Sun Communities, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; this is an annual report, not a standalone fourth-quarter report. Sun Communities is a REIT owning and operating manufactured housing (MH) communities, RV resorts, and marinas. At year-end it had 602 properties and 204,163 developed sites, slips, and storage spaces across the U.S., Ontario, and Puerto Rico.
Financial performance and position
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Total revenue | $2.273 billion | $1.398 billion |
| Net income | $413.7 million | $147.5 million |
| Net income attributable to common stockholders | $380.2 million | $131.6 million |
| Diluted EPS | $3.36 | $1.34 |
| Core FFO per diluted share and OP unit (non-GAAP) | $6.51 | $5.09 |
| Net cash from operating activities | $753.6 million | $543.3 million |
| Net cash used in investing activities | $2.338 billion | $2.487 billion |
| Net cash from financing activities | $1.570 billion | $2.001 billion |
- Total revenue increased 62.5%; real property NOI was $982.1 million, up 36.2%. Same Community MH and RV NOI grew 11.2% to $763.4 million; MH NOI rose 4.9% and RV NOI 28.9%.
- MH and annual RV occupancy was 97.4% portfolio-wide; adjusted Same Community occupancy was 98.9%. Monthly base rent per site for the total portfolio was $585, up $14 year over year.
- Home sales revenue was $280.2 million, up 59.4%; home-sales NOI reached $74.4 million, up 159.9%. New-home gross margin was 18.1%; pre-owned-home gross margin was 43.7%.
- Capital expenditure activity totaled $672.6 million. Cash, cash equivalents, and restricted cash were $78.2 million, including $65.8 million unrestricted cash.
- Total debt was $5.672 billion, with a 3.04% weighted-average interest rate and 8.8-year weighted-average maturity. Debt comprised $3.381 billion secured and $2.291 billion unsecured. The company reported approximately $994.5 million of remaining Senior Credit Facility capacity.
- Debt covenants were met at year-end. Net debt to enterprise value was approximately 18.0%. A 1 percentage-point change in relevant variable rates would have changed FY 2021 interest expense by approximately $8.2 million, based on average variable-rate balances.
Material changes versus the prior year
- Growth reflects acquisitions and a full year of Safe Harbor marina operations, acquired in October 2020, as well as stronger MH and RV operations. Marinas contributed $212.2 million of NOI in 2021 versus $17.5 million in 2020, which included only two months of activity.
- In 2021, the company acquired 54 properties—35 MH/RV properties and 19 marinas—for approximately $1.4 billion, and acquired land parcels for potential development of nearly 4,000 sites. It sold six MH communities for $162.1 million, recording a $108.1 million gain.
- Operating cash flow increased $210.3 million, while acquisition and capital spending remained substantial. The company reported $1.1 billion of net proceeds from equity issuances and issued $1.2 billion of senior unsecured notes.
- Effective January 1, 2021, reporting changed from two segments to three: MH, RV, and Marina. Prior-period segment information was recast; management stated the reclassifications did not affect prior-period net income, equity, or cash flows.
Outlook, commentary, risks, and unusual items
- No quantified company-wide earnings or revenue guidance is provided in the supplied filing text. Management said it expects strong home sales trends to continue and intends to pursue selective acquisitions, development, and expansion.
- The proposed Park Holidays acquisition, valued at £950 million (approximately $1.3 billion), was expected to close in the first quarter of 2022, subject to UK Financial Conduct Authority approval. Its related proposed credit-facility amendment was conditional on closing and definitive documentation; neither closing nor financing was assured at filing date.
- Management said COVID-19’s 2021 impact was minimal compared with 2020 and did not materially affect financial performance, while warning that future pandemic effects remain uncertain. RV and marina operations are seasonal.
- Key risks include geographic concentration, extreme weather and climate exposure, rent-control restrictions, acquisition integration and financing, marina permits and environmental liabilities, foreign currency exposure, interest rates, refinancing and covenant compliance, and REIT qualification. Florida, Michigan, Texas, and California represented 62.6% of MH/RV sites; Florida was also the largest marina revenue concentration.
- Reported earnings included a $108.1 million property-disposition gain and a $33.5 million gain on remeasurement of marketable securities. Other expense included a $10.3 million estimated contingent liability related to ground leases; additional ground-lease termination payments were capitalized. Net debt-extinguishment losses were $8.1 million.
- Legal proceedings in the ordinary course were not expected, collectively, to materially adversely affect results or financial condition; no reportable environmental proceeding was disclosed. The auditor issued an unqualified opinion and reported effective internal control over financial reporting.
Important facts for investors to verify
- Confirm Park Holidays’ closing status, final funding mix, and the terms and completion of the proposed credit-facility amendment.
- Assess how much of revenue, NOI, and earnings growth reflects acquired properties, Safe Harbor’s longer contribution period, or one-time gains versus Same Community performance.
- Review debt maturities, floating-rate exposure, refinancing needs, covenant headroom, and the effect of any further equity issuance or OP-unit conversion.
- Track occupancy, rent growth, operating-cost inflation, and seasonality—particularly transient RV and marina activity—and whether current high occupancy is sustainable.
- Evaluate climate, insurance, marina lease/permit, foreign-exchange, and ground-lease risks, along with the assumptions supporting acquisition valuations and impairment testing.
- Core FFO, NOI, and Same Community measures are non-GAAP; compare them with GAAP net income and operating cash flow. The company declared $3.28 per share of 2021 distributions; future distributions remain at the board’s discretion.