Sun Communities to Add Park Holidays UK to Portfolio for $1.3B

Sun Communities, Inc. (SUI), the real estate investment trust that invests in manufactured housing communities, recreational vehicle resorts, and marinas recently revealed that it has entered into a definitive agreement to acquire the UK-based owner and operator of holiday communities, Park Holidays UK, for $1.3 billion. The deal is likely to close in the first quarter of 2022.

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Following the news, shares of the company declined 2.9% to close at $185 in Monday’s extended trading session.

Implications of the Deal

Park Holidays is one of the primary players in the holiday communities market in the UK with properties in attractive locations in the South of England and easy access to London and other major cities of the region. With this buyout, Sun Communities could enhance its presence in the region and generate persistent cash flows.

Sun Communities expects the acquisition to be accretive to 2022 Core FFO per share. Notably, it will represent roughly 7% of the company’s properties and 8% of its total pro forma real estate asset value.

Terms of the Deal

Under the terms of the deal, the shareholders of Park Holidays will receive about $34 million in Sun common stock and the remainder of the consideration will be in cash.

Management Commentary

The CEO of Sun Communities, Gary A. Shiffman, said, “We are incredibly excited to expand Sun’s footprint into the UK by acquiring Park Holidays, which allows us to leverage our land lease community expertise in a growing market. This transaction provides Sun with immediate scale in the UK as well as a platform for future growth in a fragmented landscape. We have completed significant strategy and research work in the UK with advisors prior to this opportunity, and feel confident that its long-term macroeconomic stability and fundamentals make the UK a very favorable destination in which to expand the Sun Communities platform internationally.”

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Price Target

Recently, Evercore ISI analyst Steve Sakwa assigned a Buy rating to the stock with a price target of $220, which implies upside potential of 15.5% from current levels.

Consensus among analysts is a Strong Buy based on 5 unanimous Buys. The average Sun Communities price target of $224 implies upside potential of 17.6% from current levels. Shares have gained 28.4% over the past year.

TipRanks Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Sun Communities’ performance this quarter.

According to the tool, the website of Sun Communities recorded an 11.56% monthly rise in global visits in October. Moreover, the website traffic has grown 10.96% year-to-date.