Executive Summary / Key Takeaways

• Strategic Transformation Complete: Sun Communities has successfully divested its Safe Harbor Marinas business, completing a strategic repositioning to focus entirely on its core Manufactured Home (MH), Recreational Vehicle (RV), and United Kingdom (UK) communities, significantly enhancing its balance sheet and operational clarity.
• Robust Financial Health & Capital Allocation: Post-divestiture, SUI has aggressively delevered, repaying approximately $3.3 billion in debt, achieving a pro forma net debt to recurring EBITDA of 3.6x, and eliminating floating rate debt. This has been complemented by substantial capital returns to shareholders, including a special cash distribution and a $1 billion share repurchase program.
• Strong Core Performance & Outlook: The company's MH and UK segments are demonstrating robust performance, with Q3 2025 same-property NOI growth of 10.1% and 5.4%, respectively. Management has raised its full-year 2025 core FFO per share guidance to $6.59-$6.67, driven by strong rental rate increases and effective expense management.
• Operational Excellence & Technological Edge: Under new CEO Charles Young and President John McLaren, SUI is emphasizing operational efficiency through data-driven strategies, a centralized procurement platform, and enhanced performance reporting, aiming to drive both top-line growth and cost savings.
• Affordable Living & Recreational Demand: SUI benefits from enduring demand for affordable housing in its MH communities and affordable vacation opportunities in its RV parks, supported by high occupancy rates and a strategic focus on converting transient RV sites to more stable annual leases.

A New Dawn: Sun Communities' Strategic Repositioning

Sun Communities, Inc., established in 1975 and publicly traded since 1993, has evolved from a regional operator to a diversified real estate investment trust. Under the four-decade leadership of former CEO Gary Shiffman, the company expanded its footprint from 31 communities to over 500, notably entering the UK market in 2022 with the acquisition of Park Holidays. This journey laid the groundwork for a significant strategic pivot in 2024 and 2025, aimed at streamlining operations and sharpening its focus.

The culmination of this strategic repositioning was the divestiture of Safe Harbor Marinas. Announced in February 2025 and finalized by August 29, 2025, the $5.65 billion sale to Blackstone Infrastructure marked a transformative moment for SUI. This move was designed to accelerate the company's focus on its core MH and RV segments, enhance its leverage profile, and realize an attractive return on investment. The transaction simplified SUI's business model, leading to a revised reporting structure centered on its MH, RV, and UK communities. This strategic clarity is now a foundational element of SUI's investment thesis, emphasizing predictable, durable income streams.

Operational Technology: Driving Efficiency and Growth

Sun Communities leverages technology and data analytics as a core operational differentiator, rather than a unique physical product. This approach is fundamental to its strategy of driving efficiencies, enhancing resident experiences, and optimizing financial performance across its expansive portfolio. The company emphasizes "leveraging technology and data to drive efficiencies" and "harness transparency and the power of our technology to drive additional operational efficiencies."

SUI's operational technology includes an expanded performance reporting and ranking system that improves communication across teams and fosters accountability. This system allows for granular analysis of property performance, enabling management to identify areas for improvement and allocate resources effectively. Furthermore, a centralized procurement platform plays a crucial role in cost management. This platform facilitates "meaningful standardization, expansion and adoption" of procurement processes, leading to savings in payroll-related line items, various supply and repair categories, and technology-related costs. The strategic intent behind this technological integration is to generate additional savings through increased standardization, discipline, and economies of scale in areas such as landscaping and utilities.

The "so what" for investors is clear: this operational technology directly contributes to SUI's competitive moat by enhancing efficiency and driving profitability. By optimizing expense management and improving top-line execution through data-driven insights, SUI can achieve better margins and stronger cash flow generation. For instance, the sales and leasing funnel, a key operational metric, has seen "new milestones" in performance, measuring leads to applications, approvals, and closings, while simultaneously reducing the need for increased recurring traffic. This demonstrates how SUI's technology translates into tangible operational improvements and supports its long-term growth strategy by maximizing the potential of its existing assets.

Competitive Landscape and Strategic Positioning

Sun Communities operates in a competitive real estate landscape, primarily against other publicly traded REITs focused on manufactured housing and recreational properties. Key direct competitors include Equity Lifestyle Properties, Inc. and UMH Properties, Inc. , with indirect competition from broader residential REITs like AvalonBay Communities, Inc. and Equity Residential .

SUI's competitive advantage stems from its diversified portfolio across MH, RV, and UK holiday parks, offering a broader revenue base and reduced risk from market fluctuations. This international reach, particularly in the UK, differentiates SUI from more domestically focused competitors like UMH and ELS , potentially offering access to varied markets and faster growth in emerging regions. SUI's emphasis on affordable living and integrated recreational options also provides a unique value proposition, appealing to a wider customer base seeking community-based lifestyles.

Compared to ELS , SUI's international presence and mixed-use properties offer greater diversity, though ELS (ELS) is perceived to have strong brand loyalty and efficient cost structures in its specialized domestic MH segments. Against UMH , SUI's broader portfolio provides a strategic edge in recreational markets, but UMH (UMH) is known for its cost-effective approach in MH operations. SUI's operational technology, including its centralized procurement platform and data analytics, helps it compete on efficiency, aiming to counter the cost advantages of some rivals. However, SUI faces vulnerabilities such as exposure to economic cycles and, compared to larger multifamily REITs like AVB (AVB) and EQR (EQR), may lag in overall operational scale and efficiency, potentially impacting growth rates in premium segments. The company's strategic focus on converting transient RV sites to annual leases and shifting the UK earnings mix towards recurring real property income are direct responses to market dynamics and competitive pressures, aiming to enhance stability and predictability.

Financial Performance and Liquidity: A Strengthened Foundation

The strategic repositioning has significantly enhanced SUI's financial profile, evident in its recent performance. For the three months ended September 30, 2025, SUI reported core FFO per share of $2.28, exceeding the high end of its guidance range, driven by strong same-property performance in North America and the UK.

The Manufactured Home (MH) segment continues to be a powerhouse, delivering 10.1% same-property NOI growth in Q3 2025 and maintaining a solid 98% occupancy. This growth was primarily fueled by a 7.3% increase in real property revenue, supported by a 5.3% rise in monthly base rent and occupancy gains. For 2026, 50% of MH residents have received rent increase notices averaging approximately 5%, underscoring the segment's stability.

The Recreational Vehicle (RV) segment, while facing some transient softness, demonstrated resilience. Same-property annual RV revenue was up 8.1% in Q3 2025. The 1.1% decline in overall RV same-property NOI was largely a strategic outcome, with roughly half of the 7.8% decrease in transient RV revenue attributed to the successful conversion of transient sites to more stable annual leases. Management is focused on cost controls, with RV same-property expenses down year-over-year. For 2026, annual RV rental rates are being set with an estimated average increase of approximately 4%, prioritizing retention.

In the United Kingdom (UK), same-property NOI grew 5.4% in Q3 2025, supported by 4.8% revenue growth and 4% expense growth. Despite lighter home sale volumes due to broader macroeconomic challenges, the UK team maintained elevated market share. Park Holidays homeowners received 2026 rent increase notices averaging approximately 4.1%, reflecting a strategic shift towards recurring real property income.

SUI's liquidity and balance sheet have undergone a dramatic transformation. Following the Safe Harbor sale, SUI repaid approximately $3.3 billion of debt, including $1.6 billion from its senior credit facility, $737.7 million in secured mortgage debt, and $956.5 million in unsecured notes. This aggressive deleveraging significantly reduced interest expense, contributing to a decrease in total interest expense in Q3 and YTD 2025. As of September 30, 2025, total debt stood at $4.3 billion, with a weighted average interest rate of 3.4% and a weighted average maturity of 7.4 years. Pro forma for recent transactions, net debt to recurring EBITDA is approximately 3.6x, a substantial improvement from 6x at year-end 2024. The company also returned $521.3 million to shareholders via a special cash distribution and initiated a $1 billion stock repurchase program, repurchasing 4 million shares for $500.3 million by September 30, 2025. Unrestricted cash stood at $542.7 million, with $2 billion remaining capacity on its senior credit facility.

Outlook and Guidance: Sustained Momentum

Sun Communities' outlook for the remainder of 2025 and into 2026 is positive, reflecting confidence in its streamlined operations and disciplined execution. Management has raised its full-year 2025 core FFO per share guidance to a range of $6.59 to $6.67, an increase of $0.04 at the midpoint, signaling continued operational strength.

North American same-property NOI growth guidance has been increased to 5.1% at the midpoint, with manufactured housing same-property NOI expected to grow by 7.8% at the midpoint. RV same-property NOI guidance has been raised to a 1% decline at the midpoint, reflecting stable Q3 results and improving transient trends. UK same-property NOI guidance has also been increased to approximately 4% at the midpoint, driven by better-than-expected performance and real property strength. The company anticipates rental rate growth to exceed headline inflation for the remainder of 2025, supported by ongoing expense management.

Strategic capital deployment continues to be a focus. SUI allocated $629.5 million into 1031 exchange escrow accounts, subsequently acquiring 14 communities (11 MH, 3 RV) for $457 million in October 2025. The company also opportunistically repurchased titles to 27 UK properties previously under ground leases for $300.4 million in YTD 2025, with an additional property acquired in October 2025 and five more by Q1 2026. These ground lease repurchases were executed at attractive yields, roughly in the low to mid-4% range, enhancing financial and strategic flexibility by converting leasehold interests to freehold ownership.

Risks and Challenges

Despite a strong outlook, SUI faces several risks. The company is currently involved in class action litigation alleging federal antitrust violations, with an unfavorable outcome potentially material to its results. Macroeconomic conditions, including inflation, interest rate fluctuations, and economic volatility, could adversely impact occupancy, rental rates, and operating costs. While SUI has significantly reduced its floating rate debt, it remains exposed to long-term interest rate movements affecting future refinancing. Foreign currency exchange rate risk, particularly with the pound sterling, Canadian dollar, and Australian dollar, can introduce volatility, with a 10% strengthening of the U.S. dollar potentially reducing shareholders' equity by $103.2 million.

Operationally, the RV segment's transient business remains sensitive to macroeconomic uncertainty and reduced Canadian guests, although management is actively mitigating this through annual conversions and domestic customer focus. The company also identified a material weakness in internal control over financial reporting as of December 31, 2024, related to its risk assessment process, with ongoing remediation efforts.

Conclusion

Sun Communities has undergone a profound transformation, emerging as a focused pure-play REIT poised for sustainable growth. The strategic divestiture of Safe Harbor Marinas has fundamentally reshaped its financial structure, enabling aggressive debt reduction and substantial capital returns, while significantly enhancing financial flexibility. The company's core MH, RV, and UK segments are demonstrating robust operational performance, driven by strong demand for affordable living and recreational experiences, effective expense management, and a disciplined approach to capital allocation.

Under new leadership and with a clear strategic roadmap, SUI is leveraging its operational technology and data-driven insights to optimize efficiency and drive top-line growth. While macroeconomic headwinds and competitive pressures persist, SUI's strengthened balance sheet, strategic focus on high-quality assets, and commitment to operational excellence position it favorably. Investors looking for a resilient real estate play with predictable income streams and a clear path to long-term value creation will find Sun Communities' transformed profile compelling, supported by its strategic repositioning and ongoing operational enhancements.