Q4 2022 Sun Communities Inc Earnings Call

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Yeah.

Good morning, ladies and gentlemen, and thank you for standing by.

Come to the Sun communities fourth quarter and year end 2022 findings conference call.

At this time.

Instrument 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 meaning of the private Securities Litigation Reform Act of 1095.

Although the company believes the expectations reflected in any forward looking statements are based on reasonable assumptions. The company can provide no assurance that this.

Expectations will be achieved.

Factors and risks 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.

Having said that I would like to introduce management with US today, Gary Shiffman, Chairman, President and Chief Executive Officer.

John Mclaren strategic adviser.

Fernando cash flow Parachini, Chief 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 asks that you limit yourself to two questions. So everyone, who would like to participate.

Opportunity.

As a reminder, this call is being recorded.

I'll now turn the call over to Gary Shiffman, Chairman, President and Chief Executive Officer Mr.

Mr. Shiffman, you may begin.

Good morning, and thank you for joining us as we discuss fourth quarter and full year results for 2022 and our guidance for 2023.

Sure March 30, this year as a public company and over the past three decades, we have established a track record of strategically expanding and diversifying our portfolio of recession resistant best in class properties.

We and our stakeholders have benefited from the compelling supply and demand dynamics.

Underpinning.

Actual housing RV communities.

Communities and Marine Us.

Our strategic approach has delivered an attractive balance of a reliable organic growth and strong <unk> per share increases.

We have increased rents throughout economic cycles, and our strong results for 2022 and outlook for same property NOI growth in 2023.

Demonstrating the benefits of our operating segments, where supply is perpetually constrained and demand is resilient in 2022 core <unk> per share grew 12, 9% driven.

Driven by strong demand for our offerings as well as our accretive investment activity.

Demand for our manufactured housing communities and RV locations was evident in our consistently high occupancy levels gains in revenue producing sites and solid same property NOI growth.

At year end, our combined MH and RV occupancy was nearly 97%.

Reflecting approximately 96% occupancy within our manufactured housing portfolio.

During the year, we achieved a record of over 2900 revenue producing site gains driven by more than 2200, 50 conversions of transient RV sites to annual leases.

Which topped last year's record conversions up nearly 17000 sites.

Represented a 36% year over year increase.

And Marina our 2022 same property results continue to demonstrate supply demand tailwind with a 12 to one ratio of registered boats in the U S to the existing supply leasable wet slips and dry storage spaces.

This creates a very sticky customer base and gives us the ability to grow rents.

The resilience of our platform can be seen in our full year total manufactured housing RV Marina same property NOI results, which grew by five 8% over 2021.

With regard to external growth since acquiring peg holidays in April 2022.

Focused on integration as well as being very selective in our approach to acquisitions.

The UK market for holiday parks remains highly fragmented.

As we have done in the us over the years.

Have used our product holidays footprint to Opportunistically and scale our presence in the UK.

Subsequent to the park holiday as transaction, we acquired 14 best in class holiday parks in the UK.

These investments have accretive going in cap rates and we believe they will deliver significant.

<unk> growth and yield strong returns.

In light of current market conditions, we have shown discipline with regard to our approach to capital allocation and we'll continue to do so going forward.

As we sharpen our pencil.

First capital and funding alternatives.

Growing our revenue producing sites two expansions and ground up developments continues to offer accretive returns.

During 2022, we delivered 2000, new expansion and Greenfield development sites in North America.

Which was at the high end of our guidance.

These new sites will begin contributing revenue in 2023 and provide a new base for growth in the coming years.

We have inventory of over 16000 fully entitled sites.

<unk> and delivery in future years, representing embedded continued growth.

Additionally, we regularly evaluate our portfolio for capital recycling opportunities to enhance our long term growth profile.

With respect to ESG, we continually identify ways, we can enhance our corporate citizenship.

So im recently set a target to achieve carbon neutrality by 2035 and net zero emissions by 2045.

And as previously announced we added.

Jeff Boyle CEO related companies to our board of directors.

Yes experience and leadership will be a tremendous addition to our team.

Lastly, our board has raised our 2000 twenty's redistribution to $3 72 per share and five 7% increase from the prior year.

We're very pleased with our 2022 achievements I'd like to thank all of our Sun team members, who contributed extraordinary efforts to our collective success.

As we look ahead to 2023.

Once again expect to deliver a year of solid same property growth.

As a 30 year track record has demonstrated we have a business model that delivers results.

Economic cycles.

Supported by compelling supply demand fundamentals.

We will remain disciplined in our investment activity and our Unparallel expansion and development platform will continue to provide us with a differentiated growth opportunity.

I will now turn the call over to China, and Fernando to speak to our results and guidance in detail.

John .

Thank you Gary the stability of our operating platform has shown through in our results for the quarter and the year.

MH and RV same property NOI increased by four 4% in the quarter.

Four 9% growth in revenues reflected a 5% increase in weighted average monthly rent and a 180 basis point occupancy gain.

Five 8% increase in expenses was primarily related to turnover costs and our rental program.

One consequence of the pandemic was lengthened the average stay and therefore higher related refurbishment costs.

Having turned over these units we are now able to realize higher rents on incoming leases.

For the full year same property MH and RV NOI grew five 4% driven by a five 7% increase in revenue and a six 2% increase in expenses.

Strength of our portfolio is a direct result of our irreplaceable locations. The hard work of our team members and our continued reinvestment in our communities.

At our RV communities, we set another annual record for site conversions to annual leases.

Year transient same property RV revenues grew by three 1%, reflecting an average rate of growth of 14, 1%. Despite an almost 10% reduction in available site nights promos strategic conversion of transient sites to annual leases.

Occupancy in our same property MH and RV portfolio remained strong increasing 180 basis points during 2022 to end the year at 98, 6%.

Our call. This portfolio is performing above our original underwriting and the management team has done an excellent job integrating into sun.

The fourth quarter continued to show strength for the 31 properties Park called <unk> zones since at least January 2021 home sales rose 17%.

Full year weighted average rental rates increased five 4% driving a 24% increase in home revenues.

Brian has exceeded our expectations with a 10, 4% increase in same Marina NOI during the quarter and a seven 7% increase for the full year.

The outperformance was due to higher demand for wet slipped in dry storage spaces.

MH and RV Marine has continued to generate reliable growth due to the industry's favorable supply and demand dynamics.

In terms of external growth during 2022 and through the date of this call. Some acquired 70 operating properties for $2 2 billion.

And spent approximately $62 million for developable land parcels.

The acquired land can support over 2500, future MH and RV sites.

Development is in funds DNA for the full year 2022, some delivered approximately 1100 60 expansion sites at 11 existing communities and over 840 sites at six development communities in the U S for a total of 2000 and future revenue producing sites.

Looking ahead, we have a solid development expansion pipeline that can deliver accretive growth for years to come as well as the proven skill set and platform to sustain our growth.

Going forward, we will focus on delivering two to three new image two elements each year as well as continued expansions at our existing properties.

With regard to home sales, our average new home selling price in the U S was $196000 for the quarter, reflecting the high demand at in strategic locations at our properties.

Within our MH and RV portfolio, we gained over 2900 revenue producing sites for the year.

Total portfolio occupancy of 96, 8% includes newly delivered development and expansion sites.

Included in our revenue producing site gains were over 2200, 50 transient RV annual lease conversions this year, a new record for Sun.

We receive an approximate 50% uplift in revenue the first full year after conversion.

<unk> proposition of an RV vacation one to three hours from home open Sun to new customers, who discover or rediscover the joy of a long term RV experience.

With regard to the three properties most directly affected by Hurricane Ian I would note that the cleanup is complete and we have started the rebuilding process.

Relocate as many people as possible the other properties, including our team members in the area.

We have recently received our first permits in place new homes, and our new home sales program as largely set in anticipation of reopening sites in the second half of the year.

Finally, I want to express my gratitude to the entire <unk> team for the privilege to serve as our president for the past eight years and as Chief operating officer since 2008.

We are an unparalleled team that is assembled the best in class portfolio and operating platform has delivered impressive results over many years and continues to be positioned for future growth.

So I assume my new responsibilities focusing on our MH development efforts I look forward to supporting Bruce and the entire team.

I will now turn it over Fernando to discuss our financial results in more detail Fernando.

Thank you John for the year Sun reported core <unk> per diluted share of $7 35.

A 12, 9% increase from 2021.

For the fourth quarter, we reported core <unk> per diluted share of $1 33.

A one 5% increase from the prior year.

Similar to last quarter. This quarter's outperformance was driven by total Marina real property NOI interest income and U K tax favorability.

As of December 31.

Sun had $7 $2 billion of debt outstanding that carried a weighted average interest rate of three 8% with a weighted average maturity of seven four years on a run rate trailing 12 month basis, our net debt to EBITDA ratio was five eight times.

In terms of capital markets activity.

During and subsequent to quarter end, we completed a $311 million add on to an existing secured financing with a weighted average interest rate of four 6%.

Proceeds were used to repay amounts on our revolving credit facility.

In January of this year, we issued $400 million of 10 year senior unsecured notes, which benefited from $250 million of treasury locks and use those proceeds to further reduce our line of credit balance since we achieved an investment grade rating in 2021, we have now issued $2 2 billion.

<unk> of unsecured fixed rate notes across four tranches.

Pro forma for this activity our floating rate debt was reduced to 16% of total debt, which has now decreased from 26% as of December 31 2020.

Turning to guidance for 2023.

As summarized in Yesterdays press release, we are establishing full year guidance for core <unk> per share in the range of $7 22.

The $7 42.

We are also establishing guidance for first quarter 2023 core <unk> per share in the range of $1 15 to $1 20.

Note that we expect first quarter results to reflect the seasonality of UK operations as outlined in our supplemental which we acquired in April 2022.

In 2023, we expect total same property NOI across manufactured housing RV and marine is to increase between four 9% and five 9% at the midpoint of the range as summarized in our press release. This total same property NOI growth assumes four 6%.

Growth from manufactured housing five 8% growth from RV, and a 7% increase from marinas.

Regarding average rental rate increases we reiterate the guidance ranges provided back in October at the midpoint. These rental increases are six 3% for manufactured housing seven 8% for RV and seven 5% for marinas.

On a total portfolio basis, we expect total revenues to real property to increase between eight one and eight 7% in 2023 and expenses to increase between 13, 5% and 13, 9%.

Included in this expected expense growth is in approximately $18 million increase in property related insurance costs.

We expect total real property NOI to increase between four five and five 7% during 2023 due to strong resident guest and member demand at our properties.

Our UK operations are included in our guidance for total NOI.

We are also providing certain guidance data points to help the investment community track part Holiday's performance.

Our guidance assumes we increase revenue producing sites by 2800 to 3100 sites in 2023, and we expect about 60% of these revenue producing sites to come from RV transient site conversions to annual leases.

Anticipate investing roughly $200 million in our ground up development and expansion activity.

Throughout 2022, we continue to focus on corporate expense rationalization, including process efficiencies and reducing our office footprint.

The high inflation environment for 2023, we expect G&A expense to run between 256, and $262 million, which equates to minimal growth over 2022 midpoint.

Importantly, we expect our G&A as a percentage of revenue to decline this year.

The final note increasing interest rates were a headwind on <unk> growth in the back half of 2022 and continue to be a headwind in our 2023 guidance. We actively managed our interest rate risk by paying down over $700 million of variable rate debt in the past three months alone with long term fixed rate.

Thereby continuing to reduce our floating rate exposure.

Believe our guidance reflects the current interest rate outlook at the time of this call and is informed by forward interest rate curves as of the time of providing our guidance.

Our platform of recession resistant best in class properties is positioned to continue generating strong cash flow growth to the benefit of our stakeholders.

As a reminder, our guidance includes acquisitions dispositions and capital markets activity through February 22023, and the effect of a property disposition under contract expected to close in March 2023.

It does not include the impact of prospective acquisitions dispositions or capital markets activities, which may be included in research analyst estimates.

This concludes our prepared remarks, we will now open the call for questions operator.

Thank you.

We'll now be conducting a question and answer session.

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One moment, please why do people for questions.

Our first question is from the line of Michael Goldsmith with UBS. Please go ahead.

Good morning, Thanks, a lot, particularly my question. My first question is on the insurance.

You called out $18 million increase in property related insurance. One was your did your insurance renewal will take place how much is the insurance as a percentage of operating percentage in just to try to frame it out like.

If if insurance is 15% to 20% of expenses was 20% higher than anticipated that'd be three to 400 basis point headwind. So ex that drag if any expense growth, 6% to 7% and matching kind of like the.

Top line growth.

Hey, Michael our insurance renewal occurred between November and January November of last year and January of this year.

Legal taxes and insurance of our same property portfolio represent are expected to represent about 10%.

This year.

That is an increase of about 300 basis points over 2022.

So your your math.

As far as the headwind from an expense growth perspective tracks.

Tracks.

Got it.

Thank you for that and then.

My second question is just on.

On the flow through of the NOI growth Youre NOI is expected to grow.

Four and five.

Five 7% and Youre seeing property NOI is growing four nine to $5 nine yet your guidance is calling for earnings to be down in 2023. So can you walk through some of that pressure.

Alright, so the factors that are below the line.

When you see the.

The same property NOI growth flow through to <unk>.

Sure. The primary factor as mentioned on the call is going to be our interest expense for projected interest expense up.

For 2023.

We are actively and programmatically at working on a number of strategies to continue to reduce.

Our exposure to variable rate debt.

But certainly.

As we look out at expectations from a market perspective.

There is potential for 2023%.

Fine as far as interest expense, and then that either becomes a neutral or a tailwind heading into future years.

Thank you very much good luck this year.

Thank you Michael.

Thank you.

Our next question is from the line of Josh <unk> with.

Bank of America. Please go ahead.

Yeah, Hey, guys.

I felt like throughout the fall, but the messaging on.

The rate growth you were sending out was gonna lineup with the expense growth and correct me if I'm wrong on that.

That's kind of the message that guy.

Yeah.

In our conversations over the course of the fall.

Certainly expectations for the rest of our expense line items to fall in line with that at the at the time and mentioned during our NAREIT meetings with investors.

We have yet to.

Fully.

When we set our insurance program for the year. So that was the remaining the remaining item from that perspective, and we did realize that a larger than expected increase for 2023.

Okay.

I guess.

My real question is like.

I think about like a go forward basis like is that.

Is this something you'll be able to recover in the future like obviously like insurance jumped up a lot this year.

I'll tell you control a little bit like is there a way to kind of cover it kind of over the long term right.

You guys are thinking about it or has something kind of shifts you Tonight in the model of it.

Hey, Josh it's Gary.

We feel it's definitely recoverable.

One of the <unk>.

Key factors of our business is that we are able to.

Pass on expenses and the farmer rental increases.

As we've talked about before.

Our business is really about a reliable growth because of the strong demand and short supply.

Patient is that.

We can pass through expenses.

Regard to insurance.

As we've said we've been public for 30 years in private before that I would.

I suggest that we're really seeing.

Maybe a little bit earlier than others for a renewal standpoint.

What everybody else has been or will be seeing going forward.

It reflects the environment for insurance at this point in time as we know that can go up and down so.

Our expectation is that we will pass through these costs.

Through rental increases as we go forward because part of our operating business, but that being said, we can't underscore. The fact that with this increased cost as Fernando mentioned of $18 million, we're still seeing.

At the same property growth of five 4% at the midpoint so.

We also have.

The ability to continue negotiating our insurance through the year.

And.

We will continue to do so but.

And the effort of being totally transparent of where our costs have gone too.

That's what is included in our guidance.

Appreciate the color Gary Oh.

One last one for me.

The marine is safe Harbor.

Guys are.

Theres a membership program, where now you can get there.

Annual.

Yes at and cost.

Is that the main reason the service retail dining and entertainment NOI.

Is declining year over year, and then how are you guys thinking about.

What kind of payback as you as you kind of increased rate on the annual side like is it a two year kind of.

APAC three year, how are you guys thinking about that.

So I don't have the numbers right in front of me and we can get back to you or perhaps Fernando does but youre absolutely.

Correct as everyone might recall strategically.

We're always looking to convert lower margin business over to the stickier site rent and.

While these arent loss leaders we are.

Passing off gas fuel at our cost to attract members and I think that's reflected by the fact that we now have a waiting list and 80% of our marinas.

I think it is growing from there right now.

We have noticed.

Rental increases what were they in the Marina side.

At the midpoint, we were expecting seven 5% for for this year.

List.

Now, we now have a waitlist at 91% of our Marina and then Josh Yes the.

The bulk of.

Of the srd any NOI year over year is coming from that active program on the on the fuel side and that <unk> is really there in the service as Gary mentioned right of having a member with us for an eight plus.

Year period.

And we will continue we'll continue working through through those strategies.

Strategically over time.

We expect to more than capture.

Difference certainly on a multiple basis, where they are.

Stickiness.

The rental revenue versus the lower margin business that being said we.

Firmly.

Feel that these.

Dairy activity as especially the service is very very important to the.

Occupancy and to the stickiness and demand for the Safe Harbor marinas.

Compared to the marinas that don't offer the service.

Okay.

Thank you.

Our next question is from the line of Steve <unk> with Evercore ISI. Please go ahead.

Yes. Thanks, Good morning, I guess, maybe for Gary.

Just on the home sales in general whether it's U S U K.

Are you seeing anything by region by product type by price point.

Just curious how kind of the.

I guess, the economic uncertainties are kind of weighing on sales and whether you're seeing any bumps in the road as you kind of look into 'twenty three.

Feedback I can share with you as of this point and I'll let.

John go more into.

Specific to sales new home sales are up.

Average price was at a 186 $196000 I think it's one of the high points that we've seen.

I think it totally reflects.

Quality location and value.

Yes, that's in our portfolio.

I think it clearly reflects the capital reinvestment that we've shared with.

Our stakeholders before that if we don't reinvest in our community as we do strip the equity rate out from underneath the homeowners. So we have a stringent policy there.

On the us.

Pre owned home side of things Ironically, we've seen demand is so strong that we have been able to buy less inventory over a period of the last 12 months or so so our.

New home.

Beyond home sales.

Down a little bit it's just reflective of the demand people staying in their homes longer and the fact that their direct selling their homes. So there is no interruption in rent to us, but we're not able to buy the inventory to flip it into.

He used homes as we have been.

Cracks over a 30 year period of time that will go up and down a little bit. So we don't see that.

Anything negative whatsoever.

<unk>.

UK side were seeing enormous strength on the higher end.

Home buying the more expensive homes, increasing and I turned to John who's overseeing that to talk a little bit more about the particulars of the UK home sales I mean with respect to the U K home sales I mean, our team over there has sold over 2900 houses in 2022, which is a 23% increase year.

Over a year so like Gary said the demand continues to be very strong. So much. So that we've I think we've shared before that we built out almost 700 expansion sites over the course, finishing in 2022 that all sold out in 2022 and look to expand another 500.

Into the season, this year, which will be filled up by the end of 2023. So.

Really really strong demands in I think a lot of that has to do with the fact that.

No.

There's higher cost for basic items, which has caused more people to holiday domestically in the U K rather than go to Europe .

We're fortunate that the higher income earners in the UK, which represent holiday homeowners in our portfolio are benefiting.

From that meeting that savings.

They're bearing higher interest on their savings that our pensions are tracking with the pace of inflation.

As we shared with the original.

Information we.

We provide on the deal.

Brexit still makes it difficult to travel and the continent.

It's gotten more expensive the pound is still devalued in comparison to this time last year.

Most people travel within two hours to get to the properties and so.

And then the other.

The thing that I would add is looking out into 2023 from a strength perspective.

90% of our owners have already paid their 2023 pitch fees and fuller committed on direct debit so.

These are rock solid.

That 90% is ahead of the same time last year and the previous years.

Great. Thanks for that answer I guess, just one for Fernando on the balance sheet, obviously floating rate debt to call a lot of people.

Maybe not by surprise, but certainly been more powerful and had a bigger negative impact I guess in hindsight have you thought about the balance sheet and the way it wants to get constructed and maybe how you think about it philosophically on a go forward basis in terms of fixed versus floating.

Steve I think we've been pretty programmatic since since achieving our investment grade rating in the summer of 2021, we've done over $2 $2 billion of.

I G unsecured bonds with a with that public market.

We've also taken advantage of the fact that our assets that are still under secured financing or still have mortgages.

Because of their strong performance were able to borrow up.

An existing financings and did a $311 million.

One.

That closed between December and January .

Over the course of the last couple of months.

Today, we stand at about 16% floating rate debt as we look at our as we look strategically at the portfolio.

Gary mentioned in his remarks right we can.

We look at our investment program and ground up development and expansion.

We.

We will be able to practically self fund.

Our investment activity in 2023 are selectively looking at opportunities.

On the capital recycling front.

A couple of assets here and there that over over time.

Can also reduce variable rate debt and would remind the market. We have very manageable maturities no looming towers over the course of the next couple of years, we have about $117 million to $118 million coming due in the second half of the year and are being programmatic about locker.

In locking in that cost today.

Today.

As we've done over the course of the last last couple of years.

But certainly looking to actively manage our our exposure to floating rate debt.

Great. Thanks, that's it for me.

Thank you Steve.

Thank you. Our next question is from the line of John Kim with BMO capital markets. Please go ahead.

Thank you.

I wanted to follow Steve question.

He alluded to rising rates is not necessarily surprise, especially the last few months.

So I guess can you just walk us through why you allowed floating rate debt to increase during the fourth quarter.

The refinance it post quarter.

John These.

These financings as far as on the secured side take take them. Some time to work through it it's actually one that we started on in in July of the.

Of the second quarter as far as debt increasing into the fourth quarter of last year.

Some of that right are we had a significant amount of deliveries of ground up an expansion on <unk>.

<unk> sites.

So that that is that explains.

Some of the increase on the debt side as well as purchasing the inventory that will ultimately.

Start to produce income over the course of 2023.

Those would be the primary reasons from that perspective.

And then about 20% 25% of it is right.

Is the FX on the debt amount so from the end of September to the end of December the pound.

It did appreciate significantly.

So that would that would that accounts for about an additional $90 million of that quarter to quarter increase.

And then to further reduce the floating rate exposure or are you looking to use interest rate swaps or or utilize fixed rate debt.

We've been we've been quite programmatic from that perspective to support our issuance in the unsecured bond market.

We did over since December of 2021 at 850 of Treasury locks in swaps.

We also did swap.

$400 million of R. R.

Of our pound Sterling at term loan in the U K, So, yes that does factor into our toolbox.

Okay.

A follow up question on insurance, how much is your increase in insurance due to your your exposure to Florida and.

And if you had let's say a different geographic mix with your insurance costs.

Be more moderate.

Sure.

Yes.

Great question and.

The scale and size.

John .

We're able to.

Yeah.

Best in class pricing, so to speak and it is a question that we certainly asked.

I think that.

The majority of.

What we heard from the participants in the syndicate and our insurance.

Underwriting.

I have a graph talks about flooding hurricanes phrasing cos.

And hurricane and storm damage.

And they look at the claims that they paid out versus the premium is they've taken in.

I think this is where when I referred to the fact, we're seeing the reality of what's out there overall.

We're not going to reflect that different then.

Our competitors in other asset classes, but when we get specifically the Florida.

Getting coverage.

It was more challenging and more difficult in Florida.

We don't have it broken down individually to Florida, we negotiate as a package.

So I would just point to the overall increase in insurance.

The fact that we're in Florida, Texas, and California is by design.

Over 100 million people there.

Focus our geographic footprint and target the right markets to operate them.

Uh huh.

The demand for affordable housing has never been stronger in those markets. So it speaks to the high occupancy is the ability to push through inflationary rental increases.

We will closely evaluate and continue to evaluate our exposure. It is impacted by insurance as we go forward.

And I would just.

At this point that Gary made.

His answer which is that.

There's a lot more to do with what's.

What events are taking place across the world. This is less of a son issue in asset class issue or anything like that I mean, you look at everything whether it's earthquakes in Turkey, and so forth thats impacting the cost of insurance for everybody.

And really that's I think that sort of everybody is for lack of better words.

This area of those events happening in the form of higher costs.

I'm just wondering if that changes your view at all on where you allocate capital going forward, whether it's U K Midwest or some other markets where it may alleviate.

Some of these factors.

I think that absolutely does have bearing on how we think about things and how we look at things.

And.

You bring it up and we happen to be talking about it not that long ago, but the fact of the matter is there is 22 million people in Florida 320000, I think we talked about moved in there last year. So.

Strategically we do have to think about.

Cost return proposition.

And that stayed as we do everywhere and I wouldn't suggest that strategically we're looking at it very carefully.

I appreciate it thank you.

Thank you.

Our next question is from the line of Keegan Kahn with Wolfe Research. Please go ahead.

Hey, guys, maybe first in same store revenue expectations for 'twenty three that they definitely came in looking pretty strong. So just a few questions.

How much pushback you guys get on rate increases across your segments, given the elevated increases in <unk>.

And specifically I'm arenas, how much longer do you think you can push at an elevated level.

Past channel checks, we've done there's concern for a while that you know outsized pricing power. It's eventually going to deteriorate because it's going to break boat owner. So it's a curious for your thoughts there.

So I'll address the marine part if you can talk about the rest of the portfolio and Jon but.

I think when we talk about supply demand, we've talked about over 11 million vessels registered for eight or 900000, wet and dry slips.

As we spoke earlier, we're intentionally shifting our value proposition.

That will support continued.

Rental increases.

By operating memberships, the other lower margin attributes such as fuel.

Such as.

Discounted transient stays when theres open sites or slips available.

And other membership opportunities so.

With that kind of a supply demand out of balance.

We are very comfortable and.

We're expecting to continue growth.

Similar to what we've been experiencing so we don't.

Currently see.

Those type of headwinds that you're suggesting in the Marina business and I'll, let John talk really about a 40 year history of manufactured housing.

Keegan, it's really it's a balanced conversation, which is to say obviously looking at what expense growth is in applying to passing that on.

So our residents, but we view rent increases like a marathon versus the sprint you know as we've shared before.

I think folks have heard me say it 100 times is that the most expensive St. We have in our portfolio is a vacant one.

And I think our strategy has really stood the test of time for 25 plus years, we've delivered positive revenue and NOI growth.

Every year when others have seen ups and downs, we continue to deliver long term cash flow stability.

Maintain a solid relationship with our resident base, which is also our salesforce brings us industry, leading occupancy growth like the record 2900 sites. We gained over the course of 2022.

196000, commanding average home prices that exceed virtually all competitors in our asset class, which I think illustrates the unmatched quality and the value of our communities represent so really in summary, our strategy is well balanced we believe across all stakeholders, including our residents that live in well maintained communities and create value.

In their homes, so it's something that we have.

Watch.

Talk about very closely as we think about what increases and how we can push further on both MH and RV.

And the only thing I would add and we've.

Covered.

Posted.

Posted deck is the.

The Delta difference between alternatives, whether it being single family residential whether it'd be multifamily where.

Do provide 25% more space at 50% of the per square foot cost.

For a lot of advantages of being able to put right up to the how springer groceries on heavier Corona care part of garage.

Et cetera, and then.

Well, we certainly know there are headwinds.

On site built housing, especially due to mortgage rates.

Delta difference.

Between.

Single family residence and the overall cost of living in one of our manufactured housing communities.

Such that for many many Americans.

Manufactured housing will be the only option available.

Homeownership.

So.

I think again 40 year track record 30.

But 10 private.

Indicates that.

We will be able to continue to get the correct growth based on the value proposition that's same as true in the IRB affordable vacationing.

And certainly in the U K.

As the second vacation home and alternative to more expensive vacationing in the UK.

Got it and then taking a step back so if we think about your both your real property, excluding transient transient on a like for like basis. If we exclude your transient conversion expectations for 'twenty, three where the numbers shake out both on excluding transient than transient as a whole right. Because you obviously expect to convert a lot.

Sites, which means that the.

The comparative pool for transient is going to be much lower.

Yeah again, I'll give you the comparative four four same property.

We're expecting about a 90 basis point increase year over year and revenue from transient.

RV that is on a base of approximately seven 5% to 8%.

Fewer site nights.

So you can write it on a like for like basis were.

Would be would be much higher than that 1%, but as.

As John mentioned or maybe I mentioned during my section of the script.

We are expecting.

Another very strong year of of conversions from transient sites to annual leases of the <unk>.

3100 at the high end.

60%.

As expected on the RV side and this is once you've converted at that site you have a resident therefore on average a five plus year period of time.

It is very likely making improvements.

To that site and bringing up the value of that.

But the community itself, so we're very being.

Hyper focused on continuing the conversion program over to.

The annual side.

And just on the excluding transient portion to rate what would the what would the range be if you exclude your expectation because there's going to be a bit of an uplift.

I don't have that broken out here in front of me. We can fund that's a very quick follow up.

With you after the call.

Okay, great. Thanks, guys.

Thank you. Our next question is from the line of Wes Golladay with Baird. Please go ahead.

Hi, everyone I just have a question on the service retail and dining guide so I make sure I'm looking at it correctly. It does look like it's going down a little bit year over year and worked so a question on how we should think about modeling. This line item going forward I think you mentioned maybe in the prepared comments that it was almost like a loss leader so should this only grow.

With acquisitions, and then second part I did see a termination income is there anything impacting the guide this year off from the termination of a lease.

Yeah, It's Gary I don't want anyone to think of it as a loss leader because it's not a loss leader.

We've just elected to shift.

Smaller margin over to higher valuation the farm a sticky rent so we're not.

Losing money or subsidizing anything when we talk about passing on guests that are cost. It's not just the cost we buy the pumper trucks, but as the costs associated with delivering it as I said big advantage to paying the profits. The other boat owners would have to pay elsewhere.

And on the lease termination we did mentioned in my in my remarks.

We did rationalize some space in our main office.

Got out of two floors.

In our offices here in in Southfield.

Okay got it and then.

You Didnt mentioned potentially asset recycling do you have a preference from proceeds whether it is to pay down our variable rate debt or to recycle or to buy assets and if you were to pay down debt could you sell non core assets and accretively, we pay down the variable rate debt.

I think everything is under view.

Continuing to evaluate parts of our portfolio, where we think we can redeploy that capital with greater growth certainly with the headwinds of interest rates today that is one.

Big focus less so we're not running to shed assets, but we are reviewing them very very carefully as to growth.

As we've shared again.

Day, one of the areas that I think differentiates us and gives us the greatest opportunity as well.

Ability to create new ground up developments and expand our manufactured housing portfolio.

So because there is a cost associated with the over 16000 sites that we've already bought and paid for it or not yielding any return.

We carry on.

And by.

Paying down that debt if that's what we elect to do we obviously.

Recapture.

That loss to interest rates. So that is one area. The second area is.

Certainly funding.

The development costs, so that we can generate.

High returns and create value for the stakeholders by increasing our manufactured housing portfolio.

And then third of course is there.

The difficult economy is often turn out.

Opportunities in.

We are looking at a number of opportunities from.

From all of the different platforms, there is nothing identified yet or nothing that.

As meaningful but.

I believe in these periods of times as I said before as people have to refinance things in a whole new rate in a whole new world.

Opportunities may.

Become available there that are accretive.

Across our current cost of capital so paying down variable that is.

Probably.

Something that allows us greater opportunity to create growth in the future or if there's something very accretive we would look at that as well.

So there is no specific plan I think just general good stewardship of how we think about reducing that variable debt.

I appreciate it thanks a lot.

Thank you. Our next question is from the line of Robyn <unk> with Green Street. Please go ahead.

Hi, Good morning, I wanted to follow up on the previous question on claims trends.

The U S and U K.

Hi.

Fell by 16% from last quarter in the U K were flat.

U S.

Business line has been a fourth quarter is typically a seasonally light period in the U K, but can you maybe talk to the weakness in the UK prices.

Because if you think that that reflects market pricing.

And perhaps pushing discounts.

If you get the volume.

I mean, it's not really discounts to push the volume, but I think when we when we walked in and I think part of the investment thesis that we shared.

In the beginning was the fact that we might see the margin a little bit to gain more sites and gained more an ongoing revenue.

On those sites and so we are basically we are just executing the plan that we set out to do.

Yes.

Prefer the stickiness of the rent over the one time margin on the home sales. So you will continue to see an emphasis on that strategy as we go forward.

Cause that.

Market prices.

This 18%.

Sorry, Robyn what was the question.

So just to clarify that's taking place and does not reflect market prices will you pay for.

Town.

Oh I think it reflects.

Our strategic plan with management.

But it is interesting as John pointed out.

Seeing some higher growth in the higher end of what they referred to as the lodges.

And.

That's an area that we're focusing on and there are also smaller margins on the larger.

Then there are the.

Lower base Thompson.

Yeah. Thanks, Andrew on the second my second question is.

How are the forward bookings trending for holiday to holiday rentals in the U K.

They are actually trending a little bit ahead of this past year.

Which of course as we shared before is great because.

That is the theater for more holiday home sales and more rent paying sites.

So in the park holidays portfolio correct me, if I get this wrong, 40% of all homebuyers have stayed in one of the rentals and the property and 60% of all buyers have stayed in a rental and a park and a holiday property. So.

It really is the feeder if you will.

So seeing the demand where it is now is.

Very encouraging for us I will add that.

We did speak to them the other day there is.

Fair amount of competition out there and some discounting that's taking place outside of the public holidays in the or inferior properties.

But I think it's driving people.

To expect quality.

At Park holidays, and with the addition of <unk>.

Park leisure, which are really the high end.

Holiday vacation parks, they have a much lower percent of our fleet.

Sleep home ownership in those 14 properties.

Almost none almost none.

So.

Thank you.

We are seeing positive strength there.

Thank you.

Our next question is from the line of Brad Heffern with RBC capital markets. Please go ahead.

Yes, good morning, everyone.

What are you seeing on the leading edge demand for transient RV I know, it's obviously at the low demand time of year, but any color on what happened year to date and the forward bookings would be great.

Sure I think.

From the from the booking pace perspective.

Right now we are trending.

Just a little bit ahead of last year, which is great. We are nearly 95% booked which is better than we were at this time last year for Q1. So we're running a little bit ahead, but if you look out into the whole year, we're a little bit ahead in total booking pace meeting.

Bookings that have actually happened at this point in time versus where were last year.

Yeah, I think I'd remind everybody we're going back more of our pre COVID-19 normal pattern as John likes to say, it's a lot harder to book Tuesday, or Wednesday than it was during Covid is people are back to school back to work.

So our expectation is.

For a more normalized year over year transient growth people are still <unk>.

Positive about experiencing that outdoor vacation.

There is an increase in the surveys that we've done in our competitors done with expectation of a RV stay in camping this coming year, So tomorrow back to normal I think and a big.

Big focus that has really been there for almost 10 years now of the conversions that we talk a lot about.

It is easier to forecast.

When we convert a.

Transient into an annual it is more cost effective and picking up that 50% increase on a per site basis for the first year and.

About 75% conversions last year.

Of our transient to annual.

And.

Forward.

We expect good solid growth is coming years so.

We're going to start to see.

A reduction of.

<unk>, which will have to rethink about maybe three to five years from now as we're thinking out of how we.

Have an inventory of trans and to convert to annual and that'll be a nice problem to solve.

Okay. Thanks for that and then on the U K. It looked like MH occupancy was down almost 300 basis points in the fourth quarter.

Is that a demand impact is that seasonal or is there some other explanation.

But as a result of adding sites to the portfolio through expansion.

Okay got it thank you.

Thank you.

Next question is from the line of Anthony Powell.

Barclays. Please go ahead.

Hi, Good afternoon, just one quick one from me on acquisitions could you maybe go into.

The three deals you did in December MH RV Marina in terms of cap rates sourcing and would you expect your volume acquisitions in 2023 to be lower or higher than 2022.

Graham.

Paperwork here.

Okay.

I think that we don't typically provide guidance.

Third acquisitions and of course capital marketplace activities.

We've discussed the fact that.

Cost of capital is such that we have sharpened our pencil raise of razor thin.

I don't believe we'll lose any opportunities because.

Sun always has a seat at the table.

Just about.

All of the sellers will reach out to us on either directly or through our relationship or broker.

Brokerage.

Never had a stronger balance sheet, but we're very very focused on.

Bringing value and growth opportunity to our shareholders and currently where we have not seen any major changes to cap rates.

And North America manufactured housing.

Of institutional quality is still in the 4% or in one case I just heard up below.

For those high quality assets and very few of them trade.

Are we in the low fours to five.

Arenas.

There's been a lot of competition and.

Sort of.

Plus or minus 6% range.

Currently is where we're seeing.

The institutional quality assets.

Trade at so it's going to take a real opportunity.

As a creativeness and embedded growth, where we can justify deploying capital.

In this.

Environment and deliver the kind of growth our stakeholders are used to do so.

Short term.

I think we'll be looking at <unk>.

Selective acquisitions.

That return.

Properly to our shareholders, but certainly investing in the expansion and development and our.

Manufacturing housing portfolio.

Got it maybe a follow up on that in terms of the development sites.

Yeah.

<unk> cost change on those and how that how it's kind of the ROI profile of your development sites at mall of the past 12 months.

Yeah, It's a great question.

We certainly saw.

The cost of development spike up through the pandemic.

Short supply supply chain et cetera.

We have begun to see it decline.

We.

We're looking to build our new developments to a high single digit unlevered IRR upon stabilization.

Currently we have adjusted.

Our returns to low double digit in part because of the.

Large of rental increases as a reflection of <unk>.

CPI inflation, so as we model out going forward.

Going in rents.

Our higher than we originally modeled them out so we believe we can still acquire.

Develop if you will.

Lot more beneficially than we can acquire out in.

In the marketplace as cap rates have not adjusted for manufactured housing.

Of course because of.

The fundamentals that.

Investors see in manufactured housing them, because <unk> being one of the latter to just consolidator as.

<unk> created a really dearth of acquisition opportunity there in manufactured housing.

Okay.

Thank you for the color.

Yep.

Thank you.

There are no further questions at this time I would like to turn the floor back over to Gary Shiffman for closing comments.

We always appreciate the opportunity.

To have these calls and speak about the business today marks a very special day.

<unk>.

And really you want to take this opportunity to thank John whereas unbelievable stewardship.

As President and Chief operating officer since 2008, if I've got that correct.

And.

Really look forward to.

John's tenure operating.

Our communities in particular manufactured housing and being able to transfer that over to the 16000 site inventory. We now have the grow by.

And his stewardship and direction over there we believe we will derive great benefit for our shareholders. As we go forward and an area that really differentiates us from all others in our asset class so on behalf of.

The entire company from the communities on up to senior management and executive team I do want to extend our appreciation to shop.

Well, Doug Thank you.

We look forward to our next call and certainly invite anyone to.

Reach out to Fernando and his team with any follow up questions.

Thank you everybody.

Thank you for your participation in today's conference.

This does conclude the company's remarks, you may now disconnect your lines.

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Hum.

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Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Sun communities fourth quarter and year end 2022 Fundings 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 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. The company can provide no assurance that this.

Expectations will be achieved.

Factors and risks 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.

Having said that I would like to introduce management with US today, Gary Shiffman, Chairman, President and Chief Executive Officer.

John Mclaren strategic adviser.

Fernando cash flow kind of Genie Chief Financial Officer.

After their remarks, there will be an opportunity to ask questions.

Those who would like to participate in the question and answer session management asks that you limit yourself to two questions. So everyone, who 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, President and Chief Executive Officer Mr.

Mr. Shiffman, you may begin.

Good morning, and thank you for joining us as we discuss fourth quarter and full year results for 2022 and our guidance for 2023. This year March 30, this year as a public company and over the past three decades, we have established a track record of strategically expanding and diversifying.

Finally, our portfolio of recession resistant best in class properties.

We and our stakeholders have benefited from the compelling supply and demand dynamics.

Underpinning.

Faction housing RV communities and marinas.

Our strategic approach has delivered an attractive balance of a reliable organic growth and strong <unk> per share increases.

We have increased rents throughout economic cycles, and our strong results for 2022 and outlook for same property NOI growth in 2023 demonstrates.

Demonstrates the benefits of our operating segments.

Fly has perpetually constrained and demand is resilient in 2022 core <unk> per share grew 12, 9% driven.

Driven by strong demand for our offerings as well as our accretive investment activity.

Demand for our manufactured housing communities and RV locations will evident and our consistently high occupancy levels gains in revenue producing sites and solid same property NOI growth.

At year end, our combined MH and RV occupancy was nearly 97%.

Reflecting approximately 96% occupancy within our manufactured housing portfolio.

During the year, we achieved a record of over 2900 revenue producing site gains driven by more than 2200, 50 conversions of transient RV sites to annual leases.

Which topped last year's record conversions up nearly 17000 sites.

Represented a 36% year over year increase.

And marinas are 2022 same property results continue to demonstrate supply demand tailwind with a 12 to one ratio of registered boats in the U S to the existing supply leasable wet slips and dry storage spaces.

This creates a very sticky customer base and gives us the ability to grow rents.

The resilience of our platform can be seen in our full year total manufactured housing RV and Marina same property NOI results, which grew by five 8% over 2021.

Regard to external growth since acquiring peg holidays in April 2022.

Focused on integration as well as being very selective in our approach to acquisitions.

The UK market for holiday parks remains highly fragmented.

As we have done in the U S. Over the years, we have used our product holidays footprint to opportunistically to scale our presence in the UK.

Subsequent to the park holiday as transaction, we acquired 14 best in class holiday parks in the UK.

These investments have accretive going in cap rates and we believe they will deliver significant ongoing growth and yield strong returns.

In light of current market conditions, we have shown discipline with regard to our approach to capital allocation and we'll continue to do so going forward.

As we sharpen our pencil and assess capital and funding alternatives growing our revenue producing sites through expansions and ground up developments continues to offer accretive returns.

During 2022, we delivered 2000, new expansion and Greenfield development sites in North America.

Which was at the high end of our guidance.

These new sites will begin contributing revenue in 2023 and provide a new base for growth in the coming years.

We have inventory of over 16000 fully entitled sites for development and delivery in future years, representing embedded continued growth.

Additionally, we regularly evaluate our portfolio for capital recycling opportunities to enhance our long term growth profile.

With respect to ESG, we continually identify ways, we can enhance our corporate citizenship.

Some recently set a target to achieve carbon neutrality by 2035, and net zero emissions by 2045.

And as previously announced we added Jeff Wow CEO related companies to our board of directors.

<unk> experience and leadership will be a tremendous addition to our team.

Lastly, our board has raised our 2023 distribution to $3 72 per share and five 7% increase from the prior year.

We're very pleased with our 2022 achievements I'd like to thank all of our Sun team members, who contributed extraordinary efforts to our collective success.

As we look ahead to 2023, we once again expect to deliver a year of solid same property growth.

As a 30 year track record has demonstrated we have a business model that delivers results throughout economic cycles.

Sorted by compelling supply demand fundamentals.

We will remain disciplined in our investment activity and our Unparallel expansion and development platform will continue to provide us with a differentiated growth opportunity.

I will now turn the call over to China, and Fernando to speak to our results and guidance in detail.

John .

Thank you Gary the stability of our operating platform has shown through in our results for the quarter and the year.

MH and RV same property NOI increased by four 4% in the quarter.

Four 9% growth in revenues reflected a 5% increase in weighted average monthly rent.

180 basis point occupancy gain.

Five 8% increase in expenses was primarily related to turnover costs and our rental program. There's one consequence of the pandemic was lengthened the average stay and therefore higher related refurbishment costs.

Having turned over these units we are now able to realize higher rents on incoming leases.

For the full year same property MH and RV NOI grew five 4% driven by a five 7% increase in revenue and a six 2% increase in expenses.

Strength of our portfolio is a direct result of our irreplaceable locations. The hard work of our team members and our continued reinvestment in our communities.

At our RV communities, we set another annual record for site conversions to annual leases.

Full year transient same property RV revenues grew by three 1%, reflecting an average rate of growth of 14, 1%. Despite an almost 10% reduction in available site nights promos strategic conversion of transient sites to annual leases.

Occupancy in our same property MH and RV portfolio remained strong increasing 180 basis points during 2020 to the end of the year at 98, 6%.

Our call. This portfolio is performing above our original underwriting and the management team has done an excellent job integrating into sun.

The fourth quarter continued to show strength for the 31 properties Park called <unk> zones since at least January 2021 home sales rose 17%.

Full year weighted average rental rates increased five 4% driving a 24% increase in home revenues.

Brian has exceeded our expectations with a 10, 4% increase in same Marina NOI during the quarter and a seven 7% increase for the full year.

The outperformance is due to higher demand for wet slipped in dry storage spaces, like MH and RV rents continue to generate reliable growth due to the industry's favorable supply and demand dynamics.

In terms of external growth during 2022 and through the date of this call Sun acquired 70 operating properties for $2 2 billion.

And spent approximately $62 million for developable land parcels.

The acquired land can support over 2500, future MH and RV sites.

Development is in funds DNA for the full year 2022, some delivered approximately 160 expansion sites at 11 existing communities and over 840 sites at six development communities in the U S for a total of 2000 and future revenue producing sites.

Looking ahead, we have a solid development expansion pipeline that can deliver accretive growth for years to come as well as the proven skill set and platform to sustain our growth.

Going forward, we will focus on delivering two to three new MH developments each year as well as continued expansions at our existing properties.

With regard to home sales, our average new home selling price in the U S was $196000 for the quarter, reflecting the high demand at in strategic locations at our properties.

Within our MH and RV portfolio, we gained over 2900 revenue producing sites for the year.

Total portfolio occupancy of 96, 8% includes newly delivered development and expansion sites.

Included in our revenue producing site gains were over 250 transient RV annual lease conversions this year, a new record for Sun.

Receive an approximate 50% uplift in revenue the first full year after conversion.

Value proposition of an RV vacation one to three hours from home open Sun to new customers, who discover or rediscover the joy of a long term RV experience.

With regard to the three properties most directly affected by Hurricane Ian I would note that the cleanup is complete and we have started the rebuilding process.

We relocated as many people as possible to other properties, including our team members in the area.

We have recently received our first permits in place new homes, and our new home sales program as largely set in anticipation of reopening sites in the second half of the year.

Finally, I want to express my gratitude to the entire <unk> team for the privilege to serve as our president for the past eight years and as Chief operating officer since 2008.

We are an unparalleled team that is assembled the best in class portfolio and operating platform that has delivered impressive results over many years and continues to be positioned for future growth.

So I assume my new responsibilities focusing on our MH development efforts I look forward to supporting Bruce and the entire team.

I will now turn it over Fernando to discuss our financial results in more detail Fernando.

Thank you Josh for the year Sun reported core <unk> per diluted share of $7 35, a 12, 9% increase from 2021.

For the fourth quarter, we reported core <unk> per diluted share of $1 33.

A one 5% increase from the prior year.

Similar to last quarter. This quarter's outperformance was driven by total Marina real property NOI interest income and UK tax favorability.

As of December 31.

Sun had seven $2 billion of debt outstanding at carried a weighted average interest rate of three 8% with a weighted average maturity of seven four years on a run rate trailing 12 month basis, our net debt to EBITDA ratio was five eight times.

In terms of capital markets activity.

During and subsequent to quarter end, we completed a $311 million add on to an existing secured financing with a weighted average interest rate of four 6%.

Proceeds were used to repay amounts on our revolving credit facility.

In January of this year, we issued $400 million of 10 year senior unsecured notes, which benefited from $250 million of Treasury locks and used those proceeds to further reduce our line of credit balance since we achieved an investment grade rating in 2021, we have now issued $2 2 billion.

<unk> of unsecured fixed rate notes across four tranches.

Pro forma for this activity our floating rate debt was reduced to 16% of total debt, which has now decreased from 26% as of December 31 2020.

Turning to guidance for 2023.

As summarized in Yesterdays press release, we are establishing full year guidance for core <unk> per share in the range of $7 22.

The $7 42.

We are also establishing guidance for first quarter 2023 core <unk> per share in the range of $1 15 to $1 20.

Note that we expect first quarter results to reflect the seasonality of UK operations as outlined in our supplemental which we acquired in April 2022.

In 2023, we expect total same property NOI across manufactured housing RV and marine is to increase between four 9% and five 9% at the midpoint of the range as summarized in our press release. This total same property NOI growth assumes four 6%.

Growth from manufactured housing five 8% growth from RV, and a 7% increase from marinas.

Regarding average rental rate increases we reiterate the guidance ranges provided back in October at the midpoint. These rental increases are six 3% for manufactured housing seven 8% for RV and seven 5% for marinas.

On a total portfolio basis, we expect total revenues from our real property to increase between eight one and eight 7% in 2023 and expenses to increase between 13, 5% and 13, 9%.

Included in this expected expense growth is in approximately $18 million increase in property related insurance costs.

We expect total real property NOI to increase between four five and five 7% during 2023 due to strong resident guest and member demand at our properties.

Our UK operations are included in our guidance for total NOI.

We are also providing certain guidance data points to help the investment community track part Holiday's performance.

Our guidance assumes we increase revenue producing sites by 2800 to 3100 sites in 2023, and we expect about 60% of these revenue producing sites to come from RV transient site conversions to annual leases.

Anticipate investing roughly $200 million in our ground up development and expansion activity.

Throughout 2022, we continue to focus on corporate expense rationalization, including process efficiencies and reducing our office footprint.

Right the high inflation environment for 2023, we expect G&A expense to run between 256, and $262 million, which equates to minimal growth over 2022 the midpoint.

Importantly, we expect our G&A as a percentage of revenue to decline this year.

The final note increasing interest rates were a headwind on <unk> growth in the back half of 2022 and continued to be a headwind in our 2023 guidance. We actively managed our interest rate risk by paying down over $700 million of variable rate debt in the past three months alone with long term fixed rate.

Thereby continuing to reduce our floating rate exposure.

Believe our guidance reflects the current interest rate outlook at the time of this call and is informed by forward interest rate curves as of the time of providing our guidance.

Our platform of recession resistant best in class properties is positioned to continue generating strong cash flow growth to the benefit of our stakeholders.

As a reminder, our guidance includes acquisitions dispositions and capital markets activity through February 22023, and the effect of a property disposition under contract expected to close in March 2023.

It does not include the impact of prospective acquisitions dispositions or capital markets activities, which may be included in research analyst estimates.

This concludes our prepared remarks, we will now open the call for questions operator.

Thank you we will.

We'll now be conducting a question and answer session.

If you'd like to ask a question. Please press star one on the 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 a necessity to pick up your handset before pressing the star keys.

One moment, please wildly poll for questions.

Our first question is from the line of Michael Goldsmith with UBS. Please go ahead.

Good morning, Thanks, a lot, particularly my question. My first question is on the insurance.

You called out $80 million increase in property related insurance. One was your did your insurance renewal will take place how much is the insurance as a percentage of operating percentage in that just to try to frame it out like.

If insurance is 15% to 20% of expenses was 20% higher than anticipated that'd be three to 400 basis point headwind.

That drag if any expense growth, 6% to 7% and matching kind of like the.

Top line growth.

Hey, Michael our insurance renewal incurred between November and January November of last year and January of this year.

Legal taxes and insurance of our same property portfolio represent are expected to represent about 10%.

This year.

That is an increase of about 300 basis points over 2022.

So you are you are you.

Your math.

As far as the headwind from an expense growth perspective.

Tracks.

Got it.

Okay. Thank you for that and then.

My second question is just on.

And the flow through of the NOI growth Youre NOI is expected to grow.

Four and five.

Five 7% and Youre seeing property NOI has grown four nine to $5 nine yet your guidance is calling for earnings to be down in 2023. So can you walk through some of that pressure.

The factors that are below the lines.

I see.

The same property NOI growth to a looser route to that effort.

Sure the primary factor as I've mentioned on the call is going to be our interest expense for projected interest expense up.

For 2023.

We are actively and programmatically at working on a number of strategies to continue to reduce.

Our exposure to variable rate debt.

But certainly.

As we look out at expectations from a market perspective.

There is potential for 2023%.

Fine as far as interest expense, and then that either becomes a neutral or a tailwind heading into future years.

Thank you very much good luck this year.

Thank you Michael.

Thank you.

Our next question is from the line of Josh <unk> with Bank of America. Please go ahead.

Yeah, Hey, guys.

I felt like throughout the fall, but the messaging on.

The rate growth you were sending out was gonna lineup with the expense growth and correct me if I'm wrong.

That's kind of the message that guy.

Sure.

In our conversations over the course of the fall.

Certainly expectations for the rest of our expense line items to fall in line with that at that at the time and mentioned during our NAREIT meetings with investors.

We have yet to.

Fully.

<unk> set our insurance program for the year. So that was the remaining the remaining item from that perspective, and we did realize a larger than expected increase for 2023.

Okay.

I guess.

My My real question is like.

As I think about like a go forward basis like is that.

Is this something you'll be able to recover in the future like obviously like insurance jumped up a lot this year.

Outside of your control a little bit like is there a way to kind of cover it kind of over the long term. How you guys are thinking about it or has something kind of shifted in the model of it.

Josh It's Gary.

We feel it's definitely recoverable.

One of the.

Key factors of our business is that we are able to pay.

Pass on expenses and the farmer rental increases.

As we've talked about before.

Our business is really about a reliable growth because of the strong demand charge supply.

Patient is that.

We can pass through expenses.

Regard to insurance.

No.

As we've said we've been public for 30 years in private before that I would suggest that we're really seeing.

Maybe a little bit earlier than others for a renewal standpoint.

What everybody else has been or will be seeing going forward.

It reflects the environment for insurance at this point in time as we know that can go up and down so.

Our expectation is that we will pass through these costs.

Through rental increases as we go forward because part of our operating business, but that being said, we can't underscore. The fact that with this increased cost as Fernando mentioned of $18 million, we're still seeing.

At the same property growth of five 4% at the midpoint so.

We also have.

The ability to continue negotiating their insurance through the year.

And.

We will continue to do so but.

And the effort of being totally transparent of where our costs have gone too.

That's what is included in our guidance.

Appreciate the color Gary Oh.

One last one for me.

The marine is safe Harbor.

Guys are.

Theres a membership program, where now you can get there.

Annual country, yes at and cost.

Is that the main reason the service retail dining and entertainment NOI.

Is declining year over year, and then how are you guys thinking about.

Kind of payback as you as you kind of increased rate on the annual side like is it a two year kind of.

Hey back three year, how are you guys thinking about that.

So I don't have the numbers right in front of me and we can get back to you, but or perhaps Fernando does but.

Youre, absolutely correct as everyone might recall strategically.

We are always looking to convert lower margin business over to the stickier.

<unk> rent.

And.

While these arent loss leaders we are.

Passing off gas fuel at our cost to attract members and I think that's reflected by the fact that we now have a waiting list and 80% of our marinas.

I think it is growing from there right now.

We've noticed.

Rental increases what were they in the Marina side.

At the midpoint, we were expecting seven 5% for for this year the waitlist.

We now have a waitlist at 91% of our marinas and then Josh yes, the bulk.

Bulk of.

Of the srd any NOI year over year is coming from that active program on the on the fuel side and that <unk> is really there in the service as Gary mentioned right of having a member with us for an eight plus.

Year period and.

And we will continue we'll continue working through through those strategies, so strategically over time.

We expect to more than capture.

Certainly on a multiple basis, where the stickiness.

Rental revenue versus the lower margin business that being said we.

Firmly.

Feel that these.

Dairy activity as especially the service is very very important to the <unk>.

Occupancy.

And to the stickiness and demand for the Safe Harbor marinas as compared to the marinas that don't offer the service.

Yes.

Thank you.

Our next question is from the line of Steve Sochua with Evercore ISI. Please go ahead.

Yes. Thanks, Good morning, I guess, maybe for Gary.

Just on the home sales in general whether it's U S U K.

Are you seeing anything by region by product type by price point.

Just curious how kind of the.

I guess, the economic uncertainties are kind of weighing on sales and whether youre seeing any bumps in the road as you kind of look into 'twenty three.

Steve I can share with you as of this point and I'll let.

John can go more into.

Specific to sales new home sales are up.

Average price was at 106 $196000 I think it's one of the high points that we've seen.

I think it totally reflects.

Quality location and value.

Yes, that's in our portfolio.

I think it clearly reflects the capital reinvestment that we've shared with us.

Our stakeholders before that if we don't reinvest in our community as we do strip the equity rate out from underneath the homeowners. So we have a stringent policy there.

On the us.

Pre owned home side of things Ironically, we are seeing demand is so strong that we have been able to buy less inventory over a period of the last 12 months or so.

New home.

Beyond home sales.

Down a little bit it's just reflective of the demand people staying in their homes longer and the fact that they are direct selling their homes. So there is no interruption in rent to us, but we're not able to buy the inventory to flip it into.

He used homes as we have been.

Cracks over a 30 year period of time that will go up and down a little bit. So we don't see that.

Anything negative whatsoever.

UK side were seeing enormous strength.

The higher end.

Home buying the more expensive homes, increasing and I turned to John who's overseeing that to talk a little bit more about the particulars of the UK home sales I mean with respect to the U K home sales I mean, our team over there has sold over 2900 houses in 2022, which is a 23% increase year over year.

Year, So like Gary said the demand continues to be very strong. So much. So that I think we've shared before that we built out almost 700 expansion sites over the course, finishing in 2022 that all sold out in 2022 and look to expand another 500.

Going into the season, this year, which will be filled up by the end of 2023. So.

Really really strong demands in I think a lot of that has to do with the fact that.

No.

There's higher cost for basic items, which has caused more people to holiday domestically in the U K rather than go to Europe .

We're fortunate that the higher income earners in the UK, which represent holiday homeowners in our portfolio are benefiting.

From that meeting that savings.

They're bearing higher interest on their savings that our pensions are tracking with the pace of inflation.

As we shared with the original.

<unk>.

Information, we provide on the deal Brexit.

Brexit still makes it difficult to travel and the continent.

It's gotten more expensive the pound is still devalued in comparison to this time last year.

Most people travel within two hours to get to the properties and so.

And then the other.

The thing that I would add is looking out into 2023 from a strength perspective, 90% of our owners have already paid their 2023 pitch fees and fully committed on direct debit so.

These are rock solid.

That 90% is ahead of the same time last year and the previous years.

Great. Thanks for that answer I guess, just one for Fernando on the balance sheet, obviously floating rate debt to call a lot of people.

Maybe not by surprise, but certainly been more powerful and had a bigger negative impact I guess in hindsight have you thought about the balance sheet and the way it wants to get constructed and maybe how you think about it philosophically on a go forward basis in terms of fixed versus floating.

Steve I think we've been pretty programmatic since since achieving our investment grade rating in the summer of 2021, we've done over $2 $2 billion of.

IAG unsecured bonds with with that public market.

We've also taken advantage of the fact that our assets that are still under secured financing or still have mortgages.

Because of their strong performance were able to borrow up.

An existing financings and did a $311 million.

One.

That closed between December and January .

Over the course of the last couple of months.

Today, we stand at about 16% floating rate debt as we look at our as we look strategically at the portfolio.

Gary mentioned in his remarks, I think we can.

We look at our investment program and ground up development and expansion.

We.

We will be able to practically self fund.

Our investment activity in 2023 are selectively looking at opportunities.

On the capital recycling front.

Couple of assets here and there that over over time.

Can also reduce variable rate debt and would remind the market. We have very manageable maturities no looming towers over the course of the next couple of years, we have about $117 million to $118 million coming due in the second half of the year and are being programmatic about locker.

In locking in that cost today.

Today.

As we've done over the course of the last last couple of years.

But certainly looking to actively manage our our exposure to floating rate debt.

Great. Thanks, that's it for me.

Thank you Steve.

Thank you. Our next question is from the line of John Kim with BMO capital markets. Please go ahead.

Thank you.

I wanted to follow <unk> question.

He alluded to rising rates not necessarily price, especially in last few months.

So I guess can you just walk us through why you allow floating rate debt.

During the fourth quarter and refinance it post quarter.

John These.

These financings as far as on the secured side take take them. Some time to work through it it's actually one that we started on in in July of the.

Of the second quarter as far as debt increasing into the fourth quarter of last year.

Some of that right are we had a significant amount of deliveries of ground up an expansion on <unk>.

<unk> sites.

So that that is that explains.

Some of the increase on the debt side as well as purchasing the inventory that will ultimately.

Start to produce income over the course of 2023.

Those would be the primary reasons from that perspective.

And then about 20% 25% of it is right.

Is the FX on the debt amount so from the end of September to the end of December the pound.

It did appreciate significantly.

So that would that would that accounts for about an additional $90 million of that quarter to quarter increase.

And then to further reduce the floating rate exposure or are you looking to use interest rate swaps or or utilize fixed rate debt.

We've been we've been quite programmatic from that perspective to support our issuance in the unsecured bond market.

We did over since December of 2021 at 850 of Treasury locks in swaps.

We also did swap.

$400 million of R. R.

Of our pound Sterling at term loan in the U K, So, yes that does factor into our toolbox.

Okay.

A follow up question on insurance, how much is your increase in insurance due to your your exposure to Florida and.

And if you had let's say a different geographic mix with your insurance costs.

Be more moderate.

Sure.

Yes.

Great question and.

The scale and size.

John .

We're able to.

Yeah.

Best in class pricing, so to speak and it is a question that we certainly asked.

I think that.

The majority of.

What we heard from the participants in the syndicate and our insurance.

Underwriting.

Have a graph talks about flooding hurricanes phrasing cos.

And hurricane and storm damage.

And they look at the claims that they paid out versus the premium is they've taken in.

I think this is where when I referred to the fact, we're seeing the reality of what's out there overall.

We're not going to reflect that different.

Our competitors in other asset classes, but when we get specifically the Florida.

Getting coverage.

It was more challenging and more difficult in Florida.

We don't have it broken down individually to Florida, we negotiate as a package.

So I would just point to the overall increase in insurance.

In fact that were in Florida, Texas, and California is by design.

Over 100 million people there.

Focus our geographic footprint and target the right markets to operate them.

Uh huh.

The demand for affordable housing has never been stronger in those markets. So it speaks to the high occupancy is the ability to push through inflationary rental increases.

We will closely evaluate and continue to evaluate our exposure. It is impacted by insurance as we go forward.

And I would just.

At this point that Gary made.

His answer which is that.

There's a lot more to do with what's.

What events are taking place across the world. This is less of a son issue in asset class issue or anything like that I mean, you look at everything whether it's earthquakes in Turkey, and so forth thats impacting the cost of insurance for everybody.

And really that's I think that sort of everybody is for lack of better words, the beneficiary of those events happening in the form of higher costs.

I'm just wondering if that changes your view at all on where.

Where you allocate capital going forward, whether its the UK Midwest or some other markets where it may alleviate.

Some of these factors.

I think that absolutely does have bearing on how we think about things and how we look at things.

And.

You bring it up and we happen to be talking about it not that long ago, but the fact of the matter is there is 22 million people in Florida 320000, I think we talked about moved in there last year. So.

Strategically we do have to think about.

Cost return proposition.

And that stayed as we do everywhere and I would suggest that strategically we're looking at it very carefully.

I appreciate it thank you.

Thank you.

Our next question is from the line of Keegan Com with Wolfe Research. Please go ahead.

Hey, guys, maybe first in same store revenue expectations for 'twenty three that they definitely came in looking pretty strong. So just a few questions.

First how much pushback do you guys get on rate increases across your segments given the elevated <unk>.

Creases and second specifically marinas, how much longer do you think you can push at an elevated level.

<unk> channel checks, we've done there's concern for a while that outsized pricing power. It's eventually going to deteriorate because it's going to break boat owners. So securities for your thoughts there.

So I'll address the marine part if you can talk about the rest of the portfolio and Jon but.

I think when we talk about supply demand, we've talked about over 11 million vessels registered for eight or 900000, wet and dry slips.

And as we spoke earlier, we're intentionally shifting our value proposition.

That will support continued.

Rental increases.

By operating memberships together lower margin attributes such as fuel.

Such as.

Discounted transient stays when theres open sites or slips available.

And other membership opportunities so.

With that kind of a supply demand out of balance.

We are very comfortable and.

We're expecting to continue growth.

Similar to what we've been experiencing so we don't our.

Currently see.

Those type of headwinds that you're suggesting in the Marina business and I'll, let John talk really about a 40 year history and manufactured housing.

Keegan, it's really it's a balanced conversation, which is to say obviously looking at what expense growth is in applying to passing that on.

So our residents, but we view rent increases like a marathon versus the sprint you know as we've shared before.

I think folks have heard me say it 100 times is that the most expensive St. We have in our portfolio is a vacant one.

And I think our strategy has really stood the test of time for 25 plus years, we've delivered positive revenue and NOI growth.

Every year when others have seen ups and downs, we continue to deliver long term cash flow stability.

Maintain a solid relationship with our resident base, which is also our salesforce brings us industry, leading occupancy growth like the record 2900 sites. We gained over the course of 2022.

196000, commanding average home prices that exceed virtually all competitors in our asset class, which I think illustrates the unmatched quality and the value of our communities represent so really in summary, our strategy is well balanced we believe across all stakeholders, including our residents that live in well maintained communities and create value.

In their homes, so it's something that we have.

Watch.

Talk about very closely as we think about what increases and how we can push further on both MH and RV.

And the only thing I would add and we've.

Covered.

Posted deck is the delta difference between alternatives, whether it being single family residential whether it'd be multifamily, where you still do provide 25% more space at 50% of the per square foot cost offer a lot of advantage.

As of being able to put right up to the how Springer groceries on heavier Corona care part of garage.

Et cetera, and then.

Well, we certainly know there are headwinds on site built housing, especially due to mortgage rates the delta difference.

Between.

Single family residence and the overall cost of living in one of our manufactured housing communities.

Such that for many many Americans.

Manufactured housing will be the only option available for homeownership. So.

I think again 40 year track record 30.

But 10 private.

Indicates that.

We will be able to continue to get the correct growth.

Just on the value proposition that's same as true in the IRB affordable vacationing.

And certainly in the U K.

As the second vacation home and alternative to more expensive vacationing in the UK.

Got it and then taking a step back so if we think about your both your real property, excluding transient transient on a like for like basis. If we exclude your transient conversion expectations for 'twenty, three where the numbers shake out both on excluding transient than transient as a whole right because you obviously expect the comparator.

Sites, which means that the.

The comparative pool for transient is going to be much lower.

Yeah again, I'll give you the comparative four four same property.

We're expecting about a 90 basis point increase year over year and revenue from transient.

RV that is on a base of approximately seven 5% to 8%.

Your site nights.

So you can write it on a like for like basis were.

Would be would be much higher than that 1%, but.

As John mentioned or maybe I mentioned during my section of the script.

We are expecting another very strong year.

Of of conversions from transient sites to annual leases of the.

3100 at the high end.

60%.

As expected on the RV side and this is once you've converted at that site you have a resident therefore on average a five plus year period of time.

That is very likely making improvements.

To that site and bringing up the value of that.

But the community itself, so we're very being.

Hyper focused on continuing the conversion program over to.

The annual side.

And just on the excluding transient portion to rate what would the what would the range be if you exclude your expectations, because there's going to be a bit of an uplift.

I don't have that broken out here in front of me. We can fund that is a very quick follow up.

With you after the call.

Okay, great. Thanks, guys.

Thank you.

Our next question is from the line of Wes Golladay with Baird. Please go ahead.

Hi, everyone I just have a question on the service retail and dining guide so I make sure I'm looking at it correctly. It does look like it's going down a little bit year over year and more so a question on how we should think about modeling. This line item going forward. Yeah. I think you mentioned maybe in the prepared comments that it was almost like a loss leader so should this only grow.

With acquisitions and then the second part I did see a termination income is there anything impacting the guide this year off from the termination of a lease.

Yeah, It's Gary I don't want anyone to think of it as a loss leader because it's not a loss leader.

We've just elected to shift.

Smaller margin over to higher valuation the farm of sticky rent. So we're not.

Losing money or subsidizing anything when we talk about passing on guests at our cost it's not just the costly by the pumper trucks, but as the costs associated with delivering it but I've said big advantage to paying the profits. The other boat owners would have to pay elsewhere.

And on the lease termination we did mentioned in my in my remarks.

We did rationalize some space in our main office.

Got out of two floors.

In our offices here in Southfield.

Okay got it and then.

You didn't mention the potentially asset recycling do you have a preference from proceeds whether it is to pay down variable rate debt or to recycle or to buy assets and if you were to pay down debt could you sell noncore assets and accretively repay down the variable rate debt.

I think everything is under view.

Continuing to evaluate parts of our portfolio, where we think we can redeploy the capital with greater growth certainly with the headwinds of interest rates today that is one.

Big focus less so we're not running to shed assets, but we are reviewing them very very carefully as to growth.

As we've shared again.

Day, one of the areas that I think differentiates us and gives us the greatest opportunity as well.

Ability to create new ground up development and expand our manufactured housing portfolio.

So because there is a cost associated with over 16000 sites that we've already bought and paid for it or not yielding any return.

We carry on.

Bye.

Paying down that debt if thats, what we elect to do we obviously.

Recapture that lost interest rates. So that is one area. The second area is.

Certainly funding.

The development costs, so that we can generate.

High returns.

And create value for the stakeholders by increasing our manufactured housing portfolio.

And then third of course is.

That difficult economies, often turn out.

Opportunities and.

We are looking at a number of opportunities from.

From all of the different platforms, there is nothing identified yet or nothing that.

As meaningful but.

I believe in these periods of times as I said before as people have to refinance things at a whole new rate in a whole new world of.

Opportunities may.

Become available there that are accretive.

Across our current cost of capital so paying down variable that is.

Probably.

Something that allows us greater opportunity to create growth in the future or if there's something very accretive we would look at that as well.

There is no specific plan I think just general good stewardship of how we think about <unk>.

Reducing that variable debt.

I appreciate it thanks a lot.

Thank you. Our next question is from the line of Robyn <unk> with Green Street. Please go ahead.

Hi, Good morning, I wanted to follow up on the previous question on <unk>.

<unk> trends in the U S and U K.

Sale prices fell by 16% from last quarter in the U K that was flat.

And U S.

Business, So I understand the fourth quarter and typically a seasonally light period in the U K, but can you maybe talk to the weakness in the UK prices.

Because if you think that that reflects the market price is Hawaii.

And perhaps pushing discounts.

To get the volume.

I mean, it's not really discounts to push the volume, but I think when we when we walked in and I think part of the investment thesis that we shared.

In the beginning was the fact that we might see the margin a little bit to gain more sites and gained more an ongoing revenue.

On those sites and so we are basically we are just executing the plan that we set out to do.

Yes.

Prefer the stickiness of the rent over the one time margin on the home sales.

You will continue to see an emphasis on that strategy as we go forward.

That is in.

Market prices.

The 15%.

Sorry, Robyn what was the question.

So just to clarify this is taking the same does not reflect market prices.

You pay hometown.

Oh I think it reflects.

Our strategic plan with management.

But it is interesting as John pointed out.

Some higher growth in the higher end of what they referred to as the largest.

And.

That's an area that we're focusing on and there are also smaller margins on the largest.

Then there are the.

Lower base pumps.

Yeah. Thanks, Andrew on the second my second question is.

The forward bookings trending for holiday to holiday rentals in the U K.

They are actually trending a little bit ahead of this past year.

Which of course as we shared before is great because.

That is the feeder for more holiday home sales and more rent paying sites.

So in the park holidays portfolio correct me, if I get this wrong, 40% of all homebuyers have stayed in one of the rentals and the property and 60% of all buyers have stayed in a rental and a park and a holiday properties. So.

It really is the feeder if you will.

So seeing the demand where it is now is.

Very encouraging for us I will add that.

We did speak to them the other day there is.

Fair amount of competition out there and some discounting that's taking place outside of the public holidays in the or inferior properties.

But I think it's driving people.

To expect quality.

At Park holidays, and with the addition of <unk>.

Mark leisure, which are really the high end.

Sure.

Holiday vacation parks, they have a much lower percent of.

Fleet home ownership in those 14 properties.

Most none almost none.

No.

Thank you.

We are seeing positive strength there.

Thank you.

Our next question is from the line of Brad Heffern with RBC capital markets. Please go ahead.

Yes, good morning, everyone.

What are you seeing on the leading edge demand for transient RV I know, it's obviously at the low demand time of year, but any color on what happened year to date and the forward bookings would be great.

Sure I think.

From the from the booking pace perspective right.

Right now we are trending.

Just a little bit ahead of last year, which is great. We are nearly 95% booked which is better than we were at this time last year for Q1. So we're running a little bit ahead, but if you look out into the whole year, we're a little bit ahead in total booking pace meeting.

Bookings that are actually happen at this point in time versus where we were last year.

Yes, I think I'd remind everybody we're going back more of our pre COVID-19 normal pattern as John likes to say, it's a lot harder to book Tuesday, or Wednesday than it was during Covid is people are back to school back to work.

And so our expectation is for.

For a more normalized year over year transient growth people are still.

Positive about experiencing that outdoor vacation.

There isn't an increase in the surveys that we've done in our competitiveness is done with expectation of RV stay in camping. This coming year, So tomorrow back to normal I think and big.

Big focus that has really been there for almost 10 years now of the conversions that we talk a lot about.

It is easier to forecast.

When we convert a.

Transient to an annual it is more cost effective and picking up that 50% increase on a per site basis for the first year and.

About 75% conversions last year.

Of our transient to annual.

And.

Going forward.

We expect good solid growth is coming years so.

We're going to start to see.

A reduction.

Trends in which we'll have to rethink about maybe three to five years from now as we're thinking out of how we.

Have an inventory of transient to convert to annual and that'll be a nice problem to solve.

Okay. Thanks for that and then on the U K. It looked like MH occupancy was down almost 300 basis points in the fourth quarter.

Is that a demand impact is that seasonal or is there some other explanation.

That's a result of adding sites to the portfolio through expansion.

Okay got it thank you.

Thank you.

Next question is from the line of Anthony Powell.

Barclays. Please go ahead.

Hi, Good afternoon, just one quick one from me on acquisitions could you maybe go into.

The three deals you did in December MH, RV marine entrance of cap rates sourcing and would you expect your volume acquisitions in 2023 to be lower or higher than 2022.

All right Graham.

Paperwork here.

Okay.

I think that we don't typically provide guidance.

Third acquisitions and of course capital marketplace activities.

We've discussed the fact that.

Cost of capital is such that we have sharpened our pencils razor razor thin.

I don't believe we'll lose any opportunities because.

Sun always has a seat at the table.

Just about.

All of the sellers will reach out to us on either directly or through our relationship with <unk>.

<unk>.

Never had a stronger balance sheet, but we're very very focused on.

Bringing value and growth opportunity to our shareholders and currently.

We have not seen any major changes to cap rates.

In North America manufactured housing.

Institutional quality is still in the 4% or one case I just heard up below.

For those high quality assets and very few of them trade.

In the low fours to five.

Arenas.

There's been a lot of competition and.

Sort of.

Plus or minus 6% range currently is where we're seeing it.

Institutional quality assets.

Trade at so it's going to take a real opportunity.

As a creativeness and embedded growth, where we can justify deploying capital.

This.

Environment and deliver the kind of growth our stakeholders are used to do so.

Short term.

I think we'll be looking at.

Selective acquisitions.

That return.

Properly to our shareholders, but certainly investing in the expansion and development.

Our manufactured housing portfolio.

Maybe a follow up on that in terms of the development sites.

Yeah.

Construction costs change on those and how that how it's kind of the ROI profile of your development sites at mall of the past 12 months.

Yeah, that's a great question.

We certainly saw.

The cost of development spike up through the pandemic.

Short supply supply chain et cetera.

Have you begun to see it decline.

We.

We're looking to build.

Our new developments to a high single digit Unlevered IRR. Upon stabilization currently we've adjusted our returns to low double digit in part because of the.

Large rental increases as a reflection of.

CPI inflation, so as we model out going forward.

Going in rents.

Higher than we originally modeled them out so we believe we can still acquire.

Develop if you will.

A lot more beneficially than we can acquire out in.

In the marketplace as cap rates have not adjusted for manufactured housing.

Of course because of.

The fundamentals that.

Investors see in manufactured housing them, because <unk> being one of the larger just consolidator as.

Created a really dearth of acquisition.

The opportunity there in manufactured housing.

Thank you for the color.

Yep.

Thank you.

There are no further questions at this time I would like to turn the floor back over to Gary Shiffman for closing comments.

We always appreciate the opportunity.

To have these calls and speak about the business today marks a very special day.

And really wanted to take this opportunity to thank John whereas unbelievable stewardship, both as president and Chief operating officer since 2008, if I've got that correct.

And <unk>.

We really look forward to.

John's tenure operating.

Our communities in particular manufactured housing and being able to transfer that over to the 16000 site inventory, we now have the grow by and.

And his stewardship and direction over there we believe we will derive great benefit for our shareholders. As we go forward and an area that really differentiates us from all others in our asset class so on behalf of.

The entire company from the communities on up to senior management and executive team I do want to extend our appreciation to John .

Well, Doug Thank you.

We look forward to our next call and certainly invite anyone to.

Reach out to Fernando and his team with any follow up questions.

Thank you everybody.

Thank you for your participation in today's conference.

This does conclude the company's remarks, you may now disconnect your lines.