Founded in 1975, Southfield, Mich.-based Sun Communities Inc. has recently been working to diversify its holdings of manufactured housing (MH) communities and RV parks.
Through large-scale expansion efforts, the company added 2,200 sites adjacent to its communities in 2017, with another 1,200 in 2018 and another expected 1,200 in 2019, according to President and COO John McLaren.
Sun Communities operates a total of 382 communities located in both the United States and Canada, which includes 132 properties that are a hybrid of both an RV park and an MH park.
The company purchased its first RV resort in 1996 in Florida and its first northern camping resort in Michigan in 2011. This eventually led the company to strategically move more of its assets into the RV park sector and create Sun RV Resorts, which opened its first ground up development, Cava Robles, in Paso Robles, Calif., in 2018.
McLaren took time to catch up with RVB sister publication Woodall’s Campground Management and discuss the focus of the company, its role in the RV park sector and the future of Sun RV Resorts.
Below is an edited version of that conversation.
WCM: Sun Communities has seen a tremendous amount of growth over the past few years. What has it been like working in both the manufactured housing and RV park segments?
John McLaren: Sun Communities been on a pretty robust track in terms of acquisitions of existing properties, both in the MH and the RV asset class, and really that began in 2011. Over the course of that period of time the company has acquired more than $5 billion of operating assets, operating communities and resorts.
I really focus, more than anything else, on the cultural aspects of it and making sure that we are in tune with bringing two different cultures together and assimilating it along the way when we acquire properties. I think that is, frankly, some of our secret sauce, that being the attention that we do spend on that. One of the things that I’ve shared before, publicly, has been if you look at the history of all those acquisitions between 2011 and now, it’s almost as if one has been the dress rehearsal for the next — taking what we have learned from one experience and making the next experience better.
We always team up community and resort managers from the seller’s side of things with existing people in their same roles on the Sun Communities’ side when we do acquisitions. I’ve had plenty of positions over the course of my career where there might be things that you don’t get, or I haven’t gotten initially, and it’s a question you have to ask four or five times. We wanted to take away any trepidation about asking those questions.
We started with that, and it was good, but we actually took it to another level back in 2016 when we established what we call Sun Communities’ Concierge Desk. We have a team of people at our main office, and their job is basically to function as a concierge for all of our resort community managers out in the field, for any and every question they might have. It’s really done a lot to just sort of personalize the service that our team out in the communities receive and helps to make their jobs easier.
WCM: What are some of the market forces driving these acquisitions and the ground-up developments?
McLaren: It’s a combination of things. On the expansion side we look to expand a community if its occupancies are very high. In fact, I would say that looking at just the sheer economics, the demand is higher than what we can supply, and so it just makes pure economic sense to do that — as well as on the ground-up side. We have prioritized certain markets through market studies that we have done internally, and we see no lack of demand overall in the RV park business. I think everybody knows that there’s a very high ratio of RVs that are registered versus sites that are available, and so there’s out-sized demand in the RV space.
Another component that comes into it is the fact that, again, I don’t think it’s a big secret that there’s a lot more people that have become interested in both the MH and the RV asset class over recent years, and it’s really compressed in the cap rates associated with acquisitions. So, we’ve looked at, just financially, what it takes to acquire versus what it takes to develop ground-up properties. In many cases, as long as you are willing to go through a very arduous entitlement process, which can take two years or more, it makes sense financially to do ground-up developments versus, in some cases, buying an operational community or resort.
WCM: We have written some on the entitlement process and it can be a lengthy process. What has been your experience working with local officials?
McLaren: It’s just a long process. It’s gotten a little bit easier for us just because we’ve got projects that we’ve completed, and we can show the quality of what we’re building in comparison to what might be the preconceived notion of what the product is.
It’s still hard to do and hard to go through the process, and like I said, it’s long. It’s a lot of meetings, and you’ve got to present a vision that’s going to resonate. You have to take into account what’s important to the community itself, what their needs are and hopefully you serve those needs along the way.
WCM: What has your approach been when it comes to acquiring or building RV resorts?
McLaren: Our first RV resorts in Florida were more geared toward snowbirds and seasonal camping. They are heavily occupied with permanent residents or folks that come down for six months of the year and stay for the winter. Those parks generally functioned similarly to manufactured home communities in terms of just the activities offered.
Then when we purchased our first northern camping resort in Michigan in 2011 it went very well and we decided to strategically move more into that part of the RV business, which really started with 10 properties that we purchased in early 2013. They were all up along the northeast and again, it was an interesting experience for me because, frankly, none of us had a lot of experience in that side of the RV business.
I would also say that we started, initially, approaching it similarly to how we’ve run the ones down in Florida and quickly found out that was not the right way to do it. It was sort of one of those lessons that you learn and we kind of just said ‘Oh, let’s not pretend we know what we’re doing and let’s be more inquisitive in terms of really being in tune with what the guests have to say and what they want.’
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