Solar Communities_ I’m Including This ‘Protected Harbor’ REIT To My SWAN Portfolio (NYSE_SUI)


I’m simply round midway by way of my new e-book, REITs For Dummies, by which I will probably be serving to buyers navigate the worldwide actual property funding belief, or REIT, universe.

I’m very excited to get the e-book completed as a result of I do know that hundreds of buyers are on the fence relating to REITs, just because they’re undecided if there’s worth in proudly owning actual property shares.

After all, one of many biggest myths relating to REITs is that they’re harmful due to the numerous reduce dividends through the Nice Recession.

I can actually relate to that, as I used to be an actual property developer in 2008-2009 and I do know firsthand the ache when the subprime disaster became an entire monetary market meltdown.

After all, there’s at all times a silver lining, and for me the Nice Recession pressured me to shift from actual property developer to actual property analyst. And due to the 100,000+ followers on In search of Alpha, I used to be in a position to completely reinvent myself and turn out to be a trusted voice within the revenue house.

Earlier than In search of Alpha, I used to be primarily centered on web lease and purchasing heart improvement, the place I orchestrated over $1 billion of transactions. A part of this “floor up” expertise allowed me to conduct due diligence on a lot of my tenants, corresponding to Advance Auto Elements (AAP), Walmart (WMT), Greenback Basic (DG), Sherwin-Williams (SHW), and Blockbuster Video.

Once I was youthful, I at all times loved analyzing enterprise fashions, and finding out monetary statements. Name me a nerd, however I spent extra time in my faculty finance courses than I did partying at fraternity row.

So, the wonderful thing about my job immediately, as CEO at Large Moat Analysis, is that I can analyze a wide range of firms. The one frequent denominator, in fact, for all of our analysis is summed up in a single phrase: INCOME.

Final week I used to be touring in South Florida, and I made a decision to fulfill a buddy at Protected Harbor in Fort Lauderdale. His firm had a well-known yacht, On line casino Royale, docked in Protected Harbor, and he invited me over to take a tour. The yacht appeared in “On line casino Royale” because the “floating lair” of the film’s villain, Le Chiffre.

Protected Harbor (in Fort Lauderdale) is the most important yacht restore/refit facility within the nation, a formidable 65-acres within the Yachting Capital of the World. The property has 1600 whole vessel visits and completes over 1300 vessel hauls per 12 months with 5 lifts, considered one of which has the hauling capability of as much as 485-tons.

The marina affords dry docks and moist slips for vessels as much as 200 ft. LOA and likewise affords an on-site restaurant, YOT Bar and Kitchen, which overlooks the New River. It has over 130,000 sq. toes of workshop and workplace house, with over 20 premier on-site contractors representing all major shipyard trades on-site, prepared to fulfill all challenge calls for.

Within the phrases of Protected Harbor’s CEO Baxter Underwood, the Protected Harbor model is the “intersection of luxurious and journey within the context of cruising.”

Brad Thomas

A Daring and Protected Acquisition

In September 2020, Solar Communities, Inc. (NYSE:SUI), a REIT concerned in manufactured housing and leisure automobile communities, entered into an settlement to accumulate Protected Harbor Marinas, the most important and most diversified marina proprietor and operator in the US.

SUI Investor Presentation

Protected Harbor owns and operates 101 marinas, manages 5 marinas on behalf of third events, and has an approximate 40,000-member community of boat house owners throughout 22 states. The transaction for money and SUI fairness is valued at $2.11 billion.

SUI Investor Presentation

This was a strategic “bolt on” acquisition for SUI, because it supplies the REIT with 46k moist slips and dry storage areas and over 46K members within the community. 80% of the Marina are in coastal markets.

Florida 5,139 areas

Michigan 3,742 areas

Texas 2,064 areas

California 4,133 areas

Connecticut 3,325 areas

Different areas: 27,382 areas

Complete: 46,185 areas.

Marinas are nice belongings to personal, as the prevailing base has over 12 million registered boats inside the U.S. and an estimated provide of 900K to 1 million leasable moist slips. There’s a shrinking provide of Marinas resulting from redevelopment of waterfront properties.

Additionally, pre-owned boat gross sales underneath 30’ grew by 17% from 2012-2021 whereas gross sales for boats over 30’ elevated 52% – the typical slip size within the SUI portfolio is 41’. Over 85% of SUI’s marinas have a waitlist.

Over 50% of Marinas inside SUI’s portfolio provide service, which will increase membership tenure on common by 26% in comparison with non-service properties. Service availability drives premium rental charges for moist slips and dry storage areas.

SUI Investor Presentation

In Q3-22 marinas continued to expertise sturdy efficiency, as SUI’s Similar Marina actual property NOI elevated 9.6% in comparison with Q3-21, pushed by elevated annual boat slip income and storage income. Demand for slips and storage is persistent.

Additionally, in Q3-22, SUI elevated its Marina same-property midpoint of full 12 months steerage to six.6%, a 20 foundation level improve from the priorrange. The REIT expects same-property Marina development of 6.1% on the midpoint in This fall.

As considered under, SUI has the dimensions benefit inside the marina sector (130 owned marinas) – or round 20% of income – whereas Fairness Way of life Properties, Inc. (ELS) has a smaller share of marina income (as proven under).

SUI Investor Presentation

Who’s Prepared For a Highway Journey?

As a lot of , I present members at iREIT on Alpha with day by day video updates and plenty of C-suite interviews. Extra not too long ago I’ve been touring round to fulfill the CEOs at their workplace…

A couple of weeks in the past I visited Highwoods Properties (HIW) CEO Ted Klinck at his workplace in Raleigh, N.C. I additionally drove to Birmingham, Alabama, to fulfill with Medical Properties Belief (MPW) CEO Edward Aldag.

Just like the marina go to final week at Protected Harbor, I plan to start visiting many different REIT-owned properties throughout the U.S. and Europe. These so referred to as “boots on the bottom” interviews are extraordinarily rewarding for our analyst group in addition to our members at iREIT on Alpha.

I’ve been fascinated about even renting an RV to journey round so I can go to the properties, meet CEOs, and conduct a highway present my new e-book (REITs For Dummies) and REIT ETF Index. What do you suppose?

Brad Thomas

Properly, guess what?

SUI additionally owns best-in-class RV communities, with ~60K websites positioned in extremely fascinating locations with ~7K websites for enlargement and greenfield improvement. As proven under, RV communities signify 31% of SUI’s rental income:

SUI Investor Presentation

The availability and demand for this property sub-sector is compelling: 11 million households personal ab RV versus 1 million RV campsites. 9.5 million folks plan to purchase an RV within the subsequent 5 years and the RV rental market added over 2 million new enters in 2021.

SUI’s RV communities provide inexpensive holidays the place the typical journey is 2-3 hours from a buyer’s dwelling handle. In 2021, 250K new friends visited a SUI group and 145K new friends in 2022 (through Q3). 7-in-10 households determine themselves as not less than occasional campers.

SUI Investor Presentation

As SUI explains on the Q3 2022 earnings name (emphasis added):

“RV communities proceed to expertise excessive demand and transient conversions to annual leases accelerated 30% as in comparison with the third quarter of 2021. Yr-to-date, we now have transformed roughly 2,000 transient websites to annual leases, which exceeds our full 12 months file set in 2021. Every conversion equates to a 40% to 60% income uplift the primary 12 months and creates a brand new stream of recurring income. On a Similar Property foundation, annual RV revenues elevated 13.4% and whole NOI grew 8.4% in comparison with the third quarter final 12 months. Month-to-month base hire per RV website elevated by 7% year-over-year. On a mixed foundation, blended whole portfolio manufactured housing and annual RV occupancy was 97.1%, with over 2,300 revenue-producing websites gained year-to-date.”

The Core Enterprise Mannequin

SUI was stablished in 1975 and have become a publicly owned company in December 1993. In 1996, the corporate acquired 25 manufactured housing communities for $226 million. As you possibly can see under, since 2010, SUI has acquired properties valued at over $11.7 billion, growing its variety of properties by 4.9x (accomplished over $6.5 billion of acquisitions since 2020).

SUI Investor Presentation

Manufactured housing represents ~49% of SUI’s income and this sub-sector is taken into account its core enterprise platform. SUI has the most important manufactured housing portfolio in Nort America with greater than 99K websites. As well as, the corporate is the 2nd largest park proprietor and operator within the U.Ok., with 55 vacation parks consisting of 22K websites.

In whole, SUI has 352 manufactured housing communities consisting of 144K income producing websites and 9K websites for enlargement and greenfield improvement.

Manufactured housing fundamentals are sturdy, as SUI’s portfolio is at 96.2% occupancy, with 70% of its communities at 98% (occupancy). SUI can also be one of many largest annual purchasers of manufactured houses, with 2K houses per 12 months.

Annual dwelling move-outs in SUIs’ manufactured housing communities are 0.5%, and that’s actually an uninterrupted rental revenue stream: common tenure of residents in SUI communities is ~14 years. This low turnover is pushed by a $6k – $10k common price for a resident to maneuver a house.

SUI Investor Presentation

Manufactured houses in SUI’s communities present 25% more room at ~54% much less price per sq. foot:

SUI Investor Presentation

SUI’s manufactured housing, Similar Property NOI elevated 4.9% in Q3-22 in contrast with Q3-21 supported by 4.3% positive aspects in month-to-month base hire per website, elevated occupancy and talent to handle bills.

The Stability Sheet

On the finish of Q3-33, SUI had $6.7 billion of debt excellent that carried a weighted common rate of interest of three.4% and a weighted common maturity of 8.8 years. The online debt to trailing 12-month recurring EBITDA ratio was 5.7x.

Excluding the financial institution revolving credit score and time period mortgage amenities, the remaining $4.9 billionof debt has a weighted common rate of interest of three.4% and a weighted common maturity of 9.9 years.

SUI Investor Presentation

By way of capital markets exercise in Q3-22, SUI repaid $318 million of debt secured by 35 properties, growing its unencumbered belongings to whole asset ratio to ~79%.

SUI Investor Presentation

By way of dividend development – which is a key metric for us to judge at iREIT on Alpha – we are able to see that ELS outperforms SUI. In 2008-2009 ELS did NOT reduce its dividend, whereas SUI did. As well as, ELS has grown its dividend yearly, whereas SUI has not been as constant.


Nevertheless, we observed an attention-grabbing development happening, by which SUI’s payout ratio was declining which makes the worth proposition extra enticing. In the meantime, ELS has appear its payout ratio improve:


Valuation Issues

On the Q3-22 name, SUI elevated the midpoint of full 12 months steerage – funds from operations (“FFO”) per share – by $0.08 to a revised vary of $7.32 to $7.38. It established a This fall-22 fixed foreign money core FFO per share steerage within the vary of $1.23 to $1.29. The brand new vary represents 6% development on the midpoint for the complete 12 months and implies the 6.6% development on the midpoint in This fall-22.

As considered under, analysts forecast AFFO per share to develop by 14% in 2022 and round 6% in 2023. That’s on prime of a file 12 months of development in 2021 (+27% in AFFO per share).

FAST Graphs

Needless to say it was solely in 2021 that SUI obtained inaugural credit score scores from S&P and Moody’s, validating the steadiness sheet stewardship, sturdy working monitor file, and industry-leading place. As SUI’s CEO mentioned,

“These scores signify one other necessary milestone in Solar’s ongoing evolution as we proceed to develop our portfolio and additional strengthen our steadiness sheet. We consider these scores will enable us to proceed to execute on our development technique with further flexibility, broadened entry to capital and incremental enhancements to our general price of capital.”

FAST Graphs

As you possibly can see (above), SUI is now buying and selling at 24x present P/AFFO, and traditionally shares have traded round 26x. Nevertheless, Covid-19 introduced an outlier situation the place shares traded as excessive as 37x, the place pre-Covid shares traded at 12x to 25x.

Bear in mind, although, SUI is a a lot completely different animal immediately, with a much-improved steadiness sheet, a lot safer dividend (payout ratio), and extra constant dividend development (~5.5% CAGR).


As talked about, SUI trades at 24.3x versus ELS that trades at 30.8x. Additionally, SUI’s yield is 2.2% in contrast with ELS’s dividend yield of two.5%. Analysts forecast SUI to develop AFFO per share by 6% in 2023, and ELS is projected to develop by 5%.

We’re sustaining a BUY and I’m including SUI to my private SWAN portfolio. Having visited Protected Harbor myself final night time, I’m extraordinarily excited to turn out to be a marina landlord along with RV communities and manufactured housing websites.

I additionally see that Jeff Blau, CEO at Associated Corporations, has joined SUI’s board, and that is one other constructive addition to the administration group. SUI is about to launch This fall-23 earnings quickly, with the earnings name at 11:00 on February twenty third.

iREIT’s Annualized Complete Return estimate is 15% as proven under:

FAST Graphs

As at all times, thanks for studying and commenting.

Pleased SWAN Investing!