SUI
Sun Communities INC
NYSE
8-K: Sun Communities Reports Mixed 2023 Results, Restates Interim Financials Due to Goodwill Impairment
Sentiment:
Earnings Release
20 February 2024 5:17 PM
Sun Communities reported a net loss for both the fourth quarter and full year 2023, and announced a restatement of prior interim financial statements due to a non-cash goodwill impairment related to its UK operations.
Worse than expected
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.
Summary
- Sun Communities reported a net loss of $80.9 million, or $0.65 per diluted share, for the fourth quarter of 2023, compared to a net income of $4.7 million, or $0.04 per diluted share, for the same period in 2022.
- For the full year 2023, the company reported a net loss of $213.3 million, or $1.72 per diluted share, compared to a net income of $242.0 million, or $2.00 per diluted share, in 2022.
- Core FFO per share was $1.34 for the quarter and $7.10 for the full year.
- Total same property NOI increased by 9.6% for the quarter and 7.3% for the year.
- The company increased its annual distribution rate by 1.1% to $3.76 per share for 2024.
- A non-cash goodwill impairment of $369.9 million was recognized, requiring a restatement of interim financial statements for the quarters ended March 31, June 30, and September 30, 2023.
- The company expects total same property NOI growth of 4.8% to 6.0% and Core FFO per share of $7.04 to $7.24 for 2024.
Sentiment
Score: 4
Explanation: The sentiment is moderately negative due to the net loss, goodwill impairment, and restatement of financials. However, there are some positive aspects such as revenue growth and occupancy gains, which prevent a more negative score.
Positives
- Total revenue saw a solid increase for both the quarter and the full year.
- Same property NOI exceeded expectations, demonstrating the resilience of the portfolio.
- Occupancy gains were realized in manufactured housing and RV communities.
- The company saw high levels of conversion of transient to annual RV sites.
- The company continues to see double digit NOI increases in its marinas.
- The company increased its annual distribution rate for 2024.
- The company is focused on de-leveraging its balance sheet and maximizing the efficiency of its operating platform.
Negatives
- The company reported a net loss for both the fourth quarter and the full year.
- A significant non-cash goodwill impairment of $369.9 million was recognized.
- The company identified a material weakness in its internal control over financial reporting.
- The company's disclosure controls and procedures were deemed ineffective as of each interim period date.
- Macro headwinds continue to impact home sales in the UK.
- The company experienced a realized loss of $8.0 million from the sale of its Ingenia Communities Group shares.
- The company recognized a $102.9 million unfavorable adjustment related to remeasurement of assets from MH manufacturers in the UK.
Risks
- The company faces risks related to general economic conditions, including inflation and interest rate increases.
- There are risks associated with the company's ability to evaluate, finance, and integrate acquisitions.
- The company's liquidity and refinancing demands pose a risk.
- The company's ability to maintain compliance with debt covenants is a concern.
- The company faces risks related to changes in foreign currency exchange rates.
- The company's ability to maintain effective internal control over financial reporting is a risk.
- The company's remediation plan for the material weakness in internal control may not be successful.
- The company faces risks related to natural disasters and competitive market forces.
- The company's ability to maintain its status as a REIT is a risk.
- The company faces risks related to legislative or regulatory changes.
Future Outlook
The company expects total same property NOI growth of 4.8% to 6.0% and Core FFO per share of $7.04 to $7.24 for 2024. The company also anticipates an increase in revenue producing sites of 2,450 to 2,750 in North America.
Management Comments
- Gary A. Shiffman, Chairman, President and CEO, stated that the fourth quarter culminated a year of solid real property performance.
- He highlighted that same property NOI surpassed expectations and that the portfolio is supported by robust demand and limited supply fundamentals.
- He also mentioned that the company is focused on realizing consistent growth and delivering reliable results from its real property assets.
- He expressed confidence in the company's strategic positioning to re-accelerate earnings growth in the coming years.
Industry Context
The announcement reflects the ongoing challenges and opportunities within the real estate investment trust sector, particularly in the manufactured housing, recreational vehicle, and marina segments. The company's focus on same-property NOI growth and occupancy gains aligns with industry trends, while the goodwill impairment and restatement highlight the importance of accurate financial reporting and internal controls.
Comparison to Industry Standards
- Sun Communities' same-property NOI growth of 7.3% for the year is a solid result, but it is important to compare this to peers such as Equity LifeStyle Properties (ELS) and UMH Properties (UMH).
- ELS, a major competitor in the manufactured housing space, has also reported strong same-property NOI growth, but specific figures would need to be compared to determine relative performance.
- UMH, another player in the sector, focuses more on affordable housing and may have different growth metrics.
- The goodwill impairment is a significant issue and will need to be compared to how other REITs handle similar situations. Companies like American Tower (AMT) and Crown Castle (CCI) have faced similar issues in the past.
- The company's debt to EBITDA ratio of 6.1x is within the range of many REITs, but it is important to compare this to the specific leverage targets of its peers.
- The increase in annual distribution rate of 1.1% is modest and should be compared to the dividend growth of other REITs in the sector.
Stakeholder Impact
- Shareholders will be impacted by the net loss, restatement of financials, and the material weakness in internal controls.
- Employees may be affected by the company's remediation efforts and any potential changes in operations.
- Customers may experience changes in services or pricing due to the company's financial performance.
- Suppliers and creditors may be impacted by the company's financial health and ability to meet its obligations.
Next Steps
- The company will restate its interim financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
- The company will hold an investor conference call and webcast on February 21, 2024, to discuss the financial results.
- The company will implement a remediation plan to address the material weakness in its internal control over financial reporting.
Key Dates
- March 31, 2023: Interim period end date for which financial statements are being restated due to goodwill impairment.
- June 30, 2023: Interim period end date for which financial statements are being restated due to goodwill impairment.
- September 30, 2023: Interim period end date for which financial statements are being restated due to goodwill impairment.
- December 31, 2023: End of the fiscal year for which financial results are reported.
- February 15, 2024: Date the Audit Committee concluded that interim financial statements should no longer be relied upon and the date new directors were appointed.
- February 20, 2024: Date of the press release announcing financial results and 2024 guidance.
- February 21, 2024: Date of the investor conference call and webcast to discuss financial results.
- April 2024: First quarter distribution to be paid at the new annual rate.
Keywords
REIT, Manufactured Housing, Recreational Vehicle, Marina, Goodwill Impairment, Net Operating Income, Core FFO, Occupancy, Distribution, Real Estate
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.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.