Sun Communities, Inc. (SUI) is projected to reap around $348.6 million (after deducting the estimated offering expenses) in proceeds from the recently closed common shares offering. The company has priced this 6.9 million offering at $50.60 per share. The total shares include the 0.9 million shares sold to underwriters, upon fully exercising their purchase option.
This residential real estate investment trust (REIT) plans to utilize about $311 million of the proceeds to partly finance the previously-declared buyout of 59 manufactured home communities. On the other hand, the remaining proceeds will be used to pay off the outstanding amount under its senior credit facility.
As a matter of fact, Citigroup Inc. (C) assisted Sun Communities as the sole book-running manager in this equity offering. Notably, as of Jun 30, 2014, Sun Communities had cash and cash equivalents of $7.6 million, up from $4.6 million at the end of 2013.
In our view, this offering is a strategic fit as financing for strategic acquisitions and investments are expected to go a long way in enhancing the company’s top-line growth. Also, paying back debt would reduce its interest expenses. However, the dilutive effect of this offering on the shares cannot be avoided.
Headquartered in Southfield, MI, Sun Communities presently owns and operates 184 communities. This consists of around 69,580 developed sites.
Sun Communities currently carries a Zacks Rank #4 (Sell). Investors interested in REITs may consider better-ranked stocks like Cedar Realty Trust, Inc. (CDR) and Regency Centers Corporation (REG). Both the stocks sport a Zacks Rank #2 (Buy).
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