Hospitality Has Remained a Central Theme for Sun Communities
Sun Communities started in Michigan more than 40 years ago, creating enjoyable and affordable manufactured home developments, places for families to live, play and grow.
Its success in development and community have allowed the company to go national, go public and begin operating retirement communities, snowbird RV resorts and northern family campgrounds. Diversity is an element of the company history and strategy that continues to strengthen corporate culture and Sun’s growth plan.
“The root of the business is on the family Manufactured Housing side,” Sun Communities President and COO John McLaren said. “That could be called the hub, and with that hub comes a very strong stable revenue base. It’s manufactured housing, and we all know that. It’s allowed us to grow into the complementary business lines.
“The important part of all of this is that it brings us today to a very balance portfolio,” he said. “We feel that our portfolio balance, along with our roots in land development, provide us with the widest net possible for future growth opportunity in affordable housing.”
Affordable housing, Retirement, Vacationing
McLaren said every bit of success the company has had to do with sustained company culture.
“I can’t emphasize the importance of our culture enough, and we talk about it every day,” McLaren said.
Sun Communities’ vision is to be “an inspired, engaged and collaborative team committed to providing extraordinary service to guests, residents and each other”. If the customer experience at the communities is what it should be, the residents and guests essentially become the sales force for the brand.
“We have many guests who enjoy both types of properties having two homes, one in a snowbird community and another in the north,” McLaren said.
The RV business is a lot more retail in nature than the MH side. But, there is a lot to learn from each side of the business. And that learning can apply to both industries, and can help accelerate growth across the portfolio.
“Our social media and overall marketing presence is very important, but… Nothing compares to the type of business and growth you can gain from the customer experience on the property and the word-of-mouth,” he said. “That experience on the ground is the real driver for us. It’s like having a sales force of customers on the ground, and that realization came largely from the RV business. We have a resident sales force.”
That kind of emphasis on customer experience at the community is difficult to achieve and maintain; requiring consistent effort on all levels.
“We’re a culture that really believes anything is possible,” McLaren said.
The Golden Rule
When he became chief operating office at Sun Communities in 2008, McLaren began touring properties. Managers everywhere had plaques hanging up with a customer service philosophy. It always seemed to be a dozen bullet points no one could remember.
“We needed to simplify this, and it starts with The Golden Rule, and everyone knows what that is,” McLaren said. “Treat others the way you wish to be treated. And then there are three words of paramount importance… communication, visibility and attitude.”
McLaren took it upon himself to knock on doors, and talk to residents and guests. He still does. He asks how they like their community and he listens. When Sun acquires new communities, which they’ve done quite a bit of lately, McLaren collaborates with management, asks questions and listens.
Communication, Visibility and Attitude.
“We understand that everyone has a bad day, and that can come from a lot of different places,” McLaren said. “But we ask that each of us stays in a positive frame of mind. And from there it gets back to the Golden Rule again.
To help with visibility of good communication and a positive attitude, Sun uses an internal portal. It’s a social network really, they call “The Fridge”.
“And our thought was that, when you were a kid and did something good, you wanted people to see it, you put it on the fridge,” McLaren said. “That’s the place. You posted it up and you were proud of it. And for us ‘the fridge’ is a place to come together, share knowledge, and to celebrate.”
Plenty to Celebrate
Sun Communities was 15+ years in business when they went public in December of 1993. The company had 36 properties. During the next decade it would grow to 136 communities and 45,000 homesites.
The industry, along with many others, slowed during 2002 through 2011. Then Sun Communities re-entered an expansion mode, acquiring communities, some community portfolios, and expanding existing properties.
“We’ve grown into 350 communities in 29 states and Ontario, with 122,000 sites total,” McLaren said. “The value of all of that growth is a little more than $4.5 billion in acquisitions.
“Some of it was through large portfolio transactions, but there’s also a large portion of what we call ‘onesies and twosies’,” he said. “We describe it in investors meetings this way with every acquisition since 2011 being a bit of dress rehearsal and thoughtful refinement for the next one.”
Expansion in all Directions
In 2017 alone, Sun Communities had $150 million in acquisitions. This includes nine operating communities with 2,700 sites located in California, Florida, Illinois and Michigan. The company has acquired land in Myrtle Beach for an 840-site RV resort. And it will open another new RV property, Cava Robles in California Wine Country, during the second quarter. There’s a third for Larksburg, south of Denver, along with new sites for MH developments under consideration as well.
The company doesn’t shy away from development because zoning is difficult. Or because entitlement takes time. In fact, they embrace the process.
“During 2017, we built 2,100 expansion sites on our existing manufactured home and RV properties, and we anticipate an additional 1,350 expansion sites to be built in 2018,” McLaren said.
Investments grade communities remain available, even if CAP rates are less generous than during previous times. Sun Communities expects to build onto a successful 2017 organically and through strategic expansion/ground-up development and acquisitions in many of its geographic locations across the country.
“We look at individual communities on their own merits and how those merits fit in with our portfolio strategy,” McLaren said. “Looking at Florida alone, there’s a reason so many people love to live in Florida. We have four decades of experience there, and occupancies have remained in the high 90s”.
“We are very proud of our culture and matching that with over 40 years of experience in property operations and development establishes a wonderful foundation for growth.. As an example, in 2017 our team gained 2,406 sites of occupancy. That’s like adding eight fully occupied 300 site communities to your portfolio on top of the future runway being developed. That’s exciting!”
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John McLaren, President and COO of Sun Communities
Sun Communities had a good 2017 and the Future is Bright
In 2017, Sun Communities’ total revenues increased $148.8 million, or 17.9 percent, to $982.6 million compared to $833.8 million in 2016.
“Our strong 2017 results demonstrate our commitment to creating shareholder value by sustaining our high-quality portfolio and delivering best in class service to our residents and guests,” Sun Communities Chairman and CEO Gary A. Shiffman said in the company’s year-end reporting.
“We begin 2018 with an optimistic outlook and an enthusiasm to once again deliver industry leading organic growth,” he said. “Consistent annual rent increases, opportunities to capture occupancy gains, the ongoing development and lease up of our available expansion sites, and the opportunity to convert transient RV sites to annual leases over time provide us with a runway to deliver ongoing attractive results.”
Sun Communities’ measures on Wall Street have been bright across the board, indicative of its effective strategy and a strong market.
- Core funds from operations for the year was $4.17 per share as compared to $3.79 in the prior year, an increase of 10.0 percent.
- Same community net operating income increased 6.9 percent for the year compared to the year prior.
- Home sales volumes increased 11.6 percent and 3.5 percent for the final quarter and year end, respectively, as compared to the same periods in 2016.
- Revenue producing sites increased by 2,406 sites for 2017 compared to a 1,686 site increase for 2016.
