SUI - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Communities Second Quarter 2019 Earnings Conference Call. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in yesterday’s press release and, from time to time, in the Company’s periodic filings with the SEC. obligation events or date or release. no statements any of undertakes reflect to circumstances company to update advise forward-looking this The after the

said Chief John an questions. McLaren, management and Chief will to Shiffman, Having be and opportunity and After President would Karen their Officer; today: there Dearing, Chairman Officer; ask us Officer. Gary introduce Executive Chief Operating I that, Financial to with like remarks,

Officer. Mr. now Chairman Executive I’ll the and to call you Shiffman, Gary Shiffman, turn over begin. may Chief

Gary Shiffman

thank morning, our Good joining second quarter you and for us XXXX call. on earnings conference

has growth strong Community manufactured demand opportunities RV vacationing. segments completing XXXX quarter, to experience Fundamentals our portfolio for Our half and both housing and continued as continued outperformed. exhibit the and during the of both further first we solid strong for reflect recent second as Same housing growth our affordable acquisitions a in

was year the XX.X% the up $X.XX second share, FFO of end top $X.XX Core and our guidance. quarter for per prior ahead the from of

in Given XXXX we year raising full share our per FFO core quarter, the the are again outperformance guidance.

range $X.XX is $X.XX $X.XX a at midpoint. new or the Our increase to

NOI Additionally, X.X%. guidance our are Same to on to we of range X.X% Community revising upward

should incremental time. will as demand over limited RV managements’ delivered. are Prior and will sites in development to phases the putting these RV all Carolina the XXX the three over destination total deal Colorado, growth just out sites. X,XXX developments. a South quarter ground-up new are completed, North steady and be By opening to strong With development RV sites and work first end, over marked total of premier new after Carolina of built upscale supply, phases resorts of When Labor Day, expertise

high-demand to acquisition operating returns on we continue better activity, With We respect to current add areas, focus build compared communities properties and in at very to our when properties. rates acquisitions developing continue can portfolio. of risk-adjusted resorts high-quality new where to attention towards to cap we our

quarter Louisiana three end, to $XX.X Hampshire During Tennessee, million. we and for resorts in RV New acquired subsequent a total of and

invested and both Year-to-date, and on properties we working housing across manufactured additional almost in have operating RV. opportunities are $XXX million now diligently

manufactured market the track RV to we and high-quality our for relationships, and highly housing long-term resorts communities While continue remains industry record. leverage reputation competitive,

our been a factor in Additionally, for on has ability the $X years. eight tax-efficient our over to structuring expertise in of billion sellers transactions over acquisitions execute last differentiating

both pipeline, housing portfolio the years are that manufactured on will confident resorts in to we further RV current communities enhance and continue to Based acquisition our our come. acquiring ability for performance

allocation a in capital achieved our months over the core have continue execute near delivering and on six performance we our optimistic the remain four We and strong past over as to ability deal long-term, great initiatives.

in operating continued the portfolio reinvestment percentages. First, our high-occupancy our continued secure order to demand at for in properties

consolidation acquisition of housing additional maximize growth. to Sun the platform, the be properties, and performance levered through that and once Second, on RV placed can operating manufactured

and place of shareholder country. site fixed these building in accretive Together creation. core And will selectively Third, yield returns. our investing new fourth, resorts existing best and expenses additional initiatives and the the to where expansion communities are drive the in resorts sites long-term continue communities in highly the value

discuss I’ll results the detail. over John Karen now the call to turn and to in John?

John McLaren

well operational across expenses Lower-than-expected outperformance. NOI was acquisitions. the great Same utilities strong outperformance with The portfolio growth was results driven to the a X.X% quarter, as recent Community and Same our expense from and for by growth contributed payroll for factor X.X% better-than-expected a the our driving X.X% increase contributions increase. Thanks, Gary. for our second Community portfolio. Sun quarter our delivered NOI as revenue

by increased Manufactured X.X% revenue follows: Community annual a X.X% also Year-to-date, RV Same RV by by our driven breakouts Same increase. increase increased are as a was NOI transient Our X.X%, Community revenue increased growth X.X%; and housing and X.X%; X.X%. expense by

For the increased last six months, by revenues housing manufactured have X.X%.

driven XXX the strong Same by transient site Transient rental an to growth by RV conversions Annual in conversions. XX over reduction in over aforementioned RV grew site and by rate RV grew Community last due X% the the revenues almost nights X.X%, revenues site despite XX.X%, months. portfolio available

have recent our XXXX to our our acquisitions regards With both expectations. exceeded and activity, XXXX budgeted investment

Total of NOI a budgets X,XXX site For than occupancy the points quarter, addition the by XX during these XX the the ago, sites over months, properties second addition the revenue-producing million. XX.X%, second including last was portfolio by their XXX higher gains exceeded $X.X year basis driven of quarter.

in housing second manufactured RV sites is to and the filled year-to-date, quarter Where XXX selectively the over quarter conversions XXX second the which look half communities, of transient our sites to XXX expansion leases, XX% XXXX. were XXX a first year-to-date. sites picked convert we up in increase we and In annual

sustained demand. demonstrate to continue sales Home

we the new and year’s For the homes, In approximately including of our total homes, of the new in site across RV expansion last Carolina, year. deliveries sales resorts. home new for manufactured for home sites Top X% quarter, states over South Florida, and almost construction completed expected four of XX% sales. vacant home the second Michigan increase quarter, of an we accounting home XXX vacant sold The sales. XXX XXX the new half expansion second are communities bulk Texas

to total XXXX. be to the addition on for of for communities XX pace sites X,XXX continue and X,XXX expansion We

As the Valley Golden River Beach, earlier, opened Jellystone Granby, North in RV mentioned we phases and Colorado; Bostic, in Carolina. Myrtle Carolina; in of first Pines three Run premier Gary resorts: South Carolina

first few one a redeveloped and properties strong for sites Hurricane the sales of the Florida We after Keys of Irma expect there XX quarters. also the opened pace home next

is the July. and long Wednesday the XX-day year, it The it Since before a a year at the Xth way our for inclusive on weekend comparable to of Xth look of of the important and RV Thursday northern after July an fell is last period resorts. this most weekends

period, Same X.X% our revenue this Community resorts year-over-year. growth have For

are in strong RV transient by We encouraged third start our the quarter. performance to

quarter. performance We are very pleased second with the in our

deliver are into our excellence of to value. and that residents guests, and commitment reflection is our shareholder Our results translating effort to

With the our over that, I discuss to Karen to results. financial call will turn Karen?

Karen Dearing

core increase reported ended John. share XX, Thanks, XXXX, quarterly $X.XX for the per guidance the Sun $X.XX quarter FFO of of of XX.X% of quarter June provided previously end second and top a XXXX. over the ahead

our outperformance earlier, Same mentioned we better-than-expected growth portfolios. this and As Community NOI in by acquisition recent driven was

also Our ahead of rental home program expectations. performed

reflected the ensuring the We These expectations in remains we quarter, and we in the the property are first on over to market condition which side will quarter our timing optimal in discuss experienced may of outperformance second to the active of certain sheet due maintenance initiatives. like to balance expenses. the capital Much the the reverse that continue that support updated anticipate corporate-level growth operating shortly. half of year some guidance, second our were

credit in development In to as land of for continue we we May, proceeds properties late our the our of million raising pay the was completed to of million $XXX proceeds. an and down facility, million. operating senior increasing quarter, projects. initial as the well offering equity the use capacity $XXX sites the invest and $XXX of revolving to net The greenfield Also will amended we by in facility, expansion acquisition overnight credit

Australian for At and outstanding have development with venture end, of borrowing $X.X now for billion. ability dollars the unrestricted borrow the had terms of to facility our improved the with joint $XX.X quarter cash debt on We company hand, million in Ingenia. total

rate interest X.X% X.X weighted average of average a Our debt has of maturity a weighted and years.

and Company’s to times, trailing to XXXX We maturities EBITDA actively the pay or XX-month debt continue to attractive for first from have rate. no the end, ratio debt long-term debt quarter letter was review At net of end X.X refinance at X the our until times material down at down opportunities quarter.

guidance. to on Moving

the expense second our annual previously range our core by to a offset over share guidance of timing the increase in This per half well offering. outperformance raising equity XXXX, are FFO the as as for $X.XX. quarter, the of to impact mentioned, $X.XX reflects the of We as year

We Same growth of our to range X.X%. full guidance Community year are X.X% to also revising NOI a

our that capital analyst guidance or is does include not acquisitions impact activities prospective practice, be estimates. in of As included market’s may our the

to This call the our questions. prepared We’d open up Operator? to concludes remarks. like

Operator

time, we’ll proceed Please a Citigroup. conducting question-and-answer your Joseph, with Instructions] Nick from At comes session. be this question [Operator Our question. first

Nick Joseph

Thanks.

the walks stabilization of development and can terms us of today For you openings, through we in timing where occupancy projects? for the each the are path and

Gary Shiffman

make we it to right, greenfield your development sure heard I Nick. question want occupancy? related Sure, to

Nick Joseph

terms takes And stabilize I occupancy That’s the then phased how expect actually that Where there’s of are it you we those openings. today know of each projects? right. to And occupancy to grow? in how long because

Gary Shiffman

period about of speak We period RV. and stabilizing of housing a manufactured a time, RV as for XXX-site different three-year in time of community. shorter obviously It’s and Sure. RV a a

our and a sites delivered other for balance So high-single developed we stabilization. return in the stabilization at looked RV reached, digit sites of the very and XXX how the by two many Day. newly sites communities the And of were be first – were XXX that expectation modeling. delivered of June, end has upon – had Labor would I Day completed with to And July meet my that included in a Labor sites total XXX in is we in

Nick Joseph

initially? projects to do add drive sales perspective, these marketing a and From how and you actually demand platform your

John McLaren

is this Nick, Hey John.

year a of is So ground-up ahead developments lot into these it goes a opening. there that

you a whether so – typically have avenues advertising, up where And as where Robles the just do a that from. it’s or the relationship well good year. last as RV-ers local of it all is in to of And already. we cases immediate have, we in really areas Sun these get the advertising, example markets May campaigns, we people people some within the word portfolio with already might imagine, in we opened of California Cava out existing that, would have via as one, social up we billboard particular of has that with the drop in lot

that you an to of then drive. And phase-staged just it sort opening got example a opening, and to people test was particular of give so

share out might in kind And be community. which pretty community so the that terms that think you and in that and I kicks has to RV it’s small their it’s experiences it drives to and And initially in the them world, of advocates what to really of we for is the things it trying I’m reached of say gear. really a communication within combination it – the really know

Nick Joseph

Thanks.

Operator

question. question Markets. your Please from BMO John Capital proceed comes next Our with Kim,

John Kim

Thank you.

Looking number at transients large and there XX%, up your of revenue, your statement of then income sites increase transient X%. year-over-year and was went only a

in driving Disproportion wondering I’m revenue? transit increase So what’s of that.

John McLaren

that year. to last of Yes, did we that Northgate do acquisition has most with the

John Kim

Okay.

higher the what’s that’s point that’s price So X%? and than more it driving

Karen Dearing

year. last year we only – for a it portion the Is Northgate had of

a coming we revenue amount last this sites would and year So significant of been Northgate have the more have in added from year.

John Kim

your Okay. just It RVs opportunities like in MH, for Do acquisition see over changing more the given time? pricing. in are you development mix seems available you than

Gary Shiffman

We find think, which on were a of $XXX I if that per XX% don’t. And – you site a level around manufactured I think mean, don’t the I just basis we’ve million-plus and look acquisitions X,XXX dollar that actually at year-to-date, X,XXX housing. the done sites, on that you is over right basis,

is existing So we continue of pipeline, John, expectation fit the at profile to I the that that basic have think opportunities the we as would look portfolio. our

John Kim

calls, low Xs about to debt being comfortable running leverage in Karen, the you’ve EBITDA. net in talked past

This it’s quarter X.X. to down

close-to-peer have trade X. X? recently comfortable been leverage leverage above supported taking well raises you your feel Do and equity has still Your below

Karen Dearing

our But believe activity back that the would And level capital that’s large that and of Well, in this don’t class. a yes, think flows running leverage – in a correct take to of really time. we of pretty And our also times comfortable of you your the level, transaction asset we mentioned, to portfolio, of this the you’re recent at imminent. don’t based it comments. higher X are as I running growth strength us are on markets we stability the at Yes, all move lower bit cash times. EBITDA X

will remain mid-to likely So that it in appears near-term. low Xs we the

John Kim

you. Thank Great.

Operator

John comes Please Advisors. next Green from Pawlowski, question with Our proceed your Street question.

John Pawlowski

you Thanks. three on the cap share Could RV rates the acquisitions?

Gary Shiffman

of range of John, and the were there in and total. X Sure. the fell X, cap rates between them X

John Pawlowski

final transient, particularly the percent your acquisition, help bit John, Gary is of us demand, type Okay. Louisiana the could first understand the Louisiana you customer to just tougher a purchasing because it’s or demand.

So acquisition for to how you cash cap existing And how do flows X-ish over the rate? versus underwrite durable X that RV your that portfolio?

Gary Shiffman

always a But And very, out. on I Gary, really begin very Because I will is can start little and very growth an growth accretive the generate excited This John management drive growth, this putting just come. always and differentiating but Sure. importantly, to not on growth leave bit more team in how in I’ll much property on years demand. cap think to we’re at add location footprint is location. focused out, the really acquiring focused a extracting whatever Sun we platform rate our by can in

that New average minutes at time big and about is Rouge. Baton RV name think property, drive drive we the that the I one three from look within and the of to we is, destinations, So four-hour minutes the in look the things it’s XX what of Lake, XX time, that is population to in Reunion Orleans at it’s

thought we three-hour resort. we that were as buying we million driving how RV within distance a there X.X community, about the plot So out to people think an

XX sites piece purchased yet were to acquire to through that were we entitled, able the upside recently entitlement. but seller, not is land, which for we and an adjacent expansion there expansion and expect by also Additionally, is entitled of apply

So was impetus the we years to strong acquire. the at five-plus next very over project and that community, growth particular that very,

John Pawlowski

areas? Louisiana, Got it. And type to grow intend Mississippi, of you Alabama in

Gary Shiffman

we’re for I but footprint. everything very underwrite, cautious in geographic looking with our are that we think we diversification

for we a very, And likely, most selective not those well. we when was which as for, the market so give look will new asking but information Plantation, what can’t you’re in Tennessee, if you us very really areas. And more River that be we at check box, to in

country, It’s annually. miles amount and our million in do National from the continue that And most surprised to the the visitors XX located XX things Great one outside the us doorway of Smoky the resort we of entire Park. six Dollywood, has park, entertainment that miles Mountain away the as the park to about diligence,

pipeline on, really So that’s our it was opportunities focused how of that now. we different we in and looking acquisition the an we’re area kind at

John Pawlowski

Park Okay. market Understood. you transaction for it? your RV a across us annual Park? broader RV typical and cap footprint. for sense Could And question then one the prevailing transient give What’s rates a

Gary Shiffman

Sure.

about than be and what three talk a once in generate and can we five think not cap the can we the at rate important we the look location, but rate, kind is I redundant, next years. you to to cap right growth spread, will got more of

are not of of It’s But we cap to differentiate So up that all, also of pick we the will an be growth those XX% a pay. annual and to annual big But function additional between transient trajectory. when as rent. having XX% paying do by basis generally, we annual, more, rate much sites we convert that willing said, seasonal. on as annual to first importantly, revenue I

again, that rate. transient cap conversions as as a we but we cap at XX% then pay at rate if same the get benefit are transient to year and, population we’ll buy So the John can currently absolutely of the converting the a growth an through shared, annual, same about annual, additional

John Pawlowski

you. Okay. Thank

Operator

comes Please with Stender, next question. Fargo. proceed Todd question from Wells your Our

Todd Stender

Thanks.

to the you property acquisitions, price property was a looks site just back point list count. low Hampshire and characterize Just that New what didn’t Can maybe the like?

Gary Shiffman

together a be with quality, and sites, a That’s recent because asset of that acquisitions. Gary, most great question. XXX will But Sure. over with very, would that. part again, will sites. purchase is managed it’s it And very be asset it that XXX involved single sister we the in larger high manage It’s I’m only the probably

Todd Stender

just buy won’t sister it. right? manage that that you’ll So Is you asset,

Gary Shiffman

acquiring yet. we’ll be No, closed not it, it’s

Todd Stender

the do sites differentiate you’ve you paying price you’re yet? got the you then that Okay, you. got sites then expansion And point Thank sites, those developed property, the for between expansion are and got Louisiana that? it. And entitled

Gary Shiffman

So the and are deal first entitled is individual XX each sites different.

the Sometimes they purchase come into built price. along

Sometimes, separately. we them will acquire

tie separately were rate the acquire the paid up in property. able on acquisition we’ll deferred we particular them Sometimes, basis. existing of from to additional on the payment acquire cap the separate land But piece of is and a this property

Todd Stender

be and and couple then that cap the now, is stabilized Xs in fair? guess, from then in Xs, I a yield of at there’ll the go you’ll rate years some So a it call in

Gary Shiffman

for. Certainly, it’s something we would strive

Todd Stender

developing then Myrtle residents, of permanent and just how because resorts, lease-up? Beach, are you’re you on that be success RV Robles, kind got to pace around? or the look holding measure they MH, see not And the and the just you to Okay. you’ve going How because they’re show Paso do do the you it’s do how not of

Gary Shiffman

XX-plus John, annual Yes, of portfolio, RV. a makeup to I the important is of it’s think our what that recognize as first percent

John McLaren

XX%. about it’s Yes,

Karen Dearing

It’s XX%.

Gary Shiffman

XX% is of it annual.

function So period it over of a that’s and and operate the pay rent recognized will year.

certainly of the engaged occupancy in how and right really ability And to have transient on and very working of that own side cash-manage we monitor to analyzing on transient software the So our things. we’re side, our of fashion. to continue the then success proprietary now

So…

John McLaren

to revenue the I really, talked an within in about, frankly annual and course sense sites other hit add may make that generate we’re that high an the and in community. you But thing to one the you basis, is important running terms extent, it is of that important convert on is sort revenue opinion balance an example, is, the within weather well when some worlds that got in of does with sort very stability the revenue the creates things best annuals as which particular of ground a of of which which revenue the sites to what you’ve that I of is a it, with RV to having of where have vacation again, a the like transient stability like might because to things multiple allow in the percentage is it’s resort balance it’s differ the and development because sites, which that available it terms RV over on majority communities diligent mean, got my as because, of overall doesn’t Gary being community all happen. it a for year, you and portfolio like streams rentals able should I’d draw individual gain annuals, from, be in comes that to transient upside think, Todd, one some all you’ve of

Gary Shiffman

address we Todd? Did your question,

Todd Stender

Yes, just you speak just a new with sales. with maybe Can the it’s guess, you whether stick you new buying did. I anything color either you’re appeared homes just the just you. home final Thank and buy question credit, to of John, And affordability, They age, to with trends, solid. there. to their underlying, folks the Maybe ability them outright? seeing some buying any

John McLaren

the Yes, form little age-restricted are supported purchases those bit the communities mean, you’re you communities, get you family it’s into I really said. of sort it’s a of of by in mean of where coming get they’re of you the majority sales, vast into cash seeing everything – I more what finance. just when the

has and the year the that XXXX. growth In offer And see even think year in ahead had really like it. solid we with need and along we’re XX% we of is continue we the big home to in which last what XXXX, XX% sales, demand. new and that offer draw affordability, for been our continued quality biggest I communities the product our with

has continuing as So as up. been go to pricing well

up amenities so houses, to speck to as the the As have and well a different houses. customers benefits of we within speak, lot really result, their as that wanting all a

how the comes it the to being is is that draw. beautiful really community from So time, same really affordable – portfolio that’s and standpoint, which at credit a that it but the back apart, in breaks a

Todd Stender

you. Thank

Operator

call the over will the the for And to We end back have session. question-and-answer now reached I Gary Shiffman remarks. closing of turn

Gary Shiffman

you. thank to the you, for at third operator. our call. participating quarter second Thank everybody quarter. We’d results we like look end forward on Thank to of And announcing

Operator

conference. This concludes today’s

this for you may Thank your lines at time. disconnect your You participation.

Sun Communities (SUI) 25 Jul 192019 Q2 Earnings call transcript