Sun Communities(SUI) - 2024 Q2 - Quarterly Results

Earnings Press Release and Guidance This section details Sun Communities' Q2 and H1 2024 financial and operating performance, investment activities, and updated 2024 guidance Financial Results Q2 2024 net income reached $52.1 million, a turnaround from prior year loss, with Core FFO per share slightly declining Q2 & H1 2024 Financial Performance vs. 2023 (Millions) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income / (Loss) Attributable to Common Shareholders | $52.1M | ($207.6M) | $24.7M | ($252.5M) | | Diluted EPS / (Loss) | $0.42 | ($1.68) | $0.20 | ($2.04) | | Core FFO per Share | $1.86 | $1.96 | $3.05 | $3.19 | Operating Highlights Strong operational performance was observed with Same Property NOI growth in North America and the UK, alongside improved North American MH and RV occupancy - North American Same Property NOI increased by 3.6% in Q2 2024 and 5.6% in H1 2024 compared to the same periods in 2023[9] - UK Same Property NOI grew by 9.3% in Q2 2024 and 19.4% in H1 2024 year-over-year[9] - Occupancy for North American MH and annual RV sites increased to 97.5% at June 30, 2024, from 97.1% a year prior[10] - The number of revenue-producing MH and annual RV sites increased by approximately 1,230 in Q2 2024, an 18.7% increase over the growth in Q2 2023[11] Same Property Results Q2 2024 Same Property NOI growth was driven by MH, Marina, and UK segments, with overall positive H1 growth and improved blended occupancy Q2 2024 Same Property Performance (% Change YoY) | Segment | Revenue | Expense | NOI | | :--- | :--- | :--- | :--- | | MH | 7.2% | 9.2% | 6.4% | | North America RV | (0.7)% | 4.0% | (4.6)% | | North America Marina | 5.5% | 4.2% | 6.1% | | Total North America | 4.4% | 6.0% | 3.6% | | UK | 4.9% | 0.5% | 9.3% | H1 2024 Same Property Performance (% Change YoY) | Segment | Revenue | Expense | NOI | | :--- | :--- | :--- | :--- | | MH | 7.0% | 6.3% | 7.2% | | North America RV | 0.9% | 1.5% | 0.3% | | North America Marina | 6.2% | 5.3% | 6.7% | | Total North America | 5.1% | 4.2% | 5.6% | | UK | 7.9% | (0.5)% | 19.4% | - Same Property adjusted blended occupancy for MH and RV rose by 150 basis points to 98.7% at June 30, 2024[14] Investment Activity The company actively recycled capital through significant post-quarter dispositions for debt reduction, with modest Q2 acquisitions - In July, sold a six-property MH portfolio for $224.6 million and a single MH property for $38.0 million[15] - Net proceeds from July dispositions were used to pay down a combined $79.0 million in mortgage debt and $171.4 million on the Senior Credit Facility[15] - Acquired one marina property, two marina expansion assets, and a parcel of land in the UK for a total of $21.6 million during Q2[15][16] Balance Sheet and Capital Markets As of June 30, 2024, the company reported $7.9 billion in debt with a 4.2% weighted average interest rate and a 6.2x Net Debt to Recurring EBITDA ratio Debt Profile as of June 30, 2024 (Billions) | Metric | Value | | :--- | :--- | | Total Debt Outstanding | $7.9 billion | | Weighted Average Interest Rate | 4.2% | | Weighted Average Maturity | 6.5 years | | Net Debt / TTM Recurring EBITDA | 6.2x | | Pro Forma Net Debt / TTM Recurring EBITDA | 6.0x | 2024 Guidance Sun Communities reaffirmed full-year 2024 Core FFO per share guidance, updated Same Property NOI growth, and adjusted expenses due to debt paydowns 2024 Core FFO per Share Guidance | Period | Low | High | | :--- | :--- | :--- | | Full Year 2024 (Re-affirmed) | $7.06 | $7.22 | | Q3 2024 (New) | $2.46 | $2.56 | Revised 2024 Same Property NOI Growth Guidance | Region / Segment | Prior Guidance Range | Revised Guidance Range | Midpoint Change | | :--- | :--- | :--- | :--- | | North America | 4.6% - 5.8% | 4.7% - 5.7% | Maintained at 5.2% | | MH | 6.2% - 7.1% | 6.8% - 7.4% | +50 bps | | RV | (0.3%) - 1.3% | (0.7%) - 0.9% | -40 bps | | Marinas | 6.4% - 7.6% | 6.2% - 7.2% | -30 bps | | UK | 6.0% - 8.0% | 8.6% - 10.4% | +250 bps | - General and administrative expenses guidance was decreased by approximately $5.0 million at the midpoint, reflecting corporate cost rationalization[23] - Interest expense guidance is $6.5 million lower at the midpoint, primarily due to debt paydowns from property disposition proceeds[21] Overview This section provides a comprehensive overview of Sun Communities, including its company profile, key financial and operating highlights, and diversified property portfolio Company Overview and Investor Information Sun Communities is a fully integrated REIT with a portfolio of 666 properties, including MH, RV, marinas, and UK assets - SUI is a REIT that owns and operates 666 properties across the U.S., Canada, and the UK[34] - The portfolio includes approximately 181,760 MH and RV sites, and 48,140 marina wet slips and dry storage spaces[34] Financial and Operating Highlights Q2 2024 highlights include Core FFO per share of $1.86, a $0.94 cash distribution, 6.2x Net Debt to Recurring EBITDA, and 97.5% blended MH/RV occupancy Key Metrics as of June 30, 2024 (Millions) | Metric | Value | | :--- | :--- | | Core FFO per Share (Q2 2024) | $1.86 | | Cash Distribution per Share (Q2 2024) | $0.94 | | Total Real Property NOI (Q2 2024) | $331.3M | | Net Debt / TTM Recurring EBITDA | 6.2x | | Total Assets | $17,011.1M | | Total Debt | $7,852.8M | | Blended MH and annual RV Occupancy | 97.5% | Portfolio Overview As of June 30, 2024, the company's geographically diversified portfolio includes 666 properties across North America and the UK Portfolio Snapshot as of June 30, 2024 | Segment | Properties | Sites / Slips & Storage | | :--- | :--- | :--- | | North America MH & RV | 475 | 159,470 | | United Kingdom | 54 | 22,290 | | Marinas | 137 | 48,140 | | Total Portfolio | 666 | 229,900 | Financial Statements and Reconciliations This section presents the consolidated financial statements and reconciliations of GAAP net income to non-GAAP measures like FFO, NOI, and Recurring EBITDA Consolidated Balance Sheets As of June 30, 2024, total assets slightly increased to $17.01 billion, while total liabilities rose and shareholders' equity decreased Balance Sheet Summary (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $17,011.1 | $16,940.7 | | Total Liabilities | $9,781.6 | $9,506.8 | | Total Shareholders' Equity | $6,969.8 | $7,173.0 | Consolidated Statements of Operations Q2 2024 total revenues were flat at $864.0 million, but reduced expenses led to a net income of $52.1 million, reversing a prior year loss Q2 Statement of Operations Summary (in millions) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenues | $864.0 | $863.4 | | Total Expenses | $804.8 | $1,084.2 | | Net Income / (Loss) Attributable to SUI Common Shareholders | $52.1 | ($207.6) | Reconciliation to Core FFO Q2 2024 Net Income of $52.1 million was adjusted to yield a Core FFO of $238.7 million, or $1.86 per share FFO and Core FFO Reconciliation Summary (in millions) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income / (Loss) | $52.1 | ($207.6) | $24.7 | ($252.5) | | FFO | $230.5 | $252.4 | $374.2 | $399.0 | | Core FFO | $238.7 | $252.9 | $391.9 | $411.6 | Reconciliation to NOI Q2 2024 total NOI increased slightly to $384.7 million, with Real Property NOI, the largest component, growing to $331.3 million NOI Components (in millions) | NOI Component | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Real property NOI | $331.3 | $316.4 | | Home sales NOI | $30.7 | $36.2 | | Service, retail, dining and entertainment NOI | $22.7 | $26.0 | | Total NOI | $384.7 | $378.6 | Reconciliation to Recurring EBITDA Q2 2024 Recurring EBITDA was $335.9 million, a slight decrease from Q2 2023, with a similar trend for the first six months Recurring EBITDA (in millions) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Quarter Ended June 30 | $335.9 | $339.7 | | Six Months Ended June 30 | $569.9 | $577.1 | Supplemental Disclosure This section provides detailed operational performance data for the total property portfolio, including North America and UK Same Property results Real Property Operations - Total Portfolio Q2 2024 total portfolio Real Property NOI increased to $331.3 million, primarily driven by growth in the MH and Marina segments Total Portfolio Real Property NOI by Segment (in millions) | Segment | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | MH | $160.7 | $151.3 | | RV | $74.2 | $75.6 | | Marinas | $77.7 | $72.2 | | UK | $18.7 | $17.3 | | Total | $331.3 | $316.4 | Real Property Operations - North America Same Property Portfolio North America Same Property NOI grew 3.6% in Q2 2024, driven by MH and Marina segments, with improved occupancy and rent growth North America Same Property NOI Growth (Q2 2024 vs Q2 2023) | Segment | Q2 2024 NOI (M) | Q2 2023 NOI (M) | % Change | | :--- | :--- | :--- | :--- | | MH | $160.5 | $150.8 | 6.4% | | RV | $70.4 | $73.8 | (4.6)% | | Marina | $71.1 | $67.0 | 6.1% | | Total | $302.0 | $291.6 | 3.6% | - Same Property adjusted blended occupancy for MH and RV increased by 150 basis points year-over-year to 98.7% at June 30, 2024[54] Real Property Operations - UK Same Property Portfolio The UK Same Property portfolio showed strong Q2 2024 NOI growth of 9.3% to $19.9 million, driven by revenue increases and effective expense management UK Same Property Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $38.4M | $36.6M | 4.9% | | Operating Expenses | $18.5M | $18.4M | 0.5% | | Real Property NOI | $19.9M | $18.2M | 9.3% | - For the six months ended June 30, 2024, UK Same Property NOI increased by 19.4% compared to the prior year period[55] Other Operating Information This section provides additional operating details, including home sales performance and key statistics for MH and annual RV sites Home Sales Summary Q2 2024 total home sales revenue decreased by 12.3% to $107.5 million, leading to a 15.2% decline in home sales NOI Home Sales Performance (Q2 2024 vs Q2 2023) | Segment | Home Sales (M) | NOI (M) | Units Sold | | :--- | :--- | :--- | :--- | | MH | $58.2 (-6.6%) | $13.2 (-19.0%) | 623 (-8.9%) | | UK | $49.3 (-18.2%) | $17.5 (-12.1%) | 787 (-6.0%) | | Total | $107.5 (-12.3%) | $30.7 (-15.2%) | 1,410 (-7.3%) | Operating Statistics for MH and Annual RVs YTD 2024 resident move-outs were 3.1% of total sites, resulting in a net gain of 1,447 leased sites in the first half - YTD 2024 resident move-outs were 3.1% of total sites, with 1,236 move-outs and a net gain of 1,447 leased sites[58] Investment Activity This section details the company's capital recycling efforts, including significant property dispositions and strategic, smaller-scale acquisitions Acquisitions and Dispositions YTD 2024, the company focused on strategic dispositions totaling $319.7 million from 10 properties, with modest acquisitions of $12.0 million - Dispositions to date in 2024 total $319.7 million from the sale of 10 properties[59] - Acquisitions to date in 2024 total $12.0 million for two marina properties/expansions[59] Capital Expenditures and Investments H1 2024 total capital expenditures and investments were $320.7 million, comprising $63.4 million recurring and $257.3 million non-recurring Capital Expenditures - H1 2024 (in millions) | Category | Amount | | :--- | :--- | | Recurring Capital Expenditures | $63.4 | | Non-Recurring Capital Expenditures | $257.3 | | - Acquisitions | $103.5 | | - Expansion and Development | $77.6 | | Total | $320.7 | Capitalization This section provides an overview of the company's capital structure, including market capitalization, total debt, and key credit ratios Capitalization Overview As of June 30, 2024, Sun Communities reported a market capitalization of $15.6 billion, an enterprise value of $23.4 billion, and $7.85 billion in total debt Capitalization as of June 30, 2024 (in billions) | Metric | Value | | :--- | :--- | | Market Capitalization | $15.6 | | Total Debt | $7.9 | | Enterprise Value | $23.4 | Summary of Outstanding Debt As of June 30, 2024, the company's $7.85 billion debt had a 4.21% weighted average interest rate, split between secured and unsecured obligations Outstanding Debt Summary (in millions) | Debt Type | Amount | Weighted Avg. Interest Rate | | :--- | :--- | :--- | | Secured Debt | $3,506.3 | 4.07% | | Unsecured Debt | $4,346.5 | 4.32% | | Total Debt | $7,852.8 | 4.21% | Debt Maturities The company maintains a well-staggered debt maturity profile, with a significant $2.38 billion due in 2026 and the majority maturing after 2028 Debt Maturity Schedule (in millions) | Year | Total Maturing Debt | | :--- | :--- | | 2024 | $158.3 | | 2025 | $107.1 | | 2026 | $2,379.2 | | 2027 | $47.5 | | 2028 | $800.3 | | Thereafter | $4,397.8 | Debt Analysis As of June 30, 2024, key credit ratios remained stable, with Net Debt to Recurring EBITDA at 6.2x and an interest coverage ratio of 3.6x Key Credit Ratios as of June 30, 2024 | Ratio | Value | | :--- | :--- | | Net Debt / TTM recurring EBITDA | 6.2x | | TTM Recurring EBITDA / interest | 3.6x | | Floating rate debt / total debt | 11.3% | | Unencumbered assets / total assets | 76.9% | Definitions and Notes This section provides essential definitions for non-GAAP financial measures used in the report, clarifying their purpose and calculation Non-GAAP Supplemental Measures This section defines key non-GAAP financial measures like NOI, FFO, and EBITDA, explaining their relevance for assessing REIT performance and core operations - Defines Net Operating Income (NOI) as a measure of rental operations performance, excluding depreciation, amortization, and non-property specific expenses[86] - Defines Funds from Operations (FFO) and Core FFO, which adjust GAAP net income for real estate depreciation and certain non-core items to better represent operating performance[91][92] - Defines EBITDAre and Recurring EBITDA as measures to evaluate the company's ability to service debt and fund cash needs[89][90]