Q4 2024 Sun Communities Inc Earnings Call
...</p><p begin="00.066." end="00.033">HER SIMPLE UNIDSIDE KNITTING MODEL-FRIDAY SHERP'S
Speaker Change: Ladies and gentlemen, thank you for your patience. Please continue to hold. The Sun Community's fourth quarter and year-end 2024 earnings conference call would begin momentarily.
Speaker Change: Thank you for your patience. Please continue to hold. The Sun Community's 4th Quarter and Year End 2024 Earnings Conference Call will begin momentarily. Thank you for your patience.
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Good afternoon, ladies and gentlemen.
and thank you for standing by.
Speaker Change: Welcome to the Sun Communities fourth quarter and year-end 2024 earnings conference call.
Speaker Change: 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 1995.
Speaker Change: 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.
Speaker Change: Factors and risks that could cause actual results of different material relief from expectations are detailed in today's press release and from time to time in the company's periodic filings with the SEC.
Speaker Change: The company undertakes no obligation to advise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Speaker Change: Having said that, I would like to introduce management with us today.
Caratini: Caratini, Chief Financial Officer, and Aaron Weiss, Executive Vice President of Corporate Strategy and Business Development.
Caratini: After the remarks, there will be an opportunity to ask questions. For those who would like to participate in the question and answer session, management asks you that you limit yourselves to one question so everyone who would like to participate has ample opportunity.
As a reminder, this call is being recorded.
Caratini: I'll now turn the call over to Gary Shiffman, Chairman and Chief Executive Officer. Mr. Shiffman, you may begin.
Caratini: Good afternoon, and thank you for joining us as we discuss the fourth quarter and full year results for 2024, and our guidance for 2025, and our recently announced Safe Harbor transaction.
Caratini: We had a very productive 2024 as we advanced our strategic priorities with the primary goal of simplifying our operations.
focusing on core assets.
Caratini: and improving our balance sheet while positioning the sun for steady earnings growth.
Throughout the year, we successfully disposed of non-strategic assets.
Caratini: reduced our debt, and further enhanced our governance through board refreshment.
Caratini: Operationally, we continue to increase contribution from real property and annual income streams.
Caratini: while diligently implementing a broad repositioning strategy to maximize revenues and align expenses more efficiently, driving sustainable earnings growth.
Caratini: In total, in 2024 and through the date of this call, we disposed of approximately $570 million of non-strategic assets.
We also remained highly selective with development projects and acquisitions.
and allocated our capital towards paying down debt.
Caratini: As of year-end 2024, we have improved our net debt to EBITDA ratio to six times.
Caratini: Over the last 12 months, we have added two new members to our Board of Directors and have announced additional planned refreshments.
Caratini: Additionally, the board search committee is continuing the comprehensive search process to identify and hire a new CEO.
Caratini: We're excited to have meaningfully accelerated our strategic repositioning with the announcement earlier this week to South Safe Harbor Marina's Grinnell cash price of $5.65 billion to Blackstone Infrastructure.
Caratini: Safe Harbor was an excellent investment for Sun, and the sale at this time allows us to achieve several of our strategic objectives, most notably refocusing on our core MH and RV segments.
Caratini: and meaningfully improving our leverage profile while realizing a very attractive return.
Caratini: The sale price represents an approximately 21 times multiple on Safe Harbor's 2024 FFO.
Caratini: and a $1.3 billion gain, which is a strong return for shareholders.
Caratini: We are pleased with how this transaction allows us to simplify our business and is expected to improve our margins, earnings predictability, and revenue-to-free cash flow conversion.
Caratini: Pro forma for this transaction, our core North American manufactured housing and RV NOI will increase from approximately two-thirds to above 90% of total company NOI while also reducing our SRD&E exposure.
Caratini: In terms of our financial outlook, this sale is expected to generate proceeds that we intend to use to meaningfully deliver with an initial post-sale net debt to EBITDA ratio expected to be approximately between two and a half and three times at closing.
Caratini: The management team and the board are continuing to evaluate priority uses of the capital, which may also be used to support a combination of distributions to shareholders and reinvestment in our core businesses.
Caratini: I want to thank the entire Safe Harbor team for their partnership over the past four years and look forward to continuing to follow your growth and success under Blackstone's ownership.
Speaker Change: This transaction returns son to being a pure play owner and operator of high quality manufactured housing and RV communities supported by a strong balance sheet
Caratini: We remain very confident in this business with favorable dynamics and predictable earnings.
Speaker Change: And we are particularly encouraged with our outlook as we implement the initiatives that John will discuss.
Now turning to our operations.
Speaker Change: We have maintained our focus on our best-in-class manufactured housing and RV portfolio to position Sun for sustained earnings growth.
Speaker Change: As we discussed on last quarter's call, John McLaren returned to the company on a full-time basis as president.
Speaker Change: to oversee our accelerated repositioning and the execution of our operating initiatives.
Speaker Change: These measures are focused on maximizing revenue for top-line growth and driving bottom-line operational results, including diligent expense management and more effective asset management to drive efficiencies.
Speaker Change: I am pleased that we are already starting to see positive momentum.
Speaker Change: Turning to our results for the year, core FFO per share came in at $6.81.
Speaker Change: Total North American same property NOI growth was 4.1% for the year.
Speaker Change: These results reflect the increased contribution from our annual income streams, strong rental rate increases, continued high occupancy levels, and the initial impact from our expense savings initiatives.
Speaker Change: We delivered strong results in our manufacturer housing segment, demonstrating the ongoing demand for attainable housing. On the IRV's side, we have remained focused on better aligning our cost structure with revenue, which was in line for expectations in the fourth quarter.
Speaker Change: We also made further progress to increase the contribution from our real property and annual income streams.
Speaker Change: For the full year, approximately 70% of our revenue-producing site gains came from RV transient to annual conversions.
Speaker Change: And in the UK, positive momentum continued with strong unit sales, which in turn drive real property income.
Speaker Change: As we look at 2025, we are encouraged by a progress and positive momentum.
Speaker Change: Our goal remains the same, to position Sun to deliver steady earnings growth.
Speaker Change: We have a clear strategic direction, focused on realizing the potential earnings of our best-in-class portfolio and platform.
Speaker Change: I want to thank the entire team for their unwavering efforts and for continuing the hard work.
Speaker Change: I will now turn the call over to John and Fernando to discuss our strategy, results, and guidance in more detail. John?
John Mclaren: Thank you, Gary. I'm excited to be back in a full-time role at Sun and very encouraged by the progress we've already made in just the past several months.
John Mclaren: Returning to the team that I helped establish has been invigorating as we build upon and refine the processes and systems that have driven our success.
John Mclaren: Everything we are implementing is based on accountability through transparent performance ranking with a focus on top-line execution and disciplined expense management in order to drive efficiency and ensure a results-oriented approach.
John Mclaren: In MH&RB, our priority is solid leadership, service excellence, transparent communication, and leveraging technology and data to drive efficiencies.
John Mclaren: We have already implemented expanded performance reporting and ranking improved communication across teams.
John Mclaren: realized expense savings and have sharpened our focus on long-term growth.
John Mclaren: Specific to our performance relative to the 15 to 20 million dollar restructuring plan we have implemented, we have already captured approximately 11 million dollars in G&A savings within the plan.
John Mclaren: realize approximately four million in operating expense savings in the fourth quarter and expect to expand these savings by a further three to five million dollars relative to typical year-over-year increases in OPEC spend in 2025.
John Mclaren: We will continue to seek additional growth opportunities, continuing our work towards finding additional GNA and operating expense efficiencies.
John Mclaren: while at the same time being laser-focused on top-line revenue growth opportunities, which we expect will materialize over the course of this year.
John Mclaren: We are not just setting ambitious goals, we are executing on them and positioning Sun for long-term success in 2025 and beyond.
John Mclaren: Turning to our performance in the fourth quarter, North American same property NOI increased by 5.7% compared to the same period in 2023.
John Mclaren: This was driven by a 5.8% increase in revenues, reflecting a 5.5% increase in weighted average monthly rent and a 160 basis point occupancy gain.
John Mclaren: Our manufactured housing same-property NOI increased by 7.1%, and RV same-property NOI grew by 0.4%.
John Mclaren: For the full year, North American Same Property NOI increased by 4.1% over 2023. The NOI increase was mainly due to a 4.6% increase in revenues, offset by a 5.7% increase in expenses.
John Mclaren: Same property MH revenues increased by 6.8% with contributions from rate increases and occupancy gains with MH occupancy of 97.6% as of December 31st.
John Mclaren: Same Property RV continues to be supported by Transient Annual Conversions.
John Mclaren: This is the third year in a row with over 2,000 conversions for the full year.
John Mclaren: Transient RV performance in the fourth quarter is slightly ahead of our expectations with improved margins as we have enhanced our cost management strategies to better align expenses with revenues.
John Mclaren: Our colleagues delivered solid performance in the fourth quarter, demonstrating resilience even amid a challenging macroeconomic backdrop.
John Mclaren: Same property NOI increased by 12.9% in the quarter and 9% for the year.
John Mclaren: We also surpassed our total unit sales guidance reaching approximately 2,950 units sold for the year.
John Mclaren: The underlying fundamentals of the business remain stable and we remain encouraged by the continued strength of the business.
John Mclaren: The Park Holidays team has done an exceptional job executing our strategy and driving strong results. Their expertise in operations, customer engagement, and asset management has been instrumental in maintaining performance across our high-quality portfolio.
John Mclaren: Fernando will now discuss our financial results and balance sheet and more details we provide our 2025 guide. Fernando?
Fernando: Thank you, John. For the fourth quarter, Sun reported core FFO per share of $1.41, a 5.2% increase from the prior year. For the 12 months ended December 31st, 2024, core FFO per share was $6.81.
Fernando: As Gary mentioned, a key priority for Sun has been focusing on our core portfolio through the selective disposition of non-strategic assets and reduction of CapEx spend.
Fernando: For the year and through the date of this call, we completed total dispositions of approximately $570 million, including $180 million for the fourth quarter and year-to-date 2025.
Fernando: We also reduced non-recurring capital expenditures, which decreased approximately $315 million, or nearly 50%, from 2023 to 2024.
Fernando: As of December 31st, Sun's debt balance stood at $7.35 billion, with a weighted average interest rate of 4.1% and a weighted average maturity of 6.2 years. Our net debt to trailing 12-month recurring EBITDA ratio was six times.
Fernando: In 2024, total debt decreased by $424 million compared to the year-end 2023.
Fernando: We ended the year with a floating rate debt percentage of 8.6.
Turning to guidance.
Fernando: The company is establishing first quarter and full year 2025 guidance for diluted EPS and core FFO per share. As outlined in yesterday's supplemental disclosures, this guidance reflects the company's consolidated portfolio excluding the marina segment.
Fernando: Given the uncertainty surrounding the financial impact of the Marina portfolio during the pendency of the transaction
Fernando: including its operations prior to closing, the timing of the closing, and potential subsequent closings, the company is not providing guidance with respect to the marina segment at this time. The company expects to provide updated guidance following the closing of the safe harbor sale.
Fernando: For illustrative purposes, we have provided historical earnings and core FFO contributions from the Marina Portfolio for 2024.
Fernando: MHNRV same property NOI growth is expected to be 5% at the midpoint, driven by 4.2% revenue growth and 3% expense growth. The expense growth reflects budgeted reductions in supplies and repairs and other operating costs discussed earlier.
Fernando: Full-year manufactured housing, same property NOI, is expected to grow by 6.4% at the midpoint, while RV, same property NOI, is expected to increase by 1.5%.
Fernando: which assumes a 6% decline in transient RV revenue due to the conversion of transient sites to annual leases and anticipated revenue per available site growth of 4.7%.
Fernando: In our UK portfolio, same property NOI is expected to grow by 1.9% at the midpoint.
Fernando: with 4.9% revenue growth offset by 8.1% expense growth primarily due to increases in UK national minimum wage and payroll taxes effective in 2025.
Fernando: For our consolidated portfolio, excluding marinas, G&A expense net of non-recurring items is expected to remain flat at the midpoint compared to 2024, including approximately $11 million in expense savings discussed by John earlier.
Fernando: As a reminder, our guidance includes acquisitions, dispositions, and capital markets activity completed through February 26, 2025, but does not factor in prospective transactions or capital markets activities, including the safe harbor sale, that may be included in Research Channel Assessments.
Speaker Change: For additional details regarding our financial performance, please refer to our supplemental disclosures. With that, I will turn the call back to Gary for closing remarks before we take questions.
Gary Shiffman: Before opening the line for questions, I wanted to reiterate the positive inflection points for Sun.
Gary Shiffman: We announced our intention to simplify our business, reposition it to our core businesses, focus on durable income streams, and enhance our balance sheet.
Gary Shiffman: A successful sale of Safe Harbor would allow us to do that while realizing an attractive return on our investment.
Gary Shiffman: Furthermore, we remain very encouraged by the sustained strength of our core business.
which is being further bolstered by our operating initiatives.
Gary Shiffman: We look forward to working with Blackstone Infrastructure toward the successful closing of this transaction, and thank the entire team for their ongoing hard work and all of our stakeholders for their support.
Gary Shiffman: This concludes our prepared remarks. We will now open the call for questions.
Operator
Thank you.
Speaker Change: And we'll now open the call for questions. Once again, we ask that you limit yourselves to one question, so everyone who would like to participate has ample opportunity.
Speaker Change: To ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions.
Speaker Change: Our first question comes from Wes Galladay with Baird. Please state your question.
Speaker Change: Hi everyone, just a quick question on capital allocation. Will you be looking more at acquisitions? Could you tender for some debt? And I just want to have an assumption that you may keep your UK debt, leave that alone. Could you clarify?
Gary Shiffman: Hi Wes, it's Gary. I'll start out and thank you for those questions. Starting out I just want to say that we're incredibly excited about what this means for our business.
Speaker Change: particularly from a simplification perspective as well as the broader strategic benefits it brings.
Speaker Change: And I do really want to acknowledge and thank the Safe Harbor team for their four-year partnership and support and especially on a personal level want to recognize Baxter's role in accomplishing our goals.
Speaker Change: The past four and a half years of our ownership and partnership with the Safe Harbor team have been truly fantastic.
Speaker Change: We do deeply appreciate and recognize that collaboration and I, on a personal level, and many of us look forward to really following their continued success as they enter this next stage with Blackstone Infrastructure.
With regard to use of proceeds.
substantial debt reduction.
remain really excited about the transaction, but very, very focused.
Speaker Change: on the opportunity ahead of us and how we think about investing the proceeds from this transaction when it closes. Right now, we're certainly focused on the closing of the transaction.
Speaker Change: And then, Wes, just to make a comment on your last question regarding the GBP-denominated debt.
Speaker Change: while we expect to pay down the total balance of our line of credit.
of which about two-thirds of that is denominated in GBP.
Speaker Change: We are looking at optimal structures to put on a synthetic hedge with one of our remaining trenches of debt after the paydown activity in order to maintain that natural hedge that we've established through borrowing in local currency.
Speaker Change: Okay, fantastic. Then when we look at the balance sheet, I mean, are you done with dispositions at this point? You're going to have leverage quite low and have you changed your leverage goals at all?
Speaker Change: Yeah, I think that as we stated at the beginning, 24...
Speaker Change: Our focus has been to really get back to our core business of MH&RV and our disposition program within North America. It really was targeted on non-strategic assets.
Speaker Change: We were able to exit two to three states completely from operating in, and another one to two where we really reduced exposure there.
Speaker Change: So, we're very, very pleased at what we've accomplished, and we'll continue to...
Speaker Change: assess the portfolio and all its businesses and the properties. Even in the UK, we had two dispositions this last year. So, while there are no specific plans at this time to share, we'll just continue to review opportunities.
Thank you.
Speaker Change: Our next question comes from Yana Galan with Bank of America. Please state your question.
Thank you and congratulations on the Safe Harbor transaction.
Speaker Change: Gary, I was hoping, can you provide some details on the background of how the board came to this kind of strategic shift? And you know, why now given the business had such strong momentum and why not wait for the CEO search to conclude?
Speaker Change: Yeah, absolutely, and the CEO search is ongoing. But directly to your question, I would share with you that
As this process progressed...
Speaker Change: And as we continue to work with the board of directors, we've appreciated the input from both all of the directors and the capital allocation committee.
was an opportunistic deal.
Speaker Change: And the board, in thinking through that opportunity, really recognized how it positions the company incredibly well for the future.
Speaker Change: Very active engagement by the board throughout the process. So we did evaluate all various alternatives and the transaction itself.
Speaker Change: And we're really, really pleased, ultimately, on how the sale allows Sun to monetize a highly successful investment.
Speaker Change: and sharpened the company's focus on its core MH and RV segments, where we see, as I've indicated, strong, durable income streams and continued opportunities for growth. So it really was...
Speaker Change: That focus that helped the board and management arrive at a conclusion to move forward.
Thank you.
Speaker Change: Your next question comes from Brad Heffern with RBC Capital Markets. Please state your question.
Brad Heffern: Hey, how's it going everybody? Fernando, do you think it's likely that the sale will require a special dividend just to comply with the rules?
Brad Heffern: Thank you for the question. I mean, again, as we've stated in yesterday's supplemental and through the call earlier, we are we're evaluating all all alternatives as it relates to what the ultimate use of proceeds will be and we will update the market once we are much closer to the closing date.
Speaker Change: Okay, got it. And then a lot of the debt that you have outstanding is, or at least easily payable debt that's outstanding is around 4%. That's about what the yield on cash is these days. So I'm curious, does it make sense to actually take that out? Obviously, it's nice to have lower leverage, but presumably there are a lot of assets that you could buy to yield like that to over time.
Speaker Change: Brad, again, we're evaluating all opportunities in front of us as it relates to that use of proceeds that might, you know, that might include
Speaker Change: reinvesting some cash in the in the short term, evaluating all of the potential for debt pay down, as well as distributions to shareholders.
from a tax maximization strategy.
Speaker Change: Thank you. And your next question comes from Eric Wolf with Citibank. Please state your question.
Speaker Change: Thanks. It's Nick here with Eric. You know, just going back to the transaction, when did you start the discussions of Blackstone? And did they come to you or did you go to them? And curious if you reached out to other parties as well, and if they, either Blackstone or other parties, took a look at other parts of your portfolio besides the marinas?
That's a really good question.
We proactively really assess the market.
Speaker Change: as I indicated earlier, and took advantage of a strategic opportunity. We worked with an advisor. We ran a structured and competitive sales process.
Speaker Change: and ultimately received a premium valuation that the board was comfortable proceeding with.
Speaker Change: So, it really was a thorough, disciplined process that ensured we maximized value for our shareholders.
Speaker Change: Thanks. Was it just Marinazo or did other parties take a look at different parts of the business?
This was...
Speaker Change: the Safe Harbor Marinas platform that strategically was involved in this process.
Thank you.
Our next question comes from...
and Jamie Feldman with Wells Fargo. Please state your question.
Jamie Feldman: Great, thanks for taking the question. I'd like to shift the conversation more to the cost-cutting side. I know you guys are guided to between 15 and 20 million of, you know, operating expense, G&A savings.
Jamie Feldman: Your guidance is pretty much flat year over year when you back out the marinas.
Jamie Feldman: So how should we think about, you know, potential for additional DNA savings?
Speaker Change: How much of that 15 to 20 just came from Safe Harbor and moving that off the platform and then also I guess for John You know if you kind of I assume you're kind of working your way through the business
Speaker Change: Can you give us an update on kind of what you've been through and what you haven't been through yet in terms of, you know, where we may still see some meaningful cost savings and where you've had the most successes?
Sure. Appreciate the question, Jamie.
Speaker Change: You know, what I'll say in terms of, I think I said in my prepared remarks that we've already realized close to $11 million in savings primarily resulting from the staff reduction associated costs of G&A.
Speaker Change: as well as $4 million in savings in Q4 with respect to operations expenses.
Speaker Change: Expect to expand that further, I know, 3 to 5 in 2025. I think your question was...
Speaker Change: How do we look to expand that which is something that we've talked about the whole way through. You know we'll continue to seek additional savings over the course of 2025 but I think it's important to introduce that you will also be very laser focused on enhancing revenue growth opportunities, Jamie.
You know for example
Speaker Change: You know, we are realizing solid execution of our sales and leasing funnel, which measures leads to applications, to approvals, to closings.
Speaker Change: This is a great example of one of the most pleasing things I've seen materialized thus far, as we are improving performance metrics within the funnel, while at the same time spending less to bring traffic to the funnel.
Speaker Change: Okay, so it's really it's almost like it hits both sides of it Addition to that when you think in terms of expansion beyond what we originally said in the
Speaker Change: restructuring plan, we're already realizing expansion of and a higher adoption of our centralized procurement platform.
Speaker Change: which is generating additional savings through more standardization and economies of scale in areas like landscaping, utilities, and others that we're realizing.
Speaker Change: Things are moving along. Again, really pleased with the progress of what we've seen, you know, in Q4. Again, not just on the expense side, but as well as, like, great top line out.
Speaker Change: execution we've had with NOI growth, RPS growth, more conversions to from transient to annual and all those things that are contributing to growth overall.
Speaker Change: Okay, thank you for that. And just quickly, what's assumed in the guidance for a new CEO comp plan?
or any sort of, you know, management changes.
Speaker Change: Yeah, I think that as we prepare our budget, we use best efforts to think through
Speaker Change: cost changes that might reflect the new CEO compensation but like everything that will be determined when that CEO is found and we know exactly what the budget will be.
Thank you.
Speaker Change: And your next question comes from David Seagal with Green Street. Please state your question.
Speaker Change: Thank you. Can you help put an upper or lower limit on the amount of debt that could be paid off and any, you know, many limits on the potential sizing of a special dividend as well?
Speaker Change: David, as stated earlier, we will update the market as to more detailed use of proceeds once we are closer, closer to closing.
Speaker Change: Great. And do you intend to keep a significant amount of cash on the balance sheet for an extended period of time?
Speaker Change: As stated earlier, once we're closer to closing and once we're working through...
Speaker Change: Again, the use of proceeds as a team and alongside the Capital Allocation Committee, we will update the market as to the detailed plan for that use of proceeds.
Speaker Change: Thank you. Your next question comes from Anthony Howe with Truist Securities. Please state your question.
Anthony Howe: Hey guys, thanks for taking my question. Fernando, there's like 484 million of those.
Anthony Howe: Can you provide a breakdown of these notes and when did they mature and what are they for? Given that there was a fair value adjustment loss in this quarter, is there additional risk that these notes will be written down in the future?
Speaker Change: Anthony, I'm sorry the call, the question cut out there for a little bit. Can you repeat the question? I apologize.
Oh no, it's my phone, probably. So there's like...
Speaker Change: 484 million note receivable on the balance sheet today. Can you just provide a breakdown on what these notes are for and when do they mature? And given that there was a fair value adjustment lost this quarter, do you think there are additional risks that these notes will be written down in the future?
Speaker Change: Understood. Thank you, Anthony, for the question. And as it relates to notes receivables,
Speaker Change: for real estate. This transaction that closed in early 2025, we will only have about $42 million of developer notes with one longstanding partner that's developing a manufactured housing asset in Florida.
Speaker Change: We provided seller financing of about $42 million as well, with the Canadian Canadian disposition, Canadian RV portfolio disposition that closed in December, that has a two-year term with some extension options.
Speaker Change: attached to it, so as it relates to developer notes, that is the remaining balance.
Speaker Change: We do have just short of about $100 million of notes that are collateralized by homes sold in our communities, where we realize interest income from those. Those are evaluated for fair value on a continuous basis.
Speaker Change: But this again, depending on transaction, we evaluate, we ultimately get to
Speaker Change: the evaluation of fair value over on an ongoing basis, but no right
Speaker Change: Nothing to do at this time as it relates to the balance of those developer notes and those notes related to the financing of manufactured homes.
Speaker Change: Gotcha. And just one last question for me. Can you guys talk about why expenses is growing at 8% in the UK business? Is it due to the energy hedges that hold off?
Sure, Anthony. The primary driver...
of the increased expenses in UK same property are payroll-related.
Speaker Change: with the increases to minimum wage as well as increased payroll taxes that the the employer pays in the in the country. So that is the largest driver as it relates to to that increase of overall property and operating expenses.
Thank you.
And your next question comes from
Speaker Change: and John Kim with BMO Capital Markets. Please state your question.
Speaker Change: Thank you. Congrats on the sale. Can you provide an estimate on the tax bill gain that you expect? I know the book gain you mentioned was $1.3 billion. And how much of that gain do you think you'll be able to defer or offset via 1031 or NLLs?
or other measures.
Speaker Change: Hi John, as stated previously, we will update the market with a detailed use of proceeds as we get closer to the closing of the transaction.
Speaker Change: as we're evaluating all strategies to maximize our position in that regard.
Speaker Change: But besides volume of acquisitions, is there anything that would restrict you from using 1031?
No, the language is available in our agreement.
Thank you.
Speaker Change: And your next question comes from Michael Goldsmith with UBS. Please state your question.
Michael Goldsmith: Good afternoon, thanks a lot for taking my question. I wanted to talk a little bit about the UK home sales environment. It looks like your guidance for FFO contributions kind of...
Michael Goldsmith: straddles what you did last year, so just trying to get a sense of what the outlook is there, you know, any signs of improvement and what went through the thought process between the guidance range. Thanks.
John: Yeah, Michael, this is John. Thanks for the question. Appreciate it.
John: You know, the first thing I want to start with is, you know, let me start by saying that, you know, we have the highest quality, well-located assets in the country, coupled with the very best operators in the country.
John: And I think we know that despite the challenging macro we face, we're doing exactly what we said we'd do, reshaping the revenue pie chart.
John: with more income moving from home sale margin to real property income. So, you know, what you're seeing is the direct effect of that and trying to have more movement in terms of the number of home sales that we do to derive more rental income is really the biggest part of that.
Thank you.
John: We have reached the end of the question and answer session, and I will now turn the call over to Gary Shiffman for closing remarks.
You operator
Gary Shiffman: I think, again, I would just conclude with what I opened with. Just a big congratulations and thank you to the Safe Harbor Management team and to Baxter over there. Couldn't be more excited about the opportunity that they have in front of us.
Gary Shiffman: I know everyone will be looking forward to it. We will continue to communicate throughout the quarter.
and really
Gary Shiffman: focus on many of the agenda items that we've discussed so we can be most thoughtful in how we move forward. Thanks everybody.
Gary Shiffman: Thank you for participation in today's conference. This does conclude the company's remarks. You may now disconnect your line.