# SUN COMMUNITIES INC (SUI) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SUN COMMUNITIES INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/912593/000091259324000094/sui-20231231.htm
Accession: 0000912593-24-000094
Filing date: 2024-02-28
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SUI/
All MD&A years: /company/SUI/mda/
Previous year: /company/SUI/mda/fy2022/ (FY 2022)
Next year: /company/SUI/mda/fy2024/ (FY 2024)

ITEM 7. 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 accompanying footnotes thereto included in this Annual Report on Form 10-K. In addition to the results presented in accordance with GAAP below, we have provided NOI and FFO information as supplemental performance measures. Refer to Non-GAAP Financial Measures in this Item 7 for additional information.

OVERVIEW

We are a fully integrated REIT. As of December 31, 2023, we owned and operated, directly or indirectly, or had an interest in, a portfolio of 667 developed properties located in the U.S., the UK, and Canada, including 353 MH communities, 179 RV communities and 135 marinas. We have been in the business of acquiring, operating, developing and expanding MH and RV communities 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 in the U.S. and in the sale of holiday home and associated site license activities to holiday homeowners in our MH communities in the UK. The Rental Program operations within our MH communities support and enhance our occupancy levels, property performance and cash flows.

Catastrophic Event-Related Charges - Hurricane Ian

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

We maintain property, casualty, flood and business interruption insurance for our community portfolio, subject to customary deductibles and limits. As of December 31, 2023, estimated insurance recoveries, excluding business interruption recoveries, of $56.7 million related to Hurricane Ian were recorded in Notes and other receivables, net on the Consolidated Balance Sheets.

Changes in estimated insurance recoveries related to Hurricane Ian during the year ended December 31, 2023 were primarily the result of $51.5 million of incremental costs that exceeded the applicable deductible, net of a $4.8 million reduction due to a decrease in estimated property losses. The foregoing estimates are based on current information available, and we continue to assess these estimates. Actual charges and insurance recoveries could vary significantly from these estimates. Any changes to these estimates will be recognized in the period(s) in which they are determined.

We are actively working with our insurance providers on claims for business interruption recoveries. During the year ended December 31, 2023, we recognized $20.2 million, net of deductibles, for the lost earnings covering the date of the hurricane event through August 31, 2023. These recoveries were included in Brokerage commissions and other, net on our Consolidated Statements of Operations during the year ended December 31, 2023. The related communities are under redevelopment. As such, we currently cannot estimate a date when operating results will be restored to pre-hurricane levels. Our business interruption insurance policy provides for up to 60 months of coverage from the date of restoration.

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SUN COMMUNITIES, INC.

EXECUTIVE SUMMARY

2023 General Overview

•Total revenues for 2023 increased 8.6% to $3.2 billion.

•Achieved annual Core FFO of $7.10 per diluted share and OP unit.

•Achieved Real property Same Property NOI growth of 6.8% for MH, 4.8% for RV and 11.7% for Marina over 2022.

•Increased Same Property adjusted blended occupancy for MH and RV by 230 basis points to 98.9% as compared to 96.6% in 2022.

•Achieved 10-year total shareholder return of 323.1%, outperforming the MSCI US REIT, Russell 1000, U.S. REIT Residential and S&P 500 indexes.

•Completed the construction of over 800 total sites at five ground-up developments and 14 expansion and re-development properties.

•Completed acquisition investments of $368.7 million which represents the purchase price paid for operating properties and land parcels for future ground-up development and expansion activities, plus any capital improvements identified during due diligence needed to bring acquired properties up to the Company's operating standards.

•Closed $836.9 million of debt transactions, including an offering of underwritten senior unsecured notes of $400.0 million for net proceeds of $395.3 million which was used to pay down amounts drawn under our senior credit facility (the "Senior Credit Facility").

•Entered into derivative instruments with an aggregate notional value of $582.3 million to hedge interest rate risk associated with borrowings under our Senior Credit Facility and future debt issuance.

•Completed the sale of our 41.8 million share position in Ingenia Communities Group, generating $102.5 million of net proceeds, which was used to pay down amounts drawn under our Senior Credit Facility.

•Completed the transfer of an installment note receivable portfolio to an unrelated entity, generating net proceeds of $53.4 million that were used to pay down borrowings under our Senior Credit Facility.

•Simplified the structure of certain of our consolidated variable interest entities in a transaction with our joint venture partner.

Property Operations

Occupancy in our MH and annual RV properties, as well as our ability to increase rental rates, directly affect revenues. Our revenue streams are predominantly derived from customers renting our sites on a long-term basis. Our Same Property communities continue to achieve revenue and occupancy increases which drive continued NOI growth. Our Same Property marinas achieved revenue increases which contributed to our NOI growth.

[[GREPCENT_TABLE]]
[["","","Year Ended"],["Portfolio Information:","","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Occupancy % - Total Portfolio - MH and Annual RV Occupancy(1)","","96.4","%","","96.0","%","","97.4","%"],["Occupancy % - Same Property - Adjusted MH and Annual RV Occupancy(1)(2)(3)","","98.9","%","","96.6","%","","96.8","%"],["Core FFO per share","","$","7.10","","","$","7.35","","","$","6.51"],["Real property NOI - Total Portfolio (in millions)","","$","1,251.9","","","$","1,167.0","","","$","1,002.6"],["Real property NOI - Same Property (in millions) - MH, RV and Marina(3)","","$","1,139.1","","","$","1,061.9","","","$","928.0"],["Home sales volume - North America","","2,565","","","3,212","","","4,088"],["Home sales volume - United Kingdom(4)","","2,857","","","2,343","","","N/A"]]
[[/GREPCENT_TABLE]]

(1) Occupancy percent includes annual RV sites and excludes transient RV sites.

(2) Occupancy percent excludes recently completed but vacant expansion sites.

(3) Same Property is based on the reported year end Same Property count for each respective year.

(4) UK amounts for the year ended December 31, 2022 cover the period from April 8, 2022 (date of acquisition) through December 31, 2022.

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SUN COMMUNITIES, INC.

Acquisition Activity

During the year ended December 31, 2023, we acquired one MH community with 68 sites and 72 development sites, and one marina with 24 wet slips and dry storage spaces, for a total purchase price of approximately $107.0 million. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for details of our acquisition activities.

Disposition Activity

Management continually evaluates properties within the portfolio for potential disposition opportunities. When a given property no longer fits our desired growth profile, we seek to redeploy capital to properties and geographies fit to provide greater future returns. From time to time, strategic reductions to the portfolio are necessary to reduce exposure to less desirable locations and support long-term positioning of the Company.

During the year ended December 31, 2023, we sold one MH community located in Maine, with 155 sites for $6.8 million. In addition, we sold two parcels of land in the UK for total consideration of $111.5 million, which primarily consisted of $108.8 million in the form of an operator note receivable and subsequently reacquired these two parcels of land at fair value as part of the settlement of the related note receivable, with no remeasurement gain or loss recognized. Also, as part of a broader transaction with our joint venture partners in Sun NG, we disposed of our majority equity interest in three consolidated joint venture properties. The three RV communities had 955 developed sites. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for details on the disposition activities, Note 4, "Notes and Other Receivables," for additional information on the settlement of the notes receivable, and Note 8, "Consolidated Variable Interest Entities," for more information on the Sun NG transaction.

Real Estate Held For Sale - Changes to a Plan of Sale

We periodically classify real estate as held for sale after an active program to sell an asset has commenced and when the sale is probable. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded.

In February 2023, the criteria was met to classify Sandy Bay, an operating MH community in the UK, with 730 developed sites, as held for sale. Previously, this property had been under contract. At December 31, 2023, the sale contract was no longer in effect, and due to an unexpected change in circumstance related to the counterparty, we reclassified the property as held for use and recorded the related depreciation and amortization expense in accordance with ASC Topic 360, "Property, Plant, and Equipment" during the three months ended December 31, 2023. Refer to Note 3, "Real Estate Acquisitions and Dispositions," for additional information.

Development and Expansion Activities

We have been focused selectively on property ground-up developments and expansion opportunities adjacent to our existing properties.

Ground-up Developments - During the year ended December 31, 2023, we delivered 360 total sites at five ground-up development properties located in Florida, Michigan and Colorado. We have developed over 2,230 sites within the past three years.

Expansions - During the year ended December 31, 2023, we expanded over 440 total sites at 14 properties. We have developed over 2,170 expansion sites within the past three years.

We continue to expand our properties utilizing our inventory of owned and entitled land. We have approximately 17,980 MH and RV sites suitable for future development.

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SUN COMMUNITIES, INC.

Markets

Our MH and RV properties are largely concentrated in the U.S. in Florida, Michigan, Texas and California, and in the UK, which collectively contain 66.3% of our total MH and RV sites. We have expanded our market share in multiple states through recent acquisitions and increased our property holdings in high-growth areas of the U.S. including retirement and vacation destinations.

The age demographic of RV communities is attractive, as the population of retirement age adults in the U.S. is growing. RV communities have become a trending vacation opportunity not only for the retiree population, but as an affordable vacation alternative for families and millennials.

The following table identifies our MH and RV markets by total sites:

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["Major Market","","Number of Properties","","Total Sites","","% of Total Sites","","Number of Properties","","Total Sites","","% of Total Sites"],["Florida","","129","","","44,410","","","24.8","%","","129","","","44,280","","","24.7","%"],["Michigan","","85","","","33,500","","","18.7","%","","84","","","33,220","","","18.5","%"],["Texas","","29","","","10,820","","","6.0","%","","31","","","11,340","","","6.3","%"],["California","","37","","","8,800","","","4.9","%","","37","","","8,800","","","4.9","%"],["Arizona","","13","","","5,510","","","3.1","%","","13","","","5,520","","","3.1","%"],["Ontario, Canada","","16","","","5,180","","","2.9","%","","16","","","5,240","","","2.9","%"],["Indiana","","12","","","4,180","","","2.3","%","","12","","","4,180","","","2.3","%"],["New Jersey","","11","","","4,040","","","2.3","%","","11","","","4,040","","","2.3","%"],["Colorado","","11","","","3,890","","","2.2","%","","11","","","3,790","","","2.1","%"],["Maine","","15","","","3,540","","","2.0","%","","16","","","3,660","","","2.0","%"],["Virginia","","10","","","3,450","","","1.9","%","","10","","","3,450","","","1.9","%"],["Ohio","","9","","","2,980","","","1.7","%","","9","","","2,930","","","1.6","%"],["New York","","10","","","2,940","","","1.6","%","","10","","","2,940","","","1.6","%"],["South Carolina","","6","","","2,620","","","1.5","%","","6","","","2,620","","","1.5","%"],["Illinois","","5","","","2,240","","","1.2","%","","5","","","2,230","","","1.2","%"],["New Hampshire","","9","","","2,170","","","1.2","%","","10","","","2,380","","","1.3","%"],["Connecticut","","16","","","2,000","","","1.1","%","","16","","","2,010","","","1.1","%"],["Delaware","","5","","","1,980","","","1.1","%","","5","","","1,980","","","1.1","%"],["Maryland","","6","","","1,860","","","1.0","%","","6","","","1,860","","","1.0","%"],["Pennsylvania","","5","","","1,540","","","0.9","%","","5","","","1,540","","","0.9","%"],["Georgia","","4","","","1,420","","","0.8","%","","4","","","1,420","","","0.8","%"],["Oregon","","6","","","1,380","","","0.8","%","","6","","","1,380","","","0.8","%"],["North Carolina","","5","","","1,180","","","0.7","%","","5","","","1,180","","","0.7","%"],["Utah","","6","","","930","","","0.5","%","","6","","","930","","","0.5","%"],["Massachusetts","","3","","","920","","","0.5","%","","3","","","920","","","0.5","%"],["Washington","","2","","","780","","","0.4","%","","2","","","780","","","0.4","%"],["Wisconsin","","2","","","590","","","0.3","%","","2","","","590","","","0.3","%"],["Tennessee","","2","","","550","","","0.3","%","","2","","","540","","","0.3","%"],["Alabama","","1","","","500","","","0.3","%","","1","","","500","","","0.3","%"],["Minnesota","","1","","","470","","","0.3","%","","1","","","480","","","0.3","%"],["Iowa","","1","","","410","","","0.2","%","","1","","","410","","","0.2","%"],["Kentucky","","1","","","330","","","0.2","%","","1","","","330","","","0.2","%"],["Louisiana","","1","","","330","","","0.2","%","","1","","","330","","","0.2","%"],["Nevada","","1","","","320","","","0.2","%","","1","","","320","","","0.2","%"],["Mississippi","","1","","","160","","","0.1","%","","1","","","150","","","0.1","%"],["Montana","","1","","","80","","","\u2014","%","","1","","","80","","","\u2014","%"],["North American Total","","477","","","158,000","","","88.1","%","","480","","","158,350","","","88.2","%"],["United Kingdom","","55","","","21,310","","","11.9","%","","55","","","21,180","","","11.8","%"],["Total","","532","","","179,310","","","100.0","%","","535","","","179,530","","","100.0","%"]]
[[/GREPCENT_TABLE]]

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SUN COMMUNITIES, INC.

The following table identifies our marina markets by total wet slips and dry storage spaces:

[[GREPCENT_TABLE]]
[["","","December 31, 2023","","December 31, 2022"],["Major Market","","Number of Properties","","","","","","Wet Slips and Dry Storage Spaces","","% Wet Slips and Dry Storage Spaces","","Number of Properties","","","","","","Wet Slips and Dry Storage Spaces","","% Wet Slips and Dry Storage Spaces"],["California","","11","","","","","","","5,710","","","11.9","%","","11","","","","","","","5,710","","","11.9","%"],["Florida","","21","","","","","","","5,200","","","10.8","%","","21","","","","","","","5,050","","","10.6","%"],["Michigan","","7","","","","","","","3,900","","","8.1","%","","7","","","","","","","3,790","","","7.9","%"],["Rhode Island","","12","","","","","","","3,460","","","7.2","%","","12","","","","","","","3,420","","","7.2","%"],["Connecticut","","11","","","","","","","3,330","","","6.9","%","","11","","","","","","","3,330","","","7.0","%"],["New York","","9","","","","","","","3,020","","","6.3","%","","9","","","","","","","3,020","","","6.3","%"],["Georgia","","5","","","","","","","2,860","","","6.0","%","","4","","","","","","","2,840","","","5.9","%"],["North Carolina","","7","","","","","","","2,660","","","5.5","%","","7","","","","","","","2,660","","","5.6","%"],["Massachusetts","","9","","","","","","","2,520","","","5.2","%","","9","","","","","","","2,520","","","5.3","%"],["Maryland","","9","","","","","","","2,480","","","5.2","%","","9","","","","","","","2,630","","","5.5","%"],["Kentucky","","5","","","","","","","2,370","","","4.9","%","","5","","","","","","","2,370","","","5.0","%"],["Texas","","3","","","","","","","2,060","","","4.3","%","","3","","","","","","","2,060","","","4.3","%"],["South Carolina","","8","","","","","","","1,820","","","3.8","%","","8","","","","","","","1,820","","","3.8","%"],["Puerto Rico","","1","","","","","","","1,610","","","3.4","%","","1","","","","","","","1,610","","","3.4","%"],["Ohio","","2","","","","","","","1,040","","","2.2","%","","2","","","","","","","1,040","","","2.2","%"],["Alabama","","1","","","","","","","760","","","1.6","%","","1","","","","","","","720","","","1.5","%"],["Mississippi","","1","","","","","","","590","","","1.2","%","","1","","","","","","","590","","","1.2","%"],["Arkansas","","1","","","","","","","580","","","1.2","%","","1","","","","","","","580","","","1.2","%"],["Virginia","","2","","","","","","","420","","","0.9","%","","2","","","","","","","420","","","0.9","%"],["New Jersey","","2","","","","","","","410","","","0.9","%","","2","","","","","","","410","","","0.9","%"],["Tennessee","","2","","","","","","","390","","","0.8","%","","2","","","","","","","390","","","0.8","%"],["Maine","","3","","","","","","","250","","","0.5","%","","3","","","","","","","250","","","0.5","%"],["New Hampshire","","1","","","","","","","220","","","0.5","%","","1","","","","","","","220","","","0.5","%"],["Vermont","","1","","","","","","","210","","","0.4","%","","1","","","","","","","210","","","0.4","%"],["Oklahoma","","1","","","","","","","160","","","0.3","%","","1","","","","","","","160","","","0.3","%"],["","","135","","","","","","","48,030","","","","","134","","","","","","","47,820"]]
[[/GREPCENT_TABLE]]

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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

Total Portfolio NOI - NOI is derived from property 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 NOI provides enhanced comparability for investor evaluation of properties' performance and growth over time.

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.

Same Property NOI - This is a management tool used when evaluating the performance and growth of our Same Property portfolio. We define same properties as those we have owned and operated continuously since January 1, 2022. Same properties exclude ground-up development properties, acquired properties and properties sold after December 31, 2021. The Same Property data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions or unique situations. Same Property NOI does not include the revenues and expenses related to home sales, and service, retail, dining and entertainment activities at the properties. We believe that Same Property NOI is helpful to investors as a supplemental comparative performance measure of the income generated from the Same Property portfolio from one period to the next.

FFO

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, real estate related to impairment and 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.

Core FFO - In addition, we use FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business ("Core FFO").

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SUN COMMUNITIES, INC.

We believe that FFO and Core FFO provide 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 financial performance measure or GAAP cash flow from operating activities as a measure of our liquidity. 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. Furthermore, 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

Summary Statements of Operations

The following tables reconcile the Net Income / (Loss) attributable to Sun Communities, Inc. common shareholders to NOI and summarize our consolidated financial results for the years ended December 31, 2023, 2022 and 2021 (in millions):

[[GREPCENT_TABLE]]
[["","","Year Ended"],["","","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Net income / (loss) attributable to SUI common shareholders","","$","(213.3)","","","$","242.0","","","$","380.2"],["Interest income","","(45.4)","","","(35.2)","","","(12.2)"],["Brokerage commissions and other revenues, net","","(60.6)","","","(34.9)","","","(30.2)"],["General and administrative","","270.2","","","256.8","","","181.3"],["Catastrophic event-related charges, net","","3.8","","","17.5","","","2.2"],["Business combinations","","3.0","","","24.7","","","1.4"],["Depreciation and amortization","","660.0","","","601.8","","","522.7"],["Asset impairments","","10.1","","","3.0","","","\u2014"],["Goodwill impairment","","369.9","","","\u2014","","","\u2014"],["Loss on extinguishment of debt (see Note 9)","","\u2014","","","4.4","","","8.1"],["Interest expense","","325.8","","","229.8","","","158.6"],["Interest on mandatorily redeemable preferred OP units / equity","","3.3","","","4.2","","","4.2"],["(Gain) / loss on remeasurement of marketable securities (see Note 15)","","16.0","","","53.4","","","(33.5)"],["(Gain) / loss on foreign currency exchanges","","0.3","","","(5.4)","","","3.7"],["Gain on disposition of properties","","(11.0)","","","(12.2)","","","(108.1)"],["Other expense, net","","7.5","","","2.1","","","12.1"],["(Gain) / loss on remeasurement of notes receivable (see Note 4)","","106.7","","","0.8","","","(0.7)"],["Income from nonconsolidated affiliates (see Note 7)","","(16.0)","","","(2.9)","","","(4.0)"],["Loss on remeasurement of investment in nonconsolidated affiliates (see Note 7)","","4.2","","","2.7","","","0.2"],["Current tax expense (see Note 13)","","14.5","","","10.3","","","1.2"],["Deferred tax (benefit) / expense (see Note 13)","","(22.9)","","","(4.2)","","","0.1"],["Add: Preferred return to preferred OP units / equity interests","","12.3","","","11.0","","","12.1"],["Add: Income / (loss) attributable to noncontrolling interests","","(8.1)","","","10.8","","","21.5"],["NOI","","$","1,430.3","","","$","1,380.5","","","$","1,120.9"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Year Ended"],["","","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Real property NOI","","$","1,251.9","","","$","1,167.0","","","$","1,002.6"],["Home sales NOI","","124.5","","","154.6","","","74.4"],["Service, retail, dining and entertainment NOI","","53.9","","","58.9","","","43.9"],["NOI","","$","1,430.3","","","$","1,380.5","","","$","1,120.9"]]
[[/GREPCENT_TABLE]]

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SUN COMMUNITIES, INC.

Seasonality of Revenue

The RV and marina industries are seasonal in nature, and the results of operations in any one period may not be indicative of results in future periods.

In the RV segment, certain properties maintain higher occupancy during the summer months, while other properties maintain higher occupancy during the winter months. Based on the location of our properties with transient RV sites, our portfolio generally produces higher revenues between April and September than between October and March. The following table presents the seasonality of real property-transient revenue for the years ended December 31, 2023, 2022 and 2021:

[[GREPCENT_TABLE]]
[["","Real property - transient revenue (in millions)","","For the Three Months Ended"],["Year","","March 31","","June 30","","September 30","","December 31","","Total"],["2023","$","321.4","","","12.4","%","","27.8","%","","47.3","%","","12.5","%","","100.0","%"],["2022","$","334.5","","","12.7","%","","27.8","%","","45.8","%","","13.7","%","","100.0","%"],["2021","$","266.6","","","11.9","%","","27.3","%","","44.9","%","","15.9","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

In the marina market, the majority of our wet slip and dry storage space leases have annual terms that are billed seasonally. Wet slip storage increases during the summer months for the boating season, whereas dry storage increases during the winter season as weather patterns require boat owners to store their vessels on dry docks or within covered racks. The following table presents the seasonality of Marina real property revenue for the years ended December 31, 2023, 2022 and 2021:

[[GREPCENT_TABLE]]
[["","Seasonal real property revenue(in millions)","","For the Three Months Ended"],["Year","","March 31","","June 30","","September 30","","December 31","","Total"],["2023","$","348.7","","","20.8","%","","25.9","%","","28.6","%","","24.7","%","","100.0","%"],["2022","$","310.2","","","20.1","%","","25.6","%","","29.0","%","","25.3","%","","100.0","%"],["2021","$","246.6","","","17.7","%","","25.0","%","","29.9","%","","27.4","%","","100.0","%"]]
[[/GREPCENT_TABLE]]

60

SUN COMMUNITIES, INC.

Real Property Operations - Total Portfolio

The following tables reflect certain financial and other information for our real estate operations by segment as of and for the years ended December 31, 2023 and 2022 (in millions, except for statistical information):

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023","","Year Ended December 31, 2022"],["","MH","","","","","","","","MH"],["Financial Information","North America","","UK","","Total","","RV","","Marinas","","Total","","North America","","UK(a)","","Total","","RV","","Marinas","","Total"],["Revenues"],["Real property (excluding transient)","$","906.1","","$","114.2","","","$","1,020.3","","","$","287.1","","","$","406.8","","$","1,714.2","","$","844.0","","$","70.1","","$","914.1","","","$","268.9","","","$","365.9","","$","1,548.9"],["Real property - transient","1.9","","42.1","","","44.0","","","276.8","","","24.8","","345.6","","1.6","","38.5","","40.1","","","294.4","","","18.8","","353.3"],["Total operating revenues","908.0","","156.3","","","1,064.3","","","563.9","","","431.6","","2,059.8","","845.6","","108.6","","954.2","","","563.3","","","384.7","","1,902.2"],["Expenses"],["Property operating expenses","297.5","","89.6","","","387.1","","","262.1","","","158.7","","807.9","","274.6","","57.6","","332.2","","","261.4","","","141.6","","735.2"],["Real Property NOI","$","610.5","","$","66.7","","","$","677.2","","","$","301.8","","","$","272.9","","$","1,251.9","","$","571.0","","$","51.0","","$","622.0","","","$","301.9","","","$","243.1","","$","1,167.0"],["","As of December 31, 2023","","As of December 31, 2022"],["","MH","","","","","","","","MH"],["Other information","North America","","UK","","Total","","RV","","Marinas","","Total","","North America","","UK(a)","","Total","","RV","","Marinas","","Total"],["Number of properties","298","","55","","353","","179","","135","","667","","298","","55","","353","","182","","134","","669"],["Sites, wet slips and dry storage spaces"],["Sites, wet slips and dry storage spaces(b)","100,320","","18,110","","118,430","","32,390","","48,030","","198,850","","99,980","","18,040","","118,020","","30,330","","47,820","","196,170"],["Transient sites","N/M","","3,200","","3,200","","25,290","","N/A","","28,490","","N/M","","3,140","","3,140","","28,040","","N/A","","31,180"],["Total","100,320","","21,310","","121,630","","57,680","","48,030","","227,340","","99,980","","21,180","","121,160","","58,370","","47,820","","227,350"],["MH and Annual RV Occupancy","96.6","%","","89.5","%","","95.5","%","","100.0","%","","N/A","","96.4","%","","95.9","%","","89.0","%","","95.0","%","","100.0","%","","N/A","","96.0","%"]]
[[/GREPCENT_TABLE]]

N/M = Not meaningful.

N/A = Not applicable.

(a) UK amounts for the year ended December 31, 2022 cover April 8, 2022 (date of acquisition) to December 31, 2022.

(b) MH annual sites included 10,237 and 9,334 rental homes in our Rental Program at December 31, 2023 and 2022, respectively. Our investment in occupied rental homes at December 31, 2023 was $697.1 million, an increase of 21.8% from $572.3 million at December 31, 2022.

For the year ended December 31, 2023, the $84.9 million, or 7.3% increase in Real Property NOI as compared to the same period in 2022, consists of $39.0 million from Same Property MH and $13.5 million from Same Property RV from the North America operations, $24.7 million from Same Property Marina, and $7.7 million, net from the UK operations and other recently acquired or developed properties.

61

SUN COMMUNITIES, INC.

Real Property Operations - Same Property Portfolio

Same Property refers to properties that we have owned for at least the preceding year, exclusive of properties recently completed or under construction, and other properties as determined by management. The Same Property 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 Property portfolio, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Property 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. Additionally, for the MH and RV segments, the amounts in the tables below reflect constant currency for comparative purposes. Additionally, prior period Canadian currency figures have been translated at 2023 and 2022 average exchange rates for constant currency comparability.

62

SUN COMMUNITIES, INC.

Real Property Operations - Same Property - MH, RV and Marina

The following tables reflect certain financial and other information for our Same Property MH, RV and Marina portfolios as of and for the years ended December 31, 2023 and 2022 (in millions, except for statistical information).

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022","","Total Change","","% Change(c)"],["","MH(a)","","RV(a)","","Marina","","Total","","MH(a)","","RV(a)","","Marina","","Total","","","MH","","RV","","Marina","","Total(d)"],["Financial information"],["Same Property Revenues"],["Real property (excluding transient)","$","830.4","","","$","263.8","","","$","326.0","","","$","1,420.2","","","$","776.2","","","$","228.1","","","$","302.4","","","$","1,306.7","","","$","113.5","","","7.0","%","","15.6","%","","7.8","%","","8.7","%"],["Real property - transient","1.6","","","256.2","","","21.7","","","279.5","","","1.2","","","275.4","","","16.4","","","293.0","","","(13.5)","","","25.9","%","","(7.0)","%","","32.6","%","","(4.6)","%"],["Total Same Property operating revenues","832.0","","","520.0","","","347.7","","","1,699.7","","","777.4","","","503.5","","","318.8","","","1,599.7","","","100.0","","","7.0","%","","3.3","%","","9.1","%","","6.2","%"],["Same Property Expenses"],["Same Property operating expenses(b)(d)","223.8","","","224.7","","","112.1","","","560.6","","","208.2","","","221.7","","","107.9","","","537.8","","","22.8","","","7.5","%","","1.4","%","","3.9","%","","4.2","%"],["Real Property NOI(d)","$","608.2","","","$","295.3","","","$","235.6","","","$","1,139.1","","","$","569.2","","","$","281.8","","","$","210.9","","","$","1,061.9","","","$","77.2","","","6.8","%","","4.8","%","","11.7","%","","7.3","%"],["Other information"],["Number of properties","288","","","160","","","119","","","567","","","288","","","160","","","119","","","567"],["Sites, wet slips and dry storage spaces","98,620","","","54,370","","","40,890","","","193,880","","","98,340","","","54,400","","","41,000","","","193,740"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2022","","December 31, 2021","","Total Change","","% Change(c)"],["","MH(a)","","RV(a)","","Marina","","Total","","MH(a)","","RV(a)","","Marina","","Total","","","MH","","RV","","Marina","","Total(d)"],["Financial information"],["Same Property Revenues"],["Real property (excluding transient)","$","759.7","","","$","213.1","","","$","233.7","","","$","1,206.5","","","$","726.4","","","$","188.4","","","$","217.0","","","$","1,131.8","","","$","74.7","","","4.6","%","","13.1","%","","7.8","%","","6.6","%"],["Real property - transient","1.2","","","243.8","","","12.4","","","257.4","","","1.5","","","236.1","","","13.0","","","250.6","","","6.8","","","(14.8)","%","","3.3","%","","(5.1)","%","","2.7","%"],["Total Same Property operating revenues","760.9","","","456.9","","","246.1","","","1,463.9","","","727.9","","","424.5","","","230.0","","","1,382.4","","","81.5","","","4.5","%","","7.6","%","","7.0","%","","5.9","%"],["Same Property Expenses"],["Same Property operating expenses(b)(d)","202.7","","","195.4","","","84.1","","","482.2","","","187.5","","","187.4","","","79.5","","","454.4","","","27.8","","","8.1","%","","4.2","%","","5.8","%","","6.1","%"],["Real Property NOI(d)","$","558.2","","","$","261.5","","","$","162.0","","","$","981.7","","","$","540.4","","","$","237.1","","","$","150.5","","","$","928.0","","","$","53.7","","","3.3","%","","10.3","%","","7.7","%","","5.8","%"],["Other information"],["Number of properties","276","","","145","","","101","","","522","","","276","","","145","","","101","","","522"],["Sites, wet slips and dry storage spaces","94,930","","","48,770","","","35,550","","","179,250","","","94,400","","","48,720","","","35,740","","","178,860"]]
[[/GREPCENT_TABLE]]

(a) Same Property results for our MH and RV properties reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at the average exchange rate during the years ended December 31, 2023 and 2022 of $0.7418 and $0.7689 USD per Canadian dollar, respectively.

63

SUN COMMUNITIES, INC.

Real Property Operations - Same Property Portfolio (Continued)

(b) We net certain utilities revenues (which include utility reimbursement revenues from residents) against related utility expenses in property operating expenses as follows (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023","","Year Ended December 31, 2022"],["","MH","","RV","","Marina","","Total","","MH","","RV","","Marina","","Total"],["Utility revenue netted against related utility expense","$","68.3","","","$","19.3","","","$","22.7","","","$","110.3","","","$","63.8","","","$","18.1","","","$","19.2","","","$","101.1"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2022","","Year Ended December 31, 2021"],["","MH","","RV","","Marina","","Total","","MH","","RV","","Marina","","Total"],["Utility revenue netted against related utility expense","$","61.9","","","$","17.1","","","$","11.4","","","$","90.4","","","$","57.3","","","$","14.1","","","$","11.1","","","$","82.5"]]
[[/GREPCENT_TABLE]]

(c) Percentages are calculated based on unrounded numbers.

(d) Total Same Property operating expenses consist of the following components for the periods shown (in millions), and exclude amounts invested into recently acquired properties to bring them up to our standards.

[[GREPCENT_TABLE]]
[["","Year Ended","","Year Ended"],["","December 31, 2023","","December 31, 2022","","Change","","% Change","","December 31, 2022","","December 31, 2021","","Change","","% Change"],["Payroll and benefits","$","190.6","","","$","181.6","","","$","9.0","","","5.0","%","","$","161.8","","","$","151.2","","","$","10.6","","","7.0","%"],["Real estate taxes","107.2","","","103.1","","","4.1","","","4.0","%","","94.1","","","88.4","","","5.7","","","6.5","%"],["Supplies and repairs","75.2","","","78.9","","","(3.7)","","","(4.7)","%","","73.0","","","68.2","","","4.8","","","6.9","%"],["Utilities","64.7","","","67.0","","","(2.3)","","","(3.4)","%","","63.3","","","57.3","","","6.0","","","10.4","%"],["Legal, state / local taxes, and insurance","55.8","","","39.2","","","16.6","","","42.3","%","","35.7","","","32.4","","","3.3","","","10.1","%"],["Other","67.1","","","68.0","","","(0.9)","","","(1.4)","%","","54.3","","","56.9","","","(2.6)","","","(4.6)","%"],["Total Same Property Operating Expenses","$","560.6","","","$","537.8","","","$","22.8","","","4.2","%","","$","482.2","","","$","454.4","","","$","27.8","","","6.1","%"]]
[[/GREPCENT_TABLE]]

64

SUN COMMUNITIES, INC.

Same Property Summary (in whole units)

[[GREPCENT_TABLE]]
[["","As of","","As of"],["","December 31, 2023","","December 31, 2022","","December 31, 2022","","December 31, 2021"],["","MH","","RV","","MH","","RV","","MH","","RV","","MH","","RV"],["Other Information"],["Number of properties","288","","160","","288","","160","","276","","145","","276","","145"],["Sites"],["MH and Annual RV sites","98,620","","32,090","","98,340","","30,030","","94,930","","28,420","","94,400","","26,660"],["Transient RV sites","N/M","","22,280","","N/M","","24,370","","N/M","","20,350","","N/M","","22,060"],["Total","98,620","","54,370","","98,340","","54,400","","94,930","","48,770","","94,400","","48,720"],["MH & Annual RV Occupancy"],["Occupancy(a)","97.3","%","","100.0","%","","96.6","%","","100.0","%","","97.1","%","","100.0","%","","97.2","%","","100.0","%"],["Monthly base rent per site","$","670","","","$","593","","","$","630","","","$","546","","","$","635","","","$","555","","","$","607","","","$","516"],["% change in monthly base rent(b)","6.4","%","","8.7","%","","N/A","","N/A","","4.6","%","","7.6","%","","N/A","","N/A"],["Rental Program Statistics included in MH:"],["Number of occupied sites, end of period(c)","10,010","","","N/A","","9,310","","N/A","","8,930","","","N/A","","9,570","","N/A"],["Monthly rent per site - MH Rental Program","$","1,292","","","N/A","","$","1,221","","N/A","","$","1,225","","","N/A","","$","1,117","","N/A"],["% change(c)","5.8","%","","N/A","","N/A","","N/A","","9.7","%","","N/A","","N/A","","N/A"]]
[[/GREPCENT_TABLE]]

N/M = Not meaningful. N/A = Not applicable.

(a) Same Property adjusted blended occupancy for MH and RV increased to 98.9% at December 31, 2023, from 96.6% at December 31, 2022. The 230 basis point increase was driven by MH expansion fills and the conversion of transient RV sites to annual sites. Same Property blended occupancy for MH and RV was 97.9% at December 31, 2023, from 97.4% at December 31, 2022. Same Property adjusted blended occupancy for MH and RV increased to 98.6% at December 31, 2022, from 96.8% at December 31, 2021. The 180 basis point increase was driven by MH expansion fills and the conversion of transient RV sites to annual sites. Same Property blended occupancy for MH and RV was 97.8% at December 31, 2022 and 2021.

(b) Calculated using actual results without rounding.

(c) Occupied rental program sites in Same Property are included in total sites.

For the years ended December 31, 2023 and 2022:

•The Same Property data includes all properties that we have owned and operated continuously since January 1, 2022 exclusive of ground-up development and redevelopment properties recently completed or under construction, and other properties as determined by management.

•The MH segment's increase in NOI of $39.0 million, or 6.8% when compared to the same period in 2022, is primarily due to an increase in Real property (excluding transient) revenue of $54.2 million, or 7.0%. Real property (excluding transient and other) revenue increased primarily due to a 6.4% increase in monthly base rent.

•The RV segment's increase in NOI of $13.5 million, or 4.8% when compared to the same period in 2022, is primarily due to an increase in Real property (excluding transient) revenue of $35.7 million, or 15.6%, primarily due to an 8.7% increase in monthly base rent and conversions of transient RV sites to annual RV sites.

•The Marina segment increase in NOI of $24.7 million, or 11.7% when compared to the same period in 2022, is primarily due to a $23.6 million, or 7.8% increase in Real property (excluding transient) revenue.

For the years ended December 31, 2022 and 2021:

•The Same Property data includes all properties that we owned and operated continuously since January 1, 2021, exclusive of ground-up development and redevelopment properties recently completed or under construction, and other properties as determined by management.

•The MH segment's increase in NOI of $17.8 million, or 3.3% when compared to the same period in 2021, is primarily due to an increase in Real property (excluding transient) revenue of $33.3 million, or 4.6%. Real property (excluding transient and other) revenue increased due to a 4.6% increase in monthly base rent.

•The RV segment's increase in NOI of $24.4 million, or 10.3% when compared to the same period in 2021, is primarily due to an increase in Real property - transient revenue of $24.7 million, or 13.1%, due to a 7.6% increase in monthly base rent and conversions of transient RV sites to annual RV sites.

•The Marina segment increase in NOI of $11.5 million, or 7.7% when compared to the same period in 2021, is primarily due to a $16.7 million, or 7.8% increase in Real property (excluding transient) revenue.

65

SUN COMMUNITIES, INC.

Home Sales Summary

We sell new and pre-owned homes to current and prospective residents and customers in our communities. This inventory is purchased from manufacturers, lenders, dealers, former residents or customers.

The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2023 and 2022 (in millions, except for average selling prices and other information):

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022","","Change","","% Change"],["North America"],["Home sales","$","233.8","","","$","275.4","","","$","(41.6)","","","(15.1)","%"],["Home cost and selling expenses","178.7","","","203.3","","","(24.6)","","","(12.1)","%"],["NOI","$","55.1","","","$","72.1","","","$","(17.0)","","","(23.6)","%"],["NOI margin %","23.6","%","","26.2","%","","(2.6)","%"],["UK(a)"],["Home sales","$","186.1","","","$","190.4","","$","(4.3)","","","(2.3)","%"],["Home cost and selling expenses","116.7","","","107.9","","8.8","","","8.2","%"],["NOI","$","69.4","","","$","82.5","","$","(13.1)","","","(15.9)","%"],["NOI margin %","37.3","%","","43.3","%","","(6.0)","%"],["Total"],["Home sales","$","419.9","","","$","465.8","","","$","(45.9)","","","(9.9)","%"],["Home cost and selling expenses","295.4","","","311.2","","","(15.8)","","","(5.1)","%"],["NOI","$","124.5","","","$","154.6","","","$","(30.1)","","","(19.5)","%"],["NOI margin %","29.6","%","","33.2","%","","(3.5)","%"],["Units Sold:*"],["North America","2,565","","","3,212","","(647)","","","(20.1)","%"],["UK(a)","2,857","","","2,343","","514","","","21.9","%"],["Total home sales","5,422","","","5,555","","(133)","","","(2.4)","%"],["Average Selling Price:*"],["North America","$","91,150","","","$","85,741","","$","5,409","","","6.3","%"],["UK(a)","$","65,138","","","$","81,263","","$","(16,125)","","","(19.8)","%"]]
[[/GREPCENT_TABLE]]

(a) UK amounts for the year ended December 31, 2022 cover the period from April 8, 2022 (date of acquisition) through December 31, 2022.

NOI - North America

For the year ended December 31, 2023, the 23.6% decrease in NOI is primarily driven by a 20.1% decrease in total home sales volume as compared to the same period in 2022.

NOI - UK

For the year ended December 31, 2023, the 15.9% decrease in NOI is primarily driven by a 19.8% decrease in average selling price, partially offset by a full period of activity related to our properties in the UK during the current period as compared to a shorter period of activity from the date of acquisition of Park Holidays on April 8, 2022 through December 31, 2022.

66

SUN COMMUNITIES, INC.

Other Items - Statements of Operations(1)

The following table summarizes other income and expenses for the years ended December 31, 2023 and 2022 (amounts in millions):

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022","","Change","","% Change"],["Service, retail, dining and entertainment, net","$","53.9","","","$","58.9","","","$","(5.0)","","","(8.5)","%"],["Interest income","$","45.4","","","$","35.2","","","$","10.2","","","29.0","%"],["Brokerage commissions and other, net","$","60.6","","","$","34.9","","","$","25.7","","","73.6","%"],["General and administrative expense","$","270.2","","","$","256.8","","","$","13.4","","","5.2","%"],["Catastrophic event-related charges, net","$","3.8","","","$","17.5","","","$","(13.7)","","","(78.3)","%"],["Business combinations","$","3.0","","","$","24.7","","","$","(21.7)","","","(87.9)","%"],["Depreciation and amortization","$","660.0","","","$","601.8","","","$","58.2","","","9.7","%"],["Asset impairments","$","10.1","","","$","3.0","","","$","7.1","","","236.7","%"],["Goodwill impairment","$","369.9","","","$","\u2014","","","$","369.9","","","N/A"],["Loss on extinguishment of debt","$","\u2014","","","$","4.4","","","$","(4.4)","","","(100.0)","%"],["Interest expense","$","325.8","","","$","229.8","","","$","96.0","","","41.8","%"],["Interest on mandatorily redeemable preferred OP units / equity","$","3.3","","","$","4.2","","","$","(0.9)","","","(21.4)","%"],["Loss on remeasurement of marketable securities","$","(16.0)","","","$","(53.4)","","","$","37.4","","","(70.0)","%"],["Gain / (loss) on foreign currency exchanges","$","(0.3)","","","$","5.4","","","$","(5.7)","","","N/M"],["Gain on dispositions of properties","$","11.0","","","$","12.2","","","$","(1.2)","","","(9.8)","%"],["Other expense, net","$","(7.5)","","","$","(2.1)","","","$","(5.4)","","","257.1","%"],["Loss on remeasurement of notes receivable","$","(106.7)","","","$","(0.8)","","","$","(105.9)","","","N/M"],["Income from nonconsolidated affiliates","$","16.0","","","$","2.9","","","$","13.1","","","N/M"],["Loss on remeasurement of investment in nonconsolidated affiliates","$","(4.2)","","","$","(2.7)","","","$","(1.5)","","","(55.6)","%"],["Current tax expense","$","(14.5)","","","$","(10.3)","","","$","(4.2)","","","40.8","%"],["Deferred tax benefit","$","22.9","","","$","4.2","","","$","18.7","","","N/M"],["Preferred return to preferred OP units / equity interests","$","12.3","","","$","11.0","","","$","1.3","","","11.8","%"],["Income / (loss) attributable to noncontrolling interests","$","(8.1)","","","$","10.8","","","$","(18.9)","","","(175.0)","%"]]
[[/GREPCENT_TABLE]]

(1) Only items determined by management to be material, of interest, or unique to the periods disclosed above are explained below.

N/M = Not meaningful.

Interest income - for the year ended December 31, 2023, increased primarily due to a larger loan balance provided to Royale Holdings Group HoldCo Limited, a real estate operator, to fund investing and financing activities in the current period as compared to the same periods in 2022.

Brokerage commissions and other, net - for the year ended December 31, 2023, increased primarily due to the receipt of business interruption insurance recoveries of $20.2 million, net of deductibles, in connection with Hurricane Ian. Refer to Note 17, "Commitments and Contingencies," in our accompanying Consolidated Financial statements for additional information.

Catastrophic event-related charges, net - for the year ended December 31, 2023, was an expense of $3.8 million, compared to an expense of $17.5 million in 2022. The expense in 2023 was primarily due to an asset impairment charge of $7.0 million driven by flooding at an RV community in New Hampshire, partially offset by the receipt of insurance recoveries related to Hurricane Irma, compared to impairment charges in 2022 related to damaged property from Hurricane Ian. Refer to Note 17, "Commitments and Contingencies," in our accompanying Consolidated Financial Statements for additional information.

Business combinations - for the year ended December 31, 2023, decreased primarily as a result of no new acquisitions accounted for as business combinations during 2023 as compared to the same period in 2022. Refer to Note 3, "Real Estate Acquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional information.

Goodwill impairment - for the year ended December 31, 2023, was due to goodwill impairment charges driven by a decline in the fair value of our United Kingdom reporting unit within the MH segment. Refer to Note 6, "Goodwill and Other Intangible Assets," and Note 22, "Quarterly Financial Data (Unaudited and Restated)," in our accompanying Consolidated Financial Statements for additional information.

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Interest expense - for the year ended December 31, 2023, increased due to the higher carrying balance of debt and increased interest rates as compared to the same period in 2022. Refer to Note 9, "Debt and Line of Credit," in our accompanying Consolidated Financial Statements for additional information.

Loss on remeasurement of marketable securities - for the year ended December 31, 2023, was a loss of $16.0 million, as compared to a loss of $53.4 million during the same period in 2022 due to the fluctuation in the price of publicly traded marketable securities we owned. During the year ended December 31, 2023, we sold all of these marketable securities. Refer to Note 16, "Fair Value of Financial Instruments," in our accompanying Consolidated Financial Statements for additional information.

Loss on remeasurement of notes receivable - for the year ended December 31, 2023, was a loss of $106.7 million, as compared to a loss of $0.8 million during the same period in 2022 due to an impairment charge of $102.9 million recorded in 2023 related to our note receivable from the Royale Holdings Group HoldCo Limited. Refer to Note 4, "Notes and Other Receivables," in our accompanying Consolidated Financial Statements for additional information.

Income from nonconsolidated affiliates - for the year ended December 31, 2023, increased as compared to 2022, primarily due to the gain recognized on the disposition of our investment in Rezplot of $15.3 million in 2023. Refer to Note 7, "Investments in Nonconsolidated Affiliates," in our accompanying Consolidated Financial Statements for additional information.

Deferred tax benefit - for the year ended December 31, 2023, increased primarily due to additional deferred interest deductions at our UK operations compared to the same period in 2022. Refer to Note 13, "Income Taxes," in our accompanying Consolidated Financial Statements for additional information.

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RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SUI COMMON SHAREHOLDERS TO FFO

The following table reconciles Net income / (loss) attributable to SUI common shareholders to FFO for the years ended December 31, 2023, 2022 and 2021 (in millions, except for per share amounts):

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Net Income / (Loss) Attributable to SUI Common Shareholders","$","(213.3)","","","$","242.0","","","$","380.2"],["Adjustments"],["Depreciation and amortization","657.2","","","599.6","","","521.9"],["Depreciation on nonconsolidated affiliates","0.2","","","0.1","","","0.1"],["Asset impairments","10.1","","","3.0","","","\u2014"],["Goodwill impairment","369.9","","","\u2014","","","\u2014"],["(Gain) / loss on remeasurement of marketable securities","16.0","","","53.4","","","(33.5)"],["Loss on remeasurement of investment in nonconsolidated affiliates","4.2","","","2.7","","","0.2"],["(Gain) / loss on remeasurement of notes receivable","106.7","","","0.8","","","(0.7)"],["Loss on remeasurement of collateralized receivables and secured borrowings, net","0.4","","","\u2014","","","\u2014"],["Gain on dispositions of properties, including tax effect","(8.9)","","","(12.2)","","","(108.1)"],["Add: Returns on preferred OP units","11.8","","","9.5","","","4.0"],["Add: Income attributable to noncontrolling interests","(8.1)","","","10.4","","","14.7"],["Gain on dispositions of assets, net","(38.0)","","","(54.9)","","","(60.5)"],["FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities(1)","$","908.2","","","$","854.4","","","$","718.3"],["Adjustments"],["Business combination expense","3.0","","","24.7","","","1.3"],["Acquisition and other transaction costs(2)","25.3","","","22.7","","","8.7"],["Loss on extinguishment of debt","\u2014","","","4.4","","","8.1"],["Catastrophic event-related charges, net","3.8","","","17.5","","","2.2"],["Loss of earnings - catastrophic event-related charges, net(3)","2.1","","","4.8","","","0.2"],["(Gain) / loss on foreign currency exchanges","0.3","","","(5.4)","","","3.7"],["Other adjustments, net(4)","(27.4)","","","0.4","","","16.2"],["Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities(1)","$","915.3","","","$","923.5","","","$","758.7"],["Weighted Average Common Shares Outstanding - Diluted","128.9","","","125.6","","","116.5"],["FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities Per Share","$","7.05","","","$","6.80","","","$","6.16"],["Core FFO Attributable to SUI Common Shareholders and Dilutive Convertible Securities Per Share","$","7.10","","","$","7.35","","","$","6.51"]]
[[/GREPCENT_TABLE]]

(1)Excludes the effect of certain anti-dilutive convertible securities.

(2)These costs represent (i) nonrecurring integration expenses associated with acquisitions during the years ended December 31, 2023, and 2022, (ii) costs associated with potential acquisitions that will not close, (iii) costs associated with the termination of the bridge loan commitment during the three months ended March 31, 2022 related to the acquisition of Park Holidays, (iv) 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, and (v) other non-recurring transaction costs.

(3)Loss of earnings - catastrophic event-related charges, net for the year ended December 2023 included the following:

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023"],["Hurricane Ian - Three Fort Myers, Florida RV communities impaired"],["Estimated loss of earnings in excess of the applicable business interruption deductible","$","21.9"],["Insurance recoveries received for previously estimated loss of earnings through August 31, 2023","(19.7)"],["Hurricane Irma - Three Florida Keys communities impaired"],["Estimated loss of earnings in excess of the applicable business interruption deductible","0.5"],["Reversal of unpaid previously estimated loss of earnings that we do not expect to recover","(0.6)"],["Loss of earnings - catastrophic event-related charges, net","$","2.1"]]
[[/GREPCENT_TABLE]]

(4)Other adjustments, net relates primarily to (i) deferred tax expense / (benefit) and long term lease termination expense / (benefit) during the years ended December 31, 2023, 2022 and 2021, (ii) accelerated deferred compensation amortization and gain on sale of investment in nonconsolidated affiliate during the years ended December 31, 2023 and 2022, (iii) non-recurring management fees, severance costs, and ERP implementation costs during the year ended December 31, 2023, (iv) change in estimated contingent consideration during the years ended December 31, 2023 and December 31, 2021, (v) gain from legal settlement during the year ended December 31, 2022 and (vi) RV rebranding non-recurring costs for the years ended December 31, 2022 and 2021.

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LIQUIDITY AND CAPITAL RESOURCES

Short-term Liquidity

Our principal short-term liquidity demands historically have been, and are expected to continue to be, distributions to our shareholders and the unit holders of the Operating Partnership, property acquisitions, development and expansion of our properties, capital improvement of our properties, the purchase of new and pre-owned homes, and debt repayment. We intend to meet our short-term liquidity requirements through available cash balances, cash flow generated from operations, draws on our Senior Credit Facility, and the use of debt and equity offerings under our shelf registration statement. Refer to Note 9, "Debt and Line of Credit" and Note 10, "Equity and Temporary Equity" and Note 21, "Subsequent Events," in our accompanying Consolidated Financial Statements for additional information and related activity subsequent to December 31, 2023.

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 take a disciplined approach to selecting the optimal mix of financing sources to meet our liquidity demands and minimize our overall cost of capital. Our investment grade credit ratings of BBB and Baa3 from S&P Global and Moody's, respectively, remain unchanged from the initial rating. We plan to continue to capitalize on our unsecured bond market access to optimize our cost of capital and increase our financial flexibility.

Current market and economic conditions, including relating to, among other things, interest rates, currency fluctuations, equity valuations and inflation, may adversely affect our ability to obtain debt and equity capital in the short term on attractive terms.

Throughout our history, we have demonstrated operational reliability and cash flow strength throughout economic cycles. Our current objectives include streamlining our operations with an emphasis on our reliable real property income. We recognize the headwinds we are facing from a challenging macroeconomic environment and are re-aligning our strategy to focus on our proven, durable income streams. We are positioned for ongoing organic growth with expected rental rate increases, occupancy gains and expense management. Looking ahead to 2024, we expect rental rate growth that exceeds headline inflation with ongoing focus on expense management to continue generating strong organic cash flow growth.

Given a macroeconomic backdrop of sustained higher interest rates, we intend to prioritize variable rate debt reduction as our primary use of free cash flow from our operations and selective capital recycling. In addition, we are pulling back on our development activity and capital spending considering the more challenging macroeconomic and capital market environment. Capital spending besides projects that are underway, will be solely focused on the most strategic opportunities. We also attempt to manage interest rate risks by using interest rate hedging instruments and by monitoring our overall leverage levels. We engage in certain hedging transactions to limit our exposure from the adverse effects of changes in interest rates on borrowing costs of our loans.

Acquisition, development and expansion activities

Subject to market conditions, we intend to selectively identify opportunities to expand our development pipeline and acquire existing properties. We finance acquisitions through available cash, secured financing, draws on our Senior Credit Facility, the assumption of existing debt on properties and the issuance of debt and equity securities. The current higher interest rate environment may make it more expensive to finance acquisitions and fund developments and expansion. We will continue very selectively to evaluate acquisition and development opportunities that meet our underwriting criteria.

During the year ended December 31, 2023, we acquired one MH community with 68 sites and 72 development sites, and one marina with 24 wet slips and dry storage spaces, for an aggregate purchase price of approximately $107.0 million. Total acquisition investments were $368.7 million during the year ended December 31, 2023, and represents the purchase price paid for operating properties and land parcels for future ground-up development and expansions activities, plus any capital improvements identified during due diligence needed to bring acquired properties up to our operating standards.

We have been focused on property ground-up development and expansion opportunities adjacent to our existing properties. During the year ended December 31, 2023, we acquired four land parcels located in the U.S. and the UK for the potential development of over 1,350 sites, expanded 14 of our existing communities by over 440 sites and delivered 360 sites at five ground-up development properties.

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We continue to selectively expand our properties utilizing our inventory of owned and entitled land. We have over 17,980 MH and RV sites suitable for future development.

Refer to Note 3, "Real Estate Acquisitions and Dispositions," in our accompanying Consolidated Financial Statements for additional detail on acquisitions completed to date.

Capital Expenditures (excluding Acquisition costs)

Our capital expenditures include lot modifications, growth projects, rebranding, acquisition-related capital expenditures, expansion and development construction costs, rental home purchases and recurring capital expenditures.

Our capital expenditure activity is summarized as follows (in millions):

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022"],["Recurring Capital Expenditures","$","87.3","","","$","73.8"],["Non-Recurring Capital Expenditures and Related Activities"],["Lot Modifications","54.9","","","39.1"],["Growth Projects","104.5","","","99.5"],["Rebranding","4.7","","","15.0"],["Capital improvements to recent acquisitions","215.3","","","280.3"],["Expansion and Development","276.3","","","261.8"],["Rental Program","260.9","","","151.1"],["Other","(0.9)","","","0.4"],["Total Non-Recurring Capital Expenditure and Related Activities","915.7","","","847.2"],["Total Capital Expenditure and Related Activities","$","1,003.0","","","$","921.0"]]
[[/GREPCENT_TABLE]]

Recurring capital expenditures

Property recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing items used to operate the communities and marinas. Recurring capital expenditures at our MH and RV properties include major road, driveway and pool improvements; clubhouse renovations; adding or replacing streetlights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. Recurring capital expenditures at our marinas include dredging, dock repairs and improvements, and equipment maintenance and upgrades. The minimum capitalized amount is five hundred dollars.

Non-Recurring Capital Expenditures and Related Activities

Lot modifications - 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.

Growth projects - growth projects consist of revenue generating or expense reducing activities at the properties. These include, but are 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.

Rebranding - rebranding includes new signage at our RV communities and the costs of building an RV mobile application and updated website.

Capital improvements subsequent to acquisition often require 24 to 36 months to complete after closing and include upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovations including larger decks, heaters and furniture; new maintenance facilities; lot modifications; and new signage including main signs and internal road signs.

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Expansion and development expenditures - consist primarily of construction costs such as roads, activities, and amenities, and costs necessary to complete site improvements, such as driveways, sidewalks and landscaping at our MH and RV communities. Expenditures also include costs to rebuild after damage has been incurred at MH, RV or marina properties, and research and development.

Rental program - consists of investment in the acquisition of homes intended for the Rental Program and the purchase of vacation rental homes at our RV communities. Expenditures for these investments depend upon the condition of the markets for repossessions and new home sales, rental homes and vacation rental homes.

Cash Flow Activities

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

[[GREPCENT_TABLE]]
[["","Year Ended"],["","December 31, 2023","","December 31, 2022","","December 31, 2021"],["Net Cash Provided by Operating Activities","$","790.5","","","$","734.9","","","$","753.6"],["Net Cash Used for Investing Activities","$","(919.5)","","","$","(3,062.6)","","","$","(2,338.2)"],["Net Cash Provided by Financing Activities","$","80.3","","","$","2,348.6","","","$","1,570.4"],["Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash","$","1.0","","","$","(8.7)","","","$","(0.2)"]]
[[/GREPCENT_TABLE]]

Cash, cash equivalents and restricted cash decreased by $47.7 million from $90.4 million as of December 31, 2022, to $42.7 million as of December 31, 2023.

Operating activities - Net cash provided by operating activities increased by $55.6 million to $790.5 million for the year ended December 31, 2023, compared to $734.9 million for the year ended December 31, 2022. The increase in operating cash flow was primarily due to improved Same Property operating performance at our MH and RV communities and marinas, partially offset by an increase in interest expense during the year ended December 31, 2023 as compared to the corresponding period in 2022.

Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things:

•the market and economic conditions in our current markets generally, and specifically in the metropolitan areas of our current markets;

•lower occupancy and rental rates of our properties;

•substantial increases in insurance premiums;

•increases in other operating costs, such as wage and benefit costs, real estate taxes and utilities;

•decreased sales of manufactured homes;

•current volatility in economic conditions and the financial markets; and

•the effects of outbreaks of disease and related restrictions on business operations. Refer to "Risk Factors" in Part I, Item 1A in this Annual Report on Form 10-K.

Investing activities - Net cash used for investing activities decreased by $2.1 billion to $919.5 million for the year ended December 31, 2023, compared to $3.1 billion for the year ended December 31, 2022. The decrease in Net cash used for investing activities was primarily driven by a decrease in cash deployed to acquire properties during the year ended December 31, 2023 as compared to the corresponding period in 2022. Refer to the Consolidated Statements of Cash Flows for detail on the net cash used for investing activities during the years ended December 31, 2023 and 2022. Refer to Note 3, "Real Estate Acquisitions and Dispositions" and Note 21, "Subsequent Events," in our accompanying Consolidated Financial Statements for additional information on acquisitions and investment activity subsequent to December 31, 2023.

Financing activities - Net cash provided by financing activities decreased by $2.3 billion to $80.3 million for the year ended December 31, 2023, compared to $2.3 billion for the year ended December 31, 2022. The decrease in Net cash provided by financing activities was primarily driven by a decrease in borrowings on our Senior Credit Facility, net of repayments, a decrease in issuance of common stock, OP units and preferred OP units, net, during the year ended December 31, 2023 as compared to the corresponding period in 2022. Refer to the Consolidated Statements of Cash Flows for detail on the net cash provided by financing activities during the years ended December 31, 2023 and 2022. Refer to Note 8, "Consolidated Variable Interest Entities," Note 9, "Debt and Line of Credit" and Note 10, "Equity and Temporary Equity," in our accompanying Consolidated Financial Statements for additional information.

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We are exposed to interest rate variability associated with our outstanding floating rate debt and any maturing debt that has to be refinanced. Interest rate movements impact our borrowing costs and, while as of December 31, 2023, over 84% of our total debt was fixed rate financing, including the impact of hedge activity, increases in interest costs are likely to adversely affect our financial results.

Equity and Debt Activity

Public Equity Offerings

In November 2021, we entered into forward sale agreements in connection with an underwritten registered public offering of 4,025,000 shares of our common stock at a public offering price of $185.00 per share. In April 2022, we completed the physical settlement of the 4,025,000 shares of common stock and received aggregate net proceeds of $705.4 million. We used the net proceeds to repay borrowings outstanding under our Senior Credit Facility, and for working capital and general corporate purposes.

At the Market Offering Sales Agreement

In December 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 $1.25 billion 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. We simultaneously terminated our prior sales agreement upon entering into the Sales Agreement. Through December 31, 2023, we had entered into forward sales agreements under our Sales Agreement for an aggregate gross sales price of $160.6 million.

During the three months ended September 30, 2022, we entered into forward sale agreements with respect to 15,000 shares of common stock under our Sales Agreement for $2.6 million. Additionally, we settled all of our outstanding forward sale agreements with respect to 1,526,212 shares of common stock which includes 620,109; 600,503; 290,600; and 15,000 shares of common stock from the three months ended December 31, 2021, March 31, June 30 and September 30, 2022 forward sale agreements, respectively. The net proceeds of $275.5 million from the settlement of these forward sale agreements were used to repay borrowings outstanding under our Senior Credit Facility.

During the three months ended June 30, 2022, we completed the physical settlement of 1,200,000 shares of common stock under our prior at the market offering program and received net proceeds of $229.5 million. Additionally, we entered into forward sales agreements with respect to 290,600 shares of common stock for $50.1 million, under our Sales Agreement. These forward sale agreements were settled during the three months ended September 30, 2022.

During the three months ended March 31, 2022, we entered into forward sales agreements with respect to 600,503 shares of common stock for $107.9 million, under our Sales Agreement. These forward sale agreements were settled during the three months ended September 30, 2022.

During the year ended December 31, 2021, we entered into forward sale agreements with respect to 1,820,109 shares of common stock under our prior at the market offering program for $356.5 million. We completed the physical settlement of 1,200,000 and 620,109 shares of common stock during the three months ended June 30, 2022 and September 30, 2022, respectively.

Marketable Securities

In October 2023, we sold our 41.8 million share position in Ingenia Communities Group (ASX: INA), generating $102.5 million of proceeds, net of underwriting and other fees, with a realized loss of $8.0 million. The proceeds were used to pay down amounts drawn under our Senior Credit Facility.

Secured Debt

During the three months ended December 31, 2023, we entered into new mortgage term loans for $252.8 million that mature in November 1, 2030 and bear interest at a fixed rate of 6.49%. As a result of the new mortgage term loans, two additional properties were encumbered. We used the proceeds to repay $117.8 million of mortgage term loans that matured on November 30, 2023 and pay down amounts drawn under our Senior Credit Facility. The effective interest rate on the new secured loans is 6.251% inclusive of the impact of the aforementioned terminated swap of $50.0 million.

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SUN COMMUNITIES, INC.

During the three months ended March 31, 2023, we entered into mortgage term loans totaling $184.1 million related to 27 properties which mature between February 13, 2026 and April 1, 2033, and have a weighted average fixed interest rate of 5.39%. We used the net proceeds to repay borrowings outstanding under our Senior Credit Facility.

During the year ended December 31, 2022, we entered into a new $20.6 million construction loan, which was undrawn as of December 31, 2023, and a $3.4 million mortgage term loan that are jointly secured by one property. Both loans mature on August 10, 2047 and have a fixed interest rate of 3.65%. Additionally, we entered into a mortgage term loan of $226.0 million related to 18 existing encumbered properties, which mature between June 15, 2026 and December 15, 2029, and have a fixed interest rate of 4.5%.

During the three months ended September 30, 2022, we repaid $318.0 million of term loans collateralized by 35 properties. These loans had a weighted average interest rate of 4.81% and were set to mature from December 6, 2022 through September 6, 2024.

Senior Unsecured Notes

Subsequent to the three months ended December 31, 2023, the Operating Partnership issued $500.0 million of senior unsecured notes with an interest rate of 5.5% and a five-year term, due January 15, 2029. The net proceeds from the offering were $495.4 million, after deducting underwriters' discounts and estimated offering expenses. We used the majority of the net proceeds to repay borrowings outstanding under our Senior Credit Facility, reducing our floating-rate debt to total debt to approximately 10%. In connection with the note issuance, we settled seven forward swap contracts totaling $255.0 million and paid a net settlement payment of $2.3 million to several counterparties. Refer to Note 21, "Subsequent Events," in our accompanying Consolidated Financial Statements for additional information.

The following table sets forth certain information regarding our outstanding senior unsecured notes (in millions). All senior unsecured notes include interest payments on a semi-annual basis in arrears.

[[GREPCENT_TABLE]]
[["","","","","Carrying Amount"],["","","Principal Amount","","December 31, 2023","","December 31, 2022"],["5.7% notes, issued in January 2023 and due in January 2033(1)","","$","400.0","","","$","395.7","","","$","\u2014"],["4.2% notes, issued in April 2022 and due in April 2032","","600.0","","","592.6","","","591.8"],["2.3% notes, issued in October 2021 and due in November 2028","","450.0","","","446.8","","","446.2"],["2.7% notes, issued in June 2021 and October 2021, and due in July 2031","","750.0","","","742.4","","","741.6"],["Total","","$","2,200.0","","","$","2,177.5","","","$","1,779.6"]]
[[/GREPCENT_TABLE]]

(1) In January 2023, the Operating Partnership issued $400.0 million of senior unsecured notes with an interest rate of 5.7% and a 10-year term, due January 15, 2033 (the "2033 Notes"). Interest on the notes is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2023. The net proceeds from the offering were $395.3 million, after deducting underwriters' discounts and estimated offering expenses. We used the net proceeds from the offering to repay borrowings outstanding under our Senior Credit Facility.

The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on our senior unsecured 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 its parent company 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.

Line of Credit

In April 2022, the Operating Partnership as borrower, SUI as guarantor, and certain lenders entered into the Credit Facility Amendment, which amended our Senior Credit Facility.

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SUN COMMUNITIES, INC.

The Credit Facility Amendment increased the aggregate amount of our Senior Credit Facility to $4.2 billion with the ability to upsize the total borrowings by an additional $800.0 million, subject to certain conditions. The increased aggregate amount under the Senior Credit Facility consists of the following: (a) a revolving loan in an amount up to $3.05 billion and (b) a term loan facility of $1.15 billion, with the ability to draw funds from the combined facilities in U.S. dollars, Pound sterling, Euros, Canadian dollars and Australian dollars, subject to certain limitations. The Credit Facility Amendment extended the maturity date of the revolving loan facility to April 7, 2026. At our option that maturity date may be extended two additional six-month periods. In addition, the Credit Facility Amendment established the maturity date of the term loan facility under the Credit Facility Amendment as April 7, 2025, which may not be further extended.

The Senior Credit Facility bears interest at a floating rate based on the Adjusted Term Secured Overnight Financing Rate ("SOFR"), the Adjusted Eurocurrency Rate, the Australian Bank Bill Swap Bid Rate ("BBSY"), the Daily Sterling Overnight Index Average ("SONIA") Rate or the Canadian Dollar Offered Rate, as applicable, plus a margin, in all cases, which can range from 0.725% to 1.6%, subject to certain adjustments. As of December 31, 2023, the margins based on our credit ratings were 0.85% on the revolving loan facility and 0.95% on the term loan facility.

At the lenders' option, the Senior Credit Facility will become immediately due and payable upon an event of default under the Credit Facility Agreement. We had $944.1 million and $1.1 billion of borrowings outstanding under the revolving loan as of December 31, 2023 and 2022, respectively. We also had $1.1 billion of borrowings outstanding under the term loan on the Senior Credit Facility as of December 31, 2023 and 2022, respectively. These balances are recorded in Unsecured debt on the Consolidated Balance Sheets.

The Senior 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 Senior Credit Facility, but does reduce the borrowing amount available. We had $26.2 million and $2.6 million of outstanding letters of credit at December 31, 2023 and 2022, respectively.

Financial Covenants

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

[[GREPCENT_TABLE]]
[["Covenant","","Requirement","","As of December 31, 2023"],["Maximum leverage ratio","","65.0%","","35.9%"],["Minimum fixed charge coverage ratio","","1.40","","3.02"],["Maximum secured leverage ratio","","40.0%","","13.8%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["Covenant","","Requirement","","As of December 31, 2023"],["Total debt to total assets","","\u226460.0%","","41.7%"],["Secured debt to total assets","","\u226440.0%","","18.9%"],["Consolidated income available for debt service to debt service","","\u22651.50","","3.97"],["Unencumbered total asset value to total unsecured debt","","\u2265150.0%","","335.2%"]]
[[/GREPCENT_TABLE]]

As of December 31, 2023, 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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Derivative Transactions

We enter into treasury rate lock contracts, interest rate swaps, and forward swaps for interest rate risk management purposes. We do not enter into derivative instruments for speculative purposes. The risks being hedged are the interest rate risk related to outstanding floating rate debt and forecasted debt issuance transactions, and the benchmark interest rates used are the SOFR and the SONIA Rate.

Subsequent to the three months ended December 31, 2023, in connection with the issuance of $500.0 million of senior unsecured notes with an interest rate of 5.5% and a five-year term, due January 15, 2029, we settled seven forward swap contracts totaling $255.0 million and paid a net settlement payment of $2.3 million to several counterparties. Refer to Note 21, "Subsequent Events," in our accompanying Consolidated Financial Statements for additional information.

During the year ended December 31, 2023, we entered into derivative contracts with aggregate notional amounts of $582.3 million and terminated derivative contracts with aggregate notional amounts of $300.0 million and received an aggregate cash settlement of $13.4 million.

During the year ended December 31, 2022, we entered into derivative contracts with aggregate notional amounts of $733.6 million, and terminated derivative contracts with aggregate notional amounts of $600.0 million and received an aggregate cash settlement of $35.3 million.

Long-term Financing and Capital Requirements

Long-term Financing

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 debt and the issuance of certain debt or equity securities subject to market conditions. If current market and economic conditions, including relating to, among other things, interest rates, currency fluctuations, equity valuations and inflation, continue or worsen, our ability to obtain debt and equity capital in the long term on attractive terms may be adversely affected.

As of December 31, 2023, we had unrestricted cash on hand of $29.2 million, $2.0 billion of remaining capacity on the Senior Credit Facility, and a total of 511 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 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. In the event our current credit ratings are downgraded, it may become difficult or more expensive to obtain additional financing or refinance existing unsecured debt as maturities become due. Refer to "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K. 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 December 31, 2023, our net debt to enterprise value was 30.9% (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 J preferred OP units, Series K preferred OP units and Series L preferred OP units to shares of common stock). Our debt has a weighted average interest rate of 4.23% and a weighted average years to maturity of 6.8.

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Capital Requirements

Our capital requirements as of December 31, 2023 include both short and long term obligations:

Our primary long-term liquidity needs are principal payments on outstanding debt as summarized in the table below:

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[[/GREPCENT_TABLE]]

(1)Our outstanding debt in this table excludes debt premiums, discounts, deferred financing costs and fair value adjustment, as applicable.

(2)Our obligations related to interest expense are calculated based on the current debt levels, rates and maturities as of December 31, 2023 (including finance leases), and actual payments required in future periods may be different than the amounts included above. Perpetual securities include one year of interest expense for payment due after five years.

Certain of our nonconsolidated affiliates, which are accounted for under the equity-method of accounting, have incurred debt. We have not guaranteed the debt of our nonconsolidated affiliates in the arrangements referenced below, nor do we have any obligations to fund this debt should the nonconsolidated affiliates be unable to do so. Refer to Note 7, "Investments in Nonconsolidated Affiliates," in the accompanying Consolidated Financial Statements for additional information about these entities.

GTSC - During September 2019, GTSC entered into a warehouse line of credit with a maximum loan amount of $125.0 million. The line of credit was subsequently amended, with the maximum amount increased to $325.0 million as of December 31, 2022, with an option to increase to $375.0 million subject to the lender's consent. As of December 31, 2023 and 2022, the aggregate carrying amount of debt, including both our and our partner's share, incurred by GTSC was $261.3 million (of which our proportionate share is $104.5 million), and $275.0 million (of which our proportionate share is $110.0 million), respectively. The debt bears interest at a variable rate based on a Commercial Paper or adjusted SOFR plus a margin ranging from 1.65% to 2.5% per annum and matures on December 15, 2026.

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 $18.4 million converted at the December 31, 2023 exchange rate. During July 2022, the maximum amount was increased to $50.0 million Australian dollars, or $34.1 million converted at the December 31, 2023 exchange rate. As of December 31, 2023 and 2022, the aggregate carrying amount of the debt, including both our and our partners' share, incurred by Sungenia JV was $25.2 million (of which our proportionate share is approximately $12.6 million), and $7.9 million (of which our proportionate share is $4.0 million), respectively. The debt bears interest at a variable rate based on the BBSY rate plus a margin ranging from 1.35% to 1.4%, subject to adjustment for additional future commitments, per annum and matures on June 30, 2027.

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SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES

Critical Accounting Estimates

Our Consolidated Financial Statements are prepared in accordance with United States of America generally accepted accounting principles, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Our significant accounting estimates include acquisitions of investment properties, impairments of long-lived assets, and impairments of goodwill. Refer to Note 1, "Significant Accounting Policies," in our accompanying Consolidated Financial Statements for information regarding our critical accounting estimates that affect the Consolidated Financial Statements and that use judgments and assumptions. In certain situations, we discuss the likelihood that materially different amounts could be reported under varied conditions and assumptions.

Goodwill Impairment

In performing goodwill impairment testing, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. The fair value of each reporting unit is estimated based on a combination of discounted cash flows (income approach) and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and / or anticipated financial metrics (market approach) for each reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate weighted average cost of capital and long-term growth rates. A decline in the actual cash flows of our reporting units in future periods, as compared to the projected cash flows used in our valuations, could result in the carrying value of the reporting units exceeding their respective fair values. Further, a change in market comparables, discount rate or long-term growth rates, as a result of a change in economic conditions or otherwise, could result in the carrying values of the reporting units exceeding their respective fair values. Refer to Note 6, "Goodwill and Other Intangible Assets," in our accompanying Consolidated Financial Statements for additional information regarding goodwill.

During the year ended December 31, 2023, we performed qualitative and quantitative assessments of our goodwill balance for potential impairment in accordance with ASC 350-20, "Goodwill and Other." As a result of our impairment testing, we determined that the fair value of the UK reporting unit was below its carrying value during the first, second and third quarters, and recorded aggregate non-cash impairment charges of $369.9 million. The decline in the fair value of the UK reporting unit was primarily driven by a higher weighted average cost of capital due to changes in the macroeconomic environment, as well as inflationary pressures in the UK causing a decline in projected future cash flows in the region. Refer to Note 22, "Quarterly Financial Data (Unaudited and Restated)," in our accompanying Consolidated Financial Statements for additional information regarding amounts reported for interim periods.

We performed a sensitivity analysis for the significant assumptions in the goodwill impairment testing analysis for our UK reporting unit. As of December 31, 2023, holding all other assumptions constant and as determined by the income approach:

•A hypothetical increase of approximately 70 basis points to the discount rate would result in goodwill impairment of approximately $32.0 million;

•A hypothetical decrease in the expected average annual revenue growth rate of approximately 40 basis points over the entire forecast period would result in goodwill impairment of approximately $32.0 million;

•A hypothetical decrease of approximately 280 basis points in the expected EBITDA margins in each year over the entire forecast period would result in goodwill impairment of approximately $32.0 million.

Our other reporting units are less sensitive to changes in macroeconomic factors and forecast assumptions than our UK reporting unit due to greater excess of fair value over carrying value. For the Marina reporting unit, we concluded that the fair value exceeded its carrying value by over 19% as of October 31, 2023. We did not identify a triggering event in any other reporting unit.

Impact of New Accounting Standards

Refer to Note 20, "Recent Accounting Pronouncements," in our accompanying Consolidated Financial Statements for information regarding new accounting pronouncements.

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