UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2015~~March 31, 2016.

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

Commission file number 1-12616

SUN COMMUNITIES, INC.

(Exact Name of Registrant as Specified in its Charter)



Maryland		38-2730780
(State of Incorporation)		(I.R.S. Employer Identification No.)

27777 Franklin Rd.
Suite 200
Southfield, Michigan		48034
(Address of Principal Executive Offices)		(Zip Code)

(248) 208-2500

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, 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 and post such files). Yes [ X ] No [ ]

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 ]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company [ ]

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

Number of shares of Common Stock, $0.01 par value per share, outstanding as of ~~September 30, 2015~~March 31, 2016: ~~54,546,434~~64,577,863

INDEX




PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of ~~September 30, 2015~~March 31, 2016 (Unaudited) and December 31, ~~2014~~2015	3
	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (Unaudited)	54
	Consolidated Statement of Stockholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2015~~March 31, 2016 (Unaudited)	5
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (Unaudited)	67
	Notes to Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2823
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4837
Item 4.	Controls and Procedures	4837

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	4837
Item 1A.	Risk Factors	4837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
~~Item 5.~~	~~Other Information~~	5039
Item 6.	Exhibits	5140
	Signatures	5141

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUN COMMUNITIES, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	(unaudited) September 30, 2015			December 31, 2014			(unaudited) March 31, 2016			December 31, 2015
ASSETS
Land	$	457,279		$	309,386		$	456,380		$	451,340
Land improvements and buildings	3,604,444			2,509,827			3,586,969			3,535,909
Rental homes and improvements	478,764			439,163			469,217			460,480
Furniture, fixtures, and equipment	98,567			81,586
Furniture, fixtures and equipment							104,855			102,746
Land held for future development	23,659			23,955			23,047			23,047
Investment property	4,662,713			3,363,917			4,640,468			4,573,522
Accumulated depreciation	(879,184		)	(795,753		)	(889,941		)	(852,407		)
Investment property, net (including $92,593 and $94,230 for consolidated variable interest entities at September 30, 2015 and December 31, 2014; see Note 7)	3,783,529			2,568,164
Investment property, net (including $91,246 and $92,009 for consolidated variable interest entities at March 31, 2016 and December 31, 2015; see Note 7)							3,750,527			3,721,115
Cash and cash equivalents	23,917			83,459			410,408			45,086
Inventory of manufactured homes	15,263			8,860			16,636			14,828
Notes and other receivables, net	49,201			51,895			54,124			47,972
Collateralized receivables, net	138,241			122,962			142,944			139,768
Other assets, net	104,452			102,352			188,247			213,030
TOTAL ASSETS	$	4,114,603		$	2,937,692		$	4,562,886		$	4,181,799
LIABILITIES
Mortgage loans payable (including $64,531 and $65,849 for consolidated variable interest at September 30, 2015 and December 31, 2014; see Note 7)	$	2,205,760		$	1,656,740
Mortgage loans payable (including $63,450 and $64,082 for consolidated variable interest entities at March 31, 2016 and December 31, 2015; see Note 7)							$	2,114,818		$	2,125,267
Secured borrowings on collateralized receivables	138,887			123,650			143,664			140,440
Preferred OP units - mandatorily redeemable	45,903			45,903			45,903			45,903
Lines of credit	167,000			5,794			58,065			24,687
Distributions payable	38,819			35,084			45,351			41,265
Other liabilities (including $19,474 and $10,442 for consolidated variable interest entities at September 30, 2015 and December 31, 2014; see Note 7)	190,284			130,369
Other liabilities (including $4,213 and $4,091 for consolidated variable interest entities at March 31, 2016 and December 31, 2015; see Note 7)							184,102			184,859
TOTAL LIABILITIES	2,786,653			1,997,540			2,591,903			2,562,421
Commitments and contingencies
Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 2,298 shares at September 30, 2015 and 483 shares at December 31, 2014	68,633			13,610
Series A-4 preferred stock, $0.01 par value. Issued and outstanding: 2,067 shares at March 31, 2016 and December 31, 2015							61,732			61,732
Series A-4 preferred OP units	20,982			18,722			20,762			21,065
STOCKHOLDERS’ EQUITY
Series A preferred stock, $0.01 par value. Issued and outstanding: 3,400 shares at September 30, 2015 and December 31, 2014	34			34
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 54,546 shares at September 30, 2015 and 48,573 shares at December 31, 2014	545			486
Series A preferred stock, $0.01 par value. Issued and outstanding: 3,400 shares at March 31, 2016 and December 31, 2015							34			34
Common stock, $0.01 par value. Authorized: 180,000 shares; Issued and outstanding: 64,578 shares at March 31, 2016 and 58,395 shares at December 31, 2015							646			584
Additional paid-in capital	2,079,139			1,741,154			2,706,657			2,319,314
Distributions in excess of accumulated earnings	(916,961		)	(863,545		)	(896,896		)	(864,122		)
Total Sun Communities, Inc. stockholders' equity	1,162,757			878,129			1,810,441			1,455,810
Noncontrolling interests:
Common and preferred OP units	76,914			30,107			80,018			82,538
Consolidated variable interest entities	(1,336		)	(416		)	(1,970		)	(1,767		)
Total noncontrolling interests	75,578			29,691			78,048			80,771
TOTAL STOCKHOLDERS’ EQUITY	1,238,335			907,820			1,888,489			1,536,581
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,114,603		$	2,937,692		$	4,562,886		$	4,181,799

See accompanying Notes to Consolidated Financial Statements.

~~SUN COMMUNITIES, INC.~~

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited - dollars in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2015			2014			2015			2014			2016			2015
REVENUES
Income from real property	$	137,548		$	94,245		$	382,906		$	267,847		$	129,235		$	119,525
Revenue from home sales	18,991			13,913			54,559			38,849			24,737			16,834
Rental home revenue	11,856			9,829			34,480			28,964			11,708			11,129
Ancillary revenues	12,511			8,762			20,956			15,452			4,613			3,191
Interest	3,987			3,545			11,864			10,425			3,945			3,984
Brokerage commissions and other income, net	462			338			1,728			720			406			537
Total revenues	185,355			130,632			506,493			362,257			174,644			155,200
COSTS AND EXPENSES
Property operating and maintenance	38,716			28,031			102,437			76,413			31,201			29,214
Real estate taxes	8,520			6,004			26,031			18,092			9,585			8,715
Cost of home sales	13,386			10,524			39,645			29,472			18,184			12,557
Rental home operating and maintenance	7,031			6,232			18,115			16,696			5,876			5,605
Ancillary expenses	6,936			5,197			13,631			10,254			3,508			2,546
General and administrative - real property	10,735			6,971			31,051			23,177
General and administrative - home sales and rentals	3,845			2,313			11,290			7,932
Home selling expenses													2,278			1,690
General and administrative													13,792			11,628
Transaction costs	1,664			2,399			13,150			4,263			2,721			9,449
Depreciation and amortization	44,695			29,917			130,107			88,851			48,412			44,001
Asset impairment charge	—			837			—			837
Extinguishment of debt	—			—			2,800			—
Interest	27,453			18,619			79,593			54,149			26,294			25,389
Interest on mandatorily redeemable preferred OP units	790			808			2,429			2,417			787			852
Total expenses	163,771			117,852			470,279			332,553			162,638			151,646
Income before other gains (losses)	21,584			12,780			36,214			29,704
Income before other gains													12,006			3,554
Gain on disposition of properties, net	18,190			13,631			26,946			14,516			—			8,769
Provision for state income taxes	(77		)	(69		)	(229		)	(207		)
Distributions from affiliate	—			400			7,500			1,200
Provision for income taxes													(228		)	(75		)
Net income	39,697			26,742			70,431			45,213			11,778			12,248
Less: Preferred return to Series A-1 preferred OP units	591			661			1,844			1,997
Less: Preferred return to Series A-3 preferred OP units	45			45			136			136
Less: Preferred return to Series A-4 preferred OP units	326			—			1,032			—
Less: Preferred return to Series C preferred OP units	340			—			680			—
Less: Preferred return to preferred OP units													1,273			1,029
Less: Amounts attributable to noncontrolling interests	2,125			1,851			3,132			3,093			276			264
Net income attributable to Sun Communities, Inc.	36,270			24,185			63,607			39,987			10,229			10,955
Less: Preferred stock distributions	3,179			1,514			11,353			4,542			2,354			4,086
Less: Preferred stock redemption costs	4,328			—			4,328			—
Net income attributable to Sun Communities, Inc. common stockholders	$	28,763		$	22,671		$	47,926		$	35,445		$	7,875		$	6,869
Weighted average common shares outstanding:
Basic	53,220			41,023			52,855			39,283			57,736			52,498
Diluted	53,665			41,267			53,271			41,575			58,126			52,892
Earnings per share (See Note 13):
Basic	$	0.53		$	0.55		$	0.90		$	0.89		$	0.14		$	0.13
Diluted	$	0.54		$	0.55		$	0.90		$	0.85		$	0.14		$	0.13

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - dollars in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Net income $ 39,697
$ 26,742
$ 70,431
$ 45,213
Unrealized gain on interest rate swaps —
—
—
97
Total comprehensive income 39,697
26,742
70,431
45,310
Less: Comprehensive income attributable to the noncontrolling interests 2,125
1,851
3,132
3,101
Comprehensive income attributable to Sun Communities, Inc. $ 37,572
$ 24,891
$ 67,299
$ 42,209



	Three Months Ended March 31,
	2016		2015
Net income/comprehensive income	$	11,778	$	12,248
Less: Comprehensive income attributable to the noncontrolling interests	276		264
Comprehensive income attributable to Sun Communities, Inc.	$	11,502	$	11,984

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(Unaudited - dollars in thousands)



	7.125% Series A Cumulative Redeemable Preferred Stock		Common Stock		Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings			Non-controlling Interests			Total Stockholders' Equity
Balance at December 31, 2015	$	34	$	584	$	2,319,314	$	(864,122	)	$	80,771		$	1,536,581
Issuance of common stock from exercise of options, net	—		—		149		—			—			149
Issuance, conversion of OP units and associated costs of common stock, net	—		62		384,990		—			(108		)	384,944
Share-based compensation - amortization and forfeitures	—		—		2,204		58			—			2,262
Net income	—		—		—		11,499			243			11,742
Distributions	—		—		—		(44,331		)	(2,858		)	(47,189		)
Balance at March 31, 2016	$	34	$	646	$	2,706,657	$	(896,896	)	$	78,048		$	1,888,489

See accompanying Notes to Consolidated Financial Statements.

~~SUN COMMUNITIES, INC.~~

~~CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY~~

~~FOR THE NINE MONTHS ENDED~~ ~~SEPTEMBER 30, 2015~~

~~(Unaudited - dollars in thousands)~~

7.125% Series A Cumulative Redeemable Preferred Stock
Common
Stock
Additional Paid-in Capital Distributions in Excess of Accumulated Earnings Non-controlling Interests Total Stockholders' Equity
Balance at December 31, 2014 $ 34
$ 486
$ 1,741,154
$ (863,545 ) $ 29,691
$ 907,820
Issuance of common stock from exercise of options, net —
—
71
—
—
71
Issuance, conversion of OP units and associated costs of common stock, net —
59
332,830
—
51,247
384,136
Preferred stock redemption costs —
—
—
(4,328 ) —
(4,328 )
Share-based compensation - amortization and forfeitures —
—
5,084
150
—
5,234
Net income —
—
—
67,301
2,800
70,101
Distributions —
—
—
(116,539 ) (8,160 ) (124,699 )
Balance at September 30, 2015 $ 34
$ 545
$ 2,079,139
$ (916,961 ) $ 75,578
$ 1,238,335

~~See accompanying Notes to Consolidated Financial Statements.~~

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - dollars in thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2015			2014			2016			2015
OPERATING ACTIVITIES:
Net income	$	70,431		$	45,213		$	11,778		$	12,248
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on disposition of assets	(4,664		)	(3,606		)	(2,661		)	(1,526		)
Gain on disposition of properties, net	(26,946		)	(14,516		)	—			(8,769		)
Asset impairment charges	—			837
Share-based compensation	5,234			3,408			2,262			1,475
Depreciation and amortization	129,094			89,190			47,594			43,454
Amortization of below market lease intangible	(3,724		)	—			(1,350		)	(1,051		)
Amortization of debt premium intangible	(7,985		)	—			(2,479		)	(1,955		)
Amortization of deferred financing costs	1,410			861			484			390
Distributions from affiliate	(7,500		)	(1,200		)
Change in notes receivable from financed sales of inventory homes, net of repayments	(4,636		)	(13,806		)	(3,664		)	(2,646		)
Change in inventory, other assets and other receivables, net	(17,530		)	3,420			(1,229		)	1,553
Change in other liabilities	13,594			(542		)	191			(2,229		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	146,778			109,259			50,926			40,944
INVESTING ACTIVITIES:
Investment in properties	(148,655		)	(131,602		)	(48,220		)	(40,339		)
Acquisitions of properties	(309,275		)	(137,376		)	—			(148,620		)
Payments for deposits on acquisitions	(2,208		)	(50,000		)	(13		)	(1,950		)
Proceeds related to affiliate dividend distribution	7,500			1,200
Proceeds related to disposition of land	—			221
Proceeds related to disposition of assets and depreciated homes, net	4,849			3,940			2,847			1,343
Proceeds related to the disposition of properties	45,488			59,683			1,634			17,282
Issuance of notes and other receivables	(727		)	(442		)	(1,746		)	(40,206		)
Payment for membership interest	(1,390		)	—
Repayments of notes and other receivables	1,213			5,754			248			320
NET CASH USED FOR INVESTING ACTIVITIES	(403,205		)	(248,622		)	(45,250		)	(212,170		)
FINANCING ACTIVITIES:
Issuance and associated costs of common stock, OP units, and preferred OP units, net	77,306			562,581			384,915			33,618
Net proceeds from stock option exercise	71			126			149			71
Redemption of Series A-4 Preferred Stock	(121,445		)	—
Borrowings on lines of credit							44,820			4,863
Proceeds from issuance of other debt							8,096			255,136
Proceeds received from return of prepaid deferred financing costs							—			4,986
Distributions to stockholders, OP unit holders, and preferred OP unit holders	(121,468		)	(86,414		)	(43,511		)	(38,119		)
Preferred stock redemption costs	(4,328		)	—
Borrowings on lines of credit	394,428			384,924
Payments on lines of credit	(233,222		)	(566,307		)	(11,459		)	(10,513		)
Proceeds from issuance of other debt	326,689			187,340
Payments on other debt	(121,247		)	(87,579		)	(8,249		)	(36,185		)
Proceeds received from return of prepaid deferred financing costs	6,852			2,384
Payments for deferred financing costs	(6,751		)	(3,293		)	(15,115		)	(1,209		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	196,885			393,762			359,646			212,648
Net change in cash and cash equivalents	(59,542		)	254,399			365,322			41,422
Cash and cash equivalents, beginning of period	83,459			4,753			45,086			83,459
Cash and cash equivalents, end of period	$	23,917		$	259,152		$	410,408		$	124,881

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - dollars in thousands)


	Nine Months Ended September 30,				Three Months Ended March 31,
	2015		2014		2016		2015
SUPPLEMENTAL INFORMATION:
Cash paid for interest (net of capitalized interest of $464 and $369, respectively)	$	77,673	$	43,294
Cash paid for interest (net of capitalized interest of $101 and $124, respectively)					$	26,813	$	21,452
Cash paid for interest on mandatorily redeemable debt	$	2,620	$	2,417	$	787	$	855
Cash paid for state income taxes	$	310	$	292
Cash paid for income taxes					$	100	$	14
Noncash investing and financing activities:
Unrealized gain on interest rate swaps	$	—	$	97
Reduction in secured borrowing balance	$	13,243	$	17,119	$	4,872	$	3,936
Change in distributions declared and outstanding	$	4,264	$	8,580	$	3,984	$	3,457
Conversion of common and preferred OP units	$	7,020	$	1,878	$	137	$	902
Settlement of membership interest	$	3,498	$	—
Noncash investing and financing activities at the date of acquisition:
Acquisitions - Series A-4 preferred OP units issued	$	1,000	$	—	$	—	$	1,000
Acquisitions - Series A-4 preferred stock issued	$	175,613	$	—
Acquisitions - Series A-4 Preferred Stock issued					$	—	$	175,417
Acquisitions - Common stock and OP units issued	$	278,955	$	—	$	—	$	258,918
Acquisitions - Series C preferred OP units issued	$	33,154	$	—
Acquisitions - debt assumed	$	377,666	$	—	$	—	$	207,784
Acquisitions - other assets					$	37,750	$	4,221
Acquisitions - note payable					$	—	$	2,377

See accompanying Notes to Consolidated Financial Statements.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

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

We follow accounting standards set by the Financial Accounting Standards Board ("FASB"). FASB sets generally accepted accounting principles ("GAAP"), which we follow to ensure that we consistently report our financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification.

These unaudited Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information and in accordance with GAAP. Pursuant to the SEC rules and regulations we present interim disclosures and certain information and footnote disclosures as required. Accordingly, the unaudited Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited Consolidated Financial Statements reflect, in the opinion of management, all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of the interim financial statements. All intercompany transactions have been eliminated in consolidation. Certain reclassifications have been made to prior periods' financial statements in order to conform to current period presentation.

The results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 as filed with the SEC on ~~March 2, 2015~~February 23, 2016 (the “~~2014~~2015 Annual Report”). These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our ~~2014~~2015 Annual Report.

2. Real Estate Acquisitions ~~and Dispositions~~

~~Green Courte~~Acquisitions

~~First Phase~~

~~During~~On March 22, 2016, we and the ~~fourth quarter~~Operating Partnership entered into a Stock Purchase Agreement with Carefree Communities Intermediate Holdings, L.L.C. (the “Seller”) with respect to the Operating Partnership’s acquisition from the Seller of ~~2014, we completed the first phase~~all of the acquisition of the Green Courte properties. We acquired 32 manufactured housing ("MH") communities with over 9,000 developed sites in 11 states. Included in the total consideration paid for the first phase was the issuance of 361,797issued and outstanding shares of common stock ~~501,130 common OP units, 483,317 shares~~ of ~~6.50% Series A-4 Cumulative Convertible Preferred Stock ("Series A-4 Preferred Stock"~~Carefree Communities Inc. (“Carefree Communities”),. Carefree Communities directly or indirectly owns 103 manufactured home (“MH”) and ~~669,449 Series A-4 preferred OP units.~~

~~Second Phase~~

~~In January 2015, we completed~~recreational vehicle (“RV”) communities, comprising 9,829 developed manufactured home sites, 17,725 RV sites and approximately 396 additional manufactured home sites and approximately 2,586 additional RV sites suitable for development. We anticipate that the ~~final~~ closing of the acquisition will occur no later than July 9, 2016. As of March 31, 2016, we have deposits of $15.1 million related to rate locks on potential debt instruments related to the Carefree acquisition. The consummation of the ~~Green Courte properties. We acquired~~$1.7 billion acquisition is subject to customary closing conditions. As a result, there can be no assurances as to the ~~remaining 26 communities comprised~~actual closing or the timing of ~~over 10,000 sites.~~ ~~Included in~~ the ~~total consideration paid for the second phase was the issuance~~closing.

On March 30, 2016, we closed on an underwritten public offering of ~~4,377,073~~ 6,037,500 shares of common stock at a price of $66.50 per share. The net proceeds from the offering of $385.4 million will be used to fund a portion of the purchase price for the acquisition of Carefree Communities. If for any reason the acquisition is not consummated, we intend to use the net proceeds of the offering to repay borrowings outstanding under the revolving loan under our senior credit facility, to fund possible future acquisitions of properties and ~~5,847,234 shares of Series A-4 Preferred Stock.~~for working capital and general corporate purposes.

In March 2016, we acquired Hill Country Cottage and RV Resort ("Hill Country"), an RV resort with 353 sites located in New Braunfels, Texas.

In March 2016, we acquired Kimberly Estates, an MH community with 387 sites located in Frenchtown Township, Michigan.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables summarize the ~~fair value~~amounts of the assets acquired and liabilities assumed at the acquisition dates and the consideration paid for the acquisition completed in 2016 (in thousands):

At Acquisition Date
First Phase ⁽¹⁾

Second Phase ⁽¹⁾
Total
Investment in property $ 656,543
$ 818,109
$ 1,474,652
Notes receivable 5,189
850
6,039
Other (liabilities) assets (1,705 ) 7,405
5,700
In-place leases and other intangible assets 12,870
15,460
28,330
Below market lease intangible (10,820 ) (54,580 ) (65,400 )
Assumed debt (199,300 ) (201,466 ) (400,766 )
Total identifiable assets acquired and liabilities assumed $ 462,777
$ 585,778
$ 1,048,555

Consideration
Common OP units⁽²⁾
$ 24,064
$ —
$ 24,064
Series A-4 preferred OP units⁽³⁾
18,852
1,000
19,852
Common stock 20,427
259,133
279,560
Series A-4 Preferred Stock ⁽³⁾
13,697
175,527
189,224
Consideration from new mortgages 100,700
90,794
191,494
Cash consideration transferred 285,037
59,324
344,361
Total consideration transferred $ 462,777
$ 585,778
$ 1,048,555

⁽¹⁾~~The purchase price allocations for the first and second closings are preliminary and may be adjusted as final costs and final valuations are determined.~~

⁽²⁾~~To estimate the fair value of the common OP units at the valuation date, we utilized the market approach, observing public price of our common stock.~~

⁽³⁾To estimate the fair value of the Series A-4 preferred OP units and the Series A-4 Preferred Stock at the valuation date, we utilized an income approach. Under this approach, we used the Binomial Lattice Method.

The amount of revenue and net income included in the Consolidated Statements of Operations related to the Green Courte properties for the three and nine months ended September 30, 2015 is set forth in the following table (in thousands):

Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
(unaudited) (unaudited)
Revenue $ 33,772
$ 102,243
Net income $ 4,029
$ 13,295

~~Other Acquisitions~~

~~In August 2015, we acquired Rock Crusher Canyon RV Resort ("Rock Crusher"), a recreational vehicle ("RV") resort with 391 sites located in Crystal Lake, Florida.~~

In July 2015, we acquired Frontier Town RV Resort ("Frontier Town"), a RV resort with 584 developed sites and expansion potential of 200 sites, located in Berlin, Maryland. We also acquired Fort Whaley RV Resort ("Fort Whaley"), a RV resort with 210 developed sites and expansion potential of nearly 90 sites, located in Whaleyville, Maryland.

In May 2015, we acquired La Hacienda RV Resort ("La Hacienda"), a RV resort with 241 sites located in Austin, Texas. We also acquired Lakeside Crossing, a MH community with 419 sites and expansion potential of nearly 300 sites, located near Myrtle Beach, South Carolina.

In April 2015, we acquired the Berger portfolio ("Berger"), which consisted of six MH communities with over 3,130 developed sites and expansion potential of approximately 380 sites. Included in the total consideration paid was 371,808 common OP units and 340,206 Series C preferred OP units.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~In March 2015, we acquired Meadowlands Gibraltar ("Meadowlands"), a MH community with 321 sites located in Gibraltar, Michigan.~~

The following tables summarize the amounts of the assets acquired and liabilities assumed (excluding Green Courte) at the acquisition date and the consideration paid for the acquisitions completed in 2015 (in thousands):

At Acquisition Date
Meadowlands ⁽¹⁾

Berger ⁽¹⁾

Lakeside Crossing ⁽¹⁾

La Hacienda ⁽¹⁾

Frontier Town ⁽¹⁾

Fort Whaley ⁽¹⁾

Rock Crusher ⁽¹⁾
Total
Investment in property $ 8,313
$ 268,026
$ 35,438
$ 25,895
$ 62,126
$ 5,704
$ 5,962
$ 411,464
Inventory of manufactured homes 285
—
—
—
—
—
—
285
In-place leases and other intangible assets 270
5,040
520
1,380
70
—
110
7,390
Below market lease intangible —
(7,840 ) (3,440 ) —
—
—
—
(11,280 )
Assumed debt (6,318 ) (169,882 ) —
—
—
—
—
(176,200 )
Total identifiable assets acquired and liabilities assumed $ 2,550

$ 95,344
$ 32,518
$ 27,275
$ 62,196
$ 5,704
$ 6,072
$ 231,659

Consideration
Common OP units $ —
$ 19,650
$ —
$ —
$ —
$ —
$ —
$ 19,650
Series C preferred OP units —
33,154
—
—
—
—
—
33,154
Note payable 2,377
—
—
—
—
—
—
2,377
Cash consideration transferred 173
42,540
32,518
27,275
62,196
5,704
6,072
176,478
Total consideration transferred $ 2,550
$ 95,344
$ 32,518
$ 27,275
$ 62,196
$ 5,704
$ 6,072
$ 231,659



At Acquisition Date	Hill Country ⁽¹⁾		Kimberly Estates ⁽¹⁾		Total
Investment in property	$	29,990	$	7,313	$	37,303
Inventory of manufactured homes	—		97		97
In-place leases and other intangible assets	10		340		350
Total identifiable assets acquired and liabilities assumed	$	30,000	$	7,750	$	37,750

Consideration
Proceeds from prior dispositions held in escrow	$	30,000	$	7,750	$	37,750

⁽¹⁾ The purchase price allocations for ~~Meadowlands, Berger, Lakeside Crossing, La Hacienda, Frontier Town, Fort Whaley~~Hill Country and ~~Rock Crusher~~Kimberly Estates are preliminary and may be adjusted as final costs and final valuations are determined.

The amount of revenue and net income included in the Consolidated Statements of Operations for the three months ended March 31, 2016 related to the acquisitions completed in ~~2015 (excluding Green Courte) for the three and nine months ended September 30, 2015~~2016 is set forth in the following table (in thousands):

Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
(unaudited) (unaudited)
Revenue $ 12,676
$ 19,388
Net income $ 4,162
$ 4,974

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~



	Three Months Ended March 31, 2016
	(unaudited)
Revenue	$	280
Net income	$	188

The following unaudited pro forma financial information presents the results of our operations for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 ~~(including Green Courte)~~ as if the properties were acquired on January 1, ~~2014.~~2015. 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. 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 acquisitions been consummated on January 1, ~~2014~~2015 (in thousands, except per-share data).


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	(unaudited)				(unaudited)				(unaudited)
	2015		2014		2015		2014		2016		2015
Total revenues	$	186,381	$	166,839	$	520,382	$	470,980	$	175,547	$	156,498
Net income attributable to Sun Communities, Inc. common stockholders	$	30,609	$	31,711	$	64,580	$	55,976	$	8,243	$	7,069
Net income per share attributable to Sun Communities, Inc. common stockholders - basic	$	0.58	$	0.76	$	1.22	$	1.40	$	0.16	$	0.13
Net income per share attributable to Sun Communities, Inc. common stockholders - diluted	$	0.58	$	0.76	$	1.21	$	1.40	$	0.16	$	0.13

Transaction costs of approximately ~~$1.7~~$2.7 million and ~~$2.4 million and $13.2 million and $4.3~~$9.4 million have been incurred for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015, respectively, and are presented as “Transaction costs” in our Consolidated Statements of Operations.

~~Dispositions~~

~~During the nine months ended September 30, 2015, we completed the sales of four MH communities. Pursuant to Accounting Standards Update ("ASU") 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity~~"("ASU 2014-08"), the disposals of the communities do not qualify for presentation as a discontinued operation, as the sales do not have a major impact on our operations and financial results and do not represent a strategic shift. Additionally, the communities are not considered an individually significant component and therefore do not qualify for presentation as a discontinued operation. A gain of $26.9 million is recorded in "Gain on disposition of properties, net" in our Consolidated Statements of Operations. The table below lists the communities we have disposed of during the nine months ended September 30, 2015.



~~Community~~	~~State~~	~~Number of Sites~~
~~Candlewick Court~~	MI	~~211~~
~~Catalina~~	OH	~~462~~
~~Worthington Arms~~	OH	~~224~~
~~Valley Brook~~	IN	~~798~~

3. Collateralized Receivables and Transfers of Financial Assets

We 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.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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	Repurchase Percentage
Fewer than or equal to 15	100	%
Greater than 15 but less than 64	90	%
Equal to or greater than 64 but less than 120	65	%
120 or more	50	%

The transferred assets have been classified as ~~Collateralized receivables,~~"Collateralized Receivables," net and the cash proceeds received from these transactions have been classified as a ~~Secured borrowing~~"secured borrowing" on collaterized receivables within the Consolidated Balance Sheets. The balance of the collateralized receivables was ~~$138.2~~$142.9 million (net of allowance of ~~$0.6~~$0.7 million) and ~~$123.0~~$139.8 million (net of allowance of $0.7 million) as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, respectively. The receivables have a weighted average interest rate and maturity of ~~10.2%~~10.1% and ~~15.2~~15.7 years as of ~~September 30, 2015,~~March 31, 2016, and ~~10.4%~~10.2% and ~~14.6~~15.6 years as of December 31, ~~2014.~~2015.

The outstanding balance on the secured borrowing was ~~$138.9~~$143.7 million and ~~$123.7~~$140.4 million as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, 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 ~~$3.3~~$3.4 million and $3.0 million ~~and $9.6 million and $8.6 million~~ for the ~~three and~~ ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015, ~~and 2014,~~ 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):


	Nine Months Ended			Three Months Ended
	September 30, 2015			March 31, 2016
Beginning balance	$	123,650		$	140,440
Financed sales of manufactured homes	28,481			8,095
Principal payments and payoffs from our customers	(6,728		)	(2,626		)
Principal reduction from repurchased homes	(6,516		)	(2,246		)
Total activity	15,237			3,223
Ending balance	$	138,887		$	143,663

The following table sets forth the allowance for the collateralized receivables as of ~~September 30, 2015~~March 31, 2016 (in thousands):


	Nine Months Ended			Three Months Ended
	September 30, 2015			March 31, 2016
Beginning balance	$	(688	)	$	(672	)
Lower of cost or market write-downs	275			203
Increase to reserve balance	(233		)	(251		)
Total activity	42			(48		)
Ending balance	$	(646	)	$	(720	)

4. Notes and Other Receivables

1311

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~4. Notes and Other Receivables~~

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


	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015
Installment notes receivable on manufactured homes, net	$	22,375	$	25,884	$	23,424	$	20,418
Other receivables, net	26,826		26,011		30,700		27,554
Total notes and other receivables, net	$	49,201	$	51,895	$	54,124	$	47,972

Installment Notes Receivable on Manufactured Homes

The installment notes ~~receivable~~ of ~~$22.4~~$23.4 million (net of allowance of $0.2 million) and ~~$25.9~~$20.4 million (net of allowance of ~~$0.1~~$0.2 million) as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, respectively, are collateralized by manufactured homes. The notes represent financing provided by us to purchasers of manufactured homes primarily located in our communities and require monthly principal and interest payments. The notes have a net weighted average interest rate (net of servicing costs) and maturity of ~~8.6%~~8.7% and ~~10.1~~11.5 years as of ~~September 30, 2015~~March 31, 2016, and ~~8.7%~~8.6% and ~~10.4~~10.0 years as of December 31, ~~2014~~2015.

The change in the aggregate gross principal balance of the installment notes receivable is as follows (in thousands):


	Nine Months Ended			Three Months Ended
	September 30, 2015			March 31, 2016
Beginning balance	$	26,024		$	20,610
Financed sales of manufactured homes	653			4,359
Acquired notes (see Note 2)	850
Principal payments and payoffs from our customers	(3,645		)	(823		)
Principal reduction from repossessed homes	(1,339		)	(517		)
Total activity	(3,481		)	3,019
Ending balance	$	22,543		$	23,629

Allowance for Losses for Installment Notes Receivable

The following table sets forth the allowance change for the installment notes receivable as follows (in thousands):


	Nine Months Ended			Three Months Ended
	September 30, 2015			March 31, 2016
Beginning balance	$	(140	)	$	(192	)
Lower of cost or market write-downs	42			28
Increase to reserve balance	(70		)	(40		)
Total activity	(28		)	(12		)
Ending balance	$	(168	)	$	(204	)

Other Receivables

As of ~~September 30, 2015~~March 31, 2016, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of ~~$5.3~~$5.2 million (net of allowance of ~~$1.1~~$(0.6) million), home sale proceeds of ~~$9.4~~$16.4 million, insurance receivables of $0.9 million, insurance settlement of ~~$4.5~~$3.7 million, rebates and other receivables of ~~$4.5~~$2.3 million and a note receivable of $2.2 million. The $2.2 million note bears interest at 8.0% for the first two years and in year three is indexed to 7.87% plus the one year Federal Reserve treasury constant maturity rate for the remainder of the loan. The note is secured by the senior mortgage on one MH community and a deed of land, and is due on December 31, 2016. As of December 31, ~~2014~~2015, other receivables were comprised of amounts due from residents for rent, and water and sewer usage of ~~$4.9~~$4.7 million (net of allowance of ~~$1.0~~$0.9 million), home sale proceeds of ~~$7.4~~$10.5 million, insurance receivables of ~~$1.0~~$1.2 million, insurance settlement of $3.7 million, rebates and other receivables of ~~$6.8~~$5.3 million and a note receivable of $2.2 million.

1412

SUN COMMUNITIES, INC.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In April 2015, a $40.2 million note was repaid in conjunction with the Berger acquisition, which consisted of six MH communities (see Note 2). The note bore interest at 9.6% per annum and was secured by certain assets of the principals of the seller.


5.	Intangible Assets

Our intangible assets include in-place leases from acquisitions, franchise fees, and other intangible assets. These intangible assets are recorded in "Other assets, net" on the Consolidated Balance Sheets. The gross carrying amounts, and accumulated amortization are as follows (in thousands):

September 30, 2015 December 31, 2014
Intangible Asset Useful Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
In-place leases 7 years $ 63,281
$ (18,128 ) $ 41,511
$ (12,107 )
Franchise fees and other intangible assets 15 years 1,864
(493 ) 764
(106 )
Total $ 65,145
$ (18,621 ) $ 42,275
$ (12,213 )

~~During 2015, in connection with our acquisitions, we purchased in-place leases and other intangible assets valued at approximately~~ ~~$22.9 million~~ ~~with useful lives ranging from seven to fifteen years.~~



		March 31, 2016					December 31, 2015
Intangible Asset	Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
In-place leases	7 years	$	63,331	$	(22,398	)	$	62,981	$	(20,245	)
Franchise fees and other intangible assets	15 years	1,864		(751		)	1,864		(622		)
Total		$	65,195	$	(23,149	)	$	64,845	$	(20,867	)

The aggregate net amortization expenses related to the intangible assets are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Intangible Asset	2015		2014		2015		2014		2016		2015
In-place leases	$	2,341	$	891	$	6,020	$	2,674	$	2,153	$	1,899
Franchise fees and other intangible assets	129		19		387		58		129		129
Total	$	2,470	$	910	$	6,407	$	2,732	$	2,282	$	2,028

6. Investment in Affiliates

Origen Financial Services, LLC (“OFS LLC”)

At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, we had a 22.9% ownership interest in OFS LLC, an entity formed to originate manufactured housing installment contracts. We have suspended equity accounting as the carrying value of our investment is zero.

Origen Financial, Inc. (“Origen”)

Through Sun OFI, LLC, a taxable REIT subsidiary, we own 5,000,000 shares of common stock in Origen, which approximates an ownership interest of ~~19%~~19.3%. We had suspended equity accounting for this investment as the carrying value of our investment was zero. In January 2015, Origen completed the sale of substantially all of its assets to an affiliate of GoldenTree Asset Management, LP and has announced its intention to dissolve and liquidate. During the second quarter of 2015, and as disclosed in a press release on March 30, 2015, Origen made an initial distribution of $1.50 per share to its stockholders of record as of April 13, 2015, retaining approximately $6.2 million for expected dissolution, wind down costs, expenses, and contingencies. Depending on the actual cost of estimated wind down expenses, Origen may make one or more additional interim distributions of excess cash to stockholders prior to completing liquidation. Upon completion of liquidation, Origen will distribute remaining cash, if any, to stockholders. During the second quarter of 2015, we received an initial distribution of $7.5 million from Origen. No distributions have been received in 2016.

7. Consolidated Variable Interest Entities

~~Variable~~In 2016, the Company adopted Accounting Standards Update (“ASU”) No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The Company evaluated the application of ASU No. 2015-02 and concluded that no change was required to its accounting of its interests in less than wholly owned joint ventures, however, the Operating Partnership now meets the criteria as a variable interest ~~entities ("VIEs")~~entity. The Company’s significant asset is its investment in the Operating Partnership, and consequently, substantially all of the Company’s assets and liabilities represent those assets and liabilities of the Operating Partnership.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other VIEs that are consolidated include Rudgate Village SPE, LLC, Rudgate Clinton SPE, LLC, Rudgate Clinton Estates SPE, LLC (the “Rudgate Borrowers”), and Wildwood Village Mobile Home Park ("Wildwood"). We evaluated our arrangements with these properties under the guidance set forth in FASB Accounting Standard Codification ("ASC") ASC Topic 810 "Consolidation". We concluded that the Rudgate Borrowers and Wildwood qualify as VIEs as we are the primary beneficiary and hold controlling financial interests in these entities due to our power to direct the activities that most significantly impact the economic performance of the entities, as well as our obligation to absorb the most significant losses and our rights to

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

receive significant benefits from these entities. As such, the transactions and accounts of these VIEs are included in the accompanying 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):


	September 30, 2015			December 31, 2014			March 31, 2016			December 31, 2015
ASSETS
Investment property, net	$	92,593		$	94,230		$	91,246		$	92,009
Other assets	3,767			4,400			3,398			3,823
Total Assets	$	96,360		$	98,630		$	94,644		$	95,832

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt	$	64,531		$	65,849		$	63,450		$	64,082
Other liabilities	19,474			10,442			4,213			4,091
Noncontrolling interests	(1,336		)	(416		)	(1,970		)	(1,767		)
Total Liabilities and Stockholders' Equity	$	82,669		$	75,875		$	65,693		$	66,406

Investment property, net and other assets related to the consolidated VIEs comprised approximately ~~2.3%~~2.1% and ~~3.4%~~2.3% of our consolidated total assets at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, respectively. Debt and other liabilities comprised approximately ~~2.9%~~2.5% and ~~3.8%~~2.5% of our consolidated total liabilities at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, respectively. Noncontrolling interest related to the consolidated VIEs comprised less than 1.0% of our consolidated total equity at ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015.

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Debt and Lines of Credit

The following table sets forth certain information regarding debt (in thousands):


	Principal Outstanding				Weighted Average Years to Maturity		Weighted Average Interest Rates				Principal Outstanding				Weighted Average Years to Maturity		Weighted Average Interest Rates
	September 30, 2015		December 31, 2014		September 30, 2015	December 31, 2014	September 30, 2015		December 31, 2014		March 31, 2016		December 31, 2015		March 31, 2016	December 31, 2015	March 31, 2016		December 31, 2015
Collateralized term loans - CMBS	$	742,142	$	806,840	5.0	5.4	5.3	%	5.3	%	$	636,824	$	642,429	5.1	5.3	5.4	%	5.3	%
Collateralized term loans - FNMA	796,714		492,800		6.1	7.1	4.6	%	4.0	%	784,598		791,304		5.6	5.8	4.7	%	4.6	%
Collateralized term loans - Life Companies	469,486		204,638		13.8	10.9	4.1	%	4.3	%	497,161		502,555		14.1	14.4	4.1	%	4.1	%
Collateralized term loans - FMCC	197,418		152,462		9.2	9.9	4.0	%	4.0	%	196,235		197,418		8.7	9.0	4.0	%	4.0	%
Secured borrowing	138,887		123,650		15.2	14.6	10.2	%	10.4	%	143,664		140,440		15.7	15.6	10.1	%	10.2	%
Preferred OP units - mandatorily redeemable	45,903		45,903		6.3	6.8	6.9	%	6.9	%	45,903		45,903		6.0	6.1	6.9	%	6.9	%
Total debt	$	2,390,550	$	1,826,293	8.1	7.5	5.1	%	5.1	%	$	2,304,385	$	2,320,049	8.2	8.4	5.1	%	5.0	%

Collateralized Term Loans

In August 2015, we entered into an agreement to borrow $87.0 million in mortgage debt that will be secured by five communities at an interest rate of 4.06% for a term of 25 years. This loan will close in two separate closings. In September 2015, we completed the first closing for $51.2 million secured by four communities and the second closing for $35.8 million is scheduled to close in December 2015.

In May 2015, we defeased a total of $70.6 million aggregate principal amount of collateralized term loans with an interest rate of 5.32% that were due to mature on July 1, 2016, releasing 10 communities. As a result of the transaction we recognized a loss on debt extinguishment of $2.8 million that is reflected in our Consolidated Statement of Operations.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In April 2015, in relation to the acquisition of the Berger properties (see Note 2), we assumed debt with a fair market value of $169.9 million on the communities with a weighted average interest rate of 5.17% and a weighted average remaining term of 6.3 years.

In March 2015, in relation to the acquisition of Meadowlands, ~~(see Note 2),~~ we assumed a $6.3 million mortgage with an interest rate of 6.5% and a remaining term of 6.5 years. Also, in relation to this acquisition, we entered into a note payable with the seller for $2.4 million that bears no interest but is payable in three equal yearly installments beginning in March 2016.

~~In January 2015, in relation to~~ During the ~~acquisition~~first quarter of 2016, we paid the first of the ~~Green Courte properties (see Note 2), we refinanced approximately $90.8 million~~yearly installments of mortgage debt on 10 of the communities (resulting in proceeds of $112.3 million) at a weighted average interest rate of 3.87% per annum and a weighted average term of 14.1 years. We also assumed approximately $201.4 million of mortgage debt at a weighted average interest rate of 5.74% and a weighted average remaining term of 6.3 years.$0.8 million.

The collateralized term loans totaling ~~$2.4~~$2.2 billion as of ~~September 30, 2015,~~March 31, 2016, are secured by ~~171~~160 properties comprised of ~~68,814~~65,653 sites representing approximately ~~$2.7~~$2.6 billion of net book value.

Secured Borrowing

See Note 3, "Collateralized Receivables and Transfers of Financial Assets", for additional information regarding our collateralized receivables and secured borrowing transactions.

Preferred OP Units

Included in preferred OP units is $34.7 million of Aspen preferred OP units issued by the Operating Partnership which are convertible into ~~509,676~~500,234 shares of ~~the Company's~~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 ofor less, 0.397 common OP units, or (b) if the market price of our common stock is greater than $68.00 per share, that the number of common OP units determined by dividing (i) the sum of (A) $27.00 plus (B) 25% 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%. On January 2, 2024, we are required to redeem all Aspen preferred OP units that have not been converted to common OP units.

Lines of Credit

In August, 2015, we amended and restated our senior revolving credit facility with Citibank, N.A. and certain other lenders in the amount of $450.0 million, comprised of a $392.0 million revolving loan and $58.0 million term loan (the "Facility"). The Facility has a four year term ending August 19, 2019, 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 credit agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $300.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the Facility may be increased up to $750.0 million. The 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 credit agreement, which can range from 1.40% to 2.25% for the revolving loan and 1.35% to 2.20% for the term loan. As of ~~September 30, 2015,~~March 31, 2016, the margin on our leverage ratio was ~~1.45%~~1.40% and ~~1.40%~~1.35% on the revolving and term loans, respectively. We had ~~$142.0 million~~zero on the revolving loan and ~~$25.0~~$58.0 million on the term loan totaling ~~$167.0~~$58.0 million

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

in borrowings as of ~~September 30, 2015~~March 31, 2016, with a weighted average interest rate of ~~1.66%~~1.84%. As of December 31, ~~2014 there was~~2015 we had no ~~amount outstanding under our previous credit Facility.~~borrowings on the revolving loan and $25.0 million in borrowings on the term loan totaling $25.0 million in borrowings.

The 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 ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015, approximately ~~$3.4~~$2.8 million and $~~3.2~~3.4 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%. At ~~September 30, 2015~~March 31, 2016, the effective interest rate was 7.0%. ~~There was no outstanding balance at September 30, 2015~~At March 31, 2016, there were approximately $0.4 million in borrowings and ~~there was~~ ~~$5.8 million~~ at December 31, ~~2014~~2015. there was no outstanding balance.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Covenants

Pursuant to the terms of the 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 ~~September 30, 2015~~March 31, 2016, we were in compliance with all covenants.

9. Equity and Mezzanine Securities

~~At the Company's Annual Meeting~~In March 2016, we closed an underwritten registered public offering of Stockholders on July 20, 2015, the stockholders approved Articles of Amendment to our Amended and Restated Articles of Incorporation, as amended and supplemented, under which the number of authorized shares of our common stock, $0.01 par value per share, was increased from 90,000,000 to 180,000,000 and the number of our preferred stock, $0.01 par value per share, was increased from 10,000,000 to 20,000,000.

In July 2015, the Company entered into a repurchase agreement with certain holders of shares of Series A-4 Preferred Stock under which, at the holders’ election, the Company was obligated to repurchase up to 5,926,322 shares of the Series A-4 Preferred Stock from the holders of those shares. There were 6,364,770 shares of Series A-4 preferred shares issued and outstanding at the time of the repurchase agreement, and 438,448 shares of Series A-4 Preferred Stock were not subject to the repurchase agreement. Each holder of shares of Series A-4 Preferred Stock subject to the repurchase agreement could have elected to sell its shares of Series A-4 Preferred Stock to the Company. The purchase price was $31.08 per share, which consists of a price per share of $30.90 plus $0.18 for accrued and unpaid distributions from and including June 30, 2015 to, but not including, August 10, 2015. Each share of Series A-4 Preferred Stock had a liquidation preference of $25.00 per share, and was convertible into approximately 0.4444 shares of the Company’s common stock. Pursuant to the repurchase agreement, the Company repurchased 4,066,586 shares of the Series A-4 Preferred Stock. There are 2,298,184 shares of Series A-4 Preferred Stock issued and outstanding as of September 30, 2015.

~~In June 2015, we issued to GCP Fund III Ancillary Holding, LLC (i) 25,664~~6,037,500 shares of common stock at ~~an issuance~~a price of ~~$50.00~~$66.50 per ~~share or $1,283,200 in~~share. Net proceeds from the ~~aggregate,~~offering were approximately $385.4 million after deducting discounts and (ii) 34,219 shares of Series A-4 Preferred Stock at an issuance price of $25.00 per share, or $855,475 in the aggregate. All of these common shares and preferred shares were issued for cash consideration pursuantexpenses related to the ~~terms~~offering. We intend to use the proceeds for the acquisition of a Subscription Agreement, dated July 30, 2014, as amended, among the Company, Green Court Real Estate Partners III, LLC, and certain other parties. The parties have agreed that no additional securities are issuable under the Subscription Agreement.Carefree Communities.

Also in June 2015, we entered into an At the Market Offering Sales Agreement (the "Sales Agreement") with BMO Capital Markets Corp., Merrill Lynch, Pierce, Fenner and Smith Incorporated and Citigroup Global Markets Inc. (collectively, the "Sales Agents"). Pursuant to the Sales Agreement, we may offer and sell shares of our common stock, having an aggregate offering price of up to $250.0 million, from time to time through the Sales Agents. Each Sales Agent is entitled to compensation in an agreed amount not to exceed 2.0% of the gross sales price per share for any shares sold through it from time to time under the Sales Agreement. Concurrently, the At the Market Offering Sales Agreement dated May 10, 2012, as amended among the Company, the Partnership, BMO Capital Markets Corp. and Liquidnet, Inc., was terminated. Prior to the termination of the At the Market Offering Sales Agreement dated May 10, 2012, during the first quarter of 2015, 342,011 shares of common stock were issued at the prevailing market price of our common stock at the time of each sale with a weighted average sale price of $63.94, and we received net proceeds of approximately $21.5 million.

~~During the third quarter of 2015, under the June 2015 Sales Agreement, we sold 608,100 common shares under the Sales Agreement, at an average sales price of $68.00 for net proceeds of $40.8 million.~~

~~During the second quarter of 2015, under the June 2015 Sales Agreement, we sold 26,200 common shares under the Sales Agreement, at an average sales price of $65.15 for net proceeds of $1.7 million.~~

In April 2015, in connection with the Berger acquisition, we issued 371,808 common OP units at an issuance price of $61.00 per share and 340,206 newly created Series C preferred OP units at an issuance price of $100.00 per share. The Series C preferred OP unit holders receive a preferred return of 4.0% per year from the closing until the second anniversary of the date of issuance, 4.5% per year during the following three years, and 5.0% per year thereafter. At the holder’s option, each Series C preferred OP unit will be exchangeable into 1.11 shares of the Company’s common stock and holders of Series C preferred OP units do not have any voting or consent rights.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In January 2015, in connection with the Green Courte second closing, we issued 4,377,073 shares of common stock at an issuance price of $50.00 per share and 5,847,234 shares of Series A-4 Preferred Stock at an issuance price of $25.00 per share. The Series A-4 Preferred Stock stockholders receive a preferred return of 6.5%. In addition, one of the Green Courte Partners funds purchased 150,000 shares of our common stock and 200,000 Series A-4 preferred OP units for an aggregate purchase price of $12.5 million. As noted above, in July 2015, the Company repurchased 4,066,586 shares of the Series A-4 Preferred Stock.

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. ~~The Series A-4 preferred OP units are inclusive of its pro-rata share of net income of $0.3 million and distributions of $1.0 million for the~~ ~~nine months ended September 30, 2015~~.

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 buyback program during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 or ~~2014~~2015. There is no expiration date specified for the buyback program.

~~Common~~Subject to certain limitations, common OP unit holders can convert their common OP units into an equivalent number of shares of common stock at any time. During the ~~nine~~three months ended ~~September 30,~~March 31, 2016 and 2015,, there were ~~99,404~~0 and 17,500 common OP units converted to shares of common ~~stock. No such units were converted during the nine months ended September 30, 2014.~~stock, respectively.

Subject to certain limitations, Series A-1 preferred OP unit holders may convert ~~their~~each Series A-1 preferred OP units to approximately 2.439 shares of our common stock at any time. During the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014,~~2015, holders of Series A-1 preferred OP units converted ~~38,817~~1,298 units into ~~102,301~~3,165 shares of common stock, and ~~18,773~~9,015 units into ~~45,785~~21,985 shares of common stock, respectively.

Subject to certain limitations, Series A-4 preferred OP unit holders may convert ~~their~~each Series A-4 preferred OP units to approximately 0.444 shares of our common stock at any time. During the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, holders of Series A-4 preferred OP units converted ~~109,414~~1,000 units into ~~48,627~~444 shares of common stock. No such units were converted during the ~~nine~~three months ended ~~September 30, 2014.~~March 31, 2015.

Cash distributions of $0.65 per share were declared for the quarter ended ~~September 30, 2015~~March 31, 2016. On ~~October 16, 2015,~~April 15, 2016, cash payments of approximately ~~$37.3~~$43.8 million for aggregate distributions were made to common stockholders, common OP unit holders and restricted stockholders of record as of ~~September 30, 2015.~~March 31, 2016. Cash distributions of $0.4453 per share were declared on ~~the Company's~~our Series A cumulative redeemable preferred stock for the quarter ended ~~September 30, 2015~~March 31, 2016. On ~~October~~April 15, ~~2015,~~2016, cash payments of approximately $1.5 million for aggregate distributions were made to Series A cumulative redeemable preferred stockholders of record as of ~~October~~April 1, ~~2015.~~2016. In addition, cash distributions of $0.4062 per share were declared on ~~the Company's~~our Series A-4 Preferred Stock for the quarter ended ~~September 30, 2015~~March 31,

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2016. On ~~September 30, 2015,~~March 31, 2016, cash payments of approximately ~~$0.9~~$0.8 million were made to Series A-4 Preferred Stock stockholders of record as of ~~September 18, 2015.~~February 15, 2016.

10. Share-Based Compensation

AtDuring the Annual Meeting of Stockholders held on July 20, 2015, the stockholders approved Sun Communities, Inc. Equity Incentive Plan ("2015 Equity Plan"). The 2015 Equity Plan had been adopted by the Board and was effective upon approval by our stockholders. The 2015 Equity Plan replaced the Sun Communities, Inc. Equity Incentive Plan adopted in 2009. 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.

~~In September 2015,~~three months ending March 31, 2016, we granted ~~4,500~~16,800 shares of restricted stock to ~~key employees~~our non-employee directors under our ~~2015 Equity~~First Amended and Restated 2004 Non-Employee Director Option Plan. The ~~shares~~awards vest on March 15, 2019, and had a fair value of ~~$67.29~~$69.45 per ~~share and will vest as follows: September 29, 2018: 35%; September 29, 2019: 35%; September 29, 2020: 20%; September 29, 2021: 5%; and September 29, 2022: 5%.~~share. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

~~In July 2015,~~During the three months ending March 31, 2016, we granted 20,000 shares of restricted stock to an executive officer under our Sun Communities, Inc. Equity Incentive Plan ("2009 Equity Plan"). The shares had a fair value of $67.57 per share and will vest as follows: July 16, 2018: 35%; July 19, 2019: 35%; July 16, 2020: 20%; July 16, 2021: 5%; and July 16, 2022: 5%. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

In May 2015, we granted 25,000 shares of restricted stock to an executive officer under our 2009 Equity Plan. The shares had a fair value of $62.94 per share and will vest as follows: May 19, 2018: 35%; May 19, 2019: 35%; May 19, 2020: 20%; May 19, 2021: 5%; and May 19, 2022: 5%. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.

~~In April 2015, we granted 145,000~~130,000 shares of restricted stock to our executive officers under ~~our 2009~~the Sun Communities, Inc. 2015 Equity Incentive Plan. The shares had a fair value of ~~$63.81~~$69.25 per share. Half of the shares will vest as follows: ~~April 14, 2018:~~March 20, 2019: 20%; ~~April 14, 2019:~~March 20, 2020, 30%; ~~April 14, 2020:~~March 20, 2021, 35%; ~~April 14, 2021:~~March 20, 2022, 10%; and ~~April 14, 2022:~~March 20, 2023, 5%. The remaining ~~72,500~~65,000 shares are subject to market and performance conditions ~~which~~with multiple tranches that vest ~~over time~~ through ~~April 2020.~~March 2022. Share-based compensation for restricted stock awards with 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.

~~In February 2015, we granted~~ ~~19,800~~ ~~shares of restricted stock to our non-employee directors under our First Amended and Restated 2004 Non-Employee Director Option Plan. The awards vest on February 11, 2018, and had a fair value of~~ ~~$65.87~~ ~~per share. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.~~

~~In January 2015, we granted~~ ~~1,000~~ ~~shares of restricted stock to key employees under our 2009 Equity Plan. The shares had a fair value of~~ ~~$65.48~~ ~~per share and will vest as follows: January 8, 2018: 35%; January 8, 2019: 35%; January 8, 2020: 20%;~~

~~January 8, 2021: 5%; and January 8, 2022: 5%. The fair value was determined by using the closing share price of our common stock on the date the shares were issued.~~

During the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014,~~2015, ~~4,084~~4,500 and ~~4,904~~4,084 shares of common stock, respectively, were issued in connection with the exercise of stock options, and the net proceeds received during both periods was $0.1 million.

The vesting requirements for ~~85,958~~49,734 restricted shares granted to our executives and employees were satisfied during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016.

11. 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 ~~the Company's~~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, 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 expected to approximate ~~$39.3~~$49.1 million annually. ~~In 2015, we recognized~~ ~~22.4%, 17.4% and 45.2% during the first, second and third quarters, respectively. We expect to recognize 15.0% during the fourth quarter of 2015. In 2014,~~This transient RV revenue was ~~$31.6 million. We~~ recognized ~~25.3%~~20.7% in the first quarter ~~18.3%~~and is expected to be recognized 20.9%, 45.0% and 13.4% in the second, third and fourth quarters, respectively. In 2015, transient revenue was $39.7 million. We recognized 22.5% in the first quarter, 17.7% in the second quarter, ~~43.3%~~45.2% in the third quarter, and ~~13.1%~~14.6% in the fourth quarter.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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

Three Months Ended September 30, 2015 Three Months Ended September 30, 2014
Real Property Operations Home Sales and Rentals Consolidated Real Property Operations Home Sales and Rentals Consolidated
Revenues $ 150,059
$ 30,847
$ 180,906
$ 103,007
$ 23,742
$ 126,749
Operating expenses/Cost of sales 54,172
20,417
74,589
39,232
16,756
55,988
Net operating income/Gross profit 95,887
10,430
106,317
63,775
6,986
70,761
Adjustments to arrive at net income (loss):
Interest and other income, net 4,449
—
4,449
3,883
—
3,883
General and administrative (10,735 ) (3,845 ) (14,580 ) (6,971 ) (2,313 ) (9,284 )
Transaction costs (1,664 ) —
(1,664 ) (2,399 ) —
(2,399 )
Depreciation and amortization (31,352 ) (13,343 ) (44,695 ) (18,522 ) (11,395 ) (29,917 )
Asset impairment charge —
—
—
(837 ) —
(837 )
Interest (27,434 ) (19 ) (27,453 ) (18,614 ) (5 ) (18,619 )
Interest on mandatorily redeemable preferred OP units (790 ) —
(790 ) (808 ) —
(808 )
Gain (loss) on disposition of properties, net 13,415
4,775
18,190
14,949
(1,318 ) 13,631
Provision for state income taxes (51 ) (26 ) (77 ) (69 ) —
(69 )
Distributions from affiliate —
—
—
400
—
400
Net income (loss) 41,725
(2,028 ) 39,697
34,787
(8,045 ) 26,742
Less: Preferred return to A-1 preferred OP units 591
—
591
661
—
661
Less: Preferred return to A-3 preferred OP units 45
—
45
45
—
45
Less: Preferred return to A-4 preferred OP units 326
—
326
—
—
—
Less: Preferred return to Series C preferred OP units 340
—
340
—
—
—
Less: Amounts attributable to noncontrolling interests 2,295
(170 ) 2,125
2,442
(591 ) 1,851
Net income (loss) attributable to Sun Communities, Inc. 38,128
(1,858 ) 36,270
31,639
(7,454 ) 24,185
Less: Preferred stock distributions 3,179
—
3,179
1,514
—
1,514
Less: Preferred stock redemption costs 4,328
—
4,328
—
—
—
Net income (loss) attributable to Sun Communities, Inc. common stockholders $ 30,621
$ (1,858 ) $ 28,763
$ 30,125
$ (7,454 ) $ 22,671

2117

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Nine Months Ended September 30, 2015									Nine Months Ended September 30, 2014									Three Months Ended March 31, 2016									Three Months Ended March 31, 2015
	Real Property Operations			Home Sales and Rentals			Consolidated			Real Property Operations			Home Sales and Rentals			Consolidated			Real Property Operations			Home Sales and Rentals			Consolidated			Real Property Operations			Home Sales and Rentals			Consolidated
Revenues	$	403,862		$	89,039		$	492,901		$	283,299		$	67,813		$	351,112		$	133,848		$	36,445		$	170,293		$	122,716		$	27,963		$	150,679
Operating expenses/Cost of sales	142,096			57,763			199,859			104,759			46,168			150,927			44,294			24,060			68,354			40,475			18,162			58,637
Net operating income/Gross profit	261,766			31,276			293,042			178,540			21,645			200,185			89,554			12,385			101,939			82,241			9,801			92,042
Adjustments to arrive at net income (loss):
Interest and other income, net	13,554			38			13,592			11,145			—			11,145			4,351			—			4,351			4,521			—			4,521
Home selling expenses																			—			(2,278		)	(2,278		)	—			(1,690		)	(1,690		)
General and administrative	(31,051		)	(11,290		)	(42,341		)	(23,177		)	(7,932		)	(31,109		)	(11,774		)	(2,018		)	(13,792		)	(9,830		)	(1,798		)	(11,628		)
Transaction costs	(13,150		)	—			(13,150		)	(4,255		)	(8		)	(4,263		)	(2,721		)	—			(2,721		)	(9,449		)	—			(9,449		)
Depreciation and amortization	(90,991		)	(39,116		)	(130,107		)	(55,591		)	(33,260		)	(88,851		)	(35,362		)	(13,050		)	(48,412		)	(31,497		)	(12,504		)	(44,001		)
Asset impairment charge	—			—			—			(837		)	—			(837		)
Extinguishment of debt	(2,800		)	—			(2,800		)	—			—			—
Interest	(79,567		)	(26		)	(79,593		)	(54,135		)	(14		)	(54,149		)	(26,289		)	(5		)	(26,294		)	(25,387		)	(2		)	(25,389		)
Interest on mandatorily redeemable preferred OP units	(2,429		)	—			(2,429		)	(2,417		)	—			(2,417		)	(787		)	—			(787		)	(852		)	—			(852		)
Gain on disposition of properties, net	22,892			4,054			26,946			14,302			214			14,516			(25		)	25			—			9,479			(710		)	8,769
Provision for state income taxes	(152		)	(77		)	(229		)	(207		)	—			(207		)
Distributions from affiliate	7,500			—			7,500			1,200			—			1,200
Provision for income taxes																			(187		)	(41		)	(228		)	(75		)	—			(75		)
Net income (loss)	85,572			(15,141		)	70,431			64,568			(19,355		)	45,213			16,760			(4,982		)	11,778			19,151			(6,903		)	12,248
Less: Preferred return to A-1 preferred OP units	1,844			—			1,844			1,997			—			1,997
Less: Preferred return to A-3 preferred OP units	136			—			136			136			—			136
Less: Preferred return to A-4 preferred OP units	1,032			—			1,032			—			—			—
Less: Preferred return to Series C preferred OP units	680			—			680			—			—			—
Less: Preferred return to preferred OP units																			1,273			—			1,273			1,029			—			1,029
Less: Amounts attributable to noncontrolling interests	4,316			(1,184		)	3,132			4,564			(1,471		)	3,093			643			(367		)	276			760			(496		)	264
Net income (loss) attributable to Sun Communities, Inc.	77,564			(13,957		)	63,607			57,871			(17,884		)	39,987			14,844			(4,615		)	10,229			17,362			(6,407		)	10,955
Less: Preferred stock distributions	11,353			—			11,353			4,542			—			4,542			2,354			—			2,354			4,086			—			4,086
Less: Preferred stock redemption costs	4,328			—			4,328			—			—			—
Net income (loss) attributable to Sun Communities, Inc. common stockholders	$	61,883		$	(13,957	)	$	47,926		$	53,329		$	(17,884	)	$	35,445		$	12,490		$	(4,615	)	$	7,875		$	13,276		$	(6,407	)	$	6,869

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	September 30, 2015							December 31, 2014						March 31, 2016						December 31, 2015
	Real Property Operations		Home Sales and Rentals			Consolidated		Real Property Operations		Home Sales and Rentals		Consolidated		Real Property Operations		Home Sales and Rentals		Consolidated		Real Property Operations		Home Sales and Rentals		Consolidated
Identifiable assets:
Investment property, net	$	3,352,511	$	431,018		$	3,783,529	$	2,207,526	$	360,638	$	2,568,164	$	3,326,090	$	424,437	$	3,750,527	$	3,303,287	$	417,828	$	3,721,115
Cash and cash equivalents	24,432		(515		)	23,917		81,864		1,595		83,459		404,310		6,098		410,408		44,150		936		45,086
Inventory of manufactured homes	—		15,263			15,263		—		8,860		8,860		—		16,636		16,636		—		14,828		14,828
Notes and other receivables, net	35,818		13,383			49,201		40,751		11,144		51,895		37,319		16,805		54,124		34,258		13,714		47,972
Collateralized receivables, net	138,241		—			138,241		122,962		—		122,962		142,944		—		142,944		139,768		—		139,768
Other assets, net	99,310		5,142			104,452		97,485		4,867		102,352		184,636		3,611		188,247		209,957		3,073		213,030
Total assets	$	3,650,312	$	464,291		$	4,114,603	$	2,550,588	$	387,104	$	2,937,692	$	4,095,299	$	467,587	$	4,562,886	$	3,731,420	$	450,379	$	4,181,799

12. Income Taxes

We have elected to be taxed as a real estate investment trust (“REIT”) pursuant to Section 856(c) of the Internal Revenue Code of 1986 (“Code”), as amended. In order for us to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources. In addition, a REIT must distribute annually at least 90% of its REIT ordinary taxable income to its ~~stockholders.~~stockholders and meet other tests.

Qualification as a REIT involves the satisfaction of numerous requirements ~~(i.e., some~~(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

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 quarter ended ~~September 30, 2015~~March 31, 2016.

As a REIT, we generally will not be subject to United States ("U.S.") federal income taxes at the corporate level on the ordinary taxable income we distribute to our stockholders as dividends. If we fail to qualify as a REIT in any taxable year, our taxable income could be subject to U.S. federal income tax at regular corporate rates (including any applicable alternative minimum tax). Even if we qualify as a REIT, we may be subject to certain state and local income taxes, U.S. federal income taxes and excise taxes on our undistributed income.

SHS, our taxable REIT subsidiary, is subject to U.S. federal income taxes. 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. AFull valuation allowances are recorded against SHS’s federal deferred tax assets and therefore, no federal deferred tax asset ~~of $1.0 million~~ is included in "Other assets, net," in our Consolidated Balance Sheets as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~.2015.

We had no unrecognized tax benefits as of ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015. We expect no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of ~~September 30, 2015~~March 31, 2016.

We classify certain state taxes as income taxes for financial reporting purposes. ~~For instance, we record Texas Margin Tax as income tax in our financial statements, and~~We recorded a provision for state income taxes of approximately ~~$0.1~~$0.1 million and $0.1 million for the three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014, and~~ ~~$0.3 million~~ ~~for the nine months ended September 30,~~ 2015, ~~and 2014.~~respectively.

SHS is currently under examination by the Internal Revenue Service ("IRS") for the 2013 tax year. To date, we have not received any formal notices of proposed adjustments from the IRS related to this or any other examination periods.

13. Earnings Per Share

We have outstanding stock options, unvested restricted shares, Series A Preferred Stock, 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.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
Numerator	2015			2014			2015			2014			2016			2015
Net income attributable to common stockholders	$	28,763		$	22,671		$	47,926		$	35,445		$	7,875		$	6,869
Allocation of income to restricted stock awards	(381		)	(256		)	(541		)	(441		)	(61		)	(39		)
Preferred share conversion
Net income attributable to common stockholders after allocation	28,382			22,415			47,385			35,004			7,814			6,830
Allocation of income to restricted stock awards	381			256			541			441			61			39
Diluted earnings: net income attributable to common stockholders after allocation	$	28,763		$	22,671		$	47,926		$	35,445		$	7,875		$	6,869
Denominator
Weighted average common shares outstanding	53,220			41,023			52,855			39,283			57,736			52,498
Add: dilutive stock options	14			15			16			16			13			16
Add: dilutive restricted stock	431			229			400			207			377			378
Add: dilutive OP units	—			—			—			2,069
Diluted weighted average common shares and securities	53,665			41,267			53,271			41,575			58,126			52,892
Earnings per share available to common stockholders after allocation:
Basic	$	0.53		$	0.55		$	0.90		$	0.89		$	0.14		$	0.13
Diluted	$	0.54		$	0.55		$	0.90		$	0.85		$	0.14		$	0.13

We 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 ~~as of September 30, 2015~~for the three months ended March 31, 2016 and ~~2014~~2015 (amounts in thousands):

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	As of September 30,		Three Months Ended March 31,
	2015	2014	2016	2015
Common OP units	2,863	2,069	2,863	2,544
Series A-1 preferred OP units	389	438	387	420
Series A-3 preferred OP units	40	40	40	40
Series A-4 preferred OP units	760	—	754	869
Series A-4 Preferred Stock	2,298	—	2,067	6,331
Series C preferred OP units	340	—	340	—
Aspen preferred OP units	1,284	1,325	1,284	1,284
Total securities	7,974	3,872	7,735	11,488

14. Derivative Instruments and Hedging Activities

Our objective in using interest rate derivatives is to manage exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect it could have on future cash flows. Interest rate caps are used to accomplish this objective. We do not enter into derivative instruments for speculative purposes nor do we have any swaps in a hedging arrangement.

The following table provides the terms of our interest rate derivative contracts that were in effect as of ~~September 30, 2015~~March 31, 2016:

Type

Purpose

Effective Date

Maturity Date

Notional

(in millions)

Based on

Variable Rate

Fixed Rate

Spread

Effective Fixed Rate

Purpose

Effective Date

Maturity Date

Notional

(in millions)

Based on

Variable Rate

Fixed Rate

Spread

Effective Fixed Rate

Cap

Cap Floating Rate

4/1/2015

4/1/2018

150.1

3 Month LIBOR

0.2830%

9.0000%

—%

N/A

Cap Floating Rate

4/1/2015

4/1/2018

150.1

3 Month LIBOR

0.3240%

9.0000%

—%

N/A

Cap

Cap Floating Rate

10/3/2011

10/3/2016

10.0

3 Month LIBOR

0.2830%

11.0200%

—%

N/A

Cap Floating Rate

10/3/2011

10/3/2016

10.0

3 Month LIBOR

0.3240%

11.0200%

—%

N/A

In accordance with ASC Topic 815, "Derivatives and Hedging" ("ASC 815"), derivative instruments are recorded at fair value in "Other assets, net" or "Other liabilities" on the Consolidated Balance Sheet. As of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, the fair value of the derivatives was zero.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

15. Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts and notes receivable, accounts payable, derivative instruments, and debt.

ASC Topic 820 "Fair Value Measurements and Disclosures" ("ASC 820"), 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.

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:

Derivative Instruments

The derivative instruments held by us are interest rate cap agreements for which quoted market prices are indirectly available. For those derivatives, we use model-derived valuations in which all significant inputs and significant value drivers are observable in

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

active markets provided by brokers or dealers to determine the fair value of derivative instruments on a recurring basis (Level 2). See Note 14 for Derivative Instruments.

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). See Note 4 for Installment Notes Receivable.

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). See Note 8 for Long-Term Debt and Lines of Credit.

Collateralized Receivables and Secured Borrowings

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). See Note 3 for Collateralized Receivables and Secured Borrowing.

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.

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The table below sets forth our financial assets and liabilities that ~~require~~required disclosure of their fair values on a recurring basis ~~and~~as of March 31, 2016. The table presents the carrying values and fair values of our financial instruments as of ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014~~2015 that were measured using the valuation techniques described ~~above.~~above (in thousands). The table excludes other financial instruments such as cash and cash equivalents, accounts receivable, and accounts payable because the carrying values associated with these instruments approximate fair value since their maturities are less than one year.


	September 30, 2015				December 31, 2014				March 31, 2016				December 31, 2015
Financial assets	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Installment notes receivable on manufactured homes, net	$	22,375	$	22,375	$	25,884	$	25,884	$	23,424	$	23,424	$	20,418	$	20,418
Collateralized receivables, net	$	138,241	$	138,241	$	122,962	$	122,962	$	142,944	$	142,944	$	139,768	$	139,768
Financial liabilities
Debt	$	2,251,663	$	2,289,252	$	1,702,643	$	1,752,939
Debt (excluding secured borrowings)									$	2,160,721	$	2,220,518	$	2,179,609	$	2,181,790
Secured borrowing	$	138,887	$	138,887	$	123,650	$	123,649	$	143,664	$	143,664	$	140,440	$	140,440
Lines of credit	$	167,000	$	167,000	$	5,794	$	5,794	$	58,065	$	58,055	$	25,000	$	25,000

The derivative instruments are the only financial liabilities that were required to be carried at fair value on the Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014. We have no financial assets that are required to be carried at fair value.

16. Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)." The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases while the accounting by a lessor is largely unchanged from that applied under previous GAAP. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this new standard.

In April 2015, the FASB issued ASU 2015-03 "Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"). This amendment requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15 "Interest - Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements" ("ASU 2015-15"). This amendment provides additional guidance within ASU 2015-03 for debt issuance costs related to line of credit arrangements. These amendments are effective for fiscal years beginning after December 15, 2015, and interim periods within those years, with early adoption permitted. Entities should apply the amendments retrospectively. ASU 2015-15 provides commentary that the SEC staff would not object to an entity deferring and presenting costs associated with line of credit arrangements as an asset and subsequently amortizing them ratably over the term of the revolving debt arrangement. We ~~are currently evaluating the potential impact~~adopted these amendments ~~will have~~as of March 31, 2016, which resulted in a reclassifying of deferred financing costs of $8.2 million from "Other assets, net" to "Mortgage loans payable" on the Consolidated

SUN COMMUNITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Balance Sheets as of March 31, 2015. The debt issuance costs related to our line of credit facility remain classified as an asset on the Consolidated ~~Financial Statements.~~Balance Sheets. This change was applied throughout this document where applicable.

In February 2015, the FASB issued ASU No. 2015-02 "Consolidation (Topic 810) Amendments to the Consolidation Analysis" ("ASU 2015-02")~~. This amendment eliminates~~ which modified the ~~deferral~~evaluation of ~~FAS 167, which~~whether limited partnerships and similar legal entities are variable interest entities or voting interest entities. All entities are subject to reevaluation under the revised consolidation model. The Company is the sole general partner in a limited partnership, and as such, the Company has ~~allowed entities~~complete control in conducting all business activities associated with ~~interests in certain investment funds to follow~~ the ~~previous consolidation guidance in FIN 46(R),~~Partnership. Limited partners do not have kickout rights or participating rights. The Company adopted ASU 2015-02 as of March 31, 2016 and ~~makes other changes to both~~fully consolidates the activities of the Operating Partnership within its Consolidated Financial Statements under the variable interest entity model ~~and~~as it is the primary beneficiary. There was no impact to the Consolidated Financial Statements as the Company previously consolidated under the voting model. While the guidance is aimed at asset managers, it will affect all reporting entities that have variable interests in other legal entities (e.g., limited partnerships, similar entities and certain corporations). In some cases, consolidation conclusions will change. In other cases, reporting entities will need to provide additional disclosures about entities that currently aren’t considered VIEs but will be considered VIEs under the new guidance provided they have a variable interest in those VIEs. These amendments are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted. Entities may apply the amendments using either a modified retrospective approach or retrospectively. We are currently evaluating the potential impact this amendment will have on our Consolidated Financial Statements.

~~In August 2014, the FASB issued ASU 2014-15 "Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern~~" ("ASU 2014-15"). This amendment requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity's ability to continue as a going concern. This amendment applies to all entities and are effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. We are currently evaluating the potential impact this amendment will have on our quarterly reporting process.entity model.

In May 2014, the FASB issued ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). The objective of this amendment is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that a company 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. In applying this amendment, companies will perform a five-step analysis of transactions to determine when and how

~~SUN COMMUNITIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

revenue is recognized. This amendment applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. This amendment is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period; early adoption is not permitted. An entity should apply the amendments using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application. We are currently evaluating the methods of adoption and the impact that the adoption of ASU 2014-09 may have on our Consolidated Financial Statements.

17. Commitments and Contingencies

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.

18. Subsequent Event

~~In October 2015, we completed~~We have evaluated our financial statements for subsequent events through the ~~sale of three MH communities comprised of approximately 1,250 sites located in Indiana for $36.1 million.~~date that this Form 10-Q was issued.

2722

SUN COMMUNITIES, INC.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and Notes ~~thereto,~~filed herewith, along with our ~~2014~~2015 Annual Report. Capitalized terms are used as defined elsewhere in this Form 10-Q.

OVERVIEW

We are a fully integrated, self-administered and self-managed REIT. As of ~~September 30, 2015~~March 31, 2016, we owned and operated a portfolio of ~~251~~233 developed properties located in 3029 states throughout the United States, including ~~200~~186 MH communities, 37 RV communities, and 1410 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.

SIGNIFICANT ACCOUNTING POLICIES

We have identified significant accounting policies that, as a result of the judgments, uncertainties, and complexities of the underlying accounting standards and operations involved could result in material changes to our financial condition or results of operations under different conditions or using different assumptions. Details regarding significant accounting policies are described fully in our ~~2014~~2015 Annual Report.

SUPPLEMENTAL MEASURES

In addition to the results reported in accordance with GAAP, we have provided information regarding Net Operating Income (“NOI”) in the following tables. NOI is derived from revenues minus property operating and maintenance expenses and real estate taxes. We use NOI as the primary basis to evaluate the performance of our operations. A reconciliation of NOI to net income attributable to Sun Communities, Inc. common stockholders is included in “Results of Operations” below.

We believe that NOI is helpful to investors and analysts 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. We use NOI as a key management tool when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense, and non-property specific expenses such as general and administrative expenses, all of which are significant costs, and therefore, NOI is a measure of the operating performance of our properties rather than of the Company overall. We believe that these costs included in net income often have no effect on the market value of our property and therefore limit its use as a performance measure. In addition, such expenses are often incurred at a parent company level and therefore are not necessarily linked to the performance of a real estate asset.

NOI should not be considered a substitute for the reported results prepared in accordance with GAAP. NOI should not be considered as an alternative to net income as an indicator of our financial performance, or to cash flows as a measure of liquidity; nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. NOI, as determined and presented by us, may not be comparable to related or similarly titled measures reported by other companies.

We also provide information regarding Funds From Operations (“FFO”). We consider FFO an appropriate supplemental measure of the financial and operational performance of an equity REIT. Under the National Association of Real Estate Investment Trusts (“NAREIT”) definition, FFO represents net income (loss) (computed in accordance with GAAP), excluding extraordinary items (as defined under GAAP), and gain (loss) on sales of depreciable operating property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Management also uses FFO excluding certain items, a non-GAAP financial measure, which excludes certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. We believe that this provides investors with another financial measure of our operating performance that is more comparable when evaluating period over period results. A discussion of FFO, FFO excluding certain items, a reconciliation of FFO to net income, and FFO to FFO excluding certain items are included in the presentation of FFO in our “Results of ~~Operations"~~Operations” below.

2823

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, and develops MH communities and RV communities throughout the U.S. 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. We evaluate segment operating performance based on NOI and gross profit.

~~COMPARISON OF THE THREE MONTHS ENDED~~ ~~SEPTEMBER 30, 2015~~ ~~AND~~ ~~2014~~

~~The following table summarizes our consolidated financial results for the~~ ~~three months ended September 30, 2015~~ ~~and~~ ~~2014~~ ~~(in thousands):~~

Three Months Ended September 30,
2015 2014
Real Property NOI $ 90,312
$ 60,210
Rental Program NOI 20,587
17,140
Home Sales NOI/Gross profit 5,605
3,389
Ancillary NOI/Gross profit 5,575
3,565
Site rent from Rental Program (included in Real Property NOI) (15,762 ) (13,543 )
NOI/Gross profit 106,317
70,761
Adjustments to arrive at net income:
Other revenues 4,449
3,883
General and administrative (14,580 ) (9,284 )
Transaction costs (1,664 ) (2,399 )
Depreciation and amortization (44,695 ) (29,917 )
Asset impairment charge —
(837 )
Interest expense (28,243 ) (19,427 )
Gain on disposition of properties, net 18,190
13,631
Provision for state income taxes (77 ) (69 )
Distributions from affiliate —
400
Net income 39,697
26,742
Less: Preferred return to Series A-1 preferred OP units 591
661
Less: Preferred return to Series A-3 preferred OP units 45
45
Less: Preferred return to Series A-4 preferred OP units 326
—
Less: Preferred return to Series C preferred OP units 340
—
Less: Amounts attributable to noncontrolling interests 2,125
1,851
Net income attributable to Sun Communities, Inc. 36,270
24,185
Less: Preferred stock distributions 3,179
1,514
Less: Preferred stock redemption costs 4,328
—
—
Net income attributable to Sun Communities, Inc. common stockholders $ 28,763
$ 22,671

~~SUN COMMUNITIES, INC.~~

REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO

The following tables reflect certain financial and other information for our Total Portfolio as of and for the three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015:

Three Months Ended September 30,
Financial Information (in thousands) 2015 2014 Change % Change
Income from Real Property $ 137,548
$ 94,245
$ 43,303
45.9 %
Property operating expenses:
Payroll and benefits 11,092
8,762
2,330
26.6 %
Legal, taxes, and insurance 2,090
1,350
740
54.8 %
Utilities 15,002
10,668
4,334
40.6 %
Supplies and repair 5,989
4,126
1,863
45.2 %
Other 4,543
3,125
1,418
45.4 %
Real estate taxes 8,520
6,004
2,516
41.9 %
Property operating expenses 47,236
34,035
13,201
38.8 %
Real Property NOI $ 90,312
$ 60,210
$ 30,102
50.0 %

As of September 30,
Other Information 2015 2014 Change
Number of properties 251
184
67
Developed sites 93,718
69,677
24,041
Occupied sites ^{(1) (2)}
78,531
56,223
22,308
Occupancy % ⁽¹⁾
93.7 % 92.5 % 1.2 %
Weighted average monthly site rent - MH $ 477
$ 457
$ 20
Weighted average monthly site rent - RV ⁽³⁾
$ 409
$ 394
$ 15
Weighted average monthly site rent - Total $ 469
$ 449
$ 20
Sites available for development 7,749
6,323
1,426



	Three Months Ended March 31,
Financial Information (in thousands)	2016		2015		Change			% Change
Income from Real Property	$	129,235	$	119,525	$	9,710		8.1	%
Property operating expenses:
Payroll and benefits	9,720		8,675		1,045			12.0	%
Legal, taxes, and insurance	1,300		1,755		(455		)	(25.9	)%
Utilities	13,231		13,152		79			0.6	%
Supplies and repair	2,350		2,770		(420		)	(15.2	)%
Other	4,600		2,862		1,738			60.7	%
Real estate taxes	9,585		8,715		870			10.0	%
Property operating expenses	40,786		37,929		2,857			7.5	%
Real Property NOI	$	88,449	$	81,596	$	6,853		8.4	%



	As of March 31,
Other Information	2016			2015			Change
Number of properties	233			243			(10		)

Overall occupancy ⁽¹⁾	95.5		%	92.9		%	2.6		%

Sites available for development	7,181			7,206			(25		)

Monthly base rent per site - MH	$	490		$	467		$	23
Monthly base rent per site - RV ⁽²⁾	$	431		$	402		$	29
Monthly base rent per site - Total	$	482		$	459		$	23


⁽¹⁾	Occupied sites and occupancy % include MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.


⁽²⁾	~~Occupied sites include 12,860 sites acquired in 2015 and 1,137 sites acquired in 2014.~~


⁽³⁾	~~Weighted average~~Monthly base rent pertains to annual RV sites and excludes transient RV sites.

The ~~50.0%~~8.4% increase in Real Property NOI consists of ~~$25.0~~$1.9 million from newly acquired properties, net of disposed properties and ~~$4.9~~$5.0 million from same ~~site properties~~communities as detailed below.

3024

SUN COMMUNITIES, INC.

REAL PROPERTY OPERATIONS – SAME ~~SITE~~COMMUNITY

A key management tool used when evaluating performance and growth of our properties is a comparison of Same ~~Site communities.~~Communities. Same ~~Site communities~~Communities consist of properties owned and operated throughout ~~2015~~2016 and ~~2014.~~2015. The Same ~~Site~~Community data may change from time-to-time depending on acquisitions, dispositions, management discretion, significant transactions, or unique situations. The Same ~~Site~~Community data in this Form 10-Q includes all properties ~~acquired prior to December 31, 2013 and~~ which we have owned and operated continuously since January 1, ~~2014.~~2015. All communities from the American Land Lease portfolio acquisition are included within Same Communities.

In order to evaluate the growth of the Same ~~Site communities,~~Communities, management has classified certain items differently than our GAAP statements. The reclassification difference between our GAAP statements and our Same ~~Site~~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 reclassify these amounts to reflect the utility expenses associated with our Same ~~Site~~Community portfolio net of recovery.

The following tables reflect certain financial and other information for our Same ~~Site communities~~Communities as of and for the three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015:

Three Months Ended September 30,
Financial Information (in thousands) 2015 2014 Change % Change
Income from Real Property $ 84,972

$ 79,107
$ 5,865
7.4 %
Property operating expenses:

Payroll and benefits 6,996

7,217
(221 ) (3.1 )%
Legal, taxes, and insurance 1,436

1,285
151
11.8 %
Utilities 5,440

4,747
693
14.6 %
Supplies and repair 4,119

3,654
465
12.7 %
Other 2,706

2,559
147
5.7 %
Real estate taxes 5,336

5,639
(303 ) (5.4 )%
Property operating expenses 26,033
25,101
932
3.7 %
Real Property NOI $ 58,939
$ 54,006
$ 4,933
9.1 %

As of September 30,
Other Information 2015 2014 Change
Number of properties 174

174
—
Developed sites 66,020

65,340
680
Occupied sites ⁽¹⁾
55,699

53,750
1,949
Occupancy % ^{(1) (2)}
95.0 %
93.5 % 1.5 %
Weighted average monthly site rent - MH $ 472

$ 457
$ 15
Weighted average monthly site rent - RV ⁽³⁾
$ 407

$ 394
$ 13
Weighted average monthly site rent - Total $ 463

$ 449
$ 14
Sites available for development 5,797

6,118
(321 )



	Three Months Ended March 31,
Financial Information (in thousands)	2016		2015		Change		% Change
Income from Real Property	$	114,545	$	107,447	$	7,098	6.6	%
Property operating expenses:
Payroll and benefits	8,877		8,157		720		8.8	%
Legal, taxes, and insurance	1,685		1,625		60		3.7	%
Utilities	6,396		6,239		157		2.5	%
Supplies and repair	2,731		2,560		171		6.7	%
Other	2,890		2,621		269		10.3	%
Real estate taxes	8,993		8,263		730		8.8	%
Property operating expenses	31,572		29,465		2,107		7.2	%
Real Property NOI	$	82,973	$	77,982	$	4,991	6.4	%



	As of March 31,
Other Information	2016			2015				Change
Number of properties	219			219				—

Overall occupancy ^{(1) (2)}	96.1		%	93.6		%	⁽⁴⁾	2.5		%

Sites available for development	5,906			6,574				(668		)

Monthly base rent per site - MH	$	488		$	472			$	16
Monthly base rent per site - RV ⁽³⁾	$	430		$	416			$	14
Monthly base rent per site - Total	$	481		$	465			$	16


⁽¹⁾	~~Occupied sites and occupancy~~Occupancy % ~~include~~includes MH and ~~annual~~annual/seasonal RV sites, and ~~exclude~~excludes recently completed but vacant expansion sites and transient RV ~~sites, which are included in total developed~~ sites.


⁽²⁾	Occupancy % ~~excludes recently completed but vacant~~for 2015 has been adjusted to reflect incremental growth year over year from filled expansion sites and the conversion of transient RV sites to annual/seasonal RV sites.


⁽³⁾	~~Weighted average~~Monthly base rent pertains to annual RV sites and excludes transient RV sites.


⁽⁴⁾	Occupancy reflects current year gains from expansion sites and the conversion of transient RV guests to annual/seasonal RV contracts as vacant in 2015.

The ~~9.1%~~6.4% growth in NOI is primarily due to increased revenues of ~~$5.9~~$7.1 million partially offset by additional expenses of ~~$0.9~~$2.1 million.

SUN COMMUNITIES, INC.

Income from real property revenue consists of MH and RV site rent, and miscellaneous other property revenues. The ~~7.4%~~6.6% growth in income from real property is primarily due to increased revenue from our MH and RV portfolio ~~of $4.9 million~~ due to the ~~increased number of occupied home sites and~~2.5% occupancy gain, a 3.4% increase in the ~~increase to our~~ weighted average rental rate, ~~of 3.1%. Additionally,~~and an increase in transient RV revenue and other of ~~$0.4 million, and an increase in other miscellaneous property revenue of $0.6~~$0.7 million.

Property operating expenses increased approximately ~~$0.9~~$2.1 million, or ~~3.7%~~7.2%, compared to ~~2014.~~2015. Of that increase, ~~utility expenses~~real estate taxes increased $0.7 million primarily due to increased ~~electric, Internet~~tax appraisals in four communities. Payroll and ~~rubbish removal. Legal, taxes and insurance expenses~~benefits increased ~~$0.2~~$0.7 million, ~~primarily due~~partially attributable to an increase in ~~property~~health and ~~casualty insurance.~~life insurance expenses. Supplies and repair and other miscellaneous expenses increased $0.5 million primarily due to increases in ~~tree trimming and~~ community maintenance expenses.

3126

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 ~~dealers at substantial discounts. We~~former residents to lease or ~~sell these value priced homes to current and prospective residents. We also purchase new homes to lease and~~ sell to current and prospective residents.

The following table reflects certain financial and statistical information for our Home Sales Program for the three months ended March 31, 2016 and 2015 (in thousands, except for average selling prices and statistical information):



	Three Months Ended March 31,
Financial Information	2016			2015			Change			% Change
New home sales	$	5,469		$	5,246		$	223		4.3	%
Pre-owned home sales	19,268			11,588			7,680			66.3	%
Revenue from home sales	24,737			16,834			7,903			46.9	%

New home cost of sales	4,844			4,191			653			15.6	%
Pre-owned home cost of sales	13,340			8,366			4,974			59.5	%
Cost of home sales	18,184			12,557			5,627			44.8	%
NOI / Gross profit	$	6,553		$	4,277		$	2,276		53.2	%

Gross profit – new homes	$	625		$	1,055		$	(430	)	(40.8	)%
Gross margin % – new homes	11.4		%	20.1		%	(8.7		)%
Average selling price – new homes	$	82,864		$	79,484		$	3,380		4.3	%

Gross profit – pre-owned homes	$	5,928		$	3,222		$	2,706		84.0	%
Gross margin % – pre-owned homes	30.8		%	27.8		%	3.0		%
Average selling price – pre-owned homes	$	27,565		$	24,294		$	3,271		13.5	%

Statistical Information
Home sales volume:
New home sales	66			66			—			—	%
Pre-owned home sales	699			477			222			46.5	%
Total homes sold	765			543			222			40.9	%

Home Sales gross profit decreased $0.4 million on new home sales and increased $2.7 million on pre-owned home sales. The decrease in gross profit on new home sales is due to an increase in the cost of new homes sold as compared to their selling price. The increased profits on pre-owned homes are primarily due to an increase in volume and an increase in per unit sales prices.

SUN COMMUNITIES, INC.

The following table reflects certain financial and other information for our Rental Program as of and for the three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 (in thousands, except for statistical information):


	Three Months Ended September 30,									Three Months Ended March 31,
Financial Information	2015		2014		Change			% Change		2016		2015		Change			% Change
Rental home revenue	$	11,856	$	9,829	$	2,027		20.6	%	$	11,708	$	11,129	$	579		5.2	%
Site rent from Rental Program ⁽¹⁾	15,762		13,543		2,219			16.4	%	15,218		15,127		91			0.6	%
Rental Program revenue	27,618		23,372		4,246			18.2	%	26,926		26,256		670			2.6	%
Expenses
Commissions	855		677		178			26.3	%	775		834		(59		)	(7.1	)%
Repairs and refurbishment	3,389		3,049		340			11.2	%	2,666		2,416		250			10.3	%
Taxes and insurance	1,645		1,313		332			25.3	%	1,565		1,476		89			6.0	%
Marketing and other	1,142		1,193		(51		)	(4.3	)%	870		879		(9		)	(1.0	)%
Rental Program operating and maintenance	7,031		6,232		799			12.8	%	5,876		5,605		271			4.8	%
Rental Program NOI	$	20,587	$	17,140	$	3,447		20.1	%	$	21,050	$	20,651	$	399		1.9	%

Other Information
Number of occupied rentals, end of period	11,443		10,116		1,327			13.1	%	10,815		11,157		(342		)	(3.1	)%
Investment in occupied rental homes, end of period	$	456,027	$	389,634	$	66,393		17.0	%	$	447,378	$	431,421	$	15,957		3.7	%
Number of sold rental homes	223		208		15			7.2	%	294		181		113			62.4	%
Weighted average monthly rental rate, end of period	$	843	$	816	$	27		3.3	%	$	865	$	834	$	31		3.7	%

⁽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 assess the overall growth and performance of the Rental Program and financial impact to our operations.

The ~~20.1%~~1.9% ~~growth~~increase in NOI is primarily a result of ~~the increased number of residents participating~~an increase in ~~the Rental Program and from increased monthly~~ rental rates for the three months ended March 31, 2016 as ~~indicated in the table above.~~

compared to March 31, 2015. The increase in operating and maintenance expenses of $~~0.8~~0.3 million was primarily a result of ~~increased taxes and insurance expense of $0.3 million due to property and casualty insurance and personal property tax increases on the homes. Also, commissions expense increased by $0.2 million and~~ expenses related to refurbishment of the home after a renter move-out, ~~increased~~offset by ~~$0.3 million.~~declines in commissions and marketing expenses.

3228

SUN COMMUNITIES, INC.

~~The following table reflects certain financial and statistical information for our Home Sales Program for the~~ ~~three months ended September 30, 2015~~ ~~and~~ ~~2014~~ ~~(in thousands, except for average selling prices and statistical information):~~

Three Months Ended September 30,
Financial Information 2015 2014 Change % Change
New home sales $ 4,469

$ 2,250
$ 2,219
98.6 %
Pre-owned home sales 14,522

11,663
2,859
24.5 %
Revenue from home sales 18,991
13,913
5,078
36.5 %

New home cost of sales 3,739

1,910
1,829
95.8 %
Pre-owned home cost of sales 9,647

8,614
1,033
12.0 %
Cost of home sales 13,386
10,524
2,862
27.2 %
NOI / Gross profit $ 5,605
$ 3,389
$ 2,216
65.4 %

Gross profit – new homes $ 730

$ 340
$ 390
114.7 %
Gross margin % – new homes 16.3 %
15.1 % 1.2 %

Average selling price – new homes $ 74,485

$ 86,482
$ (11,997 ) (13.9 )%

Gross profit – pre-owned homes $ 4,875

$ 3,049
$ 1,826
59.9 %
Gross margin % – pre-owned homes 33.6 %
26.1 % 7.5 %

Average selling price – pre-owned homes $ 25,658

$ 23,435
$ 2,223
9.5 %

Statistical Information
Home sales volume:
New home sales 60

26
34
130.8 %
Pre-owned home sales 566

498
68
13.7 %
Total homes sold 626
524
102
19.5 %

Home Sales gross profit increased $0.4 million on new home sales and increased $1.8 million on pre-owned home sales. The increase in gross profit on new home sales is primarily due to an increase in volume. The increased profits on pre-owned homes are primarily due to an increase in volume and an increase in per unit sales prices.

~~SUN COMMUNITIES, INC.~~

OTHER INCOME STATEMENT ITEMS

The following table summarizes other income and expenses for the three months ended ~~September 30,~~March 31, 2016 and 2015 ~~and 2014~~ (amounts in thousands):


	Three Months Ended September 30,									Three Months Ended March 31,
	2015		2014		Change			% Change		2016		2015		Change			% Change
Ancillary revenues, net	$	5,575	$	3,565	$	2,010		56.4	%	$	1,105	$	645	$	460		71.3	%
Interest income	$	3,987	$	3,545	$	442		12.5	%	$	3,945	$	3,984	$	(39	)	(1.0	)%
Brokerage commissions and other revenues	$	462	$	338	$	124		36.7	%	$	406	$	537	$	(131	)	(24.4	)%
Real property general and administrative	$	10,735	$	6,971	$	3,764		54.0	%
Home sales and rentals general and administrative	$	3,845	$	2,313	$	1,532		66.2	%
Home selling expenses										$	2,278	$	1,690	$	588		34.8	%
General and administrative expenses										$	13,792	$	11,628	$	2,164		18.6	%
Transaction costs	$	1,664	$	2,399	$	(735	)	(30.6	)%	$	2,721	$	9,449	$	(6,728	)	(71.2	)%
Depreciation and amortization	$	44,695	$	29,917	$	14,778		49.4	%	$	48,412	$	44,001	$	4,411		10.0	%
Asset impairment charge	$	—	$	837	$	(837	)	100.0	%
Interest expense	$	28,243	$	19,427	$	8,816		45.4	%	$	27,081	$	26,241	$	840		3.2	%
Gain on disposition of properties, net	$	18,190	$	13,631	$	4,559		33.4	%	$	—	$	8,769	$	(8,769	)	(100.0	)%
Distributions from affiliate	$	—	$	400	$	(400	)	(100.0	)%
Preferred stock redemption costs	$	4,328	$	—	$	4,328		N/A

Ancillary revenues, net increased primarily due to increased golf course income and increased ~~ticket~~entertainment and merchandise income.

~~Interest income~~ Home selling expensesincreased $0.6 million, primarily ~~due to an~~as a result of increased commissions on home sales given the volume increase in ~~interest income on collateralized receivables of $0.4 million.~~

~~Brokerage commissions and other revenues~~ ~~increased primarily due to the increase in brokerage commissions due to an increase in the number of brokered homes sold.~~pre-owned home sales.

Real property general and administrative expenses increased primarily due to ~~increased~~increases in deferred compensation expense of $0.8 million, salaries, wages and related taxes of ~~$0.8~~$0.7 million, ~~increased~~and employee benefits and incentives of $1.6 million, increased deferred compensation expense of $0.7 million, and increased software support and licensing fees, legal, workers compensation, consulting and property and casualty insurance of $0.7 million.

~~Home sales and rentals general and administrative~~ expenses increased primarily due to increased salaries, wages and related taxes of $0.8 million, increased commissions on home sales of $0.3 million, increased employee benefits and incentives of $0.1 million, and increased advertising and utility expense of $0.2$0.4 million.

Transaction costs decreased as a result of lower acquisition costs during the ~~third~~first quarter of ~~2015~~2016 compared to higher diligence costs related to the ~~pending Green Courte~~American Land Lease acquisition during the ~~third~~first quarter of ~~2014 (see Notes~~2015. (See Note 2 in our Consolidated Financial Statements).

Depreciation and amortization expenses increased as a result of additional depreciation and amortization of ~~$11.7~~$4.0 million primarily related to our newly acquired properties, ~~$1.5~~$0.2 million related to depreciation on investment property for use in our Rental Program, and ~~$1.3~~$0.2 million related to the amortization of in-place leases and promotions.

~~Asset impairment charge~~ ~~decreased as a result of no impairments in 2015.~~

Interest expense on debt, including interest on mandatorily redeemable preferred OP units, increased primarily as a result of ~~a $7.0 million increase in mortgage interest due to the acquisition of the Green Courte and Berger properties,~~ an increase of ~~$3.5~~$0.2 million of interest on miscellaneous other long term debt, a $0.4 million increase in interest expense associated with our secured borrowing arrangements, and an increase of ~~$0.4~~$0.2 million of interest on our line of ~~credit, partially offset by $2.5 million of mark to market adjustments on assumed debt.~~credit.

~~SUN COMMUNITIES, INC.~~

Gain on disposition of properties, net ~~increased $4.6~~decreased $8.8 million as a result of ~~a larger gain on the sale of three MH properties during the three months ended September 30, 2015 than on the sale of six properties~~no disposition activity in ~~the third quarter of 2014 (see Note 2 in our Consolidated Financial Statements).~~2016.

~~Distributions from affiliate~~ decreased $0.4 million. During 2015, our affiliate Origen sold substantially all of its assets and has announced its intention to dissolve and liquidate. See Note 6 to our Consolidated Financial Statements.

~~Preferred stock redemption costs~~ ~~increased $4.3 million as a result of a repurchase agreement with certain holders of the Company's Series A-4 Preferred Stock (See Note 9 in our Consolidated Financial Statements).~~

3529

SUN COMMUNITIES, INC.

COMPARISON OF THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2015~~MARCH 31, 2016 AND ~~2014~~2015

The following table summarizes our consolidated financial results for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 (in thousands):


	Nine Months Ended September 30,							Three Months Ended March 31,
	2015				2014			2016			2015
Real Property NOI	$	254,438			$	173,342		$	88,449		$	81,596
Rental Program NOI	62,805				52,427			21,050			20,651
Home Sales NOI/Gross profit	14,914				9,377			6,553			4,277
Ancillary NOI/Gross profit	7,325				5,198			1,105			645
Site rent from Rental Program (included in Real Property NOI)	(46,440		)		(40,159		)	(15,218		)	(15,127		)
NOI/Gross profit	293,042				200,185			101,939			92,042
Adjustments to arrive at net income:
Other revenues	13,592				11,145			4,351			4,521
Home selling expenses								(2,278		)	(1,690		)
General and administrative	(42,341		)		(31,109		)	(13,792		)	(11,628		)
Transaction costs	(13,150		)		(4,263		)	(2,721		)	(9,449		)
Depreciation and amortization	(130,107		)		(88,851		)	(48,412		)	(44,001		)
Asset impairment charge	—				(837		)
Extinguishment of debt	(2,800		)		—
Interest expense	(82,022		)		(56,566		)	(27,081		)	(26,241		)
Gain on disposition of properties, net	26,946				14,516			—			8,769
Provision for state income taxes	(229		)		(207		)
Distributions from affiliate	7,500				1,200
Provision for income taxes								(228		)	(75		)
Net income	70,431				45,213			11,778			12,248
Less: Preferred return to Series A-1 preferred OP units	1,844				1,997
Less: Preferred return to Series A-3 preferred OP units	136				136
Less: Preferred return to Series A-4 preferred OP units	1,032				—
Less: Preferred return to Series C preferred OP units	680				—
Less: Preferred return to preferred OP units								1,273			1,029
Less: Amounts attributable to noncontrolling interests	3,132				3,093			276			264
Net income attributable to Sun Communities, Inc.	63,607				39,987			10,229			10,955
Less: Series A preferred stock distributions	11,353				4,542
Less: Preferred stock redemption costs	4,328			—	—
Less: Preferred stock distributions								2,354			4,086
Net income attributable to Sun Communities, Inc. common stockholders	$	47,926			$	35,445		$	7,875		$	6,869

3630

SUN COMMUNITIES, INC.

~~REAL PROPERTY OPERATIONS – TOTAL PORTFOLIO~~

~~The following tables reflect certain financial and other information for our Total Portfolio as of and for the~~ ~~nine months ended September 30, 2015~~ ~~and 2014:~~

Nine Months Ended September 30,
Financial Information (in thousands) 2015 2014 Change % Change
Income from Real Property $ 382,906
$ 267,847
$ 115,059
43.0 %
Property operating expenses:
Payroll and benefits 30,149
22,799
7,350
32.2 %
Legal, taxes, and insurance 5,682
3,863
1,819
47.1 %
Utilities 40,629
31,293
9,336
29.8 %
Supplies and repair 13,856
10,218
3,638
35.6 %
Other 12,121
8,240
3,881
47.1 %
Real estate taxes 26,031
18,092
7,939
43.9 %
Property operating expenses 128,468
94,505
33,963
35.9 %
Real Property NOI $ 254,438
$ 173,342
$ 81,096
46.8 %

As of September 30,
Other Information 2015 2014 Change
Number of properties 251
184
67
Developed sites 93,718
69,677
24,041
Occupied sites ^{(1) (2)}
78,531
56,223
22,308
Occupancy % ⁽¹⁾
93.7 % 92.5 % 1.2 %
Weighted average monthly site rent - MH
$ 477
$ 457
$ 20
Weighted average monthly site rent - RV⁽³⁾
$ 409
$ 394
$ 15
Weighted average monthly site rent - Total $ 469
$ 449
$ 20
Sites available for development 7,749
6,323
1,426


⁽¹⁾	~~Occupied sites and occupancy % include MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.~~


⁽²⁾	~~Occupied sites include 12,860 sites acquired in 2015 and 1,137 sites acquired in 2014.~~


⁽³⁾	~~Weighted average rent pertains to annual RV sites and excludes transient RV sites.~~

~~The~~ ~~46.8%~~ ~~increase in Real Property NOI consists of $66.6 million from newly acquired properties, net of disposed properties, and~~ ~~$14.7 million~~ ~~from same site properties as detailed below.~~

~~SUN COMMUNITIES, INC.~~

~~REAL PROPERTY OPERATIONS – SAME SITE~~

~~The following tables reflect certain financial and other information for our Same Site communities as of and for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2015~~ ~~and~~ ~~2014~~:

Nine Months Ended September 30,
Financial Information (in thousands) 2015 2014 Change % Change
Income from Real Property $ 248,082

$ 230,860
$ 17,222
7.5 %
Property operating expenses:
Payroll and benefits 20,793

19,783
1,010
5.1 %
Legal, taxes, and insurance 4,203

3,602
601
16.7 %
Utilities 14,961

14,555
406
2.8 %
Supplies and repair 9,538

9,221
317
3.4 %
Other 7,386

7,084
302
4.3 %
Real estate taxes 16,689

16,768
(79 ) (0.5 )%
Property operating expenses 73,570
71,013
2,557
3.6 %
Real Property NOI $ 174,512
$ 159,847
$ 14,665
9.2 %

As of September 30,
Other Information 2015 2014 Change
Number of properties 174
174
—
Developed sites 66,020
65,340
680
Occupied sites ⁽¹⁾
55,699
53,750
1,949
Occupancy % ^{(1) (2)}
95.0 % 93.5 % 1.5 %
Weighted average monthly site rent - MH $ 472
$ 457
$ 15
Weighted average monthly site rent - RV ⁽³⁾
$ 407
$ 394
$ 13
Weighted average monthly site rent - Total $ 463
$ 449
$ 14
Sites available for development 5,797
6,118
(321 )


⁽¹⁾	~~Occupied sites and occupancy % include MH and annual RV sites, and exclude transient RV sites, which are included in total developed sites.~~


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


⁽³⁾	~~Weighted average rent pertains to annual RV sites and excludes transient RV sites.~~

~~The~~ ~~9.2%~~ ~~growth in NOI is primarily due to increased revenues of~~ ~~$17.2 million~~ ~~partially offset by an increase in expenses of~~ ~~$2.6 million~~.

~~Income from real property revenue consists of MH and RV site rent, and miscellaneous other property revenues. The~~ ~~7.5%~~ growth in income from real property is primarily due to increased revenue from our MH and RV portfolio of $14.1 million as a result of the increased number of occupied home sites and the increase to our weighted average rental rate of 3.1%. Additionally, transient RV revenue increased $1.6 million and other revenues increased by $1.5 million primarily due to an increase in month to month fees, trash income, electric and gas income, cable television royalties, application fees, and other charges and fee revenue.

~~Property operating expenses increased~~ ~~$2.6 million, or~~ ~~3.6%~~ compared to 2014. Of that increase, salaries and wages, workers compensation costs and health insurance costs increased $1.0 million, legal, taxes and insurance expenses increased $0.6 million primarily due to increased property and casualty insurance, utilities increased $0.4 million primarily due to electric costs, supplies and repair increased $0.3 million primarily due to tree trimming, and other miscellaneous expenses increased $0.3 million primarily due to increases in credit card processing charges, corporate advertising and meeting expenses.

~~SUN COMMUNITIES, INC.~~

~~HOME SALES AND RENTALS~~

~~The following table reflects certain financial and other information for our Rental Program as of and for the~~ ~~nine months ended September 30, 2015~~ ~~and~~ ~~2014~~ ~~(in thousands, except for statistical information):~~

Nine Months Ended September 30,
Financial Information 2015 2014 Change % Change
Rental home revenue $ 34,480

$ 28,964
$ 5,516
19.0 %
Site rent from Rental Program ⁽¹⁾
46,440

40,159
6,281
15.6 %
Rental Program revenue 80,920
69,123
11,797
17.1 %
Expenses
Commissions 2,441
1,899
542
28.5 %
Repairs and refurbishment 8,127
7,859
268
3.4 %
Taxes and insurance 4,665
3,935
730
18.6 %
Marketing and other 2,882
3,003
(121 ) (4.0 )%
Rental Program operating and maintenance 18,115
16,696
1,419
8.5 %
Rental Program NOI $ 62,805
$ 52,427
$ 10,378
19.8 %

Other Information
Number of occupied rentals, end of period 11,443

10,116
1,327
13.1 %
Investment in occupied rental homes, end of period $ 456,027

$ 389,634
$ 66,393
17.0 %
Number of sold rental homes 611

562
49
8.7 %
Weighted average monthly rental rate, end of period $ 843

$ 816
$ 27
3.3 %

⁽¹⁾

~~The~~ ~~19.8%~~ ~~growth in NOI is primarily a result of the increased number of residents participating in the Rental Program and from increased monthly rental rates as indicated in the table above.~~

~~The increase in operating and maintenance expenses of~~ ~~$1.4 million~~ was primarily a result of a $0.5 million increase in commissions expense due to the increased number of new leases and taxes and insurance expense of $0.7 million due to increases in property and casualty insurance, personal property taxes on the homes and use tax expense, and repairs and refurbishment increased $0.2 million primarily due to expenses related to the refurbishment of the home after a renter move-out.

~~SUN COMMUNITIES, INC.~~

~~The following table reflects certain financial and statistical information for our Home Sales Program for the~~ ~~nine months ended September 30, 2015~~ ~~and~~ ~~2014~~ ~~(in thousands, except for average selling prices and statistical information):~~

Nine Months Ended September 30,
Financial Information 2015 2014 Change % Change
New home sales $ 14,890

$ 6,825
$ 8,065
118.2 %
Pre-owned home sales 39,669

32,024
7,645
23.9 %
Revenue from homes sales 54,559
38,849
15,710
40.4 %

New home cost of sales 12,348

5,785
6,563
113.4 %
Pre-owned home cost of sales 27,297

23,687
3,610
15.2 %
Cost of home sales 39,645
29,472
10,173
34.5 %
NOI / Gross profit $ 14,914
$ 9,377
$ 5,537
59.0 %

Gross profit – new homes $ 2,542
$ 1,040
$ 1,502
144.4 %
Gross margin % – new homes 17.1 %
15.2 % 1.9 %

Average selling price – new homes $ 77,956

$ 85,306
$ (7,350 ) (8.6 )%

Gross profit – pre-owned homes $ 12,372
$ 8,337
$ 4,035
48.4 %
Gross margin % – pre-owned homes 31.2 %
26.0 % 5.2 %

Average selling price – pre-owned homes $ 25,527

$ 24,011
$ 1,516
6.3 %

Statistical Information
Home sales volume:
New home sales 191
80
111
138.8 %
Pre-owned home sales 1,554
1,334
220
16.5 %
Total homes sold 1,745
1,414
331
23.4 %

Home Sales gross profit increased $1.5 million on new home sales and $4.0 million on pre-owned home sales. The increased profit on new home sales is primarily the result of increased per unit sales prices and increased sales volume. The increased profit on pre-owned homes sales are due to the increase in sales volume and per unit sales prices.

~~SUN COMMUNITIES, INC.~~

~~OTHER INCOME STATEMENT ITEMS~~

~~The following table summarizes other income and expenses for the nine months ended September 30, 2015 and 2014 (amounts in thousands):~~

Nine Months Ended September 30,
2015 2014 Change % Change
Ancillary revenues, net $ 7,325
$ 5,198
$ 2,127
40.9 %
Interest income $ 11,864
$ 10,425
$ 1,439
13.8 %
Brokerage commissions and other revenues $ 1,728
$ 720
$ 1,008
140.0 %
Real property general and administrative $ 31,051
$ 23,177
$ 7,874
34.0 %
Home sales and rentals general and administrative $ 11,290
$ 7,932
$ 3,358
42.3 %
Transaction costs $ 13,150
$ 4,263
$ 8,887
208.5 %
Depreciation and amortization $ 130,107
$ 88,851
$ 41,256
46.4 %
Asset impairment charge $ —
$ 837
$ (837 ) 100.0 %
Extinguishment of debt $ 2,800
$ —
$ 2,800
N/A
Interest expense $ 82,022
$ 56,566
$ 25,456
45.0 %
Gain on disposition of properties, net $ 26,946
$ 14,516
$ 12,430
85.6 %
Distributions from affiliate $ 7,500
$ 1,200
$ 6,300
525.0 %
Preferred stock redemption costs $ 4,328
$ —
$ 4,328
N/A

~~Ancillary revenues, net~~ ~~increased primarily due to increased golf course income and increased ticket and merchandise income.~~

~~Interest income~~ ~~increased primarily due to an increase in interest income from collateralized receivables of $1.1 million.~~

~~Brokerage commissions and other revenues~~ ~~increased primarily due to a $0.9 million increase in brokerage commissions due to the increase in broker home sales.~~

~~Real property general and administrative~~ expenses increased primarily due to increased salaries, wages and related taxes of $2.2 million, an increase in deferred compensation costs of $1.8 million, an increase in employee benefits and incentives of $1.7 million, an increase in consulting services of $0.4 million, an increase of $0.2 million related to legal expenses, and increased travel and trainings, directors fees and expenses, property and casualty insurance, workers compensation, subscriptions, software support and licensing fees of $1.4 million.

~~Home sales and rentals general and administrative~~ expenses increased primarily due to increased salaries, wages and related taxes of $1.7 million, increased commissions costs of $0.6 million, an increase in other expenses of $0.7 million primarily related to increased licensing, seminars, conventions and traveling, office and advertising expenses, and utility expenses.

~~Transaction costs~~ increased primarily due to higher acquisition due diligence and other transaction costs related to our acquisitions during the nine months ended 2015 compared to the due diligence costs related to the pending Green Courte acquisition during the nine months ended 2014 (see Note 2 in our Consolidated Financial Statements).

~~Depreciation and amortization~~ expenses increased primarily due to additional depreciation and amortization of $30.2 million primarily related to our newly acquired properties, $3.9 million related to depreciation on investment property for use in our Rental Program, $1.4 million related to depreciation on homes in our vacation rental program, and $3.3 million related to the amortization of in-place leases and promotions.

~~Asset impairment charge~~ ~~decreased as a result of no impairments in 2015.~~

~~Extinguishment of debt~~ ~~expenses increased after defeasing total debt of $70.6 million aggregate principal amount of collateralized term loans, releasing 10 communities.~~

~~Interest expense~~ on debt, including interest on mandatorily redeemable preferred OP units, increased primarily as a result of an $19.2 million increase in mortgage interest due to the acquisition of the Green Courte and Berger properties, an increase of $12.3

~~SUN COMMUNITIES, INC.~~

million of interest on miscellaneous other long term debt, a $1.1 million increase in interest expense associated with our secured borrowing arrangements, partially offset by $6.9 million of mark to market adjustments on assumed debt.

~~Gain on disposition of properties, net~~ increased $12.4 million as a result of a larger gain on the sale of four MH properties during the nine months ended September 30, 2015 than the sale of 10 MH properties during the nine months ended September 30, 2014 (see Note 2 to our Consolidated Financial Statements).

~~Distributions from affiliate~~ increased $6.3 million. During 2015, our affiliate Origen sold substantially all of its assets and has announced its intention to dissolve and liquidate. See Note 6 to our Consolidated Financial Statements.

FUNDS FROM OPERATIONS

We provide information regarding FFO as a supplemental measure of financial and operational performance. FFO is defined by NAREIT as net income (loss) (computed in accordance with GAAP), excluding extraordinary items (as defined under GAAP), and gain (loss) on sales of depreciable operating property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Due to the variety among owners of identical assets in similar condition (based on historical cost accounting and useful life estimates), we believe excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization, provides a better indicator of our operating performance. FFO is a useful supplemental measure of our operating performance because it 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. Management, the investment community, and banking institutions routinely use FFO, together with other measures, to measure operating performance in our industry. Further, management uses FFO for planning and forecasting future periods.

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. FFO is compiled in accordance with its 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.

4231

SUN COMMUNITIES, INC.

The following table reconciles net income to FFO data for diluted purposes for the ~~three and~~ ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 (in thousands, except per share amounts):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2015			2014			2015			2014			2016			2015
Net income attributable to Sun Communities, Inc. common stockholders	$	28,763		$	22,671		$	47,926		$	35,445		$	7,875		$	6,869
Adjustments:
Preferred return to preferred OP units													625			45
Amounts attributable to noncontrolling interests	1,174			1,220			1,554			2,067			349			78
Preferred distribution to Series A-4 preferred stock	1,666			—			—			—
Depreciation and amortization	45,014			30,229			130,247			89,772			48,077			44,264
Asset impairment charge	—			837			—			837
Gain on disposition of properties, net	(18,190		)	(13,631		)	(26,946		)	(14,516		)	—			(8,769		)
Gain on disposition of assets, net	(2,937		)	(1,634		)	(7,065		)	(4,663		)
Gain on disposition of assets													(3,656		)	(1,702		)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities ⁽¹⁾	55,490			39,692			145,716			108,942			53,270			40,785
Adjustments:
Distribution from affiliate	—			—			(7,500		)	—
Transaction costs	1,664			2,399			13,150			4,263			2,721			9,449
Preferred stock redemption costs	4,328			—			4,328			—
Extinguishment of debt	—			—			2,800			—
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities excluding certain items ⁽¹⁾	$	61,482		$	42,091		$	158,494		$	113,205		$	55,991		$	50,234

Weighted average common shares outstanding - basic:	53,220			41,023			52,855			39,283
Weighted average common shares outstanding:													57,736			52,498
Add:
Common stock issuable upon conversion of stock options	14			15			16			16			13			16
Restricted stock	431			229			400			207			377			378
Common OP units	2,874			2,069			2,783			2,069			2,863			2,560
Common stock issuable upon conversion of Series A-4 preferred stock	1,826			—			—			—
Common stock issuable upon conversion of Series A-1 preferred stock													945			—
Common stock issuable upon conversion of Series A-3 preferred OP units													75			75
Weighted average common shares outstanding - fully diluted	58,365			43,336			56,054			41,575			62,009			55,527

FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per Share - fully diluted	$	0.95		$	0.92		$	2.60		$	2.62		$	0.86		$	0.73
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities per Share excluding certain items - fully diluted	$	1.05		$	0.97		$	2.83		$	2.72		$	0.90		$	0.90


⁽¹⁾	The effect of certain anti-dilutive convertible securities is excluded from these items.

4332

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 look for opportunities to expand our development pipeline and acquire existing communities. We also intend to continue to strengthen our capital and liquidity positions by continuing to focus 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 unsecured credit facility, and the use of debt and equity offerings under our ~~automatic~~ shelf registration statement.

During the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016, we acquired 34one MH ~~communities~~community and ~~four~~one RV ~~communities~~community with ~~approximately 15,600 sites. We also disposed of four MH communities with approximately 1,700~~740 combined sites. See Note 2 to our Consolidated Financial Statements for details on the ~~2015~~2016 acquisitions ~~and dispositions~~ and Note 8 to our Consolidated Financial Statements for related debt transactions.

We will continue to evaluate acquisition opportunities that meet our criteria for acquisition. On March 30, 2016, we closed on an underwritten public offering of 6,037,500 shares of common stock at a price of $66.50 per share. The net proceeds from the offering will be used to fund a portion of the purchase price for the acquisition of Carefree Communities. See Note 2 to our Consolidated Financial Statements for additional details on the Carefree Communities acquisition. Should additional investment opportunities arise in ~~2015,~~2016, we intend to finance the acquisitions through available cash, secured financing, draws on our credit facilities, the assumption of existing debt on the properties, and the issuance of certain equity securities.

During the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, we invested ~~$38.9~~$9.8 million in the acquisition of homes intended for the Rental Program net of proceeds from third-party financing from home sales. Expenditures for ~~2015~~2016 will 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 ~~secured~~ lines of credit.

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


	Nine Months Ended September 30,						Three Months Ended March 31,
	2015			2014			2016			2015
Net Cash Provided by Operating Activities	$	146,778		$	109,259		$	50,926		$	40,944
Net Cash Used for Investing Activities	$	(403,205	)	$	(248,622	)	$	(45,250	)	$	(212,170	)
Net Cash Provided by Financing Activities	$	196,885		$	393,762		$	359,646		$	212,648

Cash and cash equivalents ~~decreased~~increased by ~~$(59.5)~~$365.3 million from ~~$83.5~~$45.1 million as of December 31, ~~2014,~~2015, to ~~$23.9~~$410.4 million as of ~~September 30, 2015.~~March 31, 2016.

Operating Activities

Net cash provided by operating activities increased by ~~$37.5~~$10.0 million from ~~$109.3~~$40.9 million for the ~~nine~~three months ended ~~September 30, 2014~~March 31, 2015 to ~~$146.8~~$50.9 million for the ~~nine~~three months ended ~~September 30, 2015.~~March 31, 2016.

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 of our ~~2014~~2015 Annual Report.

SUN COMMUNITIES, INC.

Investing Activities

Net cash used for investing activities was ~~$403.2~~$45.3 million for the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, compared to ~~$248.6~~$212.2 million for the ~~nine~~three months ended ~~September 30, 2014.~~March 31, 2015. The ~~increase~~decrease is primarily due to ~~increased cash used~~a decline in acquisition activity for the ~~continued~~

~~SUN COMMUNITIES, INC.~~

~~acquisition of properties,~~three months ended March 31, 2016 as ~~well as recurring investment in existing properties. These items are partially offset by decreased cash proceeds related~~compared to the ~~disposition~~second phase closing of ~~properties, and decreased payments for deposits on acquisitions.~~the American Land Lease transaction in the first quarter of 2015.

Financing Activities

Net cash provided by financing activities was ~~$196.9~~$359.6 million for the ~~nine~~three months ended ~~September 30, 2015,~~March 31, 2016, compared to ~~$393.8~~$212.6 million for the ~~nine~~three months ended ~~September 30, 2014.~~March 31, 2015. The ~~decrease~~increase is primarily due to a significant ~~decrease~~increase in our equity offerings in 2016 as consideration for the ~~Company's~~Carefree Community acquisition as compared to the equity offerings in 2015, ~~as compared to the Green Courte equity offerings in 2014. This~~offset by a reduction in proceeds ~~is partially offset by decreased net activity associated with our lines~~from the issuance of ~~credit and~~ other ~~debt.~~debt year over year.

Financial Flexibility

In August, 2015, we amended and restated our senior revolving credit facility with Citibank, N.A. and certain other lenders in the amount of $450.0 million, comprised of a $392.0 million revolving loan and $58.0 million term loan (the "Facility"). The Facility has a four year term ending August 19, 2019, 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 credit agreement also provides for, subject to the satisfaction of certain conditions, additional commitments in an amount not to exceed $300.0 million. If additional borrowings are made pursuant to any such additional commitments, the aggregate borrowing limit under the Facility may be increased up to $750.0 million. The 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 credit agreement, which can range from 1.40% to 2.25% for the revolving loan and 1.35% to 2.20% for the term loan. As of ~~September 30, 2015,~~March 31, 2016, the margin on our leverage ratio was ~~1.45%~~1.40% and ~~1.40%~~1.35% on the revolving and term loans, respectively. We ~~had$142.0~~had zero on the revolving loan and $58.0 million on the term loan totaling $58.0 million in borrowings as of March 31, 2016, with a weighted average interest rate of 1.84%. As of December 31, 2015 we had no borrowings on the revolving loan and $25.0 million in borrowings on the term loan totaling ~~$167.0~~$25.0 million in ~~borrowings as of September 30, 2015, with a weighted average interest rate of 1.66%. As of December 31, 2014 there was no amount outstanding under our previous credit Facility.~~borrowings.

The 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 it does reduce the borrowing amount available. At ~~September 30, 2015~~March 31, 2016 and December 31, ~~2014,~~2015, approximately ~~$3.4~~$2.8 million and ~~$3.2~~$3.4 million of availability was used to back standby letters of credit.

Pursuant to the terms of the 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 Facility are as follows:


Covenant	Must Be	As of September 30, 2015	Must Be	As of March 31, 2016
Maximum Leverage Ratio	<65.0%	42.7%	<65.0%	38.3%
Minimum Fixed Charge Coverage Ratio	>1.40	2.48	>1.40	2.39
Minimum Tangible Net Worth	1,736,435	$2,209,239	0	2,860,013
Maximum Dividend Payout Ratio	<95.0%	77.3%	<95.0%	74.1%

Market and Economic Conditions

U.S. rate environment, monetary policy change in China, Japan and the Euro area, ~~falling~~fluctuating oil prices, and turmoil in emerging markets are factors that are influencing financial markets in ~~2015.~~2016. Questions still exist on whether the U.S. economy will sustain the growth indicators it has reported and ~~whether or when~~the pace at which the U.S. Federal Reserve will ~~increase its benchmark rate for~~raise interest rates, citing the ~~first time in 10 years, as well as how Japan and the Eurozone will recover amidst easing monetary policy. The possible negative effects on the world economy~~weakness of the ~~recent Chinese stock market decline and additional~~ global ~~turmoil keep economic outlooks tempered.~~economy as a reason for greater caution about the prospects for domestic growth. While the U.S. economy looks poised for self-sustaining growth, the global economy is seeing modest improvement led by developed countries. 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. If such volatility is experienced in future periods, our industry, business and results of operations may be adversely impacted.

We anticipate meeting our long-term liquidity requirements, such as scheduled debt maturities, large property acquisitions, and Operating Partnership unit redemptions through the issuance of certain debt or equity securities and/or the collateralization of our

SUN COMMUNITIES, INC.

properties. At ~~September 30, 2015~~March 31, 2016, we had 8175 unencumbered properties with an estimated market value of ~~$945.8~~$273.1 million. ~~Seventy-seven~~Sixty-three of these unencumbered properties support the borrowing base for our $450.0 million unsecured 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

~~SUN COMMUNITIES, INC.~~

economic factors affecting the manufactured housing 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 of our ~~2014~~2015 Annual ~~Report.~~Report and in Part II, Item 1A of this report. If we are unable to obtain additional debt or equity financing on acceptable terms, our business, results of operations and financial condition would be adversely impacted.

~~There have been no material effects of damage to our communities as a result of Hurricane Joaquin in October 2015.~~

As of ~~September 30, 2015~~March 31, 2016, our net debt to enterprise value approximated ~~37.9%~~27.7% (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 units to shares of common stock). Our debt has a weighted average maturity of approximately ~~8.1~~8.2 years and a weighted average interest rate of 5.1%.

Capital expenditures for the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015 included recurring capital expenditures of ~~$13.6~~$2.9 million and ~~$10.8~~$3.4 million, respectively. We are committed to the continued upkeep of our properties and therefore do not expect a decline in our recurring capital expenditures during ~~2015~~2016.

4635

SUN COMMUNITIES, INC.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of the United States Securities Act of 1933, as amended, and the United States 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” in Part I, Item IA, contained in our ~~2014~~2015 Annual Report 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;

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;

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, changes in our expectations or otherwise, except as required by law.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements.

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SUN COMMUNITIES, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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. We generally 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.

We have two interest rate cap agreements with a total notional amount of $160.1 million as of ~~September 30, 2015~~March 31, 2016. The first interest rate cap agreement has a cap rate of 9.00%, a notional amount of $150.1 million and a termination date of April 2018. The second interest rate cap agreement has a cap rate of 11.02%, a notional amount of $10.0 million and a termination date of October 2016.

Our remaining variable rate debt totals ~~$325.9~~$216.0 million and ~~$161.5~~$160.4 million as of ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015, respectively, and bears interest at Prime or various LIBOR rates. If Prime or LIBOR increased or decreased by 1.0%, we believe our interest expense would have increased or decreased by approximately ~~$2.2~~$0.5 million and ~~$3.2~~$0.4 million as of ~~September 30, 2015~~March 31, 2016 and ~~2014~~2015, respectively, based on the ~~$216.6~~$208.0 million and ~~$316.4~~$162.0 million average balances outstanding under our variable rate debt facilities, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer, Gary A. Shiffman, and Chief Financial Officer, Karen J. Dearing, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information we are required to disclose in our filings with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that information we are required to disclose in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the quarterly period ended ~~September 30, 2015~~March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~See Note~~ 17 ~~included~~We are involved in ~~Part I, Item 1, "Notes~~various legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to ~~Unaudited Consolidated Financial Statements", within this quarterly report~~have a material adverse impact on ~~Form 10-Q.~~our results of operations or financial condition.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors in Part 1, Item 1A., "~~Risk Factors~~""Risk Factors", in our ~~2014~~2015 Annual Report, which could materially affect our business, financial condition or future results. There have been no material changes to the disclosure on these matters set forth in the ~~2014~~2015 Annual Report.

We may not acquire Carefree Communities.

We expect to close the acquisition of Carefree Communities no later than July 9, 2016. However, the closing is subject to the satisfaction of the closing conditions set forth in the purchase agreement for the transaction, including obtaining certain third party consents. If these conditions are not satisfied or waived, or if the purchase agreement is otherwise terminated in accordance with its terms, then the acquisition will not be consummated. We have incurred significant costs associated with the potential acquisition of the Carefree Communities and expect to continue to incur such costs until the acquisition closes or is abandoned. If the acquisition is not consummated we will not receive any benefits associated with these costs. The price of our common stock

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SUN COMMUNITIES, INC.

may decline to the extent that the current market price of our common stock reflects a market assumption that the Carefree Communities properties will be acquired and that we will realize certain anticipated benefits of acquiring Carefree Communities.

The intended benefits of the Carefree Communities acquisition may not be realized.

The Carefree Communities acquisition poses risks for our ongoing operations, including, among others:

that senior management’s attention may be diverted from the management of daily operations to the integration of the properties acquired in the acquisition;

costs and expenses associated with any undisclosed or potential liabilities;

that the properties acquired in the acquisition may not perform as well as anticipated; and

that unforeseen difficulties may arise in integrating the properties acquired in the acquisition into our portfolio.

As a result of the foregoing, we cannot assure you that the Carefree Communities acquisition will be accretive to us in the near term or at all. Furthermore, if we fail to realize the intended benefits of the properties acquired in the acquisition, the market price of our common stock could decline to the extent that the market price reflects those benefits.

We will assume a significant amount of debt in the Carefree Communities acquisition, which, together with our other debt, could limit our operational flexibility or otherwise adversely affect our financial condition.

Carefree Communities has approximately $1.0 billion of debt. If the acquisition closes we will increase our debt by approximately $1.0 billion. In addition, as of December 31, 2015, we had approximately $2.3 billion of total debt outstanding, consisting of approximately $2.2 billion in debt that is collateralized by mortgage liens on 160 of our properties, $140.4 million that is secured by collateralized receivables, and $45.9 million that is unsecured debt. As of December 31, 2015, we had $25.0 million outstanding on our senior revolving credit facility. If we fail to meet our obligations under our secured debt, including any debt we assume in the Carefree Communities acquisition, 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.

SUN COMMUNITIES, INC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 buyback program during the ~~nine~~three months ended ~~September 30, 2015~~March 31, 2016. There is no expiration date specified for the buyback program.

On July 29, 2015, we entered into a Repurchase Agreement with certain holders of shares of our Series A-4 Preferred Stock under which, at the holders’ election, we were obligated to repurchase up to 5,926,322 shares of Series A-4 Preferred Stock from the Series A-4 Preferred Stock holders. The price paid consisted of a price per share of $30.90 plus $0.18 for accrued and unpaid distributions from and including June 30, 2015 to, but not including, August 10, 2015. The sale right of the holders of the Series A-4 Preferred Shares to sell such shares under the Repurchase Agreement expired on August 10, 2015. We announced the Repurchase Agreement in a press release dated July 30, 2015 and a Form 8-K filed with the SEC on July 30, 2015 and announced the expiration the sale right associated with the Repurchase Agreement in a Form 8-K filed with the SEC on August 14, 2015. See Note 9 in our Consolidated Financial Statements.

~~During the quarter ended September 30, 2015, we repurchased shares of Series A-4 Preferred Stock in the following amounts at the following average prices:~~

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs
July 1 - July 31 —
$ —
—
—
August 1 - August 31 4,066,586
$ 31.08
4,066,586
—
September 1 - September 30 —
$ —
—
—
Total 4,066,586
$ 31.08
4,066.586
—

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SUN COMMUNITIES, INC.

~~ITEM 5. OTHER INFORMATION~~

~~None.~~

~~SUN COMMUNITIES, INC.~~

ITEM 6. EXHIBITS



Exhibit No.	Description	Method of Filing
~~3.1~~2.1	~~Articles of Amendment,~~ Stock Purchase Agreement dated ~~July~~March 22, ~~2015.~~2016, among Carefree Communities Intermediate Holdings, L.L.C., Sun Communities, Inc. and Sun Communities Operating Limited Partnership *	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 20, 2015~~filed March 22, 2016
~~10.1~~4.1	~~Amended and Restated Credit~~ Form of Registration Rights Agreement ~~dated August 19, 2015, among~~between Sun Communities, ~~Operating Limited Partnership, as Borrower, Citibank N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Citigroup Global Markets,~~ Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and BMO Capital Markets, as Joint Lead Arrangers and Joint Book Running Managers, Bank of America, N.A. and Bank of Montreal, as Co-Syndication Agent, Fifth Third Bank, an Ohio Banking Corporation and Regions Bank, as Co-Documentation Agents.Carefree Communities Intermediate Holdings, L.L.C.	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated August 19, 2015~~filed March 22, 2016
~~10.2~~10.1	~~Repurchase Agreement dated July 29, 2015, by and~~ Form of lock-up letter agreement among ~~Green Courte Real Estate Partners II, LLC, GCP Fund II REIT, LLC, GCP Fund II Ancillary Holding, LLC~~Carefree Communities Intermediate Holdings, L.L.C., Sun Communities, Inc. and Sun Communities ~~Inc.~~Operating Limited Partnership.	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 29, 2015~~filed March 22, 2016
~~10.3~~10.2	~~Employment~~ Form of Non-Competition Agreement ~~dated July 16, 2015 among~~to be delivered by each of David Napp and Colleen Edwards in favor of Sun Communities, Inc.~~, Sun Communities Operating Limited Partnership and Karen J. Dearing#~~	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 16, 2015~~
~~10.4~~	~~Sun Communities, Inc. 2015 Equity Incentive Plan#~~	~~Incorporated by reference to Sun Communities, Inc.'s Proxy Statement dated April 29, 2015 for the Annual Meeting of Stockholders held July 20, 2015~~filed March 22, 2016
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

~~# Management contract~~

* Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K because such schedules and exhibits do not contain information which is material to an investment decision or ~~compensatory plan or arrangement.~~which is not otherwise disclosed in the filed agreements. The Company will furnish the omitted schedules and exhibits to the Securities and Exchange Commission upon request by the Commission

SUN COMMUNITIES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~SUN COMMUNITIES, INC.~~




Dated: ~~October 27, 2015~~April 26, 2016	By:	/s/ Karen J. Dearing
		Karen J. Dearing, Chief Financial Officer and Secretary (Duly authorized officer and principal financial officer)

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SUN COMMUNITIES, INC.

EXHIBIT INDEX



Exhibit No.	Description	Method of Filing
~~3.1~~2.1	~~Articles of Amendment,~~ Stock Purchase Agreement dated ~~July~~March 22, ~~2015.~~2016, among Carefree Communities Intermediate Holdings, L.L.C., Sun Communities, Inc. and Sun Communities Operating Limited Partnership *	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 20, 2015~~filed March 22, 2016
~~10.1~~4.1	~~Amended and Restated Credit~~ Form of Registration Rights Agreement ~~dated August 19, 2015, among~~between Sun Communities, ~~Operating Limited Partnership, as Borrower, Citibank N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Citigroup Global Markets,~~ Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and BMO Capital Markets, as Joint Lead Arrangers and Joint Book Running Managers, Bank of America, N.A. and Bank of Montreal, as Co-Syndication Agent, Fifth Third Bank, an Ohio Banking Corporation and Regions Bank, as Co-Documentation Agents.Carefree Communities Intermediate Holdings, L.L.C.	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated August 19, 2015~~filed March 22, 2016
~~10.2~~10.1	~~Repurchase Agreement dated July 29, 2015, by and~~ Form of lock-up letter agreement among ~~Green Courte Real Estate Partners II, LLC, GCP Fund II REIT, LLC, GCP Fund II Ancillary Holding, LLC~~Carefree Communities Intermediate Holdings, L.L.C., Sun Communities, Inc. and Sun Communities ~~Inc.~~Operating Limited Partnership.	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 29, 2015~~filed March 22, 2016
~~10.3~~10.2	~~Employment~~ Form of Non-Competition Agreement ~~dated July 16, 2015 among~~to be delivered by each of David Napp and Colleen Edwards in favor of Sun Communities, Inc.~~, Sun Communities Operating Limited Partnership and Karen J. Dearing#~~	Incorporated by reference to Sun Communities, Inc.'s Current Report on Form 8-K ~~dated July 16, 2015~~
~~10.4~~	~~Sun Communities, Inc. 2015 Equity Incentive Plan#~~	~~Incorporated by reference to Sun Communities, Inc.'s Proxy Statement dated April 29, 2015 for the Annual Meeting of Stockholders held July 20, 2015~~filed March 22, 2016
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

~~# Management contract~~

5342



At Acquisition Date	First Phase ⁽¹⁾			Second Phase ⁽¹⁾			Total
Investment in property	$	656,543		$	818,109		$	1,474,652
Notes receivable	5,189			850			6,039
Other (liabilities) assets	(1,705		)	7,405			5,700
In-place leases and other intangible assets	12,870			15,460			28,330
Below market lease intangible	(10,820		)	(54,580		)	(65,400		)
Assumed debt	(199,300		)	(201,466		)	(400,766		)
Total identifiable assets acquired and liabilities assumed	$	462,777		$	585,778		$	1,048,555

Consideration
Common OP units⁽²⁾	$	24,064		$	—		$	24,064
Series A-4 preferred OP units⁽³⁾	18,852			1,000			19,852
Common stock	20,427			259,133			279,560
Series A-4 Preferred Stock ⁽³⁾	13,697			175,527			189,224
Consideration from new mortgages	100,700			90,794			191,494
Cash consideration transferred	285,037			59,324			344,361
Total consideration transferred	$	462,777		$	585,778		$	1,048,555



	Three Months Ended September 30, 2015		Nine Months Ended September 30, 2015
	(unaudited)		(unaudited)
Revenue	$	33,772	$	102,243
Net income	$	4,029	$	13,295



At Acquisition Date	Meadowlands ⁽¹⁾			Berger ⁽¹⁾			Lakeside Crossing ⁽¹⁾			La Hacienda ⁽¹⁾		Frontier Town ⁽¹⁾		Fort Whaley ⁽¹⁾		Rock Crusher ⁽¹⁾		Total
Investment in property	$	8,313		$	268,026		$	35,438		$	25,895	$	62,126	$	5,704	$	5,962	$	411,464
Inventory of manufactured homes	285			—			—			—		—		—		—		285
In-place leases and other intangible assets	270			5,040			520			1,380		70		—		110		7,390
Below market lease intangible	—			(7,840		)	(3,440		)	—		—		—		—		(11,280		)
Assumed debt	(6,318		)	(169,882		)	—			—		—		—		—		(176,200		)
Total identifiable assets acquired and liabilities assumed	$	2,550		$	95,344		$	32,518		$	27,275	$	62,196	$	5,704	$	6,072	$	231,659

Consideration
Common OP units	$	—		$	19,650		$	—		$	—	$	—	$	—	$	—	$	19,650
Series C preferred OP units	—			33,154			—			—		—		—		—		33,154
Note payable	2,377			—			—			—		—		—		—		2,377
Cash consideration transferred	173			42,540			32,518			27,275		62,196		5,704		6,072		176,478
Total consideration transferred	$	2,550		$	95,344		$	32,518		$	27,275	$	62,196	$	5,704	$	6,072	$	231,659



	Three Months Ended September 30, 2015									Three Months Ended September 30, 2014
	Real Property Operations			Home Sales and Rentals			Consolidated			Real Property Operations			Home Sales and Rentals			Consolidated
Revenues	$	150,059		$	30,847		$	180,906		$	103,007		$	23,742		$	126,749
Operating expenses/Cost of sales	54,172			20,417			74,589			39,232			16,756			55,988
Net operating income/Gross profit	95,887			10,430			106,317			63,775			6,986			70,761
Adjustments to arrive at net income (loss):
Interest and other income, net	4,449			—			4,449			3,883			—			3,883
General and administrative	(10,735		)	(3,845		)	(14,580		)	(6,971		)	(2,313		)	(9,284		)
Transaction costs	(1,664		)	—			(1,664		)	(2,399		)	—			(2,399		)
Depreciation and amortization	(31,352		)	(13,343		)	(44,695		)	(18,522		)	(11,395		)	(29,917		)
Asset impairment charge	—			—			—			(837		)	—			(837		)
Interest	(27,434		)	(19		)	(27,453		)	(18,614		)	(5		)	(18,619		)
Interest on mandatorily redeemable preferred OP units	(790		)	—			(790		)	(808		)	—			(808		)
Gain (loss) on disposition of properties, net	13,415			4,775			18,190			14,949			(1,318		)	13,631
Provision for state income taxes	(51		)	(26		)	(77		)	(69		)	—			(69		)
Distributions from affiliate	—			—			—			400			—			400
Net income (loss)	41,725			(2,028		)	39,697			34,787			(8,045		)	26,742
Less: Preferred return to A-1 preferred OP units	591			—			591			661			—			661
Less: Preferred return to A-3 preferred OP units	45			—			45			45			—			45
Less: Preferred return to A-4 preferred OP units	326			—			326			—			—			—
Less: Preferred return to Series C preferred OP units	340			—			340			—			—			—
Less: Amounts attributable to noncontrolling interests	2,295			(170		)	2,125			2,442			(591		)	1,851
Net income (loss) attributable to Sun Communities, Inc.	38,128			(1,858		)	36,270			31,639			(7,454		)	24,185
Less: Preferred stock distributions	3,179			—			3,179			1,514			—			1,514
Less: Preferred stock redemption costs	4,328			—			4,328			—			—			—
Net income (loss) attributable to Sun Communities, Inc. common stockholders	$	30,621		$	(1,858	)	$	28,763		$	30,125		$	(7,454	)	$	22,671



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
July 1 - July 31	—	$	—	—	—
August 1 - August 31	4,066,586	$	31.08	4,066,586	—
September 1 - September 30	—	$	—	—	—
Total	4,066,586	$	31.08	4,066.586	—