UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020.2021.
or
☐ TRANSITION PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
SUN COMMUNITIES INC.INC.
(Exact Name of Registrant as Specified in its Charter)
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| | |
Maryland | 1-12616 | 38-2730780 |
(State of Incorporation) | Commission file number | (I.R.S. Employer Identification No.) |
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| | | | | |
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 |
(Address of Principal Executive Offices) | | (Zip Code) |
(248) (248) 208-2500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| | | | | | | | | | | | | |
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 Registrantregistrant (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 Registrantregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. (Check one):
See 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 | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
☒ | ☐ | ☐ | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrant 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 ☒
Number of shares of Common Stock, $0.01 par value per share, outstanding as of April 16, 2020: 93,307,20720, 2021: 111,828,638
INDEX
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| Consolidated Financial Statements | |
| 2020 | |
| Consolidated Statements of Operations for the Three Months Ended March 31, 20202021 and 20192020 (Unaudited) | |
| Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 20202021 and 20192020 (Unaudited) | |
| | |
| Consolidated Statement of Equity for the Three Months Ended March 31, 20202021 and 20192020 (Unaudited) | |
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited) | |
| Notes to Consolidated Financial Statements | |
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Item 1. | Legal Proceedings | |
| Risk Factors | | |
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| Signatures | |
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts) | | | (Unaudited) | | | | (Unaudited) | |
| March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
Assets | | | | Assets | | | |
Land | $ | 1,418,985 |
| | $ | 1,414,279 |
| Land | $ | 2,190,762 | | | $ | 2,119,364 | |
Land improvements and buildings | 6,697,376 |
| | 6,595,272 |
| Land improvements and buildings | 8,664,199 | | | 8,480,597 | |
Rental homes and improvements | 640,709 |
| | 627,175 |
| Rental homes and improvements | 652,559 | | | 637,603 | |
Furniture, fixtures and equipment | 285,922 |
| | 282,874 |
| Furniture, fixtures and equipment | 491,735 | | | 447,039 | |
Investment property | 9,042,992 |
| | 8,919,600 |
| Investment property | 11,999,255 | | | 11,684,603 | |
Accumulated depreciation | (1,754,591 | ) | | (1,686,980 | ) | Accumulated depreciation | (2,088,105) | | | (1,968,812) | |
Investment property, net (including $350,019 and $344,300 for consolidated VIEs at March 31, 2020 and December 31, 2019; see Note 7) | 7,288,401 |
| | 7,232,620 |
| |
Investment property, net (including $479,196 and $438,918 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | | Investment property, net (including $479,196 and $438,918 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | 9,911,150 | | | 9,715,791 | |
Cash, cash equivalents and restricted cash | 394,740 |
| | 34,830 |
| Cash, cash equivalents and restricted cash | 120,174 | | | 92,641 | |
Marketable securities; (see Note 14) | 55,602 |
| | 94,727 |
| |
Marketable securities (see Note 14) | | Marketable securities (see Note 14) | 127,821 | | | 124,726 | |
Inventory of manufactured homes | 64,436 |
| | 62,061 |
| Inventory of manufactured homes | 43,242 | | | 46,643 | |
Notes and other receivables, net | 186,692 |
| | 157,926 |
| Notes and other receivables, net | 249,009 | | | 221,650 | |
Other assets, net (including $23,751 and $23,894 for consolidated VIEs at March 31, 2020 and December 31, 2019; see Note 7) | 219,176 |
| | 219,896 |
| |
| Goodwill | | Goodwill | 438,842 | | | 428,833 | |
Other intangible assets, net | | Other intangible assets, net | 300,554 | | | 305,611 | |
Other assets, net (including $31,820 and $24,554 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | | Other assets, net (including $31,820 and $24,554 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | 263,417 | | | 270,691 | |
Total Assets | $ | 8,209,047 |
| | $ | 7,802,060 |
| Total Assets | $ | 11,454,209 | | | $ | 11,206,586 | |
Liabilities | | | | Liabilities | | | |
Mortgage loans payable (including $46,727 and $46,993 for consolidated VIEs at March 31, 2020 and December 31, 2019; see Note 7) | $ | 3,273,808 |
| | $ | 3,180,592 |
| |
Mortgage loans payable (including $54,142 and $47,706 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | | Mortgage loans payable (including $54,142 and $47,706 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | $ | 3,430,420 | | | $ | 3,444,967 | |
| Preferred Equity - Sun NG RV Resorts LLC - mandatorily redeemable (fully attributable to consolidated VIEs; see Note 7) | 35,249 |
| | 35,249 |
| Preferred Equity - Sun NG RV Resorts LLC - mandatorily redeemable (fully attributable to consolidated VIEs; see Note 7) | 35,249 | | | 35,249 | |
Preferred OP units - mandatorily redeemable | 34,663 |
| | 34,663 |
| Preferred OP units - mandatorily redeemable | 34,663 | | | 34,663 | |
Lines of credit | 582,774 |
| | 183,898 |
| |
Lines of credit and other debt | | Lines of credit and other debt | 917,603 | | | 1,242,197 | |
Distributions payable | 75,636 |
| | 71,704 |
| Distributions payable | 95,076 | | | 86,988 | |
Advanced reservation deposits and rent | 151,144 |
| | 133,420 |
| Advanced reservation deposits and rent | 280,301 | | | 187,730 | |
Accrued expenses and accounts payable | 110,512 |
| | 127,289 |
| Accrued expenses and accounts payable | 160,072 | | | 148,435 | |
Other liabilities (including $19,604 and $13,631 for consolidated VIEs at March 31, 2020 and December 31, 2019; see Note 7) | 82,341 |
| | 81,289 |
| |
Other liabilities (including $47,901 and $21,957 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | | Other liabilities (including $47,901 and $21,957 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | 148,128 | | | 134,650 | |
Total Liabilities | 4,346,127 |
| | 3,848,104 |
| Total Liabilities | 5,101,512 | | | 5,314,879 | |
Commitments and contingencies (see Note 15) | | | | Commitments and contingencies (see Note 15) | | | |
Series D preferred OP units | 50,387 |
| | 50,913 |
| |
Equity interests - NG Sun LLC and NG Whitewater (fully attributable to consolidated VIEs; see Note 7) | 26,063 |
| | 27,091 |
| |
Temporary equity (see Note 9) (including $26,604 and $28,469 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | | Temporary equity (see Note 9) (including $26,604 and $28,469 for consolidated VIEs at March 31, 2021 and December 31, 2020; see Note 7) | 261,059 | | | 264,379 | |
| Stockholders' Equity | | | | Stockholders' Equity | | | |
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 93,327 March 31, 2020 and 93,180 December 31, 2019 | 933 |
| | 932 |
| |
| Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 111,835 March 31, 2021 and 107,626 December 31, 2020 | | Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 111,835 March 31, 2021 and 107,626 December 31, 2020 | 1,118 | | | 1,076 | |
Additional paid-in capital | 5,211,678 |
| | 5,213,264 |
| Additional paid-in capital | 7,618,128 | | | 7,087,658 | |
Accumulated other comprehensive loss | (8,325 | ) | | (1,331 | ) | Accumulated other comprehensive loss | 4,033 | | | 3,178 | |
Distributions in excess of accumulated earnings | (1,479,424 | ) | | (1,393,141 | ) | Distributions in excess of accumulated earnings | (1,631,044) | | | (1,566,636) | |
Total Sun Communities, Inc. stockholders' equity | 3,724,862 |
| | 3,819,724 |
| Total Sun Communities, Inc. stockholders' equity | 5,992,235 | | | 5,525,276 | |
Noncontrolling interests | | | | Noncontrolling interests | | | |
Common and preferred OP units | 52,234 |
| | 47,686 |
| Common and preferred OP units | 82,502 | | | 85,968 | |
Consolidated VIEs | 9,374 |
| | 8,542 |
| |
Consolidated VIEs (fully attributable to consolidated VIEs; see Note 7) | | Consolidated VIEs (fully attributable to consolidated VIEs; see Note 7) | 16,901 | | | 16,084 | |
Total noncontrolling interests | 61,608 |
| | 56,228 |
| Total noncontrolling interests | 99,403 | | | 102,052 | |
Total Stockholders' Equity | 3,786,470 |
| | 3,875,952 |
| Total Stockholders' Equity | 6,091,638 | | | 5,627,328 | |
Total Liabilities, Temporary Equity and Stockholders' Equity | $ | 8,209,047 |
| | $ | 7,802,060 |
| Total Liabilities, Temporary Equity and Stockholders' Equity | $ | 11,454,209 | | | $ | 11,206,586 | |
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)
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| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
Revenues | | | |
Income from real property | $ | 237,785 |
| | $ | 215,083 |
|
Revenue from home sales | 40,587 |
| | 39,618 |
|
Rental home revenue | 15,472 |
| | 13,971 |
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Ancillary revenue | 10,195 |
| | 10,178 |
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Interest income | 2,350 |
| | 4,800 |
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Brokerage commissions and other revenues, net | 3,913 |
| | 3,680 |
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Total Revenues | 310,302 |
| | 287,330 |
|
Expenses | | | |
Property operating and maintenance | 64,057 |
| | 57,909 |
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Real estate taxes | 17,176 |
| | 15,330 |
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Cost of home sales | 30,032 |
| | 29,277 |
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Rental home operating and maintenance | 5,494 |
| | 4,832 |
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Ancillary expenses | 7,482 |
| | 7,101 |
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Home selling expenses | 3,992 |
| | 3,324 |
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General and administrative expenses | 25,517 |
| | 21,887 |
|
Catastrophic weather-related charges, net | 606 |
| | 782 |
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Depreciation and amortization | 83,689 |
| | 76,556 |
|
Loss on extinguishment of debt | 3,279 |
| | 653 |
|
Interest expense | 32,416 |
| | 34,014 |
|
Interest on mandatorily redeemable preferred OP units / equity | 1,041 |
| | 1,094 |
|
Total Expenses | 274,781 |
| | 252,759 |
|
Income Before Other Items | 35,521 |
| | 34,571 |
|
Gain / (loss) on remeasurement of marketable securities (see Note 14) | (28,647 | ) | | 267 |
|
Gain / (loss) on foreign currency translation | (17,479 | ) | | 1,965 |
|
Other expense, net | (302 | ) | | (67 | ) |
Loss on remeasurement of notes receivable (see Note 4) | (2,112 | ) | | — |
|
Income from nonconsolidated affiliates | 52 |
| | 388 |
|
Loss on remeasurement of investment in nonconsolidated affiliates (see Note 6) | (2,191 | ) | | — |
|
Current tax expense | (450 | ) | | (214 | ) |
Deferred tax benefit | 130 |
| | 217 |
|
Net Income / (Loss) | (15,478 | ) |
| 37,127 |
|
Less: Preferred return to preferred OP units / equity | 1,570 |
| | 1,323 |
|
Less: Income / (loss) attributable to noncontrolling interests | (962 | ) | | 1,041 |
|
Net Income / (Loss) Attributable to Sun Communities, Inc. | (16,086 | ) |
| 34,763 |
|
Less: Preferred stock distribution | — |
| | 432 |
|
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | $ | (16,086 | ) |
| $ | 34,331 |
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| | | |
Weighted average common shares outstanding - basic | 92,410 |
| | 85,520 |
|
Weighted average common shares outstanding - diluted | 92,935 |
| | 86,033 |
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| | | |
Basic earnings / (loss) per share (see Note 13) | $ | (0.17 | ) | | $ | 0.40 |
|
Diluted earnings / (loss) per share (see Note 13) | $ | (0.17 | ) | | $ | 0.40 |
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| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2021 | | March 31, 2020 | | | | |
Revenues | | | | | | | |
Real property | $ | 330,613 | | | $ | 258,349 | | | | | |
Home sales | 52,199 | | | 40,587 | | | | | |
Service, retail, dining and entertainment | 50,612 | | | 5,103 | | | | | |
Interest | 2,631 | | | 2,350 | | | | | |
Brokerage commissions and other, net | 5,960 | | | 3,913 | | | | | |
Total Revenues | 442,015 | | | 310,302 | | | | | |
Expenses | | | | | | | |
Property operating and maintenance | 103,553 | | | 69,834 | | | | | |
Real estate tax | 22,408 | | | 17,176 | | | | | |
Home costs and selling | 41,590 | | | 34,039 | | | | | |
Service, retail, dining and entertainment | 45,431 | | | 6,682 | | | | | |
General and administrative | 38,203 | | | 25,349 | | | | | |
Catastrophic event-related charges, net | 2,414 | | | 606 | | | | | |
Business combination | 1,232 | | | 0 | | | | | |
Depreciation and amortization | 123,304 | | | 83,689 | | | | | |
Loss on extinguishment of debt (see Note 8) | 0 | | | 3,279 | | | | | |
Interest | 39,517 | | | 32,416 | | | | | |
Interest on mandatorily redeemable preferred OP units / equity | 1,036 | | | 1,041 | | | | | |
Total Expenses | 418,688 | | | 274,111 | | | | | |
Income Before Other Items | 23,327 | | | 36,191 | | | | | |
Gain / (loss) on remeasurement of marketable securities (see Note 14) | 3,661 | | | (28,647) | | | | | |
Gain / (loss) on foreign currency translation | 25 | | | (17,479) | | | | | |
| | | | | | | |
Other expense, net | (1,099) | | | (972) | | | | | |
Income / (loss) on remeasurement of notes receivable (see Note 4) | 376 | | | (2,112) | | | | | |
Income from nonconsolidated affiliates (see Note 6) | 1,171 | | | 52 | | | | | |
Income / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6) | 104 | | | (2,191) | | | | | |
Current tax benefit / (expense) (see Note 12) | 229 | | | (450) | | | | | |
Deferred tax benefit (see Note 12) | 147 | | | 130 | | | | | |
Net Income / (Loss) | 27,941 | | | (15,478) | | | | | |
Less: Preferred return to preferred OP units / equity | 2,864 | | | 1,570 | | | | | |
Less: Income / (loss) attributable to noncontrolling interests | 295 | | | (962) | | | | | |
| | | | | | | |
| | | | | | | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | $ | 24,782 | | | $ | (16,086) | | | | | |
| | | | | | | |
Weighted average common shares outstanding - basic | 107,932 | | | 92,410 | | | | | |
Weighted average common shares outstanding - diluted | 108,161 | | | 92,411 | | | | | |
| | | | | | | |
Basic earnings / (loss) per share (see Note 13) | $ | 0.23 | | | $ | (0.17) | | | | | |
Diluted earnings / (loss) per share (see Note 13) | $ | 0.23 | | | $ | (0.17) | | | | | |
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2021 | | March 31, 2020 | | | | |
Net Income / (Loss) | $ | 27,941 | | | $ | (15,478) | | | | | |
Foreign currency translation gain / (loss) adjustment | 895 | | | (7,300) | | | | | |
| | | | | | | |
Total Comprehensive Income | 28,836 | | | (22,778) | | | | | |
Less: Comprehensive income / (loss) attributable to noncontrolling interests | (335) | | | 1,268 | | | | | |
Comprehensive Income / (Loss) attributable to Sun Communities, Inc. | $ | 28,501 | | | $ | (21,510) | | | | | |
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
Net Income / (Loss) | $ | (15,478 | ) | | $ | 37,127 |
|
Foreign currency translation gain / (loss) adjustment | (7,300 | ) | | 1,575 |
|
Total Comprehensive Income / (Loss) | (22,778 | ) | | 38,702 |
|
Less: Comprehensive Income / (Loss) attributable to noncontrolling interests | 1,268 |
| | (1,118 | ) |
Comprehensive Income / (Loss) attributable to Sun Communities, Inc. | $ | (21,510 | ) | | $ | 37,584 |
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited) |
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
Operating Activities | | | |
Net Cash Provided By Operating Activities | $ | 118,513 |
| | $ | 103,141 |
|
Investing Activities | | | |
Investment in properties | (132,759 | ) | | (114,804 | ) |
Acquisitions of properties, net of cash acquired | (24,439 | ) | | (279,302 | ) |
Proceeds from dispositions of assets and depreciated homes, net | 12,612 |
| | 11,788 |
|
Issuance of notes and other receivables | (19,903 | ) | | — |
|
Repayments of notes and other receivables | 854 |
| | 1,030 |
|
Investments in nonconsolidated affiliates | (6,970 | ) | | (11,416 | ) |
Distributions from nonconsolidated affiliates | 1,275 |
| | 221 |
|
Net Cash Used For Investing Activities | (169,330 | ) | | (392,483 | ) |
Financing Activities | | | |
Issuance of common stock, OP units, and preferred OP units, net | (7,140 | ) | | (4,321 | ) |
Redemption of Series B-3 preferred OP units | — |
| | (2,675 | ) |
Borrowings on lines of credit | 1,163,965 |
| | 1,428,948 |
|
Payments on lines of credit | (763,076 | ) | | (1,160,436 | ) |
Proceeds from issuance of other debt | 230,000 |
| | 265,000 |
|
Payments on other debt | (134,203 | ) | | (200,892 | ) |
Prepayment penalty on collateralized term loans | (3,250 | ) | | — |
|
Proceeds received from return of prepaid deferred financing costs | — |
| | 1,618 |
|
Distributions to stockholders, OP unit holders, and preferred OP unit holders | (71,859 | ) | | (65,145 | ) |
Payments for deferred financing costs | (3,328 | ) | | (1,000 | ) |
Net Cash Provided By Financing Activities | 411,109 |
| | 261,097 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (382 | ) | | 158 |
|
Net change in cash, cash equivalents and restricted cash | 359,910 |
| | (28,087 | ) |
Cash, cash equivalents and restricted cash, beginning of period | 34,830 |
| | 62,262 |
|
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 394,740 |
| | $ | 34,175 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
Supplemental Information | | | |
Cash paid for interest (net of capitalized interest of $2,258, $1,357 respectively) | $ | 32,464 |
| | $ | 32,711 |
|
Cash paid for interest on mandatorily redeemable debt | $ | 1,041 |
| | $ | 1,094 |
|
Cash paid (refunds) for income taxes | $ | 75 |
| | $ | (60 | ) |
Noncash investing and financing activities | | | |
Reduction in secured borrowing balance | $ | — |
| | $ | 5,055 |
|
Change in distributions declared and outstanding | $ | 4,787 |
| | $ | 3,536 |
|
Conversion of common and preferred OP units | $ | 446 |
| | $ | 280 |
|
Acquisitions - Series D preferred interest | $ | — |
| | $ | 51,930 |
|
Acquisitions - Series E preferred interest | $ | 9,000 |
| | $ | — |
|
Acquisitions - Escrow | $ | — |
| | $ | 4,035 |
|
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF EQUITY
(In thousands) (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Temporary Equity | | Stockholders' Equity | | |
| | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests | Total Stockholders' Equity | | Total Equity |
Balance at December 31, 2020 | $ | 264,379 | | | $ | 1,076 | | $ | 7,087,658 | | $ | (1,566,636) | | $ | 3,178 | | $ | 102,052 | | $ | 5,627,328 | | | $ | 5,891,707 | |
Issuance of common stock and common OP units, net | — | | | 42 | | 522,222 | | — | | — | | — | | 522,264 | | | 522,264 | |
Conversion of OP units | — | | | — | | 1,150 | | — | | — | | (1,150) | | — | | | 0 | |
| | | | | | | | | | |
Other redeemable non-controlling interests | 52 | | | — | | — | | (52) | | — | | — | | (52) | | | 0 | |
Share-based compensation - amortization and forfeitures | — | | | — | | 7,118 | | 62 | | — | | — | | 7,180 | | | 7,180 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Foreign currency translation | — | | | — | | — | | — | | 855 | | 40 | | 895 | | | 895 | |
| | | | | | | | | | |
Net income (loss) | (1,568) | | | — | | — | | 27,647 | | — | | 1,862 | | 29,509 | | | 27,941 | |
Distributions | (1,804) | | | — | | — | | (92,823) | | — | | (3,260) | | (96,083) | | | (97,887) | |
Other | — | | | — | | (20) | | 758 | | — | | (141) | | 597 | | | 597 | |
Balance at March 31, 2021 | $ | 261,059 | | | $ | 1,118 | | $ | 7,618,128 | | $ | (1,631,044) | | $ | 4,033 | | $ | 99,403 | | $ | 6,091,638 | | | $ | 6,352,697 | |
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| Temporary Equity | | Stockholders’ Equity | | |
| | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests | Total Stockholders’ Equity | | Total Equity |
Balance at December 31, 2019 | $ | 78,004 |
| | $ | 932 |
| $ | 5,213,264 |
| $ | (1,393,141 | ) | $ | (1,331 | ) | $ | 56,228 |
| $ | 3,875,952 |
| | $ | 3,953,956 |
|
Issuance of common stock and common OP units, net | — |
| | 1 |
| (7,141 | ) | — |
| — |
| — |
| (7,140 | ) | | (7,140 | ) |
Conversion of OP units | — |
| | — |
| 446 |
| — |
| — |
| (446 | ) | — |
| | — |
|
Equity Interests - NG Sun LLC & NG Sun Whitewater RV LLC | 98 |
| | — |
| — |
| (85 | ) | — |
| — |
| (85 | ) | | 13 |
|
Share-based compensation - amortization and forfeitures | — |
| | — |
| 4,928 |
| 93 |
| — |
| — |
| 5,021 |
| | 5,021 |
|
Issuance of Series E OP units | — |
| | — |
| 181 |
| — |
| — |
| 8,819 |
| 9,000 |
| | 9,000 |
|
Foreign currency translation | — |
| | — |
| — |
| — |
| (6,994 | ) | (306 | ) | (7,300 | ) | | (7,300 | ) |
Remeasurement of notes receivable and equity method investment (see Note 17)
| — |
| | — |
| — |
| 1,953 |
| — |
| — |
| 1,953 |
| | 1,953 |
|
Net income (loss) | (1,195 | ) | | — |
| — |
| (14,514 | ) | — |
| 231 |
| (14,283 | ) | | (15,478 | ) |
Distributions | (457 | ) | | — |
| — |
| (73,730 | ) | — |
| (2,918 | ) | (76,648 | ) | | (77,105 | ) |
Balance at March 31, 2020 | $ | 76,450 |
| | $ | 933 |
| $ | 5,211,678 |
| $ | (1,479,424 | ) | $ | (8,325 | ) | $ | 61,608 |
| $ | 3,786,470 |
| | $ | 3,862,920 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Stockholders' Equity | | |
| Temporary Equity | | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests | Total Stockholders' Equity | | Total Equity |
Balance at December 31, 2019 | $ | 78,004 | | | $ | 932 | | $ | 5,213,264 | | $ | (1,393,141) | | $ | (1,331) | | $ | 56,228 | | $ | 3,875,952 | | | $ | 3,953,956 | |
Issuance of common stock and common OP units, net | — | | | 1 | | (7,141) | | — | | — | | — | | (7,140) | | | (7,140) | |
Conversion of OP units | — | | | — | | 446 | | — | | — | | (446) | | — | | | 0 | |
| | | | | | | | | | |
Other redeemable non-controlling interests | 98 | | | — | | — | | (85) | | — | | — | | (85) | | | 13 | |
Share-based compensation - amortization and forfeitures | — | | | — | | 4,928 | | 93 | | — | | — | | 5,021 | | | 5,021 | |
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Issuance of Series E preferred OP units | — | | | — | | 181 | | — | | — | | 8,819 | | 9,000 | | | 9,000 | |
Foreign currency translation | — | | | — | | — | | — | | (6,994) | | (306) | | (7,300) | | | (7,300) | |
Remeasurement of notes receivable and equity method investment | — | | | — | | — | | 1,953 | | — | | — | | 1,953 | | | 1,953 | |
Net income (loss) | (1,195) | | | — | | — | | (14,514) | | — | | 231 | | (14,283) | | | (15,478) | |
Distributions | (457) | | | — | | — | | (73,730) | | — | | (2,918) | | (76,648) | | | (77,105) | |
Balance at March 31, 2020 | $ | 76,450 | | | $ | 933 | | $ | 5,211,678 | | $ | (1,479,424) | | $ | (8,325) | | $ | 61,608 | | $ | 3,786,470 | | | $ | 3,862,920 | |
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| | | Stockholders’ Equity | | |
| Temporary Equity | | Common Stock | Additional Paid-in Capital | Distributions in Excess of Accumulated Earnings | Accumulated Other Comprehensive Income / (Loss) | Non-controlling Interests | Total Stockholders’ Equity | | Total Equity |
Balance at December 31, 2018 | $ | 63,592 |
| | $ | 864 |
| $ | 4,398,949 |
| $ | (1,288,486 | ) | $ | (4,504 | ) | $ | 60,499 |
| $ | 3,167,322 |
| | $ | 3,230,914 |
|
Issuance of common stock and common OP units, net | — |
| | 1 |
| (4,322 | ) | — |
| — |
| — |
| (4,321 | ) | | (4,321 | ) |
Conversion of OP units | — |
| | — |
| 280 |
| — |
| — |
| (280 | ) | — |
| | — |
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Equity Interests - NG Sun LLC | 256 |
| | — |
| — |
| (65 | ) | — |
| (191 | ) | (256 | ) | | — |
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Share-based compensation - amortization and forfeitures | — |
| | — |
| 3,719 |
| 74 |
| — |
| — |
| 3,793 |
| | 3,793 |
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Issuance of Series D OP units | 51,930 |
| | — |
| — |
| — |
| — |
| — |
| — |
| | 51,930 |
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Foreign currency translation | — |
| | — |
| — |
| — |
| 1,498 |
| 77 |
| 1,575 |
| | 1,575 |
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Net income | 178 |
| | — |
| — |
| 36,086 |
| — |
| 863 |
| 36,949 |
| | 37,127 |
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Distributions | (528 | ) | | — |
| 15 |
| (65,214 | ) | — |
| (2,954 | ) | (68,153 | ) | | (68,681 | ) |
Balance at March 31, 2019 | $ | 115,428 |
| | $ | 865 |
| $ | 4,398,641 |
| $ | (1,317,605 | ) | $ | (3,006 | ) | $ | 58,014 |
| $ | 3,136,909 |
| | $ | 3,252,337 |
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See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
| | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | March 31, 2020 |
Operating Activities | | | |
Net Cash Provided By Operating Activities | $ | 220,490 | | | $ | 118,513 | |
Investing Activities | | | |
Investment in properties | (151,979) | | | (132,759) | |
Acquisitions of properties, net of cash acquired | (141,755) | | | (24,439) | |
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Proceeds from dispositions of assets and depreciated homes, net | 17,774 | | | 12,612 | |
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Issuance of notes and other receivables | (7,907) | | | (19,903) | |
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Repayments of notes and other receivables | 1,207 | | | 854 | |
Investments in nonconsolidated affiliates | (4,510) | | | (6,970) | |
Distributions from nonconsolidated affiliates | 1,192 | | | 1,275 | |
| | | |
Net Cash Used For Investing Activities | (285,978) | | | (169,330) | |
Financing Activities | | | |
Issuance of common stock, OP units, and preferred OP units, net | 522,264 | | | (7,140) | |
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Borrowings on lines of credit | 442,290 | | | 1,163,965 | |
Payments on lines of credit | (766,260) | | | (763,076) | |
Proceeds from issuance of other debt | 0 | | | 230,000 | |
Payments on other debt | (14,799) | | | (134,203) | |
Prepayment penalty on collateralized term loans | 0 | | | (3,250) | |
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| | | |
Distributions to stockholders, OP unit holders, and preferred OP unit holders | (89,792) | | | (71,859) | |
| | | |
| | | |
| | | |
Payments for deferred financing costs | (701) | | | (3,328) | |
| | | |
Net Cash Provided By Financing Activities | 93,002 | | | 411,109 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 19 | | | (382) | |
Net change in cash, cash equivalents and restricted cash | 27,533 | | | 359,910 | |
Cash, cash equivalents and restricted cash, beginning of period | 92,641 | | | 34,830 | |
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 120,174 | | | $ | 394,740 | |
| | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | March 31, 2020 |
Supplemental Information | | | |
Cash paid for interest (net of capitalized interest of $1,154 and $2,258 respectively) | $ | 39,458 | | | $ | 32,464 | |
Cash paid for interest on mandatorily redeemable debt | $ | 1,036 | | | $ | 1,041 | |
Cash paid / (refunded) for income taxes | $ | (484) | | | $ | 75 | |
Noncash investing and financing activities | | | |
| | | |
| | | |
Change in distributions declared and outstanding | $ | 8,095 | | | $ | 4,787 | |
Conversion of common and preferred OP units | $ | 1,150 | | | $ | 446 | |
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Acquisitions - Series E preferred interest | $ | 0 | | | $ | 9,000 | |
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Acquisitions - Contingent consideration liability | $ | 3,201 | | | $ | 0 | |
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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") and Safe Harbor Marinas, LLC ("Safe Harbor") are referred to herein as the “Company,” “us,” “we,”"Company," "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. We present interim disclosures and certain information and footnote disclosures as 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.
During the three months ended March 31, 2021, we changed our organizational structure from a 2-segment to a 3-segment structure as a result of the recent acquisition of Safe Harbor and its internal organization. The new structure reflects how the chief operating decision maker manages the business, makes operating decisions, allocates resources and evaluates operating performance. Therefore, beginning with results for the three months ended March 31, 2021, we are reporting our financial results consistent with our newly realigned operating segments and have recast prior period amounts to conform to the way we internally manage our business and monitor segment performance. Certain reclassifications have been made to the prior period financial statements and related notes in order to conform to the current period presentation.
Estimates inherent in The most significant changes were the current financial reporting process inevitably involve assumptions about future events. Since December 2019, a novel straincombining of coronavirus, referred to asrental home revenue with real property revenue, the COVID-19 virus, has spread to countries in which we operate. COVID-19 has become a global pandemic. Commencing in March 2020, authorities in jurisdictions where our properties are located have issued stay-at-home orderscombining of rental home operating and restrictions on travelmaintenance expenses with property operating expenses, and the typescombining of businesses that may continuehome selling expenses with cost of home sales. Vacation rental home rent has been reclassified from ancillary income into real property. In addition, ancillary revenues and expenses have been renamed service, retail, dining & entertainment. There was no impact to operate. Our property site count consists of 66 percent manufactured housing (“MH”)prior period net income, stockholders equity or cash flows for residents and 34 percent recreational vehicle (“RV”) for guests. As many RV resorts remain closed and unable to generate revenue and as the pandemic may adversely affect our revenues in our MH communities, the extent and durationany of the stay-at-home order will have an effect on estimates used in the preparation of financial statements. This includes the net operating income (“NOI”) assumptions in our long-lived asset impairment testing, the ultimate collectability of rent payments from residents and guests due to the effects of COVID-19 on their financial position, and fair value measurement changes for financial assets that the Company has elected to measure at fair value.reclassifications.
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, 20192020 as filed with the SEC on February 20, 2020 (the “201918, 2021 (our "2020 Annual Report”Report"). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our 20192020 Annual Report.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2. Revenue
2. Revenue
Disaggregation of Revenue
During the three months ended March 31, 2021, we changed our organizational structure from a 2-segment to a 3-segment structure as a result of the recent acquisition of Safe Harbor and its internal organization. The new structure reflects how the chief operating decision maker manages the business, makes operating decisions, allocates resources and evaluates operating performance. Our 3 new reportable segments are: (i) Manufactured homes ("MH") communities, (ii) Recreational vehicle ("RV") resorts and (iii) Marinas. Certain reclassifications have been made to the prior period comparative information to conform to the current period presentation.
The following tables details our revenue by major source (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Revenues | | | | | | | | | | | |
Income from real property | $ | 237,785 |
| | $ | — |
| | $ | 237,785 |
| | $ | 215,083 |
| | $ | — |
| | $ | 215,083 |
|
Revenue from home sales | — |
| | 40,587 |
| | 40,587 |
| | — |
| | 39,618 |
| | 39,618 |
|
Rental home revenue | — |
| | 15,472 |
| | 15,472 |
| | — |
| | 13,971 |
| | 13,971 |
|
Ancillary revenue | 10,195 |
| | — |
| | 10,195 |
| | 10,178 |
| | — |
| | 10,178 |
|
Interest income | 2,350 |
| | — |
| | 2,350 |
| | 4,800 |
| | — |
| | 4,800 |
|
Brokerage commissions and other revenues, net | 3,913 |
| | — |
| | 3,913 |
| | 3,680 |
| | — |
| | 3,680 |
|
Total Revenues | $ | 254,243 |
| | $ | 56,059 |
| | $ | 310,302 |
| | $ | 233,741 |
| | $ | 53,589 |
| | $ | 287,330 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | March 31, 2020(1) |
| MH | | RV | | Marinas | | Consolidated | | MH | | RV | | Marinas | | Consolidated |
Revenues | | | | | | | | | | | | | | | |
Real property | $ | 198,278 | | | $ | 81,102 | | | $ | 51,233 | | | $ | 330,613 | | | $ | 183,326 | | | $ | 75,023 | | | N/A | | $ | 258,349 | |
Home sales | 45,332 | | | 6,867 | | | 0 | | | 52,199 | | | 35,782 | | | 4,805 | | | N/A | | 40,587 | |
Service, retail, dining and entertainment | 1,864 | | | 4,394 | | | 44,354 | | | 50,612 | | | 2,053 | | | 3,050 | | | N/A | | 5,103 | |
Interest | 2,086 | | | 537 | | | 8 | | | 2,631 | | | 1,999 | | | 351 | | | N/A | | 2,350 | |
Brokerage commissions and other, net | 2,520 | | | 2,895 | | | 545 | | | 5,960 | | | 2,099 | | | 1,814 | | | N/A | | 3,913 | |
Total Revenues | $ | 250,080 | | | $ | 95,795 | | | $ | 96,140 | | | $ | 442,015 | | | $ | 225,259 | | | $ | 85,043 | | | N/A | | $ | 310,302 | |
Revenue Recognition Policies and Performance Obligations(1) Recast to reflect segment changes
On January 1, 2018, we adopted FASB Accounting Standards Update (“ASU”) 2014-09 “
Our revenue consists primarily 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 slips and dry storage spaces 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” and the other related ASUs and amendments to the codification (collectively “ASC 606”). The core principle of ASC 606 is that an entity 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" except for those goods or services. A five-step transactional analysis is required to determine how and when to recognize revenue. ASC 606 applies to all contracts with customers, except those that are within the scope of other topics in the FASB accounting standards codification.
As a real estate owner and operator, the majority of our revenue is derived from site and home leases that are accounted for pursuant For additional information, refer to ASC 842 “Leases.” For transactions in the scope of ASC 606, we recognize revenue when control of goods or services transfers to the customer, in the amount that we expect to receive for the transfer of goods or provision of services. The adoption of ASC 606 did not result in any change to the timing and pattern of revenue recognition. Accordingly, retrospective application to prior periods or a cumulative catch-up adjustment was unnecessary.
Income from real property - ResidentsNote 1, "Significant Accounting Policies," in our communities lease the site on which their home is located, and either own or lease their home. Resident leases are generally for one-year or month-to-month terms and are renewable by mutual agreement between us and the resident, or in some cases, as provided by jurisdictional statute. Lease revenues for sites and homes fall under the scope of ASC 842, and are accounted for as operating leases with straight-line recognition. Income from real property includes income from site leases for annual MH residents, site leases for annual RV residents and site rentals to transient RV residents. Non-lease components of our site lease contracts, which are primarily provision of utility services, are accounted for with the site lease as a single lease under ASC 842. Additionally, we include collections of real estate taxes from residents within Income from real property.2020 Annual Report.
Revenue from home sales - Our taxable REIT subsidiary, SHS, sells manufactured homes to current and prospective residents in our communities. Prior to adoption of ASC 606, we recognized revenue for home sales pursuant to ASC 605 “Revenue Recognition,” as manufactured homes are tangible personal property that can be located on any land parcel. Manufactured homes are not permanent fixtures or improvements to the underlying real estate and were therefore not considered to be subject to the guidance in ASC 360-20 “Real Estate Sales” by the Company. In accordance with the core principle of ASC 606, we recognize revenue from home sales at the time of closing when control of the home transfers to the customer. After closing of the sale transaction, we have no remaining performance obligation. As of March 31, 2020, and December 31, 2019, we had $27.6 million and $20.9 million, respectively, of receivables from contracts with customers, which consists of home sales proceeds, and are presented as a component of Notes and other receivables, net on our Consolidated Balance Sheets. These receivables represent balances owed to us for previously completed performance obligations for sales of manufactured homes.
Rental home revenue - is comprised of rental agreements whereby we lease homes to residents in our communities. We account for these revenues under ASC 842.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Ancillary revenue - is primarily composed of proceeds from restaurant, golf, merchandise and other activities at our RV communities and is included in the scope of ASC 606. Revenues are recognized at point of sale when control of the good or service transfers to the customer and our performance obligation is satisfied. In addition, leasing of short-term vacation home rentals is included within Ancillary revenue and falls within the scope of ASC 842. Sales and other taxes that we collect concurrent with revenue-producing activities are excluded from the transaction price.
Interest income - is earned primarily on our notes receivable, which include installment notes receivables on manufactured homes purchased by the Company from loan originators. Interest income on these receivables is accrued based on the unpaid principal balances of the underlying loans on a level yield basis over the life of the loans. Interest income is not in the scope of ASC 606. Refer to Note 4, “Notes and Other Receivables” for additional information.
Broker commissions and other revenues, net - is primarily comprised of brokerage commissions for sales of manufactured homes, where we act as agent and arrange for a third party to transfer a manufactured home to a customer within one of our communities. Brokerage commission revenues are recognized on a net basis at closing, when the transaction is completed and our performance obligations have been fulfilled. Loan loss reserve expenses for our notes receivable are also included herein. Refer to Note 4, “Notes and Other Receivables” for additional information regarding our loan loss reserves.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
3. Real Estate Acquisitions and Dispositions
20202021 Acquisitions
Communities
ForDuring the three months ended March 31, 2020,2021, we acquired the following communities:communities, resorts and marinas:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Name | | Type | | Sites, Wet Slips and Dry Storage Spaces | | Development Sites | | State | | Month Acquired |
Association Island KOA | | RV: asset acquisition | | 294 | | | | | NY | | January |
Blue Water Beach Resort | | RV: asset acquisition | | 177 | | | | | UT | | February |
Tranquility MHC | | MH: asset acquisition | | 25 | | | | | FL | | February |
Cape Cod Islamorada and Angler House(1)
| | RVMarina: asset acquisition | | 230251 |
| | — |
| FL | MA | | JanuaryFebruary |
Jellystone Natural BridgePrime Martha's Vineyard(1) | | RVMarina: asset acquisition | | 299390 |
| | — |
| MA | VA | | FebruaryMarch |
Pleasant Beach Campground | | TotalRV: asset acquisition | | 529102 |
| | — |
| ON | | March |
Cherrystone Family Camping Resort | | RV: asset acquisition | | 669 | | | | | VA | | March |
Beachwood Resort | | RV: asset acquisition | | 672 | | | | | WA | | March |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Total | | 2,580 | | | | | | | |
(1) In conjunction with the acquisition, we issued Series E Preferred Operating Partnership (“OP”) Units. As of March 31, 2020, 90,000 Series E Preferred OP Units were outstanding.
(1) Includes two marinas
The following table summarizes the amountsamount of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the MH community, RV resort and marina acquisitions completed forduring the three months ended March 31, 20202021 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | In-place leases and other intangible assets | | Other assets (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | Temporary and permanent equity | | Total consideration |
Cape Cod | $ | 13,350 |
| | $ | 150 |
| | $ | (295 | ) | | $ | 13,205 |
| | $ | 4,205 |
| | $ | 9,000 |
| | $ | 13,205 |
|
Jellystone Natural Bridge | 11,364 |
| | 80 |
| | (391 | ) | | 11,053 |
| | 11,053 |
| | — |
| | 11,053 |
|
Total | $ | 24,714 |
| | $ | 230 |
| | $ | (686 | ) | | $ | 24,258 |
| | $ | 15,258 |
| | $ | 9,000 |
| | $ | 24,258 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | In-place leases and other intangible assets | | Other assets / (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | | | | | Total consideration |
Association Island KOA | $ | 14,965 | | | $ | 0 | | | $ | 41 | | | $ | (248) | | | $ | 14,758 | | | $ | 14,758 | | | | | | | $ | 14,758 | |
Blue Water Beach Resort | 9,000 | | | 0 | | | 0 | | | (151) | | | 8,849 | | | 8,849 | | | | | | | 8,849 | |
Tranquility MHC | 1,250 | | | 0 | | | 0 | | | (1) | | | 1,249 | | | 1,249 | | | | | | | 1,249 | |
Islamorada and Angler House | 18,001 | | | 22 | | | 269 | | | (317) | | | 17,975 | | | 17,975 | | | | | | | 17,975 | |
Prime Martha's Vineyard(1) | 22,258 | | | 138 | | | 127 | | | (573) | | | 21,950 | | | 21,950 | | | | | | | 21,950 | |
Pleasant Beach Campground | 1,588 | | | 0 | | | 0 | | | 1 | | | 1,589 | | | 1,589 | | | | | | | 1,589 | |
Cherrystone Family Camping Resort | 59,900 | | | 0 | | | 0 | | | (2,029) | | | 57,871 | | | 57,871 | | | | | | | 57,871 | |
Beachwood Resort | 7,000 | | | 0 | | | 0 | | | (401) | | | 6,599 | | | 6,599 | | | | | | | 6,599 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Total | $ | 133,962 | | | $ | 160 | | | $ | 437 | | | $ | (3,719) | | | $ | 130,840 | | | $ | 130,840 | | | | | | | $ | 130,840 | |
(1) Includes 2 marinas.
As of March 31, 2020,2021, we have incurred $0.9$1.8 million of additional capitalized transaction costs which have been allocated among the various categories above.
The total amount As of revenues and net income included in the Consolidated Statements of Operations for the three months ended March 31, 2021, we also incurred $1.2 million of business combination expenses associated with our acquisition of Safe Harbor and related delayed consent properties, and the Rybovich Portfolio in 2020, relatedwhich are accounted for as business combinations, as opposed to theasset acquisitions.
Refer to Note 18, "Subsequent Events," for information regarding real estate acquisitions completed in 2020 are set forth in the following table (in thousands):after March 31, 2021.
|
| | | | |
| | Three Months Ended |
| | March 31, 2020 |
Total revenues | | $ | 92 |
|
Net loss | | $ | (106 | ) |
0
8
The following unaudited pro forma financial information presents the results of our operations for the three months ended March 31, 2020 and 2019, as if the properties acquired in 2020 had been acquired on January 1, 2019. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees, and purchase accounting.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2020 Acquisitions and dispositions
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, 2019 (in thousands, except per-share data):
|
| | | | | | | | |
| | Three Months Ended |
| | March 31, 2020 | | March 31, 2019 |
Total revenues | | $ | 310,711 |
| | $ | 288,136 |
|
Net income / (loss) attributable to Sun Communities, Inc. common stockholders | | $ | (14,776 | ) | | $ | 40,078 |
|
Net income / (loss) per share attributable to Sun Communities, Inc. common stockholders - basic | | $ | (0.16 | ) | | $ | 0.47 |
|
Net income / (loss) per share attributable to Sun Communities, Inc. common stockholders - diluted | | $ | (0.16 | ) | | $ | 0.47 |
|
2019 Acquisitions
For the year ended December 31, 20192020, we acquired the following communities:communities, resorts, and marinas.
|
| | | | | | | | | | | | |
Community Name | | Type | | Sites | | Development Sites | | State | | Month Acquired |
Slickrock Campground | | RV | | 193 |
| | — |
| | UT | | December |
Pandion Ridge | | RV | | 142 |
| | 351 |
| | AL | | November |
Jensen Portfolio (1) | | MH | | 5,230 |
| | 466 |
| | Various | | October |
Glen Ellis | | RV | | 244 |
| | 40 |
| | NH | | September |
Leisure Point Resort (2) | | MH / RV | | 502 |
| | — |
| | DE | | September |
Reunion Lake | | RV | | 202 |
| | 69 |
| | LA | | July |
River Plantation | | RV | | 309 |
| | — |
| | TN | | May |
Massey’s Landing RV | | RV | | 291 |
| | — |
| | DE | | February |
Shelby Properties (3) | | MH | | 1,308 |
| | — |
| | MI | | February |
Buena Vista | | MH | | 400 |
| | — |
| | AZ | | February |
Country Village Estates (4) | | MH | | 518 |
| | — |
| | OR | | January |
Hid’n Pines RV | | RV | | 321 |
| | — |
| | ME | | January |
Hacienda del Rio | | MH (Age-Restricted) | | 730 |
| | — |
| | FL | | January |
| | Total | | 10,390 |
| | 926 |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Community Name | | Type | | Sites, Wet Slips and Dry Storage Spaces | | Development Sites | | State | | Month Acquired |
Cape Cod(1) | | RV: asset acquisition | | 230 | | | 0 | | | MA | | January |
Jellystone Natural Bridge | | RV: asset acquisition | | 299 | | | 0 | | | VA | | February |
Forest Springs(2) | | MH: asset acquisition | | 372 | | | 0 | | | CA | | May |
Crown Villa | | RV: asset acquisition | | 123 | | | 0 | | | OR | | June |
Flamingo Lake | | RV: asset acquisition | | 421 | | | 0 | | | FL | | July |
Woodsmoke | | RV: asset acquisition | | 300 | | | 0 | | | FL | | September |
Jellystone Lone Star | | RV: asset acquisition | | 344 | | | 0 | | | TX | | September |
El Capitan & Ocean Mesa(3)(4) | | RV: asset acquisition | | 266 | | | 109 | | | CA | | September |
Highland Green Estates & Troy Villa(5) | | MH: asset acquisition | | 1,162 | | | 0 | | | MI | | September |
Safe Harbor Marinas(6) | | Marina: business combination | | 37,305 | | | 0 | | | Various | | October |
Safe Harbor Hideaway Bay(7) | | Marina: business combination | | 628 | | | 0 | | | GA | | November |
Gig Harbor | | RV: asset acquisition | | 115 | | | 0 | | | WA | | November |
Maine MH Portfolio(8) | | MH: asset acquisition | | 1,083 | | | 0 | | | ME | | November |
Safe Harbor Anacapa Isle(7) | | Marina: business combination | | 453 | | | 0 | | | CA | | December |
Mears Annapolis | | Marina: asset acquisitions | | 184 | | | 0 | | | MD | | December |
Wickford | | Marina: asset acquisitions | | 60 | | | 0 | | | RI | | December |
Rybovich Portfolio(9) | | Marina: business combination | | 78 | | | 0 | | | FL | | December |
Rockland | | Marina: asset acquisitions | | 173 | | | 0 | | | ME | | December |
Mouse Mountain | | MH / RV: asset acquisition | | 304 | | | 0 | | | FL | | December |
Lakeview Mobile Estates | | MH: asset acquisition | | 296 | | | 0 | | | CA | | December |
Shenandoah Acres | | RV: asset acquisition | | 522 | | | 0 | | | VA | | December |
Jellystone at Barton Lake | | RV: asset acquisition | | 555 | | | 0 | | | IN | | December |
Kittatinny Portfolio(4) | | RV: asset acquisition | | 527 | | | 0 | | | NY & PA | | December |
| | Total | | 45,800 | | | 109 | | | | | |
(1) Contains 31 communities located in CT, GA, MD, NH, NJ, NY, NC and SC. In conjunction with the acquisition, we issued 1,972,876 sharesSeries E preferred OP units. As of common stock, net of fractional shares paid in cash.December 31, 2020, 90,000 Series E preferred OP units were outstanding.
(2) Contains 201 MH sitesIn conjunction with the acquisition, we issued Series F preferred OP units and 301 RV sites.common OP units. As of December 31, 2020, 90,000 Series F preferred OP units, specific to this acquisition, were outstanding.
(3) Contains 2 MH communities.
(4) In conjunction with the acquisition, we issued Series D Preferred Operating Partnership (“OP”) Units.G preferred OP units. As of December 31, 2019, 488,9582020, 240,710 Series D PreferredG preferred OP Unitsunits were outstanding.
(4) Includes 2 RV resorts.
(5) Includes 2 communities.
(6) Includes 99 owned marinas located in 22 states. In conjunction with the acquisition, we issued Series H preferred OP units. As of December 31, 2020, 581,407 Series H preferred OP units were outstanding.
(7) Acquired in connection with Safe Harbor Marinas acquisition. Transfer of marinas was contingent on receiving third party consents.
(8) Includes 6 communities.
(9) Includes 2 marinas. In conjunction with the acquisition, we issued Series I preferred OP units. As of December 31, 2020, 922,000 Series I preferred OP units were outstanding.
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 20192020 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes | | In-place leases and other intangible assets | | Other assets (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | Debt assumed | | Temporary and permanent equity | | Total consideration |
Slickrock Campground | $ | 8,250 |
| | $ | — |
| | $ | — |
| | $ | 8 |
| | $ | 8,258 |
| | $ | 8,258 |
| | $ | — |
| | $ | — |
| | $ | 8,258 |
|
Pandion Ridge | 19,070 |
| | — |
| | — |
| | (92 | ) | | 18,978 |
| | 18,978 |
| | — |
| | — |
| | 18,978 |
|
Jensen Portfolio | 374,402 |
| | 3,605 |
| | 7,752 |
| | 3,938 |
| | 389,697 |
| | 18,306 |
| | 58,000 |
| | 313,391 |
| | 389,697 |
|
Glen Ellis | 5,955 |
| | — |
| | — |
| | (79 | ) | | 5,876 |
| | 1,976 |
| | 3,900 |
| | — |
| | 5,876 |
|
Leisure Point Resort | 43,632 |
| | 18 |
| | 850 |
| | (678 | ) | | 43,822 |
| | 43,822 |
| | — |
| | — |
| | 43,822 |
|
Reunion Lake | 23,493 |
| | — |
| | — |
| | (1,153 | ) | | 22,340 |
| | 22,340 |
| | — |
| | — |
| | 22,340 |
|
River Plantation | 22,589 |
| | 75 |
| | — |
| | — |
| | 22,664 |
| | 22,664 |
| | — |
| | — |
| | 22,664 |
|
Massey's Landing | 36,250 |
| | — |
| | 220 |
| | (446 | ) | | 36,024 |
| | 36,024 |
| | — |
| | — |
| | 36,024 |
|
Shelby Properties | 85,969 |
| | 2,011 |
| | 6,520 |
| | (1,015 | ) | | 93,485 |
| | 93,485 |
| | — |
| | — |
| | 93,485 |
|
Buena Vista | 20,221 |
| | 439 |
| | 1,590 |
| | (93 | ) | | 22,157 |
| | 22,157 |
| | — |
| | — |
| | 22,157 |
|
Country Village | 62,784 |
| | — |
| | 2,020 |
| | 31 |
| | 64,835 |
| | 12,905 |
| | — |
| | 51,930 |
| | 64,835 |
|
Hid'n Pines | 10,680 |
| | — |
| | 70 |
| | (233 | ) | | 10,517 |
| | 10,517 |
| | — |
| | — |
| | 10,517 |
|
Hacienda del Rio | 111,971 |
| | 15 |
| | 3,280 |
| | (237 | ) | | 115,029 |
| | 115,029 |
| | — |
| | — |
| | 115,029 |
|
Total | $ | 825,266 |
| | $ | 6,163 |
| | $ | 22,302 |
| | $ | (49 | ) | | $ | 853,682 |
| | $ | 426,461 |
| | $ | 61,900 |
| | $ | 365,321 |
| | $ | 853,682 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At Acquisition Date | | Consideration |
| Investment in property | | Inventory of manufactured homes, boat parts and retail related items | | Goodwill, In-place leases and other intangible assets | | Other assets / (liabilities), net | | Total identifiable assets acquired net of liabilities assumed | | Cash and escrow | | Debt assumed | | Temporary and permanent equity | | Total consideration |
Asset Acquisition | | | | | | | | | | | | | | | | |
Cape Cod | $ | 13,350 | | | $ | 0 | | | $ | 150 | | | $ | (295) | | | $ | 13,205 | | | $ | 4,205 | | | $ | 0 | | | $ | 9,000 | | | $ | 13,205 | |
Jellystone Natural Bridge | 11,364 | | | 0 | | | 80 | | | (391) | | | 11,053 | | | 11,053 | | | 0 | | | 0 | | | 11,053 | |
Forest Springs | 51,949 | | | 1,337 | | | 2,160 | | | (107) | | | 55,339 | | | 36,260 | | | 0 | | | 19,079 | | | 55,339 | |
Crown Villa | 16,792 | | | 0 | | | 0 | | | (230) | | | 16,562 | | | 16,562 | | | 0 | | | 0 | | | 16,562 | |
Flamingo Lake | 34,000 | | | 0 | | | 0 | | | (155) | | | 33,845 | | | 33,845 | | | 0 | | | 0 | | | 33,845 | |
Woodsmoke | 25,120 | | | 40 | | | 840 | | | (461) | | | 25,539 | | | 25,539 | | | 0 | | | 0 | | | 25,539 | |
Jellystone Lone Star | 21,000 | | | 0 | | | 0 | | | (703) | | | 20,297 | | | 20,297 | | | 0 | | | 0 | | | 20,297 | |
El Capitan & Ocean Mesa | 69,690 | | | 0 | | | 0 | | | (10,321) | | | 59,369 | | | 32,108 | | | 0 | | | 27,261 | | | 59,369 | |
Highland Green Estates & Troy Villa | 60,988 | | | 1,679 | | | 2,030 | | | (15) | | | 64,682 | | | 64,682 | | | 0 | | | 0 | | | 64,682 | |
Gig Harbor | 15,250 | | | 0 | | | 0 | | | (22) | | | 15,228 | | | 15,228 | | | 0 | | | 0 | | | 15,228 | |
Maine MH Portfolio | 79,890 | | | 0 | | | 1,359 | | | 30 | | | 81,279 | | | 72,479 | | | 8,800 | | | 0 | | | 81,279 | |
Mears Annapolis | 24,354 | | | 0 | | | 6,922 | | | (546) | | | 30,730 | | | 30,730 | | | 0 | | | 0 | | | 30,730 | |
Wickford | 3,468 | | | 0 | | | 42 | | | (121) | | | 3,389 | | | 3,389 | | | 0 | | | 0 | | | 3,389 | |
Rockland | 15,082 | | | 348 | | | 101 | | | (368) | | | 15,163 | | | 15,163 | | | 0 | | | 0 | | | 15,163 | |
Mouse Mountain | 15,221 | | | 0 | | | 279 | | | (4) | | | 15,496 | | | 15,496 | | | 0 | | | 0 | | | 15,496 | |
Lakeview Mobile Estates | 22,917 | | | 195 | | | 638 | | | (72) | | | 23,678 | | | 23,678 | | | 0 | | | 0 | | | 23,678 | |
Shenandoah Acres | 16,166 | | | 0 | | | 834 | | | (197) | | | 16,803 | | | 16,803 | | | 0 | | | 0 | | | 16,803 | |
Jellystone at Barton Lake | 23,462 | | | 0 | | | 538 | | | (397) | | | 23,603 | | | 23,603 | | | 0 | | | 0 | | | 23,603 | |
Kittatinny Portfolio | 16,220 | | | 0 | | | 30 | | | 29 | | | 16,279 | | | 16,279 | | | 0 | | | 0 | | | 16,279 | |
Business Combination(1) | | | | | | | | | | | | | | | | |
Safe Harbor Marinas(3) | 1,643,879 | | | 5,700 | | | 418,033 | | | (26,831) | | | 2,040,781 | | | 1,141,797 | | | 829,000 | | | 69,984 | | | 2,040,781 | |
Hideaway Bay(3) | 26,218 | | | 23 | | | 7,242 | | | (1,077) | | | 32,406 | | | 32,406 | | | 0 | | | 0 | | | 32,406 | |
Anacapa Isle(3) | 10,924 | | | 0 | | | 3,146 | | | 60 | | | 14,130 | | | 14,130 | | | 0 | | | 0 | | | 14,130 | |
Rybovich Portfolio(2)(3) | 122,064 | | | 620 | | | 249,840 | | | (37) | | | 372,487 | | | 258,123 | | | 0 | | | 114,364 | | | 372,487 | |
Total | $ | 2,339,368 | | | $ | 9,942 | | | $ | 694,264 | | | $ | (42,231) | | | $ | 3,001,343 | | | $ | 1,923,855 | | | $ | 837,800 | | | $ | 239,688 | | | $ | 3,001,343 | |
Land for Expansion / Development
During the year ended December 31, 2019, we acquired four land parcels which are located in New Braunfels, Texas; Petoskey, Michigan; Uhland, Texas and Hudson, Florida for total consideration of $7.7 million. Two of the land parcels are adjacent to existing communities. The land acquired for expansion and development has the potential to add approximately 900 usable sites once constructed.
Ground Leases
In August 2019, we acquired Chincoteague Island KOA RV Resort (“Chincoteague”), in Chincoteague Island, Virginia for total consideration of $19.5 million. The sellers of Chincoteague continue to operate the property.(1) Refer to Note 16, “Leases”5, "Goodwill and Other Intangibles Assets," for disclosuresadditional detail on accounting treatment.goodwill and other intangible assets.
(2) Purchase price allocations were preliminary as of December 31, 2020 and were adjusted as of March 31, 2021 based on revised purchase price allocations.
In April 2019,(3) Allocations are preliminary and may change based on final purchase price allocations.
As of December 31, 2020, we acquired Strafford/Lake Winnipesaukee South KOA RV Resort ("Strafford") in Strafford, New Hampshirehave incurred $23.0 million of expensed business combination transaction costs (in relation to the acquisition Safe Harbor, Hideaway Bay, Anacapa Isle, and the Rybovich Portfolio, as each such acquisition meets the criteria to be accounted for total considerationas business combination), and $13.4 million of $2.7 million. The sellers of Strafford continue to operatecapitalized transaction costs for asset acquisitions which have been allocated among the property. Refer to Note 16, “Leases” for disclosures on accounting treatment.various categories above.
10
In March 2019, we entered into a four-year Temporary Occupancy and Use Permit with the Port of San Diego to operate a RV resort located in Chula Vista, CA until such time as we construct a new RV resort in the area. Concurrent with the transaction, we purchased tangible personal property from the prior owner of the RV resort for $0.3 million. Subsequently, in September 2019, we entered into a 66-year Temporary Occupancy and Use Permit, to construct and operate a new RV resort in Chula Vista. Refer to Note 16, “Leases” for disclosures on accounting treatment.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Land for Expansion / Development
During the year ended December 31, 2020, we acquired 8 land parcels which are located in Orange Beach, Alabama; Jensen Beach, Florida; Citra Lakes, Florida; Comal County, Texas; and Menifee, California for total consideration of $9.7 million. NaN of the land parcels are adjacent to existing communities.
Dispositions
Real estate held for sale of $32.1 million as of December 31, 2020, was reclassified from Other assets, net to various line items on the Consolidated Balance Sheets during the three months ended March 31, 2021, as the sale of those assets was no longer probable. As of March 31, 2021, the primary reclassifications were $34.5 million of assets within Investment property, net and $3.8 million within Other liabilities on the Consolidated Balance Sheets.
On July 1, 2020, we sold a manufactured housing community located in Montana, containing 226 sites, for $12.6 million. The gain from the sale of the property was approximately $5.6 million.
4. Notes and Other Receivables
The following table sets forth certain information regarding notes and other receivables (in millions)thousands):
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
Installment notes receivable on manufactured homes, net | $ | 92.2 |
| | $ | 95.6 |
|
Notes receivable from real estate developers | 37.5 |
| | 19.0 |
|
Other receivables, net | 57.0 |
| | 43.3 |
|
Total Notes and Other Receivables, net | $ | 186.7 |
| | $ | 157.9 |
|
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Installment notes receivable on manufactured homes, net | $ | 84,109 | | | $ | 85,866 | |
Notes receivable from real estate developers | 58,286 | | | 52,638 | |
Other receivables, net | 106,614 | | | 83,146 | |
Total Notes and Other Receivables, net | $ | 249,009 | | | $ | 221,650 | |
Installment Notes Receivable on Manufactured Homes
Due to the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, effective January 1, 2020, installmentInstallment notes receivable are measured at fair value, pursuant to the Company electing the value option.in accordance with ASC Topic 820 "Fair Value Measurements and Disclosures." The balances of installment notes receivable of $92.2$84.1 million (net of fair value adjustment of $1.1$0.9 million) and $95.6$85.9 million (net of allowancefair value adjustment of $0.6$1.3 million) as of March 31, 20202021 and December 31, 2019,2020, respectively, are collateralized by manufactured homes. The notes represent financing to purchasers of manufactured homes primarily located in our communities and require monthly principal and interest payments. The notes had a net weighted average interest rate (net of servicing costs) and maturity of 8.07.8 percent and 15.615.0 years as of March 31, 2020,2021, and 8.07.8 percent and 15.815.2 years as of December 31, 2019,2020, respectively. Refer to Note 14, “Fair"Fair Value of Financial instruments.” and Note 17, “Recent Accounting Pronouncement.”Instruments," for additional detail.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the aggregate balance of the installment notes receivable is as follows (in
millions)thousands):
|
| | | | | | | |
| Three Months Ended | | Year Ended |
| March 31, 2020 | | December 31, 2019 |
Beginning balance of gross installment notes receivable | $ | 96.2 |
| | $ | 113.5 |
|
Financed sale of manufactured homes | 0.3 |
| | 0.3 |
|
Principal payments and payoffs from our customers | (2.0 | ) | | (8.7 | ) |
Principal reduction from repossessed homes | (1.2 | ) | | (8.9 | ) |
Ending balance of gross installment notes receivable | 93.3 |
| | 96.2 |
|
| | | |
Beginning balance of allowance for losses on installment notes receivables | (0.6 | ) | | (0.7 | ) |
Adjustment to allowance for losses | — |
| | 0.1 |
|
Initial fair value option adjustment (see Note 17)
| 0.6 |
| | — |
|
Ending balance of allowance for losses on installment notes receivables | — |
| | (0.6 | ) |
| | | |
Initial fair value option adjustment (see Note 17) | 1.0 |
| | — |
|
Fair value adjustment | (2.1 | ) | | — |
|
Fair value adjustments on gross installment notes receivable | (1.1 | ) | | — |
|
| | | |
Ending balance of installment notes receivable, net | $ | 92.2 |
| | $ | 95.6 |
|
| | | | | | | | | | | |
| Three Months Ended | | Year Ended |
| March 31, 2021 | | December 31, 2020 |
Beginning balance of gross installment notes receivable | $ | 87,142 | | | $ | 96,225 | |
Financed sale of manufactured homes | 1,212 | | | 5,014 | |
Adjustment for notes receivable related to assets held for sale | 477 | | | (477) | |
| | | |
Principal payments and payoffs from our customers | (2,849) | | | (8,977) | |
Principal reduction from repossessed homes | (965) | | | (4,643) | |
Ending balance of gross installment notes receivable | 85,017 | | | 87,142 | |
| | | |
Beginning balance of allowance for losses on installment notes receivables | 0 | | | (645) | |
| | | |
Initial fair value option adjustment
| 0 | | | 645 | |
Ending balance of allowance for losses on installment notes receivables | 0 | | | 0 | |
| | | |
Beginning balance of fair value adjustments on gross installment notes receivable | (1,276) | | | 0 | |
Initial fair value option adjustment | 0 | | | 991 | |
Adjustment for notes receivable related to assets held for sale | (7) | | | 7 | |
Fair value adjustment | 375 | | | (2,274) | |
Fair value adjustments on gross installment notes receivable | (908) | | | (1,276) | |
| | | |
Ending balance of installment notes receivable, net | $ | 84,109 | | | $ | 85,866 | |
Notes Receivable from Real Estate Developers
As of March 31, 20202021 and December 31, 2019,2020, the notes receivable balances of $37.5$58.3 million and $19.0$52.6 million,, respectively are primarily comprise short termcomprised of construction loans provided to real estate developers. The carrying values of thosethe notes generally approximate their fair market values either due to the short-term nature of the loan and/orand / or the note being secured by underlying collateral and/and / or personal guarantees. The notes receivable from real estate developers have a net weighted average interest rate and maturity of 6.16.3 percent and 1.71.6 years as of March 31, 2020,2021, and 7.06.2 percent and 1.31.8 years as of December 31, 2019,2020, respectively. As of March 31, 2021, real estate developers collectively have $14.5 million of undrawn funds on their loans. There were no material adjustments to the fair value of notes receivable from the real estate developers for the three months ended March 31, 2021 and 2020. Refer to Note 14, “Fair"Fair Value of Financial instruments.” and Note 17, “Recent Accounting Pronouncement.” for additional detail.Instruments."
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Other Receivables, net
As of March 31, 2020,2021, other receivables were comprised of amounts due from: home sale proceeds of $28.6 million, marina customers for storage service and lease payments of $28.2 million (net of allowance of $1.7 million), residents for rent, utility charges, fees and other pass through charges of $16.0$15.9 million (net of allowance of $1.8$5.8 million); home sale proceeds of $27.6 million;, insurance receivables of $8.0$13.5 million and other receivables of $5.5$20.4 million. As of December 31, 2019,2020, other receivables were comprised of amounts due from: home sale proceeds of $23.6 million, marina customers for storage services and lease payments of $19.2 million (net of allowance of $1.4 million), residents for rent, utility charges, fees and other pass through charges of $7.8$7.1 million (net of allowance of $2.2$7.2 million); home sale proceeds of $20.9 million;, insurance and other receivables of $9.9$13.6 million and other receivables of $4.8$19.6 million.
In June 2020, we made a convertible secured loan to Rezplot Systems LLC, a nonconsolidated affiliate in which we have a 50 percent ownership interest. The note allows for a principal amount of 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. The outstanding balances were $4.0 million and $2.0 million as of March 31, 2021 and December 31, 2020, respectively, and are included in the Notes and other receivables, net line item on the Consolidated Balance Sheets. Refer to Note 6, "Investment in Nonconsolidated Affiliates," for additional information on Rezplot Systems LLC.
5. Goodwill and Other Intangibles Assets
Our intangible assets include goodwill, in-place leases, non-competition agreements, trademarks and trade names, customer relationships, and franchise agreements and other intangible assets. These intangible assets are recorded in Other assets,Intangible Assets, net on the Consolidated Balance Sheets. In accordance with FASB ASC Topic 842, below market leases are now classified as a right of use asset.
The gross carrying amounts and accumulated amortization are as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | |
| | | | March 31, 2020 | | December 31, 2019 |
Intangible Asset | | Useful Life | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
In-place leases | | 7 years | | $ | 127,148 |
| | $ | (77,999 | ) | | $ | 127,313 |
| | $ | (74,548 | ) |
Franchise agreements and other intangible assets
| | 7 - 20 years | | 16,944 |
| | (2,965 | ) | | 16,943 |
| | (2,760 | ) |
Total | | | | $ | 144,092 |
| | $ | (80,964 | ) | | $ | 144,256 |
| | $ | (77,308 | ) |
Total amortization expense related to theof our intangible assets are as follows (in thousands):
|
| | | | | | | | |
| | Three Months Ended |
Intangible Asset Amortization Expense | | March 31, 2020 | | March 31, 2019 |
In-place leases | | $ | 3,451 |
| | $ | 3,672 |
|
Franchise fees and other intangible assets | | 205 |
| | 205 |
|
Total | | $ | 3,656 |
| | $ | 3,877 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2021 | | December 31, 2020 |
Intangible Asset | | Useful Life | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
Goodwill | | Indefinite | | $ | 438,842 | | | N/A | | $ | 428,833 | | | N/A |
In-place leases(1) | | Expected term | | 149,109 | | | (102,521) | | | 145,531 | | | (92,327) | |
Non-competition agreements | | 5 years | | 10,000 | | | (500) | | | 10,000 | | | 0 | |
Trademarks and trade names | | Various(2) | | 116,500 | | | (208) | | | 116,500 | | | 0 | |
Customer relationships | | 7 - 10 years | | 107,958 | | | (3,983) | | | 108,000 | | | (2,371) | |
Franchise agreements and other intangible assets | | 5.5 - 20 years | | 28,266 | | | (4,067) | | | 23,856 | | | (3,578) | |
Total | | | | $ | 850,675 | | | $ | (111,279) | | | $ | 832,720 | | | $ | (98,276) | |
(1)In-place leases as of March 31, 2021 include amounts related to certain assets previously held for sale, and included in Other assets, net, as of year ended December 31, 2020. Assets previously classified as held for sale were reclassified to held for investment as of January 1, 2021.
(2)All trademarks and trade names have an indefinite useful life except for one that has a three year useful life as of the acquisition date.
Goodwill impairment - Upon review of the qualitative factors in accordance with FASB ASC 350-20, "Goodwill and Other," we determined that no impairment indicators existed as of March 31, 2021 and December 31, 2020. As a result, there was no impairment of goodwill during three months ended March 31, 2021.
As a result of our organizational change and segment structure realignment, goodwill is recorded in our Marinas operating segment. Goodwill was preliminary as of December 31, 2020, subject to revisions based on purchase price allocations for the Safe Harbor and Rybovich business combination acquisitions which are reflected in the revised goodwill balance at March 31, 2021. There were no incremental acquisitions during the quarter ended March 31, 2021 which had goodwill.
Amortization expenses related to the Other intangible assets are as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
Intangible Asset Amortization Expense | | March 31, 2021 | | March 31, 2020 | | | | |
In-place leases | | $ | 9,816 | | | $ | 3,451 | | | | | |
Non-competition agreements | | 500 | | | 0 | | | | | |
Trademarks and trade names | | 208 | | | 0 | | | | | |
Customer relationships | | 1,611 | | | 0 | | | | | |
Franchise fees and other intangible assets | | 490 | | | 205 | | | | | |
Total | | $ | 12,625 | | | $ | 3,656 | | | | | |
We anticipate amortization expense for ourOther intangible assets to be as follows for the next five years (in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| Year |
| Remainder 2020 | | 2021 | | 2022 | | 2023 | | 2024 |
Estimated expense | $ | 11,665 |
| | $ | 15,164 |
| | $ | 10,562 |
| | $ | 7,187 |
| | $ | 4,825 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder 2021 | | 2022 | | 2023 | | 2024 | | 2025 |
In-place leases | $ | 18,532 | | | $ | 11,145 | | | $ | 7,701 | | | $ | 5,408 | | | $ | 4,844 | |
Non-competition agreements | 1,500 | | | 2,000 | | | 2,000 | | | 2,000 | | | 2,000 | |
Trademarks and trade names | 625 | | | 833 | | | 833 | | | 0 | | | 0 | |
Customer relationships | 8,128 | | | 10,837 | | | 10,837 | | | 10,837 | | | 10,837 | |
Franchise agreements and other intangible assets | 1,676 | | | 1,962 | | | 1,933 | | | 1,879 | | | 1,872 | |
Total | $ | 30,461 | | | $ | 26,777 | | | $ | 23,304 | | | $ | 20,124 | | | $ | 19,553 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
6. Investment 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 FASB ASC Topic 323, "“Investments - Equity Method and Joint Ventures.”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 / (loss) from nonconsolidated affiliates line item on the Consolidated Statements of Operations.
RezPlot Systems LLC (“Rezplot”("Rezplot")
At March 31, 20202021 and December 31, 2019,2020, we had a 50 percent ownership interest in RezPlot, a RV reservation software technology company, which interest we acquired in January 2019.
Sungenia JVjoint venture ("Sungenia JV")
At March 31, 20202021 and December 31, 2019,2020, we had a 50 percent ownership interest in Sungenia JV, a joint venture (“JV”) formed between the Companyus and Ingenia Communities Group in November 2018, to establish and grow a manufactured housing community development program in Australia.
GTSC LLC (“GTSC”"GTSC")
At March 31, 20202021 and December 31, 2019,2020, we had a 40 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 LLC”("OFS")
At March 31, 20202021 and December 31, 2019,2020, we had a 22.9 percent ownership interest in OFS, LLC, an end-to-end online resident screening and document management suite.
SV Lift, LLC (“("SV Lift”Lift")
In November 2019, we and HG GIV, LLC formed SV Lift, a Michigan limited liability company with the purpose to own, operate and lease an aircraft. At March 31, 20202021 and December 31, 2019,2020, we had a 50 percent ownership interest in SV Lift.Lift, which owns, operates and leases an aircraft.
The investment balance in each nonconsolidated affiliate is as follows (in thousands):
| | Investment | | March 31, 2020 | | December 31, 2019 | Investment | | March 31, 2021 | | December 31, 2020 |
Investment in RezPlot | | $ | 3,684 |
| | $ | 4,184 |
| Investment in RezPlot | | $ | 2,561 | | | $ | 3,047 | |
Investment in Sungenia JV | | 11,576 |
| | 11,995 |
| Investment in Sungenia JV | | 27,337 | | | 26,890 | |
Investment in GTSC | | 19,028 |
| | 18,488 |
| Investment in GTSC | | 28,747 | | | 25,495 | |
Investment in OFS LLC | | 186 |
| | 148 |
| |
Investment in OFS | | Investment in OFS | | 181 | | | 152 | |
Investment in SV Lift | | 3,470 |
| | 2,961 |
| Investment in SV Lift | | 3,373 | | | 3,490 | |
Total | | $ | 37,944 |
| | $ | 37,776 |
| Total | | $ | 62,199 | | | $ | 59,074 | |
The income / (loss) from each nonconsolidated affiliate is as follows (in thousands):
|
| | | | | | | | |
| | Three Months Ended |
Income / (Loss) from Nonconsolidated Affiliates | | March 31, 2020 | | March 31, 2019 |
RezPlot equity loss | | $ | (500 | ) | | $ | (189 | ) |
Sungenia JV equity loss | | (115 | ) | | (40 | ) |
GTSC equity income | | 760 |
| | 575 |
|
OFS LLC equity income | | 38 |
| | 42 |
|
SV Lift equity loss | | (131 | ) | | — |
|
Total Income / (Loss) from Nonconsolidated Affiliates | | $ | 52 |
| | $ | 388 |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
Income / (Loss) from Nonconsolidated Affiliates | | March 31, 2021 | | March 31, 2020 | | | | |
RezPlot equity loss | | $ | (487) | | | $ | (500) | | | | | |
Sungenia JV equity income / (loss) | | 734 | | | (115) | | | | | |
GTSC equity income | | 1,181 | | | 760 | | | | | |
OFS equity income | | 29 | | | 38 | | | | | |
SV Lift equity loss | | (286) | | | (131) | | | | | |
Total Income from Nonconsolidated Affiliates | | $ | 1,171 | | | $ | 52 | | | | | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the GTSC investment balance is as follows (in thousands):
|
| | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
Beginning balance | | $ | 18,488 |
| | $ | 29,780 |
|
Adjustment of allowance for losses | | — |
| | 144 |
|
Initial fair value option adjustment (see Note 17) | | 317 |
| | — |
|
Cash contributions | | 3,689 |
| | 33,143 |
|
Distributions | | (2,035 | ) | | (47,382 | ) |
Equity earnings | | 760 |
| | 2,803 |
|
Fair value adjustment | | (2,191 | ) | | — |
|
Ending Balance | | $ | 19,028 |
| | $ | 18,488 |
|
| | | | | | | | | | | | | | |
| | Three Months Ended | | Year Ended |
| | March 31, 2021 | | December 31, 2020 |
Beginning balance | | $ | 25,495 | | | $ | 18,488 | |
| | | | |
Initial fair value option adjustment | | 0 | | | 317 | |
Contributions | | 4,339 | | | 19,030 | |
Distributions | | (2,372) | | | (14,676) | |
Equity earnings | | 1,181 | | | 3,944 | |
Fair value adjustment | | 104 | | | (1,608) | |
Ending Balance | | $ | 28,747 | | | $ | 25,495 | |
The change in the Sungenia JV investment balance is as follows (in thousands):
| | | | | | | | | | | | | | |
| | Three Months Ended | | Year Ended |
| | March 31, 2021 | | December 31, 2020 |
Beginning balance | | $ | 26,890 | | | $ | 11,995 | |
Cumulative translation adjustment | | (287) | | | 2,180 | |
Contributions | | 0 | | | 12,377 | |
| | | | |
Equity earnings | | 734 | | | 338 | |
| | | | |
Ending Balance | | $ | 27,337 | | | $ | 26,890 | |
7. Consolidated Variable Interest Entities
The Operating Partnership
We consolidate the Operating Partnership under the guidance set forth in FASB ASC Topic 810 "“Consolidation.” ConsolidationASU."Accounting Standard Update 2015-02 modified the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”("VIEs") or, alternatively, voting interest entities. We evaluated the application of ASU 2015-02 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.
Sun NG RV Resorts LLC (“("Sun NG Resorts”Resorts"); Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC, and Rudgate Clinton Estates SPE, LLC (collectively, “Rudgate”"Rudgate"); Sun NG Whitewater RV Resorts LLC; FPG Sun Menifee 80 LLC, (“NG Sun Whitewater RV LLC”);SHM South Fork JV, LLC.
We consolidate Sun NG Resorts, Rudgate, and Sun NG Whitewater RV Resorts LLC, FPG Sun Menifee 80 LLC, and SHM South Fork JV, LLC under the guidance set forth in FASB ASC Topic 810 "“Consolidation.”Consolidation." We concluded that each of thementity 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 theeach entity. Refer to Note3, “Real Estate Acquisitions,” Note 8, “Debt"Debt and Lines of Credit,,” and Note 9, “Equity and Temporary Equity”" for additional information on Sun NG Resorts.Resorts and Note 9, "Equity and Temporary Equity," for additional information on Sun NG Resorts, Sun NG Whitewater RV Resorts LLC, FPG Sun Menifee 80 LLC and SHM South Fork JV, LLC.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the assets and liabilities of Sun NG Resorts, Rudgate, andSun NG Sun Whitewater RV Resorts LLC. FPG Sun Menifee 80 LLC and SHM South Fork JV, LLC included in our Consolidated Balance Sheets after eliminations (in thousands):
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
Assets | | | |
Investment property, net | $ | 350,019 |
| | $ | 344,300 |
|
Other assets, net | 23,751 |
| | 23,894 |
|
Total Assets | $ | 373,770 |
| | $ | 368,194 |
|
| | | |
Liabilities and Other Equity | | | |
Debt | $ | 46,727 |
| | $ | 46,993 |
|
Preferred Equity - Sun NG Resorts - mandatorily redeemable | 35,249 |
| | 35,249 |
|
Other liabilities | 19,604 |
| | 13,631 |
|
Total Liabilities | 101,580 |
| | 95,873 |
|
Equity Interest - NG Sun LLC & NG Sun Whitewater RV LLC | 26,063 |
| | 27,091 |
|
Noncontrolling interests | 9,374 |
| | 8,542 |
|
Total Liabilities and Other Equity | $ | 137,017 |
| | $ | 131,506 |
|
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Assets | | | |
Investment property, net | $ | 479,196 | | | $ | 438,918 | |
Other assets, net | 31,820 | | | 24,554 | |
Total Assets | $ | 511,016 | | | $ | 463,472 | |
| | | |
Liabilities and Other Equity | | | |
Debt | $ | 54,142 | | | $ | 47,706 | |
Preferred equity - Sun NG Resorts - mandatorily redeemable | 35,249 | | | 35,249 | |
Other liabilities | 47,901 | | | 21,957 | |
Total Liabilities | 137,292 | | | 104,912 | |
Temporary equity | 26,604 | | | 28,469 | |
Noncontrolling interests (including SHM South Fork JV, LLC) | 16,901 | | | 16,084 | |
Total Liabilities and Other Equity | $ | 180,797 | | | $ | 149,465 | |
Investment property, net and otherOther assets, net related to the consolidated VIEs, with the exception of the Operating Partnership, comprised approximately 4.64.5 percent and 4.74.1 percent of our consolidated total assets at March 31, 20202021 and December 31, 2019,2020, respectively. Debt, Preferred Equity and otherOther liabilities comprised approximately 2.32.7 percent and 2.52.0 percent of our consolidated total liabilities at March 31, 20202021 and December 31, 2019,2020, respectively. Equity Interests and Noncontrolling interests related to the consolidated VIEs, on an absolute basis, comprised approximately less than 1.0 percent of our consolidated total equity at March 31, 20202021 and at December 31, 2019,2020, respectively.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
8. Debt and Lines of Credit
The following table sets forth certain information regarding debt including premiums, discounts and deferred financing costs (in thousands)thousands except statistical information):
|
| | | | | | | | | | | | | | | | | |
| Carrying Amount | | Weighted Average Years to Maturity | | Weighted Average Interest Rates |
| March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 | | March 31, 2020 | | December 31, 2019 |
Collateralized term loans - Life Companies | $ | 1,701,478 |
| | $ | 1,710,408 |
| | 16.9 | | 17.1 | | 4.0 | % | | 4.0 | % |
Collateralized term loans - FNMA | 902,375 |
| | 697,589 |
| | 9.0 | | 7.0 | | 3.4 | % | | 3.7 | % |
Collateralized term loans - CMBS | 296,753 |
| | 397,868 |
| | 3.4 | | 3.1 | | 4.9 | % | | 5.1 | % |
Collateralized term loans - FMCC | 373,202 |
| | 374,727 |
| | 4.6 | | 4.9 | | 3.9 | % | | 3.9 | % |
Total collateralized term loans | 3,273,808 |
| | 3,180,592 |
| | | | | | | | |
Preferred equity - Sun NG Resorts - mandatorily redeemable | 35,249 |
| | 35,249 |
| | 2.5 | | 2.8 | | 6.0 | % | | 6.0 | % |
Preferred OP units - mandatorily redeemable | 34,663 |
| | 34,663 |
| | 5.9 | | 4.0 | | 5.9 | % | | 6.5 | % |
Lines of credit | 582,774 |
| | 183,898 |
| | 3.2 | | 3.5 | | 1.8 | % | | 2.7 | % |
Total debt | $ | 3,926,494 |
| | $ | 3,434,402 |
| | 10.6 | | 11.1 | | 3.6 | % | | 4.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount | | Weighted Average Years to Maturity | | Weighted Average Interest Rates |
| March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 |
Collateralized term loans - Life Companies | $ | 1,649,163 | | | $ | 1,658,239 | | | 16.1 | | 16.3 | | 3.990 | % | | 3.990 | % |
Collateralized term loans - FNMA | 1,148,524 | | | 1,150,924 | | | 8.9 | | 9.1 | | 3.228 | % | | 3.230 | % |
Collateralized term loans - CMBS | 265,758 | | | 267,205 | | | 2.6 | | 2.9 | | 4.789 | % | | 4.789 | % |
Collateralized term loans - FMCC | 366,975 | | | 368,599 | | | 3.6 | | 3.9 | | 3.853 | % | | 3.854 | % |
Total Collateralized Term Loans | 3,430,420 | | | 3,444,967 | | | | | | | | | |
| | | | | | | | | | | |
Preferred equity - Sun NG Resorts - mandatorily redeemable | 35,249 | | | 35,249 | | | 3.5 | | 3.8 | | 6.000 | % | | 6.000 | % |
Preferred OP units - mandatorily redeemable | 34,663 | | | 34,663 | | | 4.9 | | 5.1 | | 5.932 | % | | 5.932 | % |
Lines of credit and other debt | 917,603 | | | 1,242,197 | | | 2.9 | | 3.7 | | 1.746 | % | | 2.078 | % |
Total Debt | $ | 4,417,935 | | | $ | 4,757,076 | | | 9.5 | | 9.4 | | 3.394 | % | | 3.370 | % |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Collateralized Term Loans
During the three months ended March 31, 2020 and2021 we made no repayments on the collateralized term loans. During the year ended December 31, 2019,2020, we repaid the following collateralized term loans:
|
| | | | | | | | | | | | | | | | |
Three Months Ended | | Repayment amount (in millions) | | Fixed Interest rate | | Maturity date | | (Gain) / loss on extinguishment of debt (in millions) | | Encumbered communities released |
March 31, 2020 | | $ | 99.6 |
| | 5.837 | % | | March 1, 2021 | | $ | 3.4 |
| | 11 |
|
| $ | 19.9 |
| (1) | 5.83 | % | (3) | July 1, 2020 | | $ | (0.1 | ) | | 2 |
|
December 31, 2019 | | $ | 17.0 |
| | 5.62 | % | | March 1, 2020 | | $ | — |
| | — |
|
| $ | 127.3 |
| | 5.10 | % | | November 1, 2021 | | $ | 3.2 |
| | — |
|
| $ | 21.5 |
| (2) | 6.24 | % | (3) | March 1, 2020 April 1, 2020 | | $ | (0.2 | ) | | 3 |
|
September 30, 2019 | | $ | 134.0 |
| | 4.3 | % | | May 1, 2023 | | $ | 12.8 |
| | — |
|
March 31, 2019 | | $ | 186.8 |
| | 3.83 | % | | January 1, 2030 | | $ | 0.7 |
| | — |
|
loans (in thousands except statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended | | Repayment Amount | | Fixed Interest Rate | | Maturity Date | | (Gain) / Loss on Extinguishment of Debt | | |
June 30, 2020 | | $ | 52,710 | | (1) | 5.980 | % | (3) | March 1, 2021 July 11, 2021 December 1, 2021 | | $ | 1,930 | | | |
March 31, 2020 | | $ | 99,607 | | | 5.837 | % | | March 1, 2021 | | $ | 3,403 | | | |
| $ | 19,922 | | (2) | 5.830 | % | (3) | July 1, 2020 | | $ | (124) | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(1)Includes four4 collateralized term loans, 2 due to mature on March 1, 2021, 1 due to mature on July 11, 2021 and the other due to mature on December 1, 2021.
(2)Includes 4 collateralized term loans due to mature on July 1, 2020.
(2) Includes four collateralized term loans, three due to mature on March 1, 2020 and one due to mature on April 1, 2020.
(3)The interest rate represents the weighted average interest rate on collateralized term loans.
During the three months ended March 31, 2020 and2021 we did not enter into any new collateralized term loans. During the year ended December 31, 2019,2020, we entered into the following collateralized term loans:
|
| | | | | | | | | | | |
Three Months Ended | | Loan amount (in millions) | | Term (in years) | | Interest rate | | Maturity date |
March 31, 2020 | | $ | 230.0 |
| | 15 | | 2.995 | % | | April 1, 2035 |
December 31, 2019 | | $ | 400.0 |
| (1) | 21 | | 4.026 | % | | December 15, 2039 December 15, 2041 |
September 30, 2019 | | $ | 250.0 |
| | 10 | | 2.925 | % | | October 1, 2029 |
March 31, 2019 | | $ | 265.0 |
| | 25 | | 4.170 | % | | January 15, 2044 |
loans (in thousands except statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended | | Loan Amount | | Term (in years) | | Interest Rate | | Maturity Date |
December 31, 2020 | | $ | 268,800 | | (1) | 12 | | 2.662 | % | (2) | May 1, 2030 November 1, 2032 |
March 31, 2020 | | $ | 230,000 | | | 15 | | 2.995 | % | | April 1, 2035 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)Includes two3 collateralized term loans, one1 for $8.8 million due to mature on December 15, 2039May 1, 2030 and the other2 for $39.5 million and $220.5 million, due to mature on DecemberNovember 1, 2041.2032.
(2)The interest rate represents the weighted average interest rate on collateralized term loans.
The collateralized term loans totaling $3.3$3.4 billion as of March 31, 2020,2021, are secured by 185192 properties comprised of 73,36477,306 sites representing approximately $3.2 billion of net book value.
SUN COMMUNITIES, INC.
Preferred Equity - Sun NG Resorts - mandatorily redeemable
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the investment in Sun NG Resorts, $35.3 million of mandatorily redeemable Preferred Equity ("Preferred Equity - (Continued)Sun NG Resorts") was purchased by unrelated third parties. The Preferred Equity - Sun NG Resorts carries a preferred rate of return of 6.0 percent per annum. The Preferred Equity - Sun NG Resorts has a seven-year term ending June 1, 2025 and $33.4 million can be redeemed in the fourth quarter of 2024 at the holders' option. The Preferred Equity - Sun NG Resorts as of March 31, 2021 was $35.2 million. Refer to Note 7, "Consolidated Variable Interest Entities," and Note 9, "Equity and Temporary Equity," for additional information.
(Unaudited)
Preferred OP Units - mandatorily redeemable
Preferred OP units at March 31, 20202021 and December 31, 20192020 include $34.7 million of Aspen preferred OP units issued by the Operating Partnership. As of March 31, 2020,2021, these units are convertible indirectly into 433,072406,470 shares of our common stock.
In January 2020, we amended the Operating Partnership’sPartnership's partnership agreement at the election of certain Aspen preferred OP unit holders.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”"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 average 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 ten-day average closing price 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 ten-day average closing price exceeds $68.00 per share, by (ii) the ten-day average closing price. The current preferred distribution rate is 3.8 percent on the Extended Units and 6.5 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. As of March 31, 2020,2021, 270,000 of the Extended Units and 1,013,819 other Aspen preferred units were outstanding.
Preferred Equity - Sun NG Resorts - mandatorily redeemable
SUN COMMUNITIES, INC.
In connection with the investment in Sun NG Resorts, $35.3 million of mandatorily redeemable Preferred Equity (“Preferred Equity
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Sun NG Resorts”) was purchased by unrelated third parties. The Preferred Equity - Sun NG Resorts carries a preferred rate of return of 6.0 percent per annum. The Preferred Equity - Sun NG Resorts has a seven-year term and can be redeemed in the fourth quarter of 2022 at the holders’ option. The Preferred Equity - Sun NG Resorts as of March 31, 2020 was $35.2 million. Refer to Note 3, “(Continued)
(Unaudited)
Real Estate Acquisitions,” Note 7, “Consolidated Variable Interest Entities,” and Note 9, “Equity and Temporary Equity” for additional information.
Lines of Credit and Other Debt
Credit agreementAgreement - In May 2019, we amended and restated our credit agreement with Citibank, N.A. ("Citibank") and certain other lenders. Pursuant to the credit agreement, we entered into aan unsecured senior credit facility with Citibank and certain lenders in the amount of $750.0 million, comprised of a $650.0 million revolving loan, with the ability to use up to $100.0 million for advances in Australian dollars, and a $100.0 million term loan (the “A"A&R Facility”Facility"). As of March 31, 2020, the term loan was fully drawn. The A&R Credit Agreement has a four-year term ending May 21, 2023,, which can be extended for two additional six-month periods, subject to the satisfaction of certain conditions as defined in the credit agreement. The credit agreement also provides for additional commitments in an amount not to exceed $350.0 million. The funding of these additional commitments is subject to certain conditions, including obtaining the consent of the lenders, some of which are outside of our control. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $1.1 billion.
The A&R Facility bears interest at a floating rate based on the Eurodollar rate or Bank Bill Swap Bid Rate plus a margin that is determined based on our leverage ratio calculated in accordance with the credit agreement, which margin can range from 1.20 percent to 2.10 percent for the revolving loan and 1.20 percent to 2.05 percent for the term loan. As of March 31, 2020,2021, the margin based on our leverage ratio was 1.21.20 percent on the revolving loan and 1.21.20 percent on the term loan. We had $424.9$352.9 million and $100.0 million of0 borrowings on the revolving loan and the term loan, respectively, as of March 31, 2020.2021. We had $123.6$40.4 million of borrowings on the revolving loan and no0 borrowings on the term loan, as of December 31, 2019.2020.
The A&R Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit with Citibank, but does reduce the borrowing amount available. At March 31, 20202021 and December 31, 2019,2020, we had approximately $2.6$2.2 million and $2.8$2.1 million of availability,outstanding letters of credit, respectively.
Safe Harbor Facility - On October 30, 2020, in relation to the acquisition of Safe Harbor, we indirectly assumed approximately $829.0 million of Safe Harbor's debt (“Safe Harbor Facility”) owed to Citizens Bank N.A. ("Citizens"). On December 22, 2020, this facility was amended to, among other things, (a) increase the size of the revolving commitments available to Safe Harbor from $500.0 million to $1.3 billion, subject to borrowing base availability, (b) modify certain provisions relating to the determination of the borrowing base, (c) increase the cap on the incremental borrowing capacity from $350.0 million to $500.0 million, which allows Safe Harbor to request an increase to the revolving commitments and / or to establish additional term loans subject to the higher cap and the satisfaction of certain condition, and (d) modify certain financial covenants. The revolving loan and term loan under the Safe Harbor Facility both expire on October 11, 2024. The term loan component of the Safe Harbor Facility can be extended for two additional 12-month periods, subject to the satisfaction of certain conditions set forth in the credit agreement. The revolving commitments do not have an extension option.
The Safe Harbor Facility bears interest at a floating rate based on an adjusted LIBOR rate or a base rate, plus a margin that is determined based on Safe Harbor's ratio of consolidated funded debt to total asset value, calculated in accordance with the credit agreement, which margin can range from 1.375 percent to 2.250 percent for adjusted LIBOR rate loans and 0.375 percent to 1.250 percent for base rate loans. As of March 31, 2021, based on Safe Harbor's ratio of consolidated funded debt to total asset value, the margin was 2.000 percent on any adjusted LIBOR rate loans and 1.000 percent on any base rate loans. The Safe Harbor Facility is secured by the personal property of Safe Harbor and certain related entities and subsidiaries and a pledge of the equity interests in certain subsidiaries of Safe Harbor and related entities and subsidiaries, subject to customary exceptions. At the lender's option, the Safe Harbor Facility will become immediately due and payable upon an event of default that is continuing under the credit agreement. Safe Harbor had $19.0 million and $500.0 million of borrowings under the revolving loan and term loan respectively, as of March 31, 2021. Safe Harbor had $652.0 million and $500.0 million of borrowings under the revolving loan and term loan respectively, as of December 31, 2020.
The Safe Harbor Facility provides Safe Harbor with the ability to issue letters of credit. Its issuance of letters of credit does not increase its borrowings outstanding under its line of credit with Citizens, but does reduce the borrowing amount available. The balance of the outstanding letters of credit for Safe Harbor was approximately $0.3 million at March 31, 2021 and December 31, 2020.
Floor planPlan - We have a $12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least a twelve month12-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 March 31, 2020,2021, the effective interest rate was 7.0 percent. The outstanding balance was $4.0$3.2 million as of March 31, 20202021 and $3.3$4.8 million as of December 31, 20192020. These balances are recorded within the Lines of credit and other debt line item on the Consolidated Balance Sheets.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Other - In October 2019, we assumed a term loan facility with Citibank, N.A. (“Citibank”), in the amount of $58.0 million in relation 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.rate plus a margin ranging from 1.20 percent to 2.05 percent. As of March 31, 2021, the margin based on our leverage ratio was 1.20 percent. The outstanding balance was $54.2$42.5 million at March 31, 20202021 and $57.0$45.0 million at December 31, 2019,2020, respectively. These balances are recorded in the Lines of credit and other debt line item on the Consolidated Balance Sheets.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Covenants
Pursuant to the termsThe Collateralized term loans and Lines of the A&R Facility, wecredit 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 A&R Facility, which contains minimum fixed charge coverage leverage, distribution,ratio and net worth requirements.requirements, and maximum leverage, distribution ratios and variable rate indebtedness, and (b) the terms of the Safe Harbor Facility, which contains a minimum fixed charge coverage ratio pre-distribution, a minimum fixed charge coverage ratio post distribution, a minimum borrowing base coverage ratio, and a maximum leverage ratio. At March 31, 2020,2021, 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, any of itsour other subsidiaries or any other person or entity.
Off-Balance Sheet Arrangements - Nonconsolidated Affiliate Indebtedness
WeGTSC - During September 2019, GTSC, a nonconsolidated affiliate in which we have a 40 percent investment in GTSC, a nonconsolidated affiliate. During September 2019, GTSCownership interest, entered into a warehouse line of credit with a maximum loan amount of $125.0 million. During FebruarySeptember 2020, the maximum amount was increased to $140.0$180.0 million. As of March 31, 2021, the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $180.0 million (of which our proportionate share is $72.0 million). As of December 31, 2020, the aggregate carrying amount of debt, including both our and our partners’partner's share, incurred by GTSC was approximately $139.9$167.7 million (of which our proportionate share is approximately $56.0$67.1 million). The debt bears interest at a variable rate based on LIBOR plus 1.65 percent per annum and matures on September 15, 2023.
Sungenia JV - During May 2020, Sungenia JV, a nonconsolidated affiliate in which we have a 50 percent ownership interest, entered into a debt facility agreement with a maximum loan amount of 27.0 million Australian dollars, or $20.5 million converted at the March 31, 2021 exchange rate. As of DecemberMarch 31, 2019,2021, the aggregate carrying amount of debt, including both our and our partner’spartners' share, incurred by GTSCSungenia JV was approximately $123.4$6.6 million (of which our proportionate share is approximately $49.4$3.3 million).
As of December 31, 2020, the aggregate carrying amount of debt, including both our and our partners' share, incurred by Sungenia JV was $6.7 million (of which our proportionate share is $3.3 million). The debt bears interest at a variable rate based on Australian Bank Bill Swap Bid Rate (BBSY) plus 2.05 percent per annum and is available for a minimum of three years.
9. Equity and Temporary Equity
Public Equity Offerings
On March 2, 2021, we priced a $1.1 billion underwritten public offering of an aggregate of 8,050,000 shares at a public offering price of $140.00 per share, before underwriting discounts and commissions. The offering consisted of 4,000,000 shares offered directly by us and 4,050,000 shares offered under a forward equity sales agreement (the "March 2021 Forward Equity Offering"). We sold the 4,000,000 shares on March 9, 2021 and received net proceeds of $537.6 million. We may elect to settle the forward sale agreements relating to the remaining 4,050,000 shares upon one or more forward settlement dates no later than March 2022. We may also elect to cash settle or net share settle all or a portion of our obligations under the March 2021 Forward Equity Offering if we conclude it is in our best interest to do so. If we elect to cash settle or net settle the March 2021 Forward Equity Offering, we may not receive any proceeds. If we fully physically settle the March 2021 Forward Equity Offering, we expect to receive net proceeds of approximately $544.3 million.
We evaluated the accounting of the March 2021 Forward Equity Offering under FASB ASC Topic 480 "Distinguishing Liabilities from Equity" and FASB ASC Topic 815 "Derivatives and Hedging" and determined that the March 2021 Forward Equity Offering is indexed to our own equity and meet the requirements for equity classification under ASC 815-40-25. As result, the March 2021 Forward Equity Offering has been classified as equity and is therefore exempt from derivative accounting. We recorded the March 2021 Forward Equity Offering at fair value at inception, which we determined to be zero. Subsequent changes to fair value are not required under equity classification.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
On September 30, 2020, we entered into two forward sale agreements (the "September 2020 Forward Equity Offerings") relating to an underwritten registered public offering of 9,200,000 shares of our common stock at a public offering price of $139.50 per share. The offering closed on October 5, 2020. On October 26, 2020, we physically settled the September 2020 Forward Equity Offering (by the delivery of shares of our common stock). Proceeds from the offering were approximately $1.23 billion after deducting expenses related to the offering. We used the net proceeds of this offering to fund the cash portion of the acquisition of Safe Harbor, and for working capital and general corporate purposes.
In May 2019,2020, we closed an underwritten registered public offering of 3,737,5004,968,000 shares of common stock. Proceeds from the offering were $452.1$633.1 million after deducting expenses related to the offering. We used the net proceeds of this offering to repay borrowings outstanding under the revolving loan under our senior credit facility.
At the Market Offering Sales Agreement
In July 2017, we entered into a newan at the market offering sales agreement (the “Sales Agreement”"Sales Agreement") with certain sales agents (collectively, the “Sales Agents”"Sales Agents"), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents 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. Through March 31, 2020,2021, we have sold shares of our common stock for gross proceeds of $163.8 million under the Sales Agreement. There were no issuances of common stock under the Sales Agreement during the three months ended March 31, 20202021 or during the year ended December 31, 2019.
2020.
Issuances of Common Stock and Common OP Units in Connection with the Acquisition of Certain Properties
In December 2020, in connection with the acquisition of the Rybovich Portfolio, we issued 130,475 Common OP units.
In October 2020, in connection with the acquisition of Safe Harbor, we issued 55,403 Common OP units.
In May 2020, in connection with the acquisition of the Forest Springs community, we issued 82,420 Common OP units.
Equity Interests - SHM South Fork JV, LLC
In October 2020, in conjunction with the acquisition of Safe Harbor, we indirectly acquired $4.3 million of Safe Harbor's equity interest in SHM South Fork JV, LLC, a joint venture created for the purpose of acquiring land and constructing a marina in Fort Lauderdale, Florida. The Safe Harbor Equity Interests - SHM South Fork JV, LLC balance was $4.1 million and $4.3 million at the three months ended March 31, 2021 and the year December 31, 2020, respectively. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.
Issuance of Series E Preferred OP Units
-
In January 2020, we issued 90,000 Series E preferred OP units in connection with the acquisition of Cape Cod RV Resort. The Series E preferred OP units have a stated issuance price of $100.00$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 5.50 percent.percent. Commencing the first anniversary of the issuance date, subject to certain limitation,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 March 31, 2020,2021, 90,000 Series E preferred OP Units were outstanding. Refer to Note 3, “Real"Real Estate Acquisitions and Dispositions," for additional information.
Temporary Equity:
Issuance of Series I Preferred OP Units” - In December 2020, we issued 922,000 Series I preferred OP units in connection with the acquisition of the Rybovich Portfolio. The Series I preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series I issuance date, each Series I preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $164.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series I issuance date or upon the holder's death. As of March 31, 2021, 922,000 Series I preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Issuance of Series H Preferred OP Units - In October 2020, we issued 581,407 Series H preferred OP units in connection with the acquisition of Safe Harbor. The Series H preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series H issuance date, each Series H preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $164.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series H issuance date or upon the holder's death. As of March 31, 2021, 581,407 Series H preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.
Equity Interests - FPG Sun Menifee 80 LLC - In October 2020, in connection with investment in land for future development in the city of Menifee in California, at the property known as FPG Sun Menifee 80, LLC, Foremost Pacific Group, LLC, "FPG," purchased $0.1 million of common equity interest in the land (referred to as "Equity Interests - FPG Sun Menifee 80 LLC"). The Equity Interests - FPG Sun Menifee 80 LLC do not have a fixed maturity date. Upon the occurrence of certain events, either FPG or Sun FPG Venture LLC, our subsidiary, can trigger a process under which we may be required to purchase the Equity Interests - FPG Sun Menifee 80 LLC from FPG. The Equity Interests - FPG Sun Menifee 80 LLC balance was $0.1 million at the three months ended March 31, 2021 and December 31, 2020. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.
Issuance of Series G Preferred OP Units - In September 2020, we issued 260,710 Series G preferred OP units in connection with the acquisition of El Capitan & Ocean Mesa Resorts. The Series G preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.2 percent. Subject to certain limitations, at any time after the Series G issuance date, each Series G preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $155.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series G issuance date or upon the holder's death. As of March 31, 2021, 240,710 Series G preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.
Issuance of Series F Preferred OP Units - In May 2020, we issued 90,000 Series F preferred OP units in connection with the acquisition of Forest Springs. The Series F preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series F issuance date, each Series F preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $160.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series F issuance date or upon the holder's death. As of March 31, 2021, 90,000 Series F preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.
Equity Interests - NG Sun Whitewater RV LLC - In August 2019, in connection with the investment in land at the property known as Whitewater, NG Sun Whitewater LLC purchased $2.4 million of common equity interest in Sun NG Whitewater RV Resorts LLC Resorts (referred to as “Equity"Equity Interests - NG Sun Whitewater RV LLC”LLC"). The Equity Interests - NG Sun Whitewater RV LLC dodoes not have a fixed maturity date. Upon the occurrence of certain events, either NG Sun Whitewater LLC or Sun NG LLC, our subsidiary, can trigger a process under which we may be required to purchase the Equity Interests - NG Sun Whitewater RV LLC from NG Sun Whitewater LLC. The Equity Interests - NG Sun Whitewater LLC balance was $5.1 million at the three months ended March 31, 2021 and year ended December 31, 2020. Refer to Note 3, “Real Estate Acquisitions,” and Note 7, “Consolidated"Consolidated Variable Interest Entities,,”" for additional information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Issuance of Series D Preferred OP Units - In February 2019, we issued 488,958 Series D preferred OP units in connection with the acquisition of Country Village Estates. The Series D preferred OP units have a stated issuance price of $100.00 per OP Unitunit and carry a preferred return of 3.75 percent until the second anniversary of the issuance date. Commencing with the second anniversary of the issuance date, the Series D Preferredpreferred OP Unitsunits carry a preferred return of 4.0 percent. Commencing with the first anniversary of the issuance date, each Series D Preferredpreferred OP Unitunit can be exchanged for our common stock equal to the quotient obtained by dividing $100.00 by $125.00 (as such ratio is subject to adjustments for certain capital events) at the holder’sholder's option. The holders may require redemption in cash after the fifth anniversary of the Series D issuance date or upon the holder’sholder's death. As of March 31, 2020,2021, 488,958 Series D preferred OP units were outstanding. Refer to Note 3, “Real"Real Estate Acquisitions” and Dispositions," for additional information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Equity Interests - 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 interest in Sun NG Resorts (herein jointly referred to as “Equity"Equity Interest - NG Sun LLC”LLC"). In April and September 2020, in connection with the acquisitions of Glen Ellis RV Park and Lone Star RV Park, $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’Resorts' indebtedness at such time. The current rate of return is 5.0 percent. The Equity Interests - NG Sun LLC dodoes not have a fixed maturity date and can be redeemed in the fourth quarterquarters of 20222024, 2025 and 2026 at the holders’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’sLLC's interest. During a limited period in 2022, NG Sun LLC has the right to put its interest to Sun NG LLC. If either party exercises their option, the property management agreement will be terminated, and the Company iswe are required to purchase the remaining interests of NG Sun LLC and the property management agreement at fair value. Refer to Note 3, “Real Estate Acquisitions,” Note 7, “Consolidated"Consolidated Variable Interest Entities,,”" and Note 8, “Debt"Debt and Lines of Credit,”" for additional information.
Series A-4 Preferred OP Units
On December 13, 2019, all outstanding shares of the Company’s 6.50% Series A-4 Cumulative Convertible Preferred Stock, and all of
the Operating Partnership’s Series A-4 Preferred OP Units were converted into common stock and common OP units, respectively. All
1,031,747 shares of Series A-4 preferred stock were converted into 458,541 shares of common stock (net of fractional shares paid in cash). All 405,656 Series A-4 preferred OP units were converted into 180,277 common OP units (net of fractional units paid in cash). The Series A-4 preferred shares and units were issued to the sellers of the American Land Lease portfolio which we acquired in 2014 and 2015.
Issuances of Common Stock and Common OP Units
In October 2019, in connection with the acquisition of the Jensen Portfolio, we issued 1,972,876 shares of common stock, net of fractional shares paid in cash.
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. Below is the activity of conversions during the three months ended March 31, 20202021 and 2019:2020:
|
| | | | | | | | | | | | | |
| | | | Three Months Ended | | Three Months Ended |
| | | | March 31, 2020 | | March 31, 2019 |
Series | | Conversion Rate | | Units/Shares Converted | Common Stock (1) | | Units/Shares Converted | Common Stock (1) |
Common OP unit | | 1.0000 |
| | 11,949 |
| 11,949 |
| | 6,533 |
| 6,533 |
|
Series A-1 preferred OP unit | | 2.4390 |
| | 6,677 |
| 16,283 |
| | 3,950 |
| 9,633 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Three Months Ended |
| | | | March 31, 2021 | | March 31, 2020 |
Series | | Conversion Rate | | Units / Shares Converted | Common Stock(1) | | Units / Shares Converted | Common Stock(1) |
Common OP unit | | 1.0000 | | | 24,912 | | 24,912 | | | 11,949 | | 11,949 | |
Series A-1 preferred OP unit | | 2.4390 | | | 4,316 | | 10,525 | | | 6,677 | | 16,283 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)CalculationCalculation may yield minor differences due to rounding incorporated in the above numbers.
DividendsDistributions
Distributions declared for the three months ended March 31, 20202021 were as follows:
|
| | | | | | | | | | | | |
Cash Distributions | | Record Date | | Payment Date | | Distribution per Share | | Total Distribution (thousands) |
Common Stock, Common OP units and Restricted Stock | | 3/31/2020 | | 4/15/2020 | | $ | 0.79 |
| | $ | 75,631 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions | | Record Date | | Payment Date | | Distribution Per Share | | Total Distribution (in Thousands) |
Common Stock, Common OP units and Restricted Stock | | 3/31/2021 | | 4/15/2021 | | $ | 0.83 | | | $ | 94,966 | |
| | | | | | | | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
10. Share-Based Compensation
As of March 31, 2020,2021, we had two2 share-based compensation plans: the Sun Communities, Inc. 2015 Equity Incentive Plan (“("2015 Equity Incentive Plan”Plan") and the First Amended and Restated 2004 Non-Employee Director Option Plan (“("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.
During the three months ended March 31, 20202021 and 2019,2020, shares were granted as follow:follows:
|
| | | | | | | | | | | | | | | | | | |
Grant Period | | Type | | Plan | | Shares Granted | | Grant Date Fair Value Per Share | | Vesting Type | | Vesting Anniversary | | Percentage |
| | | | | | | | | | | | | | |
2020 | | Key Employees | | 2015 Equity Incentive Plan | | 51,790 |
| | $ | 162.42 |
| (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Executive Officers | | 2015 Equity Incentive Plan | | 46,000 |
| | $ | 165.97 |
| (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Executive Officers | | 2015 Equity Incentive Plan | | 69,000 |
| (2) | $ | 125.47 |
| (2) | Market Condition | | 3rd | | 100.0 | % |
2020 | | Directors | | 2004 Non-Employee Director Option Plan | | 10,200 |
| | $ | 147.97 |
| (1) | Time Based | | 3rd | | 100.0 | % |
2019 | | Executive Officers | | 2015 Equity Incentive Plan | | 44,000 |
| | $ | 115.39 |
| (1) | Time Based | | 20.0% annually over 5 years |
2019 | | Executive Officers | | 2015 Equity Incentive Plan | | 66,000 |
| (3) | $ | 115.39 |
| (3) | Market Condition | | 3rd | | 100.0 | % |
2019 | | Directors | | 2004 Non-Employee Director Option Plan | | 18,000 |
| | $ | 113.68 |
| (1) | Time Based | | 3rd | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grant Period | | Type | | Plan | | Shares Granted | | Grant Date Fair Value Per Share | | Vesting Type | | Vesting Anniversary | | Percentage |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 54,000 | | | $ | 151.89 | | (1) | Time Based | | 20.0% annually over 5 years |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 81,000 | | (2) | $ | 99.49 | | (2) | Market Condition | | 3rd | | 100.0 | % |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 15,000 | | | $ | 151.89 | | (1) | Time Based | | 33.3% annually over 3 years |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 15,000 | | (3) | $ | 99.49 | | (3) | Market Condition | | 3rd | | 100.0 | % |
2021 | | Key Employees | | 2015 Equity Incentive Plan | | 28,856 | | | $ | 151.89 | | (1) | Time Based | | 33.3% annually over 3 years |
2021 | | Key Employees | | 2015 Equity Incentive Plan | | 61,550 | | | $ | 143.28 | | (1) | Time Based | | 20.0% annually over 5 years |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 3,400 | | | $ | 147.19 | | (1) | Time Based | | 20.0% annually over 5 years |
2021 | | Executive Officers | | 2015 Equity Incentive Plan | | 5,100 | | (4) | $ | 96.41 | | (4) | Market Condition | | 3rd | | 100.0 | % |
2021 | | Directors | | 2004 Non-Employee Director Option Plan | | 1,509 | | | $ | 147.19 | | (1) | Time Based | | 3rd | | 100.0 | % |
2021 | | Directors | | 2004 Non-Employee Director Option Plan | | 10,200 | | | $ | 148.44 | | (1) | Time Based | | 3rd | | 100.0 | % |
2020 | | Key Employees | | 2015 Equity Incentive Plan | | 13,873 | | | $ | 140.39 | | (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Executive Officers | | 2015 Equity Incentive Plan | | 69,368 | | | $ | 137.63 | | (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Key Employees | | 2015 Equity Incentive Plan | | 1,500 | | | $ | 143.20 | | (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Key Employees | | 2015 Equity Incentive Plan | | 51,790 | | | $ | 162.42 | | (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Executive Officers | | 2015 Equity Incentive Plan | | 46,000 | | | $ | 165.97 | | (1) | Time Based | | 20.0% annually over 5 years |
2020 | | Executive Officers | | 2015 Equity Incentive Plan | | 69,000 | | (5) | $ | 125.47 | | (5) | Market Condition | | 3rd | | 100.0 | % |
2020 | | Directors | | 2004 Non-Employee Director Option Plan | | 10,200 | | | $ | 147.97 | | (1) | Time Based | | 3rd | | 100.0 | % |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
(1)The fair values of the grants were determined by using the average closing price of our common stock on the dates the shares were issued.
(2)Share-based compensation for restricted stock awards with market 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 conditions using a Monte Carlo simulation. At the grant date our common stock price was $151.89. Based on the Monte Carlo simulation we expect 65.5 percent of the 81,000 shares to vest.
(3)Share-based compensation for restricted stock awards with market 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 conditions using a Monte Carlo simulation. At the grant date our common stock price was $151.89. Based on the Monte Carlo simulation we expect 65.5 percent of the 15,000 shares to vest.
(4)Share-based compensation for restricted stock awards with market 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 conditions using a Monte Carlo simulation. At the grant date our common stock price was $147.19. Based on the Monte Carlo simulation we expect 65.5 percent of the 5,100 shares to vest.
(5)Share-based compensation for restricted stock awards with market 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 conditions using a Monte Carlo simulation. At the grant date our common stock price was $165.97. Based on the Monte Carlo simulation we expect 75.6%75.6 percent of the 69,000 shares to vest.
(3)
Vesting
Share-based compensation
The vesting requirements for 252,153 and 144,231 restricted stock awards with market conditions is measured based on an estimate of shares expectedgranted to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date our common stock price was $115.39. Based on the Monte Carlo simulation we expect 75.1% of the 66,000 shares to vest.
Options
Thereexecutives, directors and employees were 0 stock option exercisessatisfied during the three months ended March 31, 2020. 2021 and 2020, respectively.
Stock Options
During the three months ended March 31, 2019,2021, 1,500 shares of common stock were issued in connection with the exercise of stock options with net proceeds of less than $0.1 million.
Vesting
The vesting requirements for 144,231 restricted shares granted to our executives, directors and employees There were satisfied duringno stock options outstanding as of March 31, 2021. During the three months ended March 31, 2020.2020, no stock options were exercised.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
11. Segment Reporting
We group ourASC Topic 280, "Segment Reporting" ("ASC 280"), establishes standards for the way the business enterprises report information about operating segments into reportable segments that provide similar productsin its financial statements. Effective January 1, 2021, we transitioned from a two-segment to a three-segment structure as a result of the recent acquisition of Safe Harbor and services. Each operating segment has discrete financial information evaluated regularly by ourits internal organization. The new structure reflects how the chief operating decision maker in evaluatingmanages the business, makes operating decisions, allocates resources and assessingevaluates operating performance. WeThis structure better align our operations with our strategic initiatives. Beginning with the results of the three months ended March 31, 2021, we are reporting our financial results consistent with our new segment structure and have 2recast prior comparative periods to align with the new segment structure. Our new structure aligns our Company around 3 reportable segments: (i) Real Property OperationsManufactured home ("MH") communities, (ii) Recreational vehicle ("RV") resorts and (ii) Home Sales and Rentals. (iii) Marinas.
The Real Property OperationsMH segment owns, operates, develops, or has an interest in, a portfolio and developsof MH communities and RV communities 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 offersalso provides manufactured home sales and leasing services to tenants and prospective tenants of our communitiescommunities.
.
Transactions between our segments are eliminatedThe RV segment owns, operates, develops, or has an interest in, consolidation. Transienta portfolio of RV revenueresorts and is included in the Real Property Operationsbusiness of acquiring, operating and developing ground up RV resorts throughout the U.S. and in Canada. It also provides leasing services for vacation rentals within the RV resorts.
The Marinas segment revenues. Transient revenue was $25.3 million for the quarter ended March 31, 2020. Transient revenue was $121.5 million for the year ended December 31, 2019. We recognized 20.1 percentowns, operates, has an interest in a portfolio, and develops marinas, and is in the first quarter, 23.2 percentbusiness of acquiring, and operating marinas throughout the U.S. with the majority of such marinas concentrated in coastal regions and others located in various inland regions.
Hybrid properties are classified to a segment based on the second quarter, 40.3 percent inpredominant site counts at the third quarter, and 16.4 percent in the fourth quarter.properties.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
A presentation of segment financial information is summarized as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Revenues | $ | 247,980 |
| | $ | 56,059 |
| | $ | 304,039 |
| | $ | 225,261 |
| | $ | 53,589 |
| | $ | 278,850 |
|
Operating expenses / Cost of sales | 88,715 |
| | 35,526 |
| | 124,241 |
| | 80,340 |
| | 34,109 |
| | 114,449 |
|
Net Operating Income / Gross Profit | 159,265 |
| | 20,533 |
| | 179,798 |
| | 144,921 |
| | 19,480 |
| | 164,401 |
|
Adjustments to arrive at net income / (loss) | | | | | | | | | | | |
Interest and other revenues, net | 6,263 |
| | — |
| | 6,263 |
| | 8,480 |
| | — |
| | 8,480 |
|
Home selling expenses | — |
| | (3,992 | ) | | (3,992 | ) | | — |
| | (3,324 | ) | | (3,324 | ) |
General and administrative expenses | (22,556 | ) | | (2,961 | ) | | (25,517 | ) | | (19,234 | ) | | (2,653 | ) | | (21,887 | ) |
Catastrophic weather-related charges, net | (606 | ) | | — |
| | (606 | ) | | (782 | ) | | — |
| | (782 | ) |
Depreciation and amortization | (62,706 | ) | | (20,983 | ) | | (83,689 | ) | | (58,245 | ) | | (18,311 | ) | | (76,556 | ) |
Loss on extinguishment of debt | (3,279 | ) | | — |
| | (3,279 | ) | | (653 | ) | | — |
| | (653 | ) |
Interest expense | (32,408 | ) | | (8 | ) | | (32,416 | ) | | (34,010 | ) | | (4 | ) | | (34,014 | ) |
Interest on mandatorily redeemable preferred OP units / equity | (1,041 | ) | | — |
| | (1,041 | ) | | (1,094 | ) | | — |
| | (1,094 | ) |
Gain / (loss) on remeasurement of marketable securities | (28,647 | ) | | — |
| | (28,647 | ) | | 267 |
| | — |
| | 267 |
|
Gain / (loss) on foreign currency translation | (17,462 | ) | | (17 | ) | | (17,479 | ) | | 1,964 |
| | 1 |
| | 1,965 |
|
Other income / (expense), net | (303 | ) | | 1 |
| | (302 | ) | | (104 | ) | | 37 |
| | (67 | ) |
Loss on remeasurement of notes receivable | (2,112 | ) | | — |
| | (2,112 | ) | | — |
| | — |
| | — |
|
Income from nonconsolidated affiliates | — |
| | 52 |
| | 52 |
| | — |
| | 388 |
| | 388 |
|
Loss on remeasurement of investment in nonconsolidated affiliates | — |
| | (2,191 | ) | | (2,191 | ) | | — |
| | — |
| | — |
|
Current tax expense | (296 | ) | | (154 | ) | | (450 | ) | | (122 | ) | | (92 | ) | | (214 | ) |
Deferred tax benefit | 130 |
| | — |
| | 130 |
| | 217 |
| | — |
| | 217 |
|
Net Income / (Loss) | (5,758 | ) | | (9,720 | ) | | (15,478 | ) | | 41,605 |
| | (4,478 | ) | | 37,127 |
|
Less: Preferred return to preferred OP units / equity | 1,570 |
| | — |
| | 1,570 |
| | 1,323 |
| | — |
| | 1,323 |
|
Less: Income / (loss) attributable to noncontrolling interests | (555 | ) | | (407 | ) | | (962 | ) | | 1,259 |
| | (218 | ) | | 1,041 |
|
Net Income / (Loss) Attributable to Sun Communities, Inc. | (6,773 | ) | | (9,313 | ) | | (16,086 | ) | | 39,023 |
| | (4,260 | ) | | 34,763 |
|
Less: Preferred stock distribution | — |
| | — |
| | — |
| | 432 |
| | — |
| | 432 |
|
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | $ | (6,773 | ) | | $ | (9,313 | ) | | $ | (16,086 | ) | | $ | 38,591 |
| | $ | (4,260 | ) | | $ | 34,331 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 | | March 31, 2020(1) |
| MH | | RV | | Marinas | | Consolidated | | MH | | RV | | Marinas | | Consolidated |
Operating revenues | $ | 245,474 | | | $ | 92,363 | | | $ | 95,587 | | | $ | 433,424 | | | $ | 221,161 | | | $ | 82,878 | | | N/A | | $ | 304,039 | |
Property operating expenses | 97,024 | | | 51,763 | | | 64,195 | | | 212,982 | | | 85,072 | | | 42,659 | | | N/A | | 127,731 | |
Net Operating Income | $ | 148,450 | | | $ | 40,600 | | | $ | 31,392 | | | $ | 220,442 | | | $ | 136,089 | | | $ | 40,219 | | | N/A | | $ | 176,308 | |
Adjustments to arrive at net income / (loss) | | | | | | | | | | | | | | | |
Interest income | | | | | | | 2,631 | | | | | | | | | 2,350 | |
Brokerage commissions and other revenues, net | | | | | | | 5,960 | | | | | | | | | 3,913 | |
| | | | | | | | | | | | | | | |
General and administrative expense | | | | | | | (38,203) | | | | | | | | | (25,349) | |
Catastrophic event-related charges, net | | | | | | | (2,414) | | | | | | | | | (606) | |
Business combination expense | | | | | | | (1,232) | | | | | | | | | 0 | |
Depreciation and amortization | | | | | | | (123,304) | | | | | | | | | (83,689) | |
| | | | | | | | | | | | | | | |
Loss on extinguishment of debt (see Note 8) | | | | | | | 0 | | | | | | | | | (3,279) | |
Interest expense | | | | | | | (39,517) | | | | | | | | | (32,416) | |
Interest on mandatorily redeemable preferred OP units / equity | | | | | | | (1,036) | | | | | | | | | (1,041) | |
(Gain) / loss on remeasurement of marketable securities | | | | | | | 3,661 | | | | | | | | | (28,647) | |
Gain / (loss) on foreign currency translation | | | | | | | 25 | | | | | | | | | (17,479) | |
| | | | | | | | | | | | | | | |
Other expense, net | | | | | | | (1,099) | | | | | | | | | (972) | |
(Gain) / loss on remeasurement of notes receivable | | | | | | | 376 | | | | | | | | | (2,112) | |
Income from nonconsolidated affiliates (see Note 6) | | | | | | | 1,171 | | | | | | | | | 52 | |
Loss on remeasurement of investment in nonconsolidated affiliates | | | | | | | 104 | | | | | | | | | (2,191) | |
Current tax benefit / (expense) | | | | | | | 229 | | | | | | | | | (450) | |
Deferred tax benefit (see Note 12) | | | | | | | 147 | | | | | | | | | 130 | |
Net Income / (Loss) | | | | | | | 27,941 | | | | | | | | | (15,478) | |
Less: Preferred return to preferred OP units / equity | | | | | | | 2,864 | | | | | | | | | 1,570 | |
Less: Income / (Loss) attributable to noncontrolling interests | | | | | | | 295 | | | | | | | | | (962) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | | | | | | | $ | 24,782 | | | | | | | | | $ | (16,086) | |
(1) Recast to reflect segment changes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 (1) |
| MH | | RV | | Marinas | | Consolidated | | MH | | RV | | Marinas | | Consolidated |
Identifiable Assets | | | | | | | | | | | | | | | |
Investment property, net | $ | 4,828,033 | | | $ | 3,187,398 | | | $ | 1,895,719 | | | $ | 9,911,150 | | | $ | 4,823,174 | | | $ | 3,038,686 | | | $ | 1,853,931 | | | $ | 9,715,791 | |
Cash, cash equivalents and restricted cash | 71,119 | | | 38,695 | | | 10,360 | | | 120,174 | | | 53,152 | | | 28,919 | | | 10,570 | | | 92,641 | |
Marketable securities | 82,781 | | | 45,040 | | | 0 | | | 127,821 | | | 80,776 | | | 43,950 | | | 0 | | | 124,726 | |
Inventory of manufactured homes | 30,534 | | | 12,708 | | | 0 | | | 43,242 | | | 33,448 | | | 13,195 | | | 0 | | | 46,643 | |
Notes and other receivables, net | 149,187 | | | 56,264 | | | 43,558 | | | 249,009 | | | 144,027 | | | 44,002 | | | 33,621 | | | 221,650 | |
Goodwill | 0 | | | 0 | | | 438,842 | | | 438,842 | | | 0 | | | 0 | | | 428,833 | | | 428,833 | |
Other intangible assets, net | 31,762 | | | 24,287 | | | 244,505 | | | 300,554 | | | 33,998 | | | 23,819 | | | 247,794 | | | 305,611 | |
Other assets, net | 155,201 | | | 39,198 | | | 69,018 | | | 263,417 | | | 184,917 | | | 38,075 | | | 47,699 | | | 270,691 | |
Total Assets | $ | 5,348,617 | | | $ | 3,403,590 | | | $ | 2,702,002 | | | $ | 11,454,209 | | | $ | 5,353,492 | | | $ | 3,230,646 | | | $ | 2,622,448 | | | $ | 11,206,586 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2020 | | December 31, 2019 |
| Real Property Operations | | Home Sales and Rentals | | Consolidated | | Real Property Operations | | Home Sales and Rentals | | Consolidated |
Identifiable assets | | | | | | | | | | | |
Investment property, net | $ | 6,689,866 |
| | $ | 598,535 |
| | $ | 7,288,401 |
| | $ | 6,651,275 |
| | $ | 581,345 |
| | $ | 7,232,620 |
|
Cash, cash equivalents and restricted cash | 348,470 |
| | 46,270 |
| | 394,740 |
| | (8,346 | ) | | 43,176 |
| | 34,830 |
|
Marketable securities | 55,602 |
| | — |
| | 55,602 |
| | 94,727 |
| | — |
| | 94,727 |
|
Inventory of manufactured homes | 128 |
| | 64,308 |
| | 64,436 |
| | — |
| | 62,061 |
| | 62,061 |
|
Notes and other receivables, net | 170,569 |
| | 16,123 |
| | 186,692 |
| | 142,509 |
| | 15,417 |
| | 157,926 |
|
Other assets, net | 163,864 |
| | 55,312 |
| | 219,176 |
| | 167,804 |
| | 52,092 |
| | 219,896 |
|
Total assets | $ | 7,428,499 |
| | $ | 780,548 |
| | $ | 8,209,047 |
| | $ | 7,047,969 |
| | $ | 754,091 |
| | $ | 7,802,060 |
|
(1) Recast to reflect segment changes
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
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 stockholders 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 quarterthree months ended March 31, 2020.2021.
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 stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates. 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 of the acquisition in 2016 of certain properties located in Canada. 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. However, we are subject to Australian withholding taxes on distributions from our investment in Ingenia Communities Group.
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, and depreciation and basis differences between tax and U.S. GAAP on our Canadian investments.GAAP. Our deferred tax assets that have a full valuation allowance relate to our taxable REIT subsidiaries business.subsidiaries. Net deferred tax liabilities of $19.1$20.4 million and $21.0$20.6 million for Canadian entities have been recorded in relation to corporate entities and included in “Other liabilities”other liabilities in our Consolidated Balance Sheets as of March 31, 20202021 and December 31, 2019,2020, respectively. There are no U.S. federal deferred tax assets or liabilities included in our Consolidated Balance Sheets as of March 31, 20202021 and December 31, 2019.2020.
We had 0 unrecognized tax benefits as of March 31, 20202021 and 2019.2020. We do not expect significant changes in tax positions that would result in unrecognized tax benefits within one year of March 31, 2020.2021.
For the three months ended March 31, 2021 we recorded a current tax benefit for federal, state, and Canadian income taxes and Australian withholding taxes of $0.2 million.For the three months ended March 31, 2020 we recorded a current tax expense for federal, state and Canadian income taxes and Australian withholding taxes of $0.5 million.
For the three months ended March 31, 2019 we recorded a current tax expense for federal, state2021 and Canadian income taxes of $0.2 million.
For the three months ended March 31, 2020 and 2019, we recorded a deferred tax benefitbenefit of $0.1 million$147.0 thousand and $0.2 million,$130.0 thousand, respectively.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
13. Earnings / (Loss) Per Share
Earnings per share 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 earnings per share using the more dilutive of the treasury stock method and the two-class method.
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 until settlement. The common shares issued upon the settlement of the forward equity sales agreements, weighted for the period these common shares are outstanding, stock options andare usually 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.
Our potentially dilutive securities include potential common shares related to our forward equity offerings, our unvested restricted common shares. Ourshares, and our Operating Partnership has outstanding common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series C 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, Series I preferred OP units and Aspen preferred OP Units, which, if converted or exercised, may impact dilution.
Diluted earnings per share considers the impact of potentially dilutive securities except when the potential common shares have an antidilutive effect. Our unvested restricted stock common shares contain rights to receive non-forfeitable dividends and participate equally with common stock with respect to dividends issued or declared, and thus, are participating securities, requiring the two-class method of computing earnings per share. The two-class method determines earnings per share by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. 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 remaining potential dilutive common shares do not contain rights to dividends and are included in the computation of diluted earnings per share.
Computations of basic and diluted earnings / (loss) per share were as follows (in thousands, except per share data):
|
| | | | | | | | |
| | Three Months Ended |
| | March 31, 2020 | | March 31, 2019 |
Numerator | | | | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | | $ | (16,086 | ) | | $ | 34,331 |
|
Less allocation to restricted stock awards | | (254 | ) | | 437 |
|
Basic earnings - Net income / (loss) attributable to common stockholders after allocation to restricted stock awards | | $ | (15,832 | ) | | $ | 33,894 |
|
Add allocation to restricted stock awards | | (254 | ) | | 437 |
|
Diluted earnings - Net income attributable to common stockholders after allocation to restricted stock awards | | $ | (16,086 | ) | | $ | 34,331 |
|
|
| | | | | | | | |
Denominator | | | | |
|
Weighted average common shares outstanding | | 92,410 |
| | 85,520 |
|
Add: dilutive stock options | | 1 |
| | 1 |
|
Add: dilutive restricted stock | | 524 |
| | 512 |
|
Diluted weighted average common shares and securities | | 92,935 |
| | 86,033 |
|
Earnings / (Loss) Per Share Available to Common Stockholders After Allocation | | | | |
Basic earnings / (loss) per share | | $ | (0.17 | ) | | $ | 0.40 |
|
Diluted earnings / (loss) per share | | $ | (0.17 | ) | | $ | 0.40 |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2021 | | March 31, 2020 | | | | |
Numerator | | | | | | | | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | | $ | 24,782 | | | $ | (16,086) | | | | | |
Less: allocation to restricted stock awards | | 152 | | | (254) | | | | | |
Basic earnings - Net Income / (Loss) attributable to common stockholders after allocation to restricted stock awards | | $ | 24,630 | | | $ | (15,832) | | | | | |
Add allocation to restricted stock awards | | 0 | | | 0 | | | | | |
Diluted earnings - Net Income / (Loss) attributable to common stockholders after allocation to restricted stock awards(1) | | $ | 24,630 | | | $ | (15,832) | | | | | |
| | | | | | | | | | | | | | | | | | |
Denominator | | | | | | | | |
Weighted average common shares outstanding | | 107,932 | | | 92,410 | | | | | |
Add: common shares dilutive effect: March 2021 Forward Equity Offering | | 229 | | | 0 | | | | | |
Add: dilutive stock options | | 0 | | | 1 | | | | | |
| | | | | | | | |
Diluted weighted average common shares and securities(1) | | 108,161 | | | 92,411 | | | | | |
Earnings Per Share Available to Common Stockholders After Allocation | | | | | | | | |
Basic earnings / (losses) per share | | $ | 0.23 | | | $ | (0.17) | | | | | |
Diluted earnings / (losses) per share(1) | | $ | 0.23 | | | $ | (0.17) | | | | | |
(1) For the three months ended March 31, 2021 and 2020, diluted earnings per share was calculated using the two-class method as the application of this method resulted in a more dilutive earnings per share for those periods.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
We have excluded certain convertible securities from the computation of diluted earnings per share because the inclusion of those 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 share as of March 31, 20202021 and 20192020 (in thousands):
|
| | | | | | |
| | As of |
| | March 31, 2020 | | March 31, 2019 |
Common OP units | | 2,408 |
| | 2,719 |
|
A-3 preferred OP units | | 40 |
| | 40 |
|
A-1 preferred OP units | | 303 |
| | 328 |
|
Series C preferred OP units | | 310 |
| | 314 |
|
Series D preferred OP units | | 489 |
| | 489 |
|
Aspen preferred OP units | | 1,284 |
| | 1,284 |
|
Series E preferred OP units | | 90 |
| | — |
|
Series A-4 preferred stock | | — |
| | 1,063 |
|
A-4 preferred OP units | | — |
| | 410 |
|
Total Securities | | 4,924 |
| | 6,647 |
|
| | | | | | | | | | | | | | |
| | As of |
| | March 31, 2021 | | March 31, 2020 |
Common OP units | | 2,596 | | | 2,408 | |
A-1 preferred OP units | | 716 | | | 303 | |
A-3 preferred OP units | | 75 | | | 40 | |
| | | | |
Aspen preferred OP units | | 406 | | | 1,284 | |
| | | | |
Series C preferred OP units | | 340 | | | 310 | |
Series D preferred OP units | | 391 | | | 489 | |
Series E preferred OP units | | 62 | | | 90 | |
Series F preferred OP units | | 56 | | | 0 | |
Series G preferred OP units | | 155 | | | 0 | |
Series H preferred OP units | | 355 | | | 0 | |
Series I preferred OP units | | 562 | | | 0 | |
Total Securities | | 5,714 | | | 4,924 | |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
14. Fair Value of Financial Instruments
Our financial instruments consist primarily of cash, cash equivalents and restricted cash, marketable securities, notes and other receivables, accounts payable,debt, and debt.
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 FASB 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 Topic 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 thousands) that required disclosure of fair value on a recurring basis as of March 31, 2021. The table presents the carrying values and fair values of our financial instruments as of March 31, 2021 and December 31, 2020, that were measured using the valuation techniques described above. The table excludes other financial instruments such as cash and cash equivalents, 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | March 31, 2021 |
Financial Assets | | 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 |
Marketable securities | | $ | 127,821 | | | $ | 127,821 | | | $ | 0 | | | $ | 0 | | | $ | 127,821 | |
Installment notes receivable on manufactured homes, net | | 84,109 | | | 0 | | | 0 | | | 84,109 | | | 84,109 | |
| | | | | | | | | | |
Notes receivable from real estate developers | | 58,286 | | | 0 | | | 0 | | | 58,286 | | | 58,286 | |
Total assets measured at fair value | | $ | 270,216 | | | $ | 127,821 | | | $ | 0 | | | $ | 142,395 | | | $ | 270,216 | |
| | | | | | | | | | |
Financial Liabilities | | | | | | | | | | |
Debt | | $ | 3,500,332 | | | $ | 0 | | | $ | 3,500,332 | | | $ | 0 | | | $ | 3,428,244 | |
| | | | | | | | | | |
Lines of credit and other debt | | 917,603 | | | 0 | | | 917,603 | | | 0 | | | 917,603 | |
Other liabilities (contingent consideration) | | 18,156 | | | 0 | | | 0 | | | 18,156 | | | 18,156 | |
Total liabilities measured at fair value | | $ | 4,436,091 | | | $ | 0 | | | $ | 4,417,935 | | | $ | 18,156 | | | $ | 4,364,003 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of Year Ended |
| | December 31, 2020 |
Financial Assets | | 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 |
Marketable securities | | $ | 124,726 | | | $ | 124,726 | | | $ | 0 | | | $ | 0 | | | $ | 124,726 | |
Installment notes receivable on manufactured homes, net | | 85,866 | | | 0 | | | 85,866 | | | 0 | | | 85,866 | |
| | | | | | | | | | |
Notes receivable from real estate developers | | 52,638 | | | 0 | | | 52,638 | | | 0 | | | 52,638 | |
Total assets measured at fair value | | $ | 263,230 | | | $ | 124,726 | | | $ | 138,504 | | | $ | 0 | | | $ | 263,230 | |
| | | | | | | | | | |
Financial Liabilities | | | | | | | | | | |
Debt | | $ | 3,514,879 | | | $ | 0 | | | $ | 3,514,879 | | | $ | 0 | | | $ | 3,613,797 | |
| | | | | | | | | | |
Lines of credit and other debt | | 1,242,197 | | | 0 | | | 1,242,197 | | | 0 | | | 1,242,197 | |
Other liabilities (contingent consideration) | | 15,842 | | | 0 | | | 0 | | | 15,842 | | | 15,842 | |
Total liabilities measured at fair value | | $ | 4,772,918 | | | $ | 0 | | | $ | 4,757,076 | | | $ | 15,842 | | | $ | 4,871,836 | |
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:
Marketable Securities
Marketable securities held by us and accounted for under the ASC 321 “"Investment Equity Securities”" are measured at fair value. Any change in fair value is recognized in the Consolidated Statement of Operations in 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 is readily available in active markets (Level 1).
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the marketable securities balance is as follows (in thousands):
| | | | As of | | As of |
| | | | | | | | | Three Months Ended | | Year Ended |
| | March 31, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
Beginning Balance | | $ | 94,727 |
| | $ | 49,037 |
| Beginning Balance | | $ | 124,725 | | | $ | 94,727 | |
Additional purchase | | — |
| | 8,995 |
| Additional purchase | | 0 | | | 11,757 | |
Change in fair value measurement | | (28,647 | ) | | 34,240 |
| Change in fair value measurement | | 3,578 | | | 6,132 | |
Foreign currency translation adjustment | | (11,414 | ) | | 816 |
| Foreign currency translation adjustment | | (1,678) | | | 10,138 | |
Dividend reinvestment, net of tax | | 936 |
| | 1,639 |
| Dividend reinvestment, net of tax | | 1,196 | | | 1,971 | |
| Ending Balance | | $ | 55,602 |
| | $ | 94,727 |
| Ending Balance | | $ | 127,821 | | | $ | 124,725 | |
Installment Notes Receivable on Manufactured Homes
Installment notes receivable on manufactured homes are recorded at fair value and are measured using model-derived indicative pricing using observableprimarily unobservable inputs, inclusive of default rates, interest rates and recovery rates (Level 2)3). Refer to Note 4, “Notes"Notes and Other Receivables,.” and Note 17, “Recent Accounting Pronouncement.”" for additional detail.information.
Notes Receivable from Real Estate Developers
Notes receivable from real estate developers are recorded at fair value and are measured using prevailing marketprimarily unobservable inputs including interest rates and counterparty performance (Level 2).The3). The carrying values of thosethe notes generally approximate their fair market values either due to the short-term nature of the note and/and / or the note being secured by underlying collateral and/and / or personal guarantees. Refer to Note 4, “Notes"Notes and Other Receivables,.” and Note 17, “Recent Accounting Pronouncement.”" for additional detail.information.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Long-Term Debt and Lines of Credit
The fair value of long-term debt 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 8, “Debt"Debt and Lines of Credit," for additional information.
.”
We have variable rates on our credit facilities and the revolving loans under our senior credit facility and the Safe Harbor credit facility. The fair value of the debt with variable rates approximates carrying value as the interest rates of these amounts approximate market rates. The estimated fair value of our indebtedness as of March 31, 2021, approximated its gross carrying value.
Financial Liabilities
We estimate the fair value of our contingent consideration liability 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 Instruments
The carrying values of cash and cash equivalents, other receivables and accounts payable approximate their fair market values due to the short-term nature of those instruments. These are classified as Level 1 in the hierarchy.
Level 3 Reconciliation, Measurements and Transfers
We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for 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.
Our assessment resulted in a net transfer into Level 3 of $138.5 million related to installment notes receivable on manufactured homes and notes from real estate developers during the three months ended March 31, 2021.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Inputs that are used to derive the fair value for installment notes receivables on manufactured homes and notes receivable from real estate developers transferred to Level 3 from Level 2 during the quarter ended March 31, 2021 as significant inputs used to value those instruments inclusive of default rates, interest rates, recovery rates, and counterparty performance rely heavily on internally sourced assumptions as opposed to observable market-based inputs.
The table below sets forthfollowing tables summarize changes to our financial assets and liabilities that required disclosure ofinstruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended March 31, 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Installment Notes Receivable on Manufactured Homes, net | | Notes Receivable From Real Estate Developers | | Other Liabilities (Contingent Consideration) |
Level 3 beginning balance at December 31, 2020 | | $ | 0 | | | $ | 0 | | | $ | 15,842 | |
Transfer to level 3 | | 85,866 | | | 52,638 | | | 0 | |
Transfer out of level 3 | | 0 | | | 0 | | | 0 | |
Net earnings (loss) | | 375 | | | 0 | | | 71 | |
Purchases and issuances | | 1,212 | | | 6,793 | | | 3,201 | |
Sales and settlements | | (3,814) | | | (262) | | | 0 | |
Other adjustments | | 470 | | | (883) | | | (958) | |
Level 3 ending balance at March 31, 2021 | | $ | 84,109 | | | $ | 58,286 | | | $ | 18,156 | |
Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgement is required in interpreting market data to develop fair value estimates. The fair value estimates are based on a recurring basisinformation available as of March 31, 2020. The table presents the carrying values and fair values2021. As such, our estimates of our financial instruments as of March 31, 2020 and December 31, 2019, that were measured using the valuation techniques described above (in thousands). The table excludes other financial instruments such as cash and cash equivalents, other receivables, and accounts payable as the carrying values associated with these instruments approximate fair value since their maturities are less than one year.could differ significantly from the actual carrying value.
|
| | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
Financial Assets | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
Marketable securities | | $ | 55,602 |
| | $ | 55,602 |
| | $ | 94,727 |
| | $ | 94,727 |
|
Installment notes receivable on manufactured homes, net | | 92,208 |
| | 92,208 |
| | 95,580 |
| | 95,580 |
|
Notes receivable from real estate developers | | 37,481 |
| | 37,481 |
| | 18,960 |
| | 18,960 |
|
Total | | $ | 185,291 |
| | $ | 185,291 |
| | $ | 209,267 |
| | $ | 209,267 |
|
| | | | | | | | |
Financial Liabilities | | | | | | | | |
Debt | | $ | 3,343,720 |
| | $ | 3,381,041 |
| | $ | 3,250,504 |
| | $ | 3,270,544 |
|
Lines of credit | | 582,774 |
| | 582,774 |
| | 183,898 |
| | 183,898 |
|
Other liabilities (contingent consideration) | | 4,133 |
| | 4,133 |
| | 6,134 |
| | 6,134 |
|
Total | | $ | 3,930,627 |
| | $ | 3,967,948 |
| | $ | 3,440,536 |
| | $ | 3,460,576 |
|
15. 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.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
16. Leases
We lease land under non-cancelable operating leases at 33 properties expiring at various dates through year 2085. 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 2026.
Lessee accountingAccounting
Future minimum lease payments under non-cancellable leases as of the three months ended March 31, 20202021 where we are the lessee include:
|
| | | | | | | | | | | |
Maturity of lease liabilities (in thousands) | | | | | |
| Operating Leases | | Finance Leases | | Total |
2020 (Excluding three months ended March 31, 2020) | $ | 2,186 |
| | $ | 112 |
| | $ | 2,298 |
|
2021 | 2,842 |
| | 120 |
| | 2,962 |
|
2022 | 2,863 |
| | 120 |
| | 2,983 |
|
2023 | 2,994 |
| | 120 |
| | 3,114 |
|
2024 | 3,300 |
| | 4,060 |
| | 7,360 |
|
Thereafter | 32,773 |
| | — |
| | 32,773 |
|
Total Lease Payments | $ | 46,958 |
| | $ | 4,532 |
| | $ | 51,490 |
|
Less: Imputed interest | (20,875 | ) | | (433 | ) | | (21,308 | ) |
Present Value of Lease Liabilities | $ | 26,083 |
| | $ | 4,099 |
| | $ | 30,182 |
|
ROU | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Maturity of Lease Liabilities (in thousands) | | Operating Leases | | Finance Leases | | Total |
2021 (Excluding three months ended March 31, 2021) | | $ | 3,879 | | | $ | 208 | | | $ | 4,087 | |
2022 | | 4,741 | | | 213 | | | 4,954 | |
2023 | | 4,771 | | | 178 | | | 4,949 | |
2024 | | 5,144 | | | 4,063 | | | 9,207 | |
2025 | | 5,175 | | | 0 | | | 5,175 | |
Thereafter | | 55,533 | | | 0 | | | 55,533 | |
Total Lease Payments | | $ | 79,243 | | | $ | 4,662 | | | $ | 83,905 | |
Less: Imputed interest | | (32,734) | | | (335) | | | (33,069) | |
Present Value of Lease Liabilities | | $ | 46,509 | | | $ | 4,327 | | | $ | 50,836 | |
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 Financial StatementsBalance Sheets are as follows:follows (in thousands):
| | Lease Asset and Liabilities (in thousands)
| | | | | |
Description | | Financial Statement Classification | | March 31, 2020 | | December 31, 2019 | Description | | Financial Statement Classification | | As of March 31, 2021 | | | As of December 31, 2020 |
Lease Assets | | | | | Lease Assets | | | | | | | |
Right-of-use asset obtained in exchange for new finance lease liabilities | | Other asset, net | | $ | 4,099 |
| | $ | 4,081 |
| |
Right-of-use asset obtained in exchange for new operating lease liabilities | | Other asset, net | | $ | 25,442 |
| | $ | 23,751 |
| |
Right-of-use asset obtained relative to below market operating lease | | Other asset, net | | $ | 28,178 |
| | $ | 28,366 |
| |
ROU asset obtained in exchange for new finance lease liabilities | | ROU asset obtained in exchange for new finance lease liabilities | | Investment property, net | | $ | 4,368 | | | | $ | 4,350 | |
ROU asset obtained in exchange for new operating lease liabilities | | ROU asset obtained in exchange for new operating lease liabilities | | Other assets, net | | $ | 59,272 | | | | $ | 48,419 | |
ROU asset obtained relative to below market operating lease | | ROU asset obtained relative to below market operating lease | | Other assets, net | | $ | 27,426 | | | | $ | 27,614 | |
Lease Liabilities | | | | | Lease Liabilities | | | |
Finance lease liabilities | | Other liabilities | | $ | 4,099 |
| | $ | 4,081 |
| Finance lease liabilities | | Other liabilities | | $ | 4,327 | | | | $ | 4,334 | |
Operating lease liabilities | | Other liabilities | | $ | 26,083 |
| | $ | 24,222 |
| Operating lease liabilities | | Other liabilities | | $ | 46,509 | | | | $ | 49,964 | |
Lease expense for finance and operating leases as included in our Consolidated Financial Statements of Operations are as follows:follows (in thousands):
|
| | | | | | | | | | |
Lease Expense (in thousands)
| | Three Months Ended | | Three Months Ended |
Description | | Financial Statement Classification | | March 31, 2020 | | March 31, 2019 |
Finance lease expense | | | | | | |
Amortization of right-of-use assets | | Interest expense | | $ | (18 | ) | | $ | (18 | ) |
Interest on lease liabilities | | Interest expense | | 26 |
| | 26 |
|
Operating lease cost | | General and administrative expense, Property operating and maintenance | | 974 |
| | 822 |
|
Variable lease cost | | Property operating and maintenance | | 369 |
| | 319 |
|
Total Lease Expense | | | | $ | 1,351 |
| | $ | 1,149 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | |
Description | | Financial Statement Classification | | March 31, 2021 | | March 31, 2020 | | | | |
Finance Lease Expense | | | | | | | | | | |
Amortization of ROU assets | | Interest expense | | $ | 6 | | | $ | (18) | | | | | |
Interest on lease liabilities | | Interest expense | | 26 | | | 26 | | | | | |
Operating lease cost | | General and administrative expense, Property operating and maintenance | | 2,148 | | | 974 | | | | | |
Variable lease cost | | Property operating and maintenance | | 1,299 | | | 369 | | | | | |
Short term lease cost | | Property operating and maintenance | | 61 | | | 0 | | | | | |
Total Lease Expense | | | | $ | 3,540 | | | $ | 1,351 | | | | | |
Lease term, discount rates and additional information for finance and operating leases are as follows:
|
| | | | | | | |
| | As of |
Lease Term and Discount Rate
| | March 31, 2021 |
Weighted-average Remaining Lease Terms (years) | | March 31, 2020 |
Weighted-average remainingFinance lease terms (years) | | 2.43 |
FinanceOperating lease | | 4.25 |
25.90 |
Operating leaseWeighted-average Discount Rate | | 25.60 |
|
Weighted-average discount rateFinance lease | | 2.44 | % |
Finance lease | | 2.50 | % |
Operating lease | | 4.143.80 | % |
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
|
| | | | | | | | |
Other Information (in thousands) | | Three Months Ended |
| | March 31, 2020 | | March 31, 2019 |
Cash paid for amounts included in the measurement of lease liabilities | | | | |
Operating Cash Flow from Operating leases | | $ | 590 |
| | $ | 450 |
|
Financing Cash Flow from Finance leases | | 8 |
| | 8 |
|
Total Cash Paid on Lease Liabilities | | $ | 598 |
| | $ | 458 |
|
As of the three months ended March 31, 2020, we have an additional executive office space operating lease for $2.9 million with a lease term of seven years. | | | | | | | | | | | | | | |
| | Three Months Ended |
Other Information (in thousands) | | March 31, 2021 | | March 31, 2020 |
Cash Paid For Amounts Included In The Measurement of Lease Liabilities | | | | |
Operating cash flow from operating leases | | $ | 945 | | | $ | 590 | |
| | | | |
Financing cash flow from finance leases | | 33 | | | 8 | |
Total Cash Paid On Lease Liabilities | | $ | 978 | | | $ | 598 | |
Related Party Leases: Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026, and the current average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rental increases thereafter. We entered into an additional office space operating lease which commenced in January 2020. Under this agreement, we lease approximately 20,087 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026 and the average gross base rent is $18.95 per square foot until October 31, 2020 with graduated rent increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.
Lessor Accounting
We are not the lessor for any finance leases at our MH, RV or marina properties as of March 31, 2020. 2021.
Over 95 percent 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 the reporting date,March 31, 2021, future minimum lease payments would not exceed twelve12 months. Similarly, over 94 percent of our investment property, net on the Consolidated Balance Sheets, and related depreciation amounts relate to assets whereby we are the lessor under an operating lease.
32
17. Recent Accounting Pronouncements
Recent Accounting Pronouncements - Adopted
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” “CECL” 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. As of January 1, 2020, we adopted the fair value option for our installment notes receivable on manufactured homes and the notes receivable within the GTSC JV which resulted in fair value adjustments of $1.6 million and $0.3 million, respectively. We also adopted the fair value option on notes receivable from real estate developers. The carrying values of those notes generally approximate their fair market values either due to the short-term nature of the loan and/or or the note being secured by underlying collateral and/or personal guarantees. The adoption of CECL had an immaterial impact on our remaining financial instruments within the CECL scope. Refer to Note 4, “Notes and Other Receivables.”, and Note 6. “Investment in Affiliates.” for additional detail.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Future minimum lease payments under non-cancellable leases at our marinas and RV properties as of the three months ended March 31, 2021 where we are the lessor include:
| | | | | | | | |
Maturity of Lease Liabilities (in thousands) | | Operating Leases |
2021 (Excluding three months ended March 31, 2021) | | $ | 8,261 | |
2022 | | 6,951 | |
2023 | | 5,039 | |
2024 | | 2,090 | |
2025 | | 1,220 | |
Thereafter | | 2,628 | |
Total Undiscounted Cash Flows | | $ | 26,189 | |
The components of lease income were as follows (in thousands):
| | | | | | | | | | | | | | |
| | Three Months Ended |
Description | | March 31, 2021 | | March 31, 2020 |
Operating Leases | | | | |
| | | | |
Fixed lease income | | $ | 3,657 | | | $ | 311 | |
Variable lease income | | $ | 1,028 | | | $ | 397 | |
17. Recent Accounting Pronouncements
Recent Accounting Pronouncements - Not Yet Adopted
In March 2020, the FASB issued ASU No. 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. We are currently evaluating the impact that ASU 2020-04 may have on our Consolidated Financial Statements and related disclosures.
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" ("ASU 2020-06"), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, "Debt: Debt with Conversion and Other Options," which requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer's own stock and classified in stockholders' equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, "Earnings Per Share," to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. We are currently evaluating the impact that ASU 2020-06 may have on our Consolidated Financial Statements and related disclosure.
SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
18. Subsequent Events
Shelf Registration Statement on Form S-3
Subsequent to the quarter ended March 31, 2021, on April 5, 2021, in connection with the expiration of our universal shelf registration statement on Form S-3, that was filed with the SEC on April 6, 2018, we filed a new universal shelf registration statement on Form S-3 with the SEC, which was deemed automatically effective and which provides for the registration of unspecified amounts of equity and debt securities. However, there can be no assurance that we will be able to complete any such offerings of securities in the future.
Acquisitions
Subsequent to the quarter ended March 31, 2021, we acquired an RV resort in Davenport, Florida with 148 developed sites for a total purchase price of $25.0 million.
Subsequent to the quarter ended March 31, 2021, we acquired a MH community located in Brighton, Michigan with 476 MH sites for a total purchase price of $24.0 million. In conjunction with the acquisition, the Operating Partnership created a new class of OP units, named Series J preferred units. As of April 21, 2021, 240,000 Series J preferred OP units were outstanding. The Series J preferred OP units have an issuance price of $100.00 and carry a preferred return of 2.85 percent per year. Subject to certain limitations, each Series J preferred OP unit is exchangeable at any time into that number of shares of the Company's common stock equal to the quotient obtained by dividing $100.00 by $165.00 (as such ratio is subject to adjustment for certain capital events). The holder may require redemption in cash (i) during the 30-day period following a change of control of the Company or (ii) any time after the fifth anniversary of the issuance date of the Series J preferred OP units.
We have evaluated our Consolidated Financial Statements for subsequent events through the date that this Form 10-Q was issued.
| |
ITEM 2. | ITEM 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, along with our 20192020 Annual Report.
OVERVIEW
We are a fully integrated, self-administered and self-managed REIT. As of March 31, 2020,2021, we owned and operated or held an interest in a portfolio of 424562 developed properties located in 3339 states throughout the U.S. and one province in Canada, including 266277 MH communities, 124141 RV communities, andresorts, 34 properties containing both MH and RV sites.
sites, and 110 marinas. We have been in the business of acquiring, operating, developing and expanding MH communities and RV communitiesresorts 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.
COVID-19 IMPACT
WeAs of March 31, 2021, there are no government regulations preventing the operations of any of our MH communities, RV resorts or marinas. Ontario, Canada does have implemented measurestravel restrictions in place that if extended into May 2021, could delay the opening of seasonal resorts in Canada. Additionally, the border for recreational travel between the Unites States and Canada remains closed with no defined opening date, which could impact cross border traffic to resorts and marinas across the United State and Canada. The execution of our operational and financial plans has helped to mitigate the impact of COVID-19 on our business. These efforts include increasing our cash position, bolstering liquidity and eliminating, reducing or deferring non-essential expenditures. Additionally, our Board of Directors and executive officers have elected to forgo base compensation for at least the second quarter. Cost containment measures have also included the furlough of a group of team members and reductions in base compensation for certain non-furloughed team members. We will provide medical health coverage to furloughed team members, if enrolled, at no cost to the team member.
To bolster liquidity, we increased unrestricted cash on hand as of March 31, 2020 to $382.5 million by drawing on our line of credit and completing a secured financing transaction for $230.0 million. As of March 31, 2020, there is $222.5 million of remaining capacity on the line of credit. We also have 143 unencumbered properties with an estimated asset value, as of March 31, 2020, of approximately $2.6 billion available to secure potential mortgage debt.
We are continuingcontinue to provide essential services using social distancing techniques and minimal contact. Our community offices are partially staffed with reduced hours and open for essential services only. To promote social distancing, we are encouraging our residents to use our online rent payment portals and other payment methods. AmenitiesWe have been closedinstituted numerous health and safety measures at the directionour communities and our Main Office to keep team members safe. These measures include infrared thermometers at entrances to monitor team members' temperatures, increased cleaning and sanitation of stateshared spaces and local municipalities and to prevent social gathering.distancing protocols throughout our footprint. We closely monitor and track stay-at-home orders by federal, state and local authorities and hold dailyregular status calls with our operations and Main Office leadership teams. We have implemented and continue to encourage remote working arrangements, wherever possible, to keep our team members safe and to do our part to promote social distancing.
We have collected approximately 98 percent of our April MH rent to date. While we are experiencing lower traffic at the communities as would be expected with shelter-in-place mandates; we are still seeing demand for move-ins and expect less move-outs during this time.
We have halted all evictions and provided a hardship program to those residents who have been economically disadvantaged as a result of COVID-19. This hardship program defers the payment of April and May rent ratably over twelve months, commencing on July 1, 2020. As of April 21, 2020, less than three percent of residents in our MH communities, including owner occupied sites and rental home sites have applied and been approved for this program. We anticipate a majority of these residents have or will receive unemployment benefits and economic stimulus under the CARES Act which will aid in the payment of rent due. To the extent stay-at-home restrictions are not lifted, this program could be extended to provide additional temporary relief to residents. Due to the effects of COVID-19 on our residents, we have also suspended charging various fees, including late fees for delinquent payments, resident-paid fees for credit or debit card usage, non-sufficient funds fees, and incremental month to month fees if a resident lease terminates during the pandemic. We have also deferred certain increases to monthly rental rates.
Certain of our RV resorts remain open, where government regulations permit, however all indoor and outdoor activities and gatherings have been suspended to encourage social distancing. Forty four RV resorts in the northern United States and Canada that normally would commence operations in early spring have had their openings delayed and do not yet have confirmed opening dates from local municipalities. To the extent stay-at-home orders and travel restrictions are not lifted, total RV revenue and related ancillary revenue from resort activities will be adversely impacted. For these resorts, peak demand is from Memorial Day weekend in May to Labor Day weekend in September.
We remain committed to assisting individuals who are in the process of leasing a site, or leasinga wet slip, a dry storage space, or purchasing a home, while maintaining health and safety protocols including following strict social distancing. Virtual viewings of homes are being utilized to avoid or minimize contact. To
The extent to which the extent stay-at-home ordersCOVID-19 pandemic impacts our operations, financial condition and travel restrictionsfinancial results will depend on future developments, which are not lifted, home sale revenue willhighly uncertain and cannot be adversely impacted.predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The uncertainty of this situation precludes any prediction as to the full impact of the COVID-19 pandemic.
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 20192020 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 is a non-GAAP financial measure that we believe is helpful to investors as a supplemental measure of operating performance because it is an indicator of the return on property investment and provides a method of comparing property performance over time. We use NOI as a key measure when evaluating performance and growth of particular properties and/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 net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of our financial performance or GAAP cash flow from operating activities as a measure of our liquidity; nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. Because of the inclusion of items such as interest, depreciation and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”("NAREIT") as GAAP net income (loss), excluding gains (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. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of our operating performance. By excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. We also use FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“("Core FFO”FFO"). We believe that Core FFO provides 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 FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, FFO is not intended as a measure of a REIT’sREIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO is calculated in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.
SUN COMMUNITIES, INC.
RESULTS OF OPERATIONS
We report operating results under two segments: Real Property Operations and Home Sales and Rentals. The Real Property Operations segment owns, operates, develops, or has an interest in, a portfolio of MH and RV communities throughout the U.S. and in Canada, and is in the business 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 to tenants and prospective tenants of our communities. We evaluate segment operating performance based on NOI and gross profit. Refer to Note 11, “Segment Reporting,” in our accompanying Consolidated Financial Statements for additional information.
Summary Statements of Operations
The extent to which the COVID-19 pandemic impacts our operations, financial condition and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic.
The following tables reconcile the Net income / (loss) attributable to Sun Communities, Inc. common stockholders to NOI and summarize our consolidated financial results for the three months ended March 31, 20202021 and 20192020 (in thousands):
|
| | | | | | | | |
| | Three Months Ended |
| | March 31, 2020 | | March 31, 2019 |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | | $ | (16,086 | ) | | $ | 34,331 |
|
Other revenues | | (6,263 | ) | | (8,480 | ) |
Home selling expenses | | 3,992 |
| | 3,324 |
|
General and administrative expenses | | 25,517 |
| | 21,887 |
|
Catastrophic weather-related charges, net | | 606 |
| | 782 |
|
Depreciation and amortization | | 83,689 |
| | 76,556 |
|
Loss on extinguishment of debt | | 3,279 |
| | 653 |
|
Interest expense | | 32,416 |
| | 34,014 |
|
Interest on mandatorily redeemable preferred OP units / equity | | 1,041 |
| | 1,094 |
|
(Gain) / loss on remeasurement of marketable securities | | 28,647 |
| | (267 | ) |
(Gain) / loss on foreign currency translation | | 17,479 |
| | (1,965 | ) |
Other expense, net | | 302 |
| | 67 |
|
Loss on remeasurement of notes receivable | | 2,112 |
| | — |
|
Income from nonconsolidated affiliates | | (52 | ) | | (388 | ) |
Loss on remeasurement of investment in nonconsolidated affiliates | | 2,191 |
| | — |
|
Current tax expense | | 450 |
| | 214 |
|
Deferred tax benefit | | (130 | ) | | (217 | ) |
Preferred return to preferred OP units / equity | | 1,570 |
| | 1,323 |
|
Income / (loss) attributable to noncontrolling interests | | (962 | ) | | 1,041 |
|
Preferred stock distribution | | — |
| | 432 |
|
NOI / Gross Profit | | $ | 179,798 |
|
| $ | 164,401 |
|
|
| | | | | | | | |
| | Three Months Ended |
| | March 31, 2020 | | March 31, 2019 |
Real Property NOI | | $ | 156,552 |
| | $ | 141,844 |
|
Home Sales NOI / Gross Profit | | 10,555 |
| | 10,341 |
|
Rental Program NOI | | 27,985 |
| | 26,017 |
|
Ancillary NOI / Gross Profit | | 2,713 |
| | 3,077 |
|
Site rent from Rental Program (included in Real Property NOI) (1) | | (18,007 | ) | | (16,878 | ) |
NOI / Gross Profit | | $ | 179,798 |
| | $ | 164,401 |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2021 | | March 31, 2020 | | | | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | | $ | 24,782 | | | $ | (16,086) | | | | | |
Interest income | | (2,631) | | | (2,350) | | | | | |
Brokerage commissions and other revenues, net | | (5,960) | | | (3,913) | | | | | |
General and administrative expense | | 38,203 | | | 25,349 | | | | | |
Catastrophic event-related charges, net | | 2,414 | | | 606 | | | | | |
Business combination expense | | 1,232 | | | — | | | | | |
Depreciation and amortization | | 123,304 | | | 83,689 | | | | | |
| | | | | | | | |
Loss on extinguishment of debt (see Note 8) | | — | | | 3,279 | | | | | |
Interest expense | | 39,517 | | | 32,416 | | | | | |
Interest on mandatorily redeemable preferred OP units / equity | | 1,036 | | | 1,041 | | | | | |
(Gain) / loss on remeasurement of marketable securities (see Note 14) | | (3,661) | | | 28,647 | | | | | |
(Gain) / loss on foreign currency translation | | (25) | | | 17,479 | | | | | |
| | | | | | | | |
Other expense, net | | 1,099 | | | 972 | | | | | |
(Income) / loss on remeasurement of notes receivable (see Note 4) | | (376) | | | 2,112 | | | | | |
Income from nonconsolidated affiliates (see Note 6) | | (1,171) | | | (52) | | | | | |
(Income) / loss on remeasurement of investment in nonconsolidated affiliates (see Note 6) | | (104) | | | 2,191 | | | | | |
Current tax (benefit) / expense (see Note 12) | | (229) | | | 450 | | | | | |
Deferred tax benefit (see Note 12) | | (147) | | | (130) | | | | | |
Preferred return to preferred OP units / equity | | 2,864 | | | 1,570 | | | | | |
Income / (loss) attributable to noncontrolling interests | | 295 | | | (962) | | | | | |
| | | | | | | | |
| | | | | | | | |
NOI | | $ | 220,442 | | | $ | 176,308 | | | | | |
(1)
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2021 | | March 31, 2020 | | | | |
Real Property NOI | | $ | 204,652 | | | $ | 171,339 | | | | | |
Home Sales NOI | | 10,609 | | | 6,548 | | | | | |
| | | | | | | | |
Service, retail, dining and entertainment NOI | | 5,181 | | | (1,579) | | | | | |
| | | | | | | | |
NOI | | $ | 220,442 | | | $ | 176,308 | | | | | |
The renter’s monthly payment includes the site rent and an amount attributable to the home lease. The site rent is reflected in
We evaluate segment operating performance based on NOI. Real Property Operations’ segment revenue. For purposes of management analysis, site rentproperty - transient revenue is included in Rental Programthe RV segment revenue. Real property - transient (excluding Vacation rental) revenue is expected to evaluateapproximate $175.9 million annually. Real property - transient (excluding Vacation rental) revenue was recognized $26.0 million in the incrementalfirst quarter and is expected to be $46.3 million in the second quarter, $76.3 million in the third quarter, and $27.3 million in the fourth quarter. Real property - transient (excluding Vacation rental) revenue gains associated withwas approximately $134.7 million for the implementation ofyear ended December 31, 2020. In 2020, Real property - transient (excluding Vacation rental) was recognized 18.8 percent in the Rental Program,first quarter, 15.6 percent in the second quarter, 44.9 percent in the third quarter, and to assess20.7 percent in the overall growth and performance of the Rental Program and financial impact on the Company’s operations.
Comparison of the Three Months Endedthree months ended March 31, 20202021 and 20192020
Real Property Operations - Total Portfolio
The following tables reflect certain financial and other information for our Total Portfolio as of and for the three months ended March 31, 2021 and 2020 and 2019:
|
| | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 | | Change | | % Change |
Financial Information (in thousands) | | | | | | | |
Income from real property | $ | 237,785 |
| | $ | 215,083 |
| | $ | 22,702 |
| | 10.6 | % |
Property operating expenses | | | | | | | |
Payroll and benefits | 21,330 |
| | 18,871 |
| | 2,459 |
| | 13.0 | % |
Legal, taxes, and insurance | 3,180 |
| | 2,384 |
| | 796 |
| | 33.4 | % |
Utilities | 25,774 |
| | 24,428 |
| | 1,346 |
| | 5.5 | % |
Supplies and repairs | 7,030 |
| | 6,354 |
| | 676 |
| | 10.6 | % |
Other | 6,743 |
| | 5,872 |
| | 871 |
| | 14.8 | % |
Real estate taxes | 17,176 |
| | 15,330 |
| | 1,846 |
| | 12.0 | % |
Property operating expenses | 81,233 |
| | 73,239 |
| | 7,994 |
| | 10.9 | % |
Real Property NOI | $ | 156,552 |
| | $ | 141,844 |
| | $ | 14,708 |
| | 10.4 | % |
|
| | | | | | | | | | | |
| As of | | |
| March 31, 2020 | | March 31, 2019 | | Change |
Other Information | | | | | |
Number of properties | 424 |
| | 379 |
| | 45 |
|
| | | | |
|
|
MH occupancy | 95.8 | % | | | | |
RV occupancy | 100.0 | % | | | | |
MH & RV blended occupancy (1) | 96.7 | % | | 96.4 | % | | 0.3 | % |
| | | | | |
Sites available for development | 10,290 |
| | 11,246 |
| | (956 | ) |
| | | | | |
Monthly base rent per site - MH | $ | 580 |
| | $ | 565 |
| | $ | 15 |
|
Monthly base rent per site - RV (2) | $ | 493 |
| | $ | 467 |
| (3) | $ | 26 |
|
Monthly base rent per site - Total | $ | 561 |
| | $ | 543 |
| (3) | $ | 18 |
|
(in thousands, except for statistical information):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2021 | | March 31, 2021(1) | | Change | | % Change | | | | | | | | |
Financial Information | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Real property (excluding Transient) | $ | 268,766 | | | $ | 207,186 | | | $ | 61,580 | | | 29.7 | % | | | | | | | | |
Real property - transient | 32,536 | | | 30,347 | | | 2,189 | | | 7.2 | % | | | | | | | | |
Other | 29,311 | | | 20,816 | | | 8,495 | | | 40.8 | % | | | | | | | | |
Total Operating | 330,613 | | | 258,349 | | | 72,264 | | | 28.0 | % | | | | | | | | |
Expense | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Property Operating | 125,961 | | | 87,010 | | | 38,951 | | | 44.8 | % | | | | | | | | |
Real Property NOI | $ | 204,652 | | | $ | 171,339 | | | $ | 33,313 | | | 19.4 | % | | | | | | | | |
(1)Overall occupancy percentage includesCanadian currency figures included within the three months ended March 31, 2020 have been translated at the 2021 average exchange rates.
| | | | | | | | | | | | | | | | | | | | |
| | As of | | |
| | March 31, 2021 | | March 31, 2020 | | Change |
Other Information | | | | | | |
Number of properties(1) | | 562 | | | 422 | | | 140 | |
| | | | | | |
MH occupancy | | 96.5 | % | | | | |
RV occupancy(2) | | 100.0 | % | | | | |
MH & RV blended occupancy(3) | | 97.3 | % | | 96.7 | % | | 0.6 | % |
| | | | | | |
Adjusted MH occupancy(4) | | 97.8 | % | | | | |
Adjusted RV occupancy(5) | | 100.0 | % | | | | |
Adjusted MH & RV occupancy(6) | | 98.3 | % | | 98.3 | % | | — | % |
| | | | | | |
Sites available for MH & RV development | | 9,646 | | | 10,293 | | | (647) | |
| | | | | | |
Monthly base rent per site - MH | | $ | 596 | | | $ | 581 | | (8) | $ | 15 | |
Monthly base rent per site - RV(7) | | $ | 522 | | | $ | 499 | | (8) | $ | 23 | |
Monthly base rent per site - Total | | $ | 579 | | | $ | 563 | | (8) | $ | 16 | |
(1)Include MH communities, RV resorts and marinas.
(2)Occupancy percentages include annual RV sites and exclude transient RV sites.
(3)Occupancy percentages include MH and annual RV sites, and excludesexclude transient RV sites.
(2) (4)Adjusted occupancy percentages include MH and exclude recently completed but vacant expansion sites.
(5)Adjusted occupancy percentages include annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(6)Adjusted occupancy percentages include MH and annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(7)Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(3) (8)Canadian currency figures included within the three months ended March 31, 20192020 have been translated at 20202021 average exchange rates.
The $14.7$33.3 million increase in Real Property NOI consists of $9.4$4.6 million from Same Communities as detailed below, $25.0 million from the Marinas and $5.3$3.7 million from recently acquired properties in the three months ended March 31, 20202021 as compared to the same period in 2019.
Real Property Operations - Same CommunitiesCommunity
A key management tool used when evaluating performance and growth of our properties is a comparison of our Same Communities. The Same Communities consist ofdata includes all properties which we have owned and operated continuously since January 1, 2019,2020, exclusive of properties recently completed or under construction, and other properties as determined by management. The Same Community data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions or unique situations.
In order to evaluate the growth of the Same Communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Community portfolio is the reclassification of water and sewerutility revenues from income from realReal property revenue to utilities.operating expenses. A significant portion of our utility charges are re-billed to our residents. We have reclassified water and sewer revenues of $9.0 million and $8.5 million for the three months ended March 31, 2020 and 2019, respectively, to reflect the utility expenses associated with our Same Community portfolio net of recovery.
The following tables reflect certain financial and other information for our Same Communities as of and for the three months ended March 31, 2021 and 2020 (in thousands, except for statistical information).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| Total Same Community | | MH | | RV |
| March 31, 2021 | | March 31, 2020 | | Change | | % Change | | March 31, 2021 | | March 31, 2020 | | Change | | % Change | | March 31, 2021 | | March 31, 2020 | | Change | | % Change |
Financial Information | | | | | | | | | | | | | | | | | | | | | | | |
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
Real property (excluding Transient) | $ | 215,471 | | | $ | 205,218 | | | $ | 10,253 | | | 5.0 | % | | $ | 172,741 | | | $ | 164,828 | | | $ | 7,913 | | | 4.8 | % | | $ | 42,729 | | | $ | 40,390 | | | $ | 2,339 | | | 5.8 | % |
Real property - transient | 25,907 | | | 28,870 | | | (2,963) | | | (10.3) | % | | 601 | | | 928 | | | (327) | | | (35.2) | % | | 25,306 | | | 27,942 | | | (2,636) | | | (9.4) | % |
Other | 7,047 | | | 5,895 | | | 1,152 | | | 19.5 | % | | 4,826 | | | 3,810 | | | 1,016 | | | 26.7 | % | | 2,222 | | | 2,085 | | | 137 | | | 6.6 | % |
Total Operating | 248,425 | | | 239,983 | | | 8,442 | | | 3.5 | % | | 178,168 | | | 169,566 | | | 8,602 | | | 5.1 | % | | 70,257 | | | 70,417 | | | (160) | | | (0.2) | % |
Expense | | | | | | | | | | | | | | | | | | | | | | | |
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Property Operating | 73,015 | | | 69,189 | | | 3,826 | | | 5.5 | % | | 43,005 | | | 40,685 | | | 2,320 | | | 5.7 | % | | 30,010 | | | 28,504 | | | 1,506 | | | 5.3 | % |
Real Property NOI | $ | 175,410 | | | $ | 170,794 | | | $ | 4,616 | | | 2.7 | % | | $ | 135,163 | | | $ | 128,881 | | | $ | 6,282 | | | 4.9 | % | | $ | 40,247 | | | $ | 41,913 | | | $ | (1,666) | | | (4.0) | % |
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| | As of | | |
| | March 31, 2021 | | March 31, 2020 | | Change |
Other Information | | | | | | |
Number of properties | | 407 | | | 407 | | | — | |
| | | | | | |
MH occupancy | | 97.3 | % | | | | |
RV occupancy(1) | | 100.0 | % | | | | |
MH & RV blended occupancy(2) | | 97.9 | % | | | | |
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Adjusted MH occupancy(3) | | 98.4 | % | | | | |
Adjusted RV occupancy(4) | | 100.0 | % | | | | |
Adjusted MH & RV blended occupancy(5) | | 98.8 | % | | 96.9 | % | (6) | 1.9 | % |
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Sites available for development | | 7,373 | | | 6,975 | | | 398 | |
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Monthly base rent per site - MH | | $ | 599 | | | $ | 580 | | (8) | $ | 19 | |
Monthly base rent per site - RV(7) | | $ | 524 | | | $ | 499 | | (8) | $ | 25 | |
Monthly base rent per site - Total | | $ | 582 | | | $ | 562 | | (8) | $ | 20 | |
(1)Occupancy percentages include annual RV sites and 2019. exclude transient RV sites.
(2)Occupancy percentages include MH and annual RV sites, and exclude transient RV sites.
(3)Adjusted occupancy percentages include MH and exclude recently completed but vacant expansion sites.
(4)Adjusted occupancy percentages include annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(5)Adjusted occupancy percentages include MH and annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(6)The occupancy percentages for 2020 have been adjusted to reflect incremental growth period-over-period from newly rented MH expansion sites and the conversion of transient RV sites to annual RV sites.
(7)Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(8)Canadian currency figures included within three months ended March 31, 2020 have been translated at 2021 average exchange rates.
The amounts in the table belowabove reflect constant currency for comparative purposes. Canadian currency figures included withinWe have reclassified water and sewer revenues of $16.5 million and $14.8 million for the three months ended March 31, 2019 have been translated at2021 and 2020, average exchange rates.to reflect the utility expenses associated with our Same Community portfolio net of recovery.
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| Three Months Ended |
| March 31, 2020 | | March 31, 2019 | | Change | | % Change |
Financial Information (in thousands) | | | | | | | |
Income from real property | $ | 214,672 |
| | $ | 204,138 |
| | $ | 10,534 |
| | 5.2 | % |
Property operating expenses | | | | | | | |
Payroll and benefits | 18,812 |
| | 18,424 |
| | 388 |
| | 2.1 | % |
Legal, taxes, and insurance | 2,888 |
| | 2,339 |
| | 549 |
| | 23.5 | % |
Utilities | 15,110 |
| | 15,720 |
| | (610 | ) | | (3.9 | )% |
Supplies and repairs | 6,129 |
| | 6,302 |
| | (173 | ) | | (2.7 | )% |
Other | 5,567 |
| | 5,405 |
| | 162 |
| | 3.0 | % |
Real estate taxes | 15,964 |
| | 15,160 |
| | 804 |
| | 5.3 | % |
Property operating expenses | 64,470 |
| | 63,350 |
| | 1,120 |
| | 1.8 | % |
Real Property NOI | $ | 150,202 |
| | $ | 140,788 |
| | $ | 9,414 |
| | 6.7 | % |
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| | As of | | |
| | March 31, 2020 | | March 31, 2019 | | Change |
Other Information | | | | | | |
Number of properties | | 367 |
| | 367 |
| | — |
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MH occupancy | | 96.1 | % | | | | |
RV occupancy | | 100.0 | % | | | | |
MH & RV blended occupancy (2) | | 97.0 | % | | | |
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Adjusted MH occupancy (1) | | 97.9 | % | | | | |
Adjusted RV occupancy (1) | | 100.0 | % | | | | |
Adjusted MH & RV blended occupancy (1) (2) | | 98.4 | % | | 96.6 | % | | 1.8 | % |
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Monthly base rent per site - MH | | $ | 589 |
| | $ | 567 |
| | $ | 22 |
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Monthly base rent per site - RV (3) | | $ | 495 |
| | $ | 467 |
| | $ | 28 |
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Monthly base rent per site - Total | | $ | 567 |
| | $ | 544 |
| | $ | 23 |
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(1)
| The adjusted occupancy percentage includes 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 2019 has been adjusted to reflect incremental growth period-over-period from filled MH 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. |
For the three months ended March 31, 2021 and 2020, and 2019, the 6.7Total Same Community $4.6 million, or 2.7 percent, growth in NOI is attributable to the MH segment $6.3 million, or 4.9 percent, growth in NOI, partially offset by the RV segment $1.7 million, or 4.0 percent decrease in NOI.
The MH segment $6.3 million, or 4.9 percent, growth in NOI is primarily due to increased Income from reala increase in Real property (excluding transient) revenue of $10.5$7.9 million, or 5.24.8 percent. The 5.2 percent increase is primarily attributableReal property (excluding transient) revenue increased due to a 1.83.2 percent increase in occupancy and a 4.3 percent increase in total monthly base rent per MH site when compared to the same period in 2019. The2020, and a 1.9 percent increase in Income from real property was partially offset by a $1.1occupancy.
The RV segment $1.7 million, or 1.84.0 percent, decrease in NOI is due to a decrease in Real property - transient revenue of $2.6 million, or 9.4 percent, and an increase in Property operating expenses, primarily attributable to increases in real estate taxes, insurance,supplies and repair, payroll and benefits.
benefit and utility costs..
Marinas Summary
The following table reflects certain financial and other information for our marinas as of and for the three months ended March 31, 2021 (in thousands, except for statistical information):
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| | Three Months Ended |
| | March 31, 2021 |
Financial Information | | |
Revenues | | |
Real property (excluding Transient) | | $ | 46,106 | |
Real property - transient | | 868 | |
Other | | 1,649 | |
Total Operating | | 48,623 | |
| | |
Expenses | | |
Property Operating | | 23,575 | |
Real Property NOI | | 25,048 | |
Service, retail, dining and entertainment | | |
Service, retail, dining and entertainment revenue | | 44,354 | |
Service, retail, dining and entertainment expense | | 38,009 | |
Service, Retail, Dining and Entertainment NOI | | 6,345 | |
| | |
Marina NOI | | $ | 31,393 | |
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Other Information - Marinas | | March 31, 2021 |
Number of properties(a) | | 110 |
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Total wet slips and dry storage | | 38,753 |
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(a) Marina properties comprised of four properties acquired in 2021 and 106 properties acquired in 2020.
Home Sales Summary
We purchase new homes and acquire pre-owned and repossessed manufactured homes, generally located within our communities, from lenders, dealers, and former residents to sell or lease to current and prospective residents.
The following table reflects certain financial and statistical information for our Home Sales Program for the three months ended March 31, 20202021 and 20192020 (in thousands, except for average selling prices and statistical information):
| | | Three Months Ended | | Three Months Ended | |
| March 31, 2020 | | March 31, 2019 | | Change | | % Change | | March 31, 2021 | | March 31, 2020 | | Change | | % Change | |
Financial Information | | | | | | | | Financial Information | | | | | | | | |
New homes | | | | | | | | |
New Homes | | New Homes | | |
New home sales | $ | 15,596 |
| | $ | 15,381 |
| | $ | 215 |
| | 1.4 | % | New home sales | $ | 22,972 | | | $ | 15,596 | | | $ | 7,376 | | | 47.3 | % | |
New home cost of sales | 12,610 |
| | 13,146 |
| | (536 | ) | | (4.1 | )% | New home cost of sales | 18,674 | | | 12,610 | | | 6,064 | | | 48.1 | % | |
NOI / Gross Profit – new homes | $ | 2,986 |
| | $ | 2,235 |
| | $ | 751 |
| | 33.6 | % | |
Gross Profit – new homes | | Gross Profit – new homes | $ | 4,298 | | | $ | 2,986 | | | $ | 1,312 | | | 43.9 | % | |
Gross margin % – new homes | 19.1 | % | | 14.5 | % | | 4.6 | % | |
|
| Gross margin % – new homes | 18.7 | % | | 19.1 | % | | (0.4) | % | | |
Average selling price – new homes | $ | 131,059 |
| | $ | 123,048 |
| | $ | 8,011 |
| | 6.5 | % | Average selling price – new homes | $ | 154,174 | | | $ | 131,059 | | | $ | 23,115 | | | 17.6 | % | |
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Pre-owned homes | | | | | | |
| |
Pre-owned Homes | | Pre-owned Homes | | |
Pre-owned home sales | $ | 24,991 |
| | $ | 24,237 |
| | $ | 754 |
| | 3.1 | % | Pre-owned home sales | $ | 29,227 | | | $ | 24,991 | | | $ | 4,236 | | | 17.0 | % | |
Pre-owned home cost of sales | 17,422 |
| | 16,131 |
| | 1,291 |
| | 8.0 | % | Pre-owned home cost of sales | 18,584 | | | 17,422 | | | 1,162 | | | 6.7 | % | |
NOI / Gross Profit – pre-owned homes | $ | 7,569 |
| | $ | 8,106 |
| | $ | (537 | ) | | (6.6 | )% | |
Gross Profit – pre-owned homes | | Gross Profit – pre-owned homes | $ | 10,643 | | | $ | 7,569 | | | $ | 3,074 | | | 40.6 | % | |
Gross margin % – pre-owned homes | 30.3 | % | | 33.4 | % | | (3.1 | )% | |
|
| Gross margin % – pre-owned homes | 36.4 | % | | 30.3 | % | | 6.1 | % | | |
Average selling price – pre-owned homes | $ | 38,806 |
| | $ | 36,013 |
| | $ | 2,793 |
| | 7.8 | % | Average selling price – pre-owned homes | $ | 42,605 | | | $ | 38,806 | | | $ | 3,799 | | | 9.8 | % | |
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| | |
Total home sales | | | | | | | | |
Total Home Sales | | Total Home Sales | | |
Revenue from home sales | 40,587 |
| | 39,618 |
| | 969 |
| | 2.4 | % | Revenue from home sales | $ | 52,199 | | | $ | 40,587 | | | $ | 11,612 | | | 28.6 | % | |
Cost of home sales | 30,032 |
| | 29,277 |
| | 755 |
| | 2.6 | % | Cost of home sales | 37,258 | | | 30,032 | | | 7,226 | | | 24.1 | % | |
NOI / Gross Profit – home sales | $ | 10,555 |
| | $ | 10,341 |
| | $ | 214 |
| | 2.1 | % | |
Home selling expenses | | Home selling expenses | 4,332 | | | 4,007 | | | 325 | | | 8.1 | % | |
Home sales NOI | | Home sales NOI | $ | 10,609 | | | $ | 6,548 | | | $ | 4,061 | | | 62.0 | % | |
| | | | | | | | | | | | | | | |
Statistical Information | | | | | | | | Statistical Information | | | |
New home sales volume | 119 |
| | 125 |
| | (6 | ) | | (4.8 | )% | New home sales volume | 149 | | | 119 | | | 30 | | | 25.2 | % | |
Pre-owned home sales volume | 644 |
| | 673 |
| | (29 | ) | | (4.3 | )% | Pre-owned home sales volume | 686 | | | 644 | | | 42 | | | 6.5 | % | |
Total home sales volume | 763 |
| | 798 |
| | (35 | ) | | (4.4 | )% | Total home sales volume | 835 | | | 763 | | | 72 | | | 9.4 | % | |
Gross Profit - new homesNew Homes
For the three months ended March 31, 2020,2021, the $0.8$1.3 million, or 33.643.9 percent increase in gross profit is primarily the result of a 33.625.2 percent increase in new home sales gross margin partially offset byvolume coupled with a 4.817.6 percent decreaseincrease in the new home sales volume,average selling price, as compared to the same period in 2019.2020.
Gross Profit - pre-owned homesPre-owned Homes
For the three months ended March 31, 2020,2021, the $0.5$3.1 million, or 6.640.6 percent decreaseincrease in gross profit is primarily the resultresult of a 6.66.1 percent decreaseincrease in pre-owned homes gross margin, primarily due to a 9.8 percent increase in the pre-owned home average selling price, coupled with a 4.36.5 percent decreaseincrease in pre-owned home sales volume, as compared to the same period in 2019.2020.
Homes sales NOI
For the three months ended March 31, 2021, the $4.1 million or 62.0 percent increase in NOI is primarily the result of a 9.4 percent increase in home sales volume coupled with increase in home average selling price, as compared to the same period in 2020.
Rental Program Summary
The following table reflects certain financial and other information for our Rental Program as of and for the three months ended March 31, 20202021 and 20192020 (in thousands, except for statistical information):
| | | Three Months Ended | | Three Months Ended | |
| March 31, 2020 | | March 31, 2019 | | Change | | % Change | | March 31, 2021 | | March 31, 2020 | | Change | | % Change | |
Financial Information | | | | | | | | Financial Information | | | | | | | | |
Revenues | | | | | | | | Revenues | | |
Rental home revenue | $ | 15,472 |
| | $ | 13,971 |
| | $ | 1,501 |
| | 10.7 | % | |
Site rent from Rental Program (1) | 18,007 |
| | 16,878 |
| | 1,129 |
| | 6.7 | % | |
Rental Program revenue | 33,479 |
| | 30,849 |
| | 2,630 |
| | 8.5 | % | |
Home rent | | Home rent | $ | 17,022 | | | $ | 15,469 | | | $ | 1,553 | | | 10.0 | % | |
Site rent | | Site rent | 19,117 | | | 18,007 | | | 1,110 | | | 6.2 | % | |
Total | | Total | 36,139 | | | 33,476 | | | 2,663 | | | 8.0 | % | |
| Expenses | | | | | | | | Expenses | | |
Repairs and refurbishment | 2,953 |
| | 2,349 |
| | 604 |
| | 25.7 | % | |
Taxes and insurance | 2,013 |
| | 1,864 |
| | 149 |
| | 8.0 | % | |
Other | 528 |
| | 619 |
| | (91 | ) | | (14.7 | )% | |
| Rental Program operating and maintenance | 5,494 |
| | 4,832 |
| | 662 |
| | 13.7 | % | Rental Program operating and maintenance | 5,224 | | | 4,823 | | | 401 | | | 8.3 | % | |
Rental Program NOI | $ | 27,985 |
| | $ | 26,017 |
| | $ | 1,968 |
| | 7.6 | % | Rental Program NOI | $ | 30,915 | | | $ | 28,653 | | | $ | 2,262 | | | 7.9 | % | |
| | | | | | | | | | | | | | | |
Other Information | | | | | | | | Other Information | | | | | |
Number of sold rental homes | 234 |
| | 210 |
| | 24 |
| | 11.4 | % | Number of sold rental homes | 211 | | | 234 | | | (23) | | | (9.8) | % | |
Number of occupied rentals, end of period | 11,431 |
| | 11,170 |
| | 261 |
| | 2.3 | % | Number of occupied rentals, end of period | 11,473 | | | 11,431 | | | 42 | | | 0.4 | % | |
Investment in occupied rental homes, end of period | $ | 596,319 |
| | $ | 547,844 |
| | $ | 48,475 |
| | 8.8 | % | Investment in occupied rental homes, end of period | $ | 621,869 | | | $ | 596,319 | | | $ | 25,550 | | | 4.3 | % | |
Weighted average monthly rental rate, end of period | $ | 1,009 |
| | $ | 963 |
| | $ | 46 |
| | 4.8 | % | Weighted average monthly rental rate, end of period | $ | 1,055 | | | $ | 1,009 | | | $ | 46 | | | 4.6 | % | |
(1)
The renter’s monthly payment includes the site rent and an amount attributable to the home lease. The site rentRental Program NOI is reflectedincluded in Real Property Operations’ segment revenue. For purposes of management analysis, site rent is included inNOI. The Rental Program revenue to evaluate the incremental revenue gains associated with the implementation of the Rental Program, andNOI is separately reviewed to assess the overall growth and performance of the Rental Program and its financial impact on the Company’sCompany's operations.
Rental Program NOI increased $2.0$2.3 million, or 7.67.9 percent, for the three months ended March 31, 20202021 as compared to the same period in 2019.2020. The increase is primarily due to an increase in Rental Program revenue of 8.5$2.7 million, or 8.0 percent, or $2.6 million, partially offset by a $0.7 million increase in expenses. The increase in revenue is partially attributabledue to a 4.84.6 percent increase in the weighted average monthly rental rate and a 2.30.4 percent increase in the number of occupied rentals in the three months ended March 31, 2020 as compared to the same period in 2019.
Other Items - Statements of Operations(1)
The following table summarizes other income and expenses for the three months ended March 31, 2021 and 2020 and 2019 (amounts in(in thousands):
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| | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 | | Change | | % Change |
Ancillary revenues, net | $ | 2,713 |
| | $ | 3,077 |
| | $ | (364 | ) | | (11.8 | )% |
Interest income | $ | 2,350 |
| | $ | 4,800 |
| | $ | (2,450 | ) | | (51.0 | )% |
Brokerage commissions and other revenues, net | $ | 3,913 |
| | $ | 3,680 |
| | $ | 233 |
| | 6.3 | % |
Home selling expenses | $ | 3,992 |
| | $ | 3,324 |
| | $ | 668 |
| | 20.1 | % |
General and administrative expenses | $ | 25,517 |
| | $ | 21,887 |
| | $ | 3,630 |
| | 16.6 | % |
Catastrophic weather-related charges, net | $ | 606 |
| | $ | 782 |
| | $ | (176 | ) | | (22.5 | )% |
Depreciation and amortization | $ | 83,689 |
| | $ | 76,556 |
| | $ | 7,133 |
| | 9.3 | % |
Loss on extinguishment of debt | $ | 3,279 |
| | $ | 653 |
| | $ | 2,626 |
| | 402.1 | % |
Interest expense | $ | 32,416 |
| | $ | 34,014 |
| | $ | (1,598 | ) | | (4.7 | )% |
Interest on mandatorily redeemable preferred OP units / equity | $ | 1,041 |
| | $ | 1,094 |
| | $ | (53 | ) | | (4.8 | )% |
Gain / (loss) on remeasurement of marketable securities | $ | (28,647 | ) | | $ | 267 |
| | $ | (28,914 | ) | | N/M (2) |
|
Gain / (loss) on foreign currency translation | $ | (17,479 | ) | | $ | 1,965 |
| | $ | (19,444 | ) | | N/M (2) |
|
Other expense, net | $ | (302 | ) | | $ | (67 | ) | | $ | (235 | ) | | 350.7 | % |
Loss on remeasurement of notes receivable | $ | (2,112 | ) | | $ | — |
| | $ | (2,112 | ) | | N/A |
|
Income from nonconsolidated affiliates | $ | 52 |
| | $ | 388 |
| | $ | (336 | ) | | (86.6 | )% |
Loss on remeasurement of investment in nonconsolidated affiliates | $ | (2,191 | ) | | $ | — |
| | $ | (2,191 | ) | | N/A |
|
Current tax expense | $ | (450 | ) | | $ | (214 | ) | | $ | (236 | ) | | 110.3 | % |
Deferred tax benefit | $ | 130 |
| | $ | 217 |
| | $ | (87 | ) | | (40.1 | )% |
Preferred return to preferred OP units / equity | $ | 1,570 |
| | $ | 1,323 |
| | $ | 247 |
| | 18.7 | % |
Income / (loss) attributable to noncontrolling interests | $ | (962 | ) | | $ | 1,041 |
| | $ | (2,003 | ) | | (192.4 | )% |
Preferred stock distribution | $ | — |
| | $ | 432 |
| | $ | (432 | ) | | (100.0 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| March 31, 2021 | | March 31, 2020 | | Change | | % Change | | | | | | | | |
Service, retail, dining and entertainment, net | $ | 5,181 | | | $ | (1,579) | | | $ | 6,760 | | | 428.1 | % | | | | | | | | |
Interest income | $ | 2,631 | | | $ | 2,350 | | | $ | 281 | | | 12.0 | % | | | | | | | | |
Brokerage commissions and other, net | $ | 5,960 | | | $ | 3,913 | | | $ | 2,047 | | | 52.3 | % | | | | | | | | |
General and administrative expense | $ | 38,203 | | | $ | 25,349 | | | $ | 12,854 | | | 50.7 | % | | | | | | | | |
Catastrophic event-related charges, net | $ | 2,414 | | | $ | 606 | | | $ | 1,808 | | | 298.3 | % | | | | | | | | |
Business combination expense | $ | 1,232 | | | $ | — | | | $ | 1,232 | | | N/A | | | | | | | | |
Depreciation and amortization | $ | 123,304 | | | $ | 83,689 | | | $ | 39,615 | | | 47.3 | % | | | | | | | | |
Loss on extinguishment of debt (see Note 8) | $ | — | | | $ | 3,279 | | | $ | (3,279) | | | (100.0) | % | | | | | | | | |
Interest expense | $ | 39,517 | | | $ | 32,416 | | | $ | 7,101 | | | 21.9 | % | | | | | | | | |
Interest on mandatorily redeemable preferred OP units / equity | $ | 1,036 | | | $ | 1,041 | | | $ | (5) | | | (0.5) | % | | | | | | | | |
Gain / (loss) on remeasurement of marketable securities (see Note 14) | $ | 3,661 | | | $ | (28,647) | | | $ | 32,308 | | | 112.8 | % | | | | | | | | |
Gain / (loss) on foreign currency translation | $ | 25 | | | $ | (17,479) | | | $ | 17,504 | | | 100.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | |
Other expense, net | $ | (1,099) | | | $ | (972) | | | $ | (127) | | | 13.1 | % | | | | | | | | |
Income / (loss) on remeasurement of notes receivable (see Note 4) | $ | 376 | | | $ | (2,112) | | | $ | 2,488 | | | 117.8 | % | | | | | | | | |
Income from nonconsolidated affiliates (see Note 6) | $ | 1,171 | | | $ | 52 | | | $ | 1,119 | | | N/M | | | | | | | | |
Income / (loss) on remeasurement of investment in nonconsolidated affiliates (see Note 6) | $ | 104 | | | $ | (2,191) | | | $ | 2,295 | | | 104.7 | % | | | | | | | | |
Current tax benefit / (expense) (see Note 12) | $ | 229 | | | $ | (450) | | | $ | 679 | | | 150.9 | % | | | | | | | | |
Deferred tax benefit (see Note 12) | $ | 147 | | | $ | 130 | | | $ | 17 | | | N/M | | | | | | | | |
Preferred return to preferred OP units / equity | $ | 2,864 | | | $ | 1,570 | | | $ | 1,294 | | | 82.4 | % | | | | | | | | |
Income attributable to noncontrolling interests | $ | 295 | | | $ | (962) | | | $ | 1,257 | | | 130.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | |
(1) Only items determined by management to be material, of interest, or unique to the quarterperiods disclosed above are explained below.
(2)N/M = Percentage change is not meaningful (“N/M “)meaningful.
Service, retail, dining and entertainment, net- for the three months ended March 31, 2021, increased primarily due to the addition of service revenue from the Safe Harbor acquisition in the fourth quarter of 2020.
Interest income - for the three months ended March 31, 2020, decreased2021, increased primarily due to lowerhigher balances on our notes receivablereceivable.
Brokerage commissions and derecognitionother revenues, net - for the three months ended March 31, 2021, increased primarily due to an increase in brokerage commissions as a result of collateralized notes receivablean increase in November 2019.the number of brokered home sales, as compared to 2020.
General and administrative expenses - for the three months ended March 31, 2020,2021, increased primarily due to an increase in wages and incentives driven by growth in strategic initiatives and acquisition activity as compared to the same period in 2019.2020.
Catastrophic event-related charges, net - for the three months ended March 31, 2021, increased primarily due to fire damages and winter ice storms.
Business combination expenses - for the three months ended March 31, 2021, were incurred as a result of our recent acquisitions of marinas. Refer to Note 3, "Real Estate Acquisitions and Dispositions" of our accompanying Consolidated Financial Statements for additional information.
Depreciation and amortization - for the three months ended March 31, 2020,2021, increased as a result of significant property acquisitions during 2019.2020 and 2021. Refer to Note 3, “Real"Real Estate Acquisitions” ofAcquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional information.
Loss on extinguishment of debt - for the three months ended March 31, 2020, increased2021, decreased primarily due to higherno prepayment penalties related to debt and financing activity as compared to the same period 2019.in 2020. Refer to Note 8, “Debt"Debt and Lines of Credit”Credit," in our accompanying Consolidated Financial Statements for additional information.
Interest expense -for the three months ended March 31, 2021, increased primarily due to the addition of debt related to Safe Harbor as compared to the same period in 2020. Refer to Note 8, "Debt and Lines of Credit," of our accompanying Consolidated Financial Statements for additional information.
LossGain / (loss) on remeasurement of marketable securities - for the three months ended March 31, 2020,2021, was a $3.7 million gain as compared to a $28.6 million loss in the same period in 2020, which represents therepresent remeasurement lossgains from our investment in marketable securities. Refer to Note 14, “Fair"Fair Value of Financial Instruments,,”" in our accompanying Consolidated Financial Statements for additional information.
Gain / (loss) on foreign currency translation - for the three months ended March 31, 2020,2021, was a $25.0 thousand gain as compared to a $17.5 million loss as compared to $2.0 million gain duringin the same period in 2019,2020, primarily due to the fluctuationfluctuations in exchange raterates on Canadian and Australian denominated currencies.
LossIncome / (loss) on remeasurement of notes receivable -for the three months ended March 31, 2020, represents the adjustment of our in-house financing notes receivable portfolio, for which we elected the fair value option on January 1, 2020. Refer to Note 4, "Notes and Other Receivables," and Note 14, “Fair"Fair Value of Financial instruments,” and Note 17, “Recent Accounting Pronouncements,”Instruments," in our accompanying Consolidated Financial Statements for additional information.
Income from nonconsolidated affiliates - decreased primarily due to our nonconsolidated affiliates’ decreased performance impacted by COVID-19 for the three months ended March 31, 2020. Refer to Note 6, “Investment in Affiliates,” in our accompanying Consolidated Financial Statements for additional information.
Loss/ (loss) on remeasurement of investment in nonconsolidated affiliates - for the three months ended March 31, 2020, represents the adjustment of our equity investment in GTSC, for which we elected the fair value option on January 1, 2020. Refer to Note 6, “"Investment in Nonconsolidated Affiliates,.” and Note 17, “Recent Accounting Pronouncements,”" in our accompanying Consolidated Financial Statements for additional information.
Current tax expensePreferred return to preferred OP units / equity - for the three months ended March 31, 2021, increased primarily as a result of the volume of preferred OP units issued in conjunction with various acquisitions since 2020. Refer to Note 12, “Income Taxes,”3, "Real Estate Acquisitions and Dispositions," and Note 9, "Equity and Temporary Equity," of our accompanying Consolidated Financial Statements for additional information.
Preferred return to preferred OP units / equity - for the three months ended March 31, 2020 increased primarily as a result of issuing 90,000 Series E Preferred OP units in conjunction with an acquisition in March 2020. Refer to Note 3, “Acquisitions,” and Note 9, “Equity and Temporary Equity,” of our accompanying Consolidated Financial Statements for additional information.
Income / (loss) attributable to noncontrolling interests - for the three months ended March 31, 2020 was a loss primarily as a result of decreased performance in our RV based joint ventures2021, increased as compared to the same period in 2019. This decreased2020, primarily due to improved financial performance is attributableof the Company and its consolidated VIEs. Refer to the impact of COVID-19 on cancellations at RV resorts.Note7, "Consolidated Variable Interest Entities," in our accompanying Consolidated Financial Statements for additional information.
SUN COMMUNITIES, INC.
Reconciliation of Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders to FFO
The following table reconciles Net income / (loss) attributable to Sun Communities, Inc. common stockholders to FFO for the three months ended March 31, 20202021 and 20192020 (in thousands, except per share amounts):
| | | Three Months Ended | | Three Months Ended | |
| March 31, 2020 | | March 31, 2019 | | March 31, 2021 | | March 31, 2020 | |
Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | $ | (16,086 | ) | | $ | 34,331 |
| Net Income / (Loss) Attributable to Sun Communities, Inc. Common Stockholders | $ | 24,782 | | | $ | (16,086) | | |
Adjustments | | | | Adjustments | | |
Depreciation and amortization | 83,752 |
| | 76,712 |
| Depreciation and amortization | 123,076 | | | 83,752 | | |
Depreciation on nonconsolidated affiliates | | Depreciation on nonconsolidated affiliates | 30 | | | — | | |
(Gain) / loss on remeasurement of marketable securities | 28,647 |
| | (267 | ) | (Gain) / loss on remeasurement of marketable securities | (3,661) | | | 28,647 | | |
Loss on remeasurement of investment in nonconsolidated affiliates | 2,191 |
| | — |
| |
Loss on remeasurement of notes receivable | 2,112 |
| | — |
| |
Income / (loss) attributable to noncontrolling interests | (882 | ) | | 723 |
| |
(Gain) / loss on remeasurement of investment in nonconsolidated affiliates | | (Gain) / loss on remeasurement of investment in nonconsolidated affiliates | (104) | | | 2,191 | | |
(Gain) / loss on remeasurement of notes receivable | | (Gain) / loss on remeasurement of notes receivable | (376) | | | 2,112 | | |
Loss attributable to noncontrolling interests | | Loss attributable to noncontrolling interests | (147) | | | (882) | | |
Preferred return to preferred OP units | 874 |
| | 527 |
| Preferred return to preferred OP units | 480 | | | 874 | | |
Preferred distribution to Series A-4 preferred stock | — |
| | 432 |
| |
| Gain on disposition of assets, net | (5,562 | ) | | (5,679 | ) | Gain on disposition of assets, net | (8,155) | | | (5,562) | | |
FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities (1)
| 95,046 |
| | 106,779 |
| |
FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1)
| | FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1)
| 135,925 | | | 95,046 | | |
| Adjustments | | | | Adjustments | | |
Other acquisition related costs (2) | 385 |
| | 160 |
| |
| Business combination expense and other acquisition related costs(2) | | Business combination expense and other acquisition related costs(2) | 1,953 | | | 385 | | |
| Loss on extinguishment of debt | 3,279 |
| | 653 |
| Loss on extinguishment of debt | — | | | 3,279 | | |
Catastrophic weather-related charges, net | 606 |
| | 782 |
| |
Loss of earnings - catastrophic weather related (3) | 300 |
| | — |
| |
| Catastrophic event-related charges, net | | Catastrophic event-related charges, net | 2,414 | | | 606 | | |
Loss of earnings - catastrophic event-related(3) | | Loss of earnings - catastrophic event-related(3) | 200 | | | 300 | | |
| (Gain) / loss on foreign currency translation | 17,479 |
| | (1,965 | ) | (Gain) / loss on foreign currency translation | (25) | | | 17,479 | | |
Other expense, net | 302 |
| | 67 |
| Other expense, net | 716 | | | 302 | | |
Deferred tax benefits | (130 | ) | | (217 | ) | Deferred tax benefits | (147) | | | (130) | | |
Core FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible(1) | $ | 117,267 |
| | $ | 106,259 |
| |
| Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1) | | Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1) | $ | 141,036 | | | $ | 117,267 | | |
| | | | | | | | |
Weighted average common shares outstanding - basic | 92,410 |
| | 85,520 |
| Weighted average common shares outstanding - basic | 107,932 | | | 92,410 | | |
Add | | | | Add | | |
Common OP units | 2,412 |
| | 2,722 |
| |
Common shares dilutive effect: March 2021 forward equity offering | | Common shares dilutive effect: March 2021 forward equity offering | 229 | | | — | | |
Common stock issuable upon conversion of stock options | 1 |
| | 1 |
| Common stock issuable upon conversion of stock options | — | | | 1 | | |
Restricted stock | 524 |
| | 512 |
| Restricted stock | 191 | | | 524 | | |
Common stock issuable upon conversion of Series A-3 preferred OP units | 75 |
| | 75 |
| |
Common stock issuable upon conversion of Series A-1 preferred OP units | 746 |
| | 803 |
| |
Common stock issuable upon conversion of Series C preferred OP units | 345 |
| | — |
| |
Common stock issuable upon conversion of Series A-4 preferred stock | — |
| | 472 |
| |
Common OP units | | Common OP units | 2,596 | | | 2,412 | | |
| Common stock issuable upon conversion of certain preferred OP units | | Common stock issuable upon conversion of certain preferred OP units | 791 | | | 1,166 | | |
| Weighted Average Common Shares Outstanding - Fully Diluted | 96,513 |
| | 90,105 |
| Weighted Average Common Shares Outstanding - Fully Diluted | 111,739 | | | 96,513 | | |
| | | | | | | | |
FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities Per Share - Fully Diluted | $ | 0.98 |
| | $ | 1.19 |
| |
Core FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities Per Share - Fully Diluted | $ | 1.22 |
| | $ | 1.18 |
| |
FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted | | FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted | $ | 1.22 | | | $ | 0.98 | | |
| Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted | | Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted | $ | 1.26 | | | $ | 1.22 | | |
(1)The effect of certain anti-dilutive convertible securities is excluded from these items.
| |
(2)(2)These costs represent the 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. | These costs represent the 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 represents 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. |
(3)Adjustment represents 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.
LIQUIDITY AND CAPITAL RESOURCES
Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unit holders of the Operating Partnership, capital improvement of properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment.
Subject to market conditions, we intend to continue to identify opportunities to expand our development pipeline and acquire existing communities.properties. We finance acquisitions through available cash, secured financing, draws on our lines of credit, the assumption of existing debt on properties and the issuance of equity securities. We will continue to evaluate acquisition opportunities that meet our criteria. Refer to Note 3, “Real"Real Estate Acquisitions” and Dispositions," in ourthe accompanying Consolidated Financial Statements for information regarding recent communityproperty acquisitions.
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 intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our lines of credit, and the use of debt and equity offerings under our shelf registration statement. Refer to Note 8, “Debt"Debt and Lines of Credit,”" and Note 9, “Equity"Equity and Temporary Equity,”" in ourthe accompanying Consolidated Financial Statements for additional information.
Capital Expenditures - MH, RV and Marinas
Our capital expenditures include expansion sites and development construction costs, lot modifications, recurring capital expenditures and rental home purchases.
ForExpansion and development activities costs of $46.9 million and $60.2 million, were completed for the three months ended March 31, 2021 and 2020, and 2019, expansionrespectively. Expansion and development activities of $60.2 million and $51.2 million, respectively, related to costs consistingconsisted primarily of construction of sites and other costs necessary to complete home site improvements. The increase is primarily driven by the ground-up developmentsimprovements at our MH and redevelopment at five communities.RV properties.
ForLot modification expenditures were $7.3 million and $7.9 million, for the three months ended March 31, 2021 and 2020, respectively, at our MH and 2019, lot modification expenditures were $7.9 million and $5.6 million, respectively.RV properties. These expenditures improve asset quality in our communities and are incurred when an existing home is removed 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’smanufacturer's installation requirements and state building codes, include items such as new foundations, driveways and utility upgrades.
ForRecurring capital expenditures at our MH and RV properties were $10.5 million and $5.9 million, for the three months ended March 31, 2021 and 2020, and 2019, recurring capitalrespectively. These expenditures were $5.9 million and $5.3 million, respectively, relatedrelate to our continued commitment to the upkeep of our MH and RV properties.
Due to COVID-19, effective April 1, 2020, we have significantly curtailed non-essentialRecurring capital expenditures at our marinas were $3.1 million for the three months ended March 31, 2021, and include items such as: dredging, dock repairs and improvements, and equipment maintenance and upgrades.
Growth project expenditures were $18.1 million and $4.4 million, for the three months ended March 31, 2021 and 2020, respectively. Growth projects consist of revenue generating or expense reducing activities at MH communities, RV resorts and we are carefully assessing acquisition activity inmarinas. This includes, but is not limited to, utility efficiency and renewable energy projects, site, slip or amenity upgrades such as the near term to preserve financial flexibility.addition of a garage, shed or boat lift, and other special capital projects that substantiate an incremental rental increase.
We invest in the acquisition of homes intended for the Rental Program. Expenditures for these investments depend upon the condition of the markets for repossessions and new home sales, as well as rental homes. We finance certain of our new home purchases with a $12.0 million manufactured home floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third-party financing of our home sales, available manufactured home floor plan financing and working capital available on our lines of credit.
Cash Flow Activities
Our cash flow activities are summarized as follows (in thousands):
| | | Three Months Ended | | Three Months Ended |
| March 31, 2020 | | March 31, 2019 | | March 31, 2021 | | March 31, 2020 |
Net Cash Provided by Operating Activities | $ | 118,513 |
| | $ | 103,141 |
| Net Cash Provided by Operating Activities | $ | 220,490 | | | $ | 118,513 | |
Net Cash Used for Investing Activities | $ | (169,330 | ) | | $ | (392,483 | ) | Net Cash Used for Investing Activities | $ | (285,978) | | | $ | (169,330) | |
Net Cash Provided by Financing Activities | $ | 411,109 |
| | $ | 261,097 |
| Net Cash Provided by Financing Activities | $ | 93,002 | | | $ | 411,109 | |
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | $ | (382 | ) | | $ | 158 |
| Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash | $ | 19 | | | $ | (382) | |
Cash, cash equivalents, and restricted cash increased by $359.9approximately $27.5 million from $34.8$92.6 million as of December 31, 2019,2020, to $394.7$120.2 million as of March 31, 2020.2021.
Operating Activities - Net cash provided by operating activities increased by $15.4$102.0 million from $103.1 million for the three months ended March 31, 2019 to $118.5 million for the three months ended March 31, 2020.2020 to $220.5 million for the three months ended March 31, 2021.
Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes; (e) current volatility in economic conditions and the financial markets; and (f) the effects of the COVID-19 pandemic. See “Risk Factors”"Risk Factors" in Part I, Item 1A of our 20192020 Annual Report and Part II, Item 1A of this report.Report.
Investing Activities - Net cash used for investing activities was $286.0 million for the three months ended March 31, 2021, compared to $169.3 million for the three months ended March 31, 2020, compared to $392.5 million for the three months ended March 31, 2019.2020. Refer to Note 3, “Real"Real Estate Acquisitions” and Dispositions," in our accompanying Consolidated Financial Statements for additional information.
Financing Activities - Net cash provided by financing activities was $93.0 million for the three months ended March 31, 2021, compared to $411.1 million for the three months ended March 31, 2020, compared to net cash provided by financing activities of $261.1 million for the three months ended March 31, 2019.2020. Refer to Note 8, “Debt"Debt and Lines of Credit,”" and Note 9, “Equity"Equity and Temporary Equity,”" in our accompanying Consolidated Financial Statements for additional information.
Financial Flexibility
On March 2, 2021, we priced a $1.1 billion underwritten public offering of an aggregate of 8,050,000 shares at a public offering price of $140.00 per share, before underwriting discounts and commissions. The offering consisted of 4,000,000 shares offered directly by us and 4,050,000 shares offered under a forward equity sales agreement (the "March 2021 Forward Equity Offering"). We sold the 4,000,000 shares on March 9, 2021 and received net proceeds of $537.6 million. We may elect to settle the forward sale agreement relating to the remaining 4,050,000 shares upon one or more forward settlement dates no later than March 2022. We may also elect to cash settle or net share settle all or a portion of our obligations under the March 2021 Forward Equity Offering if we conclude it is in our best interest to do so. If we elect to cash settle or net settle the March 2021 Forward Equity Offering, we may not receive any proceeds. If we fully physically settle the March 2021 Forward Equity Offering, we expect to receive net proceeds of approximately $544.3 million.
On September 30, 2020 and October 1, 2020, we entered into two forward sale agreements (the "September 2020 Forward Equity Offering") relating to an underwritten registered public offering of 9,200,000 shares of our common stock at a public offering price of $139.50 per share. The offering closed on October 5, 2020. We did not initially receive any proceeds from the sale of shares of our common stock in the offering. On October 26, 2020, we physically settled the September 2020 Forward Equity Offering (by the delivery of shares of our common stock) and received net proceeds of approximately $1.2 billion. We used approximately $1.1 billion of the net proceeds to fund the cash portion of the Safe Harbor purchase price, and the remainder for working capital and general corporate purposes.
In May 2020, we closed an underwritten registered public offering of 4,968,000 shares of common stock. Proceeds from the offering were $633.1 million after deducting expenses related to the offering. We used the net proceeds of this offering to repay borrowings outstanding under the revolving loan under our senior credit facility.
In July 2017, we entered into an at the market offering sales agreement (as amended, the “Sales Agreement”(the "Sales Agreement") with certain sales agents (collectively, the “Sales Agents”"Sales Agents"), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents 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. Through March 31, 2020,2021, we have sold shares of our common stock for gross proceeds of $163.8 million under the Sales Agreement. There were no issuances of common stock under the Sales Agreement during the three months ended March 31, 20202021 or during the year ended December 31, 2019.2020.
In October 2019, we assumed a term loan facility with Citibank, N.A. (“Citibank”("Citibank"), in the amount of $58.0 million in relation 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.rate plus a margin ranging from 1.20 percent to 2.05 percent. The outstanding balance was $54.2 million atas of March 31, 20202021 and $57.0 million at December 31, 2019,2020 was $42.5 million and $45.0 million, respectively.
In May 2019, we amended and restated our credit agreement with Citibank N.A. and certain other lenders. Pursuant to the credit agreement, we entered into aan unsecured senior credit facility with Citibank and certain lenders in the amount of $750.0 million, comprised of a $650.0 million revolving loan, with the ability to use up to $100.0 million for advances in Australian dollars, and a $100.0 million term loan (the “A"A&R Facility”Facility"). As of March 31, 2020, the term loan was fully drawn. The A&R Credit Agreement has a four-year term ending May 21, 2023, which can be extended for two additional six-month periods, subject to the satisfaction of certain conditions as defined in the credit agreement. The credit agreement also provides for additional commitments in an amount not to exceed $350.0 million. The funding of these additional commitments is subject to certain conditions, including obtaining the consent of the lenders, some of which are outside of our control. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $1.1 billion.
The A&R Facility bears interest at a floating rate based on the Eurodollar rate or Bank Bill Swap Bid Rate plus a margin that is determined based on our leverage ratio calculated in accordance with the credit agreement, which margin can range from 1.20 percent to 2.10 percent for the revolving loan and 1.20 percent to 2.05 percent for the term loan. As of March 31, 2020,2021, the margin based on our leverage ratio was 1.21.20 percent on the revolving loan and 1.21.20 percent on the term loan. We had $424.9 million and $100.0$352.9 million of borrowings on the revolving loan and no borrowings on the term loan, respectively, as of March 31, 2020.2021. We had $123.6$40.4 million of borrowings on the revolving loan and no borrowings on the term loan, as of December 31, 2019.2020.
The A&R Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit with Citibank, N.A. ("Citibank"), but does reduce the borrowing amount available. At March 31, 20202021 and December 31, 2019,2020, we had approximately $2.6$2.2 million and $2.8$2.1 million of availability,outstanding letters of credit, respectively.
Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. We are currentlyAs of March 31, 2021, we were in compliance with these covenants.covenants and do not anticipate that we will be unable to meet these covenants in the near term as a result of COVID-19's impact on our business. The most restrictive financial covenants for the A&R Facility are as follows:
|
| | | | | | | | | | | | | |
Covenant | | Requirement | | As of March 31, 20202021 |
Maximum Leverage Ratioleverage ratio | | <65.0% | | 27.7%27.1% |
Minimum Fixed Charge Coverage Ratiofixed charge coverage ratio | | >1.40 | | 3.553.65 |
Minimum Tangible Net Worthtangible net worth | | >$3,257,1213,731,946 | | $5,610,0187,757,794 |
Maximum Dividend Payout Ratiodividend payout ratio | | <95.0% | | 60.4%58.1% |
Maximum Variable Rate Indebtnessvariable rate indebtedness | | <50.0% | | 4.4%5.4% |
On October 30, 2020, in relation to the acquisition of Safe Harbor, we indirectly assumed approximately $829.0 million of Safe Harbor's debt owed to Citizens Bank N.A. ("Citizens"). On December 22, 2020, this facility was amended to, among other things, (a) increase the size of the revolving commitments available to Safe Harbor from $500.0 million to $1.3 billion, subject to borrowing base availability, (b) modify certain provisions relating to the determination of the borrowing base, (c) increase the cap on the incremental borrowing capacity from $350.0 million to $500.0 million, which allows Safe Harbor to request an increase to the revolving commitments and / or to establish additional term loans subject to the higher cap and the satisfaction of certain condition, and (d) modify certain financial covenants. The revolving loan and term loan under the Safe Harbor facility both expire on October 11, 2024. The term loan component of the Safe Harbor Facility can be extended for two additional 12-month periods, subject to the satisfaction of certain conditions set forth in the credit agreement. The revolving commitments do not have an extension option.
The Safe Harbor Facility bears interest at a floating rate based on an adjusted LIBOR rate or a base rate, plus a margin that is determined based on Safe Harbor's ratio of consolidated funded debt to total asset value, calculated in accordance with the credit agreement, which margin can range from 1.375 percent to 2.250 percent for adjusted LIBOR rate loans and 0.375 percent to 1.250 percent for base rate loans. As of March 31, 2021, based on Safe Harbor's ratio of consolidated funded debt to total asset value, the margin was 2.000 percent on any adjusted LIBOR rate loans and 1.000 percent on any base rate loans. The Safe Harbor Facility is secured by the personal property of Safe Harbor and certain related entities and subsidiaries and a pledge of the equity interests in certain subsidiaries of Safe Harbor and related entities and subsidiaries, subject to customary exceptions. At the lender's option, the Safe Harbor Facility will become immediately due and payable upon an event of default that is continuing under the credit agreement. Safe Harbor had $19.0 million and $500.0 million of borrowings under the revolving loan and term loan respectively, as of March 31, 2021. Safe Harbor had $652.0 million and $500.0 million of borrowings under the revolving loan and term loan respectively, as of December 31, 2020.
The Safe Harbor Facility provides Safe Harbor with the ability to issue letters of credit. Its issuance of letters of credit does not increase its borrowings outstanding under its line of credit with Citizens, but does reduce the borrowing amount available. The balance of the outstanding letters of credit for Safe Harbor was approximately $0.3 million at March 31, 2021 and December 31, 2020.
Pursuant to the terms of the Safe Harbor Facility, we are subject to various financial and other covenants. As of March 31, 2021, we were in compliance with these covenants and do not anticipate that we will be unable to meet these covenants in the near term as a result of COVID-19's impact on our marina business. The most restrictive financial covenants for the Safe Harbor Facility are as follows:
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Covenant | | Requirement | | As of March 31, 2021 |
Maximum leverage ratio | | <60.0% | | 20.3% |
Minimum fixed charge coverage ratio (pre-distribution) | | >1.35 | | 4.18 |
Minimum fixed charge coverage ratio (post-distribution) | | >1.00 | | 3.25 |
Minimum borrowing base coverage ratio | | >1.00 | | 2.95 |
We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, expansion and development of communities,properties, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/and / or the collateralization of our properties. At March 31, 2020, we had 143 unencumbered properties.
We have implemented measures to mitigate the impact of COVID-19 on our business. These efforts include increasing our cash position, bolstering liquidity and eliminating, reducing or deferring non-essential expenditures. Additionally, our Board of Directors and executive officers have elected to forgo base compensation for at least the second quarter. Cost containment measures have also included the furlough of a group of team members and reductions in base compensation for certain non-furloughed team members. We will provide health benefit coverage to furloughed team members, if enrolled, at no cost to the team member.
To bolster liquidity, we increasedhad unrestricted cash on hand as of March 31, 2020 to2021 of approximately $380.0 million by drawing on our line of credit and completing a $230.0 million secured financing transaction.$105.1 million. As of March 31, 2020,2021, there is approximately $222.5 million$1.7 billion of remaining capacity on the linelines of credit. We also have 143credit under the A&R Facility and the Safe Harbor Facility. At March 31, 2021 we had a total of 260 unencumbered MH and RV properties, of which 61 support the borrowing base for the $750.0 million revolving loan under our A&R Facility and 31 support the borrowing base for a term loan facility. The remaining 168 unencumbered MH and RV properties, with an estimated asset value of approximately $2.8 billion as of March 31, 2020, of approximately $2.6 billion2021 are available to secure potential mortgage debt. At March 31, 2021 we had a total of 110 unencumbered marinas, of which 108 support the borrowing base for our Safe Harbor Facility.
From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain debt financing or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the MH, RV and RV community industrymarina industries at the time, including the effects of the COVID-19 pandemic, the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those markets could make borrowing more difficult to secure, more expensive, or effectively unavailable. See “Risk Factors”"Risk Factors" in Part I, Item 1A of our 20192020 Annual Report and in Part II, Item 1A of this 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.
As of March 31, 2020,2021, our net debt to enterprise value was approximately 22.619.7 percent (assuming conversion of all common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, Series C preferred OP units, Series D preferred OP units, and Series E preferred OP units.units, Series F preferred OP units, Series G preferred OP units, Series H preferred OP units, and Series I preferred OP units to shares of common stock). Our debt has a weighted average maturity of approximately 10.69.5 years and a weighted average interest rate of 3.63.4 percent.
Off-Balance Sheet Arrangements
Our off-balance sheet investments include nonconsolidated affiliates. These investments all have varying ownership structures. Substantially all of our nonconsolidated affiliates are accounted for under the equity method of accounting as we have the ability to exercise significant influence, but not control, over the operating and financial decisions of these JVjoint venture arrangements. Refer to Note 6,"Investment "Investment in Nonconsolidated Affiliates," and Note 8, "Debt"Debt and Lines of Credit," in the accompanying consolidated financial statements,Consolidated Financial Statements, for additional information on our off-balance sheet investments.
Nonconsolidated Affiliate Indebtedness
GTSC - During September 2019, GTSC LLC entered into a warehouse line of credit with a maximum loan amount of $125.0 million. During FebruarySeptember 2020, the maximum amount was increased to $140.0$180.0 million. As of March 31, 2020,2021, the aggregate carrying amount of debt, including both our and our partners’partner's share, incurred by GTSC was approximately $139.9$180.0 million (of which our proportionate share is approximately $56.0$72.0 million). The debt bears interest at a variable rate based on LIBOR plus 1.65 percent per annum and matures on September 15, 2023. Refer to Note 6,"Investment "Investment in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information on our nonconsolidated affiliates.
Sungenia JV - During May 2020, Sungenia JV entered into a debt facility agreement with a maximum loan amount of 27.0 million Australian dollars, or $20.5 million converted at the March 31, 2021 exchange rate. As of March 31, 2021, the aggregate carrying amount of debt, including both our and our partners' share, incurred by Sungenia JV was $6.6 million (of which our proportionate share is $3.3 million). The debt bears interest at a variable rate based on Australian BBSY plus 2.05 percent per annum and is available for a minimum of three years. Refer to Note 6, "Investment in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information on our nonconsolidated affiliates.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains various “forward-looking statements”"forward-looking statements" within the meaning of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act"), and the 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 filing that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as “forecasts,” “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “predicts,” “potential,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed"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. These risks and uncertainties may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks disclosed under “Risk Factors”"Risk Factors" in our 20192020 Annual Report, on Form 10-K,and in our other filings with the SEC, and in Part II, Item 1A of this report, such risks and uncertainties include, but are not limited to:
•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, the real estate industry, and the markets in which we operate;
•difficulties in our ability to evaluate, finance, complete and integrate acquisitions (including the Safe Harbor acquisition), developments and expansions successfully;
•our liquidity and refinancing demands;
•our ability to obtain or refinance maturing debt;
•our ability to maintain compliance with covenants contained in our debt facilities;
•availability of capital;
•changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar and the Australian dollar;
•our ability to maintain rental rates and occupancy levels;
•our failureability to maintain effective internal control over financial reporting and disclosure controls and procedures;
•increases in interest rates and operating costs, including insurance premiums and real property taxes;
•risks related to natural disasters such as hurricanes, earthquakes, floods and wildfires;
•general volatility of the capital markets and the market price of shares of our capital stock;
•our failureability to maintain our status as a REIT;
•changes in real estate and zoning laws and regulations;
•legislative or regulatory changes, including changes to laws governing the taxation of REITs;
•litigation, judgments or settlements;
•competitive market forces;
•the ability of purchasers of manufactured home buyershomes and boats to obtain financing; and
•the level of repossessions by manufactured home 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, 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.
SUN COMMUNITIES, INC.
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.
Our variable rate debt totaled $583.1$917.6 million and $396.5$583.1 million as of March 31, 20202021 and 2019,2020, respectively, and bears interest at Prime or various LIBOR rates. If Prime or LIBOR increased or decreased by 1.0 percent, our interest expense would have increased or decreased by approximately $0.9$3.0 million and $0.7$0.9 million for the three months ended March 31, 20202021 and 2019,2020, respectively, based on the $356.6 million$1.2 billion and $290.3$356.6 million average balances outstanding under our variable rate debt facilities, respectively.
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, and our Australian equity investment and JVjoint venture 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 March 31, 20202021 and December 31, 2019,2020, our stockholder’sstockholder's equity included $154.0$254.5 million and $202.5$250.8 million from our Canadian subsidiaries and Australian equity investments, respectively, which represented 4.14.2 percent and 5.24.5 percent of total stockholder’sstockholder's equity, respectively. Based on our sensitivity analysis, a 10.0 percent strengthening of the U.S. dollar against the Canadian and Australian dollar would have caused a reduction of $15.4$25.5 million and $20.2$25.1 million to our total stockholder’sstockholder's equity at March 31, 20202021 and December 31, 2019, respectively.2020.
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 March 31, 2020.2021. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2020.2021.
In October 2020, we completed the acquisition of Safe Harbor and are currently integrating Safe Harbor into our operations, compliance program and internal control processes. Safe Harbor constituted approximately 23 percent of our total assets as of December 31, 2020, including the goodwill and other intangible assets recorded as part of the purchase price allocation, and three percent of our revenues for the year ended December 31, 2020. 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 operation of Safe Harbor from our assessment of our internal control over financial reporting for the three months ended March 31, 2021. As of March 31, 2021, Safe Harbor represented approximately 24 percent of our total assets and 22 percent of our revenues for the quarter ending March 31, 2021.
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 March 31, 20202021 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
Refer to “Legal Proceedings”"Legal Proceedings" in Part 1 - Item 1 - Note 15, “Commitments"Commitments and Contingencies,”" in our accompanying Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
Our prospects are subject to certain uncertainties and risks. Our future results could differ materially from current results, and our actual results could differ materially from those projected in forward-looking statements as a result of certain risk factors. In addition to the other information set forth in this report, you should carefully consider the risk factors described below and under “Risk Factors”in Part 1, Item 1A., "Risk Factors," in our 20192020 Annual Report, on Form 10-K and inwhich could materially affect our other filings with the SEC
The current pandemic of the coronavirus, or COVID-19, has materially and adversely impacted and disrupted ourbusiness, financial condition results of operations, cash flows and performance, and we expect it will continue to do so.
The COVID-19 pandemic has had, and it could continue toor future results. There have or a future pandemic could have,been no material and adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows, including in the following possible ways, among others:
A downturn in the economy may affect the ability of the residents in our MH communities to pay their rent.
Travel restrictions may affect the ability of potential guests to travel to and use our RV communities, a downturn in the economy may independently reduce demand for our RV communities, and our RV revenue may decrease if we cannot convert as many transient RV sites to annual RV sites as planned.
RV resorts in the northern United States and Canada that normally would commence operations in early spring have had their openings delayed and have not yet opened, and their opening dates are uncertain.
The ancillary revenue from amenities at our communities, such as restaurants, golf courses and resort activities, may decrease;
We may have difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may result in insufficient liquidity or affect our access to capital necessary to fund and grow our business and address maturing liabilities on a timely basis. As of March 31, 2020, we have drawn $524.9 million on our line of credit, of which the total capacity, excluding the unexercised accordion feature, is $750.0 million.
The financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our debt agreements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility.
Our ground up development and expansion activities, and conversions of transient RV sites to annual RV sites may be disrupted, and we may be delayed in our current projects and timelines, the magnitude of which will depend, in part, on the length and severity of the current closures and any other restrictions or limitations implemented in the future.
Negative impacts on our results of operations and our access to capital could cause us to eliminate or reduce the amount of our distributions to stockholders, or to pay some or all of our distributions in common stock rather than cash.
A general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to acquire additional properties.
Our revenue from home sales and brokerage fees may decrease as a result of stay-at-home orders and travel restrictions.
A recession or additional market corrections resulting from the spread of COVID-19 could further affect the value of our common stock, which recently decreased from a 52-week high of $173.98 to as low as $95.34. We expect our stock price to continue to be volatile.
Governmental agencies that permit and approve our projects, suppliers, homebuilders, and other business partners and third parties may be prevented from conducting business activities in the ordinary course for an indefinite period of time, which could in turn negatively affect our business.
We have furloughed a group of team members and have also reduced hours and / or reduced pay for other team members. Furloughed team members may not be available if we later desire to hire them back. Furloughs and reductions in pay and hours may negatively affect the morale of our team members.
We may experience disruptions or inefficiencies in our ability to effectively operate our business because the vast majority of our team members, including at our Main Office in Southfield, Michigan, are working virtually from their homes.
The extent to which the COVID-19 pandemic impacts our operations, financial condition and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction aschanges to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows and performance. Moreover, many risk factorsdisclosure on these matters as set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Holders of our OP units and Preferred stock have converted the following units during the three months ended March 31, 2020: |
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| | | | Three Months Ended |
| | | | March 31, 2020 |
Series | | Conversion Rate | | Units/Shares Converted | Common Stock (1) |
Common OP unit | | 1.0000 |
| | 11,949 |
| 11,949 |
|
Series A-1 preferred OP unit | | 2.4390 |
| | 6,677 |
| 16,283 |
|
2021:
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| | | | Three Months Ended |
| | | | March 31, 2021 |
Series | | Conversion Rate | | Units / Shares Converted | Common Stock(1) |
Common OP units | | 1.0000 | | | 24,912 | | 24,912 | |
Series A-1 preferred OP units | | 2.4390 | | | 4,316 | | 10,525 | |
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(1)CalculationCalculation may yield minor differences due to rounding incorporated in the above numbers.
All of the above shares of common stock were issued in private placements in reliance on Section 4(a)(2) of the Securities Act, of 1933, as amended, including Regulation D promulgated thereunder.thereunder, based on certain investments representations made by the parties to whom the securities were issued. No underwriters were used in connection with any of such issuances.
ITEM 6. EXHIBITS
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Exhibit No. | Description | Method of Filing |
3.1 | | Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K filed on February 22, 2018 |
3.2 | | Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on May 12, 2017 |
10.1 | | Incorporated by reference to Sun Communities Inc.’s's Current Report on Form 8-K filed on January 13, 2020March 31, 2021 |
10.2 | | Incorporated by reference to Sun Communities Inc.’s's Current Report on Form 8-K filed on January 14, 2020March 31, 2021 |
31.110.3 | | Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on March 31, 2021 |
31.1 | | Filed herewith |
31.2 | | Filed herewith |
32.1 | | Filed herewith |
101.INS | XBRL Instance Document | The 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 |
# Management contract or compensatory plan or arrangement
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: April 23, 202027, 2021 | By: | /s/ Karen J. Dearing |
| | Karen J. Dearing, Chief Financial Officer and Secretary (Duly authorized officer and principal financial officer) |