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CST: 25/08/2019 14:31:19   

Sun Communities, Inc. Reports 2018 Fourth Quarter Results and 2019 Guidance

185 Days ago


NEWS RELEASE

February 20, 2019

Southfield, MI, Feb. 20, 2019 (GLOBE NEWSWIRE) --  Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its fourth quarter results for 2018 and initial 2019 guidance.

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

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

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

Non-GAAP Financial Measures and Portfolio Performance

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

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


OPERATING HIGHLIGHTS

Community Occupancy

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

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


Same Community(2) Results

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

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


Home Sales

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

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

PORTFOLIO ACTIVITY

Acquisitions

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

Fourth Quarter 2018:      
Date of Acquisition Type Location Usable Sites Consideration (in Millions)
10/2018 RV Buckeye, Arizona 376   $11.6  
    Total 376   $11.6  
         
Subsequent to December 31, 2018:      
Date of Acquisition Type Location Usable Sites Consideration (in Millions)
1/2019 MH (Age Restricted) Edgewater, Florida (1) 730   $115.3  
1/2019 RV Old Orchard Beach, Maine 321   10.8  
1/2019 MH Oregon City, Oregon(2) 518   61.8  
2/2019 MH Buckeye, Arizona 400   22.3  
2/2019 MH (3) Shelby Township, Michigan 1,308   94.5  
2/2019 RV Millsboro, Delaware 291   20.0  
    Total 3,568   $324.7  

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

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

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


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

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

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

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

2019 Distributions

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


GUIDANCE 2019

The estimates and assumptions presented below represent a range of possible outcomes and may differ materially from actual results. Guidance estimates include acquisitions completed through the date of this release, and exclude any prospective acquisitions or capital markets activity. The estimates and assumptions are forward looking based on the Company's current assessment of economic and market conditions, as well as other risks outlined below under the caption “Forward Looking Statements.”

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


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

Total Portfolio
Number of communities: 378

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

Same Community Portfolio(ii)

Number of communities: 345

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

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

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

Total Company Supplementary Information:

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

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

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

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

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


EARNINGS CONFERENCE CALL

A conference call to discuss fourth quarter operating results will be held on Thursday, February 21, 2019 at 11:00 A.M. (ET). To participate, call toll-free 877-407-9039. Callers outside the U.S. or Canada can access the call at 201-689-8470. A replay will be available following the call through March 7, 2019 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13685225. The conference call will be available live on Sun Communities’ website www.suncommunities.com. The replay will also be available on the website.

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

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

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to (248) 208-2500, by email to investorrelations@suncommunities.com or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.


Forward-Looking Statements

This press release contains various “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as “will,” “may,” “could,” “expect,” “anticipate,” “believes,” “intends,” “should,” “plans,” “estimates,” “approximate,” “guidance,” and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond the Company’s control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, the performance of recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, changes in market rates of interest, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders. Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company’s Annual Report on Form 10-K.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company’s assumptions, expectations of future events, or trends.


Investor Information                                                            



RESEARCH COVERAGE            
             
Firm   Analyst   Phone   Email
Bank of America Merrill Lynch   Joshua Dennerlein   (646) 855-1681   joshua.dennerlein@baml.com
BMO Capital Markets   John Kim   (212) 885-4115   johnp.kim@bmo.com
Citi Research   Michael Bilerman   (212) 816-1383   michael.bilerman@citi.com
    Nicholas Joseph   (212) 816-1909   nicholas.joseph@citi.com
Evercore ISI   Steve Sakwa   (212) 446-9462   steve.sakwa@evercoreisi.com
    Samir Khanal   (212) 888-3796   samir.khanal@evercoreisi.com
Green Street Advisors   John Pawlowski   (949) 640-8780   jpawlowski@greenstreetadvisors.com
RBC Capital Markets   Wes Golladay   (440) 715-2650   wes.golladay@rbccm.com
Robert W. Baird & Co.   Drew Babin   (610) 238-6634   dbabin@rwbaird.com
Wells Fargo   Todd Stender   (562) 637-1371   todd.stender@wellsfargo.com
             
             
INQUIRIES            
             
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department.
             
At Our Website   www.suncommunities.com        
             
By Email   investorrelations@suncommunities.com    
             
By Phone   (248) 208-2500        
             
             
             
             
             
             
             
             


Portfolio Overview                                                                           
(As of December 31, 2018)




Balance Sheets                                                                                                                                              
(amounts in thousands)



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



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



  Three Months Ended December 31,
  2018   2017   Change   % Change
REVENUES:              
Income from real property (excluding transient revenue) $ 183,059     $ 169,102     $ 13,957     8.3 %
Transient revenue 17,426     12,348     5,078     41.1 %
Revenue from home sales 43,783     36,089     7,694     21.3 %
Rental home revenue 13,700     12,775     925     7.2 %
Ancillary revenue 7,900     5,425     2,475     45.6 %
Interest 5,004     5,571     (567 )   (10.2 )%
Brokerage commissions and other revenues, net 3,132     716     2,416     337.4 %
Total Revenues 274,004     242,026     31,978     13.2 %
EXPENSES:              
Property operating and maintenance 54,120     50,417     3,703     7.3 %
Real estate taxes 14,110     12,966     1,144     8.8 %
Cost of home sales 32,138     27,115     5,023     18.5 %
Rental home operating and maintenance 6,356     5,204     1,152     22.1 %
Ancillary expenses 8,638     5,441     3,197     58.8 %
Home selling expenses 4,403     3,066     1,337     43.6 %
General and administrative 20,570     18,409     2,161     11.7 %
Transaction costs (6) 334     2,811     (2,477 )   (88.1 )%
Catastrophic weather related charges, net 2,079     228     1,851     811.8 %
Depreciation and amortization 81,070     71,817     9,253     12.9 %
Loss on extinguishment of debt     5,260     (5,260 )   (100.0 )%
Interest 32,170     31,363     807     2.6 %
Interest on mandatorily redeemable preferred OP units / equity 1,143     753     390     51.8 %
Total Expenses 257,131     234,850     22,281     9.5 %
Income Before Other Items 16,873     7,176     9,697     135.1 %
Remeasurement of marketable securities (3,639 )       (3,639 )   N/A
Other (expense) / income, net (7) (3,239 )   3,642     (6,881 )   (188.9 )%
Income from nonconsolidated affiliates 587         587     N/A
Current tax benefit / (expense) 17     (313 )   330     105.4 %
Deferred tax benefit / (expense) 73     (163 )   236     144.8 %
Net Income 10,672     10,342     330     3.2 %
Less: Preferred return to preferred OP units / equity (1,151 )   (1,099 )   (52 )   4.7 %
Less: Amounts attributable to noncontrolling interests (51 )   (876 )   825     (94.2 )%
Net Income Attributable to Sun Communities, Inc. 9,470     8,367     1,103     13.2 %
Less: Preferred stock distribution (431 )   (929 )   498     (53.6 )%
Net Income Attributable to Sun Communities, Inc. Common Stockholders $ 9,039     $ 7,438     $ 1,601     21.5 %
               
Weighted average common shares outstanding:              
Basic 85,481     78,633     6,848     8.7 %
Diluted 85,982     79,107     6,875     8.7 %
Earnings per share:              
Basic $ 0.11     $ 0.09     $ 0.02     22.2 %
Diluted $ 0.11     $ 0.09     $ 0.02     22.2 %


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



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


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



Outstanding Securities - As of December 31, 2018
                   
  Number of Units/Shares Outstanding   Conversion Rate*   If Converted   Issuance Price per unit*   Annual Distribution Rate*
Convertible Securities                  
Series A-1 preferred OP units 332   2.4390   810   $100   6.0%
Series A-3 preferred OP units 40   1.8605   74   $100   4.5%
Series A-4 preferred OP units 410   0.4444   182   $25   6.5%
Series C preferred OP units 314   1.1100   349   $100   4.5%
Common OP units 2,726   1.0000   2,726   N/A   Mirrors common shares distributions
Series A-4 preferred stock 1,063   0.4444   472   $25   6.5%
                   
Non-Convertible Securities                  
Common shares 86,357   N/A   N/A   N/A   $2.84^
^ Annual distribution is based on the last quarterly distribution annualized.


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


Reconciliations to Non-GAAP Financial Measures


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



  Three Months Ended
 December 31,
  Year Ended
 December 31,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc. common stockholders: $ 9,039     $ 7,438     $ 105,493     $ 65,021  
Adjustments:              
Depreciation and amortization 81,314     72,068     288,206     262,211  
Remeasurement of marketable securities 3,639         3,639      
Amounts attributable to noncontrolling interests 15     825     7,740     4,535  
Preferred return to preferred OP units 552     570     2,206     2,320  
Preferred distribution to Series A-4 preferred stock 432     441     1,737     2,107  
Gain on disposition of assets, net (6,429 )   (4,733 )   (23,406 )   (16,075 )
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

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

$ 92,695     $ 81,812     $ 394,369     $ 337,384  
               
Weighted average common shares outstanding - basic: 85,481     78,633     81,387     76,084  
Add:              
Common stock issuable upon conversion of stock options 2     2     2     2  
Restricted stock 499     472     651     625  
Common OP units 2,727     2,751     2,733     2,756  
Common stock issuable upon conversion of Series A-1 preferred OP units 810     847     821     869  
Common stock issuable upon conversion of Series A-4 preferred stock 472     482     472     585  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75     75     75  
Weighted average common shares outstanding - fully diluted 90,066     83,262     86,141     80,996  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted

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

$ 1.03     $ 0.98     $ 4.58     $ 4.17  


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



  Three Months Ended
 December 31,
  Year Ended
 December 31,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 9,039     $ 7,438     $ 105,493     $ 65,021  
Adjustments:              
Interest expense 33,313     32,116     132,783     130,242  
Loss on extinguishment of debt     5,260     2,657     6,019  
Current tax (benefit) / expense (17 )   313     595     446  
Deferred tax (benefit) / expense (73 )   163     (507 )   (582 )
Income from nonconsolidated affiliates (587 )       (646 )    
Depreciation and amortization 81,070     71,817     287,262     261,536  
Gain on disposition of assets, net (6,429 )   (4,733 )   (23,406 )   (16,075 )
EBITDAre (1) $ 116,316     $ 112,374     $ 504,231     $ 446,607  
Adjustments:              
Transaction costs (6) 334     2,811     472     9,801  
Remeasurement of marketable securities 3,639         3,639      
Other expense / (income), net (7) 3,239     (3,642 )   6,453     (8,982 )
Catastrophic weather related charges, net 2,079     228     92     8,352  
Preferred return to preferred OP units / equity 1,151     1,099     4,486     4,581  
Amounts attributable to noncontrolling interests 51     876     8,443     5,055  
Preferred stock distribution 431     929     1,736     7,162  
Plus: Gain on dispositions of assets, net 6,429     4,733     23,406     16,075  
Recurring EBITDA (1) $ 133,669     $ 119,408     $ 552,958     $ 488,651  



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



  Three Months Ended
 December 31,
  Year Ended
 December 31,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 9,039     $ 7,438     $ 105,493     $ 65,021  
Other revenues (8,136 )   (6,287 )   (27,057 )   (24,874 )
Home selling expenses 4,403     3,066     15,722     12,457  
General and administrative 20,570     18,409     81,438     74,232  
Transaction costs (6) 334     2,811     472     9,801  
Catastrophic weather related charges, net 2,079     228     92     8,352  
Depreciation and amortization 81,070     71,817     287,262     261,536  
Loss on extinguishment of debt     5,260     2,657     6,019  
Interest expense 33,313     32,116     132,783     130,242  
Remeasurement of marketable securities 3,639         3,639      
Other expense / (income), net (7) 3,239     (3,642 )   6,453     (8,982 )
Income from nonconsolidated affiliates (587 )       (646 )    
Current tax (benefit) / expense (17 )   313     595     446  
Deferred tax (benefit) / expense (73 )   163     (507 )   (582 )
Preferred return to preferred OP units / equity 1,151     1,099     4,486     4,581  
Amounts attributable to noncontrolling interests 51     876     8,443     5,055  
Preferred stock distribution 431     929     1,736     7,162  
NOI(1) / Gross Profit $ 150,506     $ 134,596     $ 623,061     $ 550,466  


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



Non-GAAP and Other Financial Measures


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



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

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

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


  Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
OPERATING INFORMATION*                  
New home sales 140     146     134     106     103  
Pre-owned home sales 738     825     809     731     747  
Total homes sold 878     971     943     837     850  
                   
Communities 371     370     367     350     350  
                   
Developed sites 108,963     108,142     107,192     106,617     106,036  
Transient RV sites 19,491     19,432     19,007     15,693     15,856  
Total sites 128,454     127,574     126,199     122,310     121,892  
                   
MH occupancy 95.0 %   94.9 %   95.0 %   94.7 %   94.6 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.1 %   96.1 %   96.1 %   95.8 %   95.8 %



Debt Analysis
(amounts in thousands)



  Quarter Ended
  12/31/2018   9/30/2018   6/30/2018   3/31/2018   12/31/2017
DEBT OUTSTANDING                  
Mortgage loans payable $ 2,815,957     $ 2,819,225     $ 2,636,847     $ 2,826,225     $ 2,867,356  
Secured borrowings (4) 107,731     113,089     118,242     124,077     129,182  
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,277     35,277     35,277          
Preferred OP units - mandatorily redeemable 37,338     37,338     37,338     37,338     41,443  
Lines of credit (5) 128,000         536,377     141,800     41,257  
Total debt $ 3,124,303     $ 3,004,929     $ 3,364,081     $ 3,129,440     $ 3,079,238  
                   
% FIXED/FLOATING                  
Fixed 95.9 %   100.0 %   84.0 %   90.6 %   93.7 %
Floating 4.1 %   %   16.0 %   9.4 %   6.3 %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
WEIGHTED AVERAGE INTEREST RATES                  
Mortgage loans payable 4.22 %   4.23 %   4.27 %   4.25 %   4.25 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   6.00 %   6.00 %   %   %
Preferred OP units - mandatorily redeemable 6.61 %   6.61 %   6.61 %   6.61 %   6.75 %
Lines of credit (5) 3.77 %   %   3.31 %   3.01 %   2.79 %
Average before Secured borrowings (4) 4.25 %   4.28 %   4.15 %   4.22 %   4.26 %
Secured borrowings (4) 9.94 %   9.95 %   9.96 %   9.97 %   9.97 %
Total average 4.45 %   4.50 %   4.36 %   4.45 %   4.50 %
                   
DEBT RATIOS                  
Net Debt / Recurring EBITDA (1) (TTM) 5.6     5.4     6.5     6.2     6.3  
Net Debt / Enterprise Value 25.2 %   23.9 %   28.6 %   28.8 %   28.2 %
Net Debt / Gross Assets 37.7 %   35.9 %   42.7 %   41.9 %   41.8 %
                   
COVERAGE RATIOS                  
Recurring EBITDA (1) (TTM) / Interest 4.0   3.9   3.7   3.6   3.6
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 3.9   3.8   3.6   3.4   3.3


MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS 2019   2020   2021   2022   2023
Mortgage loans payable:                  
Maturities $     $ 58,078     $ 270,680     $ 82,155     $ 307,465  
Weighted average rate of maturities %   5.92 %   5.53 %   4.46 %   4.17 %
Principal amortization 58,164     59,630     58,843     56,822     53,437  
Secured borrowings (4) 5,265     5,746     6,171     6,379     6,374  
Preferred Equity - Sun NG Resorts - mandatorily redeemable             35,277      
Preferred OP units - mandatorily redeemable 2,675                  
Lines of credit (5)         128,000          
Total $ 66,104     $ 123,454     $ 463,694     $ 180,633     $ 367,276  


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



  Three Months Ended December 31,   Year Ended December 31,
  2018   2017   Change   % Change   2018   2017   Change   % Change
Financial Information                              
Income from real property (12) $ 181,147     $ 170,565     $ 10,582     6.2 %   $ 746,360     $ 703,272     $ 43,088     6.1 %
                               
Property Operating Expenses:                        
Payroll and benefits 15,707     15,331     376     2.5 %   66,502     65,524     978     1.5 %
Legal, taxes & insurance 2,053     1,885     168     8.9 %   9,026     7,152     1,874     26.2 %
Utilities (12) 12,000     11,596     404     3.5 %   54,949     51,480     3,469     6.7 %
Supplies and repair (13) 5,531     6,006     (475 )   (7.9 )%   26,476     25,347     1,129     4.5 %
Other 4,523     5,089     (566 )   (11.1 )%   22,952     21,960     992     4.5 %
Real estate taxes 13,471     12,668     803     6.3 %   54,098     51,695     2,403     4.6 %
Total property operating expenses 53,285     52,575     710     1.4 %   234,003     223,158     10,845     4.9 %
Real Property NOI(1) $ 127,862     $ 117,990     $ 9,872     8.4 %   $ 512,357     $ 480,114     $ 32,243     6.7 %


  As of December 31,  
  2018   2017   Change   % Change  
Other Information                
Number of properties 336     336            
                 
MH occupancy (3) 97.4 %              
RV occupancy (3) 100.0 %              
MH & RV blended occupancy % (3) 98.0 %   95.8 %   2.2 %      
                 
Sites available for development 7,348     5,087     2,261     44.4 %  
                 
Monthly base rent per site - MH $ 554     $ 533     $ 21     4.0 % (15)
Monthly base rent per site - RV (14) $ 455     $ 431     $ 24     5.4 % (15)
Monthly base rent per site - Total (14) $ 532     $ 511     $ 21     4.1 % (15)



Home Sales Summary           
(amounts in thousands except for *)



  Three Months Ended December 31,   Year Ended December 31,
Financial Information 2018   2017   Change   % Change   2018   2017   Change   % Change
Revenue:                              
New home sales $ 16,600     $ 12,155     $ 4,445     36.6 %   $ 59,578     $ 36,915     $ 22,663     61.4 %
Pre-owned home sales 27,183     23,934     3,249     13.6 %   106,453     90,493     15,960     17.6 %
Revenue from home sales 43,783     36,089     7,694     21.3 %   166,031     127,408     38,623     30.3 %
Expenses:                              
New home cost of sales 14,726     10,534     4,192     39.8 %   51,913     31,578     20,335     64.4 %
Pre-owned home cost of sales 17,412     16,581     831     5.0 %   71,420     63,536     7,884     12.4 %
Cost of home sales 32,138     27,115     5,023     18.5 %   123,333     95,114     28,219     29.7 %
NOI / Gross Profit (1) $ 11,645     $ 8,974     $ 2,671     29.8 %   $ 42,698     $ 32,294     $ 10,404     32.2 %
                               
Gross profit – new homes $ 1,874     $ 1,621     $ 253     15.6 %   $ 7,665     $ 5,337     $ 2,328     43.6 %
Gross margin % – new homes 11.3 %   13.3 %   (2.0 )%       12.9 %   14.5 %   (1.6 )%    
Average selling price – new homes* $ 118,571     $ 118,010     $ 561     0.5 %   $ 113,266     $ 101,975     $ 11,291     11.1 %
                               
Gross profit – pre-owned homes $ 9,771     $ 7,353     $ 2,418     32.9 %   $ 35,033     $ 26,957     $ 8,076     30.0 %
Gross margin % – pre-owned homes 35.9 %   30.7 %   5.2 %       32.9 %   29.8 %   3.1 %    
Average selling price – pre-owned homes* $ 36,833     $ 32,040     $ 4,793     15.0 %   $ 34,306     $ 30,991     $ 3,315     10.7 %
                               
Statistical Information                
New home sales volume* 140     103     37     35.9 %   526     362     164     45.3 %
Pre-owned home sales volume* 738     747     (9 )   (1.2 )%   3,103     2,920     183     6.3 %
Total homes sold* 878     850     28     3.3 %   3,629     3,282     347     10.6 %

               


Rental Program Summary    
(amounts in thousands except for *)



  Three Months Ended December 31,   Year Ended December 31,
Financial Information 2018   2017   Change   % Change   2018   2017   Change   % Change
Revenues:                              
Rental home revenue $ 13,700     $ 12,775     $ 925     7.2 %   $ 53,657     $ 50,549     $ 3,108     6.1 %
Site rent included in Income from real property 16,370     16,027     343     2.1 %   65,615     63,833     1,782     2.8 %
Rental program revenue 30,070     28,802     1,268     4.4 %   119,272     114,382     4,890     4.3 %
                               
Expenses:                              
Commissions 625     743     (118 )   (15.9 )%   2,291     2,734     (443 )   (16.2 )%
Repairs and refurbishment 2,973     1,914     1,059     55.3 %   10,312     9,864     448     4.5 %
Taxes and insurance 1,691     1,613     78     4.8 %   6,364     6,102     262     4.3 %
Marketing and other 1,067     934     133     14.2 %   4,132     3,414     718     21.0 %
Rental program operating and maintenance 6,356     5,204     1,152     22.1 %   23,099     22,114     985     4.5 %
Rental Program NOI(1) $ 23,714     $ 23,598     $ 116     0.5 %   $ 96,173     $ 92,268     $ 3,905     4.2 %
                               


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



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



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



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



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



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



Operating Statistics for MH and Annual RVs       



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


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


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


Footnotes and Definitions                                                                


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

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

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

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

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company’s operating performance. By excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, FFO is not intended as a measure of a REIT’s ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.

NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key measure when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities as a measure of the Company’s liquidity; nor is it indicative of funds available for the Company’s cash needs, including its ability to make cash distributions. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.

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

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

(2)  Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2018 actual exchange rates.

(3)  The Same Community occupancy percentage for 2018 is derived from 104,059 developed sites, of which 101,988 were occupied. The number of developed sites excludes RV transient sites and approximately 2,100 recently completed but vacant MH expansion sites. The Same Community occupancy percentage for 2017 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.0 percent for MH, 100 percent for RV, and 96.1 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 106,147 developed sites, of which 101,988 were occupied.

(4)  This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount.

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

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

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

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

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

(9)   These costs represent the expenses incurred to bring recently acquired properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

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

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

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

(13) Same Community supplies and repair expense excludes $0.1 million and $2.6 million for the three months and year ended December 31, 2017, respectively, of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

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

(15) Calculated using actual results without rounding.

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

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

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

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

(20) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.

(21) Lot modification capital expenditures improve the asset quality of the community. These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home.  These activities, which are mandated by strict manufacturer’s installation requirements and state building code, include items such as new foundations, driveways, and utility upgrades.

(22) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the year ended December 31, 2018 include $94.6 million of capital improvements identified during due diligence that are necessary to bring a community to the Company’s operating standards. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.

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

(24) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.

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

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

Attachment

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