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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
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| Check the appropriate box: |
| ☐ | Preliminary Proxy Statement |
| ☐ | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2) |
| þ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to ss.240.14a-12 |
Sun Communities, Inc.
Name of Registrant as Specified in its Charter
Name of Person(s) Filing Proxy Statement if other than the Registrant:
| | | | | | | | |
| Payment of Filing Fee (Check the appropriate box): |
| þ | No fee required |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
VISION
We are an inspired, engaged and collaborative team committed to providing extraordinary service to our residents, customers and each other.
CULTURE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Live the Golden Rule | | | Do the right thing | | | We over me |
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| Treat others the way you want to be treated – we don’t just practice it, we live it. The exceptional experiences we deliver wouldn’t be possible without understanding our impact on others. We operate with respect, empathy and consideration at all times. It’s not a suggestion, it’s our moral obligation. | | | We choose honesty and integrity in all our actions, making the best, most educated decisions we can. Sometimes the right thing is the easy thing, or the popular thing. Other times it isn’t. We don’t get sidetracked when things go wrong, and we don’t shy away from doing what is right. | | | We work as a collaborative and collective unit. No one person operates alone, and we keep the wider team in mind when making decisions about individual work. We know we need each other to produce an unmatched experience for our residents and customers. What’s more, we trust each other enough to sacrifice our own goals for those of the team. |
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| Nothing changes if nothing changes | | | Mindset is everything | | | Keep it simple |
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| | Mindset is the guiding force behind all our actions. We can’t always decide what happens to us, but we can always decide how to handle it. Bad experiences don’t bring down our whole day. We learn, we grow and we become resilient. We are successful because we choose to be, every day and every step of the way. | | | Let’s not overcomplicate things. Can a clearer word explain your point? Use it. Can fewer steps streamline your work? Do it. We lead with what is most important, shedding complexity as we go. Simplicity isn’t effortless, but it does make things a bit easier. |
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| We don’t sit still for long. We are constantly transforming both our industry and our company. That means we are open and flexible, using what works now to develop what works next. Even if it ain’t broke, we still make it better. Lots of folks will say it hasn’t been done – we say it hasn’t been done yet. | | | | |
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| | | | Be yourself & thrive | | | | |
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| | | | Inclusion, diversity, equity and accessibility are at the heart of who we are and what we do. Our biggest competitive advantage is the variety of individual perspectives we all bring to Sun. We support and celebrate what makes us unique, creating a space where all can succeed. | | | | |
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Dear Fellow Shareholders,
2023 marked our 30th year as a public company and we are incredibly proud of the best-in-class portfolio we have created and of the talented Sun team members who operate it. With 667 properties comprising nearly 180,000 developed sites and approximately 48,000 wet slips and dry storage spaces in the U.S., Canada and the United Kingdom ("UK"), we are the largest publicly traded owner-operator of manufactured housing ("MH") and recreational vehicle ("RV") communities, and marina properties. The compelling supply and demand fundamentals that underpin MH, RV and marinas, combined with Sun’s unmatched operational platform, generated another year of strong property-level results. On the demand side, the number of people needing quality, well-located, attainably priced housing, as well as the large number of RV and boat owners, represent a demand base that vastly exceeds the supply of available sites and slips. Meanwhile, there is very limited new supply due in part to zoning and other regulatory considerations.
These market conditions, combined with our high-quality properties and operational excellence, make our business highly resilient, a fact we have demonstrated by generating over 20 years of positive same-property NOI growth through economic cycles. We remain focused on our best-in-class portfolio and team, and simplifying our operations to position Sun for steady earnings growth.
Strong core NOI growth
During 2023, Sun achieved another year of strong property-level results, with total Same Property NOI increasing 7.3% over 2022, driven by a 6.2% increase in real property revenue and property expense growth of 4.2%. MH Same Property NOI, which represents roughly 53% of total Same Property NOI, grew 6.8% over the prior year. Same Property RV NOI represents 26% of total Same Property NOI and grew 4.8% during the year.
During 2023, MH and RV Same Property blended occupancy, which adjusts for the delivery and lease-up of expansion sites, increased by 230 basis points to end the year at 98.9%. The increase was largely driven by transient to annual RV site conversions of more than 2,100 sites. Since the start of 2020 when we began to strategically focus on transient-to-annual RV site conversions, we have completed nearly 7,000 conversions, representing a 24% increase in the number of annual sites. We expect to continue growing occupancy through additional transient site conversions and through select, accretive expansion activity.
Marina Same Property NOI increased by 11.7% during 2023, exceeding our expectations. Demand to access our unparalleled network of marinas remains strong, and at year end approximately 89% of our marinas had a wait list for at least one slip size.
In the UK, real property NOI was in line with our expectations, demonstrating the strong value proposition our holiday parks represent. The value of owning a holiday home in a Park Holidays property was demonstrated by the average resident tenure increasing to approximately eight years. Demand for UK home sales showed signs of stabilizing during the second half of the year. UK homes sales and margins were in line with our guidance, which reflected certain economic headwinds, including higher inflation and interest rates. Looking ahead to 2024, we anticipate the UK’s 2023 results represent a solid foundation from which to grow.
Sharpening our focus and simplifying our story
From 2010 through 2022, a large component of our growth was driven by acquisitions as we opportunistically purchased high-quality MH, RV and marina properties. With the benefit of our expanded portfolio, we have now shifted our strategy toward optimizing the value of our existing businesses through achieving strong rental rate growth and operating efficiencies. We remained disciplined in pursuing only the most strategic and synergistic new acquisition and expansion opportunities.
To simplify our business and reduce leverage, we have made strong progress toward monetizing assets no longer deemed to be strategic. We resolved the UK note and we now have the experienced Park Holidays team managing all assets we own in the UK. We sold our investment in the common stock of Ingenia, an owner/operator of MH and RV communities in Australia, recycled capital out of our consumer loan receivables portfolio, divested our interest in Campspot, and meaningfully reduced the number of properties owned in joint ventures, using the proceeds to pay down debt. During the first two months of 2024, we reduced our floating rate debt exposure further with proceeds from a $500 million unsecured bond offering and from closing on the sale of two MH properties.
Advancing our ESG platform
Throughout 2023, we demonstrated our ongoing commitment to ESG through increases in learning & development hours, volunteerism and investor engagements. We expanded our environmental reporting to be inclusive of all material direct and indirect impacts from our operations. With these expansions, and our ESG priorities for 2024, we aim to set our carbon goal baseline in 2025.
2024 and beyond
As we move further into 2024, our primary goals are to continue simplifying our operations to harness the earnings power of our portfolio, and to continue strengthening our investment grade balance sheet. By remaining disciplined in pursuing new acquisitions and developments, further deleveraging, and maximizing the efficiency of our operating platform, we are confident in Sun’s strategic position to accelerate earnings growth in the coming years.
Thank you
As a valued member of the Sun community, we hope you share our pride in our many accomplishments, as well as our excitement for our continued achievement. Thank you for your continued support.
Sincerely,
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Gary A. Shiffman Chairman, President and CEO | Clunet R. Lewis Lead Independent Director |
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| Date and Time | Location | Record Date |
Online Tuesday, May 14, 2024, 11:00 a.m. EDT | Shareholders may only participate online by logging in at www.virtualshareholdermeeting.com/SUI2024 (the "Annual Meeting Website") | Close of business March 18, 2024 |
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| Items of Business | Board Recommendation | For Further Details |
1 | Elect ten directors to serve until our 2025 annual meeting of shareholders and until their successors shall have been duly elected and qualified, or their earlier resignation or removal | FOR each director nominee | |
2 | Conduct a non-binding advisory vote on executive compensation | FOR | |
3 | Ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for 2024 | FOR | |
Consider any other business properly brought before the Annual Meeting.
Who Can Vote
If you were a holder of record of the Company’s common stock at the close of business on March 18, 2024 (the “Record Date”), you are entitled to notice of, and to vote at, the Annual Meeting or any adjournments.
How to Cast Your Vote
YOUR VOTE IS IMPORTANT TO US. Please vote as promptly as possible.
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| Internet | Call | Mail |
Before the Annual Meeting - www.proxyvote.com
During the Annual Meeting - www.virtualshareholdermeeting.com/SUI2024 | (800) 690-6903 | Mail your proxy card or voter instruction form based on the instructions provided |
Thank you for your interest in Sun Communities, Inc.
By Order of the Board of Directors
Fernando Castro-Caratini
Secretary
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This Proxy Statement and our Annual Report to shareholders for the year ended December 31, 2023, are available at www.proxyvote.com. |
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| Board | Sun Communities, Inc. Board of Directors |
| CEO | Chief Executive Officer |
| CFO | Chief Financial Officer |
| CNOI | Controllable Net Operating Income |
| CA Committee | Capital Allocation Committee of the Board |
| COO | Chief Operating Officer |
Core FFO(1) | Core Funds From Operations Attributable To Sun Communities, Inc. Common Shareholders and Dilutive Convertible Securities |
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Core FFO(1) per Share | Core Funds From Operations Attributable To Sun Communities, Inc. Common Shareholders and Dilutive Convertible Securities Per Share Fully Diluted |
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| DEI | Diversity, Equity and Inclusion |
EBITDA(1) | Earnings Before Interest, Taxes, Depreciation and Amortization |
| EDT | Eastern Daylight Time |
| ERM | Enterprise Risk Management |
| ESG | Environmental, Social and Governance |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| FASB | Financial Accounting Standards Board |
FFO(1) | Funds From Operations Attributable To Sun Communities, Inc. Common Shareholders and Dilutive Convertible Securities |
| GAAP | United States Generally Accepted Accounting Principles |
| G&A expense | General and administrative expense |
| GHG | Greenhouse gases |
| IDEA | Inclusion, Diversity, Equity and Accessibility |
| MH | Manufactured Housing |
Nareit | National Association of Real Estate Investment Trusts |
| NCG Committee | Nominating and Corporate Governance Committee of the Board |
| NEO | Named Executive Officers identified in this Proxy Statement: Gary A. Shiffman, Fernando Castro-Caratini, Bruce D. Thelen, Marc Farrugia and Aaron Weiss |
NOI(1) | Net Operating Income |
| NYSE | New York Stock Exchange |
| OP Unit | Unit representing an ownership interest in the Operating Partnership |
| Operating Partnership | Sun Communities Operating Limited Partnership |
PEO | Principal Executive Officer identified in this Proxy Statement: Gary A. Shiffman |
Recurring EBITDA(1) | Recurring Earnings Before Interest, Taxes, Depreciation and Amortization |
| REIT | Real Estate Investment Trust |
| Resident | Defined as resident in the U.S. and customer in the UK |
| RPS | Revenue Producing Site |
| RV | Recreational Vehicle |
Same Property NOI(1) | Net Operating Income of properties that we have owned and operated continuously since January 1, 2022 |
TTM Recurring EBITDA(1) | Trailing 12 Months Recurring Earnings Before Interest, Taxes, Depreciation and Amortization |
| SEC | Securities and Exchange Commission |
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| SHS | Sun Home Services, Inc. |
| TSR | Total Shareholder Return |
| UK | United Kingdom |
| U.S. | United States |
(1) More detailed definitions of these terms are included in the Non-GAAP Financial Measures discussion in Appendix A, which also presents the reconciliation of these non-GAAP financial measures to GAAP measures.
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Sun Communities, Inc. (NYSE: SUI) (the "Company", "Sun" or "SUI"), a Maryland corporation, and all wholly-owned or majority-owned and controlled subsidiaries, including Sun Communities Operating Limited Partnership, a Michigan limited partnership (the “Operating Partnership”), Sun Home Services, Inc., a Michigan corporation (“SHS”), Safe Harbor Marinas, LLC, a Delaware limited liability company (“Safe Harbor”), and the entities through which we operate our holiday parks business in the UK (collectively, "Park Holidays") are referred to herein as the “Company,” “us,” “we” and “our.” We are a fully integrated REIT.
COMPANY OVERVIEW(1)
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Sun Communities is the nation’s premier owner and operator of MH communities. Its subsidiary, Park Holidays, is the second largest owner and operator of MH communities (called holiday parks) in the UK. | | | Sun Outdoors offers RV sites, vacation rentals, and tent camping with world-class amenities in the U.S. and Canada. | | | Safe Harbor is the largest and most diversified marina owner and operator in the U.S. |
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353 MH Communities | | | 179 RV communities | | | 135 Marinas 48,030 wet slips & dry storage spaces
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118,430 MH sites | | | 32,390 annual RV sites 28,490 transient RV sites | | |
Property Count
667 properties in the
U.S., UK, and Canada
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n | MH communities | n | Marinas |
n | RV communities | | |
Rental Revenue Breakdown(1)
The above data is as of December 31, 2023.
(1) Represents percentage of rental revenue from the leasing of sites, homes, wet slips, dry storage spaces and commercial leases and transient revenue.
NOTE ON NON-GAAP MEASURES
This document includes information about certain non-GAAP supplemental performance measures that we use as key measures of the Company’s performance and for other purposes, such as to assist in determining the compensation of our NEOs. These non-GAAP measures include FFO, NOI and EBITDA, and derivations of such measures, including Core FFO, Core FFO per Share, Recurring EBITDA, Same Property NOI and TTM Recurring EBITDA. We believe these non-GAAP measures are appropriate given their wide use by and relevance to investors and analysts following the real estate industry. See Appendix A for more detail on these terms and reconciliations of these non-GAAP financial measures to GAAP measures.
2023 REVIEW
The strong Same Property NOI growth we generated across all segments in 2023 continued to demonstrate the resiliency of our best-in-class portfolio. Our 2023 Core FFO per Share of $7.10 was in-line with our expectations and, based on five-year and 10-year TSRs, our common stock outperformed many of the leading real estate and market indices. As importantly, during 2023 we completed transactions and capital recycling opportunities that simplified our operations and positioned our Company to deliver reliable earnings growth going forward.
Performance Highlights
Highlights of our performance during 2023 include:
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$3.2 billion Total revenues for 2023, an increase of 8.6% from 2022 | $7.10 Core FFO per Share for 2023 | 7.3% 2023 Same Property Combined NOI growth - MH, RV & Marina | 6.8% MH 4.8% RV 11.7% Marina 2023 Same Property NOI growth |
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| 3,268 Revenue Producing Sites gained in 2023 | 94th percentile 10-year TSR among MSCI U.S. REIT Index (RMS)(1) | 47.5% 5-year TSR vs. 44.5% & 42.9% for Dow Jones all Equity REIT & MSCI U.S. REIT (RMS) Indices(2) | 323.1% 10-year TSR vs. 211.5% 10-year TSR S&P 500 Index(2) |
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| $836.9 million in debt capital transactions, including $400 million senior unsecured notes | $582.3 million notional value in derivative instruments to reduce exposure to variable interest rates | Capital Recycling & De-leveraging Sold Ingenia shares Monetized a consumer loans portfolio | Business Simplification Reduced properties owned in joint ventures Divested interest in Campspot |
(1) Source: KeyBanc “The Leaderboard,” December 29, 2023.
(2) Source: S&P Global as of December 31, 2023.
Financial Highlights
As a reflection of our performance and our ability to generate strong operating results, we have raised our dividend each year over the last five years. Concurrently, our Core FFO per Share has grown on average 10.2% over the same five years, despite high inflation and interest rates and tighter financial conditions.
Annual Dividend Per Share*
5.5% AVERAGE GROWTH
* As of December 31, 2023.
Core FFO Per Share*
10.2% AVERAGE GROWTH
ENVIRONMENT, SOCIAL AND GOVERNANCE HIGHLIGHTS
ESG Initiatives
We believe that ESG initiatives are a vital part of corporate responsibility and support our goal of increasing shareholder value. For additional information, please read our most recent ESG Report on our website at www.suninc.com/esg. The following pages highlight some of our 2023 achievements.
We are committed to sustainable business practices to benefit all stakeholders: our continuous engagement with our team members, residents and customers, shareholders and local communities is paramount to our success.
We continue to enhance our sustainability program through adopting necessary policies and procedures that advance us toward establishing a baseline for our long-term carbon reduction targets. We also will continue education and awareness campaigns for our team members, board and other vital stakeholders on key ESG considerations and solutions.
ESG Highlights
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| Environmental | | | | Social | | | | Governance |
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ESG Reporting Framework Improvements vs. Prior Year: GRESB score: +3 points | | | Learning & Development Increased overall learning & development hours by 19.7% over 2022 hours | | | Investor Relations Participated in nearly 240 meetings with investors |
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Progress towards Carbon Reduction Goals Educated the team on the Carbon reduction project | | | Volunteering program Over 16,000 volunteer hours reported by our team members in 2023, a 73% increase over 2022 | | | Board Composition 27% female 82% independent As of Record Date |
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Solar Project On-site renewable energy increased by 44% from 2022 to generate over 11,600 mwhs in 2023 | | | Supply Chain Completed ESG assessments with 10 key suppliers | | | Enterprise Risk
Management Committee Identifies, monitors and mitigates risks Information Security Management Committee Manages information security |
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Human Capital Matters
Human capital management is key to our success and focuses on DEI, employee retention and talent development practices. We are committed to building an equitable and inclusive culture that inspires and supports the growth of our employees, serves our communities and shapes a more sustainable business. The most significant measures and objectives that we focus on in managing our business and our related human capital initiatives include (i) our culture, (ii) our leadership, talent, training and development, (iii) pay equity, (iv) business integrity and (v) workplace health and safety.
We deliberately foster a growth culture that is grounded in our vision and culture statements. We are an inspired, engaged and collaborative team committed to providing extraordinary service to our residents, customers and team members. We embrace the following seven key behaviors that make our Company a great place to work:
• Live the Golden Rule: Treat others the way you want to be treated;
• Do the right thing;
• We over me;
• Nothing changes if nothing changes;
• Mindset is everything;
• Keep it simple; and
• Be yourself and thrive.
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| Leadership, Talent, Training and Development |
We expect our leaders to be role models and lead in a way that enables our organization to achieve success. Our strategy is anchored in promoting the right internal talent and hiring the right external talent for career opportunities across our organization. We are focused on hiring and developing talent that mirrors the markets we serve, and investing in learning opportunities and capabilities that equip our workforce with the skills they need while improving engagement and retention.
• Our internal training program offers over 310 courses to our team members on a range of topics, including leadership, communication, inclusion and diversity, software and operations. Our internal training program has led to increased knowledge and accountability for daily operations and policies and procedures. In 2023, team members logged nearly 85,700 hours of training.
• We hold mandatory ongoing training sessions for all property management personnel to ensure that policies and procedures are executed effectively, professionally and consistently.
We are dedicated to attracting, developing and retaining our talent, focusing our efforts on ensuring that the returning seasonal team member pipeline remains robust each year and our annual talent management processes focus on the professional development of salaried team members. As of December 31, 2023, nearly 12% of our employees had over 10 years' tenure.
Our compensation philosophy, aimed to apply merit-based, equitable compensation practices, is designed to attract and retain top talent. For eligible team members, we offer competitive salary, health, welfare, retirement and pet insurance benefits, tuition reimbursement and rent / vacation discounts at our properties.
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| Inclusion, Diversity, Equity and Accessibility ("IDEA") |
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We prioritize recognizing and appreciating the diverse characteristics that make individuals unique in an atmosphere that promotes and celebrates individual and collective achievement. We believe it's not just about gender or race, but about being diverse in thoughts, life and work experiences. Our inclusive environment challenges, inspires, rewards and transforms our team to be the best. We do not tolerate harassing, discriminatory or retaliatory conduct, as such conduct is inconsistent with our policies, practices and philosophy. We continue to put our resources and energy into strategies and initiatives to create a more equitable work environment. Workforce diversity: We believe we are a stronger organization when our workforce represents a diversity of ideas and experiences. We value and embrace diversity in our employee recruiting, hiring and development practices. Training and Resources: We offer training and resources on diversity, equity and inclusion to our employees. Diversity education and training programs for our team focus on unconscious bias, gender identity and transitions, generational differences, religion in the workplace, and self-awareness and self-assessments. | 2023 Workforce Diversity 40% were female 23% of our employees (excluding those in Canada and UK) were racially or ethnically diverse 44% were aged 50 years and older, with approximately 24% being aged 60 years and older |
We are committed to providing a total compensation package that is market-based, performance driven, fair and internally equitable. Our goal is to be competitive both within the general employment market as well as with our competitors in the real estate industry, with our strongest performers being paid more.
• Compensation for each position is determined by utilizing reliable third-party compensation surveys to obtain current market data. Additionally, position descriptions and compensation are routinely reviewed for market competitiveness.
• On an annual basis, the performance of all team members is evaluated and merit increases are allocated based on performance. This process ensures equitable performance review and corresponding pay practices that attract, retain and reward top talent.
Our Code of Conduct and Business Ethics is grounded in our commitment to do the right thing. It serves as the foundation of our approach to ethics and compliance. Our anti-corruption compliance program is focused on conducting business in a fair, ethical and legal manner.
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| Workplace Health And Safety |
We actively seek opportunities to minimize health, safety and environmental risks to our team members, residents, and customers we serve in our communities by utilizing the following safe operating procedures and practices:
• As part of our commitment to safety, we oversee annual safety training programs for all employees to provide tools and safeguards for accident prevention. Our managers are responsible for ensuring that team members receive the appropriate training to perform their jobs safely;
• All team members participate in safety training during the onboarding process, and thereafter, team members in the field complete an annual safety training course; and
• We uphold a safe workplace by complying with safety and health laws and regulations, maintaining internal requirements and remediating risks. Senior leadership reviews safety concerns throughout the year on regular site visits, and we also conduct comprehensive safety inspections annually on a subset of properties on a rolling basis.
2023 NOTABLE ACCOLADES
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| We were certified a Great Place to Work by Great Place to Work® in 2023 | We were named to Best Place to Work in Southeast Michigan by Crain’s Detroit | We were named Central Florida Top Workplace by the Orlando Sentinel in 2023 | For the 13th consecutive year, we were named a Detroit Free Press Top Place to Work in 2023 |
Our people and culture agendas are also key priorities of the Board. Through the NCG Committee, the Board provides oversight of the Company’s policies and strategies relating to talent, leadership and culture, including diversity, equity and inclusion. See Role of the Board of Directors section on page 33 for information regarding the Board’s oversight of human capital. Spotlight on Engaging Team Members in Volunteerism
We over me is one of Sun’s seven core culture statements, and we enjoy living it every day by using our time, talent and treasures to strengthen the communities in which we operate and live. We track the volunteer hours recorded by our team members each year as a tangible metric that quantifies how deep and wide the We over me culture has permeated our company. The 73% increase in reported volunteer hours by Sun team members in MH, RV and Marina locations in North America in 2023, was a testament to the success of Sun’s approach to empowering local teams and pairing them with the resources and leadership support to pursue volunteerism.
We attribute the recent increase in volunteer hours in part to the Sun Unity program. This program focuses on driving volunteerism across all levels of our Company, rather than from senior leadership, by creating and promoting peer-driven volunteer opportunities. Ambassadors work with local community members, nonprofits, and their regional leaders to identify the needs of their area and then determine how Sun can contribute its resources and people to create positive change.
Spotlight on Supplier ESG Assessment
During 2023, our ESG and Sourcing Teams piloted an assessment of our major suppliers’ ESG practices and commitments. The assessment included 10 key suppliers to our North American MH and RV properties. The assessments reviewed alignment to Sun’s Code of Vendor and Supplier Conduct and availability of potential ESG metrics from our supply chain. The assessment found that all 10 suppliers were in compliance with all elements of our Code of Vendor and Supplier Conduct, which includes policies governing human rights and labor practices as well as pursuing environmental best practices.
We intend to expand the assessment to additional key suppliers within our entire portfolio in 2024.
Commitment to ESG Disclosures
We are committed to expanding our disclosure of ESG information that is useful and relevant to stakeholders, in alignment with voluntary and emerging regulatory expectations.
Materiality
We utilize a dynamic risk assessment process throughout the year to identify, observe, and manage potential risks and hazards to our operations. We gather feedback from stakeholders, which includes team members, residents, investors, and local communities. This feedback is assessed to identify and prioritize issues.
These ESG issues are regularly reviewed with our executive leadership and ERM teams to promote the appropriate alignment and integration with our overall business strategies.
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Environment | Social | Governance |
Climate change: • Physical • Transition Resource Management: • Energy • Water • Waste • Land and coastal • Biodiversity | Talent Management • Labor practices • Recruitment • Retention • Engagement • IDEA • Learning and development • Safety and health Resident & Guests: • Affordable / attainable housing • Safety and health • Satisfaction | Board Executive Leadership Cybersecurity Stakeholders • Investors • Industry • Franchisee • Supply Chain |
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| 2024 Goals |
| | ENVIRONMENTAL | | | SOCIAL | | | GOVERNANCE |
| • Complete calculations for GHG inventory to allow establishment of baseline for long-term goals • Enhance the utilization of physical risk assessment data to ensure the alignment of short- and long-term resilience approaches • Improve the assessment of biodiversity risks and opportunities to develop appropriate operational strategies | | • Continue efforts towards retention of team members • Integrate our IDEA policies and processes as appropriate • Expand ESG Assessment for Marina and UK key suppliers | | • Complete at least two voluntary framework reports • Expand the breadth and depth regarding the level of expertise that our management and board have on core ESG topics • Increase proactive outreach to investors surrounding ESG topics and concerns |
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To achieve these goals, we participate in a number of voluntary ESG frameworks and initiatives. In 2023 we submitted responses to the Global ESG Benchmark for Real Estate ("GRESB"), S&P Corporate Sustainability Assessment, CDP (formerly Carbon Disclosure Project) and UN Global Compact.
This Proxy Statement contains information related to the 2024 annual meeting of shareholders (the “Annual Meeting”) of Sun Communities, Inc. The Annual Meeting will be conducted in a virtual meeting only format on Tuesday, May 14, 2024, at 11:00 a.m. EDT. Shareholders will be able to listen, vote, and submit questions from their home or any remote location with internet connectivity by logging in at www.virtualshareholdermeeting.com/SUI2024. Information on how to participate in this year’s meeting can be found on page 110. On or about April 1, 2024, we began mailing a notice containing instructions on how to access these proxy materials to all shareholders of record at the close of business on the Record Date. This summary highlights information contained elsewhere in the Proxy Statement. It does not contain all the information that you should consider. Please read the entire Proxy Statement carefully before voting.
PROPOSAL ROADMAP
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1 | Election of Ten Directors | | The Board recommends a vote FOR each nominee for Director. See page 20. |
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| At the Annual Meeting, ten directors will be elected. The NCG Committee evaluated each nominee in accordance with the committee’s charter and our Corporate Governance Guidelines and submitted the nominees to the Board for approval. The Board, acting upon the recommendation of the NCG Committee, has nominated for re-election to the Board, ten currently -serving directors. |
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| Gary A. Shiffman Tonya Allen Meghan G. Baivier | Stephanie W. Bergeron Jeff T. Blau Jerome W. Ehlinger | Brian M. Hermelin Craig A. Leupold Clunet R. Lewis | Arthur A. Weiss |
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2 | Non-Binding Advisory Vote on Executive Compensation | | The Board recommends a vote FOR this proposal. See page 52. |
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| Section 14A of the Exchange Act requires us to allow shareholders an opportunity to cast a non-binding advisory vote on executive compensation as disclosed in this Proxy Statement. The following proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2023 executive compensation programs and policies and the compensation paid to our NEOs listed in the Summary Compensation Table. Your non-binding advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to improve the alignment of our executive compensation programs with our interests and the interests of our shareholders, and is consistent with our commitment to high standards of corporate governance. |
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3 | Ratification of Selection of Grant Thornton LLP | | The Board recommends a vote FOR this proposal. See page 104. |
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| The Audit Committee has selected and appointed Grant Thornton LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2024. Grant Thornton LLP has audited our consolidated financial statements since 2003. |
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BOARD AND CORPORATE GOVERNANCE HIGHLIGHTS
Current Directors
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A | Audit Committee | N | NCG Committee | CA | Capital Allocation Committee |
| Chair |
C | Compensation Committee | E | Executive Committee | | |
| Member |
(1) Ronald A. Klein will not stand for re-election. He will continue to serve on the Board of Directors until the date of the Annual Meeting.
Board Snapshot
(1) Based on election of all nominees at the Annual Meeting.
Other Diversity as of Record Date:
Racial / Ethnic Diversity
Tenure
Average tenure was
12 years as of the
Record Date
Governance Best Practices
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| Processes and Policies | | | | Shareholder Engagement | |
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| The Board is responsible to our stakeholders for the oversight of the Company. It is also involved in guiding the strategic direction, objectives and risk management activities of the organization. We believe in maintaining transparency and strong governance based on the highest ethical standards and have adopted the following strategies to achieve this goal: • Our bylaws give shareholders the authority to amend our bylaws by the affirmative vote of a majority of all votes entitled to be cast on a particular matter • We terminated our shareholder’s rights agreement (Poison Pill) • 82% of directors are independent • All of our directors are elected annually • Our Anti-Hedging Policy prohibits stock hedging by directors or executive officers • We maintain a Code of Conduct and Business Ethics, and a Financial Code of Ethics for Senior Financial Officers • We maintain an Executive Compensation Recovery (Clawback) Policy • We adopted proxy access, which permits a shareholder (or group of no more than 20 shareholders) who has owned 3% or more of the Company’s outstanding stock continuously for a minimum of three years to nominate up to the greater of two directors or 20% of the number of directors currently serving on the Board and to cause the Company to include those nominee(s) in the Company’s proxy materials. | | | | We engage with our shareholders and conduct shareholder outreach throughout the year. In 2023, key topics discussed with shareholders during outreach included: Corporate Governance: • Succession planning • Diversity • Board structure and refreshment • Term limits and director tenure • Capital Allocation Committee formation and charter Executive compensation: • Changes to executive compensation incentives ESG: • Completeness of our GHG inventory • Renewable energy strategy and savings Our Board receives a shareholder and investor update quarterly, at each regularly scheduled Board meeting. | |
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EXECUTIVE COMPENSATION HIGHLIGHTS
Philosophy and Objectives
Our executive officer compensation program supports our commitment to provide superior shareholder value. This program is designed to:
• Attract, retain and reward executives who have the motivation, experience and skills necessary to lead us effectively and encourage them to make career commitments to us;
• Base executive compensation levels on our overall financial and operational performance and the individual contribution of an executive officer to our success;
• Create a link between the performance of our stock and executive compensation; and
• Position executive compensation levels to be competitive with other similarly situated public companies, especially those in the real estate industry.
Elements of Compensation
The elements of 2023 executive compensation, as well as the compensation mix for our CEO, is shown below:
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| Element | CEO Compensation Mix | Form | | Purpose |
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| Base Salary | | Cash | | Base level of competitive cash to attract and retain executive talent. |
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| Annual Incentive Award | | Cash | | Motivate the executive officers to maximize our annual operating and financial performance and reward participants based on annual performance. |
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| Performance Restricted Stock Award | | Equity | | Increase our executive officers' personal stake in our success and motivate them to enhance our long-term value while better aligning their interests with those of other shareholders. |
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| Time Restricted Stock Award | | Equity | |
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The above performance restricted stock award, representing 44.7% of total executive compensation, is calculated based on the grant date fair value of the 60% market award, which was measured using a Monte Carlo simulation in accordance with FASB ASC Topic 718.
The above time restricted stock award, representing 40.3% of total executive compensation, is calculated based on the grant date fair value of the 40% time award in accordance with FASB ASC Topic 718.
Compensation Best Practices
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| What We Do | | | | What We Don't Do | |
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| • Pay for Performance: Majority of pay is performance based and not guaranteed. • Clawback Policy: We maintain an Executive Compensation Recovery (Clawback) Policy that requires recovery of erroneously awarded compensation in the event of an accounting restatement due to material non-compliance with any financial reporting requirement under federal securities laws. • Stock Ownership Guidelines: Executives must comply with stock ownership requirements (6x multiple of salary for Chairman and CEO; 4x multiple of salary for other executives). • Annual Compensation Risk Review: Annually assess risk in compensation programs. • Challenging Performance Objectives: Set challenging performance objectives for annual incentives. • Double Trigger Change of Control Agreements: An executive is entitled to severance only if, within a specified period following a change of control, he or she is terminated without cause or resigns for good reason, or the successor company does not expressly assume his or her employment agreement. • Use of Independent Consultant: The Compensation Committee has retained an independent compensation consultant that performs no other consulting services for the Company and has no conflicts of interest. | | | | • No Hedging: Directors and executive officers are prohibited from hedging their ownership of the Company's stock. • Pledging: Directors and executive officers are prohibited from pledging any of the Company’s securities as collateral for indebtedness unless the NCG Committee has first reviewed and approved the terms of the pledge. • No Excise Tax Gross Ups: The Company will not enter into any new agreements, or materially amend any existing employment agreements, with its executives that provide excise tax gross-ups in the event of a change of control of the Company. • No Uncapped Bonuses: The Company places caps on maximum bonus payouts to executive officers. | |
Additional details about each of our executive officers can be found on pages 21 and 98-100. Refer to the Compensation Discussion and Analysis section beginning on page 54 for additional information regarding our executive officer compensation program.
SUMMARY
What Am I Voting On?
Ten directors will be elected at the Annual Meeting. The NCG Committee evaluated each nominee in accordance with the committee’s charter and our Corporate Governance Guidelines and submitted the nominees to the Board for approval. Except for Jerome W. Ehlinger and Craig A. Leupold, who were appointed to serve as directors by the Board on February 15, 2024, through the Annual Meeting, all of the nominees were elected to the Board at the 2023 annual meeting. Each of the directors has served continuously from the date of his or her election or appointment to the present time.
Messrs. Ehlinger and Leupold were identified by the Company and appointed to the Board following constructive discussion the Company held with Land and Buildings Investment Management LLC, a shareholder of the Company, as part of a Board refreshment initiative. In addition, Ronald A. Klein will not stand for re-election. He will continue to serve on the Board of Directors until the date of the Annual Meeting, and one of the ten nominees, other than Mr. Ehlinger and Mr. Leupold, will resign or retire from the Board no later than December 31, 2024, as a result of the Board 's focus on refreshment.
The term of each of our directors expires at the Annual Meeting, and when his or her successor is duly elected and qualified or upon his or her earlier resignation or removal. Each director elected at the Annual Meeting will serve for a term commencing on the date of the Annual Meeting and continuing until our 2025 annual meeting of shareholders and until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. In the absence of directions to the contrary, proxies will be voted in favor of the election of the ten nominees named below.
Vote Required
A majority of the votes cast at the Annual Meeting is required for the election of each director. Abstentions will not be counted in determining which nominees received a majority of votes cast since abstentions do not represent votes cast for or against a candidate. Brokers are not empowered to vote on the election of directors without instruction from the beneficial owner of the shares and thus broker non-votes likely will result. Because broker non-votes are not considered votes cast for or against a candidate, they will not be counted in determining which nominees receive a majority of votes cast. Although we know of no reason why any nominee would not be able to serve, if any nominee should become unavailable for election, the persons named as proxies will vote your shares of common stock to approve the election of any substitute nominee proposed by the Board.
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| The Board unanimously recommends that you vote “FOR” each of the ten nominees. |
Proposal No. 1 – Election of Directors
NOMINEE BIOGRAPHICAL SUMMARY
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| Gary A. Shiffman Chairman, President and CEO, Sun Communities, Inc.
Age: 69 Director since: 1993 Committee: Executive |
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| Directorship Experience |
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| • Director, Sun Communities, Inc. |
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| Career Highlights and Qualifications |
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| • Actively involved in the management, acquisition, rezoning, expansion, marketing, construction and development of MH and RV communities for over 30 years • Extensive network of industry relationships developed over the past 30+ years • Significant direct holdings through family-related interests in various real estate asset classes (office, multi-family, industrial, residential and retail) |
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| Tonya Allen Director, Sun Communities, Inc. President of the McKnight Foundation
Age: 51 Director since: 2021 Committee: NCG |
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| Directorship Experience |
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| • Chair Emeritus of the Board of Directors at Oakland University • Chair Emeritus of the Council on Foundations • Board Member, Alumni Association of the University of Michigan • Board Member, Detroit Children's Fund • Board Member, Greater MSP • Board Member, Sagiliti |
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| Career Highlights and Qualifications |
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| • Institutional investment experience with public and private endowments, with large public and private equity holdings • ESG leadership in climate and energy, diversity and inclusion, and education and workforce development • Current Member of the General Motors Inclusion Advisory Board and serves or served as an advisor to Quicken Loans, CMS Energy, Huntington and PNC Banks, and DTE Energy regarding inclusion efforts • Demonstrated track record of devising corporate responsibility strategies that have received national accolades and regulatory approvals • Former President and CEO of The Skillman Foundation • Fellowships with the German Marshall Fund, Aspen Institute and American Enterprise Institute • Strategic impact lauded by Detroit News (Michiganian of the Year), Crain's Detroit Business (News Makers of the Year & 100 Most Influential Women), Chronicles of Philosophy (Five Innovators to Watch) and Twin Cities Business (Top 100) • Masters in Public Health, Masters in Social Work and Bachelor’s in Sociology from the University of Michigan |
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Proposal No. 1 – Election of Directors
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| Meghan G. Baivier Director, Sun Communities, Inc. President and COO of Easterly Government Properties, Inc.
Age: 44 Director since: 2017 Committees: NCG Chair, Audit |
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| Directorship Experience |
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| • Sun Communities, Inc. |
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| Career Highlights and Qualifications |
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| • Served as Chief Financial Officer of Easterly Government Properties, Inc. from 2016 - 2023 • Financial advisory and capital markets transaction experience as former Vice President of Citigroup’s Real Estate and Lodging Investment Banking group • Former Equity Research Associate with Chilton Investment Company and High Yield Research Associate at Fidelity Management • MBA from Columbia Business School, awarded the prestigious Feldberg Fellowship and BA from Wellesley College |
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| Stephanie W. Bergeron, CPA Director, Sun Communities, Inc. President and CEO of Bluepoint Partners, LLC
Age: 70 Director since: 2007 Committees: Audit Chair, NCG |
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| Directorship Experience |
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| • Served on Henry Ford Health System Board of Trustees as member of the Finance and Audit Committees • Served on Audit Committees of several publicly traded companies (including as chair) and a number of not-for-profit organizations |
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| Career Highlights and Qualifications |
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| • Financial consulting, accounting, treasury, investor relations and tax matters experience • Former President and CEO of Walsh College and named President Emerita • Former Senior Vice President - Corporate Financial Operations of The Goodyear Tire & Rubber Company • Former Vice President and Assistant Treasurer of DaimlerChrysler Corporation • Named one of Crain’s Detroit Business’ “Most Influential Women” in 1997 and in 2007 • BBA from the University of Michigan, MBA from the University of Detroit, licensed CPA in the state of Michigan |
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Proposal No. 1 – Election of Directors
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| Jeff T. Blau Director, Sun Communities, Inc. CEO and Partner of Related Companies L.P.
Age: 55 Director since: 2023 Committee: Capital Allocation Chair |
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| Directorship Experience |
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| • Serves on the Board of Directors of Equinox Holdings, Inc. • Chair of the Equity, Diversity and Inclusion Committee of the Board of the Real Estate Roundtable • Chairman of energyRe, a clean energy development company • Serves on the Board of multiple non-profit organizations, including Central Park Conservancy, the New York Partnership Fund, Robin Hood Foundation, Trinity School, Lincoln Center and The Mount Sinai Medical center |
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| Career Highlights and Qualifications |
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| • CEO of Related Companies, responsible for strategic direction, acquisitions, new development opportunities, and financing activities across all business platforms • MBA from the Wharton School of the University of Pennsylvania, BBA from the University of Michigan • Named to Crains New York’s New Influential list of 25 leaders reshaping New York |
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| Jerome W. Ehlinger Director, Sun Communities, Inc. Retired real estate business manager, portfolio manager and Chief Investment Officer
Age: 52 Director since: 2024 |
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| Directorship Experience |
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| • Serves as an Advisory Board Member and Principal, VP, and Treasurer for AQ Acquisitions LLC |
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| Career Highlights and Qualifications |
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| • Served as Global Head and Chief Investment Officer of Public Real Estate Securities at Heitman Real Estate Investment Management • Served as Managing Director and Head of Real Estate Securities, Americas, and U.S. Portfolio Manager for RREEF • Served in various REIT research and investment management roles at Morgan Stanley Dean Witter • Undergraduate degree from University of Wisconsin – Whitewater • Master of Science in Finance, Investment, and Banking from the University of Wisconsin – Madison • Chartered Financial Analyst |
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Proposal No. 1 – Election of Directors
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| Brian M. Hermelin Director, Sun Communities, Inc. Co-founder and Managing Partner of Rockbridge Growth Equity Management LP Co-founder and General Partner of Detroit Venture Partners, LLC
Age: 58 Director since: 2014 Committees: Compensation Chair, Audit, Capital Allocation |
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| Directorship Experience |
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| • Serves as Board Member, Compensation Committee member, and Chair of numerous private portfolio companies of Rockbridge Growth Equity Management LP • Member of the Compensation Committee of Intersection Holdings • Member of Audit Committee of Cranbrook Educational Community • Former Audit Committee chair of a regional gaming company • Former Chairman of Active Aero Group / USA Jet Airlines Inc. |
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| Career Highlights and Qualifications |
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| • Private equity and venture capital experience focusing on companies in the business services, financial services, sports, media and entertainment and consumer direct marketing industries • Former CEO of Active Aero Group / USA Jet Airlines Inc. • MBA from the Wharton School at the University of Pennsylvania, BBA from the University of Michigan |
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| | Craig A. Leupold Director, Sun Communities, Inc. CEO, GSI Capital Advisors.
Age: 61 Director since: 2024 Committee: Capital Allocation |
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| Directorship Experience |
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| • Served on the Board of Directors of American Campus Communities Inc. |
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| Career Highlights and Qualifications |
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| • CEO of GSI Capital Advisors, an investment manager with expertise in publicly traded real estate securities • Spent 27 years at Green Street Advisors, the last twelve of which as the firm's CEO, guiding its strategic direction and overseeing its client relationships and interactions • Undergraduate degree from the University of California – San Diego • MBA in Finance and Real Estate from Columbia University |
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Proposal No. 1 – Election of Directors
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| Clunet R. Lewis Lead Independent Director, Sun Communities, Inc. Retired attorney and businessman
Age: 77 Director since: 1993 Committees: Audit, Compensation |
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| Directorship Experience |
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| • Served as a Board Member, General Counsel, CFO, President and Managing Director of other public and private companies |
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| Career Highlights and Qualifications |
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| • Retired commercial lawyer specializing in mergers and acquisitions, debt financings, issuances of equity and debt securities and corporate governance and control issues • Former CFO and General Counsel at Eltrax Systems, Inc. • Extensive experience working with independent auditors and the SEC |
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| Arthur A. Weiss Director, Sun Communities, Inc. Partner and member of Executive Committee, Taft Stettinius & Hollister LLP
Age: 75 Director since: 1996 Committee: Executive |
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| Directorship Experience |
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| • Former Director of TCF Financial Corporation (Chairman of the Compensation Committee, member of the Credit Administration Committee and TCF Strategic Committee) • Director of several closely held companies in the real estate, technology and banking industries • Director and officer of a number of closely held public and private nonprofit corporations, including the Detroit Symphony Orchestra (Executive Committee Member, Treasurer and Board Member) • Jewish Federation & United Jewish Foundation of Metropolitan Detroit Financial and Best Business Practice Committees member |
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| Career Highlights and Qualifications |
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| • Practices law in the areas of business planning, mergers and acquisitions, taxation, estate planning and real estate • MBA in Finance and a post graduate LLM degree from New York University in Taxation • Previously recognized as one of the nation’s Top 100 Attorneys by Worth magazine and has been chosen over the last ten years as one of the Super Lawyers • Former Adjunct Professor of Law at Wayne State University and the University of Detroit |
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| Relationship to Aaron Weiss |
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| Aaron Weiss, our Executive Vice President of Corporate Strategy and Business Development, is Arthur A. Weiss' son. |
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Proposal No. 1 – Election of Directors
BOARD COMPOSITION AND REFRESHMENT
Thoughtful consideration is continuously given to the composition of our Board in order to maintain an appropriate mix of qualifications, experience and skills, introduce fresh perspectives, and broaden and diversify the view and expertise represented on the Board. As a result of our refreshment, Mr. Ronald A. Klein is not standing for re-election, the Company appointed two new directors to the Board in early 2024, and one of the ten nominees, other than Mr. Ehlinger and Mr. Leupold, will resign or retire from the Board no later than December 31, 2024.
Proposal No. 1 – Election of Directors
QUALIFICATIONS, EXPERTISE AND ATTRIBUTES
In addition to each director’s qualifications, experience and skills outlined above and the minimum Board qualifications set forth below under “Consideration of Director Nominees,” our NCG Committee looked for certain attributes in each director and based on these attributes, and the mix of attributes of the other incumbent directors, determined that each director should serve on our Board. The NCG Committee does not require that each director possess all of these attributes but rather that the Board is comprised of directors that, taken together, provide us with a variety and depth of knowledge, judgment and experience necessary to provide effective oversight and vision. These attributes include: (a) significant leadership skills as a CEO and / or relevant Board Member experience, (b) real estate industry experience, (c) transactional experience, especially within the real estate industry, (d) relevant experience in property operations, (e) financial expertise, (f) legal or regulatory experience, (g) capital markets experience, (h) marketing and / or investor relations experience, (i) executive leadership and talent development experience, (j) corporate governance experience and (k) experience in ESG initiatives and implementation.
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| Skills and Qualifications | Shiffman | Allen | Baivier | Bergeron | Blau | Ehlinger | Hermelin | Leupold | Lewis | Weiss |
| Board and Executive Experience is critical to our Board’s role in overseeing the risks facing the Company, and provides essential comparison points for operations and governance | | | | | | | | | | |
| Real Estate Industry is helpful for understanding the Company’s strengths and challenges specific to the REIT and real estate industries | |
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| Mergers and Acquisitions is critical in overseeing and providing insights on the Company’s acquisition activities | |
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| Property Operations Is valuable in understanding and overseeing management of the Company’s properties | |
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| Financial Expertise and / or Literacy is valuable in understanding and overseeing the Company’s financial reporting and internal controls | |
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| Legal / Regulatory is relevant for ensuring oversight of management’s compliance with the SEC, the NYSE and other regulatory requirements |
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| Capital Markets is valuable in understanding how capital markets work and overseeing the Company’s capital raising efforts | | | | | | | | | | |
| Marketing / Investor Relations is relevant in overseeing how the Company manages communication between corporate management and its investors | |
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Proposal No. 1 – Election of Directors
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| Skills and Qualifications | Shiffman | Allen | Baivier | Bergeron | Blau | Ehlinger | Hermelin | Leupold | Lewis | Weiss |
| Executive Leadership and Talent Development is valuable in helping the Company attract, motivate and retain high-performing employees | | | | | | | | | | |
| Corporate Governance Is critical in overseeing the structure of rules, practices and processes used to direct and manage our Company | | | | | | |
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| ESG Is valuable in overseeing the Company's ESG initiatives | | | | | | | | | | |
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| Gender Racial and Ethnic Diversity | Shiffman | Allen | Baivier | Bergeron | Blau | Ehlinger | Hermelin | Leupold | Lewis | Weiss |
| Gender Diversity |
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| Racial / Ethnic Diversity |
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Proposal No. 1 – Election of Directors
CONSIDERATION OF DIRECTOR NOMINEES
Board Membership Criteria
The Board has established criteria for Board membership. These criteria include the following specific, minimum qualifications that the NCG Committee believes must be met by an NCG Committee-recommended director nominee for a position on the Board:
• the candidate must have experience at a strategic or policy making level in a business, government, non-profit or academic organization of high standing;
• the candidate must be highly accomplished in his or her field, with superior credentials and recognition;
• the candidate must be well regarded in the community and must have a long-term reputation for high ethical and moral standards;
• the candidate must have sufficient time and availability to devote to our affairs, particularly in light of the number of boards on which the candidate may serve; and
• the candidate’s principal business or occupation must not be such as to place the candidate in competition with us or conflict with the discharge of a director’s responsibilities to us or to our shareholders.
In addition to the minimum qualifications for each nominee set forth above, the NCG Committee will recommend director candidates to the full Board for nomination, or present director candidates to the full Board for consideration, to help ensure that:
• a majority of the Board shall be “independent” as defined by the NYSE rules;
• each of its Audit, Compensation, and NCG Committees shall be comprised entirely of independent directors; and
• at least one member of the Audit Committee shall have such experience, education and qualifications necessary to qualify as an “audit committee financial expert” as defined by the rules of the SEC.
Identifying and Evaluating Nominees
When the NCG Committee identifies qualified candidates and recommends director nominees to serve on the Board, the NCG Committee considers whether the Board has an adequate distribution and representation of relevant skills, backgrounds and experience. In addition to professional accomplishments and expertise, the Board may consider diversity of background, experience and thought in evaluating and recommending qualified candidates to serve on the Board. The NCG Committee and the Board believe that diversity (including diversity of gender, race and ethnicity) is highly important because a variety of ideas and points of view can contribute to more effective decision-making.
The NCG Committee may solicit recommendations for director nominees from non-management directors, executive officers, third-party search firms or any other source it deems appropriate. The NCG Committee will review and evaluate the qualifications of any proposed director candidate that it is considering or that has been recommended to it by a shareholder in compliance with the NCG Committee’s procedures, and conduct inquiries it deems appropriate into the background of these proposed director candidates. In evaluating proposed director candidates, the NCG Committee considers the following qualifications that it believes nominees should have:
• proven real estate and / or REIT experience;
• track record of strong management and leadership capabilities at a successful organization;
• sufficient time to devote to Board responsibilities; and
• independence from the Company and its current directors and employees.
When nominating a sitting director for re-election, the NCG Committee will consider the director’s performance on the Board and the director’s qualifications in respect to the criteria set forth above. Other than circumstances in which we are legally required by contract or otherwise to provide third parties with the ability to nominate directors, the NCG Committee will evaluate all proposed director candidates based on the same criteria and in substantially the same manner, with no regard to the source of the initial recommendation of the proposed director candidate.
Proposal No. 1 – Election of Directors
Shareholder Proposals and Director Nominations for 2025 Annual Meeting of Shareholders
Requirements for Proposals to be Considered for Inclusion in Proxy Materials
Shareholder proposals that are intended to be presented at our 2025 annual meeting and included in our proxy materials for such a meeting must comply with the procedural and other requirements set forth in Rule 14a-8 of the Exchange Act. To be eligible for inclusion in our proxy materials, shareholder proposals must be received by our Secretary at our principal executive offices no later than December 2, 2024, which is 120 calendar days prior to the first anniversary of the date this Proxy Statement was released to shareholders in connection with the Annual Meeting. If we change the date of the 2025 annual meeting by more than 30 days from the date of the Annual Meeting, your written proposal must be received by our Secretary at our principal executive offices a reasonable time before we begin to print and mail our proxy materials for our 2025 annual meeting. Under the proxy access provisions of our bylaws, a shareholder (or group of no more than 20 shareholders) who has owned 3% or more of the Company’s outstanding stock continuously for a minimum of three years may nominate up to the greater of two directors or 20% of the number of directors currently serving on the Board and cause the Company to include those nominee(s) in the Company’s proxy materials, but only if the shareholder (or group) and nominee(s) satisfy the requirements set forth in Section 17 of the Company’s bylaws. Any shareholder (or group) intending to use these procedures to nominate a candidate for election to the Board for inclusion in the Company’s 2025 proxy statement must satisfy the requirements specified in our bylaws, including providing the required notice of proxy access nomination to our corporate Secretary.
With regard to the 2025 annual meeting, the notice must be received no earlier than the close of business on November 2, 2024, and no later than the close of business on December 2, 2024. The notice must include the information specified in our bylaws, including information concerning the nominee and information about the shareholder’s ownership of and agreements related to our stock. If the 2025 annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the Annual Meeting, the notice must be delivered not earlier than the close of business on the 150th day prior to the 2025 annual meeting and not later than the close of business on the later of: (i) the 120th day prior to the 2025 annual meeting; or (ii) the 10th day following the day on which public announcement of the date of the 2025 annual meeting is first made by the Company. See Section 17 of the Company’s bylaws for additional information on proxy access. Requirements for Proposals Not Intended for Inclusion in Proxy Materials and for Nomination of Director Candidates.
A shareholder who wishes to nominate one or more persons for election to our Board of Directors at the 2025 annual meeting of shareholders or to present a proposal at the 2025 annual meeting of shareholders, but whose shareholder proposal will not be included in the proxy materials we distribute for such meeting, must deliver written notice of the nomination or proposal to our Secretary at our principal executive offices not earlier than January 14, 2025 (the 120th day prior to the first anniversary of the Annual Meeting), nor later than 5:00 p.m. Eastern Time on February 13, 2025 (the 90th day prior to the first anniversary of the Annual Meeting); provided, however, that in the event that the date of the 2025 annual meeting of shareholders is advanced or delayed by more than 30 days from the first anniversary of the Annual Meeting, in order for notice by the shareholder to be timely, such notice must be so delivered no earlier than the 120th day prior to the date of the 2025 annual meeting of shareholders and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to the date of the 2025 Annual Meeting of shareholders, or, if the first public announcement of the date of the 2025 annual meeting is less than 100 days prior to the date of the 2025 annual meeting, the 10th day following the day on which public announcement of the date of the 2025 annual meeting of shareholders is first made. The public announcement of a postponement or adjournment of the 2025 annual meeting of shareholders shall not commence a new time period for the giving of a shareholder’s notice as described above. The NCG Committee’s current policy is to review and consider any director candidates who have been recommended by shareholders in compliance with the procedures established from time to time by the NCG Committee. All shareholder recommendations for director candidates must include the following information:
• the shareholder’s name, address, number of shares owned, length of period held and proof of ownership;
• the name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the proposed director candidate;
• a description of the qualifications and background of the proposed director candidate that addresses the minimum qualifications and other criteria for Board membership as approved by the Board from time to time;
• a description of all arrangements or understandings between the shareholder and the proposed director candidate;
• the consent of the proposed director candidate to (1) be named in the proxy statement relating to our annual meeting of shareholders and (2) serve as a director if elected at such annual meeting; and
• any other information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to the rules of the SEC.
Proposal No. 1 – Election of Directors
Shareholder proposals must be in writing and should be addressed to the Company's Corporate Secretary at our principal executive offices at 27777 Franklin Road, Suite 300, Southfield, MI 48034. It is recommended that shareholders use certified mail and request a return receipt in order to provide proof of timely receipt. The Chairman of the Annual Meeting reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
In reviewing director candidates, the NCG Committee takes into consideration feedback received from the Board’s annual evaluations. See page 44 for information on the Board’s evaluation process.
Effective corporate governance is essential for maximizing long-term value creation for our shareholders. Our beliefs have been grounded in a values-based ethically led organization; this foundation continues to guide our decisions and leadership.
Our governance structure is set forth in our Corporate Governance Guidelines and other key governance documents. These guidelines are reviewed at least annually and updated as appropriate in response to evolving best practices, regulatory requirements, feedback from our annual Board evaluations, and recommendations made by our shareholders and proxy advisors, all with the goal of supporting and effectively overseeing our ongoing strategic growth.
The Company is governed by the Board and Committees of the Board that meet throughout the year.
You may find each of the following documents in the Governance section of our website at: suninc.com/investor-relations/
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Committee Charters | Corporate Governance Policies and Guidelines |
| • Audit Committee Charter • Capital Allocation Committee Charter • Compensation Committee Charter • Executive Committee Charter • Nominating and Corporate Governance Committee Charter | • Anti-Hedging Policy • Biodiversity & Habitat Policy • Climate Change and Greenhouse Gas Policy • Code of Conduct and Business Ethics • Code of Vendor and Supplier Conduct • Corporate Governance Guidelines • Energy, Water and Waste Management Policy | • Executive Compensation Recovery (Clawback) Policy • Financial Code of Ethics for Senior Financial Officers • Human Rights and Labor Policy • Occupational Health and Safety Policy • Related Party Transactions Policy • Stock Ownership Guidelines |
In addition, we will send print copies of any of these documents to any shareholder who requests them.
BOARD OF DIRECTORS
Our current directors are Gary A. Shiffman, Tonya Allen, Meghan G. Baivier, Stephanie W. Bergeron, Jeff T. Blau, Jerome W. Ehlinger, Brian M. Hermelin, Ronald A. Klein, Craig A. Leupold, Clunet R. Lewis and Arthur A. Weiss. Under our charter, each of our directors serves for a one-year term and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal.
Messrs. Ehlinger and Leupold were identified by the Company and appointed to the Board following constructive discussion the Company held with Land and Buildings Investment Management LLC, a shareholder of the Company, as part of a Board refreshment initiative. In addition, Ronald A. Klein will not stand for re-election. He will continue to serve on the Board of Directors until the date of the Annual Meeting, and one of the ten nominees, other than Mr. Ehlinger and Mr. Leupold, will resign or retire from the Board no later than December 31, 2024, as a result of the Board's focus on refreshment.
The Board is elected by our shareholders to oversee and provide guidance on the Company’s business and affairs. It is the ultimate decision-making body of the Company except for those matters reserved for shareholders by law or pursuant to the Company’s governing documents. The Board oversees management’s activities in connection with proper safeguarding of the assets of the Company, maintenance of appropriate financial and other internal controls, compliance with applicable laws and regulations and proper governance. The Board is committed to sound corporate governance policies and practices that are designed and routinely assessed to enable the Company to operate its business responsibly, with integrity, and to position the Company to compete more effectively, sustain its success and build long-term shareholder value.
Board Meetings and Attendance
The Board meets quarterly, or more often as necessary.
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The Board met ten times during 2023 and took various actions by written consent. | All directors attended at least 75% of the meetings of the Board and each committee on which they served. | While the Board does not have a formal policy, all directors are encouraged to attend annual meetings of shareholders. All of our then-serving Board members attended the 2023 annual meeting. |
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Beyond the BoardroomThe Board of Directors attend training sessions on diverse topics on an annual basis, which have included:
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| Shareholder Activism | Sustainability in Real Estate | | |
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Role of the Board of Directors
Board's Role in Oversight of Strategy
One of the Board’s primary responsibilities is oversight of management’s execution of the Company’s goals and objectives. Throughout the year, management and the Board review and discuss the Company's detailed strategic plans, including changes from previous strategic positions, market and economic outlook, industry and regulatory trends, areas of focus for each functional area, expected financial implications, potential stakeholder impacts, resource requirements, human capital development, and risk and stress test scenarios, among other topics.
The Board and its committees regularly receive updates from management and actively engage in discussions regarding execution of the Company’s strategy, variables impacting results and changes to the strategic plan.
In addition to its regularly scheduled Board and committee meetings and ongoing interaction with the management team, Board members periodically visit properties representing various geographies and asset types. The Board believes these on-site visits provide additional insight into the Company’s markets, operations, residents and guests, human capital management, technology usage and allocation of capital investments, and allow for better oversight of and more thoughtful input into the Company’s strategies.
Board’s Role in Oversight of Risk Management
The Board and committees of the Board actively oversee and monitor management of the most significant risks to the Company. The Board and committees of the Board, together with members of executive and senior management, regularly review risk management in key areas of our business including, but not limited to, financial, strategic, operational, technology and compliance matters. Management and the Company’s outside advisors also periodically meet with the Board and its committees to provide detailed updates on specific areas of risk oversight.
Additionally, the Board reviews the results of our ERM efforts and receives periodic ERM updates from the ERM Committee, as described below.
ERM Committee
• Comprised of executive and senior management team members and outside advisors
• Identifies, analyzes and prioritizes risks facing the Company on an ongoing basis
• Formalizes activities to prevent, mitigate and / or monitor key risks
• Plans response activities in the event certain risk events occur
• Elevates risk awareness across the Company
• Periodically presents to the Board and committees of the Board
Board
• Oversees and monitors the risk management function
• Discusses the general risks we face, the risk factors disclosed in our annual and periodic reports and our risk management policies with our executive management team throughout the year
• Reviews risk mitigation activities and planned response activities in the event a risk event occurs
Committees of the Board
The committees of the Board play an active role in oversight of risk management as follows:
Audit Committee
Responsible for oversight of risks associated with:
• Financial results and disclosures
• Internal controls over financial reporting
• Information technology
• Legal, compliance and ethical matters
• Fraud
Capital Allocation Committee
Supports the Board's and management's review of the Company's long-term capital allocation priorities, planning and strategy, and continued optimization of the Company's balance sheet, including:
• Review, evaluate, and make recommendations to the Board regarding capital allocation priorities, including but not limited to, development activities and acquisitions, and dividend and capital return policy
Compensation Committee
Oversees compensation practices and policies, including:
• Benefits, pay equity, hiring practices, DEI and retention for all team members
• Review and approval of executive compensation
• Recommendations for non-employee Director compensation to the Board
Executive Committee
• Reviews and approves acquisitions and / or financings (including refinancing of existing debt) by the Company up to a maximum purchase price or loan amount of $300 million per transaction to ensure that the Company's strategic goals are met within the boundaries of our risk profile
NCG Committee
• Develops and recommends corporate governance guidelines to the Board and periodically reviews and recommends any necessary changes to mitigate new risks to our business
• Reviews related party transactions and conflicts of interest to preserve the best interests of the Company and our shareholders
• Ensures Board nominees qualify to provide proper guidance
• Oversees evaluation of the Board
• Oversees succession planning for the Board, CEO, executive and senior management positions to protect the continuity and success of our business
• Reviews the ESG strategy, initiatives and policies developed by management, and receives updates on significant ESG activities
Risk Areas
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| | Macroeconomic | | Strategic | | Operational |
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| • Global and national economic conditions • Capital market access and evaluation | • Portfolio management - acquisitions / dispositions / simplification • Regulatory impact • Capital recycling | • Succession Planning • Data Recovery and Cybersecurity • Privacy / Identity Management • Human capital • Climate Change / transition risk |
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In the event that a specific risk is identified, the Board directs management to assess, evaluate and provide remedial recommendations to the Board or a committee. These efforts have included formalizing the Company’s succession planning for executives and key employees, documenting and reviewing cyber-security risk mitigation plans and emergency preparedness plans to facilitate rapid response to a range of threats.
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Oversight of Succession Planning The Board is responsible for appointing our CEO and for ensuring that adequate succession plans are in place to address planned CEO succession, as well as potential unexpected or emergency succession needs. The NCG Committee oversees succession planning for both the Board and CEO, routinely obtaining input from and updating the full Board on succession plan reviews. The NCG Committee also oversees succession planning and associate development of executive and senior management positions to ensure adequate bench strength is developed and available to meet the long-term needs of the Company. The CEO and other executive management periodically update the NCG Committee and the Board on senior management succession plans including associate development plans and areas of risk. The Board has exposure to internal succession candidates on an ongoing basis, generally meeting with executives both inside and outside of Board meetings and also periodically meeting with key senior managers. The Compensation Committee considers succession planning input from the Board and the NCG Committee when determining compensation packages for the Board and NEOs. |
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Oversight of Cybersecurity Risk Management Our business operations rely on the consistent availability of our communication platforms, enterprise applications, and related systems. We have implemented protocols to ensure the secure collection, storage, and transmission of data and invest in the development and enhancement of controls designed to prevent, detect, and respond to unauthorized access, computer viruses, malware, data exfiltration and other threats. We have established an Information Security Management Committee to manage information security in accordance with the ISO 27001:2013 standard to ensure the consistent application of security principles, policy statements, and controls. In adhering to this industry standard, we manage and mitigate material risks from threats to our systems and data by partnering with reputable, recognized security firms, and conducting ongoing internal and external information security audits, risk assessments, anti-phishing campaigns, penetration testing exercises, systems monitoring activities, employee training, and cyber incident response exercises. Company policies include standards and procedures for vulnerability management, business continuity planning, encryption of sensitive data, physical security, user access controls, vendor risk management, teleworking, mobile device management, and system monitoring. Comprehensive contingency and recovery plans are in place to ensure the ongoing provision of services to customers in the event of a cybersecurity incident. These are tested on a regular basis against scenarios of varying degrees by both internal and external resources. To manage vendor risk, we conduct ongoing risk assessments based on the vendor’s published Systems and Operational Controls (SOC) reports, information provided in vendor security questionnaires, and any publicly available information including ongoing litigation or external disclosures. |
| Governance Senior leadership provides the Board of Directors with ongoing security updates, which include notable changes to program plans, changes to the risk environment, information regarding material incidents that may have occurred, third-party audit reports on recent assessments of our security controls, and details regarding forward-looking plans and strategies to mitigate cyber risk. The Audit Committee of the Board of Directors provides oversight and is responsible for assessing risks to our business, in accordance with its charter. The Audit Committee engages in regular conversations with senior leadership about our security systems in order to monitor and mitigate risks from cybersecurity incidents, in accordance with our security principles and protocols. The Senior Vice President of Information Technology and the Director of Information Security bear direct responsibility for daily management of cyber risk. Oversight from the executive team, led by the Chief Administrative Officer, ensures strategic alignment. With a wealth of executive leadership spanning over 20 years in both public and private sectors, these individuals collectively possess more than 75 years of invaluable experience in information technology and security. The Information Security Management Committee (ISMC) and ERM Committee meet regularly to provide oversight of cyber risk management functions. Committee composition includes members from cross-functional departments, including technology, innovation, human resources, accounting & finance, internal audit, operations, and executive management. Various members of these committees hold industry certifications representing expertise in information security risk and compliance management, including the Certified Information Technology Professional (CITP), Certified Information Systems Security Professional (CISSP), Certified Information Security Auditor (CISA), and Certified in Risk and Information Systems Control (CRISC) designations. |
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Oversight of Emergency Preparedness We develop, maintain and walk through emergency preparedness plans that address risks associated with man-made and natural events such as hurricanes, earthquakes, floods, droughts, wildfires, data center disruption and workforce displacement. Contingency plans for disaster recovery and incident response plans are in place and are reviewed and updated on a recurring basis. We also conduct risk assessments at multiple levels in the organization to identify potential emergency scenarios (risk events) and evaluate actions necessary to mitigate the risk and implement them. We design workforce recovery capabilities into our technology infrastructure, tools and services, with the goal of ensuring a permanent, extended or temporary loss of our facilities does not significantly impact our operations. Executive management, department heads and personnel across the organization are regularly involved in our preparedness planning and implementations. |
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Board’s Role in Oversight of Human Capital Management and Culture
The Board is actively engaged in overseeing the Company’s people and culture strategy. The NCG Committee reviews and reports back to the Board on a broad range of human capital management topics, including corporate culture, diversity, inclusion, talent acquisition, retention, employee satisfaction, engagement and succession planning. We report on human capital matters at each regularly scheduled NCG Committee meeting and periodically throughout the year, and annually at a regularly scheduled Board meeting.
Board’s Role in Oversight of ESG
As part of the Company's corporate governance, our Board is responsible to our stakeholders for the oversight of the Company. The NCG Committee oversees the implementation of new initiatives, plus the refinement of our ESG-related reporting and materials. We believe in maintaining transparency and strong governance based on the highest ethical standards.
ESG Steering Committee
• Is sponsored by the CFO and chaired by the Vice President of Sustainability. Cross-departmental management teams and working group to establish ESG strategy to integrate ESG goals and objectives across the Company
• Establishes ESG strategy, key performance indicators and sets targets
• Develops policies and response to emerging ESG issues that would be material to the Company
• Coordinates ESG response on cross-departmental issues
• Advises on ESG reporting and determines cadence of ESG communications
• Provides regular updates on ESG to the NCG Committee and the Board of Directors
• Provides regular updates on the ERM Committee to ensure any ERM related risks are covered
Committees of the Board
Each of the following Committees of the Board plays an active role in oversight of ESG:
NCG Committee
• Oversees the ESG Steering Committee
• Aligns ESG implementation and reporting across all portfolios
Compensation Committee
• Designs executive compensation to take into consideration the achievement of ESG goals
Board Structure
Leadership Structure
The Board and the NCG Committee assess and revise our leadership structure from time to time. The Board does not have a fixed policy regarding the separation of the offices of Chairman and CEO. The Board believes that it should maintain the flexibility to select the Chairman and its Board leadership structure, based on the criteria that it deems to be in the best interests of the Company and its shareholders. Mr. Shiffman currently serves as our Chairman, President and CEO. The Board believes that combining the Chairman and CEO positions is the right corporate governance structure for us at this time as it most effectively utilizes Mr. Shiffman’s extensive experience and knowledge regarding the Company and our industries, and provides for the most efficient leadership of our Board and the Company. The Board believes that Mr. Shiffman, rather than an independent director, is in the best position, as Chairman and CEO, to lead Board discussions regarding our business and strategy and to help the Board respond quickly and effectively to the many business challenges affecting the Company. The Board also believes that this structure is preferable because it allows one person to speak for, and lead, the Company and the Board, and that splitting the roles of Chairman and CEO may cause the Company’s leadership to be less effective.
Independence of Non-Employee Directors
Although the Board believes that it is more effective to have one person serve as our Chairman, President and CEO at this time, it also recognizes the importance of strong independent leadership on the Board. Accordingly, in addition to maintaining a significant majority of independent directors and independent Board committees, the Board appoints a Lead Independent Director on an annual basis to serve for a term of one year. Clunet R. Lewis is currently serving as Lead Independent Director. The Lead Independent Director calls and presides at the executive sessions of our independent directors, acts as a liaison between our management team and the Board and is responsible for identifying, analyzing and making recommendations to the Board with respect to certain strategic and extraordinary matters. The Board believes that its Lead Independent Director structure, including the duties and responsibilities described above, provides the same independent leadership, oversight, and benefits for the Company and the Board that would be provided by an independent Chairman.
The NYSE rules require that a majority of the Board consists of members who are independent. There are different measures of director independence under the NYSE independence rules and under the federal securities laws. The Board has reviewed information about each of our non-employee directors and determined that Tonya Allen, Meghan G. Baivier, Stephanie W. Bergeron, Jeff T. Blau, Jerome W. Ehlinger, Brian M. Hermelin, Ronald A. Klein, Craig A. Leupold and Clunet R. Lewis are independent directors. The independent directors meet on a regular basis in executive sessions without management participation. In 2023, the executive sessions occurred after many of the regularly scheduled meetings of the entire Board and may occur at such other times as the independent directors deem appropriate or necessary.
Committees of the Board of Directors
The following chart summarizes the members and chair of each Committee:
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| Gary A. Shiffman | Tonya Allen | Meghan G. Baivier | Stephanie W. Bergeron | Jeff T. Blau |
| Audit | | | | | |
| Capital Allocation | | | | | |
| Compensation | | | | | |
| NCG | | | | | |
| Executive | | | | | |
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| Brian M. Hermelin | Ronald A. Klein(1) | Craig A. Leupold | Clunet R. Lewis | Arthur A. Weiss |
| Audit | | | | | |
| Capital Allocation | | | | | |
| Compensation | | | | | |
| NCG | | | | | |
| Executive | | | | | |
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| Committee Chair | | Member | | | | |
(1) Effective as of the Annual Meeting and in accordance with the Board's refreshment efforts, Mr. Klein will no longer serve as a member of the Compensation, NCG or Executive Committees.
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Audit Committee Meetings held in 2023: 4 Members: Stephanie W. Bergeron (Chair), Meghan G. Baivier, Brian M. Hermelin and Clunet R. Lewis All members of the Audit Committee are independent. | |
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Stephanie W. Bergeron |
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Key Responsibilities
• Assists directors with oversight of (i) the integrity of the Company's financial statements, (ii) compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of the independent auditors, and (iv) the performance of the Company's internal audit function
• Prepares the Audit Committee Report, as required by the rules of the SEC, to be included in the annual proxy statement
• Evaluates the performance and effectiveness of the Company's CFO and reports the results of such evaluation to the Compensation Committee on an annual basis
• Oversees key matters related to the selection, performance and independence of the independent auditors, including (i) approves the engagement letter on an annual basis, (ii) directly oversees the work performed by the independent auditors, (iii) pre-approves audit and non-audit services, and (iv) evaluates the qualifications, performance, and independence of the independent auditors and lead partner
• Reviews the Company's financial statements, discusses key topics and issues with management and the independent auditors, and provides a recommendation to the Board regarding whether the financial statements should be included in the Company's Annual Report on Form 10-K
• Evaluates the performance, responsibility, budget and staffing, and directs and controls our internal audit function
• Discusses with counsel and management the Company's guidelines and policies that govern risk assessment and management
• Reviews and approves the decision by the Company to enter into swaps, including any foreign exchange forwards and foreign exchange swaps
Other Information
• Operates pursuant to an Eighth Amended and Restated Charter, approved by the Board in February 2022
• The Board has determined that all current Audit Committee members are “audit committee financial experts,” as defined by SEC rules
• During 2023, the Audit Committee members were Ms. Bergeron (Chair), Ms. Baivier, Mr. Hermelin and Mr. Lewis
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Capital Allocation Committee Formed in February 2024 Meetings held in 2023: N/A Members: Jeff T. Blau (Chair), Craig A. Leupold and Brian M. Hermelin All members of the Capital Allocation Committee are independent. | |
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Jeff T. Blau |
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Key Responsibilities
• Supports the Board's and management's review of the Company's long-term capital allocation priorities, planning and strategy, and continued optimization of the Company's balance sheet
• Reviews, evaluates, and makes recommendations to the Board regarding capital allocation priorities, including but not limited to:
• Development activities and acquisitions
• Dividend and capital return policy
• Any other related matters as may be determined by the Board from time to time
Other Information
• Operates pursuant to a Charter, approved by the Board in February 2024
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Compensation Committee Meetings held in 2023: 1 Members: Brian M. Hermelin (Chair), Ronald A. Klein and Clunet R. Lewis All members of the Compensation Committee are independent. | |
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Brian M. Hermelin |
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Key Responsibilities
• Reviews and approves corporate goals and objectives relevant to the compensation of the CEO and other executive officers, evaluates the performance of our executive officers in light of their respective goals and objectives, and determines and approves the compensation of our executive officers based on these evaluations
• Consults with executive management in developing a compensation philosophy
• Recommends the compensation of the non-employee directors to the Board for approval
• Oversees our incentive-compensation plans and equity-based plans
• Reviews and approves all compensation plans, employment agreements and severance agreements to be made with all existing or prospective executive officers
Other Information
• Operates pursuant to a First Amended and Restated Charter, approved by the Board in March 2016
• In addition to formal meetings, during 2023, Compensation Committee members met frequently on an informal basis and met regularly with management to discuss executive compensation matters
• During 2023, the Compensation Committee members were Mr. Hermelin (Chair), Mr. Klein and Mr. Lewis
• Effective as of the Annual Meeting and in accordance with the Board's refreshment efforts, Mr. Klein will no longer serve as a member of the Compensation Committee
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Executive Committee Meetings held in 2023: None (see below) Members: Gary A. Shiffman, Ronald A. Klein and Arthur A. Weiss |
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Key Responsibilities
• Manages the day-to-day business and affairs between regular Board meetings
• Has specific authority to approve all acquisitions and / or financings (including refinancing of existing debt) by the Company up to a maximum purchase price or loan amount of $300 million per transaction
• In no event may the Executive Committee, without the prior approval of the Board acting as a whole:
(i) Recommend to the shareholders an amendment to our charter;
(ii) Amend our bylaws;
(iii) Adopt an agreement of merger or consolidation;
(iv) Recommend to the shareholders the sale, lease or exchange of all or substantially all of our property and assets;
(v) Recommend to the shareholders our dissolution or a revocation of a dissolution;
(vi) Fill vacancies on the Board;
(vii) Fix compensation of the directors for serving on the Board or on a committee of the Board;
(viii) Declare distributions or authorize the issuance of our stock;
(ix) Approve or take any action with respect to any related party transaction involving us; or
(x) Take any other action which is forbidden by our bylaws or charter.
• All actions taken by the Executive Committee must be promptly reported to the Board as a whole and are subject to ratification, revision and alteration by the Board
Other Information
• Operates pursuant to a charter, last amended by the Board in July 2021
• The Executive Committee may perform other functions as requested by the Board from time to time
• The Executive Committee did not hold any formal meetings; however, during 2023, various actions were taken by unanimous written consent and the committee met informally on a periodic basis
• In 2023, the Executive Committee members were Mr. Shiffman, Mr. Klein and Mr. Weiss
• Effective as of the Annual Meeting and in accordance with the Board's refreshment efforts, Mr. Klein will no longer serve as a member of the Executive Committee
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NCG Committee Meetings held in 2023: 6 Members: Meghan G. Baivier (Chair), Tonya Allen, Stephanie W. Bergeron and Ronald A. Klein All members of the NCG Committee are independent. | |
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Meghan G. Baivier |
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Key Responsibilities
• Identifies individuals qualified to become Board Members, consistent with criteria approved by the Board
• Recommends that the Board select the committee-recommended nominees for election at each annual meeting of shareholders
• Develops and recommends to the Board a set of corporate governance guidelines
• Periodically reviews governance guidelines and recommends amendments and oversees the evaluation of the Board
• Has sole authority to retain and terminate any search firm that is used to assist in identifying director candidates and has authority to approve any such search firm’s fees and other retention terms
• Considers diversity and skills in identifying nominees for service on our Board
• Considers the entirety of the Board and a wide range of economic, social and ethnic backgrounds and does not nominate representational directors from any specific group
• Reviews the Company’s ESG strategy, initiatives and policies developed by management, and receives updates from the Company regarding significant ESG activities
• Administers the Company’s Code of Business Conduct and Ethics
• Administers the Company's Related Party Transaction Policy
Other Information
• Operates pursuant to a Third Amended and Restated Charter, approved by the Board in March 2022
• In addition to formal meetings, during 2023, NCG Committee members met frequently on an informal basis, met regularly with management to discuss corporate governance issues and met informally with management to discuss director nomination and committee assignments
• During 2023, the NCG Committee members were Ms. Baivier (Chair), Ms. Allen, Ms. Bergeron and Mr. Klein
• Effective as of the Annual Meeting and in accordance with the Board's refreshment efforts, Mr. Klein will no longer serve as a member of the NCG Committee
Compensation Policies and Practices as They Relate to Risk Management
The Compensation Committee has reviewed the Company's compensation policies and practices and believes that any risks arising from such policies and practices are not likely to have a material adverse impact on the Company. Additionally, the Compensation Committee reviewed the relationship between our risk management policies and practices and the various components of our NEOs' compensation.
For the base salary component, the Compensation Committee determined that the following limits the incentive for risky behavior that would have a material adverse effect on the Company: (a) base salary is relatively small compared to other components of the NEOs' total compensation; and (b) the NEOs and employees receive copies of both the Company's Employee Handbook and all governing documents which describe the required standards of personal and professional conduct, with which all NEOs and employees must comply with at all times.
For the annual incentive award component, the Compensation Committee determined that the following limits the incentive for risky behavior that would have a material adverse effect on the Company: (a) performance based annual incentive awards provide a balance between the short-term and long-term goals and objectives of the Company; and (b) annual incentive awards are awarded at the discretion of the Compensation Committee.
For the equity compensation component, the Compensation Committee determined that the following limits the incentive for risky behavior that would have a material adverse effect on the Company: (a) the Company’s governing documents, including the Stock Ownership Guidelines and Executive Compensation Recovery (Clawback) Policy, properly align shareholder interests with the interests of the NEOs; (b) the Compensation Committee establishes the grants and terms of the Company’s restricted stock; and (c) the Compensation Committee grants both time restricted and performance restricted awards to better align with the interest of the Company’s shareholders.
Additionally, Gary A. Shiffman, the Company’s Chairman of the Board, President and CEO, meets regularly with the Compensation Committee to discuss the Company’s compensation policies and practices. Additional steps the Company has taken include maintaining an anonymous hotline to report concerns, issues or potential violations of its code of conduct, company policies or laws.
Compensation Committee Interlocks and Insider Participation
Brian M. Hermelin, Ronald A. Klein and Clunet R. Lewis served as members of the Compensation Committee of our Board during 2023. None of the members of the Compensation Committee have been, or will be, one of our officers or employees. We do not have any interlocking relationships between our executive officers and the Compensation Committee and the executive officers and compensation committees of any other entities, nor has any such interlocking relationship existed in the past.
Safe Harbor Executive Committee
In addition to the Board committees described above, a Safe Harbor Executive Committee oversees certain aspects of Safe Harbor’s business. The Safe Harbor Executive Committee is not a committee of the Board, but of Safe Harbor. The members of the Safe Harbor Executive Committee are Mr. Shiffman, Mr. Weiss and Baxter R. Underwood, the CEO of Safe Harbor.
Other Board Policies and Processes
Board Evaluations
The Board believes annual performance reviews are essential for ensuring overall effectiveness, including fulfillment of its oversight responsibilities, strategic planning and communications. For 2023, the Board evaluation process was executed through detailed questionnaires. The NCG Committee administered Board wide questionnaires, reviewed the results of the evaluations and the recommendations and shared its findings with the Board to help direct the Board's activities and governance in the following year. In addition, each committee of the Board administered and performed its own review of the annual committee self-assessment to help direct the committees' activities and governance in the following year.
Evaluation Process
The Board's evaluation process includes multiple assessments and reviews performed throughout the year. This process ensures that the Board’s governance and oversight responsibilities are updated to reflect best practices and are well executed. These evaluations include discussions after every meeting, quarterly Board assessments, an annual Board assessment and an annual committee self-assessment.
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Questionnaires | Quarterly questionnaires are distributed to directors after each Board meeting and an annual questionnaire is distributed at the end of the year. In addition, an annual Committee questionnaire is distributed at the end of the year. Quarterly Board assessment questionnaires evaluate the following: • The Board agenda • The timeliness of meeting materials • The adequacy and insightfulness of meeting materials • Director participation • Adequacy of Board governance • The efficiency and effectiveness of the Board meeting Annual Board assessment questionnaires evaluate the following topics: • The right Board structure • The right directors • The right culture • The right information and resources • The right process • The right issues and focus Annual Committee assessment questionnaires evaluate the following topics: • The right Committee structure • The right Committee members • The right culture • The right information and resources • The right process • The right issues and focus |
Review | Responses received from quarterly evaluations are aggregated and sent to the NCG Committee Chair for review and discussion as necessary. The results of the annual Board evaluation are reviewed by the NCG Committee and shared with the Board to help direct the Board's activities and governance in the following year. The results of the annual committee's self-assessment are reviewed by the committee to help direct committees' activities and governance in the following year. |
Certain Relationships and Related Party Transactions
Policies and Procedures for Approval of Related Party Transactions
None of our executive officers or directors (or any family member or affiliate of such executive officer or director) may enter into any transaction or arrangement with us that reasonably could be expected to give rise to a conflict of interest without the prior approval of the NCG Committee.
Any such transaction or arrangement must be promptly reported to the NCG Committee or the full Board. Any such disclosure provided by an executive officer or director is reviewed by the NCG Committee and approved or disapproved.
In determining whether to approve such a transaction or arrangement, the NCG Committee takes into account, among other factors, whether the transaction was on terms no less favorable to us than terms generally available to third parties and the extent of the executive officer’s or director’s involvement in such transaction or arrangement.
The current policy was adopted and approved in March 2022. All related party transactions disclosed below were approved by the NCG Committee, which determined that each such transaction was in the best interests of the Company and included pricing and other terms that are fair to the Company. Except for Daniel Milantoni's employment described below, which the NCG Committee ratified subsequently, the NCG Committee provided prior approval of all such transactions in accordance with the Company’s policy.
Related Party Transactions
Lease of Executive Offices
Gary A. Shiffman, together with certain of his family members, indirectly owns an equity interest of approximately 28.1% in American Center LLC, the entity from which we lease office space for our principal executive offices. Each of Brian M. Hermelin, Ronald A. Klein and Arthur A. Weiss indirectly owns less than one percent interest in American Center LLC. Mr. Shiffman is our Chairman of the Board, President and CEO. Each of Mr. Hermelin, Mr. Klein and Mr. Weiss is a director of the Company. Under this agreement, we lease approximately 60,261 rentable square feet of permanent space. The lease agreement includes annual graduated rent increases through the initial end date of October 31, 2026. As of December 31, 2023, the average gross base rent was $20.95 per square foot. During the year ended December 31, 2023, we incurred rent expense of $2.1 million for the lease of the office space.
Use of Airplane
Gary A. Shiffman is the beneficial owner of an airplane that we use from time to time for business purposes. During the year ended December 31, 2023, we paid $0.5 million for the use of the airplane.
Telephone Services
Brian M. Hermelin is a principal and a beneficial owner of an entity that installs and maintains emergency telephone systems at our properties. During the year ended December 31, 2023, we paid $0.3 million for these services.
Legal Counsel
Arthur A. Weiss is a partner at Taft Stettinius & Hollister LLP, which acts as our general counsel and represents us in various matters. We incurred legal fees and expenses owed to this law firm of approximately $7.9 million during the year ended December 31, 2023.
Transactions with Immediate Family Members
Adam Shiffman, the son of Gary A. Shiffman, the Company’s Chairman, President and CEO, serves as the Company’s Vice President of Resort Development. Adam Shiffman’s aggregate annual compensation was approximately $185,000 for the year ended December 31, 2023.
Alex Shiffman, the son of Gary A. Shiffman, was appointed as the Company's Vice President of Corporate Strategy in March 2023. Alex Shiffman’s aggregate annual compensation was approximately $153,000 for the year ended December 31, 2023.
Daniel Milantoni, the spouse of Marc Farrugia, the Company’s Executive Vice President and Chief Administrative Officer, serves as the Company's Director of Human Resource Technology. Mr. Milantoni's aggregate annual compensation was approximately $221,000 for the year ended December 31, 2023.
STAKEHOLDER OUTREACH AND ENGAGEMENT
We are committed to engaging stakeholders across our organization and throughout the communities in which we operate. Engagement with our shareholders, team members, residents and customers and local communities is paramount to our success.
Shareholders
We recognize the value of listening to the views of our shareholders, and the relationship with our shareholders is an integral part of our corporate governance practices. In addition to our customary participation at industry and investment community conferences, investor road shows and analyst meetings, we conduct shareholder outreach throughout the year to ensure that management and the Board understand and consider the issues of importance to our shareholders and are able to address them appropriately.
In 2023, we reached out to 20 of the Company's top 25 institutional shareholders representing approximately 59% of our outstanding shares as of December 31, 2023, and received feedback from all of them.
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| Topics Discussed with Shareholders | |
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Corporate Governance • Succession planning • Diversity • Board structure and refreshment • Term limits and director tenure • Capital Allocation Committee formation and Charter | ESG • Completeness of our GHG inventory • Renewable energy strategy and savings | Executive Compensation • Changes to executive compensation incentives |
Our engagement with shareholders through quarterly earnings calls, SEC filings, proxy statements, press releases, investor conferences and our annual shareholder meetings provides transparency. We welcome feedback from all shareholders, who can contact our investor relation team by:
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| Internet | Call | Email | Mail |
| www.suninc.com | (248) 208-2500 | investorrelations@suncommunities.com | Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 300, Southfield, MI 48034 |
Team Members
We engage, gather feedback from, and communicate with our team members through various channels, including annual team member satisfaction surveys; SunSource, our intranet site; a dedicated Concierge Team; the Sun Idea Box; and one-on-one meetings with leaders. We maintain an anonymous hotline and online portal for team members to report concerns, issues or violations of our strict code of conduct, company policies or laws, without fear of retaliation.
Residents and Customers
Resident and customer engagement is always of paramount importance at the Company. We value feedback from our residents and customers to improve our communities and services offered. We engage with them through community events, one-on-one daily interactions, newsletters, surveys and email communications that are designed to keep everyone informed about what’s happening in their communities.
Local Communities
Community engagement is what helps make the Company so successful. We actively participate in the broader communities in which we operate primarily through our Sun Unity Ambassador program in the U.S., locally organized volunteer and sponsorship activities across our marina network in the U.S and locally based initiatives on our properties in the UK.
Industry Engagement
We believe in the power of alliance when it comes to making progress within our industry—that together is better. We participate in the following national organizations: Manufactured Housing Institute (MHI), Nareit, RV Industry Association (RVIA) and National Association of RV Parks & Campgrounds (ARVC).
COMMUNICATIONS WITH THE BOARD
The Board welcomes feedback from shareholders and other interested parties.
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| If you wish to communicate with | Write to |
Any of the directors of the Board
or
The Board as a group | Name(s) of director(s) / Board of Directors of Sun Communities, Inc.
c/o Compliance Officer
Sun Communities, Inc.
27777 Franklin Road, Suite 300
Southfield, MI 48034 |
Audit Committee(1) | Chair of the Audit Committee of Sun Communities, Inc
c/o Compliance Officer
Sun Communities, Inc.
27777 Franklin Road, Suite 300
Southfield, MI 48034 |
| Non-management directors as a group | Non-management directors of Sun Communities, Inc.
c/o Compliance Officer
Sun Communities, Inc.
27777 Franklin Road, Suite 300
Southfield, MI 48034 |
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| We recommend that all correspondence be sent via certified U.S. mail, return receipt requested. All correspondence received by the Compliance Officer will be forwarded to the addressee(s) promptly. |
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(1) You may communicate with the Audit Committee to report complaints or concerns regarding accounting, internal accounting controls or auditing matters. You are welcome to make any such report anonymously, but we prefer that you identify yourself so that we may contact you for additional information if necessary or appropriate.
OVERVIEW
Gary A. Shiffman, who is our Chairman, President and CEO, receives no additional compensation for his service as a director. The discussion below pertains to our non-employee directors.
Compensation Processes
Our Compensation Committee annually assesses the total compensation for non-employee directors relative to the compensation provided by similarly sized REITs and by our peer group. The Compensation Committee benchmarks our director compensation to that of our peers by comparing the aggregate total compensation of all of our non-employee directors to the aggregate total compensation of all of the non-employee directors of each of our peers. We believe the aggregate total compensation of all of our directors is more relevant to the interests of our shareholders than per-director compensation.
In 2023, the Compensation Committee, as part of its review of director compensation, made no change to the directors' cash fee structure or the Committees' fees. The Compensation Committee believes that the director compensation is fair, reasonable and in line with that of our peers and remains appropriate to incentivize directors to maximize shareholder value.
In an effort to align the interests of the Board with those of its shareholders, the Company’s directors are subject to a Stock Ownership Guideline Policy. Under this policy, as of December 31, 2023, each director who has been with the Company for more than five years was required to own shares of our stock with a value equal to eight times his or her annual Board cash retainer (exclusive of committee and Lead Independent Director fees). As of December 31, 2023, the value of average company stock ownership by the Company’s non-employee directors was 31 times the amount of the Board annual cash retainer, and each then-serving director was in compliance with the policy.
The Company also monitors its total director compensation expense, as a function of various company metrics, to assure that the total expense is consistent with the Company’s growth and overall shareholder value. The total director compensation expense, as compared to the Company’s total market capitalization, at year end, is a relevant factor to shareholder interests. From 2018 to 2023 the total director compensation as a percentage of the Company’s total market capitalization has declined by 20%.
DIRECTOR COMPENSATION – 2023
During 2023, we paid non-employee directors the following annual fees:
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| Additional Cash Fees |
| Lead Independent Director | $25,000 |
| Committees of the Board | Committee
Chair Fees | Committee
Membership Fees |
| Audit Committee | | $ | 30,000 | | | $ | 25,000 | |
| Compensation Committee | | $ | 22,500 | | | $ | 17,500 | |
| NCG Committee | | $ | 22,500 | | | $ | 17,500 | |
| Executive Committee | | – | | $ | 17,500 | |
The following table provides compensation for each non-employee member of the Board for the year ended December 31, 2023 and the restricted shares outstanding at December 31, 2023:
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| | Compensation | Aggregate number of restricted shares outstanding at
December 31, 2023 |
| Directors | Fees Earned
| 2023 Restricted Stock Award(1) | Total |
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| Tonya Allen | | $ | 97,500 | | | $ | 296,240 | | | $ | 393,740 | | | 5,209 | |
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| Meghan G. Baivier | | $ | 127,500 | | | $ | 296,240 | | | $ | 423,740 | | | 5,400 | |
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| Stephanie W. Bergeron | | $ | 127,500 | | | $ | 296,240 | | | $ | 423,740 | | | 5,400 | |
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| Jeff T. Blau | | $ | 74,667 | | | $ | 296,240 | | | $ | 370,907 | | | 2,000 | |
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| Brian M. Hermelin | | $ | 127,500 | | | $ | 296,240 | | | $ | 423,740 | | | 5,400 | |
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| Ronald A. Klein | | $ | 132,500 | | | $ | 296,240 | | (2) | $ | 428,740 | | | 5,400 | | (3) |
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| Clunet R. Lewis | | $ | 147,500 | | | $ | 296,240 | | | $ | 443,740 | | | 5,400 | |
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| Arthur A. Weiss | | $ | 97,500 | | | $ | 296,240 | | | $ | 393,740 | | | 5,400 | |
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| | | $ | 932,167 | | | $ | 2,369,920 | | | $ | 3,302,087 | | | 39,609 | | |
(1) The fair value associated with these awards was measured using the closing price of our common stock as of the grant date. Each non-employee director was granted 2,000 shares of restricted stock that will vest on January 25, 2026. For additional information on the valuation assumptions with respect to these grants, refer to Note 11, “Share-Based Compensation,” in the Consolidated Financial Statements of our 2023 Annual Report on Form 10-K.
(2) Mr. Klein elected to defer receipt of these restricted shares pursuant to the Sun Communities, Inc. Non-Employee Directors Deferred Compensation Plan.
(3) Includes 3,700 shares deferred pursuant to the Sun Communities, Inc. Non-Employee Directors Deferred Compensation Plan.
Director Stock Ownership Guidelines
In an effort to align the interests of the Company’s management with those of its shareholders, the Company has adopted a policy under which its non-employee directors are subject to equity ownership guidelines. Under these guidelines, each director is required to:
• Own shares of our stock with a value equal to eight times his or her annual cash retainer (exclusive of chair or committee fees).
• Achieve compliance with these guidelines by five years from the later of: (i) November 2, 2021, which was the date these guidelines were last amended or (ii) the date he or she becomes a director.
• Retain at least 50% of all shares of restricted stock as they vest (not including any newly vested shares sold or withheld to pay applicable taxes) until he or she complies with the guidelines, or if he or she fails to comply due to a reduction in our stock price.
As of March 18, 2024, each of our non-employee directors was in compliance with the stock ownership guidelines.
SUMMARY
What Am I Voting On?
The second proposal to be considered at the Annual Meeting will be a non-binding advisory vote on executive compensation. Section 14A of the Exchange Act requires us to allow shareholders an opportunity to cast a non-binding advisory vote on executive compensation as disclosed in this Proxy Statement. The following proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2023 executive compensation programs and policies and the compensation paid to our NEOs listed in the Summary Compensation Table below.
Shareholders are being asked to approve the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to our NEOs, as disclosed pursuant to the SEC’s rules and regulations, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion, is hereby approved on an advisory basis.”
As discussed in the “Compensation Discussion and Analysis” section below, the primary objectives of our executive compensation program are to attract and retain a skilled executive team to manage, lead and direct our personnel and capital to obtain the best possible economic results. The compensation of our executive officers reflects the success of our management team in attaining certain operational goals, which leads to the success of the Company and serves the best interests of our shareholders.
This proposal allows our shareholders to express their opinions regarding the decisions of the Compensation Committee on the prior year’s annual compensation to the NEOs. Your non-binding advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to improve the alignment of our executive compensation programs with our interests and the interests of our shareholders and is consistent with our commitment to high standards of corporate governance.
Proposal No. 2 – Non-Binding Advisory Vote to Approve Named Executive Officer Compensation
Vote Required
Advisory approval of this say-on-pay proposal requires the affirmative vote of holders of a majority of all the votes cast at the Annual Meeting. Abstentions will not be counted as votes cast for the say-on-pay proposal and do not represent votes cast for or against the advisory approval of the proposal. Brokers are not empowered to vote on the say-on-pay proposal without instruction from the beneficial owner of the shares and thus broker non-votes likely will result. Since broker non-votes are not considered votes cast on the say-on-pay proposal, they will not be counted in determining whether the say-on-pay proposal is approved. Because the vote on this proposal is non-binding and advisory in nature, it will not affect any compensation already paid or awarded to any NEO and will not be binding on or overrule any decisions by the Board; it will not create or imply any additional fiduciary duty on the part of the Board; and it will not restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation. To the extent there is any significant vote against our NEO compensation as disclosed in this Proxy Statement, the Compensation Committee will evaluate whether any actions are necessary to address the concerns of shareholders. The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our NEOs, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC.
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| The Board unanimously recommends that you vote “FOR” the executive compensation of our NEOs as disclosed in this Proxy Statement. |
In this section, we describe our executive compensation philosophy and program that supports our strategic objectives and serves the long-term interests of our shareholders. We also discuss how our CEO, CFO and other NEOs were compensated in 2023, and describe how their compensation fits within our executive compensation philosophy. For the year ended December 31, 2023, our NEOs were:
OUR NEOS
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Gary A. Shiffman Chairman, President, and CEO | Fernando Castro-Caratini Executive Vice President, CFO, Treasurer and Secretary | Bruce D. Thelen Executive Vice President and COO | Marc Farrugia Executive Vice President and Chief Administrative Officer | Aaron Weiss Executive Vice President of Corporate Strategy and Business Development |
CD&A TABLE OF CONTENTS
Compensation Discussion and Analysis
EXECUTIVE SUMMARY
The goals and objectives of our executive compensation program are to attract and retain a skilled executive team to manage, lead and direct our personnel and capital resources to achieve the best possible economic results, and to provide outsized TSRs to our investors. Our executive officers are compensated based on pay for performance and alignment with shareholders’ interests.
During 2023, we continued to demonstrate the resiliency of our best-in-class portfolio through our ability to generate reliable, strong Same Property NOI growth across all segments, and by achieving full year Core FFO per Share of $7.10, which was in line with our expectations. Total Same Property NOI (MH, RV and Marina) as compared to 2022 grew 7.3% (6.8% for MH, 4.8% for RV and 11.7% for Marina) during 2023, driven by a 6.2% increase in real property revenues and operating expense growth of 4.2%. Occupancy gains contributed to our strong operating results; the 3,268 Revenue Producing Sites we added during the year represented an 11.8% increase over the prior year gains. Same Property blended occupancy for MH and RV was 97.9% at December 31, 2023, up 50 basis points from year-end 2022. Adjusting for expansion sites delivered and leased, Same Property adjusted blended occupancy for MH and RV increased by 230 basis points year over year, to 98.9% at December 31, 2023. In addition, we effectively managed our balance sheet, capital resources and leverage by raising $836.9 million of fixed rate debt during 2023, using the proceeds to reduce floating rate debt.
From 2010 through 2022, a large component of our growth was driven by acquisitions as we opportunistically purchased high-quality MH, RV and Marina properties. With the benefit of our expanded portfolio, during 2023 we shifted our strategy toward optimizing the value of our existing businesses through achieving strong rental rate growth and operating efficiencies. We remained disciplined in pursuing only the most strategic and synergistic new acquisition and expansion opportunities.
To simplify our business and reduce our exposure to variable rate debt, during the fourth quarter of 2023, we made strong progress toward monetizing assets no longer deemed to be strategic. We resolved the UK note receivable that we had put into receivership at the end of the third quarter of 2023, resulting in us taking ownership of three additional real estate assets. As a result, we now have the experienced Park Holidays team managing all assets we own in the UK. Additionally, we sold our investment in the common stock of Ingenia Communities Group (“Ingenia”), an owner / operator of MH and RV communities in Australia. We also recycled capital out of our consumer loan receivables portfolio, divested our interest in Campspot, and meaningfully reduced the number of properties owned in joint ventures, using the proceeds to pay down variable rate debt.
We achieved a 10-year TSR of 323.1% outperforming the MSCI U.S. REIT (“RMS”), Russell 1000, U.S. REIT Residential and S&P 500 indexes during the same period. In addition, we had a five-year TSR of 47.5%, outperforming the RMS and the Dow Jones all Equity REIT indices.
Compensation Discussion and Analysis
Performance Highlights
When determining compensation for the year ended December 31, 2023, the Compensation Committee took into account the level of achievement of certain key financial performance metrics, including but not limited to the following:
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| Financial Performance Metric | Rationale |
| Core FFO growth | FFO is a standard operating performance measure for REITs and is defined by Nareit as GAAP net income (loss), excluding gains (or losses) from sales of certain real estate assets, plus real estate related depreciation and amortization, impairments of certain real estate assets and investments, and after adjustments for nonconsolidated partnerships and joint ventures. Core FFO is a primary operating measure in our publicly-reported earnings results, and is defined as FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. |
| Same Property combined NOI Growth - MH, RV & Marina | NOI is calculated by deducting direct property operating expenses from property operating revenues, thereby providing a measure of the actual operating performance of our properties. Same Properties are primarily those properties that we have owned and operated continuously since January 1, 2022. |
| Combined Operations / Sales CNOI - MH & RV | NOI is calculated by deducting direct property operating expenses from property operating revenues, thereby providing a measure of the actual operating performance of our properties. CNOI excludes certain items that have been deemed to be outside of Mr. Thelen's control. |
| RPS Gains - MH & RV | Revenue producing site gains represent the number of sites that we are able to fill during a period, net of the number of sites lost. By increasing Revenue Producing Sites, we increase our portfolio occupancy and can maximize generation of revenues and shareholder returns. |
| Development and expansion activities | Construction of ground-up developments and expansions of our existing communities provide for continued revenue growth through occupancy gains. |
| ESG initiatives | Performance is based on implementation and progress towards long-term commitments, including our DEI Roadmap, Carbon Neutral by 2035 and Net Zero Emissions by 2045, as well as integration of all business operations. |
Individual goals / Compensation Committee discretion | The Compensation Committee reviews each executive officer’s annual accomplishments in order to evaluate the specific contributions of each executive to our success and properly align pay and performance. |
Compensation Discussion and Analysis
Exceptional Growth
Our leadership team has executed a series of acquisition and capital market transactions that have repositioned our portfolio. These activities have bolstered our strong and flexible balance sheet while generating significant growth in Core FFO per share and significant returns for our shareholders.
For over a decade, our executive team has executed on a strategic plan to deliver outsized results by utilizing our operational expertise to create a best-in-class platform of MH and RV communities with a broader geographic range and re-balancing our all-age and age-restricted holdings. Tactics our leadership has embraced include increasing our portfolio diversification by elevating our presence along the east coast of the U.S.; expanding west to California and Arizona; opportunistically entering the Marina business in 2020, and expanding our MH platform overseas with the acquisition of Park Holidays in the UK in 2022. Since 2020, our executive team has also focused on converting transient RV sites in order to grow MH and RV combined occupancy year over year, increase the percentage of real property rents derived from steady, annual lease income, and benefit from the higher operating margins associated with non-transient sites. Since 2020, the Company has converted nearly 6,900 transient RV sites, increasing its annual RV sites by nearly 25%.
In 2023, we shifted our strategy toward optimizing the value of our existing businesses. By focusing on realizing the consistent growth our portfolio generates, by remaining disciplined in pursuing external growth opportunities, and by further enhancing our investment grade balance sheet by deleveraging, our leadership is confident in our Company’s strategic positioning to re-accelerate Core FFO per Share growth.
During the last five years, we have acquired properties valued in excess of $7.5 billion as detailed in table below:
| | | | | | | | | | | | | | | | | | | | |
| Number of Acquired Properties | Purchase Price (in millions) |
| Year Ended December 31, | MH | RV | Marinas | Total Sites, Wet Slips and Dry Storage Spaces |
| 2019 | 36 | 11 | — | 10,390 | | | $ | 815.2 | |
| 2020 | 10 | 14 | 106 | 45,800 | | | $ | 2,979.2 | |
| 2021 | 11 | 24 | 19 | 15,816 | | | $ | 1,425.1 | |
| 2022 | 60 | 1 | 8 | 24,347 | | | $ | 2,175.3 | |
| 2023 | 1 | 0 | 1 | 92 | | | $ | 107.0 | |
| | | | | | |
| Total | 118 | 50 | 134 | 96,445 | | | $ | 7,501.8 | |
Development and Expansion Activities
We have been focused selectively on property ground-up developments and expansion opportunities adjacent to our existing properties. During 2023, we deployed additional capital through the construction of ground-up development projects and expansion sites and acquisition of land for future development.
Ground-up Developments – We completed the construction of 360 MH and RV sites at five ground-up development properties. In total we have completed the development of 4,356 MH and RV ground-up development sites within the past five years.
Expansions – We expanded over 440 sites at 14 MH and RV properties in 2023. In total we have completed the development of 3,730 MH and RV expansion sites within the past five years. We continue to expand our properties by utilizing our inventory of owned and entitled land. We have approximately 17,980 MH and RV sites suitable for future development.
During the year ended December 31, 2023, we acquired four land parcels located in the U.S. and one land parcel in the UK for the potential development of over 1,350 sites for an aggregate purchase price of $35.8 million.
Compensation Discussion and Analysis
Strong and Flexible Balance Sheet
While optimizing our portfolio, we are also focused on maintaining a strong and flexible balance sheet. Through a series of capital market activities and with cash generated from operations, we have maintained conservative leverage levels, coverage ratios and liquidity as shown below:
Net Debt to Enterprise Value
Net Debt to Recurring EBITDA
Recurring EBITDA to Interest
(1) Our Net Debt to Recurring EBITDA ratio for 2020 is elevated due to the acquisition of Safe Harbor late in 2020 which had the impact of including all of its debt and only two months of its EBITDA. Our ratio normalized during 2021 as Safe Harbor’s EBITDA is fully presented in our operating results.
(2) Net Debt to Recurring EBITDA ratio for 2021 does not factor a full year contribution from $1.4 billion of acquisitions completed during the course of 2021 and $705.4 million net proceeds received in 2022 from the settlement of outstanding forward sale agreements, which was used to repay borrowings outstanding under our senior credit facility, and for working capital and general corporate purposes.
(3) Net Debt to Recurring EBITDA ratio for 2022 does not factor a full year contribution of EBITDA from $2.2 billion of acquisitions completed during the course of 2022.
(4) Net Debt to Recurring EBITDA ratio for 2023 does not factor a full year contribution from $107.0 million of acquisitions completed during the course of 2023, but includes $53.9 million of secured borrowings on collateralized receivables, a transferred asset transaction which has been classified as collateralized receivables. The cash received from this transaction has been classified as a secured borrowing and remeasured at fair value. The cash received was used to repay borrowings outstanding under our senior credit facility.
Compensation Discussion and Analysis
Executive Compensation Highlights and Key Decisions
2023 Executive Compensation Program
Our executive compensation program is grounded in a compensation philosophy aimed at achieving strong alignment between executive compensation, the Company's long-term strategic goals and our shareholders’ interests.
The Compensation Committee considers the results of the non-binding advisory vote by shareholders on executive compensation, or the “say-on-pay” proposal, presented to shareholders at our 2023 annual meeting when evaluating our executive compensation program. The Compensation Committee made no direct changes to the Company’s executive compensation program as a result of the say-on-pay vote for the year ended December 31, 2023, as 84% of shareholders supported our 2022 executive compensation program. See the Advisory Vote on Executive Compensation section, under the Compensation Processes on page 84 for additional information. When reviewing incentive structures, the Compensation Committee deeply values the continued interest of, and feedback from, our shareholders on our executive compensation program and is committed to ensure shareholder's perspectives are thoughtfully taken into account.
Pay and Performance Alignment
This section discusses our executive officer performance based on predefined key metrics and how our TSR compares to other market indices for the year ended December 31, 2023.
Annual Incentive Performance Metrics - Gary Shiffman, Fernando Castro-Caratini and Aaron Weiss
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| Target | Result | Payout
Shiffman | Payout
Castro-Caratini & Aaron Weiss |
Core FFO growth Did not meet threshold | ≥ 1.0% to < 2.0% | (3.4) | % | — | % | — | % |
Same Property combined NOI growth - MH, RV and Marina Exceeded maximum | ≥ 5.25% to 5.75% | 7.3 | % | 200 | % | 130 | % |
Development and expansion activities Met threshold | > 950 to 1,150 Sites delivered | 802 | 100 | % | 75 | % |
ESG initiatives Exceeded maximum | Exceeded | Excelled | 200 | % | 130 | % |
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Annual Incentive Performance Metrics - Bruce Thelen
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| Target | Result | Payout |
Core FFO growth Did not meet threshold | ≥ 1.0% to < 2.0% | (3.4) | % | — | % |
Same Property combined NOI growth - MH and RV Exceeded maximum | ≥ 4.75% to 5.25% | 6.2 | % | 130 | % |
Combined Operations / Sales CNOI Exceeded maximum | > Budget to Budget + 0.5% | Budget + 2.4% | 130 | % |
RPS Gains Exceeded maximum | ≥ 2,900 to < 3,200 | 3,268 | 130 | % |
Development and expansion activities Met threshold | > 950 to 1,150 Sites delivered | 802 | 75 | % |
ESG initiatives Exceeded maximum | Exceeded | Excelled | 130 | % |
Compensation Discussion and Analysis
Annual Incentive Performance Metric - Marc Farrugia
Mr. Farrugia serves as the Executive Vice President and Chief Administrative Officer of the Company. For the year ended December 31, 2023, the CEO reviewed Mr. Farrugia's overall responsibilities, his individual performance during the year, the Company’s performance or other criteria deemed relevant to the Compensation Committee, and the annual incentives of the other executive officers and Mr. Farrugia's overall compensation, and made a recommendation of Mr. Farrugia's incentive compensation to the Compensation Committee. The Compensation Committee considered the CEO's recommendation and independently reviewed Mr. Farrugia's performance and exercised its sole discretion in awarding incentive compensation to Mr. Farrugia.
Total Shareholder Return
We outperformed the S&P 500, the MSCI U.S. REIT (RMS), the Russell 1000, U.S. REIT Residential and S&P 500 indices on 10-year TSRs. We stand out as a leader among REITs for delivering TSR results. We also produced a five-year TSR of 47.5%, outperforming the MSCI U.S. REIT (RMS) and the Dow Jones all Equity REIT indices. These results are indicative of our executive team’s strategic planning, leadership, execution and dedication to the Company. The execution of our strategic vision has resulted in prolonged TSR outperformance over time as evidenced in the charts below.
SUI TSR Performance vs. Comparative Indices
10-Year Total Return
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sun Communities, Inc. | | Nareit Residential
Index | | S&P 500 | | MSCI U.S. REIT (RMS) | | Russell 1000 | | Dow Jones Equity All REIT |
Source: S&P Global as of December 31, 2023.
Compensation Discussion and Analysis
Chairman and CEO Compensation
In determining the compensation structure for Mr. Shiffman and his total compensation amount, the Compensation Committee takes into account many factors. As one of the longest-tenured CEOs in the REIT industry, Mr. Shiffman has delivered significant value to shareholders over a three-decade span. This is evidenced by the Company’s TSR over the period, which is 3,760%, among many other achievements.
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3,760% Total return delivered over Mr. Shiffman's tenure as CEO | 47.5% 5-Year TSR Outperformed both the MSCI and Nareit Residential Indices | 323.1% 10-Year TSR Top 10% of all REITS |
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| +465 bps Outperformance vs. MSCI U.S. REIT Index Last 5 Years | +1,074 bps Outperformance vs. Nareit Residential Index Last 5 Years | |
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96,445 Total sites acquired over the last 5 years | $7.5 Billion Total acquisition volume over the last 5 years | 8,086 Total ground-up development and expansion sites delivered over the last 5 years |
* Note that we have started Mr. Shiffman's tenure as of Feb. 12, 1994, and thus the returns from 1994 reflect the TSR from that date through Dec. 31, 1994, not the entire calendar year.
Compensation Discussion and Analysis
An important aspect of Mr. Shiffman’s compensation package is the link between company performance and pay; our executives’ pay should be directionally aligned with the performance of the Company so that they are strongly incentivized to deliver shareholder value and financially rewarded for doing so. In 2023, 85% of Mr. Shiffman’s pay was awarded in the form of equity, and of that amount, 60% of the total number of restricted shares awarded was performance-based.
2021 - 2023 Market Equity Award - Grant Date Fair Value vs Realized Value
Consistent with prior practices, we remain committed to a highly oriented pay-for-performance equity program in which a majority of share grants continue to be tied to rigorous shareholder return-based goals. In light of headwinds faced by the Company in 2022 and 2023, our TSR was negative in both of those years, the second time in Mr. Shiffman’s tenure with two consecutive years of negative returns (the first being 2007-2008 during the Great Recession). As a result, Mr. Shiffman’s performance-based equity incentive award, granted in 2021, did not vest at December 31, 2023 (see chart above) and his 2023 pay is at its lowest level since 2019 (see the below chart). These are deliberate and logical outcomes of our stated alignment between pay and performance. In addition, the realized value of his equity awards will ultimately be lower than is reflected in the Summary Compensation Table if performance hurdles are not met. His cash bonus payout is also at its lowest amount since 2016.
Compensation Discussion and Analysis
2018 - 2024 CEO Pay vs. Cumulative TSR
(1) Total compensation opportunity for 2024 ranges from $1.5 - $3.3 million in accordance with terms of employment agreement.
The chart above showing 2018-2024 CEO Pay vs. Cumulative TSR includes the range of Mr. Shiffman’s total compensation opportunity for 2024 in accordance with the terms of his employment agreement. Mr. Shiffman’s total compensation opportunity range for 2024 is at its lowest level in a decade. This decline is a result of the Compensation Committee's decision to reduce the number of equity incentive shares awarded to Mr. Shiffman from 75,000 in 2023 to 5,000 in 2024 (see chart below). In total, the decline from 2023 pay to the 2024 total compensation opportunity includes a reduction worth over $8.7 million entirely attributable to the reduction in the equity incentive awarded in 2024 relating to 2023 performance.
CEO # of Shares Granted
Compensation Discussion and Analysis
The chart below compares Mr. Shiffman’s total compensation received in 2022 and 2023 to his total compensation opportunity for 2024, including the $8.7 million decrease in the grant date fair value of equity awards from 2023 to 2024.
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| Name and Principal Position | Year | Salary
($) | Non - Equity
Incentive ($) | | Stock
Awards ($) | All Other
Compensation ($) | | Total ($) | |
Gary A. Shiffman Chairman, President and CEO | 2024 | | $ | 900,000 | | | $0 - $1,800,000 | (1) | | $ | 557,985 | | | $ | 16,086 | | (2) | | $1,474,071 - $3,274,071 | (3) |
2023 | | $ | 900,000 | | | $ | 747,000 | | | | $ | 9,283,660 | | | $ | 16,086 | | | | $ | 10,946,746 | | |
| 2022 | | $ | 900,000 | | | $ | 1,665,000 | | | | $ | 12,395,450 | | | $ | 6,132 | | | | $ | 14,966,582 | | |
(1) Represents range of bonus opportunity for 2024 in accordance with terms of employment agreement.
(2) Assumes no change in All Other Compensation from 2023.
(3) Represents range of total compensation opportunity for 2024 in accordance with terms of employment agreement.
Although the proportion of Mr. Shiffman’s compensation awarded in equity is decreasing as a result of this change for 2024, we believe that his significant ownership of Company stock acquired throughout his three-decade tenure at Sun Communities is sufficiently motivating in addition to the annual grants he will continue to receive.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The executive officer compensation program supports our commitment to provide superior shareholder value. This program is designed to:
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Attract, retain and reward executives who have the motivation, experience and skills necessary to lead us effectively and encourage them to make career commitments to us. | | Base executive compensation levels on our overall financial and operational performance and the individual contribution of an executive officer to our success. |
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| Create a link between the performance of our stock and executive compensation. | | Position executive compensation levels to be competitive with other similarly situated public companies, especially those in the real estate industry. |
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Compensation Discussion and Analysis
ELEMENTS OF COMPENSATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fixed | | Variable |
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| | | | | | | | |
| | | | | | | | |
| | Base Salary | + | Annual Incentive Award | + | | Long-Term Incentives | |
| | | 40% Time Vesting
Restricted Shares | 60% Performance Vesting
Restricted Shares | |
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| What? | | Cash | | Cash | | | Equity | Equity | |
| When? | | Annual | | Annual | | | 5-year period | 3-year performance period | |
How? (Measures and Weighting) | | Market Competitive | | 85% Corporate Performance Goals Metrics: Core FFO, Same Property NOI, CNOI, RPS gains, Development and Expansion activities, and ESG initiatives 15% Individual Goals | | | Subject to continued employment | Based on Company’s 3-year TSR relative to MSCI U.S. REIT Index | |
Base Salary
Fixed compensation component that provides a minimum level of cash to compensate the executive officer for the scope and complexity of the position. Amounts based on an evaluation of the executive officer’s experience, position and responsibility as well as intended to be competitive in the marketplace to attract and retain executives.
Annual Incentive Award
Variable cash compensation component that provides incentive to the executive officer based on the Compensation Committee’s assessment of both annual corporate and individual performance. Measures of corporate performance principally focused on Core FFO and other key operating metrics.
Long-Term Incentives
Variable equity compensation component focused on executive retention that provides longer-term motivation with the effect of linking stock price performance to executive compensation. The long-term equity incentive awards granted during the current year are determined based on prior year performance.
Compensation Discussion and Analysis
2023 EXECUTIVE COMPENSATION
For 2023 performance, the compensation mix for our CEO and other NEOs is shown below:
The annual incentive represents the 2023 annual performance incentive paid in 2024 and the long-term incentive award represents awards issued in 2023 based on 2022 performance, valued at the grant date fair value.
2023 Base Salary
Base salary is generally based on factors such as an individual officer’s level of responsibility, prior years’ compensation, comparison to compensation of other officers and compensation provided at competitive companies and companies of similar size.
Along with peer company benchmarking, the Compensation Committee considered the overall growth in the Company’s total capitalization, the number of MH and RV communities and marinas that the Company owns and operates, the number of employees under management and the corresponding expansion of responsibilities for these executive officers when determining their base salaries.
The base salaries of the NEOs for the year ended December 31, 2023, were paid in accordance with their employment agreements.
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| Base Salary | | Base Salary Paid |
| Executive | 2023 Base Salary | 2022 Base Salary | Percent Change | | 2023 Base Salary | 2022 Base Salary | Percent Change |
| Gary A. Shiffman | | $ | 900,000 | | | $ | 900,000 | | | — | % | | | $ | 900,000 | | | $ | 900,000 | | | — | % |
| Fernando Castro-Caratini | | $ | 550,000 | | | $ | 550,000 | | (1) | — | % | | | $ | 550,000 | | | $ | 474,868 | | (2) | 16 | % |
| Bruce D. Thelen | | $ | 500,000 | | | $ | 500,000 | | | — | % | | | $ | 500,000 | | | $ | 500,000 | | | — | % |
| Marc Farrugia | | $ | 475,000 | | | $ | 475,000 | | (1) | — | % | | | $ | 475,000 | | | $ | 412,310 | | (2) | 15 | % |
| Aaron Weiss | | $ | 525,000 | | | $ | 525,000 | | | — | % | | | $ | 525,000 | | | $ | 525,000 | | | — | % |
(1) Annual base salaries were effective on various dates under new employment agreements. See "Information about Executive Officers - Employment Agreements."
(2) The base salaries paid were prorated for the effective date of employment agreements.
In setting the 2022 compensation elements and levels for the NEOs, the Compensation Committee considered several main compensation components including base salary, target annual non-equity incentive and long-term incentive awards (collectively “total remuneration”) on an actual and target basis, as well as per individual and in aggregate, across the team, as well as other factors. The Compensation Committee selected our peer group and similarly sized REITs to compare and benchmark our executive compensation based on a number of quantitative and qualitative factors including, but not limited to, revenues, total assets, market capitalization, industry, sub-industry, location, TSR history, executive compensation components and peer decisions made by other companies. Noting that the Company has only one publicly traded direct business peer of similar size, the Compensation Committee, in consultation with Ferguson Partners Consulting, LP ("FPC"), an executive compensation consulting firm engaged by us, strove to formulate our 2022 peer group of publicly traded companies that include the following characteristics: public manufactured housing REITs, industry and business strategies, size, operational intensity and complexity, competition and other considerations such as companies that cited us as a compensation peer, with an emphasis on relative size.
Compensation Discussion and Analysis
Additionally, in 2022, we engaged Alliance Advisors to assess the use of ESG linked metrics within senior management’s executive incentive plans. The analysis indicated that the adoption of ESG metrics in executive compensation programs at S&P 500 companies is now a widespread practice, as companies want to signal the importance of ESG priorities and be responsive to investor expectations. Most companies in the real estate sector tie ESG performance metrics to executive pay. Alliance Advisors reviewed proxy statements of a group of our compensation peers to assess the use of ESG linked metrics within senior management’s executive incentive plans. Of the 21 peers evaluated, the majority include at least one ESG metric within their executive compensation programs, with varying degrees of robustness. The majority of the metrics were qualitative in nature. Based on the above, the Compensation Committee felt comfortable with how the company uses ESG metrics in executive compensation decisions.
In setting the 2023 compensation elements, the Compensation Committee considered and relied on the above analysis. As part of its review of the 2023 executive compensation, the Compensation Committee reviewed executive compensation in comparison to the executive compensation provided by similarly sized REITs and our peer group, the Company's growth in market capitalization, revenues, and number of employees as well as the Compensation Committee's evaluation of the performance of the executive team in effectively implementing corporate growth strategies and driving shareholder value. The Compensation Committee made no change to the current compensation structure as the Compensation Committee believes that the current executive compensation is fair, reasonable and in line with that of similarly sized REITs and our peers, and remains adequate to appropriately incentivize our executives to maximize shareholder value.
2023 Annual Incentive Award
This represents the cash incentive awarded for 2023 performance and paid in 2024.
The annual incentive awards motivate the executive officers to maximize our annual operating and financial performance and reward participants based on annual performance. The Compensation Committee annually reviews performance measures for determining award levels, including growth in key metrics and individual goals. In each case, actual performance is measured against targets established by the Compensation Committee.
In setting the 2023 compensation elements and levels for the NEOs, the Compensation Committee made a change to the current compensation structure to better align executive compensation with that of similarly sized REITs and our peers, and ensure it remains adequate to appropriately incentivize our executives to maximize shareholder value. The Compensation Committee slightly modified the weighing of the elements of the annual incentive award, allocating more weight to corporate performance metrics and reducing the weight of individual goals. As a result, the Compensation Committee increased the weight of the corporate performance goals from 75% to 85% and decreased the weight of the individual goals from 25% to 15%.
The Compensation Committee, in its sole and absolute discretion, reserves the right to make adjustments to calculated results for certain transactions and other extraordinary matters, including but not limited to, acquisitions, divestitures, debt and equity transactions and other capital or unusual transactions, which may have an unexpected adverse or beneficial impact, when determining achievement of that performance target.
Annual Incentive Award Structure
For 2023, the threshold, target and maximum incentive opportunities for Gary A. Shiffman, Bruce D. Thelen, Fernando Castro-Caratini, Marc Farrugia and Aaron Weiss as a percentage of salary were unchanged from 2022. The table below provides salary and incentive opportunities as the basis for determination of our 2023 annual incentive awards.
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| Incentive Opportunity (as a % of Salary) | | |
| Executive | 2023 Base Salary | Threshold | Target | Maximum | | | | | |
| Gary A. Shiffman | | $ | 900,000 | | 100 | % | 150 | % | 200 | % | | | | | |
| Fernando Castro-Caratini | | $ | 550,000 | | 75 | % | 100 | % | 130 | % | | | | | |
| Bruce D. Thelen | | $ | 500,000 | | 75 | % | 100 | % | 130 | % | | | | | |
| Marc Farrugia | | $ | 475,000 | | 50 | % | 75 | % | 100 | % | | | | | |
| Aaron Weiss | | $ | 525,000 | | 75 | % | 100 | % | 130 | % | | | | | |
Gary A. Shiffman, Fernando Castro-Caratini and Aaron Weiss
The Compensation Committee annually reviews performance measures for determining award levels, including growth in key metrics and individual goals. In each case, actual performance is measured against targets established by the Compensation Committee.
Compensation Discussion and Analysis
The table below shows the key operating metrics which were used for the 2023 annual incentive awards to Mr. Shiffman, Mr. Castro-Caratini and Aaron Weiss:
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| Metric | Rationale | % of Aggregate Annual Incentive Payment Eligibility |
| Core FFO growth | FFO is a standard operating performance measure for REITs and is defined by Nareit as GAAP net income (loss), excluding gains (or losses) from sales of certain real estate assets, plus real estate related depreciation and amortization, impairments of certain real estate assets and investments, and after adjustments for nonconsolidated partnerships and joint ventures. Core FFO is a primary operating measure in our publicly-reported earnings results, and is defined as FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. | 36.0 | % |
| Same Property Combined NOI growth - MH, RV and Marina | NOI is calculated by deducting direct property operating expenses from property operating revenues, thereby providing a measure of the actual operating performance of our properties. Same Properties are primarily those properties that we have owned and operated continuously since January 1, 2022. | 24.0 | % |
| Developments and Expansions | Construction of ground-up developments and expansions of our existing communities provide for continued revenue growth through occupancy gains. | 15.0 | % |
| ESG initiatives | Performance is based on implementation and progress towards long-term commitments, including our DEI Roadmap, Carbon Neutral by 2035 and Net Zero Emissions by 2045, as well as integration of all business operations. | 10.0 | % |
Individual goals / Compensation Committee discretion | The Compensation Committee reviews each executive officer’s annual accomplishments in order to evaluate the specific contributions of each executive to our success and properly align pay and performance. | 15.0 | % |
Compensation Discussion and Analysis
Bruce D. Thelen
Mr. Thelen’s primary responsibility is to oversee the operations and home sales within the Company’s MH and RV communities. His annual incentive award for 2023 was based on his 2023 overall performance, as measured against goals and objectives set for him and his contribution to the Company's success, as determined by the Compensation Committee.
The table below shows the key operating metrics which were used for the 2023 annual incentive awards to Mr. Thelen.
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| Metric | Rationale | % of Aggregate Annual Incentive Payment Eligibility |
| Core FFO growth | FFO is a standard operating performance measure for REITs and is defined by Nareit as GAAP net income (loss), excluding gains (or losses) from sales of certain real estate assets, plus real estate related depreciation and amortization, impairments of certain real estate assets and investments, and after adjustments for nonconsolidated partnerships and joint ventures. Core FFO is a primary operating measure in our publicly-reported earnings results, and is defined as FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business. | 18.0 | % |
| Same Property NOI growth - MH & RV | NOI is calculated by deducting direct property operating expenses from property operating revenues, thereby providing a measure of the actual operating performance of our properties. Same properties are primarily those properties that we have owned and operated continuously since January 1, 2022. | 18.0 | % |
| Combined Operations / Sales CNOI - MH & RV | NOI is calculated by deducting direct property operating expenses from property operating revenues, thereby providing a measure of the actual operating performance of our properties. CNOI excludes certain items that have been deemed to be outside of Mr. Thelen's control. | 20.0 | % |
| RPS Gain - MH & RV | Revenue producing site gains represent the number of sites that we are able to fill during a period, net of the number of sites lost. By increasing RPSs, we increase our portfolio occupancy and can maximize generation of revenues and shareholder returns. | 12.5 | % |
| Developments and Expansions |
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![CD23133 SunCommunities_IG[32].jpg](sui-20240401_g39.jpg)
