Q1 2023 Sun Communities Inc Earnings Call

[music].

Good morning, ladies and gentlemen, and thank you for standing by welcome to the Sun communities first quarter 2023 earnings Conference call. At this time management would like me to inform you that certain statements made during this call which are not historical facts may be deemed forward.

Looking statements within the meanings of the 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 its 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, and Fernando Castro Carat, Jamie 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 asked that you limit yourselves to two questions. So everyone, who would like to participate.

As 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. Shiffman, you may begin.

Good morning, and thank you for joining us on our conference call to discuss first quarter 2023 earnings and our updated guidance.

We're off to a strong start to the year as our first quarter performance extended its track record of delivering reliable NOI growth driven by our best in class properties, which supply is persistently constrained and demand remains resilient.

Our focus on providing an exceptional offering for residents guests septembers.

By a tenant customer service center properties, the same value proposition.

<unk> loyalty and durable revenues for Sun.

Our first quarter results were stronger than we anticipated with $1 23 core <unk> per share for the quarter exceeding the high end of our guidance.

Our same property NOI increased six 7%.

Surpassing the high end of our guidance by 270 basis points driven by strong performance across all three segments.

Same property manufactured housing NOI increased 5% compared to the first quarter of 2022.

Several factors, including rental rate increases.

Let's see growth and expense savings.

Same property RV NOI increased four 4% driven by a six 2% revenue growth, primarily reflecting strong conversions of transient sites to annual leases.

Following the unprecedented increase in transient demand during the pandemic, we continue to benefit from heightened awareness of RV vacations and anticipate continued strong demand for annual RV leases.

We are capitalizing on this demand to grow our base of long term durable rent revenues.

These conversions.

Same property and marine and NOI grew 15, 1% in the quarter as compared to the same time last year.

Arena outperformance was due to strong rental increases.

Demand that included longer stays by transient guests in our southeastern marinas and operating expense savings.

Demand for attainable housing for value oriented vacationing remained high and drove same property occupancy for MH and RV 190 basis points higher compared to the same time last year.

At quarter end occupancy was 98, 6%.

Tons of MH and RV annual revenue producing sites increased by 802 sites in the quarter, representing the highest first quarter volume ever recorded in a 20% increase from the same period last year.

Transient RV conversions to annual leases accounted for 65% of the Rps gains.

Australia and the success of our ongoing strategic focus to grow our base of long term residents.

Well, Matt activity continues to contribute incremental value to our long term growth.

We delivered over 200 ground up development sites and over 130 expansion sites.

We also opportunistically added to our inventory of land for future development, which now represents a pipeline of approximately 16000 sites.

Currently have sufficient new home inventory available to meet the demand for the new lead delivered sites.

On the acquisition front Sun continues to remain highly selective and purchased two new assets during the quarter.

Manufactured housing community in Michigan.

And the Savannah Center, a premier service oriented Marina in Savannah, Georgia with the services provided by third parties.

Marina enhances our network writing access to another strategic location for our members.

We will be publishing our first ESG report in the coming weeks.

We're very proud of our team members for reaching many milestones in 2022.

In the report you highlight ESG achievements such as the coastal habitat restoration program. We are piloting at marinas in Rhode Island, our UK operations, maintaining their silver rating.

Bester and people and achieving ISO certification for cyber security.

Our ESG framework score improvements and the expansion of our data coverage to include marinas and the U K demonstrated our company's commitment to being accountable to our investors team members.

<unk> partners and the communities in which we operate.

We are pleased with our strong start to our year and remain positive on our outlook.

I would like to thank our team members for their enduring dedication and hard work.

And with that I will turn the call over to Fernando to discuss our results in more detail.

Thank you Gerry first I wanted to call your attention to the supplemental disclosure changes you likely noticed in the document published after the market closed yesterday.

I've made a number of updates that are aligned with how we manage that as a whole and are intended to help you analyze our business better and more quickly. Our goal is that you find these modifications helpful and we welcome feedback.

<unk> per share was $1 23 for the first quarter exceeding the high end of guidance by three yeah.

The outperformance was driven by higher than anticipated real property revenue.

Manufactured housing, which benefited from rental rate growth and higher demand for our rental program sites from RV annual revenues that benefited from conversions of transient sites and from stronger than expected demand at our marinas. Additionally, the quarter's results benefited from higher utility rebuilds and effective expense management at the properties at.

Same property level outperformance throughout our portfolio contributed to the six 7% increase in total same property NOI.

Same property manufactured housing NOI grew 5% over the prior year, resulting from a six 4% increase in revenues and 10, 4% expense growth outperformance in revenues was due to a 280 sites increase in MH revenue producing sites, which was more than four times the occupancy gains realized in the first.

Order of 2022.

RV same property NOI increased four 4% for the first quarter with a six 2% increase in revenues and an eight 1% expense increase during the first quarter. We converted 524 transient sites to annual leases, which was ahead of our expectations as we continue to execute on our <unk>.

Strategy of converting sites and capturing more annual revenue.

Back to also see a related reduction in transient revenue.

Arena same property NOI increased 15, 1% in the first quarter.

<unk> 10, 9% increase in revenues and a four 3% increase in expenses.

Same property revenue benefited from stronger than expected transient demand, especially in the southeast and continued expense management.

During the quarter, we sold 589 homes in North America, which exceeded volume and margin expectation in.

In the U K real property NOI was ahead of expectations in the quarter due to higher owner retention NOI from home sales was below expectations in the quarter due to lower volume and the increased mix of pre owned versus new home sales.

Turning to investment activity, we purchased the Savannah Yacht center for $100 million and funded the entire purchase price by issuing convertible preferred op units.

The manufactured housing community acquired for $7 million, we issued a combination of O P units in cash.

As of March 31, 2023.

<unk> had $7 $5 billion in debt outstanding and a weighted average interest rate was three 9% and a weighted average years to maturity was seven four years, our leverage ratio on a run rate basis is six times based on our operating cash flow expectations for the year, we anticipate deleveraging.

Words are five and a half times long term leverage target over the remainder of the year.

In terms of new financing activity since our last call. We completed two additional mortgage loans that raised $100 million of fixed rate debt at a weighted average interest rate of five 7%.

Total during the quarter, we raised approximately $585 million of fixed rate debt and used proceeds to repay borrowings under our senior credit facility.

Additionally, we swapped another 100 million pounds on our Sterling denominated term loan to lock in a fixed all in rate of four 8%.

At the end of the quarter, our floating rate debt was at 16%, which is in line with our internal expectations.

Excluding our senior credit facility borrowings between now and the end of 2025.

Less than 8% of our total debt matures.

We continue to look at opportunities in the financing markets to further enhance our balance sheet.

Out debt and reducing secured debt amounts.

Yes.

As detailed in our supplemental we are affirming our guidance range for core <unk> per share for the year of $7.22 to $7.42 and establishing core <unk> per share guidance for the second quarter of $1 90 to $1 98.

Do you expect higher total portfolio real property NOI growth of six 1% to 7% driven by additional NOI from first quarter acquisitions and from higher same property NOI growth.

We also expect higher contributions from North America home sales total S. R D E and lower G&A expense to offset a lower contribution from home sales in the U K.

We now expect total same property NOI to grow by 5% to 6% for the year, representing a 10 basis point increase to prior guidance. The increase was driven by stronger than previously expected growth in same property manufactured housing and Marina, partially offset by slower transient revenue growth expectations in St.

Pretty RP.

Our revised same property NOI growth ranges for the year are four six to five 4% for manufactured housing for four to five 6% for R&D and six 8% to 8% for Marina.

For our U K operations, we are lowering our full year range for total real property and home sales NOI by roughly 10%, so a new NOI range of $141 million $148 million.

For additional details regarding our updated full year guidance in second quarter expectations. Please see our supplemental disclosures.

As a reminder, our guidance includes acquisitions and dispositions and capital markets activity through April 26, and the effect of a property disposition under contract expected to close during the second quarter, but 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 up for questions operator.

Thank you we will now open the call for questions. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

And anytime you wish to remove your question from the queue. Please press star two we also remind you to limit your question institution and others may have time to answer questions.

Our first question is from Josh <unk> with Bank of America.

Yeah, Hey, guys. Thanks for the question.

Just fernando thanks for the color on the guidance I'm, just wondering explore the UK NOI guidance range being lower 10% can you just go into more detail on what's driving that underlying change.

Sure. Thank you Josh and good morning, all the the drivers to the changes are actually an increase to expectations in real property NOI.

From the U K, that's increasing by about 9% at the midpoint or about five and a half million dollars and a decrease in expected contribution from home sales.

About 20% or about 21 $21 million that would be for a for the for the full year. So that would have.

The the impact of our performance over the first quarter and then our revised expectations for the rest of the year.

So what does that strategy, driven where you're pushing harder and that's why I like the real property is up 9% and then you're just getting less phone sales are or just kind of.

Just kind of square it.

Yeah, just trying to figure out like what's what's driving the drop in home sales too.

We're certainly we're seeing.

We're seeing shifts in the and the strategy as far as stronger as Gary mentioned in his remarks stronger owner retention at the property level that is that is driving the.

The increased expectations on the real property side.

We did see softer demand in the first quarter from a volume perspective, and as Gary mentioned in the mix of Av homes, which carry a which carry a different margin expectations.

So.

That's just scary as it did suggest that shift.

Shifts to a quality.

Pre owned home.

Prices are lower and therefore, the retail prices lower.

Imagine.

Similar to us.

It has been but the contribution from a quality of used home, it's just smaller than a new home and we have seen.

A bit of a slowdown in the new home and we're well aware of the backdrop of the economy in the U K.

And that effect as we think through guidance for the balance of the year.

Okay.

And that NOI range like how much of that.

It is like home sales.

Is it like a real property is.

Just trying to think of like like for modeling purposes.

Do you think about it.

Yeah.

Josh in our in our updated guidance the percentage split between real property and home sales.

45% coming from real property and 55% coming from home sales.

Okay. Thanks, guys, just a shift which is the shift over long term that we're looking to make but the.

The results of what's happening right now relate more to the economic environment there.

Got it thank you.

Our next question is from Derek Wolf with Citi Research.

Hey, Thanks, Yeah, just wanted to follow up on that because I think in March you put out a deck that showed that the U K.

Operations are expected to be in line.

The year, so I don't know how to do something happened in March that's caused you to can we think and if I'm doing the math correctly.

It sounds like Youre expecting like a 'twenty 1 billion decrease in home sales on club like traditional starting point is.

Five I guess around 75 to 80, so that seems like a pretty material decline. So I'm just trying to understand sort of what would have changed.

March that would cause such a large decline.

Derek I think.

Back to the matter is the decline has been very very recent.

The time from putting a deposit to closing and our iron making a decision has slowed down.

Obviously, the economic headwinds in the U K.

Right.

In fact that CPI is still double digit and.

It has an impact on the wholesales decision, making but at the same time.

Overall the portfolio performance was quite strong as we indicated retention is high side fees had been collected for the year holiday bookings are very strong in the ancillary business that comes with those holiday bookings has been strong.

<unk> was an exceptional holiday week that we've just experienced some vacation homes.

We are very cognizant and aware of the economy, there and have adjusted the home sales as we look out to match what we've seen in this more recent period of time, which really did correlate.

With the March period of time that being said, we can share that.

April .

We've been.

Following closely and there's been a positive undertones, but are taking.

Taking the approach to how we wanted to.

Think about going forward, we made the adjustment to the home sales moving forward.

Understood and then I guess I don't know are you underwriting sort of similar assets today that had sort of a high hope to talk about it and I guess as you.

Sort of.

Think about sort of underwriting them would you could you change anything in underwriting.

I don't know a lower multiple on that income stream or predict more variability. There just trying to think if there's anything you're seeing that would change how you underwrite the asset class longer term.

Well certainly we are very very focused on that underwriting and Oh. This is a time where.

Basically we can focus more on integrating what we already have in the portfolio.

And extract as we like to say the low hanging fruit volatile at the sites.

And grow the existing portfolio, so as far as our appetite.

And our underwriting moving forward it will be very very disciplined as we always say the pencil as a.

Very sharp at this time, so I wouldn't look for any major.

Acquisition opportunity and I would just reiterate our initial underwriting perspective in the business.

It was long term.

And remains long term, we think we have the right portfolio of best in class as a matter of fact.

He demonstrated management team has been through tough economic environments before and done well.

And I think that.

We're watching them adjust to this difficult market.

Exist right out there so.

As it relates to moving forward on underwriting it is adjusted to reflect that.

Current what we believe is short term impact of America.

Got it thank you.

Our next question is from Keegan Karl with Wolfe Research.

Hey, guys. Thanks for the time, so starting on the same store property RV NOI is cut kind of you know material amount.

Just curious what drove such a stark change in such a short amount of time and I know you've called out transient but that should be offset by the conversion I'm. So is it more top line or more expenses that are driving this and if it is the former.

How should we be thinking about the demand funnel right now at this time of the year relative to last year.

Thank you again, it's it's Fernando so the the revised expectations on the same property RV side of 75 basis points at the midpoint equates to about $2 one two.

$2 $1 million.

NOI from initial guidance provided in February .

That will that is primarily coming from the transient revenue.

The line item.

Where we have revised our expectations.

In February we gave guidance of about 50 basis points of growth at the midpoint for the year given the strong <unk>.

Number of conversions that we've made already and expectations for the rest of the year and we did see some weather impact in the in the first quarter.

In California and in the southwest.

That's those are the primary drivers of.

The <unk> revenue.

The forecasted revenue expectations are offset partially by a by expected expense savings in that part of the portfolio.

It's just when the demand funnel. This is the second part of the question how does it compare you know if you're looking at your transient bookings.

Month to date, how does it compare versus last year.

Versus versus last year were from a pay standpoint, we're running about five or 6%.

Below below last year.

Okay, and then changing gears you see you mentioned in recent conference. There was an opportunity for you guys to potentially readjust your insurance rate.

Given what your your peer recently reported regarding the renewal rate how should we be thinking about some potential upside here to your insurance expense and is that contemplated at all in your guidance range.

And that is that contemplated in our guidance range are key in the fact of the matter is that.

Current market rates have not really improve.

We're continuing our deep dive analysis.

Ah reviewing and analyzing our insurance needs in order to optimize.

Cost versus a risk.

As you might be referring to these options are we view include adjusting our retention pieces at levels throughout the stack for various types of risk.

More closely examining usage of our captive.

Virtually unused at this time looking for opportunities to work with new reinsurance groups, although that's been met with some headwinds because.

That's where I think all we're right now the overall insurance market is very very challenged so it's.

Just a continuing effort to improve.

Cost and examine that we have the right risk.

Risk adjusted costs going forward, so we would share with the market at any cost savings that we believe.

We have found going forward.

Great. Thanks for the time guys.

Our next question is from Michael Goldsmith with UBS.

Good morning, Thanks, a lot for taking my question.

Same store expense guidance is down by about 120 basis points G&A was adjusted down by $4 million. So can you talk a little bit about where you were able to find the savings and just maybe overall the flexibility.

Flexibility of Playability of the expense model of the business and your ability to adapt it to.

Its the changing environment.

To accommodate some of the slowdown on the revenue side.

Sure. Thank you Michael the expense savings would primarily come from offsetting some of the revenue expectation.

Expectations on the transient RV side, that's going to be the largest driver.

But also we are we did experienced in the first quarter and are expecting for the rest of the year a higher utility rebuilds.

Which is is decreasing.

Our our year over year expense on.

On that side of the of the expense stack.

Given the increased focus.

On on rebuilds to two tenants as.

As well, it's like we've talked about this before but our solar solar array projects of which we have 35 today. Another 15 are underway, which ultimately will.

To save on electric expense as we deploy deploy these projects are on the second part of your question on the G&A side.

Those are those expectations that bringing those cost expectations down is primarily coming from salaries and wages.

I assume that's just from lower hours.

Yeah.

Correct.

The property level.

Yep got it thanks for that and then.

My second question is just is.

He is on the Marina business and kind of how it how it fits into the entire enterprise.

When we started.

Concerned about the Marina business and how it would perform during a recession it seems like the.

The results are.

Our expectations are improving and it's becoming a larger part of the business as a whole. So maybe you can talk about a little bit about the improving outlook. There and then just also how it fits into the entire portfolio and how that diversity.

<unk> can help you navigate.

The tougher times.

I think that we're very pleased with the.

Marine our performance to date not only stay.

Standing performance this quarter, but what we've seen quarter after quarter over the last two years.

Our view is that Oh, having.

Having the benefit of the entire network gives us an advantage overall competitors.

And.

It's really showing in the demand for wet slips and dry slips is.

We're virtually.

At full occupancy with waiting lists at many of the marinas.

And we've had the strong benefit of strategically acquiring what we referred to as the international marinas.

Wow us to keep.

The boats that are very very large.

The safe Harbor system.

Especially.

On the transient side when these boats come in.

Our repair work that they often would head across the Mediterranean for keeping them longer and our network is we're able to provide the service for them. So.

The other thing I'd point to we have a.

Opportunity in about a 30, plus marinas to reconfigure smaller slips into larger slips there are two being re develop this year.

There are 11 in for permitting process. So we can do that and the advantage of this also has the ability to be able to charge higher linear footage rates.

For the longer boats and the greatest growth in the.

Marina vessel business is on boats 30 feet or greater.

Certainly require.

The wet slips so we have a nice opportunity there to continue to grow.

And I think a lot of it comes from the fact that as.

As we are.

Have acquired.

The marine a platform, we've been able to invest for the long term, making small capital increased improvements that are well received by the members and therefore.

Allowing.

Probably a much larger share.

Demand to take place are currently in the Safe Harbor networks. So we look to build on the strength that we saw this quarter.

Gary what's the return or IRR of a reconfiguration.

Or Asian project like that.

So when we invest.

For.

That type of Capex, we look for a 9% to 12% return.

Thank you very much.

Our next question is from Samir Khanal with Evercore.

Good morning, everyone, Hey, Fernando I'm, just curious on the home sales contribution in the in the U S and North America.

I think you gave a number of 19 million what was that.

What was that budget was that budget before was that forecast before.

I'm curious what you're seeing in the U S. As it relates to home sales and if that sort of you know.

Similar headlines day to kind of what you're seeing in the U K.

Sure our original expectations for home sales contribution.

In North America were about $17 million. So we are seeing.

<unk> expectations are.

They're in the.

In the first quarter, we did see from internal expectations, we saw more pre owned homes sold than than budgeted at higher margins, which drove which drove outperformance in that part of the business as we for the rest of the year.

As we focus on.

I mean from a back to basics filling sites that we have just created in a cross expansion sites and our ground up developments.

Roundup development projects well. This is a this is one of the levers we can we can pull to fill those sites, but we're home cells are performing are.

Strong over the over the course of the first three four months of the year.

Got it and then I guess, Gary I'm, just in terms of transaction that acquisitions I knew you did 100 million in the quarter.

I'm just trying to think about what does that opportunity set look like today is that the right quarterly run rate to think about.

That too optimistic.

When you think about marine and RV and MH.

Thanks.

Yeah, It's a great question certainly.

Cost of capital and the impact of.

It has a big impact on our transactions.

When we think of MH.

Certainly something one of the biggest consolidators there is very little Oh.

If any cap rate expansion that we've seen in fact, we.

So another couple of properties trade with a three year subsidiary <unk>.

Over the last.

Two quarters.

And we were.

Looking at evaluating those but.

They sold for inside of anything that we would have paid for them. So I think that moving forward adjusting.

Or the fact that there are much fewer.

Acquisitions out there on the MH side, there'll be kind of a onesie and Tuesday opportunity.

The Marina side, we're very very focused on the growth that we've had and we have the ability to be very very selective okay and strategically inclined to look at acquisitions moving forward.

So I think it'll be a quieter period of time.

On the acquisition side moving forward.

Amir would add.

Im just extremely selective as far as the B the acquisitions that we did in the first quarter. The $7 million manufactured housing community that was a near completed ground up development that we bought in our backyard in Michigan that we will.

Fill up.

Fill up quickly given.

Given that that's a tried and true model.

The Savannah Yacht Center.

On the Marina side really this is a two plus two equals five as far as the <unk>, how it complements the network and being able to keep.

To keep more of the business within our within the network itself, but also point to the funding.

And as for the savanna Yacht Center, which was a convertible preferred operating partnership the entire purchase price.

Where we are we did issue these securities.

And they would convert at a.

30%, almost 30% premium to where we were trading at the time when we closed the acquisition so certainly being.

Very opportunistic and.

And using our.

Using the funding sources that are available to us in the market.

Got it thanks, so much.

Our next question is from John Kim with BMO.

Thank you good morning, I wanted to ask about the mortgage loans that you priced a subsequent to quarter end at five seven I was wondering if you could provide some characteristics on what asset or assets are associated with this debt.

And what that means for cap rates.

Sure John So these were essentially I'll use a non technical term borrow ups on an existing facility with our with the Gse's.

Or are we essentially increased the LTV that had been.

That had come down over the course of the last couple of years from a financing that we've done in 2000 2019. This was done on manufactured housing.

This was.

Eight years of weighted average maturity for a for that financing and it would be would be in line with.

Say are our unsecured borrowing rates today.

Based on where the tenure is and and and expected spread but.

Gary earlier made made a comment on our expectations from a pricing perspective or manufactured housing.

Haven't really shifted over the course of the last 12 to 18.

12 to 18 months, given given the scarcity value of manufactured housing we've seen little to no.

Widening of pricing expectations for the highest quality manufactured housing assets that we own in our portfolio.

Or that we would be interested in buying.

Okay.

My second question is maybe a two parter on your UK guidance.

First of all I wanted to make sure ask if this was on a constant currency basis or does this include the new COO.

You mean versus what you had previously but secondly, there was a report recently that property surveyors in the U K has actually increased the outlook for the year on home sales.

And I'm wondering if your reduced guidance is due to vacation homes.

Not being directly correlated to the UK housing market or perhaps a lag effect. Given these are secondary homes for a lot of for all the buyers.

Or if we should not place too much emphasis on property zoom errors.

Hey, John we too and are aware of.

Oh, the Valuers are thinking about things, but that is on the general.

Oh motor market.

We would suggest is that as very positive.

Because those are the owners who are buying second vacation homes and the park holiday is portfolio.

So.

Is something that we'll just have to watch and it could be something that a great.

It's a positive.

Impact as we move forward, we can only underwrite.

We're seeing right now we know that the CPI environment is 10 plus percent there RPI on the retail side up over 13% with some evidence that there are expectations that there will be some relief in sight.

And we think all that will play positively to continued sales.

<unk> are up year over a year.

Not at a bunch of the levels, we had during the year. So we hope that would be positive, but I think that's all against.

Backdrop, if you will that from an underwriting perspective, the business is performing basically in line with our overall expectations. When we initially acquired the property.

So we remain comfortable with our outlook and the opportunity that we.

Undertook but we are experienced a short term.

Aspects of the economy, right, there, which just may be a positive.

As we referred to a kind of a green shoot if.

If that were to come to fruition.

And what about the currency impact the British pound kind of worked in your favor.

Over the last couple of months.

John that would be.

The expectations would reflect the.

Weaker dollar by <unk> and the FX rate.

Okay.

Okay. Thank you.

Our next question is from Robin Lu with Green Street.

Hi, Thanks for taking my question.

Wanted to touch on real estate taxes.

It is that even with our increased this quarter. He expect taxes to trying at this level for the remainder of the year.

You also just remind us when you expect to receive new class assessment.

Hi, Robyn.

Our expectations for the full year for our total same property portfolio are lower than what we experienced in the first quarter.

Call it in that 7% to 8% range.

E.

The assessments come in on a rolling basis over the course of the year and depends on a state by state basis. So they are they are rolling.

Can you just put in context, what the 7% to 8%.

Bucket it out for the initial guidance.

That would be in line with with our original expectations.

Yeah.

And then my second question I understand that there have been questions Ian Genie management team recently and perhaps some funny even visited Australia can you give us an update on the Chinese joint venture and what your longer term plans for that partnership.

When we look at the opportunity Robyn we remain very positive.

To be part of the growth in land lease community taking place in Australia.

So we feel good about our optionality and ability to participate in that growth, which we think is at a very early stage.

We're pleased with the current performance of our son Genia joint venture we have.

Two properties that have now been developed out selling homes freshwater as an age restricted development and we have a second one that's come online.

And we have three other developments in process, which we expect to see.

Some contribution from in the late second half of the year.

With regard to engineer the headstock overall.

They have noted continued challenges in securing home supply and construction.

It related to the pandemic and that has impacted our settlements or home sales closings, which they've guided to so were.

Carefully evaluating.

Any further.

<unk>.

We will share with you and.

Uh huh.

Shareholders.

As the year.

It goes on as to.

Our success.

That's taking place in those developments.

Hum.

Our next question is from Anthony Powell with Barclays.

Hi, good morning.

One more question on the U K home sales, if I remember correctly from last year I think part of the.

Was that you would be able to sell a higher end homes by combining sites operating sites in the U K client kind of a larger large units is that still a.

Long term initiative for the unit or is that maybe paring back given the economic environment.

I know it is a long way of several long term strategies as we've talked about certainly upgrading to the lodges.

Brings a.

Higher pitch fee.

With it because they are based on the size of the large amongst other things. So we continue those efforts. We did note that we have seen a shift.

Two.

Pre owned homes.

Probably we've.

Underwritten and guided to.

Slower lodge growth, which would be new home growth.

At the same time, the best indication of satisfaction in one of our park holidays properties comes from the fact that we're seeing this huge increase in upgrades from existing residents. So that's a very very positive thing.

We'll be able to share with you next quarter, what we've seen in sales, but certainly those upgrades are taking place probably a little bit slower than.

We forecast earlier.

<unk>.

Got it thanks, and maybe one more on I guess on M. H B.

Base rent growth I think five 4% in this quarter.

How is that split between I guess, the new your new homeowners and renewing homeowners and how do.

Do you expect to see that those new homeowners.

Homeowners are.

Where do you expect to see growth for that segment to trend over the next several quarters.

Hi, Anthony the five four is a blend of the entire portfolio.

We will build towards over the course of the year towards the guided range.

I'm about six 4% by the towards the end of the year end.

And our.

The rental increase in our rental program is running just below 10% at nine point at 9.6. So the 504 would be a combination for the entire portfolio whether that's.

And owner that is renewing.

Or.

Or a new residents in our communities.

Got it.

Are you able to get it get some market rents are on those newer residents as they move in or is it.

I guess I'm trying to see at home sales increase or increase.

The decrease.

Impacts for MH rent room.

And when we discuss tenure in our manufactured housing of about 15 years.

That's a pretty steady right the rental increase that we provide guidance on.

That is the expectation for the portfolio, where you were.

Where you would see call it.

A more updated.

Until increases would be in our rental program.

Got it okay.

Expansion.

We just don't have a large part of a market increase and we are able to push through rental increases on an annual basis across the entire portfolio.

Got it thanks.

Our next question is from Jamie Feldman with Wells Fargo.

Great. Thanks for taking my question. So I just wanted to go back to your comments on Savannah being like an international Marina can.

Can you talk about domestically how many more of those types of marinas are out there that you might want to add to the network.

I think Jamie that there probably aren't.

Three or four.

Similar marinas in the country.

Lauderdale Marina Center, which was the first one we acquired.

It has been performing exceptionally.

It is also a prime example of where we've been able to change the service model and utilize vendors third party vendors to perform the service.

Hum.

Correct.

Leased the space to them and collect the rents and Overages on the service provided we're in the process of completing the same thing in the Savannah Savannah Yacht Center.

85% of the revenue will come in from these third parties.

And as I said the huge benefit.

What it provides in value to a safe Harbor Marina member.

This particular Marina is world class, there's only one other one like it that I know of in the world that can service well its 450 feet or longer.

The Super Yacht citizen are known and then off season service.

The smaller vessel.

Vessels.

So I wouldn't say there.

More than a handful of them in this country in the center.

Probably you already owns two or three of them.

Okay.

Thank you for that so as you think about growing the marina business and putting incremental capital to work I mean is it safe to assume you're going to be looking mostly at saltwater marinas.

And does that imply they are more likely to be buying internationally going forward or do you think you'll actually do more.

Freshwater domestic marinas you go out to grow the business I mean, it seems like the network becomes an it's a global network, it's not necessarily a domestic network.

I think we are quite comfortable for the foreseeable future that there are many.

Many saltwater marinas that would strategically enhance.

Safe Harbor network.

And are those being in North America. So we've talked about from time to time, one or two points across.

Lentic.

Where are some of the larger.

Boats and yachts tend to go for certain parts of the season, but one of the great benefits of Savannah River, which.

Lauderdale Marina is the fact that.

We are seeing.

The results as we saw in the results this quarter.

Keeping those larger craft.

The Safe Harbor Marina, providing service here that we can't get elsewhere. So.

Our expectation is our growth will be predominantly in North America and all saltwater.

Okay alright, thank you.

Our next question is from Wes Golladay with Baird.

Hey, everyone I just have a quick question on development.

Delivered two of the units in the first quarter what is the plan for this year and if you can maybe give us a peek into next year.

I think.

Generally we have about 1000 sites to deliver an expansion and new development.

We're really pleased with what we've delivered so far.

And.

Also.

Yeah.

The fact that we've had all of the inventory that we need to be able to place units and provide for the demand and the development and expansion.

And as we go forward we talked about.

Are you able to provide a leader for new manufactured housing community developments per year.

I think as a.

Very unique way to be able to increase our manufactured housing.

Our percentage of our portfolio so.

We're very very happy with how development is going now and the fact that.

Really 567 years of work is now leading to the fact that we've been able to build up in inventory.

Entitled and zoned lots.

Basically that doesn't exist anywhere else in the country. So.

Feel very very good about our development going forward our expectation is for now at this rate we can self fund internally, we have about $200 million.

Capital.

Sure Mark so to speak for.

Development and expansion of this year.

Okay. Thank you just get one more it's going to the network effect is that fully kicked in for RV and marine or what do you think you'll have the full network effect.

That's scary.

On the Marina side.

I think it is increasing every single day through the.

Value, that's being perceived again I'm, having a long term view as an owner operator and being able to invest capital for.

The types of returns that we discussed earlier.

Is seen by the membership the strategic locations the ability to stay in a safe Harbor Marina up and down the east coast and how as we build out the rest of our geographic footprint.

The perks.

<unk> that the members experience both through.

The advantage of our.

Service.

And some of the F&B.

Fuel sales that we provide to the membership.

That's all taking place, but I think we have a long way to go in a building.

The continued.

Loyalty of our already loyal membership I think the same thing's true in the RV transient business. So in outdoors is only a year and a half full.

We are seeing.

A lot of positivity.

As we connect the dots and travelers can go from there.

So now outdoors communities have a son outdoors community.

Uh huh.

There's a long way to go on that brand new at the same time I'd remind everybody that we are reaching.

Yes.

Largest levels.

Converting transient customers.

Annual customers and I expect that to continue and it's a benefit of moving people through our transient.

Resorts and having them.

Get that Sun outdoor experience and being able to market to them to convert as annuals. So I think theres a lot to be gained a year over year and we're seeing that in the increased conversions and the stickiness. If you will of the annual renters once they convert.

Thanks, everyone.

Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Gary Shiffman for closing remarks.

I would just like to thank everyone for participating on the call.

We are.

Look forward to discussing our second quarter results on the next call.

Thank you.

This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.

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Good morning, ladies and gentlemen, and thank you for standing by and welcome to the Sun communities first quarter 2023 earnings Conference call. At this time management would like me to inform you that certain statements made during this call which are not historical facts may be deemed forward looking.

Statements within the meanings of the 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 its 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.

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, and Fernando Castro, Karen <unk>, 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 asked that you limit yourselves 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. Shiffman, you may begin.

Good morning, and thank you for joining us on our conference call to discuss first quarter 2023 earnings and our updated guidance for.

We're off to a strong start to the year as our first quarter performance extended its track record of delivering reliable NOI growth driven by our best in class properties, which supply has persistently constrained and demand remains resilient.

Our focus on providing an exceptional offering for residents guests and members.

Backed by a ton of customer service that our properties.

Value proposition that creates loyalty and durable revenues for Sun.

Our first quarter results were stronger than we anticipated with $1 23 core <unk> per share for the quarter exceeding the high end of our guidance.

Our same property NOI increased six 7%, surpassing the high end of our guidance by 230 basis points driven by strong performance across all three segments.

Same property manufactured housing NOI increased 5% compared to the first quarter of 2022.

Several factors, including rental rate increases.

Let's see growth and expense savings.

Same property RV NOI increased four 4% driven by a six 2% revenue growth, primarily reflecting strong conversions of transient sites to annual leases.

Following the unprecedented increase in transient demand during the pandemic, we continue to benefit from heightened awareness of RV vacations and anticipate continued strong demand for annual RV leases.

We are capitalizing on this demand to grow our base of long term durable rent revenues with these conversions.

Same property Marina NOI grew 15, 1% in the quarter as compared to the same time last year.

Marina outperformance was due to strong rental increases.

The demand that included longer stays by transient guests in our southeastern marinas and operating expense savings.

Demand for attainable housing for value oriented vacationing remained high and drove same property occupancy for MH and RV 190 basis points higher compared to the same time last year.

At quarter end occupancy was 98, 6%.

Tons of MH and RV annual revenue producing sites increased by 802 sites in the quarter, representing the highest first quarter volume ever recorded in a 20% increase from the same period last year.

Transient RV conversions to annual leases accounted for 65% of the Rps gains demonstrating the success of our ongoing strategic focus to grow our base of long term residents.

Development activity continues to contribute incremental value to our long term growth.

We delivered over 200 ground up development sites and over 130 expansion sites.

We also opportunistically added to our inventory of land for future development, which now represents a pipeline of approximately 16000 sites.

Currently have sufficient new home inventory available to meet the demand for our newly delivered sites.

On the acquisition front Sun continues to remain highly selective and purchased two new assets during the quarter.

Manufactured housing community in Michigan.

The Savannah Center, a premier service oriented Marina in Savannah, Georgia with the services provided by third parties.

Marina enhances our network, providing access to another strategic location for our members.

We will be publishing our first ESG report in the coming weeks and are very proud of our team members for reaching many milestones in 2022.

And the report the highlight ESG achievements such as the coastal habitat restoration program, we are piloting at marinas in Rhode Island.

Our UK operations, maintaining their silver rating from investor and people and achieving ISO certification for cyber security.

Our ESG framework score improvements and the expansion of our data coverage to include marinas and the UK demonstrate our company's commitment to being accountable to our investors team members business partners and the communities in which we operate.

We are pleased with our strong start to our year and remain positive on our outlook.

I would like to thank our team members for their enduring dedication and hard work.

With that I will turn the call over to Fernando to discuss our results in more detail.

Thank you Gerry first I wanted to call your attention to the supplemental disclosure changes you likely noticed in the document published after the market closed yesterday.

<unk> made a number of updates that are aligned with how we manage that as a whole and are intended to help you analyze our business better and more quickly. Our goal is that you find these modifications helpful and we welcome feedback.

<unk> per share was $1 23 for the first quarter exceeding the high end of guidance by <unk> <unk>.

The outperformance was driven by higher than anticipated real property revenue and manufactured housing, which benefited from rental rate growth and higher demand for our rental program sites from RV annual revenues that benefited from conversions of transient sites and from stronger than expected demand at our marinas. Additionally, the quarter's results benefited from <unk>.

Utility rebuilds and effective expense management at the properties at.

At the same property level outperformance throughout our portfolio contributed to the six 7% increase in total same property NOI.

Same property manufactured housing NOI grew 5% over the prior year, resulting from a six 4% increase in revenues and 10, 4% expense growth. The outperformance in revenues was due to a 280 <unk> increase in MH revenue producing sites, which was more than four times the occupancy gains realized in the first quarter of <unk>.

2022.

And RV same property NOI increased four 4% for the first quarter with a six 2% increase in revenues and an eight 1% expense increase during the first quarter. We converted 524 transient sites to annual leases, which was ahead of our expectations as we continue to execute on.

Our strategy of converting sites and capturing more annual revenue. We expect to also see a related reduction in transient revenue.

Arena same property NOI increased 15, 1% in the first quarter, consisting of a 10, 9% increase in revenues and a four 3% increase in expenses Marina same property revenue benefited from stronger than expected transient demand, especially in the southeast and continued expense management.

During the quarter, we sold 589 homes in North America, which exceeded volume and margin expectations.

In the U K real property NOI was ahead of expectations in the quarter due to higher owner retention NOI from home sales was below expectations in the quarter due to lower volume and the increased mix of pre owned versus new home sales.

Turning to investment activity, we purchased the Savannah Yacht center for $100 million and funded the entire purchase price by issuing convertible preferred op units or the manufactured housing community acquired for $7 million, we issued a combination of OPE units in cash.

As of March 31, 2023.

<unk> had $7 5 billion in debt outstanding and a weighted average interest rate was three 9% and a weighted average years to maturity was seven four years, our leverage ratio on a run rate basis is six times based on our operating cash flow expectations for the year, we anticipate deleveraging.

<unk>, our five five times long term leverage target over the remainder of the year.

In terms of new financing activity since our last call. We completed two additional mortgage loans that raised $100 million of fixed rate debt at a weighted average interest rate of five 7%.

Total during the quarter, we raised approximately $585 million of fixed rate debt and used proceeds to repay borrowings under our senior credit facility.

Additionally, we swapped another 100 million pounds on our Sterling denominated term loan to lock in a fixed all in rate of four 8%.

At the end of the quarter, our floating rate debt was at 16%, which is in line with our internal expectations.

Excluding our senior credit facility borrowings between now and the end of 2025.

It's an 8% of our total debt matures.

Continue to look at opportunities in the financing markets to further enhance our balance sheet, including terming out debt and reducing secured debt amounts.

Yeah.

As detailed in our supplemental we are affirming our guidance range for core <unk> per share for the year of $7 22 to $7 42.

And establishing core <unk> per share guidance for the second quarter of $1 90 to $1 98.

Do you expect higher total portfolio real property NOI growth of six 1% to 7% driven by additional NOI from first quarter acquisitions and from higher same property NOI growth.

Also expect higher contributions from North America home sales total MSR, DNA and lower G&A expense to offset a lower contribution from home sales in the U K.

We now expect total same property NOI to grow by 5% to 6% for the year, representing a 10 basis points increase to prior guidance. The increase was driven by stronger than previously expected growth in same property manufactured housing and Marina.

Actually offset by slower transient revenue growth expectations and same property RV are.

Our revised same property NOI growth ranges for the year are four 6% to five 4% for manufactured housing for four to five 6% for RV and six 8% to 8% for Marina.

For our UK operations, we are lowering our full year range for total real property and home sales NOI by roughly 10%, so a new NOI range of $141 million to $148 million.

For additional details regarding our updated full year guidance in second quarter expectations. Please see our supplemental disclosures.

As a reminder, our guidance includes acquisitions and dispositions and capital markets activity through April 26, and the effect of a property disposition under contract expected to close during the second quarter, but 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 up for questions operator.

Thank you we will now open the call for questions.

You would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. If at any time you wish to remove your question from the queue. Please press star two we also remind you to limit your question institution and others may have time to ask questions.

Our first question is from Josh <unk> with Bank of America.

Yeah, Hey, guys. Thanks for the question.

Fernanda thank for that.

Color on the guidance just wanted to explore the UK NOI guidance range being lower 10% can you just go into more detail on what's driving that underlying change.

Sure. Thank you Josh and good morning all.

Drivers to the changes are actually an increase to expectations in real property NOI.

From the U K.

Increasing by about 9% at the midpoint or about $5 $5 million and a decrease in expected contribution from home sales.

Of about 20% or about 21 $21 million that would be for for the for the full year. So that would have.

The the impact of outperformance over the first quarter and then our revised expectations for the rest of the year.

So with that strategy, driven where you're pushing rate harder and that's why I like the real property is up 9% and then youre just getting less phone sales or just kind of that.

Just kind of square.

Yes.

Figure out like what's driving the drop in home sales too.

We're certainly we're seeing.

Seeing shifts in the and.

And the strategy as far as stronger as Gary mentioned in his remarks stronger owner retention at the property level that is that is driving the.

Increased expectations on the real property side, we did see.

Softer demand in the first quarter from a volume perspective, and as Gary mentioned in the mix of homes, which carry.

Which carry a different margin expectations.

So.

Josh its Gary as I did suggest that shift.

Shifts to a quality.

Pre owned home.

Prices.

Lower and therefore, the retail prices lower.

Origin.

Similar to asset.

It has been but the contribution from a quality of used home, it's just smaller than a new home and we have seen.

A bit of a slowdown in the new home and we're well aware of the backdrop of the economy in the U K and.

That effect as we think through guidance for the balance of the year.

Okay.

And that NOI range like how much of that.

Profit is like home sales how much is it like a real property.

Just trying to think of like but for modeling purposes.

You should think about it.

Yeah.

Josh in our in our updated guidance.

The percentage split between real property and home sales is about 45% coming from real property and 55% coming from home sales.

Okay. Thanks consists the shift which is the shift over long term that we're looking to make but.

The results of what's happening right now relate more to the economic environment there.

Got it thank you.

Our next question is from Derek Wolf with Citi Research.

Hi, Thanks, just wanted to follow up on that because I think in March you put out a deck that showed that the U K.

Operations were sort of expected to be in line.

For the year. So I don't know if you did something happen in March that it caused you to three thank you Ed and good luck.

Doing the math correctly.

It sounds like Youre expecting like a 'twenty 1 billion decrease in home sales on call it like.

The original starting point and 75, I guess around 75%, 80%. So that seems like a pretty material decline. So I'm just trying to understand sort of what changed.

That would cause such a large decline.

Hey, Derik.

Thank.

Back to the matter is the decline has been very very recent.

The time from putting a deposit to closing.

We're making a decision has slowed down.

Obviously, the economic headwinds in the UK.

<unk>.

Sure.

Fact that.

CPI is still double digit and.

It has an impact on the wholesale decision, making but at the same time.

Overall, the portfolio performance was quite strong as we indicated.

Retention is high side fees have been collected for the year holiday bookings are very strong in the ancillary business that comes with those holiday bookings has been strong Easter was an exceptional holiday week that we've just experienced on vacation homes, but we are very cognizant and aware of.

The economy, there and have adjusted the home sales as we look out to match what we've seen in this more recent period of time, which really did correlate.

With the March period of time that being said, we can share that.

April .

We have been.

Following closely and there has been positive undertones, but.

Taking that approach to how we wanted to.

Think about going forward, we made the adjustment to the home sales moving forward.

Understood and then.

Yes, I don't know are you underwriting sort of similar assets today that have sort of a high hopes for that.

And I guess as you.

Sort of.

I think about sort of underwriting them.

Could you change anything in underwriting.

<unk> multiple on that income stream or predict more variability there just trying to think if there's anything you're seeing that change how you underwrite the asset class longer term.

Well certainly we are very very focused on that underwriting and.

This is a time where.

Basically we can focus more on.

<unk>, what we already have in the portfolio and extract as we like to say the low hanging fruit volatile at the sites.

And grow the existing portfolio, so as far as our appetite.

And our underwriting moving forward it will be very very disciplined as we always say the pencil.

Very sharp at this time, so I wouldn't look for any major acquisition opportunity.

And I would just reiterate our initial underwriting perspective in the business.

Was long term.

And remains long term, we think we have the right portfolio of best in class as a matter of fact.

Demonstrated management team it is.

Been through tough economic environments before and done well.

And I think that.

We're watching them adjust to this difficult market.

Great out there so.

As it relates to moving forward on underwriting.

Adjusted to reflect the current what we believe is short term impact of the market.

Got it thank you.

Yes.

Our next question is from Keegan Karl with Wolfe Research.

Hey, guys. Thanks for the time, so starting on the same store property RV NOI cut kind of material amount I'm.

I'm just curious what drove such a stark change in such a short amount of time and I know you called out transient, but that should be offset by the conversion.

Is it more top line or more expenses that are driving this and if it is the former how should we be thinking about the demand funnel right now at this time of the year relative to last year.

Thank you again, it's Fernando.

The revised expectations on a same property RV side of 75 basis points at the midpoint equates to about $2 one.

$2 $1 million of NOI from initial guidance provided in February .

That will that is primarily coming from the transient revenue.

Line item.

Where we have revised our expectations in.

In February we gave guidance of about 50 basis points of growth.

At the midpoint for the year given the strong <unk>.

Number of conversions that we've made already and expectations for the rest of the year and we did see some weather impact in the first quarter.

In California and in the southwest.

That's those are the primary drivers so the the the revenue.

The re forecasted revenue expectations are offset partially by.

By expected.

Pence savings in that part of the portfolio.

It's just when the demand funnel the second part of the question how does it compare if youre looking at your transient bookings.

Month to date, how does it compare versus last year.

Versus versus last year were from a pace standpoint, we're running about five or 6%.

Below below last year.

Okay, and then changing gears you see you mentioned in recent conference. There is an opportunity for you guys to potentially readjust your insurance rate.

Given what your peer recently reported regarding their renewal rate how should we be thinking about some potential upside here to your insurance expense and is that contemplated at all in your guidance range.

That is not contemplated in our guidance range.

The fact of the matter is that.

Current market rates have not really improved.

We are continuing our deep dive analysis.

Ah reviewing and analyzing our insurance needs in order to optimize.

Cost versus a risk.

And as you might be referring to these options. We view include adjusting our retention pieces in levels throughout the stack for various types of risk.

More closely examining usage of our captive which is virtually unused at this time looking for opportunities to work with new reinsurance groups, although that's been met with some headwinds because.

I think all we're right now the overall insurance market is very very challenged so.

Just a continuing effort to improve the core.

Cost and examined that we have the right.

Risk adjusted costs going forward so.

We would share with the market at any cost savings that we believe.

We have found going forward.

Great. Thanks for the time guys.

Our next question is from Michael Goldsmith with UBS.

Good morning, Thanks, a lot for taking my question.

Same store expense guidance is down by about 120 basis points G&A was adjusted down by $4 million. So can you talk a little bit about where you are able to find the savings and just maybe overall the.

Flexibility of Playability of the expense model of the business in Europe .

80 to adapt it to.

The changing environment.

Yeah.

Accommodate some of the slowdown on the revenue side.

Sure. Thank you Michael the expense savings would primarily come from offsetting some of the revenue.

Expectations on the transient RV side, that's going to be the largest driver.

But also we are we did experienced in the first quarter and are expecting for the rest of the year a higher utility rebuilds.

Is.

Is decreasing.

Our year over year expense.

On that side of the of.

The expense stack.

Given the increased focus.

On on rebuilds to two tenants.

As well as we've talked about this before but.

Our solar solar array projects of which we have 35 today, another 15 underway, which ultimately will.

Continue to save.

<unk> electric expense as we deploy deploy these projects on.

The second part of your question on the G&A side.

Those are those expectations that.

Bringing those cost expectations down is primarily coming from salaries and wages.

Yes.

It's just from lower hours.

Okay.

Correct.

Property level.

Yes got it.

And then my second question is just is on.

The Marina business and kind of how it how it fits into the entire enterprise.

<unk>.

When we started.

Concerned about the Marina business and how it would perform during a recession it seems like.

The results are.

Our expectations are improving and it's becoming a larger part of the business as a whole. So maybe you can talk about a little bit about the improving outlook. There and then just also how it fits into the entire portfolio and how that diversity.

Can help you navigate.

The tougher times.

I think that we're very pleased with the merge.

Marine our performance to date not only <unk>.

Standing performance this quarter, but what we've seen quarter after quarter over the last two years.

Our view is that.

Having the benefit of the entire network gives us an advantage overall competitors.

And.

It's really showing in the demand for wet slips and drive slips is.

We're virtually.

At full occupancy with waiting lists at many of the marinas.

And we've had the strong benefit of strategically acquiring what we referred to as the international marinas.

Wow us to keep.

The boats that are very very large.

The safe Harbor part of our system.

Especially.

On the transient side when these boats come in.

Or repair work that they often would head across the Mediterranean four for keeping them longer and our network is we're able to provide the service for them. So.

The other thing I'd point to we have.

Opportunity and about.

30, plus marinas to reconfigure smaller slips into larger slips there are two being re develop this year.

There are 11 in for permitting process. So we can do that and the advantage of this also has the ability to be able to charge higher linear footage rates.

For the longer boats and the greatest growth in the.

Marina vessel businesses in both 30 feet or greater.

Certainly required.

The wet slips so we have a nice opportunity there to continue to grow.

And I think a lot of it comes from the fact that.

As we.

Some have acquired.

The Marina platform, we've been able to invest for the long term, making small capital improvements that are well received by the members and therefore allow.

Allowing.

Probably a much larger share.

<unk>.

Demand to take place currently and the Safe Harbor network. So we look to build on the strength that we saw this quarter.

Gary what's the return or IRR.

Reconfiguration project like that.

So when we invest.

Four.

That type of Capex, we look for a 9% to 12% return.

Thank you very much.

Our next question is from Samir Khanal with Evercore.

Good morning, everyone, Hey, Fernando just curious on the home sales contribution in the U S and North America.

I think you gave a number of $19 million what was that.

What was that budget was that budget before was that forecast before.

Im curious what youre seeing in the U S. As it relates to home sales and if that sort of.

Similar headline stick to kind of what you're seeing in the U K.

Sure our original expectations for home sales contribution.

In North America were about $17 million. So we are seeing.

Increased expectations.

They're in.

The first quarter, we did see from internal expectations.

More pre owned homes sold than than budgeted at higher margins, which drove.

Which drove outperformance in that part of the business as we for the rest of the year as we focus on.

I mean from a back to basics filling sites that we have just created a cross expansion sites and our ground up developments.

Development projects will this is this is.

One of the levers we can we can pull to fill those sites but were.

Home sales are performing.

Strong over the over the course of the first three four months of the year.

Got it and then I guess Gary.

Just in terms of transaction that acquisitions, I know you did $100 million a quarter.

Just trying to think about what does that opportunity set look like today is that the right quarterly run rate to think about.

Or is that too optimistic.

When you think about marinas RV and MH.

Thanks.

It's a great question certainly.

Okay.

Cost of capital and the impact of.

It has a big impact on transactions.

When we think of MH.

Certainly.

It's been one of the biggest consolidators there is very little.

If any cap rate expansion that we've seen in fact, we.

So another couple.

<unk> trade with a three year subsidiary <unk>.

<unk>.

Over the last.

Two quarters and we were.

Looking at evaluating those but.

They sold for inside of anything that we would've paid for them. So I think that moving forward adjusting.

Or the fact that there are much fewer.

Acquisitions out there on the MH side, there'll be kind of a onesie <unk> opportunity.

On the Marina side, we're very very focused on the growth that we've had and we have the ability to be very very selective okay and strategically inclined to look at acquisitions moving forward.

So I think it'll be a quieter period of time.

On the acquisition side moving forward.

<unk> would add.

Im just extremely selective as far as the the acquisitions that we did in the first quarter the $7 million manufactured housing community that was.

Near completed ground up development that we bought in our backyard in Michigan that we will.

Fill up.

Fill up quickly given.

Given that that's.

Tried and true model.

The Savannah Yacht Center.

On the Marina side really this is a two plus two equals five as far as how it complements.

<unk>, the network and being able to keep.

To keep more of the business.

Within within the network itself, but also point to the funding mechanism.

For the savanna Yacht Center, which was a convertible preferred operating partnership the entire purchase price.

Where we are we did issue these securities.

And they would convert at a.

30%, almost 30% premium to where we were trading at the time when we closed the acquisitions is certainly being very opportunistic.

And using.

Using the funding sources that are available to us in the market.

Got it thanks, so much.

Our next question is from John Kim with BMO.

Thank you good morning, I wanted to ask about the mortgage loans that you priced a subsequent to quarter end at five seven I was wondering if you could provide some characteristics on what asset or assets are associated with this debt.

And what that means for cap rates.

Sure John So these were essentially I'll use a non technical term borrow ups on an existing facility with with the Gse's, where we essentially increased the LTV that had been.

That had come down over the course of the last couple of years from a financing that we've done in 2000 2019. This was done on manufactured housing.

Assets.

This was up eight years of weighted average maturity for for that financing and it would be would be in line with.

Our unsecured borrowing rates today.

Based on where the tenure is.

And.

And expected spread but Ah.

Gary earlier made.

Made a comment on expectations from a pricing perspective or manufactured housing.

Haven't really shifted over the course of the last 12 to 18.

12 to 18 months given.

Given the scarcity value of manufactured housing we've seen little to no.

Widening of pricing expectations for the highest quality manufactured housing assets that we own in our portfolio.

Or that we would be interested in buying.

Okay.

My second question is maybe a two parter on your U K guidance.

First of all I wanted to make sure ask if this was on a constant currency basis or does this include the new car.

Currency rate versus what you had previously but secondly, there was a report recently that property through payers in the U K has actually increased the outlook for the year on home sales.

And I'm wondering if your reduced guidance is due to vacation homes.

Not being directly correlated to the UK housing market or perhaps.

A lag effect given these are secondary homes for.

For all the buyers.

Or if we should not place too much emphasis on property surveyors.

Hey, John way too and are aware of.

Oh, the Valuers are thinking about things, but that is on the general homeowner.

Homeowner market and what we would suggest is that as very positive because those are the owners who are buying second vacation homes and the parent holidays portfolio.

So.

It is something that we'll just have to watch and it could be something that.

Great stay positive.

Impact as we move forward, we can only underwrite.

We're seeing right now we know that the CPI environment is 10 plus percent there RPI on the retail side up over 13% with some evidence that there are expectations that there will be some relief in sight.

And we think all that will play positively to continued sales.

<unk> are up year over a year.

Not at the budgeted levels, we had during the year. So we hope that would be positive, but I think thats all against.

Backdrop, if you will that from an underwriting perspective, the business is performing basically in line with our overall expectations. When we initially acquired the property.

So we remain comfortable with our outlook.

<unk> that we are.

Undertook but we are experienced the short term.

Aspects of the economy, right, there, which just may be a positive.

As we referred to a kind of a green shoot if.

If that were to come to fruition.

And what about the currency impact the British pound kind of worked in your favor.

Over the last couple of months.

John that would.

The expectations would reflect the call it.

Weaker dollar by <unk> and the FX rate.

Okay.

Okay. Thank you.

Our next question is from Robin Lu with Green Street.

Hi, Thanks for taking my question.

I just wanted to touch on real estate taxes.

I just thought it was 10%.

Increased this quarter do you expect taxes to trend at this level for the remainder of the year and can you also just remind us when you expect to receive new tax assessments.

Hi, Robyn.

Our expectations for the full year for our total same property portfolio are lower than what we experienced in the first quarter.

Call it in that 7% to 8% range.

E.

The assessments come in on a rolling basis over the course of the year and depends on.

By state basis. So they are they are rolling.

Can you just put in context, what the 7% to 8%.

Budgeted for the initial guidance.

That would be in line with with our original expectations.

Yeah.

And then my second question.

Question, Ian Genie management team recently, and perhaps some funny even visited Australia can you give us an update on the Chinese joint venture and what your longer term plan with that partnership.

So when you look at the opportunity Robyn we remain very positive.

To be part of the growth in land lease community taking place in Australia.

So we feel good about our optionality and the ability to participate in that growth, which we think is at a very early stage.

We're pleased with the current performance of our son Genia joint venture we have.

Two properties that have now been developed out selling homes freshwater as an age restricted.

And we have a second one that's come online.

And we have three other developments in process, which we expect to see.

Some contribution from in the late second half of the year.

With regard to engineer the headstock overall.

They have noted continued challenges in securing home supply and construction as it related to the pandemic and that has impacted settlements.

Home sales closings, which they've guided to so were.

Carefully evaluating.

Any further investment in.

We will share with you.

Oh.

Shareholders as.

It goes on as to.

Our success.

That's taking place in those developments.

Okay.

Our next question is from Anthony Powell with Barclays.

Hi, good morning.

One more question on the U K home sales.

Remember correctly from last year, I think part of the.

<unk> was that you would be able to sell a higher end homes by combining factors operating sites in the U K.

Kind of a larger large units is that still a.

Long term initiative for the unit or is that maybe paired back given the economic environment.

No. It is a long way of several long term strategies that we've talked about certainly upgrading to the lodges.

Brings a.

Higher pitch fee.

With it because they are based on the size of the large amongst other things. So we continue those efforts. We did note that we have seen a shift.

Two.

Pre owned homes.

Probably we've underwritten and guided to.

Slower lodge growth, which would be new home growth.

At the same time.

<unk> indication of satisfaction in one of our park holidays properties comes from the fact that we're seeing this huge increase in upgrades from existing residents. So thats a very very positive thing.

<unk>.

We will be able to share with you next quarter, what we've seen in sales, but certainly those upgrades are taking place.

A little bit slower than.

We forecast earlier.

Sure.

Got it thanks, and maybe one more on I guess on MH.

Base rent growth I think five 4% in this quarter.

How is that split between I guess, new homeowners and renewing homeowners and how do.

Do you expect to see that those new.

Homeowners.

Where do you expect to see growth for that segment to trend over the next several quarters.

Hi, Anthony the five four is a blend of the entire portfolio.

We will build towards over the course of the year towards the guided range.

I'm about six 4% by the towards the end of the year end.

And our.

The rental increase in our rental program is running just below 10% at nine point at 9.6, so the $5 four would be a combination for the entire portfolio whether that's.

An owner that is renewing.

Or.

Or a new residents in our communities.

Got it.

Are you able to get some market rents are on those newer residents as they move in or is it.

I guess I'm trying to see as home sales increase or increase.

The decrease.

That impacts for MH rent growth.

And when we discuss tenure in our manufactured housing of about 15 years.

That's a pretty steady right the rental increase that we provide guidance on.

That is the expectation for the portfolio where are you.

Where you would see call it.

More updated.

Rental increases would be in our rental program.

Yeah.

Got it okay, no development and expansion.

I think we just don't have a large part of.

Market increase and we are able to push through rental increases on an annual basis across the entire portfolio.

Got it thanks.

Our next question is from Jamie Feldman with Wells Fargo.

Great. Thanks for taking my question. So I just wanted to go back to your comments on Savannah being like an international Marina.

Can you talk about domestically how many more of those types of marinas are out there that you might want to add to the network.

I think Jamie that there probably arent.

Three or four.

Similar marinas in the country.

Lauderdale Marina Center, which was the first one we acquired.

Has been performing exceptionally.

It is also a prime example of where we've been able to change the service model and utilize vendors third party vendors to perform the service.

Correct.

Lease the space to them and collect the rents and Overages on the service provided we're in the process of completing the same thing.

Anna Yacht Center.

85% of the revenue will come in from these third parties.

And as I said the huge benefit.

What it provides in value to a safe Harbor Marina member.

And.

This particular Marina is world class there is only one other one like it that I know of in the world that can service, both 450 feet or longer.

The Super yachts, as they're known and then off season service.

Smaller.

Vessels.

So I wouldn't say there.

Okay.

More than a handful of them in this country in the center.

Probably already owns two or three of them.

Okay.

Thank you for that so as you think about growing the marina business and putting incremental capital to work I mean is it safe to assume you're going to be looking mostly at saltwater marinas.

And does that imply more likely to be buying internationally going forward or do you think you'll actually do more.

Freshwater domestic marine as you go out to grow the business I mean, it seems like the network becomes an it's a global network, it's not necessarily a domestic network.

I think we're quite comfortable for the foreseeable future that there are.

Any saltwater marinas that would strategically enhance.

Safe Harbor network.

And.

Those are being in North America. So we've talked about from time to time, one or two points across.

Atlantic.

Some of the larger.

And yes tend to go for certain parts of the season, but one of the great benefits of Savannah River, which and Lauderdale Marina.

The fact that.

We are seeing there.

Results as we saw in the results this quarter.

Keeping those larger craft.

Safe Harbor Marina, providing service here that we can't get elsewhere. So.

Our expectation is our growth will be predominantly in North America and all saltwater.

Okay alright, thank you.

Our next question is from Wes Golladay with Baird.

Hey, everyone I just have a quick question on development I think you delivered two of the units in the first quarter. What is the plan for this year and if you can maybe give us a peek into next year.

I think.

Generally we have about 1000 sites to deliver an expansion and new development.

We're really pleased with what we've delivered so far.

Uh huh.

Also.

Yeah.

The fact that we've had all the inventory that we need to be able to place units and provide for the demand and the development and expansion.

And as we go forward we talked about.

Being able to provide.

Leader for new manufactured housing community developments per year.

Which I think is a very unique way to be able to increase our manufactured housing.

Our percentage of our portfolio so.

We're very very happy with how development is going now and the fact that.

Really 567 years of work is now leading to the fact that we've been able to build up in inventory.

Entitled and zoned lots.

Basically that doesn't exist anywhere else in the country. So we feel very very good about our development going forward. Our expectation is for now at this rate we can self fund internally, we have about $200 million.

Capital.

Earmarks, so to speak for <unk>.

And an expansion this year.

Okay. Thank you just get one more.

Onto the network effect is that fully kicked in for art E. And then port Marina what do you think you'll have the full network effect.

That's scary.

Marine aside.

I think it's increasing every single day through the.

Value that's being perceived again.

I'm, having a long term view as an owner operator and being able to invest capital.

For the types of returns that we discussed earlier.

As seen by the membership the strategic locations the ability to stay in a safe Harbor Marina up and down the east coast and how as we build out.

The rest of our geographic footprint.

The PRC.

<unk> that the members experience both through.

The advantage of.

Service.

And some of the F&B.

Fuel sales that we provide to the membership.

Thats, all taking place, but I think we have a long way to go.

<unk> built.

Building.

The continued.

Loyalty.

Our already loyal membership I think the same thing's true in the RV transient business Sun outdoors is only a year and a half full and we are seeing.

A lot of positivity.

As we connect the dots and travelers can go from a center.

So now outdoors community to his son outdoors community.

But.

There's a long way to go on that brand new at the same time I would remind everybody that we are reaching.

Yes.

Largest levels.

Converting transient customers.

Annual customers.

Expect that to continue and it's a benefit of moving people through our transient.

Resorts and having them.

Get that Sun outdoor experience and being able to market to them to convert as annuals. So I think theres a lot to be gained year over year and we're seeing that in the increased conversions and the stickiness. If you will of the annual renters once they cover.

Thanks, everyone.

Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Gary Shiffman for closing remarks.

I would just like to thank everyone for participating on the call.

We.

Look forward to discussing our second quarter results on the next call.

Thank you.

This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.