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 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.’
When we really turned our focus on that, we started to grow and learn, and we invested a significant amount of capital improvements into those first 10 properties. They were opportunistic acquisitions that we knew, with an infusion of significant upgrades into the parks, were going to generate a lot of growth, which they did.
Sun Communities has such a long-term perspective on all of this, and we have a four-decade history of continual reinvestment into our communities, that the strategy we used was also met with a lot of recognition from a lot of RV resort owners we worked with. You’ve got somebody who started an RV resort 30-40 years ago and that’s their life’s work, and they deserve good stewardship from the next owner. We take that really seriously in terms of the reinvestment that we continually put into the service that we provide to the guests they’ve had for perhaps generations. That word gets out, which has created an opportunity and another pipeline for potential acquisitions as people recognize how much care we put into being good stewards of the parks we acquire.
WCM: You spoke about shifting gears and targeting more of the RV park market. Can you speak a little bit more on what the company saw that led it to create Sun RV Resorts and begin to develop its own resorts?
McLaren: We saw opportunities in certain markets that were maybe being underserved that we were able to take advantage of and then start the developments with our strength and roots in development, as well as just the general creativity of the company.
We’re always trying to figure out a better way to do just about everything we have done in the past. Last year, we created a team here at our main office called Apex, which is essentially a strategy and transformation team, and we took a number of our best and brightest team members out of various parts of the company and brought them together as a team. They were trained in process improvement methodology, which is Six Sigma.
They essentially crawl all over every process that we have, and their entire job is that of continuous improvement. But one of the caveats with any project work that they engage in is they have to be able to quantify the consumer benefit to the work that they undertake. So, it’s not just about squeezing out a little bit more on the financial side or anything like that, but they have to demonstrate that it’s going to have a guest or resident benefit, or a team member benefit in terms of morale building.
It’s hard for me to kind of describe it because it’s all very fluid in terms of our approach to everything, but it’s about continuous improvement. I think that sort of ties into answering your question as to why we wanted to put some flags in the ground and really build some remarkable resorts from the ground up.
WCM: The term “glamping” is everywhere nowadays. Are you noticing your campers wanting more high-end services at your resorts?
McLaren: Some want those luxury experiences, and some want more of a rustic, basic experience. In the end, it just comes down to the experience. Then one of the objectives that we have in all of our resorts is to offer, essentially, all of it.
If you want to stay in a more rustic accommodation that’s available, if you want to stay in a more, call it a high-end Safari tent that’s well appointed, you have that. We also work with our manufacturing partners to develop entirely new products for our vacation rental cottages that have never been introduced into the industry before.
All of these new resorts have components of that. One example of that is what we’re doing down in the Florida Keys right now, where we have units that are up on stilts that have rooftop decks looking right out onto the Atlantic Ocean that, at the same time, can withstand 180 mile per hour wind gusts. Of course, when you’re talking about the Florida Keys, we can sell one of those units for much less than what you’d be able to purchase a 50-year-old ranch house for.
WCM: Hiring is an issue for many park owners. How do you go about making sure that you have enough workers to staff these resorts? What’s the process for getting your team in place that’s going to make one of these resorts successful?
McLaren: The first step in that process is the service mindset of the company overall. Our team comes first and when you take really good care of a team, then the culture is one of empowerment where people can make decisions. In fact, they’re expected to make those decisions and that brings out the creativity in people.
When you give a team member that sort of freedom, it has a tendency to make the team member want to stay for a very long period of time. When that happens, even in terms of seasonal hiring, it’s not so much an issue any longer to get that help because they’ve had a wonderful experience as a team member with Sun Communities. A lot of times before a season closes, we’ve pretty well secured who’s going to be working with us the following season.
Probably the area that’s been toughest for us to hire in has been more along the lines of maintenance team members. It’s not so much tougher to hire those positions, there is just more pressure on wages in that area. We haven’t had people getting into the trades as much as we had 40 years ago.
But overall, we don’t really have a huge issue in terms of recruitment. Our open position time has always been low, and it’s remained fairly constant over at least the 12 years that I’ve been in my position.
WCM: Looking to the future, do you anticipate acquiring and developing resorts at a rapid pace?
McLaren: Absolutely. We still have a very healthy pipeline of acquisitions, as well as a significant amount of growth in front of us. I would expect that we’d continue to keep developing expansions and start two to three ground-up projects per year. We are going to be inquisitive and keep our eyes open to other opportunities as well.