Q1 2022 Sun Communities Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for standing by welcome to the Sun communities first quarter 2022 earnings Conference call.
At this time management would like me to inform you that certain statements made during this call which are not historical facts may be deemed forward looking statements within the meanings of the privacy of the private Securities Litigation Reform Act of 1995.
Although the company believes the expectations reflected in any forward looking statements are based on reasonable assumptions. The company can provide no assurance that its expectations will be achieved.
Factors and risks that cause that could cause actual results to differ materially from expectations are detailed in yesterday's press release and from time to time in the company's periodic filings with the SEC.
The company undertakes no obligation to advise or update any forward looking statements to reflect events or circumstances. After the date of this release.
Okay.
Having said that I would like to introduce management with US today, Gary Shiffman, Chairman and Chief Executive Officer.
John Mclaren.
President and Chief operating Officer, Karen Dearing, Chief Financial Officer, and Fernando Castro, Parachini, Senior Vice President Finance and capital markets.
After their remarks, we will have an opportunity to ask questions.
I will now turn the program over to Gary Shiffman, Chairman and Chief Executive Officer.
Mr. Shiffman, you may begin.
Good morning, and thank you for joining us as we discuss our first quarter 2022 results and growth initiatives.
And provide an update on our outlook.
As anticipated we delivered another strong quarter.
Building on 2020 one's momentum and positioning us for another solid year.
Execute on each of our growth pillars, including organic growth accretive acquisitions and developments.
Quarter core <unk> per share was $1 34, which is the <unk>.
Six 3% increase over last year.
Ongoing demand for attainable housing and affordable vacationing.
Used to be evident in our platform is driving compelling ongoing organic growth.
Patients to live in a Sun community increased 6% and same property occupancy increased 160 basis points over the same time last year.
Revenue producing sites increased by approximately 30% compared to the first quarter of 2021.
The majority of those were conversions of transient RV annual RV leases.
Binds us 50% revenue uplift within the first year.
In terms of acquisitions in the first quarter and year to date through this call. We have completed approximately $1 $6 billion of transactions.
Including the 950 million pound.
$1 $2 billion acquisition of public holidays.
We are pleased to have completed the acquisition of the park holidays portfolio.
Expands our total addressable market and takes advantage of our relative cost of capital within a very fragmented U K America.
The acquisition of these 40 properties. Many highly desirable decided locations provides sun with an additional platform for growth, Brian that our expertise and proven track record.
Our nowadays is a mirror image of our manufactured housing business with the same supply and demand drivers Nike revenues.
Eileen experienced and dedicated management team.
Manufactured housing business ended the quarter with 96, 7% total portfolio occupancy a 20 basis point increase over last year.
With compelling demand tailwind, we are continuing to pursue greenfield developments and expansion opportunities.
<unk> is uniquely positioned to capture this opportunity.
Our experienced development platform and team play.
Played an important role since we've developed our first communities over 30 years ago.
Within the RV business robust demand continues as many new guests discover the joy and affordability of an RV vacation expense.
So it's only accelerated over the past two years.
First quarter same property RV revenue growth increased 25% compared to 2021.
Furthermore, and outdoor industry, leading monthly research report in March.
That 50% of campers have already booked trips for 2022, indicating the ongoing outdoor vacationing demand.
Yeah.
Our marine our properties have also continued to perform well overall performance exceeding our first quarter expectations.
Same property marinas produced a seven 7% revenue increase this quarter compared to last year.
Yeah.
During and subsequent to the first quarter.
For marine as to our portfolio.
New locations strengthened safe harbors network effect as the largest operator marine nodes in the United States.
It also gives new boat owners and used boat owners additional opportunities to join our safe Harbor members.
Yeah.
Additionally, as you may have seen in our recent press release I'm excited to announce the promotion of Fernando Castro to executive Vice President and Chief Financial Officer effective may 2nd.
I'm pleased to have both Fernando and care and with US on this call today.
To your questions.
Aaron will play a key role in the CFO transition.
Staying on as an executive officer, leading the UK integration efforts.
<unk> got other corporate initiatives.
He has deep experience integrating many acquisitions, including large corporate transactions, such as American land lease airfreight and safe Harbor.
With strong a cycle tested record operating expanding and acquiring communities.
Favorably positioned to continue to deliver solid results.
A macro tailwind, we're seeing support growth across the business.
The demand for attainable housing outdoor vacationing Marina slips in storage that sustains through economic cycles.
Sun is uniquely positioned to meet these customer needs.
Furthermore, with the closing of park holidays, we look forward to continuing to establish a presence among the fragmented U K market.
Our highly talented and experienced team across our entire organization.
We are excited about the opportunity.
Turning to Bill and some best in class platform.
I will now turn the call over to John and Fernando to discuss our results in further detail.
Thank you Gary our team delivered another excellent quarter of operational results.
On the same property MH and RV NOI growth for the first quarter was seven 7% to 150 basis point increase over the high end of guidance.
This was driven by a nine 2% increase in revenues offset by a 12, 7% decrease in property operating expenses.
Our performance during the first quarter was driven by annual RV revenues, given increased annual RV conversions and transient RV revenues, which benefited from a full return of our Canadian snowbirds and strong rate and occupancy growth in the first quarter.
The weighted average rental increase was four 2% for the quarter and occupancy increased by 160 basis points.
Marina same property revenues were up seven 7% for the quarter driven by rental rate occupancy gains and transient revenues.
Same property Marina NOI growth was one 2% as certain expenses were unseasonably higher during the first quarter.
The first quarter is the lowest contributor to NOI from a seasonality perspective at 18% and therefore higher expenses had a disproportionate impact to NOI growth.
That said current demand leasing activity and forward visibility into the strong start to the summer boating season helps us reaffirm our full year NOI growth guidance of six to seven 4%.
Performance for the overall Marina platform exceeded expectations as we also experienced stronger demand for service.
Members.
Our acquisitions of approximately $1 $6 billion during and subsequent to the end of the first quarter.
The 41 U K properties with over 16700 sites and for Marine engine with nearly 900, wet slips and dry storage spaces.
This also includes Sandy Bay and popular Southern England decide retirement manufactured housing community for approximately $184 million consisting.
Approximately 600 occupied sites with an additional 600 expansion sites, we expect to build out over the coming years.
Additionally, we disposed of three assets in Florida in the first quarter for a total of $29 $6 million as we continue to optimize our portfolio.
As of today, our total platform includes 644 properties throughout the United States, Canada, and the United Kingdom.
As Gary mentioned applications to live in a sun community increased 6% compared to the first quarter of 2021.
Quarter unsold over 800, new and pre owned homes in line with last year.
Our new home selling price increased by almost 17% to almost $180000 and we maintain margins compared to last year.
Additionally, our brokered homes selling price increased by 35, 4% in the quarter, which demonstrates the value proposition for residents who come to live in a sun community.
Our total portfolio occupancy as of March 31 was 97, 5% and during the quarter. We gained 670 revenue producing sites with the majority being RV transient to annual lease conversions.
Funds inventory of nearly 11000 zone entitled manufactured housing and RV sites provides sun with an investment pipeline to fuel growth for many years as we execute on our development plans.
In addition, we have a significant pipeline of land for future development within the entitlement process that will enable us to be in a position to meet increasing demand for attainable housing across the country.
Yeah.
We plan to start development of five new Greenfield manufactured housing communities in 2022 with two communities actively under construction today with first phases not just been to open late this year in Colorado and Florida.
Forward bookings for our son on an operator RV resorts are pacing approximately 5% ahead compared to the same time last year for the second quarter.
As you will recall the second quarter 2021 delivered strong results as all resorts were open in very high demand.
They're pacing, 13% had been second half of the year.
Our RV same property NOI growth of almost 23% compared to the first quarter of 2021 shows the continued demand for outdoor vacationing, which benefited from the Canadian border being open for our snowbird resident and Cvs.
There's a lot of conversation around the potential impact of inflation rising gas prices.
We're also pleased to see the continued strong forward bookings for the remainder of the year, which we believe is a solid indicator of an RV vacations continued desirability.
Operationally <unk>.
A very positive quarter due to the diligent effort of all team members.
And Andrew will now discuss our financial results in more detail Fernando.
Thank you John .
I would first like to say I'm honored to be assuming the role of CFO son is a tremendous company and I look forward to continuing to help drive and support our growth.
I'd like to thank Karen for her mentorship and guidance through the years and look forward to collaborating with her for many years to come.
For the first quarter Sun reported core <unk> per share of $1 34.
Representing six 3% growth over the first quarter of 2021 and seven.
Head of the top end of our first quarter guidance range.
We've had an active year to date on the capital markets front closing on the park holidays transaction on April eight at a purchase price of approximately 950 million pounds, which was funded entirely on our new 4.2 billion dollar multi currency revolving credit and term loan facility.
Additionally, we settled forward equity contracts on approximately five 2 million shares for $935 million of net proceeds.
These proceeds were used to pay down U S dollar borrowings on our credit facility.
In early April some issued $600 million of senior unsecured notes net proceeds were used to pay down the remaining U S. Dollar balance on the revolver in conjunction with the unsecured notes offering some settled for 10 year treasury rate locks totaling $600 million for a payment to the comes.
Many of $35 million lowering our effective interest rate on the notes from four 2% just 3.6%.
We have approximately 1.2 million shares or $230 million of forward equity contracts outstanding after selling 600000 shares at the end of the first quarter.
As of March 31.
Sun had $6 $1 billion of debt outstanding at a 3% weighted average rate and a weighted average maturity of eight one years, we had $90 million of unrestricted cash on hand, and a net debt to trailing 12 months recurring EBITDA ratio of five nine times.
Our pro forma leverage on a fully loaded basis for all acquisition and capital markets activity to date is in the mid five times.
Given our outperformance for the first quarter and outlook for the remainder of the year, we are increasing our full year <unk> per share guidance range to $7 20 to $7 32, which represents a one 5% increase at the midpoint.
All year manufactured housing in Rd same property NOI growth is increasing to a range of six 5% to seven 3% and we affirm our full year Marina same property NOI growth that six to seven 4%.
For additional details and second quarter expectations, Please see our supplemental disclosures.
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 concludes 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.
I'd like to ask a question you May press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Keegan Karl with bare Berg. Please proceed with your question.
Hey, guys. Thanks for taking the questions maybe first just on your MH and RV same property NOI growth divisions can you give us a little bit more color behind what's driving it.
Thank you Dan.
The outperformance in our in the first quarter on MH and RV same property was really driven by the RV portfolio with with stronger performance from the annual side as we had as we exceeded our expectations of conversions of transient sites to annual leases as well.
I'll add on transient revenue.
Both from a b performance of four for the quarter based on based on the comp against the first quarter of 2021, where we had where we were affected by the Canadian border closure and the Californian stay at home orders both of those as well.
A little bit of outperformance on the MH side led to led to our seven 7% combined our NOI growth.
Got it just wanted to transit real quick I mean, how is it trending versus your previously issued guidance.
It's trading as well.
No.
But for now.
And again, it's really rounding.
The expectations for our for the remainder of the year and for our original budget R. R.
Our head of our original expectations for the for the year, we would be forecasting.
This is inclusive of the first quarter.
We're between 11% to 13%.
Growth in transient RV.
Got it.
Shifting gears, a little bit here as far as disclosure for holiday parks that I saw you guys classify that as MH acquisitions.
Just kind of curious what the rationale is for this why maybe you're not breaking out as a separate entity and then finally I mean should we expect these will be reported in the MH RV bucket going forward.
As far as reporting goes I think they will be.
The MH RV bucket going forward.
And our view on them as we've shared is that.
There are even more permanent than our manufacturing housing.
Homes here in the U S and that they're actually a truck on a laurie to the site craned onto the site.
Tied down to the ground and they do not have the types of wheels and axles.
We have here in the U S. So there is permanent as they can be than the fact that the <unk>.
Average licenses as they call them there as opposed to leases on 20 to 30 years.
It makes it kind of what we would consider the quintessential.
Land lease type community so.
Yeah.
As about as much as we can compare to manufactured housing as we've seen out there. They do they they are second homes. However, they must have.
They have a primary residence in order to acquire and.
Can be licensed and a holiday park and.
Primarily there.
Therefore.
<unk> as a secondary.
Got it got it very clear.
Equally are there the team will be going through just like they did for the marine and still be going through all of our reporting and all that.
Considerations regarding segment and supplemental reporting and and really create the most transparent way to give you.
The parks and particularly you know planning for them.
Going into the future and being included in same community, but we do.
We see them as manufactured housing.
Got it very helpful. Thanks, guys.
Our next question comes from the line of John Kim with BMO Capital markets. Please proceed with your question.
Hi, good morning, congratulations to Karen and Fernando.
The Marina performance NOI came in a little bit light due to higher expenses as you alluded to.
I was wondering if you can break down the same store Marino revenue and expense guidance for 2022.
Sure. John This is this is fernando so we are on the NOI side are we affirmed guidance at six to 7.4.
Percent. This would this would translate to.
At the midpoint to revenue growth of about 6% and expense growth of about 5%.
So why was the first quarter unusually high and expensive.
Well, it's a little bit higher due to due to utility costs in the quarter that were unseasonably higher but the as we look at as we have visibility toward the remainder of the year both from a top line and expense standpoint, we did make maker.
Just minutes Ah that that will that will help us hit the original guidance of six to seven 4%, we had stronger a stronger revenue growth on the wet slip and dry storage spaces.
And overall, the Marina platform did exceed our first quarter expectations with stronger stronger service demand from from our members.
Okay.
And then John mentioned in your prepared remarks that forward bookings for Rvs are trending 5% ahead of last year in the second quarter.
Your guidance for same store I'm H&R V. It's just three 9% at the midpoint.
What's the offset to the higher demand you're seeing on the RV side.
John .
The answer is that.
It is it would it be an offset from a from a comp standpoint, we did have the first quarter of 2021.
Where we we had around $6 million less.
In that quarter because of the Canadian border closure, and the California stay at home orders than we would've expected. So the we're not expecting close to 30% revenue growth in <unk>.
For the rest of the year on the RV side, given that the comparable for the remainder of the year are more are more normalized from that perspective.
Right at the bookings are 5% ahead of schedule for R&D, so as MH slowing that.
Down below that or is it.
You were conversions to transient or I'm, just wondering why the guidance doesn't suggest something higher than three 9%.
We have in the in as we've shared before.
We instituted a payroll increase across the portfolio that is impacting expenses for the first half of the year, we saw that impact in the first quarter and would expect that again in the second quarter expense growth for the second half of the year I will will normalize.
We don't have that step function increase that went in in July of 2021.
Okay got it thank you.
Our next question comes from the line of John Pawlowski with Green Street Advisors. Please proceed with your question.
And thank you for the time, John on the RV rental rate side, 6% rent growth in the quarter should we expect that to accelerate from here or kind of hold steady in the 6% range.
I think it's probably hey, John I. Appreciate the question I think it's kind of hold steady it could be up a little bit.
Okay, Great and then last one for me in terms of the U K Park holiday G&A.
So should we expect additional step changes in year, two and three of owning this business similar to what we saw with safe Harbor I'm trying to get comfortable around the scalability of the expenses that are hitting right now and what's to come beyond this year.
Yeah.
You know I think that that.
Mark holidays is a.
Thank you.
There are smaller businesses, we are changing now.
Privately held company to a publicly held company isn't there although they have placed some of those increases in their G&A for 2022, we will see.
The future holds and depending on acquisition activity.
Things of that nature you may.
See some amount of increased into the following year just to really bring them up.
A level that they need to be in order to provide the reporting M D.
I mean.
Hum along with all of them there are statutory reporting requirements in the U K.
Yeah, It's Gary John .
I would just add to that point I think the.
Opportunity, we're looking at with expansion taking place there right now 700 sites that are under construction of 700 sites beyond that.
Additional G&A would be measure it with the outsized growth, we expect to get there so.
As we really are.
Operating for the first 12 months.
We would expect to be certain.
Scalability and yet certain.
Increased G&A as we.
Get through all of the adjustments to get into the reporting here properly in the U S and to support their continued growth.
Out there so I think we'll be able to share more quarter by quarter with you.
Yes.
Okay, but in terms of G&A as a percent of revenues for park holidays.
We should expect it to be.
Stable beyond this year.
Yeah, I think that would be the case.
Okay.
Okay. Thank you.
Our next question comes from the line of Nick Joseph from Citi. Please proceed with your question.
Maybe just starting off I just wanted to clarify something so the first quarter same store Marina performance was actually ahead of expectations is that right. Because there was some conversation obviously around the expenses and kind of the remainder of the year, but just wanted to clarify the exceeded expectations or is that relative to the entire portfolio.
Nick relative to the entire portfolio, we exceeded our expectations with stronger demand for service from our from our members are on the same property side.
We did have the one 2% growth, which was slightly below our original expectations.
But as John explained during the prepared remarks.
The first quarter is the lowest contributor from out from a seasonality perspective so.
A few hundred thousand dollars have an outsized impact on the on the performance for the quarter.
That being said the topline performed extremely extremely well and visibility into the start of the northern boating season.
Has us very excited for what we can deliver for the rest of the year.
Thanks, and then maybe just on marine as there were some press articles yesterday on one of the large owners considering its future plans.
How does their portfolio compare to safe Harbor, and then blood new capital sources for the company increased competition for marine acquisitions.
As Gary Nic I think that we filed the <unk> for the last five years.
As we saw the safe harbor in the Marine business.
Uh huh.
Certainly.
I appreciate the fact that they've been growing to a scale that they're considering an IPO is one of their alternatives.
There is.
And then a very little change to the general market to the cap rates.
As safe Harbor has been able to increase its size by over 60% and an 18 20 month period of time.
Very very carefully thought through strategic acquisitions.
To improve the footprint network the membership.
Yeah, and my expectation would be that.
With a fragmented business with the.
Current availability of some securities in the networking.
Through the patriarchs, who also implemented influential in the industry that reside over it.
Safe Harbor that we should be able to continue to grow regardless of.
Centex.
Paul to.
Continue to grow or to do an IPO or anything like that so for the foreseeable future.
Safe Harbor really has the ability to proceed has been proceeding.
Yeah.
Thank you.
Our next question comes from the line of Joshua <unk> with Bank of America. Please proceed with your question.
Yeah, Hey, everyone.
I'm just curious on the marine our same store what it looks like you've just include property operating expenses I think it's my understanding and please correct me if I'm wrong, but if that does not include labor and then if he'd like.
Like all of the tight labor and if it doesn't what's the rationale for not including that in our marine our same store expenses.
Josh we are our Marina same store is on a real property basis, we are evaluating and could potentially in the future report service retail dining and entertainment on a on a same store basis as well and we can we can up.
Take the market at that at that time.
But it includes all of the expenses.
That go into operating operating the Marina.
But when liquidity.
Marina.
Oh, including payroll so like Mccann like mechanics dock and that's included in the property operating expenses or sports.
Somewhere else.
If if that Lee if that labor is working on servicing a vessel that is included in expenses for MSR DNA.
Okay.
The field docks everything else that's related to the actual operating of the wet slips and dry storage has included everything.
Okay.
Included in is it included in that $24 4 million.
For for same store.
Sure.
It's included in the same store that we reported.
Okay.
Follow up off line.
And then the my other question of are related to park holidays, you mentioned that.
The resident has to get a license.
So to have that home is that.
From the government or as you as the owner.
Okay.
Yeah. No. This is basically equates on our side to have an at least okay.
The terminology as a license it basically guarantees them the ability to have that like anywhere from 20 to 30 years Josh.
So it's from it's from it's from par call isn't it.
Okay. Okay. So that's something you could change if you wanted to.
Would that be something you would be willing to change or you like this kind of.
Set up.
If we saw a reason to change that we could change I guess.
Awesome.
Going forward, yes.
Okay.
Alright, Thank you guys.
Our next question comes from the line of Wes Golladay with Robert W. Baird Places. Please proceed with your question.
Hi, everyone I'm trying to look at the second half pace I believe you said it was up 13% at this time, how much do you have on the books for the second half and is that mostly driven by rate or occupancy.
I don't have the figure of what we actually have on the books right in front of me west, but it's a balance between both.
Typically I think we've seen.
Yeah.
Again, a pretty even balance between both rate and occupancy one of the things that we've been really focused on is those extensions into the shoulder days that are around the normal Saturday and Sunday stay that you might have and picking up more Monday is picking up more Thursday is on the way to extend that a bit.
Got it and can you provide an update on your loyalty program initiatives right now.
Sure.
So we've got a number of properties are still in that program, we're going to continue to keep it in pilot mode. If you will.
For the next six months.
Because obviously the learnings have been enlightening them through the process. We've got I think approximately 4000 5000 members within the loyalty program today and it's like I said, it's important to keep an eye out student until we go to a full launch and just gather the learnings that we're picking up.
Along the way much of what the benefit that our guests are getting within the pilot from the program are geared towards bringing them back to the properties and grown the spend within the properties rather than outside of <unk>.
Outside of the loyalty program.
Got it and then on the acquisition front Oh, sorry.
I'll look forward to updating us subsequent calls along with two as we get closer.
Okay, and then on the acquisition front looking at the Jerk Bay assets, there's not a lot of slips there maybe can you talk about what we should think about those assets.
Lessons, Gary Jared They really is a very strategic acquisition for safe Harbor.
It does have potential for slip ex expansion, but it's one of the very few service centers for large vessel situated between Maryland and Georgia.
In close proximity to one of our very large.
Marina City Marina in Charleston.
So he is a perfect network condition as I said for Safe Harbor members traveling north and south on the East coast between.
Our southern old Port Cove.
Right, the Chan Lauderdale, Marina and the South all the way up to.
No other Newport Beach.
The other marine is so.
We just think it's a great opportunity.
To expand the network capabilities for our members and that is part of the underlying strategy that we think differentiates safe harbor from any of the competition.
Jeremy Thanks, everyone.
Our next question comes from the line of Samir Khanal with Evercore. Please proceed with your question.
Yeah, Hi, good morning, everyone. I think Gary can you talk about expand on the transaction market a little bit more I know you provide a little bit color on the Marina side.
And what you're seeing on the overall market in la.
Light of bond yields moving up.
And maybe there's a way to kind of talk about sort of MH and RV sort of bifurcate that and sort of the demand you're seeing.
Sure.
It's an interesting question Sameer I can sit here and tell you.
Everybody that we have seen no impact to cap rates and neither the MH RV or marine space.
Thus far.
I think the best example of that is that.
John shared with you. The fact that we are.
Disposed of three manufactured housing communities this last quarter and the capital.
On a trailing basis was 3.5.
He's obviously, we're not our trophy assets.
So it gives you some sense of the demand that's out there.
I think.
Looking forward for right now what we have in the pipeline.
Pretty much.
What we've had.
For some time now in the manufactured housing side, its strictly relationship oriented and oftentimes we can use some securities protects deferral.
To make transactions, but I think that.
There's continued focus on that and a little bit more interest by people and relationships, we've talked to we're seeing the interest rate environment change.
Change, so we suspect and onesies and twosies to be able to capture that manufactured housing acquisition type property, but at the same time.
Recognizing the manufactured housing has been so consolidated.
We are definitely a ratchet it up higher.
Desire to.
Increase.
New development of manufactured housing, where we can build to higher yields than buy.
John shared with you we expect.
To be developing approximately five new manufactured housing communities per year going forward and have geared up for that for the last four or five years.
And then we look to the UK for a really exciting opportunity.
The holiday Park side.
To continue to expand their communities and look for additional acquisitions.
Those appear to be in the.
Cap rates that are three to 400.
Points higher than what we're seeing in the U S. So great opportunity there.
And then the Marina side as I shared with you earlier.
Still.
Fragmented industry with limited competition. So we expect to continue to deploy capital.
External growth through acquisitions of marine as well.
Great. Thanks for the color and I guess, just switching gears on the.
The marine our same store NOI growth I know for the second quarter, you provided a pretty wide range right like five 7% to seven three.
Just trying to understand what's the basically sort of two months left in the quarter can you talk about.
Kind of what the swing factor as to get your kind of the low end and the top end of that range.
Well you know are certainly it is a wide range that we're early into the season.
I think John shared in his remarks that our Fernando we're seeing strong demand, we're seeing the extension of certain leases that perhaps.
Some of the vessels would have been traveling.
Across the Atlantic overseas.
But for some of the geopolitical situation, taking there. So we're kind of excited about what we see.
And we'll look towards the next call to be able to share the actual results.
And some are just are just.
Just for reference right. It's a it's a smaller portfolio of Standalone portfolio from a marina standpoint so.
Again, a a a a shift of.
I have a few dollars has has has a greater impact both up or down so.
That's why the range is just slightly it doesn't amount to a large dollar amount from.
From a range standpoint.
Got it and then my last question, if I may Fernando on the expense growth for.
For the balance of the year and how should we think about.
The cadence of that in the remaining quarters here.
We had shared earlier, we are expecting our expense growth to be somewhere between somewhere around the 5% range on a full year basis. So.
A deceleration from what we saw in the in the first quarter as expected.
Okay. Thanks very much.
Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.
Good morning, Thanks, a lot for taking my question and congratulations on your new roles, Karen and Fernando.
As we think about MH rents keeping pace with inflation same property MH rent per site in the first quarter came in below the low end of your initial guidance range of 4% to four 2% as we think about how that progresses should that accelerate through the year and finished above the high end of the range and does that kind of becomes.
The run rate going forward.
Above four two.
This is John Thanks for the question quick answer to your question is yes.
No our guided MH rent increase for 2022 at the midpoint is $4 one.
Which is as you know already above our historical range I think going forward.
We're going to have some good opportunity over the course of 2022 to potentially achieve higher than that range.
More MH move ins and re sales take place across the portfolio over the balance of the year.
Even in locations, such as Florida, and California, where.
Many of those rent increases are tied to some form of CPI I expect to see higher increases as the year progresses and into 2023. So you.
Yes, I mean.
The quick answer is yes, we expect it to accelerate.
That's really helpful. And then as we think about transient RV.
You know it was ahead of expectations in the first quarter. It seems like forward bookings have you are ahead of last year.
Does this change how you think about kind of like where are the ultimate level of transient RV demand falls.
Relative to pre Covid levels.
Yes.
Yeah.
I'll put it this way you know RV performance is nothing short of outstanding them. Okay. We had over 230000, new guests come to our resorts last year, which in part led to the record high conversions of transient to annual leases that we had was 1700, which was like a 70% increase over any other year.
So we hadn't conversions as well as close to 600 conversions in the first quarter alone.
So that you know the booking pace being 13% ahead.
Half of last year.
Represents a record upon Iraq okay.
We haven't so as I've said on other calls like we established a new baseline to grow from.
You know, we look for that to continue to grow.
Yeah.
Thanks, and if I can squeeze one more in it's been five months since you announced the transaction for park holidays, how is that market evolved since then have valuations changed.
Competition evolved and then do you see yourself bidding on some of the larger portfolios or or is this a roll up of kind of the the onesies and twosies from here on out.
I think this is Gary and John can add it is really been working closely with.
The power group and everything we're doing out there, but I think when you see things pretty steady as we saw when we first entered this space obviously.
So there's a lot of interest in focus one son makes you know important move in a new.
Country like that are there are a lot of people out there.
Looking at the asset class, but we would look at mostly onesies and Twosies and really levering off of.
The 15 year expertise of the management that's in place to grow the existing communities to acquire new ground.
To apply their skills and their sales force too.
Build new communities as well as consolidate and the Onesies and Twosies. So that would be our focus I think the larger the larger portfolios that we know are.
Obviously, we see they are presented to us but.
The complexities involved are far from a simple business that we look forward there which is.
Increasing our manufactured housing communities because of the stickiness of the rent and all the.
A real characteristics that make it so attractive for growth. So it will be the onesies and twosies, maybe small portfolios much like we do here.
Here right now.
Thank you very much.
Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Hi, Good morning, maybe a follow up to that question how are cap rates for the onesie twosies and in the U K compared to portfolio cap rates and have it both.
Compare to what are you seeing for an M H in the U S.
I wanted to be careful what I say here because the pipeline is still full and we are negotiating in a proprietary way with so many people over there, but I'm going to suggest that the cap rates.
Exceed cap rates here by more than 400 basis points at least.
Oh.
Got it alright, thanks for that and then maybe just switching gears to the development of you mentioned you're doing five new communities per year is there maybe an opportunity to increase that you know when we've seen a lot more concerned with affordable housing options in the U S.
That's a combination change with the local communities regarding MH development.
And if you go over the long run.
Hey, this is John thanks.
That is yes.
Like we shared before we have five new MH ground up starts that are happening this year too are in the ground.
Interesting thing Thats taken place we actually have.
Add a couple more to their account.
With respect to MH projects that were in flight.
By others that were developing them and we have taken over those projects and so really what we expect to start this year is going to be more in the range of seven to eight MH communities as a result of that so.
We will continue to look for those opportunities to add to that.
Five a year that we've shared that we expect to do.
Alright, thank you.
That is all the time, we have for questions I'd like to hand, the call back to management for closing remarks.
This is Gary and I too would like to congratulate Fernando and Karen. Thank you all for your participation is I always close.
We are all available for any follow up questions. We're very excited for the growth opportunity.
We have in front of us and look forward to reporting next quarter. Thank you everyone.
Okay.
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.