$34
 $
 $298
 $876,620
 $(696) $(695,923) $19,124
 $199,457
Issuance of common stock from exercise of options, net
 
 
 201
 
 
 
 201
Issuance and associated costs of common stock, net
 
 63
 261,697
 
 
 
 261,760
Issuance of preferred OP units
 
 
 
 
 
 3,463
 3,463
Share-based compensation - amortization and forfeitures
 
 
 3,072
 
 127
 
 3,199
Net income
 
 
 
 
 19,430
 718
 20,148
Unrealized gain on interest rate swaps
 
 
 
 330
 
 32
 362
Distributions
 
 
 
 
 (96,935) (8,114) (105,049)
Balance as of December 31, 2013, revised$34
 $
 $361
 $1,141,590
 $(366) $(773,301) $15,223
 $383,541
Issuance of common stock from exercise of options, net
 
 
 127
 
 
 
 127
Issuance, conversion of OP units and associated costs of common stock, net
 
 125
 594,940
 
 
 (2,638) 592,427
Issuance and associated costs of Series A-4 preferred stock
 5
 
 13,605
 
 
 
 13,610
Issuance of preferred OP units
 
 
 
 
 
 18,852
 18,852
Issuance of common OP units
 
 
 
 
 
 24,064
 24,064
Share-based compensation - amortization and forfeitures
 
 
 4,706
 
 173
 
 4,879
Net income
 
 
 
 
 31,444
 1,752
 33,196
Settlement of membership interest
 
 
 (209) 
 
 (4) (213)
Unrealized gain on interest rate swaps
 
 
 
 366
 
 (269) 97
Distributions
 
 
 
 
 (121,861) (8,567) (130,428)
Balance at December 31, 2014$34
 $5
 $486
 $1,754,759
 $
 $(863,545) $48,413
 $940,152

See accompanying Notes to Consolidated Financial Statements.


F - 8


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended December 31,Year Ended December 31,
2012 2011 20102014 2013 2012
OPERATING ACTIVITIES:          
Net income (loss)$7,995
 $(535) $(3,513)
Net income$33,196
 $20,148
 $7,995
Adjustments to reconcile net income to net cash provided by operating activities:          
(Gain) loss from land disposition(99) 
 12
Gain on disposition of assets(2,748) (867) (99)
Gain on disposition of properties, net(17,654) 
 
Asset impairment charges
 1,382
 
837
 
 
(Gain) loss on valuation of derivative instruments(4) 13
 10
Stock compensation expense1,463
 1,609
 1,593
Loss on valuation of derivative instruments
 
 (4)
Share-based compensation4,879
 3,199
 1,463
Depreciation and amortization86,487
 73,484
 66,873
131,003
 105,210
 86,487
Amortization of deferred financing costs1,619
 1,707
 1,648
1,056
 2,713
 1,619
Distributions from affiliate(3,900) (2,100) (500)(1,200) (2,250) (3,900)
Loss from affiliate
 
 1,646
Change in notes receivable from financed sales of inventory homes, net of repayments(8,583) (5,868) (4,207)(15,300) (6,228) (8,583)
Change in inventory, other assets and other receivables, net(1,211) (18,461) (3,647)(11,144) (1,441) (1,211)
Change in accounts payable and other liabilities3,484
 12,080
 (1,566)
Change in other liabilities10,395
 (5,801) 3,484
NET CASH PROVIDED BY OPERATING ACTIVITIES87,251
 63,311
 58,349
133,320
 114,683
 87,251
INVESTING ACTIVITIES:          
Investment in properties(125,075) (87,720) (50,863)(177,866) (179,413) (125,075)
Acquisitions(249,317) (77,171) 
Acquisitions of properties(426,591) (122,176) (249,317)
Payments for deposits on acquisitions(17,064) 
 
Investment in note receivable of acquired properties
 (49,441) 
Proceeds related to affiliate dividend distribution3,900
 2,100
 500
1,200
 2,250
 3,900
Proceeds related to disposition of land172
 
 1
221
 
 172
Proceeds related to disposition of assets and depreciated homes, net936
 3,859
 3,891
3,312
 (1,017) 936
Increase in notes receivable, net(5,835) (396) 3,859
NET CASH USED IN INVESTING ACTIVITIES(375,219) (159,328) (42,612)
Proceeds related to the disposition of properties59,706
 
 
Issuance of notes and other receivables297
 (3,841) (6,440)
Repayments of notes and other receivables6,080
 1,226
 605
NET CASH USED FOR INVESTING ACTIVITIES(550,705) (352,412) (375,219)
FINANCING ACTIVITIES:          
Issuance and associated costs of common stock, OP units, and preferred OP units, net300,634
 58,366
 29,917
572,171
 261,760
 300,634
Net proceeds from stock option exercise166
 841
 211
127
 201
 166
Net proceeds from issuance of Series A Preferred Stock82,200
 
 

 
 82,200
Distributions to stockholders, OP unit holders, and preferred OP unit holders(73,371) (60,034) (53,779)(121,377) (100,403) (73,371)
Payments to retire preferred operating partnership units
 
 (925)(1,119) (300) 
Borrowings on lines of credit253,195
 214,631
 137,059
526,546
 415,410
 253,195
Payments on lines of credit(352,448) (180,124) (136,997)(702,135) (263,808) (352,448)
Proceeds from issuance of other debt192,278
 200,615
 27,208
323,241
 175,507
 192,278
Payments on other debt(89,004) (137,330) (14,114)(95,269) (269,400) (89,004)
Proceeds received from return of prepaid deferred financing costs2,384
 
 
Payments for deferred financing costs(2,031) (3,511) (393)(8,478) (5,993) (2,031)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES311,619
 93,454
 (11,813)
Net increase (decrease) in cash and cash equivalents23,651
 (2,563) 3,924
NET CASH PROVIDED BY FINANCING ACTIVITIES496,091
 212,974
 311,619
Net change in cash and cash equivalents78,706
 (24,755) 23,651
Cash and cash equivalents, beginning of period5,857
 8,420
 4,496
4,753
 29,508
 5,857
Cash and cash equivalents, end of period$29,508
 $5,857
 $8,420
$83,459
 $4,753
 $29,508
SUPPLEMENTAL INFORMATION:     
Cash paid for interest$79,400
 $55,560
 $53,316
Cash paid for interest on mandatorily redeemable debt$3,326
 $3,331
 $3,288
Cash paid for state income taxes$320
 $523
 $582
Noncash investing and financing activities:     
Unrealized gain (loss) on interest rate swaps$643
 $1,048
 $(411)
Reduction in secured borrowing balance$13,680
 $11,104
 $7,999
Dividends declared$21,093
 $15,046
 $
Noncash investing and financing activities at the date of acquisition:     
Acquisitions - Series A-1 preferred OP units issued$
 $45,548
 $
Acquisitions - debt assumed$62,826
 $52,398
 $
Acquisitions - other liabilities$880
 $4,982
 $











F - 9



SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(In thousands)


 Year Ended December 31,
 2014 2013 2012
SUPPLEMENTAL INFORMATION:     
Cash paid for interest (net of capitalized interest of $464, $678 and $0, respectively)$60,289
 $61,268
 $79,400
Cash paid for interest on mandatorily redeemable debt$3,225
 $3,238
 $3,326
Cash paid for state income taxes$314
 $155
 $320
Noncash investing and financing activities:     
Unrealized gain on interest rate swaps$97
 $362
 $643
Reduction in secured borrowing balance$21,812
 $17,906
 $13,680
Change in distributions declared and outstanding$9,051
 $4,646
 $21,093
Settlement of membership interest$213
 $
 $
Noncash investing and financing activities at the date of acquisition:     
Acquisitions - Series A-3 preferred OP units issued$
 $3,463
 $
Acquisitions - Series A-4 preferred OP units issued$18,852
 $
 $
Acquisitions - Series A-4 Preferred Stock issued$13,610
 $
 $
Acquisitions - Common stock and OP units issued$44,321
 $
 $
Acquisitions - debt assumed$209,658
 $
 $62,826
Acquisitions - other liabilities$4,221
 $
 $880
Acquisitions - release of note receivable and accrued interest$
 $49,441
 $


See accompanying Notes to Consolidated Financial Statements.


F - 910

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.Summary of Significant Accounting Policies

Business

Sun Communities, Inc., a Maryland corporation, together with the Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”) and other consolidated subsidiaries are referred to herein as the “Company”, “us”, “we”, and “our”. We are a self-administered and self-managed real estate investment trust (“REIT”).

We own, operate, and develop manufactured housing ("MH") and recreational vehicle ("RV") communities concentrated inthroughout the midwestern, southern, and southeastern United States. As of December 31, 2012,2014, we owned and operated a portfolio of 173217 properties located in 1929 states (the “Properties”), including 149183 manufactured housingMH communities, 1325 RV communities, and 11nine properties containing both manufactured housingMH and RV sites. As of December 31, 2012,2014, the Properties contained an aggregate of 63,69779,554 developed sites comprised of 52,83361,231 developed manufactured home sites, 4,904 permanent9,297 annual RV sites 5,960(inclusive of both annual and seasonal usage rights), 9,026 transient RV sites, and approximately 6,9007,000 additional manufactured homeMH and RV sites suitable for development.

Principles of Consolidation

The accompanying financial statements include our accounts and all majority-owned and controlled subsidiaries, including entities in which we have a controlling interest or have been determined to be the primary beneficiary of a variable interest entity ("VIE"). All inter-company transactions have been eliminated in consolidation. Any subsidiaries in which we have an ownership percentage equal to or greater than 50 percent,50%, but less than 100 percent,100%, or consider a VIE, represent subsidiaries with a noncontrolling interest. The noncontrolling interests in our subsidiaries are allocated their proportionate share of the subsidiaries’ financial results. This allocation is recorded as the noncontrolling interest in our Consolidated Financial Statements.consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions related to the reported amounts included in our Consolidated Financial Statementsconsolidated financial statements and accompanying footnote disclosures. Actual results could differ from those estimates.

Reclassifications and Revisions

Certain reclassifications have been made to prior periods’ financial statements in order to conform to current period presentation.

Subsequent EventsIn the fourth quarter of 2014, management identified that certain accruals related to real estate taxes, deferred revenue and utilities primarily associated with communities acquired prior to 2007 were incorrect.  The cumulative reivison for the incorrect accruals approximated $13.5 million.

We have evaluated ourPursuant to the guidance of Staff Accounting Bulletin (“SAB”) No. 99, Materiality, the Company concluded that the errors were not material to any of its prior period financial statements. Although the errors were immaterial to prior periods, the prior period financial statements were revised, in accordance with SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, due to the significance of the out-of-period correction in the fourth quarter of 2014.

F - 11

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.Summary of Significant Accounting Policies, continued

A reconciliation of the effects of the revisions to the previously reported balance sheet at December 31, 2013 follows:

  December 31, 2013
  As reported Revision As revised
  (in thousands)
Notes and other receivables, net $164,685
 $(2,544) $162,141
Other assets, net $68,936
 $(1,788) $67,148
Total assets $1,999,236
 $(4,332) $1,994,904
Other liabilities $109,342
 $9,201
 $118,543
Total liabilities $1,602,162
 $9,201
 $1,611,363
Distributions in excess of accumulated earnings $(761,112) $(12,189) $(773,301)
Common and preferred OP units $17,104
 $(1,344) $15,760
Total stockholders' equity $397,074
 $(13,533) $383,541

A reconciliation of the effects of the revisions to the previously reported statement of stockholders' equity (deficit) for subsequent events.the years ending December 31, 2013, 2012 and 2011 follows:

  Year Ended December 31,
  2013 2012 2011
  (in thousands)
Distributions in excess of accumulated earnings, as reported $(761,112) $(683,734) $(617,953)
Prior period revision (12,189) (12,189) (12,189)
Distributions in excess of accumulated earnings, revised $(773,301) $(695,923) $(630,142)
       
Noncontrolling interests, as reported $16,567
 $20,468
 $25,954
Prior period revision (1,344) (1,344) (1,344)
Noncontrolling interests, revised $15,223
 $19,124
 $24,610


Investment Property

Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment.impairment.Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long-lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long livedlong-lived assets based on discounted future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements.









F - 1012

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.Summary of Significant Accounting Policies, continued

We periodically receive offers from interested parties to purchase certain of our properties. These offers may be the result of an active program initiated by us to sell the property, or from an unsolicited offer to purchase the property. The typical sale process involves a significant negotiation and due diligence period between us and the potential purchaser. As the intent of this process is to determine if there are items that would cause the purchaser to be unwilling to purchase or we would be unwilling to sell, it is not unusual for such potential offers of sale/purchase to be withdrawn as such issues arise. We classify assets as “held for sale” when it is probable, in our opinion, that a sale transaction will be completed within one year. This typically occurs when all significant contingencies surrounding the closing have been resolved, which often corresponds with the closing date.

We allocate the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize an independent third party to value the net tangible and identified intangible assets in connection with the acquisition of the respective property. We provide historical and pro forma financial information obtained about each property, as well as any other information needed in order for the third party to ascertain the fair value of the tangible and intangible assets (including in-place leases) acquired.

Other Capitalized Costs

We capitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and construction costs related to the development of new community or expansion sites are capitalized until the property is substantially complete. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized over a seven year period based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method).

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash and cash equivalents. The maximum amount of credit risk arising from cash deposits in excess of federally insured amounts was approximately $1.8$80.7 million and $5.7 million as of December 31, 2011. We did not have any cash deposits in excess of federally insured amounts as of December 31, 2012.2014 and 2013, respectively. From time to time, we may have cash deposits in excess of federally insured amounts.

Inventory

Inventory of manufactured homes is stated at lower of specific cost or market based on the specific identification method.

Investments in Affiliates

Investments in affiliates in which we do not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to its operations and major decisions, are accounted for using the equity method of accounting. The carrying value of our investment is adjusted for our proportionate share of the affiliate’s net income or loss and reduced by distributions received. We review the carrying value of our investment in affiliates for other than temporary impairment whenever events or changes in circumstances indicate a possible impairment. Financial condition, operational performance, and other economic trends are some of the factors we consider when we evaluate the existence of impairment indicators. When we have a carrying value of zero for our investment, we suspend the equity method of accounting until such time that the affiliate’s net income equals or exceeds the share of net losses not recognized during the time in which the equity method of accounting was suspended. See Note 7 for additional information.






F - 1113

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.Summary of Significant Accounting Policies, continued


1.    Summary of Significant Accounting Policies, continued

Notes and Other Receivables

We provide financing to purchasers of manufactured homes generally located in our communities. The notes are collateralized by the underlying manufactured home sold. Notes receivable include both installment loans retained by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables (See Note 5 for additional information). For purposes of accounting policy, all notes receivable are considered one homogenous segment,population, as the notes are typically underwritten using the same requirements and terms. Notes receivable are reported at their outstanding unpaid principal balance adjusted for an allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of the loans.

Past due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash
basis until qualifying for return to accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Loans on a nonaccrual status were immaterial at December 31, 20122014 and 2011.2013. The ability to collect our notes receivable is measured based on current and historical information and events. We consider numerous factors including: length of delinquency, estimated costs to lease or sell, and repossession history. Our experience supports a high recovery rate for notes receivable; however there is some degree of uncertainty about the recoverability of our investment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the homes on the notes retained by us and repurchasing the homes on the collateralized receivables, and subsequently selling or leasing these homes to potential residents in our communities. We have established a loan loss reserve based on our estimated unrecoverable costs associated with repossessed/repurchased homes. We estimate our unrecoverable costs to be the repurchase price of the home collateralizing the note receivable plus repair and remarketing costs in excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and is applied to our estimated annual future repossessions to create the allowance for both installment and collateralized notes receivable. See Note 5 for additional information.

We evaluate the collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent more than five to seven days, dependent on state law, we begin the repossession and eviction process simultaneously. This process generally takes 30 to 45 days; due to the short time frame from delinquent loan to repossession we do not evaluate the notesnote receivables for impairments.impairment. No loans were considered impaired as of December 31, 20122014 and 2011.2013.

We evaluate the credit quality of our notes receivable at the inception of the receivable. We consider the following factors in order to determine the credit quality of the applicant - rental payment history; home debt to income ratio; total debt to income ratio; length of employment; previous landlord references; and FICOcredit scores.

Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due.

Other AssetsRestricted Cash

Included in other assets at December 31, 2012 and 2011 is restricted cash in the amount $8.9 million and $7.2 million, respectively. Restricted cash consists of amounts held in deposit at a financial institution to collateralize derivative instruments in a liability position and deposits for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. At December 31, 2014 and 2013,



$11.8 million and $9.4 million of restricted cash, respectively, was included as a component of Other assets on the consolidated balance sheets.




F - 1214

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.Summary of Significant Accounting Policies, continued

Identified Intangible Assets

The Company amortizes identified intangible assets that are determined to have finite lives over the period the assets are expected to contribute directly or indirectly to the future cash flows of the property or business. At December 31, 2014 and 2013, the carrying amounts of the identified intangible assets are included in Other assets on the consolidated balance sheets. See Note 6 for additional information on our intangible assets.

Deferred Tax Assets

We are subject to certain state taxes that are considered to be income taxes and have certain subsidiaries that are taxed as regular corporations. Deferred tax assets or liabilities are recognized for temporary differences between the tax basis of assets and liabilities and their carrying amounts in the financial statements and net operating loss carry forwards.carryforwards. Deferred tax assets and liabilities are measured using currently enacted tax rates. A valuation allowance is established if, based on the available evidence, it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. See Note 1413 for additional information.

Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain long-term financing. The costs are amortized over the terms of the respective loans. Unamortized deferred financing costs are written off when debt is retired before the maturity date. Upon amendment of the line of credit or refinancing of mortgage debt, unamortized deferred financing costs are accounted for in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 470-50-40, Modifications and Extinguishments. At December 31, 2014 and 2013, deferred financing costs are included as a component of Other assets on the consolidated balance sheets.

Share-Based Compensation

Share-based compensation cost for service vesting restricted stock awards is measured based on the closing share price of our common stock on the date of grant. Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. If it is not probable that the performance conditions will be satisfied, we do not recognize compensation expense. We measure the fair value of awards with performance conditions using the closing price of our common stock as of the grant date to calculate compensation cost. Each reporting period, we reevaluate our estimate of the number of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. We recognize compensation cost ratably over each tranche of shares based on the fair value estimated by the model.

Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Binomial (lattice) option-pricing model. The Binomial (lattice) option-pricing model incorporates various assumptions including expected volatility, expected life, dividend yield, and interest rates. Share based compensation cost for phantom share awards is re-measured based on the closing share price of our common stock at the end of each reporting period. See Note 11 for additional information.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts payable, derivative instruments, and debt. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.disclosures, pursuant to FASB ASC 820, Fair Value Measurements and Disclosures.  See Note 1817 for additional information regarding the estimates and assumptions used to estimate the fair value of each class of financial instrument.

Revenue Recognition

Rental income attributable to site and home leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants are generally for one year terms but may range from month-to-month to two years and are renewable by mutual agreement from us and the resident, or in some cases, as provided by state statute. Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sales transaction. Interest income on notes receivable is recorded on a level yield basis over the life of the notes. We report certain taxes collected from the resident and remitted to taxing authorities in revenue. These taxes include certain Florida property and fire taxes.

F - 15

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.Summary of Significant Accounting Policies, continued

Advertising Costs

Advertising costs are expensed as incurred. As of December 31, 2012, 2011,2014, 2013 and 2010,2012, we had advertising costs of $2.53.2 million, $2.42.9 million and $2.22.5 million, respectively.

Depreciation and Amortization

Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are 30 years for land improvements and buildings, 10 years for rental homes, 7seven to 15 years for furniture, fixtures and equipment, and 7seven to 15 years for intangible assets.

Derivative Instruments and Hedging Activities

We do not enter into derivative instruments for speculative purposes. We adjust our balance sheet on a quarterly basis to reflect the current fair market value of our derivatives. For those hedges that qualify for cash flow hedge accounting, we adjust our balance sheet on a quarterly basis to reflect current fair market value of our derivatives. Changes in the fair value of derivatives are recorded in earnings or comprehensive income, as appropriate. The ineffective portion of the hedge is immediately recognized in earnings to the extent that the change in value of a derivative does not perfectly offset the change in value of the instrument being hedged. The effective portion of the hedge is recorded in accumulated other comprehensive income. We use standard market conventions to determine the fair values of derivative instruments, including the quoted market prices or quotes from brokers or dealers for the same or similar instruments. All methods of assessing fair value result in a general approximation of value and such value may never actually be realized. See Note 1716 for additional information. Cash flows from derivative instruments are classified in the same category as the cash flows of the underlying hedged items, which are in the operating activities section of the Consolidated Statementsconsolidated statements of Cash Flows.cash flows.

2.      Real Estate Acquisitions and Dispositions

Green Courte
First Closing
During the fourth quarter of 2014, we completed the first closing of the acquisition of the Green Courte properties. We acquired 32 MH communities with over 9,000 developed sites in 11 states. Included in the total consideration paid for the first closing was the issuance of 361,797 shares of common stock, 501,130 common OP units, 483,317 shares of Series A-4 Preferred Stock and 669,449 Series A-4 preferred OP units.
Second Closing
Subsequent to year-end, in January 2015, we completed the second closing of the acquisition of the Green Courte properties. We acquired the remaining 26 communities comprised of over 10,000 sites. Included in the total consideration paid for the second closing was the issuance of4,377,072 shares of common stock and 5,847,234 shares of Series A-4 Preferred Stock.
Additionally, subsequent to year-end, one of Green Courte Partners funds purchased 150,000 shares of our common stock and 200,000 Series A-4 preferred OP units, for an aggregate purchase price of $12.5 million.







F - 1316

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.      Real Estate Acquisitions and Dispositions, continued

The following tables summarize the fair value of the assets acquired and liabilities assumed at the acquisition dates and the consideration paid (in thousands):
  First Closing Second Closing  
At Acquisition Date 
November 26, 2014 (1)
 
January 6, 2015 (1)
 Total
Investment in property $656,965
 $818,530
 $1,475,495
Notes receivable 5,189
 964
 6,153
Other (liabilities) assets (4,221) 4,221
 
In-place leases and other intangible assets 12,870
 15,460
 28,330
Below market lease intangible (10,820) (54,580) (65,400)
Assumed debt (199,300) (171,300) (370,600)
Total identifiable assets and liabilities assumed $460,683
 $613,295
 $1,073,978
       
Consideration      
Common OP units (2)
 $24,064
 $
 $24,064
Series A-4 preferred OP units (3)
 18,852
 1,000
 19,852
Common stock 20,257
 258,918
 279,175
Series A-4 Preferred Stock 13,610
 175,417
 189,027
Consideration from new mortgages 100,700
 120,960
 221,660
Cash consideration transferred 283,200
 57,000
 340,200
Total consideration transferred $460,683
 $613,295
 $1,073,978
(1)The purchase price allocations for the first and second closings are preliminary and may be adjusted as final costs and final valuations are determined.

(2) To estimate the fair value of the common OP units at the valuation date, we utilized the market approach, observing public price of our common stock.

(3) To estimate the fair value of the Series A-4 preferred OP units at the valuation date, we utilized a Binomial Lattice Method of the income approach.

The amount of revenue and net income included in the Consolidated Statementsconsolidated statements of Operationsoperations related to the Green Courte properties for the yearsyear ended December 31,2012 for all acquisitions detailed below 2014 is set forth in the following table (in thousands):

 Revenue Net Income
Years Ended December 31, 2012$38,557
 $290
  Year Ended December 31, 2014
  (unaudited)
Revenue $6,515
Net income $(6,744)

2012 Activity:











F - 17

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.      Real Estate Acquisitions and Dispositions, continued

2014 Other Acquisitions:
In February 2012,December 2014, we acquired Three Lakes RV Resort, Blueberry Hill RV Resort and Grand Lake Estates (collectively, the “Additional Florida Properties”), one of which isOak Creek, a MH community with 198 sites located in Hudson, Florida, one of which is located in Bushnell, Florida and one of which is located in Orange Lake, Florida, comprised of 1,114 RV sites in the aggregate.Coarsegold, California.

In July 2012,June 2014, we acquired Blazing Star RVLake Rudolph Campground and Recreational Vehicle Resort ("Blazing Star"Lake Rudolph"), an RV community with 260503 sites located in San Antonio, Texas.Santa Claus, Indiana.
In April 2014, we acquired Saco/Old Orchard Beach RV Resort ("Saco"), an RV community with 127 sites located in Saco, Maine.
In February 2014, we acquired Driftwood Camping Resort ("Driftwood"), an RV community with 698 sites and expansion potential of approximately 30 sites located in Clermont, New Jersey, and Seashore Campsites RV and Campground ("Seashore"), an RV community with 685 sites located in Cape May, New Jersey.
In January 2014, we acquired Castaways RV Resort & Campground ("Castaways"), an RV community with 369 sites and expansion potential of approximately 25 sites located in Worcester County, Maryland, and Wine Country RV Resort ("Wine Country"), an RV community with 166 sites and expansion potential of approximately 34 sites located in Paso Robles, California.
The following tables summarize the fair value of the assets acquired and liabilities assumed at the acquisition dates and the consideration paid for other acquisitions completed in 2014 (in thousands):
At Acquisition Date Wine Country Castaways Seashore Driftwood 
Saco (1)
 
Lake Rudolph(1)
 
Oak Creek (1)
 Total
Investment in property $13,250
 $36,597
 $24,258
 $31,301
 $4,366
 $30,454
 $15,944
 $156,170
In-place leases and other intangible assets 
 
 500
 790
 
 
 390
 1,680
Other assets 9
 2
 12
 4
 31
 64
 236
 358
Below market lease and franchise intangibles 
 
 
 
 (6) 
 (140) (146)
Other liabilities (60) (497) (1,188) (836) (258) (1,417) (57) (4,313)
Assumed debt 
 
 
 
 
 
 (10,358) (10,358)
Total identifiable assets and liabilities assumed $13,199
 $36,102
 $23,582
 $31,259
 $4,133
 $29,101
 $6,015
 $143,391
                 
Consideration                
Cash consideration transferred $13,199
 $36,102
 $23,582
 $31,259
 $4,133
 $29,101
 $6,015
 $143,391
(1) The purchase price allocations for Saco, Lake Rudolph and Oak Creek are preliminary and may be adjusted as final costs and final valuations are determined.

InThe following unaudited pro forma financial information presents the results of our operations for the years ended December 31, 2014 and July 20122013, as if the properties acquired during 2014 were acquired on January 1, 2013. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees and purchase accounting. The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have actually occurred had the acquisitions been consummated on January 1, 2013 (in thousands, except per-share data).
  Year Ended December 31,
  (unaudited)
  2014 2013
Total revenues $567,731
 $539,020
Net income attributable to Sun Communities, Inc. common stockholders $83,125
 $60,985
Net income per share attributable to Sun Communities, Inc. common stockholders - basic $2.01
 $1.78
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted $1.99
 $1.77


F - 18

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.      Real Estate Acquisitions and Dispositions, continued

2013 Acquisition Activity:
During the fourth quarter of 2013, we also acquired Northville Crossing Manufactured Home Community ("Northville Crossing"),Camelot Villa, a manufacturing housingMH community with 756approximately 712 sites located in Northville, Michigan.
In October 2012, we acquired Rainbow RV ResortMacomb, Michigan, Jellystone Park at Birchwood Acres ("Rainbow"Jellystone at Birchwood"), an RV community with approximately 500269 sites located in Frostproof, Florida.
In November 2012, we acquired four manufactured home communities (the "Rudgate Acquisition Properties") with approximately 1,996 sites located in southeast Michigan. We also entered into management agreements with Rudgate Village Company Limited Partnership, Rudgate Clinton Company Limited PartnershipWoodridge, New York, and Rudgate Clinton Estates L.L.C. under which we manage and operate two other manufactured home communities (the "Rudgate Managed Properties") which are located in southeast Michigan and contain approximately 1,598 sites. In addition we provided mezzanine financing to the Rudgate Managed Properties. The Rudgate Managed Properties are accounted for as variable interest entities and are included in our 2012 acquisition activity (See Note 8 for details).
In December 2012, we acquired Palm Creek Golf &Vines RV Resort ("Palm Creek"), a community with 283 manufactured home sites, 1,580 RV sites and expansion potential of approximately 550 manufactured housing or 990 RV sites located in Casa Grande, Arizona.

Also in December 2012, we acquired Lake-In-Wood Camping Resort ("Lake In Wood"Vines"), an RV community with approximately 425130 sites located in Lancaster County, Pennsylvania.Paso Robles, California.

Subsequent to year end on February 8,During the second quarter of 2013,, we acquired tenBig Timber Lake RV Resort ("Big Timber Lake"), an RV community with approximately 528 sites located in Cape May, New Jersey, and Jellystone RV Resort ("Jellystone"), an RV community with approximately 299 sites located in North Java, New York.
During the first quarter of 2013, we acquired 10 RV communities from Gwynns Island RV Resort LLC, Indian Creek RV Resort LLC, Lake Laurie RV Resort LLC, Newpoint RV Resort LLC, Peters Pond RV Resort Inc., Seaport LLC, Virginia Tent LLC,
Wagon Wheel Maine LLC, Westward Ho RV Resort LLC and Wild Acres LLC (collectively, "Morgan RV Properties"), with approximately 3,700 sites located in Ohio, Virginia, Maine, Massachusetts, Connecticut, New Jersey and Wisconsin for a purchase price of $112.8 million, which was paid by the issuance of $4.0 million of newly created Series A-3 Preferred OP Units and the remainder paid in cash. Subject to certain contractual restrictions contained in the acquisition agreements, the Series A-3 Preferred OP Units carry an annual yield of 4.5% and are exchangeable into shares of common stock at a price of $53.75 per share.














F - 14

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.      Real Estate Acquisitions, continuedWisconsin.

The following table summarizes the amounts of the assets acquired and liabilities assumed recognized at the acquisition dates and the consideration paid for the 2012 acquisitions above (in thousands):

At Acquisition Date Addtl Florida Properties Blazing Star Northville Crossing Rainbow Rudgate Acquisition and Managed Properties Palm Creek Lake In WoodTotal
Investment in property $25,384
 $6,913
 $30,814
 $7,572
 $123,754
 $87,979
 $14,457
$296,873
Inventory of manufactured homes 112
 220
 187
 679
 2,978
 
 
4,176
Notes 
 
 1,169
 
 3,002
 
 
4,171
In-place leases 180
 
 260
 40
 8,110
 2,058
 
10,648
Other assets 
 193
 
 
 745
 686
 43
1,667
Other liabilities (1,194) (179) (221) (331) (1,832) (880) (755)(5,392)
Assumed debt 
 (4,104) 
 
 (15,103) (43,619) 
(62,826)
                
Total identifiable assets and liabilities assumed $24,482
 $3,043
 $32,209
 $7,960
 $121,654
 $46,224
 $13,745
$249,317
                
                
 Consideration               
                
Cash (1)
 $24,482
 $3,043
 $32,209
 $7,351
 $54,054
 $10,247
 $13,745
$145,131
New debt proceeds (2)
 
 
 
 609
 67,600
 35,977
 
104,186
                
Fair value of total consideration transferred $24,482
 $3,043
 $32,209
 $7,960
 $121,654
 $46,224
 $13,745
$249,317

(1) Subsequent to the acquisition, on March 30, 2012, the Additional Florida Properties were encumbered with a $19.0 million loan. On September 28, 2012, Northville Crossing was encumbered with a $21.7 million loan. (See Note 9)
(2) Subsequent to the acquisition, in January 2013 we paid off the $36.0 million sellers note for Palm Creek. (See Note 9)

The following unaudited pro forma financial information presents the results of our operations for the years ended December 31,2012 and 2011 as if the properties were acquired on January 1, 2011. The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of either the results of operations that would have actually occurred or the future results of operations (in thousands, except per-share data). (1)
 Years Ended December 31,
 (unaudited)
 2012 2011
Total revenues$367,710
 $323,473
Net income attributable to Sun Communities, Inc. shareholders13,666
 6,677
Net income per share attributable to Sun Communities, Inc. shareholders - basic0.50
 0.31
Net income per share attributable to Sun Communities, Inc. shareholders - diluted0.50
 0.30

(1) Below are nonrecurring expenses that have been adjusted for the pro forma results above:
(a) Certain sellers had management fees of $0.3 million for the year ended December 31, 2011 that have been excluded from above as these fees will not continue going forward.
(b) Transaction costs related to the acquisitions are not expected to have a continuing impact and therefore have been excluded from 2012 and included in 2011 for acquisitions completed in 2012.






F - 15

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.      Real Estate Acquisitions, continued

2011 Activity:

In May 2011, we acquired Orange City RV Resort (“Orange City”), a Florida RV community comprised of 525 developed sites located in Orange City, Florida.  

In June 2011, we closed on the acquisition of Kentland Communities (“Kentland”), comprised of 17 manufactured home communities and one recreational vehicle community.  The 18 acquired communities are located in western Michigan and contain 5,434 developed sites.  

In November 2011, we acquired Cider Mill Crossings (“Cider Mill”), a Michigan manufactured home community with 262 developed sites through an auction. Cider Mill is located in Fenton, Michigan.

In December 2011, we acquired three Florida RV communities, Club Naples RV Resort, Kountree RV Resort, and North Lake RV Resort (collectively the “Florida Properties”), two of which are in Naples, Florida and one of which is in Moore Haven, Florida, comprised of 740 developed sites.

The following table summarizes the amounts of the assets acquired and liabilities assumed recognized at the acquisition dates and the consideration paid for the 2011 acquisitions (in thousands):
 2013
At Acquisition Date
Kentland Orange City
Cider Mill
Florida PropertiesTotal Morgan RV Properties Jellystone Big Timber Lake Camelot Villa Jellystone at Birchwood Vines Total
Investment in property
$131,228
 $6,460
 $2,088
 $24,027
$163,803
 $109,122
 $9,754
 $21,898
 $22,121
 $6,087
 $8,000
 $176,982
Inventory of manufactured homes
1,150
 
 
 36
1,186
 
 
 
 2,324
 
 
 2,324
Notes 3,542
 
 
 
3,542
In-place leases
9,200
 10
 
 190
9,400
Notes and other receivables 
 
 
 852
 
 
 852
In-place leases and other intangible assets 2,940
 390
 580
 610
 450
 
 4,970
Other assets
1,269
 
 
 97
1,366
 157
 7
 48
 84
 12
 1
 309
Below market leases 
 
 (3,490) (240) 
 
 (3,730)
Other liabilities
(2,067) 
 (1,678) (1,237)(4,982) (3,697) (930) (1,157) (546) (293) (4) (6,627)
Assumed debt
(52,398) 
 
 
(52,398)

 
   
 

Total identifiable assets and liabilities assumed
$91,924
 $6,470

$410

$23,113
$121,917
 $108,522
 $9,221
 $17,879
 $25,205
 $6,256
 $7,997
 $175,080
                      
        
Consideration  








               
 







  
Cash $27,383
 $2,533
 $410
 $6,113
$36,439
 $55,618
 $9,221
 $17,879
 $25,205
 $6,256
 $7,997
 $122,176
Series A-1 preferred OP units
45,548
 
 
 
45,548
New debt proceeds 18,993
 3,937
 
 17,000
39,930




  

  

Series A-3 preferred OP units (1)
 3,463
 
 
 
 
 
 3,463
Extinguishment of note receivable 49,441
 
 
 
 
 
 49,441
Fair value of total consideration transferred
$91,924

$6,470

$410

$23,113
$121,917
 $108,522
 $9,221
 $17,879
 $25,205
 $6,256
 $7,997
 $175,080

(1) Included in the total consideration paid for Morgan RV Properties was the issuance of 40,268 Series A-3 preferred OP units. In order to estimate the fair value of these units at the valuation date, we utilized the income approach using estimated future discounted cash flows.











F - 1619

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.      Real Estate Acquisitions and Dispositions, continued

The results of operations of the acquisitions detailed above are included in the Consolidated Statements of Operations beginning on their respective acquisition dates. The following unaudited pro forma financial information presents the results of our operations for the years ended December 31,2011 2013 and 2012 as if the propertiesacquisitions completed in 2013 were acquired on January 1, 2010.2012. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees and purchase accounting. The information presented below has been prepared for comparative purposes only and dodoes not purport to be indicative of either future results of operations or the results of operations that would have actually occurred orhad the future results of operationsacquisitions been consummated on January 1, 2012 (in thousands, except per-share data).(1)
Years Ended December 31,Year Ended December 31,
(unaudited)(unaudited)
2011 20102013 2012
Total revenues$304,730
 $293,982
$423,490
 $392,862
Net income attributable to Sun Communities, Inc. shareholders1,005
 (2,326)$16,352
 $23,833
Net income per share attributable to Sun Communities, Inc. shareholders - basic0.05
 (0.12)$0.47
 $0.87
Net income per share attributable to Sun Communities, Inc. shareholders - diluted0.05
 (0.12)$0.47
 $0.87

(1) Below are nonrecurring expenses that have been adjustedThe amount of revenue and net income included in the consolidated statements of operations for the pro forma results above:
(a) The sellers had management fees of $0.8 million and $1.5 million for the years ended December 31,2011 2014, 2013 and 2010 that have been excluded from2012 for all acquisitions described above as these fees will not continue going forward.
(b) Transaction costs related tois set forth in the acquisitions are not expected to have a continuing impact and therefore have been excluded from 2011 and included in 2010 for acquisitions completed in 2011.following table (in thousands):

Acquisition related
 Year Ended December 31,
 (unaudited)
 2014 2013 2012
Revenue$42,258
 $60,148
 $38,557
Net income$9,214
 $5,914
 $290

Transaction Costs

Transaction costs of approximately $4.3$18.3 million, $3.9 million and $2.0$4.3 million have been incurred for the years ended December 31,2012 2014, 2013 and 2011,2012, respectively, and are presented as “Acquisition related“Transaction costs” in our Consolidated Statementsconsolidated statements of Operations.operations.

Dispositions

During the year ended December 31, 2014, we completed the sales of 10 MH communities: Bedford Hills, White Oak, Falcon Pointe, Timberbrook, Woodlake Estates, Byrne Hill, Continental Estates, Davison East, Countryside Village and Desert View Village. During the first quarter of 2014, the Company chose to early adopt Accounting Standards Update ("ASU") 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"). Pursuant to ASU 2014-08, the disposals of the communities do not qualify for presentation as discontinued operations, as the sales do not have a major impact on our operations and financial results and do not represent a strategic shift. Additionally, the communities are not considered individually significant components and therefore do not qualify for presentation as discontinued operations. A gain of $17.7 million is recorded in "Gain on disposition of properties, net" in our consolidated statement of operations.

As of December 31, 2012, the total residual value of the acquired in-place leases above is $17.8 million. The amortization period is seven years.

F - 20

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We have completed the purchase price allocation for Kentland, Orange City, Cider Mill and the Florida Properties. The purchase price allocations for the Additional Florida Properties, Blazing Star, Northville Crossing, Rainbow, Rudgate Acquisition and Managed Properties, Palm Creek and Lake In Wood are preliminary and may be adjusted as final costs and final valuations are determined.

3.      Investment Property

The following table sets forth certain information regarding investment property (in thousands):

 December 31, 2012 December 31, 2011 December 31, 2014 December 31, 2013
Land $182,682
 $140,230
 $309,386
 $194,404
Land improvements and buildings 1,608,825
 1,342,325
 2,471,436
 1,806,546
Rental homes and improvements 305,838
 246,245
 477,554
 393,562
Furniture, fixtures, and equipment 54,354
 41,172
 81,586
 65,086
Land held for future development 25,606
 24,633
 23,955
 29,521
Investment property 2,177,305
 1,794,605
 3,363,917
 2,489,119
Accumulated depreciation (659,169) (597,999) (795,753) (734,067)
Investment property, net $1,518,136
 $1,196,606
 $2,568,164
 $1,755,052

Land improvements and buildings consist primarily of infrastructure, roads, landscaping, clubhouses, maintenance buildings and amenities.







F - 17

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.      Investment Property, continued

In December 2011,During 2014, we recorded an impairment chargescharge of $1.4$0.8 million associated with a long-lived asset for our manufactured housingan MH and RV community located in Reidsville, North Carolina.La Feria, Texas. This community consists of 45280 developed sites. Based on our impairment analysis, we reviewed the carrying value of the long-lived asset to be held and used for impairment which indicated a possible impairment. Circumstances that prompted this test of recoverability included a decrease in the net operating income and an adverse judgment that limits the numberoverall operating performance of rental homes in the community. We considered both of these factors and determined that we will not be expanding the community. We recognized the impairment loss because the long-lived asset's carrying value was deemed not recoverable and exceeded the estimated fair value. We estimated the fair value of the long-lived asset based on discounted future cash flows and any potential disposition proceeds for the given asset. We used variables such as estimated holding period, rental rates, occupancy and operating expenses during the holding period, as well as disposition proceeds to forecast future cash flows. This transactionThe impairment loss is classified as Asset Impairment Charge within the Consolidated Statementsrecorded in "Asset impairment charge" on our consolidated statements of Operations.operations.

See Note 2, "Real Estate Acquisitions and Dispositions", for details on acquisitions.


F - 21

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.      Transfers of Financial Assets

We completed various transactions with an unrelated entity involving our notes receivable during 20122014 and 20112013 under which we received a total of $26.4$35.0 million and $21.5$34.0 million, , respectively, of cash proceeds in exchange for relinquishing our right, title and interest in certain notes receivable. We have no further obligations or rights with respect to the control, management, administration, servicing, or collection of the installment notes. However, we are subject to certain recourse provisions requiring us to purchase the underlying homes collateralizing such notes, in the event of a note default and subsequent repossession of the home by the unrelated entity. The recourse provisions are considered to be a form of continuing involvement, and therefore these transferred loans did not meet the requirements for sale accounting. We continue to recognize these transferred loans on our balance sheet and refer to them as collateralized receivables as a transfer of financial assets. The proceeds from the transfer have been recognized as a secured borrowing.

In the event of note default, and subsequent repossession of a manufactured home by the unrelated entity, the terms of the agreement require us to repurchase the manufactured home. Default is defined as the failure to repay the installment note according to contractual terms. The repurchase price is calculated as a percentage of the outstanding principal balance of the collateralized receivable, plus any outstanding late fees, accrued interest, legal fees, and escrow advances associated with the installment note.  The percentage used to determine the repurchase price of the outstanding principal balance on the installment note is based on the number of payments made on the note. In general, the repurchase price is determined as follows:

Number of Payments Repurchase %
Less than or equal to 15 100%
Greater than 15 but less than 64 90%
Equal to or greater than 64 but less than 120 65%
120 or more 50%

The transferred assets have been classified as collateralized receivables in Notes and Other Receivables (see Note 5)5) and the cash proceeds received from these transactions have been classified as a secured borrowing in Debt (see Note 9)9) within the Consolidated Balance Sheets.consolidated balance sheets. The balance of the collateralized receivables was $93.8$123.0 million (net of allowance of $0.6$0.7 million) and $109.8 million) and $81.2 million (net of allowance of $0.5 million)$0.7 million) as of December 31, 20122014 and December 31, 20112013, respectively.  The outstanding balance on the secured borrowing was $94.4$123.7 million and $81.7$110.5 million as of December 31, 20122014 and December 31, 20112013, respectively.












F - 18

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.      Transfers of Financial Assets, continued

The balances of the collateralized receivables and secured borrowings fluctuate. The balances increase as additional notes receivable are transferred and exchanged for cash proceeds. The balances are reduced as the related collateralized receivables are collected from the customers, or as the underlying collateral is repurchased. The change in the aggregate gross principal balance of the collateralized receivables is as follows (in thousands):

Year Ended Year EndedYear Ended
December 31, 2012 December 31, 2011December 31, 2014 December 31, 2013
Beginning balance$81,682
 $71,278
$110,510
 $94,409
Financed sales of manufactured homes26,406
 21,509
34,952
 34,007
Principal payments and payoffs from our customers(5,662) (4,425)(11,845) (7,930)
Principal reduction from repurchased homes(8,017) (6,680)(9,967) (9,976)
Total activity12,727
 10,404
13,140
 16,101
Ending balance$94,409
 $81,682
$123,650
 $110,510

The collateralized receivables earn interest income and the secured borrowings accrue interest expense at the same interest rates. The amount of interest income and expense recognized was $9.4$11.8 million, $10.6 million and $8.5$9.4 million for the years ended December 31, 2014, 20122013 and 2011,2012, respectively.  


F - 22

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.      Notes and Other Receivables

The following table sets forth certain information regarding notes and other receivables (in thousands):

 December 31, 2012 December 31, 2011 December 31, 2014 December 31, 2013
Installment notes receivable on manufactured homes, net $21,898
 $13,417
 $25,884
 $25,471
Collateralized receivables, net (see Note 4) 93,834
 81,176
 122,962
 109,821
Other receivables, net 23,335
 20,291
 26,011
 29,393
Total notes and other receivables $139,067
 $114,884
Total notes and other receivables, net $174,857
 $164,685

Installment Notes Receivable on Manufactured Homes

The installment notes of $21.9$25.9 million (net of allowance of $0.1$0.1 million) and $25.5 million) and $13.4 million (net of allowance of $0.1 million)$0.1 million) as of December 31, 20122014 and December 31, 20112013, respectively, are collateralized by manufactured homes. The notes represent financing provided by us to purchasers of manufactured homes primarily located in our communities and require monthly principal and interest payments. The notes have a net weighted average interest rate and maturity of 8.6 percent8.7% and 11.010.4 years as of December 31, 20122014, and 7.9 percent8.9% and 10.311.9 years as of December 31, 20112013.

The change in the aggregate gross principal balance of the installment notes is as follows (in thousands):

 Year Ended Year Ended
 December 31, 2012 December 31, 2011
Beginning balance$13,545
 $9,466
Financed sales of manufactured homes7,453
 3,362
Acquired notes (see Note 2)4,171
 3,542
Principal payments and payoffs from our customers(2,292) (1,728)
Principal reduction from repossessed homes(858) (1,097)
Total activity8,474
 4,079
Ending balance$22,019
 $13,545



F - 19

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.      Notes and Other Receivables, continued
 Year Ended
 December 31, 2014 December 31, 2013
Beginning balance$25,575
 $22,019
Financed sales of manufactured homes946
 7,798
Acquired notes (see Note 2)5,189
 852
Principal payments and payoffs from our customers(4,088) (3,838)
Principal reduction from repossessed homes(1,598) (1,256)
Total activity449
 3,556
Ending balance$26,024
 $25,575

Collateralized Receivables

Collateralized receivables represent notes receivable that were transferred to a third party, but did not meet the requirements for sale accounting (see Note 4)4). The receivables have a balance of $93.8$123.0 million (net of allowance of $0.6$0.7 million) and $109.8 million) and $81.2 million(net (net of allowance of $0.5 million )$0.7 million) as of December 31, 20122014 and December 31, 20112013, respectively.  The receivables have a net weighted average interest rate and maturity of 11.0 percent10.4% and 13.214.6 years as of December 31, 20122014, and 11.2 percent10.7% and 13.213.6 years as of December 31, 20112013.

Subsequent to year end in January 2013, we entered into an agreement with Talmer Bank under which we may refer purchasers of homes in our communities to Talmer Bank to obtain loans to finance their home purchases. We do not receive referral fees or other cash compensation under the agreement. If Talmer Bank makes loans to purchasers referred by us under the agreement, those purchasers default on their loans and Talmer Bank repossesses the homes securing such loans, we have agreed to purchase from Talmer Bank each such repossessed home for a price equal to 100% of the amount under each such loan, subject to certain adjustments; provided that the maximum outstanding principal amount of the loans subject to the agreement may not exceed $10.0 million. In addition, we have agreed to waive all site rent that would otherwise be due from Talmer Bank so long as it owns any homes on which loans were made pursuant to the agreement. The agreement expires November 1, 2013, but may be extended by mutual agreement of Talmer Bank and us.

Allowance for Losses for Collateralized and Installment Notes Receivable

The following table sets forth the allowance for losses for collateralized and installment notes receivable as of December 31, 20122014 and December 31, 20112013 (in thousands):

Year Ended Year EndedYear Ended
December 31, 2012 December 31, 2011December 31, 2014 December 31, 2013
Beginning balance$(635) $(303)$(793) $(697)
Lower of cost or market write-downs243
 84
280
 421
Increase to reserve balance(305) (416)(316) (517)
Total activity(62) (332)(36) (96)
Ending balance$(697) $(635)$(828) $(793)


F - 23

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5.      Notes and Other Receivables, continued

Other Receivables

As of December 31, 20122014, other receivables were comprised of amounts due from residents for rent and water and sewer usage of $4.9 million (net of allowance of $1.0 million), home sale proceeds of $7.4 million, insurance receivables of $1.0 million, insurance settlement of $3.7 million, rebates and other receivables of $6.8 million and a note receivable of $2.2 million. The $2.2 million note bears interest at 8.0% for the first two years and 7.9% for the remainder of the loan, is secured by the senior mortgage on one MH community and a deed of land, and is due on December 31, 2016. As of December 31, 2013 other receivables were comprised of amounts due from residents for rent and water and sewer usage of $3.3$6.9 million (net of allowance of $0.5 million)$0.7 million), home sale proceeds of $6.1$5.7 million,, insurance receivables of $1.7$2.0 million,, insurance settlement of $3.7$3.7 million,, rebates and other receivables of $3.5$4.6 million and two notes receivable of $4.3 million and $2.2 million.

In June 2014, a $4.3 million note receivable, of $5.0 million. The $5.0 million note, which was loaned to the principals of the Florida Properties, bears interest at LIBOR plus 475 basis points, and is secured by allsenior mortgages on two RV communities, a pledge of the$4.0 million in Series A-3 Preferred OP Units, a subordinated interest in cash collateral account and equity interests in entities that own fouranother RV communities. The extended maturity date of the note is February 28, 2013. As of December 31, 2011 other receivables were comprised of amounts due from residents for rent and water and sewer usage of $3.0 million (net of allowance of $0.4 million), home sale proceeds of $3.3 million, insurance receivables of $0.8 million, rebates receivablecommunity, was paid in association of FNMA agreement of $4.9 million, insurance settlement of $3.7 million, note receivable related to Kentland acquisition of $0.9 million (see Note 2), and rebates and other receivables of $3.7 million.full.


6.Intangibles
6. Intangible Assets

Our intangible assets are in-place leases from acquisitions and capitalized costs in relation to leasing costs.franchise fees. These intangible assets are recorded within Other Assetsassets on the Consolidated Balance Sheets. They are amortized over a seven year amortization period. The gross carrying amount was $35.3 million and $25.3 million at December 31, 2012 and December 31, 2011, respectively.consolidated balance sheet. The accumulated amortization is $11.8 millionand $10.8 milliongross carrying amounts are as follows (in thousands):
    December 31, 2014 December 31, 2013
Intangible Asset Useful Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
In-place leases 7 years $41,511
 $(12,107) $26,961
 $(8,239)
Franchise fees 15 years 764
 (106) 770
 (29)
Total   $42,275
 $(12,213) $27,731
 $(8,268)

During 2014, in connection with our acquisitions, we purchased intangible assets classified as in-place leases valued at December 31, 2012 and December 31, 2011, respectively. Aggregateapproximately $14.6 million.

The aggregate net amortization expenseexpenses related to the intangible assets was $3.6 million, $2.5 million and $2.5 million for the years ended December 31,2012, 2011, and 2010, respectively. are as follows (in thousands):
  Year Ended December 31,
Intangible Asset 2014 2013 2012
In-place leases $3,867
 $3,297
 $1,657
Franchise fees 77
 60
 
Total $3,944
 $3,357
 $1,657

We anticipate the amortization expense for the existing intangible assets to be $4.3 million, $4.0 million, $3.8 million, $3.6 million and $3.4 millionas follows for the next five years. years (in thousands):

  Year
  2015 2016 2017 2018 2019
Estimated expense $5,564
 $5,564
 $5,690
 $4,902
 $3,896


F - 2024

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.      Investment in Affiliates

Origen Financial Services, LLC (“OFS LLC”)

At December 31, 20122014 and 20112013, we had a 22.9 percent22.9% ownership interest in OFS LLC, an entity formed to originate manufactured housing installment contracts.  We have suspended equity accounting as the carrying value of our investment is zero.


Origen Financial, Inc. (“Origen”)

Through Sun OFI, LLC, a taxable REIT subsidiary, we own 5,000,000 shares of common stock of Origen which approximates an ownership interest of 19 percent19.0%. Although it is no longer originating or servicing loans, Origen continues to manage an existing portfolio of manufactured home loans and asset backed securities. We have suspended equity accounting for this investment as the carrying value of our investment is zero. We do,did, however, receive income from dividendsdistributions of $1.2 million on our shares of Origen common stock.  The dividend payments are funded through normal operations and certain other transactions such as swap terminations and selling of securities.stock during 2014. Our investment in Origen had a market value of approximately $7.3$8.2 million based on a quoted market closing price of $1.45$1.64 per share as reported on the OTC Pink Marketplace as of December 31, 2014.2012.

The unaudited revenue and expense amounts in the table below represent actual results through November 2012 and budgeted December 2012 results.

In January 2013, we were advised by2015, Origen announced that it completed the sale of substantially all of its assets to an affiliate of GoldenTree Asset Management LP. Origen also announced that it has entered into a letter of intent with Mack Real Estate Credit Strategies, ("MRECS"), an affiliate of Mack Real Estate Group, for a proposed transaction pursuant to which MRECS and other third parties would invest additional capital into Origen by purchasing shares of newly issued common stock. Origen would continue to operate its business as a mortgage REIT and would be restatingexternally managed pursuant to a market based management agreement with MRECS. Under the letter of intent, it is anticipated that Origen's stockholders would be given the option to: (a) tender their 2011 financial statementsshares to correctOrigen for cash in an amount equal to Origen's estimated current net cash value, payable at the conclusion of the tender period, or (b) retain their shares in Origen. Origen’s Board of Directors approved the letter of intent and, as permitted by the plan of dissolution approved by Origen’s stockholders in October 2014, Origen has abandoned the plan of dissolution and the distribution of its results from operations. This adjustment has no impactremaining cash net of expenses and reserves pending completion of the transaction with MRECS. The MRECS transaction is subject to our financial statements since we have suspended equity accounting.the further negotiation and execution of definitive transaction documents, MRECS’s satisfactory completion of its due diligence on Origen, and other customary closing conditions.

The following table sets forth certain summarized unaudited financial information for Origen, (amounts inwhich was determined to be a significant subsidiary in2013 and 2012 (in thousands):

Years Ended December 31,
(unaudited) Year Ended December 31,
2012 2011 2010 2013 2012
Revenues$64,838
 $67,094
 $74,401
 $49,775
 $64,838
Expenses(66,215) (77,598) (90,995) (51,912) (66,215)
Net loss$(1,377) $(10,504) $(16,594) $(2,137) $(1,377)

 As of December 31,
 (unaudited)
ASSETS2012 2011
Loans receivable$543,420
 $628,708
Other assets19,824
 22,924
Total assets$563,244
 $651,632
LIABILITIES   
Warehouse and securitization financing$491,720
 $559,420
Other liabilities48,389
 51,625
Total liabilities$540,109
 $611,045

8. Consolidated Variable Interest Entities

On November 14, 2012, we guaranteed certain non-recourse carveouts under a $45.9 million mortgage loan (the “Senior Loan”) from Ladder Capital Finance LLC to Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC and Rudgate Clinton Estates SPE, LLC (the “Rudgate Borrowers”). The Senior Loan is secured by the Rudgate Managed Properties, which are located in southeast Michigan.  In addition, we entered into a Mezzanine Loan Agreement with the sole members of the Rudgate Borrowers under

 December 31, 2013
ASSETS 
Loans receivable$463,254
Other assets15,529
Total assets$478,783
LIABILITIES 
Warehouse and securitization financing$423,369
Other liabilities38,109
Total liabilities$461,478


F - 2125

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8. Consolidated Variable Interest Entities continued

which we agreed to provide mezzanine financing in the amount of $15.0 million in respect of theVariable interest entities ("VIEs") that are consolidated include Rudgate Managed Properties,Village SPE, LLC, Rudgate Clinton SPE, LLC, Rudgate Clinton Estates SPE, LLC (the “Rudgate Borrowers”) and entered into property management agreements to manage and operateWildwood Village Mobile Home Park, LLC ("Wildwood"). We evaluated our arrangements with these two communities.  We believe these arrangements represent variable interests in the Rudgate Managed Properties that were evaluatedproperties under the guidance set forth in FASB ASC Topic 810, Consolidation. As a result of the qualitative and quantitative analysis performed, we determinedWe concluded that the Company isRudgate Borrowers and Wildwood qualify as VIEs as we are the primary beneficiary and holds ahold controlling financial interestinterests in these entities due to the Company'sour power to direct the activities that most significantly impact the economic performance of the entities, as well as itsour obligation to absorb the most significant losses and itsour rights to receive significant benefits from these entities.  As such, the transactions and accounts of these VIEs are included in the accompanying consolidated financial statementsstatements.

In December 2014, we assumed a mezzanine loan in the amount of $17.7 million, in connection with the Green Courte acquisition, and also assumed a property management agreement to manage and operate the Wildwood community.

In November 2012, we guaranteed certain non-recourse carveouts under a $45.9 million mortgage loan (the “Senior Loan”) from November 14, 2012 through December 31, 2012.Ladder Capital Finance LLC to the Rudgate Borrowers. The Senior Loan is secured by the two MH communities that we manage but do not own, which are located in southeast Michigan. In addition, we entered into a mezzanine loan agreement with the sole members of the Rudgate Borrowers under which we agreed to provide mezzanine financing in the amount of $15.1 million in respect of the two MH communities managed by us, and entered into property management agreements to manage and operate these two communities.

Included in our consolidated balancesfinancial statements after appropriate eliminations were amounts related to the VIEs at December 31, 20122014 and December 31, 2013 as follows (in thousands):

December 31, 2012December 31, 2014 December 31, 2013
ASSETS    
Investment property, net$56,326
$94,230
 $56,805
Other assets4,598
4,400
 3,926
Total Assets$60,924
$98,630
 $60,731
    
LIABILITIES AND STOCKHOLDERS' EQUITY    
Debt$45,900
$65,849
 $45,209
Other liabilities1,773
10,442
 6,564
Noncontrolling interests(508)(416) (537)
Total Liabilities and Stockholders' Equity$47,165
$75,875
 $51,236

Investment property, net of $56.3 millionand other assets related to the consolidated VIEs comprised approximately 3.2%3.4% and 3.0% of our consolidated total assets at December 31, 2012. Debt of $45.9 millionand debt and other liabilities of $1.8 millioncomprised approximately 3.1%3.8% and 3.2% of our consolidated total liabilities at December 31, 20122014. and December 31, 2013, respectively. Noncontrolling interest related to the consolidated VIEs comprised less than 1.0% of our consolidated total equity at December 31, 20122014. and December 31, 2013.


F - 26

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9.      Debt and Lines of Credit

The following table sets forth certain information regarding debt (in thousands):
 
Principal
Outstanding
 
Weighted Average
Years to Maturity
 
Weighted Average
Interest Rates
 December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Collateralized term loans - CMBS$725,951
 $629,229
 4.5
 5.0
 5.2% 5.5%
Collateralized term loans - FNMA369,810
 364,581
 10.3
 11.3
 3.8% 3.6%
Aspen and Series B-3 preferred OP Units47,322
 48,822
 8.4
 9.2
 6.9% 6.9%
Secured borrowing (see Note 4)94,409
 81,682
 12.8
 13.2
 11.0% 11.2%
Mortgage notes, other186,228
 143,877
 6.2
 3.2
 4.3% 3.8%
Total debt$1,423,720
 $1,268,191
 6.8
 7.3
 5.2% 5.2%
 
Principal
Outstanding
 
Weighted Average
Years to Maturity
 
Weighted Average
Interest Rates
 December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Collateralized term loans - FMNA$492,800
 $440,790
 7.1 7.7
 4.0% 3.8%
Collateralized term loans - FMCC152,462
 
 9.9 
 4.0% %
Collateralized term loans - Life Companies204,638
 2,489
 10.9 3.3
 4.3% 8.0%
Collateralized term loans - CMBS806,840
 710,626
 5.4 5.9
 5.3% 5.3%
Preferred OP Units45,903
 47,022
 6.8 7.6
 6.9% 6.9%
Secured Borrowing123,650
 110,510
 14.6 13.5
 10.4% 10.6%
Total debt$1,826,293
 $1,311,437
 7.5 7.2
 5.1% 5.3%

Collateralized Term Loans

In July 2012December 2014, we borrowed the aggregate amount of $74.0 million under two mortgage loans from The Northwestern Mutual Life Insurance Company (“NM”). The loans have a 15 year term and a blended rate of 3.65%.
During the fourth quarter of 2014, in relation to the acquisition of the Green Courte properties (see Note 2), we assumed a collateralizedrefinanced approximately $100.7 million of mortgage backed security, or "CMBS", agreementdebt with a principal balance of $4.1 million, as a resultFreddie Mac ("FMCC") on 12 of the Blazing Star acquisition (See Note 2 for acquisition details), which has a weighted average maturitycommunities (resulting in proceeds of 3.0 years and bears$152.5 million) at an interest rate of 5.64%.4.03% per annum and a term of 10 years, and we assumed approximately $182.4 million of mortgage debt on 12 of the communities at a weighted average interest rate of 5.89% and a weighted average remaining term of 4.35 years.

In September 2014, we paid off the $2.4 million mortgage agreement secured by Brookside Village upon maturity and $13.5 million mortgage agreement secured by Cave Creek and Pine Trace.

In August 2014, we paid off $52.6 million of Fannie Mae ("FNMA") debt, and we paid in full a $6.5 million mortgage agreement secured by Sheffield Estates upon maturity.

In July and August 2014, we borrowed the aggregate amount of $63.5 million under five mortgage loans from Ladder Capital Finance, LLC ("Ladder"). The loans have a 10 year term and a blended annual interest rate of 4.56%. The proceeds of the loans were used to pay down a portion of our senior secured line of credit.

In January 2014, we and four of our subsidiaries borrowed the aggregate amount of $99.0 million under four mortgage loans (each, an “Individual Loan” and, together, the “Loan”) from NM pursuant to a Master Loan Agreement with NM. Each Individual Loan accrues interest at a rate of 4.20% and matures on February 13, 2026. We and each of the four borrowers have guaranteed the Loan. The proceeds of the Loan were used to repay a portion of our senior secured line of credit.

In December 2013, we and nine of our subsidiaries entered into a loan agreement with a lender for a $72.4 million term loan ("Pool A Loan"), and we and nine of our other subsidiaries entered into a loan agreement with the same lender for a $69.1 million term loan ("Pool B Loan", and collectively with the Pool A Loan, the "Loans"). The Loans mature on January 1, 2024. The Pool A Loan accrues interest at 4.89% per year and is secured by eight MH communities and two RV communities. The Pool B Loan accrues interest at 4.90% per year and is secured by eight MH communities and one RV community. We used the proceeds of the Loans and $34.4 million of additional cash to repay in full 11 loans previously made to subsidiaries of the Company.

In October 2013, we paid off maturing loans totaling $5.8 million, which were secured by two properties, Dutton Mills and Falcon Pointe.

In May 2013, we extended until May 1, 2023, $151.4 million of FNMA debt, which had an original maturity date of May 1, 2013. The current weighted average interest rate on this debt is 3.6%.


F - 2227

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




9. Debt and Lines of Credit, continued

In May 2013, we paid off the entire $3.5 million mortgage agreement secured by Holiday West Village upon maturity.

In September 2012,April 2013, we completedpaid off the sellers note associated with the acquisition of Rainbow RV Resort. The note had a secured debt agreement for $21.7principal balance of $0.6 million.

In January 2013, we paid off the sellers note associated with the acquisition of Palm Creek. The note had a principal balance of $36.0 million bearing and an interest rate of 3.89%2.0%. We also paid off the remaining $30.0 million outstanding under our $36.0 million variable financing loan from Bank of America, N.A. and a maturity date of October 1, 2022. This loan is secured by Northville Crossing (See Note 2 for acquisition details).The Private Bank.

In March, 2011, we completed a CMBS financing for $115.0 million bearing interest at a rate of 5.84% and a maturity date of March 1, 2021. This loan is secured by 11 properties. The loan refinanced $104.8 million of CMBS debt which was scheduled to mature in July 2011 and was collateralized using the same property pool.

In May 2011, we completed a refinancing agreement for $23.6 million. This debt bears interest at a rate of 5.38% and has a maturity date of June 1, 2021. This loan is secured by three properties. The loan refinanced $17.9 million of debt which was scheduled to mature in June 2012 and was collateralized using the same property pool.

In July 2011, we reached an agreement with Fannie Mae (“FNMA”) and PNC Bank, National Association, regarding the settlement of the litigation we commenced in November 2009 over certain fees charged when the variable rate loan facility was extended in April 2009. The agreement became effective January 3, 2012 and the litigation was dismissed. In accordance with the terms of the agreement, we have the option to extend the maturity date of our entire $367.0 million credit facility with PNC Bank and FNMA from 2014 to 2023, subject to compliance with certain underwriting criteria. This agreement also provided a reduction in the facility fee charged on our variable rate facility for 2011. In addition we entered into and drew on a $10.0 million variable rate facility, which matures on May 1, 2023 and provides for interest-only payments until May 1, 2014, after which principal and interest payments will be due based on a 30-year amortization.  The interest rate for the $10.0 million variable rate facility is equal to the 90-day LIBOR index, plus an investor spread equal to 95 basis points, plus a variable facility fee equal to 172 basis points through maturity.

The collateralized term loans totaling $1.1$1.7 billion as of December 31, 2012,2014, are secured by 102147 properties comprised of 39,15349,390 sites representing approximately $692.3 million$1.6 billion of net book value.

Aspen preferred OP Units and Series B-3 preferredPreferred OP units

The Aspen preferred OP units are convertible into 526,212509,676 common shares based on a conversion price of $68$68 per share with a redemption date of January 1, 2024.2024. The current preferred rate is 6.5 percent6.5%.

We redeemed $1.0 million of Series B-3 preferred OP units in May 2012.

Secured Borrowing

See Note 4, "Transfers of Financial Assets", for additional information regarding our collateralized receivables and secured borrowing transactions.

Mortgage Notes

In March 2012, we paid off a $2.7 million mortgage loan secured by a manufactured housing community in Belmont, Michigan which was due to mature on April 1, 2012.

In June 2012, we completed a variable refinancing agreement for $14.1 million. This debt bears an interest rate of LIBOR plus a 2.0% margin (effective rate at December 31, 2012 was 2.21%) and has a maturity of September 1, 2016, assuming the election of the two successive one-year extensions at our option. The loan is secured by two properties and refinanced $14.0 million of debt which matured in June 2012.

In November 2012, we entered into a $21.7 million financing agreement to fund the acquisition of the Rudgate Acquisition Properties. The debt was secured by one property. The maturity is 9.7 years and the interest rate is 4.65%.`

In November 2012, we also assumed secured debt with a principal balance of $15.4 million, as a result of the Rudgate acquisition (See Note 2). This secured debt was recorded at fair value on the date of the acquisition. The debt is secured by two properties. The maturity is 9.1 years and the interest rate is 4.3%.




F - 23

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.      Debt and Lines of Credit, continued

In December 2012, we assumed secured debt with a principal balance of $41.7 million, as a result of the Palm Creek acquisition (See Note 2). This secured debt was recorded at fair value on the date of the acquisition. The debt is secured by one property. The maturity is 9.5 years and the interest rate is 5.25%.

In December 2012, we entered into a sellers note with a principal balance of $36.0 million, as a result of the Palm Creek acquisition (See Note 2). The debt is secured by one property. The interest rate was 2.0%. We paid this note off in January 2013.

In September 2012, we paid off a mortgage loan of approximately $25.0 million secured by four properties which was due to mature on June 20, 2013.

In June 2011, we assumed secured debt with a principal balance of $52.4 million, as a result of the Kentland acquisition (see Note 2). This secured debt was recorded at fair value on the date of the acquisition which was equal to the assumed principal balance. This debt is secured by 12 properties. The weighted average maturity is 3.4 years and the weighted average annual variable interest rate of 5.61%.

In June 2011, we entered into a $22.9 million variable financing agreement to fund the Kentland and Orange City acquisitions (see Note 2). The debt was collateralized by six properties – five Kentland properties and Orange City.

On February 1, 2012, we paid off $4.5 million of this agreement which was collateralized by Orange City. In September 2012, we paid off the remaining approximately $18.1 million mortgage agreement which was due to mature on June 1, 2015.

In December 2011, we entered into a $17.0 million variable financing agreement. In March 2012, we amended and restated the variable financing agreement which added an additional $19.0 million , (the "$36.0 Million Facility"). The debt is collateralized by all six of the Florida Properties and Additional Florida Properties (see Note 2). The weighted average maturity is 4.0 years and the weighted average annual variable interest rate is 2.71%. As of June 30, 2012, we were not in compliance with the debt service coverage ratio contained in the $36.0 Million Facility. This non-compliance did not result in an Event of Default under the $36.0 Million Facility. On October 4, 2012, we entered into a loan modification agreement with the lenders, pursuant to which the lenders waived compliance with the debt service coverage ratio covenant through December 31, 2012 and modified the covenant for the quarter ending March 31, 2013.  As a condition to the loan modification, until we are in compliance with the debt service coverage ratio covenant for three consecutive quarters, the Operating Partnership agreed to remove the limitation on its guaranty and to provide full guaranty of repayment of the indebtedness. On October 4, 2012, pursuant to the loan modification agreement, we also paid down $6.0 million of the outstanding principal of the $36.0 Million Facility. In January 2013, we paid off this loan.

The mortgage notes totaling $186.2 million as of December 31, 2012, are collateralized by 24 properties comprised of 7,066 sites representing approximately $311.2 million of net book value.

Lines of Credit

In September 2011, we entered intoWe have a senior secured revolving credit facility with Bank of America,Citibank, N.A., and certain other lenders in the amount of $130.0$350.0 million (the "Facility"),. The Facility has a four year term ending May 15, 2017, which replacedcan be extended for one additional year at our $115.0option, subject to the satisfaction of certain conditions as defined in the credit agreement. The credit agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $250.0 million. The Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the credit agreement, which can range from 1.65% to 2.90%. Based on our calculation of the leverage ratio as of December 31, 2014, the margin was 1.65%. At December 31, 2014 we had no amount outstanding under the Facility and at December 31, 2013, we had approximately $178.1 million revolving line outstanding under the Facility. At December 31, 2014 and 2013, approximately $3.2 million and$2.7 million, respectively, of availability was used to back standby letters of credit.

The Facility is secured by a first priority lien on all of our equity interests in each entity that owns all or a portion of the properties constituting the borrowing base and collateral assignments of our senior and mezzaninejunior debt positions in certain borrowing base properties. The Facility has

In February 2013, we entered into a built-in accordion feature allowing up$61.5 million credit agreement to $20.0 million in additional borrowings andfund a one-year extension option, both at our discretion. In December 2012, we increased the amountportion of the Facility to $150.0 million in accordance with the termspurchase of the Morgan RV Properties acquisition (see Note 2 "Real Estate Acquisitions and Dispositions"). This loan documents. The Facility matures on October 1, 2015, assuming the election of an extension at our option. The Facility bears interest at a floating rate based on Eurodollar plus a margin that is determined based on our leverage ratio calculatedwas paid off in accordance with the Facility, which can range from 2.25% to 2.95%. Based on our calculation of the leverage ratio as of December 31, 2012, the margin is 2.50% . The outstanding balance on the line of credit was zero and $107.5 million as of December 31, 2012 and December 31, 2011, respectively. In addition, $4.0 million of availability was used to back standby letters of credit as of December 31, 2012 and December 31, 2011.March 2013.

As of December 31, 2012 and December 31, 2011, $146.0 million and $18.5 million, respectively, were available to be drawn under the Facility based on the calculation of the borrowing base at each date.




F - 24

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.      Debt and Lines of Credit, continued

We also have a $20.0$20.0 million secured line of credit agreement collateralized by a portion of our rental home portfolio. In December 2012, we increased this line of credit to $50.0 million. The net book value of the rental homes pledged as security for the loan must meet or exceed 200 percent200% of the outstanding loan balance. The
terms of the agreement require interest only payments for the first 5five years, with the remainder of the term being amortized based on a 10 year term. The interest rate is the prime rate as published in the Wall Street Journal adjusted the first day of each calendar month plus 200 basis points with a minimum rate of 5.5 percent.

5.5%. At both December 31,2012, 2014 and 2013, the effective interest rate is 5.5 percent. The outstanding balance was $25.0 million as of December 31, 2012. The outstanding balance5.5%, and there was $16.0 million as of December 31, 2011.no amount outstanding.

We have a $12.0$12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least 12 monthstwelve months’ notice of its intent to terminate the agreement. The interest rate is 100 basis points over the greater of the prime rate published in the Wall Street Journal on the first business day of each month or 6.0 percent (effective rate 7.0 percent at 6.0%. At December 31, 2012)2014 the effective interest




F - 28

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




9. Debt and Lines of Credit, continued

rate was 7.0%.  The outstanding balance was $4.8$5.8 million and $5.5$3.3 million as of December 31, 20122014 and December 31, 2011,2013, respectively.

Subsequent to year end, on February 6, 2013, we entered into a $61.5 million credit agreement. The facility matures on February 6, 2014, assuming the election of an extension at our option. The interest rate is a floating rate based on Eurodollar plus a margin based on our leverage ratio calculated in accordance with the agreement, which can range from 1.5% to 2.25%.Long-term Debt Maturities

As of December 31, 2012,2014, the total of maturities and amortization of our debt gross of(excluding premiums or discounts,and discounts) and lines of credit during the next five years are as follows (in thousands):
Maturities and Amortization By YearMaturities and Amortization By Year
Total Due 2013 2014 2015 2016 2017 After 5 yearsTotal Due 2015 2016 2017 2018 2019 Thereafter
Lines of credit$29,781
 $29,781
 $
 $
 $
 $
 $
$5,794
 $5,794
 $
 $
 $
 $
 $
Mortgage loans payable:                          
Maturities1,112,625
 45,827
 185,809
 3,834
 306,585
 54,949
 515,621
1,410,652
 24,810
 267,863
 92,289
 38,315
 16,508
 970,867
Principal amortization167,809
 19,593
 19,986
 19,732
 18,312
 14,719
 75,467
227,887
 24,093
 23,804
 23,325
 23,263
 23,670
 109,732
Aspen and Series B-3 preferred OP units47,322
 7,315
 4,225
 
 
 
 35,782
Preferred OP units45,903
 3,670
 7,570
 
 
 
 34,663
Secured borrowing94,409
 4,123
 4,528
 5,016
 5,557
 6,062
 69,123
123,650
 5,167
 5,715
 6,258
 6,802
 7,362
 92,346
Total$1,451,946
 $106,639
 $214,548
 $28,582
 $330,454
 $75,730
 $695,993
$1,813,886
 $63,534
 $304,952
 $121,872
 $68,380
 $47,540
 $1,207,608

Covenants

The most restrictive of our debt agreements place limitations on secured borrowings and contain minimum fixed charge coverage, leverage, distribution and net worth requirements. As of December 31,2012 2014, we were in compliance with all covenants.




10.      Equity Transactions

During the fourth quarter of 2014, in connection with the Green Courte acquisition, we issued 361,797 shares of common stock at an issuance price of $50.00 per share, 501,130 common OP units at an issuance price of $50.00 per unit, 483,317 shares of Series A-4 Preferred Stock at an issuance price of $25.00 per share and 669,449 Series A-4 preferred OP units at an issuance price of $25.00 per unit (see Note 2). Series A-4 Preferred Stock and Series A-4 preferred OP unit holders can convert the shares or units into shares of common stock based upon an initial conversion price of $56.25 per share (subject to adjustment upon various events) and receive a preferred return of 6.50% per year.
In January 2012,September 2014, we closed an underwritten registered public offering of 4,600,0006,900,000 shares of common stock at a price of $35.50$50.60 per share. Theshare, which includes 900,000 shares sold to the underwriter pursuant to the full exercise of its option to purchase additional shares. Net proceeds from the offering were approximately $348.9 million after deducting expenses related to the offering. We used the majority of the net proceeds of the offering to fund the cash portion of the purchase price for the acquisition of MH communities from the Green Courte entities (see Note 2) and used the remainder of the net proceeds from the offering to repay borrowings outstanding under the Facility.

In March 2014, we closed an underwritten registered public offering of 4,200,000 shares of common stock at a price of $44.45 per share, and in April 2014, the underwriters exercised their option to purchase an additional 630,000 shares of common stock at a price of $44.45 less the declared dividend of $0.65 per share. Net proceeds from the offering were $156.0$214.0 million after deducting underwriting discounts and the expenses related to the offering. TheWe used the net proceeds of the offering were primarily used to repay $123.5 millionborrowings outstanding under the Facility, for acquisitions of outstanding debtproperties and to fund $25.0 million of the purchase price of the Additional Florida Properties (See Note 2 for additional information), which were subsequently encumbered with a loan of $19.0 million.working capital and general corporate purposes.






F - 29

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10.      Equity Transactions, continued

In May 2012, pursuantMarch 2013, we closed an underwritten registered public offering of 5,750,000 shares of common stock at a price of $45.25 per share. The net proceeds from the offering were $249.5 million after deducting underwriting discounts and the expenses related to the offering. We used a shelf registration statement on Form S-3,portion of the proceeds to pay down debt. We used the remaining net proceeds of the offering to fund the acquisition of properties and for working capital and general corporate purposes.

In February 2013, we registeredissued $4.0 million of Series A-3 preferred OP units in connection with the SECMorgan RV Properties acquisition (see Note 2). Series A-3 preferred OP unit holders can convert the saleSeries A-3 preferred OP units into shares of our common stock based upon a conversion price of $53.75 per share. The Series A-3 preferred stock, debt securities, warrants and units consistingOP unit holders receive a preferred return of two or more of the aforementioned securities. This shelf registration statement was effective upon filing and replaced our previous shelf registration statement which was scheduled to expire in May 2012.4.5% per year.

In May 2012, we entered into an "at-the-market" sales agreement with BMO Capital Markets CorpCorp. and Liquidnet Inc. to issue and sell up to $100 million of shares from time to time. During 2014, 157,989 shares of common stock from time to time. The current authorization allows for the sale of our common stock up to an aggregate amount of $100 million. There were252,833 shares of common stock sold through December 31, 2012.the agreement. The shares of common stock were sold at the prevailing market price of our common stock at the time of each sale with a weighted average sale price of $46.07$62.42, and we received net proceeds of approximately $11.5 million.  The proceeds were used$9.7 million. Subsequent to pay down our line of credit.

F - 25

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.      Equity Transactions, continued

In September 2012,year-end, we closedsold an underwritten registered public offering of 3,000,000additional 342,011 shares of common stock through the agreement at a weighted average sale price of $44.06 per share. The net proceeds from the offering were $132.0 million after deducting the underwriting discounts and expenses related to the offering.$63.94. We primarily used thereceived net proceeds of the offeringapproximately $21.5 million. We are authorized to repay $78.0sell an additional $43.7 million of our senior secured revolving credit facility and we used $43.1 million to repay single mortgages secured by nine communities.

In November 2012, we closed an underwritten registered public offering of 3,400,000 shares of Series A preferred stock at a price of $25.00 per share. The net proceeds from the offering were $82.2 million after deducting the underwriting discounts and expenses related to the offering. We used $55.3 million of the net proceeds of the offering to fund the acquisition of the Rudgate Acquisition Properties. We used the remaining net proceeds of the offering for working capital and general corporate purposes.

Subsequent to year end on February 8, 2013, we issued $4.0 million of newly created Series A-3 Preferred OP Units. The Series A-3 Preferred OP Units carry an annual yield of 4.5% and are exchangeable into shares of common stock at a price of $53.75 per share. Net proceeds fromremaining under the issue were used to fund the acquisition of the Morgan RV Properties (see Note 2).

sales agreement.
In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock.  We have 400,000 common shares remaining in the repurchase program.  No common shares were repurchased during 20122014 or 20112013.  There is no expiration date specified for the buybackrepurchase program.
 
Common OP Unit holders can convert their Common OP units into an equivalent number of shares of common stock at any time.  During the year ended December 31, 2012 and 20112014, holders of Common OP Unitsunits converted 2,400 and 10,2499,110 units respectively tointo common stock.

Under our previous shelf registration statement on Form S-3 we had an "at-the-market" sales agreement to issue and sell shares
of common stock. We issued 40,524No shares ofunits were converted into common stock from January 1, 2012 through May 9, 2012, when the sales agreement was terminated.  The shares of common stock were sold at the prevailing market price of our common stock at the time of each sale with a weighted average sale price ofduring $37.22 and we received net proceeds of approximately $1.5 million2013.  The proceeds were used to pay down our line of credit.

On August 6, 2010, we entered into a Common Stock Purchase Agreement with REIT Opportunity, Ltd. (“REIT Ltd.”), which provided that, upon the terms and subject to the conditions set forth in the purchase agreement, REIT Ltd. could purchase shares of our common stock.  In January, 2011 we sold 915,827 shares of common stock at a weighted average sale price of $32.76 and received net proceeds of $30.0 million.  The funds were used to pay down our line of credit. The purchase agreement expired September 1, 2012.

In June 2011, we issued $45.5 million of Series A-1 preferred OP units as a result of the Kentland acquisition (see Note 2).  Series A-1 preferred OP unit holders can exchange each Series A-1convert their preferred OP unit for units into 2.439 shares of our common stock (which the exchange rate is subject to adjustment upon stock splits, recapitalizations and similar events) at any time after December 31, 2013.  Thesetime. During 2014, holders of Series A-1 preferred OP units are not redeemable.  Theconverted 26,379 units into 64,335 shares of common stock. No Series A-1 preferred OP unit holders receive a preferred return ofunits were converted into common stock during 5.1%2013 until June 23, 2013 and 6.0% thereafter..

Cash dividendsdistributions of $2.520.65 per share were declared for the yearquarter ended December 31, 20122014. CashOn January 16, 2015, cash payments of approximately $33.2 million for aggregate dividends, distributions and dividenddistribution equivalents made to common stockholders, common OP unitholders and restricted stockholders were $71.0 million for the year ended December 31, 2012.

On January 18, 2013, aggregate dividends, distributions and dividend equivalents of $20.0 million were made to common stockholders, common OP unitholders and restricted stockholders of record as of December 31, 2012.2014. Cash distributions of $0.4453 per share were declared on the Company's Series A cumulative redeemable preferred stock for the quarter ended December 31, 2014. On January 15, 2015, cash payments of approximately $1.5 million for aggregate distributions were made to Series A cumulative redeemable preferred stockholders of record as of January 2, 2015. In addition, cash distributions of $0.1580 per share were declared on the Company's Series A-4 Preferred Stock for the quarter ended December 31, 2014. On December 31, 2014, cash payments of approximately $0.1 million were made to Series A-4 Preferred Stock holders of record as of December 19, 2014. During 2014, we made total cash payments of approximately $112.3 million to common stockholders, common OP unitholders and restricted stockholders, $6.0 million to Series A Preferred Stock holders and $0.1 million to Series A-4 Preferred Stock holders.


F - 30

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.      Share-Based Compensation

As of December 31,2012 2014, we have two share-based compensation plans approved by stockholders: Sun Communities, Inc. Equity Incentive Plan (“2009 Equity Plan”) and the First Amended and Restated 2004 Non-Employee Director Option Plan (“Director Plan”). We believe granting equity awards will provide certain executives, key employees and directors additional incentives to promote our financial success, and promote employee and director retention by providing an opportunity to acquire or increase the direct proprietary interest of those individuals in our operations and future.



F - 26

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.      Share-Based Compensation, continued2009 Equity Plan

The 2009 Equity Plan was approved by our stockholders at the Annual Meeting of Stockholders held on July 29, 2009. The 2009 Equity Plan replaced the Sun Communities, Inc. Stock Option Plan adopted in 1993, as amended and restated in 1996 and 2000, (“1993 Plan”), and terminates automatically July 29, 2019.

Upon the approval of the 2009 Equity Plan by our stockholders, the Board of Directors terminated the 1993 Plan with respect to new awards. Outstanding awards previously granted under the 1993 Plan were not affected by the termination of the 1993 Plan, and the terms of the 1993 Plan shall continue to govern such previously granted awards.

The maximum number of shares of common stock that may be issued under the 2009 Equity Plan is 950,000 shares, with 673,000 shares remaining for future issuance.

The types of awards that may be granted under the 2009 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock based awards. The 1993maximum number of shares of common stock that may be issued under the 2009 Equity Plan providedis 950,000 shares, with 240,820 shares remaining for future issuance.

During 2014, the Company and Gary A. Shiffman (the Company's Chairman and Chief Executive Officer) entered into an Amended and Restated Restricted Stock Award Agreement, which amended and restated in its entirety the Restricted Stock Award Agreement dated June 20, 2013 between the Company and Mr. Shiffman. Under the original stock award agreement, the Company granted Mr. Shiffman 250,000 restricted shares of the Company's common stock, of which 175,000 restricted shares were awarded in respect of the performance of Mr. Shiffman and the Company over the prior three years and 75,000 restricted shares were awarded to induce Mr. Shiffman to execute a new five-year employment agreement. All of these restricted shares were scheduled to vest over time through June 2020. The restated stock award agreement amended the vesting schedule of the restricted shares, of which 100,000 restricted shares are now subject to market and performance conditions and the remaining 150,000 shares will vest over time through June 2020. We accounted for the same typesmodification of equity awardsthis award is accordance with the FASB ASC Topic 718. See discussion below on the fair value measurement of these awards.

During 2014, we granted 45,250 shares of restricted stock to employees under our 2009 Equity Plan. The restricted shares had a an average fair value of $52.54 per share and will vest as follows: 35% in 2017; 35% in 2018; 20% in 2019, 5% in 2020; and 5% in 2021. The fair value was determined using the closing price of our common stock on the date the shares were issued.

During 2014, we also granted 58,000 shares of restricted stock to our executive officers under our 2009 Equity Plan. The restricted shares had a fair value of $48.93 per share and will vest as follows: 20% in 2018; 30% in 2019; 35% in 2020; 10% in 2021; and 5% in 2022. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

Director Plan

The Director Plan was approved by our stockholders at the Annual Meeting of Stockholders held on July 19, 2012. The Director Plan amended and restated in its entirety our 2004 Non-Employee Director Stock Option Plan.

Upon the approval of the Director Plan by our stockholders, our Second Amended and Restated 1993 Stock Option Plan (the "1993 Director Plan") was terminated with respect to new awards. Outstanding awards previously granted under the 1993 Director Plan were not affected by the termination of the 1993 Director Plan, and the terms of the 1993 Director Plan shall continue to govern such previously granted awards.

The types of awards that may be granted under the Director PlansPlan are options, restricted stock and OP units. Only non-employee directors are eligible to participate in the Director Plan. The maximum number of options, restricted stock and OP units that may be issued under the Director Plan is 175,000 shares, with 90,40075,674 shares remaining for future issuance.

In February 2014, we granted 14,000 shares of restricted stock to our directors under our Director Plan. The awards vest on February 12, 2017, and had a fair value of $48.01 per share. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

During the year ended December 31, 2014, 6,833 shares of common stock were issued in connection with the exercise of stock options and the net proceeds received were $0.1 million.

We have recognized compensation costs associated with sharedshare based awards of $1.54.9 million, $1.63.2 million, and $1.61.5 million for the years ended December 31,2012 2014, 20112013, and 20102012 respectively.



F - 31

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11.      Share-Based Compensation, continued

Restricted Stock

The majority of our share-based compensation is awarded as service vesting restricted stock grants to executives and key employees. We have also awarded restricted stock to our non-employee directors. We measure the fair value associated with these awards using the closing price of our common stock as of the grant date to calculate compensation cost. Employee awards typically vest over several years and are subject to continued employment by the employee. Award recipients receive dividenddistribution payments on unvested shares of restricted stock. We may also award performance-based

As of December 31, 2014, we have 50,000 shares of restricted stock which isissued to Mr. Shiffman subject to satisfactioncertain Company performance criteria, of certain conditions relatedwhich 12,500 shares vest on March 1 of each 2015, 2016, 2017 and 2018. Compensation expense is recognized in accordance with ASC Topic 718 and based on an estimate of shares expected to our financial performance.vest. If achievement of the performance targetsit is not probable anythat the performance conditions will be satisfied, we do not recognize compensation expense. The fair value of these awards was measured using the closing price of our common stock as of the grant modification date to calculate compensation cost. Each reporting period, we reevaluate our estimate of the number of shares expected to vest. The performance conditions were satisfied for the shares vesting on March 1, 2015 and compensation expense was recognized as of December 31, 2014.

We also have 50,000 shares of restricted stock issued to Mr. Shiffman subject to certain market performance criteria, of which 16,667 shares vest on March 1 of each 2016, 2017 and 2018. In accordance with ASC Topic 718, we estimated the fair value of the shares using a Monte Carlo simulation. We recognize compensation cost related to these awards that has been recognized is reversed.ratably over each tranche of shares based on the fair value estimated by the model.

The following table summarizes our restricted stock activity for the yearyears ended December 31,2012 2014:, 2013 and 2012:

Number of Shares Weighted Average Grant Date Fair ValueNumber of Shares Weighted Average Grant Date Fair Value
Unvested restricted shares at January 1, 2012275,871
 $28.93
275,871
 $28.93
Granted44,600
 $40.93
44,600
 $40.93
Vested(8,750) $19.92
(8,750) $19.92
Forfeited(1,214) $37.04
(1,214) $37.04
Unvested restricted shares at December 31, 2012310,507
 $30.88
310,507
 $30.88
Granted371,300
 $47.19
Vested(37,291) $16.87
Forfeited(12,560) $38.47
Unvested restricted shares at December 31, 2013631,956
 $41.14
Granted117,250
 $49.97
Vested(55,488) $25.57
Forfeited(4,975) $38.45
Unvested restricted shares at December 31, 2014688,743
 $43.87

Total compensation cost recognized for restricted stock was $1.44.9 million, $1.53.2 million, and $1.51.4 million for the years ended December 31,2012 2014, 20112013, and 20102012, respectively. The total fair value of shares vested was $0.21.4 million, $0.80.6 million, and $1.80.2 million for the years ended December 31, 2012, 20112014, 2013 and 2010,2012, respectively. The remaining net compensation cost related to our


F - 27

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.      Share-Based Compensation, continued

unvested restricted shares outstanding as of December 31, 2012 was2014 is approximately $6.521.1 million. That expense is expected to be recognized $1.5 million in 2013, $1.5 million in 2014, $1.25.3 million in 2015, $4.7 million in 2016, $4.6 million in 2017 and $2.36.5 million thereafter.

Subsequent to year end in February 2013, restricted stock was granted to executive officers and directors. The total granted was 83,800 shares, which had a grant date fair value of $45.69.

Options

We have granted stock options to certain employees and non-employee directors. Option awards are generally granted with an exercise price equal to the market price of our common stock as of the grant date. Stock options generally vest over a three year


F - 32

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.    �� Share-Based Compensation, continued

period from the date of grant and have a maximum term of 10 years years. We have granted 10,500. No grants of options to our non-employee directors during each of the years ended December 31, 2011 and 2010 and no grants were made in 2014, 2013 or 2012. We issue new shares of common stock at the time of share option exercise (or share unit conversion).

The weighted average fair value of the options issued is estimated on the date of the grant using the Binomial (lattice) option pricing model, with the following weighted average assumptions used for the grants in the periods indicated:

 July 2011 Award July 2010 Award
Estimated fair value per share of options granted$9.70
 $6.93
Number of options granted10,500
 10,500
    
Assumptions:   
      Annualized dividend yield6.70% 8.50%
      Common stock price volatility45.20% 40.77%
      Risk-free rate of return1.52% 2.40%
      Expected option terms (in years)5.0
 7.3

The following table summarizes our option activity during the year ended December 31,2012:

 
Number of
Options
 
Weighted
Average
Exercise Price
(per common share)
 
Weighted
Average
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
(in 000's)
Options outstanding at January 1, 201277,086
 $29.64
    
Granted
 
    
Exercised(16,256) 30.12
    
Forfeited or expired(4,880) 33.16
    
Options outstanding at December 31, 201255,950
 $29.19
 5.6 $599
        
Options vested and expected to vest55,950
 $29.19
 5.6 $599
        
Options vested and exercisable at December 31, 201245,450
 $27.91
 5.0 $545

model. The options outstanding as of December 31,2012 2014 consist of 700 employee options and 55,25032,500 non-employee director options. There are no employee options outstanding. The compensation expense associated with non-vested stock option awards was not significant for the years ended December 31,2012 2014, 20112013, and 20102012.

The following table summarizes our option activity during the years ended December 31, 2014, 2013 and 2012:
 Number of
Options
 Weighted
Average
Exercise Price
(per common share)
Options outstanding at January 1, 201277,086
 $29.64
Granted
 $
Exercised(16,256) $30.12
Forfeited or expired(4,880) $33.16
Options outstanding at December 31, 201255,950
 $29.19
Granted
 $
Exercised(9,700) $21.67
Forfeited or expired
 $
Options outstanding at December 31, 201346,250
 $30.77
Granted
 $
Exercised(12,250) $33.40
Forfeited or expired(1,500) $35.44
Options outstanding at December 31, 201432,500
 $29.56

The following table summarizes our options outstanding and options currently exercisable at December 31, 2014:
 December 31, 2014
 Number of
Options
 Weighted
Average
Exercise Price
(per common share)
 Weighted
Average
Contractual
Term
(in years)
 Aggregate
Intrinsic
Value
(in thousands)
Options vested and expected to vest32,500
 $29.56
 4.2 $1,004
        
Options vested and exercisable32,500
 $29.56
 4.2 $1,004

Aggregate intrinsic value represents the value of our closing share price as of December 31, 2012the end of the year in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.For the years ended December 31, 2014, 2013 and 2012, the intrinsic value of exercised options was $0.3 million, $0.2 million and $0.2 million, respectively. For the years ended December 31, 2014, 2013 and 2012, the intrinsic value of vested and exercisable options was $1.0 million, $0.5 million and $0.5 million, respectively.




F - 28

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.      Share-Based Compensation, continued

Phantom Awards

We have granted phantom awards to certain key employees. Employee awards typically vest over several years and are subject to continued employment by the employee. A cash bonus is paid when the awards vest which is based on a 10 day average of our closing stock price prior to the vesting date. The awards also pay cash bonuses per unvested share equal to the amount of dividend paid per share of common stock.

The value of the awards is re-measured at each reporting date. As our stock price rises, the phantom awards increase in value, along with the associated compensation expense. Accordingly, as our stock price declines, the phantom awards decrease in value, along with the associated compensation expense.

For the years ended December 31,2012, 2011, and 2010, we recorded compensation expense of less than $0.1 million related to phantom awards. The following table summarizes the phantom award activity for the year ended December 31,2012:

 
Number of
Shares
 
Aggregate
Fair Value
(in 000's)
Unvested phantom awards at January 1, 20122,588
 $95
Granted
  
Vested(2,588) (95)
Forfeited
  
Unvested phantom awards at December 31, 2012
 $

12.      Other Income

The components of other income are summarized as follows (in thousands):

 Years Ended December 31,
 2012 2011 2010
Brokerage commissions$605
 $513
 $476
Other income (loss), net12
 416
 13
Total other income (loss), net$617
 $929
 $489


F - 2933

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.12.    Segment Reporting

Our consolidated operations can be segmentedWe group our operating segments into reportable segments that provide similar products and services. Each operating segment has discrete financial information evaluated regularly by the Company's chief operating decision maker in evaluating and assessing performance. We have two reportable segments: (i) Real Property Operations and (ii) Home Sales and Rentals. The Real Property Operations segment owns, operates, and develops MH communities and RV communities and is in the business of acquiring, operating, and expanding MH and RV communities.  The Home Sales and Rentals segment offers manufactured home sales and leasing services to tenants and prospective tenants of our communities. 

Transactions between our segments are eliminated in consolidation.  Transient RV revenue is included in Real Property Operations’ revenues and is approximately $9.431.6 million for the year ended December 31,2012 2014. This transient revenue iswas recognized 48%25.3% in the first quarter, 14%18.3% in the second quarter, 14%43.3% in the third quarter and 24%13.1% in the fourth quarter of 20122014.

A presentation of segment financial information is summarized as follows (amounts in(in thousands):

 Years Ended December 31, 2012
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$255,761
 $71,736
 $327,497
Operating expenses/Cost of sales88,046
 53,059
 141,105
Net operating income/Gross profit167,715
 18,677
 186,392
Adjustments to arrive at net income (loss):     
Other revenues11,635
 484
 12,119
General and administrative(20,037) (8,980) (29,017)
Acquisition related costs(4,296) 
 (4,296)
Depreciation and amortization(61,039) (28,635) (89,674)
Interest expense(71,077) (103) (71,180)
Distributions from affiliate3,900
 
 3,900
Provision for state income tax(249) 
 (249)
Net income (loss)26,552
 (18,557) 7,995
Less:  Preferred return to Series A-1 preferred OP units2,329
 
 2,329
Less:  Amounts attributable to noncontrolling interests1,640
 (1,958) (318)
Less:  Series A Preferred Stock Distributions1,026
 
 1,026
Net income (loss) attributable to Sun Communities, Inc.$21,557
 $(16,599) $4,958














 Year Ended December 31, 2014
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$357,793
 $93,167
 $450,960
Operating expenses/Cost of home sales125,315
 63,826
 189,141
Net operating income/Gross profit232,478
 29,341
 261,819
Adjustments to arrive at net income (loss):     
Ancillary, interest and other income, net20,715
 
 20,715
General and administrative(31,769) (10,853) (42,622)
Acquisition related costs(18,251) (8) (18,259)
Depreciation and amortization(88,695) (45,031) (133,726)
Asset impairment charge(837) 
 (837)
Interest(73,752) (19) (73,771)
Interest on mandatorily redeemable debt(3,210) 
 (3,210)
Gain on disposition of properties17,447
 207
 17,654
Gain on settlement4,452
 
 4,452
Distributions from affiliate1,200
 
 1,200
Provision for state income taxes(219) 
 (219)
Net income (loss)59,559
 (26,363) 33,196
Less:  Preferred return to Series A-1 preferred OP units2,654
 
 2,654
Less:  Preferred return to Series A-3 preferred OP units181
 
 181
Less:  Preferred return to Series A-4 preferred OP units100
 
 100
Less: Amounts attributable to noncontrolling interests3,698
 (1,946) 1,752
Net income (loss) attributable to Sun Communities, Inc.52,926
 (24,417) 28,509
Less:  Preferred stock distributions6,133
 
 6,133
Net income (loss) attributable to Sun Communities, Inc. common stockholders$46,793
 $(24,417) $22,376









F - 3034

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.12.    Segment Reporting, continued

 Years Ended December 31, 2011
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$223,613
 $54,542
 $278,155
Operating expenses/Cost of sales76,737
 41,588
 118,325
Net operating income/Gross profit146,876
 12,954
 159,830
Adjustments to arrive at net income (loss):     
Other revenues10,438
 592
 11,030
General and administrative(19,704) (8,156) (27,860)
Acquisition related costs(1,971) 
 (1,971)
Depreciation and amortization(51,063) (23,130) (74,193)
Asset impairment charge(1,382) 
 (1,382)
Interest expense(66,949) (990) (67,939)
Distributions from affiliate2,100
 
 2,100
Provision for state income tax(150) 
 (150)
Net income (loss)18,195
 (18,730) (535)
Less:  Preferred return to Series A-1 preferred OP units1,222
 
 1,222
Less:  Amounts attributable to noncontrolling interests1,003
 (1,674) (671)
Net income (loss) attributable to Sun Communities, Inc.$15,970
 $(17,056) $(1,086)




 Year Ended December 31, 2013
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$313,097
 $87,352
 $400,449
Operating expenses/Cost of home sales109,921
 60,732
 170,653
Net operating income/Gross profit203,176
 26,620
 229,796
Adjustments to arrive at net income (loss):     
Ancillary, interest and other income, net14,773
 
 14,773
General and administrative(25,941) (9,913) (35,854)
Acquisition related costs(3,928) 
 (3,928)
Depreciation and amortization(73,729) (36,349) (110,078)
Interest expense(73,001) (338) (73,339)
Interest on mandatorily redeemable debt(3,238) 
 (3,238)
Distributions from affiliate2,250
 
 2,250
Provision for state income taxes(234) 
 (234)
Net income (loss)40,128
 (19,980) 20,148
Less:  Preferred return to Series A-1 preferred OP units2,598
 
 2,598
Less:  Preferred return to Series A-3 preferred OP units166
 
 166
Less: Amounts attributable to noncontrolling interests2,450
 (1,732) 718
Net income (loss) attributable to Sun Communities, Inc.34,914
 (18,248) 16,666
Less:  Preferred stock distributions6,056
 
 6,056
Net income (loss) attributable to Sun Communities, Inc. common stockholders$28,858
 $(18,248) $10,610



























F - 35

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.31Segment Reporting, continued

 Year Ended December 31, 2012
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$255,761
 $71,736
 $327,497
Operating expenses/Cost of home sales88,046
 53,059
 141,105
Net operating income/Gross profit167,715
 18,677
 186,392
Adjustments to arrive at net income (loss):     
Ancillary, interest and other income, net11,455
 
 11,455
General and administrative(20,037) (8,316) (28,353)
Acquisition related costs(4,296) 
 (4,296)
Depreciation and amortization(61,039) (28,635) (89,674)
Interest(67,756) (103) (67,859)
Interest on mandatorily redeemable debt(3,321) 
 (3,321)
Distributions from affiliate3,900
 
 3,900
Provision for state income taxes(249) 
 (249)
Net income (loss)26,372
 (18,377) 7,995
Less:  Preferred return to Series A-1 preferred OP units2,329
 
 2,329
Less: Amounts attributable to noncontrolling interests1,640
 (1,958) (318)
Net income (loss) attributable to Sun Communities, Inc.22,403
 (16,419) 5,984
Less: Preferred stock distributions1,026
 
 1,026
Net income (loss) attributable to Sun Communities, Inc. common stockholders$21,377
 $(16,419) $4,958


 December 31, 2014 December 31, 2013
 Real Property Operations Home Sales and Home Rentals Consolidated Real Property Operations Home Sales and Home Rentals Consolidated
Identifiable assets:           
Investment property, net$2,207,526
 $360,638
 $2,568,164
 $1,460,628
 $294,424
 $1,755,052
Cash and cash equivalents81,864
 1,595
 83,459
 5,336
 (583) 4,753
Inventory of manufactured homes
 8,860
 8,860
 
 5,810
 5,810
Notes and other receivables, net163,713
 11,144
 174,857
 151,980
 10,161
 162,141
Other assets97,485
 4,867
 102,352
 62,554
 4,594
 67,148
Total assets$2,550,588
 $387,104
 $2,937,692
 $1,680,498
 $314,406
 $1,994,904


F - 36

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.Segment Reporting, continued

 Year Ended December 31, 2010
 Real Property Operations Home Sales and Home Rentals Consolidated
Revenues$204,498
 $52,425
 $256,923
Operating expenses/Cost of sales69,276
 39,444
 108,720
Net operating income/Gross profit135,222
 12,981
 148,203
Adjustments to arrive at net income (loss):     
Other revenues8,542
 505
 9,047
General and administrative(17,182) (7,628) (24,810)
Acquisition related costs
 
 
Depreciation and amortization(47,584) (21,284) (68,868)
Interest expense(64,772) (655) (65,427)
Distributions from affiliates500
 
 500
Loss from affiliate(1,646) 
 (1,646)
Provision for state income tax(512) 
 (512)
Net income (loss)12,568
 (16,081) (3,513)
       Less:  Net income (loss) attributable to noncontrolling interests967
 (1,597) (630)
Net income (loss) attributable to Sun Communities, Inc.$11,601
 $(14,484) $(2,883)



 December 31, 2012 December 31, 2011
 Real Property Operations Home Sales and Home Rentals Consolidated Real Property Operations Home Sales and Home Rentals Consolidated
Identifiable assets:           
Investment property, net$1,296,753
 $221,383
 $1,518,136
 $1,028,575
 $168,031
 $1,196,606
Cash and cash equivalents29,071
 437
 29,508
 5,972
 (115) 5,857
Inventory of manufactured homes
��7,527
 7,527
 
 5,832
 5,832
Notes and other receivables130,217
 8,850
 139,067
 109,436
 5,448
 114,884
Other assets55,231
 4,648
 59,879
 41,843
 2,952
 44,795
Total assets$1,511,272
 $242,845
 $1,754,117
 $1,185,826
 $182,148
 $1,367,974

14.    Income Taxes

We have elected to be taxed as a real estate investment trust (“REIT”) as defined under Section 856(c)856 of the Internal Revenue Code of 1986 (“Code”), as amended. In order for us to qualify as a REIT, at least ninety-five percent (95%) of our gross income in any year must be derived from certain-specified qualifying sources.sources and at least seventy-five percent (75%) of our gross income must be derived from income qualifying as real estate income under the Code. In addition, a REIT must distribute at least ninety percent (90%) of its REIT ordinary taxable income to its stockholders.stockholders and meet other tests.

Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent




F - 32

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.   Income Taxes, continued

changes occur in the area of REIT taxation which requires us to continually monitor our tax status. We analyzed the various REIT tests and confirmeddetermined that we continued to qualify as a REIT for the year ended December 31, 20122014.

As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax). Even if we qualify as a REIT, we may be subject to certain state and local income taxes and to U.S. federal income and excise taxes on our undistributed income.

For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains, and return of capital. For the years ended December 31, 2012, 2011,2014, 2013, and 2010,2012, distributions paid per share were taxable as follows (unaudited):

Years Ended December 31,Years Ended December 31,
2012 2011 20102014 2013 2012
Amount Percentage Amount Percentage Amount PercentageAmount Percentage Amount Percentage Amount Percentage
Ordinary income$0.92
 48.7% $0.74
 23.5% $0.52
 20.5%$0.82
 31.7% $0.87
 34.6% $0.92
 48.7%
Capital gain
 % 
 % 
 %0.64
 24.6% 
 % 
 %
Return of capital0.97
 51.3% 2.41
 76.5% 2.00
 79.5%1.14
 43.7% 1.65
 65.4% 0.97
 51.3%
Total distributions declared$1.89
 100.0% $3.15
 100.0% $2.52
 100.0%$2.60
 100.0% $2.52
 100.0% $1.89
 100.0%

Sun Home Services, Inc. ("SHS"), our taxable REIT subsidiary, is subject to U.S. federal income taxes. Our deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. Our temporary differences primarily relate to net operating loss carryforwards and depreciation.

The deferred income tax assets included in the Consolidated Balance Sheetsconsolidated balance sheets are comprised of the following tax effects of temporary differences (in thousands):

As of December 31,As of December 31,
2012 20112014 2013
Deferred tax assets:      
Net operating loss carryforwards$22,340
 $19,723
$26,214
 $24,237
Real estate assets19,512
 17,297
29,092
 23,999
Amortization of intangibles(128) (128)(128) (128)
Gross deferred tax assets41,724
 36,892
55,178
 48,108
Valuation allowance(40,724) (35,892)(54,178) (47,108)
Net deferred tax assets$1,000
 $1,000
$1,000
 $1,000

SHS has net operating loss carry forwardscarryforwards of approximately $77.1 million (or $65.726.2 million at after tax) as of December 31, 2012.2014. The loss carryforwards will begin to expire in 2021 through 2031 if not offset by future taxable income. Management believes its net deferred tax asset will be realized but realization is continuously subject to an assessment as to recoverability in the future.

F - 37

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.   Income Taxes, continued

The deferred tax asset will be used when we generate sufficient taxable income. No federal tax expense was recognized in the years ended December 31, 2012, 2011,2014, 2013, and 2010.2012.

We had no unrecognized tax benefits as of December 31, 20122014 and 20112013. We expect no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 20122014.

We classify certain state taxes as income taxes for financial reporting purposes.  We record Texas Margin Tax as income tax in our financial statements. In 2011 we were also subject to Michigan Business Tax that was replaced in May 2011 by a Michigan corporate

F - 33

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14.   Income Taxes, continued

income tax. We believe that we will not have any Michigan corporate income tax liability. We recorded a provision for state income taxes of approximately $0.2 million, $0.2 million and $0.5 millionfor each of the years ended December 31,2012 2014, 2011,2013, and 2010 respectively.

2012. No deferred tax liability is recorded in relation to the Texas Margin Tax as of December 31, 20122014 and 2011.2013.

We and our subsidiaries are subject to income taxes in the U.S. and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. Federal, Statefederal, state and Local,local, examinations by tax authorities before 2008.for the tax years ended December 31, 2008 and prior.

Our policy is to report income tax penalties and income tax related interest expense as a component of income tax expense.  No interest or penalty associated with any unrecognized income tax benefit or provision was accrued, nor was any income tax related interest or penalty recognized during the yearyears ended December 31, 2014, 2013 and 2012.

15.14.    Earnings (Loss) Per Share

We have outstanding stock options, and unvested restricted shares and Series A-4 Preferred Stock, and our Operating Partnership has Common OP Units,units, convertible Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units and Aspen preferred OP Units, which if converted or exercised, may impact dilution. 

Computations of basic and diluted earnings (loss) per share from continuing operations were as follows (in thousands, except per share data):
 Years Ended December 31,
Numerator2012 2011 2010
Basic earnings: net income (loss) attributable to common stockholders$4,958
 $(1,086) $(2,883)
Add: amounts attributable to common noncontrolling interests
 
 
Diluted earnings: net income (loss) available to common stockholders and unitholders$4,958
 $(1,086) $(2,883)
Denominator     
Weighted average common shares outstanding26,970
 21,147
 19,168
Weighted average unvested restricted stock outstanding285
 
 
Basic weighted average common shares and unvested restricted stock outstanding27,255
 21,147
 19,168
Add: dilutive securities17
 
 
Diluted weighted average common shares and securities27,272
 21,147
 19,168
Earnings (loss) per share available to common stockholders:     
Basic$0.18
 $(0.05) $(0.15)
Diluted$0.18
 $(0.05) $(0.15)







  Year Ended December 31,
Numerator 2014 2013 2012
Net income attributable to common stockholders $22,376
 $10,610
 $4,958
Allocation of income to restricted stock awards (127) (144) 58
Net income attributable to common stockholders after allocation $22,249
 $10,466
 $5,016
Allocation of income to restricted stock awards 127
 144
 (58)
Amounts attributable to Series A-4 Preferred Stock 76
 
 
Diluted earnings: net income attributable to common stockholders after allocation $22,452
 $10,610
 $4,958
Denominator      
Weighted average common shares outstanding 41,337
 34,228
 26,970
Add: dilutive stock options 16
 15
 17
Add: dilutive restricted stock 237
 167
 138
Add: dilutive Series A-4 Preferred Stock 215
 
 
Diluted weighted average common shares and securities 41,805
 34,410
 27,125
Earnings per share available to common stockholders:      
Basic $0.54
 $0.31
 $0.19
Diluted $0.54
 $0.31
 $0.18








F - 3438

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



15.14.    Earnings (Loss) Per Share, continued

We excluded certain securities from the computation of diluted earnings (loss) per share because the inclusion of these securities would have been anti-dilutive for the periods presented.  The following table presents the number of outstanding potentially dilutive securities that were excluded from the computation of diluted earnings (loss) per share for the years ended December 31,2012 2014, , 20112013 and 20102012 (amounts in thousands):

Years Ended December 31,Year Ended December 31,
2012 2011 20102014 2013 2012
Stock options
 77
 140
Unvested restricted stock
 276
 142
Common OP units2,071
 2,072
 2,082
2,561
 2,069
 2,071
A-1 preferred OP units1,111
 1,111
 
Series A-1 preferred OP units429
 455
 455
Series A-3 preferred OP units40
 40
 
Series A-4 preferred OP units669
 
 
Aspen preferred OP units526
 526
 526
1,284
 1,325
 1,325
Total securities3,708
 4,062
 2,890
4,983
 3,889
 3,851

The figures above represent the total number of potentially dilutive securities, and do not necessarily reflect the incremental impact to the number of diluted weighted average shares outstanding that would be computed if the impact to us had been dilutive to the calculation of earnings per share available to common stockholders.


F - 3539

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.15.    Quarterly Financial Information (Unaudited)

The following is a condensed summary of our unaudited quarterly results for years ended December 31, 20122014 and 2011.2013. Income (loss) per share for the year may not equal the sum of the fiscal quarters' income (loss) per share due to changes in basic and diluted shares outstanding.

 Quarters
 1st 2nd 3rd 4th
 (In thousands, except per share amounts)
2012       
Total revenues$83,128
 $82,379
 $83,124
 $90,985
Total expenses77,432
 81,747
 83,915
 92,178
Income (loss) before income taxes and equity income (loss) from affiliates5,696
 632
 (791) (1,193)
        
Equity income and distributions from affiliates (1)
750
 1,900
 600
 650
Income (loss) attributable to Sun Communities, Inc. common stockholders5,377
 1,663
 (650) (1,432)
        
Income (loss) per share:       
Basic$0.21
 $0.06
 $(0.02) $(0.05)
Diluted$0.21
 $0.06
 $(0.02) $(0.05)
        
2011       
Total revenues$69,714
 $68,262
 $74,723
 $76,486
Total expenses67,348
 70,358
 75,044
 78,920
Income (loss) before income taxes and equity income (loss) from affiliates2,366
 (2,096) (321) (2,434)
        
Equity income and distributions from affiliates (1)
350
 850
 450
 450
Income (loss) attributable to Sun Communities, Inc. common stockholders2,400
 (890) (373) (2,223)
        
Income (loss) per share:       
Basic$0.12
 $(0.04) $(0.02) $(0.10)
Diluted$0.11
 $(0.04) $(0.02) $(0.10)
  Quarters
  1st 2nd 3rd 4th
  (In thousands, except per share amounts)
2014        
Total revenues $111,181
 $115,387
 $125,435
 $119,672
Total expenses 100,651
 108,993
 112,655
 139,267
Income (loss) before income taxes and distributions from affiliate $10,530
 $6,394
 $12,780
 $(19,595)
         
Distributions from affiliate (1)
 $400
 $400
 $400
 $
Gain on disposition of properties, net (2)
 $
 $885
 $13,631
 $3,138
Gain on settlement $
 $
 $
 $4,452
Net income (loss) attributable to Sun Communities, Inc. common stockholders $7,846
 $4,928
 $22,671
 $(13,069)
         
Earnings per share:        
Basic $0.21
 $0.12
 $0.54
 $(0.27)
Diluted $0.21
 $0.12
 $0.54
 $(0.27)
         
2013 (3)
        
Total revenues $102,913
 $100,151
 $107,201
 $104,957
Total expenses 94,983
 97,290
 101,841
 102,976
Income (loss) before income taxes and distributions from affiliate $7,930
 $2,861
 $5,360
 $1,981
         
Distributions from affiliate (1)
 $400
 $450
 $700
 $700
Net income (loss) attributable to Sun Communities, Inc. common stockholders $5,744
 $1,035
 $3,749
 $82
         
Earnings (loss) per share:        
Basic $0.19
 $0.03
 $0.10
 $
Diluted $0.19
 $0.03
 $0.10
 $
(1) Refer to Note 7 for more information regarding distributions from affiliate.

(1)
(2) During the second quarter of 2014, we recorded a gain on disposition of properties, net of $0.9 million. In the fourth quarter of 2014, we identified and recorded a revision to this gain of $3.2 million. Had this revision been recorded in the second quarter instead of the fourth quarter, our basic and diluted earnings per share would have been income of $0.20 in the second quarter and a loss of $0.34 in the fourth quarter. Management of the Company concluded that the effect of the fourth quarter revision was not material to the second and fourth quarter 2014 financial statements.
Refer to Note 7 for more information regarding Equity income (loss) and distributions from affiliates.

(3) Financial information includes certain reclassifications to conform to current period presentation.

F - 40

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17.16.    Derivative Instruments and Hedging Activities

Our objective in using interest rate derivatives is to manage exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect theyit could have on future cash flows. Interest rate swaps and caps are used to accomplish this objective. We require hedging derivative instruments to be highly effective in reducing the risk exposure that they are designated to hedge. We formally designate any instrument that meets these hedging criteria as a hedge at the inception of the derivative contract.

As of December 31, 2012, we had three derivative contracts consisting of one interest rate swap agreement with a notional amount of $20.0 million and two interest rate cap agreements with a total notional amount of $162.4 million. We generally employ derivative instruments that effectively convert a portion of our variable rate debt to fixed rate debt and to cap the maximum interest rate on certain variable rate borrowings. We do not enter into derivative instruments for speculative purposes.




F - 36

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17.Derivative Instruments and Hedging Activities, continued

The following table provides the terms of our interest rate derivative contracts that were in effect as of December 31, 20122014:

Type Purpose Effective Date Maturity Date 
 Notional
 (in millions)
 Based on Variable Rate Fixed Rate Spread Effective Fixed Rate Purpose Effective Date Maturity Date 
 Notional
 (in millions)
 Based on Variable Rate Fixed Rate Spread Effective Fixed Rate
Swap Floating to Fixed Rate 1/1/2009 1/1/2014 20.0
 3 Month LIBOR 0.3585% 2.1450% 1.8700% 4.0150%
Cap Cap Floating Rate 4/1/2012 4/1/2015 152.4
 3 Month LIBOR 0.3603% 11.2650% —% N/A Cap Floating Rate 4/1/2012 4/1/2015 $152.4
 3 Month LIBOR 0.2320% 11.2650% —% N/A
Cap Cap Floating Rate 10/3/2011 10/3/2016 10.0
 3 Month LIBOR 0.3603% 11.0200% —% N/A Cap Floating Rate 10/3/2011 10/3/2016 $10.0
 3 Month LIBOR 0.2320% 11.0200% —% N/A

Generally,In January 2014, our interest rate swap agreement with a notional amount of $20.0 million expired. We did not enter into a new interest rate swap agreement.

In accordance with ASC Topic 815, Derivatives and Hedging, we have recorded the fair value of our derivative instruments designated as cash flow hedges on the balance sheet. See Note 17 for information on the determination of fair value for the derivative instruments.  The following table summarizes the fair value of derivative instruments included in our consolidated balance sheets as of December 31, 2014 and December 31, 2013 (in thousands):
 Asset Derivatives Liability Derivatives
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as hedging instruments  December 31, 2014 December 31, 2013   December 31, 2014 December 31, 2013
Interest rate swap and cap agreementsOther assets $
 $
 Other liabilities $
 $97
Total derivatives designated as hedging instruments  $
 $
   $
 $97

These valuation adjustments will only be realized under certain situations. For example, if we terminate contracts prior to maturity or if derivatives fail to qualify for hedge accounting, we would need to amortize amounts currently included in accumulated other comprehensive income into interest expense over the terms of the derivative contracts.  We did not terminate our swap prior to maturity, and it did not fail to qualify for hedge accounting; therefore, the net of valuation adjustments through the maturity date approximated zero.

Our hedges were highly effective and had minimal effect on income.  The following table summarizes the impact of derivative instruments for the years ended December 31, 2014, 2013 and 2012 as recorded in the consolidated statements of operations (in thousands):
Derivatives in
cash flow hedging relationship
 
Amount of gain or (loss)
recognized in OCI
(effective portion)
 Location of gain or (loss) reclassified from accumulated OCI into income (effective portion) Amount of gain or (loss) reclassified from accumulated OCI into income (effective portion)
  Year Ended December 31,   Year Ended December 31,
  2014 2013 2012   2014 2013 2012
Interest rate swap and cap agreements $97
 $362
 $643
 Interest expense $
 $
 $

Our financial derivative instruments are designated and qualify as cash flow hedges and the effective portion of the gain or loss on such hedges are reported as a component of accumulated other comprehensive income (loss)loss in our Consolidated Balance Sheets.consolidated balance sheets. To the extent that the hedging relationship is not effective or does not qualify as a cash flow hedge, the ineffective portion is recorded in interest expense. Hedges that received designated hedge accounting treatment are evaluated for effectiveness at the time that they are designated as well as through the hedging period.

In accordance with ASC Topic 815, Derivatives and Hedging, we have recorded the fair value of our derivative instruments designated as cash flow hedges on the balance sheet. See Note 18 for information on the determination of fair value for the derivative instruments.  The following table summarizes the fair value of derivative instruments included in our Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011 (in thousands):

 Asset Derivatives Liability Derivatives
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as hedging instruments  December 31, 2012 December 31, 2011   December 31, 2012 December 31, 2011
Interest rate swap and caps agreementOther assets $
 $
 Other liabilities 459
 1,106
Total derivatives designated as hedging instruments  $
 $
   459
 1,106

These valuation adjustments will only be realized under certain situations. For example, if we terminate the swaps prior to maturity No gain or if the derivatives fail to qualify for hedge accounting, we would need to amortize amounts currently included in other comprehensive income (loss) into interest expense over the terms of the derivative contracts.  We do not intend to terminate the swaps prior to maturity and, therefore, the net of valuation adjustments through the various maturity dates will approximate zero, unless the derivatives fail to qualify for hedge accounting.

Our hedges were highly effective and had minimal effect on income.  The following table summarizes the impact of derivative instruments for the years ended December 31,2012 and 2011 as recordedloss was recognized in the Consolidated Statements of Operations (in thousands):
Derivatives in
cash flow hedging
 
Amount of Gain or
(Loss) Recognized in
OCI (Effective Portion)
 Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
  Years Ended December 31,   Years Ended December 31,   Years Ended December 31,
  2012 2011 2010   2012 2011 2010   2012 2011 2010
Interest rate swap and caps agreement $643
 $1,048
 $(411) Interest expense $
 $
 $
 Interest expense $4
 $(13) $(10)
Total $643
 $1,048
 $(411) Total $
 $
 $
 Total $4
 $(13) $(10)

consolidated financial statements


F - 3741

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17.16.    Derivative Instruments and Hedging Activities, continued

related to hedge ineffectiveness or to amounts excluded from effectiveness testing on our cash flow hedge during the years ended December 31, 2014 and 2013. An insignificant loss was recognized during the year ended December 31, 2012.

Certain of our derivative instruments contain provisions that require us to provide ongoing collateralization on derivative instruments in a liability position.  As of December 31, 2012 and December 31, 20112013, we had collateral deposits recorded in other assets of approximately $1.20.7 million and. As of $3.1 millionDecember 31, 2014, respectively.we had no such deposits recorded.

18.17.    Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts and notes receivable, accounts payable, derivative instruments, and debt.

ASC Topic 820, Fair Value Measurements and Disclosures, establishes guidance for the fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories:

Level 1—Quoted unadjusted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all observable inputs and significant value drivers are observable in active markets.

Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable, including assumptions developed by us.

We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.  The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

Derivative Instruments
The derivative instruments held by us are interest rate swapsswap and cap agreements for which quoted market prices are indirectly available. For those derivatives, we use model-derived valuations in which all observable inputs and significant value drivers are observable in active markets provided by brokers or dealers to determine the fair values of derivative instruments on a recurring basis.basis (Level 2).

Installment Notes on Manufactured Homes
The net carrying value of the installment notes on manufactured homes estimates the fair value as the interest rates in the portfolio are comparable to current prevailing market rates.rates (Level 2).

Long Term Debt and Lines of Credit
The fair value of long term debt (excluding the secured borrowing) is based on the estimates of management and on rates currently quoted and rates currently prevailing for comparable loans and instruments of comparable maturities.maturities (Level 2).

Collateralized Receivables and Secured Borrowing
The fair value of these financial instruments offset each other as our collateralized receivables represent a transfer of financial assets and the cash proceeds received from these transactions have been classified as a secured borrowing in the Consolidated Balance Sheets. The net carrying value of the collateralized receivables estimates the fair value as the interest rates in the portfolio areconsolidated comparable to current prevailing market rates.rates (Level 2).

Other Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair market values due to the short-term nature of these instruments.








F - 3842

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.17.    Fair Value of Financial Instruments, continued

The table below sets forth our financial assets and liabilities that required disclosure of their fair values on a recurring basis as of December 31, 20122014.  The table presents the carrying values and fair values of our financial instruments as of December 31, 20122014 and December 31, 20112013 that were measured using the valuation techniques described above.above (in thousands). The table excludes other financial instruments such as cash and cash equivalents, accounts receivable, and accounts payable because the carrying values associated with these instruments approximate fair value since their maturities are less than one year.

December 31, 2012 December 31, 2011 December 31, 2014 December 31, 2013
Financial assetsCarrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value
Installment notes on manufactured homes, net21,898
 21,898
 13,417
 13,417
Installment notes receivable on manufactured homes, net $25,884
 $25,884
 $25,471
 $25,471
Collateralized receivables, net93,834
 93,834
 81,176
 81,176
 $122,962
 $122,962
 $109,821
 $109,821
Financial liabilities               
Derivative instruments459
 459
 1,106
 1,106
 $
 $
 $97
 $97
Long term debt (excluding secured borrowing)1,329,311
 1,355,331
 1,186,509
 1,175,261
Debt (excluding secured borrowing) $1,702,643
 $1,752,939
 $1,200,927
 $1,211,821
Secured borrowing94,409
 94,409
 81,682
 81,682
 $123,650
 $123,649
 $110,510
 $110,510
Lines of credit29,781
 29,781
 129,034
 129,034
 $5,794
 $5,794
 $181,383
 $181,383

The table below sets forth, by level, our financial assets and liabilities that were required to be carried at fair value in the Consolidated Balance Sheetsconsolidated balance sheets as of December 31, 2012.

2014
and 2013 (in thousands):
Assets Total Fair Value Level 1 Level 2 Level 3
Derivative instruments $
 $
 $
 $
Total assets $
 $
 $
 $
Liabilities        
Derivative instruments $459
 $
 $459
 $
Total liabilities $459
 $
 $459
 $

19.   Recent Accounting Pronouncements
 Description Frequency Asset/(Liability) Level 1 Level 2 Level 3
December 31, 2014Derivative instruments Recurring $
 $
 $
 $
December 31, 2013Derivative instruments Recurring $(97) $
 $(97) $

In April 2011,The derivative instruments are the FASB issued ASU 2011-03, “Reconsideration of Effective Controlonly financial liabilities that were required to be carried at fair value in the consolidated balance sheets for Repurchase Agreements” (ASU 2011-03) which amends ASC Topic 860, Transfersthe periods indicated, and Servicing.  The updated guidance in ASC Topic 860 removes from the assessment of effective control (1) the criterion requiring the transferor towe have the ability to repurchase or redeem theno financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance relatedthat are required to that criterion. The updated guidance in ASC Topic 860 is effective for the first interim or annual period beginning on or after December 15, 2011.  Early adoption was not permitted.  The adoption of this guidance did not have any impact on our results of operations or financial condition.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (ASU 2011-04) which amends ASC Topic 820, Fair Value Measurement.  The updated guidance in ASC Topic 820 changes the wording used to describe the requirements in U.S. GAAP for measuringbe carried at fair value and for disclosing information about fair value measurements.   The updated guidance in ASC Topic 820 is effective during interim and annual periods beginning after December 15, 2011.  Early adoption was not permitted.  The adoption of this guidance did not have any impact on our results of operations or financial condition.


value.

F - 3943

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20.18.    Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2014-15, (“ASU 2014-15”), Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. We are currently evaluating the potential impacts the new standard will have on our quarterly reporting process.
In May 2014, the FASB issued ASU No. 2014-09, (“ASU 2014-09”), Revenue from Contracts with Customers as a new Topic, Accounting Standards Codification ("ASC") Topic 606. The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new standard, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. This ASU is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2016 and shall be applied using either a full retrospective or modified retrospective approach. Early adoption is not permitted. We are currently evaluating the new guidance and have not determined the impact this standard may have on our consolidated financial statements nor decided upon the method of adoption.
In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"). ASU 2014-08 raises the threshold for a disposal to qualify as a discontinued operation by requiring only those disposals of a component or group of components that represent a strategic shift or that will have a major effect on a company’s operational and financial results and also requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The guidance does not change the presentation requirements for discontinued operations in the statement where net income is presented. ASU 2014-08 also requires the reclassification of assets and liabilities of a discontinued operation in the statement of financial position for all prior periods presented. The standard expands the disclosures for discontinued operations and requires new disclosures related to individually material disposals that do not meet the definition of a discontinued operation, an entity's continuing involvement with a discontinued operation following the disposal date and retained equity method investments in a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014 and interim periods within annual periods beginning on or after December 15, 2015. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issue. We have chosen to early adopt this pronouncement and have applied the guidance to recent applicable disposals (see Note 2).

19.     Commitments and Contingencies

On June 4, 2010, we settled all of the claims arising out of the litigation filed in 2004 by TJ Holdings, LLC in the Superior Court of Guilford County, North Carolina and the associated arbitration proceeding commenced by TJ Holdings in Southfield, Michigan. Under the terms of the settlement agreement, in which neither party admitted any liability whatsoever, we paid TJ Holdings $360,000. In addition, pursuant to this settlement, TJ Holdings’ percentage ownership interest in Sun/Forest, LLC will be increased on a one time basis, in the event of a sale or refinance of all of the SunChamp Properties, to between 9.03% and 28.99% depending on our average closing stock price as reported by the NYSE during the 30 days preceding the sale or refinance of all the SunChamp Properties. Once this percentage ownership interest has been adjusted, there will be no further adjustments from subsequent sales or refinances of the SunChamp Properties. The likelihood of a sale or refinancing of all of the SunChamp properties is not probable as these properties continue to see growth potential nor do we have a need to refinance all of the properties, so we do not expect it to have a material adverse impact on our results of operations or financial condition.

We are involved in various other legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition.


F - 44

21.Related Party Transactions
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20. Related Party Transactions

We have entered into the following transactions with OFS LLC:

Investment in OFS LLC. We entered into an agreement with four unrelated companies and we contributed cash of approximately $0.6 million towards the formation of OFS LLC. OFS LLC purchased the loan origination platform of Origen. The purpose of the venture is to originate manufactured housing installment contracts for its members. We accounted for our investment in OFS LLC using the equity method of accounting which we have since suspended. As of December 31, 2012,2014, we had an ownership interest in the OFS LLC of 22.9 percent22.9%, and the carrying value of our investment was zero.

Loan Origination, Sale and Purchase Agreement. As of 2014, our agreement with OFS LLC, in which OFS LLC agreed to fund loans that meet our underwriting guidelines and then transfer those loans to us pursuant to a Loan Origination, Sale and Purchase Agreement. WeAgreement, was terminated. In 2013, we paid OFS LLC a fee of $650 per loan pursuant to a Loan Origination, Sale and Purchase Agreement which totaled approximately $0.1 million during the years ended December 31, 2012 and 2011, respectively. Wewe purchased, at par, $6.4 million and $3.07.7 million of these loans during the yearsyear ended December 31, 2012 and 2011, respectively.2013.

We have entered into the following transactions with Origen:

Investment in Origen. We own 5,000,000 shares of Origen common stock and Shiffman Origen LLC (which is owned by the Milton M. Shiffman Spouse's Marital Trust, Gary A. Shiffman (our Chairman and Chief Executive Officer), and members of Mr. Shiffman's familyfamily) owns 1,025,000 shares of Origen common stock. Gary A. Shiffman is a member of the Board of Directors of Origen and Arthur A. Weiss, our director, is a trustee of the Milton M. Shiffman Spouse's Marital Trust. Ronald A. Klein, one of our directors, is the Chief Executive Officer and a director of Origen. Mr. Klein, Mr. Weiss and Brian M. Hermelin, another of our directors, beneficially own approximately 570,000, 10,000, and 200,000 shares of Origen common stock, respectively. We accounted for our investment in Origen using the equity method of accounting which we have since suspended. As of December 31, 20122014 we had an ownership interest in Origen of approximately 19 percent19%, and the carrying value of our investment was zero.

Board Membership.Membership and Chief Executive Officer. Gary A. Shiffman, our Chairman and Chief Executive Officer, is a board member of Origen, and Ronald A. Klein is a board member and the Chief Executive Officer of Origen.

In addition to the transactions with Origen described above, Gary A.Mr. Shiffman, Mr. Weiss and his affiliates and/or Arthur A. Weiss, one of our directors,Mr. Klein have entered into the following transactions with us:

Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns a 21 percent21% equity interest in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Arthur A. Weiss and Ronald A. Klein owns a less than one percent indirect interest in American Center LLC. As of October 2011,Under this lease agreement, we lease approximately 48,20062,900 rentable square feet. The term of the lease is until October 31, 2016, with an option to renew for an additional five years. The annual2026, and the base rent under the current leasethrough October 31, 2015 is $18.61$16.45 per square foot (gross) and will remain this amount through October 31, 2014.. From November 1, 2014 to August 31, 2015, the annual base rent will be $18.72 per square foot (gross) and then from September 1, 2015 to October 31, 2016, the annual base rent will be $17.92$16.95 per square foot (gross) and from November 1, 2016 to October 31, 2017, the base rent will be $17.45 per square foot (gross). We also have a temporary lease for approximately 10,500 rentable square feet with base rent equal to $12.71 per square foot (gross). This temporary lease is currently operating on a month to month basis. Our annual rent expense associated with the lease of our executive offices was approximately $0.7$1.0 million for each of the years ended December 31, 2012, 20112014 and 2010.2013, and $0.7 million for the year ended December 31, 2012. Our future annual rent expense will be approximately $0.9$1.0 million through 2016. We have also have a temporary lease for $8.48 per square foot (gross) until April 2013 on 10,500 rentable square feet.2015, $1.1 million for 2016, 2017 and 2018, $1.2 million for 2019 and $8.8 million thereafter. Each of Mr. Shiffman, Mr. Weiss and Mr. WeissKlein may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.


F - 40

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


21.Related Party Transactions, continued

Loan Funding Agreement with Talmer Bank. Each of Robert H. Naftaly and Arthur A. Weiss, who serve on our board of directors, is also a director of each of Talmer Bancorp, Inc. and its primary operating subsidiary, Talmer Bank. Each of Mr. Naftaly, Mr. Weiss and Mr. Shiffman also owns less than one percent of Talmer Bancorp, Inc.'s common stock. In January 2013, we entered into an agreement with Talmer Bank under which we may refer purchasers of homes in our communities to Talmer Bank to obtain loans to finance their home purchases. We do not receive referral fees or other cash compensation under the agreement. If Talmer Bank makes loans to purchasers referred by us under the agreement, those purchasers default on their loans and Talmer Bank repossesses the homes securing such loans, we have agreed to purchase from Talmer Bank each such repossessed home for a price equal to 100% of the amount under each such loan, subject to certain adjustments; provided that the maximum outstanding principal amount of the loans subject to the agreement may not exceed $10.0 million. In addition, we have agreed to waive all site rent that would otherwise be due from Talmer Bank so long as it owns any homes on which loans were made pursuant to the agreement. The agreement expires November 1, 2013, but may be extended by mutual agreement of Talmer Bank and us. Each of Mr. Shiffman, Mr. Naftaly and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his capacity as a shareholder and/or director of Talmer Bancorp, Inc. and Talmer Bank.

Legal Counsel. During 2010-2012,2012-2014, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation (“JRH&W”) acted as our general counsel and represented us in various matters. Arthur A. Weiss is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $3.47.5 million, $2.53.2 million and $0.83.4 million in the years ended December 31, 2012, 20112014, 2013 and 2010,2012, respectively.

Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of 24properties (four of which have been sold) from partnerships previously affiliated with him (the “Sun Partnerships”).him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those ofon us and our public stockholders onupon the sale of any of the Sun Partnerships.these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties.


F - 4145

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


21. Subsequent Events

We have evaluated our financial statements for subsequent events through the date that this Form 10-K was issued.

Second Closing of Green Courte Acquisition

During January 2015, we completed the second closing of the acquisition of the Green Courte properties. See Note 2 for details on the acquisition.

Debt

In relation to the acquisition of the Green Courte properties (see Note 2), subsequent to year end we refinanced approximately $120.9 million of mortgage debt on 13 of the communities (resulting in proceeds of $126.0 million) at a weighted average interest rate of 3.87% per annum and a weighted average term of 14.1 years, and we assumed approximately $149.9 million of mortgage debt at a weighted average interest rate of 5.74% and a weighted average remaining term of 6.3 years.

Disposition

In January 2015, we completed the sale of a MH community comprised of 798 sites located in Indiana for $17.3 million.

Acquisition Agreement
On December 4, 2014,we entered into seven separate contribution agreements (the “Contribution Agreements”) with a group of related selling entities (collectively, the “Selling Parties”) with respect to our planned acquisition of a portfolio of seven manufactured housing communities, including associated manufactured homes and certain other personal property and intangibles. After closing, we will operate the properties as six communities rather than seven. The properties are located in the Orlando, Florida area, are comprised of approximately 3,150 manufactured housing sites (approximately 60% of which are in age-restricted communities) and are 96% occupied. In addition to the developed sites, there are approximately 380 potential expansion sites in the Properties.

Total consideration for the acquisition is approximately $257.6 million, including the assumption of approximately $157.5 million of debt. The balance of the consideration will be paid in a combination of up to approximately $41.8 million in cash, common OP units of the Operating Partnership at an issuance price of $61 per unit and newly-created Series C preferred OP units of the Operating Partnership at an issuance price of $100 per unit (the “Series C Preferred Units”). Of the consideration to be paid with OP units in the Operating Partnership, 60% will be paid in Series C Preferred Units and 40% will be paid in common OP units. Distributions will be paid on the Series C Preferred Units at a rate equal to 4.0% per year from the date of issuance until the second anniversary of the date of issuance, 4.5% per year during the following three years, and 5.0% per year thereafter. Subject to certain limited exceptions, at the holder's option, each Series C Preferred Unit will be exchangeable into 1.1111 shares of the Company's common stock. Holders of Series C Preferred Units will not have voting or consent rights.

The transaction is subject to the Company's satisfaction with its due diligence investigation and customary closing conditions, including consent of the existing lenders. The transaction is expected to close in the second quarter of 2015.





F - 46

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)





 Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
    Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
   
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
 Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Academy/Westpoint Canton, MI A 1,485
 14,278
 
 6,535
 1,485
 20,813
 22,298
 (8,066) 2000 (A) Canton, MI B $1,485
 $14,278
 $
 $7,882
 $1,485
 $22,160
 $23,645
 $9,663
 2000 (A)
Allendale Allendale, MI A 366
 3,684
 
 8,624
 366
 12,308
 12,674
 (5,517) 1996 (A) Allendale, MI B 366
 3,684
 
 11,260
 366
 14,944
 15,310
 6,738
 1996 (A)
Alpine Grand Rapids, MI B 729
 6,692
 
 7,765
 729
 14,457
 15,186
 (6,307) 1996 (A) Grand Rapids, MI E 729
 6,692
 
 9,532
 729
 16,224
 16,953
 7,391
 1996 (A)
Apple Carr Village Muskegon, MI 3,807 800
 6,172
 
 1,827
 800
 7,999
 8,799
 (431) 2011 (A) Muskegon, MI 3,511 800
 6,172
 
 4,499
 800
 10,671
 11,471
 1,381
 2011 (A)
Apple Creek Amelia, OH  543
 5,480
 
 1,329
 543
 6,809
 7,352
 (2,739) 1999 (A) Amelia, OH C 543
 5,480
 
 2,205
 543
 7,685
 8,228
 3,310
 1999 (A)
Arbor Terrace Bradenton, FL B 456
 4,410
 
 1,315
 456
 5,725
 6,181
 (2,746) 1996 (A) Bradenton, FL A 456
 4,410
 
 2,516
 456
 6,926
 7,382
 3,043
 1996 (A)
Ariana Village Lakeland, FL B 240
 2,195
 
 976
 240
 3,171
 3,411
 (1,679) 1994 (A) Lakeland, FL 5,915 240
 2,195
 
 1,207
 240
 3,402
 3,642
 1,841
 1994 (A)
Autumn Ridge Ankeny, IA A 890
 8,054
 (34) 2,401
 856
 10,455
 11,311
 (5,028) 1996 (A) Ankeny, IA B 890
 8,054
 (33) 3,241
 857
 11,295
 12,152
 5,614
 1996 (A)
Bedford Hills Battle Creek, MI  1,265
 11,562
 
 2,628
 1,265
 14,190
 15,455
 (7,485) 1996 (A)
Bell Crossing Clarksville, TN  717
 1,916
 (12) 7,345
 705
 9,261
 9,966
 (3,083) 1999 (A) Clarksville, TN C 717
 1,916
 (13) 9,077
 704
 10,993
 11,697
 3,965
 1999 (A)
Big Timber Lake RV Resort Cape May, NJ E 590
 21,308
 
 1,216
 590
 22,524
 23,114
 1,268
 2013 (A)
Blazing Star San Antonio, TX 4,073 750
 6,163
 
 123
 750
 6,286
 7,036
 (113) 2012 (A) San Antonio, TX 3,913 750
 6,163
 
 1,205
 750
 7,368
 8,118
 692
 2012 (A)
Blue Star Apache Junction, AZ 2,681 980
 507
 
 
 980
 507
 1,487
 10
 2014 (A)
Blueberry Hill Bushnell, FL 4,218 3,830
 3,240
 
 333
 3,830
 3,573
 7,403
 (76) 2012 (A) Bushnell, FL C 3,830
 3,240
 
 1,839
 3,830
 5,079
 8,909
 509
 2012 (A)
Boulder Ridge Pflugerville, TX A 1,000
 500
 3,323
 24,394
 4,323
 24,894
 29,217
 (9,368) 1998 (C) Pflugerville, TX  1,000
 500
 3,324
 23,427
 4,324
 23,927
 28,251
 10,825
 1998 (C)
Branch Creek Austin, TX A 796
 3,716
 
 5,288
 796
 9,004
 9,800
 (4,408) 1995 (A) Austin, TX B 796
 3,716
 
 5,260
 796
 8,976
 9,772
 4,885
 1995 (A)
Brentwood Kentwood, MI B 385
 3,592
 
 2,320
 385
 5,912
 6,297
 (2,824) 1996 (A) Kentwood, MI A 385
 3,592
 
 2,648
 385
 6,240
 6,625
 3,255
 1996 (A)
Brookside Village Goshen, IN A 260
 1,080
 385
 11,283
 645
 12,363
 13,008
 (5,902) 1985 (A)
Brentwood West Mesa, AZ 20,043 13,620
 24,202
 
 2
 13,620
 24,204
 37,824
 424
 2014 (A)
Brookside Manor Goshen, IN B 260
 1,080
 386
 13,133
 646
 14,213
 14,859
 6,660
 1985 (A)
Brookside Village Kentwood, MI 2,564 170
 5,564
 
 684
 170
 6,248
 6,418
 (339) 2011 (A) Kentwood, MI  170
 5,564
 
 706
 170
 6,270
 6,440
 815
 2011 (A)
Buttonwood Bay Sebring, FL B 1,952
 18,294
 
 4,052
 1,952
 22,346
 24,298
 (8,524) 2001 (A) Sebring, FL A 1,952
 18,294
 
 5,251
 1,952
 23,545
 25,497
 9,905
 2001 (A)
Byrne Hill Village Toledo, OH B 383
 3,903
 
 1,496
 383
 5,399
 5,782
 (2,191) 1999 (A)
Byron Center Byron Center, MI B 253
 2,402
 
 1,926
 253
 4,328
 4,581
 (1,919) 1996 (A) Byron Center, MI E 253
 2,402
 
 2,544
 253
 4,946
 5,199
 2,412
 1996 (A)
Camelot Villa Macomb, MI E 910
 21,211
 
 4,864
 910
 26,075
 26,985
 1,418
 2013 (A)
Candlelight Village Sauk Village, IL C 600
 5,623
 
 5,689
 600
 11,312
 11,912
 (4,823) 1996 (A) Sauk Village, IL D 600
 5,623
 
 7,305
 600
 12,928
 13,528
 5,998
 1996 (A)
Candlewick Court Owosso, MI B 125
 1,900
 131
 2,906
 256
 4,806
 5,062
 (2,388) 1985 (A) Owosso, MI A 125
 1,900
 132
 2,876
 257
 4,776
 5,033
 2,685
 1985 (A)
Carriage Cove Sanford, FL 17,652 6,050
 21,235
 
 356
 6,050
 21,591
 27,641
 369
 2014 (A)
Carrington Pointe Ft. Wayne, IN A 1,076
 3,632
 (1) 6,317
 1,075
 9,949
 11,024
 (4,526) 1997 (A) Ft. Wayne, IN B 1,076
 3,632
 
 8,178
 1,076
 11,810
 12,886
 5,242
 1997 (A)
Casa Del Valle Alamo, TX B 246
 2,316
 
 1,086
 246
 3,402
 3,648
 (1,346) 1997 (A) Alamo, TX C 246
 2,316
 
 1,835
 246
 4,151
 4,397
 1,538
 1997 (A)
Castaways Berlin, MD 22,537 14,320
 22,277
 
 2,096
 14,320
 24,373
 38,693
 518
 2014 (A)
Catalina Middletown, OH B 653
 5,858
 
 3,619
 653
 9,477
 10,130
 (5,164) 1993 (A) Middletown, OH A 653
 5,858
 
 4,979
 653
 10,837
 11,490
 5,782
 1993 (A)
Cave Creek Evans, CO 5,730 2,241
 15,343
 
 8,407
 2,241
 23,750
 25,991
 (5,725) 2004 (A) Evans, CO  2,241
 15,343
 
 14,021
 2,241
 29,364
 31,605
 7,132
 2004 (A)
Chisholm Point Pflugerville, TX A 609
 5,286
 
 5,911
 609
 11,197
 11,806
 (5,394) 1995 (A) Pflugerville, TX B 609
 5,286
 
 5,788
 609
 11,074
 11,683
 6,070
 1995 (A)
Cider Mill Crossings Fenton, MI  520
 1,568
 
 5,603
 520
 7,171
 7,691
 (326) 2011 (A)
Cider Mill Village Middleville, MI  250
 3,590
 
 1,165
 250
 4,755
 5,005
 (273) 2011 (A)
Clearwater Village South Bend, IN A 80
 1,270
 60
 4,165
 140
 5,435
 5,575
 (2,408) 1986 (A)
Club Naples Naples, FL 5,763 5,780
 4,952
 
 246
 5,780
 5,198
 10,978
 (292) 2011 (A)

F - 4247

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


 Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
    Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
   
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
 Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Cider Mill Crossings Fenton, MI C $520
 $1,568
 $
 $12,480
 $520
 $14,048
 $14,568
 $1,956
 2011 (A)
Cider Mill Village Middleville, MI E 250
 3,590
 
 2,926
 250
 6,516
 6,766
 883
 2011 (A)
Clearwater Village South Bend, IN B 80
 1,270
 61
 5,401
 141
 6,671
 6,812
 2,812
 1986 (A)
Club Naples Naples, FL C 5,780
 4,952
 
 1,613
 5,780
 6,565
 12,345
 834
 2011 (A)
Cobus Green Osceola, IN  762
 7,037
 
 3,609
 762
 10,646
 11,408
 (5,864) 1993 (A) Osceola, IN E 762
 7,037
 
 6,892
 762
 13,929
 14,691
 6,669
 1993 (A)
College Park Estates Canton, MI  75
 800
 174
 8,147
 249
 8,947
 9,196
 (4,332) 1978 (A) Canton, MI C 75
 800
 174
 9,778
 249
 10,578
 10,827
 5,288
 1978 (A)
Colonial Village Allegany, NY 4,225 60
 5,760
 
 
 60
 5,760
 5,820
 99
 2014 (A)
Comal Farms New Braunfels, TX  1,455
 1,732
 
 8,956
 1,455
 10,688
 12,143
 (3,377) 2000 (A&C) New Braunfels, TX C 1,455
 1,732
 
 8,994
 1,455
 10,726
 12,181
 4,313
 2000 (A&C)
Continental Estates Davison, MI B 1,625
 16,581
 150
 1,649
 1,775
 18,230
 20,005
 (9,409) 1996 (A)
Continental North (1)
 Davison, MI B 
 
 
 9,328
 
 9,328
 9,328
 (4,595) 1996 (A)
Continental North Davison, MI E 749
 6,089
 
 11,031
 749
 17,120
 17,869
 8,807
 1996 (A)
Corporate Headquarters Southfield, MI  
 
 
 13,750
 
 13,750
 13,750
 (7,945) Various Southfield, MI  
 
 
 20,425
 
 20,425
 20,425
 7,745
 Various
Country Acres Cadillac, MI B 380
 3,495
 
 2,161
 380
 5,656
 6,036
 (2,669) 1996 (A) Cadillac, MI E 380
 3,495
 
 3,213
 380
 6,708
 7,088
 3,142
 1996 (A)
Country Hills Village Hudsonville, MI  340
 3,861
 
 2,490
 340
 6,351
 6,691
 (349) 2011 (A) Hudsonville, MI E 340
 3,861
 
 3,084
 340
 6,945
 7,285
 1,153
 2011 (A)
Country Meadows Flat Rock, MI A 924
 7,583
 296
 16,715
 1,220
 24,298
 25,518
 (11,337) 1994 (A) Flat Rock, MI B 924
 7,583
 296
 18,652
 1,220
 26,235
 27,455
 13,217
 1994 (A)
Country Meadows Village Caledonia, MI  550
 5,555
 
 2,448
 550
 8,003
 8,553
 (461) 2011 (A) Caledonia, MI C 550
 5,555
 
 3,308
 550
 8,863
 9,413
 1,339
 2011 (A)
Countryside Estates Mckean, PA 7,020 320
 11,610
 
 122
 320
 11,732
 12,052
 199
 2014 (A)
Countryside Atlanta Lawrenceville, GA 12,950 1,274
 10,957
 
 1,492
 1,274
 12,449
 13,723
 (3,685) 2004 (A) Lawrenceville, GA 12,950 1,274
 10,957
 
 1,476
 1,274
 12,433
 13,707
 4,515
 2004 (A)
Countryside Gwinnett Buford, GA 10,492 1,124
 9,539
 
 4,206
 1,124
 13,745
 14,869
 (4,164) 2004 (A) Buford, GA 10,182 1,124
 9,539
 
 4,266
 1,124
 13,805
 14,929
 5,285
 2004 (A)
Countryside Lake Lanier Buford, GA 16,850 1,916
 16,357
 
 5,394
 1,916
 21,751
 23,667
 (6,249) 2004 (A) Buford, GA 16,810 1,916
 16,357
 
 9,008
 1,916
 25,365
 27,281
 8,272
 2004 (A)
Countryside Village Perry, MI  275
 3,920
 185
 4,610
 460
 8,530
 8,990
 (4,416) 1987 (A) Great Falls, MT 4,237 430
 7,157
 
 2
 430
 7,159
 7,589
 124
 2014 (A)
Creekside Reidsville, NC  350
 1,423
 (331) (1,208) 19
 215
 234
 (21) 2000 (A&C) Reidsville, NC C 350
 1,423
 (331) (1,149) 19
 274
 293
 51
 2000 (A&C)
Creekwood Meadows Burton, MI C 808
 2,043
 404
 11,740
 1,212
 13,783
 14,995
 (6,529) 1997 (C) Burton, MI D 808
 2,043
 404
 13,100
 1,212
 15,143
 16,355
 7,629
 1997 (C)
Cutler Estates Grand Rapids, MI  749
 6,941
 
 2,882
 749
 9,823
 10,572
 (4,717) 1996 (A) Grand Rapids, MI C 749
 6,941
 
 3,276
 749
 10,217
 10,966
 5,441
 1996 (A)
Davison East (1)
 Davison, MI B 
 
 
 1,261
 
 1,261
 1,261
 (723) 1996 (A)
Deerfield Run Anderson, IN  990
 1,607
 
 4,576
 990
 6,183
 7,173
 (2,519) 1999 (A) Anderson, IN C 990
 1,607
 
 5,483
 990
 7,090
 8,080
 2,934
 1999 (A)
Desert View Village West Wendover, NV  1,119
 
 (1,042) 228
 77
 228
 305
 (107) 1998 (C)
Desert Harbor Apache Junction, AZ 11,850 3,940
 14,891
 
 
 3,940
 14,891
 18,831
 258
 2014 (A)
Driftwood Clermont, NJ 20,000 1,450
 29,851
 
 1,578
 1,450
 31,429
 32,879
 618
 2014 (A)
Dutton Mill Village Caledonia, MI 3,677 370
 8,997
 
 1,617
 370
 10,614
 10,984
 (558) 2011 (A) Caledonia, MI E 370
 8,997
 
 1,752
 370
 10,749
 11,119
 1,404
 2011 (A)
Eagle Crest Firestone, CO A 2,015
 150
 
 38,355
 2,015
 38,505
 40,520
 (11,425) 1998 (C) Firestone, CO B 2,015
 150
 
 35,333
 2,015
 35,483
 37,498
 13,481
 1998 (C)
East Fork Batavia, OH  1,280
 6,302
 
 7,394
 1,280
 13,696
 14,976
 (4,845) 2000 (A&C) Batavia, OH C 1,280
 6,302
 
 13,967
 1,280
 20,269
 21,549
 6,265
 2000 (A&C)
East Village Estates Washington Twp., MI 21,700 1,410
 25,413
 
 507
 1,410
 25,920
 27,330
 (457) 2012 (A) Washington Twp., MI 21,031 1,410
 25,413
 
 3,013
 1,410
 28,426
 29,836
 2,634
 2012 (A)
Edwardsville Edwardsville, KS  425
 8,805
 541
 6,410
 966
 15,215
 16,181
 (7,716) 1987 (A) Edwardsville, KS C 425
 8,805
 541
 8,849
 966
 17,654
 18,620
 8,872
 1987 (A)
Falcon Pointe East Lansing, MI 2,265 450
 4,049
 (300) (2,529) 150
 1,520
 1,670
 (246) 2003 (A)
Egelcraft Muskegon, MI 10,577 690
 22,596
 
 430
 690
 23,026
 23,716
 385
 2014 (A)
Fiesta Village Mesa, AZ  2,830
 4,475
 
 
 2,830
 4,475
 7,305
 79
 2014 (A)
Fisherman's Cove Flint, MI B 380
 3,438
 
 3,018
 380
 6,456
 6,836
 (3,339) 1993 (A) Flint, MI E 380
 3,438
 
 3,682
 380
 7,120
 7,500
 3,841
 1993 (A)
Forest Meadows Philomath, OR B 1,031
 2,050
 
 791
 1,031
 2,841
 3,872
 (1,215) 1999 (A) Philomath, OR E 1,031
 2,050
 
 790
 1,031
 2,840
 3,871
 1,448
 1999 (A)
Four Seasons Elkhart, IN C 500
 4,811
 
 2,058
 500
 6,869
 7,369
 (2,733) 2000 (A)
Glen Laurel Concord, NC  1,641
 453
 
 11,424
 1,641
 11,877
 13,518
 (3,517) 2001 (A&C)
Goldcoaster Homestead, FL B 446
 4,234
 172
 3,016
 618
 7,250
 7,868
 (3,233) 1997 (A)
Grand Grand Rapids, MI B 374
 3,587
 
 1,989
 374
 5,576
 5,950
 (2,695) 1996 (A)
Grand Lakes Citra, FL 6,130 5,280
 4,501
 
 669
 5,280
 5,170
 10,450
 (105) 2012 (A)
Groves Ft. Myers, FL C 249
 2,396
 
 1,346
 249
 3,742
 3,991
 (1,674) 1997 (A)

F - 4348

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


 Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
    Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
   
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
 Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Four Seasons Elkhart, IN D $500
 $4,811
 $
 $2,823
 $500
 $7,634
 $8,134
 $3,205
 2000 (A)
Frenchtown Villa District Newport, MI 30,975 1,450
 52,327
 
 1,088
 1,450
 53,415
 54,865
 896
 2014 (A)
Glen Laurel Concord, NC C 1,641
 453
 
 15,310
 1,641
 15,763
 17,404
 5,158
 2001 (A&C)
Goldcoaster Homestead, FL E 446
 4,234
 172
 4,379
 618
 8,613
 9,231
 3,894
 1997 (A)
Grand Grand Rapids, MI A 374
 3,587
 
 3,429
 374
 7,016
 7,390
 3,151
 1996 (A)
Grand Lakes Citra, FL C 5,280
 4,501
 
 2,079
 5,280
 6,580
 11,860
 653
 2012 (A)
The Grove at Alta Ridge Denver, CO 28,640 5,370
 37,152
 
 102
 5,370
 37,254
 42,624
 630
 2014 (A)
Groves Ft. Myers, FL D 249
 2,396
 
 2,450
 249
 4,846
 5,095
 1,873
 1997 (A)
Gwynn's Island Gwynn, VA C 760
 595
 
 1,275
 760
 1,870
 2,630
 127
 2013 (A)
Hamlin Webberville, MI B 125
 1,675
 536
 8,702
 661
 10,377
 11,038
 (3,756) 1984 (A) Webberville, MI A 125
 1,675
 536
 9,863
 661
 11,538
 12,199
 4,713
 1984 (A)
Hickory Hills Village Battle Creek, MI 4,484 760
 7,697
 
 1,685
 760
 9,382
 10,142
 (505) 2011 (A) Battle Creek, MI 4,242 760
 7,697
 
 2,077
 760
 9,774
 10,534
 1,365
 2011 (A)
Hidden Ridge Hopkins, MI  440
 893
 
 56
 440
 949
 1,389
 (57) 2011 (A) Hopkins, MI C 440
 893
 
 974
 440
 1,867
 2,307
 222
 2011 (A)
High Point Frederica, DE 17,500 898
 7,031
 
 5,582
 898
 12,613
 13,511
 (4,279) 1997 (A) Frederica, DE 17,282 898
 7,031
 (42) 5,892
 856
 12,923
 13,779
 5,092
 1997 (A)
Holiday Village Elkhart, IN A 100
 3,207
 143
 2,670
 243
 5,877
 6,120
 (3,215) 1986 (A) Elkhart, IN B 100
 3,207
 143
 3,972
 243
 7,179
 7,422
 3,618
 1986 (A)
Holiday West Village Holland, MI 3,513 340
 8,067
 
 1,545
 340
 9,612
 9,952
 (519) 2011 (A) Holland, MI C 340
 8,067
 
 1,432
 340
 9,499
 9,839
 1,321
 2011 (A)
Holly/Hawaiian Gardens Holly, MI B 1,514
 13,596
 
 2,427
 1,514
 16,023
 17,537
 (4,336) 2004 (A) Holly, MI A 1,514
 13,596
 
 3,146
 1,514
 16,742
 18,256
 5,569
 2004 (A)
Holly Forest Holly Hill, FL A 920
 8,376
 
 536
 920
 8,912
 9,832
 (4,522) 1997 (A) Holly Hill, FL B 920
 8,376
 
 600
 920
 8,976
 9,896
 5,105
 1997 (A)
Hunters Crossing Capac, MI  430
 1,092
 
 103
 430
 1,195
 1,625
 (21) 2012 (A) Capac, MI C 430
 1,092
 
 752
 430
 1,844
 2,274
 169
 2012 (A)
Hunters Glen Wayland, MI  1,102
 11,926
 
 3,940
 1,102
 15,866
 16,968
 (4,711) 2004 (A) Wayland, MI C 1,102
 11,926
 
 5,621
 1,102
 17,547
 18,649
 6,021
 2004 (A)
Indian Creek Ft. Myers Beach, FL B 3,832
 34,660
 
 5,131
 3,832
 39,791
 43,623
 (20,377) 1996 (A) Ft. Myers Beach, FL 69,012 3,832
 34,660
 
 8,153
 3,832
 42,813
 46,645
 22,665
 1996 (A)
Indian Creek Geneva on the Lake, OH C 420
 20,791
 
 1,984
 420
 22,775
 23,195
 1,251
 2013 (A)
Island Lake Merritt Island, FL B 700
 6,431
 
 485
 700
 6,916
 7,616
 (3,901) 1995 (A) Merritt Island, FL 12,816 700
 6,431
 
 557
 700
 6,988
 7,688
 4,309
 1995 (A)
Jellystone North Java, NY 7,146 870
 8,884
 
 1,549
 870
 10,433
 11,303
 763
 2013 (A)
Jellystone at Birchwood Acres Woodridge, NY 4,179 560
 5,527
 
 2,345
 560
 7,872
 8,432
 454
 2013 (A)
Kensington Meadows Lansing, MI A 250
 2,699
 
 8,060
 250
 10,759
 11,009
 (4,541) 1995 (A) Lansing, MI B 250
 2,699
 
 8,421
 250
 11,120
 11,370
 5,535
 1995 (A)
Kenwood La Feria, TX  145
 1,842
 
 248
 145
 2,090
 2,235
 (909) 1999 (A) La Feria, TX C 145
 1,842
 (111) (869) 34
 973
 1,007
 43
 1999 (A)
King's Court Traverse City, MI A 1,473
 13,782
 (11) 3,858
 1,462
 17,640
 19,102
 (8,980) 1996 (A) Traverse City, MI B 1,473
 13,782
 (11) 4,042
 1,462
 17,824
 19,286
 10,180
 1996 (A)
King's Lake Debary, FL B 280
 2,542
 
 2,803
 280
 5,345
 5,625
 (2,499) 1994 (A) Debary, FL 9,859 280
 2,542
 
 2,868
 280
 5,410
 5,690
 2,870
 1994 (A)
Knollwood Estates Allendale, MI 2,745 400
 4,061
 
 2,586
 400
 6,647
 7,047
 (2,539) 2001 (A) Allendale, MI 2,664 400
 4,061
 
 3,379
 400
 7,440
 7,840
 3,191
 2001 (A)
La Casa Blanca Apache Junction, AZ 9,593 4,370
 14,142
 
 2
 4,370
 14,144
 18,514
 246
 2014 (A)
Lafayette Place Warren, MI C 669
 5,979
 
 4,221
 669
 10,200
 10,869
 (4,339) 1998 (A) Warren, MI D 669
 5,979
 
 5,170
 669
 11,149
 11,818
 5,285
 1998 (A)
Lake In Wood Narvon, PA  7,360
 7,097
 
 1
 7,360
 7,098
 14,458
 (134) 2012 (A) Narvon, PA 11,013 7,360
 7,097
 
 1,045
 7,360
 8,142
 15,502
 770
 2012 (A)
Lake Juliana Auburndale, FL C 335
 3,048
 
 1,681
 335
 4,729
 5,064
 (2,388) 1994 (A) Auburndale, FL D 335
 3,048
 
 1,726
 335
 4,774
 5,109
 2,674
 1994 (A)
Lake San Marino Naples, FL C 650
 5,760
 
 1,750
 650
 7,510
 8,160
 (3,428) 1996 (A)
Lakeview Ypsilanti, MI  1,156
 10,903
 
 4,086
 1,156
 14,989
 16,145
 (4,181) 2004 (A)
Leisure Village Belmont, MI  360
 8,219
 
 207
 360
 8,426
 8,786
 (443) 2011 (A)
Liberty Farms Valparaiso, IN B 66
 1,201
 116
 3,008
 182
 4,209
 4,391
 (2,076) 1985 (A)
Lincoln Estates Holland, MI B 455
 4,201
 
 2,585
 455
 6,786
 7,241
 (3,071) 1996 (A)
Maplewood Mobile Indianapolis, IN B 275
 2,122
 
 2,080
 275
 4,202
 4,477
 (2,286) 1989 (A)
Meadow Lake Estates White Lake, MI A 1,188
 11,498
 127
 7,848
 1,315
 19,346
 20,661
 (10,042) 1994 (A)
Meadowbrook Charlotte, NC  1,310
 6,570
 
 5,453
 1,310
 12,023
 13,333
 (4,916) 2000 (A&C)
Meadowbrook Estates Monroe, MI B 431
 3,320
 379
 10,615
 810
 13,935
 14,745
 (6,819) 1986 (A)
Meadowbrook Village Tampa, FL B 519
 4,728
 
 722
 519
 5,450
 5,969
 (3,302) 1994 (A)
Meadows Nappanee, IN B 287
 2,300
 (1) 3,959
 286
 6,259
 6,545
 (3,401) 1987 (A)
Naples Gardens Naples, FL 3,729 3,640
 2,020
 
 316
 3,640
 2,336
 5,976
 (122) 2011 (A)
North Lake Estates Moore Haven, FL 4,464 4,150
 3,486
 
 138
 4,150
 3,624
 7,774
 (202) 2011 (A)
North Point Estates Pueblo, CO  1,582
 3,027
 1
 4,241
 1,583
 7,268
 8,851
 (2,302) 2001 (C)

F - 4449

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Northville Crossing Northville, MI 21,616 1,250
 29,564
 
 2,611
 1,250
 32,175
 33,425
 (570) 2012 (A)
Oak Crest Austin, TX  4,311
 12,611
 
 5,226
 4,311
 17,837
 22,148
 (6,220) 2002 (A)
Oak Island Village East Lansing, MI 3,500 320
 6,843
 
 1,601
 320
 8,444
 8,764
 (468) 2011 (A)
Oakwood Village Miamisburg, OH A 1,964
 6,401
 (1) 12,045
 1,963
 18,446
 20,409
 (6,924) 1998 (A)
Orange City Orange City, FL  920
 5,540
 
 678
 920
 6,218
 7,138
 (334) 2011 (A)
Orange Tree Orange City, FL B 283
 2,530
 15
 934
 298
 3,464
 3,762
 (1,925) 1994 (A)
Orchard Lake Milford, OH  395
 4,025
 (15) 627
 380
 4,652
 5,032
 (1,902) 1999 (A)
Palm Creek Casa Grande, AZ 41,726 11,836
 76,143
 
 
 11,836
 76,143
 87,979
 (1,464) 2012 (A)
Pebble Creek Greenwood, IN  1,030
 5,074
 
 6,490
 1,030
 11,564
 12,594
 (4,340) 2000 (A&C)
Pecan Branch Georgetown, TX  1,379
 
 235
 4,995
 1,614
 4,995
 6,609
 (1,936) 1999 (C)
Pheasant Ridge Lancaster, PA C 2,044
 19,279
 
 441
 2,044
 19,720
 21,764
 (6,948) 2002 (A)
Pin Oak Parc O'Fallon, MO A 1,038
 3,250
 467
 8,177
 1,505
 11,427
 12,932
 (5,015) 1994 (A)
Pine Hills Middlebury, IN  72
 544
 60
 2,806
 132
 3,350
 3,482
 (1,747) 1980 (A)
Pine Ridge Prince George, VA B 405
 2,397
 
 3,378
 405
 5,775
 6,180
 (2,809) 1986 (A)
Pine Trace Houston, TX 8,245 2,907
 17,169
 (7) 3,763
 2,900
 20,932
 23,832
 (5,885) 2004 (A)
Pinebrook Village Grand Rapids   , MI  130
 5,692
 
 512
 130
 6,204
 6,334
 (347) 2011 (A)
Presidential Hudsonville, MI A 680
 6,314
 
 5,473
 680
 11,787
 12,467
 (5,125) 1996 (A)
Rainbow RV Frostproof, FL  1,890
 5,682
 
 41
 1,890
 5,723
 7,613
 (107) 2012 (A)
Richmond Richmond, MI C 501
 2,040
 
 1,724
 501
 3,764
 4,265
 (1,601) 1998 (A)
River Haven Grand Haven, MI  1,800
 16,967
 
 4,812
 1,800
 21,779
 23,579
 (8,303) 2001 (A)
River Ranch Austin, TX  4,690
 843
 (4) 17,620
 4,686
 18,463
 23,149
 (3,343) 2000 (A&C)
River Ridge Austin, TX 9,926 3,201
 15,090
 (2,351) 8,797
 850
 23,887
 24,737
 (6,735) 2002 (A)
River Ridge Expansion Austin, TX  
 
 2,351
 4,290
 2,351
 4,290
 6,641
 (168) 2010 (C)
Roxbury Goshen, IN A 1,057
 9,870
 1
 2,440
 1,058
 12,310
 13,368
 (4,649) 2001 (A)
Royal Country Miami, FL 54,000 2,290
 20,758
 
 1,572
 2,290
 22,330
 24,620
 (13,644) 1994 (A)
Rudgate Clinton Clinton Township, MI 28,171 1,090
 23,664
 
 572
 1,090
 24,236
 25,326
 (425) 2012 (A)
Rudgate Manor Sterling Heights, MI 17,183 1,440
 31,110
 
 470
 1,440
 31,580
 33,020
 (558) 2012 (A)
Saddle Oak Club Ocala, FL A 730
 6,743
 
 1,147
 730
 7,890
 8,620
 (4,550) 1995 (A)
Saddlebrook San Marcos, TX  1,703
 11,843
 
 6,672
 1,703
 18,515
 20,218
 (6,119) 2002 (A)
Scio Farms Ann Arbor, MI B 2,300
 22,659
 (11) 11,772
 2,289
 34,431
 36,720
 (16,676) 1995 (A)
Sea Air Rehoboth Beach, DE 20,000 1,207
 10,179
 
 2,041
 1,207
 12,220
 13,427
 (4,341) 1997 (A)
Sheffield Auburn Hills, MI 6,825 778
 7,165
 
 891
 778
 8,056
 8,834
 (1,981) 1986 (A)
Sherman Oaks Jackson, MI  200
 2,400
 240
 6,593
 440
 8,993
 9,433
 (4,578) 1986 (A)
Siesta Bay Ft. Myers Beach, FL C 2,051
 18,549
 
 2,407
 2,051
 20,956
 23,007
 (10,920) 1996 (A)
      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Lake Laurie RV Resort Cape May, NJ C $650
 $7,736
 $
 $3,157
 $650
 $10,893
 $11,543
 $742
 2013 (A)
Lake Rudolph Santa Claus, IN 18,352 2,340
 28,113
 
 1,137
 2,340
 29,250
 31,590
 783
 2014 (A)
Lake San Marino Naples, FL D 650
 5,760
 
 3,002
 650
 8,762
 9,412
 3,833
 1996 (A)
Lakeshore Landings Orlando, FL 10,705 2,570
 19,481
 
 2
 2,570
 19,483
 22,053
 337
 2014 (A)
Lakeview Ypsilanti, MI C 1,156
 10,903
 (1) 4,611
 1,155
 15,514
 16,669
 5,520
 2004 (A)
Leisure Village Belmont, MI C 360
 8,219
 
 241
 360
 8,460
 8,820
 1,033
 2011 (A)
Liberty Farms Valparaiso, IN A 66
 1,201
 116
 2,992
 182
 4,193
 4,375
 2,327
 1985 (A)
Lincoln Estates Holland, MI A 455
 4,201
 
 2,842
 455
 7,043
 7,498
 3,588
 1996 (A)
Lost Dutchman Apache Junction, AZ 4,084 4,140
 12,213
 
 6
 4,140
 12,219
 16,359
 213
 2014 (A)
Maple Brook Matteson, IL 29,614 8,460
 48,865
 
 3
 8,460
 48,868
 57,328
 844
 2014 (A)
Maplewood Mobile Indianapolis, IN A 275
 2,122
 
 2,212
 275
 4,334
 4,609
 2,549
 1989 (A)
Maplewood Manor Brunswick, ME 8,325 1,770
 12,982
 
 
 1,770
 12,982
 14,752
 225
 2014 (A)
Meadow Lake Estates White Lake, MI B 1,188
 11,498
 127
 8,951
 1,315
 20,449
 21,764
 11,548
 1994 (A)
Meadowbrook Charlotte, NC C 1,310
 6,570
 
 14,192
 1,310
 20,762
 22,072
 6,371
 2000 (A&C)
Meadowbrook Estates Monroe, MI E 431
 3,320
 379
 12,148
 810
 15,468
 16,278
 8,104
 1986 (A)
Meadowbrook Village Tampa, FL A 519
 4,728
 
 660
 519
 5,388
 5,907
 3,565
 1994 (A)
Meadows Nappanee, IN A 287
 2,300
 
 4,107
 287
 6,407
 6,694
 3,760
 1987 (A)
Merrymeeting Brunswick, ME  250
 1,020
 
 
 250
 1,020
 1,270
 18
 2014 (A)
Mountain View Mesa, AZ 11,378 5,490
 12,325
 
 2
 5,490
 12,327
 17,817
 216
 2014 (A)
Naples Gardens Naples, FL C 3,640
 2,020
 
 1,111
 3,640
 3,131
 6,771
 391
 2011 (A)
New Point RV Resort New Point, VA C 1,550
 5,259
 
 2,845
 1,550
 8,104
 9,654
 492
 2013 (A)
North Lake Estates Moore Haven, FL C 4,150
 3,486
 
 985
 4,150
 4,471
 8,621
 592
 2011 (A)
North Point Estates Pueblo, CO C 1,582
 3,027
 
 4,968
 1,582
 7,995
 9,577
 2,845
 2001 (C)
Northville Crossing Northville, MI 20,565 1,250
 29,564
 (14) 9,717
 1,236
 39,281
 40,517
 3,693
 2012 (A)
Oak Creek Coarsegold, CA 9,914 4,760
 11,185
 
 
 4,760
 11,185
 15,945
 195
 2014 (A)
Oak Crest Austin, TX C 4,311
 12,611
 
 11,109
 4,311
 23,720
 28,031
 7,485
 2002 (A)
Oak Island Village East Lansing, MI 3,291 320
 6,843
 
 2,145
 320
 8,988
 9,308
 1,216
 2011 (A)
Oak Ridge Manteno, IL 10,557 1,090
 36,941
 
 3
 1,090
 36,944
 38,034
 637
 2014 (A)
Oakwood Village Miamisburg, OH B 1,964
 6,401
 
 13,129
 1,964
 19,530
 21,494
 8,642
 1998 (A)
Orange City Orange City, FL C 920
 5,540
 
 1,262
 920
 6,802
 7,722
 838
 2011 (A)
Orange Tree Orange City, FL  283
 2,530
 15
 973
 298
 3,503
 3,801
 2,146
 1994 (A)
Orchard Lake Milford, OH C 395
 4,025
 (15) 885
 380
 4,910
 5,290
 2,191
 1999 (A)
Palm Creek Casa Grande, AZ 41,945 11,836
 76,143
 
 5,097
 11,836
 81,240
 93,076
 7,956
 2012 (A)
Parkside Village Cheektowaga, NY 5,745 550
 10,402
 
 
 550
 10,402
 10,952
 179
 2014 (A)

F - 4550

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Silver Springs Clinton Township, MI 8,524 861
 16,595
 
 1,007
 861
 17,602
 18,463
 (304) 2012 (A)
Silver Star Orlando, FL B 1,022
 9,306
 
 874
 1,022
 10,180
 11,202
 (5,389) 1996 (A)
Snow to Sun Weslaco, TX B 190
 2,143
 13
 1,220
 203
 3,363
 3,566
 (1,515) 1997 (A)
Southfork Belton, MO C 1,000
 9,011
 
 4,247
 1,000
 13,258
 14,258
 (5,620) 1997 (A)
Southwood Village Grand Rapids, MI 5,847 300
 11,517
 
 1,261
 300
 12,778
 13,078
 (679) 2011 (A)
St. Clair Place St. Clair, MI B 501
 2,029
 
 1,273
 501
 3,302
 3,803
 (1,599) 1998 (A)
Stonebridge San Antonio, TX  2,515
 2,096
 (615) 8,571
 1,900
 10,667
 12,567
 (3,796) 2000 (A&C)
Stonebridge Richfield Twp., MI  2,044
 
 2,130
 70
 4,174
 70
 4,244
 
 1998 (C)
Summit Ridge Converse, TX  2,615
 2,092
 (883) 9,939
 1,732
 12,031
 13,763
 (3,566) 2000 (A&C)
Sun Villa Reno, NV 18,300 2,385
 11,773
 (1,100) 749
 1,285
 12,522
 13,807
 (5,963) 1998 (A)
Sunset Ridge Kyle, TX  2,190
 2,775
 
 7,118
 2,190
 9,893
 12,083
 (3,649) 2000 (A&C)
Sunset Ridge Portland, MI  2,044
 
 (9) 15,592
 2,035
 15,592
 17,627
 (5,597) 1998 (C)
Sycamore Village Mason, MI 6,220 390
 13,341
 
 2,110
 390
 15,451
 15,841
 (818) 2011 (A)
Tamarac Village Ludington, MI 5,753 300
 12,028
 86
 1,055
 386
 13,083
 13,469
 (696) 2011 (A)
Tampa East Dover, FL  734
 6,310
 
 2,240
 734
 8,550
 9,284
 (2,287) 2005 (A)
Three Lakes Hudson, FL 5,250 5,050
 3,361
 
 349
 5,050
 3,710
 8,760
 (77) 2012 (A)
Timber Ridge Ft. Collins, CO A 990
 9,231
 
 6,348
 990
 15,579
 16,569
 (6,883) 1996 (A)
Timberbrook Bristol, IN  490
 3,400
 101
 8,275
 591
 11,675
 12,266
 (6,706) 1987 (A)
Timberline Estates Coopersville, MI A 535
 4,867
 1
 3,691
 536
 8,558
 9,094
 (4,202) 1994 (A)
Town and Country Traverse City, MI B 406
 3,736
 
 1,468
 406
 5,204
 5,610
 (2,554) 1996 (A)
Valley Brook Indianapolis, IN A 150
 3,500
 1,277
 13,485
 1,427
 16,985
 18,412
 (8,857) 1989 (A)
Village Trails Howard City, MI B 988
 1,472
 (50) 2,205
 938
 3,677
 4,615
 (1,667) 1998 (A)
Warren Dunes Village Bridgman, MI 2,630 310
 3,350
 
 1,389
 310
 4,739
 5,049
 (269) 2011 (A)
Water Oak Lady Lake, FL A 2,834
 16,706
 101
 12,593
 2,935
 29,299
 32,234
 (14,951) 1993 (A)
Waverly Shores Village Holland, MI 5,244 340
 7,267
 
 458
 340
 7,725
 8,065
 (420) 2011 (A)
West Glen Village Indianapolis, IN B 1,100
 10,028
 
 4,466
 1,100
 14,494
 15,594
 (7,590) 1994 (A)
West Village Estates Romulus, MI 6,858 884
 19,765
 
 458
 884
 20,223
 21,107
 (360) 2012 (A)
Westbrook Toledo, OH A 1,110
 10,462
 
 3,175
 1,110
 13,637
 14,747
 (5,646) 1999 (A)
Westbrook Senior Toledo, OH A 355
 3,295
 
 306
 355
 3,601
 3,956
 (1,355) 2001 (A)
White Lake White Lake, MI A 672
 6,179
 1
 8,372
 673
 14,551
 15,224
 (6,121) 1997 (A)
White Oak Mt. Morris, MI A 782
 7,245
 112
 6,477
 894
 13,722
 14,616
 (6,401) 1997 (A)
Willowbrook Toledo, OH A 781
 7,054
 1
 2,437
 782
 9,491
 10,273
 (4,252) 1997 (A)
Windham Hills Jackson, MI A 2,673
 2,364
 
 13,433
 2,673
 15,797
 18,470
 (6,168) 1998 (A)
Windsor Woods Village Wayland, MI  270
 5,835
 
 1,401
 270
 7,236
 7,506
 (410) 2011 (A)
      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Paso Robles RV Resort Paso Robles, CA  $1,396
 $
 $
 $
 $1,396
 $
 $1,396
 $
 2014 (A)
Pebble Creek Greenwood, IN C 1,030
 5,074
 
 6,996
 1,030
 12,070
 13,100
 5,407
 2000 (A&C)
Pecan Branch Georgetown, TX C 1,379
 
 235
 4,984
 1,614
 4,984
 6,598
 2,312
 1999 (C)
Peter's Pond RV Resort Sandwich, MA C 4,700
 22,840
 
 3,032
 4,700
 25,872
 30,572
 1,670
 2013 (A)
Pheasant Ridge Lancaster, PA D 2,044
 19,279
 
 495
 2,044
 19,774
 21,818
 8,233
 2002 (A)
Pin Oak Parc O'Fallon, MO B 1,038
 3,250
 467
 10,879
 1,505
 14,129
 15,634
 5,892
 1994 (A)
Pine Hills Middlebury, IN E 72
 544
 60
 3,195
 132
 3,739
 3,871
 1,956
 1980 (A)
Pine Ridge Prince George, VA A 405
 2,397
 
 3,829
 405
 6,226
 6,631
 3,155
 1986 (A)
Pine Trace Houston, TX  2,907
 17,169
 (5) 11,785
 2,902
 28,954
 31,856
 7,472
 2004 (A)
Pinebrook Village Grand Rapids, MI C 130
 5,692
 
 1,507
 130
 7,199
 7,329
 931
 2011 (A)
Presidential Hudsonville, MI B 680
 6,314
 
 6,204
 680
 12,518
 13,198
 6,102
 1996 (A)
Rainbow RV Frostproof, FL E 1,890
 5,682
 
 1,989
 1,890
 7,671
 9,561
 678
 2012 (A)
Rancho Mirage Apache Junction, AZ 15,491 7,510
 22,238
 
 1
 7,510
 22,239
 29,749
 386
 2014 (A)
Reserve at Fox Creek Bullhead City, AZ 9,049 1,950
 20,074
 
 
 1,950
 20,074
 22,024
 346
 2014 (A)
Richmond Richmond, MI D 501
 2,040
 
 1,835
 501
 3,875
 4,376
 1,934
 1998 (A)
River Haven Grand Haven, MI C 1,800
 16,967
 
 6,854
 1,800
 23,821
 25,621
 9,778
 2001 (A)
River Ranch Austin, TX C 4,690
 843
 (4) 35,438
 4,686
 36,281
 40,967
 5,701
 2000 (A&C)
River Ridge Austin, TX 9,632 3,201
 15,090
 (2,351) 7,212
 850
 22,302
 23,152
 8,423
 2002 (A)
River Ridge Expansion Austin, TX  
 
 2,351
 4,503
 2,351
 4,503
 6,854
 466
 2010 (C)
Roxbury Goshen, IN B 1,057
 9,870
 
 3,873
 1,057
 13,743
 14,800
 5,531
 2001 (A)
Royal Country Miami, FL 54,000 2,290
 20,758
 
 1,773
 2,290
 22,531
 24,821
 15,079
 1994 (A)
Rudgate Clinton Clinton Township, MI 27,832 1,090
 23,664
 
 4,758
 1,090
 28,422
 29,512
 2,580
 2012 (A)
Rudgate Manor Sterling Heights, MI 16,653 1,440
 31,110
 
 6,748
 1,440
 37,858
 39,298
 3,393
 2012 (A)
Saco RV Saco, ME  790
 3,576
 
 731
 790
 4,307
 5,097
 119
 2014 (A)
Saddle Oak Club Ocala, FL B 730
 6,743
 
 1,324
 730
 8,067
 8,797
 4,996
 1995 (A)
Saddlebrook San Marcos, TX C 1,703
 11,843
 
 9,565
 1,703
 21,408
 23,111
 7,460
 2002 (A)
Scio Farms Ann Arbor, MI A 2,300
 22,659
 (11) 13,944
 2,289
 36,603
 38,892
 19,390
 1995 (A)
Sea Air Rehoboth Beach, DE 20,000 1,207
 10,179
 
 1,984
 1,207
 12,163
 13,370
 5,005
 1997 (A)
Seaport RV Resort Mystic, CT C 120
 290
 
 2,130
 120
 2,420
 2,540
 224
 2013 (A)
Seashore Cape May, NJ  1,030
 23,228
 
 982
 1,030
 24,210
 25,240
 455
 2014 (A)
Sheffield Auburn Hills, MI  778
 7,165
 
 1,570
 778
 8,735
 9,513
 2,706
 2006 (A)
Sherman Oaks Jackson, MI C 200
 2,400
 240
 7,108
 440
 9,508
 9,948
 5,306
 1986 (A)
Siesta Bay Ft. Myers Beach, FL D 2,051
 18,549
 
 3,393
 2,051
 21,942
 23,993
 12,103
 1996 (A)
Silver Springs Clinton Township, MI 7,984 861
 16,595
 
 4,512
 861
 21,107
 21,968
 2,028
 2012 (A)

F - 4651

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2012
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Woodhaven Place Woodhaven, MI A 501
 4,541
 
 3,218
 501
 7,759
 8,260
 (3,267) 1998 (A)
Woodlake Estates Yoder, IN B 632
 3,674
 (283) 434
 349
 4,108
 4,457
 (968) 1998 (A)
Woodlake Trails San Antonio, TX  1,186
 287
 (282) 9,397
 904
 9,684
 10,588
 (1,897) 2000 (A&C)
Woodland Park Estates Eugene, OR 3,116 1,592
 14,398
 1
 1,161
 1,593
 15,559
 17,152
 (7,399) 1998 (A)
Woods Edge West Lafayette, IN B 100
 2,600
 3
 10,176
 103
 12,776
 12,879
 (5,880) 1985 (A)
Woodside Terrace Holland, OH A 1,064
 9,625
 (1) 3,948
 1,063
 13,573
 14,636
 (6,361) 1997 (A)
Worthington Arms Lewis Center, OH A 376
 2,624
 
 2,640
 376
 5,264
 5,640
 (2,618) 1990 (A)
      $201,313
 $1,234,728
 $6,975
 $734,289
 $208,288
 $1,969,017
 $2,177,305
 $(659,169)    

A These communities collateralize $369.8 million of secured debt.
B These communities collateralize $345.4 million of secured debt.
C These communities collateralize $112.5 million of secured debt.
(1) The initial cost for this property is included in the initial cost reported for Continental Estates.

      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
Silver Star Orlando, FL A $1,022
 $9,306
 $
 $1,029
 $1,022
 $10,335
 $11,357
 $5,987
 1996 (A)
Sky Harbor Cheektowaga, NY 16,352 2,318
 24,253
 
 172
 2,318
 24,425
 26,743
 418
 2014 (A)
Skyline Fort Collins, CO 10,435 2,260
 12,120
 
 2
 2,260
 12,122
 14,382
 210
 2014 (A)
Snow to Sun Weslaco, TX C 190
 2,143
 13
 2,003
 203
 4,146
 4,349
 1,654
 1997 (A)
Southfork Belton, MO D 1,000
 9,011
 
 6,063
 1,000
 15,074
 16,074
 6,475
 1997 (A)
Southern Hills Stewartville, MN 8,000 360
 12,723
 
 442
 360
 13,165
 13,525
 216
 2014 (A)
Southwood Village Grand Rapids, MI 5,531 300
 11,517
 
 1,841
 300
 13,358
 13,658
 1,693
 2011 (A)
St. Clair Place St. Clair, MI E 501
 2,029
 
 1,297
 501
 3,326
 3,827
 1,852
 1998 (A)
Stonebridge San Antonio, TX C 2,515
 2,096
 (615) 9,021
 1,900
 11,117
 13,017
 4,722
 2000 (A&C)
Stonebridge Richfield Twp., MI  2,044
 
 2,227
 
 4,271
 
 4,271
 
 1998 (C)
Summit Ridge Converse, TX C 2,615
 2,092
 (883) 18,545
 1,732
 20,637
 22,369
 5,162
 2000 (A&C)
Sun Valley Apache Junction, AZ 10,679 2,750
 18,408
 
 1
 2,750
 18,409
 21,159
 318
 2014 (A)
Sun Villa Reno, NV 18,300 2,385
 11,773
 (1,100) 906
 1,285
 12,679
 13,964
 6,750
 1998 (A)
Sunset Ridge Kyle, TX C 2,190
 2,775
 
 7,603
 2,190
 10,378
 12,568
 4,442
 2000 (A&C)
Sunset Ridge Portland, MI C 2,044
 
 (9) 15,681
 2,035
 15,681
 17,716
 6,728
 1998 (C)
Swan Meadow Dillon, CO 14,325 2,140
 19,734
 
 58
 2,140
 19,792
 21,932
 318
 2014 (A)
Sycamore Village Mason, MI 5,867 390
 13,341
 
 3,280
 390
 16,621
 17,011
 2,215
 2011 (A)
Tamarac Village Ludington, MI 5,409 300
 12,028
 85
 2,550
 385
 14,578
 14,963
 1,653
 2011 (A)
Tampa East Dover, FL E 734
 6,310
 
 3,727
 734
 10,037
 10,771
 2,905
 2005 (A)
Three Lakes Hudson, FL C 5,050
 3,361
 
 1,575
 5,050
 4,936
 9,986
 506
 2012 (A)
Thunderhill Estates Sturgeon Bay, WI 5,775 640
 9,008
 
 205
 640
 9,213
 9,853
 155
 2014 (A)
Timber Ridge Ft. Collins, CO B 990
 9,231
 
 4,571
 990
 13,802
 14,792
 7,483
 1996 (A)
Timberline Estates Coopersville, MI B 535
 4,867
 
 5,829
 535
 10,696
 11,231
 5,081
 1994 (A)
Town and Country Traverse City, MI E 406
 3,736
 
 1,407
 406
 5,143
 5,549
 2,927
 1996 (A)
Town & Country Village Lisbon, ME 2,700 230
 4,539
 
 
 230
 4,539
 4,769
 78
 2014 (A)
Valley View Estates Allegany, NY 4,225 110
 4,511
 
 78
 110
 4,589
 4,699
 78
 2014 (A)
Valley Brook Indianapolis, IN B 150
 3,500
 1,277
 14,015
 1,427
 17,515
 18,942
 9,984
 1989 (A)
Village Trails Howard City, MI  988
 1,472
 (51) 2,141
 937
 3,613
 4,550
 1,893
 1998 (A)
The Villas at Calla Pointe Cheektowaga, NY 4,318 380
 11,014
 
 
 380
 11,014
 11,394
 189
 2014 (A)
Vines RV Resort Paso Robles, CA  890
 7,110
 
 662
 890
 7,772
 8,662
 408
 2013 (A)
Wagon Wheel Old Orchard Beach, ME C 590
 7,703
 
 2,541
 590
 10,244
 10,834
 684
 2013 (A)
Warren Dunes Village Bridgman, MI  310
 3,350
 
 1,706
 310
 5,056
 5,366
 762
 2011 (A)
Water Oak Lady Lake, FL 54,000 2,834
 16,706
 101
 17,142
 2,935
 33,848
 36,783
 16,699
 1993 (A)
Waverly Shores Village Holland, MI 4,986 340
 7,267
 
 518
 340
 7,785
 8,125
 988
 2011 (A)

F - 4752

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 20122014
(amounts in thousands)


      Initial Cost to Company Costs Capitalized
Subsequent to Acquisition
(Improvements)
 Gross Amount Carried
at December 31, 2014
      
Property Name Location Encumbrance Land Depreciable
 Assets
 Land Depreciable
Assets
 Land Depreciable
 Assets
 Total Accumulated
Depreciation
 Date Acquired (A) or
Constructed (C)
West Glen Village Indianapolis, IN A $1,100
 $10,028
 $
 $8,022
 $1,100
 $18,050
 $19,150
 $8,898
 1994 (A)
West Village Estates Romulus, MI 6,424 884
 19,765
 
 2,649
 884
 22,414
 23,298
 2,060
 2012 (A)
Westbrook Toledo, OH B 1,110
 10,462
 
 3,919
 1,110
 14,381
 15,491
 6,654
 1999 (A)
Westbrook Senior Toledo, OH B 355
 3,295
 
 311
 355
 3,606
 3,961
 1,587
 2001 (A)
Westward Ho RV Resort Glenbeulah, WI C 1,050
 5,642
 
 1,509
 1,050
 7,151
 8,201
 457
 2013 (A)
White Lake White Lake, MI B 672
 6,179
 
 9,259
 672
 15,438
 16,110
 7,380
 1997 (A)
Wild Acres Orchard Beach, ME C 1,640
 26,786
 
 3,607
 1,640
 30,393
 32,033
 2,136
 2013 (A)
Wildwood Community Sandwich, IL 21,364 1,890
 37,732
 
 3
 1,890
 37,735
 39,625
 651
 2014 (A)
Willowbrook Toledo, OH B 781
 7,054
 
 3,579
 781
 10,633
 11,414
 4,918
 1997 (A)
Windham Hills Jackson, MI B 2,673
 2,364
 
 15,985
 2,673
 18,349
 21,022
 7,473
 1998 (A)
Windsor Woods Village Wayland, MI C 270
 5,835
 
 3,560
 270
 9,395
 9,665
 1,261
 2011 (A)
Wine Country RV Resort Paso Robles, CA  1,740
 11,510
 
 561
 1,740
 12,071
 13,811
 234
 2014 (A)
Woodhaven Place Woodhaven, MI B 501
 4,541
 
 4,160
 501
 8,701
 9,202
 3,746
 1998 (A)
Woodlake Trails San Antonio, TX C 1,186
 287
 (56) 10,474
 1,130
 10,761
 11,891
 2,793
 2000 (A&C)
Woodland Park Estates Eugene, OR 1,811 1,592
 14,398
 
 1,138
 1,592
 15,536
 17,128
 8,346
 1998 (A)
Woods Edge West Lafayette, IN C 100
 2,600
 3
 10,592
 103
 13,192
 13,295
 6,588
 1985 (A)
Woodside Terrace Holland, OH B 1,064
 9,625
 (1) 6,195
 1,063
 15,820
 16,883
 7,408
 1997 (A)
Worthington Arms Lewis Center, OH B 376
 2,624
 
 2,912
 376
 5,536
 5,912
 2,871
 1990 (A)
      $325,135
 $2,044,542
 $8,208
 $986,032
 $333,343
 $3,030,574
 $3,363,917
 $795,753
    

A These communities collateralize $158.5 million of secured debt.
B These communities collateralize $308.1 million of secured debt.
C These communities support the borrowing base for our secured line of credit, which had no amount outstanding.
D These communities collateralize $109.4 million of secured debt.
E These communities collateralize $141.5 million of secured debt.



F - 53

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2014
(amounts in thousands)



The change in investment property for the years ended December 31, 2012, 2011,2014, 2013, and 20102012 is as follows:

Years Ended December 31,Years Ended December 31,
2012 2011 20102014 2013 2012
Beginning balance$1,794,605
 $1,580,544
 $1,565,700
$2,489,119
 $2,177,305
 $1,794,605
Community and land acquisitions, including immediate improvements302,487
 167,326
 
798,827
 192,660
 302,487
Community expansion and development13,424
 5,931
 3,462
22,195
 17,985
 13,424
Improvements, other110,029
 78,844
 46,460
173,989
 145,916
 110,029
Asset impairment
 (1,584) 
(1,870) 
 
Dispositions and other(43,240) (36,456) (35,078)(118,343) (44,747) (43,240)
Ending balance$2,177,305
 $1,794,605
 $1,580,544
$3,363,917
 $2,489,119
 $2,177,305


The change in accumulated depreciation for the years ended December 31, 2012, 2011,2014, 2013, and 20102012 is as follows:

Years Ended December 31,Years Ended December 31,
2012 2011 20102014 2013 2012
Beginning balance$597,999
 $548,218
 $501,395
$734,067
 $659,169
 $597,999
Depreciation for the period80,124
 67,286
 62,628
121,103
 96,499
 80,124
Asset impairment
 (202) 
(1,033) 
 
Dispositions and other(18,954) (17,303) (15,805)(58,384) (21,601) (18,954)
Ending balance$659,169
 $597,999
 $548,218
$795,753
 $734,067
 $659,169



F - 4854