UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017.2022.
or
[ ] ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12616
SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
|
| | | | | | | |
Maryland | 1-12616 | 38-2730780 |
(State of Incorporation) | Commission file number | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | | | | | | | |
27777 Franklin Rd, | Suite 200, | Southfield, | Michigan | | 48034 |
27777 Franklin Rd. | | |
Suite 200 | | |
Southfield, Michigan | | 48034 |
(Address of Principal Executive Offices) | | (Zip Code) |
(Registrant’sRegistrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, $0.01 par value | | SUI | | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X ]☒ No [ ]☐
Indicate by check mark whether the registrantRegistrant 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 registrantRegistrant was required to submit and post such files). Yes [ X ]☒ No [ ]☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. (Check one):
See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in rule 12b-2 of the Exchange Act. |
| | | | | | | | | | | | | |
Large accelerated filer [ X ] | Accelerated filer [ ] | Non-accelerated filer [ ] |
Smaller reporting company [ ] | Emerging growth company [ ] |
☒ | ☐ | ☐ | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrantRegistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section to Section 13(a) of the Exchange Act. [ ]☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [ X ]☒
Number of shares of Common Stock, $0.01 par value per share, outstanding as of October 17, 2017: 79,342,53618, 2022: 123,890,230
INDEX
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| | | | | | | |
| | |
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| Consolidated Financial Statements:Statements | |
| 2021 | |
| | |
| Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 20172022 and 20162021 (Unaudited) | |
| | |
| | |
| (Unaudited) | |
| | |
| | |
| | |
| | |
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Item 1. | Legal Proceedings | |
1A. | Risk Factors | | |
| | |
| | |
| Exhibits | | |
| | |
| Exhibit IndexSignatures | |
PART I –- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SUN COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited - dollars in thousands,In millions, except for per share amounts)
|
| | | | | | | |
| (unaudited) September 30, 2017 | | December 31, 2016 |
ASSETS | | | |
Land | $ | 1,079,708 |
| | $ | 1,051,536 |
|
Land improvements and buildings | 5,024,937 |
| | 4,825,043 |
|
Rental homes and improvements | 516,618 |
| | 489,633 |
|
Furniture, fixtures and equipment | 140,894 |
| | 130,127 |
|
Investment property | 6,762,157 |
| | 6,496,339 |
|
Accumulated depreciation | (1,188,332 | ) | | (1,026,858 | ) |
Investment property, net (including $50,655 and $88,987 for consolidated variable interest entities at September 30, 2017 and December 31, 2016; see Note 6) | 5,573,825 |
| | 5,469,481 |
|
Cash and cash equivalents | 137,448 |
| | 8,164 |
|
Inventory of manufactured homes | 25,741 |
| | 21,632 |
|
Notes and other receivables, net | 145,760 |
| | 81,179 |
|
Collateralized receivables, net | 134,015 |
| | 143,870 |
|
Other assets, net (including $1,638 and $3,054 for consolidated variable interest entities at September 30, 2017 and December 31, 2016; see Note 6) | 141,047 |
| | 146,450 |
|
TOTAL ASSETS | $ | 6,157,836 |
| | $ | 5,870,776 |
|
LIABILITIES | | | |
Mortgage loans payable (including $42,177 and $62,111 for consolidated variable interest entities at September 30, 2017 and December 31, 2016; see Note 6) | $ | 2,822,640 |
| | $ | 2,819,567 |
|
Secured borrowings on collateralized receivables | 134,884 |
| | 144,477 |
|
Preferred OP units - mandatorily redeemable | 45,903 |
| | 45,903 |
|
Lines of credit | — |
| | 100,095 |
|
Distributions payable | 56,520 |
| | 51,896 |
|
Other liabilities (including $1,258 and $1,998 for consolidated variable interest entities at September 30, 2017 and December 31, 2016; see Note 6) | 291,074 |
| | 279,667 |
|
TOTAL LIABILITIES | 3,351,021 |
| | 3,441,605 |
|
Commitments and contingencies |
| |
|
Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 1,085 shares at September 30, 2017 and 1,681 shares at December 31, 2016 | 32,414 |
| | 50,227 |
|
Series A-4 preferred OP units | 10,832 |
| | 16,717 |
|
STOCKHOLDERS’ EQUITY | | | |
Series A preferred stock, $0.01 par value. Issued and outstanding: 3,400 shares at September 30, 2017 and December 31, 2016 | 34 |
| | 34 |
|
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 79,341 shares at September 30, 2017 and 73,206 shares at December 31, 2016 | 793 |
| | 732 |
|
Additional paid-in capital | 3,810,930 |
| | 3,321,441 |
|
Accumulated other comprehensive income (loss) | 1,531 |
| | (3,181 | ) |
Distributions in excess of accumulated earnings | (1,117,228 | ) | | (1,023,415 | ) |
Total Sun Communities, Inc. stockholders’ equity | 2,696,060 |
| | 2,295,611 |
|
Noncontrolling interests: | | | |
Common and preferred OP units | 63,668 |
| | 69,598 |
|
Consolidated variable interest entities | 3,841 |
| | (2,982 | ) |
Total noncontrolling interests | 67,509 |
| | 66,616 |
|
TOTAL STOCKHOLDERS’ EQUITY | 2,763,569 |
| | 2,362,227 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 6,157,836 |
| | $ | 5,870,776 |
|
| | | | | | | | | | | |
| (Unaudited) | | |
| September 30, 2022 | | December 31, 2021 |
Assets | | | |
Land | $ | 4,173.1 | | | $ | 2,556.3 | |
Land improvements and buildings | 10,632.6 | | | 9,958.3 | |
Rental homes and improvements | 604.4 | | | 591.7 | |
Furniture, fixtures and equipment | 813.8 | | | 656.4 | |
Investment property | 16,223.9 | | | 13,762.7 | |
Accumulated depreciation | (2,611.8) | | | (2,337.2) | |
Investment property, net (see Note 7 at VIEs) | 13,612.1 | | | 11,425.5 | |
Cash, cash equivalents and restricted cash (see Note 7 at VIEs) | 112.0 | | | 78.2 | |
Marketable securities (see Note 15) | 100.4 | | | 186.9 | |
Inventory of manufactured homes | 153.5 | | | 51.1 | |
Notes and other receivables, net | 511.0 | | | 469.6 | |
| | | |
Goodwill | 981.5 | | | 495.4 | |
Other intangible assets, net (see Note 7 at VIEs) | 403.2 | | | 306.8 | |
Other assets, net (see Note 7 at VIEs) | 610.9 | | | 480.6 | |
Total Assets | $ | 16,484.6 | | | $ | 13,494.1 | |
Liabilities | | | |
Secured debt (see Note 8; Note 7 at VIEs) | $ | 3,006.0 | | | $ | 3,380.7 | |
Unsecured debt (see Note 8; Note 7 at VIEs) | 3,705.0 | | | 2,291.1 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Distributions payable | 111.2 | | | 98.4 | |
Advanced reservation deposits and rent (see Note 7 at VIEs) | 294.2 | | | 242.8 | |
Accrued expenses and accounts payable (see Note 7 at VIEs) | 392.8 | | | 237.5 | |
Other liabilities (see Note 7 at VIEs) | 845.4 | | | 224.1 | |
Total Liabilities | 8,354.6 | | | 6,474.6 | |
Commitments and contingencies (see Note 16) | | | |
Temporary equity (see Note 9; Note 7 at VIEs) | 206.8 | | | 288.9 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Shareholders' Equity | | | |
| | | |
Common stock, $0.01 par value. Authorized: 180.0 shares; Issued and outstanding: 123.9 at September 30, 2022 and 116.0 at December 31, 2021 | 1.2 | | | 1.2 | |
Additional paid-in capital | 9,536.4 | | | 8,175.6 | |
Accumulated other comprehensive income / (loss) | (69.9) | | | 3.1 | |
Distributions in excess of accumulated earnings | (1,628.9) | | | (1,556.0) | |
Total SUI shareholders' equity | 7,838.8 | | | 6,623.9 | |
Noncontrolling interests | | | |
Common and preferred OP units | 83.8 | | | 86.8 | |
Consolidated entities (see Note 7 at VIEs) | 0.6 | | | 19.9 | |
Total noncontrolling interests | 84.4 | | | 106.7 | |
Total Shareholders' Equity | 7,923.2 | | | 6,730.6 | |
Total Liabilities, Temporary Equity and Shareholders' Equity | $ | 16,484.6 | | | $ | 13,494.1 | |
See accompanying Notes to Consolidated Financial Statements.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
REVENUES | | | | | | | |
Income from real property | $ | 198,263 |
| | $ | 184,324 |
| | $ | 560,778 |
| | $ | 453,560 |
|
Revenue from home sales | 33,197 |
| | 31,211 |
| | 91,319 |
| | 81,987 |
|
Rental home revenue | 12,757 |
| | 12,031 |
| | 37,774 |
| | 35,696 |
|
Ancillary revenues | 17,017 |
| | 16,446 |
| | 32,086 |
| | 28,442 |
|
Interest | 5,920 |
| | 4,705 |
| | 15,609 |
| | 13,322 |
|
Brokerage commissions and other revenues, net | 1,091 |
| | 984 |
| | 2,978 |
| | 2,137 |
|
Total revenues | 268,245 |
| | 249,701 |
| | 740,544 |
| | 615,144 |
|
EXPENSES | | | | | | | |
Property operating and maintenance | 59,249 |
| | 57,089 |
| | 159,861 |
| | 125,357 |
|
Real estate taxes | 13,053 |
| | 12,384 |
| | 39,322 |
| | 32,122 |
|
Cost of home sales | 25,094 |
| | 21,935 |
| | 67,999 |
| | 58,803 |
|
Rental home operating and maintenance | 6,775 |
| | 6,350 |
| | 16,821 |
| | 17,637 |
|
Ancillary expenses | 9,993 |
| | 9,449 |
| | 21,719 |
| | 18,697 |
|
Home selling expenses | 3,290 |
| | 2,643 |
| | 9,391 |
| | 7,240 |
|
General and administrative | 18,267 |
| | 16,575 |
| | 56,188 |
| | 46,910 |
|
Transaction costs | 2,167 |
| | 4,191 |
| | 6,990 |
| | 27,891 |
|
Depreciation and amortization | 64,232 |
| | 61,483 |
| | 189,719 |
| | 159,565 |
|
Extinguishment of debt | — |
| | — |
| | 759 |
| | — |
|
Interest | 32,085 |
| | 33,800 |
| | 95,765 |
| | 88,522 |
|
Interest on mandatorily redeemable preferred OP units | 790 |
| | 789 |
| | 2,361 |
| | 2,363 |
|
Total expenses | 234,995 |
| | 226,688 |
| | 666,895 |
| | 585,107 |
|
Income before other items | 33,250 |
| | 23,013 |
| | 73,649 |
| | 30,037 |
|
Catastrophic weather related charges | (7,756 | ) | | — |
| | (8,124 | ) | | — |
|
Other income, net | 3,345 |
| | — |
| | 5,340 |
| | — |
|
Current tax benefit / (expense) | 38 |
| | (283 | ) | | (133 | ) | | (567 | ) |
Deferred tax benefit | 81 |
| | — |
| | 745 |
| | — |
|
Income from affiliate transactions | — |
| | 500 |
| | — |
| | 500 |
|
Net income | 28,958 |
| | 23,230 |
| | 71,477 |
| | 29,970 |
|
Less: Preferred return to preferred OP units | (1,112 | ) | | (1,257 | ) | | (3,482 | ) | | (3,793 | ) |
Less: Amounts attributable to noncontrolling interests | (1,776 | ) | | (879 | ) | | (4,179 | ) | | (460 | ) |
Net income attributable to Sun Communities, Inc. | 26,070 |
|
| 21,094 |
|
| 63,816 |
|
| 25,717 |
|
Less: Preferred stock distributions | (1,955 | ) | | (2,197 | ) | | (6,233 | ) | | (6,748 | ) |
Net income attributable to Sun Communities, Inc. common stockholders | $ | 24,115 |
|
| $ | 18,897 |
| | $ | 57,583 |
| | $ | 18,969 |
|
Weighted average common shares outstanding: | | | | | | | |
Basic | 78,369 |
| | 68,655 |
| | 75,234 |
| | 63,716 |
|
Diluted | 78,808 |
| | 69,069 |
| | 75,846 |
| | 64,146 |
|
Earnings per share (See Note 12): | |
| | | | |
| | |
Basic | $ | 0.31 |
| | $ | 0.27 |
| | $ | 0.76 |
| | $ | 0.30 |
|
Diluted | $ | 0.31 |
| | $ | 0.27 |
| | $ | 0.76 |
| | $ | 0.30 |
|
See accompanying Notes to Consolidated Financial Statements.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - dollars in thousands)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 28,958 |
| | $ | 23,230 |
| | $ | 71,477 |
| | $ | 29,970 |
|
Foreign currency translation adjustment | 2,648 |
| | (5,227 | ) | | 4,977 |
| | (5,226 | ) |
Total comprehensive income | 31,606 |
| | 18,003 |
| | 76,454 |
| | 24,744 |
|
Less: Comprehensive income attributable to noncontrolling interests | 1,912 |
| | 553 |
| | 4,444 |
| | 110 |
|
Comprehensive income attributable to Sun Communities, Inc. | $ | 29,694 |
| | $ | 17,450 |
| | $ | 72,010 |
| | $ | 24,634 |
|
See accompanying Notes to Consolidated Financial Statements.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017OPERATIONS
(Unaudited - dollars in thousands)In millions, except for per share amounts) (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Revenues | | | | | | | |
Real property | $ | 585.7 | | | $ | 478.1 | | | $ | 1,461.6 | | | $ | 1,213.9 | |
Home sales | 150.7 | | | 81.1 | | | 358.1 | | | 215.1 | |
Service, retail, dining and entertainment | 174.2 | | | 113.7 | | | 423.0 | | | 271.5 | |
Interest | 11.2 | | | 2.6 | | | 25.3 | | | 8.0 | |
Brokerage commissions and other, net | 10.8 | | | 8.8 | | | 27.4 | | | 21.7 | |
Total Revenues | 932.6 | | | 684.3 | | | 2,295.4 | | | 1,730.2 | |
Expenses | | | | | | | |
Property operating and maintenance | 184.7 | | | 150.8 | | | 469.2 | | | 375.2 | |
Real estate tax | 29.4 | | | 24.8 | | | 83.2 | | | 70.4 | |
Home costs and selling | 96.4 | | | 56.5 | | | 235.2 | | | 156.9 | |
Service, retail, dining and entertainment | 144.9 | | | 94.5 | | | 363.3 | | | 227.6 | |
General and administrative | 69.1 | | | 43.2 | | | 187.0 | | | 126.7 | |
Catastrophic event-related charges, net | 12.2 | | | 0.3 | | | 12.3 | | | 3.1 | |
Business combinations | 8.4 | | | — | | | 23.9 | | | 1.0 | |
Depreciation and amortization | 151.3 | | | 127.1 | | | 450.0 | | | 378.1 | |
| | | | | | | |
Loss on extinguishment of debt (see Note 8) | 4.0 | | | — | | | 4.4 | | | 8.1 | |
Interest | 61.7 | | | 39.0 | | | 162.2 | | | 116.2 | |
Interest on mandatorily redeemable preferred OP units / equity | 1.0 | | | 1.1 | | | 3.1 | | | 3.1 | |
Total Expenses | 763.1 | | | 537.3 | | | 1,993.8 | | | 1,466.4 | |
Income Before Other Items | 169.5 | | | 147.0 | | | 301.6 | | | 263.8 | |
Gain / (loss) on remeasurement of marketable securities (see Note 15) | (7.2) | | | 12.0 | | | (74.0) | | | 43.2 | |
Gain / (loss) on foreign currency exchanges | 14.9 | | | (7.0) | | | 21.7 | | | (7.1) | |
Gain / (loss) on dispositions of properties | (0.8) | | | 108.1 | | | 12.5 | | | 108.1 | |
Other income / (expense), net | 2.8 | | | (9.3) | | | 2.6 | | | (10.0) | |
Gain / (loss) on remeasurement of notes receivable (see Note 4) | (0.1) | | | 0.1 | | | 0.1 | | | 0.6 | |
Income from nonconsolidated affiliates (see Note 6) | 2.0 | | | 0.9 | | | 3.8 | | | 2.9 | |
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6) | (0.4) | | | (0.1) | | | 0.1 | | | (0.1) | |
Current tax expense (see Note 12) | (7.3) | | | (0.4) | | | (12.5) | | | (1.4) | |
Deferred tax benefit / (expense) (see Note 12) | 3.6 | | | (1.2) | | | 3.9 | | | (1.1) | |
Net Income | 177.0 | | | 250.1 | | | 259.8 | | | 398.9 | |
Less: Preferred return to preferred OP units / equity interests | 2.5 | | | 3.1 | | | 8.6 | | | 9.0 | |
Less: Income attributable to noncontrolling interests | 11.9 | | | 15.3 | | | 13.9 | | | 22.6 | |
| | | | | | | |
| | | | | | | |
Net Income Attributable to SUI Common Shareholders | $ | 162.6 | | | $ | 231.7 | | | $ | 237.3 | | | $ | 367.3 | |
| | | | | | | |
Weighted average common shares outstanding - basic | 122.4 | | | 115.1 | | | 119.2 | | | 111.7 | |
Weighted average common shares outstanding - diluted | 122.8 | | | 118.1 | | | 121.9 | | | 114.3 | |
| | | | | | | |
Basic earnings per share (see Note 13) | $ | 1.32 | | | $ | 2.00 | | | $ | 1.98 | | | $ | 3.27 | |
Diluted earnings per share (see Note 13) | $ | 1.32 | | | $ | 2.00 | | | $ | 1.97 | | | $ | 3.27 | |
|
| | | | | | | | | | | | | | | | | | | | | |
| 7.125% Series A Cumulative Redeemable Preferred Stock | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Income / (Loss) | Non-controlling Interests | Total Stockholders’ Equity |
Balance at December 31, 2016 | $ | 34 |
| $ | 732 |
| $ | 3,321,441 |
| $ | (1,023,415 | ) | $ | (3,181 | ) | $ | 66,616 |
| $ | 2,362,227 |
|
Issuance of common stock and common OP units, net | — |
| 59 |
| 484,499 |
| — |
| — |
| 2,001 |
| 486,559 |
|
Conversion of OP units | — |
| 1 |
| 3,240 |
| — |
| — |
| (3,008 | ) | 233 |
|
Conversion of Series A-4 preferred stock | — |
| 1 |
| 4,719 |
| — |
| — |
| — |
| 4,720 |
|
Redemption of Series A-4 preferred stock | — |
| — |
| (3,867 | ) | — |
| — |
| — |
| (3,867 | ) |
Redemption of Series A-4 OP units | — |
| — |
| (2,571 | ) | — |
| — |
| — |
| (2,571 | ) |
Share-based compensation - amortization and forfeitures | — |
| — |
| 9,670 |
| 223 |
| — |
| — |
| 9,893 |
|
Acquisition of noncontrolling interests | — |
| — |
| (6,201 | ) | — |
| — |
| 6,101 |
| (100 | ) |
Foreign currency exchange | — |
| — |
| — |
| — |
| 4,712 |
| 265 |
| 4,977 |
|
Net income | — |
| — |
| — |
| 67,298 |
| — |
| 3,991 |
| 71,289 |
|
Distributions | — |
| — |
| — |
| (161,334 | ) | — |
| (8,457 | ) | (169,791 | ) |
Balance at September 30, 2017 | $ | 34 |
| $ | 793 |
| $ | 3,810,930 |
| $ | (1,117,228 | ) | $ | 1,531 |
| $ | 67,509 |
| $ | 2,763,569 |
|
See accompanying Notes to Consolidated Financial Statements.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE INCOME
(Unaudited - dollars in thousands)In millions) (Unaudited) |
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
OPERATING ACTIVITIES: | | | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 223,348 |
| | $ | 190,279 |
|
INVESTING ACTIVITIES: | | | |
Investment in properties | (203,233 | ) | | (159,923 | ) |
Acquisitions of properties, net of cash acquired | (70,328 | ) | | (1,473,368 | ) |
Proceeds from affiliate transactions | — |
| | 500 |
|
Proceeds from dispositions of assets and depreciated homes, net | 6,592 |
| | 3,755 |
|
Proceeds from disposition of properties | — |
| | 88,696 |
|
Issuance of notes and other receivables | (2,480 | ) | | (1,411 | ) |
Repayments of notes and other receivables | 1,764 |
| | 852 |
|
NET CASH USED FOR INVESTING ACTIVITIES | (267,685 | ) | | (1,540,899 | ) |
FINANCING ACTIVITIES: | | | |
Issuance and associated costs of common stock, OP units, and preferred OP units, net | 457,638 |
| | 748,959 |
|
Net proceeds from stock option exercise | — |
| | 149 |
|
Borrowings on lines of credit | 575,351 |
| | 474,738 |
|
Payments on lines of credit | (675,695 | ) | | (441,738 | ) |
Proceeds from issuance of other debt | 85,081 |
| | 900,781 |
|
Payments on other debt | (72,024 | ) | | (141,490 | ) |
Prepayment penalty on debt | (759 | ) | | — |
|
Redemption of Series A-4 preferred stock and OP units | (24,698 | ) | | — |
|
Distributions to stockholders, OP unit holders, and preferred OP unit holders | (165,937 | ) | | (141,018 | ) |
Payments for deferred financing costs | (5,589 | ) | | (24,911 | ) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 173,368 |
| | 1,375,470 |
|
Effect of exchange rate changes on cash and cash equivalents | 253 |
| | (107 | ) |
Net change in cash and cash equivalents | 129,284 |
| | 24,743 |
|
Cash and cash equivalents, beginning of period | 8,164 |
| | 45,086 |
|
Cash and cash equivalents, end of period | $ | 137,448 |
| | $ | 69,829 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Net Income | $ | 177.0 | | | $ | 250.1 | | | $ | 259.8 | | | $ | 398.9 | |
Foreign currency translation loss adjustment | (84.2) | | | (3.5) | | | (151.2) | | | (1.5) | |
| | | | | | | |
Cash Flow Hedges: | | | | | | | |
Change in unrealized gain on interest rate derivatives | 40.7 | | | — | | | 75.7 | | | — | |
Less: interest rate derivative (gain) / loss reclassified to earnings | 0.2 | | | — | | | (0.6) | | | — | |
Net unrealized gain on interest rate derivatives | 40.9 | | | — | | | 75.1 | | | — | |
Total Comprehensive Income | 133.7 | | | 246.6 | | | 183.7 | | | 397.4 | |
Less: Comprehensive income attributable to noncontrolling interests | (10.2) | | | (15.2) | | | (10.8) | | | (22.5) | |
Comprehensive Income attributable to SUI | $ | 123.5 | | | $ | 231.4 | | | $ | 172.9 | | | $ | 374.9 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
SUPPLEMENTAL INFORMATION: | | | |
Cash paid for interest (net of capitalized interest of $1,981 and $378 respectively) | $ | 92,362 |
| | $ | 91,346 |
|
Cash paid for interest on mandatorily redeemable debt | $ | 2,361 |
| | $ | 2,363 |
|
Cash (refunds) paid for income taxes | $ | (53 | ) | | $ | 612 |
|
Noncash investing and financing activities: | | | |
Reduction in secured borrowing balance | $ | 17,674 |
| | $ | 14,718 |
|
Change in distributions declared and outstanding | $ | 4,527 |
| | $ | 9,527 |
|
Conversion of common and preferred OP units | $ | 3,240 |
| | $ | 2,033 |
|
Conversion of Series A-4 preferred stock | $ | 4,720 |
| | $ | 11,503 |
|
Noncash investing and financing activities at the date of acquisition: | | | |
Acquisitions - Common stock and OP units issued | $ | 28,410 |
| | $ | 225,000 |
|
Acquisitions - debt assumed | $ | 4,592 |
| | $ | — |
|
Acquisitions - receivable due from seller | $ | 5,000 |
| | $ | — |
|
Acquisitions - contingent consideration liability | $ | — |
| | $ | 9,830 |
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF EQUITY
(In millions) (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Shareholders' Equity | | |
| Temporary Equity | | | | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Income / (loss) | Noncontrolling Interests | Total Shareholders' Equity | | Total Equity |
Balance at December 31, 2021 | $ | 288.9 | | | | | $ | 1.2 | | $ | 8,175.6 | | $ | (1,556.0) | | $ | 3.1 | | $ | 106.7 | | $ | 6,730.6 | | | $ | 7,019.5 | |
Issuance of common stock and common OP units, net | — | | | | | — | | (0.2) | | — | | — | | 2.8 | | 2.6 | | | 2.6 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (16.4) | | — | | — | | — | | (16.4) | | | (16.4) | |
Conversion of OP units | — | | | | | — | | 0.7 | | — | | — | | (0.7) | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 9.7 | | 0.1 | | — | | — | | 9.8 | | | 9.8 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Other comprehensive income | — | | | | | — | | — | | — | | 22.8 | | 1.1 | | 23.9 | | | 23.9 | |
Net income / (loss) | (3.1) | | | | | — | | — | | 3.7 | | — | | 0.9 | | 4.6 | | | 1.5 | |
Distributions | (2.1) | | | | | — | | — | | (102.3) | | — | | (3.1) | | (105.4) | | | (107.5) | |
OP Units accretion | 0.2 | | | | | — | | — | | (0.1) | | — | | — | | (0.1) | | | 0.1 | |
Balance at March 31, 2022 | $ | 283.9 | | | | | $ | 1.2 | | $ | 8,169.4 | | $ | (1,654.6) | | $ | 25.9 | | $ | 107.7 | | $ | 6,649.6 | | | $ | 6,933.5 | |
Issuance of common stock and common OP units, net | — | | | | | — | | 968.6 | | — | | — | | 2.7 | | 971.3 | | | 971.3 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (1.2) | | — | | — | | — | | (1.2) | | | (1.2) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Third party equity interest in consolidated entities | 9.7 | | | | | — | | — | | — | | — | | — | | — | | | 9.7 | |
| | | | | | | | | | | | |
Other redeemable noncontrolling interests | 0.1 | | | | | — | | — | | (0.1) | | — | | — | | (0.1) | | | — | |
Acquisition of third parties equity interest in consolidated entities | — | | | | | — | | 13.2 | | — | | — | | (16.5) | | (3.3) | | | (3.3) | |
| | | | | | | | | | | | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 9.1 | | 0.1 | | — | | — | | 9.2 | | | 9.2 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Other comprehensive loss | — | | | | | — | | — | | — | | (54.2) | | (2.5) | | (56.7) | | | (56.7) | |
Net income | 1.5 | | | | | — | | — | | 77.1 | | — | | 2.7 | | 79.8 | | | 81.3 | |
Distributions | (2.0) | | | | | — | | — | | (107.0) | | — | | (3.2) | | (110.2) | | | (112.2) | |
OP Units accretion | 0.1 | | | | | — | | — | | (0.2) | | — | | — | | (0.2) | | | (0.1) | |
Balance at June 30, 2022 | $ | 293.3 | | | | | $ | 1.2 | | $ | 9,159.1 | | $ | (1,684.7) | | $ | (28.3) | | $ | 90.9 | | $ | 7,538.2 | | | $ | 7,831.5 | |
Issuance of common stock and common OP units, net | — | | | | | — | | 275.3 | | — | | — | | — | | 275.3 | | | 275.3 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (0.8) | | — | | — | | — | | (0.8) | | | (0.8) | |
Conversion of OP units | (92.6) | | | | | — | | 95.0 | | — | | — | | (2.4) | | 92.6 | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Acquisition of third party equity interest in consolidated entities | — | | | | | — | | (1.5) | | — | | — | | (4.1) | | (5.6) | | | (5.6) | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 9.3 | | — | | — | | — | | 9.3 | | | 9.3 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Other comprehensive loss | — | | | | | — | | — | | — | | (41.6) | | (1.7) | | (43.3) | | | (43.3) | |
Net income | 7.1 | | | | | — | | — | | 165.1 | | — | | 4.8 | | 169.9 | | | 177.0 | |
Distributions | (1.2) | | | | | — | | — | | (109.0) | | — | | (3.1) | | (112.1) | | | (113.3) | |
OP Units accretion | 0.2 | | | | | — | | — | | (0.3) | | — | | — | | (0.3) | | | (0.1) | |
Balance at September 30, 2022 | $ | 206.8 | | | | | $ | 1.2 | | $ | 9,536.4 | | $ | (1,628.9) | | $ | (69.9) | | $ | 84.4 | | $ | 7,923.2 | | | $ | 8,130.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Shareholders' Equity | | |
| Temporary Equity | | | | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interests | Total Shareholders' Equity | | Total Equity |
Balance at December 31, 2020 | $ | 264.4 | | | | | $ | 1.1 | | $ | 7,087.6 | | $ | (1,566.6) | | $ | 3.2 | | $ | 102.0 | | $ | 5,627.3 | | | $ | 5,891.7 | |
Issuance of common stock and common OP units, net | — | | | | | — | | 537.1 | | — | | — | | — | | 537.1 | | | 537.1 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (14.8) | | — | | — | | — | | (14.8) | | | (14.8) | |
Conversion of OP units | — | | | | | — | | 1.2 | | — | | — | | (1.2) | | — | | | — | |
| | | | | | | | | | | | |
Third party equity interest in consolidated entities | — | | | | | — | | — | | — | | — | | (0.1) | | (0.1) | | | (0.1) | |
Other redeemable noncontrolling interests | 0.1 | | | | | — | | — | | (0.1) | | — | | — | | (0.1) | | | — | |
| | | | | | | | | | | | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 7.0 | | — | | — | | — | | 7.0 | | | 7.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
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| | | | | | | | | | | | |
Other comprehensive income | — | | | | | — | | — | | — | | 0.8 | | — | | 0.8 | | | 0.8 | |
Net income / (loss) | (1.6) | | | | | — | | — | | 27.7 | | — | | 1.9 | | 29.6 | | | 28.0 | |
Distributions | (1.8) | | | | | — | | — | | (92.8) | | — | | (3.2) | | (96.0) | | | (97.8) | |
Other | — | | | | | — | | — | | 0.8 | | — | | — | | 0.8 | | | 0.8 | |
Balance at March 31, 2021 | $ | 261.1 | | | | | $ | 1.1 | | $ | 7,618.1 | | $ | (1,631.0) | | $ | 4.0 | | $ | 99.4 | | $ | 6,091.6 | | | $ | 6,352.7 | |
Issuance of common stock and common OP units, net | — | | | | | — | | 539.2 | | — | | — | | — | | 539.2 | | | 539.2 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (1.6) | | — | | — | | — | | (1.6) | | | (1.6) | |
Conversion of OP units | — | | | | | — | | 0.3 | | — | | — | | (0.3) | | — | | | — | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Other redeemable noncontrolling interests | 0.1 | | | | | — | | — | | (0.1) | | — | | — | | (0.1) | | | — | |
| | | | | | | | | | | | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 7.1 | | 0.1 | | — | | — | | 7.2 | | | 7.2 | |
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
Issuance of Series J preferred OP units | 24.0 | | | | | — | | — | | — | | — | | — | | — | | | 24.0 | |
Foreign currency translation | — | | | | | — | | — | | — | | 1.2 | | — | | 1.2 | | | 1.2 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income | 2.4 | | | | | — | | — | | 113.8 | | — | | 4.6 | | 118.4 | | | 120.8 | |
Distributions | (2.0) | | | | | — | | — | | (96.2) | | — | | (3.1) | | (99.3) | | | (101.3) | |
Other | — | | | | | — | | — | | (0.8) | | — | | — | | (0.8) | | | (0.8) | |
Balance at June 30, 2021 | $ | 285.6 | | | | | $ | 1.1 | | $ | 8,163.1 | | $ | (1,614.2) | | $ | 5.2 | | $ | 100.6 | | $ | 6,655.8 | | | $ | 6,941.4 | |
Issuance of common stock and common OP units, net | — | | | | | — | | (0.2) | | — | | — | | — | | (0.2) | | | (0.2) | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | — | | | | | — | | (0.6) | | — | | — | | — | | (0.6) | | | (0.6) | |
Conversion of OP units | — | | | | | — | | 1.3 | | — | | — | | (1.3) | | — | | | — | |
Equity interest in consolidated entities | 1.7 | | | | | — | | — | | — | | — | | 0.6 | | 0.6 | | | 2.3 | |
Other redeemable non-controlling interests | 0.1 | | | | | — | | — | | (0.1) | | — | | — | | (0.1) | | | — | |
Share-based compensation - amortization and forfeitures | — | | | | | — | | 6.7 | | 0.1 | | — | | — | | 6.8 | | | 6.8 | |
Foreign currency translation | — | | | | | — | | — | | — | | (3.4) | | (0.1) | | (3.5) | | | (3.5) | |
Net income | 7.0 | | | | | — | | — | | 234.9 | | — | | 8.2 | | 243.1 | | | 250.1 | |
Distributions | (2.0) | | | | | — | | — | | (96.3) | | — | | (3.2) | | (99.5) | | | (101.5) | |
Balance at September 30, 2021 | $ | 292.4 | | | | | $ | 1.1 | | $ | 8,170.3 | | $ | (1,475.6) | | $ | 1.8 | | $ | 104.8 | | $ | 6,802.4 | | | $ | 7,094.8 | |
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
Operating Activities | | | |
Net Cash Provided By Operating Activities | $ | 654.5 | | | $ | 656.0 | |
Investing Activities | | | |
Investment in properties | (656.6) | | | (476.5) | |
Acquisitions, net of cash acquired | (2,140.5) | | | (1,099.8) | |
Proceeds from deposit on acquisition | 0.8 | | | — | |
| | | |
Proceeds from disposition of assets and depreciated homes, net | 80.2 | | | 80.8 | |
Proceeds related to disposition of properties | 43.5 | | | 162.1 | |
Issuance of notes and other receivables | (46.3) | | | (17.1) | |
| | | |
Repayments of notes and other receivables | 3.8 | | | 4.1 | |
Investments in nonconsolidated affiliates | (37.9) | | | (27.4) | |
Distributions of capital from nonconsolidated affiliates | 12.2 | | | 10.7 | |
| | | |
Net Cash Used For Investing Activities | (2,740.8) | | | (1,363.1) | |
Financing Activities | | | |
Issuance and costs of common stock, OP units and preferred OP units, net | 1,209.8 | | | 1,076.0 | |
Common stock withheld to satisfy income tax obligations related to vesting of restricted stock awards | (18.4) | | | (17.0) | |
| | | |
| | | |
Borrowings on lines of credit | 3,093.5 | | | 2,405.3 | |
Payments on lines of credit | (2,051.7) | | | (3,014.3) | |
Proceeds from issuance of other debt | 600.9 | | | 599.0 | |
Contributions from noncontrolling interest | 9.8 | | | 1.6 | |
Payments on other debt | (390.2) | | | (49.9) | |
Payments on financial liability | (5.0) | | | — | |
| | | |
Fees paid in connection with extinguishment of debt | (4.8) | | | (0.2) | |
| | | |
| | | |
Distributions | (320.7) | | | (289.1) | |
Payments for deferred financing costs | (20.4) | | | (11.0) | |
Proceeds from gain on derivative settlement | 35.3 | | | — | |
Distributions for redemption of noncontrolling interests | (7.3) | | | — | |
| | | |
Net Cash Provided By Financing Activities | 2,130.8 | | | 700.4 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (10.7) | | | (0.3) | |
Net change in cash, cash equivalents and restricted cash | 33.8 | | | (7.0) | |
Cash, cash equivalents and restricted cash, beginning of period | 78.2 | | | 92.6 | |
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 112.0 | | | $ | 85.6 | |
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
Supplemental Information | | | |
Cash paid for interest (net of capitalized interest of $4.1 and $3.5, respectively) | $ | 151.9 | | | $ | 113.3 | |
Cash paid for interest on mandatorily redeemable debt | $ | 3.1 | | | $ | 3.1 | |
Cash paid for income taxes | $ | 4.1 | | | $ | 0.9 | |
Noncash investing and financing activities | | | |
| | | |
| | | |
Change in distributions declared and outstanding | $ | 12.7 | | | $ | 11.4 | |
Conversion of common and preferred OP units | $ | 95.7 | | | $ | 2.8 | |
| | | |
Asset held for sale | $ | — | | | $ | 0.7 | |
| | | |
Common OP units issued for redemption of noncontrolling interests | $ | 1.8 | | | $ | — | |
Contingent consideration liability related to prior acquisitions | $ | — | | | $ | 15.3 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Noncash investing and financing activities at the date of acquisition | | | |
Acquisitions - Common stock and OP units issued | $ | 37.7 | | | $ | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Acquisitions - Series J preferred interest | $ | — | | | $ | 24.0 | |
| | | |
| | | |
| | | |
| | | |
| | | |
Acquisitions - Finance lease liabilities | $ | 13.3 | | | $ | — | |
Acquisitions - Financial liabilities | $ | 359.8 | | | $ | — | |
Acquisitions - Deferred tax liabilities | $ | 313.9 | | | $ | — | |
See accompanying Notes to Consolidated Financial Statements.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership (the “Operating Partnership”"Operating Partnership") and, Sun Home Services, Inc. (“SHS”("SHS"), Safe Harbor Marinas, LLC ("Safe Harbor") and Tiger Topco 1 Limited (together with its subsidiaries, "Park Holidays") are referred to herein as the “Company,” “us,” “we,”"Company," "SUI," "us," "we," and “our.”"our."
We follow accounting standards set by the Financial Accounting Standards Board (“FASB”("FASB"). FASB setsestablishes accounting principles generally accepted accounting principles (“GAAP”in the United States of America ("GAAP"), which we follow to ensure that we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (“ASC”("ASC").
These unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”("SEC") for interim financial information and in accordance with GAAP. Pursuant to the SEC rules and regulations weWe present interim disclosures and certain information and footnote disclosures as required.required by SEC rules and regulations. Accordingly, the unaudited Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited Consolidated Financial Statements reflect, in the opinion of management, all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of the interim financial statements. All intercompany transactions have been eliminated in consolidation.
Certain reclassificationsprior period amounts have been maderevised to conform with current presentation, with no effect on net income. These include reclassification of certain revenues and expenses between Real property and Service, retail, dining and entertainment within our Marina Portfolio. There was no impact to prior period financial statements in order to conform to current period presentation.net income, shareholders equity or cash flows for any of the reclassifications. Further, the reclassification had no impact on previously reported total marina net operating income ("NOI").
The results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 20162021 as filed with the SEC on February 23, 2017 (the “201622, 2022 (our "2021 Annual Report”Report"). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our 20162021 Annual Report.
Our three reportable segments are: (i) Manufactured home ("MH") communities, (ii) Recreational vehicle ("RV") communities and (iii) Marinas. 2. Real Estate Acquisitions
2017 Acquisitions
In September 2017, we acquired three age-restricted manufactured home (“MH”) communities: Lazy J Ranch, with 220 sites in Arcata, California; Ocean West, with 130 sites in McKinleyville, California; and Caliente Sands, with 118 sites in Cathedral City, California.
In July 2017, we acquired Pismo Dunes RV Resort (“Pismo Dunes”), an age-restricted recreational vehicle (“RV”) community with 331 sites located in Pismo Beach, California.
In June 2017, we acquired Arbor Woods (“Arbor Woods”), a MH community with 458 sites located in Superior Township, Michigan.
In May 2017, we acquired Sunset Lakes RV Resort (“Sunset Lakes”), a RV resort with 498 sites located in Hillsdale, Illinois.
In March 2017, we acquired Far Horizons 49er Village RV Resort Inc. (“49er Village”), a RV resort with 328 sites located in Plymouth, California.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2. Revenue
The following table disaggregates our revenue by major source and segment (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2022 | | September 30, 2021 |
| MH | | RV | | Marina | | Consolidated | | MH | | RV | | Marina | | Consolidated |
Revenues | | | | | | | | | | | | | | | |
Real property | $ | 260.3 | | | $ | 209.6 | | | $ | 115.8 | | | $ | 585.7 | | | $ | 203.6 | | | $ | 185.8 | | | $ | 88.7 | | | $ | 478.1 | |
Home sales | 140.9 | | | 9.8 | | | — | | | 150.7 | | | 70.3 | | | 10.8 | | | — | | | 81.1 | |
Service, retail, dining and entertainment | 17.9 | | | 44.0 | | | 112.3 | | | 174.2 | | | 1.7 | | | 37.3 | | | 74.7 | | | 113.7 | |
Interest | 10.4 | | | 0.8 | | | — | | | 11.2 | | | 2.2 | | | 0.4 | | | — | | | 2.6 | |
Brokerage commissions and other, net | 6.6 | | | 4.2 | | | — | | | 10.8 | | | 3.6 | | | 4.9 | | | 0.3 | | | 8.8 | |
Total Revenues | $ | 436.1 | | | $ | 268.4 | | | $ | 228.1 | | | $ | 932.6 | | | $ | 281.4 | | | $ | 239.2 | | | $ | 163.7 | | | $ | 684.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
| MH | | RV | | Marina | | Consolidated | | MH | | RV | | Marina | | Consolidated |
Revenues | | | | | | | | | | | | | | | |
Real property | $ | 711.4 | | | $ | 461.2 | | | $ | 289.0 | | | $ | 1,461.6 | | | $ | 602.4 | | | $ | 398.8 | | | $ | 212.7 | | | $ | 1,213.9 | |
Home sales | 328.5 | | | 29.6 | | | — | | | 358.1 | | | 185.5 | | | 29.6 | | | — | | | 215.1 | |
Service, retail, dining and entertainment | 33.5 | | | 78.7 | | | 310.8 | | | 423.0 | | | 5.4 | | | 64.1 | | | 202.0 | | | 271.5 | |
Interest | 23.3 | | | 2.0 | | | — | | | 25.3 | | | 6.3 | | | 1.7 | | | — | | | 8.0 | |
Brokerage commissions and other, net | 15.6 | | | 10.7 | | | 1.1 | | | 27.4 | | | 9.8 | | | 11.0 | | | 0.9 | | | 21.7 | |
Total Revenues | $ | 1,112.3 | | | $ | 582.2 | | | $ | 600.9 | | | $ | 2,295.4 | | | $ | 809.4 | | | $ | 505.2 | | | $ | 415.6 | | | $ | 1,730.2 | |
Our revenue consists of real property revenue at our MH, RV and Marina properties, revenue from Home sales, Service, retail, dining and entertainment revenue, Interest income, and Brokerage commissions and other revenue.
The majority of our revenue is derived from site and home leases, and wet slip and dry storage space leases that are accounted for pursuant to ASC 842, "Leases." We account for all revenue from contracts with customers following ASC 606, "Revenue from Contracts with Customers," except for those that are within the scope of other topics in the FASB ASC. For additional information, refer to Note 1, "Significant Accounting Policies," in our 2021 Annual Report.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
3. Real Estate Acquisitions and Dispositions
2022 Acquisitions and Dispositions
During the nine months ended September 30, 2022, we acquired the following MH communities and marinas:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Name | | Type | | Sites, Wet Slips and Dry Storage Spaces | | Development Sites | | State, Province or Country | | Month Acquired |
Harrison Yacht Yard(1) | | Marina: asset acquisition | | 21 | | | — | | | MD | | January |
Outer Banks | | Marina: asset acquisition | | 196 | | | — | | | NC | | January |
Jarrett Bay Boatworks | | Marina: business combination | | 12 | | | — | | | NC | | February |
Tower Marine | | Marina: asset acquisition | | 446 | | | — | | | MI | | March |
Sandy Bay | | MH: asset acquisition | | 730 | | | 456 | | | UK | | March |
Park Holidays(2) | | MH: business combination | | 15,906 | | | 1,140 | | | UK | | April |
Christies Parks(1) | | MH: asset acquisition | | 249 | | | — | | | UK | | April |
Bluewater | | Marina: asset acquisition | | 200 | | | — | | | Multiple | | April |
Bluewater Yacht Sales(1) | | Marina: business combination | | — | | | — | | | Multiple | | April |
Bodmin Holiday Park | | MH: asset acquisition | | 69 | | | — | | | UK | | April |
Kittery Point | | Marina: asset acquisition | | 62 | | | — | | | ME | | May |
Spanish Trails MHC | | MH: asset acquisition | | 195 | | | 6 | | | AZ | | June |
Pine Acre Trails | | MH: asset acquisition | | 251 | | | 603 | | | TX | | June |
Bel Air Estates & Sunrise Estates(3) | | MH: asset acquisition | | 379 | | | — | | | CA | | June |
Park Leisure(4) | | MH: asset acquisition | | 2,914 | | | 391 | | | UK | | June |
Montauk Yacht Club | | Marina: business combination | | 232 | | | — | | | NY | | July |
Callaly Leisure(5) | | MH: asset acquisition | | 380 | | | 1,060 | | | UK | | September |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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| | | | | | | | | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Total | | 22,242 | | | 3,656 | | | | | |
(1) Combined with an existing property.
(2) Includes 40 owned and two managed properties.
(3) Includes two properties.
(4) Includes 11 properties.
(5) Includes one development property.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the amountsamount of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2017during the nine months ended September 30, 2022 (in thousands)millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At Acquisition Date | | Lazy J Ranch (1) | | Ocean West (1) | | Caliente Sands (1) | | Pismo Dunes (1) | | Arbor Woods (1) | | Sunset Lakes (1) | | 49er Village (1) | | Total |
Investment in property | | $ | 14,300 |
| | $ | 9,673 |
| | $ | 8,850 |
| | $ | 21,260 |
| | $ | 15,725 |
| | $ | 7,835 |
| | $ | 12,890 |
| | $ | 90,533 |
|
Notes receivable | | — |
| | — |
| | — |
| | — |
| | 23 |
| | — |
| | — |
| | 23 |
|
Inventory of manufactured homes | | — |
| | — |
| | 21 |
| | — |
| | 465 |
| | — |
| | — |
| | 486 |
|
In-place leases | | — |
| | — |
| | — |
| | 660 |
| | 730 |
| | 210 |
| | 110 |
| | 1,710 |
|
Total identifiable assets acquired net of liabilities assumed | | $ | 14,300 |
|
| $ | 9,673 |
|
| $ | 8,871 |
|
| $ | 21,920 |
| | $ | 16,943 |
| | $ | 8,045 |
| | $ | 13,000 |
| | $ | 92,752 |
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Consideration | | | | | | | | | | | | | | | | |
Cash | | $ | 14,300 |
| | $ | 5,081 |
| | $ | 8,871 |
| | $ | — |
| | $ | 14,943 |
| | $ | 8,045 |
| | $ | 13,000 |
| | 64,240 |
|
Equity | | — |
| | — |
| | — |
| | 26,410 |
| | 2,000 |
| | — |
| | — |
| | 28,410 |
|
Liabilities assumed | | — |
| | 4,592 |
| | — |
| | 510 |
| | — |
| | — |
| | — |
| | 5,102 |
|
Receivable due from seller | | — |
| | — |
| | — |
| | (5,000 | ) | | — |
| | — |
| | — |
| | (5,000 | ) |
Total consideration | | $ | 14,300 |
| | $ | 9,673 |
| | $ | 8,871 |
| | $ | 21,920 |
| | $ | 16,943 |
| | $ | 8,045 |
| | $ | 13,000 |
| | $ | 92,752 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | In-place leases, goodwill and other intangible assets(1) | | Other assets / (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | | | Temporary and permanent equity(2) | | Total consideration |
Asset Acquisition | | | | | | | | | | | | | | | | | |
Harrison Yacht Yard(3) | $ | 5.8 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5.8 | | | $ | 5.8 | | | | | $ | — | | | $ | 5.8 | |
Outer Banks | 5.2 | | | — | | | — | | | (0.4) | | | 4.8 | | | 4.8 | | | | | — | | | 4.8 | |
Tower Marine | 20.2 | | | — | | | 0.2 | | | (2.1) | | | 18.3 | | | 18.3 | | | | | — | | | 18.3 | |
Sandy Bay | 248.1 | | | 9.4 | | | 1.9 | | | (68.3) | | | 191.1 | | | 191.1 | | | | | — | | | 191.1 | |
Christies Parks(3) | 10.1 | | | — | | | — | | | 1.7 | | | 11.8 | | | 11.8 | | | | | — | | | 11.8 | |
Bluewater | 25.3 | | | 1.3 | | | 0.1 | | | 1.3 | | | 28.0 | | | 28.0 | | | | | — | | | 28.0 | |
Bodmin Holiday Park | 12.9 | | | — | | | — | | | — | | | 12.9 | | | 12.9 | | | | | — | | | 12.9 | |
Kittery Point | 8.0 | | | 0.1 | | | — | | | (0.1) | | | 8.0 | | | 7.0 | | | | | 1.0 | | | 8.0 | |
Spanish Trails MHC | 20.6 | | | 1.8 | | | — | | | — | | | 22.4 | | | 22.4 | | | | | — | | | 22.4 | |
Pine Acre Trails | 29.7 | | | — | | | — | | | — | | | 29.7 | | | 29.7 | | | | | — | | | 29.7 | |
Bel Air Estates & Sunrise Estates | 39.3 | | | — | | | 0.7 | | | — | | | 40.0 | | | 40.0 | | | | | — | | | 40.0 | |
Park Leisure | 347.1 | | | 0.7 | | | 15.1 | | | (137.1) | | | 225.8 | | | 225.8 | | | | | — | | | 225.8 | |
Callaly Leisure(4) | 24.6 | | | — | | | — | | | — | | | 24.6 | | | 24.6 | | | | | — | | | 24.6 | |
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Business Combination | | | | | | | | | | | | | | | | |
Jarrett Bay Boatworks (5)(6) | 21.3 | | | 1.4 | | | 47.5 | | | 1.0 | | | 71.2 | | | 68.4 | | | | | 2.8 | | | 71.2 | |
Park Holidays(5)(7) | 1,254.8 | | | 29.5 | | | 574.5 | | | (625.0) | | | 1,233.8 | | | 1,199.9 | | | | | 33.9 | | | 1,233.8 | |
Montauk Yacht Club(5) | 163.6 | | | 0.3 | | | 26.3 | | | 0.3 | | | 190.5 | | | 190.5 | | | | | — | | | 190.5 | |
| | | | | | | | | | | | | | | | | |
Total | $ | 2,236.6 | | | $ | 44.5 | | | $ | 666.3 | | | $ | (828.7) | | | $ | 2,118.7 | | | $ | 2,081.0 | | | | | $ | 37.7 | | | $ | 2,118.7 | |
(1)Refer to Note 5, "Goodwill and Other Intangible Assets," for additional detail on goodwill and other intangible assets.
(2) Refer to Note 9, "Equity and Temporary Equity," for additional detail.
(3) Combined with an existing property.
(4) The above allocations are estimates pending purchase price allocations.
(5) The Purchase price allocation is preliminary as of September 30, 2022, subject to revision based on the final purchase price allocations to be finalized one year from the acquisition date.
(6) The balance includes the marina acquired in February and the yacht sales business acquired in April of which $0.1 million was recorded in Investment property, $17.6 million in In-place leases, goodwill and other intangible assets, and $0.4 million in Other assets / (liabilities), net.
(7) Includes acquired intangible assets subject to amortization of $70.2 million with a weighted average amortization period of 14.6 years, consisting of trademarks and trade names, customer relationships, and other intangible assets.
As of September 30, 2022, we have incurred and capitalized $15.5 million of transaction costs, which have been allocated among various fixed asset categories for Lazy J Ranch, Ocean West, Caliente Sands, Pismo Dunes, Arbor Woods, Sunset Lakes, and 49er Villagepurchases that meet the asset acquisition criteria. As of September 30, 2022, we also incurred $23.9 million of business combination expenses, which are preliminary and mayexpensed for acquisitions deemed to be adjusted as final costs and valuations are determined.business combinations.
The total amount of total revenuesRevenues and netNet income included in the Consolidated Statements of Operations for the three and nine months ended September 30, 20172022 related to the acquisitionsbusiness combinations completed in 20172022 are set forth in the following table (in thousands)millions):
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2022 |
Total revenues | $ | 140.8 | | | $ | 245.0 | |
Net income | $ | 15.1 | | | $ | 20.6 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
|
| | | | | | | |
| Three Months Ended September 30, 2017 | | Nine Months Ended September 30, 2017 |
| (unaudited) | | (unaudited) |
Total revenues | $ | 3,178 |
| | $ | 4,493 |
|
Net income | $ | 935 |
| | $ | 1,418 |
|
The following unaudited pro forma financial information presents the results of our operations for the three and nine months ended September 30, 20172022 and 2016,2021, as if the properties acquiredcombined through business combinations in 20172022 had been acquired on January 1, 2016.2021. 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 acquisition 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 acquisition been consummated on January 1, 2021 (in millions, except for per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended (unaudited) | | Nine Months Ended (unaudited) |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Total revenues | | $ | 932.6 | | | $ | 869.3 | | | $ | 2,380.3 | | | $ | 2,057.9 | |
Net income attributable to SUI common shareholders | | $ | 162.6 | | | $ | 259.3 | | | $ | 226.8 | | | $ | 403.7 | |
Net income per share attributable to SUI common shareholders - basic | | $ | 1.32 | | | $ | 2.24 | | | $ | 1.89 | | | $ | 3.59 | |
Net income per share attributable to SUI common shareholders - diluted | | $ | 1.32 | | | $ | 2.23 | | | $ | 1.89 | | | $ | 3.58 | |
Development and Expansion Activities
During the three months ended September 30, 2022, we acquired three land parcels located in the United States for an aggregate purchase accounting.price of $18.9 million.
During the nine months ended September 30, 2022, we acquired four land parcels located in the United States for an aggregate purchase price of $23.9 million.
During the nine months ended September 30, 2022, we acquired two buildings and land parcels related to our marinas located in the United States for an aggregate purchase price of $13.9 million.
Dispositions
Management continually evaluates properties within the portfolio for potential disposition opportunities. When a given property no longer fits our desired growth profile, we seek to redeploy capital to properties and geographies fit to provide greater future returns. From time to time, strategic reductions to the portfolio are deemed necessary to reduce exposure to less desirable locations, and support long-term positioning of the Company.
During the three months ended September 30, 2022, we sold an RV community containing 514 sites located in California for $15.0 million. The disposition resulted in a loss on sale of $0.8 million, inclusive of selling costs. This property, together with a second property, was intended to be part of a combined sale as the properties originally qualified as held for sale in July 2022. However, the sale of the second property was not completed, and as such, the properties no longer qualified as held for sale as of September 30, 2022. Accordingly, the second property was classified as held for investment at September 30, 2022 on our Consolidated Balance Sheets.
During the three months ended March 31, 2022, we sold two MH communities and one community containing MH and RV sites, each located in Florida, with a total of 323 sites for $29.5 million. The gain from the sale of the properties was $13.3 million.
2021 Acquisitions and Dispositions
For the year ended December 31, 2021, we acquired the following MH and RV communities and marinas:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Name | | Type | | Sites, Wet Slips and Dry Storage Spaces | | Development Sites | | State, Province or Country | | Month Acquired |
Sun Outdoors Association Island | | RV: asset acquisition | | 294 | | | — | | | NY | | January |
Blue Water Beach Resort | | RV: asset acquisition | | 177 | | | — | | | UT | | February |
Tranquility MHC | | MH: asset acquisition | | 25 | | | — | | | FL | | February |
Islamorada and Angler House(1) | | Marina: asset acquisition | | 251 | | | — | | | FL | | February |
Prime Martha's Vineyard(1) | | Marina: asset acquisition | | 395 | | | — | | | MA | | March |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Name | | Type | | Sites, Wet Slips and Dry Storage Spaces | | Development Sites | | State, Province or Country | | Month Acquired |
Pleasant Beach Campground | | RV: asset acquisition | | 102 | | | — | | | ON, Canada | | March |
Sun Outdoors Cape Charles | | RV: asset acquisition | | 669 | | | — | | | VA | | March |
Beachwood Resort | | RV: asset acquisition | | 672 | | | — | | | WA | | March |
ThemeWorld RV Resort | | RV: asset acquisition | | 148 | | | — | | | FL | | April |
Sylvan Glen Estates | | MH: asset acquisition | | 476 | | | — | | | MI | | April |
Shelter Island Boatyard | | Marina: asset acquisition | | 52 | | | — | | | CA | | May |
Lauderdale Marine Center | | Marina: asset acquisition | | 206 | | | — | | | FL | | May |
Apponaug Harbor | | Marina: asset acquisition | | 348 | | | — | | | RI | | June |
Cabrillo Isle | | Marina: business combination | | 476 | | | — | | | CA | | June |
Marathon | | Marina: asset acquisition | | 135 | | | — | | | FL | | June |
Allen Harbor | | Marina: asset acquisition | | 176 | | | — | | | RI | | July |
Cisco Grove Campground & RV | | RV: asset acquisition | | 18 | | | 407 | | | CA | | July |
Four Leaf Portfolio(2) | | MH: asset acquisition | | 2,545 | | | 340 | | | MI / IN | | July |
Harborage Yacht Club | | Marina: asset acquisition | | 300 | | | — | | | FL | | July |
Zeman Portfolio(3) | | RV: asset acquisition | | 686 | | | — | | | IL / NJ | | July |
Southern Leisure RV Resort | | RV: asset acquisition | | 496 | | | — | | | FL | | August |
Sunroad Marina | | Marina: asset acquisition | | 617 | | | — | | | CA | | August |
Lazy Lakes RV Resort | | RV: asset acquisition | | 99 | | | — | | | FL | | August |
Puerto del Rey | | Marina: asset acquisition | | 1,746 | | | — | | | Puerto Rico | | September |
Stingray Point | | Marina: asset acquisition | | 222 | | | — | | | VA | | September |
Detroit River | | Marina: asset acquisition | | 440 | | | — | | | MI | | September |
Jetstream RV Resort at NASA | | RV: asset acquisition | | 202 | | | — | | | TX | | September |
Beaver Brook Campground | | RV: asset acquisition | | 204 | | | 150 | | | ME | | October |
Emerald Coast | | Marina: business combination | | 311 | | | — | | | FL | | November |
Tall Pines Harbor Campground | | RV: asset acquisition | | 241 | | | — | | | VA | | November |
Wells Beach Resort Campground | | RV: asset acquisition | | 231 | | | — | | | ME | | November |
Port Royal | | Marina: asset acquisition | | 167 | | | — | | | SC | | November |
Podickory Point | | Marina: asset acquisition | | 209 | | | — | | | MD | | December |
Sunroad Marina (restaurant) | | Marina: asset acquisition | | — | | | — | | | CA | | December |
Jellystone Park at Mammoth Cave | | RV: asset acquisition | | 315 | | | — | | | KY | | December |
South Bay | | Marina: asset acquisition | | 333 | | | — | | | CA | | December |
Wentworth by the Sea | | Marina: asset acquisition | | 155 | | | — | | | NH | | December |
Rocky Mountain RV Park | | RV: asset acquisition | | 75 | | | — | | | MT | | December |
Haas Lake RV Park Campground | | RV: asset acquisition | | 492 | | | — | | | MI | | December |
Pearwood RV Resort | | RV: asset acquisition | | 144 | | | — | | | TX | | December |
Holly Shores Camping Resort | | RV: asset acquisition | | 310 | | | — | | | NJ | | December |
Pheasant Ridge RV Park | | RV: asset acquisition | | 130 | | | — | | | OR | | December |
Coyote Ranch Resort | | RV: asset acquisition | | 165 | | | 165 | | | TX | | December |
Jellystone Park at Whispering Pines | | RV: asset acquisition | | 131 | | | — | | | TX | | December |
Hospitality Creek Campground | | RV: asset acquisition | | 230 | | | — | | | NJ | | December |
| | | | | | | | | | |
| | Total | | 15,816 | | | 1,062 | | | | | |
(1) Includes two marinas.
(2) Includes nine MH communities.
(3) Includes two RV Resorts.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the amounts of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | In-place leases, goodwill and other intangible assets(1) | | Other assets / (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | | | Temporary and permanent equity | | Total consideration |
Asset Acquisition | | | | | | | | | | | | | | | | | |
Sun Outdoors Association Island | $ | 15.0 | | | $ | — | | | $ | — | | | $ | (0.2) | | | $ | 14.8 | | | $ | 14.8 | | | | | $ | — | | | $ | 14.8 | |
Blue Water Beach Resort | 9.0 | | | — | | | — | | | (0.3) | | | 8.7 | | | 8.7 | | | | | — | | | 8.7 | |
Tranquility MHC | 1.2 | | | — | | | — | | | — | | | 1.2 | | | 1.2 | | | | | — | | | 1.2 | |
Islamorada and Angler House | 18.0 | | | — | | | 0.3 | | | (0.3) | | | 18.0 | | | 18.0 | | | | | — | | | 18.0 | |
Prime Martha's Vineyard | 22.3 | | | 0.2 | | | 0.1 | | | (0.7) | | | 21.9 | | | 21.9 | | | | | — | | | 21.9 | |
Pleasant Beach Campground | 1.5 | | | — | | | 0.1 | | | — | | | 1.6 | | | 1.6 | | | | | — | | | 1.6 | |
Sun Outdoors Cape Charles | 59.7 | | | — | | | 0.2 | | | (2.0) | | | 57.9 | | | 57.9 | | | | | — | | | 57.9 | |
Beachwood Resort | 14.0 | | | — | | | 0.2 | | | (7.6) | | | 6.6 | | | 6.6 | | | | | — | | | 6.6 | |
ThemeWorld RV Resort | 25.0 | | | — | | | — | | | (0.1) | | | 24.9 | | | 24.9 | | | | | — | | | 24.9 | |
Sylvan Glen Estates | 23.6 | | | — | | | 0.5 | | | (0.3) | | | 23.8 | | | (0.2) | | | | | 24.0 | | | 23.8 | |
Shelter Island Boatyard | 9.6 | | | 0.1 | | | 0.4 | | | (0.1) | | | 10.0 | | | 10.0 | | | | | — | | | 10.0 | |
Lauderdale Marine Center | 336.9 | | | — | | | 3.3 | | | 1.0 | | | 341.2 | | | 341.2 | | | | | — | | | 341.2 | |
Apponaug Harbor | 6.5 | | | — | | | 0.1 | | | (0.7) | | | 5.9 | | | 5.9 | | | | | — | | | 5.9 | |
Marathon | 19.1 | | | — | | | 0.3 | | | (0.2) | | | 19.2 | | | 19.2 | | | | | — | | | 19.2 | |
Allen Harbor | 4.0 | | | — | | | — | | | (0.1) | | | 3.9 | | | 3.9 | | | | | — | | | 3.9 | |
Cisco Grove Campground & RV | 6.6 | | | — | | | — | | | — | | | 6.6 | | | 6.6 | | | | | — | | | 6.6 | |
Four Leaf Portfolio | 210.7 | | | 0.3 | | | 4.0 | | | (0.5) | | | 214.5 | | | 214.5 | | | | | — | | | 214.5 | |
Harborage Yacht Club | 17.3 | | | 0.1 | | | 4.7 | | | (0.5) | | | 21.6 | | | 21.6 | | | | | — | | | 21.6 | |
Zeman Portfolio | 14.2 | | | — | | | 0.7 | | | (0.5) | | | 14.4 | | | 14.4 | | | | | — | | | 14.4 | |
Southern Leisure RV Resort | 17.4 | | | — | | | 0.3 | | | (0.3) | | | 17.4 | | | 17.4 | | | | | — | | | 17.4 | |
Sunroad Marina(2) | 47.8 | | | — | | | 0.5 | | | 65.0 | | | 113.3 | | | 113.3 | | | | | — | | | 113.3 | |
Lazy Lakes RV Resort | 11.3 | | | — | | | — | | | (0.1) | | | 11.2 | | | 11.2 | | | | | — | | | 11.2 | |
Puerto del Rey | 94.5 | | | 0.5 | | | 1.0 | | | (4.1) | | | 91.9 | | | 91.9 | | | | | — | | | 91.9 | |
Stingray Point | 2.9 | | | — | | | — | | | (0.3) | | | 2.6 | | | 2.6 | | | | | — | | | 2.6 | |
Detroit River | 8.7 | | | — | | | 0.2 | | | (0.6) | | | 8.3 | | | 8.3 | | | | | — | | | 8.3 | |
Jetstream RV Resort at NASA | 17.0 | | | — | | | 0.5 | | | (0.2) | | | 17.3 | | | 17.3 | | | | | — | | | 17.3 | |
Beaver Brook Campground | 4.4 | | | — | | | 0.1 | | | — | | | 4.5 | | | 4.5 | | | | | — | | | 4.5 | |
Tall Pines Harbor Campground | 10.5 | | | — | | | — | | | — | | | 10.5 | | | 10.5 | | | | | — | | | 10.5 | |
Wells Beach Resort Campground | 12.2 | | | — | | | — | | | — | | | 12.2 | | | 12.2 | | | | | — | | | 12.2 | |
Port Royal | 20.5 | | | — | | | 0.1 | | | (0.3) | | | 20.3 | | | 20.3 | | | | | — | | | 20.3 | |
Podickory Point | 3.3 | | | — | | | — | | | (0.2) | | | 3.1 | | | 3.1 | | | | | — | | | 3.1 | |
Jellystone Park at Mammoth Cave | 32.5 | | | — | | | — | | | (0.6) | | | 31.9 | | | 31.9 | | | | | — | | | 31.9 | |
South Bay | 14.0 | | | — | | | 0.2 | | | (2.5) | | | 11.7 | | | 11.7 | | | | | — | | | 11.7 | |
Wentworth by the Sea | 14.1 | | | 0.1 | | | 0.1 | | | (1.1) | | | 13.2 | | | 13.2 | | | | | — | | | 13.2 | |
Rocky Mountain RV Park | 12.5 | | | — | | | — | | | — | | | 12.5 | | | 12.5 | | | | | — | | | 12.5 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | In-place leases, goodwill and other intangible assets(1) | | Other assets / (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | | | Temporary and permanent equity | | Total consideration |
Haas Lake RV Park Campground | 20.1 | | | — | | | — | | | — | | | 20.1 | | | 16.5 | | | | | 3.6 | | | 20.1 | |
Pearwood RV Resort | 10.2 | | | — | | | — | | | — | | | 10.2 | | | 10.2 | | | | | — | | | 10.2 | |
Holly Shores Camping Resort(3) | 27.0 | | | — | | | 0.5 | | | (0.5) | | | 27.0 | | | 27.0 | | | | | — | | | 27.0 | |
Pheasant Ridge RV Park | 19.0 | | | — | | | — | | | — | | | 19.0 | | | 19.0 | | | | | — | | | 19.0 | |
Coyote Ranch Resort | 12.6 | | | — | | | — | | | (0.2) | | | 12.4 | | | 12.4 | | | | | — | | | 12.4 | |
Jellystone Park at Whispering Pines | 13.8 | | | — | | | — | | | (0.2) | | | 13.6 | | | 13.6 | | | | | — | | | 13.6 | |
Hospitality Creek Campground(3) | 15.0 | | | — | | | 0.6 | | | (0.6) | | | 15.0 | | | 15.0 | | | | | — | | | 15.0 | |
Business Combination | | | | | | | | | | | | | | | | |
Cabrillo Isle | 37.6 | | | — | | | 10.1 | | | (0.7) | | | 47.0 | | | 47.0 | | | | | — | | | 47.0 | |
Emerald Coast | 9.0 | | | 2.7 | | | 41.9 | | | (0.6) | | | 53.0 | | | 53.0 | | | | | — | | | 53.0 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 1,302.1 | | | $ | 4.0 | | | $ | 71.0 | | | $ | 38.8 | | | $ | 1,415.9 | | | $ | 1,388.3 | | | | | $ | 27.6 | | | $ | 1,415.9 | |
(1) Refer to Note 5, "Goodwill and Other Intangible Assets," for additional detail on goodwill and other intangible assets.
(2) The balance includes the marina acquired in August and the restaurant acquired in December of which $9.2 million was recorded in Investment property and $21.0 million in Other assets / (liabilities), net.
(3) The allocation was estimated as of December 2021 and was adjusted as of March 2022, based on final purchase price allocation.
As of December 31, 2021, we incurred $18.0 million of transaction costs, which were capitalized and allocated among the various fixed asset categories for purchases that meet the asset acquisition criteria. As of December 31, 2021, we also incurred $1.4 million of business combination expenses, which were expensed for acquisitions deemed to be business combinations.
Total revenues and Net income included in the Consolidated Statements of Operations for the year ended December 31, 2021 related to business combinations completed in 2021 are set forth in the following table (in millions):
| | | | | | | | |
| | Year Ended |
| | December 31, 2021 |
Total revenues | | $ | 6.4 | |
Net income | | $ | 0.5 | |
The following unaudited pro forma financial information presents the results of our operations for the years ended December 31, 2021 and 2020, as if the properties combined through business combinations in 2021 had been acquired on January 1, 2020. 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 acquisition 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, 20162020 (in thousands,millions, except per-sharefor per share data):
| | | | | | | | | | |
| | Year Ended (unaudited) |
| | December 31, 2021 | | |
Total revenues | | $ | 2,330.0 | | | |
Net income attributable to SUI common shareholders | | $ | 390.9 | | | |
Net income per share attributable to SUI common shareholders - basic | | $ | 3.47 | | | |
Net income per share attributable to SUI common shareholders - diluted | | $ | 3.40 | | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (unaudited) | | (unaudited) |
| 2017 | | 2016 | | 2017 | | 2016 |
Total revenues | $ | 272,214 |
| | $ | 255,580 |
| | $ | 746,299 |
| | $ | 623,840 |
|
Net income attributable to Sun Communities, Inc. common stockholders | $ | 25,337 |
| | $ | 20,660 |
| | $ | 59,176 |
| | $ | 21,246 |
|
Net income per share attributable to Sun Communities, Inc. common stockholders - basic | $ | 0.32 |
| | $ | 0.30 |
| | $ | 0.79 |
| | $ | 0.33 |
|
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted | $ | 0.32 |
| | $ | 0.30 |
| | $ | 0.78 |
| | $ | 0.33 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Land for Expansion / Development
Additionally, during
During the three monthsyear ended June 30, 2017,December 31, 2021, we acquired Carolina Pines RV Resort, an undeveloped parcel of11 land (“Carolina Pines” formerly known as Bear Lake), near Myrtle Beach, South Carolina,parcels, which are located across the United States and the United Kingdom for $5.9 million. This land parcel has been entitled and zoned to build a 775 site RV resort.
Transaction costs of $2.2 million and $4.2 million have been incurred for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, transactions costs were $7.0 million and $27.9 million, respectively. These costs are presented as “Transaction costs” in our Consolidated Statements of Operations.
2016 Acquisitions
In June 2016, we acquired all of the issued and outstanding shares of common stock of Carefree Communities Inc. (“Carefree”) through the Operating Partnership for an aggregatetotal purchase price of $1.68 billion. Carefree owned 103 MH$172.8 million.
Other Acquisitions
In December 2021, we acquired Leisure Systems, Inc., the franchisor of the Jellystone Park™ system, and RV communities, comprising over 27,000 sites.
Ataccounted for the closing, we issued 3,329,880 sharestransaction as a business combination. The following table summarizes the amounts of common stockassets acquired, net of liabilities assumed at $67.57 per share (or $225.0 million in common stock) to the selleracquisition date and the Operating Partnershipconsideration paid the balance of the purchase price in cash. Approximately $1.0 billion of the cash payment was applied simultaneously to repay debt on the properties owned by Carefree. The Operating Partnership funded the cash portion of the purchase price in part with proceeds from debt financings as described in Note 7, “Debt and Lines of Credit” and net proceeds of $385.4 million from an underwritten public offering of 6,037,500 shares of common stock at a price of $66.50 per share in March 2016.
We have allocated the “investment in property” balances for Carefree to the respective balance sheet line items upon completion of a purchase price allocation in accordance with the FASB ASCTopic 805 - Business Combinations, as set forth in the table below (in thousands):
|
| | | | |
At Acquisition Date | | Carefree |
Investment in property | | $ | 1,670,981 |
|
Ground leases | | 33,270 |
|
In-place leases | | 35,010 |
|
Deferred tax liability | | (23,637 | ) |
Other liabilities | | (15,665 | ) |
Inventory of manufactured homes | | 13,521 |
|
Below market lease | | (29,340 | ) |
Total identifiable assets acquired and liabilities assumed | | $ | 1,684,140 |
|
| | |
Consideration | |
|
|
Cash and equity | | $ | 1,684,140 |
|
Additionally, during 2016, we acquired seven RV resorts and one MH community for total consideration of $89.7 million. We added 1,677 sites in six states as a result of these acquisitions.
The amount of revenue and net income included in the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 related to the Carefree acquisition and other acquisitions completed during 2016 is set forth in the following table (in thousands)millions):
|
| | | | | | | |
| Three Months Ended September 30, 2017 | | Nine Months Ended September 30, 2017 |
| (unaudited) | | (unaudited) |
Revenue | $ | 55,034 |
| | $ | 156,021 |
|
Net income | $ | 3,987 |
| | $ | 17,013 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | In-place leases, goodwill and other intangible assets(1) | | Other liabilities, net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | | | Temporary and permanent equity | | Total consideration |
Leisure Systems, Inc(1) | $ | — | | | $ | — | | | $ | 24.0 | | | $ | (2.3) | | | $ | 21.7 | | | $ | 21.7 | | | | | $ | — | | | $ | 21.7 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Collateralized Receivables and Transfers of Financial Assets
We previously completed various transactions with an unrelated entity involving our notes receivable under which we received 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 receivable. 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. (1) 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. The proceeds from the transfer have been recognized as a secured borrowing.
In the event of a 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 receivable 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 receivable. The percentage used to determine the repurchase price of the outstanding principal balance on the installment note receivable is based on the number of payments made on the note. In general, the repurchase price is determined as follows:
|
| | | |
Number of Payments | | Repurchase Percentage |
Fewer than or equal to 15 | | 100 | % |
Greater than 15 but fewer than 64 | | 90 | % |
Equal to or greater than 64 but fewer than 120 | | 65 | % |
120 or more | | 50 | % |
The transferred assets have been classified as “Collateralized receivables, net” and the cash proceeds received from these transactions have been classified as “Secured borrowings on collateralized receivables” within the Consolidated Balance Sheets. The balance of the collateralized receivablesallocation was $134.0 million (net of allowance of $0.9 million) and $143.9 million (net of allowance of $0.6 million) as of September 30, 2017 and December 31, 2016, respectively. The receivables have a weighted average interest rate and maturity of 10.0 percent and 15.5 years as of September 30, 2017, and 10.0 percent and 15.7 yearspreliminary as of December 31, 2016.
The outstanding balance2021, and was adjusted as of March 2022 based on the secured borrowingfinal purchase price allocation.
Dispositions
In July 2021, we sold two MH communities located in Indiana and Missouri containing a combined 677 sites, for $67.5 million. The gain from the sale of the property was $134.9 million$49.4 million.
In August 2021, we sold four MH communities located in Arizona, Illinois and $144.5 million asMissouri, containing a combined 1,137 sites, for $94.6 million. The gain from the sale of the properties was $58.7 million.
Refer to Note 19, "Subsequent Events," for information regarding acquisitions and dispositions completed after September 30, 2017 and December 31, 2016, respectively.2022.
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 $3.3 million and $3.5 million for the three months ended September 30, 2017 and 2016, respectively, and $9.9 million and $10.3 million for the nine months ended September 30, 2017 and 2016, respectively.
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):
|
| | | |
| Nine Months Ended |
| September 30, 2017 |
Beginning balance | $ | 144,477 |
|
Financed sales of manufactured homes | 8,081 |
|
Principal payments and payoffs from our customers | (9,233 | ) |
Principal reduction from repurchased homes | (8,441 | ) |
Total activity | (9,593 | ) |
Ending balance | $ | 134,884 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth the allowance for the collateralized receivables as of September 30, 2017 (in thousands):
|
| | | |
| Nine Months Ended |
| September 30, 2017 |
Beginning balance | $ | (607 | ) |
Lower of cost or market write-downs | 699 |
|
Increase to reserve balance | (961 | ) |
Total activity | (262 | ) |
Ending balance | $ | (869 | ) |
4. Notes and Other Receivables
The following table sets forth certain information regarding notes and other receivables (in thousands)millions):
| | | | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 |
Installment notes receivable on manufactured homes, net | | $ | 97,990 |
| | $ | 59,320 |
| Installment notes receivable on manufactured homes, net | $ | 69.4 | | | $ | 79.1 | |
Notes receivable from real estate developers and operators | | Notes receivable from real estate developers and operators | 288.3 | | | 284.0 | |
Other receivables, net | | 47,770 |
| | 21,859 |
| Other receivables, net | 153.3 | | | 106.5 | |
Total notes and other receivables, net | | $ | 145,760 |
| | $ | 81,179 |
| |
Total Notes and Other Receivables, net | | Total Notes and Other Receivables, net | $ | 511.0 | | | $ | 469.6 | |
Installment Notes Receivable on Manufactured Homes
Installment notes receivable are measured at fair value, using indicative pricing models from third party valuation specialists, in accordance with ASC Topic 820, "Fair Value Measurements and Disclosures." The balances of installment notes receivable of $98.0$69.4 million (net of allowancefair value adjustment of $0.2$0.5 million) and $59.3$79.1 million (net of allowancefair value adjustment of $0.2$0.6 million) as of September 30, 20172022 and December 31, 2016,2021, respectively, are collateralizedsecured 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 havehad a net weighted average interest rate (net of servicing costs) and maturity of 8.27.6 percent and 17.014.0 years as of September 30, 2017,2022, and 8.37.6 percent and 16.014.7 years as of December 31, 2016.2021, respectively. Refer to Note 15, "Fair Value of Financial Instruments," for additional detail.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the aggregate gross principal balance of the installment notes receivable is as follows (in thousands)millions):
|
| | | |
| Nine Months Ended |
| September 30, 2017 |
Beginning balance | $ | 59,525 |
|
Financed sales of manufactured homes | 44,711 |
|
Acquired notes | 23 |
|
Principal payments and payoffs from our customers | (4,465 | ) |
Principal reduction from repossessed homes | (1,593 | ) |
Total activity | 38,676 |
|
Ending balance | $ | 98,201 |
|
| | | | | | | | | | | |
| Nine Months Ended | | Year Ended |
| September 30, 2022 | | December 31, 2021 |
Beginning balance of gross installment notes receivable | $ | 79.7 | | | $ | 87.2 | |
Financed sale of manufactured homes | 1.0 | | | 8.6 | |
Adjustment for notes receivable related to assets held for sale | — | | | 0.5 | |
Principal payments and payoffs from our customers | (8.8) | | | (11.7) | |
Principal reduction from repossessed homes | (2.0) | | | (3.0) | |
Dispositions of properties | — | | | (1.9) | |
Ending balance of gross installment notes receivable | 69.9 | | | 79.7 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Beginning balance of fair value adjustments on gross installment notes receivable | (0.6) | | | (1.3) | |
| | | |
| | | |
Fair value adjustment | 0.1 | | | 0.7 | |
Fair value adjustments on gross installment notes receivable | (0.5) | | | (0.6) | |
| | | |
Ending balance of installment notes receivable, net | $ | 69.4 | | | $ | 79.1 | |
Allowance for Losses for Installment Notes Receivable from Real Estate Developers and Operators
Notes receivable from real estate developers and operators are measured at fair value, using indicative pricing models from third party valuation specialists, in accordance with ASC Topic 820, "Fair Value Measurements and Disclosures." As of September 30, 2022 and December 31, 2021, the notes receivable balances are comprised primarily of a loan provided to a real estate operator to finance its acquisition and development costs, and construction loans provided to real estate developers. The notes receivable from real estate developers and operators had a net weighted average interest rate and maturity of 8.1 percent and 0.9 years as of September 30, 2022, and 7.2 percent and 0.9 years as of December 31, 2021, respectively. As of September 30, 2022, real estate developers and operators collectively have $53.5 million of undrawn funds on their loans. There were no adjustments to the fair value of notes receivable from real estate developers and operators for the nine months ended September 30, 2022 and 2021. Refer to Note 15, "Fair Value of Financial Instruments," for additional information.
The following table sets forthchange in the allowance change for the installmentaggregate balance of notes receivable from real estate developers and operators is as follows (in thousands)millions):
| | | | | | | | | | | |
| Nine Months Ended | | Year Ended |
| September 30, 2022 | | December 31, 2021 |
Beginning balance | $ | 284.0 | | | $ | 52.6 | |
Additions | 65.6 | | | 239.7 | |
Payments | (21.1) | | | (13.0) | |
Foreign currency exchange gain / (loss) | (40.2) | | | 2.5 | |
Other adjustments | — | | | 2.2 | |
Ending balance | $ | 288.3 | | | $ | 284.0 | |
|
| | | |
| Nine Months Ended |
| September 30, 2017 |
Beginning balance | $ | (205 | ) |
Lower of cost or market write-downs | 97 |
|
Increase to reserve balance | (103 | ) |
Total activity | (6 | ) |
Ending balance | $ | (211 | ) |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Other Receivables, net
As of September 30, 2017, otherOther receivables, net were comprised of amounts due from: residents for rent, and water and sewer usage of $7.2 million (netfrom the following categories (in millions):
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Home sale proceeds | $ | 34.4 | | | $ | 33.5 | |
Marina customers for storage, service and lease payments, net(1) | 37.5 | | | 29.3 | |
MH and annual RV residents for rent, utility charges, fees and other pass-through charges, net(2) | 17.3 | | | 10.0 | |
Insurance receivables | 21.8 | | | 9.0 | |
Other receivables(3) | 42.3 | | | 24.7 | |
Total Other Receivables, net | $ | 153.3 | | | $ | 106.5 | |
(1)Net of allowance of $1.4 million); home sale proceeds$1.9 million and $1.5 million as of $13.1 million; insurance receivables of $19.1 million; $5.0 million due from the sellers of Pismo Dunes (refer to Note 2, “Real Estate Acquisitions” for additional information);September 30, 2022 and other receivables of $3.4 million. As of December 31, 2016, other receivables were comprised of amounts due from: residents for rent, and water and sewer usage of $6.0 million (net2021, respectively.
(2)Net of allowance of $1.5 million); home sale proceeds$5.2 million and $5.5 million as of $11.6 million; insurance receivablesSeptember 30, 2022 and December 31, 2021, respectively.
(3)Includes receivable from Rezplot Systems LLC, a nonconsolidated affiliate, in which we had 48.9 percent and 49.2 percent ownership interest as of $2.3 million;September 30, 2022 and other receivablesDecember 31, 2021, respectively. In June 2020, we made a convertible secured loan to Rezplot Systems LLC. The note allows for a principal amount of $2.0 million.up to $10.0 million to be drawn down over a period of three years, bears an interest rate of 3.0 percent and is secured by all the assets of Rezplot Systems LLC. In January 2022, we made an additional loan to Rezplot Systems LLC that allows for a principal amount of up to $5.0 million to be drawn over a period of three years and bears an interest rate of 3.0 percent. The outstanding balances were $12.1 million and $10.2 million as of September 30, 2022 and December 31, 2021, respectively. Refer to Note 6, "Investments in Nonconsolidated Affiliates," for additional information on Rezplot Systems LLC.
5. Goodwill and Other Intangible Assets
Our intangible assets include ground leases,goodwill, in-place leases, non-competition agreements, trademarks and trade names, customer relationships, franchise feesagreements and other intangible assets from acquisitions.assets. These intangible assets are recorded in “OtherGoodwill and Other intangible assets, net”net on the Consolidated Balance Sheets.
Goodwill
The change in the carrying amount of goodwill during the nine months ended September 30, 2022 is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | Acquisitions(1) | | Currency Translation Adjustment | | Other(2) | | September 30, 2022 | |
Segment | | | | | | | | | | |
MH | $ | — | | | $ | 465.0 | | | $ | (73.8) | | | $ | 39.3 | | | $ | 430.5 | | |
RV | — | | | 9.5 | | | — | | | — | | | 9.5 | | |
Marina | 495.4 | | | 41.5 | | | — | | | 4.6 | | | 541.5 | | |
Total | $ | 495.4 | | | $ | 516.0 | | | $ | (73.8) | | | $ | 43.9 | | | $ | 981.5 | | (3) |
(1) During the nine months ended September 30, 2022, we recorded goodwill of $465.0 million in the MH segment related to the acquisition of Park Holidays, primarily attributed to the acquired platform and assembled workforce value associated with the scale of Park Holidays' existing operations in the United Kingdom. Additionally, we recorded goodwill of $41.5 million in the Marina segment related to the acquisition of Jarrett Bay Boatworks and Montauk Yacht Club, primarily attributed to enterprise value and the assembled workforce value associated with existing operations, and $9.5 million in the RV segment related to the acquisition of Leisure Systems, Inc, primarily attributed to its licensing arrangements, ability to obtain new franchise relationships and assembled workforce.
(2) The measurement periods for the valuation of assets acquired and liabilities assumed in a business combination end as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available but do not exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. These purchase accounting adjustments are presented under Other in the table above.During the nine months ended September 30, 2022, the goodwill in the MH segment increased by $39.3 million related to the acquisition of Park Holidays.
(3) Recognized goodwill from current year acquisitions of $516.0 million is expected to be deductible for tax purposes.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Other Intangible Assets, net
The gross carrying amounts and accumulated amortization areof our intangible assets were as follows (in thousands)millions):
|
| | | | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
Intangible Asset | | Useful Life | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
Ground leases | | 8-57 years | | $ | 33,270 |
| | $ | (1,371 | ) | | $ | 33,270 |
| | $ | (600 | ) |
In-place leases | | 7 years | | 99,954 |
| | (42,090 | ) | | 98,235 |
| | (31,796 | ) |
Franchise fees and other intangible assets | | 15 years | | 1,880 |
| | (1,432 | ) | | 1,880 |
| | (1,155 | ) |
Total | | | | $ | 135,104 |
| | $ | (44,893 | ) | | $ | 133,385 |
| | $ | (33,551 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2022 | | December 31, 2021 |
Other Intangible Asset | | Useful Life | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
In-place leases | | 2 months - 13 years | | $ | 164.5 | | | $ | (131.8) | | | $ | 162.6 | | | $ | (120.8) | |
Non-competition agreements | | 5 years | | 10.5 | | | (3.6) | | | 10.0 | | | (2.0) | |
Trademarks and trade names | | 3 - 15 years | | 74.8 | | | (3.7) | | | 5.8 | | | (0.9) | |
Customer relationships | | 4 - 17 years | | 131.4 | | | (21.4) | | | 122.4 | | | (12.3) | |
Franchise agreements and other intangible assets | | 3 - 27 years | | 47.5 | | | (8.1) | | | 31.1 | | | (5.8) | |
Total finite-lived assets | | | | $ | 428.7 | | | $ | (168.6) | | | $ | 331.9 | | | $ | (141.8) | |
Indefinite-lived assets - Trademarks and trade names | | N/A | | 140.6 | | | — | | | 114.2 | | | — | |
Indefinite-lived assets - Other | | N/A | | 2.5 | | | — | | | 2.5 | | | — | |
Total indefinite-lived assets | | | | $ | 143.1 | | | $ | — | | | $ | 116.7 | | | $ | — | |
Total | | | | $ | 571.8 | | | $ | (168.6) | | | $ | 448.6 | | | $ | (141.8) | |
Total amortizationAmortization expenses related to theour Other intangible assets arewere as follows (in thousands)millions):
| | | | | | | | | | | | Three Months Ended | | Nine Months Ended |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
Intangible Asset | | 2017 | | 2016 | | 2017 | | 2016 | |
Ground leases | | $ | 257 |
| | $ | 368 |
| | $ | 771 |
| | $ | 368 |
| |
Other Intangible Asset Amortization Expense | | Other Intangible Asset Amortization Expense | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
In-place leases | | 3,478 |
| | 3,824 |
| | 10,322 |
| | 8,142 |
| In-place leases | | $ | 3.4 | | | $ | 5.7 | | | $ | 11.8 | | | $ | 22.5 | |
Non-competition agreements | | Non-competition agreements | | 0.5 | | | 0.5 | | | 1.5 | | | 1.5 | |
Trademarks and trade names | | Trademarks and trade names | | 1.7 | | | 0.2 | | | 3.0 | | | 0.6 | |
Customer relationships | | Customer relationships | | 3.2 | | | 2.7 | | | 9.1 | | | 7.0 | |
Franchise fees and other intangible assets | | 19 |
| | 129 |
| | 277 |
| | 387 |
| Franchise fees and other intangible assets | | 0.7 | | | 0.7 | | | 2.0 | | | 1.7 | |
Total | | $ | 3,754 |
| | $ | 4,321 |
| | $ | 11,370 |
| | $ | 8,897 |
| Total | | $ | 9.5 | | | $ | 9.8 | | | $ | 27.4 | | | $ | 33.3 | |
We anticipate amortization expense for ourOther intangible assets to be as follows for the next five years (in thousands)millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder 2022 | | 2023 | | 2024 | | 2025 | | 2026 |
In-place leases | $ | 3.4 | | | $ | 10.0 | | | $ | 7.0 | | | $ | 6.1 | | | $ | 3.4 | |
Non-competition agreements | 0.5 | | | 2.1 | | | 2.1 | | | 2.1 | | | 0.1 | |
Trademarks and trade names | 1.4 | | | 5.9 | | | 5.1 | | | 5.1 | | | 5.1 | |
Customer relationships | 3.2 | | | 12.6 | | | 12.6 | | | 12.6 | | | 12.4 | |
Franchise agreements and other intangible assets | 0.8 | | | 3.3 | | | 3.2 | | | 3.1 | | | 2.8 | |
Total | $ | 9.3 | | | $ | 33.9 | | | $ | 30.0 | | | $ | 29.0 | | | $ | 23.8 | |
|
| | | | | | | | | | | | | | | | | | | |
| Year |
| Remainder of 2017 | | 2018 | | 2019 | | 2020 | | 2021 |
Estimated expense | $ | 3,819 |
| | $ | 14,514 |
| | $ | 13,598 |
| | $ | 11,870 |
| | $ | 11,478 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 6(Unaudited)
6. Investments in Nonconsolidated Affiliates
Investments in joint ventures that are not consolidated, nor recorded at cost, are accounted for using the equity method of accounting as prescribed in ASC Topic 323, "Investments - Equity Method and Joint Ventures." Investments in nonconsolidated affiliates are recorded within Other assets, net on the Consolidated Balance Sheets. Equity income and loss are recorded in the Income from nonconsolidated affiliates line item on the Consolidated Statements of Operations.
RezPlot Systems LLC ("Rezplot")
At September 30, 2022 and December 31, 2021, we had a 48.9 percent and 49.2 percent ownership interest, respectively, in RezPlot, a RV reservation software technology company, which interest we acquired in January 2019.
Sungenia Joint Venture ("Sungenia JV")
At September 30, 2022 and December 31, 2021, we had a 50.0 percent ownership interest in Sungenia JV, a joint venture formed between us and Ingenia Communities Group in November 2018, to establish and grow a manufactured housing community development program in Australia.
GTSC LLC ("GTSC")
At September 30, 2022 and December 31, 2021, we had a 40.0 percent ownership interest in GTSC, which engages in acquiring, holding and selling loans secured, directly or indirectly, by manufactured homes located in our communities.
Origen Financial Services, LLC ("OFS")
At September 30, 2022 and December 31, 2021, we had no ownership interest and a 22.9 percent ownership interest, respectively, in OFS, an end-to-end online resident screening and document management suite. During the three months ended June 30, 2022, we sold our ownership interest in OFS for $0.6 million. The gain from the sale was $0.3 million, which was recorded within Income from nonconsolidated affiliates on the Consolidated Statements of Operations.
SV Lift, LLC ("SV Lift")
At September 30, 2022 and December 31, 2021, we had a 50 percent ownership interest in SV Lift, which owns, operates and leases an aircraft.
The investment balance in each nonconsolidated affiliate was as follows (in millions):
| | | | | | | | | | | | | | |
| | | | |
Investment | | September 30, 2022 | | December 31, 2021 |
Investment in RezPlot | | $ | — | | | $ | 0.1 | |
Investment in Sungenia JV | | 45.7 | | | 36.2 | |
Investment in GTSC | | 49.9 | | | 35.7 | |
Investment in OFS | | — | | | 0.2 | |
Investment in SV Lift | | 2.5 | | | 2.9 | |
Total | | $ | 98.1 | | | $ | 75.1 | |
The income / (loss) from each nonconsolidated affiliate is as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
Income / (Loss) from Nonconsolidated Affiliates | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
RezPlot equity loss | | $ | (0.9) | | | $ | (0.8) | | | $ | (3.0) | | | $ | (1.7) | |
Sungenia JV equity income | | 1.6 | | | 0.4 | | | 2.6 | | | 1.2 | |
GTSC equity income | | 1.6 | | | 1.7 | | | 4.6 | | | 4.2 | |
OFS equity income | | — | | | — | | | 0.3 | | | 0.2 | |
SV Lift equity loss | | (0.3) | | | (0.4) | | | (0.7) | | | (1.0) | |
Total Income from Nonconsolidated Affiliates | | $ | 2.0 | | | $ | 0.9 | | | $ | 3.8 | | | $ | 2.9 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the GTSC investment balance is as follows (in millions):
| | | | | | | | | | | | | | |
| | Nine Months Ended | | Year Ended |
| | September 30, 2022 | | December 31, 2021 |
Beginning balance | | $ | 35.7 | | | $ | 25.5 | |
| | | | |
| | | | |
Contributions | | 25.8 | | | 27.3 | |
Distributions | | (16.2) | | | (23.0) | |
Equity earnings | | 4.6 | | | 6.1 | |
Fair value adjustment | | — | | | (0.2) | |
Ending Balance | | $ | 49.9 | | | $ | 35.7 | |
The change in the Sungenia JV investment balance is as follows (in millions):
| | | | | | | | | | | | | | |
| | Nine Months Ended | | Year Ended |
| | September 30, 2022 | | December 31, 2021 |
Beginning balance | | $ | 36.2 | | | $ | 26.9 | |
Cumulative translation adjustment | | (2.1) | | | (1.5) | |
Contributions | | 9.0 | | | 9.0 | |
| | | | |
Equity earnings | | 2.6 | | | 1.8 | |
| | | | |
Ending Balance | | $ | 45.7 | | | $ | 36.2 | |
7. Consolidated Variable Interest Entities
The Operating Partnership
We consolidate Rudgate Village SPE, LLC; Rudgate Clinton SPE, LLC; and Rudgate Clinton Estates SPE, LLC (collectively, “Rudgate”) as a variable interest entity (“VIE”). We evaluated our arrangement with this propertythe Operating Partnership under the guidance set forth in FASBASC 810, "Consolidation."We evaluated whether the Operating Partnership met the criteria for classification as a variable interest entity ("VIE") or, alternatively, as a voting interest entity and concluded that the Operating Partnership met the criteria of a VIE. Our significant asset is our investment in the Operating Partnership, and consequently, substantially all of our assets and liabilities represent those assets and liabilities of the Operating Partnership. We are the sole general partner and generally have the power to manage and have complete control over the Operating Partnership and the obligation to absorb its losses or the right to receive its benefits.
Other Consolidated VIEs
We consolidate Sun NG RV Resorts LLC ("Sun NG Resorts"), Sun NG Whitewater RV Resorts LLC, Sun NG Beaver Brook LLC, FPG Sun Menifee 80 LLC, Sun Solar Energy Project LLC, Sun Solar Energy Project CA II, and FPG Sun Moreno Valley 66 LLC under the guidance set forth in ASC Topic 810, “Consolidation.” "Consolidation."We concluded that Rudgate qualified aseach entity is a VIE where we are the primary beneficiary, as we have the power to direct the significant activities of and absorb the significant losses and receive the significant benefits from each entity. Refer to Note 8, "Debt and Line of Credit," for additional information on Sun NG Resorts.
During the entity.three months ended September 30, 2022, we acquired the noncontrolling equity interest held by third parties in a joint venture created for the purpose of acquiring land and constructing a marina in Fort Lauderdale, Florida ("SHM South Fork JV, LLC"). The transaction resulted in the Company owning a 100 percent ownership interest in the joint venture and we concluded that SHM South Fork JV, LLC was no longer a VIE. The acquisition was accounted for as an equity transaction in accordance with ASC Topic 810, "Consolidation," with the difference between the purchase price and the noncontrolling interest of $1.9 million recorded as a decrease to Additional Paid-in Capital on the Consolidated Balance Sheets.
During the three months ended June 30, 2017,2022, we acquired the noncontrolling equity interests in Wildwood Mobile Home Park (“Wildwood”)interest held by third parties for total consideration of $0.1 million. Prior to this acquisition, we consolidated Wildwood as a VIE. The acquisitionin Rudgate Village SPE LLC, Rudgate Clinton SPE LLC and Rudgate Clinton Estates, LLC (collectively, "Rudgate"), an MH community, which resulted in the Company owning a 100.0100 percent controllingownership interest in Wildwood, and was deemed a VIE reconsideration event.Rudgate. We concluded that WildwoodRudgate was no longer a VIE.The acquisition was accounted for as an equity transaction in accordance with ASC Topic 810, "Consolidation," with the difference between the purchase price and the acquired noncontrolling interest of $13.2 million recorded as an increase to Additional Paid-in Capital on the Consolidated Balance Sheets. Refer to Note 9, "Equity and Temporary Equity," for additional information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the assets and liabilities of our consolidated VIEs, with the exception of the Operating Partnership, included in our Consolidated Balance Sheets after eliminations (in thousands)millions):
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
ASSETS | | | |
Investment property, net | $ | 50,655 |
| | $ | 88,987 |
|
Other assets | 1,638 |
| | 3,054 |
|
Total Assets | $ | 52,293 |
| | $ | 92,041 |
|
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Debt | $ | 42,177 |
| | $ | 62,111 |
|
Other liabilities | 1,258 |
| | 1,998 |
|
Noncontrolling interests | 3,841 |
| | (2,982 | ) |
Total Liabilities and Stockholders’ Equity | $ | 47,276 |
| | $ | 61,127 |
|
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Assets | | | |
Investment property, net | $ | 704.8 | | | $ | 623.5 | |
Cash, cash equivalents and restricted cash | 22.1 | | | 13.6 | |
Other intangible assets, net | 13.3 | | | 13.4 | |
Other assets, net | 5.8 | | | 5.3 | |
Total Assets | $ | 746.0 | | | $ | 655.8 | |
| | | |
Liabilities and Other Equity | | | |
Secured debt | $ | 21.3 | | | $ | 52.6 | |
Unsecured debt | 35.2 | | | 35.2 | |
Advanced reservation deposits and rent | 16.6 | | | 13.5 | |
Accrued expenses and accounts payable | 42.0 | | | 78.3 | |
Other liabilities | 1.5 | | | 2.2 | |
Total Liabilities | 116.6 | | | 181.8 | |
Temporary equity | 44.2 | | | 35.4 | |
Noncontrolling interests | — | | | 19.4 | |
Total Liabilities and Other Equity | $ | 160.8 | | | $ | 236.6 | |
Investment property, net and otherTotal assets related to the consolidated VIEs, with the exception of the Operating Partnership, comprised approximately 0.84.5 percent and 1.64.9 percent of our consolidated total assets at September 30, 20172022 and December 31, 2016,2021, respectively. Debt and otherTotal liabilities comprised approximately 1.31.4 percent and 1.92.8 percent of our consolidated total liabilities at September 30, 20172022 and December 31, 2016,2021, respectively. Equity Interests and Noncontrolling interests related to the consolidated VIEs, on an absolute basis, comprised less than 1.0 percent of our consolidated total stockholder’s equity at September 30, 20172022 and less than 1.0 percent at December 31, 2016.2021, respectively.
7.8. Debt and LinesLine of Credit
The following table sets forth certain information regarding debt including premiums, discounts and deferred financing costs (in thousands)millions, except for statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount | | Weighted Average Years to Maturity | | Weighted Average Interest Rates |
| September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Secured Debt(1) | $ | 3,006.0 | | | $ | 3,380.7 | | | 10.9 | | 10.6 | | 3.665 | % | | 3.779 | % |
| | | | | | | | | | | |
Unsecured Debt | | | | | | | | | | | |
Senior unsecured notes(2) | 1,779.1 | | | 1,186.4 | | | 8.4 | | 8.5 | | 2.9 | % | | 2.55 | % |
| | | | | | | | | | | |
Line of credit and other debt(3) | 1,856.0 | | | 1,034.8 | | | 3.0 | | 3.5 | | 3.261 | % | | 0.978 | % |
Preferred equity - Sun NG Resorts - mandatorily redeemable | 35.2 | | | 35.2 | | | 2.0 | | 2.8 | | 6.0 | % | | 6.0 | % |
Preferred OP units - mandatorily redeemable | 34.7 | | | 34.7 | | | 3.4 | | 4.1 | | 5.932 | % | | 5.932 | % |
Total Unsecured Debt | 3,705.0 | | | 2,291.1 | | | | | | | | | |
Total Debt | $ | 6,711.0 | | | $ | 5,671.8 | | | 8.8 | | 8.8 | | 3.374 | % | | 3.038 | % |
(1) Balances at September 30, 2022 and December 31, 2021 include $0.1 million and $1.7 million of net debt premium, respectively, and $13.1 million and $14.7 million of deferred financing costs, respectively.
(2) Balances at September 30, 2022 and December 31, 2021 include $6.3 million and $3.3 million of net debt discount, respectively, and $14.6 million and $10.3 million of deferred financing costs, respectively. Weighted average interest rates include the impact of hedge activity.
(3) Balance at September 30, 2022 and December 31, 2021 includes $3.3 million and $0 of deferred financing costs, respectively. Weighted average interest rates include the impact of hedge activity.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | |
| Carrying Amount | | Weighted Average Years to Maturity | | Weighted Average Interest Rates |
| September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 |
Collateralized term loans - FNMA | $ | 1,032,621 |
| | $ | 1,046,803 |
| | 5.8 | | 6.6 | | 4.4 | % | | 4.3 | % |
Collateralized term loans - Life Companies | 949,970 |
| | 888,705 |
| | 12.5 | | 12.2 | | 3.9 | % | | 3.9 | % |
Collateralized term loans - CMBS | 452,311 |
| | 492,294 |
| | 5.2 | | 5.6 | | 5.1 | % | | 5.2 | % |
Collateralized term loans - FMCC | 387,738 |
| | 391,765 |
| | 7.1 | | 7.9 | | 3.9 | % | | 3.9 | % |
Secured borrowings | 134,884 |
| | 144,477 |
| | 15.5 | | 15.7 | | 10.0 | % | | 10.0 | % |
Lines of credit | — |
| | 100,095 |
| | 0.0 | | 3.6 | | — | % | | 2.1 | % |
Preferred OP units - mandatorily redeemable | 45,903 |
| | 45,903 |
| | 4.8 | | 5.4 | | 6.9 | % | | 6.9 | % |
Total debt | $ | 3,003,427 |
| | $ | 3,110,042 |
| | 8.4 | | 8.5 | | 4.6 | % | | 4.5 | % |
Secured Debt
Collateralized Term LoansSecured debt consists of mortgage term loans. During the nine months ended September 30, 2022 and the year ended December 31, 2021, we paid off the following mortgage term loans during the quarters presented below (in millions, except for statistical information):
In | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Repayment Amount | | Fixed Interest Rate | | Maturity Date | | Loss on Extinguishment of Debt | | |
Three months ended September 30, 2022 | | $ | 318.0 | | (1) | 4.81 | % | | December 6, 2022 - September 6, 2024 | | $ | 4.0 | | | |
Three months ended June 30, 2022 | | $ | 15.8 | | | 3.89 | % | | October 1, 2022 | | $ | — | | | |
Three months ended December 31, 2021 | | $ | 11.6 | | (2) | 4.3 | % | | February 1, 2022 | | $ | — | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(1)Includes 17 mortgage term loans which were scheduled to mature from December 6, 2022 to September 2017, in connection with6, 2024 that are secured by 35 properties.
(2)Includes two mortgage term loans which were scheduled to mature on February 1, 2022.
During the Ocean West acquisition,three and nine months ended September 30, 2022, we assumedentered into a $4.6new $20.6 million collateralizedconstruction loan, which was undrawn as of September 30, 2022 and a $3.4 million mortgage term loan with Fannie Mae,that are jointly secured by one property. Both loans mature August 10, 2047 and have a fixed interest rate of 3.65 percent. During the year ended December 31, 2021, we did not enter into any new mortgage term loans. The mortgage term loans, which total $3.0 billion as of September 30, 2022, are secured by 155 properties comprised of 61,993 sites representing approximately $2.7 billion of net book value.
Unsecured Debt
Senior Unsecured Notes
In April 2022, the Operating Partnership issued $600.0 million of senior unsecured notes with an interest rate of 4.344.2 percent and a remainingten-year term, due April 15, 2032 (the "2032 Notes"). Interest on the 2032 Notes is payable semi-annually in arrears on April 15 and October 15 of 9.8 years.each year, beginning on October 15, 2022. The net proceeds from the offering were $592.3 million after deducting underwriters' discounts and estimated offering expenses. We used the net proceeds from the offering to repay borrowings outstanding under our Senior Credit Facility (as defined below).
In June 2017, we entered into a $77.0October 2021, the Operating Partnership issued $450.0 million collateralized term loan which bears interest at a rate of 4.16 percent amortizing over a 25 term. We also repaid a $3.9 million collateralized term loansenior unsecured notes with an interest rate of 6.542.3 percent and a seven-year term, due November 1, 2028 (the "2028 Notes"). Interest on the 2028 Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2022. The Operating Partnership also issued an additional $150.0 million of its 2031 Notes (as defined below). The net proceeds from both offerings were approximately $595.5 million after deducting underwriters' discounts and estimated offering expenses. The proceeds were used to pay down borrowings under our Senior Credit Facility.
In June 2021, the Operating Partnership issued $600.0 million of senior unsecured notes with an interest rate of 2.7 percent and a ten-year term, due July 15, 2031 (the "2031 Notes"). Interest on the 2031 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2022. The net proceeds from the offering were approximately $592.4 million, after deducting underwriters' discounts and estimated offering expenses. The proceeds were used to pay down borrowings under our Senior Credit Facility.
The total outstanding principal balance of senior unsecured notes was $1.8 billion at September 30, 2022. This balance is recorded in the Unsecured debt line item on the Consolidated Balance Sheets.
Line of Credit
In April 2022, in connection with the closing of the Park Holidays acquisition, the Operating Partnership as borrower, and SUI, as guarantor, and certain lenders entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Other Loan Documents (the "Credit Facility Amendment"), which amended our senior credit facility (the "Senior Credit Facility").
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The Credit Facility Amendment increased the aggregate amount of our Senior Credit Facility to $4.2 billion with the ability to upsize the total borrowings by an additional $800.0 million, subject to certain conditions. The increased aggregate amount under the Senior Credit Facility consists of the following: (a) a revolving loan in an amount up to $3.05 billion and (b) a term loan facility of $1.15 billion, with the ability to draw funds from the combined facilities in United States ("U.S.") U.S. dollars, Pounds sterling, Euros, Canadian dollars and Australian dollars, subject to certain limitations. The Credit Facility Amendment extended the maturity date of the revolving loan facility to April 7, 2026. At our option that was duematurity date may be extended two additional six-month periods. In addition, the Credit Facility Amendment established the maturity date of the term loan facility under the Credit Facility Amendment as April 7, 2025, which may not be further extended.
Prior to the Credit Facility Amendment, the Senior Credit Facility permitted aggregate borrowings of up to $2.0 billion, with an accordion feature that allowed for additional commitments of up to $1.0 billion, subject to the satisfaction of certain conditions. Prior to the amendment, $500.0 million of available borrowings under the Senior Credit Facility were scheduled to mature on August 31, 2017. As a result ofOctober 11, 2024, with the repayment transaction, we recognized aremainder scheduled to mature on June 14, 2025. We had no loss on extinguishment of debt during the three months endedSeptember 30, 2022 and 2021. During the nine months ended September 30, 2021, we recognized losses on extinguishment of $0.3 milliondebt in our Consolidated Statements of Operations.Operations of $0.1 million related to the amendment of the Senior Credit Facility, and $0.2 million and $7.9 million, related to the termination of our $750.0 million credit facility and the $1.8 billion credit facility between Safe Harbor and certain lenders, respectively.
The Senior Credit Facility bears interest at a floating rate based on Adjusted Term Secured Overnight Financing Rate ("SOFR"), the Adjusted Eurocurrency Rate, the Daily Risk Free Rate ("RFR"), the Australian Bank Bill Swap Bid Rate ("BBSY"), the Daily Sterling Overnight Index Average ("SONIA") Rate or the Canadian Dollar Offered Rate, as applicable, plus a margin, in all cases, which can range from 0.725 percent to 1.6 percent, subject to certain adjustments. As of September 30, 2022, the margins based on our credit ratings were 0.85 percent on the revolving loan facility and 0.95 percent on the term loan facility. During the quarter ended September 30, 2022, we achieved sustainability related requirements resulting in a favorable 0.01 percent adjustment to both margins.
At the lenders' option, the Senior Credit Facility will become immediately due and payable upon an event of default under the Credit Facility Amendment. We had $862.1 million of borrowings outstanding under the revolving loan and $974.9 million of borrowings outstanding under the term loan on the Senior Credit Facility as of September 30, 2022. We had $1.0 billion of revolving borrowings on our prior Senior Credit Facility as of December 31, 2021. These balances are recorded in Unsecured debt on the Consolidated Balance Sheets.
The Senior Credit Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under the Senior Credit Facility, but does reduce the borrowing amount available. We had $21.6 million and $2.2 million of outstanding letters of credit at September 30, 2022 and December 31, 2021, respectively.
Bridge Loan Termination
In March 2022, we terminated our commitment letter with Citigroup Global Markets, Inc. ("Citigroup"), pursuant to which, Citigroup (on behalf of its affiliates), previously committed to lend us up to £950.0 million, or approximately $1.2 billion converted at the March 31, 2022 exchange rate (the "Bridge Loan"). As of the date of termination, we did not have any borrowings outstanding under the Bridge Loan. During the three months ended March 31, 2022, we recognized a Loss on extinguishment of debt in our Consolidated Statement of Operations of $0.3 million related to the termination of the Bridge Loan.
Unsecured Term Loan
In October 2019, we assumed a $58.0 million secured term loan facility related to an acquisition. The term loan has a four-year term ending October 29, 2023, and bears interest at a floating rate based on the Eurodollar rate or Prime rate plus a margin ranging from 1.20 percent to 2.05 percent. Effective July 1, 2021, the agreement was amended to release the associated collateral. The amendment extended the term loan facility maturity date to October 29, 2025 and adjusted the interest rate margin to a range from 0.8 percent to 1.6 percent. In August 2022, we amended the secured term loan facility to transition from the Eurodollar rate to SOFR. As of September 30, 2022, the margin based on our credit rating was 0.95 percent. The outstanding balance was $22.3 million at September 30, 2022 and $31.6 million at December 31, 2021, respectively. These balances are recorded in Unsecured debt on the Consolidated Balance Sheets.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Preferred Equity - Sun NG Resorts - Mandatorily Redeemable
During
In connection with the first quarterinvestment in Sun NG Resorts in June 2018, $35.3 million of 2017, we defeased an $18.9 million collateralized term loan with an interestmandatorily redeemable Preferred Equity ("Preferred Equity - Sun NG Resorts") was purchased by unrelated third parties. The Preferred Equity - Sun NG Resorts carries a preferred rate of 6.49return of 6.0 percent that was due to mature on Augustper annum. The Preferred Equity - Sun NG Resorts has a seven-year term ending June 1, 2017, releasing one encumbered community. As a result of the transaction, we recognized a loss on extinguishment of debt of $0.5 million in our Consolidated Statements of Operations. In addition, we repaid a $10.0 million collateralized term loan with an interest rate of 5.57 percent that was due to mature on May 1, 2017, releasing an additional encumbered community.
During the fourth quarter of 2016, we repaid a total of $79.1 million aggregate principal of collateralized term loans that were due to mature during 2017, releasing 10 encumbered communities. Also2025 and can be redeemed in the fourth quarter of 2016, we entered into a promissory note for $58.5 million that bears interest2024 at a rate of 3.33 percent and has a seven-year term.the holders' option. The repayment of the note is interest only for the entire term.
In September 2016, 15 subsidiaries of the Operating Partnership each entered into a promissory note for total borrowings of $139.0 million with PNC Bank, as lender (the “Freddie Mac Financing”). Five of the notes totaling $70.2 million bear interest at a rate of 3.93 percent and have ten-year terms. The remaining ten notes totaling $68.8 million bear interest at a rate of 3.75 percent and have seven-year terms. The Freddie Mac Financing provides for principal and interest payments to be amortized over 30 years.
Proceeds from the Freddie Mac Financing described above and the underwritten registered public equity offering in September 2016 described in Note 8, “Equity and Mezzanine Securities,” were utilized to repay $62.1 million in mortgage loans and $300.0 million on our revolving loan under our senior revolving credit facility (refer to Lines of Credit below for additional information regarding the A&R Facility).
In June 2016, 17 subsidiaries of the Operating Partnership entered into a Master Credit Facility Agreement with Regions Bank, as lender. Pursuant to credit agreement, Regions Bank loaned a total of $338.0 million under a senior secured credit facility, comprised of two ten-year term loans in the amount of $300.0 million and $38.0 million, respectively (collectively the “Fannie Mae Financing”). The $300.0 million term loan bears interest at 3.69 percent and the $38.0 million term loan bears interest at 3.67 percent for a blended rate of 3.69 percent. The Fannie Mae Financing provides for principal and interest payments to be amortized over 30 years.
The Fannie Mae Financing is secured by mortgages encumbering 17 MH communities comprised of real and personal property owned by the borrowers. Additionally, the Company and the Operating Partnership have provided a guaranty of the non-recourse carve-out obligations of the borrowers under the Fannie Mae Financing.
Additionally, in June 2016, three subsidiaries of the Operating Partnership entered into mortgage loan documents (the “NML Loan Documents”) with The Northwestern Mutual Life Insurance Company (“NML”). Pursuant to the NML Loan Documents, NML made three portfolio loans to the subsidiary borrowers in the aggregate amount of $405.0 million. NML loaned $162.0 million under a ten-year term loan to two of the subsidiary borrowers (the “Portfolio A Loan”). The Portfolio A Loan bears interest at 3.53 percent and is secured by deeds of trust encumbering seven MH communities and one RV community. NML also loaned $163.0 million under a 12-year term loan (the “Portfolio B Loan”) to one subsidiary which is also a borrower under the Portfolio A Loan. The Portfolio B Loan bears interest at 3.71 percent and is secured by deeds of trust and a ground lease encumbering eight MH communities. NML also loaned $80.0 million under a 12-year term loan (the “Portfolio C Loan” and, collectively, with the Portfolio A Loan and the Portfolio B Loan, the “NML Financing”) to one subsidiary borrower. The Portfolio C Loan bears interest at 3.71 percent and is secured by a mortgage encumbering one RV community. The MH and RV communities noted above that secure the NML Financing were acquired as part of the Carefree transaction.
The NML Financing is generally non-recourse, however, the borrowers under the NML Financing and the Operating Partnership are responsible for certain customary non-recourse carveouts. In addition, the NML Financing will be fully recourse to the subsidiary borrowers and the Operating Partnership if: (a) the borrowers violate the prohibition on transfer covenants set forth in the loan documents; or (b) a voluntary bankruptcy proceedings is commenced by the borrowers or an involuntary bankruptcy, liquidation, receivership or similar proceeding has commenced against the borrowers and remains undismissed for a period of 90 days.
Proceeds from the Fannie Mae Financing and NML Financing were primarily used to fund the cash portion of the Carefree acquisition. Refer to Note 2, “Real Estate Acquisitions” for additional information.
The collateralized term loans totaling $2.8 billionPreferred Equity - Sun NG Resorts as of September 30, 2017, are secured by 192 properties comprised of 76,078 sites representing approximately $3.4 billion of net book value.2022 was $35.2 million. This balance is recorded within the Unsecured debt line item on the Consolidated Balance Sheets. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Secured Borrowing
See Note 3, “Collateralized Receivables and Transfers of Financial Assets,” for information regarding our collateralized receivables and secured borrowing transactions.
Preferred OP Units - Mandatorily Redeemable
Included in preferredPreferred OP units isat September 30, 2022 and December 31, 2021 include $34.7 million of Aspen preferred OP units issued by the Operating Partnership which, asPartnership. As of September 30, 2017,2022, these units are convertible indirectly into 468,923403,262 shares of our common stock.
In January 2020, we amended the Operating Partnership's partnership agreement. The amendment extended the automatic redemption date and reduced the annual distribution rate for 270,000 of the Aspen preferred OP units (the "Extended Units"). Subject to certain limitations, at any time prior to January 1, 2024 (or prior to January 1, 2034 with respect to the Extended Units), the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the marketaverage closing price of our common stock for the preceding ten trading days is $68.00 per share or less, 0.397 common OP units; or (b) if the marketten-day average closing price of our common stock is greater than $68.00 per share, the number of common OP units is determined by dividing (i) the sum of (A) $27.00 plus (B) 2525.0 percent of the amount by which the marketten-day average closing price of our common stock exceeds $68.00 per share, by (ii) the per-share market price of our common stock.ten-day average closing price. The current preferred distribution rate is 3.8 percent on the Extended Units and 6.5 percent. percent on all other Aspen preferred OP units. On January 2, 2024 (or January 2, 2034 with respect to the Extended Units), we are required to redeem for cash all Aspen preferred OP units that have not been converted to common OP units.
Lines of Credit
In April 2017, we amended and restated our credit agreement (the “A&R Credit Agreement”) with Citibank, N.A. (“Citibank”) and certain other lenders. Pursuant to the A&R Credit Agreement, we have a senior revolving credit facility with Citibank and certain other lenders in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan (the “A&R Facility”). The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option, 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 $350.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the Facility may be increased up to $1.0 billion.
The A&R 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 margin can range from 1.35 percent to 2.20 percent for the revolving loan and 1.30 percent to 2.15 percent for the term loan. As of September 30, 2017,2022, 270,000 of the margin on our leverage ratio was 1.35 percentExtended Units and 1.30 percent1,013,819 other Aspen preferred units were outstanding. These balances are recorded within the Unsecured debt line item on the revolving andConsolidated Balance Sheets.
Covenants
The mortgage term loans, respectively. We had no borrowings on the revolving loan or term loan as of September 30, 2017. We may borrow up to $100.0 million on the term loan on or before June 1, 2018.
The A&Rsenior unsecured notes and Senior Credit Facility replaced our $450.0 million credit facility (the “Previous Facility”), which was scheduled to mature on August 19, 2019. At December 31, 2016, under the Previous Facility, we had $42.3 million in borrowings on the revolving loan and $58.0 million in borrowings on the term loan totaling $100.3 million with a weighted average interest rate of 2.14 percent.
The A&R Facility provides, and the Previous Facility provided, 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 does reduce the borrowing amount available. At September 30, 2017 and December 31, 2016, approximately $3.8 million and $4.6 million, respectively, of availability was used to back standby letters of credit.
We have a $12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least a twelve month notice of their intent to terminate the agreement. The interest rate is 100 basis points over the greater of the prime rate as quoted in the Wall Street Journal on the first business day of each month or 6.0 percent. At September 30, 2017, the effective interest rate was 7.0 percent. The outstanding balance was zero as of September 30, 2017 and $2.8 million as of December 31, 2016.
Covenants
Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. The most restrictive covenants are pursuant to (a) the terms of our debt agreements place limitations on secured borrowings and containthe Senior Credit Facility, which contains a minimum fixed charge coverage ratio, maximum leverage ratio, distribution ratio and net worth requirements.variable rate indebtedness, and (b) the terms of the senior unsecured notes, which contain a total debt to total assets ratio, secured debt to total assets ratio, consolidated income available for debt service to debt service ratio and unencumbered total asset value to unsecured debt covenants ratio. At September 30, 2017,2022, we were in compliance with all covenants.
In addition, certain of our subsidiary borrowers own properties that secure loans. These subsidiaries are consolidated within our accompanying Consolidated Financial Statements, however, each of these subsidiaries’subsidiaries' assets and credit are not available to satisfy theour debts and other obligations, of the Company,and any of itsour other subsidiaries or any other person or entity.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
8.9. Equity and Mezzanine SecuritiesTemporary Equity
Temporary Equity
Redeemable Preferred OP Units
Temporary equity includes preferred securities that are redeemable for cash at the holder's option or upon the occurrence of an event that is not solely within our control based on a fixed or determinable price. These securities are not mandatorily redeemable for cash nor do they contain a fixed maturity date. The following table sets forth the various series of redeemable preferred OP units that were outstanding as of September 30, 2022 and the related terms, and summarizes the balance included on our Consolidated Balance Sheets (in millions, except for statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Description | | OP Units Outstanding | | Exchange Rate(1) | | Annual Distribution Rate(2) | | Cash Redemption(3) | | Redemption Period | | September 30, 2022 | | December 31, 2021 |
Series D preferred OP units | | 488,958 | | | 0.8000 | | 4.0 | % | | Holder's Option | | Any time after earlier of January 31, 2024 or death of holder | | $ | 48.4 | | | $ | 49.0 | |
Series F preferred OP units | | 90,000 | | | 0.6250 | | 3.0 | % | | Holder's Option | | Any time after earlier of May 14, 2025 or death of holder | | 8.8 | | | 8.8 | |
Series G preferred OP units | | 240,710 | | | 0.6452 | | 3.2 | % | | Holder's Option | | Any time after earlier of September 30, 2025 or death of holder | | 24.6 | | | 24.8 | |
Series H preferred OP units | | 581,407 | | | 0.6098 | | 3.0 | % | | Holder's Option | | Any time after earlier of October 30, 2025 or death of holder | | 57.0 | | | 57.4 | |
Series I preferred OP units(4) | | — | | | 0.6098 | | 3.0 | % | | Holder's Option | | Any time after earlier of December 31, 2025 or death of holder | | — | | | 93.7 | |
Series J preferred OP units | | 240,000 | | | 0.6061 | | 2.85 | % | | Holder's Option | | During the 30-day period following a change of control of the Company or any time after April 21, 2026 | | 23.8 | | | 23.9 | |
Total | | 1,641,075 | | | | | | | | | | | $ | 162.6 | | | $ | 257.6 | |
(1) Exchange rates are subject to adjustment upon stock splits, recapitalizations and similar events. The exchange rates of certain series of OP units are approximated to four decimal places.
(2) Distributions are payable on the issue price of each OP unit which is $100.00 per unit for all these preferred OP units.
(3) The redemption price for each preferred OP unit redeemed will be equal to its issue price plus all accrued but unpaid distributions.
(4) All of our outstanding series I preferred OP units converted during the three months ended September 30, 2022.
Redeemable Equity Interests
The following table summarizes the redeemable equity interests included in Temporary Equity on our Consolidated Balance Sheets (in millions):
| | | | | | | | | | | | | | | | | | | | |
Equity Interest | | Description | | September 30, 2022 | | December 31, 2021 |
FPG Sun Moreno Valley 66 LLC | | In connection with the investment in land for future development in the city of Moreno Valley, California, at the property known as FPG Sun Moreno Valley 66 LLC | | $ | 0.1 | | | $ | 0.1 | |
Sun Solar Energy Project CA II | | A joint venture that operates and maintains solar energy equipment in select California communities | | 4.2 | | | 0.5 | |
Sun Solar JV | | A joint venture that operates and maintains solar energy equipment in select California communities | | 1.8 | | | 1.6 | |
FPG Sun Menifee 80 LLC | | In connection with the investment in land for future development in the city of Menifee in California, at the property known as FPG Sun Menifee 80 LLC | | 0.1 | | | 0.1 | |
NG Sun Whitewater LLC | | In connection with the investment in land at the property known as Whitewater | | 3.8 | | | 4.3 | |
NG Sun LLC | | In connection with the investment in Sun NG Resorts, a joint venture that operates a portfolio of RV communities in the United States | | 33.6 | | | 24.7 | |
NG Sun Beaver Brook LLC | | In connection with the investment in Sun NG Beaver Brook LLC, a joint venture that operates one RV communities in the United States | | 0.6 | | | — | |
Total | | | | $ | 44.2 | | | $ | 31.3 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Equity Interest - NG Sun LLC - In June 2018, in connection with the investment in Sun NG Resorts, unrelated third parties purchased $6.5 million of Series B preferred equity interests and $15.4 million of common equity interests in Sun NG Resorts (herein jointly referred to as "Equity Interest - NG Sun LLC"). In April and September 2020, in connection with certain acquisitions, $3.0 million of Series B preferred equity interests were converted to common equity interests. The Series B preferred equity interests carry a preferred return at a rate that, at any time, is equal to the interest rate on Sun NG Resorts' indebtedness at such time. The current rate of return is 5.0 percent. The Equity Interest - NG Sun LLC does not have a fixed maturity date and can be redeemed in the fourth quarters of 2024, 2025 or 2026 at the holders' option. Sun NG LLC, our subsidiary, has the right during certain periods each year, with or without cause, or for cause at any time, to elect to buy NG Sun LLC's interest. During a limited period in 2024, NG Sun LLC has the right to put its interest to Sun NG LLC. If either party exercises its option, the property management agreement will be terminated, and we are required to purchase the remaining interests of NG Sun LLC and the property management agreement at fair value. In December 2021, the operating agreement was amended and we paid Sun NG Resorts a contingent consideration earnout in the amount of $38.3 million. The contingent consideration payment was recognized as an additional purchase price payment within Land improvements and buildings in the Consolidated Balance Sheets, and within Acquisition of properties, net of cash acquired in the Consolidated Statement of Cash Flows. The Equity Interest - NG Sun LLC balance was $33.6 million and $24.7 million as of September 30, 2022 and December 31, 2021, respectively. Refer to Note 7, "Consolidated Variable Interest Entities," and Note 8, "Debt and Line of Credit," for additional information.
Permanent Equity
Universal Shelf Registration Statement
In April 2021, we filed a new universal shelf registration statement on Form S-3 with the SEC. The shelf registration statement was deemed automatically effective and provides for the registration of unspecified amounts of equity and debt securities. We have the authority to issue 200,000,000 shares of capital stock, of which 180,000,000 shares are common stock and 20,000,000 are shares of preferred stock, par value $0.01 per share. As of September 30, 2022, we had 123,880,434 shares of common stock issued and outstanding and no shares of preferred stock were issued and outstanding.
Public Equity Offerings
In May 2017,November 2021, we closedentered into two forward sale agreements relating to an underwritten registered public offering of 4,830,0004,025,000 shares of our common stock at a public offering price of $185.00 per share and completed the offering on November 18, 2021 (the "November 2021 Forward Sale Agreements"). We did not initially receive any proceeds from the sale of shares of our common stock by the forward purchaser or its affiliates. In April 2022, we completed the physical settlement of the 4,025,000 shares of common stock at a gross priceand received aggregate net proceeds of $86.00 per share. Proceeds from$705.4 million. We used the offering were $408.9 million after deducting expenses relatednet proceeds to the offering. We utilized proceeds from the offering to fully repay borrowings outstanding onunder our senior revolving credit facility, redeem certain preferred securities, and fund acquisition activities. We intend to utilize the remaining proceeds to fund possible future acquisitions, redeem preferred stockSenior Credit Facility, and for working capital and general corporate purposes.
In September 2016, we closed an underwritten registered public offering of 3,737,500 shares of common stock at a gross price of $76.50 per share. Proceeds from the offering were $283.6 million after deducting expenses related to the offering, which were used to repay borrowings outstanding on the revolving loan under our senior revolving credit facility.
In June 2016, at the closing of the Carefree acquisition, we issued the seller 3,329,880 shares of our common stock at an issuance price of $67.57 per share or $225.0 million in common stock.
In March 2016, we closed an underwritten registered public offering of 6,037,500 shares of common stock at a price of $66.50 per share. Net proceeds from the offering of $385.4 million after deducting discounts and expenses related to the offering, were used to fund a portion of the purchase price for Carefree.
At the Market Offering Sales Agreement
In July 2017,December 2021, we entered into a new atan At the market offeringMarket Offering Sales Agreement with certain sales agreement (the “Sales Agreement”) with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc., RBC Capital Markets, LLC, BTIG, LLC, Jefferies LLC, Credit Suisse Securities (USA) LLCagents and Samuel A. Ramirez & Company, Inc. (each, a “Sales Agent;” collectively, the “Sales Agents”), wherebyforward sellers pursuant to which we may offer and sell, sharesfrom time to time, up to an aggregate gross sales price of $1.25 billion of our common stock having an aggregate offering price of up to $450.0 million, from time to time(the "Sales Agreement"), through the Sales Agents.sales agents, acting as our sales agents or, if applicable, as forward sellers, or directly to the sales agents as principals for their own accounts. The Sales Agentssales agents and forward sellers are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold from time to time under the Sales Agreement.
Concurrent with entry We simultaneously terminated our prior sales agreement upon entering into the Sales Agreement. Through September 30, 2022, we had entered into forward sales agreements under our Sales Agreement our prior agreement dated June 17, 2015, with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., (the “Prior Agreement”) was terminated. The Prior Agreement hadfor an aggregate offeringgross sales price of up$160.6 million.
During the three months ended September 30, 2022, we entered into forward sale agreements with respect to $250.0 million. We did not incur any penalties in connection with termination of the Prior Agreement.
Issuances15,000 shares of common stock under our Sales Agreement for $2.6 million. Additionally, we settled all of our outstanding forward sale agreements with respect to 1,526,212 shares of common stock which includes 620,109; 600,503; 290,600; and 15,000 shares of common stock from the Prior Agreementthree months ended December 31, 2021, March 31, June 30 and September 30, 2022 forward sale agreements, respectively. The net proceeds of $275.5 million from the settlement of these forward sale agreements were used to repay borrowings outstanding under our senior credit facility.
During the three months ended June 30, 2022, we completed the physical settlement of 1,200,000 shares of common stock under our prior at the market offering program and received net proceeds of $229.5 million. Additionally, we entered into forward sales agreements with respect 290,600 shares of common stock for $50.1 million, under our Sales Agreement. These forward sale agreements were settled during 2017 were as follows:the three months ended September 30, 2022.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
|
| | | | | | | | | |
Quarter Ended | | Common Stock Issued | Weighted Average Sales Price | Net Proceeds ($ millions) |
June 30, 2017 | | 400,000 |
| $ | 85.01 |
| $ | 33.6 |
|
March 31, 2017 | | 280,502 |
| $ | 76.47 |
| $ | 21.2 |
|
During the three months ended March 31, 2022, we entered into forward sales agreements with respect to 600,503 shares of common stock for $107.9 million, under our Sales Agreement. These forward sale agreements were settled during the three months ended September 30, 2022.
During the year ended December 31, 2021, we entered into forward sale agreements with respect to 1,820,109 shares of common stock under our prior at the market offering program for $356.5 million. We completed the physical settlement of 1,200,000 and 620,109 shares of common stock during the three months ended June 30, 2022 and September 30, 2022, respectively.
Issuances of Common Stock and OP Units in Connection with the Acquisition of Certain Properties
Issuance of Common Stock and Common OP Units
In September 2017,April 2022, we issued 298,900an aggregate of 186,044 shares of our common stock totaling $26.4 million in connection with the acquisition of Pismo Dunes.Park Holidays.
InIssuances of Common OP Units
| | | | | | | | | | | | | | |
Nine Months Ended September 30, 2022 and 2021 | | Common OP Units Issued | | Related Acquisition |
May 2022 | | 10,854 | | (1) | Rudgate |
May 2022 | | 5,605 | | | Kittery Point |
February 2022 | | 14,683 | | | Jarrett Bay Boatworks |
| | | | |
| | | | |
| | | | |
(1) During the three months ended June 2017,30, 2022, we acquired the noncontrolling equity interest held by third parties in Rudgate for a total purchase price of $3.1 million. As consideration, we issued a total of 23,31110,854 common OP units and paid the remainder of the purchase price in cash. The acquisition resulted in the Company owning a 100 percent controlling interest in Rudgate. Refer to Note 7, "Consolidated Variable Interest Entities," for total considerationadditional information.
Issuances of $2.0 millionPreferred OP Units
Issuance of Series E Preferred OP Units - In January 2020, we issued 90,000 Series E preferred OP units in connection with the acquisition activity.of Sun Outdoors Cape Cod. The Series E preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 5.25 percent until the second anniversary of the issuance date. Commencing with the second anniversary of the issuance date, the Series E preferred OP units carry a preferred return of 5.5 percent. Commencing with the first anniversary of the issuance date, subject to certain limitations, each Series E preferred OP unit can be exchanged for our common stock equal to the quotient obtained by dividing $100.00 by $145.00 (as such ratio is subject to adjustments for certain capital events). As of September 30, 2022, 80,000 Series E preferred OP units were outstanding.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Conversions
Conversions to Common Stock - Subject to certain limitations, holders can convert certain series of stock and OP units to shares of our common stock at any time. ConversionsBelow is the activity of conversions during the nine month periods ended September 30, 2017 and 2016 were as follows:
|
| | | | | | | | | | | | |
| | | Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 |
Series | | Conversion Rate | Units/Shares Converted | Common Stock | | Units/Shares Converted | Common Stock |
Common OP unit | | 1 |
| 25,238 |
| 25,238 |
| | 24,896 |
| 24,896 |
|
Series A-1 preferred OP unit | | 2.439 |
| 18,319 |
| 44,676 |
| | 11,490 |
| 28,021 |
|
Series A-4 preferred OP unit | | 0.4444 |
| 9,000 |
| 3,996 |
| | 12,389 |
| 5,505 |
|
Series A-4 preferred stock | | 0.4444 |
| 158,036 |
| 70,238 |
| | 385,242 |
| 171,218 |
|
Series C preferred OP unit | | 1.11 |
| 16,806 |
| 18,651 |
| | 7,000 |
| 7,768 |
|
Dividends
Dividend distributions for the quarter ended September 30, 2017 were as follows:
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| | | | | | | | | |
Dividend | | Record Date | Payment Date | Distribution per Share | Total Distribution (thousands) |
Common Stock, Common OP units and Restricted Stock | | 9/29/2017 | 10/16/2017 | $ | 0.67 |
| $ | 55,006 |
|
Series A Preferred Stock | | 9/29/2017 | 10/16/2017 | $ | 0.4453125 |
| $ | 441 |
|
Series A-4 Preferred Stock | | 9/15/2017 | 10/2/2017 | $ | 0.40625 |
| $ | 1,514 |
|
Redemptions
If certain change of control transactions occur or if our common stock ceases to be listed or quoted on an exchange or quotation system, then at any time after November 26, 2019, we or the holders of shares of Series A-4 Preferred Stock and Series A-4 preferred OP units may cause all or any of those shares or units to be redeemed for cash at a redemption price equal to the sum of (i) the greater of (x) the amount that the redeemed shares of Series A-4 Preferred Stock and Series A-4 preferred OP units would have received in such transaction if they had been converted into shares of our common stock immediately prior to such transaction, or (y) $25.00 per share, plus (ii) any accrued and unpaid distributions thereon to, but not including, the redemption date.
In June 2017, we redeemed 438,448 shares of Series A-4 Cumulative Convertible Preferred Stock and 200,000 shares of Series A-4 preferred OP units from Green Courte Real Estate Partners III, LLC, GCP Fund III REIT LLC and GCP Fund III Ancillary Holding, LLC (collectively, the “Green Courte Entities”) for total consideration of $24.7 million. Accrued dividends totaling $0.2 million were also paid in connection with the redemptions. The Green Courte Entities and other affiliates were the sellers of the American Land Lease portfolio which we acquired in 2014 and 2015.
Repurchase Program
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 buyback program during the nine months ended September 30, 2017 or 2016. There is no expiration date specified for2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Nine Months Ended |
| | | | September 30, 2022 | | September 30, 2021 |
Series | | Conversion Rate | | Units / Shares Converted | | Common Stock(1) | | Units / Shares Converted | | Common Stock(1) |
Common OP units | | 1.0000 | | | 139,841 | | | 139,841 | | | 78,724 | | | 78,724 | |
Series A-1 preferred OP units | | 2.4390 | | | 4,695 | | | 11,444 | | | 19,296 | | | 47,058 | |
| | | | | | | | | | |
| | | | | | | | | | |
Series C preferred OP units | | 1.1100 | | | 150 | | | 166 | | | — | | | — | |
Series E preferred OP units | | 0.6897 | | 10,000 | | | 6,896 | | | — | | | — | |
Series I preferred OP units | | 0.6098 | | 922,000 | | | 562,195 | | | — | | | — | |
(1)Calculation may yield minor differences due to rounding incorporated in the buyback program.above numbers.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Distributions
9.
Distributions declared for the three months ended September 30, 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Common Stock, Common OP units and Restricted Stock Distributions | | Record Date | | Payment Date | | Distribution Per Share | | Total Distribution (in Millions) |
September 30, 2022 | | 9/30/2022 | | 10/14/2022 | | $ | 0.88 | | | $ | 111.2 | |
| | | | | | | | |
10. Share-Based Compensation
We haveAs of September 30, 2022, we had two share-based compensation plans;plans: the Sun Communities, Inc. 2015 Equity Incentive Plan (“2015(as amended, the "2015 Equity Incentive Plan”Plan") and the First Amended and Restated 2004 Non-Employee Director Option Plan (“2004(as amended, the "2004 Non-Employee Director Option Plan”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. Time based awards for directors generally vest over three years. Time based awards for key employees and executives generally vest over five years. Market condition awards for executives generally vest after three years.
First Amendment to the 2015 Equity Incentive Plan
At our 2022 Annual Meeting on May 17, 2022, our shareholders approved the First Amendment to the 2015 Equity Incentive Plan. The First Amendment increased the number of shares of common stock that may be issued under the 2015 Equity Incentive Plan to 4,750,000. As of September 30, 2022, there were 3,123,980 shares available for future issuance.
United Kingdom Sub-Plan
In April 2022, the Board of Directors adopted the UK Sub-Plan under the 2015 Equity Incentive Plan, which is solely applicable to employee participants located in the UK, and establishes certain rules and limitations for participation in the 2015 Equity Incentive Plan by UK employees for the purpose of complying with applicable UK laws.
During the nine months ended September 30, 2017,2022 and 2021, shares were granted as follows:
|
| | | | | | | | | | | | | | | | | | |
Grant Period | | Type | | Plan | | Shares Granted | | Grant Date Fair Value Per Share | | Vesting Type | | Vesting Anniversary | | Percentage |
| | | | | | | | | | | | | | |
Q3 2017 | | Directors | | 2004 Non-Employee Director Option Plan | | 1,300 |
| | $ | 87.11 |
| (1) | Time Based | | August 11, 2020 | | 100.0 | % |
| | | | | | | | | | | | | | |
Q2 2017 | | Key Employees | | 2015 Equity Incentive Plan | | 2,500 |
| | $ | 84.18 |
| (1) | Time Based | | April 24, 2019 | | 35.0 | % |
| | | | | | | | | | | | April 24, 2020 | | 35.0 | % |
| | | | | | | | | | | | April 24, 2021 | | 20.0 | % |
| | | | | | | | | | | | April 24, 2022 | | 5.0 | % |
| | | | | | | | | | | | April 24, 2023 | | 5.0 | % |
| | | | | | | | | | | | | | |
Q1 2017 | | Executive Officers | | 2015 Equity Incentive Plan | | 100,000 |
| | $ | 79.30 |
| (2) | Time Based | | March 14, 2020 | | 20.0 | % |
| | | | | | | | | | | | March 14, 2021 | | 30.0 | % |
| | | | | | | | | | | | March 14, 2022 | | 35.0 | % |
| | | | | | | | | | | | March 14, 2023 | | 10.0 | % |
| | | | | | | | | | | | March 14, 2024 | | 5.0 | % |
| | | | | | | | | | | | | | |
Q1 2017 | | Executive Officers | | 2015 Equity Incentive Plan | | 100,000 |
| | $ | 79.30 |
| (2) | Market & Performance Conditions | | Multiple tranches through March 2022 |
| | | | | | | | | | | | | | |
Q1 2017 | | Directors | | 2004 Non-Employee Director Option Plan | | 15,600 |
| | $ | 79.02 |
| (1) | Time Based | | February 8, 2020 | | 100.0 | % |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grant Period | | Type | | Plan | | Shares Granted | | Grant Date Fair Value Per Share | | Vesting Type | | | | |
2022 | | Key Employees | | 2015 Equity Incentive Plan | | 203,210 | | | $ | 179.23 | | (1) | Time Based | | |
2022 | | Executive Officers | | 2015 Equity Incentive Plan | | 66,000 | | | $ | 178.20 | | (1) | Time Based | | |
2022 | | Executive Officers | | 2015 Equity Incentive Plan | | 91,500 | | | $ | 124.88 | | (2) | Market Condition | (3) | | | |
2022 | | Directors | | 2004 Non-Employee Director Option Plan | | 11,900 | | | $ | 197.00 | | (1) | Time Based | | | | |
| | | | | | | | | | | | | | |
2021 | | Key Employees | | 2015 Equity Incentive Plan | | 90,406 | | | $ | 146.03 | | (1) | Time Based | | |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 72,400 | | | $ | 151.67 | | (1) | Time Based | | |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 101,100 | | | $ | 93.41 | | (2) | Market Condition | (3) | | | |
2021 | | Directors | | 2004 Non-Employee Director Option Plan | | 11,709 | | | $ | 148.28 | | (1) | Time Based | | | | |
| | | | | | | | | | | | |
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(1) TheRepresents the weighted average fair value per share of the grant was determined by using the closing price of our common stock on the datedates the shares were issued.awarded.
(2)Represents the weighted average fair value per share of the Monte Carlo simulation fair value price of our market condition awards on the dates the shares were awarded.
(3)Share-based compensation for restricted stock awards with performancemarket conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditionsvest using a Monte Carlo simulation.simulation to determine fair value.
During the nine months ended September 30, 2017 and 2016, 1,500 and 9,349 shares of common stock, respectively, were issued in connection with the exercise of stock options, and the net proceeds received during both periods were $0.1 million.
The vesting requirements for 186,771257,663 and 288,024 restricted shares granted to our executives, directors and employees were satisfied during the nine months ended September 30, 2017.2022 and 2021, respectively.
10.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
11. Segment Reporting
We groupASC Topic 280, "Segment Reporting," establishes standards for the way that business enterprises report information about operating segments in its financial statements. As described in Note 1, "Basis of Presentation,"we analyze our operating segments into reportable segments that provide similar products and services. Each operating segment has discrete financial information evaluated regularly by our chief operating decision maker in evaluating and assessing performance. We have two reportableresults through the following segments: (i) Real Property OperationsManufactured home ("MH") communities, (ii) Recreational vehicle ("RV") communities and (ii) Home Sales and Rentals. (iii) Marina.
The Real Property OperationsMH segment owns, operates, develops, or has an interest in, a portfolio of MH communities throughout the U.S. and RV communities,a portfolio of holiday parks throughout the UK, and is in the business of acquiring, operating and expandingdeveloping ground-up MH and RV communities.communities to provide affordable housing solutions to residents. The Home Sales and RentalsMH segment offers MH and RV park modelalso provides manufactured home sales and leasing services to tenants and prospective tenants of our communities.
Transactions between our segments are eliminatedThe RV segment owns, operates, develops, or has an interest in, consolidation. Transienta portfolio of RV revenuecommunities and is included in the Real Property Operationsbusiness of acquiring, operating and developing ground-up RV communities throughout the U.S. and in Canada. It also provides leasing services for vacation rentals within the RV communities.
Properties containing both MH and RV sites are classified to a segment revenuesbased on the predominant site counts at the properties.
The Marina segment owns, operates, and develops marinas, and is expected to approximate $77.8 million annually. This transient RV revenue was recognized 27.2 percent, 20.2 percent, and 36.9 percent in the first, second,business of acquiring and third quarters, respectively,operating marinas throughout the U.S., with the majority of such marinas concentrated in coastal regions, and is expected to be 15.7 percentothers located in the fourth quarter. In 2016, transient revenue was $58.2 million. We recognized 17.5 percent in the first quarter, 18.7 percent in the second quarter, 45.2 percent in the third quarter,various inland regions and 18.6 percent in the fourth quarter.Puerto Rico.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
A presentation of segment financial information is summarized as follows (in thousands)millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2022 | | September 30, 2021 |
| MH | | RV | | Marina | | Consolidated | | MH | | RV | | Marina | | Consolidated |
Operating revenues | $ | 419.1 | | | $ | 263.4 | | | $ | 228.1 | | | $ | 910.6 | | | $ | 275.6 | | | $ | 233.9 | | | $ | 163.4 | | | $ | 672.9 | |
Operating expenses / Cost of sales | 200.5 | | | 118.1 | | | 136.8 | | | 455.4 | | | 118.5 | | | 109.2 | | | 98.9 | | | 326.6 | |
NOI | $ | 218.6 | | | $ | 145.3 | | | $ | 91.3 | | | $ | 455.2 | | | $ | 157.1 | | | $ | 124.7 | | | $ | 64.5 | | | $ | 346.3 | |
Adjustments to arrive at net income | | | | | | | | | | | | | | | |
Interest income | | | | | | | 11.2 | | | | | | | | | 2.6 | |
Brokerage commissions and other revenues, net | | | | | | | 10.8 | | | | | | | | | 8.8 | |
| | | | | | | | | | | | | | | |
General and administrative expense | | | | | | | (69.1) | | | | | | | | | (43.2) | |
Catastrophic event-related charges, net | | | | | | | (12.2) | | | | | | | | | (0.3) | |
Business combination expense, net | | | | | | | (8.4) | | | | | | | | | — | |
Depreciation and amortization | | | | | | | (151.3) | | | | | | | | | (127.1) | |
| | | | | | | | | | | | | | | |
Loss on extinguishment of debt (see Note 8) | | | | | | | (4.0) | | | | | | | | | — | |
Interest expense | | | | | | | (61.7) | | | | | | | | | (39.0) | |
Interest on mandatorily redeemable preferred OP units / equity | | | | | | | (1.0) | | | | | | | | | (1.1) | |
Gain / (loss) on remeasurement of marketable securities | | | | | | | (7.2) | | | | | | | | | 12.0 | |
Gain / (loss) on foreign currency exchanges | | | | | | | 14.9 | | | | | | | | | (7.0) | |
Gain / (loss) on dispositions of properties | | | | | | | (0.8) | | | | | | | | | 108.1 | |
Other income / (expense), net | | | | | | | 2.8 | | | | | | | | | (9.3) | |
Gain / (loss) on remeasurement of notes receivable | | | | | | | (0.1) | | | | | | | | | 0.1 | |
Income from nonconsolidated affiliates (see Note 6) | | | | | | | 2.0 | | | | | | | | | 0.9 | |
Loss on remeasurement of investment in nonconsolidated affiliates | | | | | | | (0.4) | | | | | | | | | (0.1) | |
Current tax expense | | | | | | | (7.3) | | | | | | | | | (0.4) | |
Deferred tax benefit / (expense) | | | | | | | 3.6 | | | | | | | | | (1.2) | |
Net Income | | | | | | | 177.0 | | | | | | | | | 250.1 | |
Less: Preferred return to preferred OP units / equity interests | | | | | | | 2.5 | | | | | | | | | 3.1 | |
Less: Income attributable to noncontrolling interests | | | | | | | 11.9 | | | | | | | | | 15.3 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net Income Attributable to SUI Common Shareholders | | | | | | | $ | 162.6 | | | | | | | | | $ | 231.7 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Revenues | $ | 215,280 |
| | $ | 45,954 |
| | $ | 261,234 |
| | $ | 200,770 |
| | $ | 43,242 |
| | $ | 244,012 |
|
Operating expenses/Cost of sales | 82,295 |
| | 31,869 |
| | 114,164 |
| | 78,922 |
| | 28,285 |
| | 107,207 |
|
Net operating income/Gross profit | 132,985 |
| | 14,085 |
| | 147,070 |
| | 121,848 |
| | 14,957 |
| | 136,805 |
|
Adjustments to arrive at net income / (loss): | | | | | | | | | | | |
Interest and other revenues, net | 7,011 |
| | — |
| | 7,011 |
| | 5,689 |
| | — |
| | 5,689 |
|
Home selling expenses | — |
| | (3,290 | ) | | (3,290 | ) | | — |
| | (2,643 | ) | | (2,643 | ) |
General and administrative | (15,677 | ) | | (2,590 | ) | | (18,267 | ) | | (14,309 | ) | | (2,266 | ) | | (16,575 | ) |
Transaction costs | (2,153 | ) | | (14 | ) | | (2,167 | ) | | (4,171 | ) | | (20 | ) | | (4,191 | ) |
Depreciation and amortization | (48,624 | ) | | (15,608 | ) | | (64,232 | ) | | (47,323 | ) | | (14,160 | ) | | (61,483 | ) |
Interest | (32,082 | ) | | (3 | ) | | (32,085 | ) | | (33,797 | ) | | (3 | ) | | (33,800 | ) |
Interest on mandatorily redeemable preferred OP units | (790 | ) | | — |
| | (790 | ) | | (789 | ) | | — |
| | (789 | ) |
Catastrophic weather related charges | (7,718 | ) | | (38 | ) | | (7,756 | ) | | — |
| | — |
| | — |
|
Other income, net | 3,345 |
| | — |
| | 3,345 |
| | — |
| | — |
| | — |
|
Current tax benefit / (expense) | 210 |
| | (172 | ) | | 38 |
| | (242 | ) | | (41 | ) | | (283 | ) |
Deferred tax benefit | 81 |
| | — |
| | 81 |
| | — |
| | — |
| | — |
|
Income from affiliate transactions | — |
| | — |
| | — |
| | 500 |
| | — |
| | 500 |
|
Net income / (loss) | 36,588 |
| | (7,630 | ) | | 28,958 |
| | 27,406 |
| | (4,176 | ) | | 23,230 |
|
Less: Preferred return to preferred OP units | 1,112 |
| | — |
| | 1,112 |
| | 1,257 |
| | — |
| | 1,257 |
|
Less: Amounts attributable to noncontrolling interests | 2,174 |
| | (398 | ) | | 1,776 |
| | 1,133 |
| | (254 | ) | | 879 |
|
Net income / (loss) attributable to Sun Communities, Inc. | 33,302 |
| | (7,232 | ) | | 26,070 |
| | 25,016 |
| | (3,922 | ) | | 21,094 |
|
Less: Preferred stock distributions | 1,955 |
| | — |
| | 1,955 |
| | 2,197 |
| | — |
| | 2,197 |
|
Net income / (loss) attributable to Sun Communities, Inc. common stockholders | $ | 31,347 |
| | $ | (7,232 | ) | | $ | 24,115 |
| | $ | 22,819 |
| | $ | (3,922 | ) | | $ | 18,897 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
| MH | | RV | | Marina | | Consolidated | | MH | | RV | | Marina | | Consolidated |
Operating revenues | $ | 1,073.4 | | | $ | 569.5 | | | $ | 599.8 | | | $ | 2,242.7 | | | $ | 793.3 | | | $ | 492.5 | | | $ | 414.7 | | | $ | 1,700.5 | |
Operating expenses / Cost of sales | 489.9 | | | 284.8 | | | 376.2 | | | 1,150.9 | | | 326.8 | | | 247.3 | | | 256.0 | | | 830.1 | |
Net Operating Income / Gross Profit | $ | 583.5 | | | $ | 284.7 | | | $ | 223.6 | | | $ | 1,091.8 | | | $ | 466.5 | | | $ | 245.2 | | | $ | 158.7 | | | $ | 870.4 | |
Adjustments to arrive at net income | | | | | | | | | | | | | | | |
Interest income | | | | | | | 25.3 | | | | | | | | | 8.0 | |
Brokerage commissions and other revenues, net | | | | | | | 27.4 | | | | | | | | | 21.7 | |
| | | | | | | | | | | | | | | |
General and administrative expense | | | | | | | (187.0) | | | | | | | | | (126.7) | |
Catastrophic event-related charges, net | | | | | | | (12.3) | | | | | | | | | (3.1) | |
Business combination expense, net | | | | | | | (23.9) | | | | | | | | | (1.0) | |
Depreciation and amortization | | | | | | | (450.0) | | | | | | | | | (378.1) | |
| | | | | | | | | | | | | | | |
Loss on extinguishment of debt (see Note 8) | | | | | | | (4.4) | | | | | | | | | (8.1) | |
Interest expense | | | | | | | (162.2) | | | | | | | | | (116.2) | |
Interest on mandatorily redeemable preferred OP units / equity | | | | | | | (3.1) | | | | | | | | | (3.1) | |
Gain / (loss) on remeasurement of marketable securities | | | | | | | (74.0) | | | | | | | | | 43.2 | |
Gain / (loss) on foreign currency exchanges | | | | | | | 21.7 | | | | | | | | | (7.1) | |
Gain on dispositions of properties | | | | | | | 12.5 | | | | | | | | | 108.1 | |
Other income / (expense), net | | | | | | | 2.6 | | | | | | | | | (10.0) | |
Gain on remeasurement of notes receivable | | | | | | | 0.1 | | | | | | | | | 0.6 | |
Income from nonconsolidated affiliates (see Note 6) | | | | | | | 3.8 | | | | | | | | | 2.9 | |
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates | | | | | | | 0.1 | | | | | | | | | (0.1) | |
Current tax expense | | | | | | | (12.5) | | | | | | | | | (1.4) | |
Deferred tax benefit / (expense) | | | | | | | 3.9 | | | | | | | | | (1.1) | |
Net Income | | | | | | | 259.8 | | | | | | | | | 398.9 | |
Less: Preferred return to preferred OP units / equity interests | | | | | | | 8.6 | | | | | | | | | 9.0 | |
Less: Income attributable to noncontrolling interests | | | | | | | 13.9 | | | | | | | | | 22.6 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
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Net Income Attributable to SUI Common Shareholders | | | | | | | $ | 237.3 | | | | | | | | | $ | 367.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| MH | | RV | | Marina | | Consolidated | | MH | | RV | | Marina | | Consolidated |
Identifiable Assets | | | | | | | | | | | | | | | |
Investment property, net | $ | 6,920.1 | | | $ | 3,695.9 | | | $ | 2,996.1 | | | $ | 13,612.1 | | | $ | 5,172.2 | | | $ | 3,639.0 | | | $ | 2,614.3 | | | $ | 11,425.5 | |
Cash, cash equivalents and restricted cash | 61.8 | | | 38.0 | | | 12.2 | | | 112.0 | | | 36.7 | | | 19.9 | | | 21.6 | | | 78.2 | |
Marketable securities | 65.0 | | | 35.4 | | | — | | | 100.4 | | | 121.0 | | | 65.9 | | | — | | | 186.9 | |
Inventory of manufactured homes | 146.2 | | | 7.3 | | | — | | | 153.5 | | | 44.3 | | | 6.8 | | | — | | | 51.1 | |
Notes and other receivables, net | 379.0 | | | 82.2 | | | 49.8 | | | 511.0 | | | 374.2 | | | 55.5 | | | 39.9 | | | 469.6 | |
Goodwill | 430.5 | | | 9.5 | | | 541.5 | | | 981.5 | | | — | | | — | | | 495.4 | | | 495.4 | |
Other intangible assets, net | 95.0 | | | 33.9 | | | 274.3 | | | 403.2 | | | 27.4 | | | 22.7 | | | 256.7 | | | 306.8 | |
Other assets, net | 327.2 | | | 58.1 | | | 225.6 | | | 610.9 | | | 198.0 | | | 63.6 | | | 219.0 | | | 480.6 | |
Total Assets | $ | 8,424.8 | | | $ | 3,960.3 | | | $ | 4,099.5 | | | $ | 16,484.6 | | | $ | 5,973.8 | | | $ | 3,873.4 | | | $ | 3,646.9 | | | $ | 13,494.1 | |
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| Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Revenues | $ | 592,864 |
| | $ | 129,093 |
| | $ | 721,957 |
| | $ | 482,002 |
| | $ | 117,683 |
| | $ | 599,685 |
|
Operating expenses/Cost of sales | 220,902 |
| | 84,820 |
| | 305,722 |
| | 176,176 |
| | 76,440 |
| | 252,616 |
|
Net operating income/Gross profit | 371,962 |
| | 44,273 |
| | 416,235 |
| | 305,826 |
| | 41,243 |
| | 347,069 |
|
Adjustments to arrive at net income / (loss): | | | | | | | | | | | |
Interest and other revenues, net | 18,587 |
| | — |
| | 18,587 |
| | 15,459 |
| | — |
| | 15,459 |
|
Home selling expenses | — |
| | (9,391 | ) | | (9,391 | ) | | — |
| | (7,240 | ) | | (7,240 | ) |
General and administrative | (49,082 | ) | | (7,106 | ) | | (56,188 | ) | | (40,300 | ) | | (6,610 | ) | | (46,910 | ) |
Transaction costs | (7,001 | ) | | 11 |
| | (6,990 | ) | | (27,990 | ) | | 99 |
| | (27,891 | ) |
Depreciation and amortization | (144,143 | ) | | (45,576 | ) | | (189,719 | ) | | (118,296 | ) | | (41,269 | ) | | (159,565 | ) |
Extinguishment of debt | (759 | ) | | — |
| | (759 | ) | | — |
| | — |
| | — |
|
Interest | (95,754 | ) | | (11 | ) | | (95,765 | ) | | (88,512 | ) | | (10 | ) | | (88,522 | ) |
Interest on mandatorily redeemable preferred OP units | (2,361 | ) | | — |
| | (2,361 | ) | | (2,363 | ) | | — |
| | (2,363 | ) |
Catastrophic weather related charges | (8,075 | ) | | (49 | ) | | (8,124 | ) | | — |
| | — |
| | — |
|
Other income, net | 5,341 |
| | (1 | ) | | 5,340 |
| | — |
| | — |
| | — |
|
Current tax expense | 145 |
| | (278 | ) | | (133 | ) | | (445 | ) | | (122 | ) | | (567 | ) |
Deferred tax benefit | 745 |
| | — |
| | 745 |
| | — |
| | — |
| | — |
|
Income from affiliate transactions | — |
| | — |
| | — |
| | 500 |
| | — |
| | 500 |
|
Net income / (loss) | 89,605 |
| | (18,128 | ) | | 71,477 |
| | 43,879 |
| | (13,909 | ) | | 29,970 |
|
Less: Preferred return to preferred OP units | 3,482 |
| | — |
| | 3,482 |
| | 3,793 |
| | — |
| | 3,793 |
|
Less: Amounts attributable to noncontrolling interests | 5,163 |
| | (984 | ) | | 4,179 |
| | 1,392 |
| | (932 | ) | | 460 |
|
Net income / (loss) attributable to Sun Communities, Inc. | 80,960 |
| | (17,144 | ) | | 63,816 |
| | 38,694 |
| | (12,977 | ) | | 25,717 |
|
Less: Preferred stock distributions | 6,233 |
| | — |
| | 6,233 |
| | 6,748 |
| | — |
| | 6,748 |
|
Net income / (loss) attributable to Sun Communities, Inc. common stockholders | $ | 74,727 |
| | $ | (17,144 | ) | | $ | 57,583 |
| | $ | 31,946 |
| | $ | (12,977 | ) | | $ | 18,969 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Identifiable assets: | | | | | | | | | | | |
Investment property, net | $ | 5,112,302 |
| | $ | 461,523 |
| | $ | 5,573,825 |
| | $ | 5,019,165 |
| | $ | 450,316 |
| | $ | 5,469,481 |
|
Cash and cash equivalents | 124,434 |
| | 13,014 |
| | 137,448 |
| | 3,705 |
| | 4,459 |
| | 8,164 |
|
Inventory of manufactured homes | — |
| | 25,741 |
| | 25,741 |
| | — |
| | 21,632 |
| | 21,632 |
|
Notes and other receivables, net | 132,748 |
| | 13,012 |
| | 145,760 |
| | 68,901 |
| | 12,278 |
| | 81,179 |
|
Collateralized receivables, net | 134,015 |
| | — |
| | 134,015 |
| | 143,870 |
| | — |
| | 143,870 |
|
Other assets, net | 137,303 |
| | 3,744 |
| | 141,047 |
| | 143,650 |
| | 2,800 |
| | 146,450 |
|
Total assets | $ | 5,640,802 |
| | $ | 517,034 |
| | $ | 6,157,836 |
| | $ | 5,379,291 |
| | $ | 491,485 |
| | $ | 5,870,776 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
11. 12. Income Taxes
We have elected to be taxed as a real estate investment trust (“REIT”("REIT") pursuant to Section 856(c) of the Internal Revenue Code of 1986, as amended (“Code”("Code"). In order for us to qualify as a REIT, at least 95 percent of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90 percent of its REIT taxable income (calculated without any deduction for dividends paid and excluding capital gain) to its stockholdersshareholders and meet other tests.
Qualification as a REIT involves the satisfaction of numerous requirements (on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are 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 requires us to continually monitor our tax status. We analyzed the various REIT tests and confirmed that we continued to qualify as a REIT for the quarternine months ended September 30, 2017.2022.
As a REIT, we generally will not be subject to United States (“U.S.”) federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholdersshareholders 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).rates. Even if we qualify as a REIT, we may be subject to certain state and local income taxes, as well as U.S. federal income and excise taxes on our undistributed income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state and local income taxes. The Company isWe are also subject to local income taxes in Canada, as a result ofPuerto Rico and the acquisition of CarefreeUnited Kingdom due to certain properties located in 2016.those jurisdictions. We do not provide for withholding taxes on our undistributed earnings from our Canadian subsidiaries as they are reinvested and will continue to be reinvested indefinitely outside of the U.S.
Our taxable REIT subsidiaries However, we are subject to U.S. federal incomeAustralian withholding taxes as well as state and local income and franchise taxes. In addition,on distributions from our Canadian subsidiariesinvestment in Ingenia Communities Group. As currently structured, we are not subject to income tax in Canada.UK withholding taxes on distributions from our United Kingdom properties.
Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the basesbasis 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, depreciation and basis differences between tax and U.S. GAAP on our Canadian investments. Generally,GAAP. Our deferred tax assets that have a full valuation allowances are recorded against all U.S. federalallowance relate to our taxable REIT subsidiaries. As of September 30, 2022, we had $287.1 million of net deferred tax assets. For Canadian purposes, aliabilities, comprised of deferred tax assets, net of valuation allowance of $2.3 million, and deferred tax liabilities of $289.4 million. The deferred tax liability balance is comprised primarily of $22.5basis differences in our foreign investment in properties in the United Kingdom and Canada. As of December 31, 2021, we had $20.7 million has beenof net deferred tax liabilities, comprised of deferred tax assets, net of valuation allowance of $3.0 million, and deferred tax liabilities of $23.7 million. These balances include a net deferred tax asset, net of valuation allowance, in the United States of $1.2 million as of September 30, 2022 and December 31, 2021. The net deferred tax assets and deferred tax liabilities are recorded in relation to a corporate entitywithin Other Assets and included in “Other liabilities” inOther Liabilities, respectively, on our Consolidated Balance Sheets as of September 30, 2017. There are no U.S. federal deferred tax assets or liabilities included in our Consolidated Balance Sheets as of September 30, 20172022 and December 31, 2016.2021.
We had no unrecognized tax benefits as of September 30, 20172022 and 2016.2021. We do not expect significant increases or decreaseschanges in tax positions that would result in unrecognized tax benefits due to changes in tax positions within one year of September 30, 2017.2022.
We recorded a current tax benefit for federal, state, and Canadian income taxes of approximately $0.1 million, and current tax expense of $0.3 million forFor the three months ended September 30, 2017 and 2016, respectively, and $0.1 million and $0.6 million of current tax expense for the nine months ended September 30, 2017 and 2016, respectively.
We recorded $0.1 million and $0.7 million of deferred tax benefit in our Consolidated Statements of Operations for the three months and nine months ended September 30, 2017,2022, we recorded current tax expense for federal, state, Canadian, Puerto Rican, and UK income taxes and Australian withholding taxes totaling $7.3 million and $12.5 million, respectively. There was no deferredFor the three and nine months ended September 30, 2021, we recorded current tax benefit or expense recorded for federal, state, Canadian income taxes and Australian withholding taxes totaling $0.4 million and $1.4 million, respectively.
For the three months orand nine months ended September 30, 2016.2022, we recorded a deferred tax benefit of $3.6 million and $3.9 million, respectively. For the three and nine months ended September 30, 2021, we recorded deferred tax expense of $1.2 million and $1.1 million, respectively.
SHS is currently under audit by the Internal Revenue Service for the tax year 2015.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
12. 13. Earnings Per Share
Earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis. We calculate diluted EPS using the more dilutive of the treasury stock method and the two-class method for stock option and restricted common shares, the treasury stock method for forward equity sales and the if converted method for convertible units.
From time to time, we enter into forward equity sales agreements, which are discussed in Note 9, "Equity and Temporary Equity." We considered the potential dilution resulting from the forward equity sales agreements on the EPS calculations. At inception, the agreements do not have an effect on the computation of basic EPS as no shares are delivered unless there is a physical settlement. Common shares issued upon the physical settlement of the forward equity sales agreements, weighted for the period these common shares are outstanding, are included in the denominator of basic EPS. To determine the dilution resulting from the forward equity sales agreements during the period of time prior to settlement, we calculate the number of weighted-average shares outstanding - diluted in accordance with the treasury stock options,method.
Our potentially dilutive securities include our potential common shares related to our forward equity offerings, our unvested restricted common shares, Series A Preferred Stock, and Series A-4 Preferred Stock, and our Operating Partnership has: outstanding common OP units;units, Series A-1 preferred OP units;units, Series A-3 preferred OP units; Series A-4 preferred OP units;units, Series C preferred OP units;units, Series D preferred OP units, Series E preferred OP units, Series F preferred OP units, Series G preferred OP units, Series H preferred OP units, Series J preferred OP units and Aspen preferred OP Units, which, if converted or exercised, may impact dilution.
Diluted EPS considers the impact of potentially dilutive securities except when the potential common shares have an anti-dilutive effect. Our unvested restricted stock common shares contain rights to receive non-forfeitable distributions and participate equally with common stock with respect to distributions issued or declared, and thus, are participating securities, requiring the two-class method of computing EPS. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period. The two-class method determines EPS by (1) dividing the sum of distributed earnings allocated to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of shares of common stock outstanding for the period; and (2) dividing the sum of distributed earnings allocated to participating securities and undistributed earnings allocated to participating securities by the weighted average number of shares of participating securities for the period. The remaining potentially dilutive common shares do not contain rights to distributions and are included in the computation of diluted EPS.
Computations of basic and diluted earnings / (loss) per shareEPS were as follows (in thousands,millions, except for per share data):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Numerator | | | | | | | | |
Net Income Attributable to SUI Common Shareholders | | $ | 162.6 | | | $ | 231.7 | | | $ | 237.3 | | | $ | 367.3 | |
Less: allocation to restricted stock awards | | 1.1 | | | 1.5 | | | 1.5 | | | 2.4 | |
Basic earnings - Net Income attributable to common shareholders after allocation to restricted stock awards | | $ | 161.5 | | | $ | 230.2 | | | $ | 235.8 | | | $ | 364.9 | |
| | | | | | | | |
| | | | | | | | |
Add: allocation to common and preferred OP units dilutive effect | | 0.5 | | | 5.7 | | | 4.9 | | | 8.3 | |
Diluted earnings - Net income attributable to common shareholders after allocation to common and preferred OP units | | $ | 162.0 | | | $ | 235.9 | | | $ | 240.7 | | | $ | 373.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Denominator | | | | | | | | |
Weighted average common shares outstanding | | 122.4 | | | 115.1 | | | 119.2 | | | 111.7 | |
Add: common shares dilutive effect: Forward Equity Offering | | — | | | — | | | 0.2 | | | — | |
| | | | | | | | |
Add: dilutive restricted stock | | — | | | — | | | — | | | — | |
Add: common and preferred OP units dilutive effect | | 0.4 | | | 3.0 | | | 2.5 | | | 2.6 | |
Diluted weighted average common shares and securities(1) | | 122.8 | | | 118.1 | | | 121.9 | | | 114.3 | |
EPS Available to Common Shareholders After Allocation | | | | | | | | |
Basic EPS | | $ | 1.32 | | | $ | 2.00 | | | $ | 1.98 | | | $ | 3.27 | |
Diluted EPS(1) | | $ | 1.32 | | | $ | 2.00 | | | $ | 1.97 | | | $ | 3.27 | |
(1)For the three and nine months ended September 30, 2022 and 2021, diluted earnings per share was calculated using the two-class method for restricted stock awards as the application of this method resulted in a more diluted earnings per share during those periods.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Numerator | | 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to common stockholders | | $ | 24,115 |
| | $ | 18,897 |
| | $ | 57,583 |
| | $ | 18,969 |
|
Allocation to restricted stock awards | | (189 | ) | | (135 | ) | | (461 | ) | | (22 | ) |
Basic earnings: Net income attributable to common stockholders after allocation | | 23,926 |
| | 18,762 |
| | 57,122 |
| | 18,947 |
|
Allocation to restricted stock awards | | 189 |
| | 135 |
| | 461 |
| | 22 |
|
Diluted earnings: Net income attributable to common stockholders after allocation | | $ | 24,115 |
| | $ | 18,897 |
| | $ | 57,583 |
| | $ | 18,969 |
|
| | | | | | | | |
Denominator | | | | | | | | |
Weighted average common shares outstanding | | 78,369 |
| | 68,655 |
| | 75,234 |
| | 63,716 |
|
Add: dilutive stock options | | 2 |
| | 8 |
| | 2 |
| | 10 |
|
Add: dilutive restricted stock | | 437 |
| | 406 |
| | 610 |
| | 420 |
|
Diluted weighted average common shares and securities | | 78,808 |
| | 69,069 |
| | 75,846 |
| | 64,146 |
|
Earnings per share available to common stockholders after allocation: | | | | | | | | |
Basic | | $ | 0.31 |
| | $ | 0.27 |
| | $ | 0.76 |
| | $ | 0.30 |
|
Diluted | | $ | 0.31 |
| | $ | 0.27 |
| | $ | 0.76 |
| | $ | 0.30 |
|
We have excluded certain convertible securities from the computation of diluted earnings per shareEPS because the inclusion of thesethose securities would have been anti-dilutive for the periods presented. The following table presents the outstanding securities that were excluded from the computation of diluted earnings per shareEPS as of September 30, 20172022 and 20162021 (in thousands):
| | | | | | | | | | | | | | | | | |
| | As of | |
| | September 30, 2022 | | September 30, 2021 | |
Common OP units | | 2,429 | | (1) | — | |
|
A-1 preferred OP units | | 270 | | | 275 | | |
A-3 preferred OP units | | 40 | | | 40 | | |
| | | | | |
Aspen preferred OP units | | 1,284 | | (2) | 1,284 | | (2) |
| | | | | |
Series C preferred OP units | | 306 | | | 306 | | |
Series D preferred OP units | | 489 | | | 489 | | |
Series E preferred OP units | | 80 | | | 90 | | |
Series F preferred OP units | | 90 | | | 90 | | |
Series G preferred OP units | | 241 | | | 241 | | |
Series H preferred OP units | | 581 | | | 581 | | |
Series I preferred OP units | | — | | | 922 | | |
Series J preferred OP units | | 240 | | | 240 | | |
Total Securities | | 6,050 | | | 4,558 | | |
(1) For the three months ended September 30, 2022, Common OP units were excluded from the computation of diluted earnings per share because the inclusion of those securities would have been anti-dilutive for the period. For the nine months ended September 30, 2022, Common OP units were included in the computation of diluted earnings per share because the inclusion of those securities was dilutive for the period.
(2) For the three months ended September 30, 2022 and 2021, Aspen preferred OP units were included in the computation of diluted earnings per share because the inclusion of those securities was dilutive for the period. For the nine months ended September 30, 2022 and 2021, Aspen preferred OP units were excluded from the computation of diluted earnings per share because the inclusion of those securities would have been anti-dilutive for the period.
14. Derivative Financial Instruments
|
| | | | | | |
| | As of September 30, |
| | 2017 | | 2016 |
Common OP units | | 2,757 |
| | 2,838 |
|
Series A-1 preferred OP units | | 349 |
| | 376 |
|
Series A-3 preferred OP units | | 40 |
| | 40 |
|
Series A-4 preferred OP units | | 425 |
| | 743 |
|
Series A-4 preferred stock | | 1,085 |
| | 1,682 |
|
Series C preferred OP units | | 316 |
| | 333 |
|
Aspen preferred OP units | | 1,284 |
| | 1,284 |
|
Total securities | | 6,256 |
| | 7,296 |
|
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. Derivative Instruments and Hedging Activities
Our objective and strategy in using interest rate derivatives is to manage exposure to interest rate movements, thereby minimizing the effect of interest rate changes and the effect itthey could have on future cash flows. Interestoutflows (forecasted interest payments) on a forecasted issuance of long-term debt or on outstanding floating rate capsdebt. Treasury locks and interest rate swaps are used to accomplish this objective. We do not enter into derivative instruments for speculative purposes nor dopurposes.
We have designated the treasury lock contracts and interest rate swap contracts as cash flow hedges under ASC Topic 815, "Derivatives and Hedging." The risk being hedged is the interest rate risk related to forecasted transactions and outstanding floating rate debt. The benchmark interest rate used is the on-the-run 10-year U.S. Treasury rate and the daily weighted average Daily SONIA Rate for the treasury locks and interest rate swaps, respectively.
As of March 31, 2022, we have anyheld four Treasury lock contracts with an aggregate notional amount of $600.0 million that were designated as cash flow hedges of interest rate risk. The unrealized gains or losses on the Treasury lock contracts were recorded in Accumulated other comprehensive income ("AOCI") within the Consolidated Balance Sheets. During the three months ended June 30, 2022, in connection with the 2032 Notes issuance, we settled the four 10-year Treasury rate lock contracts totaling $600.0 million and received a settlement payment of $35.3 million. As of the settlement date, the net accumulated gain included in AOCI is being reclassified into earnings as a reduction to interest expense on a straight-line basis over the 10-year term of the hedged transaction.
During the three months ended September 30, 2022, we entered into two treasury rate lock contracts with an aggregate notional value of $200.0 million to hedge interest rate risk associated with the future issuance of long-term fixed rate debt. We also entered into two interest rate swap agreements to hedge variable rate borrowings of £400.0 million (equivalent to $445.3 million as of September 30, 2022) under the term loan on our Senior Credit Facility. The interest rate swaps locked in a hedging arrangement.total fixed rate, inclusive of spread, of 3.67 percent through the term loan maturity date of April 7, 2025. The cash flow hedge unrealized gains or losses included in the assessment of hedge effectiveness are recorded in AOCI and will be reclassified to interest expense in the same period during which the hedged transaction affects earnings. We estimate that $13.0 million will be reclassified as a reduction to interest expense over the next 12 months for all of our outstanding cash flow hedges.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table providespresents the termsgross fair value amounts of our interestrate derivative contracts that were in effect as of September 30, 2017financial instruments and the associated notional amounts (in millions):
|
| | | | | | | | | | | | | | | | | | | | |
Type | | Purpose | | Effective Date | | Maturity Date | | Notional (in millions) | | Based on | | Variable Rate | | Cap Rate | | Spread | | Effective Fixed Rate |
Cap | | Cap Floating Rate | | 4/1/2015 | | 4/1/2018 | | $ | 150.1 |
| | 3 Month LIBOR | | 3.1690% | | 9.0000% | | —% | | N/A |
Cap | | Cap Floating Rate | | 10/3/2016 | | 5/1/2023 | | $ | 9.6 |
| | 3 Month LIBOR | | 3.9690% | | 11.0200% | | —% | | N/A |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Derivatives designated as cash flow hedges | | Notional | | Fair Value of Assets(1) | | Fair Value of Liabilities | | Notional | | Fair Value of Assets(1) | | Fair Value of Liabilities |
Interest rate derivatives | | $ | 645.3 | | | $ | 41.4 | | | $ | — | | | $ | 150.0 | | | $ | 0.4 | | | $ | — | |
In accordance with ASC Topic 815, “Derivatives and Hedging,”derivative instruments are recorded at fair value in “Other assets, net” or “Other liabilities”(1)Included within Other Assets, net on the Consolidated Balance Sheets. As
Refer to Note 15, "Fair Value of September 30, 2017 and December 31, 2016,Financial Instruments," for additional information related to the fair value methodology used for derivative financial instruments.
The following table presents the gains on derivatives in cash flow hedging relationships recognized in Other Comprehensive Income (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
Derivatives designated as cash flow hedges | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Interest rate derivatives | | $ | 40.7 | | | $ | — | | | $ | 75.7 | | | $ | — | |
The following table presents the amount of our derivatives was zero.gains / (losses) on derivative instruments reclassified from Accumulated Other Comprehensive Income into earnings (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Nine Months Ended |
Derivatives designated as cash flow hedges | | Financial Statement Classification | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Interest rate derivatives | | Interest expense | | $ | (0.2) | | | $ | — | | | $ | 0.6 | | | $ | — | |
14.
15. Fair Value of Financial Instruments
Our financial instruments consist primarily of cash, and cash equivalents accounts and restricted cash, marketable securities, notes receivable, accounts payable, derivative instruments, and debt.
other receivables, derivatives assets, debt, warrants and other liabilities. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures, pursuant to ASC Topic 820, “"Fair Value Measurements and Disclosures”." The following methods and assumptions were used in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
ASC 820, "Fair Value Measurements and Disclosures," requires disclosure regarding determination of fair value for assets and liabilities and establishes a hierarchy under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’sour market assumption. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:
Level 1—1 - Quoted unadjusted prices for identical instruments in active markets;markets that we have the ability to access;
Level 2—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 significant inputs and significant value drivers are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) in active markets;markets or can be corroborated by observable market data; and
Level 3—3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The unobservable inputs reflect our assumptions about the assumptions that market participants would use.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Assets by Hierarchy Level
The table below sets forth our financial assets and liabilities (in millions) that required disclosure of fair value on a recurring basis as of September 30, 2022. The table presents the carrying values and fair values of our financial instruments as of September 30, 2022 and December 31, 2021, that were measured using the valuation techniques described above. The table excludes other financial instruments such as other receivables and accounts payable as the carrying values associated with these instruments approximate their fair value since their maturities are less than one year. These are classified as Level 1 in the hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | September 30, 2022 |
| | Carrying Value | | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value |
Financial Assets | | | | | | | | | | |
Cash, cash equivalents and restricted cash | | $ | 112.0 | | | $ | 112.0 | | | $ | — | | | $ | — | | | $ | 112.0 | |
Marketable securities | | 100.4 | | | 100.4 | | | — | | | — | | | 100.4 | |
Installment notes receivable on manufactured homes, net | | 69.4 | | | — | | | — | | | 69.4 | | | 69.4 | |
| | | | | | | | | | |
Notes receivable from real estate developers and operators | | 288.3 | | | — | | | — | | | 288.3 | | | 288.3 | |
| | | | | | | | | | |
Derivative assets | | 41.4 | | | — | | | 41.4 | | | — | | | 41.4 | |
Total assets measured at fair value | | $ | 611.5 | | | $ | 212.4 | | | $ | 41.4 | | | $ | 357.7 | | | $ | 611.5 | |
| | | | | | | | | | |
Financial Liabilities | | | | | | | | | | |
Secured debt | | $ | 3,006.0 | | | $ | — | | | $ | 3,006.0 | | | $ | — | | | $ | 2,598.5 | |
| | | | | | | | | | |
| | | | | | | | | | |
Unsecured debt | | | | | | | | | | |
Senior unsecured notes | | 1,779.1 | | | — | | | 1,779.1 | | | — | | | 1,423.8 | |
| | | | | | | | | | |
Line of credit and other unsecured debt | | 1,925.9 | | | — | | | 1,925.9 | | | — | | | 1,925.9 | |
Total unsecured debt | | 3,705.0 | | | — | | | 3,705.0 | | | — | | | 3,349.7 | |
| | | | | | | | | | |
Other financial liabilities (contingent consideration) | | 20.2 | | | — | | | — | | | 20.2 | | | 20.2 | |
Total liabilities measured at fair value | | $ | 6,731.2 | | | $ | — | | | $ | 6,711.0 | | | $ | 20.2 | | | $ | 5,968.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | December 31, 2021 |
| | Carrying Value | | Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value |
Financial Assets | | | | | | | | | | |
Cash, cash equivalents and restricted cash | | $ | 78.2 | | | $ | 78.2 | | | $ | — | | | $ | — | | | $ | 78.2 | |
Marketable securities | | 186.9 | | | 186.9 | | | — | | | — | | | 186.9 | |
Installment notes receivable on manufactured homes, net | | 79.1 | | | — | | | — | | | 79.1 | | | 79.1 | |
| | | | | | | | | | |
Notes receivable from real estate developers and operators | | 284.0 | | | — | | | — | | | 284.0 | | | 284.0 | |
| | | | | | | | | | |
Derivative assets | | 0.4 | | | — | | | 0.4 | | | — | | | 0.4 | |
Total assets measured at fair value | | $ | 628.6 | | | $ | 265.1 | | | $ | 0.4 | | | $ | 363.1 | | | $ | 628.6 | |
| | | | | | | | | | |
Financial Liabilities | | | | | | | | | | |
Secured debt | | $ | 3,380.7 | | | $ | — | | | $ | 3,380.7 | | | $ | — | | | $ | 3,405.9 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Unsecured debt | | | | | | | | | | |
Senior unsecured notes | | 1,186.4 | | | — | | | 1,186.4 | | | — | | | 1,201.8 | |
Line of credit and other unsecured debt | | 1,104.7 | | | — | | | 1,104.7 | | | — | | | 1,104.7 | |
Total unsecured debt | | 2,291.1 | | | — | | | 2,291.1 | | | — | | | 2,306.5 | |
| | | | | | | | | | |
| | | | | | | | | | |
Other financial liabilities (contingent consideration)(1) | | 20.2 | | | — | | | — | | | 20.2 | | | 20.2 | |
Total liabilities measured at fair value | | $ | 5,692.0 | | | $ | — | | | $ | 5,671.8 | | | $ | 20.2 | | | $ | 5,732.6 | |
(1)Balance updated during the three months ended March 31, 2022 to include contingent consideration related to a marina acquisition. This contingent consideration was included within Other liabilities on the Consolidated Balance Sheets at December 31, 2021.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Derivative InstrumentsCash, Cash Equivalents and Restricted Cash
The derivative instrumentscarrying values of cash, cash equivalents and restricted cash approximate their fair market values due to the short-term nature of the instruments. These are classified as Level 1 in the hierarchy.
Marketable Securities
Marketable securities held by us and accounted for under ASC 321, "Investments - Equity Securities," are interest rate cap agreements formeasured at fair value. Any change in fair value is recognized in the Consolidated Statement of Operations in the Gain / (loss) on remeasurement of marketable securities in accordance with ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and measurement of financial assets and financial liabilities." The fair value is measured by the quoted unadjusted share price which quoted market prices are indirectly available. For those derivatives, we use model-derived valuations in which all significant inputs and significant value drivers are observableis readily available in active markets provided by brokers or dealers to determine(Level 1).
The change in the fair value of derivative instruments on a recurring basis (Level 2). Refer to Note 13, “Derivative Instruments and Hedging Activities.”marketable securities balance was as follows (in millions):
| | | | | | | | | | | | | | |
| | | | |
| | Nine Months Ended | | Year Ended |
| | September 30, 2022 | | December 31, 2021 |
Beginning Balance | | $ | 186.9 | | | $ | 124.7 | |
Additional purchases | | — | | | 35.5 | |
Change in fair value measurement | | (74.0) | | | 33.4 | |
Foreign currency translation adjustment | | (14.0) | | | (9.2) | |
Dividend reinvestment, net of tax | | 1.5 | | | 2.5 | |
| | | | |
Ending Balance | | $ | 100.4 | | | $ | 186.9 | |
Installment Notes Receivable on Manufactured Homes
The net carrying value of the installmentInstallment notes receivable on manufactured homes estimates theare recorded at fair value as theand are measured using model-derived indicative pricing using primarily unobservable inputs, inclusive of default rates, interest rates in the portfolio are comparable to current prevailing marketand recovery rates (Level 2)3). Refer to Note 4,, “Notes "Notes and Other Receivables.”Receivables," for additional information.
SUN COMMUNITIES, INC.Notes Receivable from Real Estate Developers and Operators
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)Notes receivable from real estate developers and operators are recorded at fair value and are measured using model-derived indicative pricing using primarily unobservable inputs including interest rates and counterparty performance (Level 3). The carrying values of the notes generally approximate their fair market values either due to the nature of the note and / or the note being secured by underlying collateral and / or personal guarantees. Refer to Note 4, "Notes and Other Receivables," for additional information.
Derivative Assets - Interest Rate Derivatives
Long-Term Debt
Interest rate derivatives are recorded at fair value and Linesconsist of Credit
Treasury locks and interest rate swaps. The fair value of long-termthe Treasury locks and interest rate swaps are measured using observable inputs based on the 10-year Treasury note rate and the weighted average Daily SONIA Rate, respectively (Level 2).
Secured Debt
Secured debt (excluding the secured borrowing)consists primarily of our mortgage term loans. The fair value of mortgage term loans is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 7, “Debt8, "Debt and LinesLine of Credit.”Credit," for additional information.
Collateralized Receivables
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Unsecured Debt
Senior unsecured notes - the fair value of senior unsecured notes is based on the estimates of management and Secured Borrowingson rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 8, "Debt and Line of Credit," for additional information.
Line of credit and other unsecured debt - consists primarily of our Senior Credit Facility. We have variable rates on our Senior Credit Facility. 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 on the Consolidated Balance Sheets. The netdebt with variable rates approximates carrying value of the collateralized receivables estimates the fair value as the interest rates in the portfolio are comparable to current prevailingof these amounts approximate market rates (Level 2). Refer to Note 3, “Collateralized Receivables and Transfersrates. The estimated fair value of Financial Assets.”our indebtedness as of September 30, 2022 approximated its gross carrying value.
Other Financial Liabilities
We estimate the fair value of our contingent consideration liabilityliabilities based on valuation models using significant unobservable inputs that generally consider discounting of future cash flows using market interest rates and adjusting for non-performance risk over the remaining term of the liability (Level 2)3).
Other Financial InstrumentsLevel 3 Reconciliation, Measurements and Transfers
The carrying valuesWe review the fair value hierarchy classifications each reporting period. Changes in the observability of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair market values due to the short-term naturevaluation attributes may result in a reclassification of these instruments.
The table below sets forth ourcertain financial assets or liabilities. Such reclassifications are reported as transfers in and liabilities that required disclosureout of Level 3 at the beginning fair value on a recurring basisfor the reporting period in which the changes occur. Availability of secondary market activity and consistency of pricing from third-party sources impacts our ability to classify securities as Level 2 or Level 3. There were no transfers into or out of Level 3 during the nine months ended September 30, 2017. The table presents the carrying values and fair values of our financial instruments as of September 30, 2017 and December 31, 2016, that were measured using the valuation techniques described above (in thousands). The table excludes other financial instruments such as cash and cash equivalents, accounts receivable, and accounts payable as the carrying values associated with these instruments approximate fair value since their maturities are less than one year.2022.
|
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Financial assets | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Installment notes receivable on manufactured homes, net | | $ | 97,990 |
| | $ | 97,990 |
| | $ | 59,320 |
| | $ | 59,320 |
|
Collateralized receivables, net | | 134,015 |
| | 134,015 |
| | 143,870 |
| | 143,870 |
|
Financial liabilities | | | | | | | | |
Debt (excluding secured borrowings) | | $ | 2,868,543 |
| | $ | 2,837,449 |
| | $ | 2,865,470 |
| | $ | 2,820,680 |
|
Secured borrowings | | 134,884 |
| | 134,884 |
| | 144,477 |
| | 144,477 |
|
Lines of credit | | — |
| | — |
| | 100,095 |
| | 98,640 |
|
Other liabilities (contingent consideration) | | 11,115 |
| | 11,115 |
| | 10,011 |
| | 10,011 |
|
15. Recent Accounting Pronouncements
In May 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update provides clarity and reduces diversity in practice and cost and complexity when applying the guidance in Topic 718, regarding a change to the terms or conditions of a share-based payment award. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. We will apply this guidance to modifications that occur on or after the effective date.
In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year, with early application allowed for certain transactions. Upon adoption of this standard, we expect that a majority of our future property acquisitions will be considered asset acquisitions.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes changes to our financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three and nine months ended September 30, 2022 and 2021 (in millions):
In November 2016, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | September 30, 2022 | | September 30, 2021 |
Assets: | | Installment Notes Receivable on MH, net | | Notes Receivable From Real Estate Developers and Operators | | Warrants | | Installment Notes Receivable on MH, net | | Notes Receivable From Real Estate Developers and Operators |
Level 3 beginning balance at June 30, 2022 and 2021 | | $ | 73.1 | | | $ | 292.3 | | | $ | — | | | $ | 82.5 | | | $ | 62.0 | |
| | | | | | | | | | |
Realized gains / (losses)(1) | | (0.1) | | | — | | | (0.6) | | | 0.1 | | | — | |
Purchases and issuances | | — | | | 17.8 | | | 0.6 | | | 3.3 | | | 3.4 | |
Sales and settlements | | (3.6) | | | (4.3) | | | — | | | (3.4) | | | (0.6) | |
Dispositions of properties | | — | | | — | | | — | | | (1.9) | | | — | |
Foreign currency exchange losses | | — | | | (17.5) | | | — | | | — | | | — | |
Other adjustments | | — | | | — | | | — | | | 0.4 | | | (0.2) | |
Level 3 ending balance at September 30, 2022 and 2021 | | $ | 69.4 | | | $ | 288.3 | | | $ | — | | | $ | 81.0 | | | $ | 64.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 |
Assets: | | Installment Notes Receivable on MH, net | | Notes Receivable From Real Estate Developers and Operators | | Warrants | | Installment Notes Receivable on MH, net | | Notes Receivable From Real Estate Developers and Operators |
Level 3 beginning balance at December 31, 2021 and 2020 | | $ | 79.1 | | | $ | 284.0 | | | $ | — | | | $ | — | | | $ | — | |
Transfer to level 3 | | — | | | — | | | — | | | 85.9 | | | 52.6 | |
Realized gains / (losses)(1) | | 0.1 | | | — | | | (2.6) | | | 0.5 | | | — | |
Purchases and issuances | | 1.0 | | | 65.6 | | | 2.6 | | | 7.2 | | | 14.5 | |
Sales and settlements | | (10.8) | | | (21.1) | | | — | | | (11.2) | | | (1.1) | |
Dispositions of properties | | — | | | — | | | — | | | (1.9) | | | — | |
Foreign currency exchange losses | | — | | | (40.2) | | | — | | | — | | | — | |
Other adjustments | | — | | | — | | | — | | | 0.5 | | | (1.4) | |
Level 3 ending balance at September 30, 2022 and 2021 | | $ | 69.4 | | | $ | 288.3 | | | $ | — | | | $ | 81.0 | | | $ | 64.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Liabilities: | | Contingent Consideration | | Contingent Consideration | | Contingent Consideration | | Contingent Consideration |
Level 3 beginning balance at June 30, 2022 and 2021, and December 31, 2021 and 2020 | | $ | 20.2 | | | $ | 18.1 | | | $ | 20.2 | | | $ | 15.8 | |
| | | | | | | | |
Realized losses(1) | | — | | | 9.2 | | | — | | | 9.3 | |
Purchases and issuances | | — | | | 11.9 | | | — | | | 15.4 | |
| | | | | | | | |
| | | | | | | | |
Other adjustments | | — | | | (0.2) | | | — | | | (1.5) | |
Level 3 ending balance at September 30, 2022 and 2021 | | $ | 20.2 | | | $ | 39.0 | | | $ | 20.2 | | | $ | 39.0 | |
(1) Includes realized gains / losses recorded in earnings within the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.” This update requires inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shownfollowing line items on the statementConsolidated Income Statements: Warrants - Income from nonconsolidated affiliates; Installment Notes Receivable on MH, net - Gain on remeasurement of cash flows.notes receivable; Contingent Consideration - Other income / (expense), net.
Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop fair value estimates. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Upon adoptionfair value estimates are based on information available as of this guidance, we will include restricted cash and restricted cash equivalents within the reconciliation of the net change in cash and cash equivalents on our Consolidated Statements of Cash Flows. Restricted cash and restricted cash equivalents, which are included within Other assets, net in our Consolidated Balance Sheets, were $19.9 million and $17.1 million at September 30, 2017 and December 31, 2016, respectively.2022. As such, our estimates of fair value could differ significantly from the actual carrying value.
In October 2016, the FASB issued ASU 2016-16 “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Upon adoption of this standard, there will be no material impact to our Consolidated Financial Statements.
In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This update addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Upon adoption of this standard, there will be no material impact to our Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are in the initial phases of evaluating how this guidance will impact our accounting policies regarding assessment of, and allowance for, loan losses.
In March 2016, the FASB issued ASU 2016-09 “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this update are intended to simplify several aspects of the accounting for share-based payments. We adopted these amendments as of January 1, 2017. The main provisions of this update regarding excess tax benefits did not have an impact on our Consolidated Financial Statements due to our status as a REIT for taxation purposes. We have elected to continue estimating the number of shares expected to vest in order to determine compensation cost, and were previously classifying, as financing activity, cash paid by us for employee taxes when shares were withheld to cover minimum statutory requirements.
In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The core principle of this update is that a lessee should recognize the assets and liabilities that arise from leases while the accounting by a lessor is largely unchanged from that applied under previous GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Our income from real property and rental home revenue streams is derived from rental agreements where we are the lessor. As noted above, the lessor accounting model is largely unchanged by this update. We are the lessee in other arrangements, primarily for our executive offices, ground leases at five communities, and certain equipment. We are currently evaluating our inventory of such leases to determine which will require recognition of right of use assets and corresponding lease liabilities, and the related disclosure requirements thereto.
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The objective of this amendment 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 this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
We anticipate adopting ASU 2014-09 and the related updates subsequently issued by the FASB in January 2018, via the modified retrospective approach. Applicability of the standard updates to our revenue streams and other considerations are summarized below.
Income from real property - is derived from rental agreements whereby we lease land to residents in our communities. We account for the lease components of these rental agreements pursuant to ASC 840 “Leases” and the non-lease components under ASC 605 “Revenue Recognition.”
Revenue from home sales - is recognized pursuant to ASC 605 “Revenue Recognition,” as the manufactured homes are tangible personal property that can be located on any parcel of land. The manufactured homes are not permanent fixtures or improvements to the underlying real estate, and are therefore not considered by us to be subject to the guidance in ASC 360-20 “Real Estate Sales.”
Rental home revenue - is comprised of rental agreements whereby we lease homes to residents in our communities. We account for these revenues pursuant to ASC 840 “Leases.”
Ancillary revenues - are primarily comprised of restaurant, golf, merchandise and other activities at our RV communities. These revenues are recognized pursuant to ASC 605 “Revenue Recognition,” at point of sale to customers as our performance obligations are then satisfied.
Interest income - on our notes receivable will continue to be recognized as revenue, but presented separately from revenue from contracts with customers, as interest income is not in the scope of ASU 2014-09 and the related updates subsequently issued by the FASB.
Broker commissions and other revenues, net - is primarily comprised of (i) brokerage commissions that we account for on a net basis pursuant to ASC 605 “Revenue Recognition,” as our performance obligation is to arrange for a third party to transfer a home to a customer; and (ii) notes receivable loss reserves.
As detailed above, our revenues from home sales, ancillary revenues, and broker commissions will be in the scope of the new guidance. Upon adoption, we will present contract assets and liabilities, as applicable, when one party to a transaction has performed and the other has not. Further, we will expand our disclosures regarding these revenue streams, as applicable, to discuss our contract balances and performance obligations and satisfaction thereof. Adoption of this standard will have no material impact to our Consolidated Financial Statements.
16. 16. Commitments and Contingencies
Legal Proceedings
We are involved in various 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.
Catastrophic Event-Related Charges 17. Subsequent Event
On October 4, 2017, we entered into a Second Amendment to Rights Agreement (the “Amendment”), which amendedSeptember 28, 2022, Hurricane Ian made landfall on Florida's western coast. The storm primarily affected four properties in the Rights Agreement dated June 2, 2008, as amended, betweenFort Myers area. Three RV properties comprising approximately 2,500 sites, sustained significant flooding and wind damage from the Companyhurricane, and Computershare Trust Company, N.A., as the rights agent. The Amendment accelerated the scheduled expiration datesea wall and certain docks at one marina were damaged. At other affected MH and RV properties, most of the rights issued pursuantdamage was limited to trees, roofs, fences, skirting and carports. At other affected marina properties, docks, buildings, and landscaping sustained limited wind and water damage.
We recognized $29.9 million for impaired assets. We expect these charges to be partially offset by insurance recoveries, currently estimated at $17.7 million. The estimated net charges of $12.2 million related to Hurricane Ian were recognized as Catastrophic event-related charges, net in our Consolidated Statements of Operations for the Rights Agreement, commonly referred to as a “poison pill,” (the “Rights”) from June 9, 2018 to October 4, 2017. At the time of the termination of the Rights Agreement, all of the Rights distributed to holders of the Company’s common stock pursuant to the Rights Agreement expired and are no longer outstanding.
On October 13, 2017, we announced a notice of redemption to the holders of our 7.125% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”), which we have elected to redeem on November 14, 2017. Holders of the Series A Preferred Stock will receive cash in the amount of $25.00, plus all accrued and unpaid dividends, which is equal to an aggregate payment of $25.143490 per share. In the aggregate, we will pay $85.5 million to redeem all of the Series A Preferred stock.three months ended September 30, 2022. As of September 30, 2017,2022, we had not received any insurance recoveries. We maintain property, casualty, flood and business interruption insurance for our properties, subject to customary deductibles and limits. Expected insurance recoveries for loss of income and redevelopment costs greater than the impairment charge cannot be estimated at this time.
The foregoing impairment, expected insurance recovery, and net charge estimates are based on current information available to the Company. We continue to assess these estimates. The actual final impairment, insurance recoveries and net charges could vary significantly from these estimates. Any changes to these estimates will be recognized in the period(s) in which they are determined.
17. Leases
Lessee Accounting
We lease land under non-cancelable operating leases at certain MH, RV and Marina properties expiring at various dates through 2100. The majority of the leases have terms requiring fixed payments plus additional rents based on a percentage of revenues at those properties. We also have other operating leases, primarily office space and equipment expiring at various dates through 2042.
Future minimum lease payments under non-cancellable leases as of September 30, 2022 where we are the lessee include:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Maturity of Lease Liabilities (in millions) | | Operating Leases | | Finance Leases | | Total |
2022 (excluding nine months ended September 30, 2022) | | $ | 3.3 | | | $ | 0.3 | | | $ | 3.6 | |
2023 | | 12.6 | | | 0.8 | | | 13.4 | |
2024 | | 12.6 | | | 4.4 | | | 17.0 | |
2025 | | 12.2 | | | 0.3 | | | 12.5 | |
2026 | | 10.6 | | | 0.3 | | | 10.9 | |
Thereafter | | 233.4 | | | 11.7 | | | 245.1 | |
Total Lease Payments | | $ | 284.7 | | | $ | 17.8 | | | $ | 302.5 | |
Less: Imputed interest | | (132.0) | | | (7.6) | | | (139.6) | |
Present Value of Lease Liabilities | | $ | 152.7 | | | $ | 10.2 | | | $ | 162.9 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Right-of-use ("ROU") assets and lease liabilities for finance and operating leases as included in our Consolidated Balance Sheets are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Financial Statement Classification | | As of |
Description | | | September 30, 2022 | | | | | | December 31, 2021 |
Lease Assets | | | | | | | | | | |
Finance lease, right-of-use asset, net of accumulated amortization | | Investment property, net | | $ | 47.8 | | | | | | | $ | 4.3 | |
Operating lease, right-of-use asset, net | | Other assets, net | | $ | 173.7 | | | | | | | $ | 138.2 | |
Below market operating leases, net | | Other assets, net | | $ | 91.4 | | | | | | | $ | 93.1 | |
Lease Liabilities | | | | | | | | | | |
Finance lease liabilities | | Other liabilities | | $ | 10.2 | | | | | | | $ | 4.2 | |
Operating lease liabilities | | Other liabilities | | $ | 152.7 | | | | | | | $ | 129.2 | |
Lease expense for finance and operating leases as included in our Consolidated Statements of Operations are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Nine Months Ended |
Description | | Financial Statement Classification | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Finance Lease Expense | | | | | | | | | | |
Amortization of ROU assets | | Depreciation and amortization | | $ | 1.3 | | | $ | — | | | $ | 2.2 | | | $ | — | |
Interest on lease liabilities | | Interest expense | | 0.2 | | | — | | | 0.3 | | | 0.1 | |
Operating lease cost | | General and administrative expense, Property operating and maintenance, Depreciation and amortization | | 4.8 | | | 2.7 | | | 12.6 | | | 7.2 | |
Variable lease cost | | Property operating and maintenance | | 2.0 | | | 1.9 | | | 5.4 | | | 5.0 | |
| | | | | | | | | | |
Total Lease Expense | | | | $ | 8.3 | | | $ | 4.6 | | | $ | 20.5 | | | $ | 12.3 | |
Lease term, discount rates and additional information for finance and operating leases are as follows:
| | | | | | | | |
| | As of |
| | September 30, 2022 |
Lease Term and Discount Rate | | |
Weighted-average Remaining Lease Terms (years) | | |
Finance lease | | 27.81 |
Operating lease | | 32.93 |
Weighted-average Discount Rate | | |
Finance lease | | 3.05 | % |
Operating lease | | 3.81 | % |
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 |
Other Information (in millions) | | | | |
Cash Paid for Amounts Included in the Measurement of Lease Liabilities | | | | |
Operating cash flow from operating leases | | $ | 8.3 | | | $ | 4.5 | |
| | | | |
Financing cash flow from finance leases | | 4.7 | | | 0.1 | |
Total Cash Paid On Lease Liabilities | | $ | 13.0 | | | $ | 4.6 | |
Lessor Accounting
We are not the lessor for any finance leases at our MH, RV or Marina properties as of September 30, 2022.
Nearly all of our operating leases at our MH and RV properties where we are the lessor are either month-to-month or for a time period not to exceed one year. As of September 30, 2022, future minimum lease payments would not exceed 12 months.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Future minimum lease payments under non-cancellable leases at our RV communities and marinas as of September 30, 2022 where we are the lessor include:
| | | | | | | | |
Maturity of Lease Payments (in millions) | | Operating Leases |
2022 (excluding the nine months ended September 30, 2022) | | $ | 6.9 | |
2023 | | 25.9 | |
2024 | | 16.1 | |
2025 | | 8.6 | |
2026 | | 5.0 | |
Thereafter | | 42.1 | |
Total Undiscounted Cash Flows | | $ | 104.6 | |
The components of lease income for our operating leases, as included in our Consolidated Statement of Operations are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Nine Months Ended |
Description | | Financial Statement Classification | | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Operating Leases | | | | | | | | | | |
| | | | | | | | | | |
Fixed lease income | | Income from real property; Brokerage commissions and other revenue, net | | $ | 7.0 | | | $ | 5.3 | | | $ | 21.0 | | | $ | 14.3 | |
Variable lease income(1) | | Income from real property; Brokerage commissions and other revenue, net | | $ | 0.8 | | | $ | 1.3 | | | $ | 2.3 | | | $ | 3.6 | |
(1)Consists of rent primarily based on a percentage of acquisition costs and net operating income.
Failed Sale Leaseback
In connection with our acquisition of Park Holidays, we assumed ground lease arrangements for 34 UK properties that we concluded to be failed sale-leaseback transactions under ASC Topic 842, "Leases." The arrangements have maturities ranging from 2117 through 2197 with an option to repurchase for £1.00 at the end of the term. The obligation related to the underlying ground leases has been recorded as a financial liability of $310.4 million as of September 30, 2022. The financial liability is recorded within Other Liabilities on the Consolidated Balance Sheets. The following table presents the future minimum rental payments for this financial liability as of September 30, 2022:
| | | | | | | | |
Maturity of Financial Liability (in millions) | | September 30, 2022 |
2022 (excluding nine months ended September 30, 2022) | | $ | 0.7 | |
2023 | | 10.2 | |
2024 | | 10.3 | |
2025 | | 10.4 | |
2026 | | 10.4 | |
Thereafter | | 1,560.6 | |
Total Payments | | $ | 1,602.6 | |
Less: Imputed interest | | (1,292.2) | |
Present Value of Financial Liability | | $ | 310.4 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
18. Recent Accounting Pronouncements
Recent Accounting Pronouncements - Adopted
In August 2020, the FASB issued ASU 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity."This update simplifies the accounting for convertible instruments by eliminating the models that require separation of a cash conversion or beneficial conversion feature from the host contract. Under the amended guidance, a convertible debt instrument is treated as one liability accounted for at its amortized cost and convertible preferred stock is considered one equity instrument accounted for at its historical cost, unless (a) there were 3,400,000 sharesare other features that require bifurcation as a derivative, or (b) convertible debt was issued at a substantial premium. This update also eliminates several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares. Additionally, this update provides clarifications to improve the consistency of Series A Preferred Stock outstanding. AfterEPS calculations. We adopted the redemption, no Series A Preferred StockASU on January 1, 2022. The adoption of this ASU did not have an impact on our Consolidated Financial Statements.
Recent Accounting Pronouncements - Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides optional guidance for accounting for contracts, hedging relationships and other transactions affected by the reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. As of September 30, 2022, we do not expect the transition from LIBOR to alternative reference interest rates will remain outstanding.have a material impact on our Consolidated Financial Statements as the majority of our debt has fixed interest rates.
19. Subsequent Events
Acquisitions
Subsequent to the three months ended September 30, 2022, we acquired one land parcel located in the United Kingdom for a purchase price of $1.1 million.
We have evaluated our Consolidated Financial Statements for subsequent events through the date that this Form 10-Q was issued.
| |
ITEM 2. | MANAGEMENT’SITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes, filed herewith, along with our 20162021 Annual Report. Capitalized terms are used as defined elsewhere in this Quarterly Report on Form 10-Q.
OVERVIEW
We are a fully integrated, self-administered and self-managed REIT. As of September 30, 2017,2022, we owned and operated or hadheld an interest in a portfolio of 348662 developed properties located in 2939 states throughout the U.S.United States, the United Kingdom, Ontario, Canada and one province in Canada,Puerto Rico, including 229340 MH communities, 89and 160 RV communities, and 30 properties31 communities containing both MH and RV sites.
sites, and 131 marinas. We have been in the business of acquiring, operating, developing and expanding MH and RV communities since 1975.1975 and marinas since 2020. We lease individual sites with utilityutilities access for placement of manufactured homes, and RVs or boats to our customers. We are also engaged through SHS in the marketing, selling and leasing of new and pre-owned homes to current and future residents in our MH communities. The Rental Program operations of SHSwithin our MH communities support and enhance our occupancy levels, property performance and cash flows.
SIGNIFICANT ACCOUNTING POLICIES
We have identified significant accounting policies that, as a result of the judgments, uncertainties and complexities of the underlying accounting standards and operations involved could result in material changes to our financial condition or results of operations under different conditions or using different assumptions. Details regarding significant accounting policies are described fully in our 20162021 Annual Report.
NON-GAAP FINANCIAL MEASURES
In addition to the results reported in accordance with GAAP in our “Results"Results of Operations”Operations" below, we have provided information regarding net operating income (“NOI”("NOI") and funds from operations (“FFO”("FFO") as supplemental performance measures. We believe NOI and FFO are appropriate measures given their wide use by and relevance to investors and analysts following the real estate industry. NOI provides a measure of rental operations and does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses. FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation/depreciation / amortization of real estate assets. In addition, NOI and FFO are commonly used in various ratios, pricing multiples/multiples / yields and returns and valuation calculations used to measure financial position, performance and value.
NOI is derived from operating revenues minus property operating expenses and real estate taxes. NOI does not represent cash generated fromis a non-GAAP financial measure that we believe is helpful to investors as a supplemental measure of operating activities in accordance withperformance 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 measure when evaluating performance and growth of particular properties and / or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs. Therefore, NOI is a measure of the operating performance of our properties rather than of the Company overall.
We believe that GAAP andnet income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) (determined in accordance with GAAP) as an indication of the Company’sour financial performance or to be an alternative toGAAP cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’sour liquidity; nor is it indicative of funds available for the Company’sour cash needs, including itsour ability to make cash distributions. The Company believes that net income (loss) is the most directly comparable GAAP measurement to NOI. Because of the inclusion of items such as interest, depreciation and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level. The Company believesIn addition, we calculate Constant Currency NOI for our UK Operations by translating the operating results from the UK at the foreign currency exchange rate used for guidance. We believe that NOI is helpful to investors as a measureand Constant Currency NOI provide enhanced comparability for investor evaluation of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.period-over-period results.
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”("Nareit") as GAAP net income (loss) computed in accordance with GAAP,, excluding gains or losses(or losses) from sales of depreciable operating property, plus real estate-relatedestate related depreciation and amortization, real estate related impairments, and after adjustments for unconsolidated partnerships and joint ventures. The Company considers FFO to beis a non-GAAP financial measure that management believes is a useful supplemental measure for reviewing comparativeof our operating and financial performance because, byperformance. By excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates).
, FFO provides a performance measure that, when compared period over period,period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. FFO is computed in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. The CompanyWe also usesuse FFO excluding certain items, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business.business ("Core FFO").In addition, we calculate Constant Currency Core FFO by translating the operating results from the UK, Canada and Australia at the foreign currency exchange rates used for guidance. We believe that this provides investors with another financialCore FFO and Constant Currency Core FFO provide enhanced comparability for investor evaluations of period-over-period results.
We believe that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of our operatingFFO is that it does not replace GAAP net income (loss) as a performance that is more comparable when evaluating period over period results.
measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as an adjuncta supplement to GAAP 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,it. Furthermore, FFO is not intended as a measure of a REIT’sREIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO only provides investors with an additional performance measure that, when combined with measures computedis calculated in accordance with GAAP such as net income (loss), cash flow from operating activities, investing activities and financing activities, provide investors with an indicationour interpretation of our ability to service debt and to fund acquisitions and other expenditures. Other REITs may use different methods for calculating FFO, accordingly, our FFOstandards established by Nareit, which may not be comparable to FFO reported by other REITs.REITs that interpret the Nareit definition differently.
Catastrophic Event-Related Charges
RESULTS OF OPERATIONS
We report operating results under two segments: Real Property OperationsOn September 28, 2022, Hurricane Ian made landfall on Florida's western coast. The storm primarily affected four properties in the Fort Myers area. Three RV properties comprising approximately 2,500 sites, sustained significant flooding and Home Saleswind damage from the hurricane, and Rentals. The Real Property Operations segment owns, operates, develops, or has an interest in, a portfolio ofthe sea wall and certain docks at one marina were damaged. At other affected MH and RV communities throughoutproperties, most of the U.S.damage was limited to trees, roofs, fences, skirting and in Canada,carports. At other affected marina properties, docks, buildings, and is in the businesslandscaping sustained limited wind and water damage.
We recognized $29.9 million for impaired assets. We expect these charges to be partially offset by insurance recoveries, currently estimated at $17.7 million. The estimated net charges of acquiring, operating, and expanding MH and RV communities. The Home Sales and Rentals segment offers MH and RV park model sales and leasing services$12.2 million related to tenants and prospective tenants of our communities. We evaluate segment operating performance based on NOI and gross profit. Refer to Note 10, “Segment Reporting,”Hurricane Ian were recognized as Catastrophic event-related charges, net in our accompanying Consolidated Financial Statements for additional information.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
SUMMARY STATEMENTS OF OPERATIONS
The following table summarizes our consolidated financial results and reconciles net income to NOIof Operations for the three months ended September 30, 20172022. As of September 30, 2022, we had not received any insurance recoveries. We maintain property, casualty, flood and 2016 (in thousands):business interruption insurance for our properties, subject to customary deductibles and limits. Expected insurance recoveries for loss of income and redevelopment costs greater than the impairment charge cannot be estimated at this time.
|
| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
Net income attributable to Sun Communities, Inc., common stockholders: | | $ | 24,115 |
| | $ | 18,897 |
|
Other revenues | | (7,011 | ) | | (5,689 | ) |
Home selling expenses | | 3,290 |
| | 2,643 |
|
General and administrative | | 18,267 |
| | 16,575 |
|
Transaction costs | | 2,167 |
| | 4,191 |
|
Depreciation and amortization | | 64,232 |
| | 61,483 |
|
Interest expense | | 32,875 |
| | 34,589 |
|
Catastrophic weather related charges | | 7,756 |
| | — |
|
Other income, net | | (3,345 | ) | | — |
|
Current tax benefit / (expense) | | (38 | ) | | 283 |
|
Deferred tax benefit | | (81 | ) | | — |
|
Income from affiliate transactions | | — |
| | (500 | ) |
Preferred return to preferred OP units | | 1,112 |
| | 1,257 |
|
Amounts attributable to noncontrolling interests | | 1,776 |
| | 879 |
|
Preferred stock distributions | | 1,955 |
| | 2,197 |
|
NOI / Gross profit | | $ | 147,070 |
|
| $ | 136,805 |
|
|
| | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
Real Property NOI | | $ | 125,961 |
| | $ | 114,851 |
|
Rental Program NOI | | 22,060 |
| | 21,213 |
|
Home Sales NOI / Gross profit | | 8,103 |
| | 9,276 |
|
Ancillary NOI / Gross profit | | 7,024 |
| | 6,997 |
|
Site rent from Rental Program (included in Real Property NOI) (1) | | (16,078 | ) | | (15,532 | ) |
NOI / Gross profit | | $ | 147,070 |
| | $ | 136,805 |
|
(1) The renter’s monthly payment includes the site rentforegoing impairment, expected insurance recovery, and an amount attributablenet charge estimates are based on current information available to the leasing of the home.Company. We continue to assess these estimates. The site rent is reflectedactual final impairment, insurance recoveries and net charges could vary significantly from these estimates. Any changes to these estimates will be recognized in the Real Property Operations segment. For purposes of management analysis, the site rent is includedperiod(s) in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of Rental Program and financial impact on our operations.which they are determined.
RESULTS OF OPERATIONS
The following tables reconcile the Net income attributable to SUI common shareholders to NOI and summarize our consolidated financial results for the three and nine months ended September 30, 2022 and 2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Net Income Attributable to SUI Common Shareholders | | $ | 162.6 | | | $ | 231.7 | | | $ | 237.3 | | | $ | 367.3 | |
Interest income | | (11.2) | | | (2.6) | | | (25.3) | | | (8.0) | |
Brokerage commissions and other revenues, net | | (10.8) | | | (8.8) | | | (27.4) | | | (21.7) | |
General and administrative | | 69.1 | | | 43.2 | | | 187.0 | | | 126.7 | |
Catastrophic event-related charges, net | | 12.2 | | | 0.3 | | | 12.3 | | | 3.1 | |
Business combination expense | | 8.4 | | | — | | | 23.9 | | | 1.0 | |
Depreciation and amortization | | 151.3 | | | 127.1 | | | 450.0 | | | 378.1 | |
| | | | | | | | |
Loss on extinguishment of debt (see Note 8) | | 4.0 | | | — | | | 4.4 | | | 8.1 | |
Interest expense | | 61.7 | | | 39.0 | | | 162.2 | | | 116.2 | |
Interest on mandatorily redeemable preferred OP units / equity | | 1.0 | | | 1.1 | | | 3.1 | | | 3.1 | |
(Gain) / loss on remeasurement of marketable securities (see Note 15) | | 7.2 | | | (12.0) | | | 74.0 | | | (43.2) | |
(Gain) / loss on foreign currency exchanges | | (14.9) | | | 7.0 | | | (21.7) | | | 7.1 | |
(Gain) / loss on disposition of properties | | 0.8 | | | (108.1) | | | (12.5) | | | (108.1) | |
Other (income) / expense, net | | (2.8) | | | 9.3 | | | (2.6) | | | 10.0 | |
(Gain) / loss on remeasurement of notes receivable (see Note 4) | | 0.1 | | | (0.1) | | | (0.1) | | | (0.6) | |
Income from nonconsolidated affiliates (see Note 6) | | (2.0) | | | (0.9) | | | (3.8) | | | (2.9) | |
(Gain) / loss on remeasurement of investment in nonconsolidated affiliates (see Note 6) | | 0.4 | | | 0.1 | | | (0.1) | | | 0.1 | |
Current tax expense (see Note 12) | | 7.3 | | | 0.4 | | | 12.5 | | | 1.4 | |
Deferred tax expense / (benefit) (see Note 12) | | (3.6) | | | 1.2 | | | (3.9) | | | 1.1 | |
Preferred return to preferred OP units / equity interests | | 2.5 | | | 3.1 | | | 8.6 | | | 9.0 | |
Add: Income attributable to noncontrolling interests | | 11.9 | | | 15.3 | | | 13.9 | | | 22.6 | |
| | | | | | | | |
| | | | | | | | |
NOI | | $ | 455.2 | | | $ | 346.3 | | | $ | 1,091.8 | | | $ | 870.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Real property NOI | | $ | 371.6 | | | $ | 302.5 | | | $ | 909.2 | | | $ | 768.3 | |
Home sales NOI | | 54.3 | | | 24.6 | | | 122.9 | | | 58.2 | |
| | | | | | | | |
Service, retail, dining and entertainment expenses NOI | | 29.3 | | | 19.2 | | | 59.7 | | | 43.9 | |
| | | | | | | | |
NOI | | $ | 455.2 | | | $ | 346.3 | | | $ | 1,091.8 | | | $ | 870.4 | |
Seasonality of Revenue
REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO
The RV and Marina industries are seasonal in nature, and the results of operations in any one period may not be indicative of results in future periods.
In the RV segment, certain properties maintain higher occupancy during the summer months, while other properties maintain higher occupancy during the winter months. Based on the location of our properties with transient RV sites, our portfolio generally produces higher revenues between April and September than between October and March. Real property - transient revenue is included in RV segment revenue. As of September 30, 2022, we recognized Real property - transient revenue of $42.7 million in the first quarter, $93.1 million in the second quarter and $153.4 million in the third quarter. Real property - transient revenue was $266.6 million for the year ended December 31, 2021. In 2021, Real property - transient revenue was recognized 11.9 percent in the first quarter, 27.3 percent in the second quarter, 44.9 percent in the third quarter and 15.9 percent in the fourth quarter.
In the Marina segment, demand for wet slip storage increases during the summer months as customers contract for the summer boating season, which also drives non-storage revenue streams such as service, fuel and on-premise restaurants or convenience stores. Demand for dry storage increases during the winter season as seasonal weather patterns require boat owners to store their vessels on dry docks and within covered racks. As of September 30, 2022, we recognized seasonal Real property revenue of $62.4 million in the first quarter, $79.4 million in the second quarter and $90.0 million in the third quarter. Seasonal Real property revenue was $246.6 million for the year ended December 31, 2021. In 2021, seasonal Real property revenue was recognized 17.7 percent in the first quarter, 25.0 percent in the second quarter, 29.9 percent in the third quarter and 27.4 percent in the fourth quarter.
Comparison of the Three and Nine Months Ended September 30, 2022 and 2021
Real Property Operations - Total Portfolio
The following tables reflect certain financial and other information for our Total Portfolio as of and for the three and nine months ended September 30, 2022 and 2021 (in millions, except for statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change | | September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Financial Information | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real property (excluding transient) | $ | 359.8 | | | $ | 303.4 | | | $ | 56.4 | | | 18.6 | % | | $ | 1,008.2 | | | $ | 861.7 | | | $ | 146.5 | | | 17.0 | % |
Real property - transient | 160.4 | | | 126.4 | | | 34.0 | | | 26.9 | % | | 303.5 | | | 235.8 | | | 67.7 | | | 28.7 | % |
Other | 65.5 | | | 48.3 | | | 17.2 | | | 35.6 | % | | 149.9 | | | 116.4 | | | 33.5 | | | 28.8 | % |
Total Operating | 585.7 | | | 478.1 | | | 107.6 | | | 22.5 | % | | 1,461.6 | | | 1,213.9 | | | 247.7 | | | 20.4 | % |
Expense | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Property Operating | 214.1 | | | 175.6 | | | 38.5 | | | 21.9 | % | | 552.4 | | | 445.6 | | | 106.8 | | | 24.0 | % |
Real Property NOI | $ | 371.6 | | | $ | 302.5 | | | $ | 69.1 | | | 22.8 | % | | $ | 909.2 | | | $ | 768.3 | | | $ | 140.9 | | | 18.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | As of | | | |
| | September 30, 2022 | | September 30, 2021 | | Change | |
Other Information | | | | | | | |
Number of properties(1) | | 662 | | | 584 | | | 78 | | |
| | | | | | | |
MH occupancy | | 95.5 | % | | | | | |
RV occupancy(2) | | 100.0 | % | | | | | |
MH & RV blended occupancy(3) | | 96.5 | % | | 97.4 | % | | (0.9) | % | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Sites available for MH & RV development | | 16,078 | | | 10,312 | | | 5,766 | | |
| | | | | | | |
Monthly base rent per site - MH | | $ | 624 | | | $ | 599 | | (5) | $ | 25 | | |
Monthly base rent per site - RV(4) | | $ | 549 | | | $ | 515 | | (5) | $ | 34 | | |
Monthly base rent per site - Total | | $ | 605 | | | $ | 579 | | (5) | $ | 26 | | |
| | | | | | | |
Weighted average monthly rental rate - MH Rental Program | | $ | 1,192 | | | $ | 1,085 | | | $ | 107 | | |
(1)Includes MH communities, RV communities and marinas.
(2)Occupancy percentages include annual RV sites and exclude transient RV sites.
(3)Occupancy percentages include MH and annual RV sites and exclude transient RV sites.
(4)Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(5)Canadian currency figures included within the nine months ended September 30, 2021 have been translated at 2022 average exchange rates.
For the three months ended September 30, 2017 and 2016:
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| | Three Months Ended September 30, | | | | |
Financial Information (in thousands) | | 2017 | | 2016 | | Change | | % Change |
Income from real property | | $ | 198,263 |
| | $ | 184,324 |
| | $ | 13,939 |
| | 7.6 | % |
Property operating expenses: | | | | | | | | |
Payroll and benefits | | 19,168 |
| | 18,436 |
| | 732 |
| | 4.0 | % |
Legal, taxes, and insurance | | 1,921 |
| | 1,475 |
| | 446 |
| | 30.2 | % |
Utilities | | 23,765 |
| | 21,710 |
| | 2,055 |
| | 9.5 | % |
Supplies and repair | | 7,701 |
| | 7,394 |
| | 307 |
| | 4.2 | % |
Other | | 6,694 |
| | 8,074 |
| | (1,380 | ) | | (17.1 | )% |
Real estate taxes | | 13,053 |
| | 12,384 |
| | 669 |
| | 5.4 | % |
Property operating expenses | | 72,302 |
| | 69,473 |
| | 2,829 |
| | 4.1 | % |
Real Property NOI | | $ | 125,961 |
| | $ | 114,851 |
| | $ | 11,110 |
| | 9.7 | % |
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| | As of September 30, | | |
Other Information | | 2017 | | 2016 | | Change |
Number of properties | | 348 |
| | 339 |
| | 9 |
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MH occupancy | | 95.2 | % | | | | |
RV occupancy | | 100.0 | % | | | | |
MH & RV blended occupancy (1) | | 96.2 | % | | 96.2 | % | | — | % |
| | | | | | |
Sites available for development | | 10,389 |
| | 10,425 |
| | (36 | ) |
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Monthly base rent per site - MH | | $ | 528 |
| | $ | 511 |
| | $ | 17 |
|
Monthly base rent per site - RV (2) | | $ | 430 |
| | $ | 419 |
| | $ | 11 |
|
Monthly base rent per site - Total | | $ | 507 |
| | $ | 491 |
| | $ | 16 |
|
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(1)
| Overall occupancy (percent) includes MH and annual RV sites, and excludes transient RV sites. |
| |
(2)
| Monthly base rent pertains to annual RV sites and excludes transient RV sites. |
The $11.12022, the $69.1 million increase in Real Property NOI as compared to the same period in 2021, consists of $3.9 million from newly acquired properties and $7.2$15.0 million from Same CommunitiesProperty MH and RV, $4.4 million from Same Property Marina, $25.2 million from the UK operations and $24.5 million from other recently acquired or developed properties.
For the nine months ended September 30, 2022, the $140.9 million increase in Real Property NOI as detailed below.compared to the same period in 2021, consists of $35.7 million from Same Property MH and RV, $7.6 million from Same Property Marina, $40.6 million from the UK operations and $57.0 million from other recently acquired or developed properties.
Real Property Operations - Same Property
REAL PROPERTY OPERATIONS – SAME COMMUNITY
A key management tool used when evaluating performance and growth of our properties is a comparison of ourthe Same Communities.Property portfolio. Same Communities consistProperty refers to properties that we have owned for at least the preceding year, exclusive of properties ownedrecently completed or under construction, and operated throughout 2017 and 2016.other properties as determined by management. The Same CommunityProperty data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions or unique situations. The Same Community data in this Form 10-Q includes all properties which we have owned and operated continuously since January 1, 2016. All communities from the American Land Lease portfolio acquisition are included within Same Communities.
In order to evaluate the growth of the Same Communities,Property portfolio, management has classified certain items differently than our GAAP statements.statement. The reclassification difference between our GAAP statements and our Same CommunityProperty portfolio is the reclassification of water and sewerutility revenues from income from real property revenue to utilities.operating expenses. A significant portion of our utility charges are re-billed to our residents. We reclassify these amounts to reflect the utility expenses associated with ourAdditionally, prior period Canadian currency figures have been translated at 2022 average exchange rates for constant currency comparability.
Real Property Operations - Same Community portfolio net of recovery.Property - MH and RV United States and Canada
The following tables reflect certain financial and other information for our Same CommunitiesProperty MH and RV portfolio as of and for the three and nine months ended September 30, 2022 and 2021 (in millions, except for statistical information).
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| Three Months Ended |
| Total Same Property - MH and RV | | MH | | RV |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) | | September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) | | September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) |
Financial Information | | | | | | | | | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
Real property (excluding transient) | $ | 239.5 | | | $ | 225.0 | | | $ | 14.5 | | | 6.5 | % | | $ | 185.7 | | | $ | 177.6 | | | $ | 8.1 | | | 4.6 | % | | $ | 53.8 | | | $ | 47.4 | | | $ | 6.4 | | | 13.4 | % |
Real property - transient | 107.1 | | | 106.5 | | | 0.6 | | | 0.6 | % | | 0.2 | | | 0.2 | | | — | | | 7.5 | % | | 106.9 | | | 106.3 | | | 0.6 | | | 0.6 | % |
Other | 16.0 | | | 14.9 | | | 1.1 | | | 7.2 | % | | 5.1 | | | 4.9 | | | 0.2 | | | 3.1 | % | | 10.9 | | | 10.0 | | | 0.9 | | | 9.2 | % |
Total Operating | 362.6 | | | 346.4 | | | 16.2 | | | 4.7 | % | | 191.0 | | | 182.7 | | | 8.3 | | | 4.6 | % | | 171.6 | | | 163.7 | | | 7.9 | | | 4.8 | % |
Expense | | | | | | | | | | | | | | | | | | | | | | | |
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Property Operating | 114.3 | | | 113.1 | | | 1.2 | | | 1.0 | % | | 52.6 | | | 50.8 | | | 1.8 | | | 3.7 | % | | 61.7 | | | 62.3 | | | (0.6) | | | (1.1) | % |
Real Property NOI | $ | 248.3 | | | $ | 233.3 | | | $ | 15.0 | | | 6.4 | % | | $ | 138.4 | | | $ | 131.9 | | | $ | 6.5 | | | 4.9 | % | | $ | 109.9 | | | $ | 101.4 | | | $ | 8.5 | | | 8.4 | % |
(1) Percentages are calculated based on unrounded numbers.
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| Nine Months Ended |
| Total Same Property - MH and RV | | MH | | RV |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) | | September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) | | September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) |
Financial Information | | | | | | | | | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
Real property (excluding transient) | $ | 708.3 | | | $ | 666.3 | | | $ | 42.0 | | | 6.3 | % | | $ | 552.3 | | | $ | 528.9 | | | $ | 23.4 | | | 4.4 | % | | $ | 156.0 | | | $ | 137.4 | | | $ | 18.6 | | | 13.6 | % |
Real property - transient | 211.5 | | | 201.8 | | | 9.7 | | | 4.8 | % | | 0.9 | | | 1.2 | | | (0.3) | | | (23.5) | % | | 210.6 | | | 200.6 | | | 10.0 | | | 4.9 | % |
Other | 36.0 | | | 33.8 | | | 2.2 | | | 6.6 | % | | 15.4 | | | 14.2 | | | 1.2 | | | 8.8 | % | | 20.6 | | | 19.6 | | | 1.0 | | | 5.0 | % |
Total Operating | 955.8 | | | 901.9 | | | 53.9 | | | 6.0 | % | | 568.6 | | | 544.3 | | | 24.3 | | | 4.5 | % | | 387.2 | | | 357.6 | | | 29.6 | | | 8.3 | % |
Expense | | | | | | | | | | | | | | | | | | | | | | | |
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Property Operating | 305.9 | | | 287.7 | | | 18.2 | | | 6.3 | % | | 149.9 | | | 140.5 | | | 9.4 | | | 6.8 | % | | 156.0 | | | 147.2 | | | 8.8 | | | 5.9 | % |
Real Property NOI | $ | 649.9 | | | $ | 614.2 | | | $ | 35.7 | | | 5.8 | % | | $ | 418.7 | | | $ | 403.8 | | | $ | 14.9 | | | 3.7 | % | | $ | 231.2 | | | $ | 210.4 | | | $ | 20.8 | | | 9.9 | % |
(1) Percentages are calculated based on unrounded numbers.
The amounts in the tables above reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at the 2022 average exchange rate of $0.7664 USD per Canadian dollar. We have reclassified utilities revenues of $22.1 million and $19.8 million for the three months ended September 30, 20172022 and 2016:2021, and $60.6 million and $54.4 million for the nine months ended September 30, 2022 and 2021, respectively, to reflect the utility expenses associated with our Same Property portfolio net of recovery.
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| | Three Months Ended September 30, | | | | |
Financial Information (in thousands) | | 2017 | | 2016 | | Change | | % Change |
Income from real property | | $ | 144,589 |
|
| $ | 136,137 |
| | $ | 8,452 |
| | 6.2 | % |
Property operating expenses: | | |
| | | | | |
Payroll and benefits | | 13,070 |
|
| 12,596 |
| | 474 |
| | 3.8 | % |
Legal, taxes, and insurance | | 1,325 |
|
| 1,178 |
| | 147 |
| | 12.5 | % |
Utilities | | 8,961 |
|
| 8,821 |
| | 140 |
| | 1.6 | % |
Supplies and repair | | 5,702 |
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| 5,862 |
| | (160 | ) | | (2.7 | )% |
Other | | 4,078 |
|
| 3,955 |
| | 123 |
| | 3.1 | % |
Real estate taxes | | 9,631 |
|
| 9,148 |
| | 483 |
| | 5.3 | % |
Property operating expenses | | 42,767 |
| | 41,560 |
| | 1,207 |
| | 2.9 | % |
Real Property NOI | | $ | 101,822 |
| | $ | 94,577 |
| | $ | 7,245 |
| | 7.7 | % |
| | | | | | | | | | | As of | |
| | As of September 30, | | | | September 30, 2022 | | September 30, 2021 | | Change |
Other Information | | 2017 | | 2016 | | Change | Other Information | | | | | | |
Number of properties(1) | | 231 |
|
| 231 |
| | — |
| | 424 | | | 424 | | | — | |
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MH occupancy (1) | | 96.7 | % | | | | | | 97.3 | % | |
RV occupancy (1)(2) | | 100.0 | % | | | | | | 100.0 | % | |
MH & RV blended occupancy (1) (2) | | 97.2 | % |
| 95.6 | % | | 1.6 | % | |
MH & RV blended occupancy(3) | | MH & RV blended occupancy(3) | | 97.9 | % | |
| Adjusted MH occupancy(4) | | Adjusted MH occupancy(4) | | 98.0 | % | |
Adjusted RV occupancy(5) | | Adjusted RV occupancy(5) | | 100.0 | % | |
Adjusted MH & RV blended occupancy(6) | | Adjusted MH & RV blended occupancy(6) | | 98.5 | % | | 96.5 | % | (7) | 2.0 | % |
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Sites available for development | | 6,003 |
| | 7,177 |
| | (1,174 | ) | Sites available for development | | 7,920 | | | 8,081 | | | (161) | |
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Monthly base rent per site - MH | | $ | 514 |
|
| $ | 497 |
| | $ | 17 |
| Monthly base rent per site - MH | | $ | 629 | | | $ | 604 | | (9) | $ | 25 | |
Monthly base rent per site - RV (3) | | $ | 448 |
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| $ | 433 |
| | $ | 15 |
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Monthly base rent per site - RV(8) | | Monthly base rent per site - RV(8) | | $ | 560 | | | $ | 524 | | (9) | $ | 36 | |
Monthly base rent per site - Total | | $ | 506 |
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| $ | 489 |
| | $ | 17 |
| Monthly base rent per site - Total | | $ | 613 | | | $ | 585 | | (9) | $ | 28 | |
| Monthly base rent per site - MH Rental Program | | Monthly base rent per site - MH Rental Program | | $ | 1,198 | | | $ | 1,091 | | | $ | 107 | |
(1)Financial results from properties disposed of during the year have been removed from Same Property reporting.
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(1)
| The occupancy percentage includes(2)Occupancy percentages include annual RV sites and exclude transient RV sites. (3)Occupancy percentages include MH and annual RV sites and exclude transient RV sites. (4)Adjusted occupancy percentages include MH sites and exclude recently completed but vacant MH expansion sites. (5)Adjusted occupancy percentages include annual RV sites and exclude transient RV sites. (6)Adjusted occupancy percentages include MH and annual RV sites and exclude transient RV sites and recently completed but vacant expansion sites. (7)The occupancy percentages for 2021 have been adjusted to reflect incremental growth period-over-period from newly rented MH and annual RV sites, and excludes recently completed but vacant expansion sites and transient RV sites. |
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(2)
| The occupancy percentage for 2016 has been adjusted to reflect incremental growth period-over-period from filled expansion sites and the conversion of transient RV sites to annual RV sites.(8)Monthly base rent pertains to annual RV sites and excludes transient RV sites. (9)Canadian currency figures included within three months ended September 30, 2021 have been translated at 2022 average exchange rates.
For the three months ended September 30, 2022 and 2021:
•The MH segment increase in NOI of $6.5 million, or 4.9 percent, when compared to the same period in 2021 is primarily due to an increase in Real property (excluding transient) revenue of $8.1 million, or 4.6 percent, partially offset by increased property operating expenses. Real property (excluding transient) revenue increased primarily due to a 4.3 percent increase in monthly base rent.
•The RV segment increase in NOI of $8.5 million, or 8.4 percent, when compared to the same period in 2021 is primarily due to an increase in Real property (excluding transient) revenue of $6.4 million, or 13.4 percent, combined with a reduction in property operating expenses. The increase in Real property - (excluding transient) revenue was primarily due to a 7.0 percent increase in monthly base rent and conversions of transient RV sites to annual RV sites.
For the nine months ended September 30, 2022 and 2021:
•The MH segment increase in NOI of $14.9 million, or 3.7 percent, when compared to the same period in 2021 is primarily due to an increase in Real property (excluding transient) revenue of $23.4 million, or 4.4 percent, partially offset by increased property operating expenses. Real property (excluding transient) revenue increased primarily due to a 4.3 percent increase in monthly base rent.
•The RV segment increase in NOI of $20.8 million, or 9.9 percent, when compared to the same period in 2021 is primarily due to an increase in Real property (excluding transient) revenue of $18.6 million, or 13.6 percent, primarily due to a 7.0 percent increase in monthly base rent and conversions of transient RV sites to annual RV sites. |
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(3)
| Monthly base rent pertains to annual RV sites and excludes transient RV sites. |
Real property NOI growth of 7.7 percent is primarily due to increased Income from real property of $8.5 million, or 6.2 percent. The 6.2 percent increase is attributable to the 1.6 percent increase in occupancy, 3.5 percent increase in total monthly base rent per site, and a 1.1 percent increase in transient and other revenue. This increase was partially offset by a $1.2 million, or 2.9 percent,an increase in Propertyproperty operating expenses, primarily attributable to increases in payroll and benefits expenses, and real estate taxes.expenses.
Real Property Operations - Same Property - Marina
The following tables reflect certain financial and other information for our Same Property Marina as of and for the three and nine months ended September 30, 2022 and 2021 (in millions, except for statistical information).
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| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) | | September 30, 2022 | | September 30, 2021 | | Change | | % Change(1) |
Financial Information | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | |
Real property (excluding transient) | $ | 64.0 | | | $ | 58.6 | | | $ | 5.4 | | | 9.1 | % | | $ | 167.3 | | | $ | 155.6 | | | $ | 11.7 | | | 7.5 | % |
Real property - transient | 4.4 | | | 5.4 | | | (1.0) | | | (17.4) | % | | 9.5 | | | 10.4 | | | (0.9) | | | (7.8) | % |
Other | 3.9 | | | 3.9 | | | — | | | 0.3 | % | | 9.5 | | | 8.8 | | | 0.7 | | | 8.0 | % |
Total Operating | 72.3 | | | 67.9 | | | 4.4 | | | 6.5 | % | | 186.3 | | | 174.8 | | | 11.5 | | | 6.7 | % |
Expense | | | | | | | | | | | | | | | |
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Property Operating | 21.9 | | | 21.9 | | | — | | | — | % | | 63.5 | | | 59.6 | | | 3.9 | | | 6.3 | % |
Real Property NOI | $ | 50.4 | | | $ | 46.0 | | | $ | 4.4 | | | 9.6 | % | | $ | 122.8 | | | $ | 115.2 | | | $ | 7.6 | | | 6.8 | % |
(1) Percentages are calculated based on unrounded numbers.
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| As of | | | | |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Other Information | | | | | | | |
Number of properties | 101 | | | 101 | | | — | | | — | % |
Wet slip and dry storage spaces | 35,621 | | | 35,744 | | | (123) | | | (0.3) | % |
We have reclassified utility revenues of $2.9 million for the three months ended September 30, 2022 and 2021, and $8.3 million and $8.4 million for the nine months ended September 30, 2022 and 2021, respectively, to reflect the utility expenses associated with our Same Property Marina net of recovery.
For the three months ended September 30, 2022 and 2021, the $4.4 million, or 9.6 percent, increase in Marina Real Property NOI is primarily due to the $5.4 million, or 9.1 percent, increase in Real property (excluding transient) revenue.
For the nine months ended September 30, 2022 and 2021, the $7.6 million, or 6.8 percent, increase in Marina Real Property NOI is primarily due to the $11.7 million, or 7.5 percent, increase in Real property (excluding transient) revenue, partially offset by increased property operating expenses.
HOME SALES AND RENTALSUK Operations Summary
The following table reflects certain financial and other information for our Rental ProgramUK operations as of and for the three months ended September 30, 2017 and 2016 (in thousands, except for statistical information):
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| | Three Months Ended September 30, | | | | |
Financial Information | | 2017 | | 2016 | | Change | | % Change |
Rental home revenue | | $ | 12,757 |
| | $ | 12,031 |
| | $ | 726 |
| | 6.0 | % |
Site rent from Rental Program (1) | | 16,078 |
| | 15,532 |
| | 546 |
| | 3.5 | % |
Rental Program revenue | | 28,835 |
| | 27,563 |
| | 1,272 |
| | 4.6 | % |
Expenses | | | | | | | | |
Commissions | | 891 |
| | 551 |
| | 340 |
| | 61.7 | % |
Repairs and refurbishment | | 3,306 |
| | 3,349 |
| | (43 | ) | | (1.3 | )% |
Taxes and insurance | | 1,546 |
| | 1,446 |
| | 100 |
| | 6.9 | % |
Marketing and other | | 1,032 |
| | 1,004 |
| | 28 |
| | 2.8 | % |
Rental Program operating and maintenance | | 6,775 |
| | 6,350 |
| | 425 |
| | 6.7 | % |
Rental Program NOI | | $ | 22,060 |
| | $ | 21,213 |
| | $ | 847 |
| | 4.0 | % |
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Other Information | | | | | | | | |
Number of occupied rentals, end of period | | 10,960 |
| | 10,797 |
| | 163 |
| | 1.5 | % |
Investment in occupied rental homes, end of period | | $ | 482,591 |
| | $ | 453,521 |
| | $ | 29,070 |
| | 6.4 | % |
Number of sold rental homes | | 286 |
| | 286 |
| | — |
| | — | % |
Weighted average monthly rental rate, end of period | | $ | 908 |
| | $ | 879 |
| | $ | 29 |
| | 3.3 | % |
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(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 the Rental Program and financial impact to our operations. |
Rental program NOI increased 4.0 percent due to an increase in revenues of 4.6 percent, or $1.3 million, partially offset by an increase in operating and maintenance expenses of 6.7 percent, or $0.4 million. The increase in revenues is attributable to a 3.3 percent increase in the weighted average monthly rental rate and a 1.5 percent increase in the number of occupied rentals. The increase in operating and maintenance expenses of $0.4 million is primarily the result of increased commissions and increased taxes and insurance expenditures in the three months ended September 30, 2017 as compared2022 and the period from date of acquisition to September 30, 2022 (in millions, except for statistical information):
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| Three Months Ended | | YTD Since Acquisition September 30, 2022 |
| September 30, 2022 | | | | | | | |
Financial Information | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | |
Real property (excluding transient) | $ | 21.2 | | | | | | | | $ | 38.1 | | | | | | |
Real property - transient | 21.8 | | | | | | | | 34.7 | | | | | | |
Other | 0.4 | | | | | | | | 1.0 | | | | | | |
Total Operating | 43.4 | | | | | | | | 73.8 | | | | | | |
Expenses | | | | | | | | | | | | | | | |
Property Operating | 18.2 | | | | | | | | 33.2 | | | | | | |
Real Property NOI | 25.2 | | | | | | | | 40.6 | | | | | | |
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Home Sales | | | | | | | | | | | | | | | |
Revenue | 84.1 | | | | | | | | 144.7 | | | | | | |
Cost of home sales | 43.6 | | | | | | | | 75.7 | | | | | | |
Home selling expenses | 1.3 | | | | | | | | 3.6 | | | | | | |
NOI | 39.2 | | | | | | | | 65.4 | | | | | | |
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Retail, dining and entertainment | | | | | | | | | | | | | | | |
Revenue | 16.3 | | | | | | | | 27.8 | | | | | | |
Expense | 16.2 | | | | | | | | 28.8 | | | | | | |
Net Operating Gain / (Loss) | 0.1 | | | | | | | | (1.0) | | | | | | |
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UK Operations NOI | $ | 64.5 | | | | | | | | $ | 105.0 | | | | | | |
Adjustment | | | | | | | | | | | | | | | |
Foreign currency translation impact | 8.8 | | | | | | | | 11.9 | | | | | | |
UK Operations NOI - Constant Currency | $ | 73.3 | | | | | | | | $ | 116.9 | | | | | | |
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Other information | | | | | | | | | | | | | | | |
Number of properties | | | | | | | | | 54 | | | | | | |
Developed sites | | | | | | | | | 17,952 | | | | | | |
Occupied sites | | | | | | | | | 16,463 | | | | | | |
Occupancy | | | | | | | | | 91.7% | | | | | | |
Sites available for development | | | | | | | | | 3,047 | | | | | | |
| | | | | | | | | | | | | | | |
Home Sales | | | | | | | | | | | | | | | |
New home sales volume | 319 | | | | | | | | 574 | | | | | | |
Pre-owned home sales volume | 566 | | | | | | | | 1,046 | | | | | | |
Total home sales volume | 885 | | | | | | | | 1,620 | | | | | | |
| | | | | | | | | | | | | | | |
UK Operations NOI, a component of our MH segment, is separately reviewed to assess the sameoverall growth and performance of the UK Operations portfolio and its financial impact on our operations.
We have reclassified utility revenue of $3.1 million and $5.6 million for the three months ended September 30, 2022 and for the period in 2016.from date of acquisition through September 30, 2022, respectively, to reflect the utility expenses associated with our UK Operations portfolio net of recovery.
Home Sales Summary (excluding UK home sales)
We purchase new homes and acquire pre-owned and repossessed manufactured homes, generally located within our communities, from lenders, dealers, and former residents to leasesell or selllease to current and prospective residents.
The following table reflects certain financial and statistical information for our Home Sales Program for the three and nine months ended September 30, 2022 and 2021 (in millions, except for average selling price and statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change | | September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Financial Information | | | | | | | | | | | | | | | |
New Homes | | | | | | | | | | | | | | | |
New home sales | $ | 31.7 | | | $ | 31.5 | | | $ | 0.2 | | | 0.6 | % | | $ | 95.4 | | | $ | 89.2 | | | $ | 6.2 | | | 7.0 | % |
New home cost of sales | 26.8 | | | 25.9 | | | 0.9 | | | 3.5 | % | | 78.3 | | | 72.8 | | | 5.5 | | | 7.6 | % |
Gross profit – new homes | 4.9 | | | 5.6 | | | (0.7) | | | (12.5) | % | | 17.1 | | | 16.4 | | | 0.7 | | | 4.3 | % |
Gross margin % – new homes | 15.5 | % | | 17.7 | % | | (2.2) | % | | | | 17.9 | % | | 18.4 | % | | (0.5) | % | | |
Average selling price – new homes | $ | 183,237 | | | $ | 151,850 | | | $ | 31,387 | | | 20.7 | % | | $ | 174,406 | | | $ | 152,943 | | | $ | 21,463 | | | 14.0 | % |
| | | | | | | | | | | | | | | |
Pre-owned Homes | | | | | | | | | | | | | | | |
Pre-owned home sales | $ | 34.9 | | | $ | 49.6 | | | $ | (14.7) | | | (29.6) | % | | $ | 118.0 | | | $ | 125.9 | | | $ | (7.9) | | | (6.3) | % |
Pre-owned home cost of sales | 19.4 | | | 25.8 | | | (6.4) | | | (24.8) | % | | 63.4 | | | 70.4 | | | (7.0) | | | (9.9) | % |
Gross Profit – pre-owned homes | 15.5 | | | 23.8 | | | (8.3) | | | (34.9) | % | | 54.6 | | | 55.5 | | | (0.9) | | | (1.6) | % |
Gross margin % – pre-owned homes | 44.4 | % | | 48.0 | % | | (3.6) | % | | | | 46.3 | % | | 44.1 | % | | 2.2 | % | | |
Average selling price – pre-owned homes | $ | 63,339 | | | $ | 52,006 | | | $ | 11,333 | | | 21.8 | % | | $ | 59,267 | | | $ | 48,981 | | | $ | 10,286 | | | 21.0 | % |
| | | | | | | | | | | | | | | |
Total Home Sales | | | | | | | | | | | | | | | |
Revenue from home sales | $ | 66.6 | | | $ | 81.1 | | | $ | (14.5) | | | (17.9) | % | | $ | 213.4 | | | $ | 215.1 | | | $ | (1.7) | | | (0.8) | % |
Cost of home sales | 46.2 | | | 51.7 | | | (5.5) | | | (10.6) | % | | 141.7 | | | 143.2 | | | (1.5) | | | (1.0) | % |
Home selling expenses | 5.3 | | | 4.8 | | | 0.5 | | | 10.4 | % | | 14.2 | | | 13.7 | | | 0.5 | | | 3.6 | % |
Home Sales NOI | $ | 15.1 | | | $ | 24.6 | | | $ | (9.5) | | | (38.6) | % | | $ | 57.5 | | | $ | 58.2 | | | $ | (0.7) | | | (1.2) | % |
| | | | | | | | | | | | | | | |
Other Information | | | | | | | | | | | | | | | |
New home sales volume | 173 | | | 207 | | | (34) | | | (16.4) | % | | 547 | | | 583 | | | (36) | | | (6.2) | % |
Pre-owned home sales volume | 551 | | | 955 | | | (404) | | | (42.3) | % | | 1,991 | | | 2,572 | | | (581) | | | (22.6) | % |
Total home sales volume | 724 | | | 1,162 | | | (438) | | | (37.7) | % | | 2,538 | | | 3,155 | | | (617) | | | (19.6) | % |
Gross Profit - New Homes
For the three months ended September 30, 2017 and 2016 (in thousands, except for average selling prices and statistical information):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | |
Financial Information | | 2017 | | 2016 | | Change | | % Change |
New home sales | | $ | 10,331 |
| | $ | 9,391 |
| | $ | 940 |
| | 10.0 | % |
Pre-owned home sales | | 22,866 |
| | 21,820 |
| | 1,046 |
| | 4.8 | % |
Revenue from home sales | | 33,197 |
| | 31,211 |
| | 1,986 |
| | 6.4 | % |
| | | | | | | | |
New home cost of sales | | 8,699 |
| | 7,896 |
| | 803 |
| | 10.2 | % |
Pre-owned home cost of sales | | 16,395 |
| | 14,039 |
| | 2,356 |
| | 16.8 | % |
Cost of home sales | | 25,094 |
| | 21,935 |
| | 3,159 |
| | 14.4 | % |
NOI / Gross profit | | $ | 8,103 |
| | $ | 9,276 |
| | $ | (1,173 | ) | | (12.7 | )% |
| | | | | | | | |
Gross profit – new homes | | $ | 1,632 |
|
| $ | 1,495 |
| | $ | 137 |
| | 9.2 | % |
Gross margin % – new homes | | 15.8 | % |
| 15.9 | % | | (0.1 | )% | |
|
|
Average selling price – new homes | | $ | 101,284 |
|
| $ | 90,298 |
| | $ | 10,986 |
| | 12.2 | % |
| |
|
|
|
|
| | | | |
Gross profit – pre-owned homes | | $ | 6,471 |
|
| $ | 7,781 |
| | $ | (1,310 | ) | | (16.8 | )% |
Gross margin % – pre-owned homes | | 28.3 | % |
| 35.7 | % | | (7.4 | )% | |
|
|
Average selling price – pre-owned homes | | $ | 32,526 |
|
| $ | 27,585 |
| | $ | 4,941 |
| | 17.9 | % |
| | | | | | | | |
Statistical Information | | | | | | | | |
Home sales volume: | | | | | | | | |
New home sales | | 102 |
|
| 104 |
| | (2 | ) | | (1.9 | )% |
Pre-owned home sales | | 703 |
|
| 791 |
| | (88 | ) | | (11.1 | )% |
Total homes sold | | 805 |
| | 895 |
| | (90 | ) | | (10.1 | )% |
Gross2022, the 12.5 percent decrease in gross profit on new home sales increased by 9.2 percent,is primarily as a result of a 12.2 percent increase in the average selling price of news homes, partially offsetdriven by a 1.916.4 percent decrease in new home sales volumes.
Gross profit on pre-owned home sales decreased by 16.8 percent, primarily as a result of a 11.1 percent decrease in pre-owned home sales volumes as compared to the third quarter of 2016, which had elevated sales due to extensive inventory purchased in the Carefree acquisition.
OTHER ITEMS - STATEMENTS OF OPERATIONS
The following table summarizes other income and expenses for the three months ended September 30, 2017 and 2016 (amounts in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | |
| | 2017 | | 2016 | | Change | | % Change |
Ancillary revenues, net | | $ | 7,024 |
| | $ | 6,997 |
| | $ | 27 |
| | 0.4 | % |
Interest income | | $ | 5,920 |
| | $ | 4,705 |
| | $ | 1,215 |
| | 25.8 | % |
Brokerage commissions and other revenues, net | | $ | 1,091 |
| | $ | 984 |
| | $ | 107 |
| | 10.9 | % |
Home selling expenses | | $ | 3,290 |
| | $ | 2,643 |
| | $ | 647 |
| | 24.5 | % |
General and administrative expenses | | $ | 18,267 |
| | $ | 16,575 |
| | $ | 1,692 |
| | 10.2 | % |
Transaction costs | | $ | 2,167 |
| | $ | 4,191 |
| | $ | (2,024 | ) | | (48.3 | )% |
Depreciation and amortization | | $ | 64,232 |
| | $ | 61,483 |
| | $ | 2,749 |
| | 4.5 | % |
Interest expense | | $ | 32,875 |
| | $ | 34,589 |
| | $ | (1,714 | ) | | (5.0 | )% |
Catastrophic weather related charges | | $ | 7,756 |
| | $ | — |
| | $ | 7,756 |
| | N/A |
|
Other income, net | | $ | 3,345 |
| | $ | — |
| | $ | 3,345 |
| | N/A |
|
Current tax benefit / (expense) | | $ | 38 |
| | $ | (283 | ) | | $ | 321 |
| | 113.4 | % |
Deferred tax benefit | | $ | 81 |
| | $ | — |
| | $ | 81 |
| | N/A |
|
Income from affiliate transactions | | $ | — |
| | $ | 500 |
| | (500 | ) | | 100.0 | % |
Interest income for the three months ended September 30, 2017, increased primarily due to an increase in our installment notes receivables, partially offset by a decrease in our collateralized receivables, as compared to September 30, 2016.
Home selling expenses increased primarily due to increased commissions on home sales in the three months ended September 30, 2017,volume as compared to the same period in 2016.2021, partially offset by a 20.7 percent increase in new home average selling price.
For the nine months ended September 30, 2022, the 4.3 percent increase in gross profit is primarily the result of a 14.0 percent increase in new home average selling price, partially offset by a decrease of 6.2 percent in new home sales volume.
Gross Profit - Pre-owned Homes sold during
For the three months ended September 30, 2017 had higher average selling prices than2022, the 34.9 percent decrease in the same periodgross profit is primarily driven by a 42.3 percent decrease in 2016, which resulted in higher commissions.
General and administrative expenses increased primarily due to additional employee related costs as headcount increased in connection with our growth through acquisitions.
Transaction costs relate to diligence and other expenses incurred in connection with our acquisitions. These costs were lower in the three months ended September 30, 2017pre-owned home sales volume as compared to the same period in 2016, due to2021.
For the acquisition of Carefree in June 2016. Refer to Note 2, “Real Estate Acquisitions,” in our accompanying Consolidated Financial Statements for additional information.
Depreciation and amortization increased as a result of our acquisitions in 2017 and the three months ended December 31, 2016. Refer to Note 2, "Real Estate Acquisitions," of our accompanying Consolidated Financial Statements for additional information.
Interest expense decreased primarily due to repayment of all borrowings on our revolving loan and term loan under our Previous Facility during the three months ended June 30, 2017. Refer to Note 7, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information.
Catastrophic weather related charges - On September 10, 2017, Hurricane Irma hit Florida as a Category 4 hurricane and impacted 121 of our communities in Florida and three in Georgia. We recognized charges totaling $23.1 million comprised of $12.7 million for debris and tree removal, common area repairs and minor flooding damage, as well as $10.4 million for impaired assets at three communities containing 190 total sites located in the Florida Keys. These charges, which include management’s best estimate of the total repair expense the Company will incur, were partially offset by estimated insurance recoveries of $15.3 million. The net charges of $7.8 million have been classified as “Catastrophic weather related charges” in the Consolidated Statements of Operations in our accompanying Consolidated Financial Statements. Expected insurance recoveries for loss of revenue and redevelopment costs greater than the impairment charge related to the three Florida Key communities cannot be estimated at this time and are excluded from the insurance recovery estimate recorded at September 30, 2017. The Company maintains property, casualty, flood and business interruption insurance for its community portfolio, subject to customary deductibles and limits.
Other income, net for the three months ended September 30, 2017, is comprised of a foreign currency translation gain of $3.4 million partially offset by contingent liability re-measurement of $0.1 million.
Income from affiliate transactions of $0.5 million in the three months ended September 30, 2016, was due to the sale of our entire interest in Origen Financial, Inc. (“Origen”). Prior to the sale, the carrying value of our investment in Origen was zero.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
SUMMARY STATEMENTS OF OPERATIONS
The following table summarizes our consolidated financial results and reconciles net income to NOI for the nine months ended September 30, 2017 and 2016 (in thousands):
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Net income attributable to Sun Communities, Inc., common stockholders: | | 57,583 |
| | 18,969 |
|
Other revenues | | (18,587 | ) | | (15,459 | ) |
Home selling expenses | | 9,391 |
| | 7,240 |
|
General and administrative | | 56,188 |
| | 46,910 |
|
Transaction costs | | 6,990 |
| | 27,891 |
|
Depreciation and amortization | | 189,719 |
| | 159,565 |
|
Extinguishment of debt | | 759 |
| | — |
|
Interest expense | | 98,126 |
| | 90,885 |
|
Catastrophic weather related charges | | 8,124 |
| | — |
|
Other income, net | | (5,340 | ) | | — |
|
Current tax expense | | 133 |
| | 567 |
|
Deferred tax benefit | | (745 | ) | | — |
|
Income from affiliate transactions | | — |
| | (500 | ) |
Preferred return to preferred OP units | | 3,482 |
| | 3,793 |
|
Amounts attributable to noncontrolling interests | | 4,179 |
| | 460 |
|
Preferred stock distributions | | 6,233 |
| | 6,748 |
|
NOI / Gross profit | | $ | 416,235 |
| | $ | 347,069 |
|
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Real Property NOI | | $ | 361,595 |
| | $ | 296,081 |
|
Rental Program NOI | | 68,759 |
| | 64,223 |
|
Home Sales NOI / Gross profit | | 23,320 |
| | 23,184 |
|
Ancillary NOI / Gross profit | | 10,367 |
| | 9,745 |
|
Site rent from Rental Program (included in Real Property NOI) (1) | | (47,806 | ) | | (46,164 | ) |
NOI / Gross profit | | $ | 416,235 |
| | $ | 347,069 |
|
(1) The renter’s monthly payment includes2022, the site rent and an amount attributable1.6 percent decrease in gross profit is primarily the result of a 22.6 percent decrease in pre-owned home sales volume, as compared to the leasing ofsame period in 2021, partially offset by a 21.0 percent increase in average pre-owned home selling price.
Refer to the home. The site rent is reflectedUK Operations summary on page 54 for financial information related to our home sales 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 to assess the overall growth and performance of Rental Program and financial impact on our operations.UK.
Rental Program Summary
REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO
The following tables reflect certain financial and other information for our Total Portfolio as of and for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | |
Financial Information (in thousands) | | 2017 | | 2016 | | Change | | % Change |
Income from Real Property | | $ | 560,778 |
| | $ | 453,560 |
| | $ | 107,218 |
| | 23.6 | % |
Property operating expenses: | | | | | | | | |
Payroll and benefits | | 51,140 |
| | 40,572 |
| | 10,568 |
| | 26.1 | % |
Legal, taxes, and insurance | | 5,339 |
| | 4,387 |
| | 952 |
| | 21.7 | % |
Utilities | | 63,641 |
| | 48,841 |
| | 14,800 |
| | 30.3 | % |
Supplies and repair | | 19,712 |
| | 15,074 |
| | 4,638 |
| | 30.8 | % |
Other | | 20,029 |
| | 16,483 |
| | 3,546 |
| | 21.5 | % |
Real estate taxes | | 39,322 |
| | 32,122 |
| | 7,200 |
| | 22.4 | % |
Property operating expenses | | 199,183 |
| | 157,479 |
| | 41,704 |
| | 26.5 | % |
Real Property NOI | | $ | 361,595 |
| | $ | 296,081 |
| | $ | 65,514 |
| | 22.1 | % |
|
| | | | | | | | | | | | |
| | As of September 30, | | |
Other Information | | 2017 | | 2016 | | Change |
Number of properties | | 348 |
| | 339 |
| | 9 |
|
| | | | | | |
MH occupancy | | 95.2 | % | | | | |
RV occupancy | | 100.0 | % | | | | |
MH & RV blended occupancy (1) | | 96.2 | % | | 96.2 | % | | — | % |
| | | | | | |
Sites available for development | | 10,389 |
| | 10,425 |
| | (36 | ) |
| | | | | | |
Monthly base rent per site - MH | | $ | 528 |
| | $ | 511 |
| | $ | 17 |
|
Monthly base rent per site - RV (2) | | $ | 430 |
| | $ | 419 |
| | $ | 11 |
|
Monthly base rent per site - Total | | $ | 507 |
| | $ | 491 |
| | $ | 16 |
|
| |
(1)
| Overall occupancy (%) includes MH and annual RV sites, and excludes transient RV sites. |
| |
(2)
| Weighted average rent pertains to annual RV sites and excludes transient RV sites. |
The $65.5 million increase in Real Property NOI consists of $47.0 million from newly acquired properties and $18.5 million from Same Communities as detailed below.
REAL PROPERTY OPERATIONS – SAME COMMUNITY
The following tables reflect certain financial and other information for our Same Communities as of and for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | |
Financial Information (in thousands) | | 2017 | | 2016 | | Change | | % Change |
Income from real property | | $ | 404,353 |
|
| $ | 381,979 |
| | $ | 22,374 |
| | 5.9 | % |
Property operating expenses: | | | | | | | | |
Payroll and benefits | | 34,780 |
|
| 33,407 |
| | 1,373 |
| | 4.1 | % |
Legal, taxes, and insurance | | 4,073 |
|
| 3,895 |
| | 178 |
| | 4.6 | % |
Utilities | | 22,905 |
|
| 22,082 |
| | 823 |
| | 3.7 | % |
Supplies and repair | | 14,712 |
|
| 14,474 |
| | 238 |
| | 1.6 | % |
Other | | 10,550 |
|
| 10,412 |
| | 138 |
| | 1.3 | % |
Real estate taxes | | 29,104 |
|
| 27,943 |
| | 1,161 |
| | 4.2 | % |
Property operating expenses | | 116,124 |
| | 112,213 |
| | 3,911 |
| | 3.5 | % |
Real Property NOI | | $ | 288,229 |
| | $ | 269,766 |
| | $ | 18,463 |
| | 6.8 | % |
|
| | | | | | | | | | | | |
| | As of September 30, | | |
Other Information | | 2017 | | 2016 | | Change |
Number of properties | | 231 |
| | 231 |
| | — |
|
| | | | | | |
MH occupancy (1) | | 96.7 | % | | | | |
RV occupancy (1) | | 100.0 | % | | | | |
MH & RV blended occupancy (1) (2) | | 97.2 | % | | 95.6 | % | | 1.6 | % |
| | | | | | |
Sites available for development | | 6,003 |
| | 7,177 |
| | (1,174 | ) |
| | | | | | |
Monthly base rent per site - MH | | $ | 514 |
| | $ | 497 |
| | $ | 17 |
|
Monthly base rent per site - RV (3) | | $ | 448 |
| | $ | 433 |
| | $ | 15 |
|
Monthly base rent per site - Total | | $ | 506 |
| | $ | 489 |
| | $ | 17 |
|
| |
(1)
| The occupancy percentage includes MH and annual RV sites, and excludes recently completed but vacant expansion sites and transient RV sites. |
| |
(2)
| The occupancy percentage for 2016 has been adjusted to reflect incremental growth period-over-period from filled expansion sites and the conversion of transient RV sites to annual RV sites. |
| |
(3)
| Monthly base rent pertains to annual RV sites and excludes transient RV sites. |
Real property NOI growth of 6.8 percent is primarily due to increased Income from real property of $22.4 million, or 5.9 percent. The 5.9 percent increase is attributable to the 1.6 percent increase in occupancy, 3.5 percent increase in total monthly base rent per site, and a 0.8 percent increase in transient and other revenue. This increase was partially offset by a $3.9 million, or 3.5 percent, increase in Property operating expenses, primarily attributable to increases in payroll and benefits expenses, and real estate taxes.
HOME SALES AND RENTALS
The following table reflects certain financial and other information for our Rental Program as of and for the three and nine months ended September 30, 20172022 and 20162021 (in thousands,millions, except for statistical information):
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | |
Financial Information | | 2017 | | 2016 | | Change | | % Change |
Rental home revenue | | $ | 37,774 |
| | $ | 35,696 |
| | $ | 2,078 |
| | 5.8 | % |
Site rent from Rental Program (1) | | 47,806 |
| | 46,164 |
| | 1,642 |
| | 3.6 | % |
Rental Program revenue | | 85,580 |
| | 81,860 |
| | 3,720 |
| | 4.5 | % |
Expenses | | | | | | | | |
Commissions | | 1,902 |
| | 1,710 |
| | 192 |
| | 11.2 | % |
Repairs and refurbishment | | 7,950 |
| | 9,288 |
| | (1,338 | ) | | (14.4 | )% |
Taxes and insurance | | 4,489 |
| | 4,178 |
| | 311 |
| | 7.4 | % |
Marketing and other | | 2,480 |
| | 2,461 |
| | 19 |
| | 0.8 | % |
Rental Program operating and maintenance | | 16,821 |
| | 17,637 |
| | (816 | ) | | (4.6 | )% |
Rental Program NOI | | $ | 68,759 |
| | $ | 64,223 |
| | $ | 4,536 |
| | 7.1 | % |
| | | | | | | | |
Other Information | | | | | | | | |
Number of occupied rentals, end of period | | 10,960 |
| | 10,797 |
| | 163 |
| | 1.5 | % |
Investment in occupied rental homes, end of period | | $ | 482,591 |
| | $ | 453,521 |
| | $ | 29,070 |
| | 6.4 | % |
Number of sold rental homes | | 828 |
| | 858 |
| | (30 | ) | | (3.5 | )% |
Weighted average monthly rental rate, end of period | | $ | 908 |
| | $ | 879 |
| | $ | 29 |
| | 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 the Rental Program and financial impact to our operations. |
Rental program NOI increased 7.1 percent due to an increase in revenues of 4.5 percent, or $3.7 million, combined with a decrease in operating and maintenance expenses of 4.6 percent, or $0.8 million. The increase in revenues is attributable to a 3.3 percent increase in the weighted average monthly rental rate and a 1.5 percent increasestatistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change | | September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Financial Information | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Revenues | $ | 31.4 | | | $ | 33.9 | | | $ | (2.5) | | | (7.4) | % | | $ | 95.7 | | | $ | 105.8 | | | $ | (10.1) | | | (9.5) | % |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Expenses | 6.0 | | | 5.5 | | | 0.5 | | | 9.1 | % | | 15.9 | | | 15.3 | | | 0.6 | | | 3.9 | % |
Rental Program NOI | $ | 25.4 | | | $ | 28.4 | | | $ | (3.0) | | | (10.6) | % | | $ | 79.8 | | | $ | 90.5 | | | $ | (10.7) | | | (11.8) | % |
| | | | | | | | | | | | | | | |
Other Information | | | | | | | | | | | | | | | |
Number of sold rental homes | 138 | | | 307 | | | (169) | | | (55.0) | % | | 508 | | | 799 | | | (291) | | | (36.4) | % |
Number of occupied rentals, end of period | | | | | | | | | 9,126 | | | 10,123 | | | (997) | | | (9.8) | % |
Investment in occupied rental homes, end of period | | | | | | | | | $ | 543.8 | | | $ | 559.0 | | | $ | (15.2) | | | (2.7) | % |
Weighted average monthly rental rate, end of period | | | | | | | | | $ | 1,192 | | | $ | 1,085 | | | $ | 107 | | | 9.9 | % |
The Rental Program NOI is included in Real Property NOI. The Rental Program NOI is separately reviewed to assess the numberoverall growth and performance of occupied rentals. The decrease in operatingthe Rental Program and maintenance expenses of $0.8 million is primarilyits financial impact on our operations.
For the result of decreased repairs and refurbishment partially offset by increased taxes and insurance and commissions in the ninethree months ended September 30, 20172022, Rental Program NOI decreased $3.0 million, or 10.6 percent, as compared to the same period in 2016.2021. The decrease is primarily due to a 9.8 percent decrease in the number of occupied rental homes, as compared to the same period in 2021.
For the nine months ended September 30, 2022, Rental Program NOI decreased $10.7 million, or 11.8 percent, as compared to the same period in 2021. The decrease is primarily due to a $10.1 million, or 9.5 percent, decrease in revenue, driven by a 9.8 percent decrease in number of occupied rental homes, as compared to the same period in 2021.
Marina Segment Summary
The following table reflects certain financial and statisticalother information for our Home Sales Programmarinas as of and for the three and nine months ended September 30, 20172022 and 20162021 (in thousands,millions, except for average selling prices and statistical information):
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | |
Financial Information | | 2017 | | 2016 | | Change | | % Change |
New home sales | | $ | 24,760 |
| | $ | 20,472 |
| | $ | 4,288 |
| | 21.0 | % |
Pre-owned home sales | | 66,559 |
| | 61,515 |
| | 5,044 |
| | 8.2 | % |
Revenue from homes sales | | 91,319 |
| | 81,987 |
| | 9,332 |
| | 11.4 | % |
| | | | | | | | |
New home cost of sales | | 21,044 |
| | 17,513 |
| | 3,531 |
| | 20.2 | % |
Pre-owned home cost of sales | | 46,955 |
| | 41,290 |
| | 5,665 |
| | 13.7 | % |
Cost of home sales | | 67,999 |
| | 58,803 |
| | 9,196 |
| | 15.6 | % |
NOI / Gross profit | | $ | 23,320 |
| | $ | 23,184 |
| | $ | 136 |
| | 0.6 | % |
| | | | | | | | |
Gross profit – new homes | | $ | 3,716 |
| | $ | 2,959 |
| | $ | 757 |
| | 25.6 | % |
Gross margin % – new homes | | 15.0 | % |
| 14.5 | % | | 0.5 | % | |
|
|
Average selling price – new homes | | $ | 95,598 |
|
| $ | 89,397 |
| | $ | 6,201 |
| | 6.9 | % |
| | | | | | | | |
Gross profit – pre-owned homes | | $ | 19,604 |
| | $ | 20,225 |
| | $ | (621 | ) | | (3.1 | )% |
Gross margin % – pre-owned homes | | 29.5 | % |
| 32.9 | % | | (3.4 | )% | |
|
|
Average selling price – pre-owned homes | | $ | 30,630 |
|
| $ | 28,205 |
| | $ | 2,425 |
| | 8.6 | % |
| | | | | | | | |
Statistical Information | | | | | | | | |
Home sales volume: | | | | | | | | |
New home sales | | 259 |
| | 229 |
| | 30 |
| | 13.1 | % |
Pre-owned home sales | | 2,173 |
| | 2,181 |
| | (8 | ) | | (0.4 | )% |
Total homes sold | | 2,432 |
| | 2,410 |
| | 22 |
| | 0.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2022 | | September 30, 2021 | | Change | | % Change | | September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Financial Information | | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | |
Real property (excluding transient) | | $ | 91.1 | | | $ | 72.9 | | | $ | 18.2 | | | 25.0 | % | | $ | 240.1 | | | $ | 180.9 | | | $ | 59.2 | | | 32.7 | % |
Real property - transient | | 7.1 | | | 6.3 | | | 0.8 | | | 12.7 | % | | 14.7 | | | 11.4 | | | 3.3 | | | 28.9 | % |
Other | | 11.9 | | | 5.2 | | | 6.7 | | | 128.8 | % | | 19.3 | | | 9.8 | | | 9.5 | | | 96.9 | % |
Total Operating | | 110.1 | | | 84.4 | | | 25.7 | | | 30.5 | % | | 274.1 | | | 202.1 | | | 72.0 | | | 35.6 | % |
Expenses | | | | | | | | | | | | | | | | |
Property Operating | | 32.3 | | | 26.6 | | | 5.7 | | | 21.4 | % | | 89.3 | | | 69.3 | | | 20.0 | | | 28.9 | % |
Real Property NOI | | 77.8 | | | 57.8 | | | 20.0 | | | 34.6 | % | | 184.8 | | | 132.8 | | | 52.0 | | | 39.2 | % |
| | | | | | | | | | | | | | | | |
Service, retail, dining and entertainment | | | | | | | | | | | | | | | | |
Revenue | | 112.3 | | | 74.7 | | | 37.6 | | | 50.3 | % | | 310.9 | | | 202.0 | | | 108.9 | | | 53.9 | % |
Expense | | 98.8 | | | 68.0 | | | 30.8 | | | 45.3 | % | | 272.1 | | | 176.1 | | | 96.0 | | | 54.5 | % |
NOI | | 13.5 | | | 6.7 | | | 6.8 | | | 101.5 | % | | 38.8 | | | 25.9 | | | 12.9 | | | 49.8 | % |
| | | | | | | | | | | | | | | | |
Marina NOI | | $ | 91.3 | | | $ | 64.5 | | | $ | 26.8 | | | 41.6 | % | | $ | 223.6 | | | $ | 158.7 | | | $ | 64.9 | | | 40.9 | % |
| | | | | | | | | | | | | | | | |
Other information | | | | | | | | | | | | | | | | |
Number of properties | | | | | | | | | | 131 | | | 120 | | | 11 | | | 9.2 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total wet slips and dry storage | | | | | | | | | | 46,185 | | | 43,615 | | | 2,570 | | | 5.9 | % |
Gross profitThe Marina NOI is separately reviewed to assess the overall growth and performance of the Marina segment and its financial impact on new home sales increased 25.6 percent inour results of operations.
We have reclassified utility revenues of $5.6 million and $4.3 million for the three months ended September 30, 2022 and 2021, and $14.8 million and $10.5 million for the nine months ended September 30, 2017, as2022 and 2021, respectively, to reflect the utility expenses associated with our Marina portfolio net of recovery.
For the three months ended September 30, 2022 and 2021:
•The $26.8 million, or 41.6 percent increase in Marina NOI is primarily due to a $20.0 million, or 34.6 percent, increase in Marina Real Property NOI and a $6.8 million, or 101.5 percent, increase in Service, Retail, Dining and Entertainment NOI.
•The $20.0 million, or 34.6 percent growth in Marina Real Property NOI is due to an increase in the number of owned Marina properties compared to the same period in 2016. This increase is primarily2021.
For the result of a 13.1nine months ended September 30, 2022 and 2021:
•The $64.9 million, or 40.9 percent increase in new home sales volumes combined withMarina NOI is due to a 6.9$52.0 million, or 39.2 percent, increase in Marina Real Property NOI and a $12.9 million, or 49.8 percent increase, in Service, Retail, Dining and Entertainment NOI.
•The $52.0 million, or 39.2 percent, increase in Marina Real Property NOI is due primarily to an increase in the average selling pricenumber of new homes.owned Marina properties compared to the same period in 2021.
•The $12.9 million, or 49.8 percent, increase in Service, Retail, Dining and Entertainment NOI is due primarily to an increase in the number of owned marina properties offering service compared to the same period in 2021.
Gross profit on pre-owned home sales decreased 3.1 percent due to lower margins.
Other Items - Statements of Operations(1)
OTHER ITEMS - STATEMENTS OF OPERATIONS
The following table summarizes other income and expenses for the three and nine months ended September 30, 20172022 and 2016 (amounts2021 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | Change | | % Change | | September 30, 2022 | | September 30, 2021 | | Change | | % Change |
Service, retail, dining and entertainment, net | $ | 29.3 | | | $ | 19.2 | | | $ | 10.1 | | | 52.6 | % | | $ | 59.7 | | | $ | 43.9 | | | $ | 15.8 | | | 36.0 | % |
Interest income | $ | 11.2 | | | $ | 2.6 | | | $ | 8.6 | | | 330.8 | % | | $ | 25.3 | | | $ | 8.0 | | | $ | 17.3 | | | 216.3 | % |
Brokerage commissions and other, net | $ | 10.8 | | | $ | 8.8 | | | $ | 2.0 | | | 22.7 | % | | $ | 27.4 | | | $ | 21.7 | | | $ | 5.7 | | | 26.3 | % |
General and administrative expense | $ | 69.1 | | | $ | 43.2 | | | $ | 25.9 | | | 60.0 | % | | $ | 187.0 | | | $ | 126.7 | | | $ | 60.3 | | | 47.6 | % |
Catastrophic event-related charges, net | $ | 12.2 | | | $ | 0.3 | | | $ | 11.9 | | | N/M | | $ | 12.3 | | | $ | 3.1 | | | $ | 9.2 | | | 296.8 | % |
Business combinations | $ | 8.4 | | | $ | — | | | $ | 8.4 | | | N/A | | $ | 23.9 | | | $ | 1.0 | | | $ | 22.9 | | | N/M |
Depreciation and amortization | $ | 151.3 | | | $ | 127.1 | | | $ | 24.2 | | | 19.0 | % | | $ | 450.0 | | | $ | 378.1 | | | $ | 71.9 | | | 19.0 | % |
| | | | | | | | | | | | | | | |
Loss on extinguishment of debt (see Note 8) | $ | 4.0 | | | $ | — | | | $ | 4.0 | | | N/A | | $ | 4.4 | | | $ | 8.1 | | | $ | (3.7) | | | (45.7) | % |
Interest expense | $ | 61.7 | | | $ | 39.0 | | | $ | 22.7 | | | 58.2 | % | | $ | 162.2 | | | $ | 116.2 | | | $ | 46.0 | | | 39.6 | % |
Interest on mandatorily redeemable preferred OP units / equity | $ | 1.0 | | | $ | 1.1 | | | $ | (0.1) | | | (9.1) | % | | $ | 3.1 | | | $ | 3.1 | | | $ | — | | | — | % |
Gain / (loss) on remeasurement of marketable securities (see Note 15) | $ | (7.2) | | | $ | 12.0 | | | $ | (19.2) | | | (160.0) | % | | $ | (74.0) | | | $ | 43.2 | | | $ | (117.2) | | | N/M |
Gain / (loss) on foreign currency exchanges | $ | 14.9 | | | $ | (7.0) | | | $ | 21.9 | | | N/M | | $ | 21.7 | | | $ | (7.1) | | | $ | 28.8 | | | N/M |
Gain / (loss) on dispositions of properties | $ | (0.8) | | | $ | 108.1 | | | $ | (108.9) | | | N/M | | $ | 12.5 | | | $ | 108.1 | | | $ | (95.6) | | | (88.4) | % |
Other income / (expense), net | $ | 2.8 | | | $ | (9.3) | | | $ | 12.1 | | | N/M | | $ | 2.6 | | | $ | (10.0) | | | $ | 12.6 | | | N/M |
Gain / (loss) on remeasurement of notes receivable (see Note 4) | $ | (0.1) | | | $ | 0.1 | | | $ | (0.2) | | | N/M | | $ | 0.1 | | | $ | 0.6 | | | $ | (0.5) | | | 83.3 | % |
Income from nonconsolidated affiliates (see Note 6) | $ | 2.0 | | | $ | 0.9 | | | $ | 1.1 | | | 122.2 | % | | $ | 3.8 | | | $ | 2.9 | | | $ | 0.9 | | | 31.0 | % |
Gain / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6) | $ | (0.4) | | | $ | (0.1) | | | $ | (0.3) | | | 300.0 | % | | $ | 0.1 | | | $ | (0.1) | | | $ | 0.2 | | | N/M |
Current tax expense (see Note 12) | $ | (7.3) | | | $ | (0.4) | | | $ | (6.9) | | | N/M | | $ | (12.5) | | | $ | (1.4) | | | $ | (11.1) | | | N/M |
Deferred tax benefit / (expense) (see Note 12) | $ | 3.6 | | | $ | (1.2) | | | $ | 4.8 | | | N/M | | $ | 3.9 | | | $ | (1.1) | | | $ | 5.0 | | | N/M |
Preferred return to preferred OP units / equity interests | $ | 2.5 | | | $ | 3.1 | | | $ | (0.6) | | | (19.4) | % | | $ | 8.6 | | | $ | 9.0 | | | $ | (0.4) | | | (4.4) | % |
Income attributable to noncontrolling interests | $ | 11.9 | | | $ | 15.3 | | | $ | (3.4) | | | (22.2) | % | | $ | 13.9 | | | $ | 22.6 | | | $ | (8.7) | | | (38.5) | % |
| | | | | | | | | | | | | | | |
(1)Only items determined by management to be material, of interest, or unique to the periods disclosed above are explained below.
N/M = Percentage change is not meaningful.
N/A = Percentage change is not applicable.
Service, retail, dining and entertainment, net - for the three and nine months ended September 30, 2022, increased primarily due to increased service rates at our marinas and the addition of service revenue from the acquisition of additional marinas.
Interest income - for the three and nine months ended September 30, 2022, increased primarily due to interest income on a loan provided to a real estate operator to finance its acquisition and development costs in thousands):the current period as compared to the same periods in 2021.
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | |
| | 2017 | | 2016 | | Change | | % Change |
Ancillary revenues, net | | $ | 10,367 |
| | $ | 9,745 |
| | $ | 622 |
| | 6.4 | % |
Interest income | | $ | 15,609 |
| | $ | 13,322 |
| | 2,287 |
| | 17.2 | % |
Brokerage commissions and other revenues, net | | $ | 2,978 |
| | $ | 2,137 |
| | 841 |
| | 39.4 | % |
Home selling expenses | | $ | 9,391 |
| | $ | 7,240 |
| | 2,151 |
| | 29.7 | % |
General and administrative expenses | | $ | 56,188 |
| | $ | 46,910 |
| | 9,278 |
| | 19.8 | % |
Transaction costs | | $ | 6,990 |
| | $ | 27,891 |
| | (20,901 | ) | | (74.9 | )% |
Depreciation and amortization | | $ | 189,719 |
| | $ | 159,565 |
| | 30,154 |
| | 18.9 | % |
Extinguishment of debt | | $ | 759 |
| | $ | — |
| | 759 |
| | N/A |
|
Interest expense | | $ | 98,126 |
| | $ | 90,885 |
| | 7,241 |
| | 8.0 | % |
Catastrophic weather related charges | | $ | 8,124 |
| | $ | — |
| | 8,124 |
| | N/A |
|
Other income, net | | $ | 5,340 |
| | $ | — |
| | 5,340 |
| | N/A |
|
Current tax expense | | $ | (133 | ) | | $ | (567 | ) | | 434 |
| | 76.5 | % |
Deferred tax benefit | | $ | 745 |
| | $ | — |
| | 745 |
| | N/A |
|
Income from affiliate transactions | | $ | — |
| | $ | 500 |
| | (500 | ) | | 100.0 | % |
Ancillary revenues,Brokerage commissions and other, net - for the three and nine months ended September 30, 2022, increased primarily due to an increase in RV vacation rental income in the nine months ended September 30, 2017,price of brokered home sales, as compared to the same period in 2016.2021.
Interest income General and administrative expenses - for the three and nine months ended September 30, 2017,2022, increased primarily due to the acquisition of Park Holidays, and an increase in our installment notes receivables, partially offsetwages and incentives driven by a decreasegrowth in our collateralized receivables,strategic initiatives as compared to September 30, 2016.the same periods in 2021.
Catastrophic event-related charges - for the three and other revenues increased primarily due to a higher number of brokered homes sold in the nine months ended September 30, 2017, as compared to the same period in 2016.
Home selling expenses 2022, increased primarily due to increased commissions on home salesnet impairment charges of $12.2 million for properties located in the nine months ended September 30, 2017 as compared to the same period in 2016. There was a higher volume of new homes sold, coupled with higher average selling prices for both new and used, in the nine months ended September 30, 2017, as compared to the same period in 2016,Fort Myers, Florida, which resulted in higher commissions.
General and administrativeexpenses increased primarily due to additional employee related costs as headcount increased in connection with our growth through acquisitions.
Transaction costs relate to diligencesustained significant flooding, wind and other expenses incurred in connection with our acquisitions. These costs were significantly lower in the nine months ended September 30, 2017, as compared to the same period in 2016, due to the acquisition of Carefree in June 2016.damage from Hurricane Ian. Refer to Note 2, “Real Estate Acquisitions,”16, "Commitments and Contingencies," in our accompanying Consolidated Financial Statements for additional information.
Business combination expense, net - for the three and nine months ended September 30, 2022, increased primarily as a result of the acquisition of Park Holidays. Refer to Note 3, "Real Estate Acquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional information.
Depreciation and amortizationexpenses - for the three and nine months ended September 30, 2022, increased as a result of our acquisition of Carefree in June 2016,property acquisitions during 2021 and other acquisitions.2022. Refer to Note 2, “Real3, "Real Estate Acquisitions” and Dispositions," in our accompanying Consolidated Financial Statements for additional information.
Loss on extinguishment of debt - for the three and nine months ended September 30, 2022 were $4.0 million, and $4.4 million respectively, primarily related to term loan repayments during the third quarter. Loss on extinguishment of debt - for the nine months ended September 30, 2021, was due primarily to the termination of the Safe Harbor line of credit and financing activities. Refer to Note 8, "Debt and Line of Credit," in our accompanying Consolidated Financial Statements for additional information.
Interest expense -for the three and nine months ended September 30, 2022, increased due to the higher carrying balance of debt and increased interest rates as compared to the same periods in 2021. Refer to Note 8, "Debt and Line of Credit," of our accompanying Consolidated Financial Statements for additional information.
ExtinguishmentGain / (loss) on remeasurement of debt marketable securities - for the three and nine months ended September 30, 2017, is comprised2022 was a loss of $0.5$7.2 million and $74.0 million, respectively, as compared to a gain of $12.0 million and $43.2 million during the same period in connection with defeasement2021 due to the fluctuation in the price of an $18.9 million collateralized term loan and $0.3 million in connection with repayment of a $3.9 million collateralized term loan.our publicly traded marketable securities. Refer to Note 7, “Debt and Lines15, "Fair Value of Credit,”Financial Instruments," in our accompanying Consolidated Financial Statements for additional information.
Interest expense increasedGain / (loss) on foreign currency exchanges - for the three and nine months ended September 30, 2022, was a gain of $14.9 million and $21.7 million, respectively, primarily due to incremental borrowingsthe impact of $338.0 million, $405.0the U.S. Dollar strengthening against the Pound Sterling on our line of credit. There were losses of $7.0 million and $197.5$7.1 million, in connection with our Fannie Mae Financing, NML Financingthe same period in 2021, respectively, primarily due to the strengthening of the U.S. Dollar against the Australian Dollar and Freddie Mac Financing arrangements, respectively.a higher balance on the marketable securities compared to the line of credit balance denominated in Australian Dollars.
Gain / (loss) on dispositions of properties - for the three and nine months ended September 30, 2022, decreased due to a lower net gain on the sale of four properties as compared to a gain on the sale of six properties during the same period in 2021. Refer to Note 7, “Debt3, "Real Estate Acquisitions and Lines of Credit,”Dispositions," in our accompanying Consolidated Financial Statements for additional information.
Catastrophic weather related charges - refer above to Results of Operations - Other Items - Statements of Operations for the three months ended September 30, 2017.
Other income / (expense), net for- for thethree and nine months ended September 30, 2017, is comprised of2022 was a foreign currency translation gain of $6.4$2.8 million partially offset byand $2.6 million, respectively, compared to a loss of $9.3 million and $10.0 million, respectively, for the three and nine months ended September 30, 2021, primarily due to a gain from a litigation settlement in 2022 and contingent liability re-measurement of $1.1 million.consideration expense in 2021.
DeferredCurrent tax benefit expense - for the three and nine months ended September 30, 2017, was recognized in connection with certain2022, increased due to incremental taxable income from the acquisition of our communities acquiredPark Holidays in the Carefree transaction that are subject to Canadian income tax.UK. Refer to Note 11, “Income12, "Income Taxes,”" in our accompanying Consolidated Financial Statements for additional information.
Income from affiliate transactions of $0.5 million inDeferred tax benefit / (expense) - for the three and nine months ended September 30, 2016,2022, deferred tax benefit was due$3.6 million and $3.9 million, respectively, resulting from the acquisition of Park Holidays in the UK as compared to deferred tax expense of $1.2 million and $1.1 million, for the sale ofthree and nine months ended September 30, 2021, respectively. Refer to Note 12, "Income Taxes," in our entire interest in Origenaccompanying Consolidated Financial Inc. (“Origen”). Prior to the sale, the carrying value of our investment in Origen was zero.Statements for additional information.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SUI COMMON SHAREHOLDERS TO FFO
FUNDS FROM OPERATIONS
The following table reconciles netNet income attributable to SUI common shareholders to FFO data for diluted purposes for the three and nine months ended September 30, 20172022 and 20162021 (in thousands,millions, except for per share amounts):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to Sun Communities, Inc. common stockholders | $ | 24,115 |
| | $ | 18,897 |
| | $ | 57,583 |
| | $ | 18,969 |
|
Adjustments: | | | | | | | |
Depreciation and amortization | 64,484 |
| | 61,809 |
| | 190,143 |
| | 159,225 |
|
Amounts attributable to noncontrolling interests | 1,608 |
| | 685 |
| | 3,710 |
| | 255 |
|
Preferred return to preferred OP units | 578 |
| | 616 |
| | 1,750 |
| | 1,858 |
|
Preferred distribution to Series A-4 preferred stock | 441 |
| | 683 |
| | 1,666 |
| | — |
|
Gain on disposition of assets, net | (4,309 | ) | | (4,667 | ) | | (11,342 | ) | | (12,226 | ) |
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1)
| 86,917 |
| | 78,023 |
| | 243,510 |
| | 168,081 |
|
Adjustments: | | | | | | | |
Transaction costs | 2,167 |
| | 4,191 |
| | 6,990 |
| | 27,891 |
|
Other acquisition related costs (2) | 343 |
| | 1,467 |
| | 2,712 |
| | 1,467 |
|
Extinguishment of debt | — |
| | — |
| | 759 |
| | — |
|
Catastrophic weather related charges | 7,756 |
| | — |
| | 8,124 |
| | — |
|
Other income, net | (3,345 | ) | | — |
| | (5,340 | ) | | — |
|
Income from affiliate transactions | — |
| | (500 | ) | | — |
| | (500 | ) |
Debt premium write-off | — |
| | — |
| | (438 | ) | | — |
|
Deferred tax benefit | (81 | ) | | — |
| | (745 | ) | | — |
|
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items (1) | $ | 93,757 |
| | $ | 83,181 |
| | $ | 255,572 |
| | $ | 196,939 |
|
| | | | | | | |
Weighted average common shares outstanding - basic: | 78,369 |
| | 68,655 |
| | 75,234 |
| | 63,716 |
|
Add: | | | | | | | |
Common stock issuable upon conversion of stock options | 2 |
| | 8 |
| | 2 |
| | 10 |
|
Restricted stock | 437 |
| | 406 |
| | 610 |
| | 437 |
|
Common OP units | 2,761 |
| | 2,856 |
| | 2,758 |
| | 2,861 |
|
Common stock issuable upon conversion of Series A-1 preferred OP units | 858 |
| | 920 |
| | 877 |
| | 932 |
|
Common stock issuable upon conversion of Series A-3 preferred OP units | 75 |
| | 75 |
| | 75 |
| | 75 |
|
Common stock issuable upon conversion of Series A-4 preferred stock | 482 |
| | 747 |
| | 620 |
| | — |
|
Weighted average common shares outstanding - fully diluted | 82,984 |
| | 73,667 |
| | 80,176 |
| | 68,031 |
|
| | | | | | | |
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted
| $ | 1.05 |
| | $ | 1.06 |
| | $ | 3.04 |
| | $ | 2.47 |
|
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share excluding certain items - fully diluted
| $ | 1.13 |
| | $ | 1.13 |
| | $ | 3.19 |
| | $ | 2.89 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
Net Income Attributable to SUI Common Shareholders | $ | 162.6 | | | $ | 231.7 | | | $ | 237.3 | | | $ | 367.3 | |
Adjustments | | | | | | | |
Depreciation and amortization | 150.8 | | | 126.8 | | | 448.6 | | | 377.4 | |
Depreciation on nonconsolidated affiliates | — | | | — | | | 0.1 | | | 0.1 | |
| | | | | | | |
(Gain) / loss on remeasurement of marketable securities | 7.2 | | | (12.0) | | | 74.0 | | | (43.2) | |
(Gain) / loss on remeasurement of investment in nonconsolidated affiliates | 0.4 | | | 0.1 | | | (0.1) | | | 0.1 | |
(Gain) / loss on remeasurement of notes receivable | 0.1 | | | (0.1) | | | (0.1) | | | (0.6) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
(Gain) / loss on dispositions of properties | 0.8 | | | (108.1) | | | (12.5) | | | (108.1) | |
| | | | | | | |
Add: Returns on preferred OP units | 1.3 | | | 0.5 | | | 9.5 | | | 1.5 | |
Add: Income attributable to noncontrolling interests | 10.5 | | | 4.6 | | | 14.1 | | | 13.7 | |
Gain on dispositions of assets, net | (11.9) | | | (20.4) | | | (44.2) | | | (46.2) | |
FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities(1) | $ | 321.8 | | | $ | 223.1 | | | $ | 726.7 | | | $ | 562.0 | |
| | | | | | | |
Adjustments | | | | | | | |
| | | | | | | |
Business combination expense and other acquisition related costs(2) | 19.2 | | | 2.5 | | | 40.1 | | | 6.7 | |
| | | | | | | |
Loss on extinguishment of debt | 4.0 | | | — | | | 4.4 | | | 8.1 | |
| | | | | | | |
Catastrophic event-related charges, net | 12.2 | | | 0.3 | | | 12.3 | | | 3.1 | |
Earnings - catastrophic event-related charges(3) | 0.2 | | | 0.2 | | | 0.2 | | | 0.4 | |
| | | | | | | |
(Gain) / loss on foreign currency exchanges | (14.9) | | | 7.0 | | | (21.7) | | | 7.1 | |
| | | | | | | |
| | | | | | | |
Other adjustments, net(4) | (6.5) | | | 11.4 | | | (5.1) | | | 11.5 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities(1) | $ | 336.0 | | | $ | 244.5 | | | $ | 756.9 | | | $ | 598.9 | |
Adjustment | | | | | | | |
Foreign currency translation impact(5) | 7.3 | | | — | | | 9.3 | | | — | |
Constant Currency Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities | $ | 343.3 | | | $ | 244.5 | | | $ | 766.2 | | | $ | 598.9 | |
| | | | | | | |
Weighted Average Common Shares Outstanding - Basic | 122.4 | | | 115.1 | | | 119.2 | | | 111.7 | |
Add | | | | | | | |
Common shares dilutive effect from forward equity sale | — | | | — | | | 0.2 | | | — | |
| | | | | | | |
Restricted stock | 0.3 | | | 0.4 | | | 0.4 | | | 0.4 | |
Common OP units | 2.5 | | | — | | | 2.5 | | | 2.6 | |
| | | | | | | |
Common stock issuable upon conversion of certain preferred OP units | 1.5 | | | 0.5 | | | 3.1 | | | 0.4 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted Average Common Shares Outstanding - Diluted | 126.7 | | | 116.0 | | | 125.4 | | | 115.1 | |
| | | | | | | |
FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities Per Share | $ | 2.54 | | | $ | 1.92 | | | $ | 5.80 | | | $ | 4.88 | |
| | | | | | | |
Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities Per Share | $ | 2.65 | | | $ | 2.11 | | | $ | 6.04 | | | $ | 5.20 | |
| | | | | | | |
Constant Currency Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities per Share | $ | 2.71 | | | $ | 2.11 | | | $ | 6.11 | | | $ | 5.20 | |
(1)The effect of certain anti-dilutive convertible securities is excluded from these items.
| |
(2)
| These costs represent first year expenses incurred to bring acquired properties up to the Company's operating standards, including items such as tree trimming and painting costs that did not meet the Company's capitalization policy. |
(2)These costs represent (i) nonrecurring integration expenses associated with new acquisitions and first year acquisition deferred costs for the three and nine months ended September 30, 2022 and 2021, (ii) costs associated with potential acquisitions that will not close, (iii) costs associated with the termination of the bridge loan commitment during the three months ended March 31, 2022 related to the acquisition of Park Holidays and (iv) business combination expenses and expenses incurred to bring recently acquired properties up to our operating standards, including items such as tree trimming and painting costs that do not meet our capitalization policy.
(3)Adjustment related to estimated loss of earnings in excess of the applicable business interruption deductible in relation to our three Florida Keys communities that were impaired by Hurricane Irma which had not yet been received from our insurer.
(4)Other adjustments, net include (i) deferred tax (benefit) / expense and RV rebranding non-recurring cost for the three and nine months ended September 30, 2022 and 2021, (ii) accelerated deferred compensation amortization, gain from litigation settlement and long-term lease termination (benefit) / expense for the three and nine months ended September 30, 2022, (iii) gain on sale of investment in nonconsolidated affiliate for the nine months ended September 30, 2022., and (iv) change in estimated contingent consideration for the three and nine months ended September 30, 2021.
(5)We calculated the foreign currency translation impact by comparing the actual weighted average foreign currency rates with the weighted average foreign currency rates used for guidance, as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2022 | | September 30, 2022 |
| Actual | | Guidance | | Actual | | Guidance |
U.S. Dollars per Pounds Sterling | $ | 1.1821 | | | $ | 1.330 | | | $ | 1.2116 | | | $ | 1.330 | |
U.S. Dollars per Canadian Dollars | $ | 0.7691 | | | $ | 0.770 | | | $ | 0.7769 | | | $ | 0.770 | |
U.S. Dollars per Australian Dollars | $ | 0.6977 | | | $ | 0.756 | | | $ | 0.7096 | | | $ | 0.756 | |
LIQUIDITY AND CAPITAL RESOURCES
Short-term Liquidity
Our principal short-term liquidity demands historically have historically been, and are expected to continue to be, distributions to our stockholdersshareholders and the unit holders of the Operating Partnership, property acquisitions, development and expansion of our properties, capital improvement of our properties, the purchase of new and pre-owned homes, development and expansion of properties, and debt repayment.
During We intend to meet our short-term liquidity requirements through available cash balances, cash flows generated from operations, draws on our Senior Credit Facility, and the nine months ended September 30, 2017, we acquired seven communitiesuse of debt and one undeveloped parcelequity offerings under our shelf registration statement. Refer to Note 8, "Debt and Line of land. SeeCredit," and Note 2, “Real Estate Acquisitions”9, "Equity and Temporary Equity," in our accompanying Consolidated Financial Statements for additional information regarding our acquisitions in 2017. Subject to market conditions, we intend to continue to look for opportunities to expand our development pipeline and acquire existing communities. We finance the acquisitions through available cash, secured financing, draws on our lines of credit, the assumption of existing debt on properties, and the issuance of certain equity securities. We will continue to evaluate acquisition opportunities that meet our criteria for acquisition.information.
We also intend to continue to strengthen our capital and liquidity positions by focusing on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intendtake a disciplined approach to selecting the optimal mix of financing sources to meet our liquidity requirementsdemands and minimize our overall cost of capital. In June 2021, we received investment grade ratings of BBB and Baa3 with a stable outlook from S&P Global and Moody's, respectively. We plan on continuing to capitalize on our advantage in the credit markets to access a greater proportion of unsecured debt to optimize our cost of capital and increase our financial flexibility.
Current market and economic conditions, including relating to, among other things, interest rates, currency fluctuations, equity valuations and inflation, may adversely affect our ability to obtain debt and equity capital in the short term on attractive terms.
Acquisitions and development
Subject to market conditions, we intend to continue to identify opportunities to expand our development pipeline and acquire existing properties. We finance acquisitions through available cash, balances, cash flows generated from operations,secured financing, draws on our credit facility,Senior Credit Facility, the assumption of existing debt on properties and the useissuance of debt and equity offerings undersecurities. We will continue to evaluate acquisition opportunities that meet our shelf registration statement.criteria. Refer to Note 7, “Debt3, "Real Estate Acquisitions and Lines of Credit” and Note 8, “Equity and Mezzanine Securities”Dispositions," in ourthe accompanying Consolidated Financial Statements for information regarding recent property acquisitions.
In April 2022, we completed our announced acquisition of Park Holidays at an enterprise value of £950.0 million (or approximately $1.2 billion). As consideration for the acquisition, we (i) issued an aggregate of 186,044 shares of our common stock with a value of approximately $34.0 million as of the closing to certain individual sellers who are also members of Park Holidays' senior management team, and (ii) paid the remainder of the purchase price in cash.
During the three and nine months ended September 30, 2022, we completed the construction of over 170 sites and over 300 sites, respectively, at two ground-up developments and six expansion properties.
Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.detail on acquisitions completed to date.
Capital Expenditures
Our capital expenditures include expansion sites and development lot modifications,construction costs, recurring capital expenditures, andlot modifications, growth projects, acquisition-related capital expenditures, rental home purchases. For the nine months ended September 30, 2017purchases and 2016, expansionrebranding costs.
Our capital expenditure activity is summarized as follows (in millions):
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
Expansion and Development Expenditures | $ | 176.7 | | | $ | 145.6 | |
Recurring Capital Expenditures | 50.7 | | | 41.8 | |
Lot Modifications Expenditures | 25.9 | | | 20.3 | |
Growth Projects | 73.1 | | | 57.7 | |
Acquisition-related Capital Expenditures | 220.9 | | | 124.2 | |
Rental Program | 100.9 | | | 84.7 | |
Rebranding Cost | 12.7 | | | 2.0 | |
Other | (4.3) | | | 0.2 | |
Total capital expenditures activity | $ | 656.6 | | | $ | 476.5 | |
Expansion and development activities of $55.9 million and $34.3 million, respectively, related to costs consistingexpenditures - consist primarily of construction of sitescosts such as roads, activities and otheramenities, and costs necessary to complete home and RV site improvements.
For the nine months ended September 30, 2017improvements, such as driveways, sidewalks and 2016, lot modification expenditures were $18.1 million and $13.8 million, respectively. These expenditures improve asset quality inlandscaping at our MH communities and areRV communities. Expenditures also include costs to rebuild after damage has been incurred when an existing home is removedat MH, RV or Marina properties, and the site is prepared for a new home (more often than not, a multi-sectional home). These activities which are mandated by strict manufacturer’s installation requirementsresearch and state building codes, include items such as new foundations, driveways, and utility upgrades.development.
For the nine months ended September 30, 2017 and 2016, recurringRecurring capital expenditures of $12.6 million and $13.3 million, respectively, related - relate to our continued commitment to the upkeep of our properties.MH and RV properties and include items such as dredging, dock repairs and improvements, and equipment maintenance and upgrades related to our marinas.
We investLot modification capital expenditures - are incurred to modify the foundational structures required to set a new home after a previous home has been removed. These expenditures are necessary to create a revenue stream from a new site renter and often improve the quality of the community. Other lot modification expenditures include land improvements added to annual RV sites to aid in the conversion of transient RV guests to annual contracts.
Growth projects - consist of revenue generating or expense reducing activities at MH communities, RV communities and Marinas. This includes, but is not limited to, utility efficiency and renewable energy projects, site, slip or amenity upgrades such as the addition of a garage, shed or boat lift, and other special capital projects that substantiate an incremental rental increase.
Acquisition-related capital expenditures - consist of capital improvements identified during due diligence that are necessary to bring our communities and marinas up to our operating standards. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters and furniture; new maintenance facilities; lot modifications; and new signage.
Rental program - investment in the acquisition of homes intended for the Rental Program.Program and the purchase of vacation rental homes at our RV communities. Expenditures for these investments depend upon market conditionsthe condition of the markets for repossessions and new home sales, repossessionsrental homes and vacation rental homes. We finance
Rebranding cost - includes new home purchases with a $12.0 million manufactured home floor plan facility. Our ability to purchase homes intended for sale or rent may be limited by cash received from third-party financingsignage at our RV communities and costs of our home sales, available manufactured home floor plan financingbuilding an RV mobile application and working capital available on our lines of credit.updated website.
Cash Flow Activities
Our cash flow activities are summarized as follows (in thousands)millions):
| | | | Nine Months Ended September 30, | | Nine Months Ended |
| | 2017 | | 2016 | | September 30, 2022 | | September 30, 2021 |
Net Cash Provided by Operating Activities | | $ | 223,348 |
| | $ | 190,279 |
| Net Cash Provided by Operating Activities | $ | 654.5 | | | $ | 656.0 | |
Net Cash Used for Investing Activities | | $ | (267,685 | ) | | $ | (1,540,899 | ) | Net Cash Used for Investing Activities | $ | (2,740.8) | | | $ | (1,363.1) | |
Net Cash Provided by Financing Activities | | $ | 173,368 |
| | $ | 1,375,470 |
| Net Cash Provided by Financing Activities | $ | 2,130.8 | | | $ | 700.4 | |
Effect of Exchange Rate on Cash and Cash Equivalents | | $ | 253 |
| | $ | (107 | ) | |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | | Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | $ | (10.7) | | | $ | (0.3) | |
Cash, and cash equivalents, and restricted cash increased by $129.2$33.8 million from $8.2$78.2 million as of December 31, 2016,2021, to $137.4$112.0 million as of September 30, 2017.2022.
Operating Activities
activities -Net cash provided by operating activities increaseddecreased by $33.0$1.5 million from $190.3to $654.5 million for the nine months ended September 30, 20162022, compared to $223.3$656.0 million for the nine months ended September 30, 2017.2021. Operating activities were driven by an increase in operating cash flow due to improved operating performance at our existing properties and the addition of recently acquired properties, offset by the timing of cash payments related to real estate taxes and other liabilities.
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 the 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.markets; and (f) the effects of the COVID-19 pandemic. See “Risk Factors”"Risk Factors" in Part I, Item 1A of our 20162021 Annual Report.
Investing Activities
activities - Net cash used for investing activities was $267.7 million for the nine months ended September 30, 2017, comparedincreased by $1.3 billion to $1.5$2.7 billion for the nine months ended September 30, 2016. Refer to Note 2, “Real Estate Acquisitions” in our accompanying Consolidated Financial Statements for additional information.
Financing Activities
Net cash provided by financing activities was $173.4 million for the nine months ended September 30, 2017,2022, compared to $1.4 billion for the nine months ended September 30, 2016.2021. The increase in Net cash used for investing activities was primarily driven by an increase in cash deployed to acquire Park Holidays and other new properties, capital expenditure activity, and proceeds from disposition of assets and depreciated homes during the nine months ended September 30, 2022 as compared to the corresponding period in 2021. Refer to the Consolidated Statements of Cash Flow for detail on the net cash used for investing activities during the nine months ended September 30, 2022 and 2021. Refer to Note 7, “Debt3, "Real Estate Acquisitions and Lines of Credit”Dispositions," and Note 8, “Equity4, "Notes and Mezzanine Securities”Other Receivables," in our accompanying Consolidated Financial Statements for additional information.information on acquisitions and issuance of notes and other receivables.
Financing activities - Net cash provided by financing activities increased by $1.4 billion to $2.1 billion for the nine months ended September 30, 2022, compared to $700.4 million for the nine months ended September 30, 2021. The increase in Net cash provided by financing activities was primarily driven by a decrease in payments and an increase in borrowings under our Senior Credit Facility during the nine months ended September 30, 2022 as compared to the corresponding period in 2021. Refer to the Consolidated Statements of Cash Flow for detail on the net cash provided by financing activities during the nine months ended September 30, 2022 and 2021. Refer to Note 8, "Debt and Line of Credit," and Note 9, "Equity and Temporary Equity," in our accompanying Consolidated Financial FlexibilityStatements for additional information.
Equity and Debt Activity
Public Equity Offerings
In July 2017,November 2021, we entered into the November 2021 Forward Sale Agreements in connection with an underwritten registered public offering of 4,025,000 shares of our common stock at a public offering price of $185.00. In April 2022, we completed the physical settlement of the 4,025,000 shares of common stock and received aggregate net proceeds of $705.4 million. We used the net proceeds to repay borrowings outstanding under our Senior Credit Facility, and for working capital and general corporate purposes.
At the Market Offering Sales Agreement
In December 2021, we entered into the Sales Agreement, with certain sales agents and forward sellers pursuant to which we may sell, from time to time, up to an aggregate gross sales price of $1.25 billion of our common stock through the sales agents, acting as our sales agents or, if applicable, as forward sellers, or directly to the sales agents as principals for their own accounts. We simultaneously terminated our prior sales agreement upon entering into the Sales Agreement. Through September 30, 2022, we had entered into forward sales agreements under our Sales Agreement for an aggregate gross sales price of $160.6 million.
During the three months ended September 30, 2022, we entered into forward sale agreements with respect to 15,000 shares of common stock under our Sales Agreement for $2.6 million. Additionally, we settled all of our outstanding forward sale agreements with respect to 1,526,212 shares of common stock which includes 620,109; 600,503; 290,600; and 15,000 shares of common stock from the three months ended December 31, 2021, March 31, June 30 and September 30, 2022 forward sale agreements, respectively. The net proceeds of $275.5 million from the settlement of these forward sale agreements were used to repay borrowings outstanding under our Senior Credit Facility.
During the three months ended June 30, 2022, we completed the physical settlement of 1,200,000 shares of common stock under our prior at the market offering program and received net proceeds of $229.5 million. Additionally, we entered into forward sales agreements with respect 290,600 shares of common stock for $50.1 million, under our Sales Agreement. These forward sale agreements were settled during the three months ended September 30, 2022.
During the three months ended March 31, 2022, we entered into forward sales agreements with respect to 600,503 shares of common stock for $107.9 million, under our Sales Agreement. These forward sale agreements were settled during the three months ended September 30, 2022.
During the year ended December 31, 2021, we entered into forward sale agreements with respect to 1,820,109 shares of common stock under our prior at the market offering program for $356.5 million. We completed the physical settlement of 1,200,000 and 620,109 shares of common stock during the three months ended June 30, 2022 and September 30, 2022, respectively.
Secured Debt
During the three months ended September 30, 2022, we repaid $318.0 million of term loans collateralized by 35 properties. These loans had a weighted average interest rate of 4.81 percent and were set to mature from December 2022 through September 2024.
Additionally, we have negotiated fixed rate mortgages with an existing lender on certain properties that have low loan-to-value ratios and are scheduled to mature between 2026 and 2029. The additional financings are expected to close before year-end and provide proceeds to the Company of approximately $310.0 million. We intend to use the proceeds to repay borrowings outstanding under our Senior Credit Facility.
During the three and nine months ended September 30, 2022, we entered into a new Sales Agreement whereby$20.6 million construction loan, which was undrawn as of September 30, 2022, and a $3.4 million mortgage term loan jointly secured by one property. Both loans mature August 10, 2047 and have a fixed interest rate of 3.65 percent.
Senior Unsecured Notes
In April 2022, the Operating Partnership issued $600.0 million of senior unsecured 2032 Notes with an interest rate of 4.2 percent and a 10-year term, due April 15, 2032. The net proceeds from the offering were $592.3 million after deducting underwriters' discounts and estimated offering expenses. In connection with the 2032 Notes issuance, we may offersettled four 10-year Treasury rate lock contracts totaling $600.0 million and sell sharesreceived a settlement payment of $35.3 million. The balance will be amortized as a reduction of interest expense on a straight-line basis over the 10-year term of the hedged transaction. This lowers the effective interest rate on the 2032 Notes from 4.2 percent to 3.6 percent.
In October 2021, the Operating Partnership issued $450.0 million of senior unsecured 2028 Notes with an interest rate of 2.3 percent and a seven-year term, due November 1, 2028. The Operating Partnership also issued an additional $150.0 million of its 2031 Notes (as defined below). The net proceeds from both offerings were approximately $595.5 million after deducting underwriters' discounts and estimated offering expenses.
In June 2021, the Operating Partnership issued $600.0 million of senior unsecured 2031 Notes with an interest rate of 2.7 percent and a ten-year term, due July 15, 2031. The net proceeds from the offering were approximately $592.4 million, after deducting underwriters' discounts and estimated offering expenses.
The proceeds from the 2028 Notes, the 2031 Notes and the 2032 Notes, were used to pay down borrowings under our Senior Credit Facility. The total outstanding principal balance of senior unsecured notes was $1.8 billion at September 30, 2022.
The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the 2028 Notes, 2031 Notes and 2032 Notes are guaranteed on a senior basis by SUI. The irrevocable guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company. Under Rule 3-10 of Regulation S-X, as amended, subsidiary issuers of obligations guaranteed by its parent company are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company's consolidated financial statements, the parent guarantee is "full and unconditional" and, subject to certain exceptions, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), we have excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Operating Partnership are not materially different from the corresponding amounts presented in our consolidated financial statements and management believes such summarized financial information would be repetitive and not provide incremental value to investors.
Line of Credit
In April 2022, in connection with the closing of the Park Holidays acquisition, the Operating Partnership as borrower, and SUI, as guarantor, and certain lenders entered into the Credit Facility Amendment, which amended our Senior Credit Facility.
The Credit Facility Amendment increased the aggregate amount of our common stock, havingSenior Credit Facility to $4.2 billion with the ability to upsize the total borrowings by an additional $800.0 million, subject to certain conditions. The increased aggregate offering priceamount under the Senior Credit Facility consists of the following: (a) a revolving loan in an amount up to $3.05 billion and (b) a term loan facility of $1.15 billion, with the ability to draw funds from the combined facilities in U.S. dollars, Pounds sterling, Euros, Canadian dollars and Australian dollars, subject to certain limitations. The Credit Facility Amendment extended the maturity date of the revolving loan facility to April 7, 2026. At our option that maturity date may be extended two additional six-month periods. In addition, the Credit Facility Amendment established the maturity date of the term loan facility under the Credit Facility Amendment as April 7, 2025, which may not be further extended.
Prior to the Credit Facility Amendment, the Senior Credit Facility permitted aggregate borrowings of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents are entitled to compensation in$2.0 billion, with an agreed amount not to exceed 2.0 percent of the gross price per shareaccordion feature that allowed for any shares sold from time to time under the Sales Agreement. The Sales Agreement replaced our Prior Agreement, which had an aggregate offering priceadditional commitments of up to $250.0 million.
In April 2017, we entered into our A&R Credit Agreement with Citibank and certain other lenders for our A&R Facility, in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan. The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option,$1.0 billion, subject to the satisfaction of certain conditions as defined in the credit agreement. The credit agreement also provides for, subjectconditions. Prior to the satisfactionamendment, $500.0 million of certain conditions, additional commitments in an amount not to exceed $350.0 million. If additionalavailable borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the Senior Credit Facility may be increased upwere scheduled to $1.0 billion.mature on October 11, 2024, with the remainder scheduled to mature on June 14, 2025. We had no loss on extinguishment of debt during the three months ended September 30, 2022 and 2021. During the nine months ended September 30, 2021, we recognized losses on extinguishment of debt in our Consolidated Statements of Operations of $0.1 million related to the amendment of the Senior Credit Facility, and $0.2 million and $7.9 million, related to the termination of our $750.0 million credit facility and the $1.8 billion credit facility between Safe Harbor and certain lenders, respectively.
The A&RSenior Credit Facility bears interest at a floating rate based on Adjusted Term SOFR, the Eurodollar rateAdjusted Eurocurrency Rate, the Daily RFR, the Australian BBSY, the Daily SONIA Rate or the Canadian Dollar Offered Rate, as applicable, plus a margin, that is determined based on our leverage ratio calculated in accordance with the credit agreement,all cases, which can range from 1.350.725 percent to 2.201.6 percent, forsubject to certain adjustments. As of September 30, 2022, the margins based on our credit ratings were 0.85 percent on the revolving loan facility and 0.95 percent on the term loan facility. During the quarter ended September 30, 2022, we achieved sustainability related requirements resulting in a favorable 0.01 percent adjustment to both margins.
At the lenders' option, the Senior Credit Facility will become immediately due and payable upon an event of default under the Credit Facility Amendment. We had $862.1 million of borrowings outstanding under the revolving loan and 1.30 percent to 2.15 percent for$974.9 million of borrowings outstanding under the term loan. As of September 30, 2017, the margin on our leverage ratio was 1.35 percent and 1.30 percentloan on the revolving and term loans, respectively. We had no borrowings on the revolving loan or term
loanSenior Credit Facility as of September 30, 2017,2022. We had $1.0 billion of revolving borrowings on our prior Senior Credit Facility as total borrowings of $229.0 million were repaid with proceeds from our public equity offering during the quarter ended June 30, 2017. We may borrow up to $100.0 millionDecember 31, 2021. These balances are recorded in Unsecured debt on the term loan on or before June 1, 2018.Consolidated Balance Sheets.
The A&RSenior Credit Facility replaced our $450.0 million Previous Facility, which was scheduled to mature on August 19, 2019. At the time of closing of the A&R Facility, there were $220.8 million in borrowings under the Previous Facility. At December 31, 2016, under the Previous Facility, we had $42.3 million in borrowings on the revolving loan and $58.0 million in borrowings on the term loan totaling $100.3 million with a weighted average interest rate of 2.14 percent.
The A&R Facility provides and the Previous Facility provided, 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,the Senior Credit Facility, but does reduce the borrowing amount available. AtWe had $21.6 million and $2.2 million of outstanding letters of credit at September 30, 20172022 and December 31, 2016, approximately $3.8 million and $4.6 million of availability was used to back standby letters of credit.2021, respectively.
Financial Covenants
Pursuant to the terms of the A&RSenior Credit 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 Senior Credit Facility are as follows:
|
| | | | |
Covenant | | Requirement | | As of September 30, 2017 |
Maximum Leverage Ratio | | <65.0% | | 34.3% |
Minimum Fixed Charge Coverage Ratio | | >1.40 | | 2.62 |
Minimum Tangible Net Worth | | 2,491,250 | | $3,997,391 |
Maximum Dividend Payout Ratio | | <95.0% | | 64.1% |
| | | | | | | | | | | | | | |
Covenant | | Requirement | | As of September 30, 2022 |
Maximum leverage ratio | | <65.0% | | 30.8% |
Minimum fixed charge coverage ratio | | >1.40 | | 4.07 |
| | | | |
Maximum dividend payout ratio | | <95.0% | | 43.7% |
Maximum secured leverage ratio | | <40.0% | | 11.5% |
| | | | |
In addition, we are required to maintain the following covenants with respect to the senior unsecured notes payable:
| | | | | | | | | | | | | | |
Covenant | | Requirement | | As of September 30, 2022 |
Total debt to total assets | | ≤60.0% | | 39.0% |
Secured debt to total assets | | ≤40.0% | | 17.3% |
Consolidated income available for debt service to debt service | | ≥1.50 | | 5.33 |
Unencumbered total asset value to total unsecured debt | | ≥150.0% | | 351.7% |
As of September 30, 2022, we were in compliance with the above covenants and do not anticipate that we will be unable to meet these covenants in the near term.
Bridge Loan Termination
In March 2022, we terminated our commitment letter with Citigroup, pursuant to which, Citigroup (on behalf of its affiliates), previously committed to lend us up to £950.0 million, or approximately $1.2 billion converted at the March 31, 2022 exchange rate (the "Bridge Loan"). As of the date of termination, we did not have any borrowings outstanding under the Bridge Loan.
Derivative Transactions
Our objective and strategy in using interest rate derivatives is to manage exposure to interest rate movements, thereby minimizing the effect of interest rate changes and the effect they could have on future cash outflows (forecasted interest payments) on a forecasted issuance of long-term debt. We do not enter into derivative instruments for speculative purposes.
In July 2022, we entered into two treasury rate lock contracts with an aggregate notional value of $200.0 million to hedge interest rate risk associated with the future issuance of long-term fixed rate debt. The benchmark interest rate used is the on-the-run 10-year U.S. Treasury. We also entered into two interest rate swap agreements to hedge variable rate borrowings of £400.0 million (equivalent to $445.3 million as of September 30, 2022) under the term loan on the Senior Credit Facility. The interest rate swaps locked in a total fixed rate, inclusive of spread, of 3.67 percent through the term loan maturity date of April 7, 2025.
Long-term Financing and Capital Requirements
Long-term Financing
We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, expansion and development of communities,properties, other nonrecurring capital improvements and Operating Partnership unit redemptions through the long-term unsecured and secured indebtedness and the issuance of certain debt or equity securities and/subject to market conditions. If current market and economic conditions, including relating to, among other things, interest rates, currency fluctuations, equity valuations and inflation, continue or worsen, our ability to obtain debt and equity capital in the collateralizationlong term on attractive terms may be adversely affected.
We had unrestricted cash on hand as of our properties.September 30, 2022 of $101.1 million. As of September 30, 2022, there was $2.0 billion of remaining capacity on the Senior Credit Facility. At September 30, 2017,2022 we had 156a total of 507 unencumbered properties, of which 61 support the borrowing base for our $650.0 million line of credit. We will utilize available cash on hand to redeem all 3,400,000 outstanding shares of our Series A Preferred Stock on November 14, 2017. Refer to Note 17, “Subsequent Events” in our accompanying Consolidated Financial Statements for additional information.MH, RV and Marina properties.
From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, issue unsecured notes, obtain other 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 MH, RV and RV housing community industryMarina industries 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. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing unsecured indebtedness as maturities become due. See “Risk Factors”"Risk Factors" in Part I, Item 1A of our 20162021 Annual Report and in Part II, Item 1A of this report.Report. 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 September 30, 2017, 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 | | $ | 1,017,385 |
| | $ | 4,750 |
| | $ | 118,437 |
| | $ | 226,728 |
| | $ | 667,470 |
|
Collateralized term loans - Life Company | | 950,726 |
| | 5,157 |
| | 53,349 |
| | 62,874 |
| | 829,346 |
|
Collateralized term loans - CMBS | | 451,743 |
| | 1,982 |
| | 17,476 |
| | 138,016 |
| | 294,269 |
|
Collateralized term loans - FMCC | | 390,270 |
| | 1,480 |
| | 12,317 |
| | 13,305 |
| | 363,168 |
|
Secured borrowings | | 134,884 |
| | 1,354 |
| | 11,969 |
| | 14,090 |
| | 107,471 |
|
Lines of credit | | — |
| | — |
| | — |
| | — |
| | — |
|
Preferred OP units - mandatorily redeemable | | 45,903 |
| | 3,670 |
| | 7,570 |
| | — |
| | 34,663 |
|
Total principal payments | | $ | 2,990,911 |
| | $ | 18,393 |
| | $ | 221,118 |
| | $ | 455,013 |
| | $ | 2,296,387 |
|
| | | | | | | | | | |
Interest expense (2) | | $ | 855,169 |
| | $ | 33,321 |
| | $ | 245,932 |
| | $ | 217,539 |
| | $ | 358,377 |
|
Operating leases | | 58,646 |
| | 3,198 |
| | 6,803 |
| | 6,986 |
| | 41,659 |
|
Total contractual obligations | | $ | 3,904,726 |
| | $ | 54,912 |
| | $ | 473,853 |
| | $ | 679,538 |
| | $ | 2,696,423 |
|
(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 September 30, 2017 (excluding secured borrowings), and actual payments required in future periods may be different than the amounts included above. Perpetual securities include one year of interest expense in After 5 years.
As of September 30, 2017,2022, our net debt to enterprise value approximated 28.3was 27.5 percent (assuming conversion of all common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4C preferred OP units, Series D preferred OP units, Series E preferred OP units, Series F preferred OP units, Series G preferred OP units, Series H preferred OP units and Series CJ preferred OP units to shares of common stock). Our debt has a weighted average maturityinterest rate of approximately 8.4 years3.4 percent and a weighted average years to maturity of 8.8 years.
Capital Requirements
Certain of our nonconsolidated affiliates, which are accounted for under the equity-method of accounting, have incurred indebtedness. We have not guaranteed the debt of our nonconsolidated affiliates in the arrangements referenced below, nor do we have any obligations to fund this debt should the nonconsolidated affiliates be unable to do so. Refer to Note 6, "Investments in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information about these entities.
GTSC - During September 2019, GTSC entered into a warehouse line of credit with a maximum loan amount of $125.0 million. The line of credit was subsequently amended in September 2020, May 2021 and December 2021 with the maximum amount increased to $255.0 million, with an option to increase to $275.0 million subject to the lender's consent. As of September 30, 2022, and December 31, 2021 the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $275.0 million (of which our proportionate share is $110.0 million), and $243.1 million (of which our proportionate share is $97.2 million), respectively. The debt bears interest at a variable rate based on a Commercial Paper or adjusted Secured Overnight Financing Rate plus 1.65 percent per annum and matures on December 15, 2025.
Sungenia JV - During May 2020, Sungenia JV, entered into a debt facility agreement with a maximum loan amount of 4.6 percent.$27.0 million Australian dollars, or $17.4 million converted at the September 30, 2022 exchange rate. During July 2022, the maximum amount was increased to $50.0 million Australian dollars, or $32.3 million converted at the September 30, 2022 exchange rate. As of September 30, 2022 and December 31, 2021, the aggregate carrying amount of the debt, including both our and our partners' share, incurred by Sungenia JV was $5.6 million (of which our proportionate share is approximately $2.8 million), and $6.3 million (of which our proportionate share is $3.1 million), respectively. The debt bears interest at a variable rate based on the BBSY rate plus 1.35 percent per annum and matures on June 30, 2027.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Qreport contains various “forward-looking statements”"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”"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 filingdocument 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,” “designedas "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" "foreseeable future,” “believe,” “believes,” “scheduled,” “guidance”" "believe," "believes," "scheduled," "guidance," "target" 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.document, some of which are beyond our control. These risks, uncertainties and uncertaintiesother factors 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” in Part I, Item IA, contained"Risk Factors" in our 20162021 Annual Report, and in our other filings with the SEC, from time to time, such risks and uncertainties and other factors include, but are not limited to:
changes•Outbreaks of disease, including the COVID-19 pandemic, and related stay-at-home orders, quarantine policies and restrictions on travel, trade and business operations;
•Changes in general economic conditions, including inflation, deflation, and energy costs, the real estate industry and the markets inwithin which we operate;
difficulties•Difficulties in our ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully;
our•Our liquidity and refinancing demands;
our•Our ability to obtain or refinance maturing debt;
our•Our ability to maintain compliance with covenants contained in our debt facilities;facilities and our unsecured notes;
availability•Availability of capital;
change•Changes in foreign currency exchange rates, specificallyincluding between the U.S. dollar and each of the Canadian dollar;dollar, Australian dollar and Pounds sterling;
our•Our ability to maintain rental rates and occupancy levels;
our failure•Our ability to maintain effective internal control over financial reporting and disclosure controls and procedures;
increases•Increases in interest rates and operating costs, including insurance premiums and real property taxes;
risks•Risks related to natural disasters;disasters such as hurricanes, earthquakes, floods, droughts and wildfires;
general•General volatility of the capital markets and the market price of shares of our capital stock;
our failure•Our ability to maintain our status as a REIT;
changes•Changes in real estate and zoning laws and regulations;
legislative•Legislative or regulatory changes, including changes to laws governing the taxation of REITs;
litigation,•Litigation, judgments or settlements;
competitive•Competitive market forces;
the•The ability of purchasers of manufactured home buyershomes and boats to obtain financing; and
the•The level of repossessions by manufactured home and boat lenders.
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,document, whether as a result of new information, future events, changes in our expectations or 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.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices and equity prices.
Interest Rate 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 that interest rate changes could have on our future cash flows. From time to time, we 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 two interestOur variable rate cap agreements with a total notional amount of $159.7debt totaled $1.4 billion and $624.8 million as of September 30, 2017. The first interest rate cap agreement has a cap rate of 9.00 percent, a notional amount of $150.1 million2022 and a termination date of April 2018. The second interest rate cap agreement has a cap rate of 11.02 percent, a notional amount of $9.6 million and a termination date of May 2023.
Our remaining variable rate debt totaled $153.7 million as2021, respectively. As of September 30, 2017, and bears2022, our variable debt bore interest at the Adjusted Term SOFR, the Adjusted Eurocurrency Rate, the Daily RFR, the Australian BBSY rate, the Daily SONIA Rate or the Canadian Dollar Offered Rate, and the Eurodollar rate or Prime rate plus a margin. As of September 30, 2021, our variable debt bore interest at the Adjusted Eurocurrency Rate or various LIBOR rates.the Australian BBSY rate, plus a margin, and the Eurodollar rate or Prime rate. If Prime or LIBORthe above rate increased or decreased by 1.0 percent, we believe our interest expense would have increased or decreased by $10.3 million and $7.1 million for the nine months ended September 30, 2017, would have increased or decreased by approximately $1.9 million,2022 and 2021, respectively, based on the $250.7$1.4 billion and $945.7 million average balances outstanding under our variable rate debt facilities, respectively. Our variable rate debt, interest expense and average balance outstanding under our variable rate debt facilities.facility includes the impact of hedge activity.
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate risk is the risk that fluctuations in currencies against the U.S. dollar will negatively impact our results of operations. We are exposed to foreign currency exchange rate risk as a result of remeasurement and translation of the assets and liabilities of our Canadian properties in the UK and Canada, and our equity investment and joint venture in Australia, into U.S. dollars. Fluctuations in foreign currency exchange rates can therefore create volatility in our results of operations and may adversely affect our financial condition.
At September 30, 2022 and December 31, 2021, our shareholder's equity included $1.1 billion from our investments and operations in Canada, Australia and the United Kingdom and $663.6 million from our investments and operations in Canada and Australia, which collectively represented 13.8 percent and 9.9 percent of total shareholder's equity, respectively. Based on our sensitivity analysis, a 10.0 percent strengthening of the U.S. dollar against the Canadian dollar, Australian dollar and Pounds sterling would have caused a reduction of $109.3 million and $66.4 million to our total shareholder's equity at September 30, 2022 and December 31, 2021, respectively.
Capital Market Risk
We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under other financing arrangements. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (pursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act) at September 30, 2017.2022. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2017.2022.
In April 2022, we completed the acquisition of Park Holidays and are currently integrating Park Holidays into our operations, compliance program and internal control processes. Park Holidays constituted approximately 15 percent of our total assets as of September 30, 2022, including the goodwill and other intangible assets recorded as part of the purchase price allocation, and 11 percent of our revenues for the nine months ended September 30, 2022. SEC regulations allow companies to exclude acquisitions from their assessment of internal control over financial reporting during the first year following an acquisition. We have excluded the acquired operations of Park Holidays from our assessment of our internal control over financial reporting for the nine months ended September 30, 2022.
Changes in internal control over financial reporting
There have not been anywere no changes in our internal control over financial reporting during the three months ended September 30, 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various legal proceedings arisingLegal Proceedings Arising in the ordinary courseOrdinary Course of business. AllBusiness
Refer to "Legal Proceedings" in Part 1 - Item 1 - Note 16, "Commitments and Contingencies," in our accompanying Consolidated Financial Statements.
Environmental Matters
Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings taken together,involve potential monetary sanctions that we reasonably believe will exceed an applied threshold not to exceed $1.0 million. Applying this threshold, there are not expectedno environmental matters to have a material adverse impact on our results of operations or financial condition.disclose for the three months ended September 30, 2022.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors described in Part 1, Item 1A., “Risk"Risk Factors,”" in our 20162021 Annual Report, which could materially affect our business, financial condition or future results. There have been no material changes to the disclosure on these matters as set forth in the 2016 Annual Report.such report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Holders of our OP units have converted the following units during the three months ended September 30, 2022:
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended |
| | | | September 30, 2022 |
Series | | Conversion Rate | | Units / Shares Converted | | Common Stock(1) |
Common OP units | | 1.0000 | | | 135,881 | | | 135,881 | |
Series A-1 preferred OP units | | 2.4390 | | | 2,001 | | | 4,876 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Series E preferred OP units | | 0.6897 | | | 5,000 | | | 3,448 | |
| | | | | | |
| | | | | | |
| | | | | | |
Series I preferred OP units | | 0.6098 | | | 922,000 | | | 562,195 | |
(1)Calculation may yield minor differences due to rounding incorporated in the above numbers.
All of the securities described above were issued in private placements in reliance on Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder. No underwriters were used in connection with any of such issuances.
Purchases of Equity Securities
In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares ofThe following table summarizes our common stock. We have 400,000 common shares remaining in the repurchase program. No common shares were repurchased under this buyback programstock repurchases during the ninethree months ended September 30, 2017. There is no expiration date specified for2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total number of shares purchased | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs |
Period | | (a) | | (b) | | (c) | | (d) |
July 1, 2022 - July 31, 2022 | | 2,535 | | | $ | 160.54 | | | — | | | $ | — | |
August 1, 2022 - August 31, 2022 | | 98 | | | $ | 167.56 | | | — | | | $ | — | |
September 1, 2022 - September 30, 2022 | | 182 | | | $ | 142.52 | | | — | | | $ | — | |
Total | | 2,815 | | | $ | 159.61 | | | — | | | $ | — | |
During the buyback program.three months ended September 30, 2022, we withheld 2,815 shares from employees to satisfy estimated statutory income tax obligations related to vesting of restricted stock awards. The value of the common stock withheld was based on the closing price of our common stock on the applicable vesting date.
ITEM 6. EXHIBITS
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Exhibit No. | Description | Method of Filing |
3.1 | | Incorporated by reference to SUI's Annual Report on Form 10-K filed on February 22, 2018 |
3.2 | | Incorporated by reference to SUI's Current Report on Form 8-K filed on May 12, 2017 |
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| | |
Exhibit No. | Description | Method of Filing |
31.1 | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
22.1 | | Filed herewith |
31.1 | | Filed herewith |
31.2 | | Filed herewith |
32.1 | | Filed herewith |
101.INS | XBRL Instance Document | Filed herewithThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101) | Filed herewith |
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SIGNATURES
Pursuant to the requirements 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.
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Dated: October 24, 201725, 2022 | By: | /s/ Karen J. DearingFernando Castro-Caratini |
| | Karen J. Dearing,Fernando Castro-Caratini, Chief Financial Officer and Secretary
(Duly authorized officer and principal financial officer)
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EXHIBIT INDEX
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| | |
Exhibit No. | Description | Method of Filing |
31.1 | | Filed herewith |
31.2 | | Filed herewith |
32.1 | | Filed herewith |
101.INS | XBRL Instance Document | Filed herewith |
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith |