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CST: 18/11/2019 21:42:52   

Sun Communities, Inc. Reports 2019 Third Quarter Results

26 Days ago


Southfield, Michigan, Oct. 23, 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 third quarter results for 2019.

Financial Results for the Quarter and Nine Months Ended September 30, 2019

For the quarter ended September 30, 2019, total revenues increased $39.0 million, or 12.1 percent, to $362.4 million compared to $323.4 million for the same period in 2018. Net income attributable to common stockholders was $57.0 million, or $0.63 per diluted common share, for the quarter ended September 30, 2019, as compared to net income attributable to common stockholders of $46.1 million, or $0.56 per diluted common share, for the same period in 2018.

For the nine months ended September 30, 2019, total revenues increased $109.4 million, or 12.8 percent, to $962.2 million compared to $852.8 million for the same period in 2018. Net income attributable to common stockholders was $131.7 million, or $1.50 per diluted common share, for the nine months ended September 30, 2019, as compared to net income attributable to common stockholders of $96.5 million, or $1.19 per diluted common share, for the same period in 2018.

Non-GAAP Financial Measures and Portfolio Performance

  • Core Funds from Operations (“Core FFO”)(1) for the quarter ended September 30, 2019, was $1.46 per diluted share and OP unit (“Share”) as compared to $1.35 in the prior year, an increase of 8.1 percent.
     
  • Same Community(2) Net Operating Income (“NOI”)(1) increased by 7.2 percent for the quarter ended September 30, 2019, as compared to the same period in 2018.
     
  • Same Community(2) Occupancy increased by 210 basis points to 98.3 percent, as compared to 96.2 percent at September 30, 2018.
     
  • Revenue Producing Sites increased by 766 sites for the quarter ended September 30, 2019, bringing total portfolio occupancy to 96.7 percent.

Gary Shiffman, Chief Executive Officer of Sun Communities stated, “During the third quarter, we continued our consistent track record of delivering strong organic growth, as portfolio-wide occupancy gains along with tight cost controls contributed to 7.2 percent same community NOI growth. These results were further enhanced by the solid performance at our recent acquisitions. Despite a competitive acquisition environment, Sun has completed over $444.0 million of transactions year to date which will strengthen our growth over time.  We believe that our ability to address sellers’ needs for flexible exit and monetization strategies will continue to be a competitive advantage in our pursuit of accretive acquisitions.”


OPERATING HIGHLIGHTS

Portfolio Occupancy

Total portfolio occupancy was 96.7 percent at September 30, 2019, compared to 96.1 percent at September 30, 2018.

During the quarter ended September 30, 2019, revenue producing sites increased by 766 sites, as compared to 628 revenue producing sites gained during the third quarter of 2018, a 22.0 percent increase.

During the nine months ended September 30, 2019, revenue producing sites increased by 2,005 sites, as compared to an increase of 1,878 revenue producing sites during the nine months ended September 30, 2018, a 6.8 percent increase.


Same Community(2) Results

For the 345 communities owned and operated by the Company since January 1, 2018, NOI(1) for the quarter ended September 30, 2019, increased 7.2 percent over the same period in 2018, as a result of a 6.1 percent increase in revenues, and 3.9 percent increase in operating expenses. Same Community occupancy(3) increased to 98.3 percent at September 30, 2019 from 96.2 percent at September 30, 2018.

For the nine months ended September 30, 2019, NOI(1) increased 7.2 percent over the same period in 2018, as a result of a 6.2 percent increase in revenues, and a 3.9 percent increase in operating expenses.


Home Sales

During the quarter ended September 30, 2019, the Company sold 906 homes as compared to 971 homes sold during the same period in 2018.  New home sales volume increased 14.4 percent to 167 new home sales for the quarter ended September 30, 2019, as compared to 146 homes in the same period in 2018. Rental home sales, which are included in total home sales, were 317 in 2019, as compared to 316 sold during 2018.

During the nine months ended September 30, 2019, 2,631 homes were sold compared to 2,751 for the same period in 2018. New home sales volume increased 11.7 percent to 431 new home sales for the nine months ended September 30, 2019, as compared to 386 homes during the same period in 2018.  Rental home sales, which are included in total home sales, were 859 in 2019, an increase of 4.1 percent over the 825 sold during 2018.


PORTFOLIO ACTIVITY

Acquisitions

During the quarter ended September 30, 2019, the Company acquired the following communities:

Community Name   Type   Sites     Expansion Sites   State   Total Purchase Price (in millions)   Month Acquired
Glen Ellis   RV   244       40     NH   $ 6.0     September
Leisure Point Resort   MH / RV   502   (1)       DE   $ 44.5     September
Chincoteague Island   RV             VA   $ 19.5     August
Reunion Lake   RV   202       69     LA   $ 23.5     July

(1) Contains 201 MH sites and 301 RV sites.

For the nine months ended September 30, 2019, the Company acquired 14 communities, totaling 5,058 sites, for a total purchase price of $444.2 million.

Pending Transaction - Jensen Portfolio

On August 22, 2019, the Company entered into an agreement to acquire a 31-community manufactured housing portfolio (the “Jensen Portfolio”) for $343.6 million. The Jensen Portfolio has 5,230 operating sites and 466 additional sites available for development. The 31 communities are located in eight states across the eastern United States.  The purchase price will be paid through a combination of $274.8 million shares of common stock and cash consideration. We expect to acquire the Jensen Portfolio no later than October 31, 2019. However, the closing is subject to the satisfaction of customary closing conditions, including obtaining certain third party consents. If these conditions are not satisfied or waived, or if the merger agreement is otherwise terminated in accordance with its terms, then the acquisition will not be consummated.

Construction Activity

During the quarter ended September 30, 2019, the Company completed the construction of 485 sites at the following ground-up developments:

Community Name   Type   State   Completed Construction Sites   Remaining Construction Sites (1)
Carolina Pines   RV   SC   105     460
Jellystone Golden Valley   RV   NC   113     202
River Run Ranch   RV   CO   215     929
Smith Creek Crossing   MH   CO   52     258

(1) Remaining sites are approximate and may be adjusted as final construction is completed.

During the quarter ended September 30, 2019, the Company completed the construction of 177 expansion sites in three communities. Year to date, the Company has completed the construction of 365 expansion sites in 10 communities. The Company expects to complete the construction of an additional 800 to 1,000 expansion sites by year end.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Series A-4 Preferred Stock and Series A-4 Preferred OP Units Conversion

The Company intends to convert 1,051,501 shares of Series A-4 preferred stock and 405,656 Series A-4 preferred OP units issued by the Operating Partnership into its common stock and common OP units. Each share of Series A-4 preferred stock is convertible into approximately 0.4444 shares of common stock and each Series A-4 preferred OP unit is convertible into approximately 0.4444 common OP units. The Company has the right under its charter and the Operating Partnership’s partnership agreement to convert these securities, if at any time after November 26, 2019, the volume weighted average of the daily volume weighted average price of a share of its common stock on the New York Stock Exchange is equal to or greater than $64.97 for at least 20 trading days in a period of 30 consecutive trading days (the “Pricing Target”). On October 17, 2019, the Company’s Board of Directors approved the conversion of all of the Series A-4 preferred stock and Series A-4 preferred OP units into common stock and common OP units, respectively, provided that the Pricing Target is satisfied on November 27, 2019. If the Pricing target is satisfied, the conversion is expected to occur on December 13, 2019.

Debt Transactions

As of September 30, 2019, the Company had $3.3 billion of debt outstanding. The weighted average interest rate was 4.3 percent and the weighted average maturity was 9.8 years. The Company had $26.2 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.3 times.

During the quarter ended September 30, 2019, the Company completed a $250.0 million ten-year term loan transaction which carries an interest rate of 2.925 percent.  Concurrently, the Company repaid a $134.0 million term loan which was due to mature in May 2023.


GUIDANCE 2019

The Company is revising its 2019 guidance for the following metrics:

    Previous Range
 FY 2019E
  Revised Range
FY 2019E
  4Q 2019E
Net Income per fully diluted share   $1.81 - $1.87   $1.77 - $1.81   $0.28 - $0.32
Core FFO (1) per fully diluted share   $4.84 - $4.90   $4.86 - $4.90   $1.04 - $1.08

Same Community(2) Portfolio
Number of communities: 345

  2019E Change %
Income from real property 6.0% - 6.2%
Total property operating expenses 4.1% - 4.5%
Net operating income (1) 6.8% - 7.2%

Guidance estimates include the 31-community Jensen Portfolio acquisition, which is expected to close by October 31, 2019, and exclude any other prospective acquisitions and capital markets activity.

Core FFO(1) per Share estimates assume certain gain and loss items that management considers unrelated to the operational and financial performance of our core business will be adjusted from FFO(1). The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results. 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.”


EARNINGS CONFERENCE CALL

A conference call to discuss third quarter operating results will be held on Thursday, October 24, 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 November 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 13694212. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of September 30, 2019, owned, operated, or had an interest in a portfolio of 389 communities comprising over 134,000 developed sites in 32 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 September 30, 2019)




Balance Sheets                                                                                                                                              
(amounts in thousands)



    (Unaudited)    
    September 30, 2019   December 31, 2018
Assets        
Land   $ 1,311,103     $ 1,201,945  
Land improvements and buildings   6,200,895     5,586,250  
Rental homes and improvements   614,002     571,661  
Furniture, fixtures and equipment   251,363     201,090  
Investment property   8,377,363     7,560,946  
Accumulated depreciation   (1,619,924 )   (1,442,630 )
Investment property, net   6,757,439     6,118,316  
Cash and cash equivalents   26,198     50,311  
Marketable securities   64,818     49,037  
Inventory of manufactured homes   55,234     49,199  
Notes and other receivables, net   174,934     160,077  
Collateralized receivables, net (4)   93,054     106,924  
Other assets, net   226,177     176,162  
Total Assets   $ 7,397,854     $ 6,710,026  
Liabilities        
Mortgage loans payable   $ 2,967,128     $ 2,815,957  
Secured borrowings on collateralized receivables (4)   93,669     107,731  
Preferred Equity - Sun NG Resorts - mandatorily redeemable   35,249     35,277  
Preferred OP units - mandatorily redeemable   34,663     37,338  
Lines of credit (5)   140,632     128,000  
Distributions payable   69,726     63,249  
Advanced reservation deposits and rent   137,797     133,698  
Other liabilities   242,119     157,862  
Total Liabilities   3,720,983     3,479,112  
Commitments and contingencies        
Series A-4 preferred stock   31,402     31,739  
Series A-4 preferred OP units   9,540     9,877  
Series D preferred OP units   51,248      
Equity Interests - NG Sun LLC and NG Whitewater   27,461     21,976  
Stockholders' Equity        
Common stock   907     864  
Additional paid-in capital   4,854,958     4,398,949  
Accumulated other comprehensive loss   (2,825 )   (4,504 )
Distributions in excess of accumulated earnings   (1,353,214 )   (1,288,486 )
Total Sun Communities, Inc. stockholders' equity   3,499,826     3,106,823  
Noncontrolling interests        
Common and preferred OP units   49,540     53,354  
Consolidated variable interest entities   7,854     7,145  
Total noncontrolling interests   57,394     60,499  
Total Stockholders' Equity   3,557,220     3,167,322  
Total Liabilities, Temporary Equity and Stockholders' Equity   $ 7,397,854     $ 6,710,026  



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



  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   Change   % Change   September 30, 2019   September 30, 2018   Change   % Change
Revenues                              
Income from real property (excluding transient revenue) $ 202,205     $ 184,414     $ 17,791     9.6 %   $ 588,272     $ 536,704     $ 51,568     9.6 %
Transient revenue 54,218     45,193     9,025     20.0 %   111,029     88,784     22,245     25.1 %
Revenue from home sales 49,805     46,131     3,674     8.0 %   136,665     122,248     14,417     11.8 %
Rental home revenue 14,444     13,589     855     6.3 %   42,827     39,957     2,870     7.2 %
Ancillary revenue 31,999     27,608     4,391     15.9 %   57,746     46,207     11,539     25.0 %
Interest income 4,770     5,256     (486 )   (9.2 )%   14,489     15,849     (1,360 )   (8.6 )%
Brokerage commissions and other revenues, net 5,002     1,222     3,780     309.3 %   11,190     3,073     8,117     264.1 %
Total Revenues 362,443     323,413     39,030     12.1 %   962,218     852,822     109,396     12.8 %
Expenses                              
Property operating and maintenance 79,095     71,656     7,439     10.4 %   202,892     181,977     20,915     11.5 %
Real estate taxes 15,399     14,533     866     6.0 %   46,455     42,445     4,010     9.4 %
Cost of home sales 36,318     33,692     2,626     7.8 %   100,030     91,195     8,835     9.7 %
Rental home operating and maintenance 6,008     6,236     (228 )   (3.7 )%   15,887     16,778     (891 )   (5.3 )%
Ancillary expenses 18,707     15,361     3,346     21.8 %   38,288     28,985     9,303     32.1 %
Home selling expenses 3,988     4,043     (55 )   (1.4 )%   10,938     11,319     (381 )   (3.4 )%
General and administrative expenses 22,975     19,763     3,212     16.3 %   68,559     60,972     7,587     12.4 %
Catastrophic weather related charges, net 341     173     168     97.1 %   1,302     (1,987 )   3,289     (165.5 )%
Depreciation and amortization 76,532     71,982     4,550     6.3 %   229,241     206,192     23,049     11.2 %
Loss on extinguishment of debt 12,755     528     12,227     2,315.7 %   13,478     1,255     12,223     973.9 %
Interest expense 32,219     33,932     (1,713 )   (5.0 )%   99,894     98,321     1,573     1.6 %
Interest on mandatorily redeemable preferred OP units / equity 1,216     1,142     74     6.5 %   3,491     2,551     940     36.8 %
Total Expenses 305,553     273,041     32,512     11.9 %   830,455     740,003     90,452     12.2 %
Income Before Other Items 56,890     50,372     6,518     12.9 %   131,763     112,819     18,944     16.8 %
Remeasurement of marketable securities 12,661         12,661     N/A   16,548         16,548     N/A
Other income / (expense), net (6) (4,408 )   1,231     (5,639 )   (458.1 )%   (1,489 )   (3,214 )   1,725     (53.7 )%
Income from nonconsolidated affiliates 77     126     (49 )   (38.9 )%   814     59     755     1,279.7 %
Current tax expense (420 )   (213 )   (207 )   97.2 %   (906 )   (612 )   (294 )   48.0 %
Deferred tax benefit / (expense) (349 )   199     (548 )   (275.4 )%   (36 )   434     (470 )   (108.3 )%
Net Income 64,451     51,715     12,736     24.6 %   146,694     109,486     37,208     34.0 %
Less: Preferred return to preferred OP units / equity (1,599 )   (1,152 )   447     38.8 %   (4,640 )   (3,335 )   1,305     39.1 %
Less: Amounts attributable to noncontrolling interests (5,422 )   (4,071 )   1,351     33.2 %   (9,048 )   (8,392 )   656     7.8 %
Net Income attributable to Sun Communities, Inc. 57,430     46,492     10,938     23.5 %   133,006     97,759     35,247     36.1 %
Less: Preferred stock distribution (428 )   (432 )   (4 )   (0.9 )%   (1,288 )   (1,305 )   (17 )   (1.3 )%
Net Income attributable to Sun Communities, Inc. common stockholders $ 57,002     $ 46,060     $ 10,942     23.8 %   $ 131,718     $ 96,454     $ 35,264     36.6 %
                               
Weighted average common shares outstanding - basic 89,847     81,599     8,248     10.1 %   87,499     80,022     7,477     9.3 %
Weighted average common shares outstanding - diluted 90,332     82,081     8,251     10.1 %   87,931     80,024     7,907     9.9 %
                               
Basic earnings per share $ 0.63     $ 0.56     $ 0.07     12.5 %   $ 1.49     $ 1.19     $ 0.30     25.2 %
Diluted earnings per share $ 0.63     $ 0.56     $ 0.07     12.5 %   $ 1.50     $ 1.19     $ 0.31     26.1

 

 

 

 
%


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

Outstanding Securities - As of September 30, 2019
                   
  Number of Units/Shares Outstanding   Conversion Rate*   If Converted   Issuance Price per unit*   Annual Distribution Rate*
Non-convertible securities                  
Common shares 90,683   N/A   N/A   N/A   $3.00^
                   
Convertible securities                  
Series A-1 preferred OP units 316   2.4390   771   $ 100   6.0 %
Series A-3 preferred OP units 40   1.8605   75   $ 100   4.5 %
Series A-4 preferred OP units 406   0.4444   180   $ 25   6.5 %
Series C preferred OP units 310   1.1100   345   $ 100   4.5 %
Series D preferred OP units 489   0.8000   391   $ 100   3.8 %
Common OP units 2,282   1.0000   2,282   N/A   Mirrors common shares distributions
Series A-4 preferred stock 1,052   0.4444   468   $ 25   6.5 %
^ Annual distribution is based on the last quarterly distribution annualized.


Capitalization - As of September 30, 2019            
             
Equity   Shares   Share Price*   Total
Common shares   90,683     $ 148.45     $ 13,461,891  
Common OP units   2,282     $ 148.45     338,763  
Subtotal   92,965         $ 13,800,654  
             
Series A-1 preferred OP units   771     $ 148.45     $ 114,455  
Series A-3 preferred OP units   75     $ 148.45     11,134  
Series A-4 preferred OP units   180     $ 148.45     26,721  
Series C preferred OP units   345     $ 148.45     51,215  
Series D preferred OP units   391     $ 148.45     58,044  
Total diluted shares outstanding   94,727         $ 14,062,223  
 
Debt
Mortgage loans payable           $ 2,967,128  
Secured borrowings on collateralized receivables (4)           93,669  
Preferred Equity - Sun NG Resorts - mandatorily redeemable           35,249  
Preferred OP units - mandatorily redeemable           34,663  
Lines of credit (5)           140,632  
Total debt           $ 3,271,341  
 
Preferred
Series A-4 preferred stock   1,052     $ 25.00     $ 26,300  
Total Capitalization        

 

 

 

 

 

 

 

 

 

 

 
  $

 

 

 

 

 

 

 

 

 

 

 

 

 
17,359,864

 

 

 

 

 

 

 

 

 

 

 

 
 


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   Nine Months Ended
  September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Net income attributable to Sun Communities, Inc. common stockholders $ 57,002     $ 46,060     $ 131,718     $ 96,454  
Adjustments              
Depreciation and amortization 76,692     72,269     229,698     206,892  
Remeasurement of marketable securities (12,661 )       (16,548 )    
Amounts attributable to noncontrolling interests 4,839     4,311     7,720     7,724  
Preferred return to preferred OP units 530     549     1,594     1,654  
Preferred distribution to Series A-4 preferred stock 428     432     1,288     1,305  
Gain on disposition of assets, net (7,334 )   (6,603 )   (21,083 )   (16,977 )
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$ 119,496     $ 117,018     $ 334,387     $ 297,052  
Adjustments              
Other acquisition related costs (8) 375     345     902     781  
Loss on extinguishment of debt 12,755     528     13,478     1,255  
Catastrophic weather related charges, net 363     173     1,339     (1,987 )
Loss of earnings - catastrophic weather related (9) (377 )   325         975  
Other (income) / expense (6) 4,408     (1,231 )   1,489     3,214  
Ground lease intangible write-off             817  
Deferred tax (benefit) / expense 349     (199 )   36     (434 )
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$ 137,369     $ 116,959     $ 351,631     $ 301,673  
               
Weighted average common shares outstanding - basic 89,847     81,599     87,499     80,022  
Add              
Common stock issuable upon conversion of stock options 1     2     1     2  
Restricted stock 484     480     431     633  
Common OP units 2,284     2,731     2,498     2,735  
Common stock issuable upon conversion of Series A-4 preferred stock 467     472     467     472  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75     75     75  
Common stock issuable upon conversion of Series A-1 preferred OP units 780     813     792     825  
Common stock issuable upon conversion of Aspen preferred OP units     448          
Weighted average common shares outstanding - fully diluted 93,938     86,620     91,763     84,764  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

$ 1.27     $ 1.35     $ 3.64     $ 3.50  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted

$ 1.46     $ 1.35     $ 3.83     $ 3.56  


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



  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Net Income attributable to Sun Communities, Inc. common stockholders $ 57,002     $ 46,060     $ 131,718     $ 96,454  
Adjustments              
Depreciation and amortization 76,532     71,982     229,241     206,192  
Loss on extinguishment of debt 12,755     528     13,478     1,255  
Interest expense 33,435     35,074     103,385     100,872  
Current tax expense 420     213     906     612  
Deferred tax (benefit) / expense 349     (199 )   36     (434 )
Income from nonconsolidated affiliates (77 )   (126 )   (814 )   (59 )
Less: Gain on dispositions of assets, net (7,334 )   (6,603 )   (21,083 )   (16,977 )
EBITDAre (1) $ 173,082     $ 146,929     $ 456,867     $ 387,915  
Adjustments              
Catastrophic weather related charges, net 341     173     1,302     (1,987 )
Remeasurement of marketable securities (12,661 )       (16,548 )    
Other (income) / expense, net (6) 4,408     (1,231 )   1,489     3,214  
Preferred return to preferred OP units / equity 1,599     1,152     4,640     3,335  
Amounts attributable to noncontrolling interests 5,422     4,071     9,048     8,392  
Preferred stock distribution 428     432     1,288     1,305  
Plus: Gain on dispositions of assets, net 7,334     6,603     21,083     16,977  
Recurring EBITDA (1) $ 179,953     $ 158,129     $ 479,169     $ 419,151  



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



  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Net Income attributable to Sun Communities, Inc. common stockholders $ 57,002     $ 46,060     $ 131,718     $ 96,454  
Other revenues (9,772 )   (6,478 )   (25,679 )   (18,922 )
Home selling expenses 3,988     4,043     10,938     11,319  
General and administrative expenses 22,975     19,763     68,559     60,972  
Catastrophic weather related charges, net 341     173     1,302     (1,987 )
Depreciation and amortization 76,532     71,982     229,241     206,192  
Loss on extinguishment of debt 12,755     528     13,478     1,255  
Interest expense 33,435     35,074     103,385     100,872  
Remeasurement of marketable securities (12,661 )       (16,548 )    
Other (income) / expense, net (6) 4,408     (1,231 )   1,489     3,214  
Income from nonconsolidated affiliates (77 )   (126 )   (814 )   (59 )
Current tax expense 420     213     906     612  
Deferred tax (benefit) / expense 349     (199 )   36     (434 )
Preferred return to preferred OP units / equity 1,599     1,152     4,640     3,335  
Amounts attributable to noncontrolling interests 5,422     4,071     9,048     8,392  
Preferred stock distribution 428     432     1,288     1,305  
NOI (1) / Gross Profit $ 197,144     $ 175,457     $ 532,987     $ 472,520  


  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Real Property NOI (1) $ 161,929     $ 143,418     $ 449,954     $ 401,066  
Home Sales NOI (1) / Gross Profit 13,487     12,439     36,635     31,053  
Rental Program NOI (1) 25,706     23,750     78,266     72,424  
Ancillary NOI (1) / Gross Profit 13,292     12,247     19,458     17,222  
Site rent from Rental Program (included in Real Property NOI) (1) (10) (17,270 )   (16,397 )   (51,326 )   (49,245 )
NOI (1) / Gross Profit $ 197,144     $ 175,457     $ 532,987     $ 472,520  



Non-GAAP and Other Financial Measures


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



  Quarter Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Financial Information                  
Total revenues $ 362,443     $ 312,445     $ 287,330     $ 274,004     $ 323,538  
Net income $ 64,451     $ 45,116     $ 37,127     $ 10,672     $ 51,715  
Net Income attributable to Sun Communities Inc. $ 57,002     $ 40,385     $ 34,331     $ 9,039     $ 46,060  
Basic earnings per share* $ 0.63     $ 0.46     $ 0.40     $ 0.11     $ 0.56  
Diluted earnings per share* $ 0.63     $ 0.46     $ 0.40     $ 0.11     $ 0.56  
                   
Cash distributions declared per common share* $ 0.75     $ 0.75     $ 0.75     $ 0.71     $ 0.71  
                   
Recurring EBITDA (1) $ 179,953     $ 151,502     $ 147,714     $ 133,335     $ 158,129  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$ 119,496     $ 108,112     $ 106,779     $ 88,562     $ 117,018  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)

$ 137,369     $ 108,002     $ 106,259     $ 92,695     $ 116,959  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted* $ 1.27     $ 1.18     $ 1.19     $ 0.98     $ 1.35  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted* $ 1.46     $ 1.18     $ 1.18     $ 1.03     $ 1.35  
                   
Balance Sheet                  
Total assets $ 7,397,854     $ 7,222,084     $ 7,098,662     $ 6,710,026     $ 6,653,726  
Total debt $ 3,271,341     $ 3,107,775     $ 3,448,117     $ 3,124,303     $ 3,004,929  
Total liabilities $ 3,720,983     $ 3,542,188     $ 3,846,325     $ 3,479,112     $ 3,367,285  


  Quarter Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Operating Information*                  
Communities 389     382     379     371     370  
                   
Manufactured home sites 88,024     87,555     87,425     84,428     84,033  
Annual RV sites 25,756     25,009     24,750     24,535     24,109  
Transient RV sites 20,882     20,585     20,173     19,491     19,432  
Total sites 134,662     133,149     132,348     128,454     127,574  
                   
MH occupancy 95.7 %   95.7 %   95.4 %   95.0 %   94.9 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.7 %   96.6 %   96.4 %   96.1 %   96.1 %
                   
New home sales 167     139     125     140     146  
Pre-owned home sales 739     788     673     738     825  
Total home sales 906     927     798     878     971  


  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2019
Net Lease Sites (24)      
MH net lease sites 296     1,104  
RV net lease sites 470     901  
Total net leased sites 766     2,005  


Debt Analysis
(amounts in thousands)



  Quarter Ended
  9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Debt Outstanding                  
Mortgage loans payable $ 2,967,128     $ 2,863,485     $ 2,879,017     $ 2,815,957     $ 2,819,225  
Secured borrowings on collateralized receivables (4) 93,669     98,299     102,676     107,731     113,089  
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,249     35,249     35,249     35,277     35,277  
Preferred OP units - mandatorily redeemable 34,663     34,663     34,663     37,338     37,338  
Lines of credit (5) 140,632     76,079     396,512     128,000      
Total debt $ 3,271,341     $ 3,107,775     $ 3,448,117     $ 3,124,303     $ 3,004,929  
                   
% Fixed / Floating                  
Fixed 95.7 %   97.6 %   88.5 %   95.9 %   100.0 %
Floating 4.3 %   2.4 %   11.5 %   4.1 %   %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
Weighted Average Interest Rates                  
Mortgage loans payable 4.13 %   4.24 %   4.24 %   4.22 %   4.23 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   6.00 %   6.00 %   6.00 %   6.00 %
Preferred OP units - mandatorily redeemable 6.50 %   6.50 %   6.50 %   6.61 %   6.61 %
Lines of credit (5) 3.23 %   3.34 %   3.73 %   3.77 %   %
Average before Secured borrowings (4) 4.14 %   4.27 %   4.22 %   4.25 %   4.28 %
Secured borrowings on collateralized receivables (4) 9.92 %   9.93 %   9.94 %   9.94 %   9.95 %
Total average 4.30 %   4.44 %   4.39 %   4.45 %   4.40 %
                   
Debt Ratios                  
Net Debt / Recurring EBITDA (1) (TTM) 5.3     5.2     6.0     5.6     5.4  
Net Debt / Enterprise Value 18.7 %   20.2 %   24.1 %   25.2 %   24.1 %
Net Debt / Gross Assets 36.0 %   35.1 %   39.8 %   37.7 %   35.9 %
                   
Coverage Ratios                  
Recurring EBITDA (1) (TTM) / Interest 4.4   4.2   4.1   4.0   3.9
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 4.2   4.0   3.9   3.9   3.8


Maturities / Principal Amortization Next Five Years Remaining 2019   2020   2021   2022   2023
Mortgage loans payable                  
Maturities $     $ 58,078     $ 270,680     $ 82,155     $ 185,618  
Principal amortization 14,185     56,702     55,804     53,726     52,693  
Secured borrowings on collateralized receivables (4) 1,220     5,166     5,553     5,747     5,756  
Preferred Equity - Sun NG Resorts - mandatorily redeemable             35,249      
Lines of credit (5)     3,632             137,000  
Total $ 15,405     $ 123,578     $ 332,037     $ 176,877     $ 381,067  
                   
Weighted average rate of maturities %   5.92 %   5.53 %   4.46 %   4.08 %


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

  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   Change   % Change   September 30, 2019   September 30, 2018   Change   % Change
Financial Information                              
Income from real property(11) $ 214,452     $ 202,133     $ 12,319     6.1 %   $ 609,841     $ 574,491     $ 35,350     6.2 %
                               
Property operating expenses                              
Payroll and benefits 20,418     19,244     1,174     6.1 %   55,512     52,387     3,125     6.0 %
Legal, taxes, and insurance 2,589     2,600     (11 )   (0.4 )%   6,911     7,118     (207 )   (2.9 )%
Utilities (11) 17,382     16,958     424     2.5 %   45,060     44,746     314     0.7 %
Supplies and repair (12) 9,492     8,575     917     10.7 %   23,683     21,473     2,210     10.3 %
Other 5,670     6,013     (343 )   (5.7 )%   15,536     16,103     (567 )   (3.5 )%
Real estate taxes 14,607     14,110     497     3.5 %   44,093     41,772     2,321     5.6 %
Property operating expenses 70,158     67,500     2,658     3.9 %   190,795     183,599     7,196     3.9 %
Real Property NOI(1) $ 144,294     $ 134,633     $ 9,661     7.2 %   $ 419,046     $ 390,892     $ 28,154     7.2 %


  As of  
  September 30, 2019   September 30, 2018   Change   % Change  
Other Information                
Number of properties 345          
                 
MH occupancy (3) 97.8 %              
RV occupancy (3) 100.0 %              
MH & RV blended occupancy (3) 98.3 %   96.2 %   2.1 %      
                 
Monthly base rent per site - MH $ 573     $ 551     $ 22     4.2 % (14)
Monthly base rent per site - RV (13) $ 475     $ 448     $ 27     6.1 % (14)
Monthly base rent per site - Total (13) $ 551     $ 527     $ 24     4.5 % (14)



Home Sales Summary           
(amounts in thousands except for *)



  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   Change   % Change   September 30, 2019   September 30, 2018   Change   % Change
Financial Information                              
New homes                              
New home sales $ 19,775     $ 16,433     $ 3,342     20.3 %   $ 51,860     $ 42,978     $ 8,882     20.7 %
New home cost of sales 16,761     14,278     2,483     17.4 %   44,740     37,187     7,553     20.3 %
NOI / Gross Profit (1)  – new homes 3,014     2,155     859     39.9 %   7,120     5,791     1,329     22.9 %
Gross margin % – new homes 15.2 %   13.1 %   2.1 %       13.7 %   13.5 %   0.2 %    
Average selling price – new homes* $ 118,413     $ 112,555     $ 5,858     5.2 %   $ 120,325     $ 111,342     $ 8,983     8.1 %
                               
Pre-owned homes                              
Pre-owned home sales $ 30,030     $ 29,698     $ 332     1.1 %   $ 84,805     $ 79,270     $ 5,535     7.0 %
Pre-owned home cost of sales 19,557     19,414     143     0.7 %   55,290     54,008     1,282     2.4 %
NOI / Gross Profit (1) – pre-owned homes 10,473     10,284     189     1.8 %   29,515     25,262     4,253     16.8 %
Gross margin % – pre-owned homes 34.9 %   34.6 %   0.3 %       34.8 %   31.9 %   2.9 %    
Average selling price – pre-owned homes* $ 40,636     $ 35,998     $ 4,638     12.9 %   $ 38,548     $ 33,518     $ 5,030     15.0 %
                               
Total home sales                              
Revenue from home sales 49,805     46,131     3,674     8.0 %   136,665     122,248     14,417     11.8 %
Cost of home sales 36,318     33,692     2,626     7.8 %   100,030     91,195     8,835     9.7 %
NOI / Gross Profit (1) – home sales $ 13,487     $ 12,439     $ 1,048     8.4 %   $ 36,635     $ 31,053     $ 5,582     18.0 %
                               
Statistical Information                              
New home sales volume* 167     146     21     14.4 %   431     386     45     11.7 %
Pre-owned home sales volume* 739     825     (86 )   (10.4 )%   2,200     2,365     (165 )   (7.0 )%
Total home sales volume * 906     971     (65 )   (6.7 )%   2,631     2,751     (120 )   (4.4 )%

               


Rental Program Summary    
(amounts in thousands except for *)



  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   Change   % Change   September 30, 2019   September 30, 2018   Change   % Change
Financial Information                              
Revenues                              
Rental home revenue $ 14,444     $ 13,589     $ 855     6.3 %   $ 42,827     $ 39,957     $ 2,870     7.2 %
Site rent from Rental Program (1) (10) 17,270     16,397     873     5.3 %   51,326     49,245     2,081     4.2 %
Rental Program revenue 31,714     29,986     1,728     5.8 %   94,153     89,202     4,951     5.6 %
                               
Expenses                              
Repairs and refurbishment 3,644     2,818     826     29.3 %   8,751     7,339     1,412     19.2 %
Taxes and insurance 1,940     1,593     347     21.8 %   5,631     4,708     923     19.6 %
Other 424     1,825     (1,401 )   (76.8 )%   1,505     4,731     (3,226 )   (68.2 )%
Rental Program operating and maintenance 6,008     6,236     (228 )   (3.7 )%   15,887     16,778     (891 )   (5.3 )%
Rental Program NOI (1) $ 25,706     $ 23,750     $ 1,956     8.2 %   $ 78,266     $ 72,424     $ 5,842     8.1 %
                               
Other Information                              
Number of sold rental homes* 317     316     1     0.3 %   859     825     34     4.1 %
Number of occupied rentals, end of period*   11,170     10,913     257     2.4 %
Investment in occupied rental homes, end of period   $ 570,053     $ 517,321     $ 52,732     10.2 %
Weighted average monthly rental rate, end of period*   $ 987     $ 940     $ 47     5.0 %



Acquisitions and Other Summary (15)
(amounts in thousands except for statistical data)



    Three Months Ended   Nine Months Ended
    September 30, 2019   September 30, 2019
Financial Information        
Revenues        
Income from real property   $ 33,035     $ 63,548  
         
Property and operating expenses        
Payroll and benefits   5,007     10,881  
Legal, taxes & insurance   379     805  
Utilities   3,066     6,490  
Supplies and repairs   1,474     3,366  
Other   4,682     8,736  
Real estate taxes   792     2,362  
Property operating expenses   15,400     32,640  
Net operating income (NOI) (1)   $ 17,635     $ 30,908  
         
        September 30, 2019
Other Information        
Number of properties       44  
Occupied sites       4,329  
Developed sites       4,608  
Occupancy %       93.9 %
Transient sites       6,515  



Property Summary                    
(includes MH and Annual RVs)
                     
COMMUNITIES   9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
FLORIDA                    
Communities   125     125     125     124     124  
Developed sites (16)   39,067     38,879     38,878     37,874     37,879  
Occupied (16)   38,155     37,944     37,932     36,868     36,822  
Occupancy % (16)   97.7 %   97.6 %   97.6 %   97.3 %   97.2 %
Sites for development   1,633     1,638     1,685     1,684     1,494  
MICHIGAN                    
Communities   72     72     72     70     70  
Developed sites (16)   27,906     27,891     27,777     26,504     26,116  
Occupied (16)   26,677     26,591     26,430     25,075     24,830  
Occupancy % (16)   95.6 %   95.3 %   95.2 %   94.6 %   95.1 %
Sites for development   1,115     1,115     1,202     1,202     1,533  
TEXAS                    
Communities   23     23     23     23     23  
Developed sites (16)   7,098     6,997     6,953     6,922     6,905  
Occupied (16)   6,834     6,683     6,529     6,428     6,301  
Occupancy % (16)   96.3 %   95.5 %   93.9 %   92.9 %   91.3 %
Sites for development   1,086     1,100     1,107     1,121     907  
CALIFORNIA                    
Communities   31     31     31     30     30  
Developed sites (16)   5,963     5,946     5,949     5,941     5,932  
Occupied (16)   5,917     5,896     5,902     5,897     5,881  
Occupancy % (16)   99.2 %   99.2 %   99.2 %   99.3 %   99.1 %
Sites for development   302     56     56     56     59  
ARIZONA                    
Communities   13     13     13     12     11  
Developed sites (16)   4,239     4,235     4,238     3,836     3,826  
Occupied (16)   3,852     3,842     3,830     3,545     3,515  
Occupancy % (16)   90.9 %   90.7 %   90.4 %   92.4 %   91.9 %
Sites for development                    
ONTARIO, CANADA                    
Communities   15     15     15     15     15  
Developed sites (16)   4,022     3,929     3,832     3,845     3,832  
Occupied (16)   4,022     3,929     3,832     3,845     3,832  
Occupancy % (16)   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Sites for development   1,675     1,675     1,675     1,682     1,662  
INDIANA                    
Communities   11     11     11     11     11  
Developed sites (16)   3,089     3,089     3,089     3,089     3,089  
Occupied (16)   2,870     2,849     2,823     2,772     2,778  
Occupancy % (16)   92.9 %   92.2 %   91.4 %   89.7 %   89.9 %
Sites for development   277     277     277     277     277  
OHIO                    
Communities   9     9     9     9     9  
Developed sites (16)   2,770     2,770     2,770     2,770     2,770  
Occupied (16)   2,703     2,705     2,704     2,693     2,694  
Occupancy % (16)   97.6 %   97.7 %   97.6 %   97.2 %   97.3 %
Sites for development   59     59     59     59     59  
                     
COLORADO                    
Communities   10     8     8     8     8  
Developed sites (16)   2,423     2,335     2,335     2,335     2,335  
Occupied (16)   2,325     2,323     2,323     2,320     2,313  
Occupancy % (16)   96.0 %   99.5 %   99.5 %   99.4 %   99.1 %
Sites for development   1,973     2,129     2,129     2,129     2,129  
OTHER STATES                    
Communities   80     75     72     69     69  
Developed sites (16)   17,203     16,493     16,354     15,847     15,458  
Occupied (16)   16,657     16,026     15,826     15,323     14,932  
Occupancy % (16)   96.8 %   97.2 %   96.8 %   96.7 %   96.6 %
Sites for development   2,437     2,705     2,987     3,048     3,195  
TOTAL - PORTFOLIO                    
Communities   389     382     379     371     370  
Developed sites (16)   113,780     112,564     112,175     108,963     108,142  
Occupied (16)   110,012     108,788     108,131     104,766     103,898  
Occupancy % (16)   96.7 % (17) 96.6 %   96.4 %   96.1 %   96.1 %
Sites for development (18)   10,557     10,754     11,177     11,258     11,315  
% Communities age restricted   30.8 %   31.4 %   31.7 %   32.1 %   32.2 %
                     
TRANSIENT RV PORTFOLIO SUMMARY                    
 Location                    
Florida   5,506     5,693     5,650     5,917     5,786  
California   1,970     1,985     1,975     1,765     1,774  
Texas   1,642     1,693     1,717     1,752     1,758  
Maryland   1,426     1,380     1,375     1,381     1,386  
Arizona   1,421     1,424     1,421     1,423     1,057  
Ontario, Canada   937     1,043     1,131     1,046     1,056  
New York   924     935     929     925     910  
New Jersey   868     875     906     884     893  
Maine   821     848     857     572     578  
Michigan   569     584     611     576     629  
Utah   560     562     562     562     562  
Indiana   519     519     519     519     519  
Other states   3,719     3,044     2,520     2,169     2,524  
Total transient RV sites   20,882     20,585     20,173     19,491     19,432  



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



   Recurring Capital Expenditures
Average/Site*
Recurring
Capital Expenditures (19)
 Lot Modifications (20) Acquisitions (21)  Expansion &
Development (22)
Revenue Producing (23)
YTD 2019 $ 192   $ 16,922   $ 22,163   $ 497,123   $ 203,940   $ 8,159  
2018 $ 263   $ 24,265   $ 22,867   $ 414,840   $ 152,672   $ 3,864  
2017 $ 214   $ 14,166   $ 18,049   $ 204,375   $ 88,331   $ 1,990  



Operating Statistics for MH and Annual RVs



LOCATIONS   Resident Move-outs   Net Leased Sites (24)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
Florida   1,253     571     189     247     1,001  
Michigan   401     365     49     1,056     135  
Ontario, Canada   467     177     29     21     219  
Texas   245     406     37     267     48  
Arizona   62     43     32     9     125  
Indiana   45     98     6     191     16  
Ohio   71     10         106     8  
California   63     20     22     6     55  
Colorado   2     5     8     52     35  
Other states   677     310     59     245     81  
Nine Months Ended September 30, 2019   3,286     2,005     431     2,200     1,723  


TOTAL FOR YEAR ENDED   Resident Move-outs   Net Leased Sites (24)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
2018   3,435     2,600     526     3,103     2,147  
2017   2,739     2,406     362     2,920     2,006  


PERCENTAGE TRENDS   Resident Move-outs   Resident  Re-sales
2019 (TTM)   2.7 %   7.1 %
2018   2.4 %   7.2 %
2017   1.9 %   6.6 %


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 2019 actual exchange rates.

(3)  The Same Community occupancy percentage for 2019 is derived from 107,553 developed sites, of which 105,683 were occupied. The number of developed sites excludes RV transient sites and approximately 1,700 recently completed but vacant MH expansion sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.9 percent for MH, 100.0 percent for RV, and 96.8 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 109,172 developed sites, of which 105,683 were occupied. The Same Community occupancy percentage for 2018 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.

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

  Three Months Ended   Nine Months Ended
  September 30, 2019   September 30, 2018   September 30, 2019   September 30, 2018
Foreign currency translation gain / (loss) $ (3,121 )   $ 1,547     $ (26 )   $ (2,640 )
Contingent liability remeasurement loss (1,287 )   (97 )   (1,421 )   (285 )
Long term lease termination expense     (219 )   (42 )   (289 )
Other income / (expense), net $ (4,408 )   $ 1,231     $ (1,489 )   $ (3,214 )

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

(8)   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.

(9)   Core FFO(1) includes an adjustment of $(0.4) million and zero for the three and nine months ended September 30, 2019 and $0.3 million and $1.0 million for the three and nine months ended September 30, 2018 for estimated loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities that require redevelopment due to damages sustained from Hurricane Irma in September 2017, as previously announced. Amounts recognized in 2018 were received in 2019.

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

(11) Same Community results net $8.9 million and $8.5 million of utility revenue against the related utility expense in property operating and maintenance expense for the quarter ended September 30, 2019 and 2018, respectively. Same Community results net $25.8 million and $24.5 million of utility revenue against the related utility expense in property operating and maintenance expense for the nine months ended September 30, 2019 and 2018, respectively. Additionally, the Company adopted ASC 842, the new leasing standard, as of January 1, 2019 which required the reclassification of bad debt expense from Property operating expense to Income from real property. To assist with comparability within Same Community results, bad debt expense has been reclassified to be shown as a reduction of Income from real property for all periods presented.

(12) Same Community supplies and repair expense excludes $0.3 million and $1.8 million for the three and nine months ended September 30, 2018, 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.

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

(14) Calculated using actual results without rounding.

(15) Acquisitions and other is comprised of eleven properties acquired, one property being operated under a temporary use permit, and two properties that we have an interest in, but do not operate in 2019, twenty properties acquired in 2018, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, five recently opened ground-up development properties, one property undergoing redevelopment, three properties that we have an interest in, but do not operate, and other miscellaneous transactions and activity.

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

(17) As of September 30, 2019, total portfolio MH occupancy was 95.7 percent inclusive of the impact of approximately 1,700 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.

(18) Total sites for development were comprised of approximately 74.2 percent for expansion, 19.8 percent for greenfield development and 6.0 percent for redevelopment.

(19) 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.

(20) 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.

(21) 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 nine months ended September 30, 2019 include $36.6 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards.  For the years ended December 31, 2018 and 2017, these costs were $94.6 million and $84.0 million, respectively. 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.

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

(23) 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.

(24) 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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