Sun Communities (SUI) 22 Oct 202020 Q3 Earnings call transcript

Greeting. Thank you for joining us today for Sun Communities Third quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will begin after the formal presentation. [Operator Instructions] Please note this conference is being recorded. to conference like host, to now Shiffman. Gary will turn over the your I Executive Officer. Chief and Chairman Thank you.

You begin. may

performance Thank you, quarter operator. of joining an us Good on COVID-XX. morning. And as update you discuss thank We we Xth our pleased healthy the pandemic, navigating hope and staying our and continuing challenging to are third of the results that through this exceed time. we month are that continues We're provide families today and managing now impact expectations. you share our your in to our and for

and the our to our pledge balancing Our safety commitment members we responsibility team this guests, deliver remains Sun's to priority, are resorts. and of communities residents, signature our and service with top our throughout

the Harbor our RV term. in brings enhance to Safe addition is long and our manufactured to expand customer delivered expected Safe performance growth base, we and a portfolios, rental in with stream, further and solid of Marinas. potential geography and platform acquisition further Sun's over adds of enhance excited to diversity are revenue terms Harbor earnings high-quality the pending housing the In

transient performance at second our during generated housing. strong earnings call business quarter ancillary quarter We and to build affordable of results are our July, the discussed in due outperformed our demand given our week-over-week initial for resorts. increased to see pleased portfolio the RV manufactured We primarily to and for continued reservation our third expectations a with on income continued momentum RV as basis housing need the related

$XX from virus to guided reduction our of original forecast net up quarter due third the impact Our a budget. from the million to to

distanced. safely proved drive progressed, in better ability our the be for to expectations due continued to across country, travelers enjoying more to we ultimately [ph] socially a in large while $XX approximately than the our outdoor As the vacation part resorts, outperformed forecast million. method preferred vacationing and perform lifestyle RVing quarter of the forecast by remaining and to to

share quarter, demand product. same Our for NOI the the occupancy the XXX of quarter platform FFO our basis third and our $X.XX The quarter, of X.X% we in growth last third delivered resiliency reported for per underscores the community grew same core the ahead In to was X.X% points year. XX.X%. community

came during our in the of majority two Additionally, XXX approximately The five long-standing million housing through sites resorts, additional acquisitions sites. an we manufactured relationships. developed communities quarter, us the third industry approximately totaling expansion $XXX to deployed RV X,XXX and and these of acquisition

small full Our single housing pipeline and of assets and RV portfolios ever. as and manufactured as is

the the to So Sun, with to possible see assets certainty deferment and of of and continue the improve the managing execution, continuing these knowledge is that transaction tax will Sun benefits given standards. strategies best

construction approximately the and projects, announced September total our the year completed sites delivered communities across in development On up, XX of to XXX sites bringing XXth, the X,XXX also and expansions, ground expand to incremental almost to Harbor industry-leading Marinas billion. which generate growth and the base, will $X.X acquisition This serve loyal believe will our our ability over add our footprint, geographic term. of we Safe strengthen for states. pending we We and nine resorts streams, long customer acquisition redevelopment for diversify revenue

to to will this We the the welcoming month. at Safe that the Safe this of acquisition Marinas Sun look are excited about anticipate forward family. very close and We Harbor end entire team Harbor

behavior, net consequence has hardship beneficiary safety and vacation We Sun properties. for that customer the our as virus of sight have it has and the of Overall, the across the impact been of our lost potential a the country. pandemic that the the we accompanied demand of homes, not believe a

The ability the team adapt tirelessly contributing duration have now discuss the worked to of each our over customer ultimate call to that outstanding operational team successfully team like and proven for and navigate today. to know beyond the results. in in high above business. environment serve members our said I or turn central impact operations. will guests service maintaining the did far, the execute economy we're on prior John? to while you Sun's has quarters, standards to John or strategy. an As detail. our thank the demonstrated ability are our would our the to business we and results more has discussing pandemic, produce have residents going one the to results we to our our I with our the two in and not Thus we Throughout

Thank you, Gary.

X.X% gain third the or is our Manufactured XXX achieving revenue manufactured annual producing across to gains, site communities. platform From sites in the housing outperformed of expectations our than our as our for conversions total XXXX. our of totaled our gains of housing year-to-date gained revenue sites, increase resilience gains portfolio year-to-date. a year. of stronger we RPS to original from gains sites speak points XX% X,XXX quarter approximately site The XXX gains streams. RPS expansion boosting The total up sites, these within XXX communities now total results ever. Our budget This of demand brings all striking distance sites, putting came the of site X,XXX RV perspective, a revenue-producing revenue-producing XX.X%, forecasted XX in last for of we from us occupancy leases. and or resorts transient were to to basis balance

PPE operating X.X%, the included in a $X.X and PPE-related increase for same in our revenues rose community third same of expenses, would been X.X% quarter expenses. Adjusting expense, million increase growth for X.X% Our X.X%. which NOI a community resulting NOI from portfolio have

rental over RV XX X.X% RV Same increase by revenues revenues rose at Our X.X% housing last community annual X.X%. rate discussed community driven weighted transient average occupancy and rate X.X%, annual X.X% by X%. the revenues RV for gains the increased increased Same and with manufactured was months. portfolio increase X.X% by rental at and manufactured housing by the

savings on we hiring did longer furlough, have On positions. the the team seasonal while have expense payroll due for side, we to members delayed no

to rental home had to rate In quarter. second increase renewal are continues the Sun rental renewal well. from than a rates Our better and X% quarter averages. our during the applications XX%. historical Consistent rent in the program was perform renewal experienced we home trends with These XX%

rose applications in XX% For Sun to the live quarter committee, year-over-year. of inclusive total sales a

manufactured historical and rent figures strong stability the continue are collection These October be and Moving manufactured XX%. Month-to-date underscore to strength compared collection, in and at RV balanced approximately results. fundamental with portfolio our year. regard housing XXX with we at of for tenure. quarter, resident renewal XXX less With of homes MH to RV to and had annual We higher home of pre-owned third and strong approximately last result to collections rates XX% homes collections housing sold to inventory sell longer consistent RV a sales, communities. as the

$XXX,XXX. gross sales quarter XX.X%. New of our expanded a home our price This in new the in XX% was grew to X.X% margin average home revenue and by XX% driven increase

margins. quarter, developments home continued indicating also to communities, higher-than-average are in New Colorado, inventory home of and Florida, sales are Interesting brokered and which strong up less new our contributed concentrated note, demand and are have sale. gross in for sales, in which Carolina, and to our our in ground-up expansions, the has sales prices South home many XX%

to websites has Our demand our Instagram our our over supporting business, transient following experienced with in RV a We visits last our during heightened fourfold preferences business, months. grown travel centers. the and RV pandemic. record thesis particularly four weekly our experienced demand the build about to reservation calls consistent Anecdotally,

As for lifted RV on the in the year-over-year once recovery that community our transient velocity revenues where our our ended and started previously month remain Transient Fourth the down X% a of Fast last restrictions our to the vacationing. outlook recall quarter, over the forward up popularity fourth original RV just the we X.X% up. anticipating were same had an are third in acceleration to increase is basis, discussed, budget. than XX% high quarter September up of being Labor strength Day, year-over-year started of basis. RV our of We communities. better increasing July were on This weekend revenue were revenues saw the in the given travel demand To a single-digit into we our business stay-at-home as year. of approximately pick with optimistic recovery, RV throughout summer carrying the a demonstrate revenues transient

reinforced portfolio to and of results confidence our our impact of strength thus durability discuss would sheet. flows our and turn Karen? our and to the financial the far in call with balance experience to now like over pandemic strategy. that Our the I has Karen our the cash

our markets financial results our sheet, I you, fourth discussion for expectations will our quarter. the capital by Thank reviewing and balance our of be John. followed a activities

per ended core in operations, year. quarter September we the For last XX, from reported as share $X.XX compared to $X.XX XXXX, funds

During and sites sites available properties resorts just Florida, are seven sites quarter, X for The approximately RV approximately located manufactured approximately are XXXX $XXX California, of million. Michigan and and XXX in we acquisitions the comprised The properties Texas. communities third home acquired for with with XXXX two over expansion.

and to close Sun, communicated, sheet, as subsequently unsecured Safe X.X an subsidiary on to shares. was The $X.X on infrastructure. its to for including Due XXth, Harbor assumption XX. for to approximately October existing the Marinas allowed a and greenshoe, demand, X.X million announced acquisition debt. September expected approximately of Harbor management intend previously billion, raise Safe We we flexible to the $XXX retaining maintain Harbor wholly-owned of shares, To team on balance $X.X billion. As us million equity offering Safe we September the XX, including the of the acquisition which investment of launched is the million run upsize offering support strong a

the billion maturity of debt hand quarter, weighted on million cash a end and average rate third interest had and of a As of with average $X.X XX.X weighted of of outstanding we X.XX% $XXX.X unrestricted the years. in

Our be XX implications X September net recurring trailing financial debt was The a situation. to fluid operational and at its and ratio EBITDA pandemic month times. XX to continue

questions. core the be expectation said, $X.XX per the FFO to conditions range are range quarters, anticipate with quarter estimates, it implies When not for limited This per financing forecast Harbor $X.XX current equity raises is portfolio, FFO month prospective our and Safe quarter on like Operator? that to forecast our current us from today. our RV We we other we joining the the and share between our include the However, for and core core operational of Thank $X.XX It fourth two latest any concludes XXXX. contribution for share. fourth $X.XX to and range or of per share. activities. providing revenue for not would expectations for call with acquisitions open FFO three This the a to actual the but for impact continue, you results to includes, first remarks. markets activities. does the now capital that Based for transient estimated prepared our added

[Operator be will Please you. with Our proceed. with Thank first Citigroup. Instructions] Nick question Joseph

appreciate you fourth quarter providing guidance. Thanks. And

seasonality months that, through quarter. and that the the you winter you of the talked that a quarters. X.X% Safe over months, and think for I four the of into can rate. So two wondering year, have year November, Harbor the December, plays previously cap beginning the these out And how hit particularly the one of walk you'll X.X% fourth will I'm if about

Sure, Nick.

highly industry-leading So, the pursuit yeah, active results. in obviously, of we're

COVID to parts blender. So impact few moving to into count that from high-speed we a changes seasonality, going realized items are creating equity between just pluses raises, FFO and of from of minuses, there a name share the contributions estimates acquisition, lot

Safe there Harbor the it. portfolio, seasonality is For in

about in months November those will than underwritten fourth contributes our EBITDA. our typically EBITDA X% contribute to rata portfolio the in full-year and rather EBITDA, December the So pro be month XX% X% of on XX%. XX% for quarter of based to a that XXXX,

year, on full since budget, provide just Safe as the based our some For creating seasonality XXXX in of are Harbor process is underwriting. I'll quarterly their we,

QX. and is heavily MH and RV to more similar but seasonality even weighted their to So portfolio, QX our it's

So, XX% and is XX%, of XX% XX% QX generally QX XX% to to to XX%, in EBITDA, seasonality is to XX%. QX XX% QX

that And XXXX together so provide information, on our XXXX forward when guidance. to seasonality information we're we busy we and look providing putting additional some

to with demand? very travel do domestic do just That's see given you RV, any restrictions of you. think sort ability risk backfill big transient And what's the right how and Thank the that helpful. on the a with now you Canada, then of

is out Nick, Well, want come obvious the cold. John. Hey, Good it's I morning. think first down they thing the all of and to get

or whether a that think I focused the but not I to are And break people out it's question. two lot it parts. no there's of into think border Okay, on open, will important

segmentation guests than February, and transient QX, on campaigns when in domestically. communities, Canadian other yearly employed over the may season as our is support business at like might component want. We've many at any of come said, in come that. coming, spoken offset warmth. less located homes of even where might inclusive the demand, secure about guests. able But contracts annuals We maybe see some not With help you and they to enjoy and really, down with might for that, targeted early we've team plans to could important represents to very that time, strategies come homes executing as our really annual down, budget, number strategy a had seasonality shifts to only that the to least Maybe lease some think, point but sooner are of that. last transient want those on have with back I expect, down I the look business some of as down. At come our And their softness plan elevated the in potential maybe our to homes. little on having First stay tell those help folks be come been we well. winter April, to them. I are any X% decline implemented December or still come communities, proactiveness so and the comfortable Canadian you potential working in to that in our and X% March, to in of a they in may represent maybe has can't campaign looking under that we've all snowboard of They to more down I think and winter you respect come can of it's also and and their longer this down U.S. they can't with they which come note four is on fact, in come the annuals, as January, and they developed down for months I'm months like to their guests

and potential So strategic we a might confident perspective all, very feel all have. in what with to recapture from any I we're doing offset marketing

Thank you.

Yeah.

proceed. Kim BMO Our with next question is from John Please Capital Markets.

Thank you. Good morning.

You strong in growth a very quarter. had third

RVs is guidance Your basically over fourth the mentioned year high-single And, fourth digit John, you year. have flat quarter you growth for expectations quarter. in

fourth quarter wondering the I'm modest. So guidance was why relatively

to primarily Safe it's think I expectations of due the the Harbor contribution.

on mentioned a and acquisitions our housing home of year the Harbor, any and rent our with basically of that increases, or exempting RV sales along very rest at rents, rental Safe annual RV have think offsetting we along partial manufactured vacation bit I items might the based to sort strong, earlier, impacts I expected I commissions. between impacts. portfolio COVID little higher will even even or transient look delayed are when negative with ancillary from As impact contributions contribution that broker lowered the be Those the

mean, up third almost XX% over I was year year. Okay. quarter

core So I a lot would of carry an quarter. over ex would fourth that the into business, the assume

that can't remainder growth So revenue down ancillary to bring alone really is it for come that's down I going to year. the Harbor of Safe or imagine the is going the

be the ancillary fourth that not There's to an quarter. will anticipation a negative

Okay.

Karen pieces in beyond Safe are into lot quarter going her think post earlier there I covered a fourth remarks, and Harbor. of

as sharing RV absolutely the you guidance. being closing your fourth of as very and build to the sensitivity forward look But will of transaction the I do be But the in seasonality at to able helpful hope quarter the lowest models. end is the we share So well. month transient

about So it XX%. represents

in So strong third it's be was as to going not as quarter. it

just for And portfolio our lower QX own that. seasonality business way the based internal the impacts is transient on and overall, just core

bookings up same had indication of wondering next bookings the that I in gave the RV. you couple figure you for transient if September, in forward Back was XX% months.

prepared is fourth highest mean, this expect best quarter year. in time, point do over we you mentioned That's solidly can about in give for the outlook up at And I John. like we the I for remarks, Yeah, October growth the QX. single-digit the year

I when say that, that You fourth beyond but include out that's need we we release looking that would here something know, to in the again, really guidance quarter.

quarter, Okay. could particularly or I quantify of fourth as was either first the for quarter RV if you your and customers revenue, year wondering Canadian your percentage typically. the

about about Canada. represents Canadians is Annual Yeah. -- X.X% transient revenue from annual represent of X.X% and

Got it.

Okay. Thank you.

Yeah.

proceed. Joshua is from with Please Bank of Dennerlein Our next question America.

expect I'm to acquisitions. far guys. a what maybe basis Yeah. forward curious marina you as do as Hey, on on

I a the year looks like it XX Harbor two over done last years. the has about think Safe marina acquisitions

Just curious thoughts what there. your are early

perspective, to think expectations And marina from to MH I for just allocation I think on it's think $XXX deploy the and although the getting the a range. to continue in capital are RV the I initial tougher. we're going overall, side, million company capital $XXX in looking forward space, million

that, And on expansions Our structures bear million $XXX year. robust between we'll per far so to to million really typically pipeline. recognition $XXX we portfolio over long-term been name long-term continues acquisitions tax-advantageous have continue outside are fruit deploy in we've large deploy and to and year. and of million And growth transactions, able acquisition acquisitions a opportunities, $XXX for And very the developments. evidenced this besides capital in trusted our relationships by

see or thinking underwriting throwing load that what think out how just your about a underwriting might for When and to do or, CapEx follow X% MH RV? like to? NOI just know, number you to guys it compare one or of you're you don't Is up. how are capital Maybe budget I there it marinas, you are of guys Karen. kind Thanks, maybe about when

it's Yeah, similar. very very,

I the me. when when $XXX underwriting, approximately shared on per announced site. Interestingly sat think when Baxter correcting some our calls a [ph] on down deal. we basis, enough, of entire was and early as it Karen's you that did CapEx their and we per our slip divide

experienced. $XXX. was what a ours sites, it close $XXX it's It was No, $XXX so $XXX. that and And site, we XXX to pretty interesting between is

So supply, between demand, fundamentals, through very there much differences the are very talked the I think similar. the And we've and just, similar about, underpins core it existing to the a similarity working again, it how our core are. us business. there Certainly marinas, known it as RV the our then to But all things surprise CapEx, customers, see that was the are are And for MH pleasant similar for business. industry. to

Great. Karen. Gary. Thanks, Thanks,

Our is Please Street Pawlowski with John next from Advisors. question Green proceed.

Great. Good give and could that sending the may us to as side, on like? gone increases the today? for what's looking come for MH markets around average high by John, how a that you've the the time. the sense average Thanks differ rental up morning. rate what's you the and you're And out reinstated low

Yeah.

supporting for long-term at occupancy both I increases all have we think stakeholders. I we better it increases, this impact But aid know. you to temporarily the shared do in in business and our when before. to loyal spring, a response COVID, and of residents might reinstated And and elected our had halted to to the of think those we Sun rent success rate we the lower secure unprecedented

X%, XXXX we're about at and about right X.X%, right think expect averaging John. would now to finish we that I we're out So

Okay.

the portfolio, anywhere? market? weakest the what's Are falling rental Within rates

it the John? a we've really throughout on of There's we've that out, demand because No. consistent nothing the got throughout pretty applied portfolio. basis the stands country, that No,

maybe volatility anybody. economy of less thanks. for environmental you and you've because the the lake-focused and to the assets wrap for droughts, through acquired like. marinas, more Okay, Trying for and about factors of the Just last years the in head one I the namely guess think been boating floods, the but marinas? there where the with marinas my how And some risk some just associated the around environmental me Historically, is impacts environmental on largely gone revenue recent have do plummets? season of

portfolio tornadoes, as climate droughts. and looked so. over Certainly, John. risks Harbor title throughout inclined account the of marina the things to And portfolio attracted got a marina on that the the on issues. bring last title our at the are they what think platform Gary, and well. question It's to during that historical the really that we've well there one four and time have want their been and scrutinized assets, spend they and objectives opportunities of and and to and their they with years on horizons. regard hand current question water business at we is we that however And opportunities what the was or floods, really want you all acquisition with take of not they've coastal best a mostly it's to exclude as focused future good as inclined look I acquisition Safe happened, those from comfortable can, storms, into has the fact risk us wise, diligence we both both opportunities. existing Safe hurricanes, underwriting the Harbor that feel into their to what to indications the are on or big But selected And other And outlook

best insulated much to the possible as the best of from environmental So own, underwriting think the our issues. to it's best we the ability, as marinas

due many issue? environmental the Okay. year if have to how in been there In of recent years, any? demand any, just a amount assets, Have lost considerable

injected benefit are concrete. forward most There being I there aware floating think the and docks enough, putting said, they've the And floating think moorings if like made floating has that's concrete. industry that's fixed the marinas. will, And to docks fixed of of moorings, in less frequent A capital air into that become you to direction and lot docks. docks as future, than interestingly an in. And I been things which seen common, the less of. way are adjustments of now that invested areas where done of a is the with none is that floating I'm been much the That where it that, have

Okay. Thanks for the time.

Evercore question Samir ISI. proceed. Our with is next Khanal Please from

Yeah. What's it Good very certainly and was you sort about how about boosting curious that Gary, color think that revenue some we younger the should around that Hey, of think morning, strong well. everyone. the in XX I age ancillary give over next side. revenue the Is It just can if number? Harbor also XX% the ancillary a considering cohort component it's Safe months as as to quarter.

Yeah. the Samir, our this is simply John. Hey, which as just ancillary we've same We've more of come at hey, drives I a think had. had it's the result people that time. resorts activity primarily reservation into business that

vacation rental. of Inclusive

of… inclusive Yeah,

rental. The cottage and vacation

Yeah.

about seeing? Okay. growth you're sustainable think And the numbers in point at sort modeling we with think kind you 'XX of this it's as of

Yeah.

it Thanks much. for me. That's Okay. so

you. Thank

like This management I to over the turn our concludes question-and-answer remarks. conference would session. to back for closing

with We resiliency has Well, its guidance challenging to and forward durability we on and you. we fourth call. during and additional us Sun quarter information times. thank Thank Be today, safe. these for believe you again demonstrated you look sharing joining our

conference. Thank you. conclude today's does This

have You lines may at this time and pleasant disconnect your a day.