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SUN COMMUNITIES INC - Quarter Report: 2021 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021.
 
or

TRANSITION PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

SUN COMMUNITIES INC.
(Exact Name of Registrant as Specified in its Charter)

Maryland1-1261638-2730780
(State of Incorporation)Commission file number(I.R.S. Employer Identification No.)
27777 Franklin Rd,Suite 200,Southfield,Michigan 48034
(Address of Principal Executive Offices) (Zip Code)
(248) 208-2500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueSUINew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘emerging growth company” in rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

Number of shares of Common Stock, $0.01 par value per share, outstanding as of October 19, 2021: 115,970,843



INDEX
  
PART I – FINANCIAL INFORMATION
 
Item 1.Consolidated Financial Statements
 
Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020
 
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)
Consolidated Statement of Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
 Notes to Consolidated Financial Statements 
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 
Item 3.Quantitative and Qualitative Disclosures about Market Risk 
Item 4.Controls and Procedures 
PART II – OTHER INFORMATION
 
Item 1.Legal Proceedings 
Item 1A.Risk Factors 
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits 
 Signatures 




SUN COMMUNITIES, INC.
PART I

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
September 30, 2021December 31, 2020
Assets  
Land$2,457,236 $2,119,364 
Land improvements and buildings9,469,247 8,480,597 
Rental homes and improvements591,367 637,603 
Furniture, fixtures and equipment590,829 447,039 
Investment property13,108,679 11,684,603 
Accumulated depreciation(2,232,243)(1,968,812)
Investment property, net (including $567,026 and $453,236 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
10,876,436 9,715,791 
Cash, cash equivalents and restricted cash85,619 92,641 
Marketable securities (see Note 14)160,321 124,726 
Inventory of manufactured homes43,708 46,643 
Notes and other receivables, net256,924 221,650 
Goodwill461,609 428,833 
Other intangible assets, net297,625 305,611 
Other assets, net (including $28,670 and $25,072 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
401,054 270,691 
Total Assets$12,583,296 $11,206,586 
Liabilities  
Secured debt (see Note 8) (including $49,054 and $47,706 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
$3,403,436 $3,489,983 
Unsecured debt (see Note 8) (including $35,249 and $35,249 for consolidated VIE at September 30, 2021 and December 31, 2020; see Note 7)
1,286,001 1,267,093 
Distributions payable98,453 86,988 
Advanced reservation deposits and rent223,471 187,730 
Accrued expenses and accounts payable232,590 148,435 
Other liabilities (including $22,908 and $22,221 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
244,518 134,650 
Total Liabilities5,488,469 5,314,879 
Commitments and contingencies (see Note 15)
Temporary equity (see Note 9) (including $37,064 and $32,719 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
292,394 264,379 
Stockholders' Equity  
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 115,959 September 30, 2021 and 107,626 December 31, 2020
1,160 1,076 
Additional paid-in capital8,170,322 7,087,658 
Accumulated other comprehensive income1,752 3,178 
Distributions in excess of accumulated earnings(1,475,634)(1,566,636)
Total Sun Communities, Inc. stockholders' equity6,697,600 5,525,276 
Noncontrolling interests  
Common and preferred OP units85,756 85,968 
Consolidated entities (including $18,527 and $16,084 for consolidated VIEs at September 30, 2021 and December 31, 2020; see Note 7)
19,077 16,084 
Total noncontrolling interests104,833 102,052 
Total Stockholders' Equity6,802,433 5,627,328 
Total Liabilities, Temporary Equity and Stockholders' Equity$12,583,296 $11,206,586 

See accompanying Notes to Consolidated Financial Statements.

1


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)

 Three Months EndedNine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Revenues  
Real property$478,625 $320,488 $1,215,143 $829,964 
Home sales81,099 47,662 215,146 126,779 
Service, retail, dining and entertainment113,039 23,859 270,103 36,662 
Interest2,690 2,624 8,040 7,609 
Brokerage commissions and other, net8,841 5,881 21,740 13,068 
Total Revenues684,294 400,514 1,730,172 1,014,082 
Expenses  
Property operating and maintenance158,095 98,775 391,609 239,413 
Real estate tax24,751 17,442 70,361 52,341 
Home costs and selling56,567 39,899 156,920 105,989 
Service, retail, dining and entertainment87,106 17,615 211,122 31,539 
General and administrative 43,276 26,834 126,606 78,710 
Catastrophic event-related charges, net328 14 3,097 54 
Business combination— — 1,031 — 
Depreciation and amortization127,091 88,499 378,068 259,453 
Loss on extinguishment of debt (see Note 8)
— — 8,108 5,209 
Interest39,026 30,214 116,224 94,058 
Interest on mandatorily redeemable preferred OP units / equity1,047 1,047 3,124 3,130 
Total Expenses537,287 320,339 1,466,270 869,896 
Income Before Other Items147,007 80,175 263,902 144,186 
Gain / (loss) on remeasurement of marketable securities (see Note 14)
12,072 1,492 43,227 (2,636)
Gain / (loss) on foreign currency translation(7,028)5,023 (7,107)(2,496)
Gain on dispositions of properties108,104 5,595 108,104 5,595 
Other expense, net(9,372)(3,511)(10,041)(4,890)
Gain / (loss) on remeasurement of notes receivable (see Note 4)
92 (445)561 (2,311)
Income from nonconsolidated affiliates (see Note 6)
962 1,204 2,927 1,348 
Loss on remeasurement of investment in nonconsolidated affiliates
(119)(446)(130)(1,505)
Current tax benefit / (expense) (see Note 12)
(402)107 (1,418)(462)
Deferred tax benefit / (expense) (see Note 12)
(1,155)562 (1,074)804 
Net Income250,161 89,756 398,951 137,633 
Less: Preferred return to preferred OP units / equity interests3,101 1,645 9,000 4,799 
Less: Income attributable to noncontrolling interests15,290 6,907 22,629 8,806 
Net Income Attributable to Sun Communities, Inc. Common Stockholders$231,770 $81,204 $367,322 $124,028 
Weighted average common shares outstanding - basic115,136 97,542 111,717 95,270 
Weighted average common shares outstanding - diluted118,072 97,549 114,291 95,273 
Basic earnings per share (see Note 13)
$2.00 $0.83 $3.27 $1.29 
Diluted earnings per share (see Note 13)
$2.00 $0.83 $3.27 $1.29 

See accompanying Notes to Consolidated Financial Statements.
2


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (Unaudited)

 Three Months EndedNine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net Income$250,161 $89,756 $398,951 $137,633 
Foreign currency translation gain / (loss) adjustment(3,606)2,146 (1,491)(1,282)
Total Comprehensive Income246,555 91,902 397,460 136,351 
Less: Comprehensive income attributable to noncontrolling interests(15,129)(6,804)(22,564)(8,419)
Comprehensive Income attributable to Sun Communities, Inc.$231,426 $85,098 $374,896 $127,932 

See accompanying Notes to Consolidated Financial Statements.


3


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENT OF EQUITY
(In thousands) (Unaudited)
Temporary EquityStockholders' Equity
 Common
Stock
Additional Paid-in CapitalDistributions in Excess of Accumulated EarningsAccumulated Other Comprehensive IncomeNon-controlling InterestsTotal Stockholders' EquityTotal
Equity
Balance at December 31, 2020$264,379 $1,076 $7,087,658 $(1,566,636)$3,178 $102,052 $5,627,328 $5,891,707 
Issuance of common stock and common OP units, net— 42 522,222 — — — 522,264 522,264 
Conversion of OP units— — 1,150 — — (1,150)— — 
Other redeemable non-controlling interests52 — — (52)— — (52)— 
Share-based compensation - amortization and forfeitures— — 7,118 62 — — 7,180 7,180 
Foreign currency translation— — — — 855 40 895 895 
Net income / (loss)(1,568)— — 27,647 — 1,862 29,509 27,941 
Distributions(1,804)— — (92,823)— (3,260)(96,083)(97,887)
Other— — (20)758 — (141)597 597 
Balance at March 31, 2021$261,059 $1,118 $7,618,128 $(1,631,044)$4,033 $99,403 $6,091,638 $6,352,697 
Issuance of common stock and common OP units, net— 40 537,557 — — — 537,597 537,597 
Conversion of OP units— 296 — — (297)— — 
Other redeemable non-controlling interests53 — — (53)— — (53)— 
Share-based compensation - amortization and forfeitures— — 7,099 74 — — 7,173 7,173 
Issuance of Series J preferred OP units24,000 — — — — — — 24,000 
Foreign currency translation— — — — 1,164 56 1,220 1,220 
Net income2,448 — — 113,804 — 4,597 118,401 120,849 
Distributions(1,957)— — (96,188)— (3,143)(99,331)(101,288)
Other— — 15 (836)— — (821)(821)
Balance at June 30, 2021$285,603 $1,159 $8,163,095 $(1,614,243)$5,197 $100,616 $6,655,824 $6,941,427 
Issuance of common stock and common OP units, net— — (813)— — — (813)(813)
Conversion of OP units— 1,336 — — (1,337)— — 
Equity interest in consolidated entities1,750 — — — — 550 550 2,300 
Other redeemable non-controlling interests56 — — (55)— — (55)
Share-based compensation - amortization and forfeitures— — 6,704 77 — — 6,781 6,781 
Foreign currency translation— — — — (3,445)(161)(3,606)(3,606)
Net income7,023 — — 234,871 — 8,267 243,138 250,161 
Distributions(2,038)— — (96,246)— (3,101)(99,347)(101,385)
Other— — — (38)— (1)(39)(39)
Balance at September 30, 2021$292,394 $1,160 $8,170,322 $(1,475,634)$1,752 $104,833 $6,802,433 $7,094,827 

4


SUN COMMUNITIES, INC.
Stockholders' Equity
 Temporary EquityCommon
Stock
Additional Paid-in CapitalDistributions in Excess of Accumulated EarningsAccumulated Other Comprehensive LossNon-controlling InterestsTotal Stockholders' EquityTotal Equity
Balance at December 31, 2019$78,004 $932 $5,213,264 $(1,393,141)$(1,331)$56,228 $3,875,952 $3,953,956 
Issuance of common stock and common OP units, net— (7,141)— — — (7,140)(7,140)
Conversion of OP units— — 446 — — (446)— — 
Other redeemable non-controlling interests98 — — (85)— — (85)13 
Share-based compensation - amortization and forfeitures— — 4,928 93 — — 5,021 5,021 
Issuance of Series E preferred OP units— — 181 — — 8,819 9,000 9,000 
Foreign currency translation— — — — (6,994)(306)(7,300)(7,300)
Remeasurement of notes receivable and equity method investment— — — 1,953 — — 1,953 1,953 
Net income / (loss)(1,195)— — (14,514)— 231 (14,283)(15,478)
Distributions(457)— — (73,730)— (2,918)(76,648)(77,105)
Balance at March 31, 2020$76,450 $933 $5,211,678 $(1,479,424)$(8,325)$61,608 $3,786,470 $3,862,920 
Issuance of common stock and common OP units, net— 49 628,506 — — 10,114 638,669 638,669 
Conversion of OP units— 130 — — (131)— — 
Other redeemable non-controlling interests(641)— — (67)— — (67)(708)
Share-based compensation - amortization and forfeitures— — 7,284 92 — — 7,376 7,376 
Issuance of Series F preferred OP units8,965 — — — — — — 8,965 
Foreign currency translation— — — — 3,850 22 3,872 3,872 
Net income / (loss)(300)— — 60,492 — 3,163 63,655 63,355 
Distributions(492)— — (77,635)— (2,971)(80,606)(81,098)
Balance at June 30, 2020$83,982 $983 $5,847,598 $(1,496,542)$(4,475)$71,805 $4,419,369 $4,503,351 
Issuance of common stock and common OP units, net— — (1,622)— — — (1,622)(1,622)
Conversion of OP units— — 216 — — (216)— — 
Equity interest consolidated entities67 — — (67)— — (67)— 
Share-based compensation - amortization and forfeitures— — 5,188 63 — — 5,251 5,251 
Issuance of Series G preferred OP units26,071 — — — — — — 26,071 
Foreign currency translation— — — — 2,249 (103)2,146 2,146 
Net income2,958 — — 82,849 — 3,949 86,798 89,756 
Distributions(529)— — (77,641)— (2,988)(80,629)(81,158)
Balance at September 30, 2020$112,549 $983 $5,851,380 $(1,491,338)$(2,226)$72,447 $4,431,246 $4,543,795 

See accompanying Notes to Consolidated Financial Statements.
5


SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)

 Nine Months Ended
 September 30, 2021September 30, 2020
Operating Activities  
Net Cash Provided By Operating Activities$656,010 $464,458 
Investing Activities  
Investment in properties(476,536)(401,976)
Acquisitions of properties, net of cash acquired(1,099,753)(256,359)
Proceeds from disposition of assets and depreciated homes, net80,765 37,389 
Proceeds from disposition of properties162,077 12,612 
Issuance of notes and other receivables(17,114)(35,188)
Repayments of notes and other receivables4,091 2,713 
Investments in nonconsolidated affiliates(27,398)(33,390)
Distributions from nonconsolidated affiliates10,716 8,491 
Net Cash Used For Investing Activities(1,363,152)(665,708)
Financing Activities  
Issuance of common stock, OP units and preferred OP units, net1,059,048 619,793 
Borrowings on lines of credit2,405,240 1,221,980 
Payments on lines of credit(3,014,367)(1,318,986)
Proceeds from issuance of debt598,990 230,000 
Contributions from noncontrolling interest1,608 — 
Payments on debt(49,862)(229,742)
Fees paid in connection with extinguishment of debt(195)(6,226)
Distributions(289,112)(231,500)
Payments for deferred financing costs(10,961)(3,322)
Net Cash Provided By Financing Activities700,389 281,997 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(269)(48)
Net change in cash, cash equivalents and restricted cash(7,022)80,699 
Cash, cash equivalents and restricted cash, beginning of period92,641 34,830 
Cash, Cash Equivalents and Restricted Cash, End of Period $85,619 $115,529 

Nine Months Ended
September 30, 2021September 30, 2020
Supplemental Information  
Cash paid for interest (net of capitalized interest of $3,471 and $7,169 respectively)
$113,313 $100,047 
Cash paid for interest on mandatorily redeemable debt$3,124 $3,130 
Cash paid for income taxes$928 $1,069 
Noncash investing and financing activities  
Change in distributions declared and outstanding$11,438 $7,861 
Conversion of common and preferred OP units$2,784 $793 
Asset held for sale$705 $— 
Contingent consideration liability related to prior acquisitions$15,332 $— 
Noncash investing and financing activities at the date of acquisition
Acquisitions - Common stock and OP units issued$— $10,114 
Acquisitions - Series E preferred interest$— $9,000 
Acquisitions - Series F preferred interest$— $9,000 
Acquisitions - Series G preferred interest$— $26,071 
Acquisitions - Series J preferred interest$24,000 $— 

See accompanying Notes to Consolidated Financial Statements.
6

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


1.      Basis of Presentation

Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership (the "Operating Partnership"), Sun Home Services, Inc. ("SHS") and Safe Harbor Marinas, LLC ("Safe Harbor") are referred to herein as the "Company," "us," "we," and "our."

We follow accounting standards set by the Financial Accounting Standards Board ("FASB"). FASB establishes accounting principles generally accepted in the United States of America ("GAAP"), which we follow to ensure that we consistently report our financial condition, results of operations and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification ("ASC"). These unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information and in accordance with GAAP. We present interim disclosures and certain information and footnote disclosures as required by SEC rules and regulations. Accordingly, the unaudited Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited Consolidated Financial Statements reflect, in the opinion of management, all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of the interim financial statements. All intercompany transactions have been eliminated in consolidation.

On January 1, 2021, we changed our organizational structure from a two-segment to a three-segment structure as a result of the recent acquisition of Safe Harbor and its internal organization. The new structure reflects how the chief operating decision maker manages the business, makes operating decisions, allocates resources and evaluates operating performance. Beginning with the three months ended March 31, 2021, we report our financial results consistent with our newly realigned operating segments. All prior period amounts are recast to conform to the way we internally manage our business and monitor segment performance. Certain reclassifications have been made to the prior period financial statements and related notes in order to conform to the current period presentation. The most significant changes were the combining of rental home revenue with real property revenue, the combining of rental home operating and maintenance expenses with property operating expenses, and the combining of home selling expenses with cost of home sales. Vacation rental home rent has been reclassified from ancillary income into real property. In addition, ancillary revenues and expenses have been renamed service, retail, dining & entertainment. There was no impact to prior period net income, stockholders equity or cash flows for any of the reclassifications.

The results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 18, 2021 (our "2020 Annual Report"). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our 2020 Annual Report.

Our three reportable segments are: (i) Manufactured home ("MH") communities, (ii) Recreational vehicle ("RV") resorts and (iii) Marinas.
7

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2. Revenue

The following tables detail our revenue by major source (in thousands):

Three Months Ended
September 30, 2021
September 30, 2020(1)
MHRVMarinaConsolidatedMHRVMarinaConsolidated
Revenues
Real property$203,648 $185,765 $89,212 $478,625 $188,177 $132,311 N/A$320,488 
Home sales70,323 10,776 — 81,099 39,941 7,721 N/A47,662 
Service, retail, dining and entertainment1,626 37,303 74,110 113,039 1,251 22,608 N/A23,859 
Interest2,184 498 2,690 2,154 470 N/A2,624 
Brokerage commissions and other, net3,636 4,846 359 8,841 2,920 2,961 N/A5,881 
Total Revenues$281,417 $239,188 $163,689 $684,294 $234,443 $166,071 N/A$400,514 
(1) Recast to reflect segment changes.

Nine Months Ended
September 30, 2021
September 30, 2020(1)
MHRVMarinaConsolidatedMHRVMarinaConsolidated
Revenues
Real property$602,370 $398,833 $213,940 $1,215,143 $553,216 $276,748 N/A$829,964 
Home sales185,576 29,570 — 215,146 110,797 15,982 N/A126,779 
Service, retail, dining and entertainment5,340 64,061 200,702 270,103 4,377 32,285 N/A36,662 
Interest6,353 1,656 31 8,040 6,293 1,316 N/A7,609 
Brokerage commissions and other, net9,782 11,053 905 21,740 6,630 6,438 N/A13,068 
Total Revenues$809,421 $505,173 $415,578 $1,730,172 $681,313 $332,769 N/A$1,014,082 
(1) Recast to reflect segment changes.

Our revenue consists of real property revenue at our MH, RV and Marina properties, revenue from Home sales, Service, retail, dining and entertainment revenue, Interest income, and Brokerage commissions and other revenue.

The majority of our revenue is derived from site and home leases, and wet slip and dry storage space leases that are accounted for pursuant to ASC 842, "Leases." We account for all revenue from contracts with customers following ASC 606, "Revenue from Contracts with Customers" except for those that are within the scope of other topics in the FASB ASC. For additional information, refer to Note 1, "Significant Accounting Policies," in our 2020 Annual Report.
8

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
3.      Real Estate Acquisitions and Dispositions

2021 Acquisitions and dispositions

During the nine months ended September 30, 2021, we acquired the following MH communities, RV resorts and marinas:

Community NameTypeSites, Wet Slips and
Dry Storage Spaces
Development SitesState / ProvinceMonth Acquired
Sun Outdoors Association IslandRV: asset acquisition294 — NYJanuary
Blue Water Beach ResortRV: asset acquisition177 — UTFebruary
Tranquility MHCMH: asset acquisition25 — FLFebruary
Islamorada and Angler House(1)
Marina: asset acquisition251 — FLFebruary
Prime Martha's Vineyard(1)
Marina: asset acquisition390 — MAMarch
Pleasant Beach CampgroundRV: asset acquisition102 — ON, CanadaMarch
Cherrystone Family Camping ResortRV: asset acquisition669 — VAMarch
Beachwood ResortRV: asset acquisition672 — WAMarch
ThemeWorld RV ResortRV: asset acquisition148 — FLApril
Sylvan Glen Estates(2)
MH: asset acquisition476 — MIApril
Shelter Island BoatyardMarina: asset acquisition55 — CAMay
Lauderdale Marine CenterMarina: asset acquisition202 — FLMay
Apponaug Harbor(3)
Marina: asset acquisition378 — RIJune
Cabrillo Isle(4)
Marina: business combination483 — CAJune
Marathon MarinaMarina: asset acquisition147 — FLJune
Allen HarborMarina: asset acquisition165 — RIJuly
Cisco Grove Campground & RVRV: asset acquisition18 407 CAJuly
Four Leaf Portfolio(5)
MH: asset acquisition2,545 340 MI / INJuly
Harborage Yacht ClubMarina: asset acquisition300 — FLJuly
Zeman Portfolio(6)
RV: asset acquisition686 — IL / NJJuly
Southern Leisure ResortRV: asset acquisition496 — FLAugust
Sunroad MarinaMarina: asset acquisition617 — CAAugust
Lazy Lakes RVRV: asset acquisition99 — FLAugust
Puerto del Rey Marina: asset acquisition1,450 — Puerto RicoSeptember
Stingray PointMarina: asset acquisition219 — VASeptember
Detroit RiverMarina: asset acquisition440 — MISeptember
Jetstream RV ResortRV: asset acquisition202 — TXSeptember
Total11,706 747 
(1) Includes two marinas.
(2) In conjunction with the acquisition, we issued 240,000 Series J preferred OP units. As of September 30, 2021, 240,000 Series J preferred OP units were outstanding.
(3) Combined with an existing adjacent marina.
(4) Acquired in connection with the Safe Harbor acquisition. Transfer of the marina was contingent on receiving third party consent.
(5) Includes nine MH communities.
(6) Includes two RV communities.

9

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the amount of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the MH community, RV resort and Marina acquisitions completed during the nine months ended September 30, 2021 (in thousands):

At Acquisition DateConsideration
Investment in propertyInventory of manufactured homes, boat parts
and retail
related items
In-place leases, goodwill and other intangible assetsOther assets / (liabilities), netTotal identifiable assets acquired net of liabilities assumedCash and escrowTemporary and permanent equityTotal consideration
Asset Acquisition
Sun Outdoors Association Island$14,965 $— $41 $(248)$14,758 $14,758 $— $14,758 
Blue Water Beach Resort9,000 — — (151)8,849 8,849 — 8,849 
Tranquility MHC1,250 — — (1)1,249 1,249 — 1,249 
Islamorada and Angler House18,001 22 269 (317)17,975 17,975 — 17,975 
Prime Martha's Vineyard22,258 138 127 (573)21,950 21,950 — 21,950 
Pleasant Beach Campground1,531 — 57 1,589 1,589 — 1,589 
Cherrystone Family Camping Resort59,669 — 231 (2,029)57,871 57,871 — 57,871 
Beachwood Resort14,004 — 211 (7,616)6,599 6,599 — 6,599 
ThemeWorld RV Resort25,000 — — (104)24,896 24,896 — 24,896 
Sylvan Glen Estates23,469 20 531 (269)23,751 (249)24,000 23,751 
Shelter Island Boatyard9,520 132 402 (85)9,969 9,969 — 9,969 
Lauderdale Marine Center336,992 — 3,282 958 341,232 341,232 — 341,232 
Apponaug Harbor6,540 — 89 (689)5,940 5,940 — 5,940 
Marathon Marina19,129 19 261 (227)19,182 19,182 — 19,182 
Allen Harbor3,946 30 35 (111)3,900 3,900 — 3,900 
Cisco Grove Campground & RV6,609 — — 22 6,631 6,631 — 6,631 
Four Leaf Portfolio210,723 319 3,958 (464)214,536 214,536 — 214,536 
Harborage Yacht Club17,392 43 4,646 (504)21,577 21,577 — 21,577 
Zeman Portfolio14,184 — 731 (545)14,370 14,370 — 14,370 
Southern Leisure Resort17,476 — 274 (329)17,421 17,421 — 17,421 
Sunroad Marina38,570 — 537 44,008 83,115 83,115 — 83,115 
Lazy Lakes RV11,300 — — (66)11,234 11,234 — 11,234 
Puerto Del Rey(1)
93,377 610 — (2,086)91,901 91,901 — 91,901 
Stingray Point2,852 — 46 (287)2,611 2,611 — 2,611 
Detroit River8,737 — 159 (599)8,297 8,297 — 8,297 
Jetstream RV Resort17,025 — 475 (199)17,301 17,301 — 17,301 
Business Combination(2)
Cabrillo Isle37,647 — 10,073 (703)47,017 47,017 — 47,017 
Total$1,041,166 $1,333 $26,435 $26,787 $1,095,721 $1,071,721 $24,000 $1,095,721 
(1) Purchase price allocation is preliminary as of September 30, 2021, subject to revision based on the final purchase price allocation.
(2) Refer to Note 5, "Goodwill and Other Intangibles Assets," for additional detail on goodwill and other intangible assets.
10

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
As of September 30, 2021, we have incurred and capitalized $10.9 million of transaction costs which have been capitalized and allocated among the various fixed asset categories for purchases that meet the asset acquisition criteria. As of September 30, 2021, we also incurred $1.0 million of business combination expenses, which are expensed for purchases deemed to be business combinations.

The following unaudited pro forma financial information presents the results of our operations for the three and nine months ended September 30, 2021 and 2020, as if the properties combined through business combinations in 2021 had been acquired on January 1, 2020. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees and acquisition accounting.

The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have actually occurred had the acquisition been consummated on January 1, 2020 (in thousands, except per-share data):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Total revenues$685,662 $401,867 $1,734,088 $1,017,988 
Net income attributable to Sun Communities, Inc. common stockholders$231,580 $82,122 $367,838 $125,905 
Net income per share attributable to Sun Communities, Inc. common stockholders - basic$2.01 $0.84 $3.29 $1.32 
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted$1.96 $0.84 $3.22 $1.32 

Land for Expansion / Development

During the three months ended September 30, 2021, we acquired three land parcels, which are located in Ft. Collins, Colorado; Ft. Lupton, Colorado; and Leighton, Michigan, approved for the development of over 500 MH sites, for total consideration of $7.7 million.

Refer to Note 18, "Subsequent Events," for information regarding real estate acquisitions completed after September 30, 2021.

Dispositions

On July 2, 2021, we sold two MH communities located in Indiana and Missouri, containing a combined 677 sites, for $67.5 million. The gain from the sale of the property was approximately $49.4 million.

On August 26, 2021, we sold four MH communities located in Arizona, Illinois and Missouri, containing a combined 1,137 sites, for $94.6 million. The gain from the sale of the property was approximately $58.7 million.




11

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
2020 Acquisitions and dispositions

For the year ended December 31, 2020, we acquired the following MH communities, RV resorts and marinas.

Community NameTypeSites, Wet Slips and Dry Storage SpacesDevelopment SitesStateMonth Acquired
Cape Cod(1)
RV: asset acquisition230 — MAJanuary
Jellystone Natural BridgeRV: asset acquisition299 — VAFebruary
Forest Springs(2)
MH: asset acquisition372 — CAMay
Crown VillaRV: asset acquisition123 — ORJune
Flamingo LakeRV: asset acquisition421 — FLJuly
WoodsmokeRV: asset acquisition300 — FLSeptember
Jellystone Lone StarRV: asset acquisition344 — TXSeptember
El Capitan & Ocean Mesa(3)(4)
RV: asset acquisition266 109 CASeptember
Highland Green Estates & Troy Villa(5)
MH: asset acquisition1,162 — MISeptember
Safe Harbor(6)
Marina: business combination37,305 — VariousOctober
Safe Harbor Hideaway Bay(7)
Marina: business combination628 — GANovember
Gig HarborRV: asset acquisition115 — WANovember
Maine MH Portfolio(8)
MH: asset acquisition1,083 — MENovember
Safe Harbor Anacapa Isle(7)
Marina: business combination453 — CADecember
Mears AnnapolisMarina: asset acquisitions184 — MDDecember
WickfordMarina: asset acquisitions60 — RIDecember
Rybovich Portfolio(9)
Marina: business combination78 — FLDecember
RocklandMarina: asset acquisitions173 — MEDecember
Mouse MountainMH / RV: asset acquisition304 — FLDecember
Lakeview Mobile EstatesMH: asset acquisition296 — CADecember
Shenandoah AcresRV: asset acquisition522 — VADecember
Jellystone at Barton LakeRV: asset acquisition555 — INDecember
Kittatinny Portfolio(4)
RV: asset acquisition527 — NY & PADecember
Total45,800 109 
(1) In conjunction with the acquisition, we issued Series E preferred OP units. As of December 31, 2020, 90,000 Series E preferred OP units were outstanding.
(2) In conjunction with the acquisition, we issued Series F preferred OP units and common OP units. As of December 31, 2020, 90,000 Series F preferred OP units, specific to this acquisition, were outstanding.
(3) In conjunction with the acquisition, we issued Series G preferred OP units. As of December 31, 2020, 240,710 Series G preferred OP units were outstanding.
(4) Includes two RV resorts.
(5) Includes two communities.
(6) Includes 99 owned marinas located in 22 states. In conjunction with the acquisition, we issued Series H preferred OP units. As of December 31, 2020, 581,407 Series H preferred OP units were outstanding.
(7) Acquired in connection with the Safe Harbor acquisition. Transfer of the marinas was contingent on receiving third party consents.
(8) Includes six communities.
(9) Includes two marinas. In conjunction with the acquisition, we issued Series I preferred OP units. As of December 31, 2020, 922,000 Series I preferred OP units were outstanding.


12

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The following table summarizes the amounts of assets acquired, net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2020 (in thousands):

At Acquisition DateConsideration
Investment in propertyInventory of manufactured homes, boat parts
and retail
related items
Goodwill, In-place leases and other intangible assetsOther assets / (liabilities), netTotal identifiable assets acquired net of liabilities assumedCash and escrowDebt assumedTemporary and permanent equityTotal consideration
Asset Acquisition
Cape Cod$13,350 $— $150 $(295)$13,205 $4,205 $— $9,000 $13,205 
Jellystone Natural Bridge11,364 — 80 (391)11,053 11,053 — — 11,053 
Forest Springs51,949 1,337 2,160 (107)55,339 36,260 — 19,079 55,339 
Crown Villa16,792 — — (230)16,562 16,562 — — 16,562 
Flamingo Lake34,000 — — (155)33,845 33,845 — — 33,845 
Woodsmoke25,120 40 840 (461)25,539 25,539 — — 25,539 
Jellystone Lone Star21,000 — — (703)20,297 20,297 — — 20,297 
El Capitan & Ocean Mesa69,690 — — (10,321)59,369 32,108 — 27,261 59,369 
Highland Green Estates & Troy Villa60,988 1,679 2,030 (15)64,682 64,682 — — 64,682 
Gig Harbor15,250 — — (22)15,228 15,228 — — 15,228 
Maine MH Portfolio79,890 — 1,359 30 81,279 72,479 8,800 — 81,279 
Mears Annapolis24,354 — 6,922 (546)30,730 30,730 — — 30,730 
Wickford3,468 — 42 (121)3,389 3,389 — — 3,389 
Rockland15,082 348 101 (368)15,163 15,163 — — 15,163 
Mouse Mountain15,221 — 279 (4)15,496 15,496 — — 15,496 
Lakeview Mobile Estates22,917 195 638 (72)23,678 23,678 — — 23,678 
Shenandoah Acres16,166 — 834 (197)16,803 16,803 — — 16,803 
Jellystone at Barton Lake23,462 — 538 (397)23,603 23,603 — — 23,603 
Kittatinny Portfolio16,220 — 30 29 16,279 16,279 — — 16,279 
Business Combination(1)
Safe Harbor(2)
1,643,879 5,700 435,077 (43,875)2,040,781 1,141,797 829,000 69,984 2,040,781 
Hideaway Bay26,218 23 7,242 (1,077)32,406 32,406 — — 32,406 
Anacapa Isle10,924 — 3,146 60 14,130 14,130 — — 14,130 
Rybovich Portfolio(3)
122,064 620 249,840 (37)372,487 258,123 — 114,364 372,487 
Total$2,339,368 $9,942 $711,308 $(59,275)$3,001,343 $1,923,855 $837,800 $239,688 $3,001,343 
(1) Refer to Note 5, "Goodwill and Other Intangibles Assets," for additional detail on goodwill and other intangible assets.
(2) Purchase price allocation was preliminary as of December 31, 2020 and was subsequently adjusted based on the final purchase price allocation. We reclassified $17.0 million from "Other assets / (liabilities), net" to "Goodwill, In-place leases and other intangible assets." The reclassifications consist of $11.4 million to goodwill in Q3 2021 and various other asset / liability true-ups of $5.7 million during Q1 and Q2 2021. These adjustments did not have any impact on the Statements of Operations.
(3) Purchase price allocation was preliminary as of December 31, 2020 and was adjusted as of March 31, 2021 based on the final purchase price allocation.

As of December 31, 2020, we have incurred $23.0 million of expensed business combination transaction costs (in relation to the acquisition Safe Harbor, Hideaway Bay, Anacapa Isle and the Rybovich Portfolio, as each such acquisition meets the criteria to be accounted for as business combination), and $13.4 million of capitalized transaction costs for asset acquisitions, which have been allocated among the various categories above.




13

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Land for Expansion / Development

During the year ended December 31, 2020, we acquired eight land parcels, which are located in Orange Beach, Alabama; Jensen Beach, Florida; Citra Lakes, Florida; Comal County, Texas; and Menifee, California for total consideration of $9.7 million. Seven of the land parcels are adjacent to existing communities.

Dispositions

Real estate held-for-sale of $32.1 million as of December 31, 2020, was reclassified from Other assets, net to various line items on the Consolidated Balance Sheets during the three months ended March 31, 2021, as the sale of those assets was no longer probable. The primary reclassifications were $34.5 million of assets moved to Investment property, net and $3.8 million moved to Other liabilities on the Consolidated Balance Sheets.

On July 1, 2020, we sold a manufactured housing community located in Montana, containing 226 sites, for $12.6 million. The gain from the sale of the property was approximately $5.6 million.

4.      Notes and Other Receivables

The following table sets forth certain information regarding notes and other receivables (in thousands):

 September 30, 2021December 31, 2020
Installment notes receivable on manufactured homes, net$81,001 $85,866 
Notes receivable from real estate developers64,593 52,638 
Other receivables, net111,330 83,146 
Total Notes and Other Receivables, net$256,924 $221,650 

Installment Notes Receivable on Manufactured Homes

Installment notes receivable are measured at fair value, using indicative pricing models from third party valuation specialists, in accordance with ASC Topic 820 "Fair Value Measurements and Disclosures." The balances of installment notes receivable of $81.0 million (net of fair value adjustment of $0.7 million) and $85.9 million (net of fair value adjustment of $1.3 million) as of September 30, 2021 and December 31, 2020, respectively, are secured by manufactured homes. The notes represent financing to purchasers of manufactured homes located in our communities and require monthly principal and interest payments. The notes had a net weighted average interest rate (net of servicing costs) and maturity of 7.6 percent and 14.8 years as of September 30, 2021, and 7.8 percent and 15.2 years as of December 31, 2020, respectively. Refer to Note 14, "Fair Value of Financial Instruments," for additional detail.


14

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The change in the aggregate balance of the installment notes receivable is as follows (in thousands):

Nine Months Ended Year Ended
September 30, 2021December 31, 2020
Beginning balance of gross installment notes receivable$87,142 $96,225 
Financed sale of manufactured homes7,232 5,014 
Adjustment for notes receivable related to assets held for sale477 (477)
Principal payments and payoffs from our customers(8,867)(8,977)
Principal reduction from repossessed homes(2,342)(4,643)
Dispositions of properties(1,918)— 
Ending balance of gross installment notes receivable81,724 87,142 
Beginning balance of allowance for losses on installment notes receivables— (645)
Initial fair value option adjustment
— 645 
Ending balance of allowance for losses on installment notes receivables— — 
Beginning balance of fair value adjustments on gross installment notes receivable(1,276)— 
Initial fair value option adjustment— 991 
Adjustment for notes receivable related to assets held for sale(7)
Fair value adjustment560 (2,274)
Fair value adjustments on gross installment notes receivable(723)(1,276)
Ending balance of installment notes receivable, net$81,001 $85,866 

Notes Receivable from Real Estate Developers

Notes receivable from real estate developers are measured at fair value, using indicative pricing models from third party valuation specialists, in accordance with ASC Topic 820 "Fair Value Measurements and Disclosures." As of September 30, 2021 and December 31, 2020, the notes receivable balances of $64.6 million and $52.6 million, respectively are primarily comprised of construction loans provided to real estate developers. The notes receivable from real estate developers have a net weighted average interest rate and maturity of 6.3 percent and 1.3 years as of September 30, 2021, and 6.2 percent and 1.8 years as of December 31, 2020, respectively. As of September 30, 2021, real estate developers collectively have $10.3 million of undrawn funds on their loans. There were no material adjustments to the fair value of notes receivable from the real estate developers for the nine months ended September 30, 2021 and 2020. Refer to Note 14, "Fair Value of Financial Instruments," for additional information.

Other Receivables, net

Other receivables, net were comprised of amounts due from (in thousands):
 September 30, 2021December 31, 2020
Home sale proceeds
$38,219 $23,643 
Marina customers for storage service and lease payments, net(1)
26,286 19,197 
MH and annual RV residents for rent, utility charges, fees and other pass through charges, net(2)
10,723 7,106 
Insurance receivables10,658 13,597 
Other receivables(3)
25,444 19,603 
Total Other Receivables, net$111,330 $83,146 
(1)Net of allowance of $1.6 million and $1.4 million as of September 30, 2021 and December 31, 2020, respectively.
(2)Net of allowance of $5.8 million and $7.2 million as of September 30, 2021 and December 31, 2020, respectively.
(3)Includes receivable from Rezplot Systems LLC, a nonconsolidated affiliate in which we have a 50 percent ownership interest. In June 2020, we made a convertible secured loan to Rezplot Systems LLC. The note allows for a principal amount of up to $10.0 million to be drawn down over a period of three years, bears an interest rate of 3.0 percent and is secured by all the assets of Rezplot Systems LLC. The outstanding balances were $7.6 million and $2.0 million as of September 30, 2021 and December 31, 2020, respectively. Refer to Note 6, "Investment in Nonconsolidated Affiliates," for additional information on Rezplot Systems LLC.




15



5.    Goodwill and Other Intangibles Assets

Our intangible assets include goodwill, in-place leases, non-competition agreements, trademarks and trade names, customer relationships, and franchise agreements and other intangible assets. These intangible assets are recorded in Goodwill and Other intangible assets, net on the Consolidated Balance Sheets.

Goodwill

The change in the carrying amount of goodwill is as follows (in thousands):

December 31, 2020AcquisitionsSeptember 30, 2021
Goodwill$428,833 $32,776 $461,609 

Goodwill was preliminary as of December 31, 2020, subject to revisions based on purchase price allocations for the Safe Harbor and Rybovich business combination acquisitions which are reflected in the goodwill balance as of September 30, 2021.

Goodwill impairment - Upon review of the qualitative factors in accordance with ASC 350-20, "Goodwill and Other," we determined that no impairment indicators existed as of September 30, 2021 and December 31, 2020. As a result, there was no impairment of goodwill during the nine months ended September 30, 2021.

Other intangible assets, net

The gross carrying amounts and accumulated amortization of our intangible assets are as follows (in thousands):

September 30, 2021December 31, 2020
Other Intangible AssetUseful LifeGross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
In-place leasesExpected term$160,862 $(114,757)$145,531 $(92,327)
Non-competition agreements5 years10,000 (1,500)10,000 — 
Trademarks and trade names
Various(1)
116,690 (625)116,500 — 
Customer relationships
7 - 15 years
107,978 (9,401)108,000 (2,371)
Franchise agreements and other intangible assets
5.5 - 20 years
33,520 (5,142)23,856 (3,578)
Total$429,050 $(131,425)$403,887 $(98,276)
(1)All trademarks and trade names have an indefinite useful life except for one that has a three year useful life as of the acquisition date.

Amortization expenses related to the Other intangible assets are as follows (in thousands):

Three Months EndedNine Months Ended
Other Intangible Asset Amortization ExpenseSeptember 30, 2021September 30, 2020September 30, 2021September 30, 2020
In-place leases$5,664 $3,727 $22,457 $10,758 
Non-competition agreements500 — 1,500 — 
Trademarks and trade names208 — 625 — 
Customer relationships2,709 — 7,029 — 
Franchise fees and other intangible assets678 205 1,660 614 
Total$9,759 $3,932 $33,271 $11,372 

We anticipate amortization expense for Other intangible assets to be as follows for the next five years (in thousands):

Remainder 20212022202320242025
In-place leases$5,519 $13,215 $9,491 $6,619 $5,778 
Non-competition agreements500 2,000 2,000 2,000 2,000 
Trademarks and trade names208 833 833 — — 
Customer relationships2,710 10,838 10,838 10,838 10,838 
Franchise agreements and other intangible assets626 2,502 2,473 2,410 2,389 
Total$9,563 $29,388 $25,635 $21,867 $21,005 
16

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


6.      Investment in Nonconsolidated Affiliates

Investments in joint ventures that are not consolidated, nor recorded at cost, are accounted for using the equity method of accounting as prescribed in ASC Topic 323, "Investments - Equity Method and Joint Ventures." Investments in nonconsolidated affiliates are recorded within Other assets, net on the Consolidated Balance Sheets. Equity income and loss are recorded in the Income from nonconsolidated affiliates line item on the Consolidated Statements of Operations.

RezPlot Systems LLC ("Rezplot")
At September 30, 2021 and December 31, 2020, we had a 50 percent ownership interest in RezPlot, a RV reservation software technology company, which interest we acquired in January 2019.

Sungenia joint venture ("Sungenia JV")
At September 30, 2021 and December 31, 2020, we had a 50 percent ownership interest in Sungenia JV, a joint venture formed between us and Ingenia Communities Group in November 2018, to establish and grow a manufactured housing community development program in Australia.

GTSC LLC ("GTSC")
At September 30, 2021 and December 31, 2020, we had a 40 percent ownership interest in GTSC, which engages in acquiring, holding and selling loans secured, directly or indirectly, by manufactured homes located in our communities.

Origen Financial Services, LLC ("OFS")
At September 30, 2021 and December 31, 2020, we had a 22.9 percent ownership interest in OFS, an end-to-end online resident screening and document management suite.

SV Lift, LLC ("SV Lift")
At September 30, 2021 and December 31, 2020, we had a 50 percent ownership interest in SV Lift, which owns, operates and leases an aircraft.

The investment balance in each nonconsolidated affiliate is as follows (in thousands):

Nine Months EndedYear Ended
InvestmentSeptember 30, 2021December 31, 2020
Investment in RezPlot$1,302 $3,047 
Investment in Sungenia JV33,278 26,890 
Investment in GTSC 34,767 25,495 
Investment in OFS321 152 
Investment in SV Lift2,978 3,490 
Total$72,646 $59,074 

The income / (loss) from each nonconsolidated affiliate is as follows (in thousands):

Three Months EndedNine Months Ended
Income / (Loss) from Nonconsolidated AffiliatesSeptember 30, 2021September 30, 2020September 30, 2021September 30, 2020
RezPlot equity income / (loss)$(789)$$(1,745)$(1,150)
Sungenia JV equity income432 51 1,241 198 
GTSC equity income1,653 1,263 4,250 2,723 
OFS equity income43 54 169 134 
SV Lift equity loss(377)(169)(988)(557)
Total Income from Nonconsolidated Affiliates$962 $1,204 $2,927 $1,348 


17

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


The change in the GTSC investment balance is as follows (in thousands):

Nine Months Ended Year Ended
September 30, 2021December 31, 2020
Beginning balance $25,495 $18,488 
Initial fair value option adjustment
— 317 
Contributions20,117 19,030 
Distributions(14,965)(14,676)
Equity earnings4,250 3,944 
Fair value adjustment(130)(1,608)
Ending Balance$34,767 $25,495 

The change in the Sungenia JV investment balance is as follows (in thousands):

Nine Months Ended Year Ended
September 30, 2021December 31, 2020
Beginning balance $26,890 $11,995 
Cumulative translation adjustment(1,658)2,180 
Contributions6,805 12,377 
Equity earnings1,241 338 
Ending Balance$33,278 $26,890 

18

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


7.      Consolidated Variable Interest Entities

The Operating Partnership

We consolidate the Operating Partnership under the guidance set forth in ASC 810 "Consolidation." We evaluated whether the Operating Partnership met the criteria for classification as variable interest entity ("VIE") or, alternatively, voting interest entity and concluded that the Operating Partnership met the criteria of a VIE. Our significant asset is our investment in the Operating Partnership, and consequently, substantially all of our assets and liabilities represent those assets and liabilities of the Operating Partnership. We are the sole general partner and generally have the power to manage and have complete control over the Operating Partnership and the obligation to absorb its losses or the right to receive its benefits.

Sun NG RV Resorts LLC ("Sun NG Resorts"); Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC, and Rudgate Clinton Estates SPE, LLC (collectively, "Rudgate"); Sun NG Whitewater RV Resorts LLC; FPG Sun Menifee 80 LLC, SHM South Fork JV, LLC; Sun Solar Energy Project LLC (the "Sun Solar JV")

We consolidate Sun NG Resorts, Rudgate, Sun NG Whitewater RV Resorts LLC, FPG Sun Menifee 80 LLC, SHM South Fork JV, LLC, and Sun Solar JV under the guidance set forth in ASC Topic 810 "Consolidation." We concluded that each entity is a VIE where we are the primary beneficiary, as we have the power to direct the significant activities of, and absorb the significant losses and receive the significant benefits from each entity. Refer to Note 8, "Debt and Line of Credit," for additional information on Sun NG Resorts and Note 9, "Equity and Temporary Equity," for additional information on Sun NG Resorts, Sun NG Whitewater RV Resorts LLC, FPG Sun Menifee 80 LLC, SHM South Fork JV, LLC, and Sun Solar JV.

The following table summarizes the assets and liabilities of Sun NG Resorts, Rudgate, Sun NG Whitewater RV Resorts LLC, FPG Sun Menifee 80 LLC, SHM South Fork JV, LLC, and Sun Solar JV included in our Consolidated Balance Sheets after eliminations (in thousands):

September 30, 2021December 31, 2020
Assets
Investment property, net$567,026 $453,236 
Other assets, net28,670 25,072 
Total Assets$595,696 $478,308 
Liabilities and Other Equity
Secured debt$49,054 $47,706 
Unsecured debt35,249 35,249 
Other liabilities22,908 22,221 
Total Liabilities107,211 105,176 
Temporary equity37,064 32,719 
Noncontrolling interests18,527 16,084 
Total Liabilities and Other Equity$162,802 $153,979 

Investment property, net and Other assets, net related to the consolidated VIEs, with the exception of the Operating Partnership, comprised approximately 4.7 percent and 4.3 percent of our consolidated total assets at September 30, 2021 and December 31, 2020, respectively. Secured debt, Unsecured debt and Other liabilities comprised 2.0 percent of our consolidated total liabilities at September 30, 2021 and December 31, 2020, respectively. Equity Interests and Noncontrolling interests related to the consolidated VIEs, on an absolute basis, comprised less than 1.0 percent of our consolidated total equity at September 30, 2021 and December 31, 2020, respectively.
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(Unaudited)


8.      Debt and Line of Credit

The following table sets forth certain information regarding debt including premiums, discounts and deferred financing costs (in thousands except statistical information):

 Carrying AmountWeighted Average
Years to Maturity
Weighted Average
Interest Rates
 September 30, 2021December 31, 2020September 30, 2021December 31, 2020September 30, 2021December 31, 2020
Secured Debt$3,403,436 $3,489,983 10.811.43.780 %3.751 %
Unsecured Debt
Senior unsecured notes591,252 — 9.80.02.700 %— %
Line of credit and other debt624,837 1,197,181 3.73.70.976 %2.107 %
Preferred equity - Sun NG Resorts - mandatorily redeemable35,249 35,249 3.03.86.000 %6.000 %
Preferred OP units - mandatorily redeemable34,663 34,663 4.45.15.932 %5.932 %
Total Unsecured Debt1,286,001 1,267,093 
Total Debt$4,689,437 $4,757,076 9.69.43.303 %3.370 %

Secured Debt

Secured debt consists primarily of mortgage term loans.

During the nine months ended September 30, 2021, no mortgage term loans were paid off. During the year ended December 31, 2020, we paid off the following mortgage term loans (in thousands except statistical information):

Three Months EndedRepayment Amount Fixed Interest RateMaturity Date(Gain) / Loss on Extinguishment of Debt
June 30, 2020$52,710 
(1)
5.980 %
(3)
March 1, 2021
July 11, 2021
December 1, 2021
$1,930 
March 31, 2020$99,607 5.837 %March 1, 2021$3,403 
$19,922 
(2)
5.830 %
(3)
July 1, 2020$(124)
(1)Includes four mortgage term loans, two due to mature on March 1, 2021, one due to mature on July 11, 2021 and the other due to mature on December 1, 2021.
(2)Includes four mortgage term loans due to mature on July 1, 2020.
(3)The interest rate represents the weighted average interest rate on mortgage term loans.

During the nine months ended September 30, 2021, we did not enter into any new mortgage term loans. During the year ended December 31, 2020, we entered into the following mortgage term loans (in thousands except statistical information):

Three Months EndedLoan AmountTerm (in years)Interest RateMaturity Date
December 31, 2020$268,800 
(1)
122.662 %
(2)
May 1, 2030
November 1, 2032
March 31, 2020$230,000 152.995 %April 1, 2035
(1)Includes three mortgage term loans, one for $8.8 million due to mature on May 1, 2030 and two for $39.5 million and $220.5 million, due to mature on November 1, 2032.
(2)The interest rate represents the weighted average interest rate on mortgage term loans.

The mortgage term loans totaling $3.4 billion as of September 30, 2021, are secured by 192 properties comprised of 76,436 sites representing approximately $3.2 billion of net book value.


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(Unaudited)


Unsecured Debt

Senior Unsecured Notes

On June 28, 2021, we issued $600.0 million of senior unsecured notes with an interest rate of 2.7 percent and a ten-year term, due July 15, 2031 (the "2031 Notes"). Interest on the senior unsecured notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2022. The net proceeds from the offering were approximately $592.4 million, after deducting underwriters' discounts and estimated offering expenses. The proceeds were used to pay down borrowings under our line of credit. The outstanding balance was $591.3 million at September 30, 2021. This balance is recorded in the Unsecured debt line item on the Consolidated Balance Sheets.

Line of Credit

On June 14, 2021, we entered into a new credit agreement (the "New Credit Agreement") with certain lenders. The New Credit Agreement combined and replaced our prior $750.0 million credit facility, which was scheduled to mature on May 21, 2023, (the "A&R Facility"), and the $1.8 billion credit facility between Safe Harbor and certain lenders, which was scheduled to mature on October 11, 2024 (the "Safe Harbor Facility"). The Safe Harbor Facility was terminated in connection with the execution of the New Credit Agreement. We repaid all amounts due and outstanding under the Safe Harbor Facility on or prior to such effective date. We recognized a Loss on extinguishment of debt in our Consolidated Statement of Operations related to the termination of the A&R Facility and the Safe Harbor Facility of $0.2 million and $7.9 million, respectively.

Pursuant to the New Credit Agreement, we may borrow up to $2.0 billion under a revolving loan (the "New Credit Facility"). The New Credit Facility is available to fund all of the Company's business, including its marina business conducted by Safe Harbor. The New Credit Agreement also permits, subject to the satisfaction of certain conditions, additional borrowings (with the consent of the lenders) in an amount not to exceed $1.0 billion with the option to treat all, or a portion, of such additional funds as an incremental term loan.

The New Credit Facility has a four-year term ending June 14, 2025, and, at our option, the maturity date may be extended for two additional six-month periods, subject to the satisfaction of certain conditions. However, the maturity date with respect to $500.0 million of available borrowing under the New Credit Facility is October 11, 2024, which, under the terms of the New Credit Agreement, may not be extended. The New Credit Facility bears interest at a floating rate based on the Adjusted Eurocurrency Rate or Australian Bank Bill Swap Bid Rate (BBSY), plus a margin that is determined based on the Company's credit ratings calculated in accordance with the New Credit Agreement, which can range from 0.725 percent to 1.400 percent. As of September 30, 2021, the margin based on our credit ratings was 0.850 percent on the New Credit Facility.

At the lenders' option, the New Credit Facility will become immediately due and payable upon an event of default under the New Credit Agreement. We had $589.5 million of borrowings on the New Credit Facility as of September 30, 2021, all scheduled to mature June 14, 2025. As of December 31, 2020, we had $40.4 million of borrowings on the revolving loan and no borrowings on the term loan under our A&R Facility, respectively. As of December 31, 2020, we had $652.0 million and $500.0 million of borrowings under the revolving loan and term loan under Safe Harbor Facility, respectively. These balances are recorded in the Unsecured debt line item on the Consolidated Balance Sheets.

The New Credit Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under the New Credit Facility, but does reduce the borrowing amount available. At September 30, 2021 and December 31, 2020, we had approximately $3.2 million and $2.4 million (including none and $0.3 million associated with Safe Harbor's prior credit facility) of outstanding letters of credit, respectively.

Unsecured Term Loan

In October 2019, we assumed a term loan facility, in the amount of $58.0 million in relation to an acquisition. The term loan has a four-year term ending October 29, 2023, and bears interest at a floating rate based on the Eurodollar rate or Prime rate plus a margin ranging from 1.20 percent to 2.05 percent. Effective July 1, 2021, the agreement was amended to release the associated collateral. The amendment extended the term loan facility maturity date to October 29, 2025 and adjusted the interest rate margin to a range from 0.80 percent to 1.60 percent. As of September 30, 2021, the margin was 0.95 percent. The outstanding balance was $35.3 million at September 30, 2021 and $45.0 million at December 31, 2020. These balances are recorded in the Unsecured debt and Secured debt line items on the Consolidated Balance Sheets, respectively.

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(Unaudited)


Floor Plan

We have a $12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least a 12-month notice of their intent to terminate the agreement. The interest rate is 100 basis points over the greater of the prime rate as quoted in the Wall Street Journal on the first business day of each month or 6.0 percent. At September 30, 2021, the effective interest rate was 7.0 percent. There was no outstanding balance as of September 30, 2021. The outstanding balance was $4.8 million as of December 31, 2020. These balances are recorded within the Unsecured debt line item on the Consolidated Balance Sheets.

Preferred Equity - Sun NG Resorts - mandatorily redeemable

In connection with the investment in Sun NG Resorts, $35.3 million of mandatorily redeemable Preferred Equity ("Preferred Equity - Sun NG Resorts") was purchased by unrelated third parties. The Preferred Equity - Sun NG Resorts carries a preferred rate of return of 6.0 percent per annum. The Preferred Equity - Sun NG Resorts has a seven-year term ending June 1, 2025 and $33.4 million can be redeemed in the fourth quarter of 2024 at the holders' option. The Preferred Equity - Sun NG Resorts as of September 30, 2021 was $35.2 million. These balances are recorded within the Unsecured debt line item on the Consolidated Balance Sheets. Refer to Note 7, "Consolidated Variable Interest Entities," and Note 9, "Equity and Temporary Equity," for additional information.

Preferred OP Units - mandatorily redeemable

Preferred OP units at September 30, 2021 and December 31, 2020 include $34.7 million of Aspen preferred OP units issued by the Operating Partnership. As of September 30, 2021, these units are convertible indirectly into 388,056 shares of our common stock.

In January 2020, we amended the Operating Partnership's partnership agreement. The amendment extended the automatic redemption date and reduced the annual distribution rate for 270,000 of the Aspen preferred OP units (the "Extended Units"). Subject to certain limitations, at any time prior to January 1, 2024 (or prior to January 1, 2034 with respect to the Extended Units), the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the average closing price of our common stock for the preceding ten trading days is $68.00 per share or less, 0.397 common OP units; or (b) if the ten-day average closing price is greater than $68.00 per share, the number of common OP units is determined by dividing (i) the sum of (A) $27.00 plus (B) 25.0 percent of the amount by which the ten-day average closing price exceeds $68.00 per share, by (ii) the ten-day average closing price. The current preferred distribution rate is 3.8 percent on the Extended Units and 6.5 percent on all other Aspen preferred OP units. On January 2, 2024 (or January 2, 2034 with respect to the Extended Units), we are required to redeem for cash all Aspen preferred OP units that have not been converted to common OP units. As of September 30, 2021, 270,000 of the Extended Units and 1,013,819 other Aspen preferred units were outstanding. These balances are recorded within the Unsecured debt line item on the Consolidated Balance Sheets.

Covenants

The mortgage term loans, senior unsecured notes, New Credit Facility and floor plan are subject to various financial and other covenants. The most restrictive covenants are pursuant to (a) the terms of the New Credit Facility, which contains a minimum fixed charge coverage ratio, maximum leverage, distribution ratios and variable rate indebtedness and (b) senior unsecured notes, which contain a total debt to total assets, secured debt to total assets, consolidated income available for debt service to debt service and unencumbered total asset value to unsecured debt covenants. At September 30, 2021 we were in compliance with all covenants.

In addition, certain of our subsidiary borrowers own properties that secure loans. These subsidiaries are consolidated within our accompanying Consolidated Financial Statements, however, each of these subsidiaries' assets and credit are not available to satisfy our debts and other obligations, and any of our other subsidiaries or any other person or entity.

Off-Balance Sheet Arrangements - Nonconsolidated Affiliate Indebtedness

GTSC - During September 2019, GTSC, a nonconsolidated affiliate in which we have a 40 percent ownership interest, entered into a warehouse line of credit with a maximum loan amount of $125.0 million. During September 2020 and May 2021, the maximum amount was increased to $180.0 million and $230.0 million, respectively with an option to increase to $255.0 million subject to the lender's consent. As of September 30, 2021, the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $218.4 million (of which our proportionate share is $87.3 million). As of December 31, 2020, the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $167.7 million (of which our proportionate share is $67.1 million). The debt bears interest at a variable rate based on LIBOR plus 1.65 percent per annum and matures on September 15, 2023.
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(Unaudited)


Sungenia JV - During May 2020, Sungenia JV, a nonconsolidated affiliate in which we have a 50 percent ownership interest, entered into a debt facility agreement with a maximum loan amount of $27.0 million Australian dollars, or $19.5 million converted at the September 30, 2021 exchange rate. As of September 30, 2021, the aggregate carrying amount of debt, including both our and our partners' share, incurred by Sungenia JV was $6.2 million (of which our proportionate share is $3.1 million). As of December 31, 2020, the aggregate carrying amount of debt, including both our and our partners' share, incurred by Sungenia JV was $6.7 million (of which our proportionate share is $3.3 million). The debt bears interest at a variable rate based on the BBSY rate plus 2.05 percent per annum and is available for a minimum of three years.

9.      Equity and Temporary Equity

Permanent Equity

Universal Shelf Registration Statement

On April 5, 2021, in connection with the expiration of our universal shelf registration statement on Form S-3, that was filed with the SEC on April 6, 2018, we filed a new universal shelf registration statement on Form S-3 with the SEC. The new universal shelf registration statement was deemed automatically effective and provides for the registration of unspecified amounts of equity and debt securities. We have the authority to issue 200,000,000 shares of capital stock, of which 180,000,000 shares are common stock, par value $0.01 per share, and 20,000,000 are shares of preferred stock, par value $0.01 per share. As of September 30, 2021, we had 115,959,116 shares of common stock issued and outstanding and no shares of preferred stock were issued and outstanding.

Public Equity Offerings

On March 2, 2021, we priced a $1.1 billion underwritten public offering of an aggregate of 8,050,000 shares at a public offering price of $140.00 per share, before underwriting discounts and commissions. The offering consisted of 4,000,000 shares offered directly by us and 4,050,000 shares offered under a forward equity sales agreement. We sold the 4,000,000 shares on March 9, 2021 and received net proceeds of $537.6 million after deducting expenses related to the offering. In May and June 2021, we completed the physical settlement of the remaining 4,050,000 shares and received net proceeds of $539.7 million after deducting expenses related to the offering. Proceeds from the offering were used to acquire assets and pay down the Safe Harbor Facility.

On September 30, 2020 and October 1, 2020, we entered into two forward sale agreements (the "September 2020 Forward Equity Offerings") relating to an underwritten registered public offering of 9,200,000 shares of our common stock at a public offering price of $139.50 per share. The offering closed on October 5, 2020. On October 26, 2020, we physically settled the September 2020 Forward Equity Offering (by the delivery of shares of our common stock). Proceeds from the offering were approximately $1.23 billion after deducting expenses related to the offering. We used the net proceeds of this offering to fund the cash portion of the acquisition of Safe Harbor, and for working capital and general corporate purposes.

In May 2020, we closed an underwritten registered public offering of 4,968,000 shares of common stock. Proceeds from the offering were $633.1 million after deducting expenses related to the offering. We used the net proceeds of this offering to repay borrowings outstanding under the revolving loan under our senior credit facility.

At the Market Offering Sales Agreements

On June 4, 2021, we entered into an At the Market Offering Sales Agreement (the "Sales Agreement") with certain sales agents, and forward sellers pursuant to which we may sell, from time to time, up to an aggregate gross sales price of $500.0 million of our common stock, through the sales agents, acting as our sales agents or, if applicable, as forward sellers, or directly to the sales agents as principals for their own accounts. The sales agents and forward sellers are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold under the Sales Agreement. We forward sold 107,400 shares of common stock under the new Sales Agreement for $21.4 million during the three and nine months ended September 30, 2021. The forward shares are not physically settled as of September 30, 2021. The forward shares will expire if not settled by September 2022.

Upon entering into the Sales Agreement, we simultaneously terminated our previous At the Market Offering Sales Agreement entered into in July 2017. There were no issuances of common stock under the prior sales agreement during the six months ended June 30, 2021 or during the year ended December 31, 2020. From inception through termination of the prior sales agreement, we sold shares of our common stock for gross proceeds of $163.8 million.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Issuances of Common Stock, Common OP Units and Preferred OP Units in Connection with the Acquisition of Certain Properties

Rybovich Portfolio Common OP Units - In December 2020, in connection with the acquisition of the Rybovich Portfolio, we issued 130,475 Common OP units.

Safe Harbor Common OP Units - In October 2020, in connection with the acquisition of Safe Harbor, we issued 55,403 Common OP units.

Forest Springs Common OP Units - In May 2020, in connection with the acquisition of the Forest Springs community, we issued 82,420 Common OP units.

Issuance of Series E Preferred OP Units - In January 2020, we issued 90,000 Series E preferred OP units in connection with the acquisition of Cape Cod RV Resort. The Series E preferred OP units have a stated issuance price of $100.00 per OP Unit and carry a preferred return of 5.25 percent until the second anniversary of the issuance date. Commencing with the second anniversary of the issuance date, the Series E Preferred OP Units carry a preferred return of 5.50 percent. Commencing with the first anniversary of the issuance date, subject to certain limitations, each Series E Preferred OP Unit can be exchanged for our common stock equal to the quotient obtained by dividing $100.00 by $145.00 (as such ratio is subject to adjustments for certain capital events). As of September 30, 2021, 90,000 Series E preferred OP Units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Equity Interests

Equity Interest - SHM South Fork JV, LLC - In October 2020, in conjunction with the acquisition of Safe Harbor, we indirectly acquired $4.3 million of Safe Harbor's equity interest in SHM South Fork JV, LLC, a joint venture created for the purpose of acquiring land and constructing a marina in Fort Lauderdale, Florida. The Safe Harbor Equity Interests - SHM South Fork JV, LLC balance was $4.1 million and $4.3 million at September 30, 2021 and the year ended December 31, 2020, respectively. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.

Temporary Equity

Issuance of Preferred OP Units in Connection with the Acquisition of Certain Properties

Issuance of Series J Preferred OP Units - In April 2021, we issued 240,000 Series J preferred OP units in connection with the acquisition of the Sylvan Glen. The Series J preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 2.85 percent. Subject to certain limitations, at any time after the Series J issuance date, each Series J preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $165.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash (i) during the 30-day period following a change of control of the Company or (ii) any time after the fifth anniversary of the Series J issuance date. As of September 30, 2021, 240,000 Series J preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Issuance of Series I Preferred OP Units - In December 2020, we issued 922,000 Series I preferred OP units in connection with the acquisition of the Rybovich Portfolio. The Series I preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series I issuance date, each Series I preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $164.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series I issuance date or upon the holder's death. As of September 30, 2021, 922,000 Series I preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Issuance of Series H Preferred OP Units - In October 2020, we issued 581,407 Series H preferred OP units in connection with the acquisition of Safe Harbor. The Series H preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series H issuance date, each Series H preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $164.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series H issuance date or upon the holder's death. As of September 30, 2021, 581,407 Series H preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Issuance of Series G Preferred OP Units - In September 2020, we issued 260,710 Series G preferred OP units in connection with the acquisition of El Capitan & Ocean Mesa Resorts. The Series G preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.2 percent. Subject to certain limitations, at any time after the Series G issuance date, each Series G preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $155.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series G issuance date or upon the holder's death. As of September 30, 2021, 240,710 Series G preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Issuance of Series F Preferred OP Units - In May 2020, we issued 90,000 Series F preferred OP units in connection with the acquisition of Forest Springs. The Series F preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.0 percent. Subject to certain limitations, at any time after the Series F issuance date, each Series F preferred OP unit can be exchanged for a number of shares of our common stock equal to the quotient obtained by dividing $100.00 by $160.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. Each holder may require redemption in cash after the fifth anniversary of the Series F issuance date or upon the holder's death. As of September 30, 2021, 90,000 Series F preferred OP units were outstanding. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Issuance of Series D Preferred OP Units - In February 2019, we issued 488,958 Series D preferred OP units in connection with the acquisition of Country Village Estates. The Series D preferred OP units have a stated issuance price of $100.00 per OP unit and carry a preferred return of 3.75 percent until the second anniversary of the issuance date. Commencing with the second anniversary of the issuance date, the Series D preferred OP units carry a preferred return of 4.0 percent. Commencing with the first anniversary of the issuance date, each Series D preferred OP unit can be exchanged for our common stock equal to the quotient obtained by dividing $100.00 by $125.00 (as such ratio is subject to adjustments for certain capital events) at the holder's option. The holders may require redemption in cash after the fifth anniversary of the Series D issuance date or upon the holder's death. As of September 30, 2021, 488,958 Series D preferred OP units were outstanding.

Equity Interests

Equity Interest - Sun Solar JV - In July 2021, we entered into a joint venture with an unrelated third party to operate and maintain solar energy equipment in selected California communities. The unrelated third party made an equity contribution of $1.8 million in the Solar JV (referred to as "Equity Interest - Sun Solar JV"). We are the managing member and made an equity contribution of $5.8 million. The governing documents for the joint venture contain language regarding the economic treatment of each member’s equity contribution. The Equity Interest - Sun Solar JV balance was $1.6 million at September 30, 2021. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.

Equity Interest - FPG Sun Menifee 80 LLC - In October 2020, in connection with the investment in land for future development in the city of Menifee in California, at the property known as FPG Sun Menifee 80 LLC, Foremost Pacific Group, LLC, "FPG," purchased $0.1 million of common equity interest in the land (referred to as "Equity Interest - FPG Sun Menifee 80 LLC"). The Equity Interest - FPG Sun Menifee 80 LLC does not have a fixed maturity date. Upon the occurrence of certain events, either FPG or Sun FPG Venture LLC, our subsidiary, can trigger a process under which we may be required to purchase the Equity Interests - FPG Sun Menifee 80 LLC from FPG. The Equity Interest - FPG Sun Menifee 80 LLC balance was $0.1 million at September 30, 2021 and year ended December 31, 2020. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.

Equity Interest - NG Sun Whitewater LLC - In August 2019, in connection with the investment in land at the property known as Whitewater, NG Sun Whitewater LLC purchased $2.4 million of common equity interest in Sun NG Whitewater RV Resorts LLC (referred to as "Equity Interest - NG Sun Whitewater LLC"). The Equity Interest - NG Sun Whitewater LLC does not have a fixed maturity date. Upon the occurrence of certain events, either NG Sun Whitewater LLC or Sun NG LLC, our subsidiary, can trigger a process under which we may be required to purchase the Equity Interest - NG Sun Whitewater LLC from NG Sun Whitewater LLC. The Equity Interest - NG Sun Whitewater LLC balance was $5.0 million and $5.1 million at September 30, 2021 and year ended December 31, 2020, respectively. Refer to Note 7, "Consolidated Variable Interest Entities," for additional information.

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SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Equity Interest - NG Sun LLC - In June 2018, in connection with the investment in Sun NG Resorts, unrelated third parties purchased $6.5 million of Series B preferred equity interests and $15.4 million of common equity interest in Sun NG Resorts (herein jointly referred to as "Equity Interest - NG Sun LLC"). In April and September 2020, in connection with the acquisitions of Glen Ellis RV Park and Lone Star RV Park, $3.0 million of Series B preferred equity interests were converted to common equity interests. The Series B preferred equity interests carry a preferred return at a rate that, at any time, is equal to the interest rate on Sun NG Resorts' indebtedness at such time. The current rate of return is 5.0 percent. The Equity Interest - NG Sun LLC does not have a fixed maturity date and can be redeemed in the fourth quarters of 2024, 2025 and 2026 at the holders' option. Sun NG LLC, our subsidiary, has the right during certain periods each year, with or without cause, or for cause at any time, to elect to buy NG Sun LLC's interest. During a limited period in 2022, NG Sun LLC has the right to put its interest to Sun NG LLC. If either party exercises their option, the property management agreement will be terminated, and we are required to purchase the remaining interests of NG Sun LLC and the property management agreement at fair value. The Equity Interest - NG Sun LLC balance was $26.3 million and $23.3 million at September 30, 2021 and year ended December 31, 2020, respectively. Refer to Note 7, "Consolidated Variable Interest Entities," and Note 8, "Debt and Line of Credit," for additional information.

Conversions

Conversions to Common Stock - Subject to certain limitations, holders can convert certain series of stock and OP units to shares of our common stock at any time. Below is the activity of conversions during the nine months ended September 30, 2021 and 2020:

Nine Months Ended Nine Months Ended
September 30, 2021September 30, 2020
Series Conversion RateUnits / Shares Converted
Common Stock(1)
Units / Shares Converted
Common Stock(1)
Common OP unit1.0000 78,724 78,724 29,886 29,886 
Series A-1 preferred OP unit2.4390 19,296 47,058 10,614 25,884 
Series C preferred OP unit1.1100 — — 1,485 1,648 
(1)Calculation may yield minor differences due to rounding incorporated in the above numbers.

Distributions

Distributions declared for the three months ended September 30, 2021 were as follows:

DistributionsRecord DatePayment DateDistribution Per ShareTotal Distribution (in Thousands)
Common Stock, Common OP units and Restricted Stock9/30/202110/15/2021$0.83 $98,344 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


10.      Share-Based Compensation

As of September 30, 2021, we had two share-based compensation plans: the Sun Communities, Inc. 2015 Equity Incentive Plan ("2015 Equity Incentive Plan") and the First Amended and Restated 2004 Non-Employee Director Option Plan ("2004 Non-Employee Director Option Plan"). We believe granting equity awards will provide certain executives, key employees and directors additional incentives to promote our financial success and promote employee and director retention by providing an opportunity to acquire or increase the direct proprietary interest of those individuals in our operations and future.

During the nine months ended September 30, 2021 and 2020, shares were granted as follows:

Grant PeriodTypePlanShares GrantedGrant Date Fair Value Per Share Vesting TypeVesting AnniversaryPercentage
2021Executive Officers2015 Equity Incentive Plan54,000 $151.89 
(1)
Time Based
20.0% annually over 5 years
2021Executive Officers2015 Equity Incentive Plan81,000 
(2)
$94.32 
(2)
Market Condition3rd100.0 %
2021Executive Officers2015 Equity Incentive Plan15,000 $151.89 
(1)
Time Based
33.3% annually over 3 years
2021Executive Officers2015 Equity Incentive Plan15,000 
(3)
$87.49 
(3)
Market Condition3rd100.0 %
2021Key Employees2015 Equity Incentive Plan28,856 $151.89 
(1)
Time Based
33.3% annually over 3 years
2021Key Employees2015 Equity Incentive Plan61,550 $143.28 
(1)
Time Based
20.0% annually over 5 years
2021Executive Officers2015 Equity Incentive Plan3,400 $147.19 
(1)
Time Based
20.0% annually over 5 years
2021Executive Officers2015 Equity Incentive Plan5,100 
(4)
$96.41 
(4)
Market Condition3rd100.0 %
2021Directors2004 Non-Employee Director Option Plan1,509 $147.19 
(1)
Time Based3rd100.0 %
2021Directors2004 Non-Employee Director Option Plan10,200 $148.44 
(1)
Time Based3rd100.0 %
2020Key Employees2015 Equity Incentive Plan1,500 $143.20 
(1)
Time Based
20.0% annually over 5 years
2020Key Employees2015 Equity Incentive Plan51,790 $162.42 
(1)
Time Based
20.0% annually over 5 years
2020Executive Officers2015 Equity Incentive Plan46,000 $165.97 
(1)
Time Based
20.0% annually over 5 years
2020Executive Officers2015 Equity Incentive Plan69,000 
(5)
$125.47 
(5)
Market Condition3rd100.0 %
2020Directors2004 Non-Employee Director Option Plan10,200 $147.97 
(1)
Time Based3rd100.0 %
(1)The fair values of the grants were determined by using the average closing price of our common stock on the dates the shares were issued.
(2)Share-based compensation for restricted stock awards with market conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date our common stock price was $151.89. Based on the Monte Carlo simulation we expect 62.1 percent of the 81,000 shares to vest.
(3)Share-based compensation for restricted stock awards with market conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date our common stock price was $151.89. Based on the Monte Carlo simulation we expect 57.6 percent of the 15,000 shares to vest.
(4)Share-based compensation for restricted stock awards with market conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date our common stock price was $147.19. Based on the Monte Carlo simulation we expect 65.5 percent of the 5,100 shares to vest.
(5)Share-based compensation for restricted stock awards with market conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date our common stock price was $165.97. Based on the Monte Carlo simulation we expect 75.6 percent of the 69,000 shares to vest.

Vesting

The vesting requirements for 288,024 and 256,380 restricted shares granted to our executives, directors and employees were satisfied during the nine months ended September 30, 2021 and 2020, respectively.

Stock Options

During the nine months ended September 30, 2021, 1,500 shares of common stock were issued in connection with the exercise of stock options with net proceeds of less than $0.1 million. There were no stock options outstanding as of September 30, 2021. During the nine months ended September 30, 2020, no stock options were exercised.
27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


11.     Segment Reporting

ASC Topic 280, "Segment Reporting" ("ASC 280"), establishes standards for the way the business enterprises report information about operating segments in its financial statements. As described in Note 1, "Basis of Presentation," effective January 1, 2021, we transitioned from a two-segment to a three-segment structure as a result of the recent acquisition of Safe Harbor and its internal organization.

The MH segment owns, operates, develops, or has an interest in, a portfolio of MH communities and is in the business of acquiring, operating and developing ground up MH communities to provide affordable housing solutions to residents. The MH segment also provides manufactured home sales and leasing services to tenants and prospective tenants of our communities.

The RV segment owns, operates, develops, or has an interest in, a portfolio of RV resorts and is in the business of acquiring, operating and developing ground up RV resorts throughout the U.S. and in Canada. It also provides leasing services for vacation rentals within the RV resorts.

The marina segment owns, operates, has an interest in a portfolio, and develops marinas, and is in the business of acquiring, and operating marinas throughout the U.S. with the majority of such marinas concentrated in coastal regions and others located in various inland regions.

Hybrid properties are classified to a segment based on the predominant site counts at the properties.

28

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


A presentation of segment financial information is summarized as follows (in thousands):

 Three Months Ended
September 30, 2021
September 30, 2020(1)
 MHRVMarinasConsolidatedMHRVMarinasConsolidated
Operating revenues$275,597 $233,844 $163,322 $672,763 $229,369 $162,640 N/A$392,009 
Property operating expenses118,441 109,219 98,859 326,519 95,350 78,381 N/A173,731 
Net Operating Income$157,156 $124,625 $64,463 $346,244 $134,019 $84,259 N/A$218,278 
Adjustments to arrive at net income
Interest income2,690 2,624 
Brokerage commissions and other revenues, net8,841 5,881 
General and administrative expense(43,276)(26,834)
Catastrophic event-related charges, net(328)(14)
Depreciation and amortization(127,091)(88,499)
Interest expense(39,026)(30,214)
Interest on mandatorily redeemable preferred OP units / equity(1,047)(1,047)
Gain on remeasurement of marketable securities12,072 1,492 
Gain / (loss) on foreign currency translation(7,028)5,023 
Gain on dispositions of properties108,104 5,595 
Other expense, net(9,372)(3,511)
Gain / (loss) on remeasurement of notes receivable92 (445)
Income from nonconsolidated affiliates (see Note 6)
962 1,204 
Loss on remeasurement of investment in nonconsolidated affiliates(119)(446)
Current tax benefit / (expense) (see Note 12)(402)107 
Deferred tax benefit / (expense) (see Note 12)(1,155)562 
Net Income250,161 89,756 
Less: Preferred return to preferred OP units / equity interests3,101 1,645 
Less: Income attributable to noncontrolling interests15,290 6,907 
Net Income Attributable to Sun Communities, Inc. Common Stockholders$231,770 $81,204 
(1) Recast to reflect segment changes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Nine Months Ended
 September 30, 2021
September 30, 2020(1)
 MHRVMarinasConsolidatedMHRVMarinasConsolidated
Revenues$793,286 $492,464 $414,642 $1,700,392 $668,390 $325,015 N/A$993,405 
Operating expenses / Cost of sales326,758 247,284 255,970 830,012 263,852 165,430 N/A429,282 
Net Operating Income / Gross Profit$466,528 $245,180 $158,672 $870,380 $404,538 $159,585 N/A$564,123 
Adjustments to arrive at net income
Interest income8,040 7,609 
Brokerage commissions and other revenues, net21,740 13,068 
General and administrative expense(126,606)(78,710)
Catastrophic event-related charges, net(3,097)(54)
Business combination expense, net(1,031)— 
Depreciation and amortization(378,068)(259,453)
Loss on extinguishment of debt (see Note 8)
(8,108)(5,209)
Interest expense(116,224)(94,058)
Interest on mandatorily redeemable preferred OP units / equity(3,124)(3,130)
Gain / (loss) on remeasurement of marketable securities43,227 (2,636)
Loss on foreign currency translation(7,107)(2,496)
Gain on dispositions of properties108,104 5,595 
Other expense, net(10,041)(4,890)
Gain / (loss) on remeasurement of notes receivable561 (2,311)
Income from nonconsolidated affiliates (see Note 6)
2,927 1,348 
Loss on remeasurement of investment in nonconsolidated affiliates(130)(1,505)
Current tax expense (see Note 12)(1,418)(462)
Deferred tax benefit / (expense) (see Note 12)(1,074)804 
Net Income398,951 137,633 
Less: Preferred return to preferred OP units / equity interests9,000 4,799 
Less: Income attributable to noncontrolling interests22,629 8,806 
Net Income Attributable to Sun Communities, Inc. Common Stockholders$367,322 $124,028 
(1) Recast to reflect segment changes.

 September 30, 2021
December 31, 2020(1)
 MHRVMarinasConsolidatedMHRVMarinasConsolidated
Identifiable Assets
Investment property, net$4,983,329 $3,373,068 $2,520,039 $10,876,436 $4,823,174 $3,038,686 $1,853,931 $9,715,791 
Cash, cash equivalents and restricted cash38,538 20,968 26,113 85,619 53,152 28,919 10,570 92,641 
Marketable securities103,829 56,492 — 160,321 80,776 43,950 — 124,726 
Inventory of manufactured homes36,526 7,182 — 43,708 33,448 13,195 — 46,643 
Notes and other receivables, net160,593 58,750 37,581 256,924 144,027 44,002 33,621 221,650 
Goodwill— — 461,609 461,609 — — 428,833 428,833 
Other intangible assets, net30,247 23,854 243,524 297,625 33,998 23,819 247,794 305,611 
Other assets, net178,491 40,882 181,681 401,054 184,917 38,075 47,699 270,691 
Total Assets$5,531,553 $3,581,196 $3,470,547 $12,583,296 $5,353,492 $3,230,646 $2,622,448 $11,206,586 
(1) Recast to reflect segment changes.
30

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


12.     Income Taxes

We have elected to be taxed as a real estate investment trust ("REIT") pursuant to Section 856(c) of the Internal Revenue Code of 1986, as amended ("Code"). In order for us to qualify as a REIT, at least 95 percent of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90 percent of its REIT taxable income (calculated without any deduction for dividends paid and excluding capital gain) to its stockholders and meet other tests.

Qualification as a REIT involves the satisfaction of numerous requirements (on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are limited judicial or administrative interpretations and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which requires us to continually monitor our tax status. We analyzed the various REIT tests and confirmed that we continued to qualify as a REIT for the nine months ended September 30, 2021.

As a REIT, we generally will not be subject to United States ("U.S.") federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates. Even if we qualify as a REIT, we may be subject to certain state and local income taxes as well as U.S. federal income and excise taxes on our undistributed income. In addition, taxable income from non-REIT activities managed through taxable REIT subsidiaries is subject to federal, state, and local income taxes. We are also subject to local income taxes in Canada as a result of the acquisition in 2016 of certain properties located in Canada. We do not provide for withholding taxes on our undistributed earnings from our Canadian subsidiaries as they are reinvested and will continue to be reinvested indefinitely outside of the U.S. However, we are subject to Australian withholding taxes on distributions from our investment in Ingenia Communities Group.

Deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. Our temporary differences primarily relate to net operating loss carryforwards, and depreciation and basis differences between tax and GAAP. Our deferred tax assets that have a full valuation allowance relate to our taxable REIT subsidiaries. Net deferred tax liabilities of $21.5 million and $20.5 million for Canadian entities have been recorded in relation to corporate entities and included in other liabilities in our Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively. U.S. federal deferred tax liabilities of $0.1 million have been recorded and included in our Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020.

We had no unrecognized tax benefits as of September 30, 2021 and 2020. We do not expect significant changes in tax positions that would result in unrecognized tax benefits within one year of September 30, 2021.

For the three and nine months ended September 30, 2021, we recorded a current tax expense for federal, state, and Canadian income taxes and Australian withholding taxes of $0.4 million and $1.4 million, respectively. For the three months ended September 30, 2020, we recorded a current tax benefit for federal, state and Canadian income taxes of $0.1 million. For the nine months ended September 30, 2020, we recorded a current tax expense for federal, state and Canadian income taxes of $0.5 million.

For the three and nine months ended September 30, 2021, we recorded a deferred tax expense of $1.2 million and $1.1 million, respectively. For the three and nine months ended September 30, 2020, we recorded a deferred tax benefit of $0.6 million and $0.8 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


13.     Earnings Per Share

Earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period on a basic and diluted basis. We calculate diluted earnings per share using the more dilutive of the treasury stock method and the two-class method.

From time to time, we enter into forward equity sales agreements, which are discussed in Note 9, "Equity and Temporary Equity," We considered the potential dilution resulting from the forward equity sales agreements on the EPS calculations. At inception, the agreements do not have an effect on the computation of basic EPS as no shares are delivered until settlement. The common shares issued upon the settlement of the forward equity sales agreements, weighted for the period these common shares are outstanding, are usually included in the denominator of basic EPS. To determine the dilution resulting from the forward equity sales agreements during the period of time prior to settlement, we calculate the number of weighted-average shares outstanding - diluted.

Our potentially dilutive securities include potential common shares related to our forward equity offerings, our unvested restricted common shares, and our Operating Partnership outstanding common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series C preferred OP units, Series D preferred OP units, Series E preferred OP units, Series F preferred OP units, Series G preferred OP units, Series H preferred OP units, Series I preferred OP units, Series J preferred OP units and Aspen preferred OP Units, which, if converted or exercised, may impact dilution.

Diluted earnings per share considers the impact of potentially dilutive securities except when the potential common shares have an antidilutive effect. Our unvested restricted stock common shares contain rights to receive non-forfeitable dividends and participate equally with common stock with respect to dividends issued or declared, and thus, are participating securities, requiring the two-class method of computing earnings per share. The two-class method determines earnings per share by dividing the sum of distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. In calculating the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average number of shares outstanding during the period. The remaining potential dilutive common shares do not contain rights to dividends and are included in the computation of diluted earnings per share.

Computations of basic and diluted earnings per share were as follows (in thousands, except per share data):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Numerator
Net Income Attributable to Sun Communities, Inc. Common Stockholders$231,770 $81,204 $367,322 $124,028 
Less: allocation to restricted stock awards1,508 536 2,352 821 
Basic earnings - Net Income attributable to common stockholders after allocation to restricted stock awards$230,262 $80,668 $364,970 $123,207 
Add: allocation to common and preferred OP units dilutive effect5,641 — 8,269 — 
Diluted earnings - Net Income attributable to common stockholders after allocation to common and preferred OP units(1)
$235,903 $80,668 $373,239 $123,207 
Denominator    
Weighted average common shares outstanding115,136 97,542 111,717 95,270 
Add: common shares dilutive effect: Forward Equity Offering— — 
Add: dilutive stock options— — 
Add: common and preferred OP units dilutive effect2,936 — 2,574 — 
Diluted weighted average common shares and securities(1)
118,072 97,549 114,291 95,273 
Earnings Per Share Available to Common Stockholders After Allocation    
Basic earnings per share$2.00 $0.83 $3.27 $1.29 
Diluted earnings per share(1)
$2.00 $0.83 $3.27 $1.29 
(1) For the three and nine months ended September 30, 2021 and 2020, diluted earnings per share was calculated using the two-class method as the application of this method resulted in a more dilutive earnings per share for those periods.

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SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


We have excluded certain convertible securities from the computation of diluted earnings per share because the inclusion of those securities would have been anti-dilutive for the periods presented. The following table presents the outstanding securities that were excluded from the computation of diluted earnings per share as of September 30, 2021 and 2020 (in thousands):

Nine Months Ended
September 30, 2021September 30, 2020
Common OP units— 2,473 
A-1 preferred OP units275 299 
A-3 preferred OP units40 40 
Aspen preferred OP units1,284 
(1)
1,284 
Series C preferred OP units306 309 
Series D preferred OP units489 489 
Series E preferred OP units90 90 
Series F preferred OP units90 90 
Series G preferred OP units241 261 
Series H preferred OP units581 — 
Series I preferred OP units922 — 
Series J preferred OP units240 — 
Total Securities4,558 5,335 
(1) For the three months ended September 30, 2021, Aspen preferred OP units were included in the computation of diluted earnings per share because the inclusion of those securities was dilutive for the period.

14.     Fair Value of Financial Instruments

Our financial instruments consist primarily of cash, cash equivalents and restricted cash, marketable securities, notes and other receivables, debt, and other liabilities. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures, pursuant to ASC 820, "Fair Value Measurements and Disclosures." The following methods and assumptions were used in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

ASC Topic 820 "Fair Value Measurements and Disclosures," requires disclosure regarding determination of fair value for assets and liabilities and establishes a hierarchy under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumption. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy:

Level 1 - Quoted unadjusted prices for identical instruments in active markets that we have the ability to access;

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) in active markets or can be corroborated by observable market data; and

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The unobservable inputs reflect our assumptions about the assumptions that market participants would use.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Assets by Hierarchy Level

The table below sets forth our financial assets and liabilities (in thousands) that required disclosure of fair value on a recurring basis as of September 30, 2021. The table presents the carrying values and fair values of our financial instruments as of September 30, 2021 and December 31, 2020, that were measured using the valuation techniques described above. The table excludes other financial instruments such as other receivables and accounts payable as the carrying values associated with these instruments approximate their fair value since their maturities are less than one year. These are classified as Level 1 in the hierarchy.

 September 30, 2021
Financial AssetsCarrying ValueQuoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Fair Value
Cash, cash equivalents and restricted cash$85,619 $85,619 $— $— $85,619 
Marketable securities160,321 160,321 — — 160,321 
Installment notes receivable on manufactured homes, net81,001 — — 81,001 81,001 
Notes receivable from real estate developers64,593 — — 64,593 64,593 
Total assets measured at fair value$391,534 $245,940 $— $145,594 $391,534 
Financial Liabilities 
Secured debt$3,403,436 $— $3,403,436 $— $3,434,376 
Unsecured debt
Senior unsecured notes591,252 — 591,252 — 606,352 
Line of credit and other unsecured debt694,749 — 694,749 — 694,749 
Total unsecured debt1,286,001 — 1,286,001 — 1,301,101 
Other financial liabilities (contingent consideration)38,970 — — 38,970 38,970 
Total liabilities measured at fair value$4,728,407 $— $4,689,437 $38,970 $4,774,447 

 December 31, 2020
Financial AssetsCarrying ValueQuoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Fair Value
Cash, cash equivalents and restricted cash$92,641 $92,641 $— $— $92,641 
Marketable securities124,726 124,726 — — 124,726 
Installment notes receivable on manufactured homes, net85,866 — 85,866 — 85,866 
Notes receivable from real estate developers52,638 — 52,638 — 52,638 
Total assets measured at fair value$355,871 $217,367 $138,504 $— $355,871 
Financial Liabilities  
Secured debt$3,489,983 $— $3,489,983 $— $3,588,901 
Unsecured debt
Line of credit and other unsecured debt1,267,093 — 1,267,093 — 1,267,093 
Total unsecured debt1,267,093 — 1,267,093 — 1,267,093 
Other financial liabilities (contingent consideration)15,842 — — 15,842 15,842 
Total liabilities measured at fair value$4,772,918 $— $4,757,076 $15,842 $4,871,836 


34

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The following methods and assumptions were used in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash, Cash Equivalents and Restricted Cash

The carrying values of cash, cash equivalents and restricted cash approximate their fair market values due to the short-term nature of the instrument. These are classified as Level 1 in the hierarchy.

Marketable Securities

Marketable securities held by us and accounted for under ASC 321 "Investments - Equity Securities" are measured at fair value. Any change in fair value is recognized in the Consolidated Statement of Operations in Remeasurement of marketable securities in accordance with ASU 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition and measurement of financial assets and financial liabilities." The fair value is measured by the quoted unadjusted share price which is readily available in active markets (Level 1).

The change in the marketable securities balance is as follows (in thousands):

Nine Months Ended Year Ended
September 30, 2021December 31, 2020
Beginning Balance$124,725 $94,727 
Additional purchases— 11,757 
Change in fair value measurement 43,202 6,132 
Foreign currency translation adjustment(10,052)10,138 
Dividend reinvestment, net of tax2,446 1,971 
Ending Balance$160,321 $124,725 

Installment Notes Receivable on Manufactured Homes

Installment notes receivable on manufactured homes are recorded at fair value and are measured using model-derived indicative pricing using primarily unobservable inputs, inclusive of default rates, interest rates and recovery rates (Level 3). Refer to Note 4, "Notes and Other Receivables," for additional information.

Notes Receivable from Real Estate Developers

Notes receivable from real estate developers are recorded at fair value and are measured using model-derived indicative pricing using primarily unobservable inputs including interest rates and counterparty performance (Level 3). The carrying values of the notes generally approximate their fair market values either due to the nature of the note and / or the note being secured by underlying collateral and / or personal guarantees. Refer to Note 4, "Notes and Other Receivables," for additional information.

Secured Debt

Secured debt consists primarily of our mortgage term loans. The fair value of mortgage term loans is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 8, "Debt and Line of Credit," for additional information.

Unsecured Debt

Senior unsecured notes - the fair value of senior unsecured notes is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 8, "Debt and Line of Credit," for additional information.

Line of credit and other unsecured debt - consists primarily of our New Credit Facility. We have variable rates on our New Credit Facility. The fair value of the debt with variable rates approximates carrying value as the interest rates of these amounts approximate market rates. The estimated fair value of our indebtedness as of September 30, 2021 approximated its gross carrying value.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Other Financial Liabilities

We estimate the fair value of our contingent consideration liability based on valuation models using significant unobservable inputs that generally consider discounting of future cash flows using market interest rates and adjusting for non-performance risk over the remaining term of the liability (Level 3).

Level 3 Reconciliation, Measurements and Transfers

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. Availability of secondary market activity and consistency of pricing from third-party sources impacts our ability to classify securities as Level 2 or Level 3.

Our assessment resulted in a net transfer into Level 3 of $138.5 million related to installment notes receivable on manufactured homes and notes from real estate developers during the nine months ended September 30, 2021.

Inputs that are used to derive the fair value for installment notes receivables on manufactured homes and notes receivable from real estate developers transferred to Level 3 from Level 2 during the quarter ended March 31, 2021 as significant inputs used to value those instruments inclusive of default rates, interest rates, recovery rates, and counterparty performance rely heavily on internally sourced assumptions as opposed to observable market-based inputs.


36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


The following tables summarize changes to our financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three and nine months ended September 30, 2021 (in thousands):

Three Months Ended
September 30, 2021
Installment Notes Receivable on MH, netNotes Receivable From Real Estate DevelopersOther Liabilities (Contingent Consideration)
Level 3 beginning balance at June 30, 2021$82,506 $61,955 $18,101 
Transfer to level 3— — — 
Transfer out of level 3— — — 
Net gain / loss91 — 9,196 
Purchases and issuances3,299 3,383 11,893 
Sales and settlements(3,405)(542)— 
Dispositions of properties(1,918)— — 
Other adjustments428 (203)(220)
Level 3 ending balance at September 30, 2021
$81,001 $64,593 $38,970 

Nine Months Ended
September 30, 2021
Installment Notes Receivable on MH, netNotes Receivable From Real Estate DevelopersOther Liabilities (Contingent Consideration)
Level 3 beginning balance at December 31, 2020
$— $— $15,842 
Transfer to level 385,866 52,638 — 
Transfer out of level 3— — — 
Net gain / loss560 — 9,339 
Purchases and issuances7,232 14,523 15,332 
Sales and settlements(11,209)(1,135)— 
Dispositions of properties(1,918)— — 
Other adjustments470 (1,433)(1,543)
Level 3 ending balance at September 30, 2021
$81,001 $64,593 $38,970 

Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgement is required in interpreting market data to develop fair value estimates. The fair value estimates are based on information available as of September 30, 2021. As such, our estimates of fair value could differ significantly from the actual carrying value.

15.    Commitments and Contingencies

Legal Proceedings

We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition.
37

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


16.    Leases

Lessee Accounting

We lease land under non-cancelable operating leases at certain MH, RV and marina properties expiring at various dates through 2085. The majority of the leases have terms requiring fixed payments plus additional rents based on a percentage of revenues at those properties. We also have other operating leases, primarily office space and equipment expiring at various dates through 2026.

Future minimum lease payments under non-cancellable leases as of the nine months ended September 30, 2021 where we are the lessee include:

Maturity of Lease Liabilities (in thousands)Operating LeasesFinance LeasesTotal
2021 (Excluding nine months ended September 30, 2021)$2,381 $126 $2,507 
20229,057 223 9,280 
20239,003 198 9,201 
20249,347 4,070 13,417 
20259,320 — 9,320 
Thereafter179,497 — 179,497 
Total Lease Payments$218,605 $4,617 $223,222 
Less: Imputed interest(101,530)(284)(101,814)
Present Value of Lease Liabilities$117,075 $4,333 $121,408 

Right-of-use (ROU) assets and lease liabilities for finance and operating leases as included in our Consolidated Balance Sheets are as follows (in thousands):

DescriptionFinancial Statement ClassificationAs of
September 30, 2021
As of
December 31, 2020
Lease Assets
ROU asset obtained in exchange for new finance lease liabilitiesInvestment property, net$4,452 $4,350 
ROU asset obtained in exchange for new operating lease liabilitiesOther assets, net$126,756 $48,419 
ROU asset obtained relative to below market operating leaseOther assets, net$72,249 $27,614 
Lease Liabilities
Finance lease liabilitiesOther liabilities$4,333 $4,334 
Operating lease liabilitiesOther liabilities$117,075 $49,964 

Lease expense for finance and operating leases, and short term lease cost as included in our Consolidated Statements of Operations are as follows (in thousands):

Three Months EndedNine Months Ended
DescriptionFinancial Statement ClassificationSeptember 30, 2021September 30, 2020September 30, 2021September 30, 2020
Finance Lease Expense
Interest on lease liabilitiesInterest expense$27 $26 $79 $77 
Operating lease costGeneral and administrative expense, Property operating and maintenance2,771 973 7,223 2,925 
Variable lease costProperty operating and maintenance1,886 431 5,004 1,220 
Short term lease costProperty operating and maintenance57 — 195 — 
Total Lease Expense$4,741 $1,430 $12,501 $4,222 


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SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


Lease term, discount rates and additional information for finance and operating leases are as follows:


As of
Lease Term and Discount RateSeptember 30, 2021
Weighted-average Remaining Lease Terms (years)
Finance lease2.72
Operating lease34.54
Weighted-average Discount Rate
Finance lease2.45 %
Operating lease3.84 %


Nine Months Ended
Other Information (in thousands)September 30, 2021September 30, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating cash flow from operating leases$4,512 $1,836 
Financing cash flow from finance leases125 23 
Total Cash Paid On Lease Liabilities$4,637 $1,859 

Lessor Accounting

We are not the lessor for any finance leases at our MH, RV or marina properties as of September 30, 2021.

Over 95 percent of our operating leases at our MH and RV properties where we are the lessor are either month to month or for a time period not to exceed one year. As of September 30, 2021, future minimum lease payments would not exceed 12 months.

Future minimum lease payments under non-cancellable leases at our marinas and RV properties as of the nine months ended September 30, 2021 where we are the lessor include:

Maturity of Lease Payments (in thousands)Operating Leases
2021 (Excluding nine months ended September 30, 2021)$5,099 
202216,949 
202314,141 
20248,844 
20254,976 
Thereafter5,804 
Total Undiscounted Cash Flows$55,813 

The components of lease income were as follows (in thousands):

Three Months EndedNine Months Ended
DescriptionSeptember 30, 2021September 30, 2020September 30, 2021September 30, 2020
Operating Leases
Fixed lease income$5,293 $312 $14,346 $934 
Variable lease income(1)
$1,284 $399 $3,554 $1,195 
(1)Consists of rent primarily based on a percentage of revenues at the related properties.

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SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)


17.     Recent Accounting Pronouncements

Recent Accounting Pronouncements - Adopted

In July 2021, the FASB issued ASU 2021-05, "Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments." This update amends ASC 842 so that lessors are no longer required to recognize a selling loss upon commencement of a lease with variable lease payments that, prior to the amendments, would have been classified as a sales-type or direct financing lease. Under the amended guidance, a lessor must classify as an operating lease any lease that would otherwise be classified as a sales-type or direct financing lease and that would result in the recognition of a selling loss at lease commencement, provided that the lease includes variable lease payments that do not depend on an index or rate. We adopted the ASU during the three months ended September 30, 2021. The adoption of this ASU did not have an impact on our Consolidated Financial Statements as none of our lessor leases with variable lease payments required us to recognize a selling loss upon commencement of the lease.

Recent Accounting Pronouncements - Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides optional guidance for accounting for contracts, hedging relationships, and other transactions affected by the reference rate reform, if certain criteria are met. The provisions of this standard are available for election through December 31, 2022. As of September 30, 2021, we do not expect the reference rate reform will have a material impact on our Consolidated Financial Statements as the majority of our debt is fixed.

18.    Subsequent Events

Acquisitions

Subsequent to the quarter ended September 30, 2021, we acquired the following properties:

Property NameProperty TypeSites, Wet Slips and Dry Storage SpacesDevelopment
Sites
CityState / ProvinceTotal
Purchase Price
(in millions)
Beaver Brook CampgroundRV204 150N MonmouthME$4.5 

Subsequent to the quarter ended September 30, 2021, we acquired land located in Chincoteague, VA for total consideration of $7.5 million.

Senior Unsecured Notes

On October 5, 2021, we issued $450.0 million of senior unsecured notes with an interest rate of 2.3 percent and a seven-year term, due November 1, 2028 (the "2028 Notes"). Interest on the 2028 Notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2022. In addition, on October 5, 2021, we issued $150 million of senior unsecured notes with an interest rate of 2.7 percent and a 10-year term due July 15, 2031 (the "2031 Notes"). The 2031 Notes are additional notes of the same series as the $600.0 million aggregate principal amount of 2.7 percent senior unsecured notes due July 15, 2031 that we issued on June 28, 2021. The net proceeds from the offering were approximately $595.5 million after deducting underwriters' discounts and estimated offering expenses. The proceeds were used to pay down borrowings under our line of credit.

We have evaluated our Consolidated Financial Statements for subsequent events through the date that this Form 10-Q was issued.
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SUN COMMUNITIES, INC.
ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes, along with our 2020 Annual Report.

OVERVIEW

We are a fully integrated, self-administered and self-managed REIT. As of September 30, 2021, we owned and operated or held an interest in a portfolio of 584 developed properties located in 38 states throughout the United States, Canada and Puerto Rico including 282 MH communities, 146 RV resorts, 36 properties containing both MH and RV sites, and 120 marinas. We have been in the business of acquiring, operating, developing and expanding MH communities and RV resorts since 1975 and marinas since 2020. We lease individual sites with utilities access for placement of manufactured homes, RVs or boats to our customers. We are also engaged in the marketing, selling and leasing of new and pre-owned homes to current and future residents in our MH communities. The Rental Program operations within our MH communities support and enhance our occupancy levels, property performance, and cash flows.

COVID-19 IMPACT

As of September 30, 2021, there are no government regulations preventing the operations of any of our MH communities, RV resorts or marinas. The border for recreational travel between the United States and Canada is open with certain restrictions, which could impact cross border traffic to resorts and marinas across the United States and Canada. The execution of our operational and financial plans has helped to mitigate the impact of COVID-19 on our business.

We continue to provide essential services using social distancing techniques and minimal contact. To promote social distancing, we are encouraging our residents to use our online rent payment portals and other payment methods. We continue to implement numerous health and safety measures at our communities and our main office to keep team members safe. These measures include increased cleaning and sanitation of shared spaces and social distancing protocols throughout our footprint. We closely monitor and track orders by federal, state and local authorities, provide status update to our operations and main office leadership teams, and adjust our operating processes accordingly. We have implemented and continue to encourage remote working arrangements, wherever possible, to keep our team members safe and to do our part to promote social distancing.

We remain committed to assisting individuals who are in the process of leasing a site, a wet slip, a dry storage space, or purchasing a home, while maintaining health and safety protocols including following strict social distancing. Virtual viewings of homes are being utilized to avoid or minimize contact.

The extent to which the COVID-19 pandemic impacts our operations, financial condition and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The uncertainty of this situation precludes any prediction as to the full impact of the COVID-19 pandemic.

SIGNIFICANT ACCOUNTING POLICIES

We have identified significant accounting policies that, as a result of the judgments, uncertainties and complexities of the underlying accounting standards and operations involved could result in material changes to our financial condition or results of operations under different conditions or using different assumptions. Details regarding significant accounting policies are described fully in our 2020 Annual Report.
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SUN COMMUNITIES, INC.
NON-GAAP FINANCIAL MEASURES

In addition to the results reported in accordance with GAAP in our "Results of Operations" below, we have provided information regarding net operating income ("NOI") and funds from operations ("FFO") as supplemental performance measures. We believe NOI and FFO are appropriate measures given their wide use by and relevance to investors and analysts following the real estate industry. 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. 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. In addition, NOI and FFO are commonly used in various ratios, pricing multiples / yields and returns and valuation calculations used to measure financial position, performance and value.

NOI is derived from operating revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that we believe 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. We use 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 our properties rather than of the Company overall.

We believe 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 our financial performance or GAAP cash flow from operating activities as a measure of our liquidity; nor is it indicative of funds available for our cash needs, including our 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.

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, real estate related impairments, and after adjustments for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of our 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. We also use 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 Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

We believe 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 our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.
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SUN COMMUNITIES, INC.
RESULTS OF OPERATIONS

The following tables reconcile the Net income attributable to Sun Communities, Inc. common stockholders to NOI and summarize our consolidated financial results for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net Income Attributable to Sun Communities, Inc. Common Stockholders$231,770 $81,204 $367,322 $124,028 
Interest income(2,690)(2,624)(8,040)(7,609)
Brokerage commissions and other revenues, net(8,841)(5,881)(21,740)(13,068)
General and administrative expense43,276 26,834 126,606 78,710 
Catastrophic event-related charges, net328 14 3,097 54 
Business combination expense— — 1,031 — 
Depreciation and amortization127,091 88,499 378,068 259,453 
Loss on extinguishment of debt (see Note 8)
— — 8,108 5,209 
Interest expense39,026 30,214 116,224 94,058 
Interest on mandatorily redeemable preferred OP units / equity1,047 1,047 3,124 3,130 
(Gain) / loss on remeasurement of marketable securities (see Note 14)
(12,072)(1,492)(43,227)2,636 
(Gain) / loss on foreign currency translation7,028 (5,023)7,107 2,496 
Gain on dispositions of properties(108,104)(5,595)(108,104)(5,595)
Other expense, net9,372 3,511 10,041 4,890 
(Gain) / loss on remeasurement of notes receivable (see Note 4)
(92)445 (561)2,311 
Income from nonconsolidated affiliates (see Note 6)
(962)(1,204)(2,927)(1,348)
Loss on remeasurement of investment in nonconsolidated affiliates (see Note 6)
119 446 130 1,505 
Current tax (benefit) / expense (see Note 12)
402 (107)1,418 462 
Deferred tax (benefit) / expense (see Note 12)
1,155 (562)1,074 (804)
Preferred return to preferred OP units / equity interests3,101 1,645 9,000 4,799 
Income attributable to noncontrolling interests15,290 6,907 22,629 8,806 
NOI$346,244 $218,278 $870,380 $564,123 

Three Months EndedNine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Real Property NOI$295,779 $204,271 $753,173 $538,210 
Home Sales NOI 24,532 7,763 58,226 20,790 
Service, retail, dining and entertainment expenses NOI25,933 6,244 58,981 5,123 
NOI$346,244 $218,278 $870,380 $564,123 

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SUN COMMUNITIES, INC.
Seasonality of revenue

We evaluate segment operating performance based on NOI. The RV and marina industries are cyclical and seasonal in nature, and the results of operations in any one period may not be indicative of results in future periods.

In the RV market, certain properties maintain higher occupancy during the summer months, while other properties maintain higher occupancy during the winter months. The RV market typically shows a decline in demand over the winter months, yet usually produces higher growth in the spring and summer months due to higher use by vacationers. Real property - transient revenue is included in the RV segment revenue. As of September 30, 2021, we recognized $31.7 million of Real property - transient revenue in the first quarter, $72.7 million in the second quarter, $119.8 million in the third quarter. Real property - transient revenue was approximately $134.7 million for the year ended December 31, 2020. In 2020, Real property - transient was recognized 18.8 percent in the first quarter, 15.6 percent in the second quarter, 44.9 percent in the third quarter and 20.7 percent in the fourth quarter.

In the marina market, demand for wet slip storage increases during the summer months as customers contract for the summer boating season, which also drives non-storage revenue streams such as service, fuel and on-premise restaurants or convenience storage. Demand for dry storage increases during the winter season as seasonal weather patterns require boat owners to store their vessels on dry docks and within covered racks. As of September 30, 2021, we recognized $43.7 million of seasonal Real property revenue in the first quarter, $61.6 million in the second quarter, $73.8 million in the third quarter.
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SUN COMMUNITIES, INC.
Comparison of the three and nine months ended September 30, 2021 and 2020

Real Property Operations - Total Portfolio

The following tables reflect certain financial and other information for our Total Portfolio as of and for the three and nine months ended September 30, 2021 and 2020 (in thousands, except for statistical information):

Three Months EndedNine Months Ended
September 30, 2021
September 30,
2020
(1)
Change% ChangeSeptember 30, 2021
September 30, 2020(1)
Change% Change
Financial Information
Revenue
Real property (excluding Transient)$304,239 $211,565 $92,674 43.8 %$863,134 $626,620 $236,514 37.7 %
Real property - transient126,072 80,412 45,660 56.8 %235,606 136,473 99,133 72.6 %
Other48,314 28,511 19,803 69.5 %116,403 66,871 49,532 74.1 %
Total Operating478,625 320,488 158,137 49.3 %1,215,143 829,964 385,179 46.4 %
Expense
Property Operating182,846 116,217 66,629 57.3 %461,970 291,754 170,216 58.3 %
Real Property NOI$295,779 $204,271 $91,508 44.8 %$753,173 $538,210 $214,963 39.9 %
(1)Canadian currency figures included within the three and nine months ended September 30, 2020 have been translated at the 2021 average exchange rates.

 As of
September 30, 2021September 30, 2020Change
Other Information
Number of properties(1)
584 432 152 
MH occupancy96.6 %
RV occupancy(2)
100.0 %
MH & RV blended occupancy(3)
97.4 %97.2 %0.2 %
Adjusted MH occupancy(4)
97.8 %
Adjusted RV occupancy(5)
100.0 %
Adjusted MH & RV occupancy(6)
98.3 %98.3 %— %
Sites available for MH & RV development10,312 10,130 182 
Monthly base rent per site - MH$599 $587 
(8)
$12 
Monthly base rent per site - RV(7)
$518 $503 
(8)
$15 
Monthly base rent per site - Total$580 $568 
(8)
$12 
(1)Includes MH communities, RV resorts and marinas.
(2)Occupancy percentages include annual RV sites and exclude transient RV sites.
(3)Occupancy percentages include MH and annual RV sites, and exclude transient RV sites.
(4)Adjusted occupancy percentages include MH and exclude recently completed but vacant expansion sites.
(5)Adjusted occupancy percentages include annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(6)Adjusted occupancy percentages include MH and annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(7)Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(8)Canadian currency figures included within the three months ended September 30, 2020 have been translated at 2021 average exchange rates.

For the three months ended September 30, 2021, the $91.5 million increase in Real Property NOI consists of $24.1 million from Same Communities as detailed below, $51.0 million from the marinas and $16.4 million from recently acquired properties as compared to the same period in 2020.

For the nine months ended September 30, 2021, the $215.0 million increase in Real Property NOI consists of $63.1 million from Same Communities as detailed below, $117.6 million from marinas and $34.3 million from recently acquired properties in the nine months ended September 30, 2021 as compared to the same period in 2020.
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SUN COMMUNITIES, INC.
Real Property Operations - Same Community

A key management tool used when evaluating performance and growth of our properties is a comparison of our Same Communities. The Same Communities data includes all properties which we have owned and operated continuously since January 1, 2020, exclusive of properties recently completed or under construction, and other properties as determined by management. The Same Community data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions or unique situations. In order to evaluate the growth of the Same Communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Community portfolio is the reclassification of utility revenues from Real property revenue to operating expenses. A significant portion of our utility charges are re-billed to our residents.

The following tables reflect certain financial and other information for our Same Communities as of and for the three and nine months ended September 30, 2021 and 2020 (in thousands, except for statistical information).

Three Months Ended
Total Same CommunityMHRV
September 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% Change
Financial Information
Revenue
Real property (excluding Transient)$220,291 $207,407 $12,884 6.2 %$173,979 $167,051 $6,928 4.1 %$46,312 $40,356 $5,956 14.8 %
Real property - transient87,049 67,408 19,641 29.1 %238 242 (4)(1.7)%86,811 67,166 19,645 29.2 %
Other13,352 9,375 3,977 42.4 %4,845 2,863 1,982 69.2 %8,507 6,512 1,995 30.6 %
Total Operating320,692 284,190 36,502 12.8 %179,062 170,156 8,906 5.2 %141,630 114,034 27,596 24.2 %
Expense
Property Operating102,413 90,048 12,365 13.7 %49,567 43,996 5,571 12.7 %52,846 46,052 6,794 14.8 %
Real Property NOI$218,279 $194,142 $24,137 12.4 %$129,495 $126,160 $3,335 2.6 %$88,784 $67,982 $20,802 30.6 %

Nine Months Ended
Total Same CommunityMHRV
September 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% Change
Financial Information
Revenue
Real property (excluding Transient)$652,978 $615,711 $37,267 6.1 %$518,511 $495,989 $22,522 4.5 %$134,467 $119,722 $14,745 12.3 %
Real property - transient163,932 117,277 46,655 39.8 %1,200 1,343 (143)(10.6)%162,732 115,934 46,798 40.4 %
Other31,077 18,424 12,653 68.7 %14,472 7,778 6,694 86.1 %16,605 10,646 5,959 56.0 %
Total Operating847,987 751,412 96,575 12.9 %534,183 505,110 29,073 5.8 %313,804 246,302 67,502 27.4 %
Expense
Property Operating261,754 228,314 33,440 14.6 %136,927 124,297 12,630 10.2 %124,827 104,017 20,810 20.0 %
Real Property NOI$586,233 $523,098 $63,135 12.1 %$397,256 $380,813 $16,443 4.3 %$188,977 $142,285 $46,692 32.8 %
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SUN COMMUNITIES, INC.
 As of
September 30, 2021September 30, 2020Change
Other Information
Number of properties403 403 — 
MH occupancy 97.5 %
RV occupancy(1)
100.0 %
MH & RV blended occupancy(2)
98.1 %
Adjusted MH occupancy(3)
98.5 %
Adjusted RV occupancy(4)
100.0 %
Adjusted MH & RV blended occupancy(5)
98.9 %97.4 %
(6)
1.5 %
Sites available for development7,092 7,453 (361)
Monthly base rent per site - MH$606 $586 
(8)
$20 
Monthly base rent per site - RV(7)
$528 $503 
(8)
$25 
Monthly base rent per site - Total$588 $567 
(8)
$21 
(1)Occupancy percentages include annual RV sites and exclude transient RV sites.
(2)Occupancy percentages include MH and annual RV sites, and exclude transient RV sites.
(3)Adjusted occupancy percentages include MH and exclude recently completed but vacant expansion sites.
(4)Adjusted occupancy percentages include annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(5)Adjusted occupancy percentages include MH and annual RV sites, and exclude transient RV sites and recently completed but vacant expansion sites.
(6)The occupancy percentages for 2020 have been adjusted to reflect incremental growth period-over-period from newly rented MH expansion sites and the conversion of transient RV sites to annual RV sites.
(7)Monthly base rent pertains to annual RV sites and excludes transient RV sites.
(8)Canadian currency figures included within three months ended September 30, 2020 have been translated at 2021 average exchange rates.

The amounts in the table above reflect constant currency for comparative purposes. We have reclassified water and sewer revenues of $19.1 million and $18.3 million for the three months ended September 30, 2021 and 2020, and $52.2 million and $47.3 million for the nine months ended September 30, 2021 and 2020, to reflect the utility expenses associated with our Same Community portfolio net of recovery.

For the three months ended September 30, 2021 and 2020:
The $24.1 million, or 12.4 percent, growth in Total Same Community NOI is due to a $20.8 million, or 30.6 percent, increase in NOI from the RV segment and $3.3 million, or 2.6 percent, increase in NOI from the MH segment.

The RV segment $20.8 million, or 30.6 percent, increase in NOI is primarily due to an increase in Real property - transient revenue of $19.6 million, or 29.2 percent, when compared to the same period in 2020 due to increased transient and vacation rental traffic.

The MH segment $3.3 million, or 2.6 percent, growth in NOI is primarily due to an increase in Real property (excluding transient) revenue of $6.9 million, or 4.1 percent, when compared to the same period in 2020. MH property (excluding transient) revenue increased due to a 3.4 percent increase in monthly based rent and a 1.5 percent increase in Occupancy.


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SUN COMMUNITIES, INC.
For the nine months ended September 30, 2021 and 2020:

The $63.1 million, or 12.1 percent, growth in Total Same Community NOI is due to a $46.7 million, or 32.8 percent, increase in NOI from the RV segment and $16.4 million, or 4.3 percent, increase in NOI from the MH segment.

The RV segment $46.7 million, or 32.8 percent, increase in NOI is primarily due to an increase in Real property - transient revenue of $46.8 million, or 40.4 percent, due to increased transient and vacation rental traffic. The results of the comparative 2020 period were impacted by the required closure, or delayed opening, of over 40 of our RV resorts due to the COVID-19 pandemic.

The MH segment $16.4 million, or 4.3 percent, growth in NOI is primarily due to an increase in Real property (excluding transient) revenue of $22.5 million, or 4.5 percent. Real property (excluding transient) revenue increased due to a 3.4 percent increase in monthly base rent per MH site and a 1.5 percent increase in occupancy when compared to the same period in 2020.
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SUN COMMUNITIES, INC.
Marinas Summary

The following table reflects certain financial and other information for our marinas as of and for the three and nine months ended September 30, 2021 (in thousands, except for statistical information):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2021
Financial Information
Revenues
Real property (excluding transient)$72,888 $180,908
Real property - transient6,251 11,376
Other5,815 11,134
Total Operating84,954 203,418
Expenses
Property Operating(a)
33,995 85,816
Real Property NOI50,959 117,602
Service, retail, dining and entertainment
Revenue74,110 200,702
Expense60,606 159,632
NOI13,504 41,070
Marina NOI$64,463 $158,672
As of
Other Information - MarinasSeptember 30, 2021
Number of properties(b)
120
Total wet slips and dry storage44,859
(a) Marina results net $4.3 million and $10.5 million of certain utility revenue against the related utility expense in property operating and maintenance expense for three and nine months ended September 30, 2021.
(b) Marina properties consisted of 14 properties acquired in 2021 and 106 properties acquired in 2020.
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SUN COMMUNITIES, INC.
Home Sales Summary

We purchase new homes and acquire pre-owned and repossessed manufactured homes, generally located within our communities, from lenders, dealers, and former residents to sell or lease to current and prospective residents.

The following table reflects certain financial and statistical information for our Home Sales Program for the three and nine months ended September 30, 2021 and 2020 (in thousands, except for average selling prices and statistical information):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% Change
Financial Information
New Homes
New home sales$31,433 $23,734 $7,699 32.4 %$89,166 $58,536 $30,630 52.3 %
New home cost of sales25,856 19,294 6,562 34.0 %72,799 47,611 25,188 52.9 %
Gross Profit – new homes5,577 4,440 1,137 25.6 %16,367 10,925 5,442 49.8 %
Gross margin % – new homes17.7 %18.7 %(1.0)%18.4 %18.7 %(0.3)%
Average selling price – new homes$151,850 $153,123 $(1,273)(0.8)%$152,943 $141,391 $11,552 8.2 %
Pre-owned Homes
Pre-owned home sales$49,666 $23,928 $25,738 107.6 %$125,980 $68,243 $57,737 84.6 %
Pre-owned home cost of sales25,840 16,943 8,897 52.5 %70,369 47,839 22,530 47.1 %
Gross Profit – pre-owned homes23,826 6,985 16,841 241.1 %55,611 20,404 35,207 172.5 %
Gross margin % – pre-owned homes48.0 %29.2 %18.8 %44.1 %29.9 %14.2 %
Average selling price – pre-owned homes$52,006 $43,114 $8,892 20.6 %$48,981 $40,864 $8,117 19.9 %
Total Home Sales
Revenue from home sales$81,099 $47,662 $33,437 70.2 %$215,146 $126,779 $88,367 69.7 %
Cost of home sales51,696 36,237 15,459 42.7 %143,168 95,450 47,718 50.0 %
Home selling expenses4,871 3,662 1,209 33.0 %13,752 10,539 3,213 30.5 %
Home Sales NOI$24,532 $7,763 $16,769 216.0 %$58,226 $20,790 $37,436 180.1 %
Statistical Information 
New home sales volume207 155 52 33.5 %583 414 169 40.8 %
Pre-owned home sales volume955 555 400 72.1 %2,572 1,670 902 54.0 %
Total home sales volume1,162 710 452 63.7 %3,155 2,084 1,071 51.4 %

Gross Profit - New Homes
For the three months ended September 30, 2021, the $1.1 million, or 25.6 percent, increase in gross profit is primarily the result of a 33.5 percent increase in new home sales volume, as compared to the same period in 2020.

For the nine months ended September 30, 2021, the $5.4 million, or 49.8 percent, increase in gross profit is primarily the result of a 40.8 percent increase in new home sales volume coupled with a 8.2 percent increase in the new home average selling price, as compared to the same period in 2020.

Gross Profit - Pre-owned Homes
For the three months ended September 30, 2021, the $16.8 million, or 241.1 percent, increase in gross profit is primarily the result of a 72.1 percent increase in pre-owned home sales volume, coupled with a 18.8 percent increase in gross margin, primarily due to a 20.6 percent increase in the pre-owned home average selling price, as compared to the same period in 2020.

For the nine months ended September 30, 2021, the $35.2 million, or 172.5 percent, increase in gross profit is primarily the result of a 54.0 percent increase in pre-owned home sales volume, coupled with a 14.2 percent increase in gross margin, primarily due to a 19.9 percent increase in the pre-owned home average selling price, as compared to the same period in 2020.

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SUN COMMUNITIES, INC.
Homes sales NOI
For the three months ended September 30, 2021, the $16.8 million, or 216.0 percent, increase in NOI is primarily the result of a 63.7 percent increase in home sales volume, coupled with an increase in pre-owned home average selling price, as compared to the same period in 2020.

For the nine months ended September 30, 2021, the $37.4 million, or 180.1 percent, increase in NOI is primarily the result of a 51.4 percent increase in home sales volume coupled with an increase in home average selling price, as compared to the same period in 2020.

51

SUN COMMUNITIES, INC.
Rental Program Summary

The following table reflects certain financial and other information for our Rental Program as of and for the three and nine months ended September 30, 2021 and 2020 (in thousands, except for other information):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% Change
Financial Information
Revenues
Home rent$16,369 $16,171 $198 1.2 %$50,451 $46,607 $3,844 8.2 %
Site rent 17,584 19,101 (1,517)(7.9)%55,350 55,699 (349)(0.6)%
Total33,953 35,272 (1,319)(3.7)%105,801 102,306 3,495 3.4 %
Expenses
Rental Program operating and maintenance5,547 5,328 219 4.1 %15,332 14,576 756 5.2 %
Rental Program NOI$28,406 $29,944 $(1,538)(5.1)%$90,469 $87,730 $2,739 3.1 %
Other Information  
Number of sold rental homes307 225 82 36.4 %799 581 218 37.5 %
Number of occupied rentals, end of period10,123 11,729 (1,606)(13.7)%
Investment in occupied rental homes, end of period$559,021 $625,922 $(66,901)(10.7)%
Weighted average monthly rental rate, end of period$1,114 $1,032 $82 7.9 %

The Rental Program NOI is included in Real Property NOI. The Rental Program NOI is separately reviewed to assess the overall growth and performance of the Rental Program and its financial impact on the Company's operations.

For the three months ended September 30, 2021, Rental Program NOI decreased $1.5 million, or 5.1 percent as compared to the same period in 2020. The decrease is primarily due to a $1.5 million or 7.9 percent decrease in site rent revenue driven by a 13.7 percent decrease in number of occupied rental homes, as compared to the same period in 2020.

For the nine months ended September 30, 2021, Rental Program NOI increased $2.7 million, or 3.1 percent as compared to the same period in 2020. The increase is primarily due to an increase in Rental Program revenue of $3.5 million, or 3.4 percent, due to a 7.9 percent increase in the weighted average monthly rental rate, as compared to the same period in 2020.
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SUN COMMUNITIES, INC.
Other Items - Statements of Operations(1)

The following table summarizes other income and expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months EndedNine Months Ended
September 30, 2021September 30, 2020Change% ChangeSeptember 30, 2021September 30, 2020Change% Change
Service, retail, dining and entertainment, net$25,933 $6,244 $19,689 315.3 %$58,981 $5,123 $53,858 N/M
Interest income$2,690 $2,624 $66 2.5 %$8,040 $7,609 $431 5.7 %
Brokerage commissions and other, net$8,841 $5,881 $2,960 50.3 %$21,740 $13,068 $8,672 66.4 %
General and administrative expense$43,276 $26,834 $16,442 61.3 %$126,606 $78,710 $47,896 60.9 %
Catastrophic event-related charges, net$328 $14 $314 N/M$3,097 $54 $3,043 N/M
Business combination expense, net$— $— $— N/A$1,031 $— $1,031 N/A
Depreciation and amortization$127,091 $88,499 $38,592 43.6 %$378,068 $259,453 $118,615 45.7 %
Loss on extinguishment of debt (see Note 8)$— $— $— N/A$8,108 $5,209 $2,899 55.7 %
Interest expense$39,026 $30,214 $8,812 29.2 %$116,224 $94,058 $22,166 23.6 %
Interest on mandatorily redeemable preferred OP units / equity$1,047 $1,047 $— N/A$3,124 $3,130 $(6)(0.2)%
Gain / (loss) on remeasurement of marketable securities (see Note 14)$12,072 $1,492 $10,580 709.1 %$43,227 $(2,636)$45,863 N/M
Gain / (loss) on foreign currency translation$(7,028)$5,023 $(12,051)(239.9)%$(7,107)$(2,496)$(4,611)184.7 %
Other expense, net$(9,372)$(3,511)$(5,861)166.9 %$(10,041)$(4,890)$(5,151)105.3 %
Gain / (loss) on remeasurement of notes receivable (see Note 4)$92 $(445)$537 120.7 %$561 $(2,311)$2,872 124.3 %
Income from nonconsolidated affiliates (see Note 6)$962 $1,204 $(242)(20.1)%$2,927 $1,348 $1,579 117.1 %
Loss on remeasurement of investment in nonconsolidated affiliates (see Note 6)$(119)$(446)$327 (73.3)%$(130)$(1,505)$1,375 (91.4)%
Current tax benefit / (expense) (see Note 12)$(402)$107 $(509)475.7 %$(1,418)$(462)$(956)206.9 %
Deferred tax benefit / (expense) (see Note 12)$(1,155)$562 $(1,717)(305.5)%$(1,074)$804 $(1,878)(233.6)%
Preferred return to preferred OP units / equity interests$3,101 $1,645 $1,456 88.5 %$9,000 $4,799 $4,201 87.5 %
Income attributable to noncontrolling interests$15,290 $6,907 $8,383 121.4 %$22,629 $8,806 $13,823 157.0 %
(1) Only items determined by management to be material, of interest, or unique to the periods disclosed above are explained below.
N/M = Percentage change is not meaningful.

Service, retail, dining and entertainment, net - for the three and nine months ended September 30, 2021, increased primarily due to the addition of service revenue from the Safe Harbor acquisition.

Brokerage commissions and other, net - for the three and nine months ended September 30, 2021, increased primarily due to an increase in brokerage commissions as a result of an increase in the number of brokered home sales, as compared to 2020.

General and administrative expenses - for the three and nine months ended September 30, 2021, increased primarily due to an increase in wages and incentives driven by growth in strategic initiatives and acquisition activity, including the acquisition of Safe Harbor, as compared to the same period in 2020.

Catastrophic event-related charges, net - for the three and nine months ended September 30, 2021, increased primarily due to fire damages and the impact of named weather events.

Depreciation and amortization - for the three and nine months ended September 30, 2021, increased as a result of property acquisitions during 2020 and 2021. Refer to Note 3, "Real Estate Acquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional information.
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SUN COMMUNITIES, INC.
Loss on extinguishment of debt - for the nine months ended September 30, 2021, increased primarily due to the termination of the Safe Harbor line of credit and financing activities as compared to the same period in 2020. Refer to Note 8, "Debt and Line of Credit," in our accompanying Consolidated Financial Statements for additional information.

Interest expense - for the three and nine months ended September 30, 2021, increased primarily due to the higher carrying balance of debt as compared to the same period in 2020. Refer to Note 8, "Debt and Line of Credit," of our accompanying Consolidated Financial Statements for additional information.

Gain / (loss) on remeasurement of marketable securities - for the three and nine months ended September 30, 2021, the increase was a reflection of the increase of publicly traded marketable securities. Refer to Note 14, "Fair Value of Financial Instruments," in our accompanying Consolidated Financial Statements for additional information.

Gain / (loss) on foreign currency translation - for the three months ended September 30, 2021, there was a $7.0 million loss as compared to a $5.0 million gain in the same period in 2020, primarily due to fluctuations in exchange rates on Canadian and Australian denominated currencies. For the nine months ended September 30, 2021, there was a $7.1 million loss as compared to a $2.5 million loss in the same period in 2020.

Other expense, net - for the three and nine months ended September 30, 2021, the increase was primarily due to an estimated contingent liability related to potential termination of certain ground leases.

Gain / (loss) on remeasurement of notes receivable - represents the change in fair value of our in-house financing notes receivable portfolio, for which we elected the fair value option on January 1, 2020. Refer to Note 4, "Notes and Other Receivables," and Note 14, "Fair Value of Financial Instruments," in our accompanying Consolidated Financial Statements for additional information.

Income from nonconsolidated affiliates - decreased primarily due to losses incurred at the RezPlot and SV Lift nonconsolidated affiliates during the three months ended September 30, 2021. For the nine months ended September 30, 2021, there was a $1.6 million increase primarily due to increased income at GTSC and the Sungenia JV nonconsolidated affiliate as compared to the same period in 2020. Refer to Note 6, "Investment in Nonconsolidated Affiliates," in our accompanying Consolidated Financial Statements for additional information.

Current tax benefit / (expense) - for the three months ended September 30, 2021, current tax expense was $0.4 million as compared to current tax benefit of $0.1 million. For the nine months ended September 30, 2021, current tax expense increased as compared to the same period in 2020, primarily due to improved financial performance of the Company and its consolidated VIEs and a change in the quarterly tax allocation process. Refer to Note 12, "Income Taxes," in our accompanying Consolidated Financial Statements for additional information.

Deferred tax benefit / (expense) - for the three and nine months ended September 30, 2021, deferred tax expense was $1.2 million and $1.1 million as compared to deferred tax benefit of $0.6 million and $0.8 million in the same periods in 2020, respectively, primarily due to improved financial performance of the Company and its consolidated VIEs and change in the quarterly tax allocation process. Refer to Note 12, "Income Taxes," in our accompanying Consolidated Financial Statements for additional information.

Preferred return to preferred OP units / equity interests - for the three and nine months ended September 30, 2021, increased primarily as a result of the volume of preferred OP units issued in conjunction with various acquisitions since 2020. Refer to Note 3, "Real Estate Acquisitions and Dispositions," and Note 9, "Equity and Temporary Equity," of our accompanying Consolidated Financial Statements for additional information.

Income attributable to noncontrolling interests - for the three and nine months ended September 30, 2021, increased as compared to the same period in 2020, primarily due to improved financial performance of the Company and its consolidated VIEs. Refer to Note 7, "Consolidated Variable Interest Entities," in our accompanying Consolidated Financial Statements for additional information.
54

SUN COMMUNITIES, INC.
Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO

The following table reconciles Net income attributable to Sun Communities, Inc. common stockholders to FFO for the three and nine months ended September 30, 2021 and 2020 (in thousands, except per share amounts):

Three Months EndedNine Months Ended
 September 30, 2021September 30, 2020September 30, 2021September 30, 2020
Net Income Attributable to Sun Communities, Inc. Common Stockholders$231,770 $81,204 $367,322 $124,028 
Adjustments
Depreciation and amortization126,814 88,495 377,367 259,543 
Depreciation on nonconsolidated affiliates30 91 28 
(Gain) / loss on remeasurement of marketable securities
(12,072)(1,492)(43,227)2,636 
Loss on remeasurement of investment in nonconsolidated affiliates119 446 130 1,505 
(Gain) / loss on remeasurement of notes receivable(92)445 (561)2,311 
Income attributable to noncontrolling interests4,616 6,196 13,678 7,725 
Preferred return to preferred OP units— 498 — 1,498 
Interest expense on Aspen preferred OP units514 514 1,542 1,542 
Gain on dispositions of properties(108,104)(5,595)(108,104)(5,595)
Gain on dispositions of assets, net(20,526)(5,511)(46,245)(15,251)
FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1)
223,069 165,209 561,993 379,970 
Adjustments
Business combination expense and other acquisition related costs(2)
2,477 402 6,714 1,291 
Loss on extinguishment of debt— — 8,108 5,209 
Catastrophic event-related charges, net318 15 3,096 54 
(Gain) / loss on earnings - catastrophic event-related(3)
200 (300)400 — 
(Gain) / loss on foreign currency translation7,028 (5,024)7,107 2,496 
Other adjustments, net(4)
11,443 2,322 11,505 2,819 
Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities(1)
$244,535 $162,624 $598,923 $391,839 
Weighted average common shares outstanding - basic115,136 97,542 111,717 95,270 
Add
Common shares dilutive effect from forward equity sale— — 
Common stock issuable upon conversion of stock options— — 
Restricted stock438 390 414 395 
Common OP units— 2,476 2,574 2,445 
Common stock issuable upon conversion of certain preferred OP units388 1,213 396 1,220 
Weighted Average Common Shares Outstanding - Fully Diluted115,962 101,628 115,101 99,333 
FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted$1.92 $1.63 $4.88 $3.83 
Core FFO Attributable to Sun Communities, Inc. Common Stockholders and Dilutive Convertible Securities Per Share - Fully Diluted$2.11 $1.60 $5.20 $3.94 
(1)The effect of certain anti-dilutive convertible securities is excluded from these items.
(2)These costs represent business combination expenses and expenses incurred to bring recently acquired properties up to our operating standards, including items such as tree trimming and painting costs that do not meet our capitalization policy.
(3)Adjustment related to estimated loss of earnings in excess of the applicable business interruption deductible in relation to our three Florida Keys communities that were impaired by Hurricane Irma which had not yet been received from our insurer.
(4)Other adjustments, net include the change in estimated contingent consideration payments, long term lease termination expense and deferred tax (benefit) / expense for the three and nine months ended September 30, 2021 and 2020, RV rebranding non-recurring cost for the three and nine months ended September 30, 2021, and deferred compensation amortization upon retirement for the nine months ended September 30, 2020.
55

SUN COMMUNITIES, INC.
LIQUIDITY AND CAPITAL RESOURCES

Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unit holders of the Operating Partnership, capital improvement of properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment.

Subject to market conditions, we intend to continue to identify opportunities to expand our development pipeline and acquire existing properties. We finance acquisitions through available cash, secured financing, draws on our line of credit, the assumption of existing debt on properties and the issuance of debt and equity securities. We will continue to evaluate acquisition opportunities that meet our criteria. Refer to Note 3, "Real Estate Acquisitions and Dispositions," in the accompanying Consolidated Financial Statements for information regarding recent property acquisitions.

We also intend to continue to strengthen our capital and liquidity positions by focusing on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our line of credit, and the use of debt and equity offerings under our shelf registration statement. Refer to Note 8, "Debt and Line of Credit," and Note 9, "Equity and Temporary Equity," in the accompanying Consolidated Financial Statements for additional information.

Capital Expenditures - MH, RV and Marinas

Our capital expenditures include expansion sites and development construction costs, lot modifications, recurring capital expenditures and rental home purchases.

Expansion and development activities costs of $145.6 million and $197.7 million, were incurred for the nine months ended September 30, 2021 and 2020, respectively. Expansion and development expenditures consist primarily of construction costs such as roads, activities, and amenities, and costs necessary to complete home and RV site improvements, such as driveways, sidewalks and landscaping at our MH communities and RV resorts. Expenditures also include costs to rebuild after damage has been incurred at MH, RV or marina properties.

Lot modification capital expenditures were $20.3 million and $21.8 million, for the nine months ended September 30, 2021 and 2020, respectively, at our MH and RV properties. Lot modification capital expenditures are incurred to modify the foundational structures required to set a new home after a previous home has been removed. These expenditures are necessary to create a revenue stream from a new site renter and often improve the quality of the community. Other lot modification expenditures include land improvements added to annual RV sites to aid in the conversion of transient RV guests to annual contracts.

Recurring capital expenditures at our MH and RV properties were $31.5 million and $17.4 million, for the nine months ended September 30, 2021 and 2020, respectively. These expenditures relate to our continued commitment to the upkeep of our MH and RV properties. Recurring capital expenditures at our marinas were $10.3 million for the nine months ended September 30, 2021, and include items such as dredging, dock repairs and improvements, and equipment maintenance and upgrades.

Growth project expenditures were $57.7 million and $15.2 million, for the nine months ended September 30, 2021 and 2020, respectively. Growth projects consist of revenue generating or expense reducing activities at MH communities, RV resorts and marinas. This includes, but is not limited to, utility efficiency and renewable energy projects, site, slip or amenity upgrades such as the addition of a garage, shed or boat lift, and other special capital projects that substantiate an incremental rental increase.

We invest in the acquisition of homes intended for the Rental Program and the purchase of vacation rental homes for rental at our RV resorts. Expenditures for these investments depend upon the condition of the markets for repossessions and new home sales, rental homes and vacation rental homes. We finance certain of our new home and vacation rental home purchases with a $12.0 million manufactured home floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third-party financing of our home sales, available manufactured home floor plan financing and working capital available on our line of credit.
56

SUN COMMUNITIES, INC.
Cash Flow Activities

Our cash flow activities are summarized as follows (in thousands):

Nine Months Ended
September 30, 2021September 30, 2020
Net Cash Provided by Operating Activities$656,010 $464,458 
Net Cash Used for Investing Activities$(1,363,152)$(665,708)
Net Cash Provided by Financing Activities$700,389 $281,997 
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash$(269)$(48)

Cash, cash equivalents, and restricted cash decreased by approximately $7.0 million from $92.6 million as of December 31, 2020, to $85.6 million as of September 30, 2021.

Operating Activities - Net cash provided by operating activities increased by $191.5 million from $464.5 million for the nine months ended September 30, 2020 to $656.0 million for the nine months ended September 30, 2021.

Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes; (e) current volatility in economic conditions and the financial markets; and (f) the effects of the COVID-19 pandemic. See "Risk Factors" in Part I, Item 1A of our 2020 Annual Report.

Investing Activities - Net cash used for investing activities was $1.4 billion for the nine months ended September 30, 2021, compared to $665.7 million for the nine months ended September 30, 2020. Refer to Note 3, "Real Estate Acquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional information.

Financing Activities - Net cash provided by financing activities increased by $418.4 million from $282.0 million for the nine months ended September 30, 2020 to $700.4 million for the nine months ended September 30, 2021. Refer to Note 8, "Debt and Line of Credit," and Note 9, "Equity and Temporary Equity," in our accompanying Consolidated Financial Statements for additional information.

Financial Flexibility

In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective January 4, 2021. In April 2021, we filed a new universal shelf registration statement on Form S-3 with the SEC registering, among other securities, debt securities of the Operating Partnership, which are fully and unconditionally guaranteed by us.

Public Equity Offerings

On March 2, 2021, we priced a $1.1 billion underwritten public offering of an aggregate of 8,050,000 shares at a public offering price of $140.00 per share, before underwriting discounts and commissions. The offering consisted of 4,000,000 shares offered directly by us and 4,050,000 shares offered under a forward equity sales agreement. We sold the 4,000,000 shares on March 9, 2021 and received net proceeds of $537.6 million after deducting expenses related to the offering. In May and June 2021, we completed the physical settlement of the remaining 4,050,000 shares and received net proceeds of $539.7 million after deducting expenses related to the offering. Proceeds from the offering were used to acquire assets and pay down the Safe Harbor Facility.

On September 30, 2020 and October 1, 2020, we entered into two forward sale agreements (the "September 2020 Forward Equity Offerings") relating to an underwritten registered public offering of 9,200,000 shares of our common stock at a public offering price of $139.50 per share. The offering closed on October 5, 2020. On October 26, 2020, we physically settled the September 2020 Forward Equity Offerings (by the delivery of shares of our common stock). Proceeds from the offering were approximately $1.23 billion after deducting expenses related to the offering. We used the net proceeds of this offering to fund the cash portion of the acquisition of Safe Harbor purchase price, and for working capital and general corporate purposes.
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SUN COMMUNITIES, INC.
In May 2020, we closed an underwritten registered public offering of 4,968,000 shares of common stock. Proceeds from the offering were $633.1 million after deducting expenses related to the offering. We used the net proceeds of this offering to repay borrowings outstanding under the revolving loan under our senior credit facility.

At the Market Offering Sales Agreements

On June 4, 2021, we entered into the Sales Agreement with certain sales agents, and forward sellers pursuant to which we may sell, from time to time, up to an aggregate gross sales price of $500.0 million of our common stock, through the sales agents, acting as our sales agents or, if applicable, as forward sellers, or directly to the sales agents as principals for their own accounts. The sales agents and forward sellers are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold under the Sales Agreement. We forward sold 107,400 shares of common stock under the new Sales Agreement for $21.4 million during the three and nine months ended September 30, 2021. The forward shares are not physically settled as of September 30, 2021. The forward shares will expire if not settled by September 2022.

Upon entering into the Sales Agreement, we simultaneously terminated our previous At the Market Offering Sales Agreement entered into in July 2017. There were no issuances of common stock under the prior sales agreement during the six months ended June 30, 2021 or during the year ended December 31, 2020. Through June 4, 2021, we sold shares of our common stock for gross proceeds of $163.8 million under the prior sales agreement.

Senior Unsecured Notes

In June 2021, we received investment grade ratings of BBB and Baa3 with a stable outlook from S&P Global and Moody's, respectively. Our credit ratings are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us, and, although it is our intent to maintain our investment grade credit ratings, there can be no assurance that we will be able to maintain our current credit ratings. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing indebtedness as maturities become due.

In June 2021, we issued $600.0 million of senior unsecured notes with an interest rate of 2.7 percent and a ten-year term, due July 15, 2031 (the "2031 Notes"). The net proceeds from the offering were approximately $592.4 million, after deducting underwriters' discounts and estimated offering expenses. The proceeds were used to pay down borrowings under our line of credit.

The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the 2031 Notes are guaranteed on a senior basis by Sun Communities, Inc. The guarantee is full and unconditional, and the Operating Partnership is a consolidated subsidiary of the Company. Under Rule 3-10 of Regulation S-X, as amended, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company's consolidated financial statements, the parent guarantee is "full and unconditional" and, subject to certain exceptions, the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), we have excluded the summarized financial information for the Operating Partnership as the assets, liabilities and results of operations of the Operating Partnership are not materially different from the corresponding amounts presented in our consolidated financial statements and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Unsecured Term Loan

In October 2019, we assumed a term loan facility, in the amount of $58.0 million in relation to an acquisition. The term loan has a four-year term ending October 29, 2023, and bears interest at a floating rate based on the Eurodollar rate or Prime rate plus a margin ranging from 1.20 percent to 2.05 percent. Effective July 1, 2021, the agreement was amended to release the associated collateral. The amendment extended the term loan facility maturity date to October 29, 2025 and adjusted the interest rate margin to a range from 0.80 percent to 1.60 percent. As of September 30, 2021, the margin was 0.95 percent. The outstanding balance was $35.3 million at September 30, 2021 and $45.0 million at December 31, 2020.


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Line of Credit

On June 14, 2021, we entered into a new credit agreement with certain lenders. The New Credit Agreement combined and replaced our prior $750.0 million A&R Facility and the $1.8 billion Safe Harbor Facility which were scheduled to mature on May 21, 2023 and October 11, 2024, respectively. The Safe Harbor Facility was terminated in connection with the execution of the New Credit Agreement. We repaid all amounts due and outstanding under the Safe Harbor Facility on or prior to such effective date. We recognized a Loss on extinguishment of debt in our Consolidated Statement of Operations related to the termination of the A&R Facility and Safe Harbor Facility of $0.2 million and $7.9 million, respectively.

Pursuant to the New Credit Agreement, we may borrow up to $2.0 billion under the New Credit Facility. The New Credit Facility is available to fund all of the Company's business, including its marina business conducted by Safe Harbor. The New Credit Agreement also permits, subject to the satisfaction of certain conditions, additional borrowings (with the consent of the lenders) in an amount not to exceed $1.0 billion with the option to treat all, or a portion, of such additional funds as an incremental term loan.

The New Credit Facility has a four-year term ending June 14, 2025, and, at our option, the maturity date may be extended for two additional six-month periods, subject to the satisfaction of certain conditions. However, the maturity date with respect to $500.0 million of available borrowing under the New Credit Facility is October 11, 2024, which, under the terms of the New Credit Agreement, may not be extended. The New Credit Facility bears interest at a floating rate based on the Adjusted Eurocurrency Rate or Australian Bank Bill Swap Bid Rate (BBSY), plus a margin that is determined based on the Company's credit ratings calculated in accordance with the New Credit Agreement, which can range from 0.725 percent to 1.400 percent. As of September 30, 2021, the margin based on our credit ratings was 0.850 percent on the New Credit Facility.

At the lenders' option, the New Credit Facility will become immediately due and payable upon an event of default under the New Credit Agreement. We had $589.5 million of borrowings on the New Credit Facility as of September 30, 2021, all scheduled to mature June 14, 2025. As of December 31, 2020, we had $40.4 million of borrowings on the revolving loan and no borrowings on the term loan under our A&R Facility, respectively. As of December 31, 2020, we had $652.0 million and $500.0 million of borrowings under the revolving loan and term loan under the Safe Harbor Facility, respectively.

The New Credit Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under the New Credit Facility, but does reduce the borrowing amount available. At September 30, 2021 and December 31, 2020, we had approximately $3.2 million and $2.4 million (including none and $0.3 million associated with Safe Harbor's prior credit facility) of outstanding letters of credit, respectively.

Pursuant to the terms of the New Credit Facility, we are subject to various financial and other covenants. The most restrictive financial covenants for the New Credit Facility are as follows:

CovenantRequirement
As of September 30, 2021
Maximum leverage ratio<65.0%25.1%
Minimum fixed charge coverage ratio>1.404.34
Maximum dividend payout ratio<95.0%49.2%
Maximum secured leverage ratio<40.0%16.2%

In addition, we are required to maintain the following covenants with respect to the senior unsecured notes payable:

CovenantRequirement
As of September 30, 2021
Total debt to total assets≤ 60.0%34.1%
Secured debt to total assets≤ 40.0%24.7%
Consolidated income available for debt service to debt service≥ 1.506.05
Unencumbered total asset value to total unsecured debt≥ 150.0%692.7%

As of September 30, 2021, we were in compliance with the above covenants and do not anticipate that we will be unable to meet these covenants in the near term.

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We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, expansion and development of properties, other nonrecurring capital improvements and Operating Partnership unit redemptions through the long-term unsecured and secured indebtedness and the issuance of certain debt or equity securities subject to market conditions.

We had unrestricted cash on hand as of September 30, 2021, of approximately $71.6 million. As of September 30, 2021, there was approximately $1.4 billion of remaining capacity on the New Credit Facility. At September 30, 2021 we had a total of 392 unencumbered MH, RV and Marina properties.

From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, issue unsecured notes, obtain other debt financing or sell selected assets. Our ability to finance our long-term liquidity requirements in such a manner will be affected by numerous economic factors affecting the MH, RV and marina industries at the time, including the effects of the COVID-19 pandemic, the availability and cost of mortgage debt, our financial condition, the operating history of the properties, the state of the debt and equity markets, and the general national, regional and local economic conditions. When it becomes necessary for us to approach the credit markets, the volatility in those markets could make borrowing more difficult to secure, more expensive, or effectively unavailable. See "Risk Factors" in Part I, Item 1A of our 2020 Annual Report. If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.

As of September 30, 2021, our net debt to enterprise value was approximately 17.1 percent (assuming conversion of all common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series C preferred OP units, Series D preferred OP units, Series E preferred OP units, Series F preferred OP units, Series G preferred OP units, Series H preferred OP units, Series I preferred OP units and Series J preferred OP units to shares of common stock). Our debt has a weighted average maturity of approximately 9.6 years and a weighted average interest rate of 3.3 percent.

Off-Balance Sheet Arrangements

Our off-balance sheet investments include nonconsolidated affiliates. These investments all have varying ownership structures. Substantially all of our nonconsolidated affiliates are accounted for under the equity method of accounting as we have the ability to exercise significant influence, but not control, over the operating and financial decisions of these joint venture arrangements. Refer to Note 6, "Investment in Nonconsolidated Affiliates," and Note 8, "Debt and Line of Credit," in the accompanying Consolidated Financial Statements, for additional information on our off-balance sheet investments.

Nonconsolidated Affiliate Indebtedness

GTSC - During September 2019, GTSC entered into a warehouse line of credit with a maximum loan amount of $125.0 million. During September 2020 and May 2021, the maximum amount was increased to $180.0 million and $230.0 million, respectively with an option to increase to $255.0 million subject to the lender's consent. As of September 30, 2021, the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $218.4 million (of which our proportionate share is $87.3 million). The debt bears interest at a variable rate based on LIBOR plus 1.65 percent per annum and matures on September 15, 2023. Refer to Note 6, "Investment in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information on our nonconsolidated affiliates.

Sungenia JV - During May 2020, Sungenia JV entered into a debt facility agreement with a maximum loan amount of $27.0 million Australian dollars, or $19.5 million converted at the September 30, 2021 exchange rate. As of September 30, 2021, the aggregate carrying amount of debt, including both our and our partners' share, incurred by Sungenia JV was $6.2 million (of which our proportionate share is $3.1 million). The debt bears interest at a variable rate based on Australian BBSY plus 2.05 percent per annum and is available for a minimum of three years. Refer to Note 6, "Investment in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information on our nonconsolidated affiliates.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report 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 we intend that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this filing 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 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 filing. 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" in our 2020 Annual Report, and in our other filings with the SEC, such risks and uncertainties 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, 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 and our senior unsecured notes;
availability of capital;
changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian and Australian dollars;
our ability to maintain rental rates and occupancy levels;
our 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 our capital stock;
our ability 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 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. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference into this filing, 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.
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SUN COMMUNITIES, INC.
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices and equity prices.

Interest Rate Risk

Our principal market risk exposure is interest rate risk. We mitigate this risk by maintaining prudent amounts of leverage, minimizing capital costs, and interest expense while continuously evaluating all available debt and equity resources and following established risk management policies and procedures, which include the periodic use of derivatives. Our primary strategy in entering into derivative contracts is to minimize the variability that interest rate changes could have on our future cash flows. From time to time, we employ derivative instruments that effectively convert a portion of our variable rate debt to fixed rate debt. We do not enter into derivative instruments for speculative purposes.

Our variable rate debt totaled $624.8 million and $79.3 million as of September 30, 2021 and 2020, respectively, and bears interest at the Adjusted Eurocurrency Rate or BBSY rate, plus a margin, and Prime or various LIBOR rates, respectively. If Adjusted Eurocurrency Rate or BBSY rate, and Prime or LIBOR rates increased or decreased by 1.0 percent, our interest expense would have increased or decreased by approximately $7.1 million and $1.7 million for the nine months ended September 30, 2021 and 2020, respectively, based on the $945.7 million and $231.1 million average balances outstanding under our variable rate debt facilities, respectively.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk is the risk that fluctuations in currencies against the U.S. dollar will negatively impact our results of operations. We are exposed to foreign currency exchange rate risk as a result of remeasurement and translation of the assets and liabilities of our Canadian properties, and our Australian equity investment and joint venture into U.S. dollars. Fluctuations in foreign currency exchange rates can therefore create volatility in our results of operations and may adversely affect our financial condition.

At September 30, 2021 and December 31, 2020, our stockholder's equity included $297.1 million and $250.8 million from our Canadian subsidiaries and Australian equity investments, respectively, which represented 4.4 percent and 4.5 percent of total stockholder's equity, respectively. Based on our sensitivity analysis, a 10.0 percent strengthening of the U.S. dollar against the Canadian and Australian dollar would have caused a reduction of $29.7 million and $25.1 million to our total stockholder's equity at September 30, 2021 and December 31, 2020.

Capital Market Risk

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under other financing arrangements. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.
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ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (pursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act) at September 30, 2021. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2021.

In October 2020, we completed the acquisition of Safe Harbor and are currently integrating Safe Harbor into our operations, compliance program and internal control processes. Safe Harbor constituted approximately 23 percent of our total assets as of December 31, 2020, including the goodwill and other intangible assets recorded as part of the purchase price allocation, and three percent of our revenues for the year ended December 31, 2020. SEC regulations allow companies to exclude acquisitions from their assessment of internal control over financial reporting during the first year following an acquisition. We are finalizing the integration of Safe Harbor's control framework and expect that to be completed during the three months ending December 31, 2021. Accordingly, we have excluded the acquired operations of Safe Harbor from our assessment of our internal control over financial reporting for the nine months ended September 30, 2021. As of September 30, 2021, Safe Harbor represented approximately 28 percent of our total assets and 24 percent of our revenues in the nine months ended September 30, 2021.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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SUN COMMUNITIES, INC.
PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Refer to "Legal Proceedings" in Part 1 - Item 1 - Note 15, "Commitments and Contingencies," in our accompanying Consolidated Financial Statements.

ITEM 1A.  RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risk factors described in Part 1, Item 1A., "Risk Factors," in our 2020 Annual Report, which could materially affect our business, financial condition or future results. There have been no material changes to the disclosure on these matters as set forth in such report.
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ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Holders of our OP units have converted the following units during the three months ended September 30, 2021:

Three Months Ended
September 30, 2021
SeriesConversion RateUnits / Shares Converted
Common Stock(1)
Common OP units1.0000 40,862 40,862 
Series A-1 preferred OP units2.4390 12,686 30,939 
(1)Calculation may yield minor differences due to rounding incorporated in the above numbers.

All of the above shares of common stock were issued in private placements in reliance on Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, based on certain investment representations made by the parties to whom the securities were issued. No underwriters were used in connection with any of such issuances.
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ITEM 6.  EXHIBITS

Exhibit No.DescriptionMethod of Filing
3.1Incorporated by reference to Sun Communities, Inc.'s Annual Report on Form 10-K filed on February 22, 2018
3.2Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on May 12, 2017
4.1Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on October 5, 2021
4.2Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on October 5, 2021
10.1*Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on July 20, 2021
10.2*Incorporated by reference to Sun Communities Inc.'s Current Report on Form 8-K filed on October 18, 2021
22.1Filed herewith
31.1Filed herewith
31.2Filed herewith
32.1Filed herewith
101.INSXBRL Instance Document
The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
104Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)Filed herewith
* Certain schedules and exhibits have been omitted pursuance to Item 601(a)(5) of Regulation S-K because such schedules and exhibits do not contain information which is material to an investment decision or which is not otherwise disclosed in the filed agreements. The Company will furnish the omitted schedules and exhibits to the SEC upon request by the SEC.
# Management contract or compensatory plan or arrangement.
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SUN COMMUNITIES, INC.
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Dated: October 26, 2021By:/s/ Karen J. Dearing
  
Karen J. Dearing, Chief Financial Officer and Secretary
(Duly authorized officer and principal financial officer)

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