Sun Communities, Inc. Prices $500 Million of Senior Notes

Rhea-AI Summary

Sun Communities, Inc. (NYSE: SUI) announced the pricing of a $500 million public offering of 5.500% senior notes due 2029. The offering price for the Notes was 99.878% of the principal amount, with an effective yield to maturity of 5.528%. The Notes will be senior unsecured obligations of the Operating Partnership, guaranteed fully and unconditionally by the Company.

Insights

Financial Analyst

The pricing of Sun Communities Operating Limited Partnership's $500 million senior notes offering at an effective yield to maturity of 5.528% is a strategic financial move. This yield is notably higher than the current average for corporate bonds, suggesting the market may perceive an increased risk or demand a higher return from the company. The decision to issue debt can be a lever for growth, enabling the company to expand its portfolio of properties or refinance existing obligations. Investors should consider the company's debt-to-equity ratio and interest coverage ratio as indicators of financial health and the sustainability of the new debt.

However, the unsecured nature of the notes means they are not backed by specific assets, potentially placing them at a higher risk in the event of default. The full and unconditional guarantee by Sun Communities, Inc. mitigates this risk to some extent, as it reflects the parent company's commitment to the obligation. This offering could influence the company's stock price as the market digests the implications of the increased debt load and interest expenses on future earnings.

Real Estate Market Analyst

Sun Communities' move to raise capital through senior notes is indicative of the current trends in the real estate investment trust (REIT) sector, where companies often rely on a mix of equity and debt financing to manage their real estate portfolios. Given the company's focus on manufactured housing, RV communities and marinas, this capital infusion could signal an aggressive expansion or upgrading of its existing assets. The real estate market, particularly the niche segments that Sun Communities operates in, has unique growth prospects and risks.

Investors should monitor the occupancy rates, average rental rates and the geographic distribution of Sun Communities' properties, as these are critical factors that can affect the company's revenue streams and, ultimately, its ability to service its debt. The current economic climate, including interest rates and consumer spending habits, also plays a significant role in the performance of REITs. The issuance of these notes at a relatively high yield suggests a careful evaluation of these market conditions is warranted.

Credit Analyst

The creditworthiness of Sun Communities Operating Limited Partnership is a key factor in the pricing of their senior notes. The 5.500% interest rate, coupled with a public offering price slightly below par, reflects the credit market's assessment of the risk associated with this debt. Investors and analysts should scrutinize the company's credit rating, historical default rates and overall financial performance to gauge the appropriateness of the yield. The REIT industry operates on relatively high leverage, making the credit analysis particularly pertinent.

It's also important to consider the macroeconomic environment, including prevailing interest rates, which can affect the cost of borrowing and investor appetite for such securities. The guarantee from Sun Communities, Inc. suggests a strong alignment and shared risk between the Operating Partnership and the parent company, which could positively influence the credit perception among potential investors. The closing of this offering will be a critical moment to watch, as it will finalize the terms and set the stage for how the market reacts to this new debt issuance.

Southfield, MI, Jan. 04, 2024 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing and recreational vehicle communities and marinas, today announced that its operating partnership, Sun Communities Operating Limited Partnership (the "Operating Partnership"), has priced a public offering of $500 million aggregate principal amount of 5.500% senior notes due 2029 (the “Notes”). The public offering price for the Notes was 99.878% of the principal amount for an effective yield to maturity of 5.528%. The Notes will be senior unsecured obligations of the Operating Partnership, guaranteed fully and unconditionally by the Company. The offering is expected to close on or about January 11, 2024, subject to customary closing conditions.

The Operating Partnership intends to use the net proceeds of the offering to repay borrowings outstanding under its senior credit facility and for working capital and general corporate purposes.

Citigroup, J.P. Morgan, BofA Securities, BMO Capital Markets, Citizens Capital Markets, Fifth Third Securities, RBC Capital Markets and Wells Fargo Securities are acting as the joint book-running managers for the offering. Huntington Capital Markets, Regions Securities LLC, SMBC Nikko, Truist Securities, US Bancorp, PNC Capital Markets LLC, Wedbush Securities, Goldman Sachs & Co. LLC, Scotiabank, and Ramirez & Co., Inc., are acting as the co-managers for the offering.

The Notes will be issued pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission. The offering will be made only by means of a prospectus supplement and accompanying prospectus, copies of which may be obtained by contacting Citigroup Global Markets Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717 (Tel: 800-831-9146 or email to: prospectus@citi.com); by contacting J.P. Morgan Securities LLC, 383 Madison Avenue, New York, NY 10179, Attention: Investment Grade Syndicate Desk, or by telephone at 212-834-4533 (collect); or by contacting BofA Securities, Inc., 201 North Tryon Street, NC1-022-02-25, Charlotte, NC 28255-0001, Attention: Prospectus Department (Toll-free: 1-800-294-1322 or by email at dg.prospectus_requests@bofa.com). A prospectus supplement related to the offering will also be available free of charge on the SEC's website at http://www.sec.gov.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale is not permitted.

About Sun Communities, Inc.

Sun Communities, Inc. is a REIT that, as of September 30, 2023, owned, operated, or had an interest in a portfolio of 670 developed properties comprising approximately 180,170 developed sites and approximately 48,030 wet slips and dry storage spaces in the United States, the United Kingdom and Canada.

Forward Looking Statements

This press release contains various “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as “will,” “may,” “could,” “expect,” “anticipate,” “believes,” “intends,” “should,” “plans,” “estimates,” “approximate,” “guidance,” and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include risks related to natural disasters, such as hurricanes, earthquakes, floods, droughts and wildfires; existing or potential supply chain disruptions; the effects of the COVID-19 pandemic and related stay-at-home orders, quarantine policies and restrictions on travel, trade and business operations; national, regional and local economic climates; wars and other international conflicts; difficulties in the Company's ability to evaluate, finance, complete and integrate acquisitions, developments and expansions successfully; the ability to maintain rental rates and occupancy levels; competitive market forces; the performance of recent acquisitions; changes in market rates of interest; changes in foreign currency exchange rates; the ability of purchasers of manufactured homes and boats to obtain financing; and the level of repossessions by manufactured home and boat lenders. Further details of potential risks that may affect the Company are described in the Company’s periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company's assumptions, expectations of future events, or trends.

For Further Information at the Company:

Fernando Castro-Caratini

Chief Financial Officer

(248) 208-2500

www.suncommunities.com

FAQ

What did Sun Communities, Inc. (NYSE: SUI) announce?

Sun Communities, Inc. (NYSE: SUI) announced the pricing of a $500 million public offering of 5.500% senior notes due 2029.

What is the offering price for the Notes?

The offering price for the Notes was 99.878% of the principal amount, with an effective yield to maturity of 5.528%.

What are the Notes in the public offering?

The Notes will be senior unsecured obligations of the Operating Partnership, guaranteed fully and unconditionally by the Company.