Q2 2021 Sun Communities Inc Earnings Call
Greetings and thank you for joining.
And for Sun communities second quarter, 2021 earnings conference call at.
At this time all participants are in a listen only mode.
A question and answer session will begin after the formal presentation.
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.
Thank you you may begin.
Good morning, and thank you for joining us as we discuss our second quarter 2021 results.
We are pleased with the continued outstanding performance of all our business segments.
And the second quarter, we delivered 61% growth and core <unk> per share to $1.80.
And as soon as compared to the second quarter of 2020.
Exceeding the high end of our guidance of $1.63, as our ongoing momentum accelerated beyond our forecast and expectations.
Comparing to a non COVID-19 impact quarter, our second quarter F O per share was 50.
3% greater than the second quarter of 2019.
This outperformance along with a positive outlook for the third and fourth quarters.
Once again led us to raise our core 2021, <unk> guidance range by 31 cents at the midpoint to 6.
15th on 25 cents this $6 and 37 per share the changes being driven by continued outperformance of transient RV marinas and the sustained strength and our manufactured housing portfolio and our robust acquisition activity, particularly as we begin.
Dollar and realize the meaningful marina and industry consolidation opportunity.
Complementing our operational performance was SUNS well received inaugural unsecured bond issuance following our investment grade rating from S&P and Moody's.
We issued $600 million of senior notes and an oversubscribed offering.
<unk> and mid June.
SUNS access to the bond market provides us with enhanced financial flexibility to most efficiently match fund our investment activities.
With a healthy pipeline of internal and external growth opportunities. We believe this was the right time for this step.
And we'll look to continue enhancing our credit metrics over time for improved ratings.
For the quarter same community NOI grew 21, 6% over last year, reflecting the continued demand and each of our segments and our favorable strategic positioning to capture that demand.
We entered the quarter with same community occupancy of 98, 8%, a 160 basis point improvement over the second quarter of 2020 with.
With manufactured housing same community NOI growing by 5.4% and RV same community NOI growing by 85.
And 1%.
Year to date, we have filled more than 1000 and revenue producing manufactured housing and annual RV sites and have delivered more than 580 ground up and expansion sites that will continue providing the runway for growth over subsequent quarters.
And so late deliveries of 1 of <unk> key levers that we anticipate continuing to contribute to our sustained growth profile and value creation.
As of quarter, and we had approximately 9400 sites available for development that we anticipate delivering over time.
<unk> also remained active and growing our portfolio, adding 18 properties and the second quarter and through this earnings call.
Playing over $719 million of capital and adding more than 5000 sites wet slips and dry storage spaces.
This brings year to date acquisition.
<unk> volume to over $853 million across 28 properties.
Our acquisition teams remain extremely active sourcing deals and channeling them through our underwriting process.
We are very enthusiastic about the opportunities we are seeing across each of <unk> businesses.
<unk>.
Excellent reputation as a transaction partner and our structuring flexibility it gives us access to off market transactions across manufactured housing communities RV resorts and marinas and subsequent to quarter and we completed the disposition of 2 manufactured.
Clothing assets that no longer fit our core strategy.
We sold these assets at a $4.3 cap rate, which we believe is a very positive indicator of the value and quality of our core portfolio.
Our RV resort business is benefiting from the demand for outdoor experiences.
And as we have been discussing throughout the pandemic once travel restrictions begin to lift.
RV travel quickly emerged as a vacation option of choice.
And importantly, even as broader travelers picked up it is clear that people, who have experienced the benefits of RV travel and the quality.
<unk> hundred amenities that Sun resorts offer.
Becoming repeat customers.
There has been no waning of demand for RV vacationing, even as other forms of leisure travel have become available and bounce back.
As John will discuss we are confident this segment will remain strong for several.
Our reasons, including a solid forward bookings for transient and our annual site conversions.
And our marine business.
Results continue to track ahead of underwriting and we are in the midst of and active boating season.
In summary, we are pleased with.
Our results and optimistic about our outlook.
We continue to achieve strong operational results and realized internal and external growth opportunities. Furthermore, with our equity raise and the first quarter and our recent bond issuance, we are well positioned to execute on each of these prospects.
Finally, I want to take a moment to recognize and thank the entire sun team for their unwavering hard work and dedication.
Our team members are the reason we continue to deliver the type of outperformance. We have been discussing we believe that 1 element of that success is our commitment to ESG matters.
Becoming increasingly woven into all aspects of our business.
As part of that enhanced focus there is 1 element I wanted to highlight today.
And are proactively adjusting our pay structure at the property level.
To ensure that pay is properly aligned with a number of factors including.
Which responsibilities 10 year service and appropriate living wages.
While this is resulting in a payroll expense increase were committed to making <unk>, the best employer, which will facilitate us and.
And <unk> to foster a dedicated skilled and healthy team.
<unk> I will now turn the call over to John to discuss our operational performance John.
Thank you Gary Sun delivered a strong second quarter across the board outperformed our prior expectations and RV marinas and manufactured housing.
Our results reflect the combination of the stability of our best in class portfolio.
And as well as the incremental benefits of our growth initiatives across our 3 business lines.
For the second quarter combined same community manufactured housing and RV NOI increased 21, 6% from the second quarter 2020.
The growth and NOI was driven by a 22, 5% revenue.
<unk> supported by a 160 basis point increase and occupancy to 98, 8% and a 3.3% weighted average rent increase.
This was offset by a 24, 7% expense increase compared to the second quarter of last year, when we had implemented expense saving measures.
Revenue bleeding furloughs of properties impacted by Covid related closures.
Same community manufactured housing NOI increased by 5.4% from 2020 and same community RV NOI increased by 85, 1%.
RV growth reflects both the impact from Covid related delayed opening of 44 of our resorts.
And cuda on last year's results as well as the incredibly strong transient demand this year.
Given the stay at home orders that were in place during the second quarter 2020. We think is helpful to look at these results relative to the second quarter of 2019.
For all of our comparisons to 2019, where.
Resort housing last year same community pool of 367 communities.
Compared to 2019, the portfolio's NOI CAGR was 9.7% and the CAGR for revenues and expenses were $8.5 and 5.9% respectively.
The RV NOI.
CAGR was up by 18, 6%, including a 19, 6% increase and transient RV revenues.
Looking at the most recent holiday weakens further illustrates how demand has escalated.
For Memorial Day weekend, RV revenue was up 39% compared to 2000.
Similarly for the fourth of July weekend revenue improved 35% compared to 2019, and 36, 5% compared to 2020, driven by a 10, 5% increase and occupancy and a 19% increase and average daily rate.
We are pleased that so many new consumers have recently taken.
The RV vacation.
Moreover, we are confident that many of these vacationers have discover the joy of RV travel and the quality outdoor experience at a sun RV resort.
Therefore, even as other forms of travel have reopened or deemed to be safe again, we are seeing demand persists through the second half of 2000.
'twenty 1.
I would like to highlight a few metrics, which illustrate the increasing interest and sun vacations, and the engagement and loyalty of our guests.
Traffic to our Sun RV resorts website was incredibly strong and the first half of 2021 up almost 80% from the first half of 2020 and 100.
And 58% compared to 2019.
Within this growth we are seeing a shift to a younger audience with significant increase and guests age 18 to 34.
Our social media efforts are attracting the largest following and engagement and the industry with over $1.3 million followers on.
On 3 of the largest social media platforms, Instagram TIK Tac and Facebook.
A big element of some vacation as the community and the activities. We provide and these channels are an ideal way to continue to showcase what we offer and to nurture communities element to drive repeat guests.
We're on the same community perspective, first time guests to our resorts increased 80% during the first half of the year compared to 2019.
We are also piloting a new RV resorts loyalty program, where guests can earn points for stays and redeem them for benefits discounts or free nights on future vacations.
But the.
And as the Sun portfolio and the geographic variety. We offer we believe this program will further encourage guests to choose the sun RV resort as their vacation destination.
As we look to the back half of the year are transient and forecast is trending 15, 2% ahead of our original 2021 budget.
There are.
The <unk> dynamics supporting the continuation of these positive demand trends.
1 is the strong sale of new Rvs. According to the RV industry Association 2021, RV unit sales are projected to be 34% higher than in 2020 and reach a new industry record.
Additionally, there are.
And a number of I'm missing venture backed platforms, including RV share and Outdoorsy, which allow owners to rent their personal <unk>, providing a new option for consumers seeking and outdoor vacation without the capital outlay of buying and RV.
And these platforms help activate otherwise idle rvs, which we believe will fuel additional demand for RV resort.
A few with respect to the total MH and RV portfolio and the second quarter, we gained 583 revenue producing sites.
Of our revenue producing site gains over 350 transient RV sites were converted to annual leases with the balance being added to our manufactured housing expansion communities.
With the increase.
And RV guests were able to realize the opportunity to convert transient sites to annual leases and achieve and average 50% increase and site revenues during the first year of conversions.
Moving on to new construction.
And the second quarter, we delivered approximately 220, new sites 100 of which were ground up developments.
<unk> and 120 or expansion sites.
The ground up development deliveries include RV sites at our newly opened camp Pimco outside of Austin, and Texas Hill country.
This marks the first delivery and a planned series of new ground up family focused RV resorts within 1 of our JV partnerships.
And those of you wondering.
<unk> stands for fun and it's more fun outdoors.
These completed expansion and ground up development sites will contribute to revenue growth and 2021 and beyond as they fill up and stabilize.
Manufactured housing home sales and second quarter is another area, where we saw a tremendous increase.
And as compared to the same period last year.
Total sales volume was up approximately 90% year over year, as we sold more than 1100 homes and the quarter.
Compared to 2019 this sales volume represents an increase of 25%.
We believe the growth is due to a number of factors.
Including pent up demand from limited home moves during the pandemic.
The attainable nature of the homes, and our communities and and increasingly tight real estate market.
And lower relative increases for the construction and material costs of our product versus site built housing.
Average home prices during the quarter.
Increased new and pre owned homes Rose 11, 6 and 23, 3% respectively and.
Underscoring the overall geographic mix as well as sustained demand for our product and the strong desire to live and a high quality Sun communities.
This favorable demand environment helped support attractive gross margin results.
Quarter for both new and Preowned home sales, which expanded 50 basis points and 14, 6 percentage points, respectively compared to the prior year period.
Additionally, brokered home sales volume was up 113% compared to the second quarter of 2020, but the average home value increasing by.
<unk> grew 6%.
In terms of our operations and our manufactured housing business, we are benefiting from sustained strength and fundamentals and demand for affordable housing.
Applications to live and a sun communities were up more and 20% compared to 2020, and the second quarter and year.
<unk> 28.
Turning to the Marina business, we ended the quarter with 114 properties, comprising nearly 41300 wet slips and dry storage spaces.
Which includes the acquisition of 4 properties for approximately $423 million completed and the second quarter.
Better than.
And expected performance for the Marina portfolio continues to come from demand for wet slips and dry storage spaces.
Same marina rental revenue growth for the portfolio 75 properties owned and operated by Safe Harbor since the start of 2019 was almost 17% for the first half of 2021 over 2000.
Year to day team.
This is a CAGR increase and rental revenue of 9.7% for the quarter and 8% for the first half of 2021.
Overall, the marinas are performing ahead of expectations and the safe Harbor team continues to source attractive acquisitions and as Gary discussed.
According.
And to the National Marine manufacturers industry.
Dealers are seeing record levels of demand.
New boat sales reached a 13 year high in 2020 and they remain at elevated levels with most recent reported sales data through March 2021 up 30% compared to the 2020 average.
In summary, we are very encouraged by our performance across all of our businesses year to date and our outlook for the marine gear of the year.
Secular demand trends are acting as a tailwind and sun has the platform and expertise to capture that demand and realize attractive growth.
The combination of the favorable macro environment.
Along with the strategy Sun has been implementing for years has positioned us very well to continue to execute on our initiatives drive industry, leading growth and create long term value for all stakeholders.
Darren will now discuss our financial results in more detail Caren.
Thanks, John.
On the second quarter Sun reported core <unk> per share of $1.80.
67% above the prior year and 17 cents ahead of the top end of our second quarter guidance range.
Outperformance was achieved across all business lines are.
<unk> business experienced higher than forecasted revenue, including rental home revenue and other community related fees and charges as well as lower than expected operating expenses.
Annual RV revenue as well as transient and vacation rental revenues drove strong results and the RV segment.
Partially offset by higher operating expenses, including wages and benefits utilities and supply and repair costs.
And the Marina business was bolstered by higher boat slip storage and service revenues offset by higher payroll costs as well as utility and repair costs.
And how during the quarter and subsequent to quarter and we've acquired over $719 million of operating properties, bringing our year to date total to over $853 million, adding 28 properties totaling over 7600 manufactured housing and RV sites Marina what.
And dry storage spaces.
To support our operations and growth activities, we have been active and enhancing our balance sheet and and capital markets activity, which provide the capacity and flexibility to pursue our ongoing growth pipeline.
As Gary mentioned, we are pleased to have.
Flip your investment grade ratings with stable outlooks from both S&P and Moody's.
We followed this news with a successful 600 million dollar and inaugural bond offering in mid June.
Additionally, during the second quarter, we drew on the remainder of the forward equity sales agreement, we had entered into in March.
A receipt.
We settled 4 million shares with net proceeds of $540 million. The majority of which was used to fund our acquisitions and pay down our line of credit.
Finally, we recast our revolving line of credit agreement.
We replaced the prior $750 million line.
March and safe harbors prior $1.8 billion line with a combined $2 billion revolver with a $1 billion expansion option.
We ended the second quarter with $4.3 billion of debt outstanding at a 3.5% weighted average rate and a weighted average maturity of 10.4 years.
And as of June 30th we had $104 million of unrestricted cash on hand, and a net debt to trailing 12 month recurring EBITDA ratio of 5.1 times.
We are raising our full year 2021 core <unk> guidance to a range of $6.25 to $6.37.
<unk> per share.
31, <unk> increase at the midpoint from our prior range, which represents year over year growth of 24% at the midpoint of.
Approximately 17 cents of the increase is due to our outperformance and the second quarter with the remainder due to.
Contributions from our recent acquisitions and increased expectations across each of our businesses, particularly transient RV.
This is offset by approximately $8 million of property level proactive wage increases for the remainder of the year, which Gary previously discussed.
Of which approximately half had been included in prior issued guidance.
Additionally, we estimate and impacted 11 per share for the remainder of the year from the settlement of the forward equity offering completed in the second quarter.
We expect core <unk> for the third.
Quarter to be and the range of $2 to $2.6 per share.
Representing 27% year over year growth at the midpoint on top of the 10% growth we delivered in 2020 over 2019.
We are also revising full year same community NOI.
<unk> growth guidance to a range of 9.9% to 10, 7% up 230 basis points from the previous midpoint of guidance of 8%.
This revised NOI growth range is inclusive of the aforementioned increased property level payroll expenses.
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. This.
This completes our prepared remarks, we will now open up the call for questions operator.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star 1 on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May Press Star 2 and if you would like to remove your question from Mchugh for participants using speaker equipment and may be necessary to pick up.
Up your handset before pressing and starchy. Our first question comes on the line of Nick Joseph with Citigroup. Please proceed with your question.
Thanks, very much and the robust acquisition pipeline and so I'm wondering if you're seeing any.
Differences and competition for assets and relative value between the different business lines.
Good.
The.
Competition stays pretty similar as to what we've expressed in the past.
There are.
A number of our newly formed platforms that we're encountering out there small to midsized looking to grow.
Sure.
Portfolio.
We announced the.
Sale of 2 properties.
As dispositions and.
And our earnings release that 1 too.
Group that is certainly growing their platform.
Lots of competition out there on that.
The RV side and we're starting.
You'll see it a little bit on and Marina side cash.
Rates are low.
No. It wasn't part of your question seemed pretty similar to where they've been and what we've shared in the past.
The MH and RV.
And generally for us and the 4% to 5 cap rate range and were seeing them.
Turning to even sub 3 and some cases so on.
A lot of capital looking to acquire fewer and fewer available assets out there today.
Thanks, that's helpful and you mentioned the dispositions.
How many more properties are non core and you know.
And what should we expect you to sell into this transaction market.
I think that.
John.
And would share these sentiments and feel free to add anything that.
We for them.
The time and do a very close look at our assets and generally.
Where we find assets that don't fit the growth pattern of the rest of the portfolio will look at the potential dispositions.
Have to go back I think all the weighted in 2014 or 15.
Through the last dispositions that we do.
And that sampling.
And best in class RV, and MH platform over the last 10 years or so and the industry.
There.
It is.
Just a little bit of calling that will take place every so often when we don't meet those growth growth trajectories or have other reasons for selling assets.
Are there any more properties.
Right now that aren't meeting those criteria that that could be sold and the near term.
There's a handful 5 or under properties that were identified on our <unk>.
Disposition list that may or may not transact and the near future.
Thank you.
Our next question comes on the line of Wes Golladay with Robert W. Baird. Please proceed with your question.
Yeah.
Hey, good morning, everyone I'm, just wondering with the strength youre seeing and the <unk>.
And RV does it make sense to hold back some of the annual RV sites at certain locations.
Hey, Ross this is.
John Yes.
Reiterating some of the metrics that we shared in the prepared remarks I mean.
The trends that we're seeing come into our communities in terms of web traffic.
80% increase and first time guests versus 2019, I think 1 of them more and.
Significant drivers that's contributing is.
And we've talked a lot before about having 11 million registered rvs out there against about 1 million sites.
But when you have platforms like Outdoorsy and RV share like I mentioned earlier that really makes that number feel a lot higher than that and we don't know what it is can be.
12 million and can be <unk> 13 million and.
Idle Rovs are engaged throughout America.
So the activity is pretty incredible.
That said.
We have always been in that realm of a 1200.1100 conversions that we would do and 1 on things that we do.
On a continual basis throughout the portfolio is look at each property on a site by site basis and.
And derive the right balance between revenue on a per site basis versus whether it remains a transient site or becomes and annual site and as you can see we still and we will continue to grow the annual.
Side of the business as well because we have converted over I think 744 year to date, which is ex and tracking a little bit elevated from what we'd do on a normal year basis. So in a nutshell. It really is kind of a balance on a property by property basis, which we will be watching vigilantly as we always do for execution.
Yeah.
And <unk>.
Got it and then when we look at the marinas you obviously acquire another pretty fast clip here have you started to redevelop any of the site that you've acquired already.
Yeah, It's Gary.
Absolutely and there is a.
As we discussed [noise] excuse.
Thing.
Higher demand for our <unk>.
Bigger steps longer slips is both being.
So tend to be.
And longer in length, so where we can convert smaller slips into those and higher demand.
On the longer slips that continually.
<unk> and place.
Not too distant future, we will look to open a brand new and Marina development, which strategically is directly across the river from the Lauderdale Marina that was just acquired so we'll be able to expand.
And that Marina facilities. So it's an ongoing process that safe Harbor and management has done very very similar to Sun's MH and RV platform on studying.
Listing assets.
And creating value out of a redeveloped and reinvest and.
Capital, where we can.
Got it and I just have 1 quick modeling question do you have that new metric the srd theres a lot of seasonality to it should we expect <unk> results to be largely comparable to <unk>.
Yes.
The Q3.
Results.
As we mentioned are highly.
Driven on transient RV and and Marina.
And so in the Marina side, it's service really.
Driving it and on the RV side.
And retail dining entertainment and and other fees and charges. So.
I would expect continued outperformance from those.
And those areas in Q3.
Got it thanks, everyone.
Thank you.
Our next question comes from the line of Keegan Karl with Bahrenburg. Please proceed with your question.
Hey, guys.
Taking the questions I think for US just given all the recent transactions and the Marina space as their percentage of the business that you'd actually cat Marine and revenues that are you going to continue to be aggressive just given the attractive cap rates you're seeing.
Yeah, and I think what we share when we.
Acquire.
Thanks, and then.
The transaction was safe Harbor debt.
Safe Harbor rental income would represent about 7 and at that time was about 17% of Sun rental revenues. If you fast forward to today, even with all the acquisition Thats true.
Wireless.
And represents about 18% of our rental revenues.
The goal initially share with our stakeholders similar to what we did and the RV business we grew.
RV rental revenue from about 11%.
And the mid 2 thousands to about 25% to 30% today.
And are we would be prepared at the time my remarks were to go to 20% to 25% of rental revenue and.
Marina.
But as it happens we've been very successful.
And play with a continued strong pipeline on the MH and RV side. So we moved the needle about 1 percentage point with all the marine acquisitions today.
Got it and then as far as the Marina acquisition strategy should we expect more yacht focus marinas and the future.
The cap.
False compare on the east you see on traditional Marina.
Yeah, similar to real estate, it's all about location and demand in any given area and I'd share Big picture that are very similar to what we accomplished.
At Sun, and RV and MH, we focused on.
Cap rates coast.
And we're very strong we're very strong in Florida and Safe Harbor is moved up the coast to the north all the way to Maine as Safe Harbor is doing to create.
Footprint that the.
And the members that safe Harbor and travel within the system.
The ease of Safe Harbor, we think that's true.
And a differentiator and if you will from the strong platform the safe harbors created and creating and then we will move to the West coast very similar to what we did and MH and RV, we've already begun our efforts there with several acquisitions.
On the West Coast, and we will look to create membership pattern and traffic up and down the west coast as well from areas like Seattle, all the way down to San Diego.
And the goal again is to create a consistency and our quality.
And.
Sure.
Expectation throughout these safe harbor membership so.
The goal is they actually will never want to stay anywhere, but a safe harbor.
<unk>, if we can provide the footprint for them to do so.
Got it and just 1 final 1 on the investment grade.
Ratings that you guys received can you maybe go through the process.
And you went through working with the ratings agencies and was it ahead of your internal expectations to receive them.
I'm sorry could you ask the question again was it ahead of our internal ex US we worked through it I think it was.
If anything faster than we would have expected.
When we made the decision and it's something we review as part of our first quarter review with our board of directors and senior management.
Reviewing all things sun, including the balance sheet.
We determine that the timing seemed right.
And I think to all the work that's gone on the SUNS balance sheet its history and the fact, there was investment grade investment grade rated.
Prior to 2000 and for assisted and very fast approval and the investment grade rating that we saw our goal is.
The <unk>.
<unk> to work with the agencies and demonstrate.
A process that can improve the rating as we move forward.
Got it thanks for the time everyone.
Our next question comes from the line of Samir Khanal.
And with Evercore. Please proceed with your question.
Hey, Gary I guess my question is around the acquisition pipeline and then you've been very active on that front.
Looking at the numbers you could do more than a point and this here and when do you do you think thats sort of sustainable and to even next year as we think about New York growth profile over the next 12 to 24 months.
Given and the amount of capital.
Chasing deals today, and just when I kind of get true view on that.
It absolutely is a great question Samir each year, we're faced with that same question externally and internally we've been very fortunate.
They are a great acquisitions team and now we have a great acquisition teams if you wilkesboro.
The Marina acquisition teammates Safe Harbor has joined the company.
Along with our existing MH and RV team.
It's getting harder and harder there is more and more competition.
From small investors as I said earlier, all the way to big platforms that are out there that are well.
Plus the 10.31 exchange competition that's out there.
<unk> has made it more and more difficult in general 1 of the things that has succeeded helped us succeed and our acquisitions as the deep relationships the deep history. The fact.
Well cap we've been so acquisitive for the last 10 plus years.
And there really isn't a transaction.
That happens out there on the MH and RV space that Sun doesn't have an opportunity to take a look at or isn't brought.
To that transaction first.
Fact that are off market and that's where we've been very very successful theyre not.
Brokered they come directly to us and others, we're very competitive and the auctions with the brokers but.
We're not chasing things.
That don't work for our growth pattern and so the short.
So I'm sure as it's becoming more and more difficult I think we will continue to be successful.
View that we have another pipeline right now is pretty similar.
We've shared over the last few quarterly calls we will look to continue to ramp up our new community development I've indicated we've.
And on 8400 sites currently under contract and various forms of either closing or entitlement and zoning efforts and where we can build communities to high single digit Unlevered IRR on <unk>.
Stabilization, we will look to continue.
Got it but to ramp up that business over the next 3 to 5 years and if we should fall short at all on the acquisition area, We think will more than make up for the growth on the new community development level.
Thanks, Gary that that's it for me.
Thank you.
Our next question comes from the line of Joshua and General line with Bank of America. Please proceed with your question.
Yeah, Good morning, Gary Gary and John I Hope, you're all well.
And I'm curious on the R&D side, I know at NAREIT, and we discussed the rollout of your can spot that debt.
RV revenue management system.
How much of a contributor of that is driving the strength and transient arby's.
Hey, Josh Good morning, John.
And obviously as a significant contributor.
More than anything else with camp spot from the reservation process and the fact.
The system itself.
And as a built in and algorithm.
Debt.
Yes for the most efficient rate and occupancy equation.
Helps kind of.
Described before I mean every time every weekend and come along every week and the portfolio and sort of.
And I can put and the jigsaw puzzle together.
And those maximizes that grid.
<unk> and the system and that's just.
But that's just a piece of everything thats contributing on the RV side because it can also go the other way, which is from a revenue management standpoint, and if we've got some lower occupancy weekdays.
We can actually adjusted.
And so its downward to fill more occupancy and the community and so what we're able to do than just like we've done historically for years.
<unk> had a significant focus on.
On the shoulder months associated with our <unk>.
Snowbird season now.
Now, we have sort of shoulder days associated with every week and so.
And the radian and those contributions come in by moving up and down in terms of rate as well as the grid and the occupancy within a given community.
Okay, No that's great great to see and then and kind of looking at page 20 Chair stop there's a there's a column on the table called growth.
Growth projects.
I don't know, if that's new or not but I noticed it was yep.
2019, it was it was.
A lot smaller than it was in 2020 and 'twenty 'twenty 1.
Curious if most of this and most of these growth projects are being driven by our debt marinas.
Well Josh.
She noticed that it used to be called revenue, producing and or without the marina portfolio and we check.
Folio and we changed it to growth projects. So you are correct. There is a piece of this is what these projects are projects that are either revenue producing or ex.
Expense savings so they include.
And things like our solar project other utility conservation projects.
For this from the Safe Harbor side it includes that.
Flip configuration, and dry storage improvements and some of them some of their.
Water suite.
Rental boats that they're that they're.
Including so about $11 plus million dollars of it is from the MH RV side and the remainder of it is safe Harbor.
Thanks, Karen and I appreciate it.
Great.
Yeah.
Our next question comes from the line of John Polaski with Green Street Advisors. Please.
Please proceed with your question.
Hey, good morning, Thanks, a lot for the time just like the follow up on Josh and his question there John and just like to hear how you think through the intermediate term trajectory is just total RV and net dollar so Scott camp spot rolled out some of those trends and demand will probably go away, but other.
No other sources of demand and a post COVID-19 world will stick so.
Oh, absolutely RV dollars go down over the coming years will go up and just help me think through the stickiness of this demand and you're saying.
Yeah, Great question, John I appreciate it.
I've got a whole bunch of metrics and I can go through here.
And this is.
Thank you.
And you look at the growth, we've had and army CPD and Hawaii, 85% and second quarter.
And you look at the Memorial day holiday revenue growth that we've had for memorial day, and fourth of July on 39% and 35% versus 2019.
And you look at a really healthy.
A healthy split and how that growth has happened between occupancy and ADR. We have on the communities our web traffic being up 80% versus the first half of 2020, 158% versus 2019.
And then 82% increase and travelers aged 18 to 24.
39% increase the travelers age 35.
Excuse me, 25% to 34.
$1.3 million followers on Instagram ticked off on Facebook.
RV IAA.
RV industry Association estimates and there'll be 575000, RV sales and 2021.
And if you look at it and 80% increase and the first first time guests to the Sun.
For sure some people will revert back to old vacation habits, and it'll take trips and we'll get on airplanes, where CMS today, you can't read a paper without seeing how much airline travel and picked up I'm heading down to the airport tomorrow.
<unk> I'm glad I'm unclear, because hopefully I'll get through fathom and because of their diseases at the airport and.
And but the prospects for RMB frankly have never been stronger and just the fact, there's so many new people that have come in and enjoy the outdoor asset class, we will retain zone. Okay. So it's incrementally.
Better for Us and then finally.
I think you really have to consider the new entrants in this space that are getting a lot of capital behind them like Outdoorsy and RV share for all of those rfps that are sitting on people's yards, and driveways that are being activated accounts. So instead of a $11 million our views.
For every million sites. There are it really feels like a lot more than that and I think we're seeing that come in so I've said it for.
For a number of calls here, but and.
And Gary has to this discovery is for real and.
It's all good because incrementally will pick up more than we had before.
Okay.
Understood that certainly powerful statistics and do you sense. If you had debt. If you had a bet on it is your sense that just take year to date $170 million and RV revenue is that sustainable base to grow off of these next few years.
Okay.
Yes.
I think we're all I can say on <unk>.
Yes.
We had been growing for the last 10 years at a very healthy rate. So as John said, if we just continue growing the way, we've historically grown and have any incremental percentage of all the available demand going forward.
And even if some of it subsides.
We should be able to continue to deliver.
Very good returns.
To the shareholders.
I just would add 1 thing to it I think that I wouldn't want anyone to under.
Over.
Look let me put it that way and overlook the strategic planning that goes into our acquisition activity I touched on and a little earlier building traffic patterns on.
Both coast North to South.
And to north and east to West.
And when we're out there acquiring and whatnot.
And just not.
Acquiring to become larger and.
We are acquiring to create.
The set of assets to keep people much like safe Harbor does with and the Sun RV resort.
Graham.
And when Kevin touched on it but we have a big loyalty program.
Colorado branding efforts and things that Youll see rollout over the next 12 months or so.
And they're very much associated with.
<unk> generated more sustainable loyalty within the brand.
So I think we feel very very positive.
As best we can.
And on out.
As to the growth we can continue to sustain here.
Understood. Thank you for all the comments just last quick question from me.
The safe Harbor folks expect drought or any other severe kind of weather related impacts on revenue and and the near term.
Looking its a great question. The answer is we do not okay, but that being said it's hard not to.
Pay attention.
To all the climate concerns that are out there today.
And certainly.
And we're very focused on and is in.
And the entire company when it comes to Safe Harbor, you may recall.
And reviewing the transaction at the board level, we focused very much on climate.
Thoughts and process and climate change and the financial impacts the first.
And that we did.
It was to look at.
Increasing our property and casualty insurance related to named storm impacts and so we've done that already post acquisition and Safe Harbor.
Had.
Done a brown University.
First thing on study on climate control and it was headed by Professor I think his name was Curtis evolving.
And it indicated on a present value worse case scenario looking out over 15 years, there could be $10 million of ground damage.
And.
I'd just suggest that's.
The fact that 90% on the Marina.
Assets are on the water and they float up and down with the water level, it's and impact on what happens on land.
And then subsequent to the acquisition further focus.
Safe Harbor has re engaged with Brown University.
Due to that expecting over the next quarter or so the results of a.
New updated climate impact on the Safe Harbor Marina. So we're looking forward to sharing that with everybody as we get that completed over the next quarter or 2.
Okay. That's it for.
And we're very much.
Okay.
Our next question comes from the line on Michael Goldsmith with UBS. Please proceed with your question.
Good morning, Thanks, a lot for taking my question Marina NOI doubled from the first quarter to the second quarter I think the guidance at the beginning of the year called for a 60% sequential increase.
Thank you for quiet and Marina since then but can you help me breakdown.
And where that outperformance came from.
And I.
I would think.
And referring to the increase and Marina NOI, it's really based on seasonality right.
Arena seasonality.
And the lowest in the and the Q4 mm.
Q2, I mean.
Q1.
Q2, and Q3 are the highest marina.
NOI generations.
So I think I'm.
Probably looking at the seasonality.
And back.
Is that growth as well as what you mentioned their acquisitions.
And we can discuss that offline.
The guidance for the implied fourth quarter core <unk> of.
2019, and 125 day mid points, a little bit lower than what you guided to at the beginning of the year.
Or what was implied debt is there is there more than just share issuances and wage increases and the in the fourth quarter, and then that amounts to 3% to 8% core <unk> growth on that.
And on a more normal comparison is that a good way to think about kind of the future runway rate of growth.
<unk>.
To your first point and in Q4 and.
Again, I think theres, some misalignment of seasonality on on.
Estimates and hours and analysts I think.
The impact of the equity offering as you mentioned is in there and Q4 and.
And there is not only the higher level payroll costs.
Also a $4 million of costs associated with the branding of our RV platform.
And Gary mentioned and.
And some higher corporate wages and incentive comp based on outperformance that we had been experiencing.
And as an organization and I am sorry, what was your other question.
So the implied fourth quarter, <unk> growth and implies 3% to 8% growth over 2020. So is that kind of like a sustainable.
Way to think about how F O.
And could grow going forward.
Yes.
Thank you very much.
Our next question comes from the line of Brad Heffern with RBC capital markets. Please proceed with your question.
Hi, everyone.
On marinas and sort of a follow up to the prior question.
You've done all the acquisitions and you mentioned that the underwriting has been exceeding.
Sorry, the performance and thanks eating the underwriting expectations can you give any sort of like round number as to and <unk>.
And then run rate NOI is as we sit here today.
Hum.
Okay.
What I could say is that for the second quarter.
And Marina outperformance.
Was.
Higher than our internal estimates by about $9.5 million.
I think going into the remainder of the year.
Our guidance range of 31 includes about.
9 to 10 cents.
Our guidance raise range I should say, it's 31 cents includes about 9% to 10.
From.
From the Marine segment.
Yes, okay, Okay got it.
And then you all mentioned that you have and.
New development newly.
<unk> developed Marina coming on line.
Across from Lauderdale and.
Is that likely to be.
A significant.
And the source of organic growth going forward is that sort of just a 1 off or is it something that youre going to devote more capital to newly developed marinas.
I would like to think we have more opportunity there, but due to the.
Difficulty.
And length of entitlement and and the ability.
And to build new marinas.
It's likely to be more of a 1 off and I would expect we'll have other 1 offs, but.
Not a lot of opportunity.
And to build new Marinos and that is 1 of the things that attracted us to the Marina platform very similar.
Similar to what attracted us to manufactured housing and their V platform.
Yeah, Okay. Thank you.
Sure.
Our next question comes from the line of John Kim from BMO Capital markets. Please proceed with your question.
Thank you John you mentioned.
And the typical 50, 50% increase and revenue you get when you convert transient rovs to annual seasonal.
But can you talk about the conversion rate has that changed or come down dramatically just given the change and demographic of your transient RV customers.
And so in fact, it's running and it's tracking ahead.
744, and that we've done I think some of this is a product of the increased demand and where Siemens and the asset class.
And with more people come to us and resorts and more activity and interest and the resorts, but also frankly.
Talked about this for years.
Experience and they're having and.
And so it's a pretty logical thing for people that really want to be and the outdoors and rather than coming to a resort.
And perhaps staying at a different site every time, you come and you start to.
And gain friends on people that you hang around with and the resorts.
They like to congregate together and so we're.
And we're really pleased with the success and I.
And would actually say that I don't think that we would.
And do a little bit better than the normal until 11 hunters and we do on an annual basis.
So you had 17% same store revenue growth and annual seasonal and is there upside to that number in future quarters.
Yeah.
It's a tough question.
We look forward to reporting.
And third quarter and sharing that with you, but I think that our underlying.
Message would be that on top of the type of.
RV and MH and Marina.
Growth with just sticking with the <unk> for a moment that we've been experiencing with the <unk>.
Expansions and with the development and particular in the RV space and.
Anything that we gained from the wind at our back under the unfortunate circumstance that there was perhaps.
A direct result.
Result of the pandemic and different travel choices and patterns.
And this movement outdoors will help us.
Sustain if not improve the kind of growth we're seeing right now.
Okay.
I noticed your net debt to EBITDA and went down and turn this quarter to 5.1.
How much is just going to jump around going forward and I realize it's a trailing 12 month EBITDA number but.
I'm not sure if there was on something unusual with service retail and entertainment and our lightest quarter.
Also I noticed that there.
EBITDA and included asset sale gains and I'm not sure if he can and do a lot of dispositions going for.
Like how much is this 501 and can move and.
And I'm kind of coming quarters.
Our debt the drop is really from and basically seeing the impact of safe Harbor and other acquisitions in our EBITDA so fully.
Finally, having the EBITDA in our earnings because.
On a trailing 12 months.
You didn't have that so if you if you did it if you looked at that 5.1 today and you're fully loaded it for additional.
EBITDA and thats, not and that trailing 12.
Would be about 4.8 times.
And we've said before we're comfortable in the mid.
This is on lives but.
On.
Going to those levels is going to be transaction related.
Okay.
So it shouldnt be jumping around too much now except for based on acquisition EBITDA.
Okay, Gary can you.
Claire.
Verify and I'm not sure if you stated it but the cap rates were on your 2 image dispositions this quarter.
4.3.
Average fourth rate. So we were very pleased with.
The fact that the market supported.
And that type of cap rate for those properties.
And the rationale and.
And multiple bidders.
And I am sorry go ahead.
I would say the rationale was there were I think slower growth, but are you also making.
And our statement about some of your Midwest exposure.
I'm not at all.
Asset manage and just really.
And looks at the expected 5 year growth within the core portfolio and this goes with our acquisitions as well as well as our dispositions, we try and match so that things are equal to or accretive to the core portfolio.
That's why we always say when we're acquiring something cap rate is important but more important the growth patterns and how.
How we can achieve equal to or greater growth and the portfolio too.
And to support our historical returns on a per share basis same with dispositions.
And these would be ones that typically wouldn't support that type of growth or would require a significant amount of capital investment to do so and therefore.
John and his team determined we could redeploy the capital and better ways.
Okay and my final question.
Your 80% increase in website traffic to Sun RV resorts website.
Can you talk about the advertising dollars that you spent to generate that traffic.
And does that go on and <unk>.
Okay. That's fine thank you.
There are no further questions and the queue I'd like to hand, the call back to management for closing remarks.
Yeah.
Thank you everybody and we certainly were very very pleased at the.
And so for this year and look forward to sharing with you.
Progress on the next quarterly conference call and be safe. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.