Sun Communities, Inc. Reports 2014 Second Quarter Results

NEWS RELEASE
July 24, 2014

Southfield, MI, July 24, 2014 - Sun Communities, Inc. (NYSE: SUI) (the "Company"), a real estate investment trust ("REIT") that owns and operates manufactured housing and recreational vehicle communities, today reported its second quarter results.

Highlights:  Three Months Ended June 30, 2014

• FFO⁽¹⁾ excluding transaction costs was $0.78 per diluted share and OP unit ("Share") for the three months ended June 30, 2014.
   
• Same site Net Operating Income ("NOI")⁽²⁾ increased by 8.5 percent as compared to the three months ended June 30, 2013.
   
• Revenue producing sites increased by 427 sites bringing total portfolio occupancy to 91.0 percent.
   
• Two recreational vehicle communities were acquired during the second quarter of 2014 for $34.4 million.
   
• Five communities, 4 located in Michigan and 1 in Nevada, were sold for total proceeds of $15.8 million.  One of the communities was sold subsequent to quarter end.

"It was a strong second quarter and first half of 2014 with contributions from all of our business components.  Our same site NOI growth of 8.5% in the second quarter was powered by the performance of both our manufactured housing and recreational vehicle communities.  Same site net operating income grew 7.8% for the quarter in our MH communities driven by a combination of higher than budgeted revenues and lower than forecasted expenses. Our same site RV communities exceeded budgeted occupancy gains by 230 annual/seasonal sites and generated 6.4% same site NOI growth for the quarter and 10% growth year to date," said Gary A. Shiffman, Chairman and CEO. "The properties outside of same site also added to our strong results including NOI growth from the 11 property RV portfolio acquisition completed in early 2013 of over 20% for both the quarter and the year. Subsequent to quarter end we see continued strength as transient RV revenue from the 2014 Fourth of July weekend grew by nearly 30% from the 2013 holiday weekend for properties owned in both years," Shiffman added.

Funds from Operations ("FFO")⁽¹⁾
FFO⁽¹⁾ excluding transaction costs was $34.7 million and $27.0 million, or $0.78 and $0.69 per Share for the three months ended June 30, 2014 and 2013, respectively.  For the six months ended June 30, 2014 and 2013 FFO⁽¹⁾ excluding transaction costs was $72.9 million and $58.7 million, or $1.73 and $1.62 per Share, respectively.

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders for the second quarter of 2014 was $4.9 million, or $0.12 per diluted common share, as compared to net income of  $1.0 million, or $0.03 per diluted common share, for the second quarter of 2013. 

Net income attributable to common stockholders for the six months ended June 30, 2014 was $12.8 million, or $0.33 per diluted common share, as compared to net income of  $6.8 million, or $0.20 per diluted common share, for the six months ended June 30, 2013.

Community Occupancy

Total portfolio occupancy increased to 91.0 percent at June 30, 2014 from 89.2 percent at June 30, 2013.  During the second quarter of 2014, revenue producing sites increased by 427 sites as compared to 494 revenue producing sites gained in the second quarter of 2013.

During the six months ended June 30, 2014, revenue producing sites increased by 987 sites as compared to an increase of 1,115 sites during the six months ended June 30, 2013. 

Same Site Results

For the 169 communities owned throughout 2014 and 2013, second quarter 2014 total revenues increased 6.2 percent and total expenses increased 1.5 percent, resulting in an increase in NOI⁽²⁾ of 8.5 percent over the second quarter of 2013.  Same site occupancy increased to 91.3 percent at June 30, 2014 from 90.0 percent at June 30, 2013.

For the six months ended June 30, 2014, total revenues increased 6.6 percent and total expenses increased 4.3 percent, resulting in an increase in NOI⁽²⁾ of 7.6 percent over the six months ended June 30, 2013.

Home Sales

During the second quarter of 2014, 521 homes were sold as compared to the 480 homes sold during the second quarter of 2013.  Rental home sales, which are included in total home sales, were 220 and 214 for the second quarters of 2014 and 2013, respectively. 

During the six months ended June 30, 2014, 890 homes were sold compared to the 946 homes sold during the six months ended June 30, 2013.  For the 54 new homes and 836 pre-owned homes sold during the first six months of the year, the average selling price was $84,730 and $24,354, respectively.  Rental home sales, which are included in total home sales, were 354 and 450 for the six months ended June 30, 2014 and 2013, respectively.

Acquisitions

As previously announced, on April 25, 2014, the Company acquired a recreational vehicle community consisting of 127 sites located in Saco, Maine for a purchase price of $4.4 million.

On June 4, 2014, the Company acquired a recreational vehicle community consisting of 501 sites located in Santa Claus, Indiana for a purchase price of $30.0 million.

Sale of Communities

The Company completed the sale of four manufactured housing communities during the quarter and one community subsequent to quarter end for a total of $15.8 million.  Four of the communities were located in Michigan and one community was located in Nevada.

Financing

Subsequent to quarter end, the Company entered into a ten year loan agreement for $26.9 million at a rate of 4.57% which is collateralized by two recreational vehicle communities. The proceeds were used to pay down the Company's line of credit.

Guidance

Based on the expectation of continued strong portfolio performance, the Company has increased FFO⁽¹⁾ guidance for the year to $3.42 - $3.48 per Share from $3.33 - $3.43 per Share. Further details are provided below.

Guidance is inclusive of acquisitions completed through June 30, 2014.  No prospective acquisitions or prospective transaction costs are included in guidance.

• Same Site Portfolio: At the midpoint of guidance the Company's same property portfolio of 169 communities is expected to generate revenue growth of approximately 6.3% and property and operating expense growth of 2.9% resulting in NOI⁽²⁾ growth of approximately 7.8%.

*The foregoing table nets $19.2 million of utility revenue against the related utility expense in property operating and maintenance expense.

• Acquisition Portfolio: Information pertaining to the 21 properties excluded from the Company's same site portfolio is presented in the table below.

• Recreational Vehicle Revenue: Revenue from the Company's recreational vehicle communities contains a component of transient revenue from guest stays that are other than a full year or full season.  Transient revenue is expected to be approximately $31.6 million, of which 25.3% was earned in the first quarter, 18.3% was earned in the second quarter, and 42.9% and 13.5% is expected to be earned in the third and fourth quarters, respectively.
   
• Home Sales: The Company expects to sell approximately 1,930 homes.  The budgeted average gross profit per home sale is $6,250.  Total home sales include the sale of approximately 860 rentals homes.  The profit from rental home sales is removed from the calculation of FFO⁽¹⁾.
   
• Community Dispositions: Guidance includes the FFO⁽¹⁾ impact from the expected future sale of seven additional communities.

The estimates and assumptions are forward looking based on the Company's current assessment of economic and market conditions,  but may be affected by the risks outlined below under the caption "Forward-Looking Statements" and may differ materially from actual results.

Earnings Conference Call

A conference call to discuss second quarter operating results will be held on Thursday, July 24, 2014 at 11:00 A.M. (EDT). To participate, call toll-free 888-401-4668. Callers outside the U.S. or Canada can access the call at 719-457-2727.  A replay will be available following the call through August 7, 2014, and can be accessed toll-free by calling 888-203-1112 or by calling 719-457-0820.  The Conference ID number for the call and the replay is 9051999.  The conference call will be available live on Sun Communities website www.suncommunities.com.  Replay will also be available on the website.

Sun Communities, Inc. is a REIT that currently owns and operates a portfolio of 189 communities comprising approximately 71,500 developed sites.

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

Contact

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

Forward-Looking Statements
This press release contains various "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as "will," "may," "could," "expect," "anticipate," "believes," "intends," "should," "plans," "estimates," "approximate", "guidance" and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, the performance of the recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, the closing of the anticipated dispositions on expected time frames and terms, changes in market rates of interest, the ability of manufactured home buyers to obtain financing, the level of repossessions by manufactured home lenders and those risks and uncertainties referenced under the headings entitled "Risk Factors" contained in our 2013 Annual Report, and the Company's other periodic filings with the Securities and Exchange Commission.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward- looking statements made herein to reflect changes in the Company's assumptions, expectations of future events, or trends.

⁽¹⁾      Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss) (computed in accordance with generally accepted accounting principles "GAAP"), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company's operating performance. Management generally considers FFO to be a useful measure for reviewing comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not readily apparent from net loss. Management believes that the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. FFO is computed in accordance with the Company's interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company.

Because FFO excludes significant economic components of net income (loss) including depreciation and amortization, FFO should be used as an adjunct to net income (loss) and not as an alternative to net income (loss). The principal limitation of FFO is that it does not represent cash flow from operations as defined by GAAP and is a supplemental measure of performance that does not replace net income (loss) as a measure of performance or net cash provided by operating activities as a measure of liquidity. In addition, FFO is not intended as a measure of a REIT's ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO only provides investors with an additional performance measure.

⁽²⁾      Investors in and analysts following the real estate industry utilize NOI as a supplemental performance measure. NOI is derived from revenues minus property operating expenses and real estate taxes. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (loss) (determined in accordance with GAAP) as an indication of the Company's financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company's liquidity; nor is it indicative of funds available for the Company's cash needs, including its ability to make cash distributions. The Company believes that net income (loss) is the most directly comparable GAAP measurement to NOI. Net income (loss) includes interest and depreciation and amortization which often have no effect on the market value of a property and therefore limit its use as a performance measure. In addition, such expenses are often incurred at a parent company level and therefore are not necessarily linked to the performance of a real estate asset. The Company believes that NOI is helpful to investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense, and non-property specific expenses such as general and administrative expenses, all of which are significant costs, and therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

Consolidated Balance Sheets
(in thousands, except per share amounts)

Consolidated Statements of Operations
(in thousands, except per share amounts)

Reconciliation of Net Income to FFO⁽¹⁾
(in thousands, except per share amounts)

Statement of Operations - Same Site
(in thousands except for Other Information)

⁽³⁾       Includes manufactured housing and annual/seasonal recreational vehicle sites, and excludes transient recreational vehicle sites, which are included in total developed sites.
⁽⁴⁾       Occupancy %  excludes recently completed but vacant expansion sites.
⁽⁵⁾       Weighted average rent pertains to annual/seasonal RV sites and excludes transient RV sites.

Rental Program Summary
(amounts in thousands except for *)

Homes Sales Summary
(amounts in thousands except for *)

Acquisition Summary - Properties Acquired in 2013 and 2014
(amounts in thousands except for statistical data)

⁽³⁾       Includes manufactured housing and annual/seasonal recreational vehicle sites, and excludes transient recreational vehicle sites, which are included in total developed sites.
⁽⁵⁾       Weighted average rent pertains to annual/seasonal RV sites and excludes transient RV sites.