-- Sun Communities is a REIT I do not know---- Is it inclusive? Is it filed with Trump supporters and their ugly boats... what is Sun Communities & why did they buy Safe harbor Marinas? The questions of the day!
Sun Communities price target raised to $165 from $160 at BMO Capital 10/01 SUI, ELS BMO Capital analyst John Kim raised the firm's price target on Sun Communities (SUI) to $165 from $160 and keeps an Outperform rating on the shares. The analyst notes that Sun Communities stayed on brand and took a more aggressive step than its peer Equity Lifestyle (ELS), by acquiring the nation's largest marina owner, Safe Harbor. By "diving" into this business, Sun Communities adds fuel to its earnings growth engine through more accretive spread investing, Kim contends, adding that he estimates 7.5% FFOps accretion in 2021. The analyst also suspects this may partially be offset by a slightly reduced multiple until Sun Communities can prove marinas are as resilient as MH/RVs.
Sun Communities initiated with a Buy at Berenberg 10/01 SUI Berenberg analyst Keegan Carl initiated coverage of Sun Communities with a Buy rating and $170 price target. The firm added to its real estate coverage by launching coverage of manufactured-housing and single-family-rental REITs, noting that both subsectors have meaningfully outperformed the real estate average year-to-date. Carl believes this outperformance is set to persist as the market continues to underestimate the extent to which "favorable fundamentals will translate to outsized growth," the analyst said.
Sun Communities 8M share Secondary priced at $139.50 »
Sun Communities sees Q4 core FFO $1.00-$1.12, consensus $1.17 16:52 SUI Q4 core FFO guidance is inclusive of the company's latest revenue expectations for transient RV revenue, the estimated two-month contribution from the Safe Harbor acquisition, the impact from the company's 9.2 million share forward equity offering and announced financing activities. The forecast does not include any additional prospective acquisition or capital market activity.
Our RV resorts were exceptionally strong, as travelers elected drive-to vacation options and took advantage of our varied vacation destinations featuring lakes, mountains and beaches. Despite the present challenges of the pandemic, we remain focused on positioning Sun for the future. During the quarter we acquired five RV and two MH communities
Only a 2% yield....) ) )
Where Sun Communities is today
Sun Communities currently owns and operates 426manufactured housingand recreational vehicle (RV) communities across 32 states and Ontario, Canada, consisting of more than 143,000 developed sites. It primarily leases sites and manufactured homes to those seeking affordable housing options under annual contracts. It also generates income from transient RV site rentals and manufactured home sales.
Where Sun Communities seems headed over the next three years
Sun Communities has spent more than $5.8 billion since 2010 to acquire new communities, growing its portfolio more than threefold. During the first half of 2020, the company bought five communities for $132.3 million, adding 1,445 sites.
This steady diet of acquisitions will likely continue over the next three years. Given the company's acquisition prowess, it has lots of visibility into the current pipeline of opportunities as well as those that will likely come available in coming years. It also has a strong balance sheet to support this growth, with a low leverage ratio and minimal upcoming debt maturities through 2024.
While Sun Communities' primary focus has been on acquiring manufactured housing and RV communities, that will likely change over the next three years. That's because it recently agreed to buy Safe Harbor Marinas for $2.11 billion. Safe Harbor is one of the largest, most diversified marina operators in the country, as it owns and operates 101 locations and manages another five on behalf of third parties across 22 states.
The marina sector, much like both manufactured housing and RV communities, is highly fragmented. The top five operators -- led by Safe Harbor, which is more than three times larger than its next rival -- control a mere 4% of the country's 4,000 marinas, leaving significant consolidation potential. Sun Communities plans to allow the company to operate independently and continue acquiring marinas.
Meanwhile, Sun Communities has three notable organic expansion drivers within its RV and manufactured housing operations:
- Develop or redevelop communities:The REIT aims to start two to four new development projects each year. It has already spent $83 million to deliver 300 sites across four communities in 2020 and is on track to deliver 550 to 750 new sites across five properties this year.
- Expand existing communities:The company has about 7,600 vacant sites available for expansion within its existing communities. It has already spent $42 million to deliver 200 new sites across five communities in 2020.
- Transient RV site conversions:The company has been steadily converting transient RV sites to annual contracts. It currently has 22,300 short-term rental sites and converted an average of 1,100 sites per year. Those conversions typically yield a 40% to 60% revenue increase during the first year.
Expect an even bigger REIT in three years
Sun Communities is a consolidator. It has been steadily buying up manufactured housing and RV communities over the last decade, growing into the largest operator in this still highly fragmented space. Meanwhile, it's adding a new growth platform in marinas, another highly fragmented industry ripe for consolidation. As long as the REIT maintains a strong financial profile, it should have no problem continuing to expand its portfolio, earnings, and dividend over the next three years.
This actually sounds very interesting...
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