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Sun Communities Announces Restructuring, CEO Retirement & Q3 Financials

Michigan-based Sun Communities, a real estate investment trust (REIT) that owns and operates, or has an interest in, manufactured housing and RV communities and marinas, provided the following update:

Restructuring and Cost Cutting Plan

The company is announcing a comprehensive restructuring effort to more effectively align the company’s cost structure and deliver sustainable earnings growth. The company is proactively addressing its challenges and is implementing a plan to unlock the value and earnings potential of the company. The company has been considering and studying many of these cost saving initiatives throughout this year and is now accelerating their implementation and expanding the scope of the restructuring.

The cost reduction measures include better operating expense management and the implementation of identified efficiencies and savings to the company’s cost base heading into 2025 to position the business for long-term growth. It is expected that these will be achieved primarily through initiatives such as restructuring the company’s operational infrastructure, streamlining and optimizing information technology, implementing more effective asset management, payroll savings, and other targeted cost cutting. The company has identified and intends to realize annualized G&A and operating expense savings of between $15 million and $20 million on a run-rate basis from the restructuring.

John McLaren Returning as President

McLaren

John McLaren is returning to the company full-time as president to oversee the restructuring and the execution of these initiatives. Mr. McLaren has been with Sun for 22 years and was chief operating officer (COO) for 14 years through mid-2022. During his time as COO, John oversaw the acquisition and integration of approximately 350 MH and RV communities and brought a performance driven approach with a focus on bottom-line operational results.

“Progress has been made this year in advancing our strategic initiatives including selling non-strategic assets, reducing debt, and increasing the revenue contribution from annual real property income,” said Gary Shiffman, chairman and CEO. “However, more can and will be done. These proposed changes have been planned for throughout the year and we are accelerating the implementation in the context of our disappointing third quarter performance. We are redoubling our efforts on all fronts, focusing on variable and fixed costs, capital recycling, and debt reduction, with the aim of establishing a sustainable and efficient cost structure and growth trajectory given the continued strong rental rate increases we anticipate in 2025.”

CEO Announces Retirement

Shiffman

Gary Shiffman has informed the board of his intention to retire in 2025, following over 40 years of dedicated service to the company and its stakeholders. The board of directors has a committee in place, led by independent board members Jeff Blau, CEO of Related Companies, and Tonya Allen, president of the McKnight Foundation, to conduct a comprehensive search process to identify a new CEO. Mr. Shiffman intends to remain on the board of directors.

“As part of our comprehensive succession plan, Gary’s retirement will result in a refreshed perspective to take the company forward and build upon his transformative vision,” said Clunet Lewis, Sun Communities’ Lead Independent Director. “Under Gary’s leadership, the company went public in 1993 with an initial market capitalization of approximately $115 million as a small, manufactured housing REIT with 31 communities, and has evolved into the leading owner and operator of Manufactured Housing, Recreational Vehicle communities, and Marinas with over 650 properties in the United States, Canada and the United Kingdom. We look forward to working with Gary to implement a seamless CEO transition.”

Third Quarter Results

Sun Communities also reported its third quarter results for 2024.

Financial Results for the Quarter and Nine Months Ended Sept. 30

Non-GAAP Financial Measures

“Year-to-date we have achieved solid growth across our MH, annual RV, marina and UK segments, while continuing to see the volatility in the transient components of our business. Additionally, our third quarter performance reflects the impact of cost pressures which resulted in earnings and revised full year guidance that were below our expectations, and we are not satisfied with our results,” said Shiffman. “We have continued to execute on our strategic priorities of recycling non-strategic assets, reducing debt, and increasing the revenue contribution from annual real property income, and we are now also implementing a broad restructuring effort to more effectively align the company’s cost structure to deliver sustainable earnings growth. The fundamentals underlying our business and real estate assets remain strong, we anticipate strong rental rate increases next year, and we are confident that by continuing to execute on these strategic priorities, we will position the company for more stable growth in the coming quarters and demonstrate our long-term value.”

Click here to read the full release regarding third quarter financials.

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