Sun Communities, Inc. Reports 2021 Fourth Quarter Results and 2022 Guidance

Financial Results for the Quarter and Year Ended December 31, 2021

For the quarter ended December 31, 2021, total revenues increased by $158.2 million, or 41.2 percent, to $542.4million compared to approximately $384.3 million for the same period in 2020. Net income attributable to common stockholders increased by $5.2 million, or 69.1 percent, to $12.8million, or $0.11 per diluted common share, compared to net income attributable to common stockholders of $7.6million, or $0.07 per diluted common share, for the same period in 2020.

For the year ended December 31, 2021, total revenues increased by $874.3million, or 62.5 percent, to approximately $2.3billion compared to $1.4billion for the same period in 2020. Net income attributable to common stockholders increased by $248.5million, or 188.8 percent, to $380.2million, or $3.36 per diluted common share, compared to net income attributable to common stockholders of $131.6million, or $1.34 per diluted common share, for the same period in 2020.

Non-GAAP Financial Measures and Portfolio Performance

• Core Funds from Operations (“Core FFO”)⁽¹⁾ for the quarter ended December 31, 2021, was $1.31 per diluted share and OP unit (“Share”) as compared to $1.16 in the corresponding period in 2020, a 12.9 percent increase. Core FFO⁽¹⁾ for the year ended December 31, 2021, was $6.51 per Share as compared to $5.09 in the prior year, an increase of 27.9 percent.
• Same Community⁽²⁾ Net Operating Income (“NOI”)⁽¹⁾increased by 8.4 percent and 11.2 percent for the quarter and year ended December 31, 2021, as compared to the corresponding period in 2020.
• Home Sales Volume increased 19.3 percent to 933 homes for the quarter ended December 31, 2021, as compared to 782 homes in the same period in 2020, and 42.6 percent to 4,088 homes for the year ended December 31, 2021, as compared to 2,866 homes in the same period in 2020.
• Acquisitions totaled $385.4 million during and subsequent to the quarter ended December 31, 2021, including 12 RV resorts and 7 marinas.

“A strong fourth quarter concluded an incredibly productive year for Sun Communities, where we made meaningful progress in each of our internal and external growth initiatives,” said Gary A. Shiffman, Chairman and CEO. “Robust demand for the attainable housing and outdoor experiences that Sun provides resulted in compelling organic growth, driving an 11.2 percent same community NOI increase for the year, further building on our demonstrated strength throughout the pandemic. We expanded our portfolio, completing $1.4 billion of high-quality acquisitions across manufactured housing communities, RV resorts and marinas and opened four new ground-up development properties. We also continued to grow our pipeline for future growth with land purchases for greenfield development and site expansions. We are particularly excited to be entering the UK market with our announced planned acquisition of Park Holidays, a leading holiday park platform with irreplaceable seaside communities. With a proven track record of execution, accretive growth and favorable tailwinds supporting ongoing demand, we are continuing to invest in our platform in order to realize additional opportunities of accelerated growth and create shareholder value for years to come.”

OPERATING HIGHLIGHTS

Portfolio Occupancy

Total MH and annual RV occupancy was 97.4 percent at December 31, 2021 as compared to 97.3 percent at December 31, 2020, an increase of 10 basis points.

During the quarter ended December 31, 2021, MH and annual RV revenue producing sites increased by 810 sites as compared to an increase of 578 sites during the quarter ended December 31, 2020, a 40.1 percent increase.

During the year ended December 31, 2021, MH and annual RV revenue producing sites increased by 2,483 sites as compared to an increase of 2,505 sites during the year ended December 31, 2020.

Same Community⁽²⁾ Results

For the 403 MH and RV properties owned and operated by the Company since January 1, 2020, the following table reflects the percentage increases, in total and by segment, for the quarter and year ended December 31, 2021:

Same Community adjusted occupancy⁽³⁾ increased to 98.9 percent at December 31, 2021 from 97.5 percent at December 31, 2020, an increase of 140 basis points.

Home Sales

The following table reflects the home sales volume changes for the quarter and year ended December 31, 2021:

Marina Results

Marina NOI was approximately $53.6 million and $212.2 million for the quarter and year ended December 31, 2021, respectively. Refer to page 15 for additional information regarding the marina portfolio operating results.

PORTFOLIO ACTIVITY

Acquisitions

During and subsequent to the quarter ended December 31, 2021, the Company acquired the following properties:

During and subsequent to the year ended December 31, 2021, the Company acquired 56 properties totaling 16,045 sites, wet slips and dry storage spaces and 1,062 sites for expansion for a total purchase price of $1.5 billion.

During the quarter ended December 31, 2021, the Company entered into a definitive agreement to acquire Park Holidays UK (“Park Holidays”), an owner and operator of holiday communities in the United Kingdom, for £950.0million, or approximately $1.3billion. The Company anticipates that the closing of the Park Holidays acquisition (the “Park Holidays Acquisition”) will occur in mid-March of 2022. The closing of the Park Holidays Acquisition is subject to the receipt of a required regulatory approval. There can be no assurances as to the actual closing or timing of the closing.

During the quarter ended December 31, 2021, the Company acquired Leisure Systems, Inc. (“LSI”) for a total purchase price of $23.0 million. LSI is the franchisor for the Jellystone Park™ system.

Development Activity

During the quarter ended December 31, 2021, the Company completed the construction of nearly 450 sites in six ground-up developments and over 250 expansion sites in three MH communities and three RV resorts.

During the year ended December 31, 2021, the Company completed the construction of over 1,030 sites in eight ground-up developments and re-developments, and nearly 580 expansion sites in six MH communities and five RV resorts.

During the quarter ended December 31, 2021, the Company acquired eight land parcels, which are located across the United States and the United Kingdom for the potential development of nearly 3,300 sites, for total consideration of $165.1 million.

During the year ended December 31, 2021, the Company acquired 11 land parcels, which are located across the United States and the United Kingdom, for the potential development of nearly 4,000 sites for total purchase price of $172.8million.

BALANCE SHEET, CAPITAL MARKETS ACTIVITY AND OTHER ITEMS

Debt

As of December 31, 2021, the Company had approximately $5.7 billion in debt outstanding. The weighted average interest rate was 3.0 percent and the weighted average maturity was 8.8 years. At December 31, 2021, the Company’s net debt to trailing twelve month Recurring EBITDA⁽¹⁾ ratio was 5.7 times. The Company had $65.8million of unrestricted cash on hand.

Senior Unsecured Notes

During the quarter ended December 31, 2021, Sun Communities Operating Limited Partnership (“SCOLP”), the Company’s operating partnership, issued $450.0million of senior unsecured notes with an interest rate of 2.3 percent and a seven-year term, due November 1, 2028 (the “2028 Notes”), and $150.0million of senior unsecured notes with an interest rate of 2.7 percent, with a 10-year term, due July 15, 2031 (the “2031 Notes”). The 2031 Notes are additional notes of the same series as the $600.0million aggregate principal amount of 2.7 percent Senior Notes which are due July 15, 2031 that SCOLP issued on June 28, 2021. The net proceeds from the offering were approximately $595.5million after deducting underwriters’ discounts and estimated offering expenses.

Amended Senior Credit Facility

The Company has obtained commitments from its lender group to amend, extend and upsize its senior credit facility simultaneously with, and conditioned on, the closing of the Park Holidays Acquisition. The proposed amendment (the “Proposed Loan Amendment”) would provide for borrowings on the following terms:

• Up to an aggregate of $4.2 billion in total borrowings with the ability to upsize the total borrowings by an additional $800.0 million (subject to certain conditions), an increase from the existing total borrowing limit of $2.0 billion with the ability to upsize the total borrowings by an additional $1.0 billion (subject to certain conditions);
• A revolving loan facility of up to $3.05 billion, and a term loan facility of $1.15 billion, to fund the business of the Company and all its subsidiaries;
• The ability to draw funds from the combined facilities in U.S. dollars, British pounds, Euros, Canadian dollars and Australian dollars, subject to certain limitations;
• An extension of the maturity date of the revolving loan facility to the fifth anniversary of the date of the Proposed Loan Amendment, assuming the exercise of two six-month extension options;
• A maturity date for the term loan facility of the third anniversary of the date of the Proposed Loan Amendment; and
• Interest at a floating rate based on Term SOFR, the Adjusted Eurocurrency Rate, the Australian Bank Bill Swap Bid Rate (BBSY), the Daily SONIA Rate or the Canadian Dollar Offered Rate plus a margin which can range from 0.725 percent to 1.600 percent. As of February 18, 2022, the margin based on the Company’s credit ratings would have been 0.850 percent on the proposed revolving loan facility and 0.950 percent on the proposed term loan facility.

The closing of the Proposed Loan Amendment is subject to, among other things, the completion of the Park Holidays Acquisition, the negotiation and execution of definitive documentation acceptable to the Company’s lender group and customary closing contingencies. There can be no assurance that the Company will be able to successfully enter into the Proposed Loan Amendment on the terms described above or at all. If the Proposed Loan Amendment is not entered into, the Company may use its previously announced £950 million bridge loan commitment entered into in November 2021 to fund all or a portion of the purchase price for the Park Holidays Acquisition.

Equity Transaction

Public Equity Offerings

In November 2021, the Company entered into two forward sale agreements (the “November 2021 Forward Sale Agreements”) relating to an underwritten registered public offering of 4,025,000 shares of the Company’s common stock at a public offering price of $185.00 per share. The offering closed on November 18, 2021. The Company did not initially receive any proceeds from the sale of shares of its common stock by the forward purchaser or its affiliates. The Company intends to use the net proceeds, if any, received upon the future settlement of the November 2021 Forward Sale Agreements, which it expects to occur no later than November 18, 2022, to fund a portion of the total consideration for the Park Holidays Acquisition, to repay borrowings outstanding under its senior credit facility, to fund possible future acquisitions of properties and/or for working capital and general corporate purposes.

At the Market Offering

On December 17, 2021, the Company entered into an At the Market Offering Sales Agreement (the “Sales Agreement”) with certain sales agents and forward sellers pursuant to which it may sell, from time to time, up to an aggregate gross sales price of $1.25billion of its common stock. The sales agents and forward sellers are entitled to compensation in an agreed amount not to exceed 2.0 percent. Upon entering into the Sales Agreement, the Company simultaneously terminated the At the Market Offering Sales Agreement, dated June 4, 2021 (the “June 2021 Sales Agreement”), which the Company entered into in connection with a prior “at the market” offering program.

During the quarter ended December 31, 2021, the Company entered into forward sale agreements with respect to 1,712,709 shares of common stock under the June 2021 Sales Agreement for $335.1 million prior to the termination of the agreement. Year to date, the Company entered into forward sale agreements with respect to 1,820,109 shares of common stock for $356.5million under the June 2021 Sales Agreement (the “ATM Forward Sale Agreements” and together with the November 2021 Forward Sale Agreements, the “Outstanding Forward Sale Agreements”). The ATM Forward Sale Agreements were not settled as of December 31, 2021, but the Company expects to settle them no later than September 2022. The Company intends to use the net proceeds, if any, received upon the future settlement of the ATM Forward Sale Agreements, to fund a portion of the total consideration for the Park Holidays Acquisition, to repay borrowings outstanding under its senior credit facility, to fund possible future acquisitions of properties and/or for working capital and general corporate purposes.

2022 Distributions

The Company’s Board of Directors has approved setting the 2022 annual distribution rate at $3.52 per common share, an increase of $0.20, or 6.0 percent, over the current $3.32 per common share for 2021. This increase will begin with the first quarter distribution to be paid in April 2022. 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.

2022 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 completed through the date of this release, the expected contribution from the Park Holidays Acquisition, expected borrowings under the Proposed Loan Amendment and expected proceeds from the physical settlement of the Outstanding Forward Sale Agreements. These estimates exclude prospective acquisitions other than the Park Holidays Acquisition and prospective capital markets activity other than as described in the preceding sentence. The estimates and assumptions are forward-looking based on the Company’s current assessment of economic and market conditions, are based in part on the assumptions described below under the caption Notes and Assumptions to 2022 Guidance and are subject to the other risks outlined below under the caption Cautionary Statement Regarding Forward-Looking Statements.

Earnings and Core FFO⁽¹⁾

^(a) Includes 5.8million forward equity shares assumed to settle in mid-March 2022.

Basic earnings per share and Core FFO⁽¹⁾ per fully diluted share are calculated independently for each quarter; as a result, the sum of the quarters may differ from the annual calculation.

Total MH, RV and Marina Portfolio

Number of properties: 605

Same Property⁽²⁾ Portfolio^(a)

Number of properties: 529

^(a) The amounts in the table reflect constant currency, as Canadian currency figures included within the 2021 actual amounts have been translated at the assumed exchange rate used for 2022 guidance.

^(b) MH and RV Same Property results net $72.0 million and $76.2 million of utility revenue against the related utility expense in property operating expenses for 2021 and 2022 guidance, respectively. Marina Same Property results net $11.1 million and $11.3 million of utility revenue against the related utility expense in property operating and maintenance expenses for 2021 and 2022 guidance, respectively.

^(c) For 2021, MH and RV Same Property total property operating expenses exclude $2.8 million of expense 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.

For the first quarter 2022, Same Property MH and RV NOI⁽¹⁾ growth is expected to be 5.4% – 6.2% and Same Property Marina NOI⁽¹⁾ growth is expected to be 2.6% – 4.1%.

Total Company Supplementary Information^(a):

^(a) Total Company supplementary information excludes Park Holidays.

^(b) Includes gross profit from new and certain pre-owned home sales. Gross profit from pre-owned home sales of depreciated rental homes is excluded.

Notes and Assumptions to 2022 Guidance:

Inclusion of Acquisitions

The foregoing guidance, except as otherwise noted, includes:

• Expected contributions from $62.2 million of property acquisitions completed in 2022 through the date of this release; and
• Expected contribution from the Park Holidays Acquisition.

Park Holidays Acquisition Assumptions

The foregoing guidance assumes:

• The Park Holidays Acquisition closes in mid-March 2022;
• Estimated contribution of $99.5 – $104.6 million of EBITDA, inclusive of $29.1 – $30.5 million of general and administrative expenses;
• Estimated income tax expense of $20.6 – $21.3 million;
• The Outstanding Forward Sale Agreements are physically settled in mid-March 2022 and the Company receives net proceeds from such settlement of approximately $1.06 billion, which is used to pay down the Company’s senior credit facility; and
• The Proposed Loan Amendment is completed in mid-March 2022 and on that date the Company borrows approximately $1.3 billion in British pounds to fund the purchase price for the Park Holidays Acquisition.

The table below shows Park Holidays’ full year EBITDA seasonality if the transaction had closed on January 1, 2022:

Actual future events may not coincide with the foregoing assumptions and other key assumptions relating to the 2022 guidance. Without limiting the foregoing or the matters described under the caption Cautionary Statement Regarding Forward-Looking Statements below, in particular:

• The closing of the Park Holidays Acquisition is subject to the receipt of a required regulatory approval and there can be no assurances as to the actual closing or timing of the closing;
• The closing of the Proposed Loan Amendment is subject to, among other things, the completion of the Park Holidays Acquisition, the negotiation and execution of definitive documentation acceptable to the Company’s lender group, and customary closing contingencies. There can be no assurance that the Company will be able to successfully enter into the Proposed Loan Amendment on the terms described in this document or at all; and
• The proceeds to the Company from the settlement of the Outstanding Forward Sale Agreements may be less than the amount assumed above.

If any assumptions relating to the 2022 guidance prove to be incorrect, the foregoing estimates may differ materially from actual results.

EARNINGS CONFERENCE CALL

A conference call to discuss fourth quarter results will be held on Tuesday, February22, 2022 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 March8, 2022 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 13725426. 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, 2021, owned, operated, or had an interest in a portfolio of 602 developed MH, RV and marina properties comprising over 159,000 developed sites and over 45,000 wet slips and dry storage spaces in 39 states, Canada and Puerto Rico.

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, 2020 and in 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 (including the Park Holidays Acquisition), developments and expansions successfully;
• The Company’s liquidity and refinancing demands;
• The Company’s ability to obtain or refinance maturing debt and to complete the Proposed Loan Amendment;
• The Company’s ability to maintain compliance with covenants contained in its debt facilities and its unsecured notes;
• Availability of capital;
• The Company’s ability to physically settle the Outstanding Forward Sale Agreements and receive the expected amount of proceeds;
• Changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar, Australian dollar and British pound;
• 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, droughts 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 statements.

Investor Information

Portfolio Overview
(As of December 31, 2021)

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

^(a) Total wet slips and dry storage spaces are adjusted each quarter based on site configuration and usability.

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)

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

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

Non-GAAP and Other Financial Measures

Debt Analysis
(amounts in thousands)

Same Community⁽²⁾ Summary
(amounts in thousands)

Same Community⁽²⁾ Summary (continued)

Marina Summary
(amounts in thousands except for statistical data)

^(a) Marina results net $4.5 million for the quarter ended December 31, 2021, and $15.0 million for the year ended December 31, 2021 of certain utility revenue against the related utility expense in property operating and maintenance expense.

^(b) Marina properties consisted of 19 properties acquired in 2021 and 106 properties acquired in 2020.

MH and RV Acquisitions and Other Summary⁽¹⁴⁾
(amounts in thousands except for statistical data)

^(a) MH and RV Acquisitions and Other results net $1.3 million and $5.4 million of certain utility revenue against the related utility expense in property operating and maintenance expense for the quarter and year ended December 31, 2021.

Home Sales Summary
(amounts in thousands except for *)