Notably, Blue Orca, an activist investment fund with $122 million in assets under management, admits it is biased against SUI. For one, by holding a short position in the stock it stands to make significant gains if the share price declines. In a disclaimer, it states: “We are short sellers. We are biased…We have a short interest in SUI securities and therefore stand to realize significant gains in the event that the price of such securities declines.” Not to mention, it hedges its accusations against the company in a disclaimer that reads that it, “makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice.” 

In its report, the short seller alleged Sun Communities CEO Gary Shiffman took an undisclosed $4 million loan from the family of Brian Hermelin, who for almost a decade has chaired the board’s compensation committee and served on the audit committee. Shiffman allegedly used the loan to buy one of the most expensive homes for sale in Michigan, Blue Orca said. The short seller screenshotted property records in its report that show a relative of Hermelin owned the home, and that the property sold to Shiffman for $2 million less than the last publicly disclosed list price. Blue Orca also claimed Hermelin, who has served on the Sun Communities board since 2014, is a stepcousin to Shiffman.

“Put simply, undisclosed to investors, the family of a Board member overseeing the CEO’s compensation and Company controls has been lending the CEO money to finance the purchase of luxury real estate,” the report stated. Sun Communities paid Shiffman compensation valued at nearly $11 million last year, a drop from the prior year when his pay was valued at nearly $15 million.

And according to Blue Orca’s admittedly biased report, it wasn’t a sole occurrence. In a deposition, they wrote, Shiffman admitted to borrowing $700,000 from another board member who is a partner at the law firm that serves as Sun Communities’ general counsel. From the limited deposition excerpt in the report it appears that the loan actually went to a third party at Shiffman’s request. Board member Arthur Weiss, a director since 1996, is partner and member of the executive committee at law firm Taft Stettinius & Hollister LLP. Sun Communities disclosed it paid legal fees and expenses to the firm of roughly $27.9 million over three years, which included $7.9 million, $9.7 million, and $10.3 million in 2023, 2022, and 2021, respectively.

Sun Communities, which owns, operates, and develops manufactured housing communities, did not respond to Fortune’s requests for comment. Shiffman, Hermelin, and Weiss did not respond to Fortune’s requests for comment. Fortune could not independently verify all the claims made in Blue Orca’s report. 

Blue Orca said the report should be considered in its entirety, and referred to Sun Communities as “an egregious mess of conflicts of interest and dubious executive behavior which we believe manipulates critical financial disclosures to inflate adjusted funds from operation and organic growth.” 

So far, the stock is down less than 1% in the past five days, but up around 18% in the past year. Similar to almost all real estate companies, Sun Communities’ stock peaked in 2021 at $210 dollars a share during the pandemic housing boom, and it’s fallen dramatically since, dipping even further in the days following the release of Blue Orca’s short report. Again, something that benefits the short seller.

Yet, Blue Orca alleged Sun Communities trades at a premium because it underreports recurring capital expenditures (funds used to acquire, upgrade, or maintain a company’s fixed assets), which essentially inflates its share price. Its capital spending, the short seller claimed, “defies industry norms and common sense,” in that other REITs report recurring capital expenditures four to eight times higher, as a percentage of total. Its share price could be inflated by as much as 48%, by Blue Orca’s estimate.

“We think that management’s persistent and aggressive minimization of recurring capex has given analysts [and] investors a misleading view of the Company’s financial results, resulting in chronic and significant overvaluation of the stock,” the report said. 

Additionally, Blue Orca’s report pointed to what it called a “history of alleged accounting shenanigans and reporting failures.” In 2006, the Securities and Exchange Commission filed an injunctive action against Shiffman, the company’s chief financial officer, and its former controller. Regulators alleged the company failed to report losses during seven quarters and that those decisions were directed by the company’s CFO at the time. The SEC eventually dismissed its claims against Shiffman and the controller and without admitting or denying the allegations, the company settled, which included the former CFO serving a two-year suspension from practicing as an accountant before the SEC and agreeing to a fine.

That history, according to the short seller, raises further questions about whether poor corporate governance is still present at the company. Either way, Blue Orca suggests investors do their own research and due diligence before making any investment decisions in respect to Sun Communities. 

One financial blogger, who recently wrote about the short report, called the alleged $4 million undisclosed loan “bad optics,” but not a huge concern. As for the accusation of underreporting recurring capital expenditures, the blog dismissed recurring capex as a percentage of total capex as a “junk metric,” used by Blue Orca.

On the other hand, Sun Communities has robustly disclosed several related party transactions to investors. In addition to its legal fees, the company said it hired a firm owned by Hermelin that installs and maintains emergency phone systems at its properties. The company paid a total of $700,000 for 2023, 2022, and 2021. 

It also told investors that Shiffman and his family indirectly own a 28.1% stake in American Center, the entity Sun Communities leases from for its principal executive offices. Hermelin, Weiss and Ronald Klein each own less than 1% of American Center. (Klein joined the board in 2015, and stepped down in 2024.) The company pays $20.95 per square foot and leases approximately 60,261 square feet of permanent space in its agreement. Based on those figures, the value of the lease is roughly $1.3 million.

The company also uses a jet owned by Shiffman and paid him a total of $1.9 million for the past three years combined.

Blue Orca concluded that it sees Sun Communities as an “egregious governance failure tainted by scandal, whose business is growing far slower and generates far less … than investors are led to believe.” 

Blue Orca did not respond to Fortune’s request for comment.