Q3 2022 Sun Communities Inc Earnings Call
Thank you for standing by.
Welcome to the Sun communities third quarter 2022 earnings conference call.
This time management would like metering for me, but that certain statements made during this call which are not historical facts may be deemed forward looking statements within the meaning 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.
Company can provide no assurance that its expectations will be achieved.
Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterdays press release and from time to time when they come in 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.
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, and Fernando Castro car T.
<unk> financial officer.
After their remarks, there will be an opportunity to ask questions for those who would like to participate in the question and answer session management asked that you limit yourself to two questions. So everyone would like to participate has ample opportunity as a reminder, this call is being recorded.
I'll now turn the call 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 third quarter 2022 results and provide an update of our full year guidance.
I would first like to share my best wishes and support for everyone affected by Hurricane Dorian.
The Swift organize response for Sun team members in the preparation and cleanup from the hurricane.
Marketable and selfless.
We are pleased with our results this quarter and year to date and our outperformance demonstrates the resilience of our properties and our strength as operators.
Our portfolio best in class assets in high demand locations.
Strategically positioned to continue creating value for stakeholders through varying economic cycles.
Right.
Our proven track record of execution facilitated by an operational platform, which is second to none allows <unk> to provide continued growth.
Our third quarter was exceptionally strong exceeding the high end of our guidance.
Andrew will detail, we are raising our midpoint of full year <unk> guidance.
The resilience of each business segment as evidenced in our results.
Manufactured housing same property NOI increased four 9% for the quarter compared to last year.
Courted by four 3% gains in monthly base rent per se.
<unk> occupancy.
And our ability to manage expenses.
Importantly.
Our U K operations, which are included in our manufactured housing segment are performing in line with expectations.
Demonstrating continued resilience amid economic uncertainty.
Arc holidays team that's been operating the portfolio since 2005 and our cycle tested.
We demonstrated consistent execution and value creation through various economic conditions.
Similar to how we see new residents trading into manufactured housing the U S. During times of economic challenges.
We are experiencing continued strong demand for domestic holiday homes in the UK.
Yeah.
<unk> continued to experience high demand and transient conversions to annual leases accelerated 30% as compared to the third quarter of 2021.
Year to date, we have converted approximately 2000 transient sites to annual leases, which exceeds our full year record set in 2021.
Each conversion equates to a $40 to 60% revenue uplift through sphere.
And creates a new stream of recurring revenue.
The same property basis annual RV revenues increased 13, 4% and total NOI grew eight 4% compared to the third quarter of last year.
Monthly base rent per RV site increased by 7% year over year.
Yeah.
On a combined basis blended total portfolio manufactured housing an annual army occupancy was 97, 1%.
It's over 2300 revenue producing sites gained year to date.
Yeah.
Looking ahead to 2023, we are positioned for continued organic growth in manufactured housing and RV.
As we expect to realize average rental rate increases of six 3% for manufactured housing.
And seven 8% for annual RV at the midpoint.
Okay.
Both represent material increases on a year over year basis.
Arenas continue to experience strong performance.
Same marina real property NOI increased nine 6% in the third quarter compared to last year.
Driven by increased annual bone slipped revenue and storage revenue.
The man for slips and storage is persistent and over 85% of the safe Harbor marinas.
Waitlist to join as a member.
In terms of external growth.
We are and will remain very selective in approaching new opportunities.
The second quarter earnings call in July we have closed on $24 million new acquisitions.
We also sold one army community in California for $15 million.
Yeah.
Our development platform continues to be a differentiating an exciting growth driver over the long term and we are pleased to have John focused on the pipeline manufactured housing development communities.
During the quarter, we delivered over 170, <unk> expansion and Greenfield development sites.
The ESG side, we're proud to report that our grass, Florida came back in the mid 60% range, which represents a 42% improvement from last year's score.
This was only our second year participating brass and we are pleased to be scoring mine with their peers.
Our team continues to work hard to build on this momentum as we enhance our ESG protocols and reporting.
Scale.
The quality and locations of Sun's properties, along with our unrivaled team can send a clear competitive advantage through all economic cycles.
We are well positioned to continue delivering value to our stakeholders through our proven resilient platform.
I would like to thank all of our team members for their ongoing contributions and efforts, which makes fun what it is today.
I also want to congratulate Bruce talent, who will take over the chief operating officer role in 2023.
Since joining the company in 2018.
Bruce has been a vital member of <unk> leadership team.
He has consistently grown this responsibilities related to manufactured housing and RV property operations.
Listen John have worked together overseeing the operations team and I look forward to Bruce's continued leadership.
I will now turn the call over to Jonathan Fernando to speak to our third quarter results in detail.
Scott.
Thank you Gary third quarter results have demonstrated resilience.
Quarter same property manufactured housing and RV NOI increased six 4% driven by a four 7% increase in monthly base rent per site and a 200 basis point increase in occupancy.
Same property manufactured housing communities recorded a four 6% increase in revenue and a four 9% increase in NOI for the quarter compared to the prior year period.
Annual RV revenue increased 13, 4% in the quarter due to the record number of transient Daniel lease conversions continuing to build on the success we have been delivering.
The record transient to annual conversions, Jerry mentioned translated into having almost 7% fewer sites threat during the third quarter.
Notwithstanding this fact, we increased transient RV revenues 60 basis points during the quarter.
We're in the same property NOI increased by nine 6% for the third quarter, which was 60 basis points ahead of the high end of guidance.
Outperformance was largely driven by increased operating revenue from wet slips and dry storage space demand and expense savings across the portfolio.
Our U K portfolio performed well and we are experiencing continued strong demand for holiday homes. Additionally.
Additionally park holidays has practically locked in utility costs through 2024, which will benefit our residents.
The integration of our U K operations continues to advance smoothly and we will continue to realize synergies between our teams systems technologies and methodologies overtime.
Development and expansion activity remains an important contributor to our long term growth.
We continue to entitled land in locations with high structural demand in order to maintain a robust pipeline of future embedded growth.
Accordingly in the quarter and through the date of this call. We purchased four fully entitled manufactured housing land parcels for a total of $20 million that provide an opportunity to develop approximately 800 additional sites.
During the quarter SUNS sold 724, new and pre owned homes in our communities.
New home sales prices averaged $183000 for the quarter up $31000 from the prior year.
This 21% increase in the past year reflects the high quality in demand to live in a sun community.
The demand to live in a Sun community is also evident as total portfolio of manufactured housing and RV occupancy reached 97, 1% as of September 30th.
The average rental rate increases for 2023 are expected to be between 6.2, and six 4% across our MH portfolio, excluding the U K, where we expect an average rent increase in the range of seven two to seven 4%.
Our annual RV, we expect rental rate increases of seven 7% to seven 9% in a range of seven 3% to seven 6% increases and Marina rats.
As previously disclosed hurricane caused significant flooding and wind damage at three RV properties and damage the Seawall and docs are one Marina all located near Fort Myers, Florida.
Prior to the Hurricanes, making landfall reacted our emergency plan.
Members, along with third party contractors began restoration work as soon as it was safe to return on site.
We organized convoys of supplies food and travel trailers to our Florida properties.
We cannot be more proud of the entire team in effectively managing through a challenging situation.
We expect that our property casualty flood in business interruption insurance will fully cover us net of deductibles.
We are grateful for and humbled by the dedication of our team members I'm pleased with the company's performance to date.
I will now turn the call over to Fernando to discuss our financial results in more detail Fernando.
Thank you John .
For the third quarter Sun reported core <unk> per diluted share on a constant currency basis of $2 71, a 28% increase above the prior year results and exceeding the high end of our quarterly guidance range.
Performance was driven by total marine a real property net operating income interest income U K corporate tax favorability and lower corporate costs as of September 30th Sun had $6 $7 billion of debt outstanding that carried a weighted average interest rate of three 4% and has a weighted average.
Bridge maturity of eight eight years.
And our net debt to trailing 12 month recurring EBITDA ratio was five seven times.
Excluding our bank revolving credit and term loan facilities, the remaining $4 $9 billion of debt has a weighted average interest rate of three 4% and a weighted average maturity of nine nine years.
In terms of capital markets activity during the quarter, we repaid $318 million of debt secured by 35 properties, increasing our unencumbered assets to total asset ratio to nearly 79%.
We are also in the process of executing on approximately $310 million of mortgage refinancings for a portfolio of properties, which is expected to reduce our variable rate debt exposure to approximately 16%.
Mentioned on our last call in July we swapped 400 million pounds of our 875 million pound Sterling debt outstanding on our term loan from variable rate to fixed rate through 2025.
Yeah.
Lastly, since our second quarter call. We settled all remaining forward equity agreements on approximately 540000 shares for $95 million in net proceeds in total for the quarter. We settled the $1 5 million shares that netted approximately $276 million of proceeds used to.
Pay down borrowings on our credit facility.
Turning to guidance.
Summarized in Yesterdays press release, we are increasing the midpoint of our full year guidance on constant currency F O per share by eight to a revised range of $7 30 to $7.38. We are establishing fourth quarter 2022 constant currency core off of <unk> per share guidance in the range.
A $1 23.
So $1 29.
At the same property level, we are moderating our full year manufactured housing and RV NOI growth expectations by 40 basis points, primarily reflecting revised transient RV revenue expectations for the fourth quarter. The new range represents 6% growth at the midpoint for the full year and implies a six 6% growth at.
The midpoint in the fourth quarter.
Marina same property, we are increasing the midpoint of full year guidance to six 6% a 20 basis point increase from the prior range in the fourth quarter. We expect same property Marina growth of six 1% at the midpoint.
As a reminder, our guidance includes acquisitions dispositions and capital markets activity through October 24th.
And the approximately $310 million of debt financing we are in the process of closing, but it does not include the impact of prospective acquisitions dispositions or capital markets activities, which may be included in research analyst estimates.
Fluids, our prepared remarks, we will now open the call up for questions.
Operator.
Thank you we will now be conducting a question and answer session.
If he would like to ask a question. Please press star one on your telephone keypad.
All information telling them will indicate your line isn't the question queue.
Press Star two if you like to remove your question from Brasil plural.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star key one moment. Please while we poll for questions.
Our first question comes from Nick Joseph with Citigroup. Please go ahead.
Thank you.
Maybe starting on the home sales.
You look at the U S. They obviously declined year over year, how are you thinking about that and is that a leading indicator of overall demand for the MH portfolio at all.
John Good morning, Hope you're well.
The answer to that is no.
On the new home side.
Primarily what we saw was timing associated with the hurricane which actually happened on the 20th September . So it was just as we were closing out the third quarter and it pushed out anticipated closings that we had lined up in Florida for the into the fourth quarter. So we're seeing those close.
It also had an impact on the margin since some of those higher margin sales are associated with those sales. So we expect to pick those back up in the fourth quarter.
On the pre owned side.
No really it has to do with.
[laughter] fewer residents want to sell their homes.
Which gives much less inventory to resell that tracks the same with fewer broker transaction I think it really speaks again to the best in class quality of our communities lifestyles in our residents have in.
There are holding onto their homes are staying longer even as home values continue to increase so no indicator whatsoever, just a little bit of timing.
The exact count sorry, Gary.
Gary I would just add that most of the average price of 100.
$183000, which is.
Industry, leading home prices. So I think that's a good indicator as far of a timing issue.
That's helpful. And then just a similar sort of my question on the UK side and the impact of higher mortgage rates and some resets there and how you think that will impact our home sales for park holidays.
Well I can tell you Nick.
Through the first nine months of the year.
<unk> Park holidays year over year growth in home sales is 13% so very strong demand continues.
Thanks, and then just finally for the $310 million of mortgage debt, what's your expected rate on that.
Nick that's going to be between four five and four 6%.
Thank you.
Thank you. Your next question comes from Michael Goldsmith with UBS.
Yeah.
Yeah.
Good morning, Thanks for taking my question can you walk us through the factors that are bringing down the MH and RV same property NOI guidance I think you mentioned.
Transient revenue as a factor and just while touching on transient revenue.
Look like.
Same property transient revenue was up 60 basis points, which is the same as last quarter. So after a strong year of transient revenue in 2021 and flat kind of flattish. This year have we kind of hit the peak.
Oh, where transient revenue can be.
Okay.
And Michael it's Fernando so the main component to bringing the range downward for the full year.
We're moderating that growth for the full year and 'twenty two.
Is increased.
It is our expectations for the transient revenue line item that there are two effects to that one gets the record number of conversions that we've had in the portfolio with almost 2000 conversions year to date, which surpasses last years.
Last year's record by almost 20% and we expect that to continue to climb into the fourth quarter and you stated it in your question, we had a record a 2021 on the transient revenue side so are expecting.
Moderation right.
Of growth.
Think forward.
And that settling into let's say pre pandemic levels were on a same property basis that that the transient revenue line item was was growing at about 3%.
Per year, our full year transient growth expectations.
Inclusive of the fourth quarter will now be around three 5% for 2022.
Got it sticking with Fernando on the topic of expense growth it was very well controlled in the quarter.
With 1% growth down from a deceleration from seven 3% last quarter. So what are the factors that kind of went into the expense control, we would elevated growth last year, a factor and I guess, maybe more importantly, how sustainable.
Or is gross at this kind of like low single digit levels.
Sure. Thanks, Thanks, Michael So the primary driver.
For the lower operating expense growth would be on payroll and that would be due to two factors. One is the roll off of the increase that we put in place in July of 2021, which rolled off at the end of the second quarter. So a more.
Moderate growth from from that perspective from that one time.
From that onetime increase and then in the third quarter. We did a we did put in place.
Some cost containment strategies.
On the payroll side and on the utility side across MH, RV and and Marina.
The on a year to date basis, our our expense growth for MH RV is now at six 3% in the same percentage for the Marina side. So it's certainly not expecting.
Say, 1% growth on a year over year basis moving forward.
But.
Did put in place some some strategies too.
Hmm combat inflationary pressures that we're seeing in the portfolio.
Thank you very much.
Thank you. Your next question comes from Wes Golladay with Baird.
Hey, good morning, everyone.
Okay.
Thank you.
I guess, if you were to strip out the conversions would you still be looking at a high single digit revenue growth from that segment, you've kind of referred to the three 5% long term average, but I'm trying to get gauge that's more of a high single digit number on an apples to apples basis and then.
I guess, maybe when you look at the utility expenses. What are you looking at next year. When you factor in some of these savings that you can implement.
On the same site basis for the third quarter in France, yet so removing stripping the impact.
Of the other conversions for the quarter growth would have been.
Some are between two and 3%.
That answers the first question from.
From a utilities perspective, we have put in place.
We put in place Capex from a cost containment standpoint, but also helps on the environmental side would be that.
Converting the entire portfolio over to L E D.
Put in 13 to 15 arrays of solar power rays in California and are evaluating additional 13 to 15.
In Arizona, and Texas and a few other states. So those are some of the investments that we're looking at two to contain utility costs moving going forward.
And I'd add Fernando the remote Wi Fi.
Instead of controls on all of our clubhouses or vacation rentals, where we can actually control the thermostat settings, where the weekends and over the nine new states as of May.
That's the kind of difference.
The only other thing I'd add Wes this is John as you know in most cases, our portfolio totally costs are passed on <unk>.
And it's frankly are in the same boat as any one single family, but frankly, they have an advantage because our homes are typically smaller and costs less from a utility perspective. So I think that that's an important point to bring up as well as on the transient side of the business. We capture those increases in the formula rates that we charge for those sites.
Okay. Thanks for that and then I guess, where capital markets are today would you consider stepping up the asset recycling to fund your acquisitions in the U K properties and I guess more for arena at this point.
Sorry, West as Gary I missed the beginning of the question.
I'm staying with capital markets, where they're at now equities, obviously and how they are at an attractive price so where the stock is today, but you are still selling a few MH properties.
What is the appetite to sell more MH to fund your growth and that the new venture in the U K and more marinas.
Sure.
That.
Great question.
Certainly.
Capital allocation and the cost of capital is front and center.
On this.
This company as well as many of the.
Platforms that are out there today.
As rates, but I think what I would suggest is that our.
Our balance sheet has never been stronger.
Annual cash flow.
In general.
We expect to see less cap.
Cap rate expansion in our asset classes is just due to the higher demand.
We're interested in the assets.
The fact that things.
Historical demonstrated cash flow stability and resilience and strength.
Through all economic cycles, we have seen cap rate expansion.
<unk>.
What I would call less than institutional quality properties that some would not be interested in.
And.
Yeah look towards dispositions.
And we feel the properties cannot contribute the same amount of growth as the balance of the portfolio.
Oftentimes those properties come to us as part of a larger transaction.
So I think that.
We're always looking.
Asset managing our properties, but there is no inclination at this time.
Sell properties and acquire properties in the U K.
U K, we won't lose any opportunities, we've actually been able to cherry pick if you will 14 property acquisitions since we bought the Frac holidays platform.
So plenty of opportunity there.
With higher yields higher opportunities.
While we always take a look at dispositions and reallocation of our capital.
That I would point to right now.
Including the.
Back to the matter is that the pound is down against the dollar and giving us your radical greater buying power over there but.
And as we look at things.
Currency basis that's.
That's not something that we are.
Looking specifically to take advantage of where.
Oh really.
Very very disciplined slashing cost of capital and matching it up and see opportunity to invest going forward. So that's our approach last thing I'd add.
It's the fact that if this had to come.
At a time when we were more pencils down on the sidelines watching for opportunities.
We've got an abundance of growth to extract.
Large amount of acquisitions.
We've executed on over the last 12 to 18 months, so a lot of internal opportunity.
As well as the opportunities related to expansion and development of charter Sportsnet.
Oh, great. Thanks for the time everyone.
Yeah.
Okay.
Thank you.
Our next question comes from John Pawlowski with Great Great Street.
Good morning, and thanks for the time I just have a few follow up questions on the U K business.
John You mentioned home sales were up 13% year to date could you give us that same statistic for the third quarter.
I actually don't have that figure right in front of me, we can follow back up on that I apologize. The same at the same store figure four four home sale revenue was up around 13% for the third quarter.
Okay for the third quarter.
Alright.
And then can you just give us a sense Fernando or John what drove the reduced guidance for the U K NOI guidance that all like even on a constant currency basis.
So John I think the primary driver there would be a.
Small adjustment to the seasonality of the park leisure transaction as Youll remember that closed at the end of the second quarter and that's about a million dollars shifting from the second quarter or two to the third.
But on a constant currency basis for the for the third quarter, we did.
We did perform in line with our expectations.
Hum nothing nothing more from from that perspective.
Okay.
Last one for me just on two more volatile.
Cash flow strains of the UK business, the holiday rentals and holiday home sales.
No I'm aware of the long term track record of.
U K at the park holidays team being able to grow the home sales I'm. Just curious every recession is different so when you talk to the park holidays management team.
They say a reasonable bear cases for home sales and holiday rental NOI streams. If we are on the precipice of a recession.
John I think the way to answer that.
I know, there's a lot of discussion about the macro headwinds that are out there, but I kind of view is the best it can be a tailwind.
For us.
One of the thesis that we shared when we announced the acquisition originally as an example.
It is more difficult because of Brexit traveled to the continent now it's gotten more expensive.
Devaluation.
Still.
Fragmented still affordable vacation.
Still easy for most people go in there because the traveling between a two hour radius to get to the properties.
It's a very established common form of vacations that takes place in the U K and so I think that you know we started seeing.
Higher inflation and things like that but.
In the face of that we're growing home sales.
In the U K so.
I think that you know looking down the road I mean, obviously, we'll have guidance when we come out with our fourth quarter.
Notes in February .
But I think the thesis holds for everything that we thought when we acquired the portfolio.
April .
Alright, thank you for that.
Thank you your next.
<unk> comes from John Kim with BMO capital market.
Capital markets. Please go ahead Sir.
Thanks, Good morning, I, just wanted to clarify the four properties in type I E N E R.
Are not operational and was taken out of the same store pool is that the case.
Hi, John the three RV properties are currently not operational and would be taken out of the of the same store pool from a performance standpoint, we will consistent with prior practice, we will be putting in an adjustment for the expected business been a road.
Interruption proceeds that we expect to receive.
For those three properties in the in the fourth quarter. So they would be out of our same.
Same property, but be productivity or the expected productivity productivity net of.
Any deductibles are would be.
It would be in our earnings we would then at some point in the future actually collect on the on the proceeds from business interruption.
And any clarification you have on the payment of the business interruption insurance.
I know you've kind of netted that out on your charge for the quarter, but I also wanted to ask my question on.
The add backs that you had on the charge to court with O I realize its kind of deemed as a onetime item, but hurricane seem like it's occurring more than you know.
Once in a while and Florida. So I'm just wondering if you would consider this more of a cost of doing business rather than yeah.
Onetime item.
Yeah, John ideas. This is John abuse, the onetime item, we don't deal with events of this magnitude very often.
The last time, we dealt with the storms of this magnitude was five years ago.
Before that before that when a decade or more.
I don't know it was the first one I don't know.
Yes.
And then how confident are you on the 17 $717 7 million.
Christine.
At this time that is our best estimate of what we will recover from a from an insurance for perspective.
We'll update the market if those estimates were to change.
Okay, great. Thank you.
Uh huh.
Thank you. Your next question comes from Samir Khanal with Evercore ISI. Please go ahead Sir.
Hey, Gary or John I guess on the MH front, given where CPI is running.
Sort of over 8% and then you have the adjustment to social security.
Is there the ability to maybe even push rates higher on the MH side, maybe walk us through kind of your process of getting that safely.
65%.
They pushed it pushed to the residents at this time.
Yeah, Hey spirits, John Thanks for the question appreciate it.
Now here's how I would think about it we view rent increases like a marathon versus a sprint.
Thank you.
Sure it's a scary.
A lot of times, but the most expensive site you have in our portfolio is a vacant one that I think that our strategy has stood the test of time.
Over 25 years, we've delivered positive revenue and NOI growth each and every year, while others have seen the ups and downs.
For you to deliver long term cash.
Cash flow stability.
Maintain a solid relationship with our resident base, which is also our sales force brings us the industry, leading occupancy growth that we've had.
And I'll add that you know on $183000 a home.
We come in average home sale price to far exceed virtually all competitors in our asset class I think that illustrates the unmatched quality and value of our communities represent.
So I you know I think we view our strategy is well balanced across all of our stakeholders, including our residents who live in a well maintained community see value accretion in their homes.
And.
Bottom line is.
We have the ability.
Mitch you know are.
<unk> expense increases at over 90% of our MH sites.
But for the reasons I just shared.
We're comfortable with the range we're at for 2023.
Yeah.
Got it and then I guess Fernando just on the balance sheet.
I mean, just looking at the supplement I could get about 120 million of maturities in 'twenty three.
Kind of what's the plan to address that is it primarily refinancing or paying down the debt, but maybe you can address that.
Thanks, Eric Good question.
Question, Yes, we have as we look out at our maturities over the course of the last couple of years. We have the the next couple of years you have no looming large maturity towers that would let's say re rate our re rate our debt stack.
As Gary mentioned previously on the call we have a.
Very strong free cash flow growth that in the short term can be used to pay down.
Anything from a from our revolving credit facility or these are these maturities coming due.
We also from time to time have.
Looked to walk in.
Walk in the Treasury rate.
Or.
For future issuances.
At this time, we have about 200 200 million locked in a below 3% on the 10 year Treasury. So we'll be looking at pricing that's more advantageous debt than.
And what you would get in the market today.
But it's all part of our capital our capital strategy. So we do believe that.
Okay, great flexibility with regard to a two hour maturities.
Or any investments that.
That we would make over the course of the next year.
Yeah.
Got it thank you very much.
Thank you Sir.
Thank you. Your next question comes from Brad Heffern with RBC capital markets. Please go ahead Sir.
Yeah. Thank you operator, so on the U K the rate growth outlook was stronger than at least we had anticipated I guess, how does the 7.2 to $7 four guidance compare with historical rate growth and how do you think about balancing higher rates with demand just given the the weaker economic backdrop in the UK.
I think what we're seeing let's say.
The mid point of seven three is higher I mean, they typically have been in the fives.
So it's.
Arguably higher than it was last year.
Stuart.
Second part of the question right.
It's just how do you think about balancing higher rates with demand given there's obviously a lot of recessionary pressures in the U K.
Well I think once again, I say when I shared a little bit earlier that I think that.
With what's going on in the U K and difficulty to go other places and the devaluation of the pound I think frankly that drives more domestic.
Vacationing and it drives as we're seeing with the home sales growth. They produced over the course of 2022.
Considerable demand even over last year, which was pretty record year for them as well as transform themselves.
Okay got it and then is there anything that you can share on on forward booking trends in the in the RV business.
Bookings for our Q4.
Maybe the P C.
Fernando shared this pacing slightly below.
Our range last year.
But pretty close to tracking the same.
We will provide guidance in terms of what our forward bookings look like it too.
First quarter and second quarter.
Lease earnings next time around.
Okay. Thanks.
Thank you. Your next question comes from Joshua <unk> with Bank of America. Please go ahead Sir.
Yeah, everyone quick question, what what drove that incremental weapon sense of is this combination expense and other acquisition related costs in our revised guidance.
Hi, Josh that would be a combination of our expenses.
Expenses related to a B U K transaction that came in through business. Some.
From a business combination.
As well as.
In the quarter, we did a we did walk away from the number of transactions. So what do you include that deal that deal costs.
Okay.
Walking away from those deals was it just related to the cost of capital or.
Or something else driving that although the dead deal costs are directly related to.
The fact that our cost of capital changed.
Negotiated a need.
Many of these transactions over a period of months getting due diligence.
Forms of getting to closing and has the cost of capital.
Et cetera increased.
We were very disciplined with our expectations with the sellers as I shared earlier sellers'.
Expectations are based on the world as it existed six months 12 months ago, and we believe a lot of those opportunities will come back to us in the future.
But matching up the cost of capital with the returns.
Caused us to walk away from numerous deals and we are still in negotiations at this time on transactions.
In some cases, we do get adjustments and satisfactory.
Hmm.
Price side of things, but when we don't.
And we can't.
Justify the yield and the returns.
Just on the cost of capital.
We will walk away from the transactions in a disciplined manner.
I appreciate that and then one other from me.
It looks like G&A increased $7 million a quarter over quarter, what what was kind of driving that uptick.
That uptick Josh would be the deal costs are recognized in G&A, so that that would be the primary driver.
In the sequential quarter over quarter increase.
Okay. So I guess thinking about for <unk> beyond that 7 million kind of reverse is that the way to think about it.
That's correct.
Okay. Thank you.
Thank you. Your next question comes from Anthony Hau with Trust Securities. Please go ahead Sir.
Good morning, guys. Thanks for taking my question can.
Can you guys remind me of the underwriting assumptions for holiday Park expansions in terms of return cost per site and lease up timeline and how many sites. We expect to develop annually over the next couple of years in that U K portfolio.
I think so for this year Anthony as John Thanks for the question.
This year, we've already completed roughly 700 sites.
Spansion development in the U K.
And I think previously we stated that we expect to stay in that range.
Sue we'll match that up with demand.
As we go.
I have to circle back with you in terms of the.
The economics associated with.
Returns associated with those sites can be happy to do.
Anthony they want the returns would mirror.
Our expected returns for expansions here in the U S. So call it in that.
In the low teens from a from an IRR perspective.
Okay, and how long does it usually take to like at least those sites up.
And the same similar to Miami portfolio two in the U S.
I think we'd see that those sites to get leased up along with other vacant sites. They have in the portfolio over the course of a given year that they've developed.
Okay.
Okay and my last question is like for G&A. So when the initial guidance came out last year I think G&A was expected to be 235 million, but excludes the public holidays.
Oh, I think G&A from park holiday. So on 25 declined 7 million. So in total that would be like you know charge of $60 million at this current pace seems like G&A. It will be mid to 40 and and towards 2022. So what is the difference between the initial guidance and Apple.
Anthony on a on an annualized basis, if you annualize our year to date figure we would be at around 200 and in the low 200 fifty's.
The low end of our range inclusive of park holiday and so when we gave guidance at.
At about $260 million. There is some translation from a currency perspective with G&A from the U K.
The tune of about three.
$3 million to $4 million in translation.
And the rest we have yeah, we are.
You did save over the course of the third quarter.
On on payroll at the at the corporate level. So we are we are taking some some managers from that perspective, with some delayed hiring and things of that nature.
Okay. Thanks.
Thank you Anthony.
Yeah.
Thank you.
No further questions at this time I would now like to turn the floor back over to Gary Shiffman for closing comments. Please go ahead Sir.
I want to thank everyone for participating on the call today, and remind everyone that John myself and Fernando and Stephanie are all available for any follow up questions that you might have and we certainly look forward to sharing results are here.
And fourth quarter.
<unk>.
Yeah.
Yeah.
This does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
[music].
Yeah.
[music].
Hum.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Yeah.
[music].
Yes.
[music].
Okay.
Yeah.
[music].
Okay.
[music].
Okay.
[music].
Uh huh.
[music].
Okay.
[music].
Okay.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Yes.
Yes.
[music].
Yes.
Okay.
Okay.
[music].
Yes.
[music].
Okay.
[music].
Okay.
[music].
Yeah.
[music].
Sure.
Yes.
[music].
Yeah.
Yeah.
[music].
Okay.
[music].
Okay.
[music].
Sure.
[music].
Uh huh.
[music].
Okay.
[music].
Okay.
Hum.
[music].