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Sun Communities, Inc. Reports 2020 Third Quarter Results

October 21, 2020 4:47 PM


NEWS RELEASE

October 21, 2020

Southfield, Michigan, Oct. 21, 2020 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its third quarter results for 2020.

Financial Results for the Quarter and Nine Months Ended September 30, 2020

For the quarter ended September 30, 2020, total revenues increased $38.1 million, or 10.5 percent, to $400.5 million compared to $362.4 million for the same period in 2019. Net income attributable to common stockholders was $81.2 million, or $0.83 per diluted common share, for the quarter ended September 30, 2020, as compared to net income attributable to common stockholders of $57.0 million, or $0.63 per diluted common share, for the same period in 2019.

For the nine months ended September 30, 2020, total revenues increased $51.9 million, or 5.4 percent, to $1.0 billion compared to $962.2 million for the same period in 2019. Net income attributable to common stockholders was $124.0 million, or $1.29 per diluted common share, for the nine months ended September 30, 2020, as compared to net income attributable to common stockholders of $131.7 million, or $1.49 per diluted common share, for the same period in 2019.

Non-GAAP Financial Measures and Portfolio Performance

Gary Shiffman, Chief Executive Officer of Sun Communities stated, “The growth we delivered in the third quarter demonstrated the resilience of our platform and our ongoing positive operational momentum. Once again, our results were ahead of expectations as solid top line revenue performance and certain expense savings continued to mitigate the impact of the pandemic. We achieved same community NOI growth of 5.5 percent and added 776 revenue producing sites, boosting our occupancy by 50 basis points. Our RV resorts were exceptionally strong, as travelers elected drive-to vacation options and took advantage of our varied vacation destinations featuring lakes, mountains and beaches.”

Mr. Shiffman continued, “Despite the present challenges of the pandemic, we remain focused on positioning Sun for the future. During the quarter we acquired five RV and two MH communities as we continue to expand our portfolio. We are particularly excited about our pending acquisition of Safe Harbor Marinas, LLC and the integration of marinas onto our platform which should further enhance Sun’s growth profile over the long term.”


OPERATING HIGHLIGHTS

Portfolio Occupancy

Total portfolio occupancy was 97.2 percent at September 30, 2020, compared to 96.7 percent at September 30, 2019. During the quarter ended September 30, 2020, revenue producing sites increased by 776 sites, as compared to 766 revenue producing sites gained during the third quarter of 2019, a 1.3 percent increase.

During the nine months ended September 30, 2020, revenue producing sites increased by 1,927 sites, as compared to an increase of 2,005 revenue producing sites during the nine months ended September 30, 2019.


Same Community(2) Results

For the 366 communities owned and operated by the Company since January 1, 2019, NOI(1) for the quarter ended September 30, 2020 increased 5.5 percent over the same period in 2019, resulting from a 5.4 percent increase in revenues, and a 5.2 percent increase in operating expenses. Adjusted to remove the impact of $1.1 million of direct COVID-19 related expense, Same Community NOI(1) growth was 6.2 percent for the quarter ended September 30, 2020. Same Community occupancy(3) increased to 98.8 percent at September 30, 2020 from 96.8 percent at September 30, 2019.

For the nine months ended September 30, 2020, NOI(1) increased 4.6 percent over the same period in 2019, as a result of a 3.0 percent increase in revenues and a 0.2 percent decrease in operating expenses. Adjusted to remove the impact of $2.1 million of direct COVID-19 related expense, Same Community NOI(1) growth was 5.0 percent for the nine months ended September 30, 2020.


Home Sales

During the quarter ended September 30, 2020, the Company sold 710 homes as compared to 906 homes sold during the same period in 2019. The Company sold 155 and 167 new homes for the quarters ended September 30, 2020 and 2019, respectively. Rental home sales, which are included in total home sales, were 225 and 317 for the quarters ended September 30, 2020 and 2019, respectively.

During the nine months ended September 30, 2020, 2,084 homes were sold as compared to 2,631 for the same period in 2019. Rental home sales, which are included in total home sales, were 581 and 859 for the nine months ended September 30, 2020 and 2019, respectively.

Rent Collections

For the third quarter of 2020, MH and annual RV rent collections were approximately 97.0 percent and 98.0 percent, respectively, after adjusting for the impact of hardship deferrals and prepaid rent balances.


PORTFOLIO ACTIVITY

Acquisitions and Dispositions

During the quarter ended September 30, 2020, the Company acquired the following communities:

Community Name Type Sites Development Sites State Total Purchase Price (in millions) Month Acquired
Flamingo Lake RV 421 — FL $34.0 July
Woodsmoke RV 300 — FL 26.0 September
Jellystone Lone Star RV 344 — TX 21.0 September
El Capitan & Ocean Mesa(a)(b) RV 266 109 CA 59.5 September
Highland Green Estates & Troy Villa(b) MH 1,162 — MI 64.7 September
2,493 109 $205.2

(a) In conjunction with the acquisition, the Company issued Series G preferred OP units. As of September 30, 2020, 260,710 Series G preferred OP units were outstanding.
(b) Contains two communities.

Year to date, the Company has acquired 11 communities totaling 3,517 sites for a total purchase price of $303.5 million.

During the quarter ended September 30, 2020, the Company sold a manufactured home community located in Montana, containing 226 sites, for $12.6 million. The gain from the sale of the property was approximately $5.6 million.

Pending Transaction - Safe Harbor Marinas

On September 29, 2020, the Company entered into a merger agreement to acquire Safe Harbor Marinas, LLC (“Safe Harbor”) for approximately $2.1 billion. As of September 30, 2020, Safe Harbor directly or indirectly owned 101 marinas and managed five other marinas for third-party owners. The marinas collectively contain approximately 30,000 wet slips and moorings and approximately 8,300 dry racks, with approximately 9,500 additional spaces available for outside land storage. The marinas are located in 22 states in the Northeast, South, Mid-Atlantic, West and Midwest Regions of the United States, with the majority of such marinas concentrated in coastal regions and others located in various inland regions. The purchase price will be paid through a combination of the assumption of debt owed by Safe Harbor, the issuance of common and preferred OP units by the Company’s Operating Partnership, and cash. We expect to acquire Safe Harbor no later than October 30, 2020. The consummation of the $2.1 billion acquisition is subject to the satisfaction of customary closing conditions. If these conditions are not satisfied or waived, or if the merger agreement is otherwise terminated in accordance with its terms, then the acquisition will not be consummated. As a result, there can be no assurances as to the actual closing or the timing of the closing.

Construction Activity

During the quarter ended September 30, 2020, the Company completed the construction of nearly 660 sites in four ground-up developments and one redevelopment community, and nearly 25 expansion sites in one RV community.


BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

As of September 30, 2020, the Company had $3.3 billion of debt outstanding. The weighted average interest rate was 3.9 percent and the weighted average maturity was 11.4 years. The Company had $102.4 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve-month Recurring EBITDA(1) ratio was 5.0 times.

Subsequent to the quarter ended September 30, 2020, the Company entered into a new $260.0 million term loan secured by 11 properties. The loan term is 12-years and the interest rate is fixed at 2.64 percent.

Equity Transactions

On September 30, 2020, the Company entered into two forward sale agreements relating to an underwritten registered public offering of 9,200,000 shares of the Company’s common stock at a public offering price of $139.50 per share. The offering closed on October 5, 2020. The Company did not initially receive any proceeds from the sale of shares of its common stock in the offering. The Company expects to physically settle the forward sale agreements (by the delivery of shares of its common stock) and receive proceeds from the sale of those shares of its common stock upon one or more forward settlement dates no later than October 5, 2021. The Company may also elect to cash settle or net share settle all or a portion of its obligations under the forward sale agreements if it concludes it is in its best interest to do so. If the Company elects to cash settle or net settle the forward sale agreements it may not receive any proceeds. If the Company fully physically settles the forward sale agreements, it expects to receive net proceeds of approximately $1.23 billion. The Company intends to use the net proceeds, if any, received upon the settlement of the forward sale agreements to fund the cash component of the purchase price for the Safe Harbor acquisition. If for any reason the Safe Harbor acquisition is not consummated, or if the net proceeds, if any, received upon the future settlement of the forward sale agreements exceed the cash component of the purchase price, the Company intends to use any such net proceeds to repay borrowings outstanding under the revolving loan under its senior credit facility, to fund possible future acquisitions of properties and for working capital and general corporate purposes.


COVID-19 FINANCIAL IMPACT

Given the uncertainty surrounding the impact from the COVID-19 pandemic on its operations, the Company has withdrawn full year 2020 operational and financial guidance previously provided on February 19, 2020.

For the third quarter of 2020, the Company had a net benefit of approximately $4.6 million from its original budget as compared to a forecasted net reduction of up to $15.0 million outlined during the Company’s second quarter earnings release. The improvement was primarily due to better than expected transient RV revenues, ancillary activities gross profit and lower property level payroll.

The Company expects fourth quarter 2020 Core FFO to be in the range of $1.08 to $1.12 per share.

This estimate range is inclusive of the Company’s latest revenue expectations for transient RV revenue, the estimated two-month contribution from the Safe Harbor acquisition, the impact from the Company’s 9.2 million share forward equity offering and announced financing activities. The forecast does not include any additional prospective acquisition or capital market activity.


EARNINGS CONFERENCE CALL

A conference call to discuss third quarter operating results will be held on Thursday, October 22, 2020 at 11:00 A.M. (ET). To participate, call toll-free 877-407-9039. Callers outside the U.S. or Canada can access the call at 201-689-8470. A replay will be available following the call through November 5, 2020 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13708698. The conference call will be available live on Sun Communities’ website located at www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of September 30, 2020, owned, operated, or had an interest in a portfolio of 432 communities comprising nearly 146,000 developed sites in 32 states and Ontario, Canada.

For more information about Sun Communities, Inc., please visit www.suncommunities.com.

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to (248) 208-2500, by email to [email protected] or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains various “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this press release that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as “forecasts,” “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “predicts,” “potential,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes,” “scheduled,” “guidance”, “target” and similar expressions are intended to identify forward-looking statements, although not all forward looking statements contain these words. These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties and other factors, both general and specific to the matters discussed in or incorporated herein, some of which are beyond the Company’s control. These risks, uncertainties and other factors may cause the Company’s actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks disclosed under “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and the Company’s other filings with the Securities and Exchange Commission from time to time, such risks, uncertainties and other factors include but are not limited to:

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements included in this press release, whether as a result of new information, future events, changes in its expectations or otherwise, except as required by law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by these cautionary statement.


Investor Information


RESEARCH COVERAGE
Firm Analyst Phone Email
Bank of America Merrill Lynch Joshua Dennerlein (646) 855-1681 [email protected]
Berenberg Capital Markets Keegan Carl (646) 949-9052 [email protected]
BMO Capital Markets John Kim (212) 885-4115 [email protected]
Citi Research Michael Bilerman (212) 816-1383 [email protected]
Nicholas Joseph (212) 816-1909 [email protected]
Evercore ISI Steve Sakwa (212) 446-9462 [email protected]
Samir Khanal (212) 888-3796 [email protected]
Green Street Advisors John Pawlowski (949) 640-8780 [email protected]
Wells Fargo Todd Stender (562) 637-1371 [email protected]
INQUIRIES
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department.
At Our Website www.suncommunities.com
By Email [email protected]
By Phone (248) 208-2500



Portfolio Overview
(As of September 30, 2020)


Financial and Operating Highlights

(amounts in thousands, except for *)


Quarter Ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Financial Information
Total revenues$400,514 $303,266 $310,302 $301,819 $362,443
Net income / (loss)$89,756 $63,355 $(15,478) $30,685 $64,451
Net income / (loss) attributable to Sun Communities Inc. common stockholders$81,204 $58,910 $(16,086) $28,547 $57,002
Basic earnings / (loss) per share*$0.83 $0.61 $(0.17) $0.31 $0.63
Diluted earnings / (loss) per share*$0.83 $0.61 $(0.17) $0.31 $0.63
Cash distributions declared per common share*$0.79 $0.79 $0.79 $0.75 $0.75
Recurring EBITDA (1) $199,321 $148,650 $156,552 $144,738 $179,953
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (4)

$165,209 $118,092 $95,046 $105,533 $119,496
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (4)

$162,624 $110,325 $117,267 $104,534 $137,369
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (4) per share - fully diluted*$1.63 $1.20 $0.98 $1.11 $1.27
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (4) per share - fully diluted*$1.60 $1.12 $1.22 $1.10 $1.46
Balance Sheet
Total assets$8,335,717 $8,348,659 $8,209,047 $7,802,060 $7,397,854
Total debt$3,340,613 $3,390,771 $3,926,494 $3,434,402 $3,271,341
Total liabilities$3,791,922 $3,845,308 $4,346,127 $3,848,104 $3,720,983


Quarter Ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Operating Information*
Communities432 426 424 422 389
Manufactured home sites95,209 94,232 93,834 93,821 88,024
Annual RV sites26,817 26,240 26,148 26,056 25,756
Transient RV sites23,728 22,360 21,880 21,416 20,882
Total sites145,754 142,832 141,862 141,293 134,662
MH occupancy96.4 % 96.5 % 95.8 % 95.5 % 95.7 %
RV occupancy100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Total blended MH and RV occupancy97.2 % 97.3 % 96.7 % 96.4 % 96.7 %
New home sales155 140 119 140 167
Pre-owned home sales555 471 644 668 739
Total home sales710 611 763 808 906


Quarter Ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Net Leased Sites (5)
MH net leased sites349 759 287 437 296
RV net leased sites427 92 13 232 470
Total net leased sites776 851 300 669 766



Consolidated Balance Sheets
(amounts in thousands)


(Unaudited)
September 30, 2020 December 31, 2019
Assets
Land $1,441,372 $1,414,279
Land improvements and buildings 7,119,163 6,595,272
Rental homes and improvements 649,004 627,175
Furniture, fixtures and equipment 338,236 282,874
Investment property 9,547,775 8,919,600
Accumulated depreciation (1,900,306) (1,686,980)
Investment property, net 7,647,469 7,232,620
Cash, cash equivalents and restricted cash 115,529 34,830
Marketable securities 107,083 94,727
Inventory of manufactured homes 48,130 62,061
Notes and other receivables, net 191,508 157,926
Other assets, net 225,998 219,896
Total Assets $8,335,717 $7,802,060
Liabilities
Mortgage loans payable $3,191,380 $3,180,592
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,249 35,249
Preferred OP units - mandatorily redeemable 34,663 34,663
Lines of credit and other debt(6) 79,321 183,898
Distributions payable 79,600 71,704
Advanced reservation deposits and rent 146,909 133,420
Accrued expenses and accounts payable 140,848 127,289
Other liabilities 83,952 81,289
Total Liabilities 3,791,922 3,848,104
Commitments and contingencies
Series D preferred OP units 50,034 50,913
Series F preferred OP units 8,930 —
Series G preferred OP units 26,072 —
Equity Interests - NG Sun LLC and NG Sun Whitewater LLC 27,513 27,091
Stockholders' Equity
Common stock 983 932
Additional paid-in capital 5,851,380 5,213,264
Accumulated other comprehensive loss (2,226) (1,331)
Distributions in excess of accumulated earnings (1,491,338) (1,393,141)
Total Sun Communities, Inc. stockholders' equity 4,358,799 3,819,724
Noncontrolling interests
Common and preferred OP units 61,350 47,686
Consolidated variable interest entities 11,097 8,542
Total noncontrolling interests 72,447 56,228
Total Stockholders' Equity 4,431,246 3,875,952
Total Liabilities, Temporary Equity and Stockholders' Equity $8,335,717 $7,802,060



Statements of Operations - Quarter to Date and Year to Date Comparison
(In thousands, except per share amounts) (Unaudited)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 Change % Change September 30, 2020 September 30, 2019 Change % Change
Revenues
Income from real property (excluding transient revenue)$223,905 $202,205 $21,700 10.7 % $646,880 $588,273 $58,607 10.0 %
Transient revenue60,468 48,958 11,510 23.5 % 106,762 101,617 5,145 5.1 %
Revenue from home sales47,662 49,805 (2,143) (4.3)% 126,779 136,665 (9,886) (7.2)%
Rental home revenue16,171 14,444 1,727 12.0 % 46,611 42,827 3,784 8.8 %
Ancillary revenue43,803 37,259 6,544 17.6 % 66,373 67,157 (784) (1.2)%
Interest income2,624 4,770 (2,146) (45.0)% 7,609 14,489 (6,880) (47.5)%
Brokerage commissions and other revenues, net5,881 5,002 879 17.6 % 13,068 11,190 1,878 16.8 %
Total Revenues400,514 362,443 38,071 10.5 % 1,014,082 962,218 51,864 5.4 %
Expenses
Property operating and maintenance90,647 79,095 11,552 14.6 % 219,908 202,892 17,016 8.4 %
Real estate taxes17,442 15,399 2,043 13.3 % 52,341 46,455 5,886 12.7 %
Cost of home sales36,237 36,318 (81) (0.2)% 95,450 100,030 (4,580) (4.6)%
Rental home operating and maintenance5,949 6,444 (495) (7.7)% 16,128 16,453 (325) (2.0)%
Ancillary expenses20,023 18,752 1,271 6.8 % 35,731 38,333 (2,602) (6.8)%
Home selling expenses3,652 3,972 (320) (8.1)% 10,508 10,922 (414) (3.8)%
General and administrative expenses27,243 22,946 4,297 18.7 % 79,493 68,530 10,963 16.0 %
Catastrophic weather-related charges, net14 341 (327) (95.9)% 54 1,302 (1,248) (95.9)%
Depreciation and amortization88,499 76,532 11,967 15.6 % 259,453 229,241 30,212 13.2 %
Loss on extinguishment of debt— 12,755 (12,755) (100.0)% 5,209 13,478 (8,269) (61.4)%
Interest expense30,214 32,219 (2,005) (6.2)% 94,058 99,894 (5,836) (5.8)%
Interest on mandatorily redeemable preferred OP units / equity1,047 1,216 (169) (13.9)% 3,130 3,491 (361) (10.3)%
Total Expenses320,967 305,989 14,978 4.9 % 871,463 831,021 40,442 4.9 %
Income Before Other Items79,547 56,454 23,093 40.9 % 142,619 131,197 11,422 8.7 %
Gain / (loss) on remeasurement of marketable securities1,492 12,661 (11,169) (88.2)% (2,636) 16,548 (19,184) (115.9)%
Gain / (loss) on foreign currency translation4,664 (3,046) 7,710 N/M (2,441) 35 (2,476) N/M
Gain on disposition of property5,595 — 5,595 N/A 5,595 — 5,595 N/A
Other expense, net (7)(2,524) (1,362) (1,162) 85.3 % (3,378) (1,524) (1,854) 121.7 %
Loss on remeasurement of notes receivable(445) — (445) N/A (2,311) — (2,311) N/A
Income from nonconsolidated affiliates1,204 513 691 134.7 % 1,348 1,380 (32) (2.3)%
Loss on remeasurement of investment in nonconsolidated affiliates(446) — (446) N/A (1,505) — (1,505) N/A
Current tax benefit / (expense)107 (420) 527 (125.5)% (462) (906) 444 (49.0)%
Deferred tax benefit / (expense)562 (349) 911 N/M 804 (36) 840 N/M
Net Income89,756 64,451 25,305 39.3 % 137,633 146,694 (9,061) (6.2)%
Less: Preferred return to preferred OP units / equity1,645 1,599 46 2.9 % 4,799 4,640 159 3.4 %
Less: Income attributable to noncontrolling interests6,907 5,422 1,485 27.4 % 8,806 9,048 (242) (2.7)%
Net Income Attributable to Sun Communities, Inc.81,204 57,430 23,774 41.4 % 124,028 133,006 (8,978) (6.8)%
Less: Preferred stock distribution— 428 (428) (100.0)% — 1,288 (1,288) (100.0)%
Net Income Attributable to Sun Communities, Inc. Common Stockholders$81,204 $57,002 $24,202 42.5 % $124,028 $131,718 $(7,690) (5.8)%
Weighted average common shares outstanding - basic97,542 89,847 7,695 8.6 % 95,270 87,499 7,771 8.9 %
Weighted average common shares outstanding - diluted97,549 90,332 7,217 8.0 % 95,273 87,500 7,773 8.9 %
Basic earnings per share$0.83 $0.63 $0.20 31.7 % $1.29 $1.49 $(0.20) (13.4)%
Diluted earnings per share$0.83 $0.63 $0.20 31.7 % $1.29 $1.49 $(0.20) (13.4)%

N/M = Percentage change is not meaningful.


Outstanding Securities and Capitalization
(amounts in thousands except for *)


Outstanding Securities - As of September 30, 2020
Number of Units / Shares Outstanding Conversion Rate* If Converted Issuance Price Per Unit* Annual Distribution Rate*
Non-convertible Securities
Common shares98,280 N/A N/A N/A $3.16^
Convertible Securities
Series A-1 preferred OP units299 2.4390 728 $100 6.0%
Series A-3 preferred OP units40 1.8605 75 $100 4.5%
Series C preferred OP units309 1.1100 343 $100 4.5%
Series D preferred OP units489 0.8000 391 $100 3.8%
Series E preferred OP units90 0.6897 62 $100 5.25%
Series F preferred OP units90 0.6250 56 $100 3.0%
Series G preferred OP units261 0.6452 168 $100 3.2%
Common OP units2,473 1.0000 2,473 N/A Mirrors common shares distributions

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

Capitalization - As of September 30, 2020
Equity Shares Share Price* Total
Common shares 98,280 $140.61 $13,819,151
Common OP units 2,473 $140.61 347,729
Subtotal 100,753 $14,166,880
Preferred OP units as converted 1,823 $140.61 $256,332
Total diluted shares outstanding 102,576 14,423,212
Debt
Mortgage loans payable $3,191,380
Preferred Equity - Sun NG Resorts - mandatorily redeemable 35,249
Preferred OP units - mandatorily redeemable 34,663
Lines of credit and other debt(6) 79,321
Total debt $3,340,613
Total Capitalization $17,763,825


Reconciliations to Non-GAAP Financial Measures


Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO(1)
(amounts in thousands except for per share data)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Net Income Attributable To Sun Communities, Inc. Common Stockholders$81,204 $57,002 $124,028 $131,718
Adjustments
Depreciation and amortization88,495 76,692 259,543 229,698
Depreciation on nonconsolidated affiliates9 — 28 —
Gain / (loss) on remeasurement of marketable securities(1,492) (12,661) 2,636 (16,548)
Loss on remeasurement of investment in nonconsolidated affiliates446 — 1,505 —
Loss on remeasurement of notes receivable445 — 2,311 —
Income attributable to noncontrolling interests6,196 4,839 7,725 7,720
Preferred return to preferred OP units498 530 1,498 1,594
Interest Expense on Aspen preferred OP units514 — 1,542 —
Preferred distribution to Series A-4 preferred stock— 428 — 1,288
Gain on disposition of properties(5,595) — (5,595) —
Gain on disposition of assets, net(5,511) (7,334) (15,251) (21,083)
FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities (1) (4)

$165,209 $119,496 $379,970 $334,387
Adjustments
Other acquisition related costs (8)402 375 1,291 902
Loss on extinguishment of debt— 12,755 5,209 13,478
Catastrophic weather-related charges, net15 363 54 1,339
Loss of earnings - catastrophic weather related (9)(300) (377) — —
(Gain) / loss on foreign currency translation(4,664) 3,046 2,441 (35)
Other expense, net (7)2,524 1,362 3,378 1,524
Other adjustments (a)(562) 349 (504) 36
Core FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities (1) (4)

$162,624 $137,369 $391,839 $351,631
Weighted average common shares outstanding - basic97,542 89,847 95,270 87,499
Add
Common shares dilutive effect from forward sale agreement6 — 2 —
Common stock issuable upon conversion of stock options1 1 1 1
Restricted stock390 484 395 431
Common OP units2,476 2,284 2,445 2,498
Common stock issuable upon conversion of Aspen preferred OP units408 — 408 —
Common stock issuable upon conversion of Series A-3 preferred OP units75 75 75 75
Common stock issuable upon conversion of Series A-1 preferred OP units730 780 737 792
Common stock issuable upon conversion of Series A-4 preferred stock— 467 — 467
Weighted Average Common Shares Outstanding - Fully Diluted101,628 93,938 99,333 91,763
FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities (1) (4) Per Share - Fully Diluted

$1.63 $1.27 $3.83 $3.64
Core FFO Attributable To Sun Communities, Inc. Common Stockholders And Dilutive Convertible Securities (1) (4) Per Share - Fully Diluted

$1.60 $1.46 $3.94 $3.83

(a) Adjustments include deferred compensation amortization upon retirement and deferred tax (benefit) / expense.


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


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Net Income Attributable to Sun Communities, Inc. Common Stockholders$81,204 $57,002 $124,028 $131,718
Adjustments
Depreciation and amortization88,499 76,532 259,453 229,241
Loss on extinguishment of debt— 12,755 5,209 13,478
Interest expense30,214 32,219 94,058 99,894
Interest on mandatorily redeemable preferred OP units / equity1,047 1,216 3,130 3,491
Current tax (benefit) / expense(107) 420 462 906
Deferred tax (benefit) / expense(562) 349 (804) 36
Income from nonconsolidated affiliates(1,204) (513) (1,348) (1,380)
Less: Gain on dispositions of assets, net(5,511) (7,334) (15,251) (21,083)
Less: Gain on disposition of properties(5,595) — (5,595) —
EBITDAre (1)$187,985 $172,646 $463,342 $456,301
Adjustments
Catastrophic weather related charges, net14 341 54 1,302
(Gain) / loss on remeasurement of marketable securities(1,492) (12,661) 2,636 (16,548)
(Gain) / loss on foreign currency translation(4,664) 3,046 2,441 (35)
Other expense, net (6)2,524 1,362 3,378 1,524
Loss on remeasurement of notes receivable445 — 2,311 —
Loss on remeasurement of investment in nonconsolidated affiliates446 — 1,505 —
Preferred return to preferred OP units / equity1,645 1,599 4,799 4,640
Income attributable to noncontrolling interests6,907 5,422 8,806 9,048
Preferred stock distribution— 428 — 1,288
Plus: Gain on dispositions of assets, net5,511 7,334 15,251 21,083
Recurring EBITDA (1) $199,321 $179,517 $504,523 $478,603



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


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Net Income Attributable to Sun Communities, Inc. Common Stockholders$81,204 $57,002 $124,028 $131,718
Interest income(2,624) (4,770) (7,609) (14,489)
Brokerage commissions and other revenues, net(5,881) (5,002) (13,068) (11,190)
Home selling expenses3,652 3,972 10,508 10,922
General and administrative expenses27,243 22,946 79,493 68,530
Catastrophic weather-related charges, net14 341 54 1,302
Depreciation and amortization88,499 76,532 259,453 229,241
Loss on extinguishment of debt— 12,755 5,209 13,478
Interest expense30,214 32,219 94,058 99,894
Interest on mandatorily redeemable preferred OP units / equity1,047 1,216 3,130 3,491
(Gain) / loss on remeasurement of marketable securities(1,492) (12,661) 2,636 (16,548)
(Gain) / loss on foreign currency translation(4,664) 3,046 2,441 (35)
Gain on disposition of property(5,595) — (5,595) —
Other expense, net (7)2,524 1,362 3,378 1,524
Loss on remeasurement of notes receivable445 — 2,311 —
Income from nonconsolidated affiliates(1,204) (513) (1,348) (1,380)
Loss on remeasurement of investment in nonconsolidated affiliates446 — 1,505 —
Current tax (benefit) / expense(107) 420 462 906
Deferred tax (benefit) / expense(562) 349 (804) 36
Preferred return to preferred OP units / equity1,645 1,599 4,799 4,640
Income attributable to noncontrolling interests6,907 5,422 8,806 9,048
Preferred stock distribution— 428 — 1,288
NOI (1) / Gross Profit$221,711 $196,663 $573,847 $532,376


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Real Property NOI (1)$176,284 $156,669 $481,393 $440,543
Home Sales NOI (1) / Gross Profit11,425 13,487 31,329 36,635
Rental Program NOI (1)29,323 25,270 86,182 77,700
Ancillary NOI (1) / Gross Profit23,780 18,507 30,642 28,824
Site rent from Rental Program (included in Real Property NOI) (1) (10)(19,101) (17,270) (55,699) (51,326)
NOI (1) / Gross Profit$221,711 $196,663 $573,847 $532,376



Non-GAAP and Other Financial Measures


Debt Analysis
(amounts in thousands)


Quarter Ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Debt Outstanding
Mortgage loans payable$3,191,380 $3,205,507 $3,273,808 $3,180,592 $2,967,128
Secured borrowings on collateralized receivables (11)— — — — 93,669
Preferred Equity - Sun NG Resorts - mandatorily redeemable35,249 35,249 35,249 35,249 35,249
Preferred OP units - mandatorily redeemable34,663 34,663 34,663 34,663 34,663
Lines of credit and other debt (6)79,321 115,352 582,774 183,898 140,632
Total debt$3,340,613 $3,390,771 $3,926,494 $3,434,402 $3,271,341
% Fixed / Floating
Fixed97.6 % 96.6 % 85.2 % 94.7 % 95.7 %
Floating2.4 % 3.4 % 14.8 % 5.3 % 4.3 %
Total100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Weighted Average Interest Rates
Mortgage loans payable3.88 % 3.88 % 3.91 % 4.05 % 4.13 %
Preferred Equity - Sun NG Resorts - mandatorily redeemable6.00 % 6.00 % 6.00 % 6.00 % 6.00 %
Preferred OP units - mandatorily redeemable5.93 % 5.93 % 5.93 % 6.50 % 6.50 %
Lines of credit and other debt (6)1.32 % 2.03 % 1.85 % 2.71 % 3.23 %
Average before secured borrowings (11)3.86 % 3.86 % 3.64 % 4.03 % 4.14 %
Secured borrowings on collateralized receivables (11)— % — % — % — % 9.92 %
Total average3.86 % 3.86 % 3.64 % 4.03 % 4.30 %
Debt Ratios
Net Debt / Recurring EBITDA (1) (TTM)5.0 4.8 5.6 5.5 5.3
Net Debt / Enterprise Value18.3 % 17.8 % 22.6 % 19.0 % 18.7 %
Net Debt / Gross Assets31.6 % 29.7 % 35.6 % 36.0 % 36.0 %
Coverage Ratios
Recurring EBITDA (1) (TTM) / Interest4.8 4.5 4.5 4.4 4.4
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution4.6 4.4 4.3 4.2 4.2


Maturities / Principal Amortization Next Five Years2020 2021 2022 2023 2024
Mortgage loans payable
Maturities$— $— $82,155 $185,618 $315,330
Principal amortization14,554 59,615 61,326 60,604 57,082
Preferred Equity - Sun NG Resorts - mandatorily redeemable— — 35,249 — —
Preferred OP units - mandatorily redeemable— — — — 27,373
Lines of credit and other debt (6)546 13,645 10,000 55,130 —
Total$15,100 $73,260 $188,730 $301,352 $399,785
Weighted average rate of maturities— % — % 4.46 % 4.08 % 4.47 %



Real Property Operations – Same Community(2)
(amounts in thousands except for Other Information)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 Change % Change September 30, 2020 September 30, 2019 Change % Change
Financial Information
Income from real property (12)$243,373 $230,983 $12,390 5.4 % $661,984 $642,809 $19,175 3.0 %
Property operating expenses
Payroll and benefits23,720 23,642 78 0.3 % 60,457 63,255 (2,798) (4.4)%
Legal, taxes, and insurance2,385 2,829 (444) (15.7)% 7,690 7,432 258 3.5 %
Utilities (12)21,269 19,102 2,167 11.3 % 49,814 49,290 524 1.1 %
Supplies and repair (13)10,920 10,617 303 2.9 % 25,223 26,227 (1,004) (3.8)%
Other (a)9,774 8,626 1,148 13.3 % 21,607 21,276 331 1.6 %
Real estate taxes15,937 15,066 871 5.8 % 47,920 45,610 2,310 5.1 %
Property operating expenses84,005 79,882 4,123 5.2 % 212,711 213,090 (379) (0.2)%
Real Property NOI (1)$159,368 $151,101 $8,267 5.5 % $449,273 $429,719 $19,554 4.6 %

(a) Includes COVID-19 personal protective equipment expense of $1,130 and $2,065 for the three and nine months ended September 30, 2020, respectively.

As of
September 30, 2020 September 30, 2019 Change % Change
Other Information
Number of properties366 366 —
MH occupancy (3)97.2 %
RV occupancy (3)100.0 %
MH & RV blended occupancy (3)97.8 %
Adjusted MH occupancy (3)98.4 %
RV occupancy (3)100.0 %
Adjusted MH & RV blended occupancy (3)98.8 % 96.8 % 2.0 %
Monthly base rent per site - MH$594 $576 $18 3.2% (15)
Monthly base rent per site - RV (14)$444 $420 $24 5.5% (15)
Monthly base rent per site - Total (14)$559 $539 $20 3.6% (15)



Home Sales Summary
(amounts in thousands except for *)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 Change % Change September 30, 2020 September 30, 2019 Change % Change
Financial Information
New Homes
New home sales$23,734 $19,775 $3,959 20.0 % $58,536 $51,860 $6,676 12.9 %
New home cost of sales19,294 16,761 2,533 15.1 % 47,611 44,740 2,871 6.4 %
NOI (1) / Gross Profit – new homes4,440 3,014 1,426 47.3 % 10,925 7,120 3,805 53.4 %
Gross margin % – new homes18.7 % 15.2 % 3.5 % 18.7 % 13.7 % 5.0 %
Average selling price – new homes*$153,123 $118,413 $34,710 29.3 % $141,391 $120,325 $21,066 17.5 %
Pre-owned Homes
Pre-owned home sales$23,928 $30,030 $(6,102) (20.3)% $68,243 $84,805 $(16,562) (19.5)%
Pre-owned home cost of sales16,943 19,557 (2,614) (13.4)% 47,839 55,290 (7,451) (13.5)%
NOI (1) / Gross Profit – pre-owned homes6,985 10,473 (3,488) (33.3)% 20,404 29,515 (9,111) (30.9)%
Gross margin % – pre-owned homes29.2 % 34.9 % (5.7)% 29.9 % 34.8 % (4.9)%
Average selling price – pre-owned homes*$43,114 $40,636 $2,478 6.1 % $40,864 $38,548 $2,316 6.0 %
Total Home Sales
Revenue from home sales$47,662 $49,805 $(2,143) (4.3)% $126,779 $136,665 $(9,886) (7.2)%
Cost of home sales36,237 36,318 (81) (0.2)% 95,450 100,030 (4,580) (4.6)%
NOI (1) / Gross Profit – home sales$11,425 $13,487 $(2,062) (15.3)% $31,329 $36,635 $(5,306) (14.5)%
Statistical Information
New home sales volume*155 167 (12) (7.2)% 414 431 (17) (3.9)%
Pre-owned home sales volume*555 739 (184) (24.9)% 1,670 2,200 (530) (24.1)%
Total home sales volume *710 906 (196) (21.6)% 2,084 2,631 (547) (20.8)%


Rental Program Summary
(amounts in thousands except for *)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 Change % Change September 30, 2020 September 30, 2019 Change % Change
Financial Information
Revenues
Rental home revenue$16,171 $14,444 $1,727 12.0 % $46,611 $42,827 $3,784 8.8 %
Site rent from Rental Program (1) (10)19,101 17,270 1,831 10.6 % 55,699 51,326 4,373 8.5 %
Rental Program revenue35,272 31,714 3,558 11.2 % 102,310 94,153 8,157 8.7 %
Expenses
Repairs and refurbishment3,414 4,080 (666) (16.3)% 8,623 9,317 (694) (7.4)%
Taxes and insurance2,059 1,940 119 6.1 % 6,078 5,631 447 7.9 %
Other476 424 52 12.3 % 1,427 1,505 (78) (5.2)%
Rental Program operating and maintenance5,949 6,444 (495) (7.7)% 16,128 16,453 (325) (2.0)%
Rental Program NOI (1)$29,323 $25,270 $4,053 16.0 % $86,182 $77,700 $8,482 10.9 %
Other Information
Number of sold rental homes*225 317 (92) (29.0)% 581 859 (278) (32.4)%
Number of occupied rentals, end of period* 11,729 11,170 559 5.0 %
Investment in occupied rental homes, end of period $625,922 $570,053 $55,869 9.8 %
Weighted average monthly rental rate, end of period* $1,032 $987 $45 4.6 %



Acquisitions and Other Summary (16)
(amounts in thousands except for statistical data)


Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2020
Financial Information
Revenues
Income from real property $30,921 $63,257
Property and Operating Expenses
Payroll and benefits 4,241 9,557
Legal, taxes & insurance 246 780
Utilities 3,375 6,815
Supplies and repairs 1,570 3,871
Other 3,068 5,693
Real estate taxes 1,505 4,421
Property operating expenses 14,005 31,137
Net operating income (NOI) (1) $16,916 $32,120
Other Information September 30, 2020
Number of properties 66
Occupied sites 9,171
Developed sites 10,188
Occupancy % 90.0 %
Transient sites 5,403


Property Summary
(includes MH and Annual RVs)
COMMUNITIES 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
FLORIDA
Communities 127 125 125 125 125
Developed sites (17) 39,517 39,241 39,380 39,230 39,067
Occupied (17) 38,743 38,453 38,526 38,346 38,155
Occupancy % (17) 98.0 % 98.0 % 97.8 % 97.7 % 97.7 %
Sites for development 1,427 1,427 1,527 1,527 1,633
MICHIGAN
Communities 74 72 72 72 72
Developed sites (17) 29,086 27,901 27,883 27,905 27,906
Occupied (17) 28,033 27,191 26,863 26,785 26,677
Occupancy % (17) 96.4 % 97.5 % 96.3 % 96.0 % 95.6 %
Sites for development 1,182 1,182 1,115 1,115 1,115
TEXAS
Communities 24 23 23 23 23
Developed sites (17) 7,659 7,641 7,627 7,615 7,098
Occupied (17) 7,427 7,289 7,076 7,006 6,834
Occupancy % (17) 97.0 % 95.4 % 92.8 % 92.0 % 96.3 %
Sites for development 1,378 565 555 555 1,086
CALIFORNIA
Communities 34 32 31 31 31
Developed sites (17) 6,372 6,364 5,986 5,981 5,963
Occupied (17) 6,290 6,272 5,948 5,941 5,917
Occupancy % (17) 98.7 % 98.6 % 99.4 % 99.3 % 99.2 %
Sites for development 373 264 302 302 302
ARIZONA
Communities 13 13 13 13 13
Developed sites (17) 4,274 4,259 4,268 4,263 4,239
Occupied (17) 3,957 3,932 3,923 3,892 3,852
Occupancy % (17) 92.6 % 92.3 % 91.9 % 91.3 % 90.9 %
Sites for development — — — — —
ONTARIO, CANADA
Communities 15 15 15 15 15
Developed sites (17) 4,067 3,980 3,977 4,031 4,022
Occupied (17) 4,067 3,980 3,977 4,031 4,022
Occupancy % (17) 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Sites for development 1,593 1,593 1,608 1,611 1,675
INDIANA
Communities 11 11 11 11 11
Developed sites (17) 3,087 3,087 3,087 3,087 3,089
Occupied (17) 2,957 2,961 2,914 2,900 2,870
Occupancy % (17) 95.8 % 95.9 % 94.4 % 93.9 % 92.9 %
Sites for development 277 277 277 277 277
OHIO
Communities 9 9 9 9 9
Developed sites (17) 2,790 2,778 2,768 2,770 2,770
Occupied (17) 2,758 2,736 2,702 2,716 2,703
Occupancy % (17) 98.9 % 98.5 % 97.6 % 98.1 % 97.6 %
Sites for development 22 22 59 59 59
COLORADO
Communities 10 10 10 10 10
Developed sites (16) 2,453 2,441 2,423 2,423 2,423
Occupied (17) 2,365 2,327 2,318 2,322 2,325
Occupancy % (17) 96.4 % 95.3 % 95.7 % 95.8 % 96.0 %
Sites for development 1,282 1,566 1,867 1,867 1,973
OTHER STATES
Communities 115 116 115 113 80
Developed sites (17) 22,721 22,780 22,583 22,572 17,203
Occupied (17) 21,995 22,024 21,749 21,678 16,657
Occupancy % (17) 96.8 % 96.7 % 96.3 % 96.0 % 96.8 %
Sites for development 2,596 2,846 2,980 2,980 2,437
TOTAL - PORTFOLIO
Communities 432 426 424 422 389
Developed sites (17) 122,026 120,472 119,982 119,877 113,780
Occupied (17) 118,592 117,165 115,996 115,617 110,012
Occupancy % (17) 97.2 %(18)97.3 % 96.7 % 96.4 % 96.7 %
Sites for development (19) 10,130 9,742 10,290 10,293 10,557
% Communities age restricted 33.6 % 34.0 % 34.0 % 34.1 % 30.8 %
TRANSIENT RV PORTFOLIO SUMMARY
Location
Florida 5,993 5,547 5,311 5,465 5,506
California 2,236 1,978 1,947 1,952 1,970
Texas 1,917 1,590 1,612 1,623 1,642
Maryland 1,515 1,515 1,488 1,488 1,426
Arizona 1,386 1,401 1,392 1,397 1,421
Colorado 930 574 291 291 185
Ontario, Canada 920 1,007 1,009 939 937
New York 900 911 916 923 924
New Jersey 828 857 875 864 868
Maine 819 837 828 811 821
Utah 750 750 750 753 560
Virginia 564 598 630 324 329
Other states 4,970 4,795 4,831 4,586 4,293
Total Transient RV Sites 23,728 22,360 21,880 21,416 20,882



Capital Improvements, Development, and Acquisitions
(amounts in thousands except for *)


Recurring
Capital Expenditures
Average / Site*		Recurring
Capital Expenditures (20) 		Lot
Modifications (21) 		Acquisitions (22) Expansion
and
Development (23) 		Revenue Producing /Expense Reduction Projects (24)
YTD 2020$147 $17,426 $21,837 $333,011 $197,669 $15,188
2019$345 $30,382 $31,135 $930,668 $281,808 $9,638
2018$263 $24,265 $22,867 $414,840 $152,672 $3,864



Operating Statistics for MH and Annual RVs


Locations Resident Move-outs Net Leased Sites (5) New Home Sales Pre-owned Home Sales Brokered
Re-sales
Florida 1,744 247 123 154 910
Michigan 351 533 32 808 113
Ontario, Canada 647 36 25 15 334
Texas 298 421 55 189 47
Arizona 64 65 26 20 91
Indiana 57 57 4 143 11
Ohio 85 42 — 67 9
California 89 31 19 11 67
Colorado 21 43 25 20 34
Other states 1,076 452 105 243 236
Nine Months Ended September 30, 2020 4,432 1,927 414 1,670 1,852


Total For Year Ended Resident Move-outs Net Leased Sites (5) New Home Sales Pre-owned Home Sales Brokered
Re-sales
2019 4,139 2,674 571 2,868 2,231
2018 3,435 2,600 526 3,103 2,147


Percentage Trends Resident Move-outs Resident
Re-sales
2020 (TTM) 3.2 % 6.6 %
2019 2.6 % 6.6 %
2018 2.4 % 7.2 %



Footnotes and Definitions

  1. Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), and earnings before interest, tax, depreciation and amortization (“EBITDA”) as supplemental performance measures. The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.
    • FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles (“GAAP”) depreciation and amortization of real estate assets.
    • NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses.
    • EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating property, plus real estate related depreciation and amortization, and after adjustments for nonconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company’s operating performance. 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 GAAP net income (loss). Management believes 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. 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”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, 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 is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.

NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental 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 measure 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.

The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities 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. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP 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.

EBITDA as defined by NAREIT (referred to as “EBITDAre”) is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in nonconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of nonconsolidated affiliates. EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs. Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs. The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company’s performance on a basis that is independent of capital structure (“Recurring EBITDA”).

The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre. EBITDAre is not intended to be used as a measure of the Company’s cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.

(2) Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2020 average exchange rates.

(3) The Same Community occupancy percentage is 97.2 percent for MH, 100.0 percent for RV, and 97.8 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 111,838 developed sites, of which 109,421 were occupied. The Same Community occupancy percentage for 2019 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites. The adjusted Same Community occupancy percentage for 2020 is derived from 110,773 developed sites, of which 109,421 were occupied. The number of developed sites excludes RV transient sites and approximately 1,100 recently completed but vacant MH expansion sites.

(4) The effect of certain anti-dilutive convertible securities is excluded from these items.

(5) Net leased sites do not include occupied sites acquired during that year.

(6) Lines of credit and other debt includes the Company’s MH floor plan facility. The effective interest rate on the MH floor plan facility was 6.0 percent for the quarters ended September 30 and June 30, 2020, and 7.0 percent for the quarters ended March 31, 2020, and December 31 and September 30, 2019. However, the Company pays no interest if the floor plan balance is repaid within 60 days.

(7) Other expense, net was as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Foreign currency remeasurement gain / (loss)$360 $(107) $(55) $(92)
Collateralized receivables derecognition gain— 31 — 31
Contingent consideration value expense(2,724) (1,286) (2,890) (1,421)
Long term lease termination expense(160) — (433) (42)
Other expense, net$(2,524) $(1,362) $(3,378) $(1,524)

(8) These costs represent the expenses incurred to bring recently acquired properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

(9) Core FFO(1) includes an adjustment of $(0.3) million and zero for the three and nine months ended September 30, 2020 and $(0.4) million and zero for the three and nine months ended September 30, 2019, respectively, for estimated loss of earnings in excess of the applicable business interruption deductible in relation to the Company’s Florida Keys communities that required redevelopment due to damages sustained from Hurricane Irma in September 2017.

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

(11) This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount. In November 2019, the Company derecognized the transferred financial assets and secured borrowing as legal isolation criteria to be accounted for as a true sale were satisfied pursuant to the terms of the purchase agreement.

(12) Same Community results net $10.1 million and $8.9 million of certain utility revenue against the related utility expense in property operating and maintenance expense for the three months ended September 30, 2020 and 2019, respectively. Same Community results net $28.4 million and $25.8 million of utility revenue against the related utility expense in property operating and maintenance expense for the nine months ended September 30, 2020 and 2019, respectively.

(13) Same Community supplies and repair expense excludes $0.2 million and $0.6 million for the three and nine months ended September 30, 2019, of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

(14) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.

(15) Calculated using actual results without rounding.

(16) Acquisitions and other is comprised of 11 properties acquired and three properties that the Company has an interest in, but does not operate in 2020, 42 properties acquired in 2019, one property being operated under a temporary use permit, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, five recently opened ground-up developments, one property undergoing redevelopment, and other miscellaneous transactions and activity.

(17) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.

(18) As of September 30, 2020, total portfolio MH occupancy was 96.4 percent inclusive of the impact of approximately 1,400 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.

(19) Total sites for development were comprised of approximately 76.1 percent for expansion, 22.2 percent for greenfield development and 1.7 percent for redevelopment.

(20) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.

(21) Lot modification capital expenditures improve the asset quality of the community. These costs are incurred when an existing older home moves out, 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 code, include items such as new foundations, driveways, and utility upgrades.

(22) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the nine months ended September 30, 2020 include $28.5 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards. For the years ended December 31, 2019 and 2018, these costs were $50.7 million and $94.6 million, respectively. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.

(23) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.

(24) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.

Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.

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