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| 8-K - FORM 8-K INVESTOR PRESENTATION FEBRUARY 2018 - SUN COMMUNITIES INC | form8-kxinvestorpresentati.htm |
INVESTOR PRESENTATION
FEBRUARY 2018
FRIENDLY VILLAGE OF SIMI – SIMI VALLEY, CA
2
This presentation has been prepared for informational purposes only from information supplied by Sun Communities, Inc. (the ―Company‖, ―Sun‖) and from third-
party sources indicated herein. Such third-party information has not been independently verified. The Company makes no representation or warranty, expressed or
implied, as to the accuracy or completeness of such information.
This presentation contains various ―forward-looking statements‖ within the meaning of the United States Securities Act of 1933, as amended, and the United States
Securities Exchange Act of 1934, as amended, 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 presentation 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 presentation. 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 our Annual Report on Form 10-K for the year
ended December 31, 2017, and our other filings with the Securities and Exchange Commission from time to time, 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 in this presentation, 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.
FORWARD-LOOKING STATEMENTS
SUN COMMUNITIES, INC. (NYSE: SUI) OVERVIEW
3
WINE COUNTRY – PASO ROBLES, CA
Wine Country RV Resort – Paso Robles, CA
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 as well as Press Releases after December 31, 2017 for additional information.
350 communities
consisting of
~122,000 sites
across 29 states
and Ontario,
Canada
Current Portfolio
as of December 31, 2017
31 MH and RV Communities
89 RV Communities
230 MH Communities
Trailing Twelve Months Rental Revenue
as of December 31, 2017
88%
Annual
Revenues
473
4,882
226
6,498
324
475
548
413
2,150 3,420
26,137
976
2,481
1,757
1,277
2,904
4,882
7,974
1,595
680
149
2,917
916
1,156 718
672
237
588
1,139
43,328
66%
All-age communities
34%
Age-restricted communities
69%
18%
12%
25% 66% 9%
RV – Annual
18%
RV – Transient
12
Headquarters
Manufactured
Housing
70%
2017 OPERATING AND FINANCIAL HIGHLIGHTS
4
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information. Refer to information regarding non-GAAP financial measures in the attached Appendix.
1 Company information. Diluted.
2 Based on fully diluted shares of 83.262 million and 76.454 million for 4Q 2017 and 4Q 2016, respectively; and fully diluted shares of 80.996 million and 70.165 million for years ended 2017 and 2016, respectively.
3 Company information. Total same community portfolio.
Quarter Ended December 31,
2017 2016 % Change
Total Portfolio Revenue $242.0mm $218.6mm 10.7%
Total Portfolio NOI $134.7mm $119.8mm 12.4%
Same Community
Revenue
$129.6mm $121.8mm 6.4%
Same Community NOI $94.0mm $87.9mm 7.0%
EPS
1
$0.09 $(0.02) 550.0%
Core FFO / Share
1,2
$0.98 $0.91 7.7%
4Q 2017 Highlights
WINE COUNTRY – PASO ROBLES, CA
Wine Country RV Resort – Paso Robles, CA
Year Ended December 31,
2017 2016 % Change
Total Portfolio Revenue $982.6mm $833.8mm 17.9%
Total Portfolio NOI $550.9mm $466.9mm 18.0%
Same Community Revenue $533.9mm $503.8mm 6.0%
Same Community NOI $382.2mm $357.6mm 6.9%
EPS
1
$0.85 $0.26 226.9%
Core FFO / Share
1,2
$4.17 $3.79 10.0%
Base Rent / Site
3
$510 $492 3.6%
MH & RV Blended
Occupancy
97.3% 95.4% 1.9%
Full Year 2017 Highlights
2017 Acquisitions:
• ~$150mm in 9 operating assets, adding ~2,700 sites, and
1 land parcel
– 5 assets in California, 2 assets in Florida and 2 assets
in the Midwest
– Land parcel being developed into 840-site RV resort
in Myrtle Beach, SC
2018 OPERATING AND FINANCIAL GUIDANCE
5
Other Considerations
• New Home Sales Volume: 500 – 560
• Pre-owned Home Sales Volume: 2,650 – 2,900
• Increase in Revenue Producing Sites: 2,700 – 2,900
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 as well as Press Releases after December 31, 2017 for additional information. Refer to
information regarding non-GAAP financial measures in the attached Appendix.
Same Community Portfolio
Number of Communities: 336
• Income from Real Property: 5.9% - 6.1%
• Total Property Operating Expenses: 3.2% - 3.4%
—Real Estate Taxes: 4.8% - 5.2%
—Property Operating & Maintenance: 2.7% - 2.9%
• NOI: 7.0% - 7.5%
• Weighted Average Monthly Rent Increase: 3.8%
• Same Community NOI Seasonality:
Total Company
• Full-Year 2018 Net Income/diluted share: $1.26 - $1.42
• Full-Year 2018 Core FFO/share: $4.48 - $4.58
• Core FFO Seasonality:
1Q18 2Q18 3Q18 4Q18
24.9% 23.1% 27.9% 24.1%
Castaways RV Resort & Campground – Berlin, MD
1Q18 2Q18 3Q18 4Q18
25.5% 23.7% 26.1% 24.7%
Sun is the premiere owner and operator of manufactured home (―MH‖) and recreational vehicle (―RV‖)
communities
Strong cycle-tested record of operating, expanding and acquiring MH and RV communities dating back to
1975
6
POWERING SUN’S GROWTH ENGINE
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
INTERNAL EXTERNAL
Contractual Rent Increases
Weighted average monthly rent has
historically increased by 2-4%
annually
4Q17 weighted average monthly
rent increase of 3.6%
2018 expected weighted average
monthly rent increase of 3.8%
MH Occupancy Gains
4Q17 MH occupancy of 94.6%
132 communities are 98%+ occupied
Expect additional 250-300 bps of
occupancy gains across MH portfolio
to reach 98%
Expansions
Delivered ~2,100 expansion sites in
2017
Expected to deliver ~1,350
expansion sites in 2018
Over 6,500 sites available for
expansion post-2018
~15,900 transient RV sites in
portfolio, a portion of which can be
converted to annual leases over
time
962 total conversions in 2017
Conversions have historically
increased revenues by 40-60% for
the first full year after conversion
Historical three year average of
~$150mm in single asset acquisitions
Purchased 9 operating properties in
2017, adding ~2,700 sites for
~$145mm
High degree of visibility into
acquisition pipeline
Acquisitions
Looking to start on 2-3 greenfield
developments per year
Targeting high single digit IRRs
Projects underway in California,
South Carolina and Colorado
Development Transient Conversions
SUN’S FAVORABLE REVENUE DRIVERS
7
The average cost to move a home ranges from
$4K-$10K, resulting in low move-out of homes
Tenure of homes in our communities is 501
years
Tenure of residents in our communities is
approximately 12
1
years
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information. Refer to information regarding non-GAAP financial measures in the
attached Appendix.
1 Three year average.
Resident Move-out Trends
1
(Home stays in community) (Home leaves community)
Lost Dutchman – Apache Junction, AZ
6.20%
1.99%
Resident Re-sales Resident Move-outs
5.5%
5.9%
7.7%
9.1%
7.1%
6.9%
YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 YE 2017 2018E
7.0% -
7.5%
86.7%
88.9%
93.2%
95.9%
96.6%
97.3%
YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 YE 2017
$437
$445
$461
$481
$498
$518
YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 YE 2017
STRONG SAME COMMUNITY PERFORMANCE
8
Positive NOI growth for
18 consecutive years
Low-annual resident turnover results
in stability of income and occupancy
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31st for the respective year for additional information. Refer to information regarding non-GAAP financial
measures in the attached Appendix.
Note: Same community pool of assets changes annually. Same community pools included 136 communities in 2012, 231 communities in 2017 and includes 336 communities in 2018.
NOI Growth Percentage Occupancy
Percentage
Manufactured Home
Weighted Average Monthly
Rent per Site
Strong and consistent rental rate
growth creates a stable revenue
stream that is recession-resistant
Occupancy gains are a function of
Sun’s integrated platform, which
includes: leasing, sales, and
financing
7.0%
2012-2017
AVERAGE
10.6%
INCREASE
CONSISTENT AND CYCLE TESTED INTERNAL
GROWTH
9
Source: Citi Investment research, September, 2017. “REIT Industry Average” includes an index of REITs across a variety of asset classes including: self storage; mixed office; regional malls; shopping centers; apartments; student
housing; manufactured homes and specialty. Refer to information regarding non-GAAP financial measures of the attached Appendix.
Sun’s average same community NOI growth has exceeded REIT industry average by ~190 bps and the
apartment sector’s average by ~170 bps since 2002
Same Community NOI Growth Percentage
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1
Q
0
2
2
Q
0
2
3
Q
0
2
4
Q
0
2
1
Q
0
3
2
Q
0
3
3
Q
0
3
4
Q
0
3
1
Q
0
4
2
Q
0
4
3
Q
0
4
4
Q
0
4
1
Q
0
5
2
Q
0
5
3
Q
0
5
4
Q
0
5
1
Q
0
6
2
Q
0
6
3
Q
0
6
4
Q
0
6
1
Q
0
7
2
Q
0
7
3
Q
0
7
4
Q
0
7
1
Q
0
8
2
Q
0
8
2
Q
0
9
3
Q
0
9
4
Q
0
9
1
Q
1
0
2
Q
1
0
3
Q
1
0
4
Q
1
0
1
Q
1
1
2
Q
1
1
3
Q
1
1
4
Q
1
1
1
Q
1
2
2
Q
1
2
3
Q
1
2
4
Q
1
2
1
Q
1
3
2
Q
1
3
3
Q
1
3
4
Q
1
3
1
Q
1
4
2
Q
1
4
3
Q
1
4
4
Q
1
4
1
Q
1
5
2
Q
1
5
3
Q
1
5
4
Q
1
5
1
Q
1
6
2
Q
1
6
3
Q
1
6
4
Q
1
6
1
Q
1
7
2
Q
1
7
3
Q
1
7
Sun Communities, Inc.
Apartments
Sun's Average (4.4%)
Apartment Average (2.7%)
REIT Industry Average (2.5%)
4.4%
2.5%
2.7%
10
MANUFACTURED HOUSING VS. MULTIFAMILY
Sun’s manufactured homes provide nearly 15% more space at over 30% less cost per square foot
Sun’s Manufactured
Homes VS.
RENT
$917
1
per month
Multifamily
Housing
$1,150
2
per month
SQUARE FOOTAGE
PRICE
1,250
1
sq. ft. 1,100
2
sq. ft.
$0.73 per sq. ft. $1.05 per sq. ft.
1 Source: Company information.
2 Source: The RentPath Network. Represents average rent for a 2 bedroom apartment in major metropolitan areas Sun operates in adjusted for inflation as of December, 2017.
Source: Manufactured Housing Institute, Quick Facts: “Trends and Information About the Manufactured Housing Industry, 2017.”
1 Historical average from SUI community applications. 11
MANUFACTURED HOUSING VS. SINGLE FAMILY
Single Family Homes Manufactured Homes
Average cost of Single Family is $286,814 or
roughly 8 years median income
Average cost of a new Manufactured Home is
$70,600 or roughly 2 years median income
Sun’s communities offer affordable options in attractive locations
$63,100 $62,800 $60,500 $62,200 $64,000 $65,300
$68,000 $70,600
$203,182 $206,560 $207,950
$223,085
$249,429 $261,172
$276,284 $286,814
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000 Manufactured Homes Single Family Homes Portion of purchase price attributable to land
Average
Household
Income
~$37,500
1
2009 2010 2011 2012 2013 2014 2015 2016
12
GROWTH AND ATTRACTIVE RETURNS
EXPANSIONS PROVIDE STRONG
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
Approximately 2,100 sites were delivered throughout 2017
At the start of 2018, inventory of ~7,900 zoned and entitled sites available for expansion at ~60 properties in 16
states and Ontario, Canada
A 100-site expansion at a $35,000 cost per site, is expected to lease up between 12-24 months, results in a 5-year
unlevered IRR of 12% - 14%
Expansion in communities with strong demand evidenced by occupancies >96% and continued strong demand
Ocean Breeze – Jensen Beach, FL
13
SUPPORTED BY RENTAL PROGRAM
EXPANSION OPPORTUNITIES
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
1 Operating expenses include repairs and refurbishment, taxes and insurance, marketing, and commissions.
Sun’s rental program is a key onboarding and conversion tool for our communities
Rental Program All-in 5-Year Unlevered IRR
$42,000 initial investment in new home
Weighted average monthly rental rate ~$900 x 12 = $10,800 (3% annual increases)
Monthly operating expenses1 +1 month vacancy factor $275 x 12 = $3,300 (3% annual increases)
End of 5-year period sell the home and recoup 90% of original invoice price
All-in 5-year unlevered IRR in the high teens
RENTAL: EAST VILLAGE ESTATES – WASHINGTON, MI RENTAL: CIDER MILL CROSSING – FENTON, MI Vallecito – Newbury Park, CA
2013
EXTRACTING VALUE FROM STRATEGIC
ACQUISITIONS
14
Since May 2011, Sun has acquired communities valued in excess of $4.5 billion, increasing its number of
sites and communities by ~180%
1
2011
159 communities
54,811 sites
173 communities
63,697 sites
188 communities
69,789 sites
217 communities
79,554 sites
231 communities
88,612 sites
341 communities
117,376 sites
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31st for the respective year.
1 Includes 30 community dispositions realized in 2014 and 2015.
2012 2014 2015 2016
350 communities
121,892 sites
2017
Year-end Communities and Sites
HOME SALES
& RENTAL
PROGRAM
CALL
CENTER &
DIGITAL
MARKETING
OUTREACH
SKILLED
EXPENSE
MANAGEMENT
REPOSITIONING
WITH ADDIT’L
CAPEX
ADDING
VALUE WITH
EXPANSIONS
INCREASING
MARKET
RENT
PROFESSIONAL
OPERATIONAL
MANAGEMENT
CASE STUDY – DEERWOOD MH COMMUNITY IN ORLANDO,
FL
15
Deerwood | Orlando, FL
All-age MH community acquired in 2015 as
part of $1.3bn Green Courte transaction
Purchase price: $43.5mm
Additional investment: $1.5mm
• Repaved roads
• Installed new street lights and road
signs
• Remodeled sales office
• Renovated clubhouse and 2 pools
• Built new multi-sport court
• Enhanced landscaping
• Added playground
Increased occupancy from 92.4% to 98.1%
Increased NOI from $1.9mm to $3.1mm
$2.6mm
$3.6mm
$3.9mm
2015 2016 2017
$1.9mm
$2.8mm
$3.1mm
2015 2016 2017
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information. Refer to information regarding non-GAAP financial
measures in the attached Appendix.
Note: Increases calculated using actual results without rounding.
92.4%
94.6%
98.1%
2015 2016 2017
MH Occupancy
Revenue
NOI
Value created through application of Sun’s
proactive management systems and
processes to accelerate occupancy and
achieve outsized NOI growth
2018 2019 2020 2021 2022
CMBS Fannie Mae Freddie Mac Life Companies
$64,314
$82,544
$270,680
$58,078
STRATEGIC BALANCE SHEET
16
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
1 The debt ratios are calculated using trailing 12 months recurring EBITDA for the period ended December 31, 2017. Refer to information regarding non-GAAP financial measures in the attached Appendix.
2 Total Enterprise Value includes common shares outstanding (per Supplemental), OP Units and Preferred OP Units, as converted, outstanding at the end of each respective period.
3 Includes premium / discount on debt and financing costs.
Net Debt / EBITDA
1 Net Debt / TEV
2
Year Ended December 31, 2017
Principal
Outstanding
3
WA
Interest Rates
CMBS $410,747 5.10%
Fannie Mae $1,026,014 4.39%
Life Companies $1,044,246 3.93%
Freddie Mac $386,349 3.86%
Total $2,867,356 4.25%
Mortgage Debt Outstanding
principal amounts in thousands
Mortgage Debt 5-Year Maturity Ladder
amounts in thousands
Balance sheet supports growth strategy
Sun’s annual mortgage maturities average 3.5% from 2018 - 2022
$26,186
9.7x
8.4x
7.2x 7.3x
6.6x
7.5x
6.3x
2011 2012 2013 2014 2015 2016 2017
61.5%
50.4%
45.8%
34.8% 34.0% 33.8%
28.2%
2011 2012 2013 2014 2015 2016 2017
Reduced
leverage by 3.4x
turns since 2011
~33% reduction
since 2011
APPENDIX
RIVERSIDE CLUB GOLF & MARINA – RUSKIN, FL
(5.0%)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
21.8%
5.1%
24.9%
(20.0%)
(10.0%)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
70.4%
38.3%
17.0%
STRATEGY-DRIVEN OUTPERFORMANCE
18
Sun has significantly outperformed major REIT and broader market indices over the last ten years
Source: S&P Global as of December 31, 2017.
3 - year Total Return
Sun Communities, Inc. (SUI) MSCI US REIT (RMS) S&P 500
1 - year Total Return
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
187.0%
108.1%
56.3%
(100.0%)
0.0%
100.0%
200.0%
300.0%
400.0%
500.0%
600.0%
700.0%
800.0%
900.0%
857.6%
126.0%
105.1%
5 - year Total Return 10 - year Total Return
$90
$110
$130
$150
$170
$190
$210
$230
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sun Communities
Manufactured Housing
Apartment
Industrial
Mall
Office
Strip Mall
Self-storage
$207
$147
$138
$134
$128
CONSISTENT NOI GROWTH
19
Manufactured housing is one of the most recession-resistant sectors of the housing and commercial real
estate sectors and has consistently outperformed multifamily in same community NOI growth since
2000
NOI Growth
Source: Citi Investment research, September, 2017. Refer to information regarding non-GAAP financial measures in this Appendix.
$223
$211
$154
NON-GAAP TERMS DEFINED
20
Investors in and analysts following the real estate industry utilize funds from operations (―FFO‖), net operating income (―NOI‖), and recurring earnings before interest, tax, depreciation and
amortization (―Recurring EBITDA‖) as supplemental performance measures. We believe FFO, NOI, and Recurring EBITDA are appropriate measures given their wide use by and relevance to
investors and analysts. 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. 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. Recurring
EBITDA, a metric calculated as EBITDA exclusive of certain nonrecurring items, provides a further tool to evaluate ability to incur and service debt and to fund dividends and other cash needs.
Additionally, FFO, NOI, and Recurring EBITDA are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance
and value.
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.
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.
EBITDA is defined as NOI plus other income, plus (minus) equity earnings (loss) from affiliates, minus general and administrative expenses. EBITDA includes EBITDA from discontinued
operations. The Company believes that net income (loss) is the most directly comparable GAAP measurement to EBITDA.
NET INCOME / (LOSS) TO FFO RECONCILIATION
21
(amounts in thousands except per share data)
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
2017 2016 2017 2016 2015
Net income / (loss) attributable to Sun Communities, Inc. common stockholders 7,438$ (1,600)$ 65,021$ 17,369$ 137,325$
Adjustments:
Depreciation and amortization 72,068 62,351 262,211 221,576 178,048
Amounts attributable to noncontrolling interests 825 (296) 4,535 (41) 9,644
Preferred return to preferred OP units 570 604 2,320 2,462 2,612
Preferred distribution to Series A-4 preferred stock 441 - 2,107 - -
Gain on disposition of properties, net - - - - (125,376)
Gain on disposition of assets, net (4,733) (3,487) (16,075) (15,713) (10,125)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible
securities 76,609$ 57,572$ 320,119$ 225,653$ 192,128$
Adjustments:
Transaction costs 2,811 4,023 9,801 31,914 17,803
Other acquisition related costs 98 1,861 2,810 3,328 -
Income from affiliate transactions - - - (500) (7,500)
Catastrophic weather related charges, net 228 1,172 8,352 1,172 -
Loss of earnings - catastrophic weather related 292 - 292 - -
Preferred stock redemption costs - - - - 4,328
Loss on extinguishment of debt 5,260 1,127 6,019 1,127 2,800
Other (income) / expense, net (3,642) 4,676 (8,982) 4,676 -
Debt premium write-off (905) (839) (1,343) (839) -
Ground lease intangible write-off 898 - 898 - -
Deferred tax expense / (benefit) 163 (400) (582) (400) 1,000
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive
convertible securities excluding certain items 81,812$ 69,192$ 337,384$ 266,131$ 210,559$
Weighted average common shares outstanding - basic 78,633 72,277 76,084 65,856 53,686
Weighted average common shares outstanding - fully diluted 83,262 76,454 80,996 70,165 57,979
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible
securities per share - fully diluted 0.92$ 0.75$ 3.95$ 3.22$ 3.31$
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive
convertible securities per share excluding certain items - fully diluted 0.98$ 0.91$ 4.17$ 3.79$ 3.63$
Three M onths Ended December 31 , Year Ended December 31 ,
NET INCOME / (LOSS) TO NOI RECONCILIATION
22
(amounts in thousands)
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
2017 2016 2017 2016 2015
Net income / (loss) attributable to Sun Communities, Inc., common stockholders 7,438$ (1,600)$ 65,021$ 17,369$ 137,325$
Other revenues (6,287) (5,691) (24,874) (21,150) (18,157)
Home selling expenses 3,066 2,504 12,457 9,744 7,476
General and administrative 18,523 17,177 74,711 64,087 47,455
Transaction costs 2,811 4,023 9,801 31,914 17,803
Depreciation and amortization 71,817 62,205 261,536 221,770 177,637
Loss on extinguishment of debt 5,260 1,127 6,019 1,127 2,800
Interest expense 32,116 31,430 130,242 122,315 110,878
Catastrophic weather related charges, net 228 1,172 8,352 1,172 -
Other (income) / expense, net (3,642) 4,676 (8,982) 4,676 -
Gain on disposition of properties, net - - - - (125,376)
Current tax expense 313 116 446 683 158
Deferred tax expense / (benefit) 163 (400) (582) (400) 1,000
Income from affiliate transactions - - - (500) (7,500)
Preferred return to preferred OP units 1,099 1,213 4,581 5,006 4,973
Amounts attributable to noncontrolling interests 876 (310) 5,055 150 10,054
Preferred stock distributions 929 2,198 7,162 8,946 13,793
Preferred stock redemption costs - - - - 4,328
NOI/ Gross Profit 134,710$ 119,840$ 550,945$ 466,909$ 384,647$
2017 2016 2017 2016 2015
Real Property OI 118,067$ 107,256$ 479,662$ 403,337$ 335,567$
Rental Program NOI 23,623 20,863 92,382 85,086 83,232
Home Sales NOI / Gross Profit 8,974 6,903 32,294 30,087 20,787
Ancillary NOI / Gross Profit 73 254 10,440 9,999 7,013
Site rent from Rental Program (included in Real Property NOI) (16,027) (15,436) (63,833) (61,600) (61,952)
NOI / Gross Profit 134,710$ 119,840$ 550,945$ 466,909$ 384,647$
Three M onths Ended December 31 , Year Ended December 31 ,
Three M onths Ended December 31 , Year Ended December 31 ,
23
NET INCOME / (LOSS) TO RECURRING EBITDA
RECONCILIATION
(amounts in thousands)
Source: Company information. Refer to Sun Communities, Inc. Form 10-K and Supplemental for the year ended December 31, 2017 for additional information.
2017 2016 2017 2016 2015
Net income / (loss) attributable to Sun Communities, Inc., common stockholders 7,438$ (1,600)$ 65,021$ 17,369$ 137,325$
Interest 32,116 31,430 130,242 122,315 110,878
Depreciation and amortization 71,817 62,205 261,536 221,770 177,637
Loss on extinguishment of debt 5,260 1,127 6,019 1,127 2,800
Transaction costs 2,811 4,023 9,801 31,914 17,803
Catastrophic weather related charges, net 228 1,172 8,352 1,172 -
Other (income) / expense, net (3,642) 4,676 (8,982) 4,676 -
Gains on disposition of properties, net - - - - (125,376)
Current tax expense 313 116 446 683 158
Deferred tax expense / (benefit) 163 (400) (582) (400) 1,000
Income from affiliate transactions - - - (500) (7,500)
Preferred return to preferred OP units 1,099 1,213 4,581 5,006 4,973
Amounts attributable to noncontrolling interests 876 (310) 5,055 150 10,054
Preferred stock distributions 929 2,198 7,162 8,946 13,793
Preferred stock redemption costs - - - - 4,328
Recurring EBITDA 119,408$ 105,850$ 488,651$ 414,228$ 347,873$
Three M onths Ended December 31 , Year Ended December 31 ,