Real Estate Acquisitions and Dispositions

2016 Acquisitions

Carefree Acquisition

On June 9, 2016, pursuant to a Stock Purchase Agreement dated March 22, 2016, the Company through the Operating Partnership acquired from Carefree Communities Intermediate Holdings, L.L.C. (the "Seller") all of the issued and outstanding shares of common stock of Carefree Communities Inc. ("Carefree Communities") or ("Carefree"). Carefree owned 103 MH and RV communities, comprising over 27,000 sites.

The aggregate purchase price for the acquisition was $1.68 billion. At the closing, the Company issued the Seller 3,329,880 shares of its common stock (the "Acquisition Shares") at an issuance price of $67.57 per share (or $225.0 million in common stock), and the Operating Partnership paid the balance of the purchase price, or $1.5 billion, in cash. Approximately $1.0 billion of the cash payment was applied simultaneously to pay off debt on the properties owned by Carefree Communities. The Operating Partnership funded the cash portion of the purchase price in part with the proceeds of the Fannie Mae financing and the Northwestern Mutual Life Insurance Company financing described in Note 8, "Debt and Lines of Credit."

On March 30, 2016, we closed on an underwritten public offering of 6,037,500 shares of common stock at a price of $66.50 per share. The net proceeds from the offering of $385.4 million were used to fund a portion of the purchase price for the acquisition of Carefree Communities.

We have allocated the "Investment in property" balances for Carefree Communities to the respective balance sheet line items upon preliminary completion of a purchase price allocation in accordance with the FASB ASC Topic 805 - Business Combinations.



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 leases	(29,340		)
Total identifiable assets acquired and liabilities assumed⁽¹⁾	1,684,140

Consideration
Cash and equity	$	1,684,140

⁽¹⁾ The purchase price allocation for Carefree is preliminary and will be adjusted as final costs and values are determined.

The amount of total revenues and net income included in our 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)
Revenue	$	97,836
Net income	$	9,070

2016 Other Acquisitions:

In December 2016, we acquired Lake Josephine RV Resort ("Lake Josephine"), a RV resort with 178 sites located in Sebring, Florida.

In October 2016, we acquired Adirondack Gateway Campground RV Resort ("Adirondack Gateway"), a RV resort with 347 sites located in Gansevoort, New York. We recognized a gain on the acquisition of Adirondack Gateway of $0.5 million within Other expenses, net in our Consolidated Statements of Operations, as the fair value of the consideration transferred by us was less than the fair value of the identifiable net assets acquired.

Also in October 2016, we acquired Jellystone Park Camp Resort ("Jellystone Larkspur"), a RV resort with 148 sites located in Larkspur, Colorado.

In September 2016, we acquired Petoskey RV Resort ("Petoskey"), a RV resort with 78 sites located in Petoskey, Michigan.

In August 2016, we acquired Sunset Beach Resort ("Sunset Beach") in Cape Charles, Virginia. The sellers of Sunset Beach were engaged by the Company to continue to operate and maintain the property. Beginning January 1, 2022, the Company has the option to remove the sellers as operators via a payment based on certain operating performance metrics. Accordingly, total consideration of $28.3 million as of the acquisition date includes a contingent consideration liability of $9.8 million.

The contingent consideration liability represents the present value of the contingent payment estimated at acquisition closing, based on projected future operating performance metrics. The contingent payment is formula-driven, and not capped. The contingent consideration liability will be re-measured at each reporting date, with changes in fair value adjusted through earnings, until the contingency is resolved. The final contingent payment could be materially different from the initial estimate.

In June 2016, we acquired Pecan Park RV Resort ("Pecan Park"), a RV resort with 183 sites located in Jacksonville, Florida.

In March 2016, we acquired Hill Country Cottage and RV Resort ("Hill Country"), a RV resort with 356 sites located in New Braunfels, Texas.

In March 2016, we acquired Kimberly Estates, a MH community with 387 sites located in Frenchtown Township, Michigan.

The following tables summarize the fair value of the assets acquired and liabilities assumed (excluding Carefree) at the acquisition dates and the consideration paid for other acquisitions completed in 2016 (in thousands):



At Acquisition Date	Lake Josephine⁽¹⁾		Adirondack Gateway⁽¹⁾⁽²⁾		Jellystone Larkspur⁽¹⁾		Petoskey⁽¹⁾		Sunset Beach⁽¹⁾⁽³⁾		Pecan Park⁽¹⁾		Hill Country⁽¹⁾		Kimberly Estates⁽¹⁾		Total
Investment in property	$	3,400	$	2,590	$	7,516	$	3,500	$	28,283	$	7,000	$	29,990	$	7,313	$	89,592
Inventory of manufactured homes	—		—		—		—		—		—		—		97		97
In-place leases and other intangible assets	—		170		—		—		—		—		10		340		520
Total identifiable assets acquired and liabilities assumed	$	3,400	$	2,760	$	7,516	$	3,500	$	28,283	$	7,000	$	30,000	$	7,750	$	90,209

Consideration
Cash, proceeds from dispositions held in escrow, or contingent liability	$	3,400	$	2,250	$	7,516	$	3,500	$	28,283	$	7,000	$	30,000	$	7,750	$	89,699

⁽¹⁾ The purchase price allocations for Lake Josephine, Adirondack Gateway, Jellystone Larkspur, Petoskey, Sunset Beach, Pecan Park, Hill Country, and Kimberly Estates are preliminary and may be adjusted as final costs and final valuations are determined.

⁽²⁾Includes the impact of a $0.5 million bargain purchase gain recorded within Other expense, net on the Consolidated Statements of Operations for the year ended December 31, 2016.

⁽³⁾Sunset Beach consideration includes a contingent liability of $9.8 million as of the acquisition date. As of December 31, 2016, the contingent consideration liability was $10.0 million.

The amount of revenue and net income included in the Consolidated Statements of Operations for the year ended December 31, 2016 related to the 2016 acquisitions other than Carefree is set forth in the following table (in thousands):



	Year Ended December 31, 2016
	(unaudited)
Revenue	$	8,540
Net income	$	1,847

The following unaudited pro forma financial information presents the results of our operations for the years ended December 31, 2016 and 2015 as if the properties that we acquired during 2016 were acquired on January 1, 2015. 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, 2015 (in thousands, except per-share data).



	Year Ended December 31,
	(unaudited)
	2016		2015
Total revenues	$	910,559	$	848,669
Net income attributable to Sun Communities, Inc. common stockholders	$	38,556	$	195,760
Net income per share attributable to Sun Communities, Inc. common stockholders - basic	$	0.59	$	3.65
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted	$	0.58	$	3.65

2015 Acquisitions

American Land Lease

First Phase

During 2014, we completed the first phase of the acquisition of the American Land Lease ("ALL") properties. We acquired 32 MH communities with over 9,000 developed sites in 11 states. Included in the total consideration paid for the first phase was the issuance of 361,797 shares of common stock, 501,130 common OP units, 483,317 shares of 6.50% Series A-4 Cumulative Convertible Preferred Stock ("Series A-4 Preferred Stock) and 669,449 Series A-4 preferred OP units.

Second Phase

In 2015, we completed the final phase of the acquisition of the ALL properties. We acquired the remaining 26 communities comprised of over 10,000 sites. Included in the total consideration paid for the second phase was the issuance of 4,377,073 shares of common stock and 5,847,234 shares of Series A-4 Preferred Stock. In addition, one of the seller's funds purchased 150,000 shares of our common stock and 200,000 Series A-4 preferred OP units, for an aggregate purchase price of $12.5 million. In August 2015, the Company repurchased 4,066,586 shares of the Series A-4 Preferred Stock.

The following tables summarize the fair value of the assets acquired and liabilities assumed at the acquisition dates and the consideration paid (in thousands):



At Acquisition Date	First Phase			Second Phase			Total
Investment in property	$	656,543		$	818,109		$	1,474,652
Notes receivable	5,189			850			6,039
Other (liabilities) assets	(1,705		)	7,405			5,700
In-place leases and other intangible assets	12,870			15,460			28,330
Below market leases	(10,820		)	(54,580		)	(65,400		)
Assumed debt	(199,300		)	(201,466		)	(400,766		)
Total identifiable assets and liabilities assumed	$	462,777		$	585,778		$	1,048,555

Consideration
Common OP units⁽¹⁾	$	24,064		$	—		$	24,064
Series A-4 preferred OP units⁽²⁾	18,852			1,000			19,852
Common stock	20,427			259,133			279,560
Series A-4 preferred stock ⁽²⁾	13,697			175,527			189,224
Consideration from new mortgages	100,700			90,794			191,494
Cash consideration transferred	285,037			59,324			344,361
Total consideration transferred	$	462,777		$	585,778		$	1,048,555

⁽¹⁾To estimate the fair value of the common OP units at the valuation date, we utilized the market approach, observing the public price of our common stock.

⁽²⁾ To estimate the fair value of the Series A-4 preferred OP units and the Series A-4 preferred stock at the valuation date, we utilized the income approach. Under this approach, we used the Binomial Lattice Method.

The amount of revenue and net income included in the Consolidated Statements of Operations related to the ALL properties for the years ended December 31, 2015 and 2014 and is set forth in the following table (in thousands):



	Year Ended December 31, 2015		Year Ended December 31, 2014
	(unaudited)		(unaudited)
Revenue	$	137,035	$	6,515
Net income	$	14,374	$	(6,744	)

2015 Other Acquisitions

In August 2015, we acquired Rock Crusher Canyon RV Resort ("Rock Crusher"), a RV resort with 391 sites located in Crystal Lake, Florida.

In July 2015, we acquired Frontier Town RV Resort ("Frontier Town"), an RV resort with 584 developed sites and expansion potential of 200 sites, located in Berlin, Maryland. We also acquired Fort Whaley RV Resort ("Fort Whaley"), an RV resort with 210 developed sites and expansion potential of nearly 90 sites, located in Whaleyville, Maryland.

In May 2015, we acquired La Hacienda RV Resort ("La Hacienda"), an RV resort with 241 sites located in Austin, Texas. We also acquired Lakeside Crossing, an MH community with 419 sites and expansion potential of nearly 300 sites, located near Myrtle Beach, South Carolina.

In April 2015, we acquired the Berger portfolio ("Berger"), which consisted of six MH communities with over 3,130 developed sites and expansion potential of approximately 380 sites. Included in the total consideration paid was 371,808 common OP units and 340,206 Series C preferred OP units.

In March 2015, we acquired Meadowlands Gibraltar ("Meadowlands"), an MH community with 321 sites located in Gibraltar, Michigan.

The following tables summarize the fair value of the assets acquired and liabilities assumed (excluding ALL) at the acquisition dates and the consideration paid for other acquisitions completed in 2015 (in thousands):



At Acquisition Date	Meadowlands			Berger			Lakeside Crossing			La Hacienda		Frontier Town		Fort Whaley		Rock Crusher		Total
Investment in property	$	8,313		$	268,026		$	35,438		$	25,895	$	62,126	$	5,704	$	5,962	$	411,464
Inventory of manufactured homes	285			—			—			—		—		—		—		285
In-place leases and other intangible assets	270			5,040			520			1,380		70		—		110		7,390
Below market leases	—			(7,840		)	(3,440		)	—		—		—		—		(11,280		)
Assumed debt	(6,318		)	(169,882		)	—			—		—		—		—		(176,200		)
Total identifiable assets acquired and liabilities assumed	$	2,550		$	95,344		$	32,518		$	27,275	$	62,196	$	5,704	$	6,072	$	231,659

Consideration
Common OP units	$	—		$	19,650		$	—		$	—	$	—	$	—	$	—	$	19,650
Series C preferred OP units	—			33,154			—			—		—		—		—		33,154
Note payable	2,377			—			—			—		—		—		—		2,377
Cash consideration transferred	173			42,540			32,518			27,275		62,196		5,704		6,072		176,478
Total consideration transferred	$	2,550		$	95,344		$	32,518		$	27,275	$	62,196	$	5,704	$	6,072	$	231,659

The following unaudited pro forma financial information presents the results of our operations for the years ended December 31, 2015 and 2014 as if the properties that we acquired during 2015 were acquired on January 1, 2014. 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, 2014 (in thousands, except per-share data).



	Year Ended December 31,
	(unaudited)
	2015		2014
Total revenues	$	688,620	$	623,754
Net income attributable to Sun Communities, Inc. common stockholders	$	158,859	$	57,779
Net income per share attributable to Sun Communities, Inc. common stockholders - basic	$	2.96	$	1.40
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted	$	2.94	$	1.38

Transaction Costs

Transaction costs of approximately $31.9 million, $17.8 million, and $18.3 million have been incurred for the years ended December 31, 2016, 2015, and 2014, respectively, and are presented as “Transaction costs” in our Consolidated Statements of Operations.

Dispositions

There were no property dispositions during 2016, however, during the fourth quarter 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.

During the year ended December 31, 2015, we disposed of 17 MH communities and 3 MH and RV combined communities. Pursuant to Accounting Standards Update ("ASU") 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," the disposals of the communities do not qualify for presentation as a discontinued operation, as the sales do not have a major impact on our operations and financial results and do not represent a strategic shift. A gain of $125.4 million was recorded in Gain on disposition of properties, net in our Consolidated Statements of Operations. At December 31, 2015, we held $126.3 million related to certain of these dispositions in escrow as a result of an Internal Revenue Code Section 1031 transaction included in Other assets, net. During 2016, $37.6 million of the balance held in escrow was used to fund acquisitions. The remaining $88.7 million of the escrow balance reverted to us.

The table below shows our dispositions during the year ended December 31, 2015:



Community	State	Number of Sites
Silver Star	FL	406
Holiday Village	IN	326
Maplewood Mobile	IN	207
Meadows	IN	330
Valley Brook	IN	798
West Glen Village	IN	552
Woods Edge	IN	598
Edwardsville	KS	634
Candlewick Court	MI	211
College Park Estates	MI	230
Sherman Oaks	MI	366
Village Trails	MI	100
Creekside	NC	45
Colonial Village	NY	153
Valley View Estates	NY	197
Catalina	OH	462
Worthington Arms	OH	224
Casa de Valle	TX	381
Kenwood	TX	280
Snow to Sun	TX	475