SUN COMMUNITIES INC MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)


The following discussion and analysis of the consolidated financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and the accompanying Notes, along with our 2021 Annual
Report.

PREVIEW

We are a fully integrated, self-administered and self-managed REIT. As of March
31, 2022, we owned and operated or held an interest in a portfolio of 603
developed properties located in 39 states throughout the United States, Ontario,
Canada, Puerto Rico and the United Kingdom including 283 MH communities, 161 RV
resorts, 31 properties containing both MH and RV sites, and 128 marinas. We have
been in the business of acquiring, operating, developing and expanding MH
communities and RV resorts since 1975 and marinas since 2020. We lease
individual sites with utilities access for placement of manufactured homes, RVs
or boats to our customers. We are also engaged in the marketing, selling and
leasing of new and pre-owned homes to current and future residents in our MH
communities. The Rental Program operations within our MH communities support and
enhance our occupancy levels, property performance and cash flows.

PRINCIPAL ACCOUNTING POLICIES

We have identified significant accounting policies that, as a result of the
judgments, uncertainties and complexities of the underlying accounting standards
and operations involved could result in material changes to our financial
condition or results of operations under different conditions or using different
assumptions. Details regarding significant accounting policies are described
fully in our 2021 Annual Report.
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                             SUN COMMUNITIES, INC.

NON-GAAP FINANCIAL MEASURES

In addition to the results reported in accordance with GAAP in our "Results of
Operations" below, we have provided information regarding net operating income
("NOI") and funds from operations ("FFO") as supplemental performance measures.
We believe NOI and FFO are appropriate measures given their wide use by and
relevance to investors and analysts following the real estate industry. NOI
provides a measure of rental operations and does not factor in depreciation,
amortization and non-property specific expenses such as general and
administrative expenses. FFO, reflecting the assumption that real estate values
rise or fall with market conditions, principally adjusts for the effects of GAAP
depreciation / amortization of real estate assets. In addition, NOI and FFO are
commonly used in various ratios, pricing multiples / yields and returns and
valuation calculations used to measure financial position, performance and
value.

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

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

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

We believe that GAAP net income (loss) is the most directly comparable measure
to FFO. The principal limitation of FFO is that it does not replace GAAP net
income (loss) as a performance measure or GAAP cash flow from operations as a
liquidity measure. Because FFO excludes significant economic components of GAAP
net income (loss) including depreciation and amortization, FFO should be used as
a supplement to GAAP net income (loss) and not as an alternative to it.
Furthermore, 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 our interpretation of standards
established by NAREIT, which may not be comparable to FFO reported by other
REITs that interpret the NAREIT definition differently.
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                             SUN COMMUNITIES, INC.

RESULTS OF OPERATIONS

The following tables reconcile the Net income attributable to Sun Communities,
Inc. common shareholders to NOI and summarize our consolidated financial results
for the three months ended March 31, 2022 and 2021 (in millions):

                                                                            

Three months completed

March 31, 2022 March 31, 2021
Net income attributable to Sun Communities, Inc. Ordinary shareholders

                                                             $      0.7             $         24.8
Interest income                                                                (6.8)                      (2.6)
Brokerage commissions and other revenues, net                                  (8.0)                      (6.0)
General and administrative expense                                             55.7                       38.2
Catastrophic event-related charges, net                                           -                        2.4
Business combination expense                                                    0.5                        1.2
Depreciation and amortization                                                 148.5                      123.9

Loss on extinguishment of debt (see Note 8)                                     0.3                          -
Interest expense                                                               45.2                       39.5
Interest on mandatorily redeemable preferred OP units / equity                  1.0                        1.0

(Gain) / loss on revaluation of marketable securities (see Note 15)

                                                                            34.5                       (3.7)
Loss on foreign currency translation                                            2.2                          -
Gain on disposition of property                                               (13.4)                         -
Other expense, net                                                              0.6                        0.5
Gain on remeasurement of notes receivable (see Note 4)                         (0.2)                      (0.4)
Income from nonconsolidated affiliates (see Note 6)                            (0.9)                      (1.2)

Gain on revaluation of investments in unconsolidated associates (see Note 6)

                                                                   (0.1)                      (0.1)
Current tax (benefit) / expense (see Note 12)                                   1.3                       (0.2)
Deferred tax benefit (see Note 12)                                                -                       (0.1)
Preferred return to preferred OP units / equity interests                       3.0                        2.9
Income / (loss) attributable to noncontrolling interests                       (2.2)                       0.3

NOI                                                                      $    261.9             $        220.4



                                                                                        Three Months Ended
                                                                              March 31, 2022         March 31, 2021
Real property NOI                                                            $    232.8             $        204.6
Home sales NOI                                                                     18.8                       10.6

Service, retail, dining and entertainment expenses NOI                             10.3                        5.2

NOI                                                                          $    261.9             $        220.4



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                             SUN COMMUNITIES, INC.

Income seasonality

The recreational vehicle and marina industries are seasonal in nature, and results of operations for any given period may not be indicative of results in future periods.

In the RV segment, certain properties maintain higher occupancy during the
summer months, while other properties maintain higher occupancy during the
winter months. Based on the location of our properties with transient RV sites,
our portfolio generally produces higher revenues between April and September
than between October and March. Real property - transient revenue is included in
RV segment revenue. As of March 31, 2022, we recognized $42.7 million of Real
property - transient revenue in the first quarter. Real property - transient
revenue was $266.6 million for the year ended December 31, 2021. In 2021, Real
property - transient revenue was recognized 11.9 percent in the first
quarter, 27.3 percent in the second quarter, 44.9 percent in the third quarter
and 15.9 percent in the fourth quarter.

In the marina segment, demand for wet slip storage increases during the summer
months as customers contract for the summer boating season, which also drives
non-storage revenue streams such as service, fuel and on-premises restaurants or
convenience stores. Demand for dry storage increases during the winter season as
seasonal weather patterns require boat owners to store their vessels on dry
docks and within covered racks. As of March 31, 2022, we recognized $62.4
million of seasonal Real property revenue in the first quarter. Seasonal Real
property revenue was $246.6 million for the year ended December 31, 2021. In
2021, Seasonal Real property revenue was recognized 17.7 percent in the first
quarter, 25.0 percent in the second quarter, 29.9 percent in the third quarter
and 27.4 percent in the fourth quarter.

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                             SUN COMMUNITIES, INC.

Comparison of the three months ended March 31, 2022 and 2021

Real estate transactions – Total portfolio

The following tables reflect certain financial and other information for our
Total Portfolio as of and for the three months ended March 31, 2022 and 2021 (in
millions, except for statistical information):

                                                             Three Months Ended
                                        March 31, 2022      March 31, 2022      Change      % Change
Financial Information
Revenue

Real estate (excluding transitory) $306.7 $268.8

   $ 37.9         14.1  %
Real property - transient                        45.0                32.5        12.5         38.5  %
Other                                            36.5                29.3         7.2         24.6  %
Total Operating                                 388.2               330.6        57.6         17.4  %
Expense

Property Operating                              155.4               126.0        29.4         23.3  %
Real Property NOI                      $        232.8      $        204.6      $ 28.2         13.8  %



                                                            As of
                                              March 31, 2022      March 31, 2021         Change
Other Information
Number of properties(1)                                603                 562              41

MH occupancy                                          96.7  %
RV occupancy(2)                                      100.0  %
MH & RV blended occupancy(3)                          97.5  %             97.3  %          0.2  %

Sites available for MH & RV development             11,377               9,646           1,731

Monthly base rent per site - MH              $         615       $         598    (5)   $   17
Monthly base rent per site - RV(4)           $         542       $         522    (5)   $   20
Monthly base rent per site - Total           $         597       $         

580 (5) $17

(1) Includes MH communities, RV resorts and marinas.

(2) Occupancy percentages include annual RV sites and exclude transient RV sites.

(3) Occupancy percentages include annual MH and RV sites, and exclude transient RV sites.

(4) Monthly base rent refers to annual RV sites and excludes transient RV sites.

(5) Figures in Canadian currency included in the three months ended March 31, 2021 have been converted at average 2022 exchange rates.

For the three months ended March 31, 2022, the $28.2 million increase in Real
Property NOI consists of $13.6 million from Same Property MH and RV and
$0.3 million from Same Property marina as detailed below, and $14.3 million from
recently acquired properties as compared to the same period in 2021.
                                       39
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                             SUN COMMUNITIES, INC.

Real estate transactions – same property

A key management tool used when evaluating performance and growth of our
properties is a comparison of the Same Property portfolio. Same Property refers
to properties that we have owned for at least the preceding year, exclusive of
properties recently completed or under construction, and other properties as
determined by management. The Same Property data may change from time-to-time
depending on acquisitions, dispositions, management discretion, significant
transactions or unique situations. In order to evaluate the growth of the Same
Property portfolio, management has classified certain items differently than our
GAAP statements. The reclassification difference between our GAAP statements and
our Same Property portfolio is the reclassification of utility revenues from
real property revenue to operating expenses. A significant portion of our
utility charges are re-billed to our residents.

Real estate transactions – same property – MH and RV

The following tables reflect certain financial and other information for our
Same Property MH and RV as of and for the three months ended March 31, 2022 and
2021 (in millions, except for statistical information).

                                                                                                                            Three Months Ended
                                           Total Same Property - MH and RV                                                            MH                                                                         RV
                                             March 31,                                                March 31,         March 31,                                                March 31,         March 31,
                       March 31, 2022          2021            Change           % Change(1)             2022              2021            Change           % Change(1)             2022              2021            Change           % Change(1)
Financial Information
Revenue
Real property
(excluding transient)  $     233.1          $  218.7          $ 14.4                    6.6  %       $  182.4          $  174.9          $  7.5                    4.3  %       $   50.7          $   43.8          $  6.9                   15.5  %
Real property -
transient                     39.1              30.3             8.8                   28.9  %            0.5               0.6            (0.1)                 (23.1) %           38.6              29.7             8.9                   30.0  %
Other                          7.6               7.2             0.4                    5.5  %            4.9               4.4             0.5                   11.1  %            2.7               2.8            (0.1)                  (3.3) %
Total Operating              279.8             256.2            23.6                    9.2  %          187.8             179.9             7.9                    4.4  %           92.0              76.3            15.7                   20.5  %
Expense

Property Operating            88.9              78.9            10.0                   12.7  %           47.7              43.9             3.8                    8.7  %           41.2              35.0             6.2                   17.6  %
Real Property NOI      $     190.9          $  177.3          $ 13.6                    7.7  %       $  140.1          $  136.0          $  4.1                    3.0  %       $   50.8          $   41.3          $  9.5                   22.9  %

(1) Percentages are calculated on the basis of unrounded numbers.

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                             SUN COMMUNITIES, INC.
                                                          As of
                                            March 31, 2022      March 31, 2021         Change
Other Information
Number of properties                                 425                 425              -

MH occupancy                                        97.3  %
RV occupancy(1)                                    100.0  %
MH & RV blended occupancy(2)                        97.9  %

Adjusted MH occupancy(3)                            98.1  %
Adjusted RV occupancy(4)                           100.0  %
Adjusted MH & RV blended occupancy(5)               98.5  %             

96.9% (6) 1.6%

Sites available for development                    7,645               8,243           (598)

Monthly base rent per site - MH            $         620       $         597      (8) $  23
Monthly base rent per site - RV(7)         $         553       $         522      (8) $  31
Monthly base rent per site - Total         $         604       $         580      (8) $  24


(1) Occupancy percentages include annual RV sites and exclude transient RV sites.

(2) Occupancy percentages include annual MH and RV sites, and exclude temporary RV sites.

(3) Adjusted occupancy percentages include MH and exclude recently completed but vacant expansion sites.

(4) Adjusted occupancy percentages include annual RV sites and exclude transient RV sites and recently completed but vacant expansion sites.

(5) Adjusted occupancy percentages include MH and annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.

(6) Occupancy percentages for 2021 have been adjusted to reflect the incremental period-over-period growth of newly leased MH expansion sites and the conversion of transient RV sites to annual RV sites.

(7) Monthly base rent refers to annual RV sites and excludes transient RV sites.

(8) Figures in Canadian currency included in the three months ended March 31, 2021
have been converted at average 2022 exchange rates.

The amounts in the table above reflect constant currency for comparative
purposes. We have reclassified water and sewer revenues of $19.6 million and
$17.3 million for the three months ended March 31, 2022 and 2021, to reflect the
utility expenses associated with our Same Property portfolio net of recovery.

For the three months ended March 31, 2022 and 2021:

•The $13.6 million, or 7.7 percent, growth in Total Same Property NOI is due to
a $9.5 million, or 22.9 percent, increase in NOI from the RV segment and $4.1
million, or 3.0 percent, increase in NOI from the MH segment.

•The RV segment increase in NOI of $9.5 million, or 22.9 percent, is primarily
due to an increase in Real property - transient revenue of $8.9 million, or 30.0
percent, when compared to the same period in 2021 due to increased transient and
vacation rental traffic.

•The MH segment increase in NOI of $4.1 million, or 3.0 percent, is primarily
due to an increase in Real property (excluding transient) revenue of $7.5
million, or 4.3 percent, when compared to the same period in 2021. MH property
(excluding transient) revenue increased due to a 3.8 percent increase in monthly
base rent and an increase in Occupancy of 160 basis points.

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                             SUN COMMUNITIES, INC.

Real estate transactions – Same property – Marina

The following tables reflect certain financial and other information for our
Same Property Marina as of and for the three months ended March 31, 2022 and
2021 (in millions, except for statistical information).

                                                                              Three Months Ended
                                                                                                                        %
Financial Information                          March 31, 2022           March 31, 2021           Change              Change(1)
Revenue

Real estate (excluding transitional) $45.8 $

     43.3          $   2.5                      5.6  %
Real property - transient                                1.4                      0.9              0.5                     58.7  %
Other                                                    2.3                      1.7              0.6                     34.3  %
Total Operating                                         49.5                     45.9              3.6                      7.7  %
Expense

Property Operating                                      24.4                     21.1              3.3                     15.2  %
Real Property NOI                            $          25.1          $          24.8          $   0.3                      1.2  %

(1) Percentages are calculated on the basis of unrounded numbers.

                                        As of
                        March 31, 2022         March 31, 2021       Change      % Change
Other Information
Number of properties          101                    101              -              -  %


We have reclassified utility revenue from $2.5 million and $2.6 million for the three months ended March 31, 2022 and 2021, to reflect utility expenses associated with our Same property Marina net recovery portfolio.

Same property Marina NOI remained stable for the three months ended March 31, 2022
compared to the same period in 2021.

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                             SUN COMMUNITIES, INC.

Summary of door-to-door sales

We buy new homes and acquire pre-owned and trade-in manufactured homes, typically located in our communities, from lenders, dealers and former residents for sale or rental to current and potential residents.

The following table reflects certain financial and statistical information for
our Home Sales Program for the three months ended March 31, 2022 and 2021 (in
millions, except for average selling price and statistical information):

                                                                            

Three months completed

                                                       March 31, 2022          March 31, 2021           Change             % Change
Financial Information
New Homes
New home sales                                        $         26.6          $         23.0          $    3.6                 15.7  %
New home cost of sales                                          21.6                    18.7               2.9                 15.5  %
Gross profit - new homes                                         5.0                     4.3               0.7                 16.3  %
Gross margin % - new homes                                      18.8  %                 18.7  %            0.1  %
Average selling price - new homes                     $      179,730          $      154,174          $ 25,556                 16.6  %

Pre-owned Homes
Pre-owned home sales                                  $         38.1          $         29.2          $    8.9                 30.5  %
Pre-owned home cost of sales                                    19.8                    18.6               1.2                  6.5  %
Gross Profit - pre-owned homes                                  18.3                    10.6               7.7                 72.6  %
Gross margin % - pre-owned homes                                48.0  %                 36.4  %           11.6  %
Average selling price - pre-owned homes               $       55,298          $       42,605          $ 12,693                 29.8  %

Total Home Sales
Revenue from home sales                               $         64.7          $         52.2          $   12.5                 23.9  %
Cost of home sales                                              41.4                    37.3               4.1                 11.0  %
Home selling expenses                                            4.5                     4.3               0.2                  4.7  %
Home Sales NOI                                        $         18.8          $         10.6          $    8.2                 77.4  %

Other Information
New home sales volume                                            148                     149                (1)                (0.7) %
Pre-owned home sales volume                                      689                     686                 3                  0.4  %
Total home sales volume                                          837                     835                 2                  0.2  %



Gross Profit - New Homes
For the three months ended March 31, 2022, the $0.7 million, or 16.3 percent,
increase in gross profit is primarily the result of a 16.6 percent increase in
the new home average selling price, as compared to the same period in 2021.

Gross Profit - Pre-owned Homes
For the three months ended March 31, 2022, the $7.7 million, or 72.6 percent,
increase in gross profit is primarily the result of a 11.6 percent increase in
gross margin, primarily due to a 29.8 percent increase in the pre-owned home
average selling price, as compared to the same period in 2021.

Homes sales NOI
For the three months ended March 31, 2022, the $8.2 million, or 77.4 percent,
increase in NOI is primarily the result of an increase in new home average
selling price and pre-owned home average selling price, compared to the same
period in 2021.

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                             SUN COMMUNITIES, INC.

Rental Program Summary

The following table reflects certain financial and other information for our
Rental Program as of and for the three months ended March 31, 2022 and 2021 (in
millions, except for weighted average monthly rental rate and statistical
information):

                                                                              Three Months Ended
                                                       March 31,         March 31,
                                                         2022              2021             Change            % Change
Financial Information
Revenues
Home rent                                             $   16.1          $   17.0          $  (0.9)                (5.3) %
Site rent                                                 16.1              19.1             (3.0)               (15.7) %
Total                                                     32.2              36.1             (3.9)               (10.8) %

Expenses

Rental Program operating and maintenance                   4.9               5.2             (0.3)                (5.8) %
Rental Program NOI                                    $   27.3          $   30.9          $  (3.6)               (11.7) %

Other Information
Number of sold rental homes                                177               211              (34)               (16.1) %
Number of occupied rentals, end of period                9,467            11,473           (2,006)               (17.5) %

Investment in occupied rental housing, end of period $541.9 $621.9 $(80.0)

               (12.9) %

Weighted average monthly rental rate, end of period $1,139 $1,055 $84

                  8.0  %



The RNE for the rental program is included in the RNE for real estate. The rental program’s ROE is reviewed separately to assess the overall growth and performance of the rental program and its financial impact on the company’s operations.

For the three months ended March 31, 2022, Rental Program NOI decreased $3.6
million, or 11.7 percent as compared to the same period in 2021. The decrease is
primarily due to a $3.9 million or 10.8 percent decrease in revenue driven by a
17.5 percent decrease in number of occupied rental homes, as compared to the
same period in 2021.

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                             SUN COMMUNITIES, INC.

Summary of marinas

The following table reflects certain financial and other information for our marinas as of and for the three months ended March 31, 2022 and 2021 (in millions, except for statistical information):

                                                                                   Three Months Ended
                                                            March 31,          March 31,
                                                               2022               2021            Change           % Change
Financial Information
Revenues
Real property (excluding transient)                        $    67.0          $    46.1          $ 20.9                45.3  %
Real property - transient                                        2.5                0.9             1.6               177.8  %
Other                                                            2.9                1.6             1.3                81.3  %
Total Operating                                                 72.4               48.6            23.8                49.0  %
Expenses
Property Operating                                              33.2               23.6             9.6                40.7  %
Real Property NOI                                               39.2               25.0            14.2                56.8  %
Service, retail, dining and entertainment
Revenue                                                         71.2               44.4            26.8                60.4  %
Expense                                                         59.8               38.0            21.8                57.4  %
NOI                                                             11.4                6.4             5.0                78.1  %

Marina NOI                                                 $    50.6          $    31.4          $ 19.2                61.1  %

Statistical information
Number of properties                                             128                110              18                16.4  %

Total wet slips and dry storage                               45,725             39,338           6,387                16.2  %



The Marina Real Property NOI is included in Real Property NOI. The Marina NOI is
separately reviewed to assess the overall growth and performance of the marina
segment and its financial impact on the Company's operations.

We have reclassified utility revenue from $4.3 million and $2.6 million for the three months ended March 31, 2022 and 2021, to reflect utility expenses associated with our portfolio of net salvage marina properties.

For the three months ended March 31, 2022 and 2021:

•The $19.2 million, or 61.1 percent increase in Marina NOI is due to a $14.2
million, or 56.8 percent increase in Marina Real Property NOI and a $5.0 million
or 78.1 percent increase in Service, Retail, Dining and Entertainment NOI.

•The $14.2 million, or 56.8 percent growth in Marina Real Property NOI is due to
a $20.9 million, or 45.3 percent, increase in Real property (excluding
transient) revenue due to an increase in the number of owned marina properties
compared to the same period in 2021.

•The 5.0 million, or 78.1 percent increase in Service, Retail, Dining and
Entertainment NOI is due to an increase in Real property transient revenue due
to an increase in service rates at our marinas and the addition of service
revenue from the acquisition of additional marinas coupled with increased demand
and entry into the superyacht market.
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