Sun Communities(US:SUI)2025-07-31 20:14PART I – FINANCIAL INFORMATION Consolidated Financial Statements The unaudited financial statements reflect a strategic shift following the sale of Safe Harbor Marinas, now classified as a discontinued operation Consolidated Balance Sheets The balance sheet reflects a significant cash influx and debt reduction following the reclassification of marina assets for sale Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $13,362.1 | $16,549.4 | ($3,187.3) | | Cash, cash equivalents and restricted cash | $1,463.1 | $57.1 | +$1,406.0 | | Assets held for sale and discontinued operations, net | $121.1 | $4,461.7 | ($4,340.6) | | Total Liabilities | $5,570.0 | $9,096.8 | ($3,526.8) | | Unsecured debt | $1,785.3 | $4,089.4 | ($2,304.1) | | Mortgage loans payable | $2,451.6 | $3,212.2 | ($760.6) | | Total Shareholders' Equity | $7,534.2 | $7,192.8 | +$341.4 | Consolidated Statements of Operations A net loss from continuing operations was offset by substantial income from the discontinued Safe Harbor Marinas sale, resulting in high net income Q2 2025 vs. Q2 2024 Statement of Operations (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $623.5 | $596.3 | | Asset impairments | $166.1 | $10.6 | | Loss on extinguishment of debt | $102.4 | $— | | Net (Loss) / Income from Continuing Operations | ($92.2) | $32.7 | | Income from discontinued operations, net | $1,422.5 | $25.7 | | Net Income | $1,330.3 | $58.4 | | Diluted EPS | $10.02 | $0.42 | Consolidated Statements of Cash Flows Investing activities generated a significant inflow from the Safe Harbor sale, funding large-scale debt repayments and shareholder returns Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $499.9 | $553.8 | | Continuing Operations | $409.6 | $404.2 | | Discontinued Operations | $90.3 | $149.6 | | Net Cash Provided By / (Used For) Investing Activities | $5,316.5 | ($319.9) | | Continuing Operations | ($44.8) | ($187.0) | | Discontinued Operations | $5,361.3 | ($132.9) | | Net Cash Used For Financing Activities | ($4,415.2) | ($172.1) | | Continuing Operations | $1,039.1 | ($163.9) | | Discontinued Operations | ($5,454.3) | ($8.2) | | Net change in cash | $1,403.3 | $61.5 | Notes to Consolidated Financial Statements The notes detail the ~$5.65 billion Safe Harbor sale, subsequent debt reduction, capital returns, and significant asset impairments - The company agreed to sell Safe Harbor Marinas for ~$5.65 billion, with an initial closing generating ~$5.25 billion in pre-tax cash and a $1.4 billion gain; the business is now a discontinued operation2832 - In Q2 2025, proceeds were used to repay ~$3.3 billion in debt, including senior notes and mortgage loans, resulting in a $102.4 million loss on debt extinguishment667075 - The Board authorized a $1.0 billion stock repurchase program, buying back 1.6 million shares for $202.8 million, and paid a $4.00 per share special dividend totaling $521.3 million858696 - Asset impairment charges of $166.1 million were recorded in Q2 2025, including $132.7 million for UK properties and $32.2 million for US/Canada RV properties due to strategic changes151152 - Subsequent to the quarter, the company repurchased an additional $97.4 million of its stock and appointed Charles D. Young as the new CEO179180 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its strategic pivot post-divestiture, focusing on debt reduction, shareholder returns, and operational performance Results of Operations Same Property NOI grew in the MH and UK segments but declined in the RV segment, while North American home sales and Core FFO per share decreased Same Property Real Property NOI Growth (Q2 2025 vs. Q2 2024) | Segment | NOI Change | Key Drivers | | :--- | :--- | :--- | | North America MH | +7.7% | 6.9% revenue growth, driven by a 5.3% increase in monthly base rent. | | North America RV | -1.1% | 6.7% decrease in transient revenue. | | UK | +10.2% | 9.5% revenue growth, driven by an 18.3% increase in transient revenue and a 5.3% rent increase. | FFO & Core FFO per Share (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | FFO per Share | $1.36 | $1.79 | | Core FFO per Share | $1.76 | $1.86 | - North American home sales NOI decreased by 48.5% in Q2 2025, driven by a 23.0% decrease in homes sold and a 6.8% decrease in average selling price222223 - UK home sales NOI decreased by 5.7% in Q2 2025, as a 7.2% decrease in NOI margin offset volume and price increases222225 Liquidity and Capital Resources Liquidity was significantly enhanced by the Safe Harbor sale proceeds, enabling substantial debt repayment, shareholder returns, and strategic reinvestment - The initial closing of the Safe Harbor Sale generated $5.25 billion in pre-tax cash, significantly improving the company's leverage and financial flexibility248 - A capital allocation plan used proceeds for ~$3.3 billion in debt repayment, a $521.3 million special dividend, a $1.0 billion stock buyback program, and strategic reinvestments251253 - As of June 30, 2025, the company holds $889.8 million in unrestricted cash, has $3.05 billion available on its credit facility, and 100% of its debt is fixed-rate286271 Stock Repurchase Activity (Q2 2025) | Metric | Value | | :--- | :--- | | Shares Repurchased | 1.6 million | | Total Cost | $202.8 million | | Remaining Authorization | $797.2 million | Quantitative and Qualitative Disclosures about Market Risk Market risk is now primarily from foreign currency and capital markets, as interest rate risk is minimal with 100% fixed-rate debt - Interest rate risk has been significantly mitigated, as 100% of outstanding debt carried a fixed interest rate as of June 30, 2025298 - The company is exposed to foreign currency risk; a hypothetical 10% strengthening of the U.S. dollar would have reduced total shareholder's equity by $101.9 million300 - Capital market risk remains as the company, a REIT, relies on debt and equity markets to finance its business and growth301 Controls and Procedures Management concluded that disclosure controls were not effective due to a previously identified material weakness in its risk assessment process - The principal executive and financial officers concluded that disclosure controls and procedures were not effective as of June 30, 2025304 - The ineffectiveness is due to a material weakness identified as of December 31, 2024, related to an ineffective risk assessment process306 - A remediation plan is underway but has not operated long enough to be deemed effective307308 PART II – OTHER INFORMATION Legal Proceedings The company is a defendant in a class action lawsuit alleging federal antitrust violations related to manufactured home lot rents - The company is a defendant in a consolidated class action complaint, In re Manufactured Home Lot Rents Antitrust Litigation, alleging violations of federal antitrust laws156311 - Plaintiffs allege the sharing of information to maintain artificially high site rents; the company believes the allegations are without merit156157 Risk Factors There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report and Q1 2025 Quarterly Report - There have been no material changes to the risk factors described in the 2024 Annual Report and the Q1 2025 Form 10-Q313 Unregistered Sales of Equity Securities and Use of Proceeds The company converted OP units into common stock and repurchased over 1.6 million shares for $202.8 million under its new buyback program - During Q2 2025, various series of OP units were converted into a total of 64,723 shares of common stock in private placements316 Common Stock Repurchases (Q2 2025) | Period | Shares Purchased | Average Price Paid | Program | Remaining Authorization | | :--- | :--- | :--- | :--- | :--- | | May 2025 | 373,733 | N/A | Publicly Announced | $954.7M | | June 2025 | 1,261,334 | N/A | Publicly Announced | $797.2M | | Total Q2 | 1,635,067 | $114.69 (blended) | Publicly Announced | $797.2M | Other Information New legislation was signed into law that permanently extends certain favorable tax provisions for REITs and their investors - The 'One Big Beautiful Bill Act' (OBBBA) was signed into law on July 4, 2025, making significant changes to U.S. federal income tax laws320 - Key changes include the permanent extension of the 20% deduction for 'qualified REIT dividends' and an increased asset test limit for taxable REIT subsidiaries320 Exhibits and Signatures This section lists the exhibits filed with the Form 10-Q, including required officer certifications and XBRL data files - Lists all exhibits filed with the report, including officer certifications (31.1, 31.2, 32.1) and XBRL data files322