Sun communities

[Dinar]

Has anyone looked at this?  Seems like a very good business (ELS is the best performing REIT by a large margin over several decades) but mismanaged.  Anyone have any vies?  @Gregmal, @thepupil, @BG2008?

[Gregmal]

Eh don’t really know anything about these but generally feel all the REITs are boring right now. Not bad investments, but nothing to get excited about. 

[cameronfen]

Yea, I looked at Sun Communities.  Trailer parks have really good economics, as you have a captive customer where you can just raise rents over time.  There also is the role up angle too as the business used to be quite fragmented as once in a while you can buy trailer parks from mom-and-pop owners for good prices. However, a lot of that has played out. It's very hard to build trailer parks in the US as municipalities don't like them.  I bought some LIC.ASX and INA.ASX.  They are the Australian trailer parks (actually LIC.ASX is going more into retirement communities) much earlier in the development cycle, with more land to build properties and more room for pricing power.  SUI has invested in INA.ASX.  The problem is Australia's real estate looks shaky.  You can find information about the industry from podcasts: https://open.spotify.com/show/39m7rwaGmGyAfTfPtjwlh7 and related shows.  

 

Looked at this a while ago so I forget, why do you think SUI is mismanaged?  Obviously haven't done as well as ELS.  

Edited August 2, 2023 by cameronfen

[thepupil]

some quick thoughts. 

 

- agree manufactured housing / RV parkst are great. Clearly there's institutional bid for marinas right now and these guys have very strong position there. 

- I've never really looked at SUI other than its bonds (they trade a little wide in sell-offs) ). Reason being whenever I look at equity, I always conclude I'd rather own ELS.

- it appears to be at widest discount to ELS in last 10 years on a simple P/FFO basis. (5 second analysis)

- It's hard to call a company that's done 13%/yr for 10 yrs AND 13%/yr since 1994 mismanaged. and that's after a 38% drawdown

- BUT, I'd also note that SUI has historically been much more dependent on accretive issuance to grow value. They'v increased share count from 36mm to 124mm over last 10 years to roughly double ish AFFO/share. ELS has done similar per share growth in per share metrics with 12% cumulative share count growth. So I'd observe that SUI is potentially more dependent on its stock price to create value where with ELS you can take comfort that the actual portfolio created the value. With such a rapidly growing (EV has 8x'd over last 10 years) company, there's also the potential for any bad stuff to be hidden. 

- What I find confusing is the company claims 7%/yr SSNOI growth. which with leverage should lead to > 7% organic equity metric growth, which with accretive issuance should lead to even greater growth, but when I eyeball per share fundamental metrics, I only see about a double over 10 years, which implies either the SSNOI  record is not real, they've issued dilutively, or....something else. I don't know. 

- they have nice debt, 10 yr wgt avg maturity for the mortgage portion, seemingly mostly fixed. 

 

probably nothing new to you if you looked at in depth already, but just took a gander at it for a bit. 

 

[RedLion]

I’ve looked at this a bunch and written several puts on this at points of pessimism but never got exercised.
 

I think it’s a great reit, and historically trades at I think a well deserved premium.

 

But it’s never traded to the point I’ve been compelled to open a position. Every time it approaches a buy I seem to have better opportunities. 
 

I feel like this is pretty attractive from here and likely to do high single to low double digits IRR for the medium term wirh a lot of irreplaceable cash flow assets with pricing power.
 

I have higher conviction ideas, but like I mentioned I’ve made some money writing puts on this name before.