Sun Communities Q2 2024 10-Q Filed

Ticker: SUI · Form: 10-Q · Filed: Aug 1, 2024 · CIK: 912593

Sentiment: neutral

Topics: 10-Q, real-estate, financials

TL;DR

**SUN Q2 10-Q IS IN: Financials and ops update for shareholders.**

AI Summary

Sun Communities Inc. filed its 10-Q for the period ending June 30, 2024. The filing details financial performance and operational updates for the second quarter of 2024. Key financial figures and strategic developments are presented within this report.

Why It Matters

This filing provides investors with crucial financial data and operational insights into Sun Communities' performance during the second quarter of 2024, impacting investment decisions.

Risk Assessment

Risk Level: medium — As a real estate investment trust, Sun Communities is subject to market fluctuations, interest rate changes, and property-specific risks.

Key Numbers

Key Players & Entities

FAQ

What is the primary business of Sun Communities Inc.?

Sun Communities Inc. is primarily involved in real estate investment trusts (SIC code 6798).

What is the reporting period for this 10-Q filing?

The conforming period of report is June 30, 2024.

When was this 10-Q filing submitted to the SEC?

This filing was submitted on August 1, 2024.

What is the company's fiscal year end?

The company's fiscal year ends on December 31.

What is the business address of Sun Communities Inc.?

The business address is 27777 Franklin Road, Suite 300, Southfield, MI 48034.

Filing Stats: 5,085 words · 20 min read · ~17 pages · Grade level 5.6 · Accepted 2024-08-01 15:14:16

Key Financial Figures

Filing Documents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023 1 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 2 Consolidated Statements of Comprehensive Income / (Loss) for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 3 Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited) 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited) 6

Notes to Consolidated Financial Statements (Unaudited) 7

Notes to Consolidated Financial Statements (Unaudited) 7

Management's Discussion and Analysis of Financial Condition and Results of Operations 41

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 41

Quantitative and Qualitative Disclosures about Market Risk 63

Item 3. Quantitative and Qualitative Disclosures about Market Risk 63

Controls and Procedures 64

Item 4. Controls and Procedures 64

– OTHER INFORMATION

PART II – OTHER INFORMATION

Legal Proceedings 65

Item 1. Legal Proceedings 65

Risk Factors 65

Item 1A. Risk Factors 65

Unregistered Sales of Equity Securities and Use of Proceeds 66

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 66

Exhibits 67

Item 6. Exhibits 67 Signatures 68 SUN COMMUNITIES, INC.

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (In millions, except for per share amounts) (Unaudited) June 30, 2024 December 31, 2023 Assets Land $ 4,555.0 $ 4,278.2 Land improvements and buildings 11,619.4 11,682.2 Rental homes and improvements 769.2 744.4 Furniture, fixtures and equipment 1,073.3 1,011.7 Investment property 18,016.9 17,716.5 Accumulated depreciation ( 3,552.2 ) ( 3,272.9 ) Investment property, net (see Note 8 at VIEs) 14,464.7 14,443.6 Cash, cash equivalents and restricted cash (see Note 8 at VIEs) 104.2 42.7 Inventory of manufactured homes 182.3 205.6 Notes and other receivables, net 417.4 421.6 Collateralized receivables, net 54.3 56.2 Goodwill 731.7 733.0 Other intangible assets, net (see Note 8 at VIEs) 354.2 369.5 Other assets, net (see Note 8 at VIEs) 702.3 668.5 Total Assets $ 17,011.1 $ 16,940.7 Liabilities Mortgage loans payable (see Note 9; Note 8 at VIEs) $ 3,452.0 $ 3,478.9 Secured borrowings on collateralized receivables (See Note 5) 54.3 55.8 Unsecured debt (see Note 9; Note 8 at VIEs) 4,346.5 4,242.6 Distributions payable 119.7 118.2 Advanced reservation deposits and rent (see Note 8 at VIEs) 423.3 344.5 Accrued expenses and accounts payable (see Note 8 at VIEs) 406.3 313.7 Other liabilities (see Note 8 at VIEs) 979.5 953.1 Total Liabilities 9,781.6 9,506.8 Commitments and contingencies (see Note 17) Temporary equity (see Note 10; Note 8 at VIEs) 259.7 260.9 Shareholders' Equity Common stock, $ 0.01 par value. Authorized: 360.0 shares; Issued and outstanding: 124.7 at June 30, 2024 and 124.4 at December 31, 2023 1.2 1.2 Additional paid-in capital 9,481.2 9,466.9 Accumulated other comprehensive income 6.0 12.2 Distributions in excess of accumulated earnings ( 2,604.1 ) ( 2,397.5 ) Total SUI Shareholders' Equity 6,884.3 7,082.8 Noncontrolling interests Common and preferred OP units 84.8 90.2 Consolidated entities (see Note 8 at VIEs) 0.7 — Total nonco

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation Sun Communities, Inc., and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership (the "Operating Partnership"), Sun Home Services, Inc. ("SHS"), Safe Harbor Marinas, LLC ("Safe Harbor") and the entities through which we operate our business in the United Kingdom (collectively, "Park Holidays") are referred to herein as the "Company," "SUI," "us," "we," or "our." We follow accounting standards set by the Financial Accounting Standards Board ("FASB"). FASB establishes accounting principles generally accepted in the United States of America ("GAAP"), which we follow to ensure that we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification ("ASC"). These unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information and in accordance with GAAP. We present interim disclosures and certain information and footnote disclosures as required by SEC rules and regulations. Accordingly, the unaudited Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited Consolidated Financial Statements reflect, in the opinion of management, all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of the interim financial statements. All significant intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period financial statements in order to conform to current period presentation. There was no impact to prior period net income for any of the reclassifications. The results of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For the three months ended March 31, 2023, non-cash goodwill impairment increased Net loss on our Consolidated Statements of Operations by $ 15.4 million. For the three and six months ended June 30, 2023, we recorded non-cash goodwill impairment charges of $ 309.7 million and $ 325.1 million, respectively, which changed Net income to Net loss on our Consolidated Statements of Operations by these corresponding amounts. 2. Revenue Our revenue consists of real property revenue at our MH, RV, Marina and UK properties, revenue from home sales, revenue from service, retail, dining and entertainment, interest income, and brokerage commissions and other revenue. The following table disaggregates our revenue by major source and segment (in millions): Three Months Ended June 30, 2024 June 30, 2023 (1) MH RV Marina UK Consolidated MH RV Marina UK Consolidated Revenues Real property $ 239.7 $ 148.2 $ 118.8 $ 44.7 $ 551.4 $ 224.3 $ 148.2 $ 111.7 $ 41.8 $ 526.0 Home sales 49.2 9.1 — 49.2 107.5 48.8 13.5 — 60.3 122.6 Service, retail, dining and entertainment 1.9 24.7 148.0 14.0 188.6 2.0 26.0 149.3 13.7 191.0 Interest 3.4 1.5 0.2 0.2 5.3 12.7 1.1 0.2 — 14.0 Brokerage commissions and other, net 5.9 3.4 0.8 1.1 11.2 3.0 4.4 1.1 1.3 9.8 Total Revenues $ 300.1 $ 186.9 $ 267.8 $ 109.2 $ 864.0 $ 290.8 $ 193.2 $ 262.3 $ 117.1 $ 863.4 (1) Recast to reflect segment changes. Six Months Ended June 30, 2024 June 30, 2023 (1) MH RV Marina UK Consolidated MH RV Marina UK Consolidated Revenues Real property $ 477.7 $ 252.7 $ 215.2 $ 82.7 $ 1,028.3 $ 448.3 $ 247.8 $ 200.8 $ 70.7 $ 967.6 Home sales 76.4 14.6 — 85.4 176.4 89.6 19.9 — 99.4 208.9 Service, retail, dining and entertainment 4.5 31.1 252.6 18.3 306.5 4.5 31.9 240.4 16.6 293.4 Interest 6.5 2.9 0.2 0.3 9.9 23.0 2.0 0.4 — 25.4 Brokerage commissions and other, net 6.9 4.1 1.8 1.4 14.2 6.8 9.0 2.1 1.4 19.3 Total Revenues $ 572.0 $ 305.4 $

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) 3. Real Estate Acquisitions and Dispositions 2024 Acquisitions For the six months ended June 30, 2024, we acquired the following properties: Property Name Type Sites, Wet Slips and Dry Storage Spaces State, Province or Country Month Acquired Port Milford Marina 92 CT April Oak Leaf (1) Marina 89 CT April Berth One Palm Beach (1) Marina 4 FL April Total 185 (1) Combined with an existing property. The following table summarizes the amount of assets acquired, net of liabilities assumed, at the acquisition date and the consideration paid for the acquisitions completed during the six months ended June 30, 2024 (in millions): At Acquisition Date Consideration Investment in property Inventory of manufactured homes, boat parts and retail related items Goodwill and other intangible assets Other assets, net Total identifiable assets acquired net of liabilities assumed Cash and escrow Temporary and permanent equity (1) Total consideration Asset Acquisition Port Milford (2) $ 3.9 $ — $ 0.1 $ ( 0.4 ) $ 3.6 $ 1.1 $ 2.5 $ 3.6 Berth One Palm Beach (3) 2.9 — 0.1 0.2 3.2 3.2 — 3.2 Business Combination Oak Leaf (3)(4) 5.1 0.1 — — 5.2 5.2 — 5.2 Total $ 11.9 $ 0.1 $ 0.2 $ ( 0.2 ) $ 12.0 $ 9.5 $ 2.5 $ 12.0 (1) Refer to Note 10, "Equity and Temporary Equity," for additional detail. (2) In conjunction with this acquisition, we issued 19,326 common OP units valued at $ 2.5 million. (3) Combined with an existing property. (4) The purchase price allocation is preliminary as of June 30, 2024, subject to revision based on the final purchase price allocations to be finalized one year from the acquisition date. During the three months ended March 31, 2024, we entered into a ground lease that can support one marina with eight wet slips and dry storage spaces. 2024 Development and Expansion Activities During the six months ended June 30, 2024, we acquired two land parcels located in th

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (Unaudited) 2024 and 2023 Disposition Activity The following real estate dispositions occurred during the six months ended June 30, 2024: Property Name Property Type Number of Properties Sites, Wet Slips, Dry Storage Spaces and Development Sites State, Province or Country Month Disposed Net Cash Proceeds Gain on Disposition (1) Spanish Trails and Sundance MH 2 533 AZ & FL February $ 51.7 $ 6.2 Littondale MH 1 114 UK May $ 5.4 $ 2.2 (1) Recorded in Gain / (loss) on dispositions of properties on the Consolidated Statements of Operations. In August 2023, we sold one MH community located in Maine with 155 developed sites at its net carrying value for cash consideration of $ 6.8 million. The property was previously classified as held for sale during the three months ended June 30, 2023, with its net carrying value of $ 13.1 million written down by $ 6.3 million within Asset impairments on our Consolidated Statements of Operations, to a fair value less cost to sell of $ 6.8 million. In February 2023, we sold two parcels of land in the United Kingdom for total consideration of $ 111.5 million. The consideration consisted of $ 108.8 million in the form of an operator note receivable that was added to an existing facility with a weighted average interest rate of 11.9 % per annum, due May 31, 2023 and subsequently extended to July 31, 2023 as part of the operator's total facility. On the date of sale, the carrying value of the note receivable approximated its fair value due to its short term nature. The dispositions resulted in a loss on sale totaling $ 2.2 million during the year ended December 31, 2023, net of the release of foreign currency translation losses from Accumulated other comprehensive income ("AOCI") of $ 11.9 million. The total loss on sale was recorded in Gain / (loss) on dispositions of properties on the Consolidated Statements of Operations. As of December 31, 2023, we have reacquired t

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