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2018-10-24 22:52 CEST
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Sun Communities, Inc. Reports 2018 Third Quarter Results

 

NEWS RELEASE
October 24, 2018

Southfield, Michigan, October 24, 2018 - 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 2018.

Financial Results for the Quarter and Nine Months Ended September 30, 2018

For the quarter ended September 30, 2018, total revenues increased $55.3 million, or 20.6 percent, to $323.5 million compared to $268.2 million for the same period in 2017. Net income attributable to common stockholders was $46.1 million, or $0.56 per diluted common share, for the quarter ended September 30, 2018, as compared to net income attributable to common stockholders of $24.1 million, or $0.31 per diluted common share, for the same period in 2017.

For the nine months ended September 30, 2018, total revenues increased $112.3 million, or 15.2 percent, to $852.9 million compared to $740.5 million for the same period in 2017. Net income attributable to common stockholders was $96.5 million, or $1.19 per diluted common share, as compared to net income attributable to common stockholders of $57.6 million, or $0.76 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 September 30, 2018, was $1.35 per diluted share and OP unit ("Share") as compared to $1.13 per Share in the prior year, an increase of 19.5 percent.
     
  • Same Community(2) Net Operating Income ("NOI")(1) increased by 6.2 percent for the quarter ended September 30, 2018, as compared to the same period in 2017.
     
  • Same Community occupancy(3) increased by 220 basis points to 97.8 percent, as compared to 95.6 percent at September 30, 2017.
     
  • Home sales volume increased 20.6 percent to 971 homes for the quarter ended September 30, 2018, as compared to 805 homes in the same period in 2017.  New home sales volume increased 43.1 percent to 146 homes for the quarter ended September 30, 2018, as compared to 102 homes in the same period in 2017.
     
  • Revenue producing sites increased by 628 sites for the quarter ended September 30, 2018, as compared to a 394 site increase in the same period in 2017.

Gary Shiffman, Chief Executive Officer of Sun Communities stated, "Our third quarter results demonstrate the ongoing strength of our platform. We delivered solid operational results and continued to position the Company for sustained long term growth.  Core FFO increased 19.5 percent driven by the strength of our MH and RV same community portfolio, 220 basis points in same community occupancy gains and the integration of communities acquired over the last twelve months.  Continued strength in our home sales provides evidence of the desirability of our communities and reinforces our commitment to pursue expansions and new developments - essential ingredients in providing sustained industry leading results."


OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.1 percent at September 30, 2018, and 96.2 percent at September 30, 2017. The slight decline in occupancy was primarily attributable to recently constructed but vacant MH expansion sites.

During the quarter ended September 30, 2018, revenue producing sites increased by 628 sites, as compared to 394 revenue producing sites gained during the third quarter of 2017. During the nine months ended September 30, 2018, revenue producing sites increased by 1,878 sites, as compared to an increase of 1,833 revenue producing sites during the nine months ended September 30, 2017.


Same Community(2) Results

For the 336 stabilized communities owned and operated by the Company since January 1, 2017, NOI(1) for the quarter ended September 30, 2018 increased 6.2 percent over the same period in 2017, as a result of a 6.3 percent increase in revenues and a 6.6 percent increase in operating expenses. Expenses were elevated primarily as a result of supply and repair costs as well as changes to certain insurance claim reserves. Same Community occupancy(3) increased to 97.8 percent at September 30, 2018 from 95.6 percent at September 30, 2017.

For the nine months ended September 30, 2018, total revenues increased by 6.1 percent  while total expenses increased by 5.9 percent, resulting in an increase in NOI(1) of 6.2 percent over the nine months ended September 30, 2017.


Home Sales

During the quarter ended September 30, 2018, the Company sold 971 homes as compared to 805 homes sold during the same period in 2017, a 20.6 percent increase. Rental home sales, which are included in total home sales, were 316 and 286 for the quarters ended September 30, 2018 and 2017, respectively.

During the nine months ended September 30, 2018, 2,751 homes were sold compared to 2,432 homes sold for the same period in 2017, a 13.1 percent increase. Rental sales, which are included in total home sales, were 825 and 828 for the nine months ended September 30, 2018 and 2017, respectively.


PORTFOLIO ACTIVITY

Acquisitions

As previously disclosed, during the quarter ended September 30, 2018, the Company acquired a 507 site age-restricted RV resort located in Desert Hot Springs, California for total consideration of $14.3 million. Additionally, during the quarter, the Company acquired a 210 site RV resort located in Petoskey, Michigan for total consideration of $9.0 million and a 114 site RV resort located in Moab, Utah for total consideration of $14.6 million.

Hurricanes Florence and Michael

The Company has concluded its initial assessment of the communities impacted by Hurricanes Florence and Michael which indicated minor damage primarily comprised of downed trees, wind related debris and damage to certain outdoor fixtures.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

During the quarter ended September 30, 2018, the Company repaid one collateralized term loan of $30.5 million with an interest rate of 6.34 percent. The loan was due to mature on March 1, 2019.

As of September 30, 2018, the Company had $3.0 billion of debt outstanding. The weighted average interest rate was 4.50 percent and the weighted average maturity was 9.4 years. The Company had $113.6 million of unrestricted cash on hand. At period-end the Company's net debt to trailing twelve month Recurring EBITDA(1) ratio was 5.4 times.

As previously disclosed, during the quarter ended September 30, 2018, the Company entered into a $228.0 million collateralized term loan with a 4.10 percent fixed rate and a 20 year term.

Equity Transactions

During the quarter ended September 30, 2018, the Company closed an underwritten registered public offering of 5,060,000 shares of common stock. Proceeds from the offering were $499.9 million after deducting expenses related to the offering. The Company used the net proceeds of this offering to repay borrowings under the revolving loan and the term loan under our senior credit facility.

During the quarter ended September 30, 2018, the Company issued 398,516 shares of common stock through its At-the-Market ("ATM") equity sales program at a weighted average price of $100.19 per share. Net proceeds from the sales were $39.4 million.


GUIDANCE 2018

The Company is updating full year 2018 total portfolio guidance to take into account the contribution from closed acquisitions and the impact of completed equity share issuances during the quarter. Updated guidance is as follows:

Total Portfolio
Number of communities: 370

    Q4 2018E   FY 2018E
Net Income per fully diluted share   $0.22 - $0.26   $1.41 - $1.45
Core FFO(1) per fully diluted share   $1.01 - $1.04   $4.57 - $4.60

The Company is adjusting its 2018 Same Community NOI(1) growth guidance range for the year to 6.75 percent to 7.0 percent, from the prior range of 6.75 percent to 7.25 percent, reflecting the impact of third quarter same community expenses. Guidance does not include prospective acquisitions or 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 25, 2018 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 8, 2018 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 13682866. The conference call will be available live on Sun Communities' website www.suncommunities.com. Replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of September 30, 2018, owned, operated, or had an interest in a portfolio of 370 communities comprising over 127,000 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
    Ryan Lumb   (949) 640-8780   rlumb@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, 2018)


 


Balance Sheets                                                                                                                                              
(amounts in thousands)


    9/30/2018   12/31/2017
ASSETS:        
Land   $ 1,187,502     $ 1,107,838  
Land improvements and buildings   5,523,554     5,102,014  
Rental homes and improvements   559,290     528,074  
Furniture, fixtures and equipment   174,315     144,953  
Investment property   7,444,661     6,882,879  
Accumulated depreciation   (1,390,684 )   (1,237,525 )
Investment property, net   6,053,977     5,645,354  
Cash and cash equivalents   113,556     10,127  
Inventory of manufactured homes   41,030     30,430  
Notes and other receivables, net   167,698     163,496  
Collateralized receivables, net (4)   112,228     128,246  
Other assets, net   165,237     134,304  
Total assets   $ 6,653,726     $ 6,111,957  
LIABILITIES:        
Mortgage loans payable   $ 2,819,225     $ 2,867,356  
Secured borrowings (4)   113,089     129,182  
Preferred Equity - Sun NG Resorts - mandatorily redeemable   35,277     -  
Preferred OP units - mandatorily redeemable   37,338     41,443  
Lines of credit (5)   -     41,257  
Distributions payable   63,250     55,225  
Advanced reservation deposits and rent   135,647     132,205  
Other liabilities   163,459     138,536  
Total liabilities   3,367,285     3,405,204  
Commitments and contingencies   -     -  
Series A-4 preferred stock   31,739     32,414  
Series A-4 preferred OP units   10,026     10,652  
Equity Interests - NG Sun LLC   21,976     -  
STOCKHOLDERS' EQUITY:        
Common stock   864     797  
Additional paid-in capital   4,396,092     3,758,533  
Accumulated other comprehensive (loss) / income   (390 )   1,102  
Distributions in excess of accumulated earnings   (1,237,428 )   (1,162,001 )
Total SUI stockholders' equity   3,159,138     2,598,431  
Noncontrolling interests:        
Common and preferred OP units   56,018     60,971  
Consolidated variable interest entities   7,544     4,285  
Total noncontrolling interests   63,562     65,256  
Total stockholders' equity   3,222,700     2,663,687  
Total liabilities & stockholders' equity   $ 6,653,726     $ 6,111,957  


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


  Three Months Ended September 30,
  2018   2017   Change   % Change
REVENUES:              
Income from real property (excluding transient revenue) $ 184,414     $ 169,533     $ 14,881     8.8 %
Transient revenue 45,193     28,730     16,463     57.3 %
Revenue from home sales 46,131     33,197     12,934     39.0 %
Rental home revenue 13,589     12,757     832     6.5 %
Ancillary revenues 27,608     17,017     10,591     62.2 %
Interest 5,256     5,920     (664 )   (11.2 )%
Brokerage commissions and other revenues, net 1,347     1,091     256     23.5 %
Total revenues 323,538     268,245     55,293     20.6 %
               
EXPENSES:              
Property operating and maintenance 71,364     59,249     12,115     20.4 %
Real estate taxes 14,533     13,053     1,480     11.3 %
Cost of home sales 33,692     25,094     8,598     34.3 %
Rental home operating and maintenance 6,139     6,775     (636 )   (9.4 )%
Ancillary expenses 15,361     10,086     5,275     52.3 %
Home selling expenses 4,043     3,290     753     22.9 %
General and administrative 20,127     18,174     1,953     10.7 %
Transaction costs (6) 24     2,167     (2,143 )   (98.9 )%
Catastrophic weather related charges, net 173     7,756     (7,583 )   (97.8 )%
Depreciation and amortization 71,982     64,232     7,750     12.1 %
Loss on extinguishment of debt 939     -     939     N/A
Interest 33,521     32,085     1,436     4.5 %
Interest on mandatorily redeemable preferred OP units / equity 1,142     790     352     44.6 %
Total expenses 273,040     242,751     30,289     12.5 %
Income before other items 50,498     25,494     25,004     98.1 %
Other income, net (7) 1,231     3,345     (2,114 )   (63.2 )%
Current tax (expense) / benefit (213 )   38     (251 )   (660.5 )%
Deferred tax benefit 199     81     118     145.7 %
Net income 51,715     28,958     22,757     78.6 %
Less: Preferred return to preferred OP units / equity (1,152 )   (1,112 )   (40 )   3.6 %
Less: Amounts attributable to noncontrolling interests (4,071 )   (1,776 )   (2,295 )   129.2 %
Less: Preferred stock distribution (432 )   (1,955 )   1,523     (77.9 )%
NET INCOME ATTRIBUTABLE TO SUI $ 46,060     $ 24,115     $ 21,945     91.0 %
               
Weighted average common shares outstanding:              
Basic 81,599     78,369     3,230     4.1 %
Diluted 82,081     78,808     3,273     4.2 %
Earnings per share:              
Basic $ 0.56     $ 0.31     $ 0.25     80.6 %
Diluted $ 0.56     $ 0.31     $ 0.25     80.6 %


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


    Nine Months Ended September 30,
    2018   2017   Change   % Change
REVENUES:                
Income from real property (excluding transient revenue)   $ 536,704     $ 495,179     $ 41,525     8.4 %
Transient revenue   88,784     65,599     23,185     35.3 %
Revenue from home sales   122,248     91,319     30,929     33.9 %
Rental home revenue   39,957     37,774     2,183     5.8 %
Ancillary revenues   46,207     32,086     14,121     44.0 %
Interest   15,849     15,609     240     1.5 %
Brokerage commissions and other revenues, net   3,131     2,978     153     5.1 %
Total revenues   852,880     740,544     112,336     15.2 %
                 
EXPENSES:                
Property operating and maintenance   181,579     159,861     21,718     13.6 %
Real estate taxes   42,445     39,322     3,123     7.9 %
Cost of home sales   91,195     67,999     23,196     34.1 %
Rental home operating and maintenance   16,577     16,821     (244 )   (1.5 )%
Ancillary expenses   28,985     21,995     6,990     31.8 %
Home selling expenses   11,319     9,391     1,928     20.5 %
General and administrative   61,432     55,912     5,520     9.9 %
Transaction costs (6)   138     6,990     (6,852 )   (98.0 )%
Catastrophic weather related charges, net   (1,987 )   8,124     (10,111 )   (124.5 )%
Depreciation and amortization   206,192     189,719     16,473     8.7 %
Loss on extinguishment of debt   2,657     759     1,898     250.1 %
Interest   96,919     95,765     1,154     1.2 %
Interest on mandatorily redeemable preferred OP units / equity   2,551     2,361     190     8.0 %
Total expenses   740,002     675,019     64,983     9.6 %
Income before other items   112,878     65,525     47,353     72.3 %
Other (expense) / income, net (7)   (3,214 )   5,340     (8,554 )   (160.2 )%
Current tax expense   (612 )   (133 )   (479 )   (360.2 )%
Deferred tax benefit   434     745     (311 )   (41.7 )%
Net income   109,486     71,477     38,009     53.2 %
Less: Preferred return to preferred OP units / equity   (3,335 )   (3,482 )   147     (4.2 )%
Less: Amounts attributable to noncontrolling interests   (8,392 )   (4,179 )   (4,213 )   100.8 %
Less: Preferred stock distribution   (1,305 )   (6,233 )   4,928     (79.1 )%
NET INCOME ATTRIBUTABLE TO SUI   $ 96,454     $ 57,583     $ 38,871     67.5 %
                 
Weighted average common shares outstanding:                
Basic   80,022     75,234     4,788     6.4 %
Diluted   80,024     75,846     4,178     5.5 %
Earnings per share:                
Basic   $ 1.19     $ 0.76     $ 0.43     56.6 %
Diluted   $ 1.19     $ 0.76     $ 0.43     56.6 %


Outstanding Securities and Capitalization 
(in thousands except for *)

Outstanding Securities - As of September 30, 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 2,729   1.0000   2,729   N/A   Mirrors common shares distributions
Series A-4 cumulative convertible preferred stock 1,063   0.4444   472   $25   6.5%
                   
Non-Convertible Securities                  
Common shares 86,355   N/A   N/A   N/A   $2.84^
^ Annual distribution is based on the last quarterly distribution annualized.

Capitalization - As of September 30, 2018            
             
Equity   Shares   Share Price*   Total
Common shares   86,355     $ 101.54     $ 8,768,487  
Common OP units   2,729     $ 101.54     277,103  
Subtotal   89,084         $ 9,045,590  
             
Series A-1 preferred OP units   810     $ 101.54     82,247  
Series A-3 preferred OP units   74     $ 101.54     7,514  
Series A-4 preferred OP units   182     $ 101.54     18,480  
Series C preferred OP units   349     $ 101.54     35,437  
Total diluted shares outstanding   90,499         $ 9,189,268  
 
Debt
Mortgage loans payable           $ 2,819,225  
Secured borrowings (4)           113,089  
Preferred Equity - Sun NG Resorts - mandatorily redeemable           35,277  
Preferred OP units - mandatorily redeemable           37,338  
Lines of credit (5)           -  
Total Debt           $ 3,004,929  
 
Preferred
A-4 preferred stock   1,063     $ 25.00     $ 26,575  
Total Capitalization           $ 12,220,772  

Reconciliations to Non-GAAP Financial Measures


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


  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc. common stockholders: $ 46,060     $ 24,115     $ 96,454     $ 57,583  
Adjustments:              
Depreciation and amortization 72,269     64,484     206,892     190,143  
Amounts attributable to noncontrolling interests 4,311     1,608     7,724     3,710  
Preferred return to preferred OP units 549     578     1,654     1,750  
Preferred distribution to Series A-4 preferred stock 432     441     1,305     1,666  
Gain on disposition of assets, net (6,603 )   (4,309 )   (16,977 )   (11,342 )
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

$ 117,018     $ 86,917     $ 297,052     $ 243,510  
Adjustments:              
Transaction costs (6) -     2,167     -     6,990  
Other acquisition related costs (9) 345     343     781     2,712  
Loss on extinguishment of debt 939     -     2,657     759  
Catastrophic weather related charges, net 173     7,756     (1,987 )   8,124  
Loss of earnings - catastrophic weather related (10) 325     -     975     -  
Other (income) / expense, net (7) (1,231 )   (3,345 )   3,214     (5,340 )
Debt premium write-off (411 )   -     (1,402 )   (438 )
Ground lease intangible write-off -     -     817     -  
Deferred tax benefit (199 )   (81 )   (434 )   (745 )
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

$ 116,959     $ 93,757     $ 301,673     $ 255,572  
               
Weighted average common shares outstanding - basic: 81,599     78,369     80,022     75,234  
Add:              
Common stock issuable upon conversion of stock options 2     2     2     2  
Restricted stock 480     437     633     610  
Common OP units 2,731     2,761     2,735     2,758  
Common stock issuable upon conversion of Series A-1 preferred OP units 813     858     825     877  
Common stock issuable upon conversion of Series A-4 preferred stock 472     482     472     620  
Common stock issuable upon conversion of Aspen preferred OP units 448     -     -     -  
Common stock issuable upon conversion of Series A-3 preferred OP units 75     75     75     75  
Weighted average common shares outstanding - fully diluted 86,620     82,984     84,764     80,176  
               
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted $ 1.35     $ 1.05     $ 3.50     $ 3.04  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted

$ 1.35     $ 1.13     $ 3.56     $ 3.19  

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



  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 46,060     $ 24,115     $ 96,454     $ 57,583  
Adjustments:              
Interest expense 34,663     32,875     99,470     98,126  
Loss on extinguishment of debt 939     -     2,657     759  
Current tax (benefit) / expense 213     (38 )   612     133  
Deferred tax benefit (199 )   (81 )   (434 )   (745 )
Depreciation and amortization 71,982     64,232     206,192     189,719  
Gain on disposition of assets, net (6,603 )   (4,309 )   (16,977 )   (11,342 )
EBITDAre (1) $ 147,055     $ 116,794     $ 387,974     $ 334,233  
Adjustments:              
Transaction costs (6) 24     2,167     138     6,990  
Other (income) / expense, net (7) (1,231 )   (3,345 )   3,214     (5,340 )
Catastrophic weather related charges, net 173     7,756     (1,987 )   8,124  
Preferred return to preferred OP units / equity 1,152     1,112     3,335     3,482  
Amounts attributable to noncontrolling interests 4,071     1,776     8,392     4,179  
Preferred stock distribution 432     1,955     1,305     6,233  
Plus: Gain on dispositions of assets, net 6,603     4,309     16,977     11,342  
Recurring EBITDA (1) $ 158,279     $ 132,524     $ 419,348     $ 369,243  


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



  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2018   2017   2018   2017
Net income attributable to Sun Communities, Inc., common stockholders: $ 46,060     $ 24,115     $ 96,454     $ 57,583  
Other revenues (6,603 )   (7,011 )   (18,980 )   (18,587 )
Home selling expenses 4,043     3,290     11,319     9,391  
General and administrative 20,127     18,174     61,432     55,912  
Transaction costs (6) 24     2,167     138     6,990  
Depreciation and amortization 71,982     64,232     206,192     189,719  
Loss on extinguishment of debt 939     -     2,657     759  
Interest expense 34,663     32,875     99,470     98,126  
Catastrophic weather related charges, net 173     7,756     (1,987 )   8,124  
Other (income) / expense, net (7) (1,231 )   (3,345 )   3,214     (5,340 )
Current tax expense / (benefit) 213     (38 )   612     133  
Deferred tax benefit (199 )   (81 )   (434 )   (745 )
Preferred return to preferred OP units / equity 1,152     1,112     3,335     3,482  
Amounts attributable to noncontrolling interests 4,071     1,776     8,392     4,179  
Preferred stock distribution 432     1,955     1,305     6,233  
NOI(1) / Gross Profit $ 175,846     $ 146,977     $ 473,119     $ 415,959  

  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2018   2017   2018   2017
Real Property NOI (1) $ 143,710     $ 125,961     $ 401,464     $ 361,595  
Rental Program NOI (1) 23,847     22,060     72,625     68,759  
Home Sales NOI (1) / Gross Profit 12,439     8,103     31,053     23,320  
Ancillary NOI (1) / Gross Profit 12,247     6,931     17,222     10,091  
Site rent from Rental Program (included in Real Property NOI) (1)(11) (16,397 )   (16,078 )   (49,245 )   (47,806 )
NOI (1) / Gross profit $ 175,846     $ 146,977     $ 473,119     $ 415,959  


Non-GAAP and Other Financial Measures


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


  Quarter Ended
  9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
FINANCIAL INFORMATION                  
Total revenues $ 323,538     $ 271,426     $ 257,916     $ 242,026     $ 268,245  
Net income 51,715     24,170     33,601     10,342     28,958  
Net income attributable to common stockholders 46,060     20,408     29,986     7,438     24,115  
Earnings per share basic* $ 0.56     $ 0.25     $ 0.38     $ 0.09     $ 0.31  
Earnings per share diluted* 0.56     0.25     0.38     0.09     0.31  
                   
Recurring EBITDA (1) $ 158,279     $ 128,790     $ 132,222     $ 119,408     $ 132,524  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

117,018     85,623     94,976     76,609     86,917  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8)

116,959     90,372     94,907     81,812     93,757  
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted* $ 1.35     $ 1.02     $ 1.14     $ 0.92     $ 1.05  
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (8) per share - fully diluted* 1.35     1.07     1.14     0.98     1.13  
                   
BALANCE SHEETS                  
Total assets $ 6,653,726     $ 6,492,348     $ 6,149,653     $ 6,111,957     $ 6,157,836  
Total debt 3,004,929     3,364,081     3,129,440     3,079,238     3,003,427  
Total liabilities 3,367,285     3,736,621     3,471,096     3,405,204     3,351,021  

  Quarter Ended
  9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
OPERATING INFORMATION*                  
New home sales 146     134     106     103     102  
Pre-owned home sales 825     809     731     747     703  
Total homes sold 971     943     837     850     805  
                   
Communities 370     367     350     350     348  
Developed sites 108,142     107,192     106,617     106,036     104,359  
Transient RV sites 19,432     19,007     15,693     15,856     15,915  
Total sites 127,574     126,199     122,310     121,892     120,274  
                   
MH occupancy 94.9 %   95.0 %   94.7 %   94.6 %   95.2 %
RV occupancy 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Total blended MH and RV occupancy 96.1 %   96.1 %   95.8 %   95.8 %   96.2 %


Debt Analysis
(amounts in thousands)


  Quarter Ended
  9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
DEBT OUTSTANDING                  
Mortgage loans payable $ 2,819,225     $ 2,636,847     $ 2,826,225     $ 2,867,356     $ 2,822,640  
Secured borrowings (4) 113,089     118,242     124,077     129,182     134,884  
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,277     35,277     -     -     -  
Preferred OP units - mandatorily redeemable 37,338     37,338     37,338     41,443     45,903  
Lines of credit (5) -     536,377     141,800     41,257     -  
Total debt $ 3,004,929     $ 3,364,081     $ 3,129,440     $ 3,079,238     $ 3,003,427  
                   
% FIXED/FLOATING                  
Fixed 100.0 %   84.0 %   90.6 %   93.7 %   94.9 %
Floating - %   16.0 %   9.4 %   6.3 %   5.1 %
Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
                   
WEIGHTED AVERAGE INTEREST RATES                  
Mortgage loans payable 4.23 %   4.27 %   4.25 %   4.25 %   4.26 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable 6.00 %   6.00 %   - %   - %   - %
Preferred OP units - mandatorily redeemable 6.61 %   6.61 %   6.61 %   6.75 %   6.87 %
Lines of credit (5) - %   3.31 %   3.01 %   2.79 %   - %
Average before Secured borrowings (4) 4.28 %   4.15 %   4.22 %   4.26 %   4.30 %
Secured borrowings (4) 9.95 %   9.96 %   9.97 %   9.97 %   9.98 %
Total average 4.50 %   4.36 %   4.45 %   4.50 %   4.56 %
                   
DEBT RATIOS                  
Net Debt / Recurring EBITDA (1) (TTM) 5.4     6.5     6.2     6.3     6.0  
Net Debt / Enterprise Value 23.9 %   28.6 %   28.8 %   28.2 %   28.3 %
Net Debt / Gross Assets 35.9 %   42.7 %   41.9 %   41.8 %   39.0 %
                   
COVERAGE RATIOS                  
Recurring EBITDA (1) (TTM) / Interest 3.9   3.7   3.6   3.6   3.5
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution 3.8   3.6   3.4   3.3   3.2

MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS Remaining 2018   2019   2020   2021   2022
Mortgage loans payable:                  
Maturities $ -     $ 10,141     $ 58,078     $ 270,680     $ 82,544  
Weighted average rate of maturities - %   5.66 %   5.92 %   5.53 %   4.46 %
Principal amortization 13,310     57,868     59,240     58,437     56,011  
Secured borrowings (4) 1,296     5,471     5,970     6,410     6,606  
Preferred Equity - Sun NG Resorts - mandatorily redeemable -     -     -     -     35,277  
Preferred OP units - mandatorily redeemable 1,500     1,175     -     -     -  
Lines of credit (5) -     -     -     -     -  
Total $ 16,106     $ 74,655     $ 123,288     $ 335,527     $ 180,438  

Statements of Operations - Same Community(2)                                                       
(amounts in thousands except for Other Information)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   Change   % Change   2018   2017   Change   % Change
REVENUES:                              
Income from real property (12) $ 198,883     $ 187,056     $ 11,827     6.3 %   $ 565,213     $ 532,707     $ 32,506     6.1 %
                               
PROPERTY OPERATING EXPENSES:                        
Payroll and benefits 18,662     18,595     67     0.4 %   50,795     50,193     602     1.2 %
Legal, taxes & insurance 2,546     1,882     664     35.3 %   6,973     5,267     1,706     32.4 %
Utilities (12) 16,274     15,396     878     5.7 %   42,949     39,884     3,065     7.7 %
Supplies and repair (13) 8,370     7,408     962     13.0 %   20,945     19,341     1,604     8.3 %
Other 6,869     6,217     652     10.5 %   18,429     16,871     1,558     9.2 %
Real estate taxes 13,761     12,862     899     7.0 %   40,627     39,027     1,600     4.1 %
Total property operating expenses 66,482     62,360     4,122     6.6 %   180,718     170,583     10,135     5.9 %
NET OPERATING INCOME (NOI)(1) $ 132,401     $ 124,696     $ 7,705     6.2 %   $ 384,495     $ 362,124     $ 22,371     6.2 %

  As of September 30,  
  2018   2017   Change   % Change  
OTHER INFORMATION                
Communities 336     336     -        
                 
MH occupancy (3) 97.2 %              
RV occupancy (3) 100.0 %              
MH & RV blended occupancy % (3) 97.8 %   95.6 %   2.2 %      
                 
Sites available for development 7,250     6,003     1,247     20.8 %  
                 
Monthly base rent per site - MH $ 551     $ 530     $ 21     3.9 % (15)
Monthly base rent per site - RV (14) $ 447     $ 425     $ 22     5.0 % (15)
Monthly base rent per site - Total (14) $ 527     $ 507     $ 20     4.0 % (15)


Rental Program Summary    
(amounts in thousands except for *)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   Change   % Change   2018   2017   Change   % Change
REVENUES:                              
Rental home revenue $ 13,589     $ 12,757     $ 832     6.5 %   $ 39,957     $ 37,774     $ 2,183     5.8 %
Site rent included in Income from real property 16,397     16,078     319     2.0 %   49,245     47,806     1,439     3.0 %
Rental program revenue 29,986     28,835     1,151     4.0 %   89,202     85,580     3,622     4.2 %
                               
EXPENSES:                              
Commissions 481     891     (410 )   (46.0 )%   1,500     1,902     (402 )   (21.1 )%
Repairs and refurbishment 2,818     3,306     (488 )   (14.8 )%   7,339     7,950     (611 )   (7.7 )%
Taxes and insurance 1,580     1,546     34     2.2 %   4,673     4,489     184     4.1 %
Marketing and other 1,260     1,032     228     22.1 %   3,065     2,480     585     23.6 %
Rental program operating and maintenance 6,139     6,775     (636 )   (9.4 )%   16,577     16,821     (244 )   (1.5 )%
NET OPERATING INCOME (NOI) (1) $ 23,847     $ 22,060     $ 1,787     8.1 %   $ 72,625     $ 68,759     $ 3,866     5.6 %
                               

    As of September 30,
Occupied rental homes information:   2018   2017   Change   % Change
Number of occupied rental homes, end of period*   10,913     10,960     (47 )   (0.4 )%
Investment in occupied rental homes, end of period   $ 517,321     $ 482,591     $ 34,730     7.2 %
Number of sold rental homes (YTD)*   825     828     (3 )   (0.4 )%
Weighted average monthly rental rate, end of period*   $ 940     $ 895     $ 45     5.0 %


Home Sales Summary           
(amounts in thousands except for *)


  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   Change   % Change   2018   2017   Change   % Change
REVENUES AND EXPENSES:                              
New home sales $ 16,433     $ 10,331     $ 6,102     59.1 %   $ 42,978     $ 24,760     $ 18,218     73.6 %
Pre-owned home sales 29,698     22,866     6,832     29.9 %   79,270     66,559     12,711     19.1 %
Revenue from home sales 46,131     33,197     12,934     39.0 %   122,248     91,319     30,929     33.9 %
                               
New home cost of sales 14,278     8,699     5,579     64.1 %   37,187     21,044     16,143     76.7 %
Pre-owned home cost of sales 19,414     16,395     3,019     18.4 %   54,008     46,955     7,053     15.0 %
Cost of home sales 33,692     25,094     8,598     34.3 %   91,195     67,999     23,196     34.1 %
NOI / Gross Profit (1) $ 12,439     $ 8,103     $ 4,336     53.5 %   $ 31,053     $ 23,320     $ 7,733     33.2 %
                               
Gross profit - new homes $ 2,155     $ 1,632     $ 523     32.0 %   $ 5,791     $ 3,716     $ 2,075     55.8 %
Gross margin % - new homes 13.1 %   15.8 %   (2.7 )%       13.5 %   15.0 %   (1.5 )%    
Average selling price - new homes* $ 112,555     $ 101,284     $ 11,271     11.1 %   $ 111,342     $ 95,598     $ 15,744     16.5 %
                               
Gross profit - pre-owned homes $ 10,284     $ 6,471     $ 3,813     58.9 %   $ 25,262     $ 19,604     $ 5,658     28.9 %
Gross margin % - pre-owned homes 34.6 %   28.3 %   6.3 %       31.9 %   29.5 %   2.4 %    
Average selling price - pre-owned homes* $ 35,998     $ 32,526     $ 3,472     10.7 %   $ 33,518     $ 30,630     $ 2,888     9.4 %
                               
Home sales volume:                
New home sales* 146     102     44     43.1 %   386     259     127     49.0 %
Pre-owned home sales* 825     703     122     17.4 %   2,365     2,173     192     8.8 %
Total homes sold* 971     805     166     20.6 %   2,751     2,432     319     13.1 %

               


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



    Three Months Ended
 September 30, 2018
  Nine Months Ended
 September 30, 2018
REVENUES:        
Income from real property   $ 22,355     $ 36,136  
         
PROPERTY AND OPERATING EXPENSES:        
Payroll and benefits   3,421     5,617  
Legal, taxes & insurance   197     338  
Utilities(12)   2,561     4,275  
Supplies and repair   913     1,426  
Other   3,076     5,693  
Real estate taxes   772     1,818  
Property operating expenses   10,940     19,167  
NET OPERATING INCOME (NOI) (1)   $ 11,415     $ 16,969  
         
        As of September 30, 2018
Other information:        
Number of properties       34  
Occupied sites       2,520  
Developed sites       2,581  
Occupancy %       97.6 %
Transient sites       5,063  


Property Summary                    
(includes MH and Annual RVs)
                     
COMMUNITIES   9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
FLORIDA                    
Communities   124     124     123     123     121  
Developed sites (17)   37,879     37,723     37,726     37,254     36,587  
Occupied (17)   36,822     36,602     36,546     36,170     35,414  
Occupancy % (17)   97.2 %   97.0 %   96.9 %   97.1 %   96.8 %
Sites for development   1,494     1,335     1,397     1,485     1,469  
MICHIGAN                    
Communities   70     69     68     68     68  
Developed sites (17)   26,116     26,039     25,881     25,881     25,498  
Occupied (17)   24,830     24,709     24,319     24,147     23,996  
Occupancy % (17)   95.1 %   94.9 %   94.0 %   93.3 %   94.1 %
Sites for development   1,533     1,668     1,371     1,371     1,752  
TEXAS                    
Communities   23     23     21     21     21  
Developed sites (17)   6,905     6,622     6,614     6,601     6,410  
Occupied (17)   6,301     6,251     6,191     6,152     6,041  
Occupancy % (17)   91.3 %   94.4 %   93.6 %   93.2 %   94.2 %
Sites for development   907     1,168     1,100     1,100     1,277  
CALIFORNIA                    
Communities   30     29     27     27     27  
Developed sites (17)   5,932     5,694     5,692     5,692     5,693  
Occupied (17)   5,881     5,647     5,646     5,639     5,630  
Occupancy % (17)   99.1 %   99.2 %   99.2 %   99.1 %   98.9 %
Sites for development   59     177     389     389     379  
ONTARIO, CANADA                    
Communities   15     15     15     15     15  
Developed sites (17)   3,832     3,752     3,650     3,634     3,620  
Occupied (17)   3,832     3,752     3,650     3,634     3,620  
Occupancy % (17)   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Sites for development   1,662     1,662     1,664     1,696     1,628  
ARIZONA                    
Communities   11     11     11     11     11  
Developed sites (17)   3,826     3,804     3,797     3,786     3,602  
Occupied (17)   3,515     3,485     3,468     3,446     3,410  
Occupancy % (17)   91.9 %   91.6 %   91.3 %   91.0 %   94.7 %
Sites for development   -     -     -     -     269  
INDIANA                    
Communities   11     11     11     11     11  
Developed sites (17)   3,089     3,089     3,048     2,900     2,900  
Occupied (17)   2,778     2,791     2,785     2,756     2,759  
Occupancy % (17)   89.9 %   90.4 %   91.4 %   95.0 %   95.1 %
Sites for development   277     277     318     466     330  
OHIO                    
Communities   9     9     9     9     9  
Developed sites (17)   2,770     2,767     2,756     2,759     2,757  
Occupied (17)   2,694     2,698     2,672     2,676     2,676  
Occupancy % (17)   97.3 %   97.5 %   97.0 %   97.0 %   97.1 %
Sites for development   59     59     75     75     75  
COLORADO                    
Communities   8     8     8     8     8  
Developed sites (17)   2,335     2,335     2,335     2,335     2,335  
Occupied (17)   2,313     2,319     2,327     2,325     2,318  
Occupancy % (17)   99.1 %   99.3 %   99.7 %   99.6 %   99.3 %
Sites for development   2,129     1,819     650     650     670  
OTHER STATES                    
Communities   69     68     57     57     57  
Developed sites (17)   15,458     15,367     15,118     15,194     14,957  
Occupied (17)   14,932     14,786     14,544     14,587     14,532  
Occupancy % (17)   96.6 %   96.2 %   96.2 %   96.0 %   97.2 %
Sites for development   3,195     3,233     2,381     2,385     2,540  
TOTAL - PORTFOLIO                    
Communities   370     367     350     350     348  
Developed sites (17)   108,142     107,192     106,617     106,036     104,359  
Occupied (17)   103,898     103,040     102,148     101,532     100,396  
Occupancy % (17)(18)   96.1 %   96.1 %   95.8 %   95.8 %   96.2 %
Sites for development   11,315     11,398     9,345     9,617     10,389  
% Communities age restricted   32.2 %   32.2 %   33.7 %   33.7 %   33.6 %
                     
TRANSIENT RV PORTFOLIO SUMMARY                    
 Location                    
Florida   5,786     5,942     5,870     6,074     6,133  
California   1,774     1,377     806     806     808  
Texas   1,758     1,776     1,360     1,373     1,392  
Arizona   1,057     1,079     1,085     1,096     1,012  
Ontario, Canada   1,056     1,133     1,234     1,248     1,262  
New York   910     928     610     614     623  
New Jersey   893     906     931     917     1,016  
Michigan   629     350     256     256     258  
Maine   578     591     591     596     529  
Indiana   519     519     519     520     520  
Ohio   150     153     148     145     147  
Other locations   4,322     4,253     2,283     2,211     2,215  
Total transient RV sites   19,432     19,007     15,693     15,856     15,915  


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 2018 $ 161   $ 14,716   $ 15,485   $ 379,323   $ 96,246   $ 1,926  
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 Manufactured Homes and Annual RVs 



LOCATIONS   Resident Move-outs   Net Leased Sites (24)   New Home Sales   Pre-owned Home Sales   Brokered  Re-sales
Florida   1,007     652     175     220     996  
Michigan   324     526     58     1,178     115  
Ontario, Canada   446     198     34     21     191  
Texas   173     149     20     280     32  
Arizona   57     69     24     13     122  
Indiana   40     22     4     184     8  
Ohio   65     18     1     117     8  
California   26     11     14     5     63  
Colorado   4     (12 )   2     69     51  
Other locations   639     245     54     278     97  
Nine Months Ended September 30, 2018   2,781     1,878     386     2,365     1,683  

TOTAL FOR YEAR ENDED   Resident Move-outs   New Leased Sites (24)   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 (TTM)   2.4 %   7.3 %
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 103,634 developed sites, of which 101,378 were occupied. The number of developed sites excludes RV transient sites and approximately 1,900 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.

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

  Three Months Ended
 September 30,
  Nine Months Ended
 September 30,
  2018   2017   2018   2017
Foreign currency translation gain / (loss) $ 1,547     $ 3,494     $ (2,640 )   $ 6,444  
Contingent liability remeasurement gain / (loss) (97 )   (149 )   (285 )   (1,104 )
Long term lease termination expense (219 )   -     (289 )   -  
Other income / (expense), net $ 1,231     $ 3,345     $ (3,214 )   $ 5,340  

(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) Core FFO(1) includes an adjustment of $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.

(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 $8.4 million and $7.9 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended September 30, 2018 and 2017, respectively and net $24.1 million and $22.9 million for the nine months ended September 30, 2018 and 2017, respectively.

(13) Same Community supplies and repair expense excludes $0.3 million and $2.6 million for the three and nine months ended September 30, 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 19 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. Total sites for development were comprised of approximately 71.9 percent for expansion, 23.1percent for greenfield development and 5.0 percent for redevelopment.

(18) At September 30, 2018, total portfolio MH occupancy was 94.9 percent (including the impact of approximately 1,900 recently constructed but vacant MH expansion sites) and annual RV occupancy was 100.0 percent.

(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, 2018 include $73.6 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.

(22) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements.

(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.

                                                                

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