Sun Communities
Annual Report 2018

Plain-text annual report

2018 Annual Report And Form 10-K CAVA ROBLES RV RESORT - CALIFORNIA RANCHO MIRAGE - ARIZONA ARCHVIEW RV RESORT & CAMPGROUND - UTAH HID’N PINES RV RESORT - MAINE PARK PLACE - FLORIDA LETTER TO OUR SHAREHOLDERS During 2018, we demonstrated the sustained strength of the Sun Communities platform, providing affordable housing and vacationing solutions to a broad spectrum of consumers. Our focus of owning superior quality communities, characterized by our hallmark of high-levels of customer service, continued to drive strong demand. In 2018, we built on our track record of industry leading performance with 9.8 percent Core FFO per share growth for the year and a 5.6 percent increase to our dividend to $3.00 per share. These results directly reflect the 6.7 percent growth in same community net operating income, the addition of 2,600 revenue producing sites, the conversion of more than 1,150 RV sites to annual from transient, and the deployment of approximately $585 million of capital for acquisitions, expansions and development. We have consistently grown same community net operating income, net asset value, FFO per share and dividends, which reflects our dedication to creating value for all of our stakeholders. This level of performance could not be possible without our 40-year history of unwavering commitment to delivering quality and value to our residents and guests. Total Portfolio As of 12/31/18 yield expansion as they are integrated into our platform; 3) capital investments in the expansion of existing communities to provide outsized occupancy and revenue growth opportunities at attractive returns; and, 4) capital allocation to ground-up developments to provide the opportunity to build the highest quality communities and achieve higher incremental returns in locations where purchasing an existing operating property would prove too costly. We are hard at work to continue growth for the long term. In 2018, our capital deployment comprised the acquisition of 20 operating properties valued at $364 million, $14 million in fully zoned and entitled land parcels and $153 million of capital into the construction of expansion sites and ground-up development projects. The year also afforded us the unique opportunity to make a $54 million strategic investment in Ingenia Communities Group – a leading owner, operator and developer of manufactured home communities and RV resorts headquartered in Australia. Like the USA, Australia has high demand for affordable housing and we believe the opportunity to invest early in the MH and RV growth cycle should prove to provide excellent returns for our shareholders. Our investment which equates to a roughly 9.9 percent stake in Ingenia also includes the formation of a 50/50 joint venture where Sun will participate side by side in the development of manufactured home communities in Australia. We expect this investment to be highly profitable over time. We have often referred to the favorable positioning of the manufactured housing sector. This sector provides a vitally important function in our economy, with high quality, yet affordable housing for both families and seniors. Indeed, our communities also offer desirable locations and amenities not typically found in comparably priced housing. This value proposition is driving demand for our product. In 2018, we had approximately 48,000 applications for our available home sites and enjoyed an occupancy of 98 percent or greater in 40 percent of our total communities. During the year we were able to achieve an overall portfolio occupancy of 95 percent for our manufactured home communities. We expect our pipeline of expansion sites, supplemented by accretive acquisitions, will allow Sun to continue to benefit from the industry’s tailwinds. Our recreational vehicle resort communities are also enjoying a high level of demand. RV shipments in the United States saw positive growth as more young families and retirees continued to take to the road. Like our manufactured home communities, Sun offers exceptional RV destinations including beaches, lake fronts, mountains, vineyards and national parks. Our growing portfolio of 44,026 RV sites offers a complementary revenue stream to our manufactured home communities. The opportunity to grow our transient revenues through rate and occupancy increases, along with conversions of transient sites to annual over time, is expected to add to the stability and durability of our cash flows. In 2018, we converted more than 1,150 sites from transient to annual. Given the high-quality of our resorts and their irreplaceable locations, we are well positioned to capture market share. Our capital deployment strategy supports the growth of both our manufactured home community and RV resort portfolios, reflecting Sun’s commitment to building a sustainable business model. Our four core investment strategies are comprised of: 1) the continual reinvestment in the maintenance and beautification of our existing operating portfolio providing value to our residents and guests while allowing us to capture steady, annual rental increases and achieve low annual turn-over through resident satisfaction; 2) the acquisition of operating properties to supplement core revenue and earnings while also offering accretive Sun and its shareholders have enjoyed a strong run of share price appreciation, which has been bolstered by our well-covered dividend which we raised for the third consecutive year. Our multifaceted platform has produced generous total returns for our shareholders over the last ten years of approximately 1,320 percent as compared to the S&P 500 at 232 percent and the MSCI US REIT Index at 226 percent. From a capital perspective, our balance sheet is stronger than ever, which we believe will allow us to execute on our growth initiatives. We look back to 2018 with pride. We set out to accomplish industry leading results and achieved our goals. We’d like to commend our team for their hard work and dedication. We are excited about what lies ahead and look forward to sharing our journey with you during 2019. Thank you for your confidence in us. Gary A. Shiffman chairman and chief executive officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 Commission file number 1-12616 SUN COMMUNITIES INC (Exact Name of Registrant as Specified in its Charter) Maryland (State of Incorporation) 27777 Franklin Rd. Suite 200 Southfield, Michigan (Address of Principal Executive Offices) 38-2730780 (I.R.S. Employer Identification No.) 48034 (Zip Code) (248) 208-2500 (Registrant’s telephone number, including area code) Common Stock, Par Value $0.01 per Share New York Stock Exchange Securities Registered Pursuant to Section 12(b) of the Act Name of each exchange on which registered Securities Registered Pursuant to Section 12(g) of the Act: 6.50% Series A-4 Cumulative Convertible Preferred Stock, par value $0.01 per Share Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X] Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one): Large accelerated filer [ X ] Smaller reporting company [ ] Accelerated filer [ ] Non-accelerated filer [ ] Emerging growth company [ ] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of June 30, 2018, the aggregate market value of the Registrant’s stock held by non-affiliates was $7,693,151,783 (computed by reference to the closing sales price of the Registrant’s common stock as of June 30, 2018). For this computation, the Registrant has excluded the market value of all shares of common stock reported as beneficially owned by executive officers and directors of the Registrant; such exclusion shall not be deemed to constitute an admission that any such person is an affiliate of the Registrant. Number of shares of common stock, $0.01 par value per share, outstanding as of February 14, 2019: 86,380,502 Documents Incorporated By Reference Unless provided in an amendment to this Annual Report on Form 10-K, the information required by Part III is incorporated by reference to the registrant’s proxy statement to be filed pursuant to Regulation 14A, with respect to the registrant’s 2019 annual meeting of stockholders. SUN COMMUNITIES, INC. Table of Contents Item Description Part I. Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Item 3. Item 4. Properties Legal Proceedings Mine Safety Disclosures Part II. Item 5. Item 6. Item 7. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 8. Item 9. Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III. Item 10. Item 11. Item 12. Item 13. Item 14. Part IV. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Item 15. Item 16. Exhibits and Financial Statement Schedules Form 10-K Summary Page 1 8 20 21 32 32 34 36 38 60 61 61 61 61 62 62 62 62 62 63 63 SUN COMMUNITIES, INC. PART I ITEM 1. BUSINESS GENERAL Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”) and Sun Home Services, Inc., a Michigan corporation (“SHS”) are referred to herein as the “Company,” “us,” “we,” and “our”. We are a self- administered and self-managed real estate investment trust (“REIT”). We are a fully integrated real estate company which, together with our affiliates and predecessors, have been in the business of acquiring, operating, developing, and expanding manufactured housing (“MH”) and recreational vehicle (“RV”) communities since 1975. We lease individual parcels of land (“sites”) with utility access for placement of manufactured homes and RVs to our customers. We are also engaged through a taxable subsidiary, SHS, in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance and cash flows. We own, operate, or have an interest in a portfolio of MH and RV communities. As of December 31, 2018, we owned, operated or had an interest in a portfolio of 371 properties in 31 states and Ontario, Canada (collectively, the “Properties” or “Communities”), including 230 MH communities, 110 RV communities, and 31 Properties containing both MH and RV sites. As of December 31, 2018, the Properties contained an aggregate of 128,454 developed sites comprised of 84,428 developed MH sites, 24,535 annual RV sites (inclusive of both annual and seasonal usage rights), and 19,491 transient RV sites. There are approximately 11,000 additional MH and RV sites suitable for development. Our executive and principal property management office is located at 27777 Franklin Road, Suite 200, Southfield, Michigan 48034 and our telephone number is (248) 208-2500. We have regional property management offices located in Austin, Texas; Grand Rapids, Michigan; Denver, Colorado; Ft. Myers, Florida; and Orlando, Florida; and we employed an aggregate of 2,784 full and part time employees as of December 31, 2018. Our website address is www.suncommunities.com and we make available, free of charge, on or through our website all of our periodic reports, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and current reports on Form 8- K, as soon as reasonably practicable after we file such reports with the Securities and Exchange Commission (the “SEC”). STRUCTURE OF THE COMPANY The Operating Partnership is structured as an umbrella partnership REIT, or UPREIT. In 1993, we contributed our net assets to the Operating Partnership in exchange for the sole general partner interest in the Operating Partnership and the majority of all the Operating Partnership’s initial capital. We conduct substantially all of our operations through the Operating Partnership. The Operating Partnership owns, either directly or indirectly through other subsidiaries, all of our assets. This UPREIT structure enables us to comply with certain complex requirements under the federal tax rules and regulations applicable to REITs, and to acquire MH and RV communities in transactions that defer some or all of the sellers’ tax consequences. The financial results of the Operating Partnership and our other subsidiaries are consolidated in our Consolidated Financial Statements. The financial results include certain activities that do not necessarily qualify as REIT activities under the Internal Revenue Code of 1986, as amended (the “Code”). We have formed taxable REIT subsidiaries, as defined in the Code, to engage in such activities. We use taxable REIT subsidiaries to offer certain services to our residents and engage in activities that would not otherwise be permitted under the REIT rules if provided directly by us or by the Operating Partnership. The taxable REIT subsidiaries include our home sales business, SHS, which provides manufactured home sales, leasing, and other services to current and prospective tenants of the Properties. Under the partnership agreement, the Operating Partnership is structured to make distributions with respect to certain of the Operating Partnership units (“OP units”) at the same time that distributions are made to our common stockholders. The Operating Partnership is structured to permit limited partners holding certain classes or series of OP units to exchange those OP units for shares of our common stock (in a taxable transaction) and achieve liquidity for their investment. As the sole general partner of the Operating Partnership, we generally have the power to manage and have complete control over the conduct of the Operating Partnership’s affairs and all decisions or actions made or taken by us as the general partner pursuant to the partnership agreement are generally binding upon all of the partners and the Operating Partnership. 1 SUN COMMUNITIES, INC. We do not own all of the OP units. As of December 31, 2018, the Operating Partnership had issued and outstanding: • • • • • • • 89,082,937 common OP units; 1,283,819 preferred OP units (“Aspen preferred OP units”); 331,941 Series A-1 preferred OP units; 40,268 Series A-3 preferred OP units; 1,473,153 Series A-4 preferred OP units; 26,750 Series B-3 preferred OP units; and 314,438 Series C preferred OP units. As of December 31, 2018, we held: • • • 86,357,426 common OP units, or approximately 96.9 percent of the issued and outstanding common OP units; 1,062,789 Series A-4 preferred OP units, or approximately 72.1 percent of the issued and outstanding Series A-4 preferred OP units; and no Aspen preferred OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series B-3 preferred OP units, or Series C preferred OP units. Ranking and Priority The various classes and series of OP units issued by the Operating Partnership rank as follows with respect to rights to the payment of distributions and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Operating Partnership: • • • • • • first, the Series A-4 preferred OP units, Aspen preferred OP units and Series A-1 preferred OP units, on parity with each other; next, the Series C preferred OP units; next, the Series B-3 preferred OP units; next, the Series D preferred OP units; next, the Series A-3 preferred OP units; and finally, the common OP units. Common OP Units Subject to certain limitations, the holder of each common OP unit at its option may convert such common OP unit at any time into one share of our common stock. Holders of common OP units are entitled to receive distributions from the Operating Partnership as and when declared by the general partner, provided that all accrued distributions payable on OP units ranking senior to the common OP units have been paid. The holders of common OP units generally receive distributions on the same dates and in amounts equal to the distributions paid to holders of our common stock. Aspen Preferred OP Units Subject to certain limitations, at any time prior to January 1, 2024, the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the average closing price of our common stock for the preceding ten trading days is $68.00 per share or less, 0.397 common OP units, or (b) if the average closing price of our common stock for the preceding ten trading days is greater than $68.00 per share, the number of common OP units determined by dividing (i) the sum of (A) $27.00 plus (B) 25 percent of the amount by which the average closing price of our common stock for the preceding ten trading days exceeds $68.00 per share, by (ii) the average closing price of our common stock for the preceding ten trading days. The holders of Aspen preferred OP units are entitled to receive distributions not less than quarterly. Distributions on Aspen preferred OP units are generally paid on the same dates as distributions are paid to holders of common OP units. Each Aspen preferred OP unit is entitled to receive distributions in an amount equal to the product of (x) $27.00, multiplied by (y) an annual rate equal to the 10- year U.S. Treasury bond yield plus 239 basis points; provided, however, that the aggregate distribution rate shall not be less than 6.5 percent nor more than 9 percent. On January 2, 2024, we are required to redeem all Aspen preferred OP units that have not been converted to common OP units. In addition, we are required to redeem the Aspen preferred OP units of any holder thereof within five days after receipt of a written demand during the existence of certain uncured Aspen preferred OP unit defaults, including our failure to pay distributions on the Aspen preferred OP units when due and our failure to provide certain security for the payment of distributions on the Aspen preferred OP units. We may also redeem Aspen preferred OP units from time to time if we and the holder thereof agree to do so. 2 SUN COMMUNITIES, INC. Series A-1 Preferred OP Units Subject to certain limitations, the holder of each Series A-1 preferred OP unit at its option may exchange such Series A-1 preferred OP unit at any time into approximately 2.4390 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series A-1 preferred OP units are entitled to receive distributions not less than quarterly. Distributions on Series A-1 preferred OP units are generally paid on the last day of each quarter. Each Series A-1 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 6.0 percent. Series A-1 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners. Series A-3 Preferred OP Units Subject to certain limitations, the holder of each Series A-3 preferred OP unit at its option may exchange such Series A-3 preferred OP unit at any time into approximately 1.8605 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series A-3 preferred OP units are entitled to receive distributions not less than quarterly. Each Series A-3 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 4.5 percent. Series A-3 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners. Series A-4 Preferred OP Units In connection with the issuance of our 6.5% Series A-4 Cumulative Convertible Preferred Stock (the “Series A-4 preferred stock”) in November 2014, the Operating Partnership created the Series A-4 preferred OP units as a new class of OP units. Series A-4 preferred OP units have economic and other rights and preferences substantially similar to those of the Series A-4 preferred stock, including rights to receive distributions at the same time and in the same amounts as distributions paid on Series A-4 preferred stock. Each Series A-4 preferred OP unit is exchangeable into approximately 0.4444 shares of common stock or common OP units (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The Operating Partnership issued Series A-4 preferred OP units to us in connection with our acquisition of a portfolio of MH communities from Green Courte Real Estate Partners, LLC and certain of their affiliated entities (collectively, the “Green Courte parties” or the “Green Courte entities”). During the year ended December 31, 2018 and 2017, we repurchased zero and 438,448 Series A-4 preferred OP units, respectively. At December 31, 2018, we held 1,062,789 Series A-4 preferred OP units. The rights of the Series A-4 preferred OP units held by us mirror the economic rights of the Series A-4 preferred OP units issued to the Green Courte entities, but certain voting, consent, and other rights do not apply to the Series A-4 preferred OP units held by us. If certain change of control transactions occur or if our common stock ceases to be listed or quoted on an exchange or quotation system, then at any time after November 26, 2019, we or the holders of shares of Series A-4 preferred stock and Series A-4 preferred OP units may cause all or any of those shares or units to be redeemed for cash at a redemption price equal to the sum of (i) the greater of (x) the amount that the redeemed shares of Series A-4 preferred stock and Series A-4 preferred OP units would have received in such transaction if they had been converted into shares of our common stock immediately prior to such transaction, or (y) $25.00 per share, plus (ii) any accrued and unpaid distributions thereon to, but not including, the redemption date. Series B-3 Preferred OP Units Series B-3 preferred OP units are not convertible. The holders of Series B-3 preferred OP units generally receive distributions on the last day of each quarter. Each Series B-3 preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to 8.0 percent. Subject to certain limitations, (x) during the 90-day period beginning on each of the tenth through fifteenth anniversaries of the issue date of the applicable Series B-3 preferred OP units, (y) at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units, or (z) after our receipt of notice of the death of the electing holder of a Series B-3 preferred OP unit, each holder of Series B-3 preferred OP units may require us to redeem such holder’s Series B-3 preferred OP units at the redemption price of $100.00 per unit. In addition, at any time after the fifteenth anniversary of the issue date of the applicable Series B-3 preferred OP units we may redeem, at our option, all of the Series B-3 preferred OP units of any holder thereof at the redemption price of $100.00 per unit. Series B-3 preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners. 3 SUN COMMUNITIES, INC. During the year ended December 31, 2018, we redeemed a total of 41,051 Series B-3 preferred OP units. In January 2019, we redeemed the remaining 26,750 Series B-3 preferred OP units. Series C Preferred OP Units Subject to certain limitations, the holder of each Series C preferred OP unit at its option may exchange such Series C preferred OP unit at any time into 1.11 shares of our common stock (which exchange rate is subject to adjustment upon stock splits, recapitalizations, and similar events). The holders of Series C preferred OP units are entitled to receive distributions not less than quarterly. Each Series C preferred OP unit is entitled to receive distributions in an amount equal to the product of $100.00 multiplied by an annual rate equal to (i) 4.5 percent until April 1, 2020, and (ii) 5.0 percent after April 2, 2020. Series C preferred OP units do not have any voting or consent rights on any matter requiring the consent or approval of the Operating Partnership’s limited partners. Series D Preferred OP Units On January 31, 2019, the Operating Partnership created a new class of OP units named Series D preferred OP units. As of February 14, 2019, 488,958 Series D preferred units were outstanding. Subject to certain limitations, each Series D preferred OP unit is exchangeable at any time after the first anniversary of its issuance date into 0.8 shares of the Company’s common stock (as such ratio is subject to adjustment for certain capital events). The Series D preferred OP units provide for quarterly distributions on the $100 per unit issue price of 3.75% per year until January 31, 2021, and 4.0% per year thereafter. Subject to certain limitations, the Series D preferred OP unit holders may cause the Operating Partnership to redeem all or a portion of their Series D preferred OP units for $100 per unit (plus any accrued but unpaid distributions) any time after the earlier of: (i) the fifth anniversary of the issuance of the Series D preferred OP units, or (ii) the Operating Partnership’s notice of the death of the principal of the initial holder of the Series D preferred OP units. The Series D preferred OP units have no voting rights. REAL PROPERTY OPERATIONS Properties are designed and improved for several home options of various sizes and designs that consist of both MH communities and RV communities. An MH community is a residential subdivision designed and improved with sites for the placement of manufactured homes, related improvements, and amenities. Manufactured homes are detached, single family homes which are produced off site by manufacturers and installed on sites within the community. Manufactured homes are available in a wide array of designs, providing owners with a level of customization generally unavailable in other forms of multi-family housing developments. Modern MH communities contain improvements similar to other garden style residential developments, including centralized entrances, paved streets, curbs, gutters, and parkways. In addition, these communities also often provide a number of amenities, such as a clubhouse, a swimming pool, shuffleboard courts, tennis courts, and laundry facilities. An RV community is a resort or park designed and improved with sites for the placement of RVs for varied lengths of time. Properties may also provide vacation rental homes. RV communities include a number of amenities such as restaurants, golf courses, swimming pools, tennis courts, fitness centers, planned activities, and spacious social facilities. The owner of each home on our Properties leases the site on which the home is located. We typically own the underlying land, utility connections, streets, lighting, driveways, common area amenities, and other capital improvements and are responsible for enforcement of community guidelines and maintenance. In six of our 371 communities, we do not own all of the underlying land and operate the communities pursuant to ground leases. Certain of the Properties provide water and sewer service through public or private utilities, while others provide these services to residents from on-site facilities. Each owner of a home within our Properties is responsible for the maintenance of the home and leased site. As a result, our capital expenditure needs tend to be less significant relative to multi-family rental apartment complexes. 4 SUN COMMUNITIES, INC. PROPERTY MANAGEMENT Our property management strategy emphasizes intensive, hands-on management by dedicated, on-site district and community managers. We believe that this on-site focus enables us to continually monitor and address resident concerns, the performance of competitive properties, and local market conditions. As of December 31, 2018, we employed 2,784 full and part time employees, of which 2,393 were located on-site as property managers, support staff, or maintenance personnel. Our community managers are overseen by John B. McLaren, our President and Chief Operating Officer, who has been in the MH industry since 1995, three Senior Vice Presidents of Operations and Sales, nine Divisional Vice Presidents and thirty seven Regional Vice Presidents. Each Regional Vice President is responsible for semi-annual market surveys of competitive communities, interaction with local manufactured home dealers, regular property inspections, and oversight of property operations and sales functions for six to fourteen properties. Each district or community manager performs regular inspections in order to continually monitor the Property’s physical condition and to effectively address tenant concerns. In addition to a district or community manager, each district or property has on-site maintenance personnel and management support staff. We hold mandatory training sessions for all new property management personnel to ensure that management policies and procedures are executed effectively and professionally. All of our property management personnel participate in on-going training to ensure that changes to management policies and procedures are implemented consistently. We offer approximately 350 trainings including books, online courses, webinars, and live sessions for our team members through our Sun University, which has led to increased knowledge and accountability for daily operations and policies and procedures. HOME SALES AND RENTALS SHS is engaged in the marketing, selling and leasing of new and pre-owned homes to current and future residents in our communities. Because tenants often purchase a home already on-site within a community, such services enhance occupancy and property performance. Additionally, because many of the homes on the Properties are sold through SHS, better control of home quality in our communities can be maintained than if sales services were conducted solely through third-party brokers. SHS also leases homes to prospective tenants. At December 31, 2018, SHS had 10,994 occupied leased homes in its portfolio. New and pre-owned homes are purchased for the Rental Program. Leases associated with the Rental Program generally have a term of one year. The Rental Program requires intensive management of costs associated with repair and refurbishment of these homes as the tenants vacate and the homes are re-leased, similar to apartment rentals. We received approximately 48,000 applications during 2018 to live in our Properties, providing a significant “resident boarding” system that allows us to market the purchase of a home to the qualified applicants. Through the Rental Program we are able to demonstrate our product and lifestyle to the renters, while monitoring their payment history and converting qualified renters to owners. REGULATIONS AND INSURANCE General MH and RV community properties are subject to various laws, ordinances and regulations, including regulations relating to recreational facilities such as swimming pools, clubhouses, and other common areas. We believe that each Property has the necessary operating permits and approvals. Insurance Our management believes that the Properties are covered by adequate fire, property, business interruption, general liability, and (where appropriate) flood and earthquake insurance provided by reputable companies with commercially reasonable deductibles and limits. We maintain a blanket policy that covers all of our Properties. We have obtained title insurance insuring fee title to the Properties in an aggregate amount which we believe to be adequate. Claims made to our insurance carriers that are determined to be recoverable are classified in other receivables as incurred. 5 SUN COMMUNITIES, INC. SITE LEASES OR USAGE RIGHTS Typical tenant leases for MH sites are month-to-month or year-to-year, renewable upon the consent of both parties, or, in some instances, as provided by statute. Certain of our leases, mainly at our Florida and California properties, are tied to the consumer price index or other indices as they relate to rent increases. Generally, market rate adjustments are made on an annual basis. These leases are cancelable for non-payment of rent, violation of community rules and regulations or other specified defaults. During the five calendar years ended December 31, 2018, on average 2.2 percent of the homes in our communities have been removed by their owners and 6.2 percent of the homes have been sold by their owners to a new owner who then assumes rental obligations as a community resident. The average cost to move a home ranges from $4,000 to $10,000. On average, our residents remain in our communities for approximately 12 years, while homes, which give rise to the rental stream, remain for over 45 years. Please see the Risk Factors in Item 1A, and our accompanying Consolidated Financial Statements and related notes thereto beginning on page F-1 of this Annual Report on Form 10-K for more detailed information. 6 SUN COMMUNITIES, INC. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains various “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that such forward-looking statements will be subject to the safe harbors created thereby. For this purpose, any statements contained in this filing that relate to expectations, beliefs, projections, future plans and strategies, trends or prospective events or developments and similar expressions concerning matters that are not historical facts are deemed to be forward-looking statements. Words such as “forecasts,” “intends,” “intend,” “intended,” “goal,” “estimate,” “estimates,” “expects,” “expect,” “expected,” “project,” “projected,” “projections,” “plans,” “predicts,” “potential,” “seeks,” “anticipates,” “anticipated,” “should,” “could,” “may,” “will,” “designed to,” “foreseeable future,” “believe,” “believes,” “scheduled,” “guidance” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. These forward- looking statements reflect our current views with respect to future events and financial performance, but involve known and unknown risks and uncertainties, both general and specific to the matters discussed in this filing. These risks and uncertainties may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. In addition to the risks disclosed under “Risk Factors” contained in this Annual Report on Form 10-K and our other filings with the SEC, such risks and uncertainties include but are not limited to: • • • • • • • • • • • • • • • • • • • changes in general economic conditions, the real estate industry, and the markets in which we operate; difficulties in our ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully; our liquidity and refinancing demands; our ability to obtain or refinance maturing debt; our ability to maintain compliance with covenants contained in our debt facilities; availability of capital; changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar and the Australian dollar; our ability to maintain rental rates and occupancy levels; our failure to maintain effective internal control over financial reporting and disclosure controls and procedures; increases in interest rates and operating costs, including insurance premiums and real property taxes; risks related to natural disasters such as hurricanes, earthquakes, floods and wildfires; general volatility of the capital markets and the market price of shares of our capital stock; our failure to maintain our status as a REIT; changes in real estate and zoning laws and regulations; legislative or regulatory changes, including changes to laws governing the taxation of REITs; litigation, judgments or settlements; competitive market forces; the ability of manufactured home buyers to obtain financing; and the level of repossessions by manufactured home lenders. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference into this filing, whether as a result of new information, future events, and changes in our expectations or otherwise, except as required by law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. 7 SUN COMMUNITIES, INC. ITEM 1A. RISK FACTORS Our prospects are subject to certain uncertainties and risks. Our future results could differ materially from current results, and our actual results could differ materially from those projected in forward-looking statements as a result of certain risk factors. These risk factors include, but are not limited to, those set forth below, other one-time events, and important factors disclosed previously and from time to time in our other filings with the SEC. REAL ESTATE AND OPERATIONS RISKS General economic conditions and the concentration of our properties in Florida, Michigan, Texas, and California may affect our ability to generate sufficient revenue. The market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets, may significantly affect manufactured home occupancy or rental rates. Occupancy and rental rates, in turn, may significantly affect our revenues, and if our communities do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to pay or refinance our debt obligations could be adversely affected. We derive significant amounts of our rental income from properties located in Florida, Michigan, Texas, and California. As of December 31, 2018, 124 properties, representing approximately 34.1 percent of developed sites, are located in Florida; 70 properties, representing approximately 21.1 percent of developed sites, are located in Michigan; 23 properties, representing approximately 6.8 percent of developed sites, are located in Texas; and 30 properties, representing approximately 6.0 percent of developed sites, are located in California. As a result of the geographic concentration of our Properties in Florida, Michigan, Texas, and California, we are exposed to the risks of downturns in local economies or other local real estate market conditions which could adversely affect occupancy rates, rental rates, and property values in these markets. Our revenue would also be adversely affected if tenants were unable to pay rent or if sites were unable to be rented on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of the sites, or if the rental rates upon such renewal or reletting were significantly lower than expected rates, then our business and results of operations could be adversely affected. In addition, certain expenditures associated with each Property (such as real estate taxes and maintenance costs) generally are not reduced when circumstances cause a reduction in income from the Property. Furthermore, real estate investments are relatively illiquid and, therefore, will tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. The following factors, among others, may adversely affect the revenues generated by our communities: • • • • • • • the national and local economic climate which may be adversely impacted by, among other factors, plant closings, and industry slowdowns; local real estate market conditions such as the oversupply of MH and RV sites or a reduction in demand for MH and RV sites in an area; changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar and Australian dollar; the number of repossessed homes in a particular market; the lack of an established dealer network; the rental market which may limit the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates; the perceptions by prospective tenants of the safety, convenience and attractiveness of our Properties and the neighborhoods where they are located; • zoning or other regulatory restrictions; 8 SUN COMMUNITIES, INC. • • • • competition from other available MH and RV communities and alternative forms of housing (such as apartment buildings and site-built single-family homes); our ability to effectively manage, maintain and insure the Properties; increased operating costs, including insurance premiums, real estate taxes, and utilities; and the enactment of rent control laws or laws taxing the owners of manufactured homes. Competition affects occupancy levels and rents which could adversely affect our revenues. Our Properties are located in developed areas that include other MH and RV community properties. The number of competitive MH and RV community properties in a particular area could have a material adverse effect on our ability to lease sites and increase rents charged at our Properties or at any newly acquired properties. We may be competing with others with greater resources and whose officers and directors have more experience than our officers and directors. In addition, other forms of multi family residential properties, such as private and federally funded or assisted multi-family housing projects and single family housing, provide housing alternatives to potential tenants of MH and RV communities. Our ability to sell or lease manufactured homes may be affected by various factors, which may in turn adversely affect our profitability. SHS operates in the manufactured home market offering manufactured home sales and leasing services to tenants and prospective tenants of our communities. The market for the sale and lease of manufactured homes may be adversely affected by the following factors: • • • • downturns in economic conditions which adversely impact the housing market; an oversupply of, or a reduced demand for, manufactured homes; the difficulty facing potential purchasers in obtaining affordable financing as a result of heightened lending criteria; and an increase or decrease in the rate of manufactured home repossessions which provide aggressively priced competition to new manufactured home sales. Any of the above listed factors could adversely impact our rate of manufactured home sales and leases, which would result in a decrease in profitability. The cyclical and seasonal nature of the MH and the RV industries may lead to fluctuations in our operating results. The MH and RV markets can experience cycles of growth and downturn due to seasonality patterns. In the MH market, certain properties maintain higher occupancy during the summer months, while certain other properties maintain higher occupancy during the winter months. The RV market typically shows a decline in demand over the winter months, yet usually produces higher growth in the spring and summer months due to higher use by vacationers. Our results on a quarterly basis can fluctuate due to this cyclicality and seasonality. We may not be able to integrate or finance our acquisitions and our acquisitions may not perform as expected. We have acquired and intend to continue to selectively acquire MH and RV properties. Our acquisition activities and their success are subject to the following risks: • we may be unable to acquire a desired property because of competition from other well-capitalized real estate investors, including both publicly traded REITs and institutional investment funds; • • even if we enter into an acquisition agreement for a property, it is usually subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction, which may not be satisfied; even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price; 9 SUN COMMUNITIES, INC. • we may be unable to finance acquisitions on favorable terms; • • acquired properties may fail to perform as expected; acquired properties may be located in new markets where we face risks associated with a lack of market knowledge or understanding of the local economy, lack of business relationships in the area, and unfamiliarity with local governmental and permitting procedures; and • we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations. If any of the above risks occur, our business and results of operations could be adversely affected. In addition, we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were to be asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle it, which could adversely affect our cash flow. Increases in taxes and regulatory compliance costs may reduce our results of operations. Costs resulting from changes in real estate laws, income taxes, service or other taxes, generally are not passed through to tenants under leases and may adversely affect our results of operations and financial condition. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which would adversely affect our business and results of operations. We may not be able to integrate or finance our expansion and development activities. We engage in the construction and development of new communities or expansion of existing communities, and intend to continue to engage in the development and construction business in the future. Our construction and development pipeline may be exposed to the following risks which are in addition to those risks associated with the ownership and operation of established MH and RV communities: • we may not be able to obtain financing with favorable terms for community development which may make us unable to proceed with the development; • we may be unable to obtain, or face delays in obtaining, necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays, and even require us to abandon development of the community entirely if we are unable to obtain such permits or authorizations; • we may abandon development opportunities that we have already begun to explore and as a result we may not recover expenses already incurred in connection with exploring such development opportunities; • we may be unable to complete construction and lease up of a community on schedule resulting in increased debt service expense and construction costs; • we may incur construction and development costs for a community which exceed our original estimates due to increased materials, labor or other costs, which could make completion of the community uneconomical and we may not be able to increase rents to compensate for the increase in development costs which may impact our profitability; • we may be unable to secure long term financing on completion of development resulting in increased debt service and lower profitability; and • occupancy rates and rents at a newly developed community may fluctuate depending on several factors, including market and economic conditions, which may result in the community not being profitable. If any of the above risks occur, our business and results of operations could be adversely affected. 10 SUN COMMUNITIES, INC. Rent control legislation may harm our ability to increase rents. State and local rent control laws in certain jurisdictions may limit our ability to increase rents and to recover increases in operating expenses and the costs of capital improvements. Enactment of such laws has been considered from time to time in other jurisdictions. Certain Properties are located, and we may purchase additional properties, in markets that are either subject to rent control or in which rent-limiting legislation exists or may be enacted. Legislative requirements can limit accessibility of affordable financing for potential manufactured home buyers. Legislation impacting third party loan originators, consumer protection laws and lender requirements to investigate a borrower's creditworthiness may restrict access of affordable chattel financing to potential manufactured home buyers. We may be subject to environmental liability. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate is liable for the costs of removal or remediation of certain hazardous substances at, on, under or in such property. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent the property, to borrow using the property as collateral or to develop the property. Persons who arrange for the disposal or treatment of hazardous substances also may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility owned or operated by another person. In addition, certain environmental laws impose liability for the management and disposal of asbestos containing materials and for the release of such materials into the air. These laws may provide for third parties to seek recovery from owners or operators of real properties for personal injury associated with asbestos containing materials. In connection with the ownership, operation, management, and development of real properties, we may be considered an owner or operator of such properties and, therefore, are potentially liable for removal or remediation costs, and also may be liable for governmental fines and injuries to persons and property. When we arrange for the treatment or disposal of hazardous substances at landfills or other facilities owned by other persons, we may be liable for the removal or remediation costs at such facilities. All of our Properties have been subject to a Phase I or similar environmental audit (which involves general inspections without soil sampling or ground water analysis) completed by independent environmental consultants. These environmental audits have not revealed any significant environmental liability that would have a material adverse effect on our business. These audits cannot reflect conditions arising after the studies were completed, and no assurances can be given that existing environmental studies reveal all environmental liabilities, that any prior owner or operator of a property or neighboring owner or operator did not create any material environmental condition not known to us, or that a material environmental condition does not otherwise exist as to any one or more Properties. Cybersecurity breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. We rely intensively on information technology to account for tenant transactions, manage the privacy of tenant data, communicate internally and externally, and analyze our financial and operating results. In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our tenants, clients, vendors and employees in our facilities and on our network. In addition, we engage third party service providers that may have access to such information in connection with providing necessary information technology and security and other business services to us. This information may include personally identifiable information such as social security numbers, banking information and credit card information. We address potential breaches or disclosure of this confidential information by implementing a variety of security measures intended to protect the confidentiality and security of this information including (among others) engaging reputable, recognized firms to help us design and maintain our information technology and data security systems, including testing and verification of their proper and secure operations on a periodic basis. We also maintain cyber risk insurance to provide some coverage for certain risks arising out of data and network breaches. Despite our security measures, our information technology and infrastructure, as well as that of our third-party vendors, may be vulnerable to attacks by hackers (including through malware, ransomware, computer viruses, and email phishing schemes) or breached due to employee error, malfeasance, fire, flood or other physical event, or other disruptions. Any such breach or disruption could compromise our or a third-party vendor’s network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could: 11 SUN COMMUNITIES, INC. • • • • • • • result in legal claims or proceedings, disrupt our operations, including our ability to service our tenants and our ability to analyze and report our financial and operating results, decrease our revenues, damage our reputation, cause a loss of confidence, increase our insurance premiums, or have other material adverse effects on our business. We are dependent on continuous access to the Internet to use our cloud-based applications. Damage or failure to our information technology systems, including as a result of any of the reasons described above, could adversely affect our results of operations as we may incur significant costs or data loss. We continually assess new and enhanced information technology solutions to manage risk of system failure or interruption. Expanding social media platforms present new challenges. Social media outlets continue to grow and expand, which presents us with new risks. Adverse content about the Company and our Properties on social media platforms could result in damage to our reputation or brand. Improper posts by employees or others could result in disclosure of confidential or proprietary information regarding our operations. Losses in excess of our insurance coverage or uninsured losses could adversely affect our operating results and cash flow. We have a significant concentration of properties in Florida and California, where natural disasters or other catastrophic events such as hurricanes, earthquakes, floods and wildfires could negatively impact our operating results and cash flows. We maintain comprehensive liability, fire, property, business interruption, general liability, and (where appropriate) flood and earthquake insurance, provided by reputable companies with commercially reasonable deductibles and limits. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. However, certain types of losses including, but not limited to, riots or acts of war, may be either uninsurable or not economically insurable. In the event an uninsured loss occurs, we could lose both our investment in and anticipated profits and cash flow from the affected property. We would also continue to be obligated to repay any mortgage indebtedness or other obligations related to the community. If an uninsured liability to a third party were to occur, we would incur the cost of defense and settlement with, or court ordered damages to, that third party. A significant uninsured property or liability loss could have a material adverse effect on our business and our financial condition and results of operations. Investments through joint ventures involve risks not present for Properties in which we are the sole owner. We have invested and may continue to invest as a joint venture partner in joint ventures. These investments involve risks, including, but not limited to, the possibility the other joint venture partner may have business goals which are inconsistent with ours, possess the ability to take or force action or withhold consent contrary to our requests, fail to provide capital or fulfill its obligations, or become insolvent and require us to assume and fulfill the joint venture’s financial obligations. Conflicts arising between us and our joint venture partners may be difficult to manage or resolve and it could be difficult to manage or otherwise monitor the existing business arrangements. We and our joint venture partners may each have the right to initiate a buy-sell arrangement, which could cause us to sell our interest, or acquire a joint venture partner’s interest, at a time when we otherwise would not have entered into such a transaction. Each joint venture agreement is individually negotiated, and our ability to operate, finance, or dispose of a Property in our sole discretion may be limited to varying degrees depending on the terms of the applicable joint venture agreement. Climate change may adversely affect our business. To the extent that significant changes in the climate occur in areas where our Properties are located, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. Should the impact of climate change be material in nature, including significant property damage to or destruction of our Properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected. In addition, changes in federal, state and local legislation and regulation based on concerns about climate change could result in increased capital expenditures on our Properties (for example, to improve their energy efficiency and/or resistance to inclement weather) without a corresponding increase in revenue, resulting in adverse impacts to our net income. 12 SUN COMMUNITIES, INC. FINANCING AND INVESTMENT RISKS Our significant amount of debt could limit our operational flexibility or otherwise adversely affect our financial condition. We have a significant amount of debt. As of December 31, 2018, we had approximately $3.1 billion of total debt outstanding, consisting of approximately $2.8 billion in debt that is collateralized by mortgage liens on 185 of the Properties, $107.7 million that is secured by collateralized receivables, $128.0 million on our lines of credit, $35.3 million of mandatorily redeemable interest, and $37.3 million that is unsecured debt. If we fail to meet our obligations under our secured debt, the lenders would be entitled to foreclose on all or some of the collateral securing such debt which could have a material adverse effect on us and our ability to make expected distributions, and could threaten our continued viability. We are subject to the risks normally associated with debt financing, including the following risks: • • • our cash flow may be insufficient to meet required payments of principal and interest, or require us to dedicate a substantial portion of our cash flow to pay our debt and the interest associated with our debt rather than to other areas of our business; our existing indebtedness may limit our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt; it may be more difficult for us to obtain additional financing in the future for our operations, working capital requirements, capital expenditures, debt service or other general requirements; • we may be more vulnerable in the event of adverse economic and industry conditions or a downturn in our business; • we may be placed at a competitive disadvantage compared to our competitors that have less debt; and • we may not be able to refinance at all or on favorable terms, as our debt matures. If any of the above risks occurred, our financial condition and results of operations could be materially adversely affected. We may incur substantially more debt, which would increase the risks associated with our substantial leverage. Despite our current indebtedness levels, we may incur substantially more debt in the future. If new debt is added to our current debt levels, an even greater portion of our cash flow will be needed to satisfy our debt service obligations. As a result, the related risks that we now face could intensify and increase the risk of a default on our indebtedness. TAX RISKS We may suffer adverse tax consequences and be unable to attract capital if we fail to qualify as a REIT. We believe that since our taxable year ended December 31, 1994, we have been organized and operated, and intend to continue to operate, so as to qualify for taxation as a REIT under the Code. Although we believe that we have been and will continue to be organized and have operated and will continue to operate so as to qualify for taxation as a REIT, we cannot be assured that we have been or will continue to be organized or operated in a manner to so qualify or remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which require us to continually monitor our tax status. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates. Moreover, unless entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability to us for the years involved. In addition, distributions to stockholders would no longer be required to be made. Federal, state and foreign income tax laws governing REITs and related interpretations may change at any time, and any such legislative or other actions affecting REITs could have a negative effect on us. 13 SUN COMMUNITIES, INC. Federal, state and foreign income tax laws governing REITs or the administrative interpretations of those laws may be amended at any time. Federal, state, and foreign tax laws are under constant review by persons involved in the legislative process, at the Internal Revenue Service and the U.S. Department of the Treasury, and at various state and foreign tax authorities. Changes to tax laws, regulations, or administrative interpretations, which may be applied retroactively, could adversely affect us. We cannot predict whether, when, in what forms, or with what effective dates, the tax laws, regulations, and administrative interpretations applicable to us may be changed. Accordingly, we cannot assert that any such change will not significantly affect either our ability to qualify for taxation as a REIT or the income tax consequences to us. Outside of the U.S. federal tax legislation enacted into law on December 22, 2017 informally titled the Tax Cut and Jobs Act (the “Tax Act”), there has been no new major changes to the taxation of individuals and businesses in 2018. However, the overall impact of the Tax Act is uncertain. In addition, there are a significant number of technical issues clarified with respect to the interpretation and application of the Tax Act which may or may not be clarified by future guidance. It is not possible to predict whether such clarifications will result in adverse consequences to the Company or its stockholders. Stockholders are urged to consult their tax advisors with respect to the effects of the Tax Act and any other potential amendments to relevant tax laws. We intend for the Operating Partnership to be taxed as a partnership, but we cannot guarantee that it will qualify. We believe that the Operating Partnership has been organized as a partnership and will qualify for treatment as such under the Code. However, if the Operating Partnership is deemed to be a “publicly traded partnership,” it will be treated as a corporation instead of a partnership for federal income tax purposes unless at least 90 percent of its income is qualifying income as defined in the Code. The income requirements applicable to REITs and the definition of “qualifying income” for purposes of this 90 percent test are similar in most respects. Qualifying income for the 90 percent test generally includes passive income, such as specified types of real property rents, dividends, and interest. We believe that the Operating Partnership has and will continue to meet this 90 percent test, but we cannot guarantee that it has or will. If the Operating Partnership were to be taxed as a regular corporation, it would incur substantial tax liabilities, we would fail to qualify as a REIT for federal income tax purposes, and our ability to raise additional capital could be significantly impaired. Our ability to accumulate cash may be restricted due to certain REIT distribution requirements. In order to qualify as a REIT, we must distribute to our stockholders at least 90 percent of our REIT taxable income (calculated without any deduction for dividends paid and excluding net capital gain) and to avoid federal income taxation, our distributions must not be less than 100 percent of our REIT taxable income, including capital gains. As a result of the distribution requirements, we do not expect to accumulate significant amounts of cash. Accordingly, these distributions could significantly reduce the cash available to us in subsequent periods to fund our operations and future growth. Our taxable REIT subsidiaries, or TRSs, are subject to special rules that may result in increased taxes. As a REIT, we must pay a 100 percent penalty tax on certain payments that we receive if the economic arrangements between us and any of our TRSs are not comparable to similar arrangements between unrelated parties. The Internal Revenue Service may successfully assert that the economic arrangements of any of our inter-company transactions are not comparable to similar arrangements between unrelated parties. Dividends payable by REITs do not qualify for the reduced tax rates applicable to certain dividends. The maximum federal tax rate for certain qualified dividends payable to domestic stockholders that are individuals, trusts and estates is 20 percent. Dividends payable by REITs, however, are generally not eligible for this reduced rate, although the new Tax Act permits a 20 percent deduction equal to the amount of qualifying REIT dividends received, thus bringing the maximum federal tax rate on qualifying REIT dividends to 29.6 percent. While this rule does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular qualified corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less competitive than investments in stock of non- REIT corporations that pay dividends, which could adversely affect the comparative value of the stock of REITs, including our common stock and preferred stock. Prospective investors should consult their own tax advisors regarding the effect of this change on their effective tax rate with respect to REIT dividends. 14 SUN COMMUNITIES, INC. Complying with REIT requirements may cause us to forego otherwise attractive opportunities. To remain qualified as a REIT for federal income tax purposes, we must continually satisfy requirements and tests under the tax law concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. In order to meet these tests, we may be required to forego or limit attractive business or investment opportunities and distribute all of our net earnings rather than invest in attractive opportunities or hold larger liquid reserves. Therefore, compliance with the REIT requirements may hinder our ability to operate solely to maximize profits. Our ability to use net operating loss carryforwards to reduce future tax payments may be limited if we experience a change in ownership, or if taxable income does not reach sufficient levels. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percent change (by value) in its equity ownership over a rolling three-year period), the corporation’s ability to use its pre-ownership-change net operating loss carryforwards to offset its post-ownership-change income may be limited. We may experience ownership changes in the future. If an ownership change were to occur, we would be limited in the portion of net operating loss carryforwards that we could use in the future to offset taxable income for U.S. federal income tax purposes. BUSINESS RISKS Some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests. Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The term of the lease is until October 31, 2026, and the average gross base rent is $18.55 per square foot until October 31, 2019 with graduated rental increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC. Legal Counsel. During 2015-2018, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $7.1 million, $5.0 million and $8.0 million in the years ended December 31, 2018, 2017 and 2016, respectively. Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of properties from partnerships previously affiliated with him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those on us and our public stockholders upon the sale of any of these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties. We rely on key management. We are dependent on the efforts of our executive officers, Gary A. Shiffman, John B. McLaren, Karen J. Dearing, and Jonathan M. Colman. The loss of services of one or more of these executive officers could have a temporary adverse effect on our operations. We do not currently maintain or contemplate obtaining any “key-man” life insurance on the Executive Officers. Certain provisions in our governing documents may make it difficult for a third-party to acquire us. 9.8 percent Ownership Limit. In order to qualify and maintain our qualification as a REIT, not more than 50 percent of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer individuals. Thus, ownership of more than 9.8 percent, in number of shares or value, of the issued and outstanding shares of our capital stock by any single stockholder has been restricted, with certain exceptions, for the purpose of maintaining our qualification as a REIT under the Code. Such restrictions in our charter do not apply to Milton M. Shiffman, Gary A. Shiffman, and Robert B. Bayer; trustees, personal representatives and agents to the extent acting for them or their respective estates; or certain of their respective relatives. 15 SUN COMMUNITIES, INC. The 9.8 percent ownership limit, as well as our ability to issue additional shares of common stock or shares of other stock (which may have rights and preferences over the common stock), may discourage a change of control of the Company and may also: (1) deter tender offers for the common stock, which offers may be advantageous to stockholders; and (2) limit the opportunity for stockholders to receive a premium for their common stock that might otherwise exist if an investor were attempting to assemble a block of common stock in excess of 9.8 percent of our outstanding shares or otherwise effect a change of control of the Company. Preferred Stock. Our charter authorizes the Board of Directors to issue up to 20,000,000 shares of preferred stock and to establish the preferences and rights (including the right to vote and the right to convert into shares of common stock) of any shares issued. Our charter designates 6,364,770 shares of preferred stock as 6.50% Series A-4 Cumulative Convertible Preferred Stock (“Series A-4 preferred stock”), $0.01 par value per share of which 1,062,789 shares were issued and outstanding as of December 31, 2018. The power to issue preferred stock could have the effect of delaying or preventing a change in control of the Company even if a change in control were in the stockholders’ interest. Subject to certain limitations, upon written notice to us, each holder of shares of Series A-4 preferred stock at its option may convert each share of Series A-4 preferred stock held by it for that number of shares of our common stock equal to the quotient obtained by dividing $25.00 by the then-applicable conversion price. The initial conversion price is $56.25, so initially each share of Series A-4 preferred stock is convertible into approximately 0.4444 shares of common stock. The conversion price is subject to adjustment upon various events. At our option, instead of issuing the shares of common stock to the converting holder of Series A-4 preferred stock as described above, we may make a cash payment to the converting holder with respect to each share of Series A-4 preferred stock the holder desires to convert equal to the fair market value of one share of our common stock. If, at any time after November 26, 2019, the volume weighted average of the daily volume weighted average price of a share of our common stock on the New York Stock Exchange (“NYSE”) equals or exceeds 115.5 percent of the then prevailing conversion price for at least 20 trading days in a period of 30 consecutive trading days, then, within 10 days thereafter, upon written notice to the holders thereof, we may convert each outstanding share of Series A-4 preferred stock into that number of shares of common stock equal to the quotient obtained by dividing $25.00 by the then prevailing conversion price. These features of the Series A-4 preferred stock may have the effect of inhibiting a third-party from making an acquisition proposal for the Company or of delaying, deferring or preventing a change of control of the Company under circumstances that otherwise could provide the holders of our common stock and preferred stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests. Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest. Certain provisions of the Maryland General Corporation Law, (“MGCL”), may have the effect of inhibiting a third-party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our capital stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • • “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10 percent or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10 percent or more of the voting power of our then outstanding voting stock at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter impose fair price and/or supermajority and stockholder voting requirements on these combinations; and “control share” provisions that provide that “control shares” of our company (defined as shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. 16 SUN COMMUNITIES, INC. The provisions of the MGCL relating to business combinations do not apply, however, to business combinations that are approved or exempted by our Board of Directors prior to the time that the interested stockholder becomes an interested stockholder. As permitted by the statute, our Board of Directors has by resolution exempted Milton M. Shiffman, Robert B. Bayer, and Gary A. Shiffman, their affiliates and all persons acting in concert or as a group with the foregoing, from the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and these persons. As a result, these persons may be able to enter into business combinations with us that may not be in the best interests of our stockholders without compliance by our Company with the supermajority vote requirements and the other provisions of the statute. Also, pursuant to a provision in our bylaws, we have exempted any acquisition of our stock from the control share provisions of the MGCL. However, our Board of Directors may by amendment to our bylaws opt in to the control share provisions of the MGCL at any time in the future. Additionally, Subtitle 8 of Title 3 of the MGCL permits our Board of Directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium to the market price of our common stock or otherwise be in our stockholders’ best interests. These provisions include a classified board; two-thirds vote to remove a director; that the number of directors may only be fixed by the Board of Directors; that vacancies on the board as a result of an increase in the size of the board or due to death, resignation or removal can only be filled by the board, and the director appointed to fill the vacancy serves for the remainder of the full term of the class of director in which the vacancy occurred; and a majority requirement for the calling by stockholders of special meetings. Other than a classified board, the filling of vacancies as a result of the removal of a director and a majority requirement for the calling by stockholders of special meetings, we are already subject to these provisions, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election to be subject to certain provisions of Subtitle 8. In the future, our Board of Directors may elect, without stockholder approval, to make us subject to the provisions of Subtitle 8 to which we are not currently subject. Our Board of Directors has power to adopt, alter or repeal any provision of our bylaws or make new bylaws, provided, however, that our stockholders may alter or repeal any provision of our bylaws and adopt new bylaws if any such alteration, repeal or adoption is approved by the affirmative vote of a majority of all votes entitled to be cast on the matter. Changes in our investment and financing policies may be made without stockholder approval. Our investment and financing policies, and our policies with respect to certain other activities, including our growth, debt, capitalization, distributions, REIT status, and operating policies, are determined by our Board of Directors. Although the Board of Directors has no present intention to do so, these policies may be amended or revised from time to time at the discretion of the Board of Directors without notice to or a vote of our stockholders. Accordingly, stockholders may not have control over changes in our policies and changes in our policies may not fully serve the interests of all stockholders. Substantial sales of our common stock could cause our stock price to fall. The sale or issuance of substantial amounts of our common stock or preferred stock, whether directly by us or in the secondary market, the perception that such sales could occur or the availability of future issuances of shares of our common stock, preferred stock, OP units or other securities convertible into or exchangeable or exercisable for our common stock or preferred stock, could materially and adversely affect the market price of our common stock or preferred stock and our ability to raise capital through future offerings of equity or equity-related securities. In addition, we may issue capital stock that is senior to our common stock in the future for a number of reasons, including to finance our operations and business strategy, to adjust our ratio of debt to equity or for other reasons. Based on the applicable conversion ratios then in effect, as of February 14, 2019, in the future we may issue to the limited partners of the Operating Partnership, up to approximately 2.7 million shares of our common stock in exchange for their OP units. The limited partners may sell such shares pursuant to registration rights, if available, or an available exemption from registration. As of February 14, 2019, options to purchase 3,000 shares of our common stock were outstanding under our equity incentive plans, and we currently have the authority to issue restricted stock awards or options to purchase up to an additional 1,330,668 shares of our common stock pursuant to our equity incentive plans. In addition, we entered into an At-the-Market Offering Sales Agreement in July 2017 to issue and sell shares of common stock. As of February 14, 2019, our Board of Directors had authorized us to sell an additional $286.3 million of common stock under this agreement. No prediction can be made regarding the effect that future sales of shares of our common stock or our other securities will have on the market price of shares. 17 SUN COMMUNITIES, INC. An increase in interest rates may have an adverse effect on the price of our common stock. One of the factors that may influence the price of our common stock in the public market will be the annual distributions to stockholders relative to the prevailing market price of the common stock. An increase in market interest rates may tend to make the common stock less attractive relative to other investments, which could adversely affect the market price of our common stock. We may be adversely impacted by fluctuations in foreign currency exchange rates. Our current and future investments in and operations of Canadian and Australian properties are or will be exposed to the effects of changes in the Canadian dollar and Australian dollar, respectively, against the U.S. dollar. Changes in foreign currency exchange rates cannot always be predicted; as a result, substantial unfavorable changes in exchange rates could have a material adverse effect on our financial condition and results of operations. The volatility in economic conditions and the financial markets may adversely affect our industry, business and financial performance. The U.S. interest rate environment, oil price fluctuations, uncertain tax and economic plans in the U.S. executive and legislative branches, and turmoil in emerging markets have created uncertainty and volatility in the U.S. and global economies. Continued economic uncertainty, both nationally and internationally, causes increased volatility in investor confidence thereby creating similar volatility in the availability of both debt and equity capital in the financial markets. The other risk factors presented in this Annual Report on Form 10-K discuss some of the principal risks inherent in our business, including liquidity risks, operational risks, and credit risks, among others. Turbulence in financial markets accentuates each of these risks and magnifies their potential effect on us. If such volatility is experienced in future periods, there could be an adverse impact on our access to capital, stock price and our operating results. Our business operations may not generate the cash needed to make distributions on our capital stock or to service our indebtedness, and we may adjust our common stock distribution policy. Our ability to make distributions on our common stock and preferred stock, and payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our common stock or preferred stock, to pay our indebtedness or to fund our other liquidity needs. The decision to declare and pay distributions on shares of our common stock in the future, as well as the timing, amount and composition of any such future distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors. Any change in our distribution policy could have a material adverse effect on the market price of our common stock. Our ability to pay distributions is limited by the requirements of Maryland law. Our ability to pay distributions on our common stock and preferred stock is limited by the laws of Maryland. Under Maryland law, a Maryland corporation generally may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus, unless the corporation’s charter provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution, provided, however, that a Maryland corporation may make a distribution from: (i) its net earnings for the fiscal year in which the distribution is made; (ii) its net earnings for the preceding fiscal year; or (iii) the sum of its net earnings for its preceding eight fiscal quarters even if, after such distribution, the corporation’s total assets would be less than its total liabilities. Accordingly, we generally may not make a distribution on our common stock or preferred stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or, unless paid from one of the permitted sources of net earnings as described above, our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series of stock provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of stock then outstanding, if any, with preferential rights upon dissolution senior to those of our common stock or currently outstanding preferred stock. 18 SUN COMMUNITIES, INC. We may not be able to pay distributions upon events of default under our financing documents. Some of our financing documents contain restrictions on distributions upon the occurrence of events of default thereunder. If such an event of default occurs, such as our failure to pay principal at maturity or interest when due for a specified period of time, we would be prohibited from making payments on our common stock and preferred stock. Our share price could be volatile and could decline, resulting in a substantial or complete loss on our stockholders’ investment. The stock markets, including the NYSE on which we list our common stock, have experienced significant price and volume fluctuations. As a result, the market price of our common stock and preferred stock could be similarly volatile, and investors in our common stock and preferred stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The price of our common stock and preferred stock could be subject to wide fluctuations in response to a number of factors, including: • • • • • • • • • • • • • • • • issuances of other equity securities in the future, including new series or classes of preferred stock; our operating performance and the performance of other similar companies; our ability to maintain compliance with covenants contained in our debt facilities; actual or anticipated variations in our operating results, funds from operations, cash flows or liquidity; changes in expectations of future financial performance or changes in our earnings estimates or those of analysts; changes in our distribution policy; publication of research reports about us or the real estate industry generally; increases in market interest rates that lead purchasers of our common stock and preferred stock to demand a higher dividend yield; changes in foreign currency exchange rates, including between the U.S. dollar and each of the Canadian dollar and the Australian dollar; changes in market valuations of similar companies; adverse market reaction to the amount of our debt outstanding at any time, the amount of our debt maturing in the near-term and medium-term and our ability to refinance our debt, or our plans to incur additional debt in the future; additions or departures of key management personnel; speculation in the press or investment community; equity issuances by us, or share resales by our stockholders or the perception that such issuances or resales may occur; actions by institutional stockholders; and general market and economic conditions. Many of the factors listed above are beyond our control. Those factors may cause the market price of our common stock or preferred stock to decline significantly, regardless of our financial condition, results of operations and prospects. It is impossible to provide any assurance that the market price of our common stock or preferred stock will not fall in the future, and it may be difficult for holders to resell shares of our common stock or preferred stock at prices they find attractive, or at all. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources. 19 SUN COMMUNITIES, INC. Our Series A-4 preferred stock has not been rated. We have not sought to obtain a rating for our Series A-4 preferred stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A-4 preferred stock. In addition, we may elect in the future to obtain a rating of the Series A-4 preferred stock, which could adversely affect the market price of such preferred stock. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on a watch list or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision, placing on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Series A-4 preferred stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 20 SUN COMMUNITIES, INC. ITEM 2. PROPERTIES As of December 31, 2018, the Properties were located throughout the US and in Ontario, Canada and consisted of 230 MH communities, 110 RV communities, and 31 properties containing both MH and RV sites. As of December 31, 2018, the Properties contained an aggregate of 128,454 developed sites comprised of 84,428 developed manufactured home sites, 24,535 annual RV sites (inclusive of both annual and seasonal usage rights), and 19,491 transient RV sites. There are approximately 11,300 additional MH and RV sites suitable for development. Most of the Properties include amenities oriented toward family and retirement living. Of the 371 Properties, 182 have more than 300 developed sites, with the largest having 2,341 developed MH and RV sites. See “Real Estate and Accumulated Depreciation, Schedule III”, included in our Consolidated Financial Statements, for detail on Properties that are encumbered. As of December 31, 2018, the Properties had an occupancy rate of 96.1 percent excluding transient RV sites. Since January 1, 2018, the Properties have averaged an aggregate annual turnover of homes (where the home is moved out of the community) of approximately 2.4 percent and an average annual turnover of residents (where the resident-owned home is sold and remains within the community, typically without interruption of rental income) of approximately 7.2 percent. The average renewal rate for residents in our Rental Program was 62.3 percent for the year ended December 31, 2018. We believe that our Properties’ high amenity levels, customer service loyalty, and customer retention program contribute to low turnover and generally high occupancy rates. All of the Properties provide residents with attractive amenities with most offering a clubhouse, a swimming pool, and laundry facilities. Many of the Properties offer additional amenities such as sauna/whirlpool spas, tennis courts, shuffleboard, basketball courts, and/or exercise rooms. Many RV communities offer incremental amenities including golf, pro shops, restaurants, zip lines, waterparks, watersports, and thematic experiences. The Properties are principally located in the Midwestern, Southern, Northeastern, Southeastern regions of the U.S., and Ontario, Canada. We believe that geographic diversification helps to insulate the portfolio from regional economic influences. We have concentrated our properties within certain areas of the regions in order to achieve economies of scale in management and operation. The following tables set forth certain information relating to the Properties as of December 31, 2018. The occupancy percentage includes MH sites and annual RV sites, and excludes transient RV sites. Property MH/ RV City State MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 UNITED STATES MIDWEST Michigan Academy / West Point Allendale Meadows Mobile Village MH Canton MH Allendale Alpine Meadows Mobile Village MH Grand Rapids Apple Carr Village Arbor Woods Brentwood Mobile Village Brookside Village MH Muskegon MH Ypsilanti MH Kentwood MH Kentwood Byron Center Mobile Village MH Byron Center Camelot Villa Cider Mill Crossings Cider Mill Village Continental North Country Acres Mobile Village Country Hills Village Country Meadows Mobile Village Country Meadows Village MH Macomb MH Fenton MH Middleville MH Davison MH Cadillac MH Hudsonville MH Flat Rock MH Caledonia 21 MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI 441 352 403 680 458 195 196 143 712 570 258 474 182 239 577 395 — 97.5% — 94.9% — 98.0% — 79.4% (1) — 96.1% — 98.5% — 99.0% 97.5% 96.9% 97.5% 84.4% (1) 75.3% 97.4% 99.0% — 98.6% 100.0% — 98.6% — 67.5% (1) — 98.4% — 77.6% — 99.5% 99.3% 74.0% (1) 98.1% 73.4% 98.4% — 98.3% 100.0% — 96.9% — 98.5% 95.5% 91.4% (1) King’s Court Mobile Village MH Traverse City Property Creekwood Meadows Cutler Estates Mobile Village Dutton Mill Village East Village Estates Egelcraft Fisherman’s Cove Frenchtown Villa / Elizabeth Woods Grand Mobile Estates Hamlin Hickory Hills Village Hidden Ridge RV Resort (2) Holiday West Village Holly Village / Hawaiian Gardens Hunters Crossing Hunters Glen Kensington Meadows Kimberly Estates Knollwood Estates Lafayette Place Lakeview Leisure Village Lincoln Estates Meadow Lake Estates Meadowbrook Estates Meadowlands of Gibraltar Northville Crossing Oak Island Village Petoskey KOA RV Resort (2) Petoskey RV Resort (2) Pinebrook Village Presidential Estates Mobile Village Richmond Place River Haven Village Rudgate Clinton Rudgate Manor Scio Farms Estates Sheffield Estates Silver Creek RV Resort (2) Silver Springs Southwood Village St. Clair Place Sunset Ridge MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 City State SUN COMMUNITIES, INC. MH/ RV MH Burton MH Grand Rapids MH Caledonia MH Washington Twp MH Muskegon MH Flint Twp. MH Newport MH Grand Rapids MH Webberville MH Battle Creek RV Hopkins MH Holland MH Holly MH Capac MH Wayland MH Lansing MH Newport MH Allendale MH Warren MH Ypsilanti MH Belmont MH Holland MH White Lake MH Monroe MH Gibraltar MH Northville MH East Lansing RV Petoskey RV Petoskey MH Kentwood MH Hudsonville MH Richmond MH Grand Haven MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MI MH Clinton Township MI MH Sterling Heights MH Ann Arbor MH Auburn Hills RV Mears MI MI MI MI MH Clinton Township MI MH Grand Rapids MH St. Clair MH Portland MI MI MI 22 336 259 307 708 458 162 1,140 219 230 283 177 341 425 114 396 290 387 802 161 254 392 256 191 425 453 320 756 250 51 — 185 364 117 721 667 931 913 228 159 547 394 100 388 — 97.6% — 98.1% — 99.0% — 99.4% — 96.9% — 95.7% — 88.9% (1) — 96.3% — 98.7% — 97.5% 98.5% 98.5% 97.4% 99.4% 97.6% 91.4% 84.7% (1) 96.8% 95.7% (1) 98.6% 158 100.0% 100.0% — 99.7% — 94.4% — 99.1% — 89.9% (1) — 96.9% — 98.7% — 84.4% (1) — 96.9% — 97.2% — 98.7% — 94.9% (1) — 99.0% — 99.1% — 95.4% — 99.7% — 99.7% — 98.4% 159 152 100.0% N/A — 100.0% — 98.1% — 95.7% — 85.4% — 99.0% — 97.9% — 99.5% — 100.0% 105 100.0% — 99.5% — 98.0% 99.7% 94.6% 99.1% 76.5% (1) 96.6% 94.8% 78.8% (1) 92.6% 94.9% 98.2% 100.0% 99.5% 97.9% 96.3% 96.9% 99.5% 97.6% N/A N/A 98.9% 98.9% 94.9% 78.8% 97.3% 97.3% 98.4% 99.6% N/A 99.5% 98.7% — 97.0% — 65.7% (1) 96.0% 92.0% (1) Property Sycamore Village Tamarac Village Tamarac Village RV Resort (2) Timberline Estates Town & Country Mobile Village Warren Dunes Village Waverly Shores Village West Village Estates MH/ RV MH Mason MH Ludington RV Ludington MH Coopersville MH Traverse City MH Bridgman MH Holland MH Romulus White Lake Mobile Home Village MH White Lake Windham Hills Estates Windsor Woods Village Woodhaven Place Michigan Total Indiana Brookside Mobile Home Village Carrington Pointe Clear Water Mobile Village Cobus Green Mobile Home Park Deerfield Run MH Jackson MH Wayland MH Woodhaven MH Goshen MH Ft. Wayne MH South Bend MH Osceola MH Anderson Four Seasons Lake Rudolph Campground & RV Resort (2) RV Santa Claus MH Valparaiso Liberty Farm MH Elkhart MH Greenwood MH Middlebury MH Goshen Pebble Creek Pine Hills Roxbury Park Indiana Total Ohio Apple Creek East Fork Crossing Indian Creek RV & Camping Resort (2) Oakwood Village Orchard Lake Westbrook Senior Village Westbrook Village Willowbrook Place Woodside Terrace Ohio Total SOUTH Texas Austin Lone Star RV Resort (2) SUN COMMUNITIES, INC. MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 City State MI MI MI MI MI MI MI MI MI MI MI MI IN IN IN IN IN IN IN IN IN IN IN 396 301 112 296 192 314 415 628 315 469 314 220 — 99.7% — 98.7% 2 100.0% — 98.3% — 99.0% — 87.6% (1) — 96.4% (1) — 99.4% — 98.4% — 88.9% (1) — 98.4% — 95.5% 26,504 576 94.6% 570 468 227 386 175 218 — 220 298 129 398 — 93.0% — 73.5% (1) — 97.8% — 93.8% — 86.3% — 93.6% 519 N/A — 95.9% — 80.5% (1) — 93.8% — 97.2% 3,089 519 89.7% 98.5% 98.7% 100.0% 98.7% 99.5% 72.3% (1) 78.8% (1) 99.4% 96.8% 85.5% (1) 98.4% 96.4% 93.3% 89.1% 98.4% 96.5% 96.4% 91.4% 95.4% N/A 96.8% 95.3% 98.5% 97.7% 95.0% MH Amelia MH Batavia OH OH RV Geneva on the Lake OH MH Miamisburg MH Milford MH Toledo MH Toledo MH Toledo MH Holland OH OH OH OH OH OH 176 350 425 511 147 112 344 266 439 2,770 — 98.9% — 99.1% 150 100.0% — 99.0% — 95.9% — 98.2% — 95.6% — 97.4% — 91.6% 97.2% 150 97.7% 98.9% (1) 100.0% 98.8% 98.0% 99.1% 94.2% 94.0% 93.4% 97.0% RV Austin TX 17 137 100.0% 100.0% 23 SUN COMMUNITIES, INC. Property Blazing Star (2) Boulder Ridge Branch Creek Estates Chisholm Point Estates Comal Farms Hill Country Cottage and RV Resort (2) Jellystone Park™ at Guadalupe River (2) Jellystone Park™ at Hill Country (2) La Hacienda RV Resort (2) Oak Crest Pecan Branch Pine Trace River Ranch River Ridge Estates Saddlebrook Sandy Lake Sandy Lake RV Resort (2) Stonebridge Summit Ridge Sunset Ridge Traveler’s World Traveler’s World RV Resort (2) Treetops RV Resort (2) Woodlake Trails Texas Total SOUTHEAST Florida Arbor Terrace RV Park (2) Ariana Village Bahia Vista Estates Baker Acres RV Resort (2) Big Tree RV Resort (2) Blue Heron Pines Blue Jay Blue Jay RV Resort (2) Blueberry Hill (2) Brentwood Estates Buttonwood Bay Buttonwood Bay RV Resort (2) Candlelight Manor Carriage Cove Central Park MH/ RV City RV San Antonio MH Pflugerville MH Austin MH Pflugerville MH New Braunfels RV New Braunfels RV Kerrville RV Canyon Lake RV Austin MH Austin MH Georgetown MH Houston MH Austin MH Austin MH San Marcos MH Carrollton RV Carrollton MH San Antonio MH Converse MH Kyle MH San Antonio RV San Antonio RV Arlington MH San Antonio RV Bradenton MH Lakeland MH Sarasota RV Zephyrhills RV Arcadia MH Punta Gorda MH Dade City RV Dade City RV Bushnell MH Hudson MH Sebring RV Sebring MH South Daytona MH Sanford MH Haines City 24 MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 State Occupancy as of 12/31/18 Occupancy as of 12/31/17 TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX TX FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL 125 896 392 417 367 17 — — — 433 229 680 848 515 562 54 39 335 446 171 8 26 29 316 137 100.0% — 80.2% (1) — 100.0% — 100.0% — 99.5% 347 261 173 244 100.0% N/A N/A N/A — 99.1% — 49.3% (1) — 98.8% — 99.3% — 99.2% — 87.7% (1) — 100.0% 100.0% 95.4% (1) 100.0% 98.8% 97.0% (1) 100.0% N/A N/A N/A 96.8% 37.6% (1) 98.4% (1) 97.3% (1) 98.5% 83.8% (1) 100.0% 180 100.0% 100.0% — 98.8% — 97.3% — 97.7% — 100.0% 129 100.0% 144 100.0% — 72.2% (1) 97.9% 97.1% 98.8% 100.0% 100.0% 100.0% 70.9% (1) 93.2% 6,922 1,752 92.9% 205 207 251 278 367 408 206 34 275 191 407 365 128 467 108 156 100.0% 100.0% — 97.1% — 99.2% 96.1% 98.8% 74 100.0% 100.0% 44 100.0% — 96.3% (1) — 98.5% 100.0% 96.1% (1) 99.5% 21 100.0% 130 100.0% — 97.9% — 99.8% 100.0% 100.0% 96.9% 99.8% 167 100.0% 100.0% — 94.5% — 99.1% — 92.6% 90.6% 98.5% (1) 90.9% Property Central Park RV Resort (2) Citrus Hill RV Resort (2) Club Naples (2) Club Wildwood Colony in the Wood Compass RV Resort (2) Country Squire Country Squire RV Resort (2) Cypress Greens Daytona Beach RV Resort (2) Deerwood Dunedin RV Resort (2) Ellenton Gardens RV Resort (2) Emerald Coast Emerald Coast RV Resort (2) Fairfield Village Forest View Glen Haven Glen Haven RV Resort (2) Gold Coaster Gold Coaster RV Resort (2) Grand Bay Grand Lakes RV Resort (2) Grove Ridge RV Resort (2) Groves RV Resort (2) Gulfstream Harbor Hidden River RV Resort (2) Holly Forest Estates Homosassa River RV Resort (2) Horseshoe Cove RV Resort (2) Indian Creek Park Indian Creek RV Park (2) Island Lakes King’s Lake King’s Pointe Kings Manor Kissimmee Gardens Kissimmee South Kissimmee South RV Resort (2) La Costa Village Lake Josephine RV Resort (2) Lake Juliana Landings Lake Pointe Village SUN COMMUNITIES, INC. MH/ RV City RV Haines City RV Dade City RV Naples MH Hudson MH Port Orange RV St. Augustine MH Paisley RV Paisley MH Lake Alfred RV Port Orange MH Orlando RV Dunedin RV Ellenton FL FL FL FL FL FL FL FL FL FL FL FL FL MH Panama City Beach FL RV Panama City Beach FL MH Ocala MH Homosassa MH Zephyrhills RV Zephyrhills MH Homestead RV Homestead MH Dunedin RV Citra RV Dade City RV Ft. Myers MH Orlando RV Riverview MH Holly Hill FL FL FL FL FL FL FL FL FL FL FL FL FL RV Homosassa Springs FL RV Bradenton MH Ft. Myers Beach RV Ft. Myers Beach MH Merritt Island MH DeBary MH Lake Alfred MH Lakeland MH Kissimmee MH Davenport RV Davenport MH Port Orange RV Sebring MH Auburndale MH Mulberry 25 FL FL FL FL FL FL FL FL FL FL FL FL FL FL MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 State Occupancy as of 12/31/18 Occupancy as of 12/31/17 189 143 220 478 383 — 97 20 259 134 569 190 147 42 5 293 300 52 158 532 8 135 305 159 223 974 195 402 95 344 353 973 301 245 226 239 239 142 102 658 112 274 362 180 100.0% 39 84 100.0% 100.0% — 98.5% — 97.7% 175 N/A — 90.7% 5 100.0% — 96.5% 98 100.0% — 98.9% 49 47 100.0% 100.0% — 88.1% 154 100.0% — 98.3% — 97.0% — 100.0% 60 100.0% — 94.9% 5 100.0% — 98.5% 99 87 46 100.0% 100.0% 100.0% — 97.5% 118 100.0% — 100.0% 128 132 100.0% 100.0% — 100.0% 104 100.0% — 99.7% — 100.0% — 99.6% — 92.5% — 99.6% — 90.1% 98 100.0% — 99.8% 66 100.0% — 98.2% — 99.2% 100.0% 100.0% 100.0% 98.7% 95.0% N/A 90.7% 100.0% 95.4% 100.0% 98.1% 100.0% 100.0% 100.0% 100.0% 97.6% 96.7% 100.0% 100.0% 98.2% 100.0% 96.3% 100.0% 100.0% 100.0% 95.3% 100.0% 99.8% 100.0% 100.0% 99.7% 100.0% 100.0% 100.0% 100.0% 82.9% 99.2% 90.9% 100.0% 99.7% 100.0% 97.5% 99.2% SUN COMMUNITIES, INC. MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 City State Property Lake San Marino RV Park (2) Lakeland RV Resort (2) Lakeshore Landings Lakeshore Villas Lamplighter Majestic Oaks RV Resort (2) Marco Naples RV Resort (2) Meadowbrook Village Mill Creek Mill Creek RV Resort (2) Naples RV Resort (2) New Ranch North Lake Estates (2) Oakview Estates Ocean Breeze Ocean Breeze RV Resort Ocean Breeze Jensen Beach Ocean Breeze Jensen Beach RV Resort (2) Orange City Orange City RV Resort (2) Orange Tree Village Paddock Park South Palm Key Village Palm Village Park Place Park Royale Pecan Park RV Resort (2) Pelican Bay Pelican RV Resort & Marina (2) Plantation Landings Pleasant Lake RV Resort (2) Rainbow Rainbow RV Resort (2) Rainbow Village of Largo (2) Rainbow Village of Zephyrhills (2) Red Oaks Red Oaks RV Resort (2) Regency Heights Riptide RV Resort & Marina (2) Riverside Club Rock Crusher Canyon RV Resort (2) Royal Country Royal Palm Village MH/ RV RV Naples RV Lakeland MH Orlando MH Tampa MH Port Orange RV Zephyrhills RV Naples MH Tampa MH Kissimmee RV Kissimmee RV Naples MH Clearwater RV Moore Haven MH Arcadia MH Marathon RV Marathon MH Jensen Beach RV Jensen Beach MH Orange City RV Orange City MH Orange City MH Ocala MH Davenport MH Bradenton MH Sebastian MH Pinellas Park RV Jacksonville MH Micco RV Marathon MH Haines City RV Bradenton MH Frostproof RV Frostproof RV Largo RV Zephyrhills MH Bushnell RV Bushnell MH Clearwater RV Key Largo MH Ruskin RV Crystal River MH Miami MH Haines City 26 FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL 253 190 306 280 260 208 210 257 32 102 106 94 204 119 — — 236 42 4 315 246 188 204 146 475 309 — 216 75 394 280 37 376 257 336 103 485 391 23 728 153 864 395 154 100.0% 41 100.0% — 99.3% — 98.6% — 96.5% 45 82 100.0% 100.0% — 100.0% — 96.9% 54 61 100.0% 100.0% — 97.9% 68 100.0% — 99.2% — —% —% — — 64.0% (1) 100.0% 211 100.0% 100.0% 100.0% 97.5% 97.3% 100.0% 100.0% 99.2% 100.0% 100.0% 100.0% 97.9% 100.0% 99.2% —% (4) —% (4) 63.1% (1) 100.0% — 100.0% 206 100.0% — 99.6% 78.7% — 99.5% — 97.9% — 94.7% — 99.7% 183 N/A — 99.5% 11 100.0% — 99.2% 61 100.0% — 100.0% 86 52 46 100.0% 100.0% 100.0% — 92.2% 432 100.0% — 97.4% 17 100.0% — 82.6% 242 100.0% — 99.8% — 86.1% 100.0% 100.0% 100.0% 76.1% 100.0% 98.0% 93.3% 99.7% N/A 92.6% 100.0% 99.2% 100.0% 100.0% 100.0% 100.0% 100.0% 92.2% 100.0% 95.4% 100.0% 78.7% 100.0% 99.9% 82.3% SUN COMMUNITIES, INC. MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 City State Property Saddle Oak Club San Pedro Marina San Pedro RV Resort & Marina Saralake Estates Savanna Club Sea Breeze Sea Breeze RV Resort Serendipity Settler’s Rest RV Resort (2) Shadow Wood Village Shady Road Villas Shell Creek Marina Shell Creek RV Resort & Marina (2) Siesta Bay RV Park (2) Southern Charm Southern Charm RV Resort (2) Southern Pines MH/ RV MH Ocala MH Islamorada RV Islamorada MH Sarasota MH Port St Lucie MH Islamorada RV Islamorada MH North Fort Myers RV Zephyrhills MH Hudson MH Ocala MH Punta Gorda RV Punta Gorda RV Ft. Myers MH Zephyrhills RV Zephyrhills MH Bradenton Southport Springs Golf & Country Club MH Zephyrhills Spanish Main Spanish Main RV Resort (2) Stonebrook Sun N Fun RV Resort (2) Suncoast Gateway Sundance Sunlake Estates Sunset Harbor at Cow Key Marina Sweetwater RV Resort (2) Tallowwood Isle Tampa East Tampa East RV Resort (2) The Hamptons Golf & Country Club The Hideaway The Hills The Ridge The Valley Three Lakes (2) Vista Del Lago Vista Del Lago RV Resort (2) Vizcaya Lakes Walden Woods Walden Woods II Water Oak Country Club Estates Waters Edge RV Resort (2) MH Thonotosassa RV Thonotosassa MH Homosassa RV Sarasota MH Port Richey MH Zephyrhills MH Grand Island MH Key West RV Zephyrhills MH Coconut Creek MH Dover RV Dover MH Auburndale MH Key West MH Apopka MH Davenport MH Apopka RV Hudson MH Bradenton RV Bradenton MH Port Charlotte MH Homosassa MH Homosassa MH Lady Lake RV Zephyrhills 27 FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL FL 376 — — 202 1,069 — — 338 310 157 130 54 139 734 1 401 107 547 56 202 215 957 173 332 408 77 212 273 31 324 829 13 97 481 148 226 136 27 113 213 213 1,317 144 — 99.5% 99.5% — — —% —% — 100.0% — 98.0% — — —% —% — 97.0% 68 100.0% — 99.4% — 61.5% — 100.0% 46 63 100.0% 100.0% — 100.0% 95 100.0% — 96.3% — 98.9% — 91.1% 74 100.0% — 92.1% 562 100.0% — 98.8% — 99.7% — 94.6% — 98.7% 79 100.0% — 95.2% — 96.8% 345 100.0% — 98.4% — 92.3% — 99.0% — 99.2% — 100.0% 81 100.0% — 96.3% 13 100.0% — 86.7% — 100.0% —% (4) —% (4) 100.0% 97.6% (1) —% (4) —% (4) 98.5% 100.0% 99.4% 62.3% 100.0% 100.0% 100.0% 100.0% 100.0% 95.3% 98.4% (1) 91.1% 100.0% 90.7% 100.0% 98.3% 100.0% 93.4% 97.4% 100.0% 95.6% 100.0% 100.0% 98.8% 84.6% 95.0% 98.3% 99.3% 100.0% 95.6% 100.0% 79.7% 100.0% — 99.1% — 89.5% (1) 100.0% 73 98.6% 95.3% (1) 100.0% SUN COMMUNITIES, INC. MH/ RV City MH Auburndale MH Davenport MH Groveland State FL FL FL MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 219 509 291 — 99.1% — 98.8% — 73.9% 37,874 5,917 97.3% 99.1% 99.2% 70.5% 97.1% RV Plymouth CA MH Rancho Cucamonga CA MH Cathedral City RV Paso Robles MH La Habra MH Modesto MH Simi Valley MH West Covina MH Temecula RV Indio RV Lodi MH Lakeside MH Arcata MH Ventura MH Napa MH Coarsegold MH McKinleyville MH Chino RV Pismo Beach CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA CA MH San Juan Capistrano CA MH Riverside MH Cathedral City RV Cathedral City MH Oxnard CA CA CA CA RV Desert Hot Springs CA MH Newbury Park MH Victorville RV Paso Robles MH Scotts Valley RV Paso Robles CA CA CA CA CA 32 295 118 — 330 289 222 157 196 147 — 295 220 231 257 198 130 242 163 331 132 303 439 38 150 234 303 287 — 202 293 100.0% — 99.7% — 99.2% 331 N/A — 99.7% — 97.2% — 100.0% — 99.4% — 100.0% 169 359 100.0% N/A — 99.7% — 99.1% — 100.0% — 100.0% — 97.0% — 97.7% — 100.0% — 100.0% — 100.0% — 99.2% — 99.7% — 99.6% — 100.0% — 100.0% 280 100.0% — 100.0% — 99.0% 130 N/A 100.0% 100.0% 97.5% N/A 100.0% 94.5% 100.0% 99.4% 100.0% 100.0% N/A 100.0% 100.0% 100.0% 100.0% 95.0% 100.0% 100.0% 100.0% 100.0% 100.0% 99.7% 96.8% 100.0% 100.0% N/A 100.0% 97.2% N/A — 100.0% 100.0% — 5,941 203 1,765 N/A 99.3% N/A 99.1% Property Westside Ridge Windmill Village Woodlands at Church Lake Florida Total SOUTHWEST California 49’er Village RV Resort (2) Alta Laguna Caliente Sands Cava Robles RV Resort (2) Friendly Village of La Habra Friendly Village of Modesto Friendly Village of Simi Friendly Village of West Covina Heritage Indian Wells RV Resort (2) Jellystone Park™ at Tower Park (2) Lakefront Lazy J Ranch Lemon Wood Napa Valley Oak Creek Ocean West Pembroke Downs Pismo Dunes RV Resort Rancho Alipaz Rancho Caballero Royal Palms Royal Palms RV Resort The Colony The Sands RV & Golf Resort (2) Vallecito Victor Villa Vines RV Resort (2) Vista Del Lago Wine Country RV Resort (2) California Total Arizona Palos Verdes Shores MH & Golf Community MH San Pedro Blue Star / Lost Dutchman Blue Star / Lost Dutchman RV Resort (2) MH Apache Junction RV Apache Junction AZ AZ 169 88 — 95.9% 118 100.0% 93.5% 100.0% 28 Property Brentwood West Desert Harbor Fiesta Village Fiesta Village RV Resort (2) La Casa Blanca Leaf Verde RV Resort (2) Mountain View Palm Creek Golf Palm Creek Golf & RV Resort (2) Rancho Mirage Reserve at Fox Creek Sun Valley Verde Plaza Arizona Total Colorado Cave Creek Eagle Crest Jellystone Park™ at Larkspur (2) North Point Estates Skyline Swan Meadow Village The Grove at Alta Ridge Timber Ridge Colorado Total OTHER Seaport RV Resort (2) High Point Park Sea Air Village Sea Air Village RV Resort (2) Countryside Village of Atlanta Countryside Village of Gwinnett Countryside Village of Lake Lanier Autumn Ridge Candlelight Village Maple Brook Oak Ridge Sunset Lakes RV Resort (2) Wildwood Community Campers Haven RV Resort (2) Peter’s Pond RV Resort (2) Castaways RV Resort & Campground (2) SUN COMMUNITIES, INC. MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 City State MH/ RV MH Mesa MH Apache Junction MH Mesa RV Mesa MH Apache Junction RV Buckeye MH Mesa MH Casa Grande RV Casa Grande MH Apache Junction MH Bullhead City MH Apache Junction MH Tucson MH Evans MH Firestone RV Larkspur MH Pueblo MH Fort Collins MH Dillon MH Thornton MH Ft. Collins RV Old Mystic MH Frederica MH Rehoboth Beach RV Rehoboth Beach MH Lawrenceville MH Buford MH Buford MH Ankeny MH Sauk Village MH Matteson MH Manteno RV Hillsdale MH Sandwich RV Dennisport RV Sandwich RV Berlin 29 AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ AZ CO CO CO CO CO CO CO CO CT DE DE DE GA GA GA IA IL IL IL IL IL MA MA MD — 97.7% — 94.0% — 93.1% 3,836 1,423 92.4% 350 205 154 2 198 — 170 505 915 312 311 268 189 447 441 — 108 170 175 409 585 — 98.9% — 99.5% — 83.8% 8 100.0% — 100.0% 376 N/A — 99.4% — 57.0% (1) 100.0% 921 99.1% 99.0% 79.9% 100.0% 100.0% N/A 99.4% 52.1% (1) 100.0% — 100.0% 100.0% 95.2% 91.8% 90.0% 91.0% 99.1% 100.0% N/A 99.1% 99.4% 99.8% 99.5% 99.6% — 98.7% — 99.8% 137 N/A — 97.2% — 100.0% — 99.5% — 99.7% — 99.4% 100.0% 2,335 137 99.4% 44 409 373 120 261 331 548 413 309 441 426 225 476 230 329 1 105 100.0% 100.0% — 96.3% — 100.0% 96.6% 98.4% 14 100.0% — 87.4% (1) — 98.2% 100.0% 65.0% (1) 99.1% — 99.5% — 96.6% — 93.2% — 99.5% — 93.2% 100.0% 273 — 99.2% 43 77 100.0% 100.0% 392 100.0% 98.7% 97.1% 97.1% 99.6% 93.0% 100.0% 99.4% 100.0% 100.0% 100.0% Property Fort Whaley RV Resort & Campground (2) Frontier Town RV Resort & Campground (2) RV Berlin Jellystone Park™ at Maryland (2) Maplewood Manor RV Williamsport MH/ RV City RV Whaleyville SUN COMMUNITIES, INC. State MD MD MD ME ME ME ME MH Brunswick MH Brunswick RV Saco MH Lisbon RV Old Orchard Beach ME RV Old Orchard Beach ME MH Stewartville MH O’Fallon MH Belton MH Great Falls RV Sylva MH Concord MH Charlotte RV Milton RV West Ossipee Cape May Court House RV MH Cape May RV Cape May RV Clermont RV Barnegat RV Cape May MN MO MO MT NC NC NC NH NH NJ NJ NJ NJ NJ NJ MH Galloway Township NJ RV Galloway Township NJ MH Reno RV Gansevoort MH Greenfield Park RV Greenfield Park RV Gardiner RV North Java MH Cheektowaga MH Cheektowaga MH Cheektowaga MH Philomath RV Coos Bay MH Eugene MH Mckean RV Quarryville RV Narvon 30 NV NY NY NY NY NY NY NY NY OR OR OR PA PA PA MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 Occupancy as of 12/31/18 Occupancy as of 12/31/17 — — — 296 43 — 144 231 309 475 502 474 226 56 260 321 106 322 322 28 367 621 167 433 39 55 324 293 1 95 — 10 156 522 116 75 — 398 304 — 278 179 584 226 N/A N/A N/A — 99.7% — 93.0% 196 N/A — 95.8% 55 100.0% N/A N/A N/A 99.3% 100.0% N/A 99.3% 100.0% 321 100.0% — 98.1% (1) — 98.0% 100.0% 92.8% (1) 96.6% — 68.6% — 97.3% 34 100.0% — 99.2% — 99.7% 118 136 100.0% 100.0% 206 100.0% — 100.0% 262 100.0% 86 47 100.0% 100.0% 243 100.0% — 100.0% 40 100.0% — 99.7% 47 100.0% — 100.0% 65.0% 98.7% 100.0% 98.5% 100.0% N/A N/A 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 97.5% 100.0% 99.7% 100.0% 100.0% 100.0% 100.0% 209 320 349 N/A 100.0% — 100.0% — 96.7% — 98.3% — 98.7% 88 N/A — 99.7% — 98.0% N/A 243 141 N/A 100.0% 100.0% 94.8% 100.0% 100.0% N/A 100.0% 98.7% N/A 100.0% 100.0% Merrymeeting Saco / Old Orchard Beach KOA (2) Town & Country Village Wagon Wheel RV Resort & Campground (2) Wild Acres RV Resort & Campground (2) Southern Hills / Northridge Place Pin Oak Parc Southfork Countryside Village Fort Tatham RV Resort & Campground (2) Glen Laurel Meadowbrook Mi-Te-Jo Campground (2) Westward Shores Cottages & RV Resort (2) Big Timber Lake RV Camping Resort (2) Cape May Crossing Cape May KOA (2) Driftwood RV Resort & Campground (2) Long Beach RV Resort & Campground (2) Seashore Campsites & RV Resort (2) Shady Pines Shady Pines RV Resort (2) Sun Villa Estates Adirondack Gateway RV Resort & Campground (2) Jellystone Park™ at Birchwood Acres Jellystone Park™ at Birchwood Acres RV Resort (2) Jellystone Park™ at Gardiner (2) Jellystone Park™ of Western New York (2) Parkside Village Sky Harbor The Villas at Calla Pointe Forest Meadows Oceanside RV Resort & Campground (2) Woodland Park Estates Countryside Estates Jellystone Park™ at Quarryville (2) Lake in Wood RV Resort (2) SUN COMMUNITIES, INC. Property Pheasant Ridge Lakeside Crossing MH/ RV MH Lancaster City MH Conway MH Clarksville RV Horn Lake RV Moab RV Moab Bell Crossing Jellystone Park™ at Memphis (2) Archview RV Resort & Campground (2) Canyonlands RV Resort & Campground (2) Moab Valley RV Resort & Campground (2) Pony Express RV Resort & Campground (2) Gwynn’s Island RV Resort & Campground (2) RV Gwynn Jellystone Park™ at Luray (2) New Point RV Resort (2) Pine Ridge Sunset Beach RV Resort (3) Thunderhill Estates Westward Ho RV Resort & Campground (2) RV Moab RV East Luray RV New Point MH Prince George RV Cape Charles MH Sturgeon Bay RV Glenbeulah RV North Salt Lake Other Total US TOTAL / AVERAGE RV Cayuga RV Allenford RV Millgrove RV Huntsville RV Clarksburg CANADA Arran Lake RV Resort & Campground (2) Craigleith RV Resort & Campground (2) Deer Lake RV Resort & Campground (2) Grand Oaks RV Resort & Campground (2) Gulliver’s Lake RV Resort & Campground Hidden Valley RV Resort & Campground (2) RV Normandale Lafontaine RV Resort & Campground (2) Lake Avenue RV Resort & Campground (2) Pickerel Park RV Resort & Campground (2) Sherkston Shores Beach Resort & Campground (2) Silver Birches RV Resort & Campground (2) RV Lambton Shores Trailside RV Resort & Campground (2) Willow Lake RV Resort & Campground (2) Willowood RV Resort & Campground (2) Woodland Lake RV Resort & Campground (2) RV Bornholm RV Cherry Valley RV Amherstburg RV Sherkston RV Scotland RV Napanee RV Seguin RV Tiny CANADA TOTAL / AVERAGE MH and Annual RV Sites as of 12/31/18 Transient RV Sites as of 12/31/18 State Occupancy as of 12/31/18 Occupancy as of 12/31/17 PA SC TN TN UT UT UT UT VA VA VA VA VA WI WI ON ON ON ON ON ON ON ON ON ON ON ON ON ON ON — 100.0% — 82.7% (1) — 97.5% 99.8% 76.0% (1) 99.2% 155 114 131 131 186 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 27 100.0% 100.0% 255 N/A N/A 77 100.0% — 82.4% (1) — N/A 100.0% 90.9% (1) N/A 553 588 237 — — — — — 102 — 247 323 — 266 226 — 93.6% 96 100.0% 99.1% 100.0% 96.0% 15,847 6,206 96.7% 105,118 18,445 96.0% 95.6% 149 68 168 230 199 203 187 115 148 40 43 72 40 100.0% 100.0% 100.0% 100.0% — 100.0% 42 76 12 61 100.0% 100.0% 100.0% 100.0% 1,419 296 100.0% 132 185 365 116 161 30 52 8 100.0% 100.0% 100.0% 211 100.0% 63 100.0% 3,845 1,046 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% COMPANY TOTAL / AVERAGE 108,963 19,491 96.1% 95.8% (1) Occupancy in these Properties reflects the fact that these communities are in a lease-up phase following an expansion. (2) Occupancy percentage excludes transient RV sites. Percentage calculated by dividing revenue producing sites by developed sites. A revenue producing site is defined as a site that is occupied by a paying resident or reserved by a customer with annual or seasonal usage rights. A developed site is defined as an adequate sized parcel of land that has road and utility access which is zoned and licensed (if required) for use as a home site. (3) We have an ownership interest in Sunset Beach, but do not maintain and operate the property. (4) Occupancy in these Properties for 12/31/2018 reflects redevelopment following asset impairments resulting from Hurricane Irma in September 2017. 31 SUN COMMUNITIES, INC. ITEM 3. LEGAL PROCEEDINGS We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition. ITEM 4. MINE SAFETY DISCLOSURES None. 32 SUN COMMUNITIES, INC. EXECUTIVE OFFICERS OF THE REGISTRANT The persons listed below are our executive officers. Name Gary A. Shiffman John B. McLaren Karen J. Dearing Jonathan M. Colman Age 64 48 54 63 Title Chairman and Chief Executive Officer President and Chief Operating Officer Executive Vice President, Treasurer, Chief Financial Officer and Secretary Executive Vice President Gary A. Shiffman is our Chairman and Chief Executive Officer and has been a director and an executive officer since our inception in 1993. He is a member of our Executive Committee. He has been actively involved in the management, acquisition, construction and development of manufactured housing communities and has developed an extensive network of industry relationships over the past thirty years. He has overseen the acquisition, rezoning, development, expansion and marketing of numerous manufactured home communities, as well as recreational vehicle communities. Additionally, Mr. Shiffman, through his family-related interests, has had significant direct holdings in various real estate asset classes, which include office, multi-family, industrial, residential and retail. Mr. Shiffman is an executive officer and a director of SHS and all of our other corporate subsidiaries. John B. McLaren has been in the manufactured housing industry since 1995. He has served as our President since 2014 and as our Chief Operating Officer since 2008. From 2008 to 2014, he served as an Executive Vice President of the Company. From 2005 to 2008, he was Senior Vice President of SHS with overall responsibility for home sales and leasing. Mr. McLaren spent approximately three years as Vice President of Leasing & Service for SHS with responsibility for developing and leading our Rental Program and also has experience in the multi-family REIT segment and the chattel lending industry. Karen J. Dearing has served as our Chief Financial Officer and Executive Vice President since 2008. She joined us in 1998 as the Director of Finance where she worked extensively with accounting and finance matters related to our ground-up developments and expansions. Ms. Dearing became our Corporate Controller in 2002 and Senior Vice President in 2006. She is responsible for the overall management of our information technology, accounting, tax and finance departments, and all internal and external financial reporting. Prior to working for us, Ms. Dearing had 7.5 years of experience as the Financial Controller of a privately- owned automotive supplier and 4.5 years of experience as a certified public accountant with Deloitte. Jonathan M. Colman has served as an Executive Vice President since March 2003. He joined us in 1994 as Vice President- Acquisitions and became a Senior Vice President in 1995. A certified public accountant, Mr. Colman has over thirty-five years of experience in the manufactured housing community industry. Prior to joining Sun, he was involved in the acquisition, financing and management of over 75 manufactured housing communities for two of the 10 largest manufactured housing community owners, including Uniprop, Inc. during its syndication of over $90.0 million in public limited partnerships in the late 1980s. Mr. Colman is also a Vice President of all of our corporate subsidiaries. 33 SUN COMMUNITIES, INC. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been listed on the NYSE since December 8, 1993, and traded under the symbol “SUI”. On February 14, 2019, the closing share price of our common stock was $113.68 per share on the NYSE, and there were 238 holders of record for the 86,380,502 outstanding shares of common stock. On February 14, 2019, the Operating Partnership had (i) 2,720,427 common OP units issued and outstanding, not held by us, which were convertible into an equal number of shares of our common stock, (ii) 1,283,819 Aspen preferred OP units issued and outstanding which were exchangeable for 435,222 shares of our common stock, (iii) 328,991 Series A-1 preferred OP units issued and outstanding which were exchangeable for 802,417 shares of our common stock, (iv) 40,268 Series A-3 preferred OP units issued and outstanding which were exchangeable for 74,917 shares of our common stock, (v) 410,364 Series A-4 preferred OP units issued and outstanding, not held by us, which were exchangeable for 182,384 shares of our common stock, (vi) 314,438 Series C preferred OP units issued and outstanding which were exchangeable for 349,026 shares of our common stock, and (vii) 488,958 Series D preferred OP units issued and outstanding which were exchangeable for 391,166 shares of our common stock. We have historically paid regular quarterly distributions to holders of our common stock and common OP units. In addition, we are obligated to make distributions to holders of shares of Series A-4 preferred stock, Aspen preferred OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, Series C preferred OP units and Series D preferred OP units. See “Structure of the Company” under Part I, Item 1 of this Annual Report on Form 10-K. Our ability to make distributions on our common and preferred stock and OP units, payments on our indebtedness, and to fund planned capital expenditures will depend on our ability to generate cash in the future. The decision to declare and pay distributions on shares of our common stock and common OP units in the future, as well as the timing, amount, and composition of any such future distributions, will be at the sole discretion of our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions, general overall economic conditions, and other factors. Securities Authorized for Issuance Under Equity Compensation Plans The following table reflects information about the securities authorized for issuance under our equity compensation plans as of December 31, 2018: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of shares of common stock remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) Plan Category (a) (b) (c) Equity compensation plans approved by stockholders Equity compensation plans not approved by stockholders Total 3,000 — 3,000 $ $ 33.45 — — 1,136,194 — 1,136,194 Issuer Purchases of Equity Securities In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock. We have 400,000 common shares remaining in the repurchase program. No common shares were repurchased under this program during 2018 or 2017. There is no expiration date specified for the repurchase program. Recent Sales of Unregistered Securities From time to time, we may issue shares of common stock in exchange for OP units that may be tendered to the Operating Partnership for redemption in accordance with the terms and provisions of the limited partnership agreement of the Operating Partnership. 34 SUN COMMUNITIES, INC. Such shares are issued based on the exchange ratios and formulas described in “Structure of the Company” under Part I, Item 1 of this Annual Report on Form 10-K. Below is the activity of conversions during 2018, 2017, and 2016: Year Ended December 31, 2018 Year Ended December 31, 2017 Year Ended December 31, 2016 Series Common OP unit Series A-1 preferred OP unit Series A-4 preferred OP unit Series A-4 preferred stock Series C preferred OP unit Conversion Rate Units / Shares Common Stock Units / Shares Common Stock Units/ Shares Common Stock 1 2.439 0.4444 0.4444 1.11 20,608 13,430 13,765 22,576 1,919 20,608 32,752 6,116 10,033 2,130 36,055 21,919 10,000 158,036 16,806 36,055 53,456 4,440 70,238 18,651 104,106 104,106 20,691 120,906 385,242 7,043 50,458 53,733 171,218 7,815 In addition to the shares of common stock issued pursuant to OP unit conversions above, we issued 298,900 shares of common stock totaling $26.4 million on July 27, 2017 in connection with an acquisition. All of the securities described above were issued in private placements in reliance on Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, based on certain investment representations made by the parties to whom the securities were issued. No underwriters were used in connection with any of such issuances. Performance Graph Set forth below is a line graph comparing the yearly percentage change in the cumulative total shareholder return on our common stock against the cumulative total return of a broad market index composed of all issuers listed on the NYSE and an industry index comprised of fourteen publicly traded REITs, for the five year period ending on December 31, 2018. This line graph assumes a $100 investment on December 31, 2013, a reinvestment of distributions and actual increase of the market value of our common stock relative to an initial investment of $100. The comparisons in this table are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock. Peer Group We utilize peer group data for quantitative benchmarking against external market participants. We select our peer group based on a number of quantitative and qualitative factors including, but not limited to, revenues, total assets, market capitalization, industry, sub-industry, location, total shareholder return history, executive compensation components, and peer decisions made by other companies. From time to time, we update our peer group based on analysis of the aforementioned factors and application of judgment. During 2018, we updated our peer group, as shown in the “SUI New Peer Group” caption in the table below. 35 SUN COMMUNITIES, INC. Index Sun Communities, Inc. SNL U.S. REIT Residential Index NYSE Composite Index SUI New Peer Group (1) SUI Old Peer Group (2) Period Ending 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 $ $ $ $ $ 100.00 $ 100.00 $ 100.00 $ 100.00 $ 100.00 $ 149.16 $ 136.85 $ 106.75 $ 138.90 $ 137.53 $ 175.79 $ 159.22 $ 102.38 $ 159.06 $ 158.50 $ 203.42 $ 167.16 $ 114.61 $ 163.79 $ 167.15 $ 254.12 $ 181.83 $ 136.07 $ 167.48 $ 174.93 $ 286.81 184.77 123.89 163.60 175.02 (1) SUI new peer group includes: American Campus Communities, Inc., Apartment Investment and Management Company, AvalonBay Communities, Inc., Brandywine Realty Trust, Camden Property Trust, CubeSmart, Equity Lifestyles Properties, Inc., Essex Property Trust, Inc., Mid-America Apartment Communities, Inc., Macerich Company, Kimco Realty Corp., UDR, Inc., Federal Realty Investment Trust, and Weingarten Realty Investors. (2) SUI old peer group included: American Campus Communities, Inc., Apartment Investment and Management Company, AvalonBay Communities, Inc., Brandywine Realty Trust, Camden Property Trust, CubeSmart, Equity Lifestyles Properties, Inc., Essex Property Trust, Inc., Mid-America Apartment Communities, Inc., Tanger Factory Outlet Centers, Inc., Taubman Centers, Inc., UDR, Inc., and Weingarten Realty Investors. The information included under the heading “Performance Graph” is not to be treated as “soliciting material” or as “filed” with the SEC, and is not incorporated by reference into any filing by the Company under the Securities Act or the Exchange Act that is made on, before or after the date of filing of this Annual Report on Form 10-K. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial information on a historical basis. The historical financial data has been derived from our historical financial statements. The following information should be read in conjunction with the information included 36 SUN COMMUNITIES, INC. in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and the Notes thereto. In addition to the results presented in accordance with GAAP below, we have provided net operating income (“NOI”) and funds from operations (“FFO”) as supplemental performance measures. Refer to Non-GAAP Financial Measures in Item 7 below for additional information. FINANCIAL INFORMATION Total revenues Net income Net income attributable to Sun Communities, Inc. common stockholders Earnings per share - basic Earnings per share - diluted Cash distributions declared per common share FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted BALANCE SHEETS Total assets Total debt Total liabilities Year Ended December 31, 2018 2017 (1) 2016 (1) 2015 (1) 2014 (1) (In thousands, except for share related data) $ 1,126,825 $ 120,158 $ $ 982,570 $ 81,819 $ 833,778 $ 31,471 $ 674,731 $ 170,473 $ 484,259 33,196 $ $ $ $ 105,493 $ 1.29 $ 65,021 $ 0.85 $ 1.29 $ 0.85 $ 17,369 $ 0.27 $ $ 0.26 137,325 $ 2.53 $ $ 2.52 22,376 0.54 0.54 2.84 $ 2.68 $ 2.60 $ 2.60 $ 2.60 $ 385,615 $ 320,119 $ 225,653 $ 192,128 $ 134,549 $ 394,369 $ 337,384 $ 266,131 $ 210,559 $ 148,356 $ $ 4.48 $ 3.95 $ 3.22 $ 3.31 $ 3.06 4.58 $ 4.17 $ 3.79 $ 3.63 $ 3.37 $ 6,710,026 $ 6,111,957 $ 5,870,776 $ 4,181,799 $ 2,925,546 $ 3,124,303 $ 3,079,238 $ 3,110,042 $ 2,336,297 $ 1,819,941 $ 3,479,112 $ 3,405,204 $ 3,441,605 $ 2,562,421 $ 1,997,540 (1) Financial information has been revised to reflect certain reclassifications in prior periods to conform to current period presentation. 37 SUN COMMUNITIES, INC. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 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 as supplemental performance measures. Refer to Non-GAAP Financial Measures in this Item 7 for additional information. OVERVIEW We are a fully integrated, self-administered and self-managed REIT. As of December 31, 2018, we owned and operated, or had an interest in, a portfolio of 371 properties located throughout the United States and Ontario, Canada, including 230 MH communities, 110 RV communities, and 31 properties containing both MH and RV sites. We have been in the business of acquiring, operating, developing, and expanding MH and RV communities since 1975. We lease individual sites with utility access for placement of manufactured homes and RVs to our customers. We are also engaged through SHS in the marketing, selling, and leasing of new and pre-owned homes to current and future residents in our communities. The operations of SHS support and enhance our occupancy levels, property performance, and cash flows. EXECUTIVE SUMMARY 2018 Accomplishments: • Total revenues for 2018 increased 14.7 percent to $1.1 billion. • Core FFO for 2018 was $4.58 per diluted share and OP unit, an increase of 9.8 percent over 2017. • Achieved Same Community NOI growth of 6.7 percent. • Gained 2,600 revenue producing sites. • Reached Same Community occupancy of 98.0 percent, excluding approximately 2,100 recently completed, but vacant expansion sites. Sold 3,629 homes, an increase of 10.6 percent over 2017. • • Brokered homes sales increased by 7.0 percent to 2,147 in 2018 as compared to 2,006 in 2017. • Achieved 1-year, 3-year and 5-year total shareholder return of 14.2 percent, 66.9 percent and 191.3 percent, respectively, outperforming the MSCI US REIT, Russell 1000, U.S. REIT Residential, and S&P 500 indexes. • Delivered approximately 1,300 expansion sites in 13 communities. • Acquired 20 communities for total consideration of $349.1 million. • Entered into a strategic investment with Ingenia Communities Group (“Ingenia”) along with a development joint venture. Property Operations: Occupancy in our Properties as well as our ability to increase rental rates directly affects revenues. Our revenue streams are predominantly derived from customers renting our sites on a long-term basis. Our Same Community properties continue to achieve revenue and occupancy increases which drive continued NOI growth. We continue to sell homes at a high level in our communities and expect this trend to continue. Portfolio Information: Occupancy % - Total Portfolio - MH and RV blended (1) Occupancy % - Same Community - MH and RV blended (1)(2)(3) Core FFO NOI - Total Portfolio (in thousands) NOI - Same Community (in thousands) Homes Sold $ $ $ 96.1% 98.0% 4.58 533,321 512,357 3,629 $ $ $ Number of Occupied Rental Homes (1) Occupancy percent includes annual RV sites, and excludes transient RV sites. (2) Occupancy percent excludes recently completed but vacant expansion sites. (3) Same community is based on the as reported year end same community count for each respective year. 10,994 38 Year Ended December 31, 2018 2017 2016 95.8% 97.3% 4.17 479,662 382,210 3,282 11,074 $ $ $ 96.2% 96.6% 3.79 403,337 332,919 3,172 10,733 SUN COMMUNITIES, INC. Acquisition Activity: During the past three years, we have completed acquisitions of over 130 properties with over 36,000 sites located in high growth areas and retirement and vacation destinations such as California, Florida, Arizona, and Utah along with Eastern coastal areas and Ontario, Canada. During 2018, we acquired 20 communities, as detailed in the table below: Property/Portfolio State Type Total Consideration (in thousands) Number of sites Expansion Sites Leaf Verde RV Resort Arizona Archview RV Resort & Campground Utah Petoskey KOA RV Resort The Sands RV & Golf Resort Sun NG RV Resorts LLC (1)(2) Silver Creek RV Resort Highway West (1) Compass RV Resort Total $ RV RV RV RV RV RV RV 11,647 14,550 9,000 14,250 241,878 7,250 36,500 376 114 210 507 2,700 264 536 — 50 — — 940 176 — Michigan California Various Michigan Utah and Oregon 14,000 349,075 (1) Highway West and Sun NG RV Resorts LLC are comprised of 4 RV and 10 RV resorts, respectively. (2) Refer to Note 8, “Consolidated Variable Interest Entities,” Note 9, “Debt and Lines of Credit,” and Note 10, “Equity and Mezzanine Securities” in our — 1,166 175 4,882 Florida RV $ accompanying Consolidated Financial Statements for additional information. In 2018, we acquired the following land for expansion / development: Name Ocean West Location McKinleyville, CA Water Oak Country Club Estates Lady Lake, FL Oak Crest Pecan Park RV Resort Smith Creek Crossing Apple Carr River Run Ranch Austin, TX Jacksonville, FL Granby, CO Egelston, MI Granby, CO Expansion Activity: Type MH MH MH RV MH MH MH / RV Total Expansion / Development Sites Cost (millions) Month Acquired 26 296 220 158 310 121 1,144 2,275 $ $ $ $ $ $ $ $ 0.2 December 1.9 November 4.2 October 1.3 September 0.9 September 0.2 May 5.3 May 14.0 We have been focused on expansion opportunities adjacent to our existing communities, and we have developed over 3,500 sites within the past three years. We have expanded approximately 1,300 sites at 13 communities in 2018. The total cost to construct the sites was $56.7 million. We continue to expand our Properties utilizing our inventory of owned and entitled land (approximately 11,300 sites available for development) and expect to construct over 1,600 additional expansion sites in 2019. 39 SUN COMMUNITIES, INC. Markets: Our Properties are largely concentrated in Florida, Michigan, Texas and California. We have expanded our market share in California through recent acquisitions and increased our property holdings in other high growth areas of the U.S. including retirement and vacation destinations. We have also experienced strong revenue growth through recent acquisitions of RV communities. The age demographic of RV communities is attractive, as the population of retirement age baby boomers 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. The following table identifies our markets by total sites: Major Market Florida Michigan Texas California Arizona Ontario, Canada Indiana Ohio New Jersey Colorado Illinois New York Maine Pennsylvania Maryland Georgia Virginia Missouri Delaware New Hampshire Massachusetts North Carolina South Carolina Wisconsin Utah Oregon Minnesota Iowa Tennessee Nevada Montana Connecticut December 31, 2018 December 31, 2017 Number of Properties Total Sites % of Total Sites Number of Properties Total Sites % of Total Sites 124 70 23 30 12 15 11 9 7 8 5 7 6 4 4 3 5 2 2 2 2 3 1 2 4 3 1 1 2 1 1 1 43,791 27,080 34.1% 21.1% 8,674 7,706 5,259 4,891 3,608 2,920 2,916 2,472 2,150 2,118 1,595 1,519 1,382 1,140 1,031 976 916 682 679 671 588 588 562 561 475 413 392 324 226 149 6.8% 6.0% 4.1% 3.8% 2.8% 2.3% 2.3% 1.9% 1.6% 1.6% 1.2% 1.2% 1.1% 0.9% 0.8% 0.8% 0.7% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.2% 0.1% 123 68 21 27 11 15 11 9 7 8 5 6 6 3 3 3 4 2 2 — 2 3 1 2 — 2 1 1 1 1 1 1 43,328 26,137 35.5% 21.4% 7,974 6,498 4,882 4,882 3,420 2,904 2,917 2,481 2,150 1,757 1,595 1,277 1,156 1,139 718 976 916 — 680 672 588 548 — 473 475 413 237 324 226 149 6.5% 5.3% 4.0% 4.0% 2.8% 2.4% 2.4% 2.0% 1.8% 1.4% 1.3% 1.1% 1.0% 0.9% 0.6% 0.8% 0.8% —% 0.6% 0.6% 0.5% 0.4% —% 0.4% 0.4% 0.3% 0.2% 0.3% 0.2% 0.1% 371 128,454 350 121,892 40 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 NOI and FFO as supplemental performance measures. We believe NOI and FFO are appropriate measures given their wide use by and relevance to investors and analysts following the real estate industry. NOI provides a measure of rental operations and does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses. FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation/amortization of real estate assets. In addition, NOI and FFO are commonly used in various ratios, pricing multiples/ yields and returns and valuation calculations used to measure financial position, performance and value. NOI is derived from 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. Because of the inclusion of items such as interest, depreciation, and amortization, the use of 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. 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. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall. FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (loss) computed in accordance with 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. The Company 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 period over period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from net income (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. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results. 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 that, when combined with measures computed in accordance with GAAP such as net income (loss), cash flow from operating activities, investing activities and financing activities, provide investors with an indication of our ability to service debt and to fund acquisitions and other expenditures. Other REITs may use different methods for calculating FFO, accordingly, our FFO may not be comparable to other REITs. 41 SUN COMMUNITIES, INC. RESULTS OF OPERATIONS We report operating results under two segments: Real Property Operations and Home Sales and Rentals. The Real Property Operations segment owns, operates, develops, or has an interest in, a portfolio of MH and RV communities throughout the U.S. and in Canada, and is in the business of acquiring, operating, and expanding MH and RV communities. The Home Sales and Rentals segment offers MH and RV park model sales and leasing services to tenants and prospective tenants of our communities. We evaluate segment operating performance based on NOI and gross profit. Refer to Note 12, “Segment Reporting,” in our accompanying Consolidated Financial Statements for additional information. SUMMARY STATEMENTS OF OPERATIONS The following tables reconcile the Net income attributable to Sun Communities, Inc. common stockholders to NOI and summarize our consolidated financial results for the years ended December 31, 2018, 2017, and 2016 (in thousands): Net income attributable to Sun Communities, Inc. common stockholders $ Other revenues Home selling expenses General and administrative Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest expense Remeasurement of marketable securities Other expense / (income), net Current tax expense Deferred tax benefit Income from nonconsolidated affiliates Preferred return to preferred OP units Amounts attributable to noncontrolling interests Preferred stock distribution NOI/Gross Profit Real Property NOI Rental Program NOI Home Sales NOI/Gross profit Ancillary NOI/Gross profit Site rent from Rental Program (included in Real Property NOI) (1) NOI/Gross profit Years Ended 2018 2017 2016 $ 105,493 (27,057) 15,722 81,438 472 92 287,262 2,657 132,783 3,639 6,453 595 (507) (646) 4,486 8,443 1,736 $ 65,021 (24,874) 12,457 74,232 9,801 8,352 261,536 6,019 130,242 — (8,982) 446 (582) — 4,581 5,055 7,162 17,369 (21,150) 9,744 63,662 31,914 1,172 221,770 1,127 122,315 — 4,676 683 (400) (500) 5,006 150 8,946 $ 623,061 $ 550,466 $ 466,484 Years Ended 2018 2017 2016 $ 533,321 $ 479,662 $ 403,337 96,173 42,698 16,484 (65,615) 623,061 $ 92,268 32,294 10,075 (63,833) 550,466 $ 85,019 30,087 9,641 (61,600) 466,484 $ (1) The renter’s monthly payment includes the site rent and an amount attributable to the leasing of the home. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of Rental Program and financial impact on our operations. 42 SUN COMMUNITIES, INC. COMPARISON OF THE YEARS ENDED DECEMBER 31, 2018 AND 2017 REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO The following tables reflect certain financial and other information for our Total Portfolio as of and for the years ended December 31, 2018 and 2017: Financial Information (in thousands) Income from Real Property Property operating expenses: Payroll and benefits Legal, taxes, and insurance Utilities Supplies and repair Other Real estate taxes Property operating expenses Real Property NOI Other Information Number of properties MH occupancy RV occupancy MH & RV blended occupancy (1) Year Ended December 31, 2018 2017 Change % Change $ 825,973 $ 742,228 $ 83,745 11.3% 74,653 9,524 93,205 28,594 30,121 56,555 67,075 7,264 83,550 25,871 26,518 52,288 7,578 2,260 9,655 2,723 3,603 4,267 292,652 262,566 30,086 $ 533,321 $ 479,662 $ 53,659 11.3% 31.1% 11.6% 10.5% 13.6% 8.2% 11.5% 11.2% As of December 31, 2018 371 2017 Change 350 21 95.0% 100.0% 96.1% 95.8% 0.3% Sites available for development 11,258 9,617 1,641 Monthly base rent per site - MH Monthly base rent per site - RV (2) Monthly base rent per site - Total (1) Overall occupancy percentage includes MH and annual RV sites, and excludes transient RV sites. (2) Monthly base rent pertains to annual RV sites and excludes transient RV sites. $ $ $ 554 455 532 $ $ $ 533 435 512 $ $ $ 21 20 20 The $53.7 million increase in Real Property NOI consists of $21.5 million from recently acquired properties and $32.2 million from our Same Community properties as detailed below. 43 REAL PROPERTY OPERATIONS – SAME COMMUNITY SUN COMMUNITIES, INC. A key management tool used when evaluating performance and growth of our properties is a comparison of Same Communities. Same Communities consist of properties owned and operated throughout 2018 and 2017. The Same Community data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations. The Same Community data in this Form 10-K includes all properties which we have owned and operated continuously since January 1, 2017. In order to evaluate the growth of the Same Communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same Community portfolio is the reclassification of water and sewer revenues from income from real property to utilities. A significant portion of our utility charges are re-billed to our residents. We have reclassified $32.2 million and $30.6 million for the years ended December 31, 2018 and 2017, respectively, to reflect the utility expenses associated with our Same Community portfolio net of recovery. The following tables reflect certain financial and other information for our Same Communities as of and for the years ended December 31, 2018 and 2017. The amounts in the table below reflect constant currency for comparative purposes. Canadian currency figures included within the year ended December 31, 2017 have been translated at 2018 average exchange rates: Financial Information (in thousands) Income from Real Property Property operating expenses: Payroll and benefits Legal, taxes, and insurance Utilities Supplies and repair(1) Other Real estate taxes Property operating expenses Real Property NOI Other Information Number of properties MH occupancy (2) RV occupancy (2) MH & RV blended occupancy (2) Year Ended December 31, 2018 $ 746,360 2017 $ 703,272 66,502 9,026 54,949 26,476 22,952 54,098 234,003 $ 512,357 65,524 7,152 51,480 25,347 21,960 51,695 223,158 $ 480,114 Change $ 43,088 % Change 6.1% 978 1,874 3,469 1,129 992 2,403 10,845 $ 32,243 1.5% 26.2% 6.7% 4.5% 4.5% 4.6% 4.9% 6.7% As of December 31, 2018 336 2017 336 Change — 97.4% 100.0% 98.0% 95.8% (3) 2.2% Sites available for development 7,348 5,087 2,261 Monthly base rent per site - MH Monthly base rent per site - RV (4) Monthly base rent per site - Total $ $ $ 554 455 532 $ $ $ 533 431 511 $ $ $ 21 24 21 (1) Year ended December 31, 2017 excludes $2.6 million of expenses incurred for recently acquired properties to bring the properties up to Sun’s operating standards. These costs did not meet the Company’s capitalization policy. (2) The Same Community occupancy percentage for 2018 is derived from 104,059 developed sites, of which 101,988 were occupied. The number of developed sites excludes RV transient sites and approximately 2,100 recently completed but vacant MH expansion sites. (3) The Same Community occupancy percentage for 2017 has been adjusted to reflect incremental growth period-over-period from filled expansion sites and the conversion of transient RV sites to annual RV sites. (4) Monthly base rent pertains to annual RV sites and excludes transient RV sites. The 6.7 percent growth in NOI is primarily due to a 6.1 percent increase in Income from real property. The 6.1 percent increase in Income from real property is primarily due to a 2.2 percent increase in MH & RV blended occupancy and a 4.1 percent increase in total monthly base rent per site. The increase in Income from real property was partially offset by a 4.9 percent increase in Property operating expenses compared to 2017, which was primarily due to higher utilities, real estate taxes, and legal, taxes, and insurance in 2018. 44 SUN COMMUNITIES, INC. HOME SALES AND RENTALS We purchase new homes and acquire pre-owned and repossessed manufactured homes, generally located within our communities, from lenders, dealers, and former residents to lease or sell to current and prospective residents. The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2018 and 2017 (in thousands, except for average selling prices and statistical information): Financial Information Revenue: New home sales Pre-owned home sales Revenue from homes sales Expenses: New home cost of sales Pre-owned home cost of sales Cost of home sales NOI / Gross profit Gross profit – new homes Gross margin % – new homes Average selling price – new homes Gross profit – pre-owned homes Gross margin % – pre-owned homes Average selling price – pre-owned homes Statistical Information New home sales volume Pre-owned home sales volume Total homes sold Year Ended December 31, 2018 2017 Change % Change $ 59,578 $ 36,915 $ 22,663 106,453 166,031 90,493 127,408 15,960 38,623 51,913 71,420 31,578 63,536 123,333 $ 42,698 95,114 $ 32,294 20,335 7,884 28,219 $ 10,404 61.4% 17.6% 30.3% 64.4% 12.4% 29.7% 32.2% $ 7,665 $ 5,337 $ 2,328 43.6% 12.9% 14.5% (1.6)% $ 113,266 $ 101,975 $ 11,291 11.1% $ 35,033 $ 26,957 $ 8,076 30.0% 32.9% 29.8% 3.1 % $ 34,306 $ 30,991 $ 3,315 10.7% 526 3,103 3,629 362 2,920 3,282 164 183 347 45.3% 6.3% 10.6% Gross profit for new and pre-owned home sales increased $2.3 million and $8.1 million, respectively, in 2018 as compared to 2017. The increases for both new and pre-owned home sales are primarily the result of higher home sales volumes combined with higher average selling prices in 2018 as compared to 2017. 45 SUN COMMUNITIES, INC. The following table reflects certain financial and other information for our Rental Program as of and for the years ended December 31, 2018 and 2017 (in thousands, except for statistical information): Financial Information Revenues: Rental home revenue Site rent from Rental Program (1) Rental Program revenue Expenses: Commissions Repairs and refurbishment Taxes and insurance Marketing and other Rental Program operating and maintenance Rental Program NOI Other Information Number of occupied rentals, end of period Investment in occupied rental homes, end of period Number of sold rental homes Weighted average monthly rental rate, end of period Year Ended December 31, 2018 2017 Change % Change $ 53,657 $ 50,549 $ 65,615 119,272 63,833 114,382 3,108 1,782 4,890 6.1 % 2.8 % 4.3 % 2,291 10,312 6,364 4,132 23,099 2,734 9,864 6,102 3,414 22,114 (443) 448 262 718 985 $ 96,173 $ 92,268 $ 3,905 10,994 11,074 $ 530,006 $ 494,945 1,122 $ 949 $ 1,168 901 $ $ (80) 35,061 (46) 48 (16.2)% 4.5 % 4.3 % 21.0 % 4.5 % 4.2 % (0.7)% 7.1 % (3.9)% 5.3 % (1) The renter’s monthly payment includes the site rent and an amount attributable to the rental home lease. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations. Rental Program NOI increased by 4.2 percent compared to 2017. The increase is due to a 4.3 percent increase in Rental Program revenue which is primarily attributable to a 5.3 percent increase in weighted average monthly rental rates. The 4.5 percent increase in Rental Program operating and maintenance expenses is primarily due to higher Marketing and other expenses, driven by higher utility and bad debt expenses in 2018 as compared to 2017, partially offset by the decrease in commission expenses due to a decrease in the number of sold rental homes in 2018 as compared to 2017. 46 SUN COMMUNITIES, INC. OTHER INCOME STATEMENT ITEMS The following table summarizes other income and expenses for the years ended December 31, 2018 and 2017 (amounts in thousands): Year Ended December 31, 2018 2017 Change % Change Ancillary revenue, net Interest income Brokerage commissions and other revenues, net Home selling expenses General and administrative expenses Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest expense Remeasurement of marketable securities Other (expense) / income, net Income from nonconsolidated affiliates Current tax expense Deferred tax benefit $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 16,484 20,853 6,204 15,722 81,438 472 92 287,262 2,657 $ $ $ $ $ $ $ $ $ 132,783 $ (3,639) $ (6,453) $ $ 646 (595) $ $ 507 10,075 21,180 3,694 12,457 74,232 9,801 8,352 261,536 6,019 $ $ $ $ $ $ $ $ $ 130,242 $ — $ 8,982 $ — $ (446) $ $ 582 6,409 (327) 2,510 3,265 7,206 (9,329) (8,260) 25,726 (3,362) 2,541 (3,639) (15,435) 646 (149) (75) 63.6 % (1.5)% 67.9 % 26.2 % 9.7 % (95.2)% (98.9)% 9.8 % (55.9)% 2.0 % N/A (171.8)% N/A (33.4)% (12.9)% Ancillary revenue, net - increased primarily due to RV vacation home rental income as a result of acquisition activities, in addition to an increase in golf course, restaurant, and resort activity net profit during the year ended December 31, 2018 as compared to the same period in 2017. Brokerage commissions and other revenues, net - increased primarily due to a higher number of broker homes sold during the year ended December 31, 2018 as compared to the same period in 2017, in addition to $1.9 million in business interruption insurance proceeds related to Hurricane Irma. Home selling expenses - increased as a result of higher commissions due to a higher volume of home sales for the year ended December 31, 2018 as compared to the same period in 2017. General and administrative expenses - increased primarily due to employee related costs including salaries, incentive compensation, and deferred compensation amortization, in addition to higher software support and maintenance fees during the year ended December 31, 2018 as compared to the same period in 2017. Transaction costs - for the year ended December 31, 2018, decreased by $9.3 million as compared to the same period in 2017. Beginning January 2018, only direct acquisition related costs are capitalized as part of the purchase price. Acquisition costs that do not meet the criteria for capitalization are expensed as incurred. Catastrophic weather related charges, net - decreased primarily due to a smaller impact from Hurricanes Florence and Michael for the year ended December 31, 2018 as compared to a larger impact from Hurricane Irma in the same period in 2017. Depreciation and amortization - increased as a result of our recent property acquisitions and our ongoing expansion and development activities. Refer to Note 3, “Real Estate Acquisitions,” in our accompanying Consolidated Financial Statements for additional information. Loss on extinguishment of debt - decreased $3.4 million primarily due to lower prepayment penalties related to debt and financing activity as compared to 2017. Refer to Note 9, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information. 47 SUN COMMUNITIES, INC. Interest expense - for the year ended December 31, 2018, increased $2.5 million as compared to the same period in 2017, primarily due to entering into two collateralized term loans totaling $249.7 million. Refer to Note 9, “Debt and Lines of Credit,” in our accompanying Consolidated Financial Statements for additional information. Remeasurement of marketable securities - was $3.6 million in 2018, primarily due to the change in the fair value of exchange traded marketable securities. Refer to Note 7, “Investment in Nonconsolidated Affiliates,” in our accompanying Consolidated Financial Statements for additional information. Other (expense) / income, net - for the year ended December 31, 2018, was primarily comprised of foreign currency translation loss of $8.4 million, and $0.4 million in other expenses, partially offset by contingent liability remeasurement gain of $2.3 million compared to 2017 which consisted of foreign currency translation gains of $5.9 million and a contingent liability remeasurement gain of $3.0 million. Income from nonconsolidated affiliates - was $0.6 million in 2018, primarily due to equity earnings from our investments in GTSC and Origen Financial Services, LLC. Refer to Note 7, “Investment in Nonconsolidated Affiliates,” in our accompanying Consolidated Financial Statements for additional information. 48 SUN COMMUNITIES, INC. COMPARISON OF THE YEARS ENDED DECEMBER 31, 2017 AND 2016 REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO The following tables reflect certain financial and other information for our Total Portfolio as of and for the years ended December 31, 2017 and 2016: Financial Information (in thousands) Income from Real Property Property operating expenses: Payroll and benefits Legal, taxes, and insurance Utilities Supplies and repair Other Real estate taxes Property operating expenses Real Property NOI Other Information Number of properties MH occupancy RV occupancy MH & RV blended occupancy (1) Year Ended December 31, 2017 2016 Change % Change 742,228 620,917 $ 121,311 19.5% 67,075 7,264 83,550 25,871 26,518 52,288 56,744 5,941 67,495 20,732 22,362 44,306 10,331 1,323 16,055 5,139 4,156 7,982 262,566 $ 479,662 217,580 $ 403,337 $ 44,986 76,325 18.2% 22.3% 23.8% 24.8% 18.6% 18.0% 20.7% 18.9% As of December 31, 2017 350 2016 Change 341 9 94.6% 100.0% 95.8% 96.2% (0.4)% Sites available for development 9,617 10,337 (720) Monthly base rent per site - MH Monthly base rent per site - RV (2) Monthly base rent per site - Total (1) Overall occupancy (percentage) includes MH and annual RV sites, and excludes transient RV sites. (2) Monthly base rent pertains to annual RV sites and excludes transient RV sites. $ $ $ 533 439 512 $ $ $ 515 420 495 $ $ $ 18 19 17 The $76.3 million growth in Real Property NOI consists of $51.7 million from newly acquired properties and $24.6 million from Same Community properties as detailed below. 49 REAL PROPERTY OPERATIONS – SAME COMMUNITY SUN COMMUNITIES, INC. The following tables reflect certain financial and other information for our Same Communities, which includes all properties we have owned and operated continuously since January 1, 2016 as of and for the years ended December 31, 2017 and 2016. We have reclassified $26.9 million and $25.8 million for the year ended December 31, 2017 and 2016, respectively, to reflect the utility expenses associated with our Same Community portfolio net of recovery. Financial Information (in thousands) Income from Real Property Property operating expenses: Payroll and benefits Legal, taxes, and insurance Utilities Supplies and repair (1) Other Real estate taxes Property operating expenses Real Property NOI Other Information Number of properties MH occupancy (2) RV occupancy (2) MH & RV blended occupancy (2) Year Ended December 31, 2017 $ 533,942 2016 $ 503,770 Change % Change $ 30,172 6.0 % 45,240 5,562 29,726 19,109 13,696 38,399 151,732 $ 382,210 43,078 5,174 28,475 18,729 13,988 36,708 146,152 $ 357,618 $ 2,162 388 1,251 380 (292) 1,691 5,580 24,592 5.0 % 7.5 % 4.4 % 2.0 % (2.1)% 4.6 % 3.8 % 6.9 % As of December 31, 2017 231 2016 231 Change — 96.9% 100.0% 97.3% 95.4% (3) 1.9% Sites available for development 5,087 6,263 (1,176) Monthly base rent per site - MH Monthly base rent per site - RV (4) Monthly base rent per site - Total (1) Year ended December 31, 2016 excludes $0.1 million of expenses incurred for recently acquired properties to bring the properties up to Sun’s operating standards. 510 441 492 518 500 459 18 18 18 $ $ $ $ $ $ $ $ $ These costs did not meet the Company’s capitalization policy. (2) The Same Community occupancy percentage for 2017 is derived from 80,407 developed sites, of which 78,257 were occupied. The number of developed sites excludes RV transient sites and approximately 1,800 recently completed by vacant MH expansion sites. (3) The Same Community occupancy percentage for 2016 has been adjusted to reflect incremental growth period-over-period from filled expansion sites and the conversion of transient RV sites to annual RV sites. (4) Monthly base rent pertains to annual RV sites and excludes transient RV sites. The 6.9 percent growth in NOI is primarily due to a 6.0 percent increase in Income from real property. The 6.0 percent increase in Income from real property is primarily due to a 1.9 percent increase in MH & RV blended occupancy, a 3.6 percent increase in total monthly base rent per site, and a 0.5 percent increase in transient revenue and other revenue. The increase in Income from real property was partially offset by a 3.8 percent increase in Property operating expenses compared to 2016, which was primarily due to higher payroll and benefits, real estate taxes, and utilities in 2017. 50 HOME SALES AND RENTALS SUN COMMUNITIES, INC. The following table reflects certain financial and statistical information for our Home Sales Program for the years ended December 31, 2017 and 2016 (in thousands, except for average selling prices and statistical information): Financial Information Revenue: New home sales Pre-owned home sales Revenue from homes sales Expenses: New home cost of sales Pre-owned home cost of sales Cost of home sales NOI / Gross profit Gross profit – new homes Gross margin % – new homes Average selling price – new homes Gross profit – pre-owned homes Gross margin % – pre-owned homes Average selling price – pre-owned homes Statistical Information New home sales volume Pre-owned home sales volume Total homes sold Year Ended December 31, 2017 2016 Change % Change $ 36,915 $ 30,977 $ 5,938 90,493 127,408 79,530 110,507 31,578 63,536 95,114 26,802 53,618 80,420 10,963 16,901 4,776 9,918 14,694 $ 32,294 $ 30,087 $ 2,207 19.2% 13.8% 15.3% 17.8% 18.5% 18.3% 7.3% $ 5,337 $ 4,175 $ 1,162 27.8% 14.5% 13.5% 1.0 % $ 101,975 $ 94,156 $ 7,819 $ 26,957 $ 25,912 $ 1,045 29.8% 32.6% (2.8)% 8.3% 4.0% $ 30,991 $ 27,974 $ 3,017 10.8% 362 2,920 3,282 329 2,843 3,172 33 77 110 10.0% 2.7% 3.5% Gross profit for new and pre-owned home sales increased $1.2 million and $1.0 million, respectively, in 2017 as compared to 2016. The increases for both new and pre-owned home sales are primarily the result of higher volume of home sales combined with higher average selling prices in 2017 as compared to 2016. 51 SUN COMMUNITIES, INC. The following table reflects certain financial and other information for our Rental Program as of and for the years ended December 31, 2017 and 2016 (in thousands, except for statistical information): Financial Information Revenues: Rental home revenue Site rent from Rental Program (1) Rental Program revenue Expenses: Commissions Repairs and refurbishment Taxes and insurance Marketing and other Rental Program operating and maintenance Rental Program NOI Other Information Number of occupied rentals, end of period Investment in occupied rental homes, end of period Number of sold rental homes Weighted average monthly rental rate, end of period Year Ended December 31, 2017 2016 Change % Change $ 50,549 $ 47,780 $ 63,833 114,382 61,600 109,380 2,734 9,864 6,102 3,414 22,114 92,268 $ $ 2,309 12,825 5,734 3,493 24,361 85,019 11,074 10,733 $ 494,945 $ 457,691 1,168 $ 901 $ 1,089 882 $ $ $ 2,769 2,233 5,002 425 (2,961) 368 (79) (2,247) 7,249 341 37,254 79 19 5.8 % 3.6 % 4.6 % 18.4 % (23.1)% 6.4 % (2.3)% (9.2)% 8.5 % 3.2 % 8.1 % 7.3 % 2.2 % (1) The renter’s monthly payment includes the site rent and an amount attributable to the rental home lease. The site rent is reflected in the Real Property Operations segment. For purposes of management analysis, the site rent is included in the Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and assess the overall growth and performance of Rental Program and financial impact to our operations. Rental Program NOI increased by 8.5 percent compared to 2016. The increase is due to a 4.6 percent increase in Rental Program revenue attributable to a 2.2 percent increase in weighted average monthly rental rates and a 3.2 percent increase in the number of occupied rentals, combined with an overall decrease in Rental Program operating and maintenance expenses. The 9.2 percent decrease in Rental Program operating and maintenance expenses is primarily due to lower Repairs and refurbishment expenses in 2017 as compared to 2016. 52 SUN COMMUNITIES, INC. OTHER INCOME STATEMENT ITEMS The following table summarizes other income and expenses for the years ended December 31, 2017 and 2016 (amounts in thousands): Year Ended December 31, 2017 2016 Change % Change Ancillary revenue, net Interest income Brokerage commissions and other revenues, net Home selling expenses General and administrative expenses Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest expense Other income / (expense), net Income from nonconsolidated affiliates Current tax expense Deferred tax benefit $ $ $ $ $ $ $ $ $ $ $ $ $ $ 10,075 21,180 3,694 12,457 74,232 9,801 8,352 261,536 6,019 130,242 8,982 $ $ $ $ $ $ $ $ $ $ $ — $ (446) $ $ 582 9,641 18,113 3,037 9,744 63,662 31,914 1,172 221,770 1,127 $ $ $ $ $ $ $ $ $ 122,315 $ (4,676) $ 500 $ (683) $ $ 400 434 3,067 657 2,713 10,570 (22,113) 7,180 39,766 4,892 7,927 13,658 (500) 237 182 4.5 % 16.9 % 21.6 % 27.8 % 16.6 % (69.3)% 612.6 % 17.9 % 434.1 % 6.5 % 292.1 % (100.0)% (34.7)% 45.5 % Interest income - increased primarily due to an increase in our installment notes receivable, partially offset by a decrease in our collateralized receivables, as compared to December 31, 2016. Brokerage commissions and other revenues, net - increased due to the sale of 2,006 brokered homes in 2017 as compared to 1,655 in 2016, a 21.2 percent increase. Home selling expenses - increased primarily due to higher volumes and higher weighted average selling prices for both new and used homes in 2017, which resulted in higher commissions. General and administrative expenses - increased primarily due to additional employee related costs as headcount increased in connection with our growth through acquisitions. Transaction costs - relate to diligence and other expenses incurred in connection with our acquisitions. These costs were significantly lower in 2017 as compared to 2016, due to the acquisition of Carefree Communities, Inc. (“Carefree”) in 2016. Catastrophic weather related charges, net - In September 2017, Hurricane Irma impacted 121 of our communities in Florida and three in Georgia. We recognized charges totaling $31.7 million comprised of $21.3 million for debris and tree removal, common area repairs, and minor flooding damage, as well as $10.4 million for impaired assets at the three Florida Keys communities. These charges were partially offset by estimated insurance recoveries of $23.7 million. In 2016, Catastrophic weather related charges, net were primarily attributable to debris and tree removal, common area repairs, and minor flooding damage from hurricanes Hermine and Matthew. Depreciation and amortization - increased as a result of our acquisition of Carefree in 2016, as well as other properties in the second half of 2016 and during 2017. Loss on extinguishment of debt - in 2017 of $6.0 million was recognized in connection with defeasement or repayment of collateralized term loans totaling $61.4 million. In 2016, the loss on extinguishment of debt of $1.1 million was in connection with repayment of a total of $79.1 million of collateralized term loans. Refer to Note 9, “Debt and Lines for Credit,” in our accompanying Consolidated Financial Statements for additional information. Interest expense - increased primarily due to 2017 including a full year of interest expense from incremental borrowings of 53 SUN COMMUNITIES, INC. $338.0 million, $405.0 million, and $139.0 million in connection with our Fannie Mae Financing, NML Financing, and Freddie Mac Financing arrangements, respectively. The $338.0 million and $405.0 million borrowings were entered into in June 2016, and the $139.0 million was entered into in September 2016. Other income / (expense), net - in 2017 consisted of foreign currency translation gains of $5.9 million and a contingent liability remeasurement gain of $3.0 million, compared to 2016 which consisted of foreign currency translation losses of $5.0 million and a contingent liability remeasurement loss of $0.2 million, partially offset by a $0.5 million gain related to the acquisition of a community. Income from nonconsolidated affiliates - of $0.5 million in 2016 was due to the sale of our entire interest in Origen Financial, Inc. Prior to the sale, the carrying value of our investment was zero. 54 SUN COMMUNITIES, INC. RECONCILIATION OF NET INCOME ATTRIBUTABLE TO SUN COMMUNITIES, INC. COMMON STOCKHOLDERS TO FFO The following table reconciles Net income attributable to Sun Communities, Inc. common stockholders to FFO for the years ended December 31, 2018, 2017, and 2016 (in thousands, except per share amounts): Net income attributable to Sun Communities, Inc. common stockholders Adjustments: Depreciation and amortization Remeasurement of marketable securities Amounts attributable to noncontrolling interests Preferred return to preferred OP units Preferred distribution to Series A-4 Preferred Stock Gain on disposition of assets, net FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) Adjustments: Transaction costs (2) Other acquisition related costs (3) Income from nonconsolidated affiliates Loss on extinguishment of debt Catastrophic weather related costs, net Loss of earnings - catastrophic weather related (4) Other expense / (income), net Debt premium write-off Ground lease intangible write-off Deferred tax benefit Year Ended December 31, 2018 $ 105,493 2017 65,021 2016 17,369 $ $ 288,206 3,639 7,740 2,206 1,737 (23,406) 262,211 — 4,535 2,320 2,107 (16,075) 221,576 — (41) 2,462 — (15,713) $ 385,615 $ 320,119 $ 225,653 — 1,001 — 2,657 92 (292) 6,453 (1,467) 817 (507) 9,801 2,810 — 6,019 8,352 292 (8,982) (1,343) 898 (582) 31,914 3,328 (500) 1,127 1,172 — 4,676 (839) — (400) Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) $ 394,369 $ 337,384 $ 266,131 Weighted average common shares outstanding - basic: 81,387 76,084 65,856 Add: Common stock issuable upon conversion of stock options Restricted stock Common OP units Common stock issuable upon conversion of Series A-1 preferred OP units Common stock issuable upon conversion of Series A-4 preferred stock Common stock issuable upon conversion of Series A-3 preferred OP units Weighted average common shares outstanding - fully diluted 2 651 2,733 821 472 75 86,141 2 625 2,756 869 585 75 80,996 8 457 2,844 925 — 75 70,165 FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per share - fully diluted $ $ 4.48 4.58 $ $ 3.95 4.17 $ $ 3.22 3.79 (1) The effect of certain anti-dilutive convertible securities is excluded from these items. (2) In January 2018, we adopted ASU 2017-01. Under previous guidance, substantially all of our property acquisitions were accounted for as business combinations with acquisition related costs expensed as incurred and reported as Transaction costs. Under ASU 2017-01, direct acquisition related costs are capitalized as part of the purchase price. Acquisitions costs that do not meet the criteria for capitalization are expensed as incurred. (3) These costs represent the 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. (4) During 2018, the adjustment was for the previously estimated FFO impact of the income related to the loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities, impaired by Hurricane Irma, that was not recognized as income in those respective periods. The income related to the loss of earnings was recognized during the three months ended December 31, 2018 upon notification of payment by the insurance company. During 2017, the adjustment represented the related estimated loss of earnings in excess of the applicable business interruption deductible. 55 SUN COMMUNITIES, INC. LIQUIDITY AND CAPITAL RESOURCES Our principal liquidity demands have historically been, and are expected to continue to be, distributions to our stockholders and the unit holders of the Operating Partnership, capital improvement of properties, the purchase of new and pre-owned homes, property acquisitions, development and expansion of properties, and debt repayment. Subject to market conditions, we intend to continue to identify opportunities to expand our development pipeline and acquire existing communities. We finance acquisitions through available cash, secured financing, draws on our lines of credit, the assumption of existing debt on properties, and the issuance of equity securities. We will continue to evaluate acquisition opportunities that meet our criteria. During the year ended December 31, 2018, we acquired 20 communities. Refer to Note 3, “Real Estate Acquisitions” in our accompanying Consolidated Financial Statements for information regarding recent community acquisitions. We also intend to continue to strengthen our capital and liquidity positions by focusing on our core fundamentals, which are generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs. We intend to meet our liquidity requirements through available cash balances, cash flows generated from operations, draws on our lines of credit, and the use of debt and equity offerings under our shelf registration statement. Refer to Note 9, “Debt and Lines of Credit” and Note 10, “Equity and Mezzanine Securities” in our accompanying Consolidated Financial Statements for additional information. Our capital expenditures include expansion sites and ground-up development construction costs, lot modifications, recurring capital expenditures and rental home purchases. For the years ended December 31, 2018 and 2017, expansion and development activities of $152.7 million and $88.3 million, respectively, related to costs consisting primarily of construction of sites and other costs necessary to complete home site improvements. For the years ended December 31, 2018 and 2017, lot modification expenditures were $22.9 million and $18.1 million, respectively. These expenditures improve asset quality in our communities and are incurred when an existing home is removed and the site is prepared for a new home (more often than not, a multi-sectional home). These activities, which are mandated by strict manufacturer’s installation requirements and state building codes, include items such as new foundations, driveways, and utility upgrades. For the years ended December 31, 2018 and 2017, recurring capital expenditures were $24.3 million and $14.2 million, respectively, related to our continued commitment to the upkeep of our properties. We invest in the acquisition of homes intended for the Rental Program. Expenditures for these investments depend upon the condition of the markets for repossessions and new home sales, as well as rental homes. We finance new home purchases with a $12.0 million manufactured home floor plan facility. Our ability to purchase homes for sale or rent may be limited by cash received from third-party financing of our home sales, available manufactured home floor plan financing and working capital available on our lines of credit. Our cash flow activities are summarized as follows (in thousands): Net Cash Provided by Operating Activities Net Cash Used for Investing Activities Net Cash Provided by Financing Activities Effect of exchange rate on cash, cash equivalents and restricted cash Year Ended December 31, 2018 2017 2016 $ $ $ $ 363,114 $ (733,743) $ $ 409,905 (523) $ 257,983 $ (401,642) $ $ 141,557 298 $ 241,455 (1,614,512) 1,338,970 (73) Cash, cash equivalents, and restricted cash increased by $38.8 million from $23.5 million as of December 31, 2017, to $62.3 million as of December 31, 2018. Operating Activities Net cash provided by operating activities increased by $105.1 million from $258.0 million for the year ended December 31, 2017 to $363.1 million for the year ended December 31, 2018. 56 SUN COMMUNITIES, INC. Our net cash flows provided by operating activities from continuing operations may be adversely impacted by, among other things: (a) the market and economic conditions in our current markets generally, and specifically in metropolitan areas of our current markets; (b) lower occupancy and rental rates of our properties; (c) increased operating costs, such as wage and benefit costs, insurance premiums, real estate taxes and utilities, that cannot be passed on to our tenants; (d) decreased sales of manufactured homes; and (e) current volatility in economic conditions and the financial markets. See “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K. Investing Activities Net cash used for investing activities was $733.7 million for the year ended December 31, 2018, compared to $401.6 million for the year ended December 31, 2017. Financing Activities Net cash provided by financing activities was $409.9 million for the year ended December 31, 2018, compared to $141.6 million for the year ended December 31, 2017. Refer to Note 9, “Debt and Lines of Credit” and Note 10, “Equity and Mezzanine Securities” in our accompanying Consolidated Financial Statements for additional information. Financial Flexibility In July 2017, we entered into a new at the market offering sales agreement (the “Sales Agreement”) with certain sales agents (collectively, the “Sales Agents”), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold from time to time under the Sales Agreement. Through December 31, 2018, we have sold shares of our common stock for gross proceeds of $163.8 million under the Sales Agreement. In April 2017, we amended and restated our credit agreement (the “A&R Credit Agreement”) with Citibank, N.A. (“Citibank”) and certain other lenders. Pursuant to the A&R Credit Agreement, we entered into a senior revolving credit facility with Citibank and certain other lenders in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan (the “A&R Facility”). We repaid the term loan in full on September 7, 2018 and are unable to reborrow on the term loan. The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option, subject to the satisfaction of certain conditions as defined in the A&R Credit Agreement. The A&R Credit Agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $350.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $900.0 million. The A&R Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the A&R Credit Agreement, which margin can range from 1.35 percent to 2.20 percent for the revolving loan. As of December 31, 2018, the margin on our leverage ratio was 1.35 percent on the revolving loan. We had $128.0 million borrowings on the revolving loan and no borrowings on the term loan as of December 31, 2018. The A&R Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but does reduce the borrowing amount available. At December 31, 2018 and December 31, 2017, approximately $3.9 million and $1.3 million of availability was used to back standby letters of credit. Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. We are currently in compliance with these covenants. The most restrictive financial covenants for the A&R Facility are as follows: Covenant Requirement As of December 31, 2018 Maximum Leverage Ratio Minimum Fixed Charge Coverage Ratio Minimum Tangible Net Worth (in thousands) Maximum Dividend Payout Ratio < 65.0% > 1.40 > $2,918,046 < 95.0% 31.3% 2.95 $4,677,834 58.7% 57 SUN COMMUNITIES, INC. We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, construction of expansion sites and ground-up development communities, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our properties. At December 31, 2018, we had 186 unencumbered properties, of which 61 support the borrowing base for our $650.0 million line of credit. From time to time, we may also issue shares of our capital stock, issue equity units in our Operating Partnership, obtain 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 and RV community industry 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. See “Risk Factors” in Part I, Item 1A in 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. Contractual Cash Obligations Our primary long-term liquidity needs are principal payments on outstanding indebtedness. As of December 31, 2018, our outstanding contractual obligations, including interest expense, were as follows: Payments Due By Period (In thousands) Contractual Cash Obligations (1) Collateralized term loans - Life Companies Collateralized term loans - FNMA Collateralized term loans - CMBS Collateralized term loans - FMCC Secured borrowings Lines of credit Preferred Equity - Sun NG Resorts - mandatorily redeemable Preferred OP units - mandatorily redeemable Total Due $ 1,262,351 762,632 $ <1 year 27,576 16,416 405,864 382,754 107,731 128,000 35,277 37,338 7,890 6,281 5,265 — — 2,675 1-3 years 75,797 $ 3-5 years 62,806 $ After 5 years $ 1,096,172 221,560 136,570 13,305 11,917 128,000 — — 223,628 81,619 131,827 12,754 — 35,277 — 301,028 179,785 231,341 77,795 — — 34,663 Total principal payments $ 3,121,947 $ 66,103 $ 587,149 $ 547,911 $ 1,920,784 Interest expense (2) Operating leases Capital lease obligation Total contractual cash obligations $ 899,780 64,070 $ 129,261 $ 237,145 $ 185,468 $ 347,906 3,765 7,530 7,530 45,245 4,660 $ 4,090,457 120 $ 199,249 240 $ 832,064 240 $ 741,149 4,060 $ 2,317,995 (1) Contractual cash obligations in this table exclude debt premiums, discounts and deferred financing costs, as applicable. (2) Our contractual cash obligations related to interest expense are calculated based on the current debt levels, rates and maturities as of December 31, 2018 (including capital leases and excluding secured borrowings), and actual payments required in future periods may be different than the amounts included above. Perpetual securities include one year of interest expense in the “After 5 years” category. As of December 31, 2018, our net debt to enterprise value approximated 25.2 percent (assuming conversion of all common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, and Series C preferred OP units to shares of common stock). Our debt had a weighted average maturity of approximately 9.0 years and a weighted average interest rate of 4.5 percent. 58 SUN COMMUNITIES, INC. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), 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. The critical accounting estimates that affect the Consolidated Financial Statements and that use judgments and assumptions are listed below. In addition, the likelihood that materially different amounts could be reported under varied conditions and assumptions is discussed. Refer to Note 1, “Significant Accounting Policies,” in our accompanying Consolidated Financial Statements for information regarding our critical accounting estimates. Impact of New Accounting Standards Refer to Note 17, “Recent Accounting Pronouncements,” in our accompanying Consolidated Financial Statements for information regarding new accounting pronouncements. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements with any unconsolidated entities that we believe have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity, or capital resources. 59 SUN COMMUNITIES, INC. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. Interest Rate Risk Our principal market risk exposure is interest rate risk. We mitigate this risk by maintaining prudent amounts of leverage, minimizing capital costs, and interest expense while continuously evaluating all available debt and equity resources and following established risk management policies and procedures, which include the periodic use of derivatives. Our primary strategy in entering into derivative contracts is to minimize the variability that interest rate changes could have on our future cash flows. From time to time, we employ derivative instruments that effectively convert a portion of our variable rate debt to fixed rate debt. We do not enter into derivative instruments for speculative purposes. Our variable rate debt totaled $128.0 million and $194.7 million as of December 31, 2018 and 2017, respectively, and bears interest based on Prime or various LIBOR rates. If Prime or LIBOR increased or decreased by 1.0 percent, our interest expense would have increased or decreased by approximately $2.4 million and $2.3 million for the years ended December 31, 2018 and 2017, respectively, based on the $235.9 million and $229.6 million average balances outstanding under our variable rate debt facilities, respectively. Foreign Currency Exchange Rate Risk Foreign currency exchange rate risk is the risk that fluctuations in currencies against the U.S. dollar will negatively impact our results of operations. We are exposed to foreign currency exchange rate risk as a result of remeasurement and translation of the assets and liabilities of our Canadian properties, and our Australian equity investment and joint venture into U.S. dollars. Fluctuations in foreign currency exchange rates can therefore create volatility in our results of operations and may adversely affect our financial condition. At December 31, 2018 and 2017, our stockholder’s equity included $141.4 million and $91.5 million from our Canadian subsidiaries and Australian equity investments, respectively, which represented 4.6 percent and 3.4 percent of total equity, respectively. Based on our sensitivity analysis, a 10.0 percent strengthening of the U.S. dollar against the Canadian and Australian dollars would have caused a reduction of $14.1 million and $9.2 million to our total stockholder’s equity at December 31, 2018 and 2017, respectively. 60 SUN COMMUNITIES, INC. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data are filed herewith under Item 15. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEM 9. None. ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (pursuant to Rules 13a-15(e) or 15d-15(e) of the Exchange Act) at December 31, 2018. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2018. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, misstatements due to error or fraud may not be prevented or detected on a timely basis. Our management performed an assessment of the effectiveness of our internal control over financial reporting at December 31, 2018, utilizing the criteria discussed in the “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective at December 31, 2018. Based on management’s assessment, we have concluded that our internal control over financial reporting was effective at December 31, 2018. The effectiveness of our internal control over financial reporting has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report which is included herein. Changes in Internal Control Over Financial Reporting There were no material changes in our internal control over financial reporting during the year ended December 31, 2018. ITEM 9B. OTHER INFORMATION None. 61 SUN COMMUNITIES, INC. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Pursuant to instruction 3 to paragraph (b) of Item 401 of Regulation S-K, certain information regarding our executive officers is contained in Part I of this Form 10-K. Unless provided in an amendment to this Annual Report on Form 10-K, the other information required by this Item is incorporated herein by reference to the applicable information in the proxy statement for our 2019 annual meeting (the “Proxy Statement,”) including the information set forth under the captions “Board of Directors and Corporate Governance - Incumbent Directors and Nominees,” “Management and Executive Compensation - Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Board of Directors and Corporate Governance - Board of Directors and Committees” and “Board of Directors and Corporate Governance - Consideration of Director Nominees.” ITEM 11. EXECUTIVE COMPENSATION Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the applicable information in the Proxy Statement, including the information set forth under the captions “Management and Executive Compensation,” “Board of Directors and Corporate Governance - Director Compensation Table,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report.” The information in the section captioned “Compensation Committee Report” in the Proxy Statement or an amendment to this Annual Report on Form 10-K is incorporated by reference herein but shall be deemed furnished, not filed, and shall not be deemed to be incorporated by reference into any filing we make under the Securities Act or the Exchange Act. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the applicable information in the Proxy Statement, including the information set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the Proxy Statement, including the information set forth under the captions “Certain Relationships and Related Transactions and Director Independence,” “Board of Directors and Corporate Governance - Board of Directors and Committees” and “Board of Directors and Corporate Governance - Board Leadership Structure and Independence of Non-Employee Directors.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Unless provided in an amendment to this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to the Proxy Statement, including the information set forth under the caption “Ratification of Selection of Grant Thornton LLP.” 62 SUN COMMUNITIES, INC. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed herewith as part of this Form 10-K: 1. Financial Statements A list of the financial statements required to be filed as a part of this Annual Report on Form 10 K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith. 2. Financial Schedule The financial statement schedule required to be filed as a part of this Annual Report on Form 10 K is shown in the “Index to the Consolidated Financial Statements and Financial Statement Schedules” filed herewith. 3. Exhibits A list of the exhibits required by Item 601 of Regulation S K to be filed as a part of this Annual Report on Form 10-K is shown on the “Exhibit Index” filed herewith. ITEM 16. FORM 10-K SUMMARY None. 63 SUN COMMUNITIES, INC. EXHIBIT INDEX Exhibit Number Description Method of Filing 3.1 Sun Communities, Inc. Articles of Restatement 3.2 Third Amended and Restated Bylaws 4.1 4.2 Registration Rights Agreement dated February 8, 2013 among Sun Communities, Inc., and the holders of Series A-3 Preferred Units that are parties thereto Form of Registration Rights Agreement between Sun Communities, Inc. and Carefree Communities Intermediate Holdings, L.L.C. 4.3 Form of certificate evidencing common stock 4.4 Form of certificate evidencing 6.50% Series A-4 Cumulative Convertible Preferred Stock Master Credit Facility Agreement, dated June 3, 2016, by and among Sun Apple Creek LLC; Sun Bell Crossing LLC; Sun Boulder Ridge LLC; Aspen-Brentwood Project, LLC; Sun Cave Creek LLC; Sun Countryside Lake Lanier LLC; Sun Cutler Estates LLC; Aspen-Grand Project, LLC; Sun Hamlin LLC; Sun Hawaiian Holly LLC; Holiday West Village Mobile Home Park, LLC; Sun Meadowbrook FL LLC; Sun Oakcrest LLC, Sun Pine Ridge LLC; Sun Scio Farms LLC; Sun Villa MHC LLC; Waverly Shores Village Mobile Home Park, LLC, as Borrowers, and Regions Bank, as Lender Master Loan Agreement dated June 9, 2016, by and among Carefree Communities CA LLC, NHC-CA101, LLC and The Northwestern Mutual Life Insurance Company Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 10-K filed on February 22, 2018 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on May 12, 2017 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed February 12, 2013 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed March 22, 2016 Incorporated by reference to Sun Communities, Inc.’s Registration Statement on Form 8-A filed November 9, 2012 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed December 2, 2014 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Promissory Note dated June 9, 2016 in the original principal amount of $162.0 million executed by Carefree Communities CA LLC and NHC-CA101, LLC in favor of The Northwestern Mutual Life Insurance Company Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Master Loan Agreement dated June 9, 2016, by and between Carefree Communities CA LLC and The Northwestern Mutual Life Insurance Company Promissory Note dated June 9, 2016 in the original principal amount of $163.0 million executed by Carefree Communities CA LLC in favor of The Northwestern Mutual Life Insurance Company Amended and Restated Mortgage and Security Agreement dated June 9, 2016, by and between SNF Property LLC and The Northwestern Mutual Life Insurance Company Amended and Restated Promissory Note dated June 9, 2016 in the original principal amount of $80.0 million executed by SNF Property LLC in favor of The Northwestern Mutual Life Insurance Company Lease, dated November 1, 2002, by and between Sun Communities Operating Limited Partnership as Tenant and American Center LLC as Landlord Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 9, 2016 Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10-K for the year ended December 31, December 31, 2002, as amended Sixth Lease Modification dated June 26, 2018 by and between Sun Communities Operating Limited Partnership as Tenant and American Center LLC as Landlord Filed herewith 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 Fourth Amended and Restated Agreement of Limited Partnership of Sun Communities Operating Limited Partnership, dated January 31, 2019. 10.11 First Amended and Restated 2004 Non-Employee Director Option Plan# 10.12 First Amendment to First Amended and Restated 2004 Non-Employee Director Option Plan# 10.13 Sun Communities, Inc. 2015 Equity Incentive Plan# 10.14 Form of Stock Option Agreement between Sun Communities, Inc. and certain directors, officers and other individuals# Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed February 5, 2019 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 25, 2012 Incorporate by reference to Exhibit A to Sun Communities, Inc.’s Definitive Proxy Statement filed on March 29, 2018 Incorporated by reference to Sun Communities, Inc.’s Proxy Statement dated April 29, 2015 for the Annual meeting of Stockholders held July 20, 2015 Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33 69340 64 SUN COMMUNITIES, INC. 10.15 Form of Non-Employee Director Stock Option Agreement between Sun Communities, Inc. and certain directors# 10.16 Form of Restricted Stock Award Agreement# 10.17 First Amendment to Restricted Stock Award Agreement between Sun Communities, Inc. and Gary A. Shiffman dated July 15, 2014# 10.18 10.19 Employment Agreement dated June 20, 2013 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Gary A. Shiffman# First Amendment to Employment Agreement among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Gary A. Shiffman dated July 15, 2014# 10.20 Second Amendment to Employment Agreement among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Gary A. Shiffman dated March 8, 2017# 10.21 10.22 Employment Agreement dated May 19, 2015 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and John B. McLaren# First Amendment to Employment Agreement among Sun Communities, Inc. Sun Communities Operating Limited Partnership, and John B. McLaren dated March 8, 2017# 10.23 Employment Agreement July 16, 2015 among Sun Communities, Inc., Sun Communities Operating Limited Partnership and Karen J. Dearing# 10.24 First Amendment Employment Agreement among Sun Communities, Inc., Sun Communities Operating Partnership, and Karen J. Dearing dated March 8, 2017# 10.25 Sun Communities, Inc. Executive Compensation “Clawback” Policy# At the Market Offering Sales Agreement, dated July 28, 2017, among Sun Communities, Inc., Sun Communities Operating Limited Partnership, BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc., RBC Capital Markets, LLC, BTIG, LLC, Jefferies LLC, Credit Suisse Securities (USA) LLC and Samuel A. Ramirez & Company, Inc. Incorporated by reference to Sun Communities, Inc.’s Registration Statement No. 33 80972 Incorporated by reference to Sun Communities, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed June 24, 2013 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed May 20, 2015 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 17, 2015 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on March 8, 2017 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed July 15, 2014 Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on July 28, 2017. Amendment dated April 26, 2018 to the At the Market Offering Sales Agreement dated July 28, 2017, among Sun Communities, Inc., Sun Communities Operating Limited Partnership, BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc., RBC Capital Markets, LLC, BTIG, LLC, Jefferies LLC, Credit Suisse Securities (USA) LLC and Samuel A. Ramirez & Company, Inc. Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on April 26, 2018. Second Amended and Restated Credit Agreement, dated April 25, 2017 with Citibank, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and BMO Capital Markets, as Joint Lead Arrangers, and Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Joint Bookrunners, and Bank of America, N.A. and Bank of Montreal, as Co-Syndication Agents and Fifth Third Bank, an Ohio Banking Corporation, Regions Bank and RBC Capital Markets as Co-Documentation Agents and the other lenders, PNC Bank, National Association, U.S. Bank National Association, Credit Suisse, Associated Bank, N.A. and Flagstar Bank, FSB. Incorporated by reference to Sun Communities, Inc.’s Current Report on Form 8-K filed on April 27, 2017 List of Subsidiaries of Sun Communities, Inc. Consent of Grant Thornton LLP Filed herewith Filed herewith Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished herewith 10.26 10.27 10.28 21.1 23.1 31.1 31.2 32.1 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document # Management contract or compensatory plan or arrangement. 65 The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith SUN COMMUNITIES, INC. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 21, 2019 By /s/ Gary A. Shiffman Gary A. Shiffman Chief Executive Officer SUN COMMUNITIES, INC. (Registrant) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ /s/ /s/ /s/ /s/ /s/ /s/ /s/ Name Gary A. Shiffman Gary A. Shiffman Karen J. Dearing Karen J. Dearing Meghan G. Baivier Meghan G. Baivier Stephanie W. Bergeron Stephanie W. Bergeron Brian M. Hermelin Brian M. Hermelin Ronald A. Klein Ronald A. Klein Clunet R. Lewis Clunet R. Lewis Arthur A. Weiss Arthur A. Weiss Capacity Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) Date February 21, 2019 February 21, 2019 February 21, 2019 February 21, 2019 February 21, 2019 February 21, 2019 February 21, 2019 February 21, 2019 Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer) Director Director Director Director Director Director 66 SUN COMMUNITIES, INC. INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Reports of Independent Registered Public Accounting Firm Financial Statements: Consolidated Balance Sheets as of December 31, 2018 and 2017 Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017, and 2016 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017, and 2016 Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016 Notes to Consolidated Financial Statements Real Estate and Accumulated Depreciation, Schedule III Page F-2 F-4 F-5 F-6 F-7 F-8 F-10 F-45 F - 1 SUN COMMUNITIES, INC. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Sun Communities, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Sun Communities, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes, and the financial statement schedule, Real Estate and Accumulated Depreciation, Schedule III (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 21, 2019 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2003. Southfield, Michigan February 21, 2019 F - 2 SUN COMMUNITIES, INC. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Sun Communities, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Sun Communities, Inc. (a Maryland corporation) and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2018, and our report dated February 21, 2019 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Southfield, Michigan February 21, 2019 F - 3 SUN COMMUNITIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) ASSETS Land Land improvements and buildings Rental homes and improvements Furniture, fixtures and equipment Investment property Accumulated depreciation As of December 31, 2018 2017 $ 1,201,945 $ 5,586,250 571,661 201,090 7,560,946 (1,442,630) 1,107,838 5,102,014 528,074 144,953 6,882,879 (1,237,525) Investment property, net (including $308,171 and $50,193 for consolidated variable interest entities at December 31, 2018 and December 31, 2017; see Note 8) 6,118,316 5,645,354 Cash and cash equivalents Inventory of manufactured homes Notes and other receivables, net Collateralized receivables, net Other assets, net (including $19,809 and $1,659 for consolidated variable interest entities at December 31, 2018 and December 31, 2017; see Note 8) TOTAL ASSETS LIABILITIES Mortgage loans payable (including $44,172 and $41,970 for consolidated variable interest entities at December 31, 2018 and December 31, 2017; see Note 8) Secured borrowings on collateralized receivables Preferred Equity - Sun NG RV Resorts LLC - mandatorily redeemable (fully attributable to consolidated variable interest entities at December 31, 2018; See Note 8) $ $ Preferred OP units - mandatorily redeemable Lines of credit Distributions payable Advanced reservation deposits and rent Other liabilities (including $6,914 and $1,468 for consolidated variable interest entities at December 31, 2018 and December 31, 2017; see Note 8) TOTAL LIABILITIES Commitments and contingencies (see Note 18) Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 1,063 shares at December 31, 2018 and 1,085 shares at December 31, 2017 Series A-4 preferred OP units Equity Interests - NG Sun LLC (fully attributable to consolidated variable interest entities at December 31, 2018; See Note 8) STOCKHOLDERS' EQUITY Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 86,357 shares at December 31, 2018 and 79,679 shares at December 31, 2017 Additional paid-in capital Accumulated other comprehensive (loss) income Distributions in excess of accumulated earnings Total Sun Communities, Inc. stockholders' equity Noncontrolling interests Common and preferred OP units Consolidated variable interest entities Total noncontrolling interests TOTAL STOCKHOLDERS' EQUITY 50,311 49,199 160,077 106,924 225,199 6,710,026 $ 2,815,957 $ 107,731 35,277 37,338 128,000 63,249 133,698 157,862 3,479,112 31,739 9,877 21,976 864 4,398,949 (4,504) (1,288,486) 3,106,823 53,354 7,145 60,499 3,167,322 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,710,026 $ See accompanying Notes to Consolidated Financial Statements. 10,127 30,430 163,496 128,246 134,304 6,111,957 2,867,356 129,182 — 41,443 41,257 55,225 132,205 138,536 3,405,204 32,414 10,652 — 797 3,758,533 1,102 (1,162,001) 2,598,431 60,971 4,285 65,256 2,663,687 6,111,957 F - 4 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2018 2017 2016 $ 825,973 $ 742,228 $ REVENUES Income from real property Revenue from home sales Rental home revenue Ancillary revenue Interest Brokerage commissions and other revenues, net Total Revenues COSTS AND EXPENSES Property operating and maintenance Real estate taxes Cost of home sales Rental home operating and maintenance Ancillary expenses Home selling expenses General and administrative Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest Interest on mandatorily redeemable preferred OP units / equity Total Expenses Income Before Other Items Remeasurement of marketable securities Other (expense) / income, net Income from nonconsolidated affiliates Current tax expense Deferred tax benefit Net Income Less: Preferred return to preferred OP units / equity Less: Amounts attributable to noncontrolling interests Net Income Attributable to Sun Communities, Inc. Less: Preferred stock distribution 210,278 173,274 166,031 53,657 54,107 20,853 6,204 1,126,825 236,097 56,555 123,333 23,099 37,623 15,722 81,438 472 92 287,262 2,657 129,089 3,694 997,133 129,692 (3,639) (6,453) 646 (595) 507 120,158 (4,486) (8,443) 107,229 (1,736) 127,408 50,549 37,511 21,180 3,694 982,570 52,288 95,114 22,114 27,436 12,457 74,232 9,801 8,352 261,536 6,019 127,128 3,114 909,869 72,701 — 8,982 — (446) 582 81,819 (4,581) (5,055) 72,183 (7,162) 620,917 110,507 47,780 33,424 18,113 3,037 833,778 44,306 80,420 24,361 23,783 9,744 63,662 31,914 1,172 221,770 1,127 119,163 3,152 797,848 35,930 — (4,676) 500 (683) 400 31,471 (5,006) (150) 26,315 (8,946) 17,369 65,856 66,321 0.27 0.26 Net Income Attributable to Sun Communities, Inc. Common Stockholders $ 105,493 $ 65,021 $ Weighted average common shares outstanding: Basic Diluted Earnings per share (Refer to Note 14): Basic Diluted 81,387 82,040 76,084 76,711 $ $ 1.29 1.29 $ $ 0.85 0.85 $ $ See accompanying Notes to Consolidated Financial Statements. F - 5 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Net Income Foreign currency translation (loss) / gain Total Comprehensive Income Less: Comprehensive income / (loss) attributable to noncontrolling interests Comprehensive Income Attributable to Sun Communities, Inc. Year Ended December 31, 2018 2017 2016 120,158 $ 81,819 $ (5,878) 114,280 8,171 4,527 86,346 5,299 106,109 $ 81,047 $ 31,471 (3,401) 28,070 (70) 28,140 $ $ See accompanying Notes to Consolidated Financial Statements. F - 6 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Stockholders’ Equity Temporary Equity 7.125% Series A Cumulative Redeemable Preferred Stock Common Stock Additional Paid-In Capital Distributions in Excess of Accumulated Earnings Accumulated Other Comprehensive Income / (Loss) Non-controlling Interests Total Stockholders’ Equity $ 584 $ 2,319,314 $ (864,122) $ — $ 80,771 $ 1,536,581 — 149 Balance at December 31, 2015 $ 82,797 $ Issuance of common stock from exercise of options, net Issuance, conversion of OP units and associated costs of common stock, net Conversion of Series A-4 preferred stock Share-based compensation - amortization and forfeitures Foreign currency translation loss Net income Distributions — (3,248) (11,503) — — 90 (1,192) Balance at December 31, 2016 $ 66,944 $ Issuance of common stock and common OP units, net Conversion of OP units Redemption of Series A-4 preferred stock Conversion of Series A-4 preferred stock Redemption of Series A-4 preferred OP units Redemption of Series A Cumulative Convertible Preferred Stock Share-based compensation - amortization and forfeitures Acquisition of noncontrolling interests Foreign currency translation gain Net income Distributions — (259) (13,093) (4,720) (5,166) — — — — 205 (845) 34 — — — — — — — 34 — — — — — (34) — — — — — — 144 — 4 — — — 149 981,174 11,503 9,301 — — — — — — 252 — 31,321 (190,866) — — — — (3,181) — — (2,687) — — (220) 60 (11,308) $ 732 $ 3,321,441 $ (1,023,415) $ (3,181) $ 66,616 $ 63 1 — 1 — — — — — — — 514,024 3,556 (3,867) 4,719 (2,571) (84,966) 12,398 (6,201) — — — — — — — — — 297 — — 76,765 (215,648) — — — — — — — — 4,283 — — 2,001 (3,298) — — — — — 6,101 244 4,849 (11,257) Balance at December 31, 2017 $ 43,066 $ — $ 797 $ 3,758,533 $ (1,162,001) $ 1,102 $ 65,256 $ Issuance of common stock and common OP units, net Conversion of OP units Conversion of Series A-4 preferred stock Share-based compensation - amortization and forfeitures Equity Interest - NG Sun LLC Foreign currency translation Net income Distributions — (342) (675) — 21,976 — 241 (674) — — — — — — — — 66 1 — — — — — — 623,474 1,514 675 14,753 — — — — — — — 313 — — 111,715 (238,513) — — — — — (5,606) — — — (1,173) — — — (272) 8,202 (11,514) 978,631 11,503 9,557 (3,401) 31,381 (202,174) 2,362,227 516,088 259 (3,867) 4,720 (2,571) (85,000) 12,695 (100) 4,527 81,614 (226,905) 2,663,687 623,540 342 675 15,066 — (5,878) 119,917 (250,027) Balance at December 31, 2018 $ 63,592 $ — $ 864 $ 4,398,949 $ (1,288,486) $ (4,504) $ 60,499 $ 3,167,322 See accompanying Notes to Consolidated Financial Statements. F - 7 SUN COMMUNITIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating activities: Year Ended December 31, 2018 2017 2016 $ 120,158 $ 81,819 $ 31,471 Gain on disposition of assets Gain on acquisition of property Unrealized foreign currency translation loss / (gain) Remeasurement of marketable securities Contingent liability remeasurement (gain) / loss Asset impairment charges Share-based compensation Depreciation and amortization Deferred tax benefit Amortization of below market lease Amortization of debt premium Amortization of deferred financing costs Amortization of ground lease intangibles Loss on extinguishment of debt Income from nonconsolidated affiliates Change in notes receivable from financed sales of inventory homes, net of repayments Change in inventory, other assets and other receivables, net Change in other liabilities NET CASH PROVIDED BY OPERATING ACTIVITIES INVESTING ACTIVITIES: Investment in properties Acquisitions of properties, net of cash acquired Proceeds from nonconsolidated affiliate transactions Proceeds from dispositions of assets and depreciated homes, net Proceeds from disposition of properties Issuance of notes and other receivables Repayments of notes and other receivables Investments in nonconsolidated affiliates NET CASH USED FOR INVESTING ACTIVITIES FINANCING ACTIVITIES: Issuance of common stock, OP units, and preferred OP units, net Redemption of Series B-3 preferred OP units Borrowings on lines of credit Payments on lines of credit Proceeds from issuance of other debt Payments on other debt Prepayment penalty on debt Redemption of Series A-4 preferred stock and OP units Redemption of Series A cumulative convertible preferred stock Distributions to stockholders, OP unit holders, and preferred OP unit holders Payments for deferred financing costs NET CASH PROVIDED BY FINANCING ACTIVITIES Effect of exchange rate changes on cash, cash equivalents and restricted cash Net change in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, beginning of period (9,376) — 8,234 3,639 (2,336) — 15,066 274,432 (507) (7,399) (7,821) 3,867 1,638 2,024 — (2,299) (40,304) 4,098 363,114 (389,399) (320,268) — 55,855 — (216) 4,312 (84,027) (733,743) 623,540 (4,105) 1,542,677 (1,456,486) 250,000 (298,754) (2,024) — — (242,813) (2,130) 409,905 (523) 38,753 23,509 (9,338) — (6,146) — (3,035) 742 12,695 256,193 (582) (7,402) (9,548) 2,910 1,914 6,019 — (26,193) (33,031) (9,034) 257,983 (11,224) (510) 5,005 — 181 — 9,557 218,669 (400) (6,570) (10,693) 2,160 600 1,127 (500) (20,933) 30,880 (7,365) 241,455 (288,537) (120,377) (223,429) (1,487,593) — 8,575 — (3,918) 2,615 — 500 4,709 88,696 (10,633) 13,238 — (401,642) (1,614,512) 487,677 (4,460) 661,000 (719,536) 185,153 (124,427) (6,019) (24,698) (85,000) (224,483) (3,650) 141,557 298 (1,804) 25,313 750,534 — 580,754 (505,409) 964,252 (230,785) (1,127) — — (193,740) (25,509) 1,338,970 (73) (34,160) 59,473 25,313 Cash, cash equivalents and restricted cash, end of period (See Note 1 and 17) $ 62,262 $ 23,509 $ F - 8 SUPPLEMENTAL INFORMATION: Cash paid for interest (net of capitalized interest of $4,328, $2,755 and $1,595, respectively) Cash paid for interest on mandatorily redeemable debt Cash paid (refunds) for income taxes Noncash investing and financing activities: Reduction in secured borrowing balance Change in distributions declared and outstanding Conversion of common and preferred OP units Conversion of Series A-4 preferred stock Capital lease Noncash investing and financing activities at the date of acquisition: Acquisitions - Common stock and OP units issued Acquisitions - Equity Interests - NG Sun LLC (see Note 8) Acquisitions - Preferred Equity - Sun NG RV Resorts LLC (see Note 8) Acquisitions - debt assumed Acquisitions - contingent consideration liability Year Ended December 31, 2018 2017 2016 $ $ $ $ $ $ $ $ $ $ $ $ $ 126,153 2,551 461 21,451 7,889 1,515 675 $ $ $ $ $ $ $ — $ 124,046 3,114 (194) 23,449 3,267 3,556 4,720 4,114 — $ 28,410 $ $ $ $ $ $ $ $ $ 21,976 35,277 3,120 $ $ $ — $ — $ — $ 4,592 $ — $ 121,480 3,152 452 19,734 9,626 5,933 11,503 — 225,000 — — — 9,830 See accompanying Notes to Consolidated Financial Statements. F - 9 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Significant Accounting Policies Business Sun Communities, Inc., a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”), and Sun Home Services, Inc., a Michigan corporation (“SHS”) are referred to herein as the “Company,” “us,” “we,” and “our”. We are a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). We own, operate, or have an interest in a portfolio, and develop manufactured housing (“MH”) and recreational vehicle (“RV”) communities throughout the United States (“U.S.”). As of December 31, 2018, we owned, operated or had an interest in a portfolio of 371 developed properties located in 31 states and Ontario, Canada (collectively the “Properties”), including 230 MH communities, 110 RV communities, and 31 communities containing both MH and RV sites. As of December 31, 2018, the Properties contained an aggregate of 128,454 developed sites comprised of 84,428 developed MH sites, 24,535 annual RV sites, and 19,491 transient RV sites. There are approximately 11,300 additional MH and RV sites suitable for development. Principles of Consolidation We consolidate our majority-owned subsidiaries in which we have the ability to control the operations of our subsidiaries and all variable interest entities with respect to which we are the primary beneficiary. We also consolidate entities in which we have a direct or indirect controlling or voting interest. All significant inter-company transactions have been eliminated. Any subsidiaries in which we have an ownership percentage equal to or greater than 50%, but less than 100%, or considered a VIE, represent subsidiaries with a noncontrolling interest. The noncontrolling interests in our subsidiaries are allocated their proportionate share of the subsidiaries’ financial results. This allocation is recorded as the noncontrolling interest in our Consolidated Financial Statements. Certain prior period amounts have been reclassified on our Consolidated Financial Statements to conform with current year presentation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions related to the reported amounts included in our Consolidated Financial Statements and accompanying footnotes thereto. Actual results could differ from those estimates. Investment Property Investment property is recorded at cost, less accumulated depreciation. We review the carrying value of long-lived assets to be held and used for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. Our primary indicator for potential impairment is based on NOI trends period over period. Circumstances that may prompt a test of recoverability may include a significant decrease in the anticipated market price, an adverse change to the extent or manner in which an asset may be used or in its physical condition or other such events that may significantly change the value of the long- lived asset. An impairment loss is recognized when a long-lived asset’s carrying value is not recoverable and exceeds estimated fair value. We estimate the fair value of our long-lived assets based on discounted future cash flows and any potential disposition proceeds for a given asset. Forecasting cash flows requires management to make estimates and assumptions about such variables as the estimated holding period, rental rates, occupancy, development, and operating expenses during the holding period, as well as disposition proceeds. Management uses its best judgment when developing these estimates and assumptions, but the development of the projected future cash flows is based on subjective variables. Future events could occur which would cause us to conclude that impairment indicators exist, and significant adverse changes in national, regional, or local market conditions or trends may cause us to change the estimates and assumptions used in our impairment analysis. The results of an impairment analysis could be material to our financial statements. We periodically receive offers from interested parties to purchase certain of our properties. These offers may be the result of an active program initiated by us to sell the property, or from an unsolicited offer to purchase the property. The typical sale process involves a significant negotiation and due diligence period between us and the potential purchaser. As the intent of this process is to determine if there are items that would cause the purchaser to be unwilling to purchase or we would be unwilling to sell, it is not unusual for such potential offers of sale/purchase to be withdrawn as such issues arise. We classify assets as “held for sale” F - 10 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS when it is probable, in our opinion, that a sale transaction will be completed within one year. This typically occurs when all significant contingencies surrounding the closing have been resolved, which often corresponds with the closing date. We allocate the purchase price of properties to net tangible and identified intangible assets acquired based on their fair values. In making estimates of fair values for purposes of allocating purchase price, we utilize an independent third-party to value the net tangible and identified intangible assets in connection with the acquisition of the respective property. We provide historical and pro forma financial information obtained about each property, as well as any other information needed in order for the third-party to ascertain the fair value of the tangible and intangible assets (including in-place leases) acquired. On January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” Upon adoption of this standard, substantially all of our property acquisitions are accounted for as asset acquisitions. Refer to Note 17, “Recent Accounting Pronouncements,” for additional information regarding adoption of this ASU. Capitalized Costs We capitalize certain costs incurred in connection with the development, redevelopment, capital enhancement and leasing of our properties. Management is required to use professional judgment in determining whether such costs meet the criteria for immediate expense or capitalization. The amounts are dependent on the volume and timing of such activities and the costs associated with such activities. Maintenance, repairs and minor improvements to properties are expensed when incurred. Renovations and improvements to properties are capitalized and depreciated over their estimated useful lives and real estate project costs related to the development of new community or expansion sites are capitalized until the property is substantially complete and available for occupancy. Costs incurred to initially renovate pre-owned and repossessed homes that we acquire for our Rental Program are capitalized and the majority of costs incurred to refurbish the homes at turnover and repair the homes while occupied are expensed, unless they extend the life of the home. Certain expenditures to dealers and residents related to obtaining lessees in our communities are capitalized and amortized based on the anticipated term of occupancy of a resident. Costs associated with implementing our computer systems are capitalized and amortized over the estimated useful lives of the related software and hardware. Costs incurred to obtain new debt financing are capitalized and amortized over the terms of the related loan agreement using the straight-line method (which approximates the effective interest method). Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash and cash equivalents. The maximum amount of credit risk arising from cash deposits in excess of federally insured amounts was approximately $49.5 million and $17.7 million as of December 31, 2018 and 2017, respectively. Marketable Securities Marketable securities are recorded at fair value with changes in fair value recorded in Remeasurement of marketable securities within the Consolidated Statement of Operations. We hold a less than 10 percent ownership in Ingenia. The value of marketable securities as of December 31, 2018 was $49.0 million and is included within Other assets, net on the Consolidated Balance Sheet. Restricted Cash Restricted cash consists of amounts held in deposit for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. At December 31, 2018 and 2017, $12.0 million and $13.4 million of restricted cash, respectively, was included as a component of Other assets, net on the Consolidated Balance Sheets. Inventory Inventory of manufactured homes is stated at lower of specific cost or market based on the specific identification method. Investments in Nonconsolidated Affiliates We apply the equity method of accounting to entities in which we do not have a direct or indirect controlling interest or for variable interest entities where we are not considered the primary beneficiary, but can exercise influence over the entity with respect to its operations and major decisions. The cost method is applied when (i) the investment is minimal (typically less than 5.0%) and (ii) our investment is passive. Our exposure to losses associated with unconsolidated joint ventures is primarily limited to the F - 11 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS carrying value of these investments. Accordingly, distributions from a joint venture in excess of our carrying value are recognized in earnings. We review the carrying value of our investments in nonconsolidated affiliates for other than temporary impairment whenever events or changes in circumstances indicate a possible impairment. Financial condition, operational performance, and other economic trends are among the factors we consider when we evaluate the existence of impairment indicators. Refer to Note 7, “Investments in Nonconsolidated Affiliates,” for additional information. Notes and Other Receivables Notes receivable includes both installment loans for manufactured homes purchased by the Company as well as transferred loans that have not met the requirements for sale accounting which are presented herein as collateralized receivables. The notes are collateralized by the underlying manufactured home sold. For purposes of accounting policy, all notes receivable are considered one homogeneous segment, as the notes are typically underwritten using the same requirements and terms. Notes receivable are reported at their outstanding unpaid principal balance adjusted for an allowance for loan loss. Interest income is accrued based upon the unpaid principal balance of the loans. Past due status of our notes receivable is determined based upon the contractual terms of the note. When a note receivable becomes 60 days delinquent, we stop accruing interest on the note receivable. The interest on nonaccrual loans is accounted for on the cash basis until qualifying for return to accrual. Loans are returned to accrual when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. The ability to collect our notes receivable is measured based on current and historical information and events. We consider numerous factors including: length of delinquency, estimated costs to lease or sell, and repossession history. Our experience supports a high recovery rate for notes receivable; however, there is some degree of uncertainty about the recoverability of our investment in these notes receivable. We are generally able to recover our recorded investment in uncollectible notes receivable by repossessing the homes on the notes retained by us and repurchasing the homes on the collateralized receivables, and subsequently selling or leasing these homes to potential residents in our communities. We have established a loan loss reserve based on our estimated unrecoverable costs associated with repossessed/repurchased homes. We estimate our unrecoverable costs to be the repurchase price of the home collateralizing the note receivable plus repair and remarketing costs in excess of the estimated selling price of the home being repossessed. A historical average of this excess cost is calculated based on prior repossessions/repurchases and is applied to our estimated annual future repossessions to create the allowance for both installment and collateralized notes receivable. We evaluate the collectability of a loan based on our ability to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. We generally see that if the obligor is delinquent on the loan they are also delinquent on site rent. If the scheduled payment is delinquent beyond the grace period required by law or by the loan agreement, notice is given to start the collection process. A specific allowance is estimated on the past due loans based on historical delinquency data and current delinquency levels. Credit quality is evaluated at the inception of the receivable. Factors that are considered in order to determine the credit quality of the applicant include, but are not limited to: rental payment history; home debt to income ratio; loan value to the collateralized asset; total debt to income ratio; length of employment; previous landlord references; and FICO scores. Other receivables are generally comprised of amounts due from residents for rent and related charges, home sale proceeds receivable from sales near year end and various other miscellaneous receivables. Accounts receivable from residents are typically due within 30 days and stated at amounts due from residents net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We evaluate the recoverability of our receivables whenever events occur or there are changes in circumstances such that management believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan and lease agreements. Receivables related to community rents are reserved when we believe that collection is less than probable, which is generally after a resident balance reaches 60 to 90 days past due. Intangible Assets The Company amortizes identified intangible assets that are determined to have finite lives over the period the assets are expected to contribute directly or indirectly to the future cash flows of the property or business. The carrying amounts of the identified intangible assets are included in Other assets, net on our Consolidated Balance Sheets. Refer to Note 6, “Intangible Assets,” for additional information. F - 12 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred Taxes We are subject to certain state taxes that are considered to be income taxes and have certain subsidiaries that are taxed as regular corporations for U.S. (i.e., federal, state, local, etc.) and non-U.S. income tax purposes. Deferred tax assets or liabilities are recognized for temporary differences between the tax basis of assets and liabilities and their carrying amounts in the financial statements and net operating loss carryforwards in certain subsidiaries, including those domiciled in foreign jurisdictions, which may be realized in future periods if the respective subsidiary generates sufficient taxable income. Deferred tax assets and liabilities are measured using currently enacted tax rates. A valuation allowance is established if, based on the available evidence, it is considered more likely than not that some portion or all of the deferred tax assets will not be realized. Refer to Note 13, “Income Taxes,” for additional information. Deferred Financing Costs Deferred financing costs include fees and costs incurred to obtain long-term financing. The costs are amortized over the terms of the respective loans. Unamortized deferred financing costs are written off when debt is retired before the maturity date. Upon amendment of the line of credit or refinancing of mortgage debt, unamortized deferred financing costs are accounted for in accordance with FASB Accounting Standards Codification (“ASC”) 470-50-40, “Modifications and Extinguishments.” Share-Based Compensation Share-based compensation cost for service vesting restricted stock awards is measured based on the closing share price of our common stock on the date of grant. We measure the fair value of awards with performance conditions based on an estimate of shares expected to vest using the closing price of our common stock as of the grant date. If it is not probable that the performance conditions will be satisfied, we do not recognize compensation expense. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. We recognize compensation cost ratably over each tranche of shares based on the fair value estimated by the model. Share-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Binomial (lattice) option-pricing model. The Binomial (lattice) option-pricing model incorporates various assumptions including expected volatility, expected life, dividend yield, and interest rates. Refer to Note 11, “Share-Based Compensation” for additional information. Fair Value of Financial Instruments Our financial instruments consist of cash, cash equivalents and restricted cash, accounts and notes receivable, marketable securities, accounts payable, debt, and contingent consideration liability. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures, pursuant to FASB ASC 820, “Fair Value Measurements and Disclosures.” Refer to Note 16, “Fair Value of Financial Instruments,” for additional information regarding the estimates and assumptions used to estimate the fair value of each financial instrument class. Revenue Recognition Rental income attributable to site and home leases is recorded on a straight-line basis when earned from tenants. The majority of our leases entered into by tenants are generally for one year terms, but may range from month-to-month to two years and are renewable by mutual agreement from us and the resident, or in some cases, as provided by state statute. A small portion of tenant leases are for greater than two years. Revenue from the sale of manufactured homes is recognized upon transfer of title at the closing of the sales transaction. Interest income on notes receivable is recorded on a level yield basis over the life of the notes. We report real estate taxes collected from residents and remitted to taxing authorities in revenue. On January 1, 2018, we adopted ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)” and the related updates subsequently issued by the FASB. The adoption of ASU 2014-09 did not result in any changes to our accounting policies for revenue recognition. Refer to Note 2, “Revenue Recognition,” for additional information. Advertising Costs Advertising costs are expensed as incurred. As of December 31, 2018, 2017 and 2016, we had advertising costs of $6.2 million, $5.9 million and $4.2 million, respectively. F - 13 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Depreciation and Amortization Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets. Useful lives are thirty years for land improvements and buildings, ten years for rental homes, seven years for furniture, fixtures and equipment, four years for computer hardware and software, and two years to seventy-five years for intangible assets. Foreign Currency The assets and liabilities of our Australian and Canadian operations, where the functional currency is the Australian dollar and Canadian dollar, are translated into U.S. dollars using the exchange rate in effect as of the balance sheet date. Income statement amounts are translated at the average exchange rate prevailing during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss). Foreign currency exchange gains and losses arising from fluctuations in currency exchange rates on transactions and the effects of remeasurement of monetary balances denominated in currencies other than the functional currency are recorded in earnings. For the year ended December 31, 2018, we recorded a foreign currency translation loss of $8.4 million within Other income / (expense), net on our Consolidated Statements of Operations, as compared to a foreign currency translation gain of $5.9 million, for the year ended December 31, 2017 and $5.0 million foreign currency translation loss for the year ended December 31, 2016. F - 14 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Revenue Disaggregation of Revenue The following table disaggregates our revenue by major source (in thousands): Year Ended December 31, 2018 Year Ended December 31, 2017 Year Ended December 31, 2016 Real Property Operations Home Sales and Rentals Consolidated Real Property Operations Home Sales and Rentals Consolidated Real Property Operations Home Sales and Rentals Consolidated REVENUE Income from real property Revenue from home sales Rental home revenue Ancillary revenues Interest Brokerage commissions and other revenues, net $ 825,973 $ — $ 825,973 $ 742,228 $ — $ 742,228 $ 620,917 $ — $ 620,917 — 166,031 166,031 — 127,408 127,408 — 110,507 110,507 — 53,657 53,657 — 50,549 50,549 — 47,780 47,780 54,107 20,853 6,204 — — — 54,107 20,853 37,511 21,181 — (1) 37,511 21,180 33,424 18,113 6,204 3,694 — 3,694 3,037 — — — 33,424 18,113 3,037 Total revenue $ 907,137 $219,688 $ 1,126,825 $ 804,614 $177,956 $ 982,570 $ 675,491 $158,287 $ 833,778 Revenue Recognition Policies and Performance Obligations On January 1, 2018, we adopted FASB Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers” and the other related ASUs and amendments to the codification (collectively “ASC 606”). The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. A five-step transactional analysis is required to determine how and when to recognize revenue. ASC 606 applies to all contracts with customers, except those that are within the scope of other topics in the FASB accounting standards codification. As a real estate owner and operator, the majority of our revenue is derived from site and home leases that are accounted for pursuant to ASC 840 “Leases.” For transactions in the scope of ASC 606, we recognize revenue when control of goods or services transfers to the customer, in the amount that we expect to receive for the transfer of goods or provision of services. The adoption of ASC 606 did not result in any change to our accounting policies for revenue recognition. Accordingly, retrospective application to prior periods or a cumulative catch-up adjustment was unnecessary. Income from real property - Residents in our communities lease the site on which their home is located, and either own or lease their home. Lease revenues for sites and homes fall under the scope of ASC 840, and are accounted for as operating leases with straight-line recognition. Resident leases are generally for one-year or month-to-month terms, and are renewable by mutual agreement from us and the resident, or in some cases, as provided by jurisdictional statute. Non-lease components of our site lease contracts, which are primarily provision of utility services, are accounted for with the site lease as a single lease under ASC 840. Additionally, we include collections of real estate taxes from residents within Income from real property. Revenue from home sales - Our taxable REIT subsidiary, SHS, sells manufactured homes and RV park models to current and prospective residents in our communities. Prior to adoption of ASC 606, we recognized revenue for home sales pursuant to ASC 605 “Revenue Recognition,” as manufactured homes are tangible personal property that can be located on any land parcel. Manufactured homes are not permanent fixtures or improvements to the underlying real estate, and were therefore not considered to be subject to the guidance in ASC 360-20 “Real Estate Sales” by the Company. In accordance with the core principle of ASC 606, we recognize revenue from home sales at the time of closing when control of the home transfers to the customer. After closing of the sale transaction, we have no remaining performance obligation. Rental home revenue - is comprised of rental agreements whereby we lease homes to residents in our communities. We account for these revenues under ASC 840. F - 15 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ancillary revenues - are primarily composed of proceeds from restaurant, golf, merchandise and other activities at our RV communities. Revenues are recognized at point of sale when control of the good or service transfers to the customer and our performance obligation is satisfied. Sales and other taxes that we collect concurrent with revenue-producing activities are excluded from transaction price. Interest income - is earned primarily on our notes and collateralized receivables, which includes installment loans for manufactured homes purchased by the Company from loan originators and transferred loans that previously did not meet the requirements for sale accounting. Interest income on these receivables is accrued based on the unpaid principal balances of the underlying loans on a level yield basis over the life of the loans. Interest income is not in the scope of ASC 606. Refer to notes 4, “Collateralized Receivables and Transfers of Financial Assets” and 5, “Notes and Other Receivables” for additional information. Broker commissions and other revenues, net - is primarily comprised of brokerage commissions for sales of manufactured homes, where we act as agent and arrange for a third party to transfer a manufactured home to a customer within one of our communities. Brokerage commission revenues are recognized on a net basis at closing, when the transaction is completed and our performance obligations have been fulfilled. Loan loss reserve expenses for our collateralized receivables and notes receivables are also included herein. Refer to notes 4, “Collateralized Receivables and Transfers of Financial Assets” and 5, “Notes and Other Receivables” for additional information regarding our loan loss reserves. Contract Balances As of December 31, 2018 and 2017, we had $16.1 million and $13.8 million, respectively, of receivables from contracts with customers. Receivables from contracts with customers are presented as a component of Notes and other receivables on our Consolidated Balance Sheets. These receivables represent balances owed to us for previously completed performance obligations for sales of manufactured homes. Due to the nature of our revenue from contacts with customers, we do not have material contract assets or liabilities that fall under the scope of ASC 606. 3. Real Estate Acquisitions 2018 Acquisitions In 2018 we acquired the following communities and portfolios: Community Name Type Sites Development Sites State Month Acquired Leaf Verde RV Resort Archview RV Resort & Campground Petoskey KOA RV Resort The Sands RV & Golf Resort Sun NG RV Resorts LLC (1)(2) Silver Creek RV Resort Highway West (Four Resorts) (1) Compass RV RV RV RV RV (Age Restricted) RV RV RV RV Total 376 114 210 507 2,700 264 536 175 4,882 — AZ 50 UT — MI — CA 940 Various 176 MI October August August July June June — UT & OR June — FL May 1,166 (1) Highway West and Sun NG RV Resorts LLC are comprised of 4 RV and 10 RV resorts, respectively. (2) Refer to Note 8, “Consolidated Variable Interest Entities,” Note 9, “Debt and Lines of Credit,” and Note 10, “Equity and Mezzanine Securities” in our accompanying Consolidated Financial Statements for additional information. F - 16 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the amounts of assets acquired net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2018 (in thousands): At Acquisition Date Investment in property In-place leases and other intangible assets Debt assumed Other liabilities, net Total identifiable assets acquired net of liabilities assumed Consideration Cash Preferred Equity - Sun NG Resorts Equity Interests - NG Sun LLC Leaf Verde Archview Petoskey KOA Sands Sun NG Resorts Silver Creek Highway West Compass Total $11,587 $ 14,550 $ 8,730 $13,790 $240,649 $ 7,250 $ 36,500 $ 13,930 $ 346,986 60 — — — — — 270 — — 460 16,339 (3,120) — — (11,990) — — — — — — 70 — — 17,199 (3,120) (11,990) $11,647 $ 14,550 $ 9,000 $14,250 $241,878 $ 7,250 $ 36,500 $ 14,000 $ 349,075 $11,647 $ 14,550 $ 9,000 $14,250 $184,625 $ 7,250 $ 36,500 $ 14,000 $ 291,822 — — — — — — — — 35,277 21,976 — — — — — — 35,277 21,976 Total consideration $11,647 $ 14,550 $ 9,000 $14,250 $241,878 $ 7,250 $ 36,500 $ 14,000 $ 349,075 In 2018, we acquired the following land for expansion / development: Name Ocean West Location McKinleyville, CA Water Oak Country Club Estates Lady Lake, FL Oak Crest Pecan Park RV Resort Smith Creek Crossing Apple Carr River Run Ranch Austin, TX Jacksonville, FL Granby, CO Egelston, MI Granby, CO Type MH MH MH RV MH MH MH / RV Total Expansion / Development Sites Cost (millions) Month Acquired 26 296 220 158 310 121 1,144 2,275 $ $ $ $ $ $ $ $ 0.2 December 1.9 November 4.2 October 1.3 September 0.9 September 0.2 May 5.3 May 14.0 Refer to Note 20, “Subsequent Events,” for information regarding real estate acquisition activity after December 31, 2018. The total amount of revenues and net income included in the Consolidated Statements of Operations for the year ended December 31, 2018 related to the acquisitions completed in 2018 are set forth in the following table (in thousands): Total revenues Net income Year Ended December 31, 2018 (unaudited) $ $ 41,937 6,718 The following unaudited pro forma financial information presents the results of our operations for the years ended December 31, 2018 and 2017, as if the properties acquired in 2018 had been acquired on January 1, 2017. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees, and purchase accounting. F - 17 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have actually occurred had the acquisition been consummated on January 1, 2017 (in thousands, except per-share data): Total revenues Net income attributable to Sun Communities, Inc. common stockholders Net income per share attributable to Sun Communities, Inc. common stockholders - basic Net income per share attributable to Sun Communities, Inc. common stockholders - diluted Year Ended December 31, (unaudited) 2018 2017 $ 1,136,581 $ 1,028,894 $ $ $ 103,308 1.27 1.26 $ $ $ 75,607 0.99 0.99 Transaction costs of $0.5 million, $9.8 million, and $31.9 million have been incurred for the years ended December 31, 2018, 2017, and 2016, respectively. These costs are presented as Transaction costs in our Consolidated Statements of Operations. Beginning January 1, 2018, substantially all of our property acquisitions are considered asset acquisitions, and direct acquisition related costs are capitalized as part of the purchase price. Acquisitions costs that do not meet the criteria for capitalization are expensed as incurred. Refer to Note 17, “Recent Accounting Pronouncements,” for additional information. 2017 Acquisitions In 2017, we acquired the following communities: Community Name Type Sites Development Sites State Month Acquired Colony in the Wood MH (Age Restricted) Emerald Coast Lazy J Ranch Ocean West Caliente Sands Pismo Dunes Arbor Woods Sunset Lakes 49er Village MH and RV MH (Age Restricted) MH (Age Restricted) MH (Age Restricted) RV (Age Restricted) MH RV RV Total 383 201 220 130 118 331 458 498 328 2,667 — FL 14 FL — CA 4 CA — CA — CA — MI — IL — CA 18 December November September September September July June May March The following table summarizes the amounts of assets acquired net of liabilities assumed at the acquisition date and the consideration paid for the acquisitions completed in 2017 (in thousands): F - 18 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At Acquisition Date Colony in the Wood Emerald Coast Lazy J Ranch Ocean West Caliente Sands Pismo Dunes Arbor Woods Sunset Lakes 49er Village Total Investment in property $ 31,818 $ 19,400 $13,938 $ 9,453 $ 8,640 $ 21,260 $ 15,725 $ 7,835 $ 12,890 $140,959 Notes receivable Inventory of manufactured homes In-place leases and other intangible assets Total identifiable assets acquired net of liabilities assumed Consideration Cash Equity Liabilities assumed Cash proceeds from seller Total consideration — — — — — 2 — — — 21 — — 660 100 360 220 210 660 23 465 730 — — — — 23 488 210 110 3,260 $ 32,478 $ 19,500 $14,300 $ 9,673 $ 8,871 $ 21,920 $ 16,943 $ 8,045 $ 13,000 $144,730 $ 32,478 $ 19,500 $14,300 $ 5,081 $ 8,871 $ — $ 14,943 $ 8,045 $ 13,000 $116,218 — — — — — — — 4,592 — 26,410 2,000 — 510 — — — — 28,410 — 5,102 — — (5,000) $ 32,478 $ 19,500 $14,300 $ 9,673 $ 8,871 $ 21,920 $ 16,943 $ 8,045 $ 13,000 $144,730 — (5,000) — — — — — In 2017, we acquired the following land for expansion: Development Name Location Type Development Sites Cost (millions) Month Acquired Carolina Pines Myrtle Beach, SC RV Total $ 841 841 5.9 April 4. Collateralized Receivables and Transfers of Financial Assets We previously completed various transactions with an unrelated entity involving our notes receivable under which we received cash proceeds in exchange for relinquishing our right, title, and interest in certain notes receivable. We have no further obligations or rights with respect to the control, management, administration, servicing, or collection of the installment notes receivable. However, we are subject to certain recourse provisions requiring us to purchase the underlying homes collateralizing such notes, in the event of a note default and subsequent repossession of the home by the unrelated entity. The recourse provisions are considered to be a form of continuing involvement, and therefore these transferred loans did not meet the requirements for sale accounting. We continue to recognize these transferred loans on our balance sheet and refer to them as collateralized receivables. The proceeds from the transfer have been recognized as a secured borrowing. In the event of a note default and subsequent repossession of a manufactured home by the unrelated entity, the terms of the agreement require us to repurchase the manufactured home. Default is defined as the failure to repay the installment note receivable according to contractual terms. The repurchase price is calculated as a percentage of the outstanding principal balance of the collateralized receivable, plus any outstanding late fees, accrued interest, legal fees, and escrow advances associated with the installment note receivable. The percentage used to determine the repurchase price of the outstanding principal balance on the installment note receivable is based on the number of payments made on the note. In general, the repurchase price is determined as follows: Number of Payments Fewer than or equal to 15 Greater than 15 but fewer than 64 Equal to or greater than 64 but fewer than 120 120 or more Repurchase Percentage 100% 90% 65% 50% F - 19 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The transferred assets have been classified as Collateralized receivables, net and the cash proceeds received from these transactions have been classified as Secured borrowings on collateralized receivables within the Consolidated Balance Sheets. The balance of the collateralized receivables was $106.9 million (net of allowance of $0.8 million) and $128.2 million (net of allowance of $0.9 million) as of December 31, 2018, and December 31, 2017, respectively. The receivables have a weighted average interest rate and maturity of 9.9 percent and 14.1 years as of December 31, 2018, and 10.0 percent and 15.3 years as of December 31, 2017. The outstanding balance on the secured borrowing was $107.7 million and $129.2 million as of December 31, 2018, and December 31, 2017, respectively. The collateralized receivables earn interest income, and the secured borrowings accrue interest expense at the same interest rates. The amount of interest income and expense recognized was $11.2 million, $13.2 million and $14.0 million for the years ended December 31, 2018, 2017, and 2016, respectively. The balances of the collateralized receivables and secured borrowings fluctuate. The balances increase as additional notes receivable are transferred and exchanged for cash proceeds. The balances are reduced as the related collateralized receivables are collected from the customers, or as the underlying collateral is repurchased. The change in the aggregate gross principal balance of the collateralized receivables is as follows (in thousands): Beginning balance Financed sales of manufactured homes Principal payments and payoffs from our customers Principal reduction from repurchased homes Total activity Ending balance Year Ended December 31, 2018 December 31, 2017 $ $ 129,182 — (12,577 ) (8,874 ) (21,451 ) 107,731 $ $ 144,477 8,153 (12,186) (11,262) (15,295 ) 129,182 The following table sets forth the allowance for the collateralized receivables (in thousands): Beginning balance Lower of cost or market write-downs Increase to reserve balance Total activity Ending balance Year Ended December 31, 2018 December 31, 2017 $ $ (936) $ 660 (531) 129 (807) $ (607) 1,024 (1,353) (329 ) (936) F - 20 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Notes and Other Receivables The following table sets forth certain information regarding notes and other receivables (in thousands): Installment notes receivable on manufactured homes, net Other receivables, net Total notes and other receivables, net Installment Notes Receivable on Manufactured Homes Year Ended December 31, 2018 December 31, 2017 $ $ 112,798 $ 47,279 160,077 $ 115,797 47,699 163,496 The installment notes of $112.8 million (net of allowance of $0.7 million) and $115.8 million (net of allowance of $0.4 million) as of December 31, 2018 and December 31, 2017, respectively, are collateralized by manufactured homes. The notes represent financing provided to purchasers of manufactured homes primarily located in our communities and require monthly principal and interest payments. The notes have a weighted average interest rate (net of servicing costs) and maturity of 8.0 percent and 16.6 years as of December 31, 2018, and 8.2 percent and 17.2 years as of December 31, 2017. The change in the aggregate gross principal balance of the installment notes receivable is as follows (in thousands): Beginning balance Financed sales of manufactured homes Acquired notes Principal payments and payoffs from our customers Principal reduction from repossessed homes Total activity Ending balance Allowance for Losses for Installment Notes Receivable Year Ended December 31, 2018 December 31, 2017 $ $ 116,174 $ 14,237 — (8,966 ) (7,950 ) (2,679 ) 59,524 66,104 23 (6,128) (3,349) 56,650 113,495 $ 116,174 The following table sets forth the allowance change for the installment notes receivable (in thousands): Beginning balance Lower of cost or market write-downs Increase to reserve balance Total activity Ending balance Other Receivables Year Ended December 31, 2018 December 31, 2017 $ $ (377) $ 678 (998) (320 ) (697) $ (205) 170 (342) (172) (377) As of December 31, 2018, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of $7.1 million (net of allowance of $1.5 million), home sale proceeds of $16.1 million, and insurance and other receivables of $24.1 million. As of December 31, 2017, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of $7.0 million (net of allowance of $1.5 million), home sale proceeds of $13.8 million, insurance and other receivables of $26.9 million. F - 21 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Intangible Assets Our intangible assets include below market ground leases, in-place leases, franchise agreements and other intangible assets. These intangible assets are recorded in Other assets, net on the Consolidated Balance Sheets. In June 2018, we acquired 50 percent of a land parcel that was previously subject to a ground lease at one of our California communities for $8.0 million. As a result of the transaction, we wrote off $1.1 million of the gross carrying amount of the ground lease intangible and $0.3 million of the related accumulated amortization. The $0.8 million net write off is included within the Property operating and maintenance expenses in our Consolidated Statements of Operations for the year ended December 31, 2018. In December 2017, we acquired 25.0 percent of the land that was previously under a ground lease at one of our California communities for $4.0 million, and amended the ground lease agreement to include an option to purchase an additional 25.0 percent of the land. As a result of these transactions, we wrote off $1.1 million of the gross carrying amount of the ground lease intangible and $0.2 million of accumulated amortization. The $0.9 million net write off is included within Property operating and maintenance expense in our Consolidated Statements of Operations for the year ended December 31, 2017. The gross carrying amounts and accumulated amortization are as follows (in thousands): December 31, 2018 December 31, 2017 Intangible Asset Below market ground leases In-place leases Franchise agreements and other intangible assets 7 - 20 years Total Useful Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount 2 - 75 years $ 31,060 $ 7 years 103,547 16,641 $ 151,248 $ (1,942) $ (59,068) (1,942) (62,952) $ 32,165 100,843 1,880 134,888 $ Accumulated Amortization (1,409) (45,576) (1,451) (48,436) $ Total amortization expenses related to our intangible assets are as follows (in thousands): Intangible Asset Below market ground leases In-place leases Franchise fees and other intangible assets Total Year Ended December 31, 2018 2017 2016 $ $ 821 $ 809 $ 12,913 507 13,812 301 14,241 $ 14,922 $ 600 11,559 535 12,694 We anticipate amortization expense for our intangible assets to be as follows for the next five years (in thousands): Estimated expense $ 14,630 $ 12,902 $ 12,510 $ 7,908 $ 4,533 2019 2020 Year 2021 2022 2023 F - 22 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Investments in Nonconsolidated Affiliates Investments in joint ventures in which we do not have a controlling direct or indirect voting interest, but can exercise significant influence over the entity with respect to our operations and major decisions, are accounted for using the equity method of accounting whereby the cost of an investment is adjusted for our share of the equity in net income or loss from the date of acquisition, reduced by distributions received and increased by contributions made. The income or loss of each entity is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interests held by each investor. Sungenia JV - In November 2018, the Company and Ingenia Communities Group entered into a joint venture (“JV”) to establish and grow a manufactured housing community development program in Australia. The JV is referred to as “Sungenia JV.” We hold a 50 percent interest in the JV entity. We account for our interest in the Sungenia JV under the equity method of accounting as prescribed by FASB ASC Topic 323, “Investments - Equity Method and Joint Ventures,” as neither party of the Sungenia JV has individual control and we have equal exercise of significant influence. As of December 31, 2018 we had a $0.7 million investment in the Sungenia JV. During the year ended December 31, 2018, we recognized no equity gain or loss on the Consolidated Statement of Operations related to our ownership interest. GTSC LLC (“GTSC”) - In February 2018, we became a noncontrolling member of GTSC. GTSC engages in acquiring, holding and selling loans secured, directly or indirectly, by manufactured homes located in our communities. At December 31, 2018, we had a 40 percent ownership interest in GTSC. The remaining 60 percent interest is owned by an unrelated third party. We account for our interest in GTSC under the equity method of accounting as prescribed by FASB ASC Topic 323 “Investments - Equity Method and Joint Ventures.” During the year ended December 31, 2018, there was $0.5 million net gain in Income from nonconsolidated affiliates on the Consolidated Statement of Operations related to our ownership interest. Our investment in GTSC as of December 31, 2018, is $29.8 million and recorded within Other assets, net on the Consolidated Balance Sheet. Origen Financial Services, LLC (“OFS LLC”) - At December 31, 2018 and 2017, we had a 22.9 percent ownership interest in OFS LLC, an entity that specializes in resident screening services. Previously we had suspended equity method accounting as the carrying value of our investment was zero as prescribed by FASB ASC Topic 323 “Investments - Equity Method and Joint Ventures.” Subsequently in 2018, we resumed equity method accounting as our unrecorded losses were recovered. As of December 31, 2018 and 2017 our investment in OFS LLC was $0.1 million and zero, respectively and is recorded within Other assets, net on the Consolidated Balance Sheet. During the year ended December 31, 2018 and 2017, we recognized $0.2 million and zero income, respectively, in the Income from nonconsolidated affiliates on the Consolidated Statement of Operations. 8. Consolidated Variable Interest Entities In 2016, we adopted (“ASU 2015-02”) Consolidation (Topic 810): Amendments to the Consolidation Analysis. ASU 2015-02 modified the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. We evaluated the application of ASU 2015-02 and concluded that no change was required to our accounting for interests in less than wholly- owned Joint ventures. However, the Operating Partnership now meets the criteria as a VIE. Our significant asset is our investment in the Operating Partnership, and consequently, substantially all of our assets and liabilities represent those assets and liabilities of the Operating Partnership. We are the sole general partner and generally have the power to manage and have complete control over the Operating Partnership and the obligation to absorb its losses or the right to receive its benefits. Accordingly, we consolidate the Operating Partnership under this new guidance. Effective June 1, 2018, we acquired a majority interest in Sun NG RV Resorts LLC (“Sun NG Resorts”), which is comprised of ten RV resorts and one ground up RV development with 2,700 RV sites and an additional 940 sites available for development. We purchased an 80 percent interest in Sun NG Resorts for $61.6 million through Sun NG LLC; the remaining 20 percent interest of $15.4 million is held by an unrelated third party. We paid additional consideration of $123.3 million, consisting of a $1.8 million preferred equity investment and a $121.5 million temporary loan to Sun NG Resorts. We consolidate Sun NG Resorts under the guidance set forth in FASB ASC Topic 810 “Consolidation.” We concluded that Sun NG Resorts is a VIE where we are the primary beneficiary, as we have power to direct the significant activities, absorb the significant losses and receive the significant benefits from the entity. Refer to Note 3, “Real Estate Acquisitions,” Note 9, “Debt and Lines of Credit,” and Note 10, “Equity and Mezzanine Securities” for additional information. We consolidate Rudgate Village SPE, LLC; Rudgate Clinton SPE, LLC; and Rudgate Clinton Estates SPE, LLC (collectively, “Rudgate”) as a variable interest entity (“VIE”). We evaluated our arrangement with this property under the guidance set forth in FASB ASC Topic 810 “Consolidation.” We concluded that Rudgate qualified as a VIE where we are the primary beneficiary, as we have power to direct the significant activities, absorb the significant losses and receive the significant benefits from the entity. F - 23 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the assets and liabilities included in our Consolidated Balance Sheets after appropriate eliminations have been made (in thousands): ASSETS Investment property, net Other assets Total Assets LIABILITIES AND OTHER EQUITY Debt Preferred Equity - Sun NG Resorts - mandatorily redeemable Other liabilities Total Liabilities Equity Interest - NG Sun LLC Noncontrolling interests Total Liabilities and Other Equity December 31, 2018 December 31, 2017 $ $ $ $ 308,171 19,809 327,980 $ $ 44,172 $ 35,277 6,914 86,363 21,976 7,145 115,484 $ 50,193 1,659 51,852 41,970 — 1,468 43,438 — 4,285 47,723 Investment property, net and other assets, net related to the consolidated VIEs, with the exception of SCOLP, comprised approximately 4.9 percent and 0.8 percent of our consolidated total assets at December 31, 2018 and December 31, 2017, respectively. Debt, Preferred Equity and other liabilities comprised approximately 2.6 percent and 1.2 percent of our consolidated total liabilities at December 31, 2018 and December 31, 2017, respectively. Equity Interests and Noncontrolling interests related to the consolidated VIEs, on an absolute basis, comprised less than 1.0 percent of our consolidated total equity at December 31, 2018 and December 31, 2017. 9. Debt and Lines of Credit The following table sets forth certain information regarding debt including premiums, discounts, and deferred financing costs (in thousands): Carrying Amount Weighted Average Years to Maturity Weighted Average Interest Rates December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017 December 31, 2018 December 31, 2017 Collateralized term loans - Life Companies Collateralized term loans - FNMA Collateralized term loans - CMBS Collateralized term loans - FMCC Secured borrowings Lines of credit Preferred Equity - Sun NG Resorts - mandatorily redeemable Preferred OP units - mandatorily redeemable Total debt $ 1,259,158 770,417 $ 1,044,246 1,026,014 405,702 380,680 107,731 128,000 410,747 386,349 129,182 41,257 35,277 — 37,338 41,443 $ 3,124,303 $ 3,079,238 Collateralized Term Loans 14.4 5.1 4.1 5.9 14.4 2.3 3.8 4.7 9.0 13.9 5.6 5.0 6.9 15.3 3.1 — 5.0 8.9 3.9% 4.4% 5.1% 3.9% 9.9% 3.8% 6.0% 6.6% 4.5% 3.9% 4.4% 5.1% 3.9% 10.0% 2.8% —% 6.7% 4.5% During the three months ended December 31, 2018, we repaid a term loan of $10.2 million with an interest rate of 5.66 percent. The loan was due to mature on February 28, 2019. Concurrently, we entered into a $21.7 million collateralized term loan with a 4.10 fixed interest rate and 20-year term. F - 24 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the three months ended September 30, 2018, we entered into a $228.0 million collateralized term loan with a 4.10 percent fixed interest rate and a 20-year term. During the three months ended September 30, 2018, we repaid one collateralized term loan of $30.5 million with an interest rate of 6.34 percent, releasing one encumbered community, which was due to mature March 1, 2019. We recognized a loss on extinguishment of debt of $0.3 million as a result of the repayment transaction in our Consolidated Statement of Operations. During the three months ended June 30, 2018 we repaid three collateralized term loans totaling $177.7 million with a weighted average interest rate of 4.53 percent, releasing 11 encumbered communities. One loan was due to mature on August 1, 2018 and two loans were due to mature on May 1, 2023. We recognized a loss on extinguishment of debt of $1.5 million as a result of the repayment transaction. During the three months ended March 31, 2018, we repaid four collateralized term loans totaling $24.4 million with a weighted average interest rate of 6.36 percent, releasing three encumbered communities. The loans were due to mature on March 1, 2019. We recognized a loss on extinguishment of debt of $0.2 million as a result of the repayment transactions. In December 2017, we defeased a $38.6 million collateralized term loan with a 5.25 percent fixed interest rate that was due to mature on June 1, 2022. As a result of the transaction we recognized a loss on extinguishment of debt of $5.2 million in our Consolidated Statements of Operations. Concurrent with the defeasance, we entered into a new $100.0 million collateralized term loan, encumbered by the same property, with a 4.25 percent fixed rate of interest and 30-year term. In September 2017, in connection with the Ocean West acquisition, we assumed a $4.6 million collateralized term loan with Fannie Mae, with an interest rate of 4.34 percent and a remaining term of 9.8 years. In June 2017, we entered into a $77.0 million collateralized term loan which bears interest at a rate of 4.16 percent amortizing over a 25-year term. We also repaid a $3.9 million collateralized term loan with an interest rate of 6.54 percent that was due to mature on August 31, 2017. As a result of the repayment transaction, we recognized a loss on extinguishment of debt of $0.3 million in our Consolidated Statements of Operations. During the first quarter of 2017, we defeased an $18.9 million collateralized term loan with an interest rate of 6.49 percent that was due to mature on August 1, 2017, releasing one encumbered community. As a result of the transaction, we recognized a loss on extinguishment of debt of $0.5 million in our Consolidated Statements of Operations. In addition, we repaid a $10.0 million collateralized term loan with an interest rate of 5.57 percent that was due to mature on May 1, 2017, releasing an additional encumbered community. The collateralized term loans totaling $2.8 billion as of December 31, 2018, are secured by 185 properties comprised of 72,799 sites representing approximately $3.2 billion of net book value. Secured Borrowings See Note 4, “Collateralized Receivables and Transfers of Financial Assets,” for information regarding our collateralized receivables and secured borrowing transactions. Preferred OP Units Preferred OP units at December 31, 2018 and 2017 include $34.7 million of Aspen preferred OP units issued by the Operating Partnership. As of December 31, 2018, these units are convertible indirectly into 447,049 shares of our common stock. Subject to certain limitations, at any time prior to January 1, 2024, the holder of each Aspen preferred OP unit at its option may convert such Aspen preferred OP unit into: (a) if the market price of our common stock is $68.00 per share or less, 0.397 common OP units; or (b) if the market price of our common stock is greater than $68.00 per share, the number of common OP units is determined by dividing (i) the sum of (A) $27.00 plus (B) 25 percent of the amount by which the market price of our common stock exceeds $68.00 per share, by (ii) the per-share market price of our common stock. The current preferred distribution rate is 6.5 percent. On January 2, 2024, we are required to redeem all Aspen preferred OP units that have not been converted to common OP units. Preferred OP units also include $2.7 million and $6.7 million at December 31, 2018 and 2017, respectively, of Series B-3 preferred OP units, which are not convertible. During the year ended December 31, 2018, we redeemed 41,051 of the Series B-3 preferred OP units at an average redemption price per unit, which included accrued and unpaid distributions, of $100.065753. In the aggregate, we paid $4.1 million to redeem these units. In January 2019, we redeemed all remaining 26,750 Series B-3 preferred OP units. F - 25 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The weighted average redemption price per unit, which included accrued and unpaid distributions, was $100.153425. In the aggregate, we paid $2.7 million to redeem the Series B-3 preferred OP units. Preferred Equity - Sun NG Resorts - mandatorily redeemable In June 2018, in connection with the investment in Sun NG Resorts, $35.3 million of mandatorily redeemable Preferred Equity (“Preferred Equity - Sun NG Resorts”) was purchased by unrelated third parties. The Preferred Equity - Sun NG Resorts carries a preferred rate of return of 6.0 percent per annum. The Preferred Equity - Sun NG Resorts has a 7-year term and can be redeemed in the fourth quarter of 2022 at the holders’ option. The Preferred Equity - Sun NG Resorts as of December 31, 2018 was $35.3 million. Refer to Note 3, “Real Estate Acquisitions,” Note 8, “Consolidated Variable Interest Entities,” and Note 10, “Equity and Mezzanine Securities” for additional information. Lines of Credit In April 2017, we amended and restated our credit agreement (the “A&R Credit Agreement”) with Citibank, N.A. (“Citibank”) and certain other lenders. Pursuant to the A&R Credit Agreement, we entered into a senior revolving credit facility with Citibank and certain other lenders in the amount of $650.0 million, comprised of a $550.0 million revolving loan and a $100.0 million term loan (the “A&R Facility”). We repaid the term loan in full on September 7, 2018. The A&R Credit Agreement has a four-year term ending April 25, 2021, which can be extended for two additional six-month periods at our option, subject to the satisfaction of certain conditions as defined in the credit agreement. The A&R Credit Agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $350.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the A&R Facility may be increased up to $900.0 million. The A&R Facility bears interest at a floating rate based on the Eurodollar rate plus a margin that is determined based on our leverage ratio calculated in accordance with the A&R Credit Agreement, which margin can range from 1.35 percent to 2.20 percent for the revolving loan. As of December 31, 2018, the margin based on our leverage ratio was 1.35 percent on the revolving loan. We had $128.0 million borrowings on the revolving loan and no borrowings on the term loan as of December 31, 2018. The A&R Facility provides us with the ability to issue letters of credit. Our issuance of letters of credit does not increase our borrowings outstanding under our line of credit, but does reduce the borrowing amount available. At December 31, 2018 and December 31, 2017, $3.9 million and $1.3 million, respectively, of availability was used to back standby letters of credit. We have a $12.0 million manufactured home floor plan facility renewable indefinitely until our lender provides us at least a twelve month notice of their intent to terminate the agreement. The interest rate is 100 basis points over the greater of the prime rate as quoted in the Wall Street Journal on the first business day of each month or 6.0 percent. At December 31, 2018, the effective interest rate was 7.0 percent. The outstanding balance was zero and $4.0 million as of December 31, 2018 and December 31, 2017, respectively. Covenants Pursuant to the terms of the A&R Facility, we are subject to various financial and other covenants. The most restrictive of our debt agreements place limitations on secured borrowings and contain minimum fixed charge coverage, leverage, distribution, and net worth requirements. At December 31, 2018, we were in compliance with all covenants. In addition, certain of our subsidiary borrowers own properties that secure loans. These subsidiaries are consolidated within our accompanying Consolidated Financial Statements, however, each of these subsidiaries’ assets and credit are not available to satisfy the debts and other obligations of the Company, any of its other subsidiaries or any other person or entity. F - 26 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Long-term Debt Maturities As of December 31, 2018, the total of maturities and amortization of our debt (excluding premiums and discounts) and lines of credit during the next five years were as follows (in thousands): Maturities and Amortization By Year Mortgage loans payable: Maturities $ 2,078,926 $ — $ 58,078 $ 270,680 $ 82,155 $ 307,465 $ 1,360,548 Total Due 2019 2020 2021 2022 2023 Thereafter Principal amortization Secured borrowings 734,675 107,731 58,164 5,265 59,630 5,746 58,843 6,171 Preferred Equity - Sun NG Resorts - mandatorily redeemable Preferred OP units - mandatorily redeemable Lines of credit Total 35,277 — 37,338 128,000 2,675 — — — — — — 128,000 56,822 6,379 35,277 — — 53,437 6,374 447,779 77,796 — — — — 34,663 — $ 3,121,947 $ 66,104 $ 123,454 $ 463,694 $ 180,633 $ 367,276 $ 1,920,786 10. Equity and Mezzanine Securities Public Equity Offerings In September 2018, we closed an underwritten registered public offering of 5,060,000 shares of common stock. Proceeds from the offering were $499.9 million after deducting expenses related to the offering. We used the net proceeds of this offering to repay borrowings under the revolving loan and the term loan under our senior credit facility. The Company intends to use the remaining net proceeds of this offering to fund possible future acquisitions and for working capital and general corporate purposes. In May 2017, we closed an underwritten registered public offering of 4,830,000 shares of common stock. Proceeds from the offering were $408.9 million after deducting expenses related to the offering, which were used to repay borrowings outstanding under the revolving loan under our A&R Facility, fund acquisitions, working capital and general corporate purposes. At the Market Offering Sales Agreement In July 2017, we entered into a new at the market offering sales agreement (the “Sales Agreement”) with certain sales agents (collectively, the “Sales Agents”), whereby we may offer and sell shares of our common stock, having an aggregate offering price of up to $450.0 million, from time to time through the Sales Agents. The Sales Agents are entitled to compensation in an agreed amount not to exceed 2.0 percent of the gross price per share for any shares sold from time to time under the Sales Agreement. Through December 31, 2018 we have sold shares of our common stock for gross proceeds of $163.8 million under the Sales Agreement. Issuances of common stock under the Sales Agreement through December 31, 2018 were as follows: Quarter Ended September 30, 2018 June 30, 2018 December 31, 2017 Common Stock Issued Weighted Average Sales Price Net Proceeds (in Millions) 398,516 1,008,699 321,800 $ $ $ 100.19 92.98 93.33 $ $ $ 39.4 92.6 29.7 F - 27 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Issuances of common stock under our previous at the market offering sales agreement during 2017 and 2016 were as follows: Quarter Ended June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 Equity Interests - NG Sun LLC Common Stock Issued Weighted Average Sales Price Net Proceeds (in Millions) 400,000 280,502 19,498 620,828 485,000 $ $ $ $ $ 85.01 76.47 75.90 76.81 71.86 $ $ $ $ $ 33.6 21.2 1.5 47.1 34.4 In June 2018, in connection with the investment in Sun NG Resorts, unrelated third parties purchased $6.5 million of Series B preferred equity interests and $15.4 million of common equity interest in Sun NG Resorts (herein jointly referred to as “Equity Interest - NG Sun LLC”). The Series B preferred equity interests carry a preferred return at a rate that, at any time, is equal to the interest rate on Sun NG Resorts’ indebtedness at such time. The current rate of return is 5.0 percent. The Equity Interests - NG Sun LLC do not have a fixed maturity date and can be redeemed in the fourth quarter of 2022 at the holders’ option. Sun NG LLC, our subsidiary, has the right during certain periods each year, with or without cause, or for cause at any time, to elect to buy NG Sun LLC’s interest. During a limited period in 2022, NG Sun LLC has the right to put its interest to Sun NG LLC. If either party exercises their option, the property management agreement will be terminated and the Company is required to purchase the remaining interests of NG Sun LLC and the property management agreement at fair value. Refer to Note 3, “Real Estate Acquisitions,” Note 8, “Consolidated Variable Interest Entities,” and Note 9, “Debt and Lines of Credit” for additional information. Issuances of Common Stock and Common OP Units In July 2017, we issued 298,900 shares of common stock totaling $26.4 million in connection with the acquisition of Pismo Dunes. In June 2017, we issued a total of 23,311 common OP units for total consideration of $2.0 million in connection with acquisition activity during the three months ended June 30, 2017. Conversions Subject to certain limitations, holders can convert certain series of stock and OP units to shares of our common stock at any time. Below is the activity of conversions during 2018 and 2017: Series Common OP unit Series A-1 preferred OP unit Series A-4 preferred OP unit Series A-4 preferred stock Series C preferred OP unit Dividends Year Ended December 31, 2018 Year Ended December 31, 2017 Conversion Rate Units/Shares Common Stock Units/Shares Common Stock 1 2.439 0.4444 0.4444 1.11 20,608 13,430 13,765 22,576 1,919 20,608 32,752 6,116 10,033 2,130 36,055 21,919 10,000 158,036 16,806 36,055 53,456 4,440 70,238 18,651 Dividend distributions declared for the quarter ended December 31, 2018 are as follows: Dividend Record Date Payment Date Distribution per Share Total Distribution (in Thousands) Common Stock, Common OP units and Restricted Stock 12/31/2018 1/15/2019 $ 0.71 $ Series A-4 Preferred Stock 12/14/2018 12/31/2018 $ 0.40625 $ 63,249 432 F - 28 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Redemptions If certain change of control transactions occur or if our common stock ceases to be listed or quoted on an exchange or quotation system, then at any time after November 26, 2019, we or the holders of shares of Series A-4 preferred stock and Series A-4 preferred OP units may cause all or any of those shares or units to be redeemed for cash at a redemption price equal to the sum of (i) the greater of (x) the amount that the redeemed shares of Series A-4 preferred stock and Series A-4 preferred OP units would have received in such transaction if they had been converted into shares of our common stock immediately prior to such transaction, or (y) $25.00 per share, plus (ii) any accrued and unpaid distributions thereon to, but not including, the redemption date. In November 2017, we redeemed all of the outstanding shares of our 7.125% Series A Cumulative Redeemable Preferred Stock. Holders received a cash payment of $25.14349 per share which included accrued and unpaid dividends. In the aggregate, we paid $85.5 million to redeem all of the 3,400,000 outstanding shares. In June 2017, we redeemed 438,448 shares of Series A-4 Preferred Stock and 200,000 shares of Series A-4 preferred OP units from Green Courte Real Estate Partners III, LLC, GCP Fund III REIT LLC and GCP Fund III Ancillary Holding, LLC (collectively, the “Green Courte Entities”) for total consideration of $24.7 million. Accrued dividends totaling $0.2 million were also paid in connection with the redemptions. The Green Courte Entities were the sellers of the American Land Lease portfolio which we acquired in 2014 and 2015. Repurchase Program In November 2004, our Board of Directors authorized us to repurchase up to 1,000,000 shares of our common stock. We have 400,000 common shares remaining in the repurchase program. No common shares were repurchased during 2018 or 2017. There is no expiration date specified for the repurchase program. 11. Share-Based Compensation As of December 31, 2018, we had two share-based compensation plans; the Sun Communities, Inc. 2015 Equity Incentive Plan (“2015 Equity Incentive Plan”) and the First Amended and Restated 2004 Non-Employee Director Option Plan (“2004 Non- Employee Director Option Plan”). We believe granting equity awards will provide certain executives, key employees and directors additional incentives to promote our financial success, and promote employee and director retention by providing an opportunity to acquire or increase the direct proprietary interest of those individuals in our operations and future. Restricted Stock The majority of our share-based compensation is awarded as service vesting restricted stock grants to executives and key employees. We have also awarded restricted stock to our non-employee directors. We measure the fair value associated with these awards using the closing price of our common stock as of the grant date to calculate compensation cost. Employee awards typically vest over several years and are subject to continued employment by the employee. Award recipients receive distribution payments on unvested shares of restricted stock. 2015 Equity Incentive Plan At the Annual Meeting of Stockholders held on July 20, 2015, the stockholders approved the 2015 Equity Plan. The 2015 Equity Plan had been adopted by the Board and was effective upon approval by our stockholders. The maximum number of shares of common stock that may be issued under the 2015 Equity Plan is 1,750,000 shares of our common stock, with 1,136,194 shares remaining for future issuance. 2004 Non-Employee Director Option Plan The director plan was approved by our stockholders at the Annual Meeting of Stockholders held on July 19, 2012. The director plan amended and restated in its entirety our 2004 Non-Employee Director Stock Option Plan. At the Annual Meeting of the Stockholders held on May 17, 2018, the stockholders approved the First Amendment to Sun Communities, Inc. First Amended and Restated 2004 Non-Employee Director Option Plan to increase the number of authorized shares under the plan by 200,000 shares. F - 29 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The types of awards that may be granted under the director plan are options, restricted stock and OP units. Only non-employee directors are eligible to participate in the director plan. The maximum number of options, restricted stock and OP units that may be issued under the Director Plan is 375,000 shares, with 209,774 shares remaining for future issuance. During the year ended December 31, 2018 and 2017, shares were granted as follows: Award 2018 Type Key Employees Plan 2015 Equity Incentive Plan Shares Granted Grant Date Fair Value Per Share 16,500 $ 88.30 (1) Vesting Type Time Based Vesting Anniversary 2nd 3rd 4th 5th 6th Percentage 35.0% 35.0% 20.0% 5.0% 5.0% 2018 Key Employees 2018 Executive Officers 2018 Executive Officers 2018 Directors 2017 Key Employees 2015 Equity Incentive Plan 2015 Equity Incentive Plan 2015 Equity Incentive Plan 2004 Non- Employee Director Option Plan 2015 Equity Incentive Plan 50,100 $ 86.97 (1) Time Based 20% annually over 5 years 60,000 $ 87.24 (1) Time Based 20% annually over 5 years 90,000 $ 65.24 (2) Market Condition 16,800 $ 85.28 (1) Time Based 3rd 3rd 2,500 $ 84.18 (1) Time Based 2nd 2017 Executive Officers 2015 Equity Incentive Plan 100,000 $ 79.30 (1) Time Based 3rd 4th 5th 6th 3rd 4th 5th 6th 7th 2017 Executive Officers 2015 Equity Incentive Plan 100,000 $ 72.39 (3) Market & Performance Conditions Multiple tranches through March 2022 2017 Directors 2004 Non- Employee Director Option Plan 16,900 $ 79.64 (1) Time Based 3rd 100.0% (1) Grant date fair value is measured based on the closing price of our common stock on the date(s) shares are issued. (2) Share-based compensation for restricted stock awards with market conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date, our common stock price was $87.24. Based on the Monte Carlo simulation we expect 74.8% of the 90,000 shares to vest. (3) Share-based compensation for restricted stock awards with market and performance conditions is measured based on an estimate of shares expected to vest. We estimate the fair value of share-based compensation for restricted stock with market conditions using a Monte Carlo simulation. At the grant date, our common stock price was $79.30. Based on the Monte Carlo simulation we expect 91.3% of the 100,000 shares to vest. F - 30 100.0% 100.0% 35.0% 35.0% 20.0% 5.0% 5.0% 20.0% 30.0% 35.0% 10.0% 5.0% SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes our restricted stock activity for the years ended December 31, 2018, 2017, and 2016: Unvested restricted shares at January 1, 2016 Granted Vested Forfeited Unvested restricted shares at December 31, 2016 Granted Vested Forfeited Unvested restricted shares at December 31, 2017 Granted Vested Forfeited Unvested restricted shares at December 31, 2018 Number of Shares Weighted Average Grant Date Fair Value 813,260 $ $ 227,800 (165,631) $ (33,795) $ $ 841,634 $ 219,400 (196,412) $ (4,769) $ $ 859,853 233,400 $ (214,111) $ (8,025) $ $ 871,117 50.59 69.43 45.90 56.49 56.38 79.38 47.60 56.43 64.25 87.12 54.69 72.16 72.65 Total compensation cost recognized for restricted stock was $15.1 million, $12.7 million, and $9.6 million for the years ended December 31, 2018, 2017, and 2016, respectively. The total fair value of shares vested was $11.7 million, $9.3 million, and $7.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. The remaining share-based compensation cost, net related to our unvested restricted shares outstanding as of December 31, 2018 is approximately $37.5 million. The following table summarizes our expected share-based compensation cost, net related to our unvested restricted shares, in millions: Expected share-based compensation costs, net $ 13.0 $ 12.0 $ 6.9 $ 5.6 2019 2020 2021 Thereafter Options During 2018, there were no non-employee director options exercised. At December 31, 2018, 3,000 fully vested non-employee director options remained outstanding with an intrinsic value of $0.2 million. These options had a weighted average exercise price of $33.45 and a weighted average contractual term of 2.1 years. No options have been granted, and there has been no compensation expense associated with non-vested stock option awards for the years ended December 31, 2018, 2017, or 2016. F - 31 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. Segment Reporting We group our operating segments into reportable segments that provide similar products and services. Each operating segment has discrete financial information evaluated regularly by our chief operating decision maker in evaluating and assessing performance. We have two reportable segments: (i) Real Property Operations and (ii) Home Sales and Rentals. The Real Property Operations segment owns, operates, has an interest in a portfolio, and develops MH communities and RV communities and is in the business of acquiring, operating, and expanding MH and RV communities. The Home Sales and Rentals segment offers manufactured home sales and leasing services to tenants and prospective tenants of our communities. Transactions between our segments are eliminated in consolidation. Transient RV revenue is included in the Real Property Operations segment revenues and is approximately $106.2 million for the year ended December 31, 2018. In 2018, transient RV revenue was recognized 20.7 percent in the first quarter, 20.3 percent in the second quarter, 42.6 percent in the third quarter, and 16.4 percent in the fourth quarter. A presentation of our segment financial information is summarized as follows (amounts in thousands): Revenues Operating expenses / Cost of sales NOI / Gross profit Adjustments to arrive at net income / (loss): Interest and other revenues, net Home selling expense General and administrative Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest Interest on mandatorily redeemable preferred OP units Remeasurement of marketable securities Other expense, net Income from nonconsolidated affiliates Current tax expense Deferred tax benefit Net income / (loss) Less: Preferred return to preferred OP units Less: Amounts attributable to noncontrolling interests Net income / (loss) attributable to Sun Communities, Inc. Less: Preferred stock distributions Net income / (loss) attributable to Sun Communities, Inc. common stockholders Year Ended December 31, 2018 Real Property Operations Home Sales and Home Rentals Consolidated $ 880,080 $ 219,688 $ 1,099,768 330,275 549,805 27,057 — (70,042) (470) 140 (218,617) (2,657) (129,068) (3,694) (3,639) (6,414) — (372) 507 142,536 4,486 9,532 128,518 1,736 146,432 73,256 — (15,722) (11,396) (2) (232) (68,645) — (21) — — (39) 646 (223) — (22,378) — (1,089) (21,289) — 476,707 623,061 27,057 (15,722) (81,438) (472) (92) (287,262) (2,657) (129,089) (3,694) (3,639) (6,453) 646 (595) 507 120,158 4,486 8,443 107,229 1,736 $ 126,782 $ (21,289) $ 105,493 F - 32 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2017 Real Property Operations Home Sales and Home Rentals Consolidated Revenues Operating expenses / Cost of sales NOI / Gross profit Adjustments to arrive at net income / (loss): Interest and other revenues, net Home selling expenses General and administrative Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest Interest on mandatorily redeemable preferred OP units Other income / (expense), net Current tax expense Deferred tax benefit Net income / (loss) Less: Preferred return to preferred OP units Less: Amounts attributable to noncontrolling interests Net income / (loss) attributable to Sun Communities, Inc. Less: Preferred stock distribution Net income / (loss) attributable to Sun Communities, Inc. common stockholders $ 779,739 $ 177,957 $ 290,002 489,737 24,875 — (64,735) (9,812) (7,856) (199,960) (6,019) (127,113) (3,114) 8,983 (62) 582 105,506 4,581 6,319 94,606 7,162 117,228 60,729 (1) (12,457) (9,497) 11 (496) (61,576) — (15) — (1) (384) — (23,687) — (1,264) (22,423) — $ 87,444 $ (22,423) $ 957,696 407,230 550,466 24,874 (12,457) (74,232) (9,801) (8,352) (261,536) (6,019) (127,128) (3,114) 8,982 (446) 582 81,819 4,581 5,055 72,183 7,162 65,021 F - 33 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2016 Real Property Operations Home Sales and Home Rentals Consolidated Revenues Operating expenses / Cost of sales Net operating income / Gross profit Adjustments to arrive at net income / (loss): Interest and other revenues, net Home selling expenses General and administrative Transaction costs Catastrophic weather related charges, net Depreciation and amortization Loss on extinguishment of debt Interest Interest on mandatorily redeemable preferred OP units Other expenses, net Income from nonconsolidated affiliates Current tax expense Deferred tax benefit Net income / (loss) Less: Preferred return to preferred OP units Less: Amounts attributable to noncontrolling interests Net income / (loss) attributable to Sun Communities, Inc. Less: Preferred stock distribution Net income / (loss) attributable to Sun Communities, Inc. common stockholders $ 654,341 $ 158,287 $ 241,363 412,978 21,150 — (55,481) (31,863) (1,147) (166,296) (1,127) (119,150) (3,152) (4,675) 500 (471) 400 51,666 5,006 1,455 45,205 8,946 104,781 53,506 — (9,744) (8,181) (51) (25) (55,474) — (13) — (1) — (212) — (20,195) — (1,305) (18,890) — $ 36,259 $ (18,890) $ 812,628 346,144 466,484 21,150 (9,744) (63,662) (31,914) (1,172) (221,770) (1,127) (119,163) (3,152) (4,676) 500 (683) 400 31,471 5,006 150 26,315 8,946 17,369 December 31, 2018 December 31, 2017 Real Property Operations Home Sales and Home Rentals Consolidated Real Property Operations Home Sales and Home Rentals Consolidated Identifiable assets: Investment property, net $ 5,586,444 $ 531,872 $ 6,118,316 Cash and cash equivalents Inventory of manufactured homes Notes and other receivables, net Collateralized receivables, net Other assets, net Total assets 24,343 — 145,673 106,924 189,064 25,968 49,199 14,404 — 36,135 50,311 49,199 160,077 106,924 225,199 $ 5,172,521 (7,649) — 149,798 128,246 130,455 $ 472,833 $ 5,645,354 17,776 30,430 13,698 — 3,849 10,127 30,430 163,496 128,246 134,304 $ 6,052,448 $ 657,578 $ 6,710,026 $ 5,573,371 $ 538,586 $ 6,111,957 F - 34 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Income Taxes We have elected to be taxed as a REIT pursuant to Section 856(c) of the Internal Revenue Code of 1986, as amended (“Code”). In order for us to qualify as a REIT, at least 95.0 percent of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90.0 percent of its REIT taxable income (calculated without any deduction for dividends paid and excluding capital gain) to its stockholders and meet other tests. Qualification as a REIT involves the satisfaction of numerous requirements (on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are limited judicial or administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. In addition, frequent changes occur in the area of REIT taxation, which requires us to continually monitor our tax status. We analyzed the various REIT tests and confirmed that we continued to qualify as a REIT for the year ended December 31, 2018. As a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax (“AMT”) in 2017 as AMT is no longer applicable for years beginning after 2017). Even if we qualify as a REIT, we may be subject to certain state and local income taxes as well as U.S. federal income and excise taxes on our undistributed income. In addition, taxable income from non- REIT activities managed through taxable REIT subsidiaries (“TRSs”) is subject to federal, state and local income taxes. The Company is also subject to income taxes in Canada as a result of the acquisition of Carefree in 2016 and in Australia as a result of our investment in Ingenia Communities Group in 2018. We do not provide for withholding taxes on our undistributed earnings from our Canadian subsidiaries as they are reinvested and will continue to be reinvested indefinitely outside the United States. For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains, and return of capital. For the years ended December 31, 2018, 2017, and 2016, distributions paid per share were taxable as follows (unaudited / rounded): Years Ended December 31, 2018 2017 2016 Amount Percentage Amount Percentage Amount Percentage Ordinary income (1) Capital gain Return of capital $ 1.58 0.13 1.09 56.4% $ 4.8% 38.8% 100.0% $ 0.83 — 1.83 2.66 31.2% $ —% 68.8% 100.0% $ 0.81 0.51 1.28 2.60 31.2% 19.6% 49.2% 100.0% Total distributions declared $ (1) 100% of the ordinary taxable dividend qualifies as Section 199A dividend for 2018. 2.80 On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. Under the Tax Act, the corporate income tax rate is reduced from a maximum marginal rate of 35.0 percent to a flat 21.0 percent. In accordance with ASC 740, “Accounting for Income Taxes,” entities are required to recognize the effect of tax law changes in the period of enactment even though the effective date of most provisions of the Tax Act was January 1, 2018. Although the Staff Accounting Bulletin (“SAB”) No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” allows entities to record provisional amounts during a measurement period, it is our view that we have obtained the necessary information available to prepare and analyze (including computations) in reasonable detail the accounting for the change in tax law as noted below. The components of our provision / (benefit) for income taxes attributable to continuing operations for the year ended December 31, 2018 and 2017 are as follows (amounts in thousands): F - 35 Federal Current State and Local Current Deferred Foreign Current Deferred SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2018 Year Ended December 31, 2017 $ (102) $ (181) 701 11 (4) (518) 675 (11) (48) (571) (136) Total Provision / (Benefit) $ 88 $ A reconciliation of the provision / (benefit) for income taxes with the amount computed by applying the statutory federal income tax rate to income before provision for income taxes for the year ended December 31, 2018 and 2017 is as follows (amounts in thousands): Pre-tax loss attributable to taxable subsidiaries Federal provision / (benefit) at statutory tax rate State and local taxes, net of federal benefit Alternative minimum tax Rate differential Change in valuation allowance Change in deferred tax asset Others Tax (benefit) / provision - taxable subsidiaries Other state taxes - flow through subsidiaries Total provision / (benefit) Year Ended December 31, 2018 (7,299) $ Year Ended December 31, 2017 $ (17,404) (1,534) — — (112) 2,885 — (1,576) (337) 425 21.0 % — % — % 1.5 % (39.5)% — % 21.6 % 4.6 % $ 88 $ 34.0 % — % — % (1.8)% 122.5 % (148.7)% (2.1)% 3.9 % (5,918) (3) — 318 (21,322) 25,885 360 (680) 544 (136) Our deferred tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Deferred tax assets are reduced, if necessary, by a valuation allowance to the amount where realization is more likely than not assured after considering all available evidence. Our temporary differences primarily relate to net operating loss carryforwards, and depreciation and basis differences between tax and U.S. GAAP. At December 31, 2017, we re-measured the deferred tax assets and liabilities of our U.S. TRSs to reflect the effect of the enacted change in the tax rate under the Tax Act. We have also considered the new tax rate in assessing the need for and change to our existing valuation allowance and adjusted accordingly. Since we have recorded a full valuation allowance against substantially all of our deferred tax assets related to the U.S. TRSs, no material impact on the net deferred tax asset and the provision for income taxes was noted. F - 36 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The deferred tax assets and liabilities included in the consolidated balance sheets are comprised of the following tax effects of temporary differences and based on the Tax Act (amounts in thousands): Deferred Tax Assets NOL carryforwards Depreciation and basis differences Other Gross deferred tax assets Valuation allowance Net deferred tax assets Deferred Tax Liabilities Basis differences - foreign investment Gross deferred tax liabilities Net Deferred Tax Liability (1) As of December 31, 2018 2017 $ 18,071 $ 28,140 784 46,995 (44,817 ) 2,178 19,739 23,523 1,272 44,534 (41,932) 2,602 (22,406 ) (22,406 ) (25,114) (25,114) $ (20,228 ) $ (22,512) (1) Net deferred tax liability is included within Other liabilities in our Consolidated Balance Sheets. SHS had U.S. operating loss carryforwards of $73.6 million, or $15.6 million after tax, as of December 31, 2018. The loss carryforwards will begin to expire in 2023 through 2035 if not offset by future taxable income. In addition, our Canadian subsidiaries have operating loss carryforwards of $9.3 million, or $2.5 million after tax, as of December 31, 2018. The loss carryforwards will begin to expire in 2033 through 2038 if not offset by future taxable income. We had no unrecognized tax benefits as of December 31, 2018 and 2017. We expect no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2018. We classify certain state taxes as income taxes for financial reporting purposes. We recorded a provision for state income taxes of $0.7 million for the year ended December 31, 2018, $0.7 million for the year ended December 31, 2017, and $0.4 million for the year ended December 31, 2016. As previously noted, certain of our subsidiaries are subject to income taxes in the U.S. and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require application of significant judgment. With few exceptions, we are no longer subject to U.S. federal, state and local, examinations by tax authorities for the tax years ended December 31, 2011 and prior. In addition, our Canadian subsidiaries are subject to taxes in Canada and in the province of Ontario. We are no longer subject to examination by the Canadian tax authorities for the tax years ended December 31, 2012 and prior. Our policy is to report income tax penalties and income tax related interest expense as a component of income tax expense. No interest or penalty associated with any unrecognized income tax benefit or provision was accrued, nor was any income tax related interest or penalty recognized during the years ended December 31, 2018, 2017 and 2016. In 2017, SHS underwent an audit by the Internal Revenue Service for the 2015 tax year. Upon conclusion of the audit, no adjustment was required. F - 37 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Earnings Per Share We have outstanding stock options, unvested restricted common shares, and Series A-4 preferred stock, and our Operating Partnership has outstanding common OP units, Series A-1 preferred OP units, Series A-3 preferred OP units, Series A-4 preferred OP units, Series C preferred OP units, and Aspen preferred OP Units, which if converted or exercised, may impact dilution. Computations of basic and diluted earnings per share were as follows (in thousands, except per share data): Numerator Net income attributable to common stockholders Allocation to restricted stock awards Basic earnings: net income attributable to common stockholders after allocation Allocation of income to restricted stock awards Diluted earnings: net income attributable to common stockholders after allocation Denominator Weighted average common shares outstanding Add: dilutive stock options Add: dilutive restricted stock Diluted weighted average common shares and securities Earnings per share available to common stockholders after allocation: Basic Diluted Year Ended December 31, 2018 2017 2016 $ $ $ $ $ 105,493 (831) 104,662 831 $ $ $ $ 65,021 (455) 64,566 455 17,369 115 17,484 (115) 105,493 $ 65,021 $ 17,369 81,387 76,084 65,856 2 651 2 625 8 457 82,040 76,711 66,321 1.29 1.29 $ $ 0.85 0.85 $ $ 0.27 0.26 We have excluded certain securities from the computation of diluted earnings per share because the inclusion of these securities would have been anti-dilutive for the periods presented. The following table presents the outstanding securities that were excluded from the computation of diluted earnings per share for the years ended December 31, 2018, 2017 and 2016 (amounts in thousands): Common OP units Series A-1 preferred OP units Series A-3 preferred OP units Series A-4 preferred OP units Series A-4 preferred stock Series C preferred OP units Aspen preferred OP units Total securities Year Ended December 31, 2018 2017 2016 2,726 332 40 410 1,063 314 1,284 6,169 2,746 345 40 424 1,085 316 1,284 6,240 2,759 367 40 634 1,682 333 1,284 7,099 F - 38 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. Selected Quarterly Financial Information (Unaudited) The following is a condensed summary of our unaudited quarterly results for years ended December 31, 2018 and 2017. Income per share for the year may not equal the sum of the fiscal quarters’ income per share due to changes in basic and diluted shares outstanding. 2018 Total Revenues Total Expenses Income before other items Quarters 1st 2nd 3rd 4th (In thousands, except per share amounts) $257,975 $271,434 $323,412 $ 274,004 221,871 245,091 273,040 257,131 $ 36,104 $ 26,343 $ 50,372 $ 16,873 Net Income Attributable to Sun Communities, Inc. Common Stockholders $ 29,986 $ 20,408 $ 46,060 $ 9,039 Earnings per share: Basic Diluted 2017 Total Revenues Total Expenses Income before other items $ $ 0.38 $ 0.25 $ 0.56 $ 0.38 $ 0.25 $ 0.56 $ 0.11 0.11 $234,400 $237,899 $268,245 $ 242,026 209,816 222,452 242,751 234,850 $ 24,584 $ 15,447 $ 25,494 $ 7,176 Net Income Attributable to Sun Communities, Inc. Common Stockholders $ 21,104 $ 12,364 $ 24,115 $ 7,438 Earnings per share: Basic Diluted $ $ 0.29 $ 0.29 $ 0.16 0.16 $ $ 0.31 $ 0.31 $ 0.09 0.09 F - 39 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. Fair Value of Financial Instruments Our financial instruments consist primarily of cash, cash equivalents and restricted cash, marketable securities, accounts and notes receivable, accounts payable, and debt. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy under which these assets and liabilities must be grouped, based on significant levels of observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumption. This hierarchy requires the use of observable market data when available. These two types of inputs have created the following fair value hierarchy: Level 1—Quoted unadjusted prices for identical instruments in active markets; Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The following methods and assumptions were used in order to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Marketable Securities In November 2018, we purchased marketable securities on the Australian Securities Exchange (“ASX”) for total consideration of $54 million US. The marketable securities held by us accounted for under the ASC 321 “Investment Equity Securities” are measured at fair value. Any change in fair value is recognized in the Consolidated Statement of Operations in Remeasurement of marketable securities in accordance with ASU 2016-01 “Financial Instruments - Overall (Subtopic 825-10): Recognition and measurement of financial assets and financial liabilities.” The fair value is measured by the quoted unadjusted share price of which is readily available in active markets (Level 1). Installment Notes Receivable on Manufactured Homes The net carrying value of the installment notes receivable on manufactured homes estimates the fair value as the interest rates in the portfolio are comparable to current prevailing market rates (Level 2). Refer Note 5, “Notes and Other Receivables.” Long Term Debt and Lines of Credit The fair value of long-term debt (excluding the secured borrowing) is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans, and instruments of comparable maturities (Level 2). Refer to Note 9, “Debt and Lines of Credit.” Collateralized Receivables and Secured Borrowing The fair value of these financial instruments offset each other as our collateralized receivables represent a transfer of financial assets and the cash proceeds received from these transactions have been classified as a secured borrowing on the Consolidated Balance Sheets. The net carrying value of the collateralized receivables estimates the fair value as the interest rates in the portfolio are comparable to current prevailing market rates (Level 2). Refer to Note 4, “Collateralized Receivables and Transfers of Financial Assets.” Financial Liabilities We estimate the fair value of our contingent consideration liability based on discounting of future cash flows using market interest rates and adjusting for non-performance risk over the remaining term of the liability (Level 2). F - 40 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Financial Instruments The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair market values due to the short-term nature of these instruments. The table below sets forth our financial assets and liabilities that required disclosure of their fair values on a recurring basis as of December 31, 2018. The table presents the carrying values and fair values of our financial instruments as of December 31, 2018 and December 31, 2017 that were measured using the valuation techniques described above (in thousands). The table excludes other financial instruments such as cash, cash equivalents and restricted cash, accounts receivable, and accounts payable as the carrying values associated with these instruments approximate fair value since their maturities are less than one year. Financial assets Marketable securities Installment notes receivable on manufactured homes, net Collateralized receivables, net Financial liabilities Debt (excluding secured borrowings) Secured borrowings Lines of credit Other liabilities (contingent consideration) 17. Recent Accounting Pronouncements Recent Accounting Pronouncements - Adopted December 31, 2018 December 31, 2017 Carrying Value $ $ $ 49,037 112,798 106,924 Fair Value $ $ $ 49,037 112,798 106,924 $ $ $ Carrying Value Fair Value — $ — 115,797 $ 115,797 128,246 $ 128,246 $ 2,888,572 $ 2,757,649 $ 2,908,799 $ 2,726,770 $ $ $ 107,731 128,000 4,640 $ $ $ 107,731 128,000 4,640 $ $ $ 129,182 $ 129,182 41,257 6,976 $ $ 41,257 6,976 On January 1, 2018, we adopted ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” Refer to Note 2, “Revenue” for information regarding our adoption of this guidance. On January 1, 2018 we adopted ASU 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update provided clarity and reduced both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, regarding a change to the terms or conditions of a share-based payment award. There was no initial impact that resulted from adoption of this guidance; it will be applied should a modification occur. On January 1, 2018, we adopted ASU 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This update clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. Under previous guidance, substantially all of our property acquisitions were accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred. With the adoption of ASU 2017-01, substantially all of our future property acquisitions are accounted for as asset acquisitions. We allocate the purchase price of these properties on a relative fair value basis and capitalize direct acquisition related costs as part of the purchase price. Acquisitions costs that do not meet the criteria to be capitalized will be expensed as incurred and presented as General and administrative costs in our Consolidated Statements of Operations. On January 1, 2018, we adopted ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.” This update required inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of- period and end-of-period total amounts shown on the statement of cash flows. F - 41 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our restricted cash consists of amounts primarily held in deposit for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. Restricted cash is included as a component of Other assets, net on the Consolidated Balance Sheets. Changes in restricted cash are reported in our Consolidated Statements of Cash Flows as operating, investing or financing activities based on the nature of the underlying activity. The following table reconciles our beginning-of-period and end-of-period balances of cash, cash equivalents and restricted cash for the periods shown (in thousands): Cash and cash equivalents Restricted cash Cash, cash equivalents and restricted cash Recent Accounting Pronouncements - Not Yet Adopted December 31, 2018 December 31, 2017 December 31, 2016 $ $ 50,311 11,951 62,262 $ $ 10,127 13,382 23,509 $ $ 8,164 17,149 25,313 In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are evaluating how this guidance will impact our accounting policies regarding assessment of, and allowance for, loan losses. In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The core principle of this update is that a lessee should recognize the right of use (“ROU”) asset and corresponding liabilities in the Consolidated Balance Sheet that arise from lease agreements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We will adopt the amendment in the first quarter 2019 using the prospective approach. Our income from real property and rental home revenue streams is derived from rental agreements where we are the lessor. The new accounting standard narrowed the definition of initial direct costs which can be capitalized. The new standard defines initial direct costs as the incremental costs of signing a lease. Employee salaries, legal fees rendered prior to the execution of a lease, negotiation costs, advertising and other origination effort costs no longer meet the definition of initial direct costs and will not be capitalized. These costs will be included in general and administrative costs, or property operating and maintenance expense, in our Consolidated Statement of Operations. Certain commissions will be capitalized as initial direct costs pursuant to adoption of the standard. We are the lessee in other arrangements, primarily for our executive offices, ground leases at certain communities and certain property. For leases with a term greater than one year, a ROU asset and corresponding liabilities will be included on the Consolidated Balance Sheet. The ROU asset and corresponding liabilities are measured as the estimated present value of minimum lease payments at the commencement of the lease agreement and discounted by our incremental borrowing rate of a collateralized term loan. As of January 1, 2019, we expect to recognize operating lease ROU assets of $40.0 million to $50.0 million which will include the present value of minimum lease payments as well as certain existing below market lease intangibles associated with such leases. Also upon adoption, we expect to recognize operating lease liabilities of $15.0 million to $25.0 million. We will elect certain practical expedients allowable by the ASU, including the expedient to forego separation of lease and non-lease component of lessee contracts, resulting in a gross-up effect on the balance sheet assets and liabilities. Additionally for all leases, we will elect the package of practical expedients, which permits the Company not to reassess expired or existing contracts containing a lease, the lease classification for expired or existing contracts, and measurement of initial direct costs for any existing leases. In August 2018, the FASB issued ASU 2018-15 “Intangibles- Goodwill and Other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The amendments in this update are effective for fiscal years beginning after December 15, 2020. Early adoption of the amendments in this update is permitted, including adoption in any interim period, for all entities. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements. F - 42 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. Commitments and Contingencies Legal Proceedings We are involved in various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse impact on our results of operations or financial condition. Catastrophic Weather In September 2017, our communities in Florida and Georgia sustained damages from Hurricane Irma. We maintain property, casualty, flood and business interruption insurance for our community portfolio, subject to customary deductibles and limits. The table below sets forth estimated insurance recoveries (in millions). Actual insurance recoveries could vary significantly from our estimates. Future changes to estimated insurance recoveries will be recognized in the period(s) in which they are determined. Total estimated insurance receivable - December 31, 2017 Change in estimated insurance recoveries Business interruption payment receivable Advances from insurer Total estimated insurance receivable - December 31, 2018 Year Ended December 31, 2018 $ $ 23.7 9.2 2.2 (16.4) 18.7 Changes in estimated insurance recoveries for damages during the year ended December 31, 2018, were primarily the result of incremental invoices for which the total costs exceeded the applicable deductible and confirmation of payment on the business interruption insurance claim. We are actively working with our insurer on claims for lost earnings and redevelopment costs greater than the asset impairment charge for the three Florida Keys communities. The three impaired Florida Keys communities will require redevelopment followed by a tenant lease-up period. 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. 19. Related Party Transactions Lease of Executive Offices. Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1 percent in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns a less than one percent interest in American Center LLC. Mr. Shiffman is our Chief Executive Officer and Chairman of the Board. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 103,100 rentable square feet of permanent space. The initial term of the lease is until October 31, 2026, and the average gross base rent is $18.55 per square foot until October 31, 2019 with graduated rental increases thereafter. Each of Mr. Shiffman, Mr. Hermelin, Mr. Klein and Mr. Weiss may have a conflict of interest with respect to his obligations as our officer and/or director and his ownership interest in American Center LLC. Legal Counsel. During 2015-2018, Jaffe, Raitt, Heuer, & Weiss, Professional Corporation acted as our general counsel and represented us in various matters. Arthur A. Weiss is the Chairman of the Board of Directors and a shareholder of such firm. We incurred legal fees and expenses owed to Jaffe, Raitt, Heuer, & Weiss of approximately $7.1 million, $5.0 million and $8.0 million in the years ended December 31, 2018, 2017 and 2016, respectively. Tax Consequences Upon Sale of Properties. Gary A. Shiffman holds limited partnership interests in the Operating Partnership which were received in connection with the contribution of properties from partnerships previously affiliated with him. Prior to any redemption of these limited partnership interests for our common stock, Mr. Shiffman will have tax consequences different from those on us and our public stockholders upon the sale of any of these partnerships. Therefore, we and Mr. Shiffman may have different objectives regarding the appropriate pricing and timing of any sale of those properties. 20. Subsequent Events F - 43 SUN COMMUNITIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Subsequent to the quarter ended December 31, 2018, we acquired seven communities for $324.7 million, containing 2,956 MH sites and 612 RV sites. Subsequent to the quarter, we completed a $265.0 million twenty-five year term loan transaction which carries an interest rate of 4.17 percent. Concurrently, we repaid a $187.9 million term loan which was due to mature in January 2030. On January 31, 2019, the Operating Partnership created a new class of OP units named Series D Preferred OP Units in conjunction with the acquisition of a MH community in Oregon City, Oregon. As of February 14, 2019, 488,958 Series D Preferred OP Units were outstanding. The Series D Preferred OP Units provide for quarterly distributions on the $100 per unit issue price of 3.75% per year until January 31, 2021, and 4.0% per year thereafter. We have evaluated our Consolidated Financial Statements for subsequent events through the date that this Form 10-K was issued. F - 44 SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total Accumulated Depreciation $ 2,180 $ 10,710 $ 1,485 14,278 $ 14,896 $ (717 ) Date 2017 (12,046 ) 2000 (384 ) 2016 (8,647 ) 1996 Acquired (A) or Constructed (C) (A) (A) (A) (A) Property Name 49’er Village RV Resort Academy / West Point Adirondack Gateway RV Resort & Campground Allendale Meadows Mobile Village Location Plymouth, CA Canton, MI Gansevoort, NY Allendale, MI Alpine Meadows Mobile Village Grand Rapids, MI Alta Laguna Apple Carr Village Apple Creek Arbor Terrace RV Park Rancho Cucamonga, CA Muskegon, MI Amelia, OH Bradenton, FL Arbor Woods Archview RV Resort & Campground (4) Moab, UT Ypsilanti, MI Ariana Village Lakeland, FL Arran Lake RV Resort & Campground Allenford, ON Austin Lone Star RV Resort Autumn Ridge Bahia Vista Estates Baker Acres RV Resort Bell Crossing Big Timber Lake RV Camping Resort Big Tree RV Resort Blazing Star Blue Heron Pines Blue Jay MH & RV Resort Austin, TX Ankeny, IA Sarasota, FL Zephyrhills, FL Clarksville, TN Cape May Court House, NJ Arcadia, FL San Antonio, TX Punta Gorda, FL Dade City, FL Blue Star / Lost Dutchman MH & RV Resort Apache Junction, AZ Blueberry Hill Boulder Ridge Branch Creek Estates Brentwood Estates Brentwood Mobile Village Brentwood West Brookside Mobile Home Village Brookside Village Bushnell, FL Pflugerville, TX Austin, TX Hudson, FL Kentwood, MI Mesa, AZ Goshen, IN Kentwood, MI Encumbrance — B — — A D — B C — — D — — D — E B A — C E — E C B D E B — B D 620 366 729 23,736 800 543 456 3,340 6,289 240 1,190 630 890 6,810 2,140 717 590 1,250 750 410 2,040 5,120 3,830 1,000 796 1,150 385 13,620 260 170 1,970 3,684 6,692 21,088 6,172 5,480 4,410 12,385 8,419 2,195 1,175 7,913 8,054 17,650 11,880 1,916 21,308 13,534 6,163 35,294 9,679 12,720 3,240 500 3,716 9,359 3,592 24,202 1,080 5,564 $ 2,006 $ 2,180 $ 8,768 1,485 2,563 10,892 9,893 1,405 13,629 3,058 4,709 10,778 — 1,585 254 2,075 4,908 1,381 1,939 8,364 2,027 2,063 1,733 4,195 1,422 5,946 3,545 32,283 6,151 2,593 2,091 1,070 18,380 323 620 366 729 23,736 1,134 543 456 3,340 6,289 240 1,109 630 857 6,810 2,140 704 590 1,250 750 410 2,040 5,120 3,830 4,324 796 1,150 385 13,620 646 170 12,716 23,046 4,533 14,576 16,585 22,493 19,801 8,538 9,119 23,163 8,419 3,780 1,429 9,988 12,962 19,031 13,819 10,280 23,335 15,597 7,896 39,489 11,101 18,666 6,785 32,783 9,867 11,952 5,683 25,272 19,460 5,887 — — — — — — 334 — — — — — (1 ) (3 ) (81 ) — (33 ) — — (3 ) (13 ) — — — — — — — 3,324 — — — — 386 — F - 45 24,531 5,153 14,942 17,314 46,229 20,935 9,081 9,575 26,503 14,708 4,020 2,538 10,618 13,819 25,841 15,959 10,984 23,925 16,847 8,646 39,899 13,141 23,786 10,615 37,107 10,663 13,102 6,068 38,892 20,106 6,057 (9,691 ) 1996 (A&C) (1,953 ) 2016 (4,090 ) 2011 (4,313 ) 1999 (4,718 ) 1996 (1,346 ) 2017 (156 ) 2018 (2,224 ) 1994 (125 ) 2016 (870 ) 2016 (7,521 ) 1996 (1,633 ) 2016 (1,216 ) 2016 (A) (A&C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (5,798 ) 1999 (A&C) (4,936 ) 2013 (1,375 ) 2016 (2,096 ) 2012 (4,447 ) 2015 (936 ) 2016 (2,885 ) 2014 (1,906 ) 2012 (12,231 ) 1998 (6,287 ) 1995 (1,490 ) 2015 (3,527 ) 1996 (4,001 ) 2014 (9,204 ) 1985 (1,496 ) 2011 (A) (A) (A) (A&C) (A) (A) (A) (C) (A&C) (A) (A) (A) (A&C) (A) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Property Name Location Buttonwood Bay MH & RV Resort Sebring, FL Encumbrance D Byron Center Mobile Village Caliente Sands Camelot Villa Campers Haven RV Resort Candlelight Manor Candlelight Village Canyonlands RV Resort & Campground (4) Cape May Crossing Cape May KOA Carolina Pines RV Resort (5) Carriage Cove Carrington Pointe Byron Center, MI Cathedral City, CA Macomb, MI Dennisport, MA South Daytona, FL Sauk Village, IL Moab, UT Cape May, NJ Cape May, NJ Longs, SC Sanford, FL Ft. Wayne, IN Castaways RV Resort & Campground Berlin, MD Cava Robles RV Resort Cave Creek Central Park MH & RV Resort Chisholm Point Estates Cider Mill Crossings Cider Mill Village Citrus Hill RV Resort Clear Water Mobile Village Club Naples Club Wildwood Cobus Green Mobile Home Park Colony in the Wood Comal Farms Compass RV Resort (4) Continental North Country Acres Mobile Village Country Hills Village Paso Robles, CA Evans, CO Haines City, FL Pflugerville, TX Fenton, MI Middleville, MI Dade City, FL South Bend, IN Naples, FL Hudson, FL Osceola, IN Port Orange, FL New Braunfels, TX St. Augustine, FL Davison, MI Cadillac, MI Hudsonville, MI Country Meadows Mobile Village Flat Rock, MI Country Meadows Village Caledonia, MI Country Squire MH & RV Resort Paisley, FL A — A — — A — — C — E — A — B — — C A — B C E A — C — A A A B C — Land 1,952 253 1,930 910 14,260 3,140 600 3,661 270 650 5,900 6,050 1,076 14,320 1,396 2,241 2,600 609 520 250 1,170 80 5,780 14,206 762 5,650 1,455 4,151 749 380 340 924 550 520 Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total 18,294 2,402 6,710 21,211 11,915 3,867 5,623 7,415 1,693 7,736 — 21,235 3,632 22,277 — 15,343 10,405 5,286 1,568 3,590 2,422 1,270 4,952 21,275 7,037 26,828 1,732 10,480 6,089 3,495 3,861 7,583 5,555 1,719 — — — — — — — — — — — — — — — — — — — — — 61 — — — 16 — — — — — 296 — — F - 46 7,109 2,002 221 11,972 2,395 1,903 11,641 41 476 7,302 10,521 2,341 15,234 5,029 37,097 9,463 1,482 4,354 31,130 2,940 1,268 6,419 2,852 1,005 8,264 445 9,240 37 16,332 3,775 693 19,467 8,218 1,272 1,952 253 1,930 910 14,260 3,140 600 3,661 270 650 5,900 6,050 1,076 14,320 1,396 2,241 2,600 609 520 250 1,170 141 5,780 14,206 762 5,666 1,455 4,151 749 380 340 1,220 550 520 25,403 4,404 6,931 33,183 14,310 5,770 17,264 7,456 2,169 15,038 10,521 23,576 18,866 27,306 37,097 24,806 11,887 9,640 32,698 6,530 3,690 7,689 7,804 22,280 15,301 27,273 10,972 10,517 22,421 7,270 4,554 27,050 13,773 2,991 27,355 4,657 8,861 34,093 28,570 8,910 17,864 11,117 2,439 15,688 16,421 29,626 19,942 41,626 38,493 27,047 14,487 10,249 33,218 6,780 4,860 7,830 13,584 36,486 16,063 32,939 12,427 14,668 23,170 7,650 4,894 28,270 14,323 3,511 Accumulated Depreciation (13,596 ) Date 2001 (2,792 ) 1996 (358 ) 2017 (7,307 ) 2013 (1,177 ) 2016 (427 ) 2016 (9,256 ) 1996 (148 ) 2018 (185 ) 2016 (3,572 ) 2013 — 2017 (3,752 ) 2014 (6,886 ) 1997 (5,015 ) 2014 (866 ) 2014 (9,209 ) 2004 (1,040 ) 2016 (5,950 ) 1995 (6,890 ) 2011 (2,138 ) 2011 (297 ) 2016 (4,222 ) 1986 (2,332 ) 2011 (1,886 ) 2016 (8,928 ) 1993 (466 ) 2017 (5,153 ) 2000 (193 ) 2018 (11,407 ) 1996 (4,301 ) 1996 (1,286 ) 2011 (16,314 ) 1994 (2,543 ) 2011 (255 ) 2016 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A&C) (A&C) (C) (C) (A) (A&C) (A&C) (A) (A) (A) (A) (A) (A) (A&C) (A&C) (A) (A&C) (A) (A) (A&C) (A&C) (A) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Property Name Countryside Estates Countryside Village Location Mckean, PA Great Falls, MT Countryside Village of Atlanta Lawrenceville, GA Countryside Village of Gwinnett Countryside Village of Lake Lanier Buford, GA Buford, GA Craigleith RV Resort & Campground Clarksburg, ON Creekwood Meadows Burton, MI Cutler Estates Mobile Village Grand Rapids, MI Cypress Greens Daytona Beach RV Resort Deer Lake RV Resort & Campground Deerfield Run Deerwood Desert Harbor Lake Alfred, FL Port Orange, FL Huntsville, ON Anderson, IN Orlando, FL Apache Junction, AZ Driftwood RV Resort & Campground Clermont, NJ Dunedin RV Resort Dutton Mill Village Eagle Crest East Fork Crossing East Village Estates Egelcraft Ellenton Gardens RV Resort Emerald Coast MH & RV Resort (2) Fairfield Village Fiesta Village MH & RV Resort Fisherman’s Cove Forest Meadows Forest View Dunedin, FL Caledonia, MI Firestone, CO Batavia, OH Washington Twp, MI Muskegon, MI Ellenton, FL Panama City Beach, FL Ocala, FL Mesa, AZ Flint Twp, MI Philomath, OR Homosassa, FL Fort Tatham RV Resort & Campground Fort Whaley RV Resort & Campground Whaleyville, MD Four Seasons Elkhart, IN Sylva, NC Frenchtown Villa / Elizabeth Woods Newport, MI Friendly Village of La Habra La Habra, CA Encumbrance E C C A B — A B E — — C B E D E A D C A D E — B — A A B — C A E D Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total 320 430 1,274 1,124 1,916 420 808 749 960 2,300 2,830 990 6,920 3,940 1,450 4,400 370 2,015 1,280 1,410 690 2,130 10,330 1,160 2,830 380 1,031 1,330 110 510 500 1,450 26,956 11,610 7,157 10,957 9,539 16,357 705 2,043 6,941 17,518 7,158 4,260 1,607 37,593 14,891 29,851 16,923 8,997 150 6,302 25,413 22,596 7,755 9,070 18,673 4,475 3,438 2,050 22,056 760 5,194 4,811 52,327 25,202 — — — — — (1 ) (28 ) 404 — — — (1 ) (192 ) — — — — — — — — — — — — — — — — — — — — — — F - 47 1,534 1,025 9,478 2,418 8,348 458 14,796 3,795 1,882 2,210 358 6,772 4,743 314 2,985 2,370 1,840 30,681 19,369 5,123 2,136 2,121 531 475 1,235 4,369 588 735 788 6,219 3,474 22,607 1,223 320 430 1,274 1,124 1,916 392 1,212 749 960 2,300 2,638 990 6,920 3,940 1,450 4,400 370 2,015 1,280 1,410 690 2,130 10,330 1,160 2,830 380 1,031 1,330 110 510 500 1,450 26,956 13,144 8,182 20,435 11,957 24,705 1,163 16,839 10,736 19,400 9,368 4,618 8,379 42,336 15,205 32,836 19,293 10,837 30,831 25,671 30,536 24,732 9,876 9,601 19,148 5,710 7,807 2,638 22,791 1,548 11,413 8,285 74,934 26,425 13,464 8,612 21,709 13,081 26,621 1,555 18,051 11,485 20,360 11,668 7,256 9,369 49,256 19,145 34,286 23,693 11,207 32,846 26,951 31,946 25,422 12,006 19,931 20,308 8,540 8,187 3,669 24,121 1,658 11,923 8,785 76,384 53,381 Accumulated Depreciation (2,042 ) Date 2014 (1,268 ) 2014 Acquired (A) or Constructed (C) (A) (A) (6,080 ) 2004 (A&C) (5,831 ) 2004 (11,509 ) 2004 (74 ) 2016 (9,494 ) 1997 (6,665 ) 1996 (2,314 ) 2015 (845 ) 2016 (385 ) 2016 (4,135 ) 1999 (5,265 ) 2015 (2,367 ) 2014 (5,689 ) 2014 (1,657 ) 2016 (2,949 ) 2011 (15,698 ) 1998 (A) (A) (A) (C) (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (C) (10,734 ) 2000 (A&C) (7,305 ) 2012 (4,068 ) 2014 (850 ) 2016 (518 ) 2017 (2,319 ) 2015 (868 ) 2014 (4,982 ) 1993 (1,440 ) 1999 (2,748 ) 2015 (137 ) 2016 (1,077 ) 2015 (4,194 ) 2000 (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (11,053 ) 2014 (2,359 ) 2016 (A&C) (A) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Depreciable Assets Land Depreciable Assets Property Name Friendly Village of Modesto Friendly Village of Simi Friendly Village of West Covina Frontier Town RV Resort & Campground Glen Haven RV Resort Glen Laurel Location Modesto, CA Simi Valley, CA West Covina, CA Berlin, MD Zephyrhills, FL Concord, NC Gold Coaster MH & RV Resort Homestead, FL Grand Bay Grand Lakes RV Resort Grand Mobile Estates Dunedin, FL Citra, FL Grand Rapids, MI Grand Oaks RV Resort & Campground Cayuga, ON Grove Ridge RV Resort Groves RV Resort Gulfstream Harbor Gulliver’s Lake RV Resort & Campground Gwynn’s Island RV Resort & Campground Hamlin Heritage Hickory Hills Village Hidden Ridge RV Resort Hidden River RV Resort Hidden Valley RV Resort & Campground High Point Park Dade City, FL Ft. Myers, FL Orlando, FL Millgrove, ON Gwynn, VA Webberville, MI Temecula, CA Battle Creek, MI Hopkins, MI Riverview, FL Normandale, ON Frederica, DE Hill Country Cottage and RV Resort New Braunfels, TX Holiday West Village Holly Forest Estates Holland, MI Holly Hill, FL Holly Village / Hawaiian Gardens Holly, MI Homosassa River RV Resort Horseshoe Cove RV Resort Hunters Crossing Hunters Glen Homosassa Springs, FL Bradenton, FL Capac, MI Wayland, MI Encumbrance D D D C E C A — C B — E A — — C B D — C — — — C B D B — E C C Land 6,260 14,906 14,520 20,885 15,986 5,221 18,960 43,166 1,980 1,641 446 3,460 5,280 374 970 1,290 249 14,510 2,950 760 125 13,200 760 440 3,950 2,610 898 3,790 340 920 1,514 1,520 9,466 430 1,102 8,373 453 4,234 6,314 4,501 3,587 4,220 5,387 2,396 78,930 2,950 595 1,675 7,877 7,697 893 6,376 4,170 7,031 27,200 8,067 8,376 13,596 5,020 32,612 1,092 11,926 — — — — — — 172 — — — (1 ) (66 ) — — — (1 ) (200 ) — 536 — — — — (1 ) (3 ) (177 ) (42 ) — — — — — — — — F - 48 286 2,750 3,236 5,986 (274 ) 2016 Land 6,260 14,906 14,520 18,960 1,980 1,641 618 3,460 5,280 374 904 1,290 249 Depreciable Assets Total 22,255 16,890 6,054 62,776 9,663 13,726 10,043 7,180 8,687 7,664 4,876 7,089 6,342 28,515 31,796 20,574 81,736 11,643 15,367 10,661 10,640 13,967 8,038 5,780 8,379 6,591 14,510 84,243 98,753 1,370 904 833 19,610 1,290 13,273 5,809 866 4,186 4,077 656 1,702 3,946 5,313 1,801 13,227 1,017 2,227 3,397 2,459 847 7,433 2,588 866 1,153 5,768 2,019 3,011 1,253 14,989 760 661 13,200 760 440 3,950 2,433 856 3,790 340 920 1,514 1,520 9,466 430 1,102 2,396 14,902 8,894 9,924 4,290 8,835 5,017 14,464 29,788 8,933 9,529 19,364 7,039 35,623 2,345 26,915 3,156 15,563 22,094 10,684 4,730 12,785 7,450 15,320 33,578 9,273 10,449 20,878 8,559 45,089 2,775 28,017 Accumulated Depreciation (1,870 ) Date 2016 (1,462 ) 2016 (547 ) 2016 (6,512 ) 2015 (874 ) 2016 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (6,996 ) 2001 (A&C) (5,122 ) 1997 (596 ) 2016 (2,248 ) 2012 (3,889 ) 1996 (370 ) 2016 (607 ) 2016 (3,028 ) 1997 (10,240 ) 2015 (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (613 ) 2013 (6,811 ) 1984 (A&C) (789 ) 2016 (2,950 ) 2011 (1,020 ) 2011 (709 ) 2016 (419 ) 2016 (6,972 ) 1997 (3,007 ) 2016 (2,373 ) 2011 (6,307 ) 1997 (8,629 ) 2004 (652 ) 2016 (3,141 ) 2016 (490 ) 2012 (8,704 ) 2004 (A) (A) (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (A) (C) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Property Name Location Encumbrance Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total Accumulated Depreciation Date Acquired (A) or Constructed (C) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 46,648 50,480 (29,971 ) 1996 (A) Indian Creek Park Indian Creek RV & Camping Resort Indian Wells RV Resort Island Lakes Ft. Myers Beach, FL Geneva on the Lake, OH Indio, CA Merritt Island, FL Jellystone Park™ at Birchwood Acres MH & RV Resort Jellystone Park™ at Gardiner (4) Jellystone Park™ at Golden Valley (4) (5) Bostic, NC Jellystone Park™ at Guadalupe River (4) Gardiner, NY Greenfield Park, NY Kerrville, TX Jellystone Park™ at Hill Country (4) Jellystone Park™ at Larkspur Jellystone Park™ at Luray(4) Jellystone Park™ at Maryland (4) Jellystone Park™ at Memphis (4) Jellystone Park™ at Quarryville (4) Jellystone Park™ at Tower Park (4) Canyon Lake, TX Larkspur, CO East Luray, VA Williamsport, MD Horn Lake, TN Quarryville, PA Lodi, CA Jellystone Park™ of Western New York North Java, NY Kensington Meadows Kimberly Estates King’s Lake King’s Pointe King’s Court Mobile Village Kings Manor Kissimmee Gardens Lansing, MI Newport, MI DeBary, FL Lake Alfred, FL Traverse City, MI Lakeland, FL Kissimmee, FL Kissimmee South MH & RV Resort Davenport, FL Knollwood Estates La Casa Blanca La Costa Village La Hacienda RV Resort Lafayette Place Allendale, MI Apache Junction, AZ Port Orange, FL Austin, TX Warren, MI Lafontaine RV Resort & Campground Tiny, ON Lake Avenue RV Resort & Campground Cherry Valley, ON D C D D A — — — — — — — A — — A B C D B — — — — A B D C A — — 3,832 420 2,880 700 560 873 4,829 2,519 1,991 1,880 3,164 2,096 889 3,882 2,560 870 250 1,250 280 510 1,473 2,270 3,270 3,740 400 4,370 3,640 3,670 669 1,290 34,660 20,791 19,470 6,431 5,527 28,406 4,260 23,939 20,709 5,521 29,588 23,737 6,846 33,781 29,819 8,884 2,699 6,160 2,542 16,763 13,782 5,578 14,402 6,819 4,061 14,142 62,315 22,225 5,979 2,075 670 1,290 — (3 ) (5 ) — — — — — — — — — — — — — — — — — — 269 — — — — — — — — (1 ) (1 ) (87 ) (45 ) F - 49 11,988 7,888 3,213 953 7,256 449 9,412 594 74 11,277 476 131 16 59 963 6,801 8,762 10,017 2,808 502 12,730 3,708 1,369 2,763 3,894 592 1,251 926 8,105 1,354 3,832 415 2,880 700 560 873 4,829 2,519 1,991 1,880 3,164 2,096 889 3,882 2,560 870 250 1,250 280 510 1,742 2,270 3,270 3,740 400 4,370 3,640 3,670 669 1,203 28,679 22,683 7,384 12,783 28,855 13,672 24,533 20,783 16,798 30,064 23,868 6,862 33,840 30,782 15,685 11,461 16,177 5,350 17,265 26,512 9,286 15,771 9,582 7,955 14,734 63,566 23,151 14,084 3,429 29,094 25,563 8,084 13,343 29,728 18,501 27,052 22,774 18,678 33,228 25,964 7,751 37,722 33,342 16,555 11,711 17,427 5,630 17,775 28,254 11,556 19,041 13,322 8,355 19,104 67,206 26,821 14,753 4,632 (5,188 ) 2013 (A&C) (1,969 ) 2016 (5,292 ) 1995 (2,851 ) 2013 (669 ) 2018 (119 ) 2018 (555 ) 2018 (428 ) 2018 (620 ) 2016 (645 ) 2018 (539 ) 2018 (151 ) 2018 (726 ) 2018 (661 ) 2018 (3,537 ) 2013 (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (6,971 ) 1995 (A&C) (1,772 ) 2016 (3,478 ) 1994 (2,069 ) 2015 (A) (A) (A) (12,318 ) 1996 (A&C) (711 ) 2016 (1,351 ) 2016 (785 ) 2016 (4,173 ) 2001 (2,300 ) 2014 (7,638 ) 2015 (3,421 ) 2015 (7,711 ) 1998 (236 ) 2016 (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) 505 625 1,795 2,420 (155 ) 2016 SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Depreciable Assets Land Depreciable Assets Property Name Location Lake in Wood RV Resort Lake Josephine RV Resort Lake Juliana Landings Lake Pointe Village Lake Rudolph Campground & RV Resort Lake San Marino RV Park Lakefront Lakeland RV Resort Lakeshore Landings Lakeshore Villas Lakeside Crossing Lakeview Lamplighter Lazy J Ranch Leaf Verde RV Resort (4) Leisure Village Lemon Wood Liberty Farm Lincoln Estates Narvon, PA Sebring, FL Auburndale, FL Mulberry, FL Santa Claus, IN Naples, FL Lakeside, CA Lakeland, FL Orlando, FL Tampa, FL Conway, SC Ypsilanti, MI Port Orange, FL Arcata, CA Buckeye, AZ Belmont, MI Ventura, CA Valparaiso, IN Holland, MI Long Beach RV Resort & Campground Barnegat, NJ Majestic Oaks RV Resort Maple Brook Maplewood Manor Marco Naples RV Resort Meadow Lake Estates Meadowbrook Meadowbrook Estates Meadowbrook Village Meadowlands of Gibraltar Merrymeeting Mill Creek MH & RV Resort Mi-Te-Jo Campground (4) Moab Valley RV Resort & Campground (4) Zephyrhills, FL Matteson, IL Brunswick, ME Naples, FL White Lake, MI Charlotte, NC Monroe, MI Tampa, FL Gibraltar, MI Brunswick, ME Kissimmee, FL Milton, NH Moab, UT Encumbrance A Land 7,360 — A D A A D — D B D C B — — C D C — — E D E — — C A B A C — — — 490 335 480 2,340 650 21,556 1,730 2,570 3,080 3,520 1,156 1,330 7,100 3,417 360 19,540 66 455 710 3,940 8,460 1,770 2,790 1,188 1,310 431 519 640 250 1,400 1,416 3,693 7,097 2,830 3,048 29,795 28,113 5,760 17,440 5,524 19,481 18,983 31,615 10,903 12,846 6,838 8,437 8,219 6,918 1,201 4,201 3,414 4,725 48,865 12,982 10,458 11,498 6,570 3,320 4,728 7,673 1,020 4,839 7,580 8,732 — — — — — — — — — — — — — — — 113 — 116 — — 28 — — — 127 — 379 — — — — — — F - 50 2,107 838 1,821 444 8,092 4,576 1,050 1,812 1,351 843 8,838 7,166 695 84 — 1,612 1,068 3,630 2,625 1,174 1,984 574 1,513 2,308 8,277 14,531 14,782 1,249 4,913 881 2,530 482 Land 7,360 490 335 480 2,340 650 21,556 1,730 2,570 3,080 3,520 1,156 1,330 7,100 3,417 473 19,540 182 455 710 3,968 8,460 1,770 2,790 1,315 1,310 810 519 640 250 1,400 1,416 Depreciable Assets Total 9,204 3,668 4,869 30,239 36,205 10,336 18,490 7,336 20,832 19,826 40,453 18,069 13,541 6,922 8,437 9,831 7,986 4,831 6,826 4,588 6,709 49,439 14,495 12,766 19,775 21,101 18,102 5,977 12,586 1,901 7,369 8,062 8,976 16,564 4,158 5,204 30,719 38,545 10,986 40,046 9,066 23,402 22,906 43,973 19,225 14,871 14,022 11,854 10,304 27,526 5,013 7,281 5,298 10,677 57,899 16,265 15,556 21,090 22,411 18,912 6,496 13,226 2,151 8,769 9,478 12,669 Accumulated Depreciation (2,296 ) Date 2012 (176 ) 2016 (3,198 ) 1994 (3,619 ) 2015 (7,922 ) 2014 (5,575 ) 1996 (1,608 ) 2016 (607 ) 2016 (3,222 ) 2014 (2,363 ) 2015 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (4,162 ) 2015 (A&C) (8,051 ) 2004 (1,629 ) 2015 (371 ) 2017 (1 ) 2018 (2,233 ) 2011 (692 ) 2016 (A) (A) (A) (A) (A) (A) (2,829 ) 1985 (A&C) (4,150 ) 1996 (373 ) 2016 (571 ) 2016 (7,676 ) 2014 (2,255 ) 2014 (1,104 ) 2016 (13,621 ) 1994 (9,507 ) 2000 (10,729 ) 1986 (4,321 ) 1994 (1,848 ) 2015 (342 ) 2014 (632 ) 2016 (166 ) 2018 (178 ) 2018 (A) (A) (A) (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (A) (A) 244 3,693 SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Depreciable Assets Land Depreciable Assets Property Name Location Mountain View Napa Valley Naples RV Resort New Point RV Resort New Ranch North Lake Estates North Point Estates Northville Crossing Oak Creek Oak Crest Oak Island Village Oak Ridge Oakview Estates Oakwood Village Ocean Breeze Jensen Beach MH & RV Resort Ocean Breeze MH & RV Resort (6) Ocean West Oceanside RV Resort & Campground (4) Orange City MH & RV Resort Orange Tree Village Orchard Lake Paddock Park South Mesa, AZ Napa, CA Naples, FL New Point, VA Clearwater, FL Moore Haven, FL Pueblo, CO Northville, MI Coarsegold, CA Austin, TX East Lansing, MI Manteno, IL Arcadia, FL Miamisburg, OH Jensen Beach, FL Marathon, FL McKinleyville, CA Coos Bay, OR Orange City, FL Orange City, FL Milford, OH Ocala, FL Palm Creek Golf & RV Resort Casa Grande, AZ Palm Key Village Palm Village Palos Verdes Shores MH & Golf Community (2) Park Place Park Royale Parkside Village Pebble Creek Pecan Branch Pecan Park RV Resort Pelican Bay Davenport, FL Bradenton, FL San Pedro, CA Sebastian, FL Pinellas Park, FL Cheektowaga, NY Greenwood, IN Georgetown, TX Jacksonville, FL Micco, FL Encumbrance B D C C — C C B B B — D — B — — B — C D C — D B — D D D B C C — D Land 5,490 17,740 3,640 1,550 2,270 4,150 1,582 1,236 4,760 4,311 320 1,090 850 1,964 12,325 11,675 2,020 5,259 2,723 3,486 3,027 29,564 11,185 12,611 6,843 36,941 3,881 6,401 19,026 13,862 2,330 5,040 2,718 920 283 395 630 11,836 3,840 2,970 — 1,360 670 550 1,030 1,379 2,000 470 1,770 4,413 3,244 5,540 2,530 4,025 6,601 76,143 15,661 2,849 21,815 48,678 29,046 10,402 5,074 — 5,000 10,543 — — — — — — — — — 4,365 — — — — — — 345 — — 15 (3 ) (15 ) — — — — — 67 — — — 235 1,417 — F - 51 Land 5,490 17,740 3,640 1,550 2,270 4,150 1,582 1,236 4,760 8,676 320 1,090 850 1,964 Depreciable Assets Total 12,732 12,355 3,978 9,332 3,667 5,287 7,577 37,924 12,668 20,712 9,813 40,196 5,102 20,584 18,222 30,095 7,618 10,882 5,937 9,437 9,159 39,160 17,428 29,388 10,133 41,286 5,952 22,548 Accumulated Depreciation (1,998 ) Date 2014 (1,109 ) 2016 (1,108 ) 2011 (2,186 ) 2013 (293 ) 2016 (1,631 ) 2011 (3,941 ) 2001 (10,422 ) 2012 (1,967 ) 2014 (8,909 ) 2002 (2,798 ) 2011 (6,291 ) 2014 (415 ) 2016 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (C) (A) (A) (C) (A) (A) (A) (11,699 ) 1998 (A&C) 407 680 1,958 4,073 944 1,801 4,550 8,360 1,483 8,101 2,970 3,255 1,221 14,183 22,498 19,026 36,360 55,386 (2,016 ) 2016 (A&C) (150 ) 149 54 2,334 1,121 2,168 1,165 23,627 934 1,174 2,043 2,856 372 292 9,182 10,234 1,051 1,646 2,330 5,385 2,718 920 298 380 630 11,836 3,840 2,970 — 1,427 670 550 1,030 1,614 3,417 470 1,620 4,562 3,298 7,874 3,651 6,193 7,766 99,770 16,595 4,023 23,858 51,534 29,418 10,694 14,256 10,234 6,051 12,189 3,950 9,947 6,016 8,794 3,949 6,573 8,396 111,606 20,435 6,993 23,858 52,961 30,088 11,244 15,286 11,848 9,468 12,659 — 2016 (239 ) 2017 (73 ) 2018 (2,002 ) 2011 (2,642 ) 1994 (3,059 ) 1999 (632 ) 2016 (A) (A) (A) (A) (A) (A) (A) (23,840 ) 2012 (A&C) (2,067 ) 2015 (319 ) 2016 (1,986 ) 2016 (5,975 ) 2015 (3,540 ) 2015 (1,646 ) 2014 (A) (A) (A) (A) (A) (A) (6,632 ) 2000 (A&C) (2,267 ) 1999 (493 ) 2016 (1,428 ) 2015 (C) (A) (A) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total Accumulated Depreciation Property Name Pelican RV Resort & Marina Pembroke Downs Peter’s Pond RV Resort Petoskey KOA RV Resort (4) Petoskey RV Resort Pheasant Ridge Pickerel Park RV Resort & Campground Pin Oak Parc Pine Hills Pine Ridge Pine Trace Pinebrook Village Pismo Dunes RV Resort Plantation Landings Pleasant Lake RV Resort Pony Express RV Resort & Campground (4) Location Marathon, FL Chino, CA Sandwich, MA Petoskey, MI Petoskey, MI Lancaster, PA Napanee, ON O’Fallon, MO Middlebury, IN Prince George, VA Houston, TX Kentwood, MI Pismo Beach, CA Haines City, FL Bradenton, FL North Salt Lake, UT Presidential Estates Mobile Village Hudsonville, MI Rainbow MH & RV Resort Rainbow Village of Largo Rainbow Village of Zephyrhills Rancho Alipaz (2) Rancho Caballero Rancho Mirage Red Oaks MH & RV Resort (2) Regency Heights Reserve at Fox Creek Richmond Place Riptide RV Resort & Marina River Haven Village River Ranch River Ridge Estates River Run Ranch (4) (5) Frostproof, FL Largo, FL Zephyrhills, FL San Juan Capistrano, CA Riverside, CA Apache Junction, AZ Bushnell, FL Clearwater, FL Bullhead City, AZ Richmond, MI Key Largo, FL Grand Haven, MI Austin, TX Austin, TX Granby, CO Encumbrance — D C — — A — — A B C C — D E — B A E — D D B — — D A — C C A — 4,760 9,560 4,700 214 230 2,044 900 1,038 72 405 2,907 130 11,070 3,070 5,220 3,429 680 1,890 4,420 1,800 — 16,560 7,510 5,180 11,330 1,950 501 2,440 1,800 4,690 3,201 8,642 4,742 7,269 22,840 8,676 3,270 19,279 2,125 3,250 544 2,397 17,169 5,692 10,190 30,973 20,403 4,643 6,314 5,682 12,529 9,884 2,856 12,446 22,238 20,499 15,734 20,074 2,040 991 16,967 843 15,090 — — — — — — — (1 ) (61 ) 467 60 — (3 ) (257 ) — — — — — — — — — 16,165 — — — — — (3 ) (31 ) — — 182 — — F - 52 1,621 757 3,485 11 3,391 878 1,029 15,333 3,394 13,415 17,555 1,583 866 2,069 2,999 5 6,157 4,210 2,979 1,907 861 1,168 921 4,089 1,565 1,250 3,222 1,724 14,422 42,959 8,941 9,153 4,760 9,560 4,700 214 230 2,044 839 1,505 132 405 2,650 130 11,070 3,070 5,220 3,429 680 1,890 4,420 1,800 16,165 16,560 7,510 5,180 11,330 1,950 470 2,440 1,800 4,872 3,201 8,642 6,363 8,026 26,325 8,687 6,661 20,157 3,154 18,583 3,938 15,812 34,724 7,275 11,056 33,042 23,402 4,648 12,471 9,892 15,508 11,791 3,717 13,614 23,159 24,588 17,299 21,324 5,262 2,715 31,389 43,802 24,031 9,153 11,123 17,586 31,025 8,901 6,891 22,201 3,993 20,088 4,070 16,217 37,374 7,405 22,126 36,112 28,622 8,077 13,151 11,782 19,928 13,591 19,882 30,174 30,669 29,768 28,629 23,274 5,732 5,155 33,189 48,674 27,232 17,795 Date 2016 (576 ) (654 ) 2016 (6,334 ) 2013 (160 ) 2018 (502 ) 2016 (10,794 ) 2002 (233 ) 2016 (8,942 ) 1994 (2,313 ) 1980 (4,460 ) 1986 (13,644 ) 2004 (2,193 ) 2011 (564 ) 2017 (3,882 ) 2015 (1,988 ) 2016 (118 ) 2018 (7,600 ) 1996 (2,449 ) 2012 (1,356 ) 2016 (1,007 ) 2016 (310 ) 2016 (1,120 ) 2016 (3,528 ) 2014 (2,134 ) 2016 (1,421 ) 2016 (3,256 ) 2014 (2,530 ) 1998 (203 ) 2016 (13,636 ) 2001 (11,408 ) 2000 (11,751 ) 2002 — 2018 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (A) (A&C) (A) (A&C) (A&C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A&C) (C) (C) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Property Name Riverside Club Location Ruskin, FL Encumbrance D Rock Crusher Canyon RV Resort Crystal River, FL Roxbury Park Royal Country Royal Palm Village Royal Palms MH & RV Resort (2) Rudgate Clinton Rudgate Manor Saco / Old Orchard Beach KOA Saddle Oak Club Saddlebrook San Pedro RV Resort & Marina (6) Sandy Lake MH & RV Resort Saralake Estates Savanna Club Scio Farms Estates Sea Air Village Sea Breeze MH & RV Resort (6) Seaport RV Resort Goshen, IN Miami, FL Haines City, FL Cathedral City, CA Clinton Township, MI Sterling Heights, MI Saco, ME Ocala, FL San Marcos, TX Islamorada, FL Carrolton, TX Sarasota, FL Port St. Lucie, FL Ann Arbor, MI Rehoboth Beach, DE Islamorada, FL Old Mystic, CT Seashore Campsites & RV Resort Cape May, NJ Serendipity Settler’s Rest RV Resort Shadow Wood Village Shady Pines MH & RV Resort Shady Road Villas Sheffield Estates North Fort Myers, FL Zephyrhills, FL Hudson, FL Galloway Township, NJ Ocala, FL Auburn Hills, MI Shell Creek RV Resort & Marina Punta Gorda, FL Sherkston Shores Beach Resort & Campground Siesta Bay RV Park Silver Birches RV Resort & Campground Sherkston, ON Ft. Myers, FL Lambton Shores, ON C B E E — A A C D C — — — D B — — C D B — — — — C E — A — Initial Cost to Company Land Depreciable Assets 1,600 420 1,057 2,290 1,730 — 1,090 1,440 790 730 1,703 3,110 730 6,540 12,810 2,300 1,207 7,390 120 1,030 1,160 1,760 4,520 1,060 450 778 2,200 22,750 2,051 66,207 5,542 9,870 20,758 27,446 21,660 23,664 31,110 3,576 6,743 11,843 2,416 17,837 11,403 79,887 22,659 10,179 4,616 290 23,228 23,522 7,685 3,898 3,768 2,819 7,165 9,662 97,164 18,549 880 1,540 Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Depreciable Assets Land Depreciable Assets Total 5,123 3,162 4,204 2,546 3,248 1,364 8,224 11,129 5,361 1,605 23,412 (1,885 ) 1,499 1,027 287 15,500 2,492 (3,397 ) 2,481 2,735 3,092 1,468 1,525 1,247 1,051 2,196 1,551 1,600 586 1,057 2,290 1,730 — 1,090 1,440 790 730 1,703 3,110 730 6,540 12,810 2,288 1,207 9,701 120 1,030 1,160 1,760 4,520 1,060 450 778 2,200 (2,107 ) 21,620 4,963 2,055 Land — 166 — — — — — — — — — — — — — (3 ) (12 ) — 2,311 — — — — — — — — — (1,130 ) (1 ) 4 (1 ) (60 ) F - 53 71,330 8,704 14,074 23,304 30,694 23,024 72,930 9,290 15,131 25,594 32,424 23,024 Accumulated Depreciation (8,321 ) Date 2015 (1,234 ) 2015 (7,229 ) 2001 (18,076 ) 1994 (3,666 ) 2015 (1,946 ) 2016 31,888 32,978 (7,712 ) 2012 42,239 8,937 8,348 35,255 531 19,336 12,430 80,174 38,159 12,671 1,219 2,771 25,963 26,614 9,153 5,423 5,015 3,870 9,361 11,213 95,057 23,512 43,679 9,727 9,078 36,958 3,641 20,066 18,970 92,984 40,447 13,878 10,920 2,891 26,993 27,774 10,913 9,943 6,075 4,320 10,139 13,413 (10,136 ) 2012 (1,577 ) 2014 (6,101 ) 1995 (11,682 ) 2002 — 2016 (1,636 ) 2016 (1,072 ) 2016 (9,659 ) 2015 (24,534 ) 1995 (6,626 ) 1997 — 2016 (1,076 ) 2013 (4,473 ) 2014 (3,287 ) 2015 (782 ) 2016 (388 ) 2016 (412 ) 2016 (304 ) 2016 (4,129 ) 2006 (938 ) 2016 116,677 25,567 (8,503 ) 2016 (15,644 ) 1996 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (C) (A) (A) (A) (A&C) (A&C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) 366 820 1,906 2,726 (161 ) 2016 Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total Accumulated Depreciation SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Property Name Silver Creek RV Resort (4) Location Mears, MI Encumbrance — Silver Springs Sky Harbor Skyline Smith Creek Crossing (4) (5) Clinton Township, MI Cheektowaga, NY Fort Collins, CO Granby, CO Southern Charm MH & RV Resort Zephyrhills, FL Southern Hills / Northridge Place Stewartville, MN Southern Pines Southfork Southport Springs Golf & Country Club Southwood Village Bradenton, FL Belton, MO Zephyrhills, FL Grand Rapids, MI Spanish Main MH & RV Resort Thonotasassa, FL St. Clair Place Stonebridge (MI) (5) Stonebridge (TX) Stonebrook Summit Ridge Sun N Fun RV Resort Sun Valley Sun Villa Estates Suncoast Gateway Sundance Sunlake Estates Sunset Beach RV Resort St. Clair, MI Richfield Twp, MI San Antonio, TX Homosassa, FL Converse, TX Sarasota, FL Apache Junction, AZ Reno, NV Port Richey, FL Zephyrhills, FL Grand Island, FL Cape Charles, VA Sunset Harbor at Cow Key Marina Key West, FL Sunset Lakes RV Resort Sunset Ridge (MI) Sunset Ridge (TX) Swan Meadow Village Sweetwater RV Resort Sycamore Village Tallowwood Isle Hillsdale, IL Portland, MI Kyle, TX Dillon, CO Zephyrhills, FL Mason, MI Coconut Creek, FL B A E — E E — A B — — A — C — C D D B — B D — — — C C E E — — 605 861 2,318 2,260 1,395 4,940 360 1,710 1,000 15,060 300 2,390 501 2,044 2,515 650 2,615 7,014 16,595 24,253 12,120 — 17,366 12,723 3,337 9,011 17,229 11,517 8,159 2,029 — 2,096 14,063 2,092 50,952 117,457 2,750 2,385 594 890 6,290 3,800 8,570 1,840 2,044 2,190 2,140 1,340 390 13,796 18,408 11,773 300 25,306 24,084 24,030 7,636 5,995 — 2,775 19,734 9,113 13,341 20,797 — — — — — — — — — — — — — 246 (3 ) (615 ) — (883 ) (139 ) (3 ) (3 ) — (1,100 ) (3 ) — — — — — — (3 ) (9 ) — — — — — F - 54 139 3,590 5,522 717 614 2,163 11,694 1,117 8,628 3,111 1,792 2,677 2,321 2,195 6,657 790 21,225 605 861 2,318 2,260 1,395 4,940 360 1,710 1,000 15,060 300 2,390 501 2,290 1,900 650 1,732 7,153 7,758 (142 ) Date 2018 20,185 29,775 12,837 614 19,529 24,417 4,454 17,639 20,340 13,309 10,836 4,350 2,195 8,753 14,853 23,317 21,046 32,093 15,097 2,009 24,469 24,777 6,164 18,639 35,400 13,609 13,226 4,851 4,485 10,653 15,503 25,049 (5,194 ) 2012 (4,291 ) 2014 (2,027 ) 2014 — 2018 (1,715 ) 2016 (3,463 ) 2014 (376 ) 2016 (8,722 ) 1997 (2,366 ) 2015 (3,596 ) 2011 (862 ) 2016 (2,169 ) 1998 — 1998 (4,727 ) 2000 (1,747 ) 2015 (8,743 ) 2000 6,275 50,813 123,732 174,545 (11,798 ) 2016 1,602 1,623 788 975 1,743 — 798 2,390 23,838 6,656 461 1,576 4,213 854 2,750 1,285 594 890 6,290 3,800 8,570 1,840 2,035 2,190 2,140 1,340 390 13,796 20,010 13,396 1,088 26,281 25,827 24,030 8,434 8,385 23,838 9,431 20,195 10,689 17,554 21,651 22,760 14,681 1,682 27,171 32,117 27,830 17,004 10,225 25,873 11,621 22,335 12,029 17,944 35,447 (3,052 ) 2014 (8,508 ) 1998 (286 ) 2016 (3,144 ) 2015 (3,079 ) 2015 (2,120 ) 2016 (672 ) 2016 (442 ) 2017 (8,527 ) 1998 (4,687 ) 2000 (2,854 ) 2014 (932 ) 2016 (5,004 ) 2011 (1,815 ) 2016 Acquired (A) or Constructed (C) (C) (A) (A) (A) (C) (A) (A&C) (A) (A) (A&C) (A) (A) (A) (C) (A&C) (A) (A&C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (C) (A&C) (A) (A) (A) (A) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Property Name Location Tamarac Village MH & RV Resort Ludington, MI Encumbrance — Tampa East MH & RV Resort The Colony (2) The Grove at Alta Ridge Dover, FL Oxnard, CA Thornton, CO The Hamptons Golf & Country Club Auburndale, FL The Hideaway The Hills The Ridge The Sands RV & Golf Resort (4) The Valley Key West, FL Apopka, FL Davenport, FL Desert Hot Springs, CA Apopka, FL The Villas at Calla Pointe Cheektowaga, NY Three Lakes Thunderhill Estates Timber Ridge Timberline Estates Hudson, FL Sturgeon Bay, WI Ft. Collins, CO Coopersville, MI Town & Country Mobile Village Traverse City, MI Town & Country Village Trailside RV Resort & Campground Lisbon, ME Seguin, ON Traveler’s World MH & RV Resort San Antonio, TX Treetops RV Resort Vallecito Verde Plaza Victor Villa Vines RV Resort Vista Del Lago Arlington, TX Newbury Park, CA Tucson, AZ Victorville, CA Paso Robles, CA Scotts Valley, CA Vista Del Lago MH & RV Resort Bradenton, FL Vizcaya Lakes Wagon Wheel RV Resort & Campground Walden Woods Warren Dunes Village Water Oak Country Club Estates Waters Edge RV Resort Waverly Shores Village Port Charlotte, FL Old Orchard Beach, ME Homosassa, FL Bridgman, MI Lady Lake, FL Zephyrhills, FL Holland, MI A — E B — — B — — A C E D B A E — — — D — D C D E C C B / D C D E B Land 300 734 — 5,370 15,890 2,720 1,790 8,350 3,071 2,530 380 5,050 640 990 535 406 230 3,690 790 730 25,766 710 2,510 890 17,830 3,630 670 590 1,550 310 2,834 1,180 340 Depreciable Assets Land Depreciable Assets Land Depreciable Assets Total 12,028 6,310 6,437 37,116 67,555 972 3,869 35,463 12,611 5,660 11,014 3,361 9,008 9,231 4,867 3,736 4,539 3,650 7,952 9,831 9,814 7,069 20,408 7,110 9,456 5,329 4,221 7,703 26,375 3,350 16,706 5,450 7,267 85 — — — — — — — — — — — 425 — — — — (1 ) (250 ) — — — — — — — — — — — — 2,603 — 450 F - 55 3,549 5,393 922 30 2,278 631 1,166 3,019 542 1,264 160 2,922 1,632 3,079 4,685 1,878 1,721 436 1,791 1,629 1,036 2,709 1,684 1,951 1,123 1,819 566 3,080 1,151 10,143 28,532 1,908 7,528 385 734 — 5,370 15,890 2,720 1,790 8,350 3,071 2,530 380 5,050 1,065 990 535 406 230 3,440 790 730 25,766 710 2,510 890 17,830 3,630 670 590 1,550 310 5,437 1,180 790 15,577 11,703 7,359 37,146 69,833 1,603 5,035 38,482 13,153 6,924 11,174 6,283 10,640 12,310 9,552 5,614 6,260 4,086 9,743 11,460 10,850 9,778 22,092 9,061 10,579 7,148 4,787 10,783 27,526 13,493 45,238 7,358 14,795 15,962 12,437 7,359 42,516 85,723 4,323 6,825 46,832 16,224 9,454 11,554 11,333 11,705 13,300 10,087 6,020 6,490 7,526 10,533 12,190 36,616 10,488 24,602 9,951 28,409 10,778 5,457 11,373 29,076 13,803 50,675 8,538 15,585 Accumulated Depreciation (3,887 ) Date 2011 (4,949 ) 2005 (628 ) 2016 (5,703 ) 2014 (8,331 ) 2015 (135 ) 2016 (419 ) 2016 (4,718 ) 2015 (287 ) 2018 (552 ) 2016 (1,709 ) 2014 (1,757 ) 2012 (1,685 ) 2014 (7,964 ) 1996 (6,107 ) 1994 (3,270 ) 1996 (1,058 ) 2014 (359 ) 2016 (888 ) 2016 (992 ) 2016 (893 ) 2016 (815 ) 2016 (1,885 ) 2016 (1,828 ) 2013 (777 ) 2016 (555 ) 2016 (535 ) 2015 (2,783 ) 2013 (3,278 ) 2015 (1,829 ) 2011 (21,286 ) 1993 (633 ) 2016 (2,110 ) 2011 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A) (A&C) (A&C) (A) (A&C) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) Property Name West Village Estates Westbrook Senior Village Westbrook Village Westside Ridge Westward Ho RV Resort & Campground Westward Shores Cottages & RV Resort (4) Location Romulus, MI Toledo, OH Toledo, OH Auburndale, FL Glenbeulah, WI West Ossipee, NH White Lake Mobile Home Village White Lake, MI Wild Acres RV Resort & Campground Wildwood Community Willow Lake RV Resort & Campground Willowbrook Place Old Orchard Beach, ME Sandwich, IL Scotland, ON Toledo, OH Willowood RV Resort & Campground Amherstburg, ON Windham Hills Estates Windmill Village Windsor Woods Village Wine Country RV Resort Woodhaven Place Woodlake Trails Woodland Lake RV Resort & Campground Woodland Park Estates Woodlands at Church Lake Woodside Terrace Subtotal of Properties Corporate Headquarters and Other (7) Total Jackson, MI Davenport, FL Wayland, MI Paso Robles, CA Woodhaven, MI San Antonio, TX Bornholm, ON Eugene, OR Groveland, FL Holland, OH Southfield, MI Encumbrance B D B D C — B C D — B — — B C C B C — — — B — 884 355 1,110 760 1,050 1,901 672 1,640 1,890 1,260 781 1,160 2,673 7,560 270 1,740 501 1,186 1,650 1,592 2,480 1,063 19,765 3,295 10,462 10,714 5,642 15,326 6,179 26,786 37,732 2,275 7,054 1,490 2,364 36,294 5,835 11,510 4,541 287 2,165 14,398 9,072 9,625 — — — — — — — — — (1 ) (85 ) — (1 ) (78 ) — — — — — (3 ) (1 ) (56 ) (112 ) — — — A These communities collateralize $405.9 million of secured debt. B These communities collateralize $762.6 million of secured debt. C These communities support the borrowing base for our secured line of credit, which had $128.0 million outstanding. D These communities collateralize $1.3 billion of secured debt. E These communities collateralize $382.8 million of secured debt. F - 56 Initial Cost to Company Costs Capitalized Subsequent to Acquisition (Improvements) Gross Amount Carried at December 31, 2018 Land Depreciable Assets Land Depreciable Assets Land Depreciable Assets 4,457 665 5,047 734 884 355 1,110 760 24,222 3,960 15,509 11,448 Total 25,106 4,315 16,619 12,208 Accumulated Depreciation (5,730 ) Date 2012 (2,128 ) 2001 (8,916 ) 1999 (1,386 ) 2015 2,589 1,050 8,231 9,281 (1,900 ) 2013 Acquired (A) or Constructed (C) (A) (A) (A) (A) (A) (A) (A&C) (A) (A) (A) (A) (A) (299 ) 2018 (9,585 ) 1997 (7,989 ) 2013 (5,982 ) 2014 (206 ) 2016 (6,697 ) 1997 (163 ) 2016 (11,000 ) 1998 (A&C) (4,567 ) 2015 (3,110 ) 2011 (2,659 ) 2014 (5,147 ) 1998 (4,862 ) 2000 (240 ) 2016 (10,152 ) 1998 (1,250 ) 2015 (10,368 ) 1997 (A) (A) (A&C) (A) (A&C) (A) (A) (A) (A) 1,536 10,891 4,425 924 560 4,992 409 20,818 1,566 3,445 3,757 6,407 15,848 435 936 1,954 9,929 1,901 672 1,640 1,890 1,175 781 1,082 2,673 7,560 270 1,740 501 1,130 1,538 1,592 2,480 1,063 16,862 17,070 31,211 38,656 2,835 12,046 1,899 23,182 37,860 9,280 15,267 10,948 16,135 2,600 15,334 11,026 19,554 18,763 17,742 32,851 40,546 4,010 12,827 2,981 25,855 45,420 9,550 17,007 11,449 17,265 4,138 16,926 13,506 20,617 $1,171,638 $ 4,592,685 $ 30,307 $ 1,685,224 $1,201,945 $ 6,277,909 $ 7,479,854 $ (1,422,583 ) — — — 81,092 — 81,092 81,092 (20,047 ) $1,171,638 $ 4,592,685 $ 30,307 $ 1,766,316 $1,201,945 $ 6,359,001 $ 7,560,946 $ (1,442,630 ) SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) (1) Gross amount carried at December 31, 2018, at our Canadian properties, reflects the impact of foreign currency translation. (2) All or part of this property is subject to ground lease. (3) Gross amount carried at December 31, 2018 has decreased at this property due to a partial disposition of land or depreciable assets, as applicable. (4) This property was acquired during 2018. The purchase price allocations and related values shown in the table above are preliminary and may be adjusted as final costs and valuations are determined. (5) This property was not included in our community count as of December 31, 2018 as it was not fully developed. (6) This property was impaired as a result of Hurricane Irma in September 2017. (7) Corporate Headquarters and other fixed assets. F - 57 SUN COMMUNITIES, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION, SCHEDULE III DECEMBER 31, 2018 (amounts in thousands) The change in investment property for the years ended December 31, 2018, 2017, and 2016 is as follows: Beginning balance Community and land acquisitions, including immediate improvements Community expansion and development Improvements Asset impairment Dispositions and other Ending balance The change in accumulated depreciation for the years ended December 31, 2018, 2017, and 2016 is as follows: Beginning balance Depreciation for the period Asset impairment Dispositions and other Ending balance Years Ended December 31, 2018 2017 $ 6,882,879 $ 6,496,339 $ 414,840 152,672 205,006 — (94,451 ) 204,375 88,331 168,315 (10,511 ) (63,970 ) 2016 4,573,522 1,822,564 47,958 113,803 — (61,508 ) $ 7,560,946 $ 6,882,879 $ 6,496,339 Years Ended December 31, 2018 2017 2016 1,237,525 $ 253,952 — 1,026,858 $ 236,422 (405 ) 852,407 201,157 — (48,847 ) 1,442,630 $ (25,350 ) 1,237,525 $ (26,706 ) 1,026,858 $ $ F - 58 SHAREHOLDER INFORMATION ANNUAL MEETING The annual meeting of shareholders will be held at 11:00 a.m., May 21, 2019 at 27777 Franklin Road, Suite 100, Southfield, MI 48034 SEC FORM 10-K A copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2018 is available at no charge to shareholders who direct a written request to: REGIONAL OFFICES Austin, Texas Denver, Colorado Ft. Myers Beach, Florida Grand Rapids, Michigan Orlando, Florida Investor Relations Department Sun Communities, Inc. 27777 Franklin Road, Suite 200 Southfield, Michigan 48034 Telephone: (248) 208-2500 Web Site: www.suncommunities.com TRANSFER AGENT & DIVIDEND DISBURSING AGENT Computershare Trust Company, N.A. P.O. Box 43010 Providence, Rhode Island 02940-3010 Shareholder Inquiries: (800) 426-5523 INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS Grant Thornton LLP 27777 Franklin Road, Suite 800 Southfield, Michigan 48034 STOC K TRADING INFORMATION New York Stock Exchange Ticker Symbol – SUI (Common Stock) QUARTERLY STOC K PRICE INFORMATION 2018 Fourth Quarter Third Quarter Second Quarter First Quarter 2017 Fourth Quarter Third Quarter Second Quarter First Quarter HIGH $108.91 $103.74 $98.99 $92.95 HIGH $96.08 $91.87 $91.37 $83.76 LOW $94.63 $95.07 $89.55 $80.12 LOW $85.27 $84.00 $79.41 $75.76 DISTRIBUTION $0.71 $0.71 $0.71 $0.71 DISTRIBUTION $0.67 $0.67 $0.67 $0.67 CORPORATE COUNSEL Jaffe, Raitt, Heuer & Weiss 27777 Franklin Road, Suite 2500 Southfield, Michigan 48034 CORPORATE HEADQUARTERS Sun Communities, Inc. 27777 Franklin Road, Suite 200 Southfield, Michigan 48034 Telephone: (248) 208-2500 The Annual CEO Certification was submitted to the NYSE pursuant to NYSE rules and guidelines without qualification on May 31, 2018. Sun Communities, Inc. has filed, as exhibits to its Annual Report on Form 10-K for the year ended December 31, 2018, the required certifications regarding the quality of its public disclosure under the applicable provisions of the Sarbanes-Oxley Act of 2002. OFFICERS AND DIRECTORS Gary A. Shiffman . . . . . . . . .Chairman, Chief Executive Officer and Director John B. McLaren . . . . . . . . . .President and Chief Operating Officer Karen J. Dearing . . . . . . . . . .Executive Vice President, Treasurer, Chief Financial Officer and Secretary Jonathan M. Colman . . . . . .Executive Vice President Meghan G. Baivier . . . . . . . .Director, Executive Vice President, Chief Financial Officer, and Chief Operating Officer of Easterly Government Properties, Inc. Stephanie W. Bergeron. . . .Director, and Financial Consultant at Bluepoint Partners, previously the President and Chief Executive Officer of Walsh College Brian M. Hermelin . . . . . . . .Director, Co-Founder and Managing Partner of Rockbridge Growth Equity LLC Ronald A. Klein. . . . . . . . . . .Director, , Principal at JK Ventures and Chief Executive Officer of Origen Financial, Inc. Clunet R. Lewis. . . . . . . . . . .Director, Since 1993 Arthur A. Weiss . . . . . . . . . . . Director, Chairman of the Board and Shareholder of Jaffe Raitt Heuer & Weiss, P.C. NATIONWIDE & CANADA ARIZONA CALIFORNIA COLORADO CONNECTICUT DELAWARE FLORIDA GEORGIA ILLINOIS INDIANA IOWA MAINE MARYLAND MASSACHUSETTS MICHIGAN MINNESOTA MISSOURI MONTANA NEVADA NEW HAMPSHIRE NEW JERSEY NEW YORK NORTH CAROLINA OHIO OREGON PENNSYLVANIA SOUTH CAROLINA TENNESSEE TEXAS UTAH VIRGINIA WISCONSIN ONTARIO, CANADA 27777 Franklin Road, Suite 200 • Southfield, Michigan 48034 www.suncommunities.com • NYSE: SUI 

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