Sun Communities, Inc. Reports 2020 Fourth Quarter Results and 2021 Guidance

Financial Results for the Quarter and Year Ended December 31, 2020

For the quarter ended December 31, 2020, total revenues increased $82.4million, or 27.3 percent, to approximately $384.3 million compared to $301.8 million for the same period in 2019. Net income attributable to common stockholders was approximately $7.6million, or $0.07 per diluted common share, for the quarter ended December 31, 2020.

For the year ended December 31, 2020, total revenues increased $134.3 million, or 10.6 percent, to approximately $1.4 billion compared to $1.3 billion for the same period in 2019. Net income attributable to common stockholders was $131.6million, or $1.34 per diluted common share, for the year ended December 31, 2020.

Non-GAAP Financial Measures and Portfolio Performance

• Core Funds from Operations (“Core FFO”)⁽¹⁾ for the quarter ended December 31, 2020, was $1.16 per diluted share and OP unit (“Share”) as compared to $1.10 in the corresponding period in 2019, a 5.5 percent increase. Core FFO⁽¹⁾ for the year ended December 31, 2020, was $5.09 per Share as compared to $4.92 in the prior year, an increase of 3.5 percent.
• Same Community⁽²⁾ Net Operating Income (“NOI”)⁽¹⁾increased by 2.1 percent and 4.0 percent for the quarter and year ended December 31, 2020, respectively, as compared to the corresponding periods in 2019.
• Acquired approximately $3.0 billion of operating properties including the $2.1 billion acquisition of Safe Harbor Marinas in 2020.
• MH and Annual RV Revenue Producing Sites increased by 578 sites in the fourth quarter and 2,505 sites during the year ended December 31, 2020, bringing total portfolio occupancy to 97.3 percent.
• MH and Annual RV Rent Collections for the fourth quarter were over 96.0 percent and 97.0 percent, respectively.

Gary Shiffman, Chief Executive Officer stated, “As we reflect on the events of 2020, we are pleased with our performance and the demonstrated resilience and stability of our business and operating platform, particularly in light of the challenging environment. We generated 4.0 percent same community NOI growth, delivered 3.5 percent year over year Core FFO⁽¹⁾ per Share growth, deployed $3.0 billion into accretive acquisitions and raised approximately $1.9 billion in two equity offerings with strong investor demand. We are well positioned to continue delivering industry leading growth and have a new business line that broadens our opportunity set with the addition of Safe Harbor Marinas.”

Mr. Shiffman continued, “The dedication and perseverance of our team to create value for our shareholders continues to be a key factor in our success.”

OPERATING HIGHLIGHTS

Portfolio Occupancy

Total MH and annual RV occupancy was 97.3 percent at December 31, 2020, compared to 96.4 percent at December 31, 2019, an increase of 90 basis points.

During the quarter ended December 31, 2020, MH and annual RV revenue producing sites increased by 578 sites, bringing full year 2020 revenue producing site gains to 2,505 sites.

Same Community⁽²⁾ Results

For the 367 MH and RV properties owned and operated by the Company since January 1, 2019, NOI⁽¹⁾for the quarter ended December 31, 2020 increased 2.1 percent over the same period in 2019, resulting from a 5.7 percent increase in revenues and a 13.6 percent increase in expenses. Adjusted to remove the impact of $0.3 million of direct COVID-19 related health and safety expense, Same Community NOI⁽¹⁾ growth was 2.4 percent for the quarter ended December 31, 2020. Payroll, utilities and supplies and repair costs were elevated during the quarter primarily due to the extended season of the Company’s northern RV resorts. Same Community occupancy⁽³⁾ increased to 98.8 percent at December 31, 2020 from 97.0 percent at December 31, 2019.

For the year ended December 31, 2020, NOI⁽¹⁾increased 4.0 percent over the same period in 2019, resulting from a 3.6 percent increase in revenues and a 3.0 percent increase in expenses. Adjusted to remove the impact of $2.4 million of direct COVID-19 related health and safety expense, Same Community NOI⁽¹⁾ growth was 4.4 percent for the year ended December 31, 2020.

Home Sales

During the quarter ended December 31, 2020, the Company sold 782 homes as compared to 808 homes in the same period in 2019. The Company sold 156 and 140 new homes for the quarters ended December 31, 2020 and 2019, respectively, an increase of 11.4 percent. Pre-owned home sales were 626 in the fourth quarter 2020 as compared to 668 in the same period in 2019. Rental home sales, which are included in total pre-owned home sales, were 269 and 281 for the quarters ended December 31, 2020 and 2019, respectively.

During the year ended December 31, 2020, the Company sold 2,866 homes as compared to 3,439 homes sold during 2019. The Company sold 570 and 571 new homes during the years ended December 31, 2020 and 2019, respectively. Pre-owned home sales were 2,296 during the year ended December 31, 2020, as compared to 2,868 during 2019. Rental home sales, which are included in total pre-owned home sales, were 850 and 1,140 for the years ended December 31, 2020 and 2019, respectively.

Rent Collections

For the fourth quarter of 2020, MH and annual RV rent collections were over 96.0 percent and 97.0 percent, respectively, after adjusting for the impact of COVID-19 related hardship deferrals and prepaid rent balances.

January 2021 rent collections were 97.0 percent for MH and 97.0 percent for annual RV.

PORTFOLIO ACTIVITY

Acquisitions

During and subsequent to the quarter ended December 31, 2020, the Company acquired the following communities and resorts:

^(a) Includes six MH communities.

^(b) Includes two RV resorts.

During and subsequent to the quarter ended December 31, 2020, the Company acquired the following marinas:

^(a) Includes 99 owned marinas located in 22 states. In conjunction with the acquisition, the Company issued Series H preferred OP units. As of December 31, 2020, 581,407 Series H preferred OP units were outstanding.

^(b) Acquired in connection with Safe Harbor Marinas acquisition. Transfer of the marinas was contingent on receiving third party consents.

^(c) Includes two marinas. In conjunction with the acquisition, the Company issued Series I preferred OP units. As of December 31, 2020, 922,000 Series I preferred OP units were outstanding.

^(d) Includes two marinas.

During the year ended December 31, 2020, the Company acquired 24 MH communities and RV resorts with 6,919 sites and 106 marinas with over 38,800 wet slips and dry rack storage spaces for a total purchase price of approximately $3.0billion.

Construction Activity

During the quarter ended December 31, 2020, the Company completed the construction of nearly 50 sites in two ground-up developments and one redevelopment property, and over 120 expansion sites in one RV resort and one MH community. Full-year ground-up and redevelopment site deliveries were over 1,000 sites in five properties and over 300 total expansion sites in eight properties.

BALANCE SHEET, CAPITAL MARKETS ACTIVITY AND OTHER ITEMS

Debt Transactions

As of December 31, 2020, the Company had approximately $4.8 billion of debt outstanding. The weighted average interest rate was 3.4 percent and the weighted average maturity was 9.4 years. The Company had $83.0million of unrestricted cash on hand. At December 31, 2020, the Company’s net debt to trailing twelve-month Recurring EBITDA⁽¹⁾ ratio was 6.9 times, which includes all of Safe Harbor’s debt, but only two months of its EBITDA contribution.

During the quarter ended December 31, 2020, as previously disclosed, the Company entered into a new $260.0 million term loan secured by 11 MH and RV properties. The loan has a 12-year maturity and a fixed interest rate of 2.64 percent.

Equity Transactions

During the quarter ended December 31, 2020, as previously disclosed, the Company closed an underwritten registered public offering of 9,200,000 shares of common stock. Proceeds from the offering were $1.2 billion after deducting expenses related to the offering. The Company used the net proceeds of the offering to fund the cash portion of the acquisition of Safe Harbor and for working capital and general corporate purposes.

2021 Distributions

The Company’s Board of Directors has approved setting the 2021 annual distribution rate at $3.32 per common share, an increase of $0.16, or 5.1 percent, over the current $3.16 per common share for 2020. This increase will begin with the first quarter distribution to be paid in April 2021. While the Board of Directors has adopted the new annual distribution policy, the amount of each quarterly distribution on the Company’s common stock will be subject to approval by the Board of Directors.

New Director

On February 11, 2020 the Board of Directors increased the size of the board from seven to eight directors and appointed Tonya Allen to the Company’s Board of Directors as an independent director. Ms. Allen brings an expert perspective on sustainability and social issues, an important focus for the Company.

2021 GUIDANCE

The estimates and assumptions presented below represent a range of possible outcomes and may differ materially from actual results. These estimates include contributions from all acquisitions through the date of this release and exclude prospective acquisitions and capital markets activity. The estimates and assumptions are forward-looking based on the Company’s current assessment of economic and market conditions, as well as other risks outlined below under the caption Cautionary Statement Regarding Forward-Looking Statements.

Notes to 2021 guidance:

• Includes contributions from recently completed acquisitions
  • $218.5 million of MH community and RV resort acquisitions in the fourth quarter 2020 and subsequent to year end
  • $437.3 million of marina acquisitions subsequent to the closing of the Safe Harbor transaction on October 30, 2020
• Includes a lower transient RV revenue estimate of $8.0 – $10.0 million in the first quarter 2021 due to the extension of the Canadian border closure order and the California travel restrictions imposed through early February, 2021

Earnings and Core FFO⁽¹⁾

(i) Certain securities that are dilutive to the computation of Core FFO⁽¹⁾ per fully diluted share in the table above have been excluded from the computation of net income per fully diluted share, as inclusion of these securities would have been anti-dilutive to net income per fully diluted share.

Total MH and RV Portfolio

Number of properties: 446

General and Administrative Expenses

General and administrative expenses include the impact of the Company’s entry into the marina asset class. The marina portfolio is operated as an independent wholly-owned subsidiary retaining its own senior management, property management and back office operations. As significant growth potential through the consolidation of the highly fragmented marina industry is anticipated, costs associated with scaling to effectively operate a larger portfolio are required. As a general practice, marina acquisitions are underwritten with an expected incremental general and administrative cost of 3.0 percent of revenues.

Same Community⁽²⁾ Portfolio

Number of MH and RV properties: 407

Same community NOI⁽¹⁾ growth is expected to be between 5.6 percent and 6.6 percent for full year 2021.

Marinas

NOI⁽¹⁾ inclusive of the contribution from service and ancillary operations is expected to be $163.0 million – $169.0 million.

EARNINGS CONFERENCE CALL

A conference call to discuss fourth quarter operating results will be held on Thursday, February18, 2021 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 March4, 2021 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 13713712. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of December 31, 2020, owned, operated, or had an interest in a portfolio of 552 developed MH, RV and marina properties comprising over 188,000 developed sites in 39 states and Ontario, Canada.

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

CAUTIONARY STATEMENT REGARDING 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. For this purpose, any statements contained in this press release that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as “forecasts,” “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “predicts,” “potential,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes,” “scheduled,” “guidance”, “target” and similar expressions are intended to identify forward-looking statements, although not all forward looking statements contain these words. These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties and other factors, both general and specific to the matters discussed in or incorporated herein, some of which are beyond the Company’s control. These risks, uncertainties and other factors may cause the Company’s actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks disclosed under “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and September 30, 2020, and the Company’s other filings with the Securities and Exchange Commission from time to time, such risks, uncertainties and other factors include but are not limited to:

• outbreaks of disease, including the COVID-19 pandemic, and related stay at home orders, quarantine policies and restrictions on travel, trade and business operations;
• changes in general economic conditions, the real estate industry and the markets in which the Company operates;
• difficulties in the Company’s ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully;
• the Company’s liquidity and refinancing demands;
• the Company’s ability to obtain or refinance maturing debt;
• the Company’s ability to maintain compliance with covenants contained in its debt facilities;
• availability of capital;
• changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian and Australian dollars;
• the Company’s ability to maintain rental rates and occupancy levels;
• the Company’s ability to maintain effective internal control over financial reporting and disclosure controls and procedures;
• increases in interest rates and operating costs, including insurance premiums and real property taxes;
• risks related to natural disasters such as hurricanes, earthquakes, floods, and wildfires;
• general volatility of the capital markets and the market price of shares of the Company’s capital stock;
• the Company’s ability to maintain its status as a REIT;
• changes in real estate and zoning laws and regulations;
• legislative or regulatory changes, including changes to laws governing the taxation of REITs;
• litigation, judgments or settlements;
• competitive market forces;
• the ability of purchasers of manufactured homes and boats to obtain financing; and
• the level of repossessions by manufactured home and boat lenders.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements included in this press release, whether as a result of new information, future events, changes in its expectations or otherwise, except as required by law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by these cautionary statement.

Investor Information

Portfolio Overview
(As of December 31, 2020)

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

Consolidated Balance Sheets
(amounts in thousands)

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

N/M = Percentage change is not meaningful.

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

^ Annual distribution is based on the last quarterly distribution annualized.

⁽¹⁾ Calculation may yield minor differences due to fractional shares paid in cash to the stockholder at conversion.

Reconciliations to Non-GAAP Financial Measures

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO⁽¹⁾
(amounts in thousands except for per share data)

^(a) Adjustments include deferred compensation amortization upon retirement and deferred tax (benefit) / expense.

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA⁽¹⁾
(amounts in thousands)

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to NOI⁽¹⁾
(amounts in thousands)

Non-GAAP and Other Financial Measures

Debt Analysis
(amounts in thousands)

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

^(a) Includes COVID-19 personal protective equipment expense of $0.3 million and $2.4 million for the quarter and year ended December 31, 2020, respectively.

Home Sales Summary
(amounts in thousands except for *)

Rental Program Summary
(amounts in thousands except for *)