SUN COMMUNITIES INCSUI
SUN COMMUNITIES INC Fair Value Disclosure
14. Fair Value Measurements
The table below sets forth our financial assets and liabilities (in millions) that require disclosure of fair value on a recurring basis as of December 31, 2025. The valuation techniques are described in Note 1, "Significant Accounting Policies." The carrying values of cash, cash equivalents and restricted cash, other receivables and accounts payable approximate their fair market values since their maturities are less than one year. These financial instruments are classified as Level 1 in the hierarchy and are excluded from the table below.
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Fair Value Level | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Installment notes receivable on manufactured homes, net | 3 | $ | 139.2 | $ | 139.2 | $ | 93.9 | $ | 93.9 | |||||||||||||||||||||||
| Notes receivable from real estate developers and operators | 3 | 44.5 | 44.5 | 148.5 | 148.5 | |||||||||||||||||||||||||||
| Collateralized receivables, net | 3 | 43.2 | 43.2 | 51.2 | 51.2 | |||||||||||||||||||||||||||
| Derivative assets | 2 | — | — | 6.3 | 6.3 | |||||||||||||||||||||||||||
| Total assets measured at fair value | $ | 226.9 | $ | 226.9 | $ | 299.9 | $ | 299.9 | ||||||||||||||||||||||||
| Financial Liabilities | ||||||||||||||||||||||||||||||||
| Mortgage loans payable | 2 | $ | 2,429.0 | $ | 2,193.0 | $ | 3,212.2 | $ | 2,952.4 | |||||||||||||||||||||||
| Secured borrowings on collateralized receivables | 3 | 43.2 | 43.2 | 51.2 | 51.2 | |||||||||||||||||||||||||||
| Total secured debt | 2,472.2 | 2,236.2 | 3,263.4 | 3,003.6 | ||||||||||||||||||||||||||||
| Unsecured debt | ||||||||||||||||||||||||||||||||
| Senior unsecured notes | 2 | 1,786.5 | 1,655.1 | 2,676.3 | 2,476.8 | |||||||||||||||||||||||||||
| Line of credit | 2 | — | — | 1,413.1 | 1,413.1 | |||||||||||||||||||||||||||
| Total unsecured debt | 1,786.5 | 1,655.1 | 4,089.4 | 3,889.9 | ||||||||||||||||||||||||||||
| Derivative liabilities | 2 | — | — | 1.3 | 1.3 | |||||||||||||||||||||||||||
| Other financial liabilities (contingent consideration) | 3 | 0.2 | 0.2 | 11.3 | 11.3 | |||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | 4,258.9 | $ | 3,891.5 | $ | 7,365.4 | $ | 6,906.1 | ||||||||||||||||||||||||
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 instrument for which it is practicable to estimate that value.
Installment notes receivable on manufactured homes and collateralized receivables are recorded at fair value and are measured using model-derived indicative pricing using primarily unobservable inputs, inclusive of default rates, interest rates and recovery rates (Level 3). Refer to Note 4, "Notes and Other Receivables" for additional information.
Notes Receivable from Real Estate Developers and Operators
Notes receivable from real estate developers and operators are recorded at fair value and are measured using model-derived indicative pricing using primarily unobservable inputs including interest rates and counterparty performance (Level 3). The carrying values of the notes generally approximate their fair market values either due to the nature of the note and / or the note being secured primarily by underlying real estate and other collateral and / or personal guarantees. Refer to Note 4, "Notes and Other Receivables," for additional information.
Derivatives Assets and Liabilities - Interest Rate Derivatives
Interest rate derivatives are recorded at fair value and consist of interest rate swaps and forward swaps. The fair value of these financial instruments are measured using observable inputs based on the SOFR and SONIA Rates, respectively (Level 2).
Secured Debt
Secured debt consists primarily of our mortgage term loans. The fair value of mortgage term loans is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 7, "Debt and Line of Credit," for additional information.
Secured borrowings on collateralized receivables - recorded at fair value and adjusted based on the same interest rates as the related collateralized receivables (Level 3). Refer to Note 7, "Debt and Line of Credit," for additional information.
Unsecured Debt
Senior unsecured notes - the fair value of senior unsecured notes is based on the estimates of management and on rates currently quoted, rates currently prevailing for comparable loans and instruments of comparable maturities (Level 2). Refer to Note 7, "Debt and Line of Credit," for additional information.
Line of credit and other unsecured debt - consists primarily of our senior credit facility. We have variable rates on our senior credit facility. The fair value of the debt with variable rates approximates carrying value as the interest rates of these amounts approximate market rates (Level 2). The estimated fair value of our debt as of December 31, 2025 approximated its gross carrying value.
Other Financial Liabilities
We estimate the fair value of contingent consideration liabilities based on valuation models using significant unobservable inputs that generally consider discounting of future cash flows using market interest rates and adjusting for non-performance risk over the remaining term of the liability (Level 3).
Level 3 Reconciliation, Measurements, and Transfers
We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. Availability of secondary market activity and consistency of pricing from third-party sources impacts our ability to classify securities as Level 2 or Level 3. There were no transfers into or out of Level 3 during the years ended December 31, 2025 and 2024.
The following tables summarize changes to our financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy (in millions):
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| Assets: | Installment Notes Receivable on MH, net | Notes Receivable From Real Estate Developers and Operators | Collateralized Receivables, net | Installment Notes Receivable on MH, net | Notes Receivable From Real Estate Developers and Operators | Collateralized Receivables, net | ||||||||||||||||||||||||||||||||
| Level 3 beginning balance at January 1, 2025 and 2024 | $ | 93.9 | $ | 148.5 | $ | 51.2 | $ | 19.6 | $ | 134.5 | $ | 56.2 | ||||||||||||||||||||||||||
| (1.6) | (1) | — | (0.2) | (2) | (0.5) | (1) | (35.8) | (1) | 2.1 | (2) | ||||||||||||||||||||||||||||
| Purchases and issuances | 57.4 | 6.5 | — | 81.4 | 63.2 | — | ||||||||||||||||||||||||||||||||
| Sales and settlements | (10.1) | (112.6) | (5.7) | (4.6) | (13.3) | (7.1) | ||||||||||||||||||||||||||||||||
| Dispositions of properties | (0.4) | — | (2.1) | (2.0) | — | — | ||||||||||||||||||||||||||||||||
| Foreign currency exchange gains / (losses) | — | 2.1 | — | — | (0.5) | — | ||||||||||||||||||||||||||||||||
| Other adjustments | — | — | — | — | 0.4 | — | ||||||||||||||||||||||||||||||||
Level 3 ending balance at December 31, 2025 and 2024 | $ | 139.2 | $ | 44.5 | $ | 43.2 | $ | 93.9 | $ | 148.5 | $ | 51.2 | ||||||||||||||||||||||||||
(1) Realized losses recorded within Loss on remeasurement of notes receivable on the Consolidated Statements of Operations.
(2) Realized gains / (losses) recorded within Other income / (expense), net on the Consolidated Statements of Operations.
Year Ended December 31, | |||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||
| Liabilities: | Secured Borrowing on Collateralized Receivables | Other Liabilities (Contingent Consideration) | Secured Borrowing on Collateralized Receivables | Other Liabilities (Contingent Consideration) | |||||||||||||||||||
| Level 3 beginning balance at January 1, 2025 and 2024 | $ | 51.2 | $ | 11.3 | $ | 55.8 | $ | 11.3 | |||||||||||||||
Realized (gains) / losses(1) | (0.2) | — | 2.1 | — | |||||||||||||||||||
| Purchases and issuances | — | — | 0.4 | — | |||||||||||||||||||
| Sales and settlements | (7.8) | (14.0) | (7.1) | — | |||||||||||||||||||
| Dispositions of properties | — | (2.3) | — | — | |||||||||||||||||||
Other adjustments(2) | — | 5.2 | — | — | |||||||||||||||||||
Level 3 ending balance at December 31, 2025 and 2024 | $ | 43.2 | $ | 0.2 | $ | 51.2 | $ | 11.3 | |||||||||||||||
(1) Realized losses are recorded within Other income / (expense), net on the Consolidated Statements of Operations.
(2) Represents contingent consideration from a tax protection agreement that we entered into with former owners of certain marina properties at the time of acquisition. Refer to Note 2, "Assets Held for Sale and Discontinued Operations," for additional information.
Fair Value Measurements on a Nonrecurring Basis
As of December 31, 2025, assets measured at fair value on a non-recurring basis consisted of real estate assets that have been written down to an estimated fair value for impairment purposes. We review the carrying value of long-lived assets to be held for use for impairment quarterly or whenever events or changes in circumstances indicate a possible impairment. During the year ended December 31, 2025, due to a contemplated change in strategic plan for certain assets, as well as a reduction in projected future cash flows and deteriorating NOI trends for certain other assets, we recognized the following asset impairment charges (in millions, except for number of properties):
| Period | Fair Value Level | Number of Properties | Segment | Asset Impairment Charges | Aggregate Estimated Fair Value | |||||||||||||||||||||||||||
| Three months ended December 31, 2025 | 3 | (2) | 3 | UK | $ | 30.6 | $ | 14.7 | ||||||||||||||||||||||||
| Three months ended September 30, 2025 | 3 | (1) | 6 | RV | $ | 165.0 | $ | 22.9 | ||||||||||||||||||||||||
| Three months ended June 30, 2025 | 3 | (2) | 3 | UK | $ | 132.7 | (3) | $ | 8.9 | |||||||||||||||||||||||
| Three months ended June 30, 2025 | 3 | (2) | 3 | RV | $ | 32.2 | $ | 86.4 | ||||||||||||||||||||||||
| Three months ended March 31, 2025 | 3 | (4) | 7 | MH / RV | $ | 20.5 | $ | 93.4 | ||||||||||||||||||||||||
(1) The non-recurring fair value measurement was driven by a reduction in projected future cash flows and deteriorating NOI trends for the impaired properties and was determined using an income and market approach. The analysis was based upon market conditions, expectations for future growth and comparable transactions, and utilized unobservable quantitative inputs, including capitalization rates ranging from 9.5% to 10.0% and discount rates ranging from 11.0% to 13.0%.
(2) The non-recurring fair value measurement was driven by our contemplated change in strategic plan for the properties and was determined using an income approach. The fair value methodology included a probability weighted holding period and estimated sale price for the assets based on current market conditions and comparable transactions in the applicable geographic location.
(3) Recorded a deferred tax benefit of $29.5 million in conjunction with the impairment.
(4) The fair value measurement was driven by pre-construction development costs and determined by estimating discounted cash flows based on the expectation that the development projects are no longer probable of being realized.
Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop fair value estimates. The fair value estimates are based on information available as of December 31, 2025. As such, our estimates of fair value could differ significantly from the actual carrying value.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 23, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.