Sun Communities Reaps $5.65 Billion From Safe Harbor Sale, Refines Strategy

Sun Communities, Inc. SUI shares are surging on Monday after the residential REIT company disclosed a definitive agreement to sell its entire interest in Safe Harbor Marinas to Blackstone‘s BX Blackstone Infrastructure affiliates in all-cash purchase of $5.65 billion.

The purchase price reflects an approximate 21x multiple on Safe Harbor’s estimated 2024 Funds From Operations (FFO).

This transaction aligns with Sun's strategic focus on its core MH and RV segments, improving its financial flexibility and leverage profile.

The transaction is expected to generate approximately $5.5 billion in pre-tax proceeds after transaction costs.

Sun Communities plans to use the proceeds for debt reduction, shareholder distributions and reinvestment in the company's core businesses.

The transaction is subject to standard closing conditions, with the initial closing expected in the second quarter of 2025.

After the transaction, Sun’s North American MH and RV portfolio is expected to represent around 90% of the Company's Net Operating Income (NOI), streamlining its focus as a dedicated MH and RV owner and operator.

The transaction is set to significantly reduce Sun’s debt. Pro forma, the company expects its net debt to trailing 12-month EBITDA ratio to drop from approximately 6.0x to between 2.5x and 3.0x upon closing.

By reducing exposure to Service, Retail, Dining and Entertainment (SRD&E) and other non-annual income sources, the transaction is expected to improve the company's margin profile, overhead efficiency, capital expenditure needs and revenue-to-cash flow conversion.

The deal will monetize a successful investment, generating strong returns for shareholders, with an estimated book gain of $1.3 billion from Sun's roughly four-year ownership of Safe Harbor.

“This transaction allows Sun to focus on our core businesses which operate at high margins and produce durable income streams, and we are confident they will continue to deliver strong, consistent long-term growth,” stated Jeff Blau, chair of Sun’s Capital Allocation Committee. 

Gary Shiffman, chairman and CEO of Sun, said, “We are very pleased with this transaction which further accelerates Sun’s strategy to improve the Company’s leverage profile and refocus on our core segments.”

”We anticipate that Blackstone will further Safe Harbor’s position as the leading marina and superyacht servicing business in the U.S.”

The company plans to release its fourth quarter and year-end earnings results after the market closes on Wednesday, February 26, 2025. 

Investors can gain exposure to the stock via Nuveen Short-Term REIT ETF NURE and Tidal ETF Trust Residential REIT ETF HAUS

Price Action: SUI shares are up 4.28% at $131.46 at the last check Monday.

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