Q1 2025 Sun Communities Inc Earnings Call
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Good morning, ladies and gentlemen.
Thank you for standing by.
Welcome to the Sun communities first quarter 2025 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 meaning of the private Securities Litigation Reform Act of 90 95.
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 today's press release and from time to time in the company's periodic filings, but the S E C.
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 the management with US today, Gary Shiffman, Chairman and Chief Executive Officer, though.
John Mclaren: John Mclaren President for.
Speaker Change: Fernando Castro got a teeny, Chief financial Officer, and Alan Weiss Executive Vice President of corporate strategy and business development.
John Mclaren: After their remarks, there will be an opportunity to ask questions.
Speaker Change: For those who would like to participate in the question and answer session management asks that you limit yourself to one question so everyone would like to participate.
John Mclaren: Ample opportunity.
John Mclaren: As a reminder, this call is being recorded.
John Mclaren: I will now turn the call over to Gary Shiffman.
Gary Shiffman: Chairman and Chief Executive Officer.
John Mclaren: Mr. Shiffman, you may begin.
Good morning, and thank you for joining us as we discuss first quarter 2025 result.
John Mclaren: Closing of the Safe Harbor Marina transaction, and our updated guidance for the year.
John Mclaren: We are very pleased with our first quarter performance and to have announced the successful closing of the Safe Harbor Marina transaction last week.
John Mclaren: The sale of Safe Harbor marks a major milestone in the ongoing strategic repositioning toward a pure play owner and operator of manufactured housing and recreational vehicle communities.
John Mclaren: We're equally encouraged by the continued execution of our broader simplification strategy as we streamline our operations and drive cost savings and revenue growth.
John Mclaren: These efforts are materializing and position us to deliver strong resilient and consistent growth going forward.
John Mclaren: Cash generated from the closing of the Safe Harbor transaction enhances our financial flexibility and positions us for long term growth.
John Mclaren: As part of our capital allocation plan, we executed on our debt reduction efforts and established a new long term net debt to EBITDA target of three five to four five times.
John Mclaren: In addition to the Safe Harbor transaction year to date, we have.
John Mclaren: Sold six non strategic MH and RV communities generating total gross proceeds of approximately $124 million.
Speaker Change: Well, Jon Fernando will go into more detail.
Speaker Change: Wanted to reiterate our confidence in the strength of songs platform in the long term opportunities, we see across our MH and RV segments.
Speaker Change: Our fundamentals driving demand remain intact.
Speaker Change: Particularly around affordable housing with no changes to long term supply constraints, which support our positive outlook.
Speaker Change: In conjunction with the sale of Safe Harbor, you repositioned the balance sheet and have allocated approximately $1 billion and the 10 31 exchange accounts or potential tax efficient acquisitions.
Speaker Change: We are underwriting a number of high quality single assets and small portfolio of manufactured housing opportunities that have been identified through a combination of a long term industry relationships and inbound activity.
Speaker Change: In March.
Speaker Change: Now that our board nominated Mark Dinning, as an independent director candidates for election to our board of directors.
Speaker Change: America has over three decades of real estate experience and served in multiple executive roles at Duke reality.
Speaker Change: We expect his experience and perspective to be a strong addition, as we continue to execute on our strategy.
Speaker Change: The CEO search committee continues to be engaged and is advancing its work to secure the top candidate as my successor by year end.
Speaker Change: And on behalf of the Sun team I want to thank the entire safe Harbor and Blackstone teams for a smooth transaction process, we wish them continued success.
Speaker Change: As always I also want to thank the Sun team for their continued focus on delivering strong results.
Speaker Change: I will now turn the call over to John I'm Fernando to discuss our results and financial performance in more detail John.
Speaker Change: Thank you Gary.
Speaker Change: I am very pleased to discuss the results of our first quarter as we focus on delivering strong operational performance from our core MH and RV communities.
Speaker Change: We've streamlined our portfolio and have significantly enhanced our balance sheet flexibility.
Speaker Change: Front of us as an exciting chapter for Sun, one ground in operational excellence and the realization of disciplined execution through consistent organic growth and selective expansions.
Speaker Change: Our North American same property portfolio delivered four 6% NOI growth driven by solid performance of manufactured housing and ongoing progress in expense management.
Speaker Change: Manufactured housing continues to show resilience with same property NOI up eight 9% in the first quarter.
Speaker Change: Revenue grew seven 3% supported by strong rental rate increases and a 150 basis points of occupancy gain.
Speaker Change: Expenses were well managed growing two 8% with notable savings in payroll insurance and legal.
Speaker Change: Occupancy remains strong at 97, 5% with average resident tenure of approximately 21 years, demonstrating the value of our residents enjoy living in a sun community.
Speaker Change: Within the RV segment, the annual side of the RV business continues to perform well with revenue increasing seven 8% year over year, reflecting the benefits of our strategy to drive more stable recurring income.
Speaker Change: The decline in RV same property NOI of nine 1% is attributable to softness in the transient RV business, which remains under pressure from general macroeconomic uncertainty and reduced Canadian guests.
Speaker Change: Canadians account for roughly 4% of our annual base and 5% of our transient RV revenue.
Speaker Change: While transient revenue decline transient guests play an important role in supporting our annual revenue growth across the broader portfolio.
Speaker Change: The first quarter represents approximately 16% of total annual RV NOI.
Speaker Change: In the U K total same property NOI saw a modest decrease of $600000 compared to the prior year, primarily due to higher payroll as a result of increases in national minimum wage and higher real estate taxes.
Speaker Change: Revenue grew 2% supported by higher MH income and home sales volumes largely consistent with prior year with average sales prices of approximately 8% higher year over year.
Speaker Change: We are pleased with our first quarter results and the notable progress. We've made in particular, we are encouraged by our performance and enhance revenue driving strategies, we implemented and ongoing activities, we will rollout to deliver resilient earnings growth over time.
Speaker Change: We are focused on operational excellence and I'm extremely excited about the opportunities ahead as we build on this momentum and further unlock the potential within our portfolio.
Speaker Change: I will now turn the call over to Fernando to discuss our financial results in more detail as well as our updated 2025 guidance Fernando.
Fernando: Thank you John as John and Gary noted, we believe we are at an important inflection point for some not.
Speaker Change: Not just operationally and financially.
Speaker Change: We closed on substantially all of the $5 $65 billion sale of Safe Harbor Marinas on April 30, and have begun executing on our capital allocation plan that is meaningfully reshaped our balance sheet and financial profile let.
Speaker Change: Let me start with our first quarter results, we delivered core <unk> per share of $1 26, representing a five 8% increase year over year.
Speaker Change: This performance was driven by a combination of solid operational execution and early benefits from our ongoing cost optimization efforts.
Speaker Change: Turning to our balance sheet as of March 31.
Speaker Change: <unk> debt balance stood at $7 4 billion.
Speaker Change: With a weighted average interest rate of four 1% and a weighted average maturity of five nine years.
Speaker Change: Net debt to trailing 12 month recurring EBITDA ratio was five nine times.
Speaker Change: Turning to capital allocation.
Speaker Change: As outlined in our press release last week the capital allocation plan. Following the safe Harbor transaction reflects a balanced tax efficient approach to optimize shareholder value through lower leverage greater financial flexibility to drive sustainable cash flow growth.
Speaker Change: Full capital return strategy.
Speaker Change: From the net proceeds of the initial closing Sun has paid down or intends to repay approximately $3 3 billion of debt inclusive of estimated prepayment costs.
Speaker Change: Includes.
Speaker Change: The full repayment of approximately $1 6 billion under our senior credit facility, leaving us with a zero balance as of May one and no floating rate debt outstanding.
Speaker Change: The payoff of approximately $740 million of secured mortgage debt with a weighted average interest rate of five 3%.
Speaker Change: And the redemption of approximately $950 million of unsecured bonds inclusive of estimated prepayment costs scheduled to close on May 10.
Speaker Change: The weighted average coupon of five 6%.
Speaker Change: The company intends to manage its balance sheet and our leverage range of approximately three five to four five times on a long term basis.
Speaker Change: Based on the initial debt pay downs, we expect to generate annualized interest expense savings of approximately $160 million and reduced the weighted average interest rate on some outstanding indebtedness to approximately three 5%.
Speaker Change: Our weighted average debt maturities have increased to nearly eight years.
Speaker Change: Post transaction the remaining cash on hand inclusive of amounts held in 10 31 accounts is expected to initially earn an annualized interest rate of approximately $3 five 4%.
Speaker Change: Additional elements of our capital allocation plan include.
Speaker Change: A one time cash distribution of $4 per share to holders of record as of May 14th 2025 payable on May 20.
Speaker Change: Our plans to increase to our quarterly distribution by approximately 10, 6% to $1 <unk> per common share and unit.
Speaker Change: This increase is expected to begin with the second quarter distribution that is anticipated to be paid during July 2025.
Speaker Change: And the adoption of a $1 billion stock repurchase program permitting future repurchases of our common shares.
Speaker Change: We continue to evaluate additional proceeds maximization strategies, which may evolve as we finalized tax and strategic implications over the remainder of the year.
Speaker Change: Pro forma for these actions our leverage has declined meaningfully.
Speaker Change: For full year 2025, we are establishing core <unk> per share guidance in the range of $6 43.
Speaker Change: $6 63.
Speaker Change: This reflects the execution and timing of the safe Harbor Marina transaction, including the disposition of the delayed concert properties.
Speaker Change: Note that our original guidance issued in February was adjusted for full year contribution assumptions relating to safe Harbor.
Speaker Change: This updated outlook assumes the full sale of all marine assets and does not include any potential future acquisitions.
Speaker Change: OCD deployed for share repurchases and any other non ordinary course strategic actions or financial transaction.
Speaker Change: In terms of operational assumptions embedded in our updated guidance.
Speaker Change: We raised our manufactured housing same property NOI guidance by 60 basis points at the midpoint, reflecting strong first quarter results and continued top line strength expectations.
Speaker Change: RV same property NOI expectations have been reduced to a range of down three 5%.
Speaker Change: Half a percent driven by observed slower transient reservation pace, reflecting a shift towards shorter booking windows.
Speaker Change: Overall total North America same property NOI is expected to grow three 5% to five 2% with a midpoint of four 4%.
Speaker Change: Our UK same property NOI guidance remains unchanged with a projected growth range of 90 basis points to two 9% and a midpoint of one 9% growth.
Speaker Change: Ancillary NOI has been reduced by approximately $4 million at the midpoint, primarily due to lower than expected transient RV activity.
Speaker Change: For additional details regarding our full year guidance. Please see our supplemental disclosures as a reminder, our guidance includes acquisitions and dispositions and capital markets activity through may 5th.
Speaker Change: Does not include the impact of prospective acquisitions dispositions or capital markets activities, which may be included in research analyst estimates I will now turn the call back to Gary for his closing remarks Gary.
Gary Shiffman: Thank you Jonathan Fernando <unk>.
Gary Shiffman: We're extremely pleased with our four plus your investment in Safe Harbor that concluded with a successful sale, we consummated last week.
Gary Shiffman: I want to thank the entire safe Harbor team once again for their partnership with Blackstone in Safe Harbor continued success in the future.
Gary Shiffman: As it relates to Sun.
Gary Shiffman: Transformative sale aligns with our long term strategy by substantially reducing our leverage and increasing our strategic and financial flexibility.
Gary Shiffman: I would like to extend my gratitude to the entire Sun team for their efforts in delivering on this important quarter and to our shareholders for their continued support.
Gary Shiffman: This concludes our prepared remarks, operator, we're now ready to take questions.
Gary Shiffman: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question. Please press star and one on your telephone keypad.
Gary Shiffman: One formation Dawn will indicate your line is in the question queue.
Gary Shiffman: You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the stocky.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker Change: The first question comes from the line of Michael Goldsmith from UBS. Please go ahead.
Michael Goldsmith: Good morning, Thanks, a lot for taking my question maybe.
Michael Goldsmith: Maybe starting with the manufactured housing NOI guidance.
Michael Goldsmith: Went up 50 basis points.
Speaker Change: From your initial guidance. So can you walk us through what your what are you seeing on the MH side.
Michael Goldsmith: How did you revising guidance up.
Michael Goldsmith: In the year and is that on the revenue side or is that on the expense side. Thanks.
Jon Fernando: And mindful Jon good morning, Thanks for the question.
Michael Goldsmith: It's a little bit of everything to be quite honest with you.
Michael Goldsmith: Seeing good occupancy gains over the course of the first quarter that we expect to continue.
Within the rental home program, we've had really good renewal performance as well as renewal rate performance and the <unk>.
Michael Goldsmith: First quarter that.
Michael Goldsmith: To continue on.
Michael Goldsmith: The team has done a really nice job.
Michael Goldsmith: In terms of rent collections, which is.
Michael Goldsmith: Asleep moves its way towards reduced impact from a bad debt perspective.
Michael Goldsmith: <unk> had really good discipline with the expense.
Michael Goldsmith: Savings program that we launched towards the end of last year. So it's really.
Michael Goldsmith: It's hitting on all cylinders on the MH side, which is why we are.
Michael Goldsmith: Cited to improve our guidance.
Michael Goldsmith: 25.
Michael Goldsmith: Gary I would just add.
Michael Goldsmith: The fact that we have the long tenure.
Michael Goldsmith: 20, plus years in the manufactured housing side, we always point to the expenses related to turnover and things like that and so I think that.
Michael Goldsmith: As we continue to see the strong strong demand.
Michael Goldsmith: To be in the communities.
Michael Goldsmith: Also as a benefit with regard to <unk>.
Michael Goldsmith: Much extended 10 years that we're seeing.
Michael Goldsmith: Got it thanks for that and as a follow up.
Michael Goldsmith: As you think about the repurchase authorization or are you thinking of that as you know.
Michael Goldsmith: Opportunity to Opportunistically.
Michael Goldsmith: Purchase shares at Us and.
Speaker Change: And what you see is discounted valuation or is this kind of indication that sun is out we will be out in the market and kind of consistently be acquiring I'm just trying to understand.
Michael Goldsmith: Is this a.
Michael Goldsmith: Is this an opportunistic vehicle or is this something that you plan on using to its fullest.
Michael Goldsmith: Yeah. Good question I think the.
Michael Goldsmith: The way I would respond to it I think that is just part of the much larger to thoughtful program related to the.
Michael Goldsmith: The positioning of the company today it gives us continued flexibility.
Michael Goldsmith: And we're just very very pleased with the fact that we were able to close the safe Harbor Marina transaction and what.
Michael Goldsmith: It was a very volatile marketplace out there right now.
Michael Goldsmith: We closed it actually more rapidly than even we anticipated so with the ability to strengthen the balance sheet.
Michael Goldsmith: Have the capital on the 10 31 exchange.
Michael Goldsmith: Continue to.
Michael Goldsmith: <unk> focus on our overall strategy is in the MH RV or portfolio.
Michael Goldsmith: To be able to put out the special one time distribution.
Michael Goldsmith: And.
Michael Goldsmith:
Michael Goldsmith: Really look out and look forward to being able to share with them.
Michael Goldsmith: The market as things progress in the future during the year. So it's one piece of the overall.
Michael Goldsmith: Dan.
Speaker Change: Thank you very much good luck in the second quarter.
Michael Goldsmith: Sure. Thank you.
Michael Goldsmith: Thank you.
Speaker Change: The next question comes from the line of John Golan from Bank of America. Please go ahead.
Speaker Change: Thank you good morning.
Speaker Change: Wanted to follow up on the mutation in the RV guidance and what are your kind of <unk>.
Speaker Change: Being that to potentially just the continued return to office or the or Canadian travel and if you have any visibility into memorial day weekend that you can comment Don Thank you.
Speaker Change: Alright.
Speaker Change: Hey, John It's John Good morning, Thanks for the question.
Speaker Change: Thanks.
Speaker Change: So here's the broader color I want to give transient RV, which a large component of our transient revenue headwinds actually has created by our success in converting transient sites to annual sites, which I think everybody knows it's been a big success over a number of years.
Speaker Change: I think despite the near term volatility our transient RV business generated solid revenue and margins and continues to play an important role in creating the pipeline for annual conversions.
Speaker Change: Regarding recent trends.
Speaker Change: We'll share that at the end of March we were actually outpacing 2020 for bookings.
Speaker Change: Then beginning in early April began to see a shift towards much smaller much shorter booking windows and trends related to our Canadian guests came a bit more challenging.
Speaker Change: Bottom line is people are booking closer to their stays okay.
Speaker Change: Were last year.
Speaker Change: Yes.
Speaker Change: As we've shared frequently RV represents affordable vacationing.
Speaker Change: Especially in tougher economic times, the funnel towards annual RV revenue growth.
Speaker Change: While we may in fact see improvement in guidance, we've shared today related to transient as people potentially ship vacation plans is something closer to home are more affordable because their plans closer into when they want to stay.
Speaker Change: Right now we're following the data and the pacing that we havent felt it was appropriate to make an adjustment to our transient revenue forecast for 2025.
Speaker Change: That said our RV strategy remains focused on as you know continues into flex operating expenses within RV.
Speaker Change: Building upon the demonstrate annual conversion success with particular emphasis on retention of existing annual guess I think many on the call probably heard me say before that the best revenue producing site. We can gain is the one we never lose.
Speaker Change: That's where our focus is place. So it's really it's a combination of what we're seeing in terms of our Canadian gas.
Speaker Change: Things I talked about a second ago.
Speaker Change: So we're we're after online.
John: Thank you John.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Eric Wolfe from Citigroup. Please go ahead.
Speaker Change: Hey, Thanks, I think you said that you're assuming three 5% to 4% rate on the cash that you're holding on your balance sheet could you just talked about what the average cash balances you're assuming for the rest of the year I would assume it's like $1 7 billion, but just wanted to confirm.
Speaker Change: So Eric.
Speaker Change: As stated in the prepared remarks, we are not assuming any.
Speaker Change: Any prospective acquisitions or capital markets activity. So we are carrying a higher cash balance than what we expected.
Speaker Change: By year end as it relates to that interest income.
Speaker Change: Carrying.
Speaker Change: Yes.
Speaker Change: And interest rate between that three and a half.
Speaker Change: 4%, but on a net basis.
Speaker Change: It will be around $1 7 billion that's embedded in guidance.
Speaker Change: Alright, It makes sense and then in terms of potential acquisitions can you just discuss how much.
Speaker Change: It's under contract right now.
Speaker Change: Just given the size I assume that you have some visibility towards.
Speaker Change: Closing something in the near term and maybe I'm wrong on that.
Speaker Change: Talk about that and then just the types of opportunities that you are targeting in the general valuations level.
Speaker Change: Sure.
Speaker Change: So.
Speaker Change: Good question and something we're obviously very focused on what the opportunity that we have.
Speaker Change: Sure basically we built a strong long term relationship with owners over the last 30 plus years. So we have been actively engaged on a number of acquisition opportunities as I said in my earlier.
Speaker Change: Our remarks.
Speaker Change: And we will be looking forward to sharing more when we're able to do so but what I can share is they are high quality single manufactured housing assets and small portfolio.
Speaker Change: Manufactured housing opportunities that.
Speaker Change: We've reached out on from those relationships and Additionally, we've had some inbound interest come into us but.
Speaker Change: But I wouldn't really want to underscore is that this is a great opportunity for sun to deploy capital.
Speaker Change: And then the 10 31 exchanges.
Speaker Change: And reaccelerate growth in our core business, but we will do it in a very disciplined way. So we won't be looking to just put capital out for the sake of putting capital out.
Speaker Change: We will be underwriting and doing our diligence.
Speaker Change: Two.
Speaker Change: Greg the best circumstances for growth going forward.
Speaker Change: So very anxious to be able to share specifics, but.
Speaker Change: We're very excited about the opportunity that we have.
Speaker Change: In front of US and then I would just share that as most of you may be aware the identification window under a 10 31 exchange is.
Speaker Change: 45 days or so so we're working diligently with that timeframe.
Speaker Change: As I said, we won't comment prematurely.
Speaker Change: Given our active engagement, that's taking place right now.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Brad Heffern from RBC capital markets. Please go ahead.
Brad Heffern: Yes, hi, everybody good morning.
Brad Heffern: Gary you gave a very brief update on the search for a successor can you give any additional details there on what the process has been so far and what remains and then I think you also said by year end. So should we not expect an announcement until late in the year or is there a possibility that it comes before then.
Brad Heffern: Yeah.
Brad Heffern: Answering it backwards the possibility between now and year end certainly it's more representative of the process.
Brad Heffern: As I indicated.
Brad Heffern: We have a search committee in place at the board of directors, they've hired an outside third party firm, that's been helping them through the process and they've been moving.
Brad Heffern: Very thoughtfully through that process I would suggest that.
Brad Heffern: We've been very very focused on that.
Brad Heffern: Safe Harbor Marina is closing and the transaction is a top priority.
Brad Heffern: But equally.
Brad Heffern: The decision about long term leadership planning and the search Committee has worked for a new CEO has also been a top priority. So it is moving along and.
Brad Heffern: I'm glad to be able to advise you as decisions are made.
Brad Heffern: I look forward to doing so as time progresses here.
Speaker Change: Okay got it.
Brad Heffern: And then Fernando on the tax leakage from the sale is there any update you can give there I know it obviously depends on how much you are able to reinvest through the 1030 ones, but can you give a range like if you didn't reinvest anything to if you've reinvested a $1 billion or anything like that.
Brad Heffern: At this time im not able to provide a range that we are employing tax minimization strategies and we will continue to update the market.
Brad Heffern: Overtime.
Brad Heffern: As those are finalized over the course of the year.
Speaker Change: Okay. Thanks.
Brad Heffern: Okay.
Brad Heffern: Thank you.
Speaker Change: The next question comes from the line of West Golladay from Bad. Please go ahead.
Speaker Change: Hi, everyone. A question for you on the annual RV typically you have a big source of gains revenue producing site gains. This year. It was down year over year can you remind us what's in guidance and what is going on there.
Speaker Change: What's in guidance for the year as John Thanks for the question.
Speaker Change: This is approximately <unk> hundred conversions to take place over the course of the year, what I would tell you is that.
Speaker Change: We are in fact on track with our annual RV conversion contracts 2025, with the exception of some of the impact that we experienced in Q1, specifically related to renewals.
Speaker Change: New conversions of Canadian yes.
Speaker Change: I think it's important to point out with me, saying that though that cannot only represents about 4% of our RV annual business. We will continue to focus on our premium performance and RV annual conversion and retention across the board and filling more sites domestically over the course of the year.
Speaker Change: Okay and then the rental program is showing really strong gains almost it's up double digits year over year is this from lease up of your developments.
Speaker Change: Some of it is that yes some of it.
Speaker Change: Interspersed with throughout the portfolio as well.
Speaker Change: Okay, and then can I get a quick update on your hedging policy for the U K.
Speaker Change: So as as a strategy we have paid down all of our GBP debt we are looking at.
Speaker Change: Putting on synthetic hedges with some of our existing debt.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Steve <unk> from Evercore ISI. Please go ahead.
Speaker Change: Yeah. Thanks. Good morning, just wanted to touch on G&A I know when you guys announced safe Harbor that was a large.
Speaker Change: And in G&A, given that business and then you know when John came back you guys talked about.
Speaker Change: At least $15 million to $20 million in cost savings. So I'm, just curious where that cost savings plan stands and I guess, how much further how much more benefit do you think you can kind of rung out of the system here.
John: Yes, Thanks, Steve It's John I'll start.
John: Overall really pleased with the progress we've made with the 15% to $20 million expense savings plan I think we shared before that within G&A close to $11 million savings over 2024.
John: Primarily resulting from staff reductions associated costs, which is already embedded in our guidance for 2025.
We picked up additional savings related to things like advertising technology licensing costs as well as part of that plan, though within property operating expenses initiatives are taken.
John: All of our MH and RV assets to manage expenses in the controllable areas.
John: Realized as you know approximately 4 million savings in Q4, which is embedded in our 2025 expectations along with the expectation to expand that another $3 million to $5 million of additional savings in things like payroll and as I've shared earlier on the call like bad debt.
John: <unk> and other items.
John: We will continue to seek additional expense savings over the course of this year.
John: We're obviously equally focused on additional revenue growth opportunities.
John: I think the result of which is reflected in the solid Q1 image performance through both occupancy gains the rate gains.
John: Last thing I'll say is the fundamentals are a focus for example performance within our sales and leasing funnel, which measures leads to applications to approvals to closings continues to set new milestones, so thats, helping to grow on the top line as well.
John: Finally, we have expanded our centralized procurement platform, which is generating savings through more standardization discipline and economies of scale in all the areas served by this important platform. So we're pretty happy with where things are going and then look to further expansion as the year goes on.
John: Thanks, John I would just one quick one for Fernando I don't think in the guidance you provided a real property NOI.
Speaker Change: At this time versus last quarter do you have that number handy.
Speaker Change: Steve the same property portfolio between North America, and UK is 99.1st.
Speaker Change: A percent of total real property for us for the year.
Speaker Change: That's why the total REO property guidance as it was.
Speaker Change: Not provided.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of John Kim from BMO Capital markets. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Gary.
Speaker Change: On past calls and meetings when you talked about.
Speaker Change: Manufactured housing cap rates there.
Speaker Change: Oftentimes surprisingly low.
Speaker Change: Sometimes as low as sub 3%.
Speaker Change: And you're largely attributed that to 10 31 buyers in the market.
Speaker Change: How much lower the hurdle rate is for you.
Speaker Change: Our niche acquisitions, just given your circumstance today.
Speaker Change: Certainly a great question, John as I indicated before.
Speaker Change: We have a great opportunity in front of us to Oh look at MH acquisitions, but we.
Speaker Change: We will be very very disciplined in how we think about it so that we can generate.
Speaker Change: The type of salad.
Speaker Change: Growth.
Speaker Change: Yes, we are thinking.
Speaker Change: Think about the long term underwriting of these assets.
Speaker Change: Suggest.
Speaker Change: The cap rates for high quality manufacturing assets are generally consistent with historical levels I'm going to suggest in that.
Speaker Change: Four to five range.
Speaker Change: But we're going to be very cautious.
Speaker Change: And cap rates at a time when we're in the market so to speak and having those discussions, but we will certainly share those cap rates with you at a future date as we begin to.
Speaker Change: Close on potential transactions.
Speaker Change: Okay, and then on Rvs I, just wanted to make sure that youre not planning to use.
Speaker Change: The $1 billion of proceeds for.
Speaker Change: <unk> thousand one on any RV acquisitions, and then as far as the discussion on transient RV, it's still a little bit surprising was down so much given transient sites were down about 7% year over year. So I'm wondering what else do you think was causing a demand to come down so much.
Speaker Change: Got it.
Speaker Change: I'll take the first part of the question is that.
Speaker Change: Well, we'd like the RV business, we are primarily focused.
Acquisitions of manufactured housing communities. So.
Speaker Change: That's the.
Speaker Change: Expectation that that will be our primary focus.
Speaker Change: Then John as it relates to transient RV revenue and the performance in the first quarter.
Speaker Change: The decline of 20% in revenue is due primarily to seasonality.
Speaker Change: The portfolio and the high number of conversions over the last 12 months, especially in Florida impacting available transient sites during this period.
Speaker Change: First quarter represents about 16% of NOI for our R&D portfolio.
Speaker Change: And revenue per available site did decline.
Speaker Change: But again, primarily because of that availability of sites in the portfolio for the first quarter.
Speaker Change: So do you expect the first quarter was the trough as far as the year over year decline.
Speaker Change: It improves the abstract.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of Anthony Hau from <unk> Securities. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my question, Gary and John in terms of MH acquisition is there a preference between all age and age restricted communities and what's the cap rate spread in rent growth difference between the two.
Speaker Change: Oh great.
Speaker Change: Question, Anthony sort of our age old discussion that we share with American place, we believe in a very balanced portfolio.
Speaker Change: Uh huh.
Speaker Change: Importance.
Speaker Change: We've always kind of shared with the market is at.
Speaker Change: And the.
Speaker Change: Uh huh.
Speaker Change: All age communities, we generally have more strength and ability to raise rental income.
Less restricted by covenants.
Speaker Change: Covenants that my control, how you increase rents.
Speaker Change: And we experience.
Speaker Change: Higher rental increases.
Speaker Change: More challenging inflationary periods.
The same time.
Speaker Change: We experienced a 21 plus year tenure and our balanced portfolio and it is way too weighted towards longer stays in the all age versus.
Speaker Change: Age restricted.
Speaker Change: Same time high high demand.
Speaker Change: In our age restricted.
Speaker Change: Balances out.
Speaker Change: Do we think about that balance portfolio. So.
Speaker Change: Generally I would expect to continue to look for that balanced portfolio and our acquisitions.
Speaker Change: We are looking at both age restricted and all age.
Speaker Change: At this current time.
Hey, Anthony it's Josh add to that I mean, one of the things that we've shared before is that.
Speaker Change: 25% to 30% of the residents that live in our all age communities are in fact with qualified for age restricted communities as well. So it's a nice balance and from from the operating perspective, we like the fact that.
Speaker Change: We can cast a wider net of prospects that can move into our communities.
Speaker Change: The all age as well so like Gary said, it's a it's a nice balance that we seek to maintain.
Speaker Change: Gotcha.
Speaker Change: And then like the resident move out rate was four 6% year to date four three in 'twenty 'twenty four but I think it was roughly 3% in 2022 and 223, what's driving the higher churn and what's embedded in the guidance.
Speaker Change: We referenced.
Speaker Change: In HIV.
Speaker Change: Overall for the total portfolio.
Speaker Change: Yes.
Speaker Change: Pete.
Speaker Change: I think youre referencing actual resident turnover, but homes remain in the communities and so this is part of the product and why we've seen.
Speaker Change: Increase on our brokered home sales that have taken place over the over the first quarter. So we actually benefit from some of that term.
Speaker Change: But the fact is the homes like like Gary mentioned earlier, I think I said in my remarks.
Speaker Change: Average resident stays in our community for 21 years homes themselves I think it's what about a half percent.
Speaker Change: Yes.
Speaker Change: <unk> R R.
Speaker Change: Our turnover on the home specifically are under 50 basis points per year. So this just creates more opportunities for us to transact Anthony.
Speaker Change: Gotcha and just one last question for me, thus far Fernando was 2025 core <unk> run rate should we use excluding the <unk> contribution.
Speaker Change: I think Anthony the best.
Speaker Change: The best way would be to go from a same property NOI build up.
Speaker Change: For our MH RV and U K portfolio. We've also provided.
Speaker Change: Guidance for all other line items ex.
Speaker Change: <unk> Marina B that ancillary G&A et cetera et cetera.
Speaker Change: That will be your that will be your builds.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Thank you.
Speaker Change: The next question comes from the line of Peter Abraham of it from Jefferies. Please go ahead.
Peter Abraham: Yes. Thanks for the time I think most of my questions been answered, but just wanted to ask one could you just talk about what youre seeing in the financing market for.
Peter Abraham: MH and RV assets, I guess, particularly.
Peter Abraham: Kind of post proliferation that announcement.
Peter Abraham: Can you just comment on spreads in that market.
Peter Abraham: Saying that.
Peter Abraham: Okay, very strong market, the Fannie and Freddie continue to finance residential b that manufactured housing annual RV.
Peter Abraham: In multifamily, we haven't gotten any color from our partners as far as any slowdown any slowdown there.
Peter Abraham: Yes.
Peter Abraham: The life companies as well.
Peter Abraham: So the typical sources.
Peter Abraham: Recognize the fundamentals.
Peter Abraham: The business facility cash flow.
Peter Abraham: And.
Peter Abraham: Brazilians to tough economic times demand for affordable housing, so I haven't experienced or heard anything different as well.
Peter Abraham: Alright Thats helpful. Thank you.
Peter Abraham: Thank you.
Speaker Change: The next question comes from the line of David <unk> from Green Street. Please go ahead.
Speaker Change: Hey, Thank you is it possible to quantify the RV booking pace for our Canadian customers specifically.
Speaker Change: I mean.
Speaker Change: Thanks, David This is John I mean, generally speaking like I said it.
Speaker Change: Booking pace.
Speaker Change: Down okay, but.
Speaker Change: The bigger impacts the Canadian dollars have been distributed.
Speaker Change: Attributed to the first quarter as I shared in my remarks, as well as some of the earlier questions.
Speaker Change: But as you know.
Speaker Change: It's a little bit of uncertainty okay. That's out there right now that we're dealing with as we've talked about the near term challenges, but and so again I will say that.
Speaker Change: It is limited in terms of the fact that cannot only represents 4% of our annual business as well as 5% of our transient business. So even a reduction.
Speaker Change: Bookings or canceling or an increase in cancellations.
Speaker Change: More of a marginal impact on us overall, so we are focused on like I said before.
Speaker Change: Recouping that through domestic travel.
Speaker Change: And as we've seen in other times of.
Speaker Change: Tougher economic conditions, we see more people flow through to us but.
Speaker Change: I think with the pacing that we're seeing now with the booking window that we're seeing now is the reason why we made the adjustments to guidance too.
Speaker Change: Because it made sense okay.
Speaker Change: Of course, this will continue to improve over the course of 2025.
Speaker Change: Great. Thank you.
Speaker Change: Maybe just shifting to additional asset sales.
Speaker Change: Streamlining streamlining the portfolio and I was just curious what.
Speaker Change: How much additional portfolio of prudent portfolio pruning your <unk>.
Speaker Change: Looking at for the rest of the year.
David: Good question, David Thank you.
David: We are very very pleased at what we've been able to accomplish.
David: 24, a program of.
David: Dispositions along with.
David: While we've accomplished that.
David: We announced in the six communities to date I think these are non core strategic assets.
David: And they are just improving the outlook on the.
David: The rest of the portfolio.
David: There.
David: Well just continue good asset management, and they'll probably look like Onesies and Twosies when are we.
David: We determined.
David: Something doesn't fit our long term core strategy.
David: Great. Thank you.
David: Yeah.
David: Thank you we.
Speaker Change: We take the next question from the line of Eric Wolfe from Citigroup. Please go ahead.
Speaker Change: Thanks for taking the follow up.
Speaker Change: You mentioned there was a 45 day window under 10 31 exchange loss I guess is there any way to extend that and I guess, it's a real simply that you have to move under contract and 45 days like what happens to needs to happen within 45 days to avoid a taxable event.
Speaker Change: Good question, Eric So there is no way that I'm aware to extend that but that 45 day period of time is just to identify the properties.
Speaker Change: So.
Speaker Change:
Speaker Change: That's a 45 day period of time.
Speaker Change: And then you have a total of 180 days I believe to actually execute on a closing.
Speaker Change: So that first 45 is just a period of time with that and what you have to identify them.
Speaker Change: We also will benefit from a handful of deferred properties that are subject to close.
Speaker Change: In the future related to final approvals from core of engineers in municipalities.
Speaker Change: So those.
Speaker Change: 10 31 <unk>.
Speaker Change: Exchange opportunity periods will be from the date of closing so.
Speaker Change: Same math would work there too.
Speaker Change: Great and then I guess now that you've completed the sale of Safe Harbor can you just give us a sense for the amount of recurring Capex do you expect on an annual basis.
Speaker Change: Sort of dollars if you could.
Speaker Change: And he was wondering hunter indirect method.
Jon Fernando: Sure. This is fernando over the course of.
Jon Fernando: Over the course of 2025 be recurring Capex, we expect for our MH RV and U K portfolio is just over $70 million for the for the year.
Jon Fernando: Alright, and then last question I have thank.
Speaker Change: Thank you for taking these it's a little bit of old news, but I think last quarter.
Jon Fernando: Quarter you took.
Speaker Change: Take a write down in the U K business can you just remind us what value you took that business down.
Speaker Change: Down two and whether it includes all of our U K assets or excludes for instance, some of the land parcels are or other assets within the U K just trying to understand what the valuation was there and what it didn't.
Speaker Change: <unk>.
Speaker Change: Alright.
Speaker Change: Great follow up.
Speaker Change: With us, let's take that offline.
Speaker Change: But the write down.
Speaker Change: In the fourth quarter related to writing down the remaining goodwill within the within the U K U K portfolio.
Speaker Change: Okay alright, thank you.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as there are no further questions I would now hand, the conference over to Gary Shiffman for his closing comments.
Speaker Change: Eddie.
Speaker Change: Thanks, you everybody obviously, we shared with you that we're very very pleased with what we've been able to accomplish this last quarter and look forward to.
Speaker Change: Sharing information with you our second quarter's performance.
Speaker Change: Thank you operator.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the company's remarks, you may now disconnect your lines.
Speaker Change: Goodbye.
Speaker Change: Okay.
Speaker Change: [music].