Which $10B+ real estate company missed revenue estimates last quarter?
A) Big brokerage (JLL)
B) Big office owner (Boston Properties)
C) Big data center owner (Digital Realty)
D) Big manufactured housing owner (Sun)
Answer: D
No offense to our friends in the REIT space, but REITs are pretty boring.
Sun Communities' earnings call last week was not boring.
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Sun's CEO introductory statement:
"First, I want to emphasize my disappointment in the results we're reporting..."
"…we acknowledge that our third quarter results and our adjusted 2024 guidance are below both our and the market's expectations, and we are very disappointed by our performance."
"Starting with our Board of Directors, the entire Sun organization is committed to proactively addressing our challenges and restructuring Sun..."
"We undertook a comprehensive bottom-up review throughout the organization, and concurrent with today's earnings release, we are announcing a broad repositioning effort to more effectively align the company's operating expense and G&A infrastructure to deliver earnings growth."
"As of today, we have identified and expect to realize annualized G&A and operating expense savings of between $15 million and $20 million or approximately $0.11 to $0.15 per share as we rebase our cost structure for 2025. I want to emphasize that this is just the starting point..."
"Additionally, as announced this evening, I have informed the board of my intention to retire in 2025 following more than 40 years with the company."
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Manufactured housing was trading sub 4% before sub 4% was cool.
Strong and consistent cash flow growth is the only way to make that math work.
But now NOI growth is flat?!
Separately, how can you suddenly find up to TWENTY MILLION DOLLARS of cost savings?!
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Where there's smoke or just another short seller?
A few months ago, a short seller issued a report claiming that Sun's CEO benefited from an inappropriate financial relationship with a board member, that he had committed insurance fraud, and that the company had been overstating cash flow.
Sun pushed back on these claims in its earnings release.
Is this a one-off incident of bloated G&A or something more systemic? Should manufactured housing be the most inflation-hedged real estate asset class?
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