Q4 2020 Sun Communities Inc Earnings Call
Greetings and thank you for joining us today for Sun communities fourth quarter, 'twenty and 'twenty earnings Conference call.
At this time all participants are in a listen only mode.
A question and question and answer session will follow after the formal presentation.
And what should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
I would now like to turn the conference over to your host Gary Shiffman, Chairman and Chief Executive Officer.
You may begin.
Good morning, and thank you for joining us as we discuss our fourth quarter and full year, 'twenty and 'twenty results as well as our 2021 guidance.
We hope that you and your families are in good health as we continue to navigate the challenges of the pandemic.
We're very pleased with the resilience for our portfolio and the commitment and humanity of our team members. During this most difficult time.
The stable growth, we delivered and the environment further demonstrates the strength of manufactured housing and RV resorts through economic cycles.
And also underscores our rationale for meaningfully expanding our platform with the acquisition of Safe Harbor, and marinas and a business that exhibit similar stability and growth characteristics.
For the year Sun generated core <unk> per share growth of 3.5% same community NOI growth of 4% and.
And at over 2500 revenue producing sites and achieved total portfolio occupancy of 97, 3%, a 90 basis point improvement over 2019.
Yeah.
To drive additional future growth, we acquired almost $3 billion for properties in 'twenty and 'twenty.
Over $600 million of our acquisitions took place and the fourth quarter. After the closing of the Safe Harbor transaction.
Total acquisitions for the year included 20 for manufactured housing communities and RV resorts with over 6900 sites and 106, marinas with nearly 39000 and wet slips and dry storage spaces.
Additionally, post year end through the day to this call we have closed acquisitions totaling over $43 million, including one manufactured housing community two RV resorts and two marinas.
We are actively pursuing opportunities and each of our segments, our extensive experience and track record and industry relationships have helped continue to facilitate successful MH and RV transactions.
And the Marina side since the closing of the Safe Harbor transaction. We've added seven additional marinas inclusive of the World class, Reiber, which super yacht, and marinas and West Palm Beach, and Riviera Beach, Florida.
The river, which team is joining safe harbor, and we expect them to drive incremental growth across the entire marina portfolio, given the specialized nature of Super Yacht Marina operations.
As we reflect on the events of 'twenty and 'twenty and look optimistically to the future. We are encouraged by the fundamentals of our business.
The demand for high quality affordable housing and vacationing is as strong as ever.
Even with the various shelter and place restrictions throughout 'twenty, and 'twenty and into 'twenty and 'twenty, one applications to live and a sun communities remain at an all time high as we received almost 50000 applications in 'twenty and 'twenty and sold nearly 2900 homes.
Our RV resort performance remained strong as travelers, who wanted and increased level of control and safety chose our resorts for some much needed rest of it.
We believe that her being attracted a large number of first timers as indicated by a 6% year over year growth and RV shipments, including and almost 50% increase and RV shipments for the month of December.
We anticipate that many of those first timers are likely to be repeat customers and the years ahead.
We see numerous similarities with respect to marine us as a wide portion of the population and became first time boat owners as well.
According to industry sources, there was a 35 per cent increase and the number of purchases by first time boat buyers and 2020 and.
In short, we expect there will be a sustained demand across each of our business lines.
As we look to operational initiatives for 'twenty and 'twenty, one Sun is positioned to continue to execute and our four core investment strategies.
The first is reinvestment in our properties to ensure sustained demand and to maintain the high quality of our assets.
Second is the pursuit of accretive acquisitions of operating manufactured housing communities RV resorts and marinas.
Our acquisition pipeline is as full as it has ever been sellers continue to see the benefits of a transaction with sun given the certainty of execution.
Next affirm and strategies and the knowledge that Sun will improve and continue managing these assets to the highest possible standards.
Our third investment strategy as the construction of expansion sites and.
And last is the construction of Greenfield developments.
Together these for strategies support our long term sustainability of delivering industry leading growth.
As our company has grown significantly we have decided to expand the size of our board and recently announced the appointment of Tanya L and as an independent director.
Tiny brings a wealth of experience and expertise and the fields of education, and economic development and will be a tremendous asset to our team.
And we welcome Tanya and look forward to having her expert perspective, and sustainability and social issues.
As part of our board initiatives and leadership moving forward.
Our success would not be possible without the dedication and commitment of our team members, who continually place the highest priority on the health and safety of our residents and guests.
Through the many challenges this past year, our team consistently rose to the occasion and worked tirelessly to produce these positive results.
And we'd like to extend a heartfelt. Thank you to the entire team is and I'm very proud of what we have been able to accomplish together.
And we'll now turn the call over to John and Karen to discuss our results in further detail.
Thank you Gary.
Our solid performance for the fourth quarter and full year 2020, and demonstrated the resilience of our operations across manufactured housing RV resorts and marinas.
We benefited from heightened demand for our RV resorts and second half for the year and the steadiness of manufactured housing through all of 2020.
Our same community results reflect the stability of the platform as we work through the challenges of the pandemic.
For the fourth quarter same community NOI increased by $2 one per cent.
Excluding direct COVID-19 related expenses of $300000, our same community NOI growth would have been $2 four per cent.
And the fourth quarter same community NOI was driven by a five 7% growth and revenues, reflecting a three eight per cent increase and weighted average monthly rent and a 180 basis point occupancy gain.
Breaking it down further manufactured housing revenues grew by 4.8% annual RV grew by one 9% and transient RV grew by almost 18%.
If it were not for the mandated closures of our resorts and California, starting in December as well as the continued Canadian travel restrictions are fourth quarter transient RV results would have been even stronger.
The good news is the travel restrictions were lifted and California at the beginning of February and we have already begun to welcome our guests to these resorts.
Expenses in the fourth quarter were elevated predominantly due to the costs associated with the pandemic, along with higher payroll supply and repairs and utilities that RV resorts ahead extended seasons.
For the full year same community NOI increased 4% excluding.
Excluding $2 $4 million of direct Covid related expenses same community NOI would have increased by $4 four per cent.
This growth reflects a three 6% revenue increase and a 3% increase and same community expenses.
The revenue growth was primarily driven by a four five per cent increase and annual RV revenues and five 6% growth for manufactured housing revenues.
James communities transient RV revenues were down five per cent for the year, reflecting the delayed opening of 44 of our seasonal resorts due to COVID-19 related travel restrictions and the late spring and early summer.
Our RV transient business saw a meaningful rebound with same CUNY transient RV revenues growing by 5% and the third quarter and 17, 8% and the fourth quarter as compared to the same periods of 2019.
Our RV property performance will be affected and the first quarter by the California shelter and place order that ran through the early part of February.
Additionally, the continued Canadian border closure has prevented some of our guests from returning to our southern resorts for the season.
Combined these two events are estimated to have an impact of $8 million to $10 million to transient RV revenues, which is reflected in our first quarter and annual 2000 and 'twenty one guidance.
Even as the impact of the pandemic persists for bookings for the second quarter pacing meaningfully ahead with current on the books revenues, 18% above this time last year.
From a total portfolio perspective, we gained 578 revenue producing sites for the fourth quarter, bringing our total for the year to over 2500.
The addition of these sites increased our total portfolio occupancy to 97, 3% from $96 four per cent a year ago.
Of our revenue producing site gains for the year 1070 of roughly 43% were and are manufactured housing expansion communities.
For the year 863 transient RV sites were converted to annual leases.
The development of ground up and expansion sites as a consistent growth driver for us and 2020, we delivered over 1300 vacant ground up and expansion sites.
And recently completed expansion and ground up development sites will contribute to growth and 2021 and beyond as they fill up and stabilize.
Additionally, we currently have over 10000, and zoned and entitled sites and our portfolio for expansion and ground up developments, which when developed should contribute to our growth and future years.
Moving on to home sales, we sold 782 homes for the quarter and 20 866 homes for the year.
850 of these home sales were conversions of renters to owners and 2020.
We saw new home gross profit expansion of three 6% year over year, driven by strong margins, and Colorado, Connecticut and Ontario.
For the year average home sales prices rose for both new and pre owned homes.
And I 11.3, and eight 8% respectively.
The new home sales and our ground up and Redevelopments in Colorado, and Florida contributed to this increase.
Brokered home sales throughout SUNS portfolio saw a 15% increase and total sales year over year as the resell market was strong as ever.
Average brokered home prices and our communities increased by over 21% and 2020.
A healthy resell market is very important for our success as new and existing residents see the value of choosing to live and a sun community given the quality and level of ongoing reinvestment that goes into our properties.
Sun has maintained strong rent collection rates throughout 2020.
Total rent collection rates for manufactured housing communities and annual our views for the quarter ended December 31, 2020, we're over 96% and 97% respectively. After adjusting for the impact of COVID-19 related hardship deferrals and prepaid rent balances.
January collections were over 97 per cent for both manufactured housing and annual RV.
Through February 16th we have collected 95 per cent for both our manufactured housing communities and for our annual Rvs, which is consistent with prior year collections.
With respect to Safe Harbor, we closed our acquisition on October 30th 2020.
The fourth quarter performance was solid.
With the two months NOI contribution of $17 $9 million.
Covid related tailwind like the surge of new boat ownership, which Gary discussed helped drive strong wet slip rental and on land winter storage revenue.
Given the ability to enjoy the outdoors and a safe and self control environment. We anticipate marine has to be an important growth driver for the coming years.
In closing 2020 pose both numerous challenges and opportunities for Sun, we have grown as an organization and are stronger than ever we are proud of our team members' dedication to our residents and guests and are grateful for their efforts and a truly challenging year.
Karen will now discuss our financial results Karen.
Thanks, John for.
For the fourth quarter, and Sun reported core <unk> per share of $1.16, 5.5% above the prior year and for cents ahead of the top end of our guidance range.
For a plaque better than expected performance from our ground up developments and recently completed acquisitions, including Safe Harbor Marina.
For the 12 months ended December 31, 2020 core <unk> per share was $5.09 up three five per cent from 2019.
We are very pleased with our results and our positioning for 'twenty and 'twenty one.
During the year, we acquired almost $3 billion and operating properties, including the Safe Harbor Marina portfolio.
Subsequent to year end, we acquired a manufactured housing community for redevelopment and adjacent to an existing community two RV resorts and two marinas for a combined $43 million.
We had an active year on the capital markets front, raising approximately $1 9 billion and equity to ensure the strength and flexibility of our balance sheet and support our acquisitions and growth initiatives.
We ended 2020 with $4 8 billion of debt outstanding at a 3.4% weighted average rate.
And our weighted average maturity of nine point for years.
We had $83 million unrestricted cash on hand, and a net debt to trailing 12 month recurring EBITDA ratio of six nine times.
Pro forma leverage, including the estimated full year EBITDA contribution from Safe Harbor and other acquisitions is and the mid to high five times EBITDA, which is in line with our long term leverage target.
Our performance in 'twenty, and 'twenty and our competence, we have and the ability to continue to generate industry, leading results provided the incentive for our board to raise our 'twenty 'twenty, one distribution to $3.32 per share up 5.1 per cent from last year.
This is our fifth consecutive annual distribution increase.
Turning to guidance for the year, we expect core as opposed to be and the range of $5 and 79 to $5.95 per share.
And increase of 15, 3% at the midpoint.
First quarter, and that's always expect it to be and a range of $1 13 to $1.17 per share.
Moving to internal growth drivers, we are anticipating a 2021 same community NOI growth range of 5.6 to $6 six per cent, which includes a blended weighted average monthly rent increase of 3.4 per cent for manufactured housing and annual RV.
Our core F O and same community NOI guidance assumes lower transient RV revenue contributions and the first quarter of approximately $8 million to $10 million due to the California shelter and place order, which ended in early February and the extension of the Canadian border closure.
We expect revenue producing site gains throughout the year to be between.
2000, and 150 and 2000 and 350.
And the development front, we plan to deliver 1200 to 1600 day can expansion and ground up development sites and 2021.
For our Marina business, we expect total NOI inclusive of service and ancillary contributions.
$163 million to $169 million.
With respect to our G&A guidance, we expect our 'twenty 'twenty, one and G&A expense to be and the range of $164 million to $167 million.
Approximately 33 million at the year over year increase is attributed to Marina and as we scale that platform to capture and support the integration and operations of the large consolidation opportunity we see before us.
And safe harbored transitions from a private operator to a wholly owned subsidiary of a public company. It requires and expanded operating infrastructure and financial reporting structure to support both its regulatory obligations, primarily around reporting and future growth potential.
This level of G&A supports both the operationally intensive nature of the marine and business as well and our expectation for the Marina portfolio to be and high growth mode over the next several years.
And just our first 90 days of ownership, we've increased the marina portfolio transaction value by over 20 per cent.
We want to ensure that the business and the team are set up for success and anticipate that marine and related G&A will be leveraged over time.
It's important to know there is seasonality and our portfolio. Please refer to our supplemental for additional disclosures unexpected seasonality for total MH and RV NOI Marina NOI and core F F L.
As a reminder, our guidance includes acquisitions through the date of this call, but does not include the impact of prospective acquisitions or capital markets activities, which may be included in research analyst estimates.
Yeah.
Finally, we'd like to note that starting with our first quarter earnings release, we intend to provide enhanced reporting disclosures in our supplemental across MH RV and Marina.
This completes our prepared remarks, we will now open up the call for questions operator.
Thank you we will now be conducting a question and answer session.
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One moment, please while we poll for your questions.
Our first questions come from the line of Josh <unk> with Bank of America. Please proceed with your questions.
Good morning, everyone, it's actually a little Oscar back off for God's today, and congratulations on a great quarter.
And just jumping on to the Marina side, we thought and safe Harbor and hosting regardless of Newport. This August.
Do you envision hosting similar events across the different areas and your Marina portfolio over time are there any other events that the team is working and how that might drive traffic across your marine is portfolio and you mentioned all of that more on the ancillary side for the NOI, but just kind of trying to figure out what else as part of it.
So it's Gary I think that we're very excited to participate.
And the first event that you described and I think it is the beginning of trying to tie a are.
Very large membership consisting of a close to 50000 members and the Marina right now to the ability.
To go from a safe.
Safe Harbor to Safe Harbor Marina and understand.
The expectation that one would have and visiting the consistency of how these marinas run and what the services. They offer so I think that this will be the first opportunity to really showcase that and the Sun staff sitting in this room is as excited as anyone.
And to really participate and I really see what the safe Harbor and management has planned for the future. So with regard to that we'll be able to share more.
With regard to what the future holds and those types of events going forward. So kind of one of the first inaugural step outs for sun to participate in.
And this type of Safe Harbor event.
With regard to Marina details and disclosures.
We wanted to share with everyone. Today is that we will be providing enhanced disclosure by business segmentation and specifically for marinos with our first quarter earnings release, so and doing so well.
We will begin providing separate disclosure on our manufactured housing business line as well as separate disclosure on our RV business line and an effort to really provide insight into each of the three business lines. So I think it will be our first.
Order will have the opportunity to look a little.
A little bit more clearly and two marinas and the business semi segmentation as well as helping everyone understand for their review and modeling purposes.
Breaking apart MH and RV as well so that will be coming first quarter, and we'll be better able to look into the segmentation of each.
Okay, great. Thank you and I apologize I may have missed this but did you guys discuss the guidance for acquisitions and if you're just trying to think about them. If we are seeing the same flow from for Q going forward or I don't know I think and you might have mentioned that for Ikea is usually a big acquisition quarter, Yeah, Yeah just.
Trying to think how we hadn't you didn't miss it you did miss and we Didnt give it we typically don't give guidance, we usually of forward acquisitions, we usually reference the previous year or the previous few years, obviously, new with a safe harbors and Marina acquisitions, but.
Generally we look for $200 million to $400 million of MH and RV acquisitions based on historical numbers excluding.
Large portfolios, which basically I have already been consolidated and then.
Separately.
We are spoke about or I mentioned in my remarks that I can share that.
Acquisition pipeline really and manufactured housing RV and marinas is.
Absolutely as full as it's ever been and so we certainly have our work cut out for us.
We are seeing increased competition.
And the MH and RV space and it might not surprise. Many of you that were starting to see increased competition and the Marina space. So are we.
We will be very very selective that anything we do acquire will be the highest quality and the highest of opportunity to provide growth and value creation for our shareholders and we're excited to work through that pipeline and be able to.
Present, exactly what we've accomplished each quarter.
Okay, great. Thank you so much.
Thank you our next questions come from the line of John Kim with BMO Capital markets. Please proceed with your question.
Thank you a couple of questions.
On the <unk> portfolio, which is the largest acquisition, we've done and marinas and safe Harbor.
Is this the first Super yacht Marina.
Now that you own.
And can you compare some of the characteristics as far as margin retention rates or growth potential and.
And.
Super Yacht versus your typical arena.
Yeah, It's Gary again.
Oh Wow.
The for the first quarter, when we can really look a little bit deeper into segments of the business, but I would share with you that our the river, which marina and both locations.
Offers services to the world's largest boats.
But when you get into it the margins.
Remain similar but because of the unique offerings.
Occupancy.
The service requirements, which specialties draw and Hum vessels and boats that are less sensitive to the cost of our staying and the marina and provide all the ancillary revenue.
Lead towards a.
Very good returns against the investment and.
And a pretty predictable basis. So as you look out over a long period of time the consistency of that.
There are growth of revenue.
It's very comfortably predictable.
So those are the characteristics of it but with and it and it's just high occupancy.
Occupancy.
High demand there slips can.
And can accommodate boats and excess of 300 feet. So it is really the world's largest boats and yachts and sell Kraft and I can share with you. It's really a list of the who's who and.
Marina yacht ownership.
It's one of the few marinas that can accommodate that size and scale of our boats.
Yeah.
Lucky for your guidance for this year for Marina is at the mid point of NOI and that's about it.
Six cap rate.
Are you seeing compression on across the board and Brian and I wasn't really too.
We wish for portfolio with a lower cap rate acquisition.
Yeah, I guess I would describe it that.
We expected some cap rate compression and after our announcement and there have been a couple of other platforms for sale over the last 12 months and as we've studied them carefully and did our research.
And began to understand the stability of cash flow the lack of new supply.
And the demand versus supply fundamentals for growth and boat ownership.
It doesn't come as a surprise to us I think what does come and it's a little bit of a surprise.
And how fast the awareness of our many other potential investors are queuing and in the marine and our business. So we have heard both on a publicly announced basis and a private basis that there has been a cap rate compression taking place certainly.
And marine is changing hands, and a lower cap rate and a the ability of our.
The safe Harbor group to generate a higher cap rate so that cap rate is creeping in and.
And the way I'd describe it right now is Oh, our view on the Marina is is that they're trading at a 300 to 400 basis points.
Spread above where were seeing many manufactured housing and RV community is trading at today, So still a good solid spread.
And Oh, and what I would share is that of the seven marinas that were closed including river, which traded and the range of $6 four to eight five cap rate thus far.
Yeah.
Okay.
I appreciate the information and you can provide it on the seasonality of the Marina.
Can I, just ask and just given that 58 per cent of NOI and the second and third quarter, how much visibility you have on those.
And the contracts being signed.
And if there's any variability and cases.
And travel restrictions going forward.
With regard to achieving.
Achieving that NOI.
Yeah.
I think as far as are you speaking of maybe in terms of COVID-19 impact and things like that.
We don't see much risk associated with that I mean that the portfolio performed very well through true Covid last year, So and I don't.
I don't really see them.
Much impact and if that were to happen based on what happened last year.
Our second quarter bookings.
Bookings look and truck I mean, all day.
On the RV side, our second quarter and third quarter for beans are pacing ahead of last year. So as I shared in my remarks, I mean, it's it's just.
It's that what Gary has talked about the whole time as there is a tremendous amount of pent up demand for people wanting to get outdoors and.
And the RV asset class along with the Marine asset class really serve that purpose. So we're really a pretty pretty excited about what we see going forward John.
And then I may choose all annual contracts, so oh, and we've seen how it performed in 2020, so but for the impact and the Canadian borders John covered and for California.
Closures are that are now up and February.
We are I'm, feeling very comfortable with how 2021 should play out just based on.
And.
What we saw in 2000 and 'twenty.
Yeah.
Okay last one from me just turning over to them are these.
And when I look at your RV side breakdown and page for your supplement.
The trans and RMB and.
As a percentage of total RV sites has been increasing over the last year. It's now at 16, 8% from.
15 per cent a year ago.
Is that for you too.
And recent acquisitions and expansion or is this partially due to a flow slower conversion rate from <unk>.
From transient to annual increases.
Well we.
We converted 863 transient guests over to annual leases last year, which is.
So pretty close to what we do on an annual basis and so I think we're really pleased with that performance and but I would say the bigger part of that John has been the development that we have done and that's added to that denominator of transient sites that we have and our portfolio which of course.
Our future transient conversion opportunities to annual leases.
And that conversion and gets us up 40 to 60 per cent per site.
Revenue increase on an annual basis. So first year first year. So those conversions are very important to us.
There's a part of our strategy that seeks to by transient.
Just as we seek to buy vacancy and our manufactured housing communities because it's an absolute tremendous.
Tremendous first year benefit one and we get the sites filled and manufactured housing and B. When we convert the transients. So you won't find us stepping up our conversion programs as we get more and more inventory of the transient sites going forward.
I appreciate it.
Thank you our next questions come from the line of Nick Joseph with Citi. Please proceed with your question.
Thanks, Gary.
And I appreciate the comments on the cap rate differential between marinas and MH and RV.
Does it work on an IRR differential for the acquisitions that you've done recently.
Hum.
We're excited to demonstrate to the market and our shareholders.
Growth and the Marina side, if you're referencing the Marina side I think that I'm.
Part of the excitement by the Safe Harbor management and operational team has the ability to have a strong well capitalized partner to enhance and grow the business. So I think the opportunity ahead of us.
And to create.
Increased cap rate, which will generate a into a greater IRR over a.
Call. It a three to five to seven year period of time.
With additional I think a contraction of cap rate, which will naturally enter and over a period of time I think the.
The exit cap rates and this particular assets cash class will be modeled probably more aggressive than the entry of our strategy proves out and so the other areas are a very very strong.
When you compare that to MH or RV, where you're getting some level of uplift.
And actually that incremental capital will be going to marine is right now or the hours pretty similar.
Well I think you're seeing on the other segments.
Yeah, I would say that.
Yeah, and the capital will go out similarly, where we can justify the return we're going to get at it.
But due to the ability to buy at a.
Higher cap rate.
And Oh, the strategy and the supposition is we said that there'll be cap rate contraction and that I'm paper at least the I R hours grow a little bit faster and Marina side.
Thanks, and then just on the G&A side and understand it.
And that's a wholly owned subsidiary and all.
So there's some cost there and I'm wondering if there's an opportunity for synergies or to consolidate some of the backend and cross marinas and the rest of the platform for Sun savings in the future.
Nick what you know what I'd say is that.
Yeah as you mentioned.
This is the Marina platform is independently.
Operating them. So we did absorb all of the executive team senior operations back office.
And and we did not did not underwrite any expected synergies or efficiencies with that platform and if you think about that platform.
It is.
It's it's scaling right.
Growing very very rapidly and it's not scaled yet and so I I would think that we will leverage G&A over time, but I would not expect debt and near term.
Yeah.
Thank you.
Thank you our next questions come from the line and West Golladay with Baird. Please proceed with your questions.
Hey, good morning, everyone I'd like to talk about the pace of the Marina deals and how much do you think was due to pent up demand for O P units.
Yeah.
Yeah.
That's a great question.
Certainly.
Both the Sun management, and Safe Harbor, and management and one we explored the transaction.
<unk>.
Both were excited about the opportunity to create a tax deferred security.
To be able to unlock.
The acquisition and marinas that might not otherwise be available as a I know Baxter and the safe Harbor management and have shared on some of our calls many of these marinas are second and third generation.
So.
The tax recapture and the tax ramifications and the fact that they generally won't qualify for 10 31 exchanges.
I think lead us to believe that our we have a lot of opportunity in front of us.
River, which is an excellent example of where.
If you recall the exact percentage.
There were securities.
Gary.
A third 30, a third of it.
Okay. That's a third of it was actually a combination of preferred operating partnership units and are.
Operating partnership units.
And Zynga family really.
<unk> was aligned and wanting to protect.
Are the tax implications and obviously differ the impacts but at the same time, you know as I mentioned earlier and arm.
Remarks were really excited to have that entire team with their experience and the super yacht and Marina World as part of the Safe Harbor team. So not only do the tax securities become important to acquire the property, but in this case, we acquired a management.
Team.
Relationships and the industry and our core competencies that are just going to enhance our safe harbors efforts moving forward.
So you know there's a lot of benefits from having those securities.
Great. Thank you and maybe switching over to development do you have any plan starts this year and then maybe bigger picture for the industry do you have a sense of how many active developments there are for MH and RV right now nationally.
Yes. These are all coming to me just the operational questions out here.
And it's a great question and.
And today and.
We have about 8400 sites in various stages of pre development.
Okay nine manufactured housing communities.
RV communities to hybrids that are hybrids for us or a combination of manufactured housing and RV and a single development. So.
As we kind of shared.
You know we've been the largest consolidator and manufactured housing communities over the last 10 years or so.
And we began to ramp up our efforts on new community development.
Especially as we saw.
The severe compression on cap rates.
No new supply coming on and.
And having the experience at Sun communities are being a developer and new communities are initially.
And we determined that we could.
Start developing communities and better returns than acquiring them at these.
And the existing communities that these compressed cap rates.
So today will continue acquiring existing communities.
Where we think.
And the cap rates justify and the growth justified but youll.
Youll continue to see a focus.
And development.
And we think we can generate high single digit returns upon stabilization stabilization, which generally looks to be three to five years after the.
Construction begins depending if it's a rerun image.
Great and then the last one the topic of Rec and call. It comes up and a lot of discussions with investors and I'm just curious if youre seeing it and more of your markets for the MH segment, and if so how much or I guess what type of restrictions are they looking to implement and then maybe a follow up on that would be with the new administration is there anything and their plans that will impact your <unk>.
<unk>.
Hey, Wes this is John so no I mean, no real impact for Sun and as far as that is concerned it's more.
And I think so it really has to do simple fact that as we've shared.
It has been on average over the at least for last 20 years, you know rent increases and the two to four per cent range. We do have some more rent control communities in California.
Our pure and control, but it is really a smaller part of our portfolio and the fact that and we've always managed their rent increase between 2% to 4% what I'm seeing out there and what I've heard from various locations. Even if we have a single community and a particular state.
There's a lot of that dialogue frankly is sort of within our range that we would be doing anyway. So it doesn't really have a tremendous impact on us at.
At this point.
Great and then anything on the New administration.
And the passive and factor and maybe positively or negatively.
Yeah.
Well, it's too early to tell we're watching it carefully and.
And as everyone knows there's a lot of discussion out there certainly a lot of discussion on the HUD front and a continued commentary to focus on affordable or obtainable housing.
By the government agencies, but we're yet to see any meaningful shift.
Towards anything and the other thing I'd add west like some of the numbers and Gary just share with you in terms of what we have and.
And various stages of entitlement and development.
And.
That we are and a bit of a unique position because we have constructed seven ground up developments now or in the last three years and so.
And I'm going to these and these meetings with various municipalities and planning commission and that sort of thing.
No longer showing renderings and when we can do I'm, showing what we've actually done and so with the dialogue from Washington, which is important about attain ability and affordability.
We're very well able to demonstrate how we play so well into that and to helping with debt crisis.
Great. Thanks, a lot for everyone.
Thank you. Our next question is coming from the line and don't allow skiing with Green Street Advisors. Please proceed with your question.
Hey, Thanks, a lot.
Gary and John I wanted to understand the scalability of safe harbors platform, a little bit better and so you have to bring on the right and which team for yacht expertise. Just curious as this grows are there any yes. It takes you to different regions of the country or different types of.
Marinas and Oh are we going to see big step changes and G&A over the coming years or.
Do we now have all the expertise in house to scale your marine and investment.
Hey, John that there really is a great question and obviously as we prepared for budgeting for the acquisition of Safe Harbor and to discuss guidance.
And we tried to be very very transparent and our G&A and we ask that question ourselves even during the underwriting.
This should be very scalable and we do underwrite.
Two a proximately three per cent.
Grant revenue for.
For G&A as we acquire.
The new marinas that has been the practice is safe Harbor, and we continue to underwrite and that methodology, but and working closely with our Baxter and Gavin and senior management at Safe Harbor.
And the addition of the Reiber, which senior staff.
And back office is not so much of a have to have it so why do I have.
And so that's a perfect example, where their skill set and we'll be able to be spread over many of the existing safe.
Safe Harbor, and marinas and to be able to now take that super yacht ability to shift and provide services and ancillary revenues from other safe Harbor Marina is to be able to deliver our services back and forth, we think will incrementally grow the existing opportunities.
And as we look to new opportunities and there are several that I could point to and the pipeline.
It is their skill set that is being levered.
To be able to really take a hard look at opportunities and create what we would call more strategic value post acquisition.
Will benefit our growth going forward so.
I don't think you'll see the step I think youll see that were there and you'll see the incremental changes from where we are right now.
Okay and.
And Karen the $23 million and business combination expenses that are that are excluded from core episodes and what specific costs are included in that and our and additional costs expected in 2021.
No debt.
$3 million and business combination costs, I really am and.
The impact of the Safe Harbor Marina being treated as a business rather than an asset acquisition. So asset acquisitions. Your capitalized cost business Com do you expense them that was cost or just typical closing costs and real estate transactions. They are the legal costs associated with it.
And the M&A advisory fees and those types of things I think that the amount in line with what you'd see on an M&A transaction of this size and theyre not anticipated going forward most of our acquisitions.
And our considered asset acquisitions, and so those types of costs will be capitalized.
And the only thing that I'd add to that the Oh.
Complexity of marinas, and they're being the up land and the water. We did extensive diligence from an engineering standpoint to evaluate the uplands and utilities.
The waters.
Wave attenuation.
Complexities other business the seawalls so.
More than we would be doing it and I made sure RB transaction, even at that size.
One time cost.
Okay. Thank you for the color last one if I may.
Could you share the cap rate for a variety of itch.
Just NOI and then what it would be if you include the G&A load.
Okay.
What I can share is what I have in front of me and.
And I indicated for the seven <unk>.
Properties acquired.
The cap rate range was from six four to eight five.
And.
Right, but which would be on the lower end of that.
Yeah.
Okay, and then including G&A, what would the yield day.
I'm, sorry, I missed that.
Including G&A.
G&A I don't have that in front of me, but you could definitely follow up with Fernando.
Alright, thank you.
Thank you. Our next question has come from a lot of peak and Karl with Bahrenburg. Please proceed with your questions.
Hey, guys. Thanks for taking the questions. So first just given what's going on and you guys.
You've heard of any reported damages either to your MH, and RV or marine and properties and if so how material of an impact do you think that'll happen in the quarter.
Hey, this is John so I mean, we've been dealing with some of the power outages and things like that but really we haven't had.
Other than a few broken pipes and things like that they are really we feel fortunate as of right now within our communities and resorts and Texas.
That we haven't had more damage than and.
And we have so and we seem to be and pretty good shape right now.
Okay. That's good to hear and then shifting gears a little bit we look at resident move outs and the MH.
And RV space it looks like they ticked up to three three per cent for the year. What was the driver of this and how quickly do you expect to fill these sites.
Well I think that.
Yeah on the RV side. It was it was really more to do with our conversions earlier in the course of the year and.
And we have gained a lot of that back towards the latter half of this year and on the MH side I mean, what I can tell you is we've seen you know me.
More homes, and our particularly our brokered home sales business has grown considerably and morehouse and changing hands, which is good and it's healthy for the communities. So I think we're just seeing.
Additional activity that's happening.
But as I've shared and some earlier calls as well you know what we what we may lose you know from an occupancy standpoint, we're seeing and overwhelmingly come back in terms of the application activity for new people to move and as well.
Got it that's it for me thanks, guys.
Thank you.
Thank you. Our next question is coming from the line of Todd Stender Wells Fargo. Please proceed with your questions.
Oh, Thanks, just to stay on the rise of Bitch.
Brian for Fitch deal excuse me and.
And what were the terms on the new series I preferred O P units and how does that compare to the series H.
Well, let's see that one.
That one and I'm gonna have to.
Dig up.
But similar to our preferred O P and if there's gotta be a coupon right.
It's a 3% coupon and and series H three per cent also.
And there's a lockup period or some type of hold period that convert.
The com and at some point.
There is I don't think we have in front of it but we'd be glad to share with you.
Sure no problem and that's it for me. Thank you.
Thank you. Our next question is coming from the line of Josh and I, along with Bank of America. Please proceed with your question.
Yeah, Hey, guys.
Follow up we talked a lot about super yachts and interest made me think about how global industry.
Industry is.
And what's your appetite for international expansion on the Marina side.
And that's a great question I think that.
The seasonality that exist and.
And that a super yacht world of whereabouts spend their time and at different times of the year I think it will be logical to look towards a sister Marina.
And the areas of Super Yacht travel and I think we have identified a couple that are under consideration and discussion.
Based on for.
The vast experience of the great team that.
We're getting along with rigor, which and there our understanding of that Super yacht business. So we won't be jumping and running anywhere soon but I think that we will selectively look at and opportunity or two.
<unk> against.
And generally the trans Atlantic traffic that exists out of Rab of itch.
Okay interesting and so that sounds like a Mediterranean.
And expansion.
Mediterranean Mediterranean would be the logical spot.
Okay Awesome I appreciate that thanks, Thanks, Gary.
Yeah.
Thank you there are no further questions at this time I would like to hand, the call back over to management for any closing comments.
Well, we'd like to thank everybody for participating on this call and we hope that everybody stays safe and we look forward to speaking again after first quarter.
You.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Okay.