10-K 1 sui2017123110-k.htm FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2017 Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017
Commission file number 1-12616

SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)

Maryland
 
38-2730780
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
27777 Franklin Rd.
 
 
Suite 200
 
 
Southfield, Michigan
 
48034
(Address of Principal Executive Offices)
 
(Zip Code)
(248) 208-2500
(Registrant’s telephone number, including area code)
Common Stock, Par Value $0.01 per Share
 
New York Stock Exchange
Securities Registered Pursuant to Section 12(b) of the Act
 
Name of each exchange on which registered
Securities Registered Pursuant to Section 12(g) of the Act: 6.50% Series A-4 Cumulative Convertible Preferred Stock, par value $0.01 per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X]  No [ ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ]  No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]  No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ]  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):
Large accelerated filer [ X ]
Accelerated filer [ ]
Non-accelerated filer [   ]
Smaller reporting company [   ]
Emerging growth company [  ]
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]  No [X]






As of June 30, 2017, the aggregate market value of the Registrant’s stock held by non-affiliates was $6,722,799,273 (computed by reference to the closing sales price of the Registrant’s common stock as of June 30, 2017). For this computation, the Registrant has excluded the market value of all shares of common stock reported as beneficially owned by executive officers and directors of the Registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant.

Number of shares of common stock, $0.01 par value per share, outstanding as of February 15, 2018: 79,739,141

Documents Incorporated By Reference

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by Part III is incorporated by reference to the registrant’s proxy statement to be filed pursuant to Regulation 14A, with respect to the registrant’s 2018 annual meeting of stockholders.





SUN COMMUNITIES, INC.

Table of Contents

Item
Description
Page
 
 
 
Part I.
 
 
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
 
 
Part II.
 
 
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
 
 
 
Part III.
 
 
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
 
 
 
Part IV.
 
 
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary




SUN COMMUNITIES, INC.

PART I

ITEM 1. BUSINESS

GENERAL

Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”) and Sun Home Services, Inc., a Michigan corporation (“SHS”) are referred to herein as the “Company,” “us,” “we,” and “our”. We are a self-administered and self-managed real estate investment trust (“REIT”).

We are a fully integrated real estate company which, together with our affiliates and predecessors, have been in the business of acquiring, operating, developing, and expanding manufactured housing (“MH”) and recreational vehicle (“RV”) communities since 1975. We lease individual parcels of land (“sites”) with utility access for placement of manufactured homes and RVs to our customers. We are also engaged through a taxable subsidiary, SHS, in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance and cash flows.

We own, operate, or have an interest in a portfolio of MH and RV communities. As of December 31, 2017, we owned, operated or had an interest in a portfolio of 350 properties in 29 states and Ontario, Canada (collectively, the “Properties”), including 230 MH communities, 89 RV communities, and 31 Properties containing both MH and RV sites. As of December 31, 2017, the Properties contained an aggregate of 121,892 developed sites comprised of 83,294 developed MH sites, 22,742 annual RV sites (inclusive of both annual and seasonal usage rights), and 15,856 transient RV sites. There are approximately 9,600 additional MH and RV sites suitable for development.

Our executive and principal property management office is located at 27777 Franklin Road, Suite 200, Southfield, Michigan 48034 and our telephone number is (248) 208-2500. We have regional property management offices located in Austin, Texas; Grand Rapids, Michigan; Denver, Colorado; Ft. Myers, Florida; and Orlando, Florida; and we employed an aggregate of 2,727 full and part time employees as of December 31, 2017.

Our website address is www.suncommunities.com and we make available, free of charge, on or through our website all of our periodic reports, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and current reports on Form 8-K, as soon as reasonably practicable after we file such reports with the Securities and Exchange Commission (the “SEC”).

STRUCTURE OF THE COMPANY

The Operating Partnership is structured as an umbrella partnership REIT, or UPREIT. In 1993, we contributed our net assets to the Operating Partnership in exchange for the sole general partner interest in the Operating Partnership and the majority of all the Operating Partnership’s initial capital. We conduct substantially all of our operations through the Operating Partnership. The Operating Partnership owns, either directly or indirectly through other subsidiaries, all of our assets. This UPREIT structure enables us to comply with certain complex requirements under the federal tax rules and regulations applicable to REITs, and to acquire MH and RV communities in transactions that defer some or all of the sellers’ tax consequences. The financial results of the Operating Partnership and our other subsidiaries are consolidated in our Consolidated Financial Statements. The financial results include certain activities that do not necessarily qualify as REIT activities under the Internal Revenue Code of 1986, as amended (the “Code”). We have formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities. We use taxable REIT subsidiaries to offer certain services to our residents and engage in activities that would not otherwise be permitted under the REIT rules if provided directly by us or by the Operating Partnership. The taxable REIT subsidiaries include our home sales business, SHS, which provides manufactured home sales, leasing, and other services to current and prospective tenants of the Properties.

Under the partnership agreement, the Operating Partnership is structured to make distributions with respect to certain of the Operating Partnership units (“OP units”) at the same time that distributions are made to our common stockholders. The Operating Partnership is structured to permit limited partners holding certain classes or series of OP units to exchange those OP units for shares of our common stock (in a taxable transaction) and achieve liquidity for their investment.

As the sole general partner of the Operating Partnership, we generally have the power to manage and have complete control over the conduct of the Operating Partnership’s affairs and all decisions or actions made or taken by us as the general partner pursuant to the partnership agreement are generally binding upon all of the partners and the Operating Partnership.


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We do not own all of the OP units. As of December 31, 2017, the Operating Partnership had issued and outstanding:

82,425,282 common OP units;
1,283,819 preferred OP units (“Aspen preferred OP units”);
345,371 Series A-1 preferred OP units;
40,268 Series A-3 preferred OP units;
1,509,494 Series A-4 preferred OP units;
67,801 Series B-3 preferred OP units; and
316,357 Series C preferred OP units.

As of December 31, 2017, we held:

79,679,163 common OP units, or approximately 97 percent of the issued and outstanding common OP units;
1,085,365 Series A-4 preferred OP units, or approximately 72 percent of the issued and outstanding Series A-4 preferred OP units; and
no Aspen preferred OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series B-3 preferred OP units, or Series C preferred OP units.

Ranking and Priority

The various classes and series of OP units issued by the Operating Partnership rank as follows with respect to rights to the payment of distributions and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Operating Partnership:

first, the Series A-4 preferred OP units, Aspen preferred OP units and Series A-1 preferred OP units, on parity with each other;
next, the Series C preferred OP units;
next, the Series B-3 preferred OP units;
next, the Series A-3 preferred OP units; and
finally, the common OP units.

Common OP Units

Subject to certain limitations, the holder of each common OP unit at its option may convert such common OP unit at any time into one share of our common stock. Holders of common OP units are entitled to receive distributions from the Operating Partnership as and when declared by the general partner, provided that all accrued distributions payable on OP units ranking senior to the common OP units have been paid. The holders of common OP units generally receive distributions on the same dates and in amounts equal to the distributions paid to holders of our common stock.

Aspen Preferred OP Units

Subject to certain limitations, at any time prior to January 1, 2024, the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the average closing price of our common stock for the preceding ten trading days is $68.00 per share or less, 0.397 common OP units, or (b) if the average closing price of our common stock for the preceding ten trading days is greater than $68.00 per share, the number of common OP units determined by dividing (i) the sum of (A) $27.00 plus (B) 25 percent of the amount by which the average closing price of our common stock for the preceding ten trading days exceeds $68.00 per share, by (ii) the average closing price of our common stock for the preceding ten trading days. The holders of Aspen preferred OP units are entitled to receive distributions not less than quarterly. Distributions on Aspen preferred OP units are generally paid on the same dates as distributions are paid to holders of common OP units. Each Aspen preferred OP unit is entitled to receive distributions in an amount equal to the product of (x) $27.00, multiplied by (y) an annual rate equal to the 10-year U.S. Treasury bond yield plus 239 basis points; provided, however, that the aggregate distribution rate shall not be less than 6.5 percent nor more than 9 percent. On January 2, 2024, we are required to redeem all Aspen preferred OP units that have not been converted to common OP units. In addition, we are required to redeem the Aspen preferred OP units of any holder thereof within five days after receipt of a written demand during the existence of certain uncured Aspen preferred OP unit defaults, including our failure to pay distributions on the Aspen preferred OP units when due and our failure to provide certain security for the payment of distributions on the Aspen preferred OP units. We may also redeem Aspen preferred OP units from time to time if we and the holder thereof agree to do so.


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Series A-1 Preferred OP Units

Subject to certain limitations, the holder of each Series A-1 preferred OP unit at its option may exchange such Series A-1 preferred OP unit at any time into approximately 2.4390 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series A-1 preferred OP units are entitled to receive distributions not less than quarterly. Distributions on Series A-1 preferred OP units are generally paid on the last day of each quarter. Each Series A-1 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 6.0 percent. Series A-1 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners.

Series A-3 Preferred OP Units

Subject to certain limitations, the holder of each Series A-3 preferred OP unit at its option may exchange such Series A-3 preferred OP unit at any time into approximately 1.8605 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series A-3 preferred OP units are entitled to receive distributions not less than quarterly. Each Series A-3 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 4.5 percent. Series A-3 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners.

Series A-4 Preferred OP Units

In connection with the issuance of our 6.5% Series A-4 Cumulative Convertible Preferred Stock (the “Series A-4 preferred stock”) in November 2014, the Operating Partnership created the Series A-4 preferred OP units as a new class of OP units. Series A-4 preferred OP units have economic and other rights and preferences substantially similar to those of the Series A-4 preferred stock, including rights to receive distributions at the same time and in the same amounts as distributions paid on Series A-4 preferred stock. Each Series A-4 preferred OP unit is exchangeable into approximately 0.4444 shares of common stock or common OP units (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The Operating Partnership issued Series A-4 preferred OP units to us in connection with our acquisition of a portfolio of MH communities from Green Courte Real Estate Partners, LLC and certain of their affiliated entities (collectively, the “Green Courte parties” or the “Green Courte entities”).

In July 2015 and June 2017, we repurchased 4,066,586 and 438,448 Series A-4 preferred OP units, respectively. At December 31, 2017, we held 1,085,365 Series A-4 preferred OP units. The rights of the Series A-4 preferred OP units held by us mirror the economic rights of the Series A-4 preferred OP units issued to the Green Courte entities, but certain voting, consent, and other rights do not apply to the Series A-4 preferred OP units held by us.

If certain change of control transactions occur or if our common stock ceases to be listed or quoted on an exchange or quotation system, then at any time after November 26, 2019, we or the holders of shares of Series A-4 preferred stock and Series A-4 preferred OP units may cause all or any of those shares or units to be redeemed for cash at a redemption price equal to the sum of (i) the greater of (x) the amount that the redeemed shares of Series A-4 preferred stock and Series A-4 preferred OP units would have received in such transaction if they had been converted into shares of our common stock immediately prior to such transaction, or (y) $25.00 per share, plus (ii) any accrued and unpaid distributions thereon to, but not including, the redemption date.

Series B-3 Preferred OP Units

Series B-3 preferred OP units are not convertible. The holders of Series B-3 preferred OP units generally receive distributions on the last day of each quarter. Each Series B-3 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 8.0 percent.

Subject to certain limitations, (x) during the 90-day period beginning on each of the tenth through fifteenth anniversaries of the issue date of the applicable Series B-3 preferred OP units, (y) at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units, or (z) after our receipt of notice of the death of the electing holder of a Series B-3 preferred OP unit, each holder of Series B-3 preferred OP units may require us to redeem such holder’s Series B-3 preferred OP units at the redemption price of $100.00 per unit. In addition, at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units we may redeem, at our option, all of the Series B-3 preferred OP units of any holder thereof at the redemption price of $100.00 per unit. Series B-3 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners.


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During the three months ended December 31, 2017, we redeemed a total of 44,599 B-3 preferred OP units. At December 31, 2017, there were outstanding 10,800 Series B-3 preferred OP units which were issued on December 1, 2002, 24,751 Series B-3 preferred OP units which were issued on January 1, 2003, and 32,250 Series B-3 preferred OP units which were issued on January 5, 2004.

Series C Preferred OP Units

Subject to certain limitations, the holder of each Series C preferred OP unit at its option may exchange such Series C preferred OP unit at any time into 1.11 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series C preferred OP units are entitled to receive distributions not less than quarterly. Each Series C preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to (i) 4.5 percent until April 1, 2020, and (ii) 5.0 percent after April 2, 2020. Series C preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners.

REAL PROPERTY OPERATIONS

Properties are designed and improved for several home options of various sizes and designs that consist of both MH communities and RV communities.

An MH community is a residential subdivision designed and improved with sites for the placement of manufactured homes, related improvements, and amenities. Manufactured homes are detached, single‑family homes which are produced off‑site by manufacturers and installed on sites within the community. Manufactured homes are available in a wide array of designs, providing owners with a level of customization generally unavailable in other forms of multi-family housing developments.

Modern manufactured housing communities contain improvements similar to other garden‑style residential developments, including centralized entrances, paved streets, curbs, gutters, and parkways. In addition, these communities also often provide a number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts, tennis courts, and laundry facilities.

An RV community is a resort or park designed and improved with sites for the placement of RVs for varied lengths of time. Properties may also provide vacation rental homes. RV communities include a number of amenities such as restaurants, golf courses, swimming pools, tennis courts, fitness centers, planned activities, and spacious social facilities.

The owner of each home on our Properties leases the site on which the home is located. We typically own the underlying land, utility connections, streets, lighting, driveways, common area amenities, and other capital improvements and are responsible for enforcement of community guidelines and maintenance. In five of our 350 communities, we do not own all of the underlying land and operate the communities pursuant to ground leases. Certain of the Properties provide water and sewer service through public or private utilities, while others provide these services to residents from on-site facilities. Each owner of a home within our Properties is responsible for the maintenance of the home and leased site. As a result, our capital expenditure needs tend to be less significant relative to multi-family rental apartment complexes.


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PROPERTY MANAGEMENT

Our property management strategy emphasizes intensive, hands-on management by dedicated, on-site district and community managers. We believe that this on-site focus enables us to continually monitor and address resident concerns, the performance of competitive properties, and local market conditions. As of December 31, 2017, we employed 2,727 full and part time employees, of which 2,348 were located on-site as property managers, support staff, or maintenance personnel.

Our community managers are overseen by John B. McLaren, our President and Chief Operating Officer, who has been in the manufactured housing industry since 1995, three Senior Vice Presidents of Operations and Sales, eight Divisional Vice Presidents and 35 Regional Vice Presidents. Each Regional Vice President is responsible for semi-annual market surveys of competitive communities, interaction with local manufactured home dealers, regular property inspections, and oversight of property operations and sales functions for seven to 14 properties.

Each district or community manager performs regular inspections in order to continually monitor the Property’s physical condition and to effectively address tenant concerns. In addition to a district or community manager, each district or property has on-site maintenance personnel and management support staff. We hold mandatory training sessions for all new property management personnel to ensure that management policies and procedures are executed effectively and professionally. All of our property management personnel participate in on-going training to ensure that changes to management policies and procedures are implemented consistently. We offer over 300 trainings including books, online courses, webinars and live sessions for our team members through our Sun University, which has led to increased knowledge and accountability for daily operations and policies and procedures.

HOME SALES AND RENTALS

SHS is engaged in the marketing, selling and leasing of new and pre-owned homes to current and future residents in our communities. Because tenants often purchase a home already on-site within a community, such services enhance occupancy and property performance. Additionally, because many of the homes on the Properties are sold through SHS, better control of home quality in our communities can be maintained than if sales services were conducted solely through third-party brokers.

SHS also leases homes to prospective tenants. At December 31, 2017, SHS had 11,074 occupied leased homes in its portfolio. New and pre-owned homes are purchased for the Rental Program. Leases associated with the Rental Program generally have a term of one year. The Rental Program requires intensive management of costs associated with repair and refurbishment of these homes as the tenants vacate and the homes are re-leased, similar to apartment rentals. We received approximately 49,000 applications during 2017 to live in our Properties, providing a significant “resident boarding” system allowing us to market purchasing a home to the best applicants and to rent to the remainder of approved applicants. Through the Rental Program we are able to demonstrate our product and lifestyle to the renters, while monitoring their payment history and converting qualified renters to owners.

REGULATIONS AND INSURANCE

General

MH and RV community properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses, and other common areas. We believe that each Property has the necessary operating permits and approvals.

Insurance

Our management believes that the Properties are covered by adequate fire, property, business interruption, general liability, and (where appropriate) flood and earthquake insurance provided by reputable companies with commercially reasonable deductibles and limits. We maintain a blanket policy that covers all of our Properties. We have obtained title insurance insuring fee title to the Properties in an aggregate amount which we believe to be adequate. Claims made to our insurance carriers that are determined to be recoverable are classified in other receivables as incurred.


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SITE LEASES OR USAGE RIGHTS

Typical tenant leases for MH sites are month-to-month or year-to-year, renewable upon the consent of both parties, or, in some instances, as provided by statute. Certain of our leases, mainly at our Florida and California properties, are tied to the consumer price index or other indices as they relate to rent increases. Generally, market rate adjustments are made on an annual basis. These leases are cancelable for non-payment of rent, violation of community rules and regulations or other specified defaults.

During the five calendar years ended December 31, 2017, on average 2.2 percent of the homes in our communities have been removed by their owners and 5.6 percent of the homes have been sold by their owners to a new owner who then assumes rental obligations as a community resident. The average cost to move a home is approximately $4,000 to $10,000. The average resident remains in our communities for approximately 15 years, while the average home, which gives rise to the rental stream, remains in our communities for over 40 years.

Please see the Risk Factors in Item 1A, and our accompanying Consolidated Financial Statements and related notes thereto beginning on page F-1 of this Annual Report on Form 10-K for more detailed information.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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” 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 disclosed under “Risk Factors” contained in this Annual Report on Form 10-K and our other filings with the SEC, such risks and uncertainties include but are not limited to:

changes in general economic conditions, the real estate industry, and the markets in which we operate;
difficulties in our ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully;
our liquidity and refinancing demands;
our ability to obtain or refinance maturing debt;
our ability to maintain compliance with covenants contained in our debt facilities;
availability of capital;
changes in foreign currency exchange rates, specifically between the U.S. dollar and Canadian dollar;
our ability to maintain rental rates and occupancy levels;
our failure 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 our capital stock;
our failure 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 manufactured home buyers to obtain financing; and
the level of repossessions by manufactured home 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. We undertake 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 our expectations or otherwise, except as required by law.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements.

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ITEM 1A. RISK FACTORS
Our prospects are subject to certain uncertainties and risks. Our future results could differ materially from current results, and our actual results could differ materially from those projected in forward-looking statements as a result of certain risk factors. These risk factors include, but are not limited to, those set forth below, other one-time events, and important factors disclosed previously and from time to time in our other filings with the SEC.
REAL ESTATE RISKS

General economic conditions and the concentration of our properties in Florida, Michigan, Texas, and California may affect our ability to generate sufficient revenue.

The market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets, may significantly affect manufactured home occupancy or rental rates. Occupancy and rental rates, in turn, may significantly affect our revenues, and if our communities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay or refinance our debt obligations could be adversely affected. We derive significant amounts of our rental income from properties located in Florida, Michigan, Texas, and California.

As of December 31, 2017, 123 properties, representing approximately 35.5 percent of developed sites, are located in Florida; 68 properties, representing approximately 21.4 percent of developed sites, are located in Michigan; 21 properties, representing approximately 6.5 percent of developed sites, are located in Texas; and 27 properties, representing approximately 5.3 percent of developed sites, are located in California. As a result of the geographic concentration of our Properties in Florida, Michigan, Texas, and California, we are exposed to the risks of downturns in the local economy or other local real estate market conditions which could adversely affect occupancy rates, rental rates, and property values of properties in these markets.

Our income would also be adversely affected if tenants were unable to pay rent or if sites were unable to be rented on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of the sites, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our business and results of operations could be adversely affected. In addition, certain expenditures associated with each Property (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the Property. Furthermore, real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.

The following factors, among others, may adversely affect the revenues generated by our communities:

the national and local economic climate which may be adversely impacted by, among other factors, plant closings, and industry slowdowns;

local real estate market conditions such as the oversupply of MH and RV sites or a reduction in demand for MH and RV sites in an area;

changes in foreign currency exchange rates, specifically between the U.S. dollar and Canadian dollar;

the number of repossessed homes in a particular market;

the lack of an established dealer network;

the rental market which may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates;

the perceptions by prospective tenants of the safety, convenience and attractiveness of our Properties and the neighborhoods where they are located;

zoning or other regulatory restrictions;

competition from other available MH and RV communities and alternative forms of housing (such as apartment buildings and site-built single-family homes);

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our ability to effectively manage, maintain and insure the Properties;

increased operating costs, including insurance premiums, real estate taxes, and utilities; and

the enactment of rent control laws or laws taxing the owners of manufactured homes.

Competition affects occupancy levels and rents which could adversely affect our revenues.

Our Properties are located in developed areas that include other MH and RV community properties. The number of competitive MH and RV community properties in a particular area could have a material adverse effect on our ability to lease sites and increase rents charged at our Properties or at any newly acquired properties. We may be competing with others with greater resources and whose officers and directors have more experience than our officers and directors. In addition, other forms of multi‑family residential properties, such as private and federally funded or assisted multi-family housing projects and single‑family housing, provide housing alternatives to potential tenants of MH and RV communities.

Our ability to sell or lease manufactured homes may be affected by various factors, which may in turn adversely affect our profitability.

SHS operates in the manufactured home market offering manufactured home sales and leasing services to tenants and prospective tenants of our communities. The market for the sale and lease of manufactured homes may be adversely affected by the following factors:

downturns in economic conditions which adversely impact the housing market;

an oversupply of, or a reduced demand for, manufactured homes;

the difficulty facing potential purchasers in obtaining affordable financing as a result of heightened lending criteria; and

an increase or decrease in the rate of manufactured home repossessions which provide aggressively priced competition to new manufactured home sales.

Any of the above listed factors could adversely impact our rate of manufactured home sales and leases, which would result in a decrease in profitability.

The cyclical and seasonal nature of the MH and the RV industries may lead to fluctuations in our operating results.
The MH and RV markets can experience cycles of growth and downturn due to seasonality patterns. In the MH market, certain properties maintain higher occupancy during the summer months, while certain other properties maintain higher occupancy during the winter months. The RV market typically shows a decline in demand over the winter months, yet usually produces higher growth in the spring and summer months due to higher use by vacationers. Our results on a quarterly basis can fluctuate due to this cyclicality and seasonality.

We may not be able to integrate or finance our acquisitions and our acquisitions may not perform as expected.

We have acquired and intend to continue to acquire MH and RV properties on a select basis. Our acquisition activities and their success are subject to the following risks:

we may be unable to acquire a desired property because of competition from other well-capitalized real estate investors, including both publicly traded REITs and institutional investment funds;

even if we enter into an acquisition agreement for a property, it is usually subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction, which may not be satisfied;

even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price;

we may be unable to finance acquisitions on favorable terms;

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acquired properties may fail to perform as expected;

acquired properties may be located in new markets where we face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, and unfamiliarity with local governmental and permitting procedures; and

we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations.

If any of the above risks occurred, our business and results of operations could be adversely affected.

In addition, we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were to be asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow.

Increases in taxes and regulatory compliance costs may reduce our results of operations.

Costs resulting from changes in real estate laws, income taxes, service or other taxes, generally are not passed through to tenants under leases and may adversely affect our results of operations and financial condition. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our business and results of operations.

We may not be able to integrate or finance our expansion and development activities.

From time to time, we engage in the construction and development of new communities or expansion of existing communities, and may continue to engage in the development and construction business in the future. Our construction and development pipeline may be exposed to the following risks which are in addition to those risks associated with the ownership and operation of established MH and RV communities:

we may not be able to obtain financing with favorable terms for community development which may make us unable to proceed with the development;

we may be unable to obtain, or face delays in obtaining, necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays, and even require us to abandon development of the community entirely if we are unable to obtain such permits or authorizations;

we may abandon development opportunities that we have already begun to explore and as a result we may not recover expenses already incurred in connection with exploring such development opportunities;

we may be unable to complete construction and lease‑up of a community on schedule resulting in increased debt service expense and construction costs;

we may incur construction and development costs for a community which exceed our original estimates due to increased materials, labor or other costs, which could make completion of the community uneconomical and we may not be able to increase rents to compensate for the increase in development costs which may impact our profitability;

we may be unable to secure long‑term financing on completion of development resulting in increased debt service and lower profitability; and

occupancy rates and rents at a newly developed community may fluctuate depending on several factors, including market and economic conditions, which may result in the community not being profitable.

If any of the above risks occurred, our business and results of operations could be adversely affected.


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Rent control legislation may harm our ability to increase rents.

State and local rent control laws in certain jurisdictions may limit our ability to increase rents and to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. Certain Properties are located, and we may purchase additional properties, in markets that are either subject to rent control or in which rent-limiting legislation exists or may be enacted.

Legislative requirements can limit accessibility of affordable financing for potential manufactured home buyers.

Recent legislation impacting third party loan originators, consumer protection laws and lender requirements to investigate a borrower's creditworthiness may restrict access of affordable chattel financing to potential manufactured home buyers.

We may be subject to environmental liability.

Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous substances at, on, under or in such property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent the property, to borrow using the property as collateral or to develop the property. Persons who arrange for the disposal or treatment of hazardous substances also may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility owned or operated by another person. In addition, certain environmental laws impose liability for the management and disposal of asbestos‑containing materials and for the release of such materials into the air. These laws may provide for third parties to seek recovery from owners or operators of real properties for personal injury associated with asbestos‑containing materials. In connection with the ownership, operation, management, and development of real properties, we may be considered an owner or operator of such properties and, therefore, are potentially liable for removal or remediation costs, and also may be liable for governmental fines and injuries to persons and property. When we arrange for the treatment or disposal of hazardous substances at landfills or other facilities owned by other persons, we may be liable for the removal or remediation costs at such facilities.

All of the Properties have been subject to a Phase I or similar environmental audit (which involves general inspections without soil sampling or ground water analysis) completed by independent environmental consultants. These environmental audits have not revealed any significant environmental liability that would have a material adverse effect on our business. These audits cannot reflect conditions arising after the studies were completed, and no assurances can be given that existing environmental studies reveal all environmental liabilities, that any prior owner or operator of a property or neighboring owner or operator did not create any material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any one or more Properties.

Losses in excess of our insurance coverage or uninsured losses could adversely affect our operating results and cash flow.

We have a significant concentration of properties in Florida and California, where natural disasters or other catastrophic events such as hurricanes or earthquakes could negatively impact our operating results and cash flows. We maintain comprehensive liability, fire, property, business interruption, general liability, and (where appropriate) flood and earthquake insurance, provided by reputable companies with commercially reasonable deductibles and limits. Certain types of losses including, but not limited to, riots or acts of war, may be either uninsurable or not economically insurable. In the event an uninsured loss occurs, we could lose both our investment in and anticipated profits and cash flow from the affected property. Any loss could adversely affect our ability to repay our debt.

FINANCING AND INVESTMENT RISKS

Our significant amount of debt could limit our operational flexibility or otherwise adversely affect our financial condition.

We have a significant amount of debt. As of December 31, 2017, we had approximately $3.1 billion of total debt outstanding, consisting of approximately $2.9 billion in debt that is collateralized by mortgage liens on 190 of the Properties, $129.2 million that is secured by collateralized receivables, $41.3 million on our lines of credit, and $41.4 million that is unsecured debt. If we fail to meet our obligations under our secured debt, the lenders would be entitled to foreclose on all or some of the collateral securing such debt which could have a material adverse effect on us and our ability to make expected distributions, and could threaten our continued viability.


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We are subject to the risks normally associated with debt financing, including the following risks:

our cash flow may be insufficient to meet required payments of principal and interest, or require us to dedicate a substantial portion of our cash flow to pay our debt and the interest associated with our debt rather than to other areas of our business;

our existing indebtedness may limit our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt;

it may be more difficult for us to obtain additional financing in the future for our operations, working capital requirements, capital expenditures, debt service or other general requirements;

we may be more vulnerable in the event of adverse economic and industry conditions or a downturn in our business;

we may be placed at a competitive disadvantage compared to our competitors that have less debt; and

we may not be able to refinance at all or on favorable terms, as our debt matures.

If any of the above risks occurred, our financial condition and results of operations could be materially adversely affected.

We may incur substantially more debt, which would increase the risks associated with our substantial leverage.

Despite our current indebtedness levels, we may incur substantially more debt in the future. If new debt is added to our current debt levels, an even greater portion of our cash flow will be needed to satisfy our debt service obligations. As a result, the related risks that we now face could intensify and increase the risk of a default on our indebtedness.

TAX RISKS

We may suffer adverse tax consequences and be unable to attract capital if we fail to qualify as a REIT.

We believe that since our taxable year ended December 31, 1994, we have been organized and operated, and intend to continue to operate, so as to qualify for taxation as a REIT under the Code. Although we believe that we have been and will continue to be organized and have operated and will continue to operate so as to qualify for taxation as a REIT, we cannot be assured that we have been or will continue to be organized or operated in a manner to so qualify or remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which require us to continually monitor our tax status.

If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax). Moreover, unless entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability to us for the years involved. In addition, distributions to stockholders would no longer be required to be made.

Federal, state and foreign income tax laws governing REITs and related interpretations may change at any time, and any such legislative or other actions affecting REITs could have a negative effect on us.

Federal, state and foreign income tax laws governing REITs or the administrative interpretations of those laws may be amended at any time. Federal, state, and foreign tax laws are under constant review by persons involved in the legislative process, at the Internal Revenue Service and the U.S. Department of the Treasury, and at various state and foreign tax authorities. Changes to tax laws, regulations, or administrative interpretations, which may be applied retroactively, could adversely affect us. We cannot predict whether, when, in what forms, or with what effective dates, the tax laws, regulations, and administrative interpretations applicable to us may be changed. Accordingly, we cannot assert that any such change will not significantly affect either our ability to qualify for taxation as a REIT or the income tax consequences to us.

In particular, new U.S. federal tax legislation enacted into law on December 22, 2017 informally titled the Tax Cut and Jobs Act (the “Tax Act”) has made many major changes to the taxation of individuals and businesses.  There are a significant number of

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technical issues and uncertainties with respect to the interpretation and application of the Tax Act, which may or may not be clarified by future guidance.  It is not possible to predict whether such clarifications will result in adverse consequences to the Company or its stockholders.  Stockholders are urged to consult their tax advisors with respect to the effects of the Tax Act and to monitor future guidance issued with respect to the Tax Act and any other potential amendments to relevant tax laws.

We intend for the Operating Partnership to be taxed as a partnership, but we cannot guarantee that it will qualify.

We believe that the Operating Partnership has been organized as a partnership and will qualify for treatment as such under the Code. However, if the Operating Partnership is deemed to be a “publicly traded partnership,” it will be treated as a corporation instead of a partnership for federal income tax purposes unless at least 90 percent of its income is qualifying income as defined in the Code. The income requirements applicable to REITs and the definition of “qualifying income” for purposes of this 90 percent test are similar in most respects. Qualifying income for the 90 percent test generally includes passive income, such as specified types of real property rents, dividends, and interest. We believe that the Operating Partnership has and will continue to meet this 90 percent test, but we cannot guarantee that it has or will. If the Operating Partnership were to be taxed as a regular corporation, it would incur substantial tax liabilities, we would fail to qualify as a REIT for federal income tax purposes, and our ability to raise additional capital could be significantly impaired.

Our ability to accumulate cash may be restricted due to certain REIT distribution requirements.

In order to qualify as a REIT, we must distribute to our stockholders at least 90 percent of our REIT taxable income (calculated without any deduction for dividends paid and excluding net capital gain) and to avoid federal income taxation, our distributions must not be less than 100 percent of our REIT taxable income, including capital gains. As a result of the distribution requirements, we do not expect to accumulate significant amounts of cash. Accordingly, these distributions could significantly reduce the cash available to us in subsequent periods to fund our operations and future growth.

Our taxable REIT subsidiaries, or TRSs, are subject to special rules that may result in increased taxes.

As a REIT, we must pay a 100 percent penalty tax on certain payments that we receive if the economic arrangements between us and any of our TRSs are not comparable to similar arrangements between unrelated parties. The Internal Revenue Service may successfully assert that the economic arrangements of any of our inter-company transactions are not comparable to similar arrangements between unrelated parties.

Dividends payable by REITs do not qualify for the reduced tax rates applicable to certain dividends.

The maximum federal tax rate for certain qualified dividends payable to domestic stockholders that are individuals, trusts and estates is 20 percent. Dividends payable by REITs, however, are generally not eligible for this reduced rate. Although this rule does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular qualified corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less competitive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the comparative value of the stock of REITs, including our common stock and preferred stock.

Under the Tax Cuts and Jobs Act, REIT dividends (other than capital gain dividends and qualified dividends) received by non-corporate taxpayers may be eligible for a 20 percent deduction. Prospective investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities.

To remain qualified as a REIT for federal income tax purposes, we must continually satisfy requirements and tests under the tax law concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. In order to meet these tests, we may be required to forego or limit attractive business or investment opportunities and distribute all of our net earnings rather than invest in attractive opportunities or hold larger liquid reserves. Therefore, compliance with the REIT requirements may hinder our ability to operate solely to maximize profits.

Our ability to use net operating loss carryforwards to reduce future tax payments may be limited if we experience a change in ownership, or if taxable income does not reach sufficient levels.


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Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percent change (by value) in its equity ownership over a rolling three-year period), the corporation’s ability to use its pre-ownership-change net operating loss carryforwards to offset its post-ownership-change income may be limited. We may experience ownership changes in the future. If an ownership change were to occur, we would be limited in the portion of net operating loss carryforwards that we could use in the future to offset taxable income for U.S. federal income tax purposes.

BUSINESS RISKS

Some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests.

Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.0 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under the lease agreement, we lease approximately 71,500 rentable square feet of permanent space, and approximately 21,000 rentable square feet of temporary space. The initial term of the lease is until October 31, 2026, and the base rent is $17.95 per square foot (gross) until October 31, 2018, for both permanent and temporary space, with graduated rental increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director, as applicable, and their ownership interests in American Center LLC.

Legal Counsel. During 2017, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss, one of our directors, is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $5.0 million, $8.0 million and $4.6 million in the years ended December 31, 2017, 2016 and 2015, respectively.

Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of properties from partnerships previously affiliated with him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those on us and our public stockholders upon the sale of any of these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties.

We rely on key management.

We are dependent on the efforts of our executive officers, Gary A. Shiffman, John B. McLaren, Karen J. Dearing, and Jonathan M. Colman. The loss of services of one or more of these executive officers could have a temporary adverse effect on our operations. We do not currently maintain or contemplate obtaining any “key-man” life insurance on the Executive Officers.

Certain provisions in our governing documents may make it difficult for a third-party to acquire us.

9.8 percent Ownership Limit. In order to qualify and maintain our qualification as a REIT, not more than 50 percent of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals. Thus, ownership of more than 9.8 percent, in number of shares or value, of the issued and outstanding shares of our capital stock by any single stockholder has been restricted, with certain exceptions, for the purpose of maintaining our qualification as a REIT under the Code. Such restrictions in our charter do not apply to Milton M. Shiffman, Gary A. Shiffman, and Robert B. Bayer; trustees, personal representatives and agents to the extent acting for them or their respective estates; or certain of their respective relatives.

The 9.8 percent ownership limit, as well as our ability to issue additional shares of common stock or shares of other stock (which may have rights and preferences over the common stock), may discourage a change of control of the Company and may also: (1) deter tender offers for the common stock, which offers may be advantageous to stockholders; and (2) limit the opportunity for stockholders to receive a premium for their common stock that might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8 percent of our outstanding shares or otherwise effect a change of control of the Company.

Preferred Stock. Our charter authorizes the Board of Directors to issue up to 20,000,000 shares of preferred stock and to establish the preferences and rights (including the right to vote and the right to convert into shares of common stock) of any shares issued.

Our charter designates 6,364,770 shares of preferred stock as 6.50% Series A-4 Cumulative Convertible Preferred Stock (“Series A-4 preferred stock”), $0.01 par value per share of which 1,085,365 shares were issued and outstanding as of December 31, 2017.

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The power to issue preferred stock could have the effect of delaying or preventing a change in control of the Company even if a change in control were in the stockholders’ interest.

Subject to certain limitations, upon written notice to us, each holder of shares of Series A-4 preferred stock at its option may convert each share of Series A-4 preferred stock held by it for that number of shares of our common stock equal to the quotient obtained by dividing $25.00 by the then-applicable conversion price. The initial conversion price is $56.25, so initially each share of Series A-4 preferred stock is convertible into approximately 0.4444 shares of common stock. The conversion price is subject to adjustment upon various events. At our option, instead of issuing the shares of common stock to the converting holder of Series A-4 preferred stock as described above, we may make a cash payment to the converting holder with respect to each share of Series A-4 preferred stock the holder desires to convert equal to the fair market value of one share of our common stock. If, at any time after November 26, 2019, the volume weighted average of the daily volume weighted average price of a share of our common stock on the NYSE equals or exceeds 115.5 percent of the then prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, then, within 10 days thereafter, upon written notice to the holders thereof, we may convert each outstanding share of Series A-4 preferred stock into that number of shares of common stock equal to the quotient obtained by dividing $25.00 by the then prevailing conversion price.

These features of the Series A-4 preferred stock may have the effect of inhibiting a third-party from making an acquisition proposal for the Company or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of our common stock and preferred stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest.

Certain provisions of the Maryland General Corporation Law, (“MGCL”), may have the effect of inhibiting a third-party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our capital stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including:

“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10 percent or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements on these combinations; and

“control share” provisions that provide that “control shares” of our company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

The provisions of the MGCL relating to business combinations do not apply, however, to business combinations that are approved or exempted by our Board of Directors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the statute, our Board of Directors has by resolution exempted Milton M. Shiffman, Robert B. Bayer, and Gary A. Shiffman, their affiliates and all persons acting in concert or as a group with the foregoing, from the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and these persons. As a result, these persons may be able to enter into business combinations with us that may not be in the best interests of our stockholders without compliance by our Company with the supermajority vote requirements and the other provisions of the statute.

Also, pursuant to a provision in our bylaws, we have exempted any acquisition of our stock from the control share provisions of the MGCL. However, our Board of Directors may by amendment to our bylaws opt in to the control share provisions of the MGCL at any time in the future.


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Additionally, Subtitle 8 of Title 3 of the MGCL permits our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium to the market price of our common stock or otherwise be in our stockholders’ best interests. These provisions include a classified board; two-thirds vote to remove a director; that the number of directors may only be fixed by the Board of Directors; that vacancies on the board as a result of an increase in the size of the board or due to death, resignation or removal can only be filled by the board, and the director appointed to fill the vacancy serves for the remainder of the full term of the class of director in which the vacancy occurred; and a majority requirement for the calling by stockholders of special meetings. Other than a classified board, the filling of vacancies as a result of the removal of a director and a majority requirement for the calling by stockholders of special meetings, we are already subject to these provisions, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election to be subject to certain provisions of Subtitle 8. In the future, our Board of Directors may elect, without stockholder approval, to make us subject to the provisions of Subtitle 8 to which we are not currently subject.

Our Board of Directors has power to adopt, alter or repeal any provision of our bylaws or make new bylaws, provided, however, that our stockholders may alter or repeal any provision of our bylaws and adopt new bylaws if any such alteration, repeal or adoption is approved by the affirmative vote of a majority of all votes entitled to be cast on the matter.

Changes in our investment and financing policies may be made without stockholder approval.

Our investment and financing policies, and our policies with respect to certain other activities, including our growth, debt, capitalization, distributions, REIT status, and operating policies, are determined by our Board of Directors. Although the Board of Directors has no present intention to do so, these policies may be amended or revised from time to time at the discretion of the Board of Directors without notice to or a vote of our stockholders. Accordingly, stockholders may not have control over changes in our policies and changes in our policies may not fully serve the interests of all stockholders.

Substantial sales of our common stock could cause our stock price to fall.

The sale or issuance of substantial amounts of our common stock or preferred stock, whether directly by us or in the secondary market, the perception that such sales could occur or the availability of future issuances of shares of our common stock, preferred stock, OP units or other securities convertible into or exchangeable or exercisable for our common stock or preferred stock, could materially and adversely affect the market price of our common stock or preferred stock and our ability to raise capital through future offerings of equity or equity-related securities. In addition, we may issue capital stock that is senior to our common stock in the future for a number of reasons, including to finance our operations and business strategy, to adjust our ratio of debt to equity or for other reasons.

Based on the applicable conversion ratios then in effect, as of February 15, 2018, in the future we may issue to the limited partners of the Operating Partnership, up to approximately 2.7 million shares of our common stock in exchange for their OP units. The limited partners may sell such shares pursuant to registration rights, if available, or an available exemption from registration. As of February 15, 2018, options to purchase 3,000 shares of our common stock were outstanding under our equity incentive plans, and we currently have the authority to issue restricted stock awards or options to purchase up to an additional 1,351,843 shares of our common stock pursuant to our equity incentive plans. In addition, we entered into an At-the-Market Offering Sales Agreement in July 2017 to issue and sell shares of common stock. As of February 15, 2018, our Board of Directors had authorized us to sell an additional $420.0 million of common stock under this agreement. No prediction can be made regarding the effect that future sales of shares of our common stock or our other securities will have on the market price of shares.

An increase in interest rates may have an adverse effect on the price of our common stock.

One of the factors that may influence the price of our common stock in the public market will be the annual distributions to stockholders relative to the prevailing market price of the common stock. An increase in market interest rates may tend to make the common stock less attractive relative to other investments, which could adversely affect the market price of our common stock.

We may be adversely impacted by fluctuations in foreign currency exchange rates.
Our investments in and operations of Canadian properties are exposed to the effects of changes in the Canadian dollar against the U.S. dollar. Changes in foreign currency exchange rates cannot always be predicted; as a result, substantial unfavorable changes in exchange rates could have a material adverse effect on our financial condition and results of operations.


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The volatility in economic conditions and the financial markets may adversely affect our industry, business and financial performance.

The U.S. interest rate environment, oil price fluctuations, uncertain tax and economic plans in the U.S. executive and legislative branches, and turmoil in emerging markets have created uncertainty and volatility in the U.S. and global economies. Continued economic uncertainty, both nationally and internationally, causes increased volatility in investor confidence thereby creating similar volatility in the availability of both debt and equity capital in the financial markets. The other risk factors presented in this Annual Report on Form 10-K discuss some of the principal risks inherent in our business, including liquidity risks, operational risks, and credit risks, among others. Turbulence in financial markets accentuates each of these risks and magnifies their potential effect on us. If such volatility is experienced in future periods, there could be an adverse impact on our access to capital, stock price and our operating results.

Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness, and we may adjust our common stock distribution policy.

Our ability to make distributions on our common stock and preferred stock, and payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock or preferred stock, to pay our indebtedness or to fund our other liquidity needs.

The decision to declare and pay distributions on shares of our common stock in the future, as well as the timing, amount and composition of any such future distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. Any change in our distribution policy could have a material adverse effect on the market price of our common stock.

Our ability to pay distributions is limited by the requirements of Maryland law.

Our ability to pay distributions on our common stock and preferred stock is limited by the laws of Maryland. Under Maryland law, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution, provided, however, that a Maryland corporation may make a distribution from: (i) its net earnings for the fiscal year in which the distribution is made; (ii) its net earnings for the preceding fiscal year; or (iii) the sum of its net earnings for its preceding eight fiscal quarters even if, after such distribution, the corporation’s total assets would be less than its total liabilities. Accordingly, we generally may not make a distribution on our common stock or preferred stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or, unless paid from one of the permitted sources of net earnings as described above, our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series of stock provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of stock then outstanding, if any, with preferential rights upon dissolution senior to those of our common stock or currently outstanding preferred stock.

We may not be able to pay distributions upon events of default under our financing documents.

Some of our financing documents contain restrictions on distributions upon the occurrence of events of default thereunder. If such an event of default occurs, such as our failure to pay principal at maturity or interest when due for a specified period of time, we would be prohibited from making payments on our common stock and preferred stock.

Our share price could be volatile and could decline, resulting in a substantial or complete loss on our stockholders’ investment.

The stock markets, including the NYSE on which we list our common stock, have experienced significant price and volume fluctuations. As a result, the market price of our common stock and preferred stock could be similarly volatile, and investors in our common stock and preferred stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our common stock and preferred stock could be subject to wide fluctuations in response to a number of factors, including:


17

SUN COMMUNITIES, INC.

issuances of other equity securities in the future, including new series or classes of preferred stock;

our operating performance and the performance of other similar companies;

our ability to maintain compliance with covenants contained in our debt facilities;

actual or anticipated variations in our operating results, funds from operations, cash flows or liquidity;

changes in expectations of future financial performance or changes in our earnings estimates or those of analysts;

changes in our distribution policy;

publication of research reports about us or the real estate industry generally;

increases in market interest rates that lead purchasers of our common stock and preferred stock to demand a higher dividend yield;

changes in foreign currency exchange rates, specifically between the U.S. dollar and Canadian dollar;

changes in market valuations of similar companies;

adverse market reaction to the amount of our debt outstanding at any time, the amount of our debt maturing in the near- and medium-term and our ability to refinance our debt, or our plans to incur additional debt in the future;

additions or departures of key management personnel;

speculation in the press or investment community;

equity issuances by us, or share resales by our stockholders or the perception that such issuances or resales may occur;

actions by institutional stockholders; and

general market and economic conditions.

Many of the factors listed above are beyond our control. Those factors may cause the market price of our common stock or preferred stock to decline significantly, regardless of our financial condition, results of operations and prospects. It is impossible to provide any assurance that the market price of our common stock or preferred stock will not fall in the future, and it may be difficult for holders to resell shares of our common stock or preferred stock at prices they find attractive, or at all. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

Our Series A-4 preferred stock has not been rated.

We have not sought to obtain a rating for our Series A-4 preferred stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A-4 preferred stock. In addition, we may elect in the future to obtain a rating of the Series A-4 preferred stock, which could adversely affect the market price of such preferred stock. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on a watch list or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision, placing on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Series A-4 preferred stock.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants, clients and vendors, as well as personally identifiable information of our employees, in our facilities and on our

18

SUN COMMUNITIES, INC.

network. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence, which could adversely affect our business.


19

SUN COMMUNITIES, INC.

A significant interruption in our information technology systems could adversely affect our operations.

We rely intensively on information technology to account for tenant transactions, manage the privacy of tenant data, communicate internally and externally, and analyze our financial and operating results. We are dependent on continuous access to the Internet to use our cloud-based applications. Damage or failure to our information technology systems could adversely affect our results of operations as we may incur significant costs or data loss. We continually assess new and enhanced information technology solutions to manage risk of system failure or interruption.

Expanding social media platforms present new challenges.

Social media outlets continue to grow and expand, which presents us with new risks. Adverse content about the Company and our Properties on social media platforms could result in damage to our reputation or brand. Improper posts by employees or others could result in disclosure of confidential or proprietary information regarding our operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS
None.



20

SUN COMMUNITIES, INC.

ITEM 2. PROPERTIES

As of December 31, 2017, the Properties were located throughout the US and in Ontario, Canada and consisted of 230 MH communities, 89 RV communities, and 31 properties containing both MH and RV sites. As of December 31, 2017, the Properties contained an aggregate of 121,892 developed sites comprised of 83,294 developed manufactured home sites, 22,742 annual RV sites (inclusive of both annual and seasonal usage rights), and 15,856 transient RV sites. There are approximately 9,600 additional MH and RV sites suitable for development. Most of the Properties include amenities oriented toward family and retirement living. Of the 350 Properties, 174 have more than 300 developed sites, with the largest having 2,340 developed MH and RV sites. See “Real Estate and Accumulated Depreciation, Schedule III”, included in our Consolidated Financial Statements, for detail on Properties that are encumbered.

As of December 31, 2017, the Properties had an occupancy rate of 95.8 percent excluding transient RV sites. Since January 1, 2017, the Properties have averaged an aggregate annual turnover of homes (where the home is moved out of the community) of approximately 1.9 percent and an average annual turnover of residents (where the resident-owned home is sold and remains within the community, typically without interruption of rental income) of approximately 6.6 percent. The average renewal rate for residents in our Rental Program was 64.8 percent for the year ended December 31, 2017.

We believe that our Properties’ high amenity levels contribute to low turnover and generally high occupancy rates. All of the Properties provide residents with attractive amenities with most offering a clubhouse, a swimming pool, and laundry facilities. Many of the Properties offer additional amenities such as sauna/whirlpool spas, tennis courts, shuffleboard, basketball courts, and/or exercise rooms. Many RV communities offer incremental amenities including golf, pro shops, restaurants, zip lines, waterparks, watersports, and thematic experiences.

We have concentrated our communities within certain geographic areas in order to achieve economies of scale in management and operation. The Properties are principally concentrated in the Midwestern, Southern, Northeastern, Southeastern U.S. and Ontario, Canada. We believe that geographic diversification helps to insulate the portfolio from regional economic influences.

The following tables set forth certain information relating to the Properties as of December 31, 2017. The occupancy percentage includes MH sites and annual RV sites, and excludes transient RV sites.
Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
UNITED STATES
 
 
 
 
 
 
 
 
 
Midwest
 
 
 
 
 
 
 
 
 
Michigan
 
 
 
 
 
 
 
 
 
Academy/West Pointe
MH
Canton
MI
441


97.5
%
 
98.9
%
 
Allendale Meadows Mobile Village
MH
Allendale
MI
352


96.9
%
 
98.0
%
 
Alpine Meadows Mobile Village
MH
Grand Rapids
MI
403


97.5
%
 
96.8
%
 
Apple Carr Village
MH
Muskegon
MI
595


84.4
%
(1) 
94.0
%
 
Arbor Woods
MH
Superior Township
MI
458


75.3
%
 
N/A

 
Brentwood Mobile Village
MH
Kentwood
MI
195


97.4
%
 
100.0
%
 
Brookside Village
MH
Kentwood
MI
196


99.0
%
 
100.0
%
 
Byron Center Mobile Village
MH
Byron Center
MI
143


100.0
%
 
100.0
%
 
Camelot Villa
MH
Macomb
MI
712


99.3
%
 
99.3
%
 
Cider Mill Crossings
MH
Fenton
MI
434


74.0
%
(1) 
91.1
%
(1) 
Cider Mill Village
MH
Middleville
MI
258


98.1
%
 
96.9
%
 
Continental North
MH
Davison
MI
474


73.4
%
 
65.6
%
 
Country Acres Mobile Village
MH
Cadillac
MI
182


98.4
%
 
95.6
%
 
Country Hills Village
MH
Hudsonville
MI
239


100.0
%
 
99.2
%
 
Country Meadows Mobile Village
MH
Flat Rock
MI
577


95.5
%
 
95.7
%
 

21

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Country Meadows Village
MH
Caledonia
MI
395


91.4
%
(1) 
99.7
%
 
Creekwood Meadows
MH
Burton
MI
336


98.5
%
 
95.8
%
 
Cutler Estates Mobile Village
MH
Grand Rapids
MI
259


98.5
%
 
98.8
%
 
Dutton Mill Village
MH
Caledonia
MI
307


97.4
%
 
99.0
%
 
East Village Estates
MH
Washington Township
MI
708


99.4
%
 
98.3
%
 
Egelcraft
MH
Muskegon
MI
458


97.6
%
 
97.2
%
 
Fisherman’s Cove
MH
Flint
MI
162


91.4
%
 
93.8
%
 
Frenchtown Villa/Elizabeth Woods
MH
Newport
MI
1,123


84.7
%
(1) 
84.9
%
 
Grand Mobile Estates
MH
Grand Rapids
MI
219


96.8
%
 
96.8
%
 
Hamlin
MH
Webberville
MI
230


95.7
%
(1) 
89.1
%
(1) 
Hickory Hills Village
MH
Battle Creek
MI
283


98.6
%
 
98.6
%
 
Hidden Ridge RV Resort (2)
RV
Hopkins
MI
167

168

100.0
%
 
100.0
%
 
Holiday West Village
MH
Holland
MI
341


99.7
%
 
99.7
%
 
Holly Village / Hawaiian Gardens
MH
Holly
MI
425


94.6
%
 
93.6
%
 
Hunters Crossing
MH
Capac
MI
114


99.1
%
 
97.4
%
 
Hunters Glen
MH
Wayland
MI
396


76.5
%
(1) 
96.1
%
 
Kensington Meadows
MH
Lansing
MI
290


96.6
%
 
91.0
%
 
Kimberly Estates
MH
Newport
MI
387


94.8
%
 
80.4
%
 
Kings Court Mobile Village
MH
Traverse City
MI
802


78.8
%
(1) 
98.9
%
 
Knollwood Estates
MH
Allendale
MI
161


92.6
%
 
99.4
%
 
Lafayette Place
MH
Warren
MI
254


94.9
%
 
88.2
%
 
Lakeview
MH
Ypsilanti
MI
392


98.2
%
 
98.7
%
 
Leisure Village
MH
Belmont
MI
238


100.0
%
 
99.6
%
 
Lincoln Estates
MH
Holland
MI
191


99.5
%
 
99.5
%
 
Meadow Lake Estates
MH
White Lake
MI
425


97.9
%
 
94.6
%
 
Meadowbrook Estates
MH
Monroe
MI
453


96.3
%
 
94.9
%
 
Meadowlands of Gibraltar
MH
Rockwood
MI
320


96.9
%
 
95.9
%
 
Northville Crossings
MH
Northville
MI
756


99.5
%
 
99.2
%
 
Oak Island Village
MH
East Lansing
MI
250


97.6
%
 
97.6
%
 
Petoskey RV Resort (2)
RV
Petoskey
MI

78

N/A

 
N/A

 
Pinebrook Village
MH
Grand Rapids
MI
185


98.9
%
 
98.4
%
 
Presidential Estates Mobile Village
MH
Hudsonville
MI
364


98.9
%
 
98.4
%
 
Richmond Place
MH
Richmond
MI
117


94.9
%
 
88.9
%
 
River Haven Village
MH
Grand Haven
MI
721


78.8
%
 
72.3
%
 
Rudgate Clinton
MH
Clinton Township
MI
667


97.3
%
 
95.7
%
 
Rudgate Manor
MH
Sterling Heights
MI
931


97.3
%
 
98.3
%
 
Scio Farms Estates
MH
Ann Arbor
MI
913


98.4
%
 
97.9
%
 
Sheffield Estates
MH
Auburn Hills
MI
228


99.6
%
 
96.9
%
 
Silver Springs
MH
Clinton Township
MI
547


99.5
%
 
98.2
%
 
Southwood Village
MH
Grand Rapids
MI
394


98.7
%
 
98.7
%
 
St. Clair Place
MH
St. Clair
MI
100


96.0
%
 
93.0
%
 

22

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Sunset Ridge
MH
Portland
MI
249


92.0
%
(1) 
76.7
%
(1) 
Sycamore Village
MH
Mason
MI
396


98.5
%
 
99.2
%
 
Tamarac Village
MH
Ludington
MI
301


98.7
%
 
99.3
%
 
Tamarac Village RV Resort (2)
RV
Ludington
MI
104

10

100.0
%
 
100.0
%
 
Timberline Estates
MH
Coopersville
MI
296


98.7
%
 
99.3
%
 
Town & Country Mobile Village
MH
Traverse City
MI
192


99.5
%
 
97.4
%
 
Warren Dunes Village
MH
Bridgman
MI
314


72.3
%
(1) 
98.4
%
 
Waverly Shores Village
MH
Holland
MI
415


78.8
%
(1) 
100.0
%
 
West Village Estates
MH
Romulus
MI
628


99.4
%
 
98.1
%
 
White Lake Mobile Home Village
MH
White Lake
MI
315


96.8
%
 
98.1
%
 
Windham Hills Estates
MH
Jackson
MI
469


85.5
%
(1) 
91.2
%
(1) 
Windsor Woods Village
MH
Wayland
MI
314


98.4
%
 
96.5
%
 
Woodhaven Place
MH
Woodhaven
MI
220


96.4
%
 
97.7
%
 
Michigan Total
 
 
 
25,881

256

93.3
%
 
94.8
%
 
 
 
 
 
 
 
 
 
 
 
Indiana
 
 
 
 
 
 
 
 
 
Brookside Mobile Home Village
MH
Goshen
IN
570


89.1
%
 
83.0
%
 
Carrington Pointe
MH
Ft. Wayne
IN
320


98.4
%
 
98.1
%
 
Clear Water Mobile Village
MH
South Bend
IN
227


96.5
%
 
94.7
%
 
Cobus Green Mobile Home Park
MH
Osceola
IN
386


96.4
%
 
96.4
%
 
Deerfield Run
MH
Anderson
IN
175


91.4
%
 
90.3
%
 
Four Seasons
MH
Elkhart
IN
218


95.4
%
 
95.0
%
 
Lake Rudolph Campground & RV Resort(2)
RV
Santa Claus
IN

520

N/A

 
N/A

 
Liberty Farms
MH
Valparaiso
IN
220


96.8
%
 
99.1
%
 
Pebble Creek
MH
Greenwood
IN
257


95.3
%
 
96.9
%
 
Pine Hills
MH
Middlebury
IN
129


98.5
%
 
96.1
%
 
Roxbury Park
MH
Goshen
IN
398


97.7
%
 
99.0
%
 
Indiana Total
 
 
 
2,900

520

95.0
%
 
93.9
%
 
 
 
 
 
 
 
 
 
 
 
Ohio
 
 
 
 
 
 
 
 
 
Apple Creek
MH
Amelia
OH
176


97.7
%
 
97.7
%
 
East Fork
MH
Batavia
OH
350


98.9
%
(1) 
88.9
%
(1) 
Indian Creek RV & Camping Resort (2)
RV
Geneva on the Lake
OH
414

145

100.0
%
 
100.0
%
 
Oakwood Village
MH
Miamisburg
OH
511


98.8
%
 
99.2
%
 
Orchard Lake
MH
Milford
OH
147


98.0
%
 
95.2
%
 
Westbrook Senior Village
MH
Toledo
OH
112


99.1
%
 
98.2
%
 
Westbrook Village
MH
Toledo
OH
344


94.2
%
 
96.2
%
 
Willowbrook Place
MH
Toledo
OH
266


94.0
%
 
96.2
%
 
Woodside Terrace
MH
Holland
OH
439


93.4
%
 
90.7
%
 
Ohio Total
 
 
 
2,759

145

97.0
%
 
95.6
%
 
 
 
 
 
 
 
 
 
 
 

23

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
SOUTH
 
 
 
 
 
 
 
 
 
Texas
 
 
 
 
 
 
 
 
 
Austin Lone Star RV Resort (2)
RV
Austin
TX
13

141

100.0
%
 
100.0
%
 
Blazing Star (2)
RV
San Antonio
TX
119

143

100.0
%
 
100.0
%
 
Boulder Ridge
MH
Pflugerville
TX
629


95.4
%
(1) 
97.0
%
 
Branch Creek Estates
MH
Austin
TX
392


100.0
%
 
99.5
%
 
Chisholm Point Estates
MH
Pflugerville
TX
417


98.8
%
 
100.0
%
 
Comal Farms
MH
New Braunfels
TX
367


97.0
%
(1) 
99.7
%
 
Hill Country Cottage and RV Resort (2)
RV
New Braunfels
TX
15

349

100.0
%

N/A

 
La Hacienda RV Resort (2)
RV
Austin
TX

244

N/A

 
N/A

 
Oak Crest
MH
Austin
TX
433


96.8
%
 
97.7
%
 
Pecan Branch
MH
Georgetown
TX
229


37.6
%
(1) 
91.3
%
 
Pine Trace
MH
Houston
TX
680


98.4
%
(1) 
94.4
%
(1) 
River Ranch
MH
Austin
TX
848


97.3
%
(1) 
96.2
%
(1) 
River Ridge
MH
Austin
TX
515


98.5
%
 
98.8
%
 
Saddlebrook
MH
San Marcos
TX
562


83.8
%
(1) 
68.5
%
(1) 
Sandy Lake
MH
Carrolton
TX
54


100.0
%
 
100.0
%
 
Sandy Lake RV Resort (2)
RV
Carrolton
TX
12

208

100.0
%
 
N/A

 
Stonebridge
MH
San Antonio
TX
335


97.9
%
 
96.1
%
 
Summit Ridge
MH
Converse
TX
446


97.1
%
 
98.2
%
 
Sunset Ridge
MH
Kyle
TX
171


98.8
%
 
99.4
%
 
Traveler’s World
MH
San Antonio
TX
7


100.0
%
 
100.0
%
 
Traveler’s World RV Resort (2)
RV
San Antonio
TX
27

129

100.0
%
 
100.0
%
 
Treetops RV Resort (2)
RV
Arlington
TX
14

159

100.0
%
 
100.0
%
 
Woodlake Trails
MH
San Antonio
TX
316


70.9
%
(1) 
93.8
%
 
Texas Total
 
 
 
6,601

1,373

93.2
%
 
94.8
%
 
 
 
 
 
 
 
 
 
 
 
SOUTHEAST
 
 
 
 
 
 
 
 
 
Florida
 
 
 
 
 
 
 
 
 
Arbor Terrace RV Park (2)
RV
Bradenton
FL
187

174

100.0
%
 
100.0
%
 
Ariana Village
MH
Lakeland
FL
207


96.1
%
 
96.6
%
 
Bahia Vista Estates
MH
Sarasota
FL
251


98.8
%
 
100.0
%
 
Baker Acres RV Resort (2)
RV
Zephyrhills
FL
281

71

100.0
%
 
100.0
%
 
Big Tree RV Resort (2)
RV
Arcadia
FL
337

74

100.0
%
 
100.0
%
 
Blue Heron Pines
MH
Punta Gorda
FL
408


96.1
%
(1) 
98.2
%
 
Blue Jay
MH
Dade City
FL
206


99.5
%
 
98.5
%
 
Blue Jay RV Resort (2)
RV
Dade City
FL
36

19

100.0
%
 
100.0
%
 
Blueberry Hill (2)
RV
Bushnell
FL
266

139

100.0
%
 
100.0
%
 
Brentwood Estates
MH
Hudson
FL
191


96.9
%
 
92.6
%
 
Buttonwood Bay
MH
Sebring
FL
407


99.8
%
 
99.8
%
 
Buttonwood Bay RV Resort (2)
RV
Sebring
FL
365

167

100.0
%
 
100.0
%
 
Candlelight Manor
MH
South Daytona
FL
128


90.6
%
 
90.6
%
 

24

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Carriage Cove
MH
Sanford
FL
467


98.5
%
(1) 
99.4
%
 
Central Park
MH
Haines City
FL
110


90.9
%
 
90.9
%
 
Central Park RV Resort (2)
RV
Haines City
FL
196

171

100.0
%
 
100.0
%
 
Citrus Hill RV Resort (2)
RV
Dade City
FL
142

40

100.0
%
 
100.0
%
 
Club Naples (2)
RV
Naples
FL
207

97

100.0
%
 
100.0
%
 
Club Wildwood
MH
Hudson
FL
478


98.7
%
 
99.0
%
 
Colony in the Wood
MH
Port Orange
FL
383


95.0
%
 
N/A

 
Country Squire
MH
Paisley
FL
97


90.7
%
 
78.1
%
 
Country Squire RV Resort (2)
RV
Paisley
FL
14

11

100.0
%
 
100.0
%
 
Cypress Greens
MH
Lake Alfred
FL
259


95.4
%
 
95.8
%
 
Daytona Beach RV Resort (2)
RV
Port Orange
FL
105

127

100.0
%
 
100.0
%
 
Deerwood
MH
Orlando
FL
569


98.1
%
 
94.6
%
 
Dunedin RV Resort (2)
RV
Dunedin
FL
171

68

100.0
%
 
100.0
%
 
Ellenton Gardens RV Resort (2)
RV
Ellenton
FL
145

49

100.0
%
 
100.0
%
 
Emerald Coast
MH
Panama City Beach
FL
42


100.0
%
 
N/A

 
Emerald Coast RV Resort (2)
RV
Panama City Beach
FL
158


100.0
%
 
N/A

 
Fairfield Village
MH
Ocala
FL
293


97.6
%
 
97.6
%
 
Forest View
MH
Homosassa
FL
300


96.7
%
 
94.3
%
 
Glen Haven
MH
Zephyrhills
FL
52


100.0
%
 
100.0
%
 
Glen Haven RV Resort (2)
RV
Zephyrhills
FL
155

63

100.0
%
 
100.0
%
 
Gold Coaster
MH
Homestead
FL
502


98.2
%
 
100.0
%
 
Gold Coaster RV Resort (2)
RV
Homestead
FL
4

39

100.0
%
 
100.0
%
 
Grand Bay
MH
Dunedin
FL
135


96.3
%
 
94.2
%
 
Grand Lakes (2)
RV
Citra
FL
285

119

100.0
%
 
100.0
%
 
Grove Ridge RV Resort (2)
RV
Dade City
FL
152

93

100.0
%
 
100.0
%
 
Groves RV Resort (2)
RV
Ft. Myers
FL
213

56

100.0
%
 
100.0
%
 
Gulfstream Harbor
MH
Orlando
FL
974


95.3
%
 
91.9
%
 
The Hamptons
MH
Auburndale
FL
829


98.8
%
 
99.2
%
 
Hidden River RV Resort (2)
RV
Riverview
FL
210

103

100.0
%
 
100.0
%
 
The Hideaway
MH
Key West
FL
13


84.6
%
 
100.0
%
 
The Hills
MH
Apopka
FL
100


95.0
%
 
94.0
%
 
Holly Forest Estates
MH
Holly Hill
FL
402


99.8
%
 
99.5
%
 
Homosassa River RV Resort (2)
RV
Homosassa Springs
FL
92

131

100.0
%
 
100.0
%
 
Horseshoe Cove RV Resort (2)
RV
Bradenton
FL
333

143

100.0
%
 
100.0
%
 
Indian Creek Park
MH
Ft. Myers Beach
FL
353


99.7
%
 
100.0
%
 
Indian Creek RV Park (2)
RV
Ft. Myers Beach
FL
976

101

100.0
%
 
100.0
%
 
Island Lakes
MH
Merritt Island
FL
301


100.0
%
 
100.0
%
 
Kings Lake
MH
DeBary
FL
245


100.0
%
 
100.0
%
 
Kings Manor
MH
Lakeland
FL
239


82.9
%
 
74.9
%
 
King’s Pointe
MH
Lake Alfred
FL
226


100.0
%
 
98.2
%
 
Kissimmee Gardens
MH
Kissimmee
FL
239


99.2
%
 
95.4
%
 
Kissimmee South
MH
Davenport
FL
142


90.9
%
 
90.9
%
 

25

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Kissimmee South RV Resort (2)
RV
Davenport
FL
79

121

100.0
%
 
100.0
%
 
La Costa Village
MH
Port Orange
FL
658


99.7
%
 
99.5
%
 
Lake Josephine (2)
RV
Sebring
FL
110

68

100.0
%
 
100.0
%
 
Lake Juliana Landings
MH
Auburndale
FL
274


97.5
%
 
97.4
%
 
Lake Pointe Village
MH
Mulberry
FL
362


99.2
%
 
99.2
%
 
Lake San Marino RV Park (2)
RV
Naples
FL
227

180

100.0
%
 
100.0
%
 
Lakeland RV Resort (2)
RV
Lakeland
FL
173

58

100.0
%
 
100.0
%
 
Lakeshore Landings
MH
Orlando
FL
306


100.0
%
 
98.4
%
 
Lakeshore Villas
MH
Tampa
FL
280


97.5
%
 
97.1
%
 
Lamplighter
MH
Port Orange
FL
260


97.3
%
 
96.9
%
 
Majestic Oaks RV Resort (2)
RV
Zephyrhills
FL
199

54

100.0
%
 
100.0
%
 
Marco Naples RV Resort (2)
RV
Naples
FL
214

78

100.0
%
 
100.0
%
 
Meadowbrook Village
MH
Tampa
FL
257


99.2
%
 
99.6
%
 
Mill Creek
MH
Kissimmee
FL
31


100.0
%
 
100.0
%
 
Mill Creek RV Resort (2)
RV
Kissimmee
FL
88

69

100.0
%
 
100.0
%
 
Naples RV Resort (2)
RV
Naples
FL
100

67

100.0
%
 
100.0
%
 
New Ranch
MH
Clearwater
FL
94


97.9
%
 
97.9
%
 
North Lake (2)
RV
Moore Haven
FL
202

70

100.0
%
 
100.0
%
 
Oakview Estates
MH
Arcadia
FL
119


99.2
%
 
95.8
%
 
Ocean Breeze
MH
Marathon
FL


%
(5) 
82.6
%
 
Ocean Breeze Jensen Beach
MH
Jensen Beach
FL
195


63.1
%
(1) 
76.2
%
 
Ocean Breeze Jensen Beach RV Resort (2)
RV
Jensen Beach
FL
21

87

100.0
%
 
100.0
%
 
Orange City
MH
Orange City
FL
4


100.0
%
 
100.0
%
 
Orange City RV Resort (2)
RV
Orange City
FL
295

226

100.0
%
 
100.0
%
 
Orange Tree Village
MH
Orange City
FL
246


100.0
%
 
100.0
%
 
Paddock Park South
MH
Ocala
FL
188


76.1
%
 
72.9
%
 
Palm Key Village
MH
Davenport
FL
204


100.0
%
 
99.0
%
 
Palm Village
MH
Bradenton
FL
146


98.0
%
 
98.6
%
 
Park Place
MH
Sebastian
FL
474


93.3
%
 
89.0
%
 
Park Royale
MH
Pinellas Park
FL
309


99.7
%
 
97.7
%
 
Pecan Park RV Resort (2)
RV
Jacksonville
FL

183

N/A

 
N/A

 
Pelican Bay
MH
Micco
FL
216


92.6
%
 
88.9
%
 
Pelican RV Resort & Marina (2)
RV
Marathon
FL
76

10

100.0
%
 
100.0
%
 
Plantation Landings
MH
Haines City
FL
394


99.2
%
 
99.5
%
 
Pleasant Lake RV Resort (2)
RV
Bradenton
FL
250

91

100.0
%
 
100.0
%
 
Rainbow
MH
Frostproof
FL
37


100.0
%
 
100.0
%
 
Rainbow RV Resort (2)
RV
Frostproof
FL
379

83

100.0
%
 
100.0
%
 
Rainbow Village of Largo (2)
RV
Largo
FL
238

71

100.0
%
 
100.0
%
 
Rainbow Village of Zephyrhills (2)
RV
Zephyrhills
FL
333

49

100.0
%
 
100.0
%
 
Red Oaks
MH
Bushnell
FL
103


92.2
%
 
92.2
%
 
Red Oaks RV Resort (2)
RV
Bushnell
FL
459

458

100.0
%
 
100.0
%
 
Regency Heights
MH
Clearwater
FL
391


95.4
%
 
93.8
%
 

26

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
The Ridge
MH
Davenport
FL
481


98.3
%
 
94.2
%
 
Riptide RV Resort & Marina (2)
RV
Key Largo
FL
11

29

100.0
%
 
100.0
%
 
Riverside Club
MH
Ruskin
FL
728


78.7
%
 
76.4
%
 
Rock Crusher Canyon RV Park (2)
RV
Crystal River
FL
127

267

100.0
%
 
100.0
%
 
Royal Country
MH
Miami
FL
864


99.9
%
 
99.9
%
 
Royal Palm Village
MH
Haines City
FL
395


82.3
%
 
77.7
%
 
Saddle Oak Club
MH
Ocala
FL
376


99.5
%
 
99.7
%
 
San Pedro
MH
Islamorada
FL


%
(5) 
94.4
%
 
San Pedro RV Resort & Marina (2)
RV
Islamorada
FL


%
(5) 
100.0
%
 
Saralake Estates
MH
Sarasota
FL
202


100.0
%
 
100.0
%
 
Savanna Club
MH
Port St. Lucie
FL
1,069


97.6
%
(1) 
97.2
%
 
Sea Breeze Resort
MH
Islamorada
FL


%
(5) 
93.5
%
 
Sea Breeze RV Resort (2)
RV
Islamorada
FL


%
(5) 
100.0
%
 
Serendipity
MH
North Fort Myers
FL
338


98.5
%
 
99.1
%
 
Settler’s Rest RV Resort (2)
RV
Zephyrhills
FL
302

76

100.0
%
 
100.0
%
 
Shadow Wood Village
MH
Hudson
FL
157


99.4
%
 
98.7
%
 
Shady Road Villas
MH
Ocala
FL
130


62.3
%
 
58.5
%
 
Shell Creek
MH
Punta Gorda
FL
54


100.0
%
 
100.0
%
 
Shell Creek RV Resort & Marina (2)
RV
Punta Gorda
FL
142

42

100.0
%
 
100.0
%
 
Siesta Bay RV Park (2)
RV
Ft. Myers
FL
730

67

100.0
%
 
100.0
%
 
Southern Charm RV Resort (2)
RV
Zephyrhills
FL
399

98

100.0
%
 
100.0
%
 
Southern Pines
MH
Bradenton
FL
107


95.3
%
 
91.6
%
 
Southport Springs
MH
Zephyrhills
FL
547


98.4
%
(1) 
98.5
%
 
Spanish Main
MH
Thonotasassa
FL
56


91.1
%
 
92.9
%
 
Spanish Main RV Resort (2)
RV
Thonotasassa
FL
178

98

100.0
%
 
100.0
%
 
Stonebrook
MH
Homosassa
FL
215


90.7
%
 
89.3
%
 
Sun-N-Fun RV Resort (2)
RV
Sarasota
FL
904

615

100.0
%
 
100.0
%
 
Suncoast Gateway
MH
Port Richey
FL
173


98.3
%
 
83.8
%
 
Sundance
MH
Zephyrhills
FL
332


100.0
%
 
100.0
%
 
Sunlake Estates
MH
Grand Island
FL
407


93.4
%
 
93.1
%
 
Sunset Harbor at Cow Key Marina
MH
Key West
FL
77


97.4
%
 
98.7
%
 
Sweetwater RV Resort (2)
RV
Zephyrhills
FL
212

79

100.0
%
 
100.0
%
 
Tallowwood Isle
MH
Coconut Creek
FL
273


95.6
%
 
96.3
%
 
Tampa East
MH
Dover
FL
31


100.0
%
 
100.0
%
 
Tampa East RV Resort (2)
RV
Dover
FL
232

437

100.0
%
 
100.0
%
 
Three Lakes (2)
RV
Hudson
FL
214

93

100.0
%
 
100.0
%
 
The Valley
MH
Apopka
FL
148


99.3
%
 
96.6
%
 
Vista del Lago
MH
Bradenton
FL
136


95.6
%
 
94.9
%
 
Vista del Lago RV Resort (2)
RV
Bradenton
FL
25

14

100.0
%
 
100.0
%
 
Vizcaya Lakes
MH
Port Charlotte
FL
113


79.7
%
 
78.8
%
 
Walden Woods I
MH
Homosassa
FL
213


100.0
%
 
100.0
%
 
Walden Woods II
MH
Homosassa
FL
213


98.6
%
 
98.1
%
 

27

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Water Oak Country Club Estates
MH
Lady Lake
FL
1,219


95.3
%
(1) 
94.5
%
(1) 
Waters Edge RV Resort (2)
RV
Zephyrhills
FL
136

81

100.0
%
 
100.0
%
 
Westside Ridge
MH
Auburndale
FL
219


99.1
%
 
98.6
%
 
Windmill Village
MH
Davenport
FL
509


99.2
%
 
98.0
%
 
Woodlands at Church Lake
MH
Groveland
FL
291


70.5
%
 
67.4
%
 
Florida Total
 
 
 
37,254

6,074

97.1
%
 
96.4
%
 
 
 
 
 
 
 
 
 
 
 
SOUTHWEST
 
 
 
 
 
 
 
 
 
California
 
 
 
 
 
 
 
 
 
49’er Village RV Resort (2)
RV
Plymouth
CA
31

294

100.0
%
 
N/A

 
Alta Laguna
MH
Rancho Cucamonga
CA
295


100.0
%
 
99.7
%
 
Caliente Sands
MH
Cathedral City
CA
118


97.5
%
 
N/A

 
The Colony
MH
Oxnard
CA
150


100.0
%
 
100.0
%
 
Friendly Village of La Habra
MH
La Habra
CA
329


100.0
%
 
99.4
%
 
Friendly Village of Modesto
MH
Modesto
CA
289


94.5
%
 
90.7
%
 
Friendly Village of Simi
MH
Simi Valley
CA
222


100.0
%
 
100.0
%
 
Friendly Village of West Covina
MH
West Covina
CA
157


99.4
%
 
100.0
%
 
Heritage
MH
Temecula
CA
196


100.0
%
 
99.5
%
 
Indian Wells RV Resort (2)
RV
Indio
CA
138

178

100.0
%
 
100.0
%
 
Lakefront
MH
Lakeside
CA
295


100.0
%
 
100.0
%
 
Lazy J Ranch
MH
Arcata
CA
219


100.0
%
 
N/A

 
Lemon Wood
MH
Ventura
CA
231


100.0
%
 
100.0
%
 
Napa Valley
MH
Napa
CA
257


100.0
%
 
100.0
%
 
Oak Creek
MH
Coarsegold
CA
198


95.0
%
 
96.0
%
 
Ocean West
MH
McKinleyville
CA
128


100.0
%
 
N/A

 
Palos Verdes Shores MH & Golf Community
MH
San Pedro
CA
242


100.0
%
 
99.6
%
 
Pembroke Downs
MH
Chino
CA
163


100.0
%
 
100.0
%
 
Pismo Dunes RV Resort (2)
RV
Pismo Beach
CA
331


100.0
%
 
N/A

 
Rancho Alipaz
MH
San Juan Capistrano
CA
132


100.0
%
 
100.0
%
 
Rancho Cabellero
MH
Riverside
CA
303


99.7
%
 
99.7
%
 
Royal Palms
MH
Cathedral City
CA
439


96.8
%
 
96.8
%
 
Royal Palms RV Resort (2)
RV
Cathedral City
CA
37

1

100.0
%
 
100.0
%
 
Vallecito
MH
Newbury Park
CA
303


100.0
%
 
99.7
%
 
Victor Villa
MH
Victorville
CA
287


97.2
%
 
95.5
%
 
Vines RV Resort (2)
RV
Paso Robles
CA

130

N/A

 
N/A

 
Vista del Lago
MH
Scotts Valley
CA
202


100.0
%
 
100.0
%
 
Wine Country RV Resort (2)
RV
Paso Robles
CA

203

N/A

 
N/A

 
California Total
 
 
 
5,692

806

99.1
%
 
98.6
%
 
 
 
 
 
 
 
 
 
 
 
Arizona
 
 
 
 
 
 
 
 
 
Blue Star/Lost Dutchman
MH
Apache Junction
AZ
169


93.5
%
 
94.1
%
 
Blue Star/Lost Dutchman RV Resort (2)
RV
Apache Junction
AZ
75

131

100.0
%
 
100.0
%
 

28

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Brentwood West
MH
Mesa
AZ
350


99.1
%
 
97.7
%
 
Desert Harbor
MH
Apache Junction
AZ
205


99.0
%
 
100.0
%
 
Fiesta Village
MH
Mesa
AZ
154


79.9
%
 
81.2
%
 
Fiesta Village RV Resort (2)
RV
Mesa
AZ
3

7

100.0
%
 
100.0
%
 
La Casa Blanca
MH
Apache Junction
AZ
198


100.0
%
 
100.0
%
 
Mountain View
MH
Mesa
AZ
170


99.4
%
 
100.0
%
 
Palm Creek Golf
MH
Casa Grande
AZ
493


52.1
%
(1) 
70.0
%
(1) 
Palm Creek Golf & RV Resort (2)
RV
Casa Grande
AZ
889

958

100.0
%
 
100.0
%
 
Rancho Mirage
MH
Apache Junction
AZ
312


100.0
%
 
100.0
%
 
Reserve at Fox Creek
MH
Bullhead City
AZ
311


95.2
%
 
93.2
%
 
Sun Valley
MH
Apache Junction
AZ
268


91.8
%
 
91.0
%
 
Verde Plaza
MH
Tucson
AZ
189


90.0
%
 
81.5
%
 
Arizona Total
 
 
 
3,786

1,096

91.0
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
Colorado
 
 
 
 
 
 
 
 
 
Cave Creek
MH
Evans
CO
447


99.1
%
 
99.1
%
 
Eagle Crest
MH
Firestone
CO
441


100.0
%
 
100.0
%
 
The Grove at Alta Ridge
MH
Thornton
CO
409


99.8
%
 
99.8
%
 
Jellystone Park(TM) at Larkspur (2)
RV
Larkspur
CO

146

N/A

 
N/A

 
North Point Estates
MH
Pueblo
CO
108


99.1
%
 
97.2
%
 
Skyline
MH
Fort Collins
CO
170


99.4
%
 
100.0
%
 
Swan Meadow Village
MH
Dillon
CO
175


100.0
%
 
100.0
%
 
Timber Ridge
MH
Fort Collins
CO
585


99.5
%
 
99.7
%
 
Colorado Total
 
 
 
2,335

146

99.6
%
 
99.6
%
 
 
 
 
 
 
 
 
 
 
 
OTHER
 
 
 
 
 
 
 
 
 
Seaport RV Resort (2)
RV
Old Mystic
CT
42

107

100.0
%
 
100.0
%
 
High Pointe
MH
Frederica
DE
409


96.6
%
 
97.1
%
 
Sea Air Village
MH
Rehoboth Beach
DE
373


98.4
%
 
98.4
%
 
Sea Air Village RV Resort (2)
RV
Rehoboth Beach
DE
123

11

100.0
%
 
100.0
%
 
Countryside Atlanta
MH
Lawrenceville
GA
260


65.0
%
(1) 
100.0
%
(3) 
Countryside Gwinnett
MH
Buford
GA
331


99.1
%
 
99.7
%
 
Countryside Lake Lanier
MH
Buford
GA
548


98.7
%
 
98.7
%
 
Autumn Ridge
MH
Ankeny
IA
413


97.1
%
 
98.8
%
 
Candlelight Village
MH
Sauk Village
IL
309


97.1
%
 
95.5
%
 
Maple Brook
MH
Matteson
IL
441


99.6
%
 
99.3
%
 
Oak Ridge
MH
Manteno
IL
426


93.0
%
 
90.1
%
 
Sunset Lakes RV Resort (2)
RV
Hillsdale
IL
229

269

100.0
%
 
N/A

 
Wildwood Community
MH
Sandwich
IL
476


99.4
%
 
99.8
%
 
Campers Haven RV Resort (2)
RV
Dennisport
MA
234

40

100.0
%
 
100.0
%
 
Peter’s Pond RV Resort (2)
RV
Sandwich
MA
325

81

100.0
%
 
100.0
%
 
Castaways RV Resort & Campground (2)
RV
Berlin
MD
4

389

100.0
%
 
100.0
%
 

29

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Fort Whaley (2)
RV
Whaleyville
MD

179

N/A

 
N/A

 
Frontier Town (2)
RV
Ocean City
MD

584

N/A

 
N/A

 
Maplewood Manor
MH
Brunswick
ME
296


99.3
%
 
99.7
%
 
Merrymeeting
MH
Brunswick
ME
43


100.0
%
 
97.7
%
 
Saco/Old Orchard Beach KOA (2)
RV
Saco
ME

196

N/A

 
N/A

 
Town & Country Village
MH
Lisbon
ME
144


99.3
%
 
99.3
%
 
Wagon Wheel RV Resort & Campground (2)
RV
Old Orchard Beach
ME
225

61

100.0
%
 
100.0
%
 
Wild Acres RV Resort & Campground (2)
RV
Old Orchard Beach
ME
291

339

100.0
%
 
100.0
%
 
Southern Hills/Northridge Place
MH
Stewartville
MN
475


92.8
%
(1) 
94.1
%
(1) 
Pin Oak Parc
MH
O’Fallon
MO
502


96.6
%
 
93.6
%
 
Southfork
MH
Belton
MO
474


65.0
%
 
66.2
%
 
Countryside Village
MH
Great Falls
MT
226


98.7
%
 
99.1
%
 
Fort Tatham RV Resort & Campground (2)
RV
Sylva
NC
52

39

100.0
%
 
100.0
%
 
Glen Laurel
MH
Concord
NC
260


98.5
%
 
99.2
%
 
Meadowbrook
MH
Charlotte
NC
321


100.0
%
 
99.7
%
 
Big Timber Lake RV Resort (2)
RV
Cape May
NJ
309

219

100.0
%
 
100.0
%
 
Cape May Crossing
MH
Cape May
NJ
28


100.0
%
 
100.0
%
 
Cape May KOA (2)
RV
Cape May
NJ
354

275

100.0
%
 
100.0
%
 
Driftwood Camping Resort (2)
RV
Clermont
NJ
612

95

100.0
%

100.0
%
 
Long Beach RV Resort & Campground (2)
RV
Barnegat
NJ
165

49

100.0
%
 
100.0
%
 
Seashore Campsites RV Park and Campground (2)
RV
Cape May
NJ
434

242

100.0
%
 
100.0
%
 
Shady Pines
MH
Galloway Township
NJ
40


97.5
%
 
97.5
%
 
Shady Pines RV Resort (2)
RV
Galloway Township
NJ
58

37

100.0
%
 
100.0
%
 
Sun Villa Estates
MH
Reno
NV
324


99.7
%
 
100.0
%
 
Adirondack Gateway RV Resort & Campground (2)
RV
Gansevoort
NY
251

78

100.0
%
 
N/A

 
Jellystone Park(TM) at Birchwood Acres
MH
Greenfield Park
NY
1


100.0
%
 
100.0
%
 
Jellystone Park(TM) at Birchwood Acres (2)
RV
Greenfield Park
NY
91

183

100.0
%
 
100.0
%
 
Jellystone Park(TM) of Western New York(2)
RV
North Java
NY
6

353

100.0
%
 
100.0
%
 
Parkside Village
MH
Cheektowaga
NY
156


100.0
%
 
100.0
%
 
Sky Harbor
MH
Cheektowaga
NY
522


94.8
%
 
92.7
%
 
The Villas at Calla Pointe
MH
Cheektowaga
NY
116


100.0
%
 
100.0
%
 
Forest Meadows
MH
Philomath
OR
75


100.0
%
 
100.0
%
 
Woodland Park Estates
MH
Eugene
OR
398


100.0
%
 
100.0
%
 
Countryside Estates
MH
Mckean
PA
304


98.7
%
 
99.0
%
 
Lake In Wood (2)
RV
Narvon
PA
279

141

100.0
%
 
100.0
%
 
Pheasant Ridge
MH
Lancaster
PA
553


99.8
%
 
99.5
%
 
Lakeside Crossing
MH
Conway
SC
588


76.0
%
(1) 
96.2
%
 
Bell Crossing
MH
Clarksville
TN
237


99.2
%
 
98.3
%
 

30

SUN COMMUNITIES, INC.

Property
MH/RV
City
State
MH and Annual RV Sites as of 12/31/17
Transient RV Sites as of 12/31/17
Occupancy as of 12/31/17
Occupancy as of 12/31/16
Gwynn’s Island RV Resort & Campground (2)
RV
Gwynn
VA
98

31

100.0
%
 
100.0
%
 
New Point RV Resort (2)
RV
New Point
VA
228

96

100.0
%
 
100.0
%
 
Sunset Beach RV Resort (4)
RV
Cape Charles
VA


N/A

 
N/A

 
Pine Ridge
MH
Prince George
VA
265


90.9
%
(1) 
95.9
%
 
Thunderhill Estates
MH
Sturgeon Bay
WI
226


99.1
%
 
98.7
%
 
Westward Ho RV Resort & Campground (2)
RV
Glenbeulah
WI
224

98

100.0
%
 
100.0
%
 
Other Total
 
 
 
15,194

4,192

96.0
%
 
97.3
%
 
 
 
 
 
 
 
 
 
 
 
US TOTAL / AVERAGE
 
 
 
102,402

14,608

95.6
%
 
96.0
%
 
CANADA
 
 
 
 
 
 
 
 
 
Arran Lake RV Resort & Campground (2)
RV
Allenford
ON
139

50

100.0
%
 
100.0
%
 
Craigleith RV Resort & Campground (2)
RV
Clarksburg
ON
62

49

100.0
%
 
100.0
%
 
Deer Lake RV Resort & Campground (2)
RV
Huntsville
ON
156

83

100.0
%
 
100.0
%
 
Grand Oaks RV Resort & Campground (2)
RV
Cayuga
ON
227

38

100.0
%
 
100.0
%
 
Gulliver’s Lake RV Resort & Campground (2)
RV
Millgrove
ON
198

1

100.0
%
 
100.0
%
 
Hidden Valley RV Resort & Campground (2)
RV
Normandale
ON
195

50

100.0
%
 
100.0
%
 
Lafontaine RV Resort & Campground (2)
RV
Penetanguishene
ON
181

82

100.0
%
 
100.0
%
 
Lake Avenue RV Resort & Campground(2)
RV
Cherry Valley
ON
115

12

100.0
%
 
100.0
%
 
Pickerel Park RV Resort & Campground(2)
RV
Napanee
ON
132

77

100.0
%
 
100.0
%
 
Sherkston Shores Beach Resort & Campground (2)
RV
Sherkston
ON
1,364

350

100.0
%
 
100.0
%
 
Silver Birches RV Resort & Campground (2)
RV
Lambton Shores
ON
125

37

100.0
%
 
100.0
%
 
Trailside RV Resort & Campground (2)
RV
Seguin
ON
179

58

100.0
%
 
100.0
%
 
Willow Lake RV Resort & Campground(2)
RV
Scotland
ON
310

61

100.0
%
 
100.0
%
 
Willowood RV Resort & Campground (2)
RV
Amherstburg
ON
100

227

100.0
%
 
100.0
%
 
Woodland Lake RV Resort & Campground (2)
RV
Bornholm
ON
151

73

100.0
%
 
100.0
%
 
CANADA TOTAL / AVERAGE
 
 
 
3,634

1,248

100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
COMPANY TOTAL / AVERAGE
 
 
 
106,036

15,856

95.8
%
 
96.2
%
 

(1) Occupancy in these Properties reflects the fact that these communities are in a lease-up phase following an expansion.
(2) Occupancy percentage excludes transient RV sites. Percentage calculated by dividing revenue producing sites by developed sites. A revenue producing site is defined as a site that is occupied by a paying resident or reserved by a customer with annual or seasonal usage rights. A developed site is defined as an adequate sized parcel of land that has road and utility access which is zoned and licensed (if required) for use as a home site.
(3) At December 31, 2016, the number of developed sites and occupancy percentage at this property included sites that had been covered under our comprehensive insurance coverage (subject to deductibles and certain limitations) for both property damage and business interruption from a flood that caused substantial damage to this property.
(4) We have an ownership interest in Sunset Beach, but do not maintain and operate the property.
(5) Occupancy in these Properties for 12/31/2017 reflects redevelopment following asset impairments resulting from Hurricane Irma in September 2017.



31

SUN COMMUNITIES, INC.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

None.

32

SUN COMMUNITIES, INC.

EXECUTIVE OFFICERS OF THE REGISTRANT

The persons listed below are our executive officers.

Name
 
 Age
 
Title
Gary A. Shiffman
 
63
 
Chairman and Chief Executive Officer
John B. McLaren
 
47
 
President and Chief Operating Officer
Karen J. Dearing
 
53
 
Executive Vice President, Treasurer, Chief Financial Officer and Secretary
Jonathan M. Colman
 
62
 
Executive Vice President

Gary A. Shiffman is our Chairman and Chief Executive Officer and has been a director and an executive officer since our inception in 1993. He is a member of our Executive Committee. He has been actively involved in the management, acquisition, construction and development of manufactured housing communities and has developed an extensive network of industry relationships over the past thirty years. He has overseen the acquisition, rezoning, development, expansion and marketing of numerous manufactured home communities, as well as recreational vehicle communities. Additionally, Mr. Shiffman, through his family-related interests, has had significant direct holdings in various real estate asset classes, which include office, multi-family, industrial, residential and retail. Mr. Shiffman is an executive officer and a director of SHS and all of our other corporate subsidiaries.

John B. McLaren has been in the manufactured housing industry since 1995. He has served as our President since 2014 and as our Chief Operating Officer since 2008. From 2008 to 2014, he served as an Executive Vice President of the Company. From 2005 to 2008, he was Senior Vice President of SHS with overall responsibility for home sales and leasing. Mr. McLaren spent approximately three years as Vice President of Leasing & Service for SHS with responsibility for developing and leading our Rental Program and also has experience in the multi-family REIT segment and the chattel lending industry.

Karen J. Dearing has served as our Chief Financial Officer and Executive Vice President since 2008. She joined us in 1998 as the Director of Finance where she worked extensively with accounting and finance matters related to our ground-up developments and expansions. Ms. Dearing became our Corporate Controller in 2002 and Senior Vice President in 2006. She is responsible for the overall management of our information technology, accounting, tax and finance departments, and all internal and external financial reporting. Prior to working for us, Ms. Dearing had 7.5 years of experience as the Financial Controller of a privately-owned automotive supplier and 4.5 years of experience as a certified public accountant with Deloitte.

Jonathan M. Colman has served as an Executive Vice President since March 2003. He joined us in 1994 as Vice President-Acquisitions and became a Senior Vice President in 1995. A certified public accountant, Mr. Colman has over thirty-five years of experience in the manufactured housing community industry. Prior to joining Sun, he has been involved in the acquisition, financing and management of over 75 manufactured housing communities for two of the 10 largest manufactured housing community owners, including Uniprop, Inc. during its syndication of over $90.0 million in public limited partnerships in the late 1980s. Mr. Colman is also a Vice President of all of our corporate subsidiaries.



33

SUN COMMUNITIES, INC.

PART II

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the NYSE since December 8, 1993, and traded under the symbol “SUI”. The following table sets forth the high and low sales prices per share for the common stock for the periods indicated as reported by the NYSE and the distributions per share paid by us with respect to each period:
Year Ended December 31, 2017
 
High
 
Low
 
Distributions
1st Quarter
 
$
83.76

 
$
75.76

 
$
0.67

 
2nd Quarter
 
$
91.37

 
$
79.41

 
$
0.67

 
3rd Quarter
 
$
91.87

 
$
84.00

 
$
0.67

 
4th Quarter
 
$
96.08

 
$
85.27

 
$
0.67

(1) 

Year Ended December 31, 2016
 
High
 
Low
 
Distributions
1st Quarter
 
$
71.76

 
$
62.58

 
$
0.65

 
2nd Quarter
 
$
76.69

 
$
66.73

 
$
0.65

 
3rd Quarter
 
$
85.98

 
$
74.23

 
$
0.65

 
4th Quarter
 
$
79.32

 
$
69.90

 
$
0.65

(2) 

(1) Paid on January 16, 2018, to stockholders of record on December 29, 2017.
(2) Paid on January 20, 2017, to stockholders of record on December 31, 2016.

On February 15, 2018, the closing share price of our common stock was $86.52 per share on the NYSE, and there were 203 holders of record for the 79,739,141 million outstanding shares of common stock. On February 15, 2018, the Operating Partnership had (i) 2,740,342 common OP units issued and outstanding, not held by us, which were convertible into an equal number of shares of our common stock, (ii) 1,283,819 Aspen preferred OP units issued and outstanding which were exchangeable for 471,498 shares of our common stock, (iii) 343,237 Series A-1 preferred OP units issued and outstanding which were exchangeable for 837,163 shares of our common stock, (iv) 40,268 Series A-3 preferred OP units issued and outstanding which were exchangeable for 74,917 shares of our common stock, (v) 421,756 Series A-4 preferred OP units issued and outstanding, not held by us, which were exchangeable for 187,447 shares of our common stock, and (vi) 316,357 Series C preferred OP units issued and outstanding which were exchangeable for 351,156 shares of our common stock.

We have historically paid regular quarterly distributions to holders of our common stock and common OP units. In addition, we are obligated to make distributions to holders of shares of Series A-4 preferred stock, Aspen preferred OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, Series B-3 preferred OP units and Series C preferred OP units. See “Structure of the Company” under Part I, Item 1 of this Annual Report on Form 10-K. Our ability to make distributions on our common and preferred stock and OP units, payments on our indebtedness, and to fund planned capital expenditures will depend on our ability to generate cash in the future. The decision to declare and pay distributions on shares of our common stock and common OP units in the future, as well as the timing, amount, and composition of any such future distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions, general overall economic conditions, and other factors.


34

SUN COMMUNITIES, INC.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table reflects information about the securities authorized for issuance under our equity compensation plans as of December 31, 2017:
 
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
Weighted-average exercise price of outstanding options, warrants and rights
 
Number of shares of common stock remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
 Plan Category
 
(a)
 
(b)
 
(c)
Equity compensation plans approved by stockholders
 
3,000

 
$
33.45

 
1,371,343

Equity compensation plans not approved by stockholders
 

 

 

Total
 
3,000

 
$
33.45

 
1,371,343


Issuer Purchases of Equity Securities

In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock. We have 400,000 common shares remaining in the repurchase program. No common shares were repurchased under this program during 2017 or 2016. There is no expiration date specified for the repurchase program.

Recent Sales of Unregistered Securities

From time to time, we may issue shares of common stock in exchange for OP units that may be tendered to the Operating Partnership for redemption in accordance with the terms and provisions of the limited partnership agreement of the Operating Partnership. Such shares are issued based on the exchange ratios and formulas described in “Structure of the Company” under Part I, Item 1 of this Annual Report on Form 10-K.
 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
 
Year Ended December 31, 2015
Series
Conversion Rate
Units / Shares
Common Stock
 
Units/Shares
Common Stock
 
Units/Shares
Common Stock
Common OP unit
1

36,055

36,055

 
104,106

104,106

 
99,851

99,851

Series A-1 preferred OP unit
2.439

21,919

53,456

 
20,691

50,458

 
41,116

100,277

Series A-4 preferred OP unit
0.4444

10,000

4,440

 
120,906

53,733

 
114,414

50,848

Series A-4 preferred stock
0.4444

158,036

70,238

 
385,242

171,218

 
231,093

102,708

Series C preferred OP unit
1.11

16,806

18,651

 
7,043

7,815

 



In addition to the shares of common stock issued pursuant to OP unit conversions above, we issued 298,900 shares of common stock totaling $26.4 million on July 27, 2017 in connection with an acquisition.

All of the securities described above were issued in private placements in reliance on Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, based on certain investment representations made by the parties to whom the securities were issued. No underwriters were used in connection with any of such issuances.

Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on our common stock against the cumulative total return of a broad market index composed of all issuers listed on the NYSE and an industry index comprised of thirteen publicly traded residential real estate investment trusts, for the five year period ending on December 31, 2017. This line graph assumes a $100 investment on December 31, 2012, a reinvestment of distributions and actual increase of the market value of our common stock relative to an initial investment of $100. The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.


35

SUN COMMUNITIES, INC.

Peer Group

We utilize peer group data for quantitative benchmarking against external market participants. We select our peer group based on a number of quantitative and qualitative factors including, but not limited to, revenues, total assets, market capitalization, industry, sub-industry, location, total shareholder return history, executive compensation components, and peer decisions made by other companies. From time to time, we update our peer group based on analysis of the aforementioned factors and application of judgment. During 2017, we updated our peer group, as shown in the “SUI New Peer Group” caption in the table below.updatedpeertablea01.jpg

 
 
Period Ending
Index
 
12/31/12
 
12/31/13
 
12/31/14
 
12/31/15
 
12/31/16
 
12/31/17
Sun Communities, Inc.
 
$
100.00

 
$
112.95

 
$
168.48

 
$
198.55

 
$
229.76

 
$
287.03

SNL US REIT Residential
 
$
100.00

 
$
97.19

 
$
133.00

 
$
154.74

 
$
162.46

 
$
176.71

NYSE Market Index
 
$
100.00

 
$
126.28

 
$
134.81

 
$
129.29

 
$
144.73

 
$
171.83

SUI Old Peer Group (1)
 
$
100.00

 
$
92.11

 
$
127.26

 
$
144.68

 
$
151.89

 
$
161.80

SUI New Peer Group (2)
 
$
100.00

 
$
94.60

 
$
130.10

 
$
149.94

 
$
158.12

 
$
165.48


(1) SUI old peer group included: American Campus Communities, Inc., American Capital Agency Corp., Apartment Investment and Management Company, AvalonBay Communities, Inc., Camden Property Trust, Education Realty Trust, Inc., Equity Lifestyles Properties, Inc., Equity Residential, Essex Property Trust, Inc., Mid-America Apartment Communities, Inc., Senior Housing Properties Trust and UDR, Inc.
(2) SUI new peer group includes: American Campus Communities, Inc., Apartment Investment and Management Company, AvalonBay Communities, Inc., Brandywine Realty Trust, Camden Property Trust, CubeSmart, Equity Lifestyles Properties, Inc., Essex Property Trust, Inc., Mid-America Apartment Communities, Inc., Tanger Factory Outlet Centers, Inc., Taubman Centers, Inc., UDR, Inc., and Weingarten Realty Investors.




36

SUN COMMUNITIES, INC.

The information included under the heading “Performance Graph” is not to be treated as “soliciting material” or as “filed” with the SEC, and is not incorporated by reference into any filing by the Company under the Securities Act or the Exchange Act that is made on, before or after the date of filing of this Annual Report on Form 10-K.


ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial and operating information on a historical basis. The historical financial data has been derived from our historical financial statements. The following information should be read in conjunction with the information included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and the Notes thereto. In addition to the results presented in accordance with GAAP below, we have provided net operating income (“NOI”) and funds from operations (“FFO”) as supplemental performance measures. Refer to Non-GAAP Financial Measures in Item 7 below for additional information.
 
Year Ended December 31,
 
2017
 
2016 (1)
 
2015 (1)
 
2014 (1)
 
2013 (1)
 
(In thousands, except for share related data)
OPERATING INFORMATION
 
 
 
 
 
 
 
 
 
Total revenues
$
982,570

 
$
833,778

 
$
674,731

 
$
484,259

 
$
422,713

Net income attributable to Sun Communities, Inc. common stockholders
$
65,021

 
$
17,369

 
$
137,325

 
$
22,376

 
$
10,610

Earnings per share - basic
$
0.85

 
$
0.27

 
$
2.53

 
$
0.54

 
$
0.31

Earnings per share - diluted
$
0.85

 
$
0.26

 
$
2.52

 
$
0.54

 
$
0.31

 
 
 
 
 
 
 
 
 
 
Cash distributions declared per common share
$
2.68

 
$
2.60

 
$
2.60

 
$
2.60

 
$
2.52

 
 
 
 
 
 
 
 
 
 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities
$
320,119

 
$
225,653

 
$
192,128

 
$
134,549

 
$
117,583

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities
$
337,384

 
$
266,131

 
$
210,559

 
$
148,356

 
$
121,511

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted
$
3.95

 
$
3.22

 
$
3.31

 
$
3.06

 
$
3.12

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted
$
4.17

 
$
3.79

 
$
3.63

 
$
3.37

 
$
3.22

 
 
 
 
 
 
 
 
 
 
BALANCE SHEETS
 
 
 
 
 
 
 
 
 
Total assets
$
6,111,957

 
$
5,870,776

 
$
4,181,799

 
$
2,925,546

 
$
1,987,742

Total debt
$
3,079,238

 
$
3,110,042

 
$
2,336,297

 
$
1,819,941

 
$
1,485,658

Total liabilities
$
3,405,204

 
$
3,441,605

 
$
2,562,421

 
$
1,997,540

 
$
1,611,363


(1) Financial information has been revised to reflect certain reclassifications in prior periods to conform to current period presentation.


37

SUN COMMUNITIES, INC.

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION


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 accompanying footnotes thereto included in this Annual Report on Form 10-K. In addition to the results presented in accordance with GAAP below, we have provided net operating income (“NOI”) and funds from operations (“FFO”) as supplemental performance measures. Refer to Non-GAAP Financial Measures in this Item for additional information.

OVERVIEW

We are a fully integrated, self-administered and self-managed REIT. As of December 31, 2017, we owned and operated, or had an interest in, a portfolio of 350 properties located throughout the United States and Ontario, Canada, including 230 MH communities, 89 RV communities, and 31 properties containing both MH and RV sites. We have been in the business of acquiring, operating, developing, and expanding MH and RV communities since 1975. We lease individual sites with utility access for placement of manufactured homes and RVs to our customers. We are also engaged through SHS in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance, and cash flows.

EXECUTIVE SUMMARY

2017 Accomplishments:

Total revenues for 2017 increased 17.9 percent to $982.6 million.
Core FFO for 2017 was $4.17 per diluted share and OP unit, an increase of 10.0 percent over 2016.
Achieved Same Community NOI growth of 6.9 percent.
Gained 2,406 revenue producing sites.
Reached Same Community occupancy of 97.3 percent, excluding approximately 1,800 recently completed but vacant expansion sites.
Sold 3,282 homes, an increase of 3.5 percent over 2016.
Brokered homes sales increased by 21.2 percent to 2,006 in 2017 as compared to 1,655 in 2016.
Reduced net debt leverage ratio to 6.3 at December 31, 2017 compared to 7.5 at December 31, 2016.
Achieved 1-year, 3-year and 5-year total shareholder return of 24.9 percent, 70.4 percent and 187.0 percent, respectively.
Delivered over 2,100 expansion sites in 26 communities.
Closed an underwritten registered public offering for net proceeds over $400.0 million.
Acquired nine communities for total consideration of approximately $145.0 million.

Property Operations:

Occupancy in our Properties as well as our ability to increase rental rates directly affects revenues. Our revenue streams are predominantly derived from customers renting our sites on a long-term basis. Our Same Community properties continue to achieve revenue and occupancy increases which drive continued NOI growth. We continue to sell homes at a high level in our communities and expect this trend to continue.
 
 
Year Ended December 31,
Portfolio Information:
 
2017
 
2016
 
2015
Occupancy % - Total Portfolio - MH and RV blended (1)
 
95.8
%
 
96.2
%
 
95.0
%
Occupancy % - Same Community - MH and RV blended (1)(2)
 
97.3
%
 
95.4
%
 
94.7
%
Core FFO
 
$
4.17

 
$
3.79

 
$
3.63

NOI - Total Portfolio (in thousands)
 
$
479,662

 
$
403,337

 
$
335,567

NOI - Same Community (in thousands)
 
$
382,210

 
$
357,618

 
$
310,890

Homes Sold
 
3,282

 
3,172

 
2,483

Number of Occupied Rental Homes
 
11,074

 
10,733

 
10,685

(1)   Occupancy percent includes annual RV sites, and excludes transient RV sites.
(2)   Occupancy percent excludes recently completed but vacant expansion sites.

38

SUN COMMUNITIES, INC.

Acquisition Activity:

During the past three years, we have completed acquisitions of over 150 properties with over 46,000 sites located in high growth areas and retirement and vacation destinations such as California, Florida, and Eastern coastal areas such as the Jersey Shore and Cape Cod, Massachusetts. We have also expanded into Ontario, Canada, with the Carefree acquisition in 2016.

During 2017, we acquired nine communities, as detailed in the table below:
Property/Portfolio
Location
 
Type
 
Total Consideration (in thousands)
 
Number of sites - MH/Annual
 
Number of sites - Transient
 
Expansion Sites
49’er Village
Plymouth, CA
 
RV
 
$
13,000

 

 
328

 

Sunset Lakes
Hillsdale, IL
 
RV
 
8,045

 

 
498

 

Arbor Woods
Superior Township, MI
 
MH
 
16,943

 
458

 

 

Pismo Dunes
Pismo Beach, CA
 
RV
 
21,920

 

 
331

 

Lazy J Ranch
Arcata, CA
 
MH
 
14,300

 
220

 

 

Ocean West
McKinleyville, CA
 
MH
 
9,673

 
130

 

 
4

Caliente Sands
Cathedral City, CA
 
MH
 
8,871

 
118

 

 

Emerald Coast
Panama City Beach, FL
 
MH & RV
 
19,500

 
37

 
164

 
14

Colony in the Wood
Port Orange, FL
 
MH
 
32,478

 
383

 

 

Total
 
 
 
 
$
144,730

 
1,346

 
1,321

 
18


During 2017, we acquired Carolina Pines RV Resort, an undeveloped parcel of land near Myrtle Beach, South Carolina, for $5.9 million. This land parcel has been entitled and zoned to build an 841 site RV resort. Additionally, in December 2017, we acquired 25.0 percent of the land previously under a ground lease at one of our California communities for $4.0 million.

Expansion Activity:

We have been focused on expansion opportunities adjacent to our existing communities, and we have developed nearly 3,000 sites over the past three years. We have expanded over 2,100 sites at 26 communities in 2017. The total cost to construct the sites was over $66.0 million. We continue to expand our Properties utilizing our inventory of owned and entitled land (approximately 9,600 sites available for development) and expect to construct over 1,700 additional sites in 2018.

Capital Activity:

In 2017, we closed an underwritten registered public offering of 4,830,000 shares of common stock at a price of $86.00 per share. Proceeds from the offering were $408.9 million after deducting expenses related to the offering, and were used to repay borrowings outstanding on the revolving loan under our senior revolving credit facility, to fund possible future acquisitions and for working capital and general corporate purposes. Refer to Note 9, “Equity and Mezzanine Securities,” of our accompanying Consolidated Financial Statements for further information regarding capital activity.


39

SUN COMMUNITIES, INC.

Markets:

Our Properties are largely concentrated in Florida, Michigan, Texas and California. We have expanded our market share in California through recent acquisitions and increased our property holdings in other high growth areas of the U.S. including retirement and vacation destinations.

We have also experienced strong revenue growth through recent acquisitions of RV communities. The age demographic of RV communities is attractive, as the population of retirement age baby boomers in the U.S. is growing. RV communities have become a trending vacation opportunity not only for the retiree population, but as an affordable vacation alternative for families.

The following table identifies our largest markets by total sites:
 
December 31, 2017
 
December 31, 2016
Major Market
Number of Properties
Total Sites
% of Total Sites
 
Number of Properties
Total Sites
% of Total Sites
Florida
123

43,328

35.5
%
 
121

42,823

36.5
%
Michigan
68

26,137

21.4
%
 
67

24,716

21.1
%
Texas
21

7,974

6.5
%
 
21

7,593

6.5
%
California
27

6,498

5.3
%
 
22

5,375

4.6
%
Ontario, Canada
15

4,882

4.0
%
 
15

4,868

4.2
%
Arizona
11

4,882

4.0
%
 
11

4,614

3.9
%
Indiana
11

3,420

2.8
%
 
11

3,402

2.9
%
New Jersey
7

2,917

2.4
%
 
7

3,002

2.6
%
Ohio
9

2,904

2.4
%
 
9

2,913

2.5
%
Colorado
8

2,481

2.0
%
 
8

2,483

2.1
%
Illinois
5

2,150

1.8
%
 
4

1,652

1.4
%
New York
6

1,757

1.4
%
 
6

1,717

1.5
%
Maine
6

1,595

1.3
%
 
6

1,521

1.3
%
Pennsylvania
3

1,277

1.1
%
 
3

1,277

1.1
%
Maryland
3

1,156

1.0
%
 
3

1,215

1.0
%
Georgia
3

1,139

0.9
%
 
3

1,049

0.9
%
Missouri
2

976

0.8
%
 
2

976

0.8
%
Delaware
2

916

0.8
%
 
2

916

0.8
%
Virginia
4

718

0.6
%
 
4

698

0.6
%
Massachusetts
2

680

0.6
%
 
2

680

0.6
%
North Carolina
3

672

0.6
%
 
3

672

0.6
%
South Carolina
1

588

0.5
%
 
1

418

0.4
%
Wisconsin
2

548

0.4
%
 
2

548

0.5
%
Minnesota
1

475

0.4
%
 
1

426

0.4
%
Oregon
2

473

0.4
%
 
2

473

0.4
%
Iowa
1

413

0.3
%
 
1

413

0.4
%
Nevada
1

324

0.3
%
 
1

324

0.3
%
Tennessee
1

237

0.2
%
 
1

237

0.2
%
Montana
1

226

0.2
%
 
1

226

0.2
%
Connecticut
1

149

0.1
%
 
1

149

0.1
%
 
350

121,892



 
341

117,376

 



40

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 revenues minus property operating expenses and real estate taxes. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company’s financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity; nor is it indicative of funds available for the Company’s cash needs, including its ability to make cash distributions. The Company believes that net income (loss) is the most directly comparable GAAP measurement to NOI. Because of the inclusion of items such as interest, depreciation, and amortization, the use of 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. The Company believes that NOI is helpful to investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company considers FFO to be a useful measure for reviewing comparative operating and financial performance because, 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 net income (loss). Management believes that 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. FFO is computed in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results.

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, 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 only provides investors with an additional performance measure that, when combined with measures computed in accordance with GAAP such as net income (loss), cash flow from operating activities, investing activities and financing activities, provide investors with an indication of our ability to service debt and to fund acquisitions and other expenditures. Other REITs may use different methods for calculating FFO, accordingly, our FFO may not be comparable to other REITs.




41

SUN COMMUNITIES, INC.

RESULTS OF OPERATIONS

We report operating results under two segments: Real Property Operations and Home Sales and Rentals. The Real Property Operations segment owns, operates, develops, or has an interest in, a portfolio of MH and RV communities throughout the U.S. and in Canada, and is in the business of acquiring, operating, and expanding MH and RV communities. The Home Sales and Rentals segment offers MH and RV park model sales and leasing services to tenants and prospective tenants of our communities. We evaluate segment operating performance based on NOI and gross profit. Refer to Note 11, “Segment Reporting,” in our accompanying Consolidated Financial Statements for additional information.

SUMMARY STATEMENTS OF OPERATIONS

The following table summarizes our consolidated financial results and reconciles Net income attributable to Sun Communities, Inc. common stockholders to NOI for the years ended December 31, 2017, 2016, and 2015 (in thousands):
 
 
Years Ended
 
 
2017
 
2016
 
2015
Net income attributable to Sun Communities, Inc. common stockholders
 
$
65,021

 
$
17,369

 
$
137,325

Other revenues
 
(24,874
)
 
(21,150
)
 
(18,157
)
Home selling expenses
 
12,457

 
9,744

 
7,476

General and administrative
 
74,711

 
64,087

 
47,455

Transaction costs
 
9,801

 
31,914

 
17,803

Catastrophic weather related charges, net
 
8,352

 
1,172

 

Depreciation and amortization
 
261,536

 
221,770

 
177,637

Loss on extinguishment of debt
 
6,019

 
1,127

 
2,800

Interest expense
 
130,242

 
122,315

 
110,878

Other income / (expense), net
 
(8,982
)
 
4,676

 

Gain on disposition of properties, net
 

 

 
(125,376
)
Current tax expense
 
446

 
683

 
158

Deferred tax benefit / (expense)
 
(582
)
 
(400
)
 
1,000

Income from affiliate transactions
 

 
(500
)
 
(7,500
)
Preferred return to preferred OP units
 
4,581

 
5,006

 
4,973

Amounts attributable to noncontrolling interests
 
5,055

 
150

 
10,054

Preferred stock distributions
 
7,162

 
8,946

 
13,793

Preferred stock redemption costs
 

 

 
4,328

NOI/Gross Profit
 
$
550,945

 
$
466,909

 
$
384,647


 
 
Years Ended
 
 
2017
 
2016
 
2015
Real Property NOI
 
$
479,662

 
$
403,337

 
$
335,567

Rental Program NOI
 
92,382

 
85,086

 
83,232

Home Sales NOI/Gross profit
 
32,294

 
30,087

 
20,787

Ancillary NOI/Gross profit
 
10,440

 
9,999

 
7,013

Site rent from Rental Program (included in Real Property NOI) (1)
 
(63,833
)
 
(61,600
)
 
(61,952
)
NOI/Gross profit
 
$
550,945

 
$
466,909

 
$
384,647


(1)   The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of Rental Program and financial impact on our operations.


42

SUN COMMUNITIES, INC.


COMPARISON OF THE YEARS ENDED DECEMBER 31, 2017 AND 2016

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio as of and for the years ended December 31, 2017 and 2016:
 
 
Year Ended December 31,
 
 
 
 
Financial Information (in thousands)
 
2017
 
2016
 
Change
 
% Change
Income from Real Property
 
$
742,228

 
$
620,917

 
$
121,311

 
19.5
%
Property operating expenses:
 
 
 
 
 
 
 
 
Payroll and benefits
 
67,075

 
56,744

 
10,331

 
18.2
%
Legal, taxes, and insurance
 
7,264

 
5,941

 
1,323

 
22.3
%
Utilities
 
83,550

 
67,495

 
16,055

 
23.8
%
Supplies and repair
 
25,871

 
20,732

 
5,139

 
24.8
%
Other
 
26,518

 
22,362

 
4,156

 
18.6
%
Real estate taxes
 
52,288

 
44,306

 
7,982

 
18.0
%
Property operating expenses
 
262,566

 
217,580

 
44,986

 
20.7
%
Real Property NOI
 
$
479,662

 
$
403,337

 
$
76,325

 
18.9
%

 
 
As of December 31,
 
 
Other Information
 
2017
 
2016
 
Change
Number of properties
 
350

 
341

 
9

 
 
 
 
 
 
 
MH occupancy
 
94.6
%
 
 
 
 
RV occupancy
 
100.0
%
 
 
 
 
MH & RV blended occupancy (1)
 
95.8
%
 
96.2
%
 
(0.4
)%
 
 
 
 
 
 
 
Sites available for development
 
9,617

 
10,337

 
(720
)
 
 
 
 
 
 
 
Monthly base rent per site - MH
 
$
533


$
515

 
$
18

Monthly base rent per site - RV (2)
 
$
439


$
420

 
$
19

Monthly base rent per site - Total
 
$
512


$
495

 
$
17

(1)   Overall occupancy percent includes MH and annual RV sites, and excludes transient RV sites.
(2) Monthly base rent pertains to annual RV sites and excludes transient RV sites.

The $76.3 million increase in Real Property NOI consists of $51.7 million from recently acquired properties and $24.6 million from our Same Community properties as detailed below.


43

SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME COMMUNITY

A key management tool used when evaluating performance and growth of our properties is a comparison of Same Communities. Same Communities consist of properties owned and operated throughout 2017 and 2016. The Same Community data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations. The Same Community data in this Form 10-K includes all properties which we have owned and operated continuously since January 1, 2016. All communities from the American Land Lease portfolio acquisition are included within Same Communities.

In order to evaluate the growth of the Same Communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Community portfolio is the reclassification of water and sewer revenues from income from real property to utilities.  A significant portion of our utility charges are re-billed to our residents. We have reclassifed $26.9 million and $25.8 million for the year ended December 31, 2017 and 2016, respectively, to reflect the utility expenses associated with our Same Community portfolio net of recovery.

The following tables reflect certain financial and other information for our Same Communities as of and for the years ended December 31, 2017 and 2016:
 
 
Year Ended December 31,
 
 
 
 
 
Financial Information (in thousands)
 
2017
 
2016
 
Change
 
% Change
 
Income from Real Property
 
$
533,942

 
$
503,770

 
$
30,172

 
6.0
 %
 
Property operating expenses:
 
 
 
 
 
 
 
 
 
Payroll and benefits
 
45,240

 
43,078

 
2,162

 
5.0
 %
 
Legal, taxes, and insurance
 
5,562

 
5,174

 
388

 
7.5
 %
 
Utilities
 
29,726

 
28,475

 
1,251

 
4.4
 %
 
Supplies and repair (1)
 
19,109

 
18,729

 
380

 
2.0
 %
 
Other
 
13,696

 
13,988

 
(292
)
 
(2.1
)%
 
Real estate taxes
 
38,399

 
36,708

 
1,691

 
4.6
 %
 
Property operating expenses
 
151,732

 
146,152

 
5,580

 
3.8
 %
 
Real Property NOI
 
$
382,210

 
$
357,618

 
$
24,592

 
6.9
 %
 

 
 
As of December 31,
 
 
 
 
 
Other Information
 
2017
 
2016
 
Change
 
% Change
 
Number of properties
 
231

 
231

 

 
 %
 
 
 
 
 
 
 
 
 
 
 
MH occupancy (2)
 
96.9
%
 
 
 
 
 
 
 
RV occupancy (2)
 
100.0
%
 
 
 
 
 
 
 
MH & RV blended occupancy (2)
 
97.3
%
 
95.4
%
(3) 
1.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Sites available for development
 
5,087

 
6,263

 
(1,176
)
 
(18.8
)%
 
 
 
 
 
 
 
 
 


 
Monthly base rent per site - MH
 
$
518

 
$
500

 
$
18

 
3.6
 %
(5) 
Monthly base rent per site - RV (4)
 
$
459

 
$
441

 
$
18

 
4.2
 %
(5) 
Monthly base rent per site - Total
 
$
510

 
$
492

 
$
18

 
3.6
 %
(5) 

(1) 
Year ended December 31, 2016 excludes $0.1 million of expenses incurred for recently acquired properties to bring the properties up to Sun’s operating standards. These costs did not meet the Company’s capitalization policy.
(2)  
The Same Community occupancy percentage for 2017 is derived from 80,407 developed sites, of which 78,257 were occupied. The number of developed sites excludes RV transient sites and approximately 1,800 recently completed but vacant MH expansion sites.     
(3) 
The Same Community occupancy percentage for 2016 has been adjusted to reflect incremental growth period-over-period from filled expansion sites and the conversion of transient RV sites to annual RV sites.
(4) 
Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(5) 
Calculated using actual results without rounding.

The 6.9 percent growth in NOI is primarily due to a 6.0 percent increase in Income from real property. The 6.0 percent increase in Income from real property is primarily due to a 1.9 percent increase in MH & RV blended occupancy, a 3.6 percent increase in total monthly base rent per site and a 0.5 percent increase in transient and other revenue. The increase in Income from real property was partially offset by a 3.8 percent increase in Property operating expenses compared to 2016, which was primarily due to higher payroll and benefits, real estate taxes and utilities in 2017.

44

SUN COMMUNITIES, INC.

RENTALS AND HOME SALES

The following table reflects certain financial and other information for our Rental Program as of and for the years ended December 31, 2017 and 2016 (in thousands, except for statistical information):

 
 
Year Ended December 31,
 
 
 
 
Financial Information
 
2017
 
2016
 
Change
 
% Change
Rental home revenue
 
$
50,549

 
$
47,780

 
$
2,769

 
5.8
 %
Site rent from Rental Program (1)
 
63,833

 
61,600

 
2,233

 
3.6
 %
Rental Program revenue
 
114,382

 
109,380

 
5,002

 
4.6
 %
Expenses
 
 
 
 
 
 
 
 
Commissions
 
2,620

 
2,242

 
378

 
16.9
 %
Repairs and refurbishment
 
9,864

 
12,825

 
(2,961
)
 
(23.1
)%
Taxes and insurance
 
6,102

 
5,734

 
368

 
6.4
 %
Marketing and other
 
3,414

 
3,493

 
(79
)
 
(2.3
)%
Rental Program operating and maintenance
 
22,000

 
24,294

 
(2,294
)
 
(9.4
)%
Rental Program NOI
 
$
92,382

 
$
85,086

 
$
7,296

 
8.6
 %
 
 
 
 
 
 
 
 
 
Other Information
 
 
 
 
 
 
 
 
Number of occupied rentals, end of period
 
11,074

 
10,733

 
341

 
3.2
 %
Investment in occupied rental homes, end of period
 
$
494,945

 
$
457,691

 
$
37,254

 
8.1
 %
Number of sold rental homes
 
1,168

 
1,089

 
79

 
7.3
 %
Weighted average monthly rental rate, end of period
 
$
917

 
$
882

 
$
35

 
4.0
 %

(1)   The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

Rental Program NOI increased by 8.6 percent compared to 2016. The increase is due to a 4.6 percent increase in Rental Program revenue attributable to a 4.0 percent increase in weighted average monthly rental rates and a 3.2 percent increase in the number of occupied rentals, combined with an overall decrease in Rental Program operating and maintenance expenses.

The 9.4 percent decrease in Rental Program operating and maintenance expenses is primarily due to lower Repairs and refurbishment expenses in 2017 as compared to 2016. The reduction in Repairs and refurbishment expenses is primarily due to our continuing investment in occupied rentals and replacement of older homes in the Rental Program with newer ones that do not require the same level of repairs and refurbishments.

45

SUN COMMUNITIES, INC.


We purchase new homes and acquire pre-owned and repossessed manufactured homes, generally located within our communities, from lenders, dealers, and former residents to lease or sell to current and prospective residents.

The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2017 and 2016 (in thousands, except for average selling prices and statistical information):
 
 
Year Ended December 31,
 
 
 
 
Financial Information
 
2017
 
2016
 
Change
 
% Change
New home sales
 
$
36,915

 
$
30,977

 
$
5,938

 
19.2
%
Pre-owned home sales
 
90,493

 
79,530

 
10,963

 
13.8
%
Revenue from homes sales
 
127,408

 
110,507

 
16,901

 
15.3
%
New home cost of sales
 
31,578

 
26,802

 
4,776

 
17.8
%
Pre-owned home cost of sales
 
63,536

 
53,618

 
9,918

 
18.5
%
Cost of home sales
 
95,114

 
80,420

 
14,694

 
18.3
%
NOI / Gross profit
 
$
32,294

 
$
30,087

 
$
2,207

 
7.3
%
 
 
 
 
 
 
 
 
 
Gross profit – new homes
 
$
5,337

 
$
4,175

 
$
1,162

 
27.8
%
Gross margin % – new homes
 
14.5
%
 
13.5
%
 
1.0
 %
 


Average selling price – new homes
 
$
101,975

 
$
94,156

 
$
7,819

 
8.3
%
 
 
 
 
 
 
 
 
 
Gross profit – pre-owned homes
 
$
26,957

 
$
25,912

 
$
1,045

 
4.0
%
Gross margin % – pre-owned homes
 
29.8
%
 
32.6
%
 
(2.8
)%
 


Average selling price – pre-owned homes
 
$
30,991

 
$
27,974

 
$
3,017

 
10.8
%
 
 
 
 
 
 
 
 
 
Statistical Information
 
 
 
 
 
 
 
 
Home sales volume:
 
 
 
 
 
 
 
 
New home sales
 
362

 
329

 
33

 
10.0
%
Pre-owned home sales
 
2,920

 
2,843

 
77

 
2.7
%
Total homes sold
 
3,282

 
3,172

 
110

 
3.5
%

Gross profit for new and pre-owned home sales increased $1.2 million and $1.0 million, respectively, in 2017 as compared to 2016. The increases for both new and pre-owned home sales are primarily the result of higher home sales volumes combined with higher average selling prices in 2017 as compared to 2016.


46

SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

The following table summarizes other income and expenses for the years ended December 31, 2017 and 2016 (amounts in thousands):
 
 
Year Ended December 31,
 
 
 
 
 
 
2017
 
2016
 
Change
 
% Change
Ancillary revenues, net
 
$
10,440

 
$
9,999

 
$
441

 
4.4
 %
Interest income
 
$
21,180

 
$
18,113

 
$
3,067

 
16.9
 %
Brokerage commissions and other revenues, net
 
$
3,694

 
$
3,037

 
$
657

 
21.6
 %
Home selling expenses
 
$
12,457

 
$
9,744

 
$
2,713

 
27.8
 %
General and administrative expenses
 
$
74,711

 
$
64,087

 
$
10,624

 
16.6
 %
Transaction costs
 
$
9,801

 
$
31,914

 
$
(22,113
)
 
(69.3
)%
Catastrophic weather related charges, net
 
$
8,352

 
$
1,172

 
$
7,180

 
612.6
 %
Depreciation and amortization
 
$
261,536

 
$
221,770

 
$
39,766

 
17.9
 %
Loss on extinguishment of debt
 
$
6,019

 
$
1,127

 
$
4,892

 
434.1
 %
Interest expense
 
$
130,242

 
$
122,315

 
$
7,927

 
6.5
 %
Other income / (expense), net
 
$
8,982

 
$
(4,676
)
 
$
13,658

 
292.1
 %
Current tax expense
 
$
(446
)
 
$
(683
)
 
$
237

 
(34.7
)%
Deferred tax benefit
 
$
582

 
$
400

 
$
182

 
45.5
 %
Income from affiliate transactions
 
$

 
$
500

 
$
(500
)
 
(100.0
)%

Interest income - increased primarily due to an increase in our installment notes receivable, partially offset by a decrease in our collateralized receivables, as compared to December 31, 2016.

Brokerage commissions and other revenues, net - increased due to the sale of 2,006 brokered homes in 2017 as compared to 1,655 in 2016, a 21.2 percent increase.

Home selling expenses - increased primarily due to higher volumes and higher weighted average selling prices for both new and used homes in 2017, which resulted in higher commissions.

General and administrative expenses - increased primarily due to additional employee related costs as headcount increased in connection with our growth through acquisitions.

Transaction costs - relate to diligence and other expenses incurred in connection with our acquisitions. These costs were significantly lower in 2017 as compared to 2016, due to the acquisition of Carefree in 2016. Refer to Note 2, “Real Estate Acquisitions and Dispositions,” in our accompanying Consolidated Financial Statements for additional information.

Catastrophic weather related charges, net - In September 2017, Hurricane Irma impacted 121 of our communities in Florida and three in Georgia. We recognized charges totaling $31.7 million comprised of $21.3 million for debris and tree removal, common area repairs and minor flooding damage, as well as $10.4 million for impaired assets at the three Florida Keys communities. These charges were partially offset by estimated insurance recoveries of $23.7 million.
 
In 2016, Catastrophic weather related charges, net were primarily attributable to debris and tree removal, common area repairs and minor flooding damage from hurricanes Hermine and Matthew.

Depreciation and amortization - increased as a result of our acquisition of Carefree in 2016, as well as other properties in the second half of 2016 and during 2017. Refer to Note 2, “Real Estate Acquisitions and Dispositions,” of our accompanying Consolidated Financial Statements for additional information.

Loss on extinguishment of debt - in 2017 of $6.0 million was recognized in connection with defeasement or repayment of collateralized term loans totaling $61.4 million. In 2016, the loss on extinguishment of debt of $1.1 million was in connection with repayment of a total of $79.1 million of collateralized term loans. Refer to Note 8, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information.

47

SUN COMMUNITIES, INC.


Interest expense - increased primarily due to 2017 including a full year of interest expense from incremental borrowings of $338.0 million, $405.0 million and $139.0 million in connection with our Fannie Mae Financing, NML Financing and Freddie Mac Financing arrangements, respectively. The $338.0 million and $405.0 million borrowings were entered into in June 2016, and the $139.0 million was entered into in September 2016. Refer to Note 8, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information.

Other income / (expense), net - in 2017 consisted of foreign currency translation gains of $5.9 million and a contingent liability remeasurement gain of $3.0 million, compared to 2016 which consisted of foreign currency translation losses of $5.0 million and a contingent liability remeasurement loss of $0.2 million, partially offset by a $0.5 million gain related to the acquisition of a community.

Income from affiliate transactions - of $0.5 million in 2016 was due to the sale of our entire interest in Origen Financial, Inc. Prior to the sale, the carrying value of our investment was zero.

48

SUN COMMUNITIES, INC.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2016 AND 2015

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio as of and for the years ended December 31, 2016 and 2015:
 
 
Year Ended December 31,
 
 
 
 
Financial Information (in thousands)
 
2016
 
2015
 
Change
 
% Change
Income from Real Property
 
$
620,917

 
$
506,078

 
$
114,839

 
22.7
 %
Property operating expenses:
 
 
 
 
 
 
 
 
Payroll and benefits
 
56,744

 
40,207

 
16,537

 
41.1
 %
Legal, taxes, and insurance
 
5,941

 
7,263

 
(1,322
)
 
(18.2
)%
Utilities
 
67,495

 
53,112

 
14,383

 
27.1
 %
Supplies and repair
 
20,732

 
19,075

 
1,657

 
8.7
 %
Other
 
22,362

 
16,140

 
6,222

 
38.6
 %
Real estate taxes
 
44,306

 
34,714

 
9,592

 
27.6
 %
Property operating expenses
 
217,580

 
170,511

 
47,069

 
27.6
 %
Real Property NOI
 
$
403,337

 
$
335,567

 
$
67,770

 
20.2
 %

 
 
As of December 31,
 
 
Other Information
 
2016
 
2015
 
Change
Number of properties
 
341

 
231

 
110

 
 
 
 
 
 
 
MH occupancy
 
95.1
%
 
 
 
 
RV occupancy
 
100.0
%
 
 
 
 
MH & RV blended occupancy (1)
 
96.2
%
 
95.0
%
 
1.2
%
 
 
 
 
 
 
 
Sites available for development
 
10,337

 
7,181

 
3,156

 
 
 
 
 
 
 
Monthly base rent per site - MH
 
$
515

 
$
484

 
$
31

Monthly base rent per site - RV (2)
 
$
416

 
$
423

 
$
(7
)
Monthly base rent per site - Total
 
$
495

 
$
477

 
$
18

(1)      Overall occupancy (percent) includes MH and annual RV sites, and excludes transient RV sites.
(2) 
Monthly base rent pertains to annual RV sites and excludes transient RV sites.

The 20.2 percent growth in Real Property NOI consists of $45.7 million from newly acquired properties and $22.0 million from Same Community properties as detailed below.

49

SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME COMMUNITY

The following tables reflect certain financial and other information for our Same Communities, which includes all properties we have owned and operated continuously since January 1, 2015 as of and for the years ended December 31, 2016 and 2015:

 
 
Year Ended December 31,
 
 
 
 
Financial Information (in thousands)
 
2016
 
2015
 
Change
 
% Change
Income from Real Property
 
$
466,967

 
$
440,202

 
$
26,765

 
6.1
 %
Property operating expenses:
 
 
 
 
 
 
 
 
Payroll and benefits
 
38,688

 
36,465

 
2,223

 
6.1
 %
Legal, taxes, and insurance
 
5,398

 
6,633

 
(1,235
)
 
(18.6
)%
Utilities
 
26,161

 
25,674

 
487

 
1.9
 %
Supplies and repair (1)
 
16,617

 
17,154

 
(537
)
 
(3.1
)%
Other
 
12,945

 
11,823

 
1,122

 
9.5
 %
Real estate taxes
 
34,239

 
31,563

 
2,676

 
8.5
 %
Property operating expenses
 
134,048

 
129,312

 
4,736

 
3.7
 %
Real Property NOI
 
$
332,919

 
$
310,890

 
$
22,029

 
7.1
 %

 
 
As of December 31,
 
 
 
 
Other Information
 
2016
 
2015
 
Change
 
% Change
Number of properties
 
219

 
219

 

 
%
 
 
 
 
 
 
 
 
 
MH occupancy (2)
 
96.0
%
 
 
 
 
 
 
RV occupancy (2)
 
100.0
%
 
 
 
 
 
 
MH & RV blended occupancy (2) (3)
 
96.6
%
 
94.7
%
 
1.9
%
 


 
 
 
 
 
 
 
 
 
Sites available for development
 
6,542

 
5,906

 
636

 
10.8
%
 
 
 
 
 
 
 
 
 
Monthly base rent per site - MH
 
$
498

 
$
482

 
$
16

 
3.3
%
Monthly base rent per site - RV (4)
 
$
436

 
$
423

 
$
13

 
3.1
%
Monthly base rent per site - Total
 
$
489

 
$
474

 
$
15

 
3.2
%
(1)   
Year ended December 31, 2015 excludes $2.8 million of expenses incurred for recently acquired properties to bring the properties up to Sun’s operating standards. These costs did not meet the Company’s capitalization policy.
(2)     Overall occupancy (percent) includes MH and annual RV sites, and excludes recently completed but vacant expansion sites and transient RV sites.
(3) 
Overall occupancy (percent) for 2015 has been adjusted to reflect incremental growth year over year from filled expansion sites and the conversion of transient RV sites to annual RV sites.
(4) 
Monthly base rent pertains to annual RV sites and excludes transient RV sites.

The 7.1 percent growth in NOI is primarily due to increased revenues of $26.8 million partially offset by additional expenses of $4.7 million.

Income from real property revenue consists of MH and RV site rent, and miscellaneous other property revenues. The 6.1 percent growth in income from real property was due to a combination of factors. Revenue from our MH and RV portfolio increased $24.9 million due to monthly base rent per site increases of 3.2 percent, a 1.9 percent increase in occupancy, and the increased number of occupied vacation rental sites. Additionally, other revenues increased $1.8 million primarily due to increases in property tax revenues, trash income, cable television royalties, and month-to-month fees.

Property operating expenses increased approximately $4.7 million, or 3.7 percent, compared to 2015. The increase is primarily due to increased real estate taxes of $2.7 million and increased payroll and benefits of $2.2 million, partially offset by reduced legal, tax, and insurance expenses.


50

SUN COMMUNITIES, INC.

RENTALS AND HOME SALES

The following table reflects certain financial and other information for our Rental Program as of and for the years ended December 31, 2016 and 2015 (in thousands, except for statistical information):

 
 
Year Ended December 31,
 
 
 
 
Financial Information
 
2016
 
2015
 
Change
 
% Change
Rental home revenue
 
$
47,780

 
$
46,236

 
$
1,544

 
3.3
 %
Site rent from Rental Program (1)
 
61,600

 
61,952

 
(352
)
 
(0.6
)%
Rental Program revenue
 
109,380

 
108,188

 
1,192

 
1.1
 %
Expenses
 
 
 
 
 
 
 
 
Commissions
 
2,242

 
3,216

 
(974
)
 
(30.3
)%
Repairs and refurbishment
 
12,825

 
12,326

 
499

 
4.1
 %
Taxes and insurance
 
5,734

 
5,638

 
96

 
1.7
 %
Marketing and other
 
3,493

 
3,776

 
(283
)
 
(7.5
)%
Rental Program operating and maintenance
 
24,294

 
24,956

 
(662
)
 
(2.7
)%
Rental Program NOI
 
$
85,086

 
$
83,232

 
$
1,854

 
2.2
 %
 
 
 
 
 
 
 
 
 
Other Information
 
 
 
 
 
 
 
 
Number of occupied rentals, end of period
 
10,733

 
10,685

 
48

 
0.5
 %
Investment in occupied rental homes, end of period
 
$
457,691

 
$
448,837

 
$
8,854

 
2.0
 %
Number of sold rental homes
 
1,089

 
908

 
181

 
19.9
 %
Weighted average monthly rental rate, end of period
 
$
882

 
$
858

 
$
24

 
2.8
 %

(1)   The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations.

The 2.2 percent growth in Rental Program NOI is primarily due to a 2.8 percent increase in weighted average monthly rental rates. Additionally, operating and maintenance expenses decreased by $0.7 million, primarily as a result of a decline in commissions of $1.0 million that was partially offset by an increase in repairs and refurbishment.





51

SUN COMMUNITIES, INC.


The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2016 and 2015 (in thousands, except for average selling prices and statistical information):

 
 
Year Ended December 31,
 
 
 
 
Financial Information
 
2016
 
2015
 
Change
 
% Change
New home sales
 
$
30,977

 
$
22,208

 
$
8,769

 
39.5
%
Pre-owned home sales
 
79,530

 
57,520

 
22,010

 
38.3
%
Revenue from homes sales
 
110,507

 
79,728

 
30,779

 
38.6
%
New home cost of sales
 
26,802

 
18,620

 
8,182

 
43.9
%
Pre-owned home cost of sales
 
53,618

 
40,321

 
13,297

 
33.0
%
Cost of home sales
 
80,420

 
58,941

 
21,479

 
36.4
%
NOI / Gross profit
 
$
30,087

 
$
20,787

 
$
9,300

 
44.7
%
 
 
 
 
 
 
 
 
 
Gross profit – new homes
 
$
4,175

 
$
3,588

 
$
587

 
16.4
%
Gross margin % – new homes
 
13.5
%
 
16.2
%
 
(2.7
)%
 
 
Average selling price – new homes
 
$
94,156

 
$
81,346

 
$
12,810

 
15.8
%
 
 
 
 
 
 
 
 
 
Gross profit – pre-owned homes
 
$
25,912

 
$
17,199

 
$
8,713

 
50.7
%
Gross margin % – pre-owned homes
 
32.6
%
 
29.9
%
 
2.7
 %
 
 
Average selling price – pre-owned homes
 
$
27,974

 
$
26,027

 
$
1,947

 
7.5
%
 
 
 
 
 
 
 
 
 
Statistical Information
 
 
 
 
 
 
 
 
Home sales volume:
 
 
 
 
 
 
 
 
New home sales
 
329

 
273

 
56

 
20.5
%
Pre-owned home sales
 
2,843

 
2,210

 
633

 
28.6
%
Total homes sold
 
3,172

 
2,483

 
689

 
27.8
%

Gross profit for new home sales increased $0.6 million, or 16.4 percent, primarily in connection with an increase in new home sales volumes of 20.5 percent, that was partially offset by higher cost of sales for new homes.

Total gross profit for pre-owned home sales increased $8.7 million, primarily due to increased sales volumes of 28.6 percent and a 17.1 percent increase in average gross profit per home sale.








52

SUN COMMUNITIES, INC.

OTHER INCOME STATEMENT ITEMS

The following table summarizes other income and expenses for the years ended December 31, 2016 and 2015 (amounts in thousands):
 
 
Year Ended December 31,
 
 
 
 
 
 
2016
 
2015
 
Change
 
% Change
Ancillary revenues, net
 
$
9,999

 
$
7,013

 
$
2,986

 
42.6
 %
Interest income
 
$
18,113

 
$
15,938

 
$
2,175

 
13.7
 %
Brokerage commissions and other revenues, net
 
$
3,037

 
$
2,219

 
$
818

 
36.9
 %
Home selling expenses
 
$
9,744

 
$
7,476

 
$
2,268

 
30.3
 %
General and administrative expenses
 
$
64,087

 
$
47,455

 
$
16,632

 
35.1
 %
Transaction costs
 
$
31,914

 
$
17,803

 
$
14,111

 
79.3
 %
Catastrophic weather related charges, net
 
$
1,172

 
$

 
$
1,172

 
N/A

Depreciation and amortization
 
$
221,770

 
$
177,637

 
$
44,133

 
24.8
 %
Loss on extinguishment of debt
 
$
1,127

 
$
2,800

 
$
(1,673
)
 
(59.8
)%
Interest expense
 
$
122,315

 
$
110,878

 
$
11,437

 
10.3
 %
Other income / (expense), net
 
$
(4,676
)
 
$

 
$
(4,676
)
 
N/A

Gain on disposition of properties, net
 
$

 
$
125,376

 
$
(125,376
)
 
(100.0
)%
Current tax expense
 
$
(683
)
 
$
(158
)
 
$
(525
)
 
332.3
 %
Deferred tax benefit / (expense)
 
$
400

 
$
(1,000
)
 
$
1,400

 
(140.0
)%
Income from affiliate transactions
 
$
500

 
$
7,500

 
$
(7,000
)
 
(93.3
)%
Preferred stock redemption costs
 
$

 
$
4,328

 
$
(4,328
)
 
(100.0
)%

Ancillary revenues, net - increased primarily due to an increase of $3.0 million in vacation rental income at RV resorts.

Interest income - increased primarily due to an increase in interest income on notes and collateralized receivables totaling $2.1 million.

Brokerage commissions and other revenues, net - increased primarily due to a higher number of brokered homes sold in 2016 as compared to 2015.

Home selling expenses - increased $2.3 million primarily due to an increase in commissions consistent with an increase in the number of homes sold in 2016 as compared to 2015.

General and administrative expenses - increased $16.6 million primarily due to additional employee related costs as headcount increased in connection with the Company’s growth through significant acquisitions and increased consulting and implementation costs for technology and efficiency related initiatives.

Transaction costs - increased primarily due to due diligence and other transaction costs in relation to our acquisitions. Refer to Note 2, “Real Estate Acquisitions and Dispositions,” in our accompanying Consolidated Financial Statements for additional information.

Catastrophic weather related charges, net - in 2016 included costs of $1.2 million related to hurricanes Hermine and Matthew.

Depreciation and amortization - expenses increased $44.1 million primarily as a result of additional depreciation and amortization related to our newly acquired properties. Refer to Note 2, “Real Estate Acquisitions and Dispositions,” in our accompanying Consolidated Financial Statements for additional information.

Loss on extinguishment of debt - decreased $1.7 million as compared to 2015. During 2016, we repaid collateralized term loans that were due to mature during 2017. Refer to Note 8, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information.

53

SUN COMMUNITIES, INC.


Interest expense - increased $11.4 million primarily due to our borrowing $338.0 million under a senior secured credit facility and entering into three mortgage loans totaling $405.0 million, both in June 2016. Refer to Note 8, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information.

Other income / (expense), net - in 2016 includes the impact of foreign currency translation losses of $5.0 million, and contingent liability revaluation expense of $0.2 million, partially offset by a $0.5 million gain related to the acquisition of Adirondack Gateway.

Gain on disposition of properties, net - decreased $125.4 million as we recorded no gains or losses during 2016, whereas we disposed of twenty communities in 2015.

Deferred tax benefit (expense) - was favorable by $1.4 million in 2016 as compared to 2015. During 2016, we recognized a deferred tax benefit in connection with the Carefree acquisition. In 2015, we increased the valuation allowance on SHS loss carryforwards by $1.0 million.

Income from affiliate transactions - was $7.5 million in 2015 due to a distribution to us from Origen Financial, Inc. (“Origen.”) In 2016, we sold our entire interest in Origen consisting of 5,000,000 shares for proceeds of $0.5 million. The carrying value of our investment in Origen prior to the sale was zero.

Preferred stock redemption costs - were $4.3 million in 2015 as a result of a repurchase agreement with certain holders of the Company’s Series A-4 preferred stock. There were no such redemptions in 2016.


54

SUN COMMUNITIES, INC.

The following table reconciles Net income attributable to Sun Communities, Inc. common stockholders to FFO for the years ended December 31, 2017, 2016, and 2015 (in thousands, except per share amounts):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Net income attributable to Sun Communities, Inc. common stockholders
 
$
65,021

 
$
17,369

 
$
137,325

Adjustments:
 
 
 
 
 
 
Depreciation and amortization
 
262,211

 
221,576

 
178,048

Amounts attributable to noncontrolling interests
 
4,535

 
(41
)
 
9,644

Preferred return to preferred OP units
 
2,320

 
2,462

 
2,612

Preferred distribution to Series A-4 Preferred Stock
 
2,107

 

 

Gain / (loss) on disposition of properties, net
 

 

 
(125,376
)
Gain / (loss) on disposition of assets, net
 
(16,075
)
 
(15,713
)
 
(10,125
)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1)
 
$
320,119

 
$
225,653

 
$
192,128

Adjustments:
 
 
 
 
 
 
Transaction costs
 
9,801

 
31,914

 
17,803

Other acquisition related costs (2)
 
2,810

 
3,328

 

Income from affiliate transactions
 

 
(500
)
 
(7,500
)
Loss on extinguishment of debt
 
6,019

 
1,127

 
2,800

Catastrophic weather related costs, net
 
8,352

 
1,172

 

Loss of earnings - catastrophic weather related (3)
 
292

 

 

Other income, net
 
(8,982
)
 
4,676

 

Debt premium write-off
 
(1,343
)
 
(839
)
 

Deferred tax benefit / (expense)
 
(582
)
 
(400
)
 
1,000

Ground lease intangible write-off
 
898

 

 

Preferred stock redemption costs
 

 

 
4,328

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1)
 
$
337,384

 
$
266,131

 
$
210,559

 
 
 
 
 
 
 
Weighted average common shares outstanding - basic:
 
76,084

 
65,856

 
53,686

Add:
 
 
 
 
 
 
Common stock issuable upon conversion of stock options
 
2

 
8

 
16

Restricted stock
 
625

 
457

 
411

Common OP units
 
2,756

 
2,844

 
2,803

Common stock issuable upon conversion of Series A-1 preferred OP units
 
869

 
925

 
988

Common stock issuable upon conversion of Series A-3 preferred OP units
 
75

 
75

 
75

Common stock issuable upon conversion of Series A-4 preferred OP units
 
585

 

 

Weighted average common shares outstanding - fully diluted
 
80,996

 
70,165

 
57,979

 
 
 
 
 
 
 
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted
 
$
3.95

 
$
3.22

 
$
3.31

Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted
 
$
4.17

 
$
3.79

 
$
3.63


(1)   The effect of certain anti-dilutive convertible securities is excluded from these items.
(2) 
These costs represent the first year expense incurred to bring acquired properties up to the Company's operating standards, including items such as tree trimming and painting costs that did not meet the Company's capitalization policy. These costs were included as an FFO adjustment for the year ended December 31, 2016 and 2017. Had a similar adjustment been made in 2015, FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share excluding certain items would have been $3.68 for the year ended December 31, 2015.
(3)   Adjustment represents estimated loss of earnings in excess of the applicable business interruption deductible at our three Florida Keys communities that were impaired by Hurricane Irma. The Company is actively working with its insurer on the related claims, but has not yet received any advance for the expected recovery of lost earnings.


    


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SUN COMMUNITIES, INC.

LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unit holders of the Operating Partnership, capital improvement of properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment.

During the year ended December 31, 2017, we acquired nine communities. Refer to Note 2, “Real Estate Acquisitions and Dispositions” in our accompanying Consolidated Financial Statements for additional information regarding our acquisitions in 2017. Subject to market conditions, we intend to continue to look for opportunities to expand our development pipeline and acquire existing communities. We finance acquisitions through available cash, secured financing, draws on our lines of credit, the assumption of existing debt on properties, and the issuance of equity securities. We will continue to evaluate acquisition opportunities that meet our criteria.

We also intend to continue to strengthen our capital and liquidity positions by focusing on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our lines of credit, and the use of debt and equity offerings under our shelf registration statement. Refer to Note 8, “Debt and Lines of Credit” and Note 9, “Equity and Mezzanine Securities” in our accompanying Consolidated Financial Statements for additional information.

Our capital expenditures include expansion and development, lot modifications, recurring capital expenditures and rental home purchases. For the years ended December 31, 2017 and 2016, expansion and development activities of $88.3 million and $48.0 million, respectively, related to costs consisting primarily of construction of sites and other costs necessary to complete home site improvements.

For the years ended December 31, 2017 and 2016, lot modification expenditures were $18.1 million and $19.0 million, respectively. These expenditures improve asset quality in our communities and are incurred when an existing home is removed and the site is prepared for a new home (more often than not, a multi-sectional home). These activities, which are mandated by strict manufacturer’s installation requirements and state building codes, include items such as new foundations, driveways, and utility upgrades.

For the years ended December 31, 2017 and 2016, recurring capital expenditures were $14.2 million and $17.6 million, respectively, related to our continued commitment to upkeep of our properties.

We invested $17.0 million in the acquisition of homes intended for the Rental Program. Expenditures for 2018 will depend upon the condition of the markets for repossessions and new home sales, as well as rental homes. We finance new home purchases with a $12.0 million manufactured home floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third-party financing of our home sales, available manufactured home floor plan financing and working capital available on our lines of credit.

Our cash flow activities are summarized as follows (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Net Cash Provided by Operating Activities
 
$
261,750

 
$
237,566

 
$
179,463

Net Cash Used for Investing Activities
 
$
(401,642
)
 
$
(1,614,512
)
 
$
(413,184
)
Net Cash Provided by Financing Activities
 
$
141,557

 
$
1,340,097

 
$
195,348

Effect of Exchange Rate on Cash and Cash Equivalents
 
$
298

 
$
(73
)
 
$


Cash and cash equivalents increased by $1.9 million from $8.2 million as of December 31, 2016, to $10.1 million as of December 31, 2017.

Operating Activities

Net cash provided by operating activities increased by $23.1 million from $237.6 million for the year ended December 31, 2016 to $261.8 million for the year ended December 31, 2017.


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SUN COMMUNITIES, INC.

Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes; and (e) current volatility in economic conditions and the financial markets. See “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K.

Investing Activities

Net cash used for investing activities was $401.6 million for the year ended December 31, 2017, compared to $1.6 billion for the year ended December 31, 2016.

Financing Activities

Net cash provided by financing activities was $141.6 million for the year ended December 31, 2017, compared to $1.3 billion for the year ended December 31, 2016. Refer to Note 8, “Debt and Lines of Credit” and Note 9, “Equity and Mezzanine Securities” in our accompanying Consolidated Financial Statements for additional information.

Financial Flexibility

In July 2017, we entered into a new at the market sales agreement (the “Sales Agreement”) with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc., RBC Capital Markets, LLC, BTIG, LLC, Jefferies LLC, Credit Suisse Securities (USA) LLC and Samuel A. Ramirez & Company, Inc. (each, a “Sales Agent;” collectively, the “Sales Agents”), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold from time to time under the Sales Agreement. Concurrent with the entry in the Sales Agreement, we terminated our previous sales agreement which had an aggregate offering price of up to $250.0 million (the “Prior Agreement”).

In April 2017, we amended and restated our credit agreement (the “A&R Credit Agreement”) with Citibank, N.A. (“Citibank”) and certain other lenders. Under the A&R Credit Agreement, we have a senior revolving credit facility with Citibank and certain other lenders in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan (the “A&R Facility”). The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option, subject to the satisfaction of certain conditions as defined in the credit agreement. The A&R Credit Agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $350.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $1.0 billion.

The A&R Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the A&R Credit Agreement, which margin can range from 1.35 percent to 2.20 percent for the revolving loan and 1.30 percent to 2.15 percent for the term loan. As of December 31, 2017, the margin on our leverage ratio was 1.35 percent and 1.30 percent on the revolving and term loans, respectively. We had $37.8 million in borrowings on the revolving loan and no borrowings on the term loan totaling $37.8 million as of December 31, 2017, with a weighted average interest rate of 2.79 percent.

The A&R Facility replaced our $450.0 million credit facility (the “Previous Facility”), which was scheduled to mature on August 19, 2019. At the time of closing of the A&R Facility, there were $220.8 million in borrowings under the Previous Facility. At December 31, 2016, under the Previous Facility, we had $42.3 million in borrowings on the revolving loan and $58.0 million in borrowings on the term loan totaling $100.3 million with a weighted average interest rate of 2.14 percent.

At December 31, 2017 and December 31, 2016, approximately $1.3 million and $4.6 million of availability was used to back standby letters of credit.

Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. We are currently in compliance with these covenants. The most restrictive financial covenants for the A&R Facility are as follows:


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SUN COMMUNITIES, INC.

Covenant
 
Requirement
 
As of 12/31/17
Maximum Leverage Ratio
 
< 65.0%
 
34.7%
Minimum Fixed Charge Coverage Ratio
 
> 1.40
 
2.62
Minimum Tangible Net Worth (in thousands)
 
>$2,513,492
 
$3,949,597
Maximum Dividend Payout Ratio
 
< 95.0%
 
63.0%

We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, expansion and development of communities, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our properties. At December 31, 2017, we had 160 unencumbered properties, of which 61 support the borrowing base for our $650.0 million line of credit. 

From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain debt financing, or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the MH and RV community industry at the time, including the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional, and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those markets could make borrowing more difficult to secure, more expensive, or effectively unavailable. See “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K. If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.

Contractual Cash Obligations

Our primary long-term liquidity needs are principal payments on outstanding indebtedness. As of December 31, 2017, our outstanding contractual obligations, including interest expense, were as follows:
 
 
 
 
Payments Due By Period
 
 
 
 
(In thousands)
Contractual Cash Obligations (1)
 
Total Due
 
<1 year
 
1-3 years
 
3-5 years
 
After 5 years
Collateralized term loans - FNMA
 
$
1,012,316

 
$
44,754

 
$
149,854

 
$
193,005

 
$
624,703

Collateralized term loans - Life Company
 
1,045,529

 
22,948

 
58,363

 
67,983

 
896,235

Collateralized term loans - CMBS
 
411,087

 
8,013

 
15,888

 
188,966

 
198,220

Collateralized term loans - FMCC
 
388,790

 
6,035

 
12,783

 
13,883

 
356,089

Secured borrowings
 
129,182

 
5,541

 
12,620

 
14,370

 
96,651

Lines of credit
 
41,809

 

 
4,009

 
37,800

 

Preferred OP units - mandatorily redeemable
 
41,443

 
6,780

 

 

 
34,663

 Total principal payments
 
$
3,070,156

 
$
94,071

 
$
253,517

 
$
516,007

 
$
2,206,561

 
 
 
 
 
 
 
 
 
 
 
Interest expense (2)
 
$
888,979

 
$
129,074

 
$
238,148

 
$
199,640

 
$
322,117

Operating leases
 
68,824

 
2,800

 
5,726

 
5,894

 
54,404

Capital lease obligation
 
4,114

 
16

 
34

 
36

 
4,028

 Total contractual cash obligations
 
$
4,032,073

 
$
225,961

 
$
497,425

 
$
721,577

 
$
2,587,110


(1) Contractual cash obligations in the table above exclude debt premiums, discounts and deferred financing costs, as applicable.
(2) Our contractual cash obligations related to interest expense are calculated based on the current debt levels, rates and maturities as of December 31, 2017 (including capital leases and excluding secured borrowings), and actual payments required in future periods may be different than the amounts included above. Perpetual securities include one year of interest expense in the “After 5 years” category.

As of December 31, 2017, our net debt to enterprise value approximated 28.2 percent (assuming conversion of all common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, and Series C preferred OP units to shares of common stock). Our debt had a weighted average maturity of approximately 8.9 years and a weighted average interest rate of 4.50 percent.

58

SUN COMMUNITIES, INC.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.
 
The critical accounting estimates that affect the Consolidated Financial Statements and that use judgments and assumptions are listed below. In addition, the likelihood that materially different amounts could be reported under varied conditions and assumptions is discussed.

Refer to Note 1, “Significant Accounting Policies,” of our accompanying Consolidated Financial Statements for information regarding our critical accounting estimates.

Impact of New Accounting Standards

Refer to Note 17, “Recent Accounting Pronouncements,” of our accompanying Consolidated Financial Statements for information regarding new accounting pronouncements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements with any unconsolidated entities that we believe have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity, or capital resources.


59

SUN COMMUNITIES, INC.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices, and equity prices.

Interest Rate Risk

Our principal market risk exposure is interest rate risk. We mitigate this risk by maintaining prudent amounts of leverage, minimizing capital costs, and interest expense while continuously evaluating all available debt and equity resources and following established risk management policies and procedures, which include the periodic use of derivatives. Our primary strategy in entering into derivative contracts is to minimize the variability that interest rate changes could have on our future cash flows. From time to time, we employ derivative instruments that effectively convert a portion of our variable rate debt to fixed rate debt. We do not enter into derivative instruments for speculative purposes.

We have two interest rate cap agreements with a total notional amount of $159.7 million as of December 31, 2017. The first interest rate cap agreement has a cap rate of 9.00 percent, a notional amount of $150.1 million and a termination date of April 2018. The second interest rate cap agreement has a cap rate of 11.02 percent, a notional amount of $9.6 million and a termination date of May 2023.

Our remaining variable rate debt totaled
$194.7 million and $256.0 million as of December 31, 2017 and 2016, respectively, and bears interest at Prime or various LIBOR rates. If Prime or LIBOR increased or decreased by 1.0 percent, our interest expense would have increased or decreased by approximately $2.3 million and $3.0 million for the years ended December 31, 2017 and 2016, respectively, based on the $229.6 million and $299.1 million average balance outstanding under our variable rate debt facilities, respectively.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk is the risk that fluctuations in currencies against the U.S. dollar will negatively impact our results of operations. We are exposed to foreign currency exchange rate risk as a result of remeasurement and translation of the assets and liabilities of our Canadian properties into U.S. dollars. Fluctuations in foreign currency exchange rates can therefore create volatility in our results of operations and may adversely affect our financial condition.

At December 31, 2017 and 2016, our stockholder’s equity included $91.5 million and $79.9 million from our Canadian subsidiaries, respectively, which represented 3.4 percent of total equity in both periods. Based on our sensitivity analysis, a 10.0 percent strengthening of the U.S. dollar against the Canadian dollar would have caused a reduction of $9.2 million and $8.0 million to our total stockholder’s equity at December 31, 2017 and 2016, respectively.


60

SUN COMMUNITIES, INC.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data are filed herewith under Item 15.

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (pursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act) at December 31, 2017. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2017.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, misstatements due to error or fraud may not be prevented or detected on a timely basis.

Our management performed an assessment of the effectiveness of our internal control over financial reporting at December 31, 2017, utilizing the criteria discussed in the “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at December 31, 2017. Based on management’s assessment, we have concluded that our internal control over financial reporting was effective at December 31, 2017.
 
The effectiveness of our internal control over financial reporting has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report which is included herein.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.    OTHER INFORMATION

The following is a summary of additional material United States federal income tax considerations with respect to Sun Communities, Inc. This discussion is being included in this Annual Report on Form 10-K for incorporation by reference into the Company’s Registration Statements on Forms S-3 (File No. 333-204911, effective June 12, 2015; File No. 333-203502, effective April 17, 2015 and File No. 333-203498, effective April 17, 2015) and on Forms S-8 (File No. 333162216, effective as of September 30, 2009 and File No. 333-205857, effective July 24, 2015), the prospectuses filed as part of such Registration Statements on Form S-3, and any applicable prospectus supplements thereto. This discussion supplements and updates the discussions contained in, or incorporated by reference into, the prospectuses filed as part of such Registration Statements on Form S-3, and any applicable prospectus supplements thereto, under the heading “Material U.S. Federal Income Tax Considerations,” and supersedes such discussions to the extent inconsistent with such discussions.


61

SUN COMMUNITIES, INC.

ADDITIONAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Tax Cuts and Jobs Act

On December 22, 2017, H.R. 1, informally titled the Tax Cuts and Jobs Act (the “Tax Act” or the “Act”) was signed into law. The Tax Act makes major changes to the Code, including a number of provisions of the Code that may directly or indirectly affect the taxation of REITs and their security holders. The most significant of these provisions are described below. The individual and collective impact of these changes on REITs and their security holders is uncertain, and may not become evident for some period of time. While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that may or may not be revised in subsequent tax legislation. At this point, it is not clear when Congress will address these issues or when the Internal Revenue Service will be able to issue administrative guidance on the changes made in the Tax Act. Prospective investors should consult their tax advisors regarding the implications of the Tax Act on their investment.

Refer to Note 12, “Income Taxes,” of our accompanying Consolidated Financial Statements for resulting impacts of the Tax Act on the Company.

Revised Individual Tax Rates and Deductions

The Tax Act creates seven income tax brackets for individuals ranging from 10 percent to 37 percent that generally apply at higher thresholds than current law. For example, the highest 37 percent rate applies to joint return filer incomes above $600,000, instead of the highest 39.6 percent rate that applies to incomes above $470,700 under pre-Tax Act law. The maximum 20 percent rate that applies to long-term capital gains and qualified dividend income is unchanged, as is the 3.8 percent tax on net investment income.

The Act also eliminates personal exemptions, but nearly doubles the standard deduction for most individuals (e.g. the standard deduction for joint return filers rises from $12,700 in 2017 to $24,000 upon the Act’s effectiveness). The Act also eliminates many itemized deductions, limits individual deductions for state and local income, property and sales taxes (other than those paid in a trade or business) to $10,000 collectively for joint return filers (with a special provision to prevent 2017 deductions for prepayment of 2018 state or local income taxes), and limits the amount of new acquisition indebtedness on principal or second residences for which mortgage interest deductions are available to $750,000. Interest deductions on home equity debt are eliminated. Charitable deductions are generally preserved. The phaseout of itemized deductions based on income is eliminated.

The Tax Act does not eliminate the individual alternative minimum tax, but it raises the exemption and exemption phaseout threshold for application of the tax.

These individual income tax changes are generally effective beginning in 2018, but without further legislation, they will expire, or sunset, after 2025.

Pass-Through Business Income Tax Rate Lowered through Deduction

Under the Tax Act, individuals, trusts, and estates generally may deduct 20 percent of “qualified business income” (generally, domestic trade or business income other than certain investment items) of a partnership, S corporation, or sole proprietorship. In addition, “qualified REIT dividends” (i.e., REIT dividends other than capital gain dividends and portions of REIT dividends designated as qualified dividend income eligible for capital gain tax rates) and certain other income items are eligible for the deduction by the taxpayer. The overall deduction is limited to 20 percent of the sum of the taxpayer’s taxable income (less net capital gain) and certain cooperative dividends, subject to further limitations based on taxable income. In addition, for taxpayers with taxable income above a certain threshold (e.g., $315,000 for joint return filers), the deduction for each trade or business is generally limited to no more than the greater of: (i) 50 percent of the taxpayer’s proportionate share of total wages from a partnership, S corporation or sole proprietorship, or (ii) 25 percent of the taxpayer’s proportionate share of such total wages plus 2.5 percent of the unadjusted basis of acquired tangible depreciable property that is used to produce qualified business income and satisfies certain other requirements. The deduction for qualified REIT dividends is not subject to these wage and basis limitations. The deduction, if allowed in full, equates to a maximum 29.6 percent tax rate on domestic qualified business income of partnerships, S corporations, or sole proprietorships, and a maximum 29.6 percent tax rate on REIT dividends. As with the other individual income tax changes, the deduction provisions are effective beginning in 2018. Without further legislation, the deduction sunsets after 2025.


62

SUN COMMUNITIES, INC.

Net Operating Loss Modifications

Net operating loss (“NOL”) provisions are modified by the Tax Act. The Act limits the NOL deduction to 80 percent of taxable income (before the deduction). It also generally eliminates NOL carrybacks for individuals and non-REIT corporations (NOL carrybacks did not apply to REITs under prior law), but allows indefinite NOL carryforwards. The new NOL rules apply beginning in 2018.

Maximum Corporate Tax Rate Lowered to 21 percent; Elimination of Corporate Alternative Minimum Tax

The Tax Act reduces the 35 percent maximum corporate income tax rate to a maximum 21 percent corporate rate, and reduces the dividends-received deduction for certain corporate subsidiaries. The Act also permanently eliminates the corporate alternative minimum tax. These provisions are effective beginning in 2018.

Limitations on Interest Deductibility; Real Property Trades or Businesses Can Elect Out Subject to Longer Asset Cost Recovery Periods

The Tax Act limits a taxpayer’s net interest expense deduction to 30 percent of the sum of adjusted taxable income, business interest, and certain other amounts. Adjusted taxable income does not include items of income or expense not allocable to a trade or business, business interest or expense, the new deduction for qualified business income, NOLs, and for years prior to 2022, deductions for depreciation, amortization, or depletion. For partnerships, the interest deduction limit is applied at the partnership level, subject to certain adjustments to the partners for unused deduction limitation at the partnership level. The Act allows a real property trade or business to elect out of this interest limit so long as it uses a 40-year recovery period for nonresidential real property, a 30-year recovery period for residential rental property, and a 20-year recovery period for related improvements described below. Disallowed interest expense is carried forward indefinitely (subject to special rules for partnerships). The interest deduction limit applies beginning in 2018.

Maintains Cost Recovery Period for Buildings; Reduced Cost Recovery Periods for Tenant Improvements; Increased Expensing for Equipment

For taxpayers that do not use the Act’s real property trade or business exception to the business interest deduction limits, the Act maintains the current 39-year and 27.5-year straight line recovery periods for nonresidential real property and residential rental property, respectively, and provides that tenant improvements for such taxpayers are subject to a general 15-year recovery period. Also, the Act temporarily allows 100 percent expensing of certain new or used tangible property through 2022, phasing out at 20 percent for each following year (with an election available for 50 percent expensing of such property if placed in service during the first taxable year ending after September 27, 2017). The changes apply, generally, to property acquired after September 27, 2017 and placed in service after September 27, 2017.

Like Kind Exchanges Retained for Real Property, but Eliminated for Most Personal Property

The Tax Act continues the deferral of gain from the like kind exchange of real property, but provides that foreign real property is no longer “like kind” to domestic real property. Furthermore, the Act eliminates like kind exchanges for most personal property. These changes are effective generally for exchanges completed after December 31, 2017, with a transition rule allowing such exchanges where one part of the exchange is completed prior to December 31, 2017.

Technical Terminations of Partnerships

For tax years beginning January 1, 2018, the Tax Act permanently repeals the technical termination rule for partnerships. The technical termination rule provided that a partnership (or limited liability company (“LLC”) taxed as a partnership) terminated for tax purposes (and a new partnership is deemed to be created) if there was a sale or exchange of 50 percent or more of the total interest in the partnership (or LLC) capital and profits in a 12-month period.

International Provisions: Modified Territorial Tax Regime

The Act moves the United States from a worldwide to a modified territorial tax system, with provisions included to prevent corporate base erosion.


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SUN COMMUNITIES, INC.

Accrual of Income

Under the Tax Act, the Company generally will be required to take certain amounts in income no later than the time such amounts are reflected on certain financial statements. The application of this rule may require the accrual of income earlier than would be the case under the general tax rules, although the precise application of this rule is unclear at this time. This rule generally will be effective for tax years beginning after December 31, 2017. To the extent that this rule requires the accrual of income earlier than under the general tax rules, it could increase our “phantom income,” which may make it more likely that we could be required to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized.

Other Provisions

The Tax Act makes other significant changes to the Code. These changes include provisions limiting the ability to offset dividend and interest income with partnership or S corporation net active business losses. These provisions are effective beginning in 2018, but without further legislation, sunset after 2025.

ARTICLES OF RESTATEMENT

On February 20, 2018, the Company filed articles of restatement (the “Articles of Restatement”) with the Maryland Department of Assessments and Taxation consolidating its charter. The Articles of Restatement are filed herewith as Exhibit 3.1.




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SUN COMMUNITIES, INC.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Pursuant to instruction 3 to paragraph (b) of Item 401 of Regulation S-K, certain information regarding our executive officers is contained in Part I of this Form 10-K. Unless provided in an amendment to this Annual Report on Form 10-K, the other information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2018 annual meeting (the “Proxy Statement,”) including the information set forth under the captions “Board of Directors and Corporate Governance - Incumbent Directors and Nominees,” “Management and Executive Compensation - Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Board of Directors and Corporate Governance - Board of Directors and Committees” and “Board of Directors and Corporate Governance - Consideration of Director Nominees.”

ITEM 11. EXECUTIVE COMPENSATION

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the applicable information in the Proxy Statement, including the information set forth under the captions “Management and Executive Compensation,” “Board of Directors and Corporate Governance - Director Compensation Table,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report.” The information in the section captioned “Compensation Committee Report” in the Proxy Statement or an amendment to this Annual Report on Form 10-K is incorporated by reference herein but shall be deemed furnished, not filed, and shall not be deemed to be incorporated by reference into any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the applicable information in the Proxy Statement, including the information set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the Proxy Statement, including the information set forth under the captions “Certain Relationships and Related Transactions and Director Independence,” “Board of Directors and Corporate Governance - Board of Directors and Committees” and “Board of Directors and Corporate Governance - Board Leadership Structure and Independence of Non-Employee Directors.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the Proxy Statement, including the information set forth under the caption “Ratification of Selection of Grant Thornton LLP.”


65

SUN COMMUNITIES, INC.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed herewith as part of this Form 10-K:

1.    Financial Statements
A list of the financial statements required to be filed as a part of this Annual Report on Form 10‑K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith.

2.    Financial Schedule
The financial statement schedule required to be filed as a part of this Annual Report on Form 10‑K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith.

3.    Exhibits
A list of the exhibits required by Item 601 of Regulation S‑K to be filed as a part of this Annual Report on Form 10-K is shown on the “Exhibit Index” filed herewith.


ITEM 16. FORM 10-K SUMMARY

None.


66

SUN COMMUNITIES, INC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
SUN COMMUNITIES, INC.
(Registrant)
Dated: February 22, 2018
By
/s/
Gary A. Shiffman
 
 
 
Gary A. Shiffman
Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 
Name
 
Capacity
 
Date
/s/
Gary A. Shiffman
 
Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)
 
February 22, 2018
 
Gary A. Shiffman
 
 
 
 
/s/
Karen J. Dearing
 
Executive Vice President, Chief Financial Officer, Treasurer, Secretary (Principal Financial Officer and Principal Accounting Officer)
 
February 22, 2018
 
Karen J. Dearing
 
 
 
 
/s/
Meghan G. Baivier
 
Director
 
February 22, 2018
 
Meghan G. Baivier
 
 
 
 
/s/
Stephanie W. Bergeron
 
Director
 
February 22, 2018
 
Stephanie W. Bergeron
 
 
 
 
/s/
Brian M. Hermelin
 
Director
 
February 22, 2018
 
Brian M. Hermelin
 
 
 
 
/s/
Ronald A. Klein
 
Director
 
February 22, 2018
 
Ronald A. Klein
 
 
 
 
/s/
Clunet R. Lewis
 
Director
 
February 22, 2018
 
Clunet R. Lewis
 
 
 
 
/s/
Arthur A. Weiss
 
Director
 
February 22, 2018
 
Arthur A. Weiss
 
 
 
 




67

SUN COMMUNITIES, INC.

EXHIBIT INDEX

Exhibit Number
Description
Method of Filing
3.1
Filed herewith
3.2
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on May 12, 2017
4.1
Incorporated by reference to Sun Communities, Inc.’s Registration Statement on Form 8-A filed June 3, 2008
4.2
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed February 12, 2013
4.3
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed March 22, 2016
4.4
Incorporated by reference to Sun Communities, Inc.’s Registration Statement on Form 8-A filed November 9, 2012
4.5
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed December 2, 2014
4.6
Incorporated by reference to Sun Communities, Inc.’s Current report on Form 8-K filed on October 4, 2017
10.1
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.2
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.3
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.4
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.5
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.6
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.7
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016
10.8
Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10-K for the year ended December 31, December 31, 2002, as amended
10.9
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 10-K for the year ended December 31, 2011
10.10
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 23, 2014
10.11
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed December 2, 2014
10.12
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed April 2, 2015

68

SUN COMMUNITIES, INC.

10.13
Incorporated by reference to Sun Communities, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015
10.14
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 25, 2012
10.15
Incorporated by reference to Sun Communities, Inc.’s Proxy Statement dated April 29, 2015 for the Annual meeting of Stockholders held July 20, 2015
10.16
Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33 69340
10.17
Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33 80972
10.18
Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004
10.19
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014
10.20
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 24, 2013
10.21
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014
10.22
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017
10.23
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed May 20, 2015
10.24
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017
10.25
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 17, 2015
10.26
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017
10.27
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014
10.28
Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on July 28, 2017.
10.29

Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on April 27, 2017
21.1
Filed herewith
23.1
Filed herewith
31.1
Filed herewith
31.2
Filed herewith
32.1
Furnished herewith
101.1
The following Sun Communities, Inc. financial information, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2017 and 2016, (ii) Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015, (iii) Consolidated Statements of Stockholders’ Equity and Comprehensive Loss for the Years Ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows, for the Years Ended December 31, 2017, 2016 and 2015; (v) Notes to Consolidated Financial Statements, and (vi) Schedule III - Real Estate and Accumulated Depreciation
Filed herewith

69

SUN COMMUNITIES, INC.


*
Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K because such schedules and exhibits do not contain information which is material to an investment decision or which is not otherwise disclosed in the filed agreements. The Company will furnish the omitted schedules and exhibits to the Securities and Exchange Commission upon request by the Commission.
#
Management contract or compensatory plan or arrangement.


70

SUN COMMUNITIES, INC.

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE



 
Page
Reports of Independent Registered Public Accounting Firm
F-2
Financial Statements:
 
Consolidated Balance Sheets as of December 31, 2017 and 2016
F-4
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015
F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016, and 2015
F-6
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2017, 2016, and 2015
F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015
F-8
Notes to Consolidated Financial Statements
F-10
Real Estate and Accumulated Depreciation, Schedule III
F-43



F - 1

SUN COMMUNITIES, INC.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Sun Communities, Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Sun Communities, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 22, 2018 expressed an unqualified opinion.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP
GRANT THORNTON LLP

We have served as the Company’s auditor since 2003.

Southfield, Michigan
February 22, 2018


F - 2

SUN COMMUNITIES, INC.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Sun Communities, Inc.

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Sun Communities, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2017, and our report dated February 22, 2018 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP
GRANT THORNTON LLP

Southfield, Michigan
February 22, 2018


F - 3



SUN COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 
As of December 31,
 
2017
 
2016
ASSETS
 
 
 
Land
$
1,107,838

 
$
1,051,536

Land improvements and buildings
5,102,014

 
4,825,043

Rental homes and improvements
528,074

 
489,633

Furniture, fixtures and equipment
144,953

 
130,127

Investment property
6,882,879

 
6,496,339

Accumulated depreciation
(1,237,525
)
 
(1,026,858
)
Investment property, net (including $50,193 and $88,987 for consolidated variable interest entities at December 31, 2017 and December 31, 2016; see Note 7)
5,645,354

 
5,469,481

Cash and cash equivalents
10,127

 
8,164

Inventory of manufactured homes
30,430

 
21,632

Notes and other receivables, net
163,496

 
81,179

Collateralized receivables, net
128,246

 
143,870

Other assets, net (including $1,659 and $3,054 for consolidated variable interest entities at December 31, 2017 and December 31, 2016; see Note 7)
134,304

 
146,450

TOTAL ASSETS
$
6,111,957

 
$
5,870,776

LIABILITIES

 

Mortgage loans payable (including $41,970 and $62,111 for consolidated variable interest entities at December 31, 2017 and December 31, 2016; see Note 7)
$
2,867,356

 
$
2,819,567

Secured borrowings on collateralized receivables
129,182

 
144,477

Preferred OP units - mandatorily redeemable
41,443

 
45,903

Lines of credit
41,257

 
100,095

Distributions payable
55,225

 
51,896

Other liabilities (including $1,468 and $1,998 for consolidated variable interest entities at December 31, 2017 and December 31, 2016; see Note 7)
270,741

 
279,667

TOTAL LIABILITIES
3,405,204

 
3,441,605

Commitments and contingencies

 

Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 1,085 shares at December 31, 2017 and 1,681 shares at December 31, 2016
32,414

 
50,227

Series A-4 preferred OP units
10,652

 
16,717

STOCKHOLDERS’ EQUITY
 
 
 
Series A preferred stock, $0.01 par value. Issued and outstanding: none at December 31, 2017 and 3,400 shares at December 31, 2016

 
34

Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 79,679 shares at December 31, 2017 and 73,206 shares at December 31, 2016
797

 
732

Additional paid-in capital
3,758,533

 
3,321,441

Accumulated other comprehensive income (loss)
1,102

 
(3,181
)
Distributions in excess of accumulated earnings
(1,162,001
)
 
(1,023,415
)
Total Sun Communities, Inc. stockholders' equity
2,598,431

 
2,295,611

Noncontrolling interests:
 
 
 
Common and preferred OP units
60,971

 
69,598

Consolidated variable interest entities
4,285

 
(2,982
)
Total noncontrolling interest
65,256

 
66,616

TOTAL STOCKHOLDERS’ EQUITY
2,663,687

 
2,362,227

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
6,111,957

 
$
5,870,776


See accompanying Notes to Consolidated Financial Statements.

F - 4


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
REVENUES
 
 
 
 
 
 
Income from real property
 
$
742,228

 
$
620,917

 
$
506,078

Revenue from home sales
 
127,408

 
110,507

 
79,728

Rental home revenue
 
50,549

 
47,780

 
46,236

Ancillary revenues
 
37,511

 
33,424

 
24,532

Interest
 
21,180

 
18,113

 
15,938

Brokerage commissions and other revenues, net
 
3,694

 
3,037

 
2,219

Total revenues
 
982,570

 
833,778

 
674,731

COSTS AND EXPENSES
 
 
 
 
 
 
Property operating and maintenance
 
210,278

 
173,274

 
135,797

Real estate taxes
 
52,288

 
44,306

 
34,714

Cost of home sales
 
95,114

 
80,420

 
58,941

Rental home operating and maintenance
 
22,000

 
24,294

 
24,956

Ancillary expenses
 
27,071

 
23,425

 
17,519

Home selling expenses
 
12,457

 
9,744

 
7,476

General and administrative
 
74,711

 
64,087

 
47,455

Transaction costs
 
9,801

 
31,914

 
17,803

Catastrophic weather related charges, net
 
8,352

 
1,172

 

Depreciation and amortization
 
261,536

 
221,770

 
177,637

Loss on extinguishment of debt
 
6,019

 
1,127

 
2,800

Interest
 
127,128

 
119,163

 
107,659

Interest on mandatorily redeemable preferred OP units
 
3,114

 
3,152

 
3,219

Total expenses
 
909,869

 
797,848

 
635,976

Income before other items
 
72,701

 
35,930

 
38,755

Other income / (expense), net
 
8,982

 
(4,676
)
 

Gain on disposition of properties, net
 

 

 
125,376

Current tax expense
 
(446
)
 
(683
)
 
(158
)
Deferred tax benefit / (expense)
 
582

 
400

 
(1,000
)
Income from affiliate transactions
 

 
500

 
7,500

Net income
 
81,819


31,471


170,473

Less: Preferred return to preferred OP units
 
(4,581
)
 
(5,006
)
 
(4,973
)
Less: Amounts attributable to noncontrolling interests
 
(5,055
)
 
(150
)
 
(10,054
)
Net income attributable to Sun Communities, Inc.
 
72,183

 
26,315

 
155,446

Less: Preferred stock distributions
 
(7,162
)
 
(8,946
)
 
(13,793
)
Less: Preferred stock redemption costs
 

 

 
(4,328
)
Net income attributable to Sun Communities, Inc. common stockholders
 
$
65,021

 
$
17,369

 
$
137,325

 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic
 
76,084

 
65,856

 
53,686

Diluted
 
76,711

 
66,321

 
53,702

Earnings per share (Refer to Note 13):
 
 
 
 
 
 
Basic
 
$
0.85

 
$
0.27

 
$
2.53

Diluted
 
$
0.85

 
$
0.26

 
$
2.52

 
 
 
 
 
 
 


See accompanying Notes to Consolidated Financial Statements.

F - 5


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)


 
Year Ended December 31,
 
2017
 
2016
 
2015
Net income
$
81,819

 
$
31,471

 
$
170,473

Foreign currency translation gain / (loss)
4,527

 
(3,401
)
 

Total comprehensive income
86,346

 
28,070

 
170,473

Less: Comprehensive income / (loss) attributable to noncontrolling interests
5,299

 
(70
)
 
10,054

Comprehensive income attributable to Sun Communities, Inc.
$
81,047

 
$
28,140

 
$
160,419


See accompanying Notes to Consolidated Financial Statements.


F - 6


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
 
7.125% Series A Cumulative Redeemable Preferred Stock
 
Common Stock
 
Additional Paid-In Capital
 
Distributions in Excess of Accumulated Earnings
 
Accumulated Other Comprehensive Income / (Loss)
 
Non-controlling Interests
 
Total Stockholders’ Equity
Balance as of December 31, 2014, revised
$
34

 
$
486

 
$
1,741,154

 
$
(863,545
)
 
$

 
$
29,691

 
$
907,820

Issuance of common stock from exercise of options, net

 

 
95

 

 

 

 
95

Issuance, conversion of OP units and associated costs of common stock, net

 
98

 
564,260

 

 

 
52,921

 
617,279

Conversion of Series A-4 preferred stock

 

 
6,900

 

 

 

 
6,900

Preferred stock redemption

 

 

 
(4,328
)
 

 

 
(4,328
)
Share-based compensation - amortization and forfeitures

 

 
6,905

 
203

 

 

 
7,108

Net income

 

 

 
160,418

 

 
9,185

 
169,603

Distributions

 

 

 
(156,870
)
 

 
(11,026
)
 
(167,896
)
Balance at December 31, 2015
34

 
584

 
2,319,314

 
(864,122
)
 

 
80,771

 
1,536,581

Issuance of common stock from exercise of options, net

 


149

 

 

 

 
149

Issuance, conversion of OP units and associated costs of common stock, net

 
144

 
981,174

 

 

 
(2,687
)
 
978,631

Conversion of Series A-4 preferred stock

 

 
11,503

 

 

 

 
11,503

Share-based compensation - amortization and forfeitures

 
4

 
9,301

 
252

 

 

 
9,557

Foreign currency translation loss

 

 

 

 
(3,181
)
 
(220
)
 
(3,401
)
Net income

 

 

 
31,321

 

 
60

 
31,381

Distributions

 

 

 
(190,866
)
 

 
(11,308
)
 
(202,174
)
Balance at December 31, 2016
34

 
732

 
3,321,441

 
(1,023,415
)
 
(3,181
)
 
66,616

 
2,362,227

Issuance of common stock and common OP units, net

 
63

 
514,024

 

 

 
2,001

 
516,088

Conversion of OP units

 
1

 
3,556

 

 

 
(3,298
)
 
259

Redemption of Series A-4 preferred stock

 

 
(3,867
)
 

 

 

 
(3,867
)
Conversion of Series A-4 preferred stock

 
1

 
4,719

 

 

 

 
4,720

Redemption of Series A-4 OP units

 

 
(2,571
)
 

 

 

 
(2,571
)
Redemption of Series A Cumulative Convertible Preferred Stock
(34
)
 

 
(84,966
)
 

 

 

 
(85,000
)
Share-based compensation - amortization and forfeitures

 

 
12,398

 
297

 

 

 
12,695

Acquisition of noncontrolling interests

 

 
(6,201
)
 

 

 
6,101

 
(100
)
Foreign currency translation gain

 

 

 

 
4,283

 
244

 
4,527

Net income

 

 

 
76,765

 

 
4,849

 
81,614

Distributions

 

 

 
(215,648
)
 

 
(11,257
)
 
(226,905
)
Balance at December 31, 2017
$

 
$
797

 
$
3,758,533

 
$
(1,162,001
)
 
$
1,102

 
$
65,256

 
$
2,663,687


See accompanying Notes to Consolidated Financial Statements.

F - 7


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Year Ended December 31,
 
2017
 
2016
 
2015
OPERATING ACTIVITIES:
 
 
 
 
 
Net income
$
81,819

 
$
31,471

 
$
170,473

        Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Gain on disposition of assets
(9,338
)
 
(11,224
)
 
(5,051
)
Gain on disposition of properties, net

 

 
(125,376
)
Gain on acquisition of property

 
(510
)
 

Unrealized foreign currency translation (gain) / loss
(6,146
)
 
5,005

 

Contingent liability remeasurement (gain) / loss
(3,035
)
 
181

 

Asset impairment charges
742

 

 

Share-based compensation
12,695

 
9,557

 
7,108

Depreciation and amortization
256,193

 
218,669

 
174,589

Deferred tax (benefit) expense
(582
)
 
(400
)
 
1,000

Amortization of below market lease
(7,402
)
 
(6,570
)
 
(5,073
)
Amortization of debt premium
(9,548
)
 
(10,693
)
 
(10,483
)
Amortization of deferred financing costs
2,910

 
2,160

 
1,936

Amortization of ground lease intangibles
1,914

 
600

 

Loss on extinguishment of debt
6,019

 
1,127

 
2,800

Income from affiliate transactions

 
(500
)
 
(7,500
)
Change in notes receivable from financed sales of inventory homes, net of repayments
(26,193
)
 
(20,933
)
 
(9,270
)
Change in inventory, other assets and other receivables, net
(29,264
)
 
28,118

 
(14,618
)
Change in other liabilities
(9,034
)
 
(7,365
)
 
1,728

NET CASH PROVIDED BY OPERATING ACTIVITIES
261,750

 
238,693

 
182,263

INVESTING ACTIVITIES:
 
 
 
 
 
Investment in properties
(288,537
)
 
(223,429
)
 
(208,427
)
Acquisitions of properties, net of cash acquired
(120,377
)
 
(1,487,593
)
 
(309,274
)
Payments for deposits on acquisitions

 

 
(2,260
)
Proceeds from affiliate transactions

 
500

 
7,500

Proceeds from dispositions of assets and depreciated homes, net
8,575

 
4,709

 
6,848

Proceeds from disposition of properties

 
88,696

 
94,522

Issuance of notes and other receivables
(3,918
)
 
(10,633
)
 
(1,755
)
Payment for membership interest

 

 
(2,102
)
Repayments of notes and other receivables
2,615

 
13,238

 
1,764

NET CASH USED FOR INVESTING ACTIVITIES
(401,642
)
 
(1,614,512
)
 
(413,184
)
FINANCING ACTIVITIES:
 
 
 
 
 
Issuance and costs of common stock, OP units, and preferred OP units, net
487,677

 
750,534

 
310,396

Borrowings on lines of credit
661,000

 
580,754

 
421,184

Payments on lines of credit
(719,536
)
 
(505,409
)
 
(401,978
)
Proceeds from issuance of other debt
185,153

 
964,252

 
377,041

Payments on other debt
(124,427
)
 
(230,785
)
 
(222,877
)
Prepayment penalty on debt
(6,019
)
 
(1,127
)
 
(2,800
)
Proceeds received from return of prepaid deferred financing costs

 

 
6,852

Redemption of Series A-4 preferred stock and OP units
(24,698
)
 

 
(121,445
)
Redemption of Series A cumulative convertible preferred stock
(85,000
)
 

 

Redemption of Series B-3 preferred OP units
(4,460
)
 

 

Distributions to stockholders, OP unit holders, and preferred OP unit holders
(224,483
)
 
(193,740
)
 
(162,491
)
Preferred stock redemption costs

 

 
(4,328
)
Payments for deferred financing costs
(3,650
)
 
(25,509
)
 
(7,006
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
141,557

 
1,338,970

 
192,548

Effect of exchange rate changes on cash and cash equivalents
298

 
(73
)
 

Net change in cash and cash equivalents
1,963

 
(36,922
)
 
(38,373
)
Cash and cash equivalents, beginning of period
8,164

 
45,086

 
83,459

Cash and cash equivalents, end of period
$
10,127

 
$
8,164

 
$
45,086



F - 8


 
Year Ended December 31,
 
2017
 
2016
 
2015
SUPPLEMENTAL INFORMATION:
 
 
 
 
 
Cash paid for interest (net of capitalized interest of $2,755, $1,595 and $608 respectively)
$
124,046

 
$
121,480

 
$
99,989

Cash paid for interest on mandatorily redeemable debt
$
3,114

 
$
3,152

 
$
3,222

Cash (refunds) paid for income taxes
$
(194
)
 
$
452

 
$
310

Noncash investing and financing activities:
 
 
 
 
 
Reduction in secured borrowing balance
$
23,449

 
$
19,734

 
$
26,293

Change in distributions declared and outstanding
$
3,267

 
$
9,626

 
$
6,744

Conversion of common and preferred OP units
$
3,556

 
$
5,933

 
$
5,491

Conversion of Series A-4 preferred stock
$
4,720

 
$
11,503

 
$
6,900

Proceeds related to the disposition of properties held in escrow
$

 
$

 
$
126,339

Settlement of membership interest
$

 
$

 
$
2,786

Capital lease
$
4,114

 
$

 
$

Noncash investing and financing activities at the date of acquisition:
 
 
 
 
 
Acquisitions - Series A-4 preferred OP units issued
$

 
$

 
$
1,000

Acquisitions - Series A-4 preferred stock issued
$

 
$

 
$
175,613

Acquisitions - Common stock and OP units issued
$
28,410

 
$
225,000

 
$
278,955

Acquisitions - Series C preferred OP units issued
$

 
$

 
$
33,154

Acquisitions - debt assumed
$
4,592

 
$

 
$
380,043

Acquisitions - contingent consideration liability
$

 
$
9,830

 
$



See accompanying Notes to Consolidated Financial Statements.


F - 9

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.      Significant Accounting Policies

Business

Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”), and Sun Home Services, Inc., a Michigan corporation (“SHS”) are referred to herein as the “Company,” “us,” “we,” and “our”. We are a fully integrated, self-administered and self-managed real estate investment trust (“REIT”).

We own, operate, or have an interest in a portfolio, and develop manufactured housing (“MH”) and recreational vehicle (“RV”) communities throughout the United States (“U.S.”). As of December 31, 2017, we owned, operated or had an interest in a portfolio of 350 developed properties located in 29 states and Ontario, Canada (collectively the “Properties”), including 230 MH communities, 89 RV communities, and 31 communities containing both MH and RV sites. As of December 31, 2017, the Properties contained an aggregate of 121,892 developed sites comprised of 83,294 developed MH sites, 22,742 annual RV sites, and 15,856 transient RV sites. There are approximately 9,600 additional MH and RV sites suitable for development.

Principles of Consolidation

The accompanying Consolidated Financial Statements include our accounts and all majority-owned and controlled subsidiaries, including entities in which we have a controlling interest or have been determined to be the primary beneficiary of a variable interest entity (“VIE”). All inter-company transactions have been eliminated in consolidation. Any subsidiaries in which we have an ownership percentage equal to or greater than 50%, but less than 100%, or considered a VIE, represent subsidiaries with a noncontrolling interest. The noncontrolling interests in our subsidiaries are allocated their proportionate share of the subsidiaries’ financial results. This allocation is recorded as the noncontrolling interest in our Consolidated Financial Statements.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions related to the reported amounts included in our Consolidated Financial Statements and accompanying footnotes thereto. Actual results could differ from those estimates.

Investment Property

Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long-lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long-lived assets based on discounted future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy, development, and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements.

We periodically receive offers from interested parties to purchase certain of our properties. These offers may be the result of an active program initiated by us to sell the property, or from an unsolicited offer to purchase the property. The typical sale process involves a significant negotiation and due diligence period between us and the potential purchaser. As the intent of this process is to determine if there are items that would cause the purchaser to be unwilling to purchase or we would be unwilling to sell, it is not unusual for such potential offers of sale/purchase to be withdrawn as such issues arise. We classify assets as “held for sale” when it is probable, in our opinion, that a sale transaction will be completed within one year. This typically occurs when all significant contingencies surrounding the closing have been resolved, which often corresponds with the closing date.


F - 10

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


We allocate the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize an independent third-party to value the net tangible and identified intangible assets in connection with the acquisition of the respective property. We provide historical and pro forma financial information obtained about each property, as well as any other information needed in order for the third-party to ascertain the fair value of the tangible and intangible assets (including in-place leases) acquired.

On January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” Upon adoption of this standard, we expect that substantially all of our future property acquisitions will be accounted for as asset acquisitions. Refer to Note 17, “Recent Accounting Pronouncements,” for additional information regarding adoption of this ASU.

Capitalized Costs

We capitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and construction costs related to the development of new community or expansion sites are capitalized until the property is substantially complete. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and the majority of costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized over a seven-year period based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new debt financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method).

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash and cash equivalents. The maximum amount of credit risk arising from cash deposits in excess of federally insured amounts was approximately $17.7 million and $10.1 million as of December 31, 2017 and 2016, respectively.

Inventory

Inventory of manufactured homes is stated at lower of specific cost or market based on the specific identification method.

Investments in Affiliates

Investments in affiliates in which we do not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to its operations and major decisions, are accounted for using the equity method of accounting. The carrying value of our investment is adjusted for our proportionate share of the affiliate’s net income or loss and reduced by distributions received. We review the carrying value of our investment in affiliates for other than temporary impairment whenever events or changes in circumstances indicate a possible impairment. Financial condition, operational performance, and other economic trends are some of the factors we consider when we evaluate the existence of impairment indicators. When we have a carrying value of zero for our investment, we suspend the equity method of accounting until such time that the affiliate’s net income equals or exceeds the share of net losses not recognized during the time in which the equity method of accounting was suspended. Refer to Note 6, “Investment in Affiliates,” for additional information.

Notes and Other Receivables

Notes receivable includes both installment loans for manufactured homes purchased by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables. The notes are collateralized by the underlying manufactured home sold. For purposes of accounting policy, all notes receivable are considered one homogeneous segment, as the notes are typically underwritten using the same requirements and terms. Notes receivable are reported at their outstanding unpaid principal balance adjusted for an allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of the loans.


F - 11

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Past due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash basis until qualifying for return to accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. The ability to collect our notes receivable is measured based on current and historical information and events. We consider numerous factors including: length of delinquency, estimated costs to lease or sell, and repossession history. Our experience supports a high recovery rate for notes receivable; however, there is some degree of uncertainty about the recoverability of our investment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the homes on the notes retained by us and repurchasing the homes on the collateralized receivables, and subsequently selling or leasing these homes to potential residents in our communities. We have established a loan loss reserve based on our estimated unrecoverable costs associated with repossessed/repurchased homes. We estimate our unrecoverable costs to be the repurchase price of the home collateralizing the note receivable plus repair and remarketing costs in excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and is applied to our estimated annual future repossessions to create the allowance for both installment and collateralized notes receivable.

We evaluate the collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent beyond the grace period required by law or by the loan agreement, notice is given to start the collection process. A specific allowance is estimated on the past due loans based on historical delinquency data and current delinquency levels.

Credit quality is evaluated at the inception of the receivable. Factors that are considered in order to determine the credit quality of the applicant include, but are not limited to: rental payment history; home debt to income ratio; loan value to the collateralized asset; total debt to income ratio; length of employment; previous landlord references; and FICO scores.

Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due.

Restricted Cash

Restricted cash consists of amounts held in deposit for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. At December 31, 2017 and 2016, $13.4 million and $17.1 million of restricted cash, respectively, was included as a component of Other assets, net on the Consolidated Balance Sheets.

Identified Intangible Assets

The Company amortizes identified intangible assets that are determined to have finite lives over the period the assets are expected to contribute directly or indirectly to the future cash flows of the property or business. The carrying amounts of the identified intangible assets are included in Other assets, net on our Consolidated Balance Sheets. Refer to Note 5, “Intangible Assets,” for additional information.

Deferred Taxes

We are subject to certain state taxes that are considered to be income taxes and have certain subsidiaries that are taxed as regular corporations for U.S. (i.e., federal, state, local, etc.) and non-U.S. income tax purposes. Deferred tax assets or liabilities are recognized for temporary differences between the tax basis of assets and liabilities and their carrying amounts in the financial statements and net operating loss carryforwards in certain subsidiaries, including those domiciled in foreign jurisdictions, which may be realized in future periods if the respective subsidiary generates sufficient taxable income. Deferred tax assets and liabilities are measured using currently enacted tax rates. A valuation allowance is established if, based on the available evidence, it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. Refer to Note 12, “Income Taxes,” for additional information.



F - 12

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Deferred Financing Costs

Deferred financing costs include fees and costs incurred to obtain long-term financing. The costs are amortized over the terms of the respective loans. Unamortized deferred financing costs are written off when debt is retired before the maturity date. Upon amendment of the line of credit or refinancing of mortgage debt, unamortized deferred financing costs are accounted for in accordance with FASB Accounting Standards Codification (“ASC”) 470-50-40, “Modifications and Extinguishments.”

Share-Based Compensation

Share-based compensation cost for service vesting restricted stock awards is measured based on the closing share price of our common stock on the date of grant. Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. If it is not probable that the performance conditions will be satisfied, we do not recognize compensation expense. We measure the fair value of awards with performance conditions using the closing price of our common stock as of the grant date to calculate compensation cost. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. We recognize compensation cost ratably over each tranche of shares based on the fair value estimated by the model.

Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Binomial (lattice) option-pricing model. The Binomial (lattice) option-pricing model incorporates various assumptions including expected volatility, expected life, dividend yield, and interest rates. Refer to Note 10, “Share-Based Compensation” for additional information.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, accounts and notes receivable, accounts payable, derivative instruments, debt and a contingent consideration liability. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures, pursuant to FASB ASC 820, “Fair Value Measurements and Disclosures.” Refer to Note 16, “Fair Value of Financial Instruments,” for additional information regarding the estimates and assumptions used to estimate the fair value of each financial instrument class.

Revenue Recognition

Rental income attributable to site and home leases is recorded on a straight-line basis when earned from tenants. Leases entered into by tenants are generally for one year terms, but may range from month-to-month to two years and are renewable by mutual agreement from us and the resident, or in some cases, as provided by state statute. Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sales transaction. Interest income on notes receivable is recorded on a level yield basis over the life of the notes. We report real estate taxes collected from residents and remitted to taxing authorities in revenue. Refer to Note 17, “Recent Accounting Pronouncements,” for information regarding our adoption of ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” and the related updates subsequently issued by the FASB on January 1, 2018.

Advertising Costs

Advertising costs are expensed as incurred. As of December 31, 2017, 2016 and 2015, we had advertising costs of $5.9 million, $4.2 million and $3.9 million, respectively.

Depreciation and Amortization

Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are 30 years for land improvements and buildings, 10 years for rental homes, seven to 15 years for furniture, fixtures and equipment, four to seven years for computer hardware and software, and seven to 15 years for intangible assets.

Foreign Currency

The assets and liabilities of our Canadian operations, where the functional currency is the Canadian dollar, are translated into U.S. dollars using the exchange rate in effect as of the balance sheet date. Income statement amounts are translated at the average exchange rate prevailing during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss).

F - 13

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Foreign currency exchange gains and losses arising from fluctuations in currency exchange rates on transactions and the effects of remeasurement of monetary balances denominated in currencies other than the functional currency are recorded in earnings.

For the year ended December 31, 2017, we recorded a foreign currency translation gain of $5.9 million within Other income / (expense), net on our Consolidated Statements of Operations, as compared to a foreign currency translation loss of $5.0 million, for the year ended December 31, 2016. We had no foreign currency translation impact for the year ended December 31, 2015.

Derivative Instruments and Hedging Activities

We do not enter into derivative instruments for speculative purposes. We adjust our balance sheet on a quarterly basis to reflect the current fair market value of our derivatives. We use standard market conventions to determine the fair values of derivative instruments, including the quoted market prices or quotes from brokers or dealers for the same or similar instruments. All methods of assessing fair value result in a general approximation of value and such value may never actually be realized. Changes in the fair value of derivatives are recorded in earnings. As of December 31, 2017 and 2016, the fair value of our derivatives was zero. Refer to Note 15, “Derivative Instruments and Hedging Activities” for additional information.

F - 14

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.      Real Estate Acquisitions and Dispositions

2017 Acquisitions

In December 2017, we acquired Colony in the Wood (“Colony in the Wood”), an age-restricted MH community with 383 sites located in Port Orange, Florida.

In November 2017, we acquired Emerald Coast RV Beach Resort (“Emerald Coast”), an MH and RV community with 201 sites located in Panama City Beach, Florida.

In September 2017, we acquired three age-restricted MH communities: Lazy J Ranch (“Lazy J Ranch”), with 220 sites in Arcata, California; Ocean West (“Ocean West”), with 130 sites in McKinleyville, California; and Caliente Sands (“Caliente Sands”), with 118 sites in Cathedral City, California.

In July 2017, we acquired Pismo Dunes RV Resort (“Pismo Dunes”), an age-restricted RV community with 331 sites located in Pismo Beach, California.

In June 2017, we acquired Arbor Woods (“Arbor Woods”), a MH community with 458 sites located in Superior Township, Michigan.

In May 2017, we acquired Sunset Lakes RV Resort (“Sunset Lakes”), a RV resort with 498 sites located in Hillsdale, Illinois.

In March 2017, we acquired Far Horizons 49er Village RV Resort Inc. (“49er Village”), a RV resort with 328 sites located in Plymouth, California.

The following table summarizes the amounts of assets acquired net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2017 (in thousands):

At Acquisition Date (1)
Colony in the Wood
Emerald Coast
Lazy J Ranch
Ocean West
Caliente Sands
Pismo Dunes
Arbor Woods
Sunset Lakes
49er Village
Total
Investment in property
$
32,478

$
19,400

$
13,938

$
9,453

$
8,640

$
21,260

$
15,725

$
7,835

$
12,890

$
141,619

Notes receivable






23



23

Inventory of manufactured homes


2


21


465



488

In-place leases and other intangible assets

100

360

220

210

660

730

210

110

2,600

Total identifiable assets acquired net of liabilities assumed
$
32,478

$
19,500

$
14,300

$
9,673

$
8,871

$
21,920

$
16,943

$
8,045

$
13,000

$
144,730

 
 
 
 
 
 
 
 
 
 
 
Consideration
 
 
 
 
 
 
 
 
 
 
Cash
$
32,478

$
19,500

$
14,300

$
5,081

$
8,871

$

$
14,943

$
8,045

$
13,000

$
116,218

Equity





26,410

2,000



28,410

Liabilities assumed



4,592


510




5,102

Cash proceeds from seller





(5,000
)



(5,000
)
Total consideration
$
32,478

$
19,500

$
14,300

$
9,673

$
8,871

$
21,920

$
16,943

$
8,045

$
13,000

$
144,730


(1) The purchase price allocations in the table above are preliminary and may be adjusted as final costs and valuations are determined.


F - 15

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The amount of total revenues and net income included in the Consolidated Statements of Operations for the year ended December 31, 2017 related to the acquisitions completed in 2017 are set forth in the following table (in thousands):

 
Year Ended December 31, 2017
 
(unaudited)
Total revenues
$
8,857

Net income
$
2,248


The following unaudited pro forma financial information presents the results of our operations for the year ended December 31, 2017 and 2016, as if the properties acquired in 2017 had been acquired on January 1, 2016. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees, and purchase accounting.

The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have actually occurred had the acquisitions been consummated on January 1, 2016 (in thousands, except per-share data):
 
 
Year Ended December 31,
 
 
(unaudited)
 
 
2017
 
2016
Total revenues
 
$
992,770

 
$
850,376

Net income attributable to Sun Communities, Inc. common stockholders
 
$
68,404

 
$
22,720

Net income per share attributable to Sun Communities, Inc. common stockholders - basic
 
$
0.90

 
$
0.34

Net income per share attributable to Sun Communities, Inc. common stockholders - diluted
 
$
0.89

 
$
0.34


Also in 2017, we acquired Carolina Pines RV Resort, an undeveloped parcel of land (“Carolina Pines” formerly known as Bear Lake), near Myrtle Beach, South Carolina, for $5.9 million. This land parcel has been entitled and zoned to build an 841 site RV resort.

Transaction costs of $9.8 million, $31.9 million, and $17.8 million have been incurred for the years ended December 31, 2017, 2016, and 2015, respectively. These costs are presented as Transaction costs in our Consolidated Statements of Operations.

2016 Acquisitions

In June 2016, we acquired all of the issued and outstanding shares of common stock of Carefree Communities Inc. (“Carefree”) through the Operating Partnership for an aggregate purchase price of $1.68 billion. Carefree owned 103 MH and RV communities, comprising over 27,000 sites.

At the closing, we issued 3,329,880 shares of common stock at $67.57 per share (or $225.0 million in common stock) to the seller and the Operating Partnership paid the balance of the purchase price in cash. Approximately $1.0 billion of the cash payment was applied simultaneously to repay debt on the properties owned by Carefree. The Operating Partnership funded the cash portion of the purchase price in part with proceeds from debt financings as described in Note 8, “Debt and Lines of Credit” and net proceeds of $385.4 million from an underwritten public offering of 6,037,500 shares of common stock at a price of $66.50 per share in March 2016.


F - 16

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


We have allocated the “investment in property” balances for Carefree to the respective balance sheet line items upon completion of a purchase price allocation in accordance with the FASB ASC Topic 805 “Business Combinations,” as set forth in the table below (in thousands):
At Acquisition Date
 
Carefree
Investment in property
 
$
1,670,981

Ground leases
 
33,270

In-place leases
 
35,010

Deferred tax liability
 
(23,637
)
Other liabilities
 
(15,665
)
Inventory of manufactured homes
 
13,521

Below market lease
 
(29,340
)
Total identifiable assets acquired and liabilities assumed
 
$
1,684,140

 
 
 
Consideration
 


Cash and equity
 
$
1,684,140


Additionally, during 2016, we acquired seven RV resorts and one MH community for total consideration of $89.7 million. We added 1,677 sites in six states as a result of these acquisitions.

The amount of revenue and net income included in the Consolidated Statements of Operations for the year ended December 31, 2016 related to the Carefree acquisition is set forth in the following table (in thousands):
 
Year Ended 
 December 31, 2016
 
(unaudited)
Carefree Acquisition
 
Revenue
$
97,836

Net income
$
9,070


Dispositions

There were no property dispositions during 2017. During the fourth quarter of 2016, we terminated a ground lease arrangement in one of the communities acquired in the Carefree transaction. No gain or loss resulted from the ground lease termination.

3.      Collateralized Receivables and Transfers of Financial Assets

We previously completed various transactions with an unrelated entity involving our notes receivable under which we received cash proceeds in exchange for relinquishing our right, title, and interest in certain notes receivable. We have no further obligations or rights with respect to the control, management, administration, servicing, or collection of the installment notes receivable. However, we are subject to certain recourse provisions requiring us to purchase the underlying homes collateralizing such notes, in the event of a note default and subsequent repossession of the home by the unrelated entity. The recourse provisions are considered to be a form of continuing involvement, and therefore these transferred loans did not meet the requirements for sale accounting. We continue to recognize these transferred loans on our balance sheet and refer to them as collateralized receivables. The proceeds from the transfer have been recognized as a secured borrowing.

In the event of a note default and subsequent repossession of a manufactured home by the unrelated entity, the terms of the agreement require us to repurchase the manufactured home. Default is defined as the failure to repay the installment note receivable according to contractual terms. The repurchase price is calculated as a percentage of the outstanding principal balance of the collateralized receivable, plus any outstanding late fees, accrued interest, legal fees, and escrow advances associated with the installment note receivable.  The percentage used to determine the repurchase price of the outstanding principal balance on the installment note receivable is based on the number of payments made on the note. In general, the repurchase price is determined as follows:


F - 17

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Number of Payments
 
Repurchase Percentage
Fewer than or equal to 15
 
100
%
Greater than 15 but fewer than 64
 
90
%
Equal to or greater than 64 but fewer than 120
 
65
%
120 or more
 
50
%

The transferred assets have been classified as Collateralized receivables, net and the cash proceeds received from these transactions have been classified as Secured borrowings on collateralized receivables within the Consolidated Balance Sheets. The balance of the collateralized receivables was $128.2 million (net of allowance of $0.9 million) and $143.9 million (net of allowance of $0.6 million) as of December 31, 2017, and December 31, 2016, respectively. The receivables have a weighted average interest rate and maturity of 10.0 percent and 15.3 years as of December 31, 2017, and 10.0 percent and 15.7 years as of December 31, 2016.

The outstanding balance on the secured borrowing was $129.2 million and $144.5 million as of December 31, 2017, and December 31, 2016, respectively.

The collateralized receivables earn interest income, and the secured borrowings accrue interest expense at the same interest rates. The amount of interest income and expense recognized was $13.2 million, $14.0 million, and $13.2 million for the years ended December 31, 2017, 2016, and 2015, respectively.
  
The balances of the collateralized receivables and secured borrowings fluctuate. The balances increase as additional notes receivable are transferred and exchanged for cash proceeds. The balances are reduced as the related collateralized receivables are collected from the customers, or as the underlying collateral is repurchased. The change in the aggregate gross principal balance of the collateralized receivables is as follows (in thousands):

 
Year Ended
 
December 31, 2017
 
December 31, 2016
Beginning balance
$
144,477

 
$
140,440

Financed sales of manufactured homes
8,153

 
23,771

Principal payments and payoffs from our customers
(12,186
)
 
(11,937
)
Principal reduction from repurchased homes
(11,262
)
 
(7,797
)
Total activity
(15,295
)
 
4,037

Ending balance
$
129,182

 
$
144,477


The following table sets forth the allowance for the collateralized receivables (in thousands):

 
Year Ended
 
December 31, 2017
 
December 31, 2016
Beginning balance
$
(607
)
 
$
(672
)
Lower of cost or market write-downs
1,024

 
617

Increase to reserve balance
(1,353
)
 
(552
)
Total activity
(329
)
 
65

Ending balance
$
(936
)
 
$
(607
)


F - 18

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4.      Notes and Other Receivables

The following table sets forth certain information regarding notes and other receivables (in thousands):

 
 
Year Ended
 
 
December 31, 2017
 
December 31, 2016
Installment notes receivable on manufactured homes, net
 
$
115,797

 
$
59,320

Other receivables, net
 
47,699

 
21,859

Total notes and other receivables, net
 
$
163,496

 
$
81,179


Installment Notes Receivable on Manufactured Homes

The installment notes of $115.8 million (net of allowance of $0.4 million) and $59.3 million (net of allowance of $0.2 million) as of December 31, 2017 and December 31, 2016, respectively, are collateralized by manufactured homes. The notes represent financing provided to purchasers of manufactured homes primarily located in our communities and require monthly principal and interest payments. The notes have a weighted average interest rate (net of servicing costs) and maturity of 8.2 percent and 17.2 years as of December 31, 2017, and 8.3 percent and 16.0 years as of December 31, 2016.

The change in the aggregate gross principal balance of the installment notes receivable is as follows (in thousands):

 
Year Ended
 
December 31, 2017
 
December 31, 2016
Beginning balance
$
59,524

 
$
20,610

Financed sales of manufactured homes
66,104

 
41,322

Acquired notes
23

 
3,521

Principal payments and payoffs from our customers
(6,128
)
 
(4,363
)
Principal reduction from repossessed homes
(3,349
)
 
(1,566
)
Total activity
56,650

 
38,914

Ending balance
$
116,174

 
$
59,524


Allowance for Losses for Installment Notes Receivable

The following table sets forth the allowance change for the installment notes receivable (in thousands):

 
Year Ended
 
December 31, 2017
 
December 31, 2016
Beginning balance
$
(205
)
 
$
(192
)
Lower of cost or market write-downs
170

 
128

Increase to reserve balance
(342
)
 
(141
)
Total activity
(172
)
 
(13
)
Ending balance
$
(377
)
 
$
(205
)

Other Receivables

As of December 31, 2017, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of $7.0 million (net of allowance of $1.5 million), home sale proceeds of $13.8 million, insurance receivables of $24.2 million, and rebates and other receivables of $2.7 million. As of December 31, 2016, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of $6.0 million (net of allowance of $1.5 million), home sale proceeds of $11.6 million, insurance receivables of $2.3 million, rebates and other receivables of $2.0 million.

                 

F - 19

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5. Intangible Assets

Our intangible assets include ground leases, in-place leases, franchise fees, and other intangible assets. These intangible assets are recorded in Other assets, net on the Consolidated Balance Sheets.

In December 2017, we acquired 25.0 percent of the land that was previously under a ground lease at one of our California communities for $4.0 million, and amended the ground lease agreement to include an option to purchase an additional 25.0 percent of the land. As a result of these transactions, we wrote off $1.1 million of the gross carrying amount of the ground lease intangible and $0.2 million of accumulated amortization. The $0.9 million net write off is included within Property operating and maintenance expense in our Consolidated Statements of Operations for the year ended December 31, 2017.

The gross carrying amounts and accumulated amortization are as follows (in thousands):

 
 
 
 
December 31, 2017
 
December 31, 2016
Intangible Asset
 
Useful Life
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Ground leases
 
8-57 years
 
$
32,165

 
$
(1,409
)
 
$
33,270

 
$
(600
)
In-place leases
 
7 years
 
100,843

 
(45,576
)
 
98,235

 
(31,796
)
Franchise fees and other intangible assets
 
15 years
 
1,880

 
(1,451
)
 
1,880

 
(1,155
)
Total
 
 
 
$
134,888


$
(48,436
)

$
133,385

 
$
(33,551
)

Total amortization expenses related to our intangible assets are as follows (in thousands):

 
 
Year Ended December 31,
Intangible Asset
 
2017
 
2016
 
2015
Ground leases
 
$
809

 
$
600

 
$

In-place leases
 
13,812

 
11,559

 
8,299

Franchise fees and other intangible assets
 
301

 
535

 
516

Total
 
$
14,922

 
$
12,694

 
$
8,815


We anticipate amortization expense for our intangible assets to be as follows for the next five years (in thousands):

 
 
Year
 
 
2018
 
2019
 
2020
 
2021
 
2022
Estimated expense
 
$
14,507

 
$
13,591

 
$
11,863

 
$
11,471

 
$
6,870


6.      Investment in Affiliates

Origen Services

At December 31, 2017 and 2016, we had a 22.9 percent ownership interest in Origen Services, an entity that specializes in resident screening services. We have suspended equity method accounting as the carrying value of our investment is zero.

Origen Financial, Inc. (“Origen”)

Through Sun OFI, LLC, a taxable REIT subsidiary, we previously owned 5,000,000 shares of common stock of Origen, which approximated an ownership interest of 19.3 percent. During 2016, we sold all 5,000,000 shares of common stock in Origen to an unrelated party for aggregate proceeds of $0.5 million. The carrying value of our investment prior to the sale was zero. During 2015, we received a distribution of $7.5 million from Origen.



F - 20

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. Consolidated Variable Interest Entities

We consolidate Rudgate Village SPE, LLC; Rudgate Clinton SPE, LLC; and Rudgate Clinton Estates SPE, LLC (collectively, “Rudgate”) as a variable interest entity (“VIE”). We evaluated our arrangement with this property under the guidance set forth in FASB ASC Topic 810 “Consolidation.” We concluded that Rudgate qualified as a VIE where we are the primary beneficiary, as we have power to direct the significant activities, absorb the significant losses and receive the significant benefits from the entity.

During 2017, we acquired the noncontrolling equity interests in Wildwood Mobile Home Park (“Wildwood”) held by third parties for total consideration of $0.1 million. Prior to this acquisition, we consolidated Wildwood as a VIE. The acquisition resulted in the Company owning a 100.0 percent controlling interest in Wildwood, and was deemed a VIE reconsideration event. We concluded that Wildwood was no longer a VIE.

The following table summarizes the assets and liabilities included in our Consolidated Balance Sheets after appropriate eliminations have been made (in thousands):

 
December 31, 2017
 
December 31, 2016
ASSETS
 
 
 
Investment property, net
$
50,193

 
$
88,987

Other assets
1,659

 
3,054

   Total Assets
$
51,852

 
$
92,041

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Debt
$
41,970

 
$
62,111

Other liabilities
1,468

 
1,998

Noncontrolling interests
4,285

 
(2,982
)
   Total Liabilities and Stockholders’ Equity
$
47,723

 
$
61,127


Investment property, net and other assets related to the consolidated VIEs comprised approximately 0.8 percent and 1.6 percent of our consolidated total assets at December 31, 2017 and December 31, 2016, respectively. Debt and other liabilities comprised approximately 1.2 percent and 1.9 percent of our consolidated total liabilities at December 31, 2017 and December 31, 2016, respectively. Noncontrolling interests related to the consolidated VIEs, on an absolute basis, comprised less than 1.0 percent of our consolidated total equity at December 31, 2017 and December 31, 2016.

8.     Debt and Lines of Credit

The following table sets forth certain information regarding debt (in thousands):
 
Carrying Amount
 
Weighted Average
Years to Maturity
 
Weighted Average
Interest Rates
 
December 31, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
 
December 31, 2017
 
December 31, 2016
Collateralized term loans - Life Companies
1,044,246

 
888,705

 
13.9
 
12.2
 
3.9
%
 
3.9
%
Collateralized term loans - FNMA
$
1,026,014

 
$
1,046,803

 
5.6
 
6.6
 
4.4
%
 
4.3
%
Collateralized term loans - CMBS
410,747

 
492,294

 
5.0
 
5.6
 
5.1
%
 
5.2
%
Collateralized term loans - FMCC
386,349

 
391,765

 
6.9
 
7.9
 
3.9
%
 
3.9
%
Secured borrowings
129,182

 
144,477

 
15.3
 
15.7
 
10.0
%
 
10.0
%
Lines of credit
41,257

 
100,095

 
3.1
 
3.6
 
2.8
%
 
2.1
%
Preferred OP units - mandatorily redeemable
41,443

 
45,903

 
5.0
 
5.4
 
6.7
%
 
6.9
%
Total debt
$
3,079,238

 
$
3,110,042

 
8.9
 
8.5
 
4.5
%
 
4.5
%

Collateralized Term Loans

F - 21

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In December 2017, we defeased a $38.6 million collateralized term loan with a 5.25 percent fixed interest rate that was due to mature on June 1, 2022. As a result of the transaction we recognized a loss on extinguishment of debt of $5.2 million in our Consolidated Statements of Operations. Concurrent with the defeasance, we entered into a new $100.0 million collateralized term loan, encumbered by the same property, with a 4.25 percent fixed rate of interest and 30-year term. Refer to Note 20, “Subsequent Events,” for additional information regarding collateralized term loan repayments after December 31, 2017.

In September 2017, in connection with the Ocean West acquisition, we assumed a $4.6 million collateralized term loan with Fannie Mae, with an interest rate of 4.34 percent and a remaining term of 9.8 years.

In June 2017, we entered into a $77.0 million collateralized term loan which bears interest at a rate of 4.16 percent amortizing over a 25-year term. We also repaid a $3.9 million collateralized term loan with an interest rate of 6.54 percent that was due to mature on August 31, 2017. As a result of the repayment transaction, we recognized a loss on extinguishment of debt of $0.3 million in our Consolidated Statements of Operations.

During the first quarter of 2017, we defeased an $18.9 million collateralized term loan with an interest rate of 6.49 percent that was due to mature on August 1, 2017, releasing one encumbered community. As a result of the transaction, we recognized a loss on extinguishment of debt of $0.5 million in our Consolidated Statements of Operations. In addition, we repaid a $10.0 million collateralized term loan with an interest rate of 5.57 percent that was due to mature on May 1, 2017, releasing an additional encumbered community.

During the fourth quarter of 2016, we repaid a total of $79.1 million aggregate principal amount of collateralized term loans that were due to mature during 2017, releasing 10 communities. Also in the fourth quarter of 2016, we entered into a promissory note $58.5 million that bears interest at a rate of 3.33 percent and has a seven-year term. The repayment of the note is interest only for the entire term.

In September 2016, 15 subsidiaries of the Operating Partnership entered into a promissory note for total borrowings of $139.0 million with PNC Bank, as lender (the “Freddie Mac Financing”). Five of the loans totaling $70.2 million bear interest at a rate of 3.93 percent and have ten-year terms. The remaining ten loans totaling $68.8 million bear interest at a rate of 3.75 percent and have seven-year terms. The Freddie Mac Financing provides for principal and interest payments to be amortized over 30 years.

Proceeds from the Freddie Mac Financing described above and the underwritten registered public equity offering in September 2016 described in Note 9, “Equity and Mezzanine Securities” were utilized to repay $62.1 million in mortgage loans and $300.0 million on our revolving loan under our senior revolving credit facility (refer to Lines of Credit below for additional information regarding the A&R Facility.)

In June 2016, 17 subsidiaries of the Operating Partnership entered into a Master Credit Facility Agreement (the “Fannie Mae Credit Agreement”) with Regions Bank, as lender. Pursuant to the Fannie Mae Credit Agreement, Regions Bank loaned a total of $338.0 million under a senior secured credit facility, comprised of two ten-year term loans in the amount of $300.0 million and $38.0 million, respectively (collectively the “Fannie Mae Financing”). The $300.0 million term loan bears interest at 3.69 percent and the $38.0 million term loan bears interest at 3.67 percent for a blended rate of 3.69 percent. The Fannie Mae Financing provides for principal and interest payments to be amortized over 30 years.

The Fannie Mae Financing is secured by mortgages encumbering 17 MH communities comprised of real and personal property owned by the borrowers. Additionally, the Company and the Operating Partnership have provided a guaranty of the non-recourse carve-out obligations of the borrowers under the Fannie Mae Financing.

Additionally, in June 2016, three subsidiaries of the Operating Partnership entered into mortgage loan documents (the “NML Loan Documents”) with The Northwestern Mutual Life Insurance Company (“NML”). Pursuant to the NML Loan Documents, NML made three portfolio loans to the subsidiary borrowers in the aggregate amount of $405.0 million. NML loaned $162.0 million under a ten-year term loan to two of the subsidiary borrowers (the “Portfolio A Loan”). The Portfolio A Loan bears interest at 3.53 percent and is secured by deeds of trust encumbering seven MH communities and one RV community. NML also loaned $163.0 million under a 12-year term loan (the “Portfolio B Loan”) to one subsidiary which is also a borrower under the Portfolio A Loan. The Portfolio B Loan bears interest at 3.71 percent and is secured by deeds of trust and a ground lease encumbering eight MH communities. NML also loaned $80.0 million under a 12-year term loan (the “Portfolio C Loan” and, collectively, with the Portfolio A Loan and the Portfolio B Loan, the “NML Financing”) to one subsidiary borrower. The Portfolio C Loan bears interest at 3.71 percent and is secured by a mortgage encumbering one RV community. The MH and RV communities noted above that secure the NML Financing were acquired as part of the Carefree transaction (Refer to Note 2, “Real Estate Acquisitions and Dispositions”).

F - 22

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The NML Financing is generally non-recourse, however, the borrowers under the NML Financing and the Operating Partnership are responsible for certain customary non-recourse carveouts. In addition, the NML Financing will be fully recourse to the subsidiary borrowers and the Operating Partnership if: (a) the borrowers violate the prohibition on transfer covenants set forth in the loan documents; or (b) a voluntary bankruptcy proceedings is commenced by the borrowers or an involuntary bankruptcy, liquidation, receivership or similar proceeding has commenced against the borrowers and remains undismissed for a period of 90 days.

Proceeds from the Fannie Mae Financing and NML Financing were primarily used to fund the cash portion of the Carefree acquisition (Refer to Note 2, “Real Estate Acquisitions and Dispositions”).

The collateralized term loans totaling $2.9 billion as of December 31, 2017, are secured by 190 properties comprised of 75,198 sites representing approximately $3.4 billion of net book value.

Secured Borrowings

Refer to Note 3, “Collateralized Receivables and Transfers of Financial Assets,” for additional information regarding our collateralized receivables and secured borrowings transactions.

Preferred OP units

Preferred OP units at December 31, 2017 and 2016 include $34.7 million of Aspen preferred OP units issued by the Operating Partnership. As of December 31, 2017, these units are convertible indirectly into 459,499 shares of our common stock. Subject to certain limitations, at any time prior to January 1, 2024, the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the market price of our common stock is $68.00 per share or less, 0.397 common OP units; or (b) if the market price of our common stock is greater than $68.00 per share, the number of common OP units is determined by dividing (i) the sum of (A) $27.00 plus (B) 25 percent of the amount by which the market price of our common stock exceeds $68.00 per share, by (ii) the per-share market price of our common stock. The current preferred distribution rate is 6.5 percent. On January 2, 2024, we are required to redeem all Aspen preferred OP units that have not been converted to common OP units.

Preferred OP units also include $6.7 million and $11.2 million at December 31, 2017 and 2016, respectively, of Series B-3 preferred OP units, which are not convertible. During the three months ended December 31, 2017, we redeemed 44,599 of the Series B-3 preferred OP units at an average redemption price per unit, which included accrued and unpaid distributions, of $101.143755. In the aggregate, we paid $4.5 million to redeem these units. Refer to Note 20, “Subsequent Events” for additional information regarding Series B-3 preferred OP unit redemptions after December 31, 2017.

Subject to certain limitations, (a) during the 90-day period beginning on each of the tenth through fifteenth anniversaries of the issue date of the applicable Series B-3 preferred OP units, (b) at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units, or (c) after our receipt of notice of the death of the electing holder of a Series B-3 preferred OP unit, each holder of Series B-3 preferred OP units may require us to redeem such holder's Series B-3 preferred OP units at the redemption price of $100.00 per unit. In addition, at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units we may redeem, at our option, all of the Series B-3 preferred OP units of any holder thereof at the redemption price of $100.00 per unit.

Lines of Credit

In April 2017, we amended and restated our credit agreement (the “A&R Credit Agreement”) with Citibank, N.A. (“Citibank”) and certain other lenders. Pursuant to the A&R Credit Agreement, we have a senior revolving credit facility with Citibank and certain other lenders in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan (the “A&R Facility”). The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option, subject to the satisfaction of certain conditions as defined in the credit agreement. The A&R Credit Agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $350.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $1.0 billion.

The A&R Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the A&R Credit Agreement, which margin can range from 1.35 percent to 2.20 percent for the revolving loan and 1.30 percent to 2.15 percent for the term loan. As of December 31, 2017, the margin on our leverage ratio was 1.35 percent and 1.30 percent on the revolving and term loans, respectively. We had $37.8 million in borrowings on the

F - 23

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


revolving loan and no borrowings on the term loan totaling $37.8 million as of December 31, 2017, with a weighted average interest rate of 2.79 percent.

The A&R Facility replaced our $450.0 million credit facility (the “Previous Facility”), which was scheduled to mature on August 19, 2019. At the time of the closing of the A&R Facility, there were $220.8 million in borrowings under the Previous Facility. At December 31, 2016, under the Previous Facility, we had $42.3 million in borrowings on the revolving loan and $58.0 million in borrowings on the term loan totaling $100.3 million with a weighted average interest rate of 2.14 percent.

The A&R Facility provides, and the Previous Facility provided, us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but does reduce the borrowing amount available. At December 31, 2017 and December 31, 2016, $1.3 million and $4.6 million, respectively, of availability was used to back standby letters of credit.

We have a $12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least a twelve month notice of their intent to terminate the agreement. The interest rate is 100 basis points over the greater of the prime rate as quoted in the Wall Street Journal on the first business day of each month or 6.0 percent. At December 31, 2017, the effective interest rate was 7.0 percent.  The outstanding balance was $4.0 million and $2.8 million as of December 31, 2017 and December 31, 2016, respectively.

Covenants

Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. The most restrictive of our debt agreements place limitations on secured borrowings and contain minimum fixed charge coverage, leverage, distribution, and net worth requirements. At December 31, 2017, we were in compliance with all covenants.

In addition, certain of our subsidiary borrowers own properties that secure loans. These subsidiaries are consolidated within our accompanying Consolidated Financial Statements, however, each of these subsidiaries’ assets and credit are not available to satisfy the debts and other obligations of the Company, any of its other subsidiaries or any other person or entity.

Long-term Debt Maturities

As of December 31, 2017, the total of maturities and amortization of our debt (excluding premiums and discounts) and lines of credit during the next five years were as follows (in thousands):
 
Maturities and Amortization By Year
 
Total Due
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
Mortgage loans payable:
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturities
$
2,183,609

 
$
26,186

 
$
64,314

 
$
58,078

 
$
270,680

 
$
82,544

 
$
1,681,807

Principal amortization
674,113

 
55,564

 
56,904

 
57,593

 
56,612

 
54,001

 
393,439

Secured borrowings
129,182

 
5,541

 
6,036

 
6,583

 
7,069

 
7,302

 
96,651

Lines of credit
41,809

 

 
4,009

 

 
37,800

 

 

Preferred OP units - mandatorily redeemable
41,443

 
6,780

 

 

 

 

 
34,663

Total
$
3,070,156

 
$
94,071

 
$
131,263

 
$
122,254

 
$
372,161

 
$
143,847

 
$
2,206,560



9.      Equity and Mezzanine Securities

Public Equity Offerings

In May 2017, we closed an underwritten registered public offering of 4,830,000 shares of common stock at a price of $86.00 per share. Proceeds from the offering were $408.9 million after deducting expenses related to the offering, which were used to repay

F - 24

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


borrowings outstanding under the revolving loan under our A&R Facility, to fund acquisitions and for working capital and general corporate purposes.

In September 2016, we closed an underwritten registered public offering of 3,737,500 shares of common stock at a net price of $75.89 per share. Proceeds from the offering were approximately $283.6 million after deducting expenses related to the offering, which were used to repay borrowings outstanding under the revolving loan under our Previous Facility.

In June 2016, at the closing of the Carefree acquisition, we issued the seller 3,329,880 shares of our common stock at an issuance price of $67.57 per share or $225.0 million in common stock. Refer to Note 2, “Real Estate Acquisitions and Dispositions.”

In March 2016, we closed an underwritten registered public offering of 6,037,500 shares of common stock at a price of $66.50 per share. Net proceeds from the offering were approximately $385.4 million after deducting discounts and expenses related to the offering, which we used to fund a portion of the purchase price for the acquisition of Carefree Communities.

At the Market Offering Sales Agreement

In July 2017, we entered into a new at the market offering sales agreement (the “Sales Agreement”) with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc., RBC Capital Markets, LLC, BTIG, LLC, Jefferies LLC, Credit Suisse Securities (USA) LLC and Samuel A. Ramirez & Company, Inc. (each, a “Sales Agent;” collectively, the “Sales Agents”), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold from time to time under the Sales Agreement.

Concurrent with the entry into the Sales Agreement, we terminated our previous sales agreement dated June 17, 2015, with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc., (the “Prior Agreement”). The Prior Agreement had an aggregate offering price of up to $250.0 million. We did not incur any penalties in connection with termination of the Prior Agreement.

Issuances of common stock under the Sales Agreement during 2017 were as follows:
Quarter Ended
 
Common Stock Issued
 
Weighted Average Sales Price
 
Net Proceeds (in Millions)
December 31, 2017
 
321,800

 
$
93.33

 
$
29.7


Issuances of common stock under the Prior Agreement during 2017 and 2016 were as follows:
Quarter Ended
 
Common Stock Issued
 
Weighted Average Sales Price
 
Net Proceeds (in Millions)
June 30, 2017
 
400,000

 
$
85.01

 
$
33.6

March 31, 2017
 
280,502

 
$
76.47

 
$
21.2

December 31, 2016
 
19,498

 
$
75.90

 
$
1.5

September 30, 2016
 
620,828

 
$
76.81

 
$
47.1

June 30, 2016
 
485,000

 
$
71.86

 
$
34.4


Issuances of Common Stock and Common OP Units

In July 2017, we issued 298,900 shares of common stock totaling $26.4 million in connection with the acquisition of Pismo Dunes.

In June 2017, we issued a total of 23,311 common OP units for total consideration of $2.0 million in connection with acquisition activity during the three months ended June 30, 2017.

Conversions

Subject to certain limitations, holders can convert certain series of stock and OP units to shares of our common stock at any time. Below is the activity of conversions during 2017 and 2016:

F - 25

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
Series
 
Conversion Rate
Units/Shares
Common Stock
 
Units/Shares
Common Stock
Common OP unit
 
1

36,055

36,055

 
104,106

104,106

Series A-1 preferred OP unit
 
2.439

21,919

53,456

 
20,691

50,458

Series A-4 preferred OP unit
 
0.4444

10,000

4,440

 
120,906

53,733

Series A-4 preferred stock
 
0.4444

158,036

70,238

 
385,242

171,218

Series C preferred OP unit
 
1.11

16,806

18,651

 
7,043

7,815


Dividends

Dividend distributions declared for the quarter ended December 31, 2017 are as follows:

Dividend
 
Record Date
Payment Date
Distribution per Share
Total Distribution
Common Stock, Common OP units and Restricted Stock
 
12/29/2017
1/16/2018
$
0.67

$
55,225

Series A-4 Cumulative Convertible Preferred Stock
 
12/21/2017
1/2/2018
$
0.40625

$
441


Redemptions

If certain change of control transactions occur or if our common stock ceases to be listed or quoted on an exchange or quotation system, then at any time after November 26, 2019, we or the holders of shares of Series A-4 preferred stock and Series A-4 preferred OP units may cause all or any of those shares or units to be redeemed for cash at a redemption price equal to the sum of (i) the greater of (x) the amount that the redeemed shares of Series A-4 preferred stock and Series A-4 preferred OP units would have received in such transaction if they had been converted into shares of our common stock immediately prior to such transaction, or (y) $25.00 per share, plus (ii) any accrued and unpaid distributions thereon to, but not including, the redemption date.

In November 2017, we redeemed all of the outstanding shares of our 7.125% Series A Cumulative Redeemable Preferred Stock. Holders received a cash payment of $25.14349 per share which included accrued and unpaid dividends. In the aggregate, the Company paid $85.5 million to redeem all of the 3,400,000 outstanding shares.

In June 2017, we redeemed 438,448 shares of Series A-4 preferred stock and 200,000 shares of Series A-4 preferred OP units from certain of the Green Courte entities for total consideration of $24.7 million. Accrued dividends totaling $0.2 million were also paid in connection with the redemptions. The Green Courte entities were the sellers of the American Land Lease portfolio which we acquired in 2014 and 2015.

Repurchase Program

In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock. We have 400,000 common shares remaining in the repurchase program. No common shares were repurchased during 2017 or 2016. There is no expiration date specified for the repurchase program.

10.      Share-Based Compensation

As of December 31, 2017, we have two share-based compensation plans; the Sun Communities, Inc. 2015 Equity Incentive Plan (“2015 Equity Incentive Plan”) and the First Amended and Restated 2004 Non-Employee Director Option Plan (“2004 Non-Employee Director Option Plan”). We believe granting equity awards will provide certain executives, key employees and directors additional incentives to promote our financial success, and promote employee and director retention by providing an opportunity to acquire or increase the direct proprietary interest of those individuals in our operations and future.

Restricted Stock

The majority of our share-based compensation is awarded as service vesting restricted stock grants to executives and key employees. We have also awarded restricted stock to our non-employee directors. We measure the fair value associated with these awards using the closing price of our common stock as of the grant date to calculate compensation cost. Employee awards typically vest

F - 26

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


over several years and are subject to continued employment by the employee. Award recipients receive distribution payments on unvested shares of restricted stock.

2015 Equity Incentive Plan

At the Annual Meeting of Stockholders held on July 20, 2015, the stockholders approved the 2015 Equity Plan. The 2015 Equity Plan had been adopted by the Board and was effective upon approval by our stockholders. The maximum number of shares of common stock that may be issued under the 2015 Equity Plan is 1,750,000 shares of our common stock, with 1,344,769 shares remaining for future issuance.

2004 Non-Employee Director Option Plan

The director plan was approved by our stockholders at the Annual Meeting of Stockholders held on July 19, 2012. The director plan amended and restated in its entirety our 2004 Non-Employee Director Stock Option Plan.

The types of awards that may be granted under the director plan are options, restricted stock and OP units. Only non-employee directors are eligible to participate in the director plan. The maximum number of options, restricted stock and OP units that may be issued under the Director Plan is 175,000 shares, with 26,754 shares remaining for future issuance.

During the year ended December 31, 2017, shares were granted as follows:
Award
 
Type
 
Plan
 
Shares Granted
 
Grant Date Fair Value Per Share
 
Vesting Type
 
Vesting Anniversary
 
Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
Key Employees
 
2015 Equity Incentive Plan
 
2,500

 
$
84.18

(1) 
Time Based
 
2nd
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
3rd
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
4th
 
20.0
%
 
 
 
 
 
 
 
 
 
 
 
 
5th
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
6th
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
Executive Officers
 
2015 Equity Incentive Plan
 
100,000

 
$
79.30

(2) 
Time Based
 
3rd
 
20.0
%
 
 
 
 
 
 
 
 
 
 
 
 
4th
 
30.0
%
 
 
 
 
 
 
 
 
 
 
 
 
5th
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
6th
 
10.0
%
 
 
 
 
 
 
 
 
 
 
 
 
7th
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
Executive Officers
 
2015 Equity Incentive Plan
 
100,000

 
$
79.30

(2) 
Market & Performance Conditions
 
Multiple tranches through March 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
Directors
 
2004 Non-Employee Director Option Plan
 
16,900

 
$
79.64

(1) 
Time Based
 
3rd
 
100.0
%
(1) Grant date fair value is measured based on the closing price of our common stock on the date(s) shares are issued.
(2) Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation.


F - 27

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


During the year ended December 31, 2016, shares were granted as follows:
Award
 
Type
 
Plan
 
Shares Granted
 
Grant Date Fair Value Per Share
 
Vesting Type
 
Vesting Anniversary
 
Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
Executive Officers
 
2015 Equity Incentive Plan
 
65,000

 
$
69.25

(2) 
Time Based
 
3rd
 
20.0
%
 
 
 
 
 
 
 
 
 
 
 
 
4th
 
30.0
%
 
 
 
 
 
 
 
 
 
 
 
 
5th
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
6th
 
10.0
%
 
 
 
 
 
 
 
 
 
 
 
 
7th
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
Executive Officers
 
2015 Equity Incentive Plan
 
65,000

 
$
69.25

(2) 
Market & Performance Conditions
 
Multiple tranches through March 2022
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
Directors
 
2004 Non-Employee Director Option Plan
 
16,800

 
$
69.45

(1) 
Time Based
 
3rd
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
Key Employees
 
2015 Equity Incentive Plan
 
81,000

 
$
69.70

(1) 
Time Based
 
3rd
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
4th
 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
5th
 
20.0
%
 
 
 
 
 
 
 
 
 
 
 
 
6th
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
7th
 
5.0
%
(1) Grant date fair value is measured based on the closing price of our common stock on the date(s) shares are issued.
(2) Share-based compensation for restricted stock awards with performance conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation.

The following table summarizes our restricted stock activity for the years ended December 31, 2017, 2016, and 2015:
 
Number of Shares
 
Weighted Average Grant Date Fair Value
Unvested restricted shares at January 1, 2015
688,743

 
$
43.87

      Granted
216,800

 
$
64.32

      Vested
(85,021
)
 
$
31.89

      Forfeited
(7,262
)
 
$
45.94

Unvested restricted shares at December 31, 2015
813,260

 
$
50.59

      Granted
227,800

 
$
69.43

      Vested
(165,631
)
 
$
45.90

      Forfeited
(33,795
)
 
$
56.49

Unvested restricted shares at December 31, 2016
841,634

 
$
56.38

      Granted
219,400

 
$
79.38

      Vested
(196,412
)
 
$
47.60

      Forfeited
(4,769
)
 
$
56.43

Unvested restricted shares at December 31, 2017
859,853

 
$
64.25


Total compensation cost recognized for restricted stock was $12.7 million, $9.6 million, and $7.1 million for the years ended December 31, 2017, 2016, and 2015, respectively. The total fair value of shares vested was $9.3 million, $7.6 million, and $2.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. The remaining net compensation cost related to our unvested restricted shares outstanding as of December 31, 2017 is approximately $35.4 million. That expense is expected to be recognized $11.1 million in 2018, $8.8 million in 2019, $7.7 million in 2020 and $7.8 million thereafter.


F - 28

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Options

During 2017, 1,500 non-employee director options with an intrinsic value of $0.1 million were exercised at a weighted average price of $29.91. At December 31, 2017, 3,000 fully vested non-employee director options remained outstanding with an intrinsic value of $0.2 million. These options had a weighted average exercise price of $33.45 and a weighted average contractual term of 3.1 years. No options have been granted, and there has been no compensation expense associated with non-vested stock option awards for the years ended December 31, 2017, 2016, or 2015.






F - 29

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.     Segment Reporting

We group our operating segments into reportable segments that provide similar products and services. Each operating segment has discrete financial information evaluated regularly by our chief operating decision maker in evaluating and assessing performance. We have two reportable segments: (i) Real Property Operations and (ii) Home Sales and Rentals. The Real Property Operations segment owns, operates, has an interest in a portfolio, and develops MH communities and RV communities and is in the business of acquiring, operating, and expanding MH and RV communities. The Home Sales and Rentals segment offers manufactured home sales and leasing services to tenants and prospective tenants of our communities.

Transactions between our segments are eliminated in consolidation. Transient RV revenue is included in the Real Property Operations segment revenues and is approximately $78.0 million for the year ended December 31, 2017. In 2017, transient RV revenue was recognized 27.2 percent in the first quarter, 20.1 percent in the second quarter, 36.9 percent in the third quarter, and 15.8 percent in the fourth quarter.

A presentation of our segment financial information is summarized as follows (amounts in thousands):

 
Year Ended December 31, 2017
 
Real Property Operations
 
Home Sales and Home Rentals
 
Consolidated
Revenues
$
779,739

 
$
177,957

 
$
957,696

Operating expenses / Cost of sales
289,637

 
117,114

 
406,751

Net operating income / Gross profit
490,102

 
60,843

 
550,945

Adjustments to arrive at net income / (loss):
 
 
 
 
 
Interest and other revenues, net
24,875

 
(1
)
 
24,874

Home selling expense

 
(12,457
)
 
(12,457
)
General and administrative
(64,735
)
 
(9,976
)
 
(74,711
)
Transaction costs
(9,812
)
 
11

 
(9,801
)
Catastrophic weather related charges, net
(7,856
)
 
(496
)
 
(8,352
)
Depreciation and amortization
(199,960
)
 
(61,576
)
 
(261,536
)
Loss on extinguishment of debt
(6,019
)
 

 
(6,019
)
Interest
(127,113
)
 
(15
)
 
(127,128
)
Interest on mandatorily redeemable preferred OP units
(3,114
)
 

 
(3,114
)
Other income / (expense), net
8,983

 
(1
)
 
8,982

Current tax expense
(62
)
 
(384
)
 
(446
)
Deferred tax benefit
582

 

 
582

Net income / (loss)
105,871

 
(24,052
)
 
81,819

Less: Preferred return to preferred OP units
4,581

 

 
4,581

Less:  Amounts attributable to noncontrolling interests
6,339

 
(1,284
)
 
5,055

Net income / (loss) attributable to Sun Communities, Inc.
94,951

 
(22,768
)
 
72,183

Less:  Preferred stock distributions
7,162

 

 
7,162

Net income / (loss) attributable to Sun Communities, Inc. common stockholders
$
87,789

 
$
(22,768
)
 
$
65,021





F - 30

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
Year Ended December 31, 2016
 
Real Property Operations
 
Home Sales and Home Rentals
 
Consolidated
Revenues
$
654,341

 
$
158,287

 
$
812,628

Operating expenses / Cost of sales
241,005

 
104,714

 
345,719

Net operating income / Gross profit
413,336

 
53,573

 
466,909

Adjustments to arrive at net income / (loss):
 
 
 
 
 
Interest and other revenues, net
21,150

 

 
21,150

Home selling expenses

 
(9,744
)
 
(9,744
)
General and administrative
(55,481
)
 
(8,606
)
 
(64,087
)
Transaction costs
(31,863
)
 
(51
)
 
(31,914
)
Catastrophic weather related charges, net
(1,147
)
 
(25
)
 
(1,172
)
Depreciation and amortization
(166,296
)
 
(55,474
)
 
(221,770
)
Loss on extinguishment of debt
(1,127
)
 

 
(1,127
)
Interest
(119,150
)
 
(13
)
 
(119,163
)
Interest on mandatorily redeemable preferred OP units
(3,152
)
 

 
(3,152
)
Other expenses, net
(4,675
)
 
(1
)
 
(4,676
)
Current tax expense
(471
)
 
(212
)
 
(683
)
Deferred tax benefit
400

 

 
400

Income from affiliate transactions
500

 

 
500

Net income / (loss)
52,024

 
(20,553
)
 
31,471

Less: Preferred return to preferred OP units
5,006

 

 
5,006

Less:  Amounts attributable to noncontrolling interests
1,478

 
(1,328
)
 
150

Net income / (loss) attributable to Sun Communities, Inc.
45,540

 
(19,225
)
 
26,315

Less:  Preferred stock distributions
8,946

 

 
8,946

Net income / (loss) attributable to Sun Communities, Inc. common stockholders
$
36,594

 
$
(19,225
)
 
$
17,369
























F - 31

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
Year Ended December 31, 2015
 
Real Property Operations
 
Home Sales and Home Rentals
 
Consolidated
Revenues
$
530,610

 
$
125,964

 
$
656,574

Operating expenses / Cost of sales
188,030

 
83,897

 
271,927

Net operating income / Gross profit
342,580

 
42,067

 
384,647

Adjustments to arrive at net income / (loss):
 
 
 
 
 
Interest and other revenues, net
18,119

 
38

 
18,157

Home selling expenses

 
(7,476
)
 
(7,476
)
General and administrative
(40,235
)
 
(7,220
)
 
(47,455
)
Transaction costs
(17,802
)
 
(1
)
 
(17,803
)
Depreciation and amortization
(125,297
)
 
(52,340
)
 
(177,637
)
Loss on extinguishment of debt
(2,800
)
 

 
(2,800
)
Interest
(107,647
)
 
(12
)
 
(107,659
)
Interest on mandatorily redeemable preferred OP units
(3,219
)
 

 
(3,219
)
Gain on disposition of properties
106,613

 
18,763

 
125,376

Current tax expense
(56
)
 
(102
)
 
(158
)
Deferred tax expense

 
(1,000
)
 
(1,000
)
Income from affiliate transactions
7,500

 

 
7,500

Net income / (loss)
177,756

 
(7,283
)
 
170,473

Less: Preferred return to preferred OP units
4,973

 

 
4,973

Less: Amounts attributable to noncontrolling interests
10,622

 
(568
)
 
10,054

Net income / (loss) attributable to Sun Communities, Inc.
162,161

 
(6,715
)
 
155,446

Less: Preferred stock distributions
13,793

 

 
13,793

Less: Preferred stock redemption costs
4,328

 

 
4,328

Net income / (loss) attributable to Sun Communities, Inc. common stockholders
$
144,040

 
$
(6,715
)
 
$
137,325



 
December 31, 2017
 
December 31, 2016
 
Real Property Operations
 
Home Sales and Home Rentals
 
Consolidated
 
Real Property Operations
 
Home Sales and Home Rentals
 
Consolidated
Identifiable assets:
 
 
 
 
 
 
 
 
 
 
 
Investment property, net
$
5,172,521

 
$
472,833

 
$
5,645,354

 
$
5,019,165

 
$
450,316

 
$
5,469,481

Cash and cash equivalents
(7,649
)
 
17,776

 
10,127

 
3,705

 
4,459

 
8,164

Inventory of manufactured homes

 
30,430

 
30,430

 

 
21,632

 
21,632

Notes and other receivables, net
149,798

 
13,698

 
163,496

 
68,901

 
12,278

 
81,179

Collateralized receivables, net
128,246

 

 
128,246

 
143,870

 

 
143,870

Other assets, net
130,455

 
3,849

 
134,304

 
143,650

 
2,800

 
146,450

Total assets
$
5,573,371

 
$
538,586

 
$
6,111,957

 
$
5,379,291

 
$
491,485

 
$
5,870,776



F - 32

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.     Income Taxes

We have elected to be taxed as a REIT pursuant to Section 856(c) of the Internal Revenue Code of 1986, as amended (“Code”). In order for us to qualify as a REIT, at least 95.0 percent of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90.0 percent of its REIT taxable income (calculated without any deduction for dividends paid and excluding capital gain) to its stockholders and meet other tests.

Qualification as a REIT involves the satisfaction of numerous requirements (on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which requires us continually to monitor our tax status. We analyzed the various REIT tests and confirmed that we continued to qualify as a REIT for the year ended December 31, 2017.

As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax). Even if we qualify as a REIT, we may be subject to certain state and local income taxes as well as U.S. federal income and excise taxes on our undistributed income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries (“TRSs”) is subject to federal, state and local income taxes. The Company is also subject to income taxes in Canada as a result of the acquisition of Carefree in 2016. We do not provide for withholding taxes on our undistributed earnings from our Canadian subsidiaries as they are reinvested and will continue to be reinvested indefinitely outside the United States.

For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains, and return of capital. For the years ended December 31, 2017, 2016, and 2015, distributions paid per share were taxable as follows (unaudited / rounded):

 
Years Ended December 31,
 
2017
 
2016
 
2015
 
Amount
 
Percentage
 
Amount
 
Percentage
 
Amount
 
Percentage
Ordinary income
$
0.83

 
31.2
%
 
$
0.81

 
31.2
%
 
$
1.08

 
41.7
%
Capital gain

 
%
 
0.51

 
19.6
%
 
0.78

 
30.1
%
Return of capital
1.83

 
68.8
%
 
1.28

 
49.2
%
 
0.74

 
28.2
%
Total distributions declared
$
2.66

 
100.0
%
 
$
2.60

 
100.0
%
 
$
2.60

 
100.0
%

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. Under the Tax Act, the corporate income tax rate is reduced from a maximum marginal rate of 35.0 percent to a flat 21.0 percent. In accordance with ASC 740, “Accounting for Income Taxes,” entities are required to recognize the effect of tax law changes in the period of enactment even though the effective date of most provisions of the Tax Act was January 1, 2018. Although the Staff Accounting Bulletin (“SAB”) No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” allows entities to record provisional amounts during a measurement period, it is our view that we have obtained the necessary information available to prepare and analyze (including computations) in reasonable detail the accounting for the change in tax law as noted below.

The components of our (benefit) / provision for income taxes attributable to continuing operations for the year ended December 31, 2017 and 2016 are as follows (amounts in thousands):

F - 33

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
 
Year Ended 
 December 31, 2017
 
Year Ended 
 December 31, 2016
Federal
 
 
 
 
Current
 
$
(181
)
 
$
187

State and Local
 
 
 
 
Current
 
675

 
438

Deferred
 
(11
)
 

Foreign
 
 
 
 
Current
 
(48
)
 
58

Deferred
 
(571
)
 
(400
)
 
 



Total (Benefit) / Provision
 
$
(136
)
 
$
283


A reconciliation of the (benefit) / provision for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes for the year ended December 31, 2017 and 2016 is as follows (amounts in thousands):

 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
Pre-tax loss attributable to taxable subsidiaries
 
$
(17,404
)
 
 
 
$
(11,157
)
 
 
 
 
 
 
 
 
 
 
 
Federal provision / (benefit) at statutory tax rate (34%)
 
(5,918
)
 
34.0
 %
 
(3,794
)
 
34.0
 %
State and local taxes, net of federal benefit
 
(3
)
 
 %
 
(183
)
 
1.6
 %
Alternative minimum tax
 

 
 %
 
93

 
(0.8
)%
Rate differential
 
318

 
(1.8
)%
 
104

 
(0.9
)%
Change in valuation allowance
 
(21,322
)
 
122.5
 %
 
4,021

 
(36.0
)%
Change in deferred tax asset
 
25,885

 
(148.7
)%
 

 
 %
Others
 
360

 
(2.1
)%
 
(225
)
 
2.0
 %
Tax (benefit) / provision - taxable subsidiaries
 
(680
)
 
3.9
 %
 
16

 
(0.1
)%
Other state taxes - flow through subsidiaries
 
544

 
 
 
267

 
 
Total (benefit) / provision
 
$
(136
)
 
 
 
$
283

 
 

Our deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. Our temporary differences primarily relate to net operating loss carryforwards, and with respect to our Canadian investments, depreciation and basis differences between tax and U.S. GAAP.

At December 31, 2017, we re-measured the deferred tax assets and liabilities of our U.S. TRSs to reflect the effect of the enacted change in the tax rate under the Tax Act. We have also considered the new tax rate in assessing the need for and change to our existing valuation allowance and adjusted accordingly. Since we have recorded a full valuation allowance against substantially all of our deferred tax assets related to the U.S. TRSs, no material impact on the net deferred tax asset and the provision for income taxes was noted.


F - 34

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The deferred tax assets and liabilities included in the consolidated balance sheets are comprised of the following tax effects of temporary differences and based on the Tax Act (amounts in thousands):
 
As of December 31,
 
2017
 
2016
Deferred Tax Assets
 
 
 
Net operating loss carryforwards
$
19,739

 
$
30,821

Real estate assets
23,523

 
33,167

Other
1,272

 
1,746

Gross deferred tax assets
44,534

 
65,734

Valuation allowance
(41,932
)
 
(63,862
)
Net deferred tax assets
2,602

 
1,872

 
 
 
 
Deferred Tax Liabilities
 
 
 
Basis differences - foreign investment
(25,114
)
 
(23,816
)
Gross deferred tax liabilities
(25,114
)
 
(23,816
)
 
 
 
 
Net Deferred Tax Liability (1)
$
(22,512
)
 
$
(21,944
)

(1) Net deferred tax liability is included within Other liabilities in our Consolidated Balance Sheets.

SHS had U.S. operating loss carryforwards of $81.0 million, or $17.1 million after tax, as of December 31, 2017. The loss carryforwards will begin to expire in 2021 through 2035 if not offset by future taxable income. In addition, our Canadian subsidiaries have operating loss carryforwards of $10.2 million, or $2.7 million after tax, as of December 31, 2017. The loss carryforwards will begin to expire in 2033 through 2038 if not offset by future taxable income.

We had no unrecognized tax benefits as of December 31, 2017 and 2016. We expect no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2017.

We classify certain state taxes as income taxes for financial reporting purposes. We recorded a provision for state income taxes of $0.7 million for the year ended December 31, 2017, $0.4 million for the year ended December 31, 2016, and $0.2 million for the year ended December 31, 2015.

As previously noted, certain of our subsidiaries are subject to income taxes in the U.S. and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require application of significant judgment. With few exceptions, we are no longer subject to U.S. federal, state and local, examinations by tax authorities for the tax years ended December 31, 2011 and prior. In addition, our Canadian subsidiaries are subject to taxes in Canada and in the province of Ontario. We are no longer subject to examination by the Canadian tax authorities for the tax years ended December 31, 2012 and prior.

Our policy is to report income tax penalties and income tax related interest expense as a component of income tax expense. No interest or penalty associated with any unrecognized income tax benefit or provision was accrued, nor was any income tax related interest or penalty recognized during the years ended December 31, 2017, 2016 and 2015.

SHS is currently under audit by the Internal Revenue Service for the tax year 2015.



F - 35

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.     Earnings Per Share

We have outstanding stock options, unvested restricted common shares, and Series A-4 preferred stock, and our Operating Partnership has outstanding common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, Series C preferred OP units, and Aspen preferred OP Units, which if converted or exercised, may impact dilution.

Computations of basic and diluted earnings per share were as follows (in thousands, except per share data):

 
Year Ended December 31,
Numerator
2017
 
2016
 
2015
Net income attributable to common stockholders
$
65,021

 
$
17,369

 
$
137,325

Allocation to restricted stock awards
455

 
115

 
(1,757
)
Basic earnings: net income attributable to common stockholders after allocation
$
65,476

 
$
17,484

 
$
135,568

Allocation of income to restricted stock awards
(455
)
 
(115
)
 

Diluted earnings: net income attributable to common stockholders after allocation
$
65,021

 
$
17,369

 
$
135,568

Denominator
 
 
 
 
 
Weighted average common shares outstanding
76,084

 
65,856

 
53,686

Add: dilutive stock options
2

 
8

 
16

Add: dilutive restricted stock
625

 
457

 

Diluted weighted average common shares and securities
76,711

 
66,321

 
53,702

Earnings per share available to common stockholders after allocation:
 
 
 
 
 
Basic
$
0.85

 
$
0.27

 
$
2.53

Diluted
$
0.85

 
$
0.26

 
$
2.52


We have excluded certain securities from the computation of diluted earnings per share because the inclusion of these securities would have been anti-dilutive for the periods presented. The following table presents the outstanding securities that were excluded from the computation of diluted earnings per share for the years ended December 31, 2017, 2016 and 2015 (amounts in thousands):

 
Year Ended December 31,
 
2017
 
2016
 
2015
Restricted Stock

 

 
813

Common OP units
2,746

 
2,759

 
2,863

Series A-1 preferred OP units
345

 
367

 
388

Series A-3 preferred OP units
40

 
40

 
40

Series A-4 preferred OP units
424

 
634

 
755

Series A-4 preferred stock
1,085

 
1,682

 
2,067

Series C preferred OP units
316

 
333

 
340

Aspen preferred OP units
1,284

 
1,284

 
1,284

Total securities
6,240

 
7,099

 
8,550



F - 36

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14. Selected Quarterly Financial Information (Unaudited)

The following is a condensed summary of our unaudited quarterly results for years ended December 31, 2017 and 2016. Income /
(loss) per share for the year may not equal the sum of the fiscal quarters’ income / (loss) per share due to changes in basic and diluted shares outstanding.
 
 
Quarters
 
 
1st
 
2nd
 
3rd
 
4th
 
 
(In thousands, except per share amounts)
2017
 
 
 
 
 
 
 
 
Total revenues
 
$
234,400

 
$
237,899

 
$
268,245

 
$
242,026

Total expenses
 
209,729

 
222,171

 
234,995

 
234,850

Income before other items
 
$
24,671

 
$
15,728

 
$
33,250

 
$
7,176

 
 
 
 
 
 
 
 
 
Net income attributable to Sun Communities, Inc. common stockholders
 
$
21,104

 
$
12,364

 
$
24,115

 
$
7,438

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.29

 
$
0.16

 
$
0.31

 
$
0.09

Diluted
 
$
0.29

 
$
0.16

 
$
0.31

 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
 
 
Total revenues
 
$
174,644

 
$
190,799

 
$
249,701

 
$
218,634

Total expenses
 
162,638

 
195,781

 
226,688

 
211,569

Income / (loss) before other items
 
$
12,006

 
(4,982
)
 
$
23,013

 
$
7,065

 
 
 
 
 
 
 
 
 
Net income / (loss) attributable to Sun Communities, Inc. common stockholders
 
$
7,875

 
(7,803
)
 
$
18,897

 
(1,600
)
 
 
 
 
 
 
 
 
 
Earnings / (loss) per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.14

 
$
(0.12
)
 
$
0.27

 
$
(0.02
)
Diluted
 
$
0.14

 
$
(0.12
)
 
$
0.27

 
$
(0.02
)






F - 37

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.     Derivative Instruments and Hedging Activities

Our objective in using interest rate derivatives is to manage exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect it could have on future cash flows. Interest rate caps are used to accomplish this objective. We do not enter into derivative instruments for speculative purposes nor do we have any swaps in a hedging arrangement.

The following table provides the terms of our interest rate cap derivative contracts that were in effect as of December 31, 2017:
Type
 
Purpose
 
Effective Date
 
Maturity Date
 
 Notional
 (in millions)
 
Based on
 
Variable Rate
 
Cap Rate
 
Spread
 
Effective Fixed Rate
Cap
 
Cap Floating Rate
 
4/1/2015
 
4/1/2018
 
$
150.1

 
3 Month LIBOR
 
3.2040%
 
9.000%
 
—%
 
N/A
Cap
 
Cap Floating Rate
 
10/3/2016
 
5/1/2023
 
$
9.6

 
3 Month LIBOR
 
4.0040%
 
11.020%
 
—%
 
N/A

In accordance with ASC Topic 815, “Derivatives and Hedging,” derivative instruments are recorded at fair value in Other assets, net or Other liabilities on the Consolidated Balance Sheets. As of December 31, 2017 and 2016, the fair value of the derivatives was zero.

16.     Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts and notes receivable, accounts payable, derivative instruments, and debt.

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumption. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:

Level 1—Quoted unadjusted prices for identical instruments in active markets;

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The following methods and assumptions were used in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Derivative Instruments

The derivative instruments held by us are interest rate cap agreements for which quoted market prices are indirectly available. For those derivatives, we use model-derived valuations in which all significant inputs and significant value drivers are observable in active markets provided by brokers or dealers to determine the fair values of derivative instruments on a recurring basis (Level 2). Refer to Note 15, “Derivative Instruments and Hedging Activities.”

Installment Notes Receivable on Manufactured Homes

The net carrying value of the installment notes receivable on manufactured homes estimates the fair value as the interest rates in the portfolio are comparable to current prevailing market rates (Level 2). Refer Note 4, “Notes and Other Receivables.”

Long Term Debt and Lines of Credit

The fair value of long-term debt (excluding the secured borrowing) is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans, and instruments of comparable maturities (Level 2). Refer to Note 8, “Debt and Lines of Credit.”

F - 38

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Collateralized Receivables and Secured Borrowing

The fair value of these financial instruments offset each other as our collateralized receivables represent a transfer of financial assets and the cash proceeds received from these transactions have been classified as a secured borrowing on the Consolidated Balance Sheets. The net carrying value of the collateralized receivables estimates the fair value as the interest rates in the portfolio are comparable to current prevailing market rates (Level 2). Refer to Note 3, “Collateralized Receivables and Transfers of Financial Assets.”

Financial Liabilities

We estimate the fair value of our contingent consideration liability based on discounting of future cash flows using market interest rates and adjusting for non-performance risk over the remaining term of the liability (Level 2).

Other Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair market values due to the short-term nature of these instruments.

The table below sets forth our financial assets and liabilities that required disclosure of their fair values on a recurring basis as of December 31, 2017. The table presents the carrying values and fair values of our financial instruments as of December 31, 2017 and December 31, 2016 that were measured using the valuation techniques described above (in thousands). The table excludes other financial instruments such as cash and cash equivalents, accounts receivable, and accounts payable as the carrying values associated with these instruments approximate fair value since their maturities are less than one year.

 
 
December 31, 2017
 
December 31, 2016
Financial assets
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Installment notes receivable on manufactured homes, net
 
$
115,797

 
$
115,797

 
$
59,320

 
$
59,320

Collateralized receivables, net
 
$
128,246

 
$
128,246

 
$
143,870

 
$
143,870

Financial liabilities
 
 
 
 
 
 
 
 
Debt (excluding secured borrowings)
 
$
2,908,799

 
$
2,726,770

 
$
2,865,470

 
$
2,820,680

Secured borrowings
 
$
129,182

 
$
129,182

 
$
144,477

 
$
144,477

Lines of credit
 
$
41,257

 
$
41,257

 
$
100,095

 
$
98,640

Other liabilities (contingent consideration)
 
$
6,976

 
$
6,976

 
$
10,011

 
$
10,011


17.     Recent Accounting Pronouncements

In May 2017, the FASB issued ASU 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update is to provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, regarding a change to the terms or conditions of a share-based payment award. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted, including adoption in interim periods, for reporting periods for which financial statements have not yet been issued. Once effective, we will apply the standard prospectively should a modification occur.

In January 2017, the FASB issued ASU 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year.

Under current guidance, substantially all of our property acquisitions are accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred and reported as Transaction costs in our Consolidations Statements of Operations. Upon adoption of ASU 2017-01, we expect that substantially all of our future pr

F - 39

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


operty acquisitions will be accounted for as assets acquisitions. We will allocate the purchase price of the properties on a relative fair value basis and capitalize direct acquisition related costs as part of the purchase price.

In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.” This update requires inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year.

Once effective, we will include restricted cash and cash equivalents as prescribed by ASU 2016-18 in our Consolidated Statements of Cash Flows. Our restricted cash consists of amounts held in deposit for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. At December 31, 2017 and 2016, $13.4 million and $17.1 million of restricted cash, respectively, was included as a component of Other assets, net on our Consolidated Balance Sheets.

In October 2016, the FASB issued ASU 2016-16 “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This update requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Upon adoption of this standard, there will be no material impact to our Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This update addresses eight specific cash flow issues with the objective of reducing existing diversity in practice. The guidance will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Upon adoption of this standard, there will be no material impact to our Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are in the initial phases of evaluating how ASU 2016-13 will impact our accounting policies regarding assessment of, and allowance for, loan losses.

In March 2016, the FASB issued ASU 2016-09 “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendments in this update are intended to simplify several aspects of the accounting for share-based payments. We adopted these amendments as of January 1, 2017. The main provisions of this update regarding excess tax benefits did not have an impact on our Consolidated Financial Statements due to our status as a REIT for taxation purposes. We have elected to continue estimating the number of shares expected to vest in order to determine compensation cost, and were previously classifying, as financing activity, cash paid by us for employee taxes when shares were withheld to cover minimum statutory requirements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The core principle of this update is that a lessee should recognize the assets and liabilities that arise from leases while the accounting by a lessor is largely unchanged from that applied under previous GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Our income from real property and rental home revenue streams is derived from rental agreements where we are the lessor. As noted above, the lessor accounting model is largely unchanged by this update. We are the lessee in other arrangements, primarily for our executive offices, ground leases at five communities, and certain equipment. We are currently evaluating our inventory of such leases for recognition of right of use assets and corresponding lease liabilities on our Consolidated Balance Sheets, and the related disclosure requirements thereto.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. In July 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

F - 40

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



We will adopt ASU 2014-09 and the related updates subsequently issued by the FASB on January 1, 2018, via the modified retrospective approach. Applicability of the standard updates to our revenue streams and other considerations are summarized below.

Income from real property - is derived from rental agreements whereby we lease land to residents in our communities. We account for the lease components of these rental agreements pursuant to ASC 840 “Leases” and the non-lease components under ASC 605 “Revenue Recognition.”

Revenue from home sales - is recognized pursuant to ASC 605 “Revenue Recognition,” as the manufactured homes are tangible personal property that can be located on any parcel of land. The manufactured homes are not permanent fixtures or improvements to the underlying real estate, and are therefore not considered by us to be subject to the guidance in ASC 360-20 “Real Estate Sales.”

Rental home revenue - is comprised of rental agreements whereby we lease homes to residents in our communities. We account for these revenues pursuant to ASC 840 “Leases.”

Ancillary revenues - are primarily comprised of restaurant, golf, merchandise and other activities at our RV communities. These revenues are recognized pursuant to ASC 605 “Revenue Recognition,” at point of sale to customers as our performance obligations are then satisfied.

Interest income - on our notes receivable will continue to be recognized as revenue, but presented separately from revenue from contracts with customers, as interest income is not in the scope of ASU 2014-09 and the related updates subsequently issued by the FASB.

Broker commissions and other revenues, net - is primarily comprised of (i) brokerage commissions that we account for on a net basis pursuant to ASC 605 “Revenue Recognition,” as our performance obligation is to arrange for a third party to transfer a home to a customer; and (ii) notes receivable loss reserves.

As detailed above, our revenues from income from real property, home sales, ancillary revenues, and broker commissions will be in the scope of the new guidance. Upon adoption, we will present contract assets and liabilities, as applicable, when one party to a transaction has performed and the other has not. Our disclosures will be expanded, as applicable, to discuss our performance obligations, contract balances, timing and nature of our revenue streams. There will not be any other resulting changes to our accounting policies for revenue recognition or Consolidated Financial Statements from adoption of this guidance.


18.     Commitments and Contingencies

Legal Proceedings

We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition.

Catastrophic Weather Related Charges

In September 2017, Hurricane Irma impacted 121 of our communities in Florida and three in Georgia. We recognized charges totaling $31.7 million comprised of $21.3 million for debris and tree removal, common area repairs and minor flooding damage, as well as $10.4 million for impaired assets at three Florida Keys communities.

These charges were partially offset by estimated insurance recoveries of $23.7 million. We maintain property, casualty, flood and business interruption insurance for our community portfolio, subject to customary deductibles and limits. As of December 31, 2017, we had not received any insurance recoveries. Refer to Note 20, “Subsequent Events” for information regarding insurance recoveries received subsequent to year end.

The net charges of $8.0 million related to Hurricane Irma were recognized as Catastrophic weather related charges, net in our Consolidated Statements of Operations for the year ended December 31, 2017. Actual charges and insurance recoveries could vary significantly from these estimates. Any changes to these estimates will be recognized in the period(s) in which they are determined.

F - 41

SUN COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Expected insurance recoveries for lost earnings and redevelopment costs greater than the asset impairment charge for the Florida Keys were excluded from our Consolidated Statements of Operations for the year ended December 31, 2017. We are actively working with our insurer on the related claims, but have not yet received any advance for the expected recovery of lost earnings. The three Florida Keys communities will require redevelopment followed by a tenant lease-up period. As such, we currently cannot estimate a date when operating results will be restored to pre-hurricane levels. Our business interruption insurance policy provides for up to 60 months of coverage from the date of restoration.

19. Related Party Transactions

Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.0 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 71,500 rentable square feet of permanent space, and approximately 21,000 rentable square feet of temporary space. The initial term of the lease is until October 31, 2026, and the base rent is $17.95 per square foot (gross) until October 31, 2018, for both permanent and temporary space, with graduated rental increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC.

Legal Counsel. During 2015-2017, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $5.0 million, $8.0 million and $4.6 million in the years ended December 31, 2017, 2016 and 2015, respectively.

Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of properties from partnerships previously affiliated with him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those on us and our public stockholders upon the sale of any of these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties.

20. Subsequent Events

In January 2018, we redeemed 41,051 units of our 8.00% Series B-3 preferred OP units (“B-3 Units”). The weighted average redemption price per unit, which included accrued and unpaid distributions, was $100.065753. In the aggregate, we paid $4.1 million to redeem the B-3 Units.

In January 2018, we repaid three collateralized term loans totaling $7.6 million with a weighted average interest rate of 6.25 percent, releasing two encumbered communities. The loans were due to mature on March 1, 2019. We recognized a loss on extinguishment of debt of $0.2 million as a result of the repayment transactions.

In February 2018, we received $5.0 million of insurance recoveries in connection with property damage at our Florida and Georgia communities resulting from Hurricane Irma in September 2017. Refer to Note 18, “Commitments and Contingencies” for additional information regarding impacts to our consolidated financial statements from Hurricane Irma.

We have evaluated our Consolidated Financial Statements for subsequent events through the date that this Form 10-K was issued.



F - 42

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)




 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
49'er Village RV Resort (4)
 
Plymouth, CA
 
 
2,180

 
10,710

 

 
945

 
2,180

 
11,655

 
13,835

 
217

 
2017
 
(A)
Academy/West Pointe
 
Canton, MI
 
B
 
1,485

 
14,278

 

 
8,622

 
1,485

 
22,900

 
24,385

 
11,527

 
2000
 
(A)
Adirondack Gateway RV Resort & Campground
 
Gansevoort, NY
 
 
620

 
1,970

 

 
2,022

 
620

 
3,992

 
4,612

 
186

 
2016
 
(A)
Allendale Meadows Mobile Village
 
Allendale, MI
 
B
 
366

 
3,684

 

 
11,493

 
366

 
15,177

 
15,543

 
8,595

 
1996
 
(A)
Alpine Meadows Mobile Village
 
Grand Rapids, MI
 
A
 
729

 
6,692

 

 
10,058

 
729

 
16,750

 
17,479

 
9,141

 
1996
 
(A&C)
Alta Laguna
 
Rancho Cucamonga, CA
 
D
 
23,736

 
21,088

 

 
1,260

 
23,736

 
22,348

 
46,084

 
1,146

 
2016
 
(A)
Apple Carr Village
 
Muskegon, MI
 
 
800

 
6,172

 

 
9,535

 
800

 
15,707

 
16,507

 
3,430

 
2011
 
(A&C)
Apple Creek Manufactured Home Community and Self Storage
 
Amelia, OH
 
B
 
543

 
5,480

 

 
2,786

 
543

 
8,266

 
8,809

 
3,993

 
1999
 
(A)
Arbor Terrace RV Park
 
Bradenton, FL
 
C
 
456

 
4,410

 

 
4,261

 
456

 
8,671

 
9,127

 
4,299

 
1996
 
(A)
Arbor Woods (4)
 
Superior Township, MI
 
 
3,340

 
12,385

 

 
3,785

 
3,340

 
16,170

 
19,510

 
345

 
2017
 
(A)
Ariana Village Mobile Home Park
 
Lakeland, FL
 
D
 
240

 
2,195

 

 
1,440

 
240

 
3,635

 
3,875

 
2,126

 
1994
 
(A)
Arran Lake RV Resort & Campground
 
Allenford, ON (1)
 
 
1,190

 
1,175

 
15

 
239

 
1,205

 
1,414

 
2,619

 
73

 
2016
 
(A)
Austin Lone Star RV Resort
 
Austin, TX
 
 
630

 
7,913

 

 
1,534

 
630

 
9,447

 
10,077

 
498

 
2016
 
(A)
Autumn Ridge (3)
 
Ankeny, IA
 
B
 
890

 
8,054

 
(33
)
 
4,545

 
857

 
12,599

 
13,456

 
7,230

 
1996
 
(A)
Bahia Vista Estates
 
Sarasota, FL
 
 
6,810

 
17,650

 

 
751

 
6,810

 
18,401

 
25,211

 
969

 
2016
 
(A)
Baker Acres RV Resort
 
Zephyrhills, FL
 
E
 
2,140

 
11,880

 

 
1,593

 
2,140

 
13,473

 
15,613

 
704

 
2016
 
(A)
Bell Crossing (3)
 
Clarksville, TN
 
B
 
717

 
1,916

 
(13
)
 
8,505

 
704

 
10,421

 
11,125

 
5,360

 
1999
 
(A&C)
Big Timber Lake RV Resort
 
Cape May, NJ
 
A
 
590

 
21,308

 

 
1,915

 
590

 
23,223

 
23,813

 
4,016

 
2013
 
(A)
Big Tree RV Resort
 
Arcadia, FL
 
 
1,250

 
13,534

 

 
1,372

 
1,250

 
14,906

 
16,156

 
795

 
2016
 
(A)
Blazing Star
 
San Antonio, TX
 
C
 
750

 
6,163

 

 
1,669

 
750

 
7,832

 
8,582

 
1,730

 
2012
 
(A)
Blue Heron Pines
 
Punta Gorda, FL
 
E
 
410

 
35,294

 

 
2,883

 
410

 
38,177

 
38,587

 
3,120

 
2015
 
(A&C)
Blue Jay MH & RV Resort
 
Dade City, FL
 
 
2,040

 
9,679

 

 
1,109

 
2,040

 
10,788

 
12,828

 
540

 
2016
 
(A)
Blue Star/Lost Dutchman
 
Apache Junction, AZ
 
E
 
5,120

 
12,720

 

 
5,651

 
5,120

 
18,371

 
23,491

 
2,125

 
2014
 
(A)

F - 43

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Blueberry Hill
 
Bushnell, FL
 
C
 
3,830

 
3,240

 

 
2,970

 
3,830

 
6,210

 
10,040

 
1,534

 
2012
 
(A)
Boulder Ridge
 
Pflugerville, TX
 
B
 
1,000

 
500

 
3,324

 
27,780

 
4,324

 
28,280

 
32,604

 
12,277

 
1998
 
(C)
Branch Creek Estates
 
Austin, TX
 
B
 
796

 
3,716

 

 
5,790

 
796

 
9,506

 
10,302

 
6,034

 
1995
 
(A&C)
Brentwood Estates
 
Hudson, FL
 
E
 
1,150

 
9,359

 

 
2,530

 
1,150

 
11,889

 
13,039

 
1,006

 
2015
 
(A)
Brentwood Mobile Village
 
Kentwood, MI
 
B
 
385

 
3,592

 

 
2,219

 
385

 
5,811

 
6,196

 
3,646

 
1996
 
(A)
Brentwood West
 
Mesa, AZ
 
B
 
13,620

 
24,202

 

 
1,139

 
13,620

 
25,341

 
38,961

 
3,095

 
2014
 
(A)
Brookside Mobile Home Village
 
Goshen, IN
 
B
 
260

 
1,080

 
386

 
16,993

 
646

 
18,073

 
18,719

 
8,418

 
1985
 
(A&C)
Brookside Village
 
Kentwood, MI
 
D
 
170

 
5,564

 

 
502

 
170

 
6,066

 
6,236

 
1,401

 
2011
 
(A)
Buttonwood Bay
 
Sebring, FL
 
D
 
1,952

 
18,294

 

 
6,355

 
1,952

 
24,649

 
26,601

 
12,663

 
2001
 
(A)
Byron Center Mobile Village
 
Byron Center, MI
 
A
 
253

 
2,402

 

 
2,291

 
253

 
4,693

 
4,946

 
2,917

 
1996
 
(A)
Caliente Sands (4)
 
Cathedral City, CA
 
 
1,930

 
6,710

 

 
58

 
1,930

 
6,768

 
8,698

 
118

 
2017
 
(A)
Camelot Villa
 
Macomb, MI
 
A
 
910

 
21,211

 

 
11,738

 
910

 
32,949

 
33,859

 
5,830

 
2013
 
(A)
Campers Haven RV Resort
 
Dennisport, MA
 
 
14,260

 
11,915

 

 
1,022

 
14,260

 
12,937

 
27,197

 
697

 
2016
 
(A)
Candlelight Manor
 
South Dakota, FL
 
 
3,140

 
3,867

 

 
948

 
3,140

 
4,815

 
7,955

 
227

 
2016
 
(A)
Candlelight Village
 
Sauk Village, IL
 
A
 
600

 
5,623

 

 
10,691

 
600

 
16,314

 
16,914

 
8,491

 
1996
 
(A)
Cape May Crossing
 
Cape May, NJ
 
 
270

 
1,693

 

 
462

 
270

 
2,155

 
2,425

 
111

 
2016
 
(A)
Cape May KOA
 
Cape May, NJ
 
C
 
650

 
7,736

 

 
6,351

 
650

 
14,087

 
14,737

 
2,797

 
2013
 
(A)
Carolina Pines RV Resort (5)
 
Longs, SC
 
 
5,900

 

 

 
366

 
5,900

 
366

 
6,266

 

 
2017
 
(A)
Carriage Cove
 
Sanford, FL
 
E
 
6,050

 
21,235

 

 
2,308

 
6,050

 
23,543

 
29,593

 
2,955

 
2014
 
(A)
Carrington Pointe
 
Ft. Wayne, IN
 
 
1,076

 
3,632

 

 
12,389

 
1,076

 
16,021

 
17,097

 
6,401

 
1997
 
(A&C)
Castaways RV Resort & Campground
 
Berlin, MD
 
A
 
14,320

 
22,277

 

 
4,894

 
14,320

 
27,171

 
41,491

 
3,810

 
2014
 
(A&C)
Cava Robles RV Resort (5)
 
Paso Robles, CA
 
 
1,396

 

 

 
14,702

 
1,396

 
14,702

 
16,098

 

 
2014
 
(C)
Cave Creek
 
Evans, CO
 
B
 
2,241

 
15,343

 

 
11,369

 
2,241

 
26,712

 
28,953

 
8,969

 
2004
 
(C)
Central Park MH & RV Resort
 
Haines City, FL
 
 
2,600

 
10,405

 

 
1,096

 
2,600

 
11,501

 
14,101

 
606

 
2016
 
(A)
Chisholm Point Estates
 
Pflugerville, TX
 
 
609

 
5,286

 

 
4,079

 
609

 
9,365

 
9,974

 
5,989

 
1995
 
(A&C)
Cider Mill Crossings
 
Fenton, MI
 
C
 
520

 
1,568

 

 
21,686

 
520

 
23,254

 
23,774

 
5,433

 
2011
 
(A&C)
Cider Mill Village
 
Middleville, MI
 
A
 
250

 
3,590

 

 
3,292

 
250

 
6,882

 
7,132

 
1,922

 
2011
 
(A)
Citrus Hill RV Resort
 
Dade City, FL
 
 
1,170

 
2,422

 

 
824

 
1,170

 
3,246

 
4,416

 
164

 
2016
 
(A)

F - 44

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Clear Water Mobile Village
 
South Bend, IN
 
B
 
80

 
1,270

 
61

 
6,567

 
141

 
7,837

 
7,978

 
4,078

 
1986
 
(A)
Club Naples
 
Naples, FL
 
C
 
5,780

 
4,952

 

 
2,703

 
5,780

 
7,655

 
13,435

 
1,987

 
2011
 
(A)
Club Wildwood
 
Hudson, FL
 
E
 
14,206

 
21,275

 

 
736

 
14,206

 
22,011

 
36,217

 
1,128

 
2016
 
(A)
Cobus Green Mobile Home Park
 
Osceola, IN
 
A
 
762

 
7,037

 

 
9,203

 
762

 
16,240

 
17,002

 
8,589

 
1993
 
(A)
Colony in the Wood (4)
 
Port Orange, FL
 
 

 
32,478

 

 
9

 

 
32,487

 
32,487

 

 
2017
 
(A&C)
The Colony (2)
 
Oxnard, CA
 
 

 
6,437

 

 
787

 

 
7,224

 
7,224

 
367

 
2016
 
(A)
Comal Farms
 
New Braunfels, TX
 
C
 
1,455

 
1,732

 

 
9,074

 
1,455

 
10,806

 
12,261

 
4,970

 
2000
 
(A&C)
Continental North
 
Davison, MI
 
A
 
749

 
6,089

 

 
14,348

 
749

 
20,437

 
21,186

 
10,708

 
1996
 
(A&C)
Corporate Headquarters (5)
 
Southfield, MI
 
 

 

 

 
64,969

 

 
64,969

 
64,969

 
16,183

 
Various
Country Acres Mobile Village
 
Cadillac, MI
 
A
 
380

 
3,495

 

 
3,903

 
380

 
7,398

 
7,778

 
4,075

 
1996
 
(A)
Country Hills Village
 
Hudsonville, MI
 
A
 
340

 
3,861

 

 
1,863

 
340

 
5,724

 
6,064

 
1,729

 
2011
 
(A)
Country Meadows Mobile Village
 
Flat Rock, MI
 
B
 
924

 
7,583

 
296

 
19,272

 
1,220

 
26,855

 
28,075

 
15,951

 
1994
 
(A&C)
Country Meadows Village
 
Caledonia, MI
 
C
 
550

 
5,555

 

 
7,713

 
550

 
13,268

 
13,818

 
2,168

 
2011
 
(A&C)
Country Squire MH & RV Resort
 
Paisley, FL
 
 
520

 
1,719

 

 
1,001

 
520

 
2,720

 
3,240

 
127

 
2016
 
(A)
Countryside Atlanta
 
Lawrenceville, GA
 
C
 
1,274

 
10,957

 

 
5,289

 
1,274

 
16,246

 
17,520

 
5,496

 
2004
 
(A&C)
Countryside Estates
 
Mckean, PA
 
E
 
320

 
11,610

 

 
1,501

 
320

 
13,111

 
13,431

 
1,592

 
2014
 
(A)
Countryside Gwinnett
 
Buford, GA
 
A
 
1,124

 
9,539

 

 
3,840

 
1,124

 
13,379

 
14,503

 
6,515

 
2004
 
(A)
Countryside Lake Lanier
 
Buford, GA
 
B
 
1,916

 
16,357

 

 
9,002

 
1,916

 
25,359

 
27,275

 
10,976

 
2004
 
(A)
Countryside Village
 
Great Falls, MT
 
C
 
430

 
7,157

 

 
950

 
430

 
8,107

 
8,537

 
962

 
2014
 
(A)
Craigleith RV Resort & Campground
 
Clarksburg, ON (1)
 
 
420

 
705

 
5

 
219

 
425

 
924

 
1,349

 
44

 
2016
 
(A)
Creekwood Meadows
 
Burton, MI
 
A
 
808

 
2,043

 
404

 
15,334

 
1,212

 
17,377

 
18,589

 
9,438

 
1997
 
(C)
Cutler Estates Mobile Village
 
Grand Rapids, MI
 
B
 
749

 
6,941

 

 
4,102

 
749

 
11,043

 
11,792

 
6,646

 
1996
 
(A)
Cypress Greens
 
Lake Alfred, FL
 
E
 
960

 
17,518

 

 
1,353

 
960

 
18,871

 
19,831

 
1,622

 
2015
 
(A)
Daytona Beach RV Resort
 
Port Orange, FL
 
 
2,300

 
7,158

 

 
1,607

 
2,300

 
8,765

 
11,065

 
476

 
2016
 
(A)
Deer Lake RV Resort & Campground
 
Huntsville, ON (1)
 
 
2,830

 
4,260

 
35

 
584

 
2,865

 
4,844

 
7,709

 
237

 
2016
 
(A)
Deerfield Run
 
Anderson, IN
 
C
 
990

 
1,607

 

 
6,999

 
990

 
8,606

 
9,596

 
3,958

 
1999
 
(A&C)
Deerwood
 
Orlando, FL
 
B
 
6,920

 
37,593

 

 
4,804

 
6,920

 
42,397

 
49,317

 
3,673

 
2015
 
(A)
Desert Harbor
 
Apache Junction, AZ
 
E
 
3,940

 
14,891

 

 
310

 
3,940

 
15,201

 
19,141

 
1,842

 
2014
 
(A)

F - 45

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Driftwood Camping Resort
 
Clermont, NJ
 
D
 
1,450

 
29,851

 

 
2,713

 
1,450

 
32,564

 
34,014

 
4,389

 
2014
 
(A)
Dunedin RV Resort
 
Dunedin, FL
 
E
 
4,400

 
16,923

 

 
1,327

 
4,400

 
18,250

 
22,650

 
959

 
2016
 
(A)
Dutton Mill Village
 
Caledonia, MI
 
A
 
370

 
8,997

 

 
1,759

 
370

 
10,756

 
11,126

 
2,664

 
2011
 
(A)
Eagle Crest
 
Firestone, CO
 
B
 
2,015

 
150

 

 
30,614

 
2,015

 
30,764

 
32,779

 
14,732

 
1998
 
(C)
East Fork
 
Batavia, OH
 
C
 
1,280

 
6,302

 

 
19,771

 
1,280

 
26,073

 
27,353

 
9,611

 
2000
 
(A&C)
East Village Estates
 
Washington Twp., MI
 
A
 
1,410

 
25,413

 

 
4,904

 
1,410

 
30,317

 
31,727

 
6,136

 
2012
 
(A)
Egelcraft
 
Muskegon, MI
 
D
 
690

 
22,596

 

 
2,228

 
690

 
24,824

 
25,514

 
3,117

 
2014
 
(A)
Ellenton Gardens RV Resort
 
Ellenton, FL
 
E
 
2,130

 
7,755

 

 
1,353

 
2,130

 
9,108

 
11,238

 
478

 
2016
 
(A)
Emerald Coast RV Resort(4)
 
Panama City Beach, FL
 
 
10,330

 
9,070

 

 
49

 
10,330

 
9,119

 
19,449

 
166

 
2017
 
(A)
Fairfield Village
 
Ocala, FL
 
B
 
1,160

 
18,673

 

 
315

 
1,160

 
18,988

 
20,148

 
1,648

 
2015
 
(A)
Fiesta Village
 
Mesa, AZ
 
 
2,830

 
4,475

 

 
838

 
2,830

 
5,313

 
8,143

 
634

 
2014
 
(A)
Fisherman's Cove
 
Flint, MI
 
A
 
380

 
3,438

 

 
4,001

 
380

 
7,439

 
7,819

 
4,761

 
1993
 
(A)
Forest Meadows
 
Philomath, OR
 
A
 
1,031

 
2,050

 

 
538

 
1,031

 
2,588

 
3,619

 
1,465

 
1999
 
(A)
Forest View
 
Homosassa, FL
 
B
 
1,330

 
22,056

 

 
450

 
1,330

 
22,506

 
23,836

 
1,956

 
2015
 
(A)
Fort Tatham RV Resort & Campground
 
Sylva, NC
 
 
110

 
760

 

 
701

 
110

 
1,461

 
1,571

 
73

 
2016
 
(A)
Fort Whaley
 
Whaleyville, MD
 
C
 
510

 
5,194

 

 
3,910

 
510

 
9,104

 
9,614

 
679

 
2015
 
(A)
Four Seasons
 
Elkhart, IN
 
A
 
500

 
4,811

 

 
3,533

 
500

 
8,344

 
8,844

 
4,089

 
2000
 
(A)
Frenchtown Villa/Elizabeth Woods
 
Newport, MI
 
E
 
1,450

 
52,327

 

 
15,702

 
1,450

 
68,029

 
69,479

 
7,837

 
2014
 
(A&C)
Friendly Village of La Habra
 
La Habra, CA
 
D
 
26,956

 
25,202

 

 
1,092

 
26,956

 
26,294

 
53,250

 
1,407

 
2016
 
(A)
Friendly Village of Modesto
 
Modesto, CA
 
D
 
6,260

 
20,885

 

 
1,029

 
6,260

 
21,914

 
28,174

 
1,093

 
2016
 
(A)
Friendly Village of Simi
 
Simi Valley, CA
 
D
 
14,906

 
15,986

 

 
860

 
14,906

 
16,846

 
31,752

 
864

 
2016
 
(A)
Friendly Village of West Covina
 
West Covina, CA
 
D
 
14,520

 
5,221

 

 
722

 
14,520

 
5,943

 
20,463

 
324

 
2016
 
(A)
Frontier Town
 
Ocean City, MD
 
C
 
18,960

 
43,166

 

 
8,132

 
18,960

 
51,298

 
70,258

 
4,530

 
2015
 
(A)
Glen Haven RV Resort
 
Zephyrhills, FL
 
E
 
1,980

 
8,373

 

 
1,138

 
1,980

 
9,511

 
11,491

 
508

 
2016
 
(A)
Glen Laurel
 
Concord, NC
 
C
 
1,641

 
453

 

 
13,981

 
1,641

 
14,434

 
16,075

 
6,951

 
2001
 
(A&C)
Gold Coaster
 
Homestead, FL
 
A
 
446

 
4,234

 
172

 
5,241

 
618

 
9,475

 
10,093

 
4,774

 
1997
 
(A)
Grand Bay
 
Dunedin, FL
 
 
3,460

 
6,314

 

 
643

 
3,460

 
6,957

 
10,417

 
354

 
2016
 
(A)

F - 46

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Grand Lakes
 
Citra, FL
 
C
 
5,280

 
4,501

 

 
3,524

 
5,280

 
8,025

 
13,305

 
1,895

 
2012
 
(A)
Grand Mobile Estates
 
Grand Rapids, MI
 
B
 
374

 
3,587

 

 
3,848

 
374

 
7,435

 
7,809

 
3,723

 
1996
 
(A)
Grand Oaks RV Resort & Campground
 
Cayuga, ON (1)
 
 
970

 
4,220

 
12

 
453

 
982

 
4,673

 
5,655

 
229

 
2016
 
(A)
The Grove at Alta Ridge (3)
 
Thornton, CO
 
E
 
5,370

 
37,116

 

 
(30
)
 
5,370

 
37,086

 
42,456

 
4,419

 
2014
 
(A)
Grove Ridge RV Resort
 
Dade City, FL 
 
E
 
1,290

 
5,387

 

 
1,080

 
1,290

 
6,467

 
7,757

 
341

 
2016
 
(A)
Groves RV Resort
 
Ft. Myers, FL
 
A
 
249

 
2,396

 

 
3,808

 
249

 
6,204

 
6,453

 
2,755

 
1997
 
(A)
Gulfstream Harbor
 
Orlando, FL
 
B
 
14,510

 
78,930

 

 
4,137

 
14,510

 
83,067

 
97,577

 
7,209

 
2015
 
(A)
Gulliver's Lake RV Resort & Campground
 
Millgrove, ON (1)
 
 
2,950

 
2,950

 
37

 
324

 
2,987

 
3,274

 
6,261

 
170

 
2016
 
(A)
Gwynn's Island RV Resort & Campground
 
Gwynn, VA
 
C
 
760

 
595

 

 
1,983

 
760

 
2,578

 
3,338

 
499

 
2013
 
(A)
Hamlin
 
Webberville, MI
 
B
 
125

 
1,675

 
536

 
13,437

 
661

 
15,112

 
15,773

 
6,470

 
1984
 
(A&C)
The Hamptons
 
Auburndale, FL
 
B
 
15,890

 
67,555

 

 
1,973

 
15,890

 
69,528

 
85,418

 
5,930

 
2015
 
(A)
Heritage
 
Temecula, CA
 
D
 
13,200

 
7,877

 

 
986

 
13,200

 
8,863

 
22,063

 
465

 
2016
 
(A)
Hickory Hills Village
 
Battle Creek, MI
 
 
760

 
7,697

 

 
2,295

 
760

 
9,992

 
10,752

 
2,685

 
2011
 
(A)
Hidden Ridge RV Resort
 
Hopkins, MI
 
C
 
440

 
893

 

 
2,906

 
440

 
3,799

 
4,239

 
803

 
2011
 
(A)
Hidden River RV Resort
 
Riverview, FL
 
 
3,950

 
6,376

 

 
1,199

 
3,950

 
7,575

 
11,525

 
398

 
2016
 
(A)
Hidden Valley RV Resort & Campground
 
Normandale, ON (1)
 
 
2,610

 
4,170

 
33

 
1,035

 
2,643

 
5,205

 
7,848

 
248

 
2016
 
(A)
The Hideaway
 
Key West, FL
 
 
2,720

 
972

 

 
521

 
2,720

 
1,493

 
4,213

 
80

 
2016
 
(A)
High Pointe (3)
 
Frederica, DE
 
 
898

 
7,031

 
(42
)
 
6,792

 
856

 
13,823

 
14,679

 
6,686

 
1997
 
(A)
Hill Country Cottage and RV Resort
 
New Braunfels, TX
 
C
 
3,790

 
27,200

 

 
1,828

 
3,790

 
29,028

 
32,818

 
1,794

 
2016
 
(A&C)
The Hills
 
Apopka, FL
 
 
1,790

 
3,869

 

 
968

 
1,790

 
4,837

 
6,627

 
241

 
2016
 
(A)
Holiday West Village
 
Holland, MI
 
B
 
340

 
8,067

 

 
1,260

 
340

 
9,327

 
9,667

 
2,318

 
2011
 
(A)
Holly Forest Estates
 
Holly Hill, FL
 
B
 
920

 
8,376

 

 
1,336

 
920

 
9,712

 
10,632

 
5,996

 
1997
 
(A)
Holly Village / Hawaiian Gardens
 
Holly, MI
 
B
 
1,514

 
13,596

 

 
5,242

 
1,514

 
18,838

 
20,352

 
7,853

 
2004
 
(A)
Homosassa River RV Resort
 
Homosassa Springs, FL
 
 
1,520

 
5,020

 

 
1,625

 
1,520

 
6,645

 
8,165

 
365

 
2016
 
(A)
Horseshoe Cove RV Resort
 
Bradenton, FL
 
E
 
9,466

 
32,612

 

 
2,601

 
9,466

 
35,213

 
44,679

 
1,852

 
2016
 
(A)
Hunters Crossing
 
Capac, MI
 
C
 
430

 
1,092

 

 
1,247

 
430

 
2,339

 
2,769

 
453

 
2012
 
(A)
Hunters Glen
 
Wayland, MI
 
C
 
1,102

 
11,926

 

 
11,469

 
1,102

 
23,395

 
24,497

 
7,828

 
2004
 
(C)

F - 47

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Indian Creek Park
 
Ft. Myers Beach, FL
 
D
 
3,832

 
34,660

 

 
11,283

 
3,832

 
45,943

 
49,775

 
28,304

 
1996
 
(A)
Indian Creek RV & Camping Resort (3)
 
Geneva on the Lake, OH
 
C
 
420

 
20,791

 
(5
)
 
6,683

 
415

 
27,474

 
27,889

 
4,186

 
2013
 
(A&C)
Indian Wells RV Resort
 
Indio, CA
 
D
 
2,880

 
19,470

 

 
1,964

 
2,880

 
21,434

 
24,314

 
1,145

 
2016
 
(A)
Island Lakes
 
Merritt Island, FL
 
D
 
700

 
6,431

 

 
809

 
700

 
7,240

 
7,940

 
5,037

 
1995
 
(A)
Jellystone Park(TM) at Birchwood Acres
 
Greenfield Park, NY
 
A
 
560

 
5,527

 

 
5,246

 
560

 
10,773

 
11,333

 
2,242

 
2013
 
(A)
Jellystone Park(TM) at Larkspur
 
Larkspur, CO
 
 
1,880

 
5,521

 

 
2,246

 
1,880

 
7,767

 
9,647

 
362

 
2016
 
(A)
Jellystone Park(TM) of Western New York
 
North Java, NY
 
A
 
870

 
8,884

 

 
6,205

 
870

 
15,089

 
15,959

 
2,772

 
2013
 
(A)
Kensington Meadows
 
Lansing, MI
 
B
 
250

 
2,699

 

 
8,406

 
250

 
11,105

 
11,355

 
6,706

 
1995
 
(A&C)
Kimberly Estates
 
Newport, MI
 
C
 
1,250

 
6,160

 

 
8,041

 
1,250

 
14,201

 
15,451

 
827

 
2016
 
(A)
Kings Court Mobile Village
 
Traverse City, MI
 
 
1,473

 
13,782

 
269

 
7,148

 
1,742

 
20,930

 
22,672

 
12,097

 
1996
 
(A&C)
Kings Lake
 
DeBary, FL
 
D
 
280

 
2,542

 

 
2,798

 
280

 
5,340

 
5,620

 
3,314

 
1994
 
(A)
Kings Manor
 
Lakeland, FL
 
 
2,270

 
5,578

 

 
1,670

 
2,270

 
7,248

 
9,518

 
330

 
2016
 
(A)
King's Pointe
 
Lake Alfred, FL
 
B
 
510

 
16,763

 

 
478

 
510

 
17,241

 
17,751

 
1,472

 
2015
 
(A)
Kissimmee Gardens
 
Kissimmee, FL
 
 
3,270

 
14,402

 

 
1,042

 
3,270

 
15,444

 
18,714

 
781

 
2016
 
(A)
Kissimmee South RV Resort
 
Davenport, FL 
 
 
3,740

 
6,819

 

 
1,489

 
3,740

 
8,308

 
12,048

 
437

 
2016
 
(A)
Knollwood Estates
 
Allendale, MI
 
A
 
400

 
4,061

 

 
4,202

 
400

 
8,263

 
8,663

 
4,243

 
2001
 
(A)
La Casa Blanca
 
Apache Junction, AZ
 
B
 
4,370

 
14,142

 

 
587

 
4,370

 
14,729

 
19,099

 
1,786

 
2014
 
(A)
La Costa Village
 
Port Orange, FL
 
D
 
3,640

 
62,315

 

 
1,381

 
3,640

 
63,696

 
67,336

 
5,443

 
2015
 
(A)
La Hacienda RV Resort
 
Austin, TX
 
C
 
3,670

 
22,225

 

 
922

 
3,670

 
23,147

 
26,817

 
2,445

 
2015
 
(A)
Lafayette Place
 
Warren, MI
 
A
 
669

 
5,979

 

 
7,616

 
669

 
13,595

 
14,264

 
7,066

 
1998
 
(A)
Lafontaine RV Resort & Campground
 
Tiny, ON (1)
 
 
1,290

 
2,075

 
16

 
1,235

 
1,306

 
3,310

 
4,616

 
133

 
2016
 
(A)
Lake Avenue RV Resort & Campground
 
Cherry Valley, ON (1)
 
 
670

 
1,290

 
8

 
459

 
678

 
1,749

 
2,427

 
90

 
2016
 
(A)
Lake In Wood
 
Narvon, PA
 
A
 
7,360

 
7,097

 

 
1,553

 
7,360

 
8,650

 
16,010

 
1,902

 
2012
 
(A)
Lake Josephine
 
Sebring, FL
 
 
490

 
2,830

 

 
432

 
490

 
3,262

 
3,752

 
57

 
2016
 
(A)
Lake Juliana Landings
 
Auburndale, FL
 
A
 
335

 
3,048

 

 
1,806

 
335

 
4,854

 
5,189

 
3,066

 
1994
 
(A)
Lake Pointe Village
 
Mulberry, FL
 
D
 
480

 
29,795

 

 
399

 
480

 
30,194

 
30,674

 
2,584

 
2015
 
(A)
Lake Rudolph Campground & RV Resort
 
Santa Claus, IN
 
A
 
2,340

 
28,113

 

 
6,698

 
2,340

 
34,811

 
37,151

 
6,100

 
2014
 
(A&C)

F - 48

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Lake San Marino RV Park
 
Naples, FL
 
A
 
650

 
5,760

 

 
4,165

 
650

 
9,925

 
10,575

 
5,237

 
1996
 
(A)
Lakefront
 
Lakeside, CA
 
D
 
21,556

 
17,440

 

 
953

 
21,556

 
18,393

 
39,949

 
948

 
2016
 
(A)
Lakeland RV Resort
 
Lakeland, FL
 
 
1,730

 
5,524

 

 
1,340

 
1,730

 
6,864

 
8,594

 
334

 
2016
 
(A)
Lakeshore Landings
 
Orlando, FL
 
D
 
2,570

 
19,481

 

 
1,276

 
2,570

 
20,757

 
23,327

 
2,476

 
2014
 
(A)
Lakeshore Villas
 
Tampa, FL
 
B
 
3,080

 
18,983

 

 
740

 
3,080

 
19,723

 
22,803

 
1,689

 
2015
 
(A)
Lakeside Crossing
 
Conway, SC
 
D
 
3,520

 
31,615

 

 
6,549

 
3,520

 
38,164

 
41,684

 
2,859

 
2015
 
(A&C)
Lakeview
 
Ypsilanti, MI
 
C
 
1,156

 
10,903

 

 
6,643

 
1,156

 
17,546

 
18,702

 
7,570

 
2004
 
(A)
Lamplighter
 
Port Orange, FL
 
B
 
1,330

 
12,846

 

 
671

 
1,330

 
13,517

 
14,847

 
1,160

 
2015
 
(A)
Lazy J Ranch (4)
 
Arcata, CA
 
 
7,100

 
6,838

 

 

 
7,100

 
6,838

 
13,938

 
122

 
2017
 
(A)
Leisure Village
 
Belmont, MI
 
C
 
360

 
8,219

 

 
809

 
360

 
9,028

 
9,388

 
1,917

 
2011
 
(A)
Lemon Wood
 
Ventura, CA
 
D
 
19,540

 
6,918

 

 
868

 
19,540

 
7,786

 
27,326

 
406

 
2016
 
(A)
Liberty Farms
 
Valparaiso, IN
 
C
 
66

 
1,201

 
116

 
3,577

 
182

 
4,778

 
4,960

 
2,739

 
1985
 
(A&C)
Lincoln Estates
 
Holland, MI
 
 
455

 
4,201

 

 
2,869

 
455

 
7,070

 
7,525

 
4,267

 
1996
 
(A)
Long Beach RV Resort & Campground
 
Barnegat, NJ
 
 
710

 
3,414

 

 
835

 
710

 
4,249

 
4,959

 
211

 
2016
 
(A)
Majestic Oaks RV Resort
 
Zephyrhills, FL
 
E
 
3,940

 
4,725

 
28

 
1,166

 
3,968

 
5,891

 
9,859

 
311

 
2016
 
(A)
Maple Brook
 
Matteson, IL
 
B
 
8,460

 
48,865

 

 
571

 
8,460

 
49,436

 
57,896

 
5,976

 
2014
 
(A)
Maplewood Manor
 
Brunswick, ME
 
E
 
1,770

 
12,982

 

 
1,529

 
1,770

 
14,511

 
16,281

 
1,766

 
2014
 
(A)
Marco Naples RV Resort
 
Naples, FL
 
 
2,790

 
10,458

 

 
1,369

 
2,790

 
11,827

 
14,617

 
629

 
2016
 
(A)
Meadow Lake Estates
 
White Lake, MI
 
B
 
1,188

 
11,498

 
127

 
8,719

 
1,315

 
20,217

 
21,532

 
13,569

 
1994
 
(A)
Meadowbrook
 
Charlotte, NC
 
C
 
1,310

 
6,570

 

 
15,277

 
1,310

 
21,847

 
23,157

 
8,853

 
2000
 
(A&C)
Meadowbrook Estates
 
Monroe, MI
 
A
 
431

 
3,320

 
379

 
13,888

 
810

 
17,208

 
18,018

 
10,249

 
1986
 
(A)
Meadowbrook Village
 
Tampa, FL
 
B
 
519

 
4,728

 

 
1,090

 
519

 
5,818

 
6,337

 
4,120

 
1994
 
(A)
Meadowlands of Gibraltar
 
Rockwood, MI
 
A
 
640

 
7,673

 

 
4,997

 
640

 
12,670

 
13,310

 
1,296

 
2015
 
(A)
Merrymeeting
 
Brunswick, ME
 
C
 
250

 
1,020

 

 
836

 
250

 
1,856

 
2,106

 
240

 
2014
 
(A)
Mill Creek RV Resort
 
Kissimmee, FL
 
 
1,400

 
4,839

 

 
1,312

 
1,400

 
6,151

 
7,551

 
338

 
2016
 
(A)
Mountain View
 
Mesa, AZ
 
B
 
5,490

 
12,325

 

 
404

 
5,490

 
12,729

 
18,219

 
1,570

 
2014
 
(A)
Napa Valley
 
Napa, CA
 
D
 
17,740

 
11,675

 

 
615

 
17,740

 
12,290

 
30,030

 
664

 
2016
 
(A)
Naples RV Resort
 
Naples, FL
 
C
 
3,640

 
2,020

 

 
1,828

 
3,640

 
3,848

 
7,488

 
940

 
2011
 
(A)
New Point RV Resort
 
New Point, VA
 
C
 
1,550

 
5,259

 

 
4,090

 
1,550

 
9,349

 
10,899

 
1,753

 
2013
 
(A)
New Ranch
 
Clearwater, FL
 
 
2,270

 
2,723

 

 
703

 
2,270

 
3,426

 
5,696

 
173

 
2016
 
(A)
North Lake
 
Moore Haven, FL
 
C
 
4,150

 
3,486

 

 
1,745

 
4,150

 
5,231

 
9,381

 
1,404

 
2011
 
(A)
North Point Estates
 
Pueblo, CO
 
C
 
1,582

 
3,027

 

 
5,039

 
1,582

 
8,066

 
9,648

 
3,790

 
2001
 
(C)

F - 49

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Northville Crossings
 
Northville, MI
 
B
 
1,236

 
29,564

 

 
8,798

 
1,236

 
38,362

 
39,598

 
8,992

 
2012
 
(A)
Oak Creek
 
Coarsegold, CA
 
B
 
4,760

 
11,185

 

 
1,492

 
4,760

 
12,677

 
17,437

 
1,511

 
2014
 
(A)
Oak Crest
 
Austin, TX
 
B
 
4,311

 
12,611

 

 
9,266

 
4,311

 
21,877

 
26,188

 
8,949

 
2002
 
(C)
Oak Island Village
 
East Lansing, MI
 
 
320

 
6,843

 

 
2,602

 
320

 
9,445

 
9,765

 
2,440

 
2011
 
(A)
Oak Ridge
 
Manteno, IL
 
D
 
1,090

 
36,941

 

 
2,947

 
1,090

 
39,888

 
40,978

 
4,785

 
2014
 
(A)
Oakview Estates
 
Arcadia, FL
 
 
850

 
3,881

 

 
793

 
850

 
4,674

 
5,524

 
237

 
2016
 
(A)
Oakwood Village
 
Miamisburg, OH
 
B
 
1,964

 
6,401

 

 
14,521

 
1,964

 
20,922

 
22,886

 
11,107

 
1998
 
(A&C)
Ocean Breeze (6)
 
Marathon, FL
 
 
2,330

 
1,770

 

 
(1,727
)
 
2,330

 
43

 
2,373

 

 
2016
 
(A)
Ocean Breeze Jensen Beach
 
Jensen Beach, FL
 
 
19,026

 
13,862

 

 
13,340

 
19,026

 
27,202

 
46,228

 
924

 
2016
 
(A&C)
Ocean West (4)
 
McKinleyville, CA
 
B
 
5,040

 
4,413

 
27

 

 
5,067

 
4,413

 
9,480

 
79

 
2017
 
(A)
Orange City MH & RV Resort
 
Orange City, FL
 
C
 
920

 
5,540

 

 
1,882

 
920

 
7,422

 
8,342

 
1,703

 
2011
 
(A)
Orange Tree Village
 
Orange City, FL
 
D
 
283

 
2,530

 
15

 
1,124

 
298

 
3,654

 
3,952

 
2,526

 
1994
 
(A)
Orchard Lake (3)
 
Milford, OH
 
C
 
395

 
4,025

 
(15
)
 
1,715

 
380

 
5,740

 
6,120

 
2,817

 
1999
 
(A)
Paddock Park South
 
Ocala, FL
 
 
630

 
6,601

 

 
594

 
630

 
7,195

 
7,825

 
359

 
2016
 
(A)
Palm Creek Golf & RV Resort
 
Casa Grande, AZ
 
D
 
11,836

 
76,143

 

 
19,029

 
11,836

 
95,172

 
107,008

 
19,591

 
2012
 
(A&C)
Palm Key Village
 
Davenport, FL
 
B
 
3,840

 
15,661

 

 
996

 
3,840

 
16,657

 
20,497

 
1,469

 
2015
 
(A)
Palm Village
 
Bradenton, FL
 
 
2,970

 
2,849

 

 
763

 
2,970

 
3,612

 
6,582

 
183

 
2016
 
(A)
Palos Verdes Shores MH & Golf Community (2)
 
San Pedro, CA 
 
D
 

 
21,815

 

 
1,525

 

 
23,340

 
23,340

 
1,172

 
2016
 
(A)
Park Place
 
Sebastian, FL
 
D
 
1,360

 
48,678

 

 
2,216

 
1,360

 
50,894

 
52,254

 
4,234

 
2015
 
(A)
Park Royale
 
Pinellas Park, FL
 
D
 
670

 
29,046

 

 
243

 
670

 
29,289

 
29,959

 
2,513

 
2015
 
(A)
Parkside Village
 
Cheektowaga, NY
 
B
 
550

 
10,402

 

 
288

 
550

 
10,690

 
11,240

 
1,279

 
2014
 
(A)
Pebble Creek
 
Greenwood, IN
 
C
 
1,030

 
5,074

 

 
7,575

 
1,030

 
12,649

 
13,679

 
6,343

 
2000
 
(A&C)
Pecan Branch
 
Georgetown, TX
 
C
 
1,379

 

 
235

 
7,231

 
1,614

 
7,231

 
8,845

 
2,098

 
1999
 
(C)
Pecan Park RV Resort
 
Jacksonville, FL
 
 
2,000

 
5,000

 

 
820

 
2,000

 
5,820

 
7,820

 
286

 
2016
 
(A)
Pelican Bay
 
Micco, FL
 
 
470

 
10,543

 

 
1,182

 
470

 
11,725

 
12,195

 
1,036

 
2015
 
(A)
Pelican Bay Resort & Marina
 
Marathon, FL
 
D
 
4,760

 
4,742

 

 
1,237

 
4,760

 
5,979

 
10,739

 
308

 
2016
 
(A)
Pembroke Downs
 
Chino, CA
 
D
 
9,560

 
7,269

 

 
681

 
9,560

 
7,950

 
17,510

 
387

 
2016
 
(A)
Peter's Pond RV Resort
 
Sandwich, MA
 
C
 
4,700

 
22,840

 

 
3,534

 
4,700

 
26,374

 
31,074

 
5,241

 
2013
 
(A)
Petoskey RV Resort
 
Petoskey, MI
 
 
230

 
3,270

 

 
1,252

 
230

 
4,522

 
4,752

 
234

 
2016
 
(A)

F - 50

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Pheasant Ridge
 
Lancaster, PA
 
A
 
2,044

 
19,279

 

 
736

 
2,044

 
20,015

 
22,059

 
10,207

 
2002
 
(A)
Pickerel Park RV Resort & Campground
 
Napanee, ON (1)
 
 
900

 
2,125

 
11

 
394

 
911

 
2,519

 
3,430

 
126

 
2016
 
(A)
Pin Oak Parc
 
O'Fallon, MO
 
B
 
1,038

 
3,250

 
467

 
14,134

 
1,505

 
17,384

 
18,889

 
8,127

 
1994
 
(A&C)
Pine Hills
 
Middlebury, IN
 
A
 
72

 
544

 
60

 
3,587

 
132

 
4,131

 
4,263

 
2,300

 
1980
 
(A)
Pine Ridge
 
Prince George, VA
 
B
 
405

 
2,397

 

 
6,225

 
405

 
8,622

 
9,027

 
4,074

 
1986
 
(A&C)
Pine Trace (3)
 
Houston, TX
 
C
 
2,907

 
17,169

 
(257
)
 
19,511

 
2,650

 
36,680

 
39,330

 
12,190

 
2004
 
(A&C)
Pinebrook Village
 
Grand Rapids, MI
 
C
 
130

 
5,692

 

 
1,687

 
130

 
7,379

 
7,509

 
1,940

 
2011
 
(A)
Pismo Dunes Resort (4)
 
Pismo Beach, CA
 
 
11,070

 
10,190

 

 
29

 
11,070

 
10,219

 
21,289

 
183

 
2017
 
(A)
Plantation Landings
 
Haines City, FL
 
D
 
3,070

 
30,973

 

 
1,897

 
3,070

 
32,870

 
35,940

 
2,737

 
2015
 
(A)
Pleasant Lake RV Resort
 
Bradenton, FL
 
E
 
5,220

 
20,403

 

 
1,523

 
5,220

 
21,926

 
27,146

 
1,149

 
2016
 
(A)
Presidential Estates Mobile Village
 
Hudsonville, MI
 
B
 
680

 
6,314

 

 
6,512

 
680

 
12,826

 
13,506

 
7,453

 
1996
 
(A)
Rainbow RV Resort
 
Frostproof, FL
 
A
 
1,890

 
5,682

 

 
4,058

 
1,890

 
9,740

 
11,630

 
1,992

 
2012
 
(A)
Rainbow Village of Largo
 
Largo, FL
 
E
 
4,420

 
12,529

 

 
1,969

 
4,420

 
14,498

 
18,918

 
764

 
2016
 
(A)
Rainbow Village of Zephyrhills
 
Zephyrhills. FL
 
 
1,800

 
9,884

 

 
1,203

 
1,800

 
11,087

 
12,887

 
577

 
2016
 
(A)
Rancho Alipaz (2)
 
San Juan Capistrano, CA
 
 

 
2,856

 
4,000

 
751

 
4,000

 
3,607

 
7,607

 
182

 
2016
 
(A)
Rancho Caballero
 
Riverside, CA
 
D
 
16,560

 
12,446

 

 
813

 
16,560

 
13,259

 
29,819

 
664

 
2016
 
(A)
Rancho Mirage
 
Apache Junction, AZ
 
B
 
7,510

 
22,238

 

 
969

 
7,510

 
23,207

 
30,717

 
2,787

 
2014
 
(A)
Red Oaks RV Resort (2)
 
Bushnell, FL
 
 
5,180

 
20,499

 

 
1,768

 
5,180

 
22,267

 
27,447

 
1,229

 
2016
 
(A)
Regency Heights
 
Clearwater, FL
 
 
11,330

 
15,734

 

 
1,059

 
11,330

 
16,793

 
28,123

 
833

 
2016
 
(A)
Reserve at Fox Creek
 
Bullhead City, AZ
 
D
 
1,950

 
20,074

 

 
1,147

 
1,950

 
21,221

 
23,171

 
2,526

 
2014
 
(A)
Richmond Place (3)
 
Richmond, MI
 
A
 
501

 
2,040

 
(31
)
 
2,737

 
470

 
4,777

 
5,247

 
2,332

 
1998
 
(A)
The Ridge
 
Davenport, FL
 
B
 
8,350

 
35,463

 

 
2,646

 
8,350

 
38,109

 
46,459

 
3,257

 
2015
 
(A)
Riptide RV Resort & Marina
 
Key Largo, FL
 
 
2,440

 
991

 

 
1,052

 
2,440

 
2,043

 
4,483

 
90

 
2016
 
(A)
River Haven Village
 
Grand Haven, MI
 
C
 
1,800

 
16,967

 

 
11,058

 
1,800

 
28,025

 
29,825

 
12,518

 
2001
 
(A)
River Ranch (3)
 
Austin, TX
 
C
 
4,690

 
843

 
(4
)
 
44,391

 
4,686

 
45,234

 
49,920

 
10,097

 
2000
 
(A&C)
River Ridge
 
Austin, TX
 
A
 
3,201

 
15,090

 

 
9,945

 
3,201

 
25,035

 
28,236

 
11,389

 
2002
 
(C)
Riverside Club
 
Ruskin, FL
 
D
 
1,600

 
66,207

 

 
3,745

 
1,600

 
69,952

 
71,552

 
5,925

 
2015
 
(A)
Rock Crusher Canyon RV Park
 
Crystal River, FL
 
C
 
420

 
5,542

 
121

 
2,435

 
541

 
7,977

 
8,518

 
829

 
2015
 
(A)
Roxbury Park
 
Goshen, IN
 
B
 
1,057

 
9,870

 

 
4,106

 
1,057

 
13,976

 
15,033

 
6,914

 
2001
 
(A)

F - 51

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Royal Country
 
Miami, FL
 
E
 
2,290

 
20,758

 

 
2,412

 
2,290

 
23,170

 
25,460

 
17,342

 
1994
 
(A)
Royal Palm Village
 
Haines City, FL
 
E
 
1,730

 
27,446

 

 
2,197

 
1,730

 
29,643

 
31,373

 
2,544

 
2015
 
(A)
Royal Palms MH & RV Resort (2)
 
Cathedral City, CA
 
 

 
21,660

 

 
913

 

 
22,573

 
22,573

 
1,174

 
2016
 
(A)
Rudgate Clinton
 
Clinton Township, MI
 
A
 
1,090

 
23,664

 

 
7,175

 
1,090

 
30,839

 
31,929

 
6,397

 
2012
 
(A)
Rudgate Manor
 
Sterling Heights, MI
 
A
 
1,440

 
31,110

 

 
9,631

 
1,440

 
40,741

 
42,181

 
8,509

 
2012
 
(A)
Saco/Old Orchard Beach KOA
 
Saco, ME
 
C
 
790

 
3,576

 

 
5,134

 
790

 
8,710

 
9,500

 
1,142

 
2014
 
(A)
Saddle Oak Club
 
Ocala, FL
 
B
 
730

 
6,743

 

 
1,427

 
730

 
8,170

 
8,900

 
5,825

 
1995
 
(A)
Saddlebrook
 
San Marcos, TX
 
C
 
1,703

 
11,843

 

 
21,588

 
1,703

 
33,431

 
35,134

 
10,625

 
2002
 
(C)
San Pedro RV Resort & Marina (6)
 
Islamorada, FL
 
 
3,110

 
2,416

 

 
(2,376
)
 
3,110

 
40

 
3,150

 

 
2016
 
(A)
Sandy Lake MH & RV Resort
 
Carrolton, TX
 
 
730

 
17,837

 

 
1,127

 
730

 
18,964

 
19,694

 
967

 
2016
 
(A)
Saralake Estates
 
Sarasota, FL
 
 
6,540

 
11,403

 

 
705

 
6,540

 
12,108

 
18,648

 
638

 
2016
 
(A)
Savanna Club
 
Port St. Lucie, FL
 
D
 
12,810

 
79,887

 

 
195

 
12,810

 
80,082

 
92,892

 
6,895

 
2015
 
(A&C)
Scio Farms Estates (3)
 
Ann Arbor, MI
 
B
 
2,300

 
22,659

 
(12
)
 
14,754

 
2,288

 
37,413

 
39,701

 
23,970

 
1995
 
(A&C)
Sea Air Village
 
Rehoboth Beach, DE
 
 
1,207

 
10,179

 

 
2,371

 
1,207

 
12,550

 
13,757

 
6,265

 
1997
 
(A)
Sea Breeze Resort (6)
 
Islamorada, FL 
 
 
7,390

 
4,616

 

 
(4,438
)
 
7,390

 
178

 
7,568

 

 
2016
 
(A)
Seaport RV Resort
 
Old Mystic, CT
 
C
 
120

 
290

 

 
2,369

 
120

 
2,659

 
2,779

 
868

 
2013
 
(A)
Seashore Campsites RV Park and Campground
 
Cape May, NJ
 
D
 
1,030

 
23,228

 

 
2,670

 
1,030

 
25,898

 
26,928

 
3,458

 
2014
 
(A)
Serendipity
 
North Fort Myers, FL
 
B
 
1,160

 
23,522

 

 
2,338

 
1,160

 
25,860

 
27,020

 
2,331

 
2015
 
(A)
Settler's Rest RV Resort
 
Zephyrhills, FL
 
 
1,760

 
7,685

 

 
980

 
1,760

 
8,665

 
10,425

 
452

 
2016
 
(A)
Shadow Wood Village
 
Hudson, FL
 
 
4,520

 
3,898

 

 
819

 
4,520

 
4,717

 
9,237

 
225

 
2016
 
(A)
Shady Pines MH & RV Resort
 
Galloway Township, NJ
 
 
1,060

 
3,768

 

 
793

 
1,060

 
4,561

 
5,621

 
230

 
2016
 
(A)
Shady Road Villas
 
Ocala, FL
 
 
450

 
2,819

 

 
603

 
450

 
3,422

 
3,872

 
161

 
2016
 
(A)
Sheffield Estates
 
Auburn Hills, MI
 
C
 
778

 
7,165

 

 
2,260

 
778

 
9,425

 
10,203

 
3,829

 
2006
 
(A)
Shell Creek RV Resort & Marina
 
Punta Gorda, FL
 
E
 
2,200

 
9,662

 

 
884

 
2,200

 
10,546

 
12,746

 
538

 
2016
 
(A)
Sherkston Shores Beach Resort & Campground
 
Sherkston, ON (1)
 
 
22,750

 
97,164

 
283

 
3,712

 
23,033

 
100,876

 
123,909

 
5,445

 
2016
 
(A)
Siesta Bay RV Park
 
Ft. Myers, FL
 
A
 
2,051

 
18,549

 
4

 
4,735

 
2,055

 
23,284

 
25,339

 
14,748

 
1996
 
(A)
Silver Birches RV Resort & Campground
 
Lambton Shores, ON(1)
 
 
880

 
1,540

 
11

 
355

 
891

 
1,895

 
2,786

 
93

 
2016
 
(A)

F - 52

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Silver Springs
 
Clinton Township, MI
 
B
 
861

 
16,595

 

 
3,964

 
861

 
20,559

 
21,420

 
4,509

 
2012
 
(A)
Sky Harbor
 
Cheektowaga, NY
 
A
 
2,318

 
24,253

 

 
4,179

 
2,318

 
28,432

 
30,750

 
3,238

 
2014
 
(A)
Skyline
 
Fort Collins, CO
 
E
 
2,260

 
12,120

 

 
689

 
2,260

 
12,809

 
15,069

 
1,566

 
2014
 
(A)
Southern Charm RV Resort
 
Zephyrhills, FL
 
E
 
4,940

 
17,366

 

 
1,303

 
4,940

 
18,669

 
23,609

 
999

 
2016
 
(A)
Southern Hills/Northridge Place
 
Stewartville, MN
 
E
 
360

 
12,723

 

 
10,709

 
360

 
23,432

 
23,792

 
2,439

 
2014
 
(A&C)
Southern Pines
 
Bradenton, FL
 
 
1,710

 
3,337

 

 
852

 
1,710

 
4,189

 
5,899

 
207

 
2016
 
(A)
Southfork
 
Belton, MO
 
A
 
1,000

 
9,011

 

 
8,003

 
1,000

 
17,014

 
18,014

 
8,615

 
1997
 
(A)
Southport Springs
 
Zephyrhills, FL
 
B
 
15,060

 
17,229

 

 
1,999

 
15,060

 
19,228

 
34,288

 
1,652

 
2015
 
(A&C)
Southwood Village
 
Grand Rapids, MI
 
 
300

 
11,517

 

 
1,878

 
300

 
13,395

 
13,695

 
3,150

 
2011
 
(A)
Spanish Main MH & RV Resort
 
Thonotasassa, FL
 
 
2,390

 
8,159

 

 
1,496

 
2,390

 
9,655

 
12,045

 
478

 
2016
 
(A)
St. Clair Place
 
St. Clair, MI
 
A
 
501

 
2,029

 

 
2,111

 
501

 
4,140

 
4,641

 
2,127

 
1998
 
(A)
Stonebridge (5)
 
Richfield Twp., MI
 
 
2,044

 

 
246

 
2,137

 
2,290

 
2,137

 
4,427

 

 
1998
 
(C)
Stonebridge (3)
 
San Antonio, TX
 
C
 
2,515

 
2,096

 
(615
)
 
6,884

 
1,900

 
8,980

 
10,880

 
4,761

 
2000
 
(A&C)
Stonebrook
 
Homosassa, FL
 
B
 
650

 
14,063

 

 
507

 
650

 
14,570

 
15,220

 
1,238

 
2015
 
(A)
Summit Ridge (3)
 
Converse, TX
 
C
 
2,615

 
2,092

 
(883
)
 
22,019

 
1,732

 
24,111

 
25,843

 
7,962

 
2000
 
(A&C)
Sun -N-Fun RV Resort (3)
 
Sarasota, FL
 
D
 
50,952

 
117,457

 
(139
)
 
2,908

 
50,813

 
120,365

 
171,178

 
6,967

 
2016
 
(A)
Sun Valley
 
Apache Junction, AZ
 
D
 
2,750

 
18,408

 

 
1,010

 
2,750

 
19,418

 
22,168

 
2,318

 
2014
 
(A)
Sun Villa Estates (3)
 
Reno, NV
 
B
 
2,385

 
11,773

 
(1,103
)
 
1,479

 
1,282

 
13,252

 
14,534

 
8,078

 
1998
 
(A)
Suncoast Gateway
 
Port Richey, FL 
 
 
594

 
300

 

 
916

 
594

 
1,216

 
1,810

 
239

 
2016
 
(A)
Sundance
 
Zephyrhills, FL
 
B
 
890

 
25,306

 

 
955

 
890

 
26,261

 
27,151

 
2,237

 
2015
 
(A)
Sunlake Estates
 
Grand Island, FL
 
D
 
6,290

 
24,084

 

 
1,181

 
6,290

 
25,265

 
31,555

 
2,162

 
2015
 
(A)
Sunset Beach RV Resort
 
Cape Charles, VA
 
 
3,800

 
24,030

 

 

 
3,800

 
24,030

 
27,830

 
1,275

 
2016
 
(A)
Sunset Harbor at Cow Key Marina
 
Key West, FL
 
 
8,570

 
7,636

 

 
391

 
8,570

 
8,027

 
16,597

 
396

 
2016
 
(A)
Sunset Lakes RV Resort (4)
 
Hillsdale, IL
 
 
1,840

 
5,995

 

 
539

 
1,840

 
6,534

 
8,374

 
119

 
2017
 
(A)
Sunset Ridge (3)
 
Portland, MI
 
C
 
2,044

 

 
(9
)
 
19,492

 
2,035

 
19,492

 
21,527

 
8,176

 
1998
 
(C)
Sunset Ridge
 
Kyle, TX
 
C
 
2,190

 
2,775

 

 
6,485

 
2,190

 
9,260

 
11,450

 
4,730

 
2000
 
(A&C)
Swan Meadow Village (3)
 
Dillon, CO
 
E
 
2,140

 
19,734

 

 
(472
)
 
2,140

 
19,262

 
21,402

 
2,339

 
2014
 
(A)
Sweetwater RV Resort
 
Zephyrhills, FL
 
E
 
1,340

 
9,113

 

 
958

 
1,340

 
10,071

 
11,411

 
538

 
2016
 
(A)
Sycamore Village
 
Mason, MI
 
 
390

 
13,341

 

 
3,871

 
390

 
17,212

 
17,602

 
4,320

 
2011
 
(A)
Tallowwood Isle
 
Coconut Creek, FL
 
 
13,796

 
20,797

 

 
714

 
13,796

 
21,511

 
35,307

 
1,075

 
2016
 
(A)

F - 53

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Tamarac Village
 
Ludington, MI
 
 
300

 
12,028

 
85

 
3,461

 
385

 
15,489

 
15,874

 
3,342

 
2011
 
(A)
Tampa East
 
Dover, FL
 
A
 
734

 
6,310

 

 
4,670

 
734

 
10,980

 
11,714

 
4,441

 
2005
 
(A)
Three Lakes
 
Hudson, FL
 
C
 
5,050

 
3,361

 

 
2,401

 
5,050

 
5,762

 
10,812

 
1,432

 
2012
 
(A)
Thunderhill Estates
 
Sturgeon Bay, WI
 
E
 
640

 
9,008

 

 
1,326

 
640

 
10,334

 
10,974

 
1,308

 
2014
 
(A)
Timber Ridge
 
Ft. Collins, CO
 
B
 
990

 
9,231

 

 
2,915

 
990

 
12,146

 
13,136

 
7,652

 
1996
 
(A)
Timberline Estates
 
Coopersville, MI
 
B
 
535

 
4,867

 

 
5,344

 
535

 
10,211

 
10,746

 
6,095

 
1994
 
(A)
Town & Country Mobile Village
 
Traverse City, MI
 
A
 
406

 
3,736

 

 
1,726

 
406

 
5,462

 
5,868

 
3,438

 
1996
 
(A)
Town & Country Village
 
Lisbon, ME
 
E
 
230

 
4,539

 

 
2,012

 
230

 
6,551

 
6,781

 
862

 
2014
 
(A)
Trailside RV Resort & Campground
 
Seguin, ON (1)
 
 
3,690

 
3,650

 
46

 
546

 
3,736

 
4,196

 
7,932

 
222

 
2016
 
(A)
Travelers World RV Resort
 
San Antonio, TX
 
 
790

 
7,952

 

 
1,399

 
790

 
9,351

 
10,141

 
514

 
2016
 
(A)
Treetops RV Resort
 
Arlington, TX
 
 
730

 
9,831

 

 
1,107

 
730

 
10,938

 
11,668

 
583

 
2016
 
(A)
Vallecito
 
Newbury Park, CA
 
D
 
25,766

 
9,814

 

 
772

 
25,766

 
10,586

 
36,352

 
517

 
2016
 
(A)
The Valley
 
Apopka, FL 
 
 
2,530

 
5,660

 

 
1,029

 
2,530

 
6,689

 
9,219

 
320

 
2016
 
(A)
Verde Plaza
 
Tucson, AZ
 
 
710

 
7,069

 

 
1,575

 
710

 
8,644

 
9,354

 
402

 
2016
 
(A)
Victor Villa
 
Victorville, CA
 
D
 
2,510

 
20,408

 

 
1,362

 
2,510

 
21,770

 
24,280

 
1,109

 
2016
 
(A)
The Villas at Calla Pointe
 
Cheektowaga, NY
 
A
 
380

 
11,014

 

 
147

 
380

 
11,161

 
11,541

 
1,332

 
2014
 
(A)
Vines RV Resort
 
Paso Robles, CA
 
C
 
890

 
7,110

 

 
1,662

 
890

 
8,772

 
9,662

 
1,413

 
2013
 
(A)
Vista del Lago
 
Scotts Valley, CA
 
D
 
17,830

 
9,456

 

 
751

 
17,830

 
10,207

 
28,037

 
401

 
2016
 
(A)
Vista del Lago MH & RV Resort
 
Bradenton, FL
 
E
 
3,630

 
5,329

 

 
794

 
3,630

 
6,123

 
9,753

 
320

 
2016
 
(A)
Vizcaya Lakes
 
Port Charlotte, FL
 
C
 
670

 
4,221

 

 
510

 
670

 
4,731

 
5,401

 
371

 
2015
 
(A)
Wagon Wheel RV Resort & Campground
 
Old Orchard Beach, ME
 
C
 
590

 
7,703

 

 
3,043

 
590

 
10,746

 
11,336

 
2,257

 
2013
 
(A)
Walden Woods
 
Homosassa, FL
 
D / B
 
1,550

 
26,375

 

 
1,017

 
1,550

 
27,392

 
28,942

 
2,320

 
2015
 
(A)
Warren Dunes Village
 
Bridgman, MI
 
C
 
310

 
3,350

 

 
7,963

 
310

 
11,313

 
11,623

 
1,463

 
2011
 
(A&C)
Water Oak Country Club Estates
 
Lady Lake, FL
 
D
 
2,834

 
16,706

 
101

 
25,472

 
2,935

 
42,178

 
45,113

 
20,493

 
1993
 
(A&C)
Waters Edge RV Resort
 
Zephyrhills, FL
 
E
 
1,180

 
5,450

 

 
1,288

 
1,180

 
6,738

 
7,918

 
350

 
2016
 
(A)
Waverly Shores Village
 
Holland, MI
 
B
 
340

 
7,267

 
450

 
3,212

 
790

 
10,479

 
11,269

 
1,684

 
2011
 
(A&C)
West Village Estates
 
Romulus, MI
 
B
 
884

 
19,765

 

 
4,604

 
884

 
24,369

 
25,253

 
4,930

 
2012
 
(A)
Westbrook Senior Village
 
Toledo, OH
 
B
 
355

 
3,295

 

 
659

 
355

 
3,954

 
4,309

 
1,983

 
2001
 
(A)
Westbrook Village
 
Toledo, OH
 
B
 
1,110

 
10,462

 

 
5,103

 
1,110

 
15,565

 
16,675

 
8,416

 
1999
 
(A)

F - 54

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)


 
 
 
 
 
 
Initial Cost to Company
 
Costs Capitalized Subsequent to Acquisition (Improvements)
 
Gross Amount Carried at December 31, 2017
 
 
 
 
 
 
Property Name
 
Location
 
Encumbrance
 
Land
 
Depreciable  Assets
 
Land
 
Depreciable Assets
 
Land
 
Depreciable  Assets
 
Total
 
Accumulated Depreciation
 
Date
 
Acquired (A) or Constructed (C)
Westside Ridge
 
Auburndale, FL
 
D
 
760

 
10,714

 

 
702

 
760

 
11,416

 
12,176

 
984

 
2015
 
(A)
Westward Ho RV Resort & Campground
 
Glenbeulah, WI
 
C
 
1,050

 
5,642

 

 
2,475

 
1,050

 
8,117

 
9,167

 
1,565

 
2013
 
(A)
White Lake Mobile Home Village
 
White Lake, MI
 
B
 
672

 
6,179

 

 
10,472

 
672

 
16,651

 
17,323

 
9,244

 
1997
 
(A&C)
Wild Acres RV Resort & Campground
 
Old Orchard Beach, ME
 
C
 
1,640

 
26,786

 

 
4,250

 
1,640

 
31,036

 
32,676

 
6,558

 
2013
 
(A)
Wildwood Community
 
Sandwich, IL
 
D
 
1,890

 
37,732

 

 
888

 
1,890

 
38,620

 
40,510

 
4,641

 
2014
 
(A)
Willow Lake RV Resort & Campground
 
Scotland, ON (1)
 
 
1,260

 
2,275

 
16

 
346

 
1,276

 
2,621

 
3,897

 
125

 
2016
 
(A)
Willowbrook Place
 
Toledo, OH
 
B
 
781

 
7,054

 

 
4,719

 
781

 
11,773

 
12,554

 
6,350

 
1997
 
(A)
Willowood RV Resort & Campground
 
Amherstberg, ON (1)
 
 
1,160

 
1,490

 
14

 
295

 
1,174

 
1,785

 
2,959

 
94

 
2016
 
(A)
Windham Hills Estates
 
Jackson, MI
 
 
2,673

 
2,364

 

 
19,792

 
2,673

 
22,156

 
24,829

 
10,405

 
1998
 
(A&C)
Windmill Village
 
Davenport, FL
 
B
 
7,560

 
36,294

 

 
1,371

 
7,560

 
37,665

 
45,225

 
3,214

 
2015
 
(A)
Windsor Woods Village
 
Wayland, MI
 
C
 
270

 
5,835

 

 
3,623

 
270

 
9,458

 
9,728

 
2,704

 
2011
 
(A)
Wine Country RV Resort
 
Paso Robles, CA
 
C
 
1,740

 
11,510

 

 
3,525

 
1,740

 
15,035

 
16,775

 
1,987

 
2014
 
(A&C)
Woodhaven Place
 
Woodhaven, MI
 
B
 
501

 
4,541

 

 
5,411

 
501

 
9,952

 
10,453

 
4,777

 
1998
 
(A)
Woodlake Trails (3)
 
San Antonio, TX
 
C
 
1,186

 
287

 
(56
)
 
13,399

 
1,130

 
13,686

 
14,816

 
4,257

 
2000
 
(A&C)
Woodland Lake RV Resort and Campground
 
Bornholm, ON (1)
 
 
1,650

 
2,165

 
21

 
476

 
1,671

 
2,641

 
4,312

 
140

 
2016
 
(A)
Woodland Park Estates
 
Eugene, OR
 
 
1,592

 
14,398

 

 
903

 
1,592

 
15,301

 
16,893

 
9,639

 
1998
 
(A)
Woodlands at Church Lake
 
Groveland, FL
 
B
 
2,480

 
9,072

 

 
1,160

 
2,480

 
10,232

 
12,712

 
874

 
2015
 
(A)
Woodside Terrace
 
Holland, OH
 
B
 
1,063

 
9,625

 

 
8,674

 
1,063

 
18,299

 
19,362

 
9,602

 
1997
 
(A)
 
 
 
 
 
 
1,098,583

 
4,294,673

 
9,255

 
1,480,368

 
1,107,838

 
5,775,041

 
6,882,879

 
1,237,525

 
 
 
 

A These communities collateralize $411.1 million of secured debt.
B These communities collateralize $1.0 billion of secured debt.
C These communities support the borrowing base for our secured line of credit, which had $41.8 million outstanding.
D These communities collateralize $1.0 billion of secured debt.
E These communities collateralize $388.8 million of secured debt.

(1) Gross amount carried at December 31, 2017, at our Canadian properties, reflects the impact of foreign currency translation.
(2) All or part of this property is subject to ground lease.
(3) Gross amount carried at December 31, 2017 has decreased at this property due to a partial disposition of Land or Depreciable Assets, as applicable.
(4) This property was acquired during 2017. The purchase price allocations and related values shown in the table above are preliminary and may be adjusted as final costs and valuations are determined.
(5) This property was not included in our community count as of December 31, 2017 as it was not fully developed (or Corporate Headquarters).
(6) This property was impaired as a result of Hurricane Irma in September 2017.

F - 55

SUN COMMUNITIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III
DECEMBER 31, 2017
(amounts in thousands)



The change in investment property for the years ended December 31, 2017, 2016, and 2015 is as follows:

 
Years Ended December 31,
 
2017
 
2016
 
2015
 Beginning balance
$
6,496,339

 
$
4,573,522

 
$
3,363,917

 Community and land acquisitions, including immediate improvements
204,375

 
1,822,564

 
1,214,482

 Community expansion and development
88,331

 
47,958

 
28,660

 Improvements, other
168,315

 
113,803

 
195,439

 Asset impairment
(10,511
)
 

 

 Dispositions and other
(63,970
)
 
(61,508
)
 
(228,976
)
 Ending balance
$
6,882,879

 
$
6,496,339

 
$
4,573,522


The change in accumulated depreciation for the years ended December 31, 2017, 2016, and 2015 is as follows:

 
Years Ended December 31,
 
2017
 
2016
 
2015
 Beginning balance
$
1,026,858

 
$
852,407

 
$
795,753

 Depreciation for the period
236,422

 
201,157

 
159,706

 Asset impairment
(405
)
 

 

 Dispositions and other
(25,350
)
 
(26,706
)
 
(103,052
)
 Ending balance
$
1,237,525

 
$
1,026,858

 
$
852,407




F - 56