Sun Communities, Inc. (NYSE:SUI) Q1 2025 Earnings Conference Call May 6, 2025 11:00 AM ET Company Participants Gary Shiffman - Chairman & CEO John McLaren - President Fernando Castro-Caratini - EVP, CFO, Treasurer & Secretary Conference Call Participants Michael Goldsmith - UBS Jana Galan - Bank of America Eric Wolfe - Citigroup Brad Heffern - RBC Capital Markets Wes Golladay - Baird Steve Sakwa - Evercore ISI John Kim - BMO Capital Markets Anthony Hau - Truist Securities Peter Abramowitz - Jefferies David ...

Financial Data and Key Metrics Changes - The company reported core FFO per share of $1.26, representing a 5.8% increase year over year [14] - As of March 31, the company's debt balance stood at $7.4 billion with a weighted average interest rate of 4.1% [14] - The net debt to trailing twelve month recurring EBITDA ratio was 5.9 times [14] Business Line Data and Key Metrics Changes - North American same property portfolio delivered 4.6% NOI growth, driven by an 8.9% increase in manufactured housing same property NOI [9][10] - Revenue from manufactured housing grew 7.3%, supported by strong rental rate increases and a 150 basis point occupancy gain [10] - The RV segment saw a 7.8% increase in revenue year over year, but same property NOI declined by 9.1% due to softness in the transient RV business [11] Market Data and Key Metrics Changes - In the UK, total same property NOI saw a modest decrease of $600,000 compared to the prior year, primarily due to higher payroll and real estate taxes [11] - Revenue in the UK grew 0.2%, supported by higher manufactured housing income and home sales volumes [12] Company Strategy and Development Direction - The company is repositioning towards a pure play owner and operator of manufactured housing and recreational vehicle communities [5] - A new long-term net debt to EBITDA target of 3.5x to 4.5x has been established as part of the capital allocation plan [6] - The company is focused on operational excellence and disciplined execution through consistent organic growth and selective expansions [9] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the company's platform and long-term opportunities in the manufactured housing and RV segments [7] - The fundamentals driving demand for affordable housing remain intact, supporting a positive outlook [7] - Management acknowledged macroeconomic uncertainties affecting the transient RV business but emphasized the importance of annual revenue growth [34] Other Important Information - The company plans a one-time cash distribution of $4 per share and a planned increase to the quarterly distribution by approximately 10.6% to $1.04 per common share [16] - A $1 billion stock repurchase program has been adopted to allow for future repurchases of common shares [17] Q&A Session Summary Question: Can you walk us through the increase in manufactured housing NOI guidance? - Management noted good occupancy gains, strong renewal performance, and effective expense management as reasons for the revised guidance [24][25] Question: What is the outlook for RV guidance? - Management attributed the decline in transient RV revenue to seasonality and a shift towards shorter booking windows, particularly affecting Canadian guests [34][36] Question: What is the expected cash balance for the rest of the year? - Management confirmed that the expected cash balance is around $1.7 billion, which is embedded in guidance [40] Question: Can you discuss the types of properties targeted for acquisitions? - Management indicated a focus on high-quality single manufactured housing assets and small portfolio opportunities, emphasizing a disciplined approach [42][43] Question: What is the status of the CEO succession process? - Management stated that the search committee is actively engaged and making progress, with the possibility of an announcement before year-end [47][48] Question: What is the expected recurring CapEx for 2025? - Management expects recurring CapEx for the MH, RV, and UK portfolio to be just over $70 million for the year [99]

Financial Data and Key Metrics Changes - The company reported core FFO per share of $1.26, representing a 5.8% increase year over year [13] - As of March 31, the company's debt balance stood at $7.4 billion with a weighted average interest rate of 4.1% [13] - The net debt to trailing twelve month recurring EBITDA ratio was 5.9 times [13] Business Line Data and Key Metrics Changes - The North American same property portfolio delivered 4.6% NOI growth, driven by an 8.9% increase in manufactured housing same property NOI [8][9] - Revenue from manufactured housing grew 7.3%, supported by strong rental rate increases and a 150 basis point occupancy gain [9] - The RV segment experienced a 7.8% revenue increase year over year, but same property NOI declined by 9.1% due to softness in the transient RV business [10] Market Data and Key Metrics Changes - In the UK, total same property NOI saw a modest decrease of $600,000 compared to the prior year, primarily due to higher payroll and real estate taxes [10] - The company noted that Canadian guests accounted for roughly 4% of the annual base and 5% of transient RV revenue, impacting overall performance [10] Company Strategy and Development Direction - The company is repositioning towards a pure play owner and operator of manufactured housing and recreational vehicle communities [4] - A new long-term net debt to EBITDA target of 3.5x to 4.5x has been established as part of the capital allocation plan [5] - The company is focused on operational excellence and disciplined execution through consistent organic growth and selective expansions [8] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the company's platform and long-term opportunities across the manufactured housing and RV segments [5] - The fundamentals driving demand for affordable housing remain intact, supporting a positive outlook [5] - Management acknowledged challenges in the transient RV business due to macroeconomic uncertainty and reduced Canadian guests [10] Other Important Information - The company plans a one-time cash distribution of $4 per share and a planned increase to the quarterly distribution by approximately 10.6% to $1.04 per common share [16] - A $1 billion stock repurchase program has been adopted to allow for future repurchases of common shares [17] Q&A Session Summary Question: What is driving the increase in manufactured housing NOI guidance? - Management noted good occupancy gains, strong renewal performance, and effective expense management as key factors [23][25] Question: Is the repurchase authorization opportunistic or a consistent strategy? - Management indicated that it is part of a larger thoughtful program related to the company's positioning and financial flexibility [28][30] Question: What is the reason for the revision in RV guidance? - Management attributed the revision to a shift towards shorter booking windows and challenges with Canadian guests [34][36] Question: What is the expected cash balance for the rest of the year? - The expected cash balance is around $1.7 billion, which is embedded in guidance [40][41] Question: What types of properties are being targeted for acquisitions? - The company is focused on high-quality single manufactured housing assets and small portfolio opportunities [45] Question: What is the status of the CEO search? - The search committee is actively engaged and hopes to secure a candidate by year-end [49][50] Question: What is the expected recurring CapEx for 2025? - The expected recurring CapEx for the MH, RV, and UK portfolio is just over $70 million for the year [98]

Financial Data and Key Metrics Changes - The company reported core FFO per share of $1.26, representing a 5.8% increase year over year [14] - As of March 31, the company's debt balance stood at $7.4 billion with a weighted average interest rate of 4.1% [14] - The net debt to trailing twelve month recurring EBITDA ratio was 5.9 times [14] - The company established a new long-term net debt to EBITDA target of 3.5x to 4.5x [6] Business Line Data and Key Metrics Changes - North American same property portfolio delivered 4.6% NOI growth, driven by manufactured housing performance [9] - Manufactured housing same property NOI increased by 8.9% in the first quarter, with revenue growing by 7.3% [10] - RV segment revenue increased by 7.8% year over year, but same property NOI declined by 9.1% due to softness in the transient RV business [11] - In the UK, total same property NOI saw a modest decrease of $600,000 compared to the prior year [12] Market Data and Key Metrics Changes - The company noted that Canadian guests account for roughly 4% of the annual base and 5% of transient RV revenue, impacting overall performance [11] - The company experienced a shift towards shorter booking windows in the RV segment, affecting transient revenue [36] Company Strategy and Development Direction - The company is focused on a strategic repositioning toward a pure play owner and operator of manufactured housing and recreational vehicle communities [5] - A capital allocation plan was executed post-Safe Harbor transaction, emphasizing debt reduction and financial flexibility [15] - The company is underwriting high-quality single assets and small portfolio manufactured housing opportunities [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the company's platform and long-term opportunities in the manufactured housing and RV segments [7] - The fundamentals driving demand for affordable housing remain intact, supporting a positive outlook [7] - Management acknowledged macroeconomic uncertainties affecting the transient RV business but remains optimistic about future performance [36] Other Important Information - The company plans a one-time cash distribution of $4 per share and a planned increase to the quarterly distribution by approximately 10.6% [16] - A $1 billion stock repurchase program was announced, allowing for future repurchases of common shares [17] Q&A Session Summary Question: What led to the increase in manufactured housing NOI guidance? - Management indicated that the increase was due to good occupancy gains, strong renewal performance, and effective expense management [24][25] Question: Is the repurchase authorization opportunistic or a consistent strategy? - Management clarified that it is part of a larger thoughtful program related to the company's positioning and financial flexibility [28] Question: What factors contributed to the revision in RV guidance? - Management attributed the revision to a shift towards shorter booking windows and challenges with Canadian guests [34][36] Question: What is the expected cash balance for the rest of the year? - Management confirmed that the expected cash balance is around $1.7 billion, which is embedded in guidance [41] Question: What types of properties are being targeted for acquisitions? - Management is focused on high-quality single manufactured housing assets and small portfolio opportunities [44] Question: What is the status of the CEO succession process? - Management indicated that the search for a new CEO is ongoing, with a possibility of an announcement before year-end [48][49] Question: What is the expected recurring CapEx for 2025? - Management expects recurring CapEx for the MH, RV, and UK portfolio to be just over $70 million for the year [99]

Core Insights - Sun Communities, Inc. reported a net loss of $23.1 million, or $0.19 per diluted share, for the first quarter of 2025, an improvement from a net loss of $36.7 million, or $0.31 per diluted share, in the same period of 2024 [3] - The company completed the sale of its Safe Harbor Marinas business for net pre-tax cash proceeds of $5.25 billion, which is part of a strategy to reduce leverage and enhance financial flexibility [5][12] - Core Funds from Operations (Core FFO) per share for the quarter was $1.26, up from $1.19 in the same quarter of 2024 [7] Financial Performance - The North America Same Property Net Operating Income (NOI) for manufactured housing (MH) and recreational vehicle (RV) increased by $9.6 million, or 4.6%, year-over-year [7] - The adjusted blended occupancy for MH and RV in North America rose to 99.0%, a 150 basis point increase from the previous year [9] - The company expects Core FFO per share for 2025 to be in the range of $6.43 to $6.63, with North American Same Property NOI growth projected at 3.5% to 5.2% [18] Distributions and Shareholder Returns - A special cash distribution of $4.00 per share was announced, totaling approximately $520 million, payable on May 22, 2025 [16] - The quarterly distribution is set to increase by 10.6% in 2025, reaching $1.04 per share [16] - The company has authorized a stock repurchase program of up to $1.0 billion [17] Operational Highlights - The company’s portfolio included 502 properties with approximately 174,850 developed sites as of March 31, 2025 [32] - The occupancy rate for MH and annual RV sites was 98.0% as of March 31, 2025, compared to 97.5% a year earlier [8] - The company is focused on enhancing operational efficiencies and revenue-driving strategies, particularly in the manufactured housing sector [5] Balance Sheet and Capital Structure - As of March 31, 2025, the company had $7.4 billion in debt with a weighted average interest rate of 4.1% [11] - The net debt to trailing twelve-month recurring EBITDA ratio was 5.9 times [11] - The company has begun using proceeds from the Safe Harbor sale for debt reduction and reinvestment in its core portfolio [12][13]

Financial Performance - Net loss per diluted share for Q1 2025 was $0.34, compared to a net loss of $0.31 per diluted share in Q1 2024[10] - Core FFO per share for Q1 2025 was $1.26, up from $1.19 in Q1 2024, representing a year-over-year increase of 5.9%[16] - Basic earnings per share from continuing operations for Q1 2025 was $(0.19), an improvement from $(1.84) in Q4 2024[48] - Total revenues for Q1 2025 were $470.2 million, a slight increase of 0.2% compared to $469.2 million in Q1 2024[51] - Net loss attributable to SUI common shareholders for Q1 2025 was $42.8 million, representing a 56.2% increase from a net loss of $27.4 million in Q1 2024[51] - Total revenues for the quarter ended March 31, 2025, were $212.7 million, an increase of 5.0% from $202.0 million in the same quarter of 2024[83] - Total expenses for the quarter were $216.3 million, up from $201.0 million in the prior year, resulting in a loss before other items of $(3.6) million compared to a profit of $1.0 million in Q1 2024[83] Occupancy and Property Performance - North America Same Property adjusted blended occupancy for MH and RV increased by 150 basis points to 99.0% as of March 31, 2025[18] - The occupancy rate for the total portfolio was 98.0% as of March 31, 2025[49] - Same Property blended occupancy for MH and RV increased to 98.1% as of March 31, 2025, up 40 basis points from 97.7% a year earlier[60] - The number of occupied sites in North America increased to 11,100 as of March 31, 2025, from 9,970 a year earlier[59] - The number of properties decreased from 529 in Q1 2024 to 502 in Q1 2025, a reduction of 5.1%[56] Debt and Financial Position - As of March 31, 2025, the company had $7.4 billion in debt outstanding with a weighted average interest rate of 4.1%[20] - Total debt remained stable at $7,348.1 million compared to $7,352.8 million in Q4 2024[48] - The company's total outstanding debt as of March 31, 2025, is $7,381.4 million, with a weighted average interest rate of 4.08%[68] - Secured debt amounts to $3,200.7 million, with a weighted average interest rate of 4.06%[68] - Unsecured debt totals $4,147.4 million, with a weighted average interest rate of 4.10%[68] - The company’s net debt to TTM recurring EBITDA ratio was 5.9x for Q1 2025, slightly improved from 6.0x in Q4 2024[48] - The total debt to total assets ratio stands at 38.5%, well within the covenant requirements[74] Guidance and Future Expectations - The company expects Core FFO per share guidance for 2025 to be between $6.43 and $6.63[10] - The Company has established guidance for Q2 2025 with diluted EPS ranging from $11.25 to $11.33 and Core FFO per Share between $1.62 and $1.70[30] - For the full year 2025, diluted EPS is projected to be between $12.62 and $12.82, while Core FFO per Share is expected to range from $6.43 to $6.63[30] - The North America Same Property NOI growth is anticipated to be between 1.7% and 4.0%, and UK Same Property NOI growth is expected to be between 3.9% and 5.9% for Q2 2025[31] Special Distributions and Transactions - A special cash distribution of $4.00 per share was announced, totaling approximately $520.0 million, payable on May 22, 2025[26] - The company completed the sale of Safe Harbor Marinas for net pre-tax cash proceeds of $5.25 billion, with an estimated book gain of approximately $1.4 billion[22] - The company has authorized a stock repurchase program of up to $1.0 billion of its outstanding common stock[28] Operational Metrics - Recurring EBITDA for Q1 2025 was $236.7 million, down from $271.5 million in Q4 2024[48] - Net Operating Income (NOI) for Q1 2025 was $238.1 million, down from $243.1 million in Q1 2024, reflecting a decrease of 2.1%[54] - Same Property Revenues for Q1 2025 totaled $321.9 million, an increase of 4.4% from $308.2 million in Q1 2024[58] - Same Property operating expenses increased by 4.0% to $105.4 million in Q1 2025 from $101.3 million in Q1 2024[58] Market and Sales Performance - North America home sales decreased by 12.5% to $28.7 million for the quarter ended March 31, 2025, compared to $32.8 million in the same period last year[62] - The average selling price of homes in North America decreased by 17.5% to $82,709 compared to $100,306 in the previous year[62] - Utility reimbursement revenues increased to $29.3 million in Q1 2025, compared to $27.5 million in Q1 2024, indicating a growth of 6.5%[92] Asset Management - The company owns, operates, or has an interest in a portfolio of 502 developed MH, RV, and UK properties, comprising approximately 174,850 developed sites[45] - The company has 13,510 sites available for development across its North American and UK properties[49] - The company recorded asset impairment charges of $20.5 million related to pre-construction development costs at seven properties[76] Accounting and Financial Metrics - The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI, and Same Property NOI is a key management tool for evaluating performance and growth[98] - FFO is defined as GAAP net income (loss) excluding gains or losses from sales of certain real estate assets, plus real estate-related depreciation and amortization[101] - Core FFO provides enhanced comparability for investor evaluations of period-over-period results, excluding certain gain and loss items unrelated to the core business[101]

Core Insights - The Motley Fool aims to enhance the intelligence, happiness, and wealth of individuals globally [1] Company Overview - Founded in 1993, The Motley Fool is a financial services company [1] - The company reaches millions of people monthly through various channels including premium investing solutions, free guidance, market analysis on Fool.com, top-rated podcasts, and its non-profit arm, The Motley Fool Foundation [1]

Southfield, MI, April 30, 2025 (GLOBE NEWSWIRE) -- Sun Communities, Inc. (NYSE: SUI) (the “Company”) today announced that its operating partnership, Sun Communities Operating Limited Partnership (“SCOLP”), will redeem all $500 million aggregate principal amount of its outstanding 5.500% Senior Notes due 2029 (CUSIP No. 866677AK3) (the “Notes due 2029”) and all $400 million aggregate principal amount of its outstanding 5.700% Senior Notes due 2033 (CUSIP No. 866677AJ6) (the “Notes due 2033” and together with ...

Core Viewpoint - Sun Communities, Inc. has completed the initial closing of the sale of its interests in Safe Harbor Marinas to Blackstone Infrastructure, marking a strategic shift towards focusing on its core manufactured housing (MH) and recreational vehicle (RV) portfolio [1][2]. Financial Impact - The pre-tax cash proceeds from the transaction are approximately $5.25 billion, with certain properties valued at around $250 million excluded from the initial closing, pending third-party consents [3]. - The company plans to repay approximately $3.3 billion of debt using the net proceeds, which includes $1.6 billion from its senior credit facility and $740 million of secured mortgage debt [6]. - The expected annualized interest expense savings from the initial debt paydowns is approximately $160 million, reducing the weighted average interest rate on outstanding indebtedness to about 3.5% [7]. Strategic Focus - The company aims to reposition itself as a pure-play MH and RV focused entity, enhancing its leverage profile and financial flexibility to support disciplined growth [2][4]. - Approximately $1.0 billion has been allocated into 1031 exchange escrow accounts for potential future MH and RV acquisitions on a tax-efficient basis [8]. Capital Return Strategy - A one-time special cash distribution of $4.00 per share, totaling around $520 million, has been authorized by the Board of Directors, payable on May 22, 2025 [9]. - The company intends to increase its quarterly distribution by approximately 10.6% to $1.04 per common share, starting with the second quarter distribution anticipated in July 2025 [9][10]. - A stock repurchase program of up to $1.0 billion has been authorized, allowing management discretion in executing repurchases [11]. Upcoming Events - The company is scheduled to report its first quarter earnings for 2025 on May 5, 2025, and will provide updated guidance reflecting the financial impact of the initial closing [13].

Sun Communities (SUI 1.04%) has a very durable business. The real estate investment trust (REIT) is the largest publicly traded owner-operator of manufactured home and RV communities. These properties produce very resilient recurring revenues, which help support the REIT's 3% yielding dividend. The residential REIT's already highly resilient dividend is about to grow even stronger in the future. Driving the improved sustainability are asset sales that will significantly bolster its already solid balance she ...