SUI
Sun Communities INC
NYSE
10-K: Sun Communities Reports Full Year 2023 Results, Including Restatement of Interim Financials
Sentiment:
Annual Results
27 February 2024 8:21 PM
Sun Communities, Inc. files its 2023 annual report, which includes a restatement of prior interim financials due to a material weakness in internal controls related to goodwill impairment.
Worse than expected
The company reported a net loss attributable to common shareholders of $213.3 million for the year, indicating worse than expected results.
The identification of a material weakness in internal control over financial reporting and the subsequent restatement of interim financials also indicate worse than expected results.
The company recognized significant non-cash goodwill impairments of $369.9 million related to its UK operations, further contributing to worse than expected results.
Delay expected
The document mentions delays in obtaining necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays.
Capital raise
The document mentions the company's ability to raise capital through future offerings of equity or equity-related securities.
The company has entered into an At the Market Offering Sales Agreement to sell shares of common stock, with remaining capacity to sell up to an additional $1.1 billion of common stock.
The company may issue to the limited partners of the Operating Partnership, up to approximately 5.3 million shares of our common stock in exchange for their OP units.
Summary
- Sun Communities, Inc. reported a net loss attributable to common shareholders of $213.3 million for the year ended December 31, 2023.
- Total revenues for 2023 increased by 8.6% to $3.2 billion.
- The company achieved a Core FFO of $7.10 per diluted share and OP unit.
- Same Property NOI grew by 6.8% for MH, 4.8% for RV, and 11.7% for Marina properties.
- The company's adjusted blended occupancy for MH and RV properties increased to 98.9% from 96.6% in 2022.
- Sun Communities acquired one MH community and one marina for a total purchase price of approximately $107.0 million.
- The company sold one MH community for $6.8 million and two land parcels in the UK for $111.5 million.
- A material weakness in internal control over financial reporting was identified, leading to a restatement of interim financial statements for March 31, June 30, and September 30, 2023.
- The restatement was due to non-cash goodwill impairments related to the Park Holidays business in the UK, totaling $369.9 million.
Sentiment
Score: 4
Explanation: The document presents a mixed picture. While there is strong revenue growth and operational improvements, the net loss, material weakness in internal controls, and significant goodwill impairment weigh heavily on the overall sentiment. The company's future outlook is cautious, focusing on debt reduction and limited capital spending.
Positives
- The company experienced strong revenue growth, with total revenues increasing by 8.6% to $3.2 billion.
- Same Property NOI showed solid growth across all segments, indicating strong operational performance.
- Occupancy rates for MH and RV properties improved significantly, reaching 98.9%.
- The company completed strategic acquisitions and development activities, expanding its portfolio.
- Sun Communities achieved a 10-year total shareholder return of 323.1%, outperforming major market indexes.
Negatives
- The company reported a net loss attributable to common shareholders of $213.3 million for the year.
- A material weakness in internal control over financial reporting was identified, leading to a restatement of interim financials.
- The company recognized significant non-cash goodwill impairments of $369.9 million related to its UK operations.
- Home sales volume in North America decreased, impacting overall revenue.
Risks
- The company faces risks related to the restatement of prior financial statements and the identified material weakness in internal controls.
- Geographic concentration of properties in Florida, Michigan, the UK, California, and Texas exposes the company to regional economic downturns and natural disasters.
- The company's significant debt could limit operational flexibility and increase vulnerability to adverse economic conditions.
- Failure to maintain REIT status could result in adverse tax consequences.
- Cybersecurity breaches and other disruptions could compromise sensitive data and expose the company to liability.
- Climate change may exacerbate extreme weather conditions and natural disasters, impacting property values and demand.
Future Outlook
The company expects rental rate growth that exceeds headline inflation and will focus on expense management to generate strong organic cash flow growth. They intend to prioritize variable rate debt reduction and will pull back on development activity and capital spending.
Management Comments
- Management believes that the properties are covered by adequate comprehensive liability, fire, property, business interruption, general liability, and (where appropriate) flood and earthquake insurance.
- Management is taking steps to remediate the material weakness in our internal control over financial reporting.
- Management believes that the properties' high amenity levels, customer service loyalty, and customer retention program contribute to low turnover and generally high occupancy rates.
Industry Context
The document highlights the company's position in the fragmented MH, RV, and marina industries, emphasizing competition from other communities and alternative housing options. It also notes the cyclical and seasonal nature of the RV and marina industries, which can lead to fluctuations in operating results.
Comparison to Industry Standards
- The document compares Sun Communities' total shareholder return to the MSCI US REIT, Russell 1000, U.S. REIT Residential and S&P 500 indexes, showing outperformance over a 10-year period.
- The document also notes that the average MH site rent in a Sun community is approximately 50% less than the monthly cost of other rental options, according to Zillow.com's September 2023 rent index.
Stakeholder Impact
- Shareholders may be concerned about the net loss, the restatement of financials, and the identified material weakness in internal controls.
- Employees may be affected by potential changes in operations and compensation policies.
- Customers may experience changes in service or pricing due to the company's strategic adjustments.
- Suppliers and creditors may be impacted by the company's focus on debt reduction and limited capital spending.
Next Steps
- The company will focus on remediating the material weakness in internal control over financial reporting.
- The company will prioritize variable rate debt reduction and will pull back on development activity and capital spending.
- The company will continue to evaluate acquisition and development opportunities that meet their underwriting criteria.
Legal Proceedings
- The company is involved in several putative class action complaints alleging violations of federal antitrust laws related to sharing competitively sensitive information to maintain artificially high site rents.
- The company is involved in various other legal proceedings arising in the ordinary course of business.
Related Party Transactions
- The company leases office space from American Center LLC, an entity in which Gary A. Shiffman and certain family members have an indirect equity interest.
- The company uses an airplane owned by Gary A. Shiffman for business purposes.
- The company uses telephone services from an entity in which Brian M. Hermelin has a beneficial ownership interest.
- The company uses legal services from Taft Stettinius & Hollister LLP, where Arthur A. Weiss is a partner.
Key Dates
- December 31, 2023: Fiscal year end for which the annual report is filed.
- December 31, 2022: Fiscal year end for comparison purposes.
- December 31, 2021: Fiscal year end for comparison purposes.
- March 31, 2023: End of the first quarter of 2023, for which financial statements were restated.
- June 30, 2023: End of the second quarter of 2023, for which financial statements were restated.
- September 30, 2023: End of the third quarter of 2023, for which financial statements were restated.
- February 20, 2024: Date of the 8-K filing disclosing the restatement.
- February 27, 2024: Date of the filing of the 10-K.
Keywords
REIT, Manufactured Housing, Recreational Vehicle, Marinas, Real Estate, Goodwill Impairment, Financial Restatement, Internal Controls, Occupancy Rates, Net Operating Income
SUI
Sun Communities INC
NYSE
Sector: Real Estate
Filings with Classifications
Better than expected
9 June 2025 7:01 PM
Statement of Changes in Beneficial Ownership
- The acquisition of shares by a director is generally perceived as a positive signal, indicating management's confidence in the company's current valuation and future prospects.
Delay expected
2 June 2025 4:08 PM
Investor Presentation
- The company noted that as of May 30, 2025, it had closed on approximately half of the remaining value of the delayed consent properties, which are 15 marina properties representing approximately $250.0 million of value, indicating that the full sale of these properties is still pending third-party consents.
Better than expected
2 June 2025 4:08 PM
Investor Presentation
- The company reported strong 1Q25 Core FFO per share of $1.26 and Same Property NOI growth of 4.6% in North America.
- Credit ratings were upgraded by S&P to BBB+ and Moody's to Baa2, indicating improved financial health and lower risk perception.
- The company successfully executed a significant debt reduction of approximately $3.3 billion and eliminated floating rate debt exposure.
- Shareholders are receiving substantial capital return through a $4.00 per share special cash distribution and a 10.6% increase in the quarterly dividend.
Delay expected
6 May 2025 5:10 PM
Current Report (Form 8-K)
- The sale of 15 Safe Harbor properties, valued at $250 million, is delayed pending third-party consents.
Worse than expected
6 May 2025 5:00 PM
Quarterly Report
- The company reported a net loss attributable to common shareholders of $42.8 million, which is worse than the net loss of $27.4 million reported in the same period last year.
- The company identified a material weakness in internal control over financial reporting, which is a negative indicator.
Delay expected
5 May 2025 4:58 PM
Earnings Press Release
- The sales of 15 marina properties are subject to the receipt of certain third-party consents, which may delay the timing of any such sale or may prevent any such property from being sold at all.
Worse than expected
1 April 2025 2:15 PM
Proxy Statement
- Core FFO growth was below target.
- North America and UK Same Property combined NOI Growth MH, RV, Marina and UK was below target.
Better than expected
28 February 2025 9:10 PM
Annual Report
- Net income attributable to SUI common shareholders improved significantly compared to the prior year.
Delay expected
28 February 2025 9:10 PM
Annual Report
- The Safe Harbor Sale may not be completed on the anticipated timeline or at all.
Worse than expected
26 February 2025 4:43 PM
Earnings Press Release
- The net loss for Q4 2024 was significantly worse than the net loss for the same period in 2023.
- Core FFO per Share was lower for the full year 2024 compared to 2023.
Better than expected
24 February 2025 9:28 AM
8-K Filing
- The sale of Safe Harbor Marinas for $5.65 billion is expected to generate a $1.3 billion book gain and significantly de-leverage the company's balance sheet, exceeding initial expectations.
Delay expected
24 February 2025 9:28 AM
8-K Filing
- The transfer of certain properties representing approximately 10% of the total consideration may be delayed pending receipt of third-party approvals.
Worse than expected
3 January 2025 1:35 PM
SEC Form 4 Filing
- The forfeiture of shares indicates that the company did not meet the market performance criteria required for the vesting of the restricted stock, suggesting performance was worse than expected.
Worse than expected
3 January 2025 1:31 PM
SEC Form 4 Filing
- The forfeiture of shares indicates that the company did not meet certain market performance criteria, which is a negative signal.
Worse than expected
3 January 2025 1:18 PM
SEC Form 4 Filing
- The forfeiture of shares indicates that the company did not meet its performance targets, which is a negative signal.
Worse than expected
3 January 2025 1:15 PM
SEC Form 4 Filing
- The forfeiture of 51,000 performance-based restricted stock awards suggests that the company did not meet certain market performance criteria, which is a negative signal.
Worse than expected
7 November 2024 5:22 PM
Quarterly Report
- The company's total revenue decreased in Q3 2024 compared to Q3 2023.
- The company's home sales revenue decreased in Q3 2024 compared to Q3 2023.
- The company's RV segment experienced a decrease in NOI compared to the same period in 2023.
Capital raise
7 November 2024 5:22 PM
Quarterly Report
- The company has a universal shelf registration statement on Form S-3 with the SEC, providing for the registration of unspecified amounts of equity and debt securities.
- The company has an At the Market Offering Sales Agreement (ATM) with certain sales agents and forward sellers pursuant to which it may sell, from time to time, up to an aggregate gross sales price of $1.25 billion of its common stock.
- During the three months ended September 30, 2024, the company completed the physical settlement of 2,713,571 shares of common stock under the ATM for an aggregate gross sales price of $364.3 million.
Worse than expected
7 November 2024 12:53 PM
Executive Transition and Restructuring Announcement
- The company's disappointing third-quarter performance is a catalyst for the restructuring, indicating that the results were worse than expected.
Worse than expected
6 November 2024 4:18 PM
Investor Presentation
- The company has reduced its full year 2024 FFO guidance from $7.06 $7.22 to $6.76 $6.84.
- The company has reduced its expected same property NOI growth for North America from 4.7% 5.7% to 2.6% 3.3%.
Worse than expected
6 November 2024 4:01 PM
Quarterly Report
- The company's Core FFO per share decreased compared to the same quarter last year.
- The company revised its full-year guidance downwards due to cost pressures and lower than expected transient revenue.
- North America Same Property NOI growth was only 0.5% for the quarter, which is below expectations.
Worse than expected
1 August 2024 3:14 PM
Quarterly Report
- The company's FFO and Core FFO per share decreased compared to the same period last year.
- Home sales revenue decreased in both the second quarter and first half of 2024 compared to the same periods in 2023.
Capital raise
1 August 2024 3:14 PM
Quarterly Report
- The company renewed its At the Market Offering Sales Agreement (ATM) in May 2024, allowing for the sale of up to $1.25 billion of common stock.
- Through June 30, 2024, the company had entered into and settled forward sales agreements under the ATM for an aggregate gross sales price of $160.6 million, leaving $1.1 billion available for sale under the ATM.
Better than expected
31 July 2024 4:59 PM
Quarterly Report
- The company reported a significant improvement in net income compared to the same period last year, moving from a loss to a profit.
- The company's North America and UK Same Property NOI growth exceeded expectations.
- The company's occupancy rates in North America increased significantly.
Better than expected
3 June 2024 4:10 PM
Investor Presentation
- The company's North America same property NOI growth of 7.9% in 1Q24 exceeded expectations.
- The company's UK same property NOI growth of 44.5% in 1Q24 was significantly better than expected.
- The company's updated full-year 2024 Core FFO per share guidance was narrowed to a higher range of $7.06 to $7.22.
Better than expected
7 May 2024 4:16 PM
Investor Presentation
- The company's North America same property NOI growth of 7.9% in Q1 2024 exceeded expectations.
- The company's UK same property NOI growth of 44.5% in Q1 2024 was significantly better than expected.
- The company narrowed its Core FFO per share guidance for 2024 to a range of $7.06 to $7.22, indicating increased confidence in its performance.
Capital raise
3 May 2024 4:46 PM
Capital Raise Announcement
- The company is continuing its at-the-market offering program to sell up to $1,089,458,261 in common stock.
- The program allows the company to sell shares over time at prevailing market prices.
- The company has amended its sales agreement to include new sales agents and forward purchasers to facilitate the offering.
Capital raise
2 May 2024 3:01 PM
Quarterly Report
- The company has an At the Market Offering Sales Agreement to sell up to $1.25 billion of common stock.
- The company issued $500 million of senior unsecured notes with a 5.5% interest rate due in 2029.
Worse than expected
2 May 2024 3:01 PM
Quarterly Report
- The company reported a net loss attributable to common shareholders of $27.4 million, which is worse than the prior year period.
- The company experienced a loss on remeasurement of marketable securities of $19.9 million in the prior year period.
- The company incurred a loss on extinguishment of debt of $0.6 million.
Worse than expected
29 April 2024 5:02 PM
Quarterly Report
- Core FFO per share decreased to $1.19 from $1.23 in the same period last year.
- The company reported a net loss of $27.4 million for the quarter.
- Home sales revenue decreased by 20.2% year-over-year.
Delay expected
27 February 2024 8:21 PM
Annual Results
- The document mentions delays in obtaining necessary zoning, building and other governmental permits and authorizations, which could result in increased costs and delays.
Worse than expected
27 February 2024 8:21 PM
Annual Results
- The company reported a net loss attributable to common shareholders of $213.3 million for the year, indicating worse than expected results.
- The identification of a material weakness in internal control over financial reporting and the subsequent restatement of interim financials also indicate worse than expected results.
- The company recognized significant non-cash goodwill impairments of $369.9 million related to its UK operations, further contributing to worse than expected results.
Capital raise
27 February 2024 8:21 PM
Annual Results
- The document mentions the company's ability to raise capital through future offerings of equity or equity-related securities.
- The company has entered into an At the Market Offering Sales Agreement to sell shares of common stock, with remaining capacity to sell up to an additional $1.1 billion of common stock.
- The company may issue to the limited partners of the Operating Partnership, up to approximately 5.3 million shares of our common stock in exchange for their OP units.
Worse than expected
20 February 2024 5:17 PM
Earnings Release
- The company reported a net loss for both the quarter and the full year, which is worse than the net income reported in the previous year.
- The company had to restate its interim financial statements due to a significant non-cash goodwill impairment, indicating a material error in previous reporting.
Capital raise
11 January 2024 4:25 PM
Debt Offering Announcement
- The document details a public offering of $500 million in senior notes.
- The net proceeds are approximately $495.4 million after deducting underwriting discounts and expenses.
- The funds will be used to repay borrowings under the senior credit facility and for working capital and general corporate purposes.
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