Sun Communities, Inc. Provides Update on Recent Activities

Rhea-AI Summary

Sun Communities, Inc. provided an update on recent activities, including insurance renewal, home sales in the UK, completion of an administration process related to real estate assets, and a public offering of senior notes. The company expects an increase in insurance-related expenses of 15-20% compared to 2023. Park Holidays completed the sale of over 2,800 homes in 2023, with 74% pre-owned and 26% new homes. Sun completed an administration process related to real estate assets collateralizing a note receivable and a public offering of $500 million aggregate principal amount of 5.50% senior notes due 2029. The company's Full Year and Fourth Quarter 2023 results will be released on February 20, 2024, after markets close.

Insights

Financial Analyst

The recent update from Sun Communities, Inc. regarding the completion of its North American MH and RV insurance renewal, with an anticipated expense increase of 15% to 20%, is a significant factor for financial analysis. This uptick in costs could potentially squeeze margins, especially if the company cannot pass these costs onto consumers. It's crucial to monitor how this increase impacts the operating expenses and whether it will be a one-time surge or part of a longer-term trend in rising insurance costs. This information is pertinent for investors as it could affect the company's profitability and, consequently, its stock performance.

Moreover, the sale of homes by Park Holidays, a subsidiary of Sun, aligns with guidance, indicating stable operational performance in the UK market. The NOI margin figure provided gives an insight into the profitability of these operations. It's essential to compare this margin with industry benchmarks to evaluate operational efficiency. The sale composition, with a higher percentage of pre-owned homes, could reflect market dynamics or strategic inventory management, which would be of interest to investors assessing the company's revenue streams.

Debt Market Analyst

The issuance of $500 million in senior notes at a 5.50% interest rate, with the majority of proceeds used to repay floating-rate debt, indicates a strategic shift in Sun Communities' capital structure. By reducing its floating-rate debt to 10% of total debt, the company is mitigating the risk associated with interest rate fluctuations. This move could be seen as a defensive posture in an environment where interest rates are volatile or expected to rise. For stakeholders, this may be a positive sign, as it suggests a focus on long-term financial stability and a reduction in interest rate risk exposure.

However, it is also important to assess the cost of this new fixed debt relative to the company's overall cost of capital and the potential impact on financial flexibility. The interest rate of 5.50% should be compared to the current market rates for similar maturities and credit profiles to determine the attractiveness of the terms. Additionally, the use of proceeds to pay down existing debt rather than funding new investments could be indicative of the company's current strategic priorities and its assessment of growth opportunities.

Real Estate Investment Trust Analyst

The acquisition of real estate assets through a credit bid following the administration process of Royale Holdings Group in the UK is a noteworthy development. This move suggests Sun Communities is actively managing its portfolio and potentially acquiring assets at a discount to market value. The reflection of these assets on the balance sheet could potentially enhance the asset base and diversify the company's holdings, contributing to its net asset value. However, it's important to evaluate the quality of these assets, their fit within the company's existing portfolio and the implications for the company's geographic and operational diversity.

Additionally, the update on the preliminary financial estimates highlights the importance of transparency and provides a snapshot of the company's fiscal health. However, investors should be cautious and await the finalized financial results, as these preliminary figures are subject to change. The upcoming earnings release and conference call will be critical for providing a more comprehensive understanding of the company's performance and outlook, which is essential for assessing the investment potential of Sun Communities.

Southfield, MI, Jan. 22, 2024 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) ("Sun" or the "Company"), a real estate investment trust ("REIT") that owns and operates, or has an interest in, manufactured housing ("MH") and recreational vehicle ("RV") communities and marinas (collectively, the "properties"), today provided an update on the following recent activities:

• The Company recently completed its North American MH and RV insurance renewal for 2024, resulting in an expected increase in insurance-related expense of approximately 15% to 20%, as compared to 2023.
  
  
• In the UK, Park Holidays completed the sale of over 2,800 homes during 2023, in line with guidance, of which 74% were pre-owned and 26% were new homes. NOI margin for the second half of 2023 was approximately $22,000, also in-line with management’s previously communicated range.
  
  
• Sun recently completed an administration process related to three real estate assets that collateralized a note receivable extended to Royale Holdings Group in the UK. Sun acquired these assets through a credit bid, a potential outcome that was previously disclosed. Ownership of the assets will be reflected on the Company’s December 31, 2023 consolidated balance sheets, and Sun continues to work through the process relating to the remaining collateral under the note receivable.
  
  
• On January 11, 2024, Sun completed a public offering of $500 million aggregate principal amount of 5.50% senior notes due 2029. The majority of the net proceeds were used to repay borrowings outstanding under its senior credit facility, thereby reducing Sun's floating-rate debt to total debt to approximately 10%.
  
  

The Company will provide more detailed information and further updates in its upcoming earnings release and conference call. The Company’s Full Year and Fourth Quarter 2023 results will be released on Tuesday, February 20, 2024, after markets close. A conference call to discuss the results will be held on Wednesday, February 21, 2024, at 11:00 a.m. Eastern Time.

The financial information set forth above reflects the Company’s preliminary estimates with respect to such information, based on information currently available to management, and may vary from actual financial results as of and for the year ending December 31, 2023.

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; outbreaks of disease and related restrictions on 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.

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.

For Further Information at the Company:        

Fernando Castro-Caratini
Chief Financial Officer
(248) 208-2500
www.suncommunities.com

FAQ

What is the expected increase in insurance-related expenses compared to 2023?

Sun Communities, Inc. expects an increase of approximately 15-20% in insurance-related expenses compared to 2023.

How many homes did Park Holidays sell in 2023 and what was the percentage of pre-owned homes?

Park Holidays completed the sale of over 2,800 homes in 2023, with 74% being pre-owned.

What was the aggregate principal amount of the senior notes offered by Sun Communities, Inc.?

Sun Communities, Inc. completed a public offering of $500 million aggregate principal amount of 5.50% senior notes due 2029.

When will the Full Year and Fourth Quarter 2023 results be released?

The company's Full Year and Fourth Quarter 2023 results will be released on February 20, 2024, after markets close.