Sun Communities, Inc. Reports 2022 Third Quarter Results

Diluted Earnings per Share of $1.32
Constant Currency Core FFO⁽¹⁾ per Diluted Share of $2.71 Exceeded Guidance

Strong Demand and Accretive Investments Drive Continued Solid Performance
Record Volume of Transient-to-Annual RV Conversions Propel Gains in Revenue Producing Sites

Manufactured Housing & RV Same Property⁽²⁾ NOI⁽¹⁾ in the Quarter Increased 6.4 Percent
as Compared to Prior Year

Marina Same Property NOI⁽¹⁾ in the Quarter Increased 9.6 Percent as Compared to Prior Year

Increasing Full-Year Guidance for Constant Currency Core FFO⁽¹⁾

Providing Preliminary Guidance for 2023 Rental Rate Increases for MH, Annual RV and Marina

Southfield, MI, Oct. 24, 2022 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the "Company" or "SUI"), a real estate investment trust ("REIT") that owns and operates, or has an interest in, manufactured housing ("MH") and recreational vehicle ("RV") communities, and marinas (collectively, the "properties"), today reported its third quarter results for 2022.

Financial Results for the Quarter and Nine Months Ended September 30, 2022

• For the quarter ended September 30, 2022, net income attributable to common shareholders was $162.6 million, or $1.32 per diluted share, compared to net income attributable to common shareholders of $231.7 million, or $2.00 per diluted share, for the same period in 2021.
  
  
• For the nine months ended September 30, 2022, net income attributable to common shareholders was $237.3 million, or $1.97 per diluted share, compared to net income attributable to common shareholders of $367.3 million, or $3.27 per diluted share, for the same period in 2021.
  
  

Non-GAAP Financial Measures and Portfolio Performance

• Constant Currency Core Funds from Operations ("Constant Currency Core FFO")⁽¹⁾ for the quarter and nine months ended September 30, 2022, was $2.71 per common share and dilutive convertible securities ("Share") and $6.11 per Share, respectively, representing 28.4 percent and 17.5 percent increases, respectively, as compared to the corresponding periods in 2021.
  
  
• Core Funds from Operations ("Core FFO")⁽¹⁾ for the quarter and nine months ended September 30, 2022, was $2.65 per Share and $6.04 per Share, respectively, representing 25.6 percent and 16.2 percent increases, respectively, as compared to the corresponding periods in 2021.
  
  
• Same Property⁽²⁾ Net Operating Income ("NOI")⁽¹⁾ for MH and RV properties increased by 6.4 percent and 5.8 percent for the quarter and nine months ended September 30, 2022, respectively, as compared to the corresponding periods in 2021. For the Company's Marina properties, Same Property NOI⁽¹⁾ increased by 9.6 percent and 6.8 percent for the quarter and nine months ended September 30, 2022, respectively, as compared to the corresponding periods in 2021.
  
  
• Acquisitions totaled $213.9 million during the quarter ended September 30, 2022, including one MH community in the United Kingdom ("UK") and one marina in the United States.
  
  

"Our strong third quarter results highlight the sustained compelling attributes of the Sun platform, including a best-in-class portfolio of assets in high-demand locations and operational execution that is second to none," said Gary A. Shiffman, Chairman and CEO. "We delivered strong growth in each of our segments, and earnings that exceeded our expectations. With stable high occupancy in our Manufactured Housing portfolio, we are anticipating solid rental rate increases. Strong demand in RV has driven record conversions to annual sites, and over 85 percent of our marinas have wait lists to join as a member." Mr. Shiffman continued, "We have a long-term track record of execution and a business model that is positioned to perform and create value through varying economic cycles."

OPERATING HIGHLIGHTS

Portfolio Occupancy

• Total MH and annual RV occupancy (excluding UK Operations) was 97.1 percent at September 30, 2022 as compared to 97.4 percent at September 30, 2021.
  
  
• During the quarter ended September 30, 2022, the number of MH and annual RV revenue producing sites increased by 689 sites as compared to an increase of 576 sites during the corresponding period in 2021, a 19.6 percent increase. Transient RV site conversions to annual leases accounted for 82 percent of the increase in the quarter.
  
  
• During the nine months ended September 30, 2022, MH and annual RV revenue producing sites increased by 2,309 sites as compared to an increase of 1,673 sites during the corresponding period in 2021, a 38.0 percent increase. Transient RV site conversions to annual leases accounted for 86 percent of the increase during the nine months ended September 30, 2022. Additionally, the 1,990 site conversions in transient RV for the nine months ended September 30, 2022 have already surpassed the record full-year volume achieved during 2021.
  
  

Same Property Results

• MH and RV - For the 424 MH and RV properties owned and operated by the Company since at least January 1, 2021, the following table reflects the percentage increases / (decreases), both in total and by segment, for the quarter and nine months ended September 30, 2022:
  
  

Same Property⁽²⁾ adjusted occupancy⁽³⁾ increased to 98.5 percent at September 30, 2022 from 96.5 percent at September 30, 2021, an increase of 200 basis points.

• Marina - For the 101 Marina properties owned and operated by the Company since at least January 1, 2021, the following table reflects the percentage increases for the quarter and nine months ended September 30, 2022:
  
  

UK Operations Results

UK Operations, a component of the Company's MH segment, contributed $64.5 million of NOI⁽¹⁾ in the quarter ended September 30, 2022, and contributed $105.0 million of NOI⁽¹⁾ in the period from date of acquisition to September 30, 2022. On a constant currency basis, UK Operations contributed $73.3 million of NOI⁽¹⁾ in the quarter ended September 30, 2022, and contributed $116.9 million of NOI⁽¹⁾ in the period from date of acquisition to September 30, 2022. Refer to page 13 for additional information regarding UK operating results.

PORTFOLIO ACTIVITY

Acquisitions and Dispositions

During and subsequent to the quarter ended September 30, 2022, the Company acquired two properties totaling 612 sites, wet slips and dry storage spaces and 1,060 sites for expansion for a total purchase price of $213.9 million. During the quarter ended September 30, 2022, the Company sold an RV community located in California with 514 sites for $15.0 million, bringing year-to-date dispositions to $44.5 million.

Refer to page 15 for additional detail on acquisitions and dispositions.

Development and Expansion Activities

During and subsequent to the quarter ended September 30, 2022, the Company acquired four land parcels located in the United States and UK for the potential development of nearly 800 sites, for an aggregate purchase price of $20.0 million. During the quarter and nine months ended September 30, 2022, the Company completed the construction of over 170 sites and over 300 sites, respectively, at two ground-up developments and six expansion properties.

Impact of Hurricane Ian

On September 28, 2022, Hurricane Ian made landfall on Florida's western coast. The storm primarily affected four properties in the Fort Myers area. Three RV properties, comprising approximately 2,500 sites, sustained significant flooding and wind damage from the hurricane, and the sea wall and certain docks at one marina were damaged. At other affected MH and RV properties, most of the damage was limited to trees, roofs, fences, skirting and carports. At other affected marina properties, docks, buildings, and landscaping sustained limited wind and water damage.

The Company recognized $29.9 million for impaired assets. The Company expects these charges to be partially offset by insurance recoveries, currently estimated at $17.7 million. The estimated net charges of $12.2 million are classified as Catastrophic event-related charges, net, in the Consolidated Statements of Operations. The Company maintains property, casualty, flood and business interruption insurance for its properties, subject to customary deductibles and limits. Expected insurance recoveries for loss of income and redevelopment costs greater than the impairment charges cannot be estimated at this time.

The foregoing impairment, expected insurance recovery, and net charge estimates are based on current information available, and the Company continues to assess these estimates. The actual final impairment, insurance recoveries and net charges could vary significantly from these estimates. Any changes to these estimates will be recognized in the period(s) in which they are determined.

BALANCE SHEET, CAPITAL MARKETS ACTIVITY AND OTHER ITEMS

Debt

As of September 30, 2022, the Company had $6.7 billion in debt outstanding with a weighted average interest rate of 3.4 percent and a weighted average maturity of 8.8 years. At September 30, 2022, the Company's net debt to trailing twelve-month Recurring EBITDA⁽¹⁾ ratio was 5.7 times.

During the quarter ended September 30, 2022, the Company repaid $318.0 million of term loans collateralized by 35 properties. These loans had a weighted average interest rate of 4.8 percent and were set to mature from December 2022 through September 2024.

Additionally, the Company has negotiated fixed rate mortgages with an existing lender on certain properties with existing loans that have low loan-to-value ratios and are scheduled to mature between 2026 and 2029. The additional financings are expected to close before year-end and provide proceeds to the Company of approximately $310.0 million. The Company intends to use the proceeds to repay borrowings outstanding under its senior credit facility.

Derivative Transactions

As previously announced, during the quarter ended September 30, 2022, the Company entered into interest rate swap agreements to hedge variable rate borrowings of £400.0 million (equivalent to $445.3 million as of September 30, 2022) under its senior credit facility's term loan. The interest rate swaps locked in a total fixed rate, inclusive of spread, of 3.67 percent through the term loan's maturity date of April 2025.

Equity Transactions

During the quarter ended September 30, 2022, the Company settled all outstanding forward sale agreements with respect to 1.5 million shares of common stock under its at the market offering program. Net proceeds from the settlement of these forward sale agreements of $275.5 million were used to repay borrowings outstanding under the Company's senior credit facility.

GUIDANCE

Updating Full-Year 2022 and Establishing Fourth Quarter 2022 Guidance

The Company is updating its full-year guidance for diluted EPS and Constant Currency Core FFO⁽¹⁾ per Share to reflect performance through September 30, 2022 and management's expectations for the remainder of the year:

• The Company is revising its full-year guidance for diluted EPS from the prior range of $1.91 - $2.01 to a new range of $1.96 - $2.02.
• The Company is revising its full-year guidance for Constant Currency Core FFO⁽¹⁾ per Share from $7.22 - $7.32 to a new range of $7.32 - $7.38, representing an $0.08 cent increase at the midpoint.
• The Company is establishing fourth quarter 2022 guidance for diluted EPS and Constant Currency Core FFO⁽¹⁾ per Share of $0.02 - $0.08 and $1.23 - $1.29, respectively.
  
  

The table below provides a reconciliation from diluted EPS to Constant Currency Core FFO⁽¹⁾ per Share for the full-year and fourth quarter ending December 31, 2022, as follows:

^(a) Other adjustments include the same categories presented in the table that reconciles Net income attributable to SUI common shareholders to FFO on page 7.

^(b) The Company calculates the foreign currency translation impact by comparing the foreign currency exchange rate used for guidance of 1.1133 USD per GBP in effect on September 30, 2022 with the weighted average foreign currency exchange rate of 1.330 USD per GBP used to establish guidance in April 2022. The impact of fluctuations in Canadian and Australian foreign currency rates on revised or initial guidance are not material.

The Company calculates diluted EPS, Core FFO⁽¹⁾ per Share and Constant Currency Core FFO⁽¹⁾ per Share independently for each quarter; as a result, the sum of the quarters may differ from the annual calculation.

Same Property NOI⁽¹⁾ Growth

The Company is updating its expectations for Same Property NOI⁽¹⁾ Growth for the remainder of the year as follows:

UK Operations - Guidance

The Company's UK Operations are a component of its MH reporting segment. The Company is establishing NOI⁽¹⁾ guidance for its UK Operations for the fourth quarter ending December 31, 2022, as shown in the table below. These expectations are incorporated into the Company's Core FFO⁽¹⁾ per Share and Constant Currency Core FFO⁽¹⁾ per Share guidance and seasonality figures.

^(a) For UK operations, the Company calculates the foreign currency exchange rate translation impact by comparing the foreign currency exchange rate for guidance of 1.1133 USD per GBP in effect on September 30, 2022, with the weighted average foreign currency exchange rate of 1.330 USD per GBP used to establish guidance in April 2022.

Preliminary 2023 Rental Rate Growth Assumptions

The Company has sent notices to MH and annual RV residents and Marina members, and expects the following rental rate increases for 2023:

The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results. These estimates include contributions from all acquisitions and capital markets activity completed through October 24, 2022 and the approximately $310.0 million of debt financing in progress, referred to on page v. These estimates exclude all other prospective acquisitions and capital markets activity. The estimates and assumptions are forward-looking based on the Company's current assessment of economic and market conditions and are subject to the other risks outlined below under the caption Cautionary Statement Regarding Forward-Looking Statements.

EARNINGS CONFERENCE CALL

A conference call to discuss third quarter results will be held on Tuesday, October 25, 2022 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 8, 2022 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 13732466. 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.

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 (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 document 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 and uncertainties, both general and specific to the matters discussed in this document, some of which are beyond the Company's control. These risks and uncertainties 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 described under "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 and in 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:

• Outbreaks of disease, including the COVID-19 pandemic, and related stay-at-home orders, quarantine policies and restrictions on travel, trade and business operations;
• Changes in general economic conditions, including inflation, deflation, and energy costs, the real estate industry and the markets in which the Company operates;
• Difficulties in the Company's ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully;
• The Company's liquidity and refinancing demands;
• The Company's ability to obtain or refinance maturing debt;
• The Company's ability to maintain compliance with covenants contained in its debt facilities and its unsecured notes;
• Availability of capital;
• Changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar, Australian dollar and Pounds sterling;
• The Company's ability to maintain rental rates and occupancy levels;
• The Company's ability 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;
• The Company's ability 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, droughts and wildfires;
• General volatility of the capital markets and the market price of shares of the Company's capital stock;
• The Company's ability to maintain its 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 purchasers of manufactured homes and boats to obtain financing; and
• The level of repossessions by manufactured home and boat 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements included or incorporated by reference into this document, whether as a result of new information, future events, changes in the Company's expectations or otherwise, except as required by law.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company 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 the Company's behalf are qualified in their entirety by these cautionary statements.

Company Overview and Investor Information

The Company

Established in 1975, Sun Communities, Inc. (the "Company" or "SUI") became a publicly owned corporation in December, 1993. The Company is a fully integrated REIT listed on the New York Stock Exchange under the symbol: SUI. As of September 30, 2022, the Company owned, operated, or had an interest in a portfolio of 662 developed MH, RV and Marina properties comprising over 180,500 developed sites and over 46,100 wet slips and dry storage spaces in 39 states, the United Kingdom, Canada and Puerto Rico.

For more information about the Company, please visit www.suncommunities.com.

Financial and Operating Highlights
(amounts in millions, except for *)

^(a) Total wet slips and dry storage spaces are adjusted each quarter based on site configuration and usability.

^(b) These figures do not include UK operations net leased sites.

Portfolio Overview as of September 30, 2022

^(a) As of September 30, 2022, total portfolio MH occupancy was 95.5 percent inclusive of the impact of over 1,600 recently constructed but vacant MH expansion sites, and annual RV occupancy was 100.0 percent.

^(b) Total sites for development were comprised of 66.5 percent for expansion, 29.1 percent for greenfield development and 4.4 percent for redevelopment.

Portfolio Overview as of September 30, 2022 (continued)

The map below provides an overview of our property locations worldwide:

Consolidated Balance Sheets
(amounts in millions)

Consolidated Statements of Operations
(In millions, except for per share amounts) (Unaudited)

N/M = Percentage change is not meaningful.

N/A = Percentage change is not applicable.

Reconciliation of Net Income Attributable to SUI Common Shareholders to FFO⁽¹⁾
(amounts in millions, except for per share data)

^(a) The Company calculated the foreign currency translation impact by comparing the actual weighted average foreign currency rates with the weighted average foreign currency rates used for guidance, as follows:

Reconciliation of Net Income Attributable to SUI Common Shareholders to NOI⁽¹⁾
(amounts in millions)

Reconciliation of Net Income Attributable to SUI Common Shareholders to Recurring EBITDA⁽¹⁾
(amounts in millions)

Same Property⁽²⁾ Summary - MH / RV
(amounts in millions)

^(a) Percentages are calculated based on unrounded numbers.

^(a) Percentages are calculated based on unrounded numbers.

Same Property⁽²⁾ Summary - MH / RV (Continued)
(amounts in millions)

^(a) Financial results from properties disposed of during the year have been removed from Same Property reporting

Same Property Summary - Marina
(amounts in millions)

^(a) Percentages are calculated based on unrounded numbers.

^(a) Percentages are calculated based on unrounded numbers.

UK Operations Summary
(amounts in millions, except for statistical data)

Acquisitions and Other Summary (excluding UK Operations)⁽¹⁵⁾
(amounts in millions, except for statistical data)

Acquisitions and Dispositions
(amounts in millions, except for *)

^(a) Combined with an existing property.

^(b) Provides third-party management for two properties.

^(c) Contains one development property.

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