Sun Communities Sets Sail for Steady Earnings Growth with Safe Harbor Transaction
On February 27, 2025, Sun Communities (the company) hosted its Fourth Quarter and Year-End 2024 Earnings Conference Call, where management presented a robust performance for the year, driven by strategic priorities aimed at simplifying operations, focusing on core assets, and improving the balance sheet. Chairman and Chief Executive Officer Gary Shiffman highlighted the company's achievements in disposing of non-strategic assets, reducing debt, and enhancing governance through Board refreshment.
Throughout 2024, Sun Communities successfully disposed of approximately $570 million of non-strategic assets, with a significant portion being attributed to the sale of its stake in Safe Harbor Marinas. The company's strategic repositioning strategy, which includes increasing contribution from real property and annual income streams, has driven sustainable earnings growth.
The sale of Safe Harbor Marinas for an all-cash price of $5.65 billion to Blackstone Infrastructure represents a 21x multiple and a strong return on investment for shareholders. This transaction is expected to improve the company's margins, earnings predictability, and revenue-to-free cash flow conversion. Pro forma for this deal, Sun Communities' core North American manufactured housing and RV NOI will increase from approximately 2/3 to above 90% of total company NOI.
The company has expressed its intention to use the proceeds from the sale to meaningfully delever with an initial post-sale net debt-to-EBITDA ratio expected to be between 2.5 and 3x at closing. The management team and Board are evaluating priority uses of capital, which may also support a combination of distributions to shareholders and reinvestment in core businesses.
Sun Communities' financial performance for the quarter was notable, with the company maintaining its focus on best-in-class manufactured housing and RV portfolio positioning it for sustained earnings growth. The company's net debt-to-EBITDA ratio improved to 6x as of year-end 2024, demonstrating its commitment to strengthening its balance sheet.
CEO Gary Shiffman expressed confidence in Sun Communities' business prospects, citing favorable dynamics and predictable earnings. He also highlighted the company's initiatives, which will be discussed further by President John McLaren. These efforts aim to drive sustainable growth while maintaining a strong focus on core assets.
The successful completion of the Safe Harbor transaction marks a significant milestone for Sun Communities, solidifying its position as a pure-play owner and operator of high-quality manufactured housing and RV communities supported by a strong balance sheet.
