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SUN COMMUNITIES INC (SUI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 Core FFO per share was $1.41, in line with Q4 guidance ($1.37–$1.45) and up 5.2% YoY; diluted EPS was a net loss of $(1.77) driven by a $180.8M UK goodwill impairment and storm-related charges .
  • North America Same Property NOI rose 5.7% YoY on 6.6% revenue growth and adjusted blended occupancy of 99.0% (+160 bps), with MH +7.1% and RV +0.4% .
  • Balance sheet at year-end: $7.35B debt, 4.1% weighted average interest rate, Net Debt/TTM Recurring EBITDA 6.0x; dispositions in Q4 totaled ~$84.6M with incremental post-quarter activity in January 2025 .
  • Strategic catalyst: definitive agreement to sell Safe Harbor Marinas for $5.65B cash; expected to reduce net debt/EBITDA to ~2.5–3.0x at closing, refocus on core MH/RV, and generate an estimated $1.3B book gain .

What Went Well and What Went Wrong

  • What Went Well

    • “We achieved solid results in our Manufactured Housing segment,” with North America MH Same Property NOI +7.1% in Q4 and occupancy 97.6% .
    • Adjusted blended occupancy rose to 99.0% (+160 bps YoY), reflecting demand and RV transient-to-annual conversions; North America Same Property NOI +5.7% YoY .
    • Management advanced deleveraging and portfolio simplification: ~$570M of non-strategic asset sales in 2024 and YTD 2025; net debt/EBITDA improved to 6.0x .
    • Quote: “We are starting to see positive momentum with our operating initiatives and repositioning efforts aimed at maximizing revenue, diligent expense management, and more effective asset management to drive efficiencies.” – CEO Gary Shiffman .

  • What Went Wrong

    • UK goodwill impairment of $180.8M and asset impairments of $38.9M pushed Q4 diluted EPS to $(1.77) .
    • Catastrophic event-related charges: $13.9M debris/cleanup at MH/RV and $4.4M marina impairments due to hurricanes Helene and Milton .
    • RV transient remains soft; Q4 RV Same Property NOI +0.4% (flat) despite improved cost alignment; transient revenues down vs prior periods .
    • FX and macro headwinds impacted UK, with higher payroll/taxes expected in 2025; UK Same Property NOI growth guided to 0.9%–2.9% for FY25 .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$726.7 $864.0 $939.9 $745.9
Diluted EPS ($)$(0.65) $0.42 $2.31 $(1.77)
Core FFO per Share ($)$1.34 $1.86 $2.34 $1.41
Real Property NOI ($USD Millions)$285.3 $331.3 $389.2 $299.0
Recurring EBITDA ($USD Millions)$256.0 $335.9 $382.6 $271.5

Segment Real Property NOI ($USD Millions)

SegmentQ4 2023Q2 2024Q3 2024Q4 2024
MH$155.6 $160.7 $158.3 $161.9
RV$50.4 $74.2 $117.0 $50.4
Marina$65.3 $77.7 $85.1 $70.4
UK$14.0 $18.7 $28.8 $16.3
Total$285.3 $331.3 $389.2 $299.0

KPIs

KPIQ4 2023Q2 2024Q3 2024Q4 2024
MH Occupancy (%)96.6% 96.7% 96.9% 97.3%
Annual RV Occupancy (%)100.0% 100.0% 100.0% 100.0%
Blended MH + Annual RV (%)97.4% 97.5% 97.7% 98.0%
UK Annual Occupancy (%)89.5% 89.9% 91.5% 89.7%
MH Leased Sites, Net387 315 159 406
RV Leased Sites, Net296 918 893 304
Total Leased Sites, Net683 1,233 1,052 710

Notes:

  • Q4 diluted EPS loss reflects $180.8M UK goodwill impairment and $16.7M net catastrophic event charges; asset impairments were $38.9M .
  • North America Same Property adjusted blended occupancy reached 99.0% (+160 bps YoY) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core FFO per Share (excluding marinas)FY 2025N/A$4.81–$5.05 New
Diluted EPS (excluding marinas)FY 2025N/A$1.11–$1.35 New
North America Same Property NOI GrowthFY 2025N/A4.3%–5.6% New
UK Same Property NOI GrowthFY 2025N/A0.9%–2.9% New
Avg Rental Rate Increase – MHFY 20255.2% (prelim, 11/6/24) 5.2% Maintained
Avg Rental Rate Increase – Annual RVFY 20255.1% (prelim) 5.1% Maintained
Avg Rental Rate Increase – UKFY 20253.7% (prelim) 3.7% Maintained
Q4 2024 Core FFO per ShareQ4 2024$1.37–$1.45 Actual $1.41 In line

Additional FY2025 guidance (excluding marinas): Interest expense $332.1–$338.8M; current tax expense $11.5–$13.4M; G&A (ex non-recurring) $194.6–$198.1M; seasonality provided for NOI/CFPS/EBITDA .

Earnings Call Themes & Trends

TopicQ2 2024 (prior)Q3 2024 (prior)Q4 2024 (current)Trend
Cost discipline/restructuringFocus on reducing nonrecurring CapEx ~50% YoY, deleveraging via dispositions $15–$20M run-rate savings targeted; governance refresh; disappointed by expenses in transient segments ~$11M G&A savings captured; ~$4M OpEx saved in Q4; further $3–$5M expected in 2025 Improving execution
RV transient-to-annual conversions~8,000 conversions over ~4 years; continued pipeline Transient underperformed; ~2,000 conversions expected in 2024; feeder to annual income RV transient margins aligned better; Q4 transient slightly ahead of expectations; continued conversions Stabilizing with conversions
UK strategy: shift to real property incomeReal property NOI 55% of UK NOI in H1; home sales pace impacted around elections UK Same Property NOI +7.7% YTD; higher payroll/min wage pressures Q4 UK Same Property NOI +12.9% YoY; FY25 UK Same Property NOI +0.9%–2.9% guided; payroll/taxes headwind Mixed: strong Q4, cautious FY25
Marinas/superyacht timingEarlier-than-expected transatlantic movement; trimmed marina guidance by 30 bps Delayed returns from Med due to storms; occupancy headwinds Strategic exit: sell Safe Harbor for $5.65B to refocus MH/RV and reduce leverage Pivot: monetize marinas
Deleveraging/asset recycling~$300M property sales; debt paydown Additional $100–$200M possible near term ~$570M disposals 2024 + YTD 2025; post-sale net debt/EBITDA target ~2.5–3.0x Accelerating

Management Commentary

  • Strategic repositioning: “We achieved solid results in our Manufactured Housing segment… We have also been executing on our deleveraging initiative… disposing of approximately $570 million of non-strategic assets…” .
  • Safe Harbor sale: “The sale price represents an approximately 21x multiple… and a $1.3 billion gain… expected to improve our margins, earnings predictability and revenue to free cash flow conversion.” – CEO Gary Shiffman .
  • Post-sale priorities: “Initial post-sale net debt-to-EBITDA ratio expected to be approximately between 2.5 and 3x… uses of capital may include debt reduction, distributions, and reinvestment” .
  • Operating momentum: “We are already starting to see positive momentum with… maximizing revenue, diligent expense management, and more effective asset management to drive efficiencies.” .

Q&A Highlights

  • Capital allocation of sale proceeds: Board evaluating debt reduction, shareholder distributions, and reinvestment; GBP debt hedging via synthetic hedge after paydown .
  • Disposition program and leverage goals: Continued review of non-strategic assets; recent exits in select states; leverage to be lowered materially post-sale .
  • Special dividend/tax planning: Evaluating options; will update market closer to closing .
  • Notes receivable breakdown: Developer notes ~$42M remaining post-transactions; ~$100M collateralized home notes; continuous fair value evaluation .
  • UK expense growth: 2025 expense headwinds mainly payroll/minimum wage and payroll taxes .
  • RV transient outlook: Transient is a feeder to annual; continued conversions reduce volatility; focus on flexing third-party expenses (landscaping, pool repairs) .

Estimates Context

  • Wall Street consensus from S&P Global for Q4 2024 could not be retrieved due to API limit; as a result, we cannot assess beats/misses versus consensus this quarter. S&P Global consensus data was unavailable.

Where relevant, company guidance comparisons were used (Q4 Core FFO per share actual $1.41 vs guided $1.37–$1.45; in line) .

Key Takeaways for Investors

  • Core MH performance remains robust with Q4 North America MH Same Property NOI +7.1% and rising occupancy, underpinning durable real property income growth .
  • Strategic sale of Safe Harbor Marinas at 21x FFO and ~$1.3B gain repositions SUI as a purer MH/RV REIT, materially delevering to ~2.5–3.0x net debt/EBITDA at closing; expect improved earnings predictability and FCF conversion .
  • RV transient softness persists, but conversions to annual (with multi-year tenure) continue to lift stability and blended occupancy (adjusted 99.0% in Q4), supporting NOI resilience .
  • Q4 headline EPS loss reflects non-cash UK goodwill impairment and storm-related costs; Core FFO per share was healthy and aligned with guidance, highlighting non-GAAP operating strength .
  • FY2025 (ex-marinas) guidance calls for North America Same Property NOI +4.3%–5.6% and Core FFO/share $4.81–$5.05; UK NOI growth is modest due to payroll/tax headwinds .
  • Balance sheet manageable entering 2025: $7.35B debt, 4.1% WAI, 6.2-year WAM; sale proceeds expected to fund debt reduction, possible distributions, and core reinvestment .
  • Near-term trading: stock likely sensitive to transaction closings, capital allocation clarity, and RV transient seasonality; medium-term thesis improves with leverage reset and MH/RV mix expansion .

Appendix: Additional Detail

  • Q4 Same Property North America: Revenue +5.8%, Expenses +6.0%, NOI +5.7%; UK Same Property NOI +12.9% .
  • Hurricanes Helene/Milton impact: $13.9M debris/cleanup (MH/RV) and $4.4M marina impairments; ongoing assessment .
  • Debt profile: $7.35B outstanding; Mortgage loans $3.21B at 3.99% WAI; Unsecured notes $2.68B at 3.78% WAI; Credit facility borrowings with swaps in USD/GBP; floating rate debt ~8.6% .