Sun Communities Inc . (NYSE: NYSE:SUI) reported strong third-quarter results, surpassing its own guidance with a core FFO per share of $2.57. The company's growth was driven by robust revenue expansion and effective cost savings, resulting in a 6.7% increase in same-property NOI. CEO Gary Shiffman anticipates this growth to continue into 2024, backed by solid rental increases, high occupancy, and effective expense management.
Key takeaways from the call include:
- The manufactured housing segment witnessed an 8% growth in same-property NOI, bolstered by increased base rent and occupancy gains.
- RV communities and Marinas saw same-property NOI growth of 4.1% and 8.9% respectively, with the former benefitting from successful transient to annual lease conversions.
- The U.K. real property NOI rose by 15.1%, reflecting strong performance despite economic headwinds.
- Sun Communities is streamlining operations and reducing capital spending to enhance efficiency and profitability.
- The company expects rental rate growth to exceed inflation in 2024, with strong increases across all segments.
Sun Communities also highlighted its financial health during the call. The company has entered into $150 million of SOFR swaps on its U.S. dollar line of credit at a fixed SOFR rate of 4.8% through April 2026. It also sold its position in Ingenia, using the net proceeds of around $100 million to pay down borrowings on its line of credit.
Shiffman noted that the company's same property portfolio, representing over 90% of NOI, is the largest driver of results. Based on current results and expectations for continued strong demand, the company is increasing total same-property NOI guidance by 50 basis points from 5.7% growth at the midpoint of the prior range to a new midpoint of 6.2%.
Despite the robust Q3 results, the company revised its full-year Core FFO per share guidance downward by 1% at the midpoint to a range of $7.05 to $7.13. This revision was primarily driven by higher expected interest expense in the fourth quarter, related mainly to the U.K. note remaining outstanding, U.K. home sales NOI performing towards the midpoint of the range, and lower expectations for transient revenue in the U.S.
Shiffman concluded the call by expressing anticipation for the next earnings call where the company will provide full guidance for the fourth quarter of 2024.
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