Sun Communities, Inc. Reports 2022 First Quarter Results

Financial Results for the Quarter ended March 31, 2022

For the quarter ended March 31, 2022, total revenues increased by $106.5 million, or 24.1 percent, to $548.5million compared to approximately $442.0 million for the same period in 2021. Net income attributable to common shareholders was $0.7million, or $0.01 per diluted common share, compared to net income attributable to common shareholders of $24.8million, or $0.23 per diluted common share, for the same period in 2021.

Non-GAAP Financial Measures and Portfolio Performance

• Core Funds from Operations (“Core FFO”)⁽¹⁾ for the quarter ended March 31, 2022, was $1.34 per diluted share and OP unit (“Share”) as compared to $1.26 in the corresponding period in 2021, a 6.3 percent increase.
• Same Property⁽²⁾ Net Operating Income (“NOI”)⁽¹⁾for the Company’s MH and RV properties increased by 7.7 percent for the quarter ended March 31, 2022, as compared to the corresponding period in 2021.
• Same Property⁽²⁾ NOIfor the Company’s marina properties increased by 1.2 percent for the quarter ended March 31, 2022, as compared to the corresponding period in 2021.
• Acquisitions totaled $1.6 billion during and subsequent to the quarter ended March 31, 2022, including 41 properties in the United Kingdom (“UK”) and four marinas in the United States.

“Our strong first quarter performance builds on the momentum of last year as we delivered 6.3 percent growth in Core FFO per Share,” said Gary A. Shiffman, Chairman and CEO. “With sustained tailwinds, the demand for attainable housing and outdoor vacationing continues to reach new levels, and with our best-in-class offering, Sun is uniquely positioned to meet these customer needs. We are pleased to have completed the acquisition of Park Holidays and already have a growing pipeline of acquisition opportunities in the UK. Furthermore, we have been active in the capital markets as we amended and upsized our Senior Credit Facility, issued $600 million of senior notes with a favorable rate lock, and settled forward equity sale agreements, all of which enhanced our balance sheet position. Over the years, Sun has delivered consistent and cycle tested organic cash flow growth, and today the number of compelling investment opportunities is more exciting than ever across our MH, RV and marina platforms.”

OPERATING HIGHLIGHTS

Portfolio Occupancy

Total MH and annual RV occupancy was 97.5 percent at March 31, 2022 as compared to 97.3 percent at March 31, 2021, an increase of 20 basis points.

During the quarter ended March 31, 2022, the number of MH and annual RV revenue producing sites increased by 670 sites as compared to an increase of 514 sites during the quarter ended March 31, 2021, a 30.4 percent increase.

Same Property⁽²⁾ Results – MH and RV

For the 425 MH and RV properties owned and operated by the Company since January 1, 2021, the following table reflects the percentage increases, both in total, and by segment, for the quarter ended March 31, 2022:

Same Property adjusted occupancy⁽³⁾ increased to 98.5 percent at March 31, 2022 from 96.9 percent at March 31, 2021, an increase of 160 basis points.

Same Property⁽²⁾ Results – Marina

For the 101 Marina properties owned and operated by the Company since January 1, 2021, the following table reflects the percentage increases for the quarter ended March 31, 2022:

PORTFOLIO ACTIVITY

Acquisitions and Dispositions

During and subsequent to the quarter ended March 31, 2022, the Company acquired the following properties:

^(a) Combined with an existing marina.

^(b) Includes 40 owned properties.

^(c) Combined with an existing adjacent MH community.

During and subsequent to the quarter ended March 31, 2022, the Company acquired 45 properties totaling 17,646 sites, wet slips and dry storage spaces and 1,710 sites for expansion for a total purchase price of $1.6 billion.

During the quarter ended March 31, 2022, the Company sold two MH communities and one property containing both MH and RV sites located in Florida for $29.6million. The gain from the sale of the properties was $13.4million.
Development Activity

During the quarter ended March 31, 2022, the Company completed the construction of 25 expansion sites in one RV resort.

BALANCE SHEET, CAPITAL MARKETS ACTIVITY AND OTHER ITEMS

Debt

As of March 31, 2022, the Company had approximately $6.1 billion in debt outstanding. The weighted average interest rate was 3.0 percent and the weighted average maturity was 8.1 years. At March 31, 2022, the Company’s net debt to trailing twelve month Recurring EBITDA⁽¹⁾ ratio was 5.9 times. The Company had $90.4million of unrestricted cash on hand.

Senior Credit Facility Amendment

On April 7, 2022, in conjunction with the closing of the Park Holidays acquisition, Sun Communities Operating Limited Partnership (the “Operating Partnership”) as borrower, and the Company, as guarantor, and certain lenders entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Other Loan Documents (the “Credit Facility Amendment”), which amended the Operating Partnership’s Senior Credit Facility.

The Credit Facility Amendment increased the aggregate amount of the Operating Partnership’s Senior Credit Facility to $4.2 billion with the ability to upsize the total borrowings by an additional $800 million, subject to certain conditions. The increased aggregate amount under the Senior Credit Facility consists of the following: (a) a revolving loan in the amount up to $3.05 billion and (b) a term loan facility of $1.15 billion, with the ability to draw funds from the combined facilities in U.S. dollars, Pounds sterling, Euros, Canadian dollars and Australian dollars, subject to certain limitations. The Credit Facility Amendment extends the maturity date of the revolving loan facility to April 7, 2027, assuming the Operating Partnership’s exercise of each of its two six-month extension options, and, further, the Credit Facility Amendment extends the maturity date of the term loan facility to April 7, 2025, which may not be extended.

Prior to the amendment, the Senior Credit Facility permitted aggregate borrowings of up to $2.0 billion, with an accordion feature that allowed for additional commitments of up to $1.0 billion, subject to the satisfaction of certain conditions.

The Senior Credit Facility bears interest at a floating rate based on Adjusted Term SOFR, the Adjusted Eurocurrency Rate, the Daily RFR Rate, the Australian Bank Bill Swap Bid Rate (BBSY), the Daily SONIA Rate or the Canadian Dollar Offered Rate, as applicable, plus, in all cases, a margin which can range from 0.725 percent to 1.6 percent, subject to certain adjustments. As of March 31, 2022, the margin based on the Operating Partnership’s credit ratings would have been 0.85 percent on the revolving loan facility and 0.95 percent on the term loan facility.

Senior Unsecured Notes

On April 12, 2022, the Operating Partnership issued $600.0 million of senior unsecured notes with an interest rate of 4.2 percent and a 10-year term, due April 15, 2032 (the “2032 Notes”). The net proceeds from the offering were $592.3 million after deducting underwriters’ discounts and estimated offering expenses. The Company used the net proceeds from the offering to repay borrowings outstanding under its Senior Credit Facility.

In connection with the 2032 Notes issuance, the Company settled four 10-year Treasury rate locks totaling $600.0 million and received a settlement payment of $35.3 million. This lowers the effective interest rate on the 2032 Notes from 4.2 percent to 3.6 percent.

Equity Transactions

Forward Share Settlements

In April 2022, the Company settled forward sale agreements with respect to 1,200,000 shares of common stock under its at the market offering sales program sold during the fourth quarter 2021, and 4,025,000 shares of common stock in connection with its November 2021 registered forward equity offering. The aggregate net proceeds from the settlement of these forward sale agreements was $934.9 million. The Company used the net proceeds to repay borrowings outstanding under its Senior Credit Facility.

At the Market Offering

During the quarter ended March 31, 2022, the Company entered into forward sale agreements with respect to 600,503 shares of common stock under its at the market offering program for $107.9 million. These forward sale agreements were not settled as of March 31, 2022, but the Company expects to settle them by the end of the first quarter 2023.

The following table presents the Company’s outstanding unsettled forward equity agreements as of April 22, 2022:

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 and capital markets activity completed through the date of this release. These estimates 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 and are subject to the other risks outlined below under the caption Cautionary Statement Regarding Forward-Looking Statements.

The Company is providing revised or initial 2022 guidance for the following metrics:

Refer to page 8 for the reconciliation of Basic earnings per share to Core FFO per diluted Share⁽¹⁾⁽⁴⁾_.

Basic earnings per share and Core FFO per fully diluted Share⁽¹⁾⁽⁴⁾ are calculated independently for each quarter; as a result, the sum of the quarters may differ from the annual calculation.

Seasonality of Core FFO per fully diluted Share⁽¹⁾⁽⁴⁾ is based off of the midpoint of full year guidance.

Park Holidays Acquisition Assumptions

The acquisition of Park Holidays was on April 8, 2022.

The following table presents updated estimates based on the actual closing date:

^(a) Estimated EBITDA contribution is inclusive of general and administrative expenses of $29.1 – $30.5 million in the previous range and $26.1 – $27.5 million in the revised range, respectively.

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

EARNINGS CONFERENCE CALL

A conference call to discuss first quarter results will be held on Tuesday, April26, 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 May10, 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 13727742. 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 March 31, 2022, owned, operated, or had an interest in a portfolio of 603 developed MH, RV and marina properties comprising nearly 159,300 developed sites and over 45,700 wet slips and dry storage spaces in 39 states, Canada, Puerto Rico and the UK.

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 (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this filing 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 our current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this filing. These risks and uncertainties may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks described under “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 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, including, inflation, deflation, and energy costs, 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 and its senior unsecured notes;
• Availability of capital;
• Changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar, Australian dollar and Pounds sterling;
• 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 our capital stock;
• The Company’s ability to maintain our 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 or incorporated by reference into this filing, whether as a result of new information, future events, changes in the Company’s expectations or otherwise, except as required by law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company 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 the Company’s behalf are qualified in their entirety by these cautionary statements.

Investor Information

Portfolio Overview
(As of March 31, 2022)

Financial and Operating Highlights
(amounts in millions, 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 millions)

Statements of Operations – Quarter to Date Comparison
(In millions, except for per share amounts) (Unaudited)

N/M = Percentage change is not meaningful.

N/A = Percentage change is not applicable.

Outstanding Securities and Capitalization
(amounts in millions, units / shares outstanding in thousands, except for *)

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

^(a) 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 Shareholders to FFO⁽¹⁾ (amounts in millions, except for per share data)

Reconciliation of Basic Earnings per Share to Core FFO per Fully Diluted Share⁽¹⁾⁽⁴⁾ for Expected Full Year and Second Quarter 2022

* Other adjustments include the categories presented in the reconciliation of Net Income to Core FFO table in the supplemental.

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

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

Non-GAAP and Other Financial Measures

Debt Analysis
(amounts in millions, except for *)

Same Property⁽²⁾ Summary – MH / RV
(amounts in millions)

^(a) Percentages are calculated based on unrounded numbers.

Same Property⁽²⁾ Summary – Marina
(amounts in millions)

^(a) Percentages are calculated based on unrounded numbers.

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

^(a) Acquisitions and Other results net $20.4 million of certain utility revenue against the related utility expense in property operating and maintenance expense for the quarter ended March 31, 2022.

Home Sales Summary
(amounts in millions, except for *)

Rental Program Summary
(amounts in millions, except for *)

Rental Program NOI is included in Real Property NOI. Rental Program NOI is separately reviewed to assess the overall growth and performance of the Rental Program and its financial impact on the Company’s operations.

Marina Summary
(amounts in millions, except for statistical data)

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 and its financial impact on the Company’s operations.

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